Global Arab Network | UAE - Fitch Assigns DEWA's MTN Programme Final 'BBB-' Rating

Translate this article to your language:

GANPublications

e-Publications

Add Site to Favorites

Add Page to Favorites

Make Homepage

Share This Page

RSS Feed

--------------------------------------------------------------------------------------------------------------------
| |

UAE - Fitch Assigns DEWA's MTN Programme Final 'BBB-' Rating

Global Arab Network - - Mohammed Almasri

Thursday, 01 April 2010 17:09

Fitch Ratings has assigned the Dubai Electricity and Water Authority's (DEWA) proposed USD3bn global medium-term note programme a final rating of 'BBB-' and placed it on Rating Watch Negative (RWN). The rating is in line with DEWA's Long-term Issuer Default Rating of 'BBB-', which is also on RWN.

Prospective notes under the programme will constitute direct, unconditional and unsecured obligations of DEWA and will rank equally with all other outstanding unsecured and unsubordinated obligations of DEWA. Notes will be subject to a negative pledge and a cross default provision (related to an event of default on an amount exceeding USD40m). DEWA is also subject to a limitation on the incurrence of indebtedness (the consolidated EBITDA/interest expense covenant for the two most recent consecutive six month periods has been set at 2.5x or more) and to a limitation on dividend payments (equal to or less than 50% of consolidated net profit for the relevant year). Issuance proceeds are scheduled to be used for general corporate purposes.

All of DEWA's ratings, including its senior unsecured debt, are on RWN, where they were placed on 2 December 2009, reflecting uncertainty over the impact of a potential near-term amortisation of a portion of privately-held debt, issued by a related securitisation entity. Amendments to the transaction documents for this debt have averted accelerated repayment and allayed concerns about DEWA's liquidity. The RWN, nonetheless, reflects the wider challenges that the Emirate of Dubai is facing.

DEWA's ratings remain aligned to the creditworthiness of Dubai in accordance with Fitch's parent subsidiary methodology. Secure electricity supply is considered by the government as crucial for Dubai's development, and the emirate's involvement in DEWA is manifested in numerous ways, including the appointment of board members and the setting of electricity and water tariffs. DEWA also closely coordinates its strategic plan, annual budget and funding plans with the government. In addition, the company sources its gas, which is the primary fuel source needed to fire its generation plants, from the Dubai Supply Authority. DEWA's ratings continue to be based on the assumption that financial support from the shareholder will be forthcoming in the event of any future potential funding gap.

DEWA's ratings are also supported by its monopolistic market position, improving efficiency levels, and modern asset base. On a standalone basis, DEWA's creditworthiness would warrant a Long-term IDR above 'BBB-' and its credit ratios are expected to remain commensurate with investment-grade metrics.

Global Arab Network

Add comment

The opinions of the authors in articles published are theirs alone and do not necessarily reflect the views of Global Arab Network
------------------------------------------------------------------------------
Published comments are the opinions of private individuals and do not reflect the views of Global Arab Network