By JON GAMBRELL, Associated Press
DUBAI, United Arab Emirates (AP) — Dubai’s utility said Tuesday it will list some of its value on the emirate’s stock exchange, hoping to ride a recent wave of initial public offerings in Gulf Arab states while avoiding the stumbles of past IPOs.
The Dubai Electricity and Water Authority’s bid involves 3.25 billion shares to be placed on the Dubai Capital Market exchange, which the utility has put at 6.5% of its overall value.
It is part of a broader plan announced last November by Sheikh Maktoum bin Mohammed Al Maktoum, the son of Dubai ruler Sheikh Mohammed bin Rashid Al Maktoum, to list 10 state-owned industries on the stock exchange to bolster its profile and raise new capital for the skyscraper. bordered emirate.
Yet this comes amid heightened volatility in global markets given Russia’s war on Ukraine. Meanwhile, past IPOs of major players in Dubai’s economy have seen investors lose money and companies eventually go private again.
“We’ve seen a very enthusiastic response from all over the world,” the utility’s chief financial officer, Thomas Varghese, told reporters. “There are a few mishaps in Europe, but overall we don’t see them negatively affecting our program.”
The utility, known by the acronym DEWA, held a glitzy announcement Tuesday at a luxury hotel announcing the IPO. Authorities did not allow reporters to film the announcement.
In an investor prospectus, DEWA said it ended 2021 with a profit of $1.7 billion. It made $1.8 billion in profits in 2019, though they dipped in 2020 during the pandemic and its lockdowns to $1.4 billion. It paid dividends to the 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 out each year over the next five years.
Dubai is home to 3.5 million people and has seen renewed interest as the Sheikh weathered the pandemic and kept its vital tourism and property markets afloat. And DEWA remains one of the government services that almost all residents interact with while living here as the sole provider of electricity and water.
A new wave of IPOs has hit the Gulf Arab states, likely fueled by the listing of the Saudi Arabian Oil Co., or Saudi Aramco. Even long-haul carrier Emirates, the crown 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 Dubai faces, which is always glossed over by its image-conscious executives. Already, the region is on edge after years of attacks following the United States’ unilateral withdrawal from Iran’s nuclear deal with world powers. Abu Dhabi has also recently come under attack from Houthi rebels in Yemen.
“There can be no assurance that extremists or terrorist groups will not initiate terrorist or other violent activities in the UAE, or that the UAE will not be affected by an escalation of a regional armed conflict,” it said. the prospectus. He also noted that Dubai currently has limited water supplies and that all of its crucial desalination plants are in the port of Jebel Ali, the busiest port of call for the US Navy outside the States. -United.
Dubai has also had difficult IPOs, even of major state-backed companies. DP World, the huge port operator, was listed to much fanfare in 2007 to go private again in 2020. A struggling amusement park project known as Dubai Parks & Resorts also went private that year. Real estate company DAMAC Properties, whose billionaire founder has close ties to former President Donald Trump and operates a Trump golf course in Dubai, also went private in 2021.
Asked about other IPO failures, DEWA CEO Saeed Mohammed al-Tayer said the utility’s fundamentals and capacity made it a valuable company.
“We have a solid infrastructure for the next five years,” he said.
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