Dubai: The Ministry of Energy of Pakistan signed a pivotal agreement with the country’s private power utility K-Electric (KE), formerly Karachi Electric Supply Company, in which Saudi’s Al-Jomaih Group and Kuwait’s National Industries Group (NIG) holds substantial stakes.
In what is considered a “decisive move aimed at strengthening Pakistan’s energy sector”, KE deemed the deal to “successfully resolve chronic issues plaguing” Al-Jomaih Group and NIG.
“These agreements that include Power Purchase Agency Agreement (PPAA), Tariff Differential Subsidy Agreement (TDSA) and Mediation Agreements signed between KE and the Government of Pakistan had previously been a stumbling block for years, not only resulting in financial losses but were also impeding potential sale of the company’s stake,” KE said in a statement.
“This significant step, coming shortly after the Saudi Arabia’s Minister of Investment Khalid A. Al-Falih penned a follow-up letter to Pakistan’s Caretaker Minister of Finance and Revenue Dr Shamshad Akhtar signals a new era of strengthened ties and investor confidence between Pakistan and its Middle Eastern partners.”
At the signing ceremony of these agreements at the offices of Pakistan’s Ministry of Energy, Muhammad Ali, the caretaker Minister of Energy, thanked the Saudi and Kuwait governments for their strong partnership and support with the Government of Pakistan.
“Moving forward, the agreements will resolve two major issues, the payables and receivables process between KE and the Government of Pakistan and will streamline and make KE’s operations a lot more sustainable. Above all, this is positive news for the future of Karachi’s electric power landscape and customers who will benefit from the stability of these agreements,” he said.
Dr Shamshad Akhtar, Pakistan’s Minister of Finance and Revenue, stated: “Streamlining issues and resolving legacy matters therefore is of utmost importance. We believe that today’s achievement will also send a strong positive signal to investors across the globe who are eyeing Pakistan as a potential market. The energy sector is undergoing a revolution and we are committed to support it.”
To have these long-standing issues resolved, Khalid Al-Falih in his letter wrote that “The company and its investors have re-invested all profits earned in last 16 years back to business [KE], thereby creating significant value for the only private utility in Pakistan and considerably reducing the burden on the national exchequer (of Pakistan).”
He further stated: “I remain certain that a satisfactory resolution of this issue will enable Saudi investors to regain confidence to invest in Pakistan going forward.”
The majority shares (66.4 per cent) of KE, incorporated in 1913 as KESC and privatised in 2005, are listed in the Pakistan’s Stock Exchange (PSX) and owned by KES Power, a consortium of investors including Al-Jomaih Power Limited of Saudi Arabia, National Industries Group (Holding), Kuwait, and the Infrastructure and Growth Capital Fund (IGCF).