Shanghai Electric withdraws offer to acquire KE

KARACHI: China’s Shanghai Electric Power Company has yet again withdrawn its offer to acquire majority stake in K-Electric Limited (KE), a bourse filing said on Monday as government failed to announce multiyear tariffs and give other approvals.

“We have received a copy of the withdrawal of public announcement of intention for acquisition (directly or indirectly) of up to 66.40 percent of the voting shares of K-Electric Limited by Shanghai Electric Power Company Limited,” KE said in a notice to Pakistan Stock Exchange.

In August 2016, Shanghai Electric made a public announcement of intention to acquire 18.335 million shares in K-Electric Limited representing 66.4 percent of the total issued share capital against an estimated $1.7 billion. The public announcement was withdrawn in June 2017 as the time line granted by Securities and Exchange Commission of Pakistan (SECP) had lapsed and certain regulatory approvals and tariff determination remained outstanding.

Later in June last year, the Chinese power company made a fresh public announcement of intention to acquire the same percentage of stake in K-Electric.

Yet again, the regulatory and other approvals for the transaction remained outstanding and “the time period for making public announcement of offer as extended by SECP” has lapsed on March 26.

Abraaj Group, a Dubai-based private equity, in partnership with Al-Jomaih Group of Saudi Arabia and National Industries Group of Kuwait, holds a total shareholding of 66.4 percent in K-Electric. The three-firm consortium operates in the name of KES Power, which is the parent company of K-Electric.

“As the acquirer continues to be fully committed to consummate the transaction pending receipt of regulatory and other approvals, Shanghai Electric will make a fresh public announcement of intention immediately with effect from the expiry date,” the bourse filing said.

K-Electric had sought a tariff increase of up to Rs15.57/unit for operational sustainability. National Electric Power Regulatory Authority (Nepra), however, turned down the request, fixing the tariff at Rs12.07/unit in March 2017. K-Electric filed a review petition and after conducting hearings, the regulator increased the tariff to Rs12.7706/unit in October 2017.

Subsequently, ministry of energy remanded back the tariff to Nepra for reconsideration. In December last year, the authority conducted a hearing on December 05, 2017 in this regard.

Analysts urged the authority to reconsider the tariffs, while expressing concerns over the possible termination of Shanghai Electric Power’s acquisition of KE. They said the termination of acquisition could set a negative precedent in context of foreign investments coming into the country and damage investor confidence. Shanghai Power has already unveiled nine billion dollars of investment plan on the city’s power infrastructure.

An official, privy to the development, told The News there has been no communication between Nepra and KE’s management since December last year.