Annual Report 2018
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ANNUAL REPORT 2018 Generating for Generations His Majesty Sultan Qaboos Bin Said Contents Board of Directors and Key Executive Officers .................................................................. 5 Chairman’s (Board of Directors’) Report ............................................................................ 6 Operational Highlights ........................................................................................................ 9 Description of the Business .............................................................................................. 13 Profile of the Major Shareholders ..................................................................................... 17 Management Discussion and Analysis Report ................................................................ 20 Corporate Social Responsibility ....................................................................................... 25 Corporate Governance Report ......................................................................................... 29 Report of the Auditors on Financial Statements ............................................................... 39 Audited Financial Statements ........................................................................................... 43 Annual Report 2018 I 3 Board of Directors and Key Executive Officers Board of Directors Representing Mr. Khalid Jolo Chairman Nebras Power Q.S.C Mr. Peter Jones Deputy Chairman Axia Power Holdings B.V. Mr. Carlos Alcazar Director Mr. Tomoki Nishino Director Mr. Wataru Motomiya Director Chubu Electric Power Sur B.V. Mr. Naoki Takahashi Director Key Executive Officers Mr. Paul Adam Atkinson Chief Executive Officer Mr. Koichi Matsumoto Chief Financial Officer Mr. Khalid Al Maawali Commercial Manager Annual Report 2018 I 5 Chairman’s (Board of Directors’) Report environmental incidents occurred. As at 31st December 2018, the Company has achieved 1482 days without an LTA. As part of an annual review process, the health, safety, environmental and quality processes of both the Company and the Operator were carefully audited by an independent third party and both businesses retained accreditation to OHSAS 18001, ISO 14001 and ISO 9001 standards. In addition, during 2018 both PPC and POMCo were recognised for the second year in succession by the UK`s Royal Society for the Prevention of Accidents (RoSPA) with a gold award. Corporate Governance PPC has a comprehensive system of internal controls in place with clear structures, delegated authority levels and accountability. During 2018, the Company continued to carry out a review of key internal policies and procedures in order to ensure highest standards of corporate governance and to ensure compliance with the Code of Corporate Governance as issued by the Capital Market Authority. Through the Audit Committee, the Board has implemented a programme Dear Shareholders, of internal audits of different aspects of the Company’s On behalf of the Board of Directors of Phoenix Power business to monitor compliance and drive best practice. Company SAOG (“PPC” or the “Company”), I have the pleasure to present the Annual Report of the Company The Corporate Code of Governance also requires that for the year ended 31 December 2018. the shareholders appoint an independent third party to The Company, incorporated in 2011, owns and operates carry out an evaluation of the Board. The AGM of March the 2000 MW Sur Independent Power Plant (“the 2018 appointed MGI Vision to carry out this assessment Plant”), located in the Sur industrial area, approximately and a summary of their findings has been included in the 175km south-east of Muscat. Phoenix Power currently Corporate Governance Report. generates its revenues pursuant to a 15-year term Power Purchase Agreement (“PPA”) with Oman Power Operations and Water Procurement Company SAOC (“OPWP”) During the year 2018, I am pleased to report that and purchases gas from the Ministry of Oil and Gas the Company has achieved an excellent operational (“MoG”) under a 15-year Natural Gas Sales Agreement performance with the Sur Power Plant demonstrating a (“NGSA”). The operations and maintenance of the plant commercial availability of 99.70%, the key parameter to is subcontracted to Phoenix Operation and Maintenance be considered when assessing the revenues generated Company LLC (“POMCo” or “the Operator”) under a 15- during the period. This figure compares to 99.39% in year Operation and Maintenance Agreement. 2017. Health, Safety and Environment The Plant dispatched an aggregated net power volume Ensuring high standards of Health, Safety and of 8453.80 GWhrs (an increase of 8.2% on the 7809.78 Environmental performance continues to be given a GWhrs dispatched in 2017) which represents a load high priority by the Company and its Operator, POMCo factor of 48.56% when averaged over the year (compared and during the year no Lost Time Accidents (“LTA”) or to a load factor of 44.81% in 2017). 6 I Annual Report 2018 Financial Results Future Outlook The company generated revenues of RO 134.59 million All reasonable measures will be taken by the management in 2018 which were higher than the RO 128.40 million of the Company to ensure that the high standards of generated in 2017 mainly due to improved availability health, safety, environmental compliance, reliability and and increased dispatch. Costs in 2018 were RO 98.70 availability achieved in 2018 are maintained. million which were higher than the RO 92.89 million spent in 2017 mainly due to higher dispatch resulting in higher In Conclusion fuel costs. As Chairman of the Board, I would like to thank our shareholders, not only for their confidence, but also for The Net Profit of the Company was RO 12.92 million in their continued support and for the expertise they bring 2018 which was higher than RO 9.98 million earned in to the Company. On behalf of the Board of Directors, I 2017 mainly due to lower tax expense. Tax expense express my gratitude to OPWP, the Authority for Electricity was RO 2.83 million in 2018 which is lower than RO 8.92 Regulation (“AER”), the CMA and other governmental and million in 2017 (noting a one-off impact in the change of non-governmental bodies for their guidance and support. tax law (deferred tax liability for prior year’s) amounting to I also give thanks to the operations and maintenance RO 5.19 million was recognized in 2017). staff in the power plant as well as the employees of the The Company paid a dividend of Bzs 5.0 per share in Company for their dedication and commitment during 2018 compared to Bzs 7.9 per share in 2017. 2018. Thanks to their contribution, the Company was The share price ended the year at Bzs 103. able to achieve its goals and objectives. Finally, on behalf of the Board of Directors, I would like Corporate Social Responsibility to extend our deep appreciation and gratitude to His The Company fully recognizes its role as a responsible Majesty Sultan Qaboos Bin Said and His Government corporate citizen with support focusing on the local for their continued support and encouragement to the community at Sur in the areas of education, health & safety private sector by creating an environment that allows us and environmental care. During 2018, the Company to participate effectively in the growth of the Sultanate`s provided RO 30,000 of funding, support and sponsorship economy and to dedicate our achievements to the to various community causes. These included provision building of a strong nation. of support to local schools in Sur, contributions to the local Royal Oman Police (“ROP”) traffic safety campaign, providing child car seats to promote safety, provision of medical equipment for the Sur Ministry of Health as well as supporting environmental improvement initiatives, such as beach cleaning. Khalid Jolo People and Employment Chairman of the Board There have been a number of changes to the key personnel of the Company during the year. The CEO Mr. Peter Jones left the Company and was replaced by Mr. Paul Atkinson in March. The CFO Mr. Kenji Yugeta left the Company and was replaced by Mr. Koichi Matsumoto in December. The Company is committed to the ongoing development of Omani personnel and the Omanisation level at the end of 2018 is 67%. Annual Report 2018 I 7 Operational Highlights Health, Safety & Environmental Performance Royal Society for the Prevention of Accidents (RoSPA) The health, safety and welfare of people continues with a Gold award in 2018, adding to the silver award to be of paramount importance both within PPC and achieved in 2016 and gold award achieved in 2017. its Operator, POMCo. The health and safety of our The Company continues to implement a strategic employees, contractors, visitors and all those who may roadmap designed to foster ongoing improvement be impacted by our activities, is given uppermost priority. and ensure that the focus on preventing accidents and The overall health, safety and environmental performance incidents is maintained. Proactive actions continue to in 2018 remained excellent, building on the foundations have been taken to both develop and improve safety established during the first four years of commercial culture as well as target the delivery of a safe, secure and operation. Our ultimate aim is zero harm to people and environmentally compliant site. Such actions include: zero environmental incidents based on our adopted • Continued focus on employee and contractor principle that: engagement through a programme of behavioural based safety observation