ISLAMABAD: The federal government on Tuesday "formally" considered a proposal to appoint administrator on Karachi Electric (KE), for resolution of outstanding issues, prior to transfer of 66.40 per cent stakes of M/s Abraaj to Chinese company Shanghai Electric Power (SEP), well informed sources told Business Recorder.
Co-chaired by Minister for Privatisation, Mohammedmian Soomro and Minister for Energy, Omar Ayub, the meeting was attended by SAPM on Petroleum Nadeem Baber, SAPM on Power Tabish Gohar, Secretary Privatisation, Hassan Nasir Jamy, KES Board Chirman; Shan Ashary CEO K-E Syed Moonis Alvi, and senior officials of KE/KES power and Privatisation. SEP also participated via zoom and discussed their continuing interest and terms.
The source said the issue of administrator has already been discussed at a meeting at the Supreme Court. A couple of months ago, this issue also came under discussion.
"The issue of receivables and payables is lingering on for the last four years and no mechanism is found so far to resolve it. It is better that a third-party administrator should find out a solution acceptable to all the parties," the sources added.
No stakeholder, sources said, was not ready to back out from its existing stance but the presence of NAB is stopping them to find out an acceptable solution to the confronting issues.
"Either the Federal Cabinet or SC can take a decision on this issue as everyone wants to play on safe side," the sources maintained
The sources said, M/s SEP conveyed that they cannot commit anything unless the issue are resolved as elaborated in the letter.
SEP, in its letter to Privatisation Commission, that it would not move forward on purchase of 66.4 per cent stakes until the following issues are resolved. National Security Certificate (NSC)- SEP has confirmed that in principle, the draft of the Deed of Undertaking is in agreed form post several discussions between SEP and the Privatization Commission team. SEP looks forward to early approval of it by the GoP to proceed with its execution.
KE's Payable and Receivable Issue- The resolution of KE's payables and eceivables issue is very important for this transaction. SEP is expecting a clear settlement for KE's past dispute, and a reciprocity principle to settle future dues. Since payables and receivable issue is between KE and Ministry of Finance, and two entities under Ministry of Energy (SSGC and NTDC), SEP still hopes Government of Pakistan (GoP) can coordinate the settlement.
If GoP insists to use arbitration to settle this issue, then a fair arbitration ToR, including but not limited to the reciprocity principle, needs to be agreed between GoP, KE and KESP.
Regarding all other pending issues, SEP argued that in order for the company to conclude this transaction with KESP, there few other issues also need to be resolved either by GoP or Nepra.
SEP has sent its draft Facilitation Agreement (FA) long time ago and attached it again, requesting PC to provide comments, if any so that the company can proceed. SEP has forwarded the following conditions for the deal: (i) GoP's commitment not to sell its 24% KE share following a MTO waiver from SECP; (ii) Nepra's decision on KE's tariff mid-term review und write off;(iii) considering KE's current Multi Year Tariff (MYT) will be expired in June 2023, SEP also wants to understand Nepra's plan for KE's future MYT and; (iv) SEP expresses the hope that Nepra can give a stable long-term tariff mechanism for KE.
KE's exclusivity right- SEP states that it understands there are discussions on KE's exclusivity right at the level of the judiciary and regulatory organization in Pakistan.
"Chinese have conveyed in plain words that they are unwilling to proceed ahead until the issues are resolved as elaborated in the letter," the sources continued. An official statement says that it was resolved by the participants that "all-out efforts" will continue for timely and meaningful progress in the matter. According to sources, on the issue of administrator, Chinese feel that KES Power should respond. "It will take few months to conclude on investment in KE once the issue are resolved," the sources further added.
Copyright Business Recorder, 2020
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