CASE STUDY – K-ELECTRIC

PRESENTED BY:
Ushbah Khan
Hafsa Faheem
Haniya Khan
Ramsha Ahmed
Saqiba Anwar
Dur e Sameen Aamir
On September 13,
1913 Karachi
Electric Supply INTRODUCTION
Corporation
(KESC) was
incorporated
TO KESC
THREE MAJOR FUNCTIONS
• Generation
• Transmission
• Distribution
Key Facts
• Monopoly in Karachi
• No sizeable threats to
market share
• Government Entity which
became the reason for its
corrupt image
 • 1913 -1946:
• From day one, KESC served its consumers with the utmost zeal, growing
quickly with the growing city.
• 1947 – 1951:
• As Pakistan became a reality, Karachi saw a sudden surge in population and
power demand also increased rapidly.
• 1952:
• Government of Pakistan nationalized KESC in order to facilitate the much
needed investment in its infrastructure.
• 1953 – 1980:
Timeline • To meet the growing industrial, commercial and residential demand, eight
new generating plants were added, with a total capacity of 513 MW.
• 1981 – 2000:
• KESC’s flagship Bin Qasim Power Station 1 (BQPS 1) was added to the
generation fleet. KESC was first placed under WAPDA’s control and later the
Pakistan Army took over the company’s management.
• 2005:
• KESC was privatized, with the government retaining a stake of approximately
26%, while 71% was transferred to a foreign consortium.
• 2009:
• The new management, led by The Abraaj Group, took charge
New Processes introduced by
Abraaj Group
• SAP IS-U: Introduction of SAP based CRM system
• integrated Business Centers: Creation of 28 new
IBCs
• Custom Built offices: Old offices replaced by new
revamped structure
• Employees: HR restructuring, Voluntary
Separation Scheme, Management Change,
Training Plans, Promotions
• Project Azm
 • Voluntary separation scheme
• Employees from Core functions were
retained, others were outsourced
• 40 days training for employees: 10
days classroom training, 30 days OTJ
HR training
RESTRUCTURING • Career progression plan for
deserving employees
• Project Azm
Was launched to boost the employees
morale
AZM CAMPAIGN
IMPROVING THE BRAND IMAGE
• Anti theft campaign
Speak Up campaign spreading awareness about
electricity theft
• Online presence
launched an official twitter account in 2012 that
was used to communicate and cater to the
complaints
• Improved customer service
118 call centers were established each with the
capacity of handling 350 calls at one go
• Brand tracking
Brand tracking
• the brand health increased from 50 to
51 2009 to 2012
• Brand equity increased from 0.78 in
2009 to 3.2 in 2012
THE WAY FORWARD-TWO ALTERNATIVES
REBRANDING V/S COAL PROJECT
COAL
CONVERSION
PROJECT
 • Most of Pakistan’s energy comes from a mix of gas,
furnace oil and hydroelectricity.
• Pakistan has been suffering from an energy crisis
for many years due to the unreliable supply of gas,
even though it is a cheaper fuel than oil.
• Resulting in dependence on furnace oil which is
expensive and contingent on fluctuating exchange
Coal Project rates.
• With a combination of these problems, most of
Pakistan suffered from expensive electricity and
very frequent bouts of load-shedding.
• A frustrating experience for both customers and
energy companies.
• A new alternative fuel was needed that could
resolve these issues
 • K-Energy was formed which was to function as an
Independent Power Producer (IPP) in 2013.
• KESC would lease units 3 and 4 of their Bin Qasim
Power Station 1 (BQPS 1) to K-Energy which would
sell the power it produced through coal back to
KESC.
• The conversion of these units would be carried
through EPC agreement with China’s Harbin Electric
International.
Coal Project • The coal used would be similar to Thar Coal at first
so that, eventually, Thar Coal could be used as a
replacement.
• The entire project required an investment of
around $300 to 400 million, most of which would
come from foreign investors.
• It would be completed in 2 and a half years and
would result in 420 MW of energy being switched
to coal, which would represent a significant chunk
of KESC’s total production capacity being generated
from a much cheaper source.
REBRANDING
 EFFORTS PROPOSED FOR
RE-BRANDING
• Change of company name
• Coming up with a logo
• A tagline
• TVCs and online promotions
PROS AND CONS
PROS OF COAL PROJECT
• Generation tariff would reduce
• New investment opportunities would attract
foreign investors
• It would help attain the goals for KESC’s
Sustainability Project
• Construction time for new plants would be
reduced and power availability would increase
• On the marketing side, this project could lead to
a better consumer perception of KESC.
CONS OF COAL PROJECT
• significant risk for KESC of worsened consumer
perceptions.
• lead to a bad international reputation, meaning
that foreign investors would be very reluctant to
invest in Pakistan’s energy sector.
• KESC would have to apply to the National Electric
Power Regulatory Authority (NEPRA) for approval.
• gaining approval from NEPRA would take ages
• KESC would be forced to continue supplying
expensive electricity when it could potentially
supply something cheaper. This would incur a
huge loss in potential savings.
PROS OF RE-BRANDING
• If KESC was to rebrand at that
point in time, they would be
able to cash in on their
massive accomplishment of
realizing a profit after 17 years
• By rebranding in 2012, KESC
would be able to move away
from its negative image and
associations.
CONS OF RE-BRANDING
• How would the consumers react if they were
to coincide their first profit with heavy
marketing expenditure?
• Wouldn’t it be much better to invest in
improving electricity distribution and further
reducing T&D losses?
• Moreover, even though KESC realized a profit,
the value of the profit was quite low. The fact
that the company was experiencing a loss of
2.1 Billion in March 2012 showed that the
financials were not stable.
• Also, the rebranding would require an
investment compared to other projects,
which were mostly financed via sponsorships
and foreign equity injections.
DECISION
• The decision taken was in favor of
REBRANDING.
• STEP 1: Change the logos of all
offices throughout the city
overnight.
• STEP 2: Award ceremony held at
Mohatta palace.
• New logo and tagline meaning and
link with Pakistan
• Basic theme: customer centric
organization
• Major investments: infrastructure
and hardware assets
• Aman CED – stake holder
engagement is vision that Abraaj
group has been created on
• 87% students earned city and
guilds diploma
• Engaging with community:
Electricity exemption for 11 health
care and education sector NGOs
(SOS children village, SIUT)
• Supporting youth – Lyari football
league
 FINANCIAL PERFORMANCE

• 49% increase in generation capacity since 2008

• Increase efficiency from 30-40%
• Reduced T&D losses from 40% to 27%
 THE COAL COVERSION PROJECT
WAS SHELVED
• The applications for a Generation License and
tariffs were put forward in 2013 to NEPRA
• NEPRA approved the Generation License
• Project put on a back burner. Eventually,
NEPRA did award a 30-year tariff of Rs. 3.5723
/k.watt hour in 2014 resulting in high capital
costs.
• KESC’s failed to achieve its goal of introducing
new and cheaper ways of generating
electricity.
• AC Nielsen – Strong
Brand
• Consumer Experience
scores at an all time
high
• Positive Media
Exposure
• Recurring mention
• Facebook Fame
• Employee Satisfaction
 Customer
Outreach – Social
media
THANK YOU!