Karachi October 28 2022: K-Electric recorded loss of PKR 16.3 billion in the first quarter of fiscal year 2023 compared to profit of PKR 2.9 billion in the corresponding last year, according to company filing to the exchange.
“The difficult socio-political challenge both locally and at international fronts, have had a consequential impact on the macro-economic factors. The economic impact has reverberated through multiple channels, including commodity and financial markets, surging inflation, increasing policy rates and reduction in economic activity” says Company Chief Executive Officer Syed Moonis Abdullah Alvi
“Impacted by these challenges, the Company has observed a reduction in units sent-out by 8.9% and the gross profitability of the Company declined significantly. The Company operates under regulated tariff and as per current Multi-Year Tariff effective from July 01, 2016, no adjustment is provided to the Company in tariff for changes in sent-out and policy rates” He added.
Further, the Company observed increase in exchange loss by PKR 2.6 billion owing to devaluation of Pak Rupee and increase in impairment loss by PKR 4.0 billion against doubtful debts due to high inflation, increase in consumer tariff, high FCA and current economic conditions impacting consumers propensity to pay. The aforementioned factors along with increase in finance cost by PKR 3.4 billion mainly on account of increase in effective rate of borrowing and higher levels of borrowing due to non-payment of dues by Government entities, translated into the loss after tax amounting to PKR 16.3 billion.
The Company is geared up to face the challenges and focusing extensively on further operational improvements as detailed in the relevant business section and also working diligently for renewal of tariff for the next control period starting from July 01, 2023, with an aim to obtain a sustainable cost reflective tariff with robust adjustments mechanism at par with other power sector entities to ensure continuity of reliable and smooth service to consumers at least possible costs.
As of September 30, 2022, KE’s net receivables from various Federal and Provincial entities, stood at around PKR 80.4 billion on principal due basis. The recent increase in fuel prices and non-provision of local gas supply to KE have resulted in a consequential increase in KE’s Tariff Differential Subsidy (TDS) Claims receivable from the (Government of Pakistan) GoP.
Despite the pending release of KE’s receivables from government entities and departments coupled with significant increase in fuel prices globally, KE in the best interest of consumers managed payments to fuel suppliers from the cash collected so that no source of power availability is compromised.
The backlog of receivables continues to have a consequential impact on the Company’s cashflow position and resultantly its ability to enhance the pace of investment in power infrastructure. However, for sustainability of KE as well as the sector at large, it is imperative that all parties including the Government, reach an amicable solution to resolve this long-standing issue in accordance with the law.
