Planned purchase of 66.4 percent shares: Chinese co links its interest to KE's exclusivity

ISLAMAABAD: The Chinese company M/s Shanghai Electric Power (SEP), which is interested in purchasing 66.4 per cent shares of M/s Abraaj Group in KE, said on Monday that its interest is linked to future of exclusivity of the power utility.

In a letter to the Privatisation Commission, SEP's Vice Chief Economist, Shi Mingwei, has appreciated Privatisation Commission (PC) for a productive meeting with KESP team to address KE's pending issues. The Chinese company said that it was ready to start discussions on the following issues through a conference call or exchange draft documents and written commitment.

National Security Certificate (NSC) - SEP has confirmed that in principle, the draft of the Deed of Undertaking is in agreed form post several discussions between SEP and the Privatization Commission team. SEP looks forward to early approval of it by the GoP to proceed with its execution.

KE's Payable and Receivable Issue-The resolution of KE's payable and receivable issue is very important for this transaction. SEP is expecting a clear settlement for KE's past dispute, and a reciprocity principle to settle future dues. Since payable and receivable issue is between KE and Ministry of Finance, and two entities under Ministry of Energy (SSGC and NTDC), SEP still hopes the Government of Pakistan (GoP) can coordinate the settlement.

"If GoP insists to use arbitration to settle this issue, then a fair arbitration ToR, including but not limited to the reciprocity principle, needs to be agreed between GoP, KE and KESP.

"Regarding all other pending issue, SEP is of the view that in order for the company to conclude this transaction with KESP, there are few other issues also need to be resolved either by GoP or Nepra.

"SEP has sent its draft Facilitation Agreement (FA) a long time ago and has attached it again, requesting PC to provide comment if any so that the company can proceed. SEP has forwarded the following conditions for deal ;(i) GoP's commitment not to sell its 24% KE shares following a MTO waiver from SECP; (ii) Nepra's decision on KE's tariff mid-term review and write off; (iii) considering KE's current Multi Year Tariff (MYT) will expire in June 2023, SEP also wants to understand Nepra's plan for KE's future MYT and; (iv) SEP expresses the hope that Nepra can give a stable long term tariff mechanism for KE."

KE's exclusivity right- SEP says that it understands there are discussions on KE's exclusivity right at judiciary and regulatory organization in Pakistan.

"We have to make clear that whether KE can maintain its exclusivity right, will heavily affect SEP's interest to consume this transaction," Shi Mingwei wrote in the letter

The Chinese firm further maintained that although KE transaction took more than four years it remains interested in concluding this deal.

"Please understand we can only resume our discussion through this method due to the global pandemic. Hope we can find some common understanding in principle, and look forward to hear back from you soon," the SEP representative concluded.

Copyright Business Recorder, 2020