KARACHI ELECTRIC SUPPLY COMPANY LTD.

S.KAMAL HAYDER KAZMI,
Research Analyst
, PAGE
Nov 02 - 08, 2009

Karachi Electric Supply Company Ltd. (KESC) is engaged in generation, transmission, and distribution of electricity to its domestic, commercial, and industrial consumers.

KESC covers an area of 6,000 square kms and supplies electricity to industrial, commercial, agricultural, and residential areas that fall under its network. The company provides electricity to 2.1 million customers in Karachi, Dhabeji, and Gharo in the province of Sindh and Hub, and Uthal, Vindhar and Bela in Baluchistan.

The main generation units consist of Bin Qasim Power Station, Korangi Thermal Power Station, Site Gas Turbines, Korangi Gas Turbines, and the Korangi (Combined Cycle Power Plant).

OPERATING RESULTS OF GENERATION

DESCRIPTION JULY TO JUNE 2008-09
Installed Capacity (MW) 1,955
Actual Capacity (MW) 1,514
Firm Capacity (MW) 1,423
Maximum Demand (MW) 2,462
Units Generated (MWH) 8,262,115
Power Purchased (MWH) 7,005,362
Total Units Available (MWH) 14,648,751
T & D Losses (MWH) 5,252,282

FINANCIAL RESULTS

KESC generation decreased by 4.62% during the year under review as compared to the last year due to less generation at power plants on account of planned maintenance. KESC unit sent out decreased by 4.43%, which is directly attributable to 4.62% reduction in KESC generation.

The revenue from the sale of electricity registered an increase of 17.06% resulting from a tariff increase of 18.44% allowed by NEPRA in Oct 2008. The impact of increased revenue was offset by the increase of Rs.1, 566 million (4.36%) in fuel bill over last year due to increased gas consumption and higher price.

FINANCIAL RESULTS (RS IN 000)

INDICATORS FY 2009
Revenue 85,224,084
Expenditures (82,371,729)
Gross loss (6,602,536)
Operating Loss (9,831,209)
Loss Before Taxation (15,451,004)
Net loss for the Year (15,484,942)
Loss per share (Rs) (1.07)

Operation and maintenance expense increased by 16.31% over last year mainly due to annual increase in salaries and wages and other benefits of the company's employees, and repairs and maintenance of plant and machinery.

KESC is facing a liquidity crunch that cannot be fixed with additional equity or debt. Whilst the company has embarked on an aggressive T&D loss reduction campaign and bill recovery programme, there are a number of external issues that need to be resolved in parallel on a priority bases and require the support of the government.

KESC has over Rs37 billion as of 31 August 2009 stuck in verified receivables at local, provincial, and federal levels.

RENTAL POWER (50MW)

In September 2008, in order to partly meet additional power demand for the summer 2009, KESC entered into a power rental agreement with Aggreko to build, own, and operate 50 MW rental power plants, 25 MW each at haroonabad and west wharf sites.

Aggreko delivered the project as per original time schedule. 25 MW at haroonabad site was commissioned in Dec 2008 and other 25 MW at west wharf site was connected to the grid in March 2009.

ENERGY CONSERVATION PROGRAM

The Karachi energy conservation program is a social service initiative and an important facet of Karachi's energy usage policy, with a principal goal of saving 200 MW of electricity in the city by 2011.

The program has been launched in partnership with the City District Government Karachi (CDGK) and the citizens of Karachi. This is a movement for the city of Karachi, which will involve, interact, communicate with, and eventually persuade the citizens of the city to take responsibility to use electricity smartly and wisely. The cause should gain momentum to somehow bridge the gap of demand and supply of electricity and become a national movement with all energy related organizations joining this public service initiative conservation.

RECENT DEVELOPMENT

Recently, the KESC has signed a five-year contract with Al-Abbas Sugar Mills Ltd. for purchase of 15 MW electricity during the next five years from its coal-based power plant at Dhabeji. This will be the first coal-fired power plant connected to the KESC's electricity generation network.

National Electric Power Regulatory Authority (NEPRA), the electricity regulator, has decided to impose the penalties on the KESC that include a fine of Rs 300,000 being the maximum amount prescribed under section 29 of the Act for its failure to provide an uninterrupted power supply to its consumers as per its obligations under the licence conditions. Another fine of Rs 300,000 was also imposed on the KESC for its failure to dispatch adequate power from its own plants and IPPs, which resulted in shortage of power and resultant load shedding.

YEAR REVENUE (RS IN MN) LOSS/ PROFIT AFTER TAX (RS IN MN)
2000-01 29,004 (1,6353)
2001-02 31,047 (1,7716)
2002-03 33,578 (8,311)
2003-04 37,856 1,086
2004-05 41,307 321
2005-06 53,843 (7,191)
2006-07 61,038 (12,176)
2007-08 69,889 (16,072)
2008-09 87,709 (15,484)

CONCLUSION

KESC management has so far failed to get people out of frustration due to load shedding. It needs to strive hard to overcome the power deficit.

The company intends to execute various programmes over the next few years but a better implementation is required to overcome the current energy crisis and to make Karachi an environmental friendly city. The KESC management needs a concerted effort to bring the utility back on profits.