China's state-backed Shanghai Electric Power said it is bidding to acquire a stake in 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 on Monday.
K-Electric dismisses acquisition rumours
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 per cent in K-Electric.
Earlier this month, K-Electric said the rumour about Engro Corporation and Shanghai Corporation acquiring a stake in K-Electric is “incorrect and speculative.”
The statement added: “Kindly note that we have not been notified of any transaction that has been entered with any entity regarding acquisition of K-Electric,” said company’s Director Finance Muhammad Rizwan Dalia in a stock notice.
K-Electric says its output has increased
Similarly, Engro Corporation also issued a statement to clarify that it has not made any decision to buy a shareholding in K-Electric.
“(Re) the news item circulating in certain sections of print and electronic media stating that Engro Corporation has shown interest in a bid to purchase K-Electric, the company clarifies that it has neither expressed interest nor participated in any bid to purchase K-Electric,” the statement said.
In an interview with The Express Tribune conducted last month, Engro Corporation President Khalid Siraj Subhani had remained noncommittal. “Engro is not involved in the K-Electric transaction right now,” he had said.
Govt should take over K-Electric: Khursheed Shah
However, he had hastened to add that it “makes sense” for Engro Corp to acquire distribution companies. “It is not out of our domain. Whether we acquire a distribution company or not, only time will tell,” he noted.
During the earlier part of the day, word had it that Shanghai Corporation would buy 51% while Engro Corporation would acquire a 15% stake in the electricity distribution company.
According to a note issued by Arif Habib Limited, the government had privatised K-Electric with 73% transfer of ownership to a consortium comprising of Al Jomaih Group of Saudi Arabia and National Industries of Kuwait back in November 2005. A further change of ownership in the entity occurred in September 2008 when Abraaj Capital acquired a majority stake (69%) alongside complete management control.
The principal activities of K-Electric include generation, transmission and distribution of electricity, it said. “It has a consumer base of approximately 2.5 million customers comprising residential (47.4%), commercial (7.9%), industrial (32.3%) and public sector (12.4%),” it added.
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