Investors keen on the listing of the Dubai Electricity & Water Authority bought up the shares by the bucketful on its first day of trading Tuesday. Dewa, as it is known, had already increased the size of its share offering twice before settling on $6.1bn for 18 per cent of the equity. That made it the largest initial public offering in the Middle East since Saudi Aramco in 2019. Its shares jumped 15 per cent on their debut valuing Dewa at almost $39bn.
Dubai has developed a reputation as a place for companies and individuals seeking lighter touch regulation, according to the Carnegie Endowment. Even so, its financial sector has fallen behind regional competitors in Abu Dhabi and Riyadh. Dubai’s stock index has underperformed and new listings have failed to keep pace.
Dubai hopes a programme of partial privatisations starting with Dewa can improve matters. Others to come from a list of 10 include toll road operator Salik and district cooling operator Empower, which is 70 per cent owned by Dewa. One other privatisation which investors have awaited, that of Emirates airline, has yet to be announced.
Dewa’s power generation comes mostly from gas turbines. Just over a tenth is from renewables such as solar, which is expected to rise to 14 per cent at the end of this year.
Investors may well find Dewa’s monopoly status one of its most attractive features. Even so, Dubai’s government priced it attractively to ensure success. A dividend yield of more than 5 per cent competes well with international bonds offering just over 3 per cent.
At under 12 times this year’s expected ebitda Dewa should continue to attract investor attention. Regulated water and power utilities across Europe typically trade at mid-to-low teens multiples, though Dubai’s smaller market size deserves some valuation discount.
Steadier infrastructure and utilities such as Dewa may pique investor interest at a time of rising interest rates. But whether Dubai can do the same with the rest of its privatisations, especially if a lacklustre global IPO market rebounds, is the tougher test.