VZCZCXRO4841
RR RUEHLH RUEHPW
DE RUEHKP #0211/01 1831038
ZNR UUUUU ZZH
R 021038Z JUL 09
FM AMCONSUL KARACHI
TO RUEHC/SECSTATE WASHDC 1122
INFO RUEHIL/AMEMBASSY ISLAMABAD 0582
RUEHLO/AMEMBASSY LONDON 0338
RUEHNE/AMEMBASSY NEW DELHI 1890
RUEHBUL/AMEMBASSY KABUL 0296
RUEHLH/AMCONSUL LAHORE 2745
RUEHPW/AMCONSUL PESHAWAR 4628
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHMFISS/DEPT OF ENERGY WASHINGTON DC
RUEAIIA/CIA WASHDC
RUMICEA/USCENTCOM INTEL CEN MACDILL AFB FL
RUEKJCS/SECDEF WASHINGTON DC
RHEHAAA/NSC WASHINGTON DC
RHMFISS/JOINT STAFF WASHINGTON DC

UNCLAS SECTION 01 OF 02 KARACHI 000211 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958:  N/A 
TAGS: EIND ENRG ECON PK
 
SUBJECT:  KARACHI - ONGOING POWER OUTAGES LEAD TO CALLS FOR 
NATIONALIZATION 
 
REF: A. 08 Karachi 173 
 ¶B. 08 Karachi 420 
 ¶C. 08 Karachi 458 
 ¶D. 08 Karachi 533 
 ¶E. 08 Karachi 587 
 
¶1. (SBU)  Summary: Electricity supply, a perpetual problem in 
Karachi, deteriorated further as demand increased in the summer heat 
of May.  Karachi Electric Supply Company (KESC) resorts to load 
shedding and several major interruptions to the power supply have 
caused protests in the city and serious disruptions to industry. 
Local and national politicians are closely watching the situation 
amidst some calls for re-nationalization of the KESC.  End summary. 
 
¶2. (U)  As the temperatures in Karachi rose during the month of May, 
rolling power outages (known locally as load shedding) increased, 
and residents in various parts of the city reported 8 to 10 hours of 
load shedding per day, while in a few areas claims of power outages 
reached up to 20 hours.  Protests, some turning violent, have often 
been directed at the KESC; several of their customer service centers 
have been attacked and service trucks set on fire.  So great is the 
frustration that protestors even took to pelting passing vehicles 
with stones. 
 
¶3.  (U) According to KESC CEO Naveed Ismail, by early June the 
summer heat had already increased demand by 35 percent, and he 
estimated that as the temperature continued to climb, the demand on 
the system due to increased use of fans and air conditioners would 
increase by 640MW. Since according to some estimates the grid was 
already 600MW to 800MW short of meeting normal demand, the only 
recourse left to KESC was further load shedding 
 
¶4. (U) By early June the situation had reached crisis proportions 
and was affecting local businesses and industry.  City and 
provincial politicians called daily for the government to 
nationalize the KESC, which was privatized in 2005, and is still the 
only private power company in Pakistan.  The federal government 
formed a special committee to look into the KESC management and load 
shedding in Karachi.  The Karachi city council adopted a resolution 
on May 26 calling for the handover of KESC to the city government, 
which would run the utility using a group of experts.  In response, 
KESC announced a 100-day summer plan to bring load shedding to an 
end and decrease electricity theft. 
 
¶5. (SBU)  Electricity theft is a major problem for the KESC and, in 
a city as large as Karachi with little or no enforcement authority 
or oversight, it is very difficult to overcome.  Ismail told EconOff 
that even prominent Karachites and government entities with the 
means to pay their tariffs do not pay some or all of their 
electricity bills.  He added that, ironically, the people in the 
neighborhoods with the highest levels of electricity theft are those 
who generally protest the most against load shedding.  As part of 
the 100-day plan, KESC hoped to conduct 10,000 raids against 
defaulters and thieves by July. 
 
¶6. (SBU)  Further compounding the problem, on June 17, Karachi 
suffered a massive blackout when a thunderstorm in another part of 
Sindh damaged a major power transmission line.  The disruption 
caused blackouts in nearly 85 percent of Karachi.  In an effort to 
find some relief from the heat, residents slept in parks and on the 
streets; in addition, at least half of the city was without water 
because pumping stations could not operate. It took several hours 
before power began to be restored, and in much of the city it was 
well into the next day before any power returned. 
 
¶7. (U)  A light rainstorm on June 25 again disrupted the power 
supply to many parts of the city and caused residents and 
politicians to question what will happen to the power grid when the 
monsoon rains reach full strength in July.  This question has led to 
intensified calls by politicians to reverse the privatization of 
KESC. 
 
¶8. (SBU)  The current owners of KESC, the Dubai-based Abraaj 
Capital, only finalized the purchase in April.  (Note:  In 2005, 
Saudi's Al-Jomaih Group and Kuwait's National Industries Group 
purchased KESC.  In early 2008, Al-Jomaih approached Abraaj for a 
purchase offer.  End note.)  Ismail told EconOff that electricity 
 
KARACHI 00000211  002 OF 002 
 
 
demand increases by 7 to 10 percent each year, but the last major 
investment in power generation or grid maintenance was over 25 years 
ago.  As a result, during the summer months there is a shortfall of 
several hundred megawatts.  The company plans to invest $360 million 
in upgrades to the transmission system and construction of new power 
generation capacity over the next few years, including plans to 
build four coal-powered plants over the next five years.  In an 
attempt to curb wastage, KESC has also launched a conservation 
campaign in an effort to save 200 to 250MW per year. 
 
¶9. (SBU)  Ismail told EconOff that he attempts to manage the load 
shedding to avoid industrial areas, government hospitals, or other 
vital institutions.  However, many business owners in the major 
industrial estates tell Post their biggest problem is load shedding. 
 As the largest factories often produce their own power, it is the 
medium and small businesses with lower margins   that are suffering 
the most. 
 
¶10. (SBU)  Comment:  Regardless of the actions taken by KESC it will 
not be able to eliminate load shedding as the summer continues.  The 
advent of the monsoons could very well exacerbate the problem if, as 
on June 25, the system is unable to withstand even moderate rain. 
Protests against KESC will likely continue throughout the summer and 
during periods of particularly egregious load shedding.  KESC's 
problems are symptomatic of those facing the country as a whole. 
For example, on June 30 the turbines at Mangla Dam, which normally 
supplies 1100 MW to the grid, broke down when they were pushed to 
produce 1150 MW.  It will take at least two weeks to repair them and 
restore this power supply.  Even with increased investment and 
system upgrades it will take KESC three to five years to produce 
noticeable results.  Power will meanwhile continue to be a 
contentious economic and political topic in Karachi, and will 
continue to generate unrest in the streets.  End comment. 
 
 
FAKAN