Citi, HSBC set to share up to $97m in fees from DEWA IPO

Banks including Citigroup, HSBC and Emirates NBD are set to share as much as Dhs357m ($97m) in fees for working on the landmark initial public offering of Dubai’s main utility.

Dubai Electricity & Water Authority raised $6.1bn in its IPO, the second-biggest deal this year, ushering Dubai into the ranks of the world’s top listing venues. DEWA said the government, which sold an 18 per cent stake in the utility, would pay a 1 per cent selling commission for the IPO, as well as a discretionary fee of up to 0.6 per cent of the deal size.

In its pricing statement, DEWA said the selling commissions would amount to Dhs213.7m. The three joint global coordinators – Citi, Emirates NBD and HSBC – will receive the vast majority of that amount, according to people familiar with the matter.

The rest will be split among the four joint bookrunners: Credit Suisse Group AG, EFG-Hermes, First Abu Dhabi Bank, and Goldman Sachs Group, the people said, asking not to be identified as the information isn’t publicly available.

The banks are also expecting to receive a discretionary fee, though the final amount has not been set yet, the people said.

Representatives for Emirates NBD, Credit Suisse, EFG-Hermes, HSBC and First Abu Dhabi Bank declined to comment. DEWA, Citigroup, and Goldman weren’t immediately available for comment.

The DEWA payout comes in a difficult year for equity underwriting, as market volatility has caused deals to be scuppered or delayed. Global equity underwriting fees could sink more than 50 per cent this year if the high volatility persists, according to analytics firm Coalition Greenwich.

Wall Street banks Goldman and Morgan Stanley both reported an 83 per cent slump in equity underwriting revenues in the first quarter from a year earlier, dragging down overall investment banking revenues.

But in the Middle East it’s a different story. IPO proceeds in the Gulf this year are more than double those in Europe, causing bankers in London to focus more on the region.

DEWA’s IPO was the first of 10 planned listings of state-owned companies in Dubai, as part of the city’s efforts to boost trading volumes and catch up with an IPO boom that’s swept rival exchanges Abu Dhabi and Riyadh. Its successful debut paves the way for upcoming issuers to try to tap the demand for new offerings in the Gulf region, which has been bucking the volatility roiling other markets.

Underwriting fees in the Middle East tend to be lower than in other markets such as the US, where banks can earn around 5 per cent of deal value for an IPO. Still, DEWA will compare favourably to the meager fees paid out by Saudi Arabia for the record-breaking float of state oil company Aramco.

The kingdom paid banks just over $100m for the $29bn IPO in 2019, a tiny proportion by global standards both as a portion of the deal size and in absolute dollar value.