K-Electric’s ownership dispute among its major foreign indirect shareholders has landed in an international court as lead stakeholder IGCF SPV 21 Limited approached the Grand Court of the Cayman Islands to win direct proprietorship in the company while the court ordered other stakeholders to discontinue proceedings at a high court in Pakistan.
IGCF SPV 21 has a majority shareholding of 53.8% in KES Power Limited (KESP), which is the holding company of K-Electric (KE). It has filed a petition in the Grand Court for a just and equitable winding up of KES Power and sought a direct shareholding in KE by nominating its own directors on the KE board.
It said the dispute had been a major impediment in the way of reviving KE’s performance.
Since Abraaj’s bankruptcy in 2019, “we are pained to note that KE has taken a turn for the worse, with KE’s affairs not producing positive results for Karachi consumers, KE shareholders, business partners, or lenders,” SPV 21 said in a recent notification to the Pakistan Stock Exchange (PSX).
Al Jomaih Power and Denham Investment are minority shareholders in KESP, collectively holding a 46.2% stake.
KE, in its latest notification on Thursday, informed the PSX that in its ruling on August 16, 2023, the Cayman Islands Court held that “any dispute between the original shareholders and SPV 21 should be determined by a court in the Cayman Islands or England rather than the High Court of Sindh, Karachi.”
However, the Grand Court has stayed its order pending a further hearing slated for October 10, 2023, according to KE.
KE has been further informed that “there is no change to the status of the proceedings commenced in the High Court of Sindh at Karachi, Pakistan on October 21, 2022 or to the ad-interim order of the same court dated October 21, 2022 until at least October 10, 2023 (ie, the date of next hearing in the Cayman Islands).”
The company has also been told that the proceedings before the Grand Court of the Cayman Islands were only concerned with the jurisdiction in which the underlying dispute should be heard. “They did not address the merits of the claims between the original shareholders and SPV 21.”
On October 21, 2022, Al Jomaih Power Limited and Denham Investments Limited commenced proceedings against IGCF SPV 21 and others before the High Court of Sindh in Karachi. In those proceedings, the original shareholders alleged that SPV 2l and others had taken steps that were in breach of the shareholders’ agreement dated October 12, 2008 (as amended from time to time).
“The High Court of Sindh granted an ad-interim order preventing any changes to the board of K-Electric.”
In other developments, China’s state-owned Shanghai Electric Power Company (SEP) has kept renewing its commitment to acquiring KE, as pending financial disputes of billions of rupees on the company’s books and regulatory approvals delayed the transaction for over half a decade.
KE officials reported a net profit of Rs76 billion since its privatisation in 2005, equivalent to around Rs4.22 billion per year over the past 18 years.
Though the privatisation has helped the company to switch from a loss-making state-owned company to a profit-earning private firm, consumer complaints about inflated bills have continued to increase. They usually complain about the duration of power outages and monthly bills as both have spiked. Many end up paying half their monthly salaries to clear their utility bills.
Published in The Express Tribune, August 25th, 2023.
POST AUTHOR: Salman Siddiqui