Saudi Electricity’s govt liabilities mostly related to unpaid fuel costs: energy minister

Saudi Energy Minister Prince Abdulaziz bin Salman said that the majority of debts owed by Saudi Electricity Co. (SEC) came as the company did not pay fuel costs in the last 40 years, even ahead of consolidating the company in one entity.  

SEC still has a limited financial solvency to pay fuel costs, build power generation plants, or transmission networks, etc., Prince Abdulaziz told Argaam at a press conference on the latest structural and financial reforms in the power sector.  
  

Debts were first calculated then an understanding was reached with the competent ministry for a temporary settlement, the minister explained, adding these accumulated debts allowed the company to secure zero-interest loans, which do not enable the utility provider to undertake projects. Moreover, fuel was also supplied at a low cost.  

The debt accumulation led the consumption of SEC and The Saline Water Conversion Corporation (SWCC) to near 900,000 barrels per day of crude and fuel oil in the summer.  

Saudi Aramco still has 25% of its gas output remaining, while some desalination and power plants in the western region use imported fuel oil, Prince Abdulaziz added, pointing to an imbalance in the planning and integration process.  

The existing system should be rationalized and a new one should be developed on the basis of integration and efficiency – a quality shift to reform the earlier situation and restructure the sector in response to the future transition.  

Looking ahead, no single barrel of oil will be burnt except for a power plant located in a remote area, to which gas and solar energy cannot be easily supplied, or to a plant serving as an alternative for the energy mix program between renewable energy and crude or fuel oil.  

The Kingdom’s utility provider said today that new financial and regulatory reforms in the electricity sector, including the reclassification of its financial government liabilities, were approved.  

It also signed an agreement with the government to reclassify its net government liabilities worth SAR 167.9 billion into a subordinated perpetual financial equity-like instrument with a redemption option and a profit rate of 4.5% per annum.