China’s state-backed Shanghai Electric Power said it is bidding to acquire a stake in K-Electric Ltd, which has a total market value of $2.3 billion.

“Our company has embarked on preliminary work on the acquisition of a stake in K-Electric. We have not entered into any exclusive negotiations yet and the size of the stake has also not been firmed up,” Shanghai Electric said in a statement on the Shanghai stock exchange on Monday.

It said it is not the only company participating in the bidding process.

Dubai-based private equity firm Abraaj Group has flagged its intention to sell its stake of about 66 per cent in K-Electric, which supplies power to over 2.2 million customers in and around Karachi.

As of Monday, Abraaj’s stake was valued at around $1.5 billion. The Pakistan government owns about 24 per cent in K-Electric.

Earlier this month, K-Electric said the rumour about Engro Corporation and Shanghai Corporation acquiring a stake in K-Electric is “incorrect and speculative.”

The statement added: “Kindly note that we have not been notified of any transaction that has been entered with any entity regarding acquisition of K-Electric,” said company’s Director Finance Muhammad Rizwan Dalia in a stock notice.

Similarly, Engro Corporation also issued a statement to clarify that it has not made any decision to buy a shareholding in K-Electric.

“(Re) the news item circulating in certain sections of print and electronic media stating that Engro Corporation has shown interest in a bid to purchase K-Electric, the company clarifies that it has neither expressed interest nor participated in any bid to purchase K-Electric,” the statement said.

In an interview with a local media outfit last month, Engro Corporation President Khalid Siraj Subhani had remained noncommittal. “Engro is not involved in the K-Electric transaction right now,” he had said.

However, he had hastened to add that it “makes sense” for Engro Corp to acquire distribution companies. “It is not out of our domain. Whether we acquire a distribution company or not, only time will tell,” he noted.

During the earlier part of the day, word had it that Shanghai Corporation would buy 51% while Engro Corporation would acquire a 15% stake in the electricity distribution company.

According to a note issued by Arif Habib Limited, the government had privatised K-Electric with 73% transfer of ownership to a consortium comprising of Al Jomaih Group of Saudi Arabia and National Industries of Kuwait back in November 2005. A further change of ownership in the entity occurred in September 2008 when Abraaj Capital acquired a majority stake (69%) alongside complete management control.

The principal activities of K-Electric include generation, transmission and distribution of electricity, it said. “It has a consumer base of approximately 2.5 million customers comprising residential (47.4%), commercial (7.9%), industrial (32.3%) and public sector (12.4%),” it added.