KARACHI: Chinese power giant Shanghai Electric Power (SEP) has renewed its offer for the purchase of majority shares of Pakistani utility Karachi Electric (KE), after the previous offer expired on Sunday, KE said on Monday.
Shanghai Electric has been in talks to acquire a stake in KE since 2016, delayed due to regulatory approvals and liquidity constraints as a consequence of mounting circular debt plaguing the country’s power sector. The government of Pakistan owns a 24.4 percent stake in K-Electric, which powers the country’s largest city and commercial hub of Karachi.
In June, Shanghai Electric reiterated its commitment to the deal, which was worth approximately $1.77 billion in 2016 but may change.
On Monday the KE informed its shareholders through a stock filing at the Pakistan Stock Exchange (PSX) that SEP had renewed its intention to acquire the company.
“K-Electric Limited (“KE” or “the Target Company) had received an intimation for public announcement of intention from Messrs. Arif Habib Limited (the “Manager to the Offer“) on behalf of Messrs. Shanghai Electric Power Company Limited (the “Acquirer“), valid for 180 days, for acquisition of 18,335,542,678 ordinary shares of KE, constituting 66.40 percent of total issued and paid-up capital of the Target Company, that was published on 25 July 2023, and which was due to expire on 21 January 2024,” KE said in the stock filing.
Arif Habib Limited (AHL), the manager of the offer, said parties under the transaction had taken all reasonable steps toward obtaining the regulatory approvals as required under the applicable laws of China, as well as from domestic regulatory bodies as required under the Pakistani legal framework.
Some of the approvals were, however, yet to be issued and as such the parties under this transaction could not complete the transaction before receipt thereof, AHL said in the stock filing.
The new offer will remain valid April 20, 2024 and comes days after the utility company was granted distribution and supplier licenses for a period of 20 years. The previous license expired in July 2023.
In December 2023, the government of Pakistan decided to release Rs57 billion ($202 million) to K-Electric to help resolve the company’s cash flow situation and pave the way for its long-delayed sale to Shanghai Electric.
In 2005 a consortium comprising Abraaj Group and Saudi Al-Jomaih group and the National Industries Group (NIG) of Kuwait had bought a 66.4 percent stake in K-Electric through a privatization process.
In 2016, the consortium decided to sell the stake to China’s Shanghai Electric Power and submitted an application for a National Security Certificate (NSC) to the Privatization Commission.
However, the group still awaits approval of the deal due to long-standing issues of the company’s payables and receivables with various government entities.
The process was expedited after visits to Pakistan in the last few years by Abdulaziz Hamad Al-Jomaih, MD Investments at Al-Jomaih Holdings, one of the largest business groups in Saudi Arabia and a major investor in KE, who has met with Pakistani top government including former Prime Ministers Imran Khan and Shehbaz Sharif to get the issue resolved.
