KESC expects to make first profit after five years

Power distributor issues right shares to generate Rs5.4b.

KARACHI:

The Karachi Electric Supply Company (KESC) has projected that it will switch to a profit regime in the outgoing financial year after a gap of five years. Despite all problems surrounding the company, a profit of Rs2.15 billion is estimated for financial year 2011, more than the total amount the company made in the last ten financial years.

The power distributor witnessed a profit only twice in the last twelve years. Moreover, it took the controversial new management of Abraaj Capital less than three years to switch it into a profit making company. The financial statement for the outgoing year has still not been announced. The company sees its profits swelling seven folds to Rs14.1 billion in the current financial year 2012.

The Karachi Electric Supply Company has also decided to issue right shares to generate Rs5.4 billion fresh capital.

The fresh equity will support the capital expenditure and improve profitability of the company, according to a statement issued by the power distributor.

The board of directors in a meeting held on Friday decided to issue 7.25 per cent right shares, hence 29 new shares for every 400 ordinary shares held by stakeholders.

The company plans to boost its net equity by more than five times to Rs6.6 billion with the proposed right issue.

Dubai-based Abraaj Capital took over management controls of the city’s sole power distributor in October 2008 and the stock price since then has fallen 43.7 per cent to Rs2.14.

“Funds generated will be utilised to partly finance the equity component of new power generation projects and capital expenditure to augment and expand dilapidated transmission and distribution network,” adds the statement.

KESC’s stock price rose Rs0.02 to close at Rs2.16 during trade at the Karachi Stock Exchange on Friday.





Published in The Express Tribune, July 30^th, 2011.