KARACHI: K-Electric (KE) Limited Board of Directors approved the company’s financial results for the 9-month period ended March 31, at a meeting held on Wednesday at KE head office.
While the net profit was declared at 9.443 billion, 93 percent of this is the actual write-off claim as per the mechanism provided under KE’s MYT, which is still pending NEPRA approval. Timely processing of these dues is critical to the financial sustainability of the company, which declared an EPS of PKR 0.34 for the period.
During the period under review, the Company’s financial and operational performance improved as the macroeconomic environment gained momentum along with continued investments of over PKR 57 billion across the power value chain. Increased industrial and commercial activity resulted in increased power demand and drove the units sent-out by 7.2% for the 9-month period ended March 31, 2021 as compared to same period last year. As a result of operational improvements, KE’s gross profit increased by around 25 percent in the 9-month period ended March 31, 2021, compared to the same period in the last fiscal year.
Work on KE’s 900 MW RLNG-based Bin Qasim Power Station III (BQPS-III), a $650 million project continued at a rapid pace during this period, with over 70 percent of the construction works completed for the first unit of 450 MW. Construction of the Spur Pipeline which will be supplying 150 MMCFD RLNG to the Bin Qasim power complex is also progressing swiftly with over 90% of the work completed. Simultaneously, KE is discussing the finalization of the Gas Supply Agreement (GSA) with Pakistan LNG Limited (PLL) to ensure fuel supply availability at the time of commissioning the first unit of BQPS-III.
A significant milestone achieved by KE was the timely completion of rehabilitation and upgrade works on the 220 kV KDA-Jamshoro double-circuit transmission line in coordination with the Government of Pakistan and the National Transmission & Despatch Company (NTDC), enabling the total off-take from the existing interconnections to up to 1,100 MW from summer 2021. This project was completed in record time through the joint efforts of all stakeholders and has remained critical in managing the demand-supply situation during the Ramadan 2021. The company is now working on additional projects to set-up new grids and interconnection points which will enable off-take of additional power from the National Grid. Additionally, the company is undertaking a phase-wise rehabilitation of existing transmission lines and enhancement of grids in Vinder, Uthal and Bela to improve the power infrastructure within its operational territory.
CEO K-Electric Moonis Alvi said “As we complete the first half of Ramadan 2021, I commend the commitment of the Government of Pakistan, Ministry of Energy (Power Division), and NTDC towards the citizens of Karachi. Our joint efforts to complete the 220 kV transmission line enabled us to meet the growing power demands of the city. With their support and commitment, Karachi is exempt from load shed during Sehr and Iftar times. We hope to continue relying on this support as we enter the summer season, and look forward to signing the Power Purchase Agreement (PPA) with NTDC after getting necessary approvals from the Government of Pakistan.”
Further, the Company also remains in continuous engagement with NEPRA for pending approval of requests made within the MYT mid-term review, as well as quarterly tariff variations along with write-off claims, which are critical for KE’s sustainability as well as execution of planned investment of USD 1.5 billion between FY21 and FY 23 to ensure smooth and reliable supply of power to consumers of Karachi.
In addition to setting up the 900 MW BQPS-III plant, the company intends to substantially expand its transmission network through the inclusion of new grid stations and undertake initiatives to further reduce line losses to improve Karachi’s energy landscape.
However, the company also emphasized that collaboration is a must between KE and concerned stakeholders to achieve a sustainable, fair, and equitable resolution to the issue of receivables and payables along with timely approvals from NEPRA to enable continued execution of these planned investments in the greater consumer interest.
While the Company demonstrated a consistent positive trajectory in financial and operational performance, concerns remain over the prevalent circular debt situation and the long-standing matters of payables and receivables with government entities affecting the company’s sustainability. As of March 31, 2021, KE’s net receivables from various Federal and Provincial government entities stood at around PKR 80 billion on principal basis alone. This deficit continues to impact the already strained cash flow position of the company and hinders the company’s growth potential by increasing its borrowing to fulfill working capital requirements. Further, the issue of receivables and payables with government entities is also impacting the smooth execution of supply agreements with SSGC and NTDC/CPPA as well as KE’s ability to undertake the required investment to bridge the supply-demand gap and maintain quality of service. To resolve this long-standing issue, after a lengthy process well-led by an Inter-Ministerial Committee, Terms of Reference (ToRs) for arbitration have been finalized among parties, and are awaiting Cabinet approval for execution.
Copyright Business Recorder, 2021
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