Khaleej Times - Dewa listing set to revive IPOs market

Devesh Mamtani, Special to Khaleej Times March 15, 2022

Dubai Electricity & Water Authority (Dewa) on Tuesday announced plans to launch initial public offering (IPO) and list the company’s shares at Dubai Financial Market as part of the government plan to boost the emirate’s stock market to Dh3 trillion.In a statement, Dewa said it would offer 3.25 billion shares on the stock market, which it put as equivalent to 6.5 per cent of its overall worth. It did not provide an initial price for the shares.

The power utility, which is expected to start trading on the DFM by April 12, said it will aim to pay an annual dividend of Dh6.2 billion for the next five years.

Addressing a press conference in Dubai, managing director and CEO of Dewa Saeed Mohammed Al Tayer said demand for water and electricity in Dubai will sustain an upward trend as the population is expected to grow from around 3.5 million people today to 5.8 million people by 2040.

“Energy demand increased by 11 per cent in 2021, almost triple Dewa’s expectation,” he said.

The power utility senior officials such as Waleed bin Salman, executive vice-president (EVP) for business development and excellence; Khawla Al Mehairi, EVP for strategy and government communication; and Yousef Jebril, EVP for power and water planning; and Thomas Varghese, chief financial officer, were also present on the occasion.

Dewa leads IPO series

The power utility’s decision to go public comes as Dubai seeks to revive interest in its capital markets by listing as many as 10 state-owned entities this year.

Analysts and market experts said road toll system Salik and business park operator Tecom earmarked as possible next candidates to launch IPOs in coming months. They also hinted that businesses within Emirates Group, including dnata and loyalty program Skywards, as well as Dubai airport’s Duty Free, are among the potential brands being considered for public offer.

Sheikh Maktoum bin Mohammed bin Rashid Al Maktoum, Deputy Ruler of Dubai, Deputy Prime Minister and Minister of Finance, announced in November that the government will list 10 state-owned companies on the DFM to increase the size of the stock market in the Emirate to Dh3 trillion, raise the competitiveness of bourses and encourage IPOs.

“Today represents a significant moment in the history of Dewa and is an important step towards achieving our vision for capital markets in Dubai. As a central component of the Dubai economy, Dewa has a critical role to play in supporting the future growth of the Emirate and its transition to a net zero economy by 2050," Sheikh Maktoum said.

Reshaping Dubai’s future

Devesh Mamtani, chief market strategist at Century Financial, said the Dewa listing will be the first of the upcoming 10 big listings on the DFM.

“Dewa has a proactive role in shaping the future of Dubai with a keen focus on energy and climate change. The listing of the leading giant will be a trailblazing event for the trading activity on DFM and is likely to receive an overwhelming response on the IPO day,” Mamtani said.

He said the listing plan aims to help the Dubai stock market compete more effectively with bigger exchanges in the region, such as those in Saudi Arabia and neighbouring Abu Dhabi.

“The growth of DFM is long due and the listing of Dewa will open doors to a flurry of IPO on the exchange, such as the road toll operator Salik, to enhance trading volumes and improve retail interaction. The emirate has strategized the revival of the local stock exchange with stellar offerings in the pipeline and is inaugurating the trail with a dominating behemoth,” he said.

Historical moment

Al Tayer said Dewa has a very attractive financial profile and high visibility over cash flow generation and shareholder returns.

While describing IPO plan a historical moment for Dewa as the first government entity in Dubai to go public, he said Dubai’s fast paced development has resulted in a rapid increase in the demand for electricity and water.

“We have recorded 11 per cent growth in power demand last year despite the pandemic and slowdown in global economy. The utility has a firm future plans to sustain this growth and it will be playing a key role in Dubai’s green energy transition process,” Al Tayer said.

He said the company won’t need to raise debt over the next five years and capital expenditure for this year will be ranging between Dh8 billion to Dh9 billion.

Citigroup, Emirates NBD Bank and HSBC Holdings are managing the share sale while First Abu Dhabi Bank and Goldman Sachs Group involved as bookrunners.

Strong balance sheet

Dewa and its subsidiaries, which caters to the emirate’s 3.4 million people, has assets worth up to Dh190 billion ($52 billion). It recorded Dh23.8 billion revenues in 2021, reflecting a compound annual growth rate of two per cent during the period of 2019-21.

The power utility reported Dh12.1 billion adjusted earnings before interest, taxes, depreciation, and amortisation in 2021 while net income stood firm at Dh6.6 billion. It has a strong balance sheet with low net debt of just Dh17.6 billion last year.

The utility company, which serves over one million customers in Dubai, has a generation capacity of 13.4 gigawatts of electricity as well as 490 million imperial gallons of desalinated water each day.

“We’ve seen a very enthusiastic response from all over the world. There are some misevents in Europe but by and large we don’t see it affecting adversely our program,” Thomas Varghese told journalists at the event.

Clean energy top priority

“Dewa has a world-class governance system and continuous record of good governance across all its operations. It is ready to meet the increasing demand for electricity and water in the emirate, as the population is expected to grow from around 3.5 million people today to 5.8 million people by 2040,” Al Tayer said.

He said Dewa supports the Dubai Net Zero Carbon Emissions Strategy 2050 and is well-aligned to the Dubai Clean Energy Strategy 2050, which aims to provide 100 per cent of Dubai’s energy production capacity from clean energy sources by 2050.

“Looking ahead, Dewa will support the UAE’s strategic growth ambitions by providing Dubai’s millions of residents and visitors with world-class services and innovative energy solutions. And that in turn will enrich lives while ensuring the happiness and wellbeing of all our stakeholders," he said.