Karachi Electric Supply Company (KESC) has declared through a statement that two of its debt financiers, International Finance Corporation (IFC) and Asian Development Bank (ADB) who are lenders of US $275 million to KESC have expressed their intent to partially convert their debt into equity.
Each of the two institutions will invest up to US $25 million equivalent in the common shares of the power utility, thus translating into an equity infusion of US $50 million equivalent. As per the loan financing agreement signed by IFC (a member of the World Bank Group) and ADB with KESC in 2010, the two international institutions have the right to convert upto US $50 million of their debt into equity before 31 December 2012.
Accordingly, IFC and ADB have communicated their intent to exercise this right for the full amount. As per KESC management, this positive development, where two leading international financial institutions are geared to become shareholders in KESC is a reflection of their confidence in the turnaround progress being made by the power utility.
The direct and immediate impact of the conversion of this loan facility into equity will mean significant reduction in KESC's debt, not only translating into greater financial leverage but will also mean substantial savings in terms of servicing financial charges. This positive endorsement by IFC and ADB is being viewed by KESC as paving way for international investor confidence not only in the utility but also in the Pakistan economy.-PR
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