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Saudi Arabia Said to Hire HSBC for Breakup of SEC Power Monopoly

Saudi Arabia hired HSBC Holdings Plc (HSBA) to advise on a potential breakup of state-owned utility Saudi Electricity Co. (SECO) into four independent power-generation companies, four people with knowledge of the matter said.

Electricity & Cogeneration Regulatory Authority, the industry regulator, plans to offer as much as 25 percent in each of the companies to international investors, the people said, asking not to be identified as the information isn’t public.

The largest Gulf Arab economy needs to spend $100 billion this decade to boost power-generation capacity in the Kingdom by 50 percent, Saleh al-Awaji, Deputy Minister for Electricity, said March 28. The split would end the monopoly of Saudi Electricity, created after the merger of the kingdom’s power companies in 2000, and with a market value of about $18 billion.

Saudi Electricity, the largest listed utility in the Gulf, rose as much as 5.1 percent and traded 3.2 percent higher at 16.40 riyals at 12:02 p.m. in Riyadh. The Tadawul All Share Index benchmark fell 0.1 percent.

International investors could be given the right to build power plants as part of the plans to boost generation capacity, according to one of the people. HSBC is in talks with potential investors, two of the people said.

Saudi Electricity is 81 percent owned by the Saudi government, according to data compiled by Bloomberg. The company said March 20 it received a 49.4 billion-riyal interest-free loan from the government to fund electricity projects. Its first-quarter loss widened to 913 million riyals, from 657 million riyals a year earlier, as costs increased.

Paul Harris, a spokesman for HSBC in Dubai, declined to comment. Officials at Saudi Electricity and industry regulator ECRA couldn’t immediately be reached for comment.

To contact the reporters on this story: Dinesh Nair in Dubai at dnair5@bloomberg.net; Matthew Martin in Dubai at mmartin128@bloomberg.net

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net; Aaron Kirchfeld at akirchfeld@bloomberg.net Claudia Maedler

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