Research Analyst
Aug 23 - 29, 2010

Karachi electric supply corporation (KESC) is the only vertically-integrated power utility in Pakistan and manages the generation, transmission and distribution of electricity in Karachi. KESC covers a vast area of 6,000 square kilometers and supplies electricity to all the industrial, commercial, agricultural and residential areas that fall under its network. The company provides electricity to 2.1 million customers in Karachi, Dhabeji and Gharo in the province of Sindh and Hub, and Uthal, Vindhar and Bela in Balochistan.

KESC generation was severely affected due to shortage of gas during Jan-Mar 2010. As a result, the company had to consume more furnace oil and power purchases from all sources had to be increased to cater for ever increasing electricity demand of the city. Total units available for distribution were marginally increased by 112 Gwh (3.65 per cent). Against this, units billed increased by 11.24 per cent (213 Gwh) resulting in a major reduction of 4.52 per cent in T&D losses. The management is fully cognisant of the critical importance of reducing T&D losses in a significant and sustainable manner and would redouble its efforts in order to materialise its turnaround strategy.

The management has also focused on planning, prioritising and implementing a number of transmission projects in order to improve transmission network capacity and reliability and to reduce technical losses of the transmission system which will positively contribute to financial stability of the company.

During the same period, Gulshan Grid Station extension project comprising of three line bays has been completed. Agreement concluded with AKHMCF to establish 132kV Aga Khan Grid Station on cost sharing which is expected to be completed by September 2010.

The increase in revenue of the company was attributable to increase in units billed and tariff adjustments during the period Jan-Mar 2010. A phenomenal surge of 36.4 per cent was registered in the cost of fuel and power purchases. The increase was due to reduced gas supply to 121 mmcfd during the review period as compared to 196 mmcfd during the corresponding quarter last year.


Units generated (net of auxiliary) 1,321 1,709
Units purchased 1,856 1,356
Total units available for distribution 3,177 3,065
Units billed 2,108 1,895
Transmission & Distribution Losses 33.65% 38.17%
  Financial (Rs in mn)
Sale of Energy 15,216 11,903
Total Revenue 25,209 19,421
Cost of fuel & power purchase (22,839) (16,742)
O&M Expenses (3,308) (2,772)
Financial & other charges (1,856) (1,292)
(Loss) for the period (4,409) (2,640)
(Loss) per share - basic (Rupees) (0.22) (0.20)

The short supply of gas resulted in higher furnace oil consumption and also increased power purchases at a higher rate. Furthermore, O&M expenses also increased by 19.4 per cent due to prevailing inflation.

Financial charges during the review period increased on account of delayed payments to suppliers caused due to delay in realisation of GoP receivables on account of tariff adjustment and energy bills.

For increase in generation and transmission capacity, the 220 MW Korangi combined cycle power plant was formally inaugurated on February 2010. With the commissioning of 220 MW Korangi power plant, 180 MW GE Jenbacher power plants and 50 MW Aggreko rental power plants, 450 MW has been added to KESC's system during a short span of about one year.

Under the captive power policy, KESC has entered into 37 MW of additional power purchase agreements with various industries having surplus power including a landmark 15 MW coal based agreement with Al Abbas Steel. In addition, the company has spent close to Rs500 million during the winter on maintenance/overhaul of their flagship Bin Qasim power plant to increase its reliability, capacity, and efficiency for the coming summer.

Currently, KESC has categorised the year 2010 as "The Year of Distribution" as after successfully investing in generation and transmission, the management's clear focus is on product delivery, customer service, loss reduction and recoveries (from government and government related entities) and the curse of consumer theft for the financial stability of the business.


After successful injection of 450 MW efficient and economic generation capacity into KESC's system during a short span of about one year and embarking upon construction activities on 560 MW BQPS CCPP and significantly enhancing transmission network capacity and reliability, management's enhanced focus is on distribution with main emphasis on the areas of billing and recovery to achieve significant and sustainable reduction in commercial losses in order to address the related issues to the financial stability of the business. The company therefore has the potential to turn profitable and achieve operational excellence. Also, some improvements have already been noticed such as announced and scheduled load shedding, reduction in tripping, more consistency and accuracy in billing and improvements of customer support.


2008-09 42.20 6.40 25.20 13.30 0.50 7.50
2009-10 42.15 6.45 23.92 14.03 0.57 7.94