The Board of Directors of K-Electric Limited in its meeting held on October 27, 2020, approved the Company’s financial results for the year ended June 30, 2020. In the results issued to the PSX, KE declared a loss of PKR 2.96 billion in glaring contrast to a profit of PKR 17.274 billion during the same period last year. This is primarily on the back of accumulated government receivables and delayed determination of tariff variations which have severely impacted working capital requirements of the Company and driven up finance costs by 166% to PKR 16.737 billion vs. PKR 6.285 billion in FY 2019. In spite of these financial challenges in the backdrop of COVID-19 pandemic, over PKR 55 billion have been invested by the Company across the generation, transmission and distribution businesses.
Both, Industrial and commercial consumption reduction on account of COVID-19 lockdown and load-shed exemption for high-loss areas coupled with the mobility restrictions for theft detection activities, impacted the sales mix of the Company. However, despite these constraints brought on by the pandemic, T&D losses were kept within control, showing a marginal increase of 0.6% in 2020 compared to the previous year. Similarly, sales growth of 0.5% was witnessed during FY 2020. Before COVID-19 spread accelerated, up until March 20, 2020, the Company had shown even stronger operational performance with 3.1% growth in units sent-out as well as 2% T&D loss reduction, year-on-year. With the easing of lockdown since June 2020, KE’s operational performance is on track for the year FY 2021.
According to Moonis Alvi, CEO, K-Electric, “The year under review was unprecedented in more ways than one with the COVID-19 lockdown during which we provided uninterrupted power focusing on serving vulnerable consumer segments. Despite the mounting financial strain on the Company because of pending Govt. receivables, KE continues to focus on the future and the city’s energy security. The Company’s USD 650 mn BQPS-III project is on course and the first unit is expected to come online by summer of 2021, with successful completion of the project by year-end. The Company has also accelerated investment in interconnection facilities necessary to evacuate additional power from the National Grid to ensure increased availability of power for next summer. This fits in with KE’s vision to move Karachi into a load-shed free position, In sha Allah, before summer of 2023.”
The ballooning circular debt situation and inflated markup claims remain a material concern for KE and affect the sustainability of the power sector. As of September 2020, KE’s net receivables from various Federal and Provincial entities, crossed PKR 80 Billion on principal basis. For recovery of this legitimate cost which is necessary for the sustainability of the Company, KE has filed its working capital adjustment request to NEPRA as part of mid-term review filing in March 2020. It is also important to highlight that the amounts claimed by SSGC and NTDC / CPPA are grossly inflated through the inclusion of disputed mark-up, which is sub-judice, pending judgement from the Honourable courts. In spite of continued accumulation of KE’s receivables from government entities and departments, the Company has ensured payments of current monthly bills to key fuel suppliers and IPPs, including SSGC and PSO, to ensure continuity of business operations. Had these payments not been made, the demand-supply situation within KE’s service area would have been adversely impacted, ultimately resulting in increased load-shed.
The company remains firm in its vision to provide safe and reliable power to all its customers underpinned by investments of around USD 1.5 billion over the next three years, across the power value-chain to achieve its vision of a load-shed free Karachi by the year 2023. Whilst we are committed to invest the amounts mentioned hereinabove, amidst a cost plus tariff regime the investment plan and its execution remain dependent on mid-term tariff adjustments approval by National Electric Power Regulatory Authority (NEPRA) which is pending finalization since March 2020.
