Abraaj Capital to invest 361 million in Karachi electricity supply company
Business Wednesday, April 29th, 2009Karachi Electric Supply Company has finalised an amendment agreement with the government of Pakistan in accordance with the government’s desire for increased public-private partnership in previously state-held institutions.
This amendment comes as an addition to an earlier implementation agreement signed by the Pervez Musharraf government of Pakistan in 2005 and was a crucial precondition in the finalization of the agreement at the KES Power shareholder level, which would handover management control of KESC to Abraaj Capital.
The amendment, signed between the government of Pakistan and KESC, will facilitate private equity investment of USD361m with the completion of requisite corporate actions and necessary approvals, over the next three years and enable KESC to realise its goal of implementing an ambitious turnaround and growth plan, in accordance with the original privatization plan.
The investment comes through the introduction of Abraaj Capital, a regional private equity firm based in Dubai and with a presence all over the Middle East, North Africa and South Asian region, as the new majority shareholder to the holding company of KESC, namely KES Power.
Abraaj’s investment in Pakistan will now exceed USD500m of equity, which includes its earlier investments in Bosicor, BMA Capital and MS Forging. By virtue of its direct investment in KES Power, Abraaj will acquire indirect majority equity stake in KESC.
The entire sum of capital will come into KES Power the benefit of which will cascade to KESC in the form of enhanced electricity generation, transmission and meeting of the distribution needs of the country’s economic hub, the city of Karachi.
Naveed Ismail, chief executive of KESC, says: ‘This is a major commitment from Abraaj at a time when global economic challenges are making investors review their positions and retrench in most markets. KESC has never seen an investment of this scale in its entire history. Turning KESC around will need time and commitment from all stakeholders. The Abraaj investment is critical to the future of the KESC, the safekeeping of its employees and to protecting the interests of the citizens of Karachi. It represents a watershed for KESC and the citizens of Karachi. Ultimately, the decision to invest in KES Power which ultimately cascades into KESC is a huge symbol of support for Pakistan’s economic potential, especially at this time of global uncertainty.’
Mustafa Abdel-Wadood, managing director of Abraaj Capital, adds: “We have been talked about as the investing party in this deal for some time and we are pleased that the pending formalities are now near complete. The government of Pakistan and the public in Karachi should treat this as a major commitment on Abraaj’s part and as a signal of our confidence in Pakistan, a market with continued potential for long-term strategic investors like ourselves”.
The Abraaj investment into KES Power which ultimately cascades into KESC will be vital to execute a five-year plan that will add 1100MW to the existing grid in next three years out of which 450 MW of this will be on-stream by the end of September 2009.
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on Apr 29 2009. Filed under