Empower is the world's biggest district cooling company, and with further gains expected as Dubai expands its development into more parts of the city. Image Credit: Ahmed Ramzan/ Gulf News

Dubai: The Dubai district cooling company Empower has set Dh1.31-Dh1.33 a share as the IPO price range, with 1 billion shares representing 10 per cent of the equity capital being available to investors. The company could still raise the size of the offering, while the final offer price will be announced on November 9, according to an announcement by the company.

Empower, in which DEWA holds 70 per cent, expects to pay a minimum of Dh850 million a year as dividend. The stock offer price suggests a yield of 6 per cent plus. Post-IPO, the DEWA stake will come down to 63 per cent (if the issue size is not raised. The other stakeholder in Empower is Emirates Power Investment).

Analysts had been expecting Empower to price at over Dh2, with the expectations being for around Dh2.25-Dh2.30.

The IPO – Dubai’s fourth this year – is opening for subscription today, with the retail investor tranche closing November 7. That meant for professional investors will do November 8. If the issue size is not increased, Empower would be raising Dh1.31 billion to Dh1.33 billion from the stake sale.

Of the IPOs from Dubai government enterprises to date, Empower is the first set a share pricing at under Dh2 (which was what the previous one from Salik was priced at). “The pricing strategy is aggressive, and that would confirm a dividend yield upwards of 6 per cent,” said an analyst. “The way I see it, it also raises the prospects for the Empower issue to be increased.”

The company had prior to the IPO announcement paid Dh2.9 billion as dividend to DEWA and Emirates Power Investment as dividend. Empower is the world's biggest district cooling company and with a dominant market share in Dubai.

The Group is targeting 12-13 per cent revenue growth for the year compared to a year ago. In the first-half 2022, revenues came to Dh1.15 billion.

  1. The Empower dividend strategy:
  2. The company expects to pay a minimum Dh850 million per annum, in the first two fiscal years following the offering (April 2023 to October 2024).
  3. It expects to distribute the first dividend payment of a minimum Dh425 million after the IPO, for the second-half of 2022, by April 2023.
  4. After the October 2024 distribution, the company expects to pay a 'sustainable' dividend in line with the growth of the business.

“The dividend policy is designed to reflect the company’s expectation of strong cash flow and expected long-term earnings potential, while allowing the company to retain sufficient capital to fund ongoing operating requirements and continued investment for long-term growth,” Empower said in the statement.

In Dubai, as of now, it services 110,000 customers, which include Burj Al Arab, DIFC, Emirates Towers, Museum of the Future and Palm Jumeirah. (Incidentally, Empower will be the second district cooling company to list after Tabreed.)

"Significant consolidation opportunities in the fast-growing district cooling market in UAE and internationally, coupled with operational improvements in cooling plants are also further expected to contribute to Empower’s future growth," the company has said. 

Empower's dominant share
In Dubai, Empower's market share will hit the 80% share by this year-end. At the time of the IPO plan announcement, Empower said it would look to acquisitions and regional expansion to drive more income growth.

Heavy retail and professional investor interest in Empower is a given, say market traders. "Empower's listing on DFM will give extra weightage to the utility services sub-category," said an analyst. "It has all the makings to be one of the more actively traded stocks on DFM."

"New listings this year accounted for 4.6 per cent of the volume traded in the two UAE exchanges during September and 5 per cent of value," said Junaid Ansari, Head of Investment Strategy & Research at Kuwait-based Kamco Invest. "With the listing of Burjeel Holdings in October, the overall share of new listings went up to 16.3 per cent of volumes so far in October and 12.3 per cent of value traded during the month.

"The increase in trading activity in shares of TAQA (the Abu Dhabi utlity company) also resulted in the relatively small share of volume and value traded for newly listed stocks in UAE during September."