Saudi Electricity tariff increase will raise profitability by 300%

Riyadh: Most of the extra income resulting from higher tariffs for government, commercial and industrial users will go to Saudi Electricity's bottom line, NCB Capital said yesterday.

The power utility said on Saturday it would raise these tariffs as of July 1, which would add 3.2 billion riyals (Dh3.12 billion) to its annual revenues and boost its profitability.

Profitability

In a research note, NCB Capital said: "The company expects its revenue to increase by 3.2 billion riyals which we believe would mostly flow to net income.

"This should result in up to around 300 per cent increase in profitability as the change does not look to have an impact on costs.

"In 2009, Saudi Electricity's net income was 1.1 billion riyals which means that the change in revenue, which we expect to flow directly to net income, will result in up to around 300 per cent increase in profitability," NCB Capital added.

Shares in Saudi Electricity were up 3.4 per cent after they rose almost limit up on Saturday following the announcement of the change in tariffs.

The tariff rise excludes households.

"We think the stock's price should increase significantly due to the expected impact of the change in tariffs on profitability," NCB Capital said.

NCB Capital is affiliated to state-run National Commercial Bank.