Dubai launches privatisation drive with power and water IPO

Dubai has kicked off plans to boost its capital markets by selling stakes in 10 state-owned businesses with the IPO of its monopoly electricity and water provider.

In its intention to float statement on Tuesday, the Dubai Electricity and Water Authority said it would offer 3.25bn shares, or 6.5 per cent of its share capital, in what could be one of the largest listings ever in the emirate. Officials and bankers have previously said the listing could value Dewa at around 100bn dirhams ($27.2bn).

“Dubai’s fast paced development has resulted in a rapid increase in the demand for electricity and water,” chief executive Saeed Al Tayer said in a statement. “And Dewa has grown along with Dubai’s expanding economy, population and world-class competitive infrastructure.” Electricity demand grew 11 per cent in 2021, ahead of the forecast 4 per cent, he said.

The Dewa IPO is part of a plan to revive Dubai’s moribund capital markets with a series of part-privatisations, as well as the expansion of market making and support for technology firms seeking to list on the Dubai Financial Market.

The government aims to boost its domestic markets after falling behind regional competitors Abu Dhabi and Riyadh, where volume and valuations have soared in recent years.

Dubai has also revealed plans to float other government and state-related entities, including Salik, the road toll unit of the transportation authority; Empower, another utility; and business park operator Tecom.

It has yet to announce the other six businesses being readied for privatisation, with bankers anticipating they include a part of Dubai’s corporate crown jewel, Emirates Group, which owns the airline and a range of other airport and travel services, or even the sale of shares in the international airline itself, as travel demand has recovered.

Dubai, which was initially hit hard by the pandemic, has rebounded quickly as wealthy people flocked there to escape lockdowns elsewhere. The regional business hub kept its economy open alongside public health restrictions.

War in Ukraine has now sparked another inflow of money, with rich Russians flocking to the emirate as sanctions have tightened and the conflict intensified.

Outlining its growth opportunities, Dewa said Dubai has around 3.5mn residents and an active daytime population of 4.7mn, with the figures expected to rise to 5.8mn and 7.8mn respectively by 2040.

The company’s adjusted ebitda was Dh12.1bn in 2021 with net income of Dh6.6bn. Net debt stood at Dh17.6bn.

The company is also integral to the emirate’s efforts to reach net zero carbon emissions by 2050. Around 11.4 per cent of its power capacity comes from renewable sources, including the world’s largest single-site solar park, with an expected increase to 14 per cent by the end of this year.

Dewa said there was “substantial” interest in the flotation and doubted that Russia’s invasion of Ukraine would derail its plans.