• US Moody’s assigns stable A3 ratings to Oman Electricity Transmission Company (OETC) and four local distribution companies
  • OETC plans to raise RO300m ($780m) in debt to repay short-term loans
  • The remaining funds will go towards a projected RO450m investment in the Omani grid between 2015 and 2019

US ratings agency Moody’s Investors Service has assigned a stable A3 long-term issuer rating to Oman Electricity Transmission Company (OETC).

OETC plans to raise RO300million ($780m) from the debt capital markets in order to repay short-term loans of RO223m.

The remainder of the proceeds will be dedicated to capital expenditure. OETC is expected to invest RO540m on upgrading its national grid, funded by debt, to keep up with electricity demand growth of 9 per cent a year. It needs to install 400 kilovolt transmission lines and substations, according to Moody’s.

The OETC owns and operates high-voltage transmission networks in Oman.

The high rating is thanks to OETC’s high level of support from the Omani government. it is 99.99 per cent owned by Oman’s Electricity Holding Company (EHC), which is in turn owned by the Finance Ministry.

The EHC intends to convert an RO133m shareholder loan into equity.

Moody’s expects continued high levels of support despite privatisation plans, as the government will continue to fund essential infrastructure.

Moody’s assigned a provisional A3 rating to the US dollar bonds Lamaar Funding Limited (LFL) will issue on behalf of OETC, with a stable outlook. They will be unconditionally and irrevocably guaranteed by OETC.

Moody’s also assigned A3 long-term issuer ratings to Dhofar Power Company (DPC), Majan Electricity Company (MJEC), Mazoon Electricity Company (MZEC) and Muscat Electricity Distribution Company (MEDC). The outlook on all ratings is stable.

These regional power companies are responsible for distribution of electricity to consumers in different areas of Oman. They receive high subsidies from the Omani government due to low consumer tariffs. The possibility of raising utility rates was mooted in 2014, but would be socially disruptive.

Oman’s electricity privatisation law of 2004 sets the framework of privatisation for the sector. Canada’s CPCS Transcom International is carrying outstrategic study for the privatisation of MEDC.

Oman Power & Water Procurement Company (OPWP) recently appointed an expert to implement an electricity spot market, where electricity would be sold at variable prices depending on demand.

However, it is likely to meet strong resistance both locally and from developers.

“A spot market alongside power purchase agreements (PPAs) could be vulnerable to market manipulation by OPWP, who would be able to sign new PPAs and drive prices down,” says an international developer. “While a pure spot market would be too uncertain for developers and consumers.”

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