ISLAMABAD: Saudi and Kuwaiti investors in K-Electric have initiated a $2 billion international arbitration case against Pakistan, citing regulatory interference, unpaid government dues, and the prolonged blocking of a $1.77 billion sale of the country’s largest private power utility.
Filed on January 16, 2026, the arbitration is being handled by Steptoe International (UK) LLP and Omnia Strategy LLP on behalf of 32 Saudi and five Kuwaiti entities, which together hold a 30.7% indirect stake in K-Electric. These investors have been cornerstone shareholders since the company’s privatisation in 2005.
The dispute dates back to October 2016, when the investors agreed to sell 66.4% of K-Electric to Shanghai Electric Power Company. While Pakistani regulators initially supported the deal, it was stalled for more than eight years due to alleged shifting regulatory requirements, contradictory instructions from government agencies, and delays in obtaining national security and other approvals. Investors argue these delays ultimately caused Shanghai Electric to abandon the deal, claiming indirect expropriation under international law.
The arbitration also highlights long-standing unpaid government receivables, including tariff differential subsidies owed to K-Electric, some dating back nearly 20 years. Investors say these overdue payments have severely impacted the utility’s cash flows, while the government continued to levy penalties for late payments.
Additionally, investors accuse the Pakistani government of undermining NEPRA, the country’s power regulator, by politicising K-Electric’s multi-year tariff framework.
They claim the government failed to notify NEPRA’s May 2025 tariff determinations, reopened settled matters through flawed review processes, and imposed revised tariffs described as confiscatory, potentially costing K-Electric around Rs85 billion annually and threatening its financial viability.
The filing further points to attempts by domestic investors to seize control of K-Electric through offshore structures, undisclosed ownership changes, and regulatory violations, despite repeated complaints to regulators.
Investors also raised concerns over $66 million from the sale of shares in Cnergyico being diverted offshore without approval, with Pakistani regulators allegedly failing to act despite multiple alerts.
The investors argue that Pakistan has breached multiple provisions of the OIC Investment Agreement, including protections against expropriation, fair treatment, free transfer of funds, and access to effective remedies. They have also invoked rights under Pakistan’s bilateral investment treaties with Bahrain and Switzerland through the most-favoured-nation clause.
The case poses a major legal challenge for Pakistan, with potential implications for its regulatory framework and its ability to attract foreign investment in the energy sector.
