11 Hybrid Plant PDF

22 24
Mission
19 Vision
Objectives HEALTH, SAFETY & FINANCIAL &

ABOUT US ENVIRONMENT OPERATIONAL
Coverage Map
HIGHLIGHTS
Customer Base &

Energy Consumption
CONTENTS 29
Skills, Qualifications
HUMAN
and Training
Regional Staff Distribution

35 Regional Distribution
of Customers
PDO Networks
Creativity Ideas & CUSTOMERS
RESOURCES Employee of the Customers Growth
Month Committee
Growth in Energy Supplied
08 10 43
Power Sent from
RAEC Plants and
Power Purchases 49
CHAIRMAN’S Growth in
Regional Energy
MESSAGE CEO MESSAGE POWER Generation WATER Desalination
Business
GENERATION DESALINATION
Fuel Efficiency
Board of Directors & Committees RAEC Business Development Community
13 Sub Committees of the Board

53
Price Control & Subsidy
Capital Investment Projects 63
Initiatives
Social
Responsibility
CORPORATE Board of Directors Meetings Assets Management
COMMUNITIES in the Region
GOVERNANCE RAEC BUSINESS Achievements 2017
DEVELOPMENT Supply Chain & Customer Service & SOCIETY 3rd Society &
Economy
Renewable Energy Al-Duqm Forum
65 69
OPERATIONAL FINANCIAL STATEMENT
DATA & ACCOUNTS
LIST OF TABLES LIST OF FIGURES
Table - 01 : 2017 Board of Director’s Meetings Schedule 17 Figure - 01 : Omanisation in Each Function (%) 30
Table - 02 : 2016 Board of Director’s Meetings Schedule 17 Figure - 02 : Functional Staff Distribution 31
Table - 03 : Strategic Objectives 20 Figure - 03 : Qualifications of Staff 31
Table - 04 : HSE Performance Between 2016 & 2017 23 Figure - 04 : Regional Staff Distribution 32
Table - 05 : Financial & Operational Highlights 2015 – 2017 25
Figure - 05 : Percentage of RAEC Customers by Category 36
Table - 06 : Number of Omani & Non-Omani Staff 2017 30
Figure - 06 : Percentage of Consumption by Customer Category 37
Table - 07 : Customer Category & Consumption in 2017 36
Figure - 07 : RAEC Customers & MWh Consumption by Region (%) 38
Table - 08 : Customer Distribution by Region in 2017 37
Figure - 08 : Growth in Number of Customers 40
Table - 09 : RAEC Customers Supplied from PDO Networks 38
Figure - 09 : Growth in Energy Supplied (GWh) 41
Table - 10 : Growth in Number of Customers 39
Figure - 10 : Power Sent from RAEC Power Stations & Power Purchases 44
Table- 11 : Growth in Energy Supplied (GWh) 40
Figure - 11 : Percentage Power Sent from RAEC Power Plants & Power Purchases 2017 44
Table - 12 : Water Desalination 2016 – 2017 51
Figure - 12 : Regional Power Generation 2017 (RAEC Power Plants) 45
Table - 13 : The Price Control Allowances & Actual Expenditure 2015 to 2017 54
Table - 14 : List of 10 Largest Projects Under Execution in 2017 56 Figure - 13 : Fuel Efficiency (kWh / Litre) 2013 – 2017 46
Table - 15 : 2017 Operational Data for Power Plants – Dhofar 66 Figure - 14 : Fuel Consumed (Litres) 46
Table - 16 : 2017 Operational Data for Power Plants – Musandam 66 Figure - 15 : Percentage of Water Desalination by Plant – 2016 & 2017 (net) 50
Table - 17 : 2017 Operational Data for Power Plants – Al-Wusta 67 Figure - 16 : Price Control Allowances & Actual Expenditure 2015 -2 017 (OMR Million) 54
Table - 18 : 2017 Operational Data for Water Desalination Plants 67 Figure - 17 : Capex Allowance 2015 – 2017 56
The company regrets the occurrence of a fatality that took place in the concession area of the
company in Dhofar governorate. This was related to a fall of a contractor employee from the roof
of Shab Asaib power plant during the project expansion. The Board has taken steps to strengthen
the health and safety, including the adoption of a strategic plan for the next four years in line with
the plan of the mechanism of price control where the plan includes several aspects of development
with the participation of all categories of employees at the company and identify and address the
weaknesses and the focus to change the cultural aspect more. The Company has completed about
5 million hours of work recorded and four LTIs, and 720 reports of “Near miss” incidents.
CHAIRMAN's FUTURE VISION
MESSAGE The company prepared its five-year plan (2017 – 2021) including a plan to interlink some concession
areas to Dhofar power company. Also, a plan for implementing renewable energy projects has been
prepared and studies have continued to assess the feasibility of adding about 46 MW solar panels in
11 of RAEC existing diesel power plants.
H.E. SHK. FAISAL KHAMIS AL-HASHAR

REGULATORY PRICE CONTROL 4
Chairman
At the end of 2017, the company, in cooperation with the Electricity Regulatory Authority (AER),
completed the price control mechanism and the requirements of operating expenses (OPEX )and
capital expenditure (CAPEX) were determined for the period 2018-2021. The AER has intended to
provid RAEC with the opportunity to review the price control submission for 2020-2021.
DEAR SHAREHOLDERS,
I am pleased to present our Board HUMAN RESOURCES
of Directors Annual Report The total number of employees reach to 466 as at 31 December 2017, of which 444 were Omani
employees, 22 were expatriates and 16 were staff appointed to the Distribution Code Review Panel.
for the Rural Areas Electricity The Omanization rate achieved is 95%. The company continues works to develop a capable and
Company for the financial year talented Omani workforce that contributes to the strength of the nation.
ending 31st December 2017.
OPERATIONAL HIGHLIGHTS
• Total customers increased by 6% from 35,458 in 2016 to 37,513 in 2017.
• Net energy billed to customers increased from 848 GWh in 2016 to 913 GWh in 2017 reflecting an
THE COMPANY'S PERFORMANCE IN 2017
increase of 7.7%
The company succeeded in achieving a revenue of 105 million RO in 2017 compared to RO 95 million
• Water Desalination output increased by 4%, from 3.4 million m3 in 2016 to 3.5 million m3 in 2017.
in 2016, an increase of about 11% was due to the increase in number of customers by 6% and the
This increase is attributed to the increase in demand for water from Al Duqm and Masirah Island.
increase in electricity consumption.
• The Company continues to improve and develop its compliance with the regulations and
Operating expenses in 2017 increased to 81 million compared to Ro 70 million in 2016 due to two
conditions of the license, and continues to cooperate with the Electricity Regulatory Authority,
reasons: the increase in electricity production by 10% and the second reason is rise in the price of
Electricity Holding Company - Nama Group and other relevant stakeholders with the company.
selling diesel fuel by 17% from the budget. The increase in operating expenses led to a higher unit
cost of electricity and thus increased in subsidy.
The company achieved a profit after tax of 5 million RO compared to 3.7 million in the budget 2017. THANKS & GRATITUDE
This is due to continued development in the company, improving on operational performance We would take this opportunity to express our heartfelt gratitude and appreciation to His Majesty
and human resources and commitment to use the latest technologies in company systems. The Sultan Qaboos bin Said for his continued support and guidance through which the company was
company's rating was also announced by Moody and the company has received a Baa2 valuation. able to achieve recognized success and development.
We also thank all the shareholders and the Public Authority for Electricity and Water, the Authority
HEALTH, SAFETY & ENVIRONMENT for Electricity Regulation and the Nama Holding Company for their continued support. The Board of
RAEC has made significant efforts in the management of health and safety and the environment. The Directors greatly appreciates the efforts of the CEO, management team and employees who have
company attaches great importance to HSE development and support to ensure provision of a safe contributed to improved performance and recognized success.
working environment for all employees and contractors.
8 ANNUAL REPORT 2017 ANNUAL REPORT 2017 9

During this year, HSE department has completed 91 site inspections for safety and followed up on
315 Hazard/Defect/Near Miss reports, resulting in approximately 113 corrective actions to eliminate
potentially dangerous situations. Furthermore, they have conducted a 3-week operational audit,
covering 30 sites, and provided recommendations for almost 70 improvement actions.
FINANCIAL PERFORMANCE IN 2017
CEO The economic challenges our country is facing in the past few years due to descending crude oil
prices has resulted in a drop in our residential sector demand. Despite this the company continues to
MESSAGE record a steady growth in number of customers. During the past year 2,055 new customers accounts
were initiated making a total of 37,513 registered customers by the end of 2017 and recording a 6%
customer growth in comparison with year 2016. Furthermore, revenue in 2017 recorded 105 million
Omani Rials making a total profit of 5 million Omani Rials.
Eng. SALEH BIN NASSER AL RUMHI
Chief Executive Officer REBRANDING RAEC / REEFIAH
Rural Areas Electricity Company
In 2017 we initiated a process of rebranding RAEC/Reefiah to
represent the sector’s future challenges, goals, achievements,
expectations from our stakeholders and to improve the overall
It is my pleasure to present the image and reputation of our company. The new brand will be
"TANWEER" which means " Enlightenment" and will be launched
Annual Report of the Company in 2018. The registered name of RAEC will remain as present.
for the year ended December 31st,
2017 which serves to highlight all ORGANISATIONAL CHANGE
stakeholder contribution across the As a company, there are some challenges to our future which require development of our resources
company towards the development and and capabilities. These include the sector changes, the growth in the transmission network, new
achievements aligned to the company’s power generation procurement, and the increasing focus on renewable energy.
strategic direction and vision. Our objective is to work SMARTER:
• Strategic Decisions: more strategic decision-making, especially with business planning, contract
management, and procurement.
• Manage and Lead: improve our leadership, and management skills and performance.
• Asset Management: establish asset lifecycle management with better asset and business
Rural Areas Electricity Company is the only company in the electricity sector which has the license to planning and regulatory submissions.
carry out all the electricity cycle in Generation, Transmission, Distribution, Desalination and Supply in • Regional Operations: develop safer and more effective and robust operations and supply
the wide geographical regions in the Sultanate. This constitutes a challenge and opportunity for us management in our regions with appropriate controls and support from the centre.
as a team for innovation and development, and grants us the opportunity to push the company to the • Teamwork: improve team and inter-departmental working.
top of its success to distinguished levels of excellence in performance and productivity. • Employer of Choice: develop, maintain and recruit staff; improve staff satisfaction; and become
the employer of choice.
HEALTH, SAFETY & ENVIRONMENT
• Renewable Energy: become a sector leader in renewable energy and smart grids.
The company places health, safety and environment at the top priority and strives to raise the
From this perspective, I offer my sincere appreciation to the Chairman and members of the Board
awareness of its employees and contractors continuously. The company is keen to make HSE the
of Directors for all their guidance and support in overcoming our challenges, both internal and
most important pillar for achieving the company objectives.
external. Furthermore, I would like to take this opportunity to thank our customers, suppliers and
contractors for their cooperation and services which allows us to fulfil our mission and vision. We
SAFETY
also thank all the shareholders and the Public Authority for Electricity and Water, the Authority for
With regards to safety performance, the HSE Department is carrying out on-going monitoring of our Electricity Regulation, the Nama Holding Company and the Subsidiaries for the continuous support
performance and compliance across all RAEC operations with the intention of embedding a strong and cooperation. Finally, to our hardworking and qualified employees, I offer my sincere thanks and
HSE culture within the company. gratitude for their dedicated efforts that have led us to accomplish our goals and stride confidently
toward a better, more prosperous future.

CORPORATE
GOVERN ANCE
13
Board of Directors
CORPORATE GOVERNANCE
The Board of Directors of Rural Areas Electricity Company SAOC is committed to maintain the
highest standards of Corporate Governance. RAEC has designed its corporate governance policies
and practices to ensure that the company is focused on its responsibilities to its stakeholders and on
H.E. SHK. FAISAL KHAMIS AL-HASHAR creating long term shareholder value. The company recognizes the interests of all its stakeholders
Chairman including shareholders, employees, customers, suppliers and the communities in which it operates.
RAEC’s corporate governance framework is committed to the highest standards of business integrity,
ethical values and professionalism.
BOARD OF DIRECTORS & COMMITTEES

The Board of Directors is accountable to the shareholders for the governance of the Company.
All Directors are accountable for the proper stewardship of the company’s affairs and share a
ENG. SALEEM AHMED ABDULLATIF responsibility in ensuring the highest standards of disclosure and reporting, ethics and integrity.
Deputy Chairman
Powers specifically reserved for the Board include:
Providing direction and guidance to the company in the formulation of its strategies
and in the pursuance of its operational and financial goals.
SHK. MANSOR TALIB AL-HINAI Monitoring systems of governance and compliance.

Board Member
Overseeing systems of internal control and risk management.
Approving major acquisitions & disposals and capital expenditure.
MR. SULIMAN SALIM AL-ADI Reviewing HR processes with emphasis on top management succession planning.
Board Member
Approving annual budgets and strategic plans.
SUB COMMITTEES OF THE BOARD

The Board is responsible for the establishment and functioning of all Sub Committees, and the
MR. MOHAMMED AHMED AL-BRASHDI
appointment of members to these committees and their compensation. The Board has delegated
Board Member responsibilities to four board sub committees namely, the Tender Committee, Internal Audit
Committee, Human Resources Committee and Capital Investment Committee.

Tender Committee (TC) BOARD OF DIRECTORS MEETINGS
The Tender Committee is composed of two directors from the board and four internal members Table (01) & Table (02) below present all Board of Director’s meetings held in 2016 & 2017
from the management team which are the Chief Executive Officer, Chief Operation Officer-Acting,
Chief Supply Officer-Acting and Financial Controller. The functional heads attend meetings by Table - 01 : 2017 Board of Director’s meetings schedule
invitation. The main function of the Tender Committee is obtaining the most favorable terms for
acquisition of goods and services required for the main activities of the company on the principles of Name of the Sitting
Position Attended BM CIC IAC TC HRC EC
competitiveness, transparency and team decision making. Board Members Fees
Faisal Khamis Al Hashar Chairman 9 √ √ √ √ 5,000
Internal Audit Committee (IAC) Deputy

Saleem Ahmed Abdullatif 7 √ √ √ 4,400
The Internal Audit Committee comprises of three board directors. The functional heads attend Chairman
meetings by invitation. IAC covers the principles governing financial reporting, internal control and
the management of risks, both financial and operational. Osama Ahmed Yunus Member 8 √ √ √ 3,000
Mansor Talib Al Hinai Member 11 √ √ √ √ √ 2,700

Human Resources Committee (HRC)
The Human Resources Committee comprises of two board directors and from the management team Suleiman Salim Al Adi Member 14 √ √ √ √ √ 5,100
the Chief Executive Officer and the Human Resources Senior Manager. The functional heads attend
Mohammed Ahmed
meetings by invitation. HRC ensures on behalf of the board that the HR policies are implemented by Member 4 √ √ 1,600
Al Brashdi
the company and that all matters related to employees are conducted in a fair and transparent manner.
The committee also reviews and approves the corporate Performance Management Standard (PMS). Total Directors Remuneration for 2017 21,800
Capital Investment Committee (CIC)

Table - 02 : 2016 Board of Director’s meetings schedule
CIC is a committee comprising of two board directors and two from the management, the Chief
Executive Officer and the Planning Manager. The Committee is assigned by the Board of Directors to Name of the
Position Attended BM CIC IAC TC HRC EC Fee (RO)
authorize Capital Investments related to following categories: Board Members
Faisal Khamis Al Hashar Chairman 16 √ √ 8,150
Generation capacity requirements that exceed 10MW. Deputy

Osama Ahmed Yunus 20 √ √ √ 7,300
Chairman
Desalination capacity requirements that exceed 5000 m3/day.
Suleiman Salim Al Adi Member 13 √ √ √ √ 5,000
Renewable energy investments.

Saleem Ahmed Abdullatif Member 15 √ √ √ 6,900
 132kV & 33kV networks investments.
Mansor Talib Al Hinai Member 16 √ √ √ √ √ 8,100
Customer extensions and 11 kV and LT load related/non-load related investments of
OMR 1 million and above. Total Directors Remuneration for 2016 35,450
Any other Capital Investment Project, of investments of OMR 1 million and above.
Agree on procurement strategy for each Pre-Investment Appraisal document (PIAD)
that falls under scope of CIC.

ABOUT US
19
ABOUT US COVERAGE MAP
Rural Areas Electricity Company was established under the sector law 78 / 2004 to serve remote Since 2005 RAEC has undertaken a major programme of electrification in the governorates of
areas that could not be economically connected to the main electricity grid of Oman (MIS). RAEC is Musundam, Dhofar, and Al Wusta (also including Al Dakhliyah, Al Dahirah and Sharqiyah) which
a wholly owned subsidiary of the Electricity Holding Company SAOC (Nama Holding) which holds covers almost 75% of the land area of Oman. The company established 51 diesel fuel power plants
100% of the shares. In turn NHC is 100% owned by the government of the Sultanate of Oman. RAEC’s by 2010 and by 2017 interconnected some of these areas to improve efficiency and reduced the
license, issued by the Authoroty for Electricity Regulation (AER) covers its authorized areas which power plants to 35 in number. The total installed capacity has increased to 395 MW by end of 2017.
include Musandam governorate, Al Wusta, Al Dakhliyah, and Dhofar governorate excluding the
Our company operates six desalination plants (3 of them combined with power plant sites) which
licensed area of Dhofar Power Company covering mainly Salalah city.
supply bulk desalinated water to the Public Authority for Electricity and Water (PAEW). Some remote
areas are close to the infrastructure of PDO (Petroleum Development of Oman) & power is provided
by connection of RAEC customers to near by PDO networks.
VISION MISSION
To provide cost To provide

effective and sustainable
reliable electricity electricity and
services using water in a safe,
optimized networks reliable and
and renewable efficient manner.
technology.
OBJECTIVES
The company’s key objectives are listed in the Table below:
Table - 03 : Strategic objectives
Focus Area Strategic Objectives
Finance Maximize shareholder value and meet financial targets
Stakeholders & Compliance Comply with stakeholders, regulatory and statutory requirements
Technical Performance Maximize business performance efficiency
Customer Service Enhance customer experience and achieve regulatory targets
Human Resources Develop and engage staff to meet skills gap
HSE & Sustainability Embed a positive work culture and deliver safety performance
Renewable Energy Maximize renewable energy sources implementation

HEALTH, SAFETY & ENVIRONMENT
RAEC is fully aware of the importance of enforcing solid HSE policies as safety performance
is at the core of RAEC’s business ethos and a key element in the planning and execution of all
operational activities. Safety standards have been raised to embed a clear understanding of good
HSE performance and responsibility among all staff.
The table below shows the safety performance data of 2016 & 2017.
Table - 04 : HSE performance between 2016 & 2017
Component 2016 2017
Fatality 0 1
Lost time injury 1 3
Total Man-Hours worked 5,063,766 7,000,000
LTIFR (Lost Time Injury Frequency Rate) 0.2 0.9
The root causes of these incidents were rigorously investigated and corrective actions have been
implemented to prevent recurrence. The fatality occurring in 2017 related to the fall of a contractor
employee working on the roof of Shab Asaib power plant expansion project in Dhofar governorate.
The findings and improvement actions from all investigations were communicated to RAEC and
contractors’ operational management teams at a series of ‘Safety Stand Down’ events held in each
region.
Other initiatives aimed at improving the safety culture among RAEC staff and contractors, were rolled
out during 2017, included the ‘Life Saving Rules’ – adopted from the oil and gas industry and adapted
for the electricity sector. This set of rules summarizes the high priority safety procedures, laws and
rules into categories and illustrates to staff and contractors their accountability for compliance
(including the consequences for non-compliance).
Following an operational audit, undertaken by the Authority for Electricity Regulation, RAEC received
positive feedback regarding its governance of operational procedures and welcomed constructive
recommendations for improvement. The learning points from all the above were subsequently
used as part of an extensive gap analysis which formed the basis of a new HSE Strategy Plan for
2018 – 2021 aimed at achieving our ultimate goal of ‘zero harm to people, property and the natural
environment’.
The photographs below show the CEO and senior management demonstrating leadership support
for the challenging work in the remote regions.
HEALTH,
SAFETY &
ENVIRONMENT

FINANCIAL & OPERATIONAL HIGHLIGHTS
Table - 05 : Financial & operational highlights 2015 - 2017
Key Highlights Unit 2015 2016 2017

Balance Sheet Highlights and Ratios
Total Assets )RO’ 000( 310,743 357,498 382,503
Net Asset Per Share RO 242 261 269
Current Assets Over Current Liability % 40 32 31
Quick Asset Over Current Liability % 36 28 27
Fixed Assets Over Total liability % 139 136 133
Earning Highlights and Ratios
Revenue )RO’ 000( 84,304 95,090 105,362
Total Revenue/MWh Supplied RO 103 112 115
Gross Profit Over Sales Ratio % 31 26 23
Net Profit Over Sales Ratio % 15 12 5
Return on Capital Employed % 11 11 9
Return on Equity % 10 9 4
Operating Cost Over Sales Ratio % 69 74 77
Admin Cost Over Sales Ratio % 19 15 15
Total Cost Over Sales Ratio % 90 92 99
Other Operational Highlights and Ratios
Total Number of Customers Number 33,187 35,458 37,513
Total Number of New Customers Number 2,283 2,271 2,055
*Total Number of Employees Number 482 474 466
Electricity Generated at RAEC power plants MWh 862,747 939,437 831,949
Electricity Sent from RAEC power plants MWh 806,691 880,027 776,732
FINANCIAL & Power Purchased (PDO & Tibat IPP)
Total Power Supplied to Customers

MWh
MWh
107,366
816,417
114,521
848,666
315,596
913,969
OPERATIONAL Total Losses (Technical & Non-Technical) % 10.72 14.67 16.3
HIGHLIGHTS Total Water Production
Total Water Dispatched (Sent Out)

m3
m3
2,801,593
2,627,190
3,424,350
3,221,585
3,566,944
3,363,470
* Note: The figure includes 16 staff members of the Distribution Code Review Panel

Our financial & operational performance is highlighted hereunder for the last four years of operation
including 2017.
Total Assets (RO.000) Growth in Customers

Total Energy
Consumption 914GWh
Increase 6%
Customer
37,513
382,503
35,458
357,498
37,513
33,187
Total Number
30,904
of Customers
310,743
245,080
New Subscribers
Account 2,055
2014 2015 2016 2017 2014 2015 2016 2017
Total Number
of Employees 466
Growth in Demand (GWH) Revenue (RO.000)
Omanization 95%
105,362
914
95,090
848
Total Water Dispatched
3,363,470 (m3)
84,304
816
703
64,033
2014 2015 2016 2017 2014 2015 2016 2017
Water Production m3
3,566,944
3,424,350
2,801,593
2,397,487
4% Water Desalination Growth in 2017

69% of RAEC customers are in the Domestic Category which
2014 2015 2016 2017
consume 49% of energy distributed

HUMAN
RESOURCES
29
HUMAN RESOURCES
Everyone in RAEC contributes their unique personal skills so that together the company produces Figure - 02 : Functional staff distribution
excellent performance in all areas of its business. Our shared values encompass a common sense
of public commitment and a strong sense of duty to the community. One of the company’s main
objectives is to develop a capable and talented Omani workforce that contributes to the strength of General Managers & Deputies 2
the nation. By December 2017 the number of directly employed staff reached 466 employees. The
Operations & Maintanance Managers of Technical Dept 14
figure includes 16 full time staff appointed to the Distribution Code Review Panel (which supports
standards and specifications work for all sector companies). The following table and figures show the Manager of Administration & Finance 18
number of staff in each category, the Omanisation percentage and the functional staff distribution.
Deputy Managers & Head of Sections 65
Table - 06 : Number of Omani & Non-Omani staff 2017 Engineers 67

Omani Expatriate Technicians 73
Job Category
Staff No. Staff No.
General Managers& Deputies 2 0 Skilled Manpower 211
Operations & Maintenance Managers of Technical Department 12 2
Manager of Administration & Finance 18 0
Deputy Managers & Head of Sections 58 7
Engineers 58 9 SKILLS, QUALIFICATIONS & TRAINING

Technicians 71 2 RAEC considers training and development for its
staff as one of our main priorities. RAEC provided
Skilled Manpower 209 2
scholarships for selected staff as part of their
Distribution Code Review Panel staff 16 0 development plans. Moreover, RAEC provided 49
other courses covering a range of technical and
Total Staff Number 444 22
business skills. It can be observed from Figure - 03
that more than 39% of total RAEC staff are qualified
to Bachelors or Masters level.
Figure - 01 : Omanisation in each function (%)
General Managers & Deputies 100%
Operations & Maintanance Managers of Technical Dept 86% Figure - 03 : Qualifications of staff
Manager of Administration & Finance 100%
Deputy Managers & Head of Sections 89% 95%

Total Staffs
Master 23
% Bachelors 154
Engineers 87%
Diploma / Higher Diploma 125
Technicians 97%
High School 109
Skilled Manpower 99%
None 39
RAEC achieved 95% Omanisation, by employing 444 Omanis out of 466 employees.

REGIONAL STAFF DISTRIBUTION CREATIVITY IDEAS & EMPLOYEE OF THE MONTH COMMITTEE
The Creativity Idea & Employee of the Month Committee has been established over the past 4
years and aims to recognize talented employees and reward ideas that can improve any aspect
Figure - 04 : Regional staff distribution
of the company’s business. One idea was “I am RAEC” a smart touch screen next to the reception
which provides useful information for visitors. For example, CEO message, RAEC strategy, RAEC
departments, RAEC projects, RAEC tenders and other information needed by visitors.
Musandam 17%
Muscat 45%
Al Dhahirah 1%
Al - Sharqiyah 3%
Al Dhakeliya 8%
Al Wusta 11%
Dhofar 15%
It can be observed from Figure - (04) that, 45% of total RAEC direct
staff are located in the head office in Muscat. The rest are distributed
among the authorized areas according to the needs and the size of
the networks and customer distribution. Customer regional offices
are providing direct support to customers and addressing their needs
(21 offices). In addition, our Emergency Service offices, customer
services offices and power plants are manned by our contract staff
(approximately 1,300 contract staff).

CUSTOMERS
35
CUSTOMER BASE & ENERGY CONSUMPTION
Figure - 06 : Percentage of consumption by customers category
RAEC serves electricity customers mainly in the rural areas of the Sultanate of Oman. We supply
power from 35 diesel power stations and some of our customers are supplied by connections to
networks belonging to PDO (Petroleum Development of Oman). The total number of customers
increased by 6%, from 35,458 in 2016 to 37,513 in 2017. Table (07) presents the 2017 customer data Agriculture & Fisheries 4.9% Industrial 0.1%
by category and energy consumption.
Table - 07 : Customer category & consumption in 2017
Commercial 9.1% Ministry of Defense 3.9%
Customers Electricity Consumption
Customer Category
No. % MWh %
Domestic 49.4% Tourism 3.3%
Agriculture & Fisheries 509 1.4 44,646 4.9
Commercial 7,181 19.1 83,228 9.1

Government 10.0% CRT 19.3%
Domestic 25,910 69.1 451,348 49.4
Government 3,329 8.9 91,426 10.0
Industrial 35 0.1 722 0.1
Ministry of Defense 115 0.3 35,618 3.9 REGIONAL DISTRIBUTION OF CUSTOMERS

Tourism 67 0.2 30,508 3.3 Table (08) & Figure - 07 show the customer distribution by regions and customer category, indicating
CRT* 367 1.0 176,474 19.3 that the majority of RAEC customers are located in Al Wusta and Musandam Governorates with 42%
and 39% respectively, while 19% are located in rural areas of Dhofar Governorate.
Total 37,513 100 913,969 100
The above table shows that 69% of RAEC customers are in the domestic category and consume Table - 08 : Customer distribution by region in 2017
around 49.4% of total energy supplied. *CRT customers contribute 19.3% of the total MWh supplied,
Dhofar Musandam Al-Wusta Total
and the total consumption of remaining categories is around 31.3%.
Customer Electricity Electricity Electricity Electricity
Category Customer Customer Customer Customer
Consump- Consump- Consump- Consump-
No. No. No. No.
tion MWh tion MWh tion MWh tion MWh
Agriculture &
184 37,813 264 4,425 61 2,408 509 44,646
Figure - 05 : Percentage of RAEC customers by category Fisheries
Commercial 1,222 14,995 2,541 27,844 3,418 40,389 7,181 83,228
Domestic 4,373 113,898 10,860 182,447 10,677 155,003 25,910 451,348

Agriculture & Fisheries 1.4% Industrial 0.1% Government 1,221 29,864 838 30,684 1,270 30,879 3,329 91,426
Industrial 2 28 9 339 24 355 35 722
Commercial 19.1% Ministry of Defense 0.3% Ministry of

66 2,115 32 13,492 17 20,011 115 35,618
Defense
Tourism - - 23 19,572 44 10,936 67 30,508

Domestic 69.1% Tourism 0.2% CRT 77 45,849 119 41,744 171 88,880 367 176,474
Total 7,145 244,562 14,686 320,548 15,682 348,860 37,513 913,969
Government 8.9% CRT 1.0% 19% 27% 39% 35% 42% 38% 100% 100%
Note: Data for Al Wusta includes Masirah Island (Sharqiyah), Dakhalya, Dahira governorates.
*CRT customers include those subject to a cost reflective tariff, mainly commercial, industrial & government
customers consuming more than 150,000 KWh per year.

Figure - 07 : RAEC customers & MWh consumption by region (%)
Customer Consumption
19% 27%
42% 38%
39% 35%
Al - Wusta Dhofar Musandam

CUSTOMERS GROWTH
Overall, the number of RAEC customers has grown by 6% in 2017. Net additions of 2,055 customers
were added to the customer base in 2017. The following table and figure shows the growth in
customer accounts over the last 4 years.
PDO NETWORKS
Most of RAEC Customers are supplied from RAEC’s power stations. However, some power is Table - 10 : Growth in number of customers
purchased from Petroleum Development of Oman (PDO). Power purchase from PDO offers a more
economic means of providing power to some very remote locations where RAEC power generation Customer Category 2014 2015 2016 2017
systems do not exist and customers are located near PDO power networks. In 2017, 14.6% of RAEC
customers were supplied from PDO networks for which energy consumption was 14% of RAEC total Agriculture & Fisheries 336 394 443 509
energy supplied (RUD*). Table - 9 shows the number of RAEC customers supplied from PDO network
over the last 5 year. Commercial 5,651 6,119 6,640 7,181
Table - 09 : RAEC customers supplied from PDO networks Domestic 21,688 23,134 24,570 25,910
Government 3,047 3,322 3,546 3,329

Year Al Wusta Dhofar Total
industrial 44 50 61 35
2013 3,111 802 3,913
Ministry of Defense 75 104 132 115
2014 3,390 907 4,297
Tourism 62 64 66 67
2015 3,603 939 4,542
CRT1 - - - 367
2016 4,007 1,033 5,040
Total Customers 30,903 33,187 35,458 37,513
2017 4,352 1,158 5,510
% Growth 9.2 7.4 6.8 5.8
* RUD = Regulated units distributed

Figure - 8 : Growth in number of customers Figure - 9 : Growth in energy supplied (GWh)
37,513 914
35,458 848
7.7%
33,187 5.8% 816
3.9%
30,903 6.8% 703
7.4% 16.1%
2014 2015 2016 2017 2014 2015 2016 2017
GROWTH IN ENERGY SUPPLIED

Energy supplied to RAEC customers reached 914 GWh in 2017 compared with 848 GWh in 2016. The
table and figure below show the growth in energy supplied and per customer category from 2014
to 2017.
Table - 11 : Growth in energy supplied (GWh)
Customer Category 2014 2015 2016 2017
Agriculture & Fisheries 26,191 29,849 32,833 44,646
Commercial 117,945 125,671 132,921 83,228
Domestic 322,064 401,818 400,437 451,348
Government 144,472 155,882 172,641 91,426
Industrial 37,989 44,468 47,467 722
Ministry of Defense 31,664 29,350 33,539 35,618
Tourism 23,028 29,378 28,829 30,508
CRT1 - - - 176,474
Total 703,353 816,416 848,667 913,969
% Growth 8.0 16.1 3.9 7.7

POWER
GENERATION
43
POWER SENT FROM RAEC PLANTS & POWER PURCHASES REGIONAL ENERGY GENERATION
The net power sent from RAEC power plants decreased to 776,732 MWh in 2017 from 880,027 MWh in The following figure portrays the regional power generation from RAEC power stations in 2017. It can
2016 reflecting a decrease of 11.7%. This was due to commissioning of the new Tibat Independent Power be noted that, around 43% of power was generated from Al Wusta power plants, 35% and 22% from
Plant (IPP) in Musundam which contributed to RAEC energy demand in 2017. Figure (10) shows MWh Dhofar and Musandam power plants respectively.
sent out from RAEC power stations & Power Purchases in the last five years and Figure (11) presents
the detail of RAEC’s supplied power by RAEC’s Plants, PDO, Tibat and Al-Mazyunah (renewable PV)
sources.
Figure - 12 : Regional power generation 2017 (RAEC power plants)
356,948
Figure - 10 : Power sent from RAEC power stations & power purchases
319,756
286,025
880,027 276,104
806,691 182,397
776,732
175,416
698,134
635,314
315,596
124,684
107,366 114,521 Musandam Dhofar Al - Wusta
94,290
MWh Net MWh Gross

2013 2014 2015 2016 2017
Note: MWh sent = gross MWh generated minus power plant internal consumption
Power Production Power Purchases
Figure - 11 : Percentage power sent from RAEC power plants & power purchases 2017
PDO
11.7%
Tibat (Independent power plant)
17.2%
Mazyuna (PV renewable)

0.1%
RAEC Plant (net)

71%

FUEL EFFICIENCY
Our measure of diesel fuel efficiency represents the number of kWh produced by each litre of Diesel
at RAEC power plants. Our business plan targeted an average of 3.6 kWh per litre of diesel. The
target was achieved as the average fuel efficiency from RAEC power plants reached 3.66 kWh per
litre of fuel in 2017 compared to 3.54% in 2016 reflecting an improvement by 3%. This is due to proper
maintenance, load balancing & adding new Engines in the RAECO power system. The following chart
shows the trend in fuel efficiency from 2013 to 2017 and total fuel consumption.
Figure - 13 : Fuel efficiency (kWh / litre) (2013 - 2017)
3.66
3.6
3.57
3.54 3.54
2013 2014 2015 2016 2017
Figure - 14 : Fuel consumed (Litres)
264,991,846
239,825,385
227,230,132
211,906,335
193,653,648
2013 2014 2015 2016 2017
Note: The reduction in fuel consumption in 2017 was due to commissioning of the new Tibat independent power
plant in Q2 2017, which provided a larger share of the power requirement for Musandam governorate.

WATER
DESALINATION
49
GROWTH IN DESALINATION BUSINESS Table - 12 : Water desalination 2016 – 2017
As part of its regulated activities, RAEC produces desalinated water from 6 Reverse Osmosis (OMR)
plants. The six plants are located in Musandam (Kumzar), Al Wusta (Duqm, Masirah, Soqrah and Plant Gross Production m3 Net sent m3 % Growth
Abu Mudhabi) and Dhofar (Al-Halanyat). RAEC supplies the desalinated water in bulk to the Public Facility Capacity in Water
Authority of Electricity and Water (PAEW) for distribution to end customers. In 2017 RAEC produced (m3/day) Sent
2016 2017 2016 2017
3,566,944 cubic metres of desalinated water. This is around 4% higher than 2016 desalination amount
of 3,424,350 cubic metres. As can be seen in Figure (15) Al Wusta regional desalination plants sent Al Duqm 8,000 1,706,488 1,769,772 1,652,376 1,708,222 3.3
96% of total desalination water (mainly from Al-Duqm Plant 51% & from Masirah Plant 43%) and the
rest was produced by other facilities.
Masirah 6,100 1,507,687 1,576,702 1,361,722 1,437,333 5.6
Figure - 15 : Percentage of water desalination by plant – 2016 & 2017 (net) Kumzar 450 73,664 74,880 72,686 73,505 1.1
AbuMudabi 200 45,054 44,922 44,289 44,173 0.3
51% 51%
Al Duqum
43% Soqrah 250 42,128 47,156 41,776 46,841 12.1
42% Masirah
Kumzar
15% AbuMudabi Al Halaniyat 198 49,329 53,512 49,010 53,396 8.9
Sawqrah
2% 2% 2% 2% Al Halaniyat
1% 1% 1% Total 15,198 3,424,350 3,566,944 3,221,859 3,363,470 4.4
Note: 1m3= 220 imperial gallons
2016 2017

RAEC BUSINESS
DEVELOPMENT
53
PRICE CONTROL & SUBSIDY PRICE CONTROL REVIEW PROCESS TIMELINE
RAEC operates under a RPI-X Price Control that covers its production (generation / desalination), The below chart illustrates the stages in 2017 in which the company worked with the AER to determine
transmission, distribution and supply activities. RAEC’s current price control is fixed by the Authority the forthcoming price control (PC4: 2018-2021).
for Electricity Regulation which allows RAEC to recover its operating costs as well as providing
funding provisions for capital investments. A detailed assessment was conducted in 2017 by AER to
establish a new Price Control for the period 2018 - 2021.
Price Control Review Process Timeline
Table - 13 : The price control allowances & actual expenditure 2015 to 2017
Sep 2016: 20th Dec: 12th Mar 2017:

Allowances (OMR Million) Actual (OMR Million) AER started 6th August: 1st Jan 2018:
RAECresponded RAEC RAEC Response
date collection to the PC submission of Starts of new
Items and Technical to the initial price control
consultation the price control proposals
2015 2016 2017 2015 2016 2017 Assessment paper proforma
Fuel Cost 34.7 36.2 40.1 32.8 43.3 44.1

2016 2017
Opex 29.0 30.8 31.4 28.9 29.6 29.5
Nov: 22nd December: 1st June:

AER issued 19th Oct: 12th Nov 2017:
AER issued the AER issues initial Issues final price Responses to
Capex 64.9 49.5 37.2 45.4 53.0 35.4 “PC key issues price control price control
consultation control proposals the price control
proforma proposal final proposal
paper”
Figure - 16 : Price control allowances & actual expenditure 2015-2017 (OMR million)
The Price Control No. 4 (2018 - 2021) is expected to assist and encourage Licensees to address key
business challenges including:
• Information systems and customer service.
64.9
• Efficiency and justification of capital improvement.

53
49.5
45.4
• Introduction of cyber security plans.

43.3
44.1
40.1
37.2
36.2
• Improve costs of operating activities as well as administration and salaries costs.

34.7
34.5
31.4
32.8
30.8
29.5
29.6
29
• Enhance technical skills, business process and license compliance.

28.9
• Allow interlink of RAEC networks with DPC and seek opportunities for further interconnections.
• Realisation of benefits from the implementation of asset management systems.

2015 2016 2017 2015 2016 2017
Allowances Actual
Fuel Cost Opex Capex

CAPITAL INVESTMENT PROJECTS Musandam Transmission and Generation Project
During 2017 RAEC continued with major investments in its asset base, including expansion and Durig the past 4 years RAEC has
renewal of power plants, development of 11kV, 33kV and 132kV networks and associated substation undertaken a strategic project which
capacity. These projects are expected to secure the forecast demand for power in the remote areas will support and secure the growth of
under the responsibility of RAEC. A list of the largest 10 projects is provided below. the electricity demand in Musandam
governorate. This project included the
Table - 14 : List of 10 Largest projects under execution in 2017
construction of over 100km of 132kV
Project transmission line between Dibba, Khasab
Tender Value and Tibat near the border of the United
Project Name Arab Emirates. A new independent power
No. (RO
Million) plant has been constructed at Tibat which
connects to RAEC’s new 132kV system
Double Circuit 132 kV Transmission Line and Grid
27/2012 35.90 to supply power to the whole of the
Substations in Musandam Governorate
Musundam peninsula, as well as Dibba.
96/2013 Construction of Khasab New Power Station in Musandam Governorate 24.85 In addition, RAEC’s old Khasab power
plant was decommissioned and replaced
26/2015 EPC of (33 kV) Network and Substations in Wilayat Masirah 7.10 by a new diesel power plant of 80MW
capacity, which is expected to be commissioned in quarter 1 of 2018. RAEC energized the 132 kV
41/2015 Upgrading of Shab Asaib Power Station in Dhofar Governorate 6.18
system from Tibat to Khasab in 2017. It is expected to energize the Dibba substation by the second
9/2016 Upgrading of Hijj Power Station in Al Wusta Governorate 3.82 quarter of 2018.
62/2013 Headquarters Office for RAEC at Airport Heights 3.43

Expansion & Construction of other Power Plants
19/2015 Construction of Khasab Primary Substation in Musandam Governorate 2.58
RAEC’s authorized areas show significant growth in demand especially the peak load comparing to
Construction of (33KV) Feeder (4 Nos.) from Khasab Grid Station to Connect the previous years, which requires expansion of the existing power stations or building new power
11/2016 2.18
with existing feeders at Wilayat Khasab-Musandam Governorate stations. In order to do so, RAEC invested to expand Hijj power station and Shab Asaib power station
Construction of (33kV) Feeder from Khasab power station to Kumzar primary by 12 MW each. In addition to that the company built a new power station in Masirah with an installed
9/2015 1.44 capacity of 56 MW.
substation in Wilayat Khasab - Musandam Governorate
50/2016 Rehabilitation of Dhafrat Existing Power Station in Al Wusta Governorate 1.27
Figure - 17: Capex allowance (2015 - 2017)
Load Related
2015 4.5 4.2 22.8 28.3 5.1 Non-Load Related
132 kV & 33 kV
2016 4.9 4.2 9.7 28.8 0.7 Investment
Generation &
2017 5.2 4.2 11 16.1 1.9 Desalination
Common Assets

ASSETS MANAGEMENT ACHIEVEMENTS 2017 The project implementation will start in Q2 of 2018, where the Musandam region will be prioritised
first with standalone meters in remote areas and then the roll out will be conducted for Al-Wusta &
• RAEC has built its own laboratory which is equipped with modern and advanced devices for
Dhofar where Smart meters will be offered.
measuring moisture within transformers, and other parameters such as dissolved gases acidity
ratio. This data gives valuable information on transformer degradation.
• The company successfully passed the ISO 55001 Surveillance Audit for its Asset Management
System. The external audit was performed by Lloyd’s Register whose objective was to verify the
condition of previous non-compliances, and to assess continued compliance with ISO 55001.
• The RAEC Asset management department also initiated a condition monitoring programme for Collection
11kV and 33kV overhead lines using special tools such as a thermal and Corona Camera, wooden DISCO CRM Network - 2
pole tester and partial discharge tools.
• RAECO has started an Oracle Enterprise Asset Management system (NIMS) which will improve
the organization’s ability to manage the maintenance and performance of its asset base.
• In 2017 RAEC completed almost all of the GIS field survey and data collection to complete the
implementation of the GIS system. This software and database provides the physical location
and details of all power plant, desalination and network assets (including customer connections). DISCO Websites Customers
Central prepaid portal
Plans are in place to link this data with asset maintenance and performance data to improve our (Virtual Vending)
ability to efficiently manage all assets of desalination and power plants along with our electrical
networks.
Collection
Network - 1
DISCO Billing
New Meters Meters
SUPPLY CHAIN & CUSTOMER SERVICE New Vending Secure

System Vending
Prepaid Metering Project

The Prepaid Metering Project provides the infrastructure of the prepaid meters, where the customer
can charge his meter through a token number which can transfer credit to the meter remotely. RAEC AMR Project
will ensure that the channels and operations are equipped to handle the project in all licensed regions. The Automated Metering Reading project is designed
The meters come with two options: Standalone & Smart meters, both meters can be charged using for high value customers who consume about 44% of
mobile application to purchase the token. The project is expected to achieve the following: the total generated power in RAEC. The subjected
• Resolve and prevent cases of hardship customers accounts are around 521 scattered in all regions. The
project implementation is expected to enhance the
• Reduction of operational costs related to meter reading and billing
quality and speed of processing of metering data, to
• Reduction of customer disconnections due to customer’s non-payment improve billing accuracy, and to reduce debtor days.
• Enhancing customer experience and reducing visits to the offices and call centres The AMR will enhance the ability for customers to
access and interpret their own consumption data and
• Reduction of electricity consumption by customers
increase energy awareness & efficient use of energy.

Renewable Energy
As part of RAEC’s vision to reduce cost of generation and fuel consumption, several renewable RAEC RENEWABLE ENERGY SITES
energy initiatives and measures have been initiated.
11 sites are currently under study to deploy Solar PV capacity at RAEC existing diesel power
In 2016 a Renewable Energy plan was formulated selecting 11 sites for an in-depth economic plants, as well as construction of 50MW Wind Project in Fatkhait.
and technical feasibility study for the implementation of solar diesel hybrid solutions through an
IPP (Independent Power Producer) framework. This in turn will increase efficiency and lower the
associated O&M costs of RAEC power stations. The anticipated capacity for the 11 ‘hybrid’ sites is
approximately 42MW peak. Madha
The feasibility study commenced in November 2017 by assigning the Technical Advisor DNV.GL,
whose role was to undertake the feasibility study and support RAEC in determining the economic
and technical feasibility of these sites and any challenges for implementation. This was completed in
March 2018, with the decisive outcome that all 11 sites are economically and technically feasible with
a positive return on investment and lowering of RAEC costs of generation.
RAEC has initiated the procurement phase of the project by processing the application for securing
Masrooq
project land plots for all the 11 sites from Ministry of Housing. It is envisaged that the final contract
award to the successful bidder and project construction will start by Q2 2019.
In addition, RAEC has initiated a project to establish a 50MW wind farm in Dhofar governate, at
Fatkhait. This project is planned to be established under a Joint Development Agreement (JDA) with Al Khuwaimah
the Masdar renewable energy initiative of Abu Dhabi. Expected date of commissioning of the Wind
farm is Q4 2019 which will consist of 13 turbines of 3.8MW each. Masirah
Fatkhait
Farshat Qatbeet
Hitam
Al Khadrah
Mitten
Al Mazyounah Al Hallaniyat
Hasik
Diesel power generating Dhofar wind
11 sites were selected in

2016 for renewable
feasibility study 50MW power project in
Shalim & Juzor Al
Hallaniyat
Renewable 11 sites Dhofar Wind Project
Wind Turbines and each has

13 Capacity of 3.8MW
93GWh Generated Power
per Year Generated Power
160GWh per Year
42MW Total Capacity

Avoid 110,000 Tons of CO2 emission

COMMUNITIES
AND SOCIETY
63
COMMUNITY INITIATIVES
Within the company’s focus on its responsibilities towards the community, Rural Areas Electricity
Company has provided support to Al-Wafaa Center for Rehabilitation of Handicapped Children in
Khasab governorate. The support involved providing shedding in the external arena of the center
as well as providing educational martials for the students. This initiative, along with other social
responsibility initiatives, forms an integral part of the company’s strategy to support the community.
Social responsibility in the region

Upon the request of the Directorate General
of Education in South-East Al Sharqiya, RAECo
assisted in linking of an electrical generator for
Tahaim school with the cooperation between
Al-Wusta’s Customer Services and Operation
Department.
3rd Society & Economy Al Duqom

Forum
Rural Areas Electricity Company participated in
the 3rd Society and Economy Forum of Al Duqm
organized by the Chamber of Commerce and
OPERATIONAL
Industry of Oman. It was held on the 9th May
at the Grand Hyatt Hotel in Muscat under the
patronage of His Highness Sayyed Asaad bin
Tariq Al Said and His Excellency Dr. Mahathir
Mohammed, the previous Prime Minister of
Malaysia.
DATA
The forum discussed the investment
opportunities and the vision of the economic
diversification in the Sultanate. The most
important projects were presented in the
Economic Zone of Duqm and its role in serving
the national economy and the local community.

OPERATIONAL DATA Table - 17 : 2017 Operational data for power plants – Al-Wusta
Table - 15 : 2017 Operational data for power plants - Dhofar Month Diesel
Installed Maximum Gross
Plants of Peak Net MWh Consumption
Month Diesel (kW) peak (kW) MWh
Installed Maximum Gross Demand (000 Ltrs)
(kW) peak (kW) MWh
Demand (000 Ltrs)
Masrooq 1,200 520 July 1,859 1,822 628
Al-Halaniyat 1,565 460 November 1,933 1,300 603
Al-Matfaha 660 220 September 784 778 341 Masirah 22,431 16,570 May 72,223 59,814 19,009
Andat 2,012 820 June 3,030 3,019 872

Masirah (New) 56,000 15,301 November 10,333 9,656 2,777
Ayun 749 200 June 855 846 356
Al-Duqm (New) 52,789 30,700 June 148,709 128,263 40,683
Barbazum 1,488 695 June 2,753 2,740 812
Dhahbun 3,760 1,724 June 6,527 6,510 2,182 Al-Khaluf 2,508 1,013 May 4,366 4,221 1,334
Fatkhait 534 265 September 1,168 1,160 420
Al-Khuiaima 5,948 3,310 May 15,000 14,696 4,276
Hirweeb 1,775 1,150 June 3,804 3,782 1,174
Mahwice 905 228 June 996 987 349 Al-Najdah 2,700 1,223 May 4,318 4,193 1,362
Maqshan 1,788 820 May 3,577 3,532 1,249

Hijj 18,892 13,530 April 56,649 56,279 15,646
Mazyunah 14,000 7,860 June 33,595 32,092 9,194
Mettin 3,207 1,040 June 3,882 3,862 1,186 Hitam 3,432 1,420 June 6,080 5,761 1,879
Mothorah 2,012 445 June 1,938 1,893 626

Surab 3,500 1,616 May 6,225 6,041 2,037
Saih Al-Khairat 48,702 24,400 August 150,875 144,870 36,637
Dhafrat 2,260 1,200 May 3,774 3,592 1,566
Shahb Asayb 14,000 9,280 June 45,089 44,330 11,944
Sharabat 2,292 1,070 May 4,839 4,775 1,594 Al-Khadra 12,676 6,150 May 27,412 25,418 7,943
Tushnat 1,170 360 September 1,598 1,582 518
184,336 356,948 319,756 99,140
Mudhai 3,404 2,000 May 8,247 7,755 2,506
Hasik 5,000 2,572 November 10,536 10,290 3,326
109,023 286,025 276,104 75,890 Table - 18 : 2017 Operational data for water desalination plants
Installed
Table - 16 : 2017 Operational data for power plants – Musandam Desalination Gross
Governorate Capacity m3/ No of unit Net (000, m3)
Plant (000, m3)
Month Diesel day
Installed Maximum Gross
(kW) peak (kW) MWh Dhofar Al-Halaniyat 198 3 54 53
Demand (000 Ltrs)
Kumzar (Standby) 80 Mar 0.385 0.348 0.3 Al-Wusta Abu Mudabi 200 3 45 44
Dibba 23,430 20,100 June 87,885 87,542 24,277 Al-Sharqiah Masirah 6,100 10 1,577 1,437
Khasab 67,400 40,100 April 66,019 61,150 17,437 Al-Wusta Sawgrah 250 2 47 47
Madha 11,300 7,220 Jun 28,493 26,723 8,627 Musandam Kumzar 450 3 75 74
102,130 182,397 175,416 50,341 Al-Wusta Al-Duqm 8,000 4 1,770 1,708

FINANCIAL
STATEMENT &
ACCOUNTS
69
Independent auditor’s report to the shareholders of continue as a going concern, disclosing, as applicable, matters related to going concern and using
Rural Areas Electricity Company SAOC the going concern basis of accounting the Board either intends to liquidate the Company or to cease
operations, or has no realistic alternative but to do so.
Report on the financial statements
Auditor’s responsibilities for the audit of the financial statements
Opinion Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
We have audited the financial statements of Rural Areas Electricity Company SAOC (the “Company”), are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report
which comprise the statement of financial position as at 31 December 2017, and the statement of profit or that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee
loss and other comprehensive income, statement of changes in equity and statement of cash flows for that an audit conducted in accordance with ISAs will always detect a material misstatement when it
the year then ended, and notes to the financial statements, including a summary of significant accounting exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
policies set out on pages 72 to 105. aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial
position of the Company as at 31 December 2017, and its financial performance and its cash flows for the As part of an audit in accordance with ISAs, we exercise professional judgement and maintain
year then ended in accordance with International Financial Reporting Standards (IFRSs). professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due to
Basis for opinion fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting
under those standards are further described in the Auditor’s Responsibilities for the Audit of the a material misstatement resulting from fraud is higher than one resulting from error, as fraud may
Financial Statements section of our report. We are independent of the Company in accordance with involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal
the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants control.
(IESBA Code) together with the ethical requirements that are relevant to our audit of the financial
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures
statements in Sultanate of Oman, and we have fulfilled our other ethical responsibilities in accordance
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
with these requirements and the IESBA code. We believe that the audit evidence we have obtained is
effectiveness of the Company’s internal control.
sufficient and appropriate to provide a basis for our opinion.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
Other matter estimates and related disclosures made by Board.
The financial statements of the Company for the year ended 31 December 2016 were by another firm of • Conclude on the appropriateness of the Board’s use of the going concern basis of accounting and,
auditors, who issued an unmodified audit opinion dated 8 March 2017. based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Company’s ability to continue as a going concern.
Other information If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
The Board is responsible for the other information. The other information comprises the Board of report to the related disclosures in the financial statements or, if such disclosure are inadequate, to
Directors’ report which is expected to be made available to us after the date of this audit report. modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditor’s report. However, future events or conditions may cause the Company to cease to continue
Our opinion on the financial statements does not cover the other information and we do not and will not as a going concern.
express any form of assurance conclusion thereon.
• Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and events
In connection with our audit of the financial statements, our responsibility is to read the other information
in a manner that achieves fair presentation.
identified above and, in doing so, consider whether the other information is materially inconsistent with
the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially
We communicate with the Board regarding, among other matters, the planned scope and timing of
misstated. If, based on the work we have performed, we conclude that there is a material misstatement
the audit and significant audit findings, including any significant deficiencies in internal control that we
of this other information, we are required to report that fact. We have nothing to report in this regard.
identify during our audit.
Responsibilities of board of directors for the financial statements

Report on other legal and regulatory requirements
The Board of Directors (the Board) is responsible for the preparation and fair presentation of the financial
We report that the financial statements of the Company as at and for the year ended 31 December 2017
statements in accordance with International Financial Reporting Standards and their preparation in
in all material respects, comply with the applicable provisions of the Commercial Companies Law of
compliance with the applicable provisions of the Commercial Companies Law of 1974, as amended,
1974, as amended.
and for such internal control as the Board determines is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Board is responsible for assessing the Company’s ability to KPMG
11 March 2018

Statement of financial position Statement of profit or loss and comprehensive income
at 31 December 2017 for the year ended 31 December 2017
2017 2016 Notes 2017 2016
Notes RO ’000 RO ’000
RO ’000 RO ’000
ASSETS
Non-current assets
Revenue 19 105,362 95,090
Property, plant and equipment 5 330,019 308,196
Cost of sales 20 (81,442) (70,043)
Current assets
Inventories 6 6,184 5,943
Trade and other receivables 7 27,210 16,568 Gross profit 23,920 25,047
Cash and cash equivalents 8 19,090 26,791 General and administrative expenses 21 (15,439) (14,141)
Total current assets 52,484 49,302 Other income 23 4,305 3,496
Total assets 382,503 357,498
EQUITY AND LIABILITIES Profit from operations 12,786 14,402
Capital and reserves
Finance income 24 61 75
Share capital 9 500 500
Legal reserve 10 167 167 Finance costs 24 (3,134) (1,370)
General reserve 11 250 250
Retained earnings 32,365 28,693
Shareholder’s funds 12 101,089 101,089 Profit before tax 9,713 13,107
Taxation 25 (4,541) (1,721)
Total equity 134,371 130,699
Non-current liabilities Profit for the year and total comprehensive income 5,172 11,386
Amounts due to holding company 13 4,002 4,002
Provisions 14 1,375 1,329
Deferred tax liability 15 14,391 9,848
Deferred revenue 16 58,022 58,807
Total non-current liabilities 77,790 73,986
Current liabilities
Deferred revenue 16 3,123 2,884
Trade and other payables 17 51,875 57,745
Short term borrowings 18 114,825 91,750
Provisions 14 519 434
Total current liabilities 170,342 152,813
Total liabilities 248,132 226,799
Total equity and liabilities 382,503 357,498

The accompanying notes form an integral part of these financial statements.
Faisal Al Hasher Saleem Abdullatif Saleh Al Rumhi

Chairman Deputy Chairman Chief Executive Officer

Statement of cash flows
134,371
130,699
5,172
(1,500)
120,813
11,386
(1,500)
RO’000
Total
for the year ended 31 December 2017
2017 2016
RO ’000 RO ’000
Cash flows from operating activities
101,089
101,089
101,089
RO’000
Share-
holder’s
funds
Profit before tax 9,713 13,107
Adjustments for:
Depreciation 11,128 9,765
Finance costs 3,134 1,370
Finance income (61) (75)
5,172
(1,500)
32,365
28,693
11,386
(1,500)
18,807
RO’000
Retained
Earnings
Loss on sale of property, plant and equipment (9) 8

Provision for inventory 332 153
Provision for employee benefits - net 284 86
Provision for bad and doubtful debts 455 45
250
250
250
RO’000
General
reserve
Operating cash flows before working capital changes 24,976 24,459

Working capital changes due to:
Deferred revenue (547) (2,784)
Trade and other payables (5,870) 744
167
167
167
RO’000
Legal
reserve
Inventories (572) (1,037)

Trade and other receivables (11,096) 19,898
500 Payment of employee benefits (153) (48)

500
500
RO’000
Share
capital
Net cash from operating activities 6,738 41,232

Cash flows from investing activities
Purchase of property, plant and equipment (32,950) (53,679)
Proceeds from sale of property, plant and equipment 9 13
Transferred from amounts due to Ministry of Finance (Note 12)
Finance income received 61 75

Transactions with owners directly recognised in equity
Net cash used in investing activities (32,880) (53,591)

Transactions with owner directly recognised in equity
Profit for the year and total comprehensive income
Cash flows from financing activities

Proceeds from bank overdraft / short term borrowings 23,075 37,150
Finance costs paid (3,134) (1,370)
Statement of changes in Equity
Dividends paid (1,500) (1,500)

for the year ended 31 December 2017
Net cash from financing activities 18,441 34,280
Net change in cash and cash equivalents (7,701) 21,921

Cash and cash equivalents at the beginning of the year 26,791 4,870
At 31 December 2017
Cash and cash equivalents at the end of the year (Note 8) 19,090 26,791
At 1 January 2016
At 1 January 2017
Dividend paid
Dividend paid

RURAL AREAS ELECTRICITY COMPANY SAOC RURAL AREAS ELECTRICITY COMPANY SAOC
Notes to the financial statements Notes to the financial statements
for the year ended 31 December 2017 for the year ended 31 December 2017 (continued)
1. General
2 Application of new and revised International Financial Reporting Standards (IFRS) (continued)
Rural Areas Electricity Company SAOC (the “Company”) is a closely held Omani joint stock company
registered under the Commercial Companies Law of Oman. 2.2 New and revised IFRS in issue but not yet effective
The establishment and operations of the Company are governed by the provisions of the Law The Company has not yet applied the following new and revised IFRSs that have been issued but
for the Regulation and Privatisation of the Electricity and Related Water Sector (the “Sector Law”) are not yet effective:
promulgated by Royal Decree 78/2004. Effective for annual
New and revised IFRSs periods
The Company is primarily undertaking electricity generation, water desalination and electricity beginning on or after
distribution activities in the Musandam Governorate, Alwusta region Masirah Island, Khuweima and IFRIC 22 Foreign Currency Transactions and Advance Consideration 1 January 2018
Qroon areas in Sharqiya Region, Aswad area in Dahirah region, Dhofar Governate (the area outside The interpretation addresses foreign currency transactions or parts of
Dhofar Power Company SAOG’s authorised area) and in Dakhliya region (the area outside Mazoon transactions where:
Electricity Company SAOC’s authorised area) under a license issued by the Authority for Electricity • there is consideration that is denominated or priced in a foreign
Regulation, Oman (AER). currency;
• the entity recognises a prepayment asset or a deferred income liability
The Company commenced its operations on 1 May 2005 (the “Transfer Date”) following the
in respect of that consideration, in advance of the recognition of the
implementation of a decision of the Ministry of National Economy (the “Transfer Scheme”) issued
related asset, expense or income; and
pursuant to Royal Decree 78/2004.
• the prepayment asset or deferred income liability is non-monetary.
Rural Areas Electricity Company SAOC is a 99.99% owned subsidiary of Electricity Holding Company
SAOC (the” Holding company”), a company registered in the Sultanate of Oman and 0.01% is held Amendments to IFRS 2 Share Based Payment regarding classification 1 January 2018
by the Ministry of Finance (MOF), of the Government of Sultanate of Oman. and measurement of share based payment transactions.
2. Application of new and revised International Financial Reporting Standards (IFRS) Amendments to IFRS 4 Insurance Contracts: Relating to the different 1 January 2018
effective dates of IFRS 9 and the forthcoming new insurance contracts
2.1 New and revised IFRSs applied with no material effect on the financial statements standard.
he following new and revised IFRSs, which became effective for annual periods beginning on or
T
after 1 January 2017, have been adopted in these financial statements. The application of these Amendments to IAS 40 Investment Property: Amends paragraph 57 1 January 2018
revised IFRSs has not had any material impact on the amounts reported for the current and prior to state that an entity shall transfer a property to, or from, investment
years but may affect the accounting for future transactions or arrangements. property when, and only when, there is evidence of a change in use. A
change of use occurs if property meets, or ceases to meet, the definition
• IFRS 14 Regulatory Deferral Accounts
of investment property. A change in management’s intentions for the
• Amendments to IAS 1 Presentation of Financial Statements relating to Disclosure initiative use of a property by itself does not constitute evidence of a change in
• Amendments to IFRS 11 Joint arrangements relating to accounting for acquisitions of interests use. The paragraph has been amended to state that the list of examples
in joint operations therein is non-exhaustive.
• Amendments to IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets relating to
Amendments to IFRS 7 Financial Instruments: Disclosures relating to When IFRS 9 is first
clarification of acceptable methods of depreciation and amortisation
disclosures about the initial application of IFRS 9. applied
• Amendments to IAS 16 Property, Plant and Equipment and IAS 41 Agriculture: Bearer Plants
• Amendments to IAS 27 Separate Financial Statements relating to accounting investments in IFRS 7 Financial Instruments: Disclosures relating to the additional hedge When IFRS 9 is first
subsidiaries, joint ventures and associates to be optionally accounted for using the equity accounting disclosures (and consequential amendments) resulting from applied
method in separate financial statements the introduction of the hedge accounting chapter in IFRS 9.
• Amendments to IFRS 10 Consolidated Financial Statements, IFRS 12 Disclosure of Interests in
Other Entities and IAS 28 Investment in Associates and Joint Ventures relating to applying the
consolidation exception for investment entities
• Annual Improvements to IFRSs 2012 – 2014 Cycle covering amendments to IFRS 5, IFRS 7, IAS
19 and IAS 34

for the year ended 31 December 2017 (continued) for the year ended 31 December 2017 (continued)
2.1 New and revised IFRSs applied with no material effect on the financial statements (continued)
2.2 New and revised IFRS in issue but not yet effective (continued) Effective for annual
Effective for annual New and revised IFRSs periods
New and revised IFRSs periods beginning on or after
beginning on or after
IFRS 15 Revenue from Contracts with Customers 1 January 2018
IFRS 9 Financial Instruments (revised versions in 2009, 2010, 2013 and 2014) 1 January 2018 In May 2014, IFRS 15 was issued which established a single comprehensive
model for entities to use in accounting for revenue arising from contracts
IFRS 9 issued in November 2009 introduced new requirements for with customers. IFRS 15 will supersede the current revenue recognition
the classification and measurement of financial assets. IFRS 9 was guidance including IAS 18 Revenue, IAS 11 Construction Contracts and
subsequently amended in October 2010 to include requirements the related interpretations when it becomes effective.
for the classification and measurement of financial liabilities and for The core principle of IFRS 15 is that an entity should recognize revenue
derecognition, and in November 2013 to include the new requirements to depict the transfer of promised goods or services to customers in
for general hedge accounting. Another revised version of IFRS 9 was an amount that reflects the consideration to which the entity expects
issued in July 2014 mainly to include a) impairment requirements for to be entitled in exchange for those goods or services. Specifically, the
financial assets and b) limited amendments to the classification and standard introduces a 5-step approach to revenue recognition:
measurement requirements by introducing a ‘fair value through other • Step 1: Identify the contract(s) with a customer.
comprehensive income’ (FVTOCI) measurement category for certain
• Step 2: Identify the performance obligations in the contract.
simple debt instruments.
• Step 3: Determine the transaction price.
A finalised version of IFRS 9 which contains accounting requirements • Step 4: Allocate the transaction price to the performance obligations in
for financial instruments, replacing IAS 39 Financial Instruments: the contract.
Recognition and Measurement. The standard contains requirements in • Step 5: Recognise revenue when (or as) the entity satisfies a
the following areas: performance obligation.
• Classification and measurement: Financial assets are classified Under IFRS 15, an entity recognises when (or as) a performance obligation
by reference to the business model within which they are held and is satisfied, i.e. when ‘control’ of the goods or services underlying the
particular performance obligation is transferred to the customer. Far more
their contractual cash flow characteristics. The 2014 version of IFRS
prescriptive guidance has been added in IFRS 15 to deal with specific
9 introduces a ‘fair value through other comprehensive income’
scenarios. Furthermore, extensive disclosures are required by IFRS 15.
category for certain debt instruments. Financial liabilities are classified
in a similar manner to under IAS 39, however there are differences Amendments to IFRS 15 Revenue from Contracts with Customers to 1 January 2018
in the requirements applying to the measurement of an entity’s own clarify three aspects of the standard (identifying performance obligations,
credit risk. principal versus agent considerations, and licensing) and to provide
• Impairment: The 2014 version of IFRS 9 introduces an ‘expected some transition relief for modified contracts and completed contracts.
credit loss’ model for the measurement of the impairment of financial
IFRS 16 Leases 1 January 2019
assets, so it is no longer necessary for a credit event to have occurred
IFRS 16 specifies how an IFRS reporter will recognise, measure, present
before a credit loss is recognised and disclose leases. The standard provides a single lessee accounting
• Hedge accounting: Introduces a new hedge accounting model that is model, requiring lessees to recognise assets and liabilities for all leases
designed to be more closely aligned with how entities undertake risk unless the lease term is 12 months or less or the underlying asset has a
management activities when hedging financial and non-financial risk low value. Lessors continue to classify leases as operating or finance,
exposures. with IFRS 16’s approach to lessor accounting substantially unchanged
from its predecessor, IAS 17.
• Derecognition: The requirements for the derecognition of financial
assets and liabilities are carried forward from IAS 39. Amendments to IFRS 10 Consolidated Financial Statements and IAS Effective date deferred
28 Investments in Associates and Joint Ventures (2011) relating to the indefinitely
treatment of the sale or contribution of assets from and investor to its
associate or joint venture.

2. Application of new and revised International Financial Reporting Standards (IFRS) (continued)
3. Summary of significant accounting policies (continued)
Management anticipates that these new standards, interpretations and amendments will be adopted
Basis of preparation (continued)
in the Company’s financial statements as and when they are applicable and adoption of these new
standards, interpretations and amendments, except for IFRS 9, IFRS 15 and IFRS 16, are unlikely to • Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for
have a material impact on the financial statements of the Company in the period of initial application. the asset or liability, either directly or indirectly; and
Management anticipates that IFRS 15 and IFRS 9 will be adopted in the Company’s financial • Level 3 inputs are unobservable inputs for the asset or liability.
statements for the annual period beginning 1 January 2018 and that IFRS 16 will be adopted in the
Company’s financial statements for the annual period beginning 1 January 2019. The application The preparation of financial statements in conformity with IFRS requires the use of certain critical
of IFRS 15 and IFRS 9 may have significant impact on amounts reported and disclosures made in accounting estimates. It also requires management to exercise its judgement in the process of applying
the Company’s financial statements in respect of revenue from contracts with customers and the the Company’s accounting policies. The areas involving a higher degree of judgement or areas where
Company’s financial assets and financial liabilities and the application of IFRS 16 may have significant assumptions and estimates are significant to the financial statements are disclosed in note 4.
impact on amounts reported and disclosures made in the Company’s financial statements in respect
of its leases. As at 31 December 2017, current liabilities of the Company exceeded its current assets by RO 117.858
million (2016: RO 103.511 million). The Company intends to restructure its financing by converting short
As not all transition work requirements have been finalised and detailed assessment of the expected term loans to long term loans. Ministry of Finance, under the Sector Law, has undertaken to secure
impact of IFRS 9 and IFRS 15 has not been completed, the company has not yet been able to estimate the availability of the necessary finance for the Company to undertake its activities and achieve
the expected impact of implementing these standards from 1 January 2018. its objectives as long as its capital is wholly-owned by the Government, enabling the Company to
continue to operate as a going concern for the foreseeable future and to discharge its liabilities to
3. Summary of significant accounting policies other parties, as they fall due and management has no reason to doubt such support will continue.
Accordingly, these financial statements are prepared on a going concern basis and management has
Statement of compliance concluded that a matter of uncertainty in respect of going concern does not exist.
These financial statements have been prepared in accordance with International Financial Reporting
Standards, (IFRS) and the requirements of the Commercial Companies Law of 1974 as amended. The principal accounting policies are set out below.
Basis of preparation Revenue

The financial statements have been prepared on the historical cost basis except for the finance lease Revenue represents the sale of electricity to the Government and private customers within the
receivable and decommissioning provision which are valued at amortised cost, and certain financial Company’s distribution network. Revenue also comprise sale of desalinated water to the Public
instruments initially measured at fair value. Authority for Electricity and Water (PAEW) in respect of plants in certain regions.
Historical cost is generally based on the fair value of the consideration given in exchange for goods Total revenue in excess / (deficit) of the maximum allowed by the regulatory formula in accordance
and services. with the licensing requirements is deferred to the subsequent year and is shown as part of trade and
other receivables or trade and other payables.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date, regardless of whether that price Government subsidy
is directly observable or estimated using another valuation technique. In estimating the fair value of The Government of the Sultanate of Oman funds the excess of economic costs over customer and
an asset or a liability, the Company takes into account the characteristics of the asset or liability if other revenue within the Electricity and Related Water Sector. This funding is included in revenue as
market participants would take those characteristics into account when pricing the asset or liability a government subsidy. The Company recognises the subsidy when the right to receive the subsidy
at the measurement date. Fair value for measurement and/or disclosure purposes in these financial is established.
statements is determined on such a basis.
Other revenue
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 Other revenue includes installation charges and meter connection and disconnection charges and is
or 3 based on the degree to which the inputs to the fair value measurements are observable and the accounted for on an accrual basis.
significance of the inputs to the fair value measurement in its entirety, which are described as follows:
Finance income and costs
• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that Finance income comprises interest received or receivable on funds invested. Interest income is
the entity can access at the measurement date; recognised in the statement of profit or loss and other comprehensive income as it accrues taking
into account the effective yield on the asset.

3. Summary of significant accounting policies (continued) 3. Summary of significant accounting policies (continued)
Finance income and costs (continued) Property, plant and equipment (continued)
Interest expense is recognised in the statement of profit or loss and other comprehensive income as Work-in-progress
it accrues using the effective interest rate method. Capital work-in-progress is stated at cost. When the underlying asset is ready for use in its intended
condition and location, work-in-progress is transferred to the appropriate property, plant and
Foreign currency equipment category and depreciated in accordance with depreciation policy of the Company.
Items included in the Company’s financial statements are measured using Rials Omani which is
the currency of the Sultanate of Oman, being the economic environment in which the Company Gains and losses on disposals of property, plant and equipment are determined by reference to their
operates (the functional currency). The financial statements are prepared in Rials Omani, rounded to carrying amounts and are taken into account in determining operating profits.
the nearest thousand.
Financial instruments
Foreign currency transactions are translated into the functional currency using the exchange rates Financial assets and financial liabilities are recognised on the company’s statement of financial
prevailing at the transaction date. Foreign exchange gains and losses resulting from the settlement position when the company becomes a party to the contractual provisions of the instrument.
of such transactions and from the translation at year-end exchange rates of monetary assets and
liabilities denominated in foreign currencies are recognised in the statement of profit or loss and Loans and receivables
other comprehensive income as they arise. Loans and receivables are non-derivative financial assets with fixed or determinable payments
that are not quoted in an active market. They are included in current assets, except for those with
Property, plant and equipment maturities greater than twelve months after the end of the reporting year. These are classified as
Property, plant and equipment are stated at cost less accumulated depreciation and any identified non-current assets. The company’s loans and receivables comprise trade and other receivables and
impairment loss. The cost of property, plant and equipment is their purchase price together with any cash and cash equivalents in the statement of financial position.
incidental expenses necessary to bring assets to its intended condition or location.
Trade and other receivables
Subsequent expenditure Trade and other receivables are initially recognised at fair value and subsequently are stated at
Expenditure incurred to replace a component of an item of property, plant and equipment is amortised cost using the effective interest rate method less provision for impairment losses. A
capitalised if it is probable that the future economic benefits embodied within the part will flow to the provision for impairment of trade receivables is established when there is objective evidence that
Company, and its cost can be measured reliably. All other maintenance expenditure is recognised in the Company will not be able collect all amounts due according to the original terms of receivables.
the statement of profit or loss and other comprehensive income as an expense as and when incurred. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or
financial reorganisation, and default or delinquency in payments are considered indicators that the
Depreciation trade receivable is impaired. The amount of the provision is the difference between the asset’s
Depreciation is recognised in the statement of profit or loss and other comprehensive income carrying amount and the present value of estimated future cash flows, discounted at the effective
on a straight-line basis over the estimated useful lives of each part of an item of property, plant interest rate. The amount of the provision (if any) is recognised in the statement of profit or loss and
and equipment, since this most closely reflects the expected pattern of consumption of the future other comprehensive income within ‘general and administrative expenses’.
economic benefits embodied in the asset.
Cash and cash equivalents
The principal estimated useful lives used for this purpose are:
Cash and cash equivalents comprise cash on hand and demand deposits. Cash equivalents are
Years
short term, highly liquid investments that are readily convertible to known amount of cash, which are
Buildings on leasehold land 30 subject to an insignificant risk of changes in value and have maturity of three months or less at the
date of placement.
Electricity distribution works 20 - 40
Lines and cables 20 - 50
Impairment
Diesel generators 15 - 30
Substation assets 20 - 40 Financial assets
Desalination plants 20 - 40 Financial assets are assessed for indicators of impairment at each reporting date. Financial assets
Other plant and machinery 20 - 40 are impaired where there is objective evidence that, as a result of one or more events that occurred
Furniture, fixtures and vehicles 5-7 after the initial recognition of the financial asset, the estimated future cash flows of the investment
have been impacted.
Plant spares 20

Impairment (continued) Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new
Financial assets (continued) ordinary shares are shown in equity as a deduction, net of tax, from the proceeds.
For financial assets, objective evidence of impairment could include: Trade and other payables
• significant financial difficulty of the counterparty; Trade payables are obligations to pay for goods or services that have been acquired in the ordinary
• default or delinquency in payments; or course of business from suppliers. Accounts payable are classified as current liabilities if payment is
due within one year or less. If not, they are presented as non-current liabilities.
• it becomes probable that the borrower will enter bankruptcy or financial reorganisation.
Liabilities are recognised for amounts to be paid for goods and services received, whether or not
For certain categories of financial assets, such as trade receivables that are assessed not to be
billed to the Company.
impaired individually are subsequently assessed for impairment on a collective basis.
Taxation
Objective evidence of impairment for a portfolio of receivables could include the company’s past
experience of collecting payments, an increase in the number of delayed payments in the portfolio Income tax is calculated as per the fiscal regulations of the Sultanate of Oman.
past the credit year as well as observable changes in national or local economic conditions that
correlate with default on receivables. Current tax is the expected tax payable on the taxable income for the year, using the tax rates
enacted or substantially enacted at the reporting date, and any adjustment to tax payable in respect
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial of previous years.
assets with the exception of trade receivables, where the carrying amount is reduced through the
use of allowance account. Deferred tax is provided using the liability method, providing for temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used
When a trade receivable is considered uncollectible, it is directly written off after obtaining appropriate for income tax purposes. Deferred tax is calculated on the basis of the tax rates that are expected
approvals. Subsequent recoveries of amounts previously written off are credited to the profit or loss. to apply to the year when the asset is realised or the liability is settled based on tax rates (and tax
laws) that have been enacted or substantially enacted by the reporting date. The tax effects on the
Non-financial assets temporary differences are disclosed under non-current liabilities as deferred tax.
The carrying amounts of the company’s non-financial assets other than inventories are reviewed at
each reporting date to determine whether there is any indication of impairment. If any such indications A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will
exist then the asset’s recoverable amount is estimated. be available against which the unused tax losses and credits can be utilised. The carrying amount of
deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer
An impairment loss is recognised if the carrying amount of an asset or cash generating unit exceeds probable that the related tax benefit will be realised.
its value in use and its fair value less costs to sell. In assessing the value in use, the estimated future
cash flows are discounted to their present value using a pre-tax discount rate that reflects current Deferred tax assets and liabilities are offset as there is a legally enforceable right to offset these in
market assessments of the time value of money and the risks specified to the asset. Impairment Oman.
losses recognised in prior years are assessed at each reporting date for any indications that the
loss has decreased or no longer exists. An impairment loss is reversed if there has been a change Current and deferred tax is recognised as an expense or benefit in the statement of profit or loss and
in estimates used to determine the recoverable amount. An impairment loss is reversed only to the other comprehensive income except when they relate to items credited or debited directly to equity,
extent that the asset’s carrying amount does not exceed the carrying amount that would have been in which case the tax is also recognised directly in equity.
determined, net of depreciation or amortisation, if no impairment loss had been recognised.
Provisions
Inventories Provisions are recognised in the statement of financial position when the Company has a legal or
Inventories are stated at the lower of cost and net realisable value. Costs comprise purchase costs constructive obligation as a result of a past event and it is probable that it will result in an outflow of
and where applicable, direct labour costs and those overheads that have been incurred in bringing economic benefit that can be reliably estimated.
the inventories to their present location and condition. Cost is calculated principally using the
weighted average method. Provision is made for slow moving and obsolete inventory items where The amount recognised as a provision is the best estimate of the consideration required to settle
necessary, based on management’s assessment. the present obligation at reporting date, taking into account the risks and uncertainties surrounding
the obligation. Where a provision is measured using the cash flows estimated to settle the present

Leases
Provisions (continued)
Leases where the lessor retains substantially all the risks and rewards of ownership of the asset
obligation, its carrying amount is the present value of those cash flows. Where some or all of the are classified as operating leases. Operating lease payments are recognised as an expense in the
economic benefits required to settle a provision are expected to be recovered from third party, the statement of profit or loss and other comprehensive income on a straight-line basis over the period
receivable is recognised as an asset if it is virtually certain that reimbursement will be received and of lease.
the amount of the receivable can be measured reliably.
Dividend distribution
Provision for employee benefits
Dividend distribution to the Company’s shareholders is recognised as a liability in the financial
A liability is recognised for benefits accruing to employees in respect of wages, salaries and annual statements in the period in which the dividends are approved by the Company’s shareholders.
leave when it is probable that settlement will be required and they are capable of being measured
reliably. 4. Critical accounting estimates
The preparation of financial statements in conformity with IFRS requires the use of certain critical
Liabilities recognised in respect of employee benefits are measured at their nominal value using the
accounting estimates. It also requires management to exercise its judgment in the process of applying
current remuneration. the Company’s accounting policies. The Company makes estimates and assumptions concerning the
future. The resulting accounting estimates will, by definition, seldom equal the related actual results.
Provision for employee benefits is accrued having regard to the requirements of the Oman Labour
Law 2003 as amended or in accordance with the terms and conditions of the employment contract Estimates and judgments are continually evaluated and are based on historical experience and
with the employees, whichever is higher. Employee entitlements to annual leave are recognised other factors, including expectations of future events that are believed to be reasonable under the
when they accrue to employees and an accrual is made for the estimated liability arising as a result circumstances. The areas requiring a higher degree of judgment or complexity, or areas where
of services rendered by employees up to the reporting date. These accruals are included in current assumptions and estimates are significant to the financial statements are set out below:
liabilities, while that relating to end of service benefits is disclosed as a non-current liability.
Depreciation
End of service benefits for Omani employees are contributed in accordance with the terms of the Social
Depreciation is charged so as to write off the cost of the assets over their estimated useful lives. The
Securities Law 1991 and Civil Service Employees Pension Fund Law. Gratuity for Omani employees
calculation of useful lives is based on management’s assessment of various factors such as the operating
who transferred from Ministry of Housing, Electricity and Water on the transfer date is contributed
cycles, the maintenance programs, and normal wear and tear using its best available estimates.
in accordance with the terms of the Social Securities Law 1991 and Civil Service Employees Pension
Fund Law. An accrual has been made and is classified as a non-current liability in the statement of
Provision for inventory obsolescence
financial position.
Provision for inventory obsolescence is based on management’s assessment of various factors such
as usability, the maintenance programs, and normal wear and tear using its best available estimates.
Customer contributions
Effective from 1 July 2009, the Company has adopted IFRIC 18, ‘Transfers of assets from customers’, Allowance for doubtful debts
whereby customer contributions towards the cost of property, plant and equipment have been
Allowance for doubtful debts is based on management’s best available estimates of recoverability of
recognised in the statement of profit or loss and other comprehensive income in accordance with
the amounts due along with the number of days for which such debts are due.
the provisions of IFRIC 18.
Taxation
Government grants
The Company has considered revenue arising from customer contributed assets recognised under
Grants from the Government are recognised at their fair value where there is a reasonable assurance
IFRIC 18, ‘Transfers of assets from customers’ as taxable income based on management discussions
that the grant will be received and the company will comply with all attached conditions.
with the tax authorities.
Government grants relating to costs are deferred and recognised in the profit or loss over the period
Revenue recognition
necessary to match them with the costs that they are intended to compensate.
Due to various reasons, a certain portion of the Company’s revenue is estimated rather than based on
actual billing. Detailed computations were made on the basis of pre-determined billing patterns and
Government grants relating to construction of assets are included in deferred revenue as “funding
unit usage related criteria in order to arrive at the estimated revenue from those customers where
from government sponsored assets” within non-current liabilities and are credited to profit or loss on
the Company is unable to obtain meter readings. If the actual meter readings for such customers
a straight line basis over the expected useful lives of related assets.
differ from the estimates, the Company’s revenue for the period would impacted to the extent of
such differences.

88
RURAL AREAS ELECTRICITY COMPANY SAOC
Notes to the financial statements
for the year ended 31 December 2017 (continued)
5. Property, plant and equipment

Furniture,
Buildings Other plant
Electricity fixtures
on leasehold Lines and Work-in-
distribution Diesel Substation Desalination and Plant
land and cables machinery progress
works generators assets plants vehicles spares Total
ANNUAL REPORT 2017

RO ’000 RO ’000 RO ’000 RO ’000 RO ’000 RO ’000 RO ’000 RO ’000 RO ’000 RO ’000 RO ’000
Cost
1 January 2017 18,700 37,794 64,942 96,072 13,630 16,108 38,863 4,054 1,875 76,176 368,214
Additions 1,441 2,048 5,280 (652) 3,100 - 12,970 74 54 21,197 45,512
Transfers 2,388 107 6,787 652 4,228 - 11,205 - (15) (25,352) -
Disposals - - - - - - - (50) - - (50)
Adjustments 4 31 25 (12,936) 165 - 150 - - - (12,561)
31 December 2017 22,533 39,980 77,034 83,136 21,123 16,108 63,188 4,078 1,914 72,021 401,115
Depreciation
1 January 2017 5,033 10,766 7,376 18,462 2,612 3,626 8,419 2,742 982 - 60,018
Charge for the year 810 1,496 1,652 3,805 563 543 1,762 431 66 - 11,128
Transfers - - - - - - 4 - (4) - -
Disposals - - - - - - - (50) - - (50)
31 December 2017 5,843 12,262 9,028 22,267 3,175 4,169 10,185 3,123 1,044 - 71,096
Net book value
31 December 2017 16,690 27,718 68,006 60,869 17,948 11,939 53,003 955 870 72,021 330,019
RURAL AREAS ELECTRICITY COMPANY SAOC

Notes to the financial statements
for the year ended 31 December 2017 (continued)
5. Property, plant and equipment (continued)

Buildings Furniture,
Other plant
on Electricity fixtures
Lines and Work-in-
leasehold distribution Diesel Substation Desalina- and Plant
and cables machinery progress
land works generators assets tion plants vehicles spares Total
RO ’000 RO ’000 RO ’000 RO ’000 RO ’000 RO ’000 RO ’000 RO ’000 RO ’000 RO ’000 RO ’000
Cost
1 January 2016 18,448 36,419 61,555 58,257 12,495 15,359 38,228 3,832 1,670 68,360 314,622
Additions 34 1,163 2,251 16,646 434 685 460 256 205 30,805 52,939
Transfers 218 199 1,139 20,563 694 - 176 - - (22,989) -
Disposals - - - (40) - - (1) (47) - - (88)
Adjustments - 13 (3) 646 7 64 0 13 - - 740
31 December 2016 18,700 37,794 64,942 96,072 13,630 16,108 38,863 4,054 1,875 76,176 368,214
Depreciation
1 January 2016 4,313 9,241 5,902 15,258 2,181 3,092 7,154 2,261 918 50,320
Charge for the year 720 1,525 1,474 3,225 431 534 1,265 527 64 9,765
Transfers - - - (21) - - - (46) - - (67)
Disposals - - - - - - - - - - -
31 December 2016 5,033 10,766 7,376 18,462 2,612 3,626 8,419 2,742 982 60,018
Net book value 13,667 27,028 57,566 77,610 11,018 12,482 30,444 1,312 893 76,716 308,196
31 December 2016
ANNUAL REPORT 2017
Construction work-in progress includes works which are in different stages of completion and relates to (a) construction and upgrading of substations and
feeders, (b) electrical transmission works networks, (c) extension of power supply, (d) furniture and fixtures, computers and software, and (e) other common assets.
89
5. Property, plant and equipment (continued) 7. Trade and other receivables

2017 2016
The Company’s property, plant and equipment are constructed on lands leased from Ministry of RO ’000 RO ’000
Housing, Government of Sultanate of Oman under usufruct agreements.
Trade receivables from the
1,498 2,497
Depreciation charge for the year has been allocated between the cost of sales and general and Public Authority for Electricity and Water (PAEW)
administrative expenses as follows: Trade receivable from private customers 7,286 4,165
2017 2016 Trade receivables from Government customers 1,901 1,967
RO ’000 RO ’000 Allowance for doubtful debts (1,394) (939)
Depreciation charge for the year Net trade receivables 9,291 7,690
Cost of sales (Note 20) 10,697 9,239 Amount due from related parties (note 26) 362 433
General and administrative expenses (Note 21) 431 526 Advances to contractors and suppliers 2,213 2,081
Prepayments 266 431
11,128 9,765 Government subsidy receivable 12,924 -
6. Inventories K-factor receivable 864 5,343

2017 2016 Other receivables 1,290 590
RO ’000 RO ’000 27,210 16,568
Spares and consumables 7,522 7,343 Movement in allowance for doubtful debts
Fuel 3,185 2,791 At 1 January 939 894
Allowance for inventory obsolescence (4,523) )4,191( Amount of provision during the year 455 45
At 31 December 1,394 939
6,184 5,943
Movement in allowance for inventory obsolescence Management believes that as of 31 December, trade receivables of RO 9.291 million
(2016 - RO 7.690 million) were fully collectible.
The allowance for doubtful debts relate to trade receivables from private, government customers
At 1 January 4,191 4,038 and also relate to receivable from PAEW on water sales.
Amount of provision during the year 332 153 K-factor receivable represents revenue receivable on account of shortfall of actual regulated revenue
over the maximum allowed as per the price control formula.
At 31 December 4,523 4,191 Management believes that the other receivable classes within trade and other receivables do not
contain impaired assets.
8. Cash and cash equivalents

2017 2016
RO ’000 RO ’000
Call deposits 17,781 18,608

Current accounts 1,295 8,169
Cash on hand 14 14
19,090 26,791
Bank call deposits carry an interest rates of 0.75% per annum (2016: 0.75%)

9. Share capital 13. Amounts due to holding company

The Company’s authorised, issued and paid-up capital consists of 500,000 shares of RO 1 each. The Amounts due to the Holding company, represent the interest free loans provided to the Company for
details of the shareholders are as follows: capital expenditure. The loans do not have a fixed repayment term and are unsecured. The loan is
not repayable within one year from the reporting date. It is therefore, impracticable to determine the
Percentage of Number of 2017 2016 fair value of the loan and is carried at cost and classified as long-term.
Shareholding Shares issued RO RO
14. Provisions
Electricity Holding Company SAOC 99.99% 499,950 499,950 499,950 2017 2016
Nama Shared Services LLC 0.005% 25 25 - RO ’000 RO ’000
Nama Institute of Competence Non-current
Development 0.005% 25 25 -
Employee benefits – gratuity 1,375 1,329
Ministry of Finance - - - 50
Current
100.000% 500,000 500,000 500,000
Employee benefits - leave encashment 519 434
The share capital held by Ministry of Finance has been transferred to Nama Shared Services LLC
Movement in provision for employee benefits – gratuity
(NSS) and Nama Institute of Competence Development (NICD) at 25 shares each at the Extraordinary
General Meeting (EGM) held on 04-Oct-2017.
At 1 January 1,329 1,282
10. Legal reserve Charge for the year 99 60
The legal reserve, which is not available for distribution is accumulated in accordance with Article Payments made during the year (53) (13)
154 of the Commercial Companies Law 1974, as amended. The annual appropriation must be 10% of
the net profit for each year after taxes, until such time as the reserve amounts to at least one third
of the share capital. No portion from the profit has been made during the year as the Company has At 31 December 1,375 1,329
already achieved this minimum amount required in the legal reserve. This reserve is not available for
distribution. Movement in provision for employee benefits – leave encashment
11. General reserve At 1 January 434 443

In accordance with the Company’s policy, an amount not exceeding 20% of the profit after transfer Charge for the year 185 26
to legal reserve should be transferred to a general reserve until the balance of the general reserve
reaches one half of the share capital, which has been achieved. Payments made during the year (100) (35)
12. Shareholder’s funds At 31 December 519 434

Following the implementation of a decision of the Sector Law and in accordance with the transfer
scheme, the Electricity Holding Company SAOC (the “Holding Company”) received certain assets
and liabilities from the Ministry of Housing, Electricity and Water (MHEW) on the transfer date (1 May
2005).
Subsequently, part of the assets and liabilities were transferred to the Company. The value of the net
assets transferred and for regulated assets in prior years certain contributions is represented in the
books as shareholder’s funds. There is no contractual obligation to repay this amount and there are
no fixed repayment terms.

15. Deferred tax liability 17. Trade and other payables

Deferred income taxes are calculated on all temporary differences using a principal tax rate of 2017 2016
15% (2016 - 12%). The net deferred tax liability/(assets) in the statement of financial position and RO ’000 RO ’000
the net deferred tax charge in the statement of profit or loss and other comprehensive income are
attributable to the following items: Creditors for capital projects 21,919 31,509
At Charge/(credit) At
Accruals and other payables 17,168 18,501
31 December 2017 1 January for the year 31 December
Assets RO ’000 RO ’000 RO ’000 Suppliers and contractors’ payables 9,724 6,864
Amount due to related parties (Note 26) 3,064 871
Provision for inventory obsolescence (243) (110) (353)
Allowance for doubtful debts (113) (96) (209) 51,875 57,745
Usufruct charges accrual (137) (45) (182)
18. Short term borrowing
(493) (251) (744)
Liability 2017 2016
Accelerated tax depreciation 10,341 4,794 15,135 RO ’000 RO ’000
Short term borrowing 114,825 91,750
Net deferred tax liability 9,848 4,541 14,391
The Company has availed credit facilities amounting to RO 110 million from commercial banks. The
31 December 2016
facility is mainly for the expenditure and procurement of assets of the Company.
Assets
The utilized credit facility in the amount of RO 110 million (2016: RO 91.75 million) is repayable on 31
Provision for inventory obsolescence (225) (18) (243) March 2018 (expiry date). The credit facility carries interest at a rate of 3.25% to 4.25% (2016: 3%).
Allowance for doubtful debts (107) (6) (113) The Company is not required to pay any arrangement or commitment fees. The facility is secured
against a letter of comfort given by the Holding company.
Usufruct charges accrual (128) (9) (137)
19. Revenue
(460) (33) (493) 2017 2016
RO ’000 RO ’000
Liability
Accelerated tax depreciation 8,587 1,754 10,341
Government subsidy received 89,523 71,821
Electricity sales to private customers 12,097 9,108
Net deferred tax liability 8,127 1,721 9,848
Electricity sales to Government customers 4,136 4,315
Water sales to Public Authority for Electricity and Water (PAEW) 3,700 4,317
16. Deferred revenue Other revenue 385 186
Deferred revenue represents Government funding towards the cost of property, plant and equipment 109,841 89,747
for the projects started before 1 January 2009. These contributions are deferred over the life of the
Add: revenue shortfall in maximum allowed revenue as per the
relevant property, plant and equipment. Funding from government towards the cost of property, plant
price control formula - 5,343
and equipment represents unconditional grant received / receivable from government / government
authorities to the construction of the assets. Less: excess maximum allowed revenue as per the
price control formula (4,479) -
Deferred revenue recognized during the year amounted to RO 3.1 million (2016 - RO 3.2 million) in
profit or loss. 105,362 95,090

20. Cost of sales 23. Other income

2017 2016 2017 2016
RO ’000 RO ’000 RO ’000 RO ’000
Amortisation of deferred revenue 3,111 3,157

Fuel consumption 44,062 43,315
Depreciation (Note 5) 10,697 9,239 Sale of scrap 146 19
Operation and maintenance contract fee 7,381 6,762 Sale of forms and tenders 75 138
Spares and consumable expenses 3,074 3,172 Gain / (loss) on sale of property, plant and equipment 9 (8)
Maintenance and repairs expenses 3,332 3,199 Other income 964 190
Equipment hire charges 1,461 2,743
Electricity purchases 10,981 1,224 4,305 3,496
Other direct costs 454 389
24. Finance income/cost
81,442 70,043 2017 2016
RO ’000 RO ’000
21. General and administrative expenses
Finance income:
2017 2016
RO ’000 RO ’000 Interest in bank deposits 61 75
Staff costs (Note 22) 10,082 9,440 Finance costs:

Service expenses 2,511 2,157 Bank interest and charges (3,134) (1,370)
Commission expense 940 1,098
25. Taxation
Depreciation (Note 5) 431 526
Directors’ remuneration and sitting fees (Note 26) 52 59 Income tax is provided as per the provisions of the “Law of Income Tax on Companies” in the
Sultanate of Oman after adjusting for items which are non-assessable or disallowed. The deferred
Other expenses 1,423 861 tax on all temporary differences has been calculated and dealt with in the statement of profit or loss
and other comprehensive income.
15,439 14,141
The taxation charge for the year is comprised of:
Commission represents amount paid to Oman National Engineering and Investment Company SAOG
2017 2016
(ONEIC) and National Electricity Center (NEC) for undertaking customer meter reading and billing
services and provision of collection facilities. RO ’000 RO ’000
22. Staff costs Deferred tax charge in respect of current year (Note 15) 4,541 1,721
2017 2016
RO ’000 RO ’000
Salaries and wages 5,436 5,210

Other allowances and benefits 4,547 4,170
End of service benefits (Note 14) 99 60
10,082 9,440

25. Taxation (continued) 26. Related parties (continued)

The Company is liable to income tax in accordance with the income tax law of the Sultanate of Oman
(i) Key management personnel compensation
at the enacted tax rate of 15 % (2016 - 12%) on taxable income in excess of RO 30,000. The following
is a reconciliation of income taxes calculated on accounting profits at the applicable tax rate with the Key management personnel are those persons who have authority and responsibility for planning,
income tax expense for the year: directing and controlling the activities of the Company, directly or indirectly, including any director
2017 2016 (whether executive or otherwise). The compensation for key management personnel during the year
RO ’000 RO ’000 is as follows:
2017 2016
Accounting profit before tax 9,713 13,107 RO ’000 RO ’000
Tax on accounting profit before tax at 15% 1,457 1,573
Salary and other short term benefits 1,728 1,673
Add/(less) tax effect of:
End of service benefits 503 487
Tax impact of permanent difference 8 -
Directors’ remuneration and sitting fees (Note 22) 52 59
Tax impact of change in tax rate 2,461 -
Unrecognised deferred tax asset on tax losses 615 148 2,283 2,219
(ii) Amount due from related parties (Note 7)
Tax charge for the year 4,541 1,721
Related parties under common ownership
In the current year after the adjustment of expenses as per tax law, the company is in tax loss
Oman Power and Water Procurement Company SAOC 206 206
position accordingly no current tax has been recorded in the current year. Deferred tax assets of RO
615,000 on carry forward tax losses for the current year has not been recognized as management Muscat Electricity Distribution Company SAOC 30 6
understands that there are remote chances of having taxable income future years due to higher tax Mazoon Electricity Company SAOC 67 123
depreciation charge which would result in a lapse of current year carry forward losses.
Dhofar Power Company SAOC 26 48
Tax assessments for the years 2011 to 2015 are pending with the Oman taxation authorities. The
Management of the Company believes that additional taxes, if any, related to the open tax year Majan Electricity Company SAOC 26 43
would not be significant to the Company’s financial position as at 31 December 2017 Oman Electricity Transmission Company SAOC 2 2
The Company has carried forward tax losses of RO 14.927 million as at 31 December 2017 (2016 -
Al Ghubrah Power & Desalination Company SAOC 2 2
RO 18.319 million).
Wadi Al Jizzi Power Company SAOC 2 2
26. Related parties Electricity Holding Company SAOC 1 1
Related parties comprise the shareholders, directors, key management personnel and business
entities in which they have the ability to control or exercise significant influence in financial and 362 433
operating decisions (other related parties).
(iii) Amounts due to related parties (Note 17)
The Company maintains balances with the related parties which arise in the normal course of - -
business. Outstanding balances at year end are unsecured and settlement occurs in cash.
Electricity Holding Company SAOC 1,252 867
Following is the summary of significant transactions with related parties during the year:
Muscat Electricity Distribution Company SAOC 2 2
2017 2016
Oman Power & Water Procurement SAOC 1,799 -
Expenses RO ’000 RO ’000
Nama Institute of Competence Development 9 -
Accounting service charges to Electricity Holding Company SAOC 179 187
Mazoon Electricity Distribution Company SAOC 2 2
Distribution Code Review Panel (DCRP) shared expenses 276 311
3,064 871
455 498
These balances represent costs incurred by the Company on behalf of other entities of the group.

26. Related parties (continued) 29. Financial risk management (continued)
(v) Loan from holding company Financial risk factors

2017 2016
Market risk
RO ’000 RO ’000
Price risk
Electricity Holding Company SAOC 4,002 4,002
The permitted tariff (prices) for distribution of electricity is determined either by long term agreements
with the customer or under the Permitted Tariff Regulations issued by the Public Authority for
27. Proposed dividend Electricity and Water (PAEW). Hence, the Company is not subject to significant price risk.
The Board of Directors of the Company at their meeting held on 25 February 2018 has proposed a
cash dividend of RO 3.000 per share aggregating to RO 1,500,000 on the Company’s existing share Foreign exchange risk
capital (2016 – dividend of RO 3.000 per share aggregating RO 1,500,000 was proposed and paid Foreign exchange risk arises when future commercial transactions or recognised assets or liabilities
as dividend). This dividend is subject to the approval of the Company’s shareholders in the Annual are denominated in a currency that is not the entity’s functional currency. The Company is exposed
General Meeting. to foreign exchange risk arising from currency exposures primarily with respect to the US Dollar.
The Rial Omani is pegged to the US Dollar. Since most of the foreign currency transactions are in
28. Commitments US Dollars or other currencies linked to the US Dollar, management believes that the exchange rate
2017 2016 fluctuations would have an insignificant impact on the Company’s pre-tax profit.
RO ’000 RO ’000
Interest rate risk
Capital commitments 3,887 17,974 The Company’s interest rate risk arises from short term borrowings and overdraft facilities. Short-
term borrowings have been obtained at an interest rate of 1.60% per annum till March 2016 and 3%
Operating lease commitments for remaining period. The Company carries out periodic analysis of its interest rate exposure and
Less than 1 year 328 389 reassesses the source of borrowings and renegotiates interest rates at terms favorable to the Company.
More than 1 year but not more than 5 years 261 589 The interest rates on overdraft facilities are subject to change upon re-negotiation of the facilities
which takes place on an annual basis.
589 978
At the reporting date the interest rate risk profile of the Company’s interest bearing financial
Shipping guarantee 2 2 instruments was:
2017 2016
29. Financial risk management RO ’000 RO ’000
The Company’s activities expose it to a variety of financial risks: market risk (including price risk,
foreign currency risk and interest rate risk), liquidity risk and credit risk. However, the Company’s Short term borrowing 114,825 91,750
overall risk management programme focuses on the unpredictability of financial markets and seeks
to minimise potential adverse effects on the Company’s financial performance. 114,825 91,750

Credit risk management is carried out by the Company and liquidity risk and market risk by the A 1% increase in interest rates at the reporting date would have increased borrowing costs, on an
holding company’s treasury department under policies approved by the Board of Directors. The annual basis, by the amounts shown below:
Board provides written principles for overall risk management, as well as written policies covering 2017 2016
specific areas, such as foreign exchange risk, interest rate risk, use of derivative financial instruments RO ’000 RO ’000
and non-derivative financial instruments, and investment of excess liquidity.
Interest expense 1,148 918
A 1% decrease in interest rates would have had the equal but opposite effect to the amounts shown
above, on the basis that all other variables remain constant.

29. Financial risk management (continued) 29. Financial risk management (continued)
receivables. Trade receivables primarily represent amount due from government and private
Liquidity risk
customers. The Company has a significant concentration of credit risk as below:
Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding
from an adequate amount of committed credit facilities. Management maintains flexibility in funding The exposure to credit risk for trade receivables at the reporting date by type of customer is:
by maintaining availability under committed credit lines. Management monitors the Company’s
liquidity by forecasting the expected cash flows. The table below analyses the Company’s financial 2017 2016
liabilities that will be settled on a net basis into relevant maturity grouping based on the remaining RO ’000 RO ’000
period at the reporting date to the contractual maturities date. The amounts disclosed in the table
are the contractual undiscounted cash flows. Balances due within twelve months equal their carrying Public Authority for Electricity and Water 1,498 2,497
balances, as the impact of discounting is not significant.
Private customers 7,286 4,165
Carrying 1-3 3 months More than Government customers 1,901 1,967

31 December 2017 amount months to 1 year one year
10,685 8,629
RO ’000 RO ’000 RO ’000 RO ’000
Interest bearing The age of trade receivables and related impairment loss at the reporting date is:
Short term borrowings. 114,825 114,825 - - 2017 2016
Non-interest bearing Past due Past due
Impair- but not Impair- but not
Amounts due to holding company 4,002 - - 4,002
Gross ment impaired Gross ment impaired
Trade and other payables 51,875 28,829 23,046 - RO ’000 RO ’000 RO ’000 RO’000 RO’000 RO’000
170,702 143,654 23,046 4,002 Not past due 1,635 - - 1,369 - -
31 December 2016 Less than 1 month 1,469 - - 1,241 - -

Past due - 31 to 90 days 3,036 - 3,036 2,695 - 2,695
Interest bearing
Past due - 91 to 365 days 2,067 - 2,067 2,171 - 2,171
Short term borrowings 91,750 91,750 - -
Past due above 1year 2,478 (1,394) 1,084 1,153 (939) 214
Non-interest bearing
Amounts due to holding company 4,002 - - 4,002 10,685 (1,394) 6,187 8,629 (939) 5,080
Trade and other payables 57,745 24,267 33,478 -

Investment in bank deposits and bank balances
153,497 116,017 33,478 4,002 The Company’s banks accounts are placed with reputed financial institutions with the below credit
rating as per Moody’s Investor Service Ratings.
Credit risk 2017 2016
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial Bank RO ’000 RO ’000
instrument fails to meet its contractual obligations. The credit risk of the Company is primarily
attributable to trade and other receivables, bank deposits and bank balances. A1 National Bank of Oman SAOG 47 287
P-1 Bank Muscat SAOG 17,801 18,922
Trade and other receivables
Ahli Bank 55 -
The Company’s exposure to credit risk on trade and other receivables is influenced mainly by
the individual characteristics of each customer. The Company has established credit policies P-1 HSBC Oman SAOG 1,173 7,568
and procedures that are considered appropriate and commensurate with the nature and size of
19,076 26,777

29. Financial risk management (continued) 29. Financial risk management (continued)
The carrying amount of financial assets represents the maximum credit exposure. The exposure to Financial risk factors (continued)
credit risk at the reporting date is on account of:
2017 2016 Categories of financial instruments (continued)
RO ’000 RO ’000
Financial Liabilities 2017 2016
Trade receivables 9,291 7,690 RO ’000 RO ’000
Due from related parties 362 433 Financial liabilities held at amortised cost
Other receivables 1,290 590 Short term borrowings 114,825 91,750
Cash at bank 19,076 26,777 Creditors for capital projects 21,919 31,509
Accruals and other payables 17,168 18,501
30,019 35,490
Suppliers and contractors payables 9,724 6,864
Categories of financial instruments Amount due to related parties 3,064 871
Financial assets 166,700 149,495

2017 2016
Capital risk management
RO ’000 RO ’000
The Company’s objectives when managing capital are to safeguard the Company’s ability to continue
Cash and cash equivalents 19,090 26,791 as a going concern and to provide an adequate return to shareholders.
Loans and receivables The Board’s policy is to maintain a strong capital base so as to maintain creditor and market confidence
and to sustain future development of the business. The capital structure of the Company comprises
Trade receivables 9,291 7,690
share capital, reserves, retained earnings and shareholders’ funds. The Company is not subject to
Government subsidy receivable 12,924 - external imposed capital requirements other than as prescribed by the Commercial Companies Law
K-factor receivable 864 5,343 of 1974, as amended.
Due from related parties 362 433 The Company sets the amount of capital in proportion to risk. The Company manages the capital
Other receivables 1,290 590 structure and makes adjustments to it in the light of changes in economic conditions and the risk
characteristics of the underlying assets.
23,441 14,056
Fair value estimation
The carrying amounts of financial assets and liabilities with a maturity of less than one year are
assumed to approximate to their fair values. The fair value of the amount due to Holding company
cannot be estimated as it does not carry interest and has no fixed repayment terms.
30. Approval of financial statements
The financial statements were approved by the Board and authorised for issue on 25 February 2018.

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22 24

Objectives HEALTH, SAFETY & FINANCIAL &

Customer Base &

Regional Staff Distribution

Board of Directors & Committees RAEC Business Development Community

13 Sub Committees of the Board

Table - 03 : Strategic Objectives 20 Figure - 03 : Qualifications of Staff 31

CHAIRMAN's FUTURE VISION

H.E. SHK. FAISAL KHAMIS AL-HASHAR

8 ANNUAL REPORT 2017 ANNUAL REPORT 2017 9

FINANCIAL PERFORMANCE IN 2017

10 ANNUAL REPORT 2017 ANNUAL REPORT 2017 11

BOARD OF DIRECTORS & COMMITTEES

Powers specifically reserved for the Board include:

SHK. MANSOR TALIB AL-HINAI Monitoring systems of governance and compliance.

Overseeing systems of internal control and risk management.

Approving major acquisitions & disposals and capital expenditure.

SUB COMMITTEES OF THE BOARD

14 ANNUAL REPORT 2017 ANNUAL REPORT 2017 15

Faisal Khamis Al Hashar Chairman 9 √ √ √ √ 5,000

Internal Audit Committee (IAC) Deputy

Mansor Talib Al Hinai Member 11 √ √ √ √ √ 2,700

Capital Investment Committee (CIC)

Faisal Khamis Al Hashar Chairman 16 √ √ 8,150

Generation capacity requirements that exceed 10MW. Deputy

Renewable energy investments.

16 ANNUAL REPORT 2017 ANNUAL REPORT 2017 17

To provide cost To provide

Focus Area Strategic Objectives

Finance Maximize shareholder value and meet financial targets

Technical Performance Maximize business performance efficiency

Customer Service Enhance customer experience and achieve regulatory targets

Human Resources Develop and engage staff to meet skills gap

Renewable Energy Maximize renewable energy sources implementation

20 ANNUAL REPORT 2017 ANNUAL REPORT 2017 21

Component 2016 2017

Lost time injury 1 3

Total Man-Hours worked 5,063,766 7,000,000

LTIFR (Lost Time Injury Frequency Rate) 0.2 0.9

22 ANNUAL REPORT 2017 ANNUAL REPORT 2017 23

Key Highlights Unit 2015 2016 2017

Total Assets )RO’ 000( 310,743 357,498 382,503

Net Asset Per Share RO 242 261 269

Current Assets Over Current Liability % 40 32 31

Quick Asset Over Current Liability % 36 28 27

Fixed Assets Over Total liability % 139 136 133

Earning Highlights and Ratios

Revenue )RO’ 000( 84,304 95,090 105,362

Total Revenue/MWh Supplied RO 103 112 115

Gross Profit Over Sales Ratio % 31 26 23

Net Profit Over Sales Ratio % 15 12 5

Return on Capital Employed % 11 11 9

Operating Cost Over Sales Ratio % 69 74 77

Admin Cost Over Sales Ratio % 19 15 15

Total Cost Over Sales Ratio % 90 92 99

Other Operational Highlights and Ratios

Total Number of Customers Number 33,187 35,458 37,513

Total Number of New Customers Number 2,283 2,271 2,055

*Total Number of Employees Number 482 474 466

Electricity Generated at RAEC power plants MWh 862,747 939,437 831,949

FINANCIAL & Power Purchased (PDO & Tibat IPP)

Total Power Supplied to Customers

OPERATIONAL Total Losses (Technical & Non-Technical) % 10.72 14.67 16.3

50/2016 Rehabilitation of Dhafrat Existing Power Station in Al Wusta Governorate 1.27