Winters can often mean good news for power company profits, but in the case of Saudi Electricity Company (SEC) the reverse was true.
The publicly-listed utilities company reported a net operating loss of 742 million Saudi riyals (Dh726.6m) in the fourth quarter.
The result was higher than the loss of 622m riyals last year.
Gross loss stood at 574m riyals at the end of the quarter, from 474 million riyals in the corresponding period last year.
“Seasonal factors were the main reasons behind the losses,” said Iyad Ghulam, a research analyst at NCB Capital in Riyadh. SEC “reports losses in the winter as demand for electricity declines”.
Consumption during the winter is not at the peak summer level, when demand reaches the full capacity of stations, yet at the same time the fixed costs of running those stations remain the same.
“Losses at gross and operating levels came in higher than expected, which we believe can be attributed to higher fixed costs,” Mr Ghulam said.
Investors, however, have benefitted from a price appreciation of almost 15 per cent over the past six months as the Saudi firm focuses on its capacity production.
“SEC signed contracts worth 6 billion riyals in October and November to increase its power supply and meet the rising demand,” Mr Ghulam said.
“Electricity consumption has been growing at a rate of 9 per cent annually over the past few years and it is expecting to continue growing at a high pace to reach 70 gigawatts by 2020.”
SEC shares closed at 14.80 riyals yesterday, down 0.6 per cent.
halsayegh@thenational.ae