KARACHI, May 4: It is fourteen years since the KESC distributed the last cash dividend to shareholders: at 10 per cent in 1989. But bonus shares were a constant feature until 1995, when one-for-10 shares were issued. For all the eight years since, the shareholders in KESC have been disbursed neither a cash nor a bonus share in dividend.
According to the listing regulation 32(1)(b), a company that defaults on the payment of dividend/bonus for five years from the date of last declaration has to be relegated to the KSE's "defaulters' counter".
The rule has been applied extensively on well over 100 companies. And even the national flag carrier - Pakistan International Airlines (PIA) - was warned by the exchange last month to either remunerate shareholders or be prepared to be thrown out to the defaulters' counter.
KESC continues to sit on the regular counter, but the argument in this case, doubtless, would be that to pay dividend, the Corporation must make a profit. The monopoly utility that ought to have been a cash cow for the country has continued to yield all but mind-boggling losses.
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 un-represented by available assets".
On Thursday, the share in KESC of the face value of Rs3.50 was trading at premium at Rs8.10. Investors possibly hoping for a turn of the tide with the proposed privatization of the utility.
In order to encourage buyers, Asian Development Bank (ADB) has already declared that it would purchase up to 7.67 per cent of the 73 per cent stock that the government intends to sell at the same rate at which the successful buyer seeks the equity.
Marshuk Ali Shah, country director of ADB, the other day said that four potential strategic investors had submitted Expressions of Interest (EoIs) for KESC and that those were being evaluated.
But privatization plans of KESC like those of PSO are largely elusive. Deadlines have been announced only to be postponed later on. Mr Marshuk has defended the postponement of privatization saying that international and local environment was not conducive.
But hope is in the air, for ADB's country director has been quoted as saying that "there are bright chances that KESC will be privatized later this year". 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 losses (T&D losses).
In their latest report to the accounts for the half year ended-December 2003, directors confirm that the T&D losses are now 38.15 per cent.
For the latest six months July-December 2004, KESC posted after tax loss at Rs3.76 billion, which was considerably lower than loss of Rs6.48 billion suffered by the utility in the corresponding period of the previous year.
Revenue increased to Rs18.79 billion, from Rs16.52 billion and expenditure remained about static at around Rs20.86 billion, which enabled the Corporation to halve the gross loss to Rs2.06 billion, from Rs4.30 billion in the same period of last year.
Directors contended that reduction in financial loss during July-December 2003 by Rs2.73 billion was on account of: increase in KESC generation by 12.4 per cent; increase in supply of gas from 130 mmcfd to 246 mmcfd; decrease in T&D losses and reduction in financial losses.
Overall recovery of dues had also increased from Rs17.74 million in July-Dec 2002 to Rs19.81 million in the period under review, which the Corporation said was a result of efforts of the management and Army monitoring teams.
"The continuous efforts of management for the last five years to improve operational and financial efficiency of the Corporation have started to show results", reported Brig.
Tariq Saddozai in his half-term report, adding: "The current half year figures indicate all round progress. However, we have to exert vigorously to improve the position of the Corporation till a turnaround is achieved".