Open to acquiring other DISCOs if privatisation proceeds, say K-Electric

KARACHI: K-Electric Limited (KEL) has expressed willingness to acquire other distribution companies (DISCOs) if the privatisation process continues, the management stated during a corporate analyst briefing on recently approved tariffs, according to Arif Habib Limited.

K-Electric’s transmission network currently comprises over 7,095 MVAs of capacity, 74 grid stations, 184 power transformers, and 1,394 kilometres of transmission lines.

The management said that privatisation had led to estimated savings of Rs900 billion for both consumers and the government.

“Under the tariff differential claim mechanism, no direct subsidy or financial benefit is extended to KE. Instead, the government subsidises tariffs for end-consumers,” Arif Habib noted.

The utility said it would file a review with the National Electric Power Regulatory Authority (NEPRA) on certain tariff components, including the adjustment of Late Payment Surcharge (LPS).

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It has also submitted write-off claims worth Rs75–76 billion to NEPRA. An accounting adjustment of Rs67 billion has already been made, and the approval or rejection of the remainder will result in a gain or loss for KE, Topline Securities said.

Generation Tariff

NEPRA has allowed a 14 per cent USD-based Return on Equity (ROE) on generation for a control period of seven years or the remaining life of the plant — whichever is shorter — except for BQPS-III, which gets an 11-year term due to a longer debt schedule.

Heat rate efficiency gains will be shared between KEL and consumers in a 40:60 ratio, except for BQPS-I, which follows a separate formula.

Distribution and Transmission Tariffs

For the distribution and transmission segments, NEPRA has approved ROEs of 14 per cent and 12 per cent, respectively, over a seven-year control period.

A notional debt-to-equity ratio of 70:30 has been maintained, as per the previous Multi-Year Tariff (MYT), Topline added.

K-Electric reiterated that a tariff review can be filed with NEPRA before a set deadline. If the deadline lapses, the new tariff will be implemented automatically.

Performance Benchmarks

The utility’s actual recovery stood at 91.5 per cent in FY24 and 92.5 per cent in 9MFY25, versus NEPRA benchmarks of 93.25 per cent and 93.60 per cent, respectively. Transmission and distribution (T\&D) losses were recorded at 16 per cent in FY24 and 14.4 per cent in 9MFY25, against allowed benchmarks of 14.58 per cent and 14.27 per cent.

Performance above NEPRA benchmarks for recovery will be shared with consumers, while underperformance will affect KE’s profit and loss. The mechanism for sharing T\&D gains will be addressed in the Integrated Investment Plan currently under NEPRA’s review.

Renewable Expansion

K-Electric aims to increase its renewable energy share to 30 per cent of total generation by 2030, with 1,282MW of renewables in the pipeline. Competitive bidding for 640MW has been completed, with private firms to supply power at Rs8.92–11.21/kWh, helping reduce overall generation costs.

The management also highlighted that if natural gas is made available instead of LNG, generation costs could drop significantly — from Rs19.2 to Rs11.92 per unit — allowing the benefit to be passed on to consumers.