Saudi Electricity, the Gulf's largest utility by market value, posted a 12 percent profit decline in the third-quarter on rising costs from inputs and new projects, missing forecasts.
The company made 1.5 billion riyals ($400 million) in the three months to Sept. 30 against 1.704 billion riyals a year earlier, it said in a statement posted on the bourse website.
"The decline in profits is due to an increase in inflation rates which reflected on operating costs and the prices of goods and services," it said. It also blamed start-up costs of new projects.
Analysts' forecasts for Electricity's third quarter ranged from 1.78 billion riyals to 1.87 billion riyals, according to a survey by newswire Reuters last month.
It was the first time in at least four years that the firm posts a profit decline in the third-quarter which coincides with the summer.
The state-controlled firm generally does not suffer profit declines in the second and third quarters, when power consumption surges due to heavy reliance on air-conditioners in the desert kingdom in the summer.
Saudi Electricity traditionally reports losses in the first and fourth quarters when milder temperatures lower consumption.
The rise in costs was mainly driven by a 100 percent increase in maintenance costs, which account for 30 percent of overall costs and a 5 percent increase in housing allocation paid to the firm's 28-000 workforce, Chief Executive Ali Saleh Al-Barrak said.
"This rise in costs intervened at a time when demand on electricity rose 10 percent this year. This is not an easy growth figure, it's too big, we have never seen it before," Al-Barak told Reuters.
"But our [electricity] prices have not changed so the increase in sales volume has covered a little bit of the rise in costs," he said.
The firm spent about 30 billion riyals over the past 12 months to expand power production capacity, he said.
"For 2009, there is an investment programme but it will be worth less than in 2008 when we we felt under greater pressure to roll out large investments because of demand's rapid growth," he said.
He declined to give a precise figure. In an interview last year, Al-Barrak said the firm will need to spend 190 billion riyals towards a 60 percent capacity hike in the nine years to 2015.
Al-Barrak said he expected costs to decline next year. "Costs will decrease in 2009, led mainly by maintenance and input costs which are expected to ease as part of the global trend".
Saudi Electricity has to implement a government measure meant to help state employees and pensioners cope with a surge in inflation, including a commitment to raise wages by 5 percent annually between 2008 and 2010.
Shares of Saudi Electricity rose 0.5 percent to 9.50 riyals on Sunday, and are down 35.6 percent this year, outperforming the all-share index which has fallen 49.9 percent. (Reuters)For all the latest energy and oil news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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