KARACHI: Pakistan’s top economic body approved an arbitration deal between K-Electric (KE) and other power sector companies in the country on Friday to resolve their longstanding payment issues, clearing the way to transfer the ownership of KE to a China's Shanghai Electric Power after a Saudi business tycoon urged the country’s top political leadership to expedite the process during a trip to Pakistan earlier this year.
Abdulaziz Hamad Aljomaih, who leads one of the largest business groups in Saudi Arabia with major holdings in KE, visited the country in March and was assured by government functionaries of a quick resolution of the payment issues to ensure the earliest release of tariff differential claims amounting to Rs275 billion.
An investor-owned utility company, KE’s transaction has been lingering since 2016. Experts believe its completion will pave way for billions of dollars of investment in Karachi’s energy infrastructure.
During the Economic Coordination Committee’s meeting on Friday, which was chaired by the finance minister Shaukat Tarin, the country’s privatization ministry made a detailed presentation regarding the outstanding payables and receivables of KE.
The meeting was told about the principles agreed between the federal government and KE to resolve most of the longstanding issues regarding additional supply and payment procedures.
“The ECC appreciated the efforts made by all concerned and directed to expedite the signing of a new power purchase agreement (PPA) for a smooth payment mechanism and uninterrupted power supply to Karachi,” said a statement issued by the finance ministry.
“The ECC also accorded approval for the settlement of issues out of past transactions through arbitration,” the statement said, adding: “The Federal Minister for Energy informed the Committee that the new PPA would soon be signed with K-Electric.”
The Terms of References between the power sector utilities and KE will be determined by an ECC committee headed by the country’s planning minister, Asad Umar.
The singing of the arbitration agreement will clear the way for the issuance of the required National Security Certificate to transfer KE to China’s Shanghai Electric Power.
In 2005, a consortium comprising Abraaj Group and Aljomaih/National Industries Group (NIG) of Kuwait had bought 66.4 percent stakes in K-Electric through a privatization process.
The Pakistan government still holds 24.36 percent shares in KE.
Later in 2016, the consortium decided to sell 66.4 percent KE stakes to the Chinese power company and submitted an application for the National Security Certificate (NSC) to Pakistan’s privatization commission, though the transaction kept on lingering due to the outstanding payment issues.