KARACHI, March 20: Contrary to the terms of an agreement, made public at the time of the Karachi Electric Supply Corporation’s privatisation, the power utility’s new management is not bound to invest a particular amount of money in its power generation and distribution system on an annual basis, it emerged on Tuesday.

It was previously announced by the government that the KESC under the new management would invest $500 million over a period of three years.

But well-placed sources in the power ministry and the KESC said the new management was under no such obligation under the agreement.

At the time of KESC’s handover to new buyers on Nov 30, 2005, the then privatisation and investment minister, Dr Abdul Hafeez Shaikh, had said the KESC’s transfer would provide better service to the industry, reduce cost of doing business and improve its efficiency. He had said the buyer would invest $500 million in the KESC over three years and $75 million during the fiscal year (2005-6).

There was no such clause in the ‘Share Purchase Agreement’ reached between the federal government and the consortium of three companies -- i.e. KES Power Limited, Hasan Associates (Pvt) Limited and Premier Mercantile Services (Pvt) Limited -- that made it mandatory on the new buyers to make the investment, the sources said, adding that the KESC’s new buyers had to spend substantially to run the organisation at a profit.

Chief Executive Officer of the KESC Frank Scherschmidt had told the president in July 2006 that the new KESC management would invest Rs22 billion that year under a plan which included procurement of a combined-cycle power plant to be made operational by the following summer.

Disputing his claim, the sources said no substantial investment had been made by the private management of the power utility. Instead, they claimed that Rs600 million was withdrawn from the employees’ provident fund account and the KESC management had borrowed a loan against the said amount from a bank to invest it to improve the distribution system. They said that the withdrawal of capital from the provident fund was against the rules and regulations of the power utility.

Insiders in the KESC confided to Dawn that some of the non-strategic shares had been sold to an Arabian company and a representative of that company had participated in the KESC’s recent board meeting.

However, KESC officials neither confirmed nor denied any deal between the KESC and the Arabian firm.