Oman’s Electricity Sector: A Hidden Gem for Investments Qais bin Saud Al-Zakwani Executive Director & Member Oman Economic Forum – 23 March 2016

The story thus far…… August 2004 Royal Decree 78/2004 for Regulation and Privatisation of the Electricity Sector promulgated Authority established September 2007 Public Authority for Electricity and Water established - assumes policy making responsibilities for the electricity sector, and full responsibilities for the water sector 1996 Privatisation of the first IPP in Oman - Manah 1999 Council of Ministers approves electricity restructuring policies 1 May 2005 Implementation of new market structure Authority grants Licenses and Exemptions

Electricity Sector Market Framework Direction of payments Direction of Transmission Electricity Subsidy (Article (19)) Single point of injection Calculated by the Authority Paid by Ministry of Finance to Supply Licencees Authority for Electricity Regulation Water Departments UPC Al Rusail Wadi Jizzi Al Kamil ACWA Barka Al Ghubrah SMN Barka Sohar Al Sawadi Al Batinah Sur Others Main Inter-connected System OPWP MEDC C U S T O M E R S Majan OETC Mazoon Rural Areas Generation & Desalination Distribution & Supply DGC Dhofar System OPWP DPC Sembcorp Salalah DPC/OETC Others All intra sector transactions are: (i) regulated & (ii) fully cost reflective

Impact of Restructuring & Regulation + 171.5% + 55.2%

Success Factors of IPP/IWPP Competitions Authority ensures competition is done fairly and transparently, and limits market power abuse through market share and economic interest restrictions Result: number of interested bidders remains high in all competitions for new capacity Competitive Procurement Established track record of timely and complete subsidy payments, even during the 2009 financial crisis 100% private generation sector (except two decaying plants) Government guarantee no longer needed Secure Funding Financial and administrative independence – reports directly to the Council of Ministers Conflicts of interest not tolerated – lengthy investigations in the past Strong Regulatory Regime Investor rights protected in Salalah Concession Agreement Advanced discussions with the Government to privatise MEDC Respect for Private Sector

Renewable Energy Opportunities Small Scale Rural Electrification: Regulatory policy issued by Authority in 2013: Requirement to Include Renewable Energy Component in Article (87) Electrification Funding Applications from RAEC Requirement to Evaluate Projects Using ‘Economic’ Fuel Cost Assumptions Solar Rooftops: The Authority is currently revising the existing regulatory framework to: Allow Distribution companies to act as agents for OPWP, the current single buyer of electricity, to buy rooftop PV-generated electricity from consumers Establish minimum technical standards for rooftop PV Establish net metering mechanism to compensate for electricity generated by rooftop PV panels

Renewable Energy Opportunities Large Scale Policies expecting imminent approval : Economic Gas Pricing: For immediate implementation of RE projects that are found economically and technically feasible when compared with the economic price of gas National Energy Strategy to 2040: Ensure a minimum quota for renewables to be implemented when planning for future capacity needs for the Sultanate Status: preparations for large-scale grid-connected RE projects by reviewing assessment methodologies and technical requirements, and active discussions with potential developers. Sites have been identified with monitoring equipment gathering data since 2010 Decision to adopt similar procurement mechanism as existing IPP/IWPP framework Why?

If it’s working well, why change things? International Investors’ Interest Increasing No. of Interested Bidders If it’s working well, why change things?

Qais bin Saud Al-Zakwani Thank you Qais bin Saud Al-Zakwani Executive Director & Member qais@aer-oman.org Tel: (968) 24609710