KESC: THE LOAD-SHEDDING STORY
May 30 - June 5, 2011
Two phenomena seem to have enveloped the lives of Pakistani people - one, the ubiquitous monster of load shedding and second, the newly created fear of the frailty of our security structure. The dimensions of phenomenon one are well defined as we have become too familiar with it while the dimensions of phenomenon two are somewhat vague yet more disturbing. The two concerns might seem mutually exclusive. Nevertheless, the common feature in the ultimate analysis turns out to be the systemic failure.
We keep on piling up failures without caring to look back at the pile: energy planning failure, energy generation failure, energy loss management failure, and energy-related debt management failure. And then our attention is diverted to some serious security issue: a destabilizing terrorist attack or a belligerent outside excursion into our territory. The people, already suffering from the shock of persistent load shedding, are suddenly pushed into a state of horror that shakes their belief in the security and sovereignty of their country.
Much has been said, written, read, and discussed about our energy planning failure. We all know what is happening around. Nobody seems interested in improving the situation. The size of inter-corporate energy debt - the smoke screen deliberately created to hamper power generation - continues to grow. Contradictory assessments of Thar coal reserves as well as their industrial worth keep hitting headlines and nobody cares to clarify the issue. Ongoing hydropower projects are delayed, sometimes for funds paucity reason and sometimes as a result of oil companies' negative moves. PEPCO and KESC, although operating under two different sectors - public and private - have hardly come up with any conclusive evidence as to which system is better for a utility. Both are busy writing a history of constant degradation.
While PEPCO is the victim of public sector inefficiencies and corruption, KESC as a private organization has failed to assert the superiority of market-based economy. It plans to exact as much revenue from the junk systems and installations as possible, without making new real business investments. A monopoly, with an ever-rising product demand and liver to jack up prices, must not fail to establish itself as a giant corporate body. It is unfortunate that the KESC management, instead of focusing on growth through investment and expansion, has resorted to such anti-employee techniques as downsizing and outsourcing which should have no place in potential and vibrant economies. The entire world is talking of China and India as the new, future global economic leaders. Pakistan, despite occupying the strategic neighborhood of these economies, gets no mention, anywhere. Why?
Perhaps, our corporate executives have not been able to realize their game-changing potential. They remain subservient to the corrupt rulers' regressive policies instead of distinguishing themselves as a role model for the coming generations. Like it or not, the nations are now raised under diverse and dynamic corporate cultures. Our destiny depends very much on the mindset and initiatives of our corporate executives.
Sir Richard Bronson writes in his foreword to The New Secrets of CEOs, by Steve Tappin and Andrew Cave: "On a global level, the behavior of people, industries, and enterprises has immediate and often long-term effects on our world. If mankind makes a mistake, it can be catastrophic." KESC is a test case for our entrepreneurial capacities and managerial innovativeness. If Karachiites are ditched by the routine, awkwardly poor management techniques, world's confidence in our private sector, though already at its lowest, will be lost forever.
The KESC post-privatization history gives little hope that 'growth by investment and expansion' strategy will be followed. Nevertheless, one hopes that better sense prevails. The settlement of the ongoing KESC-employee standoff will give a clear view of what the management is really up to. The employees should also realize the importance of their role in making or breaking a problem-riddled utility organization. Only with their whole-hearted support, the management can come out of the crisis and set KESC on road to growth and prosperity. They should clearly understand that while unionizing is their legal right, working for the good and betterment of their organization is an equally legal obligation. It is not just about supporting your company but it is about bringing peace to the lives of 180 million people of this mega city.
KESC'S OPERATIONAL & FINANCIAL INDICATORS (RS IN MILLION)
PARTICULARS JUNE 2009 JUNE 2010 JUL-MAR 2011 Units generated 8,262 7,964 NA Units purchased 7,005 7,842 NA Units sold 9,396 9,905 NA Trans / Dist. Losses % 35.9 34.9 (Jan-Mar) 30.1 1. Sale of Energy-net 58,069 70,508 59,958 2. Tariff Adjustment 26,950 33,220 30,467 3. Others 2,690 4,960 160 Total Revenue (1+2+3) 87,709 108,688 90.585 Total Expenses 103,159 123,425 97,338 Total Assets 131,936 207,629 220,695 Property, Plant and Equipment 82,194 141,432 *163,993 Current Assets 48,918 65,903 56,592 Trade Receivables 19,114 29,030 32,585 Share Capital 52,068 74,966 80,335 Accumulated Losses 66,350 80,813 83,749 Long Term Debt 42,725 55,486 53,048 Current Liabilities 60,261 93,497 103,887 Trade Payables 26,854 54,792 65,097
During the last 21 months, KESC has recorded a 67 percent growth in assets and increased share capital by Rs28 billion, but it has also posted fresh losses of more than Rs17 billion during the same period. The gigantic KESC operations cannot be managed through piecemeal investments. To realize KESC's full potential, high-dose investments need to be made. The government, instead of threatening the management of re-nationalization, should provide administrative cover to KESC for recovery of its stuck-up dues and containment of losses through theft. It could also help KESC to acquire cheap credit from international market at 2-3 percent above LIBOR. For this, KESC will certainly have to make large size equity investment. This is the only way to get out of the mess KESC and Karachi people are in.