Chinese Shanghai Electric Power has entered into a definitive agreement with the Abraaj Group to buy 66.4% stake in its subsidiary K-Electric Company Limited against the value of US$ 1.77 billion.
The official statement issued by Abraaj Group did not disclose the transaction period between the two groups but it claims that the deal will be one of the largest private sector transactions in Pakistan upon completion.
This could be good news for millions of Pakistanis specially for those living in Karachi and its outskirts, as Chinese Shanghai Electric is a specialized power utility in China. It is a state-owned enterprise controlled by State Power Investment Corporation, a Fortune 500 company. Listed on the Shanghai Stock Exchange, firm is mainly responsible for the power supply of Shanghai, with generation of 35.23 TWh in 2015.
In contrast, Abraaj Group is a UAE –based financial group which invests in profitable ventures and divest its shares in corporations similar to the emerging deal.
Not only will there be transfer of technology in Karachi but its people may end up getting quality service at reasonable rates.
In 2009, Abraaj Group invested US$ 361 million in Karachi Electric Supply Company to acquire 71 percent of its shares. The company continued its investments in later years. It made handsome money as it supplied electricity to 2.5 million houses in Karachi.
Operationally, K-Electric claimed to have upgraded its installed generation capacity by adding over 1,000 MW, with overall efficiency levels improving from 30.4% in 2009 to 37.4% in 2016. The company said that it reduced transmission and distribution losses by over 12 percentage points. K-Electric added 12 new grid stations by augmenting old and building new power lines which resulted in increased transmission capacity of 768 MVA.
A few months back, the company had shown its interest in buying the Faislabad Electric Supply Company.
K Electric owes liabilities worth Rs 68 billion to Sui Southern Gas Limited (SSGC) which it has not paid for years, terming these dues as non-payment of electricity bills by government departments.
The utility company was blamed for causing the death of 1,200 people due to heatstroke in the summer seasons a few years ago as prolonged power outages hit the city.
Besides, the company has been facing many cases in different courts, mainly on overbilling and irrational tariff setting.
The interest of Chinese corporation to invest in Pakistan’s utility company could be attributed towards the development of China Pakistan Economic Corridor.
China is very much involved in the construction of K2 and K3 Nuclear Power Plants in the outskirts of Karachi which have been set to generate 1,100 MW each by end of 2023 specially to meet the growing demand of Karachi and its adjoining areas.
The electricity production costs of these developing nuclear power plants is said to cheaper significantly than plants that use natural gas and furnace oil. Therefore, the presence of Chinese entities in Karachi and Pakistan are likely to be better for her citizens and economy.