KARACHI, June 20: The Dubai-based Abraaj group of companies is likely to announce on Monday a new CEO who would take over management of the Karachi Electric Supply Company from the Aljomaih group following finalisation of a deal through which the Saudi company offloaded 50 per cent of its 73 per cent shares and management in the utility, sources said on Friday.

The Dubai based Abraaj which is a leading regional financial and capital investments group, besides being involved in real estate business, has been engaged in the ‘due diligence’ process in the KESC from its seaside office in the metropolis.

The Dubai-based company has pledged to dole out 400 million dollars to the government, which to some extent relieved pressure on its budget-makers.

But the big question is why the new bosses of the KESC have agreed to take charge at a time when the company has suffered huge losses, borne out by the financial statement of the company for 2007-08.

During the period transmission and distribution losses were 30.80 per cent. According to the report, the KESC was to pay Rs 26 billion to the different providers.

Although no names have yet been disclosed, insiders were tip Mr Arif Naqvi to take over as the new KESC CEO. Mr Naqvi , as chief executive of Abraaj Capital, had earlier made efforts to bring in investments to the tune of one billion dollars to Pakistan by 2010. It had set up a Pakistan-focused 300 million dollar fund.

Meanwhile, KESC’s Executive Director Tanzeem Naqvi, who is also being mentioned among the probables for the top slot, claimed that under his watch, the company had been able to make a profit of Rs 4 billion in billing charges. M/S Aljomaih group of Saudi Arabia, the main partner in the consortium, which had purchased 73 per cent of the shares (9.611 billion shares) @ Rs 1.65 per share for a total amount of Rs 15.86 billion.

Despite restrictions of no off-loading of shares before three years, Aljomaih secretly sold out 25 per cent of shares @ Rs. 4.50 to Mr Naser Al-Marri of Kuwait and appointed him as vice chairman.

Thus the Saudi investor siphoned back Rs 10.81 billion, whereas approximately Rs 22 billion were outstanding at the time of privatisation to be recovered by the new owners.

According to sources the new deal, details of which are not known, the Dubai-based investor had promised to make 400 million dollars investment in the problem –ridden utility. But the new investors have not pledged investment in generation and transmission sector of the utility, lack of which is the cause of the power outages.

It may be pointed out that before privatization the government had resorted to reduction of face value of share from Rs 10.0 to Rs. 3.50 thereby reducing the total paid up capital of 13.167 billion shares from Rs. 131.67 billion to Rs. 46.08 billion only and waiver of Rs. 92 billion debts.

After the disastrous experience with M/s Siemens as Operations and Management Contractors; new contract was placed on ABB for setting up 220 MW Power Station at KTPS. The funds (US $ 500 Million) had been arranged by M/S Aljomaih through a loan from IFC under sovereign guarantee of Government of Pakistan and by pledging KESC’s assets and property which also negates the claims that the Company had been privatized for the purpose of investment by the rich owners.

The KESC, after its 2 and half year of its privatization, has only shown decline in its performance, and practically driven the company to a direction where it was feared to be sliding rapidly in the black hole. The present management added to its difficulties by killing KESC financially. Presently there is not a single asset of KESC which has not been mortgaged. Even large Industrial customer’s accounts are mortgaged to the generating company to whom the payments of such customers are directly being debited.

It may be pointed out that Abraaj group does not have any experience of managing a power supply utility. This could lead to yet another nightmare which the people of this city endured when Siemens were the management contractors. Insiders said Abraaj buy out is supported by elements supportive of a leading Sindh-based political party.

Meanwhile the KESC suffered a shortage of 350 MW which had forced the utility to persist with outages which in many areas extended up 9 hours at a stretch. Defence Phase V extension was the e the worst hit where there was no electricity for more than nine hours. Residents alleged the KESC staff was not telling the truth. Both industry and trading community also continue to suffer with the domestic consumer. ENDS