The biggest shareholder of KES Power Limited, IGCF SPV 21 Limited, has declared its intention to acquire a direct holding in K-Electric Limited (KE), the company informed the Pakistan Stock Exchange on Thursday.
IGCF SPV21 Limited announced in a strongly worded statement that it has petitioned the Grand Court of the Cayman Islands for a “just and equitable winding up” of K-Electric’s holding company.
On July 7, 2023, IGCF SPV 21 Limited (“SPV21”) filed a petition in the Grand Court of the Cayman Islands for a Just & Equitable Winding Up of KES Power Limited (“KESP”). KESP is a Cayman-domiciled non-trading entity and acts as a holding company for 66.4 percent of K-Electric Limited (“KE”) which is its sole asset.
SPV21 is the largest shareholder in KESP, owning 53.8 percent of KESP. SPV21 is ultimately owned by the Infrastructure and Growth Capital Fund L.P. (“IGCF”) which was previously managed by the now-defunct Abraaj Group. IGCF is currently managed by its General Partner on behalf of its limited partners.
Since October 2022, the general partner of IGCF has been owned by Sage Venture Group Limited (“SVGL”), a special purpose company of AsiaPak Investments Limited (“AsiaPak”). The ultimate beneficial owner of both SVGL and AsiaPak is Shaheryar Chishty, a Pakistani citizen.
SPV21 invested in KESP as part of a 2009 rescue effort to turn around KE after the 2005 privatization had failed to produce positive results. It is through an investment of fresh capital into KE that SPV21 came to be the largest shareholder in KESP.
IGCF says that the only FDI that KE has ever received from KESP came from funds provided by IGCF investors, whereas the original KE privatization in 2005 resulted in sale proceeds only going to the Government of Pakistan, and not as capital investment into KE.
Investment funds provided by IGCF investors enabled a substantial positive turnaround of KE’s affairs. Since the Abraaj bankruptcy in 2019, the company said it isn’t pained to note that KE has taken a turn for the worse, with KE’s affairs not producing positive results for Karachi’s consumers, KE shareholders, business partners, or lenders.
IGCF commented that since October 2022, the minority shareholders of KESP (who collectively own 46.2 percent of KESP as compared to SPV21’s 53.8 percent shareholding) have denied us our KESP rights and have sought to frustrate us at KESP:
- Denying us from exercising our rights as KESP shareholders by preventing us from appointing our nominees to the KE Board of Directors
- Stymying the smooth functioning of KESP, whose sole function is to act as the holding company for KE
- Blatantly violating the KESP shareholders’ agreement
- Disparaging IGCF, SVGL, and Shaheryar Chishty in multiple forums; and
- Consistently and wilfully misrepresenting our plans to improve KE.
“For the sake of producing positive results for KE and for KE’s consumers, we have made repeated attempts to have a smooth working relationship in KESP and with KESP’s minority shareholders. We are disheartened to report that this has not been reciprocated by KESP’s minority shareholders,” it said.
Accordingly, IGCF has taken a view that KESP no longer serves its sole function and the shareholder disputes are a major distraction to the key task of assisting in the turnaround of KE and for these reasons, IGCF has petitioned the Cayman Court to wind up KESP.
The final decision of the Just & Equitable Winding Up of KESP rests with the courts of the Cayman Islands. However, there will be no impact on the day-to-day operations and management of KE. The management of KE and the KE Board continues to operate independently of KESP.
By this action, SPV21 simply seeks to own its shares in KE directly instead of through a holding company in the form of KESP which has unfortunately outlived its original purpose due to the continued negative actions of KESP’s minority shareholders.
On this occasion, Shaheryar Chishty said, “Our singular focus is to deliver plentiful, affordable, and reliable electricity to Karachi’s consumers. We are confident this goal will be better accomplished by removing the distraction of a shareholder dispute and all KESP shareholders taking a direct shareholding in KE instead of through KESP. If KESP’s minority shareholders do not share our bold vision for Karachi, then they are welcome to dispose of their KE shares as they see fit without obstructing our efforts to improve the lives of Karachi’s citizens”.
