KARACHI: China’s Shanghai Electric Power Company has expressed a fresh intention to acquire 66.4 percent (18.335 million shares) of the paid-up capital of K-Electric Limited just one day after withdrawing from the previous buyout offer.
“We have received today a copy of the fresh announcement of intention for acquisition (directly or indirectly) of up to 66.40 percent of the voting shares of K-Electric Limited by Shanghai Electric Power Company Limited, subject to receipt of requisite regulatory and other approvals,” K-Electric (KE) said in a notice sent to Pakistan Stock Exchange on Wednesday.
On Tuesday, the Chinese company withdrew an offer to buy the majority stake in KE after the power utility’s key shareholder failed to secure regulatory approvals. In 2016, Shanghai Electric announced its intention to acquire KE’s 18.335 million shares.
Arif Habib Limited, manager to the offer, did not disclose the new value of the planned acquisition, while the market is abuzz with rumors that there might be a revision in the size of transaction compared with the earlier agreement of $1.77 billion as several things would have to be factored in.
KE owes around Rs100 billion to Sui Southern Gas Company and National Transmission and Despatch Company on account of payables for electricity and gas as well as late payment surcharge. Moreover, a no objection certificate from the Federal Board of Revenue is also needed to go ahead with the transaction.
Sources said the implication of changes in capital gains tax, announced in the budget for the fiscal year of 2017/18, are also under consideration as Abraaj Group, KE’s owner, is an equity fund and the power utility’s share price has increased manifold since its acquisition by Abraaj in 2009.
On Wednesday, KE’s share value shed 2.8 percent to close at Rs6.77/share and at this rate the value of 18.335 million shares comes to Rs124 billion ($1.17 billion). Abraaj Group, a Dubai-based private equity, in partnership with Al-Jomaih Group of Saudi Arabia and National Industries Group of Kuwait, holds a total shareholding of 66.4 percent in K-Electric.
The three-firm consortium operates in the name of KES Power, which is the parent company of K-Electric. Since the acquisition is dependent on all the settlements, a KEL’s delegation in February met with the government officials and discussed the status of payables and receivables.
The Privatization Commission, however, could not be convinced to issue the national security clearance certificate before all the outstanding dues are cleared. Sources said KE assured Shanghai Electric that some Rs50 billion of the outstanding Rs98 billion would be waived. “That, however, didn’t happen.”
Karachi is the country’s biggest economic centre. K-Electric is the key power supplier to the city and its adjoining areas and. It is Pakistan’s only vertically-integrated power company engaged in generation, transmission and distribution. Operating five power plants with a total installed capacity of 2,243 megawatts, KE has 69 grid stations and 21,817 sub-stations with 2.5 million customers.