LONDON: The sale of a major controlling stake in Karachi-Electric (KE) to KES Power out of Pakistan appears to be in progress – pending approval from the Cayman Islands court.
However, the government of Pakistan is unaware of the deal as the matter is being handled in complete secrecy, according to reliable insiders.
According to documents, the sale of the controlling interest in KE is being spearheaded by Shehryar Chishti, who joined the KE deal a few months ago, recently as Sage Ventures Ltd. through an entity set up in an offshore tax haven, according to documents seen on Television.
Shehryar is the Chairman of Daewoo FastX Buses and Liberty Power. He is known as a voracious asset buyer – a situation that arose in KE after the collapse of the Abraaj Group in 2018.
Although Abraaj Group had in 2016 agreed to sell a controlling stake in KES Power to Shanghai Electric (Shanghai), the sale has been plagued by bureaucratic difficulties even though PML-N supremo Nawaz Sharif, Shahid Every successive government, including Khaqan Abbasi, and PTI Chairman Imran Khan, had publicly supported the deal.
Meanwhile, Shanghai continues to renew its mandatory tender offer on the Pakistan Stock Exchange (PSX) every six months, although insiders say that any deal, if any, will be at a price lower than the original deal negotiated by Shanghai. It will be totally different.
Reliable sources familiar with the Cayman court proceedings have that one of Abraaj’s liquidators — the Cayman-based Deloitte and the appointed administrator of Abraaj’s managed Infrastructure and Growth Capital Fund (IGCF) , i.e. Alvarez. And London-based Marsal (A&M) has agreed to a deal that has been submitted to the Cayman Court for approval under seal.
Sources added that confidential court documents appear to show that the other liquidator, PwC in Cayman, and receivers of a secured creditor, Mashreq Bank in the UAE, which had a charge on Abraaj’s direct ownership of KES Power, He didn’t know either.
Inquiries to some shareholders of KES Power indicated that they were unaware of the details of the deal, implying that the deal was done directly by Sage Ventures with Abraaj Liquidators.
When contacted by a senior KE executive said: “I have no information (about the deal) and cannot comment.”
Senior figures from Shanghai Power and the Ministry of Power told to a query that authorities are not yet aware of any action by Cayman.
Another KE source said the company, if aware of Cayman’s action, would have to report such fact to the PSX.
KE supplies electricity to 22 million customers in Karachi and is the largest player in Pakistan’s energy sector apart from the government itself. It was privatized in 2005 by selling off KES Power, a joint consortium of Al Juma Group (one of the largest family-owned enterprises in Saudi Arabia) and National Industries Group (NIG) – publicly owned in Kuwait. is the largest company.
In 2009, Abraaj Group acquired equal stake and management control in KES Power with the permission of the government. 70% of Abraaj Investments was held by IGCF, which was owned by several international investors and 30% by Abraaj itself.
The privatization of K-Electric was widely considered a success. Between 2005 and 2016, when KES Power agreed to sell it to Shanghai for $1.8 billion, the power supplier was turned around and in 2012 posted its first annual profit in 17 years of more than $400 million in 2016. was
The Government of Pakistan issued a statement at the time welcoming the sale to Shanghai, which was subject to regulatory and government approvals, including the issuance of a National Security Clearance Certificate and a new tariff by Nepra. Six years later, the sale process is nowhere near complete.
At the same time, developments in Abraaj had a profound effect on transactions. Abraaj’s parent and management companies entered voluntary liquidation in the Cayman Court in 2018, appointing separate liquidators for different parts of the same business group. This did not and should not have affected the solvency of its subsidiaries and funds such as IGCF which they managed for external investors, and which remained successful and operational.
KES Power was not a subsidiary of Abraaj although it was managed by the group until 2018. Since then, it has been managed independently and a new KE chairman, Sean Ash’ari, has been appointed.
Ash’ari represented Al-Jumeeh and NIG. Shehryar’s involvement in KE started a few months ago.
According to a reliable KE source, about two months ago, Ashari’s tenure as KE chairman was not renewed and A&M’s Mark Skelton was given the role.
The SECP did not object to the appointment of the latter. Legal sources also point out that any change of ultimate control would require a mandatory tender offer as K is listed, but inquiries have revealed that both the stock exchange and the SECP are unaware.
While all this was happening inside Pakistan, Sage Ventures and Chishti began working behind the scenes to approach Abraaj’s liquidators to offer controlling influence in KES Power in the Cayman Islands.
A Cayman court was expected to rule on Deloitte/A&M’s application last week about Sage Ventures’ offer, but the decision was apparently delayed after some objections were raised. Inquiries in the Cayman Court were inconclusive as the court proceedings were sealed, leaving behind mystery and suspicions about the transfer of control of a key national security asset to Pakistan without the knowledge of most of its stakeholders. increases in .tv and Chishti and Sage Ventures disclosed to IGCF investors that they are seeking to acquire the KE stake held by KES Power at a fraction of the value of the Shanghai deal.
It said “recent public financial and political issues in the Islamic Republic of Pakistan including, but not limited to, the recent change in government and the recent, and continuing, material depreciation of the Pakistani rupee”. A rationale for encouraging international investors to accept this deep concession.
To assist in achieving the rationale for the transaction, the Acquirer has entered into an agreement with ABRAAJ Investment Management Limited (In Official Liquidation) (‘AIML’) to acquire the assets of AIML and interests relating to IGCF, including the A majority, controlling stake in IGCF. General Partner Limited (‘GP Interests’),” it added.
The documents also state that “Aquiror has entered into an agreement with Alvarez and Marsal Europe LLP (“A&M”) pursuant to which effective as of the closing date of the acquisition of the LP interests and GP interests, A&M provided online will continue to do. To provide assistance and support to the Acquiror and the IGCF GP on an interim basis.”
It appears that these are the contents of these agreements, which are likely to be the basis of sealed applications to the Cayman Courts for approval.
A document states: “We offer this proposal on the condition that none of its existence, its content or our communication about it be disclosed by you publicly or to any third party. shall go, and the proposal shall be withdrawn upon any unauthenticated. ]ed disclosure.”
A KE source said the deal with Delight and A&M appears to have been sealed and confidential.
The source said: “This is a deal cooked up in secret about a strategic asset of Pakistan. There is no transparency or clarity about who is funding the acquisition and what are the sources of these funds.”
