Fitch Ratings has downgraded Dubai Electricity & Water Authority’s (Dewa) long-term rating from A+ to A-.
Fitch downgraded its rating on Dubai Holding Commercial Operations Group from A+ to A- and placed Etisalat’s rating of AA- on negative watch.
“[These] entities have strong operational and strategic ties with the Dubai and UAE governments respectively and the actions reflect Fitch’s view that the credit profiles of the sovereign entities have weakened and lower certainty as to how any government support may be provided,” according to a statement by the ratings agency.
Fitch also says Dubai’s creditworthiness is weakening as its public sector obligations are being transferred to the UAE’s federal balance sheet. It projected that Dubai’s debt will triple to $30bn compared to a year ago, by the end of 2009. The emirate’s debt will be equivalent to 40 per cent of gross domestic product (GDP).
Dubai Holding Commercial Operations Group is 97.4 per cent owned by Sheikh Mohamed al-Maktoum, the ruler of Dubai. The Dubai government continues to financially support the group, according to the Fitch statement.
In Dewa’s case, the government appoints its board members and sets tariffs for water and power.
“Dewa’s ratings continue to be supported by its position as the exclusive vertically integrated electricity and potable water utility in the emirate of Dubai, consistently improving efficiency levels, and a modern asset base,” said Fitch. “However, investment requirements are likely to impact its future financial profile.”
The UAE owns a 60.03 per cent stake in Etisalat. Seven out of 11 of the company’s directors are also government representatives.