New energy firms eye Middle East for growth

The Middle East has emerged as a key destination for China's new energy companies that are expanding overseas, providing vast development opportunities despite increased global trade challenges, said industry experts and company executives.

The Middle East offers significant advantages due to its abundant wind and solar resources, while wealthy consumers and large enterprises in the region also have strong purchasing power, ensuring stable revenues for Chinese firms seeking expansion abroad, said Li Jing, Partner of Deal Strategy and Mergers & Acquisitions at KPMG in China.

Compared to long-term, capital-intensive infrastructure projects, renewable energy generation projects have shorter cycles and clearer profit models. Chinese companies expanding overseas can leverage their technological advantages and commercial experience to quickly seize related market opportunities, Li said.

According to a report released recently by KPMG China on the international expansion of new energy companies, the Middle East region receives 22-26 percent of the total solar energy on Earth, with solar potential equivalent to the energy produced by 1 to 2 million barrels of oil annually per square kilometer, which is capable of satisfying at least 50 percent of global power demand.

Additionally, about three-quarters of the region's area has wind speeds exceeding the minimum threshold for utility-scale wind farms, with Morocco, Egypt, and Tunisia ranking among the top countries globally in wind energy potential, it said.

On a macro level, China and Arab states have been actively promoting bilateral investment cooperation in recent years. China has signed agreements with 22 Arab countries and the Arab League as part of the Belt and Road Initiative, establishing a comprehensive cooperation mechanism, according to the report.

Chinese Premier Li Qiang recently visited Saudi Arabia and the United Arab Emirates, with a delegation including executives of China's top renewable energy companies, such as Chinese wind turbine manufacturer Xinjiang Goldwind Science & Technology Co Ltd, solar product manufacturer Trina Solar and solar power firm GCL Group.

Facing rising tariffs from the United States and the European Union aimed at curbing Chinese dominance in the global solar supply chain, Chinese manufacturers have had to rethink their overseas strategies, said Cai Zhongquan, managing partner of energy and natural resources for China and Asia-Pacific at KPMG.

The overseas market is becoming a critical part of the strategic layout for Chinese new energy companies, especially in solar, wind, storage, and hydrogen energy. The Middle East, seen as a potential safe haven, has become an attractive market for expansion, said Cai.

According to KPMG, China is increasingly focused on external cooperation in the renewable energy sector, with exports of electric vehicles, lithium-ion batteries, and solar cells up nearly 30 percent year-on-year last year.

Jinko Solar and TCL Zhonghuan, two of the world's largest producers of solar modules and silicon wafers, announced joint ventures with Saudi Arabia's Public Investment Fund in July, with investments exceeding $3 billion. GCL Technology and Trina Solar have also revealed plans for Middle East projects.