1. P.O. Box 181, Ruwi, Postal Code 112, Sultanate of Oman, Tel: (968) 2481 0859, 2481 0869, Fax: (968) 2481 0772, C.R. 1/59041/3, Email: info@al-madina.org, Website: www.al-
madina.org
13/03/05
Dhofar Power Co. (SAOG):
Issue Price RO. 1.420
Shares Offered 6,895,700
Issue Opens 15-Mar-05
Issue Closes 14-Apr-05
Issue Overview:
Particulars 2003A 2004A 2005P 2006P 2007P 2008P 2009P
Operating Revenue (RO' 000) 15,609 23,464 24,623 25,085 25,683 26,192 26,773
Net Profit (RO' 000) 1,728 2,788 2,637 2,742 3,275 3,414 4,431
Earnings Per Share (RO) 0.088 0.142 0.134 0.139 0.166 0.173 0.225
Total Assets (RO' 000) 109,421 103,910 93,920 90,686 87,130 83,361 79,900
Net Assets (RO' 000)** 21,430 22,968 20,418 20,692 21,020 21,361 21,804
Debt to Equity (times) 3.61 3.23 3.47 3.25 3.02 2.77 2.51
Net Assets per Share (RO) 1.088 1.166 1.036 1.05 1.067 1.084 1.107
**Excluding Dividend
A: Actual, P: Projected
(Source: DPC Prospectus)
• Dhofar Power Co (SAOG) is the fourth power company to go public in the Sultanate of Oman. The
company operates a new 192 MW Gas fired power plant in addition to the existing 30 MW gas
turbine and 17 MW Aero-derivative turbine which it took over. On 21st
March 2001, the Company
signed a 20-year concession agreement with the MHEW (Ministry of Health, Electricity and Water)
for the privatization of the Salalah Power system on a BOOT (Build, Own, Operate and Transfer)
basis. As a consequence, all the assets will be transferred to the Government at the end of the
concession period which is 30th
April 2023.
• The Company currently has 19.702 million shares in issue. Based on the Concession Agreement,
SPH (Salalah Power Holdings) is offering 35% of Dhofar Power's issued shares (6,895,700 shares)
to the public of Oman at a price of RO. 1.420 per share.
• Subscription for this issue is open to Omani and non-Omani individuals, corporate bodies and
institutions (whether established in Oman or otherwise). However, in a case of over-subscription,
Omani nationals and Omani incorporated entities will be given priority in allotment. Minimum
subscription is 100 shares and thereafter in multiples of hundred. A single subscriber can apply for a
maximum of 10% of the shares on offer (i.e. 689,500 shares). The subscription period is from 15th
March '05 to 14th
April '05.
• Subscription banks for the issue include Bank Dhofar, Bank Muscat, National Bank of Oman,
Oman International Bank and Oman Arab Bank.

2. Company Background:
• Dhofar Power was formed from a consortium led by PSEG (Public Service Enterprise Group)
following a successful bidding process for a power plant project in the region of Salalah (approx.
1,000 Km south of Muscat). The initial COD (commercial operation date) of the Company was 1st
May 2003.
• There was a delay of 60 days in achieving the original COD and the plant started commercial
operations from May 1, 2003. This delay was the result of procurement and construction problems
that are often experienced in projects of this size, and a force majeure event in the form of cyclones
in May 2002. The Company managed this delay without any cost overruns through an early
generation agreement with the Government and Larsen and Toubro Limited (the EPC Contractor).
• The Government did not hand over the existing generating assets (30 MW gas turbine and the 17
MW aero-derivative turbine) on COD, as the major overhaul was not duly completed and
generating assets did not clear the pre-takeover tests. The Government is undertaking the requisite
major overhaul on these turbines and expects to handover the same to the Company in the first
quarter of 2005. This failure to hand over the generating assets constitutes a major political force
majeure event and the company has been relieved of all obligations in this regard. The Government
has been paying the full allowances including the Fixed Allowance from COD for these two
turbines. In addition, the Company has retained USD. 4.5 million out of the asset purchase price
paid to the Government which the Company has reasonably estimated will be sufficient to
undertake the major overhaul, if necessary, and to compensate the Company for any material
adverse change in costs.
Shareholding
Shares % Holding Shares % Holding
Salalah Power Holdings (Ltd) 15,958,620 81.0% 9,062,920 46.0%
Omani Shareholders 3,743,380 19.0% 3,743,380 19.0%
Public 0 0.0% 6,895,700 35.0%
Total 19,702,000 100% 19,702,000 100%
(Source: DPC Prospectus)
Original Shareholding Revised Shareholding
Dhofar Power: Board of Directors
Name Position
Mr Hamoud Bin Ibrahim Bin Soomar Al Zadjali Chairman
Mr Hal. E. Sunar Deputy Chairman
Sheikh Khalid Bin Mustahail Bin Ahmed Al Mashani Director
Mr Tariq Abdul Hafidh Salim Al Aujaili Director
Mr Alfredo Z. Matos Director
Mr David G. Seabrook Director
Mr Nelson Garcez Director
(Source: DPC Prospectus)

3. • The Project was commissioned at a completed cost of RO. 98.545 million as shown below:
Particulars Amount (RO '000)
Costs
Generating Assets 56,367
Transmission & Distribution Assets 38,917
Other Project Costs 3,261
Total 98,545
Means of Funding
Equity 19,702
Term Loan 78,843
Total 98,545
(Source: DPC Prospectus)
Business Plan:
• The Government of the Sultanate invited proposals (Tender no. 5/97) for the privatization of the
Salalah Power System. The project was awarded to the consortium lead by PSEG which in turn
incorporated the Dhofar Power Company. The most comparable entity to Dhofar Power co in Oman
is United Power Co (SAOG) which also operates under a BOOT (Build, Own, Operate, and
Transfer) environment.
• The NGSA sets out the terms of purchase of natural gas from the MOG. The term of the NGSA
expires on the date upon which the CA term expires. In accordance with the NGSA, natural gas will
be supplied up to the gas delivery point of the Plant. DPC/DGC purchases all natural gas at the RO.
equivalent of USD 1.50 per MMBTU. The fuel charge element of the CA allows a full pass through
of the gas price to the extent that electricity is generated within the specified Plant efficiency.
• The Power Purchase Agreement (the “PPA”) is in a form attached as an appendix to the CA and
will be between DGC and MHEW/OPWPC. The Government has formed OPWPC to act as a single
central purchaser of bulk electrical power and electricity generating capacity in Oman, in which
case, the PPA will be entered into with or assigned to OPWPC. Pursuant to the terms of the PPA,
DGC will provide guaranteed net output of the New Power Station and sell the electrical energy
associated with the guaranteed net output to MHEW/OPWPC. DGC will be paid for the available
net capacity, and actual electrical energy delivered, by way of a capacity charge and an energy
charge, which will be calculated by reference to the corresponding allowances under the CA at the
date of termination.
• The CA provides that, based on its demand assessment, DPC will prepare and submit to the
Government annually its plan for the next 5 calendar years, setting out, amongst other things, the
Company’s proposed capital investment programme and proposed additional allowances to cover
such investment. DPC has already submitted five-year business plans for the years 2003 and 2004
for augmentation of the existing Salalah Power System with an estimated capital expenditure budget
of about RO 60 million (2004 Business Plan figures). The business plan is based on the projected
demand profile for the Dhofar region explained above. The Company is awaiting Government
approval for the same.

4. Tariff Structure:
For each month during the concession period, the company is entitled to receive a defined operating
income based on:
• Capital cost allowances, as provided below, which are designed to cover the investment costs (debt
service, return on equity and periodic maintenance). Such allowances will be paid by the
Government for 20 years (with a reduction after year 15). Part of the capital cost allowances is
escalable with changes in the RO/USD exchange rate as provided below:
Years 1 to 15 (from COD)
Charges in RO (per annum) Non-Escalable Escalable Total
New Power Station Allowance 2,699,304 4,247,964 6,947,268
Aero derivative Turbine Allowance 273,204 429,948 703,152
30MW Gas turbine allowance 359,472 565,716 925,188
Existing T&D System Allowance 470,520 1,456,716 1,927,236
New T&I Facilities Allowance 533,616 1,652,040 2,185,656
T&D System Enhancement & Extension Allowance - 1,282,380 1,282,380
Total 4,336,116 9,634,764 13,970,880
Years 16 –20 (From COD)
Charges in RO (per annum) Non-Escalable Escalable Total
New Power Station Allowance 1,436,148 - 1,436,148
Aero derivative Turbine Allowance 145,356 - 145,356
30MW Gas turbine allowance 191,256 - 191,256
Existing T&D System Allowance 250,344 - 250,344
New T&I Facilities Allowance 283,908 - 283,908
Total l 2,307,012 - 2,307,012
(Source: DPC Prospectus)
The Non-Escalable allowances for the years 16-20 are reduced following full repayment of all loans,
which will be repaid within 15 years from COD. The Government is currently paying the T&D
Enhancement and Extension Allowance at RO 88,415 per month as against a Company calculation of
RO 106,865 per month. The differential represents a dispute, which is being referred to an expert for
resolution.
• A fixed operating cost allowance of RO 72,083 per month, which is designed to cover fixed O&M
costs, associated with the New Power Station. Such allowance will run for the full concession
period and be adjusted according to Omani Consumer Price Index (“CPI”).
• A fuel cost allowance, reimbursing fuel costs incurred by the Company based on predetermined
operating efficiencies.
• A variable operating cost allowance (RO 0.200 per 1000 units of electricity produced), which is
designed to cover variable costs associated with the NPS excluding fuel costs. The allowance will
be adjusted according to Omani CPI.
• A T&D System operating cost allowance designed to cover T&D operating costs. These costs will
be reviewed every three years to reflect changes in the operating parameters (including extension of
the network, increase in the number of customers) excepting for the first two reviews, which will be
after first year and fifth years respectively from the COD. Such allowance will be adjusted
according to Omani CPI.

5. • General and administrative cost allowance of RO 36,083 per month, to cover the general overhead
of the business. Such allowance will be adjusted according to Omani CPI.
Risks
Some risks that Dhofar Power is exposed to include:
• Construction risk is the prime risk in the case of power plants. DPC has completed the entire
construction activity and the plant has delivered power as envisaged under the CA making the
construction risk nil.
• Revenue risk comprises of demand, price, and payment risk. DPC will be receiving fixed
allowances based on system availability (demand risk). Based on the CA, allowances payable to
DPC have been fixed for the 20-year term (price risk). Balance payments are made by the MHEW,
a Government entity (Payment risk).
• Risk of penalties resulting from Power outages are to be concerned. In Mar 2003, there was an
outage of the T&D system. The CA includes a provision to the Government in such circumstances
of service interruption.
• Fuel Risk revolves around the availability and price of gas and fuel oil. The non-availability of gas
conforming to specifications in the NGSA could hamper the operations of DPC.
• DPC is exposed to inflation risk, to foreign exchange risk and also interest rate risk. These are all
macro economic risks.
PSEG (USA) – Overview
• Public Service Enterprise Group is an energy and energy services company incorporated in Newark,
New Jersey, United States. The company owns four major subsidiaries namely: PSE&G (a
regulated electric and gas distribution business), PSEG Power (a US power producer), PSEG
Services Corporation and PSEG Energy Holdings (the parent of PSEG's other unregulated
businesses such as PSEG Global).
• PSEG Global operates independent power generation and distribution facilities throughout the
world. The company began domestic operations in 1984 and has focused its development effort on
the international marketplace since 1993. The company has interests in more than 30 generation and
distribution projects around the world.
• The Salalah Plant is one such project which is managed by the company. The company currently
has an 81% ownership interest (will reduce to 46% after the Public Issue) in Dhofar Power.
• PSEG announced on December 20, 2004 that it has entered into a definitive merger agreement with
Exelon Corporation, to create Exelon Electric& Gas, the largest utility in the U.S. The merger,
which has been unanimously approved by both companies’ boards of directors, will create a
combined company with total assets of approximately USD. 79 billion, serving seven million
electric customers and two million gas customers in Illinois, New Jersey and Pennsylvania.

6. Financial Highlights
In Millions, Year ended 31st December 2004 2003 2002
Operating Revenues (US $) 10,996 11,139 8,220
Operating Income (US $) 1,947 2,079 1,523
Income from continuing operations (US $) 721 852 405
Net Income (US $) 726 1,160 235
Earnings per diluted share from continuing operations (US $) 3.03 3.72 1.94
(Source: PSEG Annual Report, Dec '04)
Turnover by Business Segment: Year 2004
(4,000)
(2,000)
0
2,000
4,000
6,000
8,000
PSEGPower PSE&G PSEGEnergy Holdings Other
USD(millions)
Electricity Sector in Oman
• The present power system in Oman is comprised of three discrete networks comprising the
central system (includes Muscat system, Wadi Al-Jizzi system and Sharqiya system), the
Salalah system and a number of isolated rural systems.
• The Government completed the interconnection of the Central System in 2002. The Salalah system
is not proposed to be connected to the transmission system in the foreseeable future due to
geographical distance. The MHEW (Ministry of Housing, Electricity & Water) is able to dispatch
and monitor the performance of all the plants interconnected within the Central System. The
MHEW (Ministry of Housing, Electricity & Water) currently owns all of the existing electricity and
related water infrastructure in Oman, with the exception of the Manah, Al Kamil, Barka, Sohar
(under construction) and the Salalah regional power assets.
• The Government has embarked on a comprehensive drive for restructuring, regulation and
privatization of electricity supply and the water industry in Oman. We witnessed the
privatization of United Power co. (SAOG) in the year 1995, which was followed by Al Kamil
Power Co. SAOG (August, 2004). AES Barka (SAOG) was privatized in the year 2004 and now
Dhofar Power (SAOG) becomes the fourth company to follow the privatization drive.
• The Sector Law (passed and signed on 20th
July, '04) sets out the system for the unbundling of the
power and related water desalination industry which will transfer responsibilities from the direct
operation of MHEW to the Regulatory Authority and a series of closed joint stock companies
having responsibilities for power and water procurement, transmission, and supply of electricity.

7. • There is an extensive and successful track record of private sector participation in the electricity and
water sector in Oman, representing in excess of 50% of installed capacity.
Project Type Capacity Year of Award Developer
Al Manah Phase I Gas based power plant 90 MW 1994 Tractebel
Al Manah Phase II Gas based power plant 190 MW 1999 Tractebel
Al Kamil Gas based power plant 285 MW 2000 IPR
Barka Gas based power & dependant water plant 427 MW/20 MIGD 2000 AES
Salalah Integrated Utility 240 MW 2001 PSEG
Sohar* Gas based power & dependant water plant 585 MW/33 MIGD 2004 Tractebel
*Agreements signed on 20th July, 2004
(Source: DPC Prospectus)
• The table below reveals the production/distribution statistics for electricity in Oman for the five
years (1998-2002):
Electricity
Year 1998 1999 2000 2001 2002 CAGR %
Electricity production (GWh) 8,200 8,413 9,111 9,737 10,331 4.73%
Electricity distribution (GWh) 7,807 8,682 8,682 9,178 9,851 4.76%
Connections (000 nos) 396 418 438 447 474 3.66%
Population (000 nos) 2,287 2,325 2,402 2,478 2,538 2.10%
(Source: DPC Prospectus)
• The table below shows the supply scenario in the Dhofar region for the period 2000-2002:
Electricity
Year 2000 2001 2002 CAGR %
Electricity production (GWh) 812 1,233 923 6.62
Electricity distribution (GWh) 780 839 897 7.24
Connections (’000 nos) 39 41 43 5
Population (‘000 nos) 225 232 238 2.85
(Source: DPC Prospectus)
• In addition to this macroeconomic-linked demand, Dhofar region may see additional demand by
way of new industrial areas like the Free Trade Zone, which would require bulk electricity
requirements in the near future. DPC would have a business growth profile more like a normal
business entity with its related financial upsides as opposed to a pure IPP/IWPP. Based on the
current demand profile, DPC estimates new generation capacity augmentation of 30 MW will be
required every 3-5 years. DPC has already received confirmation from the Government of their
understanding of the potential need to add 60 MW of generation capacity to support local growth
through to year 2009.

8. Valuation and Recommendation
• The prospective dividend payment and yields are displayed below:
Particulars FY 2005 FY 2006 FY 2007 FY 2008 FY 2009
Dividend (RO' 000) 2,687 2,468 2,947 3,073 3,988
Payout ratio % 102% 90% 90% 90% 90%
Dividend % 13.60% 12.50% 15.00% 15.60% 20.20%
Yield %* 9.60% 8.80% 10.50% 11.00% 14.30%
*Based on a single dividend payout at the end of the calender year
(Source: DPC Prospectus)
Multiples
• The two tables below display the P/E and Dividend yields of Dhofar Power, United Power (the only
comparable entity to Dhofar Power in Oman) and the other two listed companies namely AES
Barka (SAOG) and Al Kamil Power Co (SAOG):
P/E Ratio (times)
Particulars FY 2005 FY 2006 FY 2007 FY 2008 FY 2009
DPC 10.6 10.2 8.6 8.2 6.3
UEC*+ 6.5 6.6 6.3 6.4 6.5
AES** 7.3 6.7 8.4 8.4 NA
AKPC*** 9.9 9.1 8.5 8.0 NA
Dividend Yield
Particulars FY 2005 FY 2006 FY 2007 FY 2008 FY 2009
DPC 9.6% 8.8% 10.5% 11.0% 14.3%
UEC 10.9% 10.8% 11.1% 11.0% 10.9%
AES 6.3% 10.1% 5.3% 6.9% NA
AKPC 3.8% 4.7% 5.9% 6.5% NA
* Market Price assumed at RO. 1.24/share
** Market Price assumed at RO. 1.89/share
*** Market Price assumed at RO. 1.70/share
+ Al Madina Research
• When comparing the P/E ratios, Dhofar Power is currently seen as less attractive to United Power.
However, over a period of time the scrip does become more attractive.
• At an offer price of RO. 1.420, Dhofar Power seems to have the highest P/BV compared to all the
other power companies listed in the market. It is especially high in comparison to United Power
Company.

9. • Finally, looking at dividend yields we notice that at an offer price of RO. 1.42, the company is
offering very attractive dividends. Over a period of time the company has projected higher dividend
rates which make it an attractive investment opportunity. In most of the years the company has
expected to pay higher yields than AES Barka (SAOG) and Al Kamil Power Co (SAOG).
Dividend Discount Model
• Dhofar Power Company has been developed on a BOOT basis by which all assets of the company
will be transferred to the Government at the end of the Concession period (30th
April, 2023).
Management at DPC (Dhofar Power Company) is confident that the demand scenario in the Dhofar
region will permit them for further expansion of generation capacity in the future. We have valued
the company using the dividend stream forecasts made by the company from June '05 till June '23.
• In our estimate we have used a cost of capital of 8.5% (5% government bond rate + 3.5% equity
risk premium).
• The following table provides a price range for the scrip based on a range of Cost of Capital:
Cost of Capital Price
7.5% 1.994
8.0% 1.921
8.5% 1.852
9.0% 1.787
10.0% 1.666
• At a Cost of Capital of 8.5% the fair value of the scrip works out to be RO. 1.852. This is well
above the offer price of RO. 1.420. The issue is selling at a discount of around 23% of fair value.
• After a period of 15 years from the COD, it is estimated that the company will have paid off (all or
most of) its debt.
• From the 16th
year of operation till the 20th
year (from COD) the company is expected to receive
lower tariffs. This is especially true in the case of Capital cost allowances.
• We recommend investors to subscribe for this issue as Dhofar Power is a genuine dividend
paying company and has good profitability. The company is offering high dividends and has good
expansion possibilities in the future. In fact, the Company has already received a confirmation from
the Government of their understanding of the need to add 60 MW of capacity to support growth by
Year 2009.
• This is a suitable investment both for the short and long term. Omani nationals, Omani
incorporated entities and non-Omani nationals are eligible to subscribe for the issue.

10. 2005E 2006E 2007E 2008E 2009E
(RO' 000) (RO' 000) (RO' 000) (RO' 000) (RO' 000)
Non-current assets
Property, plant and equipment 84,475 79,899 74,174 68,936 63,812
Total non-current assets 84,475 79,899 74,174 68,936 63,812
Current assets
Inventories 874 874 874 874 874
Receivables 2,203 2,185 2,178 2,158 2,149
Cash and bank balances 6,368 7,728 9,904 11,393 13,065
Total current assets 9,445 10,787 12,956 14,425 16,088
Total assets 93,920 90,686 87,130 83,361 79,900
Equity and reserves
Share capital 19,702 19,702 19,702 19,702 19,702
Legal reserves 716 990 1,318 1,659 2,102
Retained Earnings 0 0 0 0 0
Proposed Distribution 1,126 1,281 1,447 1,564 2,188
Total shareholders funds 21,544 21,973 22,467 22,925 23,992
Hedging Deficit (6,110) (5,023) (4,041) (3,168) (2,433)
Total Equity 15,434 16,950 18,426 19,757 21,559
Non-current liabilities
Hedging Deficit 6,110 5,023 4,041 3,168 2,433
Term Loans 67,288 63,420 59,253 54,771 49,950
Total non-current liabilities 73,398 68,443 63,294 57,939 52,383
Current liabilities
Current maturities of the term loans 3,608 3,868 4,167 4,482 4,821
Payables 1,480 1,425 1,243 1,183 1,137
Total current liabilities 5,088 5,293 5,410 5,665 5,958
Total equity and liabilities 93,920 90,686 87,130 83,361 79,900

11. 2005E 2006E 2007E 2008E 2009E
(RO' 000) (RO' 000) (RO' 000) (RO' 000) (RO' 000)
Operating Revenue 24,623 25,085 25,683 26,192 26,773
Operating costs (15,583) (16,254) (16,830) (17,407) (17,320)
Gross Profit 9,040 8,831 8,853 8,785 9,453
Administrative and general expenses (1,298) (1,210) (1,132) (1,146) (1,168)
Profit from operations 7,742 7,621 7,721 7,639 8,285
Net financing enpense (5,105) (4,879) (4,446) (4,225) (3,854)
Net profit for the year 2,637 2,742 3,275 3,414 4,431
The information and opinions in this report were prepared by Al Madina Financial & Investment Services Co. (SAOC). Al Madina does not
undertake to advise you of changes in its opinion or information. Al Madina and other associated with it may make markets or specialize in,
have positions in and effect transactions in securities of companies mentioned and may also or seek to perform investment banking services for
other companies. This memorandum is based on information available to the public. No representation is made that it is accurate or complete.
This memorandum is not an offer to buy or sell or a solicitation of an offer to buy or sell the securities mentioned.The investment discussed or
recommended in this report may not be suitable for all investors. Investors must make their own investment decisions based on their specific
investment objectives and financial position and using such independent advisors as they believe necessary. Where an investment is
denominated in a currency other than the investor’s currency changes in rates of exchange may have an adverse effect on the value, price of, or
income derived from the investment. Past performance is not necessarily a guide to future performance. Income from investments may
fluctuate. The price or value of the investments to which this report relates, either directly or indirectly, may fall or rise against the interest of
investors.
For further information please contact:
Fahad Al Khalili (DGM, Investments), GSM: 99421220
Khalid Al Yahmadi (Investment Banking manager), GSM: 99434782
Ritesh Jesrani (Financial Analyst), GSM: 99822511
Rashid Al Musalti (Brokerage manager), GSM: 99200887
Omar Bin Rashid Al Mamari (Client Services manager), GSM: 99364393
Nabil Al Balushi (Senior Financial Broker), GSM: 99328555