Professional Documents
Culture Documents
The vision of KESC is to meet the energy demand of its customers through green sources
of power such as solar energy and wind energy for the comfort and progress of the
society.
The mission of KESC is to meet customer’s expectations with electrical power that is
reliable, stable, and from an environmental friendly source of generation, to improve the
safety and quality of the work place for employees and to develop growth opportunities
FINANCIAL ANALYSIS
Liquidity Ratios The company is facing a liquidity crunch since 1992-93. Since the
liquidity ratio is less than one. A slight improvement was noted in 1999, primarily due to
Activity Ratios Average Collection period is very high, though it has registered a
positive improvement over the years. But it is way behind the standard of donor agencies.
Fixed asset to current asset turn over has shown an improvement over the past few years
but it is still quite low, mainly due to the huge quantum (37%) of Transmission and
Distribution losses.
Leverage Ratios The percentage of the total funds that are provided by the creditors
compared to the total assets is totally increasing. The debt to total asset ratio however did
Due to continuous accumulation of losses, the equity has turned negative inspite of the
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Growth Ratios Book value per share was very much positive, that is Rs.39.90 per share
in 1996, which has now eroded dramatically over a short period to -44.58 per share in the
year 2000.
Earnings per share are negative for the last seven years and have fluctuated in the range
Profitability Ratios Due to operating losses, the company TIE ratio has remained
negative during the last five years which was as low as –0.2635 in 1996 and declined to –
Profit margin on sales is negative since 1993 and is declining year after year.
Return on asset was –1.05% in 1996, which decreased further over the years to –19.5% in
Return on Equity was –7.74% in 1996, which further decreased –371.88% in 1997. Since
1998 onward, the return on equity figures is positive that is 136.19% in 1998, 86.96% in
1999 and 60.02% in the year 2000. This clearly reflects the financial soundness of the
firm, which is clearly negative. In fact, the positive figures are due to the negative values
EXTERNAL AUDIT
additional financial burden of fuel, machinery and equipment cost. Due to bad
macroeconomic condition, the ability to pay energy bills by the low-income consumers
has eroded. Electricity being an essential service has inelastic demand as such, many low-
income groups revert to theft of electricity which is inflicting heavy losses on KESC.
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Social, Cultural, Demographic and Environmental The theft culture is not restricted
only to the poor masses but is also prevalent in the posh localities of the city. Though the
consumers belonging to this class are not willing to pay due to their influential position in
the society. Due to the rapid population growth, new residential and commercial areas are
Political, Government and Legal Forces The company has monopoly for generation,
raise its tariff to reflect the cost of input without the approval of NEPRA and the
federal government. The government due to potential unrest and under the
influence of various trade associations does not allow realistic tariff increases.
Under the government of Pakistan’s energy policy of 1994 power generation plants
cannot be set up in the public sector. To meet its demand KESC has to purchase the
required power from the IPPs at comparatively higher rates. On 20 th October, 2001,
NEPRA allowed 2.3% increase in tariff, which is likely to increase the revenues of
KESC by Rs.75 million per month. Under the new energy policy, expected to be
announced by the year 2001, prospective IPPs would be invited for open bidding
for setting power generation plants. The stipulations of the policy would force the
bidders to install more efficient and longer life plants having low cost per kilowatt
per hour produced. Thus decrease in the price of purchased power is expected.
Technological Forces Sui Southern Gas Company is commissioning a gas field and
other infrastructure facilities by June 2002 for delivering bulk gas to Karachi for
industrial and residential consumers. Government of Pakistan has directed Sui Southern
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Gas Company to supply additional 90 Million Metric Cubic Feet per Day to KESC to
aforesaid entities. Due to frequent breakdowns, load shedding and poor service response,
considering the feasibility of setting up a desalination plant in Karachi, primarily for the
water supply to the residents of Defence Housing Authority. The proposal project also
envisages installation and commissioning of two 100 MW power plants whose steam
would be used for desalination. Defence Housing Authority is also planning to sell
electricity to the residents, commercial and industry in its area through the existing KESC
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INTERNAL AUDIT (VALUE CHAIN)
Primary Activities
Inbound Logistics Fuel oil as natural gas, major input in power generation, are received
at oil and gas terminals located at Bin Qasim Thermal Power Station, Korangi
Thermal Power Station, Korangi Thermal Gas Turbine and Site Gas turbine
generating station. Every generating station has fuel storage capacity for 72 hours
continuous operation at full load. The oil pipeline is owned by PSO as such KESC
cannot exercise the option of buying fuel oil from other sources. Natural gas
received from SSGC is not stored rather it goes directly into operation. Spare parts,
stationery, etc. are received and stored in the central store located in SITE area.
KESC has reduced inventory carrying cost by not maintaining stock of items
related to new service connections. Instead the consumers procure and provide the
same as and when required. However, KESC has accumulated huge stock of
obsolete stores of over 300 millions burdening the storage areas and more
handling and inventory control are very inefficient and can be improved through
personnel which will result cost reduction and increasing productivity. Due to poor
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Operations The generating units of BQPS are the most efficient among all other units of
KESC. Unit#3 of BQPS is under shutdown since January 2001 due to fault in the
generator winding and fore want of major overhauling. Unit 1 and 2 are operating
at near full capacity whereas Unit#4 and 5 are operating at de-rated capacity; due
boiler tube leakage under the condition of high steam pressures. The Gas Turbine
units of KTGT and SSGT are inherently inefficient and are operated only in peak
demand hours due to almost 50% higher cost of generation as compared to BQPS
BQPS, KPTS, KTGT and SGT. BQPS and KTPS plants are based on steam turbine
technology and KTGT and SGT are based on gas turbine technology. The installed
capacities are:
KTGT 4 units at 20 MW
SGT 5 units at 20 MW
The units of KTPS, KTGT and SGT are more than 25 years old and hence have derated
due to aging and poor maintenance. KTPS is generating only at 57% of its installed
capacity i.e., producing 180 MW instead of 316 MW. In spite of the above factors, the
average generation cost per units of KESC is the lowest i.e., Rs.3.00 per unit as compared
to the imported power from WAPDA (@Rs 3.25 per unit) and IPP’s (@ Rs 4.50 per
unit). The cost per unit generated can be reduced further by 100% conversion of BQPS
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units to natural gas and proper and timely (every 5 years) maintenance of the generating
units.
Outbound Logistics The power from KESC generating station is transmitted to the load
centers of the city through its network of 75 extra high tension transmission lines
and 49 grid stations. KESC transmission losses of 2.5% match the international
standard. The power from grid stations is distributed to industrial and residential
37.7% (average for the year ) which are way above the internationally accepted
standard of 18% for the sub-continent. The distribution losses comprise of technical
and non-technical losses. The excess technical is attributed to overloaded and old
feeders and low tension mains whereas the non-technical losses re caused by the
construction of new grids close to load centers and by addition new feeders and
extensive operation for the removal of illegal connections and by installing energy
Marketing and Sales KESC enjoys monopolistic status in its licensed jurisdiction and its
marketing and sales efforts are not directed towards increasing sales or market share.
Whatever marketing efforts though very little, being exerted is for the purpose of
discouraging theft and creating awareness among the consumers about avoiding
supply shortages. The current average collection period of electricity dues of KESC is
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149.9 days against the standard of 60 days. For reducing the average collection period a
number measures can be taken, such as controlling staff against raising average and false
bills. Increasing the number of meter readers, timely issue of energy bills, prompt
Services Though the response to breakdown complaint has improved significantly during
the past 2 to 3 years, the overall customer service of KESC is still very poor. The existing
and prospective customers have to face a lot of difficulties in getting themselves heard at
the KESC offices due to the complacency and lack of knowledge on part of the staff, low
Secondary Activities
section, payroll and establishment section, asset section, allocation section, pricing
section and credit billing section. Accounts department deals with the employee payrolls,
loan and debt servicing, energy billing, assets records, allocation of costs and keeping
records of transactions. Stores, payrolls and ledger accounts are fully computerized and
progress. The work environment is poor and the procedures and systems such as payment
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Finance Finance department prepares capital construction budgets and revenue budgets
of the organization, negotiates with GOP, banks and other donor agencies for the
arrangement of needed funds for projects and operations and deals with NEPRA,
GOP and GOS regarding the tariffs. It is involved in pursuing GOP for
successful in arranging the needed funds uptil now but its emphases is on meeting
the short term obligations rather than acquiring and using funds for long term
productive funds.
Personnel The department is involved in maintaining the records of more than 13000
employees of the company. The role of the department is not very supportive in human
resource training and development, rather it is bogged down in the matters of disciplinary
actions against employees. It has no plans for job rotation and enrichment of technical
the ban on hiring since 1993 and the brain drain, KESC is facing shortage of competent
permanent staff and the situation is aggravating as more and more competent employees
are either retiring and/or leaving the company for better prospects. Overall employee
militralistic style of the new management, apprehension of loosing jobs due to layoffs
and lower real wages (pay scales are not revised since 1994).
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Stores The department is involved in the purchase and storage of furnace-oil gas,
Purchases of upto Rs 50,000 can be made on cash whereas over and above this
poor due to which inventory worth more than Rs. 300 million has gone obsolete.
management and the employees either differ decisions or leave the decision making
SWOT ANALYSIS
Strengths
3. All generating units are designed for 100% natural gas operation.
SITE i.e, industrial consumers. This will reduce the distribution losses.
Weakness
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5. Decision-making is mostly centralized.
Opportunities
1. KESC has monopolistic license to generate, transmit and distribute electricity and
collect revenues.
5. SSGC is commissioning its new gas-fields and allied infra-structure for bulk gas
8. HUBCO has surplus generation which can provide for KESC generation shortages.
Threats
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4. DHA is seriously considering for generating, transmitting and distributing electricity
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MAJOR & MINOR PROBLEMS
Major Problem
Poor Management-The KESC has been facing unprecedented financial losses over the
last seven eight years. Once an efficient and huge profit earning organization it
suffered set backs in the recent years due to poor and passive management.
affairs of the company, particularly in the areas of hiring, posting and transfers.
were unable to lead the company in the right direction. The management has
been unable to foresee and adapt its operations to minimize the impact of the
unbearable burden of the soaring prices of furnace oil. The top managers, one
after the other, have remained silent spectators to the plunging levels of
on the part of management have led to a situation where the gap in generation
and demand has to be filled by the expensive power import from the IPP’s.
Minor Problems
High Fuel Cost-the price of furnace oil is continuously increasing which was Rs.6, 070
per ton on 19th April 1999 and has now soared to Rs.12, 073 per ton as on 16th September
2001.
company.
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Low productivity-due to lack of training & development and lack of motivation.
Primitive techniques/methods are still being followed in the areas of transmission and
distribution network is causing revenue losses due to line losses and interruptions.
Poor Maintenance- In the absence of spare generating capacity, KESC cannot shutdown
its shutdown its units for maintenance in the months from April to October without
Lack of Planning- The Planning department does not have expertise and tools for load
forecasting such as Computer Aided Planning and Design. KESC was unable to catch the
rapid growth in demand and IPPs were invited to fill the gap between the supply demand.
forced to take decisions, which are not in the company’s best interest and practically it
No Vision & Mission-in the absence of a clear vision and mission, both the managers
STRATEGIC ALTERNATIVES
1) The present scenario demands that the management should be critically examined and
the people, no matter to which level they belong should be either retrained in their jobs or
replaced, depending upon their ability to cope with the change. This restructuring should
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be taken up irrespective of the level at which these people are working within the
organization.
based, that is transmission, distribution and generation. These three companies should be
partly owned by the government also which should look after the affairs of the company
3) The complete privatization is the third option available and although its look lucrative
to privatize the company, previous experience has shown that it has not been successful
in the past and has resulted in the loss of valuable capital and human assets
STRATEGIC CHOICE
The obvious choice lies in the breaking up of the corporation into three separate
company’s management which would be totally responsible for the profits and losses
• Introduction
• Background
• Generation Department
• Transmission
• Distribution
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• Human Resource Department
• Financial Analysis
• Future Outlook
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27th October 2001
T H E K A R A C H I E L E C T R I C S U P
O R G A N O G R A M
B r ig . T a r iq M a h m o o d K h a n
M a n a g in g D ir e c t o r
C o l. F a r o o q K h aO n s w a ld R e a r l
I / C I m p . D i s t r i b Cu t o i o r pn o r a t e S e c r e t a r y
C o l. S a r d a r K h a C n o l. M . T a r iq
I / C I m p . G e n e r a O t Ii o C n I n t e l l i g e n c e
C o l. S h a u k a t R a z a
D . M . D .
A b d u l R a u f Y Ao tu a s u u l lf a h K h a nK h a l i d I q b a l C o l. A s a d A l i S S ah e a eh d M a h m oM o . d S h a b b i r S . M . M u f t i R iz w a n W a hC i do l . M u s t a h s a n B il la h
C h . M g r . F i n aC n h c u e i e f A c c o uI / nC t a C n . t E n g . D is t r . D i v . OI I I C B i ll in g I / C C . E n g r . G Ce n . eE r n a g t i ro . n S & P C . E n g r . C i vC i l . E n g r . T r a n Os .I C& AP dr o m j . n . & S e r .
S a r d a r M . K hM a on h a m m e d L S i ah qa ab tb i r A . S o l Ja a n m g i l G u l A n w a r A li R o Mo m. Ji a m il P a n w a r C . A b d u lm R M a as hj . e S e h d a h e e d MH .u Ss s h a a i nf i q
D y . C o n t r . F iDn ay . n C c e o n t r . F i nC a . n E a n c g e . D i s t . C D . i v E - In I I g . D i s t . CD . i v M- I g r . B i l l i n g C . E n g r . B Q P S C o n t r o l le r T r a O n sI Cp o P r te r s o n Dn e P l M ( C o m p . D e p t t . )
W a q a r A . F a r Ar o b q d i u l S a m a d V a c a n t
O f f t g . D y . C . OE nf f g t g r . . OD py .e Cr a . t i Eo D nn y gs . r C. M. E a ni n g t .r . P & R
T a r iq N o o r A b d u l S a m a d
S E ( E l e c t r ic a l ) S E ( I & C )
Z a f a r u l l a Mh o h a m m a dW Sa hs ea eh me e S n S h a a g h h z ea ed r H Mu su s s a t ai n f a B h R a ei h a n N o o r F e r o z I r f a n M a n s o o r O k a il i A b d u l H a m e e d Z o u q i
M E ( E le c ) M E ( E le c ) M E ( E le c ) M E ( E le c ) M E ( E le c ) M E ( I & C ) M E ( I & C ) M E ( I & C ) M E ( I & C ) M E ( I & C ) M E ( I & C )
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