Shanghai Electric gives up its plan to buy 18.33 billion ordinary shares of K-Electric in Karachi

ISLAMABAD: Shanghai Electric Power Company Limited has decided to withdraw its offer to acquire up to 18.336 billion ordinary shares of K-Electric Limited, representing 66.4% of the total issued share capital.

Arif Habib Limited, the manager of the offer, has notified the Pakistan Stock Exchange (PSX) about this decision through a notice issued on Monday.

The period for making the public announcement of the offer, as extended by the Acquirer, expired on April 20, 2024. Certain regulatory and other approvals for the transaction are still outstanding, leading to the withdrawal of the offer.

Arif Habib further stated that this withdrawal process is being carried out to ensure compliance with the law.

To recall, the Public Announcement of Intention (PAI) to acquire a majority shareholding in KEL was published on July 25, 2023.

Notably, the National Electric Regulatory Authority (Nepra) has granted K-Electric Ltd (KEL) both a non-exclusive distribution license and a supplier-of-last-resort (SoLR) license for 20 years, valid until January 18, 2044.

The non-exclusive distribution license allows smaller private power distribution companies with Nepra licenses to enter the power distribution and sale business, particularly in housing societies and colonies. However, if these companies default or are unable to ensure power supply, the rights, responsibilities, and benefits of power supply would shift to KEL under the SoLR.

KEL’s previous 20-year distribution license expired in July 2023, and an interim license was granted by Nepra for six months. The extension of the distribution license and the award of SoLR for the next 20 years were granted after the majority of consumer groups in Karachi supported KEL’s request, citing the utility’s commitment to a future investment of Rs484 billion for continuity and improved service delivery.

Despite support, there were opposing voices from consumer groups alleging poor performance and expensive power due to old plants. Some suggested that the license term should be limited to 3-5 years, with extensions linked to performance targets. These critics highlighted KEL’s failure to enhance generation capacity, heavy dependence on the national grid, and skewed reliance on imported fuel.

Nepra acknowledged concerns about KEL’s performance not meeting international standards but also recognized it as one of the top-performing distribution companies in comparison to its peers. The regulator stated that, despite shortcomings, there was no alternative to KEL for the distribution business.