KARACHI: Karachi Electric Supply Company (KESC) posted loss for the six months ended Dec 31, at Rs2.8. billion, a shade lower than Rs3.1 billion suffered in the same time last year.

The utility made it a point to distance the loss generating items by calculating earnings before interest, tax, depreciation and amortisation (EBITDA), which stood at Rs4 billion, a billion rupees more than the Rs3 billion earned same time last year.

The board announced right shares at 9.20 per cent, i.e. 46 right shares for every 500 shares held, at the par value of Rs3.50 per share.

Directors said that the purpose of asking shareholders for cash in right issue was “to provide fresh equity which would support the capital expenditure requirements, improve debt equity and liquidity ratios, reduce finance costs and generate profits for the company, which would be of benefit to stakeholders.”

Referring to the ‘benefits of right issue to the company,’ the directors observed that partial funding of projects through additional equity would reduce financing costs and positively contribute to future financial results.

Regarding ‘use of funds’, KESC mentioned that funds generated through right issue “will be utilised to partly finance equity component of new generation projects and capital expenditure requirement to augment and expand dilapidated transmission and distribution network and system improvement and loss reduction projects and to meet working capital deficit to reduce bank borrowings and resultant financial costs.”

The company has also drawn out the ‘financial projections’ following the right, but with caveats. The (optimism) in the projections were said to be based on certain assumptions of which some key assumptions included fuel supply and price and applicable tariff etc, which the company said were governed by external factors and were largely beyond management control.

Market participants said that for all those high hopes of the management, it was to be seen if investors were impressed as to put the par value of Rs3.50 in the 40 per cent discounted market price of the stock to pick up the right.

Following the declaration of results and the rights announcement on Tuesday, the stock in KESC slipped 3 paisa to close at Rs1.93 with trading in 1.2 million shares.

The accounts of the utility showed Revenue (net) generated from ‘sale of energy’ increasing to Rs45 billion in the half year ended Dec 31, from Rs43 billion in same six months of 2010. Costs on account of ‘purchase of electricity’ rose to Rs35 billion, from Rs28 billion and ‘consumption of fuel and oil’ rose to Rs27 billion, from Rs23 billion. Expenses incurred in generation, transmission and distribution were noted to have stepped back at Rs7 billion, from Rs7.5 billion. Consumers’ services and administrative expenses edged higher to Rs5.7 billion, from Rs4.9 billion. Finance costs mounted to Rs3.2 billion, from Rs2.5 billion, erasing the tiny profit of Rs31 million earned in the six months under review, compared to loss of Rs1 billion in the same time last year.