Prime Minister Imran Khan has assured Saudi business tycoon Abdulaziz Hamad Aljomaih – managing director-investments – Aljomaih Holdings – one of the largest business groups in Saudi Arabia – to expedite the resolution of K-Electric’s debt issues with other entities to facilitate a smooth transaction with the Chinese power generation firm – Shanghai Electric.
Aljomaih is one of the largest investors in KE that bought then KESC (Karachi Electric Supply Coropration) in 2005.
During his visit, the high-profile visitor took up three issues which included acquisition of KE shares by Chinese firm, price differential claims and gas sales agreement and power purchase agreement with Sui Southern Gas Company (SSGC) and National Transmission and Despatch Company (NTDC) respectively. These issues have also hindered the KE acquisition by the Chinese firm.
In his meetings with the Pakistani leadership, Aljomaih said that a strategic investor with utility expertise would leverage strengths to bring further advancements, benefiting the consumers and economy at large.
He said, “K-Electric has been transformed into a utility that is attracting investors like Shanghai Electric, one of the major players in the global energy sector that has transformed the city of Shanghai from 3,000MW to 30,000MW. This would have not been possible 10 or 15 years ago. However, this is possible today when KE has been transformed into a top of the line integrated utility company of Pakistan. The transaction that has been lingering since 2016, when completed will open the doors to investment of billions of dollars into Karachi’s energy infrastructure.”
The KE and SSGC have been in dispute over payment issues which had halted the process of Shanghai Electric’s acquisition of KE shares.
Sources told The Express Tribune that Aljomaih, who was also a major shareholder in the KE, had informed the premier that delayed payment of price differential claims by NTDC had also led to halting investment in KE.
He further noted that KE would have invested the entire amount that was stuck in NTDC on account of differential claims if the power firm had made the payment in time.
He observed that the KE had also not been able since long to pay dividends to the shareholders due to its poor financial health followed by price differential claims stuck in NTDC.
K-Electric’s investment plans of over Rs220 billion are dependent on the resolution of critical issues including the disputed mark-up charged by various government entities like SSGC and NTDC receivable from KE and the payment of tariff differential claims and other amounts.
KE’s net receivables from various federal and provincial entities stand at around Rs80 billion on principal basis and their non-receipt for over a decade pushed the power utility back into losses after eight years of profitability.
Availability of power in summer
An official said that during Aljomaih’s visit to Islamabad and Karachi, PM Imran had also asked him about the availability of power in Karachi during the summer season.
The premier was briefed that this year power situation in summer will be better as first unit of KE’s BQPS-III plant will start generation by the time peak season starts in Karachi.
He was also informed that KE’s new power plant will consume unutilized RLNG capacity available with the government.
The premier instructed Minister for Finance Dr Abdul Hafeez Sheikh, who was also present during the meeting, to ensure support from the government side to resolve any outstanding issues that may create hurdle in the availability of additional power for Karachi.
Pakistan LNG Limited (PLL) and KE have signed agreement for gas supply. The SSGC is reluctant to sign an agreement due to payment dispute issues and is concerned about NAB which is already investigating several former heads of the gas company.
However, during the meeting, the government assured support for an early resolution of all outstanding issues of KE, including GSA and PPA. These agreements are critical to ensure availability of additional power in Karachi’s grid during summers this year.
This long-standing issue is the primary impediment to finalising a Gas Supply Agreement (GSA) with SSGC and aggravates the uncertainty around Karachi’s power supply.