KARACHI, 15 June 2005 — The Privatization Commission of Pakistan is contemplating offering 73 percent stake to the second highest — and the only other — bidder for the Karachi Electric Supply Corporation (KESC) to round off the privatization deal if the Saudi Arabian company Kanooz Al-Watan and the German co-bidder Siemens, which posted a Rs.20.24 billion ($337 million) bid in February, miss the payment deadline.
The Saudi Arabian power company and its co-bidder have until Wednesday (today) to pay the 73 percent stake money they offered for the KESC, failing which the offer will automatically go to the second highest bidder (at Rs.14 billion), Hasan Associates Pvt. Ltd., a consortium led by a Pakistani company.
A Privatization Commission source maintained that Kanooz Al-Watan have been given the deadline of June 15 for making their payment otherwise the second highest bidder, Hasan Associates, would be asked to match their bid.
A top KESC officer confirmed the news and on condition of anonymity said that according to the rules and policy if the Saudi bidders fail to deposit the money by Wednesday (today) it will be given to a Pakistan firm, but still the Privatization Commission will be the final authority to decide the deal.
The Pakistan government has been providing an annual subsidy of Rs.12 billion to the KESC, which has a monopoly in Pakistan’s largest city being the sole state-run power utility company. The KESC has been known to make huge financial and technical losses for many years, mainly due to a high rate of electricity theft, even after being taken control of by the army. Even new policies by the largely military management and increased tariff could not be able to muzzle corruption and mismanagement in the KESC.
Karachi’s perpetually deteriorating law and order situation is one big issue which may have upset the Saudi bidders. Overstaffing could be another. Lately, the KESC workers have been raising a great hue and cry over the government’s bid to privatize the company, to the extent of resorting to threats, violent protests and even hunger strikes and fast unto death.
Privatization has been the latest crisis to disturb the Pakistan government which has been forced to send troops to take over the country’s largest telecommunication, Pakistan Telecommunication Corporation Ltd. (PTCL) after workers disrupted connections and resorted to work stoppage, etc, threatening the government with violent agitation if it went ahead with its plans to sell a part of the company.
Privatization Commission Secretary Tehseen Iqbal, who returned from Saudi Arabia after meeting officials of Kanooz Al-Watan blamed a “few disgruntled elements” for misinforming and misguiding the Saudi group on the law and order situation in the city.
“Now that all these fears and misgivings about the city have not been dispelled, the group may not be coming. Earlier it had also appointed a chief executive — a German who has had a long experience of managing utilities in Europe,” the secretary disclosed.
Kanooz, Iqbal said, had planned to set up a 100-megawatt power plant in the city, besides investing money into the KESC to improve its services. He said that the Saudi group was also interested in the privatization of other utilities and enterprises in Pakistan.
Kanooz Al-Watan offered the highest bid of Rs.20.24 billion for the acquisition of 73 percent shares of KESC in an open auction held on Feb. 4, 2005. The Cabinet Committee on Privatization (CCoP) approved the bid on Feb. 6. But the letter of acceptance (LoA) was issued on Feb. 20, almost two weeks after the CCoP approved the deal. Since then it is now two months that the group has not deposited the bid money. This has led to speculations and rumors in the market as, according to the bid rules, the money offered by the successful bidder has to be deposited within two weeks of the auction. Iqbal said that all the concerns of the group about the management of the KESC had been removed. The group will draw up its own system of services and billing to the satisfaction of consumers. It depends on the group whether it wants to retain the army and rangers for backup support.
