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Thursday, 1 November 2007

Dewa planning $2bn Islamic bond sale

State-owned Dubai Electricity and Water Authority (Dewa) plans to raise at least $2 billion through a sale of Islamic or conventional bonds that starts on Sunday, an official at one of the arranging banks said.Other bank officials in London and Dubai confirmed Dewa would start presentations to investors for its first bonds to raise cash for expansion in Dubai, where demand for power and water is driven by surging economic and population growth."A global investor roadshow commences on Sunday, for a benchmark sukuk or conventional transaction," one banker said, asking not to be identified. A benchmark-sized bond is typically considered to be worth at least $500 million. Sukuk comply with Islam's ban on lending for interest, instead paying bondholders the returns derived from underlying physical assets, such as rent from real estate."It will be at least $2 billion, probably a lot more," an official at one of the banks arranging the sale said.Barclays Capital, Citibank and Dubai Islamic Bank (DIB) are arranging the sale.People familiar with the plan told Reuters in September Dewa was looking to raise as much as $2.5 billion in sukuk alone.Sukuk sales have dried up after defaults on US home loans made banks around the world more reluctant to lend, driving up borrowing costs and triggering a global credit crunch in July.The size of Dewa's bond sale was subject to market conditions, and the bonds would be listed in London and Dubai, one banker said.Another said the roadshow would start in Dubai.Roadshows for large Gulf Arab sukuk sales typically target the Middle East, Europe and Asia.Moody's Investors Service gave the company an A1 credit rating and Fitch Ratings an AA- rating, citing links to the Dubai government.Dewa is expect to invest more than $16 billion by 2012 to expand its facilities, Moody's said. Dewa is Dubai's sole provider of power and water.Electricity consumption in the desert emirate, where day-time summer temperatures hover around 42 degrees centigrade, soared almost 30% to 21,475 gigawatt-hours last year, and water consumption climbed 11.3% to 64.9 billion gallons, according to Dewa's website. - (Reuters, 1 Nov 07)

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