CEO’S MESSAGE

Marco Arcelli CEO

The year 2023 stands out as an historic waypoint in ACWA Power’s rapid journey, as we achieved a record-breaking feat in the growth of our business.

My move to the Kingdom of Saudi Arabia was a decision deeply rooted in my admiration for the Kingdom’s ambitious Vision 2030 and ACWA Power being a key enabler of one of the largest decarbonisation programmes in the world. And what I have witnessed during my first year, the speed and magnitude of realising the vision has been nothing short of spectacular and it seems that a day in the Kingdom is like a week elsewhere.

Today, ACWA Power is the largest private power producer in the Middle East, the largest water desalination company in the worldBased on gross capacities in GW and m³ per day. and first mover in green hydrogen. We are the only company in the world that is a leader in all three technologies. This is a truly remarkable achievement in just 20 years since its inception and stands as a testament to the vision, unwavering belief, and collaborative spirit of our leaders, people, and partners.

2023: A booster year

The year 2023 stands out as a historic waypoint in ACWA Power’s rapid journey, as we achieved a record-breaking feat in the growth of our business. We added 10.7 GW of power, 1.4 million m³/day of desalinated water, 3.7 GWhBESS Nameplate DC installed capacity. of Battery Energy Storage System (BESS) capacity, and 3,000 tonnes/year of green hydrogen to our portfolio of assets under management across all four business verticals, renewables, water desalination, green hydrogen, and flexible generation, committing an additional SAR 5.8 (USD 1.5) billion in equity.

This significant achievement maintains our robust growth trajectory and the effectiveness of our strategic initiatives in capturing new opportunities and expanding our geographic footprint, while decarbonising our operations and the countries where we operate.

The year also marks an unparalleled milestone in the history of ACWA Power, as we achieved a recordbreaking 12 financial closes, amounting to a staggering total investment cost of SAR 59 billion (USD 15.7 billion), including the landmark Neom Green Hydrogen Project. Despite the prevailing economic challenges, our ability to secure significant investments confirms our standing as a partner of choice in the global energy sector.

In the renewables space, we added solar PV and wind projects in the Kingdom, Uzbekistan and South Africa, totalling 7.1 GW, a 41% year-on-year increase, and brings our renewable capacity to almost 45% of the total power capacity. This includes the three mega-scale PV projects with a total capacity of more than 4.5 GW from within the PIF renewable pipeline, four wind and three PV projects in Uzbekistan with a total capacity of 2.5 GW, and one 150 MW PV project in South Africa.

We inaugurated the 950 MW Noor Energy 1 hybrid CSP/ PV solar plant on the sidelines of COP-28 in the UAE and the project now awaits the official commercial operations certificate from Dubai Electricity & Water Authority (DEWA) for the final phase. Similarly, the 900 MW DEWA V PV in the UAE is now operating at full capacity awaiting the commercial operations certificate for the final phase from DEWA.

Meanwhile in the Kingdom, having brought the last phase of the project to operations in early 2024, the 1,500 MW Sudair PV IPP is now the largest operating single site PV plant in the world. And thanks to our work on providing all the utilities as renewable-powered solutions with innovative elements of the circular economy, Red Sea Global was able to open the first two resorts of this magnificent new tourist destination. This is probably the largest off-grid, fully renewable powered project in the world, with the largest fully-renewables powered desalination plants and the largest BESS installation of more than 1.3 GW/hour capacity. We are using the wastewater to feed hectares of wetlands and a nursery, turning what was a desert area into a green land as part of the Saudi Green Initiative to plant 600 million trees by 2030.

In water desalination, we signed the WPA for Hassyan IWP in the UAE, setting a record for the lowest levelised cost of water at 0.37 USD/m³, demonstrating our ability to lower costs by optimising power consumption through the integration of renewable sources of energy and digital technologies in our RO plants.

The project for DEWA will be the world’s largest solarenergy powered desalination plant producing 818,000 m³/ day, and a significant contribution to the UAE’s anticipated 2030 water capacity targets. Subsequently, during the first quarter of 2024, we achieved financial close, and the project is currently under construction.

Within five months of signing the WPA for Rabigh 4 IWP in the Kingdom, we achieved financial close for the 600,000 m³/day project. We also inaugurated the 600,000 m³/day Jubail 3A (Jazlah) IWP, the first large-scale integrated water desalination and solar PV project in the Kingdom.

With completion of the last phases of Taweelah Reverse Osmosis (RO) plant, located in the UAE, and the subsequent issue of project commercial operation certificate, the world’s largest RO facility with a capacity of more than 900,000 m³/day is now fully operational.

In November 2023, we broke ground on the first phase of 3,000 tonne/year green hydrogen project in Uzbekistan, the second in our portfolio. We are in parallel developing the plant so that it will produce 2.4 GW of wind energy to power the production of 500,000 tonnes of green ammonia per year. It took us more than three years to develop Neom Green Hydrogen Project but only one year to break the ground for ACWA Power’s next green hydrogen project. This is excellent evidence of how we can scale up and accelerate what we do wherever we do.

Meanwhile, the construction of the world’s largest green hydrogen project, Neom Green Hydrogen Project, is underway with most of the hydrogen and power element equipment and structures already commissioned and partially installed by the EPC contractor following the project’s USD 6.3 billion financial close in March 2023. The project is on track for completion and delivery of its first shipment of green ammonia by the of 2026.

We signed PPAs for two large-scale Combined Cycle Gas Turbines CCGT power plants, Taiba 1 and Qassim 1 located in the Madina and Qassim regions of the Kingdom with a production capacity of 1,800 MW for each plant. This conforms with the Kingdom’s plan to use natural gas as a transition fuel through highly efficient combined-cycle with carbon capture capabilities.

In November 2023, the 2,400 MW Hassyan IPP in the UAE was commissioned to operate at full capacity following the issue of the plant commercial operation certificate by the offtaker DEWA.

In 2023, the Company made remarkable progress in Health, Safety, Security, and Environment (HSSE), guided by our overarching commitment to embed accountability at the core of our operational ethos. Our concerted efforts, steered by the Safety Executive Committee (SEC) and the global Safety Task Force (STF), have established new benchmarks in safety and well-being, both within the organisation and across our project sites.

Through our dedicated efforts, we successfully reduced our lost-time injury rate in 2023 to 0.01, with the most crucial accomplishment being the absence of any fatalities. Our goal remains to achieve zero harm across the organisation.

The successful achievement of crucial project milestones and the effective implementation of the Reliability of Supply (RoS) framework have enhanced both our underconstruction and operational portfolio. These efforts have significantly boosted our consolidated power availability from about 87% to almost 92%. Meanwhile, our desalination plants have maintained historical consolidated availability levels of more than 96%.

The remarkable surge in our business development efforts and enhanced operational efficiency fuelled our robust financial performance in 2023. This led to a significant 14% year-on-year rise in our operating income, reaching a record SAR 2,984 million, while our net profit also saw a notable 8% increase, reaching SAR 1,662 million.

Our 2030 vision

To meet the challenges of climate change and succeed in a competitive global industry, we face a quadrilemma. We need to provide power and water sustainably, affordably, securely, and quickly. Speed is of the essence, particularly given the scale of transition ahead.

To maintain our remarkable growth rate, in June 2023, the Board approved our strategy for ‘ACWA Power 2.0’. Under this plan, we aim to triple our assets under management to about USD 250 billion by 2030 and aspire to not only sustain our global leadership in water desalination but also emerge as one of the top worldwide renewable energy firms, including in green hydrogen production.

As a key national partner and significant contributor to Vision 2030, ACWA Power will continue to play a pivotal role in enabling the Kingdom’s energy transition through the Public Investment Fund (PIF) strategic partnership, which entails developing 70% of the Kingdom’s renewables pipeline. We are already ahead of our interim targets set at the time of the IPO, having identified 13.6 GW of the pipeline within the PIF framework, of which 8.6 GW is currently operational, under construction or in advanced development stages. Our home market represents 60% of our AUM and will remain our core growth market through 2030 and beyond.

Our distinguished track record uniquely positions us to explore opportunities beyond our home market as a reliable leader in spearheading the energy transition. The Republic of Uzbekistan serves as a notable illustration of a country rapidly transitioning its energy mix to renewables, with a vision similar to that of the Kingdom and is currently our largest development outside the Kingdom. With other Central Asian nations following suit, this region is a key market in our growth trajectory.

Our expansion into the Chinese market is crucial for the success of our growth ambition for three main reasons. First, The People’s Republic of China is undergoing a massive decarbonisation programme, adding last year alone 290 GW of new renewable capacity, and we pride ourselves in supporting and enabling the energy transition in such growing economies. Second, we have operated in The People’s Republic of China to support our international operations since 2009, and Chinese companies are already some of our long established partners on our projects, so we know the context, we have relationships and partnering with some of them in The People’s Republic of China can both accelerate our growth and reduce the execution risks. Third, the scale China offers limits the number of countries where we need to operate by 2030, enhancing our focus and execution.

Moreover, the opportunities in The People’s Republic of China extend beyond renewable projects; there are also prospects in water desalination, an area where we have proven expertise. Additionally, there is significant potential for GH₂ that can be consumed locally or exported to neighbouring countries.

In our pursuit of growth and excellence, we are committed to becoming the best employer in the region, the thought leader in the industry, and the preferred partner for growth in the countries where we operate.

Our people are our greatest asset and the engine to drive our growth ambition. During 2023, we rolled out the new People strategy along three themes — capability, culture, and agility, and we have now quadrupled our development budget. Through training, mentorship, and career advancement opportunities, we will foster a culture of excellence, innovation, and inclusivity, where every team member can thrive and contribute meaningfully to our success.

We value ingenuity and integrity and nurture the next generation of leaders and we want to equip our colleagues with the hard and soft skills that will help them become champions of the industry and lay the groundwork for a sustainable future. We have also rolled out an innovative flexible benefit programme and improved work-life balance guidelines to make ACWA Power the best employer wherever we operate.

We will work closely with our suppliers and partners to enhance transparency, efficiency, and sustainability across our supply chain. To lead some of the largest decarbonisation programs in the world, we need to be proactive in managing the scale and speed of growth. During 2023, we entered into strategic framework agreements with key suppliers and equity partners, and by fostering strong and collaborative relationships, we will ensure that we have access to the highest quality capital, materials, services, and solutions, to deliver exceptional value to our customers and stakeholders.

Innovation is at the heart of everything we do. We scout the world for the best technologies, the most innovative solutions, and bring them together to serve the Kingdom and the world. We will continue to collaborate with leading research institutions, industry partners, and start-ups to develop and commercialise innovative solutions to stay ahead of the curve in leading the energy transition.

Our team

Since joining ACWA Power, I have been working closely with Raad Al-Saady, Vice-Chairman and Managing Director, who had joined in January. Raad and I have worked on the new growth strategy and Raad has been particularly active in developing our stakeholder relationships, notably with governments and commercial organisations.

During the year, we have made several key managerial appointments, including Thomas Brostrom, Chief Investment Officer, Faisal Jadu, Head of People and Culture, and Simon Watson, Head of Health, Safety, Security and Environment.

I am very pleased with our cooperation and the progress in all the initiatives that we have launched, and I would like to thank the whole of our management team and all the ACWA Power employees and families for their commitment and energy during the year, for the results we have achieved.

Our strong results in 2023 lay a solid foundation to build on and deliver our Strategy 2.0 targets, and I look with optimism at 2024 and beyond. We know we have ambitious tasks to deliver across our business verticals in multiple geographies, and I see around me a strong, motivated and committed team which is capable and ready to deliver on them. We are aware of the global challenges surrounding businesses around the world, and we strive to anticipate and manage them efficiently. ACWA Power is not immune to such risks, but we have demonstrated over and again our robust resilience in stressful environments to negotiate headwinds with remarkable success. I am therefore confident that, together with our dedicated over 3,700 people and always supportive stakeholders, from our financing partners to EPC contractors to OEMs, we will continue to meet our ambitious targets and contribute to making this world better and more sustainable, year after year.