Shanghai Electric close to buying Pakistan’s K-Electric in $1.6 -bn deal

Shanghai Electric, a Chinese multinational power generation and electrical equipment manufacturing company is close to finalising a deal to buy Pakistan's K-Electric Limited in a $1.6-billion deal - the biggest acquisition of a private-sector company in Pakistan's history.

"We have received the public announcement of intention for acquisition of up to 66.4 per cent of the shares of K-Electric Limited by Shanghai Electric Limited," K-Electric said in a filing with the Stock Exchange.

K-Electric, formerly known as Karachi Electric Supply Company Limited, is currently the only vertically-integrated power utility in Pakistan that manages the generation, transmission and distribution of electricity to the city having over 20 million people.

The company covers a vast area of over 6,500 kms and supplies electricity to all the industrial, commercial, agricultural and residential areas that come under its network, comprising over 2.2 million customers in Karachi and in the nearby towns of Dhabeji and Gharo in Sindh and Hub, Uthal, Vindar and Bela in Balochistan.

Founded a hundred years ago, K-Electric is one of the oldest companies operational in Karachi. It was set up under the Indian Companies Act of 1882 as the Karachi Electric Supply Corp, which was nationalised by the Pakistan government in 1952, and acquired in 2005 by Saudi Arabia's Aljomaih Group, who in turn sold a 72.58-per cent stake to Dubai-based private equity firm Abraaj Capital in 2009.

Pakistan struggles to provide power to its 190 million people and industries and demand for power in Karachi touched a record high of more than 3,100 megawatts against a regular supply of about 2,700 megawatts.

In late June K-Electric came under fire from politicians, regulators and even the Taliban after a heatwave killed thousands in Karachi when temperatures touched 47 degrees

Apart from the government blaming K-Electric for not being able to supply uninterrupted power, the Tehreek-e-Taliban Pakistan threatened ''action'' if the company did not improve the power situation.

In Karachi, not only electricity theft and bill evasion occurs at quite high rates, but many rich and influential families refuse to pay their bills, and even the federal and provincial governments owe K-Electric $1.1 billion.