DEWA IPO bodes well for Dubai’s asset sale

A further nine government and state-owned companies are now set to be listed on the DFM

Optimism is growing over government plans to monetise state assets following the hugely successful Dubai Electricity & Water Authority (DEWA) initial public offering (IPO).

DEWA debuted on the Dubai Financial Market (DFM) on April 12 in the UAE’s largest ever IPO, raising $6.1 billion from local, regional and international investors. Such was the strength of demand to acquire shares in Dubai’s monopoly provider of water and electricity that the size of the share sale was increased from 6.5 percent to 18 percent. The IPO was 37 times oversubscribed and was the largest in the Middle East since the flotation of Saudi Aramco in late 2019.

DFM CEO Hamed Ali said the high level of interest was testament to the infrastructure and connectivity of the capital markets and the strength of Dubai in general. DEWA is now the largest listed company on the DFM, entering with a market capitalisation of $33.8 billion.

Pipeline of listings

The DEWA IPO is intended to be the first of 10 listings of Dubai-government owned assets – a plan first announced in November 2021. Other entities confirmed to be in the pipeline include business parks operator, Tecom Group; Salik, a road toll operator; and district cooling services provider Empower. The big name that investors have been waiting to come up for more than a decade is Dubai’s flag carrier Emirates. Late last year, company officials said an IPO was under consideration, but it remains to be seen when it will go ahead and whether it will be the airline itself or units attached to the business.

Empower and Tecom are in the process of finalising the legal structures necessary to proceed with their listings.

The DEWA float comes amid a broader Middle East IPO boom that has seen the region draw ahead of Europe for only the second time since the 2008 global financial crisis. By the end of March, the region’s floats had pulled in $4.8 billion, well above Europe’s $3.9 billion; DEWA’s IPO has now pushed the Middle East over the $10 billion mark. The last time it enjoyed this lead over Europe was following the Aramco IPO, which raised nearly $30 billion.

Widening the capital markets

AIi explained that Dubai’s listings are intended to drive “the growth of capital markets” rather than being a pure “privatisation programme.” The aim is to double the size of the DFM to AED 3 trillion ($817 billion) to help the bourse compete more effectively with stock markets in Saudi Arabia and Abu Dhabi, following a series of delistings and a lack of IPOs in recent years. At the same time as announcing the 10 asset sales, the government launched an AED2 billion market maker fund in a bid to encourage listings from other sectors such as energy, logistics and retail. It also announced an AED 1 billion fund to support tech company IPOs.

But a culture of privatisation and citizen investment will, nonetheless, be catalysed by the IPOs. 

Daniel Pryor, head of research at the London-based free market think-tank Adam Smith Institute, said: “It’s no wonder Dubai is embracing privatisation: a surefire recipe to boost economic development and improve infrastructure. Just as ordinary Brits continue to benefit from the Thatcher-era privatisations today, Emiratis can look forward to more investment in higher quality services, greater innovation and direct financial benefits if they end up becoming shareholders.”

Pryor added: “The selling off of government-controlled assets will invite more competition into stagnant markets, offering smart investors an opportunity to reap the rewards of a booming Emirati economy.”

Positive sentiment

DEWA’s shares surged by 23 percent after listing on April 12. Investors expect long-term gains on the back of a population forecast to grow from 3.5 million to 5.8 million by 2040.

Samia Bouazza, CEO of Multiply Group, which invested $100 million into DEWA at the IPO, said: “As one of the cornerstone investors, we are excited about what the future holds for one of the region’s leading fully integrated utilities companies, especially its strategy for energy transition to net zero by 2050.”

And that confidence can be felt globally. The DFM is open to investors of any nationality based in any country. British investors who turned a profit after the privatisations of the 1980s might look optimistically at Dubai’s move to offer up other assets to the market. 

Confirmed 2022 Dubai floats

• Salik: Road toll operator
• Tecom Group: Business parks operator
• Empower: District cooling services provider