Govt to clear way for K-Electric’s sale

Company chairman says key approvals awaited for selling utility’s majority stake

ISLAMABAD:

Finance Minister Shaukat Tarin on Monday reassured K-Electric’s investors of addressing the bottlenecks in the way of sale of the power utility’s majority shares to Shanghai Electric Power.

A delegation comprising K-Electric’s board of directors representing Saudi Arabia’s Aljomaih Investments and other Middle Eastern firms met the finance minister.

According to sources, the delegation gave a briefing on the company’s contribution to Pakistan. Since its privatisation, K-Electric has invested Rs400 billion in the country.

K-Electric Chairman Shan Ashary stated that the sale of majority stake of the company had been stalled by the delay in government approvals.

These include settlement of K-Electric’s payables and receivables, for which the company has agreed to initiate an arbitration process.

K-Electric’s legal teams have been engaged in negotiations on an arbitration agreement with officials in the Privatisation Commission, Sui Southern Gas Company and the government of Pakistan.

However, final approvals are awaited before proceeding to address the actual systemic issues.

The absence of a governing mechanism coupled with the stalled process threatened to affect the utility’s financial viability as it was increasing borrowing to finance working capital requirements, the delegation highlighted.

Tarin extended the government’s full cooperation to Mark Skelton, who had recently joined K-Electric’s board and represented foreign investors in the company.

The meeting of foreign investors in Islamabad comes one year after Saudi business tycoon and Aljomaih Holdings Managing Director Investments Abdulaziz Hamad Aljomaih visited Pakistan’s capital to seek the resolution of longstanding issues.

Prime Minister Imran Khan had welcomed Aljomaih and assured the company that matters were close to being resolved. Aljomaih officials also met with the president and ministers and secretaries of provincial and federal governments including the ministers of energy and finance, chief minister, Privatisation Commission officials and others last year.

Following the 2021 visit, PM Khan issued directives for the constitution of an inter-ministerial committee, to be led by the Privatisation Commission, and its members would be from the ministries of finance, energy, planning and development as well as other key stakeholders to immediately address the bottlenecks.

One year later, the foreign investors arrived again to seek updates on the matter.

A power purchase agreement (PPA) between K-Electric and the government of Pakistan, which expired in 2015, is also awaiting renewal.

Sources revealed that a new draft of PPA had been finalised several months ago but due to the busy schedule of Cabinet Committee on Energy, it was yet to be presented for approval.

Similarly, issues pertaining to the gas supply agreement (GSA) between SSGC and the power utility also remain unresolved to date.

Investment in Pakistan’s power sector is critical at this juncture, when the electricity market is geared towards increased liberalisation.

The prime minister has returned from an official trip to China – the first since 2019 – where the Board of Investment showcased the investment opportunities in Pakistan’s industries as well as the energy sector and China-Pakistan Economic Corridor (CPEC).

However, the lack of substantial progress on key issues pertaining to K-Electric in spite of the promises made by the government may not only discourage the existing investors, but also affect the country’s reputation as an investment hub.

 

Published in The Express Tribune, February 8^th, 2022.

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