Case Study: Emicool

About

Emirates District Cooling Company – otherwise known as Emicool – was established in 2003 as one of the first district cooling providers in the Middle East and North Africa (MENA) region. Today, it operates 17 district cooling plants in the United Arab Emirates (UAE), primarily in Dubai. Emicool has a total connected load of over 310,000 Refrigeration Tons (equivalent to over 1 GW), serving more than 45,000 residential, commercial, retail, hospitality and industrial customers. In 2022, an Actis-led consortium acquired a 50% stake in the business, and is now co-owner alongside Dubai Investments.

The opportunity

The UAE is warm all-year round, and there is a constant need for cooling in buildings. Demand is therefore consistent, essentially tracking the outside air temperature, which makes supplying cooling a stable core infrastructure business. Meanwhile, traditional air conditioning units can consume up to 120% higher grid electric power as compared todistrict cooling plants. Dubai has set ambitious targets to achieve a 30% improvement in energy and water efficiency by 2030 and a 50% improvement by 2050. Operations like Emicool – which enable significantly more efficient energy and water consumption – are therefore critical to meeting the emirate’s goals.

For investors, district cooling offers many of the same benefits as other forms of decarbonisation or clean energy technologies. It is characterised by long-term, stable contracts that offer potential for reliable returns, while also contributing to meeting the United Nations’ Sustainable Development Goals.

Furthermore, the UAE represents a compelling investment destination. It has an investment grade sovereign credit rating and is ranked number one in the World Bank’s Enforcing Contracts Indicator in the MEA region and is also in first place in the region when it comes to ease of doing business.

Actis in action

Actis had identified district energy as a core target sector and had been evaluating it for several years given its strong fit with the Actis Long Life Infrastructure (ALLIF) strategy’s target risk/return profile and the important role it plays in supporting the energy transition. After becoming an active participant in the sector through other asset sale processes, Actis identified an attractive opportunity to acquire a 50% stake in Emicool is one of the leading district cooling service providers in the UAE, particularly known for its green initiatives in the energy transition, sustainability projects, and smart B2C models driven by digital and AI-enabled solutions. Actis, therefore, moved swiftly to pursue the opportunity to become a joint owner by acquiring a 50% stake from the existing investor, and also brought in one of ALLIF’s investors as a partner in the investment.

Sustainability

Centralised cooling systems are essential for societies across the Middle East to adapt and build resiliency against the impact of climate change. Such systems drive reductions in energy usage and are up to 50% more efficient than conventional cooling.

Through a new ESG Committee constituted after our investment, the Actis Sustainability team has worked with Emicool’s management, as well as with international experts, to establish best practice policies and procedures in governance and health and safety. Emicool also continues to support training and employment opportunities for women and local Emiratis in skilled operations and maintenance roles. Moreover, enabled by grant funding from Actis Acts, Emicool has launched a scholarship programme for talented female STEM students within the UAE, contributing to achieving gender equality initiatives in the region.

The outcome

We are currently focusing on operational excellence, capturing organic growth within Emicool’s existing exclusive service territories as well as pursuing select inorganic growth opportunities, led by the company’s newly appointed Chief Development Officer. A number of changes have already been made to improve performance. For example, Emicool has improved energy efficiency across the portfolio by almost 9% since Actis’ investment, and almost half of the total water currently used in Emicool’s operations is now recycled water, helping preserve critical potable water resources in the UAE. The company is also augmenting its data analytics to support enhanced operational efficiencies.

Emicool is an excellent case study of the benefits that district cooling can bring to a country. Going forward, Emicool is expected to continue to make operational improvements and increase the number of customers it supplies from its existing plants, as well as leverage Actis’ global presence to pursue additional growth opportunities in the region. Furthermore, other countries, particularly in warm, sunny areas of the world such as Asia, Latin America and Africa are also potential markets in which the technology can be rolled out more broadly in the future.

Disclaimer
General discussions contained in this document regarding the UAE district cooling sector market represent the view of either the source cited or Actis. Such information is not research and should not be treated as research. Moreover, there is no assurance historical trends will continue.

The case studies and figures above are presented for informational purposes only and were selected to demonstrate the type of investments that Actis will seek to make. There can be no guarantee that transactions with similar characteristics will be available to Actis.

There can be no assurance that any Actis Fund will be able to implement its investment strategy, achieve its investment objective, or avoid substantial losses. There can be no assurance that Actis will be successful in implementing its sustainability plan across this investment.