November 04, 2006	Saturday	Shawwal 11, 1427

KARACHI, Nov 3: The Karachi Electric Supply Corporation (KESC) posted after tax losses in the staggering sum of Rs11 billion for the 15 months (July 2005 to Sept 2006). The results were announced at the stock exchange on Friday.

Energy sector analysts thought it would perhaps be unfair to place all of the blame on the new owners of the KESC for they were handed over the control of the utility and government holding of 73 per cent on November 19, 2005. “Seven months would be too short a period to assess the competence of the buyers”, says a sympathetic analyst.

Shareholders in the monopoly utility would nonetheless be peeved at the bleak performance. For the first quarter of the current year ended September 30, 2006, the KESC was shown to have incurred after tax loss amounting to Rs3.9 billion. That represented increase of 40 per cent or Rs1 billion more over the loss of Rs2.8 billion suffered in the corresponding period of the previous year.

Alongside the results for 1Q07, the company also announced financial figures for the year ended June 30, 2006. If the 1Q07 figures were bad enough, the full year 2005 result were worst. The utility posted an after tax loss in the sum of Rs7.2 million, which replaced the profit of Rs669 million earned a year ago.

The mammoth losses occurred in spite of a huge sum of Rs7.6 million taken into account as “subsidies from the government, recoveries /recoverable from the government under the terms of Implementation Agreement” for the financial year ended June 30, 2006 and a total of Rs13 billion earned for 15 months marked as “tariff adjustment on account of increase in fuel prices and cost of power purchases”.

Revenue for the year to June 30, 2006 amounted to Rs41.4 million, representing 7.8 per cent increase over Rs38.4 million earned the previous year. Expenses incurred in generation, transmission and distribution showed a huge rise by Rs2 billion to Rs8 billion, from Rs6 billion in FY05.

For the first quarter ended September 30, 2006, revenue from sale of energy remained about flat at Rs11.7 billion. But the company had to bear Rs1 billion higher cost on consumption of fuel, which stood at Rs8.5 billion, compared with from Rs7.5 billion in the corresponding period of the previous year.

The performance of the new management would perhaps be judged from the second quarter of the current year. Of significant importance to the public would be the transmission and distribution (T&D) losses and to watch if the new owners have been able to make a sizeable cut.

Since ages, around half of the electricity generated by the KESC has continued to go missing.

Shareholders in KESC have been holding the company’s stock at market price of Rs6.95, hoping the price to rise and a possible resumption of dividend. They may take heart and be comforted by the knowledge that Dr Abdul Hafeez Shaikh the then federal minister for Privatisation and Investment looked at the brighter side.

While switching over the ownership from the state to the private sector, the minister was quoted to have said: “The KESC has been running into losses for over a decade and badly bleeding the exchequer by Rs1 billion a month. The privatisation of KESC will bring better services through professional management, new investment, and technology and employment benefits.”

The shareholders in KESC may peer far to see if there is light at the end of the tunnel.