Dewa plans to issue bonds worth $1.5 billion in April to fund expansion

Dubai Electricity and Water Authority (Dewa) will issue $1.5 billion (Dh5.5bn) worth of bonds in April to fund its ongoing expansion plans, the utility firm's top official told Emirates Business.

When sold, Dewa would have raised nearly Dh10bn from international markets over the period of 12 months. Dewa is also looking at nearly doubling the size of its ECA facility in the next few months.

"We've done about Dh4bn from ECA (export credit agency) deals for the last eight months and we will issue the $1.5bn bond in April this year," said Saeed Mohammed Al Tayer, Dewa MD and CEO.

Industry analysts welcome the plan but remain in the watch and see mode as they wait for the market's response to the news.

"This is a good news because it indicates that some appetite may be strengthening for quality issuer for sound infrastructure projects. It is a positive sign that a good credit is looking to come to the market," said Michael Grifferty President, The Gulf Bond and Sukuk Association (GBSA).

Jan Willem Plantagie, Managing Director and Regional Manager at Standard & Poor's said the timing of bond issuance is often driven by capital requirements or capital expenditure.

"It is not necessarily dictated by what the market circumstances are," he said. "What does this mean in view of the market will only be determined once it is issued and then we will look at the pricing and the investors demand for this.

The pricing, he added, may be more costly this time due to previous credit downgrades that Dewa had.

"The current pricing reflects the recent downgrades already so the new bonds will probably be priced with the current bonds," said Stephen de Stadler, Managing Director and Head of Business Development at Fitch Ratings.

"But it is definitely a good thing that Dewa is issuing bonds," he added. "Dewa feels it has the feasibility to issue bonds and I would like to see later what the appetite of the market is."

At the end of 2008, Dewa recorded a net profit of Dh4.2bn compared to a net loss of Dh744m in 2007. According to Gulf Research Center, Dewa, is the only government owned company that has an explicit government guarantee.

With regard, however, to the Dh3.2bn sukuk it issued on June 16, 2008 due in 2013, Dewa's prospectus says the certificates will be limited recourse obligations of the Issuer.

Potential investors, it noted, should be aware that the Government of Dubai is "not guaranteeing the obligations of Dewa Funding Limited" under the certificates or the obligations of Dewa under any of the Transaction documents to which it is a party.

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