PROSPECTUS. Voltamp Energy SAOG. Energising lives. Energising Oman.

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1 PROSPECTUS Energising lives. Energising Oman. Voltamp Energy SAOG (Under Transformation) Initial Public Offering of 25,000,000 ordinary shares Offer Price: RO per share (Comprising a nominal value of Baisas 100, premium of Baisas 440 and issue expenses Baisas 2 per share) Issue Opens: 5th May, 2008 Issue Closes: 3rd June, 2008 Lead Issue Manager & Financial Advisor Co-Financial Advisor Collecting Banks Investment Management Group Underwriters

2 PROSPECTUS Voltamp Energy SAOG (under transformation) Postal Address: P.O.Box 75, P.C: 124, Rusayl, Sultanate of Oman Tel: Fax: Initial Public Offering of 25,000,000 (twenty five million) Ordinary Shares Total Offer Size: RO million Offer price: RO per share (Comprising a nominal value of Baisas 100, premium of Baisas 440 and Issue Expenses Baisas 2 per share) Oman Arab Bank SAOC United Securities LLC Lead Issue Manager & Financial Advisor Oman Arab Bank, Investment Management Group P.O. Box 2010, Postal Code: 112, Sultanate of Oman Ph: Fax: Underwriters Co-Financial Advisor Ernst & Young PO Box: 1750, Ruwi, 112, Qurum, Muscat, Sultanate of Oman Ph: Fax: Collecting Banks Oman Arab Bank SAOC Bank Muscat SAOG Bank Dhofar SAOG OFFERING PERIOD Opening Date: May 5, 2008 Closing Date: June 3, 2008 Vision Investment Services Co. SAOC Gulf Baader Capital Markets SAOC Lead Issue Manager & Financial Advisor Co-Financial Advisor Collecting Banks Investment Management Group Underwriters The Capital Market Authority ( CMA ) assumes no responsibility for the accuracy and adequacy of the statements and information contained in this Prospectus nor shall it have any liability for any damage or loss resulting from the reliance upon or use of any part of the same by any person. This Prospectus has been prepared in accordance with the requirements as prescribed by the CMA. This is an unofficial English translation of the original Prospectus prepared in Arabic and approved by the CMA in accordance with the Administrative Decision no. F/19/2008 dated 27/4/

3 Important Notice to Investors The aim of this Prospectus is to present material information that may assist investors to make an appropriate decision as to whether or not to invest in the securities offered. This Prospectus includes all material information and data and does not contain any misleading information or omit any material information that would have a positive or negative impact on the decision of whether or not to invest in the offered securities. The issuer entity represented by the Founders/Selling Shareholders are jointly and severally responsible for the integrity and adequacy of the information contained in this Prospectus and confirm that, according to the best of their knowledge, due diligence has been observed in the preparation of this Prospectus and further confirm that no material information has been omitted, the omission of which would render this Prospectus misleading. All investors should examine and carefully review this Prospectus in order to decide whether or not it would be appropriate to invest in the securities offered by taking into consideration all the information contained in this Prospectus in the context. Investors should not consider this Prospectus a recommendation by the issuer entity of the offered securities to buy the offered securities. Every investor shall bear the responsibility of obtaining independent professional advice on the investment in the offered securities and conduct his/her/its own independent valuation of the information and assumption contained herein using whatsoever analysis or projections he sees fit as to whether or not to invest in the securities offered. It is to be noted that no person has been authorised to make any statements or provide information on the Company or the offered securities other than the persons whose names are indicated herein. In the event that any other person makes representations or provides any such information it should not be taken as authorised by the issuer entity or the issue manager. 2

4 ADDITIONAL POINTS TO BE NOTED This Prospectus includes relevant information that is deemed important and does not include any misleading information nor exclude any principal information, the omission of which may materially influence any investor s decision pertaining to the investment in Shares through this Prospectus. All summaries of documents or provisions of documents provided in this Prospectus should not be relied upon as being comprehensive statements in respect of such documents and are only to be seen as being a brief summary of such documents. All equity investments carry market risks to varying degrees. The value of any security can fall as well as rise depending on the market conditions. FORWARD-LOOKING STATEMENTS This Prospectus contains forward-looking statements, including statements about the Company s beliefs and expectations. These future statements are based on the Company s current plans, estimates and projections as well as its expectations of external conditions and events. They have implementable plans in place and thus have realistic expectations of achieving these. Forward-looking statements involve inherent risks and uncertainties and speak only as at the date they are made. The Company cautions investors that a number of important factors could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements. These factors include, but are not limited to, the following: level of demand for the Company s products and services; actions of the Company s competitors; regulatory, legal and fiscal developments; success of the Company s investments and capital expenditure programs; performance of the Omani economy; and other factors described under "Risk Factors and Mitigants" as given in chapter 16 of this Prospectus. The Company will follow the rules and regulations of the Capital Market Authority, after it is listed in the Muscat Securities, and will communicate to its share holders periodically the progress of the new projects as mentioned in this prospectus including any changes in their plans if any. The Company will update the shareholders either directly from the Company or through the website of the Muscat Securities Market. 3

5 TABLE OF CONTENTS Page No IMPORTANT NOTICE TO INVESTORS... 2 CHAPTER 1 Definitions... 5 CHAPTER 2 General Information on the Issue and Issuer... 6 CHAPTER 3 Share Split and its Effect CHAPTER 4 Issue Expenses CHAPTER 5 Underwriting Arrangements CHAPTER 6 Purpose of the Issue and Utilisation of the Proceeds CHAPTER 7 Objectives of the Company and Approvals CHAPTER 8 Shareholding Details CHAPTER 9 Market and Economic Overview CHAPTER 10 Description of the Company and Business Overview and Activities CHAPTER 11 Summarised Historical Consolidated Financial Statements 50 (For Financial Years ) CHAPTER 12 Summarised Prospective Consolidated Financial Statements 73 (For Financial Years ) CHAPTER 13 Dividends Policy CHAPTER 14 Valuation and Price Justification CHAPTER 15 Related Party Transactions CHAPTER 16 Risk Factors and Mitigants CHAPTER 17 Corporate Governance CHAPTER 18 Rights and Liabilities of Shareholders CHAPTER 19 Conditions and Procedures of the Subscription of the Shares 115 CHAPTER 20 Undertakings

6 CHAPTER 1 DEFINITIONS The Board : means the board of directors of the Company elected in accordance with the Articles of Association of the Company. Business Day : means any day on which commercial banks are open for business in the Sultanate of Oman. CCL : means the Commercial Companies Law of the Sultanate of Oman issued by Royal Decree 4/74 and the amendments thereto. Company : means Voltamp Energy S.A.O.G (under transformation). LLC : means Limited Liability Company SAOC : means Closed Omani Joint Stock Company SAOG : means General Omani Joint Stock Company Employees : employees means those employees of the Company who have joined the Company on or before 29 th February 2008 and continue to be in the employment of the Company at the Closing Date. 5

7 CHAPTER 2 GENERAL INFORMATION ON THE ISSUE AND THE ISSUER Name of the Issuer: Commercial Registration No: Principal Place of Business Voltamp Energy SAOG (under transformation) dated 03/08/1987 issued by the Ministry of Commerce & Industry Postal Address : P.O.Box 75, P.C 124, Rusayl, Sultanate of Oman Tel: Fax: Company s Duration: Financial Year: Type of Shares and Voting Rights: Ordinary Shares: Authorised Share Capital of the Company: Existing Ordinary Shares Before the IPO: Offered Shares: Unlimited Commences on the first day of January and ends on the thirty first day of December of each year All the Equity Shares issued by the Issuer and the entire equity capital of the company consist of only Ordinary shares and each single share carrying the right to one vote at the Constitutive General Meeting of the Company and any General Meeting of the Company including any Extraordinary General Meeting. Equity Shares issued by the Issuer with a nominal value of one hundred Baisas (RO 0.100) and each share carrying the right to one vote at the Constitutive General Meeting of the Company and any General Meeting of the Company including any Extraordinary General Meeting. The Authorised share capital of the Company shall be RO. 10,000,000 (Rial Omani Ten Million), divided into 100,000,000 (One Hundred Million) Ordinary Shares. RO 3,500,000 (Rial Omani Three Million Five Hundred Thousand) divided into 35,000,000 (35 Million) ordinary shares. Offer of 25,000,000 (Twenty Five Million) shares that consists of 1. Offer of 10 Million shares to the public selling by the promoters 2. Issue of 15 Million New Ordinary Shares (after the completion of IPO) for public subscription by the Company 3. The Company will allot 5% (1,250,000) of the offered shares for the Company employees and Managers as per the details given in this Prospectus 6

8 The Issued and Paid up Caital after IPO: Par Value for the share: Restrictions on the shares: RO 5,000,000 (Rial Omani Five Million) dividend in to 50 Million shares 100 Baisa for each share Restrictions imposed on the Promoters: In accordance with Article 77 of the CCL, the Promoters of the Company shall not withdraw from the Company or dispose of their Shares prior to publication of two Balance Sheets pertaining to two consecutive financial years, effective from the date of listing of the Shares on the Muscat Securities Market. An exception to this shall be the cases of assignment of the Shares amongst the Shareholders themselves and cases of inheritance. The period during which the Promoters are not permitted to withdraw or dispose off their Shares may be extended for a further one year by a decision of the Minister of Commerce & Industry, at the request of the Capital Market Authority, without prejudice to the right held by the Promoters to make second grade pledge on those Shares. If any defect has taken place in the procedures pertaining to incorporation of the Company, the party concerned may within a period of five years from the incorporation of the Company, serve notice to it for remedying such a defect as per article 71 of the CCL. However, if the Company fails to take the initiative within one month of such notice for necessary remedial measures, the person concerned may have recourse to the competent court to pass a decision for dissolution of the Company. The Promoters, members of the Board of Directors and the first Auditors shall be held liable severally and jointly for the damages arising from the dissolution of the Company and which are attributable to their illegal acts or their negligence or omission in the incorporation of the Company. Restrictions imposed on the Employees and Managers The Employees and Managers have no right to sell or transfer shares acquired pursuant to the IPO before six months. Thereafter, the Employees and the Managers may sell or transfer such shares without any restriction. 7

9 Promoters/Selling Shareholders: The current partners/shareholders of the Company prior to the IPO who are offering a portion of their Shares through an Offer for Sale under this Prospectus to the extent of a maximum of 10,000,000 (Ten Million) Ordinary Shares out of their combined holding of 35,000,000 (Thirty Five Million) Ordinary Shares. Details of the number of Shares being offered by the Selling Shareholders are set out in the Chapter 7 of this Prospectus. Shares held by the Promoters after the IPO: 25,000,000 (Twenty Five Million) Ordinary Shares i.e. 50% of the capital after the completion of IPO. Details of the individual holdings are set out in the Chapter 8 of this Prospectus. Subscription Price of the Shares: Ratio of Offered Shares (25 Million Shares) to post IPO issued and paid up Share Capital (50 Million Shares) : Baisas 542 (Five Hundred and Forty Two) per Share consisting of Baisas 100 (One Hundred) nominal value, Baisas 440 (Four Hundred and Forty) share premium and Baisas 2 towards Issue Expenses. 50% of the Issued and Paid Up Share Capital of the Company. Main Purpose for which the proceeds of the Subscription would be utilised: 1) Proceeds from the Issue of New Ordinary Shares Issue proceeds under this category aggregating to RO 8,100,000 (Rial Omani Eight Million, One Hundred Thousand) will accrue to the Company, and will be utilised by the Company for financing the ongoing capital expenditure, for meeting its long term working capital requirements and investment in future strategic projects. 2) Proceeds from the Offer for Sale of Existing Ordinary Shares Issue proceeds under this category aggregating to RO 5,400,000 (Rial Omani Five Million, Four Hundred Thousand) will accrue to the Selling Shareholders only and not to the Company. 3) Issue Expenses Collected The amount of RO 50,000 (Rial Omani Fifty Thousand) being collected towards part of the Issue Expenses from the total issue will accrue to the Company. 8

10 Persons Qualified to Subscribe for the Shares Offered: Permissible Level of Non-Omani Shareholding after Listing: Commencement Date of the Subscription: Subscription shall be open to Omanis, Non-Omanis, Individuals, Non-Indviduals, Corporate Bodies/ Institutions/Investment Funds/Pension Funds. Once the Shares are listed for trading on Muscat Securities Market, it will be permissible for non Omanis to own up to 70% of the Share Capital of the Company in accordance with the Law and the Memorandum & Articles of Association. May 5, 2008 Closing Date of the Subscription: June 3, 2008 Listing: First Day of Trading: Minimum Limit for the Subscription under One Application: The Shares will be listed for trading on the Muscat Securities Market The first day the Shares are traded on the Muscat Securities Market Individuals including Employees & Board of Managers: 1,000 (One Thousand) Shares and in multiples of 100 thereafter Non-Individuals: (Corporate Bodies/Institutions/ Investment Funds) 10,100 (Ten Thousand One Hundred) Shares and in multiples of 100 thereafter Maximum Limit for the Subscription under One Application: Individuals & Non-Individuals: (Corporate Bodies/ Institutions/Investment Funds) up to or equal to 10% of the total issue size which works out up to or equal to 2,500,000 (Two Million Five Hundred Thousands) Shares; Employees: maximum eligible value of shares will be up to 19 (nineteen) times his/her basic salary as on 29 th February 2008; Managers: up to 50,000 (Fifty Thousand) Shares per Manager. Total of five managers. Overall Offering Split and Allotment Procedures: In case of over-subscription, the Offering of 25,000,000 (Twenty Five Million) Ordinary Shares shall be split among the eligible investor groups, in the following portions: 9

11 Overall Offering Split and Allotment Procedures: (Contd.) Category I Individuals 17,500,000 (Seventeen Million Five Hundred Thousand) shares, being 70% of the Offered Shares for Retail applicants applying for a maximum of 10,000 (Ten Thousand) shares. Distribution of shares shall be on pro-rata basis. Individual Investors shall comprise of only natural persons. Category II Non Individual Investors 6,250,000 (Six Million Two Hundred Fifty Thousand) shares, being 25% of the Offered Shares for both natural and juristic persons including Individual applicants applying for more than 10,000 shares and for Corporate bodies/ Institutions / Investment Funds. Distribution of shares will be on pro-rata basis. Category III Employees and Managers Employees: 1,000,000 (One Million) shares, being 4% of the Offered Shares for employees upto a maximum value of 19 times of their basic salary on firm allotment basis. Managers: 250,000 (Two Hundred Fifty Thousand) shares, being 1% of the Offered Shares for Managers upto maximum of 50,000 shares for each Manager of five Managers on firm allotment basis. Any undersubcription in Category I shall be added to shares allocated for Category II and vice versa. Any undersubcription in Category III shall be added to Category I. Allotment for Foreign Nationals will be limited to a maximum of 70% of the total shares offered. Foreign Corporate Body/ Institution/ Investment Fund is defined as one which is not incorporated in the Sultanate of Oman or in any of the GCC countries. The final allocation on the above basis will be decided by the Lead Issue Manager and the Company in consultation with the CMA. Underwriting Arrangements: The issue of 25 million shares aggregating issue amount of RO million is underwritten by Gulf Baader Capital Markets S.A.O.C, Vision Investment Services Co. S.A.O.C, Oman Arab Bank S.A.O.C and United Securities L.L.C. The details are given in Chapter 5. 10

12 Basis for Undersubscribed Shares: In case of a shortfall in subscription, the shortfall shall be subscribed by the Underwriters. Prohibitions with regard to the Applications for Subscription: The subscribers to the shares issued as mentioned hereunder shall not be permitted to participate in the subscription: 1) Sole Proprietorship Establishments. Whereas, the owner of a Sole Proprietorship Establishment would be required to subscribe in his name only if he so desires. 2) Trust Accounts. Whereas, the Brokerage Companies would be required to address the Customers for the subscription in their personal names. 3) Multiple Applications for the subscription. Whereas, it is prohibited for any person to submit more than one application for subscription in his personal name. 4) Applications made under joint names, including the applications made in the name of legal heirs. Whereas, they or their legal attorney would be required to apply in their personal names. All such applications shall be rejected without contacting the applicant. Lead Issue Manager & Financial Advisor Co-Financial Advisor: Reporting Accountants: Oman Arab Bank SAOC Investment Management Group P.O. Box 2010, PC 112, Ruwi Sultanate of Oman corporatefinance@oabinvest.com Ernst &Young P.O. Box: 1750, Ruwi, PC 112, Ernst & Young Building, Qurum, Muscat, Sultanate of Oman KPMG PO Box 641 P.C. 112, Ruwi Sultanate of Oman 11

13 Statutory Auditors: Statutory Auditors: (2006 & 2007) KPMG P.O. Box 641 PC 112, Ruwi Sultanate of Oman For the year: 2005 Mazars Chartered Accountants & Co. LLC Muscat Gold Market Building P.O. Box 1092, PC 131 Sultanate of Oman Internal Auditors: Legal Advisor for the IPO: Legal Advisors for the Company Collecting Banks: Transfer and Registration Agent: BDO Jawad Habib P.O. Box 1176 Ruwi, PC 112 Sultanate of Oman Al Busaidy, Mansoor Jamal & Co., Muscat International Centre, Mezzanine Floor, Central Business District, Bait Al Falaj Street, P.O. Box 686, Ruwi, PC 112, Sultanate of Oman, Hamdan Al Durey Barristers and Legal Consultants Central Business District, Building No 978, Flat No 53, P.O. Box 1633 PC 112, Ph: Fax: , Sultanate of Oman Bank Muscat SAOG Bank Dhofar SAOG Oman Arab Bank SAOC Muscat Depository & Securities Registration Co. SAOC P.O. Box 952, PC 112, Ruwi, Sultanate of Oman Tel: , Fax:

14 CHAPTER 3 Introduction SHARE SPLIT AND ITS EFFECT The Company has split the nominal value of the shares from RO to Baisas 100 resulting in splitting each share into ten shares. This chapter elaborates on the effect of this decision. It is recommended that each subscriber read and understand it. Definition of Share Split Share Split refers to the intention of a Company to split its existing shares to number of shares by reducing the nominal value of the share and increasing the number of shares without any effect on the total value of the Company s paid up Capital, or the total market capitalisation of the shares owned in the Company, even if the total of the number of shares will increase as a result of this division. Objectives of Share Split The Company is of the view that Share Split will achieve the following goals: Reduce the nominal value of the share making it affordable for a larger number of retail investors. Increase liquidity by multiplying the number of shares available for trading; and Facilitate a larger participation by the small/individual shareholders Impact of Share Split The decision of Share Split will not have any impact on the shareholding or the extent of each shareholders liabilities in the Company. The only direct impact is an increase in the number of shares. The Company considers that the benefits gained from the Share Split such as increase in liquidity and the shares that will be available for trading for all investors and participants in the Muscat Securities Market, will be in the best interest of the public. The following table presents the impact of Share Split for the Company according to the financial statement for the year ended 31 December, 2007: Before Split After Split Nominal value per Share RO 1 Baisas 100 Number of Issued Capital Shares 3,500,000 35,000,000 Paid up Capital RO 3,500,000 RO 3,500,000 Shareholders Equity RO 4,362,271 RO 4,362,271 Book Value per Share RO Baisas 124 Net Annual Profit RO 2,422,215 RO 2,422,215 Earning per Share Baisas 692 Baisas 69 13

15 Effect of Share Split The decision to split shares does not have any impact on the total market capitalisation of the shares. In fact, Share Split is dividing the nominal value of the share in the same percentage. The following is an explanation: Assume, - number of shares before split: 100 shares - share price in MSM on the date of the general meeting: RO Therefore after dividing one share into 10 shares, the result will be as follows: Number of shares Share price Total nominal share value Share Split effects on dividend: Before Split 100 shares RO RO 542 After Split 1000 shares RO RO 542 The decision of Share Split will not affect the Company s policy regarding dividend distribution or dividend ratio. The dividend distribution system in the Sultanate of Oman is based upon accounting dividend as a percentage of nominal paid up value per share. Thus the nominal paid up value per share will be Baisas 100 after split and not RO 1.000; e.g. if the Company declared previously (before Share Split) dividend distribution of Baisas 350 per share (35% of nominal value before split), and presumably the Company decided to maintain this policy, this dividend will be after Share Split Baisas 35 per share (35% of the nominal value after split). For instance, if the shareholder holds 100 shares before Share Split, dividend distribution will be as follows: Before Share Split After Share Split Number of holding shares 100 shares 1000 shares Nominal value of the share RO Baisas 100 Dividend per share Baisas 350 Baisas 35 Dividend ratio to nominal value 35% 35% Total distributed dividend RO 35 RO 35 14

16 CHAPTER 4 ISSUE EXPENSES The costs of the Issue are estimated at RO 276,600 (Rial Omani Two Hundred and Seventy Six Thousand and Six Hundred Only), which equates to approximately 2.049% of the total proceeds of the Offering. The breakdown of the estimated expenses is contained in the table below: Estimated Cost and Expenses Amount (RO) Issue Managers & Financial Advisors 80,000 Collecting Banks 70,000 Underwriting fees 40,500 CMA & MDSRC Fees 10,100 Legal Advisor 20,000 Reporting Accountant 6,000 Marketing, Advertising and Publicity 40,000 Mailing and Postage 2,500 Other expenses and contingencies 7,500 Total Issue Expenditure 276,600 Issue Expenses 2 Baisas per share (50,000) Difference between Estimated Expenses & the collection of Issue Expenses 226,600 The costs of the Issue will be partially met out of additional subscription amount of Baisas 2 per share paid by the applicants towards Share Issue Expenses. The actual costs of the Issue less Issue Expenses collected, estimated at RO 226,600 will be charged to the Shareholders Equity of the Company. 15

17 CHAPTER 5 UNDERWRITING ARRANGEMENTS In case of a shortfall in the subscription of the Offered Shares, the shortfall shall be underwritten as under: Underwriter Gulf Baader Capital Markets SAOC Vision Investment Services Co. SAOC Number of Ordinary Shares underwritten Percentage shares underwritten Amount Underwritten@540 Baisas per share (RO) 9,109, % 4,918,860 6,747, % 3,643,596 Oman Arab Bank SAOC 5,000, % 2,700,000 United Securities LLC 4,143, % 2,237,544 Total 25,000, % 13,500,000 The Company has entered into underwriting arrangements with the above entities. The underwriting fee is estimated at RO 40,500 (Rial Omani Forty Thousand Five Hundred) In the event of any devolvement, the underwriters will subscribe to the extent of the shortfall as stated above, at a price of 540 Baisas per share and the Company shall not claim the issue expense of 2 Baisas per share, from the underwriters on such devolved shares. 16

18 CHAPTER 6 PURPOSE OF THE ISSUE AND UTILISATION OF THE PROCEEDS Objectives of the Issue: Raising capital for the purposes which are already mentioned in the Prospectus. Listing the Company s Shares on the MSM. Partial divestment of Shares by the Selling Shareholders. Utilisation of the Proceeds of the Issue: The Company will receive the proceeds of public subscription, amounting to RO 8,100,000 (Rial Omani Eight Million, One Hundred Thousand) relating to the issue of the new Ordinary Shares, which will be utilised for setting-up a 132 kv transformers manufacturing project in Oman in technical collaboration of Tatung Co. of Taiwan, to fund the ongoing capital expenditure for the distribution transformers project in Qatar, meeting long-term working capital requirement and to invest in the future strategic projects. The target timetable of the Company for the use of the proceeds of public subscription as follows: Type of Expenses Amount Date Capital Expenditure RO 6 Million 2008/09 Working Capital RO 2.1 Million 2008 Total RO 8.1 Million The Company will receive the proceeds of public subscription, amounting to RO 5,400,000 (Rial Omani Five Million, Four Hundred Thousand) relating to the offer for sale of the Existing Ordinary Shares, which will be distributed to the Selling Shareholders through this offering, which is at an offer price of RO (Baisas Five Hundred and Forty) per share excluding Issue Expenses. The baisas 2 per share collected towards Issue Expenses will cover a portion of the expenses incurred by the Company in relation to the IPO. 17

19 CHAPTER 7 Overview OBJECTIVES OF THE COMPANY AND APPROVALS The Company was incorporated in the Sultanate of Oman on 3 August 1987 as a Limited Liability Company ( LLC ) and is currently undergoing the due process of transformation from an LLC into a SAOG organised under the laws of the Sultanate of Oman. The Company is the flagship Company of the well established and well diversified Al Anwar Holdings SAOG in the Sultanate of Oman. The Company has manufacturing facilities in Rusayl Industrial Area, Sultanate of Oman for Transformers and LV Switchgear Panels. The Company is on the fast growth path in the field of Electrical Products enjoying international acceptance and a preferred source status for its products and services in the Utilities & Oil & Gas sector throughout the MENA region. The Company holds the following material permits and licenses: 1 Ministry of Commerce and Industry: Commercial Registration Commercial Registration Number: Date of Registration: 3/8/1987 Expiry date: 2/8/ Ministry of Commerce and Industry: Industrial License Registration Number: 2547 Expiry Date: 02/08/ Oman Chamber of Commerce & Industry: Membership Registration Number: 1614 Expiry Date: 31/12/ Ministry of Environment & Climate Affairs : License License Number: 3674 Expiry Date: 04/06/08 ISO 9001:2000 Certification The Company holds an ISO 9001:2000 Certification for marketing, design, manufacturing, testing and commissioning of all its products. Company Objectives The objects for which the Company is established are: (i) (ii) to carry on all or any of the business of purchasing, importing, generating, transmitting, transforming, converting, distributing, supplying, selling, exporting and dealing in electricity and all other forms of energy and products or services associated therewith; to locate, establish, construct, equip, operate, use, manage and maintain transforming, switching, conversion transmission and distribution facilities, cables, overhead lines, substations, switching stations, tunnels, cable bridges, link boxes, telecommunications stations, masts, aerials and dishes, fibre optic circuits, satellites and satellite microwave connections, heat pumps, plant and equipment used for combined heat and power schemes; 18

20 (iii) to acquire (whether by usufruct, lease, concession, grant, or otherwise) establish, develop, exploit, operate and maintain land, any estates in land, which may seem to the Company capable or possibly capable of affording or facilitating the purchase, transmission, transformation, conversion, supply distribution, generation, development, production or manufacture of electricity or any other forms of energy in accordance with the laws of Oman; (iv) to carry on all or any of the business of designers, developers, manufacturers, constructors, installers, operators, users, inspectors, testers, maintainers, repairers, servicers, suppliers, distributors, importers and exporters of and dealers in cables, wires, meters, pylons, tracks, rails, pipelines, and any other plant, apparatus, equipment, systems and things used in connection with the transmission, transformation, conversion, supply, distribution, control and generation of electricity or any other forms of energy; (v) to provide or procure the provision of such facilities and services as may be necessary or desirable to forecast electricity/energy demand and to satisfy such demand; vi) to appoint and enter into agreements or arrangements with any person to represent the Company or any other organisation or person at meetings of local, national and international organisations and bodies concerned with activities connected or associated with any of the businesses or activities of the Company and to provide services of all kinds to such organisations and bodies; vii) to carry on all or any of the business of and provide services associated with, engineers (including without limitation, electrical, mechanical, heating, ventilation, civil, chemical, telecommunications and gas engineers), mechanics, technicians, draftsmen, designers, surveyors, architects and builders for achievement of the Company s abovementioned objects in compliance with the prevailing laws; Resolutions Passed The Shareholders of the Company unanimously passed the following resolutions in their meetings held on 10 th December 2007 and 24 th February Approved the proposal for conversion of the Company from an LLC to an SAOG as per the provisions of the CCL. 2. Approved the new Authorised Share Capital of the Company which would be RO 10,000,000 (Rial Omani Ten Million) and the Issued Share Capital of RO 5,000,000 (Rial Omani Five Million) divided into 50,000,000 (Rial Omani Fifty Million) Ordinary Shares of 100 Baisas each (RO 0.100). 3. Approved the transformation as a part of the process of selling/issuing the Offered Shares to the public through an IPO which would comprise of two (2) components:- i) Offer for sale of 10,000,000 (ten million) Ordinary Shares of face value Baisas. 100 each at an issue price of Baisas 542 per share to the public by the existing Shareholders (Promoters). ii) Fresh issue of 15,000,000 (fifteen million) new Ordinary Shares by the Company, to the public of face value Baisas 100 each at an issue price of Baisas. 542 per share. 19

21 iii) Out of the total 25,000,000 (twenty five million) Shares which would be offered to the public, up to 1,250,000 (one million two hundred fifty thousand) Shares would be reserved for the Managers and the Employees of the Company. 4. Approved that post IPO, the current shareholders (Promoters) would hold 50% of the issued share capital of the Company and the public including the Employees and the Managers would hold the remaining 50%. 5. Approved the consent of the current shareholders in the LLC Company to offer a portion of their Ordinary Shares to the public as part of the IPO. The number of shares to be offered by each of the Promoters is as shown hereunder. Promoter s Name No. of shares before transformation Face value Bz 100 No. of Shares to be Offered For Sale Face value Bz 100 Al Anwar Holdings SAOG 20,097,000 5,742,000 SABCO LLC 7,451,500 2,129,000 Mr. Mushtaq bin Abdullah bin Jaffer 3,160, ,000 H.H. Seyyid Shihab bin Tariq Al Said 2,597, ,000 Mr. Mohammed bin Abdul Rasool Al Jamali 1,130, ,000 Dr. Ali bin Jaffar bin Mohammed 563, ,000 Total 35,000,000 10,000, Approved to form a constitutive committee consisting of the following members: i) Mr. Qais bin Mohamed Al Yousef, Chairman ii) iii) Mr. Abdulredha bin Mustafa Sultan, Director Mr. Saibal Sen, Director iv) Mr. Sebastian Manavalan, Director v) Mr. Krishna Kumar Gupta, Director The above committee is authorised to do all such acts and deeds required for the IPO such that the IPO shall be in compliance with statutory and regulatory requirements and approvals. 7. Approved the draft Memorandum & Articles of Association of the Company as per the requirements of the CCL pertaining to SAOG Companies for the submission to the competent authorities and their approval. 8. Approved the appointment of Oman Arab Bank SAOC as Lead Issue Manager and authorised them or their representatives to complete the due diligence and all legal, financial and accounting matters pertaining to conversion and transformation of the Company from an LLC to an SAOG Company and the preparation and finalisation of the IPO documents as required by the concerned official bodies and also to appoint a Co-Financial Advisor. 9. Approved the appointment of KPMG as the reporting Accountants and Al Busaidy, Mansoor Jamal & Co. as Legal Advisors for the IPO. 20

22 CHAPTER 8 SHAREHOLDING DETAILS Promoters and Selling Shareholders of the Company (before transformation): Name of Shareholder Number of shares* Percentage Al Anwar Holdings SAOG 20,097, % SABCO LLC 7,451, % Mr. Mushtaq bin Abdullah bin Jaffer 3,160, % H.H. Seyyid Shihab bin Tariq Al Said 2,597, % Mr. Mohammed bin Abdul Rasool Al Jamali 1,130, % Dr. Ali bin Jaffar bin Mohammed 563, % Total 35,000, % * after split Pursuant to a unanimous resolution of the Shareholders, the Share Capital of the Company was increased from RO 1,500,000 (Rial Omani One Million Five Hundred Thousand) to RO 3,500,000 (Rial Omani Three Million Five Hundred Thousand) through an issue of Bonus Shares of RO 2,000,000 (Rial Omani Two Million) to the Promoters/Selling Shareholders. The Shares were issued by way of Bonus Shares. Post Offer Equity Structure: The Public shareholding and the minimum Promoters /Selling Shareholders shareholding after the IPO is envisaged as under: Sl. No Promoter/Selling Shareholder and Public Nationality No. of Ordinary Shares Nominal Value by RO Ratio to Capital 1. Al Anwar Holdings SAOG 2. SABCO LLC Mr. Mushtaq bin Abdullah bin Jaffer H.H. Seyyid Shihab bin Tariq Al Said Mr. Mohammed bin Abdul Rasool Al Jamali Omani Company Omani Company 14,355,000 1,435, % 5,322, , % Omani 2,257, , % Omani 1,855, , % Omani 807,500 80, % 6. Dr. Ali bin Jaffar bin Mohammed Omani 402,500 40, % 7. Public (including Employees and Managers) Omani / Non Omani 25,000,000 2,500, % Total 50,000,000 5,000, % 21

23 Promoters Voting Rights Pursuant to the IPO and conversion into a Public Joint Stock Omani Company, the issued and paid-up share capital of the Company will be RO 5,000,000 (Rial Omani Five Million) divided into 50,000,000 (fifty million) Ordinary Shares with a nominal value of One Hundred Baizas each (RO 0.100). Each single share will carry the right to one vote at the Constitutive General Meeting of the Company and any General Meeting of the Company including any Extraordinary General Meeting. The Promoters and Selling Shareholders will hold 25,000,000 (twenty five million) Ordinary Shares which will have one vote per share, the same as other Ordinary Shares issued to the public. The Promoters and the Selling Shareholders will effectively have 50% of the voting rights. Restrictions imposed on the Promoters: In accordance with Article 77 of the CCL, the Promoters of the Company shall not withdraw from the Company or dispose of their Shares prior to publication of two Balance Sheets pertaining to two consecutive financial years, effective from the date of listing of the Shares on the Muscat Securities Market. An exception to this shall be the cases of assignment of the Shares amongst the Shareholders themselves and cases of inheritance. The period during which the Promoters are not permitted to withdraw or dispose of their Shares may be extended for a further one year by a decision of the Minister of Commerce & Industry, at the request of the Capital Market Authority, without prejudice to the right held by the Promoters to make second grade pledge on those Shares. If any defect has taken place in the procedures pertaining to incorporation of the Company, the party concerned may within a period of five years from the incorporation of the Company, serve notice to it for remedying such a defect as per article 71 of the CCL. However, if the Company fails to take the initiative within one month of such notice for necessary remedial measures, the person concerned may have recourse to the competent court to pass a decision for dissolution of the Company. The Promoters, members of the Board of Directors and the first Auditors shall be held liable severally and jointly for the damages arising from the dissolution of the Company and which are attributable to their illegal acts or their negligence or omission in the incorporation of the Company. Brief profile of the Main Promoters: AL ANWAR HOLDINGS SAOG Al Anwar Holdings SAOG is establised in 1994 by a group of prominent institutions and business houses. Al Anwar was instrumental in pioneering industrial development in Oman in various industrial segments including Transformers and Switchgears. Al Anwar has promoted, nurtured, created and shared wealth with the investing populace of this country in the past. In its current business model with a well diversified and geographically dispersed investments in industrial and non-industrial sectors such as financial services and insurance. Al Anwar has invested in several companies of repute. Some of Al Anwar s current and past investments include: National Aluminum Products Co SAOG, Al Anwar Ceramic Tiles SAOG, Al Maha Ceramic Tiles SAOC, Falcon Insurance SAOC and Taageer Finance Co SAOG. 22

24 Board of Directors: SL. No Name of the Director Independent/Non Indepedent Position 1 Brig. Masoud Humaid Al Harthy Independent Chairman 2 Mr. Qais Mohammed Musa Al Yousef Independent Dy. Chairman 3 Mr. Shabir Musa A. Al Yousef Independent Director 4 Mr. Abdulredha Mustafa Sultan Independent Director 5 Mr. Nawwaf Ghubash Ahmed Al Merri Independent Director 6 Mr. Hamed Rashid Al Dhaheri Independent Director 7 Mr. Mohamed A. M. Al Khonji Independent Director AL ANWAR HOLDINGS SAOG SHAREHOLDERS HOLDING 1% AND MORE AS ON 31 MARCH 08 Sl. No. Name No.of shares % 1 Fincorp Investment Co.LLC 22,574, % 2 Financial Services Co. Trust-Gulf 17,995, % 3 Al Khonji Investment LLC 7,000, % 4 Mohammed & Ahmed Al Khonji Co 4,457, % 5 Mohamed Hafedh Ali Dhahab 3,005, % 6 Oman Arab Bank- Asset Mgt-Trust Gulf 1,050, % 7 Oman Construction Co. LLC 889, % 8 Others 31,577, % Total 88,550, % The Board of Al Anwar is comprised of eminent personalities from business and industry and it has a highly professional management team. Details of its current investments, financial performance and vision can be accessed through its website, As the company is listed, its financial performance can also be accessed through the MSM website. SABCO LLC / SABCO Group Established during the early Renaissance years of the 70s with a capital of RO 500,000, SABCO Group has grown into an integrated investment, commercial, industrial and service organisation to day. It is registered with the Ministry of Industry and Commerce and also the Oman Chamber of Commerce. The SABCO group has more than 100 employees today. SABCO group has made its presence in the field of services, manufacturing, real estate, contracting, distribution and oil and gas and security and defence through Direct and Associate Businesses. 23

25 SABCO Commercial Centre, Voltamp Manufacturing Company LLC (Presently Voltamp Energy SAOG (under transformation), National Mineral Water Co. SAOG and Oman Marketing and Services Company deserve special mention among the group companies of SABCO Group. Shareholders of SABCO. a. Sayyid Badr Bin Hamad Bin Homood Al Bu Said Secretary General - Ministry of Foreign Affairs (Rank of a minister) b. Sayyid Khalid Bin Hamd Bin Hamood Al Bu Said Chairman of SABCO Group and Al Ahli Bank SAOG. c. Sayyid Aymen Bin Hamad Bin Hamood Al Bu Said Vice Chairman of SABCO Group. d. Zawan Bint Hamad Suleiman Al Nabhani e. Sayyida Waffa Bint Hamad Al Nu Said. Direct Businesses Sabco LLC: A holding company involved in private and public sector project development and representation of world renowned companies. Oman Perfumery LLC / Amouage Limited The House of Amouage : Manufacturer, International distributor and retailer of luxury Amouage perfumes, home fragrances, skincare and accessories. The website is SABCO Commercial Centre: Oman s pioneering boutique shopping mall opened in SABCO Art LLC / SABCO Press LLC: A full service communication and entertainment solutions provider. Oman Expo LLC: A pioneer in Oman s events industry organising diversified exhibitions, events and conferences. The website is Al Hail Investments LLC : A property development and Asset Management Company. The website is Sabco Media SAOC : A media company which owns, manages and operates Radio, TV and other media related activities. Mushtaq Abdullah Jaffer Al Saleh v Born in 1951 v Master of International Politics, U.L.B. Brussels, Belgium v His Majesty The Sultan conferred upon him First Order of Al-Nouman Decoration in 1990 v Languages: Fluent in Arabic, English and French Official Profile: v v Joined The Ministry of Foreign Affaires in Served and promoted to several positions till appointed Ambassador Extraordinary and Plenipotentiary to Djibouti in 1977, Japan in 1980, Algeria in 1983 and China in 1987 Upon the request of GCC, The Government of Oman seconded him to serve as the very first Ambassador Extraordinary & Plenipotentiary of GCC to the European Union ( ) 24

26 v Opted for an early retirement plan in 2002 v Appointed in 1998 One of the Five Representatives, representing Oman in the newly created GCC Consultative Council for a term of three years v Re-appointed for second term in 2001 Business Profile: Participated and chaired several renowned companies listed on Muscat Securities Market ( ), mainly: v v v v v v v Chairman of Board of Directors of Oman Orix Leasing Vice Chairman of Board of Directors of Gulf Hotels Vice Chairman of Board of Directors of Commercial Bank Vice Chairman of Board of Directors of Oman Carpets Vice Chairman of Board of Directors of Hilton Salalah Member of Board of Directors of AlKhaleej Polypropylene Member of Board of Directors of Oman National Holdings 25

27 CHAPTER 9 MARKET AND ECONOMIC OVERVIEW With an established base in Oman and currently entering into Qatar, the Company is looking to diversify to cover other countries within the Gulf and the wider MENA region. An overview of the projected macroeconomic growth in some of the key markets in which the Company operates and/or expects to have a presence is shown below: GCC s Nominal GDP and the Expected Growth in the GCC and MENA Region USD Billion MIDDLE EAST 1,544 1,705 1,865 2,013 Growth 11% 10% 9% 8% Oman Growth 6% 6% 7% 7% Qatar Growth 14% 9% 8% 7% Saudi Arabia Growth 8% 7% 7% 7% NORTH AFRICA Growth 11% 7% 7% 6% Source: Global Insight, 2007 Oman Economic Overview Total Nominal GDP Oman is currently witnessing a period of significant economic growth. The country s economy has expanded by 10.64%, measured in Gross Domestic Product ( GDP ) terms, from 2005 to 2007 compared to 9.29% during the preceding 3 years. As a result, nominal GDP has increased from RO 7.9 billion in 2002 to RO 14.6.billion in This economic growth has been primarily driven by the contribution of petroleum activities which has increased by 47.8 % to the total GDP due to rising oil prices in the world markets. In RO Million 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Nominal GDP, % 20% 15% 10% 5% 0% Nominal GDP Grow th Source: Statistical Yearbook 2007, Ministry of National Economy; Figures for 2007 are preliminary 26

28 Oman Economic Activities 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1, Petroleum Activities Non Petroleum Activities Source: Statistical Yearbook October 2007, Ministry of National Economy The contribution from non-petroleum activities rose by 18% in 2006 principally on the strength of the 45% growth in manufacturing, 20% in building and construction activities and 24% in transport, storage and communication. Oman s non-oil exports have increased by 39% from RO 1.1 billion in 2005 to RO 1.6 billion in the year Economic Drivers Oman s long-term economic growth plans are embodied in the Vision 2020 ( Vision ) document which sets out the strategic goals to be achieved by the year The fundamental goals of the Vision are as follows: Ñ Ñ Ñ Ñ Ñ To develop and upgrade Omani human resources in order to cope with technological progress and attain international competitiveness. To develop a private sector capable of optimum use of human and natural resources in an efficient and ecologically sound way, in close collaboration with the government. To utilise the geo-strategic location of the Sultanate, optimise the use of its natural resources and promote economic diversification. To distribute the fruits of development among all regions and all citizens. To preserve, safeguard and develop the achievements accomplished in the past twenty- five years. From a planning perspective, the Government links developmental priorities and budgetary plans to five-year planning cycles. The current five-year plan is an important stepping-stone towards achieving the Vision through which the Government is seeking to achieve a GDP growth rate of 7.4% for the period The Vision s aim is that by 2020, Oman s economy will have limited reliance on oil revenues and would have diversified into non-oil sectors such as natural gas, downstream industries and tourism. It is projected that by 2020, the share of oil revenues in Oman s GDP would be around 9% (compared to 48% in 2006) while natural gas revenues will contribute 10% (compared to 3.6% in 2006) to the GDP. 1 Ministry of National Economy 27

29 Economic Diversification The non-oil industrial sector s contribution to GDP is expected to rise from the current level in 2006 of 14.2% to 29% in This structural shift is expected to have a significant impact on Oman s future economic development. To achieve these goals, the Government is focusing on the following economic drivers: Ñ Ñ Ñ Increasing Foreign Direct Investment: During the past few years, positive steps towards privatisation have been taken as part of the structural reform program. These steps are aimed at supporting the country s development strategy and making the Omani economy more attractive to foreign and local investors. Some key steps that have been taken include the lifting of foreign direct investment-related restrictions relating to most sectors, streamlining business regulations and adopting a one-stop investment approach. The ratification of the Free Trade Agreement ( FTA ) with the United States in 2006 is an indication of the Government s commitment to economic reform and diversification. Oman s membership in the World Trade Organisation ( WTO ) in 2000 is an effort towards the liberalisation of its markets. Industrialisation: The industrial sector is also expected to help Oman realise its Vision In 1994, the industrial sector accounted for only 4.3% of GDP, while today nearly 8.5% of GDP is accounted for by this sector. Oman is planning to raise the contribution of manufacturing to the GDP to 15% by Currently, Muscat, Sohar and Salalah are the key centres of the process of industrialisation. Sohar is undergoing a huge transformation with around USD 12 billion worth of developments. Five major projects have been already announced namely Sohar Refinery Project, Sohar Methanol Project, Oman-India Fertilizer project, Ferro-Chrome project and Sohar Fertilizer project. Continued activity in the industrial sector is anticipated with the Government s commitment to its long term target of diversifying away from the oil and gas sector. A key component of this diversification includes various proposed aluminium-related downstream projects. Tourism: Vision 2020 stresses the importance of diversifying the economic base of the country and identifies tourism as one of the important economic drivers which can help realise the Vision. In order for the Government to meet its long-term targets, a tourism growth rate of 15% to 20% per annum 3 needs to be achieved. As a step in this direction, the Government is enhancing the role of the private sector in projects and activities. The Ministry of Tourism ( MoT ), established in 2004, has already signed agreements with private developers for implementing 14 projects worth more than RO 6.6 billion. Qatar Economic Overview Nominal GDP Qatar s economy is in a high growth phase. The nominal GDP in Qatar grew significantly by 24.2% in 2006 after witnessing a strong growth of 33.8% in 2005 and 34.8% in In 2006, Qatar s GDP per capita increased by 15.5% to reach USD 57,350, and is expected to reach USD 68,467 by the year Qatar s Nominal GDP QR Million Total GDP (Million Rial Qatari) 85, , , ,909 % Change 21.5% 34.8% 33.8% 24.2% Source: Annual Report 2005, 2006, Qatar Central Bank 3 Vision Oman 2020, Ministry of National Economy 4 Qatar National Bank 28

30 Qatar s GDP as Oil and Non-Oil Activities Contribution to GDP (QR million) 140, , ,000 80,000 60,000 40,000 20, Oil & Gas sector Non-oil sector Source: Qatar Economic Review 2007, Qatar National Bank Economic Activities The oil and gas sector has grown to QR 118,707 million in 2006 from QR 92,071 million in 2005 which is equivalent to a growth rate of 29%. The non-oil sector has increased by 17.14% in 2006 to reach QR 73,202 million. In 2006, finance, insurance and real estate represented 21.5% of the total non-oil sector and manufacturing sector represented 19.3%. Building and construction sector has increased by 17.7% in 2006 and reached QR 10,291 million comparing to QR 8,744 million in The table below provides the break down of the non-oil sector in Qatar for 2005 and 2006: GDP for Non-Oil Sector QR Million 2005 Share 2006 Share Growth Agriculture & Fishing % % 7.9% Manufacturing 13, % 14, % 8.1% Electricity & Water 2, % 2, % 9.7% Building & Construction 8, % 10, % 17.7% Trade, Rest, & Hotels 6, % 7, % 10.9% Transport & Communication 5, % 5, % 9.7% Finance, Ins. & Real Estate 14, % 15, % 6.6% Other Services 11, % 17, % 49.1% Total 62, % 73, % 17.1% Source: Qatar Economic Review 2007, Qatar National Bank Economic Drivers The main drivers that contribute to Qatar s strong economic performance are highlighted below: Ñ Qatar s oil production averaged 800,000 bpd 5 during the first half of Qatar s oil production increased by 31,000 bpd during the year 2006, to average 810,000 bpd, compared to an average of 779,000 bpd produced during Barrel per day 29

31 Ñ Ñ Ñ Ñ Ñ Qatar s exports have increased by 32.2% in 2006, to reach QR billion. The oil and gas exports reached QR billion of which 57% is accounted for by oil exports and the balance 43% by gas exports. Qatar s oil price averaged USD 61.1 during the first half of In 2006, oil price has increased by 21.7% to reach USD 62.9 compared to USD 51.7 in The population in Qatar was 522,023 as per the 1997 census, and has grown in 2004 by 43% to reach 744,029 according to the 2004 census. The total assets of Qatari banks have increased by 46.7% in 2006 to reach QR billion, and their net profits increased by 28.9% to reach QR 5,523 million in the same year. Many development projects in sectors such as infrastructure, health, education and tourism have further contributed to the economic performance. Mega projects are undergoing development: - Infrastructure: the New Doha International Airport project is estimated to cost USD 2.5 billion and will be completed in three phases (2009, 2012 and 2015). Several roads and expressways projects are under implementation. Amongst the major road projects is the Qatar-Bahrain Bridge with an estimated value of USD 2 billion. - Gas and LNG 6 : Al-Khaleej Gulf Project, the Dolphin project and Kuwait-Qatar gas supply project are expected to enhance Qatar s gas production capabilities and increase gas sales to the domestic consumers and gas export market. RasGas LNG 3,4 and 5, RasGas LNG 6 and 7 Qatargas II and III projects are aimed at enhancing the production and export of LNG. - Leisure and tourism: the Pearl of the Gulf project, estimated at USD 2.5 billion, is a manmade island which is expected to include over 7,500 dwelling units, 3 luxury hotels and entertainment centres, restaurants and parks. The project master plan focuses on the creation of new hotels and tourist attractions, and it is designed to develop a tourism base of 1.4 million by The total additional spending is expected at USD 15 billion. - Healthcare: Hamad Medical City project is estimated to cost around USD 0.4 billion and will include a 300-bed unit, a dialysis unit, medical staff accommodation and laboratories. Hamad Southern Area Hospital estimated to cost USD 57 million will include 200-bed facility. The USD 26 million Cardiology Hospital which comprises of a 110-bed facility is being developed at Rumailah. Industry Information Power Industry in the GCC The power and utility sector in all GCC countries is witnessing significant growth. The current economic development, increasing industrial capacity and population growth is outstripping demand for electricity in the region. According to the World Energy Council, an additional 100 gigawatts of power generation capacity would be needed by 2020, which is projected to cost an estimated USD 150 billion. 6 Liquefied Natural Gas 30

32 The current GCC power capacity is illustrated in the following graph: Present GCC Power Capacity Kuw ait Qatar Saudi Arabia Bahrain Oman UAE - 5,000 10,000 15,000 20,000 25,000 30,000 35,000 MW Source: The Power of Watt, ABQ Zawya Ltd, 2007 The future GCC power capacity is illustrated in the following graph: Future GCC Power Capacity Kuw ait Qatar Saudi Arabia Bahrain Oman UAE - 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 MW Installed Capacity Additional Capacity Source: The Power of Watt, ABQ Zawya Ltd, 2007 Market Demand for Transformers The high demand for power has resulted in a significant increase in demand for power transformers. During 2006, the market demand for power transformers in the MENA region was 32,595 MVA (Megavolt Ampere). Oman represented 8% of the total MENA demand; KSA has the biggest share of 19%, Qatar 6%, UAE 15%, Kuwait 6% and Bahrain 2%. At present, more than 90% of the transformer demand in the GCC is met by imports. This represents a significant business potential for existing players to replace imported products. 31

33 The power transformer market demand for 2006 is illustrated in the following graph: Transformer Market Size, MVA T urke y 2,4 00 E g ypt 1,525 S yria 6 00 Jorda n 64 0 Iraq 3,41 5 K uw ait 1,965 K S A 6,3 75 Ira n 4,86 0 B a hrain 7 55 Q a ta r 1,8 05 U A E 4,9 15 O m a n 2,610 S u dan 5 20 Y em e n 2 10 Source: Feasibility Study for Power Transformers, A. F. Ferguson & Co., 2007 The power transformer market for the MENA region is projected to reach 75,080 MVA (Megavolt Ampere) in 2012 as per the following graph: Power Transformer Demand Forecast 2012 MVA 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 - Saudi Arabia UAE Iraq Oman Qatar Kuwait Egypt Sudan Bahrain Yemen Other countries Source: Feasibility Study for Power Transformers, A. F. Ferguson & Co., 2007 It is this significant growth in the demand for power transformer that the Company endeavours to capture with its new projects in Oman and Qatar. 32

34 Customer Sectors In 2006, 73% of the MENA demand for power transformers came from entities in the utility sector, 16% of demand was contributed by the oil and gas sector and 11% by heavy industry. The graph below illustrates the demand for the three main sectors in the GCC countries: Demand for Power Transformers by Sector 120% 100% Market demand 80% 60% 40% 20% 0% Oman KSA Qatar UAE Kuw ait Bahrain Yemen Utility Oil and Gas Heavy Industry Source: Feasibility Study for Power Transformers, A. F. Ferguson & Co.,

35 CHAPTER 10 Overview: DESCRIPTION OF THE COMPANY AND BUSINESS OVERVIEW AND ACTIVITIES Established in 1987, the Voltamp Energy is the flagship company of the Al Anwar Group. It manufactures low voltage switchgear panels through a franchisee agreement with Schneider- France. Current Ownership Structure Al Anwar Holdings SAOG SABCO LLC Other Shareholders 57.42% 21.29% 21.29% 0.01% Voltamp Energy LLC 99.99% 51% Voltamp Transformers Oman LLC Voltamp Manufacturing Company Qatar (under construction) Voltamp Energy is to be converted from LLC to SAOG as part of the IPO process. The proposed ownership structure, incorporating the additional project, is expected to be as follows: Planned Ownership Structure* Al Anwar Holdings SAOG SABCO LLC Other Shareholders (pre-ipo) New Shareholders (post-ipo) 28.71% 10.65% 10.65% 50.00% 0.01% Voltamp Energy SAOG (under transformation) 99.99% 99.99% 51% Voltamp Transformers Oman LLC 0.01% Voltamp Power Oman LLC (proposed) Voltamp Manufacturing Company Qatar (under construction) The 0.01% shareholding held by Al Anwar Holdings SAOG in VTO is under trust of VE. A similar structure is anticipated for the shareholding structure of VPO whereby 100 shares of VPO will be held by VTO under trust of VE. 34

36 Brief Profile of Subsidiaries of the Company Voltamp Transformers Oman LLC ( VTO ) Established in 1991 in collaboration with Babcock Transformers UK, VTO is a certified ISO 9001 company that specialises in a range of power, distribution and speciality transformers. It designs and manufactures special multi-tap transformers for the oil & gas sector. VTO has a state-of-the-art manufacturing facility located in the Rusayl Industrial Area, Sultanate of Oman where it currently manufacturers transformers with capacities ranging from 50 kva to 15 MVA, 33 kv class. In addition to manufacturing activities, VTO also offers services relating to the erection, commissioning, servicing and testing of transformers and associated equipment through its Engineering and Services Division. VTO is currently looking to expand its customer base in the wider MENA region, with a primary focus on the GCC markets, including Kingdom of Saudi Arabia, Kuwait, United Arab Emirates, and Yemen. The Projected Financials are given in the following table VOLTAMP TRANSFORMERS OMAN LLC Projected Income statement for the year ended 31 December Income RO RO RO RO RO RO RO Revenue 10,700,000 13,036,000 16,426,000 17,607,825 18,938,216 20,447,628 22,173,133 Cost of sales -7,334,450-8,930,391-11,340,572-12,168,350-13,076,518-14,099,604-15,272,261 Gross profit 3,365,550 4,105,609 5,085,428 5,439,475 5,861,698 6,348,024 6,900,872 Percentage of gross profit 31.45% 31.49% 30.96% 30.89% 30.95% 31.05% 31.12% Other income 141,904 90, , , , , ,154 Expenses Selling, administrative and general 3,507,454 4,195,609 5,187,428 5,546,875 5,974,903 6,467,469 7,027, , ,978-1,193,688-1,303,960-1,387,531-1,505,886-1,616,551 Profit from operations 2,696,775 3,227,631 3,993,740 4,242,915 4,587,372 4,961,583 5,410,475 Finance charges -175, , , , , , ,000 Profit for the year before taxation 2,521,775 3,052,631 3,818,740 4,067,915 4,412,372 4,786,583 5,235,475 Taxation -299, , , , , , ,657 Net profit for the year 2,222, ,689, ,364, ,583, ,886, ,215, ,610, Earnings per share for the year Voltamp Manufacturing Company Qatar VMCQ was established in 2007 in Qatar with an initial capital of QR 16.2 million. VE owns 51% of VMCQ and the remainder is owned by two Qatari companies; Al-Salam International Investment Company LLC and Al Arkan Al Arabah, own the remaining 49%. 35

37 The manufacturing of transformers at VMCQ is expected to start in July 2008 and will focus on manufacturing transformers as well as associated switchgear. It is expected that VMCQ will initially cater to the needs of the Qatar and Bahrain markets, which are currently experiencing significant growth. VMCQ will manufacture oil filled transformers up to 10 MVA / 33 kv class, dry type transformers up to 1.6 MVA / 11kV class and LV switchgear. The specific products will include: Ñ Ñ Ñ Ñ Normal transformers for utilities applications 3 winding and 4 winding transformers for special applications Transformers for industrial applications Transformers for VSD applications Ñ Transformers with tappings on both the primary and secondary windings (tappings up to 50% earthing transformers) The main reasons for establishing VMCQ are: Ñ Ñ The economic growth in Qatar and the new mega projects are still under development, which offer product demand potential There is no local transformer manufacturer in Qatar, at present, which would allow VMCQ to benefit from a first mover advantage as a local manufacturer Ñ Ñ VTO has existing customers in Qatar, such as Qatar General Electricity and Water Corporation ( KAHRAMAA ), through which it has developed a strong brand name and product presence in the local market. It should be possible to leverage the existing customers and reputation to further penetrate the market while providing improved post-sales support through the local operation Qatar s strategic position will enable Voltamp to access customers in Bahrain, Kuwait and KSA About the Consultant: The detailed feasibility study was undertaken by Deloitte consultants relating to VMCQ s operation and a brief about the consultants is given below: About Deloitte Deloitte refers to one or more of Deloitte Touche Tohmatsu, a Swiss Verein, its member firms, and their respective subsidiaries and affiliates.delotte Touche Tohmatsu is an organisation of member firms around the world devoted to excellence in providing professional services and advice, focused on client service through a global strategy executed locally in nearly 150 countries. With access to the deep intellectual Capital of 120,000 people worldwide, Deloitte delivers services in four professional areas-audit, tax, consulting and financial advisory services- and serves more than one-half of the world s largest companies, as well as large national enterprises, public institutions, locally important clients, and successful, fast-growing global growth companies. Services are not provided by the Deloitte Touche Tohmatsu Verein,and, for regulatory and other reasons, certain member firms do not provide services in all four professional areas. 36

38 Key Sectors of Demand for the VMCQ Project: The feasibility study conducted by Deloitte highlights the following key sectors from which demand is expected to be generated: Ñ Ñ Ñ Ñ Ñ Ñ Ñ Infrastructure Tourism Healthcare Education Utilities Heavy Industries Oil & Gas The Projected Financials for the VMCQ as per the feasibility study conducted by Deloitte Consultants is given below: VMCQ Projected Income Statements ( ) Income RO RO RO RO RO RO RO Revenue 2,865, ,321, ,355, ,508, ,793, ,226, ,825, Cost of sales -2,486,364-7,575,496-8,379,508-9,294,590-10,326,819-11,141,725-12,384,526 Gross profit 378,878 1,745,962 1,976,096 2,213,552 2,466,325 3,084,700 3,441,244 Percentage of gross profit 13.22% 18.73% 19.08% 19.23% 19.28% 21.68% 21.74% Other income 378,878 1,745,962 1,976,096 2,213,552 2,466,325 3,084,700 3,441,244 Expenses Selling, administrative and general -569, ,649-1,014,125-1,092,424-1,181,059-1,288,698-1,407,817 Profit from operations -190, , ,971 1,121,128 1,285,266 1,796,002 2,033,427 Finance charges -59,028-47,223-41,320-35,417-29,514-23,611-17,708 Profit for the year before taxation -249, , ,651 1,085,711 1,255,752 1,772,391 2,015,719 Taxation Net profit for the year -249, , , ,085, ,255, ,772, ,015, Earnings per share for the year Capacity utilisation Growth % 11.09% 11.13% 11.17% 11.20% 11.24% 37

39 Voltamp Power Oman LLC (Under formation) As part of its growth strategy, the Company is proposing to set up a new project (VPO), which will be located in the Sohar Industrial Estate. The project aims to enhance the Company s product range by offering power transformers up to 150 MVA/132 kv class This extension of the product portfolio will allow the Company to further enhance its brand name in the local and regional power sector. The new project will cater to local demand as well as the wider GCC and MENA region. The power transformer market is growing strongly and this project provides the Company with an opportunity to benefit from this growth while, at the same time, providing a diversification to its current product portfolio. The location in Sohar Industrial Estate provides easy access to the industrial hub being developed around Sohar Port, Sohar Refinery and the aluminium smelter. In addition, Sohar Port will facilitate the efficient import raw materials and export transformers. VPO s location is Sohar, near to the UAE, will also enable to the company to easily access the large and growing UAE transformer market. An independent project feasibility study has been completed by M/S.A.Ferguson & Co, reputed consultants from India, whose brief is given below and the Company s management expects to progress to a more detailed planning phase in the coming months. At this stage, the initial cost of the project is estimated at RO 9 million and is expected to commence production by January The Company has entered into a technology collaboration agreement with Tatung Co. of Taiwan for production of power transformers up to 150 MVA/132 kv class. Tatung is a diversified international company involved in the design and manufacture of a wide variety of industrial products. Tatung is a leader in the power and energy business and its products include power transformers up to 345 kv (and being expanded up to 500kV), oil-filled and dry distribution transformers, switchgear, copper rods, bare copper wires, telecommunication cables, and optical fibre cables. Tatung was founded in 1918 and is headquartered in Taipei, Taiwan. Profile of A Ferguson & Co. AFF is one of the leading firms of Chartered Accountants and Management Consultants in India. They have a long history of providing high quality and specialised services in most areas of management consultancy. They provide a range of specialist management consultancy services in various functions and sectors, drawing on resources from a large domestic and international network. With consulting experience of over 30 years in India, they are a pioneer and leader in several consultancy products and services. They pride themselves in not being just another consultancy organisation. Their business philosophy is to add value to their client s business by providing a solution most appropriate to the business context, with specific emphasis on the implementability of their recommendations. They believe in building long term relationships with their clients, and it is no surprise that their client retention rate is among the highest in the business. Further information about them can 38

40 be found at The Projected Financials in the future for the Project as per the study conducted by the consultants A Ferguson & Co. are given below: Projected Income Statement for Voltamp Power Oman LLC for the period (Year ending 31st December) Income RO RO RO RO RO RO RO Revenue 0 3,010,000 9,693,000 16,169,000 21,613,000 25,341,000 Cost of sales 0-3,044, ,460, ,776, ,401, ,028, Gross profit 0-34,335 2,232,616 4,392,175 6,211,285 7,312,533 Percentage of gross profit 0.00% -1.14% 23.03% 27.16% 28.74% 28.86% Other income Expenses Selling, administrative and general 0-34,335 2,232,616 4,392,175 6,211,285 7,312, ,00-1,348,776-1,720,852-2,151,532-2,697,757-3,182,441 Profit from operations -358,000-1,383, ,764 2,240,643 3,513,528 4,130,092 Finance charges 0-461, , , , ,000 Profit for the year befoe taxation -358,000-1,844,111 60,764 1,725,643 3,016,528 3,667,092 Taxation Net Profit for the year -358,000-1,844,111 60,764 1,725,643 3,016,528 3,667,092 Earnings per share for the year Products and Services The following section outlines the switchgear and transformer products that the Company and VTO respectively, manufacture and market in the region. Transformers are split into Low Power, Medium Power and Power categories as described below: Transformer Categorisation Category Low power transformers ( LPT ) Medium power transformers ( MPT ) Power Transformers ( PT ) Power Range 3 MVA to 15 MVA, 33 kv class 15 MVA to 50 MVA, any voltage class Above 50 MVA, any voltage class Voltamp Energy SAOG (under transformation) The Company is engaged in the design and manufacture of low (up to 1 kv) voltage control and distribution systems which primarily involves engineering, assembly and testing of LV switchgear products. The main products include: Ñ Ñ Ñ Ñ Intelligent and conventional motor control centres Power control centres Main and sub-main distribution boards Auto mains failure and auto transfer switch panels with PLC controls 7 Voltamp Energy LLC,

41 Ñ Ñ Ñ Ñ Auto synchronising generator control panels Capacitor banks and harmonic filter panels Custom built control panels Feeder pillars and metering panels The Company has established a strong market in Oman with major clients such as Petroleum Development Oman ( PDO ), the Ministry of Housing, Electricity and Water and Oman Refinery Company. Voltamp Transformers Oman LLC VTO is engaged in the manufacturing and supply of oil filled transformers in the following categories: Ñ Ñ Ñ Ñ Distribution transformers from 50 kva to 3,000 kva/ 33 kv class Low Power transformers up to 15 MVA/ 33 kv class Earthing transformers Special transformers with multi-tap construction The following graph illustrates the different types of product and their respective share based on sales in 2007: Sales by Products Type Low Power 10% Standard 23% Non-Standard 67% The graph highlights that almost 67% of VTO s sales is in the non standard segment. This is a key strength as it allows VTO to operate in a niche market which offers higher margins as well as allowing it to differentiate itself from competition. In addition to its manufacturing capability, VTO provides engineering and maintenance services as detailed below: Ñ Maintenance contracts which include examination of transformers, cleaning of brushings, annual oil sampling, transformer site testing and complete transformer overhauls Ñ On-site assessment services for measurement of insulation and winding resistance, magnetic circuit test, winding ratio test, insulating oil test and all sorts of cable terminations checking Ñ Ñ Field supervision and testing of transformers up to 132 kv On-site repair which consists of electrical checks, oil quality analysis, cleaning, checking the function of all protection devices, overhauling the tap changer and testing the transformer 40

42 Ñ Ñ Ñ Ñ Factory services for ratings up to 20 MVA / 33 kv class Delivery of spare parts and components Technical support, which includes failure analysis and oil analysis Turnkey sub-station projects including management capabilities relating to every phase of the project from supply, erection and installation through to final commissioning of substations up to 33kV voltage class VTO has an agreement of exclusivity with a laboratory in Sharjah to provide technical services for oil analysis, insulation and other testing services. Customer Segments Voltamp Energy SAOG (under transformation) The Company has a 14% 7 market share in the Omani market for low voltage switchgear based on 2007 sales. The Company caters to the utility, oil and gas, infrastructure and industry sectors as indicated in the following graph: The Company s Market Segments 2007 Industry 16% Infrastructure 6% Oil & Gas 53% Utility 25% Source: Voltamp Energy LLC Voltamp Transformers Oman LLC VTO s customer base covers three key industries and is spread across Oman and the wider MENA region: Ñ Ñ Ñ Utilities: VTO serves major clients in the power and energy sector such as the Ministry of Defence Oman, Majan Electricity Co., Mazoon Electricity Co., Rural Area Electricity Co. Ministry of Defence Muscat, KAHRAMAA, Sharjah Electricity & Water Authority, Dubai Electricity & Water Authority and PEC-Aden. Oil & Gas: some of VTO s large clients include PDO, Occidental of Oman, Kuwait Oil Company, Joint Operations, Kuwait National Petroleum Company ( KNPC ). Heavy Industry: VTO provides products to industrial companies such as Sohar Aluminium, Sohar Refinery, Oman Gas Co. and Oman LNG. In addition, VTO is also focusing on the tourism sector. In this sector, VTO provides a range of products to major hotels as well as large, integrated tourism projects in Oman. Customers in this segment include the Al Bustan Palace, Shangri-La s Barr Al Jissah Resort and The Wave. 41

43 VTO Market Segments 2007 Industry 24% Infrastructure 7% Oil & Gas 25% Utility 44% Source: Voltamp Transformers Oman LLC Voltamp Manufacturing Company Qatar The detailed feasibility study undertaken relating to VMCQ s operation highlights the key sectors from which demand is expected to be generated: Ñ Ñ Ñ Ñ Ñ Ñ Ñ Infrastructure Tourism Healthcare Education Utilities Heavy Industries Oil & Gas As indicated earlier, Qatar s economy is experiencing significant growth and the sectors listed above are key beneficiaries of the growth. Major Contracts The tables below highlight some of the recent contract wins for the Company and VTO: List of contracts for the Company: Name of the Contract Value of the Contract (RO) Expected Completion Date Oman Refinery 420,000 (3-4) qtr 2008 Al Opera 152,000 (3-4) qtr 2008 Galfar (Sur&Buraimi Projects) 90,000 (2-3) qtr 2008 Oman Gas 92,000 (2) qtr 2008 Muscat Airport 100,000 (3) qtr 2008 PDO 205,000 (2-3) qtr 2008 Al Anwar Ceramics 40,000 (2) qtr 2008 Switches & Boards 348,000 (2-4) qtr

44 List of contracts for VTO Name of the Contract Value of the Contract (RO) Expected Completion Date Bechtel-Sohar Aluminium 116,000 (3) qtr 2008 Bahwan Engineering 1,563,000 (3) qtr 2008 Al Tayar Co. Qatar 3,000,000 (4) qtr 2008 L&T Oman 323,000 (2) qtr 2008 Mazoon Electric 254,000 (3) qtr 2008 Majan Electric Company 199,000 (4) qtr 2008 Trade Links 238,000 (2) qtr 2008 STS Company 187,000 (3) qtr 2008 Al Falahi Company 186,000 (2) qtr 2008 Rural Electric Company 156,000 (2) qtr 2008 Omran Company 108,000 (2) qtr 2008 During the year 2005, VTO was awarded a prestigious two -year call off contract from Qatar General Electricity & Water Corporation (KAHRAMAA) to supply distribution transformers worth QR 77,409,885. The contract was won by VTO in competition with the international manufacturers who also bided for this contract. Organisation and Management The diagram below describes the high-level organisational structure for the combined entity of the Company and VTO. Organisational Chart Voltamp Energy 43