LONDON: In recent days, the complex ownership structure of K-Electric (KE), a key cornerstone of Pakistan’s national security infrastructure, has come under intense scrutiny in connection with ongoing proceedings in the Cayman Islands Court for full control of the utility service.
The ownership structure has come into the limelight after it was reported that a majority stake in KE is taken over by Sage Venture Group Limited, a British Virgin Islands-registered special purpose company wholly owned by Asiapac Investments Limited, owned by businessman and banker Shahryar Chishti.
The businessman, who also owns Daewoo Bus Service, has said he intends to reform the entire Kei system after taking full direct control. However, the original stakeholders are considering further legal challenges both inside and outside Pakistan and Sage Ventures Ltd is reported to have petitioned a Cayman court to wind up KESP, the immediate parent of KE, provoking resistance from Saudi Arabia’s Aljomah Group and Kuwait’s NIG.
So, who exactly owns the KE that became a global name after joining the now-defunct Abraaj and its founder Arif Naqvi?
Evidence suggests that in 2005 Saudi Arabia’s Aljomaih Group and Kuwait’s National Industries Group (NIG) obtained the bulk of KE ownership through an agreement with the support of the Government of Pakistan. This privileged position continues to this day, giving the two entities an effective ownership of 30.7% in the company.
In 2008, an extraordinary exemption was granted by the Pakistani government to Abraaj’s entry, which made it possible for him to enter this investment venture. This access was facilitated through a special purpose vehicle based in the Cayman Islands, named Infrastructure Growth and Capital Fund (IGCF) SPV 21, with over 80 investors brought in by Abraaj as part of the IGCF fund structure, in addition to Abraaj’s proprietary investments.
In the wake of the liquidation of Abraaj around 2018 following the major scandal, the responsibility of managing the firm’s stake fell to the liquidators by including the interests of Limited Partners (LPs) within the IGCF Fund, and the original shareholders and liquidators began working together to complete the sale of KE to Shanghai Electric.
However, in 2022, there was a turn of events when the liquidator initiated a series of transactions, effectively transferring his responsibilities to a company established in the same year, named Sage Ventures Limited, owned by Shaharyar Chishti and his spouse. The dispute became public when Chishti claimed that he held a majority stake in KE, while the original shareholders maintained that Sage Ventures Limited only managed the IGCF fund and held a minority stake in the fund’s LP, which amounts to a transparent shareholding of about 7% in KE, compared to the 30.7% owned by the original shareholders.
The original stakeholders state that the claim of majority stake in KE is baseless on the grounds that acquiring the General Partner (GP) of IGCF as GP ownership confers only management rights without any economic stake in KE and that the IGCF fund’s holding in SPV 21 consists entirely of non-voting shares.
The existence of separate share classes including voting and non-voting shares in the Cayman Islands adds to the complexity. However, examination of the actual share register of SPV 21 revealed that the sole owner of the voting stock is Abraaj Investment Management Limited (AIML), which is currently under liquidation. This raises further questions about the true ownership of the main company and indicates that there will be a tough legal battle ahead.
The original shareholders, who own 30.7%, together with Mashreq Bank (based out of the UAE), an additional significant stakeholder in KE with 10.5% ownership, collectively account for 41.2% ownership. All these stakeholders have the same interests. Their common objective, according to him, revolves around increasing KE and promoting Foreign Direct Investment (FDI) in Pakistan. He says that the original shareholders have opted not to receive any dividends from KE since 2005, thereby channeling cash flow back into the company to increase efficiencies and encourage growth.
Shahryar Chishti told geo news that “with new ownership and management at IGCF we want to focus solely on improving KE”.
He said that a lot needs to be done in KE and he aims to do in KE what has not been done in the last few years. He said his priority would be to tackle the issues of deficit, high cost creation, rising debt and low quality of service.