Dubai Electricity and Water Authority (DEWA), which recently announced its highest first-quarter EBITDA of AED2.6 billion in its history ($710 million, up 9 percent) and record first-quarter consolidated operating profit of AED995 million ($271 million, up 11.6 percent), have received a rating boost from Moody’s.
The exclusive electricity and water services provider, which is listed on the Dubai Financial Market (DFM), has been upgraded from Baa2 to A3 with stable outlook by the New York-based Moody’s. DEWA’s Baseline Credit Assessment (BCA) has also been upped to baa1 from baa2.
Moody’s is one of the leading agencies in the world providing data, intelligence and analytical tools to help business and financial leaders make decisions.
In its analysis, Moody’s noted the “extraordinary support from the Government of Dubai” for the utilities company.
Moody’s said: “DEWA’s baa1 BCA is supported by the company’s (1) dominant market position in Dubai’s power and water sectors and its strong asset base with a 56% reserve margin recorded in 2023; (2) generally strong credit metrics for the current rating level; (3) a tariff structure that supports the company’s healthy cash flow generation ability; and (4) strong liquidity profile.”
The report also added: “DEWA has excellent liquidity. As of 31 March 2024, the company had around AED10 billion of cash and cash equivalents and AED8.3 billion of committed facilities. Over the course of the next 12 months, Moody’s expects DEWA to generate around AED15 billion of cash flow from operations, which along with its existing cash holdings will be sufficient to cover cash outflows of around AED24 billion, which represent Moody’s forecasts of DEWA’s committed capital spending needs, upcoming debt repayment and dividends.”
The stable outlook reflects the authority’s low business risk profile and considers the significant credit linkages between DEWA and the Government of Dubai.
Saeed Mohammed Al Tayer, MD & CEO of DEWA, commented: “The upgrade is a tribute to the visionary leadership of His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, and the directives of His Highness Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum, Crown Prince of Dubai and Chairman of the Executive Council of Dubai, and His Highness Sheikh Maktoum bin Mohammed bin Rashid Al Maktoum, First Deputy Ruler of Dubai, Deputy Prime Minister, and Minister of Finance of the UAE.
“The rating upgrade reflects favourable economic and fiscal developments in the emirate of Dubai, which will translate into improved financial and operating results for the company. DEWA’s robust asset base, low overall leverage, strong operating cashflow provide enhanced certainty of consistent dividend for our valued shareholders.”
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