Bridging the gap between energy ambitions and execution

UAE

Umer Ahmad, CEO of Capton Energy, talks to The Energy Year about channelling capital to underfunded segments of energy transition markets in the GCC, Africa and Asia, and the importance of efforts beyond clean power generation, including energy efficiency projects and charging infrastructure, to reduce the region’s carbon footprint. Capton Energy is a joint venture between Siemens Financial Services and Desert Technologies that develops, invests in and manages solar and other energy transition infrastructure assets.

What are the main opportunities that Capton Energy sees in the UAE market, and how are you pursuing them?
Players such as EDF, TotalEnergies, Masdar and ACWA Power are having a large and commendable impact on utility-scale renewable energy IPP projects. That arena is highly competitive and well-served. There is a desperate need for financing in certain areas, and there’s a massive opportunity to make a difference.
Therefore, our team, guided by the vision of our founding shareholders – Siemens Financial Services and Desert Technologies – has chosen to focus on areas within energy transition markets across the Middle East, Africa and Asia that are less well served by capital providers. We are an energy transition investor. We invest in energy transition infrastructure at the project level, not so much in the developers themselves.
We have identified underfunded segments of the market, and we are in the process of launching a fund to fill those gaps. In Africa and Asia, we are playing a role in mini-hydro assets and commercial and industrial solar projects, alongside hybrid power and battery storage, often in off-grid situations. We also selectively undertake utility-scale projects. For example, in South Asia, we are progressing with a solar project of up to 200 MW, with government offtake.
In the GCC – the UAE and Saudi Arabia included – we primarily address funding gaps in energy efficiency projects, EV charging and small and medium-sized off-grid projects where we reduce reliance on diesel with hybridised solutions that use cleaner technologies such as solar and battery storage.

What role do energy efficiency solutions play in your portfolio?
When thinking about addressing climate change, people often look at the impact that can be made by adding renewable energy to the generation mix. Whilst this is very important, reducing existing energy consumption has a more immediate and cost-effective impact on carbon footprints.
The energy efficiency solutions that Capton has brought to the Middle East are different to what has been seen before in the region, perhaps even beyond what has been done in many developed markets. Our service-based offering provides an investable model for third-party capital to directly fund energy-saving projects.
In the past, energy efficiency has been driven by ESCOs [energy service companies] that provide technology and services to building and infrastructure owners who may be industrial, corporate or government clients. Often, contractors will require payment on day one and will guarantee that a certain level of energy savings will be realised by the client over time. Capton’s service-based model means that clients don’t have the upfront capex burden or any related balance sheet impact.
We own the projects and finance them in a cost-effective manner through a mix of equity and debt that is usually only seen in larger infrastructure projects, such as solar IPPs. We are currently advancing several energy efficiency projects across the UAE, Saudi Arabia and the broader GCC.

Does Capton typically carry out its projects alone, or do you seek partnerships with other companies?
Capton’s strategy for small-to-medium projects emphasises partnerships that enable replication and efficient scaling. For example, we recently signed a partnership with distributed solar utility Enerwhere to help them accelerate and reach their ambitions.
Thus far, it has been relatively simple to find interested partners, as our unique model facilitates synergistic, win-win collaborations with developers and service providers. We expect to announce many further partnerships in the near future.
Our shareholders can also be our partners in our projects. For instance, Siemens is a very good partner for energy efficiency projects in the UAE and the GCC, and Desert Technologies is a very strong player in Saudi Arabia.
Capton primarily operates as an investor rather than a developer. While we possess full development capabilities, we focus on enabling developers by offering financial sophistication, capital and strategic guidance.
There are many developers, particularly in emerging economies, who are doing a spectacular job at building their pipeline of projects. However, many only execute a small percentage of them because they lack commercial and financial sophistication and capital. They might not have significant deal-closing or financing experience, for example, and that’s where we come in. We help make their projects bankable, helping to bridge the gap between ambition and execution.

What type of investors do you generally seek to attract to your ventures?
Capton’s shareholders have provided seed capital to establish our regulated fund manager status, initiate projects, make early investments and for further investment alongside third-party investors as we move to our next phase. We are now actively raising third-party capital for our collective investment scheme and specific co-investment opportunities.
Our target investors include institutional entities such as pension funds, sovereign wealth funds and family offices in the Middle East and Asia. Additionally, thematic investors seeking impact investments – multilateral and country-specific development banks, for example – are natural partners. These institutions often align with our goals of addressing inequalities, expanding energy access, creating jobs and combating climate change in underfunded markets, much of which fits with the UN’s Sustainable Development Goals. By collaborating with us, investors can make meaningful impacts that might otherwise be out of reach.

Can you give us an overview of some of your objectives for the next five years?
Our immediate focus is to raise the capital for our initial fund or collective investment scheme and to successfully deploy that capital into projects for impact and strong risk-adjusted returns in our target segments. By year five, we will probably have launched a second fund, or be into the next iteration of our mission. As is typical with fundraising, we expect to go through two or three closes or phases to close our first fund. We expect to close the first round in the first half of 2025 and phase the following rounds during the year and maybe into 2026.
In 10 years, we might be at fund four and creating an impact to the order of several billion dollars in the markets that we serve. Most importantly, however, we would like to see the impact we generate with our first fund and the difference we have made in moving the energy transition forward. With time, if we are doing our job properly, underfunded segments will see more capital and competition coming in. To keep investing in underfunded segments, we will have to keep innovating and continuing to identify where we can make a difference, and pushing the boundaries of what is possible.

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