x Abu Dhabi, UAEThursday 18 January 2018

S&P raises DEWA bond issue rating

Bonds issued by Thor Asset Purchase for Dubai Electricity and Water Authority are no longer considered "junk", the ratings agency S&P said.

Bonds issued by a vehicle connected with Dubai's power utility are no longer considered "junk", says a credit ratings agency.

The improved outlook for debt issued by the Dubai Electricity and Water Authority (DEWA) comes as Dubai World puts together the final pieces of a plan to restructure its debt.

Standard & Poor's (S&P) yesterday raised the rating on US$2 billion (Dh7.34bn) worth of bonds from Thor Asset Purchase, a Cayman Islands vehicle that issued DEWA debt, one notch to "BBB minus".

The rating, which is the lowest for an investment-grade bond, partially reverses a sharp downgrade DEWA underwent last December, in the middle of the larger debt crisis triggered by Dubai World.

S&P said it raised Thor's grade after DEWA generated more cash from operations earlier this year and successfully issued $2bn in new bonds two weeks ago.

"We consider that DEWA's recent issuance … significantly improves its liquidity position over the next 12 months," S&P analysts wrote.

"Furthermore, DEWA's first-half results in 2010 significantly outpaced our expectations, resulting in a return to stronger free cash flows."

S&P, along with Fitch Ratings and Moody's Investors Service, grew concerned about an accelerated repayment clause in the Thor bond issuance that could have forced DEWA to repay the debt in full earlier than the 2036 due date.

The issue was resolved when bondholders agreed to modify the language of the issuance and DEWA agreed to repay an unspecified portion of the debt by the end of this year, Fitch said in March.

DEWA does not make its financial results public but said in August that peak electricity consumption rose 9.6 per cent over the same period last year, indicating increased electricity sales.

The credit rating boost reflects improved liquidity and performance, the DEWA managing director Saeed al Tayer said yesterday.

"This hike in rating by Standard & Poor's indicates the strong performance of DEWA and the trust of the international market is really focused on Dubai," he said.