SEC announces Q1 2011 preliminary results


Saudi Electricity Company's (SEC) net loss was significantly more than its estimates.

The company's net loss came in at US$206.3mn compared to a reported loss of US$208.5mn in Q1 2010 according to press release by the Saudi bank, NCB Capital (NCBC).

Disappointing bottom line figure:

Q1 2011 came in at a loss of US$206.3mn, significantly more than SEC's estimate and consensus, compared to a reported loss of US$208.5mn in Q1 2010 (almost flat YoY).

Operating income faced a slight decline YoY:

Q1 2011 came in at a loss of US$235mn significantly more than SEC's estimate of US$146.6mn and a US$236.7mn loss in Q1 2010. EPS consistent on an annual basis: Q1 2011 came in at a loss of US$0.05 compared to its estimate at US$0.02.

Depreciation and purchased energy behind the weak performance:

Despite an improvement in the top line figure, SEC reported very weak earnings. According to the announcement on Tadawul, this comes as a result to increased cost of purchased energy from its independent producers, as well as a rise in depreciation expensefrom new projects which came on stream. The company  believes that the combination of the two factors led to the more than expected losses during the quarter.

Tariff change did not offset the cost pressure:

The Q1 2011 results were particularly disappointing to SEC given that the tariff change (which became effective on July 1, 2010) did not offset the impact of the rising costs. These results suggest that the company would potentially revise its cost estimates upwards leading to large adjustment on earnings going forward. SEC awaits detailed results before updating its model.

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