Annual Report 2019 Diligently Serving You 08 Message of His Excellency the Chairman Contents 10 Message of His Excellency the Chief Executive Officer 20 Electric Power Generation 26 National Grid SA 32 Integrated Dawiyat Company 38 Distribution and Customer Services 42 Saudi Power Procurement Company 46 Saudi Electricity Company for Projects Development 50 Strategic Planning and Business Development 54 Human Resources 60 Shareholders 64 Maintaining Safety & Preserving the Environment 72 Corporate Social Responsibility 76 Supply and Contract Services 80 Financial Results Summary 102 Consolidated Financial Statements The Custodian of the Two Holy Mosques King / Salman bin Abdulaziz Al-Saud May Allah Protect Him His Royal Highness Prince / Mohammad bin Salman bin Abdulaziz Al-Saud May Allah Protect Him Crown Prince, Deputy Prime Minister and Minister of Defense Board of Directors Saudi Electricity Company Dr. Najm bin Abdullah H.E.Dr. Khaled bin Saleh Eng. Abdulaziz bin Fahd Al-Zaid Al Sultan Al-Khayyal Vice Chairman of Chairman of the Board Member of the Board the Board Dr. Abdulmalik bin Mr. Rashed bin Ibrahim Abdullah Al-Hogail Sharif Member of the Board Member of the Board Dr. Raed bin Nasser Eng. Gerard Mestrallet Al-Rayes Member of the Board Member of the Board Eng. Isam bin Alwan Eng. AbdulKarim bin Ali Al-Bayat Al-Ghamdi Member of the Board Member of the Board Annual Report | 2019 Message of His Excellency the Chairman Every time we have the pleasure of pondering one of the Saudi Electricity Company’s annual reports, we feel at once overjoyed and proud. And we ought to be impressed. The story the numbers tell is a brilliant one about unrelenting growth, nationwide megaprojects, and a professional, talented workforce that’s the envy of the world. And the report for the year 2019 is no different. The year’s hallmark was a paradigm shift in how the company does business. The company’s digital transformation, manifested in gargantuan projects and world-class services built for and around the customer, powered on dauntlessly as the company trained its sights on the ultimate goal: to live up to the expectations of Vision 2030. It’s no secret that the Government of the Custodian of the Two Holy Mosques King Salman Bin Abdulaziz and Crown Prince Mohammad Bin Salman has been giving prime attention to the national electrical power industry, with the aim being to bolster and strengthen the industry and see it through every possible challenge. The result in 2019 was a bevy of bold initiatives, pointed decisions, and massive projects that live up to the guidance and vision of our leadership’s policies and plans that will make the Kingdom’s economy one of the world’s greatest. A dream combination of accumulated national talent and expertise and cutting- edge technology – a lot of it home-grown – promises to turn the Kingdom into a regional hub for electrical industries, on par with the world’s biggest, most advanced producers and exporters, in both in performance and product. At the forefront of all the success is a board of directors that rose to the challenge of driving the company into a future – growing, transforming, and reinventing it into a true powerhouse of performance and talent that electrifies the new realities and requirements of sustained economic and population growth and construction that Vision 2030 prescribes, with all the accompanying surge in demand for electricity and the modern technology that supports it. Another accomplishment that will forever etch 2019 in the annals of SEC greatness was the transformation of the company’s customer-facing services. Plenty of programs and services in every one of the company’s business lines are now fully automated, a feat made possible thanks to the years-long effort to recruit and domesticize talent and smart grid 8 technology. After having automated its entire power grid, the company is now working on You will be enthused to read all about the details of the many other megaprojects in this building a centralized national command center that will control the company’s distribution report on financial year 2019. With 54 transformer stations and 26 complementary and grids nationwide, along with eight other regional control centers around the Kingdom’s supplementary power plants built in 2019, the company upped its actual power output major cities. Close to 100,000 automated medium-voltage switches have been installed so and boosted its potential capacity by 396 additional megawatts while saving more than far, and the company aims to take automated switching nationwide by 2025, which will cut SAR324 million. The company bolstered its transmission grid with additional overhead power losses, mitigate outages, and build efficiency into grid maintenance and operations and underground cabling and extended its fiber optics network to 488 households and five across all business lines. industrial districts in 22 cities. But the one endeavor that crowned an already great year was the Smart Metering Project. And all of this writes an even greater story: the one of our staff and how every one of them With the tenders having been awarded just before the year was out, the company is in worked hard throughout the year to get the company to not only meet, but exceed the a veritable race against the clock to have a whopping 10 million smart electrical power ambitious, lofty bar it had set for itself and power away towards new horizons, year in and meters installed for all of its customers, no matter where in the Kingdom they happen year out. The projects that the company had accomplished throughout the year would not to be, by March 2021. The project is being deployed in coordination with the Ministry of have been possible without the tremendous efforts of the talented, hard-working Saudis Energy; the Integration System of the Electric Power Sector; the Electricity and Cogeneration who run this company and have proven to be its lifeblood. They leaned in and gave it their Regulatory Authority; the Ministry of Communications and Information Technology; the all, and came up with laudable work, innovative ideas, and quality initiatives that put the Saudi Standards, Metrology and Quality Organization; the Communications and Information company in its rightful place as a leading provider of electric power. The attention, backing Technology Commission; and the Local Content and Government Procurement Authority. and support from His Royal Highness Prince Abdulaziz Bin Salman, the Minister of Energy, for these achievements and projects have been limitless. This colossus of a project is set to be instrumental in boosting reliability, the automation of billing, and the integration of customer data. After having been a costly, labor-intensive, Finally, as we joyously ponder the details of the successes the company’s staff had time-consuming process for so long, reconnecting power to customers is now automated. hammered out in 2019, and on behalf of the members of the board, management, and The system streamlines the relationship between the company and its customers and each member of the staff as well as on my own, I present our sincerest thanks, praise and brings plenty of features incorporated into the design and software of their smart meters gratitude to the Custodian of the Two Holy Mosques King Salman Bin Abdulaziz and Crown right to their fingertips. Prince Mohammad Bin Salman for their Government’s unending support that has been vital for our success in making these achievements, and our thanks and gratitude to His Royal As of the end of 2019, there were 9.758 million customers in all sectors, 370,773 of which Highness Prince Abdulaziz Bin Salman for the great support and attention he extends to were new ones. By 2021, the number of customers is expected to cross the 11 million mark, the company. It may still be too early to anticipate future growth and gauge the results of all posing an ever-growing challenge that the company is sure to step up to yet again. these accomplishments and transformations, but one thing is for sure: the board will always remain committed to the growth of the generation, transmission, and distribution business As always, the company has been an enthusiastic supporter for greater local content in its lines, along with the accompanying growth in technology, cybersecurity and human supply mix, giving national manufacturers and contractors the advantage over foreign ones. resources – all for the satisfaction of the customers, who expect nothing short of electricity service of world-class quality that’s also safe, reliable, and environmentally friendly. The company has come a long way in transitioning its outlets to electronic, online services, with the remaining ones coming along in quick succession. The SEC bureau in Riyadh is We pray to God for more achievement and success for the electric power industry in currently trying out the smart office concept. powering the Kingdom’s growth and development. We hope to achieve even more in the coming years to overcome more challenges and exceed our own aspirations. The Barq service cuts down the lead time to get electric power to a mere seven days, compared to the 50 days or more it used to take in 2015. Dr. Khaled bin Saleh Al-Sultan Chairman of the Board of Directors The ALKAHRABA app has been built up into a full-fledged suite of services, and the call centers have been staffed with well trained, highly qualified people with full technical support. 9 Annual Report | 2019 Message of His Excellency the Chief Executive Officer If I were to be asked to describe 2019 with a superlative, I would be spoiled for choice. Brilliant would be one way to describe it. Exceptional would be another.