Spat between PM’s aide, Saudi investor clouds KE deal prospects

Sun Online Desk

8th April, 2021 01:50:28 printer

Spat between PM’s aide, Saudi investor clouds KE deal prospects

In a dramatic turn that may forestall an early settlement of tens of billions of dues between K-Electric and state-owned entities, Saudi investor Abdulaziz H. Aljomaiah and Special Assistant to the Prime Minister on Power Tabish Gauhar publicly accused each other of conflict of interest and attempts to fleece the state and Karachi-based power consumers.

In a letter to Prime Minister Imran Khan, Mr Aljomaiah said that during his last month’s visit to Pakistan he had been given a clear understanding by the former and his cabinet members about settlement of issues but complained that “last minute negative comments on the agreed document by your SAPM [Mr Gauhar]” had potentially put at risk the takeover of KE by Shanghai Electric.

Mr Gauhar, however, rejected the allegations and said that as SAPM he was duty-bound to defend the state and consumers and he would defend the national interest without any bias, favour or fear.

Mr Aljomaiah said he was assured during the visit to Pakistan on March 15-16 that the resolution of pending issues would clear the way for the long-delayed entry of Shanghai Electric Power to KE. “I was assured by all including Your Excellency that a dispute resolution document” finalised by all stakeholders through a lengthy painstaking process was in the final stages of approval by the PM Office, he added.

Mr Aljomaiah alleged that Mr Gauhar had a clear conflict of interest in KE matters and hence during deliberations painstaking efforts were made to ensure adequate representation of parties that had a bona fide and a conflict-free interest. “Mr Gauhar was not included in such deliberations since he has served as the former chief executive officer and chairman of KE and would be ill-placed to adequately represent the interest of the federal government where KE was counterparty. His involvement will taint the process and the outcome will always remain challenged regardless of what it is,” the Saudi businessman wrote.

He also alleged that the SAPM also solicited an invite to join on March 10 an all KE international investors briefing even though he was not part of the negotiation process and stated categorically and with certainty, much to the dismay of investors from Saudi Arab, Kuwait and the UAE, that the government would be unable to resolve the outstanding issues in a fair manner for both the government and KE, and that a resolution should not be expected any time soon and alleged that it was with mala fide intent and later spoke negatively on the media.

Mr Aljomaiah also wondered why Mr Gauhar publicly questioned the decisions he took on behalf of KE during this tenure as its CEO, including challenging the amount of regulatory clawback determinations. He said it was unjust and contrary to the spirit of investment principle about a group which entered Pakistan 15 years ago, made the largest single direct investment into a power utility and succeeded in turning a bleeding wound of the GOP into a self-sustaining entity despite tremendous roadblocks and bureaucratic hurdles.

Responding to the letter, Tabish Gauhar said that just because he served as CEO and chairman of KE between 2009 and 2015 did not constitute a “conflict of interest” since he had no current direct or indirect economic stake in KE. “I am just doing my job as one of the GOP functionaries to protect the public interest. I don’t have any ‘personal’ views on KE; they simply reflect the ‘institutional’ views of the power division, Ministry of Energy.”

He said the fact that the Shanghai Power transaction was stalled since October 2016 clearly implied that something fundamental was wrong with the proposed terms and conditions that two successive governments and several bureaucracies had struggled to accept to date.

The SAPM said the resolution of the “terms of reference” of the proposed “arbitration tribunal” was just one of the roadblocks (i.e. circular debt) to the Shanghai transaction. There were issues pertaining to Nepra’s mid-year tariff determination that the independent regulator was handling on its own. Also, there were matters relating to signing of new gas and power agreements with SSGC (a listed company) and NTDC/CPPA (a GOP entity), respectively, for future supplies where there were still quite fundamental disputes on the payment methodology.

Mr Gauhar also put on record that Shanghai’s revised offer to KE’s existing shareholders, including their insistence on imposing a consumer surcharge for delayed subsidy payments going forward, had also been rejected by Nepra as a matter of principle for all Discos (distribution companies), not just KE.

He said there was clear difference between the interests and sustainability of KE and its consumers (top priority for GOP) and the financial concerns of the selling investors (of secondary importance to the state) which could not be given immunity for their actions, inactions or policy choices of many years. He denied that he was “self invited” to the call with KE investors who had sought to listen to him. In fact, Shan Ashary (KE chairman and Al Jomaih’s chief rep) was not only present at the call but also spoke after Tabish Gauhar and confirmed his assessment as well.

On the clawback point, which meant return of excess profit of up to Rs45bn to KE’s consumers, Mr Gauhar said it was irrelevant for his position as CEO years ago but important was Nepra’s decision and the need to vacate KE’s over five-year stay order so that a corresponding relief is passed on to its consumers. He alleged that KE was running a media campaign through a PR firm against him.

He said he was in favour of KE going to Shanghai Electric and had suggested this under the CPEC umbrella to accelerate the proposed transaction and was making all-out efforts to provide more power to KE from the national grid, more gas for the upcoming new power plant from PLL and more indigenous gas versus RLNG for their existing plants.

He said Shanghai Electric takeover meant writing off tens of billions of rupees of overdue amounts and penalties, signing a non-commercial-based power purchase agreement against the federal cabinet’s decision, agreeing to further surcharges and tariff increase for consumers, federal subsidy budget, etc. It’s important for everyone to at least know about the implications, he added.

Source: Dawn