Dubai to offer shares in DEWA to boost stock market trading

Emirate will sell a stake in Dubai Electricity and Water Authority ‘in coming months’, says deputy ruler

Dubai plans to offer shares in its main utility as part of a plan to boost the emirate’s flagging stock market. The emirate will sell a stake in Dubai Electricity and Water Authority “in coming months,” deputy ruler Maktoum bin Mohammed bin Rashid said in a tweet last month.

Shares will be listed “in stages” due to the size of the utility’s assets and profile in the economy.

Dubai said last month it plans to sell stakes in 10 state-owned companies in what may prove to be a test of confidence in a stock market dogged by falling volumes at a time when regional rivals are stepping up sales.

The sale is part of plans to boost the size of its financial market to AED3 trillion ($817 billion) as the Middle East’s business hub seeks to catch up with Abu Dhabi and Riyadh.

The emirate’s deputy ruler announced the plan at his first meeting as the head of the securities and exchange higher committee, without providing a timeline for the listings.

He also approved a AED2bn market-making fund to increase liquidity and a AED1bn fund to support tech IPOs.

DEWA has invited banks to pitch for a role on an initial public offering that could value the utility at around $25bn, according to Bloomberg quoting people familiar with matter.

The public utility announced that Moelis is its adviser on what will likely be the emirate’s biggest listing yet.

The company, owned by the Dubai government, will probably choose a mix of international and local banks, according to sources.

While Dubai firms are required to sell at least 25 per cent of their shares in an IPO, DEWA may try to list a smaller amount at first, the people said.

The deal could be the first of 10 IPOs of state companies planned by Dubai as it seeks to revive trading on its bourse and catch up with Abu Dhabi and Riyadh, which have both seen multiple listings in recent months.

Trading on the main bourse has fallen in three of the past four years as a string of companies delisted at a time of declining liquidity and stock prices.

DEWA has more than a million customers in Dubai, according to its website. Along with its subsidiaries, it has assets worth up to AED190 billion ($52 billion). It reported net income of AED4.9 billion in 2019, the latest data available to Bloomberg.

Dubai has staged just one IPO since 2017, and its only prospect of a listing this year fell through when logistics firm Tristar Transport pulled its offering in April.

At the same time, flagship names such as port operator DP World have delisted. Others like Emaar Malls and Damac Properties are in the process of doing so.

At the same time, the Covid-19 pandemic has hurt the city’s lifeblood tourism and real estate industries. Meantime, new listings in other Middle East financial hubs such as Abu Dhabi and Riyadh are attracting a flood of cash.

The IPO plan comes as Dubai and the wider Gulf economies recover from last year’s coronavirus pandemic and oil-price crash.

That rebound has buoyed regional stock markets. Investors placed more than $34bn of orders for Abu Dhabi-based ADNOC Drilling Co.’s $1.1bn IPO in September. ACWA Power International, a Saudi Arabian utility, attracted $300bn for its $1.2bn listing around the same time.

Dubai’s equity market has climbed 20 per cent this year, while Abu Dhabi’s is up almost 60 per cent and Saudi Arabia’s added 35 per cent.

Dubai announced its plan to IPO companies this month. It’s said that DEWA and Salik, which collects road tolls, will be among the 10 firms, but hasn’t revealed the names of the rest.