No matter where one looks in Pakistan China is engaged, and that engagement is increasing month-on-month. The latest area of acquisition by the Chinese is KES power, the conglomerate that has been providing electricity — mostly at a considerable profit — to Karachi for several years. The deal was done in Shanghai a week ago but has only just been announced and KES is to divest itself of K-Electric which is the country’s largest and only vertically integrated power utility/supplier. The deal was made between the Abraaj Group and Shanghai Electric Power (SEP) which is a state owned operation controlled by the Chinese State Power Investment Corporation. It is a deal in line with other power acquisitions by the Chinese around the world — they are to also build the next generation of nuclear power station in the UK under a deal approved by the British government on September 15th 2016.
The Abraaj group has been in the sector since 2009, when it bought the controlling stake of the Karachi utility when it was deep in crisis. Since then it has made a turnaround and the plan was to exit at the five-year point but there were regulatory difficulties as well as problems with finding a buyer. The Chinese have bought into an entity that in March this year turned a net profit of Rs22.8 billion and is in line with their expansion in Pakistan, in particular the western arm of the China Pakistan Economic Corridor that reaches northwards to Tashkurgan and beyond into Central Asia.
There are two government-appointed directors on the company board and one of them has expressed concern over the lack of transparency surrounding the deal, a concern we echo. There has been no board meeting to discuss the deal, and it is unknown whether incentives such as the subsidy on tarrif which will be of considerable interest to consumers industrial and commercial, is going to continue or not. Concerns aside, the deal is now done and the SEC is saying that it will work with Abraaj to ‘transform K-Electric into one of the best companies in Pakistan.’ Whether it is a good deal for the consumer remains to be seen.
Published in The Express Tribune, November 1st , 2016.
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