March 09, 2008	Sunday	Safar 30, 1429

KARACHI, March 8: Given the Karachi Electric Supply Company’s failure to enhance its generation and distribution capacity, and refusals by the Pakistan Electric Power Company (Pepco) and the Water and Power Development Authority (Wapda) to lend support in terms of energy provision, most of Karachi’s residents are likely to suffer the lack of electricity every two hours this summer, insiders told Dawn on Saturday.

As the mercury surged to 33.5 degrees Celsius, many areas endured two-hour spells of load-shedding at least three times during the day. Although the peak demand was well under 1,900MW, the KESC suffered a shortfall of between 300 and 400MW despite the fact that KANUPP came back on line with 80MW and Wapda supplied an extra 100MW, bringing its current supply to 200MW. Nevertheless, the KESC also resorted to four hours of industrial load-shedding from 7-11pm.

The situation shaping up for the summer appears even more ominous in view of the recent disruption of supplies from Pepco shortly after its managing director, Munawar Baseer Ahmed, announced at a seminar that the KESC would have to arrange its own power generation primarily because of its inability to clear outstanding dues. “If we [Pepco] do not get payments against the supplied electricity, how can the KESC expect to get power from us?” he said.

Last summer, when the peak demand in the city touched 2,450MW, Wapda provided up to 700MW to the KESC. The supply was reduced to 300MW in November and since then, the residents of various areas endured over four-hour-long spells of load-shedding.

During the approaching summer, the peak demand is likely to touch 2,700MW while a minimum supply shortfall of 600MW is expected since the KESC has failed to improve its network despite a Rs13 billion allocation – of which Rs8.5 billion was exclusively for the transmission – for system improvement.

Of the six power units at Bin Qasim, meanwhile, one is off-line for repair while the rest are operating far below their capacity.

The grim situation is causing concern amongst recently-elected public representatives who have reportedly tried to meet KESC officials in an attempt to avert possible power riots in the city in the future. However, no meeting has materialised so far.

Rescue bid fails

In the early 1990s, the KESC used to export electricity to Wapda but corruption and mismanagement have led to it now needing to import about 27 per cent of its total requirement.

In an attempt to improve its functioning, the utility was privatised in 2005 but no positive results were yielded, as President Pervez Musharraf acknowledged at the inauguration of a DHA desalination plant.

Since its privatisation, the KESC has come under fire from both consumers and the government. The recently-relieved operation and management contractors, M/s Siemens, lacked experience in running such a utility and took steps that allegedly damaged its basic structure. Consequently, load-shedding became common, shattering consumers’ confidence and incurring heavy losses for the damaged utility. After M/s Siemens relinquished charge, it was expected that the KESC management would not repeat past mistakes but the situation has not apparently changed.

The utility’s failure to invest in systems’ improvement has left it with 570MW of suppressed load, which is included in the 2012 projection of 4,300MW. Last year, the KESC was receiving over 700MW from Wapda every day but instead of improving its own generation capacity, blamed Wapda for the city’s power crisis.

In order to reduce the magnitude of the problem, the KESC was also exploring the possibility of hooking on to the 150MW Fauji Korangi and the equivalent producing Western Electric Power Ltd projects. The Fauji Korangi power dual fuel gas-fired project was expected to be commissioned by the end of 2008 at the earlier while Western Electric Power Ltd, a 150MW capacity plant based on diesel engine technology using primarily natural gas as fuel, was scheduled to go into operation by early this year. However, the matter has been delayed.

Shady deals

Insiders say that the eventual privatisation of the handing over of 73 per cent of KESC’s shares lacked any of the concrete covenants agreed upon between the government of Pakistan and the bidders. The highest of the bidders, M/s Alkanooz, did not carry on with the takeover for reasons that are yet to surface.

Reportedly, say some insiders, these bidders shied away because of threats from a pressure group, while some say that M/s Alkanooz decided not to invest in Pakistan for other reasons. A third opinion holds that some local big guns with heavy financial clout did not want a foreign presence in Karachi, particularly one that could deliver — in fact, these big guns wanted to keep the pie for themselves.

Experts believe that this line of thinking resulted in no new bids being called after M/s Alkanooz’s exit. Instead, the second highest bidder was cultivated to match the former highest bidder’s price, which materialised in Oct 2005 after which the utility was handed over.

The new owners siphoned out their own investment by peddling 25 per cent of their shares to the Kuwait Fund for a hefty Rs4.50 per share, thus receiving an amount that is more than half their total investment of an estimated Rs16 billion (for 73 per cent shares at the cost of Rs1.65 per share).

While the KESC management failed to invest in generation and transmission, its chief executive continues to advocate conservation and patience to Karachi’s beleaguered customers. However, his arguments justifying the delay in initiating generation and system improvement projects cannot explain the logic of the new owner’s failure to invest in system improvement as they had promised, and siphoning out their own investment. There is no explanation as to why the KESC failed to acquire barge-mounted or land-based additional generating units on rent on fast track, when these were available in the international market.