Thursday September 28, 2023

Leaked document exposes K-Electric’s real ownership structure

Leaked documents show Shehryar Chishti indirectly is LP of IGCF Fund “with a 5.1% indirect interest in KE

September 04, 2023
View of the KE headquarters in Karachi. — Facebook/K-Electric
View of the KE headquarters in Karachi. — Facebook/K-Electric

LONDON: The Karachi Electric (KE) Chairman Mark Skelton has certified that Shaheryar Arshad Chishty’s indirect beneficial ownership in K-Electric, through the Infrastructure and Growth Capital Fund (IGCF Fund), is only 5.1 percent.

This startling turn of events contradicts previous numerous portrayals by IGCF as the majority shareholder in the company, KE.

Leaked documents from Alvarez and Marsal, a renowned international consulting firm, show that Shehryar Shaheryar Arshad Chishty indirectly is an LP (Limited Partner) of the IGCF Fund “with a 5.1 percent indirect interest in KE”.

The document, available with this paper, is signed by Mark Skelton who is the current chairman of KE and chairman of Cayman Island registered KES Power Limited (KESP), the parent entity of KE. Skelton also holds the position as director of IGCF General Partner Limited, who is the manager of the IGCF Fund. Skelton is also the Managing Director of Alvarez & Marsal Europe LLP. The document, carrying the revelation, was signed by the chairman of KE and KESP on July 11, 2023 for a legal filing. The verified document is titled “KES Power Limited (IGCF) – entities holding greater than 5 percent economic beneficial (indirect) interest in KE as of July 11, 2023.”

A debate has raged in the Pakistani media in recent months where Shaheryar Arshad Chishty claimed he has become the “majority” owner of K Electric Limited, with numerous reports suggesting that he holds a substantial ownership stake in the company. The original Saudi and Kuwaiti investors, Al-Jomaih and NIG, have throughout rejected the claim, saying they hold over 30.7 percent indirect share in KE and that the majority ownership claim bv Shaheryar Arshad Chishty is misleading. This notion has now been reinforced by the certified document from the chairman of KE and KESP.

The leaked document, obtained from anonymous sources, provides undeniable evidence as it carries signatures of Mark Skelton, the chairman of KE, and raises several questions.

The certified document contains detailed ownership information and structure details that expose the true extent of IGCF Fund’s involvement in K-Electric. The certified document also reveals that approximately 30 percent of IGCF SPV 21, the third shareholder in KESP (apart from the Saudi and Kuwait groups), is held by Mashreq Bank. This effectively translates into Mashreq Bank holding 10.5 percent indirect stake in KE. Comparing this to the ownership stake of Shaheryar Arshad Chishty as a Limited Partner/Investor in the IGCF Fund, Shaheryar Arshad Chishty’s see-through ownership turns out to be only 5.1 percent i.e., less than half of that of Mashreq Bank.

Shaheryar Arshad Chishty’s economic stake in KE comes about from purchasing Limited Partners interests from various investors in the IGCF Fund. Originally, there were over eighty investors in the IGCF Fund established in 2008.

Hence the pecking order of indirect ownership in KE would start at the top with the largest chunk held by the original investors in KE, since the time of privatisation back in 2005, being the Saudi and Kuwait conglomerates (30.7 percent). Next in line would be Mashreq Bank (10.5 percent) which sort of inherited the stake due to the misfortunes of Abraaj Group now in liquidation. The smallest portion, amongst these four groups, belongs to Shaheryar Arshad Chishty (5.1 percent) through his offshore entity in the British Virgin Islands (BVI).

Mark Skelton didn’t respond to questions for this story.

The ongoing issue over the nomination of directors to the board of K-Electric is between the two large groups of shareholders of KES Power, the holding company. Shaheryar Arshad Chishty’s Infrastructure and Growth Capital Fund (IGCF)-owned SPV-21 Ltd claims it controls a 53.8pc shareholding in KES Power. All others dispute this claim and say such a claim is nothing but false representation. The matter is before a court in Cayman Islands and it looks like the legal wrangling will go on for many months.