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11th-12th November, 2010

2nd WORKSHOP ON“POWER SECTOR REFORMS”

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BRIEF HISTORY OF IESCO

1998

Creation Registration Commencement of Business

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OBJECTIVE OF PERFORMANCE CONTRACT (2010):

GOP/MOWP is committed to ensure that Distribution

Companies can have:

1. Effective Management

2. Efficient and Quality Service

3. Adequate Operational Autonomy

4. Effective & Strong BOD

5. Effective Internal Controls

6. Business Plans Implementation

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OBJECTIVE OF COMPANIES ORDINANCE 1984 & UNDERLYING CORPORATE GOVERNANCE

Objective of Ordinance is to run corporate sector professionally by ensuring

in Companies the:

Implementation of Business plans

Formulation of Human Resource Management policies

Capital expansion plans

Comprehensive Financial Statements and Audit

Effective Internal Controls

Report on Governance, Risk & Compliance issues

Effective Role of management & Board of Directors

Safeguard the Interest of Shareholders (St 290)

Does not the Companies Ordinance, 1984 more elaborately cover

all the Objectives that Performance Contract intends to???

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HOW IESCO IS CURRENTLY BEING GOVERNED!

IESCO

Regulators

Monitoring Agencies

Auditors

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AREA OF CONCERN! If we all think that Power Sector is still in crisis despite the presence of so

many regulators, regulations and Audits then what is the root cause?

Either the focus on the implementation of the existing laws missing

OR

More efforts are exerted in inventing the new ones

OR

We have no plan as how to implement it

OR

Regulations are not in accordance with the need

Under this scenario, something has to be done

so that Single Performance Contract be able to

turn around the whole Power Sector?

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All the objectives of Performance Contract are covered in

Ordinance

Legal backup – Missing

Focus on “Scoring of points – results in narrowing down

approach”

Environment differs from company to company

Format is defective as even if the company achieves 100% of

the targets set for all the KPI’s, the maximum score achieved

will only be 65 out of 100

Budgeting control concept has not been properly incorporated

& needs to be reviewed

COMMENTS ON PERFORMANCE CONTRACT

Contd…

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Strangely targets have been laid for accidents ???

Not fair to link targets with units sold as long as power

shortage is there

Companies concern may be taken to assign weightages

Concerns of Labor union need to be addressed

Punitive clauses relating to termination to be revisited

COMMENTS ON PERFORMANCE CONTRACT

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As the expectations from Performance contract are very high and this

document has become a last resort to turn the table, therefore it needs to

be ensured that:

Is the Contract being made between the right persons ?

Will it not interfere in the autonomy of the company ?

Should it not be between IESCO Management & BOD?

Whole exercise of revisiting the performance contracts and KPI may be

started from afresh by formulating a joint committee of DISCOs,

MOW&P, Donors & Private Sector professionals to achieve the

objectives as desired

SUGGESTIONS FOR IMPROVEMENTS

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KPIsOperational & Commercial

Performance - 50%TotalScore

2009-10Jul toSep 10

To AchieveMax Marks

Remarks

Line Losses 15.00 11.25 7.50 -10No Cushion for Companies having low losses to be at 10%

Collection Ratio 25.00 6.25 8.25 + 5

No Cushion for Companies having low losses to be at 10%

Target for collection for DISCOs having low recovery should be above 100 %

Transformer Failure Rate 2.00 1.00 2.00

+ 10

Targets based on NEPRA Performance Standards, so margin for +10% above target is difficult

Line Failure Rate - Below 20 Min 2.00 1.50 2.00

Line Failure Rate - Above 20 Min 2.00 1.00 2.00

Defective Meters 4.00 3.00 4.00 + 20In IESCO, proportion of defective meters is low

Financial Performance - 8% 8.00 4.50 6.75 + 10Why O&M Expenses linked with Units Sold?

Capitalization - 5% 5.00 5.00 3.75

Capital Expenses – 10% 10.00 4.50 - + 10Scoring criteria is against the Budgeting Concept

Customers Relations Mgt – 5% 5.00 4.50 4.00

HR Management – 12% 12.00 12.00 10.00

Employee Safety – 10% 10 - 4 Target Illogical

Total Scoring 100 54.50 52.25

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PROJECTS BEING UNDER TAKEN

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Proj.Cost:US$58.496M

Exp:US$16.288M

Proj.Cost:US$30.06M

Exp:US$4.23M

Strengthening of

Infrastructure(Projects Being

Undertaken)

Calculation ofT/F wiseLosses

(pilot projectundertaken)

ERPImplementation

(at Feasibility & Prep. Stage)

Collection through

Bar-CodeReaders

(expected Dec10)

GIS basedAsset

Management(pilot project

undersurvey)

SCADA(at Feasibility study Stage)

Coding & Tagging of

T/Fs(InitialStage)

ConsumerCensus

(Compl. Date Dec 10)

AMI(AdvancedMetering

Infrastructure) (at Feasibilitywork Stage)

Installation ofTOU

MetersAchiev: 25 %

Power Dist& Enhancement

Project(ADB)

Electricity Dist& Transmission

ImprovementProject(WB)

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FINANCIAL POSITION OF FY2010-11Summary of Major KPI’s indicating consumer satisfaction

T & D Losses = 9.2%

Collection (Pvt.) Consumers = 100%

Collection (Gov.) Consumers = 56% Financial Summary indicating Sound financial position:

DescriptionFY 08- 09(Audited)

FY (Qtr 1)09-10

FY 09- 10(Audited)

FY (Qtr 1) 10-11 Prov.

Sales Revenue 38,348 13,842 50,219 17,785

Other Income 1,432 473 1,722 383

GOP Subsidy 11,339 4,468 15,816 5,740

Total Revenue 51,119 18,783 67,757 23,908

Power Purchase Price

43,866 14,096 57,429 14,211

Operating Expenses

3,674 926 4,048 1,230

Depreciation 930 231 929 241

Total Expenses 48,470 15,253 62,405 15,682

Rising Operating

Profit 2,649 3,530 5,352 8,226

Rs. in Million

Description Amou

nt (Mil)

Receivables from Gov t 7,500

Receivables from Pvt 2,771

Total Receivables 10,271

Subsidy Receivable 6,698

Gross Receivables 16969

Power purchase payable

(6,311)

Surplus of Receivables Over Payables (A+B-C)

10,658

Indicates Short Term Strong Liquidity Position

As on 30 Sep 10

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SUMMARY OF AJK TARIFF ISSUES

Present Tariff of AJK Rs. 5.50 / Unit

Paid by AJK Rs. 2.59 / Unit

Deficit Rs. 2.91 / Unit

Share of AJK in Govt Billing 38%

Share of AJK in Total Billing 9.5 %

Total Receivables from AJK as on 30 Sep 2010 4,909.981 Million

AJK does not want to pay at Govt Notified Rates

Note: Avg Sale is 900 Million units per year

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MAJOR BOTTLENECKS & SUGGESTION FOR IMPROVEMENTSr Bottle Necks Suggestions

1 Recovery from Govt. Departments GOP to take serious Note of it & remove the Budgetary Constraints for Govt Department to ensure timely payments to Discos

2 Increasing interference of Sales Tax Department

Power Sector to be declared exempt from Sales Tax Audit

3 Claim of Sales Tax Department to Charge Sales Tax on Supplies to AJK depsite Presidential Order in 2002 to not to Charge Sales Tax on Electricity Supply to AJK

Power Sector to be declared Zero Rated or Exempt from the Application of Sales Tax to avoid Cash flow problems as huge amounts of funds of Discos are Blocked as Sales Tax Refund

4 Unpaid subsidies Outstanding Subsidies to be cleared & for future Electricity Tariff may be increased to cover the Gap between Notified & Determined Tariff

5 High cost of borrowing The Cost of fund against the Relenet Loans to be reduced from 17% to 12%

6 High Corporate Income Tax Rates Separate Income Tax Package for Power Sector

7 Defective Notification of AJK Tariff To be made in line with the understanding between GOP and Govt. of AJK

8 Delay in Determination of Tariff To be made in time

9 Political Influence Must be avoided for Autonomy of the Companies.

10 High Generation Cost Generation Mix need to be focused on

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DAMAGES OCCURRED DUE TO HEAVY RAIN/ FLOOD ON 27.07.2010 TO 29.07.2010

Contd…

 Sr.  Description Unit Total Amount ( Rs )

1 Structure No 304 4,295,154

2 Transformers No 255 62,206,766

3 Accessories No 19,900 7,906,717

4 Cables MTR 19,996 4,351,136

 Grand Total (Rs) 78,759,773

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THANK YOU

THANK YOU

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KEY PERFORMANCE INDICATORS

Description FY 08 FY 09 FY 10 Jul-Oct 10

Consumers, Mil. 1.88 1.98 2.06 2.08

Peak Load, MW 1,522 1,643 1,968 1,479

U. Purchased, GWh 8,061 8,071 8,396 3,247

U. Sold 7,232 7,201 7,572 2,950

Losses, % 10.3% 10.8% 9.8% 9.2 %

NEPRA Target 12% 11% 10% 10%

Var. from NEPRA 1.7 0.2 0.2 0.8

Collection Ratio (Govt) % 97.1 91.3 83.6 67

Collection Ratio (Pvt) % 98.9 98.4 100.0 100

Collection Ratio (Total) % 98.4 96.6 95.9 92

AT&C Index (Govt) 87.1 81.4 75.4 61

AT&C Index (Pvt) 88.7 87.8 90.2 91

AT&C Index (Total) 88.3 86.2 86.5 84

* Tariff Determination under consideration

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Transformer Coding

Transformer Coding of 19 Feeders Having maximum quantum of loss from each Division

have been completed in September 2010.

Transformer coding of 3 Division i.e. City, Westridge & Tariqabad is completed in October,

2010 and remaining i.e. Cantt, S/Town & Rawat will be Completed in November, 2010

Installation of Meters o 50 KVA capacity (General Duty Transformers) three feeders of

Islamabad Circle and Capt. Aamir Shaheed Feeder of Rawalpindi Circle fully completed

CONSUMER CENSUS Consumer census started by Barqab in Rawalpindi Circle as a pilot projects was

abnormally delayed.

Now IESCO has decided to get it done by its own employee.

Format for Consumer Census is being printed and provided to the field formation in

November, 2010

Survey will be conducted and completed in December 2010

IESCO ON GOING PROJECTS

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Billing collection through scanners/barcodes readers will be started in December,

2010 as certain preparatory meetings have been held in this context.

This will help to improve the collection / remittance mechanism besides rapid flow

of information about payment made by the customers on daily basis upto the level

of SDO.

AUTOMATED METER READINGS INFRASTRUCTURE

Survey is being conducted by M/S Nortech Hungry based company for AMI it will

help on the following areas.

Load Management

Outage Data

Transformers wise Losses

Detection of Theft

Improvement in Customer Services

BILLING AND COLLECTION THROUGH SCANNERS

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SAMPLE FLASH REPORTOperational & Commercial

Performance - 50%Target

100% Achievement

100% Score

ResultWeighted

ScoreResult

WeightedScore

Line Losses 10 % 10 % 7.5 9 % 15

Collection Ratio 100 % 100 % 18.75 105 % 25

Transformer Failure Rate 16.3 % 16.3 % 1 14.65 % 2

Line Failure Rate - Below 20 minutes 183 183 1 164 2

Line Failure Rate - Above 20 minutes 14 14 1 12.6 2

Defective Meters - 7-12m as % of total 6.4 % 6.4 % 2 5.12 % 4

Financial Performance - 8%

Cash in Transit (Monthly Average) 7 % 7 % 1.5 6.3 % 3

O&M Expenses (Rs/kWh) 0.51 0.51 2.5 0.45 5

Capital Expenditure Project Implemen.15%

Capitalization (Completion of A90 Form) 75 % 75 % 3.75 79 % 5

Capital Expenses

Secondary Transmission & Grid Station 75 % 75 % 3.75 83 % 5

Distribution of Power (DOP) 90 % 90 % 1.5 100 % 2

Energy Loss Reduction Program (ELR) 90 % 90 % 1.5 100 % 2

Rural Electrification (RE) 100 % 100 % 0.75 110 % 1Contd…

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SAMPLE FLASH REPORT

D Customer Relations Management - 5% Target

100% Achievement

100% Score

ResultWeighted

ScoreResult

WeightedScore

i New Connections 100 % 100 % 1 100 % 1

ii Customer Facilitation 100 % 100 % 1 100 % 1

iiiEfficiency of Supply Complaint Resolution

100 % 100 % 1 100 % 1

iv Efficiency of Billing Complaint Resolution 100 % 100 % 2 100 % 2

E Human Resource Management - 12%

i Officers Strength - Occupancy Ratio 89 % 89 % 2 89 % 2

ii Staff Strength - Occupancy Ratio 87 % 87 % 2 87 % 2

iii Resolution of Disciplinary Cases 77 % 77 % 1 77 % 1

iv Settlement of Audit Paras 85 % 85 % 1 85 % 1

v %age of Officers Trained During the Year 1 % 1 % 3 1 % 3

vi %age of Staff Trained During the Year 2 % 2 % 3 2 % 3

F Employee Safety - 10%

i No. of Accidents - Fatal 3 3 - - 6

ii No. of Accidents - Non-Fatal 6 6 2 4 4

Total Scoring 65.50 100

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STATUS OF VARIOUS ACTIVITIES & PROJECTS BEING UNDERTAKEN

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DAMAGES OCCURRED DUE TO HEAVY RAIN/ FLOOD ON 27.07.2010 TO 29.07.2010

 Sr Description Unit

Name of Circle IESCO TOTAL

Amount( Rs ) Islamabad Rawalpindi Attock Jehlum Chakwal

1 HT Structure No 57 35 59 2 15 188 2,780,154

2 LT Structure No 32 21 46 0 17 116 1,515,000

3 T/F 200 KVA No 20 40 5 0 0 86 28,234,916

4 T/F 100 KVA No 19 17 25 1 6 68 18,827,208

5 T/F 50 KVA No 25 11 23 2 11 72 11,540,904

6 T/F 25 KVA No 7 1 11 0 5 24 3,086,239

7 T/F 15 KVA No 1 0 2 0 0 3 328,919

8 T/F 10 KVA No 0 0 0 0 2 2 188,580

9 Steel Cross Arms No 56 60 41 0 33 190 547,192

10 Dropout Cutout No 97 186 282 3 182 750 2,093,895

11 ACSR 7/.186 MTR 1400 1200 0 0 0 2600 174,200

12 ACSR 7/.0132 MTR 3500 0 5640 0 820 9960 470,000

13 11KVA Disc insuiators No 147 60 127 0 79 413 213,941

14 11KVA PIN insulators No 156 60 174 0 65 455 57,850

15 11 KV pins No 131 60 174 0 65 430 88,415

16 11 KV Capacitor Bank No 0 0 1 0 0 1 350,000

17 Stay Rod No 21 0 22 0 0 43 63,966

18 Stay Wire KG 1400 0 220 0 0 1620 243,000

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DAMAGES OCCURRED DUE TO HEAVY RAIN/ FLOOD ON 27.07.2010 TO 29.07.2010

 Sr  Description Unit

Name of Circle IESCO TOTAL

Amount( Rs ) Islamabad Rawalpindi Attock

Jehlum

Chakwal

19 11 KV 500 MCM 5/C cable MTR 2115 600 0 0 0 2715 1,508,825

20 11 KV S/C AWG Cable MTR 0 600 0 0 0 600 894,000

21 Termination Kit 500 MCM cable No 8 0 0 0 0 8 24,228

22Strraight joint Kit (500 MCM)

No 90 0 0 0 0 90 700,380

23 Straight joint Kit (4AWG) No 25 0 0 0 0 25 476,825

24 4 Way switch No 3 0 0 0 0 3 2,400,000

25 Pvc 4/c 37/.083 cable MTR 776 300 76 0 0 1152 638,856

26 Pvc S/c 37/0.83 cable MTR 750 0 0 0 0 750 86,250

27 PVC 4/c 19/0.083 MTR 1120 600 155 0 0 1876 516,310

28 PVC 4/c 19/0.052 cable MTR 0 0 45 0 0 95 10,260

29 PVC 2/C 7/0.052 cable No 1600 0 0 0 0 7600 212,800

30 LT Kit(19/0.083) No 30 0 0 0 0 30 65,480

31 LT Kit(37/0.083) No 130 0 0 0 1350 130 106,340

32 LT conductor(7/00.122) MTR 2850 0 3770 0 0 7780 248,960

33 D Shackle Assembly No 52 0 43 0 0 95 8,740

34 LT Spool Inulator No 122 0 43 0 0 165 3,300

35 Earh Rod No 60 0 0 0 0 60 24,720

36 Earth Wire KG 260 0 0 0 0 260 29,120

Grand Total 78,759,773

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HOW IESCO IS CURRENTLY BEING REGULATED

Regulators

NEPRA

SECP

PPRA

Major Monitoring Agencies

TransitionCommittee

Auditor GenPakistan

Fed BoardRevenue

Ministry(W&P)

Audits

Tax AuditFBR

InternalAudit

GovernmentAudit

StatutoryAudit

IESCO