This is the fifth article in an eight-part series on Pakistan’s SOE reform.
The previous article examined the privatisations that worked. This article examines two privatisations whose accumulated cost to the public runs into hundreds of billions of rupees.
The next article will distil the lessons successes and failures and examine the recent PIA transaction.
The seventh and eighth articles will set out the process and institutional reforms required to make privatisation work at the pace and scale the country now needs.
If the banking sector and PTCL show what successful privatisation looks like, Pakistan Steel and K-Electric show what happens when the basic conditions for success are not met — and how the cost mounts when nothing is done about it.
Both cases are routinely cited in Pakistani policy discussion. Both are routinely misunderstood. In both, the deeper failure has been institutional, sustained, and avoidable.
Pakistan steel — when doing nothing becomes the decision
The 2006 Pakistan Steel transaction was blocked by the Supreme Court on grounds of undervaluation through a controversial judgement. The Court’s concern that the transaction value was substantially below the value of the attached land was not unreasonable. But the remedy was problematic. Had the major land assets been separated from the transaction, a properly structured privatisation of the steel operations could well have proceeded creating huge value instead of huge loss of money and time.
Successive governments mishandled the entity for nearly two decades after the Court’s intervention. There was no serious restructuring, no commercial viability plan, no properly prepared transaction at any subsequent stage. The entity was kept on life support through fiscal injections, then formally closed.
The cost of that inaction, in losses absorbed by the exchequer, runs into hundreds of billions of rupees. SSGC alone was left carrying over Rs. 25 billion in unpaid receivables, plus accumulated interest. Workers were eventually retrenched, after the institutional failure had destroyed any prospect of revival or sale. An industrial sector lost a strategically significant capability.
The Pakistan Steel story is not just about a court decision. It is about what governments did, and did not do, after the court decided — inaction proving to be the most expensive decision.
K-Electric — twenty years on, the public is still paying
K-Electric is Pakistan’s most consequential post-privatisation failure of accountability — and the lessons are directly relevant to the DISCO privatisations now planned.
In February 2005, two pre-qualified parties bid for 73 percent of KESC. The successful bidder, Kanooz Al-Watan — a virtually unknown Saudi firm without any track record of operating an integrated utility — offered Rs 1.65 per share, committing Rs 15.85 billion plus Rs 4.23 billion in preference shares. It failed to make the required payment, and its bid was cancelled.
The second-highest bidder, Hassan Associates, was offered to match the price. It did, and the Cabinet Committee on Privatisation accepted the matched bid in September 2005. Neither bidder possessed any experience in operating a utility serving a major metropolis. The first failure was therefore present at the moment of sale: the buyer was not capable of running a complex utility.
What happened next has never been fully explained. In November 2005 — just two months after the Cabinet Committee accepted Hassan Associates’ bid — the transfer of 71.5 percent of shares and management control was made not to Hassan Associates but to KES Power Limited, a company incorporated in the Cayman Islands. The substitution has never been publicly accounted for.
The initial sponsors of KES Power, led by Al-Jomaih of Saudi Arabia, comprehensively failed to deliver. In FY2005, KESC reported transmission and distribution losses of 34.2 percent despite Rs 12.5 billion in federal subsidy. By 2009, distribution losses had risen to 36 percent, and the original sponsors had effectively conceded. Management control passed to the Abraaj Group, a private equity firm brought in to attempt a turnaround.
The institutional failure was not limited to the buyer. The Privatisation Commission, the Ministry of Power, and NEPRA all failed to monitor and enforce post-transaction obligations effectively. Multi-year tariff petitions remained pending for years. Disputes over allowable costs and recoverable amounts consumed enormous regulatory and judicial resources without resolution.
What K-Electric points to in its defence — service improvements, reduced load-shedding, and a cumulative investment of over USD 4 billion since privatisation — deserves examination. The audited financial statements tell a more complex story. KE’s own disclosure confirms that “profits earned by KE since 2009 have all been reinvested into KE’s business.” Much of the company’s reported investment has therefore been financed not from sponsor equity, but from retained profits generated through tariff (including tariff subsidy), large-scale external borrowings, and — critically — the indefinite postponement of payments owed to state-owned suppliers.
According to K-Electric’s own audited financial statements, the federal exchequer has already paid Rs 743 billion in tariff differential claims to NTDC/CPPA on KE’s behalf since privatisation, and KE is claiming a further Rs 239 billion as receivable from the Government in its FY2023 accounts. The total public support/exposure to a privatised utility approaches Rs 1 trillion, per KE’s 2023 financial statements.
The audited financials of June 30, 2023 makes the picture sharper still. KE’s current liabilities of Rs 515 billion exceeded current assets of Rs 412 billion by Rs. 103 billion — a negative working capital. Even such current assets include Rs 239 billion (58 percent) receivable from GoP. Of those, Rs 67.9 billion was recognised in respect of trade debt write-off claims that NEPRA had explicitly stated required “further deliberation” before being allowed. On 5 June 2025, NEPRA issued its decision, allowing Rs 50 billion as “full and final claim” against KE’s revised claim of Rs 76 billion, and explicitly disallowing the remainder. The decision was upheld on review in October 2025. Against the Rs. 67.9 billion recognised in FY2023, this implies overstatement of at least Rs. 17.9 billion in both other receivables and accumulated profits.
Beyond the recorded position, NTDC/CPPA-G has claimed Rs 174 billion and SSGC Rs 151 billion in disputed mark-up on overdue balances — together over Rs 325 billion of contested liabilities that KE has not accrued, and remain under litigation.
The arithmetic is unforgiving. Twenty years after a transaction meant to relieve the public of fiscal responsibility for Karachi’s electricity supply, the federal taxpayer continues to underwrite the company through direct subsidies, compensation to its unpaid state-owned suppliers, and the absorption of contested receivables into circular debt. The fundamental promise of privatisation — that public fiscal exposure would end with the transfer of ownership — has not been delivered.
KE has not paid a single rupee of cash dividend to its shareholders in over twenty years. In FY2023, it recorded a loss of Rs. 30.9 billion. Its FY2023 audited accounts are the most recent published — financial statements for the years thereafter remain unpublished, with KE citing tariff determination delays.
The verdict is structural. Ownership was transferred. The fiscal burden remained where it always was — on the public. Privatising a complex utility without sponsor capability, without a competent regulator in place beforehand, and without institutional capacity to enforce post-transaction obligations does not solve the SOE problem. It transfers it to a structure that is harder, not easier, to hold accountable.
A cost the country cannot keep paying
Pakistan Steel and K-Electric tell the same story in different shapes. In one, a transaction was blocked and then nothing was done. In the other, a transaction was completed but post-transaction enforcement and regulation did not follow. Both produced the same outcome: hundreds of billions of rupees absorbed by the exchequer, by other state-owned entities, and by ordinary taxpayers — for outcomes that bear no resemblance to the promises privatisation was meant to deliver.
The country cannot afford to repeat such tales. The next wave of privatisations — the DISCOs in particular, but also other large strategic entities — will succeed or fail on whether these lessons are properly learned and applied.
Copyright Business Recorder, 2026
The writer, a former managing partner of a leading professional services firm, is a public sector governance and public financial management specialist and has done extensive work on governance in the public and private sectors. He posts on X @Asad_Ashah