Oman's plans to privatise two state-owned electricity companies underscore the government's push to diversify the economy, according to Fitch Solutions, a part of the Fitch Group.
The planned partial sale of of the Oman Electricity Transmission Company (OETC) and the Muscat Electricity Distribution Company (MEDC) in 2019 signals a shift towards more open investment policies, Fitch Solutions said in a report on Friday. Nama Holding, a government-owned water and electricity company that controls the two companies, said it will allow foreigner investors to participate in the sale.
"The decision to invite foreign investors thus underlines a broader drive by the government, accelerated since the oil price slump that began in 2014, to diversify the economy away from hydrocarbons production." the report said. "This strategy (referred to as Tanfeedh) rests, in turn, on attracting greater flows of foreign direct investment."
The sale is part of a broader plan that aims to raise a $1.8 billion byu 2021 from privatisation of state-owned assets. This is the equivalent to five per cent of non-oil revenues per year and about 1 per cent of total revenues, according to Fitch Solution's forecasts. The privatisation drive is part of the government’s efforts to scale back its large fiscal deficit, which Fitch forecasts at 7.9 per cent of the gross domestic product in 2018 and 6 per cent in 2019.
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Oman's government is aiming to attract foreign direct investment through such sales to bolster its fiscal position and facilitate technology transfers from abroad that can improve productivity.
The two electricity companies have combined assets worth about $3.2bn.
The exact revenue earned from the sales will depend on investor appetite - which in turn will depend on factors like global financing costs and proposed dividends, Fitch said.
The two companies have combined assets worth some USD3.2bn. While the exact amount earned from the sales will depend on investor appetite--which will depend on factors like global financing costs and proposed dividends, Fitch said.
The Omani government’s planned privatisation of the two state-owned companies will have "a modest positive impact on the fiscal deficit," according to Fitch.
The government has made "good progress" in its goal to attract FDI, Fitch said, citing the $13bn urban development project in Muscat signed in June by the government and Dubai-based developer Majid al Futtaim.
