Tuesday, November 29, 2022

K-Electric says geopolitical and macroeconomic factors affected performance

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Challenging geopolitical and macroeconomic factors have had a cascading impact on multiple sectors including K-Electric which grapples with immense challenges during the first quarter of FY23.

Surging inflation, policy rate hike, reduction in economic activity and adverse exchange rate variations had a significant impact on the Company’s operations and profitability.

The company observed a reduction in units sent-out by 8.9% on account of reduction in economic activity, huge exchange loss owing to devaluation of Pak Rupee and an increase in impairment loss against doubtful debts due to high inflation, increase in consumer tariff, high FCA and current economic conditions impacting consumers propensity to pay. An additional burden is being placed by surging finance cost mainly on account of increase in effective rate of borrowing and higher levels of borrowing due to non-payment of dues by Government entities which have surged to an alarming level of PKR 80.4 billion on net principal basis.

K-Electric 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. The aforementioned factors resulted in net loss of PKR 16.3 billion in the first quarter of FY23 compared with the net profit of PKR 2.9 billion in the same period for FY22.

Despite these challenges, the Company continues its strides towards operational enhancements and its transmission and distribution losses improved by 2 percentage points from Q1 FY22 to stand at 15.8% at the end of Q1 FY23. Moreover, during the period of extended monsoon the Company’s network and power infrastructure remained resilient and reliable.

Over 40,000 meters have been provided during the quarter to inculcate a culture of metered billing. KE has also stepped up to support those affected by the widespread flooding following the recent monsoon spells. K-Electric employees contributed PKR 2.7 million from their salaries which was matched by KE management to help people in Sindh and Balochistan. Under NEPRA’s CSR vision of Power with Prosperity, KE has donated PKR 7.5 million to Akhuwat’s solar microfinance fund out of which PKR 5.7 million has been utilized for 35 beneficiaries. The second cohort of KE’s Roshni Baji Program also completed their graduation.

KE remains committed to tackle the challenges and focus on furthering its operational improvements. The company is also working on the renewal of the tariff for the next control period starting from July 1, 2023 with an aim to obtain a sustainable, cost reflective and investment enabling tariff with adjustment mechanism at par with other power sector entities. Further, the Company remains engaged with GoP for sustainable resolution of the government receivables issue as the same is severely impacting the company’s cashflow position and the bottom line. Support from key stakeholders including government and regulator remains critical for KE to ensure continuity of reliable and smooth service to consumers at least possible costs.

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