Yields on Dubai Electricity & Water Authority’s eight-year bonds fell to a record as Moody’s Investors Service raised its rating to investment grade status on a “marked improvement” in cash flows.
The yield on the utility’s 7.375 percent dollar bonds due in October 2020 dropped 21 basis points, or 0.21 percentage point, to a record 4.7 percent at 4:26 p.m. in Dubai. Moody’s raised the long-term debt of Dubai Electricity, known as DEWA, by one level to Baa3, the lowest-investment grade ranking, with a stable outlook.
“The Moody’s upgrade to investment grade is well deserved,” said Gus Chehayeb, the Dubai-based director for Middle East research at Exotix Ltd. “DEWA continues to deliver and strengthen its credit metrics, through a combination of debt repayments and improving cash flows.” The utility is also benefiting “in general from Dubai’s recovering economy,” he said.
DEWA, which generates and distributes power and water in Dubai, is among state-linked companies in the city that have paid or restructured debt this year. Chief Executive Officer Saeed Mohammed al-Tayer said in March DEWA would repay 1.2 billion dirhams ($327 million) of loans that month ahead of schedule and that no further repayments are due this year. DEWA’s first-half profit rose 13 percent to 1.8 billion dirhams.
“DEWA’s business and financial profiles are commensurate with an investment-grade rating, with solid prospects for the company maintaining these in the medium term given recent operational improvements and credit-enhancing strategic steps taken in addition to the company’s recurring deleveraging efforts,” David Staples, Moody’s managing director for corporate finance issuers, said in a report today.
DEWA is expanding generation capacity as power demand in Dubai, one of seven sheikhdom’s that are part of the United Arab Emirates, climbed 3.8 percent in the second quarter, outstripping the 3 percent growth in supply in the same period, the company said this month.
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