The management of Karachi Electric (KE) is reportedly engaging several influentials to get the same incentives for new buyers, ie, Shanghai Electric of China, as those available to Abraaj Group which currently owns 66 per cent stakes in the company, well-informed sources told Business Recorder.
Chinese government-owned Shanghai Electric Power Co has qualified as the final bidder for the controlling stake worth an estimated $1.6 billion. The company intends to acquire up to 18.335 billion ordinary shares, 66 percent of the total number of issued shares of K-Electric from KES Power.
Ministry of Water and Power, sources said, is planning to convene a high-level meeting this week to discuss issues associated with the resale of KE.
The sources said, KE management has submitted documents of the new deal with the Security and Exchange Commission of Pakistan (SECP) but was showing a reluctance to share it with the Ministry of Water and Power.
The government holds 24.4 percent in the power utility and a Joint Secretary level officer of Water and Power Ministry represents the federal government on the Board.
KE’s representatives are routinely engaging with Finance Minister Senator Ishaq Dar to get the maximum possible incentives at the time of the company is handed over to the new prospective buyers.
KE has to pay Rs 68 billion of Sui Southern Gas Company Limited (SSGCL) and Rs 48 billion of National Transmission and Despatch Company besides Rs 5 billion Late Payment Surcharge (LPS) totalling Rs 121 billion.
According to sources, KE management maintains that new buyers should be extended the same incentives that are available to incumbent owners, which is not acceptable to Water and Power Ministry. In 2008, Abraaj bought a controlling stake in KES Power, the majority shareholder in K-Electric against $361 million.
“Federal government will not allow resale of KE to a new the company until outstanding amount is cleared,” the sources said, adding that new buyers will have to sign new Power Purchase Agreement (PPA) with CPPA and Gas Purchase Agreement (GPA) with SSGC.
The sources said, Punjab government was recently up in arms against National Electric Power Regulatory Authority (Nepra) in fulfilling its regulatory role to provide relief to the consumers.
The allowance of low efficiency to K-Electric which has higher efficiency plants has resulted in windfall profits for the company and higher tariffs for the consumers
The Punjab government further argued that K-Electric was drawing 650 MW from the national grid. CCI decided in 2012 to withdraw 350 MW. The decision was challenged in Sindh High Court and stayed. The agreement between NTDC and K-Electric has since expired.
The brawl however continues. Four companies, ie, Shanghai Electric Power, Chinese Golden Concord Holdings Ltd and French Engie SA had expressed their interest to acquire shareholdings in the $2.4 billion Karachi-based power utility from the Dubai-based venture capital Abraaj Group.
Nepra, in its performance evaluation report of KE 2014-15, claimed that outage hours were more in 2014-15 as compared to 2013-14. According to Nepra, although K-Electric has shown an improvement as compared to the preceding year yet in comparison to NTDC with a much more larger network, K-Electric has greater duration of interruption per point.