An Analysis of Karachi Electric Supply Company Limited
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THE KARACHI ELECTRIC SUPPLY COMPANY LIMITED INTRODUCTION History Karachi Electric Supply Company Limited (KESC), (formerly Karachi Electric Supply Corporation) is one of the city's largest employers: around 17,000 people currently work for the company. It is also one of the oldest companies in Karachi and was established in the city even before the creation of Pakistan in 1947. Incorporated in September 13, 1913, under the Indian Companies Act of 1882, the company was nationalized in 1952 but was re-privatized on November 29, 2005. KESC came under new management in September, 2008. In 1996, deterioration in KESC’s financial health began, which promoted suggestions for the utility’s transfer into private hands. During the interim between 1996 and 2005, Army management instated at the state utility with a view towards enhancing the Company’s operational and financial health in May 1999. There are conflicting views towards this shift and management, with allegations of severe misconduct. During 2002 and 2003, incentives were introduced in preparation for KESC’s privatization, which eventually finalized on November 29, 2005 with a 71% transfer of ownership to an association comprising of the Saudi Al-Jomaih Group of Companies and Kuwait’s National Industries Group (NIG), with the government still retaining a 26% stake. Due to various operational setbacks and the unfortunate choice of Siemens as an Operations and Management (O&M) contractor, the privatized association was unable to improve the Company’s financial and operational crisis. In the earlier part of 2008, Saudi Al-Jomaih approached Abraaj Capital, a leading private equity firm based in Dubai, with a proposal for a potential stake in KESC. The deal was eventually finalized in October 2008 at a ticket price of $361 million for a significant equity stake in the Company, which grants Abraaj Capital full management control. Abraaj Capital has brought in a professional management team with over 41 senior
THE KARACHI ELECTRIC SUPPLY COMPANY LIMITED INTRODUCTION History Karachi Electric Supply Company Limited (KESC), (formerly Karachi Electric Supply Corporation) is one of the city's largest employers: around 17,000 people currently work for the company. It is also one of the oldest companies in Karachi and was established in the city even before the creation of Pakistan in 1947. Incorporated in September 13, 1913, under the Indian Companies Act of 1882, the company was nationalized in 1952 but was re-privatized on November 29, 2005. KESC came under new management in September, 2008. In 1996, deterioration in KESC’s financial health began, which promoted suggestions for the utility’s transfer into private hands. During the interim between 1996 and 2005, Army management instated at the state utility with a view towards enhancing the Company’s operational and financial health in May 1999. There are conflicting views towards this shift and management, with allegations of severe misconduct. During 2002 and 2003, incentives were introduced in preparation for KESC’s privatization, which eventually finalized on November 29, 2005 with a 71% transfer of ownership to an association comprising of the Saudi Al-Jomaih Group of Companies and Kuwait’s National Industries Group (NIG), with the government still retaining a 26% stake. Due to various operational setbacks and the unfortunate choice of Siemens as an Operations and Management (O&M) contractor, the privatized association was unable to improve the Company’s financial and operational crisis. In the earlier part of 2008, Saudi Al-Jomaih approached Abraaj Capital, a leading private equity firm based in Dubai, with a proposal for a potential stake in KESC. The deal was eventually finalized in October 2008 at a ticket price of $361 million for a significant equity stake in the Company, which grants Abraaj Capital full management control. Abraaj Capital has brought in a professional management team with over 41 senior