Khaled AlGnoon

Khaled AlGnoon, CEO of Saudi Electricity Company (SEC), talks to TBY about the firm’s latest achievements, Vision 2030, and plans for the future.

What are the company’s latest achievements? And can you elaborate on the company’s mission?
In constant pursuit of excellence, SEC is committed through its vision, mission, objectives, and strategies to support the strategic goals of the Vision 2030 and the Integrated Energy Strategy. SEC plays a pivotal and integral role in the Kingdom’s economic development, and benefits from the strong visionary government leadership provided by the Custodian of the Two Holy Mosques King Salman bin Abdulaziz and HRH Crown Prince Mohammed bin Salman bin Abdulaziz, with unwavering support and guidance from HRH Prince Abdulaziz bin Salman, the Minister of Energy. Our board of directors, executive management team and the entire staff of SEC are working tirelessly to make the Kingdom’s Vision 2030 a reality. To achieve our aims, the SEC has aligned its corporate strategy and investment program with the priorities of the National Plan for the Kingdom’s electricity sector. The main objective is to level up the quality and reliability of the electricity service provided to end consumers, in addition to achieving the sustainability objectives outlined in Vision 2030.

Can you elaborate on the company role into achieving the goals of vision 2030? How is SEC aligning its strategies with country energy transition goals?
SEC plays a major role in the energy transition of KSA. SEC is playing a major role in diversifying the country’s energy mix, which will shift from heavy reliance on Crude oil and heavy fuel oil to natural gas and renewable energy. The Ministry of Energy aspires to lift renewable energy installed capacity to 50% of total installed capacity in 2030; SEC, as the main grid owner and operator, is mandated to connect the new sources of energy to the grid. The reinforcement and expansion of the transmission network will allow the effective penetration of renewable energy paving the way for de-carbonization. One of the main strategic objectives in SEC strategy is maintaining high security of supply and enhance system reliability and a dedicated program on the renewable energy integration projects has been established to contribute to achieving power sector targets. SEC is also contributing to the Vision 2030 objective of diversifying KSA’s exports: the company is supporting MoEnergy in developing international transmission interconnections with Egypt, Jordan, and Iraq with other geographies to be explored in the future. SEC has aligned its investments plan with the priorities of the KSA’s national plan for the electricity sector as well as its Vision 2030 sustainability objectives. SEC’s investment plan was developed with the support of Ministry of Energy to strengthen the company and the power sector.

What are your main priorities and target?
SEC’s priority is to have a reliable, efficient, and sustainable power sector in KSA. As such, our priorities include maintaining a high security of supply and enhancing system reliability, as well as achieving a 1st quartile in operational and safety KPIs. On the ESG, we have seen positive trends in reducing our carbon footprint over the past five years, driven primarily by fleet technology upgrades and improvements in the fleet technology mix. The company also sought to implement best international practices in preserving the environment and promoting social responsibility and governance. As a result, the company’s performance improved from last year by 25%, in a comparison of top international companies conducted by S&P Global. On the financial sustainability, we focus on optimizing operational and capital expenditures and capitalize on new business development opportunities to maximize shareholder value. For the localization and local content, we will focus on increasing localization of products and services.

Can you elaborate on the strategies and initiatives that the company has implemented to ensure and maintain its financial sustainability in KSA dynamic energy market?
Our financial strategy is based on a set of core principles that support our strong credit rating linked to the Kingdom’s sovereign credit rating, to ensure access to a variety of sources of finance, instruments and markets domestically and internationally, and to maintain sufficient liquidity to meet investment needs and maintain appropriate liquidity for daily operations and short-term financing needs. In light of this, the company is always looking to build long-term relationships with financing partners of all categories that support SEC as well as exploit its strong internal flows to meet operating and investment expense requirements and strengthen the company’s financial position. Our corporate strategy outlines the importance of financial optimization in capital deployment and in operations: SEC is working on optimizing its operating expenses across its business activities and enhancing its capital efficiency to safeguard financial sustainability. Another key pillar of financial sustainability revolves around growing SEC’s engine-2 activities in the non-regulated space: growth in non-regulated revenues will support SEC’s financial sustainability in times where large amount of capital is needed to support KSA’s energy transition efforts.

How do you balance the need for sustainable growth with ensuring electricity remains accessible to all segments of society?
We operate with a clear understanding that our corporate responsibility extends beyond mere profitability. We believe that sustainability within a company should aim at the preservation of profit, people, and planet in order to ensure responsible business continuity and success. Our commitment to sustainability and accessibility is deeply ingrained in our corporate strategy and operations. Achieving a delicate balance between sustainable growth whilst ensuring accessibility to electricity is a core principle at SEC. Sustainable growth for us entails many initiatives such as responsible resource management, liquid fuels displacement, renewable energy integration, distributed generation enablement, and continuous technological advancements aimed at minimizing our carbon footprint and reducing environmental impact. Evidently, SEC plans to invest approximately SAR7.1 billion into renewable energy integration projects and growing the grid’s renewable energy capacity by 2025, in addition to driving existing fleet efficiency. By investing in clean energy technologies, enhancing efficiency, and optimizing our operations, we strive to ensure that our growth is in harmony with the planet and in line with the Kingdom’s vision and sustainability ambitions. However, we also recognize that energy is the fuel of our modern economies and that electricity is a fundamental necessity for all segments of society. To guarantee accessibility, we maintain a strong focus on attainability, affordability, and inclusivity in our services. We work closely with our regulators, partners, and peers to ensure sustainable energy economics continue to become even more competitive and the energy transition is just to ensure essential access to electricity for all socioeconomic groups. Moreover, we are committed to promoting local communities, creating jobs locally, providing affordable access to energy, and improving the welfare of our customers in order to advance socio-economic growth within the Kingdom. SEC is in line with national mandates. In 2022, we have achieved 93.75% Saudization of the workforce and 71% localization of the supply chain. Our outreach programs actively engage with communities to understand their specific needs. We implement targeted initiatives, such as energy efficiency programs and smart meter projects—we have successfully completed the installation of 11 million smart meters across the Kingdom—to monitor electricity consumption more effectively, improve service quality, optimize resource consumption, and increase access to electricity. While the program allowed enhanced access to electricity, it also enabled our customers to be part of the transition and SEC to manage electricity demand more efficiently, resulting in an estimated 1% reduction in overall energy consumption per smart meter, highlighting the feasibility of attaining sustainable growth while ensuring accessibility. Ultimately, our vision is to evolve as a sustainable utility company that not only powers economic growth but also plays a pivotal role in enhancing social equity. Through responsible practices and active community engagement, we aim to drive sustainable growth while ensuring equitable access to electricity for everyone.

Can you discuss the company corporate governance structure and practices? How does SEC integrate a solid ESG agenda into its daily operations?
As the largest producer, transmitter, and distributor of electrical energy in the Middle East and North Africa, SEC plays a vital role in leading Saudi Arabia’s path toward achieving sustainability targets. We are excited to play a meaningful role and fully align with our nation’s ambitious sustainability action initiatives and embedding sustainability practices in all our business operations is a strategic key priority of ours, as we are committed to building a sustainable company. As part of this commitment, we have adopted a comprehensive ESG strategy, whilst focusing our efforts on strengthening our ESG governance structure to provide more integrity, transparency, and accountability to all our stakeholders. Building trust both externally and within our company around our ESG practices is rooted in good governance, covering firm ethical standards and strong corporate policies and guidelines. Our robust ESG governance framework therefore prioritizes transparency, accountability, and ethical conduct, whilst foreseeing for a clear split in roles and responsibilities across the different stakeholders involved. In fact, we believe that ESG, and, as a matter of fact, sustainability, should not be an isolated activity, but rather integrated into everything we do, as we evolve into a sustainability organization. To that, our board of directors, comprising of diverse expertise and experience, oversees key decision-making processes and ensures alignment with our corporate values and strategic goals. We also have a dedicated ESG committee that is composed of different business members who are involved in steering our strategic activities, including our targets and initiatives. Finally, we seek to ensure that all our employees are fully aware, guided, and are complying with their respective roles and responsibilities as regards to ESG, which is why over the course of the last year, we have laid an intensified focus on capability building and knowledge transfer. Overall, we aspire to maintain an open line of communication with all our external and internal stakeholders to foster trust and uphold the highest standards of integrity, the context in which we publish periodic ESG reports, highlighting our progress, performance, and future goals in sustainability. This transparency holds us accountable and allows stakeholders to assess our ESG commitments and achievements. That being said, our ESG agenda is interwoven into daily operations through several avenues. On sustainable practices we actively pursue sustainability and ESG through responsible resource management, energy efficiency, renewable energy adoption & integration and carbon management, as well as conservation efforts when it comes to the “E” pillar. As for the “S” and “G” pillars, we strive to promote social responsibility, have a positive impact on our employees and society, and prioritize safety measures in all our operations; as well as, exemplifying responsible business practices through the development and implementation of governance policies and procedures, in addition to monitoring compliance with regulatory requirements and best practices. On stakeholder engagement we engage with stakeholders, including regulators and rating agencies, investors, employees, customers, and communities, to understand their expectations and concerns. This engagement informs our ESG agenda, ensuring it is meaningful and relevant. On employee involvement and development we empower our employees to drive ESG-related initiatives within their respective roles. Training programs and internal campaigns educate and motivate our workforce to embrace relevant practices and create synergies across the different business units. In essence, our corporate ESG governance practices and agenda form a symbiotic relationship, promoting responsible decision-making and aligning our operations with the broader goals of sustainability.

Could you share some innovative projects or technologies that the company is implementing to enhance both its efficiency and sustainability?
Digitalization is playing a big part in SEC’s strategy. Digitalization applications touch on our assets, our processes, and customers. With the support of the Ministry of Energy, SEC has set ambitious targets to position the Saudi electricity sector among the global leaders and automation and digitalization are at the core of such ambitions. Understanding consumers and availing digital services for our customers require modernization of assets and processes. SEC has installed more than 10 million smart meters in the past three years as a major milestone in automating the grid. Customers are now able to obtain a large part of their services online in addition to monitoring their consumption. Additionally, SEC is committed to automating 40% of its distribution network feeders to improve security of supply and reliability of the network; modern control centers will support SEC in effectively managing the grid across operating areas. Internal processes related to safety, environment, HR, and other functions are also benefiting from the digital transformation to improve the performance of the business lines through technology and automation. SEC is investing ~SAR10 billion to push automation and digitalization across its business functions.

How do you cooperate with private entities to foster innovation and investment in energy sector? can you share some examples?
As you would expect, the growth in the power sector in KSA requires large amounts of capital to be invested in the near future and beyond. To enable effective investment plan implementation, we are conscious that global strategic partnerships are essential to achieving the Kingdom’s objectives for the power sector. SEC is currently revamping and modernizing its supply chain and procurement strategies to support the implementation of its strategy. Building strong and collaborative partnerships is essential for effective execution and transfer or knowledge. SEC is also keeping its capital investment plan updated to provide more visibility for investors and partners to effectively contribute to this journey.

What are the medium-term investments that the company is currently prioritizing and focusing on?
The focus of our investments is to boost the reliability and efficiency of the electricity system, support the expansion of the network and integrate large utility scale renewable plants. SEC plans to invest about SAR68 billion by 2030 on renewable integration and renewable impact reinforcement projects. Also, the investment plan includes projects to enhance SAIDI & SAIDI KPIs, reducing distribution and transmission losses, automation, safety, and environmental compliance.

What are your main targets for 2024?
Our plans are primarily focused on enhancing the reliability and efficiency of the electricity system. This entails augmenting the reliability of the power transmission grid to enhance the efficiency of energy generation, while facilitating production from renewable energy sources and automating our distribution network.