ISLAMABAD: The Shanghai Electric Power (SEP) of China appears to be getting upset over inordinate delays in its K-Electric acquisition plan and has indicated it cannot be expected to stay on forever.

A delegation led by Vice Chief Economist of the SEP Mingwei Shi called on Minis­ter for Planning, Develop­ment and Reforms Makh­doom Khusru Bakhtyar here on Thursday and complained that its $1.77 billion takeover plan of the KE continued to face roadblocks.

Informed sources told Dawn that the delegation complained to the planning division’s team that also included the member energy, member private sector and other senior officials that relevant ministries remained unmoved even after passage of seven months of the new government in place.

At a meeting with planning minister, SEP team complains about roadblocks $1.77bn takeover plan is facing

The delegation said that Privatisation Minister Mianmohammed Soomro had constituted a committee around five months ago for speedy settlement of matters relating to the transactions and since then the SEP had been running from one ministry to another, but the bureaucracy appeared to have adopted hands-off approach to the issue.

As a consequence, the SEP’s plans for $9bn investment for improvement of K-Electric system remained stuck up, the delegation said. “Imagine the results of implementation of even parts of the proposed investment by now had the deal materialised two years ago,” a source quoted Mingwei Shi as telling the minister.

It was reported that the government had not yet issued national security certificate for formal execution of the deal.

At the heart of problem are the unsettled liabilities of KE payable to public sector gas and power companies on account of gas and electricity supplies. The amounts involved are reported to be around Rs100bn while KE has claims against entities of the Sindh government.

Officials said the Planning Commission had no direct role in the SEP-KE deal but being focal point of the China-Pakistan Economic Corridor, the Chinese investors had taken up the matter with the planning minister.

The sources said the planning minister also invited the SEP for investments in coming major hydropower projects in Azad Jammu and Kashmir.

According to a statement issued by the Planning Commission, Mingwei Shi said the SEP’s “investment in purchasing K-Electric is only the beginning and the company is interested to further expand its investment portfolio in power sector of Pakistan”. It said the minister was briefed about the latest status and issues in finalising the transaction for purchase of the KE and “Mr Mingwei Shi requested the minister to facilitate the process for early completion of transaction”.

The minister told the delegation that there was a huge potential for private and foreign direct investment in the power value chain, including generation, transmission and distribution. He said the government was committed to resolve the issues affecting the viability of power sector.

Finance Minister Asad Umar and the Prime Minister’s Adviser on Commerce, Textile, Industries and Investment Abdul Razak Dawood had held several meetings in the past with the Chinese firm on the deal.

The KE, formerly the Karachi Electric Supply Company, is partially owned by the KES Power Limited, previously a consortium member of the “original” sale and purchase agreement (SPA) of November 14, 2005 and a company incorporated under the laws of the Cayman Islands now comprising Abraaj Entity (50 per cent), Al Jomaih Power Limited (30pc) and Denham Investment Limited (20pc).

The KES’s total share holding of K-Electric is 66.40pc and it entered into a sale and purchase agreement with the Shanghai Electric Power Company Ltd on Oct 28, 2016.

Published in Dawn, March 29th, 2019