KES Power Limited, which has IGCF SPV 21 Limited as its largest shareholder, informed the Pakistan Stock Exchange on Thursday that the company intends to acquire a direct stake in K-Electric Limited (KE).
K-Electric’s holding company has been petitioned for a “just and equitable winding up” by IGCF SPV21 Limited, according to a forcefully worded statement.
The Grand Court of the Cayman Islands received IGCF SPV 21 Limited’s (“SPV21”) petition for a Just & Equitable Winding Up of KES Power Limited (“KESP”) on July 7, 2023. The sole asset of KESP, which has its domicile in Cayman, is 66.4 percent of K-Electric Limited (or “KE”), which serves as a holding company for KESP.
KESP’s largest shareholder, SPV21, holds a 53.8 percent stake in the company. The Infrastructure and Growth Capital Fund L.P. (“IGCF”), which was formerly run by the long-gone Abraaj Group, is the ultimate owner of SPV21. On behalf of its limited partners, the General Partner of IGCF currently oversees operations.
Sage Venture Group Limited (“SVGL”), a special purpose company of AsiaPak Investments Limited (“AsiaPak”), has owned the general partner of IGCF since October 2022. The ultimate beneficial owner of SVGL and AsiaPak is Pakistani national Shaheryar Chishty.
As part of a 2009 rescue effort to turn around KE after the 2005 privatization had failed to yield positive results, SPV21 invested in KESP. SPV21 became the biggest shareholder in KESP as a result of injecting new capital into KE.
The original KE privatization in 2005 resulted in sale proceeds going only to the Government of Pakistan, and not as capital investment into KE. According to IGCF, the only FDI that KE has ever received from KESP came from funds provided by IGCF investors.
Investment capital provided by IGCF investors allowed KE’s affairs to significantly improve. The company stated that it is not distressed to see that KE has deteriorated since the bankruptcy of Abraaj in 2019, with KE’s affairs not yielding favorable outcomes for Karachi’s customers, KE shareholders, business partners, or lenders.
IGCF stated that since October 2022, the minority shareholders of KESP have denied us our KESP rights and have attempted to obstruct us at KESP (they collectively own 46.2 percent of KESP as opposed to SPV21’s 53.8 percent shareholding):
- by preventing us from appointing our candidates to the KE Board of Directors, you are preventing us from exercising our rights as KESP shareholders.
- preventing KESP from performing its sole duty of serving as the holding company for KE
- flagrantly breaking the shareholders’ agreement with KESP
- insulting the SVGL, IGCF, and Shaheryar Chishty in a number of forums; and
- knowingly and repeatedly misrepresenting our plans to enhance KE.
“We have repeatedly tried to maintain a cordial working relationship with KESP’s minority shareholders in order to produce favorable results for KE and for KE’s customers. We regret to inform you that KESP’s minority shareholders have not reciprocated in kind,” the statement read.
As a result, IGCF believes that KESP is no longer fulfilling its sole purpose and that shareholder disputes are a significant deterrent from assisting in the turnaround of KE. For these reasons, IGCF has petitioned the Cayman Court to dissolve KESP.
The Cayman Islands’ courts have the final say in the Just & Equitable Winding Up of KESP. The daily management and operations of KE won’t be affected, though. The KE Board and management continue to function separately from KESP.
By taking this action, SPV21 is merely attempting to acquire its shares in KE directly as opposed to through KESP, a holding company that, regrettably, has outlived its usefulness due to the persistently bad behavior of KESP’s minority shareholders.
Shaheryar Chishty stated, “Our one and only goal is to provide Karachi’s consumers with abundant, reasonably priced, and trustworthy electricity. We are confident that eliminating the distraction of a shareholder dispute and requiring all KESP shareholders to purchase shares directly from KE as opposed to through KESP will improve the achievement of this goal. Minority shareholders of KESP are free to sell their KE shares if they so choose without impeding our efforts to better the lives of Karachians if they do not share our audacious vision for Karachi.”