China’s Shanghai Electric power company will buy a controlling stake in K-Electric, a power generation and distribution company in Pakistan’s largest city, for $1.77n, K-Electric’s parent company announced in a statement yesterday.
Dubai-based Abraaj Group said it had entered into a definitive agreement with China’s state-backed Shanghai Electric to divest its 66.4% stake in K-Electric.
K-Electric serves around 2.2mn customers in and around Karachi, Pakistan’s largest city with a population of about 20mn.
It is involved in both generation at thermal power plants and power distribution.
“Today marks a milestone in that partnership as we enter into a definitive agreement to divest our stake in a high performance business and market leader to a strategic buyer who is fully committed to continuing this success story into the future,” Arif Naqvi, Abraaj’s chief executive, said in a statement.
When completed, the deal will be biggest M&A agreement in Pakistan in a decade.
Large parts of the Pakistani economy remain nationalised, or held by a few private businessmen, rather than diversified companies.
“The K-Electric transaction only marks the beginning of SEP’s co-operation with Abraaj and we look forward to further collaboration between the two parties in many other areas in the future,” Wang Yundan, Shanghai Power’s chief executive, said in a statement.
Shanghai Electric announced its intention to bid for the stake in August.
Chinese companies’ interest in Pakistan is growing after China announced energy and infrastructure projects worth $46bn in the South Asian nation last year, with a view to opening a trade corridor linking western China with the Arabian Sea.