K-Electric reports half-year profit of Rs6.8bn

The Board of Directors of K-Electric Ltd (KE) recently approved the company’s financial results for the half-year ended December 31, 2020.

KE has reported a net profit after tax amounting to Rs6.872 billion for the period under review, translating into an earning per share (EPS) of Rs0.25. This included Rs4.6 billion actual write-offs claim as per the mechanism provided under KE’s MYT.

The KE board decided to invest the profits earned back into business.

During the period under review, the company showed strong operational performance on the back of improved macroeconomic environment after uplifting of the Covid-19 lockdown along with investments of around Rs26.422 billion across the power value chain. As a result, during the period under review, units sent out grew by 4.8pc along with a 5.5pc increase in units billed and 0.6pc points reduction in T&D losses.

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It is important to note that the key driver of this growth was industrial segment which showed a growth of 10pc higher compared to same period last year. Driven by these operational improvements, the company’s gross profit increased by 23pc as compared to the same period last year.

The company continued to make strides on its 900MW RLNG project. Civil structure of critical systems has been completed and installation of gas turbine, steam turbine and unit main transformer for the first unit (450MW) is in progress. The company signed heads of terms agreement with Pakistan LNG Limited (PLL) in October 2020 for RLNG supply and is in discussions with PLL for signing of GSA for 150 MMCFD RLNG supply.

In this respect, the Ministry of Energy (Petroleum Division) has also directed relevant stakeholders including PLL and SSGC to resolve pending issues and to expedite the execution of GSA, to ensure timely fuel supply and commissioning of first unit (450 MW) of 900 MW plant by summer of 2021.

In addition, with the anticipated growth in power demand in the upcoming summer, KE is in continuous engagement with Government of Pakistan and National Transmission & Distribution Company for off-take of additional 450 MW through existing interconnection points and it is expected that the required rehabilitation works will be completed by March 2021, enabling evacuation of additional 450 MW through existing interconnections from April 2021 onwards.

A key concern for KE is the prevailing circular debt situation and disputed mark-up claims which in addition to adversely affecting the sustainability of the company, are also a major hindrance in execution of supply agreements with SSGC and NTDC / CPPA. As of December 31, 2020, KE’s net receivables from various Federal and Provincial entities, stood at around Rs78 billion on principal basis having a consequential impact on the Company’s cashflow position and its ability to enhance the pace of investment in power infrastructure. To resolve the issues related to KE’s payables and receivables, discussions around Terms of Reference (ToRs) for arbitration facilitated by the Privatization Commission are ongoing, and the Company seeks a fair and equitable resolution to the issue in accordance with law.

Further, the company also remains in continuous engagement with NEPRA for pending approval of requests made within the MYT mid-term review, as well as quarterly tariff variations along with write-off claims for the period FY2017 to FY2020.

Going forward, the company remains committed to its planned investments of $1.5 billion between FY2021 to FY2023, spread across the entire power value-chain, including expeditious completion of 900MW RLNG plant, along with setting up of new grid stations for off-take of additional power of up to 1,400MW from the national grid by 2023, subject to required approvals. However, sustainable resolution to issue of government receivables and timely approvals by NEPRA as mentioned above remain critical to the execution of these planned investments.

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