SMN Power IPO set to open next month

10/08/2011 00:00 AST

SMN Power Co, which has been formed to own two major independent power projects in Oman with a combined generation capacity of 1,345MW, will offer its 35 per cent stake to investing public in September.

“The initial public offering (IPO) will be floating in September, after Eid. The company will offer the shares at a fixed price, which include a premium,” said a senior official of BankMuscat, which is the issue manager.

Unlike other share offers, the face value of SMN Power Co share will be RO1.

SMN Power, which was in consultation with the Capital Market Authority (CMA) for its share offer, has already submitted a draft prospectus. “A final prospectus will be submitted to the CMA soon,” added the official, who declined to reveal the issue size and offer price.

According to CMA norms, a company can open an IPO for subscription one week after getting approval from the regulating authorities.

It appears that SMN Power Co issue will be the only share offer on the local bourse this year, although three other companies have eaerlier proposed to enter the market.

The official, who does not want to be named, also said the company management is in the process of transferring all assets of SMN Power Holding to the newly-formed Omani firm SMN Power Co, which was listed on the third market of the Muscat Securities Market (MSM) on August 8.

This is required because the UAE-based SMN Power Holding can not offer its shares to Omani investors. SMN Power owns the 668MW-capacity Al Rusayl Power Company and SMN Barka Power Company — an independent water and power project (IWPP) with a power generation capacity of 678MW and 120,000 cubic metres per day of desalinated water.

The company is diluting its 35 per cent stake in line with a contractual commitment with the government, which stipulates that the IPO has to be floated by the year-end.

Sources said the profitability of the two power plants of SMN Power is pre-determined and is not vulnerable to market fluctuations. The price of natural gas (feedstock of power plants) and the price at which power is sold to Oman Power and Water Procurement Company are all pre-determined through long-term contracts.

“There is hardly any volatility in earnings of independent power producers. The earnings are not subject to market risks.

Investors will know how much return they can expect,” said an analyst. “Since these companies can not reinvest, they distribute their earnings to shareholders by way of dividends. These defensive dividend paying stocks are the most attractive ones during a market volatility,” noted the analyst.

SMN Power is a joint venture of Kahrabel FZE, Abu Dhabi-based Mubadala Development Company and National Trading Company. Kahrabel and Mubadala have 47.5 per cent each in SMN Power Holding, while the remaining 5 per cent ownership is with the local firm National Trading Company.

Times of Oman