ISLAMABAD, Nov 29: The federal government on Thursday finalized a plan for restructuring of Karachi Electric Supply Corporation (KESC) with a target to complete its privatization by Dec 31, 2002.
The plan that envisaged issuance of bonds and involvement of Asian Development Bank (ADB) as equity shareholder to the extent of about seven per cent was finalized at a meeting presided over by Finance Minister Shaukat Aziz.
A high-level team of ADB headed by Mr Kawasaki, the head of bank’s south Asia wing, and Khalid Rehman, head of energy department, Minister for Privatization Commission Altaf Saleem, Wapda and KESC chairman Lt-Gen Zulfiqar Ali Khan, secretary-general of finance Moeen Afzal, managing-director of KESC and secretaries of finance and water and power, and financial advisers of KESC Price Waterhouse Coopers attended the meeting.
Finance Minister Shaukat Aziz told Dawn that the financial advisers on KESC privatization submitted their final report on restructuring and privatization of organization and the meeting fully agreed to it. He said that the restructuring plan would now be submitted to the federal cabinet for approval during forthcoming meeting in December and then the regulatory framework and restructuring process would start before the end of December.
The report, he said, contained time-bound targets for regulatory framework, restructuring process, invitation of bidders and negotiations with prospective buyers including issuance of bonds.
He did not give exact size of bonds but said there was a possibility that the ADB became equity partner in the utility.
“It’s an aggressive schedule but we think it can be implemented,” said the minister. He said that KESC had been accruing around Rs1.2 billion per month losses but now the losses were about Rs1 billion per month due to fall in oil prices. Official sources said that accumulated KESC losses were now touching Rs80 billion as annual losses amounted to around Rs15 to 18 billion. Of this amount, a portion would be covered through issuance of bonds and the remaining liabilities would have to be taken over by the federal government to make the utility a loss-free privatizable entity.
The sources said that KESC’s Rs10 billion outstanding dues payable to Wapda would also be covered under the restructuring plan. A separate plan was also discussed that involved additional provision of gas supply to KESC in next couple of months.
The additional gas supply would provide KESC a saving of Rs500 million per month, the sources added. The privatization of KESC is already beyond schedule by many years as it was originally planned to be transferred to the new buyer by the end of December 1998 and then the target was revised many times.
However, the privatization process could not be started due to heavy liabilities, over 40 per cent line losses and unfavourable market conditions.
