UAE gives approval for FEWA privatization

23 October 2007 – The UAE Federal National Council has approved the privatization of assets belonging to the Federal Electricity and Water Authority (FEWA), part of the UAE federal government, which supplies water and electricity to parts of the Northern Emirates.

The approval was made in a meeting chaired by His Highness Shaikh Mohammad Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai.

“The cabinet approved an amendment to Federal Law No. 31 for 1999 regarding the establishment of the Federal Electricity and Water Authority, adding an article that allows private investors to invest in the production and distribution of electricity and water in the country,” a statement said.

The move marks a major shift from the tradition of owning and managing the state’s assets towards allowing private participation. However, it is not clear which model the federal government would adopt – initial public offering (IPO) or selling stakes to private partners.

Although privatization of utilities is not new to the UAE, as most of the power and desalination plants in Abu Dhabi have already been privatized, the rest of the country is yet to follow. Dubai, which has one of the country’s largest utility operations, has not yet made moves to privatize services, although it has allowed some quasi-private district cooling companies to enter the market recently.

The Cabinet’s decision is in line with recent comments made by the global financial watchdog the International Monetary Fund (IMF) in its country report earlier this month.

“IMF directors encourage the listing on the equity market of large quasi-public enterprises, and promote an increased role for institutional investors in the markets” the report said.