“In the scorching deserts of Abu Dhabi, a high-stakes battle is brewing. Behind the gleaming skyscrapers and majestic mosques, a quiet war is being waged for control of the city’s district cooling business. This lucrative prize has drawn in some of the biggest names in asset management, with KKR leading the charge. As the mercury rises, so do the stakes – with billions of dollars on the line, only the most cunning and strategic player will emerge victorious. In this cutthroat arena, where temperatures soar and margins are razor-thin, only one question remains: who will claim the coveted title of Abu Dhabi’s district cooling kingpin?”
Asset Managers Vie for Abu Dhabi’s District Cooling Business
KKR and I Squared Capital are among global asset managers bidding for a district cooling business owned by Abu Dhabi’s Multiply Group, part of a $1.5 trillion empire overseen by one of the UAE’s most powerful Sheikhs, three sources said.
District cooling plants, which deliver chilled water via insulated pipes to cool offices, industrial and residential buildings, have been developed as a more economical and environmentally friendly alternative to air conditioning.
Global Players in the Running
The Middle East’s biggest alternative investment manager, Investcorp, is among the potential suitors for PAL Cooling Holding (PCH), the three people with knowledge of the matter told Instachronicles, declining to be named as the details are not public.
The asset managers join a race that includes CVC which is working with Engie-backed National Central Cooling Co, also known as Tabreed, in a deal that could be worth around $1 billion, said the people.
- KKR, Investcorp and TAQA declined to comment, while Multiply, I Squared Capital, CVC and Tabreed were not immediately available for comment.
- Private equity funds worldwide secured around $680 billion in 2024, a 30% decrease from about $966 billion raised in 2023, S&P Global Market Intelligence data said in January.
Competing Interests in the Deal
Abu Dhabi energy and utilities firm TAQA is also eyeing the deal, which is approaching its second round with potential buyers expected to put forward binding bids next month, they said.
KKR became the latest asset manager to announce plans to build a team in the region to go after Gulf deals, showcasing the growing interest in local investment opportunities in the Gulf.
Before, equity firms would raise money there to invest elsewhere, but now, they are looking at local investment opportunities in the Gulf as governments in the region implement ambitious programmes to diversify their economies from oil.
Multiply is controlled by IHC, whose chairman is Sheikh Tahnoon bin Zayed Al Nahyan, the UAE’s national security adviser and brother of the country’s president who controls a sprawling business empire including two sovereign wealth funds.
Regional Investment Opportunities
Governments in the Gulf are implementing ambitious programmes to diversify their economies from oil, creating a fertile ground for investment opportunities. In recent years, the region has witnessed a significant shift in the investment landscape, with governments and private sector entities alike recognizing the need to reduce their reliance on oil and gas revenue.
In this context, buyout groups are now looking at local investment opportunities in the Gulf, a trend that is likely to continue in the near future. KKR, for instance, has announced plans to build a team in the region to go after Gulf deals, a move that underscores the asset manager’s commitment to exploring investment opportunities in the region.
Why the Gulf?
The Gulf region offers a unique combination of economic stability, political stability, and a growing appetite for investment. The region’s sovereign wealth funds, which have traditionally invested globally, are now looking to invest locally, creating a wealth of opportunities for buyout groups and other investors.
Moreover, the Gulf’s economic transformation is driven by a range of factors, including the increasing importance of renewable energy, infrastructure development, and tourism. These sectors offer significant investment opportunities, and buyout groups are well-positioned to capitalize on them.
Private Equity Landscape
Private equity funds worldwide secured around $680 billion in 2024, a 30% decrease from about $966 billion raised in 2023, according to S&P Global Market Intelligence data. The decline in private equity fundraising is a testament to the impact of regional economic changes on private equity activity.
Despite the decline, private equity firms remain optimistic about the outlook for the industry. Many firms are adopting a more cautious approach to fundraising, focusing on smaller, more niche deals, and building stronger relationships with investors and portfolio companies.
Key Trends
- Increased focus on sustainability and ESG considerations
- Growing importance of digital transformation and technology
- Shift towards more selective and strategic deal-making
- Greater emphasis on partnerships and collaborations
Conclusion
In conclusion, the article reveals that KKR is among a group of asset managers vying for Abu Dhabi’s district cooling business, highlighting the increasing interest in the Middle Eastern market. The key takeaway is that asset managers are eyeing opportunities in the region, driven by the growing demand for cooling solutions in the face of rising temperatures. The significance of this development lies in the potential for foreign investment and the creation of new opportunities for local businesses.
The implications of KKR’s involvement in Abu Dhabi’s district cooling business are far-reaching, with the potential to not only boost the local economy but also drive innovation in the industry. As the world grapples with the challenges of climate change, the development of sustainable cooling solutions is becoming increasingly important. Abu Dhabi’s district cooling business, with its focus on efficient and environmentally friendly solutions, is well-positioned to play a leading role in this effort. As a result, the involvement of asset managers like KKR can be expected to bring new capital and expertise to the table, further accelerating the growth of this critical sector.
In the end, the competition for Abu Dhabi’s district cooling business is a testament to the region’s growing importance as a hub for investment and innovation. As the global community continues to grapple with the challenges of a changing climate, the development of sustainable cooling solutions will be a critical component of the solution. Abu Dhabi’s district cooling business, with its commitment to efficiency and environmental responsibility, is poised to play a leading role in this effort.