KARACHI, Dec 1: For the financial year ended June 30, 2003, Karachi Electric Supply Corporation (KESC) posted a loss, which is hardly surprising. But the shareholders may take heart and be comforted by the fact that the Corporation was able to reduce ‘loss from ordinary activities’ by 22 per cent to Rs13.9 billion from Rs17.7 billion, incurred the year ago.

The accounts were considered by the KESC Board, which met on Friday. There was surely no question of declaration of a dividend for the Corporation still has to fill up the gapping hole of Rs17.6 billion in accumulated deficit that it carries on its balance sheet.

The last cash dividend had been paid by KESC 14 years ago at 10 per cent in 1989, but bonus issues were a regular feature until 1995 when one-for-ten shares were issued. Although capitalization of profit did dilute the shareholders’ equity and earnings, a payout in any form was, nonetheless, better than none. The Corporation has summoned the annual shareholders’ meeting on December 15.

A little while ago, KESC had reduced the nominal value of share in the company from Rs10 to Rs3.50 by the cancellation of Rs6.50 per share or Rs57.2 billion of its issued paid-up capital. The face value of stock that had been cancelled was said to be that portion as was “lost or unrepresented by available assets”.

As a part of restructuring of the KESC’s unhealthy balance sheet, the Corporation had taken up the matters of conversion of debt of about Rs65 billion into equity and reduction of capital. On Tuesday, the share in KESC of the face value of Rs3.50 was trading at premium at Rs5.80. Investors possibly hoping for a turn of the tide with the proposed privatization of the utility. Five parties are in the run for acquiring the 73 per cent stake in KESC, which the government intends to sell. In order to encourage buyers, the Asian Development Bank has declared that it would purchase up to 7.67 per cent of the 73 per cent stock that is on offer at the same rate at which the successful buyer seeks the equity. Private investors who have expressed interest in acquiring the controlling shares in KESC include: ABB (Pvt) Limited of the US; Corner Stone Partners LLC of the US; a group led by local Hasan Associates (Pvt) Limited; Kanooz Al Watan for Project LLC of Saudi Arabia and Independent Power Corporation of the UK, which also is the major shareholder in Hub Power Company (Hubco) — the 1292mw Independent Power Plant (IPP). But privatization plans of KESC like those of other major units such as PSO are largely elusive. On May 8, Privatization Minister Dr Abdul Hafeez Shaikh had proclaimed that KESC would be sold out to the private sector in the next three months. That deadline expired in August; other days were announced, which came and went. The newest deadline is now January 2004.

Currently, KESC is understood to be procuring 400 mw to 600 mw of power from Wapda; 125 mw from Gul Ahmed and 110 mw from Tapal Energy. There are said to be nearly two million registered consumers with KESC. It would be instructive to recall that the company’s statutory auditors have confirmed in the past that much of the losses slapped on the utility were due to the transmission & distribution (T&D) losses. Some 15 years ago in 1988, the T&D losses stood at 18.84 per cent, which rose to 23.80 per cent 12 years ago in 1991. The Army took over the affairs into its hand and vowed to clean out the mess. The T&D losses are now believed to have run up to 41.7 per cent.

KESC earned Rs32.3 billion from energy sales during the year ended June 30, 2003, which reflected eight per cent increase from Rs29.8 billion earned last year. Increase in energy charges and sale and a grand slump of 76 per cent in financial charges to Rs1.9 billion from Rs7.6 billion last year, were factors that improved the bottomline. Noticeably, while the KESC’s revenue is on the rise, expenses are also increasing. Fuel costs rose by nine per cent to Rs21.1 billion from Rs19.3 billion. The Corporation is endeavouring to convert its furnace oil power generating units into gas to save costs. During the year under review, the Corporation was also shown to have received Rs8 billion in subsidy from the government.