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KEL_Analyst Briefing Takeaways, (AKD Off the Analyst's Desk Nov 23, 2022)

KEL: Analyst Briefing Takeaways

K-Electric Limited (KEL) held its analyst briefing yesterday to apprise investors on the FY22 and 1QFY23 results along with its future outlook. To recall, KEL posted a PAT of PkR8.5bn (EPS: PkR0.31), while posting a LAT of PkR16.4bn (LPS: PkR0.6) in 1QFY23.

 

• The management explained the reasons for incurring a loss in the first quarter of the fiscal year, citing impairment losses of PkR7.9bn against doubtful trade debts along with a reduction in units sent out which caused a loss of PkR2.4bn. Moreover, an exchange loss of PkR2.6bn was incurred due to the rapidly depreciating local currency, while finance costs of PkR6.4bn further impacted earnings.
• The company recorded an improvement in its recovery rate in FY22, clocking in at 96.7%. For 1QFY23, the company could only recover 88.9% of bills sent out to consumers. The management has explained that due to macro-economic conditions, higher tariffs along with high inflation has left a significant portion of consumers unable to pay their dues, hence leading to impairment losses.
• For the first time since its privatization, T&D losses have fallen below the approved benchmark in the tariff allotted by NEPRA, dropping down to 15.3% in FY22 vs. 17.5% in FY21. This bears good news for the company along with the entire Power sector, as the major causes of circular debt are low recovery ratios along with higher than tariffed T&D losses. 
• The generational efficiency of KEL improved by 0.6%YoY in FY22 and 1QFY23, clocking in at 38.6%/38.7%. Forced outages in FY22 dropped down to 749 in FY22 vs 1,768 in FY21, with the reliability of the system improving to 99.5% from 98.8%. Transmission capacity increased by 5% in FY22, with trips in transmission decreasing by ~20%.
• Going forward, the 900MW RLNG plant is expected to increase generational efficiency, along with 450-500MW of renewable projects which are going to come online by FY25. Moreover, the transmission capacity is planned to expand to 7,200MVA by FY23 through multiple projects.
• KEL is planning to file with separate tariffs for Generation, Transmission and Distribution, hoping that cost-recovery will be aided due to the separation of tariffs for all 3 operations. Moreover, the company is working towards a new Multi-Year Tariff starting from FY24, hoping it will enable key investments which were unable to be made under the current MYT.