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.
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!!
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.
"
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.
Hey all, I am doing a research on Bloggers. Please help me by filling this survey form. It hardly takes 14 mins. I shall be so thankful to you. :)
http://www.field-tab.com.pk/survey/ift02.html
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
@smsulari: Are you authorized to use Gallup logo on your survey?
Here is how LMB authors responded to this survey.
Pakistan power cuts, another ENRON?
http://FixyaExperts.wordpress.com, http://FixyaExperts.blogspot.com
by Parveez Syed © 2008
Tariff plea by KESC’s new management puts govt in a fix"
http://dawn.com/2008/09/25/top12.htm