Omani power companies launch major IPO
Muscat, May 11, 2014
Two Omani electricity-generating companies Al Batinah Power and Al Suwadi Power have launched their RO62.7 million ($162.9 million) IPO offering 35 per cent of the shares for sale to both retail and institutional investors.
Al Batinah Power Company (under transformation) and Al Suwadi Power Company SAOG (under transformation) are offering a total of 33.4 million existing ordinary shares at a fixed offer price of RO1.590.
Both companies, which are owned by mostly foreign consortiums, said the IPOs which opened today (May 11) will close on June 9. The duo aims to raise RO62.7 million ($162.9 million) from these offerings.
The IPO launch will culminate with a listing of their respective shares on the Muscat Securities Market.
Al Suwadi Power said it will raise 32.5 million rials through the sale of 250 million shares priced at 0.13 rials each, while Al Batinah Power's offering of 236 million shares at 0.128 rials each would generate 30.21 million rials.
The two companies are the owners of the two largest and most efficient power plants currently in operation in Oman. The founding shareholders are selling these shares to the public to comply with their respective obligations in Project Founders Agreements signed with government owned Electricity Holding Company (EHC) in 2010.
The offer is open to Omani and non-Omani investors, including individual and institutional investors, that have an investor account with the Muscat Clearing and Depository Company SAOC, said the companies in a joint statement.
In each IPO, 65 per cent of the shares made available for subscription have been reserved for investors applying for a minimum of 1,000 shares and a maximum of 600,000 shares. The balance 35 per cent of the shares has been reserved for investors applying for 600,100 shares or more, up to the maximum application amounts (equal to 10 per cent of each offer, respectively), it stated.
The projected average dividend yield on an investment in either company at the IPO price (excluding issue expenses) for the next five years is 8.1 per cent per year. The dividends are payable twice yearly (May and November, but with a first dividend in June 2014), the statement added.
The companies said due to long-term off-take and gas supply agreements with the Oman Government, both are able to offer returns that will likely be unaffected by market downturns (contracted until 2028)
Bank muscat is the financial adviser and issue manager for both the Al Batinah Power IPO and the Al Suwadi Power IPO.
This compares favourably with an average dividend yield of 6.5 per cent for other power companies listed on the Muscat Securities Market, and 3.9 per cent dividend yield for the MSM 30 Index.
The first dividends will be payable in June and November 2014, and twice yearly thereafter (in May and November). At the offer price, both companies offer an IRR of ~ 14 per cent to the investors. This translates into a substantial discount of 40 to 60 per cent on a discounted cash flow-based valuation.
Al Batinah Power owns and operates a power plant in Sohar (known as the Sohar 2 power plant), a gas-fired combined cycle power generation plant with a contracted power capacity of 744 MW, located approximately 200km northwest of Muscat in Oman within the Sohar Industrial Port area.
Al Suwadi Power owns and operates a power plant in Barka (known as the Barka 3 power plant), a gas-fired combined cycle power generation plant with a contracted power capacity of 744 MW, located approximately 80km northwest of Muscat in Oman.
Speaking at the IPO launch, Jurgen De Vyt, the CEO of Al Batinah Power, and Przemek Lupa, the CEO of Al Suwadi Power, said: “Both Al Batinah Power and Al Suwadi Power benefit from stable and predictable cash flows. This is on account of their revenues being contracted on an availability basis with OPWP, which is owned by the Government of Oman, pursuant to a 15 year Power Purchase Agreement (PPA) that expires in March 2028.”
“Each company also benefits from a gas supply agreement with the government over the same period. Owing to the well-tested and proven back-to-back contractual framework, neither company is exposed to changes in gas prices and to fluctuations in power demand for power until 2028, thereby offering returns that are unaffected by market downturns,” they stated.
Application forms for both IPOs and their respective prospectuses are available for collection at branches of Bank Muscat, Bank Dhofar, National Bank of Oman, Oman Arab Bank, Bank Sohar and Ahli Bank.-TradeArabia News Service