PM stops privatisation of power companies

Govt will keep control of the companies, float their shares on stock market

ISLAMABAD: Prime Minister Nawaz Sharif has put the planned strategic sale of power distribution and generation companies to a halt and now shares of these companies will be floated on the stock exchange.

According to officials aware of the development, the Privatisation Division in a meeting of the Cabinet Committee on Privatisation on July 14 said the Privatisation Commission (PC) had been working on the sell-off process of 14 state-owned enterprises in the power sector and financial advisers had already been appointed.

However, it pointed out that the privatisation process of all power companies had stalled because of directives of the prime minister.



The Privatisation Division argued that the work done by the consortium of financial advisers would prove beneficial for institutional development and would also support privatisation efforts in the future.

Moreover, the findings of the advisers could be put to use for the restructuring of state-owned enterprises.

The Privatisation Division stressed that an early decision was required to encourage the PC to meet its legal and financial commitments in line with a financial advisory services agreement signed with the consortium of advisers.

It suggested that if the government decided to put off the strategic sale for the time being, another possible option could be the listing of shares of power distribution companies on the stock exchange through initial public offerings (IPOs).

“This will add significant value to the distribution companies, which will get access to capital flow outside of the government budget and sovereign guarantees,” the division said.

“It will also strengthen corporate governance in power companies at large and strengthen accountability; the investors interested in acquiring a bigger shareholding will buy shares, which would have a positive impact on the share price.”

In the long run, the power companies will see increased competition, efficiency and discipline through better performance benchmarks.

The Privatisation Division proposed that the process should be initiated for the listing of shares of qualified power distribution companies through an IPO on the stock exchange where it was found applicable and feasible.



It revealed that the proposal had been reviewed and recommended by the PC board in its meeting on May 6, 2016.

Consequently, the cabinet body directed the Privatisation Division to start the process of floating shares of the Faisalabad Electric Supply Company (Fesco) and Islamabad Electric Supply Company (Iesco) in the first phase in order to ensure larger participation of the general public.

It also decided that the government would keep control and management of the power companies. Moreover, all existing boards of the companies would continue to function.

Published in The Express Tribune, July 21^st, 2016.

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