Saudi and Kuwaiti investors in K-Electric have initiated a $2 billion international arbitration case against Pakistan, alleging regulatory interference, prolonged non-payment of government dues, and the extended blockage of a $1.77 billion sale of the country’s largest private power utility, according to a report published by The News.
The arbitration was filed on January 16, 2026, by international law firms Steptoe International (UK) LLP and Omnia Strategy LLP on behalf of 32 Saudi entities and five Kuwaiti companies. Collectively, these investors hold a 30.7% indirect stake in K-Electric and have remained cornerstone shareholders since the utility’s privatisation in 2005.
According to the arbitration filing, the dispute centres on a series of actions and omissions by Pakistani authorities that the investors claim have undermined their investment and violated protections available under international law. A major component of the case relates to the failed sale of K-Electric to Shanghai Electric Power Company, which was agreed in October 2016.
Under the transaction, Shanghai Electric was to acquire a 66.4% stake in K-Electric for approximately $1.77 billion. While the deal initially received regulatory backing within Pakistan, it remained stalled for more than eight years. The investors allege that shifting regulatory requirements, contradictory directives from government agencies, and prolonged delays in securing mandatory national security and other approvals created an uncertain environment that ultimately caused the Chinese buyer to withdraw from the transaction.
The investors argue that the prolonged blockage of the sale amounts to indirect expropriation, as defined under international investment treaties, depriving them of the ability to exit their investment on agreed commercial terms.
Beyond the stalled acquisition, the arbitration filing highlights long-standing unpaid government receivables owed to K-Electric, particularly tariff differential subsidies. Some of these receivables reportedly date back nearly two decades. The investors contend that the persistent non-payment of these dues has placed sustained pressure on the utility’s cash flows, even as government entities continued to impose penalties and late payment charges on K-Electric.
The filing also raises concerns over regulatory actions affecting K-Electric’s tariff framework. The investors accuse the Pakistani government of undermining the independence of the National Electric Power Regulatory Authority (NEPRA) by politicising the utility’s multi-year tariff determinations. They allege that NEPRA’s final tariff decisions issued in May 2025 were not formally notified by the government, leaving the utility without a legally enforceable tariff structure.
Furthermore, the investors claim that previously settled tariff matters were reopened through what they describe as flawed review processes, resulting in revised tariffs that are confiscatory in nature. According to their estimates, the revised framework could impose an annual financial impact of approximately Rs85 billion on K-Electric, potentially rendering the utility economically unviable.
In addition to regulatory and financial grievances, the arbitration filing points to alleged attempts by domestic investors to gain control of K-Electric through offshore holding structures, undisclosed changes in ownership, and violations of regulatory requirements. The investors state that despite raising repeated complaints with regulators and enforcement agencies, no effective remedial action was taken.
The case underscores growing concerns among foreign investors regarding regulatory certainty and investment protection in Pakistan’s power sector. The outcome of the arbitration is expected to carry significant implications for Pakistan’s investment climate, particularly at a time when the country is seeking to attract fresh foreign capital across key infrastructure and energy segments.
Follow the PakBanker Whatsapp Channel for updates across Pakistan’s banking ecosystem.