The majority shareholders of an offshore holding company that owns most of Pakistani power company K-Electric said on Wednesday they have initiated legal proceedings to seek direct ownership of a stake in the utility.
The power utility’s holding structure has widely been considered an impediment to its acquisition by China’s state-owned Shanghai Electric, a deal that has lingered for years due to regulatory and legal hurdles in Pakistan.
Infrastructure and Growth Capital Fund SPV21 (IGCF), which has a 53.8% shareholding in Cayman Island-registered KES Power Limited (KESP), which in turn owns 66.4% of K-Electric, told Reuters it had filed for a Just & Equitable Winding Up of KESP in the Grand Court of Cayman Islands on Tuesday.
“By this action SPV 21 IGCF simply seeks to own its shares in KE directly instead of through a holding company in the form of KESP which has unfortunately outlived its original purpose due to the continued negative actions of KESP’s minority shareholders,” IGCF said in a statement to Reuters.
Sadia Dada, Chief Marketing and Communications Officer at K-Electric, said the utility was “neither privy to the contents of the petition nor in a position to comment”.
The remaining shareholders of KES Power Limited, Saudi-and Kuwait-based companies Al-Jomiah power limited and Denham Investment, did not respond to a Reuters request for comment.
K-Electric is the only electricity generator, transmitter, and distributor for Karachi, Pakistan’s largest city, and its adjoining areas, and the only listed electricity supplier in Pakistan. It was privatised in 2005, with a current market capitalization of 53 billion rupees ($195.03 million).
IGFC was previously owned by the now defunct Abraaj Group, and changed hands in 2022 when AsiaPak Investments, a private investment firm with operational assets in Pakistan and Hong Kong, acquired it.
In October 2022, a high court in Pakistan’s Sindh province, of which Karachi is the capital, issued a stay order preventing any change in the present board of directors because of a lawsuit filed by minority shareholders in KESP. There are three vacant slots on the board of directors.
If KESP is dissolved, it may also support the ability of the acquirer to appoint directors through a direct shareholding in K-Electric, which would provide more clarity to the Shanghai Electric deal.
Shanghai Electric has been in talks to acquire a stake in KE for more than half a decade, delayed due to regulatory approval and liquidity constraints as a consequence of mounting circular debt plaguing the country’s power sector. The government of Pakistan owns a 24.4% stake in K-Electric.
In June, Shanghai Electric reiterated its commitment to the deal, which was worth approximately $1.77 billion in 2016 but may change.
“We are not repudiating the Shanghai contract or intending to do so by winding up KESP,” Darin Baur, a director of IGCF and one of the initial nominees for the vacant position on the KE board told Reuters.