Abraaj to reap $1.8bn from Pakistani utility sale

Shanghai Electric Power is set to acquire the firm’s 66% stake in K Electric in one of Pakistan’s largest private sector transactions to date.

The Abraaj Group has agreed to sell its 66.4 percent stake in a Pakistani power utility to China's Shanghai Electric Power for $1.77 billion. 

The Dubai-based fund manager will divest its entire holding in K Electric, which it acquired in 2009, to the state-owned company. The Pakistani government will retain its 24.36 percent stake in the utility, with the remaining interest owned by minority shareholders including the International Finance Corporation and the Asian Development Bank. 

K Electric is the only vertically integrated power utility in Pakistan. It has exclusive distribution rights for Karachi, the largest city in the country, and its adjoining areas, covering 2.5 million consumers. 

Abraaj said that over the course of its investment, K Electric added over 1GW in installed generation capacity, with its overall efficiency improving from 30.4 percent in 2009 to 37.4 percent in 2016. It also reduced transmission loss by over 12 percent by adding 12 new grid stations and upgrading power lines, according to the firm. 

In 2012, K Electric recorded profits for the first time in 17 years, Abraaj added. The firm declined to disclose the return it will make on its investment in the company.

The deal, which is still subject to regulatory clearance, is set to be one of the largest private sector transactions ever closed in Pakistan. 

SEP said in August that it was not the only suitor for the K Electric stake. Other bidders included Chinese renewables developer Golden Conrad, French utility Engie and at least one investment fund, according to reports.

“The transaction only marks the beginning of SEP's cooperation with Abraaj and we look forward to further collaboration between the two parties in many other areas in the future,” said Wang Yundan, chairman of SEP. 

Earlier this March, Abraaj launched an energy development platform that will largely be run by Themis, a developer it acquired in 2013.