This credit rating upgrade comes as a positive result following the approval of comprehensive regulatory, structural and financial reforms for the electricity sector adopted by the High Commissioner, and announced by His Royal Highness, Prince Abdulaziz bin Salman bin Abdulaziz; The Minister of Energy and Chairman of the Board of Directors of the Electricity and Cogeneration Regulatory Authority during the press conference held on Monday Rabi al-Akhir 1, 1442 AH, corresponding to November 16, 2020 AD, on the implementation of a set of comprehensive organizational, structural and financial reforms in the electricity sector, aimed at raising the level of service provided to the consumer, and creating an environment A stimulus and an attractive investment in the electricity sector, contributing to economic development, and in line with the requirements of the “Kingdom 2030” vision.
Among the reforms announced were; Addressing the net financial obligations owed to the government by the Saudi Electricity Company, which amounted to 168 billion Saudi riyals, by converting it into a secondary financial instrument classified under equity, canceling the government fee, which was previously approved by the company in early 2018, and organizing the company’s revenues in a way that enables it to operate efficiently. To recover the costs involved in providing the service, and to achieve a return on capital invested in the aspects of activity organized by the Electricity and Cogeneration Regulatory Authority, while the government continues to support the company through the budget account.
Moody’s stated that the newly approved regulatory framework for the Saudi Electricity Company provides a transparent mechanism and future clarity on the company’s revenues, compared to the previous situation. In addition, the refinancing of the net financial liabilities owed to the government by converting them into a financial instrument, with an indefinite term, which has a lower priority than the rest of the debts, is evidence of the increase in government support for the company, which the agency described as very high, and it also makes the company’s capital structure more Visible and sustainable. Moody’s considered that the company’s liquidity position is sufficient, as the approved regulatory framework qualifies it to raise its cash flows from operating operations and enhances its financial flexibility.
In a statement on this topic, Mr. Fahad Al-Sudairy, CEO of the Saudi Electricity Company, said: “On behalf of the company’s board of directors and all its employees, I express my sincere thanks and gratitude to the Custodian of the Two Holy Mosques; King Salman bin Abdulaziz Al Saud, and his trusted Crown Prince; Prince Mohammed bin Salman bin Abdulaziz, may God preserve them, for the support of the electricity sector and the company. I also thank the Ministerial Committee for Restructuring the Electricity Sector, chaired by His Royal Highness, Prince Abdulaziz bin Salman bin Abdulaziz; The Minister of Energy, and the membership of His Excellency Mr. Mohammed bin Abdullah Al-Jadaan; Minister of Finance, Acting Minister of Economy and Planning, Chairman of the Board of Directors of the National Center for Privatization, and His Excellency Mr. Yasser bin Othman Al-Rumayyan; Governor of the Public Investment Fund. Our thanks go to colleagues in the electricity sector integration system teams for the great role that everyone played in developing and approving these reforms.
Al-Sudairy said in his comment on the raising of the company’s credit rating: “We are happy with the positive impact of these reforms, which was represented in raising the company’s credit rating, because it confirms the effectiveness of these reforms by improving the company’s financial position and its credit record, and thus its ability to finance its future projects, and its empowerment. By implementing its strategy, aimed at making the electricity sector stronger, more sustainable, reliable and efficient.