Inflation, Rising Electricity costs hurt KE Profitability

Inflation, rising electricity costs and economic slowdown have hit the KE profitability and recoveries of bills in the first half of financial year 2023.

In the first half of FY23, sociopolitical and macroeconomic factors have wreaked havoc on numerous sectors, including KE.

Inflation, policy rate hikes, and economic slowdown hurt the Company’s operations and revenue as well.

According to statement, the Company saw a 5.7% drop in units sent out due to economic activity and an increase in impairment loss against doubtful debts due to high inflation, consumer tariff increases, and present economic conditions affecting customers’ propensity to pay.

Finance costs are rising due to a rise in effective rate of borrowing and higher levels of borrowing due to Government entities’ non-payment of dues, which have reached an alarming PKR 79.6 billion on net principal basis. Check KE Duplicate Bill in 2023 | How To Check Online

The current Multi-Year Tariff, starting July 1, 2016, does not adjust tariff for sent-out and policy rate changes. The above reasons caused a net loss of PKR 27.0 billion in the first half of FY23 compared to a net profit of PKR 3.3 billion in FY22.

KE reiterates that regular bill payment is critical to ensuring uninterrupted power supply and is improving recoveries by introducing easy instalment payment solution for its customers under the “Humqadam – Recovery Plan” and creating facilitation camps to address billing concerns.

Before the new year, KE’s BQPS-III power plant delivered its full 900 MW to grid. KE is making rapid headway on its KKI Grid, the first 500 kV facility in its network that strengthens its connection with the National Grid, and the new 220 kV Dhabeji Interconnection.

System reliability tasks continue. KE’s proposed investment plan for FY24-FY30, set for a NEPRA public hearing on March 1, 2023, also aims to improve network stability, safety, and reliability to ensure affordable energy for all.

KE will continue to address issues and enhance operations. The firm is renewing the tariff for the next control period starting July 1, 2023, to achieve a sustainable, cost-reflective, investment-enabling tariff with an adjustment mechanism comparable to other power sector entities.

The Company continues to work with GoP to resolve the government receivables issue, which is hurting revenue and the bottom line. KE needs government and regulator support to provide stable and affordable service to customers.