KESC switches to profit after six years of losses
Karachi Electric Supply Company (KESC) has switched to a profit regime in fiscal 2012 after a gap of six years.
The electric supplier posted net profit of Rs2.62 billion, more than the total amount the company made in the last ten financial years, in fiscal 2012 compared with loss of Rs9.4 billion in the same period a year ago, says a notice sent to the Karachi Stock Exchange.
The profit also marks the first billion made by Dubai-based Abraaj Capital since it acquired management controls of the city’s sole power distributor in November 2005. The management posted a profit of Rs321 million in the year it took over and since then has been incurring a loss. The utility witnessed a profit only twice in the last twelve years.
The core increase in profitability stems from tariff adjustment, one of the three ways the electricity distributor generates revenue, data shows. Revenue from tariff differential electrified 56% to Rs70 billion in the outgoing financial year compared with the preceding year’s Rs45 billion.
Overall revenues grew 24% to Rs163 billion compared with the preceding year’s Rs131 billion.
The company also managed to trim expenses incurred in transmission, generation and distribution by 8% to Rs13.3 billion in fiscal 2012 from Rs14.5 billion.
Transmission and distribution losses have come down to 32.2% of the total from 34.43% in fiscal 2005, the year it switched from being a state-owned enterprise to a private company. The line losses are still higher than the national average of around 22% and more than double the global average of around 15%.
The company’s shares rose 22% or Rs0.81 to Rs4.49, the highest since May 3 during trade at the Karachi Stock Exchange.
The result will help us position KESC favourably in the investors’ community and help us generate funds for our future mega projects, added Gauhar. A profitable KESC will help us attract the required financial resources from local and international financiers,” said KESC CEO Tabish Gauhar in a press statement.
Raising capital
The new management has had to raise large amounts of capital in order to switch the entity into a profit regime.
During the last few years, KESC has been successful in arranging substantial funds for its development project from Asian Development Bank, International Finance Corporation and OEKB along with many local financial institutions.
In July 2011, the company decided to issue 7.25% right shares, hence 29 new shares for every 400 ordinary shares held by stakeholders.
The management launched term finance certificate worth Rs2 billion to the general public in May 2012, to finance KESC’s permanent working capital requirements.
In the latest move, KESC will list secured term finance certificates of Rs1.2 billion to raise capital. Privately placed term finance certificates are offered to banks, other financial institutions and not the general public. KSE notified on Wednesday that trading in the second such term finance certificate of KESC will start on the Exchange from August 13, 2012.
“We are grateful to our international shareholders who have been very patient and our international and local lenders who entrusted us with their money,” said Gauhar.
Published in The Express Tribune, August 9th, 2012.
COMMENTS (19)
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A measly two percent decrease in transmission and line losses shows that KESC is not particularly operating any more efficiently than it used it. Jack up the prices high enough and even the most inefficient company will make a profit.
This is just the start. There is still a long way to go.
WAPDA is losing Rs 2 Billion a day. Punjab's 15% line losses do not reflect reality - all losses are covered up and parked in other places (like FATA). Electricity theft needs to be criminalized - right now even police stations in Karachi run on stolen electricity.
Privatization for WAPDA is the only way to go forward.
https://twitter.com/KESCwala
@Hassan Hakeem: There is no comparison to the Punjab where things are better managed and you never had such line loss as with the KESC. Things are better anaged in Punjab but we all have to give credit to the company managing the KESC for doing a good job. It shows that things can be turned around with the right management.
Our standards have lowered to a level when we're happy at seeing a monopoly making a profit. Sad.
Well done KESC.... that's what privatization can do...Its time to privatize PIA, Railways, Steel Mill and others...That is an eye opener for chief justice and for the people of Pakistan that privatization is not a bad thing...wonder if steel mill was privatized 6 years a ago for $362 million for a 75% stake rather than losses of the state-run steel mills have crossed Rs50 billion during the last four years.
It is not surprising KESC's employ are stolen the electricity and encrouge for sotle the electricity and one do not stole the electricity then metter reader send froged bill by showing thect stop meter etc. I am sure if all employ oathe for not allowing and not do theft then if pricr of electricity reuce even then KESC will be in more pfrofit then they can think. If all employer from bottom to top do not do corruption then price of electricty would be maximum 3 rupee/unit. Saad Shibli Asc
Profits will be taken bt those aArab sheikhs.....................
In simple words KESC has successfully managed to squeeze the lifeblood out of the masses in order to skim profits.
There is no shortfall of electricity in the country and whatever the shortfall is shown in various provinces and in different cities is to keep the masses engage in basic problems like shortfall of electricity, clean drinking water, joblessness, health etc.
The biggest fall the government has made is by privatizing the entity to a foreign company which is tantamount to selling Karachi to a foreign country.
Unfortunately, such things happens in Pakistan where the sole authority to make arbitrary decisions says that it is done in the interest of the city or the country but behind the scene are the huge kickbacks which goes in the pockets of sole arbitrator and his accomplices.
Why KESC will not run into profit when it has increased all types of tariffs manifolds in short span of time by giving kickbacks to the members of the body that oversee KESC affairs.
Inshallah, the new government will take back all the assets by the present management of KESC and will take over the overall charge with the change of the government in Pakistan.
Guess Karachi doesn't that need that 700 MW from the national grid anymore then eh?
@Naeem Siddiqui: Well cone? KESC has line loss of 32%. No distribution company in Punjab has a line loss higher than 15%.
@Zain: Have a look at the profitability of AWT & the fraud committed in NLC which have remained unpunished.
Amused at the comments here. Can't they see how KESC has made a profit (hint: increasing unit costs / speedy meters and the list goes on) ? Guys this is nothing to be happy and proud of !!
Well done KESC !! this year you have done a gr8 job by serving us politely.
Profiting on the cost of Karachi's economy is not sensible thing. KESC should work on alternate cheap electricity generation as nowadays electricity is taking out huge money from the citizen pockets and an increased cost of doing business is pushing commodities prices very high.
Great, now how about putting the electric meters back on their original speed, reducing tariffs, prosecuting electricity thieves (including government, military & judiciary), replacing old electricity meters with SMART meters, ending load shedding, free helpline number and kicking out non-productive workers.
well done KESC.... Knew they will turn it around!!!
Well done KESC :)
Just goes to show that no entity (except the military) can run efficiently in Pakistan as a public entity. From hospitals to schools to airlines; everything runs better when it is privatized in our country. Businesses and people don't even rely on the police, preferring to hire their own private security guards. This is the abysmal state of government services in Pakistan. Harassment and demands for bribe are common for simple procedures at any government office. If not privatization, the alternative way of achieving progress would be for our government to wake up and start doing its job, which is not going to happen.
This is evidence that when being operated by educated, professional people, Pakistan's companies can perform well. A private company will never hire useless people like the public institutions of Pakistan do for political purposes. They hire on merit, they hire people who will contribute to the success of the company. The UAE group which acquired KESC has instilled professionalism and we can see the results infront of us. I'm sure Karachi's electricity situation will continue to improve in the coming years if it remains under the management of people who are sincere in doing their jobs, because their motivation is strong (profit). Our government lacks motivation to provide services to its citizens, and we can see the results of that in Punjab.