Karachi-Rupee devaluation, surging inflation, policy rate hikes, and reduction in economic activity, alongwith continuing volatility in sociopolitical and macroeconomic conditions throughout FY23 have had a trickle-down impact on multiple sectors including KE. The KE’s operations and profitability have been impaired during the first nine months of FY23 as a result of these persevering challenges.
Compared with the period July to March 2022, the KE has observed a reduction in units sent-out by 5.8 percent due to reduced economic activity, huge exchange loss owing to devaluation of Pak Rupee, and an increase in impairment loss against doubtful debts due to high inflation, government-mandated increases in consumer tariff, and current economic conditions, which collectively are impacting the customers’ propensity to pay. An additional burden is being placed by surging finance cost, mainly on account of increase in effective rate of borrowing and higher levels of borrowing. The KE operates under regulated tariff and as per the current Multi-Year Tariff, effective from July 01, 2016, no adjustment is provided to the company in tariff for changes in sent-out and policy rates. The aforementioned factors have resulted in a net loss of Rs9.4 billion in the nine-month period of FY23, compared with the net profit of Rs1.49 billion in the same period for FY22. The company reiterates that regular bill payment is critical to ensuring uninterrupted supply of power and is taking initiatives to improve recoveries by introducing easy installment payment solution for its customers under the scheme, “Humqadam – Recovery Plan”. Facilitation camps are being established across the city, which also included night camps, post-iftar during Ramazan. On the Generation side, after successful heat rate test duly witnessed by NEPRA, COD of BQPSIII Unit 2 has been declared effective from March 09, 2023 on RLNG. Unit-1 is under observation and an expected heat rate test is planned in early May 2023 on RLNG, post which COD for Unit 1 will also be declared. On the transmission front, KE is making quick progress on its KKI Grid – the first 500 kV facility in the KE’s network strengthening the connection with the National Grid – and the new 220 kV Dhabeji Interconnection. Further projects to enhance system reliability are also underway. The KE’s proposed investment plan for the next control period (FY24-FY30) focuses on improving network stability, safety, and reliability to ensure access to affordable energy for all; a public hearing was conducted by NEPRA on March 01, 2023, in this regard. Another upcoming hearing pertaining to the company’s Generation Petition is scheduled for May 02, 2023.
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The KE remains committed to addressing the prevailing challenges and focuses on enhancing its operational improvements along the value chain. The company is also working on the renewal of the tariff for the next control period starting from July 01, 2023, with an aim to obtain a sustainable, cost reflective, and investment enabling tariff with adjustment mechanism at par with other power sector entities. Further, the company remains engaged with the Government of Pakistan for sustainable resolution of the government receivables’ issue as it is adversely impacting the company’s cash-flow position and hence the bottom line. Support from key stakeholders including government and the regulator remains crucial for the KE for ensuring continuity of reliable and smooth service to customers, at optimal costs.