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Saudi Electricity Company (SEC)

Restructuring Project

N ti l G id

Restructuring Project

National Grid SA

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Restructuring Targets 1

Contents

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SEC&TheSubsidiaries OrganizationStructures2

NationalGridSA OrganizationStructures

Restructuring Impact on SEC External Stakeholders

5 Future Steps

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Restructuring Targets

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unbundling a monopoly is a pre-requisite for market liberalization, which in turn provides long-term benefits such as: Competitive market which improve productivity, operation

RestructuringTargets

efficiency and quality of service.

Attract investment, that will contribute to satisfy the requirements of the large growth rates in electricity demand

It is very important to keep and maintainpower system stability, so restructuring willbe implemented gradually such that therebe implemented gradually, such that therewould be no impact on services providedby SEC

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In year 2000, SEC consolidated all electricity companies (10 Companies and 11 Electricity Projects) in one company named the Saudi Electricity Company (SEC).

A new organization structure was developed based on business

Preparation for Electricity market

functions (Generation, Transmission and Distribution).

All employees of the merged enteritis were placed in the new organization structure.

Financial separation of the business of generation, transmission and distribution

Procedures unification, best practice implementation and improvements programs.

Integration of automated systems and move to the comprehensive Enterprise Resource Planning (ERP) system

Strengthening the capacity of generation , transmission and distributionnetworks

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Restructuring of SEC Generation, Transmission & Distributions Businesses to

the following subsidiaries:

SECBoardDecision

National Grid SADISTCO

All subsidiaries are limited liability Companies and fully owned by SEC

4 GENCOs

Companies and fully owned by SEC No impact or change on shares or shareholders due to

restructuring. A consolidated financial statement will be published by SEC

incorporating Subsidiary Companies financial results.

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SEC initiated the unbundling process by establishing 6 subsidiaries within a Single Buyer market structure

Expected Unbundling Stages of SEC

Before 1/1/2012

Transition Stage Medium-Term Stage Long-term Stage

SEC(vertically integrated)

SEC Holding

National Grid SA Distrco

4 Gencos

100% 100% 100%

Further Unbundling & Restructuring

1/1/2012

Ownership Separation of

Transmission or Generation

Companies from Holdco

Single Buyer Market

Principal Buyer Market with Wholesale Market Competition

Open market with retail

competition and market

exchange

Focus

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Accordingly, new contractual interfaces and financial flows will need to be put in place

Contractual Interfaces and Key Financial FlowsContractual Agreement

Financial Flow

Customers

End-user Tariffs

Sales Agreement

Transmission CompanyDistribution Company

Genco AGenco AGenco AGeneration Company4

Power PurchaseLease Lease Energy & LeaseLease CollectedService Service Service

SEC (Holding) Company

Power Purchase Agreements

Lease Revenue

LeaseRevenue Capacity Revenue

Lease Agreement

Lease Agreement

CollectedRevenue

Service Level

Agreement

Service Level

Agreement

Service Level

Agreement

Note: Service charges related to SLAs are not shown to simplify figure

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In summary, the new organization model is based on the following allocation of responsibilities

Holding Company

Prepares and approves system planning (including generation expansion plan) and budgets

Performs long-term fuel planning and administers fuel supply agreements

Provides financing Develops new power plants tenders IPPs and administers their

Owns, operates and maintains

Develops new power plants, tenders IPPs and administers their contracts

Develops EHV transmission system and interconnections Acts as the single buyer of electricity and leases transmission

and distribution capacity Provides shared services to subsidiaries Monitors the performance of subsidiaries Liaises with ECRA for all regulatory matters

Distribution Company Owns, operates and maintains

the distribution network

Transmission Company 1. Ownership, operation and

maintenance of transmission networks.2. Operation and control of the

Generation Company A, p

power plants Plans and executes

enhancements, rehabilitations, replacements and extension projects

Issues substation demand forecast (sales and consumption)

Performs distribution network planning and executes projects

Manages customer services, billing and collection

Manages small isolated generators

2. Operation and control of the electrical system.3. Monitor network performance, and economical operation of power plants.4. Preparation requirements of transmission networks.5. Design and implementation of transmission projects (high voltage).6. Submit periodic reports on the performance of the transmission company to the Holding Company.7. Issuing budgets quarterly, and annual.

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SEC&TheSubsidiariesOrganizationStructures

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SECOrganizationStructure

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TheOptimizedGroupingisamajorshiftfromthecurrentgeographicdistribution

Gencos Power Plants Location(During Period 2014 2021)

Al-Qurayyat

GhazlanDammam

Qurayyah

BerriQaisuma

Faras

Arar

Rabigh PP8

Hail

Al-Qasim

PP5

Shadgum

Al-Jouf

Madinah

Tabarjal

Rafha

Tabouk

Al-Wajh

PP12Qurayyah CC

Rabigh New

Ras Abu Qamees

PP14

PP13Al Rais

Ras Al KhairDuba GT

PP9 Uthmaniyah

JuaymahSafaniyah

Makkah

Rabigh

Shoaiba

JeddahPP8

PP7

Najran

Tihama

Bisha

Asir

Taif

Jizan GT

Juba

Shoqaiq

PP10

Sharourah

Jeddah South

DCA B

Shoaiba CC

PP14

BahaLayla

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CEORegulatoryAffairs

BoardofDirectors

OrganizationStructureforNationalGridSA

Operation&Control

GridMaintenanceProjectsPlanningEngineeringTransmission Finance

TechnicalServices

Business Coordination

BUDivision Department

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NationalGrid SAOrganizationStructures

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As of 1/1/2012N ti l G id SA National Grid SA

Is Alive

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Finalization of National Grid SA Company establishment procedures.

Appointment of Board of Directors members.

National Grid SA Go Live Steps

Appointment of CEO. Finalization of Organization Structure approved by

Board of Directors. Appointment of Executive Management. Automated systems update.Automated systems update. Transfer of Employees and other resources from

SEC to National Grid SA.

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Organizational Structure of the National Grid SA

approved Level I and II approvedBoard of Directors

CEORegulatory Affairs

Operations and Control

Grid Maintenance

HV ProjectsPlanningEngineeringTechnical Services

Transmission Finance

Business Coordination

Operation & Control COA

Operation & Control - WOA

Grid Maintenance Sector -COA

Projects Central

Projects West

Projects East

Network Planning

Planning Support

Engineering Services

Engineering & Design

Engineering Protection

TelecomEngineering

and SAS

Commissioning Services

Asset Quality Performance

Tele Communications

Grid Maintenance Sector -WOA

Grid Maintenance Sector EOA

Operation & Control - EOA

Operation &

SOA Grid Maintenance

Planning & Coordination

Projects South

Projects Support

Standard & Specifications

Services

Research & Development

BU Sector Dept. Section

Planning & Coordination

Planning & Coordination

Planning & Coordination

Planning & Coordination

Sector -EOA Operation & Control - SOA

National Control System

Operation Planning

System Control

Planning & Coordination

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Duties & Responsibilities of Operation & Control Business Unit

To operate & control power transmission system kingdom Wide in economical & secured operation and safe conditionoperation and safe condition.

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Duties & Responsibilities of Operation & Control Business Unit

AlJoufT

HailT

TabookT QaysumahT

Qassim

T

TRiyadh

NCC

DammamT

Jeddah

TJubbah

NCC

C

E

S

W

T

Madinah

Yanbu

TNajran

TAbha

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Duties & Responsibilities of Grid Maintenance Regional

(COA, WOA, EOA & SOA)

To operate and maintain the Transmission Network in the Region adopting cost effective maintenance practices, optimum maintenance scheduling per established maintenance policies and proceduresmaintenance policies and procedures, enhancing safety and life of the equipment.

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Duties & Responsibilities of Grid Maintenance Regional(COA, WOA, EOA & SOA)

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Fiber Optic Network

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Duties & Responsibilities of Projects Business Unit

To manage the projects execution from awarding up toTo manage the projects execution from awarding up to close out stages for the HV ( 110 up to 132 ) system in all regions (COA, WOA, EOA, SOA).

To Implement and approve project programs. To Review, monitor and accept contractor construction

procedures . To Manage relationships with contractors to maintain

an ongoing dialogue with regular feedback.

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Duties & Responsibilities of Planning Business Unit

Do the Network Planning and studies for the o t e et o a g a d stud es o t eHV system in all regions (COA, WOA, EOA, SOA), Follow up, Monitor and document the Load Forecast, secure Capital & Operating Budget , Right of Ways for transmission facilities keep and update thefacilities , keep and update the documentation and Geographical Information Systems.

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To prepare and Provide the SOW,

Duties & Responsibilities of Engineering Business Unit

o p epa e a d o de t e SO ,engineering & designs packages and engineering support during the various stages of projects of the HV Transmission Network Systems including Substations Transmission LinesSubstations, Transmission Lines, Protection and Telecommunications in all regions (COA, WOA, EOA, SOA).

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Duties & Responsibilities of Technical Services Business Unit

To undertake commissioning of the newly installed transmission assets and ensure that they meet the Company Standards & Specifications and are operating as designed ,

Act as interface between System Operation and Project management in the energization of Transmission projects,

Monitor the Asset Performance and Service Quality To conduct frequent audit on project design packages and factory

test reports to ensure that all Transmission Projects are properly Design from all aspects and to conform that operation and g p pmaintenance and others positions & requirements are incorporated

To assure that all activities from project start-up until completion are bound within the framework of the Quality system

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Growth Indicators 2004 - 2017

Years

Main IndicatorsVoltage LevelCurrent SituationFuture Growth

20042010Growth%

2017Growth% %%

Total Length of O/H & U/G Circuit KM

EHV 11743180035329520151

HV2194128176283567063

Substation Numbers

EHV669341166152

HV4505492285390

Transformer Numbers

EHV24830925744200

HV11871536292403102

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Restructuring Impact on SEC External

Stakeholders

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In the next stage, work will remain according to

Restructuring impact on External Stakeholders

existing policies and procedures and No

changes will happen in dealing with all

categories of consumers, contractors, suppliers g

and Banks.

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Future Steps

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SEC is now performing the activities required for the unbundling of the four GENCOS d DISTCO d i 2013

Future Steps

GENCOS and DISTCO during 2013.

This situation will continue until the realization of the prerequisites for the transition to open market and

titi k t lib li ticompetitive market liberalization.

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Through a study undertaken by SEC with a Consultant, it has became clear that:All countries who have liberalized their electricity market, have had the basic requirements (which are currently not available).

Market Liberalization Requirements

The most important of which are: 1.The availability of balanced tariff that reflects the cost for every

category of consumers to ensure adequate revenue for the Sector or a clear Governmental commitments to cover the deficit .

2.Availability of an acceptable reserve margin (from 10% to 15%) of generation capacity during peak timeof generation capacity during peak time.

3.Availability of reliable and inter-connected transmission system in Kingdom

4. A flexible and quick mechanism to modify tariff according to the variables to encourage investment .

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Thank You35