Karachi Electric Supply pp yCompany (KESC)November 2009
Executing the Transformation
Executive Summary
Key Hurdles Facedy
Key Accomplishments
Plan Going Forward Plan Going Forward
Abraaj acquired a controlling stake in KESC, the integrated power utility serving Karachi, in May 2009 through KES Power (holding company)
Executive Summary (1/3)
The transaction officially closed on May 5, 2009: Abraaj through KES Power has already injected US$ 193 million in KESC to fund capital expenditure
and working capital since October 2008;
First rights issue of US$ 176 million completed on October 5, 2009:
Transaction Update
g p
KES Power fully subscribed to shares along with minorities shares, which led to an increase in its shareholding from 71.50% to 72.17%;
Government of Pakistan (GoP) fully subscribed to shares retaining 25.66% ownership;
Second rights issue of US$ 107 million announced October 27, 2009 and expected to be completed by February 2010 (subject to SECP approval)February 2010 (subject to SECP approval)
The restructuring plan is being spearheaded by a strong, experienced and highly motivated senior management team assembled by Abraaj, which took over operational control of KESC on September 16, 2008
A diagnostic analysis through a comprehensive due diligence process has evolved the business strategy for Restructuring Strategy g y g p g p gy
KESC into five distinct workstreams that are being worked at and managed contemporaneously:
1. Generation:
Due Diligence Findings: Old, dilapidated plants with significant capacity de-rating
Deteriorating fuel mix
Adverse relations with suppliers
Initiatives: Capacity Addition: 405 MW added to the system
Existing Capacity Improvement: 55 MW recovered from existing plants through major overhauling and maintenance of units
220 MW and 560 MW Projects: 220 MW project fast-tracked and commissioned. Contract for 560 MW renegotiated with COD expected in April 2012
3
The restructuring plan has been divided into five workstreams that are being managed contemporaneously
Executive Summary (2/3)
Restructuring Strategy (contd)
Mix Optimization: Increased reliance on self-generation and diversified fuel mix
Enhanced Efficiency: Overall efficiency improved to 32.3% and plans to increase average efficiency to over 34% by 2010
2. Transmission & Distribution (T&D):2. Transmission & Distribution (T&D):
Due Diligence Findings: Overloaded network due to delays in commissioning of grid stations and manual operation of system
load
High T&D losses due to significant theft and high technical losses
Billing mismanagement, poor customer service, and inefficient IT infrastructure
Initiatives: Overall plan aims to reduce T&D losses 15% increase in grid stations leading to 650 MVA increase in transformation capacity
Proactive maintenance has led to significant reduction in network trippings and faults
Pilot project (IBC) launched for the overall rehabilitation of the T&D network
Focused disconnection and reconnection drive launched
3. Human Resource:
Due Diligence Findings: Lack of a cohesive senior management team and an inefficient organization structure
Demoralized workforce
No CBA (Collective Bargaining Agent) in place
Initiatives: Hiring of top management to lead the turnaround strategy and strengthening of middle management
Incentive schemes being created to enhance motivation levels
A team has been identified for CBA negotiations
4
Successful execution of the plan has the potential to make KESC cash positive in the next 2-3 years
Executive Summary (3/3)
Restructuring Strategy (contd)
4. Stakeholder Alignment:
Due Diligence Findings: Failure to engage various stakeholders in any form of dialogue broken relationships
E t l ti di ti l f dibilit ith i i l d d k i i Extremely negative media perception loss of credibility with opinion leaders and key civic associations
Initiatives: Communications strategy envisioned to align KESCs stakeholders to the Companys interests
Marketing campaigns to communicate milestones and drive transparency in public messagingMarketing campaigns to communicate milestones and drive transparency in public messaging
Focused CSR and internal campaigns launched to enhance public image and motivate employees
5. Value-add Initiatives:
Leverage of KESCs infrastructure, rights of way, and capitalizing on its two million strong customer base through collaborations with telecom, consumer and marketing companies
Value creation through an unbundling strategy
5
Senior Management Team A highly experienced team is in place to execute the restructuring strategy
Board of Directors Internal Audit
CEO HSE DirectorTabish Gauhar
16 yrs in Energy Sector Abraaj KESC acquisition lead AES Regional CFO, Hubco Electrical Engineer, MBA
Amir Zafar
26 yrs HSE experience Masters in engineering
COO Distribution
Jan Abbas Zaidi
COO G&T
Dale Sinkler
CSOG&T
Arshad Zahidi
CSODistribution
Nayyer Hussain
Head of CorporateStrategy
Dr. Naveed Ahmed 20+ yrs of experience with 16 yrs in fertilizer and 18+ yrs in utility related 19+ yrs experience in 16 yrs of energy sector
S
H d f COO H d M k ti & H d HR
IPPs globally CEO positions in regional
IPPs incl Haripur Power, Meghnaghat Power, AES Lal Pir, Pak Gen
power sectors in project development, operations and process engineering Abraaj, Engro
experience globally COO and President of AES
Kazakhstan - US$ 200 m revenue group (0.5 m customers; 4,500 employees)
consumer banking, especially risk and M&A of banking portfolios in MENASA and Europe Abraaj, Citibank, Mashreq
Bank
experience in the US and Pakistan with ENRON, HUB Power & other energy companies Key member of ENRON
turnaround team
Head ofSpecial Projects
Zulfiqar Ali
COO Support Services
Jalil Tarin
Group CFOTayyab Tareen
Head Marketing &Communication
Ovais Naqvi
Head HR Management Asir Manzur
15+ yrs in project and structured financing, private equity and risk in
16 yrs experience with multinationals in turnarounds financial
32+ yrs of financial restructuring experience in Pakistan & ME
20 yrs experience in media, publishing brand management and private
26 yrs in general management & HR managing restructuring of
Note: CEO Chief Executive Officer; CSO - Chief Strategy Officer; COO Chief Operating Officer
private equity and risk in MENASA and Europe Abraaj, Citibank
turnarounds, financial management, planning and acquisitions Abraaj, Coca Cola CFO UK Chartered Accountant
Pakistan & ME PSO, Asia Petroleum and
PIA
management, and private equity in the US, Europe and Gulf/South Asia region
managing restructuring of various large enterprises Union Bank, Pak Saudi
Bank, Mashreq Bank, Coca Cola Pakistan, SMEDA
6
Executive Summary
Key Hurdles Facedy
Key Accomplishments
Plan Going Forward Plan Going Forward
Team has managed to resolve several key issues that hindered KESCs performance. However, deep-rooted systemic issues persist which has hampered progress in key workstreams
Key Hurdles Faced
Circular Debt
Over US$ 580 million in receivables from GoP and related sovereign entities ( i.e. Strategic Customers, federal and provincial bodies) are still outstanding
This has resulted in a liquidity crisis at KESC
Resolution of Circular Debt issue will dramatically improve KESCs liquidity crisisResolution of Circular Debt issue will dramatically improve KESC s liquidity crisis
Power P h
Absence of a PPA with WAPDAPPA ti ti ith NTDC h t d iftl ti i t d d t t k iPurchase
Agreement PPA negotiations with NTDC have not progressed as swiftly as anticipated due to two key issues:
Metering Point
Letter of Credit
Generation & Transmission
Gas Supply: 220 MW plant cannot be operated at full capacity due to insufficient gas pressure Rights of Way: Two recently constructed grid stations have not been energized due to a failure to procure
rights of way from the CDGK
Human Highly politicized and active unions: No real strategy was in place to address CBA negotiations, etc Workforce: Concerns around lack of motivation and integrity issues involving some of the employees remain
ResourcesWorkforce: Concerns around lack of motivation and integrity issues involving some of the employees remain
Issue of ghost employees
8
Distribution was in significant disarray at the time of takeover, with the extent of damage becoming apparent only post takeover
Key Hurdles Faced - Distribution
Business Operations
Billing mismanagement and poor customer service Due to a poor billing system and inaccurate reporting of data, KESCs loss data was under reported
Analysis at time of takeover based on reported data
Substantial theft (c. 70% of total losses) Complex political, socio-economic and law & order situation
No theft detection mechanism (e.g. check meters, AMRs), absence of consumer mapping
10% of kunda areas are difficult areas (such as katchi abadis) where it is difficult to reduce theft
Theft
10% of kunda areas are difficult areas (such as katchi abadis), where it is difficult to reduce theft Complex meter tampering methods are used for theft
Technical
High system technical losses due to dilapidated network infrastructure Preventive maintenance: ad-hoc maintenance only in breakdown situations
Uncontrolled expansion and overloading resulted in voltage fluctuations and poor customer service
9
Executive Summary
Key Hurdles Facedy
Key Accomplishments
Plan Going Forward Plan Going Forward
Key Accomplishments Since New Management Involvement
C it t f US$ 361 illi
Financial
G ti
Commitment of US$ 361 million: Will facilitate investment of over US$ 800
million in Generation, T&D over 3 - 4yrs US$ 193 million already injected Lender relationships restored post Abraaj
involvement and capital injection T i i & Di t ib ti
Since Sep 08 50 MW rental power - March 2009 90 MW - November 2008 (CCPP) 90 MW July 2009 (CCPP)
Generationj
6 new grid stations online, 1 more in 09 New connections drive 69% increase in reconnection ratio Integrated Business Center (IBC) launched to
Transmission & Distribution
90 MW July / Aug 2009 (GEJB) 40 MW October 2009 (CCPP) 90 MW December 2009 (GEJB)* Total: 450 MW
560 MW signed and fast-tracked (US$56 million down payment made)
Integrated Business Center (IBC) launched to control theft and improve billing and customer service: 2 more IBCs in 2009 Customer service / complaint cell
Key Accomplishments
o do pay e t ade)
Azm: campaign for employee moraleCommunications
Implementation Agreement (IA) signedGoP / Sovereign
Voluntary accountability governance council set up Transparency: twice weekly press briefings Energy conservation campaign with CDGK Truth campaign: highlight legacy issues
Hiring of top leadership 3,400 non-mgmt to mgmt promotions 7,000 contracts renewed improved
Human Resources IA benefits to KESC: Removal of Discriminatory Pricing KESC treated like other DISCOs for
purchase of power from NTDC NTDC: 650 MWs under PPA
CSR: program kick-started , pemployee morale Review of job descriptions / benefits Adding more depth to middle mgmt Incentive schemes
Revised tariff petition filed with Regulator. Public hearing held on Sep 7, 2009
Note: *50% already online 11
Key Accomplishments Generation Overview
Power Purchases Own Generation
WAPDA / NTDC
650 MW
Bin Qasim c. 1,100 MW
New 560 MW plant to come online by FY
2012
IPPSc. 415 MW
SITE Gas Turbine c. 54 MW
Replaced by 90 MW GEJB
Commissioned in July 2009
Gul AhmedTapalKanuppDHA Co-GenP i
Korangi Town
c. 54 MW
Replaced by 90 MW GEJB
Dec 2009 (50% replaced)
PasmicAnoudOthers
R l
Korangi Thermal Power
Plant c. 160 MW
To be replaced with more
efficient plant ~ by 2011
Pl
Gas Based Korangi
Combined Cycle Plant
- All 4 GTs have been commissioned (194 MW)
- CC already operational -
Rental
Aggreko -50 MW
(commissioned M 12 09)
yLong-term Plan
- Coal based power plant (1000 MW)
- Renewable and clean energy y220 MW
- CC already operational -Oct 2009 (205 MW)
Mar 12, 09) energy
12
Successfully enhanced KESCs dependable capacity from 1,376 MW to 1,670 MW
Key Accomplishments Generation (1/3)
KESC has added 405 MW of gross capacity to the system and recovered 55 MW from existing plants Overcome significant issues at CCPP to bring the project back on track Signed and executed two new fast track projects at SITE and Korangi (90 MW already online)
Capacity Addition
GenerationTimeline
Jan09 Mar09 Oct09 Dec09Nov08 Aug09Jul09
Aggreko
25MW
GEJenbacher
Phase1
30MW
GEJenbacherPhase2
45MW
SmallIPPs
17MW
Aggreko
25MW
CCPP
90MW
CCPP40MWCCPP 90MW
GEJenbacher
Phase1
60MW
GEJenbacher
Phase1
45MW
Action Gross Dependable Capacity (MW)
405MWonline
Existing Capacity
Annual Maintenance performed on four units of BQPS (Unit 1,3,4 & 5)
Major overhauling performed on BQPS Unit 6 and KTPS Unit 4
Reduced plant tripping by 80% in the last
p yImprovement
1,376
1,670
seven months
Recovered 45 MW at BQPS and 10 MW at KTPS
13Basic Add-On
Key Accomplishments Generation (2/3)Proactive project management has prevented further delays in 220 MW project
Existing Capacity
GE Jenbacher: Successfully negotiated replacement at two existing sites (KGTPS and SGTPS) with 180 MW of new
capacity using GE Jenbacher engines
GE Jenbacher operating efficiency of 40% will add an incremental 80 MW with the same gas usageGE Jenbacher operating efficiency of 40% will add an incremental 80 MW with the same gas usage
Contract negotiated at a very low price - full turnkey
SGTPS plant has been fully commissioned with 90 MW brought online in August 2009
OeKB to provide financing for KGTPS plant. COD for an additional 90 MW is expected by December 2009 with over 50% of the plant already constructed
New Projects
220 MW Project: Team of power and construction specialists have led a turnaround of the project and successfully commissioned all four gas turbines
180 MW brought online in July 2009
Steam turbine also operational in October 2009
560 MW Project: Two months of negotiations led to a much improved and favorable contract for KESC. Further negotiations with GE & Harbin led to a reduction in supply contract costs
R ti t d t t f 1 LC t 6 LC d d ti f th j t Renegotiated payment terms from 1 LC to 6 LCs spread over duration of the project
Site is ready for contractor mobilization; advance payment of US$ 56 million made on April 15, 2009
$75 million letter of credit posted in favor of EPC Contractor
R t l 50 MW t l t t ith A k t H b d & W t Wh f Rental: 50 MW rental power contract with Aggreko at Haroonabad & West Wharf Full 50 MW commissioned on March 12, 2009
SSGC supplying gas at both sites
14
Key Accomplishments Generation (3/3)New management aims to increase average efficiency of plants to over 34% by 2010
Plant Efficiency
Average Efficiency of Plants Average efficiency of the KESC units was
29.0% prior to new management takeover
New management has improved overall efficiency to 32.3% and plans to increase average efficiency to over 34% by 2010
40%
average efficiency to over 34% by 2010 mainly through:
Preventive maintenance of all units
Targeted capex
Replacement of low efficiency plants30%
35%
29 0%
34.2%
New high efficiency generation25%Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10
29.0%
15
Key Accomplishments Project Management Case StudyFast-tracking and proactive project management of GE Jenbacher recognized by Asian Power Awards2009 two awards secured by KESC
Project Management
New management has brought in dedicated project management teams not only to bring the much delayed 220 MW back on track but also to add incremental capacity of 180 MW contracted through GE Jenbacher
The 180 MW GE Jenbacher project, negotiated by the new management at extremely favorable commercial terms was completed in a record time span of 7 months and won two Asian Power awards:
Asian Power Awards 2009 Gold award Asian Power Plant of the Year
Asian Power Awards 2009 Silver award Best Fast-track Power Project in Asia Prior to new management takeover, the 220 MW faced several issues including: project delays of over one year,
poor commercial terms, insufficient gas pressure, no commissioning / testing plan, no project management team, no gas pipeline
New management has led a turnaround of the 220 MW project: Dedicated team consisting of power and construction specialists
Construction of gas pipeline
90 MW GE Jenbacher Plant
SGTPS (90 MW GE Jenbacher Plant)
Fast-track implementation of project leading to COD much earlier than expected at time of due diligence. Project fully commissioned
Plant
16
Improving and expanding the transmission network in order to enable uninterrupted power supply
Key Accomplishments Transmission (1/2)
New Management Initiatives:
Under the FIP program, KESC planned to build 9 new grid stations within a certain time period. However, upon takeover only 3 of the 9 grid stations had been completed, two of which were not energized
Capacity Addition
New management has fast-tracked construction of grid stations: 6 new grid stations were added to the network increasing transformation capacity by 650 MVA
3 new grid stations are in the pipeline which will add a further 490 MVA
New power transformers at Korangi Town, RECP, Queens Road, Valika and Haroonabad grid stations have been commissionedcommissioned
TimelinesofNew132KVHybridGrids
D 08 M 09 M 09 M 09 J l 09 O t 09 * b*D 09
*SubjecttoRightofWays
KorangiSouth AirportII JailRoadAzizabadMemonGothPRLGulshaneMaymar
Dec08 Mar09 Mar09 May09 Jul09 Oct09
80 MVA 40 MVA 80 MVA 80 MVA 80 MVA 80MVA40 MVA
*Feb10*Dec09
Mehmoodabad
80MVA
Faulty 250 MVA auto transformer repaired, tested and energized at the KDA grid stationT 40 MVA t f i d i h d i d
80MVA 40MVA 80MVA 80MVA 80MVA 8040MVA
Maintenance
80
Two 40 MVA transformers repaired in house and energized Considerable reduction in EHT trippings due to proactive maintenance
Maintenance
17
Implementation of various initiatives and a focused capex plan has led to a reduction in transmission losses and network trippings
Key Accomplishments Transmission (2/2)
Loss Reduction
Transmission Losses Transmission losses have reduced from 4.2% in September 08 to 3.0% in September 09
Reduction in losses has been achieved through:
Addition of capacitor banks at 35 grid stations
Implementation of a load balancing strategy at 12 grid stations
4.2%
3.0%
Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09
Reduction in Trippings
Number of Trips* (2007 2009) Number of Extra High Tension (EHT) and transformer trippings reduced 9% YoY in 2009
Reduction in trippings has been achieved through:through:
Preventive maintenance carried out at 52 grids
114 faulty relays replaced with new ones
1,223 1,106
1,006
18
Cleaning of hardware at 135 transmission circuits,
Rehabilitation & preventive maintenance carried out at 29 circuits
Note: * January to October for each year
2007 2008 2009
Several projects geared towards distribution reform are underway
Key Accomplishments Distribution Overview
Distribution Network Improvement
Preventive maintenance being carried out on 160 feeders
IBC Roll Out
IBCs are the cornerstone KESCs distribution restructuring strategy
Improved Billing Software
A new billing software is being considered for deployment:
Key projects planned: Laying of 281 Km of new
feeders
300 new transformers
A thorough IBC roll out plan has been conceived for roll-out across Karachi
By January 2010 25% of KESCs R&C billing will be covered by IBC
Enhanced MIS capabilities
Ability to detect theft patterns
Work seamlessly with customer relationship and loss calculation software
Protective gear on transformers
Expansion of transformer workshop
IBCs
Target to cover 70% of Karachi by IBCs in 2010
calculation software
GIS software to be deployed, which will allow KESCs assets to be tracked through GPS
Metering Infrastructure
Multiple projects underway: Project to replace low quality
meters
HR Development
Training modules have been developed for theft reduction:
Including special training on
Safety Improvements
Head of Safety hired to oversee safety improvements
Basic safety issues are beingmeters
Check meter installation at transformers to track theft
Automated new connection process
Including special training on meter tampering
Training of dedicated loss reduction personnel
BOC Manager training on
Basic safety issues are being addressed
Safety and maintenance key performance KPI for IBCs
Institutionalization of near
Installation of a bus-bar system in multi-storey buildings
g gstrategies to detect theft
Meter Inspector training
miss reporting standards
Line managers being trained to impart safety training
19
Major initiatives include data cleansing for more accurate information, pilot testing of loss reduction initiatives and operational reorganization for better performance and accountability
Key Accomplishments T&D Losses (1/3)
T&D Losses (%)
41%
35%38%
43%39% 40% 39%
37%40%
35%32%
26%
32%37% 34%
Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09
Losses reported in KESC have marginally increased, but they now present a far more reliable pictureProgress KESC has spent the last 12 months working on initiatives to develop a platform for reform:
Organization has been significantly restructured into four regions, with each region led by a DCOO
Many initiatives including incentive plans, recovery drives, meter inspector training programs and disconnection drives have been executed to understand key issues
Th ft d t ti i f t t i f d l t 3 000 h k t h b i t ll d
Key Successes
Theft detection infrastructure in progress of development, 3,000 check meters have been installed, consumers are being mapped and an energy balancing initiative is underway
IBCs (Integrated Business Center): In April 2009, after 4 months of conceptualization, the first IBC was launched in Defence
The concept has now been perfected and is being aggressively rolled outThe concept has now been perfected and is being aggressively rolled out
Installation of HT capacitors: Evidence suggests that installation of HT capacitors has the potential to significantly reduce losses with capacitor bank installation
51 capacitors (total target 250) have been installed in the system more underway
20
A Kunda removal drive is being carried out across Karachi
Key Accomplishments T&D Losses (2/3)
The new KESC management has initiated a Kunda removal drive throughout the city. This includes: C. 2,000 disconnections daily
Raids carried out with the assistance of Rangers / Police
Kunda Removal Drive
Incentive plans for employees linked to theft / Kunda reduction
Bulk metering implemented in some areas
Community service in the heavily infected areas
Fatwa from religious scholars against theft of electricity
Pi k R id I Cit L b C l Bi Q i
Select Examples
Pink Residency
Entire residential complex was hooked to Kundas
Raid conducted at the colony and now all residents have applied for
Iqra City
Several hundred Kundas were found in a massive apartment complex
After much effort, building
Labor Colony Bin Qasim
Over 1,000 Kundas converted to regular connections
80% of the connections are now meterednow all residents have applied for
meters and connections are being legalized
management has agreed to apply for new connections
21
Performance improvements have been achieved through an ongoing name and shame campaign
Key Accomplishments T&D Losses (3/3)
Improvement in amount precovered from disconnections
31.1%
Improvement in units billed against theft
19.5%
Improvement in consumer
reconnections22.4%
22
Significant investment in distribution network has led to improvements in network reliability
Key Accomplishments Network (1/2)
Preventive Maintenance
Preventive maintenance has been carried out on the most critical feeders and faults have drastically reduced post maintenance, c. 30% of KESCs worst feeders have been maintained
Installation of jumpers to improve connection between circuits and prevent system over-heating has been completed on 55% of the affected network
New 11-KV
New conductors are being installed to reduce breakdowns: 40,000 conductors are on track to be installed on 160 feeders (c. 15% of network) by the end of the year
11-KV feeders distribute electricity from grid stations to consumers: To ease system constraints and increase distribution capacity, in the last 10 months110 new
FeedersTo ease system constraints and increase distribution capacity, in the last 10 months110 new feeders (11% increase) have been energized and 100 more are targeted to be energized by June 2010 (20% increase)
Model Town A Model Town project to improve the network in each of Karachis towns has been launched
A t f thi j t f h b l t d i th fi t h f i tModel Town Project
As part of this project four areas have been selected in the first phase for improvement In these areas as a result of installation of new feeders and PMTs, rehabilitation of the LT network and
preventive maintenance of key feeders, the number of faults have reduced by 42%
Maintenance Completed Number of Faults*
41
81
38
2030 40 50 60 70 80 90
100
150
200
250
300
350
400 *
10
0 10 20
New Feeders New PMTs
LT Network
Preventive Maint
0
50
100
Apr-09 May-09 Jun-09 Jul-09 Aug-09Feeder Trips Wire Broken Cable Faults PMT Faults
23* Number is in thousands
The Rapid Response Center (RRC) was established in June 2009 to monitor distribution network performance, facilitate management oversight and ensure coordination
Key Accomplishments Network (2/2)
Media:RRC sends daily media
briefing
MIS:Hourly MIS on faults
shared with management
Local Govt. Liaison:Communication with local
bodies on faults
Rapid Response Center:Ensures coordination and
information flow
Information Coordination
Operational Coordination
Operations:Keep track of operations
Security:Send security in case of
p
Keep track of operations and expedite lags
Send security in case of mobs / attack on crews
24
Increased promotional activities, safety trainings and safety audits have led to a reduction in the number of accidents / incidents in KESC
Key Accomplishments Safety
Safety Trainings
2113
1446
2000
2500
Promotional Activities
1788
12701400160018002000
675917
1446
0
500
1000
1500
397
813
614365
650
346
43 65205
650
200400600800
10001200
Total Accidents / IncidentsSafety AuditsSafety Audits
0
FY 07 FY 08 FY 09 Qtr 1 FY 10Staff Trained
0
FY 07 FY 08 FY 09 Qtr 1 FY 10Tool Box Talk Near Miss Evacuation
58
39
2840
50
60
70
437
1047
494600
800
1000
1200
437
1047
494600
800
1000
1200
7 8 62
20
3
28 26
14
30
10
20
30
FY 07 FY 08 FY 09 Qtr 1 FY 10
195
437 494
0
200
400
FY 07 FY 08 FY 09 Qtr 1 FY 10
195
437 494
0
200
400
FY 07 FY 08 FY 09 Qtr 1 FY 10Fatal Major MinorSafety AuditsSafety Audits
Note: Quarterly data is not annualized (FY 09 is 12 months data; Qtr 1 FY 10 is 3 months data) 25
Three Integrated Business Centers (IBCs) have been launched, the first one was launched in April 2009 while two more have been recently inaugurated
Key Accomplishments IBCs
Concept
IBCs result in a complete turnaround of an areas operations This turnaround is achieved by consolidating commercial and technical operations, having the IBC
perform as a profit center, workforce reorganization and through improved processes and infrastructure
IBCsKESCs First Integrated Business Center (IBC)
Cash Collected through Disconnections Total Collections
2,599 3,289
5,447
3,057 3,790
3,476
2,000
3,000
4,000
5,000
6,000
0.2 0.2 0.3 0.3 0.4 0.4 0.5 0.5
2.9 3.8
5.1 5.7
5.1 4.8
2.0
3.0
4.0
5.0
6.0
7.0 First IBC Performance
0.1 0.2 0.4 0.3 0.4 0.4 0
1,000
0.0 0.1 0.1
Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09Cash Recovered (US $ millions) No. of Disconnections
0.0
1.0
Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09Cash Collected (US$ millions)
26
In order to centralize complaint cell and provide quality 24/7 service to the consumer, KESC is investing in a state-of-the-art call centre
Key Accomplishments 118 Call Center
Complaint Management System
CMS at call center tracks all technical complaints: It has a telephone database of over 1 million consumers
To facilitate complaint tracking and monitoring, the system cleanses addresses which helps agents respond to queries and helps maintenance crews locate system faultsrespond to queries and helps maintenance crews locate system faults
Information available to call center agents includes: Updates on failure at grids, transmission lines, distribution lines and general location failures
Real time information on load shed schedules
Call center representatives have been deployed at maintenance centers to train local staff
Representatives at maintenance centers Infrastructure upgrades
Call center software being revised to improve customer service
Major initiatives
Maintenance center performance monitored through regular visits
Complaint management MIS developed
CMS system being enhanced to deploy at maintenance centers
New hardware to expand capacity
Key processes developed include: Complaint management at maintenance
center
Process development Quality of service monitoring
Quality monitoring cell to be established which will monitor:
Customer service at IBCscenter
Consumer inquiry facilitation
Detailed process flow diagrams developed
Customer service at IBCs
MIS and accuracy of data reporting
Adherence to company standards
27
461 skilled employees have been hired over the last 12 months to address resource gaps
Key Accomplishments Human Resource (1/2)
Overview
17,200 employees Ageing Management
Senior Management: 45% are above 55
Middl M t 30% b 55
Departmental Split of EmployeesTransmission,
6%
Generation,
Support Services,
14%
Middle Management: 30% are above 55
11,500 staff Recent CBA election won by Labour Union
Distribution, 74%
Generation, 6%
Hiring philosophy: to support the turnaround and business strategy i.e. modernization, customer service and growth:
To recruit best in class talent at all levels i.e. entry, middle & senior
Talent sources at entry Level: top tier institutions local / international
Recruiting
Middle / Senior Level: Power sector, Engineering & FMCG Sector, Financial Sector, with relevant experience & solid corporate business structure
C. 60% of existing officers are in age bracket of 40-60 years, 60% of fresh hiring is in below 32 years
Hi i b S i li ti Hi i b D t tHiring by Specialization Hiring by Department
Engineering & Sciences,
35%
Other, 15%
Distribution,
Other Support Functions,
31%
Business & Financial
Management, 50%
Distribution, 48%
G&T, 15%
Security, 6%
28
Development programs for employees continue to be a key focus area. Positive relationship maintained with the Unions and CBA referendum process managed smoothly
Key Accomplishments Human Resource (2/2)
Meetings held by CEO with various levels of employees to introduce concept of an open communication channel
Transformation leadership sessions cascaded down to middle management (615 employees / 22 sessions) Technical programs to be conducted and certified through independent testing mechanism by Institute of
OrganizationalDevelopment
Technical programs to be conducted and certified through independent testing mechanism by Institute of Engineering Professionals (IEP)
Other initiatives include: Internal Job Postings internal opportunities for qualified staff
Introduction of Engineering Qualification Allowance
SAP HCM Module is 75% live
Career Progression concept for Junior Staff
Review of HR Policies
SAP HCM Module is 75% live
Other functionalities being developed e.g. leave, time and health management Time / Surveillance System implementation project has been initiated
HR Technology
Active engagement with Union leadership Positive meetings with CBA on Charter of Demands negotiations Alignment and enrichment of jobs:
Alignment of jobs which carry responsibilities of supervisory nature
Industrial Relations
Enrichment of jobs with bigger responsibilities and skills enhancement
Introduction of Job Enhancement Allowance
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Public Relations Campaign Advertisements (1/4)
Anti-Theft Campaign
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Public Relations Campaign Advertisements (2/4)
Truth Campaign
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Public Relations Campaign Advertisements (3/4)
Monthly Scorecard
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Public Relations Campaign Advertisements (4/4)
Umeed Zone Campaign
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Executive Summary
Key Hurdles Facedy
Key Accomplishments
Plan Going Forward Plan Going Forward
Plan Going Forward - Generation Plan
Short TermShort Term
GEJB 180 MW
Estimated Cost: US$ 106 mn
BQPS 560 MW
Estimated Cost: US$ 460 mnEstimated Cost: US$ 200 mn
CCP 220 MW
135 MW online
Estimated Cost: US$ 106 mn
Commissioning Status
Contractor mobilized detailed
Estimated Cost: US$ 460 mn
Commissioning Status
90 MW N 08
Estimated Cost: US$ 200 mn
Commissioning Status
135 MW online 45 MW to be online by December,
2009
Contractor mobilized, detailed design in progress
US$ 56 million advance payment made
COD by 2012
90 MW Nov 08 90 MW July 09 40 MW Oct 09
Long Term (feasibility stage)
COD by 2012
500 MW Coal Plant 500 MW Coal Plant300 MW Coal Plant
OR
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1 x 1,000+ MW Coal Plant
Plan Going Forward T&D Plan (1/2)A Comprehensive Capex plan has been developed for the T&D network
Transmission Capex
Transmission Metering and SCADA to improve monitoring and control
Re-integration of SCADA with new generation and transmission assets
Improve reliability and reduce technical losses
New grid stations: Two new grid stations expected to be energized by December 2009
New 132/220 kV lines
Rehabilitation/expansion of existing network Rehabilitation/expansion of existing network
Distribution Capex
Distribution Theft reduction program:Capex p g
Including check meters, replacement meters and automatic meter readers (AMRs)
Installation of HT and LT Aerial Bundle Cable (ABC)
System improvement and expansion to improve reliability and meet demand growth. System Improvement proposals being executed and budgeted for 2009-10p p p g g
Billing system being upgraded to industry standards
Introduce geographic information system (GIS) for asset identification and efficient customer handling
Installation of power factor corrective devices for voltage stabilityp g y
Rehabilitation of distribution system through installation of 11 kV feeders and distribution transformers, and change in system design philosophy
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T h i l L R d ti St t
which ties into the long term strategy of the company
Plan Going Forward T&D Plan (2/2)
Technical Loss Reduction Strategy
Initiatives Long term strategy
Load flow study (SINCAL/CYMDIST) Set up team in KESC for regular load flow studies
Reduce system overloading by network expansion Installation of new power lines and transformersp g
Results of load flow study have been shared; team aims to regularly update the study with new data
SCADA1 implementation Sped up SCADA implementation by identifying
gaps and ensuring smooth implementation
p
System rehabilitation Rehabilitate existing system (grids, feeders,
conductors etc)
Projects to balance system voltage profile Installation of capacitors, conductors etc
Non-Technical Loss Reduction Strategy
SCADA is expected to be installed by December 2009 (already 56 grid stations connected)
Installation of capacitors, conductors etc
Optimization & system reliability improvement
Launched IBCs to reform and modernize the distribution function
Restructured KESCs operations into four differentregions with Deputy COOs leading each region
Single point responsibility for customer service, maintenance, billing and service delivery in each IBC
Tools to detect and prevent theft (energy balancing)Installation of AMRs2 on 11 KV feeders check
Initiatives Long term strategy
g p y g g Have installed 3,000 check meters all across Karachi
to detect theft
Revenue Protection Department is being significantly upgraded for theft detection
City wide Kunda removal drive in progress
Installation of AMRs2 on 11 KV feeders, check meters on distribution transformers and bus-bar meters to monitor theft in multi-storey buildings
Specific projects to target loss reductions Training of loss reduction personnel Organization restructuring of distribution networkOrganization restructuring of distribution network
into regional profit centers
Collection strategy to improve cash flow Replacement of faulty metersNotes:
1 Supervisory Control and Data Acquisition2 Automatic Meter Readers 37
Overall plan includes restructuring Distribution on lines of IBC, addressing compensation & benefits issues and implementing a performance management system
Plan Going Forward Human Resource
Strategic Alignment
To ensure functional initiatives are aligned with the business plan, a system of Key Action Areas (KAAs) for the top leadership team have been agreed
Each functional head has responsibility to deliver his/her KAAs and these are monitored and updated on a quarterly basis
Senior levels of the organization have already been restructured Distribution business is to be remodeled along the lines of IBC Organization
Restructuring
quarterly basis
These are being cascaded down by the leadership to their teams
Significant manpower changes will be phased as following: Internal Hiring (IJP): a transparent process of selecting existing employees for the new restructured
organization. Four IBCs have already been selected this way
Management Trainees: for specific areas of Generation, Transmission, Distribution, Finance, HR etc will be based on predefined positions
Restructuring
will be based on predefined positions
Compensation & Benefits
Inconsistencies to be addressed and align the work force to ensure a motivated, performance driven organization
Performance Management: To be implemented for 2010 based on company objectives and drive variable pay and promotionsy
Other Areas
Policies & Procedures: Current approach stems from government service rules which have been in place since pre-privatization. These need to be re-aligned with industry best practices. Some policies have been modified, yet there is need for further changes in many cases
SAP HR: To be properly utilized
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SAP HR: To be properly utilized
HR Team Restructuring: Improved service delivery to be achieved through a redesigned HR team. This will include a specific team for Disciplinary Cases
Overall Framework for KESCs Marketing and Communications Department
Plan Going Forward Public Relations (1/3)
1. Creating a marketing ecosystem.
2. Creating an FMCG best-in-class operating process, based on global best practice.on global best practice.
3. Creating a mass communication tonality. This is a political campaign, not a brand readjustment.campaign, not a brand readjustment.
4. Driving multiples strands: from brand and media, to the social role as the bedrock.social role as the bedrock.
5. Driving media efficiency. Creating the look and tone of a professionally run, confident, customer-facing utility.p o ess o a y u , co de t, custo e ac g ut ty
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Core goals of KESCs Marketing and Communications Department
Plan Going Forward Public Relations (2/3)
Brand Challenges Business Supportg pp
Reverse media hostility Align media on our business to
ensure transparency
Advisory on consumer insight Integrated Business Center (IBC)
launchesensure transparency
Gain consumer trust and confidence Ensure good and responsible
citizenship
launches
Public and internal safety Address theft and collecting issue
citizenship
Leverage sports and football to change brand image
Revamp KESCs brand design
Showcase KESC employees Energy conservation Unite people within KESC Revamp KESC s brand design
Sow the right seeds with consumers for tomorrow
Showcase business achievements
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A five step plan has been developed to drive forward the envisioned Azm (Resolve) Campaign
Plan Going Forward Public Relations (3/3)
Employee Research
1 Understand and segment KESC employees and benchmark track-able
metrics
Internal Azm: Launch Campaign
2
Explain Azm and how employees can play their partp g
AzmChampions
3
Cascade messages, incite change and collect real Azm storiesChampions
Azm Stories
4
Spread compelling stories that further amplify the Azm causeAzm StoriesCampaign
5
Spread compelling stories that further amplify the Azm cause
Azm Star Awards
Recognize and celebrate success
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