KE committed to bringing Karachi to power surplus situation by 2022, despite challenges

KE committed to bringing Karachi to power surplus situation by 2022, despite challenges

Karachi, March 3, 2021: K-Electric remains committed in bringing Karachi to a power surplus position by 2022 through a series of planned investments across the power value chain. These investments, which would be subject to regulatory approvals will allow KE to benefit consumers and the economy at large.

This was stated by Aamir Ghaziani, Chief Financial Officer of K-Electric at the Corporate Briefing, held via webinar, which was attended by analysts from leading brokerage houses and other stakeholders.

The impact of COVID coupled with increased finance cost due to accumulated receivables from Government and its entities led to KE reporting a loss in FY 2020. However, analysts were informed that first half of FY 2021 has shown improvement in key operational and financial indicators including 4.8% growth in sent-out, improvement in T&D losses by 0.6pp and reduction in interest rates. This has helped turn around KE back into profits in FY 21.

KE remains committed to its vision of taking Karachi to a power surplus position by 2022. The upcoming 900 MW RLNG-based BQPS-III is proceeding as per expected timelines and the first unit of 450 MW is scheduled to come online by May 2021. This power plant will also help improve KE’s generation fleet efficiency from 38% in FY 2020 to 48% in FY 2023. Apart from this 350 MW of renewable energy projects are also in the pipeline.

Work on the 220 kV Dhabeji Grid and transmission lines has started and finalization of contractual arrangements for the off-take of additional 1,400 MW from National Grid (including 450 MW from existing interconnections) is in advanced stages. KE is hopeful that the National Transmission & Despatch Company (NTDC) will complete necessary rehabilitation of the 220 KV Dhabeji grid along with implementation of “Cross Trip” scheme by March of 2021. Conclusion of the interconnection agreement (ICA) with NTDC and power purchase agreement (PPA) with CPPA-G for 2,050 MW (existing 650 MW existing plus additional 1,400 MW) is crucial for off-take of additional power.

Project Sarbulandi, part of KE’s PKR 24 billion loss reduction investment from FY 17 to FY 23 is the power utility’s flagship initiative to uplift underdeveloped areas of Karachi by focusing not just on network health but also on community uplift activities and infrastructure development such as the construction of water filtration plants, rehabilitation of parks and schools and through free medical camps across the city. As part of Sarbulandi the Company has continued with the conversion to Aerial Bundled Cable (ABC) with more than 800 Pole Mounted Transformers (PMT) converted to ABC during first half of FY 2021, and around 10,000 PMTs overall. The impact is already being felt in parts of Korangi, Orangi and Landhi with up to four hours of load-shed reduction on average. KE plans to convert all High Loss (HL) PMTs to ABC by 2023. This will allow for continuity in loss-reduction and exempt more than 93% of service areas from load-shed.

The power utility continues to invest in the communities it operates in through a series of Corporate Social Responsibility (CSR) initiatives such as the KE Roshni Baji Project (Women Neighborhood Ambassador Program), which will create livelihood opportunities for women. Participating women will receive a stipend and also get opportunities for capacity building through STEM skill-based training. Not only will these women ambassadors promote safety awareness and encourage consumers to convert to legal connections but the program will also create a female resource pipeline for the energy sector.

For KE, safety remains a priority and as part of its commitment to continue strengthening the reliability and safety of its network, the Company revisited safety practices and completed revalidation of earthing and grounding of all low-tension (LT) poles. At the same time work on Rain Emergency Rehabilitation Plan (RERP) has been started that will also help improve network resilience before the upcoming monsoons in the most critical areas. Meanwhile, the Company continues to pursue the matter of illegal encroachment of KE’s network by TV and internet cables. While it continuously removes these illegal cables from its network the power utility also seeks support from relevant authorities to combat external factors including theft of earthing/grounding material and illegal/unsafe use of KE’s network through kundas and other means.

Analysts were also briefed about key challenges to the sustainability of the company and project timelines. Foremost among these is the circular debt that threatens to derail the entire power sector. As of December 2020, KE’s net receivables from various Federal and Provincial entities stood at around PKR 77 billion on principal basis, which continue to put a strain on the Company’s cash-flow position. KE remains in continuous engagement with relevant stakeholders and seeks a fair and equitable resolution of all settlements, including any mark-up. Significant delays in approval of tariff adjustments, write off claims and investments approval remain a key concern for KE as they lead to significant accumulation of working capital requirement as well as create regulatory uncertainty. KE remains engaged with NEPRA for earliest resolution of the same.

The session concluded with a note of thanks from the KE management.