Saudi to overhaul power sector

POWER OVERHAUL: Saudi plans to privatise Saudi Electricity, breaking the utility up into four separate units. (Getty Images)

A plan to overhaul and privatise Saudi Arabia's power sector could be approved by the country's highest economic body within a few weeks, a Saudi official said on Monday.

Power demand is rising rapidly in the world's top oil exporter of more than 24 million people, as record oil revenues fuel economic expansion in the vast desert state.

The plan would split the power generation assets of the Gulf's largest utility by market value, Saudi Electricity Company (SEC) into four separate units before eventual privatisation, said Abdullah Shehri, deputy governor at Saudi Arabia's electricity regulator (ECRA).

SEC, which is government owned but partly traded publicly, will be transformed into a holding company for the four units, he told reporters on the sidelines of a conference.

SEC would likely still own at least one of the companies and transmission assets after privatisation, he added.

Saudi's Supreme Economic Council was considering the plan, which has already received ECRA's approval, Shehri said.

Privatisation would help bring the massive investment the power sector needs, Shehri said. SEC has been struggling to find cash to meet the growing power demand.

"We want additional investment to curtail future financial challenges," he said. "This will also cut down on expenses and enhance competition."

The restructuring would unbundle generation and transmission assets, and a new company would be formed to run Saudi Arabia's power transmission grid, Shehri said.

Unbundling would be followed by the introduction of competition in the wholesale sector, and later with competition in the retail sector, he said.

Power generation capacity in the kingdom needs to grow threefold over the next 25 years to meet future demand, said Ibrahim El-Amin, professor at King Fahd University of Petroleum and Minerals in Saudi Arabia.

Capacity needs to rise to 115,000 megawatts in 2032, from current capacity or around 35,000 megawatts, El-Amin said. (Reuters)

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