What is KESCs New Year gift to its consumers?

K.E.S.Cs New Year gift to its consumers is hope. The firm plans to offer right shares to the stockholders whose names would appear in the register of members at the close of business on January 1, 2010. The back to back issues of two right offers would take the firms paid up capital to Rs75 billion from Rs52 billion at present.
While in part, the funds generated through right shares would help plug its working capital deficit and reduce bank borrowings, it will be mostly be utilized to finance the equity component of new generation projects and to improve the rundown state of its existing transmission and distribution network.
K.E.S.C. expects the right issue to positively contribute towards its future financial results by reducing these losses.
According to company projections, the issue would reduce its net losses to Rs2.267 billion by 2010-11, as against net loss of Rs15.4 billion incurred in fiscal year 2009. The firm forecasts to finally start earning profits in the subsequent years, expecting to post net earnings of Rs8.278 billion 2011-12 and Rs23.615 billion in 2012-13.
The question, however, is whether the utility companys ambitious plan to improve operations will work or not. So far, and despite its efforts, the new management has been unable to boost bottom-line profits for one reason or another.
The firms generation capacity decreased by 4.6 percent during financial year 2009, whereas, the units available for distribution increased by 0.85 percent with unit billed reduced by 1.80 percent.
Consequently, transmission and distribution losses increased to 35.6 percent from 34.1 percent over the previous year.
It is no hidden secret, that power shortage is not a KESC-specific phenomenon; neither can transmission and distribution losses be patched up so promptly. Such losses arise due to lack of adequate infrastructure, which is typically laid out and upgraded gradually over a course of time.
Even if this right issue supports KESCs finances - there are high chances that the firm will continue to book line losses, as most of it is not due to small hiccups in the system but due to years of mismanagement, inefficient billing and theft.
The so called kundas are something so pervasive and so much politically charged at times that even the army generals couldn sever it when they ran the ailing firm before its privatization in late 2005.
One test of confidence on KESCs plan is how will retail investors react to the issue. Priced at Rs3.5per share, the right issue is 32 percent costlier than the firms average stock price of Rs2.60 since Jan 2009.
Yet, some smart money was seen active on December 11, when trading volume in KESCs stock jumped manifolds to 3.65 million, compared with average of 0.73 million in the fiscal year to date.