China pulls out of KE’s buyout deal

KARACHI: China’s Shanghai Electric Power Company has yet again withdrawn its offer to acquire majority stake in K-Electric Limited (KE) as the timeline for concluding the deal pending for almost four years expired on Friday.

“We, Arif Habib Limited, in our capacity as manager to the offer, would like to intimate that the time period for making the public announcement of offer, as extended by the Securities and Exchange Commission of Pakistan, will lapse as of June 26, 2020 on the basis of certain regulatory and other approvals for the transaction remain outstanding,” a statement said.

This was not the first time that the state-owned company from China withdrew its offer as the instance emerged every year since Shanghai Electric made the first public announcement of intention to acquire KE in August 2016.

Under the deal, it would buy 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The public announcement was first withdrawn in June 2017 as the time line granted by Securities and Exchange Commission of Pakistan had lapsed and certain regulatory approvals and tariff determination remained outstanding.

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.

The offer’s manager said the Chinese company is still interested to buy the power utility serving more than 2.5 million customers across Karachi, Dhabeji and Gharo in Sindh, and Uthal, Vinder and Bela in Balochistan.

“As the acquirer continues to be fully committed to consummate the transaction pending receipt of regulatory and other approvals, the acquirer shall make a fresh public announcement of intention in accordance with the prescribed formalities with effect from the expiry date,” Arif Habib Limited added.

“This process of withdrawal and re-issuance is being undertaken to ensure compliance with the law. Accordingly, the transaction will be consummated immediately upon receipt of remaining regulatory and other approvals.”

In the past, there was a disagreement on tariffs. But, the government later agreed to the multiyear tariffs, but the deal needs consents from other authorities.

KE previously unveiled a plan to invest around $3 billion in all core functions in the next four years. The plan envisages generation capacity addition by 3,000MW, which includes 300MW of renewables aimed at diversifying KE’s fuel mix.