ANNUAL REPORT 2014 POWERING THE NATION

Transcription

1 ANNUAL REPORT 2014 POWERING THE NATION

2 HIS MAJESTY SULTAN QABOOS BIN SAID

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5 CONTENTS About Electricity Holding Company 3 Vision, Mission and Values 5 Board Members 6 Leadership Team 7 Chairman s Report 8-9 Corporate Governance Report Human Resources 16 Health & Safety Improvement Programme 17 Asset Management 18 Communication 19 Customer Service 20 Sustainability Operational & Financial Review 25 Group Business Performance Review Subsidiaries Performance Highlights Consolidated Financial Statement 45-83

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7 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 The company commenced commercial operations on 16 September 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

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9 VISION, MISSION AND VALUES VISION We strive to develop and empower our human resources to deliver safe and sustainable electricity solutions to our customers. MISSION To provide electricity solutions by 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 EHC ANNUAL REPORT

10 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 6 EHC ANNUAL REPORT 2014

11 LEADERSHIP TEAM Omar Al Wahaibi Chief Executive Officer Saleh Al Rashdi VP Generation Vishwanath S Chief Financial Officer Ibrahim Al Suleimany Executive Manager, Group Human Resource Ghada Al Yousef Executive Manager, Group Communication and Sustainability Ali Al Abri Executive Manager, Group Planning and Risk Management Khalid Al Salmani Acting Executive Manager, IT Suhaila Al Farsi Company Secretary EHC ANNUAL REPORT

12 CHAIRMAN S REPORT 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 Operational Performance Oman 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 The staff strength of Nama Group as on 31 December 2014 is 2828 in comparison to 2781 employees in Financial Performance The gross operating revenue of the Group increased by 6% from RO 759 million in 2013 to RO 806 million in The net profit after tax increased by 9% from RO million in 2013 to RO 123 million in 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 per MWh in Implementing Group Strategies The Group continued the implementation of group strategies in 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 This brandmark reflects the unified vision of the group. Privatisation of the Electricity Sector and Restructuring of the Water Sector Based 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. 8 EHC ANNUAL REPORT 2014

13 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 Development The 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 (3 rd phase) Ibri Power Plant Qurrayat Water Desalination Plant Barka Water Desalination Plant (3 rd phase) Sohar Water Desalination Plant (2 nd 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. Acknowledgement On behalf of the Board members, I would like to express our sincere gratitude to His Majesty Sultan Qaboos bin Said for his support to the electricity and related water sector and for his 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 Mahrouqi Chairman of the Board of Directors EHC ANNUAL REPORT

14 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: BOD Shareholder Company Secretary Functional Reporting Internal Audit Committee Ministry of Finance Board of Directors Group Nomination, Remuneration and Human Resource Committee Administrative Reporting Chief Executive Officer Executives Deputy Chief Executive Officer Vice President - Generation Executive Human Resources Executive Communication Executive Information Technology Chief Financial Officer Executive Strategic Planning and Risk Management 10 EHC ANNUAL REPORT 2014

15 3. Role of the Board of Directors and the Board Committees Board of Directors The Board represents the shareholder (MOF) and is accountable to them for protecting their interest in accordance with the Sector Law through effective governance of the business. The 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 Audit Committee The Audit Committee is expected to ensure that adequate processes are in place to ensure compliance with regulatory requirements, enhance the effectiveness of internal and external auditors through interacting with them and insulating them from the undue influence of the management, and provide subject matter expertise to the Board on matters of governance and risk. 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 nonaudit services, taking into account relevant ethical guidance regarding the provision of non-audit services by the external audit firm. Group Nomination, Remuneration and Human Resources Committee The GNRHC is an EHC Board level committee which looks at matters related to the nomination of candidates to the Subsidiary Boards and Management of both EHC and its Subsidiaries, HR policies and other significant HR matters that need the attention of the members of the BoD. Their objectives are: To 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. EHC ANNUAL REPORT

16 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. Qualification and Election of the Board Members 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 12 EHC ANNUAL REPORT 2014

17 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 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 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 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 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 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. EHC ANNUAL REPORT

18 6. Details of attendance for the Board and Committees meetings during 2014 Member Names Mohammed Al Mahrouqi Abdulmalik Al Hinai Abdulsalam Al Kharousi Manal Abdwani BOD Meetings Dates Chairman Vice Chairman Member Member 1 st BOD Meeting 26-Feb-14 Attended Attended Attended Attended 2 nd BOD Meeting 30-Mar-14 Attended Attended Attended Attended 3 rd BOD Meeting 06-Jul-14 Attended Attended Attended Attended 4 th BOD Meeting 22-Oct-14 Attended Attended Attended Attended 5 th BOD Meeting 16-Dec-14 Attended Apologies Apologies Attended Total Number of BOD Attended 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 1 st IAC Meeting 23-Feb-14 Attended Apologies Attended 2 nd IAC Meeting 12-Jun-14 Attended Attended Apologies 3 rd IAC Meeting 17-Sep-14 Attended Apologies Attended 4 th IAC Meeting 23-Dec-14 Attended Attended Attended Total Number of IAC Attended Sitting Fees (OMR) 1, 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 Sitting Fees (OMR) 1, EHC ANNUAL REPORT 2014

19 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. OPWP 99.99% WJPC99.99% UCCD 67.00% 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: DPC 98.79% RAECO 99.99% 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 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. GPDC 99.99% MEDC 99.99% OETC 99.99% MJEC 99.99% MZEC 99.99% Percentage of EHC Shareholding EHC ANNUAL REPORT

20 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 Nama has formulated a 3- year road map ( ) 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 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 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 EHC ANNUAL REPORT 2014

21 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 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. EHC ANNUAL REPORT

22 Asset Management The Group Asset Management improvement strategy implementation demonstrated excellent progress in 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 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 As part of the assessment, companies have identified gaps and improvement opportunities, which have been built into their implementation plans for 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 EHC ANNUAL REPORT 2014

23 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 shiftbased employees, which generated 59% participation. Re-branding: As a key strategic project, the first phase of the Rebranding 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 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. EHC ANNUAL REPORT

24 Customer Service 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 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. 20 EHC ANNUAL REPORT 2014

25 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 planning 2. Knowing the goals and the beneficiaries 3. Training and qualification 4. The right choice of projects 5. Knowing the time schedule Challenges 1. Society s acceptance of new projects 2. Cooperation of the various related authorities 3. Depending on voluntary and external human resources 4. 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. EHC ANNUAL REPORT

26 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 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. 22 EHC ANNUAL REPORT 2014

27 Financial Report No Pillar Economy Economy Social Social Official Organisation / Project Enjaz Oman/ Sharikati Project Different authorities/ ICV tender (ICV analysis) Taawon/volunteers introduction programme Taawon/Wiyakum Outcome volunteers participants - A report about ICV - 4 qualified people to write future reports 560 employees (20% of Nama employees underwent the programme ) 95 teams (more than 3800 members) Budget 110,000 50,000 15,680 34, Social Environment Environment Environment/ Social Community* Community* Community* GPDC/My safe home Nama Group/Electricity rationalisation campaign ESO/opening a branch of ESO in Salalah and the forestation campaign of Dhofar governorate Facilities center for skills development/ Development and sustainability training Different organisations/specifying an amount of money for Meetings, events, conferences and awards Different organisations/communication plan to achieve sustainability policy Different organisations/ Sustainability Report Tender (A comprehensive report to evaluate the performance of the Group s sustainability) - Training 400 people - Preparing 6 people to be certified trainers in First Aid - A unified national campaign - A qualified team from the Group to organise future campaigns Planting more than 1000 trees - 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 - 4 annual meetings of the committee - Participating in a single conference at least Sustainability articles and ads - One sustainability report - 4 qualified people to write future reports *Community: Financial allocations from all of sustainability pillars (environment, society, economy) 22,500 of 2015 budget 50,000 45,904 84,096 35,000 40,000 35,000 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). EHC ANNUAL REPORT

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29 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 % Change 2014 & 2013 Earning Before Interest and Tax RO 000 s 158, , , Net Profit After Tax RO 000 s 122, ,124 84, Operating Cash Flow RO 000 s 278, , , Net Govt Subsidy (Including Salalah Business) RO 000 s 302, , ,422 (2.53) Capital Expenditure (Including Assets under Finance lease) RO 000 s 497, , , Total Assets RO 000 s 2,753,268 2,366,217 2,176, Total Equity RO 000 s 1,365,697 1,188,040 1,065, Key Ratios % Change 2014 & 2013 Earnings per share RO Operating cash flow per share RO Net Assets per share RO Key Operations % Change Electricity MIS (GWh) Units Generated GWh 2,818 3,162 3,354 (10.88) Units Purchased GWh 22,315 19,718 18, Units Transmitted GWh 24,404 21,898 21, Units Sold GWh 22,058 19,851 18, Distribution Loss % (0.26) Max Transmission system demand GWh EHC ANNUAL REPORT

30 Key Operations % Change Electricity Rural (GWh) Units Generated GWh 1,636 1,296 1, Units Purchased GWh 2,775 1,954 1, Units Sold GWh 3,062 2,770 2, Distribution Loss % Water Units Generated M CuM Units Purchased M CuM Units Sold M CuM Customers MIS Number 816, , , Rural System Number 115, ,138 94, Total Number 932, , , Staff Count Number ,781 2, 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 REVENUE EHC ANNUAL REPORT 2014

31 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 TOTAL EXPENSES Profit After Tax PROFIT AFTER TAX 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 EHC ANNUAL REPORT

32 Operating Cash Flow Operating Cash flow (Increased by RO 70 million) 300 OPERATING CASH FLOW % 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 cashflow was re-invested in the Distribution and Transmission Companies Capital Expenditure programme, Servicing of loans etc EHC ANNUAL REPORT 2014

33 Group Business Performance Review Customers Customer per company MEDC 284,625 MZEC 345,308 MJEC 186, CUSTOMERS RAECO 31,472 DPC 84,127 Total customer base has been increased by 8% to 932, 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. RAECO DPC MEDC MJEC MZEC CUSTOMERS PER COMPANY EHC ANNUAL REPORT

34 Electricity Supplied - GWh Electricity Supplied per Company MEDC 8651 MZEC 6706 MJEC 6702 RAECO ELECTRICITY SUPPLIED - GWh DPC RAECO DPC MEDC MJEC MZEC ELECTRICITY SUPPLIED PER COMPANY (GWh) 30 EHC ANNUAL REPORT 2014

35 Power Generation and Procurement 4454 Power Generated (GWh) Power Procurement (GWh) Power production in the group decreased by 0.1%, in line with the planned lower generations. POWER GENERATION AND PROCUREMENT Power Procurement (GWh) Power Generated (GWh) 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) Water Desalination (MCuM) - Group Water Procurement (MCuM) - External WATER DESALINATION (MCuM) Water Procurement (MCuM) - External Water Desalination (MCuM) - Group While the Water desalinated by the Group increased by only 0.6%; Water procurement grew by over 23% EHC ANNUAL REPORT

36 Distribution Loss (%) Distribution Loss: MIS 9.9 Distribution Loss: Rural Areas and DPC DISTRIBUTION LOSS (%) Distribution Loss: MIS Distribution Loss: Rural Areas and DPC EHC ANNUAL REPORT 2014

37 Government Subsidy Government Subsidy MEDC 71.4 MZEC 97.5 MJEC 66.5 RAECO 42.3 Salalah Business 27.8 OPWP K Factor 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 Salalah Business GOVERNMENT SUBSIDY 2011 OPWP K Factor MEDC RAECO MJEC MZEC SUBSIDY PER COMPANY (RO Millions) SUBSIDY PER UNIT EHC ANNUAL REPORT

38 Subsidiaries Performance Highlights Wadi Al Jizzi Power Company SAOC Contribution to Group Profit 0.4% 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 WJPC CONTRIBUTION TO GROUP Revenue Profit After Tax EHC ANNUAL REPORT 2014

39 Al Gubrah Power and Desalination Company SAOC Contribution to Group Profit 2.8% Activities: Electricity Generation and related water desalination. Annual Highlights Over all plant availability is 85% which is 0.9% lesser than GWh power delivered to the grid, lower by 4% compared to 2013 Water dispatched 50.3 million m 3, higher by 0.7% compared to 2013 Total Man Hours with out Lost Time Accident is 4.93 million GPDC CONTRIBUTION TO GROUP Revenue Profit After Tax GPDC - 2.8% % CONTRIBUTION TO GROUP EBT EHC ANNUAL REPORT

40 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 Total length of 132 KV transmission circuits increased from 3,150 circuit KM in 2013 to 3,783 circuit-km in 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 OETC CONTRIBUTION TO GROUP Revenue Profit After Tax OETC % % CONTRIBUTION TO GROUP EBT 36 EHC ANNUAL REPORT 2014

41 Muscat Electricity Distribution Company Saoc 17% Contribution to Group EBT MEDC CONTRIBUTION TO GROUP Revenue Profit After Tax 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 System loss performance of 8.73% achieved as compared to 9.17% in 2013 MEDC - 17% Subsidy per MWh is 8.3 in 2014 as compared to 7.6 in 2013 % CONTRIBUTION TO GROUP EBT EHC ANNUAL REPORT

42 Mazoon Electricity Company SAOC 11.8% Contribution to Group EBT 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 MZEC CONTRIBUTION TO GROUP Revenue Profit After Tax MZEC % % CONTRIBUTION TO GROUP EBT 38 EHC ANNUAL REPORT 2014

43 Majan Electricity Company SAOC 7.2% Contribution to Group EBT 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 MJEC CONTRIBUTION TO GROUP Revenue Profit After Tax MJEC - 7.2% % CONTRIBUTION TO GROUP EBT EHC ANNUAL REPORT

44 Rural Areas Electricity Company SAOC 2.6% Contribution to Group EBT Activities: Electricity generation, water desalination and electricity distribution and supply activities in rural areas. Annual Highlights 3185 new customers, an increase of 11% over Net power generated and sent out has increased from 635,167 MWh to 722,921 an increase of 13.8% over Desalinated water generation has increased from 2,291,034 m3 in 2013 to m3 in 2014, an increase of 4.6% RAECO CONTRIBUTION TO GROUP Revenue Profit After Tax RAECO - 2.6% % CONTRIBUTION TO GROUP EBT 40 EHC ANNUAL REPORT 2014

45 Dhofar Power Company SAOC 3.7% Contribution to Group EBT 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 DPC CONTRIBUTION TO GROUP Revenue Profit After Tax DPC - 3.7% % CONTRIBUTION TO GROUP EBT EHC ANNUAL REPORT

46 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 DGC CONTRIBUTION TO GROUP Revenue Profit After Tax DGC - 22% % CONTRIBUTION TO GROUP EBT 42 EHC ANNUAL REPORT 2014

47 Oman Power and Water Procurement Company SAOC Contribution to Group 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 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 The WPA with Sharqiya Desalination is classified as finance lease with the Scheduled Commercial Operation in October The Salalah Concession Agreement is restructured w.e.f. 1 January This resulted in OPWP entering into power purchase agreement (PPA) with Dhofar Generating Company (DGC) and bulk supply agreement with Dhofar power company (DPC) OPWP CONTRIBUTION TO GROUP Revenue Profit After Tax EHC ANNUAL REPORT

48 44 EHC ANNUAL REPORT 2014