ISLAMABAD:China’s Shangai Electrical Power(SEP) has expressed a pledge to finish exchange of K-Electric within half year subject to resolution of issues.

A gathering,led by the minister for privatisation and minister for energy, was held in the second week of the continued month on the way forward on issues associated with the transfer of K-Electric shares to SEP. Officials from SEP also joined the gathering through Zoom.

The Chinese officials shared that when they need clarity on the pending problems, it’ll take approximately two months to draft a business plan and agree on a share price with K-Electric. They added that when that’s done it’ll take them approximately four additional months to finish all regulatory and administrative approvals.

The Chinese officials shared that when they need clarity on the pending issues, it’ll take approximately two months to draft a business plan and agree on a share price with K-Electric. They added that when that’s done it’ll take them approximately four additional months to finish all regulatory and administrative approvals.

The gathering had been called to deliberate and agree on how forward on all pending issues concerning the issuance of National Security Certificate (NSC) for transfer of K-Electric shares and to interact SEP during this endeavour.

Speaking on the occasion, minister for energy expressed that an early resolution of all the problems concerning K-Electric is being explored. Meanwhile, Shanghai Electric can also indicate their readiness to accumulate K-Electric shares and to sketch a comprehensive business plan for improvement of the utility company.

The meeting was announced that a draft Deed of Extinguishment (DoE) and Deed of Undertaking (DoU) are agreed at the executive level with K-Electric Power Limited and Shanghai Electric, respectively.

The Special Assistant to PM on Power stated that the govt of Pakistan is making sincere efforts to holistically address the operational constraints of K-Electric by ensuring availability of required gas to run K-Electric’s thermal plants and providing additional electricity from the national grid to satisfy the wants of the corporate . He also expressed that it’s important to know the investment plan of Shanghai Electric after its acquisition of K-Electric.

Shi Mingwei, who was representing Shanghai Electric, said that the SEP is conscious of the discussions being held to deal with the previous receivables/payables of K-Electric and hoped that each one matters are going to be resolved amicably. He also remarked that for future, they expect a transparent arrangement about the principle of reciprocity on receivables/payables of K-Electric.

On the difficulty of a business plan, Shi stated that since 2016 additional issues have surfaced thanks to which the business plan shared earlier with the govt of Pakistan must be updated. He also stated that problems with mid-term review of multi-year tariff and write-offs are still pending with the National electrical power regulatory agency (Nepra).

Likewise, the difficulty of K-Electric’s exclusivity and uncertainty on new multi-year tariff structure have implications for the event of a replacement business plan.

He informed that in 2016, once they first expressed their willingness to accumulate shares within the company, it had been a profit-making entity, whereas as per the Iatest financial results it’s a loss making entity and thus a future business plan outlay will depend upon the result of the resolution of all identified.

The meeting discussed at length the implications of appointing an administrator for K-Electric as per Nepra Act, 1997.Also present within the meeting, the K-Electric director said that this matter must be haunted with the prevailing shareholders and will to not be haunted with SEP at this stage, a view which was supported by SEP.

The SAPM on petroleum enquired about the expected timelines for SEP to shut the transaction with existing shareholders and to require control of K-Electric affairs.

Responding to the present , the SEP officials said that it’s hooked in to the subsequent four core issues; resolution of past receivables/payables of K-Electric, decisions from Nepra on long pending problems with mid-term review of multi-year tariff and write-offs claim, certainty on exclusivity till the validity of existing license of K-Electric (till 2023), certainty on configuration of future commercial agreements and tariff for K-Electric.

The representative of K-Electric and therefore the company board chairman said that they’re in close touch with Shanghai Electric supported the periodic arrangements with the govt of Pakistan. He expressed that a strategic investor like SEP can run K-Electric and a required level of certainty is desired by any such transaction. The resolution of issues highlighted by SEP are going to be critical to any potential investor for an entity like K-Electric. He also expressed that as observed by the Supreme Court, they’re also committed to working along side the govt to seek out an amicable resolution of all issues surrounding the K-Electric transaction.

The K-Electric CEO highlighted that besides addressing problems with receivables/ payables, the resolution of operational aspects including commercial agreements with Sui Southern gas service and Central Power Purchasing Agency (CPPA) are imperative to avoid recurrence of problems countered by K-Electric.

He also stated that it’s tough to sustain smooth operations if there are extended delays in receipt of dues including subsidy amounts. He stressed that pursuant to Nepra’s legal framework, they expect regulatory predictability also when planning for further investments in K-Electric’s infrastructure.

The minister for privatisation in his closing remarks stated that the meeting has been very beneficial and every one stakeholders would need to move ahead with an open mind, ensuring sustainability and effective operation of K-Electric, which is within the best interest of all concerned.