Fundraising

Abraaj to divest stake in Pakistani utility

China’s Shanghai Electric Power has started preliminary work on the auction and says it is not the only suitor for the $1.5bn stake.

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K-Electric, a Pakistani power utility, has confirmed that Dubai-based private equity firm The Abraaj Group intends to sell its stake of around 66 percent in the business. 

Abraaj's stake in K-Electric, which it owns through holding company KES Power, is currently valued at $1.5 billion, based on the utility's stock price at today's close. The company has an overall market value of $2.3 billion.

The emerging market-focused firm acquired its controlling stake in 2009. The Pakistani government retains 24 percent, while the Asian Development Bank and the International Finance Corporation own 1.9 percent. Other minority shareholders own 7.4 percent, representing the free float.

“We would like to notify that Abraaj is evaluating the possibility of divesting (directly or indirectly) its shareholding in K-Electric which will be subject to a prescribed sale process, due diligence and execution of binding documentation,” said Muhammad Rizwan Dalia, director of finance and company secretary of K-Electric in a filing at the Pakistan Stock Exchange.   

State-owned Shanghai Electric Power is participating in the auction, according to a filing at the Shanghai Stock Exchange. The Chinese company said it is doing preliminary work on the potential acquisition and has not decided how much it could buy. 

It also said it hasn’t entered into any exclusive negotiations with the firm and it is not the only suitor for the stake in K Electric. Chinese renewables developer Golden Concord is also pursuing the interest, as well as French utility Engie and at least one investment fund, according to reports. 

Golden Concord’s spokesperson in Hong Kong could not be reached for comments and its Shanghai headquarter and Engie hadn’t responded to email queries by press time. Abraaj declined to further comment on the divestment. 

K-Electric, formerly known as Karachi Electric Supply Company, is at present the only vertically integrated power utility in Pakistan, says its company website. It manages the generation, transmission and distribution of electricity across the city of Karachi.