KARACHI: K-Electric (KE), currently on the crossroads of a change in management to China’s Shanghai Electric Power, has announced to invest $1 billion as it looks to meet the city’s burgeoning power needs by next summer.
The statement, in which Waqar Siddique, chairman K-Electric and managing partner at The Abraaj Group was quoted, added that Shanghai Electric Power (SEP), as a potential incoming investor, has also expressed complete confidence in the project and fully endorses the vision for Karachi’s transformation.
The Karachi-based integrated power company, KE, unveiled a plan on Monday to develop a 900-megawatt LNG-based power plant at its Bin Qasim site at an estimated cost of $1 billion, a project that includes simultaneous upgrade to associated transmission infrastructure. The plant is expected to start commercial production by “summer 2018”.
The addition of power from the project would turn Karachi into a surplus power city from a deficit of around 400-500MW at present.
The Dubai-based Abraaj Group had earlier locked a deal to sell its majority stake (66.4%) in KE to Shanghai Electric at a price of $1.77 billion late last year. Execution of the business deal, however, hit a roadblock after the Chinese acquirer was apparently put off by a significant cut in consumer tariff (MYT or multi-year tariff) by the power regulator (Nepra).
The reduction in the tariff is a negative for management, neutral for consumers, and positive for the government, it was learnt. According to a Shanghai Electric Power notification of June 22, 2017 to the Shanghai Stock Exchange, it expressed confidence in obtaining a new multi-year tariff that meets its expectations. The company, however, has also not ruled out a termination of the transaction as well.
In another notification to the Pakistan Stock Exchange, Shanghai Electric recently reaffirmed its commitment to go ahead with its original plan of acquiring majority stake in KE. Earlier, the Chinese strategic investor shared a multi-billion dollar ($9 billion) investment plan for KE with the government.
On Monday, KE Chairman Siddique said the 900 MW project marks the beginning of a multi-billion dollar investment plan which is set to accelerate Karachi’s economic potential. “Shanghai Electric Power (SEP), as a potential incoming investor, have also expressed complete confidence in this project and fully endorses K-Electric’s vision for Karachi’s transformation,” he said.
SEP Chairman Wang Yundan said, “while the transaction is yet to be completed, we are actively following K-Electric’s plans which have been comprehensively outlined in their Multi Year Tariff review petition. This is indeed an exciting milestone and we fully endorse their vision for Karachi. SEP looks forward to leveraging its strengths as a strategic investor to further realize K-Electric’s potential in providing better services to the people of Karachi.”
K-Electric CEO Tayyab Tareen said in the statement “we aim to commission the project in the fastest possible time and are confident that with the right facilitation from all quarters, power from the plant may be added to our supply as soon as summer of 2018.”
The $1 billion investment is in addition to over $1.4 billion injected into the integrated power company since 2009 by K-Electric.
“Amongst other initiatives, the company added 1,057 MW of generation, reduced transformer trips by 58% and reduced line losses from 36% to 22%,” the statement said.
Published in The Express Tribune, July 11th, 2017.