K-Electric
| File:Kesc logo.jpg | |
| Company type | Public |
|---|---|
| Industry | Electricity Generation, Transmission and Distribution (installed capacity 2,052 MW) |
| Founded | September 1913 |
| Headquarters | Karachi, Pakistan, Karachi , Pakistan |
Key people | Tabish Gauhar, CEO ; Nayyer Hussain, COO |
| Revenue |  PKR 49.606 billion (2011-12) |
| Total assets | PKR 93.076 Billion |
| Owner | ABRAAJ CAPITAL through KES POWER & The Government of Pakistan |
Number of employees | over 10, 962 (As of Dec. 31, 2012) |
| Website | www.kesc.com.pk |
Karachi Electric Supply Company Limited (KESC), was incorporated on September 13, 1913, under the now repealed Indian Companies Act, 1882 currently Companies Ordinance, 1984). In 1952, the Government of Pakistan (GoP) took control of the Company by acquiring majority shareholding of KESC. In 2005, the Government privatized KESC. In 2008, Abraaj Capital, a leading private equity firm based in Dubai, bought the power utility for a significant equity stake in the Company. Abraaj Capital now enjoys full management control over KESC via the holding company, KES Power Limited which holds 72.58 per cent of its shares. The management of KESC is run through a professional management team headed by Mr. Tabish Gauhar, KESC’s Chief Executive Officer (CEO). The Government still holds 25.66 per cent of the KESC shares.
KESC is the only remaining vertically integrated power utility in Pakistan that generates, transmits and distributes electricity. KESC has exclusive franchise rights to provide electricity to industrial, commercial, agricultural and residential consumers of Karachi, Pakistan’s largest city, and its surrounding areas under the Electricity Act, 1910 as amended to date and NEPRA Act 1997, to its licensed areas. The Company has a total of 10,962 employees (source: KESC HR Department); its network spans an area of 6,500 square kilometers and it enjoys one of the largest customers’ bases in the world of over 2 million connections, catering to electricity needs of around 20 million inhabitants of Karachi. Listed on all three of Pakistan’s stock exchanges, KESC has generated Rs. 162.816 billion revenue during fiscal year 2011-12.
History
Energy Crises in 1970s and 1980s
In the 1970s and 1980s, Pakistan suffered from intense power shortages, which led subsequent governments to realize that a serious power crisis was in the offing. With a view towards encouraging private investment in the country’s power sector, the Government of Pakistan started off by providing lucrative incentives to foreign investors through various policies, first of which was initiated in 1994. Through the 1994 Power Policy, establishment of Independent Power Producers (IPPs) was encouraged to provide Pakistan with much-needed investment in the power industry.
1996-2005: Pakistan Army took management of KESC
In 1996, a steep deterioration in KESC’s financial health began, which promoted suggestions for the utility’s transfer into private hands. During the interim period between 1996 and 2005, Army management was instated at the state utility with a view to stabilizing the Company’s operational and financial health.
Privatization
During 2002 and 2003, incentives were introduced in preparation for KESC’s privatization, which eventually finalized on 29 November 2005 with a 71% transfer of ownership to a consortium of the Saudi Al-Jomaih Group of Companies and Kuwait’s National Industries Group (NIG), with the government still retaining around 26% stake. The privatized consortium was unable to improve the Company’s financial and operational crisis.
Abraaj Capital
In the earlier part of 2008, Saudi Al-Jomaih, approached Abraaj Capital, a leading private equity firm based in Dubai, with a proposal for a potential stake in KESC. The deal was eventually finalized in October 2008 at a ticket price of $ 361 million for a significant equity stake in the Company, which grants Abraaj Capital full management control. Abraaj Capital has brought in a professional management team with over 41 senior managers to immediately address the management affairs at KESC. The team is headed by Tabish Gauhar, KESC’s Chief Executive Officer (CEO).
Investment and profit
After decades of financial illness, KESC has remarkably achieved an important milestone of becoming a profitable entity. From 2008 to 2012, KESC witnessed an unprecedented USD 1 Billion shareholders equity investment, major overhauling of its technical resources, wide ranging capacity and efficiency improvements and an effective management. These much needed interventions have enabled KESC to get back on the sustainability track.
While a profit of PKR 2.62 billion seems insignificant when compared with the financial investment made, it is indeed a step towards a sustainable future. During the last few years, KESC has been successful in arranging substantial funds for its development project from IFC, ADB and OEKB and many local financial institutions. That coupled with the capital injection has enabled KESC to add over 1000 megawatts of new and efficient generation capacity and significantly enhance its transmission and distribution capacities. Efficiency gains have really helped the Company improve its operating performance over the past few years.
In November 2012, Karachi Electric Supply Company received USD 50 million from two of its debt financiers, International Finance Corporation (IFC) and Asian Development Bank (ADB) who are lenders of USD 275 million to KESC. Each of the two institutions has invested USD 25 million equivalents in the common shares of the power utility, thus translating into an equity infusion of USD 50 million equivalents.
Term Finance Certificates
In July 2012, Karachi Electric Supply Company declared that the first ever utility sector bonds issued by it, the Rs. 2 billion AZM Term Finance Certificates, have been fully subscribed. The history making venture received an overwhelming response from investors, such that the entire subscription has been completed within the first six weeks of the three month period, which is reflective of the confidence reposed in KESC's certificates.
2012: Year of Turnaround
Karachi Electric Supply Company declared 2012 as the “Year of Turnaround”, and organized AZM Tameer-e-Nau Conference spread over 45 sessions during the year in which all its 10,962 employees took part. The Conference was aimed at transformation of the Company mindset and to convert the once government-controlled half-working utility into an efficient, effective and successful entity. The AZM Conference expressed the unanimous commitment to transform KESC into a truly customer centric private entity. The employees pledged to reinforce the common goal to restore Karachi to its former glory as the ‘City Of Lights’.
Power generation & transmission
By 2012, Karachi Electric Supply Company achieved Gross Dependable Generation Capacity of 2052 Megawatts. Latest addition to its generation fleet took place in April 2012, when KESC‘s newly constructed prime power station called Bin Qasim Power Station No. II, started to generate 560 additional megawatts based on Combined Cycle technology. Before that, 1010 MWs had been added to KESC’s installed power generation capacity, from January 2009 to March 2011, by construction of new power plants, improvement of existing fleet efficiency by over 10 per cent through replacement of old machines with highly efficient machines, timely and digital annual maintenance and overhaul of Bin Qasim Power Station No. I’s old units and by optimum dispatch of electricity. Reliability of the system has been improved by reducing unit tripping by 33 per cent and by 31 per cent reduction in the loss of un-served energy. KESC’s 180 MW GE – Jenbacher Gas Engines – Project has been awarded “Best Fast Track Project (Silver Award)” and “Best Plant in the Region” title by Asian Power Magazine.
Also, 673 MVA have been added to KESC’s transmission capacity through construction of eight new grid stations bringing the total number of Grid Stations to 60, and installation of 16 new transformers at existing grid stations. A total of 31.5 kilometer new transmission lines have been laid down enhancing the network from 1186 to 1218.5 kilometers, while 124 kilometer extra high tensions lines have been rehabilitated. With addition of 18 new circuits to the network the total number of circuits has come to 118. With that, transmission losses have been reduced from 4.19 per cent in September 2008 to 1.45 per cent in November 2011.
Integrated Business Centers (IBC)
To provide one-window service to customers, KESC management launched 27 IBCs (integrated business centers) across Karachi catering to all customers related issues from new connections to bills amendment and faults repair. The IBCs were established after clubbing maintenance centers and billing zones. KESC also launched Virtual IBCs after the success of IBCs for giving costumers better services. VIBCs work just like IBCs and the VIBCs started working from July 2011. Call Centre 118 has also been modernized reinforced and its performance has improved, bringing the complaint attendance time to a few hours from the days and weeks of the past.
Corporate Social Responsibility Excellence Award
Karachi Electric Supply Company has been awarded the ‘Corporate Social Responsibility Business Excellence Award 2012’ at the first CSR Business Excellence Awards 2012 ceremony, organized by National Forum for Environment and Health (NFEH) in collaboration with United Nations Environmental Program (UNEP). The award recognized KESC for the on-going commitment towards sustainable social and environmental investments for the community especially in the areas of health and youth development.
Social Investment Plan
KESC’s Social Investment program (SIP) is aimed at extending support to various vital healthcare and educational institutions serving the under-privileged and needy on purely humanitarian grounds. KESC has so far signed five Memorandums of Understanding under SIP: with Sindh Institute of Urology and Transplantation (SIUT), to provide absolutely free of cost electricity to its three dialysis centers in the City; with Indus Hospital for bearing 50 per cent of their electricity cost: with Marie Adelaide Leprosy Centre (MALC), Layton Rahmatulla Benevolent Trust (LRBT) and The Citizens Foundation (320 TCF schools), for covering 100 per cent of the cost of electricity used by these institutions every month.
Thought Leadership Forum
Karachi Electric Supply Company, in line with its vision to promote enlightened thoughts and objectivity, has created a prestigious “Thought Leadership Forum” as a contribution towards the development of the country’s economy. Under this forum, seminars related to key economic issues and opportunities are organized periodically focusing on logical, implementable and contemporary perspectives aimed at sustainable economic and social development. KESC invites most respected and established thought leaders who present their in-depth analysis of various economic issues and their solutions. Businesspersons, corporate leaders, diplomats, media personalities and key achievers from various walks of life are invited to attend these seminars.
Key Challenges
KESC launched its new campaign against Electricity Thieves by the name of They Steal We Pay (Urdu: ہم بهريں وه كريں) in 2009.This campaign warns the thieves that if they steal electricity they would be charged a penalty or be jailed for a long time. KESC also offers ordinary citizens to report about any thievery they know or have seen stealing electricity. While describing key challenges faced by power sector, State Bank of Pakistan notes: “… Leakages in terms of theft and inefficiencies at the generation and transmission stage, must be seriously addressed. In this regard, the example of a privatized KESC is insightful: this utility has shed surplus staff (despite stiff union opposition); has cut power supply on account of unpaid bills (even for high profile government agencies); has invested in more efficient generation units; and has formulated a commercially-driven load-shedding schedule. As a result, the situation is quite different in Karachi compared to the rest of the country”- (SBP – Annual Report 2011-12).
Online bill payment
Karachi Electric Supply Company in a major value addition departed from conventional practice of bill payment and established a system of online payment service in collaboration with 12 leading banks of the country, becoming the first power utility in Pakistan to bring the convenience of an integrated and round the clock online bill payment service. The banks are: Allied Bank, Burj Bank, Bank Al Habib, Citibank, HBL, KASB Bank, MCB Bank, Standard Chartered bank, Summit Bank, Samba Bank, Soneri Bank and UBL. Customers can log on to KESC official website www.kesc.com.pk anytime and from anywhere in the world, and pay by using their 13 digit account number. KESC customers can also visit their own internet banking page and pay their power bills by entering their 13 digit KESC account number. This convenient service saves them from waiting for the printed bill to arrive and physically visiting bank branches and standing in queues. Customers not familiar with online payment, have been offered other value added alternate payment facilities via Easy Paisa outlets, UBL Omni shops and NADRA offices by just presenting their 13 digit account number at a much wider distribution network of these institutions.
Aerial Bundle Cable (ABC)
Karachi Electric Supply Company has successfully converted a number of PMTs and consumer connections in some parts of the City including Clifton and Keamari areas into high tension Aerial Bundle Cable (ABC) based supply system that mainly preempts illegal connection through kunda thus saving considerable units previously stolen because of open copper wire. Starting 2011 with two pilot projects, KESC-pioneered overhead ABC conversion venture would be covering more PMTs and consumers soon. The advantages of thermoplastic ABC conversion include control of losses caused due to illegal hook connection, prevention of theft of copper conductor, prevention of fatal accidents, minimizing of tripping, minimizing of complaints of power failure, higher current rating and lower short circuit rating, higher insulation and moisture resistance, better resistance to surge currents, better resistance to chemicals and corrosion, low dielectric losses, longer service life, and have better electrical and mechanical properties while being smaller in diameter and lower in weight.
Coal, biogas & LNG
KESC aims at not only bridging the prevailing power demand-supply gap, but also has an objective towards translating this benefit into a lower tariff end user tariff, by burning cost effective fuel as compared to power generation via the 3.7 times more expensive furnace oil. The current fuel supply situation also forces the Company to carry out scheduled load shedding at half of its over 1200 feeders, mainly in commercial and residential localities, though still exempting major hospitals, water pumping stations, essential services, strategic installations and sensitive connections located anywhere in the City from load shedding.
As a part of its drive to enhance affordable electricity power generation capacity, KESC has been working for setting up of coal fired power plants up to 1000 MWs with Bright Eagle Enterprise Group Limited, a Hong Kong based company sponsored by Chinese and Korean investors. These coal-based power plants from China would be established, commissioned and energized in Karachi on a fast track basis. Bright Eagle Enterprise is also collaborating for conversion of KESC’s 1,260 MW Bin Qasim Power Plant-I from residual fuel oil to coal under a Joint Development Agreement. KESC is also actively pursuing Thar coal reserves based power generation under a Joint Development Agreement with Oracle Coalfields of UK and Sindh Carbon Energy signed in June this year under to set up a coal mine mouth power plant.
KESC has signed a Joint Development Agreement (JDA) with Sindh Coal Energy Limited (SCEL) and Oracle Coalfields PLC (Oracle) of UK which is engaged in Coal exploration, mining and production, for establishing a coal-based power plant, reference to tapping the indigenous Thar coal reserves for power generation. This JDA defines the respective responsibilities of each party and marks another key milestone for KESC following the signing of an MOU with Oracle on 12th December 2009 for the Thar Coal Power Project- a venture that aims to develop a mine-mouth coal-powered generation facility at Block VI Thar Coal Fields having an initial capacity of 300 MW and potential upside of 1100 MW. The integrated arrangement, as stipulated by the JDA, will enable KESC to secure a long-term fuel supply from SCEL at competitive prices while SCEL will own and operate the mine which will be integrated with the KESC mine-mouth power plant.
The Company is also in the process of setting up a waste-to-energy power project that will produce approximately 22 MWs of electricity. This bio-gas power plant will have the potential to produce 100,000 tons of organic fertilizer every year. Another key initiative will be the possibility of working on a 300-600 MW mine-mouth coal project at Thar, which will utilize the indigenous coal to be mined by Sindh Engro Coal Mining Company Limited holding the mining lease rights in Block-II of Thar. KESC in pursuing its strategy for fuel security will be working with Engro Vopak Terminal Ltd (EVTL) on the fast track innovative LNG project aimed at using the existing infrastructure at its terminal at Port Qasim to bring in intermittent supply of RLNG using a FSRU of Excelerate, USA as a trading vessel. In addition, it plans to work with Engro's subsidiary, Elengy Terminal Pakistan Ltd (ETPL), to obtain long term terminal capacity in the 3.5mtpa floating LNG terminal at Khiprianwala, Port Qasim being developed by ETPL for delivery of first gas in 15 months after achieving financial close. Engro Polymer and Chemicals Limited (EPCL) will also be entering into negotiations with KESC for a supply of 65 MWs, using high voltage (220 KV) transmission line from KESC to EPCL to fulfill its electricity requirement.
‘A’ Rating
Karachi Electric Supply Company secured a level ‘A’ rating from the Global Reporting Initiative (GRI) for its Integrated Sustainability Report for the year 2012. This makes KESC the first power utility in Pakistan to achieve the level ‘A’ rating for an integrated report. This rating also places KESC as one of the very few organizations globally that have been rated ‘A’ by GRI in the very first attempt. In keeping with international best practice, KESC’s integrated sustainability report provides depth and context to the group’s performance and identifies how sustainability is central to the utility’s culture and business. KESC is the first public utility in Pakistan to comply with GRI sustainability reporting standards G3.1. The award is recognition of KESC’s commitment to embedding sustainability management into its business and adopting global best practice environmental, social and governance principles (ESG).
KESC’s sustainability policy is underpinned by long-term economic, social and environmental value creation that is driven by a wide ranging stakeholder engagement strategy. As the sole provider of power to the largest metropolis of Pakistan, KESC acknowledges that its own sustainability is fundamentally linked to economic, social and environmental value creation.