KARACHI: Infighting among the ultimate owners of K-Electric Ltd led one group of investors to announce on Wednesday that it wants to wind up a Cayman Islands-based company to establish a direct shareholding in Karachi’s only power utility.
In a densely worded statement, IGCF SPV21 Ltd said it had filed a petition in the Grand Court of the Cayman Islands for a “just and equitable winding up” of the holding company of K-Electric.
The intended shift from indirect to direct shareholding of K-Electric comes after a Pakistani investor took in October 2022 a prominent role in a fund that was previously managed by the now-defunct Abraaj Group.
The investors behind the attempt at the winding up of K-Electric’s holding company claim that the other group of investors has violated the shareholders’ agreement and prevented them from appointing their nominees to K-Electric’s board of directors.
Disputes among owners a ‘major distraction’ to KE’s turnaround, claim majority shareholders in holding company
Who owns K-Electric?
Cayman Islands-registered KES Power Ltd owns 66.4 per cent shares in K-Electric. The government of Pakistan controls 24.36pc shares in K-Electric while the rest is owned by institutional investors and the general public.
KES Power is then owned by another Cayman Islands-based firm, IGCF SPV21 Ltd, which controls 53.8pc shares in the holding company of the Karachi utility. The rest of the shareholding in KES Power belongs to Saudi and Kuwaiti investors.
IGCF SPV21 Ltd, in turn, is “ultimately owned” by Infrastructure and Growth Capital Fund L.P. or IGCF, which is the fund that Abraaj Group managed until its eventual collapse following its chief’s arrest for misappropriating investors’ money in 2019.
The tussle between KES Power’s minority shareholders controlling 46.2pc stake and SPV21 Ltd with 53.8pc ownership began in October 2022. That was the time when Sage Venture Group Ltd — a British Virgin Islands-registered special-purpose company of AsiaPak Investments Ltd — became “general partner” of IGCF following a court-sanctioned sale of certain assets of Abraaj Investment Management, which was undergoing official liquidation internationally at the time.
A general partner brings in capital from investors and manages a private equity fund on behalf of its limited partners. The new general partner, as well as its parent company, are ultimately owned by Shaheryar Chishty, a Pakistani citizen who previously worked in international banking and now owns multiple companies in the country’s power sector.
What’s next for K-Electric?
Going by the official statement by IGCF SPV21 Ltd, the change in ownership structure granting Mr Chishty the control of KES Power seems to have rubbed the minority shareholders the wrong way.
They have been “stymying” the smooth functioning of KES Power, “disparaging” IGCF, Sage Venture Group and Mr Chishty on “multiple forums” and “consistently and wilfully misrepresenting” the plans of IGCF SPV21 Ltd to improve K-Electric, the company claimed.
“Accordingly, IGCF has taken a view that KES Power no longer serves its sole function and the shareholder disputes are a major distraction to the key task of assisting in the turnaround of K-Electric,” it said.
It added that there’ll be no impact on the day-to-day operations and management of K-Electric, which continues to operate independently of KES Power.
“By this action, SPV21 simply seeks to own its shares in K-Electric directly instead of through a holding company in the form of KES Power, which has unfortunately outlived its original purpose due to the continued negative actions of KES Power’s minority shareholders,” it said.
The Securities and Exchange Commission of Pakistan, which is the apex regulator of the corporate sector, directed K-Electric in November 2022 not to change the composition of its board of directors. By that time, Mr Chishty’s firm had assumed its new role in the Cayman Islands-based fund previously managed by Abraaj Group.
As a result, three KES Power-nominated directors — Boudewijn Clemens Wentink, Khaqan Saadullah Khan and Saadia Khurram — resigned from the board of K-Electric.
“The resignation of three non-executive directors nominated by KES… raises suspicions that indirect shareholding of (K-Electric) through KES has been changed,” said the SECP’s supervision department in an official communication at the time. K-Electric currently has a 10-member board of directors as opposed to a 13-member board that existed before October 2022.
According to a Reuters report, the dissolution of KES Power and the subsequent appointment of new directors to the board of K-Electric will “provide more clarity” to the proposed takeover of the utility by Shanghai Electric Power.
Shanghai Electric Power had agreed to buy a controlling shareholding in K-Electric from Abraaj Group back in 2016 for a sum of $1.77 billion. But the transaction never materialised because the seller failed to obtain the required approvals from different authorities.
A spokesperson for K-Electric declined to comment on the statement. The minority shareholders of KES Power — Aljomaih Holding and Denham Capital — couldn’t be immediately reached for comment.
Published in Dawn, July 13th, 2023
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