Karachi (Reuters) – A Cayman Islands court ordered minority investors in Pakistan utility K-Electric (KELE.PSX) to drop a case in Pakistan seeking to block the company’s majority shareholder from naming directors, the shareholder said on Friday, but a minority investor gave a conflicting account.
Infrastructure and Growth Capital Fund SPV21 (IGCF) told Reuters that a court in the Cayman Islands issued a ruling in its favour on Wednesday. Reuters was not immediately able to verify the court ruling.
IGCF owns a 53.8% shareholding in Cayman Island-registered KES Power Limited (KESP), which in turn owns 66.4% of K-Electric. The government of Pakistan owns 24.4% of K-Electric.
K-Electric’s holding structure has widely been considered an impediment to its acquisition by China’s state-owned Shanghai Electric (601727.SS), a deal that has been delayed for years by regulatory and legal hurdles in Pakistan.
According to a court document provided by IGCF, the Grand Court of the Cayman Islands ordered the minority shareholders to “terminate” the petition in the high court in Pakistan’s Sindh province. It sought to prevent IGCF from appointing its nominees to K-Electric’s board of directors.
In October 2022, the Sindh court issued a stay order preventing any change in K-Electric’s board because of the lawsuit. There are three vacant slots on the board.
“We trust that this order will clear any doubts that had been created by the (Sindh High Court) stay order as to the rights of IGCF to appoint their nominees to K-Electric’s Board,” IGCF said in a statement
The Pakistan court case was brought by KESP minority shareholders Saudi holding company Al-Jomaih and Denham Investment, which is based in Saudi Arabia and Kuwait. Denham did not immediately respond to a request for comment. K-Electric declined to comment.
Shan Ashary, chief investment officer of Al-Jomaih, said the Cayman ruling “only partially granted” what IGCF sought but he did not specify details. He said the Cayman court recognised that the Pakistan court should decide certain “important public policy matters.”
He said that the Cayman ruling allows the Pakistan case to proceed through the government’s privatization commission and power division.
Ashary said a second hearing would take place in the Cayman Islands in October, but this would first require an appeal of the court’s ruling.
K-Electric is the only electric utility for Karachi, Pakistan’s largest city, and its adjoining areas, and the only listed electricity supplier in Pakistan. It was privatised in 2005 and has a market capitalisation of 53 billion rupees ($195 million).
In July, IGCF initiated legal proceedings to seek direct ownership of a stake in K-Electric by dissolving KESP.
IGCF declined to comment directly on whether it backed Shanghai Electric’s long-stalled bid for K-Electric.
“We are supportive of any effort that leads to affordable electricity for Karachi and opposed to any transaction that leads to increasing the suffering of Karachi’s consumers,” it said.
In June, Shanghai Electric reiterated its commitment to the deal, which was worth approximately $1.77 billion in 2016.
