Experts guide Empower’s oversubscribed IPO on Dubai Financial Market

On Tuesday next week, Emirates Central Cooling Systems Corporation (Empower) will officially start trading on the Dubai Financial Market, following the successful conclusion of a hotly contested initial public offering.

Established in 2003 to provide energy through its various plants to the emirate's property sector, Empower has since its inception grown into one of the world’s largest district cooling services providers. According to the IPO’s prospectus, the company has 80 district cooling plants and a network that is more than 350 kilometres long.

As part of Dubai’s plans to increase the size of its financial market to about Dh3 trillion, Empower’s November 15th listing will make the company the fourth state-linked entity* to float this year, raising Dh2.66 billion ($724 million) at a market capitalisation of around $3.6 billion.

Strong investor demand and oversubscription of shares saw Empower amend its IPO strategy twice during the subscription period. Initially raising the size of the offering to 15% from 10% stake, last week selling shareholders, Dubai Electricity and Water Authority (Dewa) and Emirates Power Investment, increased the size of the stake to 20%.

The 2 billion shares are being offered at between Dh1.31 and Dh1.33 per share, with Dewa and Emirates Power Investment retaining 56% and 24% of Empower’s share capital, respectively, following the offering.

The IPO was led by Citi, Emirates NBD Capital and Merrill Lynch as global coordinators, with EFG Hermes serving as joint bookrunner. Investment banking advisory was led by Moelis & Co, while Deloitte was responsible for delivering due diligence services to the consortium of IPO advisors, and local banks participating in funding solutions.

“Empower’s IPO represents a key milestone not only for the company, but also for Dubai, with its goal to list ten state-owned entities as part of its strategy to monetise on some of its assets and attract liquidity to the Dubai Financial Market,” explained Adnan Fazli, a partner at Deloitte.

On Deloitte’s work for the IPO, he said: “We are delighted to have supported the company on its listing and we look forward to continue to support and deliver on a strong pipeline of IPOs over the coming months.”

With its added financial muscle, Empower – which already has about 80% of Dubai’s market according to CEO Ahmad Bin Shafar – plans to expand in the United Arab Emirates, Saudi Arabia, Oman, Bahrain and Egypt.

New shareholders have been attracted with the outlook of AED 850 million (USD 231 million) in annual dividends, implying a 6.5% yield. Cornerstone investors include the UAE Strategic Investment Fund, Shamal Holding and the Abu Dhabi Pension Fund (the trio pumped Dh335 million into the IPO).

* Earlier this year road-toll operator Salik, Dubai Electricity & Water Authority and business park operator Tecom Group completed their IPO on the Dubai Financial Market.