Business & Management

DP World rating revised to positive

Standard & Poors Rating Services has revised its outlook on Dubai-based port operator DP World Ltd. (DPW) to positive from stable.

S&P also affirmed their BB long-term corporate credit and senior unsecured debt ratings, and their B short-term corporate credit rating on DPW. The recovery rating on the senior unsecured debt is unchanged at 3, indicating S&Ps expectation of meaningful (50 per cent-70 per cent) recovery in the event of a payment default.

The outlook revision reflects S&Ps view that DPWs financial risk profile will improve when it has completed the sale of 75 per cent of its shares in DPW Australia. DPW has announced that the US$1.5 billion of proceeds will be used for debt repayment.

In addition, DPWs operating performance remains healthy and supportive, in our view, with 8.5 per cent throughput growth across consolidated terminals for the first-quarter 2011 relative to the corresponding period of the previous year.

Late in the first quarter of 2011, DPWs ultimate majority shareholder, Dubai World Corporation DWC (not rated), announced the completion of the restructuring of debt totaling about $23.9 billion. In S&Ps opinion, the track record of no adverse interference by DWC since its debt moratorium was announced in November 2009 is a supporting factor for its rating on DPW.

This track record, and S&Ps belief that DWC will continue to allow DPW to operate on a stand-alone basis and not subject it to material cash calls or asset transfers to DWC mitigates the negative rating pressure arising from what we believe to be a weaker parent.

The positive outlook reflects S&Ps expectation that DPW will not experience adverse interference from its ultimate parent DWC, in line with the track record so far. S&P also expects DPWs financial performance to improve, with FFO to debt increasing to the mid teens over the medium term.

In addition, S&P is assuming that the company will shortly start a process to successfully refinance the US$3 billion loan facility falling due in October 2012.

An upgrade will be contingent on DPW generating positive discretionary cash flows (after payment of any dividends) and a ratio of FFO to fully adjusted debt in excess of 15 per cent.

S&P would also need to gain further insight into the ultimate parent, DWC, concerning its strategy and policy in relation to DPW over the medium to long term.

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Middle East energy demand growth to continue

ExxonMobil presented the latest edition of the companys Outlook for Energy: A View to 2030 at a roundtable in Dubai outlining the increasing global and regional energy demand.

A fast paced growing population will drive an increase in global energy demand of about 35 per cent by 2030 compared to 2005 while the Middle East region alone is expected to register about an 85 per cent increase in demand, Rob Gardner, manager for the energy and economics division of ExxonMobils Corporate Strategic Planning department stated.

Gardener pointed out during the roundtable: "The Middle East has always been a critical mix for global energy and will continue to be so."

The report argues that oil, natural gas and coal will continue to meet most of the worlds needs during this period because no other energy sources can match their availability, versatility, affordability and scale.

Gardner said that the growing use of natural gas and other less-carbon intensive energy supplies, combined with greater energy efficiency in nations around the world, will help mitigate environmental impacts of increased energy demand.

According to the Outlook, global energy-related carbon dioxide emissions growth will be lower than the projected average rate of growth in energy demand.

"It is very clear from our energy outlook that the world will require more energy as hundreds of millions of people experience improved living standards and greater access to electricity. We will need more of all forms of energy, with increasing supplies of oil and natural gas remaining critical to meet this expanded demand," Gardner said.

"The key role oil and natural gas plays in the global energy outlook for decades to come underlines the importance of the Middle East region as a major supplier in meeting the worlds needs," Gardner added.

Rising electricity demand - and the choice of fuels used to generate that electricity - represent a key focus area, which will have a major impact on the global energy landscape over the next two decades. According to the outlook, global electricity demand will rise by more than 80 percent through 2030 from 2005 levels.

Electricity demand in the Middle East is projected to increase by more than 150 per cent from 2005 to 2030. Global demand for natural gas for power generation is expected to rise by about 85 percent from 2005 to 2030 when natural gas will provide more than a quarter of the worlds electricity needs.

A key component in the world energy mix will be power generation. The largest and fastest growing major energy-demand sector and is likely to represent 55 per cent of the total growth in demand through 2030. At that time, power generation will account for about 40 per cent of total primary energy demand.

According to ExxonMobils Outlook, efforts to ensure reliable, affordable energy while also limiting greenhouse gas emissions will lead to policies in many countries that put a cost on carbon dioxide emissions.

As a result, abundant supplies of natural gas will become increasingly competitive as an economic source of electric power as its use results in less CO2 emissions than other energy sources in generating electricity.

For renewable energy sources, ExxonMobil believes that wind, solar, and biofuels will grow sharply through 2030. However, because they are starting from a small base, their contribution by 2030 is likely to remain relatively small.

On the topic of nuclear power, Gardner said: "Nuclear power remains an important power generation source and will play an important role in the future."

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