Dubai’s Empower buys rival cooling firm Palm Utilities for $500m

The acquisition, the biggest of its kind for the industry, will be the world’s largest district cooling company.

Dubai’s Empower has bought rival Palm Utilities for US$500 million from Istithmar World to create what will be the world’s largest district cooling company.

The sale includes Palm District Cooling, the chilled water service provider owned by Palm Utilities.

The acquisition, the biggest of its kind for the industry, will be funded by Empower’s own reserves as well as equity and debt financing, the company said. District cooling is regarded as a more environmentally friendly way for residential villas, apartments and offices because it uses less electricity than traditional air conditioning.

“This emphasises the importance of establishing sustainable communities across the emirate and it is in line with Dubai’s vision to become of the world’s most sustainable cities and a role model for energy efficiency,’’ said Saeed Mohammed Al Tayer, Empower’s chairman and the chief executive of Dubai Electricity and Water Authority (Dewa).

“Through this acquisition, we aim to enhance energy efficiency and meet the growing demand for district cooling services in response to Dubai’s increasing economic development, having won the bid to host Expo 2020.”

The sale of Palm Utilities comes amid a spate of asset sales by the Istithmar World’s parent, the Dubai World conglomerate.

Dubai World, in its turn owned by the Government of Dubai, has to pay creditors US$4.4 billion in 2015. Istithmar World sold the hotel and theme park Atlantis to Investment Corporation of Dubai last year as well as its 50 per cent stake in the Fontainebleau Miami Beach hotel.

Empower, which is owned by Dewa and Dubai Technology and Media Free Zone, will immediately take over all projects, functions, operations assets and assets and liabilities of Palm Utilities and Palm District Cooling.

Palm Utilities provides services to developments that include Palm Jumeirah, Jumeirah Lakes Towers, Jumeirah Village, Discovery Gardens, Dubai Multi Commodities Centre and Ibn Battuta shopping mall, Empower said.

The market share of Empower in the UAE will be boosted to about 70 per cent, say analysts, and its capacity to 1 million refrigeration tonnes. If executed properly, it should mean better service and pricing for consumers, they added.

“It’s a pretty big deal,” said Sanyalak Manibhandu, a senior analyst at National Bank of Abu Dhabi Securities. “If they are efficient, consumers should benefit because it should lower costs and hopefully this is passed on to the consumer.”

In 2012, Empower increased its profits by 17 per cent to $51.7 million. Palm Utilities’ income advanced 32 per cent to Dh164m in the same year.

District cooling requires a plant that cools water, which is then channelled to villa complexes or high-rises, replacing individual air-conditioned units with blanket coverage.