KARACHI: K-Electric Ltd CEO Moonis Alvi said on Tuesday the unusually high loss that the vertically integrated power utility recorded in the first nine months of 2022-23 constitutes no more than a “blip” in the long run.
Speaking to economist Ali Khizar on his YouTube channel, Mr Alvi said the company’s lenders, including those from Europe and China, knew in advance about the loss. “The substantial part of this loss was budgeted… We’d told our lenders in advance to expect a loss,” he said.
The financial performance of K-Electric took a nosedive in the first three quarters of 2022-23, with a net loss of Rs39.4bn versus a net profit of Rs1.5bn a year ago. The quarterly loss in January-March clocked in at Rs12.3bn, up 6.7 times from the same quarter of the preceding year.
Rumours did the rounds on social media after the latest quarterly result that the loss, unprecedented in recent years, had something to do with the change in the company’s ownership structure last year.
Mr Alvi denied it. K-Electric came out in February with a seven-year plan involving Rs484bn in fresh investments — a recent commitment that Mr Alvi repeatedly cited to support his claim that the mounting losses were not only expected but also accounted for.
“The board that approved that investment plan was the same board that approved this loss. It means the loss was predictable. Our position is that these losses have been caused by factors that are not in our control,” he said. He listed four factors along with the respective rupee figures that contributed to the company’s negative bottom line.
One, the company recorded a decline of 5.8 per cent in the total units available for distribution, also known as “sent-out”. It’s an outcome of deteriorating macroeconomic indicators, he said, as the industry is facing a slowdown and consumption by households has also dropped. This alone has contributed Rs7bn to the loss, he said.
Other major contributors to the negative bottom line were the exchange rate loss (Rs9bn), financing cost owing to rising interest rates (Rs12bn) and the impairment loss amid reduced bill recoveries and rising defaults (Rs9bn-10bn).
Mr Alvi said K-Electric’s investors, as well as lenders, continue to fully back the Rs484bn investment plan despite the losses.
His reassurance is against the backdrop of a British Virgin Islands-registered special purpose entity, by the name of Sage Venture Group Ltd, acquiring a large part of the controlling stake in K-Electric in October 2022.
Published in Dawn, May 10th, 2023