Saudi and Kuwaiti investors holding a significant stake in K-Electric, Pakistan's largest private power utility, have launched a high-stakes $2 billion international arbitration case against the Pakistani government. The claim, filed on January 16, 2026, accuses authorities of regulatory sabotage, chronic unpaid dues, and blocking a lucrative $1.77 billion sale potentially jeopardizing the country's appeal to foreign investors.
Represented by top firms Steptoe International (UK) LLP and Omnia Strategy LLP, the 32 Saudi entities and five Kuwaiti companies have been pivotal shareholders since K-Electric's 2005 privatization, controlling a 30.7% indirect stake. The dispute ignited in October 2016 with a proposed 66.4% sale to China's Shanghai Electric Power Company, initially greenlit by regulators but stalled for over eight years. Investors blame a barrage of shifting rules, conflicting government orders, and endless delays in national security approvals, framing it as "indirect expropriation" under international law that scared off the buyer.
Compounding the issue are massive unpaid government receivables like tariff differential subsidies stretching back two decades that have strangled K-Electric's cash flows, even as late-payment penalties accrue. Investors further allege government interference in NEPRA's operations: ignoring May 2025 tariff decisions, launching flawed reviews, and enforcing "confiscatory" revisions that could siphon Rs85 billion annually, threatening the utility's very survival.
Other flashpoints include suspected domestic maneuvers to grab control via shadowy offshore entities and regulatory blind spots; plus a controversial $66 million diversion from Cnergyico share sales, allegedly funneled abroad without clearance despite investor warnings. The claimants invoke breaches of the OIC Investment Agreement covering expropriation safeguards, fair treatment, fund transfers, and remedies along with Pakistan's treaties with Bahrain and Switzerland via most-favored-nation clauses.
This escalating legal battle could reshape Pakistan's investment climate, regulatory oversight, and power sector stability, with billions at stake.
