x Abu Dhabi, UAEMonday 24 July 2017

Privatisation of Dubai's assets could raise $20bn

The privatisation programme being considered by the Government of Dubai could raise billions of dollars and substantially reduce the emirate's debts, according to an analysis by The National.

The privatisation programme being considered by the Government of Dubai could raise billions of dollars and substantially reduce the emirate's debts, according to an analysis by The National.

A study of the main candidates for privatisation, as named by Mohammed al Shaibani, the director general of the Dubai Ruler's Court and the chairman of the Dubai Supreme Fiscal Committee, shows potential total value of almost US$20 billion (Dh73.45bn) in five of the emirate's biggest corporations.

Emirates Airline, Jumeirah, DP World, Dubai Electricity and Water Authority (DEWA) and Dubai Aluminium were all mentioned by Mr al Shaibani in recent policy announcements about potential state sell-offs.

Analysing them according to declared or estimated profits, where available, shows a total potential value of $19.35bn, assuming the government retains a maximum controlling 51 per cent stake in all five.

The biggest contributor would be Emirates Airline, the calculations show. Sir Maurice Flanagan, its vice chairman, recently said the airline was on track to make at least $1.4bn in profit this year.

On a conservative ratio of 10 times earnings, this would make for a market capitalisation of $14bn and a potential flotation of about $7bn worth of shares.

"Solid companies with stable free cash flows and future growth potential are likely to be attractive to investors especially given strong global interest in emerging markets," said Khalid Howladar, the senior credit officer at the ratings agency Moody's Middle East.

The next biggest is the utilities company DEWA, which could produce a windfall of $6bn for the Government. But some bankers believe DEWA is not an imminent candidate for sell-off due to its strategic position within the emirate's economy.

Mr al Shaibani said recently direct government debt amounted to about $30bn, although other estimates put total debts, including government-related enterprises, at $110bn.

"Given the substantial size of the debt overhang, it would be difficult to clear it from economic growth alone," said Mr Howladar.

 

fkane@thenational.ae