executing the transformation

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


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


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


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


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


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


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

29

Public Relations Campaign Advertisements (1/4)

Anti-Theft Campaign

30


Truth Campaign

31


Monthly Scorecard

32


Umeed Zone Campaign

33

Executive Summary

Key Hurdles Facedy

Key Accomplishments


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


Commissioning Status

Contractor mobilized detailed



90 MW N 08



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

35

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

36

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

38

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

39

Core goals of KESCs Marketing and Communications Department


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

40

A five step plan has been developed to drive forward the envisioned Azm (Resolve) Campaign


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

41

executing the transformation

Documents

restructuring plan

overall plan

diligence findings

mw projects

high td losses

forward plan

overall efficiency

transmission distribution