September 15, 2023, KARACHI: The recently concluded fiscal year was significantly influenced by challenging sociopolitical and macroeconomic factors that have had a cascading impact on multiple sectors including KE. Surging inflation, policy rate hikes, rupee devaluation and a contraction in economic activity have cast a significant influence on the company’s operations and overall profitability.
Compared with FY22, KE has observed an 7.3% reduction in units sent out due to reduced economic activity. Inflationary pressures and government-mandated increases in prices of electricity have also impacted customer’s propensity to pay, decreasing KE’s recovery ratio from 96.7% to 92.8% between FY22 and FY23, resulting in an increase in impairment loss against doubtful debts. An additional burden is being placed by surging finance cost mainly on account of increase in effective rate of borrowing. The Company operates under regulated tariff and as per applicable Multi-Year Tariff, no adjustment is provided to the Company in tariff for changes in sent-out and policy rates. The aforementioned factors resulted in net loss for the year of PKR 30.9 billion compared with the net profit of PKR 8.5 billion for FY22.
Despite extremely challenging circumstances, the Company continued its journey of investments in power infrastructure of the city in the interest of its consumers. Key milestones achieved in FY23 included the successful commissioning of both units of KE’s 900 MW RLNG-based BQPS-III plant, which is among the top six efficient generation units in the country. Construction work is also progressing rapidly on the KE’s first flagship 500kV Grid at KKI, with pre-commissioning works also being fast tracked for 220 kV Dhabeji grid. These will enable the offtake of additional electricity from National Grid bolstering the supply available for Karachi. The Company’s Investment Plan 2030, submitted to NEPRA for approval, aims to grow KE’s share of renewable energy to 30%, in addition to investments of PKR 484 billion across the transmission and distribution value chain.
The company also increased its efforts to curb electricity theft and facilitate customers in clearing their electricity dues. Over 100,000 customers have been supported through facilitation camps across the city, and 100 tonnes of kunda wires have also been removed by field teams operating round-the-clock. Connections with long-standing dues are also being disconnected in line with the NEPRA Consumer Service Manual, the governing document for all distribution companies in Pakistan.
Sharing his views, CEO K-Electric stated, “This fiscal year we navigated choppy waters, but our commitment to Karachi did not waver. We are not only strategizing to address the immediate challenges but also fervently working towards the future. We continue to innovate and leverage technology in our business operations and deliver a superior customer experience. We understand the current concerns our customers may have but any direction on price of electricity for the country will come from the Federal Government and is not in KE’s control. We pledge our fullest support to those willing to work with us in overcoming theft and encouraging regular bill-payment. Through our envisaged investment, we are also committed to support innovation, sustainability, and liberalization in the power sector.”
KE remains committed to addressing the prevailing challenges and focuses on enhancing its operational improvements along the value chain. The company is also working on the renewal of the tariff for the next control period started from July 1, 2023, with an aim to obtain a sustainable, cost reflective, and investment enabling tariff with adjustment mechanism at par with other power sector entities. Further, the company remains engaged with the Government of Pakistan for sustainable resolution of the government receivables’ issue as it is adversely impacting the company’s cashflow position and hence the bottom line. Support from key stakeholders including government and the regulator remains crucial for KE for ensuring continuity of reliable and smooth service to customers, at optimal costs.
ABOUT K-ELECTRIC:
K-Electric (KE) is a public listed company incorporated in Pakistan in 1913 as KESC. Privatized in 2005 KE is the only vertically integrated utility in Pakistan supplying electricity within a 6500 square kilometers territory including Karachi and its adjoining areas. The majority shares (66.4%) of the company are listed in the PSX owned by KES Power, a consortium of investors including Aljomaih Power Limited of Saudi Arabia, National Industries Group (Holding), Kuwait, and the Infrastructure and Growth Capital Fund (IGCF). The Government of Pakistan is also a minority shareholder (24.36%) in the company.