Saudi Electricity posts biggest loss in four years

FALLING DEMAND: SEC posted its biggest loss in four years during the first quarter. (Getty Images)

Saudi Electricity Company (SEC), the Gulf's largest utility by market value, posted its biggest loss in at least four years in the first quarter on a decline in sales and a surge in investment costs.

The state-controlled firm said it lost 771 million riyals ($205.6 million), or 0.19 riyals per share, in the three months to March 31, compared with a loss of 434 million riyals, or 0.10 riyals per share, in the year-earlier period.

SEC traditionally reports losses in the first and fourth quarters when milder temperatures reduce the need for air-conditioning, and as a result lowering consumption.

"The first-quarter sees the lowest consumption in the kingdom because the weather becomes mild," Chief Executive Ali Al-Barrak told newswire Reuters in an interview. "Air-conditioning represents 70% of our sales."

The company's earnings were also affected by a rise in depreciation of assets in the first quarter to 2.13 billion riyals, compared with 666 million riyals a year-earlier, it said in a statement on the bourse website.

"We invested billions of riyals in 2007 in infrastructure and equipment, and because they started production we had to consolidate them as assets, which leads to an increase in the amount of money for depreciation," Al-Barrak explained.

"Investments like these get reimbursed over a 20-year period."

Riyadh-based investment bank KSB Capital Group had forecast SEC's loss at 480 million riyals, in a Reuters survey.

Higher costs for supplies and services, such as transporting fuel from refineries to power plants, were also among factors behind the loss, SEC said, without being more specific.

With power demand growing at an annual 7%, it plans to invest 190 billion riyals to raise capacity by 60% by 2015 to 54,000 megawatts from 34,000 megawatts at the end of 2006.

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

The results were announced after trading hours. Shares of SEC closed down 3.57% at 13.50 riyals, a decline of 8.5% this year. EFG-Hermes set a fair value target of 14.30 riyals on the stock in March. (Reuters)

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