$50 mln investment in ordinary shares; IFC & ADB set to become shareholders in KESC

KARACHI, Nov 29 (APP): Karachi Electric Supply Company (KESC) has declared through a statement that two of its debt financiers, International Finance Corporation (IFC) and Asian Development Bank (ADB) who are lenders of USD 275 million to KESC have expressed their intent to partially convert their debt into equity.

A KESC statement here on Thursday said that each of the two institutions will invest up to USD 25 million equivalent in the common shares of the power utility, thus translating into an equity infusion of USD 50 million equivalent.

It said that as per the loan financing agreement signed by IFC (a member of the World Bank Group) and ADB with KESC in 2010, the two international institutions have the right to convert upto USD 50 million of their debt into equity before 31 Dec 2012.

Accordingly, IFC and ADB have communicated their intent to exercise this right for the full amount. As per KESC management, this positive development, where two leading international financial institutions are geared to become shareholders in KESC is a reflection of their confidence in the turnaround progress being made by the power utility.

The direct and immediate impact of the conversion of this loan facility into equity will mean significant reduction in KESC’s debt, not only translating into greater financial leverage but will also mean substantial savings in terms of servicing financial charges.

This positive endorsement by IFC and ADB is being viewed by KESC as paving way for international investor confidence not only in the utility but also in the Pakistan economy.

Pakistan was also among the top of 72 markets worldwide on a risk free return and it also reached its record high last week crossing 16,500 mark.