The planned listing comes a day after Dubai said it would sell stakes in 10 companies. It will be a test of confidence in a stock market dogged by falling volumes and at a time when regional rivals Saudi Arabia and Abu Dhabi are stepping up IPOs.
“This is a great move and the speed at which this announcement came shows that Dubai has a plan ready for execution,” said Mohammed Ali Yasin, chief strategy officer at Al Dhabi Capital Ltd. “This is a company that’s making money and will get a lot of demand from investors.”
DEWA caters to the emirate’s 3.4 million people. Along with its subsidiaries, it has assets worth up to 190 billion dirhams ($52 billion). It reported net income of 4.9 billion dirhams in 2019, the latest data available to Bloomberg.
It became debt free after repaying its last commercial bond last year, according to Chief Executive Officer Saeed Mohammed Al Tayer. The company has other unused credit lines and uses project financing for specific facilities.
“We believe the exceptionally high quality of state owned enterprises in Dubai are a guarantee of success for the privatization programme,” said Miguel Azevedo, head of investment banking for the Middle East and Africa at Citigroup Inc., which has worked on several of the emirate’s IPOs.
Equity trading in Dubai has fallen in three of the past four years and a string of companies delisted. At the same time, the Covid-19 pandemic hurt the city’s lifeblood tourism and real estate industries.
Yet the economy has rebounded this year thanks to Dubai’s rapid vaccination drive and push to attract visitors. Rising oil prices have also buoyed Persian Gulf states more broadly.
Investor appetite for the region’s power and water providers was underscored by ACWA Power International’s October IPO in Saudi Arabia. The company has surged 37% since it was listed last month, giving it a valuation of $15 billion.
In Dubai, the stock market’s biggest companies are banks and real estate developers. The city 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.