UAE’s Pure Harvest considers a number of debt structures to expand to Asia
Pure Harvest Smart Farms’ breakthrough farming system has attracted a diverse mix of investors.
Dubai: Abu Dhabi-based Pure Harvest Smart Farms plans to raise funding through a new sukuk (Islamic bond) or conventional bond to support its food-security driven expansion plans, Tariq Sanad, the company’s chief financial officer, told Salaam Gateway.
The agritech firm’s breakthrough farming system that can produce year-round crops in the desert has attracted a diverse mix of investors since its inception in 2016.
“Our strategy is to grow 365 days a year because that is sustainable and serves the food security mandate. During the pandemic and the recent Ukraine-Russia conflict, we have seen that the food system is quite unstable and fragile,” said Sanad.
“These two events highlighted the importance of food security especially in the regions where we operate, which have harsh climates and a dependency on food imports,” he said.
Pure Harvest’s controlled environment agriculture (CEA) system features semi-automated greenhouses that optimise every aspect of the climate, including temperature, humidity, and carbon dioxide.
With this technology, the UAE-based company can grow fruits and vegetables using one-seventh of the water used by traditional greenhouse-based farms.
The system represents a much-needed solution for the growing food security challenges worsened by Russia’s invasion of Ukraine as it can boost local production in places with restrictive environments.
“We’ve utilised everything we’ve learnt from R&D to ensure we can control the environment inside, which represents a Mediterranean climate that’s conducive to producing fruit and vegetables throughout the year,” said Sanad.
“We cannot continue relying on 80% of our food [in the UAE] coming from outside. We’re solving a problem that we’re seeing right now, way ahead of other regions.”
Starting off with tomatoes six years ago, today, Pure Harvest can now grow three subsets of crops. These include vine crops such as cucumbers, tomatoes, courgettes (zucchini), aubergine (eggplant), and capsicum peppers; all types of leafy greens; and berries.
“With the current pipeline in construction, we’re able to produce about 1,130 tonnes a month with all the facilities we will have in Kuwait, the UAE, and Saudi Arabia,” said Sanad.
“Our strategy is to provide locally for locals; it’s not about producing to export. However, we’re exporting our expertise in terms of our expansion globally.”
The company secured $180 million from global investors in June this year.
“We started with a small semi-commercial facility, in Nahel, Abu Dhabi, and we did all our R&D on it, then we expanded with our investments and raised a sukuk that was able to fund our growth in the UAE and into Saudi Arabia, where we built another six-hectare facility,” said Sanad.
“We’re replicating this now. We’re looking to go into Kuwait, and we’ve acquired another facility in the UAE which we look forward to retrofitting with our technology. We’re also expanding to southeast Asia.”
The latest funding brought the total amount raised by Pure Harvest to-date to $387.1 million. It follows the $50 million raised through sukuk financing last year, led by Dubai’s SHUAA Capital.
He noted that the success of the sukuk was linked to the company’s food security objectives and environmental, social and governance (ESG) elements as well as its location in the Middle East, which is home to a large Islamic financing base.
However, even conventional investors supported this funding. One of the key investors in the sukuk was American investment firm Franklin Templeton, which said at the time that the investment reflected its ESG and Sharia-compliant mandates.
"We are now looking to raise another source of non-dilutive capital, and a Sukuk would be one source we consider,” said Sanad.
"These are big investments as we have ambitious growth plans that we need to fund. We build glass and steel which from a cost-capital perspective are better to fund with non-dilutive debt, of which a sukuk could be a consideration."
As for southeast Asia, the company is eyeing expansion in Malaysia, Singapore, Indonesia and the Philippines.
“Even though southeast Asia is very green, it has a subtropical humid climate, so you won’t see the fruits and vegetables you would see everywhere else, and they have a high dependency on imports,” said Sanad.
“Key parts of our inputs [for the greenhouse food production systems] are electricity and carbon dioxide; therefore, being close to power plants has a massive advantage in the cost structure. We’re looking to collaborate with commercial partners to enable that and help us find the right infrastructure.”
Globally, the controlled environment agriculture market is projected to grow from around $74 billion in 2020 to more than $172 billion in 2025, according to US-based KD Market Insights.
In addition to hydroponic greenhouse farming, Pure Harvest is expanding into vertical farming, another form of CEA, through a collaboration with South Korea’s PlanTFarm, whose country is highly urbanised. “We learnt everything from the hardest point. We selected a country [the UAE] which has one of the harshest climates, not only high in temperature but also in humidity, which is a key factor you need to take into consideration as you build these facilities” said Sanad.
“If you’re going to create a solution, it should work in the worst possible scenario. That was the reason we started in the UAE, besides having a lot of support from the government. A big part of it was, if we could solve it here, we could solve it anywhere,” he concluded.
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