Abraaj to acquire Pakistani power company

Abraaj Capital has obtained government approval to acquire a controlling stake in Karachi Electric Supply Company though a $361m investment in KES Power, its parent company.

MENASA-focused Abraaj Capital will invest $361 million in KES Power over the next three years for a 50 percent stake and management control. The investment will also give Abraaj controlling over Karachi Electric Supply Company (KESC), in which KES Power owns a 71.5 percent stake.

The Dubai-based firm first agreed to invest in KES Power in October 2008, but the investment was dependent on obtaining necessary regulatory approvals. The Government of Pakistan and KESC have finalised an amendment agreement, paving the way for the deal to go ahead.

KESC is the sole power provider in Karachi, Pakistan's financial hub. The investment in KES Power will be used by KESC to enhance electricity generation, transmission and distribution. The company intends to add 1100MW to the existing grid in the next three years, out of which 450MW will added by the end of September this year.

The timing of the investment is crucial in light of KESC’s “outdated systems and losses that have aggravated load shedding and outages over the last few years,” Abraaj said in a statement.

“We have been talked about as the investing party in this deal for some time and we are pleased that the pending formalities are now near complete,” Mustafa Abdel-Wadood, managing director of Abraaj, said. He added that the investment is a sign of Abraaj’s confidence in Pakistan, “a market with continued potential” for long-term investors.

Abraaj Capital’s total investment in Pakistan following this transaction is more than $500 million.