Financial statements: Compliance with applicable reporting framework ensured: KE

ISLAMABAD: Denying accusations levelled by one of the Board members, Asad Ali Shah, Karachi Electric (KE) has said that the company has established proper governance controls and robust systems to ensure that its financial statements are compliant with the applicable financial reporting framework.

In a letter to Farrukh Khan, CEO, Pakistan Stock Exchange Limited, KE’s Chief Risk Officer and Company Secretary, RizwanPesnani stated that write-offs are part of the company’s tariff regime, ie, Multi-Year Tariff, which is publicly available, therefore, there is no ambiguity concerning the recognition of claims for the write-off of bad debts.

The KE has intimated PSX on January 24, 2023 on its action against the false and unsubstantiated claims made by former director Asad Ali Shah on the company’s treatment of its financial statements. This was pursuant to a controversial letter to MD PSX authored by Shah – a chartered accountant – which was widely circulated in the public domain and claimed to point out irregularities in the way that KE was reporting its finances and documenting revenue.

KE says will take ‘appropriate legal action’ on ex-board member’s letter

The company’s disclosure to the bourse stated that legal action had been initiated against Shah for misconstruing key facts, which seemed to indicate mal-intent and cause damage to KE’s reputation among investors and shareholders.

According to the power utility company, actual plea document submitted to Sindh High Court which is available uses policies of regulatory authority to dispel misrepresentation of facts. Against Shah’s allegation that KE is illogically defining consumers as “premises,” NEPRA Manual for Consumers is presented as clear evidence that author’s claim is completely incorrect. Clause 8.5(a)(iii) states: “The consumers who sell their houses, shops, industries, seasonal factories, etc. without making payment of electricity bills, DISCO (KE) shall recover the arrears from the new occupants of the defaulting premises.”

The Court petition also points out a mistake in Shah’s accusation that KE records revenue for all electricity theft across Karachi. The allegation is unfounded as it does not distinguish between registered temporary connections provided by the company and unsanctioned, illegal theft. Such mistakes, the defendant KE argues, are painting a biased picture of the organization and its practices, indicating a deeper, mala fide motive.

Furthermore, Nepra’s decision of 2019 on KE MYT is also furnished to disprove the accusation that the company is making claims of write-offs while the company does not have any ID cards of these customers. The KE explains that the determination and decision of the MYT was an extensive process and during deliberations the requirement of CNICs was removed due to its impracticality. As the governing body of the power sector, this decision is binding upon the DISCO and KE has also actively developed a comprehensive policy in consultation with relevant stakeholders to ensure that the write-off claims presented are accurate. Financial statements have been prepared and verified with support of multiple auditors over the years and all necessary disclosures are also provided, though the accusations appear to be cherry picking information and demonstrating otherwise.

Barrister Ayan Ali Memon, who represents the defendant, also argues that the act of publicly circulating the letter despite availability of competent forums for redressal is a breach of a director’s fiduciary responsibilities and confidentiality clauses applicable on them. Such behaviour could render an individual liable for disqualification for directorship in any company.

As per information available, after admitting the plea, the court has restricted Shah from publicizing material on social media, WhatsApp, electronic and print media and scheduled a hearing soon.

Copyright Business Recorder, 2023