Green light for private power in the UAE

17 April 2011

Dubai’s government guarantee for the emirate’s first independent power project holds weight with investors

When Dubai announced plans to develop an independent water and power project (IWPP) at Hassyan, many cited the emirate’s financial woes as a reason why the scheme would not come to fruition.

At the time, Dubai’s high-profile bailout by neighbouring emirate Abu Dhabi was fresh in the collective memory. As the first project of its kind, the IWPP was considered unfeasible without government guarantees to support it. A sovereign backer in financial difficulty was therefore anticipated as a major hurdle for Hassyan 1.

However, much time has passed since the bailout. During these months, Dubai Electricity & Water Authority (Dewa) has moved ahead with constructing the framework for the first project and the other planned schemes that will follow. Dewa has been able to spend time on this as the global financial crisis caused a decrease in power and water demand projections. Without this respite, it would not have been able to do so.

The financial crisis was consequently a mixed blessing. It called Dubai’s creditworthiness into question, but it also afforded its state utility the time to reassess its capacity-building plans. This was crucial as Dubai could not continue building engineering, procurement and construction projects indefinitely without bringing in investment from outside.

Importantly, Dewa has maintained its reputation as a strong creditor throughout. The government of Dubai has now said that it will guarantee the project. Despite the emirate’s financial woes, the guarantee still holds weight with investors. Significantly, it also indicates the government’s commitment to the project.

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