Growing demand pushing Oman to continue investing in utilities services

Driven by rapid industrialisation, a growing population base and state-funded investments in major infrastructure projects, demand for electricity and water has surged in Oman over the past decade. Peak power demand on Oman’s Main Integrated System (MIS) has more than doubled since 2006 and water demand has almost tripled, according to Finnish consultancy and engineering firm Pöyry. Base case assumptions developed by government regulators and procurement agencies in the sultanate forecast strong growth in demand over the next several years in both water and power. Mohammed Amin bin Mustafa Al Saleh, CEO of the Oman National Engineering and Investment Company, told OBG, “Demand for electricity and water is expected to continue to grow at 6-7% annually, meaning the government will need to continue to focus on the development of utilities in the coming years. This is especially important to help encourage increased foreign direct investment in the special economic zones and industrial estates, as investors need consistent supply at competitive prices.”

Liberalisation

Oman’s utilities sector pioneered the deregulation and liberalisation of power and water in the GCC with the development of the first independent power producer (IPP) in Al Manah in 1996. As the sector has been gradually privatised, most IPPs have been listed on the Muscat Securities Market, providing opportunities for long-term investments with stable returns in a strong regulatory market. In 2004 specialised sector companies were launched in Oman with responsibility for each stage of the power and water supply chain. The industry regulator, the Authority for Electricity Regulation (AER), was established in 2005 with primary functions that include issuing new licences, compliance, implementing general policy for the state and coordination between the various ministries, organisations and stakeholders in the sector. The Oman Power and Water Procurement Company (OPWP) is the planning body for power supplies in the country and the sole procurer of new electricity generation and water desalination capacity. The company is responsible for ensuring that there is sufficient electricity and water production capacity available at the lowest cost to meet growing demand.

The sector is structured around a single buyer model. Electricity and water from independent power plants and water plants operating across Oman is purchased by OPWP under a competitive tender process, and transferred to Oman Electricity Transmission Company (OETC), which in turn supplies electricity to distribution companies. Both the OETC and OPWP are subsidiaries of the government-owned Nama Group holding company, which controls the government’s stake in firms engaged in procurement, transmission and distribution of power. Independent plants, operated by private players, are required to generate at a performance level specified in long-term purchase agreements when so instructed by the system operator. The structure is supported by water and electricity tariffs paid to the IPP or water plant by OPWP.

Industry Structure

The Oman national power system is sub-divided into several constituent systems serving the whole of the country. The largest network, known as the MIS, supplies 90% of Oman’s total electricity and covers the northern part of the sultanate, including the governorates of Muscat and Buraimi, as well as most of the Al Batinah South, Al Dakhliyah, Al Sharqiyah, Al Batinah North and Al Dhahirah Governorates. A smaller system owned by the Dhofar Power Company serves the Salalah area in the south, and the rest of the country is supplied by the Rural Areas Electricity Company (RAEC). Petroleum Development Oman (PDO), the majority state-owned oil and gas exploration and production company, also owns and operate its own power system connected to the MIS and Salalah systems. The need to increase power generation to meet demand growth projections has largely insulated planned projects in the utilities sector from austerity cuts. Though the sector is experiencing a bit of a slowdown in tendering new projects as a result of the ongoing economic downturn, the government oversees a clear work programme for implementation of power projects and progress remains on schedule. Elaborating on government funding support for the power sector, Milan Maksimovic, general manger Energoprojekt, told OBG, “Despite the drop in oil revenues, the country has continued to award new utilities projects and invest in the sector. But they really have no choice, given a growing population and rising energy demand.”

However, declining oil revenues also mean that the Omani government can no longer continue to support cheap power. As a result, the sector is moving towards greater privatisation in distribution and transmission. Ambitious strategies aimed at meeting capacity requirements and privatising generation and transmission systems provide a host of opportunities for private investors seeking decent returns from a defensive asset class.

Sector Profits & Tariffs

Pay-outs to the predominantly privately owned power generation companies for electricity purchased by OPWP totalled OR492.9m ($1.1bn) in 2015, against OR306.7m ($795.5m) paid out in 2014, according to OPWP’s 2015 annual report. This was a 42% increase in cost per MWh of electricity, driven by the doubling of gas prices – the principal fuel for electricity generation – from $1.5 per million British thermal units (Btu) to $3 per million Btu in January 2015. As in previous years, the increased cost of producing electricity is not expected to be passed on to the consumer, but will be borne by the government as part of its subsidisation of power and water.

However, the 2016 subsidy, which is estimated in excess of OR500m ($1.3bn), is likely to be gradually pared down when cost-reflective tariffs (CRT), which are currently being planned by the AER, are rolled out for large commercial and industrial consumers. Electricity charges paid by customers across all categories are currently governed by a system of permitted tariffs which have remained essentially unchanged since 1986. The 2016 Nama Group initiative introducing advanced automated metre reading services, or smart metering, is a first step aimed at replacing government subsidies with cost-based pricing. The service is targeted at as many as 12,000 large industrial and commercial customers whose electricity consumption exceeds 150 MWh per annum. Along with enhancing the quality and speed of processing metering data, smart metering is required to audit consumption for large consumers as a prelude to the planned implementation of CRT for large electricity customers. Phased implementation of CRT for large industrial, commercial and government consumers has already been approved by the Financial Affairs and Energy Resources Council as a means of effectively eliminating government subsidies and billing certain consumers at cost for generating and supplying electricity.

Privatisation & Investment

There is a healthy degree of private participation in Oman’s power generation market segment. Transmission and distribution remain government-owned, although feasibility studies are under way aimed at privatising these as well, likely using a similar PPP financing model to that used in power generation. “While there are many IPPs in the generation segment, transmission and distribution remain government-owned and the PPP financing model has yet to be explored fully,” Maksimovic told OBG. “But the prospect of privatisation of some of the utilities infrastructure is exciting.”

According to a May 2016 report from MuscatDaily. com, the Arab Petroleum Investment Corporation has estimated that Oman will require $6bn investment in power generation and $2bn in transmission and distribution during the 2016-20 period. With a view to increasing private sector participation and attracting investment in the country’s electricity sector, Nama Group completed the sale of Dhofar Generation Company in May 2016, and is currently assessing the potential privatisation of Oman’s largest state-owned distribution and supply companies by customer base, the Muscat Electricity Distribution Company (MEDC).

Nama Group firms began targeting longer-term amortising loans from banks and international markets in 2015 as an alternative to government funding, according to a February 2016 report. The borrowing is carried out by individual companies in close coordination with the holding company. In 2015 capital delivery projects include a $1bn bond issue to fund long-term capital expenditures of Nama Group subsidiary OETC, which develops, operates and maintains power transmission grids in Oman. Nama Group also arranged OR537m ($1.4bn) in long-term loans for the MEDC and Mazoon Electricity Company in 2015 and the Majan Electricity Company in 2016. The group is currently in the market for $250m in finance for Dhofar Power Company.

In the longer term, OPWP is developing a spot electricity market slated for market trial and operational launch in 2019/20. The objective is to provide an alternative route for power producers to sell electricity to state-owned OPWP outside of a standard, long-term power purchase agreement. Operating alongside the existing system of purchase agreements, qualified producers participating in the spot market will be able to receive prices determined on a day-to-day basis in accordance with specified market rules. The development of a competitive wholesale market for electricity is expected to introduce efficiencies and increase the potential for competition in Oman’s power generation market.

Supply & Demand

The sultanate’s total electricity production to the end of December 2015 stood at 32,758.3 GWh, rising 12.6% from the 29,094.6 GWh produced over the same period in 2014, according to the National Centre for Statistics and Information. The increased generation capacity is required to meet the needs of a rapidly developing population base. The total number of electricity customers in Oman has grown by an average of 6% annually over the past 10 years, according to Nama Group figures. Higher than average growth of 7% in 2015 was attributed to new consumers in the domestic segment served by the MEDC and Mazoon Electricity Company. The RAEC, also a Nama Group subsidiary, was serving 33,187 consumers in rural areas of the country at the end of 2015, a 7.4% increase over 2014. Consumption patterns indicate that roughly 49% of total energy supplied by the RAEC in rural areas is drawn by consumers in the domestic category. These patterns are expected to change in the future, as more large industrial and tourism sector customers are connected to RAEC networks.

OPWP projections in their Seven Year Statement 2015-2022 anticipate that peak power demand in the MIS, which covers much of the northern half of the sultanate, will grow at about 8% per year through to 2022, rising from 5565 MW in 2015 to 9529 MW in 2020. At the same time, contracts with many power generating units are scheduled to expire in the next five to six years, and several IPPs will be retired, including the Al Ghubrah and Wadi Jizzi plants in 2018. As a result, total contracted capacity in Oman is expected to fall to 5728 MW by 2021, down from 6876 MW in 2015, widening the demand-supply gap, according to OPWP’s seven-year outlook.

Closing The Gap

In order to mitigate the looming power deficit, significant generation capacity is being brought on-line between 2019 and 2022. Two major IPPs currently under development at Sohar-3 and Ibri are scheduled to begin operations in early 2019. The two plants, with a combined generation capacity of 3219 MW, represent the single largest jointly procured power scheme to be undertaken in the sultanate and are projected to boost total grid-connected generation capacity by up to 30%. A consortium led by Mitsui & Co will develop the Sohar 3-Ibri project. Investment is estimated at $2.3bn.

OPWP has also developed plans to launch a major 800-MW, gas-fired IPP in the Muscat region, which is slated for commercial operation in January 2021. Subject to regulatory approval, the procurement process is scheduled to commence with a request for qualifications before the end of 2016. Another pair of IPPs, which are sized at 800-1000 MW, is slated for commercial launch in 2022, the precise location of which is yet to be determined, according to OPWP. The qualification process for the plant is expected to commence in 2017.

Transmission & Distribution

Roughly 97% of Oman has access to electricity, according to data from the US International Energy Agency, and the majority is sourced from one of two major networks: the MIS in the north and the Dhofar-Salalah system in the south. PDO also operates its own network in central Oman, and the RAEC operates 34 diesel power stations across the sultanate to provide electricity to areas outside of both major networks. Total investment in the expansion and modernisation of Oman’s electricity distribution sector rose to OR221m ($574m) in 2015, up 27% from OR174m ($451.9m) in 2014, Hamad bin Salim Al Maghderi, chairman of the Distribution Code Review Panel, a grouping of Oman’s electricity distribution companies, said at a March 2016 press conference.

To meet the growing need for new load upgrades to existing distribution infrastructure, the OETC announced plans in April 2016 to invest OR300m ($779.1m) over the next three years for the expansion of transmission lines and substations within the MIS and north and south Oman. Half of the amount was reported by the OETC to have been earmarked for supporting the off-taking of power from new plants scheduled to open at Sohar-3 and Ibri in 2019. Funding for the projects will be sourced from a $1bn bond raised from overseas markets in 2015 for funding investment programmes. On a smaller scale, the RAEC is implementing a project for building a 132-KV, high-voltage line and grid station at a cost of approximately $6.35m, which aims to connect and provide reliable power supply in the state of Haima in Al Wusta Governorate.

Working Together

Greater integration and interconnectedness between existing systems is also gathering support, and in May 2016 PDO signed a memorandum of understanding with the OETC and OPWP that is aimed at establishing a framework to better integrate electricity grids operated by PDO with the existing OETC grid in Dhofar and Salalah, before eventually connecting the OETC southern grid with the main grid in the north. Underscoring the benefits of interconnectedness at the Oman Energy and Water Exhibition and Conference at Seeb in 2016, Ahmad Al Jahdami, the CEO of OPWP, noted that “power interconnection between PDO and the main power grid will allow for joint planning for future power capacities in a manner that will reduce costs of the produced capacities.” He added, “It will also provide new opportunities for utilisation of renewable energy between the two grids in addition to meeting the gas needs in the sultanate.”

At the level of international exchange, plans are reportedly in development to import and export power with other GCC states. OPWP is working with OETC, the AER and GCC Interconnection Authority to finalise access conditions that will facilitate trade agreements and allow for electricity transfers on the grid interconnection system. Oman and the UAE established their connection in October 2011. OPWP arranged a trial capacity exchange in 2016, which is intended to enable this option as a confirmed alternative to current contingency resources, such as temporary diesel generation.

Greater Efficiency

Mandated to provide value for the government and security for customers, the nine companies engaged in the generation, transmission and distribution of electricity as part of the government-owned Nama Group holding company have a natural interest in boosting efficiency and reducing transmission losses.

Over the past six years, these firms have recorded significant efficiency improvements in electricity generation, holding the annual growth in gas consumption by the power sector to 6%, despite an annual growth in electricity consumption of 10%. The growth in efficiency has been widely attributed to new high-efficiency turbines in generation systems that are responsible for an overall 30% reduction in gas consumption per unit of power generation since 2009, according to OPWP.

Plans to reduce gas consumption by an additional 20% by 2022 are under way, focused on introducing higher efficiency combined-cycle plants, power trading opportunities with PDO and GCC interconnectors, and reverse osmosis desalination plants to replace multi-stage flash technology. Transmission losses between generation and consumer are another focus of efficiency initiatives in Oman aimed at rationalising generation capacity. Losses peaked at 24.5% in 2004, when the sector was liberalised, and reached a low of 9.5% in 2015 in northern Oman, where the majority of the population resides. The downtrend is largely attributed to measures taken by Nama Group to penalise distribution companies that fail to meet targets and reward those that do.

Renewables

To cater to anticipated growth in demand for power, authorities are exploring various ventures in alternative energy. Still in its infancy, the renewables sector is expected to make headway in 2016/17, buoyed by public and private sector initiatives to harness solar and wind resources for electricity generation. Most other renewable energy alternatives around the world, including geothermal and tidal, are not feasible in the Omani context. The country’s highest below-ground temperatures are insufficient to support geothermal energy generation, and the tidal energy potential in the Arabian Sea is among the lowest in the world. Hydro energy is, however, being explored by the Public Authority for Electricity and Water (PAEW) at Wadi Dayqah Dam in Muscat Governorate.

Solar Energy

Oman has several competitive advantages for developing the entire value chain in solar industry, primarily due to the availability of sand and up to 320 days per year of regular sunshine. The falling cost of solar photovoltaic (PV) power systems and components has positioned the sector for growth in Oman, particularly as energy subsidies continue to drop. Solar PV cells are already being used in a limited fashion to power street lighting, parking metres, cathiodic protection systems for oil pipelines, and microwave and television transmission stations. The expectation in the country is that solar PV technology may grow to challenge combined-cycle gas turbines as the power generation technology of choice at sufficiently high gas prices. “If you are in the power sector, the world is moving very quickly towards solar,” Navneet Kasbekar, CEO of Al Suwadi Power, told OBG. “A megawatt of power produced by gas or fuel oil is today rapidly in the process of being beaten on cost by solar power.”

Increased, streamlined regulation of the renewables sector is required and may be forthcoming as a means of encouraging investment. “Renewable energy, especially solar, is the future of Oman, but the country needs to ensure that it has regulations in place that both encourage and enable investment in the sector. A good first step would be to establish an authority that is solely dedicated to regulating renewable energy investments,” Al Saleh told OBG.

Until these regulations are developed and consolidated in a single regulatory body, the Omani solar market is likely to be characterised by ad hoc independent initiatives. The archetype in this approach is the $600m solar project in Amal that is being developed in partnership between GlassPoint and PDO. Construction on the project began in late 2015, and operations are scheduled to commence in 2017. When complete, the Miraah solar project, as it is known, is expected to produce 6000 tonnes of steam per day for PDO’s enhanced oil recovery operations, saving an estimated 5.6trn British thermal units of natural gas each year. The amount is equivalent to the energy feedstock required to provide electricity to roughly 209,000 people in Oman.

Solar Strategy

In its 2014 annual report, the RAEC announced plans to raise the contribution of renewable energy, particularly solar energy, to total RAEC power generation capacity to 25% within the next five years. Plans drawn up by the company envisage PV-based plants of 2-3-MW capacity operated in a hybrid system with diesel to ensure uninterrupted supply when demand exceeds renewable capacity in the summer months. The RAEC’s maiden commercial-scale solar based venture came on-line in Mazyona, Dhofar Governorate, in 2015, and combines thin film and polycrystalline technologies to generate 300-KW capacity. Competitive tenders were expected to be floated for two additional hybrid PV and diesel-based power plants upon receiving the necessary approvals.

In 2016 the AER issued a pledge to pave the way for the introduction and growth of solar rooftop generation in the sultanate. The initial goal of the strategy was to encourage residential customers to venture into solar rooftop generation. The option was subsequently extended to industrial and commercial customers as well.

In an April 2016 statement to the press, Hilal Al Ghaithy, the AER’s deputy director of consumer affairs, said that licensed distribution and supply companies will reportedly be permitted to sign agency contracts with owners of solar rooftop capacity to off-take excess output on behalf of OPWP, currently the sole off-taker of all electricity output under the 2004 Law for the Privatisation of the Electricity and Related Water Sector.

In keeping with the government’s effort to reduce electricity subsidies in general, the policy framework and regulations being formulated in support of solar rooftop generation do not envision any financial compensation in the initial stages of programme implementation, according to the AER.

Wind Energy

Wind power projects are new to Oman and are being developed as part of a government effort to reduce diesel consumption for electricity generation in remote areas where the national grid is not yet extended. The RAEC is currently moving forward with plans to establish a 1. 7-MW capacity pilot wind-based power project on Masirah Island, off the sultanate’s eastern seaboard. Gulf Renewable Energy, a subsidiary of US-based Southern Energy Partners, was selected by the AER to implement the Masirah Wind Power pilot.

The implementation timeframe of the pilot is expected to precede a highly anticipated 50-MW wind farm project housing up to 25 wind turbines in the windswept Thumrait province of the Dhofar Governorate. The RAEC and Masdar – an investment vehicle of the Abu Dhabi government – are 50:50 joint-venture partners in the $125m project, which is projected to meet the electricity needs of around 16,000 homes in Thumrait. Initially planned for launch in 2017, the landmark venture is expected to be delayed because of a decision to retender the engineering, procurement and construction contract for the project, according to a senior official familiar with project details. A new deadline for bringing the project on-line is yet to be determined.

Desalination Demand

Demand for water resources and potable water in Oman has risen steadily over the past 10 years, driven by population growth, industrial development programmes and tourism projects. Roughly 20% of the sultanate’s water comes from wells, some in major well fields connected to other pipeline networks in Oman, but mostly single wells or small well fields that supply isolated systems in rural areas. Conservation of groundwater is prioritised in the sultanate as a means of preserving a strategic long-term reserve and an alternative resource during consumption peak periods or desalination plant shutdowns.

In line with the policy of reducing reliance on groundwater as a drinking water supply, the sultanate relies on seawater and major desalination plants for almost 80% of its water, according to the PAEW’s 2015 annual report. Water is currently sourced from four major desalination sites in Oman: Ghubrah, Barka, Sohar and Sur. The first three serve the MIS, while Sur serves the needs of customers in Al Sharqiyah, where there is a separate extensive water transmission system, which is currently isolated from the MIS. A total of 37 small desalination plants with a production capacity of about 37,011 standard cu metres per day (scmd) are also scattered in rural areas across eight governorates, serving local distribution networks and tanker filling stations.

Regulation & Tendering

The PAEW is the regulator for water services in Oman and functions as a direct water service provider, supplying potable water to all homes and businesses in Oman except in Sohar city and Dhofar Governorate. In its role as water service provider, the PAEW operates contracts with private companies to operate and maintain distribution and supply infrastructure that includes transmission lines, reservoirs, pumping stations, wells and well-fields, tanker filling points and desalination plants, among other assets. A new build-own-operate (BOO) model has recently been introduced by the PAEW for small desalination plants in areas not served by the MIS. The BOO model places full responsibility on the developer for the long-term performance of their equipment. These contracts are showing considerable promise and the PAEW is reportedly looking to extend the approach in Musandam, where the PAEW has planned a number of small plants to reduce reliance on expensive tanker ships to supply isolated villages.

Expanding

The authority also invests heavily in greenfield networks and the expansion of existing grids to improve services and extend piped water supplies to new areas. In 2015 the PAEW spent a total of roughly OR88m ($228.5m) on capital projects, down 3% from the OR90m ($233.7m) spent in 2014, according to its annual report. OPWP acts as the country’s sole procurer of new water desalination capacity from private sector operators of independent water and power plants and independent water projects (IWPs). The company is responsible for ensuring that there is sufficient water production capacity available at the lowest cost to meet growing demand.

The government is currently undertaking a major review of the water sector across the sultanate aimed at improving coordination among the various bodies that currently manage the sector’s constituent elements, namely water resources, potable water and wastewater. One key outcome of the review is the expectation that the utilities currently owned and managed by the PAEW will come under formal external regulation similar to the electricity sector. Given the likelihood of formal regulation, the PAEW has been developing “shadow” regulatory processes to bring its activities into alignment with the future regulatory structure, as noted by the PAEW in its 2015 annual report.

Demand Growth

Strong financial support for the PAEW’s water supply mandate has seen its potable water production, transmission and distribution infrastructure grow substantially every year since the authority was established in 2007. According to the PAEW’s 2015 annual report, water production (water entering the PAEW system from wells and desalination plants) rose in 2015 by 6% to more than 300m cu metres, with over 3000 new pipeline customers added each month to PAEW networks.

A water shortage in the summer of 2015 limited year-on-year growth in water distribution to customers via the MIS in the Muscat capital region. The supply deficit was addressed as peak demand began to decline and new supply was brought on-line from the delayed $215m Ghubra desalination plant, opened on a trial basis in June 2015 and subsequently made fully operational in February 2016, supplying 190,000 scmd to the Muscat metropolitan area. Looking to the future, OPWP demand projections for potable water in Oman’s northern region, which includes Muscat Governorate, stood at 6% growth per through 2020, stabilising at a significantly lower level than seen in the late 1990s, when demand grew almost 20% per year.

Generation & Performance

Growth in production of water is anticipated across all primary water sources, including large desalination plants, small desalination plants and wells. A recent trend in which the highest growth has been seen in wells is expected to be reversed with the commissioning of new large-scale seawater desalination capacity (see analysis). OPWP has recently completed procurement of several major projects, which are now at different levels of development. These include the Barka IV Desalination Plant with 281,000 scmd capacity, the Sohar III Desalination Plant (250,000 scmd) and a water desalination plant at Qurayyat (200,000 scmd). From 2018 to 2019, new capacity at the Barka IV and Sohar III plants is projected to be sufficient to meet targets, according to OPWP seven-year statement. Similarly, when the temporary IWP in Qurayyat begins operations in 2017, total available capacity is projected to meet the PAEW’s projections for demand.

Solid Waste Management

Lacking a clear recycling strategy for its municipal solid waste stream, most of the 1.8m tonnes of solid waste generated every year end up in one of the sultanate’s four landfills, 317 dumpsites or an unknown number of unauthorised dumpsites. This has created environmental and health issues, particularly for dumpsites located in residential areas or nearby private and public drinking water supplies. In the absence of a strategic master plan, waste management in Oman has been passing through a transitional phase, with the lack of waste collection and disposal facilities compounding waste management problems.

Responding to this challenge, Be’ah, the sultanate’s waste management body, has launched a waste management plan that is expected to generate investments in the sector of up to OM423.47m ($1.1bn) (see analysis). Be’ah plans to divert 60% of the nation’s waste for collection, treatment, recycling or landfills by 2020, using 13 engineered landfills and 36 waste transfer stations in several wilayat, particularly Muscat and Salalah. The current model for solid waste management projects in the country is Al Amerat landfill, which began operations in early 2011 as the first engineered sanitary landfill in Oman. Spread over an area of 9.1 ha, the site consists of five cells with a total capacity of 10m cu metres of solid waste. Similar solid waste management facilities planned across populated areas of the country will eventually pave the way for closure of authorised and unauthorised garbage dumps around the country.

Wastewater & Sewage

Government-owned Haya Water was established in 2002 to build and operate wastewater collection infrastructure in and around Muscat. Pursuant to a 2014 ruling by the Council of Ministers and a 2015 agreement with the Ministry of Regional Municipalities and Water Resources, the scope of Haya Water has been expanded to cover management, operation, maintenance and supervision of wastewater facilities in all governorates except Dhofar. Haya will also be involved in the design and construction of new infrastructure and advanced wastewater treatment systems across the sultanate. Most recently, the Oman Daily Observer reported in June 2016 that Haya Water floated a tender for construction of a 10,000-scmd sewage treatment plant and 63 km irrigation network at Liwa. Haya has also floated consultancy service tenders for wastewater networks and sewage treatment plants in the wilayat of Daba and Mad’ha in the Musandam Governorate.

Outlook

Demand for electricity and water remains strong in Oman, with growth forecasts ranging from 6-10% over the coming years. The need to increase power and potable water capacity is expected to insulate planned projects from austerity cuts, and ambitious government-driven procurement strategies will provide a host of opportunities for private sector investors seeking solid returns from a single-buyer system. To meet capacity requirements, new large IPPs and IWPs will be brought on-line between 2019 and 2022, supplemented in the water industry by temporary desalination plants and rapid deployment desalination facilities. The sultanate’s water desalination sector has proven attractive for foreign investors, with robust interest demonstrated by prominent international developers in a string of recently tendered or awarded IWPs. Government initiatives including smart metering, CRTs and non-residential water tariffs are also expected to help rationalise delivery and gradually replace government subsidies with cost-based pricing. With strategies in place, strong demand growth and a robust regulatory framework supporting private investment in power and water, Oman’s utilities industry is poised for more growth.