Cayman Grand Court allows Pakistan proceedings to continue in the KE takeover battle

BusinessCayman Grand Court allows Pakistan proceedings to continue in the KE takeover...

Monitoring Desk: The Grand Court of the Cayman Islands has granted partial relief to Infrastructure and Growth Capital Fund SPV21 (IGCF) but also allowed the Pakistan Proceedings to continue with the Government of Pakistan through the Privatization Commission and Power Division Secretaries, NEPRA and SECP in the battle for the takeover of Karachi Electric (KE).

Mr Justice Segal Judge of the Grand Court made the order in Al Jomaih Power Limited and Denham Investment Ltd’s case against Infrastructure and Growth Capital Fund SPV21 (IGCF).


In October 2022, the Sindh High Court issued a stay order preventing any change in KE’s board of directors because of a lawsuit filed by the shareholders in KESP. There are three vacant slots on the board of directors.

A spokesman of Al Jomaih Power Limited and Denham Investment Ltd said: “This order merely documents the Court’s previous judgment. In effect, the Cayman court has only partially granted the relief sought but SPV 21 recognising that there are important public policy matters that the Pakistan courts and authorities must be allowed to determine and are bound to take very seriously. K-Electric is an important asset and Al Jomaih and Denham remain committed to the people of Karachi and the success of K-Electric. In recognition of that point, the Cayman Court permits the Pakistan Proceedings to continue with the Government of Pakistan through the Privatization Commission and Power Division Secretaries, NEPRA and SECP.
“We are grateful to the Cayman Courts for recognizing that this is a sensitive matter for the people and Government of Pakistan with implications and national security.”
The spokesman said that nothing in the 16th August Order can be implemented till a second hearing takes place, which will be sometime in early October.

The Order asks the two shareholders to terminate or otherwise discontinue the proceedings commenced by them in the High Court of Sindh at Karachi, Pakistan by the Suit for Declaration and Permanent Injunction issued on 21 October 2022 and also orders that the “Other Shareholders” shall not (whether by themselves or their agents) commence or pursue, or procure or assist the commencement or pursuit of, any proceedings in connection with any dispute or disagreement under, arising out of, or relating to the Shareholder Agreement dated 15 October 2008 in any court or tribunal other than in either the Grand Court of the Cayman Islands or an English court.

The Order, however, also rules “The Other Shareholders may continue the Pakistan Proceedings against (i) the Government of Pakistan through the Secretary, Privatisation Commission, Ministry of Privatisation and Investment (ii) the Government of Pakistan through the Secretary, Ministry of Energy, Power Division (iii) National Electric Power Regulatory Authority and (iv) the Securities and Exchange Commission of Pakistan as defendants to the Pakistan Proceedings if and to the extent that the Other Shareholders only apply for and pursue relief that requires those defendants to the Pakistan Proceedings to exercise their duties, rights or powers in relation to K-Electric Limited or KES Power Limited in a manner that does not prevent the Applicant from exercising, or interfere with the exercise (whether before or after the date of this order) by the Applicant of, its rights under the SHA as a KES Power Limited shareholder.”

In layman’s terms, this means that further court hearings are required to determine the facts.

The KE ownership structure has come under discussion after it was reported that the majority shareholding of K-Electric has been taken over by Sage Venture Group Ltd, a British Virgin Islands–registered special purpose company wholly owned by AsiaPak Investments Ltd.

Evidence shows that it was in the year 2005 that the Aljomaih Group of Saudi Arabia and National Industries Group (NIG) of Kuwait, through an agreement in collaboration with the Government of Pakistan, attained the lion’s share of KE ownership. This privileged position has persisted to this day, endowing the two entities with commanding see-through ownership of 30.7% of the company, KE.

In 2008, an exceptional exemption waiver was granted by the Pakistani Government for the entry of Abraaj, enabling their entrance into this investment venture. This access was facilitated through a special purpose vehicle domiciled in the Cayman Islands, named Infrastructure Growth and Capital Fund (IGCF) SPV 21, which boasted over 80 investors brought in by Abraaj as part of the IGCF Fund structure in addition to Abraaj’s proprietary investment, according to records.

In the wake of Abraaj’s liquidation around 2018 after the big scandal, the mantle of managing the firm’s stake, encompassing the interests of Limited Partners (LP) within the IGCF Fund, fell to liquidators and the original shareholders and liquidators started working together to consummate the sale of KE to Shanghai Electric.

However, in the latter part of 2022, events took a turn when liquidators undertook a series of transactions, effectively transferring their responsibilities to a company freshly incorporated in 2022, namely Sage Ventures Limited, owned by Shehryar Chishti and his spouse. The dispute became public when Chishti claimed he possessed the majority stake in KE whereas the original shareholders say that Sage Ventures Limited has acquired only the management of the IGCF Fund and a minority share in the LPs of the Fund, translating to just about 7% of see-through shareholding in KE in comparison to the formidable 30.7% ownership held by the original shareholders.
The original stakeholders say the claim of owning the majority stake in KE is unfounded on the basis that acquiring the General Partner (GP) of IGCF as GP ownership merely gives management rights without any economic stake in KE and that the IGCF Fund’s stake in SPV 21 comprises purely non-voting shares.

Adding to the complexity is the existence of distinct share classes, including voting and non-voting shares, in the Cayman Islands. However, an investigation into SPV 21’s actual share register has revealed that the sole proprietor of the voting stock is Abraaj Investment Management Ltd (AIML), which is also currently under liquidation. This raises further questions about the actual ownership of the main company and indicates that there will be hard legal battles ahead.

The original shareholders, possessing 30.7% ownership, along with Mashreq Bank (based out of UAE), an additional significant stakeholder with 10.5% see-through ownership in KE, collectively account for 41.2% ownership in KE. All these stakeholders have aligned interests. Their shared objective, according to them, revolves around enhancing KE and fostering foreign direct investment (FDI) in Pakistan. The original shareholders have opted not to receive any dividends from KE since 2005, channeling the cash flow back into the company to bolster its capacity and stimulate growth, they say.

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