Dubai’s state-owned water and power utility plans IPO
DUBAI, United Arab Emirates — Dubai’s state-owned utility has announced that it will list a sliver of its worth on the emirate’s stock exchange, hoping to ride a recent wave of initial public offerings in the Gulf Arab states while avoiding the stumbles of past IPOs.
The Dubai Electricity and Water Authority’s offering involves 3.25 billion shares that will be placed on the Dubai Financial Market exchange, which the utility put at 6.5% over its overall worth.
It’s part of a wider plan announced last November by Sheikh Maktoum bin Mohammed Al Maktoum, the son of Dubai’s ruler Sheikh Mohammed bin Rashid Al Maktoum, to list 10 state industries on the stock market to boost its profile and raise new capital for the emirate.
Yet it comes amid increased volatility in markets worldwide given Russia’s war on Ukraine. Meanwhile, past IPOs of major players in Dubai’s economy have seen investors lose money and the companies ultimately go private again.
“We’ve seen a very enthusiastic response from all over the world,” said Thomas Varghese, the utility’s chief financial officer.
The utility, known by the acronym DEWA, held a glitzy announcement Tuesday at a luxury hotel announcing the IPO. Officials would not let journalists film the event.
In a prospectus for investors, DEWA said it finished 2021 with a profit of $1.7 billion. It had profits of $1.8 billion in 2019, though they dipped in 2020 during the pandemic and its lockdowns to $1.4 billion. It paid dividends to Dubai government of $1.2 billion, $408 million and $544 million in 2019, 2020 and 2021, respectively.
The company plans to pay dividends twice a year to investors, with a minimum of $1.6 billion paid yearly over the next five years.
Dubai is home to 3.5 million people and has seen a surge of interest as the sheikhdom weathered the pandemic and kept its vital tourism and real estate markets afloat. And DEWA remains one of the government services nearly every resident interacts with as the sole provider of electricity and water.
A renewed wave of IPOs has struck across the Gulf Arab states, likely fueled by the listing of the Saudi Arabian Oil Co., or Saudi Aramco. Even long-haul carrier Emirates, the jewel of state-linked industries known informally as Dubai Inc., has been discussed as a possible IPO target.
However, the prospectus also outlines the risks faced by Dubai, something always glossed over by its image-conscious rulers. The region has been on edge after years of attacks following the unilateral withdrawal by the U.S. from Iran’s nuclear deal with world powers. Abu Dhabi also recently came under attacks from Yemen’s Houthi rebels. “There can be no assurance that extremists or terrorist groups will not initiate terrorist or other violent activity in the UAE, or that the UAE will not be impacted by any escalation of regional armed conflict,” the prospectus reads.