Saudi Electricity earnings helped by summer heat

Saudi Electricity, the Gulf's largest utility by market value, increased its third-quarter profit by 5.8% on higher sales in the summer, beating analysts' forecasts.

Chief Executive Ali bin Saleh Al-Barrak said he expected a return to annual profit growth in 2007 for the first time since 2005 despite the traditionally loss-making fourth-quarter.

Net income was 1.704 billion riyals ($454.4 million) in the three months to September 30, usually the best quarter, coinciding with a surge in demand for power during the hot summer months in the desert kingdom.

Analysts' forecasts for the third quarter profit ranged from 1.68 billion riyals to 1.7 billion riyals, according to a Reuters survey last month.

"The rise in profits stemmed from an increase in electricity energy sales and in tariffs... that has exceeded the increase in operating costs," the firm said in a statement.

Operating profit in the nine-months to September 30 rose 6% to 1.87 billion riyals.

Barrak said sales volume in the first nine months of 2007 rose 8%. He said in June that annual growth in power demand was 7%.

"We hope to achieve net profits this year that are higher than 2006," he said after the third-quarter earnings were announced.

A loss of not more than 642 million riyals in the fourth quarter would put the company on track to achieve growth in net profit for 2007. It made a net loss of 508 million riyals in the fourth quarter of last year, almost double its level a year earlier.

The company, which is investing heavily to cope with the rise in demand, has been affected by the global rise in contracting costs for its maintenance and operations, Barrak said. He declined to elaborate saying only the cost of fuel transport rose 20-30% in 2007 from 2006.

"The important investments being undertaken, coupled with efforts to cut costs and improving human resources to raise productivity will have a positive impact in the coming few years," he said.

He did not elaborate on the human resources development plan.

The company may continue to cut jobs over the next few years under a voluntary early retirement scheme which aims to reduce the 29,000-strong workforce by 900 this year, Barrak said in June.

The stock closed on Wednesday at 12.75 riyals, up 4.1% from the previous session.

Saudi Electricity plans to invest 190 billion riyals to increase generating capacity by 60% by 2015 to increase power production to 54,000 megawatts (MW) by 2015 from 34,000 MW at the end of 2006 and meet surging demand.

The firm would invest some 7 billion riyals a year of its own cash and raise the rest in either loans or Islamic bonds. - Reuters

Print | Email | Discuss this article |

READERS' COMMENTS

View all comments (0)

Have your say

Click here to post a comment

Add your Comment All posts are sent to the administrator for review and are published only after approval. ArabianBusiness.com reserves the right to remove any comment at any time for any reason. Please keep your responses appropriate and on topic.
Name *
Remember me on this computer
Email *	(Your email address will not be published)
City
Country
Subject *
Comment *
Notify me of further comments
Security Code *
Please click post only once - your comment will not be published immediately.

MORE FROM ARABIANBUSINESS.COM