KESC control changes hands today

Considering the mess KESC is already in, the Al Abraj group is set to take over the Karachi Electric Supply Company (KESC) on Tuesday.

After the privatisation, Aljomaih had taken over the utility on Nov 29, 2005, but the KESC management passed on to new owners who had 50 per cent right shares.

Dawn

8 Comments so far

  1. Shamsi (shamsi) on September 16th, 2008 @ 2:22 pm

    Letter to Cowasjee August 28, 2008

    All my previous communications to you have not exceeded a few words-
    at best a full sentence. This present email however is longer owing to
    its importance as some of the matters discussed herein would affect
    the pockets of every person living in Karachi for a long time to come.

    I am referring to the news item published in the Dawn and other
    newspapers regarding KESC being allowed an increase in tariff of 20% –
    25 % over the existing tariff that was fixed during the time of the
    previous Government.

    Under the new arrangement, KESC has been allowed
    to charge and recover from the consumers full price of fuel oil that
    it pays. Additionally, KESC has been allowed to buy electricity from
    NTDC at a uniform tariff of of Rs. 3.70 /kwh, which is the same as
    other PEPCO companies purchasing power generated by WAPDA (It has
    since been clarified on August 28th by PEPCO that the reported figure
    in the DAWN of Rs. 3.70 is incorrect and that the correct figure is
    Rs.5/kwh) The new purchase price of Rs.5/- would allow KESC to save
    around Rs. 5/kwh in the future.

    This seems to be a fair decision as
    far as the KESC is concerned. However, it will inflate the electricity
    bills of the consumers by about 25-30 percent. IT HAS NOT BEEN
    CLARIFIED IF THE ELECTRICITY RATE/TARIFF WOULD BE CHANGED EVERY MONTH
    BASED ON THE FLUCTUATION OF FUEL OIL PRICES IN THE INTERNATIONAL
    MARKET.

    I suspect that KESC has been allowed to workout the tariff
    based on the maximum price of Crude that had been prevailing in
    July-August, ’08 in the international market i.e. USD 147/barrel and
    that KESC will continue charging this rate even if the price of oil
    comes down.

    Now, if you look a bit deeper into the reasons why the GOP wrapped up
    this deal with KESC in such a hurry, it throws up certain troubling
    questions as below.

    -Majority Shares in the KESC were sold by GOP to a Saudi Company
    about 3 years ago. Subsequent sale/ transfer of shares to a third
    party could be done only after obtaining GOP’s sanction. However, my
    information is that the majority of the shares of the KESC have been
    sold by the Saudi Company to ABRAJ CAPITAL of Dubai, without the
    permission of GOP, in contravention of the privatization deal. Let us
    see who this ABRAJ is? It is a private Hedge/Equity Fund, which has
    for its backers/investors a group of medium sized Arab businessmen. –
    Mostly from UAE- but some from Pakistan too, our Prince of Nawabshah
    being one of them.

    Its CEO is one AREF NAQVI- who once used to work for a Foreign Bank
    in the UAE, Rumors abound that Naqvi is an Investment Consultant to
    our Prince of Nawabshah. (His other important advisors being ARY and
    Giga Group’s Pardesis).

    The Bonnie & Clyde duo that was ousted from
    power in 1996 had stashed away the money STOLEN from our Country, in
    different foreign banks including banks in Cayman Islands, Channel
    Island, Switzerland, UK and UAE/Dubai. The size of the heist in
    1996-97 was estimated at USD.1.8 billion, which has now swelled to
    around USD 8 billion.

    Major gains were reportedly made in properties
    acquired in Dubai in late nineties. A very hefty amount made as
    commission by the ‘woman’ in the UN’s ‘oil for food’ program for Iraq
    – a scam during the time of Saddam Hussein. In a published report of
    the U.N, our former P.M (woman) has been named as one of those
    involved in the scam. .

    The other Pakistani involved in the scam was
    Rahman Malik, our current Interior Minister, whose name also appears
    in the U.N’s report.

    Normally, increase in electricity tariff is allowed by the GOP only
    after detailed discussions are held by the Electricity Tariff Fixing
    Body (can’t remember the name of the organization) with the KESC, as
    well as with other stake-holders i.e. the consumers.

    In this particular instance, KESC has been allowed to increase its tariff by
    about Rs. 5/unit—a 25 to 30% increase over the current rates in
    UNDUE HASTE-in a matter of 2-3 days- without consulting with the
    consumers group… (This aspect has been commented upon in today’s
    Dawn editorial also). Such largesse being bestowed on the KESC in a
    hush-hush manner in such haste cannot be without consideration.

    If it were to be ASSUMED that the consideration is by way of an
    initial DOWN PAYMENT (the figure could be anything- I leave it to your
    imagination) AND COMMISSION of 5% on the increase that has been
    allowed (5% of Rs.5/-= i.e. 0.25/kwh unit) and made payable
    continuously over the life of the agreement. The size of the
    COMMISSION would amount to a colossal figure.

    Calculation below:

    -Average hourly production of electricity. 1.5 Mega watt/hour
    = 1,500,000 Kw/hr

    DAILY production = (1.5 million X 24 hrs = 36,000,000
    Kw. Hours (unit)

    Assuming that out of the above. Only 66% is billable hours

    – Billable hours PER DAY would be: 24 million Kw Hr (Unit)/day
    COMMISSION: @ Rs. 0.25 / Unit PER DAY = (24 million X Rs.0.25). Rs.
    6.0 Million/day " PER MONTH = Rs. 180 million/month

    PER ANNUM = Rs. 2,100 million/year (210 crores) (Approx. USD.
    30Million) /YEAR perpetually over the life of the agreement. (If you
    wish, you could get calculation above checked by Mr. D’Souza of SHEHRI
    who I believe is a very competent Consulting Engineer).

    It has become an urgent issue as AZ is a candidate for the post of
    the President and elections are due to be held on 6th September.
    Once he is elected, nothing can be done to stop the scam – before
    billions more are allowed to be stolen.

    Rather late? I don’t think so!!


  2. MB (kar_munib) on September 16th, 2008 @ 5:32 pm

    I am stunned, let me reproduce what shamsi said in my other post about this group

    "
    Abraj group (the new owners of KESC) Google search :) some surpriseing facts will be known to all.

    http://www.alabrajholding.com/projects.asp

    They are: Dhobi, Nayee, Jamadar, Chokidar, Driver & Mali, nowhere in their listings they have an technical expertise on managing / running projects like KESC.
    "


  3. Kashif Aziz (kashaziz) on September 16th, 2008 @ 6:26 pm

    Abraaj Capital, who took over KESC from Al-Jumma Group, is child company of the Abraj Group.

    As I have mentioned here, he Abraaj group already has several investments in Pakistan, including the financial and steel sectors. It owns a 40 per cent stake in the Bosicor Group, 80 per cent of Manan Shahid Forgings and 50 per cent of BMA Capital Management.

    Abraaj Capital was primary bidder in privatization of Pakistan Steel Mills. It also owns between 20 to 30 per cent stakes in several airlines and aviation companies in the region. Abraaj manages over AED14.7 billion ($4 billion) of assets, including seven private equity funds, as of 2007.

    For details of Abraaj Capital, please check http://www.abraaj.com/english/List_curinv.aspx

    The point is not whether Abraaj is "qualified" to manage KESC. The questions is that why they delayed till September to took over management when acquisition took place in June. It was reported in newspapers that they had established a stealth presence in Karachi (somewhere in an unmarked bungalow) and were going through huge administrative changes (mostly firings) behind the scenes. KESC MD General Retd. Amajd went on leave in June and new management started firing senior executives one by one so KESC is without any senior management since last two months. Was the government sleeping during all that time?

    I believe there is some pressure tactic applied on the government. Abraaj waited till things went out of control and public frustration peaked. Abraaj is going to have its say in days to come, will cut cost by firing people (starting with daily wagers) and raise tariff to further skin Karachities.


  4. smsulari on September 16th, 2008 @ 9:51 pm

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  5. Teeth Maestro (kar_teeth) on September 16th, 2008 @ 11:51 pm

    Just filled out the survey – I think it was well drafted [with the exception of one or two questions]

    Social media – the last question had ‘I dont know any site like this’ ????
    Could not adequately categorize myself in Occupation – ended up putting myself in ‘small business owner’

    I am willing to put up a post – so that it can be responded to with a wider audience in Pakistan


  6. Kashif Aziz (kashaziz) on September 17th, 2008 @ 12:17 am

    @smsulari: Are you authorized to use Gallup logo on your survey?

    Here is how LMB authors responded to this survey.


  7. tyneham on September 20th, 2008 @ 7:05 pm

    Pakistan power cuts, another ENRON?
    http://FixyaExperts.wordpress.com, http://FixyaExperts.blogspot.com
    by Parveez Syed © 2008


  8. d0ct0r on September 26th, 2008 @ 6:12 am

    Tariff plea by KESC’s new management puts govt in a fix"

    A request for increase in consumer tariff filed by the new management of the Karachi Electric Supply Company (KESC) has put the federal government in a quandary because it feels that Al Abraj — the new owner — is a non-entity in the eyes of the law.

    http://dawn.com/2008/09/25/top12.htm



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