21 Dec 2021

Renewable Energy M&A in the UAE: Key Legal Issues for Consideration

Authored by: Hadef & Partners, Sector Groups

In Brief:  

  1. There has been a substantial increase in the volume and the value of M&A in the renewable energy sector (both globally and in the UAE) in recent years as investors continue to announce green priorities.
  2. The UAE has been a leader in the GCC with respect to energy transition and is reported to have the largest portfolio of renewables in the region.
  3. In this article, we examine certain legal considerations with respect to renewable energy M&A in UAE.


There has been a steady increase in Mergers and Acquisitions (M&A) in the renewable energy sector globally in recent years, and it appears that this trend has intensified since the outbreak of the Covid-19 pandemic.

Sovereign wealth, pension and private equity funds continue to announce “green” priorities. Multinationals from various sectors (including oil & gas, technology, industrial, utilities, banks and insurers) are progressively declaring carbon-neutral targets as part of their environmental, social and governance programmes. It is expected that these objectives will result in investors seeking to re-deploy capital between asset classes.

Notwithstanding the historic significance of fossil fuels to the United Arab Emirates (UAE) with respect to its economic development, the UAE is an interesting and promising market with respect to renewable energy M&A. The UAE has been a leader in the Gulf Cooperation Council (GCC) with respect to energy transition and is reported to have the largest portfolio of renewables in the region. This is demonstrated by a number of key achievements:

  • the establishment of the Abu Dhabi Future Energy Company, Masdar, and the region’s first carbon-neutral zero waste city, Masdar City, in 2006;
  • the hosting of the annual World Future Energy Summit in Abu Dhabi since 2008; and
  • the establishment of the headquarters of The International Renewable Energy Agency (IRENA) in the UAE in 2009.

In October of this year, the UAE became the first Gulf country to commit to eliminating planet-warming emissions within its borders. The UAE committed to invest AED600 billion (US$163 billion) in clean and renewable energy by 2050 as part of its efforts to achieve climate neutrality. In addition, the UAE has recently announced that it has won its bid to host the COP28 conference in 2023 (the UN Climate Change Conference is the largest global conference of heads of states and governments on climate and environmental issues). In Dubai, the Supreme Council of Energy announced an implementation plan for the Dubai Clean Energy Strategy 2050 to enhance the sustainable development of Dubai. The Dubai Clean Energy Strategy 2050 aims to provide 75% of Dubai’s total power output from clean energy sources by 2050. The Mohammad bin Rashid Al Maktoum Solar Park in Dubai is the largest single-site solar energy project in the world. It is being developed over multiple phases and is designed to have a total capacity of 5GW of renewable energy by 2030.

In addition, funding from seven international banks is now in place for the world's biggest solar power project, being built in Abu Dhabi - a 2 GW project in Al Dhafra.

Abu Dhabi is also examining hydrogen as a method to progress its clean energy agenda. Emirates Waste To Energy Company, a partnership between Masdar and Bee’ah is developing the first waste-to-energy facility in the UAE, which will be located in Sharjah. The Middle East's first experimental wind-power plant was set up in the UAE on the Sir Baniyas Island, and Masdar is also an active investor in wind energy around the globe.

Such government policies, strategies and projects are stimulating entrepreneurs within the private sector to establish and develop renewable energy projects and related businesses – many of which may represent appealing growth opportunities for foreign and local investors.

The UAE is also a relevant player with respect to renewable energy M&A in the wider Middle East and North Africa (MENA) region in that the corporate structure of projects located in MENA jurisdictions outside the UAE may include companies incorporated in the UAE (e.g. holding companies or management companies) given that investors often view the UAE as a commercial and legal hub for the region.

With this backdrop, we examine below a snapshot of certain legal considerations with respect to renewable energy M&A connected with the UAE.

1. Government / UAE National Ownership Requirement

Independent Power Producers (“IPPs”) are private entities, which own and / or operate projects to generate electricity and then sell it to a utility, central government buyer and / or end users. The Emirates of Dubai and Abu Dhabi both significantly rely on the IPP model with respect to renewable energy production – albeit that it is reported that the relevant government authorities, the Dubai Electricity and Water Authority (“DEWA”) and Abu Dhabi Water and Electricity Authority (“ADWEA”) respectively, hold majority equity stakes in all IPP projects in the UAE. Accordingly, to the extent investors are examining the acquisition of a partial interest in a renewable energy power project in Dubai or Abu Dhabi, it may be the case that such investors will hold a minority stake only in the relevant IPP entity (with the majority being held by one of the aforementioned government authorities) – although, please note that the applicable electricity regulation laws in Dubai and Abu Dhabi do not require DEWA and ADWEA to hold a majority (and in the case of Abu Dhabi, any) stake in the IPP entity: this provides some maneuverability for potential greater private sector investment in the sector. Separate to potential investment directly in IPPs, there is obviously also scope for investment in the supporting or related sectors (e.g. the manufacture of solar panels).

From a foreign investor perspective, given the key operational company in an IPP structure is likely to (and that companies operating in a supporting or related sector will often) be incorporated “onshore” in the UAE, the foreign investor will need to be mindful of the requirement for the company to be at least 51% owned by UAE nationals (whether that be UAE government entities or private persons) pursuant to the Federal Law no. 2 of 2015 regarding Commercial Companies (“UAE Companies Law”).

In this respect it is worth noting the recent UAE Federal Decree Promulgating Law No. 26 of 2020 (“Decree”) pursuant to which 51 articles of the UAE Companies Law are amended. The aspect of the Decree which has attracted most interest from media and investors is the modification of Article 10 of the UAE Companies Law, which required a UAE national or an entity wholly owned by UAE nationals to hold at least 51% of the share capital of each UAE company that is incorporated ‘onshore’. Article 10 has been amended to remove the specific requirement for a minimum of 51% UAE shareholding in onshore entities. A list of the relevant activities permitted for the purpose of 100% foreign ownership has been published by each of Dubai Economy and the Abu Dhabi Department of Economic Development.

Interestingly, the list published by:

  • Dubai Economy includes:
    • Power generation;
    • Solar Energy Systems & Components Trading;
    • Solar Panels Manufacturing; and
    • Solar Panels Assembling; and
  • the Abu Dhabi Department of Economic Development includes:
    • Solar Panels Manufacturing; and
    • Solar Panels Assembling.

The inclusion by Dubai Economy and the Abu Dhabi Department of Economic Development of such activities reflects that the governments in Dubai and Abu Dhabi are desirous of stimulating foreign investment in the solar sector.

2. Transaction Structure

Every transaction is obviously different and the merits of a particular transaction structure over another should be independently analyzed in the context of the specific factual matrix related to a particular transaction. In the case of an M&A transaction the target of which is a renewable energy power producer, a share purchase structure is frequently the preferred structure in many jurisdictions. There are a number of reasons for this including:

  • Many transactions in the renewable energy sector involve the acquisition of a partial interest in the business rather than the entire business. This would be very challenging to achieve and would mandate many more consents with an asset sale.
  • Renewable energy projects are often structured with a principal operational company which is party to numerous material contracts with various counterparties. Effecting the sale of a renewable energy business by way of an asset sale would be particularly complex and disruptive to the business because, unlike ordinary businesses, it relies on every one of those material contracts remaining in place to be feasible (i.e. numerous novations and / or assignments, and the potentially extensive work related thereto, would therefore likely be required).

In the UAE, there are often a number of general advantages to effecting an M&A transaction (regardless of sector) as a share purchase (as opposed to an asset purchase) transaction in any event.

3. Regulatory Approvals

The energy industry is highly regulated in the UAE (as in most jurisdictions). The buyer should conduct thorough legal due diligence to ensure that, among other things, the target business has all required permits, licences and approvals in place and that no proceedings have been instituted by governmental entities or agencies. Depending on the nature of the business being acquired the approval of certain government authorities / agencies (e.g. the Federal Electricity and Water Authority, DEWA, ADWEA and the UAE Ministry of Energy and Infrastructure) may be required prior to completion of the acquisition. This would mandate a split signing and completion transaction structure (which is often the case in relation to a share purchase transaction involving a UAE company in any event).

4. Warranties

Aside from the normal suite of warranties that should be included in a typical share purchase agreement, the buyer should carefully consider whether any additional, specific warranties relevant to the target business should be added or any areas that should be particularly focused on. For example, in respect of a solar energy power company, robust warranties as to leasehold or freehold title to the underlying land will be critical. In addition, warranties as to the solar energy company’s right to be connected to the relevant grid and infrastructure could be included in a share purchase agreement. In relation to an independent power project, the material contracts will typically be easily identifiable and accordingly warranties regarding material contracts can be simplified and targeted.

5. Impact on Financing and Security Documents

Power projects are typically subject to substantial and complex financing arrangements and accordingly any acquisition of shares is likely to require amendments to the financing and security agreements in place with respect to the projects. Accordingly, discussions with the lenders will need to run in parallel with discussions between the buyer and the seller, and the transaction will need to be structured so as to facilitate the amendment of the financing and security agreements.

6.0 Wider MENA Region Transactions

As mentioned above, the UAE may be a relevant jurisdiction in a renewable energy M&A transaction even where the renewable energy project is located in another jurisdiction in the MENA region. For example, the key stakeholders in the renewable energy project may have elected for a holding company or management company to be incorporated in the UAE given the UAE’s position as a key commercial and legal hub for the region. In such transactions, issues in respect of which the parties should be mindful include:

  • the economic substance regulations in the UAE require UAE onshore and free zone companies that carry out certain “Relevant Activities” to maintain and demonstrate an adequate “economic presence” in the UAE relative to the activities they undertake. The Relevant Activities include, among others, “Headquarters Business​​”, “Holding Company Business” and “Distribution and Service Centre Business​”. To the extent the target business has entities incorporated in the UAE which conduct such activities, it would need to be assessed as part of UAE legal due diligence as to whether the economic substance regulations are applicable to these entities and if so, if they are in compliance; and
  • a filing in respect of any change in the ultimate beneficial owners of the UAE subsidiaries which arises as a result of the transaction would need to be submitted to the applicable authority in the UAE with respect to ultimate beneficial ownership regulations in the UAE. This may even be the case even where there is no change in the direct shareholdings of the entities incorporated in the UAE. In the event that the transaction does involve a change in the direct shareholdings of the entities incorporated in the UAE, the applicable share transfer process in the UAE will need to be followed.


The transition to clean energy (which, according to some commentators, seems to have been accelerated by the outbreak of the Covid-19 pandemic, in that the pandemic has reinforced the need for respect for science and nature, and a global approach to a global problem) is likely to prompt an increase in M&A in the sector including in the UAE and the wider MENA region. Buyers and sellers in such transactions need to carefully consider, among other things, legal issues specific or relevant to the sector (including those outlined above).


This article, together with any commentary, does not constitute legal advice. It is provided solely for information purposes on a complimentary basis, without consideration of any specific objectives, circumstances or facts. It reflects then current views of the writer which may modify in time and based on differing objectives, circumstances or facts. A writer's view may differ from views of colleagues and/or the firm. You should seek legal advice on each specific matter. Access to this article does not form an attorney-client relationship.