Omani Power Firms Set To Double Profits After Share Offer

Posted by Joseph R. Fonseca
Sunday, May 11, 2014
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Oman's Al Batinah Power Co and Al Suwadi Power Co, which launched twin initial public share offers on Sunday and are owned by the same consortium, will double their profits from 2014 to 2018 as they pay off start-up costs, a top executive said.

The firms, whose owners aim to raise a combined 62.7 million rials ($163 million) through the sale of 35 percent of each company, together provide just over a quarter of the electricity for Oman's main power grid - around the capital, Muscat.

The companies were required to go public and list on the sultanate's bourse under the terms of their licences, having launched operations in April 2013.

"If people are looking for robust and very predictable dividends this is a nice opportunity," said Przemek Lupa, chief executive of Al Suwadi Power and project manager for the two IPOs, told Reuters. "We're profitable."

Al Suwadi's net profits will rise to 10.9 million rials in 2018 from 4.8 million rials this year, according to the IPO prospectuses, while Al Batinah's profits will rise to 10.3 million rials from 4.6 million rials over the same period.

Their earnings before tax, interest, depreciation and amortisation will remain steady at around 30 million rials a year while finance charges from constructing the plants reduce over time.

They have supply contracts with Oman until 2028.

According to IPO documents, this will enable the companies to offer subscribers an average annual dividend yield of 8.1 percent over the next five years. Dividends will be paid twice yearly, with the first dividend planned for June.

Al Batinah is selling 236.2 million shares at 0.128 rials per share, for a total of 30.2 million rials.

Al Suwadi is the larger of the two IPOs, offering 250 million shares at 0.13 rials per share, which would raise 32.5 million rials if fully subscribed.

Bank Muscat is acting as financial adviser and lead manager on both flotations.

In the IPOs, 65 percent of the shares are reserved for retail investors, with the remainder for institutions and wealthy individuals making orders of more than 600,000 shares.

Should the retail or institutional tranches be undersubscribed any extra subscriptions in the other part can be utilised to meet the shortfall. There are no restrictions on foreign participation, although no person or entity can acquire more than a 3.5 percent stake in each company through the IPO.

The companies' shareholders will sell shares in the IPOs on a proportional basis.

This means French utilities group GDF Suez's holding will fall to 30 percent from 46 percent, while that of local firm Suhail Bahwan Group will drop to 14 percent from 22 percent.

Two Japanese investors, Sojitz Corp and Shikoku Electric Power Co, will cut their respective stakes to 7 percent from 11 percent, with Oman's state pension fund also reducing its holding to about 7 percent from 10 percent.

The offers run from May 11 to June 9 and the companies expect to list on June 23.

(Reporting by Matt Smith; Editing by Greg Mahlich)

($1=0.3850 Omani rials)

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