HEC sell-off: Senate panel uncovers massive irregularities

The sale stalled after the buyer’s cheque of Rs225 million bounced

ISLAMABAD:

A Senate panel investigating alleged wrongdoings in the failed privatisation attempt of the Heavy Electrical Complex concluded its probe on Friday, as fresh details emerged showing the net worth of the prospective buyer at Rs99,000.

During its last hearing, the sub-committee of the Senate Standing Committee on Finance had discussed the financial health of the bidder, the flaws in the diligence process and the government’s claim of selling the HEC at Rs1.095 billion.

Pakistan Tehreek-e-Insaf Senator Mohsin Aziz observed, however, the documents shared by the Privatisation Commission (PC) showed the buyer Cargill Holdings Limited’s net worth was Rs99,000.

A man named Saboor Rehman owns 90% shares of the company, contrary to the claim it is owned by the Cargill Progressive Group. Moreover, the firm was incorporated in Kenya just one day after the government had announced re-advertising the HEC privatisation.

The financial adviser hired for the transaction had valued the HEC between Rs1.2 billion and Rs1.5 billion. But the PC board approved to sell the entity at Rs250 million with a thin majority of five against four votes.

While the Cabinet Committee on Privatisation also endorsed the decision, the transaction could not materialise after the bidder’s cheque of Rs225 million bounced.

“The sub-committee would give its recommendations to the main committee on Monday in light of the documents and the discussions,” said the panel convener, Senator Kamil Ali Agha. The Senate Standing Committee on Finance has already hinted at referring the case to the National Accountability Bureau.

Azeem Hayee, the transaction manager of the HEC, claimed the bid was accepted on the financial health of the parent company Cargill Progressive Group. However, he could not catch the bidder had even submitted a fake web address, www.cargillprogressivegroup.com. It is difficult to find out traces of the group on the website the company has mentioned in the documents.

Hayee was among those PC officials who were allegedly in contact with the bidder.

Senator Aziz determined the HEC’s actual value was Rs1.62 billion with fixed assets worth Rs882 million and Rs736 million in current assets.

But PC Chairman Mohammad Zubair argued that determining the worth of the buyer was the job of the people involved in the due diligence process and the financial adviser.

He also contested the sub-committee’s assertion the Cargill Holding Limited’s net worth was Rs99,000, as the bidder had deposited Rs25 million in earnest money.

The special panel further unearthed the bidder’s address was registered on a PO Box number in Nairobi.

Senator Aziz remarked ghost companies always operated on a PO Box number.

Senator Agha observed the PC also did not look into the tax records of the bidder.

While the PC chairman admitted the transaction was not “risk-free”, he insisted the government had tried to strike a balance between the advantages and risks.

About the government’s claim of selling the HEC at Rs1.095 billion, the sub-committee observed the government had treated the current liabilities as a part of its price, which, according to accounting rules, was not correct.

Against Rs435m of running finance loans, there were Rs736 million in current assets, therefore it was wrong to show them as gains from the transaction, said Senator Aziz.

Mohammad Shahzad, representative of Deloitte, the financial consultancy firm, seconded Aziz that current liabilities could not be accounted as part of the price.


Published in The Express Tribune, January 16^th, 2016.