This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 MUSCAT 002126 
 
SIPDIS 
 
DEPARTMENT FOR EB/IFD AND NEA/ARPI 
DEPARTMENT PLEASE PASS USTR/JBUNTIN 
USDOC FOR 4520/ITA/MAC/AMESA/OME/MTALAAT 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: EINV ENRG EFIN BEXP MU
SUBJECT: AMERICAN ENERGY FIRM ENJOYS STRONG IPO 
 
REF: A) 03 MUSCAT 1857 
     B) 03 MUSCAT 219 AND PREVIOUS 
 
Contains business sensitive information.  Please handle 
accordingly. 
 
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Summary 
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¶1. (U) AES Barka, a subsidiary of U.S.-based AES 
Corporation, recently floated 11.2 million shares of its 
capital for public underwriting by Omanis and Omani 
companies. The shares correspond to 35 percent of its paid- 
up capital, and the preliminary response to this IPO has 
been extremely positive for the company.  AES Barka is the 
largest independent power and water generation company in 
Oman and will be listed on the Muscat stock exchange.  End 
Summary. 
 
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Going Public 
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¶2. (U) AES Barka, a consortium between the AES Corporation 
(headquartered in Arlington, VA) and local Omani partners, 
floated 35 percent of its shares on November 21.  This 
initial public offering (IPO), which will close on December 
20, falls under the Project Founders' Agreement with the 
Omani government calling for an IPO within four years of 
establishment. 
 
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Background on AES in Oman 
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¶3. (SBU) A government tender for the Barka power plant 
project opened in April 2000 and was won by a consortium 
between AES Oasis (a subsidiary of the AES Corporation) and 
the local Multi Technologies, the investment arm of the 
Suhail Bahwan Group (ref B). The two partners formed a 
company (AES Barka) to manage the project on a Build, Own 
and Operate (BOO) basis with AES owning $70.72 million USD 
(85 percent of paid up capital) and Multi Technologies 
owning $12.48 million USD (15 percent). The BOO arrangement 
gives the company the option to renew its initial 15-year 
contract period for an additional 10 years, with no 
obligation to sell its shares to the government.  In the 
long run, AES Barka officials believe that the Omani 
government will move toward a merchant market for 
electricity (i.e., serving and charging customers directly, 
without selling to the Omani government as an intermediary), 
and they envision such a move will happen within the 25-year 
scope of the Founders' Agreement the company signed. 
 
¶4. (SBU) After initial contractual difficulties that were 
resolved with Embassy assistance (ref A), the Barka power 
plant commenced operation in June 2003.  The total project 
cost was $415 million USD, which included a $332 million USD 
loan from a group of financial institutions.  The project 
has been profitable from day one, which undoubtedly is 
another attractive feature of the company for prospective 
investors.  It has already distributed $22.62 million USD of 
profit as dividends to shareholders during its first year in 
business, and the company's chief financial officer told 
Econoff recently the company hopes to distribute another $12 
million USD by the end of 2004. 
 
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Joining the List 
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¶5. (U) Following completion of the underwriting process, the 
company will be listed on the Muscat Securities Market early 
next year alongside two existing independent power 
companies, United Power managing the Manah Power Plant 
(operated by Belgium's Trachtebel), and the Al-Kamil Power 
Company (operated by the UK's International Power). 
 
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Road Show 
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¶6. (SBU) AES Barka officials are seeking maximum visibility 
for their company during this IPO phase, so the top brass 
are fanning out across Oman to drum up additional investor 
interest in five locations outside the capital. 
 
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Comment 
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¶7. (SBU) This IPO, limited to Omani citizens and companies, 
is already attracting strong demand based on the success of 
AES Barka's initial year of operation.  Local analysts 
believe that two factors are at play: high liquidity in the 
marketplace (investors are flush), and a lack of alternative 
investment opportunities in the Sultanate.  Market 
capitalization in Muscat has not grown as dramatically as in 
most GCC capitals, but the trend is decidedly upward.  Such 
IPO's are helping to fuel an influx of capital into the MSM, 
and in the process overcome a lingering public skepticism 
over capital market dealings since the market crash of late 
¶1997.  The biggest and most anticipated IPO should occur 
early next year, when state telecoms giant Omantel floats 30 
percent of its shares.  By that point, it should be much 
clearer whether the current capital surge is just another 
bubble or part of a sustainable growth trend in Oman. 
 
BALTIMORE