Lights turned back on for Saudi Electricity
The juice is back on at Saudi Electricity, the publicly traded utility that plans to increase tariffs for the first time in years. The stock rose 3 per cent to 12.1 riyals yesterday and has gained 13 per cent since last Wednesday's close. Tariffs for industrial, commercial and government customers will rise by 9.6 per cent from the start of next month, Abdullah al Shehry, the governor of the Electricity and Co-generation Regulatory Authority, said on Saturday. Residential tariffs will not rise.
The increase will add about 1.6 billion riyals to SEC's revenues in the second half of the year, said Ali Saleh al Barrak, the company's chief executive. "It will have a very good impact on profitability," Mr al Barrak said. Investors seemed to agree, as the stock has rebounded from a two-month slump. NCB Capital said in a note the move would increase the company's net income by 300 per cent, from 1.1bn riyals last year.
The Arab world's largest power producer had shed 16.3 per cent of its value between the start of April and the end of last month on doubts that the proposed tariff increase would come through. Analysts also questioned the clarity of plans to privatise the company. At the end of March, Saudi power officials threw cold water on the proposed increase at a conference in Abu Dhabi, saying it was unlikely to receive final approval from the government.
SEC needs all the cash it can get its hands on as it faces a forecast 25 per cent increase in power consumption in five years. The company said in March it wanted to add 12,043 megawatts of capacity by 2015 - equal to six or seven of the type of power stations built in Abu Dhabi in the last decade. The company operates about 40,000mw of capacity. firstname.lastname@example.org
Published: June 6, 2010 04:00 AM