ISLAMABAD: The Cabinet Committee on Privatization (CCoP) on Friday failed to resolve the problem of sale of the majority stake in K-Electric to Shanghai Electric Power Company.
The complicatedness of the K-Electric deal remained unresolved during a meeting of the CCoP on Friday, according to officials of Ministry of Privatization, reported an English daily.
The meeting was presided over by the Prime Minister Shahid Khaqan Abbasi at his official secretariat and referred the K-Electric sale for further deliberation after failure to reach agreement at the CCoP meeting.
It was reported Privatisation Minister Daniyal Aziz and Privatisation Secretary Irfan Ali did not hold the same opinion.
Last week Profit reported that the government was bent out on finalizing the K-Electric deal before its tenure concluded at the end of this month.
In March, the government had issued a security clearance certificate to K-Electric which would pave way for the deal to be consummated.
During the meeting, the matter regarding the sale of sale of its shares by KES Power Limited in K-Electric Limited to SEP was brought up and it was decided to issue a National Security Certificate subject to ratification by the federal cabinet, as per a government statement.
But the cabinet then referred the matter to CCoP for looking into worries of outstanding liabilities and legal structure of the entity.
On Friday, CCoP instructed all the appropriate ministries to meet all the outstanding needs required for finalizing the deal, said Aziz.
He added there was no disagreement regarding the deal between government departments.
But Mr Aziz accused that delaying tactics had caused the deal to have lapsed for almost two years.
He said CCoP agreed on a new language for the draft agreement as confusion prevailed due to the previous decision.
One of the main pending problems was the degree to which Shanghai Electric would record the liabilities in its balance sheet after successful takeover of K-Electric, said a privatisation ministry official.
The official said since Shanghai Electric would possess management control of K-Electric, it should take up all the outstanding liabilities of the entity.
But, Shanghai Electric and government ministers believed the company could only book those liabilities in its books as per its shareholding which was 66.4 percent.
The Privatisation Minister stated all local laws would be applicable on Shanghai Electric, hence there shouldn’t be any confusion about the ownership and liabilities.
K-Electric, majority owned by Abraaj Group divested 66.4 percent of its shareholding in the company to Shanghai Electric Power Company Limited for $1.77 billion in October 2016.
Government shareholding constitutes 24.36 percent stake in K-Electric, foreign shareholders hold 3.09 percent, public 2.69 percent, mutual funds 1.67 percent, public-sector company’s 0.13 percent, financial institutions 1.48 percent and others’ 0.18 percent.
Interestingly, Shanghai Electric Power twice withdrew its bid to acquire K-Electric in last 1.5 years, first was in June 2017 and then on March 26th, 2018 due to regulatory reasons, but the next day it sent a notification to the bourse expressing public interest to acquire 66.4 percent stake in the company.