The official announcement by Shanghai Electric that they were terminating their purchase of a majority stake in K-Electric should not come as a surprise to anyone. The deal to sell KE to Shanghai had been on life-support for the better part of a decade.Â
This was just them finally pulling the plug.Â
First signed in 2016 the deal to sell KE was masterminded by Arif Naqvi and the Abraaj Group. In the nine years since then Shanghai Electric has made regular attempts to pay the $1.77 billion sum agreed upon to acquire the company. The government of Pakistan has responded to these efforts by running circles of red tape around them that effectively paralysed the entire transaction.Â
During this decade of paralysis the reality of KE has changed drastically. Abraaj, the group responsible for turning KE around and making it something worth selling to a foreign investors in a multibillion dollar sale, has collapsed and its founder Arif Naqvi is in prison. Abraaj’s stake in KE went into a fund in the Cayman Islands which is now owned by AsiaPak Investments — the investment arm of Sheheryar Chishty, the owner of Daewoo and the Thar Coal-1 project in Pakistan. While Mr Chishty emerges as the clear majority owner of the company, the government’s continued paralysis when it comes to KE has meant no clarity in terms of who gets real management control. Â
At the same time, the current management of KE in Pakistan has been asleep at the switch. They have failed to deal with the rising problem of users that default on their bills and have absolutely failed to account for the massive solar revolution that has emerged in residential electricity consumers. A recent scandal involving the company’s CEO over workplace harassment has also raised questions over the power company’s corporate governance. Â
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