Empower went through a round of consolidation and acquisition of district cooling capacities in Dubai through these two years. Heading into its IPO, the company holds the title of the world's biggest district cooling service provider. Image Credit: Ahmed Ramzan/ Gulf News

Dubai: The district cooling company Empower is the next Dubai government owned enterprises to head into IPO mode, planning to sell 1 billion shares - representing 10 per cent of the capital - and with subscriptions opening October 31. The share price range is to be decided by book-building, something that two of the earlier three Dubai IPOs had done. The exception was the road-toll operator Salik, which set the price at Dh2.

According to a public announcement, the Empower subscription period closes November 7. The minimum subscription amount for the retail investor tranche is Dh5,000, and those deemed professional investors can start from Dh5 million. (The shares have a nominal value of 10 fils.)

Recently, Empower said that in the event of an IPO, a minimum annual dividend of Dh850 million will be paid for two years through half-yearly instalments. "Dividends are one of the biggest highlights of Empower IPO," said Junaid Ansari, Head of Investment Strategy & Research at Kuwait-based Kamco Invest.

The association with DEWA is surely helpful, and in addition, the long-term contract nature of revenues in the district cooling business gives visibility to future revenues and profits, assuring investors of future financial performance of the company.

- Junaid Ansari of Kamco Invest

Read more

Top Empower officials are bullish on growth prospects, which will include further consolidation in Dubai and possible opportunities for 'inorganic growth' too. Pictured here from left to right are Samer Khoudeir, Chief Sales and Marketing Officer - Empower; Ramesh Ramadurai, Chief Financial Officer - Empower; Ahmad Bin Shafar, Chief Executive Officer - Empower; Tariq Alyasi, Chief Operations and Maintenance Officer - Empower; and Edgar Qureshi, Chief Commercial Officer - Empower. Image Credit: Ahmed Ramzan / Gulf News

Empower confirmed that its offer price range will be announced October 31 ahead of the subscription process opening. Incidentally, DEWA holds 70 per cent in the entity, which operates district cooling capacities in prime Dubai locations such as the Palm, Meydan, etc.

The plan post-IPO is to deliver ‘incremental growth by leveraging infrastructure at existing developments, to expand its network to nearby and adjacent developments’, the company said in a statement. As with DEWA, Empower’s credentials will build on the rapid expansion of the city’s real estate development as well as of the resident base.

Another district cooling service provider, Tabreed, is already listed on the DFM. The Dubai Financial Market is up 6 per cent year-to-date. 

To make the shares more attractive from a valuation perspective, they are likely to be priced between Dh2.10 and Dh2.30.

- Vijay Valecha, Chief Investment Officer at Century Financial
Offer upsize?
The share size offered would surely be upsized, as allocations of 5 per cent each have been made to Emirates Investment Authority and the Pensions and Social Security Fund of Local Military Personnel in Dubai.

According to Junaid Ansari of Kamco, "The run up in GCC stock markets earlier this year and the recent resilience in regional indices vs. global markets have given confidence to private companies seeking to list. We believe that new (privately-owned) players would now be on the fence and gauge the performance of the market before making a move to raise funds."

Empower currently holds the title of the ‘world’s largest’ district cooling service provider, and in Dubai has a targeted share of around 80 per cent of the total connected capacity by end 2022. Its customer numbers total more than 110,000, a tally that includes those brought in by the recent acquisition of Nakheel and that of Dubai International Airport’s district cooling capacity.

Prospects for district cooling

The overall DCS sector in the emirate will likely grow from 25.6 per cent to 40 per cent by 2030. Dubai’s expansion of the urban areas will require more district cooling capacities being added in the medium-term. What that ensures is steady income growth for service providers. It would be interesting to see whether Empower has plans to go beyond the local market at any stage.

Even otherwise, further rapid development at locations such as MBR City and new projects from the likes of Nakheel will keep Empower busy. 

Back-to-back IPOs
Empower opens for subscription just as another one gets listed.

On October 31, in Abu Dhabi, the G42-owned Bayanat AI will list on ADX, and adding to the sock exchange's already impressive year in terms of new listings, the addition of new trading instruments such as futures, the alliance with FTSE, and the sheer growth in volumes.

ADX remains the regional leader in stock market growth through the year.