K-Electric’s battle for control: Al-Jomaih and Denham take Pakistan to court

On January 16, 2026, Saudi and Kuwaiti investors in K-Electric filed a $2 billion international arbitration case against Pakistan, marking a new chapter in a long-running dispute over the future of the country's largest private power utility. This information was relayed in a notice to the Pakistan Stock Exchange on 21st January, 2026.

Represented by law firms Steptoe International (UK) LLP and Omnia Strategy LLP, the investors, who collectively own 30.7% of K-Electric, are seeking compensation for regulatory interference, unpaid dues, and the prolonged blocking of a $1.77 billion sale of K-Electric’s controlling stake to Shanghai Electric Power, a deal that has now collapsed after years of delays.

Rooted in the dispute that started in October 2016 when the investors agreed to sell K-Electric to Shanghai Electric, the case is a reflection of Pakistan’s institutional prowess. 

Although initially supported by the regulators in 2016, the deal was delayed for more than eight years, primarily due to shifting government requirements. According to the investors, this delay led to Shanghai Electric backing out of the deal, and the investors argue that the failure to finalize the sale constitutes indirect expropriation under international law.

In addition to the stalled sale, the investors claim that Pakistan has failed to make significant payments owed to K-Electric, including tariff differential subsidies that date back nearly two decades. These unpaid dues have reportedly placed a severe strain on K-Electric’s cash flows. 

Meanwhile, the investors also accuse the Pakistani government of undermining the country’s power regulator, NEPRA, by politicizing K-Electric’s multi-year tariff framework. Specifically, they allege that the government has ignored NEPRA's final tariff determinations issued in May 2025 and reopened settled matters through flawed review processes. These changes are expected to cost K-Electric approximately Rs85 billion annually, potentially threatening the utility’s economic viability.

The arbitration case also highlights attempts by domestic investors to take control of K-Electric through offshore structures, undisclosed ownership changes, and regulatory violations. Despite multiple complaints made to Pakistani regulators, the investors argue that their concerns have gone unaddressed. 

The investors also raised alarms over the diversion of $66 million from the sale of shares in Cnergyico, a company listed on the Pakistan Stock Exchange, which they claim was transferred offshore without regulatory approval.

While the arbitration filing has significant implications for Pakistan’s regulatory practices, particularly with regard to foreign investments. This high-stakes dispute could further damage the country's relationship with foreign investors, especially in the power sector, which has faced numerous challenges in recent years. As the case progresses, it will undoubtedly have far-reaching consequences not only for K-Electric but for Pakistan’s broader investment climate.

But what exactly is it that led to such complicated accusations over Pakistan and its dealings with K-electric?

Saudi and Kuwaiti Investors’ Troubled Relationship with Pakistan’s Power Sector

The roots of this dispute extend back to 2005, when Saudi and Kuwaiti investors, notably the Al-Jomaih Group and Denham Investments Limited, became cornerstone shareholders in K-Electric. These investors have held a significant stake in the company through KES Power Limited (KESP), which owns 66.4% of K-Electric. Since then, tensions over the utility’s ownership, governance, and future have been a constant source of friction between the investors and the Pakistani government.

The most recent clash occurred in October 2025 when reports surfaced of a potential deal involving Saudi investors for K-Electric’s parent company, KES Power. 

The sale was initially believed to involve the transfer of a majority stake to a Saudi investor. However, K-Electric issued a public denial, asserting that it had no knowledge of such a transaction. The company’s major shareholder, Al-Jomaih, refuted the claims, stating that the businessman allegedly behind the deal, Shaheryar Chishty, did not own any shares in KESP and therefore could not have sold any shares. This denial reignited the ongoing shareholder war, which has been ongoing since the collapse of the Abraaj Group.

The dispute intensified when Chishty’s AsiaPak Investments acquired a controlling 53.8% stake in KESP in 2022, taking over from Abraaj’s liquidators. This move was immediately contested by the other shareholders, particularly Al-Jomaih and Denham Investments, who argued that it breached the Shareholders’ Agreement (SHA) governing KESP. The SHA was designed to maintain stability within the company by requiring unanimous consent for any change of control. However, AsiaPak’s acquisition was seen as a violation of this agreement, leading to a series of legal challenges that are still being fought in various courts, including the Cayman Islands.

The legal battles surrounding K-Electric have had far-reaching consequences for the utility’s future. Not only has the stalled sale to Shanghai Electric remained in limbo, but a multi-billion-dollar takeover deal with China has also been halted. This deadlock has kept K-Electric in a state of uncertainty, preventing it from modernizing its operations and securing the investment needed to improve its services.

The Role of NEPRA, SECP, and the Government of Pakistan

The ongoing legal and corporate challenges have been compounded by regulatory and governance issues within K-Electric. The investors accuse the Pakistani government of interfering with K-Electric’s operations and undermining the National Electric Power Regulatory Authority (NEPRA), which is responsible for setting electricity tariffs. According to the investors, the government has failed to implement NEPRA’s 2025 multi-year tariff determination, causing significant financial losses for K-Electric. Additionally, the government has allegedly pressured NEPRA to alter K-Electric’s return on equity from US dollars to Pakistani rupees, a change that could cost the utility Rs100 billion annually.

The investors argue that these regulatory changes, combined with the government’s failure to pay long-overdue subsidies, have pushed K-Electric to the brink of financial collapse. They claim that the government’s actions are tantamount to expropriation, violating Pakistan’s international obligations under various investment agreements.

At the heart of the dispute lies the issue of governance. The investors allege that Pakistani regulators, including the Securities and Exchange Commission of Pakistan (SECP), the State Bank of Pakistan (SBP), and the Federal Investigation Agency (FIA), have failed to act on their complaints regarding offshore ownership changes, regulatory violations, and other corporate governance breaches. They argue that these agencies have discriminated against them, failing to scrutinize local investors’ activities while imposing harsh penalties and scrutiny on foreign investors.

This lack of effective governance has further exacerbated the uncertainty surrounding K-Electric’s future. With the investors accusing the government of stifling K-Electric’s ability to operate independently and profitably, the arbitration case could have long-term repercussions for Pakistan’s power sector and its relationship with foreign investors.

What Does This Mean for Pakistan?

The arbitration case filed by the Saudi and Kuwaiti investors could be a game-changer for Pakistan’s investment climate, and not in a good way. The case not only highlights a growing discontent among foreign investors with Pakistan’s regulatory environment, which has been marred by inconsistent policies, delays in approvals, and a lack of transparency, but also points towards the current administration’s complete disregard to regulations while selling national assets. This situation is compounded by the ongoing governance issues within K-Electric, which have made it increasingly difficult for the utility to operate efficiently.

If the case moves forward, it could set a precedent for how foreign investments are treated in Pakistan, especially in sensitive sectors like energy. For the Pakistani government, the case represents a critical juncture in its efforts to improve its relationship with international investors and boost confidence in the country’s regulatory framework.