SEC share price hits two year high
Additional 30% increase predicted after tariff structure changes.
The share price of the Saudi Electric Company (SEC) continued its ascent, hitting a 28 months-high on Saturday in spite of reports it had awarded a US$60 million contract to boost network capacity in Riyadh.
Shares of the monopoly provider of electricity closed at 14,15 Saudi riyals (SR) on the Saudi Stock Exchange, up 0.7 percent on the day, having risen from SR10,8 since June 5, when the company announced it would increase its tariffs for commercial, industrial and governmental customers.
Ahmed Al Qahtani, analyst at NCB Capital in Jeddah, said that the new tariff structure will increase full year 2011 revenue by SR 3.2 billion, and predicted a further increase in the share price.
“The impact of the new tariffs will first make itself felt in the third quarter. We believe that the share price will rise by another 30 percent in the next couple of months,” said Al Qahtani.
The SEC faces investments in the power generation and transmission and distribution infrastructure of SR 300bn ($80 billion) until 2018, as demand for electricity in the Kingdom is rapidly expanding.
But Al Qahtani believes that only a small amount of the extra revenue will be invested, with most of the funding being raised on the debt markets via sukus and and direct loans. “Most of the additional money will go straight into net profit.”
In 2009, the SEC posted a full year net profit of 1.17billion, said Al Qahtani.
The new tariff has increased rates by 9.6 percent for non-households, with private users still paying 3.5 percent less than production cost, Reuters quoted Abdullah al-Shehry, governor of the Electricity and Co-generation Regulatory Authority at the time. The increase raises the average tariff for all users to 0.137 riyals, up from 0.125 riyals previously, said Shehry.
The SEC has signed a 223 million Saudi riyals ($59.46 million) deal with a local contractor to boost the capacity of its network in Riyadh, Jeddah-based Okaz daily reported on Saturday.
The deal involves connecting the news Hittin No. 9005 substation station to the electricity grid with a voltage of 132kv, the paper reports, citing Ali Al Barrak, chief executive of the utility which has a monopoly on electricity generation, transmission and distribution in the kingdom.