Anda di halaman 1dari 41

Karachi Electric Supply Company (KESC)

Business Overview
KESC is the only vertically integrated power utility in Pakistan with licensing rights for the city of Karachi
Value Chain Generation
FO or Gas

Transmission

Distribution
By Customer Type: B C t T 1%

Own Generation (60%) Grid Stations End User

Residential Commercial

22% 77%

Industrial

FO or Gas

Imports & Purchases (40%)


MW 1,738 460 650 2,848 Capacity:

c. 35% losses

By Revenue
Residential
Capacity: 8,025 distribution transformers 8 025 di t ib ti t f 1,107 11 KV feeders; 5,500 km of cable 11,013 km of overhead lines

Dependable Capacity KESC Internal IPPs WAPDA Total

50%

32% 18%

Commercial Industrial

59 grid stations id t ti 117 power transformers Network of 220, 132, and 66 KV circuits

Operations:

Fully integrated power utility involved in generation, transmission and distribution A public limited company listed on all three stock exchanges in Pakistan 17,567 Staff split into five active unions CBA in place unions. c. 2.1 million customers (77% residential customers, 22% commercial and 1% industrial customers)

Employees: Labor: Customer Base:

This presentation addresses the four key questions that an average p person or stakeholder of KESC has regarding: g g
1.

Load-Shedding Electricity Tariff Customer Service Foreign Investment

2. 2

3.

4.

1. Load Shedding - Four Primary Causes


A Scheduled Load Shedding (LS) Policy is in place across the KESC network (covering whole of Karachi and parts of Baluchistan & SIndh 6500 square km area approx. 18 million people)

1. Demand & Supply Gap

Scheduled LS Policy* 24/7 exemption to all six major industrial zones + strategic customers (KWSB, etc) For residential customers, no LS between 1:30am and 9:00am daily and during Friday prayers; otherwise: 3 x 1 hr fixed timings daily fixed-timings (normal loss feeders: 70%) and 3 x 1.5 hr fixed timings daily (high loss feeders: 30%)

but there are occasional Unscheduled Outages as well due to any of the following equipment failure across the network : network**: 1,200 feeders 18,000 km of overhead & underground wires/cables 2,500 substations , 15,000 PMTs 150 power units 60 grid stations

2. Fuel Constraints

3. Transmission & Distribution Bottlenecks/ Faults

Key Commercial Markets (78 y ( feeders) - as per the Energy Summit decision on energy conservation

4. Liquidity /Cash Flow Constraints

* compared to an average 6-7 hours of unscheduled load shedding last summer ** nonetheless, 99% of Industrial Customers were provided uninterrupted power supply, and 97% of Residential & Commercial Customers were load shed as per above Policy August 2010 statistics

1.1 Load Shedding - Demand & Supply Gap (MW)


has reduced considerably over the past 2 years, as new power units have come on line, which has helped us maintain a Scheduled LS Policy across the system , but theres often a difference between Installed Capacity and Available Capacity in any given hour due to y y ; g pressure, furnace oil supply disruption, technical faults, scheduled , pp y p , , a variety of reasons beyond our control; such as low gas volume and p preventive maintenance, etc. Likewise, 3rd party power suppliers such KANNUP and DHA COGEN are often unavailable from time to time

Average summer 2010 peak load of 2,500 MW (5% increase from last summer)
Demand

New Connections of 309 MW added since March 2009 Not-so-significant impact of recent energy conservation initiatives f f 450 MW added to the system since new management took over in Sept 2008, and ( g y another 560 MW under construction (3x GE/France gas turbines already at site; largest such project in Pakistan) i.e. in excess of 1000 MW of new capacity over 3 years
Gross Capacity Addition (MW)
215 345 85 45 450 1,010

Supply

KESC-WAPDA PPA Signing

30 150 90 50

Nov-08 Mar-09

Nov 2008

Mar 2009

Jul 2009

Aug 2009

Oct 2009

Dec 2009

Mar 2010

Jul 2011

Mar 2012

Various indigenous/imported coal based projects in feasibility stage (1000 MW) 5-year Power Purchase Agreement signed in Jan 10 with NTDC (WAPDA) for up to 650MW supply Up to 37MW of incremental supply secured from small captive power producers

1.1 Load Shedding - Demand & Supply Gap (MW)


220 MW Combined Cycle Power Plant - Korangi

2 x 90 MW GE JENBACHER Simple Cycle Power Plants - Korangi & SITE

2 x 25 MW Aggreko Rental Power Plants West Wharf & Haroonabad

1.1 Load Shedding - Demand & Supply Gap (MW)

560 MW Bin Qasim Power Station Phase II Under construction

1050 MW Bin Qasim Power Station Phase I - Existing

1.2 Load Shedding - Fuel Supply Constraints


We burn two types of fuel: natural gas from SSGC and furnace oil from PSO. Any shortage of fuel (especially volume/pressure of natural gas) means that were often unable to run our generating plants at full capacity, leading to scheduled & unscheduled outages

KESC-PSO FSA Signing

Total Gas Requirement = 300 MMCFD* + 130 MMCFD for 560 MW BQPS II** BQPS-II**

* As per decision of the ECC meeting of June 2008 and Cabinet Committee on Energy Crisis meeting of July 2009 ** As assured by GOP under the Revised Implementation Agreement of April 2009 Article 158 of the Constitution also guarantees the required quantity of gas to KESC from SSGC

10-year landmark Fuel Supply Agreement signed with PSO in 2010 33,000 ton credit limit (equivalent to PKR 1.5 billion) barely covers 15 days of fuel requirement against our 45 day recovery cycle a serious strain on our working capital as were now compelled to make advance cash payment against daily fuel purchases We re Were actively pursuing other furnace oil procurement alternatives

Average Supply: 200 MMCFD this year versus 275 MMCFD last summer

No Gas Supply Agreement with SSGC yet, hence, ad hoc daily supply against our need to maintain consistent power supply to Karachi Gas quota & pricing allocation (amongst power, fertilizer, CNG. Industrial, power fertilizer CNG Industrial and domestic sectors) needs to be reviewed by GOP

Supply Shortfall: 100 MMCFD

Unable to U bl t run our gas-fired plants at f ll fi d l t t full capacity leading to load shed Every 25MMCFD reduction in gas supply increases consumer end tariff by 50 Paisas per Unit (because replacement furnace oil 2.5x more expensive than gas)

1.2 Load Shedding - Fuel Supply Constraints


Analysis Gas Consumption (MMCFD)

Jul 2009-10 2008-09 251 265

Aug 254 250

Sep 265 292

Oct 215 268

Nov 183 235

Dec 106 149

Jan 88 194

Feb 125 177

Mar 167 216

Apr 194 247

May 191 285

Jun 215 282

Avg MMCFD 188 238

% -21

Analysis FurnaceOilConsumption(MTons)IncludingIPPs Analysis Furnace Oil Consumption (M Tons) Including IPPs

Jul 2009-10 2008-09 73,352 72784

Aug 77,968 60549

Sep 37,480 39007

Oct 53,178 41065

Nov 19,738 16436

Dec 32,642 11547

Jan 54,232 35030

Feb 37,413 41577

Mar 65,618 48212

Apr 60,506 50958

May 119,149 60456

Jun 121,315 78484

Total 752,591 556,105

% 35

1.3 Load Shedding - Transmission & Distribution Bottlenecks / Faults


an overloaded, unbalanced and fragile T&D network (transmission lines, transformers, sub stations, feeders, etc) means that were sometimes unable to supply power to the end consumers, leading to unscheduled outages; however, capacity addition and system improvements are proactively addressing these infrastructure bottlenecks

Historical lack of investment and master planning (haphazard growth) Main Causes System catering to unauthorized load (read: theft) as well Actual load greater than sanctioned load in most instances ( pp g and voltage fluctuation) g (tripping g ) Rights of Way issues with municipal authorities leading to delay in execution of projects Frequent theft of overhead conductors and bus bars at sub stations (copper) HT distribution network mostly underground

7 new grid stations energized (plus 3 under construction) Key initiatives (since Sept 08) 25 km new transmission lines laid & 76 km of existing lines rehabilitated p j y p Rs. 2.5 billion Model Towns project substantially completed 200 new Feeders laid 700 new PMTs installed Load Balancing across the T&D network

1.3 Load Shedding - Transmission & Distribution Bottlenecks / Faults


an overloaded, unbalanced and fragile T&D network (transmission lines, transformers, sub stations, feeders, etc) means that were sometimes unable to supply power to the end consumers, leading to unscheduled outages; however, capacity addition and system improvements are proactively addressing these infrastructure bottlenecks

Main Cable Fault (MCF) 2009 vs 2010 vs.

Average Pending MCF Comparison 2009 vs 2010 vs.


89

577 306 308 Mar 328 419

475

614 443 June 2010

596

478
31

48

46 39 Apr 2009

58

70 54 51 25

Apr 2009

May

July

Mar

May

June 2010

July

1.4 Load Shedding - Liquidity & Cash Flow Constraints


Circular Debt is choking our liquidity and working capital, adversely affecting our ability to procure fuel and power from external sources on time, leading to load shedding for our customersnonetheless, KESC strives hard to abide by its payment obligations even though over Rs 81.3 billion is currently outstanding in GOP and public receivables Rs. 81 3

Major Receivables
PKR billions Federal Government (MOF) Provincial Government (CDGK, KWSB etc) Public Receivables Grand Total 34.1 15.2 32.0 81.3 81 3

Payments Summary
PKR billions Total Paid to Suppliers since Sept 08 WAPDA SSGC PSO Gul Ahmed Tapal Kanupp Total 49.6 54.8 54 8 25.4 14.9 16.4 4.2 165.3 Last FY (2009-10) Payments Purchases 36.3 23.0 23 0 11.0 8.0 9.0 2.1 89.4 40.4 28.3 28 3 11.3 8.3 8.7 3.5 100.5

1.4 Load Shedding - Liquidity & Cash Flow Constraints


Non-payment of bills is also causing a severe cash flow constraint, adversely affecting our ability to procure fuel and power from external sources on time, leading to load shedding for our customers On average, 30% of our consumers do not pay their bills on time

Collections Snapshot FY 10

Overview

Total KESC Industry Residential Commercial Public Sector


VIBC/IBC RecoveryRatio

89.80% 99.3% 88.3% 88 3% 89.1% 68.6%


Receivableformorethan30days asatJuly31,2010

Public Sector Consumers (primarily KWSB and CDGK) have the lowest collection rate

TipuSultan IBCDefence N.Nazimabad IBCGulshan F.B.Area Saddar IBCClifton Lyari Bahadurabad Garden SITE Johar Landhi Malir Nazimabad KIMZ BinQasim ShahFaisal Orangi Baldia Liaqatabad NKar/Surjani Gadap Korangi Uthal

92.84% 91.10% 90.88% 90.83% 90.52% 90.50% 90.41% 88.69% 88.06% 87.76% 87.21% 85.61% 82.64% 80.37% 80.19% 80.01% 79.04% 78.53% 78.43% 77.99% 77.43% 76.23% 74.79% 73.38% 54.39%

455,672 526,596 1,053,821 901,998 508,509 1,255,402 708,828 2,176,367 1,457,871 855,324 159,037 1,100,435 413,690 1,261,593 1,287,721 367,934 719,289 595,087 2,123,922 740,236 1,620,207 , , 2,525,438 887,977 1,240,928 529,964 25,473,842

1.4 Load Shedding - Liquidity & Cash Flow Constraints


T&D losses are units (KWh) sent out but not billed because of technical and commercial (read: theft) losses, resulting in less money for us to procure fuel and power from external sources leading to load shedding for everyone, including honest regular paying customers

34.9% T&D losses in FY 2009/2010:


1/3rd technical losses (approx), and

1% T&D Loss

Rs. 1-1.5 billion loss per annum

2/3rd commercial (theft) losses (approx)

69 kunda-infested localities in Karachi (#500,000 kundas)


59.48% 56.56% 54.83% 53.94% 53.69% 50.60% 50.33% 49.46% 49 46% 48.77% 43.32% 35.31% 34.75% 33.99% 31.18% 28.41% 27.59% 26.44% 23.68% 23.14% 19.96% 18.21% 17.54% 17.47% 9.74% 6.29%

Area
Orangi Korangi Landhi Baldia Liaqatabad Malir Nazimabad N Karachi / Surjani Gadap Lyari N. Nazimabad Shah Faisal F. B. Area Garden Johar Bahadurabad Gulshan Iqbal Tipu Sultan Clifton KIMZ Saddar Uthal Defence Bin Qasim SITE

Distribution Loss (Jan 2010 - July 2010 Average)

1.4 Load Shedding - Liquidity & Cash Flow Constraints


T&D losses are units (KWh) sent out but not billed because of technical and commercial (read: theft) losses, resulting in less money for us to procure fuel and power from external sources leading to load shedding for everyone, including honest regular paying customers

KESC Initiatives I iti ti 1. 2. 3. 4. 5. FIRs + Name & Shame public awareness campaign through media 8,000 complaints received from public under our Speak Up Program 5,000 attended to date Fatwa from religious scholars against electricity theft f f Kunda removal drive and village electrification schemes Various technical initiatives such as laying Aerial Bundled Cables, installing Automatic Meter Readers, Readers increasing HT/LT ratio, installing capacitor banks (for power factor) setting up new grid ratio factor), stations and transformers, doing load balancing, etc Internal accountability campaign against corruption and non performance Differentiation between high loss and low loss feeders in term of scheduled load shedding

6. 7.

1.4 Load Shedding - Liquidity & Cash Flow Constraints


T&D losses are units (KWh) sent out but not billed because of technical and commercial (read: theft) losses, resulting in less money for us to procure fuel and power from external sources leading to load shedding for everyone, including honest regular paying customers

1.4 Load Shedding - Liquidity & Cash Flow Constraints


T&D losses are units (KWh) sent out but not billed because of technical and commercial (read: theft) losses, resulting in less money for us to procure fuel and power from external sources leading to load shedding for everyone, including honest regular paying customers

Initial Results

There has been a decreasing trend in T&D losses over the past three quarters The IBC results are particularly encouraging, as shown below:
Distribution (LT)* Loss Profile of Current IBCs

Needed

Amendment to Electricity Act to make electricity theft a non-bailable non bailable offence (as in India) Full support from the government, political parties, media, law enforcement agencies, judiciary, and civil society in eliminating electricity theft by a significant minority h ti th vast majority of h i ifi t i it hurting the t j it f honest customers. It h t t t has to be a JOINT effort

Load-Shedding Electricity Tariff Customer Service Foreign Investment

2. Electricity Tariff
KESC Tariff Myths M h vs. Reality R li

Myth
1. 1 KESC determines the consumer tariff unilaterally, at its discretion
1. 1

Reality
NEPRA (Regulator) determines our tariff under a fixed formula agreed at privatization in Nov 2005

GOP decides what % of NEPRA determined tariff is passed onto consumers as Consumer Tariff. The remainder is paid to KESC by GOP as Consumer Subsidy. As the S b id A th GOP progressively reduces th i l d the Consumer Subsidy, the Consumer Tariff goes up accordingly NEPRA / GOP determines the different tariff rates & slabs for various categories of consumers residential (lowest), industrial, commercial (highest), etc.

2.

KESC tariff is high because of T&D losseswe recover the cost of theft from honest customers...

2.

Our actual T&D losses are at least 10% higher than the notional losses assumed/built into our fixed tariff formula(and d li i each year regardless of actual f l ( d declining h dl f t l results)

2. Electricity Tariff
KESC Tariff Myths M h vs. Reality R li

Myth
3. 3 We claim tariff increases on account of monthly Fuel Surcharge Adjustment (FSA) yet save on furnace oil by not dispatching our oil plants & IPPs at full capacity, get p y cheap electricity from WAPDA but dont pass on the benefit to consumers, etc
3. 3

Reality
Fuel & power purchase cost is a straight pass through item under our tariff formula. During the last fiscal year (July 09 June 10), there was an increase in the price of: Furnace Oil: Rs 28,000 to Rs 51,000 per ton Natural Gas: Rs 350 to Rs 394 per MMBTU IPP (Tapal): Rs 6.6 to Rs 11.8 per KWh WAPDA: Rs 6.2 to Rs 9 per KWh Directly/Indirectly burnt approx. 197,000 tons (35%) more furnace oil during the last fiscal year compared to the previous fiscal year (because of reduced gas supply) Furnace oil is 2.5 times more expensive than natural gas Every 25 MMCFD reduction in gas increases tariff by 50 paisa per unit on average Reduced gas supply not only increases consumer tariff (monthly price adjustment) but also de-rates our de rates available plant capacity and reliability

2. Electricity Tariff
KESC Tariff Myths M h vs. Reality R li

Myth
4. 4 We over charge our customers through average billing, fast meters, etc
4. 4

Reality
Average Billing (adjusted in subsequent months) is an administrative reality (but down from 10% to 8% overall) due to faulty meters, inaccessibility to meters inside premises and because of law & order situation, meter tampering, etc. Our meters are procured from third party manufacturers, manufacturers and actually slow down with age until replaced with more accurate devices. For billing complaints, customers have recourse to the Federal Ombudsman, Courts, NEPRA, etc in addition to the CEO Task Force. It is strictly against our Policy to over charge charge our customers in any manner

As a utility company, it is in KESCs own interest to keep the electricity tariff as affordable as possible. The SC ff ff reality, however, is that the current tariff formula does not compensate us for the actual cost of operating and maintaining the utility, nor does it incentivize the shareholders/lenders to inject more capital to finance new power plants, grid stations, etc to meet long term demand. These structural flaws in the tariff formula ought to be addressed now to take care y p ( ) of the future. In the meanwhile, and simultaneously, to keep the tariff affordable (and reduce load shed), we need 300 MMCFD of gas now (+ 130 MMCFD for the upcoming 560MW plant next year), or equivalent furnace oil @ gas price, or consumer tariff subsidy regime to continue. Long term solution lies in setting up coal plants (indigenous or imported).

Load-Shedding: Issues & Remedies Consumer Tariff Customer Service Foreign Investment

3. Customer Service
Historically, being a public sector monopoly, KESC never took Customer Service as a core valuetheres now a renewed focus on this but differentiating between the good and the bad customer

Integrated Business B i Centers

Public Communication

CEO Task Force / Rewards Program

Scheduled Load Shedding Policy

Private Company with a Public Public Service Role

118 Call Center / New Connections

Community Welfare Program Internal I t l Reorganization

Reducing Faults Attendance Time

3.1 Customer Service - Scheduled Load Shedding Policy


is in place for the last one year which allows people to plan their lives around it

24/7 e emption to all six major ind strial zones + strategic customers (KWSB etc) exemption si industrial ones c stomers (KWSB, For residential customers, no load shed between 1:30am and 9:00am daily and during Friday prayers; otherwise:

Salient Features

3 x 1 hr fixed-timings daily (normal loss feeders: 70%) and 3 x 1.5 hr fixed timings daily (high loss feeders: 30%) Differentiation between normal-loss (good )and high-loss (bad) localities. All low-loss (excellent) areas to be load shed free in the near future Load shed relief if theres a prolonged unscheduled outage in an area for any reason Ad hoc load shed relief given daily (religious and political gatherings, law and order situation, etc) Key commercial markets (78 feeders) - as per the Energy Summit decision on energy conservation Shutdown ads given in 3 newspapers (in advance)

3.2 Customer Service - Integrated Business Centers (IBCs)


the new face of KESC providing one-stop service to our customers for their billing and technical complaintsmerged the erstwhile BOCs and M&Cs into a single entity headed by a General Manager as the CEO of that business

Overview

3 IBCs fully operational in Defence, North Nazimabad, and Gulshan Iqbal and recently Clifton 3 additional IBC in pipeline including 2 industrial centers expected to be fully operational by Oct10 Total of 25-27 such IBCs by the end of next year to cover the entire city
Existing3IBCs No.of Customers Dateof Launch L h Cumulative Billing Covered% 254,320 Clifton 64,000 Aug10 g Liaqatabad 89,500 Sep10 p KIMZ 20,000 Sep10 p SITE 36,125 Oct10 Johar 20,000 Dec10 Saddar 36,125 Dec10

13%

17%

19%

24%

36%

40%

45%

3.3 Customer Service - Public Communication


an integral part of our Customer Service orientation is to actively engage with our stakeholders, particularly our customers and media, something that had been lacking in the past

Key Initiatives

Newspaper ads on Safety, Theft, Energy Name & Shame Conservation, Monthly Scorecards, etc Campaign Press releases Media team beefed up Press conferences Info portal (www kescinfo com pk) (www.kescinfo.com.pk) Media Interviews Umeed newsletters
They Steal, We Pay Pay Campaign

Media Briefings

15,000+ 15 000+ email database Monthly updates to GOP, etc

3.3 Customer Service - Public Communication


an integral part of our Customer Service orientation is to actively engage with our stakeholders, particularly our customers and media, something that had been lacking in the past

Safety Campaign

Energy Conservation

3.3 Customer Service - Public Communication


an integral part of our Customer Service orientation is to actively engage with our stakeholders, particularly our customers and media, something that had been lacking in the past

Khuli Kutcheries (Open Houses) on the spot resolution of customer complaints 17 across various towns of Karachi this year Baldia Town Elander Road Gulistan Johar (x2) Khalid Bin Waleed Town, Road, (x2), Road, Landhi, North Nazimabad (x2), Gulshan Iqbal, Defence, Lyari, Orangi, Gulzar Hijri, Gulberg, Manghopir, SITE, North Karachi/Surjani

3.4 Customer Service - CEO Task Forces & Customer Rewards Program
two dedicated Task Forces have been set up in the CEO Secretariat to monitor and address customer complaints regarding technical faults and billing

Technical Faults
CEO Task Forces

3 shifts working 24/7 across the city Billing issues Out of 334 cases 307 cases have been resolved and responded to the consumer since 1st June10; 92% resolution ratio.

Rewards Program

Monetary rebate being considered to be given to those customers who pay their bills on time for 12 consecutive months and have no other billing related anomalies Work in Progress

3.5 Customer Service - 118 Call Center / New Connections Department


118 Call Center capability significantly enhanced with installation of Customer Relationship Management Software (CRMS) and addition of over 250 call agents. New Connections department working towards clearing backlog of pending consumers consumers Workforce enhanced from 100 to 350 call agents 118 Call Center One window billing unit now entertains approx 200 walk in customers daily

New Ne Connections

New Connections team is working diligently towards i i the t to bl revising th current processes so as t enable: Maximum automation Process simplification Increasing customer convenience g 309 MW added since March 2009

3.6 Customer Service - Reducing Faults Attendance Time


other than frequency, the duration, of outages (SAIDI Index) is also an important element of our Customer Service that we are actively focused on Generation & Transmission all power units and grid stations monitored by a centralized Load Dispatch Centre using state of the art SCADA system Key Initiatives Distribution - a Rapid Response nerve Centre in place that coordinates with 118 Call Centre and various Operations Centers to address HT/LT faults p Number of owned MTL vehicles increased to 1,010 with trakker system in 500 vehicles+ another 815 from third parties Training of technical staff at our Gulshan Training Center recently started providing crossfunctional training to LT employees for HT work g p y Procurement of key items (PMTs, Cables, Joints, VCBs etc) streamlined/fast tracked EOQ concept introduced in Inventory Management Decentralization process partially completed to bring HT & LT departments under one head

3.7 Customer Service - Internal Reorganization


eventually, its our 17000 employees who will drive our shared Customer Service agenda. To streamline our internal organization, a number of landmark initiatives have been taken for the first time since privatization Charter of Demand signed in early 2010 with elected CBA after 11 years under which: 6,000 workers regularized, 25% base salary increase given, performance-based variable compensation structure introduced, etc 1300 management employees regularized in 2010 with medical, provident fund, gratuity, etc benefits g p y g ,p ,g y, Since September 2008: 419 employees laid off on account of integrity and performance related issues 1261 employees retired 750 fresh talent hired Running the largest Management Trainee & Trainee Engineer program in the country (approx 200 people) A landmark Performance Management System kicked off in 2010 (employee appraisal against set objectives, etc) All transfers/postings through a transparent Internal Job Posting (IJP) system Working environment in the office and housing colonies improved work in progress

3.8 Customer Service - Community Welfare Program


notwithstanding the challenging financial position of KESC, we have embarked on several Corporate Social Responsibility (CSR) projects in the communities that we serve, for instance: Dedicated double-feeder supply and load shedding exemption to several hospitals (e.g. Civil Hospital, Marie Adelaide Leprosy Centre) Water purification plants e.g. at Ibrahim Hyderi Free eye camps at various l F t i localities liti Denso Hall restoration work Youth Football development at grass root level in Lyari

3.8 Customer Service - Community Welfare Program


KESC Care Camps (Flood Relief) Base Camp in Thatta at Makli Camp 1 at Munarki Camp 2 at Surjani Camp 3 at Sundha Over 550 tents, 8000 IDPs Food, Shelter, Drinking Water, Medical Care for all IDPs Free electricity/generators have been provided to relief camps in: Bin Qasim Town Super Highway-Northern Bypass H k B Hawks Bay

Load-Shedding: Issues & Remedies Consumer Tariff Customer Service Foreign Investment

4.1 Foreign Investment Shareholder Base

Abraaj Capital (Dubai)


c. 180 investors from ME, Europe, Far East, North America etc. N t a single A i t Not i l Pakistani

Other Shareholders
(Al Jomaih / Saudi Arabia) + NIG / Kuwait)

50%

50%

Minority & Shareholder Free Float

KES Power

Government of Pakistan (GOP)

1.90% 72.45%

25.66%

4.2 Foreign Investment Since Privatization


Under the IA Amendment Agreement of April 2009, Abraaj Capital agreed to inject $361 million into KESC over a period of 3 years, on the back of certain GOP commitments and obligations, several of which remain outstanding whilst Abraaj Capital is ahead of its commitment on investment This translates into approx $1 billion of debt & equity investment in investment. approx. KESC over 3 years which is unprecedented in the history of the company

Investment Timeline
Year 1 ending April 2010 Agreement with GOP Actual Investment: Abraaj GOP Total Equity Funding Foreign Debt IFC / ADB / OeKB Local Debt NBP / HBL / SCB etc. Total Debt Funding Total Financing Commitments (Equity + Debt) US$ 100 million US$ 100 million US$ 200 million US$ 520 million US$ 1 021 million 1,021 US$ 210 million US$ 110 million US$ 320 million US$ 208 million US$ 71 million US$ 153 million US$ 70 million US$ 361 million US$ 140 million US$ 501 million US$ 150 million Year 2 ending April 2011 US$ 150 million Year 3 ending April 2012 US$ 61 million US$ 361 million Total

New Face of KESC

Annexure

Support Required (1/3)


Even as sustained performance improvements are becoming evident at KESC, a number of external factors continue to hamper the utilitys operational and financial health
Circular Debt/ Strategic Customers KESC is suffering from severe working capital constraints due to accumulated receivables of Rs. 49.32 billion from the GOP, federal and provincial government bodies and other sovereign entities including Strategic Customers This is despite the fact that the Implementation Agreement (IA) contains an explicit and unequivocal commitment on the part of the GOP, acting through the Ministry of Finance (MOF), to make payment of all amounts due and owing from identified Strategic Customers for the supply of power Karachi Water & Sewerage Board (KWSB): KESCs liquidity is significantly hampered due to nonpayment of these receivables particularly Rs. 10.91 billion which is outstanding from KWSB Despite repeated attempts by KESC to obtain payment from both KWSB and the MOF, the commitment of the GOP under the IA remains unfulfilled KESC has even accepted the principal that its claims against KWSB and others may be set off/paid directly against what KESC itself owes to other state owned entities state-owned entities. This principal was also agreed and committed to by the GOP, and is clearly expressed in the minutes of the Economic Coordination Committee (ECC) appended as Schedule 1 to the IA Those minutes contain an explicit best efforts commitment to set off the amounts due from KWSB within 60 days of the date of signing of the IA. However, to date, this commitment y g g , , remains unfulfilled The GOP also committed to ensuring that the MOF would clear all dues from Federal agencies and offices immediately. While some of these dues have been paid, other amounts remain outstanding

Support Required (2/3)


Even as sustained performance improvements are becoming evident at KESC, a number of external factors continue to hamper the utilitys operational and financial health
Tariff Issues The GOP committed (under Article 10.2(a) of the IA) to supporting and assisting KESC in the filing of new tariff petitions with NEPRA, including petitions to rationalize and restructure the existing multiyear tariff (MYT). The GOP also committed to the timely notification of all NEPRA determinations (i.e. within 30 days of determination) under Article 7.1 of the IA KESC filed both a detailed tariff petition (dated May 2009) and a subsequent motion for review (dated January 2010) seeking certain adjustments and changes to the MYT Despite repeated requests to the GOP, no support or assistance has been forthcoming from the relevant Ministry for either the petition or the motion for review. Similarly, there have been significant delays to the notification of certain NEPRA determinations for fuel surcharge adjustments or quarterly adjustments in the tariff Furthermore, the IA and appended ECC decisions committed the GOP to ensuring that NEPRA would allow KESC to recover costs of PKR 5.93 billion suffered by KESC as a result of the delay in notifying the removal of the 4% cap on quarterly tariff adjustments p q y j The ECC decision on this matter is included in the IA (under Schedule 1, clause 2.1(q)). Despite the existence of a clear decision from the ECC, NEPRA has refused to allow KESC to recover this amount even though other DISCOs are given the same benefit The GOP committed to provide support and assistance to KESC for a number of other matters affecting the company under Article 10.2 of the IA. These included: Assistance in obtaining rights of way (ROW) for new transmission and distribution lines Applications to the Federal Government or Government of Sindh for conclusive land title documents However, many critical applications for ROW continue to be delayed, and these delays have held up completion of key projects including the Model Towns improvement projects Similarly, KESC has received no support in its endeavor to obtain conclusive title documents for certain of its key properties, including properties on which KESC has or intends to build new power plants

Other Matters

Support Required (3/3)


Even as sustained performance improvements are becoming evident at KESC, a number of external factors continue to hamper the utilitys operational and financial health
Existing Allocation Gas Supply Against an official allocation of 276 MMCFD, SSGC has reduced KESCs gas supply by over 30% (176 MMCFD in the Jan-Aug 2010 versus 237 MMCFD in the Jan-June 2009). At present, gas supply i only 199 MMCFD M t l is l MMCFD. Moreover, gas i provided on an ad-hoc b i with no is id d d h basis ith minimum volume or pressure requirements. This is leading to Tripping of power units Increased use of furnace oil (FO), which impacts the tariff (FO is 2.5x more expensive than gas) Future Allocation SSGC has shown resistance in providing KESC with additional gas for the upcoming 560 MW CCPP In the ECC decision (July 2008), the GOP committed to provide its full support to KESC for allocation of an additional 130 MMCFD for the new plant Construction of the plant is already in advanced stages, but no action has been taken by the GOP with respect to the promised additional gas allocation Gas Supply Agreement (GSA): GOP assistance and support was committed to ensure that a commercially acceptable GSA would be signed b t i d between SSGC and KESC D d KESC. Despite repeated requests, SSGC h not responded t KESC on it t d t has t d d to the terms of the GSA