Dubai needs to spend $19 billion (£9 billion) over the next five years to keep its lights on and fresh water flowing, according to a prospectus issued by the emirate’s power and water authority.

Soaring demand for utilities and escalating costs in the city-state mean firms and households in Dubai have faced the first utility bill increases for a decade.

Dubai Electricity and Water Authority (Dewa) is seeking to raise $2 billion in a bond issue, likely to include a sukuk, a security based on Islamic financial principles. The money is needed to finance a heavy construction programme to satisfy electricity consumption that increased by 15 per cent in the first seven months of the year.

Demand for power and water will increase by 20 per cent a year in Dubai, according to the Dewa prospectus. Peak demand for power rose from 3,571 megawatts in 2005 to 4,113 megawatts in 2006. Dewa needs to cope with Dubai’s anticipated 10 per cent annual population growth, which is eating into the margin of spare capacity in the emirate’s power grid.

Dubai is importing some 400 megawatts from neighbouring Abu Dhabi, but the United Arab Emirates’ capital is also experiencing power shortages. The entire region is suffering from the escalating cost of natural gas, the preferred fuel for power generation.

Dewa needs to raise tariffs to meet the cost of more expensive natural gas and of fuel oil that makes up the short-fall in Dubai’s gas requirements. The prospectus states: “Dewa is seeking government approval for an increase in electricity and water tariffs in the future across all customers as a whole.”

Tariff increases could prove controversial in Dubai. Minor price rises in diesel fuel provoked uproar last summer, although the cost of road fuel in the UAE is a fraction of the price paid in Europe and North America.

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