| The Karachi Electric Supply Corporation
Limited |
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| Annual
Report 2001 |
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| CONTENTS |
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| Name
of Directors, Bankers, Auditors |
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| Notice
of Meeting |
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| Chairman's
Review |
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| Directors'
Report to the Members |
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| Income
and where it went |
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| Historical
Highlights |
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| Operating
results of generating stations |
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| Transmission
and Distribution system |
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| Auditors'
Report to the Members |
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| Balance
Sheet |
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| Profit
and Loss Account |
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| Statement
of Changes in Financial Position |
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| Statement
of Changes in Equity |
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| Notes
to the Financial Statements |
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| Pattern
of Shareholdings |
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| BOARD
OF DIRECTORS |
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|
| CHAIRMAN |
|
| Lt.
Gen. Zulfiqar All Khan |
|
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| MANAGING
DIRECTOR |
|
| Brigadier
Tariq Saddozai |
|
|
| DIRECTORS |
|
| Mr.
M. Khusrow Khawaja |
|
| Mr.
Asghar All Randhawa |
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| Mr.
Muhammad Amjad |
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| Mr.
Jan Bahadur Uppal |
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| Engr.
S. Ibrahim Shah |
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| Mr.
Shafiqur Rehman Paracha |
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| Mr.
Samee-ul Hasan |
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| Mr.
Muhammad Zubair Motiwala |
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| Mr.
Zakaria Usman |
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| Mr.
Tariq Iqbal Khan |
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| CORPORATE
SECRETARY |
|
| Mr.
Oswald Pearl |
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| BANKERS |
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| National
Bank of Pakistan |
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| Habib
Bank Limited |
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| United
Bank Limited |
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| Muslim
Commercial Bank Limited |
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| Allied
Bank of Pakistan Limited |
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| First
Women Bank Limited |
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| Citi
Bank N.A |
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| Bolan
Bank Limited |
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| AUDITORS |
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| Rahim
Jan & Company |
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| Sidat
Hyder Qamar & Company |
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| REGISTERED
OFFICE |
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| Aimai
House, Abdullah Haroon Road, Karachi |
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| NOTICE
OF MEETING |
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| Notice
is hereby given that the 91 st Annual General Meeting of the Karachi Electric
Supply Corporation Ltd. |
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| will
be held at Navy Welfare Centre, Liaquat Barracks, Karachi, on Saturday, the
29th December, 2001 at |
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| 10.00
a.m. to transact the following business: |
|
|
| (1)
To confirm minutes of the Annual General Meeting held on 27th February, 2001. |
|
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| (2)
To receive and adopt the Directors' Report and the Audited Accounts (with
Auditors' Report) for the |
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| year
ended 30th June, 2001. |
|
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| (3)
To appoint Auditors in place of those retiring and fix their remuneration for
2001-2002. Retiring |
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| Auditors
viz: M/s. Rahim Jan & Co. and M/s. Sidat Hyder Qamar & Co., being
eligible have offered |
|
| themselves
for re-appointment. |
|
|
| B.
SPECIAL BUSINESS |
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| (4)
To approve conversion of GOP subordinated loan & KESC debt servicing
liabilities amounting to |
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| Rs.17,834.56
million into equity subject to approval of the competent authority. |
|
|
| To
consider and, if deemed fit, pass the following Special Resolutions with or
without modification:- |
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|
| "RESOLVED
that the conversion of GOP Subordinated Loan and KESC Debt Servicing
Liabilities |
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| amounting
to Rs.17,834.56 million into equity and the issue of further capital to that
extent without |
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| making
a Right Issue be and is, hereby, approved subject to the approval of the
Federal |
|
| Government
/ Securities & Exchange Commission of Pakistan (SECP) as required u/s 86
of the |
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| Companies
Ordinance 1984." |
|
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| "FURTHER
RESOLVED that the Directors of the Company be and are, hereby, authorized to
take |
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| all
necessary steps in this regard, approve the terms (other than as specified
herein) of and effect |
|
| issuance
of 1,783,456,000 ordinary shares of Rs.10/- each fully paid up at par in full
& final |
|
| settlement
of GOP Subordinated Loan and KESC Debt Servicing Liabilities of
Rs.17,834,560,000 |
|
| (Rupees
Seventeen Billion Eight Hundred Thirty-Four Million Five Hundred Sixty
Thousand Only) |
|
| subject
to completion of all legal requirements envisaged under Companies Ordinance
1984 and |
|
| KESC
Memorandum & Articles of Association. The above shares will rank pari
passu in every |
|
| respect
with the existing capital of the Company." |
|
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| Any
other business with the permission of Chair. |
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|
| Transfer
Books of the Corporation will remain closed from 20.12.2001 to 31.12.2001
(both days |
|
| inclusive). |
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|
By order of the Board |
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|
THE KARACHI ELECTRIC SUPPLY CORPORATION LTD. |
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|
OSWALD PEARL |
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| Karachi:
November 24, 2001 |
|
CORPORATE SECRETARY |
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|
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| N.B. |
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| i)
The shareholders will please notify change in their addresses, if any. |
|
|
| ii)
Any member of the company entitled to attend and vote at the meeting of the
company shall be |
|
| entitled
to appoint another member, as his proxy to attend and vote instead of him,
and a proxy so |
|
| appointed
shall have such rights as respect speaking and voting at the meeting as are
available |
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| to a member. |
|
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| iii)
Any individual beneficial owner of CDC, entitled to vote at the meeting of
the Company must |
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| authenticate
his identity by showing his original NIC or Passport at the time of meeting
and in case |
|
| of
proxy, must enclose an attested copy of his NIC. |
|
|
| iv)
Form of proxy is enclosed. |
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| Instrument
of appointment of proxy and power of attorney or any other authority under
which it is |
|
| signed,
must be deposited at the registered office of the company at least 48 hours
before the time |
|
| of
the meeting. |
|
|
| v)
Pursuant to the provision of Section 60 and 81 of the Companies Ordinance
1984 a member may, |
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| if
he opts, deposit with the company a nomination conferring on one or more
persons the right to |
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| acquire
the interest in the shares therein specified in the event of his death. |
|
|
| vi)
A statement under section 160(1)(b) of the Companies Ordinance 1984
pertaining to the special |
|
| business
is being sent to the members along with notice of the meeting and published
accounts. |
|
| The
Memorandum & Articles of Association of KESC is available at the
Registered Office of the |
|
| Company
for perusal & inspection of the members during office hours. |
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|
| STATEMENT
U/S 160(1)(b) of the Companies Ordinance, 1984 |
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| Economic
Coordination Committee (ECC) of the Cabinet has approved Financial
Restructuring of KESC |
|
| which
interalia includes conversion of GOP Subordinated Loan & KESC Debt
Servicing Liabilities amounting |
|
| to
Rs.17,834.56 million into equity. The proposed debt equity swap as above
would not only reduce the |
|
| financial
charges of the Company but would also improve debt equity ratio. The expanded
capital base would |
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| also
improve the negative book value of Rs.45/- per share as on 30.06.2000. The
share capital would be issued |
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| at
par i.e. Rs.10/- per share which is about 21/2 times higher than the quoted
price of KESC shares. The |
|
| proposed
debt equity swap, as such would safeguard the interest of minority
shareholders and reflects the |
|
| determination
and continuous GOP support to steer KESC out of the present financial
imbalances. |
|
|
| The
details of loan / debt servicing liabilities covered in the proposed debt
equity swap are furnished on |
|
| next page. |
|
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| The
Directors have no interest in the Special Business as narrated, herein-above. |
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| DETAILS
OF LOAN / DEBT SERVICING LIABILITIES COVERED |
|
| IN
THE PROPOSED DEBT EQUITY SWAP |
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|
|
| FOREIGN LOANS |
|
|
PRINCIPAL REPAYMENT |
|
|
1998-99 |
1999-2000 |
2000-2001 |
TOTAL |
|
| LOAN
NUMBER |
ACTUAL |
ACTUAL |
PROVISIONAL |
ACTUAL/PROV. |
|
|
Principal |
Interest |
Principal |
Interest |
Principal |
Interest |
Principal |
Interest |
|
|
(Rupees in million) |
|
| ASIAN
DEVELOPMENT BANK LOANS |
|
| ADB Loan 150-PAK |
5.520 |
0.200 |
-- |
-- |
-- |
-- |
5.520 |
0.200 |
|
| ADB Loan
151-PAK |
1.520 |
1.690 |
1.530 |
1.570 |
1.520 |
1.460 |
4.570 |
4.720 |
|
| ADB Loan
230-PAK |
15.240 |
18.510 |
15.240 |
17.400 |
15.230 |
16.290 |
45.710 |
52.200 |
|
| ADB Loan
390-PAK |
25.660 |
22.450 |
27.580 |
20.570 |
29.670 |
18.530 |
82.910 |
61.550 |
|
| ADB Loan
391-PAK |
23.500 |
13.350 |
25.340 |
11.610 |
27.340 |
9.740 |
76.180 |
34.700 |
|
| ADB Loan 516-P,~K |
32.750 |
29.920 |
35.590 |
27.500 |
38.680 |
24.870 |
107.020 |
82.290 |
|
| ADB Loan
578-PAK |
12.440 |
7.210 |
13.510 |
6.670 |
14.690 |
6.080 |
40.640 |
19.960 |
|
| ADB Loan
925-PAK |
61.400 |
353.210 |
67.690 |
346.290 |
74.630 |
338.650 |
203.720 |
1038.150 |
|
| ADB Loan 1314/1315-PAK |
-- |
320.300 |
56.460 |
358.280 |
62.240 |
384.100 |
118.700 |
1062.680 |
|
|
----------- |
----------- |
----------- |
----------- |
----------- |
----------- |
----------- |
----------- |
|
|
178.030 |
766.840 |
242.940 |
789.890 |
264.000 |
799.720 |
684.970 |
2356.450 |
|
| OTHER.
LOANS |
|
| NI Bank Loan 11th-13th |
4.100 |
1.110 |
4.100 |
0.820 |
4.090 |
0.520 |
12.290 |
2.450 |
|
| NI Bank Loan 15th |
1.420 |
0.650 |
1.420 |
0.540 |
1.430 |
0.440 |
4.270 |
1.630 |
|
| OPEC Loan
137-P |
3.670 |
1.660 |
3.660 |
1.400 |
3.670 |
1.130 |
11.000 |
4.190 |
|
| OPEC Loan 160-P |
8.040 |
3.940 |
8.050 |
3.350 |
8.050 |
2.770 |
24.140 |
10.060 |
|
| SFD Loan
2/96 |
58.380 |
29.930 |
60.890 |
25.650 |
63.500 |
21.190 |
182.770 |
76.770 |
|
| SFD Loan 5/163 |
25.840 |
11.500 |
26.960 |
10.390 |
28.120 |
9.230 |
80.920 |
31.120 |
|
| OECF Loan
PK-P3 |
38.690 |
27.340 |
38.680 |
24.530 |
38.680 |
21.730 |
116.050 |
73.600 |
|
| OECF Loan PK-P16 |
94.710 |
148.460 |
94.710 |
138.040 |
94.710 |
127.620 |
284.130 |
414.120 |
|
| IBRD Loan
2552-PAK |
27.570 |
26.050 |
27.560 |
22.190 |
27.560 |
18.330 |
82.690 |
66.570 |
|
| IBRD Loan
3107-PAK |
38.120 |
60.050 |
38.130 |
54.710 |
38.130 |
49.380 |
114.380 |
164.140 |
|
| Italian State Credit |
149.030 |
200.820 |
149.030 |
184.420 |
149.030 |
168.030 |
447.090 |
553.270 |
|
| EXIM/IBRD Loan |
39.600 |
113.780 |
39.590 |
105.810 |
39.590 |
97.850 |
118.780 |
317.440 |
|
| KFW
Loan 8666240/F1076 |
72.380 |
291.890 |
72.390 |
432.580 |
72.380 |
408.180 |
217.150 |
1132.650 |
|
| OECF Loan
PK-P30 |
221.710 |
297.200 |
221.710 |
280.420 |
221.710 |
258.920 |
665.130 |
836.540 |
|
| OECF Loan PK-P39 |
-- |
62.350 |
104.700 |
56.820 |
209.390 |
51.270 |
314.090 |
170.440 |
|
| EXIM/ADB
(5th) Loan |
195.550 |
285.130 |
195.540 |
409.840 |
195.550 |
412.660 |
586.640 |
1107.630 |
|
|
978.810 |
1561.860 |
1087.120 |
1751.510 |
1195.590 |
1649.250 |
3261.520 |
4962.620 |
|
|
----------- |
----------- |
----------- |
----------- |
----------- |
----------- |
----------- |
----------- |
|
|
1156.840 |
2328.700 |
1330.060 |
2541.400 |
1459.590 |
2448.970 |
3946.490 |
7319.070 |
|
|
| Less:
Adjustment against |
|
| upto
30 June, 2001 |
1,345.000 |
1,416.000 |
245.000 |
-- |
-- |
-- |
1,590.000 |
1,416.000 |
|
|
----------- |
----------- |
----------- |
----------- |
----------- |
----------- |
----------- |
----------- |
|
| Net
payable upto June 2001 |
(188.160) |
912.700 |
1,085.06 |
2,541.400 |
1,459.590 |
2,448.970 |
2,356.490 |
5,903.07 |
|
|
========== |
========== |
========== |
========== |
========== |
========== |
========== |
========== |
|
| A.
Debt service liability |
Principal |
|
2,356.490 |
|
|
Interest |
|
5,903.070 |
|
|
----------- |
|
|
8,259.560 |
|
| B.
Subordinated loan |
|
9,575.000 |
|
|
----------- |
|
| Total
amount proposed to converted |
|
17,834.560 |
|
|
========== |
|
|
|
|
|
|
|
| CHAIRMAN'S
REVIEW |
|
|
| Gentlemen, |
|
|
| It
is a great pleasure for me to welcome you to |
|
| the
91st Annual General Meeting of your Corporation |
|
| and
to present before you the Directors' Report and |
|
| Annual
Accounts together with the Auditors Report |
|
| for
the year 2000-01. |
|
|
| During
the year under report, the management |
|
| of
the KESC has succeeded in its efforts towards the |
|
| prime
objective of providing maximum facilities to the |
|
| customers
through regular supply of power, proper |
|
| billing
of the highest number of consumers on actual |
|
| metering
and operation of round the clock service |
|
| centers.
The improvement in the performance of the |
|
| KESC
has significantly benefited the largest |
|
| industrial
and commercial capital of the country. |
|
|
| There
has been remarkable improvement in |
|
| the
overall performance of the KESC, since the |
|
| takeover
of management by Pak Army in May 1999 |
|
| and
induction of Army Monitoring Team (AMT) in 15th |
|
| August
2000. The achievements/performance in last |
|
| two
years indicate that the generation capacity |
|
| enhanced
from 1,214 MW to 1,426 MW. All the |
|
| generating
Units of BQPS have been converted to |
|
| use
natural gas as a substitute to reduce the input |
|
| cost.
As the furnace oil price is much higher than the |
|
| prices
of natural gas, the previous gas quota of 40 |
|
| MMCFD
for BQPS has now increased to 80 MMCFD |
|
| (176
MMCFD by Jan 2003). The revenue recovery |
|
| position
of the KESC has also improved. Total |
|
| collection
of the Corporation, which was |
|
| Rs.
20.8 billion in Financial Year (FY) 1998-99 boost |
|
| up
to Rs. 27.0 billion in FY 99-2000 and Rs. 30.2 |
|
| billion
in FY 2000-01. The increase in revenue |
|
| collection
has become possible because of the |
|
| following
measures with the help of AMT: |
|
|
| Reduction
of average billing from 60% to 17% |
|
| and
minimum billing from 17%to 12%, bringing |
|
| 182,689
new consumers on billing panel, quick |
|
| processing
of Faulty Meter Report (FMR) and |
|
| effective
disconnection drive. Paying |
|
| consumers'
ratio increased from 41% to 58%. |
|
|
| KESC
has recovered Rs. 9.6 billion from |
|
| government
departments and Rs. 47.6 billion |
|
| from
private sector in last two years. |
|
|
| The
improvement made in the recovery has |
|
| been
totally wiped out by massive increase in cost of |
|
| fuel
inputs, which together with the cost of power |
|
| purchase
exceeds the annual revenue of the KESC |
|
| and
is the major contributor to the fiscal deficit of the |
|
| Corporation.
The furnace oil price, which increased to |
|
| 143%
in October 2000, is still 100% more than that |
|
| was
prevailing in April 1999. Similarly the gas price |
|
| has
also increased by 63%. The financial effect of |
|
| these
increases was Rs. 10 billion approximately in |
|
| the
year under review. Besides, the heavy debt |
|
| servicing
on loans and TFC have made the things |
|
| worst
for KESC. |
|
|
| The
operational shortfall during FY 2000-01 |
|
| has
been met through arrangement of funds available |
|
| from
ADB loans and bridge financing. Besides, GOP |
|
| arranged
a loan of Rs. 4.0 billion for KESC from |
|
| commercial
banks for repayment of overdue power |
|
| purchase
liabilities. As per policy matrix agreed with |
|
| ADB,
GOP has guaranteed to provide facility for |
|
| funding
KESC's shortfall upto June 30, 2003 or the |
|
| date
of privatization, whichever is earlier. |
|
|
| OPERATIONAL
RESULTS |
|
| The
installed capacity of KESC generating |
|
| stations
for the year 2000-01 was 1,756 MW while the |
|
| actual
capability was 1,426 MW. The maximum |
|
| demand
for KESC licensed area for the year under |
|
| report
was 1,860 MW. The operational activities of the |
|
| Corporation
are as under: |
|
|
| Description |
|
2000-2001 |
1999-2000 |
Percentage |
|
|
MWH |
MWH |
inc./(dec.) |
|
| 1.
Units generated (KESC) |
|
7,988,779 |
7,745,011 |
3.15 |
|
| 2.
Units sent out (KESC) |
|
7,455,231 |
7,232,999 |
3.07 |
|
| 3.
Units purchased from KANUPP, |
|
| PASMIC, TAPAL & GulAhmad |
|
1,931,237 |
1,916,082 |
0.79 |
|
| 4. Units purchased from WAPDA |
|
1,756,993 |
1,785,119 |
(1.58) |
|
| 5.
Total available for sale |
|
11,143,461 |
10,934,200 |
1.91 |
|
|
|
|
| 6.
Units billed |
|
6,924,192 |
6,429,809 |
7.68 |
|
|
|
|
|
| Out
of total generation of 7,989 Gwh in |
|
| 2000-01
Bin Qasim thermal power station generated |
|
| 6,266
Gwh or 78.44%. The maximum station |
|
| contribution
to the system during the year under |
|
| review
was 1020 MW (64% system demand). |
|
|
| The
import of power from WAPDA enabled |
|
| KESC
to avoid load shedding. WAPDA has not only |
|
| supplied
the much needed electrical energy, but also |
|
| favoured
the KESC by deferring payment for the |
|
| power
supplied. |
|
|
| TRANSMISSION
& DISTRIBUTION LOSSES |
|
| The
transmission and distribution losses which |
|
| were
40.23% in FY 99-2000 have been decreased to |
|
| 36.81%
in FY 2000-01 by taking the following |
|
| measures
with the help of Army Monitoring Team. |
|
|
| Regularization
of 100,000 Kundas/Hooks and |
|
| new
connections on billing panel. |
|
|
| Laying
of additional 11 KV feeders and |
|
| transformers. |
|
|
| Survey
and combing of industrial and |
|
| commercial
areas to regularize the |
|
| unauthorized
extended load. |
|
|
| Bring
more consumers on billing panel. |
|
|
| Installation
of energy meters on distribution |
|
| transformers
indicated losses in the range of |
|
| 30
to 80 percent in different localities of |
|
| Karachi.
Based on this information meter are |
|
| being
shifted outside the premises in posh |
|
| areas
of KDA-1, Defence and Gulshan-e-lqbal |
|
| which
is giving positive results vis-a-vis |
|
| increase
in consumption of energy. |
|
|
| The
losses will reduce gradually with the |
|
| continuous
support of the Army Monitoring Team. As |
|
| such
the T&D losses for the year 2001-02 has been |
|
| estimated
at 32%. |
|
|
| KESC
Plan for improvement include further |
|
| reduction
in level of receivables, T&D losses and |
|
| restructuring
of one zone in Defence and Clifton area |
|
| to
provide one window operation for the consumers |
|
| and
also accountability for own staff for losses and |
|
| revenue
collection. The implementation of the plan will |
|
| help
to achieve the targets fixed for the year 2001-02. |
|
|
| REVENUE
& EXPENDITURE |
|
| The
financial year under review indicates an |
|
| increase
of 2798 million in total revenue and |
|
| increase
of Rs. 6212 million in expenditure over the |
|
| previous
year as summarized below: |
|
|
| DESCRIPTION |
|
2000-2001 |
1999-2000 |
Percentage |
|
|
(Rs. Million) |
Incr./(Decr). |
|
| Income: |
|
| Revenue
from sale of energy |
|
28,118 |
25,035 |
12.32% |
|
| Other
income |
|
722 |
1,007 |
(28.30%) |
|
|
----------- |
----------- |
----------- |
|
|
28,840 |
26,042 |
10.74% |
|
|
----------- |
----------- |
----------- |
|
| Expenditure |
|
|
|
| Cost
of fuel & power purchased |
|
31,497 |
26,118 |
20.60% |
|
| Depreciation |
|
2,755 |
2,821 |
(2.34%) |
|
| Interest |
|
5,725 |
5,481 |
4.45% |
|
| Provision
for doubtful debts |
|
1,729 |
1,094 |
58.05% |
|
| Other
expenses |
|
3,335 |
3,315 |
0.64% |
|
|
----------- |
----------- |
----------- |
|
|
45,041 |
38,829 |
16.00% |
|
|
----------- |
----------- |
----------- |
|
| Loss
before tax |
|
(16,201) |
(12,787) |
(26.70%) |
|
|
========== |
========== |
========== |
|
| During
the year under review, revenue from |
|
| sale
of energy has increased by 12.32% over |
|
| previous
year which is due to increase in units sold by |
|
| 7.69%
and tariff increase of 5.6% from 27.3.2001 and |
|
| another
2.6% from 4.11.2001 including additional |
|
| revenue
generated through fixed charges on account |
|
| of
load survey of consumers. |
|
|
| The
net loss for the financial year 2000-01 |
|
| comes
to Rs. 16,201 million as against 12,787 million |
|
| during
last year. The main reasons for the loss are the |
|
| increased
fuel and power purchase costs, not |
|
| allowed
to be passed on to consumers by NEPRA |
|
| and
heavy financial charges on shod-term
and |
|
| long-term
loans obtained to bridge the financing |
|
| gaps. |
|
|
| The
other cost that include salaries, wages |
|
| and
other operational and maintenance expenses |
|
| and
provisions increased marginally by 0.64% during |
|
| the
year under report over the actual expenses of last |
|
| year. |
|
|
| Substantial
reduction has been made in payment of |
|
| overtime,
transport, medical, telephone and other |
|
| expenses
through remedial measures. |
|
|
| To
improve the financial health of the |
|
| Corporation,
Economic Coordination Committee of |
|
| the
Cabinet has approved conversion of subordinated |
|
| loan
amounting to Rs. 9,575 million into equity. |
|
| Besides,
Government of Pakistan and Asian |
|
| Development
Bank, have agreed to the following |
|
| financing
up to June 2003: |
|
|
|
Rs. Million |
|
| a) Debt Equity Swap (foreign |
|
| debt-servicing
up to June 2003) |
|
15,835 |
|
| b)
Bridge Financing/ADB Loan |
|
13,334 |
|
| c)
Conversion of overdue liabilities |
|
|
|
