Ownership Tussle At Karachi Electric Sparks Saudi, Kuwaiti Intervention

Special Investment Facilitation Council sets up a three-member, high-powered committee to probe the matter and resolve it. Committee welcomed by Shaheryar Arshad Chishty

Ownership Tussle At Karachi Electric Sparks Saudi, Kuwaiti Intervention

With the ongoing ownership tussle over the power utility Karachi Electric showing no sign of resolving, original stakeholders from Saudi Arabia and Kuwait have raised serious concerns. It has prompted the recently-established Special Investment Facilitation Council (SIFC) to intervene.

The Executive Committee of SIFC has set up, on the instructions of Chief of Army Staff General Syed Asim Munir, a three-member committee to resolve issues related to the power utility.
The high-powered three-member committee comprises the Caretaker Minister for Energy (chair of the committee), the Caretaker Minister for Privatisation, and the Caretaker Minister for Law and Justice, sources said.

Saudi and Kuwaiti investors reportedly raised concerns over the contentious claims made by the Infrastructure and Growth Capital Fund (IGCF) about the ownership of KE at the highest level in Pakistan and requested an intervention. 

Those with inside knowledge of the development say there are hopes the creation of the high-powered committee would assuage the Saudi and Kuwaiti concerns while a stern message would be conveyed to everyone involved in the dispute.

Sources claimed that intervention "from the highest level" in the first week of September this year saw the federal law ministry direct the Privatization Division to maintain close vigilance over the change in shareholding of KES Power Ltd (KESP) and the case of K-Electric pending in the Sindh High Court owing to the strategic importance of the matter.
The ministry advised legal counsels of the Privatization Division to seek an extension in the stay granted by the Sindh High Court concerning changes made to KE's board of directors. The high court is currently hearing a case between KE’s shareholders over the legitimacy of the sale of shares to Sage Ventures Limited through the liquidation of Abraaj Investment Management Ltd (AIML), who controlled the Infrastructure and Growth Capital Fund (IGCF).
In October 2022, the Sindh High Court issued an interim order preventing any changes to the composition of KE’s board of directors without first seeking consent from the principal shareholders of KES Power, including Al-Jomaih and NIG Holdings of Saudi Arabia and Kuwait respectively.

Committee welcomed 

Shaheryar Arshad Chishty, the chief executive officer of AsiaPak Investments Limited, confirmed the creation of the three-member committee in a letter to Muhammad Ali, the Caretaker Federal Minister for Energy, Power and Petroleum.

"I welcome the formation of a three-member committee by the SIFC and appeal to your good offices to help resolve Al-Jomaih’s concerns so that we can all focus on putting KE on the path to recovery," Chishty's letter stated.

"I am the nominated director representing IGCF in relation to these discussions and would request the SIFC committee to invite the principal decision maker on the Al-Jomaih side for a meeting to resolve these issues in a fair and amicable manner," he offered.

Gulf-based stakeholders unimpressed

KE sources have said that the original stakeholders have pointed to the sharp contrast between the two, well-established groups from Saudi Arabia and Kuwait, who have decades of established standing and enjoy a strong repute in the international arena. Compared to the partnership offered by an individual who has completely bypassed Pakistan's national security clearance process, is someone who - they claimed - has only a five percent effective economic stake in KE, has been a defaulter for IFC and the World Bank, and is facing multiple lawsuits not only from third parties in other cases but also from EY and parties within the KESP structure.

Furthermore, KE sources say Chishty's intentions are quite apparent since he has issued a winding up petition for liquidation of KESP, forcefully restructure the board of KESP, and has also voted against KESP appointing legal counsel to defend itself in the court of law. These actions make Chishty an unsuitable and incompatible partner with the original shareholders, sources say.
Sources say the three-member committee is likely to look at all of these issues before finding an amicable resolution as directed from the highest quarters while valuing the strategic, bilateral relationship without causing friction with Saudi and Kuwaiti investors.

The argument
The three-member committee of SIFC was formed after a row erupted in the media as to who owns majority shares in KE.

Al-Jomaih Group of Saudi Arabia and National Industries Group (NIG) of Kuwait obtained a stake in KE in 2005. In 2008, Abraaj joined the two original shareholders through IGCF SPV 21. After the 2018 scandal resulting in Abraaj’s collapse, liquidators managed IGCF SPV 21's stake in KESP.

In 2022, Sage Ventures, a newly incorporated entity with no track record but owned by Chishty and his spouse, claimed a majority stake in KE through back-door transactions in the Cayman Islands.

The Saudi and Kuwaiti shareholders overwhelmingly opposed this.
In October 2022, Sage Venture Group Ltd set up a special-purpose company in the British Virgin Islands named AsiaPak Investments Ltd. This company assumed the role of "general partner" for IGCF. This transition occurred through a closed-door court process whereby AIML sold assets of a company undergoing official liquidation proceedings. A general partner raised capital from investors and, oversaw the establishment of a private equity fund on behalf of limited partners, and acted as a manager. Now, it seems both the recent general partner and its parent company are ultimately under the ownership of Chishty.
The two Gulf-origin stakeholders contend that IGFC's claims to own a majority of shares in KE lack foundation. They argue that acquiring the General Partner (GP) of IGCF only entails management rights, devoid of economic stake in KE. The IGCF Fund's share in IGCF SPV 21 comprises non-voting shares.