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Karachi Electric Supply Corporation Limited
Annual Report 1998
CONTENTS
Name of Directors, Bankers, Auditors
Notice of Meeting
Chairman's Review
Directors' Report to the Members
Income and where it went
Historical Highlights
Operating results of generating stations
Transmission and Distribution system
Auditors Report to the Members
Balance Sheet
Profit and Loss Account
Statement of Changes in Financial Position
Notes to the Financial Statements
Pattern of Shareholdings
BOARD OF DIRECTORS
CHAIRMAN
Syed Shahid Husain
MANAGING DIRECTOR
Mr. Kamal Afsar
DIRECTORS
Mr. Shahmir Khan
Mr. Raziur Rehman Khan
Mr. Abdullah Hussain Haroon
Sayed Muzafar Ali Shah
Mr. M. Zubair Motiwala
Mr. Fayyaz Ahmad
Syed Mazhar Ali
Mr. Asadullah Khawaja
Mr. Jahangir Siddiqui
Mr. M. Khusrow Khowaja
CORPORATE SECRETARY
Mr. Oswald Pearl
BANKERS
National Bank of Pakistan
Habib Bank Ltd.
United Bank Ltd.
Muslim Commercial Bank Ltd.
Allied Bank of Pakistan Ltd.
First Women Bank Ltd.
AUDITORS
Rahim Jan & Company
Sidat Hyder Qamar Maqbool & Co.
REGD. OFFICE
Aimai House, Abdullah Haroon Road, Karachi.
NOTICE OF MEETING
Notice is hereby given that the 88th Annual General Meeting of the Karachi Electric Supply Corporation Ltd. will be
held at Navy. Welfare Centre (Former P.N. Fleet Club), Liaquat Barracks, Karachi, on Wednesday, the 31st March, 1999
at 11:30 a.m. to transact the following business.
(1) To confirm minutes of the Extra-Ordinary General Meeting held on 22nd January, 1999.
(2) To receive and adopt the Directors' Report and the Audited Accounts (with Auditors' Report) for the
year ended 30th June, 1998.
(3) To appoint Auditors in place of those retiring and fix their remuneration for 1998-99. Retiring Auditors
viz: M/s. Rahim Jan & Co. and M/s. Sidat Hyder Qamar Maqbool & Co. being eligible have offered
themselves for re-appointment.
Any other business with the permission of the Chair.
Transfer Books of the Corporation will remain closed from 22.03.1999 to 04.04.1999 (both days inclusive).
By order of the Board
THE KARACHI ELECTRIC SUPPLY CORPORATION LTD.
OSWALD PEARL
CORPORATE SECRETARY
Karachi: February 27, 1999
N.B.
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 to a member.
iii) This meeting has been called in terms of the extension of the period for holding of Annual General Meeting for
the year ended June 30, 1998 granted by the Securities Exchange Commission of Pakistan, Islamabad vide their
letter No. 19(930)CF/ISS/96 dated 31.12.1998.
iv) Form of proxy is enclosed.
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 80 and 81 of the Companies Ordinance 1984 a member may, if he opts,
deposit with the company a nomination conferring on one or more persons the right to acquire the interest in the
shares therein specified in the event of his death.
CHAIRMAN'S REVIEW
I am honoured to be welcoming you to the 88th Annual General Meeting of the KESC and to be able to present
Directors' Report, Audited Accounts and the Auditors' Report for the year 1997-98. The financial year started
inauspiciously with the tragic death of KESC Managing Director, Malik Shahid Hamid. The organization has not been
able to overcome the trauma created by the impact of his sudden death.
KESC suffered a loss of Rs. 6.86 billion during the year under review. This could perhaps be ascribed to the
increase in fuel price as well as continued transmission and distribution losses. Moreover expenditure on depreciation
as well as the financial charges increased with the commissioning of Bin Qasim (Unit No. 6) as well as ADB/EXIM (5th
Power Sector Loan of US$ 200 million).
During the year under report Bin Qasim (Unit-6) started commercial operation on April 27, 1998 and the
installed capacity increased to 1,735 MW. Effective installed capacity of power stations came down from 1,735 MW to
1,525 MW in 1996-97, owing to non-utilization of Dual Fuel Station West Wharf (Unit 8-9) and Korangi Thermal Power
Station (Unit 1-2). The operational results are shown as under:-
1997-98 1996-97 % incr/(decr.)
MWH MWH
i) Units generated (KESC) 7,318,330 7,457,774 (1.87)
ii) Units sentout (KESC) 6,824,172 6,968,449 (2.07)
iii) Units purchased 3,030,274 1,868,913 62.14
iv) Total available for sale 9,854,446 8,837,362 11.51
v) Units billed 6,385,129 5,639,847 13.21
The generation at Bin Qasim Power Station, during the year increased by 2.67% over the previous year which
alone generated 78% of the total electricity generated by the KESC. KESC generation declined by 1.87% during the
year and the increased demand was met from purchase of power from KANUPP, PASMIC, Tapal Energy, Gul Ahmad
and particularly WAPDA. KESC purchased 29.3% of its demand from outside. This compares with 20% purchase
during the previous year and suggests a declining reliance of self generated power. This year the total generation was
10.3 million MWH as compared to 9.30 million MWH during the previous year.
TRANSMISSION AND DISTRIBUTION LOSSES
T&D losses during the year were reported to be 34% as opposed to 35% in the previous year. Special Task
Forces were established and elements from the military inducted to check theft as an element of T&D losses.
REVENUE AND EXPENDITURE
During the year under review revenue increased by Rs. 4.8 billion but the expenditure surpassed the revenue
collection and increased by only Rs. 4.9 billion despite increase in tariff. The summary is given below:-
(Rs. Million)
Percentage
Income 1997-98 1996-97 Incr/(decr.)
- Revenue from sale of energy 20,726.39 15,796.78 31.21 %
- Other income 412.56 493.64 (16.42%)
----------------------------------
21,138.95 16,290.42 29.76%
----------------------------------
Expenditure
- Cost of fuel and power purchased 18,516.81 14,424.76 28.37%
- Depreciation 2,139.66 1,719.23 24.45%
- Interest 2,854.35 2,112.35 35.12%
- Provision for doubtful debts 1,698.30 1,438.03 18.10%
- Other expenses 2,786.54 3,375.40 (17.44%)
----------------------------------
27,995.66 23,069.77 21.35%
----------------------------------
(6,856.71) (6,779.35) 1.14%
----------------------------------
The revenue for the year 1997-98 is inclusive of effect of 18.0% tariff increase allowed to KESC from March
09, 1998 and increased units billed by 13.21% over 1996-97. The increase of Rs. 4,925.89 million in expenditure is
mainly due to higher fuel prices, cost of power purchases and commissioning of Bin Qasim Unit-6 as well as completion
of Transmission and Distribution Schemes under ADB 5th Power Sector loan which were beyond our control.
CONSUMER SERVICES
The number of new connections during the year under report was 13,508 as against 7,738 in the previous year.
About 52,000 consumers were brought on billing panel during the year.
ON GOING PROJECTS
210 MW Bin Qasim thermal power station extension (Unit-6) showed an overall progress of 98.5%. During the
year the project made substantial progress towards completion. The unit has been synchronized on August 30, 1997
and attained 210 MW load On October 5, 1997.
KESC Fifth Power (Sector Loan) Project
The work continued on this project during 1997-98 and overall completion of 95% has been achieved by June
1998.
Progress of work during 1997-98 is as under:
A. Conventional Grid Stations
Against this project new 132/11 KV, 40 MVA transformers were erected, tested and commissioned at the
following grid stations:
Civic Centre Grid Station 2 x 40 MVA
Defence Grid Station 1 x 40 MVA
Liaquatabad Grid Station 1 x 40 MVA
Malir Grid Station 2 x 40 MVA (upgraded to 132 Kv)
Pipri Grid Station 1 x 40 MVA
The transformation capacity at 132/11 KV level increased by 280 MVA during the year and cumulative increase
in the transformation capacity under this project is 720 MVA till June, 1998.
B. GIS Grid Station
At Baldia Grid Station 250 MVA 220/132 KV auto transformer has been installed and commissioned, which has
relieved over loading of 220/132 KV. Baldia auto transformer Grid Station extension work has been completed at 132
KV Queens Road Grid Station, Korangi West and Valika Grid Station. Work on 220 KV Queens Road Grid Station is
in progress.
C. Underground Cable Transmission Lines
132 KV transmission lines of Malir - CCA loop and STGT - Lyari Grid Station have been tested and
commissioned. The work is in the completion stage on the other lines.
D. Distribution
Under the above project contract for the procurement of 16 different packages of distribution material for
augmentation of distribution system was awarded. Most of the material has been received whereas delivery of balance
material is about to be completed.
Sixth Power (Sector Loan) Project
Contract for Overhead Transmission Lines have been awarded against which Interconnection of Tapal P/P, and
Gul Ahmad P/P and BOC Grid Station loop have been completed.
Erection work on 220 KV Mauripur-West Wharf and 132/11 KV Valika-N. Naz.-SITE-II line is in process. Piling
work on 132 KV Pipri West-Gharo line completed and work on pile caps is in progress. Piling work and Pile cap is in
progress on 220 KV Baldia-Mauripur, Mauripur-West Wharf and 132 KV Valika-N.Naz. SITE Lines.
Energy Sector Loan Project
1. 132 KV Lyari Grid Station
The work on Lyari Grid Station has been completed and the Grid Station has been energized with a 40 MVA,
132/11 KV transformers. With the energization of the Grid, the power supply in Old Town area has improved and
stabilized.
2. S.I.T.E. II Grid Station
90% of the works has been completed and the Grid Station is expected to be completed and commissioned in
December, 1998.
3. Surjani Town Grid Station
Civil works are in progress and are expected to be completed by end of March, 1999.
CONCLUSION:
Before I take leave I must place on record my concern at the declining health of the Corporation. An effort to
privatize it has not made much headway although substantial financial restructuring has been undertaken. It is my
considered opinion that the Corporation can only be rescued through a fast track privatization. It is for the shareholders
to take a decision in the best interest of the Corporation.
I wish to express my thanks to all my colleagues and members of the KESC Board of Directors for their
valuable help and co-operation extended to the Corporation. I am also thankful to the Ministry of Water and Power,
Ministry of Finance and Economic Affairs and Planning Division for their assistance. The Provincial Governments of
Sindh and Balochistan and Local Authorities also deserves our thank for their help and guidance towards various
affairs of the Corporation.
SYED SHAHID HUSAIN
CHAIRMAN
Directors' Report to the Members
1. The Board of Directors present herewith Eighty Sixth Annual Report on the working of the Corporation together
with Audited Statement of Accounts for the year ended June 30, 1998.
(i) The T&D losses for the year under report, have decreased by 0.91% as compared to corresponding
period of previous year. The decrease is attributable to the improved operational activities and due to
aggressive campaign to remove illegal connections, reduce pilferage of energy with the help of officials
of Army. It is expected that with the continuing efforts and after rehabilitation and augmentation of
Transmission and Distribution system, the T&D losses will further come down appreciably.
(ii) Overtime levels have come down. However, strict measures to reduce overtime continue to be taken.
The formation of Overtime Control Committee is a step in that direction and it is expected that the
overtime payments will be brought down to minimum possible levels.
2. FINANCIAL RESULT (Rs. in thousands)
From the statement of Accounts it will be observed that
after meeting all operation and administrative costs
including depreciation, but before provision for taxation,
the accounts show a loss of (6,856,715)
From which must be deducted provision
For taxation - for the year turnover (112,600)
deferred 1,289,944 1,177,344
----------
(Loss) after taxation (5,679,371)
To which must be added
(Loss) brought forward from
the previous year (6,156,438)
----------
Making a total (loss), carried over (11,835,809)
to next year ==========
3. The major factors which have adversely affected KESC financial position are mainly due to higher fuel prices,
cost of power purchases, commissioning of Bin Qasim Unit 6 as well as completion of Transmission and
Distribution schemes and inadequate tariff increase.
4. AUDITORS
M/s. Rahim Jan & Co., Chartered Accountants and M/s. Sidat Hyder Qamar Maqbool & Company, Chartered
Accountants retire and offer themselves for re-appointment.
It is recommended that appointment of M/s. Rahim Jan & Co., Chartered Accountants and M/s. Sidat Hyder
Qamar Maqbool & Company, Chartered Accountants as Joint Auditors for 1998-99 be considered. The
resolution for appointment of Auditors and fixation of their remuneration will be proposed at the meeting.
5. The necessary steps are underway to ensure that the computer operating systems of the Company are fully
compliant with regard to "Y2K". A significant progress has been achieved so far and the process is likely to be
finalised within the specified time.
6. Pattern of shareholding appears on pages 40 and 41.
ON BEHALF OF THE BOARD OF DIRECTORS
KAMAL AFSAR
MANAGING DIRECTOR
Karachi: February 27, 1999
Income and where it went
July-June July-June
1997-98 1996-97
 (Rupees in thousand)
Amount % Amount %
Our Income was:
From sale of energy 20,726,388 98.05 15,796,778 96.97
From other sources 412,559 1.95 493,644 3.03
---------- ---------- ---------- ----------
21,138,947 100.00 16,290,422 100.00
========== ========== ========== ==========
We paid out and provided
Generation expenses
Sui gas 2,529,868 11.97 2,432,525 14.93
Fuel oil 8,247,150 39.01 8,548,147 52.47
Other expenses 477,787 2.26 553,599 3.40
---------- ---------- ---------- ----------
Total generation expenses          11,254,805 53.24 11,534,271 70.80
Power purchased 7,739,787 36.61 3,444,086 21.14
Transmission & distribution expenses 1,440,336 6.82 1,856,613 11.40
Public lamps expenses 61,507 0.29 59,191 0.36
Consumers services &
billing expenses 482,280 2.28 600,890 3.69
Administration & general
expenses and other charges 2,022,938 9.57 1,759,241 10.80
Contribution towards
Workers Participation
Fund - - - -
Depreciation 2,139,656 10.12 1,719,228 10.55
Financial charges 2,854,353 13.50 2,096,247 12.87
Deficit (6,856,715) (32.43) (6,779,345) (41.61)
---------- ---------- ---------- ----------
21,138,947 100.00 16,290,422 100.00
========== ========== ========== ==========
Historical Highlights
(Rupees In thousand)
1998-89 1989-90 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98
Description
Units sold GWH 4,765.17 5,074.40 4,969.01 5,491.99 5,879.51 6,086.89 5,631.83 6,021.01 5,639.85 6,385.13
Revenue from sale
of energy Rs. 5,367,940 6,323,771 7,161,374 8,471,664 9,708,641 11,578,113 12,383,282 15,988,034 15,796,778 20,726,388
Other revenue Rs. 87,051 113,369 126,504 189,528 185,479 218,692 307,660 351,404 493,644 412,559
==================================================================================================================
Total revenue Rs. 5,454,991 6,437,140 7,287,878 8,661,192 9,894,120 11,796,805 12,690,942 16,339,438 16,290,422 21,138,947
==================================================================================================================
Deduct:
Cost of fuel and
power purchased Rs. 2,294,923 2,911,333 3,192,290 3,881,070 5,154,963 6,317,788 6,734,531 9,096,992 14,424,758 18,516,805
Depreciation Rs. 799,230 883,615 1,146,852 1,406,747 1,478,870 1,485,804 1,667,767 1,642,504 1,719,228 2,139,656
Additional depreciation Rs. 230,362 245,742 273,088 339,897 409,399 476,588 - 1,200,783 - -
Interest Rs. 602,360 785,875 1,164,750 1,344,895 1,275,268 1,387,328 1,720,324 1,793,365 2,112,349 2,854,353
Other expenses Rs. 1,026,973 1,015,657 1,038,350 1,376,309 1,421,134 1,953,414 2,379,768 3,074,662 4,813,432 4,484,848
==================================================================================================================
Total expenses Rs. 4,953,848 5,842,222 6,815,330 8,348,918 9,739,634 11,620,922 12,502,390 16,808,306 23,069,767 27,995,662
Net profit/(loss) ==================================================================================================================
before taxation Rs. 501,143 594,918 472,548 312,274 154,486 175,883 188,552 (468,868) (6,779,345) (6,856,715)
==================================================================================================================
Rate of dividend % 10.00 - - - - - - - - -
Rate of bonus shares % 15.00 25.00 12.50 12.50 7.50 1,000 10.00 - - -
Rate of return on average
net fixed assets % 10.16 9.47 9.24 7.87 674 721 7.13 5.65 - -
OPERATING RESULTS OF GENERATING STATIONS
July-June July-June
1997-98 1996-97
Total installed capacity KESC* MW 1,735 1,525
Actual capability MW 1,312 1,219
Installed capacity KANUPP MW 125 125
Firm capacity KESC MW 1,312 1,219
Maximum demand:
For Karachi MW 1,729 1,529
Overall after supply to WAPDA MW 1,723 1,529
Units generated MWH 7,318,330 7,457,774
Auxiliary power consumed MWH 494,158 489,325
% 6.75 6.56
Units sent out by KESC Generating Stations MWH 6,824,172 6,968,449
Units imported from KANUPP/WAPDA/PASMIC/TAPAL MWH 3,030,274 1,868,913
Units available for distribution MWH 9,854,446 8,837,362
Transmission and distribution losses % 34.62 35.53
Internal consumption by Departments and staff MWH 84,894 74,354
Units billed:
i. For current year MWH 6,358,071 5,623,191
ii. For previous year MWH 27,058 16,656
iii. Total units sold MWH 6,385,129 5,639,847
*This includes Gas Turbines capability in ISO condition.
Transmission and Distribution System
Description As on Additions As on
July 30, during June 30
1997 1997-98 1998
Transmission System
220 KV Overhead  - Route Kilometers