RO 400m electrical contracts, but too few contractors

The Distribution Code Review Panel (DCRP) has bemoaned what it describes as a paucity of suitably qualified Grade A contractors to undertake vital electrical infrastructure contracts worth in excess of RO 400 million annually.

17 October 2015
Muscat - The Distribution Code Review Panel (DCRP), which groups all of the electricity distribution companies operating in the Sultanate, has bemoaned what it describes as a paucity of suitably qualified Grade A contractors to undertake vital electrical infrastructure contracts worth in excess of RO 400 million annually.

The panel's chairman, Eng Hamad bin Salim al Maghdari, who is also CEO of the Rural Areas Electricity Company (RAECO), has warned that the continuing dearth of capable electrical contractors could potentially hamper ongoing efforts to expand and modernise the Sultanate's electricity transmission, supply and distribution infrastructure in trend with the nation's ongoing development.

Of the estimated 195 electrical contractors registered with the DCRP, only around 15 are in the Grade A category, meaning they are deemed qualified to undertake technically challenging contracts, involving notably the construction of power stations, primary substations and 132KV networks. In reality, however, only five of these contractors are "functional" and up to the task in executing Grade A category projects, he noted.

"When you look at the (annual) budgets of the distribution companies -- ranging from RO 60 million to even RO 100 million in the case of RAECO, it totals around RO 400-500 million this year alone.  Given these budgets, there are just not enough companies that are ready to take on the volume of contracts (linked to this capex)," the official said.

"These electrical projects are not merely about laying cables, installing building wires, and erecting electrical poles; the real challenges are in the technicalities of constructing primary substations, and so on -- which requires capable and qualified contractors," he further lamented.

The official made the remarks at an industry seminar held in the city recently.  Joining a panel discussion on opportunities for small and medium industries operating in the electrical contracting sector, Al Maghdari said a hefty 70 per cent of the contractors registered with the DCRP are Grade C and D firms, which broadly fall in the category of SMEs.

"These are essentially small companies working on 11kV projects, overhead lines, and networks leading up the primary substations. There are a lot of capable players in this segment, and market competition is very good. The main issue for us, however, is in ensuring there are adequate (Grade A) contractors to undertake the more challenging contracts. We encourage companies to upgrade their capabilities in order to be suitably qualified to undertake these big contracts," he remarked.

Asked about the likely impact of the oil price slump on power sector contracts, the official said he was optimistic that the sector would continue to grow regardless of the wider economic downturn.

The government, he said, was mindful of the strategic and fundamental importance of the electricity sector to the nation's ongoing development, and would continue to invest in greenfield and brownfield networks.

The Distribution Code Review Panel is an entity operating under the Law Regulating the Electricity sector and Related Water Sector issued by Royal Decree 78/2004, Article (90).

DCRP lists electricity distribution companies including Muscat Electricity Distribution Company, Rural Areas Electricity Company, Mazoon Electricity Company, Majan Electricity Company and Dhofar power Company. It also includes representatives from the Authority for Electricity Regulation -- Oman, Oman Electricity Transmission Company and Oman Power and Water Procurement Company.

© Oman Daily Observer 2015