K-Electric says Abraaj evaluating possibility of Divestment

Breaking a long-held silence over reports of its sell-off deal with state-owned Chinese buyers, K-Electric Limited (KEL) Monday said its UAE-based owners are evaluating $1.5 billion strategic divestment options.

“Abraaj is evaluating the possibility of divesting (directly or indirectly) its shareholding in K-Electric,” KES Power Limited, the majority shareholder in KEL, notified the power utility on August 28.

The proposed strategic divestment, according to KES’s company secretary Murtaza Hussain, is subject to a prescribed sale process, due diligence and execution of binding documents, including receipt of applicable regulatory approvals and satisfaction of other precedent. Monday saw Muhammad Rizwan Dalia, director finance and company secretary at KEL, notifying the company’s stakeholders at Pakistan Stock Exchange about the price-sensitive inside information.

The potential divestment plan triggered KEL’s retail price on Pakistan bourse by 2.5 percent to Rs9.09 with 49.73 million trading turnover. Having mostly been topping the PSX’s most-traded issues list in recent weeks, KEL also hit its highest price rate of Rs9.15 in intraday trade in the week’s first session.

According to insiders, by its forthcoming Annual General Meeting which is due in September the price of KEL at PSX would climb to the Rs10 mark. “Such activity was witnessed on back of the company’s PSX announcement mentioned below,” viewed market observers at Topline Research.

Benchmark KSE-100 index increased by 96 points or 0.24 percent to close above 40,000 points psychological barrier on the day.

Nabeel Haroon at JS Research said the electricity provider declared its plan of $2.2 billion to improve its generation capacity and to upgrade its current transmission and distribution network.

This, the analyst said, was apart from material information disseminated in the market by the power utility that Abraaj Group was evaluating the possibility of strategic divestment.

As the Karachi-based power utility is reported to have put 51 percent of its controlling stake in KEL, almost half a dozen bidders have so far come up as potential buyers, China’s Shanghai Electric Power and China Southern Power Grid prominent among them.

Dubai-based Abraaj Group, according to a federal minister, had earlier engaged a South Korean firm for the strategic sell-off and was now engaged with Chinese energy firms to divest 66 percent worth $1.5 billion of its stakes in KEL.