Dubai utility surges after pulling off year’s second-biggest IPO

The logo of Dubai Electricity & Water Authority PJSC (DEWA) on a vehicle outside their office in the Al Hudaiba district of Dubai, United Arab Emirates, on Thursday, April 7, 2022. Dubai’s main power and water company raised $6.1 billion in the world’s second-biggest initial public offering this year, defying a global slowdown in listings. Photographer: Christopher Pike/Bloomberg

Dubai Electricity & Water Authority jumped in its trading debut after raising $6.1 billion in the world’s second-biggest initial public offering this year.

Shares of Dubai’s main utility rose 20% to 2.98 dirhams from the offer price of 2.48 dirhams, which was the top end of the marketed range. The IPO valued DEWA at $33.8 billion.

The deal is the latest sign of feverish appetite for IPOs from the Arab Gulf. DEWA almost tripled the size of its offer to 18% in the face of huge demand, drawing orders worth $86 billion, excluding cornerstone and strategic investors.

Russia’s invasion of Ukraine has shuttered global IPO markets, already buckling under the weight of surging inflation and monetary policy tightening. The Middle East sidestepped the worst of the volatility, while soaring energy prices boosted cash reserves for local investors, who have been keen to put the money to work.

DEWA priced its IPO for an implied dividend yield of 5%, a boon as rising interest rates make companies that provide steady income more attractive. The utility has a monopoly in the city and is seen as a way to gain exposure to Dubai’s economic and demographic growth potential.

Dubai last year missed out on a flurry of share sales in the Middle East, led by neighboring Abu Dhabi and Saudi Arabia, and DEWA is only the emirate’s second IPO since 2017. Now, the government is planning to list nine more state companies, including Tecom Group, in an effort to boost trading activity.

Trading volume had picked up in Dubai over the last three months of 2021, hitting a four-year high in November after a string of initiatives to bolster activity, but momentum has since faltered. DEWA’s IPO is an important test for the market’s liquidity.