Privatisation Commission Secretary, Tahsin Khan Iqbal, signed and handed over transfer documents to the authorised attorneys of the consortium Shan A Ashary of Aljomaih Holding Company, Farooq Hasan of Hasan Associates and Haleem Siddique of Premier Mercantile Services.
In addition, the buyers also established an irrecoverable revolving letter of credit on National Bank of Pakistan for $500 million as a guarantee to replace and upgrade the distribution network and establish new power plants for the Karachi-based utility. The L/C tenor is seven years but sources say this amount would be utilised in three years.
The buyers have also credited $75 million in KESC''s account for its working capital needs.
In essence Aljomaih consortium has invested $350 million to obtain two classes of shares. 51 percent shares classified as sponsors equity will be held by them for at least three years and 22 percent shares allotted to them as preferred shares are saleable after one year.
The agreement signed between the Privatisation Commission and the buyers commits them to the scope of work required to reduce line losses and bring about efficiency in KESC''s operations.
Around Rs 22 billion in ongoing projects have already been provided to the KESC by the government. From December onwards one billion rupees in subsidy from the Federal Budget to KESC will now be discontinued.
On Tuesday, the new Board of Directors of KESC was constituted. It has five directors from the buyers'' side and three from the government side. The former commerce secretary Tasneem Noorani is reportedly among the government directors. The Board also appointed a new Chief Executive Officer for the utility.
Privatisation Minister Dr Abdul Hafeez Shaikh has said that KESC transfer to Hasan Associates-led consortium would provide better service to the industry, reduce cost of doing businesses and improve its efficiency.
He was addressing the ceremony held for transfer of GoP''s 73 KESC shares with management to the consortium, comprising Hasan Associates (Pvt) Limited, Aljomaih Holding Co KSA and Premier Mercantile Services.
The signing ceremony of bid documents and issuance of Letter of Acceptance (LOA) was held on November 19,2005.
Hafeez Shaikh said that the Commission has received $258 million (Rs 15.9 billion) of Rs 20.2 billion bid money which would also increase the FDI. He added that the buyer will invest $500 million in KESC in next three years. Its first phase of $75 million would be invested during the current fiscal year.
The minister maintained that successful KESC transaction would send a strong signal to the investors and help the government expedite process for other major transactions. Dr Hafeez termed the KESC transaction as a landmark that he claimed would not only result in rapid turn around of KESC but also a source of better services to the people of Karachi.
The minister appreciated all the concerned departments; consultants and officials of Privatisation Commission who played role in making the KESC transaction a success.
He recalled that the government gives top priority to KESC consumers and believes that the new management will come up with an efficient system and better strategy to cut down KESC loss and give central position to consumers in its future planning.
According to the minister, KESC sell-off will be followed by PTCL, PS0, PPL NIT and PSMC. He said that PSMC privatisation would be completed by mid January 2006.
Shan A Ashary on the occasion appreciated the government''s privatisation programme and termed KESC successful transfer to his consortium as a big step in the right direction.
The Attorney of Aljomaih Holding gave a clear commitment to the authorities on the occasion that the new management will not retrench any of the KESC employees.
He said, "Being authorised attorney of the new management I would like to give an assurance to everybody that none of KESC employees will be retrenched. Rather the new management will train the existing workforce and hire more to make the utility a vibrant force in real terms."
On Wednesday, the Sindh High Court is expected to take up a case to stay the take-over of the KESC. Rashid Rizvi Advocate is expected to appear on behalf of the petitioners.