Empower

IPO

Emirates Central Cooling Systems Corporation PJSC (Empower) was established on 23 November 2003 as a corporate entity pursuant to Dubai Law No. (10) of 2003, as amended by Dubai Law No. (3) of 2010 and commenced commercial operations on 15 February 2004. On 14 October 2022, pursuant to Dubai Law No. (22) of 2022 (which repealed Law No. 10 and Law No. 3 and any other legislation to the extent that it contradicts the provisions of Dubai Law No. (22) of 2022), the Company was established in its current form, as a public joint stock company to succeed Emirates Central Cooling Systems Corporation.

On 24th October 2022, the company announced its intention to float 10% of its total issued share capital (equivalent to a total of 1,000,000,000 number of Shares) on the Dubai Financial Market (“DFM”). This was followed by two successful upsizing announcements, which saw a total of 2,000,000,000 ordinary shares (“Offer Shares”), equivalent to 20.0% of Empower’s total issued share capital, offered. Empower was officially listed on the DFM on 15th November 2022.

Investment highlights

1. Disruptor of Traditional Cooling Methods with Sustainable District Cooling

The Group has promoted the implementation of district cooling technology in the UAE, leading the market in deploying a more sustainable method to cool buildings.
Through centralised distribution of chilled water, district cooling can reduce energy used for cooling by up to 50% from utilising 0.9 kW to 1 kW of electricity per RT compared to 1.6 kW to 1.8 kW for traditional cooling methods
The Group’s distinctive operating model within the district cooling industry facilitates a differentiated offering compared to its competitors. By leveraging its superior scale, the Group has developed into an integrated owner and DCS provider that utilises in-house operational expertise to achieve an industry standard for a low-cost base and roll-out of advanced digitalisation capabilities

2. The Largest District Cooling Services Provider in the World and the Clear Leader in Dubai

According to the International District Energy Association, the Group is currently the world’s largest district cooling services provider and it is a clear leading player in the district cooling market in Dubai with a targeted market share of approximately 80% of the total connected capacity of the district cooling market in Dubai by the end of 2022 and more than 110,000 customers (including the recent acquisition of Nakheel and the Dubai International Airport District Cooling Acquisition), with the district cooling sectors’ market penetration in Dubai forecast to grow from 25.6% in 2021 to 40% by 2030, as per the Dubai Integrated Energy Strategy 2030
As of 31 December 2021, the Group had a connected and contracted capacity of approximately 1.4 million RT and 1.5 million RT, respectively
The Group has consistently grown its connected capacity over the years through both greenfield new developments like Business Bay as well as large notable acquisitions, such as the US$500 million purchase of Palm District Cooling in 2013 (connected capacity of approximately 369,000 RT), which accounted for approximately 36.5% of the Group’s revenue in 2021, and the acquisition of Meydan in 2020 for AED 100 million (site capacity of approximately 382,000 RT)
In 2021, the Company signed a heads of terms agreement with Dubai Aviation City Corporation in relation to the proposed acquisition of the district cooling systems of Dubai International Airport (“Dubai International Airport District Cooling Acquisition”), which, upon completion, will add an additional connected capacity of approximately 70,000 RT to the Group’s network
The Group will have 81 district cooling plants by the end of 2022 (subject to completing the Dubai International Airport District Cooling Acquisition) and is the sole and exclusive provider of DCS to several of Dubai’s key landmarks and developments including Business Bay, Meydan, and Palm Jumeirah
The Group caters to varied project types and customers. As of 2021, the Group provided DCS to 1,413 buildings. Of these 1413 buildings, 64% were residential, 15% were commercial, 14% were hospitality, 3% were healthcare related, and the remaining 4% were other buildings
The Group focuses on long-term service contracts, enabling it to maintain a large client base by being the sole DCS provider to certain connected areas and developments, which in turn ensures that the Group has ongoing business once these developments are completed. These service contracts provide a secure and recurring revenue stream for the Group by ensuring that revenues are contracted in the long-term

3. A Fast-Growing District Cooling Market with Supportive Government Policies

The Group plays a key role in Dubai’s green energy transition process, with district cooling forming a central pillar of the Dubai Integrated Energy 2030 plan, which sets a target of 40% of Dubai’s cooling being via DCS by 2030, the district cooling market in Dubai is expected to increase from 25.6% in 2021 to 40% by 2030 and is expected to also contribute approximately 13% towards the demand side management (“DSM”) 2030 strategy target in electricity savings
The Government of Dubai in turn supported a dynamic and 100% green vision for Dubai with the “Dubai 2040 Urban Master Plan” to promote the sustainable development of Dubai. The Plan projects an increase in land areas for hotels and tourism by 134% by 2040, as well as an increase in residents and daytime population to 5.8 million and 7.8 million, respectively, by 2040. The Government is also targeting an increase in its renewable energy share usage of 25% by 2030, with a longer-term target to achieve 100% clean energy by 2050
Dubai has solid macroeconomic fundamentals for district cooling due to (i) a resilient and healthy economy undergoing one of the fastest growth rates in the region, (ii) a healthy demographic profile composed of a growing population and continuous expat inflows, (iii) strong growth in the residential and real estate supply, with high density residential units favouring district cooling adoption, and (iv) a rapidly growing hotel capacity and a growing hospitality industry that is fast-recovering from the COVID-19 induced slowdown.
In 2021, Dubai had a population of 3.5 million residents, which is expected to grow at a CAGR of 2.5% between 2019 and 2040. Furthermore, Dubai has a strong and healthy economic growth outlook, with GDP growing at 2.7% and 6.2% in 2019 and 2021, respectively, and a projected GDP growth of 5% by 2023

4. Sustainability-Centric Business Model Enabling Dubai’s Energy Transition

The Group’s next generation cooling technology and its continued focus on recycling and reusing water, as well as its implementation of smart technologies to reduce cooling usage has positioned the Group as a key enabler to meet Dubai’s ambitious targets to reduce water and energy usage
Dubai’s Supreme Council of Energy’s has set ambitious targets to reduce annual electricity and water usage by 30% by 2030, which includes the implementation of efficient cooling solutions to reduce the electricity usage for cooling (with traditional air conditioning representing approximately 70% of total electricity consumption) by covering 40% of cooling demand through DCS by 2030. As the DCS provider with the largest market share in Dubai based on its connected capacity, the Group is ideally positioned to be a key enabler to meeting this target
The Group estimates that in 2021 the Group contributed 1.7 billion kWh savings in the electricity compared to what a traditional cooling operator would have provided the Group’s cooling service. Dubai’s DSM strategy reported annual savings of 6.4 billion kWH in 2021
Other contributions of the Group to the DSM’s strategy include: (i) building retrofits to use DCS (including the most recently completed Jumeirah Emirates Towers, Burj Al Arab and Jumeirah Beach Hotel), (ii) changing consumer behaviour where the Group is pioneering the utilisation of smart metering systems for end-users, enabling more efficient tracking of DCS usage and management of recycled water
The Group is targeting to reduce its potable water usage in DC operations by increasing the number of cycles in its reverse osmosis system (which is up to 8.7 times) and increasing the use of Treated Sewage Effluent (TSE) from 12% in 2021 to over 40% by the end of 2025
The Group has an inclusive workforce of more than 30 nationalities with women representing approximately 16% of management positions and approximately 21% of the Group’s head office as of 31 December 2021 and a dedicated Emiratisation programme with 33% Emirati representation in the head office in 2021
The Group has been recognised by the Dubai Chamber Sustainability Network with an Advanced CSR label four times in a row

5. Management and Operational Expertise with Next Generation Technology Disrupting Cooling

The Group’s managerial and operational expertise, coupled with innovative technology solutions, has enabled it to continue to optimise its operations and continue to deliver operational improvements, resulting in cost savings and a disciplined capital expenditure programme
The Group has developed an integrated end-to-end approach to its operations by adopting a low-cost modular approach to project design, incurring capital expenditure only when an incremental load is required. Once district cooling plants are operational, the Group utilises its 24/7 in-house plant operators to monitor all district cooling plants from its state-of-the-art command control centre (“CCC”) that allows for the planning, execution and real time monitoring of its district cooling plants
By deploying next generation technology, the Group has continued to introduce innovative efficiency-driven measures to consistently improve electrical and water efficiency, outperforming the Group’s electrical and water efficiency targets year-on-year since 2017. As a result, the Group has continually optimised its costs by utilising decreasing levels of water and electricity. In 2021, the Group saved approximately AED 8.8 million from its continued improvement in electrical efficiency
The Group believes its current water efficiency key performance indicators (“KPIs”) of 1.6 imperial gallon per RT, which has remained the same between 2017 and 2021, indicate an optimal level of water efficiency, with reverse osmosis treatment processes contributing to consistently lowering the water consumption when compared to standard district cooling industrial design that tend to have an average between 2 gallons per RT and 3 gallons per RT.
Furthermore, the Group continues to seek new methods to improve operational efficiency and minimise its cost profile. As one of the largest users of potable water in Dubai, the Group has sought methods to reduce and reuse water to achieve cost savings and contribute to Dubai’s DSM strategy
The Group is liaising with the Dubai Municipality to continue developing the necessary infrastructure to be supplied with TSE water. The Group has sought to minimise its use of potable water by improving the number of cycles of water in its system and by replacing potable water with TSE, which is 10 times cheaper. The Group is targeting to increase the use of TSE from an expected 16% by the end of 2022 to 40% by the end of 2025

6. Resilient, Predictable and Growth Financial Profile Supported by a Favourable Business Model

The Group has highly predictable and resilient cash flows, underpinned by robust commercial agreements, as well as a high growth financial profile backed up by long-term exclusivity agreements with some of the largest master developers in Dubai
The Group has a tariff structure, which is secured by long-term contractual agreements with initial terms that typically commence on the date of the relevant agreement and expire 25 years or more and underpinned by a large, fixed charge component (which represented 37.9%, 38.2% and 37.9% of revenue for the three years ended 31 December 2021, 2020 and 2019 respectively) and 77.5%, 74.6% and 78.2% of Adjusted EBITDA for the years ended 31 December 2021, 2020, and 2019, respectively
As result of the Group’s long-term contractual agreements and large, fixed charge component, it has highly predictable cash flows with low variability, which have driven stable average Adjusted EBITDA Margins of 48.9%, 51.3% and 48.4% for the years ended 31 December 2021, 2020, and 2019, respectively
As an operator of critical infrastructure, the Group has been able to deliver strong revenue growth of 6.1% CAGR between 2019 and 2021 and 16.2% growth between 30 June 2021 and 30 June 2022, demonstrating a highly resilient revenue mix despite COVID-19. The Group’s long-term contractual agreements with master developers and building owners provide the Group the sole and exclusive rights to provide DCS, securing a lucrative captive pool of demand
With a moderate leverage profile, the Group has considerable headroom in its borrowing capacity, supported by highly predictable cash flows, to continue delivering both organic and inorganic capacity growth, which the Group believes will result in high growth earnings profile and attractive dividend pay-outs

For further information on Empower, please refer to the UAE Prospectus and the IOM under the Key Documents section of this website.