A power struggle between Saudi Arabian and Pakistani investors over one of Pakistan’s largest power companies, K-Electric, is escalating into a battle with far-reaching implications for both the company’s future and the broader economic relationship between Pakistan and Gulf investors.
The dispute centers around K-Electric’s ownership. Al Jomaih Power, a Saudi firm, and Denham Investment, a Kuwaiti fund, originally bought a stake in K-Electric during its privatization in 2005. They now face off against Shaheryar Chishty and his company AsiaPak Investments, which purchased a significant stake in the company three years ago from the liquidator of the collapsed private equity group Abraaj.
The Gulf investors claim that Chishty and his allies are violating a pre-existing shareholder agreement and Pakistani rules regarding disclosure and security clearance, aiming to block them from taking board seats at K-Electric. Cayman Islands court documents, seen by the Financial Times, suggest that these legal entanglements are threatening to derail K-Electric’s $2 billion reform plan, vital to improving the company’s infrastructure and energy distribution.
At a time when Pakistan is eager to attract more investment from the Gulf, the country’s military-led investment vehicle, the Special Investment Facilitation Council (SIFC), is pushing for a resolution. SIFC’s Lt. Gen. Sarfaraz Ahmed has been in talks with both sides, exploring the possibility of one party buying out the other. However, the dispute remains unresolved, and time is running out, as the current board of K-Electric is set to expire later this year.
The case has become a symbol of the broader challenges facing Pakistan’s privatization efforts. Critics argue that K-Electric’s troubled history highlights how privatization has failed to improve governance and efficiency in the country’s energy sector. The utility company’s difficulties began when Abraaj, which had invested $360 million in 2008, successfully reduced transmission and distribution losses, making power generation more efficient in Karachi. However, when Abraaj collapsed, the ownership of K-Electric became murky, leaving the company without clear direction.
As the legal battle drags on, both Gulf and Pakistani investors are watching closely. There are growing concerns that the fight will make it difficult to raise the $2 billion needed for K-Electric’s much-needed overhaul of its transmission and distribution system, as well as efforts to scale up renewable energy capacity.
“If the shareholder issue remains unresolved, international financing will be a challenge,” said Shan Ashary, who represents Al Jomaih on K-Electric’s board.
Chishty, however, remains resolute, telling the Financial Times: “No one wants to invest in a company with no plan.” Despite the turmoil, K-Electric’s spokesperson, Imran Rana, denied that the shareholder dispute was affecting the company’s core business, pointing to the approval of a new generation tariff by Pakistan’s electricity regulator and plans for a $2 billion transmission upgrade.
The impasse continues to be a concern for both the Pakistani government and Saudi authorities, with military officials noting that the dispute could jeopardize investor sentiment in the region. One source familiar with the situation emphasized that a resolution is urgent, suggesting that one side may have to buy out the other to break the deadlock.
This high-stakes battle for control of K-Electric underscores the challenges of privatizing critical infrastructure in Pakistan and the complicated dynamics between Gulf investors and Pakistani authorities. With K-Electric’s reform efforts on the line, the resolution of this dispute will be pivotal for both the company’s future and Pakistan’s ability to secure vital foreign investment.
