MENASA-focused Abraaj Capital will invest $361 million in KES Power over the next three years for a 50 percent stake and management control. The investment will also give Abraaj a controlling stake Karachi Electric Supply Company (KESC), in which KES Power owns a 71.5 percent stake.
The Dubai-based firm first agreed to invest in KES Power in October 2008, but the investment was dependent on obtaining necessary regulatory approvals. The Government of Pakistan and KESC have finalised an amendment agreement, paving the way for the deal to go ahead.
KESC is the sole power provider in Karachi, Pakistan's financial hub. The investment in KES Power will be used by KESC to enhance electricity generation, transmission and distribution. The company intends to add 1100-megawatts to the existing grid in the next three years, out of which 450-megawatts will added by the end of September this year.
The timing of the investment is crucial in light of KESC’s “outdated systems and losses that have aggravated load shedding and outages over the last few years”, Abraaj said in a statement.
“We have been talked about as the investing party in this deal for some time and we are pleased that the pending formalities are now near complete”, Mustafa Abdel-Wadood, managing director of Abraaj, said. He added that the investment is a sign of Abraaj’s confidence in Pakistan, “a market with continued potential” for long-term investors. The firm opened a Karachi office last year; its six-person investment team is led by Farrukh Abbas.
Abraaj's other private equity investments in Pakistan include Bosicor, an integrated oil company; BMA Capital Management, a financial services company; and Mannan Shahid Forgings, a steel forging company. Its total investment in Pakistan following this transaction is more than $500 million.
Abraaj could not be reached by press time.