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Tuesday, May 28, 2024

Chairman of KE Disputes Shehryar Chishti’s Majority Ownership Claim, Reveals Only 5.1% Indirect Stake in KE

This revelation of Shehryar Chishti's actual stake in KE underscores the dangers of misinformation and the critical need for verified information.

Karachi Electric (KE) Chairman Mark Skelton has officially certified that Shehryar Chishti’s indirect beneficial ownership in KE, facilitated through the Infrastructure and Growth Capital Fund (IGCF Fund), stands at a mere 5.1%. This revelation contradicts numerous earlier claims made by Shehryar Chishti, who had portrayed himself as the majority shareholder in KE.

Leaked documents from Alvarez and Marsal, a well-known international consulting firm, reveal that Shehryar Chishti is an LP (Limited Partner) of the IGCF Fund with “a 5.1% indirect interest in KE.”

The document, in possession of this publication, bears the signature of Mark Skelton, who serves as both the Chairman of KE and the Chairman of Cayman Island registered KES Power Limited (KESP), the parent company of KE. Mr. Skelton also holds a directorial position in IGCF General Partner Limited, which manages the IGCF Fund. Furthermore, Mr. Skelton is the Managing Director of Alvarez & Marsal Europe LLP.

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This certified document, signed by the Chairman of KE and KESP on July 11, 2023, for a legal filing, is titled “KES Power Limited (IGCF) – entities holding greater than 5% economic beneficial (indirect) interest in KE as of 11 July 2023.”

The Pakistani media has recently been embroiled in a debate over Shehryar Chishti’s claim of becoming the “majority” owner of K Electric Limited.

Multiple reports had suggested that he held a substantial ownership stake in the company. However, the original Saudi and Kuwaiti investors, Al-Jomaih and NIG, have consistently rejected this claim, asserting that they collectively hold over 30.7% indirect share in KE. The certified document from the Chairman of KE and KESP now reinforces this stance.

This leaked document, acquired from undisclosed sources, provides concrete evidence of the actual ownership structure, and it raises crucial questions. The document contains intricate ownership information and structural details that unveil the full extent of IGCF Fund’s involvement in K-Electric.

It also discloses that approximately 30% of IGCF SPV 21, the third shareholder in KESP (besides the Saudi and Kuwaiti groups), is owned by Mashreq Bank. This translates into Mashreq Bank holding a 10.5% indirect stake in KE. In comparison, Shehryar Chishti’s see-through ownership is revealed to be only 5.1%, less than half of Mashreq Bank’s stake.

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Chishti’s economic stake in KE is a result of his acquisition of Limited Partners’ interests from various investors in the IGCF Fund, which was established in 2008 with over eighty initial investors.

Given the extended investment horizon, beyond the fund’s originally envisaged lifespan, many investors sought to exit.

Chairman of KE Disputes Shehryar Chishti's Majority Ownership Claim, Reveals Only 5.1% Indirect Stake in KE

Consequently, the hierarchy of indirect ownership in KE starts with the original investors in KE, the Saudi and Kuwaiti conglomerates (30.7%) since the time of privatization in 2005. Following them is Mashreq Bank (10.5%), which inherited the stake due to the difficulties faced by Abraaj Group, now in liquidation. The smallest portion belongs to Chishti (5.1%) through his offshore entity in the British Virgin Islands (BVI).

The revelation of K Electric’s genuine ownership structure has significant repercussions across various domains. Investors and stakeholders who relied on previous media reports are now grappling with this new reality.

Legal experts are scrutinizing the implications, questioning financial disclosure integrity, corporate governance, and regulatory oversight. The sudden shift in ownership perception has opened the door to potential legal challenges and investigations, highlighting the importance of accurate and transparent corporate reporting.

This revelation of Shehryar Chishti’s actual stake in KE underscores the dangers of misinformation and the critical need for verified information.

It also underscores the role of investigative journalism in uncovering corporate truths and emphasizes the importance of independent media in holding powerful entities accountable and providing the public with accurate information. Furthermore, it emphasizes the supervisory role of regulatory authorities in investigating concealed transactions in offshore jurisdictions, especially when they pertain to assets of national security significance for Pakistan.