Wapda holds all shares of the government of Pakistan in Kapco amounting to 40.25% of the total outstanding shares. PHOTO: FILE
The commission told the cabinet committee, in a meeting held last month, that the financial adviser had completed due diligence process and submitted its report.
It said Wapda had strongly urged that instead of selling its shares in Kapco through the Privatization Commission, it should be allowed to undertake the process on its own gradually and according to its development needs.
Wapda holds all shares of the government of Pakistan in Kapco amounting to 40.25% of the total outstanding shares.
Kapco, established in 1996, is situated in Muzaffargarh district of Punjab and produces 1,600 megawatts of electricity. It is also listed on the domestic stock exchange.
Kapco reported a drop of 13% in its net profit to Rs6.2 billion in nine months ended March 31, 2016 due to a decline in sales with the overhauling of turbines. It had earned Rs7.12 billion in the same period last year.
The decline in earnings was mainly because of higher operation and maintenance expenditure and 43% lower other income including lower penal mark-up income due to improved recoveries.
The Privatization Commission recalled that in a meeting on July 6, 2015, held under the chairmanship of Finance Minister Ishaq Dar, it was decided to push ahead with the sale of Wapda shares in Kapco in line with the approval given by the Cabinet Committee on Privatization in October 2013.
Accordingly, the commission appointed a financial adviser and held a transaction kickoff meeting with the adviser in October 2015, which was also attended by the Wapda chairman.
A financial advisory services agreement between the commission and the adviser offers a fee of $1.71 million that will be paid after completion of various transaction stages. It caps out-of-pocket expenses at $0.15 million and $0.17 million has already been paid to the adviser on completion of mobilisation process. The success fee depends on the sale proceeds.
The PC board in its meeting on May 6, 2016 deliberated on the issue and recommended that the matter should be placed before the cabinet committee for final decision.
Later, the cabinet body dismissed the demand of Wapda and asked the Privatization Commission to proceed with the divestment of government shares in Kapco.
Published in The Express Tribune, June 19th, 2016.
Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.
COMMENTS
Comments are moderated and generally will be posted if they are on-topic and not abusive.
For more information, please see our Comments FAQ