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SEC Distribution Field Force OverviewDistribution Contractors Day with Saudi Electricity Company

October 28th, 2015

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The contracting phase consistsof two main elements: tendering process and

contracting process

Prequalification Contracting Operation

Key

levers

1.1 Ceiling distribution & coverage assurance

2.1 General terms & conditions

Key

elements

1.2 Bidding mechanism 2.2 Performance management

1.3 Pricing mechanism 2.3 Others

1 .Tendering 2 .Contract1 2

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Key

Changes'

1. Prequalification model: new prequalification process and criteria to assess contractors

2. Coverage model: model will be used on office level to help match supply to demand in all offices across the Kingdom

3. Tendering strategy: will include the number of required contractors in each electricity department and how their ceilings will be defined

1. Pricing mechanism: reference prices along with an improved pricing mechanism are expected to yield more accurate prices

2. Contract ceiling: contract ceiling is distributed based on contractors’ work capacities, prequalification scores and bids

3. Awarding strategy: will determine who gets awarded a contract, and what their ceiling will be. If contractor refuses to sign, his ceiling is given to the next in line contractor (cascading)

1. Guarantees: Bid bonds are required from contractors. These are refundable unless contractor confirms intent to sign contract. Bank guarantees are 5% of contract ceiling.

2. Contract duration: new UR contract term is reduced to 2 years with 1 optional year

3. Payment terms: 50% payment upon completion of work is incorporated to allow better liquidity

4. KPIs: KPIs are integrated in the contract to objectively measure contractor's performance, and linked to SEC’s evaluation sheet

5. Incentives & penalties system: the building blocks for a future incentive & penalty system are put in place

Tendering Contracting2 3

A number of key recommendationsare implemented in Phase 1

Prequalification1

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PREQUALIFICATION TOOLS CONTRACTING & TENDERING TOOLS

12+ operational tools are developedto facilitate the operationalization of the new process

CONTRACTING GUIDE

UPDATED CONTRACT CLAUSES

KPI EVALUATION

PRICE UNIFORMIZATION

COVERAGE ANALYSIS

MODEL

VALUE ALLOCATION & COMMITMENT

INSTRUCTIONS FOR BIDDERS

WORK ORDER ALLOCATION

TOOL

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TenderingPrequal Contracting

Bids from last tendering process are entered

into model

Model applies appropriate inflation

factor

New price uniformization

methodology is applied to bids

Final historic reference prices are generated

Historic bids entered to be compared against new

contract bids

An inflation factor based on a detailed contractor cost model is applied to

historical bids

New contract bids are uniformized on a line item

level using a standard deviation methodology

Bids are compared to historic reference prices

and final prices are calculated

Initiation includes developing historicreference prices to gauge

contractor bids

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SEC WILL DETERMINE TOTAL COVERAGE REQUIRED IN EVERY OFFICE

…AND DISTRIBUTE IT ACCORDINGLY TO CONTRACTORS

0

100

200

300

400

Forecasted work value

Madinah Office

260

Total coverage required

391

Max. ceilings

Contractor A

Contractor B

Contractor C

Contractor D

391

Min. ceilings

Contractor A

Contractor B

Contractor CContractor D

156

Work Value (M SAR)

Note: This data pertains to the Madinah office onlySource: SEC data

Demand

EXAMPLE OF MADINAH OFFICE

Supply

x150% ~ x

40%

Contractors’ bids and prequal scoreswill be used in determining the

contract ceilings

TenderingPrequal Contracting

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CONTRACT SAFETY REQUIREMENTS ARE UPDATED TO INTEGRATE 5-STAR SYSTEM

TenderingPrequal Contracting

5 star safety system is now a mandatory system that all contactors

must abide by

CONTRACT SAFETY REQUIREMENTS ARE UPDATED TO INTEGRATE 5-STAR SYSTEM

• Safety KPIs are incorporate in contractor performance measurement:- Number of Type 1 (First Aid) Incidents per 1 M work- Number of Type 2,3,4 (Injury, Handicap, Death) Incidents per 1

M work- Percentage of times that work site complied with SEC safety

standards

• 12% of the points in the prequalification scoring pertains to safety record & HSE systems

• Safety performance averaged over the last three months will be reflected in work allocation through KPIs

• Contract addendum enforces the 5-star safety system in performance

• Safety systems will be checked in post-signing stage. Contract is subject to termination if standards are not met

• Non-compliance on safety requirements for trenches subject contractors to a penalty of 200 SAR

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Timely Work Performance

1. Percentage of WOs completed within time (count)

Total work orders completed on time compared to total number of WOs completed

2. Percentage of WOs completed within time (value)

Value of all work orders completed on time compared to all work value performed under URC

5. Average delay on delayed WOs (count) The average number of delayed days for all work orders that have delays

7. Density of contractor work Average work value for a given contractor's work orders

Safety Performance

9. Number of Type 1 (First Aid) Incidents per 1M SAR work

Number of type 1 incidents that happen with a given contractor compared to his value of work

10. Number of Type 2,3,4 (Injury, Handicap, Death) Incidents per 1M SAR work

Number of type 2, 3, 4 incidents that happen with a given contractor compared to his value of work

12. Percentage of times that work site complied with SEC safety standards

Number of contractor site visits that complied with SEC safety standards compared to total number of site visits

Collaboration & Responsiveness

18. Average number of days to accept work order Response time of contractor when a work order is issued

20. Number of emergency and maintenance rejected WOs* Number of emergency and maintenance rejected work orders in a given month

21. Number of construction rejected WOs Number of construction rejected work orders in a given month

CATEGORY KPI DESCRIPTION

TenderingPrequal Contracting

~10 KPIs were developed based oncurrent situation & best practices

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KPI DASHBOARD TO BE GENERATED MONTHLY…

…AND AUTOMATICALLY LINKED TO EVALUATION USING WEIGHTS

TenderingPrequal Contracting

New evaluation system will the building block for a future incentive & penalty scheme

We have developed a newdashboard for KPIs linked to the

standard evaluation form