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kesc

ASIF FAROOQI

ISLAMABAD: The government has deferred the privatisation plan of Karachi Electric Supply Company (KESC) following refusal by its financial adviser, the United Bank of Switzerland (UBS), to go ahead with the process, well-placed government sources have confirmed.

As announced by Finance Minister Shaukat Aziz, the company was to be put on sale by the end of this fiscal.

"After terming the circumstances for the privatisation of KESC as unfavourable in the country, UBS has abandoned the project. Consequently, the government had to reverse the process," official sources told Business Recorder on Saturday.

UBS was appointed as financial adviser through an open bidding during the Nawaz Sharif government with an aim to restructure and privatise the company. It had just completed the financial restructuring and was due to kickoff the actual privatisation plan.

"The UBS has not been formally relieved by the government but the project has been abandoned with mutual consent," sources at the Ministry of Water and Power said. They said that both parties had failed to meet each other's conditionalities. "UBS did not depute foreign experts for the restructuring plan and the government could not inject enough liquidity into the local KESC."

They maintained that although the termination of contract took place in an unpleasant way, the parties decided not to charge each other for breach of contract.

Sources said withdrawal of financial adviser was followed by other unhealthy signs that the government had to abandon the whole exercise immediately.

"KESC has become a negative equity over the months and weeks and most of its burden is carried by Wapda," officials said. They added that these were not ideal circumstances for the privatisation process.

"New equipment is needed with better technological supervision and infrastructure," the officials said. "KESC needs massive input before it could be put into ideal situation for sale."

The sources said the Asian Development Bank has shown keen interest in the revival of privatisation plan of the KESC and has offered to take up five percent equity of the company. "This would give a bit of confidence to the investor when process of privatisation restarts," the officials said.

The government has decided to re-design the road map for the KESC privatisation putting responsibility on different state institutions for doing the initial spadework necessary for the successful sell-off.

"The new road map would be made available to the ADB within a month redefining the role of KESC, PC, the ministry and other related institutions," the sources said.

The ADB has asked to provide it with the flow chart on different aspects of the privatisation within a month's time.