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PROSPECTUS

Sembcorp Salalah Power & Water Company SAOG

(Under Transformation)

Initial Public Offering of 33,410,019 Shares

Offer price: OMR 1.590 per Offer Share(Comprising a nominal value of OMR 1, a premium of Bzs 570 and Offer expenses of Bzs 20 per Offer Share)

Collecting Banks:

Legal Advisers to Sembcorp Salalah:

Al Busaidy, Mansoor Jamal & Co.

Offer Opens 28 August, 2013

Offer Closes 26 September, 2013

Not for distribution in the United States, Canada, Australia, South Africa, Republic of Ireland or Japan

HSBC Bank Middle East LimitedHSBC Bank Oman SAOGGlobal Coordinator and Bookrunner:Issue Manager:

His Majesty Sultan Qaboos Bin Said

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Sembcorp Salalah Power & Water Company SAOG(Under Transformation)

Prospectus

Initial Public Offering of 33,410,019 Shares

Offer price: OMR 1.590 per Offer Share

(Comprising a nominal value of OMR 1, a premium of Bzs 570 and Offer expenses of Bzs 20 per Offer Share)

Offer opens: 28 August 2013

Offer closes: 26 September 2013

Issue Manager Global Coordinator and BookrunnerHSBC Bank Oman SAOG HSBC Bank Middle East Limited

Collecting BanksBank Muscat SAOG Oman Arab Bank SAOC National Bank of Oman SAOG Bank Dhofar SAOG

Legal Advisers to Sembcorp Salalah

Latham & Watkins LLP Al Busaidy, Mansoor Jamal & Co.

Issue Manager and Lead Underwriting Arranger Collecting BanksIssue Manager and Lead Underwriting Arranger Collecting Banks

Issue Manager and Lead Underwriting Arranger Collecting BanksIssue Manager and Lead Underwriting Arranger Collecting Banks

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Sembcorp Salalah Power & Water Company SAOG (Under Transformation)

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Important Notice to Investors

The aim of this Prospectus is to present material information that may assist investors to make

an appropriate decision as to whether or not to invest in the shares of Sembcorp Salalah Power

& Water Company SAOG (Under Transformation) (the “Company” or “Sembcorp Salalah”) offered

hereunder (the “Offer Shares”).

This Prospectus includes all material information and data and does not contain any misleading

information or omit any material information that would have a positive or negative impact on

the decision of whether or not to invest in the Offer Shares.

The Directors of Sembcorp Salalah are jointly and severally responsible for the integrity and

adequacy of the information contained and confirm that to their knowledge appropriate due

diligence has been performed in the preparation of this Prospectus and further confirm that

no material information has been omitted, the omission of which would render this Prospectus

misleading.

All investors should examine and carefully review this Prospectus in order to decide whether it

would be appropriate to invest in the Offer Shares by taking into consideration all the information

contained in this Prospectus in its proper context. Investors should not consider this Prospectus

a recommendation by Sembcorp Salalah to buy the Offer Shares. Every investor is responsible for

obtaining his or her own independent professional advice on the investment in the Offer Shares

and for conducting an independent valuation of the information and assumptions contained

herein using appropriate analysis or projections.

No person has been authorised to make any statements or provide information in relation to

Sembcorp Salalah or the Offer Shares other than the persons whose names are indicated in

this Prospectus. Where any person makes any statement or provides information it should not

be taken as authorised by Sembcorp Salalah, the Issue Manager or the Global Coordinator and

Bookrunner.

Sembcorp Salalah Power & Water Company SAOG

(Under Transformation)P.O. Box 299, Jawharat Al Shatti, Postal Code 134, Sultanate of Oman

Tel: +968 2411 5263; Fax: +968 2451 1424URL: www.sembcorpsalalah.com.om

PROSPECTUS

Initial Public Offering of 33,410,019 Shares of Nominal Value OMR 1 each

OFFER PERIOD

Offer Opens on: 28 August 2013Offer Closes on: 26 September 2013

ISSUE MANAGER

HSBC Bank Oman SAOGAl Khuwair

P.O. Box 1727, Postal Code 111, CPO Seeb, Sultanate of OmanTel: +968 2494 7052; Fax: +968 2494 7304

URL: www.hsbc.co.om

GLOBAL COORDINATOR AND BOOKRUNNER

HSBC Bank Middle East Limited2nd Floor, Building No. 5

Emaar Square, Sheikh Zayed Road, Dubai, United Arab Emirates Tel: +971 4 423 5115; Fax: +971 4 423 5814

URL: www.hsbc.ae

COLLECTING BANKS

Bank Muscat SAOGOman Arab Bank SAOC

National Bank of Oman SAOGBank Dhofar SAOG

LEGAL ADVISERS TO SEMBCORP SALALAH

Latham & Watkins LLPAl Busaidy, Mansoor Jamal & Co.

The Capital Market Authority (the “CMA”) assumes no responsibility for the accuracy and adequacy of the statements and information contained in this Prospectus nor will it have any liability for any damage or loss resulting from the reliance upon or use of any part of the same by any person. This Prospectus has been prepared in accordance with the requirements as prescribed by the CMA. This is an unofficial English language translation of the original Prospectus prepared in the Arabic language and approved by the CMA in accordance with Administrative Decision no. Kh/65/2013 dated 20 August 2013.

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Selling Restrictions outside Oman

Kingdom of Bahrain

In relation to investors in the Kingdom of Bahrain, securities the subject of this Prospectus and related offering documents may only be offered in registered form to existing account holders and accredited investors as defined by the Central Bank of Bahrain in the Kingdom of Bahrain where such investors make a minimum investment of at least US$100,000, or any equivalent amount in other currency or such other amount as the Central Bank of Bahrain may determine.

This offer does not constitute an offer of securities in the Kingdom of Bahrain in terms of Article 81 of the Central Bank and Financial Institutions Law 2006 (Decree Law No. 64 of 2006). This Prospectus and related offering documents have not been and will not be registered as a prospectus with the Central Bank of Bahrain. Accordingly, no securities may be offered, sold or made the subject of an invitation for subscription or purchase nor will this Prospectus or any other related document or material be used in connection with any offer, sale or invitation to subscribe or purchase securities, whether directly or indirectly, to persons in the Kingdom of Bahrain, other than to accredited investors for an offer outside Bahrain.

The Central Bank of Bahrain has not reviewed, approved or registered this Prospectus or related offering documents and it has not in any way considered the merits of the securities to be offered for investment, whether in or outside the Kingdom of Bahrain. Therefore, the Central Bank of Bahrain assumes no responsibility for the accuracy and completeness of the statements and information contained in this document and expressly disclaims any liability whatsoever for any loss howsoever arising from reliance upon the whole or any part of the content of this document.

State of Kuwait

This Prospectus has not been reviewed by the Capital Markets Authority of Kuwait and is not issued by a person licensed by the Capital Markets Authority. Accordingly, this Prospectus may not be circulated within the State of Kuwait nor may any of the Offer Shares be offered for subscription or sold, directly or indirectly, nor may any invitation or offer to subscribe for any of the Offer Shares be made to persons, including for the avoidance of doubt, any legal entities, in the State of Kuwait. In the event that this Prospectus is forwarded to any person in the State of Kuwait, it should be disregarded and no steps should be taken in reliance upon it. No person in the State of Kuwait may accept or subscribe for, or purport to accept or subscribe for, the Offer Shares.

Egypt

The Offer Shares have not been, and are not being, publicly offered, sold, promoted or advertised in Egypt. Further, this Prospectus does not constitute a public offer of securities in Egypt and is not intended to be a public offer.

State of Qatar

The Offer Shares have not been and will not be offered, sold or delivered, at any time, directly or indirectly in the State of Qatar in a manner that would constitute a public offering. No application has been or will be made for the Offer Shares to be listed or traded on the Qatar Exchange or the QE Venture Market. This Prospectus has not been, and will not be, reviewed or approved by or registered or filed with the Qatar Financial Markets Authority or Qatar Central Bank and may not be publicly distributed. This Prospectus is intended for the original recipient only and must not be provided to any other person. It is not for general circulation in the State of Qatar and may not be reproduced or used for any other purpose.

Kingdom of Saudi Arabia

This Prospectus may not be distributed in the Kingdom of Saudi Arabia except to such persons as are permitted under the Offers of Securities Regulations as issued by the Capital Market Authority of the Kingdom of Saudi

Additional points to be noted

References to documents

All summaries of documents or provisions of documents provided in this Prospectus may not provide a complete summary of such documents, and statements in this Prospectus relating to such documents should not be relied upon as being comprehensive statements in respect of such documents.

Scope of information

The information contained in this Prospectus is intended to provide a prospective Applicant with adequate information relating to the investment opportunity and background information on the IPO. However, this Prospectus does not necessarily contain all the information that a prospective Applicant may consider material. The content of this Prospectus is not to be construed as legal, business or tax advice. Each prospective Applicant should consult his own lawyer, financial adviser or tax adviser for legal, financial or tax advice in relation to any subscription, purchase or proposed subscription or purchase of the Offer Shares.

Investor due diligence

Prior to making any decision as to whether to subscribe for the Offer Shares, prospective Applicants should read this Prospectus in its entirety. In making an investment decision, prospective Applicants must rely upon their own examination of the terms of this Prospectus and the risks involved in making an investment.

Equity risk

All equity investments carry market risks to varying degrees. The value of any security can fall as well as rise depending on the market conditions. Potential investors should read “Chapter XIII – Risk Factors” of this Prospectus.

Restrictions on distribution of this Prospectus

The distribution of this Prospectus and the Offer Shares may, in certain jurisdictions, be restricted by law or may be subject to prior regulatory approvals. This Prospectus does not constitute an offer to sell or an invitation by or on behalf of Sembcorp Salalah to subscribe to any of the Offer Shares in any jurisdiction outside of Oman where such offer or invitation would be unlawful. This Prospectus may not be distributed in any jurisdiction where such distribution is, or may be, unlawful. Sembcorp Salalah, the Issue Manager, the Global Coordinator and Bookrunner and the Collecting Banks require persons into whose possession this Prospectus comes, to inform themselves of and observe, all such restrictions. None of Sembcorp Salalah, the Issue Manager, the Global Coordinator and Bookrunner or the Collecting Banks accept any legal responsibility for any violation of any such restrictions on the sale, offer to sell or solicitation to subscribe for Offer Shares by any person, whether or not a prospective Applicant, in any jurisdiction outside Oman where such sale, offer to sell or solicitation to subscribe would be unlawful.

Restrictions on use of information contained in this Prospectus

The information contained in this Prospectus may not be published, duplicated, copied or disclosed in whole or in part or otherwise used for any purpose other than in connection with the Offer, without the prior written approval of Sembcorp Salalah and the Issue Manager.

Disclaimer of implied warranties

Save and except as required under applicable law and regulations, no representation or warranty, express or implied, is given by Sembcorp Salalah, the Issue Manager, the Global Coordinator and Bookrunner or the Collecting Banks, or any of their respective directors, managers, accountants, lawyers, employees or any other person as to the completeness of the contents of this Prospectus; or of the projections included within; or of any other document or information supplied at any time in connection with the Offer; or that any such document has remained unchanged after the issue thereof.

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United States

The Offer Shares have not been, and will not be, registered under the US Securities Act of 1933, as amended (the “US Securities Act”) and may not be offered or sold within the United States or to, or for the account or benefit of, US persons (as such term is defined in Rule 902 under the US Securities Act (a “US Person”)) except in certain transactions exempt from the registration requirements of the US Securities Act. Terms used in this paragraph have the meanings given to them by Regulation S under the US Securities Act.

Each of the Global Coordinator and Bookrunner and the Issue Manager has agreed that it will not offer or sell the Offer Shares (i) as part of its distribution at any time or (ii) otherwise until 40 days after the later of the commencement of the Offer and the closing date of the Offer, within the United States or to, or for the account or benefit of, US Persons, and it will have sent to each dealer to which it sells Shares during the distribution compliance period a confirmation or other notice setting out the restrictions on offers and sales of the Shares within the United States or to, or for the account or benefit of, US Persons. Terms used in this paragraph have the meanings given to them by Regulation S.

The Offer Shares are being offered and sold outside of the United States to non‑US Persons in reliance on Regulation S.

United Kingdom

Investment in Sembcorp Salalah is a controlled investment for the purposes of the financial promotion restriction under section 21 of the Financial Services and Markets Act 2000 (“FSMA”).

This Prospectus has not been approved under FSMA by an authorised person. This communication is exempt from the general restriction under section 21 of FSMA on the communication of invitations or inducements to engage in investment activity on the grounds that it is made only to or directed only at the following persons (“Relevant Persons”):

(a) “investment professionals” within the meaning of Article 19 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (“FPO”); or

(b) “high net worth companies, unincorporated associations etc” within the meaning of Article 49 of the FPO,

or any other person to whom this Prospectus may lawfully be communicated.

Persons who are not Relevant Persons must not act or rely on this communication. Sembcorp Salalah. the Issue Manager and the Global Coordinator and Bookrunner will deal in the investments described in this Prospectus only with Relevant Persons.

An “investment professional” for the purposes of Article 19 of the FPO is a person who has professional experience in matters relating to “investments”.

A “high net worth company, unincorporated association etc” for the purposes of Article 49 of the FPO is (i) a body corporate which has, or is a member of the same group as an undertaking which has, a called‑up share capital or net assets of at least £5 million (or where the body corporate has more than 20 members or is a subsidiary undertaking of a parent undertaking which has more than 20 members, at least £500,000); (ii) an unincorporated association or partnership which has net assets of not less than £5 million; (iii) the trustee of a high value trust which has, or has had in the 12 months before the date of this communication, an aggregate value of at least £10 million; or (iv) any person (“A”) whilst acting in the capacity of director, officer or employee of a person (“B”) falling within any of the above where A’s responsibilities when acting in that capacity, involve him in B’s engaging in investment activity.

European Economic Area

In relation to each Member State of the European Economic Area that has implemented Directive 2003/71/EC (as amended) (the “Prospectus Directive”) (each, a “Relevant Member State”), an offer to the public of Offer Shares may not be made in that Relevant Member State, except that an offer to the public in that Relevant

Arabia resolution number 2‑11‑2004 dated October 4, 2004 as amended by resolution number 1‑28‑2008 dated August 18, 2008 (the “KSA Regulations”).

This Prospectus is directed to “sophisticated investors”, as defined under Article 10 of the KSA Regulations (“Sophisticated Investors”), for information purposes only. This Prospectus is not intended for distribution to, or use by anyone who is not a Sophisticated Investor. Any person who is not a Sophisticated Investor should not act on this Prospectus or any of its contents. This Prospectus also is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution would be contrary to law or regulation.

The Capital Market Authority of the Kingdom of Saudi Arabia does not make any representation as to the accuracy or completeness of this Prospectus, and expressly disclaims any liability whatsoever for any loss arising from, or incurred in reliance upon, any part of this Prospectus. Prospective purchasers of the securities offered hereby should conduct their own due diligence on the accuracy of the information relating to the securities. If you do not understand the contents of this Prospectus, you should consult an authorised financial adviser.

United Arab Emirates (excluding the Dubai International Financial Centre)

This Prospectus is strictly private and confidential and is being distributed to a limited number of investors and must not be provided to any person other than the original recipient, and may not be reproduced or used for any other purpose.

By receiving this Prospectus, the person or entity to whom it has been issued understands, acknowledges and agrees that none of the Shares or Prospectus have been approved by the UAE Central Bank, the UAE Ministry of Economy and Planning, the UAE Securities and Commodities Authority or any other authorities in the United Arab Emirates, nor has the Global Coordinator and Bookrunner or the Issue Manager received authorisation or licensing from the UAE Central Bank, the UAE Ministry of Economy and Planning, the UAE Securities and Commodities Authority or any other authorities in the United Arab Emirates to market or sell the Shares within the United Arab Emirates. No marketing or offer of the Shares has been or will be made from within the United Arab Emirates and no subscription to the Shares may or will be consummated within the United Arab Emirates. It should not be assumed that either the Global Coordinator and Bookrunner or the Issue Manager is a licensed broker, dealer or investment adviser under the laws applicable in the United Arab Emirates, or that it advises individuals resident in the United Arab Emirates as to the appropriateness of investing in or purchasing or selling securities or other financial products. The Shares may not be offered or sold directly or indirectly to the public in the United Arab Emirates. This Prospectus does not constitute a public offer of securities in the United Arab Emirates in accordance with the UAE Commercial Companies Law, Federal Law No. 8 of 1984 (as amended) or otherwise.

Nothing contained in this Prospectus is intended to constitute investment, legal, tax, accounting or other professional advice. This Prospectus is for your information only and nothing in this Prospectus is intended to endorse or recommend a particular course of action. You should consult with an appropriate professional for specific advice rendered on the basis of your situation.

Dubai International Financial Centre

This Prospectus is not intended to, and does not, constitute a financial promotion, an offer, sale or delivery of shares or other securities under the Dubai International Financial Centre (the “DIFC”) Markets Law (DIFC Law 12 of 2004, as amended), Regulatory Law (DIFC Law 1 of 2004, as amended), under the Offered Securities Rules of the Dubai Financial Services Authority (the “DFSA”) or otherwise. The Shares are not intended for, are not being offered, distributed, sold or publicly promoted or advertised, directly or indirectly, to, or for the account or benefit of, any person in the DIFC. This Prospectus is not intended for distribution to any person in the DIFC and any such person that receives a copy of this Prospectus should not act or rely on this Prospectus and should ignore the same. The DFSA has not approved the offer of Shares or this Prospectus nor taken steps to verify the information set out in it, and has no responsibility for it.

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(i) to an institutional investor under Section 274 of the SFA or to a relevant person as defined in Section 275(2) of the SFA or to any person pursuant to an offer that is made on terms that such rights or interest are acquired at a consideration of not less than S$200,000 (or its equivalent in a foreign currency) (or such other amount as may be prescribed under the SFA) for each transaction, whether such amount is to be paid for in cash or by exchange of securities or other assets;

(ii) where no consideration is given for the transfer;

(iii) where the transfer is by operation of law; or

(iv) as specified in Section 276(7) of the SFA.

Member State of Offer Shares may be made at any time under the following exemptions under the Prospectus Directive, if they have been implemented in that Relevant Member State:

(i) to any legal entity which is a qualified investor as defined in the Prospectus Directive;

(ii) to fewer than 150 natural or legal persons (other than “qualified investors” as defined in the Prospectus Directive); subject to obtaining the prior consent of the Global Coordinator and Bookrunner; or

(iii) in any other circumstances which do not require the publication by Sembcorp Salalah of a prospectus within the meaning of the Prospectus Directive,

provided that no such offer of Offer Shares shall result in a requirement for the publication by Sembcorp Salalah or any underwriter of a prospectus pursuant to Article 3 of the Prospectus Directive or any measure implementing the Prospectus Directive in a Relevant Member State.

For the purposes of this provision, the expression “an offer to the public” in relation to Offer Shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the Offer and any Offer Shares to be offered so as to enable an investor to decide to acquire any Offer Shares, as the same may be varied in that member state by any measure implementing the Prospectus Directive in that member state.

Singapore

This Prospectus has not been and will not be lodged with and registered with the Monetary Authority of Singapore (the “MAS”) as a prospectus under the Securities and Futures Act (Chapter 289 of Singapore) (the “SFA”). Accordingly, statutory liability under the SFA in relation to the content of prospectuses would not apply. You should consider carefully whether the investment is suitable for you.

As this Prospectus has not been registered as a prospectus with the MAS, this Prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of Shares may not be circulated or distributed, nor may any of the Shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to the public or any member of the public in Singapore other than (i) to a relevant person pursuant to Section 275(1) of the SFA, or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions specified in Section 275 of the SFA, (ii) to an institutional investor specified in Section 274 of the SFA, or (iii) in accordance with the conditions of any other applicable provisions of the SFA, as the same may be amended from time to time. Shares subscribed or purchased pursuant to Sections 274 or 275 of the SFA may only be transferred in accordance with provisions of Section 276 of the SFA.

Where the Shares are acquired under Section 275 of the SFA by a relevant person which is a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor, the securities (as defined in Section 239(1) of the SFA) of that corporation shall not be transferable for 6 months after that corporation has acquired the Shares under Section 275 of the SFA except:

(i) to an institutional investor or to a relevant person as defined in Section 275(2) of the SFA or arising from an offer under Section 275(1A) of the SFA;

(ii) where no consideration is given for the transfer; or

(iii) where the transfer is by operation of law.

Where the Shares are acquired under Section 275 of the SFA by a relevant person which is a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary is an individual who is an accredited investor, the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferable for 6 months after that trust has acquired the Shares under Section 275 of the SFA except:

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Presentation of Financial, Industry and Market Data

Financial Data

Unless stated otherwise, the financial data in this Prospectus is derived from Sembcorp Salalah’s audited financial statements or its unaudited reviewed interim financial statements, in each case prepared in accordance with IFRS. Copies of the 2010, 2011 and 2012 annual audited financial statements and the condensed interim financial statements for the six‑month period ended 30 June 2013 are set out in "Chapter XXIII – Financial Statements" of this Prospectus. Sembcorp Salalah’s financial year commences on 1 January and ends on 31 December. In this Prospectus, any discrepancy in any table between the total and the sum of the relevant amounts listed is due to rounding.

Currency of Presentation

In this Prospectus, all references to “OMR” and “Omani Rials” are to the legal currency for the time being of Oman, all references to “US$” and “US Dollars” are to the lawful currency for the time being of the United States of America and references to “S$” and “Singapore Dollars” are to the lawful currency for the time being of Singapore. Translations of amounts from Omani Rials to US Dollars in this Prospectus are solely for the convenience of the reader. The Omani Rial has been pegged to the US Dollar since June 1986. Unless specified otherwise, for all periods presented in “Chapter X – Description of Sembcorp Salalah and Business Overview”, “Chapter XII – Project Cost and Financing” and “Chapter XIV – Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Prospectus, translations of amounts between Omani Rials and US Dollars have been made at an exchange rate of US$1.00 = OMR 0.3852, reflecting the commercially available rate that Sembcorp Salalah has fixed for converting between US Dollars and Omani Rials.

Industry and Market Data

Unless stated otherwise, industry and market data used throughout this Prospectus has been obtained from third‑party industry publications and/or websites, including, without limitation, IPA and OPWP. Although it is believed that industry data used in this Prospectus is reliable, it has not been independently verified and therefore its accuracy and completeness are not guaranteed and its reliability cannot be assured. Similarly, internal company reports, while believed to be reliable, have not been verified by any independent sources. The extent to which the market and industry data used in this Prospectus is meaningful depends on the reader’s familiarity with and understanding of the methodologies used in compiling such data.

Presentation of Power Generation and Seawater Desalination Data

This Prospectus contains references to MW and MiGD capacities of the Plant. For the purposes of this Prospectus, all of the references to “MW” are to megawatts of electrical energy. All references to “MiGD” are to million imperial gallons per day of water.

Forward‑Looking Statements

This Prospectus contains certain “forward‑looking statements”. These forward‑looking statements generally can be identified by words or phrases such as “aim”, “anticipate”, “believe”, “expect”, “estimate”, “goal”, “intend”, “objective”, “plan”, “project”, “shall”, “will”, “will continue”, “will pursue” or other words or phrases of similar import. Similarly, statements that describe Sembcorp Salalah’s strategies, objectives, plans or goals are also forward‑looking statements. All forward‑looking statements are subject to risks, uncertainties and assumptions that could cause actual outcomes to differ materially from those contemplated by the relevant forward‑looking statement.

Important factors that could cause actual results to differ materially from Sembcorp Salalah’s expectations include, among others:

inability to estimate future performance;

inability of Sembcorp Salalah to meet its payment obligations under its financing arrangements;

inability to realise revenue forecasts after the off‑take obligations contained in the Project Documents have expired;

certain financing and/or operational risks, which are inherent to the Project;

change in monetary and/or interest policies of Oman, local and/or international inflation, local and/or international interest rates;

fluctuations in foreign exchange rates, equity prices or other rates or prices;

the performance of the financial markets in Oman;

general economic and business conditions in Oman which may have an impact on Sembcorp Salalah’s business activities;

changes in laws and/or regulation and/or conditions that may have a bearing on the position of Sembcorp Salalah’s clients, and/or suppliers after the PWPA has expired, or the power generation sector in Oman; and

increasing competition and the conditions of Sembcorp Salalah’s clients, suppliers and the power generation sector after the Project Documents have expired.

By their nature, certain market risk disclosures are only estimates and could be materially different from what actually occurs in the future. As a result, actual future gains or losses could be materially different from those that have been estimated. None of Sembcorp Salalah, the Issue Manager, the Global Coordinator and Bookrunner or any of their respective affiliates has any obligation to update or otherwise revise any statements in this Prospectus to reflect circumstances arising after the date hereof or to reflect the occurrence of underlying events, even if the underlying assumptions do not come to fruition or differ from actuality.

For a further discussion of factors that could cause actual results to differ, see “Chapter XIII – Risk Factors” of this Prospectus. After listing on the MSM, Sembcorp Salalah will adhere to the disclosure rules and regulations issued by the CMA, which includes making timely disclosure regarding Sembcorp Salalah’s results of operation. Sembcorp Salalah advises prospective Applicants and Shareholders to track any information or announcements made by it after listing through the MSM website at www.msm.gov.om.

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Chapter I: Abbreviations and Definitions

AER The Authority for Electricity Regulation of Oman.

Applicant A person or entity who applies for the purchase of Offer Shares pursuant to the terms of this Prospectus.

Application The application form used to apply for the Offer pursuant to the terms of this Prospectus.

Application Money The amount to be paid by each Applicant at the time of submission of his/her Application as specified in “Chapter XXII – Subscription Conditions and Procedures” of this Prospectus.

Articles The articles of association of Sembcorp Salalah, as registered with the Ministry of Commerce & Industry.

Baizas/Bzs Omani Baizas (Bzs 1,000 = OMR 1).

Basis of Allotment The basis on which the Offer Shares will be allotted to Applicants under the Offer and which is described in “Chapter XXII – Subscription Conditions and Procedures” of this Prospectus.

BDCC BDCC Investment Company, a special‑purpose vehicle managed by Instrata.

Board/Board of Directors The board of directors of Sembcorp Salalah, elected and holding office in accordance with the Articles and the CCL.

BOO Build, own and operate.

BOOT Build, own, operate and transfer.

Capital Market Law The Capital Market Law of Oman promulgated by Royal Decree 80/98, as amended.

Category I Investors Omani and non‑Omani individuals and juristic persons who apply for a minimum of 100 Offer Shares and in multiples of 100 Shares thereafter up to a maximum of 50,000 Offer Shares.

Category II Investors Institutions and individual investors who apply for a minimum of 50,100 Shares and in multiples of 100 Shares thereafter up to a maximum of 3,341,000 Shares, or 10 per cent. of the Offer Shares.

CCL The Commercial Companies Law of Oman promulgated by Royal Decree 4/74 (as amended).

CCGT Combined cycle gas turbine.

Chairman The Chairman of the Board.

CEO The Chief Executive Officer of Sembcorp Salalah.

CFO The Chief Financial Officer of Sembcorp Salalah.

CMA The Capital Market Authority of Oman.

COD The commercial operation date of the Plant, being 25 May 2012.

Code The CMA code of corporate governance for public joint stock companies issued by circular 11/2002, as amended.

Collecting Banks Bank Muscat SAOG, Oman Arab Bank SAOC, National Bank of Oman SAOG and Bank Dhofar SAOG.

Completion Date The completion date under the terms of the CTA, being 12 July 2013.

CSA The contractual service agreement dated 15 December 2009 between Sembcorp Salalah and General Electric.

Table of Contents

Chapter I Abbreviations and Definitions ...................................................................................................................... 15

Chapter II Summary Information Relating to Sembcorp Salalah .............................................................................. 21

Chapter III General Information on the Offer and Sembcorp Salalah ..................................................................... 23

Chapter IV Summary of Expenses in Connection with the Offer .............................................................................. 27

Chapter V Purpose of the Offer and Use of Proceeds ............................................................................................... 28

Chapter VI Objects and Approvals ................................................................................................................................ 29

Chapter VII Shareholding Details .................................................................................................................................. 31

Chapter VIII Overview of Oman and the Omani Economy ........................................................................................ 35

Chapter IX Regulatory Framework and Industry Overview ....................................................................................... 38

Chapter X Description of Sembcorp Salalah and Business Overview ...................................................................... 46

Chapter XI Contractual Framework .............................................................................................................................. 62

Chapter XII Project Cost and Financing ........................................................................................................................ 70

Chapter XIII Risk Factors ................................................................................................................................................ 76

Chapter XIV Management’s Discussion and Analysis of Financial Condition

and Results of Operations ............................................................................................................................................. 84

Chapter XV Projected Financial Information ............................................................................................................... 91

Chapter XVI Dividend Policy .......................................................................................................................................... 94

Chapter XVII Valuation and Price Justification ............................................................................................................. 96

Chapter XVIII Related Party Transactions and Material Contracts.......................................................................... 102

Chapter XIX Corporate Governance ........................................................................................................................... 104

Chapter XX Rights and Liabilities of Shareholders .................................................................................................... 114

Chapter XXI Market Information ................................................................................................................................. 116

Chapter XXII Subscription Conditions and Procedures ............................................................................................ 119

Chapter XXIII Financial Statements ............................................................................................................................. 127

Chapter XXIV Undertakings ......................................................................................................................................... 222

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HSSE Health, safety, security and the environment.

Hyflux Hyflux Ltd.

IFRS International Financial Reporting Standards.

Independent Director As defined in the Code.

Instrata Instrata Capital B.S.C.(c).

Issue Manager HSBC Bank Oman SAOG

IPA IPA Energy + Water Economics Ltd., the independent market adviser in relation to the Offer.

IPO The initial public offering of the Offer Shares pursuant to the Offer.

IPP Independent power project.

IPWC Inma Power & Water Company LLC, a wholly‑owned subsidiary of OIC.

IRR Internal rate of return.

IWPP Independent water and power project.

kJ Kilojoules.

km Kilometres.

km2 Square kilometres.

kV Kilovolts.

kW Kilowatts.

kWh Kilowatt hours.

LHV Lower heating value.

LIBOR London Interbank Offered Rate.

m3 Cubic metres.

Management The senior management team of Sembcorp Salalah.

MCDC Muscat Clearing & Depository Company SAOC.

MECA The Ministry of Environment and Climate Affairs of Oman.

Memorandum The memorandum of association of Sembcorp Salalah, as registered with the Ministry of Commerce & Industry.

Ministry of Commerce & Industry/MoCI

The Ministry of Commerce & Industry of Oman.

Ministry of Finance/MoF The Government (represented by the Ministry of Finance).

Ministry of Housing/MoH The Government (represented by the Ministry of Housing).

Ministry of Manpower/MoM The Government (represented by the Ministry of Manpower).

Ministry of Oil & Gas/MOG The Government (represented by the Ministry of Oil & Gas).

MENA The Middle East and North Africa.

MIS The Main Interconnected System of Oman.

MMBTU Million British thermal units.

MSM The Muscat Securities Market.

MW Megawatts.

NCSI National Center for Statistics and Information of Oman.

NGSA The natural gas sales agreement dated 23 November 2009 between Sembcorp Salalah and the Ministry of Oil & Gas.

Non-Executive Director As defined in the Code, a member of the Board who is not a full‑time director (employee director) and/or does not draw any fixed monthly or annual salary from Sembcorp Salalah.

CTA The common terms agreement dated 20 November 2009 between, amongst others, Sembcorp Salalah, Bank Muscat SAOG, Bank of China Limited, China Development Bank Corporation, KfW IPEX‑Bank GmbH, Standard Chartered Bank and Sumitomo Mitsui Banking Corporation Europe Limited as mandated lead arrangers, as amended by an amendment agreement dated 26 February 2010.

DCF Discounted cash flows valuation methodology.

Deputy Chairman The Deputy Chairman of the Board.

DGC Dhofar Generating Company SAOC.

Dollar Commercial Facilities Agreement

The facilities agreement dated 20 November 2009 between Sembcorp Salalah, Standard Chartered Bank as Dollar Commercial Facility Agent and Intercreditor Agent and the Original Dollar Commercial Lenders named therein.

DPC Dhofar Power Company SAOG.

DSCR Debt Service Coverage Ratio.

DTC Dongfang Turbine Co., Ltd.

EBITDA Earnings before interest, taxes, depreciation and amortisation.

ECA The electrical connection agreement dated 23 November 2009 between DPC and Sembcorp Salalah.

Effective Date The effective date under the PWPA, being 23 November 2009.

EGM An extraordinary general meeting of the Shareholders.

EHC Electricity Holding Company SAOC.

EHC Option The option of EHC to acquire up to 35 per cent. of the Shares in accordance with the PFA.

EPC Contract The EPC turnkey engineering, procurement and construction contract dated 20 August 2009 between Sembcorp Salalah and SEPCOIII Electric Power Construction Corporation.

Equator Principles The principles set out in the paper entitled “A financial industry benchmark for determining, assessing and managing social and environmental risk in project financing” dated July 2006 developed by the International Finance Corporation.

Finance Documents As defined in the CTA.

Financial Close 23 March 2010.

Financial Year The period of twelve months starting on 1 January and ending on 31 December of that particular year.

GCC The Cooperation Council for the Arab States of the Gulf, comprising Oman, United Arab Emirates, Saudi Arabia, Qatar, Bahrain and Kuwait.

GDP Gross domestic product.

General Electric/GE General Electric International LLC.

Global Coordinator and Bookrunner

HSBC Bank Middle East Limited.

Government The Government of Oman.

Government Guarantee The government guarantee agreement dated 23 November 2009 between Sembcorp Salalah and the Ministry of Finance.

GWh Gigawatt hours.

HBGC Hangzhou Boiler Group Co. Ltd.

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Project Founders Sembcorp Utilities, SOFIH, SOIHL, OIC, OICHC and IPWC.

Project Sponsors Sembcorp Utilities, OIC and Instrata.

PSA The project support agreement dated 20 November 2009 between Sembcorp Salalah, Sembcorp Utilities, OIC, SOFIH, SOIHL, IPWC, Standard Chartered Bank and Bank Muscat SAOG, as amended and restated on 26 December 2011.

PWPA The power and water purchase agreement dated 23 November 2009 between Sembcorp Salalah and OPWP.

RAECO Rural Areas Electricity Company SAOC.

Rial Commercial Facilities Agreement

The facilities agreement dated 20 November 2009 between Sembcorp Salalah, Bank Muscat SAOG as Rial Commercial Facility Agent, Standard Chartered Bank as Intercreditor Agent and the Original Rial Commercial Lenders named therein.

RO Reverse osmosis.

ROP The Royal Oman Police.

Salalah System The Salalah regional power system of Oman.

SAOC Société Anonyme Omanaise Close, an Omani closed joint stock company.

SAOG Société Anonyme Omanaise Générale, an Omani general joint stock company.

Scheduled COD The scheduled commercial operation date of the Plant under the PWPA, being 4 April 2012.

Sector Law Royal Decree 78/2004, promulgated on 1st August 2004, as amended.

Security Documents As defined in the CTA.

Selling Shareholders SOIHL, IPWC and BDCC.

Sembcorp Gulf O&M Sembcorp Gulf O&M Co. Ltd., a wholly‑owned subsidiary of Sembcorp Utilities.

Sembcorp Industries Sembcorp Industries Ltd.

Sembcorp Salalah/Company Sembcorp Salalah Power & Water Company SAOG (Under Transformation).

Sembcorp Salalah O&M Sembcorp Salalah O&M Services Company LLC, a company jointly‑owned by Sembcorp Utilities and OIC.

Sembcorp Utilities Sembcorp Utilities Pte. Ltd., a wholly‑owned subsidiary of Sembcorp Industries.

SEPCOIII SEPCOIII Electric Power Construction Corporation.

SHA The shareholders’ agreement dated 17 November 2009 between SOIHL, SOFIH, IPWC and BDCC, as supplemented by an accession agreement dated 26 December 2011 and as further amended from time to time.

Share An ordinary share of Sembcorp Salalah.

Shareholder A shareholder of Sembcorp Salalah.

Shareholder Loans The subordinated advances made in favour of Sembcorp Salalah by SOIHL, SOFIH, IPWC and BDCC, pursuant to the terms of the PSA.

O&M Agreement The operation and maintenance agreement dated 8 February 2010 between Sembcorp Salalah and Sembcorp Salalah O&M.

OCCI Oman Chamber of Commerce & Industry.

OCGT Open cycle gas turbine.

OETC Oman Electricity Transmission Company SAOC.

Offer The offer for sale of 33,410,019 (thirty‑three million four hundred and ten thousand and nineteen) existing Shares by the Selling Shareholders, each with a nominal value of OMR 1, as described in this Prospectus.

Offer Closing Date The closing date of the Offer, which is described in “Chapter XXII – Subscription Conditions and Procedures” of this Prospectus.

Offer Expenses The expenses collected from each Applicant in connection with the Offer, as further described in “Chapter IV – Summary of Expenses in Connection with the Offer” of this Prospectus.

Offer Opening Date The opening date with respect to the Offer, which is described in “Chapter XXII – Subscription Conditions and Procedures” of this Prospectus.

Offer Period The period between the Offer Opening Date and the Offer Closing Date inclusive of both days and during which an Applicant can submit an Application.

Offer Price OMR 1.590 per Share.

Offer Proceeds The proceeds of the Offer that will be available to the Selling Shareholders.

Offer Shares The Shares subject to the Offer.

OIC Oman Investment Corporation SAOC.

OICHC Oman Investment Corporation Holding Company.

Oman The Sultanate of Oman.

Omani Rial/OMR Omani Rials, the lawful currency of Oman.

OMSGD The Government (represented by the Office of the Minister for State and the Governor of Dhofar).

OGM An ordinary general meeting of the Shareholders.

OPWP Oman Power and Water Procurement Company SAOC.

P/E Price to earnings.

PAEW Public Authority for Electricity & Water of Oman.

PDO Petroleum Development Oman LLC.

PFA The project founders agreement dated 23 November 2009 between each of the Project Founders and EHC, and as further amended from time to time.

Plant The Salalah independent power and water plant located in the wilayat of Mirbat in Salalah, Oman.

PPA Power purchase agreement.

Project The development, ownership, financing, design, construction and operation of the Plant.

Project Documents As defined in the CTA (including, but not limited to, the PWPA, the NGSA, the ECA, the WCA, the Usufruct Agreements, the Government Guarantee, the PFA, the SHA, the EPC Contract, the O&M Agreement and the Technical Assistance Agreement).

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Chapter II: Summary Information Relating to Sembcorp Salalah

This summary highlights information contained elsewhere in this Prospectus. It does not contain all the information that you should consider before investing in the Offer Shares. You should read the entire Prospectus carefully, including the financial statements of Sembcorp Salalah set out in “Chapter XXIII – Financial Statements” of this Prospectus. You should read “Chapter XIII – Risk Factors” of this Prospectus for more information about important factors that you should consider before buying Offer Shares.

Overview of Sembcorp Salalah

Sembcorp Salalah’s core business activity is to develop, own and operate an electricity generation and seawater desalination plant located between the towns of Taqah and Mirbat, approximately 50 km from Salalah. Salalah is an administrative town in the Dhofar Governorate. The Plant has been in full commercial operation since 25 May 2012 and has a contracted power capacity of 445 MW and a contracted water capacity of 15 MiGD. The power and desalinated water that Sembcorp Salalah produces from the Plant is fully contracted to OPWP on a take‑or‑pay basis and used to meet the growing power and water demands of the Dhofar Governorate. Sembcorp Salalah is the predominant supplier of electricity and water to the Dhofar Governorate, supplying, as at the date of this Prospectus, approximately 72 per cent. of the power dispatch and 100 per cent. of the net installed water capacity in the Dhofar Governorate. As the largest and most energy‑efficient power and water plant in Dhofar, the Plant is expected to continue to play a major role in meeting the growing power and water demand of the Dhofar Governorate and the region during the term of the PWPA and the longer term.

Sembcorp Salalah generates its revenues pursuant to the PWPA, a 15‑year term power and water purchase agreement with OPWP, which is indirectly wholly‑owned by the Government. The terms of the PWPA provide that the Plant’s contracted power and water capacity is sold exclusively to OPWP on a long‑term take‑or‑pay basis.

As at the date of this Prospectus, the Shareholders are SOFIH, which owns 40 per cent., SOIHL, which owns 20 per cent., IPWC, which owns 35 per cent. and BDCC, which owns 5 per cent. For a profile of each of these Shareholders, please see “Chapter VII – Shareholding Details” of this Prospectus.

Competitive Strengths

Sembcorp Salalah’s competitive strengths include the following:

Strong predictability of stable cash flows.

Well‑established contractual framework.

Government guarantees payment obligations of OPWP under the PWPA due to strategic importance of both the industry and the Project.

Fully operational project with minimal operating risk.

Excess capacity and outage allowance to ensure an extended Plant lifespan.

Mitigation of fuel risks.

Extensive experience of the Project Sponsors.

Experienced and skilled operational personnel.

Opportunities for incremental revenue growth.

For further details in relation to Sembcorp Salalah’s competitive strengths, please see “Chapter X – Description of Sembcorp Salalah and Business Overview – Competitive Strengths” of this Prospectus.

Site The area comprising two hundred and seventy‑six thousand one hundred and twenty‑eight square metres and identified as “Area for Salalah IWPP” on the plan forming part of Krooki number 7‑47‑017‑01‑003.

Sinosure Covered Facilities Agreement

The facilities agreement dated 20 November 2009 between Sembcorp Salalah, Bank of China Limited, Shadong Branch as Sinosure Facility Agent, Standard Chartered Bank as Intercreditor Agent and the Original Sinosure Covered Lenders named therein.

SOFIH Sembcorp Oman First Investment Holding Co Ltd., a wholly‑owned subsidiary of Sembcorp Utilities.

SOIHL Sembcorp Oman IPO Holding Co Ltd., a wholly‑owned subsidiary of Sembcorp Utilities.

S$ Singapore Dollars, the lawful currency of the Republic of Singapore.

Technical Assistance Agreement

The technical assistance agreement dated 8 February 2010 between Sembcorp Salalah O&M and Sembcorp Gulf O&M.

Temporary Areas The areas comprising three hundred and forty‑four thousand seven hundred and twenty square metres and identified as “Lay Down / Temporary Area for Salalah IWPP” on the plan forming part of Krooki number 7‑47‑017‑01‑003.

US$ US Dollars, the lawful currency of the United States of America.

UAS The usufruct agreement relating to the Site dated 23 November 2009 between Sembcorp Salalah and the Ministry of Housing.

UATA The usufruct agreement relating to the Temporary Areas dated 23 November 2009 between Sembcorp Salalah and the Ministry of Housing.

Usufruct Agreements The UAS and the UATA.

WCA The water connection agreement to be entered into between the OMSGD and Sembcorp Salalah, the form of which is scheduled at Schedule I to the PWPA.

Working Capital Facility Agreement

The facility agreement dated 26 February 2013 between Sembcorp Salalah and Bank Muscat SAOG.

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Chapter III: General Information on the Offer and Sembcorp Salalah

Name Sembcorp Salalah Power & Water Company SAOG (Under Transformation).

Commercial registration number

1077337

Date of registration 29 September 2009

Registered office P.O. Box 299 Jawharat Al ShattiPostal Code 134Sultanate of Oman

Principal place of business Third FloorAl Thabat Building (Building No. 53)Airport StreetAirport Heights – SeebSultanate of OmanTel: +968 2411 5263; Fax: +968 2451 1424

Duration Unlimited.

Financial Year Commences on 1 January and ends on 31 December each year.

Authorised share capital OMR 100,000,000, divided into 100,000,000 Shares with a nominal value of OMR 1 per Share.

Issued and paid-up share capital

OMR 95,457,195 divided into 95,457,195 Shares with a nominal value of OMR 1 per Share.

Number of Shares offered for subscription

33,410,019 Shares, representing 35 per cent. of Sembcorp Salalah’s total issued and paid‑up share capital.

Type of Shares offered for subscription

All the Shares issued by Sembcorp Salalah and the entire equity capital of Sembcorp Salalah consist only of ordinary shares. Each single Share carries the right to one vote at any general meeting of Sembcorp Salalah, including any OGM or EGM.

Offer Price of the Offer Shares OMR 1.590 per Offer Share (comprising a nominal value of OMR 1, a premium of Bzs 570 and the Offer Expenses of Bzs 20 per Offer Share).

Percentage of the total issued and paid-up share capital on Offer

35 per cent. of the issued and paid‑up share capital of Sembcorp Salalah.

Names of Selling Shareholders and number of Shares being sold

SOIHL: 19,091,439 Shares, representing 57.14 per cent. of the Offer Shares.

IPWC: 12,528,757 Shares, representing 37.50 per cent. of the Offer Shares.

BDCC: 1,789,823 Shares, representing 5.36 per cent. of the Offer Shares.

Purpose of the IPO Sembcorp Salalah is undertaking the IPO to comply with the obligations stipulated in the PFA.

Persons eligible for the Offer Shares

The subscription will be open to Omani and non‑Omani individuals and juristic persons.

Risk Factors

Sembcorp Salalah’s key risk factors include the following:

The Plant has a limited operating history.

Sembcorp Salalah’s sole activity is the generation of electricity and the desalination of seawater.

Sembcorp Salalah depends on OPWP to purchase all of the capacity and output of the Plant under the terms of the PWPA.

Sembcorp Salalah is subject to disputes with OPWP and SEPCOIII in relation to liquidated damages under the PWPA.

Sembcorp Salalah’s ability to operate the Plant and respond to unexpected events is dependent on the availability of skilled personnel, including those provided by Sembcorp Salalah O&M.

Sembcorp Salalah depends on certain of its shareholders and their affiliates for its operations and engages in transactions with certain related parties.

Sembcorp Salalah’s operations are subject to government regulation and licences.

Sembcorp Salalah may not have adequate insurance to cover all potential losses.

For further details in relation to Sembcorp Salalah’s risk factors, please see “Chapter XIII – Risk Factors” of this Prospectus.

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Issue Manager HSBC Bank Oman SAOGAl KhuwairP.O. Box 1727, Postal Code 111, CPO Seeb, Sultanate of OmanTel: +968 2494 7052; Fax: +968 2494 7304URL: www.hsbc.co.om

Global Coordinator and Bookrunner

HSBC Bank Middle East Limited2nd Floor, Building No. 5, Emaar Square, Sheikh Zayed RoadDubai, United Arab Emirates Tel: +971 4 423 5115; Fax: +971 4 423 5814 URL: www.hsbc.ae

Collecting Banks Bank Muscat SAOGP.O. Box 134, Postal Code 112, Ruwi, Sultanate of Oman.Tel: +968 2476 8064; Fax: +968 2478 7764URL: www.bankmuscat.com

Oman Arab Bank SAOCP.O. Box 2010, Postal Code 112, Ruwi, Sultanate of OmanTel: +968 2482 7399; Fax: +968 2482 7367URL: www.oman-arabbank.com

National Bank of Oman SAOG P.O. Box 751, Postal Code 112, Ruwi, Sultanate of OmanTel: +968 2477 8757/8610; Fax: +968 2477 8993URL: www.nbo.co.om

Bank Dhofar SAOGP.O. Box 1507, Postal Code 112 , Sultanate of Oman.Tel: +968 2478 7348; Fax: +968 2478 4428URL: www.bankdhofar.com

Reporting accountants and auditors of Sembcorp Salalah

KPMG 4th Floor, HSBC Bank Building, MBD, P.O. Box 641, P.C. 112, Sultanate of Oman Tel: +968 2470 9181; Fax: +968 2470 0839 URL: www.kpmg.com

Persons prohibited from subscribing to the Offer

The following Applicants shall not be permitted to subscribe to the Offer:

Sole Proprietorship Establishments: The owners of sole proprietorship establishments may only submit Applications in their personal names.

Trust Accounts: Customers registered under trust accounts may only submit Applications in their personal names.

Multiple Applications: An Applicant may not submit more than one Application.

Joint Applications: Applicants may not submit applications in the name of more than one individual (including on behalf of legal heirs).

All such Applications will be rejected without contacting the Applicant.

Proposed allocation procedure In case of oversubscription of the Offer, for the purpose of allocating the Offer Shares between the eligible investor groups, the allocation of the Offer Shares will be made as follows:

Category I Investors: 20,046,012 Shares, being 60 per cent. of the Offer, on a pro-rata basis.

Category II Investors: 13,364,007 Shares, being 40 per cent. of the Offer, on a pro-rata basis.

In accordance with Article 65 of the CCL, a minimum number of Offer Shares may be distributed equally among subscribers, taking into consideration small subscribers and the remaining Offer Shares shall be allocated on a pro-rata basis.

Any under-subscription in Category I will be carried to Category II and vice versa, as described in “Chapter XXII – Subscription Conditions and Procedures” of this Prospectus.

Minimum limit for subscription by each Applicant

Category I Investors: 100 Shares and in multiples of 100 Shares thereafter.

Category II Investors: 50,100 Shares and in multiples of 100 Shares thereafter.

Maximum limit for subscription by each Applicant

Category I Investors: 50,000 Shares.

Category II Investors: 3,341,000 Shares, representing 10 per cent. of the Offer.

Offer Opening Date 28 August 2013

Offer Closing Date 26 September 2013

Nominal value of the Shares OMR 1 per Share

Estimated total expenses incurred in connection with the Offer

OMR 2,183,885

Offer Expenses Bzs 20 per Offer Share

Date of EGM for approval of the IPO

7 July 2013

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Chapter IV: Summary of Expenses in Connection with the Offer

The maximum expenses incurred by Sembcorp Salalah in connection with the Offer are estimated at OMR 2,183,885, which would equate to 4.1 per cent. of the total proceeds of the Offer if all 33,410,019 Offer Shares are sold. The breakdown of the maximum estimated expenses incurred by Sembcorp Salalah in relation to the Offer is contained in the table below:

Estimated Expenses OMR

Issue Manager/Global Coordinator and Bookrunner fees 1,540,800

Collecting Bank fees 209,815

CMA and MCDC fees 40,000

Legal Advisers 202,634

Tax, accounting and audit 50,076

Market consultant fees 19,260

Marketing, advertising and publicity 96,300

Other expenses 25,000

Total expenses in connection with the Offer 2,183,885

Offer Expenses of Bzs 20 per Offer Share collected (668,200)

Difference between estimated total expenses incurred and Offer Expenses of Bzs 20 per Offer Share collected

1,515,685

The above figures are indicative estimates only. The Offer Price includes an amount equal to the Offer Expenses of Bzs 20 per Offer Share, which will be used to meet part of the expenses incurred by Sembcorp Salalah in relation to the Offer. If all 33,410,019 Offer Shares are sold, total Offer Expenses of Bzs 20 per Offer Share collected will equate to OMR 668,200. Expenses incurred by Sembcorp Salalah in relation to the Offer in excess of the Offer Expenses of Bzs 20 per Offer Share collected will be borne by the Selling Shareholders.

Legal advisers to Sembcorp Salalah

Latham & Watkins LLPDubai International Financial Centre Precinct Building 1, Level 3 P.O. Box 506698 DubaiUnited Arab Emirates Tel: +971 4 704 6300; Fax: +971 4 704 6499URL: www.lw.com

Al Busaidy, Mansoor Jamal & Co Barristers & Legal Consultants P.O. Box 686Postal Code 112 Ruwi Sultanate of Oman Tel: +968 2481 4466; Fax: +968 2481 2256 URL: www.amjoman.com

Legal advisers to the Issue Manager and the Global Coordinator and Bookrunner

SNR Denton & Co, Oman BranchP.O. Box 3552Postal Code 112 RuwiSultanate of OmanTel: +968 2457 3000; Fax: +968 2457 3098URL: www.dentons.com

Communications consultants to Sembcorp Salalah

FTI Consulting, Inc.P.O. Box 71253DubaiUnited Arab EmiratesTel: +971 4 437 2100URL: www.fticonsulting.com

Independent market adviser IPA Energy + Water Economics Ltd74 Wigmore StreetLondonW1U 2SQUnited KingdomTel:+44 20 7659 9888; Fax: +44 20 7962 1321URL: www.ipaeconomics.com

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Chapter VI: Objects and Approvals

Overview

Sembcorp Salalah was incorporated and registered as a SAOC on the Ministry of Commerce & Industry Commercial Register on 29 September 2009. At an EGM held on 7 July 2013, it was resolved to transform Sembcorp Salalah into a SAOG.

Sembcorp Salalah’s core business activity is to own and operate an electricity generation and seawater desalination plant together with the associated facilities in the Dhofar Governorate of Oman. The Project was developed by Sembcorp Utilities and OIC, and the Plant has been in full commercial operation since 25 May 2012.

Sembcorp Salalah is 100 per cent. owned by the Selling Shareholders and following this Offer, on full subscription of the Offer, the public will own 35 per cent. of Sembcorp Salalah’s issued and paid‑up share capital.

Sembcorp Salalah presently holds the following permits and licences which are material to the ongoing operation of its business:

Ministry of Commerce & Industry: Commercial Registration

Commercial Registration Number: 1077337Date of Registration: 29 September 2009Expiry Date: 28 September 2014

Oman Chamber of Commerce & Industry: Membership

Registration Number: 2526Granted on: 25 September 2012Expiry Date: 3 October 2014

AER: Generation and Desalination Licence

Effective Date: 1 June 2011Expiry Date: 31 May 2036

MECA: Environmental Licence

Preliminary Environmental Approval – Third RenewalGranted on: 12 December 2010Expiry Date: 2 March 2014

For details of further key licences held by Sembcorp Salalah, please see “Chapter X – Description of Sembcorp Salalah and Business Overview – Litigation and Regulatory Proceedings” of this Prospectus.

Objects

The Articles provide that the main objectives of Sembcorp Salalah are to invest in, develop, finance, procure, design, construct, own, operate and maintain the Salalah independent power and water plant located at the wilayat of Mirbat in Salalah, Oman.

Chapter V: Purpose of the Offer and Use of Proceeds

Purpose of the Offer

The Selling Shareholders are undertaking the IPO to comply with their obligations under the PFA, which require them, amongst other things, to make 35 per cent. of the Shares available for public subscription and to list such Shares on the MSM.

The Government has embarked upon an extensive program to enable international investors to participate in infrastructure projects in Oman. It has also been the Government’s intention that Omani investors should be able to participate in strategic projects of this nature. As part of the tendering process for the Project, each of the Project Founders entered into the PFA with EHC on 23 November 2009, which required them to provide certain warranties and undertakings to EHC in respect of Sembcorp Salalah, which was the project company formed by the Project Founders for the purposes of entering into the PWPA and undertaking the Project.

The PFA requires the Project Founders, within four years from the incorporation of Sembcorp Salalah, to offer 35 per cent. of the shares of Sembcorp Salalah to the public. Accordingly, the Selling Shareholders are offering 33,410,019 Shares, equivalent to 35 per cent. of the issued share capital of Sembcorp Salalah. Sembcorp Salalah has obtained the requisite approvals to offer 35 per cent. of its issued share capital, including approval from PAEW pursuant to Article 13 of the Sector Law.

Use of the Proceeds of the Offer

The Offer Shares do not represent an issuance of new Shares. The Offer Shares represent the selling/divestment of a part of the Shares currently held by the Selling Shareholders. The Offer Price includes an amount equal to the Offer Expenses of Bzs 20 per Offer Share, which will be used to meet part of the expenses incurred by Sembcorp Salalah in relation to the Offer. Expenses incurred by Sembcorp Salalah in relation to the Offer in excess of the Offer Expenses of Bzs 20 per Offer Share collected will be borne by the Selling Shareholders. As such, the proceeds will not have any impact on Sembcorp Salalah’s financial statements.

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Chapter VII: Shareholding Details

Equity Structure of Sembcorp Salalah at Incorporation

Sembcorp Salalah was incorporated with an initial authorised share capital of OMR 2,000,000, divided into 2,000,000 ordinary shares, and an issued and paid‑up share capital of OMR 500,000, divided into 500,000 ordinary shares. The following table provides details of the Shares, as at the date of incorporation of Sembcorp Salalah:

Name of ShareholderNumber of Shares

held % of Total

Aggregate Nominal Value of Shares held

(OMR)

SOFIH 200,000 40% 200,000

SOIHL 100,000 20% 100,000

IPWC 200,000 40% 200,000

Total 500,000 100% 500,000

Changes in Equity Structure Subsequent to Incorporation and Details of Sembcorp Salalah Before the Offer:

In December 2011, IPWC transferred a 5 per cent. interest in Sembcorp Salalah, consisting of 25,000 Shares, to BDCC.

At an EGM held on 10 June 2013, the Shareholders agreed to increase the authorised share capital of Sembcorp Salalah to OMR 100,000,000, divided into 100,000,000 ordinary shares.

At a meeting of the Board of Directors held on 19 June 2013, the directors of Sembcorp Salalah approved the conversion of the Shareholder Loans into equity of Sembcorp Salalah, increasing the issued and paid‑up share capital of Sembcorp Salalah to OMR 95,457,195, with an effective date of 1 July 2013. The current equity structure, after giving effect to the conversion of the Shareholder Loans into equity, is as follows:


held % of Total

Aggregate Nominal Value of Shares held

(OMR)

SOFIH 38,182,878 40% 38,182,878

SOIHL 19,091,439 20% 19,091,439

IPWC 33,410,018 35% 33,410,018

BDCC 4,772,860 5% 4,772,860

Total 95,457,195 100% 95,457,195

Memorandum and Articles

A copy of the Memorandum and Articles is available for perusal at the office of Sembcorp Salalah during business hours. A copy of the Memorandum and Articles will also be available on the website of the CMA at www.cma.gov.om.

Resolutions Passed

At the EGM held on 7 July 2013, the following resolutions were unanimously passed:

(a) to transform Sembcorp Salalah from a SAOC to a SAOG, in connection with which the Selling Shareholders will offer to sell the Offer Shares for public subscription;

(b) to approve the proposed amendments to the Articles to conform to the requirements imposed by the CMA and the laws of Oman with respect to the form and content of the articles of association of SAOGs;

(c) that the Selling Shareholders will offer 35 per cent. of Sembcorp Salalah’s issued share capital to the public, in the manner detailed below:

Name of Shareholder

Number of Shares held prior to

the Offer Offer Shares

Number of Shares held following

the Offer

SOFIH 38,182,878 Nil 38,182,878

SOIHL 19,091,439 19,091,439 Nil

IPWC 33,410,018 12,528,757 20,881,261

BDCC 4,772,860 1,789,823 2,983,037

Public Nil Nil 33,410,019

Total 95,457,195 33,410,019 95,457,195

(d) to appoint HSBC Bank Oman SAOG as the Issue Manager for the IPO;

(e) to appoint HSBC Bank Middle East Limited as the Global Coordinator and Bookrunner for the IPO;

(f) to appoint Latham & Watkins LLP and Al Busaidy Mansoor Jamal & Co. as legal advisers for the IPO;

(g) to appoint KPMG as the reporting accountants for the IPO;

(h) to approve that the expenses incurred by Sembcorp Salalah in connection with the Offer shall be met from the Offer Expenses of Bzs 20 per Offer Share paid by the Applicants, and any expenses incurred by Sembcorp Salalah in connection with the Offer in excess of the collected Offer Expenses of Bzs 20 per Offer Share shall be borne by the Selling Shareholders;

(i) to ratify all actions taken by the Board in relation to the IPO prior to the date of the EGM; and

(j) to authorise the Board to attend to the following matters and to carry out the following acts:

(i) to finalise all the necessary procedures for the IPO and the Prospectus on behalf of Sembcorp Salalah; and

(ii) to do all other acts, execute all documents, file and register any documents with any relevant authority and obtain consents and approvals on behalf of Sembcorp Salalah and the Selling Shareholders which may, at the sole discretion of the Board, be deemed appropriate or necessary in connection with the IPO.

Continuing Obligations

In accordance with the CCL, all existing obligations of Sembcorp Salalah, prior to its transformation to a public joint stock company, shall continue in the transformed company.

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Brief profile of the Shareholders:

SOFIH and SOIHL (wholly-owned subsidiaries of Sembcorp Utilities)SOFIH and SOIHL are both British Virgin Islands‑incorporated companies and wholly‑owned subsidiaries of Sembcorp Utilities, a Singapore‑based energy and water business serving both the industrial and municipal sectors. Sembcorp Utilities provides a wide spectrum of third‑party utilities and services including power, steam, desalinated water, reclaimed water, natural gas, industrial water, wastewater treatment, chemical waste incineration, chemical feedstock, on‑site logistics and solid waste management. Sembcorp Utilities has a number of strategic relationships and long‑term partnerships with multinational customers.

Sembcorp Utilities is, in turn, a wholly‑owned subsidiary of Sembcorp Industries, an energy, water and marine group with an operating history of 50 years, operating in Singapore, Australia, Brazil, Chile, China, India, Indonesia, Oman, Panama, Philippines, South Africa, Vietnam, United Arab Emirates, United Kingdom, United States and the Caribbean. Sembcorp Industries was incorporated in 1998 following the merger of Singapore Technologies Industrial Corporation and Sembawang Corporation. Sembcorp Industries is listed on the main board of the Singapore Exchange and is a component stock of the Straits Times Index, several MSCI and FTSE indices and the Dow Jones Sustainability Asia Pacific Index. Its largest single shareholder is Temasek Holdings (Private) Limited (which is in turn wholly owned by the Minister for Finance, a body constituted under the Singapore Minister for Finance (Incorporation) Act (Chapter 183)). The market capitalisation of Sembcorp Industries was approximately S$8.8 billion as at 30 June 2013 and its turnover for the financial year ended 31 December 2012 was approximately S$10.2 billion.

For more information in relation to Sembcorp Utilities and Sembcorp Industries, please visit www.sembcorp.com

Inma Power & Water Company LLC (a wholly-owned subsidiary of OIC)IPWC is an Oman‑incorporated company and wholly‑owned subsidiary of OIC, a private equity investment company whose principal activities include identifying, evaluating and executing investments in companies and projects within Oman. OIC’s shareholders are Gulf Investment Corporation (50 per cent.), the State General Reserve Fund (10 per cent.), National Investment Funds Company (35 per cent.), and Bank Muscat (5 per cent.).

OIC has a diversified portfolio of investments in the oil and gas, petrochemical, utilities, construction and manufacturing sectors in Oman. OIC works closely with industrial partners to develop and invest in ventures which transfer technology, know‑how and innovation to Oman and provides growth capital to support the development of Omani businesses. Other than the Project, its investment portfolio includes Octal Holding SAOC, V2 Trenching & Co LLC, TMK Gulf International Pipe Industries LLC and Ultra Electronics in collaboration with Oman Investment Corporation LLC.

For more information in relation to OIC, please visit www.omaninvcorp.com.

BDCC Investment Company (managed by Instrata)BDCC is a Cayman Islands‑incorporated company managed by Instrata, an asset management firm which was established in Bahrain in February 2007 and specialises in infrastructure investment in the MENA region. Instrata’s strategy is to identify, structure and manage, on behalf of its investors, infrastructure investments fundamental to regional economic development. Instrata is regulated by the Central Bank of Bahrain as a Business Investment Firm holding Licence Category 2. Instrata’s team of investment professionals has broad international and regional infrastructure investment experience having invested and/or advised in excess of US$180 billion of infrastructure projects. Instrata is backed by leading regional shareholders such as the Kuwait Investment Company SAK (a subsidiary of the Kuwait Investment Authority) and SAGE Capital Management Group WLL.

For more information in relation to Instrata, please visit www.instrata.com.

The following diagram illustrates the shareholding structure of Sembcorp Salalah immediately prior to the IPO:

OIC Sembcorp Industries

Sembcorp Utilities

Sembcorp Salalah

IPWC

Manager

SOFIH SOIHL BDCC

Instrata

100%100%100%*

35% 40% 20% 5%

* Includes the 1 per cent. shareholding held by OICHC (which is wholly owned by OIC).

Equity Structure After the Offer:

After the completion of the Offer, and assuming that all of the Offer Shares are sold, Sembcorp Salalah’s issued and paid‑up share capital will remain OMR 95,457,195 and will be held as follows:


held % of Total

Aggregate Nominal Value of Shares

held (OMR)

SOFIH 38,182,878 40% 38,182,878

IPWC 20,881,261 21.875% 20,881,261

BDCC 2,983,037 3.125% 2,983,037

Public 33,410,019 35% 33,410,019

Total 95,457,195 100% 95,457,195

The following diagram illustrates the shareholding structure of Sembcorp Salalah following the IPO:

OIC Sembcorp Industries

Sembcorp Utilities

Sembcorp Salalah

IPWC

Manager

SOFIH

Public

BDCC

Instrata

100%100%*

40% 3.125%21.875% 35%

* Includes the 1 per cent. shareholding held by OICHC (which is wholly owned by OIC).

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Chapter VIII: Overview of Oman and the Omani Economy

Location

Strategically positioned at the crossroads of Asia and Europe, Oman has historically been a centre of trade and commerce. With a population of approximately 3.62 million as at 2012, spread over a land area of 309,500 km2, Oman is a country with stable political, economic and social systems. Oman is administratively divided into eleven governorates (Ad Dakhiliyah, Ad Dhahirah, Al Batinah North, Al Batinah South, Al Buraimi, Al Wusta, Ash Sharqiyah North, Ash Sharqiyah South, Dhofar, Muscat and Musandam). Oman’s capital city is Muscat (in the Muscat Governorate), which is situated on the northeast coast of the country. Salalah, a developing tourist destination, is located on Oman’s southern coast, bordering the Indian Ocean (in the Dhofar Governorate). There has been a sharp increase in the number of industrial and commercial projects in the Salalah region in recent years.

Government

Oman is politically organised as a monarchy. His Majesty Sultan Qaboos bin Said Al Said came to power in 1970 and is both the Head of State and Prime Minister. As Prime Minister he presides over the Council of Ministers. The Council of Ministers assists the Sultan in framing and implementing the general policies of Oman. The Basic Law royal decree, issued in November 1996, serves as the basis of a constitution governing state affairs. The Basic Law establishes a bicameral system of elected representatives with advisory powers and numerous civil liberties for the population. Members of each chamber serve in an advisory capacity, although members of the lower chamber also have a limited capability to propose legislation.

International Relations

Oman maintains strong relations with its neighbours, as well as a wide range of Western and other countries. Oman has enjoyed political and economic stability over the past 40 years and is a member of various prominent international organisations, including:

the United Nations (member since 1971);

the International Monetary Fund and the International Bank for Reconstruction and Development (member since 1971);

the World Trade Organisation (observer since 1995 and full member since 2000); and

Interpol (member since 1972).

Regionally, Oman is a founding member of the GCC (alongside five other Arab Gulf states: Bahrain, Kuwait, Qatar, Saudi Arabia and the United Arab Emirates). Oman last chaired the GCC in 2008 in accordance with the GCC’s annual rotation of the chair among member countries. Oman is also a member of the GCC’s Permanent Petroleum Cooperation Committee which is charged with preparing the long‑term petroleum strategy of the GCC in accordance with its sustainability goals. The Permanent Petroleum Cooperation Committee makes proposals with respect to the supply of oil from the GCC to international markets and provides a forum for GCC member states to coordinate policies and share proposals.

Key Economic and Social Indicators

The following table shows a selection of key economic and social statistics for Oman for the periods indicated:

2010 2011 2012

GDP at market prices (OMR billions) 22.61 26.90 30.03

Population (millions) 2.77 3.30 3.62

Per capita GDP at market prices (OMR) 7,997 9,700 Not available

Restrictions imposed on the Shareholders

The following restrictions apply to the Selling Shareholders under the terms of the PFA:

(a) on and from the Effective Date up to but excluding the date on which the Project Founders complete the IPO, Sembcorp Utilities, as the lead Project Founder, is required to, directly or indirectly, hold and maintain at least 35 per cent. of the shares in Sembcorp Salalah; and

(b) on and from the date on which the Project Founders complete the IPO up to and including the third anniversary of the COD, Sembcorp Utilities, as the lead Project Founder is required to, directly or indirectly, hold and maintain at least 22.75 per cent. of the shares in Sembcorp Salalah.

Thereafter, no shareholding restrictions apply to the Project Founders under the PFA. The Project Founders may, subject to applicable law, dispose of Shares in excess of the above thresholds with the consent of EHC.

Under the terms of the PSA, no Selling Shareholder may, prior to the discharge of all amounts due under the Finance Documents, transfer or grant an option or any pre‑emption right over its Shares, other than as permitted pursuant to the Finance Documents and the Security Documents.

Each of SOFIH, IPWC and BDCC have voluntarily agreed that they shall not sell or otherwise dispose of any of the Shares held by them following the Offer for a period of six months after the Offer Closing Date, other than in certain limited circumstances.

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Public Finance

The data in this section is based on information gathered from publications of the NCSI, the Central Bank of Oman and other public sources.

For the year ended 31 December 2012, Government revenue was OMR 14.0 billion, of which oil and gas revenue was OMR 10.4 billion, or just below 75 per cent. of total revenue. The average price of Omani oil in 2012 was US$109.6 per barrel. Total public expenditure for the year ended 31 December 2012 was OMR 10.8 billion, leading to a surplus of OMR 3.2 billion as against a deficit of OMR 1.2 billion projected in the budget for 2012. For the year 2013, the Government has budgeted public revenue of OMR 11.2 billion based on an estimated oil price of US$85 per barrel, being below current oil prices. Total Government expenditure for 2013 is projected at OMR 12.9 billion, which is 19 per cent. higher than the actual expenditure for 2012.

The graphic below displays trade balance figures in Oman during the period from 2005 to 2012:

7.19

3.39 4.19

6.15

8.81

6.86 7.609.08

10.81

9.249.03

6.47

3.775.69

3.354.113.79

2005 2006 2007 2008 2009 2010 2011 2012

8.309.49

14.50

10.63

14.07

18.11

20.05

Surplus or Deficit Merchandise Imports Merchandise Exports

Trade Balance (OMR billions)

(Source: Monthly Statistical Bulletin, April 2013, NCSI)

Development Plans

The Government has drawn up the Eighth Five‑Year Development Plan, covering the period from 2011 to 2015, which proposes substantial public investments of more than OMR 12 billion with focus on the infrastructure sector including airports, roads, seaports and water. These investments are expected to improve domestic demand and further increase the diversification of the Omani economy.

The Government has projected cumulative revenue of OMR 37.5 billion over the plan period with an overall public expenditure of OMR 42.7 billion over the five year plan period. The plan expects non‑oil activities to grow at a rate of 10 per cent. (at current prices) and 6 per cent. (at constant prices). This emphasises the continuing efforts to further diversify the economy. The plan targets to provide additional employment for 200,000 to 275,000 Omani citizens.

Oil and gas industry as % of GDP 46% 53% 52%

Annual inflation 3.3% 4.0% 2.9%

MSM market capitalisation (OMR billions) 10.9 10.3 11.7

Crude oil Dubai spot price (US$ per barrel) 78.1 106.2 109.1

Crude oil production (million barrels per day) 315 323 307

Sources: Ministry of National Economy NCSI CBO Annual Report 2011 MSM Annual Statistical Bulletin 2012 World Bank figures

Economy

Oman has a credit rating of “A” by Standard & Poor’s and “A1” by Moody’s Investor Services. The Omani Rial is pegged to the US Dollar at a fixed exchange rate of US$1 = OMR 0.3845. According to information published by the NCSI, the Omani economy is estimated to have grown by 11.6 per cent. in 2012, supported by the relative stability in crude oil prices in the international markets.

As of 2012, Oman was the world’s 23rd largest producer of oil and the 27th largest producer of gas, and held the world’s 26th largest oil reserves and 28th largest gas reserves, according to The World Factbook published by the US Central Intelligence Agency. On the back of an oil‑based economy, the increase in oil prices from around US$62 per barrel to US$109 per barrel from 2009 to 2012 enabled significant development in Oman’s domestic infrastructure, including its healthcare, telecommunications and transportation systems and the expansion of its international trade network. The Government continues to focus on diversification of the economy in order to gradually reduce its dependence on oil and hydrocarbon revenues, which now represent 52 per cent. of Oman’s GDP. The Government is committed to further non‑oil industry growth into the future.

The graphic below displays average daily production in Oman and average prices of crude oil during the period from 2010 to 2012:

120

100

80

60

40

20

0

325

320

315

310

305

300

295

290

285

2802009 2010 2011 2012

mmbbl USD/bbl

297

315

323

307

109106

62

Crude oil production Crude oil Dubai Spot price

(Source: Monthly Statistical Bulletin, April 2013, NCSI)

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Electricity & Water Sector Ownership

The Omani electricity and water sector is partly government‑owned and partly privatised. The chart below displays the ownership structure of the electricity and water sector in Oman:

Government ownership structure Private ownership structure

Government ownership structure Private Investors(Local and International)

Public shareholdingspurchased on MSM

ACWA Power Barka SAOG

Al Kamil Power Company SAOG

Sohar Power Company SAOG

Al-Rusail Power Company SAOG

SMN Barka SAOG

Sembcorp Salalah SAOG (U.T.)

Phoenix Power Company (Sur IPP)Under Construction

Al Suwadi Power Company (Barka 3)

Al Batinah Power Company (Sohar 2)

United Power Company SAOG

Electricity Holding Company SAOC

Al-Ghubrah Power &Desalination Company SAOC

Wadi Al-Jizzi Power CompanySAOC

Oman Power & WaterProcurement Company SAOC

Oman Electricity TransmissionCompany SAOC

Muscat Electricity DistributionCompany SAOC

Dhofar Power Company SAOC

Rural Areas Electricity Company SAOC

Mazoon Electricity CompanySAOC

Majan Electricity CompanySAOC

100%

0.01%

99.99% 65% 35%

35%

40%

35%

35%

65%

65%

65%

100%

100%

100%

100%

60%

Chapter IX: Regulatory Framework and Industry Overview

The information in this section has been derived from OPWP’s 7‑year statement (2013‑2019), issued April 2013, OPWP’s website and other public sources.

Sector Overview

The Oman power system is divided into three regional systems, partially connected via interconnectors:

the MIS, which is the largest part of the system and covers the northern area of Oman;

the Salalah System, located in the Dhofar Governornate, of which the Plant’s capacity constitutes approximately 72 per cent. of the power dispatch and 100 per cent. of the net installed water capacity, as at the date of this Prospectus; and

the Rural Areas Electricity System, operated by RAECO, which serves the rest of Oman

Oman Power and Water Procurement Company

OPWP is the single buyer of power and water for all IPP/IWPP projects within Oman. OPWP is responsible for ensuring that there is sufficient electricity and water production capacity available at the lowest cost to meet growing demands in Oman. OPWP undertakes long‑term generation planning and publishes an annual seven‑year statement, which identifies new IPP/IWPP projects to be competitively tendered and developed by private sector entities, in order to meet the future power generation and water desalination requirements of Oman. These projects are critical to the reliable and sustainable development of the power sector and the economic development of Oman.

OPWP was established under the Sector Law, Article 74 of which specifies its functions and duties (a complete list of which can be found on OPWP’s website), including:

To secure production capacity and output to meet demand for electricity in the MIS and the Salalah System, in coordination with RAECO.

To secure production capacity and output to meet demand for desalinated water in Oman.

To meet requirements for new electricity and desalinated water capacity in Oman, with new projects to be designed, constructed, financed, owned and operated by local and foreign investors.

The purchase, procurement, and management of production capacity and output, ancillary services and all goods and other services on the basis of economic purchase.

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Main Interconnected System

The MIS covers the majority of Oman, serving approximately 600,000 electricity customers. The MIS comprises:

a number of power generation facilities owned and operated by various companies and connected by a single 220/132 kV transmission grid owned by OETC; and

three distribution networks owned and operated by Muscat Electricity Distribution Company SAOC, Mazoon Electricity Company SAOC and Majan Electricity Company SAOC, respectively.

The MIS is connected to Abu Dhabi via a 220 kV link that can import/export 200 MW. In addition, several of the power generation facilities connected to the MIS produce desalinated water in conjunction with electricity to meet the water requirements of PAEW and Majis Industrial Services Company SAOC, the entities responsible for water services in the MIS.

Rural Areas Electricity System

The Rural Areas Electricity System covers the majority of the land mass of Oman, serving over 20,000 customers. The Rural Areas Electricity System comprises more than 40 diesel power plants, comprising approximately 400 MW across the Sultunate of Oman for supply of electricity to the Dhofar, Musandam, Al‑Wusta, Masirah parts of Dakliyah, Dahira and Sharqiya regions. The power generated from the plants in these regions is sold directly to customers.

The Rural Areas Electricity System is connected to the MIS via a 132 kV interconnector that can import/export 60 MW. The Rural Areas Electricity System is also connected to the Salalah System via a 132 kV interconnector that can import/export 100 MW.

In addition, five desalination plants with a total capacity of over 2.2 MiGD are located in Abu Mudhaibi, Sowgrah, Kumzer, Masirah and Al Hallaniyat. The desalinated water produced by these plants is sold to PAEW.

Salalah System

The Salalah System covers the city of Salalah and surrounding areas in the Governorate of Dhofar. The Salalah System serves approximately 70,000 electricity customers. The Salalah System comprises the generation, transmission and distribution of power and the water desalination capabilities of:

Sembcorp Salalah, contracted for 445 MW electricity generation capacity and 15 MiGD desalinated water capacity;

New Power Station located in Raysut, operated by DPC and DGC pursuant to a concession agreement with the Government and comprising eight OCGT units with a total net capacity of 276 MW; and

the transmission and distribution system owned and operated by DPC and its subsidiary, DGC, pursuant to a concession agreement signed with the Government in 2001.

OPWP has also announced plans for a new IPP in Raysut with electricity generation capacity of 300‑400 MW alongside restructuring of the existing DPC.

The Salalah System also has contingency reserves via the interconnection with the 132 kV link between Thumrait and Harweel, owned by PDO and completed in 2012. Its purpose is to support reserve‑sharing between the two systems, providing improved reliability by allowing each system access to unused reserves in contingency scenarios. The transfer capacity of the interconnection is currently 100 MW of import/export capability though this is expected to increase over time.

OPWP acts as counter‑party to the concession agreement on the Government’s behalf. OPWP procures the required power and desalinated water in bulk from generation and production facilities connected to the Salalah System and PDO interconnected system. OPWP is required to ensure that sufficient power generation resources are available to meet DPC’s demands and, wherever beneficial, to procure desalinated water to meet the needs of the water department in the Dhofar Governorate.

Contracted Capacity

OPWP’s present portfolio of contracted capacity in Oman comprises long‑term contracts with twelve operational plants, eleven of which are in the MIS and one of which (being Sembcorp Salalah) is in the Salalah System. Total contracted capacity is 7,681 MW and 131 MiGD. Summary details of these plants and contractual arrangements are provided in the table below:

ProjectContract Type

Contract Capacity Plant Type Plant Owner

Contract Expiry System

Ghubrah PWPA 475 MW36.8 MiGD

OCGT/SteamMSF DesalinationNatural gas‑fired

Al Ghubrah Power and Desalination Co. SAOC

2018 MIS

Rusail PPA 687 MW OCGTNatural gas‑fired

Rusail Power Co. SAOC(2)

2022 MIS

Wadi Jizzi PPA 325 MW OCGTNatural gas‑fired

Wadi Al‑Jizzi Power Co. SAOC

2020 MIS

Manah PPA 273 MW OCGTNatural gas‑fired

United Power Co. SAOG(1)

2020 MIS

Al Kamil PPA 282 MW OCGTNatural gas‑fired

Al Kamil Power Co. SAOG(1)

2017 MIS

Barka I PWPA 435 MW20 MiGD

CCGT/SteamMSF DesalinationNatural gas‑fired

ACWA Power Barka SAOG(1)

2018 MIS

Sohar I PWPA 590 MW33 MiGD

CCGT/SteamMSF DesalinationNatural gas‑fired

Sohar Power Co. SAOG(1)

2022 MIS

Barka II PWPA 679 MW26.4 MiGD

CCGT/SteamRO DesalinationNatural gas‑fired

SMN Barka Power Co. SAOC(2)

2024 MIS

Sohar II PPA 745 MW CCGT/SteamNatural gas‑fired

Al Batinah Power Co. SAOC(3)

2028 MIS

Barka III PPA 745 MW CCGT/SteamNatural gas‑fired

Al Suwadi Power Co. SAOC(3)

2028 MIS

Sur (Under Construction)

PPA 2,000 MW CCGT/SteamNatural gas‑fired

Phoenix Power Co. SAOC(3)

2029 MIS

Salalah PWPA 445 MW15 MiGD

CCGT/SteamRO DesalinationNatural gas‑fired

Sembcorp Salalah Power & Water Co. SAOG (Under Transformation)(3)

2027 Salalah System

Note 1: Denotes a company listed on the MSM.Note 2: Denotes a company whose holding company is listed on the MSM.Note 3: Denotes a company which is required to be listed on the MSM in future.

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2013 2014 2015 2016 2017 2018 2019AnnualisedGrowth (%)

Expected Scenario:

Average Demand (MW) 282 310 448 481 520 561 606 14%

Annual Energy (TWh) 2.47 2.71 3.92 4.23 4.55 4.91 5.31 14%

Peak Demand (MW) 424 462 641 686 736 789 848 12%

Contracted Capacity Required

474 517 718 769 824 884 950 12%

Low Case Scenario:



Peak Demand (MW) 404 431 463 498 536 579 625 8%


453 483 518 557 601 648 700 8%

High Case Scenario:



Peak Demand (MW) 443 492 682 738 798 864 936 13%


496 551 764 826 894 968 1,048 13%

Salalah System Water DemandThe OMSGD, which is responsible for the water system in the Dhofar Governorate, has provided projections for total water demand in the Dhofar Governorate to OPWP, which are set out in the current Seven‑Year Statement. Desalinated water is expected to supply the aggregated potable water demands of the wilayats of Salalah, Taqah and Mirbat. Water demand in the Salalah/Taqah/Mirbat area is expected to increase at an average rate of nearly 6 per cent. per annum. The main growth drivers are increasing population and economic development.

The OMSGD has provided projections of these water demands from 2013 to 2019 in terms of both average peak daily demand and total annual demand, as displayed in the table and graphic below:

100

80

60 64 66 71 7579 84

88

40

20

02013 2014 2015 2016 2017 2018 2019

Total Annual Demand (thousand m3 per day)

Thousand m3/dSalalah Water Demand (2013-2019)

(Source: OPWP)

OPWP is required by the Sector Law and its licence to ensure the adequacy of generation resources in the Salalah System to meet future power demands. The Sector Law establishes OPWP’s general responsibility to secure sufficient generation resources to meet demand. Although the OPWP licence does not stipulate a specific generation security standard for the Salalah System (as it does for the MIS), it requires OPWP to ensure that electricity customers in the Salalah System receive a service generally of equivalent quality to that received by customers in the MIS.

As at the date of this Prospectus, a process is underway to restructure DPC and the delivery of power in the Salalah System. A Ministerial Committee comprising representatives from the PAEW and the AER has been formed to oversee this restructuring, which envisages the reorganisation of the existing Salalah concession business to form separate generation, high voltage transmission and distribution and retail supply businesses. As part of this reorganisation, it has been proposed that, during 2013, the Salalah concession agreement between DPC, DGC and OPWP will be terminated and replaced by a power purchase agreement in respect of the New Power Station. This process is expected to ultimately bring the management of electricity in the Salalah System into line with the regulatory structure that governs the MIS.

Salalah System Electricity DemandAccording to OPWP, peak demand for electricity in the Salalah System is expected to grow from 424 MW in 2013 to 848 MW by 2019, at an average growth rate of 12 per cent. per annum. The demand drivers in the Salalah System include population‑driven residential growth, construction of commercial and government buildings, infrastructure development, new tourism projects, and industrial growth in designated economic zones. In the near term, committed industrial projects are expected to have a strong impact, although all sectors are growing rapidly.

Projected annual power demand and contracted capacity required for the Salalah System in the period from 2013 to 2019, as estimated by OPWP, is shown in the table and graphic below:

1,000

900

800

700

600

500

400

300

200

100

02012

389

936

848

625

2013 2014 2015 2016 2017 2018 2019

Low case average demand

Low case peak demand

Expected average demand

Expected peak demand

High case average demand

High case peak demand

MW

Salalah Power Demand (2012-2019)

(Source: OPWP)

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OPWP Procurement Activities

Projects in developmentAs highlighted previously, OPWP contracted in 2009 and 2010 for the development of the following plants:

Sembcorp Salalah (445 MW CCGT and 15 MiGD reverse osmosis plant);

Sohar II IPP (745 MW CCGT plant);

Barka III IPP (745 MW CCGT plant); and

Sur IPP (2,000 MW CCGT plant).

Only Sembcorp Salalah was developed to supply forecast electricity and water demand to the Salalah System. The remaining plants were contracted to meet the forecast electricity demand of the MIS.

Upcoming ProjectsIn 2013, OPWP issued a tender for the Salalah 2 IPP at Raysut in southern Oman, with a minimum capacity of 300 MW and a maximum capacity of approximately 400 MW. This tender for new capacity also included the sale of the existing New Power Station (273 MW), such that respondents will submit a combined bid for ownership of both plants. It is expected that, upon award in 2014, the successful bidder will take over ownership and operation of the New Power Station from DPC under a power purchase agreement with OPWP, whilst also commencing construction of the new plant. The commercial operation date of the Salalah 2 IPP is projected for 2017.

Future ProcurementFour potential procurement activities may be anticipated in Oman over the period from 2014 to 2019:

Contract extensions for plants scheduled to fall out‑of‑contract: A number of existing P(W)PAs are scheduled to expire before 2021. This includes Al Kamil (2017), Barka I (2018), Ghubrah (2018) and Wadi Jizzi (2020). OPWP will evaluate whether to enter into new contracts with these power and water plants or whether to procure the development of new power and water capacity. Preliminary discussions between OPWP and the owners of these plants have indicated that they would anticipate offering the relevant capacity to OPWP after the expiry of the current contracted period.

Temporary Generation: The demand forecast suggests that relatively modest electricity supply deficits may emerge before the Salalah 2 IPP achieves commercial operation. In the expected demand case, additional capacity in the range of 50 MW may be required in 2016. In the high case, additional capacity in both 2015 (about 50 MW) and 2016 (about 110 MW) may be required. Temporary generation units are feasible at these levels. Sembcorp Salalah also has additional capacity able to be sold to OPWP (around a further 40 MW is available, representing the difference between the capacity achieved in testing and the currently contracted 445 MW).

Additional Desalination Capacity: As presented above, OPWP expects that additional water capacity will be required in the 2014‑2019 timeframe. If required, this may be procured with a lead time of around three years on a water‑only basis (IWP). Sembcorp Salalah’s water desalination capacity may be extended by constructing new facilities on the spare land at its site and utilising extra capacity in the water transmission pipeline to Salalah. Other sites may also be considered. It is noted that, given Sembcorp Salalah’s existing facilities and common infrastructure, any new IWP development would require the incremental investment and development of such facilities to support desalination supply.

Power Generation Capacity: The Salalah 2 IPP is expected to provide sufficient capacity to meet the generation security standard until around 2020 or 2021. Procurement activities to meet the next plant, nominally the Salalah 3 IPP (or potentially IWPP), are expected to begin around 2016, subject to demand requirements.

There is also a prospect of wind power generation in the Dhofar Governorate, and PAEW plans to evaluate this resource potential. As yet, there is no government policy established with targets for renewable energy development. However, this could emerge as another procurement activity in the medium or longer term.

Salalah/Taqah/Mirbat 2013 2014 2015 2016 2017 2018 2019Annualised Growth (%)

Total Annual Demand (thousand m3 per day) 64 66 71 75 79 84 88 5.5%

Total Annual Demand (MiGD) 14 15 16 17 17 18 19

Water demand in the Salalah/Taqah/Mirbat area is expected to increase at an average annualised rate of 5.5 per cent. per annum. The main growth drivers are increasing population and economic development.

Desalination Capacity RequirementsHistorically, demand for potable water in the Dhofar Governorate has been met exclusively from groundwater resources, but now that Sembcorp Salalah has achieved full commercial operation, the Plant has sufficient capacity to meet current requirements for desalinated water in the Dhofar Governorate. However, OPWP has indicated that, in the future, with increasing consumption, groundwater sources may also be required to supplement this capacity during peak periods by as early as 2015. As shown in the below chart, OPWP is forecasting that the Salalah System’s water demand will grow by 37.5 per cent. by 2019.

OPWP has indicated that current Government policy is to minimise the use of groundwater, under normal circumstances, and reserve groundwater resources for contingency purposes. This would indicate that additional water desalination capacity is needed in the near future. Given Sembcorp Salalah’s current position as the sole provider of desalinated water to the Salalah System and its ability to expand its facility to increase water capacity to meet all forecast increased demand in a cost efficient manner, Sembcorp Salalah has a near‑term opportunity to contract further with OPWP and add further capacity to its current operations in order to satisfy near‑term expected system demand. Such an expansion would be expected to result in both increased capacity charges and variable charges. It would also require investment by Sembcorp Salalah in order to construct the necessary expansion facilities. Sembcorp Salalah expects to discuss this expansion investment opportunity of its water desalination capacity with OPWP in the near‑term.

A diagram outlining the projected demand/supply balance is set out in the table and graphic below:

Salalah Water Supply and Capacity (2013 – 2019)

10080604020

0(20)(40) 2013 2014 2015 2016 2017 2018 2019

Desalination Capacity Reserve (Shortfall) Total Annual Demand

Thousand m3/d

(Source: OPWP)

2013 2014 2015 2016 2017 2018 2019

Total Annual Demand (thousand m3 per day) 64 66 71 75 79 84 88

Desalination Capacity (thousand m3 per day) 68 68 68 68 68 68 68

Reserve (Shortfall) 4 2 (3) (7) (11) (16) (20)

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Milestone” and the “Phase 2 Water Milestone”) was subsequently completed in the first quarter of 2012. The construction of the Plant was successfully completed and the final acceptance tests were achieved in May 2012. The Project’s total capital cost as of the COD was OMR 378 million, which included all construction, insurance and related costs (including financing costs).

The following table shows the main chronology of the Project’s implementation:

Date Event

November 2007 Request for proposal issued by OPWP

16 June 2008 Bid submission by Sembcorp Salalah

8 December 2008 Sembcorp Salalah declared as “preferred bidder”

23 November 2009 Execution of PWPA and declaration of Effective Date

23 March 2010 Financial Close

16 July 2011 Phase 1 Power Milestone achieved

2 January 2012 Phase 2 Power Milestone achieved

12 March 2012 Phase 2 Water Milestone achieved

4 April 2012 Scheduled COD and commencement of the term of the PWPA

25 May 2012 COD achieved

3 April 2027 Expiry date of PWPA

The EPC Contractor for the Project was SEPCOIII while the engineering, procurement, construction supervision and commissioning of the desalination plant was subcontracted to Hyflux. The Plant is based on gas turbine combined cycle technology and has dual fuel capability with natural gas as the primary fuel and diesel as a back‑up fuel, and reverse osmosis technology for the production of potable water from seawater desalination. Sembcorp Salalah uses General Electric 6FA gas turbines and reverse osmosis technology developed by Hyflux. The Plant is the largest and the most energy efficient power and water plant in the Dhofar Governorate of Oman.

Sembcorp Salalah generates its revenues pursuant to a 15‑year term power and water purchase agreement with OPWP. The terms of the PWPA provide that the Plant’s contracted power and water capacity is sold exclusively to OPWP on a long‑term take‑or‑pay basis. The Ministry of Oil & Gas supplies gas to the Plant under a 15‑year natural gas sales agreement.

The Ministry of Finance guarantees the payment obligations due from OPWP to Sembcorp Salalah. The Government Guarantee will remain in force until the initial financing for the Project has been refinanced or fully paid. OPWP pays a charge consisting of a capacity charge covering the Plant’s fixed costs and a return on capital, and a variable charge to cover energy and other variable costs. Hence, as long as the power and water is available for dispatch, capacity charges will be paid, subject to agreed outages for maintenance.

Chapter X: Description of Sembcorp Salalah and Business Overview

Overview of Sembcorp Salalah

Sembcorp Salalah’s core business activity is to develop, own and operate an electricity generation and seawater desalination plant located between the towns of Taqah and Mirbat, approximately 50 km from the regional town of Salalah, home to over 200,000 residents. The Plant has been in full commercial operation since 25 May 2012 and has a contracted power capacity of 445 MW and a contracted water capacity of 15 MiGD. As at the date of this Prospectus, Sembcorp Salalah supplies approximately 72 per cent. of the power dispatch and 100 per cent. of the net installed water capacity of the Dhofar Governorate. As the largest and most energy‑efficient power and water plant in the Dhofar Governorate, the Plant is expected to play a major role in meeting the growing power and water demand of the region over the short‑, medium‑ and long‑term.

Sembcorp Salalah generates its revenues pursuant to a 15‑year term power and water purchase agreement with OPWP, which is indirectly wholly‑owned by the Government. The terms of the PWPA provide that the Plant’s contracted power and water capacity is sold exclusively to OPWP on a long‑term take‑or‑pay basis. The power and desalinated water that Sembcorp Salalah produces from the Plant is used as the sole supplier of desalinated water to the Dhofar Governorate.

Sembcorp Salalah was incorporated and registered as a SAOC on the Ministry of Commerce & Industry Commercial Register on 29 September 2009. At an EGM held on 7 July 2013, it was resolved to transform Sembcorp Salalah into a SAOG. Sembcorp Salalah was incorporated for an unlimited duration. The legal and commercial name of Sembcorp Salalah is Sembcorp Salalah Power & Water Company SAOG (Under Transformation) and its registered office is located at P.O. Box 299, Jawharat Al Shatti, Postal Code 134, Sultanate of Oman. Sembcorp Salalah’s commercial registration number is 1077337.

Sembcorp Salalah was capitalised through a combination of share capital and the Shareholder Loans. Sembcorp Salalah was incorporated with an initial authorised share capital of OMR 2,000,000, divided into 2,000,000 ordinary shares, and an issued and paid‑up share capital of OMR 500,000, divided into 500,000 ordinary shares. At an EGM held on 10 June 2013, the Shareholders agreed to increase the authorised share capital of Sembcorp Salalah to OMR 100,000,000, divided into 100,000,000 ordinary shares. At a meeting of the Board of Directors held on 19 June 2013, the directors of Sembcorp Salalah approved the conversion of the Shareholder Loans into equity of Sembcorp Salalah, increasing the issued and paid‑up share capital of Sembcorp Salalah to OMR 95,457,195, with an effective date of 1 July 2013.

As at the date of this Prospectus, the Shareholders are SOFIH, which owns 40 per cent., SOIHL, which owns 20 per cent., IPWC, which owns 35 per cent. and BDCC, which owns 5 per cent. For a profile of each of these Shareholders, please see “Chapter VII – Shareholding Details” of this Prospectus.

History and Background of Sembcorp Salalah

In November 2007, in accordance with the implementation by the Government of various privatisation policies designed to encourage private sector participation in the electricity and related water sector, OPWP, together with its financial, legal and technical advisers, invited bids for the Project, comprising the development, ownership, financing, design, construction and operation of the Plant. A consortium comprising Sembcorp Utilities and OIC submitted its bid for the Project on 16 June 2008, in competition with other consortia. On 8 December 2008, OPWP selected the Sembcorp Utilities/OIC consortium as “preferred bidder” in relation to the Project.

The first phase of the Project (designated as the “Phase 1 Power Milestone”) was completed in the third quarter of 2011, within the timeline of 19 months from the signing of the PWPA, and the Plant began dispatching approximately 61 MW of power to the power grid. The second phase (designated as the “Phase 2 Power

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Government Guarantees Payment Obligations of OPWP under the PWPA due to the Strategic Importance of both the Industry and ProjectThe power and water sectors are of high strategic importance to both the Dhofar Governorate and Oman as a whole. Given that, as at the date of this Prospectus, the Plant constitutes approximately 72 per cent. of the power dispatch and 100 per cent. of the net installed water capacity of the Dhofar Governorate, and given the projection of growth in electricity and water demand, the Project is expected to remain critical to the continued supply of electricity and water in the Dhofar Governorate in the long‑term. According to OPWP, peak demand for electricity in the Salalah System is expected to grow from 424 MW in 2013 to 848 MW by 2019, at an average growth rate of 12 per cent. per annum, and water demand in the Salalah/Taqah/Mirbat area is expected to increase at an average rate of nearly 6 per cent. per annum.

Consequently, the Government, both directly and indirectly participates in and supports the Project:

i) as off‑taker under the PWPA, as 100 per cent. indirect owner of OPWP;

ii) as supplier, through the Ministry of Oil & Gas, which is responsible for procuring and delivering all natural gas to the Project;

iii) as shareholder, as majority owner of OIC, in turn 100 per cent. owner of IPWC, which will own a 21.875 per cent. interest in Sembcorp Salalah immediately following the Offer;

iv) as transmission system operator, as 100 per cent. indirect owner of DPC and through the OMSGD, which respectively own and operate all power and water transmission facilities in the Dhofar Governorate; and

v) as guarantor, pursuant to the Government Guarantee (Oman currently has a credit rating of “A” by Standard & Poor’s and “A1” by Moody’s Investor Services), which guarantees the payment obligations of OPWP under the PWPA.

In addition to the Government Guarantee, under the Sector Law, OPWP must remain wholly‑owned by the Government and the Ministry of Finance is obliged to secure the availability of adequate finance for OPWP to enable it to undertake its activities.

Fully Operational Project with Minimal Operating RiskAs the Plant is completed and has been in full commercial operation for over 14 months, Sembcorp Salalah is not exposed to any construction risk. Sembcorp Salalah also benefits from minimal operating risk as its operator, Sembcorp Salalah O&M, is a joint venture indirectly owned by two of the Project Sponsors, Sembcorp Utilities and OIC, creating an alignment of interests which ensures that the Plant is operated efficiently. Sembcorp Salalah O&M is managed locally and benefits from the procedures and expertise of Sembcorp Utilities, which holds a long track record and expertise in the industry, with facilities of over 5,900 MW of power capacity and over 1,500 MiGD of water in operation or under development globally, is well established in the region, has a demonstrated track record of running similar plants and which holds a significant equity interest in the Project. In addition, Sembcorp Salalah has entered into a long‑term maintenance contract with General Electric, the manufacturer of the Plant’s gas turbine units, for the scheduled maintenance of these units. This means that Sembcorp Salalah benefits from the synergies of its gas turbine manufacturer being responsible for the on‑going maintenance of this machinery, and therefore also having aligned interests in the Project.

Excess Capacity and Outage Allowance to Ensure an Extended Plant LifespanPower and water plants generally suffer degradation of their capacity to produce electricity and desalinated water over time. Management believes that the excess of actual capacity over the contracted capacity of the Plant will more than compensate the estimated degradation of the Plant over the term of the PWPA. The PWPA also contemplates outages, allowing Sembcorp Salalah to perform maintenance on the power plant for 15 per cent. of the time (outside the peak months of April, May and June) and on the desalination plant for 5 per cent. of the time (throughout the year). Management expects that this contemplated maintenance is likely to extend the lifespan of the Plant and delay the degradation of its electricity and desalinated water capacity.

Selected Financial and Operating Data

The table below shows selected financial and operating data as at, and for the periods ended, on the dates indicated:

Selected Financial and Operating Data (OMR):

As at, and for the year ended, 31 December

As at, and for the six months ended, 30 June

2010 2011 2012 2012 2013

Revenue for the period — 3,048,977 46,649,938 18,268,167 31,292,249

Profit (loss) after tax for the period (22,387) (861,967) 902,749 693,107 6,986,706

Total assets at the end of the period 207,418,663 317,667,773 407,363,106 385,385,518 405,891,279

Total liabilities at the end of the period 219,500,526 355,140,252 445,963,268 424,189,758 423,473,601

Cash and cash equivalents at the end of the period 3,269,649 4,129,004 38,860,806 11,650,281 37,326,565

Due to the achievement of COD on 25 May 2012, Management believes that no meaningful comparison can be given between income statement data for the year ended 31 December 2012 or the six months ended 30 June 2013, and earlier corresponding periods. For further discussion of the financial results of Sembcorp Salalah, please see “Chapter XIV – Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Prospectus.

Competitive Strengths

Sembcorp Salalah’s competitive strengths include:

Strong Predictability of Stable Cash FlowsUnder the PWPA, Sembcorp Salalah is entitled to receive capacity charges from OPWP for the contracted power and water capacities of the Plant, which are periodically tested and comprise approximately 90 per cent. of the total revenue of Sembcorp Salalah (excluding fuel revenue, which is a pass‑through). These capacity charges are payable by OPWP regardless of whether the actual output of the Plant is dispatched by OPWP, and regardless of whether Sembcorp Salalah is instructed by DPC and the OMSGD to generate and deliver power and/or produce and deliver potable water. This means that, subject to limited exceptions, OPWP is obliged to pay capacity charges to Sembcorp Salalah for 100 per cent. of the available power and water capacity of the Plant. Sembcorp Salalah’s capacity charges are calculated so that they cover its debt service and other fixed costs, including fixed operating and maintenance costs, insurance costs and capital returns. Fuel revenues and charges are calculated based on the consumption of natural gas calculated by the Plant model for electrical energy and water output delivered and is in effect a virtual pass‑through cost. In addition, for the power and water that is made available, OPWP also pays Sembcorp Salalah a variable output charge to cover operating costs. Accordingly, Sembcorp Salalah has strong predictability of stable cash flows that are not affected by the amount of power and water actually required by OPWP as Sembcorp Salalah is also paid on an availability basis.

Well-Established Contractual FrameworkThe Project represents one of twelve independent power and/or water production projects to be implemented by the Government through OPWP on a “build, own and operate” basis and benefits from a well‑established contractual framework. OPWP used a similar procurement and ownership template and a similar contractual framework with the other IWPPs in Oman prior to the Project.

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In relation to the first, Sembcorp Salalah has a usufruct right in relation to excess land which could potentially be used for the purposes of expanding its desalination capacity by approximately 5 MiGD. Although such an expansion would require new project development and, consequently, new financing arrangements, Management believes that, as Sembcorp Salalah already has the necessary connections and experience in place in relation to the Plant, any such expansion of the desalination capacity of the Plant could be completed efficiently and take advantage of existing infrastructure and therefore achieve economies of scale. OPWP has indicated that current Government policy is to minimise the use of groundwater, under normal circumstances, and reserve groundwater resources for contingency purposes. This may indicate that additional water desalination capacity will be needed in the Dhofar Governorate in the near future.

Further, Sembcorp Salalah’s actual power capacity is 44 MW greater than its contracted power capacity of 445 MW (based on tested capacity). As such, the Plant could deliver further power to OPWP, subject to additional contractual arrangements with OPWP.

Technology and Processes

Description of the PlantThe Plant is an independent power and water plant located between the towns of Taqah and Mirbat, approximately 50 km from Salalah, an administrative town in the Dhofar Governorate.

Prior to the Sembcorp Utilities/OIC consortium’s bid for the Project, extensive optimisation studies were performed by Sembcorp Utilities’ modelling consultant, VTU Energy, to identify, short‑list and select a plant configuration which would represent the most economically attractive and technically sound configuration in accordance with the power and water output requirements and operational constraints required by OPWP. After a detailed scenario analysis, Sembcorp Utilities chose the following configuration for the Plant:

five GE 6FA gas turbines;

two steam turbines; and

five heat recovery steam generators.

The power facility integrates five units of gas turbines with five units of heat recovery steam generators and two steam turbines in a combined cycle configuration to achieve optimal energy production efficiency.

The following schematic displays the configuration of the Plant:

Mitigation of Fuel RisksUnder the NGSA, the Ministry of Oil & Gas is responsible for the procurement and delivery to the Plant of all of its natural gas requirements. All gas delivered to the Plant by the Ministry of Oil & Gas must meet minimum quality standards. In the event that natural gas is not available, and provided that Sembcorp Salalah is not in breach of its obligations regarding the operations of the Plant and the Plant is operational using backup diesel, Sembcorp Salalah is still entitled to receive capacity charges from OPWP, in addition to its incremental costs for the use of diesel from the Ministry of Oil & Gas. Any increase in the price of gas charged by Ministry of Oil & Gas is directly passed through the PWPA. The Plant has therefore mitigated risks associated with gas quality, gas supply and gas price.

In the event, among others, of the non‑availability of natural gas or a disruption in the natural gas supply system, Sembcorp Salalah has an obligation under the PWPA to maintain a backup fuel supply for three days of full load at the Site, which it complies with at all times.

Extensive Experience of the Project SponsorsSembcorp Salalah benefits from the extensive power, water and energy experience of the Project Sponsors, including development, ownership and operation of large scale gas turbine based power and desalination projects. Sembcorp Utilities is a leading energy, water and on‑site logistics group with a strong track record in identifying, securing, financing and executing energy and water projects and a number of strategic relationships and long‑term partnerships with multinational customers. OIC is a private equity investment company with strong experience of investing in the region and a diversified portfolio of investments in the oil and gas, petrochemical, construction and manufacturing sectors in Oman. The Project is strategically important to the Project Sponsors, who provide Sembcorp Salalah with technological and management capabilities and expertise that are critical to its operational success. For further information in relation to the Project Sponsors, please see “Chapter VII – Shareholding Details” of this Prospectus.

Sembcorp Salalah O&M is also party to the Technical Assistance Agreement with Sembcorp Gulf O&M. This arrangement enables Sembcorp Salalah, where required, to draw upon the technical expertise of Sembcorp Utilities in its operation and maintenance of the Plant.

Experienced and Skilled Operational PersonnelSembcorp Salalah has the advantage of well‑trained and experienced personnel employed by Sembcorp Salalah O&M, who bring extensive management expertise and the knowledge sharing of know‑how accumulated through decades of experience. In particular, Sembcorp Salalah personnel are able to attend training and off‑site sessions with personnel of the Project Sponsors around the world in order to share and exchange knowledge and best practices.

For further details relating to the senior management team of Sembcorp Salalah, please see “Chapter XIX – Corporate Governance” of this Prospectus. Management is strongly supported by:

a highly‑trained Plant staff of 74 employed by Sembcorp Salalah O&M;

the O&M Contract entered into with Sembcorp Salalah O&M, a company formed by the Project Sponsors;

the Technical Assistance Agreement entered into with Sembcorp Gulf O&M, a wholly‑owned subsidiary of Sembcorp Utilities; and

a long‑term maintenance contract with General Electric, the original equipment manufacturer of the gas turbines of the Plant.

Opportunities for Incremental Revenue GrowthSembcorp Salalah has two key opportunities for incremental growth of revenues:

the expansion of existing facilities to deliver additional desalinated water capacity; and

the sale of current excess power capacity.

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U” stamp for pressure vessels manufacturing. Since the 1960s, DTC has manufactured over 500 sets of steam turbines for power plants, industrial and marine customers, which, as at the date of this Prospectus, accounts for more than 30 per cent. market share in China. In addition to the domestic Chinese market, DTC’s steam turbines have been exported to Malaysia, Iran, Pakistan, Indonesia, Bangladesh, Yemen and India as well as Japan, America and Europe, with unit capacity ranges from 50 to 325 MW.

Heat Recovery Steam GeneratorsThe five heat recovery steam generators used in the Plant were supplied by another Chinese manufacturer, HBGC, which was established in 1955. Since the 1970’s, HBGC has been focused on the development, design and manufacture of remaining heat generation equipment used for metallurgy, chemical, building material, petrochemical, combined circulation and power stations. HBGC designs and manufactures heat recovery steam generators under the licence of Nooter/Eriksen, one of the world’s leading independent suppliers of natural circulation heat recovery steam generators.

DesalinationReverse osmosis is the desalination technology employed for the Plant and was supplied by a Singaporean manufacturer, Hyflux, via subcontract. Hyflux is a leading provider of integrated water management and environmental solutions with operations and projects in Singapore, Southeast Asia, China, India, Algeria, the Middle East and North Africa. Reverse osmosis technology was chosen due to the relatively small size of the Plant’s desalination plant. The desalination plant comprises five duty racks and one standby rack, to be used during chemical cleaning operation or other maintenance procedures, ensuring spare capacity even when delivering full contracted capacity under the PWPA.

Technical ParametersCapacity: Capacity of a plant is defined as the total electrical power, in MW, and water, in MiGD, which can be delivered by the power plant under specific environmental conditions. The contracted capacity of the Plant under the PWPA is 445 MW and 15 MiGD. The original net capacity at reference conditions in the original performance test was 489 MW and 15.37 MiGD.

The following table shows the contracted and actual performance of the Plant, as at the latest performance tests for the Plant which took place in May 2013:

TestContracted Performance Actual Performance Remarks

Net Capacity of Power Plant

445 MW 489 MW Management believes that the 44 MW excess capacity of the Plant will compensate the estimated degradation of the Plant over the term of the PWPA of around 10‑15 MW.

Net Capacity of Water Plant

15 MiGD 15.37 MiGD Management believes that the existing water plant can meet the contracted capacity throughout the term of the PWPA.

Plant Net Heat Rate on Gas

Average 7,460 kJ per kWh

Average 7,353 kJ per kWh

The Plant demonstrates an approximately 1.2 per cent. improvement over the contracted efficiency of the Plant in its second contract year. Management forecasts an average net heat rate improvement of at least 0.5 per cent. over the PWPA contracted efficiency for that period.

The following pictures display the Plant’s power facility and the seawater reverse osmosis desalination facility:

Power Facility

Seawater Reverse Osmosis Desalination Facility

With five gas turbines and two steam turbines, the contracted power capacity of the Plant is 445 MW. The Plant’s water production is based on a reverse osmosis process and the contracted water production capacity is 15 MiGD. The Plant entered into full commercial operation on 25 May 2012.

Sembcorp Salalah has contracted the operation and maintenance of the Plant to Sembcorp Salalah O&M under an arrangement covering the management of operations and maintenance for the entire Plant. Sembcorp Salalah O&M is also party to the Technical Assistance Agreement with Sembcorp Gulf O&M. This arrangement enables Sembcorp Salalah, where required, to draw upon the technical expertise of Sembcorp Utilities in its operation and maintenance of the Plant.

Gas TurbinesThe five 6FA gas turbines used in the Plant were supplied by General Electric and were selected due to their good record of reliable commercial operation. The 6FA gas turbine is configured with the robust “Dry Low NOx” system, which is the leader in pollution prevention for 50 hertz combined cycle applications, with greater than 54 per cent. efficiency and achieving approximately 15 ppm NOx. The 6FA can be configured to meet site and power requirements, for mid‑size combined cycle or cogeneration plants such as the Plant, where flexible operation and maximum performance are key considerations. The 6FA turbine can be arranged in a multi‑shaft configuration where one or two gas turbines are combined with a single steam turbine. The 6FA gas turbine burns a variety of fossil fuels, which can be switched after start‑up without sacrificing performance.

Steam TurbinesThe two steam turbines used in the Plant were supplied by DTC, a Chinese state‑owned enterprise engaged in the research, design and manufacture of large steam turbines and gas turbines. DTC possesses the “ASME

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The power capacity charge is payable for each hour during which the Plant is available and is designed to cover fixed costs, including debt service, and return on capital.

The water capacity charge is payable for each hour during which the Plant is available and is designed to cover fixed costs, including debt service, and return on capital.

The electrical energy charge is designed to cover variable operating costs of generation, excluding fuel costs, and is payable according to the electrical energy delivered under the PWPA.

The water output charge is designed to cover variable operating costs of desalination, excluding fuel costs, and is calculated based on the volume of water output delivered.

The fuel charge is calculated based on the consumption of natural gas calculated by the Plant model for electrical energy and water output delivered and is in effect a virtual pass‑through cost.

Payments are denominated in Omani Rials. The investment charge element of the capacity charge is linked to the OMR‑US$ exchange rate. The fixed and variable operation and maintenance charges for power and water are linked to the OMR‑US$ exchange rate, a prescribed US inflation rate relating to turbines and generators, and the Omani inflation rate for a portion of the total charge. The PWPA defines the OMR‑US$ exchange rate as the mid‑rate of the OMR‑US$ spot rate as published by the Central Bank of Oman on the last Omani business day of the relevant billing period.

Beyond the term of the PWPAManagement believes that the Plant will operate well beyond the term of the PWPA, and will be well‑placed to meet the forecast long‑term demand for power and water in the Dhofar Governorate. After the expiry of the term of the PWPA, the PWPA will either be extended or, if the power and water market in Oman is liberalised during this period, the power and water produced by the Plant will be sold into a merchant market.

An independent study was conducted by IPA, on behalf of Sembcorp Salalah, to assess the evolution of market structure and the value of Sembcorp Salalah under various scenarios after the expiry of the PWPA. IPA is an economic consultancy based in London specialising in electricity, gas, renewables, carbon and water, providing services in pricing and markets, trading and risk, regulation, project economics, financing and private sector participation across these sectors, and is one of the leading specialised energy practices in Europe.

In 2012, peak and annual demand for electricity in the Salalah System were 389 MW and 2,250 GWh, respectively. By 2027, when the PWPA is due to expire, these are expected to grow to 1,185 MW and 7,420 GWh, respectively. In 2012, peak and annual demand for desalinated water was 61,000 m3 per day and 22 million m3, respectively. By 2027, these are predicted to increase to 130,000 m3 per day and 47 million m3, respectively. Whether the Project stays online or closes after the expiry of the PWPA, IPA’s analysis shows that the capacity of existing plants and firm new builds in the Salalah System will not be sufficient to cover demand thereafter. Therefore, IPA forecasts that the Plant will have value after the PWPA expires.

From a technical perspective, the planning criterion for OPWP should be to meet system demand and peak loads at minimum cost. Under the single‑buyer approach, OPWP will have an incentive to negotiate with Sembcorp Salalah to extend the operations of the Plant beyond the expiry of the PWPA. OPWP can be expected to use an “avoided cost” methodology when assessing the merits of extending offtake agreements, leaving it indifferent between procuring capacity and services from new or existing operators such as Sembcorp Salalah.

The evolution of the market towards a liberalised market approach is considered a possibility. It is emphasised that the results from both approaches are expected to be very similar on both technical and commercial grounds.

To date, the single‑buyer approach has worked successfully in Oman, the risks are well‑known and all projects have been bankable with regional and international banks alike. IPA therefore expects OPWP to continue to act as the single buyer for electricity and desalinated water in the post‑PWPA period.

Availability: Availability is the amount of time the Plant is technically capable of generating power and water as per specifications. Under the PWPA, the Plant is contracted to be available for 85 per cent. of the time for power and 95 per cent. of the time for water, on an annualised basis. Management nevertheless assumes conservatively that the power plant will face forced outages 2 per cent. of the time, and, due to its capability to utilise the standby rack, that the desalination plant will not experience forced outages.

Plant Efficiency: The efficiency of the power plant is measured in terms of the amount of fuel required to produce one unit of power. As shown in the table above, the demonstrated efficiency in the most recent performance tests of the Plant in May 2013 was better than the contractual requirements under the PWPA.

InterconnectionsThe ECA between Sembcorp Salalah and DPC provides for the connection of the Plant to the Salalah power system. This ECA is expected to be novated to OETC in the near future. The Plant is connected to the DPC 132 kV Grid substation and the load dispatch centre of DPC in Salalah by an optical communication network via redundant high‑speed communication channels.

DPC is also connected to the Rural Areas Electricity System via a 132 kV interconnector, allowing the import and export of power between the two systems.

The seawater for desalination and cooling purposes is taken from a seawater intake. The processed water and brine is discharged via an outfall to the sea. Potable water is connected to the adjacent potable water facilities and pumping station.

The gas supply to the Plant is connected to a gas pressure reducing station operated by the Ministry of Oil & Gas.

Operation and MaintenanceThe Plant is operated and maintained throughout the term of the PWPA by Sembcorp Salalah O&M, a joint venture between Sembcorp Utilities, which holds 70 per cent. and OIC, which holds 30 per cent. Sembcorp Salalah O&M is responsible for Plant availability, efficiency, power and water output capacities and operational cost control. Sembcorp Salalah O&M operates the Plant in accordance with applicable environmental laws and is responsible for operating the Plant efficiently, whilst ensuring the correct spare parts are available and staff are properly qualified and trained. The O&M Agreement contains provisions for incentives and penalties, on ordinary arms’ length commercial terms, linked to achievement of certain availability and heat rate targets.

Sembcorp Salalah O&M is also party to the Technical Assistance Agreement with Sembcorp Gulf O&M, a wholly‑owned subsidiary of Sembcorp Utilities. This arrangement enables Sembcorp Salalah, where required, to draw upon the technical expertise of Sembcorp Utilities in its operation and maintenance of the Plant.

In addition, Sembcorp Salalah has entered into the CSA with General Electric to undertake all major maintenance with respect to the gas and steam turbines until 2029.

Revenue Overview

During the term of the PWPAThe PWPA sets out the terms of generation and supply of power and desalinated water to OPWP until 2027. The PWPA imposes an obligation on Sembcorp Salalah to operate and maintain the Plant to an agreed level of availability in respect of the guaranteed contracted power capacity and the guaranteed contracted water capacity following the COD. The PWPA also imposes an obligation on Sembcorp Salalah to operate the Plant in a safe manner and within its design parameters.

Since the COD, the Plant has contracted net electricity generating capacity of 445 MW and a desalinated water production capacity of 15 MiGD, and sells the electrical energy and the water output to OPWP. In return, Sembcorp Salalah receives a tariff covering capacity charges, electrical energy charges, water output charges and fuel charges from OPWP, described as follows:

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The financial outcomes from both single‑buyer and liberalised market approaches (in nominal terms) are shown in the table below:

Liberalised Market EBITDA

Representative Year

Cost to Single Buyer

(A)

Sembcorp Salalah 1 CCGT

(B)

Sembcorp Salalah 1 RO

(C)

TOTAL

(D = B + C)

Difference to Single Buyer

(E = A/D – 1)

2028 114,445 93,819 20,621 114,440 0.00%

2031 125,100 102,519 22,533 125,051 0.04%

2034 136,781 112,025 24,621 136,646 0.10%

2039 159,941 130,247 28,539 158,786 0.73%

2044 152,756 151,595 – 151,595 0.77%

Total(1) 2,839,271 2,454,643 372,325 2,826,968 0.44%

Average(1) 141,964 122,732 18,616 141,348 0.44%

Source: IPA Economics ReportNote 1: Totals and averages shown are based on results for all calendar years 2027‑2046, inclusive.

Summary of Licences and Permits

Sembcorp Salalah holds a number of licences and permits issued by relevant authorities in Oman in relation to the Project. The following is a summary of the key operating licences and permits in relation to Sembcorp Salalah’s business:

Permit Name Date of Expiry Agency

Commercial Registration Certificate 28 September 2014 MoCI

Chamber of Commerce & Industry Membership 3 October 2014 OCCI

Generation And Desalination Licence 31 May 2036 AER

Preliminary Environmental Approval – Third Renewal 2 March 2014 MECA

Permit to Operate 22 November 2014 MECA

Security and Safety Permit – Power Plant 27 April 2014 ROP

Security and Safety Permit – Water Desalination Plant 12 February 2014 ROP

Health, Safety, Security and the Environment

Sembcorp Salalah has policies in place to ensure compliance to legal health and safety requirements, and to provide a safe work place for its employees and visitors, contractors and members of the public. Sembcorp Salalah aims to maintain the highest standards of HSSE performance in all its activities. Management is committed to continuously improving its HSSE performance and managing HSSE risks associated with Sembcorp Salalah’s activities, products and services. Sembcorp Salalah has established and will maintain a HSSE management system, and integrate HSSE considerations into all aspects of its business operations by implementing policies which aim to prevent accidents, injuries, occupational illnesses and pollution as well as conserve natural resources.

On 14 May 2013, the AER issued a report based on a health and safety audit of the Plant conducted by Parsons Brinckerhoff, an international infrastructure and engineering consultancy. The audit report concluded that Sembcorp Salalah was not compliant with the health and safety requirements stipulated in its licence, and made five recommendations for immediate action in order to rectify the health and safety risks identified in the audit report. On 30 May 2013, Sembcorp Salalah responded to the AER, evidencing action taken and policies implemented by Sembcorp Salalah in order to mitigate the risks described in the audit report and comply with the recommendations specified therein.

IPA Power and Water Market ModellingIPA used a version of its proprietary ECLIPSE® modelling platform to forecast the dispatch and capacity developments in the markets for electricity and desalinated water in southern Oman. This was used to establish market and contract pricing for electricity and water and the dispatch profile for the Project in Sembcorp Salalah’s base case.

The key assumptions for the power modelling are shown in the table below.

Parameter Assumption

Annual Demand 2,250 GWh in 2012, growing at 13.05 per cent. on average from 2012‑2019; 4.1 per cent. in 2020‑2030, and 2.73 per cent. thereafter.

Peak Demand 389 MW in 2012, growing at 11.78 per cent. on average from 2012‑2019; 4.1 per cent. in 2020‑2030, and 2.73 per cent. thereafter.

Cost of New Build and Thermal Efficiency

New CCGT @ US$1,500 per kW and efficiency 53 per cent. (net LHV).

Technical Lifetime for all Power Plants

35 years.

Input Gas Prices US$1.50 per MMBTU (LHV) in 2013 US Dollars.

Long‑Term US Inflation 3.0 per cent. per annum.

The key assumptions for desalinated water modelling are shown in the table below.

Parameter Assumption

Annual Demand 22 million m3 in 2012, growing at 5.50 per cent. on average from 2012‑2019; 5.0 per cent. in 2020‑2030, and 3.0 per cent. thereafter.

Peak Demand 61,000 m3 per day in 2012, growing at 5.37 per cent. on average from 2012‑2019; 5.0 per cent. in 2020‑2030, and 3.0 per cent. thereafter.

Cost of New Build and Thermal Efficiency

New reverse osmosis @ US$2,000 per m3 per day.

Technical Lifetime for all Desalination Plants

30 years.

Input Electricity Prices Results from the power analysis.

Long‑Term US Inflation 3.0 per cent. per annum.

IPA believes the case outlined above provides a reasonable central outcome that can be used to assess the value of Sembcorp Salalah post‑PWPA.

National energy strategy is determined by the Government. Until a new strategy is outlined, it is most reasonable to assume that existing energy and water procurement policies will continue. Even if this were to lead Oman to import greater quantities of natural gas, this should not be a significant problem since the Middle East holds some of the major natural gas resources in the world.

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Plant, the generation of electricity and the production of potable water, and all matters necessarily ancillary thereto or connected to such activities.

Employees

As at 30 June 2013, Sembcorp Salalah and Sembcorp Salalah O&M together employed 78 personnel, comprising 27 Omani nationals (35 per cent.) and 51 expatriates (65 per cent.). Sembcorp Salalah has not been set an official Omanisation target by the Ministry of Manpower.

Risk Management and Control

The Board of Directors has overall responsibility for the establishment and oversight of Sembcorp Salalah’s risk management framework. The Board has delegated the responsibility of developing and monitoring Sembcorp Salalah’s risk management policies and procedures and its compliance with them to the senior management team of Sembcorp Salalah.

As further described in “Chapter XIV – Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Prospectus, Sembcorp Salalah has policies in place to mitigate the risk that changes in market prices, such as foreign exchange rates and interest rates, will affect Sembcorp Salalah’s income or the value of its holdings of financial instruments. The objective of such market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

Corporate Social Responsibility

As well as providing a catalyst for growth in the Dhofar Governorate, Sembcorp Salalah aims to contribute positively to, and build a mutually beneficial relationship with, the local community. The key areas in which it makes these contributions are local recruitment, environmental management and mitigation and social and community welfare. Sembcorp Salalah is committed to internationally recognised corporate governance practices and ethical business conduct. The Board of Directors and Management understand that their implementation of good governance practices and ethical business conduct results in sound business decisions. They also have a positive impact on public perceptions of Sembcorp Salalah and benefit the wider economic and social development of Oman.

Sembcorp Salalah’s human resource strategy supports the Ministry of Manpower’s Omanisation Plan, by recruiting graduate engineers from local colleges and providing a structured training programme including on‑the‑job exposure and apprenticeships. Sembcorp Salalah collaborates with technical institutions to promote programmes that build skillsets of local youths. Such an arrangement is already in place with the Salalah Technical College, where six students undertook an eight‑week industrial attachment with Sembcorp Salalah from May 2013. Sembcorp Salalah also supports regional social development activities that encourage and create awareness in relation to social issues.

Sembcorp Salalah also implements responsible environmental practices and procedures. In 2010, Sembcorp Salalah commissioned an environmental impact assessment which included a review of the environmental impact of the Plant on the local community, as well as a social impact management plan, which has been implemented. Sembcorp Salalah is committed to protecting the environment through its stipulated environment management programme and operates within the limits of all applicable environmental legislation. Sembcorp Salalah has established green belts within the Plant for environmental rejuvenation and improved aesthetics. In June 2013, Sembcorp Salalah also hosted an event to mark World Environment Day, which was attended by local environmental agencies.

Sembcorp Salalah has also been involved with various social and community welfare initiatives in collaboration with Government departments and non‑governmental organisations. These initiatives include sponsorship of the road traffic safety campaign in Oman, assistance and support to handicapped children and the less privileged, and offering of incentives to the top performing students in local schools and colleges.

The Plant was designed to comply in all respects with all applicable environmental regulations, World Bank guidelines and Equator Principles. Environmental regulations in Oman specify the performance requirements of an industrial plant with reference to air, water, hazardous materials, waste, dredging and noise. Established standards that are relevant to the Project relate to the release of liquid effluents to the marine environment and the release of air contaminants. Air emission standards in Oman are based on the National Ambient Air Quality Standards of the United States.

Since the COD, the Plant has not suffered any material environmental incidents, nor has Sembcorp Salalah been required to report any such incidents to the MECA.

Insurance

Sembcorp Salalah maintains comprehensive policies of insurance and reinsurance cover in the international markets with credit‑worthy counterparties, as is market standard for this type of project. The following table sets out the insurance policies currently in effect in relation to the Project:

Policy Cover Level of cover

All Risk of Material Damage Insurance

Covers all risks of loss of or damage (including machinery breakdown) to all insured property (or part thereof) forming part of the Plant for a minimum period of 12 months commencing from the COD and is renewable on an annual basis thereafter.

US$750 million, subject to a maximum of US$500 million per claim when aggregated with claims under Business Interruption Insurance.

Business Interruption Insurance

Covers loss of revenue that follows as a direct consequence from the loss of or damage to the Plant covered under All Risk of Material Damage Insurance. The indemnity period is 24 months.

US$282 million, subject to a maximum of US$500 million per claim when aggregated with claims under All Risk of Material Damage Insurance.

Sabotage and/or Terrorism Insurance

Covers all risk of direct physical loss of or damage to all property, as a result of an act of terrorism, in connection with the construction, testing and commissioning, start‑up, ownership, operation, use or maintenance of the Plant as well as loss of revenue as a result of business interruption. The indemnity period is 24 months.

US$1,032 million, subject to a maximum of US$300 million per claim.

Public and Products Liability Insurance

Covers legal liability to third parties for death, bodily injury or loss of or damage to their property arising from activities in connection with the construction, testing and commissioning, start‑up, ownership, operation, use or maintenance of the Plant.

US$50 million per claim and in the annual aggregate.

Directors and Officers Liability Insurance

Covers risk of any wrongful acts of a director, officer or employee except for and to the extent that the company has given an indemnity.

US$50 million per claim and in the aggregate.

Sembcorp Salalah also maintains third‑party extensions in relation to its insurance policies, which cover the risk of downstream impact on the Plant from failure of the transmission systems operated by DPC and OMSGD.

Property

The site used for the Plant is owned by the Ministry of Housing, which has granted Sembcorp Salalah a usufruct right over the Site for a term of 25 years and a usufruct right over the Temporary Areas for a term of 4 years, in each case from 23 November 2009. The usufruct right over the Site may be renewed for a further term of 25 years, at Sembcorp Salalah’s option. The Ministry of Housing is obliged to give Sembcorp Salalah the right to possession of the Site and the Temporary Areas, free and clear of any right adverse to the usufruct right and to ensure that Sembcorp Salalah has undisturbed enjoyment of the Site and the Temporary Areas. Sembcorp Salalah must use the Site and the Temporary Areas only for the purposes of the design, procurement, construction, excavation, erection, installation, commissioning, financing, operation and maintenance of the

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Sembcorp Salalah currently has a usufruct right in relation to excess land which could potentially be used for the purposes of expanding its desalination capacity. Although such an expansion would require new project development and, consequently, new financing arrangements, Management believes that, as Sembcorp Salalah already has the necessary connections and experience in place in relation to the Plant, any such expansion of the desalination capacity of the Plant could be completed efficiently and take advantage of economies of scale.

Litigation and Regulatory Proceedings

Litigation

Liquidated damages claimOPWP has claimed liquidated damages from Sembcorp Salalah under the PWPA, in relation to delays in achieving the construction milestone dates set out in the PWPA. In relation to these delays, Sembcorp Salalah is seeking contractual relief from OPWP on various grounds permitted under the PWPA.

Sembcorp Salalah is also seeking liquidated damages under the EPC Contract from the EPC Contractor, SEPCOIII, for the aforesaid delays, where applicable. SEPCOIII has, in turn, filed a counterclaim against Sembcorp Salalah seeking to recover its reasonable increase in costs due to various events which it alleges are attributable to Sembcorp Salalah.

This counterclaim from SEPCOIII has been and continues to be rejected by Sembcorp Salalah, and Sembcorp Salalah has requested that SEPCOIII substantiate that the alleged events in fact caused the delays in achievement of the construction milestones. SEPCOIII has yet to establish its entitlement relief for the alleged delay events. Semborp Salalah has commenced a mediation and arbitration process as allowed under the EPC contract in order to pursue a successful conclusion.

In accordance with the terms of the PWPA, OPWP has withheld US$27 million from Sembcorp Salalah. In turn, Sembcorp Salalah has withheld US$36 million from SEPCOIII from amounts owing under the EPC Contract. In addition, Sembcorp Salalah has received a bank guarantee amounting to US$70 million as a performance bond from SEPCOIII, which expires on 31 December 2013.

Sembcorp Salalah has engaged external legal counsel in relation to the claims by OPWP under the PWPA and the claims against, and counterclaims by, SEPCOIII under the EPC Contract. These disputes are expected to be settled in 2013/2014. Management, having consulted external legal counsel and a member of the Academy of Experts (UK), believes that the final settlement of its disputes with OPWP and SEPCOIII should result in a neutral or favourable position for Sembcorp Salalah, although, as is the nature with disputes, there can be no assurance of such an outcome.

All forecasts, including dividend forecasts, assume that the final settlement of disputes with OPWP and SEPCOIII will result in Sembcorp Salalah being in a neutral position (i.e., no positive or negative impact). In the event that the final outcome of these disputes (which is expected to occur in 2013/14) is negative for Sembcorp Salalah, then, depending on the extent of the negative financial impact, Sembcorp Salalah may not be in a position to pay dividend in the manner forecast in this Prospectus (as set out in “Chapter XVI – Dividend Policy”), or may, temporarily, not be in a position to pay any dividend at all. On the other hand, in the event that the final outcome of these disputes is positive for Sembcorp Salalah, then the Board may favourably consider the payment of a one‑time special dividend to the Shareholders.

Regulatory ProceedingsAs at the date of this Prospectus, Sembcorp Salalah is not subject to any regulatory proceedings.

Opportunities for Future Growth

As described in “Chapter IX – Regulatory Framework and Industry Overview” of this Prospectus, water demand in the Salalah/Taqah/Mirbat area is expected to increase at an average rate of nearly 6 per cent. per annum. The main growth drivers are increasing population and economic development.

Now that the Plant has achieved full commercial operation, it has sufficient capacity to meet current requirements for desalinated water in the Dhofar Governorate. However, OPWP has indicated that, in the future, with increasing consumption, groundwater sources may also be required to supplement this capacity during peak periods by as early as 2015. OPWP has also indicated that current Government policy is to minimise the use of groundwater, under normal circumstances, and reserve groundwater resources for contingency purposes. This may indicate that additional water desalination capacity will be needed in the near future.

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UATA Sembcorp Salalah and the MoH

23 November 2009

4 years from the Effective Date

22 November 2013

CSA Sembcorp Salalah and General Electric

15 December 2009

20 years from the date of the CSA

14 December 2029

Government Guarantee

Sembcorp Salalah and the MoF

23 November 2009

15 years from the Scheduled COD

3 April 2027

O&M Agreement

Sembcorp Salalah and Sembcorp Salalah O&M

8 February 2010 15 years from the Scheduled COD

3 April 2027

Technical Assistance Agreement

Sembcorp Salalah O&M and Sembcorp Gulf O&M

8 February 2010 15 years from the Scheduled COD

3 April 2027

SHA SOFIH, SOIHL, IPWC and BDCC(3)

17 November 2009

Until the earlier of the date of the Offering or the date of exercise of the EHC Option

To be determined

Note 1: The SHA was acceded to by BDCC on 26 December 2011.Note 2: The ECA is expected to be novated to OETC in the near future.Note 3: The PFA was acceded to by BDCC on 26 December 2011.

Details of Key Documentation

Project Founders’ AgreementThe PFA was entered into between the Project Founders and EHC on 23 November 2009. Pursuant to an accession agreement to the PFA dated 26 December 2011, BDCC became party to the PFA upon its acquisition of 5 per cent. of the issued share capital of Sembcorp Salalah. The PFA sets out various warranties and undertakings given by the Project Founders to EHC in respect of, amongst other things, listing pursuant to a public offering and disposals of the Shares. The PFA contains restrictions on share disposals and provides for the procurement of the conversion of Sembcorp Salalah to a listed SAOG from an unlisted SAOC and the public offering of 35 per cent. of the issued share capital of Sembcorp Salalah on the MSM. The PFA states that the listing of the Offer Shares must occur during a period of four years from the date of the incorporation of Sembcorp Salalah, i.e., on or before 28 September 2013. The listing of the Offer Shares is scheduled to take place within 15 days after the Offer Closing Date, which may fall after 28 September 2013. However, Management believes that there is no material risk under the PFA (and the related obligations under the Finance Documents, in light of the specific cure periods set out therein) if the Offer Shares are listed a few days after 28 September 2013, provided that the Offer Closing Date is adhered to.

If all of the Offer Shares are not disposed of during such offering, the Project Founders are required to continue offering the relevant Offer Shares for sale on an annual basis during a further three‑year period following the initial listing. During this three‑year period, EHC will have an option to acquire the balance of any Shares that were not sold at a price which is calculated based on a formula set out in the PFA.

The PFA contains various undertakings given by the Project Founders, including, but not limited to: procuring that the entire issued share capital of Sembcorp Salalah comprises a single class of shares, each share having a nominal value of OMR 1; compliance with the listing and offer obligations contained in the PFA in relation to the IPO of Sembcorp Salalah; and disposal of shareholdings in Sembcorp Salalah only in accordance with the PFA.

Power and Water Purchase Agreement The PWPA was entered into between OPWP and Sembcorp Salalah on 23 November 2009. It establishes the terms upon which Sembcorp Salalah is to design, construct and commission the Plant, generate and supply electrical energy and demineralised water and the basis upon which Sembcorp Salalah receives capacity charges, electrical energy charges, water output charges and fuel charges.

Chapter XI: Contractual Framework

Summary of Contractual Framework

The following diagram illustrates the key contracts relating to the Project and the relevant counterparties thereto:

Sembcorp SalalahSHA

WCAECA

DPC OMSGD MOH

EHC

PWPA NGSA

O&MAgreement

ProjectFounders

UsufructAgreements

TechnicalAssistance Agt.

Sembcorp SalalahO&M

Sembcorp GulfO&M

GovernmentGuaranteeShareholders

MOF OPWP MOG

PFA

The following table shows details of the key contracts relating to the Project:

Project Document Parties Effective Date Term Expiration Date

PFA EHC, Sembcorp Utilities, SOFIH, SOIHL, OIC, OICHC, IPWC and BDCC(1)

23 November 2009


3 April 2027

PWPA Sembcorp Salalah and OPWP

23 November 2009


3 April 2027

NGSA Sembcorp Salalah and the MOG

23 November 2009


3 April 2027

ECA Sembcorp Salalah and DPC(2)

23 November 2009

25 years from the Effective Date

22 November 2034

WCA Sembcorp Salalah and the OMSGD

Has not yet been entered into

25 years from the date of signing of the WCA

Has not yet been entered into

UAS Sembcorp Salalah and the MoH

23 November 2009

25 years from the Effective Date, subject to a further extension of 25 years at the option of Sembcorp Salalah

22 November 2034, subject to extension

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costs and revenues. If a buyer risk event or events constitute a material adverse change, the PWPA provides a mechanism by which the capacity charges, electrical energy charge and/or water output charge may be adjusted or Sembcorp Salalah reimbursed. A similar provision allows for adjustment or reimbursement to OPWP if a buyer risk event constitutes a material beneficial change.

The PWPA also provides for various force majeure events that may hinder Sembcorp Salalah from performing its obligations under the PWPA. The onus of proving the existence and effect of a force majeure event is on Sembcorp Salalah. If it can be established that a force majeure event has occurred, or will occur, Sembcorp Salalah will be relieved from liability for any failure to perform its obligations under the PWPA and the term of the PWPA will be extended by the period for which the force majeure event hindered Sembcorp Salalah from performing its obligations. Sembcorp Salalah is only entitled to be paid capacity charges during the relevant force majeure delay period to the extent of capacity availability.

Sembcorp Salalah has no right to terminate the PWPA. In the event of breach of the PWPA by OPWP, Sembcorp Salalah would need to bring a claim for direct loss under an indemnity contained in the PWPA. This would allow Sembcorp Salalah to claim lost electrical energy charges, water output charges, fuel charges and capacity charges.

Subject to certain force majeure and termination provisions contained therein, the term of the PWPA commenced on 23 November 2009 and expires on 3 April 2027, the date which falls 15 years after the Scheduled COD.

Natural Gas Sales Agreement The NGSA was entered into between the Ministry of Oil & Gas and Sembcorp Salalah on 23 November 2009. It establishes the terms upon which Sembcorp Salalah purchases natural gas as feedstock for the Plant from the Ministry of Oil & Gas for 15 years. The NGSA term expires on the same date as the PWPA term. The NGSA term is to be automatically extended to reflect any extensions to the term of the PWPA.

In accordance with the NGSA, natural gas will be supplied up to the gas delivery point of the Plant. Sembcorp Salalah has no obligation to pay the Ministry of Oil & Gas for any natural gas delivered and accepted until Sembcorp Salalah has received the amount of the PWPA payment from OPWP (provided that Sembcorp Salalah has invoiced OPWP properly and on a timely basis, OPWP has not exercised a right of set‑off under the PWPA and Sembcorp Salalah gave notice to OPWP and the Ministry of Oil & Gas). If Sembcorp Salalah receives part of the PWPA payment, it is required to pay the corresponding percentage of the monthly invoice amount, with the remainder due upon receipt of the unpaid portion.

The NGSA provides a detailed nomination regime. The maximum quantity of natural gas that Sembcorp Salalah may nominate and take under the NGSA on any day and which Ministry of Oil & Gas shall be obliged to deliver is 95,000 MMBTU. Sembcorp Salalah is entitled to a zero nomination of gas but to the extent that Sembcorp Salalah does require some gas then, due to the minimum design capacity of the facilities, there will be a minimum daily quantity. Outside of the minimum and maximum daily quantities, the Ministry of Oil & Gas has discretion as to whether to supply the nominated amounts. Notwithstanding the nomination process, the NGSA has no minimum take requirements and consequently there is no “take or pay” liability on Sembcorp Salalah.

Sembcorp Salalah purchases all fuel at the Omani Rial equivalent of US$1.50 per MMBTU (inclusive of transportation costs to the gas delivery point and all taxes and duties), although the NGSA also states that this price will “from time to time be equal to the price for natural gas which is utilised in substantially the majority of the electricity generation and water desalination sector in Oman”. This suggests that the contract price may be adjusted, but the NGSA sets out no further detail.

The fuel charge element of the PWPA payments allows a full pass‑through of the gas price based on the calculated gas consumption for electrical energy and water output delivered. In accordance with the NGSA, Sembcorp Salalah is obligated to pay only for the gas actually consumed for the generation of power. The Ministry of Oil & Gas is responsible for the uninterrupted supply of gas to the Plant (except for one interruption per year of up to 24 hours, during the months of December to March only, and one interruption per year of up

Capacity charges are designed to cover fixed costs, including debt service and return on capital; electrical energy charges are designed to cover variable operating costs of generation, excluding fuel costs. The water output charge is designed to cover variable operating costs of desalination, excluding fuel costs. The fuel charge is a pass‑through of the gas price under the NGSA and is recoverable prior to payment under the NGSA. Payments under the PWPA are denominated in Omani Rials and Sembcorp Salalah is safeguarded under the PWPA against OMR/US$ exchange rate adjustments and also against inflation for the component of the tariff that covers fixed operation costs.

Under the PWPA, adjustments will be made to the capacity charges, electrical energy charge and the water output charge for changes in the OMR/US$ exchange rate. In addition, adjustments will be made for inflation in respect of the fixed operation and maintenance charge, the electrical energy charge and the water output charge.

The PWPA sets out a number of obligations of Sembcorp Salalah during the operation period of the Plant. Amongst other things, Sembcorp Salalah must provide to the Ministry of Oil & Gas, free of charge, such supply of electrical energy as is required for the continued operation of the gas‑receiving facilities of the Plant. Sembcorp Salalah is also under a general obligation to act in good faith and to the standard of a reasonable and prudent operator in performing its obligations under the PWPA.

Sembcorp Salalah is required to maintain a stock of backup diesel sufficient for at least three days’ operation at the guaranteed contracted power capacity and the guaranteed contracted water capacity. Where diesel is used and the stock falls below this level, Sembcorp Salalah must commence replenishing such stock within 24 hours of use at as fast a rate as is practical in accordance with the requirements of law and international good practice in the electricity and desalination industries. Upon falling gas pressure or upon a gas operation failure, Sembcorp Salalah must ensure that all units immediately switch from natural gas to diesel.

The PWPA does not contain provisions for the pass‑through of costs of operation on diesel. Sembcorp Salalah will be reimbursed for the cost of operation on diesel for a price equal to the gas price. Sembcorp Salalah will only be able to recover incremental costs of operation on diesel from the Ministry of Oil & Gas in accordance with the terms of the NGSA.

The PWPA contains provisions to allow for refinancing and to share refinancing gains as between OPWP and Sembcorp Salalah. OPWP is entitled to 80 per cent. of any refinancing gain, up to a threshold amount of around OMR 58 million. The consent of OPWP is required before Sembcorp Salalah enters into any financing arrangements, and OPWP may withhold consent if it considers a financing arrangement will unreasonably constrain the ability of Sembcorp Salalah to realise refinancing gain. The consent of OPWP is also required before entering into any refinancing upon which a refinancing gain could be achieved by Sembcorp Salalah. The share of refinancing gains due to OPWP may be paid as a reduction in the capacity charges over the remaining term of the PWPA, or, if OPWP and Sembcorp Salalah are unable to agree how the capacity charges are to be reduced, as a single payment, or a combination of a single payment or a reduction in the capacity charges.

Sembcorp Salalah is responsible for securing supplies of utilities to the Plant. In addition, it is liable for all risks associated with the site of the Plant and for any clean‑up costs resulting from damage to the coastline or sea.

The PWPA sets out standard representations and warranties that Sembcorp Salalah is required to give and apply. Amongst others, Sembcorp Salalah has represented and warranted that it will not engage in any business or activity other than permitted by its generation and desalination licence.

The PWPA provides for various buyer risk events which outline the relief that Sembcorp Salalah will receive should the specified events occur that hinder Sembcorp Salalah from performing its obligations under the PWPA. The onus of establishing the existence of a buyer risk event and its impact is upon Sembcorp Salalah. If a relevant buyer risk event is established, Sembcorp Salalah will not be liable for any failure to perform or any delay in its performance and will continue to be entitled to be paid capacity charges during the relevant period. Sembcorp Salalah is under a continuing obligation to mitigate the effect of buyer risk events on its

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reasonable endeavours to maintain its equipment in such condition as to enable the passing of potable water between the equipment and the water transmission system and accept potable water into the water transmission system at the connection site.

Usufruct AgreementsThe Usufruct Agreements were each entered into between the Ministry of Housing and Sembcorp Salalah on 23 November 2009. The Usufruct Agreements constitute the land lease agreements in relation to the Site and the Temporary Areas. The UATA has a term of 4 years from the Effective Date and the UAS has a term of 25 years from the Effective Date. The UAS may be renewed for a further term of 25 years at the option of Sembcorp Salalah, subject to an increase of the annual consideration to the Omani Rial equivalent of US$500,000. During the term of each Usufruct Agreement, Sembcorp Salalah is liable to pay an annual rent of OMR 1,000 to the Ministry of Housing.

The Ministry of Housing is obliged to give Sembcorp Salalah the right to possession of the Site and the Temporary Areas, free and clear of any right adverse to the usufruct rights and to ensure that Sembcorp Salalah has undisturbed enjoyment of the Site and the Temporary Areas. Sembcorp Salalah must use the Site and the Temporary Areas only for the purposes of the design, procurement, construction, excavation, erection, installation, commissioning, financing, operation and maintenance of the Plant, the generation of electricity and the production of potable water, and all matters necessarily ancillary thereto or connected to such activities.

Under each Usufruct Agreement, Sembcorp Salalah is entitled to assign and/or mortgage the usufruct rights provided that this is in accordance with the prescribed activities under the Usufruct Agreements and is for the benefit of lenders with the sole purpose of financing such prescribed activities. The Ministry of Housing will be entitled to terminate the Usufruct Agreements when either (i) Sembcorp Salalah’s generation and desalination licence is revoked, and not replaced within 18 months, or (ii) Sembcorp Salalah or any transferee has ceased to carry out the prescribed activities in relation to the Project and such cessation has continued for a continuous period of two years.

Under the Usufruct Agreements, Sembcorp Salalah has an obligation to remove the Plant at the end of its useful life and restore the land. Sembcorp Salalah is also required, at its sole cost and expense, to dismantle, demobilise, safeguard and transport the Plant assets, eliminate soil and ground water contamination, fill in all excavation and restore the grade of the surface.

Contractual Service Agreement The CSA was entered into between Sembcorp Salalah and General Electric on 15 December 2009. It sets out the terms on which General Electric provides long‑term maintenance services in respect of the Plant’s five 6FA turbines. In consideration for these services, Sembcorp Salalah is required to pay fees to General Electric throughout the 20‑year term of the CSA. Such fees are paid quarterly.

Government GuaranteeThe Government Guarantee was entered into between the Ministry of Finance and Sembcorp Salalah on 23 November 2009. The function of the guarantee is to guarantee the payment obligations of OPWP under the PWPA. If OPWP is in default of such payment obligations, the Ministry of Finance must make good the default within ten Omani business days of written demand by Sembcorp Salalah. The Government Guarantee relates only to the payment obligations of OPWP under the PWPA and does not cover the obligations of any of the other counterparties to the Project Documents.

Any financial obligation of OPWP under the PWPA becomes due only if any such financial obligation is not being disputed in accordance with the PWPA. No claim may be made under the Government Guarantee until the aggregate amount claimed exceeds OMR 2,500,000.

The Government Guarantee will remain in force until the initial financing for the Project has been refinanced or fully paid and OPWP has maintained certain unsecured debt ratings for 730 consecutive days. However, under

to 6 hours at any time, such time to be approved by Sembcorp Salalah).

If the Ministry of Oil & Gas fails to supply natural gas in whole or in part for any reason (including force majeure) and Sembcorp Salalah operates the Plant on diesel instead, the Ministry of Oil & Gas is required to pay Sembcorp Salalah damages for each hour the plant is running on diesel, determined by reference to the difference in fuel consumption and cost between operating using gas and diesel. If, as a result of MOG’s failure to deliver gas, Sembcorp Salalah is obliged to operate the plant using diesel for a continuous period of 3 months, the Ministry of Oil & Gas must indemnify Sembcorp Salalah against any incremental operating costs.

Sembcorp Salalah has the right to reject non‑specification gas and also has the option to accept non‑specification gas at a discounted price (97 per cent. of the contract price). In the event that Sembcorp Salalah unknowingly accepts non‑specification gas, Sembcorp Salalah will pay the contract price and the Ministry of Oil & Gas is required to reimburse Sembcorp Salalah for any losses incurred from taking the nonconforming gas, subject to Sembcorp Salalah’s duty to mitigate such losses.

The force majeure provisions of the NGSA entitling Sembcorp Salalah to relief are generally consistent with those of the PWPA, although, as stated above, the Ministry of Oil & Gas is not entitled to claim force majeure with respect to its gas supply obligations.

The NGSA is terminable by Sembcorp Salalah as a result of the dissolution of the Ministry of Oil & Gas or a material breach of the NGSA by the Ministry of Oil & Gas, although alternative sources of fuel would need to be secured. Sembcorp Salalah events of default are insolvency, failure to make payment where the debt exceeds OMR 200,000 within 30 days of the due date and material breaches which are not remedied within 30 days of notice.

Electrical Connection AgreementThe ECA was entered into between DPC and Sembcorp Salalah on 23 November 2009. DPC is the sole electricity transmission, distribution and supply company within its concession area, pursuant to the Salalah Concession Agreement. DPC owns and operates the Salalah Power System on the terms of a 20‑year concession. The Plant is connected to the transmission and distribution system owned by DPC.

The parties’ obligations under the ECA commence from the Effective Date and remain in force for an initial period of 25 years, if Sembcorp Salalah continues to retain its generation licence, and shall continue in force beyond the expiry of the initial term of 25 years unless and until either party terminates the ECA with six months’ prior notice to the other.

The ECA provides for, amongst other things, connection of the Plant to the transmission system against the payment of a connection fee. Additionally, the ECA sets out the terms and conditions with respect to ownership, operational and safety responsibilities and rights of each of the parties in respect of connection to the electricity transmission system.

Water Connection AgreementThe agreed form of the WCA is scheduled to the PWPA at Schedule I, and is awaiting signature by the OMSGD and Sembcorp Salalah. The WCA will govern the connection of the Project to the water transmission system operated by the OMSGD. The WCA will contain provisions dealing with ownership, operational and safety responsibilities and rights of Sembcorp Salalah and the OMSGD in respect of connection to the water transmission system. Sembcorp Salalah’s business has not been materially affected by the non‑execution of the WCA as at the date of the Prospectus.

The term of the WCA will be initially 25 years and thereafter continues until terminated by either party upon one month’s written notice. Under the terms of the WCA, Sembcorp Salalah will have the right for its equipment to be and remain connected to the water transmission system and be operational for the term of the WCA, and will be required to keep its equipment connected to the water transmission system until decommissioning or disconnection is permitted in accordance with the terms of the WCA. The OMSGD will be required to use

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cent. of Sembcorp Salalah’s issued share capital to EHC in accordance with the PFA. The SHA also sets out certain provisions relating to appointment, composition, quorum and voting requirements in respect of the Board of Directors.

The SHA provides that no director is entitled to receive from Sembcorp Salalah any fees or any payment for any cost, expense or loss incurred or suffered by that director in carrying out his duties and obligations as a director, save as payable under any separate employment or service contract entered into between that director and Sembcorp Salalah.

The SHA will terminate on the earlier of (i) the date of admission of the Offer Shares for trading on the Muscat Securities Market and (ii) the exercise by EHC of its option to purchase the Offer Shares, as provided for in the PFA.

the Sector Law, OPWP must remain wholly owned by the Government and the Ministry of Finance is obliged to secure the availability of adequate finance for OPWP to enable it to undertake its activities under the Sector Law.

No claims may be made under the Government Guarantee after 90 days after the termination or expiry of the PWPA, although claims made prior to the expiry of the 90‑day period are to remain valid and enforceable under the Government Guarantee.

Operation and Maintenance Agreement The O&M Agreement was entered into between Sembcorp Salalah O&M and Sembcorp Salalah on 8 February 2010. It sets out the provision of operation and maintenance services by Sembcorp Salalah O&M in relation to the operation and maintenance of the Plant. The O&M Agreement requires Sembcorp Salalah O&M to maintain the Plant until 3 April 2027, the date which falls 15 years after the Scheduled COD.

Under the O&M Agreement, Sembcorp Salalah O&M is responsible for:

the operation, maintenance and repairs of the Plant and the portion of the shared facilities necessary for the Plant on behalf of Sembcorp Salalah;

the generation of electricity for supply to OPWP;

managing spare parts, tools, materials and consumables required for the operation and maintenance of the Plant;

the direction and supervision of staff at the Plant and ensuring safety of the Plant and staff and invitees at the Plant; and

mobilisation and training of human resources.

The O&M Agreement contains provisions for incentives and penalties, on ordinary arms’ length commercial terms, linked to achievement of certain availability and heat rate targets.

Sembcorp Salalah’s sole and exclusive remedy for damages with respect to deficiencies in Sembcorp Salalah O&M’s performance of the services is payment of liquidated damages, calculated in accordance with the terms of the O&M Agreement.

Technical Assistance AgreementThe Technical Assistance Agreement was entered into between Sembcorp Salalah O&M and Sembcorp Gulf O&M on 8 February 2010. It engages Sembcorp Gulf O&M to act as technical adviser to Sembcorp Salalah O&M in relation to the Project. Sembcorp Gulf O&M is required, amongst other things, to provide support and advisory services to Sembcorp Salalah O&M relating to the technical operation and maintenance of the Plant; to advise Sembcorp Salalah O&M in respect of environmental matters; to assist Sembcorp Salalah O&M in relation to recruitment, training and safety; assisting with testing and breakdown repair and advising Sembcorp Salalah O&M with regards to insurance and legal matters.

Under the Technical Assistance Agreement, Sembcorp Salalah O&M is required to pay Sembcorp Gulf O&M an annual fee of US$1,750,000 in the first contract year, increasing by 3 per cent. per annum. The Technical Assistance Agreement is scheduled to expire on the same date as the O&M Agreement.

Shareholders’ AgreementThe SHA was entered into between SOIHL, SOFIH and IPWC on 17 November 2009. Pursuant to an accession agreement to the SHA dated 26 December 2011, BDCC became party to the SHA upon its acquisition of 5 per cent. of the issued share capital of Sembcorp Salalah. The SHA sets out the arrangements between the Shareholders with respect to the management of Sembcorp Salalah and the process relating to the Offer.

The SHA provides that the Shareholders must offer the Offer Shares via a public offering on the MSM within a period of four years commencing on the date of incorporation of Sembcorp Salalah or otherwise sell 35 per

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Debt Financing

Sembcorp Salalah has entered into financing agreements for the purpose of financing the Project with a consortium of international and local banks, amounting to an aggregate of approximately OMR 284 million (US$737 million). Each of these financing agreements is documented in the relevant agreement set out below and is also subject to the terms of the CTA.

The following table shows the currently outstanding financing arrangements of Sembcorp Salalah, with the amount outstanding as at 30 June 2013:

Type of Loan Lender(s) Currency

Total Base and Standby

Facility (OMR)

Total Amount

Drawn as at 30 June 2013

(OMR)

Total Outstanding as at 30 June

2013 (OMR)

Funded Facility Arrangements:

Dollar Commercial Facilities Agreement

KfW IPEX‑Bank GmbH, Standard Chartered Bank, Sumitomo Mitsui Banking Corporation Europe Limited, Bank Muscat SAOG, CliffordCapital Pte. Ltd

US$ 106,916,112 103,907,700 101,154,146

Rial Commercial Facilities Agreement

Bank Muscat SAOG, Bank Sohar SAOG, National Bank of Oman SAOG

OMR 50,000,000 48,600,000 47,312,100

Sinosure Covered Facilities Agreement

Bank of China Limited, China Development Bank Corporation

US$ 133,279,200 129,812,400 126,372,371

Working Capital Facility Agreement

Bank Muscat SAOG OMR 1,500,000 – –

Unfunded Facility Arrangements:

ECA Performance Bond Facility Agreement

Bank Muscat SAOG US$ 1,540,800 1,540,800 1,540,800

293,236,112 283,860,900 276,379,417

No Cash Sweep MechanismThe Finance Documents do not impose any mandatory cash sweep mechanism in respect of Sembcorp Salalah’s accounts. This is unlike many of the listed power companies in Oman, which are subject to a mandatory cash sweep mechanism under their financing arrangements, resulting in either nil or limited dividends in the latter part of the P(W)PA period for the relevant project company or the requirement to refinance existing debt in order to seek the removal of this requirement.

The absence of a mandatory cash sweep mechanism in Sembcorp Salalah’s financing arrangements means that Sembcorp Salalah’s ability to pay dividends will not be constrained in the same manner as if a cash sweep was imposed. As a result, based on the Offer Price, Sembcorp Salalah expects to pay dividends above the MSM average dividend yield over its lifetime. For further details of Sembcorp Salalah’s dividend policy, please see “Chapter XVI – Dividend Policy” of this Prospectus.

Chapter XII: Project Cost and Financing

Project Costs

Sembcorp Salalah achieved COD on 25 May 2012. The Plant was commissioned at a completed cost of approximately OMR 378 million (US$981 million). The following table shows the breakdown of the Project costs:

OMRUses:Construction Costs 279,994,685 Financing Costs 55,058,223 Development Costs 14,940,577 Other Capital Expenditures 16,271,374 Initial Inventory 8,041,669 Funds Available for Sembcorp Salalah 3,470,767 Total 377,777,295Sources:Share Capital 500,000 Shareholder Loans 94,957,195 Term Loans 282,320,100 Total 377,777,295

Equity Contributions

The Shareholders initially provided equity for the Project, as provided in the table below:

Shareholder: OMRSOFIH 200,000SOIHL 100,000IPWC 175,000BDCC 25,000Total 500,000

Shareholder Loans

On 20 November 2009, Sembcorp Salalah, its Shareholders at the time, and the lenders under the CTA, entered into the PSA, under which the Shareholders were required to provide subordinated advances, as provided in the table below:

Shareholder: Currency of Loan Amount (OMR)SOFIH US$ 37,982,878 SOIHL US$ 18,991,439IPWC OMR 33,235,018BDCC(1) OMR 4,747,860Total 94,957,195Note 1: On 26 December 2011, IPWC entered into a Shareholder Loan assignment whereby IPWC agreed to assign to BDCC a portion of the

loan to Sembcorp Salalah in the amount of OMR 4,747,860 and an amended and restated project support agreement was entered into.

As further described in “Chapter VII – Shareholding Details” of this Prospectus, at a meeting of the Board of Directors held on 19 June 2013, the directors of Sembcorp Salalah approved the conversion of the Shareholder Loans into equity of Sembcorp Salalah, increasing the issued and paid‑up share capital of Sembcorp Salalah to OMR 95,457,195, with an effective date of 1 July 2013.

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September 2026. As noted above, Sembcorp Salalah is not subject to a mandatory cash sweep mechanism under the Finance Documents.

The projected repayment schedule of the principal amounts of Sembcorp Salalah’s term facilities can be summarised as follows:

Outstanding as at 30 June

2013

Payable in 2HY 2013

Payable during FY

2014

Payable during FY

2015-16

Payable during FY

2017-18

Payable after FY 2018

In US Dollars 713,495,890 16,710,535 31,955,234 70,946,485 77,616,041 516,267,595

In Omani Rials 274,838,617 6,436,898 12,309,156 27,328,586 29,897,699 198,866,278

As at the date of this Prospectus, Sembcorp Salalah has paid both principal and interest in accordance with the terms and conditions of the Finance Documents.

Key Financing CovenantsThe key covenants under the CTA are summarised below:

Positive Covenants: The CTA contains usual positive covenants in relation to financing arrangements of this type, including, but not limited to: operation of the Plant; corporate existence; consents; taxes; pari passu ranking; application of revenue and proceeds; maintenance and inspection of records; maintenance of accounts; intellectual property; “know your customer” checks; compliance with laws; notice of testing; site security; and insurance.

Negative Covenants: The CTA contains usual negative covenants in relation to financing arrangements of this type, including, but not limited to: amendments to the Project Documents; liquidation or merger; entry into new agreements in relation to the Project; disposals (other than as permitted under the Finance Documents); further indebtedness (other than as permitted under the Finance Documents); negative pledge; change of business; capital assets; loans and guarantees; amendment to constitutional documents; transactions with affiliates; performance testing; winding up; actions in relation to the Government Guarantee; suspension or abandonment; immunity; use of proceeds; and illegal commissions.

Events of Default: The CTA contains usual events of default in relation to financing arrangements of this type, including, but not limited to, non‑payment, non‑compliance with the Finance Documents and the Project Documents; misrepresentation; insolvency events; execution and distress; judgments; delay; Government intervention, cross‑default; revocation of consents; illegality; DSCR ratio (see below); material adverse effect; failure of security interests; loss or damage to the Project; failure of the Government Guarantee; forecast funding shortfall; deferred amounts under performance bonds; abandonment; immunity; failure of performance bonds; failure of insurance; and changes to operation and maintenance guarantees.

Debt Service Coverage Ratio: Any fall in the DSCR, at any calculation date, below the ratio of 1.05:1 will constitute an event of default under the CTA.

In certain specified cases, where a default is capable of remedy, the CTA permits a cure period. As at the date of this Prospectus, Sembcorp Salalah is not in default under any of the Finance Documents or any other material financing arrangements. The PFA requires that the listing of the Offer Shares takes place within four years of the date of the incorporation of Sembcorp Salalah, i.e., on or before 28 September 2013. The listing of the Offer Shares is scheduled to take place within 15 days after the Offer Closing Date, which may fall after 28 September 2013. However, Management believes that there is no material risk under the PFA (and the related obligations under the Finance Documents, in light of the specific cure periods set out therein) if the Offer Shares are listed a few days after 28 September 2013, provided that the Offer Closing Date is adhered to.

Debt Service ReserveUnder the terms of the Finance Documents, Sembcorp Salalah is required to maintain a cash balance equivalent to six months’ debt service in a separate bank account pledged in favour of the lenders. The lenders are entitled to withdraw amounts from this account if certain events occur, such as a default under the Finance Documents.

As an alternative to maintaining the debt service reserve amount as cash, Sembcorp Salalah has the option of procuring letters of credit, from creditworthy institutions, in respect of some or all of the debt service reserve amount. The providers of such letters of credit are not permitted to share in the security package.

As at the date of this Prospectus, Sembcorp Salalah maintains the entire debt service reserve amount as cash. Sembcorp Salalah intends to offer each founder Shareholder the option of arranging a letter of credit to satisfy the minimum required balance in the debt service reserve account. If any founder Shareholder arranges such a letter of credit, the cash so released (which prior to the issuance of the letter of credit was being used to satisfy the minimum required balance in the debt service reserve account) will, subject to compliance with applicable laws, be transferred to that Shareholder by means of a loan from Sembcorp Salalah on an arms‑length basis.

Interest and HedgingInterest under the Dollar Commercial Facilities Agreement is charged at a floating rate of LIBOR plus margin, as shown in the table below:

PeriodMargin

(% per annum)

Prior to the Completion Date 3.00%

From the Completion Date up to the sixth anniversary of the Completion Date 2.85%

From the sixth anniversary of the Completion Date to the tenth anniversary of the Completion Date

3.20%

From the tenth anniversary of the Completion Date to the thirteenth anniversary of the Completion Date

3.55%

From the thirteenth anniversary of the Completion Date 3.95%

In accordance with the terms of the CTA, Sembcorp Salalah has fixed the rate of interest through interest rate swap agreements entered into with SMBC Capital Markets, Ltd (dated 20 November 2009), KfW IPEX‑Bank GmbH (dated 20 November 2009 and 23 March 2010) and Standard Chartered Bank (dated 24 November 2009) and 31 May 2010, respectively, for 95.32 per cent. of its US Dollar commercial facilities.

Interest under the Rial Commercial Facilities Agreement is charged at a fixed rate, as shown in the table below:

PeriodMargin

(% per annum)

From Financial Close to the third anniversary of Financial Close 8.00%

From the third anniversary of Financial Close to the fifth anniversary of Financial Close

7.00%

From the fifth anniversary of Financial Close to the eighth anniversary of Financial Close

4.25%

From the eighth anniversary of Financial Close TBC(1)

Note 1: From the eighth anniversary of Financial Close, the margin is to be agreed between Sembcorp Salalah and the Omani Rial commercial lenders.

Interest under the Sinosure Covered Facilities Agreement is charged at a floating rate of LIBOR plus margin of 3 per cent. per annum.

Repayment ScheduleThe aggregate amount of drawdowns under each of Sembcorp Salalah’s term facilities is repayable in full by 29 half‑yearly instalments commencing from 30 September 2012, with the final instalment being due on 30

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Direct Agreement 1 March 2010 English Sembcorp Salalah and GE

Direct Agreement in relation to the CSA.

Direct Agreement 11 February 2010 English Sembcorp Salalah and Sembcorp Salalah O&M

Direct Agreement in relation to the O&M Agreement.

Direct Agreement Has not yet been entered into

English Sembcorp Salalah and OMSGD

Direct Agreement in relation to the WCA.

Note 1: The Agreement for security over Shares was acceded to by BDCC on 26 December 2011.

Security Package

Each term loan has been secured in favour of the lenders by a package of share and asset security granted by Sembcorp Salalah and the Shareholders. It includes the following agreements, which have each been duly registered where necessary:

Security Document DateGoverning Law Grantor(s) Security Granted

Commercial mortgage 9 February 2010 Omani Sembcorp Salalah

First priority mortgage over Sembcorp Salalah’s accounts, tangible assets, intangible assets, consents, project contracts and future assets.

Sale and purchase agreement

9 February 2010 Omani Sembcorp Salalah

Sale and purchase agreement in respect of the assets secured pursuant to the commercial mortgage described above.

Legal mortgage 1 March 2010 Omani Sembcorp Salalah

First priority mortgage over Sembcorp Salalah’s rights, title and interest in the Usufruct Agreements and the related movable and immovable property.

Agreement for security over Shares

8 February 2010 Omani SOIHL, SOFIH, IPWC and BDCC(1)

Charge over all of the Shares in Sembcorp Salalah.

Account pledge 9 June 2013 Omani Sembcorp Salalah

Pledge over fixed deposit account of Sembcorp Salalah.

Security Deed 9 February 2010 English Sembcorp Salalah

Fixed charge over all of Sembcorp Salalah’s right, title and interest in the Site, and floating charge over the whole of Sembcorp Salalah’s undertaking, assets, property, revenues and present and future rights.

Deed of Charge and Assignment

20 November 2009 English Sembcorp Salalah

Assignment over Sembcorp Salalah’s accounts and project contracts and first fixed charge over certain authorised investments.

Deed of Assignment

27 January 2010 English Sembcorp Salalah

Assignment over Sembcorp Salalah’s reinsurance policies.

Direct Agreement 23 November 2009 Omani Sembcorp Salalah and OPWP

Direct Agreement in relation to the PWPA.

Direct Agreement 23 November 2009 Omani Sembcorp Salalah and MOG

Direct Agreement in relation to the NGSA.

Direct Agreement 23 November 2009 Omani Sembcorp Salalah and DPC

Direct Agreement in relation to the ECA.

Direct Agreement 13 January 2010 English Sembcorp Salalah and SEPCOIII

Direct Agreement in relation to the EPC Contract.

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The Project may be adversely affected by increased operating and maintenance costs or capital expenditure, and cost increases higher than those projected at the outset may not be recovered under the PWPA.Operating the Plant involves, among other things, general technical, legal, regulatory and other factors that may be beyond Sembcorp Salalah’s control. Changes in these factors could make it more expensive for Sembcorp Salalah to operate the Plant than projected, and could require additional capital expenditures or could reduce revenues. Additionally, complications with engineering design and implementation or technology or equipment failure could result in reduced plant availability or production and/or higher‑than‑anticipated capital expenditures and/or operating and maintenance costs.

The rates at which the capacity charges and output charges under the PWPA were calculated and fixed for its 15‑year term, subject to specified escalations, and cost increases higher than those projected at the outset may not be recovered. The Project could be subject to changes in the operating cost structure over the 15‑year term of the PWPA, including on account of reasons relating to operations; maintenance, repair and overhaul of plant and equipment; procurement of backup fuel; backup fuel transportation; environmental compliance; ground rent; utility services; and insurance.

Sembcorp Salalah depends on OPWP to purchase all of the capacity and output of the Plant under the terms of the PWPA.OPWP is Sembcorp Salalah’s sole customer and the sole purchaser of all electricity and water capacity and output from the Plant. Payments by OPWP under the PWPA are Sembcorp Salalah’s sole source of revenue. Under the PWPA, Sembcorp Salalah is entitled to receive capacity charges from OPWP. These capacity charges are payable by OPWP regardless of whether the actual output of the Plant is dispatched. No other entity, besides OPWP, is currently licensed in Oman to buy the Plant’s capacity. If OPWP were to cease fulfilling its obligations under the PWPA, Sembcorp Salalah would not be able to sell the Plant’s capacity and output to another purchaser, absent a change in law. Sembcorp Salalah is dependent on OPWP’s creditworthiness and the on‑going financial support it receives from EHC and the Government from time to time. If OPWP’s creditworthiness materially deteriorates and/or if EHC or the Government ceases to provide the requisite financial support to OPWP, OPWP may no longer be able to fulfil its obligations under the PWPA and its ability to make payments under the PWPA may be impaired and accordingly, Sembcorp Salalah’s revenue may be adversely affected, which could have a material adverse effect on the business, results of operations and financial condition of Sembcorp Salalah, including the market price of the Shares.

OPWP is entitled to terminate the PWPA for default by Sembcorp Salalah which, absent cure (if curable) within agreed cure periods, will give rise to such termination right. In such case Sembcorp Salalah will lose its sole source of revenue. The extension of the PWPA at the expiry of its term is also dependent on the agreement of OPWP. Although the power and water sectors are of high strategic importance to the Dhofar Governorate and Oman as a whole, this may not always be the case and the power and water sectors in Oman may change significantly during the term of the PWPA. The long‑term view of the Project depends greatly on the demand for electricity and desalinated water in the Dhofar Governorate. Any termination of the PWPA, failure to extend the PWPA at the expiry of its term, or other failure to realise the forecasted revenues following termination or expiry of the PWPA could have a material adverse effect on the business, results of operations and financial condition of Sembcorp Salalah, including the market price of the Shares.

OPWP is currently the sole purchaser of all power generation and water production capacity from licensed generation and production operators in Oman. As such, OPWP does not currently face any competition. However, there can be no assurance that the Government will not open the electricity and water markets to competitors or allow bypass sales of power and water by providers of generation or production capacity to persons other than OPWP in the future. In addition, no assurance can be made that OPWP’s role in the sector will not change in the future. The introduction of competition in Oman or the change of OPWP’s role in the sector could have a material adverse effect on the business, results of operations and financial condition of Sembcorp Salalah, including the market price of the Shares.

Chapter XIII: Risk Factors

Prior to investing in Offer Shares, prospective Applicants should carefully consider the risk factors relating to Sembcorp Salalah’s business and industry described below together with all other information contained in this Prospectus, including the financial statements set out in “Chapter XXIII – Financial Statements” of this Prospectus, before making any investment decision relating to the Offer Shares. These risks and uncertainties are not the only issues that Sembcorp Salalah faces; additional risks and uncertainties not presently known to Sembcorp Salalah or that Sembcorp Salalah currently believes to be immaterial may also have a material adverse effect on its financial condition or business success. The occurrence of any or a combination of the following events could have a material adverse effect on Sembcorp Salalah’s business, results of operations, financial condition and prospects and cause the market price of the Shares to fall significantly and investors to lose all or part of their investment. Unless otherwise stated in the relevant risk factors set out below, Sembcorp Salalah is not in a position to specify or quantify the financial or other risks mentioned herein.

Risks Relating to the Project

The Plant has a limited operating history and Sembcorp Salalah’s historic financial statements are unlikely to be indicative of future cash flows, results of operations or rate of growth.The Plant achieved COD and commenced full commercial operation on 25 May 2012 and, consequently, the Plant has only operated for approximately 14 months. Accordingly, prospective investors have limited information with which to evaluate the operating performance of the Plant and its current or future prospects or financial results and performance.

The business prospects and financial performance of Sembcorp Salalah must be considered in light of the risks, uncertainties, expenses and difficulties frequently encountered by projects with a limited operating history, including challenges in planning and forecasting accurately due to limited historical data, which means the past results of Sembcorp Salalah cannot be relied on as an indication of future performance. Accordingly, the inability to successfully identify and address risks and difficulties and to successfully implement Sembcorp Salalah’s business plan could have a material adverse effect on the business, results of operations and financial condition of Sembcorp Salalah, including the market price of the Shares.

Sembcorp Salalah’s sole activity is the generation of electricity and the desalination of seawater.The operation of power generation and seawater desalination plants such as the Plant means that Sembcorp Salalah’s business is exposed to operational risks. These operational risks can include, or result in, among other things: machinery breakdown and equipment failures; facilities operating inefficiently; available plant capacities being less than projected; disruptions in primary and back‑up fuel supply; increased expenses or outages due to increased water turbidity, for example, due to the kharif period; disruptions to key third‑party suppliers; disruptions in seawater supply or quality; disruptions in the transmission systems; loss of key staff; inability to comply with regulatory or permit requirements; unforeseen third‑party liabilities; and force majeure or catastrophic events such as acts of war, armed conflicts, blockades, acts of rebellion, riots, civil commotions, strikes, sabotage, terrorist acts, lightning, fires, floods, earthquakes, tsunamis, floods, storms, cyclones, typhoons, tornados or other natural calamities or acts of God.

The operational risks of the Project may prevent Sembcorp Salalah from performing its obligations under the PWPA, which is its source of revenue and, in certain situations, such failure to perform could result in OPWP terminating the PWPA. Additionally, Sembcorp Salalah’s current financial covenants prohibit it from diversifying its operations in the future and it is unlikely that Sembcorp Salalah will be able to generate revenue or cash flow, except through the PWPA. If the Plant is not operated successfully, this could have a material adverse effect on the business, results of operations and financial condition of Sembcorp Salalah, including the market price of the Shares.

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The loss of any member of the Board or Management or the loss of any other key employees may result in a loss of organisational focus, poor execution of operations, or an inability to identify and execute potential strategic initiatives such as expansion of capacity. The occurrence of any of these events may have a material adverse effect on the business, results of operations and financial condition of Sembcorp Salalah, including the market price of the Shares.

Sembcorp Salalah is dependent on power and water transmission facilities that it does not own or control and that may be subject to transmission constraints.Sembcorp Salalah depends on power and water transmission facilities owned, operated and maintained by DPC and the OMSGD, respectively, to export the electricity and potable water output delivered from the Plant under the PWPA. The Plant is connected to DPC’s and the OMSGD’s facilities at physical connection points. If either DPC or the OMSGD fail to provide Sembcorp Salalah with the required connections or disconnects its systems, or if DPC’s or the OMSGD’s transmission facilities fail to provide Sembcorp Salalah with adequate transmission capacity, Sembcorp Salalah could be restricted in its ability to deliver electricity or desalinated water output, as the case may be. Provided that Sembcorp Salalah’s plant units are available during such periods of disconnection without fault on Sembcorp Salalah’s part or transmission system insufficiency or failure, Sembcorp Salalah would be entitled to continue to receive capacity charges for available power and water capacities, but it would receive no output charges for the shortfall in output. Any such disconnection or insufficiency or failure of power and water transmission facilities could have a material adverse effect on the business, results of operations and financial condition of Sembcorp Salalah, including the market price of the Shares.

Sembcorp Salalah depends on certain of its shareholders and their affiliates for its operations and engages in transactions with certain related partiesSembcorp Salalah is involved in and is dependent on certain related party transactions with its shareholders and with other companies controlled by its shareholders, including the operator, Sembcorp Salalah O&M. Sembcorp Salalah depends on Sembcorp Salalah O&M, which is a company currently owned by certain of its shareholders, to manage all aspects of the operation and maintenance of the Plant. Any inability or failure by Sembcorp Salalah O&M to provide these services could have a material adverse effect on the business, results of operations and financial condition of Sembcorp Salalah, including the market price of the Shares.

Sembcorp Salalah has also engaged in transactions with certain related parties, and it may continue to do so in the future. See “Chapter XVIII – Related Party Transactions and Material Conflicts” of this Prospectus. Conflicts of interests may arise between Sembcorp Salalah and its affiliates, potentially resulting in the conclusion of transactions on terms not determined by market forces. Sembcorp Salalah has certain policies in place dealing with conflicts of interest and intends to abide by applicable laws and regulations relating to transactions with related parties.

The operation and maintenance of the Plant depends on the performance by various third parties of contractual obligations.Sembcorp Salalah relies on counterparties to its key contracts, including the Project Documents, in the operation of the Plant. In the development of the Plant, Sembcorp Salalah has relied on contractors and numerous subcontractors, engineers, architects and licensing, permitting and other legal specialists, as well as financial institutions and other providers of capital, to finance the development of the Project. If any such counterparty becomes bankrupt or insolvent, defaults in the performance of its contractual obligations, is excused from such performance as a result of a force majeure or similar event or otherwise does not perform its contractual obligations for any reason, Sembcorp Salalah may not be able to obtain alternate suppliers, lessors, premises, goods or services, as the case may be, on terms and conditions as favourable as the existing contracts relating to such contractors, suppliers, lessors, service providers, premises, goods and services. Further, material non‑performance by a counterparty under a key contract may give rise to a default or termination under the PWPA or under related project‑level indebtedness. Any such action by a key third party could have a material adverse effect on the business, results of operations and financial condition of Sembcorp Salalah, including the market price of the Shares.

Sembcorp Salalah is subject to disputes with OPWP and SEPCOIII in relation to liquidated damages under the PWPA.As further described in “Chapter X – Description of Sembcorp Salalah and Business Overview – Litigation and Regulatory Proceedings” of this Prospectus, OPWP has claimed liquidated damages of approximately US$44 million from Sembcorp Salalah under the PWPA, in relation to delays in achieving various construction milestone dates set out in the PWPA. In turn, Sembcorp Salalah is seeking liquidated damages of approximately US$99 million under the EPC Contract from SEPCOIII, and SEPCOIII has filed a counterclaim against Sembcorp Salalah for additional payments associated with various events allegedly attributable to Sembcorp Salalah of approximately US$127 million.

All forecasts in this Prospectus, including dividend forecasts, assume that the final settlement of disputes with OPWP and SEPCOIII will result in Sembcorp Salalah being in a neutral position (i.e., no positive or negative impact). In the event that the final outcome of these disputes (which is expected to occur in 2013/14) is negative for Sembcorp Salalah, then depending on the extent of the negative financial impact, Sembcorp Salalah may not be in a position to pay dividend in the manner forecast in this Prospectus (as set out in “Chapter XVI – Dividend Policy”), or may, temporarily, not be in a position to pay any dividend at all. On the other hand, in the event that the final outcome of these disputes is positive for Sembcorp Salalah, then the Board may favourably consider the payment of a one‑time special dividend to the Shareholders.

There can be no certainty of a neutral or positive outcome to these disputes, and any negative outcome to these disputes for Sembcorp Salalah could have a material adverse effect on the business, results of operations and financial condition of Sembcorp Salalah, including the market price of the Shares and the capacity of Sembcorp Salalah to pay dividends.

Sembcorp Salalah does not own the land on which the Plant is situated.The site used for the Plant is owned by the Ministry of Housing which, under the terms of the UAS, has granted a usufruct right over the Site to Sembcorp Salalah with a term of 25 years from the Effective Date, which may be renewed at the option of Sembcorp Salalah for a further term of 25 years. If Sembcorp Salalah is in material breach of the terms of the UAS, the Ministry of Housing may, at its option, elect to terminate the UAS early, evict Sembcorp Salalah from, and repossess, the site. A termination of the UAS would have a material adverse effect on the business, results of operations and financial condition of Sembcorp Salalah, including the market price of the Shares.

Sembcorp Salalah’s ability to operate the Plant and respond to unexpected events is dependent on the availability of skilled personnel, including those provided by Sembcorp Salalah O&M.Sembcorp Salalah depends to a significant degree on the continued services of its key personnel, both employed by it and those employed by Sembcorp Salalah O&M, which is responsible for operating the Plant. Their knowledge of the power generation and desalination industries and their skills and experience are crucial elements to the success of Sembcorp Salalah’s business. Qualified personnel are in great demand throughout the power and desalination industries. The loss of any key personnel or an inability to attract, retain and motivate additional qualified management and other personnel could have a material adverse effect on the business, results of operations and financial condition of Sembcorp Salalah, including the market price of the Shares.

Sembcorp Salalah also faces labour competition risk due to the limited supply of skilled local labour in the Dhofar Governorate. The Ministry of Manpower’s Omanisation Plan requires Sembcorp Salalah to implement policies to increase the proportion of its Omani workforce. Traditionally, businesses in the Dhofar Governorate have found it challenging to attract skilled Omani employees from other regions in the country. Any competing business establishing another power and desalination plant in the region in future might potentially aim to recruit a number of Sembcorp Salalah’s Omani employees on the basis that it is the most readily‑available local talent pool in the region.

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or partial loss of Sembcorp Salalah’s assets, there can be no assurances that the insurance proceeds received by Sembcorp Salalah in respect thereof will be sufficient to satisfy all of its indebtedness. The occurrence of a significant adverse event not fully or partially covered by insurance could have a material adverse effect on the business, results of operations and financial condition of Sembcorp Salalah, including the market price of the Shares.

Sembcorp Salalah is exposed to the risks of terrorism or sabotage.Sembcorp Salalah employs sophisticated systems of physical security measures to protect its employees, operations and assets. A security breach could lead to significant damage to Sembcorp Salalah’s assets or to injury or loss of life to its personnel. Whilst Sembcorp Salalah has terrorism and sabotage insurance coverage in place, some or all of the costs associated with any such breach and the resulting losses may be uninsured. The occurrence of any significant security breach could have a material adverse effect on the business, results of operations and financial condition of Sembcorp Salalah, including the market price of the Shares.

Sembcorp Salalah is subject to the risks associated with the use of gas supply.Natural gas is supplied by to the Plant through a pipeline owned and operated by the Ministry of Oil & Gas. The Project therefore relies on the security measures adopted by the Government for the operation of these pipelines and there can be no guarantee that such security will be effective and the pipeline could be subject to sabotage or terrorist attack. In addition, Sembcorp Salalah is subject to all of the usual operating risks associated with gas supply, including the possibility of leaks and explosions in pipelines, any of which could cause personal injury, result in damage to, or destruction of, the pipeline, production facilities and equipment and the environment. In addition to the impact on the environment, such an accident may cause a material delay or interruption in the supply of natural gas to the Plant, which, in turn, could have a material adverse effect on the business, results of operations and financial condition of Sembcorp Salalah, including the market price of the Shares.

Sembcorp Salalah’s business may be adversely affected if the Omani Rial/US Dollar peg were to be removed or adjusted.Sembcorp Salalah maintains its accounts, and reports its results, in Omani Rial. As at the date of this Prospectus, the Omani Rial remains pegged to the US Dollar. However, there can be no assurance that the Omani Rial will not be de‑pegged in the future or that the existing peg will not be adjusted in a manner that adversely affects Sembcorp Salalah. Any such de‑pegging could have an adverse effect on the business, results of operations and financial condition of Sembcorp Salalah, including the market price of the Shares.

Inflation could increase Sembcorp Salalah’s costs and adversely affect its results of operations.The economy in Oman has been characterised by high rates of inflation in recent years. As Sembcorp Salalah tends to experience inflation‑driven increases in some of its costs, which are sensitive to rises in general price levels in Oman, its costs may rise. In this situation, Sembcorp Salalah may not be able to raise the prices it charges for its products and services sufficiently to preserve operating margins. Accordingly, any resumption of high rates of inflation in Oman could increase its costs and decrease its operating margins.

Adverse changes in foreign exchange and custom duty rates will adversely affect Sembcorp Salalah’s business.A substantial portion of the equipment that Sembcorp Salalah intends to deploy for expansion and future roll‑outs is imported and requires payments in foreign currencies. Imports are subject to regulations and approvals, the availability of foreign exchange credit and the levy of customs duties. Where there is no local alternative, delays in obtaining required approvals or changes in customs duties or foreign exchange rates could lead to a delay in the acquisition of necessary equipment and adverse financial implications due to price movements thereof, which could have a material adverse effect on Sembcorp Salalah’s business, results of operations, financial condition and prospects, including the market price of the Shares.

Sembcorp Salalah’s operations are subject to government regulation and licences.Sembcorp Salalah’s operations are subject to regulation in Oman. Regulations that specifically apply to Sembcorp Salalah’s business generally cover five areas: corporate existence, and power and authority to conduct its business; the conduct of power generation and water production; the transmission of power and water; environmental regulation; and regulation of health and safety. Sembcorp Salalah is subject to a varied and complex body of laws and regulations that both public officials and private parties may seek to enforce. Sembcorp Salalah conducts its power generation and seawater desalination operations under several licences, leases and permits and the Usufruct Agreements. Such licences, permits and usufruct may be suspended, terminated or revoked if Sembcorp Salalah does not comply with the licence, permit or usufruct requirements, does not comply with any applicable emissions and other environmental requirements, systematically fails to provide required information, becomes insolvent, fails to fulfil any capital expenditure or production obligations or does not comply with any other applicable licence, permit or usufruct conditions. In addition, the laws and regulations to which Sembcorp Salalah is subject impose numerous requirements on the modification, ownership and operation of the Plant. If Sembcorp Salalah fails to comply with these requirements, this may prevent it from modifying or operating the Plant, and Sembcorp Salalah could be subject to civil or criminal liability, fines and the imposition of clean‑up obligations, including liens, to secure those obligations. Sembcorp Salalah’s business could also be materially adversely affected by changes in existing law, the interpretation of existing laws or the adoption of new laws applicable to Sembcorp Salalah. The imposition of fines or penalties, or the revocation or suspension of licences, permits or usufruct arrangements could have a material adverse effect on the business, results of operations and financial condition of Sembcorp Salalah, including the market price of the Shares.

Sembcorp Salalah may not have adequate insurance to cover all potential losses.Sembcorp Salalah is obligated under the Project Documents to maintain a certain minimum level of insurance against certain risks; however, as a result of certain operating risks and other potential hazards associated with the power generation and water desalination industry, Sembcorp Salalah may from time to time become exposed to significant liabilities for which it may not have adequate insurance coverage. Power generation and water desalination involves hazardous activities, including acquiring, transporting and unloading fuel, operating large pieces of rotating equipment and delivering electricity and potable water to transmission systems. In addition to natural risks such as earthquakes, floods, lightning, hurricanes and wind, hazards such as fire, explosion, collapse and machinery failure, there are inherent risks in the Project that may occur as a result of inadequate internal processes, technological flaws, human error, terrorism or unknown external events. The control and management of these risks depend on adequate development and training of personnel and on the existence of operational procedures, preventative maintenance plans and specific programmes supported by quality control systems which reduce, but do not eliminate, the possibility of the occurrence and impact of these risks.

Sembcorp Salalah maintains insurance for the Project, including all risks property and machinery insurance, general third‑party liability insurance, and business interruption insurance, in amounts and with deductibles that Sembcorp Salalah considers appropriate. There can be no assurance that such insurance will be sufficient or effective under all circumstances and against all hazards or liabilities to which Sembcorp Salalah may be subject. Further, if there are changes in the insurance markets or increases in insurance costs, Sembcorp Salalah cannot provide assurance that insurance coverage will continue to be available on terms similar to those presently available or at all, or that Sembcorp Salalah will be able to pass through to OPWP for reimbursement under the PWPA any insurance costs in excess of those projected when Sembcorp Salalah entered into the PWPA. There can be no assurances that Sembcorp Salalah’s insurance coverage will be adequate to compensate it for any actual losses suffered, nor can there be any assurances that Sembcorp Salalah’s existing insurance policies will continue to be available on commercially reasonable terms or at all. Moreover, the occurrence of a significant event that is uninsured, such as a substantial business interruption could have a material adverse effect on Sembcorp Salalah’s financial position, results of operations and cash flows. In the event there is a total

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Libya, Bahrain, Yemen and Syria have witnessed serious unrest, in some instances leading to civil disorder, foreign military intervention and a change of government. As at the date of this Prospectus, a conflict is ongoing in Syria. Historically, there are on‑going security concerns in‑and‑around the Palestine and Lebanon areas with such conflicts having the ability to increase in scale and severity in a particularly short period of time. In recent years, there have been instances of political unrest in Iran and continuing tension regarding Iran’s nuclear programme, which have the potential to give rise to foreign military action against Iran and possible Iranian retaliatory action.

Regional risks could also affect investor sentiment in the MENA region as a whole and potentially have a material and adverse effect on the market price of the Shares.

Risks Relating to the Shares

There is no existing market for the Shares and it is uncertain whether one will develop to provide Shareholders with adequate liquidity.Prior to the Offer, there has not been a public market for the Shares. The Selling Shareholders cannot predict whether investor interest in Sembcorp Salalah will lead to the development of an active trading market on the MSM, or otherwise, or how liquid any market that does develop might be. The Offer Price for the Offer Shares may not be indicative of prices that will prevail in the open market following the Offer.

Future sales of the Shares could adversely affect their market price.Sembcorp Salalah is unable to predict whether substantial amounts of Shares (in addition to those which will be available in the Offer) will be sold in the open market following the termination of the lock‑up arrangements of the Selling Shareholders. Any sales of substantial amounts of Shares in the public market, or the perception that such sales might occur, could materially and adversely affect the market price of the Shares.

The market price of the Shares may fluctuate widely in response to different factors.Following the Offer, the market price of the Shares could be subject to significant fluctuations due to a change in sentiment in the stock market regarding the Shares or securities similar to them or in response to various facts and events, including any regulatory changes affecting Sembcorp Salalah’s operations, variations in its half yearly or yearly operating results and its business developments or those of its competitors.

In addition, stock markets have from time to time experienced extreme price and volume volatility, which, in addition to general economic and political conditions, could adversely affect the market price for the Shares. To optimise returns, investors may need to hold the Shares on a long‑term basis as they may not be suitable for short‑term investment. The value of the Shares may go down as well as up, and the market price of the Shares may not reflect the underlying value of Sembcorp Salalah’s business.

Sembcorp Salalah may not be able to fulfil its dividend policy.Any payment of future dividends will be made taking into account the sufficiency of distributable reserves and liquidity in order to ensure Sembcorp Salalah’s operational needs and/or business growth are not limited by the unavailability of funds, as well as Sembcorp Salalah’s known contingencies and compliance with any funding facility covenants. In addition, under its outstanding term loan facilities, Sembcorp Salalah is currently prohibited from making distributions to Shareholders unless the payment is made from retained profits (i.e., accumulated losses have been recovered), and Sembcorp Salalah is able to demonstrate from cash flow projections for the following year that it will be able to meet debt service on a quarterly basis in the following year and also maintain an interest coverage ratio in accordance with the applicable facility agreement.

Dividend payments are not guaranteed and the Board of Directors may decide, in its absolute discretion, at any time and for any reason, not to pay dividends. Further, any dividend policy, to the extent implemented, will significantly restrict Sembcorp Salalah’s cash reserves and may adversely affect its ability to fund unexpected capital expenditures, as well as the ability to make interest and principal repayments on its outstanding term loan facilities. As a result, Sembcorp Salalah may be required to borrow additional money or raise capital by issuing equity securities, which may not be possible on attractive terms or at all.

Because Sembcorp Salalah has operated as a SAOC, it has limited experience complying with public/listed company obligations and fulfilling these obligations will be expensive and time consuming and may divert Sembcorp Salalah’s management’s attention from the day-to-day operation of the business.Sembcorp Salalah has operated historically as a SAOC and, accordingly, some of its senior management have limited experience managing a publicly traded company and complying with laws pertaining to public companies. In particular, the significant regulatory oversight and reporting obligations imposed on public companies will require substantial attention from Sembcorp Salalah’s senior management and may divert its attention away from the day‑to‑day management of Sembcorp Salalah’s business, which could have an adverse effect on Sembcorp Salalah’s business, financial condition and results of operations, including the market price of the Shares. Similarly, corporate governance obligations, including with respect to the development and implementation of appropriate corporate governance policies, and concurrent service on the Board of Directors and possibly multiple Board committees, will impose additional burdens on Sembcorp Salalah’s directors.

In addition, as a public company, Sembcorp Salalah will incur significant legal, accounting and other expenses that it did not incur as a private company. Sembcorp Salalah will also incur costs associated with its public company reporting requirements and it is expected that being a public company will make it more expensive for Sembcorp Salalah to hire directors and to obtain director and officer liability insurance. Sembcorp Salalah may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. Further, Sembcorp Salalah may need to hire additional accounting, financial and compliance staff with appropriate public company experience and technical accounting knowledge.

Risks Relating to Oman

Investing in securities involving emerging markets generally involves a higher degree of risk.Investing in securities involving emerging markets, such as Oman, generally involves a higher degree of risk than investments in securities of issuers from more‑developed countries. These higher risks include, but are not limited to: political, social and economic instability; external acts of warfare and civil clashes; governments’ actions or interventions, including tariffs, protectionism, subsidies, expropriation of assets and cancellation of contractual rights; regulatory, taxation and other changes in law; difficulties and delays in obtaining new permits and consents for Sembcorp Salalah’s operations or renewing existing ones; potential lack of reliability as to title to real property in certain jurisdictions where Sembcorp Salalah operates; and inability to repatriate profits and/or dividends.

Oman’s economy is susceptible to future adverse effects similar to those suffered by other emerging market countries. In any event, there can be no assurance that the market for securities bearing emerging market risk, such as the Shares, will not be affected negatively by events elsewhere, especially in emerging markets.

Any property in Oman, whether or not owned by a foreign entity or investor, at any time, may be compulsorily acquired by the government, if to do so would be in the public interest.Any property in Oman may, whether or not owned by a foreign entity or investor, at any time, be compulsorily acquired by the Government, if to do so would be in the public interest. Land could be compulsorily acquired by Royal Decree or pursuant to any specific powers conferred upon the Government pursuant to a specific Royal Decree after a period of notification.

Oman is located in a region that has been subject to ongoing political and security concerns.Oman is located in the MENA region, a region that is strategically important and subject to ongoing political and security concerns. The MENA region is currently experiencing an unprecedented level of political instability, turmoil and conflict, as evidenced by recent events, which could have an adverse effect on Oman’s ability to engage in international trade and which could also indirectly have a material adverse effect on Sembcorp Salalah’s businesses, financial condition, results of operations or prospects, including the market price of the Shares.

The MENA region, in which Oman is located, is subject to a number of geopolitical and security risks and ongoing unrest. Beginning in the first half of 2011, a number of countries in the MENA region, including Tunisia, Egypt,

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Capacity ChargesCapacity payments are paid to Sembcorp Salalah by OPWP in respect of the Plant’s contracted capacity for power and water, irrespective of how much power and water is actually dispatched, and includes a fixed operations and maintenance component to cover, amongst other things, fixed operation and maintenance, insurance, and staff costs as well as the procurement of spare parts. Deductions are made from Sembcorp Salalah’s capacity payments only to the extent that the Plant’s units are either not available, subject to planned unavailability allowances, or operate at a reduced capacity pursuant to the terms of the PWPA.

Output ChargesOPWP pays Sembcorp Salalah supplemental payments in respect of certain adjustments and/or variations to cover variable operating costs of electricity generation and desalination (excluding fuel costs), including, amongst other things, start‑up costs, costs relating to the use of backup fuel, operations and maintenance costs relating to shared facilities and certain insurance cost adjustments and staff costs.

Financing ArrangementsSembcorp Salalah has an obligation to service certain financing arrangements prior to the payment of dividends. The majority of its financing costs are appropriately hedged, which assists Sembcorp Salalah in meeting its obligations under these arrangements.

The OperatorThe operator of the Project, Sembcorp Salalah O&M, is a joint venture company owned by two of the Project Sponsors, Sembcorp Utilities and OIC, under a 15‑year operating agreement. Sembcorp Salalah O&M is managed locally and benefits from the expertise and procedures of Sembcorp Utilities and OIC, who are well‑established companies in the region, and whose interests are aligned with Sembcorp Salalah’s in ensuring that the Project is operated and maintained as efficiently as possible.

Seasonality Due to higher electricity demand in the summer period in Oman, higher revenues and operating profits would usually be expected in the second quarter of the year compared to the first, third and fourth quarters and planned maintenance of the Plant is conducted in the winter period due to lower electricity demand. Under the terms of the PWPA, there is no allowance for planned outages during the summer, resulting in higher capacity payments during that period.

Liquidated DamagesAs further described in “Chapter X – Description of Sembcorp Salalah and Business Overview – Litigation and Regulatory Proceedings” of this Prospectus, OPWP has claimed liquidated damages from Sembcorp Salalah under the PWPA, in relation to delays in achieving various construction milestone dates set out in the PWPA. In turn, Sembcorp Salalah is seeking reliefs, permitted under the PWPA, against such damages and at the same time, is seeking liquidated damages under the EPC Contract from SEPCOIII, where applicable. SEPCOIII has also filed a counterclaim against Sembcorp Salalah which has been and continues to be rejected by Sembcorp Salalah.

Results of Operations

Description of Key Income Statement Line ItemsRevenue: Sembcorp Salalah receives revenues from the sale of electricity and water to OPWP pursuant to the PWPA. The PWPA provides the payment calculation procedures, which determine the amounts to be invoiced by Sembcorp Salalah to OPWP on a monthly basis. Revenue includes amounts derived from capacity charges, electrical energy charges, water output charges and fuel charges. Revenue from the sale of electricity and water is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates. Revenue is recognised when electricity and water are delivered at the customers’ premises which is taken to be the point of time when the customer has accepted the deliveries and

Chapter XIV: Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following management’s discussion and analysis of financial condition and results of operations discusses Sembcorp Salalah’s historical financial results for the six‑month periods ended 30 June 2012 and 30 June 2013 and for the years ended 31 December 2010, 2011 and 2012. Investors should read the following discussion in conjunction with Sembcorp Salalah’s interim reviewed financial statements for the six‑month period ended 30 June 2013 and Sembcorp Salalah’s audited consolidated financial statements as at and for the years ended 31 December 2012, 2011 and 2010 prepared in accordance with IFRS, including the accompanying notes thereto, which are included in “Chapter XXIII – Financial Statements” of this Prospectus. Sembcorp Salalah’s interim reviewed financial statements for the six‑month period ended 30 June 2013 and Sembcorp Salalah’s audited consolidated financial statements as at and for the years ended 31 December 2010, 2011 and 2012 have been reviewed or audited (as applicable) by KPMG, Sembcorp Salalah’s independent auditor.

Prospective Applicants are encouraged to read the whole of this Prospectus, including “Chapter X – Description of Sembcorp Salalah and Business Overview” of this Prospectus for an overview and a description of Sembcorp Salalah’s operations and “Chapter XIII – Risk Factors” of this Prospectus for a discussion of factors that may affect Sembcorp Salalah’s business, financial condition and results of operations and not rely solely on the financial information contained in this section.

Overview

Sembcorp Salalah’s core business activity is to develop, own and operate an electricity generation and seawater desalination plant located between the towns of Taqah and Mirbat, approximately 50 km from Salalah, an administrative town in the Dhofar Governorate, the southernmost region of Oman. The Plant has been in full commercial operation since 25 May 2012 and has a contracted power capacity of 445 MW and a contracted water capacity of 15 MiGD. As at the date of this Prospectus, Sembcorp Salalah supplies approximately 72 per cent. of the power dispatch and 100 per cent. of the net installed water capacity of the Dhofar Governorate. As the largest and most energy‑efficient power and water plant in the Dhofar Governorate, the Plant is expected to play a major role in meeting the growing power and water demand of the region.

Sembcorp Salalah generates its revenues pursuant to a 15‑year term power and water purchase agreement with OPWP, which is indirectly wholly‑owned by the Government. The terms of the PWPA provide that the Plant’s contracted power and water capacity is sold exclusively to OPWP on a long‑term take‑or‑pay basis.

Key Factors Affecting Sembcorp Salalah’s Results

Described below are certain factors that may be helpful in understanding Sembcorp Salalah’s overall operating results. These factors are based on the information currently available to Management and may not represent all of the factors that are relevant to an understanding of Sembcorp Salalah’s current or future results of operations. See “Chapter XIII – Risk Factors” of this Prospectus.

Power and Water Purchase AgreementAs further described in “Chapter X – Description of Sembcorp Salalah and Business Overview” and “Chapter XI – Contractual Framework” of this Prospectus, Sembcorp Salalah entered into the PWPA, a long‑term power and water purchase agreement with OPWP, on 23 November 2009. Under the terms of the PWPA, Sembcorp Salalah receives revenues from OPWP for: (i) capacity charges, which are designed to cover fixed costs (including debt service and return on capital); (ii) electrical energy charges, which are designed to cover variable operating costs of generation (excluding fuel costs); (iii) water output charges, which are designed to cover variable operating costs of desalination (excluding fuel costs); and (iv) fuel charges, a pass‑through of the gas price under the NGSA. Payments under the PWPA are denominated in Omani Rials and Sembcorp Salalah is safeguarded under the PWPA against OMR/US$ exchange rate adjustments and also against inflation for the component of the tariff that covers fixed operation costs.

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Analysis of Income Statement for the Six Months Ended 30 June 2013Due to the achievement of COD on 25 May 2012, Management believes that no meaningful comparison can be given between income statement data for the six months ended 30 June 2013 and the six months ended 30 June 2012. An analysis of Sembcorp Salalah’s income statement data for the six months ended 30 June 2013 is provided as follows:

RevenueRevenue for the six months ended 30 June 2013 was OMR 31 million (US$80 million). Key characteristics of the revenue for the six‑month period were high power plant reliability of 99.4 per cent. and high water plant reliability of 99.4 per cent.

Cost of SalesTotal cost of sales for the six months ended 30 June 2013 was OMR 14 million (US$36 million). Fuel cost contributed 33 per cent. to the total cost of sales, which was pass‑through in nature, as described in “Chapter XI – Contractual Framework” of this Prospectus. Depreciation contributed to 41 per cent. of the total cost of sales. Other significant costs include insurance, gas turbine maintenance and labour cost.

Administrative and General ExpensesAdministrative and general expenses for the six months ended 30 June 2013 were OMR 0.4 million (US$1 million).

Other incomeOther income mainly represents interest waived on the Shareholder Loans. The Shareholders waived any right to be paid interest on the Shareholder Loans from 29 March 2012 to 30 June 2013 and authorised Sembcorp Salalah to write off the same.

Finance CostFinance cost for the six months ended 30 June 2013 was OMR 14 million (US$35 million). Finance cost mainly comprised interest expense on project financing loans and the release of deferred financing cost. Profit also improved by US$16 million, resulting from the waiver by the Shareholders of interest due on the Shareholder Loans. Further details relating to Sembcorp Salalah’s financing structure are provided in “Chapter XII – Project Cost and Financing” of this Prospectus.

Income Tax ExpenseIncome tax expense for the six months ended 30 June 2013 was OMR 2.5 million (US$6.5 million). Income tax expense related almost exclusively to Sembcorp Salalah’s deferred tax liability (net of deferred tax assets) arising mainly from temporary differences of property, plant and equipment and tax losses. Temporary differences mainly arose due to accelerated tax depreciation and a forecast of unused tax losses.

Profit after Tax for the PeriodAs a result of the foregoing factors, Sembcorp Salalah’s profit after tax for the six months ended 30 June 2013 was OMR 7 million (US$18 million). Sembcorp Salalah’s net profit margin was 22 per cent. for the six months ended 30 June 2013.

Analysis of Income Statement for the Year Ended 31 December 2012

Due to the achievement of COD on 25 May 2012, Management believes that no meaningful comparison can be given between income statement data for the year ended 31 December 2012 and the years ended 31 December 2011 and 31 December 2010. An analysis of Sembcorp Salalah’s income statement data for the year ended 31 December 2012 is provided as follows:

RevenueRevenue for the year ended 31 December 2012 was OMR 47 million (US$121 million). The vast majority of

the related risks and rewards of ownership have been transferred to the customer based on contractual terms stipulated in the PWPA.

Cost of Sales: comprises purchases of fuel, operating and maintenance costs, depreciation and insurance costs.

Administrative and general expenses: Administrative and general expenses consist principally of the cost of providing staff and other general administrative expenses. Staff costs have historically been the largest component of administration and other expenses relating to finance, human resources and information systems.

Finance cost: Finance costs comprise: (i) interest expense on interest rate swaps; (ii) interest expense on loans from the Shareholders; (iii) interest expense on interest‑bearing loans and borrowings; and (iv) asset retirement obligation expenses. Interest expense and similar charges are expensed in the income statement in the period in which they are incurred, except to the extent that they are capitalised as being directly attributable to the acquisition, construction or production of an asset which necessarily takes a substantial period of time to prepare for its intended use or sale.

Income tax expense: Income tax expense comprises current and deferred tax. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Sembcorp Salalah is liable to income tax in accordance with the laws of Oman, at the rate of 12 per cent. of taxable income in excess of OMR 30,000.

The table below sets out selected income statement data for the years ended 31 December 2010, 2011 and 2012 and the six month periods ended 30 June 2012 and 30 June 2013:

Statement of Comprehensive Income (OMR):

Year ended 31 December Six months ended 30 June

2010 2011 2012 2012 2013

Revenue — 3,048,977 46,649,938 18,268,167 31,292,249

Cost of sales — (2,510,919) (21,959,323) (8,763,715) (13,934,566)

Gross profit — 538,058 24,690,615 9,504,452 17,357,683

Administrative and general expenses (22,387) (95,143) (678,021) (289,049) (435,759)

Other income — — — — 6,184,592

Profit before interest and tax (22,387) 442,915 24,012,594 9,215,403 23,106,516

Finance cost (1,108,948) (20,709,372) (6,679,335) (13,625,303)

Profit (loss) before tax (22,387) (666,033) 3,303,222 2,536,068 9,481,213

Income tax expense — (195,934) (2,400,473) (1,842,961) (2,494,507)

Profit (loss) after tax for the period (22,387) (861,967) 902,749 693,107 6,986,706

Effective portion of change in fair value of hedge (15,467,164) (24,528,649) (2,030,432) (2,996,401) 14,031,134

Total comprehensive income (loss) for the period (15,489,551) (25,390,616) (1,127,683) (2,303,294) 21,017,840

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Liquidity and Capital Resources

Sembcorp Salalah’s primary sources of liquidity have been equity funding, subordinated loans provided by various of the Project Founders and debt facilities. The debt facilities include a term loan facility which was initially provided by an international syndicate of commercial lenders in an amount of US$753 million (OMR 290 million). Sembcorp Salalah has drawn an amount of US$733 million (OMR 282 million) of the debt facilities and does not forecast to draw down any further amounts. Sembcorp Salalah’s liquidity requirements arise primarily to meet its ongoing debt service obligations.

The table below sets out selected cash flow data for the years ended 31 December 2010, 2011 and 2012 and the six months ended 30 June 2012 and 30 June 2013:

Statement of Cash Flows (OMR):Year ended 31 December Six months ended 30 June

2010 2011 2012 2012 2013

Net cash from (used in) operating activities (44,282,354) (2,881,353) 15,542,391 2,730,619 5,902,795

Net cash from (used in) investing activities (128,664,164) (108,073,262) (55,033,668) (49,579,542) (2,355,273)

Net cash from (used in) financing activities 120,235,664 111,813,970 74,223,079 54,370,200 (5,081,763)

Net change in cash and cash equivalents (52,710,854) 859,355 34,731,802 7,521,277 (1,534,241)

Cash and cash equivalents at beginning of period 55,980,503 3,269,649 4,129,004 4,129,004 38,860,806

Cash and cash equivalents at end of period 3,269,649 4,129,004 38,860,806 11,650,281 37,326,565

Capital Expenditures

Management does not forecast any future material capital expenditure during the operational phase of the Plant. Any future capital expenditure will bring economic benefit to the Plant’s operations. Maintenance costs for the Plant are charged through the Sembcorp Salalah’s profit and loss account.

Contractual Commitments

The following table sets out Sembcorp Salalah’s contractual commitments to make future payments as at 30 June 2013:

Contractual Obligations (OMR):Payments Due by Period

TotalLess Than

1 Year 1 to 5 YearsAfter 5

Years

Commitments in respect of contracts placed 14,479,425 855,144 3,682,512 9,941,769

Lease commitments under the Usufruct Agreements 22,000 1,000 4,000 17,000

Market Risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices, will affect Sembcorp Salalah’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

Interest Rate RiskInterest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Sembcorp Salalah does not account for any fixed rate financial liabilities

Sembcorp Salalah’s revenue arose from fixed power and water capacity charges which amounted to 83 per cent. of total revenue. The majority of the remaining revenue related to fuel charges which were pass‑through in nature, as described in “Chapter XI – Contractual Framework” of this Prospectus.

Cost of SalesCost of sales for the year ended 31 December 2012 was OMR 22 million (US$57 million). Fuel cost accounted for 33 per cent. and depreciation for 42 per cent. of total cost of sales. Other costs included contractual service maintenance, insurance and operation and maintenance costs.

Administrative and General ExpensesAdministrative and general expenses for the year ended 31 December 2012 were OMR 0.7 million (US$1.8 million).

Finance CostFinance cost for the year ended 31 December 2012 was OMR 21 million (US$55 million). This comprised interest expense on project financing, shareholder loans and deferred financing cost. Further details relating to Sembcorp Salalah’s financing structure are provided in “Chapter XII – Project Cost and Financing” of this Prospectus.

Income Tax ExpenseIncome tax expense for the year was OMR 2.4 million (US$6.2 million). Income tax expense related almost exclusively to Sembcorp Salalah’s deferred tax liability (net of deferred tax assets) arising mainly from temporary difference of property, plant and equipment and tax losses. Temporary differences mainly arose due to accelerated tax depreciation and a forecast of unused tax losses.

Effective Portion of Change in Fair Value of HedgeEffective portion of change in fair value of hedge for the year ended 31 December 2012 was OMR 2 million (US$5 million). This related to the effective portion of the change in fair value of Sembcorp Salalah’s US Dollar interest rate swaps. Sembcorp Salalah entered into a number of interest rate swaps in 2009 to hedge 95.32 per cent. of its US Dollar tranche of third‑party debt against movements in US Dollar LIBOR. Further details are provided in “Chapter XII – Project Cost and Financing” of this Prospectus.

Profit after Tax for the YearAs a result of the foregoing factors, Sembcorp Salalah’s profit after tax for the year ended 31 December 2012 was OMR 0.9 million (US$2.3 million). Sembcorp Salalah’s net profit margin was 2 per cent. for the year ended 31 December 2012.

Financial Position

The table below sets out selected financial position data as at 31 December 2010, 2011 and 2012 and 30 June 2013:

Statement of Financial Position (OMR):As at 31 December As at 30 June

2010 2011 2012 2013

Total non‑current assets 197,610,082 308,281,373 355,677,386 348,092,639

Total current assets 9,808,581 9,386,400 51,685,720 57,798,640

Total assets 207,418,663 317,667,773 407,363,106 405,891,279

Total equity (12,081,863) (37,472,479) (38,600,162) (17,582,322)

Total non‑current liabilities 191,382,940 330,726,966 306,096,681 287,862,224

Total current liabilities 28,117,586 24,413,286 139,866,587 135,611,377

Total liabilities 219,500,526 355,140,252 445,963,268 423,473,601

Total equity and liabilities 207,418,663 317,667,773 407,363,106 405,891,279

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Chapter XV: Projected Financial Information

The projections in this section of the Prospectus have been prepared by Sembcorp Salalah on the basis of the financial model audited for the benefit of Sembcorp Salalah by an independent audit firm (the “Financial Model”). This section should be read together with the information contained in “Forward‑Looking Statements” “Chapter XIII – Risk Factors”, “Chapter XIV – Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Chapter XXIII – Financial Statements” of this Prospectus.

The results of the Financial Model are not projections or predictions. A financial model simply illustrates hypothetical results that are mathematically derived from specified assumptions. The Financial Model was designed as a financial forecasting and evaluation tool and not as an operational model. Thus, it will not readily allow comparisons of actual results against forecasts and does not include an ongoing budget comparison facility.

The inclusion of information derived from the Financial Model should not be regarded as a representation or warranty by Sembcorp Salalah, the Selling Shareholders, the Issue Manager or the Global Coordinator and Bookrunner or any other person that the results of the Financial Model will be achieved. Actual capacity, availability, dispatch and production levels, heat‑rate, operating, maintenance and capital costs, and interest and inflation rates will almost certainly differ from those assumed for purposes of this section. Accordingly, Sembcorp Salalah’s actual performance and cash flows for any future period will almost certainly differ from those shown in this section. Prospective investors are cautioned not to place undue reliance on the performance or cash flows in the information derived from the following projected financial information and should make their own independent assessment of the future results of operations, cash flows and financial condition of Sembcorp Salalah. KPMG has not examined the Financial Model and therefore does not express an opinion on it.

Assumptions used for drawing projections for the five years ending 31 December 2018:

Significant Agreements

Sembcorp Salalah has entered into the following agreements, which were used to arrive at the projected financial statements:

The PWPA, which establishes the terms upon which Sembcorp Salalah generates and supplies electrical energy and demineralised water and the basis upon which Sembcorp Salalah receives revenues.

The NGSA, in respect of the purchase of natural gas as feedstock from Ministry of Oil & Gas for 15 years.

The O&M Agreement, in respect of the provision of operation and maintenance services by Sembcorp Salalah O&M in relation to the Plant.

The Finance Documents, which set out the terms and conditions of the funds made available to Sembcorp Salalah. This includes the following financing agreements:

the Dollar Commercial Facilities Agreement;

the Rial Commercial Facilities Agreement;

the Sinosure Covered Facilities Agreement; and

the Working Capital Facility Agreement.

Macroeconomic AssumptionsPrincipal macroeconomic assumptions used by Sembcorp Salalah:

The foreign exchange rate is assumed to be OMR 0.3852 = US$1.00. The inflation rate differential between Oman and the United States is assumed to be zero.

The inflation rate for Oman and the United States is assumed to be 3 per cent.

at fair value through profit or loss and Sembcorp Salalah does not designate hedging instruments under a fair value hedge accounting model. Therefore a change in interest rate as at 30 June 2013 would not affect profit or loss.

As further described in “Chapter XII – Project Cost and Financing” of this Prospectus, Sembcorp Salalah has fixed the rate of interest through interest rate swap agreements for 95.32 per cent. of its US Dollar commercial facilities.

Credit RiskCredit risk is the risk of financial loss to Sembcorp Salalah if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from Sembcorp Salalah’s receivables from customers and cash balances held with banks.

Under the terms of the PWPA, Sembcorp Salalah’s sales are billed wholly to OPWP. Sembcorp Salalah manages its credit risk with OPWP by monitoring OPWP’s credit rating. Furthermore, under the Government Guarantee, the Ministry of Finance guarantees the payment obligations due from OPWP to Sembcorp Salalah. Sembcorp Salalah also limits its credit risk with regard to bank deposits by only dealing with reputable banks and financial institutions with strong credit ratings.

Currency RiskThe majority of the transactions and balances of Sembcorp Salalah are in either Omani Rials or US Dollars. As the Omani Rial is pegged to the US Dollar, balances in US Dollars are not expected to represent significant currency risk.

Liquidity RiskSembcorp Salalah limits its liquidity risk by ensuring bank facilities and shareholders’ advances are available, where required. Liquidity requirements are monitored on a monthly basis and management ensures that sufficient liquid funds are available to meet any commitments as they arise.

Significant Accounting PoliciesFor a full description of significant accounting policies employed by Sembcorp Salalah in the preparation of its accounts, please refer to “Note 2: Basis of Preparation and Significant Accounting Policies” to the audited financial statements of Sembcorp Salalah for the year ended 31 December 2012 and the condensed interim financial statements of Sembcorp Salalah for the period ended 30 June 2013, which are included in “Chapter XXIII – Financial Statements” of this Prospectus.

Use of Estimates and JudgmentsThe preparation of the financial statements in conformity with IFRS requires Management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from such estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

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Income Statement (OMR millions):

Year ended 31 December2013 2014 2015 2016 2017 2018

Revenue from operations 61.66 62.10 65.76 64.54 63.56 64.71 Interest income 0.05 0.09 0.09 0.08 0.08 0.09Operating costs (17.60) (18.73) (21.99 ) (20.70) (20.60) (21.10) EBITDA 44.11 43.46 43.86 43.92 43.04 43.70 Depreciation (11.33) (10.88) (10.76) (10.78) (10.74) (10.72) Asset retirement obligation – depreciation and expenses (0.04 ) (0.04) (0.04) (0.05) (0.05) (0.05) Interest on working capital facility and short‑term loan; letter of credit fees (0.03 ) (0.08 ) (0.08) (0.02) (0.01) (0.01) Interest on Shareholder Loans (2.98) – – – – – Interest foregone on Shareholder Loans 6.17 – – – – – Senior debt – interest and agency fee (19.69 ) (18.75) (17.04) (15.86) (14.86) (14.55) Deferred financing cost (1.30) (1.12 ) (1.07) (1.01) (0.95) (0.89) Profit before tax 14.91 12.59 14.87 16.20 16.43 17.48 Income tax (paid and deferred) (3.78) (1.65) (1.92) (2.07) (2.09) (2.21) Profit after tax 11.14 10.94 12.95 14.13 14.34 15.27

Cash Flow Statement (OMR millions):

Year ended 31 December2013 2014 2015 2016 2017 2018

EBITDA 44.11 43.46 43.86 43.92 43.04 43.70 Change in working capital 0.07 0.06 (0.07) 0.06 0.06 (0.09)Interest on working capital facility (0.03) (0.08) (0.08) (0.02) (0.01) (0.01)Tax – – – – – – Surplus cash from operating activities 44.15 43.44 43.71 43.96 43.09 43.60 Senior debt – interest and agency fee (20.46) (18.97) (17.57) (16.10) (15.11) (14.59)Repayment of senior debt (11.52) (12.31) (13.21) (14.12) (14.48) (15.41)Interest on Shareholder Loans (1.38) – – – – – Repayment of Shareholder Loans (94.96) – – – – – Transfer to debt service reserve account (15.02) 0.18 0.33 0.23 0.48 (1.13)Surplus cash prior to investing/distribution (99.19) 12.34 13.26 13.97 13.98 12.47 Movement in net liquidated damages (10.17) – – – – – Addition to fixed assets (10.39) (1.16) – – – – Equity drawn 94.96 – – – – – Initial working capital facility drawn 1.35 – – (1.35) – – Surplus cash from investing activities (23.44) 11.18 13.26 12.62 13.98 12.47Dividend paid (1.24) (14.80) (12.50) (12.69) (12.79) (13.46)Net cash flow (24.68) (3.62) 0.76 (0.07) 1.19 (0.99)

Financing Assumptions

The covenants under the Finance Documents are maintained throughout the term of the financing.

The principal repayment profile and interest cost are set out in the Finance Documents and are summarised in “Chapter XII – Project Cost and Financing” of this Prospectus.

Accounting Assumptions

The tax rate is assumed to be 12 per cent. of taxable profits. OMR 30,000 per annum is assumed to be tax‑exempt from the calculation of taxable profits.

Legal reserves are built up to a maximum of one‑third of share capital by allocating 10 per cent. of net annual profit (after tax) to that account.

The following tables show the projected balance sheet, income statement and cash flow statement of Sembcorp Salalah for the period 2013‑2018. Projected income statements and cash‑flow statements are for calendar years, while projected balance sheet is as of the end of each calendar year.

Balance Sheet (OMR millions):As at 31 December

2013 2014 2015 2016 2017 2018

Liabilities

Share capital 95.46 95.46 95.46 95.46 95.46 95.46

Statutory reserves 1.20 2.30 3.59 5.01 6.44 7.97

Retained earning 8.71 3.76 2.91 2.93 3.04 3.32

Senior debt 259.87 248.69 236.54 223.44 209.91 195.38

Working capital facility 1.35 1.35 1.35 – – –

Payables 18.31 5.44 4.94 4.71 4.56 4.47

Asset retirement liability 0.44 0.47 0.50 0.53 0.57 0.61

Deferred tax liability 6.37 8.02 9.94 12.01 14.10 16.31

Total liabilities 391.71 365.49 355.23 344.09 334.08 323.52

Assets

Gross fixed assets 360.70 361.85 361.85 361.85 361.85 361.85

Less: depreciation 21.01 31.89 42.64 53.42 64.16 74.88

Net fixed assets 339.69 329.96 319.21 308.43 297.69 286.97

Net asset retirement obligation 0.37 0.36 0.35 0.34 0.33 0.32

Fuel stock 4.08 4.08 4.08 4.08 4.08 4.08

Receivables 18.37 5.67 5.76 5.71 5.74 5.79

Debt service reserve account 15.02 14.84 14.51 14.28 13.80 14.93

Cash 14.18 10.58 11.32 11.25 12.44 11.43

Total Assets 391.71 365.49 355.23 344.09 334.08 323.52

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Shareholders, based on the forecast set out in “Chapter XV – Projected Financial Information” of this Prospectus.

Expected Dividend Announcement Date Amount (OMR millions) Dividend (Bzs per Share)

October 2013 1.24 13

April 2014 7.45 78

October 2014 7.35 77

April 2015 3.72 39

October 2015 8.78 92

April 2016 2.86 30

October 2016 9.83 103

April 2017 2.86 30

October 2017 9.93 104

April 2018 2.96 31

October 2018 10.50 110

Chapter XVI: Dividend Policy

Right to Receive Dividends

The Offer Shares rank equally with all other Shares for any rights to dividends that may be declared and paid in respect of the financial year of Sembcorp Salalah ending 31 December 2012 on a pari passu basis, and any subsequent years. Following the Offer, the Shareholders’ register of Sembcorp Salalah maintained by the MCDC will be amended to enable new Shareholders to receive dividends declared.

Dividend Policy

Sembcorp Salalah’s dividend policy is subject to restrictions contained in the CCL, its Memorandum and Articles of Association and the terms of the Finance Documents. These are summarised as follows:

In accordance with the CCL, in each financial year, 10 per cent. of the net profits after tax of every company organised under Omani law must be transferred to a legal reserve until the reserve amounts to at least one‑third of the corporation’s share capital. The legal reserve may not be distributed to shareholders by way of dividend. The CCL also requires a proposed dividend payment to be approved by the passing of a shareholder resolution at an annual general meeting, and that a dividend must be paid out of net profits or out of optional reserves subject to the provisions of Article 106 of the CCL.

In accordance with the Articles, any profit remaining after the transfer to the legal reserve may be distributed to shareholders or carried forward on the Board’s recommendation.

In accordance with the terms of the Finance Documents, Sembcorp Salalah holds an unsecured distribution account from which it can make payments to the Shareholders without restriction. Following payment of all specified amounts due under the Finance Documents, Sembcorp Salalah is entitled to transfer amounts to the distribution account from its operating revenues accounts provided that: (i) no default has occurred or would occur as a result of the transfer; (ii) Sembcorp Salalah’s debt service reserve account and maintenance reserve account are fully funded by cash or acceptable credit support; (iii) the DSCR for the period before the transfer and the forecast DSCR for the period after the transfer is at least 1.15:1; and (iv) Sembcorp Salalah has confirmed in writing that it expects to receive sufficient funds to meet its projected expenditures over the next 6 months. The Finance Documents do not require a mandatory cash sweep.

Management proposes to follow a reasonable dividend payout policy, subject to debt repayments, working capital and operational expenditure requirements. The amount of annual dividends and the determination of whether to pay dividends in any year may be affected by a number of other factors, including Sembcorp Salalah’s business prospects, financial performance, free cash availability, covenants under the Finance Documents and the outlook for the power and water sector. Dividend yields, based on the Offer Price, are forecast to remain at levels above the average yield for companies listed on the MSM. Sembcorp Salalah’s dividend policy will be reviewed on a bi‑annual basis by the Board.

Under the Finance Documents, transfers to Sembcorp Salalah’s distribution account are only permitted thirty days following each repayment date under the Finance Documents (i.e., at the end of each March and September). Management therefore proposes that any dividends would be paid in the months of April and October. Any dividend payment in October would represent an interim dividend, based on Sembcorp Salalah’s audited nine‑month financial statements for that financial year. Any dividend payment in April would represent the final dividend, after taking into account any interim dividend already paid, based on Sembcorp Salalah’s statutory financial statements for the previous financial year. Management intends that the Board will seek the Shareholders’ approval at an OGM following the IPO, to make interim dividend payments in accordance with the guidelines imposed by the CMA in this regard.

The following table shows a five‑year forecast of estimated dividends to be paid by Sembcorp Salalah to its

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A long‑term maintenance contract with General Electric, the manufacturer of the Plant’s gas turbine units, for the scheduled maintenance of these units. Consequently the Project benefits from the synergies of its gas turbine manufacturer being responsible for the on‑going maintenance of this machinery, therefore having aligned interests in the Project.

Excess Capacity and Outage Allowances to Ensure an Extended Plant LifespanPower and water plants generally suffer degradation of their capacity to produce electricity and desalinated water over time. However, Sembcorp Salalah has a tested capacity of 489 MW compared to its contracted capacity of 445 MW. Management believes that this excess of capacity will more than compensate the estimated degradation of the Plant over the term of the PWPA.

Sembcorp Salalah also has a generous outage allowance of 15 per cent. for nine months of the year, which is higher than regional industry norms. Management believes that this outage allowance will enable the Plant to have a lifespan that is longer than a plant with a lower outage allowance.

Mitigation of Fuel RisksUnder the NGSA, the Ministry of Oil & Gas is responsible for the procurement and delivery to the Plant of all of its natural gas requirements. All gas delivered to the Plant by the Ministry of Oil & Gas must meet minimum quality standards. In the event that natural gas is not available, and provided that Sembcorp Salalah is not in breach of its obligations regarding the operations of the Plant and the Plant is operational using backup diesel, Sembcorp Salalah is still entitled to receive capacity charges from OPWP, in addition to its incremental costs for the use of diesel from the Ministry of Oil & Gas. Any increase in the price of gas charged by Ministry of Oil & Gas is directly passed through the PWPA. The Plant has therefore mitigated risks associated with gas quality, gas supply and gas price.

Extensive Experience of the Project SponsorsSembcorp Salalah benefits from the extensive power, water and energy experience of the Project Sponsors. Sembcorp Utilities is a leading energy, water and on‑site logistics group with a strong track record in identifying, securing, financing and executing energy and water projects and has a number of strategic relationships and long‑term partnerships with multinational customers. OIC is a private equity investment company with strong experience of investing in the region and a diversified portfolio of investments in the oil and gas, petrochemical, construction and manufacturing sectors in Oman.

Sembcorp Salalah O&M is also party to the Technical Assistance Agreement with Sembcorp Gulf O&M, a wholly‑owned subsidiary of Sembcorp Utilities. This arrangement enables Sembcorp Salalah, where required, to draw upon the technical expertise of Sembcorp Utilities in its operation and maintenance of the Plant.

Experienced and Skilled Operational PersonnelSembcorp Salalah has the advantage of well‑trained and experienced personnel bringing extensive management expertise and the knowledge sharing of know‑how accumulated through decades of experience.

Opportunities for Incremental Revenue GrowthSembcorp Salalah has two key opportunities for incremental growth of revenues:

the expansion of existing facilities to deliver additional desalinated water capacity; and

the sale of current excess power capacity.

In relation to the first, Sembcorp Salalah has a usufruct right in relation to excess land which could potentially be used for the purposes of expanding its desalination capacity by approximately 5 MiGD. Although such an expansion would require new project development and, consequently, new financing arrangements, Management believes that, as Sembcorp Salalah already has the necessary connections and experience in place in relation to the Plant, any such expansion of the desalination capacity of the Plant could be completed efficiently and take advantage of existing infrastructure therefore achieving economies of scale. OPWP has

Chapter XVII: Valuation and Price Justification

Overview

The key strengths of Sembcorp Salalah forming the basis of valuation are as follows:

Strong Predictability of Stable Cash FlowsUnder the PWPA, Sembcorp Salalah is entitled to receive capacity charges for the contracted power and water capacities of the Plant. These fixed payments, payable regardless of whether the actual output of the Plant (power and/or water) is dispatched by OPWP, comprise approximately 90 per cent. of the annual revenues of Sembcorp Salalah (excluding fuel revenue, which is a pass‑through). In addition, OPWP pays a variable output charge for the power and water that is made available by the plant.

Well-Established Contractual FrameworkThe Project benefits from a well‑established contractual framework and is one of 12 independent power and/or water production projects contracted to OPWP and guaranteed by the Oman government on a “build, own and operate” basis.

Government Guarantees Payment Obligations of OPWP under the PWPA due to the Strategic Importance of both the Industry and ProjectThe power and water sectors are of high strategic importance to Oman and Sembcorp Salalah is key to the Salalah System, providing 72 per cent. of the power dispatch and 100 per cent. of the net installed water capacity of the Salalah System.

OPWP and IPA have forecasted continued growth in both electricity (12 per cent. annually in both Oman and Salalah) and water demand (6 per cent. annually in both Oman and Salalah). As a consequence, the Project is expected to remain critical to the continued supply of electricity and water in the Dhofar Governorate.

Consequently, the Government, both directly and indirectly is expected to continue to support the Project:

(i) as off‑taker under the PWPA, as 100 per cent. indirect owner of OPWP;

(ii) as supplier, through the Ministry of Oil & Gas, which is responsible for procuring and delivering all natural gas to the Project;

(iii) as shareholder, as majority owner of OIC, in turn 100 per cent. owner of IPWC, which will own a 21.875 per cent. interest in Sembcorp Salalah immediately following the Offer;

(iv) as transmission system operator, as 100 per cent. indirect owner of DPC and through the OMSGD, which respectively own and operate all power and water transmission facilities in the Dhofar Governorate; and

(v) as guarantor, pursuant to the Government Guarantee, which guarantees the payment obligations of OPWP under the PWPA.

Fully Operational Project with Minimal Operating RiskGiven the Plant has been in full commercial operation for over 14 months, it is not exposed to any construction risk. Further, Sembcorp Salalah also benefits from minimal operating risk as it has entered into:

a long‑term O&M contract with Sembcorp Salalah O&M, a joint venture indirectly owned by two of the Project Sponsors, Sembcorp Utilities and OIC, creating an alignment of interests which helps to ensure that the Plant is operated efficiently. Sembcorp Salalah O&M is managed locally and benefits from the procedures and expertise of Sembcorp Utilities. Sembcorp Utilities holds a long track record and expertise in the industry, with facilities of over 5,900 MW of power capacity and over 1,500 MiGD of water in operation or under development globally.

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Internal Rate of ReturnBased on projected dividend flows under the base case scenario, the projected IRR is 14.5 per cent.

Numerous valuation sensitivity cases were run using key post‑PWPA period inputs. This analysis reflected movement in the valuation of Sembcorp Salalah of +/‑ 1.5 per cent. around the Base Case dividend IRR.

Relative Valuation

Under the relative valuation approach, the valuation is benchmarked against other listed power companies with similar profiles to Sembcorp Salalah (i.e., operations, cash flows, capital structure, growth plans, etc.) The relative valuation is generally based on current financial results or projections for the next year.

The benchmarks that are considered most appropriate to use for Sembcorp Salalah are:

dividend yield; and

price‑to‑earnings multiples.

Advantages of Relative Valuation

Based on publicly available information.

Market efficiency theoretically implies that a company’s trading valuation should reflect all publicly available information including current market conditions, industry trends, business risk, growth characteristics, etc.

Can indicate the value of a company without reflecting a control premium (i.e., for the purposes of valuing a minority investment).

Disadvantages of Relative Valuation

It may be difficult to find a sample of truly comparable companies considering operational history, technology and configuration differences, period of the P(W)PA, debt financing terms, etc.

The trading valuation of a company may be affected by factors such as thin trading, small capitalisation, ownership restrictions, limited research coverage, small public float, etc.

External variables such as M&A activity and regulatory updates, changes or scrutiny may affect stock prices.

Dividend Yield

Dividend yield is the primary relative valuation benchmark for Sembcorp Salalah, in view of a stable business model with no growth plans. The following table shows the projected dividend yield, based on the Offer Price, for the period 2013‑2018:

2013(1) 2014 2015 2016 2017 2018 Average

Dividend per Share (Bzs) 13 155 131 133 134 141 141

Dividend Yield (%) 9.9% 9.9% 8.3% 8.5% 8.5% 9.0% 9.0%

Note 1: Dividend yield for 2013 is an annualised number based on a one month post‑IPO holding. The average dividend per share and dividend yield include the dividend paid in 2013 as part of the five‑year average.

Price to Earnings Multiple

The P/E multiple is a secondary benchmark. The following table shows the projected P/E multiple for the period 2013‑2018:

2013 2014 2015 2016 2017 2018

Net Income per Share (Bzs) 117 115 136 148 150 160

P/E Multiple 13.5x 13.7x 11.6x 10.6x 10.5x 9.8x

indicated that current Government policy is to minimise the use of groundwater, under normal circumstances, and reserve groundwater resources for contingency purposes. This may indicate that additional water desalination capacity will be needed in the Dhofar Governorate in the near future.

Further, Sembcorp Salalah’s actual power capacity is approximately 40 MW greater than its contracted power capacity of 445 MW. As such, the Plant could deliver further power to OPWP, subject to additional contractual arrangements with OPWP.

Offer price

The Offer Price of OMR 1.570 (excluding the Offer Expenses of Bzs 20 per Offer Share) per Share for Sembcorp Salalah is based on the following valuation methodologies:

discounted cash flows; and

relative valuation.

Discounted Cash Flows

For Sembcorp Salalah, as it has contracted stable and highly predictable operational cash flows, DCF is considered the most appropriate methodology as it appropriately captures the value of future cash flows through the discounting ultimately of projected cash flows to shareholders.

Advantages of DCF

One of the most theoretically sound valuation methods.

Offers a detailed valuation methodology of projections based on contractual agreements.

Flexible form of valuation as multiple scenarios can be compared.

Sensitisation of value based on key drivers.

Less dependent on volatile market conditions.

Disadvantages of DCF

Valuation is sensitive to the underlying assumptions (mitigated in Sembcorp Salalah’s case by long‑term contracts).

Cash flow projections in the PWPA and post-PWPA periodsSembcorp Salalah’s operating cash flows can be estimated with relative certainty during the term of the PWPA (i.e., until April 2027), while the valuation beyond the term of the PWPA has been provided by IPA, an independent consultant appointed on behalf of Sembcorp Salalah.

The estimation of projected cash flows beyond the term of the PWPA involve a number of assumptions, including demand for power and water, available capacities, alternative sources, tariffs, availability of gas, pricing of gas and off‑take arrangement. IPA has developed projected cash flows of Sembcorp Salalah under multiple scenarios, based on its experience in more than 80 countries.

For the purpose of the DCF valuation of Sembcorp Salalah, projected cash flows have been considered, assuming that the Plant operates beyond the term of the PWPA. The projections for capital expenditure and dividend distributions have been based on Sembcorp Salalah’s estimates. The following table shows projected Share valuation based on various discount rates under the base case scenario:

Discount Rate Valuation (OMR per Share)

8 per cent. 2.83

9 per cent. 2.57

10 per cent. 2.33

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owns and operates over 40 plants with a total generation capacity of over 40,000 MW. As a holder of a significant portfolio of power and water assets, as compared to Sembcorp Salalah’s single asset profile, this company is not considered a viable comparable.

The following table shows further details of each of the power and water companies described above:

Name of Company

Country(Asset/

Corporate) LiquidityContract

typeP(W)PAExpiry Comparable Capacity

SMN Power Holding SAOG

Oman (Asset) BOO 2022/

20241,366 MW/26 MiGD

Sohar Power Company SAOG

Oman (Asset) BOO 2022 590 MW/

33 MiGD

ACWA Power Barka SAOG

Oman (Asset) BOO 2018 435 MW/

20 MiGD

United Power Company SAOG

Oman (Asset) BOOT 2020 273 MW

(Power only)

Al Kamil Power Company SAOG

Oman (Asset) BOO 2017 282 MW

(Power only)

Sharqiyah Desalination Co

Oman (Asset) – BOO 2029 20 MIGD

(Water only)

Qatar Electricity & Water Company

Qatar (Corporate) n/a Multiple 5,823 MW/

258 MiGD

Saudi Electricity Company

Saudi Arabia (Corporate) n/a Multiple 46,074 MW

The following table shows key data points in relation to the three power and water plants which were used as comparables:

P(W)PA End Price to Earnings Dividend Yield

SMN Power Holding SAOG 2022/2024 15.5x 9.0%

Sohar Power Company SAOG 2022 22.7x 9.5%

ACWA Power Barka SAOG 2020 13.5x 6.5%

Comparables review

The following GCC‑listed power and water companies were considered as potential comparables for Sembcorp Salalah:

SMN Power Holding SAOG (MSM: SMNP): The holding company of two project companies, each of which owns and operates a single plant, the first being being Al Rusail and the second being Barka II, Both plants are located in Manah and are connected to the MIS. Al Rusail is a 687 MW natural gas‑fired open cycle power plant. The PPA for Al Rusail expires in 2022 and it is a BOO project. Barka II is a 679 MW natural gas‑fired open cycle power plant with 26 MiGD water desalination capacity. The PPA for Barka II expires in 2022 and it is a BOO project.

Sohar Power Company SAOG (MSM: SHPS): Owns and operates the Sohar I 590 MW natural gas‑fired combined cycle power plant located in the MIS. The plant also has 33 MiGD water desalination capacity. The PPA expires in 2022 and it is a BOO project.

ACWA Power Barka SAOG (MSM: APBS): Owns and operates the Barka I 435 MW natural gas‑fired open cycle power plant located in the MIS. The plant also has 20 MiGD multi‑stage flash water desalination capacity. The PPA expires in 2020 and it is a BOO project. In July 2012, ACWA Power Barka SAOG was granted a letter of award by OPWP for the expansion of its existing water desalination capacity by 10 MiGD.

ACWA Power Barka SAOG, Sohar Power Company SAOG and SMN Power Company SAOG each have less than ten years remaining on their P(W)PAs with OPWP (expiring in 2020, 2022 and 2022/24 respectively). Sembcorp Salalah has nearly 14 years remaining on its PWPA (expiring in 2027).

Other GCC listed power and water companies considered, but determined not to be comparables, include:

United Power Company SAOG (MSM: UECS): Owns and operates the Manah 273 MW natural gas‑fired open cycle power plant connected to the MIS. It should be noted that United Power Company SAOG is a BOOT project while all other listed companies are BOO projects. The PPA expires in 2020 and as a BOOT project, the plant is to be transferred to the Government for a consideration of OMR 1 on 30 April 2020 and the shareholders of United Power Company SAOG would have no entitlement over the cash flows beyond that date. On the other hand, the shareholders of Sembcorp Salalah and other listed power companies owning BOO projects would be eligible to receive returns in the post P(W)PA period, should the plants remain operational. As such, the higher current dividend yield of United Power Company SAOG is reflective of the nature of the BOOT project and is not comparable with BOO projects.

Al Kamil Power Company SAOG (MSM: KPCS): Owns and operates the Al Kamil 282 MW natural gas‑fired open cycle power plant located in the MIS. The PPA expires in 2017 and it is a BOO project. Al Kamil Power Company SAOG is highly illiquid, trading only a limited of number of days per month and at very low volumes. Given the inability for an investor to conveniently acquire this stock it is not considered a strong comparable for Sembcorp Salalah.

Sharqiyah Desalination Co. (MSM: SHRQ): Owns and operates two water desalination plants in the Sharqiyah region near Sur. The first is a reverse osmosis desalination plant with approximately 3 MiGD capacity which was privatised by the government in 2006 and the second is a greenfield reverse osmosis desalination plant with approximately 18 MiGD capacity.

Qatar Electricity and Water Company (Qatar Exchange: QEWS): Qatar‑based power and utilities company that was established in 1991 and is 43 per cent. owned by the Government of Qatar and around 36 per cent. listed on the Qatar Exchange. Qatar Electricity and Water Company’s portfolio includes over 5,700 MW of power and 258 MiGD of water. As a holder of a significant portfolio of power and water assets, as compared to Sembcorp Salalah’s single asset profile, this company is not considered a viable comparable.

Saudi Electricity Company (Saudi Stock Exchange: SECO): Saudi Electricity Company is a majority government‑owned utility in Saudi Arabia with generation, transmission and distribution operations. It

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Key Management Benefits

Key management personnel are those persons having authority and responsibility for planning, directing, and controlling the activities of Sembcorp Salalah, directly or indirectly, including any director (whether executive or otherwise). OMR 133,541 and OMR 99,404 was paid to key management personnel during the years ended 31 December 2012 and 31 December 2011, respectively. OMR 81,875 was paid to key management personnel during the six months ended 30 June 2013.

Chapter XVIII: Related Party Transactions and Material Contracts

Related Party Transactions

Sembcorp Salalah has a related party relationship with entities over which certain shareholders are able to exercise significant influence. In the ordinary course of business, such related parties provide goods and services to Sembcorp Salalah.

Prices and terms for these transactions, which are entered into in the normal course of business, are on mutually agreed terms and conditions. Sembcorp Salalah had the following significant transactions with related parties during the years ended 31 December 2011 and 2012 and the six month period ended 30 June 2013:

Year ended 31 DecemberSix months

ended 30 June

Significant Transactions with Related Parties (OMR): 2011 2012 2013

Sembcorp Industries:

Reimbursement of expenses 78,767 360,291 4,220

Project bonus – 92,448 –

Sembcorp Salalah O&M:

Mobilisation fee 1,137,354 – –

Operation and maintenance cost 719,619 2,814,930 1,953,096

Incentive payment – 123,057 167,691

SOFIH:

Finance cost(1) 1,964,031 1,969,412 973,944

SOIHL:

Finance cost(1) 982,015 984,706 486,972

IPWC:

Finance cost(1) 3,215,620 2,821,376 1,395,271

OIC:

Reimbursement of expenses 3,189 11,612 2,740

Project bonus(2) – 53,928 –

Total 8,100,595 9,231,760 4,983,934Note 1: The Shareholders waived any right to be paid interest on the Shareholder Loans from 29 March 2012 to 30 June 2013 and authorised

Sembcorp Salalah to write off the same.

Note 2: Project bonus has been approved by the Board of Directors and is payable after the settlement of liquidated damages claims described in “Chapter X – Description of Sembcorp Salalah and Business Overview – Litigation and Regulatory Proceedings” of this Prospectus.

The following balances were due from Sembcorp Salalah to related parties as at 31 December 2011 and 2012 and 30 June 2013:

As at 31 December As at 30 June

Balances Due to Related Parties (OMR): 2011 2012 2013

Sembcorp Industries – 253,203 246,640

Sembcorp Salalah O&M 122,263 389,650 509,629

SOFIH 500,424 1,495,892 –

SOIHL 250,212 747,946 –

IPWC 816,019 2,143,012 1,377,176

Total 1,688,918 5,029,703 2,133,445

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List of Other Directorships:

In addition to Sembcorp Salalah, Mr. Tang is also a director of the following companies:

Sembcorp Industries Ltd; Sembcorp Marine Ltd; Sembcorp Utilities Pte Ltd; Sembcorp Environment Pte. Ltd.; Sembcorp Gas Pte Ltd; Sembcorp Cogen Pte Ltd; Shenzhen Chiwan Sembawang Engineering Company Limited; Shanghai Cao Jing Co‑generation Co. Ltd; Penglai Jutal Offshore Engineering Heavy Industry Co. Ltd; Sembcorp Utilities (UK) Limited; SCU Mauritius Pte Ltd; Jurong Shipyard Pte Ltd; Baker Marine Pte Ltd; PPL Shipyard Pte Ltd; SMOE Pte Ltd; Sembawang Shipyard Pte Ltd; Sembcorp Development Ltd; The China Water Company Limited; Thermal Powertech Corporation India Limited; Sembcorp (China) Holding Co., Ltd; Singapore‑Sichuan Investment Holdings Pte Ltd; and Cambridge Centre For Advanced Research In Energy Efficiency In Singapore Ltd.

Name: Mr. Kalat Al-Bulooshi

Position: Deputy Chairman

Year of Joining: 2009

Education: Mr. Al‑Bulooshi holds a Mechanical Engineering degree from the University of Bradford, UK.

Experience: Mr. Al‑Bulooshi is the Deputy Chairman of Sembcorp Salalah. He is also the Chief Executive Officer of OIC. Prior to joining OIC, Mr. Al‑Bulooshi held a number of key positions in leading organisations in Oman, such as Sohar Aluminium, Sohar Industrial Ports Company and Petroleum Development of Oman.

Mr. Al‑Bulooshi has experience in the oil and gas, utilities, ports, infrastructure, metal and manufacturing industries. He has managed multi‑billion dollar projects from concept stage to commissioning and operation.

Mr. Al‑Bulooshi is an entrepreneur and is the founder and board member of a number of companies.


In addition to Sembcorp Salalah, Mr. Al‑Bulooshi is also a director of the following companies:

V2 Trenching & Co. LLC; Ultra Electronics Ithra LLC; Oman Gas Company SAOC; Oman National Transport Company SAOC; and Gulf International Pipe Industries LLC.

Name: Mr. Tan Cheng Guan

Position: Non‑Executive Director


Education: Mr. Tan holds a Bachelor of Civil Engineering (Honours) from the University of Liverpool, UK and completed the Advanced Management Programme at Harvard Business School, USA.

Chapter XIX: Corporate Governance

Certain sections of this chapter summarise the issues relating to corporate governance based on the Articles, the CCL and the rules and regulations issued by the CMA, in particular, the Code. The description provided in this chapter is only a summary and does not purport to give a complete overview of the Articles, nor of the relevant provisions of the CCL, the Code or the CMA rules and regulations.

Overview

This section details the composition of the Board, various Board committees and Management. It also highlights the corporate governance practices that Sembcorp Salalah has or will have in place.

Board

Current Board CompositionThe current Board of Directors was re‑elected on 26 March 2013, and its members’ term of office shall expire on the third anniversary of this date, pursuant to Article 95 of the CCL. The current composition of the Board of Directors is as follows:

Name RepresentingExecutive/

Non-ExecutiveIndependent/

Non-Independent(1)

Mr. Tang Kin Fei SOIHL Non‑Executive Non‑Independent

Mr. Kalat Al‑Bulooshi IPWC Non‑Executive Non‑Independent

Mr. Tan Cheng Guan Personal capacity Non‑Executive Non‑Independent

Mr. Abdul Amir Saied Mohammed Personal capacity Non‑Executive Non‑Independent

Mr. Richard Quek Hong Liat SOFIH Non‑Executive Non‑IndependentNote 1: A director is deemed independent pursuant to CMA rules and regulations.

Biographical Information of the Members of the Board

Name: Mr. Tang Kin Fei

Position: Chairman


Education: Mr. Tang holds a First Class Honours degree in Mechanical Engineering from the University of Singapore and completed the Advanced Management Programme at INSEAD.

Experience: Mr. Tang is the Chairman of Sembcorp Salalah. Mr. Tang is also Group President and CEO of Sembcorp Industries. With 25 years’ experience at Sembcorp Industries, he is credited with spearheading its growth into a focused energy, water and marine group with operations across six continents.

Mr. Tang is Vice Chairman of the Singapore Business Federation and a council member of the Singapore Chinese Chamber of Commerce & Industry. He serves on several China‑Singapore, Saudi‑Singapore and Abu Dhabi‑Singapore business councils and is a director and member of the governing board of the Cambridge Centre for Advanced Research in Energy Efficiency in Singapore, a research centre set up by the University of Cambridge in collaboration with Singapore universities and the National Research Foundation to study carbon assessment and abatement for the petrochemical industry. In addition, Mr. Tang is the Council Chairman of Ngee Ann Polytechnic, as well as Vice Chairman and a trustee of the Kwong Wai Shiu Hospital, a charitable hospital which provides care for needy patients.

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In addition to Sembcorp Salalah, Mr. Mohammed is also a director of the following companies:

Oman Fisheries Co. SAOC; Al Hosn Investment Company SAOC; Oman Brunei Investments Company SAOC; Muscat Finance SAOG; Al Madina Logistics Company SAOC; and Sembcorp Salalah O&M.

Name: Mr. Richard Quek Hong Liat



Education: Mr. Quek holds a Masters in Business Administration from the University of Oregon, USA.

Experience: Mr. Quek is a director of Sembcorp Salalah. He is also the Executive Vice President and Head of Commercial at Sembcorp Industries. Mr. Quek is responsible for mergers & acquisitions and project financing at Sembcorp. He was previously responsible for corporate finance activities in the Group. Mr. Quek is also a director on the boards of various Sembcorp companies.

Mr. Quek led the transaction team for Sembcorp’s acquisition of Cascal’s global municipal water business and project financing teams for the Fujairah and Salalah projects. He also led the divestments of Sembcorp Industries’ logistics and engineering & construction businesses.

Prior to joining Sembcorp, he held corporate and project finance positions at various entities, including Enron International, UBS AG and BP Asia Pacific.


In addition to Sembcorp Salalah, Mr. Quek is also a director of the following companies:

CSE Holding Pte Ltd; Norfolk Development Group (Norfolk Hotel Ltd); PT Kawasan Industri Kendal RDC (Vietnam) Pte Ltd; Sembawang Capital Pte Ltd; Sembcorp (Germany) Pte Ltd; Sembcorp GCC Holding Co Ltd; Sembcorp Gulf Holding Co Ltd; Sembcorp Gulf O&M; Sembcorp Investment Pte Ltd; Sembcorp Oman First Investment Holding Co Ltd; Sembcorp Oman IPO Holding Co Ltd; Sembcorp Utilities (BVI) Ltd; Sembcorp Ventures Pte Ltd; SemRental (B) Sdn Bhd; Sembcorp Financial Services Pte Ltd.; Sembcorp Parks Management Pte Ltd; Sembcorp Properties Pte Ltd; Singapore Technologies Industrial Corporation Ltd; STIC Investments Pte Ltd; Singapore‑Wuxi Investment Holdings Pte Ltd; Vietnam‑Singapore Industrial Park Pte Ltd; Vietnam‑Singapore Industrial Park JV Co Ltd; Sembawang Corporation Ltd; and Sembawang Holdings (Pte) Ltd

Post-IPO Board CompositionAs per the proposed Articles approved at an EGM held on 7 July 2013, Sembcorp Salalah shall be managed by a Board comprising nine members, provided that, if a candidate is a Shareholder or is representing a juristic entity that is a Shareholder, such candidate (or juristic entity) owns at least 50,000 Shares. Candidates shall be elected to the Board at an OGM in accordance with the provisions of the CCL and the Articles.

Sembcorp Salalah intends to have a Board that complies with applicable CMA and CCL requirements, including with respect to the number of Independent Directors and Non‑Executive Directors, and that represents the interests of all Shareholders, including those who purchase Offer Shares.

Experience: Mr. Tan is a director of Sembcorp Salalah. He is also the Chairman of Sembcorp Salalah O&M. Mr. Tan is the Executive Vice President and Head of Group Business Development and Commercial & Corporate Planning at Sembcorp Industries. He is responsible for business and strategic development and drives business development for Sembcorp’s energy and water businesses.

Mr. Tan has broad experience in strategy, business and project development for the utilities industry. Mr. Tan rejoined Sembcorp Industries in 2007 after spending three years heading Vopak’s operations in China. Prior to that, he spent 14 years with Sembcorp as well as over a decade in the oil and gas sector with Brown & Root Far East. While at Sembcorp Industries, Mr. Tan started the development of the group’s utilities business based on Jurong Island and led the business’ expansion into China, the UK and the Middle East. He also led Sembcorp’s acquisition of Cascal NV’s global municipal water business and the investment in a world‑scale coal‑fired power plant in India.


In addition to Sembcorp Salalah, Mr. Tan is also a director of the following companies:

Emirates Sembcorp Water & Power Company P.J.S.C; Sembcorp Utilities BVI Ltd; Sembcorp Air Products (Hyco) Pte Ltd; Sembcorp Cogen Pte Ltd; Sembcorp Environment Pte Ltd; Sembcorp Gas Pte Ltd; Sembcorp GCC Holding Co Ltd; Sembcorp Gulf O&M; Sembcorp Gulf Holding Co Ltd; Sembcorp Development Ltd; Sembcorp NEWater Pte Ltd; Sembcorp Oman First Investment Holding Co Ltd; Sembcorp Oman IPO Holding CO Ltd; Sembcorp Salalah O&M; Sembcorp Utilities (UK) Limited; Sembcorp Utilities Pte Ltd; Shenyang Sembcorp Water Co., Ltd; Thermal Powertech Corporation India Ltd; Sembcorp Bournemouth Water Limited; Sembcorp Bournemouth Water Investments Limited; Sembcorp Utilities South Africa (Pty) Ltd; Sembcorp Silulumanzi (Pty) Ltd; Sembcorp Siza Water (Pty) Ltd; Sembcorp Gayatri O&M Company Private Limited; Aguas de Panama SA; Sembcorp Aguas Santiago SA; Sembcorp Aguas Chacabuco SA; Sembcorp Aguas Lampa SA; Sembcorp Aguas del Norte SA; Sembcorp Sercon SA; Sembcorp Utilities (Chile) SA; Sembcorp Libardon SA; Sembcorp YangCheng Power Company Pte Ltd; and Sembcorp Utilities (Oman) Pte Ltd.

Name: Mr. Abdul Amir Saied Mohammed



Education: Mr. Mohammed holds a Masters in Business Administration from Oxford Brookes University, UK. He has also been a Member of the Association of Accounting Technicians since 1979.

Experience: Mr. Mohammed is a director of Sembcorp Salalah. He is also a director of Oman Investment Corporation, representing the State General Reserve Fund, which is a shareholder of Sembcorp Salalah. Mr. Mohammed is the Deputy Chief Executive Officer at the State General Reserve Fund. He is responsible for the functions of operation units and assists the Chief Executive Officer in the day‑to‑day operations.

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Role of the BoardThe primary role of the Board of Directors is to provide entrepreneurial leadership to Sembcorp Salalah within a framework of prudent and effective controls that enable risk to be properly assessed and managed.

Powers of the BoardThe Board has full authority to perform all acts required to manage Sembcorp Salalah in accordance with its objectives and with the primary objective of creating value for the Shareholders. This authority is not limited or restricted except as provided by applicable law, by the Articles or by a resolution of the Shareholders. The day‑to‑day management of Sembcorp Salalah is performed by Sembcorp Salalah’s senior management team, as described in “Chapter XIX – Corporate Governance” of this Prospectus.

Some of the principal functions of the Board include:

determining, refining and advancing Sembcorp Salalah’s vision through corporate strategy, major plans of action and business decisions, and by monitoring developments and approving variations to the strategy and vision;

analysing and approving the annual operating plan and developing, reviewing and updating other necessary plans to effectuate Sembcorp Salalah’s objectives;

appointing the CEO and all positions reporting directly to the CEO and specifying their roles, responsibility, and power;

supervising and assessing the performance of senior management to ensure that the business is properly managed to meet Sembcorp Salalah’s objectives;

monitoring the integrity of Sembcorp Salalah’s accounting and financial reporting systems, including the independent audit function, and ensuring that appropriate internal controls are in place;

approving financial statements related to Sembcorp Salalah’s business and work results, as submitted quarterly by executive management to the Board, in a manner that accurately reflects the financial position of Sembcorp Salalah;

approving, within two months of the end of the Financial Year, Sembcorp Salalah’s balance sheet and a profit and loss statement audited by Sembcorp Salalah’s auditors;

preparing, adopting and monitoring the effectiveness of corporate governance rules and disclosure practices in support of Sembcorp Salalah’s commitment to best practices;

approving material internal regulations of Sembcorp Salalah regarding including specifying the responsibilities and the authorities of the executive management;

reviewing material transactions with related parties that are not in the ordinary course of business prior to bringing such matters before a general meeting of the Shareholders;

applying and maintaining high ethical standards throughout Sembcorp Salalah;

approving policy and overseeing disclosure, communications and Shareholder reporting processes to ensure the fair and timely release of material information and compliance with regulatory requirements;

approving a formal and comprehensive delegation of power to the various levels of management, the Board sub‑committees and any other financially empowered group or individual, with an awareness of the limits imposed by the Articles or applicable law;

determining the frequency with which delegates must report to the Board regarding the exercise of delegated powers; and

ensuring that any persons acting pursuant to a delegation from the Board will inform the Board at regular intervals about decisions taken pursuant to such authority.

Appointment of the BoardThe Board will be elected by the general meeting of the Shareholders by secret ballot, and if a candidate (whether individual or corporate) is a Shareholder, the candidate personally (if a natural person) or the nominating entity (if a juristic person) must hold at least 50,000 Shares at the time of nomination of the candidate for election to the Board. The duration of the membership of the Board of Directors will be for a period of three years, and their re‑election is permitted for a similar period. This period will be calculated from the date of the general meeting in which this election was made until the third subsequent general meeting. If the date of this general meeting exceeds the period of three years, the membership will be extended by law until the date of such meeting but it should not exceed the period specified in Article 120 of the CCL for holding the general meeting.

Subject to Article 95 of the CCL, and without prejudice to the Articles, nominees to the membership of the Board must:

be of good conduct and sound reputation;

be at least 25 years old;

not be unable to settle indebtedness to Sembcorp Salalah;

not be declared insolvent or bankrupt unless the state of insolvency or bankruptcy has ceased pursuant to the law;

not be convicted of a felony or dishonourable crime unless he has been discharged;

not be a member or a representative of a juristic person in more than four public joint stock companies based in Oman once appointed to the Board in question;

be authorised to nominate himself for Board membership by the juristic person if he is nominated with such capacity;

not be a member of the board of directors of a public or closed joint stock Company which is based in Oman and which is carrying out similar objectives to that of Sembcorp Salalah, on which he intends to nominate himself for Board membership; and

present an acknowledgement which contains a statement of the number of his Shares if he is a Shareholder and that he will not dispose of them to the extent that he will be deprived of his status as a Shareholder, throughout the term of his office.

Without any prejudice to the regulations of the CCL mentioned above, the following conditions will be fulfilled while forming the Board of Directors:

the Board will be comprised of a majority of Non‑Executive Directors;

a minimum of one‑third of the total Board (subject to a minimum of two) will be composed of Independent Directors in accordance with the rules and conditions issued by the CMA from time to time;

a juristic Shareholder will not be represented by more than one representative on the Board; and

the roles of CEO and Chairman will not be combined.

If a member of the Board of Directors ceases to meet any of the conditions necessary for membership of the Board, he/she must inform the Board and his/her place will be considered vacant from the date of receipt of that information; otherwise, his/her membership will terminate from the date Sembcorp Salalah finds out this information, without prejudice to his/her liability in accordance with law, and his/her place will be filled in accordance with the provisions of Article 98 of the CCL.

The Board of Directors will elect a Chairman and a Deputy Chairman from its members. The Deputy Chairman will officiate as Chairman when the latter is absent. The Chairman of the Board of Directors must implement the resolutions of the Board of Directors and must conduct the regular business of Sembcorp Salalah under the supervision and control of the Board of Directors in accordance with the authority specified in the Articles and Sembcorp Salalah’s internal regulations.

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Remuneration of the BoardThe OGM will determine the annual remuneration and sitting fees of the Chairman and the members of the Board of Directors at not more than 5 per cent. of the net annual profits of Sembcorp Salalah after providing for taxation and deducting the legal and optional reserves in accordance with Article 106 of the CCL and setting aside or distributing the dividends to Shareholders at not less than 5 per cent. of the net profits. The maximum total over‑all limit on the entire remuneration and sitting fees paid by Sembcorp Salalah will be OMR 200,000, with a sub‑ceiling of OMR 10,000 as a sitting fee for each Director per annum. Where Sembcorp Salalah makes losses or less profit to the extent that setting aside or distributing dividends to the Shareholders is not possible, remuneration and sitting fees will be determined in accordance with the rules issued by the CMA. The remuneration will be distributed amongst the members of the Board of Directors in such proportions and manner as they, by agreement, may determine, failing which the remuneration will be divided equally among the Board. A member of the Board of Directors will be eligible for compensation for his services if he is assigned a job or travels or does something related to Sembcorp Salalah’s work.

Under the terms of the SHA, no member of the Board of Directors may receive any fees or compensation from Sembcorp Salalah in carrying out his duties and obligations as a director other than those payable under any separate employment or service contract entered into between the director and Sembcorp Salalah, or costs or expenses reasonably incurred in connection with attending and being present in a meeting of the Board of Directors. As at the date of this Prospectus, no member of the Board of Directors has entered into a employment or service contract with Sembcorp Salalah.

Board CommitteesFollowing the Offer, the Board of Directors intends to constitute three committees: the Audit Committee, the Nominations Committee and the Remuneration Committee. The Board of Directors will be fully appraised of all decisions governing Sembcorp Salalah’s overall operations, as submitted and recommended by the three committees.

The Audit Committee’s key functions will be to assist the Board in overseeing the integrity of Sembcorp Salalah’s policies and financial statements, including validating and recommending them for approval to the Board, and to oversee the performance of Sembcorp Salalah’s internal audit function. The Audit Committee will also be responsible for Sembcorp Salalah’s risk management plans, systems processes and procedures.

The Nominations Committee’s key functions will be to identify and nominate candidates to fill vacancies in the Board of Directors and Management as and when they arise, to review the structure, size and composition of the Board, to make recommendations to the Board with regard to any such changes, and to consider succession planning for members of the Board of Directors and Management.

The Remuneration Committee’s key functions will be to determine the framework and policy for the remuneration of members of the Board of Directors and Management, to ensure that remuneration is appropriate and sufficient to attract and retain such individuals as are needed to run the company successfully and to oversee any major changes in employee benefit structures and equity‑based bonus plans.

Senior Management Team

The current composition of the senior management team of Sembcorp Salalah is as follows:

Name Position

Mr. Lim Yeow Keong CEO

Mr. David Guy CFO and Company Secretary

Mr. Leonilo Barre Caraos Plant Manager

The Board of Directors must not perform the following acts unless expressly authorised to do so by the Articles or by a resolution of the general meeting:

make donations, except donations required by the business wherever they are small and customary amounts;

sell all or a substantial part of Sembcorp Salalah’s assets;

pledge or mortgage the assets of Sembcorp Salalah, except to secure debts of Sembcorp Salalah incurred in the ordinary course of Sembcorp Salalah’s business; or

guarantee debts of third parties, except guarantees made in the ordinary course of business for the sake of achieving Sembcorp Salalah’s objectives.

Sembcorp Salalah will be bound by all acts performed by its Board of Directors, its Chairman, its CEO and all other senior management (if any), as long as they act in the name of Sembcorp Salalah and within the scope of their powers.

The Board of Directors, in cases other than the distribution of dividends and approving the balance sheet, profit and loss account, and reports of the audit committee and auditors, may pass resolutions without the need to convene a meeting of the Board of Directors if all members of the Board approve the same in writing.

Pursuant to Article 107 of the CCL, it is not permitted for any member of the Board or senior management to utilise the information that reaches them in the capacity of their positions or jobs to gain any benefit for themselves or their minor children or for any of their relatives to the fourth degree as a result of transactions in the Shares. It is also not permitted for any member of the Board or senior management who has a direct or indirect interest in any authority that is involved in activities which are aimed at influencing the price of Shares issued by Sembcorp Salalah. The provisions of Articles 109 and 110 of CCL will be applied in case of violation.

A member of the Board or senior management or other related party of Sembcorp Salalah must not have any direct or indirect interest in the transactions or contracts concluded by Sembcorp Salalah for its account, except those concluded in accordance with the rules and regulations of the CMA.

The members of the Board of Directors will be liable to Sembcorp Salalah, the Shareholders and third parties for damages caused by their acts in violation of applicable law and their acts which fall beyond the scope of their powers, or by any fraud or negligence in the performance of their duties or by their failure to act prudently under certain circumstances.

Any provisions or stipulations limiting the liability of the members of the Board will be null and void, and Sembcorp Salalah will reimburse any director the costs and sums adjudged in any civil or criminal case brought against him as a result of his activities as a member of the Board in the event that final judgment in such case will absolve the director of liability. Sembcorp Salalah may institute an action against any member of the Board that it deems liable for damages that Sembcorp Salalah has suffered. The Board of Directors or the OGM will appoint a person to pursue the case on behalf of Sembcorp Salalah and authorise him to pay costs of the case from the funds of Sembcorp Salalah. Any Shareholder may propose suing the members of the Board of Directors, and if the OGM does not adopt his/her proposal, he/she may himself/herself file the case on behalf of Sembcorp Salalah. If the case is successful, the Shareholder will be reimbursed the costs and expenses of the case out of the sums adjudged and the balance will be paid to Sembcorp Salalah.

It is not permitted to file a lawsuit against the members of the Board of Directors or their heirs regarding the works they have done while discharging their duties, unless the case is filed within five years from the earlier of (i) the date of the act or omission forming the basis of the complaint; or (ii) the date of the general meeting at which the Board of Directors submitted the accounts of Sembcorp Salalah for the period including the act or the shortcoming which is the reason for the complaint. This period will not apply to suits filed by the CMA.

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Internal Regulations

In accordance with the provisions set out in Article 68 of the CCL, Sembcorp Salalah is required to lay down internal regulations for regulating its management, business and personnel affairs through its Board of Directors, within one year from the date of registration of the transformation of Sembcorp Salalah with the Commercial Registrar. Sembcorp Salalah has in place a number of corporate governance processes that meet most of the CMA’s requirements for an SAOG as mandated by the regulations issued by the CMA dealing with corporate governance and it will review these and make any appropriate changes that are required in light of its transformation to an SAOG. These regulations shall cover at least the following, separately from the rules and regulations of the CMA:

Organisational structure of Sembcorp Salalah, including the responsibilities related to the various posts within Sembcorp Salalah and the reporting structure/procedures.

Specifying the extent of the authority vested with each post with regard to approval of financial expenditure.

Specifying the allowance for meetings, remuneration and other privileges as prescribed in respect of the members of the Board of Directors and Board committees, and the basis for their calculation.

Policies related to the purchases and service contracts.

The minimum level of information required to be submitted to the Board of Directors.

Authorities, duties and responsibilities relevant to executive management and Board committees.

Policies related to human resources including salaries, appointment, development, training, promotions and termination of services etc., covering other relevant aspects.

Investment policies.

Policies in relation to related party transactions.

Policies and measures for submission of material information in a transparent manner to the CMA and the MSM within the specified time, including a definition of “material information”.

Any other regulations that the Board may deem necessary to achieve an adequate level of corporate governance.

Biographical Information of the Senior Management Team

Name: Mr. Lim Yeow Keong

Position: CEO


Education: Mr. Lim holds a First Class Honours degree in Chemical Engineering in collaboration with Environmental Engineering from the University of Toronto, Canada.

Experience: Mr. Lim is the CEO of Sembcorp Salalah. Mr. Lim joined Sembcorp Industries in 1997 after he was awarded a company scholarship. Over the course of his career, Mr. Lim has been actively involved in the development of Sembcorp Industries’ utilities businesses in the GCC region, in particular the United Arab Emirates and Oman. Mr. Lim was the lead developer for the Project and oversaw its development from the tender phase to completion.

Name: Mr. David Guy

Position: CFO


Education: Mr. Guy holds a Bachelor of Arts (Honours) from Durham University, UK and is a member of the Institute of Chartered Accountants in England and Wales.

Experience: Mr. Guy is the CFO and Company Secretary of Sembcorp Salalah. Mr. Guy has extensive sector experience after 17 years in the power and water industries. In 2010, Mr. Guy was appointed as regional Group Chief Financial Officer of SembCorp Utilities (Netherlands) NV (formerly Cascal NV), following its acquisition by Sembcorp Industries. From 2003 to 2010, Mr. Guy was Senior Vice President – Finance of Sembcorp Utilities (UK) Ltd., where he led the financing of Wilton 10, the UK’s largest biomass boiler at the time, as well as leading the restructuring of the local pension scheme. Prior to joining Sembcorp Industries in 2003, Mr. Guy was Financial Director for Enron Teeside Operations Ltd.

Name: Mr. Leonilo Barre Caraos

Position: Plant Manager


Education: Mr. Caraos holds a Bachelor of Science in Mechanical Engineering from Batangas State University, Philippines. Mr. Caraos is a Professional Mechanical Engineer licenced by the Philippine Professional Regulation Commission.

Experience: Mr. Caraos is the Plant Manager of Sembcorp Salalah. Mr. Caraos is a professional mechanical engineer with more than 25 years’ experience in the power and energy industry, specifically in the field of commissioning, operation and HSSE management. Prior to working at Sembcorp Salalah, Mr. Caraos was Operations Manager in the 746 MW Phu My 3 combined‑cycle power plant in Vietnam.

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resolutions of the OGM shall not be valid unless the meeting is attended by Shareholders or their proxies who represent at least half of the issued and paid‑up share capital of Sembcorp Salalah. If such a quorum is not formed, a second meeting shall be called to discuss the same agenda. The second OGM shall be notified to the Shareholders in the same manner as the first meeting, at least one week prior to the date set for the second meeting. The resolution of the meeting shall be valid regardless of the number of shares represented, provided that such meeting is held within one month from the date of the first meeting. The resolution of the OGM shall be adopted by simple majority of votes cast.

Extraordinary General Meetings

An EGM will be convened to decide on issues such as:

(a) a reduction or increase in the authorised share capital of Sembcorp Salalah;

(b) the dissolution, liquidation or merger of Sembcorp Salalah;

(c) the sale of Sembcorp Salalah’s business or its disposal in any form or manner;

(d) an amendment to the Articles; and

(e) the issue of negotiable bonds by public subscription or private placement.

The resolutions of the EGM shall not be valid unless the meeting is attended by Shareholders or proxies representing at least three‑quarters of Sembcorp Salalah’s issued and paid‑up share capital. Failing such a quorum, a second meeting shall be convened to discuss the same agenda. The Shareholders shall be notified of the second EGM in the same manner as the first EGM, at least two weeks prior to the date set for the second meeting.

The resolutions of the second EGM shall be valid if the meeting is attended by Shareholders or proxies representing more than half of Sembcorp Salalah’s issued and paid‑up share capital, provided such meeting is held within six weeks of the date of the first EGM. The resolutions of the EGM shall be adopted by a majority of three‑quarters of the votes cast in respect of a certain resolution, provided such resolution must receive votes in favour representing more than fifty per cent. of Sembcorp Salalah’s issued and paid‑up share capital.

Any shareholder or any interested party may refer to the Primary Commercial Court within five years from the date on which the meeting was held, to decide on nullification of any decision if taken during a general meeting in violation of the CCL, the provisions of the Articles, the company’s internal regulations, or through deceit or misuse of authority.

Restrictions on transfer of ownership of the Shares

The shareholding of each Shareholder may not exceed the maximum limit prescribed and provided for in the Articles, the CCL and the Capital Market Law respectively, unless the necessary approvals are secured.

Any person whose shareholding, along with his minor children’s shareholding, reaches 10 per cent. or more of Sembcorp Salalah’s issued and paid‑up share capital, is required to advise the CMA of the same in writing. Further, the Shareholder must inform the CMA in writing of any transaction or dealing which leads to any change in this percentage immediately after it happens.

No single person or related person up to second degree may hold 25 per cent. or more of the shares of a public joint stock company, save in accordance with the rules issued by the CMA on the subject.

Chapter XX: Rights and Liabilities of Shareholders

Shareholders’ liabilities

The liability of a Shareholder will be limited to payment of the value of the Shares for which the Shareholder has subscribed. The Shareholder will not be liable for the debts of Sembcorp Salalah except to the limit of the nominal value of the subscribed Shares.

Shareholders’ rights

All the Shares enjoy equal and inherent rights, which, in accordance with the CCL, are:

the right to receive dividends declared in the general meeting;

preferential rights to subscribe for any new Shares, except as provided for under applicable law;

the right to share in the distribution of the proceeds of Sembcorp Salalah’s surplus assets on liquidation;

the right to transfer Shares in accordance with applicable law;

the right to access Sembcorp Salalah’s balance sheet, profit and loss account and Shareholders’ register;

the right to be invited to attend the general meeting and vote in such meetings personally or by proxy (each Shareholder will have one vote for each Share owned);

the right to apply for annulment of any resolution made by the general meeting or the Board of Directors if such resolution(s) are contrary to applicable law or the Articles or the internal regulations of Sembcorp Salalah;

the right to institute legal proceedings on behalf of the Shareholders or Sembcorp Salalah against the Board of Directors or the auditors of Sembcorp Salalah; and

the right to approach the CMA (provided that the move is supported by Shareholders who own at least 5 per cent. of the Shares), to request the CMA to exercise its authority to suspend resolutions of the general meeting which are made in favour of a certain category of Shareholders or against a certain category of Shareholders, or in the interest of the members of the Board of Directors or others.

Reports and statements

The Board shall prepare unaudited quarterly financial statements for the first, second and third quarter of each financial year. It shall also prepare an annual report within two months from the end of each financial year, comprising the audited balance sheet, profit and loss statement, cash flow statement, changes in shareholder’s equity, report of the Board of Directors, report on the discussions held by the Board and their analysis and report on the organisation and management of Sembcorp Salalah. These statements should be disclosed at least two weeks prior to the OGM through the electronic transmission system on the MSM website.

The unaudited quarterly financial statements shall be forwarded to the information centre of the MSM within thirty days from the end of each quarter or any other legal period prescribed by the disclosure rules and conditions issued by CMA through the private electronic transmission system of the MSM’s information centre. The said centre shall also be provided with two copies duly endorsed by the Board of Directors.

Ordinary General Meetings

The Board of Directors may convene an OGM at any time and such meeting shall be convened whenever required by the CCL or the Articles, or upon request of one or more Shareholders who represent at least 25 per cent. of the issued and paid‑up share capital of Sembcorp Salalah. The Board shall establish the agenda of the OGM. If the meeting is convened by the auditors, the agenda shall then be established by them. The Board, or the auditors if necessary, shall include in the agenda any proposal put forward by Shareholders who represent more than 10 per cent. of the issued and paid‑up share capital of Sembcorp Salalah provided that such proposal is submitted for inclusion in the agenda at least one month before the date of the meeting. The

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Settlement ProcedureAt the end of each trading session, the amount of securities and money to be delivered and/or paid on the settlement day is determined through the netting process and reflected in the MCDC settlement report. Transactions are finally settled on T+3 in the way of delivery against payment. Ownership of purchased securities are transferred among investors’ trading accounts and the cash settlement is done among brokers through the designated settlement bank.

Trading Trading in securities is carried out on the MSM over five working days per week, excluding official holidays, and for not less than two hours a day.

The MSM has an electronic trading system which:

automatically blocks purchase orders which exceed the limits of the broker’s bank guarantee or reach the limit of the special order provided by law; and

enables all companies and entities whose securities are listed in the MSM, and their registrars, to view the register of their own shares.

Before an investor can trade in securities on the MSM, it needs to apply for and obtain a shareholder’s number from the MCDC, the issuance of which automatically triggers the creation of an investor account for the custody of securities traded in the MSM. Each investor can be allocated a shareholder’s number, only. Once the investor has received its shareholder’s number, the MSM allocates the investor a trading account with a licensed broker. Individual investors who seek to trade securities on the MSM need to maintain a direct securities account with the MCDC and a trading account with an accredited broker.

Investors must establish a trading account with an MSM‑accredited broker before they can commence trading. When an account is opened, the applicant becomes an investor participant and is entitled to issue instructions for trading in securities. Trades in all securities are settled in dematerialised form.

The shareholder’s number identifies the investor account at the MCDC used to transfer shares to and from the account each time the investor buys or sells shares. When the investor intends to sell shares, he is required to transfer the quantities of shares to his broker trading account.

The process of securities trading starts when an investor formally requests his broker to purchase or sell a security, according to specific conditions.

An investor is responsible for all costs associated with trading securities and is required to pay, upon request of his broker, all the amounts necessary to cover his transactions, in particular the purchasing price and commissions or other fees required by the MSM.

Trading System The MSM operates on an automated screen‑based and order‑driven trading system which matches buying and selling orders of the investors. Investors can place their orders with the MSM accredited brokers, who enter these orders into the trading system. Then, the system automatically matches buy and sell orders of a particular security based on the price and quantity requirements.

The trading system also generates and displays details of current and historical trading activity, including prices, volumes traded and outstanding buy and sell orders.

An off‑market trading mechanism also exists, known as the ‘special order’ process.

Chapter XXI: Market Information

Background

The MSM was established on 21 June 1988 by Royal Decree 53/88 and is the only stock exchange in Oman. Subsequently, on 9 November 1998, Royal Decree 80/98 promulgating the Capital Market Law established the CMA as regulator of the stock exchange. The MSM is a governmental entity, financially and administratively independent from the CMA, but subject to its supervision. The CMA has issued a Code of Corporate Governance for companies listed on the MSM, which was most recently amended in October 2012.

The MSM Index was established in 1992 with a base date of June 1990. The number of companies included in the index sample has increased over time, and currently stands at 30 companies.

Listing Requirements

Prior to applying for listing on the MSM, a company is required to obtain the approval of the CMA and the General Manager of the MSM. The applicant is required to submit a listing application to the MSM within one month from the date of registration along with the following documents and information:

certificate of commercial registration;

list of authorised signatories and specimens of their signatures;

copies of the company’s memorandum and articles of association;

the prospectus relating to the offering;

an attested copy of the minutes of the constitutive general meeting; and

any additional requirements of the CMA.

Reporting Requirements

Each listed company must, amongst other things:

prepare quarterly unaudited financial statements for the first, second and third quarters of the financial year and file the same to the CMA in the prescribed form within 30 days from the end of the quarter (45 days for those with subsidiaries);

prepare annual audited financial statements in accordance with IFRS and file the same to the CMA within two months from the end of the financial year or 14 days prior to the general meeting of the company;

immediately inform the CMA in the event of, amongst other things: a change of name or address; amendment to its memorandum and/or articles of association of the company; a change of any director or member of the management team of the company, giving reasons; closure of any branch or termination of dealing with any agent; change of external auditor of the company; any attachment or mortgage on the company’s assets; any unexpected losses affecting the financial position of the company, giving reasons; and any proceedings instituted by or against the company that may have a material impact on the financial position of the company.

Clearance and Settlement

MCDC is responsible for maintaining shareholder records and providing custody services for securities and investment funds listed on the MSM, bonds traded on the MSM, and other securities issued by the Government. All transactions in the MSM are settled on a book‑entry clearing basis on T+3.

Settlement MethodThe MSM has adopted a multilateral netting system under which transactions are cleared and settled on a net basis by a broker. After the clearing of the transactions by the MSM, the transfers of securities ownership is done through the book‑entry system which is operated by the MSM.

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Chapter XXII: Subscription Conditions and Procedures

Offer Structure

Category I Investors Category II Investors

No. of Offer Shares 20,046,012 Offer Shares 13,364,007 Offer Shares

Percentage of Offer Shares 60 per cent. 40 per cent.

Basis of Allotment Pro‑rata Pro‑rata

Minimum Subscription 100 Shares and thereafter in multiples of 100 Shares

50,100 Shares and thereafter in multiples of 100 Shares

Maximum Subscription 50,000 Shares 3,341,000 Shares, which is equal to 10 per cent. of the Offer size

Terms of Payment of Application Money

100 per cent. of the subscription amount to be paid at the time of submission of the Application to the Collecting Banks

100 per cent. of the subscription amount to be paid at the time of submission of the Application to the Collecting Banks

Other Conditions Application to be submitted to any of the Collecting Banks on or before 26 September 2013

Application to be submitted to any of the Collecting Banks on or before 26 September 2013

Offer Period 28 August 2013 to 26 September 2013 28 August 2013 to 26 September 2013

Eligibility for the Subscription of Offer Shares

The Offer will be open to Omani and non‑Omani individuals and juristic persons. All GCC individuals and juristic persons are treated as Omani individuals and juristic persons for the purpose of owning shares in Omani companies.

No single person or related person up to a second degree can hold 25 per cent. or more of the shares of a public joint stock company, except with the explicit approval of the CMA.

Prohibitions with Regard to the Applications for Subscription

In accordance with the Capital Market Law, the following Applicants shall not be permitted to subscribe to the Offer:

Sole Proprietorship Establishments: The owners of sole proprietorship establishments may only submit Applications in their personal names.

Trust Accounts: Customers registered under trust accounts may only submit Applications in their personal names.

Multiple Applications: An Applicant may not submit more than one Application.

Joint Applications: Applicants may not submit applications in the name of more than one individual (including on behalf of legal heirs).

All such Applications will be rejected without contacting the Applicant.

Subscription on Behalf of Minor Children

For the purpose of this Offer, any person under 18 years of age on the date of submission of an Application will be defined as a minor.

Only a father may subscribe on behalf of his minor children.

Trading SessionsTrading sessions take place from Sunday to Thursday (except public holidays in Oman) as follows:

Time

Pre‑Opening Session 09:00 to 10:00

Trading Session 10:00 to 13:00

Closing 13:00

Suspension of TradingThe MSM may temporarily suspend trading of any listed security if there is information or rumour that may affect the price of the security or in case the company restructures its capital or splits its shares. Trading of the securities of any company shall also be suspended if the company is dissolved or liquidated. In certain circumstances the company may request a suspension of trading.

Trading PerformanceThe table below shows the number of listed companies, the number of traded shares, the value of traded shares and the number of executed transactions as at 31 December for each of the years indicated.

2010 2011 2012

Number of listed companies 119 114 115

Number of traded shares (millions) 3,013 2,366 4,319

Value of traded shares (OMR millions) 1,274 981 1,025

Number of executed transactions (thousands) 538,560 359,596 328,809

Market capitalisation (OMR millions) 10,902 10,342 11,665

Source: MSM Annual Statistics Data

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Allocation in Case of Undersubscription

In case of undersubscription, the Offer Shares will be adjusted in proportion to the Offer Shares offered by the Selling Shareholders and, in case the EHC does not exercise its share option under the PFA, the Selling Shareholders are required to re‑offer the unsubscribed Shares annually thereafter for three consecutive years.

Any undersubscription in any category shall be carried to the other category. The final allocation on the above basis will be decided by the Issue Manager and Sembcorp Salalah in consultation with the CMA.

Minimum Limit of Public Subscription

The minimum number of Offer Shares for Category I Investors will be 100 Offer Shares and in multiples of 100 Offer Shares thereafter. For Category II Investors, it will be 50,100 Offer Shares and in multiples of 100 Offer Shares thereafter.

Maximum Limit of Public Subscription

The maximum number of Offer Shares that can be applied for by a Category I Investor is 50,000 Offer Shares. The maximum limit for a Category II investor is 10 per cent. of the total Offer size which equates to 3,341,000 Offer Shares. It is not permissible for any Applicant to subscribe for more than this amount.

For the purpose of calculation of this percentage, the application for the subscription of the father (or guardian) shall be merged with the applications of the minor children. If the volume of the Offer Shares subscribed exceeds the said percentage, the Offer Shares registered under each application shall be reduced proportionately before making the allotment.

None of Sembcorp Salalah, the Issue Manager or the Global Coordinator and Bookrunner are liable for any changes in applicable laws or regulations that occur after the date of this Prospectus. Applicants are advised to make their own independent investigations to ensure that their Applications comply with prevailing laws and regulations.

Terms of Payment

The Selling Shareholders will open an escrow account entitled the “Sembcorp Salalah IPO” account with each of the Collecting Banks for the collection of the Application Money.

This account will be managed by each Collecting Bank, which, after allotment and refunds, will transfer the balances in such account to the Issue Manager.

Each Applicant can pay by cash, draw a cheque or demand draft or instruct an account transfer for the amount payable at the time of submission of the Application and/or on allocation.

Particulars of the Bank Account of the Investor

Each Applicant is required to furnish the particulars of its bank account (registered in the name of the Applicant). The Applicant must not use the bank account number of any other person except in the case of minor children only.

If the bank account of the Applicant is registered with a bank other than one of the Collecting Banks, the Applicant will be required to submit a document to confirm the details of the bank account particulars as provided in the Application. This can be done by submitting any document from the bank of the Applicant that states the account number and name of the account holder. Documents that may be accepted include account statements or a letter or any document issued by the bank confirming this information. The Applicant is responsible for ensuring that the evidence submitted is legible and contains the required information. The Applicant is not obliged to submit any evidence with regard to the accuracy of its bank account if it is subscribing through the Collecting Bank where it maintains its account. In this case, the bank will be required to verify and confirm the correctness of the Applicant’s account through its own system and procedures or through the evidence submitted to it by the Applicant.

If an Application is made on behalf of a minor by any person other than the minor’s father, the person submitting the Application will be required to attach a valid Sharia (Legal) Power of Attorney issued by the competent authorities authorising him or her to deal in the funds of the minor through sale, purchase and investment.

Applicant’s Number with MCDC

Any Applicant who subscribes for the Offer Shares must have an account and Investor Number with the MCDC. Any Applicant may apply to obtain an Investor Number and open an account by completing the MCDC application form. This may be obtained from the MCDC’s Head Office or its website at www.csdoman.co.om, or from brokerage companies licensed by the MSM. The completed form may be submitted by an Applicant through any of the following channels:

At the head office of the MCDC, at P.O. Box 952, Postal Code 112, Ruwi, Muscat, Sultanate of Oman.

At the branch of the MSM based in Salalah, Oman, Tel: +968 2329 9822, Fax: +968 2329 9833.

At the office of any brokerage company licensed by the MSM.

By sending a facsimile to MCDC at +968 2481 7491.

By opening an account through the MCDC website at www.csdoman.co.om.

In order to open an account with the MCDC, a juristic person will be required to furnish a copy of its constitutional documents, in the form prescribed by the MCDC, along with a completed MCDC application form in order to open an account and receive an Investor Number.

Applicants who already hold accounts with the MCDC are advised, before the Offer, to confirm their details as noted in the Application. Applicants may update their particulars through any of the channels mentioned above.

All correspondence including allocation notices and dividend cheques will be sent to Applicant’s address as recorded at the MCDC. Applicants should ensure that their addresses as provided to the MCDC are correct and kept up‑to‑date.

Each Applicant should secure from the MCDC its Investor Number as the Investor Number will be required in order to complete the Application. Each Applicant is responsible for ensuring that the Investor Number set out in their Application is correct. Applications not bearing the correct Investor Number will be rejected without contacting the Applicant.

For more information on these procedures, Applicants should contact the MCDC:

Muscat Clearing & Depository Co., SAOC P.O. Box 952, Postal Code 112, Ruwi, Muscat, Sultanate of Oman

Tel: +968 2482 2222; Fax: +968 2481 7491 www.csdoman.co.om

Offer Period

The Offer Period will commence on 28 August 2013 and end on 26 September 2013 with the end of the official working hours of the Collecting Banks.

Allocation in Case of Oversubscription

In case of oversubscription, the Offer shall be split among the eligible investor groups, in the following portions:

Category I Investors: 20,046,012 Offer Shares, being 60 per cent. of the Offer, for individuals and juristic persons applying for a maximum of 50,000 Offer Shares. Distribution of Offer Shares shall be on a pro‑rata basis.

Category II Investors: 13,364,007 Offer Shares, being 40 per cent. of the Offer, for individuals and juristic persons applying for 50,100 Offer Shares or more, up to a maximum of 3,341,000 Offer Shares. Distribution of Offer Shares shall be on a pro‑rata basis.

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Where an Investor has been allocated fewer Offer Shares than indicated in the Application or at a price lower than the price at which the Application money was calculated, the excess amount, if any, paid on Application, will be refunded to the Investor from the escrow account of “Sembcorp Salalah IPO”.

Acceptance of the Applications

The Collecting Banks will not accept Applications in the following circumstances:

If the Application does not bear the signature of the Applicant.

If the Application Money is not paid by the Applicant in accordance with the conditions set out in this Prospectus.

If the Application Money is paid by cheque and the cheque is dishonoured for whatever reason.

If the Application does not include the Applicant’s Investor Number registered with the MCDC.

If the Application is submitted in joint names.

If the Applicant is a sole proprietorship or trust account.

If the Investor Number furnished in the Application is incorrect.

If the Applicant submits more than one Application in the same name, all of them will be rejected.

If the supporting documents are not enclosed with the Application.

If the Application does not contain all the particulars of the bank account of the Applicant.

If the particulars of the bank account provided in the Application are found to be incorrect or not relevant to the Applicant, with the exception of Applications submitted in the names of minor children, who are allowed to make use of the particulars of the bank accounts held by their fathers.

If the power of attorney is not attached to the Application in respect of an Applicant who subscribes on behalf of another person (with the exception of the fathers who subscribe on behalf of their minor children).

If the Application does not comply with the legal requirements as provided for in this Prospectus.

If the Collecting Bank receives an Application that does not comply with the procedures set out in this Prospectus, due effort will be taken to contact the Applicant so that the mistake may be corrected. If the Applicant does not rectify the Application within a specified period, the Collecting Bank will return the Application together with the Application Money to the Applicant.

Refusal of Applications

The Issue Manager may reject any Application under any of the conditions referred to above, subject to securing the approval of the CMA and submission of a comprehensive report furnishing the details of the Applications that are rejected and the reasons behind the rejections.

All Category II Investors who have an account with a bank will be required to submit a document to confirm the details of the bank account particulars as provided in the Application. This can be done by submitting any document from the bank of the Applicant that states the account number and name of the account holder. Documents that may be accepted include account statements or a letter or any document issued by the bank confirming this information. The Applicant is responsible for ensuring that the evidence submitted is legible and contains the required information.

In accordance with the instructions of the CMA, the details of the bank account will be listed in the records of the MCDC for transferring any refund as well as for crediting the dividends distributed by the companies listed on the MSM. For Applicants who already have bank accounts registered with the MCDC the account mentioned in the Application will be used for the transfer of refunds only.

Any Application containing the bank account number of a person other than the Applicant will be rejected, with the exception of Applications made on behalf of minors that contain bank accounts particulars of their fathers.

Documentation Required

Submission of a document confirming the accuracy of the bank account number provided in the Application is only required where the bank account is registered with a bank that is not the Collecting Bank.

A copy of a valid power of attorney duly endorsed by the competent legal authorities must be included in the event the subscription is on behalf of another person (with the exception of a subscription made by a father on behalf of his minor children).

In case of applications by juristic persons (non‑individuals) which are signed by a person in his or her capacity as an authorised signatory, a copy of adequate and valid documentation should be attached.

Mode of Application

The Applicant will be responsible for furnishing all particulars and will ensure the correctness and validity of the information set out in the Application. The Applicant will be required, before completing the Application, to carefully read this Prospectus, including the conditions and procedures governing the subscription.

The Applicant will be required to fill in the Application and furnish copies of all particulars as noted on the Application.

The Applicant will be required to submit the Application to one of the Collecting Banks, together with the Application Money and the documents in support of the Application.

Cheque or demand draft for the Application Money will be in favour of “Sembcorp Salalah IPO”.

Banks Receiving the Applications

Applications will be accepted by any one of the Collecting Banks during official bank hours only. The Collecting Bank receiving the subscription is required to accept the Application after confirmation of compliance with the procedures set out in this Prospectus. The Collecting Bank must instruct the Applicants to comply and fulfil any requirements set out in the Application.

Applicants must submit an Application to one of the Collecting Banks on or before the Offer Closing Date. The Collecting Bank shall refuse any Application received after the official working hours on the Offer Closing Date.

Payment into Escrow Account

All Investors will, with the submission of the Application, pay by cash, draw a cheque or demand draft or instruct an account transfer for the amount payable at the time of submission of the Application and/or on allocation in favour of “Sembcorp Salalah IPO”.

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Listing and Trading of the Offer Shares

The Offer Shares will be listed with MSM in accordance with the laws and procedures in force on the date the application is made for the listing and registration. The above listing date is an estimated date and the exact date will be published on the MSM website.

Responsibilities and Obligations

The Issue Manager, the Global Coordinator and Bookrunner, the Collecting Banks and the MCDC must abide by the responsibilities and obligations set out by the directives and regulations issued by the CMA. The Issue Manager, the Global Coordinator and Bookrunner and the Collecting Banks must also abide by any other responsibilities that are provided for in the agreements entered into among them and Sembcorp Salalah and the Selling Shareholders.

The parties concerned will be required to take remedial measures with regard to any liability arising from any negligence committed in the performance of the functions and responsibilities assigned to them. The Issue Manager will be the entity responsible before the regulatory authorities for taking suitable steps and measures for redressing such liability.

Transfer Restrictions

As referenced above, the Offer Shares have not been, and will not be, registered under the US Securities Act or any state securities laws in the United States and may not be offered or sold within the United States or to, or for the account or benefit of, US persons except in certain transactions exempt from the registration requirements of the US Securities Act. Accordingly, the Offer Shares may not be reoffered, resold, pledged or otherwise transferred in the United States or to US Persons unless the Offer Shares are registered under the US Securities Act, or an exemption from the registration requirements of the US Securities Act is available and in accordance with the restrictions described under “Eligible Investors” below.

Each purchaser of Offer Shares will be deemed to have represented and agreed as follows:

(a) The purchaser (i) is not a US Person and is purchasing the Offer Shares outside the United States pursuant to Regulation S, (ii) is acquiring the Offer Shares for its own account or for the account of a person who is not a US Person and is outside the United States and (iii) is aware, and each beneficial owner of the Offer Shares has been advised, that the sale of the Offer Shares to it is being made in reliance on Regulation S or another exemption from the registration requirements of the US Securities Act.

(b) The purchaser understands that the Offer Shares are being offered in a transaction not involving any public offering in the United States within the meaning of the US Securities Act, that the Offer Shares have not been and will not be registered under the US Securities Act and that (A) if in the future the purchaser decides to offer, resell, pledge or otherwise transfer any of the Offer Shares, such Offer Shares may be offered, resold, pledged or otherwise transferred only (i) in the United States to a person whom the seller reasonably believes is a Qualified Institutional Buyer (as such term is defined in Rule 144A under the US Securities Act) or (ii) to a person that is not a US Person outside the United States pursuant to Regulation S and that (B) the purchaser will, and each subsequent holder is required to, notify any subsequent purchaser of the Offer Shares from it of the resale restrictions referred to in (A) above.

(c) The purchaser understands that Offer Shares held in certificated form (if any) will bear a legend substantially to the following effect:

THIS SECURITY HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “US SECURITIES ACT”), ANY STATE SECURITIES LAWS IN THE UNITED STATES OR, EXCEPT AS SET OUT IN THE COMPANY’S PROSPECTUS (THE “PROSPECTUS”), THE SECURITIES LAWS OF ANY OTHER JURISDICTION AND MAY NOT BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT AS PERMITTED BY THIS LEGEND. THE HOLDER HEREOF, BY ITS ACCEPTANCE OF THIS SECURITY, REPRESENTS, ACKNOWLEDGES AND AGREES THAT IT WILL NOT REOFFER, RESELL, PLEDGE

Enquiry and Complaints

Any Applicant who intends to seek clarification or file complaints with regard to issues related to the allotment or rejected Applications or refund of the Application Money in excess of the subscription, may contact the branch of the Collecting Bank where the subscription was made. In case there is no response from the Collecting Bank, the Applicant may contact the person whose details are set out below:

Bank Contact Name Postal Address Contact Details

Bank Dhofar SAOG Hussain Iqbal Ali Al‑Lawati

P.O. Box 1507Postal Code 112RuwiSultanate of Oman

Tel: +968 2478 7348Fax: +968 2478 4428Email: [email protected]

Aisha Said Al‑Khanjari


Tel: +968 2479 0466 ext. 420Fax: +968 2478 4428Email: [email protected]

Bank Muscat SAOG Ahmed Al Busaidi P.O. Box 134Postal Code 112RuwiSultanate of Oman

Tel: +968 2476 8064Fax: +968 2478 7764Email: [email protected]

National Bank of Oman SAOG

Koukab Ali Said Al Hasni


Tel: +968 2477 8757/8610Fax: +968 2477 8993Email: [email protected]

Oman Arab Bank SAOC Lujaina Nasser Al Ismaili

P.O. Box 2010, RuwiPostal Code 112Ruwi Sultanate of Oman

Tel: +968 2475 4663/2482 7378Fax: +968 2482 7367Email: [email protected]

If the Collecting Bank fails to resolve the complaint with the Applicant, it will refer the subject matter to the Issue Manager and keep the Applicant informed of the progress and development in respect of the subject matter of the dispute.

Allotment Letters and Refund of Money

The Issue Manager will arrange to allot the Offer Shares to Applicants within 15 days after the end of the Offer Period after receiving the approval of the CMA on the basis of allotment. The Issue Manager will also refund the excess money to eligible Applicants within 15 days after the end of the Offer Period and after receiving the approval of the CMA. The Issue Manager will arrange to send allotment letters to Applicants who have been allotted Shares through MCDC to their addresses registered with the MCDC.

Proposed Timetable

The following table shows the expected time schedule for completion of the subscription procedures:

Procedure Date

Commencement of subscription 28 August 2013

Closing of subscription 26 September 2013

Due date for the Issue Manager to receive the subscription data and final registers from the Collecting Banks

7 October 2013

Notification of the CMA of the outcome of the subscription and the proposed allotment

7 October 2013

Approval of the CMA of the proposed allotment 8 October 2013

Commencement of refund and dispatch of the notices regarding allotment 9 October 2013

Listing of the Offer Shares with MSM 10 October 2013

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Chapter XXIII: Financial Statements

Page

Audited Financial Statements for the Year Ended 31 December 2010 ..................................................................128



Reviewed Financial Statements for the Six Months Ended 30 June 2013 ..............................................................207

OR OTHERWISE TRANSFER THIS SECURITY EXCEPT: (X) IN COMPLIANCE WITH THE US SECURITIES ACT AND OTHER APPLICABLE LAWS AND EXCEPT TO A TRANSFEREE WHO IS: (i) NOT A “US PERSON” (AS SUCH TERM IS DEFINED UNDER RULE 902 UNDER THE US SECURITIES ACT) PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A BUYER THAT MEETS SUCH CRITERIA OUTSIDE THE UNITED STATES PURSUANT TO REGULATION S; (ii) A “QIB” (AS SUCH TERM IS DEFINED IN RULE 144A UNDER THE US SECURITIES ACT) PURSUANT TO RULE 144A UNDER THE US SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A BUYER THAT MEETS SUCH CRITERIA; OR (iii) IN A TRANSACTION NOT SUBJECT TO THE REGISTRATION REQUIREMENTS OF THE US SECURITIES ACT; AND (Y) (1) UPON DELIVERY OF ALL CERTIFICATIONS, OPINIONS AND OTHER DOCUMENTS THAT THE COMPANY MAY REQUIRE AND (2) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAW OF ANY STATE OF THE UNITED STATES AND ANY OTHER JURISDICTION.

THIS SECURITY IS NOT TRANSFERABLE EXCEPT IN ACCORDANCE WITH THE RESTRICTIONS DESCRIBED HEREIN. EACH TRANSFEROR OF THIS SECURITY AGREES TO PROVIDE NOTICE OF THE TRANSFER RESTRICTIONS SET FORTH HEREIN AND IN THE PROSPECTUS TO THE TRANSFEREE.

Eligible Investors

The Offer Shares may only be offered and sold to persons that are not US Persons outside the United States pursuant to Regulation S. A Shareholder may only sell, transfer, assign, pledge, or otherwise dispose of its Offer Shares within the United States to transferees that are Qualified Institutional Buyers, in reliance on the exemption from the registration requirements of the US Securities Act provided by Rule 144A or pursuant to another exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act. See “Transfer Restrictions” above.

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SEMBCORP SALALAH POWER & WATER COMPANY SAOC

Financial Statements31 December 2010

Contents Page

Report of the Auditors ..................................................................................................................................................130

Statement of comprehensive income ........................................................................................................................131

Statement of financial position ...................................................................................................................................132

Statement of cash flows ...............................................................................................................................................133

Statement of changes in equity ..................................................................................................................................134

Notes ..................................................................................................................................................................135 to 151

Sembcorp Salalah Power & Water Company SAOCFinancial statements31 December 2010

Registered office Principal place of business:PO Box 299, Salalah Postal Code 134, Jawharat Al Shatti, Sultanate of Oman.

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131

Statement of comprehensive income

Notes

For the year ended 31

December 2010

For the period from 29

September 2009 to 31

December 2009

RO RO

General and administrative expenses (22,387) (3,598)

Loss before income tax (22,387) (3,598)

Income tax expense 9 - ‑

Loss after tax for the year/ period (22,387) (3,598)

Other comprehensive (loss) income, net of income tax:

Effective portion of change in fair value of cash flow hedge 4 (15,467,164) 2,911,286

Total comprehensive (loss) income for the year/ period (15,489,551) 2,907,688

The notes on pages 135 to 151 form an integral part of these financial statements.The report of the Auditors is set forth on page 130.

INDEPENDENT AUDITORS REPORT TO THE SHAREHOLDERS OF SEMBCORP SALALAH POWER & WATER COMPANY SAOC

Report on the financial statements

We have audited the financial statements of Sembcorp Salalah Power & Water Company SAOC (“the Company”), set out on pages 2 to 23, which comprise the statement of financial position as at 31 December 2010, and the statements of comprehensive income, changes in equity and cash flows for the year then ended, and notes, comprising a summary of significant accounting policies and other explanatory information.

Management’s responsibility for the financial statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards, the disclosure requirements of the Commercial Companies Law of 1974, as amended, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as at 31 December 2010, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.

Report on other legal and regulatory requirements

In our opinion, the financial statements of the Company as at and for the year ended 31 December 2010, in all material respects, comply with the Commercial Companies Law of 1974, as amended.

/s

KPMG

5 March 2011

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Statement of cash flows

Notes

For the year ended 31

December 2010

For the period from 29

September 2009 to 31

December 2009

RO RO

Cash flows from operating activities:

Loss for the year/ period (22,387) (3,598)

Changes in working capital:

Increase in other receivables and prepayments (6,515,320) (23,612)

(Decrease) increase in trade and other payables (37,744,647) 65,862,233

Net cash (used in) flow from operating activities (44,282,354) 65,835,023

Cash flows from investing activities:

Addition to capital work in progress (128,664,164) (67,201,655)

Net cash used in investing activities (128,664,164) (67,201,655)

Cash flows from financing activities:

Proceeds from share capital issued - 500,000

Proceeds from shareholders loan 37,486,055 56,847,135

Proceeds from term loan 82,749,609 ‑

Net cash flow from financing activities 120,235,664 57,347,135

Net (decrease) increase in cash and cash equivalents (52,710,854) 55,980,503

Cash and cash equivalents at beginning of the year /period 55,980,503 ‑

Cash and cash equivalents at end of the year/ period 6 3,269,649 55,980,503


Statement of financial positionas at 31 December

Notes 2010 2009

RO RO

Non-current assets

Capital work in progress 3 195,897,917 67,201,655

Deferred tax asset 4&9 1,712,165 ‑

Derivative instruments 4 - 5,613,796

Total non-current assets 197,610,082 72,815,451

Current assets

Prepaid expenses and other receivable 5 6,538,932 23,612

Cash and cash equivalents 6 3,269,649 55,980,503

Total current assets 9,808,581 56,004,115

Total assets 207,418,663 128,819,566

Equity

Share capital 7(a) 500,000 500,000

Accumulated losses (25,985) (3,598)

Hedging reserve 7(c) (12,555,878) 2,911,286

Total equity (12,081,863) 3,407,688

Non-current liabilities

Shareholders loan 10 94,333,190 56,847,135

Term loan 12 82,749,609 ‑

Asset retirement obligation 13 32,098 ‑

Deferred tax liability 4&9 - 396,994

Derivative instruments 4 14,268,043 2,305,516

Total non-current liabilities 191,382,940 59,549,645

Current liabilities

Trade and other payable 8 28,117,586 65,862,233

Total liabilities 219,500,526 125,411,878

Total equity and liabilities 207,418,663 128,819,566

The financial statements were approved and authorised for issue in accordance with a resolution of the Board of Directors on 5 March 2011.

/s /sKalat Ghuloom Hassan Al Bulooshi Tareq Mohamed Sultan Al MugheiryDeputy Chairman Director


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Notes (forming part of the financial statements)

1) Legal status and principal activities

Sembcorp Salalah Power & Water Company SAOC (“the Company”) was registered as a closed Omani joint stock company in the Sultanate of Oman on 29 September 2009.

The Company has entered into a Shareholders Agreement (“the Shareholders Agreement”) dated 17 November 2009 between the following parties (“the Shareholders”):

% holding

Sembcorp Oman First Investment Holding Co Ltd (“SOFIH”) 40%

Sembcorp Oman IPO Holding Co Ltd (“SOIHL”) 20%

Inma Power & Water Company LLC (“IPWC”)* 40%

100%

The Company has been awarded a tender by the Government of the Sultanate of Oman (the “Government”) to build, own and operate an electricity generation and seawater desalination plant together with the associated facilities in the Salalah region (“the Plant”). The Company is projected to commence commercial operations by second quarter of 2012.

* a wholly owned subsidiary of Oman Investment Corporation SAOC (“OIC”).

Significant agreements:

The Company has entered into the following major agreements:

i) Power and Water Purchase Agreement (“ the PWPA”) dated 23 November 2009 with Oman Power & Water Procurement Company SAOC (“OPWP”) for a period of fifteen years commencing from the date of commercial operations (“Operation period”) to procure the power and water produced by the Company;

ii) Natural Gas Sales Agreement (“NGSA”) dated 23 November 2009 with the Ministry of Oil and Gas (“MOG”) of the Government for the supply of natural gas;

iii) Usufruct Agreement (“Usufruct Agreement”) dated 23 November 2009 with the Ministry of Housing for grant of Usufruct rights over project site;

iv) Long Term Service Agreement (“LTSA”) with General Electric for maintenance services on gas turbine and generators;

v) EPC Turnkey Engineering, Procurement and Construction (“EPC”) Contract dated 20 August 2009 with SEPCOIII Electric Power Construction Corporation (“SEPCOIII”) for the construction of the Plant; and

vi) Government Guarantee Agreement (“Government Guarantee”) dated 23 November 2009 with Government represented by Ministry of Finance (“MOF”), whereby the MOF is prepared to guarantee the payment by the OPWP of its financial obligation to the Company under the PWPA.

vii) Operation and Maintenance (“O& M”) agreement with Sembcorp Salalah O&M Services Company LLC (“SSOM”) dated 8 February 2010 for a period of 15 years from the scheduled commercial operation date.

Statement of changes in equityfor the year/ period ended 31 December

Share Hedging Accumulated

capital reserve Losses Total

RO RO RO RO

At 29 September 2009

Share capital issued 500,000 ‑ ‑ 500,000

Total comprehensive income for the period

Loss for the period ‑ ‑ (3,598) (3,598)

Other comprehensive income, net of income tax

Changes in fair value of cash flow hedge, net of income tax ‑ 2,911,286 ‑ 2,911,286

Total comprehensive income for the period ‑ 2,911,286 (3,598) 3,407,688

At 31 December 2009 500,000 2,911,286 (3,598) 3,407,688

1 January 2010 500,000 2,911,286 (3,598) 3,407,688

Total comprehensive loss for the period

Loss for the year - - (22,387) (22,387)

Other comprehensive income, net of income tax

Changes in fair value of cash flow hedge, net of income tax - (15,467,164) - (15,467,164)

Total comprehensive income for the year 500,000 (12,555,878) (25,985) (12,081,863)

At 31 December 2010 500,000 (12,555,878) (25,985) (12,081,863)

The notes on pages 135 to 151 form an integral part of these financial statements.The report of Auditors is set forth on page 130.

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equivalents comprise cash balances, demand deposits and fixed deposits and term deposits with original maturity not greater than three months. Bank overdrafts that are repayable on demand and form an integral part of the Company’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

Non‑derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transaction costs.

(ii) Derivative financial instruments, including hedge accounting The Company holds derivative financial instruments to hedge its foreign currency and interest

rate risk exposures. On initial designation of the hedge, the Company formally documents the relationship between the hedging instrument(s) and hedged item(s), including the risk management objectives and strategy in undertaking the hedge transaction, together with the methods that will be used to assess the effectiveness of the hedging relationship.

The Company makes an assessment, both at the inception of the hedge relationship as well as on an ongoing basis, whether the hedging instruments are expected to be “highly effective” in offsetting the changes in the fair value or cash flows of the respective hedged items during the period for which the hedge is designated, and whether the actual results of each hedge are within a range of 80% to 125%. For a cash flow hedge of a forecast transaction, the transaction should be highly probable to occur and should present an exposure to variations in cash flows that could ultimately affect reported net income.

Derivatives are recognised initially at fair value; attributable transaction costs are recognised in profit or loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for as described below.

(iii) Cash flow hedges When a derivative is designated as the hedging instrument in a hedge of the variability in cash

flows attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction that could affect profit or loss, the effective portion of changes in the fair value of the derivative is recognised in other comprehensive income and presented in the hedging reserve in equity. The amount recognised in other comprehensive income is removed and included in profit or loss in the same period as the hedged cash flows affect profit or loss under the same line item in the statement of comprehensive income as the hedged item. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in profit or loss. If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated, exercised, or the designation is revoked, then hedge accounting is discontinued prospectively.

The cumulative gain or loss previously recognised in other comprehensive income and presented in the hedging reserve in equity remains there until the forecast transaction affects profit or loss. When the hedged item is a non‑financial asset, the amount recognised in other comprehensive income is transferred to the carrying amount of the asset when the asset is recognised. If the forecast transaction is no longer expected to occur, then the balance in other comprehensive income is recognised immediately in profit or loss. In other cases the amount recognised in other comprehensive income is transferred to profit or loss in the same period that the hedged item affects profit or loss.

(iv) Separable embedded derivatives Changes in the fair value of separable embedded derivatives are recognised immediately in

profit or loss.

2) Basis of preparation and significant accounting policies

Basis of preparationa) Statement of compliance The financial statements are prepared in accordance with International Financial Reporting Standards

as issued by the International Accounting Standards Board (“IASB”) and applicable requirements of the Oman Commercial Companies Law of 1974 (as amended).

b) Basis of measurement These financial statements are prepared on historical cost basis except for provision for site restoration

and deferred finance cost which are measured at amortised cost and derivative financial instruments which are measured at fair value.

c) Use of estimates and judgements The preparation of the financial statements in conformity with IFRSs requires Management to make

judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

Information about critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements is included in financial valuation of derivatives financial instruments and impairment of trade receivables.

Significant accounting policies The accounting policies set out below have been applied consistently by the Company and are

consistent with those used in the previous year.

a) Foreign currencyi) Functional and presentation currency The financial statements have been presented in Rial Omani (“RO”) which is the functional

currency of the Company.

ii) Foreign currency transactions Transactions in foreign currencies are translated to the respective functional currencies of

Company at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortised cost in foreign currency translated at the exchange rate at the end of the reporting period. Non‑monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Foreign currency differences arising on retranslation are recognised in profit or loss, except for differences arising on the retranslation of available‑for‑sale equity instruments or qualifying cash flow hedges, which are recognised in other comprehensive income. Non‑monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.

b) Financial instruments(i) Non derivative financial instrument Non‑derivative financial instruments comprise trade and other receivables, due to related parties,

cash and cash equivalents, loans and borrowings, and trade and other payables. Cash and cash

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remaining financial assets are assessed collectively in Companies that share similar credit risk characteristics. All impairment losses are recognised in profit or loss account.

An impairment loss is reversed if reversal can be related objectively to an event occurring after the impairment loss was recognised. For financial assets measured at amortised cost, the reversal is recognised in profit or loss.

The recoverable amount of the Company’s receivables is calculated as the present value of future cash flows, discounted at the original effective interest rate inherent in the asset. Receivables with a short duration are not discounted. Collectively provisions are maintained in respect of losses which are incurred but not yet specifically identified within the portfolio of receivables. The recoverable amount of other assets is the greater of their net selling price and value in use. In assessing value in use, the estimated cash flows are discounted to their present value using a pre‑tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the asset.

An impairment loss in respect of a held to maturity security or receivable carried at amortised cost is reversed if the subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment loss was recognised.

(ii) Non – financial assets The carrying amounts of the Company’s non‑financial assets, other than inventories and deferred

tax assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the assets’ recoverable amounts are estimated. An impairment loss is recognised whenever the carrying amount of an asset or its cash‑generating unit exceeds its recoverable amount. A cash‑generating unit is the smallest identifiable asset Company that generates cash flows that largely are independent from other assets. Impairment losses are recognised in the income statement unless it reverses a previous revaluation that was credited to equity, in which case it is charged to equity. Impairment losses recognised in respect of cash‑generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash‑generating units (Company of units) and then, to reduce the carrying amount of the other assets in the unit (Company of units) on a pro rata basis.

The recoverable amount of an asset or cash‑generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre‑tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or cash‑generating unit. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash‑generating unit to which the asset belongs.

In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists.

An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the assets’ carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

e) Financial liabilities Trade and other payables are recognised initially at fair value and subsequently measured at amortised

cost using the effective interest method.

Interest‑bearing liabilities are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest‑bearing liabilities are stated at amortised cost with any

c) Property, plant and equipment(i) Recognition and measurement Items of property, plant and equipment are measured at cost less accumulated depreciation and

accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self‑constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use, the costs of dismantling and removing the items and restoring the site on which they are located, and capitalised borrowing costs. Cost also may include transfers from other comprehensive income of any gain or loss on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment.

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and are recognised net within other income in profit or loss. When revalued assets are sold, the amounts included in the revaluation reserve are transferred to retained earnings.

(ii) Subsequent expenditure Subsequent expenditure is capitalised only when it increases future economic benefits embodied

in the specific asset to which it relates.

Subsequent expenditure relating to property, plant and equipment that has already been recognised is added to the carrying amount of the asset when it is probable that future economic benefits, in excess of the originally assessed standard of performance of the existing asset, will flow to the Company. All other subsequent expenditure is recognised as an expense in the period in which it is incurred.

Certain items of property, plant and equipment are subject to overhauls at regular intervals. The inherent components of the initial overhaul are determined based on the estimated costs of the next overhaul and are separately depreciated in order to reflect the estimated intervals between two overhauls. The costs of the overhauls subsequently incurred are capitalised as additions and the carrying amounts of the replaced components are written off to the income statement.

(iii) Capital work in progress Capital work in progress is measured at cost and is not depreciated until it is transferred into one

of the above categories, which occurs when the assets is ready for intended use.

iv) Site Restoration A liability for future site restoration is recognized as the activities giving rise to the obligation of

future site restoration take place. The liability is measured at the present value of the estimated future cash outflows to be incurred on the basis of current technology. The liability includes all costs associated with site restoration, including plant closure and monitoring costs.

d) Impairment(i) Financial assets A financial asset is considered to be impaired if objective evidence indicates that one or more

events have had a negative effect on the estimated future cash flows of that asset. An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate.

Individually significant financial assets are tested for impairment on an individual basis. The

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A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

i) New standards and interpretation not yet effective A number of new standards, amendments to standards and interpretations are not yet effective for

the year ended 31 December 2010, and have not been applied in preparing these financial statements. None of these are expected to have any material impact on the financial statements of the Company.

3 Capital work in progress

2010 2009

RO RO

Opening balance 67,201,655 ‑

Additions during the year/ period:

Construction cost incurred 101,397,125 ‑

Insurance cost 6,752,995 ‑

Financing cost 8,180,107 987,697

Initial spare parts 5,689,804 ‑

Development cost 4,712,948 10,181,992

Salaries and wages 937,146 80,711

Other directly attributable expenses 1,026,137 105,480

Advances to SEPCO III (note 1(v)) - 55,845,775

128,696,262 67,201,655

At 31 December 195,897,917 67,201,655

Capital work in progress represents costs incurred towards construction of the Plant.

Development costs represent:

costs and expenses incurred by the Shareholders (and reimbursed by the Company in accordance with the Shareholders Agreement) in connection with the development and preparation a submission of bid, the establishment of the Company and the finalization of the Shareholders loan, the cost and expenses of external lawyers, consultants and advisors engaged in setting up the Company; and

success fee payable by the Company in accordance with the Shareholders Agreement for successful financial close.

difference between cost and redemption value being recognised in the income statement over the period of the borrowings on an effective interest basis.

f) Employee terminal benefits Contributions to a defined contribution retirement benefit plan, for Omani employees in accordance

with the Oman Social Insurance Scheme, are recognised as expense in the income statement as incurred.

The Company’s obligation in respect of non‑Omani terminal benefits, which is an unfunded defined benefit retirement plan, is the amount of future benefit that such employees have earned in return for their service in the current and prior periods. The provision is calculated using the projected unit credit method and is discounted to its present value. The provision is in accordance with the Omani Labour Law.

g) Provisions A provision is recognised in the balance sheet when the Company has a legal or constructive obligation

as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre‑tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

h) Revenue recognition Revenue from the sale of electricity and water is measured at the fair value of the consideration

received or receivable, net of returns and allowances, trade discounts and volume rebates. Revenue is recognised when electricity and water are delivered at the customers’ premise which is taken to be the point of time when the customer’s has accepted the deliveries and the related risks and rewards of ownership have been transferred to the customer based on contractual terms stipulated in PWPA.

i) Financing income Financing income comprises interest received on bank deposits and foreign exchange gains and losses

that are recognised in the income statement. Interest income is recognised in the income statement, as it accrues, taking into account the effective yield on the asset.

j) Borrowing costs Interest expense and similar charges are expensed in the income statement in the period in which

they are incurred, except to the extent that they are capitalised as being directly attributable to the acquisition, construction or production of an asset which necessarily takes a substantial period of time to prepare for its intended use or sale. The interest component of finance lease payments is recognised in the income statement using the effective interest rate method.

k) Income tax Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is

recognised in the income statement except to the extent that it relates to items recognised directly to equity, in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

Deferred tax is calculated using the balance sheet liability method providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at the balance sheet date.

142


143

6 Cash and cash equivalents

2010 2009

RO RO

Cash at bank 3,269,649 55,980,503

7 Equity

(a) Share capital The Company’s registered capital (issued and fully paid) comprises 500,000 shares of RO1 each..

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company’s residual assets.

(b) Legal reserve Artitle 106 of the Commercial Companies Law of 1974 requires that 10% of a company’s net profit be

transferred to a non‑distributable legal reserve until the amount of legal reserve becomes equal to at least one‑third of the company’s issued share capital.

(c) Hedging reserve Hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash

flow hedging instruments related to hedged transactions that have not yet occurred (note 4).

8 Trade and other payables

2010 2009

RO RO

Payables to SEPCOIII 23,849,784 55,489,177

Insurance premium 748,638 ‑

Due to related parties ( note 11) 23,514 10,151,619

Interest payable 3,068,610 106,331

Other payables 427,040 115,106

28,117,586 65,862,233

9 Income tax

The Company is liable to income tax, in accordance with the income tax laws of Sultanate of Oman, at the rate of 12% of the taxable income in excess of RO 30,000.

No current income tax is recognised in the income statement in view of losses incurred during the year (2009: RO nil).

Deferred tax liability has been recognised directly in equity in respect of the changes in fair values of interest rate swap and forward rate contract (note 4).

The Company’s assessment for the tax year 2009 has not yet been finalised with the Secretariat General for Taxation at the Ministry of Finance. The Board of Directors of the Company believe that additional taxes, if any in respect of open tax years would not be significant to the Company’s financial position as at 31 December 2010.

10 Shareholders loan

Shareholders loan 94,957,193 56,847,135

Less: Unamortised transaction cost (624,003) ‑

94,333,190 56,847,135

4 Hedging reserve

2010 2009

RO RO

Interest rate swaps: (i)

SMBC Capital Market Limited (3,218,491) 1,146,493

Standard Chartered Bank (7,017,127) 4,467,303

KfW‑IPEX (2,662,321) ‑

(Decrease) increase in fair value of derivative instruments (12,897,939) 5,613,796

Deferred tax asset (liability) (note 9) 1,547,753 (673,656)

(Decrease) increase in fair value of derivative instruments net of tax (11,350,186) 4,940,140

Forward rate contract (ii)

Standard Chartered Bank (1,370,104) (2,305,516)

Deferred tax asset (note 9) 164,412 276,662

Decrease in fair value of derivative instruments net of tax (1,205,692) (2,028,854)

Hedging reserve at the end of the year/ period (12,555,878) 2,911,286

Less: Hedging reserve at the beginning of the year/ period (2,911,286) ‑

Effective portion of change in fair value of cash flow hedge for the year/ period (15,467,164) 2,911,286

4 Hedging reserve (continued)

On 19 November 2009, the Company entered into a Common Terms Agreement (“CTA”), for credit facilities with a consortium of international and local banks with Standard Chartered Bank as the Dollar Commercial Facility Agent, Bank Muscat SAOG as the Rial Commercial Facility Agent and Bank of China, Shan dong Branch as the Sinosure Facility Agent.

i) The long term facilities of the Company bear interest at US LIBOR plus applicable margins. In accordance with the CTA, the Company has fixed the rate of interest through an Interest Rate Swap Agreements (“IRS”) entered into with SMBC Capital Market Limited, KfW IPEX Bank GmbH and Standard Chartered Bank dated 20 November 2009 , 23 March 2010 and 08 April 2010 respectively, for 94% of its USD loan facility. The corresponding maximum hedged notional amount is approximately USD 459 million and USD119 million at a fixed interest rate of 4.435% and 3.8% per annum respectively, excluding margins.

ii) Under the EPC contract, the price includes an amount of approximately Euro 127 million. The Company has entered into a Forward Rate Agreement (“FRA”) to hedge against the fluctuations in Euro/USD exchange rate. The FRA was entered into with Standard Chartered Bank on 24 November 2009. As per the FRA the Company shall pay a fixed USD amount at an exchange rate of 1.4907 and receive contractual EUR amount at each maturity date.

5 Prepaid expenses and other receivable

Prepaid insurance cost 6,538,932 ‑

Other receivable - 23,612

6,538,932 23,612

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145

Staff salary and other costs 15,576 81,437

10,812,911 11,025,225

Balances due to related parties at the year/ period end comprised:

SSOM 18,246 ‑

Sembcorp Gulf O&M Company Limited - 1,967,624

Sembcorp Industries Ltd 2,207 5,173,781

IPWC - 128,918

OIC 3,061 2,881,296

23,514 10,151,619

12 Term loan

Maturity 2010

RO

Non‑current

Project financing loan (USD) 2012‑2026 78,773,400

Project financing loan (Rials) 2012‑2026 13,750,000

92,523,400

Less: Unamortised transaction cost (9,773,791)

82,749,609

On 19 November 2009, the Company entered into a Common Terms Agreement (“CTA”), for credit facilities with a consortium of international and local banks with Standard Chartered Bank as the Dollar Commercial Facility Agent, Bank Muscat SAOG as the Rial Commercial Facility Agent and Bank of China, Shondong Branch as Sinosure Facility Agent, collectively “the Mandated Lead Arranger”.

Limit 2010

RO RO

United States Dollar facilities

Dollar Commercial facilities (i) 106,916,112 35,149,500

Sinosure Covered facilities (ii) 133,279,200 43,623,900

Rial Omani facilities

Rials Commercial facilities (iii) 50,000,000 13,750,000

290,195,312 92,523,400

RepaymentsThe aggregate amount of drawdowns under the above facilities is repayable in full by 29 half yearly instalments commencing from 30 September 2012, with the final instalment being due on 30 September 2026.

On 20 November 2009 the Company, its shareholders and the lenders under the Common Term Agreement (“CTA”), entered into a Project Support Agreement (“the PSA”) under which shareholders are required to provide subordinated advances (“the Shareholders loan”) and actual drawdown amount as described below:

Currency LimitDraw down

amount2010

RO

SOFIH USD 98,605,600 98,605,600 37,982,877

SOIHL USD 49,302,800 49,302,800 18,991,438

IPWC RO 37,982,878 37,982,878 37,982,878

94,957,193

RepaymentsAs per the PSA, the aggregate amount of Shareholders’ loan may be repaid at any time but only from amounts standing to the credit of Distribution Accounts and available for such purposes in accordance with and subject to the terms of the CTA. Such repayment, if any, cannot be made prior to offer for sale or listing.

Interest Shareholders’ loan carries interest rate at 5.1% for the USD loan and 8.35% for the RO loan.

Other feesThe Company is required to pay an upfront fee to Shareholders within three business days that loan is made.

11 Related party transactions

The Company has a related party relationship with entities over which certain shareholders are able to exercise significant influence. In the ordinary course of business, such related parties provide goods and render services to the Company.

Prices and terms for these transactions, which are entered into in the normal course of business, are on mutually agreed terms and conditions.

The Company had the following significant transactions with related parties during the year/ period:

2010 2009

RO RO

Sembcorp Industries Limited 7,826 5,173,781

ST Architects & Engineers Pte Ltd 4,689 ‑

SSOM 18,246 ‑

SOFIH 6,653,156 2,423,419

SOIHL 966,901 227,897

IPWC 3,159,032 318,832

OIC 3,061 2,881,296

10,812,911 11,025,225

The nature of the above transactions is as follows:

Development cost and success fee (note 3) 4,719,353 10,181,992

Upfront fee (note 10) - 761,796

Interest on shareholders loan (note10) 6,059,736 ‑

Mobilization fee 18,246 ‑

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147

14 Financial risk management

The Company has exposure to the following risks from its use of financial instruments: Market risk Credit risk Liquidity risk

This note presents information about the Company’s exposure to each of the above risks, the Company’s objectives, policies and processes for measuring and managing risk, and the Company’s management of capital. Further quantitative disclosures are included throughout these financial statements. The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. The Board has entrusted the Management with the responsibility of developing and monitoring the Company’s risk management policies and procedures and its compliance with them.

a) Market riskMarket risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

Interest rate riskAt the balance sheet date, the interest rate profile of the Company’s interest‑bearing financial liabilities was:

Interest rate 2010 2009

% RO RO

Financial assets

Bank balances 3,269,649 55,980,503

Financial liabilities

Shareholders loan

‑ USD fixed rate loans 5.10% (56,974,316) (34,112,531)

‑ RO fixed rate loans 8.35% (37,982,878) (22,734,604)

Term loan

‑ USD variable rate loans Libor+3% (78,773,400) ‑

‑ RO fixed rate loans 8% (13,750,000) ‑

(187,480,594) (56,847,135)

The Company does not account for any fixed rate financial liabilities at fair value through profit or loss and the Company does not designate hedging instruments under a fair value hedge accounting model. Therefore a change in interest rate at the reporting date would not affect profit or loss.

Cash flow sensitivity analysis for variable rate instruments

Interest

i) Interest on Dollar Commercial facilities is charged at a floating rate of LIBOR plus margin. The Company has entered into an interest rate swap to cap its obligation against unfavorable interest rate changes.

The margins are indicated below:

Margin % (p.a.) Prior to completion date (as defined in the CTA) 3.00% Thereafter upto the sixth anniversary of completion date 2.85% Thereafter upto the tenth anniversary of completion date 3.20% Thereafter upto the tenth anniversary of completion date 3.55% Thereafter 3.95%

ii) Interest on Sinosure Covered facilities is charged at a floating rate of LIBOR plus margin (3% p.a.). The Company has entered into an interest rate swap to cap its obligation against unfavorable interest rate changes.

iii) Interest on Rial Omani Commercial facilities bear fixed interest rates of 8% p.a.

Other feesThe Company is required to pay a front end fees to the Mandated Lead Arranger. In addition, the Company shall pay commitment fee at 1.3% of undrawn Dollar Commercial facilities and Sinosure Covered facilities and 0.4% of undrawn Rial Omani facilities.

SecuritiesThe term loans are secured by a mortgage over the Company’s property, plant and equipment and current assets of the Company, including a lien on the balances in the sales collection accounts of the Company.

CovenantsThe term loan facilities contains certain covenants pertaining to, amongst other things, liquidation and merger, entering into material new agreements, negative pledge, disposal of asset, granting of loan and guarantee, acquisition of capital assets, debt service coverage ratio, change of business, loan and guarantee, hedging agreement, etc, which the Company is required to comply.

13 Asset Retirement Obligation (“ARO”)

Under the Usufruct Agreement, the Company has a legal obligation to remove the Plant at the end of its useful life and restore the land. The Company shall at its sole cost and expense dismantle, demobilise, safeguard and transport the assets, eliminate soil and ground water contamination, fill all excavation and return the surface to grade of the designated areas.

The fair value of ARO provision has been calculated using an expected present value technique. This technique reflects assumptions such as costs, plant useful life, inflation and profit margin that third parties would consider to assume the settlement of the obligation. The movement in ARO provision is as follows:

2010RO

At 1 January -

Provision made during the year 32,098

At 31 December 32,098

148


149

Sensitivity analysisA 10% strengthening of foreign currencies against the RO at the balance sheet date would increase/ (decrease) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant.

2010 2009

Equity Profit or loss Equity Profit or loss

RO RO RO RO

EURO 1,230,994 - 5,590,674 ‑

SGD - (157) ‑ (3,386)

1,230,994 (157) 5,590,674 (3,386)

b) Credit riskCredit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s receivables from customers and cash balances held with banks.

At 31 December 2010, the Company has not yet commenced commercial operations and accordingly there is no credit risk arising from OPWP.

The Company limits its credit risk with regard to bank deposits by only dealing with reputable banks and financial institutions.

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:

2010 2009

RO RO

Break down of financial assets (at carrying amount)

Cash and cash equivalents 3,269,649 55,980,503

Interest rate swaps used for hedging‑ assets - 5,613,796

3,269,649 61,594,299

c) Liquidity riskLiquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.

The Company limits its liquidity risk by ensuring bank facilities and shareholders’ advances are available, where required. Liquidity requirements are monitored on a monthly basis and management ensures that sufficient liquid funds are available to meet any commitments as they arise.

A change of 100 basis points in interest rates at the reporting date would have increased (decreased) equity and income statement by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant.

Equity

100 bps 100 bps 100 bps 100 bps

increase Decrease increase decrease

2010 2010 2009 2009

RO RO RO RO

Interest rate swap 18,405,109 (18,405,109) 13,895,809 (13,895,809)

Currency riskThe Company is exposed to foreign currency exchange rate volatility arising primarily from EURO denominated obligation under the EPC contract and transaction with certain related parties denominated in SGD. The EURO risk is hedged by using the forward rate contract.

Apart from above the majority of the transactions and balances are in either RO or USD. As RO is pegged to the USD, balances in USD are not considered to represent significant currency risk.

The Company’s foreign currency exposure is as follows:

2010 2009

Amount in RO EURO SGD EURO SGD

31 December 2009

Financial assets

Cash and cash equivalents 2,976,018 - 14,346,467 ‑


Trade and other payable (5,578,424) (1,569) 8,121,047 (33,858)

(2,602,406) (1,569) ‑ (33,858)

Expected purchase of gas turbines under the EPC contract (9,507,799) - (57,385,869)

Forward rate agreement 12,110,205 - 57,385,869 ‑

Net exposure - (1,569) ‑ (33,858)

The following significant exchange rates applied during the year/ period.

2010 2009

Foreign currency Average rate Spot rate Average rate Spot rate

RO

EURO 1 0.511037 0.50833 0.574218 0.566066

SGD 1 0.283027 0.29705 0.276832 0.276832

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151

The following agreements contain embedded derivatives as follows:

i) The PWPA between the Company and PWP contain embedded derivatives in the pricing formulae that computes the investment charge rate and the fixed operation and maintenance charge rate for each of the power facility and the desalination facility. Percentages of the fixed operation and maintenance charge rate for each of power facility and the desalination facility will be adjusted to reflect changes in US price index and the Omani Consumer price index.

ii) The O & M agreement between the Company and SSOM contain embedded derivatives in the pricing formulae that computes the fixed operation and maintenance charge rate and for the Plant. Percentages of the fixed operation and maintenance charge rate for each of the Plant will be adjusted to reflect changes in fixed inflation rate.

These embedded derivative are not separated from the host contract, the PWPA, and accounted for as a stand alone derivative under IAS 39, as the management believes that the economic characteristics and risk associated with the embedded derivative are closely related to those of the host contract.

Capital management The Company aims to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development and growth of its businesses, while at the same time maintaining an appropriate dividend policy to reward shareholders.

15 Contingent liabilities

2010 2009

RO RO

Performance guarantees 19,040,800 19,040,800

The Company has taken bank guarantees from Bank Muscat and National Bank of Abu Dhabi (Muscat) for the amount of USD 4,000,000 and RO 17,500,000 to Dhofar Power Company SAOG and OPWP respectively.

These bank guarantees are countered indemnified by Corporate Guarantee from Sembcorp Utilities Private Limited and Bank Guarantee from Inma Power & Water Company LLC.

16 Capital commitments

At 31 December 2010, commitments in respect of contracts placed are as follows:

Commitments in respect of contracts placed 157,231,243 243,615,954

Amounts approved by Directors but not contracted 16.813,210 36,056,707

174,044,453 279,672,661

Operating lease commitments:

At 31 December future minimum lease commitments under the Usufruct Agreement are as follows:

2010 2009

RO RO

Within one year 1,000 1,000

Between two and five years 4,000 4,000

After five years 19,000 20,000

17 Comparative figures

Certain comparative information has been reclassified to conform to the presentation adopted in these financial statements.

The following are the contractual maturities of financial liabilities, including interest payments and excluding the impact of netting agreements:

Cash flows

Carrying amount

Contractual cash flow

Less than 1 year

More than 1 to 5 years

More than 5 years

31 December 2010 RO RO RO RO RO

Derivatives

Interest rate swaps used for hedging 12,897,939 (12,897,939) (4,346,184) (10,336,802) 1,785,047

Forward exchange contracts used for hedging 1,370,104 (1,370,014) (1,370,014) - -

Non-derivatives Financial liabilities

Shareholders loan 94,333,190 (114,150,502) (6,161,667) (107,988,835) -

Term loan 82,749,609 (130,816,417) (3,786,845) (27,314,268) (99,715,304)

Trade and other payables 28,117,585 (28,117,585) (28,117,585) - -

219,468,427 (287,352,457) (43,782,295) (145,639,905) (97,930,257)

31 December 2009

Derivatives

Forward exchange contracts used for hedging 2,305,516 (2,305,516) (1,750,585) (554,931) ‑

Non-derivatives financial liabilities

Shareholders loan 56,847,135 (67,559,255) (3,688,607) (63,870,648) ‑

Trade and other payables 65,862,233 (65,862,233) (65,862,233) ‑ ‑

125,014,884 (135,727,004) (71,301,425) (64,425,579) ‑

It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amount.

Fair value hierarchy

The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

Level 1 – Fair values are measured based on quoted prices (unadjusted) from active markets for identical financial instruments.

Level 2 – Fair values are measured using inputs, other than those used for Level 1, that are observable for the financial instruments either directly (prices) or indirectly (derived from prices)

Level 3 – Fair values are measured using inputs which are not based on observable market data (unobservable input).

2010 2009

Level 2 Level 2

RO

Derivative financial assets - 5,613,796

Derivative financial liabilities 14,268,043 ‑

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153



Contents Page






Notes ..................................................................................................................................................................159 to 178



154


155

Statement of comprehensive incomefor the year ended 31 December

Notes 2011 2010

RO RO

Revenue 3 3,048,977 ‑

Cost of sales 4 (2,510,919) ‑

Gross profit 538,058 ‑

Administrative and general expenses 5 (95,143) (22,387)

Profit (loss) before interest and tax 442,915 (22,387)

Finance cost 6 (1,108,948) ‑

Loss before tax (666,033) (22,387)

Income tax expense 15 (195,934) ‑

Loss after tax for the year (861,967) (22,387)

Other comprehensive loss, net of income tax:

Effective portion of change in fair value of cash flow hedges 10 (24,528,649) (15,467,164)

Total comprehensive loss for the year (25,390,616) (15,489,551)


INDEPENDENT AUDITORS REPORT TO THE SHAREHOLDERS OFSEMBCORP SALALAH POWER & WATER COMPANY SAOC






Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.



Opinion




/sKPMG15 February 2012

156


157

Statement of cash flows for the year ended 31 December

Notes 2011 2010

RO RO


Loss for the year (666,033) (22,387)

Non cash adjustment:

Depreciation and amortisation 495,712 ‑

Amortisation of deferred financing cost 52,476 ‑

Finance costs 1,108,948 ‑


Increase in inventory (669,660) ‑

Increase in trade receivable, prepayments and other receivable (2,949,931) (6,515,320)

Increase in trade and other payables 856,083 (37,744,647)

(1,772,405) (44,282,354)

Finance cost paid (1,108,948) ‑

Net cash used in operating activities (2,881,353) (44,282,354)


Addition to fixed assets (108,041,164) (128,664,164)

Addition to intangible assets (32,098) ‑



Proceeds from shareholders loan - 37,486,055

Proceeds from term loan 111,813,970 82,749,609


Net increase (decrease) in cash and cash equivalents 859,355 (52,710,854)

Cash and cash equivalents at beginning of the year 3,269,649 55,980,503

Cash and cash equivalents at end of the year 12 4,129,004 3,269,649



Notes 2011 2010

RO RO

Non-current assets

Property, plant and equipment 7 33,063,988 ‑

Capital work in progress 8 270,134,002 195,897,917

Intangible assets 9 26,402 ‑

Deferred tax asset 10 &15 5,056,981 1,712,165


Current assets

Trade and other receivables 11 4,587,736 6,538,932

Inventory 669,660 ‑



Total assets 317,667,773 207,418,663

Equity

Share capital 13(a) 500,000 500,000


Hedging reserve 10&13 (c ) (37,084,527) (12,555,878)

Total equity (37,472,479) (12,081,863)



Term loan 18 193,546,448 82,749,609

Asset retirement obligation 19 260,284 32,098

Deferred tax liabilities 15 195,934 ‑



Current liabilities

Current portion of long term loan 18 1,748,427 ‑


Total current liabilities 24,413,286 28,117,586



The financial statements were approved and authorised for issue in accordance with a resolution of the Board of Directors on 15 February 2012.

/s /sKalat Ghuloon Hassan Al Bulooshi Tan Cheng Guan Chairman Director


158


159


1 Legal status and principal activities


The Company has entered into a Shareholders Agreement (“the Shareholders Agreement”) dated 17 November 2009 between the following parties (“the Shareholders”):

% holding

Sembcorp Oman First Investment Holding Co Ltd (“SOFIH”) 40%

Sembcorp Oman IPO Holding Co Ltd (“SOIHL”) 20%

Inma Power & Water Company LLC (“IPWC”)* 35%

BDCC Investment Company 5%

100%

The Company has been awarded a tender by the Government of the Sultanate of Oman (the “Government”) to build, own and operate an electricity generation and seawater desalination plant together with the associated facilities in the Salalah region (“the Plant”). The Company is projected to commence commercial operations by second quarter of 2012.

In December 2011, IPWC transferred a 5% interest in the Company to BDCC Investment Company (“BDCC”).

* a wholly owned subsidiary of Oman Investment Corporation SAOC (“OIC”).

Significant eventsThe Company achieved Commercial Operation Date (“COD”) 1(the Phase 1 Power Milestone) on 16 July 2011 against the originally scheduled date on 6 July 2011 as per Power and Water Purchase Agreement (“the PWPA”) with the Guaranteed Contracted Power Capacity 61 MWH.

COD 2 was also delayed from its original scheduled date of 6 October 2011 due to the wrong termination kit installed and procured by the grid substation and the occurrence of Cyclone Keila from 1 to 5 November 2011 that impacted construction progress. The Guaranteed Contracted Power Capacity and Guaranteed Contracted Water Capacity during Phase 2 Milestone are 173 MWH and 2841.25 m3/h respectively.

Subsequent to the reporting date, the Company achieved the Phase 2 Power Milestone on 2 January 2012 and expected to achieve the Phase 2 Water Milestone in February 2012

Significant agreements:The Company has entered into the following major agreements:





Statement of changes in equityfor the year ended 31 December

Share Hedging Accumulated

capital reserve Losses Total

RO RO RO RO

At 1 January 2010 500,000 2,911,286 (3,598) 3,407,688

Total comprehensive loss for the year

Loss for the year ‑ ‑ (22,387) (22,387)

Changes in fair value of cash flow hedge, net of income tax ‑ (15,467,164) ‑ (15,467,164)

Total comprehensive income for the year ‑ (15,467,164) (22,387) (15,489,551)

At 31 December 2010 500,000 (12,555,878) (25,985) (12,081,863)

At 1 January 2011 500,000 (12,555,878) (25,985) (12,081,863)


Loss for the year - - (861,967) (861,967)

Changes in fair value of cash flow hedge, net of income tax - (24,528,649) - (24,528,649)

Total comprehensive income for the year - (24,528,649) (861,967) (25,390,616)

At 31 December 2011 500,000 (37,084,527) (887,952) (37,472,479)

The notes on pages 159 to 178 form an integral part of these financial statements.The report of Auditors is set forth on page 154.

160


161

Foreign currency differences arising on translation of monetary items are recognised in profit or loss, except for differences arising on the retranslation of available‑for‑sale equity instruments, qualifying cash flow hedges or other non monetary items, which are recognised in other comprehensive income. Non‑monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.

b) Financial instruments

(i) Non derivative financial instrument Non‑derivative financial instruments comprise trade and other receivables, amounts due to

related parties, cash and cash equivalents, loans and borrowings, and trade and other payables. Cash and cash equivalents comprise cash balances, demand deposits and fixed deposits and term deposits with original maturity not greater than three months. Bank overdrafts that are repayable on demand and form an integral part of the Company’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows. Non‑derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transaction costs.


rate risk exposures. On initial designation of the hedge, the Company formally documents the relationship between the hedging instrument(s) and hedged item(s), including the risk management objectives and strategy in undertaking the hedge transaction, together with the methods that will be used to assess the effectiveness of the hedging relationship. The Company makes an assessment, both at the inception of the hedge relationship as well as on an ongoing basis, whether the hedging instruments are expected to be “highly effective” in offsetting the changes in the fair value or cash flows of the respective hedged items during the period for which the hedge is designated, and whether the actual results of each hedge are within a range of 80% to 125%. For a cash flow hedge of a forecast transaction, the transaction should be highly probable to occur and should present an exposure to variations in cash flows that could ultimately affect reported net income. Derivatives are recognised initially at fair value; attributable transaction costs are recognised in profit or loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for as described below.


flows attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction the effective portion of changes in the fair value of the derivative is recognised in other comprehensive income and presented in the hedging reserve in equity. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in profit or loss. If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated, exercised, or the designation is revoked, then hedge accounting is discontinued prospectively.

The cumulative gain or loss previously recognised in other comprehensive income and presented in the hedging reserve in equity remains there until the forecast transaction affects profit or loss.

When a hedging instrument expires or is sold, terminated or exercised, or the entity revokes designation of the hedge relationship but the hedged forecast transaction is still expected to occur, then hedge accounting is discontinued prospectively. The cumulative gain or loss at that point remains in equity and is recognised in accordance with the above policy when the transaction occurs. If the hedged transaction is no longer expected to take place, the cumulative unrealised gain or loss recognised in equity is recognised immediately in the profit or loss.

v) EPC Turnkey Engineering, Procurement and Construction (“EPC”) Contract dated 20 August 2009 with SEPCOIII Electric Power Construction Corporation (“SEPCOIII”) for the construction of the Plant;



2 Basis of preparation and significant accounting policies



b) Basis of measurement These financial statements are prepared on historical cost basis except where otherwise described in

the accounting policies below.




Significant accounting policiesThe accounting policies set out below have been applied consistently by the Company and are consistent with those used in the previous year.

a) Foreign currency

i) Functional and presentation currency The financial statements have been presented in Rial Omani (“RO”) which is the functional


Transactions in foreign currencies are translated to the respective functional currencies of Company at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortised cost in foreign currency translated at the exchange rate at the end of the reporting period. Non‑monetary assets and liabilities denominated in foreign currencies that are measured at historical cost are translated to the functional currency at the exchange rate at the date of the transaction. Non‑monetary assets and liabilities measured at fair value in foreign currencies are translated into the functional currency at foreign exchange rates ruling at the dates the fair value was determined.

162


163

(iv) Site Restoration A liability for future site restoration is recognized as the activities giving rise to the obligation of


d) Impairment

i) Financial assets A financial asset is considered to be impaired if objective evidence indicates that one or more


Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in Companies that share similar credit risk characteristics. All impairment losses are recognised in profit or loss account.




ii) Non – financial assets The carrying amounts of the Company’s non‑financial assets, other than inventories and deferred

tax assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the assets’ recoverable amounts are estimated. An impairment loss is recognised whenever the carrying amount of an asset or its cash‑generating unit (“CGU”) exceeds its recoverable amount. A cash‑generating unit is the smallest identifiable asset group that generates cash flows that largely are independent from other assets. Impairment losses are recognised in the income statement unless it reverses a previous revaluation that was credited to equity, in which case it is charged to equity. Impairment losses recognised in respect of cash‑generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash‑generating units (group of CGUs) and then, to reduce the carrying amount of the other assets in the CGU (Group of CGUs) on a pro rata basis.


ii) Separable embedded derivatives Changes in the fair value of separable embedded derivatives are recognised immediately in

profit or loss.

c) Property, plant and equipment

(i) Recognition and measurement Items of property, plant and equipment are measured at cost less accumulated depreciation and

accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self‑constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use, the costs of dismantling and removing the items and restoring the site on which they are located, and capitalised borrowing costs. Cost also may include transfers from other comprehensive income of any gain or loss on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment.

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and are recognised net within other income in profit or loss. When revalued assets are sold, the amounts included in the revaluation reserve are transferred to retained earnings.


in the specific asset to which it relates. Subsequent expenditure relating to property, plant and equipment that has already been recognised is added to the carrying amount of the asset when it is probable that future economic benefits, in excess of the originally assessed standard of performance of the existing asset, will flow to the Company. All other subsequent expenditure is recognised as an expense in the period in which it is incurred.

(iii) Depreciation Depreciation is calculated using the straight‑line method to allocate the cost less its residual

value so as to write off items of property, plant and equipment over their estimated useful lives. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of an item is depreciated separately. The estimated useful lives for the years is as follows:

Plant and machinery 12 to 30 years Computer equipment 3 years Office equipment 3 to 10 years Motor vehicles 10 years


(iii) Capital work in progress Capital work in progress is measured at cost and is not depreciated until it is transferred into one


164


165

Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly to equity, in which case it is recognised in equity.


Deferred tax is calculated using the balance sheet liability method providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

l) New standards and interpretation not yet effective A number of new standards, amendments to standards and interpretations are not yet effective for


3 Revenue

2011 2010

RO RO

Fixed capacity charge 1,931,733 ‑

Energy charge 86,482 ‑

Fuel charge 1,030,762 ‑

3,048,977 ‑

4 Cost of sales

Fuel cost 1,026,668 ‑

Operation and maintenance cost 719,619 ‑

Contractual services maintenance cost 262,535 ‑

Depreciation 483,626 ‑

Consumables and supplies 11,237 ‑

Other overhead 7,234 ‑

2,510,919 ‑

5 Administrative and general expenses

Staff costs 27,787 2,737

Professional fee 26,776 7,040

Depreciation and amortisation 12,086 ‑

Other expenses 28,494 12,610

95,143 22,387





Interest‑bearing liabilities are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest‑bearing liabilities are stated at amortised cost with any difference between cost and redemption value being recognised in the income statement over the period of the borrowings on an effective interest basis.







received or receivable, net of returns and allowances, trade discounts and volume rebates. Revenue is recognised when electricity and water are delivered at the customers’ premise which is taken to be the point of time when the customer has accepted the deliveries and the related risks and rewards of ownership have been transferred to the customer based on contractual terms stipulated in PWPA.





k) Income tax

166


167

9 Intangible assets

2011 2010

RO RO

Opening balance - ‑

Add: Purchased during the year 35,299 ‑

Less: Amortisation (8,897) ‑

26,402 ‑

An intangible asset represents purchase of ERP software.

10 Hedging reserve

Interest rate swaps: (i)

SMBC Capital Market Limited (9,019,530) (3,218,491)


KfW‑IPEX (7,579,794) (2,662,321)

Change in fair value of derivative instruments (42,141,508) (12,897,939)

Deferred tax asset (note 15) 5,056,981 1,547,753

Change in fair value of derivative instruments net of tax (37,084,527) (11,350,186)

Forward rate contract (ii)

Standard Chartered Bank - (1,370,104)

Deferred tax asset (note 15) - 164,412

Change in fair value of derivative instruments net of tax - (1,205,692)

Hedging reserve at the end of the year (37,084,527) (12,555,878)

Less: Hedging reserve at the beginning of the year (12,555,878) 2,911,286

Effective portion of change in fair value of cash flow hedge for the year (24,528,649) (15,467,164)


i) The long term facilities of the Company bear interest at US LIBOR plus applicable margins. In accordance with the CTA, the Company has fixed the rate of interest through an Interest Rate Swap Agreements (“IRS”) entered into with SMBC Capital Market Limited, KfW IPEX Bank GmbH and Standard Chartered Bank dated 20 November 2009 , 23 March 2010 and 08 April 2010 respectively, for 94% of its USD loan facility. The corresponding maximum hedged notional amount is approximately USD 459 million and USD119 million at a fixed interest rate of 4.435% and 3.8% per annum respectively, excluding margins.

ii) Under the EPC contract, the price includes an amount of approximately Euro 127 million. The Company has entered into a Forward Rate Agreement (“FRA”) to hedge against the fluctuations in Euro/USD exchange rate. The FRA was entered into with Standard Chartered Bank on 24 November 2009. As per the FRA the Company shall pay a fixed USD amount at an exchange rate of 1.4907 and receive contractual EUR amount at each maturity date.

6 Finance costs

2011 2010

RO RO

Interest expense on Shareholders loan 310,239 ‑

Interest expense on Term loan 746,337 ‑

Commission and bank charges 52,372 ‑

1,108,948 ‑

7 Property, plant and equipment

Plant and Machinery

Office equipment

Motor vehicles

Computer equipment Total

Cost RO RO RO RO RO

At 1 January 2011 ‑ ‑ ‑ ‑ ‑

Additions during the year 23,301 600 23,567 24,210 71,678

Transfer during the year 33,479,125 ‑ ‑ ‑ 33,479,125

At 31 December 2011 33,502,426 600 23,567 24,210 33,550,803

Accumulated depreciation

At 1 January 2011 ‑ ‑ ‑ ‑ ‑

Charge for the year 482,421 17 1,188 3,189 486,815

At 31 December 2011 482,421 17 1,188 3,189 486,815

Carrying amount - - - - -

At 31 December 2011 33,020,005 583 22,379 21,021 33,063,988


2011 2010

RO RO

Opening balance 195,897,917 67,201,655

Additions during the year:

Construction cost incurred 79,042,166 101,397,125

Insurance cost 4,923,459 6,752,995

Financing cost 18,642,141 8,180,107

Initial spare parts 287,033 5,689,804

Development cost - 4,712,948

Salaries and wages 994,899 937,146

Other directly attributable expenses 3,825,512 1,026,137

Transferred to:

Plant and machinery (33,479,125) ‑

At 31 December 270,134,002 195,897,917


Development costs represent: costs and expenses incurred by the Shareholders (and reimbursed by the Company in accordance

with the Shareholders Agreement) in connection with the development and preparation a submission of bid, the establishment of the Company and the finalization of the Shareholders loan, the cost and expenses of external lawyers, consultants and advisors engaged in setting up the Company; and

success fee payable by the Company in accordance with the Shareholders Agreement for successful financial close.

168


169

15 Income tax


Deferred tax asset has been recognised directly in equity in respect of the changes in fair values of interest rate swap and forward rate contract (note 10).

2011 2010

RO RO

a) Recognised in profit or loss

Deferred tax expense for the year 195,934 ‑

b) Reconciliation

The following is the tax reconciliation of income taxes calculated at the applicable tax rate with the income tax expenses.

Loss before tax (666,033) (22,387)

Income tax as per rates mentioned above 79,924 2,686

Unrecognised deferred tax assets (275,858) (2,686)

(195,934) ‑

c) Deferred tax asset / (liability)

At 1 January

Recognised during the

yearAt 31

December

RO RO RO

Charged to profit or loss

Property, plant and equipment ‑ (195,934) (195,934)

Deferred tax recognised in equity

Derivative instrument 1,712,165 3,344,816 5,056,981

Deferred tax assets have not been recognised in respect of taxable losses in the amount of RO 2,321,200 (2010: RO 22,383). The taxable losses will expire in year 2017. Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit will be available against which the Company can utilise the benefits therefrom.

d) Status of previous period returnThe Company’s assessment for the tax year 2009 and 2010 has not yet been finalised with the Secretariat General for Taxation at the Ministry of Finance. The Board of Directors of the Company believe that additional taxes, if any in respect of open tax years would not be significant to the Company’s financial position as at 31 December 2011.


2011 2010

RO RO


Less: Unamortised transaction cost (374,402) (624,003)

94,582,792 94,333,190

11 Trade and other receivables

2011 2010

RO RO

Trade receivable 1,189,480 ‑

Advances to vendors 1,667,730 ‑

Prepayments 1,637,805 6,538,932

Retentions 90,299 ‑

Other receivable 2,422 ‑

4,587,736 6,538,932


Cash in hand 1,611 ‑

Cash at bank 4,127,393 3,269,649

4,129,004 3,269,649

13 Equity

(a) Share capital The Company’s registered capital (issued and fully paid) comprises 500,000 shares of RO1 each. The

holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company’s residual assets.

(b) Legal reserve Article 106 of the Commercial Companies Law of 1974 requires that 10% of a company’s net profit be




14 Trade and other payable

2011 2010

RO RO


Trade payable 282,855 748,638

Due to related parties ( note 17) 122,263 23,514

Interest payable 3,815,526 3,068,610

Accrued expenses and other payable 2,996,115 427,040

22,664,859 28,117,586

170


171

The nature of the above transactions is as follows:

Development cost and success fee (note 8) - 4,719,353

Interest on shareholders loan (note16) 6,161,666 6,059,736

Mobilization fee 1,137,354 18,246

Operation and maintenance cost 719,619 15,576

Reimbursement of expenses 81,956 ‑

8,100,595 10,812,911

Balances due to related parties at the year end comprised:

SSOM 122,263 18,246

Sembcorp Industries Ltd - 2,207

OIC - 3,061

122,263 23,514

18 Term loan

Maturity 2011 2010

RO RO

Non‑current

Project financing loan (USD) 2012‑2026 170,547,300 78,773,400

Project financing loan (Rials) 2012‑2026 35,150,000 13,750,000

205,697,300 92,523,400

Less: Unamortised transaction cost (10,402,425) (9,773,791)

195,294,875 82,749,609

Less: Current portion of term loan (1,748,427) ‑

Long term loan 193,546,448 82,749,609


Limit 2011 2010

RO RO RO

United States Dollar facilities

Dollar Commercial facilities (i) 106,916,112 77,040,000 35,149,500

Sinosure Covered facilities (ii) 133,279,200 93,507,300 43,623,900

Rial Omani facilities

Rials Commercial facilities (iii) 50,000,000 35,150,000 13,750,000

290,195,312 205,697,300 92,523,400


On 20 November 2009 the Company, its shareholders and the lenders under the Common Term Agreement (“CTA”), entered into a Project Support Agreement (“the PSA”) under which shareholders are required to provide subordinated advances (“the Shareholders loan”) and actual drawdown amount as described below:

Currency Limit Draw down amount 2011 2010

RO RO

SOFIH USD 98,605,600 98,605,600 37,982,877 37,982,877

SOIHL USD 49,302,800 49,302,800 18,991,438 18,991,438

IPWC RO 33,235,018 33,235,018 33,235,018 37,982,878

BDCC* RO 4,747,860 4,747,860 4,747,860 ‑

94,957,193 94,957,193

*On 26 December 2011, IPWC entered into Shareholder Loan Assignment whereby IPWC agreed to sell to BDCC a portion of the loan in the amount of RO 4,747,860 it has given to the Company.


Interest Shareholders’ loan from SOFIF, SOIHL and BDCC carry interest rate at 5.1%.Shareholders’ loan from IPWC carries interest rate at 8.35%.

Other feesThe Company is required to pay an upfront fee to Shareholders within three business days that loan is made.


The Company has a related party relationship with entities over which certain shareholders are able to exercise significant influence. In the ordinary course of business, such related parties provide goods and render services to the Company.

Prices and terms for these transactions, which are entered into in the normal course of business, are on mutually agreed terms and conditions.

The Company had the following significant transactions with related parties during the year:

2011 2010

RO RO

Sembcorp Industries Limited 78,767 7,826

ST Architects & Engineers Pte Ltd - 4,689

SSOM 1,856,972 18,246

SOFIH 1,964,031 6,653,156

SOIHL 982,015 966,901

IPWC 3,215,620 3,159,032

OIC 3,189 3,061

8,100,594 10,812,911

172


173


a) Market riskMarket risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.



% RO RO

Financial assets

Bank balances 4,127,393 3,269,649


Shareholders loan


‑ RO fixed rate loans 5.10% (4,747,860) ‑


Term loan

‑ USD variable rate loans Libor+3% (170,547,300) (78,773,400)

‑ RO fixed rate loans 8% (35,150,000) (13,750,000)

(300,654,493) (187,480,594)




Equity

100 bps 100 bps 100 bps 100 bps

Increase Decrease Increase Decrease

2011 2011 2010 2010

RO RO RO RO


Interest i) Interest on Dollar Commercial facilities is charged at a floating rate of LIBOR plus margin. The Company

has entered into an interest rate swap to cap its obligation against unfavorable interest rate changes.

The margins are indicated below: Margin % (p.a.) Prior to completion date (as defined in the CTA) 3.00% Thereafter upto the sixth anniversary of completion date 2.85% Thereafter upto the tenth anniversary of completion date 3.20% Thereafter upto the tenth anniversary of completion date 3.55% Thereafter 3.95%

ii) Interest on Sinosure Covered facilities is charged at a floating rate of LIBOR plus margin (3% p.a.). The Company has entered into an interest rate swap to cap its obligation against unfavorable interest rate changes.

iii) Interest on Rial Omani Commercial facilities bear fixed interest rates of 8% p.a.

Other feesThe Company is required to pay a front end fees to the Mandated Lead Arranger. In addition, the Company shall pay commitment fee at 1.3% of undrawn Dollar Commercial facilities and Sinosure Covered facilities and 0.4% of undrawn Rial Omani facilities.


CovenantsThe term loan facilities contains certain covenants pertaining to, amongst other things, liquidation and merger, entering into material new agreements, negative pledge, disposal of asset, granting of loan and guarantee, acquisition of capital assets, debt service coverage ratio, change of business, loan and guarantee, hedging agreement, etc, which the Company is required to comply.


Under the Usufruct Agreement, the Company has a legal obligation to remove the Plant at the end of its useful life and restore the land. The Company shall at its sole cost and expense dismantle, demobilise, safeguard and transport the assets, eliminate soil and ground water contamination, fill all excavation and return the surface to grade of the designated areas. The fair value of ARO provision has been calculated using an expected present value technique. This technique reflects assumptions such as costs, plant useful life, inflation and profit margin that third parties would consider to assume the settlement of the obligation. The movement in ARO provision is as follows:

2011 2010

RO RO

At 1 January 32,098 ‑

Provision made during the year 228,186 32,098

At 31 December 260,284 32,098



174


175

Exposure to credit risk has been disclosed in note 11. Under the terms of the PWPA, the Company’s sales are billed wholly to OPWP. The Company manages its credit risk with OPWP by monitoring its credit rating and obtaining credit enhancements.

The Company limits its credit risk with regard to bank deposits by only dealing with reputable banks and financial institutions.


2011 2010

RO RO



Trade receivable 1,189,480 ‑

Retention and other receivable 92,721 ‑

5,411,205 3,269,649

c) Liquidity riskLiquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.

The Company limits its liquidity risk by ensuring bank facilities and shareholders’ advances are available, where required. Liquidity requirements are monitored on a monthly basis and management ensures that sufficient liquid funds are available to meet any commitments as they arise.

Currency riskThe Company is exposed to foreign currency exchange rate volatility arising primarily from EURO denominated obligation under the EPC contract and transaction with certain related parties denominated in SGD. The EURO risk is hedged by using the forward rate contract. Apart from above the majority of the transactions and balances are in either RO or USD. As RO is pegged to the USD, balances in USD are not considered to represent significant currency risk.

The Company’s foreign currency exposure is as follows:

2011 2010

Amount in RO EURO SGD EURO SGD

Financial assets

Cash and cash equivalents - - 2,976,018 ‑


Trade and other payable - - (5,578,424) (1,569)

- - (2,602,406) (1,569)

Expected purchase of gas turbines under the EPC contract

- - (9,507,799) ‑

Forward rate agreement - - 12,110,205 ‑

Net exposure - - ‑ (1,569)

The following significant exchange rates applied during the year.

2011 2010

Foreign currency Average rate Spot rate Average rate Spot rate

RO

EURO 1 0.53363 0.50771 0.511037 0.50833

SGD 1 0.30654 0.29621 0.283027 0.29705

Sensitivity analysisA 10% strengthening of foreign currencies against the RO at the balance sheet date would increase/ (decrease) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant.

2011 2010

Equity Profit or loss Equity Profit or loss

RO RO RO RO

EURO - - 1,230,994 ‑

SGD - - ‑ (157)

- - 1,230,994 (157)

b) Credit riskCredit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s receivables from customers and cash balances held with banks.

176


177

The following agreements contain embedded derivatives as follows:

iii) The PWPA between the Company and PWP contain embedded derivatives in the pricing formulae that computes the investment charge rate and the fixed operation and maintenance charge rate for each of the power facility and the desalination facility. Percentages of the fixed operation and maintenance charge rate for each of power facility and the desalination facility will be adjusted to reflect changes in US price index and the Omani Consumer price index.

iv) The O & M agreement between the Company and SSOM contain embedded derivatives in the pricing formulae that computes the fixed operation and maintenance charge rate and for the Plant. Percentages of the fixed operation and maintenance charge rate for each of the Plant will be adjusted to reflect changes in fixed inflation rate.

These embedded derivative are not separated from the host contract, the PWPA, and accounted for as a stand alone derivative under IAS 39, as the management believes that the economic characteristics and risk associated with the embedded derivative are closely related to those of the host contract.



Guarantees

2011 2010

RO RO


The Company has taken bank guarantees from Bank Muscat and National Bank of Abu Dhabi (Muscat) for the amount of USD 4,000,000 and RO 17,500,000 to Dhofar Power Company SAOG and OPWP respectively.

Liquidated damagesThe Company achieved Commercial Operation Date (“COD”) 1(the Phase 1 Power Milestone) on 16 July 2011 against the originally scheduled date on 6 July 2011 stated in the Power and Water Purchase Agreement (“the PWPA”) with the Guaranteed Contracted Power Capacity of 61 MWH.

COD 2 was also delayed from its original scheduled date of 6 October 2011 due to the wrong termination kit installed and procured by the grid substation, and occurrence of Cyclone Keila from 1 to 5 November 2011 that impact construction progress. The Guaranteed Contracted Power Capacity and Guaranteed Contracted Water Capacity during Phase 2 Milestone are 173 MWH and 2841.25 m3/h respectively.

Subsequent to the reporting date, the Company achieved the Phase 2 Power Milestone on 2 January 2012 and expected to achieve the Phase 2 Water Milestone in February 2012.

The Company is seeking contractual reliefs from OPWP for liquidated damages and revenue losses primarily as follows:

“Buyer Risk Relief” (which will allow the Company to back date the achievement of Phase 2 Power Milestone due to the wrong termination kit. However, this relief claim has been disputed by OPWP. We are currently in discussion with OPWP to establish the validity of this relief.

Claim under Clause 28.1 of the PWPA that extreme weather situation (Cyclone Keila hit the coasts of Oman) constitutes a Force Majeure Event for which we will seek relief as provided in the PWPA.


Cash flows

Carrying amount


Less than 1 year


More than 5 years


Derivatives

Interest rate swaps used for hedging

42,141,508 (44,422,945) (7,541,262) (24,574,861) (12,306,822)


Shareholders loan 94,582,792 (106,268,195) (5,806,632) (100,461,563) -

Term loan 195,294,875 (282,336,847) (3,995,104) (70,305,394) (208,036,349)


354,684,034 (455,692,846) (40,007,857) (195,341,818) (220,343,171)

31 December 2010

Derivatives


12,897,939 (12,897,939) (4,346,184) (10,336,802) 1,785,047

Forward exchange contracts used for hedging

1,370,104 (1,370,014) (1,370,014) ‑ ‑



Term loan 82,749,609 (130,816,417) (3,786,845) (27,314,268) (99,715,304)


219,468,427 (287,352,457) (43,782,295) (145,639,905) (97,930,257)


Fair value hierarchyThe table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:




2011 2010

Level 2 Level 2

RO

Derivative financial liabilities 42,141,508 14,268,043

178


179



The Company has engaged an external legal counsel to advise and protect our interests in the disputes and claims under the PWPA and the EPC Contract. These claims and disputes are expected to be settled in FY2012. The management of the Company and external legal counsel believes that the final settlement should at least result in a neutral position for the Company.

In addition the Company has received a Bankers’ Guarantee amounting to about RO 68.5million as Performance Bond from SEPCOIII.



2011 2010

RO RO

Commitments in respect of contracts placed 49,174,632 157,231,243

Amounts approved by Directors but not contracted 11,182,356 16,813,210

60,356,988 174,044,453

Operating lease commitments:

At 31 December future minimum lease commitments under the Usufruct Agreement are as follows:






180


181

INDEPENDENT AUDITORS REPORT TO THE SHAREHOLDERS OFSEMBCORP SALALAH POWER & WATER COMPANY SAOC






Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with relevant ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.



Opinion




/sKPMG11 March 2013



Contents Page






Notes ..................................................................................................................................................................186 to 206

182


183


Notes 2012 2011

RO RO

Non-current assets

Property, plant and equipment 7 350,305,973 33,063,988

Capital work in progress 8 - 270,134,002

Intangible assets 9 37,555 26,402

Deferred tax asset 10 &16 5,333,858 5,056,981


Current assets

Trade and other receivable 11 11,034,297 4,587,736

Inventory 12 1,790,617 669,660



Total assets 407,363,106 317,667,773

Equity

Share capital 14 (a) 500,000 500,000


Legal reserve 14 (b) 90,275 ‑

Shareholders’ funds 514,797 (387,952)

Hedging reserve 10 &14 (c) (39,114,959) (37,084,527)

Total equity (38,600,162) (37,472,479)


Shareholders loan 17 - 94,582,792

Term loan 19 258,641,887 193,546,448

Asset retirement obligation 20 409,570 260,284

Deferred tax liability 16 2,596,407 195,934



Current liabilities

Shareholders loan 17 94,832,393 ‑

Current portion of Term loan 19 11,575,124 1,748,427





The financial statements were approved and authorised for issue in accordance with a resolution of the Board of Directors on 11 March 2013.

/s /sDeputy Chairman Director

The notes on pages 186 to 206 form an integral part of these financial statements.The report of the Independent Auditors is set forth on page 181.

Statement of comprehensive incomefor the year ended 31 December

Notes 2012 2011

RO RO

Revenue 3 46,649,938 3,048,977

Cost of sales 4 (21,959,323) (2,510,919)

Gross profit 24,690,615 538,058


Profit before interest and tax 24,012,594 442,915

Finance cost 6 (20,709,372) (1,108,948)

Profit (loss) before tax 3,303,222 (666,033)

Income tax expense 16 (2,400,473) (195,934)

Profit (loss) after tax for the year 902,749 (861,967)

Other comprehensive loss, net of income tax:

Effective portion of change in fair value of cash flow hedge 10 (2,030,432) (24,528,649)

Total comprehensive loss for the year (1,127,683) (25,390,616)


184


185

Statement of changes in equityfor the year ended 31 December

Share Hedging Legal Accumulated

capital reserve reserve losses Total

RO RO RO RO RO

At 1 January 2011 500,000 (12,555,878) ‑ (25,985) (12,081,863)


Loss for the year ‑ ‑ ‑ (861,967) (861,967)

Changes in fair value of cash flow hedge, net of income tax ‑ (24,528,649) ‑ ‑ (24,528,649)

Total comprehensive income for the year ‑ (24,528,649) ‑ (861,967) (25,390,616)

At 31 December 2011 500,000 (37,084,527) ‑ (887,952) (37,472,479)

At 1 January 2012 500,000 (37,084,527) - (887,952) (37,472,479)


Profit for the year - - - 902,749 902,749

Transfer to legal reserve - - 90,275 (90,275) -

Changes in fair value of cash flow hedge, net of income tax - (2,030,432) - - (2,030,432)

Total comprehensive loss for the year - (2,030,432) 90,275 812,474 (1,127,683)

At 31 December 2012 500,000 (39,114,959) 90,275 (75,478) (38,600,162)


Statement of cash flows for the year ended 31 December

Notes 2012 2011

RO RO



Non cash adjustment:

Depreciation and amortisation 7&9 9,235,213 495,712

Amortisation of deferred financing cost 6 1,047,068 52,476

Finance costs 6 19,662,304 1,108,948

Provision for asset retirement obligation 20 16,313 ‑


Increase in inventory (1,120,957) (669,660)


Increase in trade and other payable 2,223,313 856,083

26,282,110 (1,772,405)

Finance cost paid (10,739,719) (1,108,948)

Net cash flow from (used in) operating activities 15,542,391 (2,881,353)


Acquisition of property, plant and equipment (54,985,285) (108,041,164)

Acquisition of intangible assets 9 (48,383) (32,098)



Proceeds from term loan 76,622,800 111,813,970

Repayment of term loan (2,399,721) ‑


Net change in cash and cash equivalents 34,731,802 859,355

Cash and cash equivalents at beginning of the year 4,129,004 3,269,649

Cash and cash equivalents at end of the year 13 38,860,806 4,129,004


186


187



v) EPC Turnkey Engineering, Procurement and Construction (“EPC”) Contract dated 20 August 2009 with SEPCOIII Electric Power Construction Corporation (“SEPCOIII”) for the construction of the Plant;











Significant accounting policiesThe accounting policies set out below have been applied consistently by the Company and are consistent with those used in the previous year.

a) Foreign currency

i) Functional and presentation currency The financial statements have been presented in Rial Omani (“RO”) which is the functional


Transactions in foreign currencies are translated to the respective functional currencies of Company at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortised cost in foreign




The Company has entered into a Shareholders Agreement (“the Shareholders Agreement”) dated 17 November 2009 between Sembcorp Oman First Investment Holding Co Ltd (“SOFIH”) 40% shareholder, Sembcorp Oman IPO Holding Co Ltd (“SOIHL”) 20% shareholder and Inma Power & Water Company LLC (“IPWC”) 40% shareholder. In December 2011, IPWC transferred a 5% interest in the Company to BDCC Investment Company (“BDCC”). The shareholding as of 31 December 2012 is as follows:

% holding

SOFIH 40%

SOIHL 20%

IPWC 35%

BDCC 5%

100%

Sembcorp Industries Limited is ultimate parent company of SOFIH and SOIHL. Oman Investment Corporation (“OIC”) is ultimate parent company of IPWC.

The Company has been awarded a tender by the Government of the Sultanate of Oman (the “Government”) to build, own and operate an electricity generation and seawater desalination plant together with the associated facilities in the Salalah region (“the Plant”). The Company had achieved Commercial Operation Date (“COD”) on 25 May 2012.

Significant eventsThe Company achieved Phase One Power Milestone on 16 July 2011 against the originally scheduled date of 6 July 2011 as per Power and Water Purchase Agreement (“the PWPA”) with the Guaranteed Contracted Power Capacity of 61 MWH.

Phase Two Power and Phase Two Water Milestones were also delayed from their original scheduled date of 6 October 2011 due to the wrong termination kit installation in the grid substation by the Grid Operator and the occurrence of Cyclone Keila from 1 to 5 November 2011 that impacted construction progress. The Guaranteed Contracted Power Capacity and Guaranteed Contracted Water Capacity during Phase 2 Milestone are 173 MWH and 2841.25 m3/h respectively.

The Company achieved the Phase Two Power Milestone on 2 January 2012 and Phase Two Water milestone on 12 March 2012 against the originally scheduled date of 6 October 2011. Final COD was achieved on 25 May 2012 against the originally scheduled date of 4 April 2012. Delay in achievement of milestone was primarily due to the low power grid demand. The plant has been in operation since COD (note 22).

Significant agreements:The Company has entered into the following major agreements:



188


189

The cumulative gain or loss previously recognised in other comprehensive income and presented in the hedging reserve in equity remains there until the forecast transaction affects profit or loss. When a hedging instrument expires or is sold, terminated or exercised, or the entity revokes designation of the hedge relationship but the hedged forecast transaction is still expected to occur, then hedge accounting is discontinued prospectively. The cumulative gain or loss at that point remains in equity and is recognised in accordance with the above policy when the transaction occurs. If the hedged transaction is no longer expected to take place, the cumulative unrealised gain or loss recognised in equity is recognised immediately in the profit or loss.

ii) Separable embedded derivatives Changes in the fair value of separable embedded derivatives are recognised immediately in

profit or loss.

c) Property, plant and equipment

(i) Recognition and measurement Items of property, plant and equipment are measured at cost less accumulated depreciation and

accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self‑constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use, the costs of dismantling and removing the items and restoring the site on which they are located, and capitalised borrowing costs. Cost also may include transfers from other comprehensive income of any gain or loss on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and are recognised net within other income in profit or loss. When revalued assets are sold, the amounts included in the revaluation reserve are transferred to retained earnings.


in the specific asset to which it relates. Subsequent expenditure relating to property, plant and equipment that has already been recognised is added to the carrying amount of the asset when it is probable that future economic benefits, in excess of the originally assessed standard of performance of the existing asset, will flow to the Company. All other subsequent expenditure is recognised as an expense in the period in which it is incurred.

(iii) Depreciation Depreciation is calculated using the straight‑line method to allocate the cost less its residual

value so as to write off items of property, plant and equipment over their estimated useful lives. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of an item is depreciated separately. The estimated useful lives for the years is as follows:

Plant and machinery 12 to 30 years Roads and pipelines 10 to 30 years Computer equipment 3 years Office equipment 3 to 10 years Motor vehicles 10 years Motor vehicles 10 years

currency translated at the exchange rate at the end of the reporting period. Non‑monetary assets and liabilities denominated in foreign currencies that are measured at historical cost are translated to the functional currency at the exchange rate at the date of the transaction. Non‑monetary assets and liabilities measured at fair value in foreign currencies are translated into the functional currency at foreign exchange rates ruling at the dates the fair value was determined. Foreign currency differences arising on translation of monetary items are recognised in profit or loss, except for differences arising on the retranslation of available‑for‑sale equity instruments, qualifying cash flow hedges or other non monetary items, which are recognised in other comprehensive income. Non‑monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.

b) Financial instruments

(i) Non derivative financial instrument Non‑derivative financial instruments comprise trade and other receivables, amounts due to

related parties, cash and cash equivalents, loans and borrowings, and trade and other payables. Cash and cash equivalents comprise cash balances, demand deposits and fixed deposits and term deposits with original maturity not greater than three months. Bank overdrafts that are repayable on demand and form an integral part of the Company’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

Non‑derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transaction costs.


rate risk exposures. On initial designation of the hedge, the Company formally documents the relationship between the hedging instrument(s) and hedged item(s), including the risk management objectives and strategy in undertaking the hedge transaction, together with the methods that will be used to assess the effectiveness of the hedging relationship.

The Company makes an assessment, both at the inception of the hedge relationship as well as on an ongoing basis, whether the hedging instruments are expected to be “highly effective” in offsetting the changes in the fair value or cash flows of the respective hedged items during the period for which the hedge is designated, and whether the actual results of each hedge are within a range of 80% to 125%. For a cash flow hedge of a forecast transaction, the transaction should be highly probable to occur and should present an exposure to variations in cash flows that could ultimately affect reported net income. Derivatives are recognised initially at fair value; attributable transaction costs are recognised in profit or loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for as described below.


flows attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction the effective portion of changes in the fair value of the derivative is recognised in other comprehensive income and presented in the hedging reserve in equity. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in profit or loss. If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated, exercised, or the designation is revoked, then hedge accounting is discontinued prospectively.

190


191

respect of cash‑generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash‑generating units (group of CGUs) and then, to reduce the carrying amount of the other assets in the CGU (Group of CGUs) on a pro rata basis.






Interest‑bearing liabilities are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest‑bearing liabilities are stated at amortised cost with any difference between cost and redemption value being recognised in the income statement over the period of the borrowings on an effective interest basis.







received or receivable, net of returns and allowances, trade discounts and volume rebates. Revenue is recognised when electricity and water are delivered at the customers’ premise which is taken to be the point of time when the customer has accepted the deliveries and the related risks and rewards of ownership have been transferred to the customer based on contractual terms stipulated in PWPA.



(iv) Capital work in progress Capital work in progress is measured at cost and is not depreciated until it is transferred into one


(v) Site Restoration A liability for future site restoration is recognized as the activities giving rise to the obligation of


d) Impairment

i) Financial assets A financial asset is considered to be impaired if objective evidence indicates that one or more


Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in Companies that share similar credit risk characteristics. All impairment losses are recognised in profit or loss account.




ii) Non – financial assets The carrying amounts of the Company’s non‑financial assets, other than inventories and deferred

tax assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the assets’ recoverable amounts are estimated. An impairment loss is recognised whenever the carrying amount of an asset or its cash‑generating unit (“CGU”) exceeds its recoverable amount. A cash‑generating unit is the smallest identifiable asset group that generates cash flows that largely are independent from other assets. Impairment losses are recognised in the income statement unless it reverses a previous revaluation that was credited to equity, in which case it is charged to equity. Impairment losses recognised in

192


193

4 Cost of sales

2012 2011

RO RO

Fuel cost 7,278,047 1,026,668

Operation and maintenance cost 2,814,930 719,619

Contractual services maintenance cost 1,893,002 262,535

Depreciation 9,152,636 483,626

Insurance cost 455,139 ‑

Incentive payment 123,057 ‑

Electricity import cost 99,178 ‑

Spare parts, consumables and supplies 40,612 11,237

Unwinding of discount 16,313 ‑

Licence and permits 24,136 ‑

Others 62,273 7,234

21,959,323 2,510,919


Staff costs 141,663 27,787

Legal and professional charges 384,881 26,776

Depreciation and amortisation 82,577 12,086

Others 68,900 28,494

678,021 95,143

6 Finance costs

Interest expense on equity bridge loan 4,569,295 306,564

Interest expense on project financing 8,989,896 400,351

Interest expense on interest rate swaps 5,996,826 335,272

Deferred financing cost 1,047,068 52,476

Commission and bank charges 106,287 14,285

20,709,372 1,108,948




k) Income tax Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is

recognised in the income statement except to the extent that it relates to items recognised directly to equity, in which case it is recognised in equity.


Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss. The measurement of deferred tax reflects the consequences that would follow the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantially enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets and they relate to taxes levied by the same tax authority on the same taxable entity.

A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

(l) New standards and interpretation not yet effective A number of new standards, amendments to standards and interpretations are not yet effective for


3 Revenue

2012 2011

RO RO

Fixed capacity charge ‑ Power 25,947,573 1,931,733

Fixed capacity charge ‑ Water 12,707,141 ‑

Energy charge 680,681 86,482

Fuel charge 7,314,543 1,030,762

46,649,938 3,048,977

194


195

9 Intangible assets

2012 2011

RO RO

Opening balance 26,402 ‑

Transferred from capital work in progress 45,551 35,299

Purchased during the year 2,832 ‑

Amortisation during the year (37,230) (8,897)

37,555 26,402

An intangible asset represents purchase of ERP software.

10 Hedging reserve

Interest rate swaps:

SMBC Capital Market Limited (9,318,935) (9,019,530)


KfW‑IPEX (8,048,549) (7,579,794)

Hedging reserve at the end of the year (44,448,817) (42,141,508)

Deferred tax asset (note 16) 5,333,858 5,056,981

Hedging reserve at the end of the year (net of tax) (39,114,959) (37,084,527)

Less: Hedging reserve at the beginning of the year (37,084,527) (12,555,878)

Effective portion of change in fair value of cash flow hedge for the year (2,030,432) (24,528,649)


The long term facilities of the Company bear interest at US LIBOR plus applicable margins. In accordance with the CTA, the Company has fixed the rate of interest through an Interest Rate Swap Agreements (“IRS”) entered into with SMBC Capital Market Limited, KfW IPEX Bank GmbH and Standard Chartered Bank dated 20 November 2009, 23 March 2010 and 08 April 2010 respectively, for 95.32% of its USD loan facility. The corresponding hedged notional amount outstanding as of 31 December 2012 is approximately USD 455 million and USD118 million at a fixed interest rate of 4.345% and 3.8% per annum respectively.


2012 2011

RO RO

Trade receivable 9,058,602 1,189,480

Due from related parties (note 18) 922 ‑

Advances to vendors 1,573,727 1,667,730

Prepayments 303,181 1,637,805

Retentions 90,299 90,299

Other receivable 7,566 2,422

11,034,297 4,587,736


Land and buildings

Roads and pipelines

Plant and machinery

Office equipment

Motor vehicles


Cost RO RO RO RO RO RO RO

At 1 January 2012 ‑ 654,225 32,848,201 600 23,567 24,210 33,550,803

Additions during the year ‑ ‑ 116,824 67,522 205,753 12,270 402,369

Transfer during the year 47,998,922 25,344,563 252,570,824 ‑ ‑ 123,768 326,038,077

Disposals during the year ‑ ‑ ‑ ‑ ‑ (688) (688)

At 31 December 2012 47,998,922 25,998,788 285,535,849 68,122 229,320 159,560 359,990,561


At 1 January 2012 ‑ 10,097 472,324 17 1,188 3,189 486,815

Charge for the year 1,200,442 632,039 7,300,170 7,369 17,369 40,594 9,197,983

Disposals during the year ‑ ‑ ‑ ‑ ‑ (210) (210)

At 31 December 2012 1,200,442 642,136 7,772,494 7,386 18,557 43,573 9,684,588

Carrying amount

At 31 December 2012 46,798,480 25,356,652 277,763,355 60,736 210,763 115,987 350,305,973

At 31 December 2011 ‑ 644,128 32,375,877 583 22,379 21,021 33,063,988


2012 2011 RO RO

Opening balance 270,134,002 195,897,917Additions during the year:Construction cost incurred 43,899,053 79,042,166Insurance cost 1,652,307 4,923,459Financing cost 6,073,777 18,642,141Initial spare parts - 287,033Salaries and wages 637,221 994,899Other directly attributable expenses 3,687,268 3,825,512

326,083,628 303,613,127Transferred to:Land and buildings (47,998,922) ‑Roads and pipelines (25,344,563) (654,225)Plant and machinery (252,570,824) (32,824,900)Computer equipment (123,768) ‑Intangible assets (45,551) ‑At 31 December - 270,134,002


196


197

16 Income tax


Deferred tax asset has been recognised directly in equity in respect of the changes in fair values of interest rate swap (note 10).

2012 2011

RO RO

a) Recognised in profit or loss

Deferred tax expense for the year 2,400,473 195,934

b) Reconciliation

The following is the tax reconciliation of income taxes calculated at the applicable tax rate with the income tax expenses.


Income tax as per rates mentioned above (396,387) 79,924

Losses for which no deferred tax asset recognised (1,455,771) (275,858)

Expenses not deductible for tax purposes (548,315) ‑

Deferred tax expense for the year (2,400,473) (195,934)

c) Deferred tax asset / (liability)

At 1 January

Recognised during the

yearAt 31

December

RO RO RO

Charged to profit or loss

Property, plant and equipment (195,934) (4,297,460) (4,493,394)

Tax losses ‑ 1,896,987 1,896,987

(195,934) (2,400,473) (2,596,407)

Deferred tax recognised in equity

Derivative instrument (note 10) 5,056,981 276,877 5,333,858

d) Status of prior year returnsThe Company’s assessment for the tax year 2009 to 2011 has not yet been finalised with the Secretariat General for Taxation at the Ministry of Finance. The Board of Directors of the Company believe that additional taxes, if any in respect of open tax years would not be significant to the Company’s financial position as at 31 December 2012.



Less: Unamortised transaction cost (124,800) (374,401)

94,832,393 94,582,792

12 Inventory

2012 2011

RO RO

Fuel inventory 993,568 669,379

Spare parts and consumables 797,049 281

1,790,617 669,660


Cash in hand 1,925 1,611

Cash at bank 38,858,881 4,127,393

38,860,806 4,129,004

14 Equity

(a) Share capital The Company’s registered capital (issued and fully paid) comprises 500,000 shares of RO1 each.







2012 2011

RO RO


Trade payable 661,319 282,855

Due to related parties (note 18) 642,853 122,263

Retentions and deductions 14,783,649 ‑


Accrued expenses and other payable 1,991,237 2,996,115

33,459,070 22,664,859

Retentions and deductions mainly include the deductions from EPC contractor on account of Liquidated damages claimed by the Company.

198


199


The Company has a related party relationship with entities over which certain shareholders are able to exercise significant influence. In the ordinary course of business, such related parties provide goods and render services to the Company. Prices and terms for these transactions, which are entered into in the normal course of business, are on mutually agreed terms and conditions. The Company had the following significant transactions with related parties during the year:

2012 2011

RO RO

Sembcorp Industries Limited

‑ Reimbursement of expenses 360,291 78,767

‑ Project bonus 92,448 ‑

SSOM

‑ Mobilisation fee - 1,137,354

‑ Operation and maintenance cost 2,814,930 719,619

‑ Incentive payment 123,057 ‑

SOFIH

‑ Finance cost 1,969,412 1,964,031

SOIHL

‑ Finance cost 984,706 982,015

IPWC

‑ Finance cost 2,821,376 3,215,620

OIC


‑ Project bonus 53,928 ‑

9,231,760 8,100,595

Balances due to related parties (note 15) at the year‑end comprised:

SSOM 389,650 122,263

Sembcorp Industries Ltd 253,203 ‑

642,853 122,263

Balance due to related parties in respect of accrued interest on the shareholders loan is RO 4,386,850 and is payable to SOFIH (RO 1,495,892), SOIHL (RO 747,946) and IPWC (RO 2,143,012) (note 15 & 17).

Balance due from related party (note 11) is as follows:

Emirates Sembcorp Water & Power Company PJSC 922 ‑

Key Management benefitsKey Management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Company, directly or indirectly, including any director (whether executive or otherwise). RO 133,541 (2011: RO 99,404) were paid to key management personnel during the year.

On 20 November 2009 the Company, its shareholders and the lenders under the Common Term Agreement (“CTA”), entered into a Project Support Agreement (“the PSA”) under which shareholders are required to provide subordinated advances (“the Shareholders loan”) and the actual drawdown amount is described below:

Currency LimitDraw down

amount

2012 2011

RO RO

SOFIH USD 98,605,600 98,605,600 37,982,877 37,982,877

SOIHL USD 49,302,800 49,302,800 18,991,438 18,991,438

IPWC RO 33,235,018 33,235,018 33,235,018 33,235,018

BDCC* RO 4,747,860 4,747,860 4,747,860 4,747,860

94,957,193 94,957,193

*On 26 December 2011, IPWC entered into Shareholder Loan Assignment whereby IPWC agreed to sell to BDCC a portion of the loan in the amount of RO 4,747,860 it has given to the Company.


According to the PSA, the Shareholders and the Company are required to convert the Shareholders loan into equity prior to a Public Offer for sale or listing. In December 2012 the Board of Directors of the Company approved the conversion of the Shareholders loan into equity no later than 30 June 2013.

Interest Shareholders’ loan from SOFIH, SOIHL and BDCC carry interest rate at 5.1%.Shareholders’ loan from IPWC carries interest rate at 8.35%.

Other feesThe Company was required to pay an upfront fee to Shareholders within three business days of the loan being made.

200


201

CovenantsThe term loan facilities contain certain covenants pertaining to, amongst other things, liquidation and merger, entering into material new agreements, negative pledge, disposal of asset, granting of loan and guarantee, acquisition of capital assets, debt service coverage ratio, change of business, loan and guarantee, hedging agreement, etc, with which the Company is required to comply.


Under the Usufruct Agreement, the Company has a legal obligation to remove the Plant at the end of its useful life and restore the land. The Company shall at its sole cost and expense dismantle, demobilise, safeguard and transport the assets, eliminate soil and ground water contamination, fill all excavation and return the surface to grade of the designated areas. The fair value of ARO provision has been calculated using an expected present value technique. This technique reflects assumptions such as costs, plant useful life, inflation and profit margin that third parties would consider to assume the settlement of the obligation. The movement in ARO provision is as follows:

2012 2011

RO RO

At 1 January 260,284 32,098

Provision made during the year 132,973 228,186

Unwinding of discount 16,313 ‑

At 31 December 409,570 260,284




d) Market riskMarket risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

19 Term loan

2012 2011

RO RO

Non‑current Maturity



279,920,380 205,697,300


270,217,011 195,294,875

Less: Current portion of term loan (11,575,124) (1,748,427)

258,641,887 193,546,448



Interest iv) Interest on Dollar Commercial facilities is charged at a floating rate of LIBOR plus margin. The

Company has entered into an interest rate swap to cap its obligation against unfavourable interest rate changes.

The margins are indicated below: Margin % (p.a.) Prior to completion date (as defined in the CTA) 3.00% Thereafter up to the sixth anniversary of completion date 2.85% Thereafter up to the tenth anniversary of completion date 3.20% Thereafter up to the tenth anniversary of completion date 3.55% Thereafter 3.95%

v) Interest on Sinosure Covered facilities is charged at a floating rate of LIBOR plus margin (3% p.a.). The Company has entered into an interest rate swap to cap its obligation against unfavourable interest rate changes.

vi) Interest on Rial Omani Commercial facilities bear fixed interest rates of 8% p.a.

Other feesThe Company is required to pay a front end fees to the Mandated Lead Arranger. In addition, the Company shall pay commitment fee at 1.3% of undrawn Dollar Commercial facilities and Sinosure Covered facilities and 0.4% of undrawn Rial Omani facilities. As at 31 December 2012, there were no undrawn loans.


202


203


2012 2011

RO RO




Due to related parties, retention and other receivables 98,787 92,721

48,018,195 5,411,205

The age analysis of current trade and other receivables is as follows:

Not past due 4,791,389 1,282,201

Past due 0 to 3 months 3,000,000 ‑

Past due 3 to 6 months 1,366,000 ‑

9,157,389 1,282,201

b) Liquidity riskLiquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation. The Company limits its liquidity risk by ensuring bank facilities and shareholders’ advances are available, where required. Liquidity requirements are monitored on a monthly basis and management ensures that sufficient liquid funds are available to meet any commitments as they arise.



% RO RO

Financial assets

Bank balances 38,858,881 4,127,393


Shareholders loan




Term loan

‑ USD variable rate loans Libor+3% (231,733,480) (170,547,300)

‑ RO fixed rate loans 8% (48,186,900) (35,150,000)

(374,877,573) (300,654,493)




Equity

100 bps 100 bps 100 bps 100 bps

Increase Decrease Increase Decrease

2012 2012 2011 2011

RO RO RO RO


Currency riskThe majority of the transactions and balances are in either RO or USD. As RO is pegged to the USD, balances in USD are not considered to represent significant currency risk. The Company is not exposed to significant currency risk as at 31 December 2012.

(b) Credit riskCredit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s receivables from customers and cash balances held with banks.

Under the terms of the PWPA, the Company’s sales are billed wholly to OPWP. The Company manages its credit risk with OPWP by monitoring its credit rating and obtaining credit enhancements.

The Company limits its credit risk with regard to bank deposits by only dealing with reputable banks and financial institutions with strong credit ratings.

204


205

Embedded derivativesThe following agreements contain embedded derivatives as follows:i) The PWPA between the Company and OPWP contain embedded derivatives in the pricing the

investment charge rate and the fixed operation and maintenance charge rate for each of the power facility and the desalination facility. Percentages of the fixed operation and maintenance charge rate for each of power facility and the desalination facility will be adjusted to reflect changes in US price index and the Omani Consumer price index.

ii) The O & M agreement between the Company and SSOM contain embedded derivatives in pricing the fixed operator fee. Percentages of the fixed operator fee will be adjusted to reflect changes in fixed inflation rate.

iii) The LTSA between the Company and GEIL contain embedded derivatives in the pricing the fixed monthly fee and variable monthly fee for provision of long term maintenance services. Percentages of the fixed monthly fee and variable monthly fee will be adjusted to reflect changes in US price index.

These embedded derivatives are not separated from the host contract, the PWPA, and accounted for as a standalone derivative under IAS 39, as the management believes that the economic characteristics and risk associated with the embedded derivative are closely related to those of the host contract.


22 Contingent liabilities and guarantees

Guarantees:

2012 2011

RO RO


During the year the Company has taken bank guarantees from Bank Muscat for the amount of USD 4,000,000 to Dhofar Power Company SAOG under the electrical connection agreement.

Liquidated damages:The Company achieved Commercial Operation Date (“COD”) 1 (the Phase 1 Power Milestone) on 16 July 2011 against the originally scheduled date on 6 July 2011 stated in the Power and Water Purchase Agreement (“the PWPA”) with the Guaranteed Contracted Power Capacity of 61 MWH.

COD 2 (the Phase II Power and Phase II Water Milestones) was also delayed from its original scheduled date of 6 October 2011 due to the wrong termination kit installation by the Grid Operator, and procured by the grid substation, and occurrence of Cyclone Keila from 1 to 5 November 2011 that impacted construction progress. The Guaranteed Contracted Power Capacity and Guaranteed Contracted Water Capacity during Phase 2 Milestone were 173 MWH and 2841.25 m3/h respectively.

The Company achieved the Phase II Power Milestone on 2 January 2012 and Phase II Water milestone on 12 March 2012 respectively.

Final COD was achieved on 25 May 2012 against the originally scheduled date on 4 April 2012. Delay in the achievement of the milestone was primarily due to the low power grid demand. The Plant was fully operational after COD.

The Company has claimed liquidated damages from SEPCO III, EPC contractor in relation to the above delays.


Cash flows

Carrying amount


Less than 1 year


More than 5 years


Derivatives


44,448,817 (46,144,726) (6,678,670) (31,680,445) (7,785,611)


Shareholders loan 94,832,393 (97,810,323) (97,810,323) - -

Term loan 270,217,011 (380,958,941) (20,788,411) (98,043,720) (262,126,810)


442,957,291 (558,373,060) (158,736,474) (129,724,165) (269,912,421)

31 December 2011

Derivatives

Interest rate swaps used for hedging 42,141,508 (44,422,945) (7,541,262) (24,574,861) (12,306,822)

Non‑derivatives Financial liabilities


Term loan 195,294,875 (282,336,847) (3,995,104) (70,305,394) (208,036,349)


354,684,034 (455,692,846) (40,007,857) (195,341,818) (220,343,171)


Fair value hierarchyThe table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:




2012 2011

Level 2 Level 2

RO RO

Derivative financial liabilities 44,448,817 42,141,508

206


207

Sembcorp Salalah Power & Water Company SAOCCondensed interim financial statements30 June 2013

Registered office Principal place of business:PO Box 299, Salalah Postal Code 134, Jawharat Al Shatti,

The Company is seeking contractual reliefs from OPWP for liquidated damages and revenue losses primarily as follows:

“Buyer Risk Relief” (which will allow the Company to back date the achievement of Phase 2 Power Milestone) due to the wrong termination kit. However, this relief claim has been disputed by OPWP. Management of the Company is currently in discussion with OPWP to establish the validity of this relief.

Claim under Clause 28.1 of the PWPA that extreme weather situation (Cyclone Keila hit the coasts of Oman) constitutes a Force Majeure Event for which Management of the Company will seek relief as provided in the PWPA.

“Buyer Risk Relief” (which allow the Company to back date the achievement of COD) due to the lower grid demand.

SEPCO III has also filed a claim against the Company entitling it to seek recovery of its reasonable increase in costs due to various events amount to owner delays. The claim was principally rejected by the Company and has requested SEPCO III to substantiate the claim that the alleged events in fact caused the delays in achievement of milestones. SEPCO III has yet to establish its entitlement relief for the alleged delay events.

The Company has engaged an external legal counsel to advise and protect the Company’s interests in the disputes and claims under the PWPA and the EPC contracts. These claims and disputes are expected to be settled in 2014.

Management of the Company and external legal counsel believes that the final settlement of its disputes with OPWP and SEPCO III should at least result in a neutral position for the Company.

In addition, the Company has received a bank guarantee amounting to USD 70 million, as performance bond from SEPCOIII.



2012 2011

RO RO

Commitments in respect of contracts placed - 49,174,632

Amounts approved by Directors but not contracted - 11,182,356

- 60,356,988

Operating lease commitments:At 31 December, future minimum lease commitments under the Usufruct Agreement are as follows:






Shareholders’ funds before hedging reserves have been additionally presented in the statement of financial position to disclose the capital contributed by the shareholders, the legal reserve and accumulated losses.

208


209

INDEPENDENT AUDITORS’ REPORT ON REVIEW OF INTERIM FINANCIAL INFORMATION TO THE SHAREHOLDERS OF SEMBCORP SALALAH POWER & WATER COMPANY SAOC

Introduction

We have reviewed the accompanying condensed statement of financial position of Sembcorp Salalah Power & Water Company SAOC (“the Company”) as at 30 June 2013, the condensed statement of comprehensive income, the condensed statement of changes in equity and condensed statement of the cash flows for the period then ended, and notes to the interim financial information (“the condensed interim financial information”). Management is responsible for the preparation and presentation of this condensed interim financial information in accordance with IAS 34 Interim Financial Reporting. Our responsibility is to express a conclusion on this condensed interim financial information based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity.

A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed separate interim financial information as at 30 June 2013 is not prepared, in all material respect, in accordance with IAS 34 Interim Financial Reporting.

Sultanate of Oman.



Contents Page

Independent auditors’ report on review of interim financial information ............................................................209

Condensed statement of profit or loss and other comprehensive income ..........................................................210

Condensed statement of financial position ..............................................................................................................211

Condensed statement of cash flows ..........................................................................................................................212

Condensed statement of changes in equity ..............................................................................................................213

Notes to condensed interim financial statements .......................................................................................214 to 221

210


211

Condensed statement of financial positionas at 30 June

Notes 30 June 2013

31 December 2012

RO RO

Non-current assets

Property, plant and equipment 8 344,652,447 350,305,973

Intangible assets 19,670 37,555

Deferred tax asset 3,420,522 5,333,858


Current assets

Trade receivable, prepayments and other receivable 9 18,335,045 11,034,297

Inventory 10 2,137,030 1,790,617



Total assets 405,891,279 407,363,106

Equity

Share capital 12 (a) 500,000 500,000

Retained earnings (accumulated losses) 6,834,836 (75,478)

Legal reserve 12 (b) 166,667 90,275

Shareholders' funds 7,501,503 514,797

Hedging reserve 12 (c ) (25,083,825) (39,114,959)

Total equity (17,582,322) (38,600,162)


Term loan 17 253,843,468 258,641,887

Asset retirement obligation 423,495 409,570

Deferred tax liability 14 5,090,914 2,596,407

Derivative instruments 28,504,347 44,448,817


Current liabilities


Current portion of long term loan 17 11,885,676 11,575,124

Trade and other payable 28,768,506 33,459,070




The financial statements were approved and authorised for issue in accordance with a resolution of the Board of Directors on _______ 2013.

/s /sDeputy Chairman Director

The notes on pages 214 to 221 form an integral part of these condensed interim financial statements.The review report of the Independent Auditors is set forth on page 209.

Condensed statement of profit or loss and other comprehensive incomefor the six month period ended 30 June

Unaudited

Notes 2013 2012

RO RO

Revenue 3 31,292,249 18,268,167

Cost of sales 4 (13,934,566) (8,763,715)

Gross profit 17,357,683 9,504,452


Other income 6 6,184,592 ‑

Profit before interest and tax 23,106,516 9,215,403

Finance income 9,229 ‑

Finance cost 7 (13,634,532) (6,679,335)

Profit before tax 9,481,213 2,536,068

Income tax expense 14 (2,494,507) (1,842,961)

Profit after tax for the year 6,986,706 693,107

Other comprehensive income (loss), net of income tax:

Effective portion of change in fair value of cash flow hedge 12(c ) 14,031,134 (2,996,401)

Total comprehensive income (loss)for the year 21,017,840 (2,303,294)

Earnings per share annualized:

Basic and diluted, profit for the year attributable to equity holders 13.97 1.38


212


213

Condensed statement of changes in equityfor the six month period ended 30 June

Share capital

Hedging reserve

Legal reserve

(Accumulated losses)

retained earnings Total

RO RO RO RO RO

Unaudited

At 1 January 2012 500,000 (37,084,527) ‑ (887,952) (37,472,479)

Total comprehensive loss for the period

Profit for the period ‑ ‑ ‑ 693,107 693,107

Changes in fair value of cash flow hedge, net of income tax ‑ (2,996,401) ‑ ‑ (2,996,401)

Total comprehensive income for the period ‑ (2,996,401) ‑ 693,107 (2,303,294)

At 30 June 2012 500,000 (40,080,928) ‑ (194,845) (39,775,773)

At 1 January 2013 500,000 (39,114,959) 90,275 (75,478) (38,600,162)

Total comprehensive income for the period

Profit for the period - - - 6,986,706 6,986,706

Transfer to legal reserve - - 76,392 (76,392) -

Changes in fair value of cash flow hedge, net of income tax - 14,031,134 - - 14,031,134

Total comprehensive income for the period - 14,031,134 76,392 6,910,314 21,017,840

At 30 June 2013 500,000 (25,083,825) 166,667 6,834,836 (17,582,322)


Condensed statement of cash flows for the six month period ended 30 June

Unaudited

2013 2012

RO RO


Profit before tax for the period 9,481,213 2,536,068

Adjustment for:

Depreciation and amortisation 5,761,805 3,021,805

Amortisation of deferred financing cost 718,697 335,501

Interest payable written off (6,174,592) ‑

Finance costs 12,915,835 6,343,834

Provision for asset retirement obligation 13,925 2,731


Increase in inventory (346,413) (926,224)


Increase in trade and other payable 1,054,565 6,450,384

Cash generated from operating activities 16,124,287 9,074,453

Finance costs paid (10,221,492) (6,343,834)

Net cash flow from operating activities 5,902,795 2,730,619


Acquisition of property, plant and equipment (2,351,154) (49,533,989)

Acquisition of intangible assets (4,119) (45,553)



Proceeds from term loan - 54,370,200

Repayment of term loan (5,081,763) ‑

Net cash flow (used in) from financing activities (5,081,763) 54,370,200

Net change in cash and cash equivalents (1,534,241) 7,521,277

Cash and cash equivalents at beginning of the period 38,860,806 4,129,004

Cash and cash equivalents at end of the period 37,326,565 11,650,281


214


215

lives of these assets increased. The effect of these changes on actual and expected depreciation expenses, included in statement of comprehensive income, in current and future years, respectively, is as follows:

2013 2014 2015 2016 2017 Later

RO RO RO RO RO RO

Decrease /(increase) in depreciation expense 1,165,283 1,546,648 1,546,648 1,550,886 1,546,648 (7,356,114)

Significant accounting policiesThe accounting policies applied by the Company in this condensed interim financial statements are the same as those applied by the Company in its financial statements as at and for the year ended 31 December 2012.

3 Revenue

Unaudited

2013 2012

RO RO

Fixed capacity charge ‑ Power 18,359,558 9,780,866

Fixed capacity charge ‑ Water 7,740,364 4,782,279

Energy charge 482,266 291,422

Water Delivery charges 197,085 ‑

Fuel charge 4,512,976 3,413,600

31,292,249 18,268,167

4 Cost of sales

Fuel cost 4,540,354 3,416,058

Operation and maintenance cost 1,953,096 1,322,015

Contractual services maintenance cost 1,160,927 863,924

Depreciation 5,707,098 3,000,156

Insurance cost 356,720 74,340

Incentive payment 122,850 78,216

Electricity import cost 44,140 ‑

Provision for asset retirement obligation 13,925 ‑

License and permits 28,927 ‑

Other overhead 6,529 9,006

13,934,566 8,763,715

Notes to the condensed interim financial statements(forming part of the condensed interim financial statements)



The Company has entered into a Shareholders Agreement (“the Shareholders Agreement”) dated 17 November 2009 between Sembcorp Oman First Investment Holding Co Ltd (“SOFIH”) 40% shareholder, Sembcorp Oman IPO Holding Co Ltd (“SOIHL”) 20% shareholder and Inma Power & Water Company LLC (“IPWC”) 40% shareholder.

The Company has been awarded a tender by the Government of the Sultanate of Oman (the “Government”) to build, own and operate an electricity generation and seawater desalination plant together with the associated facilities in the Salalah region (“the Plant”). The Company achieved Commercial Operation Date (“COD”) on 25 May 2012.


Basis of preparation

a) Statement of compliance The condensed interim financial statements have been prepared in accordance with IAS 34 Interim

Financial Reporting. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the Company since the last annual financial statement as at and for the year ended 31 December 2012. The condensed interim financial statements does not include all the information required for full annual financial statements prepared in accordance with Interim Financial Reporting Standards (IFRSs).



c) Use of estimates and judgements Preparing the interim financial statements requires management to make judgements, estimates and

assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing these condensed interim financial statements, except as described below, significant judgements made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the financial statements as at and for the year ended 31 December 2012.

Change in accounting estimates

Useful life of the property, plant and equipmentDetails of property, plant and equipment are set out in note 8. During the year, the Company has conducted and considered an operational efficiency review of its plant and machinery, which resulted in changes in the expected useful lives of items of Property, plant and equipment. The plant and machinery, building and pipelines related to power plant which Management previously expected to be in use for 30 years is now expected to remain in operation for 35 years. Roads which Management previously expected to be in use for 10 years are now expected to remain in operation for 20 years. As a result, the expected useful

216


217


30 June 2013

31 December 2012

RO RO


Due from related parties (note 16) 922 922

Advances to vendors 1,805,830 1,573,727

Prepayments 27,286 303,181

Retentions 90,299 90,299

Other receivable 270,389 7,566

18,335,045 11,034,297

10 Inventory

30 June

2013

31 December 2012

RO RO

Fuel inventory 931,900 993,568

Spare parts and consumables 1,205,130 797,049

2,137,030 1,790,617


Cash in hand 1,576 1,925

Cash at bank 37,324,989 38,858,881

37,326,565 38,860,806

Cash at bank includes Debt Service Reserve Account in the amount of RO 16,380,052, out of which the Company has made a placement in the amount of RO 15,702,010 at weighted average interest rate of 0.48%. Fixed deposit will mature in the month of September 2013.

12 Equity

(a) Share capital During the period, the Company has increased its authorised share capital from RO 2 million to RO

100 million. The Company’s registered capital (issued and fully paid) comprises 500,000 shares of RO1 each. On 3 July 2013, Ministry of Commerce and Industry approved to increase company’s registered capital (issued and fully paid) from RO 500,000 (500,000 shares of RO 1 each) to RO 95,457,195 (95,457,195 shares of RO 1 each). Registered capital was increased by converting shareholders’ loan in the amount of RO 94,957,195 (note 15).


Unaudited

2013 2012

RO RO

Staff costs 91,969 27,160

Legal and professional charges 73,124 128,000

Depreciation and amortisation 54,707 20,653

Other admin and general expenses 215,959 113,236

435,759 289,049

6 Other income

Other income mainly comprises write back of interest on shareholders loan for the period from 29 March 2012 to 30 June 2013 (note 15).

7 Finance costs

Interest expense on equity bridge loan 2,977,930 1,542,006

Interest expense on project financing 5,875,328 2,801,458

Interest expense on interest rate swap 4,059,705 1,980,456

Deferred financing cost 718,697 335,501

Commission and bank charges 2,872 19,914

13,634,532 6,679,335


Land and buildings

Roads and pipelines

Plant and machinery

Office equipment

Motor vehicles


Cost RO RO RO RO RO RO RO

At 1 January 2013 47,998,922 25,998,788 285,535,849 68,122 229,320 159,560 359,990,561

Additions during the period 10,000 ‑ 12,183 61,982 ‑ 2,110 86,275

At 30 June 2013 48,008,922 25,998,788 285,548,032 130,104 229,320 161,670 360,076,836


At 1 January 2013 1,200,442 642,136 7,772,494 7,386 18,557 43,573 9,684,588

Charge for the period 754,825 442,291 4,491,523 12,296 11,679 27,187 5,739,801

At 30 June 2013 1,955,267 1,084,427 12,264,017 19,682 30,236 70,760 15,424,389

Carrying amount

At 30 June 2013 46,053,655 24,914,361 273,284,015 110,422 199,084 90,910 344,652,447

At 31 December 2012 46,798,480 25,356,652 277,763,355 60,736 210,763 115,987 350,305,973

218


219


According to the PSA, the Shareholders and the Company were required to convert the Shareholders loan into equity prior to a Public Offer for sale or listing. On 3 July 2013, Shareholders’ loan was converted into share capital. Shareholders’ loan converted to share capital is as follows:

Shareholders' loan converted to share

capital

RO

SOFIH 37,982,878

SOIHL 18,991,439

IPWC 33,235,018

BDCC 4,747,860

94,957,195

Interest on shareholders’ loan written backShareholders of the Company waived their equitable right of interest on shareholders’ loan from 29 March 2012 to 30 June 2013 and authorised the Company to write back the same. The breakup of interest waived is as follows:

Equitable rightinterest rate RO

SOFIH 5.1% 2,469,837

SOIHL 5.1% 1,234,918

BDCC 5.1% 308,730

IPWC 5.1% 2,161,107

6,174,592


The Company has a related party relationship with entities over which certain shareholders are able to exercise significant influence. In the ordinary course of business, such related parties provide goods and render services to the Company. Prices and terms for these transactions, which are entered into in the normal course of business, are on mutually agreed terms and conditions. The Company had the following significant transactions with related parties during the period:

Share capital before

conversion of Shareholders'

loan

Shareholders' loan

converted to share capital

Share capital after

conversion of Shareholders'

loan

RO RO RO

SOFIH 200,000 37,982,878 38,182,878

SOIHL 100,000 18,991,439 19,091,439

IPWC 175,000 33,235,018 33,410,018

BDCC 25,000 4,747,860 4,772,860

500,000 94,957,195 95,457,195





flow hedging instruments related to hedged transactions that have not yet occurred.


30 June 2013

31 December 2012

RO RO

Payables to EPC contractor 3,447,002 5,383,992

Trade payable 1,226,911 661,319

Due to related parties (note 16) 756,269 642,853

Retentions and deductions 14,783,649 14,783,649


Accrued expenses and other payable 2,038,904 1,991,237

28,768,506 33,459,070

Retentions and deductions mainly include the deductions from EPC contractor on account of Liquidated damages claimed by the Company.

14 Income tax

Income tax expense is recognised based on Management’s best estimate of the weighted average annual income tax rate expected for the full financial year applied to the pre‑tax income of the interim period. The Company’s effective tax rate for the six months period ended 30 June 2013 was 26.31% (six month period ended 30 June 2012: 72.67%). The change in effective tax rate was caused by the reduction in tax losses expired.

220


221

Interest rate on Rial commercial facility has been fixed at 7% per annum with effect from third anniversary of financial close.


The Company’s financial risk management objectives and policies are consistent with those disclosed in the financial statements as at and for the year ended 31 December 2012.


Liquidated damages:OPWP has claimed liquidated damages from the Company due to the achievement in the milestones as mentioned in the financial statements as at and for the year ended 31 December 2012.

The Company has claimed liquidated damages from SEPCO III, EPC contractor, in relation to the delays in achievement of milestones.

The Company is also seeking contractual reliefs from OPWP for liquidated damages and revenue losses under Buyer Risk Reliefs.

The Company has engaged an external legal counsel to advise and protect the Company’s interests in the disputes and claims under the PWPA and the EPC contracts. These claims and disputes are expected to be settled in 2013.

Management of the Company and external legal counsel believe that the final settlement of its disputes with OPWP and SEPCO III should at least result in a neutral position for the Company.

In addition, the Company has received a bank guarantee amounting to USD 70 million, as performance bond from SEPCOIII.



Total compensation paid to key management personnel for the six month period ended 30 June 2013 is RO 81,875 (2012:RO 75,692).

Unaudited

30 June 2013

30 June2012

RO RO

Sembcorp Industries Limited


SSOM

‑ Operation and maintenance cost 1,953,096 1,420,209

‑ Incentive payment 167,691 78,216

SOFIH

‑ Finance cost 973,944 979,325

SOIHL

‑ Finance cost 486,972 489,663

IPWC

‑ Finance cost 1,395,271 1,402,980

OIC


30 June 2013

31 December 2012

Balances due to related parties at the period end comprised:

SOFIH - 1,495,892

SOIHL - 747,946

IPWC 1,377,176 2,143,012

SSOM 509,629 389,650

Sembcorp Industries Ltd 246,640 253,203

2,133,445 5,029,703

Balance due from related party is as follows:

Emirates Sembcorp Water & Power Company PJSC 922 922

Shareholders of the Company waived off their equitable right of interest on shareholders’ loan from 29 March 2012 to 30 June 2013 (note 15).

17 Term loan

Non‑current Maturity



274,838,617 279,920,380


265,729,144 270,217,011

Less: Current portion of term loan (11,885,676) (11,575,124)

253,843,468 258,641,887

222


223

(2) Issue Manager

Pursuant to our responsibilities under Article 3 of the Capital Market Law, Article 13 of the Executive Regulations of the Capital Market Law, issued under CMA Board No. 1/2009 (as amended), and the directives issued by the CMA, we have reviewed all the relevant documents and other material required for the preparation of this Prospectus pertaining to the issue of the shares of Sembcorp Salalah Power & Water Company SAOG (Under Transformation).

The Board of Directors of Sembcorp Salalah Power & Water Company SAOG (Under Transformation) will bear the responsibility with regard to the correctness of the information provided for in this Prospectus, and they have confirmed that they have not omitted any material information from it, the omission of which would render this Prospectus misleading.

We confirm that we have undertaken the due diligence required by our profession with regard to this Prospectus which was prepared under our supervision and, based on the reviews and discussions with Sembcorp Salalah, its directors, officers and other related parties, we confirm the following:

We have undertaken reasonable due diligence to ensure the information given to us by Sembcorp Salalah and included in this Prospectus is conformant with the facts in the documents and other material of the Offer.

To the best of our knowledge and from the information available from Sembcorp Salalah, Sembcorp Salalah has not omitted any material information, the omission of which would render this Prospectus misleading.

This Prospectus and the Offer to which it relates, is conformant with all the rules and terms of disclosure stipulated for in the Capital Market Law, the Executive Regulations of the Capital Market Law, the prospectus models applied by the CMA, the CCL and the directives and decisions issued in this regard.

The information contained in this Prospectus in the Arabic language (and the unofficial translation into the English language) is true, sound and adequate to assist the investor to take the decision as to whether or not to invest in the securities offered.

Issue Manager

/s

___________________________________________________HSBC Bank Oman SAOG

Chapter XXIV: Undertakings

(1) Sembcorp Salalah Power & Water Company SAOG (Under Transformation)

The Board of Directors of Sembcorp Salalah Power & Water Company SAOG (Under Transformation) jointly and severally hereby confirm that:

The information provided in this Prospectus is true and complete.

Due diligence has been taken to ensure that no material information has been omitted, the omission of which would render this Prospectus misleading.

All the provisions set out in the Capital Market Law, the CCL, and the rules and regulations issued pursuant to them have been complied with.

On behalf of the Board of Directors (Authorised Signatories):

Name Signature

Mr. Kalat Al‑Bulooshi /s

Mr. Abdul Amir Saied Mohammed /s

224


(3) Legal Adviser

The legal adviser whose name appears below, hereby confirms that all the procedures taken for the offering of the securities as described in this Prospectus are in line with the laws and legislations related to Sembcorp Salalah’s business and the CCL, the Capital Market Law and the regulations and directives issued pursuant to them, the requirements and rules for the issue of shares issued by the Capital Market Authority, the Articles of Sembcorp Salalah, and the resolutions of the general meeting and Board of Directors of Sembcorp Salalah. Sembcorp Salalah has obtained all the consents and approvals of the official authorities required to carry out the activities described in this Prospectus.

Legal Adviser

/s

___________________________________________________Al Busaidy, Mansoor Jamal & Co.

Sembcorp Salalah Power & Water Company SAOG (Under Transformation)P.O. Box 299, Jawharat Al Shatti, Postal Code 134, Sultanate of Oman,

Tel: +968 2411 5263; Fax: +968 2451 1424, www.sembcorpsalalah.com.om