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Karachi Electric Supply Company (KESC). What We Inherited. Capital injection alone does not solve the problem; requires detailed turnaround strategy to be implemented by a strong management team. Financial. Operational. Cash Loss: US$ 14 - 15 million per month
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What We Inherited Capital injection alone does not solve the problem; requires detailed turnaround strategy to be implemented by a strong management team Financial Operational • Cash Loss: US$ 14 - 15 million per month • Inability to purchase sufficient FO leading to a reduction in electricity production • Outstanding sovereign issues resulting in adverse material impact on financial and operational viability including accumulated losses of c. US$ 700 million, contingent liability of c. US$ 600 million (Nov 2008) and circular debt of US$ 250 million • Over US$ 1 billion in cash requirement over next 3 years • Old and dilapidated plants • Adverse fuel mix • System reliability of 55% ; Availability of 89% • Capacity de-rated by 400MW resulting in lost revenue of c. US$ 400 million • High transmission & distribution (“T&D”) losses of over 40% • Unreliable network • Inadequate and reactive maintenance Stakeholders Alignment Management & Strategy Execution • Key stakeholder relationships disrupted • Severe reputational damage • Extremely negative public image • Loss of confidence by consumers • Management & Leadership Failure • Demoralized workforce • Misaligned management objectives • Lack of coordination in project management leading to ineffective capex • Current organization structure not suited to effectively manage over 18,000 employees • Absence of accountability and zero supervision
What Have We Accomplished • Generation & Transmission: • 450 MW Gross Generation Capacity added (US$ 300 mn) - 220 MW CCPP, 180 MW GEJB and 50 MW Aggreko • Won 2 Asian Power Awards in 2009 (GE Jenbacher) • Fleet efficiency improved from 29.8% in September ‘08 to 33% currently • 8new grid stations constructed - SCADA system fully operational across network • Distribution: • Reduction in T&D losses by 3.8% on a rolling average basis • 6 Integrated Business Centers, one window operation for customers, launched • Rs. 2.5 billion Model Town Project substantially completed • 200 new feeders and 700 new PMTs installed and energized • 118 Call Centre capability significantly enhanced (from 70 to over 350 call agents) • Scheduled load-shedding regime implemented • 24/7 exemption to all 6 industrial zones + strategic customers (KWSB, etc) • Investment / Other: • US$ 255 million equity injection by KES Power to date • Major fuel and power supply agreements in place: PPA; FSA • HR – 3,400 non-mgmt to mgmt promotions; 7,000 contracts renewed • COD signed with elected CBA after a decade • Winners of the Environment Excellence Award 2010
What Are We Doing • Generation & Transmission: • Construction of new 560 MW CCPP at BQPS; Cost (US$ 400 mn). 62.2% complete; COD: SC (+348 MW gross) July-Sep 2011, CC 2012 (+180 MW gross) • Projects underway to asses feasibility of Alternative Fuels (c. 1,000+ MW): • LNG: MOU already signed with EngroVopak • Coal: MOUs signed with various contractors in China and Canada • Biogas: 2 MOUs already signed for joint project development • 2grid stations currently under construction; feasibility underway for 3 more • An extensive Transmission Network Capacity Debottlenecking Project (US$ 90 mn) is in development • Distribution: • Eventual goal to have 27 Integrated Business Centers spread across Karachi • Various technical solutions being explored: • Aerial Bundle Cable project and Automatic Meter Readers for industrial consumers • Pre-paid metering for residential / commercial consumers • Increasing HT/LT ratio • Integrated Voice Response being implemented for the call centers • Investment/Other: • US$ 255 million additional equity injection by KES Power • Negotiating with SSGC to sign a GSA
What Do We Need ? KESC’s Commitment Stakeholder’s Commitment Reduce Load shedding and bridge capacity gap Tariff Revision • Revise and restructure tariff to allow • for returns necessary to inject further investment • Removal of clawback • Increase of base tariff of PKR 0.574/ kWh and adjustment for collections • Increase in allowed loss rate • KESC will eliminate* load shedding by 2011 and will invest to maintain zero shedding level • KESC will bridge capacity gap of ~ 900 MW by 2015 Lower tariff / subsidy Fuel • Guarantee 480 MMCFD of gas per day to ensure full capacity utilization at low cost to the GOP and customers • KESC will offset expected increase in tariff by: • Increasing utilization of gas and moving to coal • Lower cost via world class performance Minimize NTDC power purchase Enforcement Support • Support KESC in reducing theft via: • Amendments to 1910 Electricity Act • Stronger enforcement • Institutionalize offset mechanism for intra-government payables and receivables • KESC will eliminate the need to draw any electricity from NTDC and become a net exporter of power of ~7,600 GWh in 2015 Service quality compliance Consumer Subsidy • Do not withdraw entire consumer subsidy at once to avoid severe customer reaction • KESC will improve quality of service provided to end customers by improving reliability and customer processes • Note: * Eliminate load-shedding apart from some minimal capacity constrained load shedding in 2 peak load months