KARACHI, Nov 12: The Karachi Electric Supply Corporation (KESC) management is offering relief packages for the collection of over Rs22 billion from various agencies. This includes Rs10.21 billion available under the head of provision for doubtful debts which is said to be 58 per cent of the dues outstanding for over a year.

A pre-privatization financial profile of the KESC shows total accumulated losses exceeded Rs16 billion after having suffered a loss of Rs8.11 billion during last financial year.

The accumulated losses coupled with a host of other factors “indicate the existence of a material uncertainty which may cast significant doubt about the corporation’s ability to continue as a going concern”, says the annual report of the KESC for the year 2004-05.

To keep the corporation going, the government provided a total subsidy of Rs12.54 billion during the last fiscal year which included Rs6.48 billion to meet operational cash shortfall, Rs725 million for tariff relief to the consumers, Rs922.58 million for settlement of old dues with KANUPP and Rs4.41 billion for settlement of old disputes with National Refinery.

The government provided a subsidy of Rs9.57 billion in the year 2003-04 when the KESC showed a profit of Rs1.27 billion. The KESC’s pre-tax profit has been reduced to almost half of 2003-04 pre-tax profit amounting to Rs663 million.

The KESC management has, however, declared to turnaround the utility by the year 2007 with implementation of a Financial Improvement Plan (FIP) and a comprehensive system improvement programme and reduction of transmission and distribution losses.

In the year 2001, the corporation with the help of Rs13.70 billion government financial assistance took up implementation of a system improvement and reduction of T and D losses programme. But the government did not release any fund for this programme in the year 2003-04 and instead the KESC was negotiating an Rs3 billion bank loan on a government guarantee.

So far the government has released only Rs2.59 billion under the programme and quite a substantial part remains to be implemented.

Under a financial restructuring plan, the government has already converted loans of Rs65.34 billion into equity and reduced the paid-up capital base of the KESC by Rs57.20 billion. The plan has been implemented with the approval of the KESC shareholders’ general body, permission of the Securities and Exchange Commission of Pakistan (SECP) and confirmation of the Sindh High Court.

In the year 2004-05 the KESC’s income increased by about 4 per cent to Rs39.82 billion but the expenditure went up by almost 11 per cent to Rs51.69 billion. The increase in revenue was attributed to improvement in sales and a cut on T and D losses. But the rising cost of fuel and power purchases pushed up the expenditure by over 14 per cent. KESC’s expenditure also increased because of the rise in wages given by the government.

The KESC’s generation in the year 2004-05 was 1,387-megawatt against installed capacity of 1,756-megawatt. The KESC’s generation is reduced due to outages of KTPS units 1 and 2 and Bin Qasim units 2, 3 and 5. The shortfall in the electric power demand has been met from the import from Wapda IPPs, KANUPP and Pakistan Steel.

The federal cabinet has set the stage for transfer of KESC management to a Saudi based investors’ group Al Jomaih that joined Hasan Associates that initially offered the second high bid for acquisition of 73 per cent shares of the KESC in February 2005 now has agreed to match the highest offer of Rs1.65 a share.

Reports suggest that the Al Jomaih is about to sign the documents for transfer of management any day next week and offer $100 million first instalment. Within next two weeks the group will offer $200 million plus to complete the transaction.

The privatization programme is under severe pressure after a setback on PTCL transaction and a completion of KESC deal is bound to give much relief to the government.