ISLAMABAD: The Senate Standing Committee on Power has sought complete record of privatisation process of Karachi Electric Supply Corporation (KESC), now Karachi Electric (KE), including the hiring process of the financial advisors (FAs).
Presided over by Senator Saifullah Abro, the committee also quizzed KE’s Chief Regulatory Affairs Imran Qureshi for not properly responding to queries raised during the meeting. Additional Secretary Power Division Muhammad Arshad who initially introduced Imran Qureshi as second-in-command in KE after the Chief Executive Officer (CEO) also expressed his displeasure on Qureshi for not presenting clear picture of KE affairs in his presentation. The CEO KE did not attend the meeting due to his reported illness.
The representative of Privatisation Commission, Salman shared chronology of KE’s affairs which led to its privatisation, saying that KESC was making losses for consecutive 13 years as distribution network was neither upgraded nor maintained in a shape that could meet the increasing demand of electricity in the service area of KESC. Transmission and distribution losses were phenomenally high at 46 per cent with theft also.
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He said privatisation process of KESC was initiated in May 2001 with the appointment of Price Waterhouse Coopers (PWC) as the financial advisor. As per the requirement, Expressions of Interest (EoIs) were invited in March 2022 from qualified strategic investors interested for acquisition of 51 per cent to 71 per cent interest in KESC along with its management control. Only two parties, i.e., Applied Energy Services (AES) and ABB Pakistan submitted EoIs. Request for Statement of Qualification (RSOQ) were forwarded to both the parties. Later, only AES Power submitted the SoQ by the closing date which was accepted by PC. Subsequently, AES withdrew its interest in the transaction in September 2002 for reasons that inter-alia highlighted that the tariff determined by Nepra for KESC (in September 2002) was not enough to meet KESC’s costs for operation and the required investments. As a result, the transaction came to a halt.
The privatisation process of KESC was re-launched in September 2003 with fresh EoI’s invited. After due process of receiving and evaluating SoQs, bidding was held on February 4, 2005 that was participated by Kanooz-Al-Watan (Saudi Arabia) and Consortium of Hasan Associates (HAC) Private Limited. Kanooz-Al-Watan submitted the highest bid of Rs1.65 per share for 9,611,964,738 shares (73 per cent) amounting to Rs15.86 billion, whereas, the consortium of Hasan Associate (HA) offered the bid of Rs1.01 per share amounting to Rs9.71 billion. Subsequently, Kanooz-Al-Watan withdrew the bid and Rs100million earnest money was confiscated by PC.
After the cancellation of Letter of Acceptance (LoA) issued to Kanooz-Al-Watan, the consortium led by HAC was invited to match the highest bid of Rs1.65 per share which they agreed to match. PC Board after deliberation recommended the approval of matching bid of the HAC to the Cabinet Committee on Privatisation (CCoP).
The chairman and some of the committee members expressed their desire to hold a meeting in Karachi on KE affairs but Senator Asad Khan Junejo foiled their attempt by saying “the Committee should formulate a comprehensive agenda for the proposed meeting as only meeting on KE is not acceptable”.
Taking advantage of the situation, the Chairman Standing Committee stated that he would not allow KE’s alleged accomplices in Power Division and even in Senate to succeed, adding that since the GoP is owner of 24.6 per cent shares in KE, Senate Committee would go to last limit to safeguard the interests of the State.
Senator Saifullah Abro reiterated that why agreement between K-Electric and government of Pakistan has not been renewed since its expiry in 2015 and when will the agreement be renewed. He directed the Power Division to provide correspondence regarding the renewal of agreement between K-Electric and Government of Pakistan in the next meeting.
The committee has also sought complete year-wise detail of investments in generation, transmission and distribution made by KE including tendering process of projects. The issue of KE’s generation tariff was also discussed when supply from national grid came under discussion. Chairman Nepra Tauseef H Farooqi informed that average FCA of KE is Rs36 per unit, whereas, Discos’ average FCA tariff is Rs10 per unit.
In reply to question, the chairman Nepra expressed his inability to get information of Nandipur power project, saying that they (company) are not sharing information with the regulator, requesting the Chairman Standing Committee to seek information by using his authority.
Copyright Business Recorder, 2022
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