Will the new owner of KESC put power supply in order

[LRE]

Will the new owner of KESC put power supply in order



Sunday, June 22, 2008
By Saad Hasan

KARACHI: The deafening sound of a gas-fired generator reverberates in a dark alley of a middle-class residential apartment building in Karachi. Women chattering aloud stroll past men engaged in a serious discussion on politics. But all voices these subdued by laughter of children playing hide-and-seek, as clock strikes one in the morning.

Just a few yards away from that place in Gulshan-e-Iqbal, engineers of Karachi Electric Supply Company (KESC) hectically try to fix a broken pole-mounted transformer (PMT).

Breakdowns in the rickety distribution system of the power utility, which supplies electricity to the country’s largest city, are a recurring feature during the scorching Karachi summers.

All investments made in improving the system, first by government and then by private owners, have failed to bring about much change in the dark situation.

“Load-shedding has increased after privatisation of KESC,” observed Waqas Hasan, who resides near Aladdin Park. “Before the privatisation outages used to occur once a week and now it happens everyday.”

Indeed, KESC privatisation in 2005 has been cloudy from the very start. Even though Al Jomiah Holding Company of Saudi Arabia, the principal shareholder in the private consortium, has bore heavy financial losses, it has miserably failed in adding more power to the system.

Now to the dismay of frustrated Karachiites, it has sold the majority stake along with management control to another Saudi group, an investment firm Abraaj Capital.

The disclosure of the sell-out has come just two months after Federal Water and Power Minister Raja Pervaiz Ashraf announced that KESC would be adding 600MW to its system in next six months. If that plan has been shelved then it is wakeup call for new PPP government to take up power issue more seriously.

Privatisation experience has been questionable from the beginning. The original composition of the consortium biding for KESC in 2004 was different.

The two pre-qualified consortiums included one led by Saudi Arabia’s Kanooz Al-Watan and other by Hasan Associates and tycoon stockbroker Aqeel Karim Dhedi.

After Kanooz Al-Watan realised what they were about to buy was unmanageable, they backed off. Then Hasan Associates, Al-Jomiah and Kuwait’s National Industries Group bought 71.5 percent stake in KESC along with management control.

Out of the total 13 billion shares of KESC, 9 billion shares were sold to Al-Jomiah led consortium for Rs15 billion.

Soon after the takeover it made pledges to undertake many changes. A German expert Frank Scherschmidt was installed as CEO to run the affairs and at the same time operation and management control was awarded to Siemens.

In little over two-year time, the CEO has been changed and the O&M contract discarded. The incumbent CEO Syed Muhammad Amjad is on his way out as well.

Farooq Hasan, Chairman of Hasan Associates, which was at forefront of arranging the consortium and has a minority stake in the utility, is not happy either.

“I feel sorry,” he said about the failure of the current management. “But I must tell you if it (KESC) was not privatised the situation would have been even worse.”

His assertion is true. KESC was able to recover some line losses during July-March 2007-08. Transmission and distribution losses came down to 30 percent from previous year’s 34pc.

It would be daunting task for new owners to curb electricity theft, which shoots up phenomenally during summers. However experts say the utility ought to improve its performance before venturing into drive for recovering unpaid bills.

But what strategy the new owners apply to pacify customers and improve performance at a time when soaring fuel prices mean heavy bills, only time will tell.

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