02 Feb 2025
The Saudi Electricity Company (SEC) has announced that it has received approval from the Ministerial Committee for the Restructuring of the Electricity Sector and SEC (the Ministerial Committee) for a final settlement of historically disputed financial obligations related to technical discrepancies in quantities, prices and handling costs of fuel and electric power. A dedicated task force, including representatives from the Ministry of Energy, the Ministry of Finance, and the Saudi Electricity Regulatory Authority, in coordination with relevant entities, conducted a comprehensive study of these disputed transactions, which originally totaled SAR 10.3 billion. Independent technical and legal advisors were engaged to provide recommendations to the Ministerial Committee.
Following this review, the committee issued a resolution approving SAR 5.687 billion as the final settlement amount, to be recognized as a liability obligation from SEC to the government, represented by the Ministry of Finance. The committee also decided to convert this financial obligation into a Mudaraba Instrument in accordance with the terms of the Mudaraba Agreement signed between SEC and the Ministry of Finance. This conversion is set to be completed within 30 days from January 31, 2025.
SEC will reflect this settlement obligation in its financial statements and sign an addendum to the Mudaraba Agreement, bringing the total value of the Mudaraba Instrument to SAR 173.607 billion. The financial impact of this settlement is expected to be recognized in SEC’s 2024 financial statements, with no material effect anticipated on shareholder dividend distributions. It is worth noting that the Mudaraba Instrument is a subordinated, unsecured, perpetual, and redeemable financial instrument, with an annual profit margin linked to the weighted average regulatory rate of return on capital costs.Profit distributions will only be made when dividends are declared for common shareholders. This instrument is Shariah-compliant and classified as equity, ensuring it does not affect the ownership structure or shareholder rights in SEC.
Commenting on the decision, Eng. Khalid Al-Ghamdi, Acting CEO of Saudi Electricity Company, stated that this decision marks a significant milestone in the financial reforms announced on November 16, 2020. The Ministerial Committee’s resolution successfully settles all historical financial obligations of SEC, further strengthening its capital structure by integrating this settlement into the Mudaraba Agreement. He added that this step enhances the company’s financial position and supports its ability to execute large-scale investment plans, aligning with the government’s support to SEC’s strategic role in the energy sector. He reaffirmed SEC’s focus on developing Saudi Arabia’s electrical infrastructure, integrating renewable energy plants, and deploying battery storage solutions to improve capacity and reliability. He emphasized that the company’s mission is to provide a comprehensive, high-quality electricity service across the Kingdom while driving sustainable growth and creating long-term value for its shareholders.
Al-Ghamdi reiterated SEC’s commitment to supporting the Kingdom’s sustainable energy transition in line with Vision 2030. He highlighted that SEC remains dedicated to advancing a diverse and sustainable energy mix in the Kingdom, ensuring that its substantial investments keep pace with global energy advancements and meet the rising demand for electricity, reflecting the robust economic growth of Saudi Arabia. He also stressed the company’s ongoing efforts to boost local content and workforce localization, reinforcing its role in strengthening the national economy.
He concluded by acknowledging the unwavering support from the Custodian of the Two Holy Mosques for the electricity sector, stating that this decision ensures the delivery of enhanced services to citizens and residents across the Kingdom, aligning with the goals of Vision 2030.
