ISLAMABAD: K-Electric, the country’s only privatised power utility, has warned that the tariff revisions proposed by the Power Division could result in an annual financial loss of Rs100 billion, severely undermining its financial viability and Karachi’s energy security.
In this regard, KE Chairman Mark Gerard Skelton and CFO Aamir Ghaziani have jointly written to the Secretary Power, with copies marked to the finance minister and senior Nepra officials.
Their letter, dated October 7 – two days before Nepra’s hearing, during which the Power Division reportedly adopted an aggressive stance – informed senior government officials and the regulator of key developments during week-long deliberations.
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These discussions focused on review motions and a reconsideration request filed by the Power Division, challenging KE’s multi-year tariffs for transmission, distribution, supply, and generation for FY 2024-30, as well as its write-off decision for FY 2017-23.
KE said detailed talks took place between September 29 and October 3, with delegations led initially by Rihan Akhtar, CEO CPPA-G, and later by Additional Secretary Power Division Mahfooz Bhatti, alongside officials from the Power Division, PPMC, CPPA, and PPMC’s legal counsel, Munawar-Us-Salam.
During the hearings, KE presented multiple representations concerning generation, transmission, distribution, supply tariffs, and the write-off decision.
The utility flagged procedural and factual deficiencies – initially outlined in its September 29 letter – and reiterated these concerns during the hearings, submitting detailed written comments for NEPRA’s consideration.
KE also felt compelled to clarify a claim made by a Power Division representative before October 7, asserting that the proposed tariff adjustments would have no cash-flow impact on the utility.
“With utmost respect, we submit that this assumption does not fully reflect the financial reality,” KE said, adding that each rupee cut in its determined tariff results in a Rs15 billion decline in recoverable revenue, severely affecting its bottom line and cash flows.
KE warned that the Power Division’s proposed adjustments could lead to an annual loss exceeding Rs100 billion, threatening its financial viability and Karachi’s energy future.
For FY 2024 alone, projected earnings of around Rs4 billion would turn into a loss exceeding Rs100 billion. The impact would extend beyond finances, undermining investment plans, cash flows, and the ability to serve Karachi and its surrounding areas.
The proposed disallowances, KE added, would fully erode its margins, shifting the company from an EBITDA-positive position to an operating deficit.
Moreover, the projected annual loss would breach financial covenants tied to several syndicated and multilateral loans. As of August 31, 2025, KE’s total outstanding debt stood at Rs272 billion, including Rs91 billion in foreign and Rs181 billion in local loans.
KE warned that lenders, including international development finance institutions and local commercial syndicates, might invoke “event of default” clauses, accelerating loan repayments and demanding immediate settlement of outstanding amounts. This could also freeze undisbursed tranches and cancel committed credit lines.
The letter further cautioned that eroded cash flows would sharply limit working capital, causing delays in essential operations, vendor payments, and fuel purchases – directly threatening electricity supply to Karachi, home to over 20 million and the nation’s economic hub.
Ultimately, KE’s going-concern status would be at risk, potentially leading to qualifications in its statutory financial statements and regulatory filings with the Securities and Exchange Commission of Pakistan (SECP) and Pakistan Stock Exchange (PSX).
“The macroeconomic consequences of such financial stress could ripple across the broader power sector and erode investor confidence in the government’s ongoing privatisation and reform efforts,” the letter added.
“Our intention in submitting this letter is to ensure that your good office has a complete and factual view of the potential consequences of the assumptions under consideration, so that any revisions pursued by the Power Division reflect a balanced appreciation of operational sustainability and public interest,” KE’s Chairman and CFO concluded.
Given the seriousness of the matter, KE’s top management has requested a meeting with the Secretary Power Division to present detailed data and brief him personally.
They stressed that such a discussion is essential to ensure an informed, fair decision that safeguards Karachi’s energy security and the power sector’s stability.
Copyright Business Recorder, 2025
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