KESC rejects allegations

Karachi Electric Supply Company (KESC) has categorically rejected all charges levelled by Senate's Standing Committee and said the government has not paid any direct amount to KESC to fund its operations since the current management took charge of the company's control. The management and shareholders have been absorbing all operational losses without passing on any burden to the government.
KESC said the government only paid the tariff differential claim that KESC passed on to its electricity consumers. This practice is in use for all other distribution companies as consumers are charged lesser tariff than the actual tariff determined by Nepra. This pass-through consumer tariff differential amount has actually adversely impacted KESC's cash flows because the tariff differential claim is settled after a considerable time lag by the government while the power utility transfers it to its consumers in monthly basis.
Contrary to the impression created by the Senate Standing Committee, KESC said that federal and provincial governments had to pay a huge amount of more than Rs 72 billion to the power utility which included outstanding electricity bills of provincial and federal government institutions and tariff differential claims.
KESC's performance, investment details, infrastructure development projects and all other financial and non-financial details are accessible to everyone in shape of its audited annual reports and can be reviewed by anyone in order to make an informed opinion. In reply to the incorrect statement over investment position, KESC pointed out that the present shareholders had committed to invest $361 million and that amount has been fully invested. This can be confirmed by any government body from concerned competent authorities. As a matter of fact, from 2009 to 2012, KESC's management has been able to attract an unprecedented investment of dollar one billion in shape of equity and debt. This substantial investment had been utilised on major infrastructure enhancement projects including more than 1,000 MW generation capacity addition, significant enhancement in distribution and transmission capacities and a vibrant customer service infrastructure. Over the last few years, KESC's operational efficiency and productivity have witnessed a marked improvement, enabling the company to better serve its customers. Today, all industrial zones, major hospitals, other strategic installations and many residential and commercial localities are totally exempted from loadshedding, representing almost 55 percent of KESC's network.
KESC's visibly improved performance has been recognised by all stakeholder groups including general public and even august institutions like State Bank of Pakistan that has in its annual report commended KESC's progress. The central bank in its 2011-12 annual report states, "Leakages in terms of theft and inefficiencies at the generation and transmission stage must be seriously addressed. In this regard, the example of a privatised KESC 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."
KESC rejected the impression that there were any irregularities in the agreements signed with the government, saying all agreements with the government were signed by competent authorities after due diligence and approvals by multiple high-powered offices including Finance, Water and Power and Law Ministries, Privatisation Commission, Economic Co-ordination Committee, etc. The matter, however, is sub judiced and any forum, government or otherwise, should refrain from making public statements that are aimed at maligning KESC.
While categorically rejecting the claim made by SSGC to the effect of KESC owing Rs 46.4 billion to the gas utility till February 2013, KESC said the actual payable amount to SSGC stood at Rs 4 billion after accounting for unpaid electricity bills owed to KESC by government owned KWSB. As a matter of fact during the current fiscal year, KESC has paid Rs 23 billion to SSGC against gas purchases of Rs 22 billion.
It is also pertinent to note that so far SSGC has not been able to supply KESC the allocated quota of over 400 MMCFD. That has not only caused a huge cash outlay for KESC on buying four times more expensive furnace oil but also resulted in some of country's most efficient plants to stay idle. On the gas supply agreement, KESC has a well published stance that as soon as SSGC agrees to provide supply guarantees, KESC will sign the GSA. As of now the only bottleneck is the supply guarantee that SSGC has yet to agree with.
KESC said the Company had been taking long strides over the recent years towards a sustainable future. KESC has been successful in arranging substantial funds for its infrastructure development project from IFC, ADB and OeKB and many local and foreign financial institutions. Both ADB and IFC, being satisfied with KESC's performance, have converted part of their loans into equity. KESC had recently embarked on an investment plan worth Rs 40 billion aimed at improving the efficiency of its operations, further enhancement of electricity generation and bringing down the cost of power generation. Creation of a false negative perception by a statutory body is not in the interest of the country's social-economic development and a more responsible approach is desired.-PR