Oman’s Electricity Holding Company (EHC) is appointing professional services firm KPMG as financial adviser on the sale of the Oman Electricity Transmission Company (OETC), allowing the first privatisation of a Gulf grid operator.

KPMG will act as lead adviser on the sale, after winning the contract in a closed tendering process. It will hold its first meeting with EHC in early September. Following the talks, KPMG will have one month to prepare the terms of reference for the accounting, legal and technical consultants that have yet to be selected.

EHC expects to issue a tender for the three consultancy contracts in October, with KPMG managing the process.

As with the financial consultancy contract, these tenders could be closed, with companies being either invited or prequalified to bid.

Once the consultants have carried out due diligence, KPMG will define a strategy for the privatisation. This process is expected to be completed within six months. It is still unclear whether the privatisation will involve an asset or share sale, or whether the government will retain a stake in OETC. The privatisation process is expected to take two years.

OETC was established in February 2003 with capital of OR500,000 ($1.3m). It began operating in May 2005.

The firm owns and operates the main power grid, which covers 90 per cent of the sultanate.

The decision to sell OETC follows the passing of a law in 2004 requiring the government to privatise its power assets.

EHC was set up to hold government shares in nine companies. Of the nine, seven were targets for privatisation, including OETC and Al-Rusail Power Company, which has already been sold.

The other firms up for sale are Wadi al-Jizzi Power Company, Al-Ghubrah Power and Desalination Company, Mazoon Electricity Company, Majan Electricity Company, and Muscat Electricity Distribution Company.

The 2004 law prohibited the sale of the Oman Power & Water Procurement Company (OPWP) and the Rural Areas Electricity Company.

EHC is wholly owned by the Finance Ministry and each of the nine subsidiaries is 99.99 per cent owned by EHC and 0.01 per cent owned by the Finance Ministry.

Al-Rusail Power Company was privatised in 2007 and is owned by a consortium of Belgium’s Suez Energy International, Abu Dhabi-based Mubadala Development Company and the local National Trading Company. As part of the deal, the firms are developing the Barka 2 independent water and power project (IWPP).

The new plant will have capacity of 678MW of power and 26.4 million gallons a day of water.

OPWP has also issued a tender for consultancy services for the privatisation and expansion of Al-Ghubrah. The privatisation model used for the sale of the Al-Rusail Power Company is now being replicated by EHC for the Al-Ghubrah Power & Desalination Company.

Its Al-Ghubrah IWPP involves the rehabilitation of an existing state-owned facility and the construction of a new plant.

The IWPP will include a 25 million-gallon-a-day reverse-osmosis desalination plant. The two plants will have combined capacity of 800MW (MEED 8:8:08).

OETC in numbers

• 2003: Year company launched

• 2005: Year operation began

• $1.3m: Capital at start-up

• 90 per cent: Coverage of the sultanate

• 576km: Length of 220-230kV lines

• 2,631km: Length of 60-150kV lines

Source: Arab Union of Producers, Transporters & Distributors of Electricity, Statistical Bulletin 2007