Masdar, the clean energy company in oil-rich Abu Dhabi, is best known for building a green city in the Arabian desert. But while the zero-carbon city has captured the lion’s share of attention, Masdar as a company is having an impact far from home by investing in clean technology projects and startups in Europe, Asia, Africa and the U.S.
With a reach that extends from Silicon Valley to the Seychelles, two of Masdar’s business units are investing large sums of money overseas. Masdar Power is developing and financing wind and solar energy projects in the UK, Spain, Germany and Egypt, as well as in Abu Dhabi. Masdar Capital manages more than $500 million in venture capital, a sizable amount in the still-emerging clean tech space. All of Masdar is owned by the Mubadala Development Co., which in turn is owned by the government of Abu Dhabi.
A week or so ago, when visiting Abu Dhabi, I met with Frank Wouters, the director of Masdar Power and Alex O’Cinneide, head of investments for Masdar Capital. Both said their businesses are intended to be for-profit, stand-alone entities. But they are also part of a broad and long-term strategy to transform Abu Dhabi’s economy from one based on oil and gas to a more diversified economy driven by knowledge, innovation and the export of clean technologies. So learning, as well as return on invested capital, shapes their approach.
“We can learn a lot faster when we do projects abroad than if we were just a local player,” Wouters told me. Rarely if ever, he said, will Masdar Power be a passive investor. “We’re always in it for the learning and the strategy.”
And what has he learned so far? Wouters believes, unsurprisingly, that the four categories of renewable energy in which Masdar Power has invested — solar PV, concentrated solar power, land-based and offshore wind — will all be growth businesses in the years ahead, despite continuing regulatory uncertainties. It’s no accident that Masdar Power has not invested any money in the U.S., where the regulatory environment for renewable energy is especially unsettled.
Among its investments:
London Array: Masdar has a 20% stake in this 1000MW offshore wind farm, which is an estimated $3 billion project. Once built, it will supply enough electricity to power 750,000 homes, about one-quarter of the homes in the greater London area. Partners include DONG Energy of Denamark (50%) and E.On of Germany (30%).
Torresol Energy: A joint venture of the SENER group of Spain (60%) and Masdar (40%), the firm has invested $1.76 billion to build three concentrated solar power plants in Spain. It’s actively looking to develop CSP plants elsewhere.
Masdar PV: Based in Germany, this is a solar panel manufacturing business. It has announced deals to supply panels to projects in Germany and India.
Masdar Power is also developing a wind farm in Egypt and planning a small offshore wind farm in the Seychelles, an island nation in the Indian Ocean. In Abu Dhabi, its biggest project is a 100 MW CSP plant with partners Total and Abengoa Solar.
While the renewable energy market is largely shaped by regulation, Wouters told me: “We’re all working very hard to bring the costs of all these technologies down, so they can compete on their own merit.”
With a smart grid, sufficient transmission and improvements in energy storage technology, he said, wind and solar can combine to provide baseload power.
Masdar Capital, meanwhile, has fully invested its first fund of $250 million and raised another $290 million. Masdar put up $100 in the first fund, and $50 million in the second, which is co-managed by Deutsche Bank Climate Change Investors. Co-investors in the first fund included Consensus Business Group, Credit Suisse and Siemens. Siemens is back in the second fund, along with GE, Mitsubishi Heavy Industries and the Development Bank of Japan.
“The clean tech market has been very difficult since we started investing in 2006,” O’Cinneide acknowledged.
Government policy again is a key. The California-based solar panel maker Solyndra, for example, which is one of Masdar’s portfolio companies, has been rocked by competitive from China.
O’Cinneide explains: “If you’ve got industries that are built off large economics of scale, if China puts $39 billion of subsidies into their solar industry, which is what people say they did in 2009, that’s going to structurally change solar companies that don’t have access to that kind of financing.”
Despite the difficult climate, Masdar Capital has had two successful exits so far. A German-based company called Sic Processing, which does waste recovery, was sold to a private equity fund, and HaloSource, a clean water and antimicrobial technology company headquartered in Seattle, went public on London’s AIM exchange.
Other Masdar investments include Heliovolt, Duratherm, Solargenix, Europlasma, EnerTech, Sulfurcell and, most recently, a Chinese wind developer called UPC Renewables China. More details are here.