Both companies in line for privatisation process; PSM consortium decided. CREATIVE COMMONS
Pakistan awarded contracts of financial advisory services for the privatisation of a power generation and a distribution company to the International Finance Corporation (IFC) of the World Bank Group, pushing ahead with its plan of handing over the power sector to private hands.
The Privatisation Commission (PC) board approved the hiring of IFC as financial adviser (FA) for the privatisation of Gujranwala Electric Power Company (Gepco) and Jamshoro Power Company (JPC) Limited, said a PC official.
Headed by PC Chairman Mohammad Zubair, the board also approved Pak-China Investment Bank-led consortium as financial adviser to privatise the Pakistan Steel Mills – the country’s largest industrial unit and the only integrated steel mills of the country.
The PSM is spread over an area of 18,600 acres and employs 15,274 people, the two factors that have become the biggest obstacles in its privatisation.
Gepco is one of the four profitable entities, having 2.8 million connections. Its average monthly bill collection in the last fiscal year 2013-14 amounted to Rs6.2 billion. For the month of January, the company issued Rs4.1 billion billing and collected Rs5.95 billion including past arrears. The industrial consumers contribute almost half of the total revenues.
The government has not hired the IFC through a competitive process but the World Bank’s arm is considered one of the top consultants in the world. It will charge over Rs163 million or $1.6 million consultancy fee for both entities in addition to 0.9% of the total privatisation proceeds from both the state owned-entities as success fee.
The charges are less than claimed by FAs hired for privatisation of Faisalabad Electric Supply Company (Fesco) and Lahore Electric Supply Company (Lesco). The FAs will charge $1.2 million for each entity besides claiming 1% of the privatisation proceeds.
As part of its plan to restructure the country’s power sector, the PML-N government has assured the International Monetary Fund that it will privatise several power sector companies before the end of its five-year tenure. The first of these, Fesco, is expected to be sold by August this year, followed by Lesco and Islamabad Electric Supply Company (Iesco) that are planned to be sold by December, according to written assurances.
The IFC will also provide financial advisory services for Jamshoro Power Company Limited. The company owns and operates two electricity generation units in Sindh: the Jamshoro Steam Power Plant, which is an 880MW natural gas and furnace oil-run plant and the Kotri Gas Turbine Power Plant, which is a 174MW natural gas-run plant.
Last year, the PML-N government contracted a $900-million loan with the Asian Development Bank to convert these power plants into coal. The PC official said that the loan liabilities would be of the buyer.
PSM’s FA
After several unsuccessful attempts, the PC board also managed to hire a consortium of FAs for the privatisation of PSM. The consortium is comprised of Pak-China Investment Bank, Fergusons and Company, Cornelius, Lane & Mufti, Abacus Consulting, Sino Steel and Iqbal Nanjee & Company.
The consortium obtained 83 points at the technical stage, however, some of the board members objected to the high fee that was demanded – the highest so far claimed by any FA.
Published in The Express Tribune, April 25th, 2015.
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