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Dewa needs $16b in next five years

Friday, Nov 02, 2007

Dubai: Dubai Electricity and Water Authority (Dewa) requires $16 billion (Dh58.72 billion) to fund its utility projects over the next five years and is set to launch its first bond sale on Sunday.

Dewa is planning to build a huge electricity and water desalination complex in Jebel Ali, said to be the world's largest, to power Dubai's rapid economic growth and meet demands of rising population.

The Jebel Ali complex, with capacity estimated to be 9,000 megawatts of electricity and 600 million gallons of water per day, could cost more than $12 billion.

It is one of several utility projects under study, an official said, adding that the emirate's sole utility provider needs more than $30 billion in the next 10 years. Dewa will launch its first bond sale on Sunday to raise funds for expansion.

"It is Dewa 's debut bond sale. It is a benchmark issue," a banker familiar with the matter told Gulf News, but gave no details. The roadshow will be conducted in Dubai and Abu Dhabi, a source said. Dewa could raise about $2.5 billion in two tranches, one Islamic and one conventional bond issue, the source said. Barclays Capital, Citibank and Dubai Islamic Bank are said to be arranging the sale.

Moody's has assigned an A1 credit rating to Dewa and Fitch gave an AA- rating, with both the agencies highlighting the company's key role in supporting Dubai's economic growth.

Profile change

" Dewa will be required to more than triple power and water capacity over the next 10 years, which is likely to result in a step-change of its to-date strong financial profile. Over the next five years, Moody's anticipates that Dewa will be required to invest more than $16 billion in the expansion of its generation, transmission and distribution facilities to cater for rising demand," said Philipp Lotter, Moody's senior credit officer and lead analyst for Dewa .

The agency said Dewa 's ratings reflect the group's intrinsic credit strengths and the additional support that can be derived from the financial strength of Dubai. Lotter said the utility has a track record of "efficient and modern operations" and will benefit from its monopoly position and as a stable long-term power supplier "in the context of Dubai's ambitious expansion".

But Fitch said Dewa 's profitability can be severely compromised if gas supply volumes are insufficient, "as became evident in 2006 when Dewa had to purchase secondary liquid fuels at much higher prices."

The current number of 360,000 customers is expected to grow significantly in the coming years as the ongoing industrial, residential and tourism projects are completed.

Hundreds of thousands of people will be added to Dubai's current population of about 1.5 million when large-scale developments such as Dubai World Central, Dubai Waterfront, Palm Islands and Dubailand are completed.

© Gulf News 2007. All rights reserved.

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