Moody's upgrades Dewa to Ba1

Moody’s Investors Service on Monday said it had upgraded Dubai Electricity and Water Authority (Dewa) rating to Ba1 from Ba2 with stable outlook.

Moody's said it upgraded $3bn DEWA Funding Ltd. guaranteed debt instruments.

The rating action reflects the combination of Dewa’s manageable refinancing risk and adequate liquidity profile in the context of the company retaining a sizeable capital expenditure programme; maintaining a strong financial profile over the medium term, reflected by strong metrics for the rating category; and the gradual and consistent improvement of its credit metrics in recent quarters.

Moody's expects Dewa to continue to improve its credit metrics as a result of growing revenues and cash generation, thereby reducing volatility in operating performance. This growth can be attributed to the recent tariff increase and the introduction of a surplus charge

At the current rating level, Moody's assumes that Dewa will maintain an adequate liquidity profile by prudently phasing future capital expenditures; limiting shareholder returns; and accessing available sources for anticipated funding needs well in advance, thereby reducing potential future stress on cash flows.

The stable outlook reflects Moody's expectation that the environment within which Dewa currently operates will be subject to no material regulatory changes -- beyond any changes required to accommodate the Hassyan 1 independent water and power project -- or market adverse changes.

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