2007 English Annual Report Eng

His Majesty Sultan Qaboos Bin Said
CO NTE N T S
Pages
Chairmans Report
Mission and Vision
Management Discussion & Analysis
12
Operational Results of the Subsidiary Companies
16
Corporate Governance
24
Report and Consolidated Financial Statements
29
Chairmans Report
Dear Shareholder,
On behalf of the Board of Directors of the Electricity Holding Company SAOC (EHC), I am delighted to
present the Annual Report for the financial year ended 31 December 2007.
Financial Results
The consolidated financial results of Electricity Holding Company SAOC and its eight Subsidiaries
(EHC Group) display yet another year of good performance. Consolidated profit after tax stands at RO
48.8m compared to RO 35.9m earned in 2006, showing a remarkable growth of 36%. Earnings per
share in 2007 stand at RO 24.402 per share compared to RO 17.937 per share in 2006.
The standalone financial results of EHC has generated a net profit of RO 50.6m compared to RO
34.9m earned in 2006, a growth of 45% over that of 2006. The income comprises mainly of the
dividends received from the subsidiary companies related to 2006, besides the income generated
from the provision of accounting services to the subsidiaries. An amount of RO 12.5m included in the
current year results pertains to the profit on sale of all the shares of Al Rusail Power Company SAOC,
a subsidiary company.
Government Subsidy
During 2007, the Government of the Sultanate of Oman provided subsidy, to the relevant subsidiary
companies totalling RO 104m. The corresponding amount for the year 2006 was RO 108m. Subsidy
reflects the excess of economic cost of supply of electricity over the permitted tariff revenue.
Major Milestones
The year 2007 witnessed some major achievements for the EHC Group, them being:
i.
Completion of the privatization process of Al-Rusail Power Company SAOC (RPC) by way of
100% share sale to an investment group from the private sector.
ii.
Investment of RO 69.2m on capital expenditure, an increase of 20% over 2006.
iii.
Increase in the customer base from 500,081 to 520,748, registering a growth of 4% over 2006.
iv.
Electricity Sale to Customers increased by 6% from 9.4m MWh in 2006 to 10m MWh.
v.
Oman Power and Water Procurement Company SAOC (OPWP) became the first company in
the Sultanates electricity sector to obtain the ISO 9001:2000 Quality Management System
(QMS) certification.
vi.
OPWP also secured a long term local and foreign currency issuer rating of A2 from Moodys
Investors Service.
vii.
Several Corporate Initiatives like Balanced Score Card, Quality Management Systems (QMS)
to aid achievement of ISO 9001:2000, Enterprise Content Management System (ECMS) etc.
were launched.
viii.
Group-wide revision in the pay-scales of the staff has been initiated, which has been made
effective from January 2008.
ix.
Setting up of an Internal Audit department in EHC to provide group wide support to help
monitor controls and compliances.
Future
EHC executes the directives of the Government of Sultanate of Oman in respect of the privatization
of its subsidiary companies. Hence in accordance with the issued directives, EHC is studying the
privatization plan of Oman Electricity Transmission Company during 2008. EHC shall likewise enhance
its capabilities for increasing the efficiency and quality of the accounting services rendered to its
subsidiaries and is thereby studying the provision of new central services, administrative support and
is directing the subsidiaries to use the best administrative and technical systems. In this regard EHC
shall adopt a number of joint initiatives for raising the efficiency and performance of the subsidiary
companies.
On the other hand, EHC Group plans to invest RO 106m in Capital Expenditure projects during 2008
to meet the projected growth in the electricity demand of 10%, besides the projected increase in the
customer base by 5%.
It is noteworthy that on 1 January 2008, the Boards of Directors of EHC Group were reconstituted.
We take this opportunity to express our gratitude to the outgoing Members of the Boards of Directors
of EHC and all its subsidiaries for their dedicated and effective services all through the period of
formation of the Companies beginning from September 2004. We also sincerely appreciate the efforts
of the executive management and the staff of EHC and the subsidiaries for their dedicated services
and discharge of their duties.
Finally, on behalf of the Board of Directors, I express my sincere gratitude and appreciation to His
Majesty Sultan Qaboos Bin Said, whose vision and wise leadership have paved the path of development
and advancement of the electricity and related water sector of the Sultanate of Oman.
On Behalf of the Board of Director
Directors,
Mohammed Abdul
ulla
ul
lah Al
Al Ma
ah
hrouqi
Chairman
6
Mission and Vision
EHC is Committed to:

O
Implement the Governments policies and take necessary measures to achieve its objectives of
encouragement of participation of the private sector in electricity and related water sector
projects.
Implement the Governments policies regarding the financing of the electricity and related water
sector companies and safeguarding the Governments interest.
Providing central accounting services to the subsidiary companies within the electricity and
related water sector.
EHC operates on its Mission and Vision of:
Mission
To contribute to the development of Oman, maximising stakeholders interest
in the electricity and related water sector by adopting best business practices
and providing strategic leadership, with quality and efficient business support
to the subsidiaries.
Vision
Empower: Develop right skills in employees and subsidiaries and become an
employer of choice.
Excel: Excel and inspire excellence by improving all processes and delivering
high quality and efficient services.
Execute: Implement and achieve all the objectives of the government for the
sector.
Evolve: Lead sector transformation into commercial enterprises by being a

trusted and innovative partner.
Preface
on 19 October 2002. The Company commenced commercial business on 16 September 2003.

EHC holds the governments shares in the eight companies, engaged in the activities of generation,
transmission and distribution of electricity and related water. EHC in turn is owned by the Ministry of
Finance with the responsibility to implement the policies of the government assigned to it pursuant to
the provisions of the Sector Law.
Strategic Objectives
Y
Maintain inherent financial strength and maximize shareholder value.
Maximize financial performance and ensure adequate financial resources to support

subsidiaries.
Implement government policies in the sector.
Inspire confidence and maintain high satisfaction by provision of appropriate support to the
subsidiaries.
Create awareness and manage expectations.
Enhance asset management.
Establish information and performance management best practices.
Improve processes and manage risks.
Promote knowledge sharing and skills development across the group achieving synergies in
pursuing the strategic objectives.
Develop and implement human capital development policies for employees in the group,
including those affected by privatization.

Attract and retain employees by being the employer of choice.
10
Shareholding and Process Flow in EHC Group
SHAREHOLDING PATTERN
PROCESS FLOW
Generation &
Desalination
MOF
100%
Generation of Electricity &

Desalination of Water
Transmission & Dispatch
(GPDC)
EHC
(`WJPC)
OETC
OPWP, OETC
99.99%
0.01%
GPDC, WJPC
Providing
transmission
services
Power & Water Procurement
Distribution & Supply
OPWP
MEDC, MJEC, MZEC
MEDC
MJEC
MZEC
RAECO
RAECO
Generation,
Transmission,
Distribution: Rural
Areas
Distribute & Supply Electricity
End User
11
Board of Directors
H.E. Mohammed Abdullah Al Mahrouqi

Chairman
H.E. Dr. Abdulmalik Abdullah Al Hinai

Deputy Chairman
Mrs. Manal Mohammed Al Abdwani

Member
12
H.E Yahya Said Al-Jabri

Member
Mr. AbdulSalam Nasser Al Kharousi

Member
Management Discussion & Analysis

Privatization Process
The company has maintained, as its core objective, the strategic objective of privatization of the
electricity and related water sector, as envisaged by the Sector Law.
During the year, privatization of Al-Rusail Power Company SAOC (RPC) was completed, while the
transmission company, Oman Electricity Transmission Company SAOC has been identified as the
next company to be privatised. The process for privatisation of RPC, which started in late 2005, was
successfully concluded in January 2007, with the 100% sale of its shares to the winning consortium
of Suez-Tractabel S.A., Mubadala Development Corporation and National Trading Company LLC for a
net consideration of RO 48.5m.
Impact of Gonu
Some of the electricity sector companies suffered significant to moderate losses caused by the
Tropical cyclone Gonu during June 2007, causing damage to properties in the Al Sharqiya and Muscat
regions, with resultant effect on the financial performance of the group during the year; the combined
loss suffered by the group in the year 2007 was RO 5.7m. We acknowledge and place on record
our deep appreciation for the efforts of the management and staff of the group companies and the
various Government Agencies, who worked shoulder to shoulder, round the clock, to restore electricity
and related water production and distribution in the extremely adverse conditions of the cyclones
aftermath.
Initiatives and Achievements
A number of corporate initiatives were launched during the year, the important ones being:
1. Quality Management System (QMS): It defines the Organisations scope of work and its
policies consistent with the corporate vision, mission & objectives and outlines the business
processes to meet the requirements of ISO 9001:2000.
2. Enterprise Content Management System (ECMS): It is a comprehensive document control &
management system.
3. Balanced Score Card (BSC): A management system which enables an organisation to frame
its vision, strategy & translate them into action. BSC provides feedback on both the internal
business processes and external outcomes in order to continuously improve strategic
performance and results. Workshops were conducted to implement the BSC program across
the EHC Group.
Stakeholder Relationships
EHC continued its strive to provide central accounting and financial services to its eight subsidiary
companies. Besides the core accounting function, certain management and related advisory services
have been additionally incorporated under the domain of the services offered to the subsidiary
companies.
13
The Consolidated Financial Performance for the year 2007 demonstrated significant improvement in
the Results of the EHC Group, from RO 35.9m in the year 2006 to RO 48.8m in the year 2007.
Consolidated Financial Performance
350,000
326,598
301,072
300,000
265,199
277,794
Rial Omani 000
250,000
200,000
2006
2007
150,000
100,000
50,000
35,873
Revenue
Expenditure
48,804
Profit After Taxation
103,738
14
15,581
3,041
12,538
-
6,317
3,598
57,294
48,181
Rial Omani 000
107,500
153,508
144,449
Revenue represents the sale of electricity to domestic, commercial, government, agriculture &
fisheries, tourism and industrial customers within the distribution network owned by the companys
subsidiaries. Besides, revenue also includes bulk supply of desalinated water to the water department
and demineralised water to others.
The Consolidated Basic Earnings per Share (EPS) has gone up from RO 17.937 to RO 24.402, the
following chart reflects the subsidiary company-wise EPS during 2007 and 2006
13.310
12.866
0.210
2.810
9.680
13.070
2.602
8.150
0.00
0.902
3.148
2.696
10.000
7.879
21.708
20.240
10.350
20.000
Rial Omani
2006
2007
15.306
17.937
30.000
24.402
40.000
(10.000)
(20.000)
(30.000)
The Consolidated Assets and Liabilities position for the years 2007 and 2006 is given below
Rial Omani 000
200 9 ,33 0 0
7 42,99 8 4
200 2 , 6 8 6
731,44 3 2
155 9 , 8 0 7
133 5 , 5 0 8
14,371
20,820
7 7 8 ,11 0 6
777 7,, 799 0
The Consolidated Net Assets Value (NAV) per share remained the same in the year 2007 from that of
2006, inspite of sale of RPC. The individual NAV for each subsidiary company is depicted below
Rial Omani
2006
2007
15
Operational Results of the Subsidiary Companies

Al Ghubrah Power and Desalination Co. SAOC
Regulated business of combined generation of Electricity and Desalination of water
Al Ghubrah Power and Desalination Company SAOC (GPDC) achieved revenues of RO 52.2m for the
year ending Dec 31, 2007 which included RO 27.2m for electricity capacity and energy charges and
RO 25m for water capacity and energy charges. The revenues have gone up by 3.8% from that of 2006
levels of RO 50.3m. The Net profit of RO 7.6m reflects an increase of 48% partially due to savings
in costs on account of employment of operations and maintenance staff since April 2007 as against
the contract staff cost in 2006.
Description
Units
Electricity Generated
MWh
Water Generated
2007
000 CuM
Electricity Sold
MWh
Water Sold
000 CuM
2006
2,807,387
2,484,187
53,980
53,570
2,604,000
2,339,000
52,890
52,270
AL GHUBRAH POWER AND DESALINATION CO. SAOC

Income allocation 2006
Cost of Sales
Admin Expenses
D
Depreciation
i i
Share holders
Cost of Sales
Admin Expenses
D
Depreciation
i i
Share holders
65%
66%
5%
4%
16%
20%
10%
16
14%
Wadi Al Jizzi Power Co. SAOC

Regulated business of generation of Electricity
Wadi Al-Jizzi Power Company SAOC achieved revenues of RO 13.7m for the year ending Dec 31, 2007
which included RO 6.3m for electricity capacity charges and RO 7.4m for electricity energy charges.
The corresponding total revenue in the year 2006 was RO 13.8m. The net profit is however higher due
to savings in gas consumption, transmission connection charges, contract fee for plant operations and
other direct costs.
Description
Units
2007
2006
MWh
1,009,314
1,053,943
Electricity Sold
MWh
997,500
1,043,176
WADI AL JIZZI POWER CO. SAOC

Cost of Sales
Admin Expenses
Depreciation
Share holders
Cost of Sales
Admin Expenses
Depreciation
Share holders
62%
61%
7%
6%
10%
22%
21%
11%
17
Oman Power and Water Procurement Co. SAOC

Regulated business of Bulk Supply of electricity to Licensed Suppliers in consideration of a Bulk
Supply Tariff and secure adequate supplies of electricity. Bulk Supply of Desalinated water to the Water
Department and secure the sale of demineralised water to persons other than Water department.
Oman Power and Water Procurement Company SAOC (OPWP) achieved revenues of RO 214m for
the year ending Dec 31, 2007 compared to RO 200m in 2006. The revenues of 2007 included sale
of electricity amounting to RO144.6m and sale of water amounting to RO 55.3m compared to
corresponding amounts of RO 140m and RO 44m in 2006. The increase in profits is attributable to the
increase in volumes.
Description
Unit
2007
2006
Electricity Purchase
000 MWh
12,480
11,783
Water Purchase
000 CuM
84,203
82,104
RO 000
11,111
12,226
Subsidy (Salalah Business)
OMAN POWER AND WATER PROCUREMENT CO.SAOC
Cost of Sales
Admin Expenses
Share holders
Cost of Sales
Admin Expenses
Share holders
72%
777%
28%
22%
0% 1%
18
1% 1%
Oman Electricity Transmission Co. SAOC

The Company is a monopoly licensed provider of transmission services to the Main Interconnected
System in the north of Oman.
Description
Unit
Service Area
Regulated Units
Transmitted
Sq KM
2007
129,334
129,334
11,380
10,821
7.9
3.4
MW
2,582
2,444
000 MWh
Energy Loss
Maximum Demand
(Peak)
2006
Oman Electricity Transmission Company SAOC (OETC) earned revenues of RO 27.1m for the year
ending Dec 31, 2007 which corresponds to RO 26.5m for the year 2006. The decrease in the net profit
is mainly due to the increase in repairs and maintenance expenses, comprising primarily of cyclone
damages, transformer shifting expenses etc.
OMAN ELECTRICITY TRANSMISSION CO. SAOC

Cost of Sales
Admin Expenses
Depreciation
Share holders
Cost of Sales
Admin Expenses
Depreciation
Share holders
19%
17%
18%
20%
37%
22%
41%
26%
19
Rural Areas Electricity Co. SAOC

To generate electricity and produce desalinated water; transmit, distribute and supply electricity
to customers in its Authorised Area extending throughout the Sultanate of Oman and includes the
Musandam, Al Sharqiyah, Al Wusta and Dhofar Regions (but excludes the Salalah Concession Area).
Description
Unit
2007
2006
Customers
Number
17,757
16,607
MWh
309,354
272,151
Electricity Sent out
MWh
289,175
252,490
Total Water Produced

(Sur desalination plant
disposed in 2007)
000 CuM
597
4,286
Internal Consumption
of Water
000 CuM
13
Water Sold
000 CuM
602
4,260
Rural Areas Electricity Company SAOC (RAECO) earned a total revenue of RO 25.9m for the year ending
Dec 31, 2007, comprising of Electricity Sales of RO 6.1m, Water Sales of RO 1.9m and Government
Subsidy of RO 17.9m. The Government Subsidy has gone up by 10% from 16.2m in 2006. Water sales
revenue during the year is lower than 2006 due to the sale of Sur Desalination plant. The Net loss for
the year stood at RO 1.4m as against a loss of RO 0.1m in 2006.
RURAL AREAS ELECTRICITY CO.SAOC

Cost of Sales
Admin Expenses
Depreciation
Share holders
Cost of Sales
Admin Expenses
Depreciation
Share holders
73%
73%
14%
12%
1%
14%
20
1%
12%
Distribution Companies:
MUSCAT ELECTRICITY DISTRIBUTION CO. SAOC
MAJAN ELECTRICITY CO.SAOC
MAZOON ELECTRICITY CO. SAOC
Undertake to operate, maintain, develop and expand

the electricity distribution system in Oman.
Description
Service Area
Customers
Electricity Distributed
Energy Loss
Maximum Demand (peak)
Subsidy
Subsidy per KWh
Unit
Muscat
Majan
Mazoon
2007
2006
2007
2006
2007
2006
Sq KM
3,900
3,900
50,250
50,250
74,669
69,669
Number
176,114
168,711
118,836
113,853
208,077
200,792
MWh
%
MWh
RO million
RO
4,819,762 4,693,557 2,154,076 1,929,625 2,774,887 2,605,000

22
19
17
18
23
25
1,246
1,146
584
532
877
843
16
23
23
25
36
45
0.003
0.005
0.011
0.013
0.013
0.010
21
MUSCAT ELECTRICITY DISTRIBUTION CO. SAOC

Cost of Sales
Admin Expenses
Commission
Depreciation
Share holders
Cost of Sales
Admin Expenses
Commission
Depreciation
Share holders
81%
80%
6%
8%
2%
2%
5%
6%
4%
6%
MAJAN ELECTRICITY CO.SAOC

Cost of Sales
Admin Expenses
Commission
Depreciation
Share holders
Cost of Sales
Admin Expenses
Commission
Depreciation
Share holders
72%
71%
7%
9%
9%
9%
3%
7%
9
9%
4%
MAZOON ELECTRICITY CO. SAOC

Cost of Sales
Admin Expenses
Commission
Depreciation
Share holders
Cost of Sales
Admin Expenses
Commission
Depreciation
Share holders
70%
75%
9%
7%
2%
3%
8%
8%
22
9%
9%
23
Corporate Governance
Board of Directors:
The Board of Directors sets the overall policy direction, provides supervision and control to the
company. In order to maintain an effective and efficient oversight and control on the strategic, financial
and commercial compliance issues, the board reviews appropriate information provided on a timely
manner.
Incoming Board of directors with effect from 29 December 2007:

Name
Title
Position
H.E. Mohammed Abdullah

Al M
Mah
ahro
rouq
uqii
Chairman, Public Authority for Electricity

& Wa
Wate
terr
Chairman
Undersecretary of Economic Affairs,

Ministry of National Economy
Deputy
Chairman
H.E Yahya Said Al-Jabri
Executive PresidentCapital Market Authority
Member
Director General of Planning & Follow Up,

Ministry of Commerce & Industry
Member
Mr. AbdulSalam Nasser Al Kharousi
Director General of Budget & Contracts,

Ministry of Finance
Member
The Outgoing Board of Directors:

Name
Title
Position
H.E. Dr. Khamis Mubarak Al Alawi
Minister of Transportation & Telecommunications
Chairman
Undersecretary of Economic Affairs,

Ministry of National Economy
Deputy
Chairman
H.E. Sayyid Mahmood Hilal Al-Busaidi*
Secretary General of Tender Board
Member
H.E. Yahya Said AlJabri*
Executive President Capital Market Authority
Member
Mr. Khalifa Shames Al Subhi
Director General of Budget & Contracts,

M
Min
inis
istr
try
y of F
Fin
inan
ance
ce
Member
Director General of Planning & Follow Up,

Ministry of Commerce & Industry
Member
Mr. Talib Bin Salim Al Falahi **
Ex-Secretary General of Tender Board (Acting)
Member
* From May 2007

** Up to March 2007
24
Details of attendance and remuneration for the four Board meetings for the year 2007:
Name
Meetings
attended
H.E
E. D
Drr. K
Kha
hami
mis
s Mu
Muba
bara
rak
k Al A
Ala
lawi
wi
H.E. Mohammed Abdullah Al Mahrouqi*
Sitting
fee per
meeting
RO
0
Bonus
paid RO
Total
Remuneration
RO
300/500
10,000
11,400
650
650
H.E
E. S
Say
ayyi
yid
d Ma
Mahm
hmoo
ood
d Hi
Hila
lall Al.Bus
Busai
aidi
di
2
200
00
5,000
000
5,400
400
H.E. Yahya Said Al-Jabri*
500
500
Mr. Khalifa Shames Al Subhi
200
5,000
5,600
Mrs. M
Manall Mohammed
h
d Al A
Abd
bdwanii
2
200
00/5
/500
00
5,000
000
6,100
100
Mr. Talib Bin Salim Al Falahi
200
5,000
5,200
Mr. AbdulSalam Nasser Al Kharousi*
500
500
30,000
35,350
Total
* From 29 December 2007
Internal Tender Committee
The Internal Tender Committee (ITC) comprises of nominated members from the Board of Directors
and from the management. The ITC is chaired by the Chairman of the Board of Directors. The ITC
approves all purchases above RO 15,000/- up to a limit of RO 250,000/-. For purchases valued at over
RO 250,000/-, the ITC refers to the Government Tender Board of Oman.
The Committees main task is to assist the Board in approving contracts in accordance with the
Financial Delegation of Authority. The following table shows the attendance details of members for the
nine meetings held by the ITC:
Members
Position
Meetings Attended
H.E. Dr. Khamis Bin Mubarak al Alawi**
Chairman
H.E.
E Sa
Sayy
yyid
id M
Mah
ahmo
mood
od H
Hil
ilal
al A
All-Bu
Busa
said
idi*
i*
Chai
Ch
airm
rman
an
Mr. Talib Bin Salim Al Falahi***
Chairman
Mrs. Manal Bint Mohammed Al Abdwani**
Deputy Chairman
H.E. Mohammed Abdullah Al Mahrouqi**
Member
Mr. Khalifa Shamis Mohammed Al Subhi
Member
Mr.
M
r. H
Has
assa
san
n Mo
Moha
hamm
mmed
ed A
Abd
bdaw
awan
anii
Memb
Me
mber
er
Mr. Ali Abdullah Al Abri
Member
Mr. R.K. Mehta
Member
Mrs. Mariam Abdullah Al Subhi
Secretary
* With Effect from 19 May 2007

** Up to 26 March 2007
*** Up to 18 April 2007
25
Internal Audit Committee

The commitee ensures the development and improvement of the internal control environment, to ensure
the highest standard of work within the company, besides ensuring compliance with the governance
requirements and risk review, which may affect conducting of the companys business performance in
future.
The Committee assists the Board in reviewing reports and financial statements referred to the Board by
the Executive Management or by the companys External Auditor. In addition, the Committee provides
assurance to the Board regarding the efficiency of the internal audit and control environment by
reviewing the reports submitted by the Internal Auditors.
The Internal Audit Committee of the company comprises of the following Board Members:
Name
Title
Position
Meetings attended
H.E. Dr. Abdulmalik Al Hinai
Undersecretary of Economic Chairman

Affa
Af
fair
irs
s, M
Min
inis
istr
try
y of N
Nat
atio
iona
nall
Economy
Mrs. Manal Al Abdwani
Director General of Planning Member

& Fo
Foll
llow
ow U
Up
p, M
Min
inis
istr
try
y of
Commerce & Industry
Mr. Khalifa Al Subhi
Director General of Budge

g t
& Contracts, Ministry of
Finance
Head Internal Audit
Member
Secretary
Mr. Essam Mousa
Human Resources Committee

The Human Resources Committee (HR Committee) comprises of members nominated from the
management. This committee deliberates certain matters related to the policies and procedures
concerning the employees of EHC, and proposes matters for the Board of Directors to approve.
The Committees main responsibility is to assist the Board in establishing and developing the companys
human resource policies, including the human resource guide.
The HR Committee comprising of the following members had nine meetings during 2007:
Name
Title
Position
Mr. Al
Mr
Alii Ab
Abdu
dull
llah
ah A
All Ab
Abri
ri
Chairm
Chai
rman
ans
sA
Ass
ssis
ista
tant
nt;; Se
Secr
cret
etar
ary
y
to Board of Directors
Chairman
Mr. Hassan Mohammed Abdawani
Chief Executive Officer (Acting)
Member
Mr. R.K
M
K.M
Meht
hta
Finance Di
Fi
Director
t
Member
b
Mr. Saleh Faqir Al Raisi*
Human Resource Manager
Member
* Up to September 2007
26
Quality Management System

In order to incorporate Quality Management System (QMS) in all the activities of the company, a
committee has been set up, to study, evaluate and improvise the Quality policy consistent with the
corporate vision, mission and objectives, refine the System documentation, Record control and Quality
Manual, encourage customer orientation and thereby improve Business performance. The members
of QMS committee comprise of:
Name
Title
Position
Mr. Hassan Mohammed Abdawani
Chairman
Mr. Punyabrata Sen
Head Strategic Management Unit
Manage
Mana
geme
ment
nt
Representative
Ms. Suhaila Naamat Al Farsi
Business Performance and Quality Analyst
Member
Management:
The previous year has witnessed some changes in the companys top management positions, as the
then Chief Executive Officer of the company resigned in February 2007. This position was held for a
brief period by H.E. Mohammed Abdullah Al-Mahrouqi, followed by the appointment of Eng. Hassan
Mohammed Jawad Al Abdwani as Chief Executive Officer (Acting) since September 2007. Such change
did not affect the companys performance.
The Management Team led by the Chief Executive Officer (Acting) is responsible for achieving the
strategic objectives of the company.
Executive Management Team
Currently, the Management team comprises of suitably qualified and experienced professionals
Eng. Hassan Abdwani

Member Internal Tender Committee
Member HR Committee
Chairman Quality Management System
Mr. Ali Al Abri
Chairmans Assistant
Secretary to the Board of Directors
Chairman HR Committee
HR & Admin. Manager (Acting)
Mr. R.K. Mehta
Finance Director
Member HR Committee
Mr. Punyabrata Sen
Head Strategic Management Unit

Management Representative
Quality Management System
Mr. Ahmed Saleh Al Jahdhami
Director of Privatization and Re-structuring

Department
27
The Electricity Holding Company and its Subsidiaries have been active in providing employment
opportunities for Omanis and assisting in their training and development. The training plan of the
company aims at training Omani nationals in an organized and phased way.
The total staff strength in the EHC Group at the end of 2007 was at 1,634 as against 1,249 staff in
the year 2006. The new recruitment comprises of around 243 Omani nationals; the increase is largely
attributable to the absorption of the Operation and Maintenance contract staff by Al Ghubrah Power
and Desalination Company SAOC.
Development of Personal Balanced Score Cards for each staff member has been one of the key
initiatives, taken up by the company during 2007. Sector-wide revisions in the pay-scales of the staff
members have also been initiated.
Omanisation Percentage:
Omani
2006
2007
Expatriates
2006
28
2007
20
07
EHC
OPWP
MEDC
MJEC MZEC RAECO OETC
GPDC
WJPC
Total
52
33
260
171
266
194
97
33
52
1,158
78%
79%
95%
97%
98%
96%
90%
83%
78%
93 %
59
35
281
190
298
191
108
190
49
1,401
76%
80%
93%
93%
98%
95%
89%
61%
75%
86 %
15
14
11
15
91
22%
21%
5%
3%
2%
4%
10%
17%
22%
7%
1
19
9
21
1
15
5
11
1
14
4
121
12
1
18
2
233
33
24%
20%
7%
7%
2%
5%
12%
39%
25%
14 %
ELECTRICITY HOLDING
COMPANY SAOC AND ITS SUBSIDIARIES
Report and consolidated financial statements

for the year ended 31 December 2007
29
Pages
Independent auditors report
1-2
Consolidated balance sheet
Consolidated income statement
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
6-7
8 - 42
Deloitte & Touche (M.E.)

Muscat International Center
Location: MBD Area
P.O.Box 258, Ruwi
Postal Code 112
Sultanate of Oman
Tel: +968 2481 7775
Tel: +968 2481 5897
Fax: +968 2481 5581
www.deloitte.com
to the shareholders of
Electricity Holding Company SAOC
Report on the consolidated financial statements

We have audited the accompanying financial statements of Electricity Holding Company SAOC and its subsidiaries
(the Group) which comprise of the consolidated balance sheet as at 31 December 2007, and the consolidated
income statement, consolidated statement of changes in equity and consolidated cash flow statement for the year
ended 31 December 2007, and a summary of significant accounting policies and other explanatory notes, as set
out on pages 3 to 42.
Managements responsibility for the financial statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in
accordance with International Financial Reporting Standards. This responsibility includes: designing, implementing
and maintaining internal control relevant to the preparation and fair presentation of financial statements that are
free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting
policies; and making accounting estimates that are reasonable in the circumstances.
Auditors responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We
conducted our audit in accordance with International Standards on Auditing. Those standards require that we
comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the
consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditors judgment, including the
assessment of the risks of material misstatement of the consolidated financial statements, whether due to
fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entitys
preparation and fair presentation of the consolidated financial statements in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
entitys internal control. An audit also includes evaluating the appropriateness of accounting policies used and
the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation
of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
Independent auditors report

to the shareholders of
Electricity Holding Company SAOC (continued)
Basis of qualified opinion

As stated in note 3 of these consolidated financial statements, under IFRIC 4-Determining whether an arrangement
contains a lease, the power purchase agreement between Oman Power and Water Procurement Company SAOC
(OPWP) , a subsidiary and United Power Company SAOG (UPC) and other relevant power producing companies and
the arrangement between OPWP and Oman Electricity Transmission Company SAOC (OETC), a subsidiary related
to transmission facilities of UPC will be treated as a finance lease as per the provisions of IAS 17 Leases which
will result in the following:
Recognition of the property, plant and equipment related to the generation, interconnection and
transmission facilities at fair value.
Depreciation of these assets over their estimated useful lives.
Recognition of interest costs implicit in the leases.
In the opinion of the management, adoption of this interpretation will result in violation of the conditions in the
license issued by Authority for Electricity Regulation, Oman (AER) and other provisions of the Sector law. The
accounting of costs and determination of profits will also violate the license requirements and hence both OETC
and OPWP have not adopted this interpretation. The effect of such non-adoption of the interpretation on these
consolidated financial statements has not been quantified.
Qualified opinion
In our opinion, except for the effects of the matters described in the basis of qualified opinion paragraph, the
consolidated financial statements present fairly, in all material respects, the financial position of Electricity Holding
Company SAOC and its Subsidiaries (the Group) as of 31 December 2007, and of its financial performance
and cash flows for the year ended 31 December 2007 in accordance with International Financial Reporting
Standards.
Delo
loitte
itttte
e & Touc
ch
he (M
(M.E
E.)
Muscat, Sultanate of Oman
8 June 2008
Consolidated balance sheet

as at 31 December 2007
Notes
2007
2006
RO 000
RO 000
ASSETS
Non-current assets
Property, plant and equipment
690,096
698,357
Advance payments
41,336
44,627
731,432
,
742,984
,
Total non-current assets

Current assets
Inventories
23,361
24,666
Trade and other receivables
73,651
60,141
Other current assets
541
11,372
Bank deposits
10
3,700
7,000
Cash and cash equivalents
11
101,433
102,621
202,686
205,800
3,500
Total current assets
202,686
209,300
Total assets
934,118
952,284
Assets held for sale
12
EQUITY AND LIABILITIES

Capital and reserves
Share capital
13
2,000
2,000
Statutory reserve
14
1,886
2,017
General reserve
15
2,750
Retained earnings
Due to Ministry of Finance
Total equity
115,457
72,108
655,697
701,981
777,790
778,106
Non-current liabilities
Provision for staff benefits
1,341
1,089
Deferred tax liability
17
11,557
7,832
Deferred revenue
18
7,922
5,450
20,820
14,371
Total non-current liabilities

Current liabilities
Trade and other payables
19
114,861
128,140
Other current liabilities
20
20,128
29,761
Bank overdrafts
21
1,390
Provision for current tax
519
516
Total current liabilities
135,508
,
159,807
,
Total equity and liabilities
934,118
952,284
389
389
Net assets per sh

share (RO)
............
......
.....
...
. ........
Chairman
22
Director
Chief Executive Officer
Fina
n nce Director
The accompanying notes form an integral part of these consolidated financial statements.
Consolidated income statement

Notes
For the year ended
For the year ended
31 December 2007
31 December 2006
RO000
RO000
Continuing operations
Revenue
23
326,598
301,072
Operating costs
24
(258,146)
(233,379)
68,452
67,693
Gross profit
General and administrative expenses
25
(30,759)
(27,597)
Commission
27
(6,704)
(6,096)
30,989
34,000
22,378
5,697
(31)
(180)
53,336
39,517
(4,485)
(4,080)
48,851
35,437
(47)
436
48,804
35,873
24.402
17.937
Profit from operations

Other income
28
Finance charges
Profit before tax from continuing operations
Income tax charge
30
Profit after tax from continuing operations

Discontinued operations
(Loss) / profit after tax from discontinued operations
31
Profit for the year

Basic earnings per share (RO)
32
Consolidated statement of changes in equity

Share
Statutory
General
Retained
Dues to
capital
reserve
reserve
earnings
MOF
RO 000
RO 000
RO 000
RO 000
RO 000
2,000
1,329
37,234
722,343
762,906
Profit for the year
35,873
35,873
Transfer to statutory reserve
688
(688)
Dividends paid
(311)
(311)
Adjustment (Note 2)
(20,362)
(20,362)
2,000
2,017
72,108
701,981
778,106
Profit for the year
48,804
48,804
Transfer to statutory reserve
36
(36)
a subsidiary (Note 28)
(167)
(2,164)
(2,331)
Transfer to general reserve
2,750
(2,750)
Dividends paid
(505)
(505)
Adjustment (Note 2)
(46,284)
(46,284)
2,000
1,886
2,750
115,457
655,697
777,790
Balance at 1 January 2006
Balance at 1 January 2007
Total
RO 000
Adjustment due to sale of

Al Rusail Power Company SAOC,
Balance at 31 December 2007

For the year ended
For the year ended
31 December 2007
31 December 2006
RO 000
RO 000
53,283
40,012
38,017
43,097
(12,538)
24
214
1,211
Operating activities
Profit before tax
Adjustments for:
Depreciation on property, plant and equipment
Profit on sale of investment in a subsidiary
Loss on sale of property, plant and equipment
Loss on retirement of property, plant and equipment
Depreciation reversal on restatement of asset value
(16)
Inventory adjustments
229
24
(686)
(157)
Provision for inventory obsolescence

Write back of provision for Income tax
Capital work-in-progress expensed
Provision for impaired debts
Net transfer to provision for staff benefits
Interest received
Interest paid
(1)
261
1,575
2,865
261
574
(6,317)
(3,594)
25
Deferred revenue
2,472
2,530
Advance payments amortized
3,291
,
1,544
,
80,830
87,377
Operating cash flows before working capital movement

(Increase)/decrease in working capital due to:
Inventories
(1,471)
(2,966)
(11,898)
(6,305)
10,831
11,372
37,502
12,359
(9,633)
17,651
106,161
119,488
(372)
(1,303)
105,789
,
118,185
,

Cash generated from operations

Income tax paid
Net cash from operating activities
Investing activities
Gross proceeds on sale of a subsidiary (Note 29)
48,510
(69,223)
(58,766)
Disposal of property, plant and equipment
1,574
834
Disposal of assets held for sale
3,500
Bank deposits with a maturity of more than three months
3,300
(7,000)
Interest received
6,317
3,594
(6,022)
(61,338)
Purchase of property, plant and equipment
Net cash used in investing activities

for the year ended 31 December 2007 (continued)
For the year ended
For the year ended
31 December 2007
31 December 2006
RO 000
RO 000
Financing activities
Repayment of Due to Ministry of Finance
(92,886)
(153)
Advance to Ministry of Finance
(5,996)
Decrease in bank overdrafts
(1,390)
(16,090)
(25)
(7)
(505)
(311)
(100,955)
(16,408)
(1,188)
40,439
Cash and cash equivalents at the beginning of the year
102,621
62,182
Cash and cash equivalents at the end of the year
101,433
102,621
Restatement of Due to MOF
Interest paid
Dividend paid
Net cash used in financing activities
Net changes in cash and cash equivalents
The net cash flow generated from operating activities of the discontinued operation was RO 53 thousand
(2006-RO 495 thousand).
Notes to the consolidated financial statements

1
Legal status and principal activities
Electricity Holding Company SAOC (the company) is a closed Omani joint stock company registered under the
Commercial Companies Law of Oman on 19 October 2002. The company commenced business on 16 September
2003.
The establishment and operations of the Electricity Holding Company are governed by the provisions of the Law
for the Regulation and Privatisation of the Electricity and Related Water Sector (the Sector Law) promulgated by
Royal Decree 78/2004.
The principal activities of the company comprise the management of Government investments in, and the
Privatization of, the Electricity and Related Water Sector in the Sultanate of Oman and provision of certain central
services to its subsidiary companies. The registered office of the company is at P.O. Box 850, Mina Al Fahal, PC
116, Sultanate of Oman.
The subsidiary companies commenced their operations on 1st May 2005 (the Transfer Date) following the
implementation of a decision of the Ministry of National Economy (the Transfer Scheme) issued pursuant to
Royal Decree 78/2004.
The principal activities of the subsidiaries are set out below:
Subsidiary company
Shareholding
percentage
Principal activities
%
Al Ghubrah Power and
Desalination Company SAOC
99.99
Electricity Generation and related

Water Desalination.
Wadi Al Jizzi Power Company SAOC
99.99
Electricity Generation.
Oman Electricity Transmission

Company SAOC
99.99
Electricity Transmission.
Oman Power and Water Procurement

Company SAOC
99.99
Bulk purchase and sale of Electricity

and Related Water.
Muscat Electricity Distribution

Company SAOC
99.99
Distribution of electricity and

maintenance of distribution
networks in the Muscat region.
Mazoon Electricity Company SAOC
99.99

networks in the wilayats of
ASharqiyah, Al-Dhakliyah and South
Batinah region.
Majan Electricity Company SAOC
99.99

networks in the wilayats
of ADhahirah,and North
Batinah region.
Legal status and principal activities (continued)
Subsidiary company
Shareholding
percentage
Principal activities
%
Rural Areas Electricity Company SAOC
99.99
Electricity
Generation,
Desalination,
and
Water
Electricity
Distribution activities in Musandam

Governorate, Al Wusta Region, Masirah
Island, Khuweima and Qroon Area in
Sharqiyah Region, Aswad Area in
Dhahirah
Region
in
the
Dhofar
Governorate, the Area outside Dhofar

Power
Company
SAOC
(DPC)
authorised Area and in the Dhakhliyah

Region, the area outside Mazoon
Electricity Co SAOC authorised Area.
On 31 January 2007, the company along with Ministry of Finance (MOF) sold its entire shareholding (99.99%)
in Al-Rusail Power Company SAOC (RPC), a subsidiary to SMN Power Holding Co. Ltd., Guy Richelle and Jean
Francois Roberge (Buyers) (Note 28).
These consolidated financial statements represent the results of operations of the company and that of all the
above subsidiaries for the year 2007 (the Group) and that of Al Rusail Power Company SAOC for the month of
January 2007.
2
Following the implementation of a decision of the Ministry of National Economy issued pursuant to Royal
Decree 78/2004 (the Sector Law) and in accordance with the transfer scheme, the company and through it,
its subsidiaries received the following assets and liabilities from the Ministry of Housing, Electricity and Water
(MHEW) on 1 May 2005 (Transfer Date):
RO 000
Property, plant and equipment (net)
662,615
Plant spares
8,314
Investment in subsidiaries
4,500
Advance payments
47,840
Trade and other receivables (net)
32,506
Inventories (net)
23,711
11
Total assets
779,497
(54,794)
Deferred revenue
Due to Ministry of Finance as on 1 May 2005
(2,360)
722,343
Due to Ministry of Finance (continued)
RO 000
Movement during the year 2006 due to restatement of
values required as of Transfer date of 1 May 2005 on
account of:
Oman Electricity Transmission Company SAOC
Accruals wrongly credited to Due to EHC, now corrected
(1,720)
Rural Areas Electricity Company SAOC
Assets transferred to Dhofar Power Company SAOG
(8,672)
Impairment of Sur Desalination Plant (held for sale)
(1,032)
Claim on Dhofar Power Company SAOG, relating to the period

prior to 1 May 2005, now written off
(1,179)
Removal of assets pertaining to MHEW, wrongly included as on

1 May 2005
Adjustments to carrying value of Diesel Generators received from MHEW
Part funding of Sur Desalination Plant by MHEW
(18)
(8,487)
746
(18,642)
Due to Ministry of Finance as on 31 December 2006
701,981
Amount repaid during the year
(46,131)
Restatement of certain assets in Rural Areas Electricity Company SAOC,

taken over from MHEW on 1 May 2005
Due to Ministry of Finance as on 31 December 2007
(153)
655,697
Adoption of new and revised International Financial Reporting Standards (IFRS)
For the year ended 31 December 2007, the Group has adopted all of the new and revised standards and
interpretations issued by the International Accounting Standards Board (IASB) and the International Financial
Reporting Interpretations Committee (IFRIC) of the IASB that are relevant to its operations and effective for year
beginning on 1 January 2007 except IFRIC 4 Determining whether an arrangement contains a lease and
consequently IAS 17-Leases.
The adoption of relevant standards and interpretations has not resulted in changes to the company and its
subsidiaries accounting policies and has not affected the amounts reported for the current year.
10
Adoption of new and revised International Financial Reporting Standards (IFRS) (continued)
Under IFRIC 4-Determining whether an arrangement contains a lease, the power purchase agreement between
Oman Power and Water Procurement Company SAOC (OPWP) and United Power Company SAOG (UPC) and the
arrangement between OPWP and Oman Electricity Transmission Company SAOC (OETC) related to transmission
facilities of UPC will be treated as a finance lease as per the provisions of IAS 17 Leases which will result in
the following:
Recognition of the property, plant and equipment related to the generation, interconnection and
transmission facilities at fair value.
Depreciation of these assets over their estimated useful lives.
Recognition of interest costs implicit in the leases.
The management believes that adoption of IFRIC 4 interpretation will result in recognition of costs, associated
with relevant agreements on a profile inconsistent with the cost recovery mechanism provided for in the licence
issued by the Authority for Electricity Regulation, Oman (AER) and recognition of fixed assets which relates to
production of power and related desalinated water, transmission and distribution activities, which are prohibited
under the licence issued to OPWP by AER and the provisions of the Sector Law. The management is thus of the
opinion that adoption of IFRIC 4 and IAS 17 will result in inappropriate reporting of the costs and profits of the
company and hence has not adopted these.
At the date of authorization of these financial statements, the following standards and interpretations were in
issue but not yet effective:
Effective for annual periods
beginning on or after
IFRIC 11: IFRS 2: Group and Treasury Share Transactions
1 March 2007
IFRIC 12: Service Concession Arrangements
1 January 2008
IFRIC 14: IAS 19-The Limit on a Defined Benefit Asset

Minimum Funding Requirements and their Interaction
1 January 2008
IFRIC 13: Customer Loyalty Programs
1 July 2008
IFRS
2: (Revised) Share-based Payment
1 January 2009
IFRS
8: Operating Segments
1 January 2009
IAS
1: (Revised) Presentation of Financial Statements
1 January 2009
IAS
23: (Revised) Borrowing Costs
1 January 2009
IAS
32: (Revised) Financial Instruments: Presentation
1 January 2009
IFRS
3: (Revised) Business Combinations
1 July 2009
IAS
27: (Revised) Consolidated and Separate Financial Statements
1 July 2009
IAS
28: (Revised) Investments in Associates
1 July 2009
IAS
31: (Revised) Interests in Joint Ventures
1 July 2009
The management anticipates that the adoption of the above standards and interpretations in future periods will
have no material impact on the financial statements of the Group.
11
Summary of significant accounting policies
Basis of preparation
These consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards Board.
Basis of accounting
These consolidated financial statements are presented in Rial Omani (RO) which is the currency in which majority
of transactions are denominated and are rounded off to the nearest thousand.
These consolidated financial statements have been prepared on the historical cost basis as modified by
measurement of certain financial instruments at fair value.
Basis of consolidation
These consolidated financial statements incorporate the financial statements of the company and entities
controlled by the company (its subsidiaries). Control is achieved where the company has the power to govern the
financial and operating policies of an entity so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed off during the year are included in the consolidated income
statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting
policies in line with those used by other members of the Group.
All intra-group transactions, balances, income and expenses are eliminated on consolidation.
Minority interest has not been disclosed separately on the face of the consolidated financial statements as the
sole shareholder of the holding company, being the Ministry of Finance of the Government of Oman, is also the
minority shareholder in all the subsidiaries.
Property, plant and equipment are stated at cost less accumulated depreciation and any identified impairment
loss. Borrowing costs, net of interest income, which are directly attributable to acquisition of items of property,
plant and equipment, are capitalised as the cost of property, plant and equipment.
12
Summary of significant accounting policies (continued)
Property, plant and equipment (continued)
Subsequent expenditure
Expenditure incurred to replace a component of an item of property, plant and equipment including major inspection
and overhaul expenditure is capitalised. Other subsequent expenditure is capitalised only when it increases
the future economic benefits embodied in the item of property, plant and equipment. All other maintenance
expenditure is recognised in the consolidated income statement as an expense as and when incurred.
Depreciation
Depreciation is calculated so as to write off the cost of property, plant and equipment (other than capital work in
progress) on a straight line basis over the expected useful economic life of the asset concerned.
The principal estimated useful lives used for this purpose are:
Assets
Buildings
Years
30
Generation assets
25-30
Transmission and related assets
30-60
Distribution and related assets
20-40
Other plant and machinery
12-60
Furniture, vehicles and equipment
05-07
Plant spares
20
Property, plant and equipment include plant spares, which are depreciated over their estimated economic useful
life. Inventory spares with a unit cost of RO 5,000 or greater are recorded as plant spares and included in property,
plant and equipment at the time of their purchase and are transferred to the appropriate asset category upon
issue.
Capital work in progress
Capital work in progress is stated at cost. When commissioned, capital work in progress is transferred to the
appropriate property, plant and equipment category and depreciated in accordance with depreciation policies of
the Group.
13
Impairment
At each consolidated balance sheet date, the Group reviews the carrying amounts of its assets to determine
whether there is any indication that those assets have suffered an impairment loss. If any such indication exists,
the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if
any).
The loss arising on impairment of an asset is determined as the difference between the recoverable amount and
the carrying amount of the asset and is recognized immediately in the income statement.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is
increased to the revised estimate of its recoverable amount and the increase is recognized as income immediately,
provided that the increased carrying amount does not exceed the carrying amount that would have been determined
had no impairment loss been recognized for the asset (cash-generating unit) earlier.
Inventories
Inventories are stated at the lower of cost and net realisable value. Costs comprise purchase cost and where
applicable, direct labour costs and those overheads that have been incurred in bringing 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 on criteria determined by the Group.

Provision for end of service indemnity for non-Omani employees is made generally in accordance with the Oman
Labour Law unless specified higher in the contract of employment or the Human resource policy and is based on
current remuneration and cumulative years of service at the balance sheet date.
End of service benefit for Omani employees are contributed in accordance with the terms of the Social Securities
Law 1991 and Civil Service Employees Pension Fund Law for direct hires by the company and employees transferred
from MHEW respectively.
Provisions
Provision is recognised in the consolidated balance sheet when the Group has a legal or constructive obligation as
a result of a past event and it is probable that it will result in an outflow of economic benefit that can be reasonably
estimated.
Deferred revenue
Deferred revenue shown under non-current liabilities represents customer contributions towards the cost of
property, plant and equipment. These contributions are deferred over the life of the relevant property, plant and
equipment.
14
Taxation
Income tax is calculated as per the fiscal regulations of the Sultanate of Oman.
Current tax is the expected tax payable on the taxable income for the year, using the tax rates ruling on the
consolidated balance sheet date.
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 for income tax purposes.
Deferred tax is calculated on the basis of the tax rates that are expected to apply to the year when the asset is
realised or the liability is settled. The tax effects on the temporary differences are disclosed under non-current
liabilities as deferred tax.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available
against which the unused tax losses and credits can be utilized. Deferred tax assets are reduced to the extent that
it is no longer probable that the related tax benefit will be realized.
However, for the purposes of deferred tax, it is assumed that carrying amount of assets and liabilities is equal to
the carrying amounts used for income tax purposes on the Transfer Date.
Revenue
Revenue represents the sale of electricity to the Government, commercial and residential customers within the
Groups distribution network, sale of desalinated water to Public Authority for Electricity and Water (PAEW) and
Majis Industrial Services Company SAOC (MISC) and transmission connection charges.
Revenue also includes the funding received from Ministry of Finance (MOF) in respect of cost relating to the
Salalah business of Oman Power and Water Procurement Company SAOC, a subsidiary.
Total revenue in excess of the maximum allowed by the regulatory formula in accordance with the licensing
requirements is deferred to subsequent year and is shown as other current liability. This is applicable to Distribution
and Supply Companies, Oman Electricity Transmission Company SAOC, Oman Power and Water Procurement
Company SAOC and Rural Areas Electricity Company SAOC.
Other revenue includes meter connection fees, tender fees, bank interest, fines and application of deferred revenue
on customer contributions and is accounted on accrual basis.
Interest income is accounted on accrual basis by reference to the amount outstanding and the applicable interest
rates.
15
Government subsidy
The Government of the Sultanate of Oman has funded the excess of economic costs over customer and other
revenue within the Electricity and Related Water Sector. This funding is included in revenue. The Group companies
account for subsidy when the right to receive the subsidy is established. This is applicable to Distribution and
Supply Companies and Rural Areas Electricity Company SAOC.
Power purchase cost
Oman Power and Water Procurement Company SAOC, a subsidiary has made fixed capacity contractual payments
to United Power Company for its Manah Power Plant. Such payments are recognised in the income statement
on a straight line basis over the period of the contract, which is representative of the time pattern of the users
benefit. Fixed capacity payments in respect of other Independent Power and Water Projects, are recognised in
the consolidated income statement based on actual payments made which is representative of the time pattern
of the users benefit.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets are added
to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on
qualifying assets is deducted from the borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in the profit or loss in the year in which they are incurred.
Foreign currency translation
Transactions denominated in foreign currencies are initially recorded at the rates of exchange prevailing on the
date of the transaction. Monetary assets and liabilities denominated in such currencies are translated at the rates
prevailing on the balance sheet date. Gains and losses from foreign currency transactions are dealt with in the
consolidated income statement.
For the purposes of the statement of cash flows, the Group considers all bank and cash balances with an original
maturity of less than three months from the date of placement to be cash and cash equivalents.
16
Financial instruments
Financial assets and financial liabilities are recognised on the Groups consolidated balance sheet when the
company and its subsidiaries become a party to the contractual provisions of the instrument.
Financial assets
The principal financial assets are advances, trade and other receivables, bank balances and cash. These are stated
at their nominal values less any allowance for estimated impaired debts.
Advances and receivables are non-derivative financial assets with fixed or determinable payments and are not
quoted in an active market. They are included in current assets, except for maturities greater than 12 months after
the balance sheet date, which are classified as non-current assets.
Financial liabilities
The principal financial liabilities are dues to Ministry of Finance, trade and other payables and bank borrowings.
Trade and other payables are stated at their nominal values.
Bank borrowings are initially measured at fair value, net of transaction costs. They are subsequently measured at
amortised cost using effective interest method, with interest expense recognised on an effective yield basis.
Share capital is stated at the net proceeds received.
Impairment of financial assets
Financial assets are assessed for indicators of impairment at each balance sheet date. Financial assets are
impaired where there is objective evidence that, as a result of one or more events that occurred after the initial
recognition of the financial asset, the estimated future cash flows of the investment have been impacted.
For financial assets, objective evidence of impairment could include:
significant financial difficulty of the counterparty or
default or delinquency in payments.
For certain categories of financial asset, such as trade receivables that are assessed not to be impaired individually
are subsequently assessed for impairment on a collective basis.
Objective evidence of impairment for a portfolio of receivables could include the companys past experience of
collecting payments, an increase in the number of delayed payments in the portfolio past the credit period as well
as observable changes in national or local economic conditions that correlate with default on receivables.
17
Impairment of financial assets (continued)
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with
the exception of trade receivables, where the carrying amount is reduced through the use of a provision account.
When a trade receivable is considered uncollectible, it is directly written off as bad after appropriate approvals.
Subsequent recoveries of amounts previously written off are credited to a revenue account, bad debts
recovered.
Financial risk management
Overview
The Groups activities and its use of financial instruments exposes it to a variety of financial risks being:
Credit risk
Liquidity risk
Market risk
The Groups overall risk management programme focuses on the unpredictability of financial markets and seeks
to minimise potential adverse effects on the Groups financial performance. The Group uses derivative financial
instruments to hedge certain foreign currency fluctuation risk exposures.
Credit risk management is carried out by the respective Group companies and Liquidity and Market risk by the
Group treasury department of the company under policies approved by the Board of Directors. Group treasury
identifies, evaluates and hedges financial risks in close co-operation with the company and its subsidiaries. The
Board provides written principles for overall risk management, as well as written policies covering specific areas,
such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non
derivative financial instruments, and investment of excess liquidity.
(i)
Credit risk
Credit risk is the risk of financial loss to the Group, if a customer or counterparty to a financial instrument
fails to meet its contractual obligations. The credit risk of the Group is primarily attributable to trade and other
receivables and investment in bank deposits.
18

The Groups exposure to credit risk on trade and other receivables is influenced mainly by the individual characteristics
of each customer. The Group has established credit policies and procedures that are considered appropriate and
commensurate with the nature and size of receivables. Trade receivables primarily represent amount due from
Oman Investments and Finance Company SAOG (OIFC), Oman National Engineering and Investment Company
SAOG (ONEIC), local companies, which are sub-contracted to provide customer meter reading, billing and collection
services; Public Authority for Electricity and Water, Majis Industrial Services Company SAOC (MISC) and dues from
Government customers and other private customers. Management do not consider that there is any significant
exposure from this concentration of credit risk. Other receivables are short term in nature, primarily advances to
suppliers of goods and services and prepaid expenditures.
Investments
The Group limits its exposure to credit risk on its investments by only investing in liquid securities and only with
counterparties which have a good credit rating. Given good credit ratings and liquidity, management does not
expect any counterparty to fail to meet its obligations.
Investment in bank deposits and bank balances

The companys banks accounts are placed with reputed financial institutions.
(ii)
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Groups
approach to managing liquidity is to ensure, as far as possible that it will have sufficient liquidity to meet its
liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking
companys credit worthiness.
Typically the Group plans that it has sufficient cash on demand to meet expected operational expenses covering
a period of at least 30 days, including the servicing of financial obligations. This excludes the potential impact of
extreme circumstances that cannot reasonably be predicted, such as natural disasters. In addition, the Group has
access to credit facilities.
(iii)
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates, affect the
Groupss income or the value of its holdings of financial instruments. The objective of market risk management is
to manage and control market risk exposures within acceptable parameters, while optimising the return.
19
Price risk
The permitted tariff (prices) for generation, transmission, supply and connection of electricity and water by the
relevant Group companies are determined either by long term agreements with the customer of the respective
companies or the Permitted Tariff Regulations issued by the Authority for Electricity Regulation, Oman (AER).
Foreign currency risk

The Groups functional and presentation currency is Rial Omani and the Groups performance is substantially
independent of changes in foreign currency rates. The Group has transactional currency exposures. Group uses
forward currency contracts to eliminate major transactional exposures.
There are no significant financial instruments denominated in foreign currency and consequently, foreign currency
risk is not significant.
Interest rate risk

The Group has short term bank deposits, which are interest bearing and exposed to changes in market interest
rates. The Group adopts a policy of ensuring that all its deposits and borrowing are on a fixed rate basis.
Capital management
The Groups objectives when managing capital are to safeguard the Groups ability to continue as a going concern
and benefit other stakeholders.
The Boards 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 Group is confident of improving on the current level of profitability by enhancing top line growth and prudent
cost management. The Group is not subject to externally imposed capital requirements.
Use of estimates
The preparation of the financial statements requires management to make estimates and assumptions that affect
the reported amount of financial assets and liabilities at the date of the consolidated financial statements and the
resultant provisions and changes in fair value for the period. Such estimates are necessarily based on assumptions
about several factors involving varying, and possibly significant, degrees of judgment and uncertainty and actual
results may differ from managements estimates resulting in future changes in estimated assets and liabilities.
20
Use of estimates (continued)
The following are the significant estimates used in the preparation of the consolidated financial statements:
(i) Depreciation
Depreciation is charged so as to write off the cost of assets over their estimated useful lives. The calculation of
useful lives is based on managements assessment of various factors such as the operating cycles, the maintenance
programs, and normal wear and tear using its best estimates.
(ii) Provision for inventory obsolescence
Provision for inventory obsolescence is based on managements assessment of various factors such as usability,
the maintenance programs, and normal wear and tear using its best estimates.
(iii) Provision for impaired debts
Provision for impaired debts is based on managements best estimates of recoverability of the amounts due along
with the number of days for which such debts are due.
(iv) Deferred revenue
Revenue from customer contributions towards the cost of network connection related property, plant and equipment
are deferred over the useful life of those property, plant and equipment based on managements assessment of
various factors such as the usability and normal wear and tear, using its best estimates.
21
22
26,332
200,868
(43,181)
2,832
1,256
239,961
(4,654)
(7,427)
3,285
412
248,345
Generation
assets
RO 000
166,901
(154)
4,466
150
162,439
37,870
10,304
114,265
Transmission
and related
assets
RO 000
313,014
(672)
8,803
30,984
273,899
(1,619)
2,439
22,288
250,791
Distribution
and related
assets
RO 000
38,303
(31)
4,900
1,531
31,903
6,429
1,407
24,067
Other plant
and
machinery
RO 000
4,816
(178)
31
1,603
3,360
(163)
1,224
2,299
Furniture,
vehicles and
equipment
RO 000
11,500
(2,651)
(4,294)
4,275
14,170
(35)
(4,701)
7,988
10,918
Plant
spares
RO 000
800,178
(48,460)
69,223
779,415
(4,654)
(9,587)
58,766
734,890
Total
RO 000
Included under Disposals/adjustments in the cost of property, plant and equipment is an amount of RO 830 thousand at cost (net book value of RO 818
thousand), (2006 Nil) that were destroyed by tropical cyclone Gonu in June 2007.
38,444
(208)
Disposals / adjustments (1,385)
31 December 2007
2,346
(19,084)
Transfers
2,140
27,284
Additions
22,054
31,629
3,121
1,712
17,221
Buildings
RO 000
1 January 2007
Assets held for sale (Note 12)
(48,443)
Transfers
(343)
13,431
Additions
Disposals / adjustments
66,984
Capital
work-inprogress
RO 000
1 January 2006
Cost
23
Charge for the year
Transfers
1 January 2007
Charge for the year
Transfers
31 December 2007
31,629
31 December 2006
20,472
23,678
2,654
(37)
1,109
1,582
978
604
RO 000
Buildings
RO 000
197,003
152,412
48,456
(8,700)
389
13,809
42,958
(1,154)
9,518
122
20,161
14,311
RO 000
Generation
assets
RO 000
157,116
157,746
9,155
(6)
3,838
5,323
3,444
1,879
RO 000
Transmission
and related
assets
RO 000
247,931
270,779
42,235
(54)
16,321
25,968
(35)
15,661
10,342
RO 000
Distribution
and related
assets
RO 000
29,581
34,449
3,854
(3)
58
1,477
2,322
53
1,339
930
RO 000
Other plant
and
machinery
RO 000
2,348
3,098
1,718
(75)
781
1,012
(48)
589
471
RO 000
Furniture,
vehicles and
equipment
RO 000
12,277
9,490
2,010
(118)
(447)
682
1,893
650
(175)
925
493
RO 000
Plant
spares
RO 000
698,357
690,096
110,082
(8,993)
38,017
81,058
(1,154)
10,085
43,097
29,030
RO 000
Total
RO 000
During the year, the relevant subsidiary companies undertook a comprehensive count of their inventories during which exercise, excess / shortages of
plant spares were found and have been appropriately dealt with in the consolidated income statement.
Rights to the land on which the power plant, substation buildings, transmission and distribution networks are constructed were transferred from
MHEW as part of the transfer scheme and are subject to Usufruct Agreements between the MHEW and the respective subsidiary companies.
38,444
31 December 2007
Net book value
(Note 12)
1 January 2006
Depreciation
RO 000
Capital
work-inprogress
RO 000
Property, plant and equipment (continued)
Accumulated
Advance payments
2007
2006
RO 000
RO 000
For generation facilities
18,847
20,232
For interconnection and transmission facilities
22,489
24,395
41,336
44,627
Advance payments pertain to fixed capacity payments made to United Power Company SAOG in respect of power
purchases from Manah Power Plant. The tariff in respect of fixed capacity contractual payments for Phase I
comprising plant and interconnection transmission facilities has been structured in such a way that the tariff
rates are significantly higher during initial years as compared to the later period of the contract. Fixed capacity
contractual payments are recognised as an expense in the income statement on a straight line basis, over the
period of the contract, which is representative of the time pattern of the users benefit.
Advance payments represent total cumulative payments made to date reduced by total cumulative charges to date
recognised in the income statement on a straight-line basis.
Inventories
Fuel
Chemicals
General spares
Goods in transit
2007
2006
RO 000
RO 000
3,023
4,882
146
300
43,613
45,819
(23,421)
(26,766)
431
23,361
24,666
During the year, relevant subsidiary companies undertook a comprehensive count of their inventories, during
which exercise, excess/shortages were found in general spares and have been appropriately dealt with in the
consolidated income statement.
24
2007
RO 000
2006
RO 000
Amounts due from Government debtors
36,634
35,116
Amounts due from OIFC and ONEIC
14,486
13,707
Amount due from PAEW
25,483
21,028
Amount due from MISC
989
4,365
4,872
370
(20,342)
(18,767)
61,985
55,956
Due from Ministry of Finance
5,996
Prepayments
2,596
593
142
2,932
3,592
73,651
60,141
Amount due from Private customers (frozen)

Amount due from other private customers
Net trade receivables
Income tax advance

Other receivables
Up to 31 December 2007, subsidiary companies, which have supply of electricity as their activity (Licensed
Suppliers), had agreements with Oman Investments and Finance Company SAOG (OIFC) and Oman National
Engineering and Investment Company SAOG (ONEIC) and whereby the monthly customer meter reading, billing
and collection function for private and government customers was outsourced to OIFC and ONEIC. The Licensed
Suppliers had also assigned all amounts due from private customers to OIFC and ONEIC and paid a commission
under the above agreements based on the customer category and the amounts assigned. This arrangement has
been modified effective from 1 January 2008.
The provision for impaired debts substantially relates to government debts yet to be received, taken over from
MHEW as part of the transfer scheme and frozen accounts of private customers.
Due from Ministry of Finance represents the excess amount paid to Ministry of Finance on disbursement of sale
consideration of Al Rusail Power Company SAOC.
25
Other current assets represent short fall of revenue in maximum allowed revenue as per price control formula,
which is accrued during the year.
2007
2006
RO 000
RO 000
11,372
36
11,372
11,408
11,372
Less: Subsidy received during the year
(10,867)
Subsidy receivable as on 31 December
541
11,372
2007
2006
RO 000
RO 000
3,700
7,000
3,700
7,000
Subsidy receivable as on 1 January

Subsidy receivable for the year
10 Bank deposits
Bank deposit with maturity of greater than three months from

the value date of the deposit
Bank deposits are with commercial banks in Oman denominated in Rial Omani (2006 US Dollars), short term in
nature, with effective interest rates ranging from 4.2% to 4.5% (2006 5.1% to 5.4%) per annum.
11 Cash and cash equivalents
Cash on hand
Bank current accounts
2007
2006
RO 000
RO 000
34
22
58,830
10,964
42,569
91,635
101,433
102,621
Bank deposits with a maturity of three months or less from the

value date of the deposit
Bank deposits are with commercial banks in Oman denominated in Rial Omani (2006 US Dollars), short term in
nature, with effective interest rates ranging from 3.8% to 4.5% (2006 5.1% to 5.4%) per annum.
Included in bank current account is an amount of RO 3 thousand (2006-RO 3 thousand) relating to funds of the
Distribution Code Review Panel, held by Muscat Electricity Distribution Company, a subsidiary in the capacity of
it being a member of the Panel (Note 19).
26
12
On 7 January 2006, the Government of the Sultanate of Oman decided to sell the Sur Desalination Plant comprising
of 2 Diesel Generator sets and 3 Reverse Osmosis units belonging to Rural Areas Electricity Company SAOC
(RAECO), a subsidiary. Consequently these have been classified as assets held for sale in the consolidated financial
statements and have been stated at the net realizable value of RO 3,500 thousand. The results of operations of
the Sur Desalination Plant have been disclosed as discontinued operations (Note 31). The resulting impairment
loss of RO 1,032 thousand has been charged to the Government through Dues to MOF (Note 2).
On 15 January 2007, the Sur Desalination plant with its ancillary assets and the obligations under the water
purchase agreement with MHEW were transferred to Al Sharqiyah Desalination Company for RO 3,500 thousand
under an Asset Sale agreement.
13
Share capital
The companys authorised issued and paid-up capital consists of 2,000,000 shares of RO 1 each. The shares are
fully owned by the Ministry of Finance, Government of the Sultanate of Oman.
Ministry of Finance
14
Percentage of
Shareholding
Number of
shares
2007
RO000
2006
RO000
100%
2,000,000
2,000
2,000
Statutory reserve
In accordance with the Commercial Companies Law of 1974 (as amended), 10% of the net profit after deduction
of taxes should be transferred to a non-distributable statutory reserve each year until the amount of such statutory
reserve has reached a minimum of one-third of the companys issued share capital. Accordingly, the company and
all except one of its subsidiaries has achieved the amount required for the statutory reserve. This reserve is not
available for distribution to shareholders as dividend.
15
General reserve
In accordance with the Groups accounting policy, an amount not exceeding 20% of the profit after transfer to
statutory reserve should be transferred to a general reserve until the balance of the general reserve reaches one
half of the share capital. Accordingly, the company and all except one of its subsidiaries have achieved the amount
so required.
27
16
Proposed dividend
The Board of Directors of the company at their meeting held on 08 June 2008 have proposed a cash dividend
of RO 0.250 per share aggregating RO 500,000 on the companys existing share capital. (For the year ended 31
December 2006, of RO 0.250 per share aggregating RO 500,000 was proposed and paid as dividend. Dividend
paid by subsidiaries to the minority shareholders (MOF) @ 0.01% amounted to RO 5,000). This dividend is subject
to the approval of the companys shareholders in the Annual General Meeting.
17
Deferred tax liability
Deferred income taxes are calculated on all temporary differences under the liability method using a principal tax
rate of 12%. The net deferred tax liability / (assets) in the consolidated balance sheet and the net deferred tax
charge in the consolidated income statement are attributable to the following items:
Balance at
1 January 2007
RO 000
Charge
for the year
RO 000
Balance at
31 December 2007
RO 000
(172)
16
(156)
(343)
(234)
(577)
(3,071)
(4,019)
(7,090)
(3,586)
(4,237)
(7,823)
11,418
8,200
19,618
7,832
3,963
11,795
Assets
Accumulated tax losses
Liability
Accelerated tax depreciation
Reversal due to sale of RPC

Assets
28
Accumulated tax losses
30
Liability
Accelerated tax depreciation
(296)
11,557
18
Deferred revenue
Deferred revenue shown under non-current liabilities represents customer contributions towards the cost of
property, plant and equipment. These contributions are deferred over the life of the relevant property, plant and
equipment.
28
19

2007
2006
RO 000
RO 000
Trade payables
4,947
5,675
8,411
51,334
Accrued expenses
60,187
46,416
Creditors for capital projects
38,602
23,639
2,714
1,076
114,861
128,140
Other payables
Included under Due to Ministry of Finance is an amount of Nil (2006-RO 47,674 thousand) being the amount
funded to the company to meet certain liabilities of the Group, related prior to the transfer date. This amount is
repayable on demand and does not carry any interest.
Included in other payables is an amount of RO 3 thousand (2006-RO 3 thousand) relating to funds of the Distribution
Code Review Panel, held by Muscat Electricity Distribution Company SAOC, a subsidiary in the capacity of it being
a member of the Panel (Note 11).
20
Other current liabilities represent revenue in excess of maximum allowed as per price control formula deferred to
subsequent year.
Revenue in excess of maximum allowed as per price

control formula on 1 January
2007
2006
RO 000
RO 000
29,761
7,727
20,119
29,761
49,889
37,488
(29,761)
(7,727)
20,128
29,761
Add: Revenue in excess of maximum allowed

as per price control formula for the year (Note 23)
Interest on excess revenue billed over maximum
allowed revenue under the price control formula
Less: Reversal of Revenue in excess of maximum

allowed as per price control formula during the year (Note 23)
Revenue in excess of maximum allowed as
per price control formula on 31 December
29
21
Bank overdrafts
Bank overdrafts
2007
2006
RO 000
RO 000
1,390
The Group has credit facilities with BankMuscat SAOG including overdrafts to finance the working capital
requirements. Bank overdrafts are repayable on demand or within one year from the date of the Credit Facilities
Agreement.
22
Net assets per share
Net assets (RO 000)

Number of shares at year end (000)
Net assets per share (RO)
2007
2006
777,790
778,106
2,000
2,000
389
389
Net assets per share is calculated by dividing the shareholders equity at the year end by the number of shares
outstanding.
23
Revenue
For the year ended
For the year ended
31 December 2007
31 December 2006
RO 000
RO 000
115,564
104,485
Electricity sales to Government
37,944
39,964
Water sales to PAEW and MISC
57,294
48,181
103,738
107,500
11,110
12,226
150
94
2,452
1,280
328,252
313,730
(338)
29,761
7,727
(10,867)
11,372
(20,119)
(29,761)
(91)
(1,996)
326,598
301,072
Electricity sales to private customers
Government subsidy
Net funding from MOF for Salalah concession
Transmission connection charges
Other operating income
Less: Adjustment for rectification of prior years revenue

in excess of maximum allowed as per price control formula
Add: Previous year revenue in excess of maximum allowed
as per price control formula reversed (Note 20)
(Less) / add: Subsidy (received) / receivable during the year
Less: Revenue in excess of maximum allowed as per price
control formula, deferred to next year (Note 20)
Less: Revenue from discontinued operations (Note 31)
30
23
Revenue (continued)
During the year, Rural Areas Electricity Company (RAECO), a subsidiary of the company has reviewed activities
of the Meter Reading, Billing & Collection (MRBC) Contractor, ONEIC and identified possibilities of customers
not billed for energy consumption, particularly in 2007. Most of these customers are in remote and sparsely
populated areas. RAECO is in the process of discussion with ONEIC to determine and recover the unbilled energy
consumption as accurately and practically possible. (Considering the past average consumption pattern of such
customers, the unbilled revenue is estimated approximately at RO 500,000.) Pending resolution of this matter,
no revenue recognition for unbilled energy consumption by the above customers has been done in these financial
statements.
24
Operating costs
For the year ended
For the year ended
31 December 2007
31 December 2006
RO 000
RO 000
133,125
94,207
Gas and diesel consumption
51,732
66,815
Depreciation
36,570
41,796
Payments to Dhofar Power Company SAOG
8,202
8,570
Contract fee for plant operation and maintenance
3,835
7,059
Staff costs
2,473
Spares and consumable expenses
8,513
7,149
Maintenance and repairs expenses
9,845
5,284
188
354
Inter connection and transmission facilities charges
1,657
726
Other direct costs
2,135
2,651
258,275
234,611
(129)
(1,232)
258,146
233,379
Power and water purchase costs
Chemicals consumption
Less: Operating cost of discontinued operations (Note 31)
Included under spares and consumable expenses is an amount of RO 575 thousand (2006-RO 2,428 thousand) on
account of net shortage of general and plant spares written off based on a comprehensive count of general and
plant spares undertaken by the relevant subsidiary companies during the year.
Included in spares and consumable expenses an amount of RO 1,801 thousand (2006-Nil) and maintenance and
repairs expenses is an amount of RO 1,926 thousand (2006-Nil), incurred on account of materials utilised for
repair work on the damages caused by tropical cyclone (Gonu) in June 2007 (Note 26).
31
25

For the year ended
31 December 2007
RO 000
For the year ended

31 December 2006
RO 000
14,592
12,621
Service expenses
8,316
6,794
Depreciation
1,447
1,301
341
246
1,575
3,016
Inventory obsolescence charge
114
599
Loss on sale of property, plant and equipment
130
214
4,259
3,075
30,774
27,866
(15)
(269)
30,759
27,597
Staff costs
Directors remuneration (including bonus) and sitting fees

Other expenses
Less: General and administrative expenses of

discontinued operations (Note 31)
Included in other expenses is an amount of Nil (2006-RO 1,213 thousand) relating to Usufruct charges for the 8
months period for 2005.
Other expenses stated above, include a net sum of RO 1,972 thousand (2006-Nil) incurred on account of damages
to property, plant and equipment caused by the tropical cyclone Gonu in June 2007 of which RO 818 thousand is
towards write-off of the net book value of property, plant and equipment destroyed, RO 1,284 thousand towards
bonus, overtime and sundry expenses for staff working on repair works (Note 26) and a credit for insurance claim
of RO 130 thousand received from insurance company covering part of the losses caused by Gonu.
26
Impact of Tropical Cyclone GONU
Tropical cyclone Gonu which struck the Sultanate of Oman on 6 June 2007, caused significant adverse effect on
four of the subsidiary companies financial position.
The total effect in the income statement for Gonu related damages (net of insurance claims received) of the
Group is:
For the year ended
31 December 2007
RO 000
For the year ended

31 December 2006
RO 000
Operating costs (Note 24)
3,727
General and administrative expenses (Note 25)
1,972
5,699
32
27
Commission
For the year ended
For the year ended
31 December 2007
31 December 2006
RO 000
RO 000
Billing commission
2,302
2,156
Factoring commission
4,402
3,940
6,704
6,096
Commission represents the billing and factoring commission paid to OIFC and ONEIC for undertaking customer
meter reading, billing and collection services, and factoring of private customers debts.
28
Other income
For the year ended
For the year ended
31 December 2007
31 December 2006
RO 000
RO 000
6,317
3,594
12,538
Penalties and fines
797
213
Sale of forms and tenders
204
92
Sale of scrap
240
109
Write back of provision for inventory obsolescence
748
753
26
1,508
936
22,378
5,697
Interest on bank accounts

Profit on sale of investment in a subsidiary (Note 29)
Profit on sale of property, plant and equipment

Other revenues
Included under other revenues is an amount of RO 346 thousand (2006 RO 673 thousand) pertaining to net
excess in inventories based on a comprehensive count of general spares and plant spares undertaken by the
company during the year.
29
Disposal of investment in a subsidiary
The company along with Ministry of Finance (MOF) entered into a Share Sale and Purchase Agreement (SPA) on
6 December 2006 with SMN Power Holding Company Limited (SMN) to sell their entire share holding in Al Rusail
Power Company SAOC (RPC). The sale was completed on 31 January 2007 for an aggregate consideration of RO
50 million paid by SMN, subject to adjustments under the provisions of the SPA. The final adjusted consideration
determined by the Completion Accounts of RPC was RO 48.5 million. Accordingly EHC paid back the differential
amount of RO 1.5 million due to SMN on 17 July 2007. Out of the net consideration of RO 48.5 million, RO 35.5
million is towards settlement of Due to EHC in the books of RPC and balance RO 13.0 million is towards sale of
the companys investment in RPC.
33
29
Disposal of investment in a subsidiary (continued)

For the year ended
31 December 2007
RO 000
For the year ended

31 December 2006
RO 000
Trade receivables
2,809
Inventories
3,234
Book value of net assets sold

Current assets
Non current assets

36,674
(4,026)
(141)
(9)
(238)
(167)
Retained earnings
(2,164)
Net assets disposed off
35,974
Gain on disposal
12,538
48,512
(2)
48,510
(35,472)
Current liabilities
Trade payables
Provision for current tax
Non-current liabilities
Deferred tax liabilities
Reserves and Surplus
Statutory reserve
Less: Cash and cash equivalents balances disposed off

Gross proceeds on sale of a subsidiary
Less: Amount paid towards settlement of Due to EHC
Net consideration received in cash and cash equivalents
34
13,038
30
Income tax charge
Income tax is provided as per the provisions of the Law of Income Tax on Companies in Oman after adjusting
the items which are non-assessable or disallowed. The tax rate applicable to the company and all its subsidiaries
is 12%. The deferred tax on all temporary differences have been calculated and dealt with in the consolidated
income statement.
For the year ended
For the year ended
31 December 2007
31 December 2006
RO 000
RO 000
516
512
3,963
3,627
4,479
4,139
(59)
4,485
4,080
For the year ended
For the year ended
31 December 2007
31 December 2006
RO 000
RO 000
91
1,996
(129)
(1,232)
(15)
(269)
(59)
(Loss) / profit after tax from discontinued operations
(47)
436
Cash flow from discontinued operation
(53)
495
Tax charge for the year comprises:

Current tax
Deferred tax (Note 17)
Add / (less) : Income tax charge on discontinued

operations (Note 31)
Income tax charge during the year
31
Discontinued operations
Revenue
Operating cost
Income tax charge
Discontinued operation represents operations relating to Sur desalination plant which was transferred to Al
Sharqiyah Desalination Company on 15 January 2007 (Note 12). The General and administrative expenses have
been apportioned to the discontinued operation in the ratio of revenue therefrom to the total revenue of the
REACO, a subsidiary.
35
32
Basic earnings per share

For the year ended
For the year ended
31 December 2007
31 December 2006
48,804
35,873
2,000
2,000
24.402
17.937
Profit for the year (RO 000)

Number of shares at the year end (000)
Earnings per share (RO)
The par value of each share is RO 1. The earnings per share is calculated by dividing the profit after tax for the
year by the number of shares outstanding at the year end.
33
Related parties
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 operating decisions. For the
purpose of IAS 24, the Government of the Sultanate of Oman being the sole shareholder of the company is not
considered as a related party.
The company maintains balances with these related parties which arise in the normal course of business from the
commercial transactions and are entered into at terms and conditions which is considered to be comparable with
those adopted for arms length transactions with third parties. Outstanding balances at year end are unsecured
and settlement occurs in cash.
No expenses have been recognized in the year for bad or doubtful debts in respect of amounts owed by related
parties.
Key management benefits

Key management personnel are those persons having authority and responsibility for planning, directing and
controlling the activities of the Group, directly or indirectly, including any Director (whether executive or otherwise).
The compensation for key managerial personnel during the year is as follows:
For the year ended
For the year ended
31 December 2007
31 December 2006
RO 000
RO 000
1,981
1,295
Post employment benefits
308
93
Directors remuneration (including bonus) and sitting fees
341
246
2,630
1,634
Short term benefits
36
34
Contingencies and operational commitments
(a)
Contingent assets
Transmission & Distribution-Extension and Enhancement allowance

The Government has fixed Transmission and Distribution-Extension and Enhancement (T&DEE) allowance based
on the actual value of work executed by Dhofar Power Company SAOG (DPC). Accordingly, the Government has
been making payments of T&DEE allowance, determined on the basis of estimated value, at a monthly rate of RO
88 thousand. However, DPC had accrued the T&DEE allowance at a rate of RO 107 thousand per month based on
the contracted value of T&DEE work.
In accordance with the provisions of Concession Agreement, the matter was referred to a Legal Expert for
determination of the T&DEE allowance. The Expert has determined in favour of DPC on 24 August 2005. Based
on the Experts determination, OPWP has paid to DPC its claim amount of RO 676 thousand as well as continued
to pay the higher allowance of RO 107 thousand during the year and has claimed the same, as pass through
cost, from MOF. However, the Government has notified to DPC that it intends to challenge the ruling of the
Expert through the process of arbitration. The cumulative amount paid to DPC on account of increased (T&DEE)
allowance till 31 December 2007 stands at RO 898 thousand.
(i)
Oman Power and Water Procurement Company SAOC (OPWP), a subsidiary has certain claims from Dhofar
Power Company (DPC) in respect of DPCs certain non-compliance with the Salalah Concession Agreement.
These claims are as follows:
For 2003
During 2004, OPWP notified Dhofar Power Company (DPC), its claim for penalties on it of approximately RO 1.1
million in respect of certain non-compliance with the Concession Agreement by DPC during the year 2003.
In accordance with the provisions of the Concession Agreement, the parties referred the issues in this regard to
an independent Expert. The Expert determined in favour of DPC on 14 July 2005. OPWP has notified DPC that it
intends to challenge the ruling of the Expert through the process of arbitration.
For 2004
In 2005, OPWP has claimed RO 1.9 million, as penalties from DPC for certain non-compliance with the concession
agreement during 2004. DPC has disputed the claim. OPWP is evaluating its options of pursuing the matter
further.
For 2005
In March 2006, OPWP has claimed from DPC RO 0.4 million as penalties for certain non-compliance with the
concession agreement during 2005. DPC has disputed the claim. OPWP is evaluating its options of pursuing the
matter further.
37
34
Contingencies and operational commitments (continued)
(a)
Contingent assets (continued)
For 2006
OPWP is yet to receive the System Performance Report for the year 2006, which may identify any non-compliance
with the concession agreement leading to claims by the company on DPC.
All receipts and payments related to DPC are pass through transactions to Ministry of Finance.
(ii)
Liquidated damages
The company has claimed liquidated damages of RO 2.2 million, from Sohar Power Company SAOC (SPC)
for delay in achieving Commercial Operation Date (COD) and RO 1.1 million for early power delay claims.
While SPC has contested the claim, it has not yet exercised its option of Experts determination in this
matter.
(iii)
In accordance with the terms of the Billing and Collection Contract with OIFC, the subsidiary company
Muscat Electricity Distribution Company SAOC (MEDC) has a pending claim of RO 717 thousand against
the contractor, towards penalty for meters not read during the contract period. No income and asset
has been recognized in the books for this amount as it is disputed by the contractor and currently under
review by both parties.
(iv)
The management of the RAECO is currently pursuing arbitration proceedings against an Operation and
Maintenance (O&M) Contractor, claiming compensation for a total amount of RO 1,598 thousand for
damages due to their improper performance of the O&M contract, leading to failure of power generating
unit at Salalah Power Station in June 2000. The contractor has disputed the claim of RAECO.
(b)
Contingent liabilities
Claims against the Group not acknowledged as debts
2007
2006
RO 000
RO 000
3,931
72
(i)
The company has received a notice of claim in the amount of RO 1,350 thousand from SMN Power
Holding Company Limited (buyers of Al Rusail Power Company SAOC (RPC), an erstwhile subsidiary of
the company). Under the terms of the Share Sale and Purchase Agreement (SPA), this claim may impact
the consideration due to the company for the sale of RPC. The company believes that there is no merit in
the claim and has thus repudiated the same.
(ii)
For the year 2007, an amount of RO 1,253 thousand has been claimed against OPWP by DPC on account
of increased Transmission and Distribution System Operating Cost Allowance. The matter is under dispute
with DPC and hence no provision has been made for this amount in these financial statements.
All receipts and payments related to DPC are pass through transactions to Ministry of Finance.
38
34
Contingencies and operational commitments (continued)
(b)
Contingent liabilities (continued)
(iii)
The management of the subsidiary company, Al Ghubrah Power and Desalination Company SAOC (GPDC)
is currently pursuing arbitration proceedings against the erstwhile Operation and Maintenance (O&M
contractor) claiming compensation for damages resulting from their improper performance of the O&M
contract, leading to excessive deterioration of some plant and equipment. The contractor is claiming RO
4,227 thousand of which RO 3,855 thousand is towards their contract fee invoices raised on the company
and provided for in the books, The additional sum of RO 372 thousand claimed by the contractor is
towards their invoices for supply of miscellaneous material and services, which are disputed by the
company and covered under the arbitration proceedings, provision for which is not required since the
management believes that the same is not tenable.
GPDC will secure a bank guarantee before releasing the above payment of RO 3,855 thousand.
(iv)
A contractor of the subsidiary company Oman Electricity Transmission Company SAOC (OETC) has
claimed payment of RO 90 thousand on account of additional work carried out. The management of
OETC believes that the claim is not tenable as the work carried out was required as per contracted terms.
No provision for this amount has therefore been made in the books of accounts.
(v)
During the year Billing and Collection contractor (OIFC) of subsidiary company Muscat Electricity
Distribution Company SAOC, has sought refund of net excess amount of RO 718 thousand remitted by
them with respect to customers whose accounts were Frozen or were to be Frozen. MEDC is yet to verify
these figures. If agreed the amount ultimately will increase the Amount due from private customers
(frozen) and reduce the Amounts due from OIFC to that extent, this would also increase the corresponding
provision for impaired debts.
(vi)
The claims against the subsidiary company Mazoon Electricity Company SAOC (MZEC), regarding certain
litigations in progress against the company relating to disputes with a contractor amounting to RO 148
thousand and with an ex-employee. The legal advisors of MZEC have advised that these claims do not have
any merit and be contested. No provision has been made in the books as the company does not consider
these claims to result in any material loss.
(c)
Commitments
2007
2006
RO 000
RO 000O
2,344
801
44,752
11,709
Operational commitments
Letters of credit
Capital commitments
Contracted but not provided for
39
35
Financial risks
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure. The exposure to credit risk at
the balance sheet date is on account of:
2007
2006
RO 000
RO 000
Trade receivables
82,327
74,723
Other receivables
11,666
4,185
541
11,372
3,700
7,000
101,433
102,621
199,667
199,901

Bank deposit with a maturity of greater than three
months from the value date of the deposit
The exposure to credit risk for trade receivables at the balance sheet date by type of customer is:
2007
2006
RO 000
RO 000
36,634
35,116
Oman Investments and Finance Company SAOG
7,246
6,939
Oman National Engineering and Investment Company SAOG
7,240
6,768
Private customers (frozen)
4,365
4,872
370
Public Authority for Electricity and Water
25,483
21,028
Majis Industrial Services Company SAOC
989
82,327
74,723
Government customers
Other private customers
The age of trade receivables and related impairment loss at the balance sheet date is:
31 December 2007
31 December 2006
Gross
Impairment
Gross
Impairment
RO 000
RO 000
RO 000
RO 000
Not past due
35,509
21,551
Past due 1-365 days
22,682
26,719
3,740
995
8,765
2,143
20,396
19,347
17,688
16,624
82,327
20,342
74,723
18,767
1-2 years
More than 2 years
There is no impairment assessed for other receivables.
40
35
Financial risks (continued)
The movement in provision for impairment for receivables is as follows:
Brought forward balance
2007
2006
RO 000
RO 000
18,767
15,902
1,575
3,016
(151)
20,342
18,767
Charge for the year (Note 25)

Write back during the year
Carried forward balance
The provision account in respect of trade receivables is used to record impairment losses unless the relevant Group
companies are satisfied that no recovery of the amount owing is possible. At that point the amount considered
irrecoverable is directly written off in the trade receivables account.
Liquidity risk
The following are the contractual maturities of financial liabilities, including interest payments:
Carrying
1-365
1-2
More than
amount
days
years
2 years
RO 000
RO 000
RO 000
RO 000
106,450
106,450
8,411
8,411
114,861
114,861
Carrying
1-365
1-2
More than
amount
days
years
2 years
RO 000
RO 000
RO 000
RO 000
76,806
76,806
51,334
51,334
1,390
1,390
129,530
129,530
31 December 2007
31 December 2006
Bank overdrafts
41
35
Financial risks (continued)
Interest rate risk
At the balance sheet date the interest rate risk profile of the companys interest bearing financial instruments was:
2007
2006
RO 000
RO 000
3,700
7,000
42,569
91,635
46,269
98,635
Fixed rate assets related instruments

Bank deposit with a maturity of greater than three months from the
value date of the deposit
Bank deposit with a maturity of three months or less from the
value date of the deposit (included in cash and cash equivalents)
Fair value sensitivity analysis for fixed rate instruments
The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss.
Therefore a change in interest rates at the balance sheet date would not affect profit or loss.
Fair value of financial assets and liabilities
The carrying value of the financial assets and liabilities as recorded in the consolidated balance sheet approximates
to their fair value.
36
Approval of the consolidated financial statements
The consolidated financial statements were approved by the Board of Directors of the company and authorised
for issue in their meeting held on 8 June 2008.
37
Comparative figures
Certain comparative figures have been reclassified wherever required to conform to current years presentation.
The comparative figures in the consolidated income statement and consolidated cash flow statement include the
results of operations of the Al Rusail Power Company SAOC (RPC), a subsidiary for the 12 month period ended
31 December 2006 and are not comparable to the current year presentation which includes results of operations
only for the month of January 2007 of RPC (Note 1).
42

2007 English Annual Report Eng

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2007 English Annual Report Eng

Enviado por

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His Majesty Sultan Qaboos Bin Said

Mission and Vision

Management Discussion & Analysis

Operational Results of the Subsidiary Companies

Report and Consolidated Financial Statements

Investment of RO 69.2m on capital expenditure, an increase of 20% over 2006.

Mission and Vision

EHC is Committed to:

EHC operates on its Mission and Vision of:

Evolve: Lead sector transformation into commercial enterprises by being a

on 19 October 2002. The Company commenced commercial business on 16 September 2003.

Maintain inherent financial strength and maximize shareholder value.

Maximize financial performance and ensure adequate financial resources to support

Implement government policies in the sector.

Create awareness and manage expectations.

Enhance asset management.

Establish information and performance management best practices.

Improve processes and manage risks.

including those affected by privatization.

Shareholding and Process Flow in EHC Group

Generation of Electricity &

Power & Water Procurement

Distribution & Supply

Distribute & Supply Electricity

H.E. Mohammed Abdullah Al Mahrouqi

H.E. Dr. Abdulmalik Abdullah Al Hinai

Mrs. Manal Mohammed Al Abdwani

H.E Yahya Said Al-Jabri

Mr. AbdulSalam Nasser Al Kharousi

Management Discussion & Analysis

Consolidated Financial Performance

Rial Omani 000

Profit After Taxation

Rial Omani 000

Rial Omani 000

777 7,, 799 0

Operational Results of the Subsidiary Companies

AL GHUBRAH POWER AND DESALINATION CO. SAOC

Income allocation 2007

Wadi Al Jizzi Power Co. SAOC

WADI AL JIZZI POWER CO. SAOC

Income allocation 2007

Oman Power and Water Procurement Co. SAOC

Subsidy (Salalah Business)

OMAN POWER AND WATER PROCUREMENT CO.SAOC

Income allocation 2006

Income allocation 2007

Oman Electricity Transmission Co. SAOC

OMAN ELECTRICITY TRANSMISSION CO. SAOC

Income allocation 2007

Rural Areas Electricity Co. SAOC

Electricity Sent out

Total Water Produced

RURAL AREAS ELECTRICITY CO.SAOC

Income allocation 2007

MUSCAT ELECTRICITY DISTRIBUTION CO. SAOC

MAJAN ELECTRICITY CO.SAOC

MAZOON ELECTRICITY CO. SAOC

Undertake to operate, maintain, develop and expand

4,819,762 4,693,557 2,154,076 1,929,625 2,774,887 2,605,000

MUSCAT ELECTRICITY DISTRIBUTION CO. SAOC

Income allocation 2007

MAJAN ELECTRICITY CO.SAOC

Income allocation 2007