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Latest post on 05 December 2011 - 09:07

A cold shoulder for Dewa but Moody's reckons it's hot stuff Sean Cronin http://www.thenational.ae/thenationalconversation/industry-insights/energy/a-cold-shoulder-for-dewa-but-moodys-reckons-its-hot-stuff Nov 23, 2011 The email and mobile phone pinged within seconds of each other. The first was a press release from Moody's Investors Service upgrading the credit rating of Dubai Electricity and Water Authority (Dewa). Then a text arrived from Dewa telling me my bill for the month was Dh3,800 (US$1,034). My Hobnob biscuit was lost to the depths of my mug from the shock of it. Moody's upgraded the utility because they said it was making progress in tackling some Dh4.4 billion in debts due by August. I imagine they've been making very good progress indeed based on what they've had out of my pocket in the past two months of the summer - almost Dh6,000 to be precise. I am not among the entities Moody's covers, but if I were, they would have probably downgraded me at the same time they upgraded Dewa. The press release would say Cronin is put on "negative credit watch" based on mounting water and electricity-related liabilities that are unsustainable without a sharp increase in earnings or an immediate programme of asset disposals. The main problem I had with the bill, aside from not having enough money to pay it, was that there was no evidence of profligate power usage to explain why it had more than trebled in a year. I checked the bank statements to see if my pregnant wife had bought an aluminium smelter she'd not told me about; you know, the nesting instinct. But I couldn't see anything. HSBC would have probably sent me a text if she had. When I enquired about the bill in the arctic-cold Dewa office, I was told I should be more energy conscious. "That's a bit rich," I thought. "You could keep penguins in here." Surely people who live in heavily refrigerated glass-houses shouldn't throw stones. The real genius bit came next with the offer to have my meter checked - at a cost of Dh30. Of course, it was found to be working perfectly. So then I owed Dh3,830. I bet Moody's hadn't factored in this extra windfall in its improved outlook. I didn't much like the suggestion that I had some kind of yeti-sized carbon footprint. Aside from the aircon, TV and white goods, our main electrical extravagance is the boy's Thomas and Friends train set. It wasn't easy telling a three-year-old one of his engines would have to go. Seeing his little bottom lip quiver as he was forced to choose between Percy and James was like watching that scene in Sophie's Choice all over again - but with miniature locomotives. Dewa has had to pay dearly for the billions of dollars it has borrowed in recent years, paying interest rates as high as 8.5 per cent to tempt investors to buy its debt offerings. Now its customers are also having to pay dearly as those debts are repaid. While the utility's credit profile improves, that of the wider economy is starting to get distinctly clammy. The rising cost of power in Dubai over the summer has been so sharp and severe it is bound to create stresses elsewhere in the emirate. Aside from the obvious inflationary effect, it will also hurt wider consumer spending. It is, of course, only right that consumers pay for the real cost of water and energy - so the gradual removal of subsidies should be encouraged. But it shouldn't happen overnight - even if it does produce a great end-of-term scorecard with straight "AAA"s from the ratings agencies. Never before has the onset of the winter had such a beneficial financial effect on Dewa's customers. These days the villa feels a bit like the Tropical House in London's Kew Gardens. We're thinking of growing bananas in the porch, which we could then sell to pay for the lights. With the banana proceeds and whatever we get from the electric toothbrushes on Dubizzle we should be able to put the air conditioning back on for a few days in August. I hope you're happy Dewa. And well done for your improved credit outlook. Shame about ours.

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