62
His Majesty Sultan Qaboos Bin Said
His Majesty Sultan Qaboos Bin Said
�Annual Report
Content Page
Chairman’s Message 6
Company Profile 9
• Objectives 9
• Share Capital 9
• Service Area 9
Highlights 10
Organization and Human Resources 11
• Organization Structure 11
• Human resources 12
• Training 12
Business Overview 13
• Operational Statistics 13
• Customers Services 14
• New Connections 17
• Electricity Imported 19
Distribution System 21
• Distribution System Assets 21
• Operation and Maintenance 21
Power Quality Indicators 22
Projects Highlights 23
• Projects Summary 23
• Information System 24
Health, Safety and Environment 25
Managing the crisis of Gonu Cyclone 27
Corporate Governance Report 28
Financial Statements 31
Contents
�Annual Report
�Annual Report
List of Illustrations
Tables
SN Content Page
1 Company Highlights for 2007 10
2 Internal and External Training & Participants 12
3 Summary of Customers, MWh Supplied and Revenue By Category 14
4 Connection Applications and Executed Connections 17
5 Villages Electrification and New Lines Added 18
6 Monthly Summary of Electricity Imported, Supplied, Billed and Losses 19
7 Equipments and Distribution Lines in MZEC Network 21
8 Distribution Business Outsourced Activities 21
9 Power Quality Indicators for (33 / 11) KV Network 22
10 Projects Completed and In Progress 23
11 Company HSE KPIs for 2007 27
12 Board of Directors 28
13 Board of Directors Meetings 30
14 Audit Committee Meetings 30
15 Internal Tender Committee meetings and Composition 31
16 Distribution of Shares 32
Figures SN Content Page
1 MZEC Licensed Areas 9
2 Organization Structure 11
3 MZEC Manpower, Direct Employees 12
4 Summer and Winter daily Profile 13
5 Summer and Winter monthly Profile 14
6 MWh Billed 15
7 Revenues earned by category 15
8 Number of Customers 15
9 Connection Applications and Executed Connections 17
10 Electricity imported and Supplied To Customers 19
11 SAIFI, SAIDI and CAIDI Indicators 22
12 Number of Projects Completed and In Progress 23
�Annual Report
Dear shareholders,
On behalf of the Board of Directors, I am pleased to present the third Annual Report of Mazoon Electricity Company SAOC and audited financial statements for the year ended 31 December 2007.
Year 2007 was an exceptional year as the capabilities of the company were put to test when the tropical cyclone “GONU” hit the Sultanate on the 6th of June 2007 and severely affected Mazoon Electricity Company’s authorized service areas. As a result of the cyclone, distribution networks in Sur, Ja’alan BB Ali, Dima & Tayeen and Barka were severly damaged. The Company was able to successfully execute and implement the Business resumption plan which was developed in advance, to recover from the impact of ‘Gonu’ cyclone and to restore the power supply within the targeted time. I take this opportunity to express the gratitude and appreciation to the employees, contractors and suppliers who actively took part in the restoration process and helped to maintain company’s image and reputation among the public. Government agencies, Royal Oman Police and the Royal Air Force also deserve a word of appreciation for the commitment shown in the relief activities and the guidance and support provided to control the situation. The company has received Oman’s Civil Medal as an appreciation for the efforts in restoring power supply to the customers in the affected areas.
Company continued its efforts to build organizational capabilities as per the statutory obligations during the year also. MZEC has launched public safety awareness during Holy Ramadan as well as conducted a safety gathering in Muscat and the three Regions. Two codes of practices were prepared and approved by AER-Oman, namely Efficient use of Electricity and Customers with special needs code of practice, in compliance with the requirements of license condition 24 and 42.
Company recognizes the importance and role of IT in its day to day business and continuously develops, maintain and upgrade the management information system to provide timely, relevant and right information at right time for decision making and to provide better service to the valued customers and public. Company is in the process of developing a ‘GIS’ system which will schematically represent the entire distribution network of the company and the assets contained therein.
Financial Year 2007 was yet another successful year for the company as is reflected in the financial statements. Inspite of the adverse impact of cyclone GONU’ the company recorded growth in the profit and total assets of the company. The net profit of the company has increased to RO. 6.65 Million compared to RO. 6.43 Million during 2006. Accordingly basic earnings per share has increased to R.O. 13.300 compared to R.O. 12.866 in year 2006.The total revenue for the year was R.O. 73,242,000 comprising of R.O. 37,351 Million (51%) from sales of electricity to customers and R.O. 35,891 (49%) from Government subsidy.
Human ResourcesCompany has recruited 60 employees during the year to support the company operations and projects and the company is proud of its 98% Omanization.
Chairman’s Message
�Annual Report
Losses ReductionCompany has initiated a comprehensive system loss reduction program and as result of management and staff commitment and efforts, company was able to achieve the loss reduction of more than 4%. Total system loss (technical and non technical) for the year was 20.19% compared to 24.88% in 2006.Company is committed to reduce the system losses further down to acceptable levels to reduce the support of Government in the form of subsidy and thus a saving to Government exchequer.
OperationsDistribution system peak demand during the year was 877.4 MW, registering an increase of 4% compared to 2006. This is primarily attributable to the 7,282 new connections executed during the year. Company has completed 22 projects towards distribution system reinforcements and rehabilitations to meet the increased load.
In an effort to comply with Government objectives in villages’ electrifications, electrification projects were undertaken and completed in 19 villages with a total investment of R.O 1.3 Million reflecting the company’s commitment in this respect. Most of those projects were in Al Sharqiyah region.
The Electricity Holding Company has constituted a Forum consisting of the electricity company, contractors, suppliers and manufacturers to discuss and address the issues relating to project execution and solutions to speed up the project execution and the company has participated actively in this forum. Changes in the Board of DirectorsI am pleased to take this opportunity to extend thanks and appreciation on my behalf and on behalf of the General Manager, the company management and staff to all members of Board who retired during the year, for their active participation during the period of membership in the Board of Directors for the last three years, and also I welcome, the new members in the new BOD’s.
Future OutlookAs a step towards better management for the company revenues. The Company has decided to discontinue the factoring arrangement with billing & collection contractor, for collection of receivable from electricity billing to private customers, effective from January 2008. Company will strengthen its organizational capabilities in human resources and IT infrastructure to carry out the accounts receivable management.
Company will continue to focus on the Regulatory compliance including compliance to the distribution and supply license obligations and corporate governance in the coming years.
The company is committed to support the Government objectives for village’s electrifications and will allocate adequate resources towards achieving this objective. A policy decision has been taken by the company to procure directly, major material to be used in different projects, to avoid delays in projects execution and also to benefit from the economies of bulk purchases.
System loss reduction of 3% from the present level is targeted for the year 2008 and company will introduce more stringent measures for the achievement of this objective.
AcknowledgementI would like to thank my fellow board members for their active participation and contributions in the decision making and in the process of guiding and directing our company. On behalf of the board I thank the management and employees for their contributions and efforts, our esteemed customers, agents, contractors and suppliers without whose support the company could not have achieved this remarkable performance
We reiterate our commitment to put our best endeavors to achieving the objectives of privatization of the electricity sector, under the wise and able leadership of His Majesty Sultan Qaboos Bin Said and the Government of the Sultanate.
Manal Bint Mohammed Al AbdwaniChairperson, Board of Directors
�Annual Report
The company is licensed to distribute and supply electricity to Al Dakhilyah, Al Sharqiyah and South Al Batinah Regions.
�Annual Report
The Government’s strategy for restructuring the electricity and related water sector in the country comes to keep abreast of developments taking place in terms of the increasing demand for electricity, to prepare this vital sector for privatization in the coming years, and to strengthen the role of the private sector in contributing to the management and implementation of large and basic service projects.
Restructuring electricity sector and regulating its activities in the country is concurrent with these developments and changes. The Royal Decree No. 78 / 2004 enacted the law for regulation and privatization of the electricity sector, and the transfer of all Governmental assets and liabilities associated with generating, purchasing, transporting and distributing electric power into the Electricity Holding Company and nine subsidiary companies according to their licensed activities
By Royal Decree No. 78 / 2004, Authority for Electricity Regulation, Oman was established to regulate this important sector. Mazoon Electricity Company is one of the companies 100% owned by the Electricity Holding Company and the Ministry of Finance.
The company is licensed to distribute and supply electricity to Al Dakhilyah, Al Sharqiyah and South Al Batinah Regions.
Objectives:1. Achieving the Government objectives for restructuring the electricity supply industry by undertaking licensed activities. 2. Covering the widest geographical scope in Al Dakhilyah, Al Sharqiyah and South Al Batinah regions.3. Developing and improving services provided to customers.4. Promoting capable human resources and moving into the commercial working environment.5. Strengthening the Company `s image within society.
Share Capital:The authorized, issued and paid up capital of the company is fixed at RO. 500,000 divided into 500,000 shares, of R.O. 1 each.
Service Area: The licensed areas are Al Dakhilyah, Al Sharqiyah and South Al Batinah.
Al Dakhilyah Region With its location and topography, Al Dakhilyah consists of the great plateau down from the mountain slopes of Jabal Al Akhdhar from the north in the direction of the desert southward, contacting most regions of the Sultanate. It adjoins Al Sharqiyah from the east, Al Dhahirah region from the west, Al Wusta region from the south and Muscat and Al Batinah from the North. It has total population of about 235,337 Omanis and 31,803 expatriates, according to the 2003 census. Al Dakhilyah includes eight willayats: Nizwa, Sumail, Bahla, Adam, Al Hamra, Manah, Izki and Bid Bid. Nizwa is the regional center and it is about 164 kilometers far from Muscat. The company has 6 offices in Al Dakhilyah.
Al Sharqiyah Region Al Sharqiyah region represents the north eastern front of the Sultanate of Oman, overlooking the Arabian Sea from the east. It includes the interior side the Hajar Mountains from the north, adjoining Rimal Al Sharqiyah from the south and Al Dakhilyah from the west. It has a population of about 264,090 Omanis and 48,618 expatriates, totaling 312,708 people, according to 2003 Census. Al Sharqiyah region includes eleven willayats: Sur, Ibra, Bidiya, Al Qabel, Al Mudhibi, Dema-w-Al Taein, Al Kamel& Al Wafi, Jaalan Bani Bu-Ali, Jaalan Bani Bu-Hassan, Wadi Bani Khalid and Masirah . The company has 7 offices in Al Sharqiyah region.
South Al Batinah Al Batinah region rests in the north of Muscat, the capital. Al Batinah is considered a connecting link between the major parts of Oman and Governorate of Musandam, located in the extreme north, and UAE. It has a population of 653,000 or 28% of the total population of the Sultanate. It is considered one of the largest areas in terms of population and is divided into two parts: South Al Batinah and Al Batinah North. It enjoys a population density of 52.3 people per one kilo meter. South Al Batinah Willayats are Al Rustaq, Barka, Al Suwaiq, Al Musanah, Al Awabi, Nakhal, and Wadi
Al Ma`awel. Al Batinah is confined between the foothills of the Hajar Mountains and the Gulf of Oman eastward. The coastal plain is about 25 km wide. The company has 5 offices in South Al Batinah. Figure (1) below illustrates the company’s licensed areas.
Company Profile
6,399 31,900 36,400 74,69971,293 63,338 73,446 208,07742 41 57 1403288 2978 3249 951579 73 86 23622 14 22 58
10Annual Report
SL# Description Units 2007
General Data
1.01 Service Area Sq KM 74,699
1.02 Customers(Output) Number 208,077
1.03 Total (Output) MWh 2,774,887
1.04 Energy Loss % 20.19
1.05 Maximum Demand(Output) MW 877.4
1.06 Distribution Stations(Input) Number 9573
1.07 Distribution Stations (Input) MVA 3101
1.08 Sub-Stations (Input) Number 140
1.09 Sub-Stations(Input) MVA 2250
1.1 Distribution Network 33KV Ckt KM 2677.99
1.11 Distribution Network 11KV Ckt KM 7754.19
1.12 Distribution Network 0.433 KV Ckt KM 9262.06
Ratios
2.01 Total MWh/Total Connection MWh/ Connection 13.34
2.02 Total revenue/ MWh billed RO/MWh 26.39
2.03 Staff Costs/ MWh billed RO/MWh 1.09
2.04 Staff Cost/System Peak MW RO/MW 3441.99
2.05 CAPEX/MWh billed RO/MWh 42.66
2.06 MWh billed / Total Employees MWh/Employee 9158.04
2.07 OPEX/MWh billed RO/MWh 23.30
2.08 Average Staff Cost RO per staff per month 830.58
2.09 Profit Before Tax /Share RO/ Share 15.12
2.1 Profit Before Tax /Employee RO/Employee 24950.49
2.11 Profit Before Tax /MWh billed RO/MWh 2.72
Table (1): Company Highlights for 2007
Highlights
11Annual Report
Organization and HumanResources Organization Structure
The company’s structure is designed to fulfill and reflect the statutory obligations of the company. Several factors have contributed with various degrees in shaping the company organization structure such as licensed areas geography, new market structure obligations, continuation of outsourced services, concentration on core business with emphasis on specialization.
Figure (2): Company Organization Structure
Secrtery Board of Directors Internal Audit
Internal Tender Committee
Internal AuditingCommitteeGeneral Manager
G.M. Office Legal Officer
Regulatory Compliance
Expert
CustomersService Manager
DistributionManager
Administration &Finance Manager
Planing &Projects Manager
12Annual Report
Organization and Human Resources Human Resources The Company is keen in ensuring a sufficient pool of trained staff to meets its operational needs. It recruits, trains and supervises staff career development. The company also cares to improve the development of staff’s skill. MZEC has a workforce of 303 employees
Figure (3): MZEC Manpower, Direct Employees
TrainingMazoon hired an outsourced body to assess the training need and create training plan for years 2008-2010. Training and development activities covered a broad range, including formal courses, in-house training, participating in conferences and other activities. Total of 251 employees participated in 102 training program.
Table (2): Internal and External Training & Participants
The company has recruited 60 staff during 2007as part of its plan, with emphasis on recruiting qualified Omanis for the job. During the year, Human Resources Manual was approved by the Board. Also, new salary structure was proposed to reflect the current market situation. The structure is in its final stage of approval by the Board.
350
300
250
200
150
10
50
0
2006
Omani Expateriate
2007
Course In Oman Overseas
Management and Professional development related 7 10
Safety 5 1
Information Technology related 17 0
Administrative 15 2
Finance 3 1
Customer Service 3 2
Technical 10 6
Other courses/Seminars 3 7
Total 73 29
2006 2007
Omani 226 15 276 22
Expatriate 5 0 5 0
Total 231 15 281 22
MZEC Employees MZEC Employees
M F M F
1�Annual Report
Business OverviewOperational Statistics
Due to the nature of the geographic areas in the company’s licensed areas, which is characterized by very high temperature in summer and moderate during winter, the demand varies between these two seasons. The demand profile is in line with the climate changes during the year. Figures (4) and (5) give an overview of the daily and monthly electricity demand profile for the licensed areas of the company.
Figure (4): Summer and Winter Daily Profile
1- Summer peak day (15th July 2007) –Demand profile analysis.
• The maximum demand on MZEC Network recorded on 15th July 2007 was (877.4 MW).
The demand peaked at 15:00 when the humidity was 83 % and temperature reached 50 degree
centigrade.
• Lowest load during this day was (482.2 MW) at 18:00.
• Average demand during this day was (658.25 MW)
2- Winter minimum day (6th January 2007)–Demand profile analysis.
• The demand on the system is very low during the night and reaches its minimum point of
(133.15 MW) at period 03:00 – 04:00. This is mainly due to less of A/C load during winter.
• Peak demand during this day (315.4 MW) at 18:00.
• Average demand was (209.45 MW).
1�Annual Report
Business Overview Figure (5): Summer and winter monthly profile
During the year the company average load was 403.25 MW. Average temperature in the company licensed areas was 35 degree centigrade and average humidity was 66%.As it can be seen in the figure, there is drop in demand in July because of Guno cyclone.
Customers Services
Electricity supplied to Customer and Revenues.
The Company purchases electricity from Oman Power and Water Procurement Company (OPWP) and distribute to its 208, 077 customers in 25 willayats. 80% of the company customers are residential, 15 % Commercial. Government and other categories (Industrial, Agricultural/Fisheries and Hotels/Tourism) account for 5 %.
Table (3): Summary of customers, MWh Supplied and Revenues by Category
* Others: Agri/Fisheries and Hotels/Tourism
159,716
29,790
9,698
1,591
200,795
165,916
30,604
9,895
1,662
208,077
Residential
Commercial
Government
Others *
Total
No of Customers
2006 2007CategoryBill- MWh
2006 2007
Revenue R.O.
2006 2007
MWH / Customers
2006 2007Revenue / Customers R.O.
2006 2007
1,765,174
305,747
402,602
133,367
2,606,890
1,908,991
327,906
396,897
141,093
2,774,887
18,564,972
6,079,375
7,912,028
2,003,028
34,559,403
20,275,887
6,562,756
7,819,751
2,010,706
36,669,100
11.05
10.26
41.51
83.83
12.98
11.51
10.71
40.11
84.89
13.34
116.24
204.07
815.84
1259
172.11
122.21
214.44
790.27
1209.81
176.23
1�Annual Report
Business Overview Highest Revenue per customer earned by resdential customers is (55.3 %). Highest MWh supplied to residential customers is (1,908,991 MWh) which account for 68.8% from total MWh supplied during the year.
Figure (6): MWh Billed
Figure (7): Revenues(R.O) earned by Category
Figure (8): Number of Customers
Table (4) above gives details about the electricity supplied and the revenues earned by different customer categories.
1�Annual Report
1�Annual Report
Business Overview New Connections
Due to implementation of new customers statement and to large number of projects completed during the year, the total number of customers increased to 208,077 with a growth of 3.63% compared to last year. The company received 7,598 connection applications and executed 95.8% of them. Following table summarizes connection applications and executed connections.
Table: (4): Connection Applications and Executed Connections
* The reason of executed connections is more than the number of connection applications because some applications are transferred from 2006 to 2007.
Figure: (9): Connection Applications and Executed Connections
As part of the license conditions, two codes of practices were prepared and approved by AER-Oman, namely, Customers with special needs code of practice and efficient use of electricity
PERIOD
Q1
Q2
Q3
Q4
CONNECTION APPLICATIONS
1520
2032
2179
1867
EXECUTED CONNECTION
1728*
1764
2174
1616
Connection Applications Executed Connection
2500
2000
1500
1000
500
0Q 1 Q 2 Q 3 Q 4
1�Annual Report
Jaalan B B Hassan AlAwad 0 1.5 0.5 71688.1
AlKamil & Al Wafi AlGhubira 0 0.431 1.135 42424
Saleel Jaber 0 3.66 1.45 46287.235
Left Houses at Al Mudhaibi AL-Zahara 0 4.1 1.5 96028.321
AlMazhat 0 1.53 0.45 26987.4
Hail Al Harim and Hail Al Kufuf 25.83 5.75 275616
Sharqiyah Qaar, Rusaili & AL Ajma 0 0.404 1.7 63925.4
Sur Al Sulaimyah 0 1.05 0.813 29500
Shiya 0 3.75 1.2 136400
Bidiya Shibak 3.883 1.75 82512.1
Umm Sarha 0 1.848 0.462 32832
Izki AL-Hajer 0 2 0.5 27913.6
Dakhiliah Al Hamra Dar sat 0 1 1 28292
Bidbid Wadi AL-Najoom & AL-Saknah 0 4 0.5 118118
A'Saqi & Erq Jamma 0 7.533 2.2 103187.15
Hail A'Taeb & A'Duwaderya at South Batinah Rustaq Wadi Bani Ghafer 0 9.5 0.68 45643.84
A'Seeb at Wadi Bani Hinai 0 2.06 0.25 24268.2
MASOUDA AT HOQAIN 0 0.856 0.168 15950
A'DARH AL KABIRA 0 0.8 0 28050
Total 19 0 75.735 22.008 1,295,623.346
Region Wilayah Villages Electrified Length Kilo Meter Added Cost (R.O)
in 2007 33KV 11KV 0.433 KV
Dima & Tayeen
Table (5): Villages Electrification and new lines added
1�Annual Report
Business OverviewElectricity Imported
Figure (10): Electricity Imported and Supplied To Customers (MWh)
The company purchase (import) energy from Oman Power and Water Procurement Company (OPWP) as per the power purchase agreement at the source. The amount of energy imported depends on demand. Table 7 below shows that energy purchased (imported) differs from supplied due to transmission and distribution losses. Highest electricity distributed was in July while lowest was in January.
Table (6): Monthly Summary of electricity imported, Supplied, Billed and losses
With exclusion of transmission system losses, the distribution aggregated losses was 20.19%. This is the difference between the energy measured at entry point of the system and the exit point at customers’ meter (billed).
600,000
500,000
400,000
300,000
200,000
100,000
0
Bought (from PWP)2007
Bought (from PWP)2006
At (Bulk Supply Points)2007
At (Bulk Supply Points)2006
Jan
Feb
March
April
May
Jun
July
Aug
Sep
Oct
Nov
Dec
Total
Losses
MonthBought
(from PWP)Transmission
System Losses (MWh)
Loss %At (Bulk Supply
Points)(MWh)
(Billed)(MWh)
Bought (from PWP)
Transmission System Losses
(MWh)Loss %
At (Bulk Supply Points)
(MWh)
(Billed)(MWh)
142,920 9,064 6.34 133,856 110,869 151,181 10,964 7.8 140,216 133,375
149,764 8,613 5.75 141,151 111,792 154,304 13,007 9.2 141,297 114,470
191,836 9,992 5.21 181,844 124,180 196,190 12,498 6.8 183,692 137,033
300,872 22,992 7.64 277,880 155,935 322,109 15,889 5.2 306,220 162,933
420,651 18,753 4.46 401,898 222,352 449,735 27,989 6.6 421,746 271,309
432,365 20,124 4.65 412,241 306,737 415,193 9,589 2.4 405,603 324,978
467,842 23,290 4.98 444,552 299,357 482,929 18,832 4.1 464,097 318,224
418,317 21,123 5.05 397,194 295,378 446,467 19,734 4.6 426,733 337,894
398,446 22,227 5.58 376,219 314,102 364,313 5,788 1.6 358,525 310,189
352,519 14,431 4.09 338,088 259,602 233,782 9,557 4.3 224,225 280,650
230,951 11,165 4.83 219,786 224,253 224,674 3,547 1.6 221,128 223,117
154,520 9,058 5.86 145,462 182,333 185,876 2,415 1.3 183,460 160,714
3,661,003 190,832 5.21% 3,470,171 2,606,890 3,626,754 149,811 4.13% 3,476,943 2,774,887
24.88% 20.19%
2006 2007(MWh)
20Annual Report
21Annual Report
Distribution SystemDistribution system Assets
The distribution system of Mazoon Electricity Company consists of the following voltage levels 33 KV, 11 KV & 0.433 KV. Those voltage categories are working on various 33/ 11 KV primary substations, 11 / 0.433 KV distribution substation and 33 / 0.433 KV substations. Following table shows the categories in sizes & number of substations.
Table (7): Equipments and Distribution Lines in MZEC Network
Operation and Maintenance
Some distribution business activities are outsourced to the private sector. Following table shows cost of outsourced operation and maintenance activities.
Table (8): Distribution Business Outsourced Activities
The above outsourced services were reviewed thoroughly and new tenders were floated designed with an aim to reflect MZEC licensed duties and responsibilities.
2006 2007
S.B D SH MZEC S.B D SH MZEC
Number of 3311/ kV Ss 42 38 55 135 42 41 57 140 Number of 110.433/ kV Ss 3227 2513 3129 8869 3288 2978 3249 9515 Number of 3311/ kV TX 76 72 85 234 79 73 87 236 Number of 330.433/ kV TX 20 14 22 56 22 14 22 58
OH 944.66 632.54 968.52 2,545.72 948.955 692.55 957.8 2,599.30
Cable 68.69 22.91 50.21 141.81 68.292 30.27 48.5 147.06
OH 2,193.48 2,285.48 2,668.58 7,147.54 2134.46 2423.81 2804.79 7,363.06
Cable 97.71 144.67 158.70 401.08 122.733 159.229 192.21 474.172
OH 3,845.18 2,005.39 2,464.49 8,315.06 3902.253 2089.127 2598.44 8,589.82
Cable 166.00 226.87 198.80 591.67 169.015 274.095 272.07 715.18
33 kV line (km)
11 kV line (km)
0.433 kV line (km)
2006 2007
SN Contract Type Monthly Cost RO Annual Cost Monthly Cost RO Annual Cost
RO RO
1 Emergency and Maintenance of 11 KV & LT Networks 105,447.21 1,265,366.50 184,188.000 2,210,256.000
2 Maintenance of 33 KV Networks 12,766.90 153,202.80 20,175.750 242,109.000
3 Live Line washing for 33 & 11KV networks 21,470.60 257,647.20 29,807.000 357,683.000
4 AC maintenance system at indoor s/s 475.00 5,700.00 - -
5 Cleaning for 3311/ KV S/S 3,261.50 39,138.00 - -
6 Total 1,721,054.5 2,810,048
22Annual Report
Power Quality IndicatorsSAIFI, SAIDI and CAIDI are the internationally accepted power quality indicators.• SAIFI indicates the system Average Interruption Frequency Index.• SAIDI indicates System Average Interruptions Duration Index.• CAIDI indicates Customer Average Interruption Duration Index.
Table (9): Power Quality Indicators for (33 / 11) KV Network
Figure (11): SAIFI, SAIDI, CAIDI Indicators
Region South Batinah Dakhilyah Sharqiyah Mazoon
2006 2007 2006 2007 2006 2007 2006 2007
SAIFI Interrruption/1000 Customers 1.15 1.15 1.13 1.03 1.31 1.44 1.2 1.22
SAIDI Minutes Lost / 1000 Customers (Year) 105 117 116 71 162 212 128 136
CAIDI Minutes / Interruption 91 102 102 69 124 147 107 112
interruption / 100Km per year 25 20 23 20 24 32 24 24
Minutes Lost / 100 km (Lines 33&11 KV) 23 21 23 14 30 48 25 27
2�Annual Report
Projects HighlightsProjects Summary
•The company executed 48 distribution network projects for villages’ electrification and reinforcement and extension to planned areas during 2007 and 129 projects are still under progress transferred to 2008. Following table and figure gives details of these projects.
Table (10): Projects Completed and In Progress
Figure (12): Number of Projects Completed and In Progress
• Load Related Capital Expenditure (CAPEX): is expenditure related to expand and/or upgrade the company distribution system for accommodation of new loads such as village’s electrification and reinforcement projects. The company invested RO. 12,658,178 Million in such load related projects during the year including projects in progress• Non- Load Related Capital Expenditure (CAPEX): is expenditure required to maintain and/ or replace the company distribution system or supporting facilities and systems such as IT projects, GIS, vehicles and other assets.• Largest electrification project executed in the year was (tender No. T.B 63 / 2007), Electrical distribution works (11kv & 433v) Networks Extension at Ghaleelah,Basaria,Mudairib,Dooh, Ghaleem & Nafaa with total cost of RO. 506,019.21
Limitation of contractors and materials, Cyclone Gonu and sharp increase in some major materials prices, have contributed in delaying the completion of many projects.
Villages Electrifications 29 4,431,566.81 11 1,308,153.18 21 1,295,623.346 19 2,952,841.67
Reinforcement 24 2,631,241.15 20 5,317,051.08 22 5,592,126.577 63 13,754,115
Total 53 7,062,807.96 87 6,625,204.26 43 6,887,749.92 82 16,706,956.67
Completed in 2006 In Progress 2006 Completed in 2007 In Progress 2007
No of Projects Cost RO
No of Projects Cost RO
No of Projects Cost RO
No of Projects Cost RO
Villages Electrification Reiforecement
70
60
50
40
30
20
10
0
2924
1120 21 22 19
63
2006-Completed 2007-In Progress 2006-Completed 2007-In Progress
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Information SystemsMazoon has conducted many presentations and attended many seminars during the year mainly to increase the overall awareness of the concepts of Strategic Asset Management System and its capabilities to integrate with Enterprise GIS (Geographic Information System). In summary Mazoon seeks for following services which will phased on three to four years and shall be implemented based on Mazoon immediate needs:
1. Corporate System Design and Migration Strategya. User need study and requirement analysisb. Study of existing data model and suggest modification if necessaryc. Hardware and software configuration recommendationd. Development of web based GIS system
2. Data Collection and Conversion of Complete Distribution Networka. Field survey of three different voltage levelsb. Collection of attributes up to customer connectionc. Data conversion and migration to the final data model
3. Application Development and Integrationa. Work management system applicationb. CAD migration applicationc. Integration with ETAP, current flow analysis softwared. Integration of Geodatabase model with Corporate GIS
In addition, Mazoon has finalized the IT Strategy project which has addressed the critical projects for the next 3- 4 years. Indeed, identifying the IT Infrastructure, Applications and Organization Structure needed to carry out Mazoon Business is one of the major achievements this year.
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Health, Safety and Environment (HSE)Mazoon Electricity Company (MZEC) has taken major steps in HSE since the beginning of 2007. This is due to the commitment of the company cooperate management to embed HSE in the business and implement the company HSE policy, also the wiliness of the employees to accept the changes.
MZEC activities are driven by electrical works, where company and contractors staff are exposed to electricity hazards in terms of burns as a result of high currents and shock as a result of voltage. Associated hazards to MZEC activities are working at height, lifting, moving objects, falling objects, heat and motive energy. Chemicals do not play major role in the business apart from arc quenching oil.
Environment has an important place in MZEC engineering and operation practices, where a number of environment potential damaging elements are identified and controlled, such as oil leaks, poor site house keeping , concrete and leaking SF6.
MZEC had launched safety awareness for employees, contractor and customers. The HSE team has managed to conduct safety gathering day at the capital and three regions especially for company employees and contractors. The day mainly consisted of electrical shock first aid and health, safety and environment competitions. Moreover, the team and customer services supervised to accomplish three sessions consist of electrical hazards, risk prevention and electrical shock first aid during the month of Ramadan, started with Sumail district.
2007 has passed with acceptable HSE records, with considering the potential level of exposure during the bad weather conditions in March and June. 2008 is the challenge to improve and maintain the achieved 2007 records, whereas, indicators are presented in the HSE plan and with the initiative to maintain the set targets, the below table present the achievement of the company in 2007.
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Table(11) : Company HSE KPIs for 2007
Since Mazoon Electricity Company had received the alert on 4th of June 2007 and the company had stepped up it’s preparation to minimize the subsequent impact and apply recovery measures with minimum losses. The company had considered a number of response scenarios depending on the cyclone possible change of direction. MZEC had divided the impact zones as direct at South Sharqiyah , indirect at South Al-Batinah and Dakhiliya. For the direct impact zone with special focus on Sur, had mobilized 2 set of emergency generators and overhead lines materials including High and Low voltages. Furthermore; mobilized and stationed more than 200 contractor staff and MZEC employees.
Managing the crises of Gonu Cyclone
On the night of June the 6th, MZEC electrical network and the company capabilities to handle such magnitude of emergency was under the test. A number of overhead lines, distribution transformers were damaged and thousands of customers lost electricity as the cyclone swiftly moving into inner land. The impact of the storm and impact of the damage was evaluated and recovery work had started immediately.
City of Sur and surrounding Willayats were affected by the wind and wadi washouts, 10s of pole mounted distribution transformers and 100s of overhead poles were fallen and washed-out.
The indirect impact of the storm has reached both Dakhiliyah region at Fanja and South Al-Batinah at Barka, where a number of transformers and overhead lines were damaged.
Emergency teams mobilized to the affected sites and started recovery with the aim of the restoring power supply and thus the Business Resumption within the targeted time.
The total recorded recovery cost is in the range of 800,000 Omani Rials.
Challenges and Future outlook The company faced with number of challenges related to the fast growth in demand, network extensions for customers, understanding and implementing the industry codes of practices, assets vandalism, compliance to the various statutory requirements, etc.
Therefore, the company will concentrates its efforts in the year on four key focus areas namely, business profitability and losses reductions, employees, customers and compliance.
CORPORATE Performance Indicator Target Actual
Health TROI 4 0
Fatalities 0 0
Safety LTI 4 2
FAC 8 8
Road Safety No.of car damages 7 3
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Corporate Governance ReportCompany Philosophy The management of Mazoon Electricity Company SAOC believes that setting the highest standard of the Corporate Governance, as envisioned by Capital Market Authority (CMA) in the code of Corporate Governance (Code), is not a matter of mere compliance but a useful mechanism to restructure the core corporate value. Its implementation is yet another important milestone for achieving an efficient, impartial and ethical system of functioning at the top management keeping in view the overall interest of the shareholders. The mandatory disclosure requirement as spelt out in the code not only enhances the broader role the directors need to play for achieving corporate objective in the midst of challenges and adversities. Mazoon Electricity Company governance system has been integrated with ethical business practices and sound corporate culture manifested with values and transparent and impartial governing policies on continuous basis. Board of DirectorsComposition of the Board. The Board comprises of 5 members pursuant to the article No “15” of the article of association as amended, of the company. Composition of the Board during 2007 is as under:
Table: (12): Board of Directors
Functions of the Board of Directors
A) The Board of Directors, who is at the helm of affaires of the company, direct the business activities and extend strategic guidance to the operating management in realize the mission of the company. The day –to –day management is delegated to the General Manager by the Board, who further carries out the assigned duties through a team of executive, who are heading the various function of the company.B) The Board's duties and responsibilities encompass wide variety of function of managing the affairs of the company, and more specifically those are detailed under article (5) 0f the code. A summery of these as follows: 1 Approval of business plan, financial policies, investment strategies, action plan, internal regulations and implementation guidelines.2 Review of the operational and financial performance of the company and also the performance of company’s trading and other investments at periodic intervals.3 Approval of financial statements and other reports (Quarterly and annual) and submission shareholders and other authorities as prescribed by the laws of the country.4 Fixing up authority levels and delegation of power to the executive management.5 Implementation of a transparent disclosure policy, including all transactions with directors and the related parties and monitor its compliance.6 Ensure compliance with the laws of the country through proper internal control systems.7 Selection of sub-committees, specifying their roles, responsibilities and powers and evaluate their performance.8 Appoint the General Manager and other key executives and evaluation of their functions.9 All other matters specifically not delegated to the committees and executive management.10 Put necessary plans and review them from time to time to implement company’s strategies and develop company’s business plan.11 Monitor and Audit the executive management control and insure that compliance with the company’s objectives and shall not contrary with the laws of the country.
S.No Representing Founder Members and nominated directly by: No of Members
1 The Government of Sultanate of Oman - Electricity Holding Company 4 Members
2 The Government of Sultanate of Oman – Ministry of Finance 1 Member
Total 5 Members
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Current Directors
a) details of the current Directors of the company who are holding their office at the 31 December 2007, their membership in other companies in the Sultanate of Oman and their attends in the various meetings of the company during 2007 are stated as under:
Ms. Manal Mohammed Al Abdwani Chairperson (Director General MOC&I, Sultanate of Oman)
Nominated by Electricity Holding Company.• Non Executive/Independent Director. • Chairperson of other Boards – 1.
• Member of other Boards – 2. • Member of other committee – Nil. • Attend 3 of 6 Board Meetings. • Attend the AGM.
Mr. Khalifa Ali Al Hosni Deputy Chairperson(Director General MOE, Sultanate of Oman)
• Nominated by Electricity Holding Company. • Non Executive/Independent Director.• Chairman of other Boards – Nil. • Member of other Bards – 1.
• Member of other committee – Nil. • Attend 6 of 6 Board Meetings. • Attend the AGM
Dr. Zaid Khamis AL Siyabi Member
(Director General MO&G, Sultanate of Oman)
• Nominated by Electricity Holding Company. • Non Executive/Independent Director.• Chairman of other Boards – Nil. • Member of other Boards – 1. • Member of other committee – 1.
• Attend 5 of 6 Board Meetings. • Attend the AGM
Mr. Abdullah Salem Al MukhainiMember
(Director General MOH, Sultanate of Oman)
• Nominated by Electricity Holding Company. • Non Executive/Independent Director.• Chairman of other Boards – Nil. • Member of other Boards – Nil.
• Member of other committee – Nil. • Attend 6 of 6 Board Meetings. • Attend the AGM
Mr. Haitham Yousef Al ZadjaliMember
(H.O. Pension Section, Sultanate of Oman)
• Nominated by Ministry of Finance. • Non Executive/Independent Director.• Chairman of other Boards – Nil. • Member of other Boards – 1.
• Member of other committee – 1. • Attend 6 of 6 Board Meetings. Attend the AGM.
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During the second quarter of the financial Year 2007 Eng. Hamed Mohammed Al Mahruqy (Chairman) has resigned as well as the Electricity Holding Company SAOC is one of the main shareholders in the company Appoint Ms. Manal Mohammed Al Abdwani to be as a Chairperson effecting from May 1, 2007
• Number of Meetings Held and Dates of Meetings.
Table (13): Board of Directors Meetings
Audit Committee.
A.Terms of Reference
The Audit Committee has been set up pursuant to Article (54) of the Articles of Association and its terms of reference include all matters specified under that article.
B. Composition of the Audit committee
The Audit Committee comprises of the following three directors of the Company. All members of the Audits Committee are independent and non executives.
Table (14): Audit Committee Meetings
Dates of these meeting were:
Type No Dates
Board meetings 6 9 Jan 2007,7 April 2007, 15 April 2007,19 May 2007, 6 August 2007,20 Nov 2007
Annual General Meeting 1 14 April 2007
Extraordinary General Meeting Nil Nil
Name of Members Period No. of Meeting Held No. of Meeting Attended.
• Mr. Khalifa Bin Ali Al Hosni Full Year 5 5 Chairman of the Committee
• Dr. Zaid Bin Khamis Al Siyabi Full Year 5 4 Member
• Mr. Haitham Bin Yousef Al Zadjali Full Year 5 4 Member
4th April 2007
28th August 2007
2nd September 2007
3rd November 2007
25th December 2007
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Internal Tender Committee
As per the Government tender law, the Board has established the Internal Tender Committee and identified its primary functions.
The Internal tender Committee consists of four members and chaired by the Board of Directors chairman or his deputy up to 6 / 3 / 2007. Internal Tender Committee conducted 25 meetings during the year on following dates in 2007. Afterward it is restructured and includes chairman and 4 members from the company management and one from BOD.
Internal Tender Committee conducted 25 meetings during the year on following dates
Table (15): Internal Tender Committee Meetings and Composition
1. Meetings No (1 - 8 )
2. Meeting No ( 9 )
22nd January 29th January 5th February 12th February 26th February
6th March 26th March 11th April 24th April 8th May
14th May 21st May 4th June 25th June 9th July
16th July 7th August 3rd September 18th September 25th September
8th October 30th October 17th November 26th November 12th December
Member Position Meeting Held Meetings Attended
Eng. Hamad Bin Mohammed AL Mahruqy(Chairman BOD) Chairman 1 0
Mr. Khalifa bin Ali AL-Hosni(Deputy Chairman BOD) Acting Chairman 1 1
Mr. Haitham bin Yosef Al-Zadjali Member 1 1
Eng. Abdullah bin Said AL-Badri Member 1 1
Mr. Salim bin Yasser AL-Sulymani Member 1 0
Eng. Ahmed bin Saif Al-Mazrouy Member 1 1
Eng. Majid bin Nasser Al-Busaidi Member 1 0
Member Position Meeting Held Meetings Attended
Eng. Hamad Bin Mohammed AL Mahruqy(Chairman BOD) Chairman 8 7
Mr. Khalifa bin Ali AL-Hosni(Deputy Chairman BOD) Acting Chairman 8 1
Eng. Abdullah bin Said AL-Badri Member 8 6
Mr. Salim bin Yasser AL-Sulymani Member 8 8
Eng. Mohammed bin Hamed Al-Busaidi Member 8 8
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3. Meetings No ( 10 - 25 )
Remuneration Matters
The Company has paid remuneration of R. O. 44,900 to the Directors, Audit Committee members and Internal Tender Committee Chairman for the year 2007.
Details of Non Compliance by the company.
The Company has not paid any penalty and no strictures have been imposed on the company by Muscat Securities Market/Capital Market Authority or any statutory authority, on any matter related to capital market during the year.
Communications with the shareholders and Investors
Since MZEC is part of the newly established electricity supply industry market structure, pursuant to Royal Decree 782004/, the company is maintaining close liaison with the Electricity Holding Company (EHC) as Major shareholder on various policy issues as well as transitional matters. The company’s annual report will be sent to the shareholders, EHC and Ministry of Finance (MOF).Distribution of Shareholding
The Shareholder pattern as on 31st December 2007was as follows:
Table (16): Distribution of Shares
The Statutory Auditors
Deloitte & Touche was appointed as the Statutory Auditors of the Company.
Member Position Meeting Held Meetings Attended
Manal bint Mohammed AL-Abdwani (Chairman BOD) Chairman 16 13
Mr. Khalifa bin Ali AL-Hosni(Deputy Chairman BOD) Acting Chairman 16 3
Mr. Haitham bin Yosef Al-Zadjali Member 16 12
Eng. Abdullah bin Said AL-Badri Member 16 12
Mr. Salim bin Yasser AL-Sulymani Member 16 14
Eng. Ahmed bin Saif Al-Mazrouy Member 16 14
Eng. Majid bin Nasser Al-Busaidi Member 16 12
Shareholders Total Shares % Share Capital
Electricity Holding Company SAOC 499,950 99.99%
Ministry of Finance 50 0.01%
Total 500,000 100%
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Financial Statements31 December 2007
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