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Saturday, 15 September 2007

Dewa planning $2.5 billion of Islamic bonds

MANAMA: State-owned Dubai Electricity & Water Authority (Dewa) is planning to sell as much as $2.5 billion of Islamic bonds, two sources familiar with the plan said yesterday. Demand for power and water in the emirate is surging as the population grows and businesses expand, spurred by a tripling in oil prices since 2002 that has fuelled economic growth. The sources declined to give details on the planned bond sale. Electricity consumption in the desert emirate, where day-time summer temperatures hover around 42 degrees centigrade, soared almost 30 percent to 21,475 gigawatt-hours last year, and water consumption in the desert emirate climbed 11.3 percent to 64.9 billion gallons, according to Dewa's Web site. Dubai's Majid Al Futtaim Group in 2005 built the Middle East's first indoor ski slope, covering with snow an area equivalent to three football fields and in a temperature all year round of -1 to -2 degrees centigrade, according to its Web site. "There is a lack of power supply across the Gulf with rapid industrial development and population growth," said Abid Riaz, senior research analyst at EFG-Hermes. "All these countries are playing catch-up." Dubai's population surged almost 26 per cent to 1.42 million at the end of last year, from 1.13m a year earlier, equivalent to 24,333 people every month, according to Dubai's Statistics Department. The figure does not include tourists. Dewa's managing director Saeed Mohamed Al Tayer said in March the emirate would spend 50 billion dirhams ($13.62bn) on boosting power generating capacity to 9,500 megawatts by 2010 from 4,599 megawatts at the end of last year, and expanding its transmission and distribution network. Demand for Islamic bonds, known as sukuk, has surged as more Muslims seek investments that comply with their beliefs, and more Western investors seek exposure to booming Gulf economies. Moody's Investors Service in August said it expected Gulf sales of corporate sukuk this year to exceed last year's record of $9 billion. Companies had sold $6.3 billion by August. "There's plenty of liquidity around but it all depends on the pricing," said Toby Lanyon, general manager in Bahrain for the European Islamic Investment Bank. Gulf sukuk sales have largely dried up in recent weeks, as global credit fears sparked by concerns over the U.S. subprime mortgage market prompted some companies to postpone sales. Ratings company Standard & Poor's last month assigned an A+ rating to Dewa floating rate notes that will be paid through the securitisation of the company's utilities income. Moody's gave the notes an A1 rating. - (GN, 15 Sep 07)
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