Shanghai Power committed to buying K-Electric

Dilawar Hussain Published March 27, 2018

General view of the K-Electric’s Bin Qasim Power Plant.—Reuters

KARACHI: The Shanghai Electric Power Ltd (SEPL) has sought the government’s support in accelerating the process of regulatory approvals to facilitate the completion of Sale-Purchase Agreement (SPA) of majority shares in K-Electric Ltd (KEL).

A delegation of SEPL led by Wang Yundan, the company chairman, called on the Prime Minister Shahid Khaqan Abbasi in Islamabad on Monday and apprised him of the current status of acquisition process of majority stake in KEL.

The premier assured the delegation that the government remains committed to supporting SEPL with a view to further liberalising the power generation and distribution sector. “To this extent, the government is committed to enabling the process [of KEL sale] to move forward subject to completion of all regulatory frameworks,” Abbasi told the delegation.

Meanwhile, KEL and Arif Habib Ltd (AHL), which is manager to the offer, informed the Pakistan Stock Exchange (PSX) that Shanghai Electric will be renewing its interest in purchasing controlling stake in KEL since the last public announcement of its intention (PoI) has run into its time limit.

The deal is valued at $1.77 billion. The time period for making the PoI of purchase of stake in KEL expired on Monday, which led the K-Electric to announce the withdrawal of intention for acquisition (directly or indirectly) of up to 66.40pc of its shares by SEPL.

The announcements made separately to the PSX by KEL and AHL on Monday were essentially formalities and did not mean to say that either the seller or buyer had walked out of the deal.

“As the acquirer continues to be fully committed to consummate the transaction pending receipt of regulatory and other approvals. The acquirer shall make a fresh public announcement of intention in accordance with the prescribed formalities immediately with effect from the expiry date,” the statement read.

Accordingly, the transaction will be consummated immediately upon receipt of remaining regulatory and other approvals.

The major hurdle to completion of the deal is the Multi-Year Tariff (MYT) for KEL to be decided by National Electric Power Regulatory Authority.

As for approvals, both Ministry of Defence and Ministry of Interior have given the no-objection certificates for the sale of majority shares to the Chinese company, but other approvals remain pending, the sources said.

Published in Dawn, March 27th, 2018

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Mahen

Mar 27, 2018 07:53am

it’s nothing but the start of EAST CHINA COMPANY, really unfortunate to see Public Property goes to Private.

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SMI

Mar 27, 2018 09:21am

Nothing should be sold!!! I appealed to concern that don't allow sale of any national asset or properties to foriegn companies. Give investor tax relief and good share of profit margin but don't sale any land or national asset. Put strict condition for investor that at the end of contract national asset or property should be in good condition and able to generate handsome profit for next 30 years

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Sameer

Mar 27, 2018 10:20am

As unbelievable as it sounds; NEPRA may be the last bastion between politicians exploiting Pakistan and fair tariff for the people! More power to Nepra.

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Zak

Mar 27, 2018 10:22am

Let the deal close quickly. More investments & better service will follow.

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akhan

Mar 27, 2018 10:37am

All i want to say please play safe.

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Chandra

Mar 27, 2018 10:39am

I am no ecocnomic expert, but as a layman it seems gradually Pakistan is handing over major infra and energy controls to China. It is interesting development to watch from outside. Down the line, it will set a good or a bad example for other developing nations to learn from.

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SHAHID SATTAR

Mar 27, 2018 10:49am

The sale must not be complet

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Arshad

Mar 27, 2018 10:56am

Offcourse, KE is an unlimited "Gold Mine" for any potential buyer.......... Sadly, we are selling it to a foreign company again !!!

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SHAHID SATTAR

Mar 27, 2018 11:05am

The sale must not be completed unless the buyers are willing to meet the following demands from the consumers of the K-Electric: 1) The disclosure about all the previous owners of the present sellers; 2) taking back all the cases filed by K-Electric against decisions by Nepra or any other party for providing any sort of relief to the consumers. The unjust treatment of Nepra providing relief every month to the consumers all through the country excluding Karachi to be done away with, and committing to provide such relief to the K-Electric consumers as well. These are the main conditions which must be met to safeguard the interests of the public in Karachi and any deviation from the same should make the handover of the K-Electric to Shanghai Power subject to opposition by the consumers.

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Dr. Salaria, Aamir Ahmad

Mar 27, 2018 11:18am

Unfortunately it's not only the best possible way to salvage K-Electric but also to increase it's chances of becoming a profit-earning Enterprise.

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HellMan

Mar 27, 2018 11:20am

What will happen, if he stops power generation during war time or emergency time ??

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Vijay B..

Mar 27, 2018 11:31am

You have me wondering if selling such strategic assets as KEL, PSX, a number of Dams, and what not to foreign entities and that too to all of them from the same country, literally owned by their government is such a good idea. I guess PIA and the post office and railways might be next? It really gives me the creeps just imagining being under the thumb of some foreign government (China in this case) on all aspects of my life. What are you guys thinking? Or are you guys thinking at all? It took a long time and many sacrifices to win our freedom from the British, to be thus frittered away to the Chinese?Tsk, Tsk.None of this has happened in neighboring India, nor would I think the government there would let it happen.

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Zak

Mar 27, 2018 11:32am

@Chandra : In exchange we get security collaboration, better services, & improved work ethic. It is a good partnership.

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Mar 27, 2018 11:58am

For those who oppose privatization, it has been proven time and again that businesses and the economy do better when in private hands. Government should be there to collect tax and regulate and nothing more.

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khalid

Mar 27, 2018 11:58am

Why we are selling our assets. Are we dumb?

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SMI

Mar 27, 2018 12:11pm

@Vijay B.. I endorsed his comments

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Daniyal

Mar 27, 2018 12:27pm

To Whom it may concerns I urge not to sale the national assets as they are the backbone and way to boost the national income after proper investment and planning.

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Dev

Mar 27, 2018 12:28pm

Chinese taking control bit by bit. Wont be surprised if they already had cronies in the NS govt 3-4 years back.

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Kunal, Gurgaon

Mar 27, 2018 12:39pm

@Zak: Open your eyes before it's too late.

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Fayzee

Mar 27, 2018 12:42pm

@khalid We are selling our assets because we are unable to manage them. Corruption is everywhere.

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Atif

Mar 27, 2018 12:46pm

Shanghai Electric should buy all electricity distribution companies in Pakistan. Maybe they can run it efficiently.

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Hasan

Mar 27, 2018 01:13pm

Ignorance. KEL is already privately owned by Abraaj Capital. It is not a national asset anymore and was sold a long time ago. All the improvements and efficiencies are a result.

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R s

Mar 27, 2018 01:14pm

@Zak have some self confidence also. If they are doing means efficiency will increase. It’s not your fault. This is collective decline of national psyche. Unfortunate but it’s ground reality

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Shabbir

Mar 27, 2018 01:29pm

The shares in K-Electric were already sold to a foreign company back in 2007 through privatisation. This sale is the onward sale of shares by the current majority owner to a Chinese buyer. If GOP permitted sale to a third party in 2007, they cannot prevent onward sale by such shareholder. This would push our country back by decades because certainty of disinvestment is a major comfort which foreign investors derive from their investment in any jurisdiction. On the other hand, K-Electric is not being plucked out of Karachi and moved to China. It will continue to service the consumers of Karachi and will remain an independently regulated entity by NEPRA perhaps in a much better way than any local corrupt government officials would. The concerns of local consumers should be addressed by NEPRA as the regulator.

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Ashwani

Mar 27, 2018 01:33pm

There goes an old saying......Hope for best..prepare for worst

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M.Saeed

Mar 27, 2018 01:57pm

@Mahen it was already sold to a Middle East company.

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RAVEENDRA NATH

Mar 27, 2018 01:59pm

@Zak "Let the deal close quickly. More investments & better service will follow" "@Chandra : In exchange we get security collaboration, better services, & improved work ethic. It is a good partnership" Pakistan's main focus on collaboration with China is 'security', security' and 'security'. Pakistanis can also learn some ethics. Shanghai Power will have only 66.40% shares and the remaining 33.60% will remain in Pakistan. When the company make huge profits, may be through efficient working and increase in tariff, 33.60% profit will be with Pakistan. All-in-all a win-win situation for both the Chinese Company and Pakistanis shareholders. China already has big stake in KSE and many other companies and with more acquisitions, China will need to increase the security collaboration.

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Hwh

Mar 27, 2018 02:50pm

Pakistan has started to sale the country to China.

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Abhi

Mar 27, 2018 03:16pm

@Shabbir. Giving complete control of power generation unit to foreign company and justifying it is mind blowing. In future if company says they need to raise tariffs for all its new efficiency and latest technology how the regulator will stop them. They are privately own company who's sole motive is profit and not there for public service. It could be much easier to 51 and 49 percent partnership so you have control of company (even if it your private company) and they get the profit by running it. Regulators can only do so much. And this is just by experience all the private energy companies in every part of world give better service at premium cost and I don't think Pakistan is in state to own the cost. Hope someone will put some sense in your government and people to to sell key resource to foreign companies. Didn't we learn anything from our history (East India company)

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Danny

Mar 27, 2018 03:31pm

@Zak Are you from China because I noticed that anything China buys you’re very happy with it particularly National assets.Do you know any country sale their national assets will become that country’s slave.You have sold Karachi stock exchange now your power stations next steel industry and airlines,Railway...etc then automatically you will be working for them.

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Balochi

Mar 27, 2018 04:00pm

Wake up early...politicians are selling Pakistani assets and transferring money out of Pakistan. Only losing Pakistani peoples.

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Shah

Mar 27, 2018 04:24pm

Such a shame. Pakistan had all the right things to become a developed and happy country 1-2 generations ago. Instead we will have to watch the 21st century from the sidelines.

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Anis Motiwala

Mar 27, 2018 06:10pm

I feel very very uneasy about this development. As it is the monopoly for a large city like Karachi was bad enough. I wish the KE could be broken up into 2 or 3 competing distributors.

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Seedoo

Mar 27, 2018 07:07pm

I am all for privatization, but I do have concerns about these state owned enterprises being handed to China without much due process and competitive bidding. I don't have any problem with Chinese investment and welcome it with open arms, but there needs to be proper transparency in such transactions, which includes keeping an eye on monitoring these politician's bank accounts which may swell up as a result of kickbacks from such transactions.

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Shabbir

Mar 27, 2018 08:58pm

@Abhi it is not possible for a genco to increase tariffs at their whim. Its a rigourous process, the tariffs are determined by NEPRA after reviewing all costs etc. You have to understand the local dynamics before you can understand the benefits of privatisation. Unless a company is run as a profit making venture, it won't be long before it meets the fate of pia, Psm. Our government is unable to manage the state functions properly let alone managing a billion dollar venture. The dividends which the gop makes from all successful privatisation in a year are greater than the returns they could have made in 10 years had they not been privatised. No serious investor will invest billions into a venture unless you provide them with control and autonomy. That is what happened when abraaj took over in 2007 and turned a loss making entity into one of the most successful turnarounds in the region. If you want controls make your regulator and laws stronger so there is no impact on the consumers.

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Syed

Mar 28, 2018 12:06am

@Mahen It's better to go in private hands rather than financial burden. Examples are abundant like PSM, PIA, and etc.

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Irfan Akhtar

Mar 30, 2018 09:48pm

@SMI Corrent your knowledge on two accounts: K Electric is not a national asset. Majority share is with a private company that wants to sell its stakes. Secondly, governments are not supposed to run businesses.

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