Moody’s affirms DEWA and DP World ratings, but revises outlook for Dubai-owned firms

DEWA’s credit position has continuously improved since 2011 on a supportive tariff structure and disciplined capital spending. (AFP)
Updated 30 November 2019

Moody’s affirms DEWA and DP World ratings, but revises outlook for Dubai-owned firms

  • The negative outlook on DEWA and DP World reflects the ratings agency’s expectation of a drawn-out slowdown in the non-oil sectors of the UAE economy

DUBAI: Ratings firm has Moody’s has affirmed the Baa1 ratings of state-owned firms Dubai Electricity & Water Authority (DEWA) and DP World but revised their outlook to negative from stable.

“The rating action reflects the credit linkages between [the companies] and the government of Dubai. Moody’s expects a growing risk of structurally slower real GDP growth for the emirate of Dubai and deteriorating fiscal strength of the government amid increasing debt levels,” Moody’s commented in its separate ratings action on the Dubai firms.

The negative outlook on DEWA and DP World reflects the ratings agency’s expectation of a drawn-out slowdown in the non-oil sectors of the UAE economy, which Dubai is heavily reliant on for its revenue stream.

 “Together with a limited pipeline of new revenue-raising measures and a counter-cyclical fiscal policy stance, increase the risk that the government’s debt burden will continue to rise,” it noted.

“Given DEWA’s sole operational exposure to Dubai and its full ownership by the government of Dubai, Moody’s considers that DEWA’s credit profile is tied to the economic and fiscal developments of the emirate.”

Moody’s also explained that considering DP World’s material operational concentration in Dubai and the high government ownership, the global port operator’s credit profile was tied to the economic and fiscal developments of the emirate.

The Dubai government indirectly holds 80.45 percent of DP World through Port and Free Zone World FZE, a subsidiary of investment company Dubai World.

DP World’s reported gross debt has increased to $11.6 billion as of June 30, from $7.7 billion as of 31 December 2017.

DEWA’s credit position meanwhile has continuously improved since 2011 as a supportive tariff structure and disciplined capital spending have yielded strong free cash flow generation.

“DEWA enjoys a dominant market position in Dubai’s power and water sectors, and a strong asset base with a 30.5% reserve margin in 2018,” Moody’s said.

The ratings agency expects DEWA’s liquidity to remain very strong over the next 12 to 18 months. Its Dh10.8 billion cash hoard as of mid-year would further be complemented by an expected Dh9.9 billion cash generation from operations over the next 12 months, Moody’s said.

“A stabilization of DEWA’s rating outlook would require an improvement in Dubai’s economic environment and a stabilization of the emirate’s debt burden. DEWA’s ratings could be downgraded in case of a deterioration in Dubai’s economic environment and debt burden,” the ratings agency said.

For DP World, Moody’s said an upgrade of the company was currently unlikely given the negative outlook.

“A stabilization of DP World’s rating outlook would require an improvement in Dubai’s economic environment and a stabilization of the emirate’s debt burden,” it said.

“Furthermore, the rating could be weakened if DP World exceeds its net leverage guidance or undertakes higher-risk development projects or perceived risker M&A activity,” Moody’s said in its closing comment.


Turkish Airlines may delay delivery of Airbus, Boeing planes

Updated 27 May 2020

Turkish Airlines may delay delivery of Airbus, Boeing planes

  • The carrier plans to begin some domestic flights on June 4 and international on June 10
  • Airlines chairman said the impact of the coronavirus on market could last up to five years

ISTANBUL: Turkish Airlines, which halted nearly all of its passenger flights as a result of the coronavirus crisis, may delay the delivery of some Boeing and Airbus planes, its chairman was quoted as saying on Wednesday.
The carrier plans to begin some domestic flights on June 4 and some international flights on June 10 as airlines worldwide try to get planes flying again after a global travel slump.
But Turkish Airlines chairman Ilker Ayci said in an interview with Turkey’s Hurriyet newspaper that the impact of the coronavirus could last up to five years and that it would take a while to reach 2019 load factor levels.
Turkish Airlines had received half of its order for 25 Boeing 787-9 planes, he said, adding that the delivery of the rest could be delayed.
The airline is in talks to take delivery of Airbus 350-900s that are ready from an order of 25, and that it was working to delay the delivery of the rest, he said.
“We are trying to lighten the serious loads that could arise. We are getting our narrow-body planes.”
Ayci said Turkish Airlines would no longer offer free in-flight food and drinks on domestic flights and other flights shorter than two hours.
He also repeated that the company would try to maintain employment, but that salaries would have to be adjusted, with the aim of supporting those paid the least.