Abu Dhabi’s Masdar is no soft touch


September 29, 2014

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It is easy to see the irony in oil-rich nations investing in wind power. We saw one such high-profile deal last week.

On Wednesday, Abu Dhabi green energy investor Masdar announced it has bought a 35% stake in the 402MW UK offshore wind farm Dudgeon for £525m. It is investing alongside the scheme’s Norwegian development partners Statoil and Statkraft. The announcement has been timed to coincide with a United Nations Climate Change Summit in New York.

But let’s not kid ourselves. This is not the start of a major rush by Middle Eastern investors into the European wind power sector. These investors are much cannier than that.

Let’s take a quick glance at the commercial property sector. In the immediate aftermath of the 2007 credit crunch and 2008 financial crisis there was a feeling that Asian and Middle Eastern investors would buy up vast swathes of European commercial property. It never materialised. These investors would rather focus on investing in a limited number of high-profile assets.

Masdar appears to be using a similar approach in wind.

At Dudgeon, it has invested in a project that is set to be the world’s fourth-largest offshore wind farm, which is due in 2017.

And in its other investment in the UK offshore sector, it bought a 20% stake in the 630MW London Array, which is the world’s largest offshore wind farm. It made this latter investment in October 2008.

Both are high-profile projects in the world’s largest offshore wind market. Both make sense if your strategy is to focus on making a small number of notable investments.

This is borne out with a look at the wind investments made by Masdar since it was formed in 2006.

It has invested in the 117MW Talifa project, which is set to be the first major wind farm in Jordan; is working on a 30MW scheme on Sir Bani Yas island in Abu Dhabi; and backed an initiative to roll out small wind farms on Pacific islands in Samoa. However, it very definitely hasn’t been splurging the cash willy-nilly — and it won’t.

Masdar is the clean energy arm of Mubadala Development Company, which is a wealth fund owned by the Abu Dhabi government. Its aim is to help Abu Dhabi invest its huge oil wealth in schemes that help the economy diversify away from fossil fuels.

Let’s not forget that the Abu Dhabi government’s sovereign wealth fund is the world’s second-largest with assets of $773bn, according to the Sovereign Wealth Fund Institute. With assets like that, you may wonder why Masdar hasn’t done more deals since 2006.

But Masdar’s strategy is more nuanced. Its job is to find sensible investments that work commercially and enrich Abu Dhabi.

It has been spreading its risk by putting money into different types of clean energy projects, including solar; has provided backing for clean energy technology firms; and is also working on plans for a green ‘city’ in Abu Dhabi.

In short, sensible investment principles. It will continue to invest in wind, but it won’t be a soft touch.

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