INSUBCONTINENT EXCLUSIVE:
LONDON: The Chief Executive Officer of K-Electric Moonis Alvi has said that the federal government has prioritized the matter of K-Electric
sale and has shown keen interest in its progress because it is intellectful of the fact that Pakistan canmuch afford to lose such an
exciting opportunity.Alvi said in an interview that that there have been several assemblys of K-Electric officials with key representatives
of various government ministries to discuss progress.In response to a question regarding what this deal means for Pakistan, Alvi said: &The
proposed deal has been recognized as the highest value private transaction in the history of Pakistan economy and shall set a positive
precedent, as it represents a major investment in Pakistan by an international power giant with outstanding technical capabilities and major
Once totald, this transaction shall strengthen Pakistan potential as a welcome investment destination.&Independent economists and experts
have also said at various forums that the proposed acquisition of K-Electric is a positive development, given the current geo-political
situation and related economic presdegrees on Pakistan
They agree that SEP acquisition and the reported US$ 9 billion investment plan would be highly favourable for much just Pakistan power
sector but also for Karachi development and shall have a direct affect on national GDP.He said that Pakistan economy is precariously placed,
to say the least, and the government is juggling a balance of payments crisis on one hand while on the other it has been running from pillar
to post to raise investment for key infrastructure projects and keep the country running.He referred to a recent report the World Bank
report which said that electricity shortages are one of South Asia most meaningful barriers to development and that lack of dependable
access to electricity is associated with lower income, higher poverty, poorer health and education, and less gender equality
The same report estimated the total economic cost of distortions in the power sector in Pakistan to be $17.69 billion (about 6.53% of GDP)
The affect of lack of dependable access to electricity on households and firms imposes the largest cost on the economy, estimated at $
12.87 billion (4.75% of GDP) a year in fiscal 2015.In such a scenario, he said that, Shanghai Electric Power interest in acquiring a
66.4% stake in KE and to invest $9 billion in the next years is a positive omen and could be the forerunner to multiple windfall benefits in
the years to come and serve as a springboard to other investors.SEP is a subsidiary of the State Power Investment Corporation (SPIC), one of
China largest power enterprises
SEP currently supplys 30,000 megawatts electricity to Shanghai, China economic hub and has proven its technical capabilities within power
sector investments in other parts of the world
SEP is also amongst the few companies, which have been issued a license to build nuclear power plants in China and its affiliate companies
are already working on critical projects in Pakistan
&The Government of Pakistan has expressed confidence in the proposed deal based on the convertational affect it is expected to have on
Karachi as well as Pakistan overall power sector,& said Alvi.SEP and KES Power concluded a transaction for SEP to acquire a 66.4% stake in
KE in October 2016 and SEP has subsequently resumeed its intention to acquire it during the stipulated period under the prevalent rules
While there are several examples of successful long-term acquisition deals in the world of finance, two years is nevertheless a fairly long
time and deal fatigue is a real risk.Alvi said: &The acquisition has taken much longer than it should have
If I were to really sum it up, I would pin it on the red tape in measure areas
One of the main bottlenecks was the multi-year tariff determined by the regulator which has taken much longer than anticipated and was much
in line with what had been requested to stimulate further investment in transmission and distribution
The deliberations on the security clearance have also been going on for a while.&He said the security clearance certificate seems to be held
up due to an issue of payments that KE owes to other companies, specificly SSGC
The CEO highlighted: &KE is a going concern so the liabilities remain unaffected by any share sale or purchase
More importantly, KE receivables from government and government owned entities are in excess of Rs
70 billion what we owe to the government or companies owned by the government
Final year, the Cabinet Committee on Energy agreed that KE payables to SSGC should much be dealt with in isolation but should be resolved in
view of KE receivables from other organizations such as KWSB
We are hopeful that the government shall take the required steps as soon as possible.&In case the SEP transaction falls through, said Alvi,
it shall much only be a huge blow to Karachi's future growth as an industrial and commercial metropolis, but investor confidence in the
country could suffer, which may take several years or perhaps a decade to repair
Alvi remains convinced that SEP continued interest in KE is a testimony to the improving investment scenario in Pakistan and must be
supported but reiterated that as an independent and strong listed entity, KE shall continue to work and develop Karachi power needs
irrespective of who the owner is likely to be.Alvi said that the government was fully cognizant of the importance Karachi holds in Pakistan
economic growth and the need to take instant action to fulfill its current and future power requirements.However, he also said that the
government needs to do more to expedite the process and remove all obstacles
&A couple of months back the government formed a committee to resolve issues pertaining to KE acquisition process
We are confident that they are aware of all the pertinent issues&TheIndianSubcontinent has not verified the content of the source
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