Sector landmark: Second oldest private-owned power project, a 285 MW gas-fired plant in South Al Sharqiyah Governorate, is set for decommissioning and eventual public auction
The company behind one of the oldest privately-financed independent power projects (IPP) in the Sultanate of Oman is set for liquidation following its failure to secure an extension of its Power Purchase Agreement (PPA), which expired at the end of last year.
Publicly-listed Al Kamil Power Company SAOG (AKPC), which owns and operates a 285 MW gas-fired power plant at Al Kamil in North Al Sharqiyah Governorate, announced last week that it has convened an Extraordinary General Meeting (EGM) of its shareholders on March 8, 2022, to approve a proposal by the Board for the liquidation and eventual dissolution of the company.
It comes during a tumultuous time for the country’s power sector which witnessed an unprecedented downtrend in electricity demand growth amid the recent global economic downturn aggravated by the coronavirus pandemic. Saddled with surplus capacity, and with the outlook for power demand growth still uncertain, the power authorities scuppered plans for the procurement of new capacity, while prioritizing more modern and efficient power plants for load distribution.
In the event, privately-owned power plants nearing the end of their PPAs with Oman Power and Water Procurement Company (OPWP), the sole offtaker of electricity output, had their hopes dashed when hoped-for extensions did not materialise. Additionally, with older, less-efficient gas turbines on their hands, they were also at an inherent disadvantage in competing for supply contracts on the Spot Market that came online earlier this year.
In an explanatory note to shareholders, Al Kamil Power — a subsidiary of global energy giant Engie — said its proposal to liquidate the company came in the wake of the findings by a consultant cautioning that expected revenues from the Electricity Spot Market would be “negligible”.
“In light of the above: given that (i) the decision by OPWP to annul the Power 2022 Procurement Process and the resulting confirmation of the expiry of the PPA between the company and OPWP, and (ii) the independent study commissioned by the company finding that it has no real prospect of participating in the Spot Market launched in January 2022, the Board of Directors is of the view that there is no commercial purpose for the company to continue its business operations and hence, the company must be liquidated,” it stated.
As part of the proposed decommissioned of the plant, the gas turbines and other hardware will be sold through an open tender, it stated.
Commissioned in 2002 as a relatively modest-sized power plant, Al Kamil Power’s start-up marked the revival of a new phase of private-financed power generation in the Sultanate of Oman — a trend that has continued to date. Its launch came just two years after the Sultanate of Oman ushered in a new era of private Independent Power Projects (IPPs) for electricity generation — a first in the Middle East — with the commissioning of the 290 MW Manah IPP in the year 2000.
