Islamabad—The Chinese Shanghai Electric Power company that has entered into agreement with Abraaj Group to buy 66.4 per cent stake in K-Electric against the value of $1.77 billion, has indicated that it would invest mammoth amount of $10 billion in the transmission and distribution system.
The huge investment of the Chinese company is tantamount to showing confidence on the existing economic outlook of the country that improved in the last three years of the sitting government, a senior official told Pakistan Observer.
He said that once the formal handing over of the management of K-Electric is transferred, Chinese company will start investing the huge investment of $10 billion in the areas of transmission and distribution system besides spending amount in improving the electricity generation side. “The investment would be made in seven years time.”
At present, the shadow cabinet of Chinese Shanghai Electric Power has unofficially taken the charge of K-Electric and is currently in process of understanding the affairs of the K-Electric.
With a long history that traces its roots to 1880, the Chinese Shanghai Electric Power is multinational power generation and electrical equipment manufacturing company headquartered in Shanghai. It is a state-owned enterprise controlled by State Power Investment Corporation, a Fortune 500 company. Listed on the Shanghai Stock Exchange, firm is mainly responsible for the power supply of Shanghai, with generation of 35.23 TWh in 2015.
Chinese Shanghai Electric Power has entered into a definitive agreement with the Abraaj Group to buy 66.4 per cent stake in its subsidiary K-Electric Company Limited against the value of $1.77 billion for those living in Karachi and its outskirts, as Chinese Shanghai Electric is a specialized power utility in China.
In contrast, Abraaj Group is a UAE –based financial group which invests in profitable ventures and divest its shares in corporations similar to the emerging deal.
Not only will there be transfer of technology in Karachi but its people may end up getting quality service at reasonable rates.
In 2009, Abraaj Group invested $361 million in Karachi Electric Supply Company (KESC) to acquire 71 per cent of its shares. The company continued its investments in later years. It made handsome money as it supplied electricity to 2.5 million houses in Karachi.
Operationally, K-Electric claimed to have upgraded its installed generation capacity by adding over 1,000MW, with overall efficiency levels improving from 30.4 per cent in 2009 to 37.4 per cent in 2016. The company said that it reduced transmission and distribution losses by over 12 percentage points. K-Electric added 12 new grid stations by augmenting old and building new power lines which resulted in increased transmission capacity of 768MVA.
A few months back, the company had shown its interest in buying the Faisalabad Electric Supply Company (FESCO).
The utility company was blamed for causing the death of 1,200 people due to heatstroke in the summer seasons a few years ago as prolonged power outages hit the city.
Besides, the company has been facing many cases in different courts, mainly on overbilling and irrational tariff setting.
The interest of Chinese corporation to invest in Pakistan’s utility company could be attributed towards the development of China Pakistan Economic Corridor.
China is very much involved in the construction of K2 and K3 Nuclear Power Plants in the outskirts of Karachi which have been set to generate 1,100 MW each by end of 2023 specially to meet the growing demand of Karachi and its adjoining areas.
The electricity production costs of these developing nuclear power plants is said to cheaper significantly than plants that use natural gas and furnace oil. Therefore, the presence of Chinese entities in Karachi and Pakistan are likely to be better for her citizens and economy.