Business | General
Dewa faces challenges with expansion plan
Dubai Electricity and Water Authority (Dewa) will face major challenges in implementing its large-scale investment plan over the next few years as the utility provider builds up capacity to match demand, a ratings agency said.
- By Shakir Husain, Staff Reporter
- Published: 23:23 November 28, 2008
Dubai: Dubai Electricity and Water Authority (Dewa) will face major challenges in implementing its large-scale investment plan over the next few years as the utility provider builds up capacity to match demand, a ratings agency said.
Moody's anticipates that Dewa will invest around Dh70 billion over the next five years to expand its core generation and desalination assets.
Dewa plans to triple its electricity generation capacity from the current 6.67 gigawatts (GW) to 21.7GW in 2017, while water desalination capacity will grow from 275 million gallons per day to 912.5 million gallons per day over the same period.
"The sheer size of the programme brings with it numerous challenges, including attracting the right caliber of bidders and contractors, as well as long term financing," Moody's said in a report, pointing out that the major near-term challenge is the company's refinancing plan, which involves addressing a $2.2 billion loan maturity by April 2009.
However, it is expected the Dubai government will intervene as a lender of last resort if the entity is not able to raise funds through other sources, given the strategic role Dewa plays in the emirate's development, the report noted.
The government has already shown its commitment to support Dewa when it explicitly guaranteed the $2.2 billion dual tranche syndicated Islamic facility early this year, it observed.
Softening
"Irrespective of a short-term softening of Dubai's growth, we view Dewa's ambitious expansion plan as challenging, given the size of these new developments and the necessity to implement them within a tight time frame," Moody's said.
It put Dewa's total debt as of September 2008 at Dh18.6 billion.
Dubai expects its population to double to more than three million by 2015, which will result in a further increase in electricity and water demand.
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