KESC’s major shareholder looks to end operations in Pakistan | Pakistan Today

KESC’s major shareholder looks to end operations in Pakistan

The incoming premier Nawaz Sharif is likely to face a shock when Abraaj Capital, a Dubai based power giant having 72.5 percent shares in the Karachi Electric Supply Company (KESC), winds up its operations in Pakistan.
An amendment had been made in the KESC agreement 2005, during the tenure of Pakistan People’s Party (PPP) government in April 2009 according to which the government would bear all losses and liabilities of the power company if it ended operations from the country. If KESC ends operations from the country then Pakistan Muslim League-Nawaz (PML-N) government would bear losses and liabilities of the company which are approximately Rs 280 billion.
KESC is in a fix after the Senate Standing Committee on Water and Power decided to cut electricity supply by half from National Transmission and Ditribution Company (NTDC). Besides, lender companies have started demanding their outstanding dues since they fear that Abraaj Capital will leave the country anytime soon. KESC, which was privatized with zero liabilities by the government in 2005, is now defaulting over Rs 280 billion to various government and non-government organisations.
KESC owes Rs 54 billion to NTDC, Rs 48 billion to Sui Southren Gas Company (SSGC), Rs 32 billion to International Finance Company, Rs 26 billion to Asian Development Bank (ADB), Rs 8 billion to banking consortium, Rs 4 billion to Pakistan Telecommunication Authority (PTA) and Rs 6 billion to Federal Board of Revenue (FBR). The company also owes billions of rupees to other public and private firms. Per details, KESC was privatized in 2005 by the then government and an agreement was signed by the Planning Commission (PC) on behalf of the government with Aljomaih Holding Co KSA. Later, Aljomaih Holding Co KSA sold KESC to Al-Abraaj Group in 2007-08.
Under the 2005 agreement, concession holders were reported to establish an irrecoverable revolving letter of credit to National Bank of Pakistan for $ 500 million as a guarantee to replace and upgrade distribution network and establish new power plants for the Karachi-based utility within the first two to seven years and the government was not supposed to exempt any future dues by WAPDA.
A seven year freeze on any increase of tariff (except for escalation/de-escalation due to fuel) was also agreed in the agreement by Aljomaih Holding Co KSA. In April 2009, Ministry of Water and Power, which is not a signatory to the agreement, signed an amended agreement with the KESC and a new article was inserted that said the “Government of Pakistan (GoP) in case of a take-over of the company, would pay all the liabilities (past and future) of KESC.” The amended agreement stood suspicious because the ministry acted on behalf of the government despite the fact that the amendment, if needed, should have been made by the Planning Commission, which is the original party to the agreement.
In another new article of the agreement, all payments of electricity supplied to the company by NTDC would be made by the government as the company shall have no obligation to make payment of amounts claimed by NTDC. As support assistance to the company, the new Article 10.2 meant that the government shall use its good offices to support and assist the company for insurance of such orders, certificates and documents which are not inconsistent with the laws of Pakistan.
The most interesting support the company sought, which was agreed by the government under this article, was KESC obtaining conclusive land title documents accurately showing the company’s right, title and interest in property owned by the company and obtaining easements, rights of way and rights of access to and through immovable property. “The government at the time of privatization agreed to supply 650 MW electricity from NTDC to KESC for up to seven years at the cheapest rates with the condition that it improves its electricity generation system. But seven years have gone by and the power company has not enhanced its power generation capacity,” KESC Shareholders Association General Secretary Chaudhry Mazhar Ali said, talking to Pakistan Today.
“The power utility a lame excuse to wind up its operation from the country after the Senate Standing Committee on Water and Power decided to cut power supply to the utility by half,” he added. “Since the power company has no justification to negotiate with the government to continue electric supply from NTDC, Abraaj Capital would leave the country after making huge profits,” he predicted.
“The power utility has started blackmailing by shutting six dual-fuel units at Bin Qasim in order to continue to get 700 MW of free electricity from the NTDC and to create a political stunt in case of non-supply from NTDC,” he added. “Intentional excessive load shedding is a criminal act adopted by the power utility to avoid payment of billions of rupees to various organisations,” he alleged. “Abraaj Capital is not going anywhere,” KESC Spokesman Ahmed Faraz told Pakistan Today. “NTDC can not cut or suspend supply of electricity as the distribution company has to supply agreed quantity of power to KESC per amended agreement of 2009,” he justified. Leveling the argument of blackmailing tactics of KESC and closure of six dual fuel units of Bin Qasim, he said all the power generation units of Bin Qasim are working and there is no truth in these allegations.



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