KESC shines

Just a few days ago, members of the Senate’s Standing Committee on Water and Power requested the government to undo KESC’s privatisation and hand it back to the government. Now, as the Company continues to post successive improvements in its performance, one wonders whether those members are also aware of its break from the tainted past of government ownership and operations.
The metropolitan’s sole power distributors’ annual financial results for FY13 make a very strong statement about why KESC is doing exceedingly well and could do even better if it were not for delays in payment by the government.
KESC announced its financial results for FY13 yesterday-–reporting a massive increase of over two times in net profit. The Company has generated higher number of units lately with a drive towards reducing transmission and distribution losses. T&D losses that once towered to about 40 percent in Karachi had plopped to 26 percent as at March end 2013.
Improved generation and distribution efficiency have translated into a steep rise in gross margins from 10 percent last year to 15 percent in FY13. Operating profits reflect the hard work put in by the firm into more effective collection and load distribution systems.
That said—the ‘C’ word played spoiler in KESC’s profits yet again. The bottom line could have been much fatter, had it not been for humongous financial charges. The Company’s finance cost nearly doubled during FY13 as there was no respite in mounting receivables, forcing it to arrange for short-term fixes for working capital and operating requirements. The pre-tax profit still grew considerably, as the top line growth trickled down.
While, most of the IPPs have received payments on account of circular debt settlement by the government, KESC remains the lone step child. Despite repeated requests to government officials, KESC had not received a penny on this account by August 15, 2013. The pain was felt by citizens of Karachi, as the Company increased the duration of load shedding.
KESC has conducted its business efficiently despite tough conditions. However, if it continues to get the cold shoulder from Islamabad, the brunt of financial charges may be too daunting a task for KESC to handle. Since the Chairman of the Senate Standing Committee is convinced that privatisation is such a bad thing, perhaps Senator Zahid Khan can present KESC’s management with a roadmap to mirror the stellar financial achievements of state-owned gencos and discos.

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KARACHI ELECTRIC SUPPLY COMPANY

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Rs (mn)                                   FY13      FY12       chg

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Revenue                                188,989   162,816       16%

Expenditure                            146,179   133,255       10%

Gross profit                            28,821    16,260       77%

Gross margin                               15%       10%         -

Operating profit                        17,865    10,271       74%

Finance cost                            13,960     7,702       81%

Profit before tax                        3,904     2,569       52%

Profit after tax                         6,729     2,602      159%

EPS (Rs)                                  0.26      0.11

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