ISMAIL DILAWAR

KARACHI: Friday was no exception for the privately-run listed power utility, K-Electric Limited (KEL), to have topped the list of most-traded equities at Pakistan Stock Exchange (PSX).

Having been counting millions of its listed shares changing hands on a daily basis, the Karachi-based KEL appreciated in value to Rs8.71 in the week’s last session with 56 million shares trading.

Trigger for this bull-run in the market shares of UAE-based Abraj Group firm is its possible acquisition by a powerful consortium comprising Shanghai Power Electric (SEP) of China and Engro Corporation of Pakistan in a $2.5-$2.8 billion deal, reportedly.

Two of the three stakeholders, KEL and Engro Corp, have rebutted the media and brokerage reports talking of any such development. “There is no such thing taking place at this time,” KEL spokesperson Sadia Dada told Business Recorder Thursday.

The utility’s director communication “categorically” said that “the rumors circulating in the market are baseless”.

Before that, Engro Corp came in denial of the reported sell-off deal.

“The news item circulating in certain sections of print and electronic media stating that Engro Corporation has shown interest in a bid to purchase K-Electric, the company clarifies that it has neither expressed interest nor participated in any bid to purchase K-Electric,” reads a press alert the conglomerate issued Thursday.

Asked for a rationale, an insider at Engro cited the government’s “increased intervention” in the electricity supplier’s affairs as a major bottleneck for it to be a stakeholder. “The political thing, you know,” he said.

With SEP, the major potential acquirer, keeping mum on the media hype the market analysts, citing media reports, estimate the size of the unconfirmed deal at $ 2.5 billion to $2.8 billion for KEL’s 18.15 billion shares, constituting 66.4 percent held by KES power (Abraaj group and Al-Jomaih Group).

They see the acquisition price ranging from Rs14.3 to Rs16.0 per share.

“We believe near-term market reaction to this media report is likely to be positive in the case of KEL,” viewed Syed Atif Zafar, an analyst at JS Research.

Tahir Abbas at Arif Habib Limited Research said its equity value put at $2.5-$2.8 billion the KEL’s acquisition price would translate into Rs9.5-10.6 per share.

“Moreover, if the transaction value is $2.5-2.8 billion then its acquisition price will be Rs14.3-16.0/share,” he said.

With market forces having done their calculations, the scrip peaking to new highs on PSX, Engro having distanced itself from issue and KEL coming up in a complete denial, some insiders at the power utility insist that the talk-of-the-town has some substance in it.

“They are in talks with Chinese but nothing concrete is expected to come up before September AGM (annual general meeting),” an insider confided to Business Recorder.

In the shareholders meeting, he said, the company’s financial accounts, dividends etc, would be declared that would help the two sides determine the transaction price of the sell-off.

“Chinese had visited KE’s power houses 8-10 days ago,” he claimed adding the UAE-based owners of KEL might sell out 51 percent of their 71 percent shareholdings to retain the balance.

“They (Abraaj) would keep their participation as they are working, under the name of K-Energy, on the conversion of two gas-based power plants, Unit 1 and Unit 2, into coal-based at Port Qasim,” he explained.

Augmenting his claim, the insider said those doubting the sell-off deal taking place should look at KEL’s share trading at the stocks market. “Whenever a company is put up for sale its share prices appreciate,” he said adding “It would go up to Rs10 per share by September-end”.

Top officials at the ministry of petroleum also have a buzz of the issue as one such high ranking official said: “This is probably Abraaj selling K-Electric”.

“They (Abraaj) had tried (South) Koreans before. May be its Chinese now,” he added.

Talking about a government touch in the issue, the official said the same was limited to Islamabad’s current shareholding in KEL and any shareholders agreement. “In my opinion NEPRA approvals will be a larger issue,” the official opined.

Asked to elaborate the complexities if any, he said: I don’t see any but I am sure NEPRA would find some”.

If seen in the backdrop of the insider’s claim that the SEP-KEL deal might materialize belatedly in September, one can have some insight into Dada, KE spokeswoman, using words like “this time” while refuting media reports.