During the six months period ended 31 December 2021, the units sent out increased by 2.4% over the same period last year affirming growth in the city’s appetite for electricity. Further, continued investment in the utility’s infrastructure enabled the company to reduce transmission and distribution losses by 1.9% points. As a result, Company’s gross profit witnessed an 11% increase over the same period last year.
However, the corresponding increase in net profit of the Company could not be witnessed due to the devaluation of the Pakistani Rupee in the international market and an increase in impairment loss against trade debts. The increase in impairment loss against trade debts was a result of higher electricity prices coupled with general inflation adversely affecting the customers’ propensity to pay. Despite challenging circumstances, the Company continued its effort to improve its collection rate, and the Company’s collection rate improved by 3.3% to 94.9%.
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During the six months period, the utility made significant progress on commissioning the first unit of its flagship 900 MW RLNG-based Bin Qasim Power Station 3 (BQPS-III). The first Unit of 450 MW is currently in the final commissioning phases ahead of its next milestone. The company is simultaneously pursuing construction of 500 kV as well as 220 kV grids and interconnection which will allow KE to import up to 2,050 MW of electricity from the National Grid, further improving system reliability to serve Karachi as well as reducing the burden of idle capacity costs in the National Grid. Supplementing these initiatives, KE also added 6 power transformers at various grids across the city along with regular maintenance of the network, crucial to a reliable supply of electricity.
The company is also making strides in its mission to uplift communities while curbing transmission and distribution losses. As part of its flagship Project Sarbulandi, around 127,000 new connections were given in the first half of FY22, bringing a safe and reliable power supply to an increasing number of consumers which will spur socio-economic development. Moreover, as part of its commitment and to further customer centricity, the power utility took various initiatives focusing on customer facilitation and digitization.
However, the backlog of net receivables from various Federal and Provincial entities – standing at around PKR 73 billion on a principal basis as of December 31, 2021 – continues to have a consequential impact on KE’s cash flow position and adversely impacts its ability to accelerate the pace and scale of investment in power infrastructure. Therefore, for the sustainability of KE as well as the sector at large, it is imperative that all parties including the Federal Government, come together for an amicable solution to resolve this long-standing issue.
In this regard, discussions around the finalization of the Arbitration Agreement to resolve historic disputes involving relevant parties are ongoing and the Company remains in continuous engagement with relevant stakeholders for a fair resolution to the issue in accordance with the law. Further, the Power Purchase Agency Agreement (PPAA), InterConnection Agreement, and Tariff Differential Subsidy Agreement for the off-take of additional supply from National Grid and release of subsidy have been materially agreed with relevant stakeholders and will be executed post relevant approvals.
Going forward, the Company remains committed to its planned investments and looks forward to a sustainable resolution to the issue of government receivables and timely approvals by NEPRA which remain critical to the execution of planned investments.
