IGCF breaks silence on KE stake

Says Sage Venture Group Ltd acquired controlling stake in IGCF, not in K-Electric

ISLAMABAD:

The Infrastructure Growth and Capital Fund (IGCF), one of K-Electric (KE)’s shareholders with a non-controlling stake, broke silence on the matter of KEs’ shares acquisition. It has stated that Sage Venture Group Limited, a British Virgin Island company, has acquired controlling stake in IGCF and not in KE. The letter was subsequently disclosed by KE to the Pakistan Stock Exchange (PSX) on Thursday.

IGCF is one of the investors in KES Power, the consortium that holds majority shareholding in KE, informed KE via a letter, stating that “the fund is a Cayman Island registered private investment fund with numerous institutional investors managed by the IGCF GP and holds multiple assets, including an indirect, non-controlling shareholding in K-Electric.”

The letter also confirms that these developments took place between the owners (IGCF LP) and managers (IGCF General Partner Limited (IGCF GP)) of the fund, and also reveals the name of the acquiring party as Sage Venture Group Limited, a British Virgin Islands registered special purpose company wholly owned by AsiaPak Investments Limited.

To note, AsiaPak Investments Limited is reportedly a Hong Kong based private equity firm with investment in Pakistani infrastructure, industries, transportation, logistics, energy and the financial sector.

KE officials continued to decline to comment on the matter. However, anonymous sources have shared that the rumours first surfaced after an internal email was circulated to staff last week. The text reads as follows: “Reference to a recent news item, we would like to clarify that KES Power is not selling any of its shares in KE and there is no change in the shareholding or management of KE nor in the day-to-day operations and responsibilities of KE.”

A majority of KE shares (66.4%) are listed on the PSX and are owned by KES Power, a consortium of investors including IGCF. The other principal shareholders, Aljomaih Power Limited of Saudi Arabia and National Industries Group (Holding) of Kuwait, continue to maintain their stake in KES Power. The shareholding of KES Power in KE is expected to remain unchanged, as per KE sources.

According to sources, these transactions, although of an indirect nature, are likely to result in nominations of certain directors on the KE Board of Directors. Based on available sources and information on the KE website, KE’s Board of Directors has 13 representatives including three nominations from the government of Pakistan which holds 24.36% shares through the office of the president of Pakistan. The government-nominated directors on the KE Board provision are for direct visibility to the Ministry of Energy and Ministry of Power, thus helping to maintain a check and balance system, and are also expected to ensure that the rights of consumers are safeguarded.

It is expected that the IGCF stake is comparable to the stake held by the government of Pakistan, which equates to about three to four nominations on the board. Based on the new structure of IGCF, the board positions will likely be shared between the current asset owners of IGCF LP and IGCF GP.

At the time of filing this story, two directors on the KE board have resigned which corresponds to this assessment. With the Sage Venture acquisition, it is likely that Daewoo Chairman, Shehryar Chishti who is reported to be spearheading the transfer of IGCF shares, may have a presence on the board either directly or through a nominee.

While the rumours have fallen flat after the disclosure by IGCF, industry experts wondered why there was such a large gap between the market buzz around the rumour and the reality. Some experts now suggest that the change had been “massively over-hyped” given the knowledge that the shares being acquired previously belonged to Abraj Investments Limited (AIML), a private equity firm much like AsiaPak.

Sources now suggest that upon liquidation of the private equity firm, the liquidators were managing these shares. Analysing the situation, one industry expert stated that “Chishti appears to be using the same route (as Arif Naqvi), but it remains to be seen if he wields the same clout”.

Published in The Express Tribune, October 21^st, 2022.

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