Privatisation programme: Slim chances of getting $4b in proceeds this year

Focus shifts to comparatively easy share offers in capital market.


Shahbaz Rana October 22, 2014

ISLAMABAD:


The government’s hopes of receiving about $4 billion in privatisation proceeds in the current fiscal year have dimmed as shares of all the shortlisted companies are unlikely to be sold because of the reluctance to take politically difficult decisions and an uncertain political scenario.


According to sources in the Ministry of Finance and Privatisation, the privatisation programme finalised for the current fiscal year 2014-15 may not be fully implemented by the deadline of June next year.

Most of the share offers of power companies are not likely to be completed before the deadline. The privatisation of Pakistan Steel Mills (PSM) and Pakistan International Airlines (PIA) would also depend on political stability despite both of them being part of the current year’s programme, said the officials.

To review the progress, Prime Minister Nawaz Sharif chaired a meeting on Wednesday and discussed the possibility of making changes to the plan with an increasing focus on completing comparatively easy capital market share offers than selling off power distribution companies. This will help raise money to minimise the budget deficit.



For the current fiscal year, the Privatisation Commission (PC) had picked 27 state-owned enterprises for reducing the government’s shareholding. Of that, shares of four companies are supposed to be offered in the first half of the year. These are Pakistan Petroleum Limited (PPL), Oil and Gas Development Company Limited (OGDCL), Heavy Electrical Complex (HEC) and National Power Construction Corporation.

PC Chairman Mohammad Zubair estimated that the country would receive $4 billion in privatisation proceeds this year, although the Ministry of Finance put the figure at $2 billion or Rs198 billion.

The PC has so far successfully sold 5% shares of PPL on a premium. However, it missed the October deadline to offload a 10% stake in OGDCL, initially due to procedural delays and later because of a stay order granted by the Peshawar High Court (PHC).

The Supreme Court set aside the PHC stay order, allowing the federal government to float the shares. The PC has set November 5 to 7 for book building, according to the officials.

But before that, OGDCL will announce its quarterly results to portray the latest financial health of the company to the investors. The government expects to receive around $800 million from the sale of OGDCL shares on the London Stock Exchange.

“The 10% government stake comprises 322.8 million shares, of which 311 million will be offered to international investors, domestic institutional investors and high net worth individuals during the November 5-7 book-building process,” said PC Chairman Zubair. The remaining 11 million shares will be offered to retail investors after a month.

Replying to a question about the privatisation plan, Zubair said the privatisation of state units had political implications and the government had to take all stakeholders into confidence.

He, however, insisted that the programme was on track and they would give equal importance to the power companies and share float in the capital market. “The $4 billion target is still achievable.”

The government is also expected to complete the strategic sale of Heavy Electrical Complex on November 1 against the original deadline of September.

However, according to sources, the chances to privatise PIA, PSM and power distribution companies were not so bright. These offers required difficult decisions, which the government may not be able to take in the face of protests and sit-ins by the Pakistan Tehreek-e-Insaf and Pakistan Awami Tehreek to topple the administration in Islamabad.

However, it would try to sell the Faisalabad Electric Supply Company (Fesco) in the current fiscal year, they added.

Earlier, the prime minister had given directives for the sale of stakes in the energy sector on a fast track. In its original plan, the PC had targeted to sell Fesco by May next year and Islamabad, Gujranwala, Hyderabad, Multan, Sukkur, Quetta and Peshawar electricity supply companies by June 2015.

Northern Power Generation Company is planned to be sold by April next year, followed by Jamshoro Power Company, Central Power Generation Company and Lakhra Power Plant.

Published in The Express Tribune, October 23rd, 2014.

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COMMENTS (4)

Ahsan | 9 years ago | Reply

Selling assets just to bridge deficit is like selling your house and then your car just to pay for recreational drugs....what you gona do when you run out of assets to sell? This is an important step in reincarnation of the east india company... buy your way into owning the country.

Waseem | 9 years ago | Reply

@Nida Alvi: oh so you call this good performance and betterment of the economy. PML-N is only selling the assets to payback interest on loans and high trade deficit which was created due to rupee appreciation by this government. If the process continued with this speed by 2018 we will not have anything to sell except our nukes. And with huge loans taken by this government we will surely default.

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