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Chinese ministry okays SEP-Abraaj deal

HONG KONG: Shanghai Electric Power (SEP) said on Friday it has received approval from the Chinese Ministry of Commerce to acquire stakes in K-Electric.

One of Abraaj Group’s companies, KES Power, had reached an agreement with SEP in October to divest its stake in K-Electric, the country’s largest and only vertically integrated power utility.

Abraaj owns 66.4 per cent of K-Electric’s total shares, along with management control. The deal, when closed, will be worth $1.77 billion.

SEP is a state-owned enterprise controlled by China’s State Power Investment Corporation, a Fortune 500 company.

Listed on the Shanghai Stock Exchange, it is mainly responsible for Shanghai’s power supply, with a generation of 35.23TWh (terawatt hours) last year.

The deal ended a stormy, but ultimately fruitful, engagement that Abraaj began in 2009 when it acquired the controlling stake with management control in the midst of a severe crisis in the utility.

According to people familiar with the original acquisition, Abraaj had intended to implement its turnaround plan and exit the investment in five years, but the exit was delayed due to regulatory hurdles in unbundling the utility, as well as difficulties in locating buyers.

Along the way, the new management clashed often with the Ministry of Water and Power, with labour unions, and with the state-owned gas supply company responsible for providing fuel for its power plants. It saw three CEOs come and go, and faced an embarrassing overbilling scandal along the way.

The Dubai-based private equity fund claims to have added 1,000MW to KE’s power generation, improved “overall efficiency levels” from 30.4pc in 2009 to 37.4pc this year, and reduced transmission and distribution losses by 12 percentage points.

The company recorded its first net profit in 2012 after languishing in loss for over a decade. Its last reported net profit, for the nine-month period ending in March this year, surged 40pc year-on-year to touch Rs22.8 billion.

courtesy : dawn news



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