K-Electric seeks $2bn from Shanghai Electric for stake sale

KARACHI: K-Electric (KE), Pakistan’s only private sector power utility, said on Wednesday it wants Shanghai Electric Power (SEP) to raise its offer to buy a majority stake in the company to $2 billion, citing improved performance and growth prospects.

The SEP had previously offered to acquire 66.40 percent shares in KE for $1.77 billion, but the deal has been delayed for years due to regulatory hurdles and legal disputes. Shan Ashary, Chief Investment Officer (CIO) of Al-Jomaih and a director at KE, told a group of journalists in Karachi that the SEP has again expressed its desire to buy stakes in KE.

He said the company had invested heavily in upgrading its infrastructure and expanding its customer base in the past few years, which justified a higher valuation.

“We have brought visible improvement in the power company through mega investment in the last few years and because of it we want that offer should go up to $2 billion," Ashary said. “The SEP had previously offered to acquire shares for $1.77 billion... now it should be $ 2 billion."

He added that the SEP had the capability and expertise to further improve the power sector of Karachi, Pakistan’s largest city and economic hub, which faces frequent power outages and supply shortages. Al-Jomaih official said the electricity demand of Karachi stands at 5,000 megawatts (MW) during peak season and would increase sharply if the entire industry shifts to KE. Ashary also expressed hope that the newly established Special Investment Facilitation Council (SIFC), a body set up by the government to address the issues of foreign investors, would help expedite the deal with SEP.

He said he had met with SIFC officials and raised Aljomaih’s issue, but no practical steps had been taken yet.

Aljomaih Holding Company, a Saudi Arabian conglomerate, and Kuwait’s National Industries Group (NIG) are the largest shareholders of KE, holding 47 percent shares in KES Power, which constitute 30 percent in KE. Another shareholder, Asia Pak Investments, claims to have acquired 54 percent shares in KE, but Ashary disputed that claim and said Asia Pak Investments had no more than 5 percent shares in KE. Ashary said KE was ready to offer one slot for Asia Pak Investments in its board, which he said was fully functional and had submitted a plan for intensive investment in Karachi to the National Electric Power Regulatory Authority (Nepra).

He also said that Infrastructure Growth and Capital Fund (IGCF), a fund that holds shares in KES Power, had more than 80 existing investors and that Mashreq Bank’s 30 percent shareholding position in IGCF was still retained. Ashary welcomed any potential Pakistani investor who wanted to join Aljomaih legally and termed Pakistan the best place for Saudi and other Gulf countries to invest as the rate of return in Pakistan was higher compared to European countries.