Pesco losses reach Rs 60. 68 billion: audit report

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The accumulated losses of Peshawar Electric Supply Company Limited (Pesco) reached Rs 60. 68 billion as on June 30, 2010. According to Audit Report-2010-11 of Water and Power Development Authority, the Government of Pakistan invested Rs 18. 1 billion since the incorporation of the Company by making payment of company liabilities, which were subsequently adjusted in equity under the head Deposit for shares . The Company needs to improve its operating performance to improve its equity position, the audit report said. The report further said that the long-term loans increased by Rs 696 million ie 166 percent (Rs 1. 1 2 billion: 2009-10, Rs 419 million: 2008-09). This mainly included the loans from ADB. The Company needs to justify the objective and nature of these loans. The audit says that the Company should avoid obtaining long-term loans because of its financial health. According to the report, the advances, prepayments and other receivable increased significantly by 61. 69 percent (Rs 64. 88 billion: 2009-10 Rs 40. 123 billion 2008-09), out of which 35. 65 percent were against Wapda associated undertakings. The Audit suggested to improve the recovery of its outstanding dues. The report says that non-payment to sister companies showed that the Company was facing shortage of cash. On the other hand, the Company was carrying huge amount of cash and bank balances ie Rs 3. 362 billion. The Company should justify retention of such a huge cash balances, the audit says. The report further says that there was an increase in revenue by Rs 13. 49 billion ie 24. 96 percent (Rs 66. 827 billion: 2009-10: Rs 53. 478 billion 2008-09), on the other hand, cost of sales increased by Rs 20. 87 billion ie 39. 11 percent (Rs 74. 23 billion: 2009-10: Rs 53. 36 billion 2008-09) with the result that the Company suffered gross loss of Rs 7. 398 billion and gross profit margin turned to minus 11. 19 percent. Consequently, the net profit ratio also remained negative during this year. This showed a poor financial performance of the Company, the report says. The negative equity of the Company increased to Rs 42,601 million during the year under report. The stores and spares increased by Rs 647. 187 million ie 43 percent (Rs 2,145 million: 2009-10: Rs 1,498 million 2008-09). The Company should keep its stores and spares according to the requirement and avoid unnecessary purchase. Current ratio of the Company was 0. 63 (0. 61: 2008-09) which showed a slight improvement in liquidity of the Company. Creditors, accrued and other liabilities increased by 44. 29 percent, out of which 93 percent was payable to associated undertakings in respect of purchase of electricity and other inter-company transactions which increased by 35 percent over the previous year. The debtor s turnover period showed a slight increase from 85 to 88 days while its creditors turnover period also increased by 24 days and currently the Company is discharging its trade payables facing cash problems. The Company needs to improve its recovery position. Other operating costs increased by R. s. 905 million ie 13. 51percent (Rs 7,609 million : 2009-10: Rs 6,704 million 2008-09). Salaries and wages, repair and maintenance and office supplies and other expenses and other charges contributed 71percent of the current operating cost. The Company needs to control its operating expenses.

Courtesy : Business Recorder


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