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    Karachi Electric Supply Corp/some Questions.

    A letter by Mr. Hamid Sherwani from Karachi has been published in the daily Dawn English Karachi on May 09, 2005 about KESC. Every Pakistani has a right to ask same questions to government Popes!

    SHAFIQ KHAN
    CANADA

    HERE IS THE LETTER:


    SEVENTY-three per cent shares of the KESC were sold to a Saudi enterprise on Feb 4, at the rate of Rs1.80 or so per share, as reported by Dawn, whereas the quoted price at the Karachi Stock Exchange on that date was more than eight Rs8 per share.

    The story does not end here. According to the report (April 19), though the buyer company was legally bound to deposit Rs20.04 billion as bid money within 14 days of acceptance of the bid, it has failed to pay till today.

    Instead of cancelling this deal and confiscating the bid money of Rs100 million within 15 days of acceptance, the Privatization Commission deputed its representative to go to Saudi Arabia and persuade the buyer company to pay Rs20.04 billion as soon as possible. According to Dawn (April 24), the buyer has promised to pay Rs20.04 billion soon which is again an evasive technique.

    According to reports, the government had invested Rs20 billion a few months before selling to the Saudi company just to get Rs0.04 billion to hand over management of the company. The government has already posted a senior army officer to organize the affairs of the company to bring it out of the red. Has he failed?

    I hope the Privatization Commission chairman will enlighten us on the following points:

    Why were shares sold at the rate Rs1.80 a share when the same were being sold at the Stock Exchange at more than Rs8 a share? Why was the deal not cancelled and deposit money of Rs100 million confiscated when the buyer had failed to pay Rs20.04 billion within 15 days of acceptance? Why was a senior officer sent to Saudi Arabia to ask the buyer company to deposit Rs20.04 billion long after the commitment date had expired?

    HAMID SHERWANI
    Karachi

    #2
    Re: Karachi Electric Supply Corp/some Questions.

    "Why were shares sold at the rate Rs1.80 a share when the same were being sold at the Stock Exchange at more than Rs8 a share? "

    Because the gov't had a preferred holding in the company and probably via some structured transaction transfered the ownership of its holding on to the Saudi Group.

    "Why was the deal not cancelled and deposit money of Rs100 million confiscated when the buyer had failed to pay Rs20.04 billion within 15 days of acceptance? "

    the deal was probably contingent on financing and i would assume that once you have gone through the pains of doing a deal..it is not easy to go back. A lot of monies has been spent on bankers, lawyers, acct's to get the deal done. These things happen all the time. Probably some issue with the Saudi's funders.


    Why was a senior officer sent to Saudi Arabia to ask the buyer company to deposit Rs20.04 billion long after the commitment date had expired? "

    Has to be something more than just a clerical oversight.

    The question you should be asking is "Why is the army personnel better than a banker in doing this?" WHy the fk is the army involved in the transaction..shouldn't they be worried about fighting the jihadis, fighting Indians, training for armageddon...what the fk are they doing in the middle of an investment banking transaction?"

    ^ this is the biggest tragedy of the letter...
    Now repeat after me...."Jeter is the prophet and Rivera is the savior"

    Comment


      #3
      Re: Karachi Electric Supply Corp/some Questions.

      Well, your answers to the questions raised in the letter are based on assumptions and concoctions which has nothing to do with the reality.
      In my opinion,

      (1) the Citi banker Prime Minister and the Musharraf government has the same capitalist mentality as IMF,World bank and Americans do.
      (2) The government needs money by hook or crook and the only way to generate revenues is to sale government owned institutions.
      (3) The government is desperate to materialize the deal to get rid of KESC so it's not cacelling the deal besides the fact that the buyer has not turned up as agreed upon.
      (4) Government is afraid if the deal does not go through, they might not see another buyer in the near future.

      This deal reminds me fruit sean in Sindh and Punjab, banana and mango when some contractor strikes a deal with the owner of the orchard, say Ten Lac for the season. The contractor makes a down payment of Rs. 50,000.00 way before the trees bearing fruit and remaining Rs.950,000.00 he pays intermittently as he picks the fruit time to time till the end. The theka is gone when trees simply starts blooming (bearing flowers).
      But when the trees bear fruits completely and if the fruit is far less than the expectation of the contractor, he slips away (disappear) one night leaving his advance payment of Rs. 50,000.00. The contractor calculates through his experience and if he finds the entire crop would be Rs. 5.00 lac or Rs. 6.00 Lac, he thinks to swallow Rs. 50,000.00 pill rather to pay from his pocket the loss of 4-5 Lac Rupees.

      The bottom line is, if the buyers of KESC might have worked out and found, they would be in loss if go through the deal and would prefer to give up on 100.00 Million Rupees down payment than paying Rs.20.04 Billion!
      Ooooooooooooooops!

      SHAFIQ KHAN


      Originally posted by Pinstripe Danda
      "Why were shares sold at the rate Rs1.80 a share when the same were being sold at the Stock Exchange at more than Rs8 a share? "

      Because the gov't had a preferred holding in the company and probably via some structured transaction transfered the ownership of its holding on to the Saudi Group.

      "Why was the deal not cancelled and deposit money of Rs100 million confiscated when the buyer had failed to pay Rs20.04 billion within 15 days of acceptance? "

      the deal was probably contingent on financing and i would assume that once you have gone through the pains of doing a deal..it is not easy to go back. A lot of monies has been spent on bankers, lawyers, acct's to get the deal done. These things happen all the time. Probably some issue with the Saudi's funders.


      Why was a senior officer sent to Saudi Arabia to ask the buyer company to deposit Rs20.04 billion long after the commitment date had expired? "

      Has to be something more than just a clerical oversight.

      The question you should be asking is "Why is the army personnel better than a banker in doing this?" WHy the fk is the army involved in the transaction..shouldn't they be worried about fighting the jihadis, fighting Indians, training for armageddon...what the fk are they doing in the middle of an investment banking transaction?"

      ^ this is the biggest tragedy of the letter...
      Last edited by SHAFIQ KHAN; May 9, 2005, 08:52 PM.

      Comment


        #4
        Re: Karachi Electric Supply Corp/some Questions.

        Nawas Sharief was manipulating things from Saudi retreat

        Comment


          #5
          Re: Karachi Electric Supply Corp/some Questions.

          Khan Sahib,
          Iam still confused why sell in privatisation for Rs 1.80 when Market continues to trade at Rs. 7 and above. Havent yet got a satisfactory response from anyone. Even if KESC is a loss making entity, market continues to price it at Rs.7, if ownership is transferred, then by international financial standards there was a premium to be paid by the buyer. So what was so different here? And, is the market wrong pricing kesc at Rs 7.00??

          Much more important issue here is handing over power supply of the main port city to a foreign entity. Many countries restrict ownership to sensitive asstes because of security concerns. US does not allow foreign companies to own more than 20% of their airlines.

          Comment


            #6
            Re: Karachi Electric Supply Corp/some Questions.

            ^ which part of preferred equity or pipe transaction don;t you understand...I assume all of it.
            Now repeat after me...."Jeter is the prophet and Rivera is the savior"

            Comment


              #7
              Re: Karachi Electric Supply Corp/some Questions.

              Originally posted by Pinstripe Danda
              ^ which part of preferred equity or pipe transaction don;t you understand...I assume all of it.
              PD_
              Cud u b so kind enuff to let us know how this transaction has been structured. And, yes u are right, I have failed to understand the transaction, thus I will be eternally grateful if you cud shed some light on this kesc deal....thanking you and waiting most eagerly for your response....your ever truly..Fartguru

              Comment


                #8
                Re: Karachi Electric Supply Corp/some Questions.

                I am assuming that hte gov't held preferred instruments in the company. Should they want to sell their stake at a negotiated price with a buyer who brings in things other than capital, they reserve the right to do so. I am sure fairness opinions are usually gatherred as part of the regulatory guidelines in Pak. Pakistanis are backward..but not that backward.

                Deals like these are common and there is nothing wrong with the structure of the transaction, you shouldn;t have an issue with that..you should have an issue with the following.

                1) How is it that the Army is involved in this in the first place?
                2) Have they acquired a fairness opinion
                3) What other things besides capital does the Saudi concern bring ot the table..(I am assuming jihadi mentality/practice is not needed)
                Now repeat after me...."Jeter is the prophet and Rivera is the savior"

                Comment


                  #9
                  Re: Karachi Electric Supply Corp/some Questions.

                  Originally posted by Pinstripe Danda
                  I am assuming that hte gov't held preferred instruments in the company. Should they want to sell their stake at a negotiated price with a buyer who brings in things other than capital, they reserve the right to do so. I am sure fairness opinions are usually gatherred as part of the regulatory guidelines in Pak. Pakistanis are backward..but not that backward.

                  Deals like these are common and there is nothing wrong with the structure of the transaction, you shouldn;t have an issue with that..you should have an issue with the following.

                  1) How is it that the Army is involved in this in the first place?
                  2) Have they acquired a fairness opinion
                  3) What other things besides capital does the Saudi concern bring ot the table..(I am assuming jihadi mentality/practice is not needed)
                  PD
                  Company is worth the present value of its future expected cash flows. Are you telling me that the market was wrong at the time of privatization? Cause even if Saudi's bought capital investments, that capital investment will be discounted in the form of increased cash flows i.e., higher share price.

                  As for your concerns
                  1) Cause they are runnig state of affairs, Men in charge
                  2) Do not know, will check
                  3) Doesnt really matter, if you run a business or buy one that is assumed

                  Comment


                    #10
                    Re: Karachi Electric Supply Corp/some Questions.

                    FG, vlauation techniques are a plenty. This was a negotiated sale of prinicpal investment. There is nothing wrong "legally" with a party selling it's equity to another for a deep discount. If the shareprice reflects future earnings, as it happens a lot,( tech bubble, new economy, amazon.com, the runaway inflation of the KSE in general, )as opposed to evaluation of leveraged assets, long term capital commitments etc..which can drive down the share price as well.

                    re; point #3: It does matter...as part of the negotiated transaction the Saudi outfit could be assuming/transferring liabilities, giving a lower hurdle rate for borrowing, relationships in the market etc etc..all these demand a premium
                    Now repeat after me...."Jeter is the prophet and Rivera is the savior"

                    Comment


                      #11
                      Re: Karachi Electric Supply Corp/some Questions.

                      Originally posted by Pinstripe Danda
                      FG, vlauation techniques are a plenty. This was a negotiated sale of prinicpal investment. There is nothing wrong "legally" with a party selling it's equity to another for a deep discount. If the shareprice reflects future earnings, as it happens a lot,( tech bubble, new economy, amazon.com, the runaway inflation of the KSE in general, )as opposed to evaluation of leveraged assets, long term capital commitments etc..which can drive down the share price as well.

                      re; point #3: It does matter...as part of the negotiated transaction the Saudi outfit could be assuming/transferring liabilities, giving a lower hurdle rate for borrowing, relationships in the market etc etc..all these demand a premium
                      Hmmm..PD make plenty sense....me need to hit the books, stay away from halwa...tks PD..

                      Comment


                        #12
                        Re: Karachi Electric Supply Corp/some Questions.

                        The Privatisation commission to my knowledge is purely civilian run..the direct role of Army officers is news to me...I believe they vetted the bidding groups quite thoroughly..but something similar did happen previously in the award of mobile company licenses...the company which defaulted past a certain stage lost the deal and it went to the 2nd highest bidder...
                        How can a man die better than facing fearful odds for the ashes of his fathers and the Temple of his Gods?

                        Comment

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