Saudi tycoon in Pakistan to end impasse over KE sale

Published March 16, 2021
A Saudi group that had originally bought the Karachi Electricity Supply Corporation, now called K-Electric, in 2005 has re-entered the scene amid an impasse over the future of the power utility’s business relations with the government. — Photo courtesy K-Electric website/File
A Saudi group that had originally bought the Karachi Electricity Supply Corporation, now called K-Electric, in 2005 has re-entered the scene amid an impasse over the future of the power utility’s business relations with the government. — Photo courtesy K-Electric website/File

ISLAMABAD: A Saudi group that had originally bought the Karachi Electricity Supply Corporation, now called K-Electric, in 2005 has re-entered the scene amid an impasse over the future of the power utility’s business relations with the government following the downfall of Abraaj Capital chief Arif Naqvi.

The owner of the Aljomaih Holding Company of Saudi Arabia, Shaikh Abdulaziz Hamad Aljomaih, spent a hectic day here after his early morning arrival. He held separate meetings with President Arif Alvi, Prime Minister Imran Khan, ministers for finance, energy and privatisation and some other important stakeholders.

Senior officials of almost all the important ministries concerned were part of some of these meetings.

He will spend another busy day in Karachi on Tuesday (today) by having a series of meetings with all the stakeholders before flying back in the evening.

His visit followed a series of engagements between the KE management, some of its other foreign board directors and the government over the settlement of huge past payables and receivables and other matters including KE’s another sale to the Shanghai Electric of China.

The owner of Aljomaih Group meets Alvi, Imran

Informed sources said the high-profile visitor discussed a business programme, challenges faced by the KE and overall investment and business regime in the country.

An official said it appeared the Aljomaih group was asserting itself as the actual owner of the KE after Mr Naqvi’s arrest in London over alleged misappropriation of securities funds.

The Saudi businessman is reported to have explained to the authorities the Aljomaih group’s investment strategies, saying the initial investment in Pakistan was driven by strong brotherly relationship between the people of the two countries and that he was still interested in looking into challenges facing the KE.

He told the authorities that the group was holding large investment funds, which take over loss-making entities, transform them into profitable organisations through restructuring and move.

In an apparent reference to the Shanghai Electric, he said it was now time for the KE to be run by a technical team.

Mr Aljomaih is the managing director-investments of Aljomaih Group and is principally responsible for all international investments on behalf of the group. He is the chairman of Arcapita Investment in Bahrain and holds numerous board positions in various portfolio companies of Aljomaih Group. Previously, he served on the board of directors of Etihad, Etisalat in Saudi Arabia and Dana Gas in the UAE.

Aljomaih Group had invested in K-Electric for the past 15 years since its privatisation in 2005. He also served as the first chairman of the KE’s BoD at that time. He continued to be on the board of the KES Power, the company that holds the majority shares of KE.

Early this year, the Supreme Court had declined a federal government request for facilitating the settlement of almost Rs300 billion worth of financial claims and counter-claims among various public sector entities and KE.

The government requested the apex court to set some guiding principles for settlement or arbitration of huge build up of payables and receivables from the privatised KE. Concise statements of payables and receivables were also presented to the apex court in chambers.

The apex court was told that government officials were reluctant to take initiative for settlement of controversial amounts because of fears of the National Accountability Bureau (NAB).

A number of federal secretaries and chief executives of companies over the past five-six years had declined to be drawn into controversies relating to settlement or write-offs for such huge financial adjustments.

As a result, not only the prospective transfer of KE’s majority shares to the Shanghai Electric had been stalled for years, but also the troubled integrated public utility was not doing enough for improvement of its system in the country’s largest city, affecting the consumers in peak summers.

The issue was also hampering the signing of fresh agreements for power and gas supply to the KE, which could lead to 800-900MW shortage in Karachi in the coming summers.

The core problem is Rs272bn outstanding dues the National Transmission & Despatch Company and Sui Southern Gas Company claim against the KE on account of past electricity and gas supplies. Both companies are reluctant to sign fresh supply agreements with KE unless these dues are cleared.

Of this, the SSGC has a claim of Rs122bn against the KE that it says had developed over the years despite no formal gas supply agreement. Also, the NTDC management wants clearance of its Rs150bn before signing the agreement for additional power supply.

The KE, on the other hand, claims about Rs234bn against the government and its agencies on a gross payable basis and expects about Rs80bn net payments from the public sector provided all payables and receivables are settled on principal payment basis i.e. if both sides give up mark-up and settle for principal dues.

Published in Dawn, March 16th, 2021

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