Moody's changes Dewa outlook to positive

Moody's Investors Service on Wednesday changed the outlook to positive from stable for Dubai Electricity and
Water Authority (Dewa) including related entities (Dewa Funding Ltd and its guaranteed debt instruments ($1 billion notes due April 2015).

At the same time, Moody's has converted Dewa's issuer rating into a Ba2 corporate family rating (CFR) and assigned a probability of default rating (PDR) of Ba2, in line with the rating agency's practice for corporate issuers with non-investment-grade ratings.

The change in outlook to positive reflects the constructive impact of Dewa's ongoing efforts to extend its debt maturity profile, thereby strengthening its liquidity profile. In April 2010, Dewa raised $1bn worth of five-year notes and signed a number of Export Credit Agency (ECA) agreements on August 31, 2010 worth more than Dh4.2bn with a maturity of 12 years each. Moody's expects that the estimated Dh4.4bn worth of debt repayments that are due
by September 2011, as well as capital expenditures and working capital requirements, will be adequately covered by Dewa's cash on hand (which amounted to Dh2.55bn as at June 30, 2010) and available credit facilities.

Moreover, despite the slowdown in economic growth over the past 18 months, Moody's notes that Dewa's operating performance has held up reasonably well. Revenues in the first six months of 2010 grew by 3.4 per cent, with electricity demand growing by 7.8 percent whilst water consumption fell by 0.4 per cent due to reduced demand from the construction sector. Dewa's operating profit fell slightly due to higher input costs related to natural gas and fuel. Dewa still benefits from favourable off-take agreements below market price.

Looking ahead, Moody's says that Dewa's ratings could be upgraded over the medium term provided it continues to prudently manage its debt maturity profile, especially its upcoming debt maturities, without compromising its capital expenditure programme

Meanwhile, Dewa is launching a two-tranche dollar bond, a source at one of the lead managers said on Wednesday, Reuters adds.

The six and 10-year bonds will each be of benchmark size - at least $500 million.

Lead managers are Citi, Credit Agricole, National Bank of Abu Dhabi, RBS and Standard Chartered, the source added.

Pricing will take place on Thursday.

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