Saudi electricity company (SEC) has a 69% dominance over the production of electricity, full command on its transmission and supply to residential, commercial, industrial, government, and other areas all over Saudi Arabia. Their registered headquarters are in Riyadh, Kingdom of Saudi Arabia. The company is a tariff-regulated company of electricity that follows electricity tariffs that have been determined and revised over the years. According to Forbes 2019, the company was ranked the fifth largest in the kingdom with its annual sales of $17.1 billion. The company was established in the year 2000 when eastern, western, central, and southern regional electricity companies merged into joint-stock firms. The major shareholder is the public investment fund at 74.3% followed by the general public at 18.8%. the remaining 6.9% is owned by Saudi Aramco. Their total assets add up to a range of 134 billion. An audit report was conducted on the company following International Financial Reporting Standards and other pronouncements that are endorsed in the Kingdom of Saudi Arabia. The audit report consists of notes to the financial statements, statements of financial position, income statements, changes in equity, and cash flows for the year ended. According to the company’s bylaws, the financial year begins on 1st January and ends on 31st December of each Gregorian year (Saudi Electricity Company, 2022). The audit gives a vivid comparison of the financial performance of the firm and is useful to determine the trend that might be followed avoiding financial turbulence
As far as the strategic position of the company is concerned, SEC has a stable electricity consumption base which shows a constant growth of 4.8% (Saudi Electricity Company, 2022. The generation of electricity in the firms has also experienced an average rise of 5.3% and their distribution grid lines keep on expanding the network
The company’s vision statement indicates clearly that its objective is world-class service to all consumers. This is aimed at winning the attention of customers and accessing a wider market around the globe.
The mission of the company is to power the kingdom that energizes the world. Offering the best services in powering the world is their main objective. We are devoted to delivering adequate services, goods, and services to our staff, consumers, and society while adhering to the highest of performance levels.
The Saudi electricity company has three main objectives which are first to transform into a smart and digitalized electricity system. Secondly, to be as efficient as possible and lastly to be customer-centric in that all their innovative ideas have the consumers as their center of focus. Through its development programs, the company seeks to raise the efficiency of employees and provide them with the necessary training to perform their jobs efficiently and effectively, with a 2.1% increase in training days by the end of 2023 (Saudi Electricity Company, 2022). Within the framework of the company’s program for job localization and community service, the company will maintain a localization rate of 92.5%
To maintain and grow their consumers while at the same time keeping their shareholders happy, SEC strikes deals of long-term fuel supply set by the government meeting the high demand that is in the kingdom. Constant and strong financial support from the government through the public investment fund increases the competitive strength of the SEC. The firm has put together multiple adjustments to hedge risks (Saudi Electricity Company, 2022). The intra-competition among the different branches provides healthy growth making the company earn more revenue while still bringing them together towards achieving a common goal.
The company is spearheaded by a board of 8 directors,15 executive directors, and chief executive officers of other subsidiary companies. The board comprises a chairperson, his vice-chairperson, and six other members. H.E. Dr. Khaled bin Saleh Al Sultan is the Chairman of the Board and Dr. Najm bin Abdullah Al-Zaid is the Vice Chairman of the Board. Other members include Mr. Mohammed bin Abdulrahman Albalaihed, Eng. AbdulKarim bin Ali Al-Ghamdi, Mr. Walid Ibrahim Shukri, Eng. Nabil Abdulaziz Al-Naim, Dr. Raed bin Nasser Al-Rayes, Eng. Isam bin Alwan Al-Bayat and Mr. David Whipple Crane.
The executive management includes Khaled bin Hamad Al-Gnoon as the acting CEO, Riad Bin Fahad Al-Zamil as the Executive Vice President from Generation, Ibrahim Mohammed I Alkhenizan as the acting Executive Vice President of Distribution and Customer Services , Abdullah Bin Abdulmohsen Al-Madhi as theExecutive Vice President of Services and Contracts, Feras H. Al-Mulla as the Senior Vice President of Legal Affairs, Monzer Bin Mahmoud Tayeb as Senior Vice President of Communications and Public Relations, Manish Manchandya as the Executive Vice President of Finance, Abdulkarim Bin Abdulaziz Al-Rasheed as the Senior Vice President of Human Resources, Mazin Bin Ali Al-Bahkali as the Executive Vice President of Strategic Planning & Business Development, Riad Bin Fahad Al-Zamil as acting Chief Engineering , Ibrahim Bin Fahad Al-Jarbou as the acting Executive Vice President HSSE , Khaled Salim Al-Ghamdi as the Senior Vice President for Information Technology and Digital Transformation, and Peter John. Chambers(Saudi Electricity Company, 2022).
The CEOs of the subsidiary companies are Ibrahim Bin Fahad Al-Jarbou CEO of National Grid SA, Mahdi Bin Nasser Al-Dosary CEO of Saudi Electricity Company for Projects Development, Wael Bin Ali Al Ghamdi as acting CEO of Dawiyat.
SEC uses environmental, social, and governance (ESG) framework which is determined to facilitate the transition to zero-carbon debt, responsible business practices, and empowering the people and communication. These ambitions strike common themes that affect the company, the kingdom, and the world in general. The transition to low carbon and a circular economy is set to be achieved through efficiently managing resources such as water and practicing biodiversity. Mitigation of climate change brings about low carbon emission, controlled toxic emissions, and brings about the use of renewable sources of energy. The responsible business practices in mind are good governance and integrity in workplaces through human rights business ethics and transparency from the cooperate governance set(Saudi Electricity Company, 2022). The company is leveraging towards reduction of diesel consumption by 69 million barrels, issuing green sukuks to use for environmentally friendly projects, and installing 8.8 million smart meters that will up the customer service and transit to digitalization
Financial Statement Analysis
The year-over-year financial performance of the company reflects an increase in adjusted net incomes and operating revenues. The credit ratings as per Moody’s, Fitch, and S&P are recorded as stable. Revenue went up by 0.9% from 68,709 SAR million to 69,338 million Saudi Arabian Riyals (SAR). The gross profit shot from 8,323 SAR million to20,542 SAR million, a rise of 146.8%. The operating profits rose from 7,704 SAR million to 17,561 SAR million recording a 128% rise. The Earnings Before Interest Taxes Depreciation and Amortization (EBITDA) were at 25,216 SAR million and shot up to 37,095 SAR million recording a 47.1%. the net income of the year recorded a 375% rise from 3,026 SAR million to 14,391 SAR million. Adjusted net income was at 6,729 SAR million from the previous 2,098 SAR million which is a 220.7% rise(Saudi Electricity Company, 2022). Basic and diluted earnings per share rose by 224% from 0.50 SAR million to 1.62 SAR million. There has been a notable drop in margin percentage points on gross profit by 17.5, operating profit by 14.1, EBITDA by 16.8, net income by 16.4, and adjusted net income by 6.6.
SEC has 71 power plants that generate over 40000 MW of power around the clock. This makes them a reliable power source in Saudi Arabia. It generates power through gas and diesel plants which is a relatively cheap option in the region since the country is rich in crude oil and getting these materials is easy and cheap. Their reliance on natural resources gives them a better competition state over others by making sure there is a steady flow of power. Being a large firm, it has the benefit of employing a large mass of people to meet the supply needs of its clients and consumers and this makes sure that the demands of the consumers are met effectively. However, SEC is a government-owned company thus its operations are locally limited and it is prone to delays in decision making due to bureaucracy which affects the selected representatives on delivering their services. This makes them inefficient as compared to western energy plants in the country. This inefficiency is affecting their working and this causes them to lose customers to the western power providers. Saudi Electricity companies can expand greatly if they focus on including renewable sources of energy in their portfolio and tapping into the ever-growing power demand in the Middle East. They can also increase their efficiency rates by making sure that all the delays and expanding their activities to neighboring countries(Saudi Electricity Company, 2022). SEC faces threats from the western power providers since they offer power with no delays and there is the efficient handling of problems unlike them. The firm has a well-placed vision and mission but its progress can be limited by bureaucratic issues or the violent uprisings recently witnessed in the region.
All the tactics, guidelines, and practices put in place by the Saudi Electricity Company have a positive outcome in different levels from the environment to the consumers through the company can benefit more by leveraging on expansion further than the Kingdom of Saudi Arabia and increasing its focus on green energy. Increment in the financial risk appetite can result in great losses since the market is volatile at the moment but if the company focuses on assimilating external small energy firms from further regions it will expand.
Saudi Electricity Company. (n.d.). March 22, 2022, from https://www.se.com.sa/en-us/Pages/home.aspx