Moody's rates DEWA's proposed Sukuk (P)A1

The Sukuk rating, which is provisional subject to receipt of the final prospectus, underlying agreements (in particular the Lease Agreement, Purchase Undertaking and Sale Undertaking) and legal opinions, follows Moody's recent assignment of A1 issuer ratings to DEWA, which also have a stable outlook.

DEWA plans to raise funds through the issuance of Shari'ah-compliant Ijara Sukuk Trust Certificates, which follow a sale-and-leaseback agreement of selected Trust Assets. According to the structure of the transaction, DEWA will sell Trust Assets to DEWA Funding, which will finance these via Sukuk proceeds and subsequently lease these back to DEWA. DEWA will pay DEWA Funding rental proceeds which will be used to satisfy the regular Periodic Distribution Amounts payable to the Noteholders, which are determined via a LIBOR reference. Any shortfall in Periodic Distribution Amounts will be satisfied by DEWA.

Upon regular dissolution of the Sukuk, or at a certain Dissolution Event (such as standard events of default), DEWA undertakes to re-purchase the Trust Assets at an aggregate exercise price which is intended to repay Noteholders in full.

Each certificate will represent beneficial ownership in the Trust Assets and will rank parri passu with other certificates or unsecured obligations of the issuer and DEWA. Holders of the certificates have no recourse to any assets of the issuer or DEWA, and do not have security or any preferential claim over any of the Trust Assets or other assets.

All legal documents, including the Purchase Undertaking and the Lease Agreement, are governed by English Law. While Moody's does not opine on the transaction's compliance with Shari'ah or any other governing law, it notes that it expects a recognised Shari'ah Board to examine the structure and pronounce that the structure and mechanism of the transaction are acceptable within the principles of Shari'ah prior to closing.

Moody's rating of the Sukuk is equivalent to DEWA's senior unsecured issuer rating, as Moody's views the transaction as being commensurate with a senior unsecured investment obligation that implies that Noteholders ultimately rely on the creditworthiness of DEWA for their return and principal repayment. DEWA must cover any amounts that DEWA Funding is unable to provide from lease rental payments to satisfy the Periodic Distribution Amounts; and the Purchase Undertaking implies that Noteholders rely on DEWA's ability to either repay or refinance the instrument at maturity.

DEWA Funding Limited, registered in the Cayman Islands, is a special purpose entity set up for the sole purpose of issuing Sukuk Trust Certificates on behalf of Dubai Electricity & Water Authority.

Dubai Electricity & Water Authority ("DEWA"), incorporated in Dubai in the United Arab Emirates (UAE), is the state-owned monopoly provider of electricity and water in Dubai, where it serves more than 360,000 customers. The company operates as a vertically integrated multi-utility, with business activities including electricity generation, transmission and distribution as well as water desalination and distribution.