Payments pending: KESC accuses government of reneging on promises

Believes such actions can hamper privatisation plans.

KARACHI:

The federal government is not honouring its sovereign commitments given to the Abraaj Group, the Dubai-based firm that manages Karachi Electricity Supply Company, which may hamper future privatisation plans, say senior officials of the company.

The government was reluctant to clear outstanding dues of the Karachi Water and Sewerage Board (KWSB) owed to KESC under the Amendment Agreement of 2009, said the company’s top managers during an interaction with journalists here on Thursday.

In addition to that, the government was not ensuring supplies of gas and delaying the clearance of Tariff Differential Claims (TDCs), they added.

Company’s Chief Executive Officer Syed Nayyer Hussain and his entire team discussed the achievements that they made, the future investment plans and the challenges being faced.



The government owed Rs63.6 billion to KESC including Rs37.8 billion worth of TDCs and Rs25.8 billion of KWSB, which is 43.6% of the total receivables held by KESC.

“To ensure that the privatisation plans are successfully implemented, the federal government should honour its commitments,” said Syed Muhammad Taha, Chief Distribution Officer of KESC.

Syed Moonis Abdullah Alvi, the Chief Financial Officer, said under the Amendment Agreement, if the KWSB does not service its liabilities within three months, these will be the obligation of the federal government.

But the spokesman for the Ministry of Finance, Rana Assad Amin, said the TDC dues were a dispute between the KESC and the National Tariff and Dispatch Company (NTDC). On the issue of KWSB, he said KESC should approach the federal adjustor for the recovery of the dues.

“KESC is the only privatised entity and any future buyer of a public sector power enterprise will surely come to us for consultation before striking a deal,” said Alvi.

The government has announced an ambitious privatisation plan under which it promises to either privatise or offload shares in 32 public entities, including power distribution companies of Islamabad, Faisalabad and Hyderabad.

“In August, I raised the issue of KWSB payments with Ishaq Dar and he responded by telling me to bring an order from the Supreme Court and the federal government will cut the outstanding amount from the National Finance Commission (Sindh’s share) and give it to KESC,” said Alvi.

The company has already served a legal notice on the government three months back. The government had also promised to give 276 million cubic feet of gas per day (mmcfd) to KESC, but was providing far less than the committed volumes, which was affecting power generation, he added.

“We have to sit across the table and sort out things which are hampering the implementation of the agreement,” said CEO Syed Nayyer Hussain.

He said KWSB’s monthly billing was in the range of Rs625 million to Rs650 million. KESC was clearing the monthly bills of Sui Southern Gas Company in addition to paying arrears but KWSB was not paying to KESC, he added.

To a question, Zahidi said under the agreement the NTDC was bound to provide 650 megawatts of electricity until 2015. He said KESC was self-sufficient in power supply but was resorting to load-shedding as a strategic policy to reduce line losses and improve recoveries.

The KESC’s new management can claim some big achievements. After taking over, the Abraaj Group has added 1,006MW to the system with an investment of $1 billion, said Zahidi. The new management improved efficiency from 30% to 40%.

KESC has introduced drastic changes to improve financial and administrative affairs of the company and resultantly line losses have been reduced and recovery has improved a lot, said the CEO.

He said the company was ready to share its success model with other power distribution companies.

Published in The Express Tribune, December 27^th, 2013.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.