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Innovation In Action

For Dubai Electricity and Water Authority (DEWA)

Citi's Export Credit Agency-backed deal solves a financing challenge

The Challenge
DEWA, Dubai's government-owned electric power and water desalination/distribution company, was undergoing a massive expansion to triple its capacity.

As part of a capex plan from suppliers in Italy, France and Germany, the company needed cost-effective external financing. But in summer 2008, when an RFP was issued, the global financial markets were dramatically weak.

Bank, bond, securitization and Islamic finance markets were virtually closed to new borrowing. Another challenge: DEWA's required funding had an unprecedented long tenor, at a time when investors were unwilling to fund long-term borrowing.

The Innovation
Given the absence of other modes of financing, Citi - having been mandated as one of the Mandated Lead Arrangers (MLA) and overall deal coordinators - received support from Export Credit Agencies (ECAs) when structuring long-term financing in March 2009.

The resulting USD1+ billion financing - the first major multi-ECA financing for a quasi-sovereign from the UAE or Gulf Cooperation Council (GCC) - gave DEWA an unprecedented door-to-door tenor of 13 years, supported by comprehensive guarantees from three European ECAs:

  • Germany's Euler Hermes (EUR516 million)
  • Italy's SACE (USD150 million with an option of up to USD300 million)
  • France's COFACE (USD180 million)

The Hermes tranche, with 95% cover, was the largest approved for Dubai to date. SACE's tranche carried an unusually high 100% level of cover, and provided an option for a second tranche of up to USD300 million, also at 100% cover. Finally, COFACE showed a strong commitment to DEWA by approving a total line of up to USD485 million.

The Result
With nearly 100% of the deal AAA/AA-rated guaranteed by the three ECAs, along with attractive premium levels given Dubai's high OECD rating, DEWA achieved competitive pricing and a 13-year tenor in the current risk-averse environment.

The financing delivered cost-effective, long-term borrowing for DEWA. It also enhanced Dubai's reputation, since previous financing from the Emirates hadn't exceeded 10 years.