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July 19, 2020

The KE journey

Opinion

July 19, 2020

September 1913: The Karachi Electric Supply Company (KESC) was formed to meet the electricity needs of Karachi, a growing port city. In 1952, the Government of Pakistan nationalized KESC on the pretext of improving the infrastructure.

2005: The federal budget gave a subsidy of Rs6.5 billion to KESC. The same year, the government privatized KESC by selling a 66.4 percent stake to Saudi Arabia’s AlJomaih Group.

2009: The PPP government of Asif Ali Zardari allowed the Dubai-based Abraaj Capital – a private equity firm with absolutely no experience in managing a large power utility network spread over 6,500 square kilometers – take management control of KESC. Mr Arif Naqvi, a Pakistani businessman, founder and CEO of Abraaj, committed to inject capital “to finance new equipment at KESC’s aging facilities, boost generating capacity and bring in management expertise (NAB is now investigating this commitment).”

2009-2013: The PPP government doled out Rs272 billion worth of subsidies to KESC.

2014: Akbar S Babar, one of the founding members of the PTI, filed a case with the ECP, alleging that the PTI received funds from foreign companies and foreign nationals through undeclared accounts.

2013-2018: The PML-N government doled out Rs144 billion worth of subsidies to K-Electric (remember, the subsidy prior to privatization was Rs6.5 billion).

2015: K-Electric claims that the Karachi Water & Sewerage Board owes the power utility Rs35 billion. 2016: China’s state-owned Shanghai Electric Power shows interest in acquiring shares in KE in a $1.77 billion deal.

2018-present: The PTI government has doled out Rs100 billion worth of subsidies to KE.

April 3, 2019: A parliamentary committee was told that “K-Electric owes Rs125 billion to Sui Southern Gas Company (SSGC) and the National Transmission & Distribution Company (NTDC)...”

April 5, 2019: Arif Naqvi was arrested by authorities in the UK on “fraud charges”.

April 11, 2019: The US Securities and Exchange Commission filed a complaint against Abraaj and Mr Arif Naqvi in the United States District Court alleging that they “defrauded…..United States investors by misappropriating over $230 million.” The complaint further alleges that the “Defendants’ materially false statements, omissions, and deceptive acts violated the anti-fraud provisions…….”

June 2020: Liquidators managing Abraaj’s insolvency “now estimate Chief Executive Officer Arif Naqvi’s alleged theft to have cost the firm $385 million an amount significantly more than what prosecutors claimed.”

July 2020: A 60-year-old resident of Karachi was killed by a falling live wire. The Supreme Court noted that “22 children had died after suffering electric shocks…...but the deaths had had no impact on the power utility.” Chief Justice Gulzar Ahmed asked, “Why were the electricity providers not grabbed by the collar over these many deaths?” Moonis Alvi, K-Electric chief executive, insists that his company “cannot be blamed for Karachi loadshedding.”

Conclusion: This is one of Pakistan’s most profitable business models. Fund election campaigns of political leaders. Buy the regulator. When the political leaders come to power you take hundreds of billions in subsidies. Force SSGC to give you free gas. Force NTDC to give you free electricity (your company sells the same and makes additional billions). Then you laugh all the way to the bank.

The writer is a columnist based in Islamabad.

Email: [email protected] Twitter: @saleemfarrukh