K-Electric

K-Electric

File:K-electric Logo.jpg Logo of K-Electric
Type	Public
Traded as	KSE: KEL
Industry	Electricity Generation, Transmission and Distribution (installed capacity 1,827 MW)
Predecessor	Karachi Electric Supply Company
Founded	September 1913 (1913-09)
Headquarters	KE House, 39-B, Sunset Boulevard, Phase-II, Defence Housing Authority, Karachi, Pakistan
Area served	Karachi, Pakistan
Key people	Tayyab Tareen  (Chief Executive Officer) Syed Moonis Abdullah Alvi  (Chief Financial Officer) Dale Sinkler  (Chief Generation & Transmission Officer) Eram Hasan  (Chief Supply Chain Officer) Syed Fakhar Ahmed  (Chief Marketing & Communications Officer)
Revenue	PKR 190.358 billion (2014-15)
Net income	PKR 28.324 billion
Total assets	PKR 367.56 billion
Owner	ABRAAJ GROUP through KES POWER & The Government of Pakistan
Number of employees	over 10, 962 (As of 31 Dec. 2012)
Website	www.ke.com.pk

K-Electric, formerly known as Karachi Electric Supply Company Limited and commonly referred to as KE is a Pakistani vertically integrated electric corporation involved in generating, transmitting and distributing power to around 20 million inhabitants of Karachi. It employs over 11,000 people and covers an area of 6,500 square kilometers with industrial, commercial, agricultural and residential areas falling under its network.

K-Electric was incorporated on 13 September 1913, under the now repealed Indian Companies Act, 1882 (currently Companies Ordinance, 1984). In 1952, the Government of Pakistan took control of the Company by acquiring majority shareholding of KESC. In 2005, the Government privatized K-Electric. In 2009, The Abraaj Capital, a leading private equity firm based in Dubai, bought the power utility for a significant equity stake in the Company.

Abraaj Group fully controls KE via the holding company, KES Power Limited which holds 72.58% of its shares. The management of KE is run by a management team headed by Tabish Gauhar, who was appointed as the KE's Chief Executive Officer in November 2009 and has taken over as the Chairman of KE's Board of Directors effective 12 February 2013. Nayyer Hussain, who was serving as an executive director and Chief Distribution Officer since 2010, assumed the role of Chief Executive Officer, effective 12 February 2013 till 27 November 2013, when Mr. Tayyab Tareen was appointed as the Chief Executive Officer, who has been associated with the company from 2009 having served as the Chief Financial Officer and Chief Strategy Officer.

History

1913 - 1933: KE was formed

A century ago a company was formed to serve the power needs of a small port town called Karachi. This was the humble beginning of Karachi Electric Supply Company. Known as the “City of Lights,” Karachi was at the very centre of individual dreams and national aspirations.

1933 - 1947: Phenomenal Consumer Growth

The power needs of the country increased following independence phenomenal population growth and unplanned geographic expansion. Today, it represents a very complicated power utility system that energizes lives of over 20 million people; spread over 6,500 square km across Karachi & its adjoining areas such as ‘Uthal, Bela & Vinder’.

In 1952, : Nationalization

The Government of Pakistan (GoP) took control of the Company by acquiring majority shareholding of KE.

1960 - 1970: Deterioration

KE was a profit making utility but due to lack of vision, resource management, corruption, false practices, negligence, ignorance, political influence etc., it started to weaken the company rapidly.

1970 - 1980s: Energy crises

In the 1970s and 1980s, Pakistan suffered from intense power shortages, which led subsequent governments to realize that a serious power crisis was in the offing. With a view towards encouraging private investment in the country’s power sector, the Government of Pakistan started off by providing lucrative incentives to foreign investors through various policies, first of which was initiated in 1994. Through the 1994 Power Policy, establishment of Independent Power Producers (IPPs) was encouraged to provide Pakistan with much-needed investment in the power industry.

1994–2005: Pakistan Army took management of KE

.In 1994, the declining health of KE, gave rise to the suggestion of transferring it into private hands. During the interim period between 1994 and 2005, Army management was instated at the state utility to stabilize the Company’s operational and financial health.

Privatisation

During 2002 and 2003, incentives were introduced in preparation for KE’s privatisation, which eventually finalised on 29 November 2005 with a 71% transfer of ownership to a consortium of the Saudi Al-Jomaih Group of Companies and Kuwait’s National Industries Group (NIG), with the government still retaining around 26% stake. The privatised consortium was unable to improve the Company’s financial and operational crisis.

Abraaj Group

In the earlier part of 2009, Saudi Al-Jomaih, approached The Abraaj Group, a leading private equity firm in growth markets, with a proposal for a potential stake in KE. The deal was eventually finalised in May 2009 at a ticket price of $361 million for a significant equity stake in the Company, which granted Abraaj Group full management control. Abraaj Group brought in a professional management team with over 41 senior managers to immediately address the management affairs at KE. Currently, the team is headed by Chairman Tabish Gauhar and CEO Tayyab Tareen.

Investment, profit and the turnaround

After decades of financial illness, KE has remarkably achieved an important milestone of becoming a profitable entity. From 2009 to 2012, KE witnessed an unprecedented US$1 billion shareholders equity investment, major overhauling of its technical resources, wide ranging capacity and efficiency improvements and an effective management. These much needed interventions have enabled KE to get back on the sustainability track.

While a profit of PKR 3.73 billion (2014-15) seems insignificant when compared with the financial investment made, it is indeed a step towards a sustainable future. During the last few years, KE has been successful in arranging substantial funds for its development project from IFC, ADB and OEKB and many local financial institutions. That coupled with the capital injection has enabled KE to add over 1010 megawatts of new and efficient generation capacity and significantly enhance its transmission and distribution capacities. Efficiency gains have really helped the Company improve its operating performance over the past few years.

In November 2012, K-Electric received US$50 million from two of its debt financiers, International Finance Corporation (IFC) and Asian Development Bank (ADB) who are lenders of US$275 million to KE. Each of the two institutions has invested US$25 million equivalents in the common shares of the power utility, thus translating into an equity infusion of US$50 million equivalents and with another recent investment of US$300 million to enhance the reliability and performance of the Transmission network.

Term Finance Certificates

In July 2012, KE declared that the first ever utility sector bonds issued by it, the Rs. 2 billion AZM Term Finance Certificates, have been fully subscribed. The history making venture received an overwhelming response from investors, such that the entire subscription has been completed within the first six weeks of the three-month period, which is reflective of the confidence reposed in KE's certificates.

In January 2014, KE introduced Pakistan’s first sharia-compliant investment certificate named, Sukuk. Like its predecessor AZM, the Sukuk certificates is also expected to set new records in sales and add to the trust of the KE consumers.

Largest employee engagement program in the history of Pakistan

KE declared 2012 as the “Year of Turnaround”, and organized AZM Tameer-e-Nau Conference spread over 45 sessions during the year in which all its 10,962 employees took part. The Conference was aimed at transformation of the Company mindset and to convert the once government-controlled half-working utility into an efficient, effective and successful entity. The AZM Conference expressed the unanimous commitment to transform KE into a truly customer centric private entity. The employees pledged to reinforce the common goal to restore Karachi to its former glory as the ‘City Of Lights’.

Power generation & transmission

By 2012, KE achieved Gross Dependable Generation Capacity of 1670 Megawatts. The latest addition to its generation fleet took place in May 2015 when its Korangi plant saw the addition of another Combined Cycle unit. This added another 27 MW to the existing 220 MW that the power plant was generating. Before that, in April 2012, KE’s newly constructed prime power station called Bin Qasim Power Station No. II started to generate 560 additional megawatts when it was converted to Combined Cycle technology. Overall, 1037 MWs had been added to KE’s installed power generation capacity, from January 2009 to May 2015, by construction of new power plants, improvement of existing fleet efficiency by 21.7 per cent through the measures stated above in addition to the replacement of old machines with highly efficient machines, timely and digital annual maintenance and overhaul of Bin Qasim Power Station I’s old units and by optimum dispatch of electricity. Reliability of the system has been improved by reducing unit tripping by 33% and by 31% reduction in the loss of un-served energy. KE’s 180 MW GE – Jenbacher Gas Engines – Project has been awarded “Best Fast Track Project (Silver Award)” and “Best Plant in the Region” title by Asian Power Magazine.

Also, 768 MVA have been added to KE’s transmission capacity through construction of 12 new grid stations bringing the total number of Grid Stations to 64, and installation of 16 new transformers at existing grid stations. A total of 63 kilometre new transmission lines have been laid down enhancing the network from 1186 to 1249.32 kilometers, while 124 kilometer extra high tensions lines have been rehabilitated. With addition of 18 new circuits to the network the total number of circuits has come to 118. With that, transmission losses have been reduced from 4.19% in 2008 to 1.40% in 2015.

Integrated Business Centers (IBC)

To provide one-window service to customers, KE management launched 28 IBCs (integrated business centers) across Karachi catering to all customers related issues from new connections to bills amendment and faults repair. The IBCs were established after clubbing maintenance centers and billing zones. KE also launched Virtual IBCs after the success of IBCs for giving customers better services. VIBCs work just like IBCs and the VIBCs started working from July 2011. Call Centre 118 has also been modernised reinforced and its performance has improved, bringing the complaint attendance time to a few hours from the days and weeks of the past.

Corporate Social Responsibility Excellence Award

• KE has been awarded the ‘Corporate Social Responsibility Business Excellence Award 2012 at the first CSR Business Excellence Awards 2012 ceremony, organised by National Forum for Environment and Health (NFEH) in collaboration with United Nations Environmental Program (UNEP) recognizing K-Electric for its ongoing commitment towards sustainable social and environmental investments for the community especially in the areas of health and youth development.

• KE received the CSR Award for 2014 from NFEH in recognition of the utility’s support to the education and youth platforms.

• KE was recognized for its ‘Outstanding Corporate Volunteerism’ by INJAZ Pakistan, over its involvement in the professional skills based mentoring programs.

• The Global Reporting Initiative awarded a Level ‘A’ rating to the company over its various environmental and social initiatives.

• KE received the CSR Association of Pakistan CSR Excellence Award 2012 for ‘Innovation’ and ‘Sustainability Reporting’.

• It was awarded International CSR Excellence Award 2012 organized by NFEH and UNEP for ‘Community Service’.

• K-Electric employees were awarded Certificates of Appreciation from Fatimid Foundation for overwhelming participation in its blood donation drive.

Social Investment Plan

KE’s Social Investment program (SIP) is aimed at extending support to various vital healthcare and educational institutions serving the under-privileged and needy on purely humanitarian grounds. KE has so far signed 14 Memorandums of Understanding under SIP: with Bait ul Sukoon, Behbud Association Karachi, Karwan-e-Hayat, Lady Dufferin Hospital, SOS Children's village, and The Kidney Centre with Sindh Institute of Urology and Transplantation (SIUT), to provide absolutely free of cost electricity to its three dialysis centers in the City; with Indus Hospital for bearing 50% of their electricity cost: with Marie Adelaide Leprosy Centre (MALC), Layton Rahmatulla Benevolent Trust (LRBT) and The Citizens Foundation (320 TCF schools), for covering 100% of the cost of electricity used by these institutions every month.

At present, KE’s SIP partners include: • Sindh Institute of Urology and Transplantation (SIUT)

• The Indus Hospital

• Layton Rahmatulla Benevolent Trust (LRBT)

• Marie Adelaide Leprosy Centre (MALC)

• The Kidney Center

• Baitul Sukoon Cancer Hospital

• The Citizen’s Foundation (TCF)

• SOS Children’s Village

• Kashif Iqbal Thalassemia Care Center (KITCC)

• Behbud Association

• Karwan-e-Hayat

• Rana Liaquat Craftsmen Colony (RLCC)

• Lady Dufferin Hospital

• Family Educational Services Foundation (FESF)

Thought Leadership Forum

KE, in line with its vision to promote enlightened thoughts and objectivity, has created a prestigious "Thought Leadership Forum" as a contribution towards the development of the country’s economy. Under this forum, seminars related to key economic issues and opportunities are organised periodically focusing on logical, implementable and contemporary perspectives aimed at sustainable economic and social development. KE invites most respected and established thought leaders who present their in-depth analysis of various economic issues and their solutions. Businesspersons, corporate leaders, diplomats, media personalities and key achievers from various walks of life are invited to attend these seminars.

Campaigns

While describing key challenges faced by power sector, State Bank of Pakistan notes: "… Leakages in terms of theft and inefficiencies at the generation and transmission stage must be seriously addressed. In this regard, the example of a privatized KE is insightful: this utility has shed surplus staff (despite stiff union opposition); has cut power supply on account of unpaid bills (even for high-profile government agencies); has invested in more efficient generation units; and has formulated a commercially driven load-shedding schedule. As a result, the situation is quite different in Karachi compared to the rest of the country.

KE launched its new campaign against electricity thieves by the name of "They Steal We Pay" (Urdu: وه كريں ہم بهريں) in 2009. This campaign warned power thieves that if they steal electricity they would be charged a penalty or be jailed for a long time.

In May 2015, KE launched a mega campaign against defaulters and power thieves called “Operation Burq”. Working in tandem with law enforcement agencies, teams were appointed to collect payments, register cases against nonpayers, and reduce losses through actively chasing defaulters. TV, print, and social media campaigns were run to bring people into the loop about the campaign’s results. This campaign continued successfully till July of the same year having had an aggressive approach.

Online bill payment

KE in a major value addition departed from conventional practice of bill payment and established a system of online payment service in collaboration with 12 leading banks of the country, becoming the first power utility in Pakistan to bring the convenience of an integrated and round the clock online bill payment service. The banks are: Allied Bank, Burj Bank, Bank Al Habib, HBL, KASB Bank, MCB Bank, Standard Chartered bank, Summit Bank, Samba Bank, Soneri Bank and UBL. Customers can log on to www.ke.com.pk, the KE official website, anytime and from anywhere in the world, and pay by using their 13 digit account number. KE customers can also visit their own internet banking page and pay their power bills by entering their 13 digit KE account number. This convenient service saves them from waiting for the printed bill to arrive and physically visiting bank branches and standing in queues. Customers not familiar with online payment, have been offered other value added alternate payment facilities via Easy Paisa outlets, UBL Omni shops and NADRA offices by just presenting their 13 digit account number at a much wider distribution network of these institutions.

Aerial bundle cable (ABC)

KE has successfully converted 300 PMTs up till now and consumer connections in some parts of the City, including Clifton, Keamari areas, and Altaf Town into high-tension ABC-based supply system that mainly pre-empts illegal connection through Kunda, thus saving considerable units previously stolen because of open copper wire. Starting 2011 with two pilot projects, KE-pioneered overhead ABC conversion venture would be covering more PMTs and consumers soon.Around 560,000 consumers have benefitted from the conversion thus far.

The advantages of thermoplastic ABC conversion include mitigation of losses caused due to illegal hook connection, prevention of theft of copper conductor, prevention of fatal accidents, minimising of tripping, minimising of complaints of power failure. After ABC treatment, these wires will have higher current rating and lower short circuit rating, higher insulation and moisture resistance, better resistance to surge currents, better resistance to chemicals and corrosion, low dielectric losses, longer service life, better electrical and mechanical properties while being smaller in diameter and lower in weight.

Coal, biogas and LNG

KE not only aims at bridging the prevailing power demand-supply gap, but also has an objective towards translating this benefit into a lower tariff end user tariff, by burning cost effective fuel as compared to power generation via the 3.7 times more expensive furnace oil. The current fuel supply situation also forces the Company to carry out scheduled load shedding which is limited to high-loss areas, mainly in commercial and residential localities, though still exempting major hospitals, water pumping stations, essential services, strategic installations and sensitive connections located anywhere in the City from load shedding. All this development has been made in the hindsight of receding energy resources, constantly growing electricity demand in Karachi and a need for alternate and renewable sources of energy. The project will also add mileage to KE’s drive towards becoming a vertically-integrated power utility.

In line with its LNG initiatives, KE has signed anMoU for the purchase of power from EngroPowergen’s utility scale LNG-fired power generation plant at Port Qasim. The plant is in its development phase with EngroPowergen in discussions with GE and Siemens for selection of machines. Having more power available at cheaper rates will help build a better backup supply for K-Electric.

As a part of its drive to enhance affordable electricity power generation capacity, KE has been working for setting up of coal-fired power plants up to 1000 MWs with Bright Eagle Enterprise Group Limited; a Hong Kong-based company sponsored by Chinese and Korean investors. These coal-based power plants from China would be established, commissioned and energized in Karachi on a fast track basis. Bright Eagle Enterprise is also collaborating for conversion of KE’s 1,260 MW Bin Qasim Power Plant-I from residual fuel oil to coal under a Joint Development Agreement. KE is also actively pursuing Thar coal reserves based power generation under a Joint Development Agreement with Oracle Coalfields of UK and Sindh Carbon Energy to set up a coal mine mouth power plant.

In 2015, KE also entered into an agreement with China Datang Overseas Investment Company (CDTO) and China Machinery Engineering Company (CMEC) to set up a 700 MW (2x350) coal-fired power plant with an investment of $1 Billion.

KE also signed a Joint Development Agreement (JDA) with Sindh Engro Coal Mining Company (SECMC) and Oracle Coalfields PLC (Oracle) of UK which is engaged in Coal exploration, mining and production, for establishing a coal-based power plant, reference to tapping the indigenous Thar coal reserves for power generation. This JDA defines the respective responsibilities of each party and marks another key milestone for KE following the signing of an MoU with Oracle on 12 December 2009 for the Thar Coal Power Project- a venture that aims to develop a mine-mouth coal-powered generation facility at Block VI Thar Coal Fields having acapacity of 660 MW (220x3). The integrated arrangement, as stipulated by the JDA, will enable KE to secure a long-term fuel supply from SECMC at competitive prices while SECMC will own and operate the mine which will be integrated with the KE mine-mouth power plant.

Power plants

KE is the only vertically-integrated power utility in Pakistan. It produces electricity from its own generation units with an installed capacity of 1827 MW. It also has power purchase agreements for 1021 MW from various IPPs (Independent Power Producers), WAPDA, KANUPP (Karachi Nuclear Power Plant) and through imports. These purchases are based on an optimized generation cost that is governed by the fuel cost at the respective power facilities and their operating efficiencies.

• Bin Qasim Power Station 1 (Capacity: 840 MW)
• Bin Qasim Power Station 2 (Capacity: 560 MW)
• Korangi Combined Cycle Power Plant (Capacity: 247 MW)
• SITE Gas Turbine Power Station (Capacity: 90 MW)
• Korangi Gas Turbine Power Station (Capacity: 90 MW)

Rebrand

More facts about KE:

• 1st company to be listed on Karachi Stock Exchange
• Load Management. (high, medium & low loss areas)
• Public Safety Drives
• 1st Power Utility to Exempt Industries from Loadshed
• Lowest ever Transmission & Distribution losses from 40% to record lowest 25% where 1 percent line loss is equivalent to PKR 1 billion.
• Khuli Kacheri
• Football youth development programs
• 1st Power utility to implement SAP-ISU.
• 1st utility to receive ‘A’ rating from Global Reporting Initiative (GRI)
• Launched the 1st Shariah compliant listed Sukuk worth PKR 6 billion which was oversubscribed within the first 12 business hours
• Despite stiff competition & violent resistance for over a year KE the Only power utility in Pakistan without a ‘UNION’
• 56% of Karachi exempted from Load shed.
• KE today stands as the 2nd largest private entity in Pakistan in terms of revenue.
• The 3rd largest company with a total assets base of PKR. 367 billion.
• In nationwide football ranking, KE Football team for the 1st time is at 2nd position.

SALES REVENUE:

• 5TH LARGEST COMPANY – OVERALL
• 2ND LARGEST PRIVATE COMPANY AFTER HUB POWER

TOTAL ASSETS;

• 3RD LARGEST – OVERALL
• LARGEST COMPANY – PRIVATE SECTOR

PAT:

• 17TH LARGEST COMPANY – OVERALL
• 12TH LARGEST COMPANY – PRIVATE SECTOR

PAID UP CAPITAL:

• LARGEST COMPANY - OVERALL

The Rebrand

Rebrand was an important pillar of the ‘holistic, inside out & outside in’ framework which was articulated in 2009 known as the ‘Value Creation Plan’ that aimed to convert KE, from a weak brand to an exemplary brand & Rebrand could only be done once positive changes & traction towards turnaround (tandem with reality) was consistently experienced by majority of the stakeholders & star customers that don’t steal or default. The scorecard of milestones achieved in the last 4 years is very extensive however, it is worthwhile to mention few achievements that paved the way to Rebrand

• 56% of the city including industries exempted from load shed.
• Lowest ever T&D losses from 40% to just 23.7% (1% line loss is equivalent to approximately US$1 million)
• Union-free work environment
• Unprecedented investment of approximately US$1.3 billion in the power infrastructure
• One-window-solution offices

The Management and the Board are encouraged by the success the Company has experienced during the past few years as part of the turnaround and wish to continue with a stronger zeal and energy under a new identity that is in line with our aspirations, ESG philosophy, does not restrict us geographically & yet does not shy away from its legacy.

New Identity

To reflect its renewed commitment to serve its vast consumer-base and instill its core resolve into its functions, the Company revamped its corporate identity changing its name, logo and tagline. The new identity, that entails 3 feathers that represent their primary function & ESG (Environmental, Social Governance) values, creates a perception of a robust organization dedicated to serve Karachi & hence Pakistan.

See also

• Electricity sector in Pakistan
• KESC FC
• List of electric supply companies in Pakistan
• List of dams and reservoirs in Pakistan
• List of power stations in Pakistan
• Satpara Dam
• Allai Khwar Hydropower Project
• Gomal Zam Dam
• Kunda System in Karachi

References

[1] "K-ELECTRIC ANNUAL REPORT 2014" [2]

External links

• K-Electric