Saudi Electricity revenue grows to SAR 75.3B in 2023

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The Saudi Electricity Company (SEC) announced its financial results for the fiscal year 2023 today, showcasing operational revenues of SAR 75.3 billion, marking a notable increase from SAR 72.0 billion recorded in the previous year, representing a growth of 4.5 percent. This rise in revenues can be primarily attributed to a 5% increase in electricity demand over the course of the year, as well as other factors such as continued subscriber base expansion, revenue growth from the transmission system due to increased subscriber loads, and increased revenue from Integrated Dawiyat (a wholly-owned subsidiary of the Saudi Electricity Company) - owing to a greater number of customers availing fiber optic connections to their homes. Furthermore, the company generated new revenues stemming from the development of projects for constructing substations and transmission lines for its customers.

The company's net profit for the year 2023 amounted to SAR 10.2 billion, down from SAR 15,1 billion in the preceding year. This decline in net profit was mainly attributable to an escalation in financing costs, influenced by prevailing global interest rates and additional financing secured during the fiscal year to support the company's capital projects, alongside the recording of non-recurring expenses. Moreover, increased operating and maintenance expenses, driven by business and asset expansion, increased maintenance programs, and heightened loads. Additionally, the costs associated with contracts for developing projects for the construction of substations and transmission lines for the company's customers contributed to the decline. Nonetheless, this variance in net profit was partly mitigated by an upturn in operating revenues and a reduction in the provision for doubtful debts, driven by enhanced collection throughout 2023 compared to the previous fiscal year. As such, basic and diluted earnings per share for 2023 stood at SAR 0.62, compared to SAR 1.79 per share in the preceding year.

Furthermore, the company disclosed that its total assets expanded by 4% in 2023, reaching SAR 500.7 billion, up from SAR 479.4 billion at the close of the prior year. This increase was largely fueled by strategic capital investments in ongoing projects, which surged by 52% compared to the previous year, reaching SAR 41.6 billion, underscoring the company's commitment to fostering future growth opportunities through continued substantial investments directed towards meeting escalating electric service demands, enhancing service quality and reliability, developing smart grids, and providing the foundational infrastructure for the transmission and distribution sectors, ultimately leading to the optimization of the energy mix for electrical power generation in line with the objectives of Saudi Vision 2030.

Reflecting on the company's financial and operational performance, Eng. Khaled bin Hamad Al-Gnoon, CEO of the Saudi Electricity Company, emphasized: “We aspire to be strategic partners in propelling progress and prosperity within the Kingdom's electricity sector. Our investments, both present and future-oriented, are geared towards achieving sustainable development and fulfilling the needs of investors, subscribers, and the communities we serve. In 2023, we witnessed accelerated growth in expansion-focused capital investments, which allowed us to maintain our pivotal role as the largest producer, transmitter, and distributor of electricity in the Middle East and North Africa.”

Exploring further aspects of the company’s performance, he stated: “We have taken significant strides in digital transformation, process automation, and technological capability enhancement, allowing us to deliver electrical services of superior quality and reliability. Additionally, we have reinforced investments in developing new business ventures in fiber optics, electric vehicle infrastructure, and other areas expected to enhance future growth opportunities.”

Then, concluding his overall commentary on 2023, Mr. Al-Gnoon said: "These achievements and the ongoing enhancement in service levels owe much to the unwavering support extended to the electricity sector by the Custodian of the Two Holy Mosques, King Salman bin Abdulaziz and His Royal Highness Crown Prince Mohammed bin Salman as well as the continuous guidance and oversight provided by His Royal Highness Minister of Energy, Prince Abdulaziz bin Salman. Their commitment ensures the provision of resources necessary to overcome obstacles and challenges, facilitating the sector's development and the enhancement of services provided to subscribers."

Moreover, the company elaborated on its initiatives to leverage itseec expertise and extensive asset base, thereby creating additional growth avenues through the development of new unregulated businesses in collaboration with the Water and Electricity Regulatory Authority, encompassing ventures such as fiber optics, data centers, sustainable energy services, project development and management, and infrastructure provision for electric vehicles, among others. In a significant move during 2023, the company announced the signing of a joint venture with the Public Investment Fund to acquire a 25% stake in the Electric Vehicle Infrastructure Company (EVIQ), a closed joint-stock entity fully owned by the Public Investment Fund, valued at SAR 254 million, emphasizing the fact that the transaction was funded through the company’s own resources.

As part of its strategic vision to expand its generation project portfolio and uphold its leading position in the Kingdom's electricity generation sector while contributing to ambitious energy transformation endeavors, SEC inked Power Purchase Agreements with the Saudi Power Procurement Company for two gas-fired power generation projects employing combined cycle systems: the Taibah-1 project and the Qassim-1 project, the total investment value of which amounted to SAR 14.6 billion (USD 3.9 billion). The company also received approval from the Saudi Power Procurement Company to commence the Rabigh power plant expansion project involving the integration of units equipped with combined cycle technology, boasting a capacity of 1.2 gigawatts. Additionally, within the framework of its ESG efforts, SEC not only initiated its tenth fuel-to-gas conversion project with the aim of enhancing thermal efficiency and diminishing the carbon footprint associated with the target power plant’s energy production, but also leveraged its resources to qualify as one of the developers set to participate in the fifth phase of renewable energy projects, offering a total capacity of 3700 megawatts under the National Renewable Energy Program, supervised by the Ministry of Energy. Moreover, significant progress has been made in the interconnection between Saudi Arabia and Greece by the formation of a joint venture between National Grid Saudi (a wholly-owned subsidiary of the Saudi Electricity Company), and the Independent Power Transmission Operator of Greece (IPTO). This strategic partnership was established with the primary objective of initiating feasibility studies aimed at interconnecting the electrical networks of both nations. In a contribution to the process of digital transformation, SEC successfully launched “Alkahraba”, an application geared towards enriching the experience of customers through the digitalization of services provided to subscribers. In a pivotal move towards fostering sustainability and during the COP28 Climate Summit, the company announced its aim to achieve net-zero by 2050, a pledge which perfectly aligns with KSA’s aspirations to attain net-zero emissions by 2060, by embracing a circular carbon economy.

The company managed to fund its growth plans, thanks to its robust financial position and sustainable capital structure. Throughout 2023, the company successfully executed several notable transactions in the debt financial markets, with a cumulative value of SAR 33.75 billion (equivalent to USD 9 billion). These transactions encompassed diverse financing instruments, including conventional Sukuk, green Sukuk linked environmental, social, and governance practices (ESG), as well as domestic and international syndicated financing or export credit agreements. These endeavors underscored the company's commitment to continued investment in future growth.

Maintaining a robust investment-grade credit rating mirroring the Kingdom’s sovereign credit rating, the company garnered favorable ratings from global agencies Moody's and Standard & Poor's. Moody's provided a rating of (A1) with a positive outlook, while Standard & Poor's assigned a rating of (A) with a stable outlook, and Fitch bestowed a rating of (A) with a stable outlook. Such ratings stand as a testament to the company's financial strength and are among the highest credit ratings awarded to companies in the Kingdom.

It’s noteworthy that in February 2024, the company successfully issued dual-tranche Sukuk worth USD 2.2 billion. The issuance comprised a USD 1.4 billion tranche with a 10-year term and another USD 800 million tranche with a 5-year term, as part of its international Sukuk program. Moreover, the company concluded several significant financing agreements in financial markets throughout the years, stressing that all of them were undertaken in support of its investment plans aimed at enhancing electricity services for subscribers, while concurrently strengthening its regulated asset base, which is expected to have positive long-term impact on the company’s financial position and foster future revenue growth prospects.