Global market: OGDCL’s equity-linked bonds to raise $1 billion

Petroleum ministry allows offshore sale of bonds of the oil sector's giant.

ISLAMABAD: In a bid to finance the budget deficit, the petroleum ministry has allowed the Privatisation Commission to sell equity-linked bonds of Oil and Gas Development Company (OGDCL) which can raise $1 billion from the international market.

In a briefing to a National Assembly panel on Thursday, Privatisation Minister Waqar Ahmed Khan said that the petroleum minister has accepted the proposal to tap international resources by floating seven per cent shares of OGDCL. He said the equity-linked bonds will fetch comparatively cheap loans at an interest rate ranging from 4 to 4.5 per cent.

The petroleum ministry is yet to obtain the permission of OGDCL board of directors, which is a prerequisite for such transactions. Currently, the government owns a 76 per cent stake in the oil sector giant, 21 per cent shares have been floated in the Karachi Stock Exchange and the remaining were issued in global stock markets.

The government intends to float the equity-linked instrument in March but much depends on the national economic health, which is deteriorating due to delay in initiating reforms. The premium on the country’s credit has started picking up again after seeing the lows of 591 basis points in November last year.

The privatisation minister was scheduled to meet the Prime Minister Yousaf Raza Gilani on Thursday to obtain his nod approval for the equity-linked instrument. The Privatisation Commission in consultation with the OGDCL management is yet to decide whether this money will be generated to finance OGDCL projects or for the oil and gas sector in general by forming a holding company.

During a London Stock Exchange meeting, “international investors were not concerned about the war on terror as most of the questions pertained to management of public sector enterprises,” said Waqar Ahmed Khan. The eight public sector enterprises are causing a collective loss of Rs252 billion per annum.

“What guarantee does the investor have that the Supreme Court of Pakistan will not take suo motu notice of any transaction,” asked Doyna Aziz, a member of the standing committee.

The minister said if the authorities agree, the Privatisation Commission could generate up to $3 billion before June. Khan said the government was also planning to float 20 per cent shares of the Islamabad Electricity Supply Corporation in the Karachi Stock Exchange. The shares will be listed through an initial public offering, the first sale of stocks by a company to the public through the equity market.

The Privatisation Commission also gave a briefing to the Standing Committee on Privatisation. The committee, headed by Khawaja Sohail Mansoor, decided that prior to privatisation of any entity or floating of its shares in the market, the proposed transaction will be brought before the NA Standing Committee for discussion.

The committee was informed about the active programme in the current privatisation policy which relies on public-private partnership (PPP) by offloading 26 per cent shares.

The committee members also raised questions about transparency in the privatisation of key public enterprises in the past. “An internal audit was going on to determine any wrongdoings in the privatisation of Karachi Electricity Supply Company (KESC),” said Khan. The KESC, a privatised firm, is under fire due to sacking of 4,000 employees.

Published in The Express Tribune, January 21^st, 2011.