KARACHI, May 18: The off-shore owners of the privatised Karachi Electric Supply Company are secretly negotiating a deal with a Dubai-based investor for offering right shares equivalent to 50 per cent of their holding in the utility, sources said.

The Aljomaih group of Saudi Arabia, the main partner of consortium, had purchased 73 per cent or 9.611 billion shares at Rs1.65 per share for a total of Rs15.86 billion. Despite restrictions of not offloading shares before three years, Aljomaih secretly sold 25 per cent of shares at Rs4.50 per share to Mr. Naser Al-Marri of Kuwait and has appointed him as vice-chairman. Thus the Saudi investor has siphoned back Rs10.81 billion, whereas approximately Rs22 billion were outstanding at the time of privatisation to be recovered by the new owners.

According to the new deal the Dubai-based investor, whose identity was not yet clear, would get 50 per cent of the holdings of both of them and has promised to make investment of about $400 million in the problem-ridden utility.

Out of these $400 million, $200 million would be sliced out for settling dues of Pepco, while the rest would be for improvement of the company. The new investor would not be bringing investment in generation and transmission sector of the utility, said the sources.

The prospective investor, who is said to be connected with stock market, will also have his directors, and possibly his men in the top management of the utility.

According to sources the financial adviser of the utility, chief financial officer Muhammad Asghar, has already resigned in anticipation of the changes.

There were also reports that the new owners were also manipulating to sell the prized KESC property on Elander Road to grab more money. According to sources the KESC could build its own head office on this plot and in the long run could save millions on rental it was paying for its offices to the State Life.

Before privatisation, the government had resorted to reduction of face value of share from Rs10 to Rs3.50, thereby reducing the total paid-up capital of 13.167 billion shares from Rs131.67 billion to Rs46.08 billion only and waiver of Rs92 billion debts.

PricewaterhouseCoopers, which was appointed as financial adviser for this transaction, made the incorrect valuation of utility’s assets and the reserve price was fixed as Rs1.32 per share only, said the KESC insiders.

The Aljomaih-led management has totally failed to implement its mission statement “to generate, transmit and distribute electricity, for the progress and prosperity of the people of metropolis; to excel customer expectations with reliable, stable and affordable electric power; and to improve the safety and quality of workplace for its employees”.

These statements have been proved as comic story as the consumers have suffered worst period since inception of the KESC and all stakeholders, including employees have seen most awful period.

After the disastrous experience with Siemens as operations and management contractors; a new contract was placed on ABB for setting up 220MW power station at KTPS. The funds ($500 million) have been arranged by Aljomaih through a loan from the International Finance Corporation (IFC) under sovereign guarantee of Government of Pakistan and by pledging KESC’s assets and property, which also negates the claims that the company had been privatised for the purpose of investment by the rich owners.

According to sources in the KESC, the organisational structure was “totally damaged, first by Siemens as operation and management contractor and after their departure, by the present management headed by CEO, a retired general”.

Last year in June when it was reported that the Asian Development Bank was extending a loan of $150 million to the KESC to improve its power generation and capacity and transmission network, it was suggested that the credit would go towards the corporation’s $809 million (Rs52 billion) capital investment programme. The balance of funding would come from the shareholders, the IFC and the local commercial banks.

But the power supply situation, the unending breakdown of generating units and transmission and distribution system, exposed the hollow claims of the new KESC management.