Government asks Abraaj to place $361 million in escrow account

[Naveed Yaseen]

ISLAMABAD (August 27 2009): The Federal government has asked Abraaj Capital to place 361 million dollars in an escrow account in Pakistan, out of total promised investment of 500 million dollars, official sources told Business Recorder. This was requested at a high level meeting held here on Wednesday called to review and discuss the performance and other related issues of Karachi Electric Supply Company (KESC).

Federal Minister for Water and Power Raja Parvez Ashraf, Federal Finance Minister Shaukat Tarin, Capital Chief Executive Officer (CEO) of Abraaj Capital Arif Naqvi and other senior officials of Finance, Ministry of Water and Power and KESC participated in the meeting.

The meeting was informed that Abraaj had already injected 138 million dollars into the KESC ahead of schedule. The meeting was told that this was the part of the approximately 500 million dollars of new equity over three years being facilitated by Abraaj that would go into enhancing and rehabilitating the long-neglected generation, transmission and distribution network of the company. Arif Naqvi reaffirmed Abraaj's commitment to the KESC and agreed in principle to place its remaining equity in Pakistan shortly.

According to an official statement, Naqvi committed to go beyond the initial 361 million-dollar equity commitment if and when required by the business, along with the other shareholders. The meeting observed that KESC had a public service role to perform in the larger national interest and should fulfil its commitments.

The Minister for Water and Power directed the KESC to provide uninterrupted power supply to the people, and urged complete rehabilitation of their transmission system. Power supply arrangements should be made on the basis of future demand and supply projection. To reduce the demand/supply gap, the KESC's generation roadmap of adding 1000+MW of new capacity is well under execution with various projects either already commissioned or under construction (a total of 450 MW will be commissioned before this year end).

To reduce the number of localised outages, trips, etc, all 18 towns will have their own distribution network/hardware revamped by June 2010 as per the schedule agreed with the Cabinet Committee. The meeting was informed that other than the two major blackouts this summer (June and July), the "loadshedding" record this summer was much better than last year's.

The meeting was further briefed on the KESC's outstanding receivables, tariff, recovery campaign, T&D loss reduction campaign, involving the local government CDGK in a meaningful manner, introducing certain amendments to the Electricity Act- power theft, allocating the requisite quantity of natural gas to KESC's existing and upcoming power plants, and signing of a gas supply agreement with Sui Southern Gas Company (SSGC), including 90-day credit term, etc.

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