[Edaily Marketin Soyoung Park Reporter] The global investment banking (IB) industry is turning its attention to the Middle East, home to a host of the world’s largest sovereign wealth funds. “Oil Drive” is a series covering news from the Middle Eastern investment market. It covers stories of global investment firms diving into “oil money” as well as local developments in the Middle East as the region seeks to move away from oil dependence and focus on investments in new technologies. It also reports on South Korean companies attracting capital from the Middle East. [Editor’s Note]

Electricity demand is on the rise in the Middle East and North Africa (MENA) region. Investments in artificial intelligence (AI) and digital infrastructure have traditionally been led by government-backed capital, such as sovereign wealth funds and state-owned enterprises.

However, as project scales have recently grown, there is a clear trend toward attracting private capital—primarily through long-term funding channels such as project financing (PF) from banks and infrastructure funds.

In South Korea as well, there is a growing view that AI power infrastructure in the Middle East represents a new alternative investment asset. There is talk that existing experience with project financing for power plants in the Middle East could be expanded to finance AI infrastructure.

According to the global investment banking (IB) industry on the 8th, the investment structure surrounding AI data centers in the MENA region is expanding from direct capital expenditures by technology companies to long-term infrastructure investments utilizing project financing (PF) and institutional capital.

Rystad Energy, a global energy research and analysis firm, forecasts that electricity demand in the MENA region will more than double, rising from 1,671 terawatt-hours (TWh) in 2025 to 3,670 TWh in 2050. This highlights how, as competition in AI technology intensifies in the MENA region, data centers are emerging as a new source of electricity demand alongside the hydrogen and transportation sectors.

One of the key bottlenecks in expanding data centers is securing a stable power supply. Therefore, countries in the MENA region need to invest not only in building data centers but also in power generation, energy storage systems (ESS), transmission and distribution, and cooling facilities. To this end, government funds, such as sovereign wealth funds, have invested in alternative investment portfolios that combine power and digital infrastructure.

However, as the scale of power demand grows, there is an increasing need for structures that attract private capital, such as bank project financing (PF) and infrastructure funds. For example, in the United Arab Emirates (UAE), there are efforts to create investment assets by securing long-term contracts for renewable energy that can provide a stable supply 24 hours a day. This involves combining solar power with large-scale ESS to ensure a consistent power supply, which in turn serves as the basis for securing large-scale bank project financing.

Saudi Arabia is taking an even more proactive approach. DataVolt, a developer and operator of renewable-energy-based AI data centers, is pursuing a plan to finance an AI data center currently under construction in Saudi Arabia using non-recourse project finance. This structure recoups the loan based on the project’s assets and cash flows.

Funds focused on data center development have also entered the market. BSF Capital (formerly Saudi Franci Capital) has established the “Saudi Data Center Fund 1” in partnership with Al Muammar Information Systems.

Domestic general partners (GPs) are also expected to identify new overseas alternative investment opportunities in the MENA region. South Korea and the UAE are currently pursuing cooperation that combines AI data centers and energy infrastructure through the “Stargate UAE” initiative. This encompasses not only mega-scale AI data centers but also the construction of power grids utilizing nuclear power, natural gas, and renewable energy.

The Korean financial sector has also accumulated project finance (PF) experience in Middle Eastern power plant infrastructure. The Export-Import Bank of Korea provided $225 million (approximately 302.4 billion won) in project finance for the 2GW Al-Sadawi solar power project in Saudi Arabia, in which Korea Electric Power Corporation (KEPCO) participated. A large number of global commercial banks also participated in the project’s lending syndicate.

An official in the investment banking industry stated, “As data centers and power infrastructure become increasingly integrated in the future, there will be greater scope to expand existing project finance experience in power generation into AI infrastructure financing,” adding, “This means we can broaden our perspective from export financing that simply follows construction companies to the next stage, where AI power infrastructure itself is viewed as an investment asset.”