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Abu Dhabi, UAEMonday 10 December 2018

Saudi Arabia sees progress in electricity privatisation

Sell-off delayed by revisions to energy prices and compensation plan for low- to medium-income citizens

Khalid Al Falih, the Saudi minister of energy, wants the kingdom's electricity sector to operate on a commercial basis. Delores Johnson / The National
Khalid Al Falih, the Saudi minister of energy, wants the kingdom's electricity sector to operate on a commercial basis. Delores Johnson / The National

Saudi Arabia's deputy electricity minister said on Wednesday he hoped for progress next year in privatising the power sector including the unbundling of state-run Saudi Electricity (SEC).

"There have been some developments that required us to wait," Saleh Al Awaji, who is also chairman of SEC, told an industry conference in Riyadh.

Awaji said factors impacting privatisation included the Citizens Account - a government plan to compensate low- to medium-income citizens - and revisions to energy prices.

"We hope to see some achievements during 2018," he said, referring to requirements for the sale of SEC's generation assets.

Electricity tariffs still do not match the cost of producing electricity in the kingdom. The Saudi government has said energy prices will be subject to gradual increases until 2020.

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"The creation of generation companies will transform the sector into a sector that relies to a large extent on government support into a sector that operates on a commercial basis," Saudi Energy Minister Khalid Al Falih said on Tuesday.

Raising power prices gradually are among the structural reforms cited by the minister "while taking into consideration the ability of consumer sectors to absorb the increase and maintaining economic growth and the competitiveness of national products and industrial investments."

The establishment of an account for power tariffs is another reform that aims to cover the deficit between the commercially expected income from power and the income from the officially approved tariff, while taking into consideration the amendments to power consumption tariffs, the minister added.

Investments of more than 250 billion riyals (Dh245bn) are expected to be made in the electricity sector by 2022 to cover a peak load of 80,000 megawatts.

The restructuring of the sector includes an energy mix that relies more on gas and less on liquid fuel. It includes renewables and nuclear too.

SEC expects to save about 320-340 million barrels of oil equivalent per day (boepd) by 2020 through efficiently generating power, its CEO said.

Power demand grew slightly this year compared to last year said Abdulla Al Shehri, the head of the electricity regulator.