ADQ’s $25bn US energy deal underlines importance of investing in future

Partnership with Energy Capital Partners shows strength of UAE-US ties

The data centre industry has grown amid increased digitalisation. AFP

Abu Dhabi's ADQ joining with US private equity firm Energy Capital Partners for a $25 billion energy and data centres mega strategy is the latest big-ticket investment from the UAE.

Abu Dhabi's sovereign wealth fund announced on Wednesday that it has partnered with Energy Capital Partners to invest in energy projects and power data centres, mostly in the US.

The move puts the spotlight on the Emirates' efforts to tap into high-potential sectors and is also in line with plans to position itself for a future economy fuelled by technology.

Why is ADQ doing this deal?

ADQ's investment is in line with trends in the technology sector, in particular, data centres, which have emerged as an important component as the consumption of data has exploded. Remote working trends, largely established in response to the Covid-19 pandemic, have led to increased data consumption, fuelling the adoption of cloud services and the data centres that house them.

That has given incentive for companies and investors to pour money into the segment, betting on an industry expected to grow further.

"As an active investor with a sharp focus on critical infrastructure and proven capability in building long-term partnerships, we are in a prime position to help address these shifting structural dynamics," Mohamed Alsuwaidi, managing director and group chief executive of ADQ, said in a statement.

The global data centre market is projected to hit nearly $585 billion by 2032, from an estimated $242.72 billion in 2024, growing at a compound annual rate of almost 12 per cent, data from Fortune Business Insights shows.

The ADQ-Energy Capital Partners deal will involve an initial $5 billion being poured into the projects, mostly in the US. The full $25 billion will be used within the next five years, with the potential to be increased if there are other opportunities, Bloomberg reported, quoting ADQ deputy group chief executive Hamad Al Hammadi.

How crucial is energy for data centres?

Data centres consume a considerable amount of energy and this will only grow further as the adoption of digitalisation and artificial intelligence increases.

In the US, where ADQ's data centre investment will be concentrated, the power needs of data centres are projected to grow to about three times higher than the current capacity by the end of the decade, just to keep pace with adoption, consultancy McKinsey said.

That means that, from the present 3 per cent to 4 per cent of total US power demand, those needs will soar to between 11 per cent and 12 per cent by 2030, it said.

The US Department of Energy, meanwhile, previously said that data centre load growth had tripled in the past decade and was projected to double or triple by 2028. US electricity demand is seen to account for data centre expansion and the rise of AI applications, it added.

What deal says about UAE-US relations

Energy is one of ADQ's key portfolios. With the energy mix expected to shift considerably, "this is influencing an increasing focus on large-scale investments in renewable energy, resulting in enhanced energy efficiency", it said.

ADQ's strategy also mirrors the broader strategy of the UAE to become a major player in technology and energy globally, and the ADQ-Energy Capital Partners deal highlights how relations between the UAE and US continue to grow.

The Emirates views the US as a major business partner in energy and technology, and investing in the world's largest economy is an “absolute imperative”, Dr Sultan Al Jaber, Minister of Industry and Advanced Technology, said this month in a conference in Houston, Texas.

On Tuesday, Mr Trump also highlighted UAE-US efforts to strengthen co-operation on the economy and technology during a meeting with Sheikh Tahnoon bin Zayed, Deputy Ruler of Abu Dhabi and National Security Adviser.

In February, Adnoc, the Abu Dhabi-based UAE energy bellwether, moved its US investments to XRG, the $80 billion international lower-carbon energy and chemicals investment company launched by Adnoc last November.

Among those investments is a 35 per cent stake in an ExxonMobil hydrogen plant in Texas, as well as an 11.7 per cent equity stake in the NextDecade Rio Grande LNG export facility. After Mr Trump's election victory, Dubai-based Damac announced a $20 billion investment in American data centres. Meanwhile, UAE-based technology fund MGX joined Big Tech companies in the recent Stargate AI project in Texas.