K-Electric, Pakistan government resolve dispute, pave way for sale to Chinese giant

KARACHI: In a breakthrough, the Pakistani government and K-Electric (KE) have agreed to resolve a long-standing payment dispute, paving the way for the sale of KE to Shanghai Electric Power (SEP), officials confirmed on Sunday.
In 2005, Dubai-based, now collapsed, private equity firm Abraaj Group, Saudi business group Aljomaih Holdings, and National Industries Group (NIG) of Kuwait bought a 66.4 percent stake in KE, formerly known as Karachi Electric Supply Company (KESC).
In 2016, the consortium decided to sell its KE stake to SEP but due to outstanding payment issues with the government of Pakistan, which holds 24.36 percent KE shares, the transaction had not been concluded.
In March this year, Abdulaziz Hamad Al-Jomaih, managing director investments at Aljomaih Holdings, was in Pakistan to expedite the removal of impediments to conclude the SEP deal. He met with Prime Minister Imran Khan, President Arif Alvi and other key officials, and said he was assured that the government would extend support in expediting the process of approvals so that held up tariff differential claims to the tune of around Rs275 billion, are released at the earliest.
On Sunday, KE representatives met with an inter-ministerial committee to resolve the outstanding issues.
“I am glad to report that the Federal Govt & KE have today agreed upon principles to resolve most of their long-standing disputes regarding additional supply, payment procedures & subsidy disbursements,” Energy Minister Hammad Azhar said in a Twitter post on Sunday.
“We will be swiftly moving toward signing a new PPA (Power Purchase Agreement),” he added.
KE confirmed that both sides had agreed to resolve the issues within the “next few days.”
“Government of Pakistan representatives reaffirmed their commitment to the people of Karachi and indicated that the PPA will be signed shortly,” KE said in a written response to questions by Arab News. “Terms of Reference (ToR) document for arbitration of the long standing dispute on payments will also be finalized in next few days.”
While the power utility says the release of pending payments would enable it to continue investing in Karachi’s power infrastructure and sign new investment agreements, analysts say resolution of the issue is critical to solving the city’s power problems.
“I think it is heading toward resolution,” Samiullah Tariq, head of research at Pakistan Kuwait Investment, told Arab News.
“It was a major issue and without its resolution, Karachi’s power problem couldn’t have been solved.”

K-Electric, Pakistan government resolve dispute, pave way for sale to Chinese giant