Oman’s Electricity Holding Company (EHC) has awarded a contract to a consortium led by Canada’s CPCS Transcom International to carry out a strategic study for the privatisation of Muscat Electricity Distribution Company (MEDC).

The study, which is set to begin in February, involves exploring privatisation options and assessing MEDC’s readiness for privatisation.

CPCS has previously worked on assessing electricity distribution in Iraq.

MEDC has responsibility for electricity distribution to more than 260,000 customers in the governorate of Muscat. It was formed in 2005 as a result of the restructuring of Oman’s electricity and water sector to prepare for eventual privatisation, following a royal decree in 2004.

It is currently a subsidiary of EHC, which received a RO310m ($805m) subsidy in 2013. About RO63m of this was designated for MEDC, which had revenues of RO204.8m in 2013 and post-tax profits of RO23.5m in 2013. This represents a 10 per cent increase in MEDC’s profits on 2012, compared with a 17 per cent increase in subsidies.

The government raised the issue of cutting subsidies in 2014, but has yet to take action. The fall in oil prices may force a reassessment of subsidies and a faster pace of privatisation, as about 79 per cent of public revenues came from crude in 2014.

Average electricity demand in Oman’s main interconnected system (MIS) is expected to increase by about 10 per cent a year until 2020, according to Oman Power & Water Procurement Company (OPWP). Oman already has experience with engaging the private power sector for generation projects, as it seeks to keep pace with demand.

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