Who remembers the KESC of 2005 or before? I do. KESC is always on the brink. KESC is known for prolonged power outages. KESC’s customer service is non-existent. You would call them and they either never pick up, or they pick up and put the phone on the side, and you can hear the complaint centre staff talking to each other.
Then, a foreign consortium comes forward and buys a controlling stake in KESC. And over time things changed to some extent.
Initially, the investor didn’t gain much by way profit on its investment. Eventually, KESC’s financial fortunes were turned around and it began making some profit. And that led to investment in the company.
Its name was changed from KESC to just KE or K-Electric and this rebranding also came with a renewed emphasis on improving relations with customers. Of course, that didn’t mean that breakdowns and loadshedding ended, but they became reduced. Also, compared to the rest of the country where loadshedding would sometimes happen for an hour, every other hour, Karachi began to fare relatively far better.
So what’s the issue? Why the delay?
The deal had been proposed and was about to go through in 2016. First the Abraaj Group had its problems, not least with its founder Arif Naqvi and his legal troubles and eventual detention. So Abraaj is now out of the picture.
Then came the issue of a dispute regarding what KE owed and what was owed to KE - or ‘receivables’ as they are called. This seems to have delayed the sale to Shanghai Electric further - bear in mind that Shanghai Electric has a proven track record of ensuring a reliable supply of power to one of the world’s largest and most dynamic urban centres.
This dispute can be resolved, if there is a will. The deal took shape when the PML-N government was in office, but even with the PTI in power (and a party that says it wants Karachi’s betterment) not much has changed.
Till now, perhaps.
In the last week, Sheikh Abdulaziz Hamad Aljomaih of the Aljomaih group, which has a controlling stake in KE and which wanted to sell that stake to Shanghai Electric in 2016, came to Pakistan. He met the President, the Prime Minister, the Finance Minister, the Privatisation and Energy Ministers, and some other important stakeholders. His visit was covered extensively in the newspapers and on TV channels, presumably because after a gap of five years there seem to be a renewed push to make the sale go through.
A way out?
In a recent interview to Aaj TV, President Arif Alvi suggested that there may soon be a way out of the impasse. He said the government and KE had agreed on the appointment of an arbitrator to sort out the receivables issue, so that once that was settled the sale could go through.
This is a new development
A leading TV anchor also covered the visit in his show on his channel (not Aaj TV). He said that there was a Chinese investor willing to buy KE and the government should facilitate and that it was anyways in line with the Government of Pakistan’s plans to eventually privatise the power sector.
The obvious benefit will be to the Saudi group Aljomaih which bought a controlling share in 2005 and now wants to sell it.
However, there are several benefits that will accrue beyond the shareholder and they are substantial:
For starters, the city of Karachi (population around 20 million) will get a company that has a proven track record and which specialises in the power business to run KE. That in turn should benefit the people of Karachi because it would mean a company that is better run and managed than any power sector company in the country at present. This will be the sale’s greatest benefit and the single-most important reason why it should go ahead.
It will provide a much-needed injection of foreign direct investment (FDI) into Pakistan’s economy. It will correct the common perception held by many an overseas investor that Pakistan is not a very investor-friendly country. Here the case is slightly different in that the foreign investor already came and purchased part of a major asset in 2005, but now it wants to sell its share in that asset to another foreign investor, and if that is facilitated by the government then it would result in substantial FDI inflow that Shanghai Electric will bring augmenting KE operations.
The sale will also provide a much-needed fillip to Pakistan’s much-vaunted privatisation plans which say and claim far more than what is actually achieved on the ground.
(The views expressed in this article are not necessarily those of the newspaper)
Copyright Business Recorder, 2021