GCC in prime position to benefit from region's alternative energy resources

The report - Cleantech and Alternative Energy: The Private Equity Opportunity in the GCC - highlights the challenges facing GCC private sector investors and governments in developing truly sustainable regional economies and businesses and beyond the immediate benefits of alternative energy, also outlines - for the first time - the central role of the industry in this essential process.

Furthermore, the report introduces a three-step program - identifying specific technologies, accelerating development of these technologies and driving technology adoption - with responsibilities divided between governments and the private sector (including a strong role for private equity and venture capital investors) for properly introducing cleantech to the GCC and realizing a potential for leadership.

"Globally, high demands, tight hydrocarbon supplies, rising prices and the growing environmental awareness are hastily driving solar, wind and biofuels and nuclear technology into the energy mainstream," said Khaldoun Haj Hasan, Co-Founder and Managing Partner, Ithmar Capital.

"The GCC, fortunately, is sanctified with both hydrocarbon and alternative resources and is now in a prime position to benefit greatly if the right framework is put in place," continued Haj Hasan.

The report says total GCC oil revenues are projected to exceed $600bn in 2008 and even in the unlikely event of prices falling to $50 per barrel; the GCC will earn $4 trillion by 2020 and $8 trillion by 2030.

The effect of these inflows has been magnified further by a new spirit of fiscal responsibility amongst regional governments compared to previous price spikes, with only around 30% of the extra funds being spent rather than the 75% seen in the 1970s.

This spending has focused primarily on paying off debt and building up strategic assets - the $64bn paid by Gulf investors for international acquisitions in 2007 represents almost twice the previous year's outlay.

Although concentration of supply has recently pushed energy prices - and GCC revenues - staggeringly upwards, this situation disguises both the imperative and opportunity for change. With the rising energy consumption per capita, ever-increasing populations and high cost of living in the region, there is a growing mismatch between energy demand and supply.

Priorities should be for reducing hydrocarbon usage through creative and flexible policy instruments and incentivising alternative energy usage. The three-step program provides a means to create the basis for a knowledge-based economy which will, in return, ensure the continued relevance of the GCC in the post-hydrocarbon world. The private equity opportunity here is to respond to the potentially dramatic market changes created by legislation.

"The region's governments and investors are in a position to benefit a great deal if the GCC, with its capabilities, is prepared to embrace tomorrow's energy resources," said Faisal Belhoul, Founder and Managing Partner, Ithmar Capital.

"For example, Abu Dhabi's Masdar initiative has been extremely positive for this region and hopefully, in time, their promising efforts will inspire similar initiatives across the GCC," concluded Belhoul.