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Saudi Electricity profit up on heatwave, lower costs
Costs decreased; heatwave raises Q2 sales by 15.5 pct.
July 20, 2010 10:19 by Reuters
Saudi Electricity Co’s second-quarter earnings rose 50 percent, it reported on Monday, beating forecasts after record temperatures in June boosted power demand for air conditioning and new plants lowered maintenance costs.
The Gulf’s largest utility by market value made 1.07 billion riyals ($285.3 million) or 0.26 riyals per share in the three months to end-June after 715 million riyals or 0.17 riyals a year earlier, it said in a statement to the Saudi bourse.
This was above the average forecast given by analysts and exceeded by about 13 percent the highest prediction. “The increase in the net profit stems from an increase in revenues and a decline in some operating costs,” the company said. Operating profit rose 55 percent to 962 million riyals.
Chief Executive Ali Saleh al-Barrak told Reuters sales rose 14 percent in the first half while the start of several new power plants improved productivity and lowered maintenance costs.
Sales in the second quarter rose 15.5 percent to 7.38 billion riyals, according to Reuters calculations and earlier quarterly financial statements.
“An unusual thing happened this year which helped our second-quarter sales: We had an unprecedented heatwave during June, with temperatures reaching more than 50 degrees celsius in several cities, a record for the month. This boosted power consumption especially from air conditioners,” Barrak said.
The state-controlled company usually posts its best quarterly earnings during the second and third quarters of the year as hotter temperatures boost power consumption.
The second-quarter earnings performance also precedes the implementation on July 1 of higher tariffs for industrial, government and commercial users which are expected to boost revenues and significantly enhance profitability.
It started as of July 1 applying higher tariffs for government, commercial and industrial users which would add 1.6 billion riyals to its revenues during the second half of 2010 and boost its profitability.
The extra revenues generated by the new tariffs are expected to “significantly reduce the losses we usually make during the first and fourth quarters of each year, if not erase them for good,” Barrak said.
The firm made a net loss of 782 million riyals in the first quarter of 2010 and 510 million riyals in the fourth quarter of 2009.
The tariff hike was the latest government-sponsored step to be taken to help the power utility cope with power demand growing at an annual 8 percent and requiring investments close to $80 billion in the 10 years to 2018.
Strongly outperforming the all-share and other sector indexes, shares in the firm have gained about 19 percent this year, with much of the advance made after the announcement of the higher tariffs.
The government granted the cash-strapped firm a 15 billion-riyal soft loan in April to support its finances and ease the burden of lending from commercial banks.
(Reporting by Souhail Karam, Editing by Greg Mahlich)