His Majesty Sultan Qaboos Bin Said · gratitude to His Majesty Sultan Qaboos Bin Said for his wise...

His Majesty Sultan Qaboos Bin Said

MAZOON ELECTRICITY COMPANY S.A.O.C ANNUAL REPORT 2011CITY COMPANY S.A.O.C ANNUAL REPORT 2011

MAZOON ELECTRICITY COMPANY S.A.O.C ANNUAL REPORT 2011CITY COMPANY S.A.O.C ANNUAL REPORT 2011

CONTENTS

Chairman’s Report 4Board of Directors 6Management Team 7Vision, Mission and Values 8General Manager’s Report 10Management Report & Analysis 13Financial and Operational Performance 14Organization & Human Resource 17Health, Safety and Environment 18Projects 19Regulatory Compliance 20Third Price Control 20Distribution of Power 21Supply of Power 23Governorate Information 25Corporate Governance 36Financial Statements 37

MAZOON ELECTRICITY COMPANY S.A.O.C ANNUAL REPORT 2011

CHAIRMAN’S REPORT

Dear shareholders,

I have great pleasure in presenting, on behalf of the Board, the Annual Report and audited Fi-nancial Statements of Mazoon Electricity Company SAOC for the year ended 31 December 2011. The year 2011 was an exceptional year witnessing sector wide industrial unrest and protests. Yet the company was able to report growth and achieved operational efficiencies, improving perfor-mance in CAIDI, Lost Time Injury and Distribution System Losses.

Business growth

The number of customers increased to 269,099 from 249,252 in 2010 showing a growth of 7.96 percent. Regulated units sold to customers showed a growth of 10.91 percent compared to 2010 to reach 4,645 GWh.

Revenue

The revenue for the year was RO 129 million compared to RO 113 million of 2010 with an increase of 14.16 percent. The revenue consists of RO 65.84 million (2010-RO 58.71 million) from sale of power, RO 61 million (2010-RO 51.87 million) from subsidy and RO 2.1 million (2010-RO 1.9 mil-lion)from other income.

Net profit

The company reported a net profit of RO 10.175 million compared to RO 12.36 million of 2010 owing to the increased staff costs after recruiting 114 new employees following government di-rectives and due to changes in staff cost policies. In addition to salary costs relating to new em-ployees and the cost of living allowance, the company has for the first time, provided RO 1.30 mil-lion towards gratuity to the Omani national employees transferred from the Ministry of Housing, Electricity & Water in 2005.

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Capital expenditure and assets

Though hampered by the industrial unrest in the first half of the year, the company was able to execute capital project to the tune of RO 54 million showing an increase of 20 percent compared to RO 45 Million of 2010. The company continued to invest in its prop-erty plant & equipment over and above the annual depreciation so that the net book value of assets has increased from RO 211 Million at the beginning of the year to reach RO 253 Million as at 31 December 2011.

Reduction in distribution system losses

For the third consecutive year the company was able to reduce the distribution system losses beyond the reduction target set by AER and thus entitled to sys-tem loss incentive as part of Maximum Allowed Rev-enue. The distribution system loss for the year was 14.26 percent against the target of 15.70 percent set by the AER.

Health, Safety and Environment

During the year the company focused mainly on im-plementing the recommendations of the HSE auditor appointed by AER and on training for the employees. Four major HSE incidents involving the public and the contractor’s employees, happened during the year. Two of the incidents happened while attempting theft of network assets and one was from illegal connec-tion, all resulting in fatalities. The most unfortunate in-cident was the loss of life of three people due to elec-tric shock from a pool of water under a 11 KV terminal pole carrying a Low Tension circuit, in Jalan Bani Bu Ali. The company has augmented its HSE initiatives by ad-vertisement through the media and public campaign (by the HSE department and the operational staff) to create awareness among the public about the dan-gers of electricity and the safety precautions.

Strategic vision and key focus areas

The company recognizes the importance of main-taining the momentum in improving the operational efficiency and achieving the financial objectives to accomplish the vision of “MZEC to be one of the lead-ing distribution and supply companies in the region by 2016”. The key focus areas in the third price control period would be (i) reduction of distribution system losses as per the targets agreed with AER, (ii) improved performance in public safety and (iii) economic invest-ments to meet the growing demand and DSSS com-pliance.The company shall continue to abide by the corporate governance principles and comply with all regulatory requirements in order to enhance the shareholders’ value.

Acknowledgment

On behalf of the board, I would like to express sincere gratitude to His Majesty Sultan Qaboos Bin Said for his wise and able leadership. We thank the Government of the Sultanate of Oman, Public Authority for Elec-tricity and Water, Authority for Electricity Regulation, Electricity Holding Company and the sector subsidiary companies for their continued support and coopera-tion.I would like to thank the fellow board members for their active participation and contributions in guiding and directing the company. I would like to express my appreciation to the executive management and the employees for their commitment and contributions in achieving the financial and operational objectives.

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Eng.Omar Khalfan Nasser Al Wahaibi Chairman, Board of Directors


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BOARD OF DIRECTORS

Eng.Omar Khalfan Nasser Al Wahaibi Chairman

Eng.Hassan Al AbdawaniDeputy Chairman

John Robertson WrightMember

Michael LimMember

Abdul Aziz Al KharosiMember


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MANAGEMENT TEAM

Eng. Abdullah Said Al BadriGeneral Manager

Salim Said Al KamyaniCommercial Affairs Manager

Biju Joseph PadanilamHead of Corporate andStrategy Office

Eng. Saleem Nasser MahrouqiHSE Manager

Eng. Abdul Aziz Shidhani Planning and RegulatoryAffairs Manager

Eng.Majid Nasser Al Busaidi Senior ManagerAssets Management

Salim Yasir Al SulemaniSenior Manager Shared Services

Eng. Mohammed Al QurriProjects Manager

Eng. Mohammed Abdullah Al HajriSenior Manager OperationAl Dakhilya

Eng. Nasser Khalid Al RashidiSenior Manager OperationSouth Batinah

Eng. Mohammed Hamed Al BusaidiSenior Manager OperationAl Sharqiya


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OUR VISION

OUR MISSION

OUR VALUES

MZEC to be one of the leading electricity distribution and supplycompanies in the region by 2016

Deliver electricity to customers safely reliably and economicallyin accordance with the license

Ownership, Team Work and Customer Focus.

MAZOON ELECTRICITY COMPANY


STRATEGIC OBJECTIVES- Enhancement of business profitability- Reduction of system losses- Comply with MZEC statutory obligations- Maintain average time duration of 5 working days for simple connections- Improve efficiency of response and customer fuse off call within 3 hours- Electrification of accessible villages- Develop employees competencies to the job requirements- MZEC continue to be an attractive place to work


GENERAL MANAGER’S REPORT

The year 2011 was yet another successful year for the company showing growths in customers (7.96 percent) and Revenue (14.16 percent) and achieving major financial and operational objec-tives. The first half of the year witnessed unprecedented country wide public protests and strikes, affecting severely the entire operations of the company for a few months. Yet, with the support of the government and commitment and contributions from the employees, the company could recover and report better financial and operational results.

The company has reported (i) ‘Exceeding Target’ performance in 1 KPI, (ii) Achieving Targets in 6 KPIs and (iii) ‘Substantially Achieving Target’ in the case of 2 KPIs, out of the nine Key Performance Indicators agreed with the shareholders.

The company continued its successive stride of reducing distribution system loss beyond the re-duction target to report 14.26 percent in 2011 as against the AER target of 15.70 percent thereby entitling the company for an incentive of RO 461 thousand, for the third consecutive year.

The company reported Earnings Before Interest and Tax of RO 25.19 million, approximately 104 percent of the targeted EBITDA of RO 24.20 million. The Customer Average Interruption Duration Index (CAIDI) was brought down to 60 minutes from 64 minutes of previous year and 65 minutes targeted. Compared to the target of 18 towards Lost Time Injury, set based on the number of company employees and emergency & maintenance contractor’s employees, there was only one incident (involving contractor employees) during the year.

Though the capital project work was severely affected during the months of protests and strikes, the company could execute projects worth RO 54 million thereby substantially achieving the tar-get of RO 69 million which was set in the beginning of the year.

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The gross value addition during the year was RO 31.54 million showing an increase of RO 2.17 million com-pared to 2010. The company has retained RO 21.025 million (66.66 percent) towards maintenance & expan-sion of the company (in the form of depreciation and retained earnings). During the year the company has completed electri-fication of 23 villages that meet reasonable demand criteria and 20 villages that do not meet reasonable demand criteria. The project work is in progress in re-spect of 36 villages and are expected to be completed in early 2012.

The strategic projects SCADA phase 1 and the imple-mentation of Customer Relations Management ( CRM) were successfully completed by the company during the year.

One of the appreciable achievement of the company was the successful submission, consultation and fina-lization of the third price control with limited support from external experts.

The company responsibly took part in the government directive to provide employment to Omani nationals and recruited 114 new employment aspirants. For the second consecutive year the company received award from the Ministry of Manpower for achieving 98 per-cent omanisation. The realigned organization struc-ture following business process mapping carried out in 2010 was implemented effective from January 2011 for enhancing the efficiencies and synergies in opera-tions.Apart from the public protests and strikes, the year was full of challenges and the sailing has never been

smooth. One of the greatest challenges the company faced during the year was the restoration of supply in Jalan Bani Bu Ali area consequent to grid failure. Four major HSE incidents happened; two resulting from theft attempts, one arising from illegal connection and the tragic incident at Jalan Bani Bu Ali, were heart-ening and the company give highest priority to opera-tional and public safety.

The third price control casts more responsibilities on the company in respect of execution of capital expenditure program, Distribution System Security Standards compliance, distribution system losses, further operational efficiency and HSE compliance to “deliver electricity to the customers safely, reliably and economically in accordance with the Licence”. The key focus areas for the coming years include:

- Further reduction of distribution system losses as agreed with Authority for Electricity Regulation

- Execution of Capital Expenditure Program as per the third price control

- Improving Safety in operations and Public safety- Implementation of the new billing system.- Distribution System Security Standards Compliance

and other licence conditions- Application of innovative methods for preventing

asset vandalism and improving substation security- Create ‘empowering environment for employees’

The company has revised its strategic objectives tak-ing into consideration the above requirements and is committed to; improve efficiency and compliance in operations, ensuring value services to the customers, be an attractive place to work for the employees and enhance shareholders value.

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Abdullah Said Al BadriGeneral Manager


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MANAGEMENT REPORT & ANALYSIS

Majid Nasser Al BusaidiSenior Manager Asset Management

Khalfan Nasser Al RawahiCounterpart for Asset Lifecycle Manager

Salim Yasser Al SuleimaniSenior Manager Shared Service

Ahmed Saif Al MahriziAdmin and HR Manager

Ahmed Zayed AL ShaqsiControl Center Manager

Hamed Said Al JassasiFinance Manager

Sultan Saleem Al Alawi IT Manager

Asset Management Division

Shared Services Division


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MANAGEMENT REPORT & ANALYSIS Nakhal Fort


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Financial and Operational Performance

1. Financial performance

The Key financial indicators; Revenue, EBITDA, Capex and Net Book Value of assets for the year in comparison with the corresponding figures of the previous year are given in Figure 1 below.

Figure 1: Financial Performance

1.1. Gross Value added statement

The gross value added during 2011 showed an increase of RO 2.175 Million compared to 2010 as shown in the Table 1 below.

Table 1: Gross Value Added

2011 2010

RO›000 RO›000

Value Added

Revenue 128,995 112,509

Less: Power purchase, spares and repairs (91,088) (78,513)

Less: General and Administrative expenses (6,473) (5,092)

Less: Interest on loan from bank for working capital (762) (646)

Value added by Distribution and supply activities 30,672 28,258

Add: Other income 869 1,108

Total Value Added 31,541 29,366


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Application of value added is provided in the Table 2 below which shows that out of the RO 31.541 million

value added, 66.66 percent is retained for maintenance & expansion of the company owing to a change in the

dividend policy.

Table 2: Application of Value Added

2011 2010

RO’000 Percent RO’000 Percent

Application of Value Added

To pay employees

Employee related costs (8,788) 27.86% (5,684) 19.36%

To pay directors

Sitting fee and other remuneration (58) 0.18% (45) 0.15%

To pay Government

Income tax (670) 2.12% (1,404) 4.78%

To pay providers of capital

Equity dividend (1,000) 3.17% (12,146) 41.36%

To provide for the maintenance and expansion of the company

Depreciation (11,850) 37.57% (10,087) 34.35%

Retained profit (9,175) 29.09% - -

Total (31,541) 100.00% (29,366) 100.00%

2. Operational Performance

2.1 Business growth

The units sold during the year increased by 10.91 percent due to increase in the number of customers by 7.96 percent and increased consumption per customer. The growth in customers and regulated units sold are shown in Figure 2 below.

Figure 2: Operational performance

Customers Regulated Units Sold ( GWH)


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2.2 Operations Efficiency

The distribution system loss was 14.26 percent compared to target set by AER 15.70 percent and 15.32 percent of 2010. The CAIDI which is a measure of interruption duration has been brought down to 60 minutes compared to 64 minutes reported in 2010. The performance in distribution system loss and CAIDI are shown in Figure 3 below.

Figure 3: Operational indicators

3. Significant Ratios

As shown in the Table 3 below the customer per district office, the units sold per customer and the total rev-enue per unit have increased compared to 2010. The staff cost per unit and the total cost per unit are increased mainly due to recruitment of 114 new staff as per government directive and the changes in sector wide policies relating to staff costs.

Table 3: Significant ratios

Particulars Unit of Measure 2011 2010

MWh/connection MWh 17.26 16.80

Average Customers per district office Number 14,950 13,847

Total Revenue/MWh billed RO 27.77 26.86

Staff Cost per MWh RO 1.89 1.35

Opex cost per MWh RO 6.98 6.26

Total Cost per MWh RO 25.62 23.89

Earnings per share RO 18.438 24.72

Net assets per share RO 232 238

Return on equity Percent 7.94 10.20

Distribution System Loss CAIDI ( Minutes)

14.26

14.00


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Organization and Human ResourcesThe company implemented the realigned organization structure given in Figure 4 effective from 01 January 2011.

Figure 4: Organization structure

The total number of staff at the end of the year was 493 consisting of 484 Omani Nationals and 9 Expatriate as given in Table 4 below. The company continued to maintain the level of Omanisation above 98 percent and has received award from Ministry of Manpower for highest omanaisation.

Table 4: Employee details

Function 2010 2011

Administrative/Supervisory 175 217

Managerial/Executives 8 21

Technical 168 241

Other 7 14

Total 358 493

HUMAN RESOURCES


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Training and Development

Training programs conducted during the year based on the training need analysis is given in the Table 5 below.

Table 5: Training details

Course In country Overseas

Courses Participants Courses Participants

Management and Professional Development related 3 6 8 12

Safety 15 726 3 5

Information Technology related 3 11 3 6

Administrative 17 481 1 1

Finance 1 4 3 8

Customer Service - - 3 5

Technical 13 255 7 13

English Second Language 1 3 1 1

Other courses/Seminar 1 10 11 29

Site Visit/Inspection - - 4 7

Total 54 1496 44 87

Health, Safety and Environment (HSE)The auditor appointed by AER conducted HSE audit to ensure compliance with distribution licence conditions 7 & 17 and also with Ministerial Decision on Occupational safety and health. Various actions were identified and implemented based on the recommendations of the auditor. The company is also in the process of building the HSE Maturity Model recommended by the consultants M/s. COWI During the year four major HSE incidents happened involving the public and the contractor’s employees. Two of the incidents happened while attempting theft of network assets and one was from illegal connection, result-ing in the death of one each in the three incidents. The most unfortunate incident was the loss of life of three people due to electric shock from a pool of water under a 11 KV terminal pole carrying a Low Tension circuit, in Jalan Bani Bu Ali

Key performance indicators

The Key performance Indicators relating to the company’s employees and emergency & maintenance contrac-tors’ employees are shown in the Table 6 below .

Table 6: HSE Key Performance Indicators

Particulars Performance Indicator 2011 2010

Occupational Safety Fatalities - -

Road Safety LTI 1 2

No. of car damages - -


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The company has established an Executive Committee headed by the General Manager to drive the implemen-tation of HSE action plan and to follow up action progress on a monthly basis.

The company conducted training on the ESR and Building & Fire Safety for all concerned employees, as well as, for new recruitment technical staff. The training details are given in table 7 For ensuring safe operations, the company focused on providing concerned engineers professional tools and signs like caution & danger signs, approved earth kits, caution tapes & plastic chain, PPE, live line testing device, safety locks and key safe devices to be used during carrying out switching programs. MZEC arranged defensive driving courses for employees and also are in process of setting speed limit devices for all vehicles.

Table 7: HSE Training

No. Particulars Participants

1 Accident Reporting & Investigation 15

2 Behavioral Safety 54

3 Call Center Training 9

4 Construction Health & Safety 10

5 Fire Warden, Fire safety and Fire Fighting 136

6 Introduction of HSE 190

7 Work-Related Stress Management 52

8 One Day Practical Training (Safety) 59

9 Defensive driving – Heavy and light vehicles 33

10 First Aid 83

11 Personal Protective Equipment Awareness 29

12 Electrical Safety Rule and Safe System of Work 56

Total 726

The company conducted workshop involving all the distribution companies in the sector for best solutions for controlling the Assets Vandalism. Towards protection of public against electrical hazards the company carried out awareness programs and use SMS service during severe climatic conditions for safety advises. In order to ensure substation security for reducing the occurrence of assets posing threat to public safety the company has introduced dedicated substation inspection team which carries out inspection of:

1. Distribution substations on monthly basis.2. Primary substations on weekly basis.

3. Electrical feeders (Poles, AB Switches, stay wires & surge arrestor) once in every three months

ProjectsCapital Expenditure

The major projects awarded during the year were: - Construction of 2×20 MVA Substation with New 33 KV & 11 KV Feeders At-Hufri in Barka At South Batinah

Region (RO 1,998,122.918), - Construction of 2×20 MVA Substation with New 33kv & 11kv Feeders In Khadhara Bu Rushaid in Suwaiq At

South Batinah Region (RO 2,298,307.316), - Construction of Three Feeders 33KV from Blue City Grid Station to Billah and Barka New Substations at Barka

in South Batinah Region (RO 1,548,998) and- Upgrading of Saqsooq Substation From 2x6 MVA to 3x20 MVA Indoor Station At Barka in South Batinah Re-

gion (RO 1,753,124.01)


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The total capital expenditure (Value of work done) during the year was RO 54 million compared to RO 45 million in 2010.The major projects completed were:

- ‘Extension of Power Supply to Jarwalah in Ibra, Al Rahab, Al Eyesi, Al Seleel, Khab Al Khees, Al Qulait, Alka, Wusal, Aljar, Hail Bareik, Jabtain in Dima & Tayeen in Sharqiah Region with a value of RO 1,053,360.

- Construction of 132/33KV Grid Station & Associated Transmission System in Nakhal Area. RO 829,493.28 - Construction of New 2x20 MVA Ibra-1 Sub Station at Ibra in Sharqiya region RO 825,206.104 and - Construction of Primary Sub Station with ( 2x10 MVA ) Transformers for Power Supply to Adam Airport at

Dakhilya Region. RO 741,394.5

During the year the company electrified 23 villages meeting Reasonable demand criteria set by the Author-ity and 20 villages not meeting the reasonable demand criteria. Project work in respect of the remaining 36 villages are in progress and is expected to be completed in early 2012.

Strategic Projects

The company has successfully completed and implemented SCADA phase 1 connecting all indoor primary sub-stations and the Customer Relations Management (CRM) projects.

Regulatory ComplianceExecutive Task Team Actions (ETT) Summer 2011

The ETT actions for 2011 were broadly categorized into four categories; (i) 33 KV projects, (ii) additional projects (iii) ensuring 0.95 power factor at capacitor banks and (iv) connection of temporary generators.All the 33 KV projects planned for the summer as part of ETT actions were commissioned before the target date except in the case of Ibra and Al Hamra substations which were delayed by one month due to the strikes, but the contingency measures were taken to meet the demand in these two substations. All the 21 additional projects as part of ETT actions were carried out before summer. Resetting of capacitor banks were carried out in order to ensure a Power Factors of 0.95 at Grids. Temporary generators were connected at Mudhaibi, Sur, JBB Ali and MIS to meet the additional demand.

Third Price controlThe second price control was for the three year period 2009 to 2011 and the third price control values for the years 2012 to 2014 were determined by the Authority during the year. The third price control submission, con-sultation and approval process took approximately one year and the various stages in the process are shown in Table 8 below;

Table 8: Third price control submission and approval process

S. No. Particulars Date

1 ‘Proforma’ submission 07 May 2011

2 Initial Notified Values by AER 22 August 2011

3 Company’s response to Initial Notified Values 08 October 2011

4 Final Notified Values 20 November 2011

5 Company’s response to Final Notified Values 10 December 2011


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Distribution of power Distribution System Assets

Distribution system assets as at the end of the year are shown in the Table 9 below.

Table 9: Distribution system assets


33/11 KV S/s Number 184 192

11/0.433 KV S/s Number 11,667 12,586

33/11 KV TX Number 309 330

33/0.433 KV TX Number 77 74

33 KV network OH Km 3,405 3,430

Cable Km 263 300

11 KV network OH Km 7,816 8,094

Cable Km 729 874

0.433 KV network OH Km 8,215 8.458

Cable Km 1,379 1,747

Distribution System Maintenance

The emergency & maintenance services in all the districts are outsourced to contractors. The company also has contract for substation security inspection by dedicated teams.

Demand Profile

The peak load experienced during the year was 1,268 MW, (recorded on 20th June 2011 at 15:00) compared 1,125 MW of last year showing a growth of 12.71 percent. The lowest demand on the same day was 735.93 MW.

The lowest load reported during the year was 197.62 MW on 01 January 2011 at 04 hours. and the maximum load experienced on the same day was 440 MW.Demand profile over the 24 hour period on the days of the peak demand during summer and lowest demand during winter are shown in Figure (6) below

Figure 6: Peak and Low demand 24 hour profile

Maximum DemandFigure 5: Maximum demand


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Figure 7 below shows the monthly maximum and minimum demand during the year compared to the previous year 2010.

Figure 7: Summer and winter monthly profile

Distribution System Losses The distribution system losses for the year was 14.26 percent compared to 15.70 percent target set by the Au-thority and 15.32 percent in last year. The distribution system losses for the company and the region along with the previous year’s actual are given in Figure 8.

Figure 8: Distribution system losses

As seen in the graph the major reduction in South Al Batinah region (from 19.06 percent in 2010 to 16.87 per-cent) and marginal reduction in Dakhliya region contributed to the overall reduction of the distribution of sys-tem losses and hence an entitlement of incentive of RO 461 thousand. The calculation of distribution system loss is given in the table (10) below.


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Table 10: Distribution system losses

Particulars 2011 2010

MWh MWh

Bought from PWP 5,523,430 5,069,270

Less: Supplied directly to customer by OETC (51,366) (48,737)

Less: Transmission system loss (114,524) (132,093)

BST at bulk supply points 5,357,540 4,888,440

Supplied/Billed 4,644,863 4,188,193

Less: Supplied directly to customer by OETC (51,366) (48,737)

Net Regulated units distributed 4,593,497 4,139,456

Distribution losses 764,043 748,984

Distribution losses (percentage) 14.26% 15.32%

Supply of powerCustomer Profile

A total of 19,847 new customers were added during the year and the number of customers as at the end of the year was 269,099 which comprised of 209,898 (78 percent) residential and 44,520 (17 percent) commercial customers as shown in Figure 9.

Figure 9: Customer segments

Electricity Imported at bulk supply point and billed

The electricity received at the bulk supply points and the billed quantities for each month during 2011 in com-parison with 2010 are given in the Figure 10.

Figure 10: Electricity imported at bulk supply point and billed (MWh) (2010 &2011)

79%

1%

5%

15%

78%

1%

4%

17%

Customer segments 2011Customer segments 2010


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Sale of power

The electricity units sold increased by 11 percent in 2011 while the revenue from sale of electricity increased by 12 percent. The category wise electricity consumption and the revenue is given in Table 11.

Table 11: Number of customers, Electricity Supplied and Revenue

Category Number of customers MWh billed Revenue

2010 2011 2010 2011 2010 2011

Residential 196,620 209,898 2,712,734 2,999,418 29,656,786 33,230,904

Commercial 38,870 44,520 625,885 739,056 12,636,647 14,918,883

Government 11,603 12,152 617,696 711,880 12,905,390 14,990,904

Others * 2,159 2,529 231,765 194,508 3,513,335 2,701,524

Total 249,252 269,099 4,188,080 4,644,863 58,712,158 65,842,216

* Others: include Agriculture/Fisheries, Hotels/Tourism and Industrial

Energy billed

65 percent of the total electricity sold were to the residential customers and units sold to residential customers showed an increase of 10.58 percent. The increase in billed quantities in 2011 compared to 2010 in respect of commercial and government customers were 18 percent and 15 percent respectively. Energy billed under vari-ous customer categories are shown in Figure (11) below.

Figure11: Electricity Sales (MWh) by customer segments

Sales revenue

Figure 12 shows the sales revenue for the different categories of customers during 2011 compared to 2010.

Figure12: Electricity Sales (RO) by customer segments

2,999,418

194,508

711,880

739,056

33,230,904

2,701,524

29,656,786

3,513,333

12,905,39112,636,647

14,990,904

14,918,883

2,712,734

231,765

617,696

625,885

Energy Billed 2010

Revenue by Customers Category 2010

Revenue by Customers Category 2011

Energy Billed 2011


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GOVERNORATE INFORMATION

Falaj Daris


Al Dakhilyah Governorate comprises of eight Willayats viz. Nizwa, Sumail, Bahla, Adam, Al Hamra, Manah, Izki and Bid Bid. The company has 6 offices in Al Dakhilyah Governorate and the organization structure is given in Figure 13

Al Dakhilyah Governorate comprises of eight Willayats viz. Nizwa, Sumail, Bahla, Adam, Al Hamra, Manah, Izki and Bid Bid. The company has 6 offices in Al Dakhilyah Governorate and the organization structure is given in Figure 13

AL DAKHILYAH

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Bahla Fort


Figure13: Organisation structure-Dakhliya

The relevant information and statistics relating to Dakhliya is given in Table 12

Table 12: Dakhliya statistics


Area Km² Km² 31,190 31,190

Customers Number 79,376 73,928

Revenue RO 20,0191,86 17,619,430

Max Load MW 378 327

Min Load MW 61 60

Bulk Supply Tariff (purchase) MWh 1,561,404 1,423,696

Regulated Units Distributed (sales) MWh 1,376,451 1,229,755

Distribution System Loss Percent 10.35 10.71

Customer Average Interruption Duration Index (CAIDI) Minutes 49.62 41.63

Number of 33/11 kV Ss Number 59 56

Number of 11/0.433 kV Ss Number 3,787 3,525

Number of 33/11 kV TX Number 103 99

Number of 33/0.433 kV TX Number 12 12

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Mohammed Abdullah Al Hajri Senior Manager OperationDakhliyah

Said Saleh Al BalushiDistribution Manager

Saleh Mohammed Al MufarajiCustomer Service Manager

Mohammed Salim Al AdawiHead of Admin and Finance

Salim Hassan Al AmeryHead of Projects

Senior Manager Operations


AL SHARQIYAH

The company has 7 offices in Al Sharqiyah governorates to service the customers in 10 Willayats viz. Sur, Ibra, Bidiya, Al Qabel, Al Mudhibi, Dema-w-Al Taein, Al Kamel& Al Wafi, JaBani Bu-Ali, Jaalan Bani Bu-Hassan and Wadi Bani Khalid (Masirah is not covered in MZEC authorized area as per license). The organisation structure relating to South & North Sharqiya Governorate operation is shown in Figure14 below.

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Wadi Bani Khalid


AL SHARQIYAH

Figure14: Organisation structure-Sharqiya

The relevant information and statistics relating to Sharqiya is given in Table 13

Table 13: Sharqiya statistics


Area Km² Km² 37,180 37,180


Revenue RO 19,934,015 17,584,512

Max Load MW 406 353

Min Load MW 61 39









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Mohammed Hamad Al BusaidiSenior Manager OperationSharqiya

Said Ali Al AraimiDistribution Manager

Khalfan Musabah Al JahmaniCustomer Service Manager

Saud Khamis Al FarajiHead of Admin and Finance

Hilal Hamdan Al HajriHead of Projects



SOUTH AL BATINAH

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The company distributes electricity to its customers in Al Rustaq, Barka, Al Suwaiq, Al Musanah, Al Awabi, Nakhal, and Wadi Al Ma`awel willayats in South Al Batinah and has 5 offices. Figure 15 Shows the organization structure for South Al Batinah Governorate operations.

Al-Hazm Fort


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Figure15: Organisation structure-South Al Batina

The relevant information and statistics relating to South Al Batinah is given in Table 14

Table 14: South Al Batinah statistics


Area Km² Km² 6,260 6,260


Revenue RO 25,889,015 23,508,294

Max Load MW 514 465

Min Load MW 65 69









Nasser Khalid AL ResheidiSenior Manager OperationSouth Al Batinah

Talal Said Al AbriHead of Projects

Yusuf Ahmed Al FarsiCustomer Service Manager

Ahmed Ali Al SyabiHead of Admin and Finance

Fahd Said Al AbriDistribution Manager



CORPORATE GOVERNANCE

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Company Philosophy

The company recognizes that the corporate governance practices are fundamental in protecting the interest and enhancing the value to the shareholders and stakeholders. The company’s governance system has been built on the philosophy and principles outlined in code of corporate governance issued by the Capital Market Authority, Oman and has been integrated with ethical business practices, sound corporate culture with a frame work of transparent and impartial governing policies and procedures.

The company’s board consists of all independent and non executive directors and their functions and duties align with the provisions of Commercial Companies Law and the Articles of Association of the company. The Board has constituted Audit Committee and Internal Tender Committee.

The company has also appointed internal auditor and legal advisor and also has implemented manuals for in-ternal regulations. The transactions with major related parties, the companies within the same holding group, are in the normal course of business and are at arm’s length.

Nakhal Fort


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Board of Directors

Composition of the Board

The Board comprises of 5 members – 4 nominated by the Electric-ity Holding Company SAOC and 1 nominated by the Ministry of Finance- pursuant to the article No “15” of the articles of associa-tion, as amended, of the company.

Eng.Omar Khalfan Nasser Al Wahaibi, Chairman(Chief Executive Officer, Electricity Holding Company)

Nominated by Electricity Holding Company. Non Executive/Independent Director. Chairman of other Boards - Nil Member of other Boards - 1 Member of other committee -2

Eng. Hassen Mohammed Jawad Ali Abdawani, Deputy Chairman(Deputy CEO & Vice president Transmission & Distribution, Electricity Holding Company)

Nominated by Electricity Holding Company. Non Executive/Independent Director. Chairman of other Boards – Nil Member of other Boards – 2 Member of other committee – 3

Chin Hee Michael Lim, Member (Executive Manager IT- Electricity Holding Company)

Nominated by Electricity Holding Company. Non Executive/Independent Director. Chairman of other Boards – Nil Member of other Boards – 2 Member of other committee – 3

John Robertson Wright, Member

Nominated by Electricity Holding Company. Non Executive/Independent Director. Chairman of other Boards – Nil Member of other Boards – 2 Member of other committee - 3

Abdul Aziz Bin Mohammed Bin Said Al Kharousi, Member(Director of Budget Services Sector, MOF)

Nominated by Ministry of Finance. Non Executive/Independent Director. Chairman of other Boards – Nil. Member of other Boards – Nil Member of other committee - 1

Members of the Board

The board of directors of the company changed following the Annual General Meeting held on 21.March 2011, and the new board assumed office effective from that date. Mr. Abdull Aziz Bin Mohammed Bin Said Al Kharusi was nominated by Ministry of Finance in place of Mr. Haitham bin Yosef Al-Zadjali in September. The details of the Directors of the company holding their office as at 31 December 2011 and their membership in the board of other companies in the Sultanate of Oman are as follows:


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The meetings of the board and the attendances in the various meetings during 2011 are given in the table 16 below:

Table 16: Meetings of the board and members’ attendance

AGM Board meeting

Member Position 21/03/11 14/2/11 26/02/11 02/04/11 05/05/11 10/08/11

Mrs. Manal bint Chairperson yes yes yes Not Not Not

Mohammed AL-Abdwani member member member

Mr. Venugopal Deputy yes yes yes Not Not Not

Venkatesh Chairperson member member member

Eng. Said Mohammed Member no yes yes Not Not Not

Al Masoudi member member member

Mr. Ali Abdulla Al Abri Member yes yes yes Not Not Not

member member member

Mr. Haitham bin Member no yes yes yes yes yes

Yosef Al-Zadjali

Eng.Omar Khalfan Chairman Not Not Not yes yes yes

Nasser Al Wahaibi member member member

Eng. Hassen Mohammed Deputy Not Not Not yes yes yes

Jawad Ali Abdawani Chairman member member member

Mr. Chin Hee Michael Lim Member Not Not Not yes yes yes


Mr. John Robertson Wright Member Not Not Not no yes yes


Mr. Abdull Aziz Bin (from17 sep.) Not Not Not Not Not Not

Mohammed Bin Said Al Kharusi member member member member member member

* Yes - Attended

* No - Not AttendedMembers of Board changed after AGM on 21.03.2011

Audit Committee

A. Terms of Reference

The new Board has constituted the Audit Committee pursuant to Article (54) of the Articles of Association and its terms of reference include all matters specified under that article.

B. Composition of the Audit committee

The Audit Committee comprises of three independent and non executives directors of the Company and the details of meetings and attendance are as shown in the table 17 below.


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Table 17: Audit Committee Meetings

Name Position 26 Feb 2011 05 May 2011 08 Aug 2011 05 Dec 2011

Mr. Venugopal Venkatesh Chairman yes Not member Not member Not member

Eng. Said Mohammed Al Masoudi Member yes Not member Not member Not member

Mr. Ali Abdullah Al Abri Member yes Not member Not member Not member

Mr. John Robertson Wright Chairman Not member yes yes yes

Mr. Chin Hee Michael Lim Member Not member yes yes yes

Mr. Haitham bin Yosef Al-Zadjali Member Not member yes yes Not member

Mr. Abdull Aziz Bin Mohammed Member Not member Not member Not member yes

Bin Said Al Kharosi

* Yes - AttendedMembers of Board changed after AGM on 21.03.2011

2. Internal Tender Committee:

The Internal Tender Committee established as per the provisions of the Government Tender Law consisted of Chairperson of the Board, one Board member and four members from the executive management team. The ITC was reconstituted following the appointment of new Board of Directors and presently there are four mem-bers in the ITC including the Chairman of the Board as the Chairman of ITC, Deputy Chairman of the Board, General Manager and Senior Manager Shared Services. The details of the meetings held during the year and the board members attendance are as follows:

Table 18: Internal Tender Committee Meetings and board members attendance

Name Position 11 Jan 22 Feb 30 Apr 23 May 31 Jul 29 Oct 27 Dec

Manal Mohammed Chairperson yes yes Not Not Not Not Not

AL-Abdwani member member member member member

(Chairperson BOD)

Mr. Haitham bin Deputy yes yes Not Not Not Not Not

Yosef Al-Zadjali Chairman member member member member member

Eng.Omar Khalfan Chairperson Not Not yes yes yes yes yes

Nasser Al Wahaibi member member

Eng. Hassen Mohammed Deputy Not Not yes yes no yes no

Jawad Ali Abdawani Chairman member member

Members of Board changed after AGM on 21.03.2011

Remuneration Matters

The company paid RO 507 thousand towards remuneration to the key management personnel (including the Directors remuneration of RO. 58 thousand) during the year.

Non- compliance by the company

No penalty or strictures have been imposed on the company by Muscat Securities Market/Capital Market Au-thority or Ministry of Commerce & Industries on any matter related to capital market during the year.


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Communications with the shareholders and Investors

The company maintains close liaison with the Electricity Holding Company (EHC), the Major shareholder on var-ious strategic initiatives and policy issues. The company’s financial and operational performances are reviewed regularly by monthly reporting to Electricity Holding Company. The company’s annual report will be forwarded to the shareholders EHC and Ministry of Finance (MOF).

Distribution of Shareholding

As at 31st December 2011 the share holding was as follows:

Table 19: Distribution of Shareholding

Shareholders Shareholding

RO percent

Electricity Holding Company SAOC 499,950 99.99

Ministry of Finance 50 0.01

Total share capital 500,000 100

The Statutory Auditors

M/s. Price Water House Coopers were the Statutory Auditors of the Company for the year 2011.


FINANCIAL STATEMENTS


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MAZOON ELECTRICITY COMPANY SAOCFINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2011


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