INVESTMENTS IN POWER SECTOR FOR ECONOMIC GROWTH Saudi Economic Forum 1-2 March 2011 Riyadh

Available generation (MW) GROWTH (2000 – 2009) DATA No of customer ( Million) Peak load (MW) Available generation (MW) Transmission (KM) Energy (GWH) 2000 3.6 22000 23000 30000 114000 2010 5.7 45000 48000 49000 198000 Increase 2.1 25000 19000 84000 Growth (%) 58% 104% 108% 63% 73% 2

projects Under Execution Generation 174 projects US$18 bln . Transmission 290 projects US$14 bln. Distribution 170 projects US$ 2.3bln. Total 634 projects US$ 34.3bln. will be in operation 2010-2014

LOAD FORECAST MW

FUTURE CAPITAL INVESTMENT Over the next 10 years: Generation expansion US$45 billions Transmission expansion US$ 22 billions Distribution expansion US$ 13 billions Total capital investment US$ 80 billions

IPP PROGRAM 30 – 40 % of Future generation will be IPP . SEC will Continue to encourage private investors to build, operate and own power projects . 30 – 40 % of Future generation will be IPP . SEC partnership will be 20%-50% in the equity. Long term power purchase agreements (20years) With reasonable return on investment .

IPP PLANNED PROJECTS US $ 15bn TO BUILD 12 GW NAME OF IPP PROJECT CAPACITY (GW) INVESTMENT BlnUS$ PROJECT COMPLETION QURAYYAH 1.8 2.3 2014 DHEBA 1.6 2.1 2015 SHUQAIQ ALOGAIR 2.4 2.8 2016 JEDDAH SOUTH 2017 RAS ALZOUR 2.9 2019

Conclusion The growth of electricity demand will continue 7-8%. Massive investments (80 billion US$). 30% of generation expansion as IPP . Private sector have the opportunity . Private sector have responsibility Infrastructure Technology and Saudi work force

Power Industry in Saudi Arabia Starts in the 50`s as 100%private utilities . Late 70`S consolidated into four major power companies (SCECO’s). Mid 2000 All operating entities merged in one company : Saudi Electricity Company (SEC). The government involved as shareholder .

SAUDI ELECTRICITY COMPANY Largest electric utility in the region in terms of capacity ,market capital and shareholder’s equity. Serving the largest economy in middle east and 6million customers in 12000 cities ,towns and villages. Owns 85% generation and 100% T&D and retail . Total assets over 60 bn US$. Annual revenues US$ 6bn with 6% annual growth. 50 GW installed capacity with 8% growth . (AA- ) credit rating

Scope of Operations SEC’s operations are split into four main regions, which reflects the historical regional structure of the power sector Interconnection of the four regions is a high priority for SEC, which will mitigate the need for some new capacity and will harbour greater efficiencies This will be covered in greater detail by our Transmission Division

CHALLENGES Electricity is the basic infrastructure . Power is capital-intensive infrastructure projects. High growth in demand ( will continue 7- 8%). High consumption for residential use (55%). Low average load factor (60%) seasonal. Inefficient old of generating units.

WHY IPP? Providing Financial Option for Highly Capital Intensive Generation Projects . Helping To Re-Direct Available Funds To T&D (Monopoly Activities) Reallocation Expenditure From CAPEX To OPEX. Avoiding Mismatch Between Medium Term Financing and Long Life PP Projects.

SUCCESSFUL IPP ROJECTS Two IPP Projects in process: 1. Rabigh Power Plant (Awarded July 2009) 1200 MW / HFO IPCOD APRIL 2012 Investment 2.4 billion US$ IRR 8.5% with 20% for SEC 2. Riyadh Power Plant 11 (awarded last month) 1800 MW / GAS IPCOD APRIL 2013 INVESTMENT 2.3 billion US$. IRR 6.5% with50% for SEC

Opportunities Building more power generation capacity . Replace all the old generation units. Development of new power plants as an IPP. Promote energy conservation initiatives. Load management programs (time of use tariff). Our medium term plan will see continued investment in our generation plants to ensure that we maintain our capacity margin of 10% The two charts provide a breakdown of our planned annual capacity additions by region in terms of MW and costs In addition, IWPP’s are planning to add additional capacity of 6,000MW over the next 6-7 years Introduce smart grid and smart meters . Encourage and support renewable energy.

Conclusion opportunities are greater The growth of electricity demand will continue 7-8%. Massive investments (80 billion US$). 30% of generation expansion as IPP . Private sector have the opportunity in these expansions. The challenges are great, but the opportunities are greater

SAUDI NATIONAL GRID by 2020

Saudi power plans First long-term electricity plan developed 1979. Between 1980-2000 regional planning by SCECOS. 2003 SEC issued the first integrated power plan. 10- year forecast becomes more practical in KSA. Near term 5-year plan window used today. periodic update of the plan every tow years. Low residential tariff (8 hallah /kwh) . Low average load factor (55%) seasonal. Inefficient old of generating units.