Shanghai Electric Power Said to Near Deal to Buy K-Electric

Updated on
  • Chinese state-owned firm in exclusive talks with Abraaj Group
  • Company will also make offer to K-Electric’s minority holders

Shanghai Electric Power Co. is nearing a deal to acquire a controlling stake in Pakistani utility K-Electric Ltd. from buyout firm Abraaj Group, people familiar with the matter said.

The state-backed Chinese company has been in exclusive negotiations to buy Abraaj’s 66 percent stake in the $2.4 billion power generator, the people said, asking not to be identified as the information is private. A formal agreement could come as early as this week, though the timing is still fluid, the people said.

Pakistani regulations would require Shanghai Electric Power to make a mandatory offer to minority shareholders of K-Electric, according to the people. Negotiations are ongoing and talks could still falter, the people said.

A deal to buy out all of K-Electric would be the biggest acquisition in Pakistan for at least a decade as well as Shanghai Electric Power’s biggest overseas purchase, according to data compiled by Bloomberg. Shanghai Electric Power emerged as the lead bidder for the stake last month after submitting the highest offer, people familiar with the matter said at the time.

Shares of K-Electric rose as much as 1.8 percent, the biggest intraday gain since Sept. 30, and were up 0.7 percent at 11:10 a.m. in Karachi. The benchmark KSE 100 Index fell 0.1 percent.

Overseas Utilities

K-Electric had also drawn interest from Chinese clean-energy group Golden Concord Holdings Ltd., French utility Engie SA and at least one investment fund, people with knowledge of the matter said in August. A representative for K-Electric didn’t answer calls seeking comment. Calls to Shanghai Electric Power’s office went unanswered, while a representative for Abraaj declined to comment.

Chinese companies have announced $10 billion of overseas utility acquisitions this year, up from $24 million during the same period in 2015, according to data compiled by Bloomberg. State Grid Corp. of China agreed in July to buy a $1.8 billion stake in Brazilian power distributor CPFL Energia SA, the data show. Beijing Enterprises Holdings Ltd. reached a deal in February to acquire Germany’s EEW Energy from Waste GmbH for 1.44 billion euros ($1.58 billion).

Shanghai Electric Power said in a Sept. 30 exchange statement it hired advisers to conduct due diligence on K-Electric and was still negotiating on the potential purchase. The company hasn’t yet received any notice of entering exclusive talks, and the deal still involves substantial uncertainties, according to the statement. The Chinese company said in a separate filing in August that it was doing preliminary preparation work to buy a stake in K-Electric.

K-Electric, formerly known as Karachi Electric Supply Co., serves more than 2.2 million customers in and around the Pakistani city and employs nearly 11,000 people, according to its website.

— With assistance by Jing Yang

(Updates with K-Electric share move in fifth paragraph. A previous version of this story corrected the spelling of State Grid and details of a Shanghai Electric filing.)
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