Chairman message

Chairman’s Report

On behalf of the Board of Directors, I am delighted to present the 11th Annual Report and audited financial statement of Majan Electricity Company S.A.O.C (MJEC) as at 31st December 2015. 

Financial Performance

The company sustained a strong financial position which allowed us to provide the shareholders with a secure and growing earning stream.
MJEC has achieved total revenue of RO 215.607 million (2014, RO 166.640 million), an increase of 29.4% mainly due to the increase in the subsidy by 50%. Revenue from sale of electricity was RO 116.995 million (2014, RO 98.850 million) an increase of 18.4% which reflects the strong growth in the number of the customers connected to the distribution system and the consumption of direct connected customers to the Transmission System. Subsidy received was increased from RO 64.872 million in 2014 to RO 97.825 million in 2015. Operating costs stood at RO 183.452 million (2014, RO 141.741 million). The increase was driven mainly by the higher cost of electricity purchases accounting due to the increase in gas cost by 100%. The BST accounted for 79% of the total operating cost.
The result for the year, a remarkable position underlying net profit of RO 13.894   million, which resembles an increase by 52% compared to last year 2014 (RO 9.139 million). Net cash generated from operating activities was RO 23.41 million in 2015 compared to was RO 26.10 million in 2014.The total current Asset showed a growth of 43.5 % in 2015 to reach RO 53.517 million compared to RO 37.29 million in 2014. Similarly the current labilities were increased from RO 100.492 million in 2014 to RO. 141.538 million in 2015 (increasing 40.8 %). The current ratio in 2015 was 0.378 compared to 0.371 in 2014.

Business Performance

During 2015, MJEC continued its focus on developing and upgrading its infrastructure and continued expanding the network in order to support the growth in the customer demand, improve existing services and ensure network security and reliability.
We ended 2015 with an outstanding achievement in total capital investments of RO. 48.6 million (RO. 34 Million in 2014), in load and non-load associated with the 33, 11 kV and LT network as well as in non-network related investments. The investments covered all areas of MJEC authorized Governates. This benefited all our customers both large and small and has provided corresponding opportunities for shareholders to earn additional returns on a growing asset base.
The investments in reliability projects resulted in improving Customer Average Interruption Duration to a satisfactory level of 35 minutes during 2015 (41.3 minutes in 2014). This is strong evidence that our investments are producing the tangible results we expected.
In terms of the customers growth, MJEC customers base has grown to 198,005 (186,605 in 2014) customers with total supply of 7,846 GWh (6,703 GWh in 2014).
By end of 2015, MJEC has achieved the losses target of 10.42 % compared to 14.6 % in 2014 which has effectively contributed to reducing the Distribution Losses in the Main Interconnected System (MIS). This was an outstanding achievement and a step forward to achieving sustainable losses reductions in future years.
MJEC continues make excellent progress in certification to ISO 55001, the new international Asset Management standard. At the pre-certification assessment conducted in 2015, MJEC scored the highest asset management maturity score for the second year in a row.

Health, Safety, Security & Environment

The company put an immense effort into the health, safety, security and environment for the MJEC staff and extended this interest to include contractors and the community. During 2015, MJEC has completed ONE YEAR without lost time incident.  It’s a significant achievement from all of the MJEC and contractors to have worked safely for 561 days without LTI. This amounts to 9 million working hours without LTI.  
We encourage all employees to continue implementation of safe work practices and embed the HSSE culture in all of the company’s operations.

Regulated Activities

Proactive involvement in regulatory activities is one of our highest priorities. The utility business is fundamentally dependent on this economic regulation. The company is focusing its efforts to operate within the parameters of the price control determination whilst improving operational efficiency and gain benefit from the specified incentive mechanisms.

Human Resources

We believe the need to retain and attract valuable staff in all areas of the company is fundamental to the success of any organization.  MJEC continues to focus on providing a healthy and motivated environment that meets the need of our staff and allows them to maximize their contribution to the success of the company.   In 2015, MJEC invested 4.4 % of total payroll cost to develop the staff in a wide range of different development programs. This year the 1st MJEC started to implement the HEMAM program for staff development. The will ensure that all the aspects of our staff skills, capabilities and behavior are developed. MJEC ended the year with an Omanization level of 93.6% which is an integral component in the country’s Omanization plan regarding the orientation and induction of Omanis to the private sector, corporate culture and work environment.

Corporate Governance


The company recognizes that corporate governance practices are fundamental to the smooth and effective functioning of the organization and its ability to protect the rights of shareholders and stakeholders and enhance stakeholders’ value. As a company regulated by the AER, we continued to respond to the requirement of the Regulator and other sector stakeholders.

Future Outlook


We are confident that the company will continue its growth in 2016 both financially and operationally. In order to accomplish the vision and achieve its strategic objectives MJEC will:
• Implement the competency assessment program and development plans of all MJEC staff.
• Lead the technical development for SMART solutions to enhance the level of service to our customers.
• Achieve the realization of the benefits of all the strategic initiatives programs.
• Comply with the License conditions, policies and manuals applicable to Supply Business.
• Continue the implementation of best practice asset management and achieve ISO 55000 certification.
• Embed a positive HSSE Culture in both its staff and contractors.
• Improve the financial performance through cost efficiency, revenue optimization and subsidy management.
• Ensure effective capital investments to secure network security and reliability standards.


Acknowledgement


On behalf of the Board members I would like to express my gratitude to His Majesty Sultan Qaboos Bin Said for his support and his strong and wise leadership, which has paved the way for ongoing development of Oman.
I would like to thank all MJEC staff for their dedication and commitment to the safe and reliable supply of electricity. I wish to express my gratitude to our customers for their support. I want to thank my fellow Board Members, and Authority of Electricity Regulatory Oman, Public Authority for Electricity & Water, Electricity Holding Company & our sister companies for their effort and support provided to the company.   I also would like to thank Ministry of Finance, Ministry of Housing and all the government entities in the authorized regions of Majan.  Last and not least, I would also like to extend my thanks to our contractors for their ongoing commitment to the shared success of the company.


Abdullah Mohammed Al-Hashimi
Chairman