Shanghai Electric bids for stake in Pakistan’s K-Electric

SINGAPORE : China’s state-backed Shanghai Electric Power said on Monday it is bidding to acquire a stake in Pakistani utility K-Electric Ltd, which has a total market value of $2.3 billion.

"Our company has embarked on preliminary work on the acquisition of a stake in K-Electric. We have not entered into any exclusive negotiations yet and the size of the stake has also not been firmed up," Shanghai Electric said in a statement on the Shanghai stock exchange. It said it is not the only company participating in the bidding process.

Dubai-based private equity firm Abraaj Group has flagged its intention to sell its stake of about 66 percent in K-Electric, which supplies power to over 2.2 million customers in and around Karachi.

As of Monday, Abraaj´s stake was valued at around $1.5 billion. The Pakistan government owns about 24 percent in K-Electric.- Reuters Our correspondent adds: Media reports suggest that Chinese clean-energy group Golden Concord Holdings Ltd is also competing with Shanghai Electric Power Co for control of K-Electric Ltd.

Golden Concord is the parent company of Hong Kong-traded GCL-Poly Energy Holdings Ltd, the world's biggest polysilicon and solar wafer maker, and clean-power producer GCL New Energy Holdings Ltd. Shanghai Electric Power, which has a market value of $3.6 billion, is a listed unit of China's State Power Investment Corp.

The two Chinese companies and other bidders have been asked to submit binding offers by the end of this month for Abraaj Group's 66 percent.  Sources said French utility Engie SA and one investment fund are also in the final round.

Abraaj, an emerging-markets investment firm with about $9.5 billion of assets under management, bought the controlling stake in K-Electric in 2009, according to its website. K-Electric, formerly known as Karachi Electric Supply Co, employs about 11,000 people.

The K Electric stocks have risen 19 percent this year, trailing the 21 percent increase at the Pakistan Stock Exchange’s benchmark KSE-100 Index. The K Electric stake was valued at about $1.5 billion based on the company's stock price Thursday in Karachi, according to data compiled by Bloomberg.

Last week, unconfirmed reports hit Pakistan stock market that Engro Corp is also keen to buy stakes in K-Electric. But, Engro and K-Electric, both denied saying the groups were not interested in any such deal.

Analyst Ahsan Mehanti at Arif Habib Corp said $2.3 billion value shows a share at around Rs14, which was a big price for a share being sold in the market at a price of Rs8.70. “However, it will not have much impact over the share value in the stock market, as the groups were going to purchase shares from Abraaj Group,” he said. “In case shares are purchased from minority shareholders too, it will have positive impact on the K-Electric share in the market.”

A broker with a large number of retail investors said if shares were being purchased from the minority share holders, it will have around 10 to 15 percent impact over the share price, which would also take some time. Otherwise, the investment would be good for the country only, as reforms are needed in K-Electric.