Tuesday, Aug 23, 2011
--Empower expected to assume Palm District Cooling management
--Dubai's district cooling industry seen consolidating
--Palm District Cooling working on refinancing
By Nicolas Parasie
Of ZAWYA DOW JONES
DUBAI (Zawya Dow Jones)--Dubai-based district cooling firm Empower is expected to assume the management of local peer Palm District Cooling, or PDC, a subsidiary of Dubai World's investment arm, in a move that may eventually lead to the consolidation of the emirate's fragmented district cooling industry, four people familiar with the plans said.
The people said Empower, which is a joint venture between majority owner Dubai Electricity and Water Authority, or Dewa, and Dubai Technology and Media Free Zone, or Tecom, is set to assume the management of PDC as part of a larger plan being mulled in the emirate to consolidate the main local district cooling firms under one, financially stronger parent company, namely state utility Dewa.
"The whole industry of district cooling is going through a period of consolidation. These companies work on capital-intensive projects so there is a need for an entity such as Dewa which can take care of the capital raising," said one of the people familiar with the plans.
Dewa, presently the sole provider and distributor of electricity in Dubai, made a net profit of 3.5 billion U.A.E. dirhams ($954 million) in 2010 and has better access to capital markets. It sold $2 billion in a dual-tranche bond sale in October.
"These plans are still at a preliminary stage and are discussed at the highest government level," said another of the people familiar with the matter.
District cooling firms rode the wave of the regional real-estate boom and invested heavily in large-scale projects to provide cooling for new property developments. But business suffered after the global financial crisis led to a regional real-estate slump that saw property prices in Dubai fall by more than 50% from their 2008 peaks, forcing many real-estate developers to stop or delay projects. PDC, like other district cooling firms in the region, in the aftermath found it difficult to raise short-term capital to fund its activities.
In Abu Dhabi, National Central Cooling Co. (TABREED.DFM), or Tabreed, earlier this year had to rely on a capital injection from government-owned Mubadala Development Co. to cope with the aftermath of the crisis.
PDC is presently in talks with its corporate creditors to refinance debt, one of the people familiar with the situation said. It is not clear how much debt the firm is seeking to refinance but it raised $150 million via a loan in 2009, the person added.
A PDC spokeswoman confirmed that the company is "still working on the refinancing" but declined to provide any further details. She added that management at PDC was still the same. Empower declined to comment. Dewa didn't respond to emailed questions.
PDC is fully owned by Palm Utilities, itself a subsidiary of Istithmar World, according to the company. Istithmar is the investment arm of Dubai World, the government conglomerate that completed its $25 debt billion restructuring earlier this year.
PDC has been predominantly active on Dubai-based projects linked to property firm Nakheel--whose ownership is set to be transferred to Dubai's government from Dubai World once it completes its own debt restructuring. Projects that PDC is involved in include Jumeirah Lake Towers, Palm Jumeirah, Dubai Metals and Commodities Centre and Ibn Battuta Shopping Mall.
Empower is supplying cooling to Dubai's financial centre district and the Jumeirah Beach Residence housing development among others. It has earmarked AED9 billion in investments over the next five years and in June repaid the final instalment of a AED200 million loan from HSBC, according to its website.
Consolidating several district cooling firms under Dewa's umbrella, if agreed, may take up to two years, another person familiar with the situation said.
District cooling is a process whereby water is chilled at a plant and then channeled through a network of pipes to mainly large-scale developments such as military camps or a group of high-rise buildings. It is considered a more energy-efficient and less noisy alternative to the rooftop air-conditioning systems commonly found in the Middle East.
Company websites: http://www.palmutilities.com/; http://www.empower.ae/; http://www.dewa.gov.ae/
-By Nicolas Parasie, Dow Jones Newswires; +9714 446-1681; nicolas.parasie@dowjones.com
Copyright (c) 2011 Dow Jones & Co.
(END) Dow Jones Newswires
23-08-11 1100GMT
