Revitalization of Karachi-Problems of Loadshedding in Karachi

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Presented by:
Mr. Azhar Adil Dahar

1.Karachi Electric Supply Corporation Limited

KESC is an integrated electric utility supplying power under a monopoly license to a service area of some 6,000 square kilometers in and around Karachi, Pakistan’s largest city and industrial and commercial center. With a population of about 16 million, the city accounts for about 15% of Pakistan’s gross domestic product. KESC was incorporated as a private limited company in 1913 and subsequently listed on the Karachi Stock Exchange. In 1952, the Government of Pakistan nationalized KESC by acquiring a majority shareholding. Over several decades, KESC has faced many operational and financial challenges primarily due to inefficient public sector management (including by the military) and lack of investment, and has been the subject of numerous restructuring efforts, while remaining in public hands. In 2003, the Government decided to privatize KESC through the Energy Sector Restructuring Program The privatization process was successfully concluded in December 2005 when the Government transferred 73% of KESC’s shares to a consortium of investors led by KES Power Limited (KES Power), 60% owned by Al-Jomaih Holding (Al Jomaih), a Saudi industrial group, and 40% by National Industries Holding, a subsidiary of one of the largest Kuwaiti industrial and financial conglomerates. The new management immediately initiated efforts to improve the most critical of KESC’s operations. Management formulated a strategy to turn KESC into an;

a) Efficient,
b) Reliable,
c) Customer-Responsive,
d) Profitable Entity

Nevertheless, as a result of the earlier years of neglect and lack of investment in generation and the transmission & distribution (T&D) network, KESC could not keep pace with growth in demand. Therefore, during the peak period of summer, when Karachi experienced particularly extreme climatic conditions, KESC faced a high capacity shortage and was unable to provide reliable electric supply to the city. For hours (and even days, especially during rains), customers suffered blackouts, sharp voltage fluctuations, and billing problems. In many cases the load-shedding schedule notified to customers was not followed. As a result, KESC faced severe media criticism and high customer dissatisfaction, eventually resulting in civil disturbance and demands that the Government reconsider the privatization. This RAG after examining all the details obtained and discussions held with the representatives of KESC and other stakeholders have formulated a strategy for turning around the situation at hand . The strategy is based upon both short term and long term measures. This strategy, depends upon injection of new funds from different agencies on very soft terms to do the following:

i) Immediately enhancing the generation capacity of KESC by 750 MW by addition of two units. One of 500MW to meet the immediate shortfall and one of 250MW for the future need of about one year. Estimated cost of these additions is around PRs34 billion/$525 million, ii) However, as the electricity requirements of Karachi are growing at rate of 8-10 percent per year, there is a need to also make room for provisioning of funds needed for this future requirement. iii) Rehabilitation and improvement of the Transmission and Distribution network Estimated cost is around PRs17 billion/$268 million, iv) Rehabilitation of existing generation facilities. Estimated cost of these additions is around PRs600 million/$10 million, v) Upgrading of commercial systems. Estimated cost of these additions is around PRs400 million/$6 million.

2.“Growing Demand-Supply Gap- Where does Pakistan stand?” Per capita power consumption in Pakistan is one of the lowest in the world (413 kilowatt-hours (kWh) compared, for example, to the Philippines with 497 kWh and Thailand with 1,414 kWh). Only...
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