Omani utility plans to IPO on Aug 28, plans expansion

Sembcorp JV plans $138m listing, eyes water capacity increase in next five years
By Beatrice Thomas
Wed 21 Aug 2013 04:39 PM

The head of one of Oman’s biggest power and water plants has flagged expanding the $1bn facility within five years as it taps into growing demand in the region.

Announcing plans for a $138m initial public offering (IPO) on August 28, Sembcorp Salalah Power and Water Co chief executive Lim Yeow Keong also confirmed it was exploring opportunities to sell excess capacity from the plant.

Sembcorp Salalah - a joint venture between Sembcorp Utilities (60 percent), Oman Investment Corp (35 percent) and Instrata Capital (5 percent) - developed, owns and operates the gas-fired electricity generation and seawater desalination plant between Taqah and Mirbat in the Dhofar Governorate of Oman.

The plant, which went online last May, supplies approximately 72 percent of the power and 100 percent of the net installed water capacity in the Dhofar Governorate under a 15-year deal with the government-owned Oman Power and Water Procurement Company (OPWPC).

It has a contracted capacity of 445 megawatts (MW) and a contracted water capacity of 15 million imperial gallons per day (MiGD).

Speaking to Arabian Business, Lim said that while an expansion was not on the cards in the short term, boosting the water plant’s capacity by about 30 per cent to 20 MiGD was being considered.

“That’s something that we hope to achieve,” he said.

“It’s not cut in concrete yet, but it’s something that we are trying to make materialise within the next five years or so.”

Lim said the company would also explore opportunities to sell current excess power capacity, which was currently 44MW, though it would require a separate agreement with the government.

“It really depends on when the government requires (the extra power),” he said.

“Based on the forecast I think they may require it pretty soon. But, definitely it is something that has really been communicated to them and it’s something that we will continue to work with them and they are fully aware that the extra capacity is readily available.”

Under its current deal, the company receives capacity charges for 100 per cent of the available power and water, equating to 90 per cent of its revenue, irrespective of actual demand.

Sembcorp Salalah chief financial officer David Guy said while Sembcorp Utilities was looking for opportunities in other GCC countrries, Sembcorp Salalah’s focus would remain on Oman.

“It’s pretty clear that OPWPC expect significant growth in power and water in Oman and in Salalah’s system especially, so I think there will be more such projects in the pipeline,” he said.

“However, from our perspective our model is one where we deliver stable cash flows and increasing profitability and our project financing gets paid off.”

In a statement announcing the IPO, which is a requirement under its contract, the company said it expected to raise $138m by offering 35 percent of its share capital, or 33.4 million existing ordinary shares at a price of $4.13 per share, on the Muscat bourse.

Guy confirmed that after the IPO, Sembcorp Utilities’ share holding would drop to 40 percent, OIC’s to 21.875 percent and Instrata’s to 3.125 percent.

The offer runs until Sept 26 and the stock is expected to begin trading on the Muscat bourse around October 10.

HSBC Holdings' Middle Eastern arm is the sole global coordinator and bookrunner for the issue.

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