Oman transmission company raises $1bn

31 May 2015

First international rated corporate bond from Oman

  • Oman Electricity Transmission Company has placed $1bn of corporate bonds on international markets
  • The bonds were priced at a coupon rate of 3.96 per cent
  • Orders exceeded $2.7bn

The Oman Electricity Transmission Company (OETC) has raised $1bn on international debt markets through a corporate bond issuance, according to local press.

This is the first investment grade international bond issuance by an Omani corporate entity, after US ratings agency Moody’s Investors Service assigned a stable A3 long-term issuer rating to OETC in April.

The bonds were priced at a coupon rate of 3.96 per cent. It attracted a strong investor appetite, with orders exceeding $2.7bn.

It has a tenor of ten years, so is due on 7 May 2025.

OETC will use the proceeds to repay existing short-term debt of RO223m, finance capital expenditure for ongoing and future projects and for general corporate purposes.

Approximately 33 per cent of the notes were distributed to investors in the Middle East, 28 per cent in the US, 24 per cent in the UK, 8 per cent in Continental Europe and 7 per cent in Asia.

By investor type, approximately 62 per cent of notes were distributed to fund managers, 30 per cent to banks and private banks, 4 per cent to agencies and 4 per cent to insurance companies and pension funds.

Local Bank Muscat and US-based JP Morgan Securities acted as joint lead managers. International legal firm Dentons advised OETC, and US-based Dechert and local Al-Busaidy, Mansoor Jamal & Co acted as counsel to the lead managers.

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

It is expected to invest RO540m on upgrading the national grid, 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.

OETC is 99.99 per cent owned by Oman’s Electricity Holding Company (EHC), which is in turn owned by the Finance Ministry.

Oman’s electricity privatisation law of 2004 sets the framework of privatisation for the sector. While generation is now largely privatised, Oman still has a single offtaker, the OPWP, and publically owned transmission and distribution companies.

They received an RO310m ($806m) subsidy in 2013, to compensate for low consumer rates.

Studies are been undertaken on the privatisation of the transmission and distribution companies, and introducing a spot electricity market to sell electricity at variable market prices.

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