Govt, KESC sign accord to facilitate $361m investment

[LahoreEstate]

Staff Report

KARACHI: The federal government and Karachi Electric Supply Company (KESC) have signed an Amendment Agreement (AA) to facilitate private equity investment of $361 million by the period of over next three years.

The details obtained by Karachi Stock Exchange (KSE) notification informed that the federal government has finalised an agreement recently with KESC in lieu with its programme of public-private partnership in previously state-held institution.

This step enables KESC to finally realise its goal of implementing and ambitious turn around and growth plan in pursuance of original privatization programme with the completion of requisite corporate actions and necessary approvals, the KSE notices stated.

It is learnt, the amendment comes as an addition to an earlier Implementation Agreement (IA) signed by the government in November 2005, and it was a crucial precondition in the finalisation of the agreement at the KSE Power shareholder level, which would handover management control of KESC to Abraaj Capital. Accordingly, the 71.5 percent shareholding would be transfer to the consortium of KES Power along with management control.

“With the funds under management of close to $6 billion worldwide, Abraaj’s strategic stake in KES Power of $361 million gives KESC a unique backing of the major player in the investment field of the region,” KSE notification said and added “one with an established management and operational track record in large-scale ‘distress turnaround’, as well as a depth of funding capability likely to give the government a significant comfort about the future of KESC under the new management.”

Chief Executive Officer KESC, Naveed Ismail said the decision to invest in KES Power, which ultimately cascades into KESC is a huge symbol of support for Pakistan’s economic potential, especially at this time of global uncertainty.

The Abraaj investment into KES Power will be vital to execute a five-year plan that will add 1100MW to the existing grid in next three years out of which 450MW of this will be on-stream by the end of September 2009.

The entire sum of capital will come into KES Power the benefit of which will cascade to KESC in the form of enhanced electricity generation, transmission and meeting of the distribution needs of the country’s economic hub, the city of Karachi.

Managing Director Abraaj Capital, Mustafa Abdel-Wadood said the government and the public in Karachi should treat this as a major commitment on Abraaj’s part and as a signal of our confidence in Pakistan.

The investment comes through the introduction of Abraaj Capital, a private Dubai-based equity firm and with the presence of all over the Middle East, North Africa and South Asian (MENASA) region, as the new majority shareholder to the holding company of KESC namely KES Power.

Abraaj’s investment in Pakistan will now exceed $500 million of equity, which includes its earlier investment in Bosicor, BMA Capital and MS Forging. By virtue of its direct investment in KES Power, Abbraj will acquire indirect majority equity stake in KESC.

http://www.dailytimes.com.pk/default.asp...2009_pg5_2