NEPRA Approves Multi-Year Tariff for K-Electric’s Transmission and Distribution Segments

K-Electric Limited (PSX: KEL) has announced that the National Electric Power Regulatory Authority (NEPRA) has approved a Multi-Year Tariff (MYT) for its Transmission and Distribution (T&D) segments covering the period from FY2024 to FY2030. According to a company filing with the Pakistan Stock Exchange (PSX), the MYT approval follows K-Electric’s submission to NEPRA on December 27, 2023, under Rule 3(1) of the NEPRA Tariff Standards and Procedure Rules, 1998, after securing approval for its investment plan for the MYT period. K-Electric stated that it is currently reviewing the detailed decision and may exercise available legal remedies, if required, as per applicable regulations. Meanwhile, NEPRA is still in the process of determining the MYT for K-Electric’s Supply segment, as well as a Motion for Review of the approved Investment Plan. According to Topline Securities, NEPRA has awarded USD IRR of 14 percent to KEL for distribution business against requested USD IRR of 16.67 percent. The USD IRR of 14 percent translates into PKR ROE of 25.6 percent for Y1 (i.e. FY24). This is better than previous tariff PKR return of 16.67 percent. This current tariff is unbundled in 3 different segments, i.e., (1) Generation, (2) Transmission and (3) Distribution Tariff. Earlier, the company used to have a single tariff for all business segments. We also released a separate note, when the company was awarded with a generation tariff dated Oct 23, 2024 titled “$ ROE and take or pay allowed”. The PKR ROE is higher than USD ROE as the company has indexed this return formula with the base exchange rate assumed from FY16. NEPRA said this return formula of the distribution business may be reviewed and aligned with other DISCOs once they are privatized. KE noted that the outcome of these proceedings is critical for the preparation of its financial statements for the period after June 30, 2023. Further updates will be shared with the PSX once NEPRA issues its decision on the remaining tariff petitions.