All clearances for K-Electric sale received: privatisation minister

Power Division secretary contradicts statement, says his dept has yet to give its go-ahead

ISLAMABAD: All concerned government departments have given their clearance for the sale of Abraaj Group’s 66.4% stake in K-Electric to Shanghai Electric Power, and the deal would conclude “very soon”, said Daniyal Aziz, Minister for Privatisation on Friday.

However, his statement was negated by Secretary Power Division Yousaf Naseem Khokhar who said that his department has not given any clearance for the acquisition of a majority stake by Shanghai Electric and the process was still going on.

Khokhar said that the “issue was still far from over and the matter will go before an inter-ministerial committee for approval. The Power Division still seeks resolution of outstanding dues.”



The National Electric Power Regulatory Authority (Nepra), Competition Commission of Pakistan (CCP), Securities and Exchange Commission of Pakistan (SECP), Ministry of Defense, Ministry of Interior and National Transmission and Dispatch Company (NTDC) have given the no-objection certificates, said Aziz while talking to The Express Tribune.

He said that the Privatisation Commission was taking utmost care and it would very soon give the National Security Clearance Certificate after completing all remaining procedural formalities.

Aziz gave the statement after a delegation comprising Shanghai Electric Power Company, Abraaj Group and K-Electric met with the prime minister and privatisation minister separately. Aziz said that Shanghai Electric was best placed to address electricity woes in Karachi.

In August last year, Abraaj Group struck a deal to sell KES Power - the offshore entity that controls 66.4% of total K-Electric shares - to China-based Shanghai Power. At that time, the deal was estimated at $1.77 billion and was contingent upon settlement of issues between the government and the seller.

However, due to low determination of multi-year tariff by Nepra, the size of the deal is expected to be lower than $1.77 billion, said the sources. Nepra revised the base tariff upwards to Rs12.77 per unit from Rs12.07 effective July 2016, which would remain in place till 2023. K-Electric had sought an increase to Rs15.57 per unit for sustainability of its operation.

Minister for Power Awais Ahmad Leghari is said to be in favour of an upward revision in K-Electric tariff but bureaucrats oppose any such favour.

The Ministry of Defence has already given the security clearance certificate subject to the condition that the new buyer of K-Electric -the country’s largest integrated power utility company - would ensure power supplies to vital defence installations at all times.

Aziz said that the NTDC has given this assurance to provide uninterrupted power supplies to all the vital installations. The minister said that Shanghai Electric has a plan to invest $9 billion and in the first two years the company would make an investment of $2 billion.

Shanghai Electric is considered among the top companies in terms of customers’ service delivery and has the solution to all the power-related problems of the country’s largest metropolitan city, said the minister while supporting the deal.

He said that the Chinese company’s systems were very advanced and in case of any emergent situation it has backup systems for power generation, transmission and distribution. Shanghai Electric informed the Privatisation Commission that it has the best customer complaints resolution mechanisms, said Aziz.

Since Abraaj and Shanghai Power could not timely conclude the deal by March this year, they had to seek fresh regulatory approvals. After the expiry of the original deadline, Shanghai Electric made a public announcement on June 29 of its intention to acquire K-Electric. The SECP has now set December 26 as the deadline for concluding the deal.

Sui Southern Gas Company (SSGC) and National Transmission and Despatch Company (NTDC) have made claims worth around $1.24 billion on account of cost of electricity, gas and late payment surcharges. Abraaj Group does not want to pay the interest and is seeking settlement of payment of principal amount

The Ministry of Power is again emphasising the resolution of outstanding dues as prerequisite to conclude the deal. The ministry’s continuous position is that outstanding dues have to be settled by the seller before the deal is finalised.



Yundan Wang, Chairman of Shanghai Electric, discussed matters concerning the transition of K-Electric to the new prospective company, specifically the processing of NOCs for the transaction, according to an official announcement of the Privatisation Commission.

It added that the Shanghai Electric delegation briefed the minister about their investment plan to revitalize K-Electric. Yundan indicated their plan to invest $9 billion in K-Electric by 2030 to upgrade the transmission and generation capacity. He hoped that their plan would change the prospects and perspectives of KES as a service provider in the power sector.

Yundan briefed the minister about his plans to stop leakages but emphasised that socio-economic development of the target areas can play a major role in changing attitudes and in improving governance as well as recoveries. He also shared that K-Electric will also continue to extend electricity to designated hospitals as their social responsibility.

Published in The Express Tribune, November 25^th, 2017.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.