Abraaj Capital Buys Into Pakistan’s KES Power

DUBAI/KARACHI (Reuters) – Private equity firm Abraaj Capital has bought a controlling stake in KES Power, the parent company of Karachi Electric Supply Co (KESC.KA), to boost generating capacity in Pakistan’s largest city.

Dubai-based Abraaj, which manages about $5 billion in funds, said in a statement on Wednesday it was buying new shares in KES Power Ltd, giving Abraaj a 50-percent stake and management control of the firm.

Karachi is Pakistan’s biggest city with a population of more than 13 million and is home to many industries, the country’s two main ports and its main stock market.

Abraaj did not give a value for the deal, although local media has reported it could be worth as much as $400 million.

A spokesman at Abraaj declined to comment.

KESC was privatised in 2005, and a consortium led by Saudi Arabia’s al-Jomaih group and Kuwait’s National Industries Holding (NIND.KW), who were the majority stakeholders, will remain as shareholders, Abraaj said.

Cities all over Asia suffer from poor electricity supplies or complete breakdowns. Private investors generally regard power utilities as too risky.

But the orginal Gulf consortium saw potential in Karachi’s electrical system. They paid $365 million for a majority shareholding and management control of KESC.

“KESC has been a turnaround story waiting for the right turnaround artists,” Asad Iqbal, Managing Director at Ismail Iqbal Securities Ltd in Karachi.

“Abraaj’s move is a bold one given the current situation facing the company and, if they can provide the right leadership and the required capital to turn it around, they can do wonders for their investments as well as the inhabitants of Karachi.”

Abraaj said funds would be used to finance new equipment at KESC’s ageing facilities, boost generating capacity and bring in management expertise.

In August, Abraaj appointed Farrukh Abbas to head its operations in Pakistan.

“Turning KESC around will demand time and, above all, a prerequisite that all stakeholders play their part,” Abbas said in Wednesday’s statement. “In-depth discussions and agreements are being finalized, notably with local, provincial and federal authorities.

Abbas added the agreements would be critical to keeping jobs at the electricity firm.

KESC’s total supply capacity is approximately 2,344 megawatts, according to the statement.

By John Irish and Sahar Ahmed
(Additional reporting by Ola Galal; Editing by David Cowell)