Saudi Electricity Company

Feeding the Demand

The Saudi Electricity Company is on a constant quest to keep up with a relentless increase in demand. With both a soaring population and rising usage driving the need for electricity generation in the Kingdom, how do the SEC plan to take account of the need for additional power from the Middle East’s fastest growing consumer of electricity?

“Since it was first established and started operation in 2000,” says President and CEO Ali S. Al Barrak, “the Saudi Electricity Company has made outstanding achievements in a relatively short period despite the substantial financial difficulties that faced the company.”

Chief among these achievements is the reduction in the tariff of electrical power, a standardization of company processes and procedures and “completion of the fundamental basis for restructuring activities,” says Al Barrak, such as training “to meet the requirements of the company’s activities and upgrade the efficiency of its performance.”

“The company managed to ensure a balance between such tasks and maintaining a stable supply of electric power” says Al Barrak, “in addition to meeting the future requirements of electricity, taking into consideration the accelerating pace of the economic growth in the Kingdom and the expansion in construction, service and industrial fields and the establishment of a number of new economic estates.”

And it is this pace of growth which presents an area of tremendous challenge to the company.

Population increases and the attendant expansion in construction, service and industrial consumers, has seen the maximum load rising annually at a rate of seven per cent.

With the number of subscribers increasing by 43 per cent over the course of the last twelve years (from 3.5 million subscribers in 2000 to five million subscribers at present), the maximum load reached as high as 50,000 MW by the end of 2011 — a stark contrast to the 1,000 MW load of 1976.

“Such maximum load is expected to reach to 62, 000 MW in 2017 based on present and anticipated growth rates,” says Al Barrak, “which means that there a clear need to add further MW during the next decade.”

“Addressing this challenge requires high efficiency rates and value-added performance backed by a strong financial position.”

This accelerating demand for electrical power — which runs as high as 10 per cent in certain regions during the summer months — is something the company is taking measures to address.

Specifically, the SEC board approved a ten year plan (starting in 2009 and culminating in 2020) that aims to meet future growth rates of “about 7 per cent yearly for the next five years and 6 per cent for the following years,” says Al Barrak.

“The plan covers the need for generation, transmission and distribution facilities needed to meet the demand. Thirty two GW will be built in the next 10 years, with an investment of US$80 billion. The private sector will be invited to invest in the generation to build, operate and own about 30 per cent of generation expansion. SEC owned resources, lending capacity and government support will finance the rest.”

The SEC is addressing the anticipated rise in demand by calling for the tender of many projects for the upgrade of electric power generation. Some of these projects are to be financed by loans while others are to be self-financed.

The first major project is to be the expansion of Shoaybah Power Plant with the addition of three new 375 MW units. The second will result in the addition of gas turbines to a power plant in Riyadh. Another will expand three power plants in the Kingdom’s southern region by adding seven gas turbine units.

“The second expansion of power plant in Riyadh is being tendered in the market to add 16 gas turbines. In addition, more gas turbine units will be tendered for the southern region, We are now joined with the Saline Water Conversion Corporation to tender an Integrated Water and Power Plant project in the western region.”

The SEC is ahead of the game in one very important respect — with others suffering as a result of the global financial turmoil, the effect these conditions have had on project finance in the Kingdom seems to be little to none.

“No doubt every market has been affected by the global financial crisis to different degrees,” says Al Barrak, “but Saudi Arabia noticed very limited effect due to the continuous spending on the infrastructure by government, the strong Saudi economy and conservative financial policy.

And what of SEC’s role within the Gulf Cooperation Council (GCC) power grid project, in which the company has invested SR2 billion (US$534 million) and holds ownership of 40 per cent of the first phase of the GCC power grid (the rest being owned by the other stakeholders, Kuwait, Bahrain and Qatar)? Al Barrak is bullish on the subject, saying the project is close to completion and speaking confidently as to what its completion might mean for Saudi’s future role in electrical energy generation.

“We are over 80 per cent done with the construction and expect that the grid will be functional shortly,” he says.

“The grid will be able to transfer 1.5 GW between Kuwait, Saudi Arabia, Qatar and Bahrain.”

“Saudi Arabia will become a major player in energy exchange between the GCC countries due to the Saudi installed capacity and grid size compared to other countries. Our objective is to be a leader in electric energy.”

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