RIYADH: Adding new projects last year didn’t stop ACWA Power from seeing a 14-percent decline in profits.

The Riyadh-based power generation company added five new projects and ten going operational in 2021, the CEO Paddy Padmanathan told Arab News, adding that this wasn’t enough.

The reason for the decline has been attributed to the company’s decision to share a large portion of the initial public offering grant proceeds with a group of veteran staff members.

“When we did the IPO, the shareholders recognized the value given to the company by a group of staff who have been with the company for a long time,” said Padmanathan.

He further explained that the IPO grant to those staff was added as an expense item on the financial balance sheet — a key factor that was responsible for bringing the profit down.

While the surge in oil and gas prices has favored the company’s business plan, the commodity volatility and inflation, also affected the cost of production, he said. 

Shifting focus to renewables

The company recently announced that it will suspend investments on fossil and shift focus to renewables.

The CEO believes that the global electricity adoption will increase from 20 percent now to 50 percent in the next 30 years.

But he pointed out that there is about 30 percent of fossil fuel energy that cannot be replaced with less carbonized substitutions.

“They are used for industrial and long-distance transport purposes. We really don’t have any other solutions to that carbonization. It is only the green hydrogen that has that potential,” pointed out Padmanathan.

About 75 percent of the cost of making green hydrogen is electricity, which “we can make using renewable energy.”

“The renewables sources are today cost-competitive, which can help produce green hydrogen at lower costs,” he added.

Padmanathan is confident that Saudi Arabia will remain a significant energy producer even after the energy transition toward renewables.

“The Kingdom is blessed not only with oil under the ground but also with the sun, which is a fantastic resource.”

Green hydrogen production

In 2020, ACWA Power partnered with NEOM and Air Products to establish a production facility at around $6.5 billion of investment. 

Located in NEOM, the project will be powered by renewable energy to produce green hydrogen for global markets.

The facility is expected to be operational by 2026 with a capacity to produce 650 tons of carbon-free hydrogen per day.

Padmanathan believes that the Kingdom will have many more similar facilities over the next decade.

“The market is evolving; the opportunity is very wide,” he said.