HIS MAJESTY SULTAN QABOOS BIN SAID - Nama · 2 H.E. Abdulmalik Al Hinai Vice Chairman 3 Mr. Abdulsalam Al Kharousi Member 4 Mrs. Manal Al Abdwani Member 5. Qualification and Election

A N N U A L R E P O R T 2 0 1 4

POWERING THE NATION

HIS MAJESTY SULTAN QABOOS BIN SAID

CONTENTSAbout Electricity Holding Company 3

Vision, Mission and Values 5

Board Members 6

Leadership Team 7

Chairman’s Report 8-9

Corporate Governance Report 10-15

Human Resources 16

Health & Safety Improvement Programme 17

Asset Management 18

Communication 19

Customer Service 20

Sustainability 21-23

Operational & Financial Review 25

Group Business Performance Review 29-33

Subsidiaries Performance Highlights 34-43

Consolidated Financial Statement 45-83

EHC ANNUAL REPORT 20142

AbOuT ElECTriCiTy HOldiNg COmpANy

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 eleven 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• Utilities Centre for Competency Development

EHC ANNUAL REPORT 2014 3


ViSiON, miSSiON ANd VAluES

ViSiON“We strive to develop and empower our human resources to deliver safe and sustainable electricity solutions to our customers.”

miSSiONTo provide electricity solutions by optimising and utilising its resources through implementing five critical strategies, namely:• Human Resource Development• Health and Safety• Customer Service• Asset Management• Communication

VAluES• Team Work• Integrity• Respect• Quality• Customer Focus• Professionalism


bOArd mEmbErS

H.E. Abdulmalik Abdullah Al Hinai - Vice Chairman

H.E. Mohammad Abdullah Al Mahrouqi - Chairman

Mrs. Manal Mohammed Al Abdwani - Member

Mr. Abdulsalam Nasser Al Kharousi - Member


lEAdErSHip TEAm

Omar Al WahaibiChief Executive Officer

Ibrahim Al Suleimany Executive Manager,

Group Human Resource

Khalid Al SalmaniActing Executive Manager, IT

Saleh Al RashdiVP Generation

Vishwanath SChief Financial Officer

Ghada Al YousefExecutive Manager, Group

Communication and Sustainability

Suhaila Al FarsiCompany Secretary

Ali Al AbriExecutive Manager, Group Planning

and Risk Management


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 of the Group, for financial year ended 31 December 2014.

OpErATiONAl pErfOrmANCEOman’s Electricity and Water Sector continued to register a strong growth rate in 2014 through increasing the Distribution and Transmission Capital Assets, reaching more Customers and new geographic areas, as a result of the growing population that the Sultanate is witnessing.

In 2014, the customer base increased by 8% to 932,208 subscribers compared to 2013 and the electricity supplied increased by 11% to 25,121 GWh.

The group companies invested RO 363 million in network expansion compared to RO 278 million in 2013. The staff strength of Nama Group as on 31 December 2014 is 2828 in comparison to 2781 employees in 2013.

fiNANCiAl pErfOrmANCE The gross operating revenue of the Group increased by 6% from RO 759 million in 2013 to RO 806 million in 2014. The net profit after tax increased by 9% from RO 113.1 million in 2013 to RO 123 million in 2014.

The Electricity subsidy for the year 2014 is at RO

303 million, a 2.5% decrease. Subsidy per customer dropped from RO 361 in 2013 to RO 324 in 2014 and subsidy per unit dropped from RO 13.7 per MWh in 2013 to RO 12.04 per MWh in 2014.

implEmENTiNg grOup STrATEgiESThe Group continued the implementation of group strategies in 2014. Moreover, the work on the billing system pilot programme was completed and introduced to rural area’s customers. We are working now on introducing the programme in Muscat Electricity & Distribution Company (MEDC) and we are aiming to complete the full implementation of the new billing system within the next 12 months.

In 2014, the “Nama” branding project was announced. According to the plan, the brand was first introduced within the group and will be introduced externally later in the year 2016. This brandmark reflects the unified vision of the group.

priVATiSATiON Of THE ElECTriCiTy SECTOr ANd rESTruCTuriNg Of THE WATEr SECTOrBased on the request of PAEW, EHC started implementing the government directives to commence a study to assess the readiness of Muscat Electricity Distribution Company (MEDC) for privatisation. The group formed a committee responsible for managing this process firstly, to ensure the participation of related parties and secondly, to choose the best consultants for this project.

CHAirmAN’S REPORT


After receiving the approval from Ministry of Finance, EHC approved a budget for a project to restructure the water sector in the Sultanate and took over the management of the project’s budget and completed procedures for hiring of a head for the project.

mAjOr prOjECT dEVElOpmENTThe Sur power plant project which commenced commercial operations in December, increased the total capacity for power generation by 2000 MW. In 2014, the contract for the desalination plant at Sur was transferred from Public Authority for Electricity & Water (PAEW) to the Oman Power and Water Procurement Company (OPWP) to implement the amendments made to the law, for Regulation and Privatisation of the Electricity and Related Water Sector, issued by the Royal Decree No. 47/2013. Additionally, the execution of the contract procedures were started to add new generation capacities, which include:

• Musandam Power Plant• Salalah Power Plant• Al Ghubrah Water Desalination Plant• Sohar Power Plant (3rd phase)• Ibri Power Plant• Qurrayat Water Desalination Plant• Barka Water Desalination Plant (3rd phase)• Sohar Water Desalination Plant (2nd phase)

Our distribution and transmission companies will continue their capital project investments in line with

regulatory framework with the approved RO 429 million as its investment budget for 2015, in order to expand and enhance electricity transmission and distribution network in the Sultanate.

ACkNOWlEdgEmENTOn 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 visionary leadership, which has paved the way for the ongoing development of Oman. I would like to take this opportunity to thank our customers, suppliers, bankers and all others who have contributed to the success of the Nama Group.

I also thank our CEO, Eng. Omar Al Wahaibi and CEOs of the subsidiary companies, the management team of the Group and all staff of Nama Group for their dedication and commitment to the continued growth and development.

mohammad Abdullah Al mahrouqiChairman of the Board of Directors


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.

2. Organisational Structure:

BO

DS

hare

hold

erEx

ecut

ives

Ministry of Finance

Board of Directors

Chief Executive Officer

ExecutiveHuman Resources

ExecutiveCommunication

Executive InformationTechnology

Deputy ChiefExecutive Officer

Chief FinancialOfficer

Internal Audit CommitteeGroup Nomination,

Remuneration and HumanResource Committee

CompanySecretary

Functional Reporting

Administrative Reporting

Executive StrategicPlanning and Risk

Management

Vice President -Generation


3. role of the board of directors and the board Committees

• BoardofDirectors

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 Board has the responsibility of overseeing, counselling 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; and

• 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

• AuditCommittee

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. 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 and 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; and

• Adopt policy on the engagement of the external auditor to supply non-audit services, taking into account relevant ethical guidance regarding the provision of non-audit services by the external audit firm.

• GroupNomination,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 assist the EHC Board and the 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; and

• To assist the EHC Board and the Subsidiary Boards in identifying appropriate candidates for nomination to positions within Management at EHC and Subsidiary levels.


4. board Composition

EHC being a 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. The Board consists of 4 members as follows:

Sl. member Name position in the bOd

1 H.E. Mohammad Al Mahrouqi Chairman

2 H.E. Abdulmalik Al Hinai Vice Chairman

3 Mr. Abdulsalam Al Kharousi Member

4 Mrs. Manal Al Abdwani Member

5. QualificationandElectionoftheBoardMembers

In electing Members of the Board of Directors, the terms and conditions issued by the Ministry of Commerce & Industry is being 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:

i. Not be less than 21 years old

ii. Not be a member of a public joint stock or closed company whose principal place of business is in the Sultanate of Oman and practicing similar activities

iii. Not have been declared bankrupt or dissolved unless such case has ceased to exist as per the provisions of the law

iv. Not have been convicted in a felony or criminal act unless rehabilitated

v. Not be unable to settle his debts & obligations to various lenders

vi. It is not permitted to combine the position of CEO/General Manager and the Chairman of the Board of Directors


Electricity Holding Company is led by a strong and experienced Board. The members bring diversity in expertise and perspective to the leadership of the complex, highly regulated, Electricity sector.

H.E. mohammad 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 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, incharge to managing 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.


6. details of attendance for the board and Committees meetings during 2014

member Namesmohammed Al mahrouqi

Abdulmalik Al Hinai

Abdulsalam Al kharousi

manal Abdwani

BOD Meetings Dates Chairman Vice Chairman Member Member

1st BOD Meeting 26-Feb-14 Attended Attended Attended Attended

2nd BOD Meeting 30-Mar-14 Attended Attended Attended Attended

3rd BOD Meeting 06-Jul-14 Attended Attended Attended Attended

4th BOD Meeting 22-Oct-14 Attended Attended Attended Attended

5th BOD Meeting 16-Dec-14 Attended Apologies Apologies Attended

Total Number of BOD Attended 5 4 4 5

Sitting Fees (OMR) 3,250 2,000 2,000 2,500

BOD Bonus (OMR) 10,000 5,000 5,000 5,000

internal Audit Committee (iAC)

IAC Meetings Dates Chairman Member Member

1st IAC Meeting 23-Feb-14 Attended Apologies Attended

2nd IAC Meeting 12-Jun-14 Attended Attended Apologies

3rd IAC Meeting 17-Sep-14 Attended Apologies Attended

4th IAC Meeting 23-Dec-14 Attended Attended Attended

Total Number of IAC Attended 4 2 3

Sitting Fees (OMR) 1,600 600 900

group Nomination remuneration & Human resource Committee (gNrHrC)

GNRHRC Meetings Dates Chairman Member Member

1st GNRHRC Meeting 23-Feb-14 Attended Attended Attended

2nd GNRHRC Meeting 25-May-14 Attended Apologies Attended

3rd GNRHRC Meeting 06-Jul-14 Attended Attended Attended

Total Number of HRC Attended 3 2 3

Sitting Fees (OMR) 1,200 600 900


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 AGM’s 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.

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:

• As a majority shareholder in the Subsidiaries, representing the ownership of the Government of the Sultanate of Oman, supporting and implementing the Government’s privatisation 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:

WJPC99.99%

OPWP 99.99%

GPDC 99.99%

OETC 99.99%

MJEC 99.99%MZEC 99.99%

UCCD 67.00%

DPC 98.79%

RAECO 99.99%

MEDC 99.99%

Percentage of EHC Shareholding

10. Non Compliance by the Company

The company has not paid any penalty and no strictures have been imposed on the company by Ministry of Commerce and Industry on any matter during the year.

11. dividend policy

The Board adopts fixed dividend payout policy that provides ample internal financial reserves to support the future capital investments.

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.

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 recognised Accounting Standards.

Deloitte and Touche (Deloitte) were the Statutory Auditors of EHC during 2014. 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.


HumAN RESOURCES

In realisation of Nama Group vision, the key driver achieving the strategic goals lies with developing people who are also our most important assets.

In this regard, Nama Group initiated the Integrated Talent Management Framework Project (ITMFW) and the key benefit are:-

• Standardised and streamlined processes leading to ease of administration and talent rotation

• Stepping stone towards People Capability Maturity Model (PCMM) Level 3 certification – global standard in HR processes and workforce management

• Position the power sector as an employer of choice to attract and retain talent

• Graduate Development Programme for a structured development of management trainees from colleges leading to development of Omani talent in future.

The project design stage has been

completed and implementation will start from 2015. Nama has formulated a 3- year road map (2015-17) to implement all of the HR processes across the group in a phased manner to cover the Performance Management System and Competency Assessment which will include Grade 10 and above employees in Phase I and all the other employees to be included in Phase II starting from 2016.

As a part of the implementation, a change management committee was formed that were tasked to develop an effective communication tool; in addition more than 30 workshops were conducted to engage employees on the new performance management system.

lEAdErSHip dEVElOpmENT prOgrAmmE (ruWAd)

Ruwad is one of the many developmental initiatives that Nama Group is committed to undertake. The key objective of Ruwad is to identify high performing and high potential employees at every level, in all group companies and grooming them to become the future of Nama

Group. 14 high potential employees (Ruwad) have been identified within the group companies in year 2013 and all of these candidates have been receiving coaching sessions through their respective CEOs. Nama Group companies will be launching the second batch of Ruwad, in year 2015.

uTiliTy CENTEr fOr COmpETENCy dEVElOpmENT (uCCd)

1- The Center was established earlier in the year 2014 as a joint venture between Nama Group of Companies and Veolia with an aim to 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 realise their full potential.

2- In 2014, the UCCD delivered a total of 12 sessions of general training that consisted of 633 actual trainee days and 151 attendees. The overall satisfaction score for year 2014 was 3.59 out of 4.


HEAlTH, SAfETy ANd ENVirONmENT IMPROVEMENT PROGRAMME

Nama Group Projects in 2014:

· Implementing Health, Safety and Environmental Management System (HSE-MS) which is aligned to the International Standards: Occupational Health and Safety international standard (OSHAS 18001) and Environmental standard ISO 14001.

· Providing IT system, which captured proactive and reactive HSE indicators as well as tracking the actions from inspections and audits. The performance indicators included fatalities, lost time injuries, safety meetings, tool box meetings, management HSE site visits, emergency drills, hazards/risk assessments and control registers. All this information was used to identify and implement HSE improvements.

· Transforming HSE culture through sharing learning and best practices. Many sharing sessions were conducted both at HSE Board and the knowledge sharing conference. These included but not limited to

managing near misses, lessons learnt from fatalities and lost time injuries, sharing behaviour based tools and many more.

Above projects provided a strong platform for managing HSE performance and will continue to do so; particularly in transforming HSE behaviour to meet our long term aspiration of having HSE as a value to each individual where they share safety stories with their colleagues at work, and their families and friends at home.

Although the Group achieved a Lost Time Injury Frequency (LTIF) of 0.31, considered as the best performance in the industry, the subsidiaries still suffered three fatalities and eight Lost Time Injuries (LTI’s). All these incidents are from our contracting community. Hence, managing HSE performance of Nama contractors remains the biggest challenge. This will be Nama’s Group key HSE focused area in 2015/2016.


ASSET MANAGEMENT

The Group Asset Management improvement strategy implementation demonstrated excellent progress in 2014. The aim of the programme 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 worst served customers and progressively meet the compliance obligations of our stakeholders. Additionally, it is expected that the companies will be accredited to ISO 55001, the international standard for asset management, by October 2016.

The scope of the programme is based around 3 key themes of work:

1. The development of the technical asset management requirements such as policy, strategy and process design.

2. Building the internal asset

management capability and capacity within the company’s staff.

3. Providing appropriate asset management IT based tools and techniques.

The programme has been structured around a group level steering committee to provide overall co-ordination, governance and decision making on common work. Each participating company has its own implementation plan and governance structure.

An independent assessment against the requirements of the UK asset management specification, PAS 55, was conducted again this year and the resulting score across all companies significantly exceeded the targets for improvement set out on an annual basis. This positions the companies well for certification in 2016. As part of the assessment, companies have identified gaps and improvement opportunities,

which have been built into their implementation plans for 2015.

The focus of the company’s work in 2014 have concentrated on completion of asset management strategies and process design, improving the capital planning processes and their understanding of the condition and risks associated with their assets.

Additionally, a common asset management competency set has been implemented based on the UK Institute of Asset Management competency framework and job descriptions established for asset management unique positions.

Critical now to the programme is the implementation of an enterprise wide asset management IT system that is being progressed as part of a group wide programme. This has been initiated and will be one of the key activities for 2015.


COmmuNiCATiON

Building on the success of the launch of Group Communication and Sustainability Department (GCS) in 2013, a number of projects have been implemented across the group to support a seamless approach to communication activities.

Employee Engagement Survey: The first Employee Engagement Survey in 2014 to measure the effectiveness of employee engagement in all five strategic areas: Human Resources, Customer Services, Health & Safety, Asset Management and Communication. The Survey was carried out through an independent online portal administered by KPMG and seven paper-based surveys at various parts of the Sultanate to cater for field and shift-based employees, which generated 59% participation.

re-branding: As a key strategic project, the first phase of the Re-branding project was completed with the approval of the new brand – Nama. A brand equity analysis was carried out in 2014 to assess the baseline performance of marketing and communication campaigns, and a similar survey will be carried out to assess the impact of Nama brand implementation during 2015 and onwards.

knowledge Sharing Conference (kSC): The Second KSC14 was held on 9-10 November with an opening ceremony to award all of the speakers, organisers and contributors to the Group’s strategy under the auspices of HE Yahya Al Jabri, Chairman of Special Economic Zone of A’ Duqm . The conference aimed at supporting the Group’s commitments in delivering quality customer service

and engagement with key internal and external stakeholders on strategic initiatives. Over 500 participants were registered over the 3 days and the media coverage value generated over this period was OMR 135,000 which accounted for 50% of the total value in 2014.

Spokesperson policy and Training: In accordance with the “Staff Code of Conduct”, GCS organised a Spokesperson Training programme for the official spokespersons of the Group, which included the CEOs and Communication department heads and business change managers across all subsidiaries.

The objective of carrying out the training was to ensure compliance with media standard and to align all spokespersons to the Group’s key messages.


In response to the latest innovations in the field of customer service around the world, the group adopted a holistic approach to utilise best practices and innovations to push customer service in the electricity sector to an international level. To achieve this objective, the group embarked on developing their customer service operations to provide the best customer service possible using the latest technological development.

billing: The Group is developing their billing system to enable customers to view and pay their bills on the internet and via mobile apps that can be installed on their smart phones. The new billing system will also enable customer to receive their bills via SMS and email and have a very clear idea about their balances and their consumption.

meter reading: The Group is also developing their meter reading

operations to enhance the accuracy of meter reading and the quality of estimations to obtain representative reading for customers.

Electronic collection: The Group is also working to develop electronic collection channels like Kiosks and other channels to facilitate payment of bills for customers. Moreover the group introduced the concept of prepaid meters to customers, which will enable customers to control their consumption using pre-payment.

Customer Satisfaction Survey: To have a better understanding of customer preferences, the Group conducted a major customer satisfaction survey for more than 3000 customers from different regions to understand customer preferences and their view of the current service and possible ways to improve the services delivered.

Training and development: The Group worked on developing the skills and knowledge of customer service teams, by providing several trainings in vendor management standards, billing operations, meter reading operations, call handling, customer service skills and many other types of training. These increased capabilities introduced changes to the organisation of their customer service departments, which greatly enhanced productivity and streamlined business processes.

With these developments and customer service enhancements, the Group is not only targeting excellence in customer service, but also targeting to an effective contribution to the overall economic development of Oman.

CuSTOmEr SERVICE


SuSTAiNAbiliTy REPORT

One of the most important achievements of 2014 is implementing the Group’s sustainability policy internally through spreading awareness between the employees about the policy’s goals and introducing the Sustainability Committee members headed by Eng. Omar bin Khalfan Al Wahaibi. The committee comprises of executive and non-executive members with comprehensive knowledge of the most important sustainability requirements and the process of submitting funding applications in accordance with 3 important pillars; environment, society, and economy.

The vision of sustainability lies within developing human resources to offer subscribers safe and sustainable electricity solutions. Energy is a common factor driving development, environment and society; making it crucial for us to preserve it for future generations.

lAuNCHiNg SuSTAiNAbiliTy pOliCy

In September 2014, sustainability policy was officially launched during a press conference, in which a number of sustainability project agreements were signed such as the “Sharikati” initiative

funding agreement, in co-operation with Injaz Oman and an agreement with Omani network of volunteers (Taawon) for “Wiyakum” project.

SuCCESS

1. Excellent planning2. Knowing the goals and the

beneficiaries3. Training and qualification4. The right choice of projects5. Knowing the time schedule

CHAllENgES

1. Society’s acceptance of new projects2. Cooperation of the various related

authorities3. Depending on voluntary and external

human resources4. Most NGOs don’t allow private

bodies to participate in the decision making process

(Injaz Oman has offered a seat for Nama Group in the management board)

VOluNTAry WOrk

A community’s vitality depends on the dominant culture. Every member of the community should understand that voluntary work is part of their social

and religious responsibility and realizing that takes a lot of time. Therefore, Nama Group created a policy to encourage voluntary work through two steps:

• Appointing one day for each employee to do voluntary work.

• Specifying the number of targeted volunteers who will participate in a few programmes organized by Injaz Oman and Omani network of volunteers “Taawon”.

ExiSTiNg prOjECTS

• injaz Oman: “Sharikati” programme focus is to support the local economy through motivating the youth to start up SMEs, as well as to promote local products in the development of ICV. During this programme, students are trained in the field of business management for one whole year. The programme for the first time included, colleges and universities from all over Oman along with volunteers from Nama employees. The number of participating students reached 65 teams with 10 students each. On the other hand, there were 150 volunteers from Nama to lead the 65 teams.


• Omani network of volunteers (Taawon): “Wiyakum” Initiative.

• External: Aims to encourage voluntary work in the sultanate and prepare the volunteers to become role models and change the voluntary work culture in the local community by supporting various development initiatives that serves the interests of the community. This programme caught the interest of many young people, from the existing voluntary teams and the new ones. 95 teams, with around 3,800 members, participated from all over the Sultanate. The winners will be announced in the second quarter of 2015.

• internal: Aims to enhance the Group’s employee volunteering skills and engage them in a whole day dedicated for voluntary work that “Taawon” organised for non-profitable organisations within Muscat. This is considered the first phase of the initiative and more employees from the other governorates will be involved later on.

• ESO: The group recently signed an agreement with the Environment Society of Oman to finance the first branch of ESO outside Muscat. The office will be in Salalah and will help the association’s projects in Dhofar Governorate. The office will create several direct and indirect jobs for the local community along with a capacity building activities for the public. The project will also include a campaign to plant around 1,000 local trees in the governorate where Nama Group staff, represented by DPC, will participate as volunteers. This project contributes to the environmental pillar of the sustainability policy.

fuTurE prOjECTS

Nama Group’s sustainability report: In line with the international standards, the

statistics related to environment, society and economy will be collected from each company under Nama Group and collated into one report so as to compare the efforts paid previously in this area, which lay the foundation for the future plans for sustainability projects.

Committee and Plan of ICV: Local procurement data will be calculated, as well as the contract value of local SMEs in order to determine the percentage of the Group’s investment in the local market, the overall contribution to Omanization and the methods of improving it. Also, meetings are hold with representatives from Ministry of Oil and Gas and PDO to benefit from their expertise in the field of ICV and discuss ways for cooperation.

Conservation Awareness Campaign: Its aim is to organise a unified national campaign to spread awareness about energy saving to the citizens so that the focus of the Group’s efforts is on a single campaign rather than distracting consumers’ attention with more than one campaign.

Capacity Building Initiative with UCCD: This project will consist of a series of training programmes for different age groups including students and staff from schools and universities in order to develop their knowledge about environment and economy in the Sultanate.

“My Safe House” project: An initiative made by the HSSE department at GPDC, which aims at training nearly 400 people from the local community in first aid and fire fighting.

It is worth mentioning that all these projects require the training of a group of Nama’s employees and involving them in the work in order to transfer experiences, as a type of human resources sustainability.


fiNANCiAl rEpOrT

budgetOutcomeOfficialOrganisation/ProjectpillarNo.110,000- 150 volunteers

- 400 participantsEnjaz Oman/ Sharikati ProjectEconomy1

50,000- A report about ICV- 4 qualified people to write future reports

Different authorities/ ICV tender (ICV analysis)Economy2

15,680560 employees (20% of Nama employees underwent the programme )

Taawon/volunteers introduction programmeSocial3

34,32095 teams (more than 3800 members)Taawon/WiyakumSocial4

22,500 of 2015 budget

- Training 400 people- Preparing 6 people to be certified trainers in

First Aid

GPDC/My safe homeSocial5

50,000- A unified national campaign- A qualified team from the Group to organise

future campaigns

Nama Group/Electricity rationalisation campaign

Environment6

45,904Planting more than 1000 treesESO/opening a branch of ESO in Salalah and the forestation campaign of Dhofar governorate

Environment7

84,096- Experts sessions: 120 people- Environment ambassadors: 25 university

students- Junior environment ambassadors: 180

school students under the age of 14- Career preparation for new graduates: 45

graduate

Facilities center for skills development/ Development and sustainability training

Environment/Social

8

35,000- 4 annual meetings of the committee- Participating in a single conference at least

Different organisations/specifying an amount of money for Meetings, events, conferences and awards

Community*9

40,000Sustainability articles and adsDifferent organisations/communication plan to achieve sustainability policy

Community*10

35,000- One sustainability report- 4 qualified people to write future reports

Different organisations/ Sustainability Report Tender(A comprehensive report to evaluate the performance of the Group’s sustainability)

Community*11

*Community: Financial allocations from all of sustainability pillars (environment, society, economy)

NExT plAN

1. Evaluating the success of current projects.

2. Focusing on success factors and challenges.

3. Developing projects (the second phase of enhanced versions of the projects).

4. Creating new opportunities and projects that serve all sustainability pillars (environment, society and economy).



OpErATiONAl & fiNANCiAl REVIEW 2014

Operational Highlights

Energy Sold : Increase by 11%

Water Sold : Increase by 8.5%

Customer Numbers : Increase by 8%

financial Highlights

Net Profit After Tax Increase by 8.7%

Operating Revenue Increase by 6.7%

Capital Investment Increase by 79% (Including Assets Under Finance Lease)

key financials 2014 2013 2012% Change

2014 & 2013

Earning Before Interest and Tax RO 000’s 158,154 153,976 124,134 2.71

Net Profit After Tax RO 000’s 122,995 113,124 84,686 8.73

Operating Cash Flow RO 000’s 278,273 208,284 167,172 33.60

Net Govt Subsidy (Including Salalah Business) RO 000’s 302,417 310,279 247,422 (2.53)

Capital Expenditure (Including Assets under Finance lease) RO 000’s 497,911 277,638 241,900 79.34

Total Assets RO 000’s 2,753,268 2,366,217 2,176,708 16.36

Total Equity RO 000’s 1,365,697 1,188,040 1,065,203 14.95

key ratios 2014 2013 2012% Change

2014 & 2013

Earnings per share RO 61.498 56.56 42.34 8.73

Operating cash flow per share RO 139.137 104.14 83.59 33.60

Net Assets per share RO 682.849 594.02 532.60 14.95

key Operations 2014 2013 2012 % Change

Electricity miS (gWh)

Units Generated GWh 2,818 3,162 3,354 (10.88)

Units Purchased GWh 22,315 19,718 18,464 13.17

Units Transmitted GWh 24,404 21,898 21,041 11.44

Units Sold GWh 22,058 19,851 18,504 11.12

Distribution Loss % 10.35 10.3 13.4 (0.26)

Max Transmission system demand GWh 5.7 4.4 4 29.55


key Operations 2014 2013 2012 % Change

Electricity rural (gWh)

Units Generated GWh 1,636 1,296 1,468 26.24

Units Purchased GWh 2,775 1,954 1,431 41.98

Units Sold GWh 3,062 2,770 2,456 10.55

Distribution Loss % 9.9 14.8 15.3 33.06

Water

Units Generated M CuM 53.6 51.3 52.4 4.48

Units Purchased M CuM 156.2 126.8 118 23.19

Units Sold M CuM 209 176.8 167.8 18.21

Customers

MIS Number 816,609 754,254 695,345 8.27

Rural System Number 115,599 105,138 94,927 9.95

Total Number 932,208 859,392 790,272 8.47

Staff Count Number 2828 2,781 2,696 1.69

revenue

• Total Revenue (Increase by RO 51.3 million)

• 6.7% Annual Growth

• Power Sales have increased by RO 51.1 million due to 8% increase in Customer Growth and 11% growth in units sold, change in customer-mix.

• Net Subsidy from Government has decreased by RO 7.8 million caused by reduced purchase cost and growth in business infrastructure.

900

800

700

600

500

400

300

200

100

0

821.169

201420132012201120102009

769.9

451.5 518.4560.3

659.1

REVENUE


Total Expenses

• Total Expenses ( Increase by RO 45.2 million)

• 7% Annual growth

• Operating cost higher by RO 20 million mainly due to increased power and water procurement.

• General and Administration expenses higher in line with growth in business operations and inflationary impact.

• Depreciation cost higher by RO 12.7M due to increased investment in Capital Expenditure.

ProfitAfterTax

• Profit after Tax (Increase by RO 9.9 million)

• 9% Annual growth

• Increase in power consumption , Industrialisation and customer base contributed to the increased profits. Efficiencies in generation also contributed for the increase.

• Profit includes unrealised gain on finance lease for DGC is 23 Million and reversal of provision no longer required for major maintenance RO 5 Million.

800

700

600

500

400

300

200

100

0

731.511

201420132012201120102009

686.3

382.6 455.4506.2

589.9

TOTAL EXPENSES

140

120

100

80

60

40

20

0

123

201420132012201120102009

113.1

75.4 71.962.3

84.7

PROFIT AFTER TAX


Operating Cash flow

• Operating Cash flow (Increased by RO 70 million)

• 25.2 % Annual growth

• The 9% increase in Net Profit, and better credit terms with suppliers, resulted in a 25.2 % increase in Operating Cash flow of the Subsidiary companies.

• Almost the entire operational cash-flow was re-invested in the Distribution and Transmission Companies’ Capital Expenditure programme, Servicing of loans etc.

300

250

200

150

100

50

0

278.2

201420132012201120102009

208.2

118.6

225.2 227.3

167.2

OPERATING CASH FLOW


Customers

932208Customer per company

MEDC 284,625

MZEC 345,308

MJEC 186,676

RAECO 31,472

DPC 84,127

• Total customer base has been increased by 8% to 932,208

• The major increase is in Domestic customers 50,665; Commercial customers 19,773

• Government customers; increased by 1,927 and a small growth in Agricultural and Industrial customers.

1000000

800000

600000

400000

200000

0

932208

201420132012201120102009

859392

630767 677668727483

790272

CUSTOMERS

CUSTOMERS PER COMPANY

MEDC - 284625DPC - 84127

RAECO - 31472

MJEC - 186676

MZEC - 345308

grOup buSiNESSpErfOrmANCE REVIEW


Electricity Supplied - gWh

25121Electricity Supplied per Company

MEDC 8651

MZEC 6706

MJEC 6702

RAECO 723

DPC 2339

30000

25000

20000

15000

10000

5000

0

25121

201420132012201120102009

22621

1383416132

1851320960

ELECTRICITY SUPPLIED - GWh

ELECTRICITY SUPPLIED PER COMPANY (GWh)

MEDC - 8651DPC - 2339

RAECO - 723

MJEC - 6702

MZEC - 6706


power generation and procurement

4454 power generated (gWh)

25090 power procurement (gWh)

• Power production in the group decreased by 0.1%, in line with the planned lower generations.

• Power procurement has increased by 27% in line with the growth in demand, essentially in the MIS region.

• Commissioning of Sur plant has enhanced the production capacity.

Water desalination (mCum)

53.63 Water desalination (mCum) - group

156.2 Water procurement (mCum) - External

• While the Water desalinated by the Group increased by only 0.6%; Water procurement grew by over 23%.

30000

25000

20000

15000

10000

5000

0

25090

201420132012201120102009

21672

1313113874

1626519932

POWER GENERATION AND PROCUREMENT

4946 5553 5531 4872 4458 4454

Power Procurement (GWh)

Power Generated (GWh)

250

200

150

100

50

0

156.2

201420132012201120102009

126.8

62.481

97.1118

WATER DESALINATION (MCuM)

52.3 49.1 49.5 52.4 51.3 53.63

Water Procurement (MCuM) - External

Water Desalination (MCuM) - Group


distribution loss (%)

10.35 distribution loss: miS

9.9 distribution loss: rural Areas and dpC

18

16

14

12

10

8

6

4

2

0201420132012201120102009

DISTRIBUTION LOSS (%)

10.3510.3

14.815.315.514.4

14.717.2

15.113.8

12.8

9.9

Distribution Loss: MIS Distribution Loss: Rural Areas and DPC


government Subsidy

government Subsidy

MEDC 71.4

MZEC 97.5

MJEC 66.5

RAECO 42.3

Salalah Business 27.8

OPWP K Factor -3.03

• The Electricity subsidy for the year 2014 (including Salalah) is at RO 302 million, which is 2.5% lesser than the 2013 outturn subsidy of RO 310 million. The decrease in subsidy is mainly driven by the favourable energy procurement cost passed through the distribution companies

350

300

250

200

150

100

50

0

302.4

201420132012201120102009

310.3

146.9 144.0 153.4

247.4

GOVERNMENT SUBSIDY

SUBSIDY PER COMPANY (RO Millions)

MEDC - 71.4SalalahBusiness - 27.8

OPWPK Factor - 3.03

RAECO - 42.3

MJEC - 66.5MZEC - 97.5

15.000

10.000

5.000

0.000

12.038

201420132012201120102009

13.7

9.4

8 7.7

11.8

SUBSIDY PER UNIT


Wadi Al jizzi power Company SAOC

Contribution to group

Profit0.4%Activities: Electricity generation

Annual Highlights

• Power generation is 21% higher than previous year (574GWh vs. 474 GWh) on more demand

• Average plant availability for the period is 88%, 4% lesser than 2013 (92%).

• 1.2 million man hours without Lost Time Incident.

12

10

8

6

4

2

0

-2

7.7

10.2

1.1

-0.4

20132012

WJPC CONTRIBUTION TO GROUP

9.2

0.5

2014

Revenue Profit After Tax

SubSidiAriES pErfOrmANCEHIGHLIGHTS


Al gubrah power and desalination Company SAOC


Profit2.8%Activities: Electricity generation and related water desalination.

Annual Highlights

• Over all plant availability is 85% which is 0.9% lesser than 2013

• 2094 GWh power delivered to the grid , lower by 4% compared to 2013

• Water dispatched 50.3 million m3, higher by 0.7% compared to 2013

• Total Man Hours with out Lost Time Accident is 4.93 million

45

40

35

30

25

20

15

10

5

0

40.6

0.2

2013

GPDC CONTRIBUTION TO GROUP

34.715

3.2

20142012

42.8

6.3


% CONTRIBUTION TO GROUP EBT

GPDC - 2.8%


Oman Electricity Transmission Company SAOC

35.3% Contribution to group EbT

Activities: Electricity Transmission

Annual Highlights

• Total length of 220KV transmission circuit have increased from 1529 circuit KM in 2013 to 1848 circuit KM in 2014.

• Total length of 132 KV transmission circuits increased from 3,150 circuit KM in 2013 to 3,783 circuit-KM in 2014.

• Three new grid stations constructed (Ghubrah, Sur and Buraimi Industrial Area) during 2014 in addition to upgrading of grid stations in Shinas, Sohar, Mudhaibi, Rusaq, Izki, Samail and Mawalleh

• Maximum transmission system demand up by 21.2% (5296 MW)and regulated transmitted up by 22.4% (26799 GWh) as compared to 2013.

100908070605040302010

0

77.9

20132012

OETC CONTRIBUTION TO GROUP

56.5

27.6

Revenue Profit After Tax92.07

44.4

2014

46.2


OETC - 35.3%


muscat Electricity distribution Company SAOC

17% Contribution to group EbT

Activities: distribution and supply of electricity and maintenance of distribution networks in the muscat region

Annual Highlights

• 23,145 new customers added to the network, an increase of 9% over 2013.

• System loss performance of 8.73% achieved as compared to 9.17% in 2013

• Subsidy per MWh is 8.3 in 2014 as compared to 7.6 in 2013

250

200

150

100

50

0

204.8

2013

MEDC CONTRIBUTION TO GROUPRevenue Profit After Tax

225.7

21.5

20142012

188.5

21.3 23.5


MEDC - 17%


mazoon Electricity Company SAOC


Activities: distribution and supply of electricity and maintenance of distribution networks in the willayats of A’Sharqiya, Al dhakliyah and South batinah region.

Annual Highlights

• 27,126 new customers , an increase of 9% over 2013

• System loss performance of 10.3% achieved as compared to 11.2% in 2013

• Subsidy per MWh is 14.5 in 2014 compared to 15.7 in 2013

200180160140120100

80604020

0

178.9

20132012

MZEC CONTRIBUTION TO GROUP

158.9

21.7

Revenue Profit After Tax197.1

13.6

2014

22.4


MZEC - 11.8%


majan Electricity Company SAOC


Activities: distribution and supply of electricity and maintenance of distribution networks in the willayats of A ‘dhahirah, governorate of buraimi and North batinah region.

Annual Highlights

• 12,084 new customers, an increase of 7% over 2013

• System loss for 2014 is 14.6% as compared to 11.3% in 2013

• Subsidy per MWh is 9.9 in 2014 as compared to 9.1 in 2013.

180

160

140

120

100

80

60

40

20

0

145.6

20132012

MJEC CONTRIBUTION TO GROUP

130.6

12.8


166.6

9.1

2014

14.4


MJEC - 7.2%


rural Areas Electricity Company SAOC


Activities: Electricity generation, water desalination and electricity distribution and supply activities in rural areas.

Annual Highlights

• 3185 new customers , an increase of 11% over 2013.

• Net power generated and sent out has increased from 635,167 MWh to 722,921 an increase of 13.8% over 2013.

• Desalinated water generation has increased from 2,291,034 m3 in 2013 to 2397486 m3 in 2014, an increase of 4.6%.

70

60

50

40

30

20

10

0

-10

64.2

52.7

-0.8

5.9

20132012

RAECO CONTRIBUTION TO GROUP

61

2.4

2014



RAECO - 2.6%


dhofar power Company SAOC


Activities: Electricity, distribution and supply activities in the dhofar (Salalah) area.

Annual Highlights

• 7,276 new customers, an increase of 9.5% over 2013

• System loss is 9.1% compared to 14.3% in 2013

• Regulated units sold are 2,339 GWh and have increased by 0.2% over 2013.

70

60

50

40

30

20

10

0

-10

47.8

-0.9

2013

DPC CONTRIBUTION TO GROUP

66

4.4

2014

46.6

5

2012



DPC - 3.7%


dhofar generating Company SAOC

22% Contribution to group EbT

Activities: Electricity generation in the dhofar (Salalah) area.

Annual Highlights

• Power generation is 54% higher than previous year (953 GWh vs. 620 GWh) on more demand.

• Average plant availability for the period is 96%.

• Profit includes Unrealised gain on finance lease for DGC is 23 Million and reversal of provision no longer required for major maintenance RO 5 Million.

30

25

20

15

10

5

0

-5

DGC CONTRIBUTION TO GROUP

10.4

-0.9

2013


14.9

29.1

2014


DGC - 22%


Oman power and Water procurement Company SAOC


Profit-1.5%Activities: bulk purchase and Sale of electricity and related water and supervision of the Salalah Concession Agreement

Annual Highlights

• The Sur IPP commenced in operations in Dec 2014. The PPA arrangement with Phoenix for Sur IPP is reviewed and classified as an operating lease.

• The water purchase agreement (WPA) for Sur IWP is novated to OPWP w.e.f. 25 Dec 2014. The WPA with Sharqiya Desalination is classified as finance lease with the Scheduled Commercial Operation in October 2014.

• The Salalah Concession Agreement is restructured w.e.f. 1 January 2014. This resulted in OPWP entering into power purchase agreement (PPA) with Dhofar Generating Company (DGC) and bulk supply agreement with Dhofar power company (DPC).

500450400350300250200150100

500

-50

OPWP CONTRIBUTION TO GROUP

468

3.9

403.3

-8.1

Revenue Profit After Tax473

-1.8

201420132012



ElECTriCiTy HOldiNg COmpANy SAOCANd iTS SubSidiAriES

Report and consolidated financial statementsfor the year ended 31 December 2014

Pages

Independent auditor’s report 46-47

Consolidated statement of financial position 48-49

Consolidated statement of profit or loss and other comprehensive income 50

Consolidated statement of changes in equity 51

Consolidated statement of cash flows 52

Notes to the consolidated financial statements 53 - 85




CONSOlidATEd STATEmENT Of fiNANCiAl pOSiTiONat 31 December 2014

2014 2013

Notes rO ’000 RO ’000

ASSETS

Non-current assets

Property, plant and equipment 6 2,314,463 1,780,389

Goodwill 4,320 4,320

Deferred tax assets 24 1,601 1,237

Advance payments 7 14,099 15,668

Service concession receivables 8 - 141,285

Bank deposits 9 82,500 56,042

Total non-current assets 2,416,983 1,998,941

Current assets

Inventories 10 33,669 35,660

Trade and other receivables 11 213,743 177,730

Bank deposits 9 41,500 82,151

Cash and bank balances 12 30,891 31,069

319,803 326,610

Assets classified as held for sale 42 16,482 40,666

Total current assets 336,285 367,276

Total assets 2,753,268 2,366,217

EQuiTy ANd liAbiliTiES

Capital and reserve

Share capital 13 2,000 2,000

Legal reserve 14 12,342 12,342

General reserve 15 3,000 3,000

Retained earnings 664,649 542,100

Shareholders’ funds 17 683,751 628,598

Equity attributable to owners of the parent Company 1,365,742 1,188,040

Non-controlling interests (45) -

Total equity 1,365,697 1,188,040

The accompanying notes form an integral part of these consolidated financial statements.


CONSOlidATEd STATEmENT Of fiNANCiAl pOSiTiONat 31 December 2014 (continued)

2014 2013

Notes rO ’000 RO ’000

Non-current liabilities

Term loan 18 - 75,865

Finance lease liabilities 19 90,052 44,351

Trade and other payables 20 22,670 8,372

Provision for decommissioning costs 21 10,949 17,427

Provision for employee benefits 21 8,559 8,272

Deferred revenue 22 175,610 109,267

Advance from Ministry of Finance 23 - 123,222

Deferred tax liability 24 75,021 63,754

Total non-current liabilities 382,861 450,530

Current liabilities

Term loan 18 75,865 12,708

Short term borrowings 25 551,000 400,000

Deferred revenue 22 12,151 2,858

Bank overdrafts 26 22,696 30,345

Finance lease liabilities 19 8,446 4,753

Trade and other payables 20 315,530 261,412

Current tax liability 34 8,356 6,894

Provision for employee benefits 21 3,354 3,530

997,398 722,500

Liabilities classified as held for sale 42 7,312 5,147

Total current liabilities 1,004,710 727,647

Total liabilities 1,387,571 1,178,177

Total equity and liabilities 2,753,268 2,366,217

______________________________ _____________________________ ___________________________mohammed Abdullah Al mahrouqi dr. Abdulmalik Abdullah Al Hinai Omar khalfan Al WahaibiChairman Director Chief Executive Officer



CONSOlidATEd STATEmENT Of prOfiT Or lOSS ANd OTHEr COmprEHENSiVE iNCOmEfor the year ended 31 December 2014

Notes 2014 2013rO’000 RO’000

Revenue 27 806,182 759,416Operating costs 28 (576,271) (540,693)

Grossprofit 229,911 218,723General and administrative expenses 29 (107,026) (96,232)Other income 31 16,586 26,046

Profitfromoperations 139,471 148,537Finance income 32 2,935 3,478Finance costs 33 (16,730) (23,584)

Profitbeforetax 125,676 128,431Taxation 34 (17,486) (14,396)

Profitfortheyearfromcontinuingoperations 108,190 114,035Profit / (loss) for the year from discontinued operation 43 14,805 (911)

Profitfortheyear 122,995 113,124

Other comprehensive income :Items that may be reclassified subsequently to profit or loss :Revaluation gain on hedge instruments for the year - 2,275Reclassification to profit or loss - 7,965

Other comprehensive income for the year - 10,240

Total comprehensive income for the year 122,995 123,364

Profitfortheyearattributableto: - Owners of the Parent Company 123,090 113,124 - Non-controlling interests (95) -

Profitfortheyear 122,995 113,124

Total comprehensive income attributable to: - Owners of the Parent Company 123,090 123,364 - Non-controlling interests (95) -

Total comprehensive income for the year 122,995 123,364



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CONSOlidATEd STATEmENT Of CASH flOWS for the year ended 31 December 2014

2014 2013rO’000 RO’000

CashflowsfromoperatingactivitiesProfit before tax 125,676 128,431Adjustments for: Tax impact of discontinued operations 3,268 (64) Depreciation on property, plant and equipment 96,284 83,576Loss on sale of property, plant and equipment 437 925Loss on write off of property, plant and equipment 293 7,709 Provision for inventory obsolescence (net) 407 168 Provision for doubtful debts (net) 1,082 1,687 Provision for employee benefit expense 1,504 924Provision for major maintenance - 444Reversal of decommissioning provision - (27,775) Interest expense 16,470 23,584Interest income (2,935) (3,478)Unwinding of decommissioning cost provisions 260 465

Operatingcashflowsbeforeworkingcapitalchanges 242,746 216,596Working capital changes to:Inventories 1,584 (726)Trade and other receivables (37,095) (32,589)Advance payments 1,569 5,599Service concession receivable - (1,174)Deferred revenue 26,955 6,667Advance from Ministry of Finance - 29,677Trade and other payables 49,028 (7,669)

Cash generated from operating activities 284,787 216,381Payment of end of service benefits (1,393) (1,283)Income tax paid (5,121) (5,903)

Net cash generated from operating activities 278,273 209,195CashflowsfrominvestingactivitiesPurchase of property, plant and equipment (504,887) (277,638)Net assets held for sale 26,349 -Loss from discontinued operation 14,805 (911)Proceeds from sale of property, plant and equipment 5,128 12,150Encashment of / (investment in) bank deposits 14,193 (19,421)Interest received 2,935 3,478

Net cash used in investing activities (441,477) (282,342)

CashflowsfromfinancingactivitiesNet movement in short-term borrowings 151,000 95,000Net movement in term loan (12,708) (48,025)Net movement in finance lease liabilities 49,394 (4,256)Minority interest acquisition adjustment (41) (27)Interest paid (16,470) (21,140)Investment in a subsidiary - (101)Dividend paid (500) (500)

Netcashgeneratedfromfinancingactivities 170,675 20,951

Net change in cash and cash equivalents 7,471 (52,196)Cash and cash equivalents at the beginning of the year 724 52,920

Cash and cash equivalents at the end of the year 8,195 724

Cash and cash equivalents at the end of the yearCash and bank balances 30,891 31,069Overdraft (22,696) (30,345)

8,195 724



1. general

Electricity Holding Company SAOC (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.

The subsidiary companies, other than Dhofar Power Company SAOC, (DPC) and Utilities Centre for Competency Development LLC (UCCD), 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:

Subsidiary companyShareholding percentage %

principal activities

Al Gubrah Power and Desalination Company SAOC (GPDC)

99.99 Electricity generation and related water desalination.

Wadi Al Jizzi 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)

99.99Distribution and Supply of electricity and maintenance of distribution networks in the Muscat region.

Mazoon Electricity Company SAOC (MZEC) 99.99Distribution and Supply of electricity and maintenance of distribution networks in the wilayats of A’Sharqiya, Al-Dhakliyah and South Batinah region.

Majan Electricity Company SAOC (MJEC) 99.99Distribution and Supply of electricity and maintenance of distribution networks in the wilayats of A’Dhahirah, and North Batinah region.

NOTES TO THE CONSOlidATEd fiNANCiAl STATEmENTSfor the year ended 31 December 2014


NOTES TO THE CONSOlidATEd fiNANCiAl STATEmENTSfor the year ended 31 December 2014 (continued)

1. general (continued)

Subsidiary companyShareholding percentage %

principal activities

Rural Areas Electricity Company SAOC (RAECO)

99.99 Electricity generation, water desalination, and electricity distribution and supply activities in Musandam Governorate, Alwusta Region, Masirah Island, Khuweima and Qroon area in Sharqiya Region, Aswad area in Dahirah Region in the Dhofar Governorate, the area outside Dhofar Power Company SAOC authorised area and in the Dakhliya Region, the area outside Mazoon Electricity Co SAOC authorised area.

Dhofar Power Company SAOC (DPC) 98.79 Distribution and Supply of electricity and maintenance of distribution networks in the Salalah region.

Dhofar Generating Company SAOC (DGC) Electricity generation

Utilities Centre for Competency Development LLC (UCCD)

67.00 As per an agreement with Veolia Middle East, provides human resource services, consultancy services and training services.

These consolidated financial statements represent the results of operations of the Parent Company and all the above subsidiaries (together the “Group”).

2. Application of new and revised international financial reporting Standards (“ifrSs”)

2.1 New and revised IFRSs applied with no material effect on the consolidated financial statements

The following new and revised IFRSs, which became effective for annual periods beginning on or after 1 January 2014, have been adopted in these consolidated financial statements. The application of these revised and new IFRSs have not had any material impact on the amounts reported for the current and prior years but may affect the accounting for future transactions or arrangements.

• Amendments to IAS 32 Financial Instruments: Presentation relating to application guidance on the offsetting of financial assets and financial liabilities.

• Amendments to IAS 36 recoverable amount disclosures: The amendments restrict the requirements to disclose the recoverable amount of an asset or CGU to the period in which an impairment loss has been recognised or reversed. They also expand and clarify the disclosure requirements applicable when an asset or CGU’s recoverable amount has been determined on the basis of fair value less costs of disposal.

• Amendments to IAS 39 Financial Instruments: Recognition and Measurement, Novation of Derivatives and Continuation of Hedge Accounting. The amendment allows the continuation of hedge accounting when a derivative is novated to a clearing counterparty and certain conditions are met.

• Amendments to IFRS 10, IFRS 12 and IAS 27 – Guidance on Investment Entities on 31 October 2012, the IASB published a standard on investment entities, which amends IFRS 10, IFRS 12, and IAS 27 and introduces the concept of an investment entity in IFRSs.



2. Adoption of new and revised international financial reporting Standards (ifrS) (continued)

2.2 New and revised IFRSs in issue but not yet effective and not early adopted

The Group has not early applied the following new standards, amendments and interpretations that have been issued but are not yet effective:

New and revised ifrSsEffective for annual periodsbeginning on or after

Amendments to IFRS 7 Financial Instruments: Disclosures relating to disclosures about the initial application of IFRS 9.

When IFRS 9 is first applied

IFRS 7 Financial Instruments: Additional hedge accounting disclosures (and consequential amendments) resulting from the introduction of the hedge accounting chapter in IFRS 9.

When IFRS 9 is first applied

IFRS 9 Financial Instruments (2009) issued in November 2009 introduces new requirements for the classification and measurement of financial assets. IFRS 9 Financial Instruments (2010) revised in October 2010 includes the requirements for the classification and measurement of financial liabilities, and carrying over the existing derecognition requirements from IAS 39 Financial Instruments: Recognition and Measurement.

IFRS 9 Financial Instruments (2013) was revised in November 2013 to incorporate a hedge accounting chapter and permit the early application of the requirements for presenting in other comprehensive income the own credit gains or losses on financial liabilities designated under the fair value option without early applying the other requirements of IFRS 9.

1 January 2018

Finalised version of IFRS 9 (IFRS 9 Financial Instruments (2014)) was issued in July 2014 incorporating requirements for classification and measurement, impairment, general hedge accounting and derecognition.

IFRS 9 (2009) and IFRS 9 (2010) were superseded by IFRS 9 (2013) and IFRS 9 (2010) also superseded IFRS 9 (2009). IFRS 9 (2014) supersedes all previous versions of the standard. The various standards also permit various transitional options. Accordingly, entities can effectively choose which parts of IFRS 9 they apply, meaning they can choose to apply: (1) the classification and measurement requirements for financial assets: (2) the classification and measurement requirements for both financial assets and financial liabilities: (3) the classification and measurement requirements and the hedge accounting requirements provided that the relevant date of the initial application is before 1 February 2015.




2.2 New and revised IFRSs in issue but not yet effective and not early adopted (continued)

New and revised ifrSsEffective for annual periodsbeginning on or after

IFRS 15 Revenue from Contracts with Customers

In May 2014, IFRS 15 was issued which established a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. IFRS 15 will supersede the current revenue recognition guidance including IAS 18 Revenue, IAS 11 Construction Contracts and the related interpretations when it becomes effective.

The core principle of IFRS 15 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Specifically, the standard introduces a 5-step approach to revenue recognition:

• Step 1: Identify the contract(s) with a customer.

• Step 2: Identify the performance obligations in the contract.

• Step 3: Determine the transaction price.

• Step 4: Allocate the transaction price to the performance obligations in the contract.

• Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation.

Under IFRS 15, an entity recognises when (or as) a performance obligation is satisfied, i.e. when ‘control’ of the goods or services underlying the particular performance obligation is transferred to the customer. Far more prescriptive guidance has been added in IFRS 15 to deal with specific scenarios. Furthermore, extensive disclosures are required by IFRS 15.

1 January 2017

Annual Improvements to IFRSs 2012 - 2014 Cycle that include amendments to IFRS 5, IFRS 7, IAS 19 and IAS 34.

1 July 2016

Amendments to IAS 16 and IAS 38 to clarify the acceptable methods of depreciation and amortization.

1 January 2016

Amendments to IFRS 11 to clarify accounting for acquisitions of Interests in Joint Operations. 1 January 2016

Amendments to IAS 16 and IAS 41 require biological assets that meet the definition of a bearer plant to be accounted for as property, plant and equipment in accordance with IAS 16.

1 January 2016




2.2 New and revised IFRSs in issue but not yet effective and not early adopted (continued)

New and revised ifrSsEffective for annual periods

beginning on or after

Amendments to IFRS 10 and IAS 28 clarify that the recognition of the gain or loss on the sale or contribution of assets between an investor and its associate or joint venture depends on whether the assets sold or contributed constitute a business.

1 January 2016

Amendments to IAS 27 allow an entity to account for investments in subsidiaries, joint ventures and associates either at cost, in accordance with IAS 39/IFRS 9 or using the equity method in an entity’s separate financial statements.

1 January 2016

Amendments to IFRS 10, IFRS 12 and IAS 28 clarifying certain aspects of applying the consolidation exception for investment entities.

1 January 2016

Amendments to IAS 1 to address perceived impediments to prepares exercising their judgment in presenting their financial reports.

1 January 2016

Annual Improvements to IFRSs 2010 - 2012 Cycle that includes amendments to IFRS 2, IFRS 3, IFRS 8, IFRS 13, IAS 16, IAS 38 and IAS 24.

1 July 2014

Annual Improvements to IFRSs 2011 - 2013 Cycle that includes amendments to IFRS 1, IFRS 3, IFRS 13 and IAS 40.

1 July 2014

Amendments to IAS 19 Employee Benefits clarify the requirements that relate to how contributions from employees or third parties that are linked to service should be attributed to periods of service.

1 July 2014

The Board anticipates that these new standards, interpretations and amendments will be adopted in the Group’s financial statements for the period beginning 1 January 2015 or as and when they are applicable and adoption of these new standards, interpretations and amendments, except for IFRS 9 and IFRS 15, may have no material impact on the consolidated financial statements of the Group in the period of initial application.

3. Summaryofsignificantaccountingpolicies

Statement of compliance

The financial statements have been prepared in accordance with International Financial Reporting Standards, (IFRS) Oman and the requirements of the Commercial Companies Law of 1974, as amended.

basis of preparation

The financial statements have been prepared on the historical cost basis except the finance lease receivable and decommission provision which are valued at amortised cost and certain financial instruments initially measured at fair value.

Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these financial statements is determined on such a basis, except for leasing transactions that are within the scope of IAS 17 and decommissioning provision within the scope of IAS 37.



3. Summaryofsignificantaccountingpolicies(continued)

In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;

• Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and

• Level 3 inputs are unobservable inputs for the asset or liability.

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.

basis of consolidation

Subsidiaries

The consolidated financial statements incorporate the financial statements of the Parent Company and entities controlled by the Parent Company. 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 non-controlling 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.




basis of consolidation (continued)

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.

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

• the aggregate of fair value of the consideration received and fair value of any retained interest, and

• 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 acquiree 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.

Goodwill is carried at cost as established at the date of acquisition of the business, as explained above, less accumulated impairment losses, if any.

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.

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 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

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.

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.

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.

The principal estimated useful lives used for this purpose are:

years

Buildings 30Transmission and related assets 20 - 60Assets under finance lease 13 - 20Distribution and related assets 20 - 40Other plant and machinery 3 - 60Decommissioning assets 8 - 20Furniture, vehicles and equipment 5 - 7Plant spares 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.




financial instruments (continued)

Non-derivative financial instruments (continued)

Subsequent to initial recognition, non-derivative 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 electricity, water and other services sold or services performed in the ordinary course of business.

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 and other payables

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

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.




impairment (continued)

Financial assets (continued)

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 non-financial 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 labour 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 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 non-current 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.

Employeebenefits

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 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 non-current 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 previous 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 rebates and other similar allowances.

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.

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 borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in the profit or loss in the year in which they are incurred.



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 previous 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.

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 with effect from 2010. 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.



4 Critical accounting estimates (continued)

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 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.

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.



5 financial risk management (continued)

financial risk factors (continued)

Market risk (continued)

interest rate risk

Bank deposits (continued)

A 1% increase or decrease in interest rate on bank deposits would have increased / decreased the profit, by the amounts shown below:

2014 2013rO’000 RO’000

Change in bank deposits interest income 1,311 1,382

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 were as below:

2014 2013rO’000 RO’000

Term loan 75,865 88,573Short term borrowings 551,000 400,000Bank overdrafts 22,696 30,345

649,561 518,918

A 1% increase or decrease in interest rates on interest bearing liabilities would have decreased / increased the profit, by the amounts shown below.

2014 2013rO’000 RO’000

Term loan 758 886Short term borrowings 4,755 3,665Bank overdrafts 265 76

5,778 4,627

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.





liquidity risk (continued)

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 2014Carrying

amount

Total contractual cashflows

less than

1 year

1 yearto

5 years

morethan

5 yearsrO’000 rO’000 rO’000 rO’000 rO’000

Non-interest bearing Trade and other payables 338,200 338,200 315,530 22,670 -interest bearingTerm loan 75,865 76,754 76,754 - -Short term borrowings 551,000 551,000 551,000 - -Bank overdrafts 22,696 22,696 22,696 - -Finance lease liabilities 98,498 160,334 19,106 89,224 52,004

748,059 810,784 669,556 89,224 52,004

31 December 2013

Non-interest bearing Trade and other payables 269,784 269,784 261,412 8,372 - interest bearingTerm loan 88,573 95,912 16,342 79,570 - Short term borrowings 400,000 400,000 400,000 - - Bank overdrafts 30,345 30,345 30,345 - - Finance lease liabilities 49,104 78,006 11,092 53,902 13,012

568,022 604,263 457,779 133,472 13,012

The advance from Ministry of Finance amounting to RO nil (2013: RO 123.222 million) has no fixed repayment term and do not carry any interest and, therefore, not shown in the above table.

As at 31 December 2014, the Group’s current liabilities exceeded its current assets by RO 668.425 million (2013 - RO 360.371 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.





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.

Trade and other receivables

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:

2014 2013rO’000 RO’000

Government customers (including service concession receivable) 28,702 167,874Other private customers 124,414 107,209

153,116 275,083

The age of trade receivables and related impairment loss at the reporting date is as below:

31 december 2014 31 December 2013

gross impairment

past due but not

impaired Gross Impairment

Past due but not impaired

rO’000 rO’000 rO’000 RO’000 RO’000 RO’000

Not past due 42,064 - - 35,735 - -Less than 1 month 10,360 - - 10,217 - -1 month to 3 months 30,985 - - 23,538 - -3 months to 1 year 39,931 (1,804) 38,127 50,230 (1,797) 48,4331 year to 5 years 29,776 (9,275) 20,501 155,363 (8,200) 147,163

153,116 (11,079) 58,628 275,083 (9,997) 195,596





Credit risk (continued)

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.

The carrying amount of financial assets represents the maximum credit exposure. The exposure to credit risk at the reporting date is on account of:

2014 2013rO’000 RO’000

Service concession receivable - 141,285Trade receivables (gross) 153,116 133,798Amount due from related parties 15,809 15,296Other receivables 36,392 13,534Bank deposits 124,000 138,193Cash at bank 30,838 31,033

360,155 473,139

fair value estimation

Financial instruments comprises financial assets and financial liabilities. 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 was 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.

The categories of the Group’s financial instrument are as follows:

2014 2013rO’000 RO’000

financial assets Loans and receivables (excluding advances and prepayments) 318,326 432,199

financial liabilities Financial liabilities held at amortised costs 968,373 788,702 Finance lease liabilities 98,498 49,104

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.


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7 Advance payments

2014 2013rO’000 RO’000

Generation facilities 14,099 15,668

Advance payments pertain to fixed capacity payments made in respect of power and water purchases under operating lease arrangement and represent total cumulative payments made to date reduced by the total cumulative charges to date recognised in the profit or loss.

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 were accounted as per guidance provided in IFRIC 12- Service Concession Arrangements. The Concession Arrangements was terminated on 1 January 2014 as explained in Note 40.

9 bank deposits

Bank deposits have maturity dates ranging from 177 to 1,058 days (2013 - 130 to 728 days) from the reporting date and are with commercial banks in Oman at commercial rates.

10 inventories

2014 2013rO’000 RO’000

Inventories 51,013 52,597Less: allowance for inventory obsolescence (17,344) (16,937)

33,669 35,660

Movement in allowance for inventory obsolescence

At 1 January 16,937 16,769Recognized during the year 584 973Amounts written off (177) (805)

At 31 December 17,344 16,937



11 Trade and other receivables

2014 2013rO’000 RO’000

Trade receivables 153,116 133,798Less: allowance for impaired debts (11,079) (9,997)

Net trade receivables 142,037 123,801Amount due from related parties 15,809 15,296Advances and prepayments 19,505 25,099Other receivables 36,392 13,534

213,743 177,730

Movement in allowance for impaired debts

At 1 January 9,997 8,310Bad debts written off (445) (712)Recognized during the year 1,527 2,399

At 31 December 11,079 9,997

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.

12 Cash and bank balances

2014 2013rO’000 RO’000

Cash on hand 53 36Cash at bank 30,838 31,033

30,891 31,069

13 Share capital

The Parent Company’s authorised, issued and paid-up capital consists of 2 million (2013 : 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 transferred 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 group company. This reserve is available for distribution to the shareholders of the subsidiaries.



16 Non-controlling interest

The non-controlling interest represents minority shareholders in UCCD. Non-controlling interest in DPC as at 31 December 2014 are 340,688 shares (2013- 348,469 ordinary shares) equating to a 3.3% (2013 – 3.5%) and has not been disclosed in these financial statements, as management is of the opinion that the amount of non-controlling interest is not material.

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 2014, RAECO transferred advance from MoF amounting to RO 55.153 million to shareholders’ funds (Note 23).

18 Term loan

2014 2013rO’000 RO’000

Non-current - 75,865Current 75,865 12,708

75,865 88,573

The Group syndicated long-term loan facilities from financial institutions in the aggregate amount of approximately RO 131 million (2013 – RO 131 million). These facilities bear interest at US Dollar denominated LIBOR plus applicable margins. Margin percentages range from 0.53% to 3.25%. Up to 31 December 2012, facilities of approximately RO 126 million had been drawn based on actual requirements, with the remaining un-drawn facilities had been cancelled.

The term loan is repayable in half yearly installments which commenced from 4 November 2007. The loan repayment schedule for the balance outstanding at the end of reporting period is as follows:

31 december 2014Carrying

amountless than

1 year1 year to

5 yearsmore than

5 yearsrO’000 rO’000 rO’000 rO’000

Liability 75,865 75,865 - -

31 December 2013

Liability 88,573 12,708 75,865 -

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

minimum lease payments present value of minimum lease payments

2014 2013 2014 2013rO’000 RO’000 rO’000 RO’000

Not later than 1 year 19,106 11,092 8,446 4,753Later than 1 year not later than 5 years 89,224 53,902 50,530 33,027Later than 5 years 52,004 13,012 39,522 11,324

160,334 78,006 98,498 49,104Less: future finance charges (61,836) (28,902) - -

98,498 49,104 98,498 49,104

The maturity profile of these finance lease liabilities is as under:

2014 2013rO’000 RO’000

Non-current portion of finance lease liabilities 90,052 44,351Current portion of finance lease liabilities 8,446 4,753

98,498 49,104

20 Trade and other payables

Non-currentOther payables 22,670 8,372

CurrentTrade payables 90,713 56,334Other payables 79,883 42,772Accruals 144,934 162,306

315,530 261,412

Total trade and other payables 338,200 269,784

Non-current other payables mainly relates to retention monies for capital work-in-progress contracts and facilities maintenance provision.



21 provisions

2014 2013rO’000 RO’000

Non-currentEmployee benefits 8,559 8,272Decommissioning costs 10,949 17,427

19,508 25,699CurrentEmployee benefits 3,354 3,530

Movement in provision for employee benefits

At 1 January 11,802 11,600Additions during the year 1,504 924Payments made (1,393) (722)

At 31 December 11,913 11,802

Movement in provision for decommissioning costs

At 1 January 17,427 43,347Additions / adjustment during the year (6,738) 1,390Unwinding of decommissioning provision (Note 33) 260 465Reversal of decommissioning provision - (27,775)

At 31 December 10,949 17,427

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.

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.

23 Advance from ministry of finance

Advance from Ministry of Finance was the amount received for capital expenditure for specified projects subsequent to 1 January 2009 and had been classified as non-current liability.

The Parent Company had been in discussions with MoF on the prospective treatment of these amounts in line with group capitalization policy, and during the year the following treatment has been adopted in the consolidated financial statements:

a) Funding in respect of assets forming part of Regulated Asset Base (RO 55.153 million) treated as Shareholder Funds; and

b) Funding in respect of assets not forming part of Regulated Asset Base (RO 64.231 million) be accounted as government grant, by treating the same as deferred income.



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 at1 january 2014

Charge/(credit)for the year

balance at31 december

2014rO’000 rO’000 rO’000

AssetsTax effect of provisions (1,800) (177) (1,977)Finance lease liability (3,104) (201) (3,305)Decommissioning assets (870) (144) (1,014)

(5,774) (522) (6,296)

liabilityAdvance payments 1,880 (189) 1,691Accelerated tax depreciation 66,411 11,614 78,025

68,291 11,425 79,716

Net deferred tax liability 62,517 10,903 73,420

The Group has recognized deferred tax assets amounting to RO 1.601 in respect of OPWP (2013: RO 1.237 in respect of OPWP and DPC) and a deferred tax liability of RO 75.021 million (2013: RO 63.754 million) for other subsidiaries.

Balance at1 January 2013

Charge / (credit)for the year

Balance at31 December 2013

RO’000 RO’000 RO’000AssetsTax effect of provisions (1,545) (255) (1,800)Accumulated tax losses (4,081) 4,081 -

Finance lease liability - (3,104) (3,104)Decommissioning assets (2,295) 1,425 (870)

(7,921) 2,147 (5,774)

liabilityAdvance payments - 1,880 1,880Accelerated tax depreciation 59,225 7,186 66,411

59,225 9,066 68,291

Net deferred tax liability 51,304 11,213 62,517



25 Short term borrowings

2014 2013rO’000 RO’000

Short term borrowings 551,000 400,000

The Group’s short-term borrowings are denominated in Rial Omani.

The credit facility bears a fixed interest rate and was due for bullet repayment on 1 July 2014. During the current year, the expiry date has been revised to 30 June 2015. The term loans are repayable as a bullet payment on 30 June 2015 (expiry date). 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 including overdrafts to finance the working capital requirements and to support its other operational requirements. Bank overdrafts are unsecured, repayable on demand and carry interest at commercial rates.

27 revenue

2014 2013rO’000 RO’000

Electricity sales 393,924 342,795Water sales 94,697 97,516Government subsidy 294,751 288,744Funding for operation of Salalah concession - 30,457Other operating revenue 15,144 8,826

798,516 768,338Adjustment as per price control methodology 7,666 (8,922)

806,182 759,416

28 Operating costs

Energy and water purchases 438,034 418,728Depreciation 90,350 79,435Plant operation and maintenance costs 17,439 22,253Material and chemical costs 8,606 8,187Employee benefit expenses 5,816 5,235Other direct costs 16,026 6,855

576,271 540,693

29 general and administrative expenses

Employee benefit expenses 57,005 50,976Service expenses 19,826 24,729Commission 12,016 10,563Depreciation 5,934 4,141Loss on retirement of property, plant and equipment 448 983Directors remuneration and sitting fees 519 500Other expenses 11,278 4,340

107,026 96,232



30 Employeebenefitexpense

2014 2013rO’000 RO’000

Wages, salaries and other benefits 61,317 50,155End of service benefits 1,504 6,056

62,821 56,211 Allocated to:Operating costs 5,816 5,235General and administrative expenses 57,005 50,976

62,821 56,211

31 Other income

Penalties and fines 1,474 1,865Reversal of provisions 212 16,811Profit on disposal of property, plant and equipment 11 58Other income 14,889 7,312

16,586 26,046

32 finance income

Interest income 2,935 3,478

33 finance costs

Finance charges on:Finance lease liabilities 6,712 7,297Long term loans 1,185 11,457Unwinding of decommissioning cost provision (Note 21) 260 465Short-term loans 7,981 4,167Overdraft facilities 592 198

16,730 23,584



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 with in the profit or loss.

2014 2013rO’000 RO’000

Current tax 6,583 3,183Deferred tax 10,903 11,213

17,486 14,396

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:

2014 2013rO’000 RO’000

Accounting profit before tax 125,676 128,431

Income tax at Oman tax rate of 12% 15,078 15,408Add/(less)taxeffectof:Tax exempt revenue (779) (8)Changes in temporary differences 671 612Current year tax losses not recognised 1,972 206Tax in respect of prior years 544 (1,822)

17,486 14,396

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 GPDC for which tax assessment has been completed up to 31 December 2007, DPC up to 31 December 2009, MZEC and MJEC up to 31 December 2010 and DGC up to 31 December 2012. 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 2014.

35 Fairvalue(loss)/gainonhedgeinstruments

The Group had 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 were recorded in the hedge reserve, with a corresponding hedge deficit / surplus balance.

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 considered 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 Nil (2013 - RO 0.017 million). The year end trade receivable balances amounted to RO 1.848 million (2013 - RO 1.829 million).

No expenses have been recognised in the year (2013 - 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:

2014 2013rO’000 RO’000

Short term employee benefits 8,206 6,844Post-employment benefits 972 781Directors’ remuneration and sitting fees 547 500

9,725 8,125

37 proposed dividend

The Board of Directors of the Parent Company at their meeting held on 10 March 2015 have proposed a dividend of RO 0.250 per share aggregating RO 500,000 on the Group’s existing share capital (2014 - RO 0.250 per share aggregating RO 501,000). This dividend is subject to the approval of the Parent Company’s shareholders in the Annual General Meeting.

38 Commitments

2014 2013rO’000 RO’000

Operating lease commitmentsNot more than 1 year 233,161 210,670More than 1 year but not more than 5 years 896,734 1,086,603 More than 5 years 1,489,442 1,420,268

2,619,337 2,717,541

Capital commitments 174,085 134,404

letters of credit 309 8,091

guarantees 125 -



39 Contingencies

Al Ghubrah Power & Desalination Company SAOC (DGC)

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 DGC and the MOG. Further, the management believes that the 6% rate of interest is significantly high. DGC is in the process of negotiation with MOG for the waiver of these interest charges.

Metal Engineering LLC has lodged a case in the Administrative Court claiming compensation amounting to RO 641,118 in respect of losses alleged to have resulted from the non-issuance of the commencement order with respect to Tender No. 330/2009. DGC has denied any liability in this case and has requested that the case be dismissed. The Court has issued an interlocutory judgment by virtue of which the case has been referred to an expert.

dhofar power Company SAOC (dpC)

Bank Muscat against Ozdil

Ozdil Energy Resources LLC (“Ozdil”) had entered into a Contract with DPC in year 2011 for the construction of a 132 KV overhead line. Consequently to the delays in project and voluntary liquidation of Ozdil, DPC had terminated the contract. Ozdil had availed credit facilities from Bank Muscat SAOG (the “Bank”) for the execution of the project and assigned the receivables in favour of the Bank.

The Bank filed a suit against Ozdil before the Muscat Primary Court under number 364/2014 for recovery of the outstanding amounts and the Company is the 4th defendant in that suit. The relief prayed by the Bank against DPC is the appointment of an expert to calculate the financial dues owned by DPC to Ozdil and a declaration / injunction that DPC would not challenge the claim of the Bank against Ozdil. Management is of the view that DPC has strong position in the case and accordingly no provision has been booked in these consolidated financial statements.

Saltic LLC FZC

The Plaintiff has filed case against DPC and other parties seeking provision of electricity connection and compensation for termination of supply agreement. DPC had terminated the supply agreement due to the withdrawn of approval from the relevant authorities. Management is of the view that DPC has strong position in the case and accordingly no provision has been booked in these consolidated financial statements.

Cases from Customers

Certain cases has been filed against DPC in respect of discrepancies in billing for electricity consumption and other matters.

The Management is of the view that DPC has strong positions in above cases and accordingly no provision has been booked in these consolidated financial statements.

40 Reorganization/restructuringofSalalahconcessionbusiness

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 Dhofar 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, concession agreement has been cancelled and the following major arrangements took place effective 1 January 2014 to facilitate the Reorganization / Restructuring:



40.Reorganization/restructuringofSalalahconcessionbusiness(continued)

1. Concession Agreement entered into between the DPC and the Government (novated to OPWP) and related Process Agreements (for IWPP and PDO interconnection) has been terminated.

2. Dhofar Generation Company SAOC (DGC) has been granted a Generation Business License by Authority for Electricity Regulation (AER) and become sole responsible for the Generation business, DGC entered into a Power Purchase Agreement (‘PPA’) with OPWP.

3. Transmission assets have been transferred to Oman Electricity Transmission Company SAOC who took over ownership and responsibility for Transmission system (132 KV) in Dhofar region.

4. DPC has been 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.

5. DPC formalized 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 have been transferred at book value.

6. Electrical Connection Agreements for connection of the different system (Generation; Transmission and Distribution) have been executed by relevant parties (DGC, OETC and DPC).

7. DPC novated certain Electrical Connection Agreements and Usufruct agreements relating to transmission system to OETC.

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. The transfer of shares in DGC was 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.

Transmission business

Effective from 1st January 2014, the transmission assets of DPC have been 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.Assetsandliabilitiesclassifiedasheldforsale

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 2014 in accordance with the requirements of IFRS 5. The following table shows assets and liability classified as held for sale as on 31 December 2014.

2014 2013 rO’000 RO’000

Service concession receivables - 32,958Plant and equipment 3,959 -Deferred tax assets - 64Finance lease receivable 54,373 -Inventories 3,610 4,872Trade and other receivables 1,500 -Cash and cash equivalents 5,768 -

Total assets 69,210 37,894Goodwill allocated 2,772 2,772Intra-group eliminations (55,500) -

Assetsclassifiedasheldforsale 16,482 40,666

Maintenance provisions - (5,147)Due to parent company / related party (32,992) (26,366)Provision for decommissioning cost (2,766) -End of service benefits payable (18) -Deferred tax liability (810) -Trade and other payables (1,352) -Provision for tax (2,394) -

Total liabilities (40,332) (31,513)Intra-group eliminations 33,020 26,366

Liabilitiesclassifiedasheldforsale (7,312) (5,147)

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.



43 discontinued operation (continued)

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.

2014 2013rO’000 RO’000

Profit/(loss)fortheyearfromdiscontinuedoperationRevenue 14,987 10,476Operating cost (9,638) (7,733)

Gross profit 5,349 2,743General and administrative cost (482) (782)Net finance charges (610) (2,936)Reversal of provision no longer required 5,147 -Unrealized gain on recognition of finance lease 22,990 -Income tax (3,268) 64

Profit/(loss)aftertaxation 29,126 (911)Less : intra-group eliminations (14,321) -

Profit/(loss)fortheyearfromdiscontinuedoperation 14,805 (911)

CashflowsfromdiscontinuedoperationNet cash flows from operating activities 1,175 3,592Net cash used in investing activities (1,496) -Net cash flows from / (used in) financing activities 6,090 (3,592)

Netcashoutflows 5,769 -

44 Comparativefigures

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 Approvaloffinancialstatements

The financial statements were approved by the Board and authorised for issue on

10 March 2015.


Documents

HIS MAJESTY SULTAN QABOOS BIN SAID - Nama · 2 H.E. Abdulmalik Al Hinai Vice Chairman 3 Mr. Abdulsalam Al Kharousi Member 4 Mrs. Manal Al Abdwani Member 5. Qualification and Election