Multi-Year Tariff (MYT)
Delays in tariff determinations and lack of cost reflective tariff not adequately compensating for actual cost of business impacts the ability to make required investments, ultimately compromising consumer interests
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Delays in Tariff Finalization
KE’s Multi-Year Tariff (MYT) finalization took almost 3 years
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Lack of Cost Reflective Tariff
Recovery loss, a critical cost component to be compensated through write-offs in KE’s MYT – however, despite fulfilling the required criteria, there are delays in processing of these claims by NEPRA
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Impact on Planned Investments
Delays and uncertainty around tariff resulted in delayed investments in KE’s power infrastructure including the 900 MW BQPS III RLNG based power plant
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Mid-Term Review
KE has filed for certain adjustments to enable it to execute planned investments in a timely manner – critical that NEPRA processes the same in an expedient manner
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Impact of COVID-19
Significant impact on operational and financial indicators – important that the government and regulator devise a plan / strategy to compensate distribution companies
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Impact of COVID-19
The fall out of COVID-19 and measures including lockdown and deferment of electricity bills are likely to have a significant impact on the power sector, particularly distribution companies – estimated annual impact is c. PKR 500 Billion
Non-Operational (c. PKR 300 Billion)
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Change in consumption mix due to lockdown – adverse mix
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Increase in fixed costs / capacity costs due to increased under / nonutilization of plants
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Delays in determinations for tariff variations / adjustments
Operational (c. PKR 200 Billion1)
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Reduction in units sent-out due to reduced power demand
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Adverse sent-out mix and change in consumption pattern – increase in T&D losses
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Reduced recoveries and financial impact of deferred recoveries
What needs to be Done?
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Adjustments in tariff should be allowed by NEPRA
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Compensation for compliance of government directives
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Package for vulnerable domestic segments
Source: CPPA-G
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KE’s Planned Projects & Demand Supply Outlook
To ensure continued investments across the value chain, it is critical that payment of outstanding dues including TDC and other government receivables is made at the earliest
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Uncertainty around supply from National Grid
KE had to plan for its own power projects to meet Karachi’s growing power demand
Robust Investment Plan including 900 MW RLNG and 700 MW Coal Project
Significant time and resources committed to key planned projects, including 700 MW Coal Project
Delays in approvals of 700 MW Project
Despite lapse of over 3 years, tariff for 700 MW approved by NEPRA is pending notification with Power Division and has thus adversely impacted project timelines
Projected Shortfall in KE’s service area
Due to delays in approvals, there may be a shortfall of around 1,400 MW in KE’s service area in FY 2023
KE being asked to absorb surplus capacity in the National Grid
Due to fragmented planning at national level, there is now surplus capacity and further additions of around 20,000 MW have been committed till 2027
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KE’s Receivables from Government Entities
To ensure continued investments across the value chain, it is critical that payment of outstanding dues including TDC and other government receivables is made at the earliest
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Continuous accumulation in receivables from government entities / departments has resulted in KE’s borrowings to fund operational and working capital requirements reach unsustainable levels
1. FY 2020 balance does not include claims for June 2020, however, includes TDC release received in June 2020
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