World’s biggest Islamic bond fuels Saudi electricity shake-up
$45 billion sukuk at center of drive to boost quality and reliability of power supplies
Saudi Arabia on Monday launched a massive restructuring of its power generation and distribution system that is expected to lead to improved service quality and reliability for consumers.
As part of the shake-up, the government will turn the $44.77 billion it is owed by the Saudi Electricity Company into an Islamic bond, or sukuk.
“The transaction is considered the world’s largest Islamic transaction ever to be executed, demonstrating the Kingdom’s leadership and global preeminence in Islamic finance,” SEC said.
Sweeping reform of the SEC corporate and financial structure will also involve the establishment of a new regulatory asset-based model to oversee and regulate SEC’s cash inflows.
“The reforms will help the sector and SEC overcome several financial and structural challenges faced in the past, and will ultimately improve the quality of service to customers and enhance the sector’s reliability,” SEC chairman Khaled bin Saleh Al-Sultan said. Saudi Energy Minister Prince
Abdul Aziz bin Salman, who chaired the committee charged with the long-planned restructuring, said: “The goal of these comprehensive reforms is to enhance the sustainability and efficiency of the Kingdom’s electricity sector, in line with the goals set out in Saudi Vision 2030.”
Saleh Al-Amri, chief executive of GCC LAB, an electrical testing laboratory, told Arab News the reforms would guarantee the sustainability of electricity production and consumption, and that use of renewable energy could double.
“The consumption of energy will be more efficient, and the private sector will be given a chance to compete for the production of electricity,” he said. “Costs will be reduced and the quality of services will be improved.”
Dr. Luai Alhems, director of the Engineering Research Center at King Fahd University of Petroleum and Minerals, told Arab News the beneficial impact of the reforms would be felt by manufacturing companies, contractors and maintenance and service providers. The energy sector not only played a pivotal role in the national economy but also affected ordinary people’s lives every day, he said.
“The new regulations will reflect positively on quality and consumer prices because the latest technologies and sources of energy will be used for production,” he said, and renewable energy would play a more important role in domestic supply.