POWERING THE ECONOMY - Electricity Holding Company SAOC

Transcription

EHC Annual Report 2013
1
POWERING THE ECONOMY
Electricity Holding Company SAOC
Annual Report 2013
2
His Majesty Sultan Qaboos Bin Said
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Annual Report 2013
CONTENTS
07
- About Electricity Holding Group
08
- Vision and Mission
09
- Values
10
- Board Members
11
- Leadership Team
12
- Chairman's Report
14
- CEO's Report
16-22
- Corporate Governance Report
24
- Human Resources
25
- Health & Safety Improvement Program
26
- Asset Management
27
- Communication
28
- Customer Service
31
- Operational & Financial Review
31
- Financial Highlights
32-39
- Group Business Performance Review
40-48
- Subsidiaries Performance Highlights
49-101
5
- Consolidated Financial Statement
6
7
About Electricity Holding Group
The Electricity Holding Company SAOC
(EHC) is a joint stock company that was
registered in the Sultanate of Oman
on 19 October 2002. The company
commenced commercial operations on
16 September 2003.
EHC holds the shares on behalf of the
Government in nine companies engaged
in the procurement, generation,
transmission and distribution of electricity
and related water services.
These companies are:
• Al Ghubrah Power and Desalination
Company
• Dhofar Power Company
• Majan Electricity Company
• Mazoon Electricity Company
• Muscat Electricity Distribution
Company
• Oman Electricity Transmission
Company
• Oman Power & Water Procurement
Company
• Rural Areas Electricity Company
• Wadi Al Jizzi Power Company
• Dhofar Generation Company
The Electricity
Holding Group
engaged in the
procurement,
generation,
transmission
and distribution
of electricity
and related
water services.
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Values
Vision & Mission
Vision
“We strive to develop and empower our
human resources to deliver safe and
sustainable electricity solutions to our
customers.”
Mission
To provide electricity solutions by
optimizing and utilizing its resources
through implementing five critical
strategies, namely:
• Human Resource Development
• Health and Safety
• Customer Service
• Asset Management
• Communication
• Building strong working relationships
• Maintaining a collaboration work climate
• Recognizing and celebrating success
• Supporting career mobility
• Rewarding appropriate team behavior
• Keeping commitments and promises
• Representing the truth
• Acting in the best interests of the
customer, company, team and individual
• Adhering to the company ethics
• Accurately representing own
competencies.
Team Work
Integrity
• Being sensitive to others’ time
• Recognizing contributions of others
• Supporting work/ life balance needs of
self and others
• Treating others impartially and with
dignity
• Practicing patience and active listening.
• Insisting on high quality in all things
• Making quality customer service a top
priority
• Striving for continuous improvement
• Providing timely and constructive
performance feedback
• Recruting and developing quality staff
Respect
Quality
• Making customers a top priority
• Considering long- and short term
customer needs
• Delivering on commitments to customers
• Taking responsibility for improving
customer service.
• Seeking and providing honest feedback
• Developing skills instead of maintaining
• Considering organizational needs in our
own development
• Sharing individual expertise and
experience
• Supporting and mentoring others.
Customer Focus
Professionalism
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Board Members
H.E. Mohammed Abdullah
Al Mahrooqi
H.E. Abdulmalik Abdullah
Al Hinai
Chairman
Vice Chairman
Mrs. Manal Mohammed
Al Abdwani
Mr. Abdulsalam Nasser
Al Kharousi
Member
Member
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Leadership Team
Saleh Al Rashdi
Omar Al Wahaibi
Hassan Abdawani
Chief Executive Officer
Deputy Chief Executive Officer
VP Generation
Vishwanath S
Ibrahim Al Sulaimani
Ghada Al Yousef
Chief Financial Officer
Executive Manager,
Group Human Resource
Executive Manager, Group
Communication and Sustainability
Ali Al Abri
Khalid Al Salmani
Suhaila Al Farsi
Executive Manager, Group Strategy
Planning and Risk Management
Acting Executive Manager, IT
Company Secretary
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higher level of customer value added
services:
• Human Resource Development
• Health, Safety and Environment
• Customer Service
• Asset Management
• Communication
Chairman’s Report
Dear Shareholders,
On behalf of the Board of Directors of
the Electricity Holding Company SAOC
(“EHC”), I am pleased to present the
annual report and the audited financial
statements for the EH Group for financial
year ended 31 December 2013.
Operational Performance
Oman’s Electricity and Water Sector
registered a strong growth rate in 2013
with the continued spending on the
Distribution and Transmission Capital
Assets, connecting the New IPPs and
Customers, to cater to the increased
demand owing to new customers and
growing population.
FY2013, the EH Group has continued to
grow strongly contributing to the overall
economic development of the country.
Compared to 2012, the number of
customers has increased by 8.7% to
859,392; the electricity supplied has
increased by 7.9% to 22,621 GWh.
The group companies have incurred
capital expenditure of RO 278 million
on network expansion compared to
RO 242 million in 2012. EH Group
consisted of staff strength of 2,781 as
at 31 December 2013 of which 90% or
2,494 were Omani Nationals compared
to 89% Omanisation in 2012.
Financial Performance
The gross operating revenue of the
Group increased by 17.6% from RO
645 million in 2012 to RO 759 million
in 2013, the net profit after tax increased
by 33.6% from RO 84.6 million to RO
113.1 million, mainly due to increase in
customers numbers and higher power
consumption.
The Electricity subsidy for the year 2013
(including Salalah) is at RO 310 million,
which is 30% over the 2012 outturn
subsidy of RO 239 million. The increase
in subsidy is mainly driven by the
significant continuing capital investment,
increase in procurement cost due to new
IPPs on account of the significant growth
in residential and commercial customers,
which have lower tariff revenue. Subsidy
per customer grew from RO 302 in
2012 to RO 361 in 2013 and Subsidy
per unit increased to RO 13.7 per Mwh
in 2013 as against RO 11.4 per Mwh
in 2012.
Working Capital ratios are expected
to improve in the coming years upon
revision in the overall financing structure
of the companies.
Strategic Direction
The EH Group has continued its streak
in line with its established Vision, Mission
and Values, focusing on the following key
areas of activities to improve the people
capabilities to ultimately strengthen
the customer relationship by delivering
Major Project Development
Year 2013 witnessed the addition of
electricity generation capacity, with the
procurement of power from Barka III and
Sohar II plants. To continue meeting the
economic development of the Sultanate
of Oman and the customers demand for
electricity and related water in the future,
the following major initiatives are planned
to achieve this:
• Sur Power Project
• Musandam IPP
• Salalah New IPP
• Al Ghubrah IWP
The Distribution and Transmission
companies will continue to invest in
the Capex program, in line with the
regulatory framework.
The Group completed the Re-structuring
exercise of Dhofar Power Company
SAOC, with the bifurcation of generation
and transmission business to Dhofar
Generation Company SAOC and Oman
Electricity Transmission Company SAOC
respectively.
Acknowledgements
On behalf of the Board members, I would
like to express our sincere gratitude to
His Majesty Sultan Qaboos Bin Said for
his support to the electricity and related
water sector and for his strong and wise
leadership, which has paved the way for
the ongoing development of Oman.
I would like to take this opportunity to
thank all our customers, suppliers,
bankers and all others who have
contributed to the success of the EH
Group.
I also thank our CEO, Mr. Omar AlWahaibi and CEOs/GMs of the subsidiary
companies, the management team of
the Group and all staff of the EH Group
for their dedication and commitment to
the continued growth and development
of the Group.
Mohammed Abdullah Al Mahrouqi
Chairman of the Board of Directors
Year 2013 witnessed
the addition of
electricity generation
capacity, with the
procurement of power
from Barka III and
Sohar II plants.
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agreement for the supply of
cables and conductors for the
Group companies was executed to
provide cost effective solutions to
the procurement process, ensuring
quality and timeliness.
CEO’s Report
The first
“Knowledge
Sharing
Conference” was
held with an
objective to share
knowledge and
new technologies
to develop a
world-class
electricity sector.
Dear Shareholders,
The Electricity Holding Group (EH Group)
marched ahead in 2013, taking forward
the established Group Vision, Mission
and Values; engaging people, delivering
higher value services to customers and
securing the financial sustainability for
the future of the sector.
In its endeavor to strategise the business
performance goals, EHC significantly
progressed in delivering the 5 pillars
established in 2012: Human Resource,
Health Safety and Environment,
Customer Service, Asset Management
and Communication. The strategies
have turned into actions to enable the
realization of the desired benefits
Key Achievements:
• Approval of 5-year Business
Strategy as part of EHC’s efforts in
streamlining its business to achieve
conformity with International best
practices.
• Completion of the project “selfmeter reading” project, which aims
at enhancing the functional systems
of the five electricity distribution
companies to provide an alternative
solution to our customers and
achieve greater satisfaction with the
delivery of our services.
• Establishment of a ‘Utilities Centre
for Competency Development”,
as a Joint Venture Company,
which will strive to contribute to
the development of Omani talent
through the provision of bespoke
competency assessments and
training programmes for the
Electricity and Water Sectors.
• The sign off of the framework
I believe that
the EH Group
Leadership is
capable in leading
the businesses, and
delivering on the
strategic initiatives,
as planned.
• Completion of ‘RUWAD’ assessment
and development Centers which
helped us identify 60 participants
were identified as high potential
employees who will be groomed to
become future leaders of EH Group.
• The launch of first “Knowledge
Sharing Conference” with an
objective to share knowledge and
new technologies to develop the
electricity sector within Oman.
• The ‘Integrated Talent Management
Framework’ Project was launched
to enhance the capability of
human resources and to support
Omanisation plans for long term
success, in line with our strategy.
• EH group progressed with the
implementation of the Asset
Management
Programme
and completed the first asset
performance review to assess the
Group’s capability in this area.
• EHC extended its communication
horizon beyond Oman through its
participation in International fairs to
approach Omani students studying
in United Kingdom.
business development programme and
commitment to execute and ensure the
success of the Group initiatives.
I would also like to thank all our
employees for their hard work,
willingness to embrace changes and
the remarkable effort and commitment
towards achieving a successful 2013.
Finally, I would like to thank the Board of
Directors for their support and guidance.
• Completion of the IT Master plan for
the Group.
• EHC opened its Group Data Center
at Knowledge Oasis Muscat (KOM).
Challenges Ahead
In 2014, the Group will continue placing
the final building blocks to implement the
approved strategy to start realizing the
desired benefits, while also embarking
on key initiatives such as
Organize long-term fund raising program
for Group companies.
Conduct a study on the readiness
privatization options for Muscat Electricity
Distribution Company.
I believe that the EH Group Leadership
is capable in leading the businesses, and
will deliver on the strategic initiatives, as
planned.
Gratitude
I would like to thank the Group’s
Leadership Team for their commitment
to the future development of the group’s
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Omar Al-Wahaibi
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3. Role of the Board of Directors
and the Board Committees
Board of Directors
The Board represents the shareholder
(MOF) and is accountable to them for
protecting their interest in accordance
with the Sector Law through effective
governance of the business. The EHC –
Corporate Governance Report 2 Board
has the responsibility of overseeing,
counseling and directing the corporate
managers to ensure that the interests of
the Government are served. The roles of
the BoD of EHC for the Group in general
are:
• Establishing for the Group, a framework
of prudent and effective controls
which enable risk to be assessed and
managed across the Group
• Setting strategic aims for the group,
ensuring that the adequate shared
resources are in place for the Group
to meet its objectives;
• Setting the values and standards for
the Group, ensuring that the obligations
to its shareholders and other
stakeholders are understood and met
by all the Directors in the Group.
Corporate Governance Report
1. EHC’s Philosophy on Code of
Governance
The Electricity Holding Company (EHC)
recognizes the important role that
good corporate governance plays in
the smooth and efficient functioning of
the company, protecting its interests
and enhancing shareholder value. In
pursuing the corporate objectives we
are committed to the highest level of
governance and strive to foster a culture
that values ethical standards, personal
and corporate integrity and respect for
others.
EHC’s Corporate Governance Policy
has been built on the philosophy and
principles outlined in International form
and the code of corporate governance
issued by the Ministry of Commerce and
Industry for SAOG companies, and it is
being formally developed to be put in
place and shared with EHC’s subsidiaries.
It is our view that governance is not just a
matter for the Board; a good governance
culture must be focused throughout the
Group.
Shareholder
2. Organizational Structure
Ministry of Finance
BOD
Functional Reporting
Company
Secretary
Deputy Chief Executive Officer
Executive
Human Resources
Executive
Communcation
Audit Committee
The Audit Committee is expected to
ensure that adequate processes are
in place to ensure compliance with
regulatory requirements, enhance the
effectiveness of internal and external
auditors through interacting with them
and insulating them from the undue
influence of the management, and
provide subject matter expertise to the
Board on matters of governance and
risk.
Group Nomination,
Remuneration & Human
Resource Committee
Internal Audit Committee
Administrative Reporting
Executives
Board of Directors
Vice President - Generation
Executive
Information
Technology
Chief
Financial Officer
Executive Strategic
Planning & Risk
Management
Their objectives are to:
• Monitor the integrity of the financial
statements of the company and any
formal announcements relating to the
company’s financial performance,
reviewing significant financial reporting
judgments contained in them
• Review the company’s internal
financial controls, internal controls and
risk management systems
• Monitor and review the effectiveness
of the company’s internal audit
function
• Review and monitor the external
auditor’s independence & objectivity
and the effectiveness of the audit
process, taking into consideration
relevant Capital Market Authority
regulation, Commercial Companies
Law and Sector Law; and any other
related law
• Adopt policy on the engagement of
the external auditor to supply nonaudit services, taking into account
relevant ethical guidance regarding
the provision of non-audit services by
the external audit firm.
Group Nomination, Remuneration
and Human Resources Committee
The GNRHC is an EHC Board level
committee which looks at matters related
to the nomination of candidates to the
Subsidiary Boards and Management
of both EHC and its Subsidiaries, HR
policies and other significant HR matters
that need the attention of the members
of the BoD.
Their objectives are to:
• To assist the EHC Board and the
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Subsidiary Boards in fulfilling their
oversight responsibilities for the
independence of BoD members
and the integrity of the remuneration
strategy at EHC and its Subsidiaries
• To support Subsidiary Boards in
identifying appropriate candidates for
nomination to the Subsidiary Board
and to fill BoD vacancies as and when
they arise
• To assist the EHC Board and the
Subsidiary Boards in identifying
appropriate candidates for nomination
to positions within Management at
EHC and Subsidiary levels.
The Electricity
Holding Company
(EHC) recognizes
the important role
that good corporate
governance plays
in the smooth and
efficient functioning
of the company
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4. Board Composition
EHC being an unlisted joint stock
company is guided by the provisions
of Commercial Companies Law No.
4/1974 as amended from time to time
and individual articles of associations. By
virtue of this:
• EHC has 4 Board Members
• The Board composition is a mix
of Independent and Non-Executive
Independent Board Members
• The Non-Executive Independent
Members are not doing any work with
the Company for which they receive
permanent monthly and annual
remuneration.
Electricity Holding Company is led by a strong and experienced Board. The members
bring diversity in expertise and perspective to the leadership of a complex, highly
regulated, Electricity sector.
It is not permitted
to combine the
position of CEO/
General Manager
and the Chairman
of the Board of
Directors.
SI
Member Name
Position in the BOD
1
H.E. Mohammad Abdullah Al Mahrouqi
Chairman
2
H.E. Abdulmalik Abdullah Al Hinai
Vice Chairman
3
Mr. Abdulsalam Al Kharousi
Member
4
Mrs. Manal Al Abdwani
Member
5. Qualification and Election of
the Board Members
In electing Members of the Board of
Directors, the terms and conditions
issued by the Minister of Commerce &
Industry is being be followed, taking into
consideration the provisions of Article
(95) of the Commercial Companies Law,
and without prejudice to the contents of
the Articles of Association.
The Member of the Board of Directors
fulfills the following requirements:
• Not be less than 21 years old
• Not be a member of a public joint
stock or closed company whose
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principal place of business is in the
Sultanate of Oman and practicing
similar activities
• Not have been declared bankrupt
or dissolved unless such case is
ceased to exist as per the provisions
of the law
• Not have been convicted in a felony
or criminal act unless rehabilitated
• Not be unable to settle his debts &
obligations to various lenders
• It is not permitted to combine the
position of CEO/General Manager
and the Chairman of the Board of
Directors.
H.E. Mohammad Abdullah Al Mahrouqi
Master Degree in International Business Administration which he obtained from the
University of Bristol U.K in 1998. In 1993, he graduated from the Economics College
of King Saud University, Kingdom of Saudi Arabia. Currently the Chairman of the
Public Authority for Electricity and Water. He has been holding the position since the
establishment of this Authority in September 2007
H.E. Abdulmalik Abdullah AL Hinai
Ph.D. in International Relations/Political Economy obtained from the London School
of Economics and Political Sciences (LSE) University of London, UK in 1999. He is
currently Advisor to Ministry of Finance, charged to manage the Works of Ministry of
National Economy.
Mr. Abdulsalam Al Kharousi
Master Degree in Business Economic obtained from University of Hull in 2005.
Currently, he is a Director General of Budget and Contracts in Ministry Of Finance.
Mrs. Manal Al Abdwani
Master Degree in Business Administration with Distinction obtained from University
of Lincloinshire and Humberside UK in 2003. Currently, she is a Director General
Planning and Follow up in Ministry Of Commerce & industry. Her main responsibility is
participating in setting the strategies for the development of private sector and various
economic sectors that are directly supervised by Ministry of Commerce and Industry.
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6. Details of attendance for the Board and Committees meetings during 2013
Member Names
Mohammed
Al Mahrouqi
Abdulmalik
Al Hinai
Abdulsalam
Al Kharousi
Manal
Abdwani
BOD Meetings
Dates
Chairman
Vice Chairman
Member
Member
1st BOD Meeting
23/02/2013
Attended
Attended
Attended
Attended
2nd BOD Meeting
28/5/2013
Attended
Attended
Attended
Attended
3rd BOD Meeting
25/8/2013
Attended
Attended
Attended
Attended
4th BOD Meeting
25/11/2013
Attended
Attended
Apologies
Attended
5th BOD Meeting
5/12/2013
Attended
Attended
Attended
Attended
6th BOD Meeting
31/12/2013
Attended
Attended
Attended
Attended
5
5
4
5
Total Number of BOD Attended
IAC Meetings
Dates
Chairman
Member
Member
1st IAC Meeting
20/2/2013
Attended
Attended
Attended
2nd IAC Meeting
21/5/2013
Attended
Attended
Attended
3rd IAC Meeting
06/8/2013
Attended
Attended
Attended
4th IAC Meeting
27/10/2013
Attended
Attended
Apologies
4
4
3
Total Number of IAC Attended
GNRHC Meetings
Dates
Chairman
Member
Member
1st GNRHRC Meetings
20/2/2013
Attended
Attended
Attended
2nd GNRHRC Meeting
21/05/2013
Attended
Attended
Attended
3rd GNRHRC Meeting
18/07/2013
Attended
Attended
Attended
4th GNRHRC Meeting
06/10/2013
Attended
Attended
Attended
5th GNRHRC Meeting
19/12/2013
Attended
Attended
5
5
Total Number of IAC Attended
4
7. General meetings of shareholders
Annual General Meeting (AGM) refers to the general meeting of the Company which is held annually. Article 120 of the Commercial
Company Law mandates EHC to hold an AGM within three months of the end of each financial year. It is the policy of EHC that the
gap between subsequent AGMs shall not be more than fifteen months.
8. Communications with the Shareholders and Investors
Pursuant to Royal Decree 78/2004, the company maintains close liaison with the Ministry of Finance (MOF), the shareholder, on
various policy issues. Annually, the company communicates its annual report to the shareholder MOF.
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9. Governance between EHC and its Subsidiaries
EHC was established by the Sector Law and, with the exception of DPC and DGC, has 99.99% ownership of the Subsidiaries.
EHC’s ownership of DPC is 98.60% and DPC owns 100% of DGC.
EHC’s primary roles consist of:
• As a majority shareholder in the Subsidiaries, representing the ownership of the Government of the Sultanate of Oman, supporting
and implementing the Government’s privatization policy.
• As a service provider to the Subsidiaries, providing central accounting and financial support services pursuant to EHC’s
responsibilities under the Sector Law
• As the holding company for the Group, developing and leading strategy for the Group.
As part of its strategic role, EHC is responsible for promoting and developing the highest standards of corporate governance across
the Group and this includes appointing each of the Subsidiary Boards in coordination with the MoF pursuant to the Sector Law and
satisfying themselves that an appropriate governance structure is in place within EHC and its Subsidiaries.
The Governance structure adopted by the EHC Board and its subsidiaries is represented in the following chart:
DPC, 98.66%
GPDC, 99.99%
RAECO, 99.99%
7.
WJPC, 99.99%
General meetings of shareholders
Annual General Meeting (AGM) refers to the general meeting of the Company which is held
annually. Article 120 of the Commercial Company Law mandates EHC to hold an AGM within
three months of the end of each ﬁnancial year. It is the policy of EHC that the gap between
subsequent AGM’s shall not be more than fifteen months.
MEDC, 99.99%8.
Communications with the Shareholders and Investors
OPWP, 99.99%
Pursuant to Royal Decree 78/2004, the company maintains close liaison with the Ministry of
Finance (MOF), the shareholder, on various policy issues.
Annually, the company
communicates its annual report to the shareholder MOF.
9.
Governance between EHC and its Subsidiaries
EHC was established by the Sector Law and, with the exception of DPC and DGC, has 99.99%
ownership of the Subsidiaries. EHC’s ownership of DPC is 98.60% and DPC
owns
100% of
OETC,
99.99%
MJEC, 99.99%
DGC.
EHC’s primary roles consist of:
As a majority shareholder in the Subsidiaries, representing the ownership of the
Government of the Sultanate of Oman, supporting and implementing the Government’s
MZEC, 99.99%
privatization policy;
Percentage of EHC Shareholding
As a service provider to the Subsidiaries, providing central accounting and ﬁnancial
support services pursuant to EHC’s responsibilities under the Sector Law;
As the holding company for the Group, developing and leading strategy for the Group.
As part of its strategic role, EHC is responsible for promoting and developing the highest
standards of corporate governance across the Group and this includes appointing each of the
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10. Non Compliance by the
Company
The company has not paid any penalty
and no strictures have been imposed
on the company by the Ministry of
Commerce and Industry on any matter
during the year.
13. Statutory Auditors
Statutory auditors express an opinion on
the fairness with which EHC presents,
in all material respects, its financial
positions the results of its operations, and
its cash flows in line with internationally
recognized Accounting Standards.
11. Dividend Policy
The Board adopts fixed dividend payout
policy that provides ample internal
financial reserves to support the future
capital investments.
Deloitte and Touch (Deloitte) were the
Statutory Auditors of EHC during 2013.
Deloitte is the brand under which tens of
thousands of dedicated professionals in
independent firms throughout the world
collaborate to provide Audit, Consulting,
Financial Advisory, Enterprise Risk
Services, and Tax services to selected
clients.
12. Distribution of Shareholding
Since the company is fully owned by the
Government of the Sultanate of Oman,
represented by MoF, EHC directly reports
to the shareholder through the MoF.
We strive to develop and empower
our human resources to deliver safe
and sustainable electricity solutions to
our customers.
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Human Resources
Health & Safety Improvement Program
high performing and high potential
employees at every level, in all group
companies and grooming them to
become the future of EH Group.
14 high potential employees (Ruwad)
have been identified within the group
companies for the first time.
Ruwad is one of the many developmental
interventions that EH Group is committed
to undertake.
Integrated Talent Management
Framework (ITMF)
Establishment of Utility Center
for Competency Development
(UCCD)
Earlier in 2013, Electricity Holding Group
of Companies and Veolia Environment
held a signing ceremony to the start
of implementation of the joint-venture
agreement to establish the UCCD.
Under the agreement, EH Group
announced its collaboration with Veolia
to join their expertise to source and offer
tailor-made training solutions through
the establishment of UCCD, EHC will
contribute to the provision of bespoke
competency assessments and training
programs. The UCCD will equip and
inspire Omani Companies to practice
the highest standards of the profession,
develop their capacities in water and
energy, and encourage Omani talents to
realize their full potential.
Therefore, the Group aims to develop
human resources by establishing a clear
strategy for enhancing the capability of
the Omani workforce in particular.
Leadership Development
Program (Ruwad)
As part of our continued efforts to
strengthen our leadership capabilities
and development of a robust leadership
pipeline, we are proud to launch Ruwad,
our Leadership Development Program.
The key objective of Ruwad is to identify
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Electricity Holding Group signed a
partnership agreement recently with
Protiviti to commence the implementation
of an “Integrated Talent Management
Framework” to enhance the capability of
its human resources.
ITMF provides an integrated approach to
recruitment, development, performance
management, compensation and
training. The objective of this approach is
to make the human resources functions
operate more efficiently and to create
an integrated approach for managing
people which can allow EH Group
respond more effectively to business
needs. Furthermore, the implementation
of ITMF is in line with the Group’s strategy
to achieve People Capability Maturity
Model (PCMM level-3) certification.
The aim of the Group Health & Safety
improvement program is to improve
workplace safety outcomes through
cultural transformation and attainment of
OHSAS 18001 Certification by 2017.
The program is being run under MSP
program management principles with
each company represented on the
program board.
It is based around 3 key themes of work:
• Certification to OHSAS 18001
• Transforming health & safety culture
• Providing appropriate H&S IT based
tools and techniques.
The focus of 2013 concentrated on the
improvement work necessary in attaining
certification with three companies
expecting to obtain it by quarter 1,2014.
Additionally, only 2 companies remain to
implement the Interlex Health & Safety
Management System.
While there have been enormous efforts
over the last 5 years in improving safety
performance, significant work remains
in transforming the safety culture which
will be the primary focus of work for the
forthcoming two years.
The aim of the
Group Health &
Safety improvement
program is to
improve workplace
safety outcomes
through cultural
transformation and
attainment of OHSAS
18001 Certification
by 2017.
26
Asset Management
Asset Management
Improvement Program
The Group Asset Management
improvement strategy implementation
progressed well during 2013. The
aim of the program is to enhance the
asset management systems of the six
participating subsidiaries MEDC, MJEC,
MZEC, OETC, RAECO and DPC in order
to provide improved reliability of supply
to our customers and progressively
meet sector compliance obligations.
Additionally, it is expected that they will
be able to be accredited to ISO 55000, an international standard for asset
management, by October 2016.
The program has been structured
around a group level steering committee
to provide overall co-ordination,
governance and decision making on
common work. Each company has its
own management committee with an
appointed asset management program
manager. It is based around 3 key
themes of work:
• The development of the technical
asset management requirements such
as policy, strategy and process design.
• Building the internal AM people
capability and capacity within the
companies
• Providing appropriate AM IT based
tools and techniques.
A baseline assessment against the
requirements of the asset management
specification, PAS 55, was conducted
with companies. To be conducted
annually, this has set the targets for
annual improvement over the next 3
years. Companies have identified the
gaps against the required standard and
updated their implementation plans
Communication
accordingly.
The focus of the company’s work in 2013
has included improved understanding
the assets, their condition and risk with
a number of initiatives commenced to
achieve this. Additionally, improving
asset information systems, asset
performance reporting and maintenance
management processes were targeted
by most companies.
Over 90 staff in the sector were trained in
asset management principles and training
for a certificate in asset management
was provided to 20 staff in the newly
created asset management departments
which has seen the first cohort of Omani
engineers with formal Institute of Asset
Management UK qualifications including
the first female engineer in the region.
This is in addition to internal training by
the companies as part of implementing
new systems and tools. While there is necessarily a lot of
foundational work being conducted,
in parallel, several initiatives have been
conducted to make real improvements
in customer reliability and reduced
business risk through the identification
of high risk assets and targeted reliability
improvement programs.
The most important achievement of
2013 is the inauguration of the Group
Communications and Sustainability
Department which is responsible for
delivery EH Group’s communication
strategy pillar.
As a strategic pillar and as an enabler
for other strategic pillars, Group
Communication and Sustainability
Department was established at EHC to
provide strategic direction, operational
standards and a shared service, where
required, to its subsidiaries. The shared
services provided include:
• Brand management and marketing
• Sustainability
• Corporate Communications, and
employee engagement.
Another very important achievement is
the launch of the first group conference
and the ‘sharing’ brand. The department
was responsible for coordinating more
than 40 research papers received for
the conference, and arranged for 26
internal staff speakers from EH Group to
present their papers at the conference in
addition to coordinating the registration
of more than 350 staff members from
the Group to participate in this important
conference.
As part of the Group’s vision to become
the ‘leading utility services provider
in Oman’, EH Group approved its
Sustainability Policy and Plan in 2013
and adopted three main themes; Social,
Environment, Economic. The policy
compliments the vision to develop and
empower human resources to deliver
safe and sustainable electricity solutions
to customers which aim to support
three pillars: social, economic and
environmental.
27
28
implemented to product bills for 30,000
customers on a monthly basis, in the first
stage. The next step for the project is to
complete the rollout and including the
entire customer base in the new billing
system.
Customer Service
The year 2013 was a very exiting
year for customer service and full and
challenges and achievement and major
breakthroughs in customer service which
was the result of the intense efforts made
by the distribution and supply companies
to improve their customer services.
One of the most important achievements
on 2013 is establishing the future
direction and operational model of
customer service operations in the
distribution and supply companies
(Blueprint). The Future Model is
developed in collaboration with an
international consulting firm specialized
in the utilities sector (ESBI).
The Future Model is designed to enable
the distribution and supply companies
to deliver excellent customer service to
their customers based on international
standards. As a result of this model, a 5year plan was put into place to develop
customer service in the distribution and
supply companies gradually and in a
comprehensive manner.
During 2013, many projects were
implemented and brought forth excellent
results. One of the most important
projects of 2013 was the Pilot Billing
Project, which enabled the distribution
and supply companies to produce
customer bills on a monthly basis using
their internal resources. Within this project
the internal resources in the distribution
and supply companies were trained and
developed to be able to implement a
new billing system and use it to product
customer bills with exceptional levels of
accuracy. The project was successfully
Another project that was launched in
2013 was the Self Meter Reading
System (SMR) which was implemented
successfully in MEDC, MJEC, MZEC,
RAECO and DPC. This system allow the
electricity customer in all the distribution
and supply companies to send their
meter readings on a monthly basis
through a variety of channels including
SMS, Email, the call center or they can
come to the company’s offices and
deliver their meter readings to be used
in the calculation of the bill values. The
project was associated with a major
awareness campaign titled “YOU
KNOW IT BETTER” to provide the
needed information to the customer to
be able to send their reads through the
different channels.
During 2013, MEDC launched a major
initiative in the sector with the introduction
of Prep-Paid Meters branded as (SABIQ)
to the Omani electricity market. Using
these meters the customers can charge
their accounts with the expected amount
of consumption from many locations in
Muscat Governorates or the company
offices. The new service helps real
estate ownes to rent their asset without
worrying about the accumulation of debt
as a result of non-payment of electricity
bills by tenants.
During the 2013, distribution and supply
companies worked aggressively on
enhancing the communication with their
customer using different means:
• Deploying customer communications
through SMS, email and outbound
calls for many activities like billing, new
connections, collection, meter reading
and other customers interactions.
• Launching several awareness
campaigns for electricity consumption
and self meter reading and health and
safety.
• The distribution and supply companies
have worked to develop their contact
centers to be able to answer customer
queries and complaints efficiently and
effectively
• Several distribution and supply
companies are using Twitter
and Facebook and Instagram to
One of the
most important
achievements
on 2013 is
establishing the
future direction
and operational
model of
customer service
operations in the
distribution and
supply companies
(Blueprint).
29
communicate with their customers
on a continuous basis to understand
their needs and answer their queries
and keep them abreast with the
developments in the company which
might help the customer make better
use of the company services.
During 2013, the Distribution and supply
companies continued in developing the
skills and knowledge of their customer
service staff by extensive training
programs on customer handling and
complaints resolution. The training
programs also included extensive training
of international standards of customer
service adopted worldwide.
During 2013, the DISCO were also
committed to meet the service standards
that were set in the beginning of the
year and achieved 90% resolution
rate of all complaints within 30 days.
In addition, they achieved more than
85% of efficiency in their contact center
response with 75% of the calls being
answered in less than 20 seconds. In
addition, during 2013, the distribution
and supply companies were able to
enhance many of their operational
performance indicators by increasing
bills collection ratio and reducing delayed
in the amount of payments while at the
same time reducing the overall losses
related to their commercial activities.
30
31
Operational & Financial Review 2013
Operational Highlights
• Energy Sold: Increase by 7.3%
• Water Sold: Increase by 5%
• Customer Number: Increase by 9%
Financial Highlights
• Net Profit Afer Tax Increase by 34%
• Operating Revenue Increase by 17%
• Capital Investment Increase by 17%
Key Financials
RO 000’s
2013
2012
% Change
Earning Before Interest and Tax
RO 000’s
153,976
124,134
24
Net Profit After Tax
RO 000’s
113,124
84,686
34
Operating Cash Flow
RO 000’s
208,284
167,172
25
Net Govt Subsidy (Including Salalah Business)
RO 000’s
310,279
247,422
25
Capital Expenditure
RO 000’s
277,638
241,900
15
Total Assets
RO 000’s
2,366,217
2,176,708
9
Total Equity
RO 000’s
1,188,040
1,065,203
12
Key Ratios
RO
2013
2012
% Change
Earnings per share
RO
56.56
42.34
34
Operating Cash Flow per share
RO
104.14
83.59
25
Net Assets per share
RO
594.02
532.60
12
2013
2012
% Change
Key Operations
Electricity MIS (GWh)
Units Generated
GWh
3162
3354
(6)
Units Purchased
GWh
19718
18464
7
Units Transmitted
GWh
21898
21041
4
Units Sold
GWh
19851
18504
7
Distribution Loss
%
10.3
13.4
(23)
Max Transmission System Demand
GWh
4.4
4
10
32
Key Operations
2013
2012
% Change
Electricity Rural (GWh)
Units Generated
Units Purchased
Units Sold
Distribution Loss
GWh
GWh
GWh
%
1,296
1,954
2,770
14.8
1,468
1,431
2,456
15.3
(12)
37
13
(3)
Water
Units Generated
Units Purchased
Units Sold
M CuM
M CuM
M CuM
51.3
126.8
176.8
52.4
118
167.8
(2)
7
5
Customers
MIS
Rural System
Total
Number
Number
Number
Staff count
Number
754,254
105,138
859,392
695,345
94,927
790,272
8
11
9
2,781
2,696
v
• Group Business
• Performance Review
Revenue
• Total Revenue (Increase by RO 110.8
million)
• 16.8% Annual Growth
• Power Sales have increased by
RO 31.2 million due to 9% increase
in customer growth and 7% growth in
units sold, change in customer mix.
• Net Subsidy from Government has
increased by RO 62.8 million caused
by increased purhcase cost from
commission of new plants and growth
in business infrastructure.
• Reversal of decommissioning liability
has contributed an extraordinary
income of RO 16.8 million.
900
800
769.9
700
659.1
560.3
600
518.4
500
451.5
400
300
200
100
0
2013
2012
2011
2010
2009
Total Expenses
• Total Expenses (Increase by RO 96.4
million) 96.232
• 16.3 % Annual growth.
• Operating cost higher by RO 82
million mainly due to increased power
and water procurement.
• General and Administration expenses
higher in line with growth in businesss
operations and inflationary impact.
• Higher finance cost due to increase
in short-term borrowings and impact
on account of unwinding of SWAP.
Profit after Tax
• Profit after Tax (Increase by RO 28.4
million)
• 33.5% annual growth
• Increase in power consumption,
Industrialisation and customer base
contributed to the increased profits.
• Efficiencies in generation also
contributed to the increase.
• Efficiencies in procurement due to the
new generation capacities added to
the growth.
• Reversal on de-recognition of
decommissioning assets, provided an
extraordinary income to the group.
33
800
700
686.3
589.9
600
506.2
500
455.4
382.6
400
300
200
100
0
2013
2012
2011
2010
2009
120
113.1
100
84.7
80
71.9
75.4
62.3
60
40
20
0
2013
2012
2011
2010
2009
34
35
1,000,000
Operating Cash Flow
• Operating Cash flow (Increased by
RO 41 million)
• 24.5% annual growth
• The 33% increase in Net Profit,
resulted in a 24% increase in operating
cashflow of the Subsidiary companies.
• Almost the entire operational cashflow was re-invested in the Distribution
and Transmission Companies’ Capital
Expenditure program, servicing of
loans etc.
• A small portion of the cash flow,
contributed by the generating
companies was invested in local bank
deposits.
Group Business
Performance Review
250
227.3
208.2
225.2
900,000
790.272
727.483
677.668
700,000
200
Customers
167.2
500,000
400,000
118.6
300,000
Customer per
company
100
50
0
2012
2011
2010
2009
630.767
600,000
859,392
150
2013
859.397
800,000
200,000
MEDC
261,480
MZEC
318,182
MJEC
174,592
RAECO
28,287
DPC
76,851
• Total customer base has been
increased by 9% to 859,392
• The major increase is in domestic
customers 48,419; commercial
customers 18,029
• Government customers 1778; with a
small growth in agricultural and
industrial customers.
100,000
2013
2012
2011
2010
2009
DPC, 76.851
RAECO, 28.287
MEDC, 261.480
MSEC, 174.592
MZEC, 318.182
Customers per Company
Electricity Supplied - GWh
25,000
22,621
Power Generation and
Procurement
20,960
18,513
16,132
13,834
15,000
4,458
10,000
MEDC
8,025
MZEC
5,778
MJEC
6,048
DPC
22,621
20,000
Electricity Supplied
per Company
RAECO
36
21,672
5,000
1000
651
500
2,119
0
2013
2012
2011
2010
2009
DPC, 2,119
RAECO, 651
MEDC, 8,025
MJEC, 6,048
25.000
Power
Generated
(GWh)
Power
Procurement
(GWh)
Water Desalination (MCuM)
MZEC, 5,778
126.8
Electricity Supplied per Company (GWh)
30.000
20.000
15.000
Water
Desalination
(MCuM)
Group
Water
Procurement
(MCuM)
External
19.932
21.672
10.000
16.265
13.874
13.131
5.000
4.458
1.000
• Power production in the group
decreased by 8%, in line with the
planned plant retirements and lower
generations.
• Power procurement has increased by
8% in line with the growth in demand,
essentially in the MIS region.
• Commissioning of new plants has
enhanced ability to procure, namely
Sohar II, Barka III and Salalah IWPP.
51.3
37
4.872
5.531
5.553
4.946
0
2013
2012
2011
POWER PROCUREMENT (GWh)
2010
2009
POWER GENERATED (GWh)
While the Water desalinated by the Group reduced by 2%; Water procurement grew
by over 7%.
180
160
140
120
100
126.8
80
118
97.1
62.4
81
60
40
51.3
20
52.4
49.5
49.1
52.3
0
2013
2012
2011
WATER PROCUREMENT (MCuM) EXTERNAL
2010
2009
WATER DESALINATION (MCuM) GROUP
38
Distribution Loss (%)
10.3
14.8
Government Subsidy
Distribution
Loss: MIS
The Distribution Loss has shown a significant improvement in the MIS region at 25%
while a minor improvement in rural areas at 3%.
Distribution
Loss: Rural
Areas and
DPC
15.3
16.0
15.5
14.8
13.9
14.0
14.4
14.7
15.1
12.8
12.0
10.0
350
310.3
300
Government
Subsidy
10.3
8.0
6.0
4.0
2.0
0
2013
Distribution Loss: MIS
2012
2011
Distribution Loss: Rural Areas and DPC
2010
2009
247.4
250
MEDC
62.7
MZEC
90.5
MJEC
55.0
RAECO
50.2
Salalah Business
30.5
50
OPWP K Factor
21.5
0
17.2
18.0
39
Total Subsidy (RO million)
200
153.4
150
144.0
146.9
100
2013
The electricity subsidy for the year 2013
(including Salalah) is at RO 310 million,
which is 25% over the 2012 outturn
subsidy of RO 247 million. The increase
in subsidy is mainly driven by the
significant continuing capital investment,
increase in procurement cost due to new
IPPs on account of the significant growth
in residential and commercial customers,
which have lower tariff revenue.
2012
2011
2010
2009
OPWP 21.5
DPC, 30.5
MEDC, 62.7
RAECO, 50.2
Subsidy per customer grew from RO
313 in 2012 to RO 361 in 2013 and
Subsidy per unit increased to RO 13.7
per Mwh in 2013 as against RO 11.8
per Mwh in 2012.
MZEC, 90.5
MJEC, 55.0
Subsidy per Company (RO Millions)
15.0
13.7
11.8
7.7
10.0
8
9.4
5.0
0.0
2013
2012
2011
Subsidy per Unit
2010
2009
Subsidiaries Performance
Highlights
0.1%
Al Gubrah Power and
Desalination Company SAOC
12
10.2
10
Wadi Al Jizzi Power Company
SAOC
40
2.8%
7.7
8
6
Contribution
to Group
Profit
Activities: Electricity Generation.
Annual Highlights
Power generation is 21% lower than
previous year (474GWh vs. 602GWh)
on expiry of 3 units.
REVENUE
PROFIT AFTER TAX
4
2
-0.4
-5
2013
2012
42.8
40.6
40
Contribution
to Group
Profit
35
30
25
20
Activities: Electricity Generation
and related water desalination.
1.1
0
45
41
Annual Highlights
• Overall plant availabilty is 85.9%
which is 0.3% higher than 2012
• 2514 GWh power delivered to the
grid, lower by 2% compared to 2012
• Water dispatched 50.02 million m^3,
higher by 0.4% compared to 2012
• Total Man Hours without Lost Time
Accident is 4.06 million
REVENUE
PROFIT AFTER TAX
15
10
5
0.2
0
6.3
-5
2013
2012
GPDC, 2.80%
Contribution to Group EBT
Average plant availability for the period
is 92%, 4% over budgeted availability of
88% & 1% higher than 2012 (91%).
1,014,910 man hours
without Lost
Contribution
Time Incident.
to Group
41.30%
EBT
Oman Elelctricity
Transmission Company SAOC
80
42
• Maximum transmission system
demand up by 7% (4,369 MW)
and regulated transmittied up by
4% (21,898 GWh)Contribution
as compared to
2012.
to Group
77.9
70
60
21.20%
56.5
50
46.2
EBT
40
27.6
30
REVENUE
PROFIT AFTER TAX
MUSCAT ELECTRICITY
DISTRIBUTION COMPANY SAOC
20
250
204.80
200
188.50
150
REVENUE
PROFIT AFTER TAX
100
50
Activities: Electricity Transmission
Annual Highlights
• Total length of 220KV transmission
circuit have increased from 1,400
circuit KM in 2012 to 1529 circuit KM
in 2013.
• Total length of 132 KV transmission
circuits decreased from 3,160 circuit
KM in 2012 to 3,150 circuit‐KM in
2013
• Two new grid stations constructed
(Quriyat and Sur) during 2013 in
addition to upgrading of gridstations in
Jahloot, Misfah and Barka.
21.3
23.5
10
0
0
2013
2012
OETC, 41.30%
Activities: Distribution and supply
of electricity and maintenance
of distribution networks in the
Muscat region
2013
2012
MEDC, 21.20%
Annual Highlights
• 21,610 new customers added to the
network, an increase of 9% over
2012.
43
180
• System loss performance of 9.17%
achieved as compared to 12.86% in
2012
• Subsidy per MWh isContribution
7.6 in 2013 as
compared to 7.2 into
2012
Group
19.40%
EBT
Mazoon Electricity Company
SAOC
44
178.9
2012
• Subsidy per MWh is 15.7 in 2013
and is maintained atContribution
2012 percentage
of 15.7.
to Group
158.9
160
140
12.80%
120
100
EBT
80
REVENUE
PROFIT AFTER TAX
60
Majan Electricity Company
SAOC
160
145.6
140
130.6
120
100
80
REVENUE
PROFIT AFTER TAX
60
40
40
22.4
20
21.7
14.4
20
12.8
0
0
of distribution networks in
the willayats of A’Sharqiya, Al
Dhakliyah and South Batinah
region.
45
2013
2012
MZEC, 19.40%
of distribution networks in
the willayats of A “Dhahirah”
Governorate of Buraimi and North
Batinah region.
2013
2012
MJEC, 12.80%
Annual Highlights
• 12,080 new customers, an increase
of 7.4% over 2012
2012
• Subsidy per MWh is 9.1 in 2013 as
compared to 8.0 in 2012
Annual Highlights
• 25,219 new customers, an increase
of 8.6% over 2012
70
Rural Areas Electricity
Company SAOC
5.60%
46
64.2
Dhofar Power Company
SAOC
60
52.7
50
Contribution
to Group
EBT
Activities: Electricity generation,
water desalination and electricity
distribution and supply
activities in rural areas.
Annual Highlights
• 2,912 new customers, an increase of
11.4% over 2012
• Net power genarated and sent out
has increased from 555,808 MWh to
635,167 an increase of 14.2% over
2012
• Desalinated water generation has
increased from 1,985,724 m3 in
2012 to 2,291,034 m3 in 2013, an
increase of 15%.
Activities: Electricity generation,
distribution and supply activities
in the Dhofar (Salalah) area.
40
30
REVENUE
PROFIT AFTER TAX
20
10
5.9
0
-.8
-10
2013
2012
RAECO, 5.60%
47
Annual Highlights
• 7,299 new customers, an increase of
10.5% over 2012
• System loss is 14.3% compared to
16.4% in 2012
• Regulated units sold are 2,119 GWh
and have increased by 12% over
2012.
50
47.8
46.6
45
40
35
30
25
REVENUE
PROFIT AFTER TAX
20
15
5
10
-0.9
0
-5
2013
2012
48
Oman Power and Water Procurement Company SAOC
Activities: Bulk Purchase and Sale of electricity and related water and supervision of the Salalah Concession
Agreement.
Annual Highlights
• The IPPs Barka III (Al Sawadi Power Company) and Sohar II (Al Batinah Power Company) achieved their Commercial Operation
within the first week of April 2013. These projects contributed a total combined generation capacity of 1,488 MW for Summer
2013.
• Al Ghubrah IWP (42 MIGD) OPWP achieved successful conclusion of the WPA with execution of the agreements on 11 February
with the Scheduled Commercial Operation in October 2014.
• 2013 witnessed the re-structuring of Dhofar Power Company and the Salalah concession agreement and the unbundling of
assets leading to the formation of separate Generation, Distribution and Transmission entities to be effective from January 2014.
• During 2013 a total capacity of 101MW of temporary power was generated to support MIS due to construction delays of Sur
IPP.
49
Consolidated financial statements
for the year ended 31 December 2013
50 - Independent auditor’s report
53 - 55 - Consolidated statement of financial position
56 - Consolidated statement of profit or loss and
other comprehensive income
57 - Consolidated statement of changes in equity
59 - Consolidated statement of cash flows
500
468
450
61 - 99 - Notes to the consolidated financial statements
403.3
400
350
300
250
200
REVENUE
PROFIT AFTER TAX
150
100
50
3.9
0
-8.1
-50
2013
2012
52
53
Consolidated statement of
financial position
2013
2012
Notes
RO ’000
RO ’000
6
1,780,389
1,607,112
4,320
7,092
ASSETS
Non-current assets
Property, plant and equipment
Goodwill
Deferred tax assets
24
1,237
-
Advance payments
7
15,668
21,267
Service concession receivables
8
141,285
173,069
Bank Deposits
9
56,042
48,311
1,998,941
1,856,851
Total non-current assets
Current assets
Inventories
10
35,660
39,974
Trade and other receivables
11
177,730
146,828
9
82,151
70,461
12
31,069
62,594
326,610
319,857
40,666
-
367,276
319,857
2,366,217
2,176,708
Bank deposits
Cash and bank balances
Assets classified as held for sale
Total current assets
Total assets
42
The accompanying notes form an integral part of these consolidated financial statements.
54
55
Consolidated statement of financial position
for the year ended 31 December 2013 (continued)
Consolidated statement of
financial position
2013
2012
Notes
RO ’000
RO ’000
Share capital
13
2,000
2,000
Legal reserve
14
12,342
12,342
General reserve
15
3,000
3,000
Hedge reserve
35
-
(1,860)
542,100
421,123
628,598
628,598
1,188,040
1,065,203
EQUITY AND LIABILITIES
Capital and reserve
Retained earnings
Shareholders’ funds
Total equity
17
2013
2012
Notes
RO ’000
RO ’000
18
19
20
21
21
21
22
35
23
24
75,865
44,351
8,372
17,427
8,272
112,125
123,222
63,754
125,512
49,102
8,131
43,347
7,983
4,703
105,458
8,940
93,545
51,305
453,388
498,026
12,708
400,000
30,345
4,753
261,412
6,894
3,530
719,642
5,147
11,086
305,000
9,674
4,258
269,322
9,222
3,617
1,300
613,479
-
724,789
613,479
Total liabilities
1,178,177
1,111,505
Total equity and liabilities
2,366,217
2,176,708
Non-current liabilities
Term loan
Finance lease liabilities
Trade and other payables
Provision for decommissioning costs
Provision for employee benefits
Provision for major maintenance
Deferred revenue
Hedging deficit
Advance from Ministry of Finance
Deferred tax liability
Total non-current liabilities
Current liabilities
Term loan
Short-term borrowings
Bank overdrafts
Current tax liability
Provision for employee benefits
Hedging deficit
18
25
26
19
20
34
21
35
Liabilities classified as held for sale
42
Total current liabilities
Chairman
Dr. Abdulmalik Abdullah Al Hinai
Director
Omar Khalfan Al Wahaibi
57
(501)
(51)
85,901
1,215
84,686
984,446
Total
Consolidated statement of profit or
loss and other comprehensive income
(4,592)
56
RO ’000
Other comprehensive income for the year
10,240
1,215
Total comprehensive income for the year
123,364
85,901
113,124
84,686
123,364
85,901
Profit for the year attributable to:
Owners of the parent
Total comprehensive income attributable to:
Owners of the parent
-
(501)
(51)
-
(4,592)
-
84,686
-
633,190
84,686
-
-
-
-
7,965
-
Reclassification to profit or loss
-
1,215
Dividend paid
2,275
Items that may be reclassified subsequently to profit or loss :
-
Revaluation gain on hedge instruments for the year
Other comprehensive income :
-
84,686
-
113,124
Profit for the year
Acquisition of minority
interest
606
43
-
(911)
(Loss) / profit for the year from discontinued operation
-
84,080
-
114,035
Profit for the year from continuing operations
Adjustment of
receivable towards
sale of Rusail Power
Company SAOC
(22,267)
34
Transactions with
owners:
(14,396)
Taxation
1,215
106,347
-
128,431
Profit before tax
-
(15,548)
-
(23,584)
Total comprehensive
income for the year
33
1,215
Finance costs
-
2,461
-
3,478
-
32
Other comprehensive
income for the year
Finance income
-
119,434
-
148,537
Profit from operations
-
13,121
Profit for the year
26,046
336,989
31
(3,075)
Other income
3,000
(83,766)
12,342
(96,232)
2,000
29
At 1 January 2012
General and administrative expenses
RO ’000
190,079
RO ’000
218,723
Gross profit
RO ’000
(454,948)
RO ’000
(540,693)
RO ’000
28
RO ’000
645,027
Shareholders’
funds
759,416
Retained
earnings
27
Hedge
reserve
RO’000
General
reserve
RO’000
Legal
reserve
2012
Share
Capital
Revenue
Operating costs
2013
Notes
Consolidated statement of changes in equity
1,188,040
2013
2012
RO’000
RO’000
127,520
106,953
(64)
-
Depreciation on property, plant and equipment
83,576
72,800
Loss on sale of property, plant and equipment
925
32
7,709
-
168
626
1,687
1,704
Provision for employee benefit expense
924
1,823
Provision for major maintenance
444
511
(27,775)
-
Interest expense
23,584
17,181
Interest income
(3,478)
(2,461)
465
1,256
215,685
200,425
(726)
(2,745)
(32,589)
(26,436)
5,599
1,881
(1,174)
(15,827)
6,667
9,583
Advance from Ministry of Finance
29,677
(6,480)
(7,669)
7,592
Cash flows from operating activities
542,100
Adjustments for:
Tax impact of discontinued operations
Loss on writeoff of property, plant and equipment
3,000
12,342
2,000
At 31 December
2013
(500)
-
Acquisition of minority
interest
Transactions with
owners:
Dividend paid
(27)
-
113,124
10,240
Total comprehensive
income for the year
10,240
Other comprehensive
income for the year
113,124
Profit for the year
429,503
(10,240)
3,000
12,342
2,000
8,380
(8,380)
Reclassification of
hedging deficit taken
over at the time of
acquisition of DPC
(note 35)
421,123
(1,860)
3,000
12,342
2,000
At 1 January 2013
RO ’000
RO ’000
RO ’000
RO ’000
RO ’000
Retained
earnings
Hedge
reserve
General
reserve
Legal
reserve
59
Consolidated statement
of cash flows
628,598
(500)
-
(27)
-
123,364
-
10,240
113,124
-
-
1,065,203
-
628,598
1,065,203
628,598
RO ’000
RO ’000
Shareholders’
funds
58
Profit before tax
Share
Capital
Consolidated statement of changes in equity
Total
Provision for inventory obsolescence
Provision for doubtful debts
Reversal of decommissioning provision
Unwinding of decommissioning cost provisions
Operating cash flows before working capital changes
Working capital changes to:
Inventories
Advance payments
Service concession receivable
Deferred revenue
60
2013
2012
RO’000
RO’000
215,470
167,993
Payment of end-of-service benefits
(1,283)
-
Income tax paid
(5,903)
(821)
208,284
167,172
Cash generated from operating activities
Net cash generated from operating activities
Cash flows from investing activities
(277,638)
(241,966)
12,150
93
(19,421)
(54,972)
3,478
2,461
(21,140)
(17,181)
(302,571)
(311,565)
95,000
115,000
(48,025)
39,657
(4,256)
(3,830)
(27)
(51)
Investment in subsidiary
(101)
Dividend paid
(500)
Purchase of property, plant and equipment
Proceeds on sale of property, plant and equipment
Investment in bank deposits
Interest received
Interest paid
Net cash used in investing activities
Cash flows from financing activities
Term loan availed
Settlement of finance lease liabilities
Minority interest acquisition adjustment
Net cash generated from financing activities
Net change in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Overdraft
1. General
(the “Company” or “Parent Company”)
is a closed Omani joint stock company
registered under the Commercial
Companies Law of Oman on 19 October
2002.
The establishment and operations of
the Company are governed by the
provisions of the Law for the Regulation
and Privatisation of the Electricity and
Related Water Sector (the “Sector Law”)
promulgated by Royal Decree 78/2004.
The principal activities of the company
comprise the management of Government
investments in, and the Privatisation of
the Electricity and Related Water Sector
in the Sultanate of Oman and provision of
certain central services to its subsidiary
companies.
Dhofar Power Company SAOC (DPC)
commenced their operations on 1
May 2005 (the transfer date) following
the implementation of a decision of
the Ministry of National Economy (the
“transfer scheme”) issued pursuant to
Royal Decree 78/2004.
The principal activities of the subsidiaries
are set out below:
The subsidiary companies, other than
Principal
Activities
Al Gubrah Power and Desalination Company
SAOC (GPDC)
99.99
Electricity generation and related water desalination.
(501)
Wadi Al Jizi Power Company SAOC (WJPC)
99.99
Electricity generation.
Oman Electricity Transmission Company
SAOC (OETC)
99.99
Electricity transmission.
Oman Power and Water Procurement
Company SAOC (OPWP)
99.99
Bulk purchase and sale of electricity and related
water.
Muscat Electricity Distribution Company
SAOC (MEDC)
99.99
Distribution and Supply of electricity and
maintenance of distribution networks in the Muscat
region.
Mazoon Electricity Company SAOC (MZEC)
99.99
Distribution and Supply of electricity and
maintenance of distribution networks in the wilayats
of A’Sharqiya, Al-Dhakliyah and South Batinah
region.
150,275
(52,196)
5,882
52,920
47,038
724
52,920
31,069
62,594
(30,345)
(9,674)
724
52,920
Shareholding
Percentage %
Cash and cash equivalents at the end of the year
Cash and bank balances
Notes to the consolidated
financial statement
Subsidiary
Company
42,091
Cash and cash equivalents at the end of the year
61
62
Subsidiary
Company
Shareholding
Percentage %
Principal
Activities
Majan Electricity Company SAOC (MJEC)
99.99
Distribution and Supply of electricity and maintenance
of distribution networks in the wilayats of A’Dhahirah,
and North Batinah region.
Rural Areas Electricity Company SAOC
(RAECO)
Dhofar Power Company SAOC (DPC)
99.99
98.79
Utilities Centre for Competency Development 67.00
LLC (under formation)
Electricity generation, water desalination, and
electricity distribution and supply activities in
Musandam Governate, Alwusta Region, Masirah
Island, Khuweima and Qroon area in Sharqiya
Region, Aswad area in Dahirah Region in the
Dhofar Governate, the area outside Dhofar
Power Company SAOC authorised area and in
the Dakhliya Region, the area outside Mazoon
Electricity Co SAOC authorised area.
The Government of Sultanate of Oman has granted
the right to build, takeover certain existing assets,
generate, transmit, distribute and supply electricity
in the Salalah region.
2.1 Standards and
Interpretations adopted with
no effect on the financial
statements
2. Adoption of new and
revised International Financial
Reporting Standards (IFRS)
The following new and revised Standards
and Interpretations have been adopted in
these consolidated financial statements.
Their adoption has not had any significant
impact on the amounts reported in these
consolidated financial statements but
may affect the accounting for future
transactions or arrangements.
For the year ended 31 December
2013, the Group has adopted all
the new and revised standards and
interpretations issued by the International
Accounting Standards Board (IASB) and
the International Financial Reporting
Interpretations Committee (IFRIC) of the
IASB that are relevant to its operations
and effective for the period beginning on
1 January 2013.
Amendments to IFRS 7 Disclosures
- Offsetting Financial Assets and
Financial Liabilities
The amendments to IFRS 7 require entities to disclose information about rights
of offset and related arrangements (such as collateral posting requirements)
for financial instruments under an enforceable master netting agreement or
similar arrangement.
IFRS 10:
Consolidated Financial Statements
IFRS 10 replaces the parts of IAS 27 Consolidated and Separate Financial
Statements that deal with consolidated financial statements and SIC-12
Consolidation - Special Purpose Entities. IFRS 10 changes the definition of
control such that an investor has control over an investee when (a) it has
power over the investee, (b) it is exposed, or has rights, to variable returns
from its involvement with the investee and (c) has the ability to use its power
to affect its returns. All three of these criteria must be met for an investor to
have control over an investee.
Previously, control was defined as the power to govern financial and
operating policies of the entity so as to obtain benefits from its activities.
IFRS 11:
Joint arrangements
IFRS 11, replaces IAS 31 Interest in Joint Ventures and guidance contained
in a related interpretations. IFRS 11 deals with how a joint arrangement
of which two or more parties have joint control should be classified
and account for. Under IFRS 11, investments in joint arrangements are
classified either as joint operations or joint ventures, based on rights and
obligation of parties to the arrangements by considering the structure, the
legal form of the arrangement, the contractual terms agreed by the parties
to the arrangement and, when relevant, other facts and circumstances.
IFRS 12:
Disclosure of Interests in Other
Entities
IFRS 12 is a new disclosure standard and is applicable to entities that
have interests in subsidiaries, joint arrangements, associates and / or
unconsolidated structured entities. In general, the application of IFRS 12
has resulted in more extensive disclosures in the consolidated financial
statements.
IFRS 13:
Fair Value Measurement
IFRS 13 establishes a single source of guidance for fair value
measurements and disclosures about fair value measurements. The scope
of IFRS 13 is broad; the fair value measurement requirements of IFRS
13 apply to both financial instrument items and non-financial instrument
items for which other IFRSs require or permit fair value measurements
and disclosures about fair value measurements, except for share-based
payment transactions that are within the scope of IFRS 2 Share-based
Payment, leasing transactions that are within the scope of IAS 17 Leases,
and measurements that have some similarities to fair value but are not fair
value (e.g. net realisable value for the purposes of measuring inventories
or value in use for impairment assessment purposes).
Under formation as per an agreement with Veolia
Middle East to provide human resource services,
consultancy services and training services.
These consolidated financial statements
represent the results of operations of the
company and all the above subsidiaries
(together the “Group”).
63
Amendments to IAS 1
Presentation of Items of
Other Comprehensive
Income
The amendments introduce new terminology, whose use is not mandatory,
for the statement of comprehensive income and income statement. Under the
amendments to IAS 1, the ‘statement of comprehensive income’ is renamed
as the ‘statement of profit or loss and other comprehensive income’ [and
the ‘income statement’ is renamed as the ‘statement of profit or loss’]. The
amendments to IAS 1 retain the option to present profit or loss and other
comprehensive income in either a single statement or in two separate but
consecutive statements. However, the amendments to IAS 1 require items
of other comprehensive income to be grouped into two categories in the
other comprehensive income section: (a) items that will not be reclassified
subsequently to profit or loss and (b) items that may be reclassified
subsequently to profit or loss when specific conditions are met. Income tax
on items of other comprehensive income is required to be allocated on the
same basis - the amendments do not change the option to present items of
other comprehensive income either before tax or net of tax.
The amendments have been applied retrospectively, and hence the
presentation of items of other comprehensive income has been modified
to reflect the changes. Other than the above mentioned presentation
changes, the application of the amendments to IAS 1 does not result
in any impact on profit or loss, other comprehensive income and total
comprehensive income.
Annual Improvements
2009-2011 Cycle
IAS 19 Employee Benefits (as revised
in 2011)
64
65
All actuarial gains and losses are recognised immediately through other
comprehensive income in order for the net pension asset or liability recognised
in the consolidated statement of financial position to reflect the full value of the
plan deficit or surplus.
Furthermore, the interest cost and expected return on plan assets used in the
previous version of IAS 19 are replaced with a ‘net interest’ amount under
IAS 19 (as revised in 2011), which is calculated by applying the discount
rate to the net defined benefit liability or asset. These changes have had an
impact on the amounts recognised in profit or loss and other comprehensive
income in prior years. In addition, IAS 19 (as revised in 2011) introduces
certain changes in the presentation of the defined benefit cost including more
extensive disclosures.
2.2 Standards & Interpretations in issue not yet effective
At the date of authorisation of these consolidated financial statements, the following new and revised Standards and Interpretations
were in issue but not yet effective:
New IFRS and relevant amendments
Effective for annual periods beginning on or after
Financial Instruments
Makes amendments to the following standards:
IAS 1 - Clarification of the requirements for comparative information
IAS 16 - Classification of servicing equipment
IAS 32 - Clarify that tax effect of a distribution to holders of equity instruments
should be accounted for in accordance with IAS 12 Income Taxes
IAS 34 - Clarify interim reporting of segment information for total assets in
order to enhance consistency with the requirements in IFRS 8 Operating
Segments
IFRS 9: Financial Instruments (as revised January 2015
in 2010 to include requirements for the
classification and measurement of financial
liabilities and incorporate existing derecognition
requirements)
IAS 19 (as revised in 2011) changes the accounting for defined benefit
plans and termination benefits. The most significant change relates to the
accounting for changes in defined benefit obligations and plan assets. The
amendments require the recognition of changes in defined benefit obligations
and in the fair value of plan assets when they occur, and hence eliminate
the ‘corridor approach’ permitted under the previous version of IAS 19 and
accelerate the recognition of past service costs.
Amendment to IFRS 10 Consolidated Financial January 2014
Statements, IFRS 12 Disclosure of Interests in
Other Entities and IAS 27 Separate Financial
Statements, to provide ‘investment entities’ (as
defined) an exemption from the consolidation of
particular subsidiaries and instead require that
an investment entity measure the investment
in each eligible subsidiary at fair value through
profit or loss in accordance with IFRS 9 Financial
Instruments or IAS 39 Financial Instruments:
Recognition and Measurement.
Consolidation, joint arrangements,
associates and disclosures
Amendments to IFRSs
Effective for annual periods beginning on or after
IAS 32: Financial instruments: presentation, January 2014
Offsetting Financial Assets and Financial
Liabilities: to clarify certain aspects because
of diversity in application of the requirements
on offsetting, focused on four main area
(a) the meaning of ‘currently has a legally
enforceable right of set-off’(b) the application of
simultaneous realisation and settlement (c) the
offsetting of collateral amounts (d) the unit of
account for applying the offsetting requirements
IAS 36: impairment of assets, Recoverable January 2014
Amount Disclosures for Non-Financial Assets
to reduce the circumstances in which the
recoverable amount of assets or cash-generating
units is required to be disclosed, clarify the
disclosures required, and to introduce an explicit
requirement to disclose the discount rate used
in determining impairment (or reversals) where
recoverable amount (based on fair value less
costs of disposal) is determined using a present
value technique.
IAS 39: Financial Instruments: Recognition January 2014
and Measurement, Novation of Derivatives and
Continuation of Hedge Accounting’ makes it
clear that there is no need to discontinue hedge
accounting if a hedging derivative is novated,
provided certain criteria are met.
A novation indicates an event where the original
parties to a derivative agree that one or more
clearing counterparties replace their original
counterparty to become the new counterparty
to each of the parties. In order to apply the
amendments and continue hedge accounting,
novation to a central counterparty (CCP) must
happen as a consequence of laws or regulations
or the introduction of laws or regulations.
IFRIC 21 – Levies
66
New Interpretations and amendments to Interpretations:
The Directors anticipate that the adoption of the above standards and interpretations in future periods will have no material impact
on the financial statements of the Group in the period of initial application.
3. Summary of significant
accounting policies
The principal accounting policies applied
in the preparation of these consolidated
financial statements are set out below.
These policies have been consistently
applied to all the years presented, unless
otherwise stated.
Statement of compliance
The consolidated financial statements
have been prepared in accordance
with International Financial Reporting
Standards, (IFRS) and the requirements
of the Commercial Companies Law of
1974, as amended.
Basis of preparation
are prepared on the historical cost basis
except for certain financial instruments
which are measured at fair value.
Historical cost is generally based on the
fair value of the consideration given in
exchange of goods and services.
January 2014
67
The preparation of consolidated
financial statements in conformity with
IFRS requires the use of certain critical
accounting estimates. It also requires
management to exercise its judgement
in the process of applying the Group’s
accounting policies. The areas involving
a higher degree of judgement or
complexity or areas where assumptions
and estimates are significant to the
consolidated financial statements are
disclosed in note 4.
As at 31 December 2013, the Group’s
current liabilities exceeded its current
assets by RO 357.513 million (2012
- RO 293.622 million). The Parent
Company’s management, on behalf of
the Group is in the process of obtaining
long term credit facilities which will be
drawn down, as required, in order to
meet the Group’s on-going funding
requirements. Accordingly, the net
negative current assets position as at
the year end is not considered to have
an impact on the going concern status.
Hence these financial statements are
prepared on a going concern basis.
Basis of consolidation
Subsidiaries
incorporate the financial statements
of the Parent Company and entities
controlled by the Parent Company and
its subsidiaries. Control is achieved when
the Parent Company:
• has power over the investee;
• is exposed, or has right, to variable
returns from its investment with the
investee;
• and has the ability to use its power to
affect its returns.
The Parent Company reassesses
whether or not it controls an investee
if facts and circumstances indicate that
there are circumstances to indicate that
there are changes to one or more of the
three elements of control listed above.
When the Company has less than
majority of voting rights of an investee,
it has power over the investee when
the voting rights are sufficient to give it
the practical ability to direct the relevant
activities of the investee unilaterally. The
Company considers all relevant facts
and circumstances in assessing whether
or not the Company’s voting rights in an
investee are sufficient to give it power.
Consolidation of a subsidiary begins
when the Company obtains control over
the subsidiary and ceases when the
Company loses control of the subsidiary.
Specially, income and expenses of
a subsidiary acquired or disposed of
during the year are included in the
consolidated statement of profit or loss
and other comprehensive income from
the date the Company gains control until
the date when the Company ceases to
control the subsidiary.
Profit or loss and each component
of other comprehensive income are
attributed to the owners of the Parent
Company and to the non-controlling
interests. Total comprehensive income
of subsidiaries is attributed to the owners
of the Parent Company and to the noncontrolling interests even if this results
in the non-controlling interests having
deficit balance.
When necessary, adjustments are made
to the financial statements of subsidiaries
to bring their accounting policies into line
with Group’s accounting policies.
All intra group assets and liabilities,
equity, income, expenses and cash
flows relating to transactions between
members of the Group are eliminated in
full on consolidation.
Changes in the Group’s
ownership interests in existing
subsidiaries
Changes in the Group’s ownership
interests in subsidiaries that do not result
in the Group losing control over the
subsidiaries are accounted for as equity
transactions. The carrying amounts of the
Group’s interests and the non-controlling
interests are adjusted to reflect the
changes in their relative interests in the
subsidiaries. Any difference between the
amounts by which the non-controlling
interests are adjusted and the fair value
of the consideration paid or received
is recognized directly in equity and
attributed to owners of the Parent
Company.
68
When the Group loses control of a
subsidiary, a gain or loss is recognized
in profit or loss and is calculated as the
difference between
1. the aggregate of fair value of the
consideration received and fair value
of any retained interest, and
2. the previous carrying amount of the
assets (including goodwill) and
liabilities of the subsidiary and any
non-controlling interests.
All amounts previously recognized in
other comprehensive income in relation
to that subsidiary are accounted for as
if the Group had directly disposed of
the related assets or liabilities of the
subsidiary (i.e, reclassified to profit or
loss or transferred to another category
of equity as specified / permitted by
applicable IFRSs). The fair value of
any investment retained in the former
subsidiary at the date when control is
lost is regarded as the fair value on initial
recognition for subsequent accounting
under IAS 39, when applicable, the cost
on initial recognition of an investment in
an associate or a joint venture.
Business combinations
Acquisitions of businesses are
accounted for using the acquisition
method. The consideration transferred
in a business combination is measured
at fair value, which is calculated as the
sum of the acquisition-date fair value
of the assets transferred by the Group,
liabilities incurred by the Group to the
former owners of the acquire and the
equity interests issued by the Group in
exchange for control of the acquiree.
Acquisition-related costs are generally
recognized in profit or loss as incurred.
All acquisition date, the identifiable assets
acquired and liabilities assumed are
recognized at their fair value.
Goodwill
Goodwill is measured as the excess if the
sum of the consideration transferred, the
amount of any non-controlling interests
in the acquiree and the fair value of the
acquirer’s previously held equity interest
in the acquiree (if any) over the net of
the acquisition-date amounts of the
identifiable assets acquired and the
liabilities assumed.
69
other assets of the unit pro rate based on carrying amount of each asset in the unit. Any impairment loss for goodwill is recognized
directly in profit or loss. An impairment loss recognized for goodwill not reversed in subsequent period.
On disposal of a relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or
loss on disposal.
Foreign currency
Items included in the financial statements of the Group are measured and presented using Rials Omani which is the currency
of the Sultanate of Oman, being the economic environment in which the Group operates (the functional currency). The financial
statements are prepared in Rials Omani, rounded to the nearest thousand.
Transactions denominated in foreign currencies are initially recorded at the rates of exchange prevailing on the date of the
transaction. Monetary assets and liabilities denominated in such foreign currencies are translated at the rates prevailing on the
reporting date. Gains and losses from foreign currency transactions are recognized in the profit or loss.
Property, plant and equipment are stated at cost less accumulated depreciation and any identified impairment loss. Borrowing costs
which are directly attributable to the acquisition of items of property, plant and equipment, are capitalised.
Goodwill is carried at cost as established
at the date of acquisition of the business,
as explained above, less accumulated
impairment losses, if any.
Subsequent expenditure
Expenditure incurred to replace a component of an item of property, plant and equipment is capitalised if it is probable that the
future economic benefits embodied within the part will flow to the Group, and its cost can be measured reliably. All other repairs
and maintenance expenditure is recognised in the profit or loss as an expense as and when incurred.
For the purpose of impairment testing,
goodwill is allocated to each of the
Group’s cash-generating units (or
groups of cash-generating units) that is
expected to benefit from the synergies
of the combination.
Depreciation
Depreciation is recognised in the profit or loss on a straight-line basis over the estimated useful lives of each part of an item of
property, plant and equipment, since this most closely reflects the expected pattern of consumption of the future economic benefits
embodied in the asset.
A cash-generating unit to which
goodwill has been allocated is tested for
impairment annually, or more frequently
when there is an indication that the unit
may be impaired. If the recoverable
amount of the cash-generating unit
is less than its carrying amount, the
impairment loss is allocate first to reduce
the carrying amount of any goodwill
allocated to the unit and then to the
The principal estimated useful lives used for this purpose are:
Buildings
Transmission and related assets
Assets under finance lease
Distribution and related assets
Other plant and machinery
Decommissioning assets
Furniture, vehicles and equipment
Plant spares
Year
30
20-60
13-20
20-40
3-60
8-50
5-7
20
Capital work-in-progress
Capital work-in-progress is stated at
cost. When the underlying asset is ready
for use in its intended condition and
location, work-in-progress is transferred
to the appropriate property, plant and
equipment category and depreciated in
accordance with depreciation policies of
the Group.
Financial instruments
Financial assets and financial
liabilities are recognised on the Group’s
consolidated statement of financial
position when the Group becomes a
party to the contractual provisions of the
instrument.
Non-derivative financial
instruments
Non-derivative financial instruments
comprise
service
concession
receivables, trade and other receivables,
bank deposits, cash and bank balances,
term loans and other borrowings and
trade and other payables. Non-derivative
financial instruments are recognised
initially at fair value plus, for instruments
not at fair value through profit or loss,
any directly attributable transaction costs.
Subsequent to initial recognition, nonderivative financial instruments are
measured at amortised cost using the
effective interest rate method, less any
impairment losses.
Trade receivables
Trade receivables are amounts due
from customers for merchandise sold
or services performed in the ordinary
course of business.
70
Cash and cash equivalents
Cash and cash equivalents comprise
cash balances and call deposits and
term deposits with original maturity not
greater than three months from the date
of placement which are not subject to
significant risk of change in value. Bank
overdrafts that are repayable on demand
and form an integral part of the Group’s
cash management are included as a
component of cash and cash equivalents
for the purpose of the statement of cash
flows. In the consolidated statement of
financial position bank overdrafts are
shown as current liabilities.
Trade payables are obligations to
pay for goods or services that have
been acquired in the ordinary course
of business from suppliers. Accounts
payable are classified as current liabilities
if payment is due within one year or
less (or in the normal operating cycle of
the business if longer). If not, they are
classified as non-current liabilities.
Derivative financial instruments
The Group holds derivative financial
instruments to hedge interest rate risk
exposures. Derivatives are recognised
initially at fair value; attributable
transaction costs are recognised in the
profit or loss when incurred. Subsequent
to initial recognition, derivatives are
measured at fair value, and changes
therein are accounted for as described
below.
Cash flow hedges
Changes in the fair value of the derivative
hedging instrument designated as a
cash flow hedge are recognised directly
in equity to the extent that the hedge is
effective. To the extent that the hedge
is ineffective, changes in fair value are
recognised in the profit or loss.
If the hedging instrument no longer meets
the criteria for hedge accounting, expires
or is sold, terminated or exercised, then
the hedge accounting is discontinued
prospectively. Any gain or loss previously
recognised in equity remains there until
the forecast transaction occurs. When
the hedged item is a non-financial
asset, the amount recognised in equity
is transferred to the carrying amount of
the asset when it is recognised. In other
cases, the amount recognised in equity
is transferred to profit or loss in the same
period that the hedged item affects profit
or loss.
Impairment
Financial assets
Financial assets are assessed for
indicators of impairment at each reporting
date. Financial assets are impaired
where there is objective evidence that,
as a result of one or more events that
occurred after the initial recognition of
the financial asset, the estimated future
cash flows of the investment have been
impacted.
For financial assets, objective evidence
of impairment could include:
• significant financial difficulty of the
counterparty
• default or delinquency in payments
• it becoming probable that the borrower
will enter bankruptcy or financial
reorganization.
Certain categories of financial assets,
such as trade receivables that are
assessed not to be impaired individually,
are subsequently assessed for
impairment on a collective basis.
Objective evidence of impairment for a
portfolio of receivables could include the
Group’s past experience of collecting
payments, an increase in the number of
delayed payments in the portfolio past
the credit period as well as observable
changes in national or local economic
conditions that correlate with default on
receivables.
The carrying amount of the financial
asset is reduced by the impairment loss
directly for all financial assets with the
exception of trade receivables, where the
carrying amount is reduced through the
use of allowance account.
When a trade receivable is considered
uncollectible, it is directly written off as
bad. Subsequent recoveries of amounts
previously written off are credited to the
profit or loss.
Non-financial assets
The carrying amounts of the Group’s nonfinancial assets other than inventories
are reviewed at each reporting date to
determine whether there is any indication
of impairment. If any such indications
exist then the asset’s recoverable
amount is estimated.
An impairment loss is recognised if the
carrying amount of an asset or cash
generating unit exceeds its value in use
and its fair value less costs to sell. In
assessing the value in use, the estimated
future cash flows are discounted to
their present value using a pre-tax
discount rate that reflects current market
assessments of the time value of money
and the risks specified to the asset.
Impairment losses recognised in prior
periods are assessed at each reporting
date for any indications that the loss
has decreased or no longer exists. An
impairment loss is reversed if there has
been a change in estimates used to
determine the recoverable amount. An
impairment loss is reversed only to the
extent that the asset’s carrying amount
does not exceed the carrying amount
that would have been determined, net
of depreciation or amortization, if no
impairment loss had been recognised.
Inventories
Inventories are stated at the lower of cost
and net realizable value. Costs comprise
purchase cost and where applicable,
direct labor costs and those overheads
that have been incurred in bringing the
inventories to their present location and
condition. Cost is calculated principally
using the weighted average method.
Allowance is made for slow moving
and obsolete inventory items where
necessary, based on management’s
assessment.
Leases
Operating leases
Leases in which a significant portion of
the risks and rewards of ownership are
retained by the lessor are classified as
71
operating leases. Payments made under
operating leases (net of any incentives
received from the lessor) are charged to
the profit or loss on a straight-line basis
over the period of the lease.
Finance leases
Leases of property, plant and equipment
where the Group has substantially all
the risks and rewards of ownership are
classified as finance leases. Finance
leases are capitalised at the lease’s
commencement at the lower of the fair
value of the leased property and the
present value of the minimum lease
payments.
Each lease payment is allocated between
the liability and finance charges. The
interest element of the finance cost is
charged to profit or loss over the lease
period so as to produce a constant
periodic rate of interest on the remaining
balance of the liability for each period.
Taxation
Income tax is calculated as per the fiscal
regulations of the Sultanate of Oman.
Current tax is the expected tax payable
on the taxable income for the year,
using the tax rates ruling at the reporting
date.
Deferred tax is recognized for temporary
differences between the carrying
amounts of assets and liabilities for
financial reporting purposes and the
amounts used for income tax purposes.
Deferred tax is calculated on the basis of
the tax rates that are expected to apply
to the year when the asset is realised or
the liability is settled based on tax rates
(and tax laws) that have been enacted
or substantially enacted by the reporting
date. The tax effects on the temporary
differences are disclosed under noncurrent liabilities or non-current assets
as deferred tax liabilities / assets, as the
case may be.
A deferred tax asset is recognised only
to the extent that it is probable that future
taxable profits will be available against
which the unused tax losses and credits
can be utilised. The carrying amount
of deferred tax assets is reviewed at
reporting date and reduced to the extent
that it is no longer probable that the
related tax benefit will be realised.
Deferred tax assets and liabilities are
offset as there is a legally enforceable
right to set off these in Oman.
Current and deferred tax is recognised
as an expense or benefit in the statement
of profit or loss except when they relate
to items credited or debited directly
to equity, in which case the tax is also
recognised directly in equity.
Employee benefits
End of service benefits are accrued
in accordance with the terms of
employment of the Group’s employees
at the reporting date, having regard to
the requirements of the Oman Labour
Law 2003 as amended. Employee
entitlements to annual leave and leave
encashments are recognised when they
accrue to employees and an accrual is
made for the estimated liability arising
72
as a result of services rendered by
employees up to the reporting date.
These accruals are included in current
liabilities, while that relating to end of
service benefits is disclosed as a noncurrent liability.
Gratuity for Omani employees who
transferred from Ministry of Housing,
Electricity and Water on the transfer date
is contributed in accordance with the
terms of the Social Securities Law 1991
and Civil Service Employees Pension
Fund Law.
Contributions to a defined contribution
retirement plan for Omani employees
in accordance with the Omani Social
Insurance Law 1991, are recognised
as an expense in the profit or loss as
incurred.
Provisions
Provisions are recognised in the
consolidated statement of financial
position when the Group has a legal or
constructive obligation as a result of a
past event and it is probable that it will
result in an outflow of economic benefit
that can be reliably estimated.
The amount recognised as a provision
is the best estimate of the consideration
required to settle the present obligation
at the reporting date, taking into account
the risks and uncertainties surrounding
the obligation. Where a provision is
measured using the cash flows estimated
to settle the present obligation, its
carrying amount is the present value of
those cash flows.
Provision for decommissioning
A provision for decommissioning costs
is recognised when there is a present
obligation as a result of activities
undertaken pursuant to the usufruct
agreements, it is probable that an outflow
of economic benefits will be required to
settle the obligation, and the amount
of provision can be measured reliably.
The estimated future obligations include
the costs of removing the facilities and
restoring the affected areas.
In the current year some of subsidiaries’
management decided to derecognise
provision for decommissioning cost, as the
eventuality of incurring decommissioning
costs by the subsidiaries appears to be
remote at present, given the present set
of circumstances, and will become a
liability if and only when a notice to this
effect is issued by the government of
Sultanate of Oman or its representative
to the subsidiaries.
Further, since the eventual outflow
of resources embodying economic
benefits to settle the obligation of
decommissioning cost is remote rather
than a possibility, the Group management
is of the view that the obligation need not
be disclosed as a contingent liability.
Deferred revenue
Deferred revenue represents Government
project funding towards the cost of
property, plant and equipment. These
contributions are deferred over the
life of the relevant property, plant and
equipment. From 1 July 2011 customer
contributions other than assets funded
by government for the use of the public
at large are recognised in accordance
with IFRIC 18 ‘Transfers of assets from
customers’ and are not deferred.
Government grants
Grants from government are recognised
at their fair value where there is a
reasonable assurance that the grant will
be received and the Group will comply
with all related conditions.
Government grants relating to costs are
deferred and recognised in the profit
or loss over the period necessary to
match them with the costs that they are
intended to compensate.
Government grants relating to
construction of assets are included in
deferred revenue within non-current
liabilities and are credited to profit or loss
on a straight line basis over the expected
useful lives of related assets.
Revenue
Revenue represents the sale of electricity
to the Government, commercial and
residential customers within the Group’s
distribution network, sale of desalinated
water, transmission connection charges
and subsidy from government.
Revenue also includes the funding
received from the Ministry of Finance
(MOF) in respect of costs relating to the
Salalah business of Oman Power and
Water Procurement Company SAOC, a
subsidiary.
Revenue is measured at fair value of the
consideration received or receivable.
Revenue is reduced for estimated
73
rebates and other similar allowances.
borrowing costs eligible for capitalisation.
Revenue is recognised to the extent of
maximum allowed revenue (MAR) by
the regulatory formula in accordance
with the licensing requirements. Actual
regulated revenue in excess of MAR is
deferred to the subsequent year and is
shown under trade and other payables.
All other borrowing costs are recognised
in the profit or loss in the year in which
they are incurred.
Revenue also includes meter connection
fees, tender fees, fines and application of
deferred revenue on contributions and is
accounted for on an accrual basis.
Revenue from services rendered is
recognised in profit or loss in proportion
to the stage of completion of the
transaction at the reporting date. The
stage of completion is assessed by
reference to surveys of work performed.
Government subsidy
The Government of the Sultanate of
Oman funds the excess of economic
costs over customer and other revenue
within the Electricity and Related Water
Sector. This funding is included in
revenue. The Group recognises the
subsidy when the right to receive the
subsidy is established.
Borrowing costs
Borrowing costs directly attributable to the
acquisition, construction or production of
qualifying assets are added to the cost of
those assets, until such time as the assets
are substantially ready for their intended
use or sale. Investment income earned
on the temporary investment of specific
borrowings pending their expenditure on
qualifying assets is deducted from the
4. Critical accounting estimates
The preparation of consolidated
financial statements in conformity with
IFRS requires the use of certain critical
accounting estimates. It also requires
management to exercise its judgment
in the process of applying the Group’s
accounting policies. The Group makes
estimates and assumptions concerning
the future. The resulting accounting
estimates will, by definition, seldom
equal the related actual results.
Estimates and judgements are
continually evaluated and are based on
historical experience and other factors,
including expectations of future events
that are believed to be reasonable under
the circumstances. The areas requiring
a higher degree of judgement or
complexity, or areas where assumptions
and estimates are significant to the
financial statements are set out below:
Depreciation
Depreciation is charged so as to write off
the cost of assets over their estimated
useful lives. The calculation of useful lives
is based on management’s assessment
of various factors such as the operating
cycles, the maintenance programs, and
normal wear and tear using its best
estimates.
Allowance for inventory
obsolescence
Allowance for inventory obsolescence
is based on management’s assessment
of various factors such as usability, the
maintenance programs, and normal
wear and tear using its best estimates.
Allowance for doubtful debts
Allowance for doubtful debts is based
on management’s best estimates of
recoverability of the amounts due along
with the number of days for which such
debts are due.
Provision for decommissioning
costs
Upon expiry of the Usufruct agreement,
the Group will have a legal requirement
to remove the facilities and restore the
affected area.
In the current year management of certain
subsidiaries decided to derecognise
provision for decommissioning cost, as the
eventuality of incurring decommissioning
costs by the subsidiaries appears to be
remote at present, given the present set
of circumstances, and will become a
liability if and only when a notice to this
effect is issued by the government of
Sultanate of Oman or its representative
to the subsidiaries.
Further, since the eventual outflow of
resources embodying economic benefits
to settle the obligation of decommissioning
cost is remote rather than a possibility, the
Group management is of the view that
the obligation need not be disclosed as a
contingent liability.
74
Taxation
The Group has considered revenue
arising from contribution from connected
entities in respect of connection assets as
taxable income based on management
discussions with the tax authorities.
According to the guidance released
by the Oman taxation authorities, the
Group has considered the revenue on
contribution from connected customers
as taxable income from 2010 to 2013.
Government sponsored projects have
been treated as government grants, and
removed from taxation calculations with
effect from 2007.
Deferred taxation
The Group makes provision for deferred
tax liability during the term of the power
purchase agreement, arising primarily
from accelerated tax depreciation and
accumulated tax losses.
The Group makes provision for deferred
tax liability during the term of the power
purchase agreement, arising primarily
due to timing difference between the
cost as per regulatory framework based
on which revenue is determined and the
lease cost as per IAS 17.
In the tax assessment for years 2007 and
2008, the Tax Department has mentioned
that, as per the tax law, depreciation shall
be allowed as a deduction to the legal
owner of the assets.
The Tax Department, disregarded the
finance lease treatment adopted by
the subsidiaries and concluded that the
subsidiaries are entitled only to the output
from the assets and not the owner of the
assets. The department finalized the tax
assessment for 2007 and 2008 based
on operating lease treatment considered
by the subsidiaries in the tax returns and
stated that the same treatment will be
adopted consistently for later years also
unless there is substantial change in the
terms of the agreement. Based on Tax
Department’s position, the management
decided to reverse the deferred tax
liability earlier recognised on account of
accelerated tax depreciation on leased
assets accounted in prior years on a
conservative basis with the corresponding
effect in the statement of profit or loss.
Lease classification
The Group has entered into the power
purchase agreements with the Power
Generation Companies. In accordance
with the criteria provided in IFRIC 4,
“Determining Whether an Arrangement
Contains a Lease” (“IFRIC 4”), the Group
assesses whether PPA agreement
conveys a right to use an asset meets the
definition of a lease. The determination of
whether an arrangement is (or contains)
a lease is based on the substance of the
arrangement at the inception date.
The arrangement is assessed for
whether fulfilment of the arrangement is
dependent on the use of a specific asset
or assets or the arrangement conveys a
right to use the asset or assets, even if
that right is not explicitly specified in an
arrangement. Based on the assessment
the PPA is classified either as finance
75
leases or operating leases. Leases are classified according to the arrangement and to the underlying risks and rewards specified
therein in line with IAS 17.
5. Financial risk management
The Group’s activities expose it to a variety of financial risks including market risk (including foreign exchange risk and interest rate
risk), liquidity risk and credit risk. However, the Group’s overall risk management programme focuses on the unpredictability of financial
markets and seeks to minimise potential adverse effects on the Group’s financial performance. Credit, liquidity and market risk
management is carried out by the Group’s management under policies approved by the Board of Directors. The Board provides
principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk,
credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.
Financial risk factors
Market risk
Foreign exchange risk
Foreign exchange risk arises when future commercial transactions or recognised assets or liabilities are denominated in a currency
that is not the entity’s functional currency. The Group is exposed to foreign exchange risk arising from currency exposures primarily
with respect to the US Dollar. The Rial Omani is pegged to the US Dollar. Since most of the foreign currency transactions are in
US dollar or other currencies linked to the US dollar, management believes that the exchange rate fluctuations would have an
insignificant impact on the pre-tax profit.
Interest rate risk
Bank deposits
The Group has deposits which are interest bearing and are exposed to changes in market interest rates. The Group carries out
periodic analysis and monitors the market interest rate fluctuations taking into consideration the Group’s needs in order to manage
interest rate risk.
A 1% increase or decrease in interest rate on bank deposits would have increased / decreased the profit, by the amounts shown
below:
Change in bank deposits interest income
2013
2012
RO’000
RO’000
1,382
1,187
Borrowings
The Group has interest bearing liabilities, which expose the Group to interest rate risk. At the reporting date the Group’s interest
bearing financial instruments was as below:
76
Term loan
Short term borrowings
Bank overdrafts
Term loan
Bank overdrafts
2012
RO’000
88,573
400,000
30,345
RO’000
136,598
305,000
9,674
Interest bearing
518,918
451,272
2013
2012
RO’000
886
3,665
76
RO’000
1,116
2,770
33
4,627
3,919
Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding from an adequate amount of
committed credit facilities. The management maintains flexibility in funding by maintaining availability under committed credit lines.
The management monitors the Group’s liquidity by forecasting the expected cash flows.
The table below analyses the Group’s financial liabilities and net-settled derivative financial liabilities that will be settled on a net
basis into relevant maturity grouping based on the remaining period at the reporting date to the contractual maturities date. The
amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within twelve months equal their carrying
balances, as the impact of discounting is not significant.
31 December 2013
Carrying
amount
Total contractual
cash flows
less than
1 year
1 year to
5 years
More than
5 years
RO’000
RO’000
RO’000
RO’000
RO’000
269,784
269,784
261,412
8,372
-
88,573
400,000
30,345
49,104
95,912
400,000
30,345
78,006
16,342
400,000
30,345
11,092
79,570
53,902
13,012
568,022
604,263
457,779
133,472
13,012
Non-interest bearing
Interest bearing
Term loan
Bank overdrafts
31 December 2012
2013
A 1% increase or decrease in interest rates on interest bearing liabilities would have decreased / increased the profit, by the
amounts shown below.
77
Non-interest bearing
277,453
277,453
269,322
8,131
-
Term loan
136,598
166,846
15,139
112,108
39,599
305,000
305,000
305,000
-
-
9,674
9,674
9,674
-
-
53,360
89,864
11,559
43,583
34,722
504,632
571,384
341,372
155,691
74,321
Bank overdrafts
The advance from Ministry of Finance amounting to RO 123.222 million (2012: RO 93.545 million) has no fixed repayment term
and do not carry any interest and, therefore, not shown in the above table.
The following are the contractual undiscounted cash flows associated with derivatives that are cash flows hedges:
Notional amount by term to maturity
Interest rate swaps:
31 December 2013
31 December 2012
Negative fair
value
Notional
amount
1 - 12 months
1 to 5 years
Over 5 years
RO’000
RO’000
RO’000
RO’000
RO’000
-
-
-
-
-
10,240
62,854
7,979
41,179
13,696
Credit risk
Credit risk is the risk of financial loss to the Group, if a customer or counterparty to a financial instrument fails to meet its contractual
obligations. The credit risk of the Group is primarily attributable to trade and other receivables, service concession receivables,
investment in bank deposits and bank balances.
The Group’s exposure to credit risk on trade and other receivables is influenced mainly by the individual characteristics of each
customer. The Group has established credit policies and procedures that are considered appropriate and commensurate with the
nature and size of receivables. Trade receivables primarily represent amounts due from government and private customers.
The exposure to credit risk for trade and service concession receivables at the reporting date by type of customer is as below:
The age of trade receivables and related impairment loss at the reporting date is as below:
78
79
2013
2012
2013
2012
RO’000
RO’000
RO’000
RO’000
Government customers (including service concession receivable)
167,874
226,747
Service concession receivable
141,285
173,069
Other private customers
107,209
59,601
Trade receivables (gross)
133,798
113,277
Amount due from related parties
15,296
-
Other receivables
13,534
21,772
Bank deposits
138,193
118,772
Cash at bank
31,033
62,594
473,139
489,484
275,083
286,348
The age of trade receivables and related impairment loss at the reporting date is as below:
31 December 2013
Gross Impairment Past due but
not impaired
RO’000
RO’000
RO’000
31 December 2012
Gross Impairment Past due but
not impaired
RO’000
RO’000
RO’000
Not past due
35,735
-
-
46,785
-
-
Less than 1 month
10,217
-
-
12,564
(204)
12,360
1 month to 3 months
23,538
-
-
28,907
(640)
28,267
3 months to 1 year
50,230
(1,797)
48,433
14,243
(1,176)
13,067
155,363
(8,200)
147,163
183,849
(6,290)
177,559
275,083
(9,997)
195,596
286,348
(8,310)
231,253
1 year to 5 years
Investment in bank deposits and bank balances
The Group manages credit risk on bank balances by placing balances with reputed financial institutions with a minimum credit
rating of P-1.
The carrying amount of financial assets represents the maximum credit exposure. The exposure to credit risk at the reporting date
is on account of:
Fair value estimation
The carrying amounts of financial assets and liabilities with a maturity of less than one year are assumed to approximate to their fair
values. The fair value of interest rate swap is determined using the mark to market valuations available at the reporting date. The fair
value of long term loans is considered to approximate to their fair values as they are obtained at market interest rates.
Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern, and to provide
an adequate return to shareholders.
The Group’s policy is to maintain a strong capital base so as to maintain creditor and market confidence and to sustain future
development of the business. The capital structure of the Group comprises share capital, reserves, retained earnings and
shareholders’ funds.
The Group sets the amount of capital in proportion to risk. The Group manages the capital structure and makes adjustments to it
in the light of changes in economic conditions and the risk characteristics of the underlying assets.
The fair value of non-current trade and other receivables and service concession receivables is estimated as the present value of
future cash flows, discounted at the market rate of interest at the reporting date.
6. Property, plant and equipment
The Group’s property, plant and equipment are constructed on lands leased from Ministry of Housing, Government of Sultanate of
Oman.
The finance leased assets primarily represent power generation and transmission equipment acquired under finance lease.
130,126
205,035
16,937
158,844
-
439,621
341,996
89,549
75,075
Net book
value
31 December
2013
31 December
2012
43,500
16,931
625,601
742,239
191,869
137,817
147,357
57,678
499
(5)
-
9,334
47,850
-
184
8,950
Other
plant
and
machinery
RO ’000
23,522
11,643
3,672
(499)
(65)
-
939
3,297
-
(200)
659
RO ’000
Plant
spares
2,838
11,934
8,430
12,149 19,632
17,869
(429)
(46)
(789)
(4,589)
5,294
-
4,398
13,946
(266)
51
3,791
Furniture,
vehicles
and
equipment
RO ’000
-
3,777
6,895
-
-
747
RO ’000
Decommissioning
assets
10,370
30,018 23,304
(19,291)
1,818,720
241,900
(325)
RO ’000
Total
490,273
(22,544)
(4,589)
(62)
-
83,576
433,892
(266)
-
72,800
RO ’000
Total
361,358
266,099
1,607,112
221,481 1,780,389
-
-
-
-
-
-
-
-
RO ’000
Capital
work-inprogress
-
221,481 2,270,662
266,099 2,041,004
219,598
277,638
(262,747)
(1,469) (12,277)
- (35,619)
(84)
-
291,638
127,986
(153,525)
RO ’000
Capital
work-inprogress
116,638
96,718
153,460
-
8,695
3,488
152,704
-
16
(2,063) (19,164)
-
36,868
13,488
(29)
(16)
-
-
-
28,702
33,025
-
(51)
19,918
19,920
7,120
2913
RO ’000
Assets Distribution
under
and
finance
related
lease
assets
RO ’000
RO ’000
-
10,306
3,306
(1,885)
RO ’000
Plant
spares
25,880 11,727
3,711
4,018
979
8,172
(515)
(502)
(98)
(50)
-
(450)
19,734
4,831
1,765
Furniture,
vehicles
and
equipment
RO ’000
80
31 December
2013
1 January 2013
Charge for the
year
Transfers
Disposals
Adjustments
Write off
Charge for the
year
Transfers
Disposals /
adjustments
RO ’000
Transmission
Buildings
& related
assets
(continued)
132,786
934,108
30,417
(10,494)
(2,986)
-
(18,841)
46,014
3,244
-
29,748
250,178
185,667
3,670
15,510
201
(13)
-
-
158,024
6,314
21,329
RO ’000
Decommissioning
assets
6,148
10,626
483,121
784,445
23,622
126,041
-
-
662,032
84,385
38,028
Other
plant
and
machinery
RO ’000
38,716
Depreciation
1 January 2012
106,480
31 December
2013
-
269,342
-
Assets Distribution
under
and
finance
related
lease
assets
RO ’000
RO ’000
378,864 269,342
12,615
9,374
95,076
(3,434) (28,538)
-
-
88,563
1,030
16,969
(48)
(34)
286,842
9,095
82,927
RO ’000
74,788
2,739
11,036
1 January 2013
Additions
Transfers
Adjustments
Disposals
Write-off
Cost
1 January 2012
Additions
Transfers
Disposals /
adjustments
RO ’000
Transmission
Buildings
& related
assets
81
82
11. Trade and other receivables
7. Advance payments
Generation facilities
Interconnection and transmission facilities
2013
2012
2013
2012
RO’000
RO’000
RO’000
RO’000
15,668
16,925
133,798
113,277
-
4,342
(9,997)
(8,310)
15,668
21,267
123,801
104,967
Amount due from related parties
15,296
-
Advances and prepayments
25,099
20,089
Other receivables
13,534
21,772
177,730
146,828
At 1 January
8,310
7,072
Bad debts written off
(712)
(466)
Provision recognized during the year
2,399
1,704
At 31 December
9,997
8,310
8. Service concession receivables
Service concession receivables arise from construction and operation services provided in relation to a service concession
arrangement between Dhofar Power Company SAOC and government of Sultanate of Oman which was subsequently
novated to OPWP. These receivables are accounted as per guidance provided in IFRIC 12- Service Concession Arrangements.
9. Bank deposits
Bank deposits have maturity dates ranging from 130 to 728 days (2012 - 125 to 984 days) from the reporting date and are with
commercial banks in Oman at commercial rates.
10. Inventories
Inventories
Less: allowance for inventory obsolescence
2013
2012
RO’000
RO’000
52,597
56,743
(16,937)
(16,769)
35,660
39,974
Provisions recognized / (reversed)
Amounts written off
At 31 December
Trade receivables
Less: allowance for impaired debts
Net trade receivables
Movement in allowance for impaired debts
The allowance for impaired debt substantially relates to government debts yet to be collected, taken over from erstwhile, Ministry
of Housing, Electricity and Water (MHEW) as part of the transfer scheme and frozen accounts of private customers. The other
receivables classes within trade and other receivables do not contain impaired assets.
12. Cash and bank balances
Movement in allowance for inventory obsolescence
At 1 January
83
16,769
16,618
973
626
(805)
(475)
16,937
16,769
2013
2012
RO’000
RO’000
Cash on hand
36
66
Cash at bank
31,033
62,528
31,069
62,594
Bank balance of RO 101,000 pertains to one of the subsidiaries, Utilities Centre for Competency Development LLC which is under
formation.
84
13. Share capital
The Parent Company’s authorised, issued and paid-up capital consists of 2 million (2012: 2 million) shares of RO 1 each. The
shares are fully owned by the Ministry of Finance, Government of the Sultanate of Oman.
14. Legal reserve
The legal reserve, which is not available for distribution is accumulated in accordance with Article 154 of the Commercial Companies
Law 1974, as amended. The annual appropriation must be 10% of the net profit for each year after taxes, until such time as the
reserve amounts to at least one third of the share capital. No portion from the profit has been made during the year as the Group
already achieved this minimum amount required in the legal reserve. This reserve is not available for distribution.
15. General reserve
The Group companies other than DPC transfer an amount not exceeding 20% of the profit after transfer to legal reserve should
be transferred to a general reserve until the balance of the general reserve reaches one half of the share capital of the respective
company. This reserve is available for distribution to shareholders.
16. Non-controlling interest
The total amount of shares attributable to non-controlling interest as at 31 December 2013 are 348,469 shares (2012- 375,025
ordinary shares) equating to a 1.21% (2012 – 1.26%) right in DPC.
Non-controlling interest has not been disclosed in these consolidated financial statements, as management is of the opinion that
the amount of non-controlling interest is not material.
The Group syndicated long-term loan facilities from financial institutions in the aggregate amount of approximately RO 131
million (2012 – RO 131 million). These facilities bear interest at US Dollar denominated LIBOR plus applicable margins. Margin
percentages range from 0.53% to 3.25% (2012 - 0.53% to 3.25%). Up to 31 December 2013, facilities of approximately RO
86 million (2012 - RO 126 million) have been drawn.
The term loan is repayable in half yearly installments which commenced from 4 November 2007. The loan repayment schedule
is as follows:
31 December 2013
Carrying amount
Less than 1 year
1 year to 5 years
More than 5 years
RO’000
RO’000
RO’000
RO’000
88,573
12,708
75,865
-
136,598
11,086
101,317
24,195
Liability
31 December 2012
Liability
The loan agreements contain certain restrictive covenants, which amongst other; include restrictions over project finance ratios. The
loans are secured by a pari-passu legal mortgage over certain property, plant and equipment and over the Group’s rights under
the concession arrangements.
19. Finance lease liabilities
17. Shareholders’ funds
Following the implementation of a decision of the Sector Law and in accordance with the transfer scheme, the Group received
certain assets and liabilities from the Ministry of Housing, Electricity and Water (MHEW) on the transfer date (1 May 2005).
The value of the net assets transferred is represented in the books as shareholder’s funds and there is no contractual obligation to
repay this amount and there are no fixed repayment terms.
During 2012, the company has adjusted the excess amount paid RO 4.592 million to MOF for Rusail Power Company SAOC sale
against shareholder’s funds.
Minimum lease payments
2012
RO’000
RO’000
Non-current
75,865
125,512
Current
12,708
11,086
88,573
136,598
Present value of minimum lease
payments
2013
2012
2013
2012
RO’000
RO’000
RO’000
RO’000
Not later than 1 year
11,092
11,559
4,753
4,258
Later than 1 year not later than
5 years
53,902
43,583
33,027
21,770
Later than 5 years
13,012
34,722
11,324
27,332
78,006
89,864
49,104
53,360
(28,902)
(36,504)
-
-
49,104
53,360
49,104
53,360
18. Term loan
2013
85
Less: future finance charges
86
Movement in provision for employee benefits
The maturity profit of these finance lease liabilities is as under:
Non-current portion of finance lease liabilities
Current portion of finance lease liabilities
2013
2012
2013
2012
RO’000
RO’000
RO’000
RO’000
44,351
49,102
11,600
10,206
4,753
4,258
924
1,823
49,104
53,360
Payments made
(722)
( 429)
At 31 December
11,802
11,600
At 1 January
43,347
57,689
Adjustment
1,390
(15,598)
465
1,256
(27,775)
-
17,427
43,347
20. Trade and other payables
8,372
8,131
Trade payables
56,334
26,322
Other payables
42,772
82,444
162,306
160,556
261,412
269,322
269,784
277,453
Current
Accruals
Total trade and other payables
Non-current other payables mainly relates to retention monies for capital work-in-progress contracts and facilities maintenance
provision.
2013
2012
RO’000
RO’000
8,272
7,983
17,427
43,347
-
4,703
25,699
56,033
3,530
3,617
Non-current
Decommissioning costs
Major maintenance
Current
Employee benefits
Additions during the year
Unwinding of decommissioning provision
Reversal of decommissioning provision
At 31 December
The provision for decommissioning costs represents the present value of management’s best estimate of the future sacrifice of
the economic benefits that will be required to remove the facilities and restore the affected area at the Group’s leased sites. The
estimate has been made on the basis of quotes obtained from third party contractors.
Movement in provision for major maintenance costs
21. Provisions
Employee benefits
At 1 January
Movement in provision for decommissioning costs
Non-current
Other payables
87
At 1 January
4,703
4,192
Provided during the year
1,552
1,552
Reversal due to major repairs incurred during the year
(1,108)
(1,041)
Transferred to liabilities held for sale
(5,147)
-
-
4,703
At 31 December
22. Deferred revenue
Deferred revenue shown under non-current liabilities represents sponsored project funding and customer contributions towards the
cost of property, plant and equipment. These contributions are deferred over the life of the relevant property, plant and equipment.
88
23. Advance from Ministry of Finance
Advance from Ministry of Finance represents the amount received for capital expenditure for specified projects subsequent to
1 January 2009 and is classified as non-current liability.
24. Deferred tax
Deferred income taxes are calculated on all temporary differences under the liability method using a principal tax rate of 12%. The
net deferred tax liability / (assets) in the consolidated statement of financial position and the net deferred tax charge in the profit or
loss are attributable to the following items:
Balance at
1 January 2013
Charge/ (credit)
for the year
Balance at
31 December 2013
RO’000
RO’000
RO’000
Provision for inventory
obsolescence
(445)
(52)
(497)
(997)
(203)
(1,200)
(4,348)
4,081
(267)
-
(3,104)
(3,104)
(1,933)
1,425
(508)
(7,723)
2,147
(5,576)
-
1,880
1,880
59,028
7,185
66,213
Balance at
1 January 2012
Charge/ (credit)
for the year
Balance at
31 December 2012
Provision for inventory
obsolescence
(187)
(258)
(445)
(849)
(148)
(997)
Accumulated tax losses
(2,421)
(1,927)
(4,348)
Finance lease liability
(1,490)
1,490
-
(639)
639
-
(2,140)
207
(1,933)
(7,726)
3
(7,723)
2,140
(2,140)
-
43,460
15,568
59,028
45,600
13,428
59,028
37,874
13,431
51,305
Assets
Deferred revenue
Assets
Accumulated tax losses
Finance lease liability
Liability
Advance payments
Accelerated tax depreciation
Net deferred tax liability
59,028
9,065
68,093
51,305
11,212
62,517
The Group has recognized deferred tax assets amounting to RO 1.237 in respect of OPWP and DPC and a deferred tax liability of
RO 63.754 million for other subsidiaries.
89
Liability
Advance payments
Accelerated tax depreciation
Net deferred tax liability
25. Short-term borrowings
2013
2012
RO’000
RO’000
400,000
305,000
The Group’s short-term borrowings are denominated in Rial Omani.
The credit facility bears a fixed interest rate and is due for bullet repayment on 1 July 2014. Borrowings are secured by letter of
guarantee issued by the Parent Company. These borrowings are expected to be re-financed through long-term credit facilities to
be arranged in due course.
26. Bank overdrafts
The Group has credit facilities with Bank Muscat SAOG including overdrafts to finance the working capital requirements and to
support its other operational requirements. Bank overdrafts are repayable on demand and carry interest at commercial rates.
90
30. Employee benefit expense
27. Revenue
Electricity sales
Water sales
Government subsidy
Funding for operation of Salalah concession
Other operating revenue
Adjustment as per price control methodology
2013
2012
RO’000
RO’000
342,795
311,574
97,516
90,709
288,744
204,101
30,457
39,394
8,826
4,125
768,338
649,903
(8,922)
(4,876)
759,416
645,027
31. Other income
Penalties and fines
Reversal of provisions
Profit on disposal of property, plant and equipment
Other income
28. Operating costs
Energy and water purchases
418,728
353,770
Depreciation and amortisation
79,435
69,220
Plant operation and maintenance costs
22,253
17,262
Material and chemical costs
8,187
1,386
Employee benefit expenses
5,235
6,324
-
2,283
6,855
4,703
540,693
454,948
Service expense
Other direct costs
29. General and administrative expenses
Employee benefit expenses
50,976
44,534
Service expenses
24,729
22,596
Commission
10,563
9,468
Depreciation
4,139
3,533
Loss on retirement of property, plant and equipment
983
151
Directors remuneration and sitting fees
500
479
4,342
3,005
96,232
83,766
Other expenses
91
Wages, salaries and other benefits
End-of-service benefits
Allocated to:
Operating costs
General and administrative expenses
2013
RO’000
50,155
6,056
2012
RO’000
44,619
6,239
56,211
50,858
5,235
50,976
6,324
44,534
56,211
50,858
1,865
16,811
58
7,312
2,031
119
10,971
26,046
13,121
32. Finance income
Interest income
3,478
2,461
7,297
11,457
465
4,167
198
6,262
5,169
1,254
2,366
497
23,584
15,548
33. Finance costs
Finance charges on:
Long term loans
Unwinding of decommissioning cost provision
Short-term loans
Overdraft facilities
92
34. Taxation
Income tax is provided as per the provisions of the Law of Income Tax on Companies in Oman after adjusting for items which are
not taxable or disallowed. The tax rate applicable to the Group is 12%. The deferred tax on all temporary differences has been
calculated and dealt within the profit or loss.
2013
2012
RO’000
RO’000
Current tax
3,183
8,836
Deferred tax
11,213
13,431
14,396
22,267
The respective companies within the Group are liable to income tax in accordance with the Income Tax Law of the Sultanate of
Oman at the enacted tax rate of 12% on taxable income in excess of RO 30,000. The following is a reconciliation of income taxes
calculated on accounting profits at the applicable tax rate with the income tax expense for the year:
Accounting profit before tax
2013
2012
RO’000
RO’000
128,365
106,953
15,400
12,834
-
(600)
Changes in temporary differences
612
105
Current year tax losses not recognised
206
5,471
(1,822)
4,457
14,396
22,267
Income tax at Oman tax rate of 12%
Add / (less) tax effect of:
Tax exempt revenue
Tax in respect of prior years
Tax assessments for the following years onwards are pending assessment by Oman taxation authorities:
Taxation for Electricity Holding Company SAOC has been agreed with the Oman Taxation Authorities for all the years up to 31
December 2009 whereas taxation has been agreed for all the subsidiaries with the Oman Taxation Authorities for all years up to
31 December 2008 except for Al Gubrah Power & Desalination Company SAOC for which tax assessment has been completed
up to 31 December 2007. The management is of the opinion that additional taxes, if any, related to the open tax years would not
be material to the financial position of the Group as at 31 December 2013.
93
35. Fair value (loss) / gain on hedge instruments
The Group entered into interest rate swaps to hedge against interest rate exposures arising from its variable interest rate term loans
(note 18). All fair value losses/gains on the interest rate swaps are recorded in the hedge reserve, with a corresponding hedge
deficit/surplus balance.
Based on the interest rate gap between the 6 month US LIBOR and the fixed interest rates, over the life of the Interest Rate Swap
(IRS), the indicative losses were assessed at approximately RO 10.2 million by the counter parties to the IRS as at 31 December
2012.
In view of the restructuring as disclosed in note 40, during the year ended 31 December 2013 the initial syndicated term loan
facilities was refinanced and accordingly the related Interest Rate Swap Agreements were terminated.
The loss on IRS amounting to RO 2.1 million has been allocated to discontinued operations. The Group has made an adjustment
to opening hedging reserve to reclassify hedging deficit taken over at the time of acquisition of Dohfar Power Company SAOC. The
management considers the adjustments to the hedging reserve are not material.
36. Related parties
Related parties comprise the shareholders, directors, key management personnel and business entities in which they have the
ability to control or exercise significant influence in financial and operating decisions.
The Group maintains balances with these related parties which arise in the normal course of business. Outstanding balances at year
end are unsecured and settlement occurs in cash.
The Parent Company and PAEW have common directors and hence are considered as related parties. During the year, the
Parent Company provided support services to PAEW earning revenue of RO 0.017 million (2012 - RO 0.038 million).
The year end trade receivable balances amounted to RO 0.125 million (2012 - RO 0.118 million). The Parent Company also
incurred costs on behalf of PAEW and the year-end amounts receivable relating to this amounted to RO 1.704 million (2012 - RO
1.474 million).
No expenses have been recognised in the year (2012 - RO Nil) for bad or doubtful debts in respect of amounts owed by related
parties.
Key management personnel
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities
of the Group, directly or indirectly, including any Director (whether executive or otherwise). The compensation for key managerial
personnel during the year is as follows:
2013
2012
RO’000
RO’000
6,844
4,805
Post-employment benefits
781
717
Directors’ remuneration and sitting fees
500
429
8,125
5,951
Short-term employee benefits
94
37. Proposed dividend
The Board of Directors of the parent company, at their meeting held on 26 February 2014, have proposed a dividend of RO
0.250 per share aggregating RO 500,000 on the Group’s existing share capital (2012 - RO 0.250 per share aggregating RO
501,000). This dividend is subject to the approval of the company’s shareholders in the Annual General Meeting.
38. Commitments
2013
2012
RO’000
RO’000
210,670
156,777
More than 1 year but not more than 5 years
1,086,603
1,099,637
More than 5 years
1,420,268
1,622,137
2,717,541
2,878,551
134,404
90,451
8,091
8,387
Operating lease commitments
Not more than 1 year
Capital commitments
Letters of credit
39. Contingencies
Al Ghubrah Power &
Desalination Company SAOC
The Ministry of Oil and Gas (MOG) has
levied an interest of RO 803,564 in
2010, pertaining to delayed payment of
gas invoices for the years 2005 to 2008
at an interest rate of 6%.
The management is of the opinion
that these interest charges will not
be payable as there is no contractual
obligation in the absence of gas supply
agreement between Al Ghubrah Power
& Desalination Company SAOC (the
“Company”) and the MOG. Further,
the Company believes that the 6%
rate of interest is significantly high. The
Company is in the process of negotiation
with MOG for the waiver of these interest
charges.
not known whether Ministry of Housing
has claimed objection proceedings
against the judgment.
The legal heirs of Habib Khalfan Al Hasni
have lodged a claim amounting to RO
1,324,000 in respect of a piece of land
within the premises of the Company. The
claim was pending retrial proceedings in
the Appeal Court.
Kent International LLC has lodged a
case in the Primary Court for damages in
respect of alleged unilateral termination
of Purchase Order # G009/15454
dated 26 September 2009. Both
Primary Court and Appeal Court rendered
a judgment in favor of the Company by
virtue of which the claim as well as the
appeal was dismissed. It is not known
whether the arbitration proceedings
are filed before the Supreme Court in
relation to the judgment.
During the year, the Appeal Court on
retrial proceedings rendered a judgment
by virtue of which the case against the
Company was dismissed. However,
the judgment obligated the Ministry
of Housing to grant the claimants a
piece of land of 600 square meters in
compensation for the land claimed. It is
Dhofar Power Company SAOC
and its subsidiary
Transmission and Distribution
- Extension and Enhancement
Allowance (‘T & DEE Allowance’)
The Group has accrued the T & DEE
allowance at a rate of RO 106,865 per
month based on the contracted value
of the Transmission and Distribution –
Extension and Enhancement work. The
Government disputed the determination
of T & DEE allowance by the Group and
contended that the allowance should be
determined based on the estimated value
of T & D – Extension and Enhancement
work executed by the Group, i.e.,
RO 88,415 per month. In accordance
with the provisions of the Concession
Agreement, the matter was referred to a
legal expert who gave a ruling in favour
of the Group on 24 August 2005.
Transmission and Distribution
- Extension and Enhancement
Allowance (‘T & DEE
Allowance’)
However, the Government notified the
Group that it intends to challenge the
ruling of the Expert through the process
of arbitration. The Group contends that
the Government failed to commence
the proceedings within the timeline
provided in the Concession Agreement.
The Government has not taken any
further action and is currently paying
the T & DEE allowance at the rate of RO
106,865 per month as determined by
the Group. Accordingly, the Group, has
recognised the appropriate portion of the
disputed T & DEE allowance amount as
income under IFRIC 12.
Power interruptions - penalties
for 2003
During 2004, the Government claimed
an amount of approximately RO 1.1
million in respect of interruptions in
power supply during 2003, which was
challenged by the Group. In accordance
with the provisions of the Concession
Agreement, the parties referred the
matter to an independent expert, who
ruled in favour of the Group on 14 July
2005. However, in August 2005, the
Government notified the Group that it
intends to challenge the ruling of the
Expert through the process of arbitration
but has not yet commenced the
proceedings. Accordingly, the Group has
not established any provision in respect
of penalties for power interruptions in
Power interruptions - penalties
for 2004
In 2005, the Government claimed RO
1.965 million as penalties in respect
of interruptions in power supply during
2004. The Group contended that events
of blackouts are not penalisable as
per the provisions of the Concession
Agreement, and that the other penalties
calculated by the Government for
events other than blackouts were not
in accordance with the provisions of the
Concession Agreement. In any case,
the Group considers these events as
“Force Majeure” i.e. substantially these
outages were caused by events beyond
the reasonable control of the Group
management as has been supported by
the Technical Experts appointed by the
Group, which has been contested by the
Government.
95
In view of the expert’s judgement on
similar issues in 2003, which supported
the Group’s contention, the Group has
rejected the Government’s claim. The
Government has notified the Group
that it intends to refer the matter for
Expert determination, but the Group
contends that the Government has
failed to commence the proceedings in
accordance with the timeline provided in
the Concession Agreement. Accordingly,
and Group has not established any
provision in respect of penalties for
power interruptions in these consolidated
financial statements.
Power interruptions – penalties
for 2005
0.438 million as minimum penalties
for a few incidences of power outages
during 2005. The Group contend that,
in regards to these, power was restored
within the allowable time of restoration,
as interpreted by management as per
the Service Concession Agreement
and as had been ascertained by the
mediating expert in relation to similar
events experienced in 2003. The Group
also considers these events as “Natural
Force Majeure” events and has notified
the Government accordingly. The other
material event has been notified by and
Group as a cause of an existing “Political
Force Majeure” event. Accordingly,
the Group has not established any
provision in respect of penalties for
power interruptions in these consolidated
for 2006
In 2007, the Government claimed
RO 13.4 million as penalties for
2006. The Group believe the claim
is unsubstantiated. The Group has
relied upon the Annual Performance
and Quality of Service Report for the
year 2006, which was audited by
independent consultants, wherein the
calculated penalties aggregated to RO
11,852, which the Group duly paid
on 9 April 2007. Therefore, the Group
rejected in totality the claim made by the
Government. Accordingly, the Group’s
management believes that there are no
legal or constructive obligations under
the Concession Agreement and hence
no provision has been established in
for 2007
In June 2008, the Government has
claimed RO 1.05 million as penalties
for power outages during 2007.
There was one incident of complete
power supply failure (“blackout”), due
to a gas supply failure. The Group had
notified this event as both a Natural
Force Majeure and a Political Force
Majeure to the Government. The Group
management believe that there are no
legal or constructive obligations as to
the power interruptions penalties under
the Concession Agreement and has
rejected in totality the claim made by
the Government and hence no provision
for power interruption penalties has
been established in these consolidated
96
for 2008
In 2009, the Government has claimed RO
53,181 as penalties for power outages
during 2008. The Group had calculated
and paid an amount of RO 11,917
as penalties for power interruptions,
which occurred in 2008. No provision
for the additional power interruption
penalties has been established in these
consolidated financial statements.
for 2009
In 2011, the Government has claimed
provisional penalties of RO 31,677
for power outages during 2009. The
Group had calculated and paid an
amount of RO 6,873 as penalties
for power interruptions. The Group
management believe that there are no
legal or constructive obligations as to
the power interruptions penalties under
the Concession Agreement and hence
no provision for power interruption
penalties has been established in these
for 2010
In 2011, the Government has claimed
provisional penalties of RO 218,211 for
power outages during 2010. The Group
had calculated and paid an amount of
RO 13,830 as penalties for power
interruptions. Currently the Group is
discussing with OPWP the basis for its
penalty calculation. The Parent company
and the Group management believe
that there are no legal or constructive
obligations as to the power interruptions
penalties under the Concession
Agreement and hence no provision
for power interruption penalties during
2010 has been established in these
for 2011
6,512 as penalties for 2011. The Parent
company and Group has relied upon
the Annual Performance and Quality of
Service Report for the year 2011, which
was audited by independent consultants,
wherein the calculated penalties
aggregated to RO 2,880, which the
Parent company and Group duly paid
on 4 April 2012. The Parent company
and the Group additionally accepted and
provided for claims amounting to RO
1,348 based upon internal assessments
of these claim. Accordingly, Group’s
management believes that there are no
other legal or constructive obligations
under the Concession Agreement and
hence no further provision has been
established in these consolidated
40. Reorganization /
restructuring of Salalah
concession business
In line with the decision of the Council
of Minister in 2009, the Public Authority
for Electricity and Water, pursuant to
its powers under Sultani Decree No.
58/2009 “Promulgating the By-Law of
Public Authority for Electricity and Water
(as amended)” and Sultani Decree No.
78/2004 “Promulgating the Law for
the Regulation and Privatisation of the
Electricity and Related Water Sector (as
amended)”, has decided to reorganise
the existing Salalah concession business
to form separate generation, high
voltage transmission and distribution
and retail supply businesses (the
"Reorganisation"). In line with decision
of the Council of Ministers of 30
November 2012, the Shareholders
have approved the reorganization in
the extra ordinary general meeting held
on 7 July 2012 and authorized the
Board of Directors to take all necessary
steps to implement the Reorganization/
Restructuring of the Salalah concession
business. The implication on the Salalah
concession business would be that the
Generation, Transmission, Distribution
and Supply businesses currently
undertaken by Dohfar Power Company
SAOC (DPC) as a vertically integrated
utility will be separated and that these
businesses would be regulated under
the general provisions of the Sector
Law. Accordingly, the following major
arrangements will take place effective
1 January 2014 to facilitate the
Reorganization/ Restructuring:
1. Concession Agreement entered into
between the DPC and the Government
(novated to OPWP) and related
Process Agreements (for IWPP
and PDO interconnection) will be
terminated.
2. Dohfar Generation Company SAOC
(DGC) will be granted a Generation
Business License by Authority for
Electricity Regulation (AER) and
become sole responsible for the
Generation business, DGC will enter
into a Power Purchase Agreement
(‘PPA’) with OPWP.
3.Transmission assets will be transferred
to Oman Electricity Transmission
Company SAOC who will take over
ownership and responsibility for
Transmission system (132kV) in
Dhofar region.
4. DPC will be granted a license by
AER for the Distribution and Supply
businesses. The Distribution & Supply
license sets out the mechanism for
setting the revenues of DPC through
Price Control Review. In preparation
for the Reorganization/Restructuring,
DPC has already agreed Maximum
Allowed Revenue for year 2014.
5. DPC will formalize Asset Transfer
Agreement with the Subsidiary and
OETC for transferring the ownership
of the Generation and Transmissions
Assets to the Subsidiary and
OETC respectively. As per the draft
agreements the assets will be
transferred at book value.
6. Electrical Connection Agreements
for connection of the different
systemst (Generation; Transmission
and Distribution) will be executed
by relevant parties (DGC, OETC and
DPC).
7. DPC will novate certain Electrical
Connection Agreements and Usufruct
agreements relating to transmission
system to OETC.
The Board of Directors of DPC has
approved all draft agreements referred
97
to above where DPC is a party. The
concession agreement is terminated
effective 31 December 2013 and all
new agreements become effective from
1 January 2014.
41. Sale of subsidiary company
and transfer of transmission
business
Generation business
In line with decision of the Council
of Ministers of 30 November 2012,
shareholders of DPC in the Extra Ordinary
General Meeting (EGM) held on 7 July
2013 approved sale / privatization of
the DGC as part of Salalah Independent
Power Plant 2 tender and authorized
the Board to take all necessary steps to
implement the same.
In December 2013, Authority for
Electricity Regulation (“AER”) wrote
to the Parent Company referring to
Sector Law conditions prohibiting any
licensee from having economic interest
in another licensees and therefore
advising that DPC’s interest in Subsidiary
be transferred to the Parent Company.
AER agreed a period of 90 days from
date of grant of license to the DPC,
1 January 2014, to complete this transfer.
Management expects that the transfer
of shares in DGC will be completed in
the first quarter of 2014. Management
expects that fair value less cost to sell
of the generation business will be higher
than the aggregate carrying amount of
the related assets and liabilities.
98
Transmission business
Effective from 1st January 2014, the transmission assets of DPC will be transferred to Oman Electricity Transmission Company
SAOC (“OETC”). DPC and OETC have agreed to transfer the transmission related assets at their book values which has been
approved by the shareholders of the DPC and OETC in their Extra Ordinary General Meeting (EGM) /Annual General Meeting held
on 7 July 2013 and 7 September 2013 respectively.
42. Assets and liabilities classified as held for sale
Considering the Reorganization/Restructuring of DPC and transfer of shareholding in DGC to the Parent Company as discussed
in detail in note 41, assets and liability relating to generation business of DPC are classified as held for sale as at 31 December
2013 in accordance with the requirements of IFRS 5. The following table shows assets and liability classified as held for sale as
on 31 December 2013.
99
2013
2012
RO’000
RO’000
Revenue
10,476
14,106
Operating cost
(7,733)
(11,150)
Gross profit
2,743
2,956
General and administrative cost
(782)
(717)
(2,936)
(1,633)
64
-
(911)
606
3,592
4,780
(3,592)
(4,780)
-
-
(Loss) / profit for the year from discontinued operation
Net finance charges
Income Tax
2013
RO’000
Service concession receivables
Deferred tax assets
(Loss) / profit from discontinued operation
32,958
64
Cash flows from discontinued operation
Inventories
4,872
Net cash inflows from operating activities
Goodwill
2,772
Net cash outflows from financing activities
Assets classified as held for sale (including goodwill)
40,666
Maintenance provisions
(5,147)
Liability classified as held for sale
(5,147)
Net assets classified as held for sale
35,519
43. Discontinued operation
In view of the Reorganization / Restructuring of Salalah Concession Business as discussed in detail in note 40 to note 42, the
operations of generation business has been classified as discontinued operations. The Group presented the income for such
discontinued operations in a single line in the Statement of profit or loss. For the Group, this amount represent net income from
generation businesses of Salalah Concession Business.
Analysis of profit for the year from discontinued operations
The results of the discontinued operations included in the profit for the year are set out below. The comparative profit and cash
flows from discontinued operations have been re-presented to include those operations classified as discontinued in the current
year.
Net cash outflows
44. Comparative figures
Comparative figures have been reclassified, where necessary for consistency with current year classifications. Such reclassifications
did not result in changes to previously reported comprehensive income or equity.
45. Approval of financial statements
The financial statements were approved by the Board and authorised for issue on 26 February 2014.
E H C A n n u a l R e p o r t 2 0 1 3 10 0
On behalf of the Board members, I would like
to express our sincere gratitude to His Majesty
Sultan Qaboos Bin Said for his support to the
electricity and related water sector and for his
strong and wise leadership, which has paved
the way for the ongoing development of Oman.
Chairman of the Board of Directors

POWERING THE ECONOMY - Electricity Holding Company SAOC

Transcription

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