beyondbrics

Oman’s SMN Power Holding, the Gulf country’s biggest power company has sprung a surprise with an announcement that it’s selling $64m of shares despite the general gloom in the markets and a dearth of initial public offerings in the region.

The company which is three-way joint venture between Mubadala Development, an Abu Dhabi government investment arm, International Power mostly owned by GDF Suez, and Oman’s National Trading, is selling 35 per cent of its total share capital, the company said in an e-mailed statement on Sunday.

It’s the first IPO in Oman’s power sector since August 2008 when Sohar Power, also part-owned by French utilities group GDF Suez (4774:PAR) also the same percentage of its total share capital. Oman’s stock exchange, the Muscat Securities Market has a market capitalisation of $17.2bn and is dwarfed by larger markets in the region such as Saudi Arabia’s Tadawul and Dubai’s financial market.

“From the perspective of Western institutional investors all but a very few dedicated long-term players will stay away,” Julian Bruce equity sales head at EFG-Hermes Holding SAE in Dubai told beyondbrics. “The market is not trading on fundamentals at present and bringing a company to market in current conditions has raised a few eyebrows.”

As our colleague Robin Wigglesworth wrote at the time, Nawras, an Omani telecoms company sold stock last year but the shares closed at the lowest end of the mooted price range, and that was only after bankers kept the books open for an extra week.

An Omani IPO may be tricky due to the current volatility in the region’s and the world’s markets. Middle East stock markets were rattled this year as political unrest spread after the toppling of rulers in Tunisia and Egypt. Oman itself faced political unrest earlier this year when young protesters took to the streets to demand jobs, forcing the government to create more positions.

European debt woes and the Standard & Poor’s downgrade of the US again hurt the region’s markets already reeling from political unrest.

IPOs in the Middle East and North Africa region raised $398.9m in the first half, down 67 per cent from the same period last year, according to Ernst & Young. A staggering 225 companies in the Middle East have delayed their offers or postponed going to market in the last three years, according to the E&Y report.

Despite the grim outlook it has to be said that power supply in the Gulf states is a hot topic amongst investors as the countries are forced to meet the increasing demands of their growing domestic populations.

The offer price for the company’s shares has been set at OMR3.520 per share and the subscription is open to Omani and non-Omanis, the company said. The shares will be listed on the Muscat Securities Market by 25th October.

“I would expect the lion’s share of the allocations to be taking up by retail and local institutions,” Bruce says.

Related reading:
Nawras IPO: a bad omen for the Gulf?, beyondbrics
The Gulf: IPOs back on the launch pad, FT