Muscat: Al Batinah Power Co and Al Suwadi Power Company have announced the opening of their initial public offerings (IPOs) for subscription on Sunday.
The two companies are the owners of the two largest and most efficient power plants currently in operation in Oman. The founding shareholders are selling these shares to the public to comply with the obligations in the project founders' agreement signed with the Electricity Holding Company (EHC) in 2010. Both IPOs represent an offer of 35 per cent of the share capital of each company, said a company release.
The IPO subscriptions, which will close on June 9, 2014, are open for subscription to Omani and non-Omani investors including individual and institutional investors.
Al Batinah Power is offering 236,210,601 existing shares at a price of 128 baisas per share (comprising nominal value of 100 baisas and a premium of 26 baisas besides an issue expense of 2 baisas) totaling OMR30,234,957. Al Suwadi Power is offering 250,042,219 existing shares at a price of 130 baisas per share (comprising nominal value of 100 baisas, share premium of 28 baisas and an issue expense of 2 baisas) totaling OMR32,505,488.
Minimum of 1,000 shares
In each IPO, 65 per cent of the shares made available for subscription have been reserved for investors applying for a minimum of 1,000 shares and a maximum of 600,000 shares, and the balance 35 per cent of the shares have been reserved for investors applying for 600,100 shares or more, up to the maximum application amount (equal to 10 per cent of each offer, respectively).
The Capital Market Authority is expected to approve share allotment on June 19, and the listing of shares on the Muscat Securities Market is expected on July 23.
At the IPO price, both companies offer an average projected dividend yield of 8.1 per cent for the first five years.
This compares with an average dividend yield of 6.5 per cent for other power companies listed on Muscat Securities Market, and 3.9 per cent dividend yield for the MSM 30 Index.
The first dividends will be payable in June, 2014 and November, 2014, and twice yearly thereafter. At the offer price, both companies offer an IRR of 14 per cent to the investors. This translates into a substantial discount of 40 per cent to 60 per cent over their discounted cash flow based valuations.
Bank Muscat is the financial adviser and issue manager for both the Al Batinah Power and the Al Suwadi Power IPOs.
Al Batinah Power owns and operates a power plant in Sohar (known as Sohar-2), a gas-fired combined cycle power generation plant with a contracted power capacity of 744 MW, located approximately 200km northwest of Muscat in Oman within the Sohar Industrial Port area. Al Suwadi Power owns and operates a power plant in Barka (known as Barka-3), a gas-fired combined cycle power generation plant with a contracted power capacity of 744 MW, located approximately 80km northwest of Muscat in Oman.
Both plants were commissioned on time, have been operating since the beginning of April, 2013 and have achieved a 99.7 per cent reliability (for Al Suwadi Power) and 99.9 per cent reliability (for Al Batinah Power) in 2013. They are expected to play a major role in meeting Oman's growing power demand for many years to come, thereby making a valuable contribution to the Sultanate's people, its communities and its industries. The plants constitute a total investment of $1.7 billion, and a total installed capacity of 1,488 MW, representing about 27 per cent of the total current contracted power capacity of Oman's Main Interconnected System (MIS).
Experienced power players
The companies also benefit from strong and committed founding shareholders, including experienced power players on a global scale, in Oman and in the region, as well as large and reputable Omani investors. GDF SUEZ, the main promoter, is an established international developer, owner and operator of power and water projects. The other founders are Suhail Bahwan Group, Sojitz, Shikoku Electric and Public Authority for Social Insurance (PASI).
"Both Al Batinah Power and Al Suwadi Power benefit from stable and predictable cash flows. This is on account of their revenues being contracted on an availability basis with OPWP, which is owned by the Government of Oman, pursuant to a 15 year Power Purchase Agreement (PPA) that expires in March 2028," Jurgen De Vyt, chief executive officer of Al Batinah Power, and Przemek Lupa, chief executive officer of Al Suwadi Power, stated jointly.
"Each company also benefits from a gas supply agreement with the Government of Oman over the same period. Owing to the well-tested and proven back-to-back contractual framework, neither company is exposed to changes in gas prices and to fluctuations in demand for power until 2028, thereby offering returns that are unaffected by market downturns."