Saudi Electricity Co (SEC) aims to complete its restructuring by January 2014, as the largest-listed utility in the Gulf region prepares to invest $100bn over the next 10 years to almost double its power generation capacity, the firm’s chief executive said last week.
The utility in January created the National Grid Company, a wholly-owned power transmission subsidiary, the first step in a multi-year restructuring process. It also plans to create and spin off four generation companies and one distribution company.
“These subsidiaries will be 100% owned by SEC and the restructuring will help them to improve their performance, efficiency and create more transparency and prepare SEC for a future market,” Ali al-Barrak told Zawya Dow Jones in an interview.
SEC, whose major shareholder is the Saudi government, has a monopoly over almost all the electric power generation and all the transmission and distribution in the kingdom.
The firm needs to invest $100bn over the next 10 years to almost double its power generation capacity to 102,000MW, said al-Barrak, adding that about 15,000MW of power generation capacity is currently under construction.
About $20bn of the total amount required for SEC’s expansion will come through independent power projects, or IPPs, and the rest will be financed through soft loans and debt issue.
“We don’t have any plans to tap the debt market or secure new soft loans this year...but definitely we will next year,” he said.
In 2011, the company secured a 51.1bn riyal ($13.6bn) loan from the government that will mature over 25 years to finance new projects, and earlier this year it signed a $1.4bn loan agreement with a group of international banks led by HSBC to help finance the construction of a power plant.
Saudi Arabia burnt through 377,000 bpd at power stations and water-desalination plants in March, up 45% from the 260,000 bpd used during the same period in 2011, and 24% higher than February, according to figures posted on the Joint Organization Data Initiative, or JODI, website, which is supervised by the Riyadh-based International Energy Forum and shows data supplied directly by governments dating back to 2002.
The figures signal a rise in demand for oil, which is needed to fuel electricity stations and industrial complexes in the rapidly growing economy.
But al-Barrak said the kingdom will continue to see an increase in power demand of about 5% in the short to medium term.
Saudi Electricity, which typically posts losses in the cooler months and swings to profit during the intense heat of the summer, last month said its first-quarter net loss narrowed to 583mn Saudi riyals ($155.5mn) from a net loss of 774mn riyals in the year-earlier period, due to a higher volume of purchased electricity and lower costs.
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