KARACHI ELECTRIC SUPPLY COMPANY LTD

S.M. ABBAS ZAIDI,
Research Analyst
, PAGE
May 25 - 31, 2009

The Karachi Electric Supply Company Ltd (KESC) engages in generation, transmission, distribution of electric energy to industrial, commercial, agricultural, and residential consumers in Pakistan. In November 2005, the privatization of the KESC was finalized with the transfer of 73% shares of Government of Pakistan along with Management Control. New investors include KES Power Limited, Hassan Associates (Private) Limited and Premier Mercantile Services (Private) Limited who hold 71.5%, 1.00% and 0.5% shares in the capital of Company, respectively. KESC operates as a subsidiary of KES Power Ltd.

OPERATIONAL PERFORMANCE (UNITS-GWh)

OPERATIONAL JAN-MARCH 2009 JAN- MARCH 2008
Units generated KESC 1,842 1,680
Unites sent out KESC 1,709 1,547
Units purchased 1,356 1,321
Total units available for distribution 3,065 2,868
Units billed 1,895 2,029
Transmission & Distribution Losses 38.2% 29.2%
SHARE HOLDING PATTERN
SHARE HOLDERS NO. OF SHARES % OF SHAREHOLDING
Govt. of Pakistan 3,403,763,472 25.65%
New Investors 9,611,964,737 73.00%
Others 151,346,774 1.35%
Total 13,167,074,983 100.00%
Source: KESC

FINANCIAL PERFORMANCE

FINANCIAL PERFORMANCE
(Rs in mn)
INDICATORS JAN-MARCH 2009 JAN- MARCH 2008
Sale of Energy 11,903 10,391
Other Revenue 873 683
Gross Revenue 12,776 11,074
Cost of fuel & power purchase -(Net of Subsidy) (10,099) (10,081)
  2,677 993
O&M Expenses 2,788 2,408
Provision for doubtful debts 300 765
Depreciation 951 898
Financial & other charges 1,278 499
(Loss) before tax (2,640) (3,577)
Loss per share Re. (0.21) (0.28)
Source: KESC

KESC generation increased by 162 GWh (9.64%) over the corresponding period last year, mainly attributable to commissioning of GTs of 220 MW combined cycle power plant at KTPS which contributed 129 GWh. Power purchases from WAPDA increased by 2.64% (35 GWh). Ratio of self-generation to power purchase improved to 56:44 from 54:46. Total units available for distribution increased by 6.87% whereas total units billed decreased by 6.60%. The Management should make all out efforts to reduce T&D losses by working upon a long term and sustainable solution on improving the billing and recovery systems. Revenue from sale of energy has registered an increase of 14.54% mainly because of tariff increase allowed by NEPRA in October 2008. Cost of fuel has also gone up by 11.01% due to 38% escalation in gas prices and higher power purchase cost due to increase in consumption and per unit cost from WAPDA.

O&M expenses increased by 15.77% whereas financial charges were substantially higher by 156.11% on account of increased interest payments on KIBOR-linked running finance facilities availed by the Company in order to meet working capital shortfall and as KIBOR had scaled up during the period under review. Additionally increased interest charges on deferred payments because of cost of fuel and power purchases also contributed to enhanced financing cost. Loss before tax for Q3 because of cumulative impact of positive & negative contributing factors as stated above decreased by 26.19% from Rs.3, 577 M in Q3-08 to Rs.2, 640 M. One of the contributing factors to the decrease in loss has been the realization of subsidy after removal of 4% cap on the increase in cost of fuel and power purchase in tariff determination. It is important to note that cost of power purchase & fuel, depreciation and financial charges collectively constitute approximately 86% (Rs.18,971 M) of total expenditure (Rs.22,060 M).

TRANSMISSION & DISTRIBUTION

A number of critically important projects have been commissioned or are in the final stage of completion, which has improved network reliability and increased transmission & distribution capacity. 132 kV GIS Hybrid Grid Stations at PRL, Gulshan-e-Maymar and Korangi South have been completed and commissioned. Whereas, five (5) other 132 KV GIS Hybrid Grid Stations are at various stages of completion and shall be commissioned in a phased manner, which would further improve network reliability and capacity of the transmission network.

CURRENT SITUATION

Karachi, the economic hub of the country, is facing extended hours of power outages. PEPCO was providing 600-800MW electricity; well-above 250MW that they were asked to provide. According to PEPCO this additional 600-800MW power supply to KESC, invalidates justification of load shedding. The installed capacity of KESC's various generating stations is 1690MW against the maximum demand of 2300MW. The maximum demand supply gap of 600-700 MW is bridged by IPPs (Tapal & Gul-Ahmed), KANUPP and PEPCO. Meanwhile, the FPCCI Chief has also lamented that KESC is deliberately curtailing its own power generation for reasons best known to them and thus playing havoc with the lot of trade, industry and people in general, thereby inflicting deadweight loss on the national economy.

CONCLUSION

KESC needs to ensure maximum utilization of its capacity by streamlining its operations in the greater national interest and there should not be any load shedding. There is a strong need that the President, Prime Minister, and Minister for Water and Power to take notice of load shedding and save Pakistan's commercial/industrial hub. Similarly, our judiciary has also become very strong and has been taking notices on various issues. Therefore, it is a demand of the time that it takes a strong notice of nemesis of load shedding.