Acwa Power is advancing its SAR 7.1 bn rights issue in a bid to fuel its expansion and bolster Saudi Arabia’s energy transformation. The rights trading ended yesterday, while the subscription period for new shares ends next Wednesday.

We talked to Acwa Power’s CEO Marco Arcelli to break down the details of the transaction and what it signals for the company’s future. We discussed the rationale behind the rights issue, the plan to direct 75-85% of the proceeds toward new projects within the Kingdom, and how the company aims to manage its growth while maintaining its current net debt levels. Edited excerpts from our conversation:

EnterpriseAM: Why did Acwa choose a rights issue for this capital raise?

Marco Arcelli: A rights issue was the optimal fit for us. It allowed us to raise significant capital while prioritizing our existing shareholders, giving them the first participation window in our growth journey. This raise strengthens our balance sheet, crucial for our capital-intensive sectors, and supports our ambitious growth without over-relying on debt.

E: What are your expectations for the uptake from both retail and institutional shareholders?

MA: We have very strong expectations for uptake. The overwhelming pre-commitment of over 77% from major shareholders like PIF and Vision Invest is a powerful indicator of confidence and significantly de-risks the offering. Institutional investors recognize Acwa Power’s unique position as a leader in water desalination, energy transition, and green hydrogen.

We are confident both segments will see the long-term value. We believe this rights issue offers a compelling proposition for all investors looking to be part of a company driving essential global change and delivering sustainable returns.

E: How does the raise fit into Acwa’s goals?

MA: Simply put, this raise ensures we have the immediate firepower to continue our aggressive expansion and meet our targets head-on. We see it as a foundational pillar in our financial strategy to achieve our goal of raising assets under management to USD 250 bn by 2030. Our projections indicate that our equity contributions to new projects will range between USD 2 bn and USD 2.5 bn (SAR 7.5 bn to SAR 9.4 bn) annually from 2024 to 2030, a significant increase from the average of USD 1 bn to USD 1.3 bn in previous years.

The raise directly addresses a substantial portion of our immediate equity funding requirements for our rapidly expanding project pipeline. It provides us with the necessary funds to make timely equity contributions to new and ongoing projects, both within Saudi Arabia, aligning with Vision 2030, and in our strategic international markets.

E: With SAR 5-6 bn allocated to projects, what are your priorities for deployment?

MA: The immediate priority is to ensure the seamless progression of our robust project pipeline. This includes flagship renewable energy projects that contribute to decarbonization, critical water desalination plants addressing water security, and pioneering green hydrogen initiatives. In 2024 alone, we signed eight new power and water purchasing agreements totaling 14.3 GW and 410k cubic meters per day.

The increased capital will allow us to move faster on large-scale renewable energy projects nearing financial close, which are critical for the energy transition. This funding isn’t just about financial numbers; it’s about accelerating our impact and delivering tangible benefits to the regions we serve, faster than ever before. It enables us to bring more clean energy and water capacity online faster, benefiting communities and supporting economic development.

This funding will also support our commitment to delivering projects on time and within budget. Our business model relies on long-term power and water purchase agreements, typically ranging from 20 to 35 years, and timely project delivery is paramount to realizing these long-term revenue streams.

E: You have earmarked SAR 1.4 bn for M&A activities. Can you tell us more about your acquisition strategy?

MA: We are targeting selective consolidation prospects in key regions where mergers and acquisitions can accelerate earnings and deliver steady cashflows, in line with our growth strategy. Our focus remains on four core technologies — renewable energy, water desalination, green hydrogen, and flexible generation. Key markets include Saudi Arabia, the Middle East, Africa, Central and Southeast Asia, and most recently, China.

E: What are the expected risks to deploying this new capital effectively, and how does Acwa Power plan to mitigate these risks?

MA: We are acutely aware of the challenges and have built our operations to address them head-on. Our experienced teams — together with our proven track record of achieving initial or final commercial operation dates on eight projects in 2024 — help us mitigate potential risks by ensuring disciplined execution and strong partner engagement. Our success in securing USD 15.6 bn in financial closes and adding over 28.5 GW of power capacity and 2.7 mn cubic meters per day of desalinated water capacity in the past 24 months underscores our ability to manage risks effectively while maintaining a rapid pace of execution.

E: With a significantly larger capital base, should investors expect major changes to dividend policy in the coming years?

MA: Our commitment is to long-term value creation, and our capital allocation strategy, including our dividend policy, will always reflect that overarching goal.

While a significantly larger capital base enhances our financial strength and flexibility, our primary focus remains on reinvesting in our robust project pipeline to drive long-term growth and achieve our ambitious 2030 targets.

Our financial model balances self-financing with project-level debt. This capital raise is specifically for equity contributions to new and ongoing projects, which are expected to generate significant future cashflows. Our priority is a strong balance sheet supporting accelerated growth, with a disciplined approach to capital allocation, aiming for long-term sustainability.

E: With net debt rising to more than SAR 18 bn, what is Acwa Power’s future borrowing strategy?

MA: The capital increase will enhance the company’s long-term financial sustainability and improve its creditworthiness. The goal is not to replace borrowing, but to support our balanced and sustainable growth by combining capital financing and project financing through borrowing to achieve our strategic objectives.

Project financing remains a critical element for executing projects, in line with the growth plan and the public-private partnership model, enabling us to optimize capital allocation as we move forward with more large-scale projects.

The company’s net debt to operating cashflow ratio was 6.4 times in 2024, which is considered appropriate for companies targeting growth.

E: Are you planning any more raises in the future?

MA: Our strategy is dynamic regarding future raises. We will balance self-financing with other instruments, including project finance, to ensure we always have the resources for our commitments.

Our focus remains on navigating the energy quadrilemma of security, affordability, sustainability, and speed, and this capital raise directly supports our ability to do so. We are always evaluating the most efficient and strategic ways to fund our growth, ensuring we maintain financial flexibility to seize opportunities as they arise.

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