A LONG journey might be about to end for Abraaj Group, the Dubai-based private equity fund that had made the bold move of acquiring a majority stake and management control in the beleaguered Karachi Electric Supply Company back in 2009. Those were troubled days as everyone remembers, when the first-ever privatisation of a power utility in Pakistan was floundering. Nobody really understood what Abraaj was up to and the move was met with a heavy dose of scepticism at the time. The new management took control at a time when the utility, renamed K-Electric, had been abandoned by its management, rolling blackouts in Karachi were a daily occurrence and a bruising battle with the state-owned power utility Pepco, which supplied almost half of the city’s power, had just seen a massive disconnection that cut off the power supply to the entire city.
Given the circumstances in which the acquisition was made, the positive track record of the Abraaj-led team must be acknowledged. It has restored the utility to profitability and brought load-shedding under control, even if through the morally dubious policy of increasing the incidence of load-shedding in areas that had been designated by it as ‘high loss’. They have weathered some powerful storms along the way, from rains and heatwaves that led to prolonged blackouts, labour unrest and more bruising conflict with government departments that did not pay their bills, to clashes with the Ministry of Water and Power. But to its credit, unlike the management that preceded it, the team did not give up and persevered through it all to reach this point.
Now comes the time for Abraaj to enjoy the fruits of its efforts, and the prize is a substantial one at $1.7bn for divestment of its 66.4pc stake, described by Abraaj as “one of the largest private-sector transactions in Pakistan”. At this time, it is imperative to bear in mind that there is a strong and abiding public interest in this transaction. So even though it is a ‘private transaction’, there is a significant role for public authorities to play. The public interest lies in determining whether the improvement in the utility’s affairs is being evenly experienced by all segments of the city’s population or whether it is a reality only for the elites whose neighbourhoods have seen an uninterrupted supply of power and the bulk of the investment made in system upgrades during the last seven years. It is also in ensuring that the new investor, Shanghai Electric Power, has the capacity to operate in Pakistan, where some amount of transparency and disclosure is the norm. The deal is still subject to approval from the state, and these matters ought to be thoroughly vetted before the Abraaj management is allowed to walk off with its prize.