KESC continues its march toward higher profitability

Published: April 26, 2013
KESC saw its revenues increase by 28.3% to Rs136 billion during the first nine months of the financial year ending June 30, 2013. PHOTO: FILE

KESC saw its revenues increase by 28.3% to Rs136 billion during the first nine months of the financial year ending June 30, 2013. PHOTO: FILE


The Karachi Electric Supply Company (KESC) continues to have a good year, with revenues and profits up sharply in the third quarter of financial year 2013.

According to a statement sent by the company to the Karachi Stock Exchange, KESC saw its revenues increase by 28.3% to Rs136 billion during the first nine months of the financial year ending June 30, 2013. Net income, meanwhile, swung to a Rs4.6 billion profit during that period, compared a Rs5 billion loss in the same period last year.

KESC is the only integrated utility in Pakistan, owning its power generation, transmission and distribution networks. It is also the only company in the power distribution business to be privately owned, with management control currently in the hands of Abraaj Capital, the Dubai-based private equity firm founded by Arif Naqvi, a former Karachiite himself.

Abraaj’s turnaround strategy for KESC has involved trying to reduce its cost of generating power while also ensuring that the unsustainably high transmission losses (mostly due to theft) are reduced. For the past four years, the company has been providing an incentive to neighbourhoods to self-police against electricity theft by reducing or even eliminating power cuts to areas with negligible theft.

As a result of this strategy, while most of the rest of the country struggles with several hours of power outages, Karachi has largely been spared the worst of the energy crisis. About 46% of Karachi’s area is now not affected by power outages at all, including virtually all of the industrial estates in the city, according to KESC officials.

As a result, KSE’s line losses have continued to decrease, causing a significant improvement in the company’s cash flows. Earnings before interest, taxes, depreciation and amortisation (Ebitda) nearly quadrupled during the first nine months of fiscal 2013 to Rs19.2 billion.

It is not yet clear, however, if KESC will be able to meet its stated target of a net income of just over Rs12 billion for the current financial year with just one quarter to go. Nonetheless, the company’s success in turning around its operations has engendered a significant amount of goodwill amongst investors. At Friday’s closing price of Rs5.66 per share, KESC is currently trading at 12.4 times the past four quarters’ earnings, a slight premium over the market’s average PE ratio.

Published in The Express Tribune, April 27th, 2013.

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Reader Comments (6)

  • Syed A. Mateen
    Apr 27, 2013 - 1:49AM

    Today Mian Nawaz Sharif has given an example of KESC during a jalsa that electricity in whole Punjab is not available from 20 to 22 hours in a day, whereas in Karachi abundant electricity is available for Karachiites.

    The duration of load-shedding has been significantly reduced in those areas where there is no power theft.


  • meekal a ahmed
    Apr 27, 2013 - 12:54PM

    An excellent example where government-injected liquidity is creating a speculative bubble.


  • Apr 27, 2013 - 2:43PM

    Hats off KESC! These guys are performing tremendous, they deserve big applause… Keep Lightening Karachi.


  • Apr 27, 2013 - 5:06PM

    KESC is still overstaffed from its days as a government owned enterprise. They haven’t been able to retrench those excess workers. When they tried to do that the workers responded with violence. The fact that they’ve been able to make a profit despite being burdened by an excessive workforce means that it’s an even greater achievement.


  • khan
    Apr 27, 2013 - 6:52PM

    @Syed A. Mateen:
    KESC STILL has the highest theft rates than any gov owned company at approx 30% vs 15% in punjab..
    however its way better from when it was privitized


  • Shaheen
    May 16, 2013 - 3:29PM

    Well done K.E.S.C, keep it up.


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