The Abraaj Group (‘Abraaj’ or ‘The Group’), a leading investor operating in global growth markets, announced that it has mandated Citi to evaluate strategic options with respect to its indirect stake in K-Electric (‘the Company’), a vertically integrated power utility listed on the Karachi, Islamabad and Lahore stock exchanges in Pakistan.
Abraaj acquired a controlling stake, through one of its Funds, in KES Power, the majority shareholder of K-Electric, in 2009. Since Abraaj’s acquisition, significant equity has been injected into K-Electric, resulting in a distinct improvement in the Company’s operations, notably through the addition of enhanced efficient generation capacity (1,000MW+ of new capacity since FY 2009) and a reduction by 10 percentage points in the transmission and distribution losses as of March 2014.
As a result of Abraaj’s active ownership model and the clear value creation plan that was set in place, K-Electric’s financial performance has improved, with the Company posting positive EBITDA and net income of US$ 276 million and $ 70 million respectively in FY 2013, compared to negative EBITDA of $87 million and a net loss of $ 197 million in FY 2009. K-Electric reported profitability for the first time in 17 years in FY 2012.
In addition to enhancing the operational effectiveness of the Company, K-Electric has been successful in embedding sustainability into its new business model. K-Electric was recently awarded the FT/IFC Transformational Business award for the category of ‘Achievement in Project Finance – Energy’, which recognized its achievement in creating truly transformational social, economic, environmental and corporate governance benefits, while positively enhancing the lives of over 20 million citizens of Karachi.
Furthermore, in November 2012, K-Electric secured a level ‘A’ rating from the Global Reporting Initiative (GRI), making it the first private sector utility in Pakistan to achieve such a rating for its integrated sustainability report.