SECP bars K-Electric from changing board composition

K-Electric Ltd said on Friday the apex regulator of the corporate sector has directed it not to change the composition of its board of directors “till further orders”.

K-Electric’s holding company is Cayman Islands-registered KES Power Ltd, with a shareholding of 66.4 per cent. The government of Pakistan controls 24.36pc shareholding in K-Electric while the rest is owned by institutional investors and the general public.

The latest directive by the Securities and Exchange Commission of Pakistan (SECP) follows the news that a British Virgin Islands-registered special purpose entity by the name of Sage Venture Group Ltd acquired a large part of the controlling stake in K-Electric last month.

The doomed private equity fund Abraaj Capital held a majority stake in KES Power Ltd until its chief, Arif Naqvi, was arrested in 2019 for misappropriating investors’ funds.

K-Electric Ltd announced through a densely worded filing on Oct 20 that “changes have been consummated” involving IGCF General Partner Ltd (IGCF GP), a fund manager, and the Infrastructure and Growth Capital Fund L.P. (Fund), which owns the fund’s assets. Sage Venture Group acquired controlling interests in IGCF GP and a certain limited partnership interests in the fund.

Consequently, KES Power-nominated directors Boudewijn Clemens Wentink, Khaqan Saadullah Khan and Saadia Khurram resigned from the board of K-Electric. That prompted the SECP to seek detailed information from K-Electric about the changes in its ownership structure and whether the company has complied with takeover regulations.

According to the SECP, the latest information about the ownership structure of K-Electric is still “awaited” as the publicly listed company has sought further time to comply with the regulatory directive.

“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.

The news of a possible change in K-Electric’s ownership was first reported by The News on Oct 12. However, K-Electric expressed its ignorance about any such development in a formal declaration the next day. The company confirmed the development — albeit in a highly convoluted language — through a stock notice later on Oct 20.

Analysts believe the transaction is perhaps an outcome of the Cayman Court–sanctioned sale of certain assets of Abraaj Investment Management (AIM), which is currently undergoing official liquidation internationally. AIM held a controlling interest in KES Power. Any investor replacing AIM should then gain control of K-Electric.

Shanghai Electric Power had agreed to buy a controlling shareholding in K-Electric from Abraaj 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.

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