Cabinet body withholds equity-linked bond issue
The decision was taken in a meeting of the Cabinet Committee on Privatisation, headed by the Finance Minister, Dr Abdul Hafeez Shaikh. The Cabinet Committee on Privatisation has further constituted a committee that will choose between an equity-linked convertible bond and an exchangeable bond, bearing in mind the risks involved in both the cases.
The committee will be headed by the Privatisation Minister, Senator Waqar Ahmed Khan and will consist of the minister for petroleum and natural resources, deputy chairman Planning Commission, chairman Securities and Exchange Commission of Pakistan, secretary finance, secretary privatisation and governor State Bank of Pakistan.
The Privatisation Commission has sought the Cabinet Committee’s approval for raising over $1 billion by floating shares of the Oil and Gas Development Corporation Limited (OGDCL) in the international market.
The spread on credit (five years bonds) have started increasing again after returning to as low as 594 basis points in November last year. The spread on five-year bonds rose to a peak of 5,106 basis points in November 2008, when fears of default by Islamabad increased.
The International Monetary Fund has already suspended Pakistan’s $11.3 billion bailout programme due to delays in taking the agreed corrective measures to bring the economy back on track.
Share sale of power distributor put on hold
The Privatisation Commission’s plan of off loading one-fifth shares of the Islamabad Electric Supply Company (Iesco) has also been put on hold, as the Cabinet body has referred the matter to Council of Common Interest instead of giving a go-ahead.
The Cabinet Committee on Privatisation asked the Commission to get the plan first approved from the CCI, the highest decision making body of the federal and the provincial governments. The Commission wanted to sell 20 per cent shares through Initial Public Offering in the Karachi Stock Market.
Iesco is considered the most efficient power distribution company and earned a net profit of Rs5 billion during the last financial year.
Approved privatisations
The Cabinet Committee also approved the privatisation of Heavy Electrical Complex and National Power Construction Corporation Limited (NPCCL). The Commission had recommended the privatisation of the Heavy Electrical Complex (HEC) on public private partnership basis whereby 26 per cent of the shares along with management rights to be transferred to the successful bidder. In 2006 the government tried to sell the 90 per cent shares but could not get favourable bids. HEC is engaged in manufacturing power transformers.
The Privatisation Commission had also recommended the privatisation of the National Power Construction Corporation Limited, which was also approved by the Committee.
Published in The Express Tribune, February 4th, 2011.
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