KARACHI: Shanghai Electric has agreed to buy 66.4 percent shares of K-Electric in a deal worth Rs. 180 billion, although regulatory approvals are still awaited.
Shanghai Electric Power is a listed subsidiary of State Power Investment Corporation.
The company formerly known as Karachi Electric Supply Corporation was privatized in 2005 for a sum of Rs. 16 billion to a Saudi-Kuwaiti group. In those days, the US dollar was valued at Rs 59.75 in the inter-bank market. Going by those rates, the company was privatized for $270 million, which would now be almost Rs. 28 billion.
The general perception was that privatization will improve financial condition of the company. In 2009, the company was sold to private equity firm Abraj Group with management control for Rs. 361 million. The US dollar in rupee terms was at Rs. 81 levels then; the agreement would be valued at approximately Rs. 38 billion today.
Abraj invested Rs. 100 billion in K-Electric. For that, loans were taken from international organizations. Later, these international organizations invested in the company.
These investments extended its transmission line and improved production. As a result, the company reaped profits.
But the world had its eyes on the sole company that supplied electricity to a city of 20 million people. And so, a Chinese company has agreed to buy it for Rs. 180 billion. For now, K-Electric is taking permission from customers and investors to complete the sale deed. It is expected that arrangements for the takeover will be complete by February.