K-Electric sale stalled due to undisclosed terms of agreement, says former secretary

Former privatisation secretary Irfan Ali, has claimed that the sale of K-Electric (KE) Ltd to Shanghai Electric Power Company was stalled in 2018 because he was not shown the terms of share purchase agreement, reported Dawn.

According to the privatisation secretary he was required to see the share purchase agreement before issuing clearance certificate, keeping in view the national interest of the country.

In addition Ali claimed that Abraaj, the private equity firm that wanted to sell its controlling stake in KE to Shanghai Electric for $1.77 billion, refused to show him the share purchase agreement.

Former prime minister Shahid Khaqan Abbasi has blamed the former privatization secretary for the stalled KE sale. 

Abbasi added that there were “enough indemnities” in the share purchase agreement to protect the government’s interest and the clearance certificate could be issued. In addition the terms of the share purchase agreement between Abraaj and Shanghai Electric were commercially confidential so it was not legally possible for it to be shared with the government. 

 “This transaction would only have had a great, positive impact on the government and the people in the country.” said Abbasi.

Abbasi said the KE sale did not go through which in turn made it difficult to get foreign investment in Pakistan.

“K-Electric is in a mess,” he said. “If a world-class utility like Shanghai Electric had come in, other utilities around the world would have looked at Pakistan and invested in its other utilities.”

A former executive at Abraaj Tabish Gauhar, who left before the KE sale was agreed, said Abraaj had prioritised discussions with senior Pakistani politicians during the sale process. But government officials involved in vetting the transaction were also important, he said.

“The reality is people like Irfan Ali are very relevant as well,” Gauhar said in an interview.

The K-Electric sale did go through in the past but now K-Electric and its shareholders are talking to the government about securing national security clearance for the Shanghai Electric deal.