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KSA’s electricity sector undergoes largest transformation on a global scale

KSA’s electricity sector undergoes largest transformation on a global scale
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Riyadh – Mubasher: The Saudi Ministry of Energy organised on 16 November 2020 a press conference to announce sweeping electricity sector reforms and the achievements of the kingdom's goals under Vision 2030.

These reforms are considered a crucial stepping stone in achieving the ministry’s long-term health and sustainability goals for the electricity sector, said a press release on Wednesday.

The reforms include a transition to the optimal energy mix for electricity production in the kingdom, with a shift to renewable energy and efficient natural gas sources, coupled with higher system efficiency and lower use of liquid fuels for energy production.

Moreover, they entail an increase in the sector's Transmission and Distribution network security and reliability as well as greater environmental compliance to reduce the sector's carbon footprint.

Minister of Energy, Prince Abdulaziz bin Salman bin Abdulaziz Al Saud, said, "The reforms are considered the largest and most extensive on a global scale. These reforms lay critical foundations by helping to create a more solid and financially viable sector attracting the required investments."

For his part, Chairman of Saudi Electricity Company (SEC), Khaled bin Saleh Al Sultan, commented, "With this historic comprehensive reform programme, SEC's balance sheet will become more robust enhancing SEC's ability to fund projects and enabling it to execute on its strategy to contribute to the development of a stronger, more sustainable, and diverse electricity sector."

HSBC, financial advisor to SEC said, "These announcements are expected to create an attractive environment for investment in the electricity sector and contribute to the economic development of Saudi Arabia, in line with the Vision 2030 programme."

According to the statement, the magnitude of the reform is a momentous landmark as it is the largest Islamic financial transaction to be executed globally with the issuance of a $45 billion Mudaraba instrument (interest of 4.5%) by SEC.

Through the reforms, SEC will have the largest regulated asset base of any utility in the MENA region and will have a regulated asset base which is comparable to the largest utility companies in G20 countries.

Furthermore, the reforms will guarantee the immediate deleveraging of the $128 billion balance sheet of SEC from a debt-to-equity-ratio of 2.2 to a ratio of 0.6.