Shanghal Electric’s withdrawal of its application to buy 66 percent of the shares of K-Electric moves the twisted saga of the first privatisation of a Pakistani electricity company closer to completion. K-Electric is also distinct among distribution companies in having generation resources of its own, though it does require support from the national grid. K-Electric was first sold to the Abraj Group, headed by Mohsin Naqvi. Naqvi went bust amid allegations of fraud, and the government asked the Chinese government for help. It did so by having Shanghai Electric take over Abraaj’s share. However, it did not pay for it. That allowed Pak-Asia Group, headed by Shaheryar Chishti, and which owns, among other things, Daewoo Express and Thar Coal Block 1, to buy Abraaj’s share, owned by a Cayman Islands holding company, through another Cayman Islands Holding Company. However, Chishti has not been able to take management control, because the minority shareholders, the Jumeirah Group, and the government have combined to prevent elections to a new board of directors. The Shanghai Electric’s withdrawal of its application for the performance of the contract has now been withdrawn, and is no longer the Sword of Damocles being held over Mr Chishti’s head.
The giving to Chishti of management control of K-Electric would help improve corporate governance there. K-Electric has been beset by scandal since CEO Moonis Alvi was accused of sexual harassment in July, and though the BoD later reappointed him, problems remain which can only be settled by a clear owner. At the same time, though there have been fewer deaths than before, the monsoon has brought deaths by electrocution among the eight recorded so far in the city. K-Electric remains a vital part of the infrastructure of the city, which is falling apart. The exit of a Chinese firm from Pakistan unfortunately almost coincided with the recent B2B conference in China and the launch of CPEC 2.0. And though Mr Chishti has a stake in CPEC 1, through Thar Coal, the exit will have to absorbed by Chinese firms. With three DISCOs to go on the block by the end of the year, this development will impinge on prospective investors’ minds. The reasons given by Shanghai Electric, the failure of the Pakistani authorities to close on the deal, and the regulatory hurdles it faced, may influence investors and buyers alike.
