Govt stumbles in fifth attempt to privatise HEC

Published: December 3, 2016

ISLAMABAD: The Ministry of Industries has technically blocked the privatisation process of Heavy Electrical Complex (HEC), frustrating the government’s fifth attempt to sell the enterprise.

Representatives of the Ministry of Industries, State Engineering Corporation and HEC joined hands to technically knock out the two investment houses that had applied for becoming financial advisers for the company’s privatisation, according to documents and discussions with the people involved in the process.

Government to start HEC privatisation process afresh

Without hiring the financial advisers, the HEC privatisation cannot be taken forward.

The move is seen as a direct challenge to the Cabinet Committee on Privatisation (CCOP) that has authorised the Privatisation Commission (PC) to press on with the sell-off plan. Finance and Privatisation Minister Ishaq Dar is the chairman of the CCOP.

The PC had invited expressions of interest for the appointment of financial advisers for the strategic sale of HEC, which manufactures power transformers. In response, Next Capital and KASB Securities submitted technical and financial bids.

PC Chairman Mohammad Zubair set up a nine-member evaluation committee to scrutinise the technical bids. Unlike majority of the members who gave 62 points to 89.50 points to both the bidders, three representatives of the Ministry of Industries and its subordinate departments gave scores of 28 to 33 to the bidders.

Resultantly, both the bidders could not get the required minimum score of 70 for technically qualifying for the job, showed the documents. KASB Securities got a cumulative score of 60.50 while Next Capital got 51.70.

PC suggests removing HEC from privatisation list

Ministry of Industries Senior Joint Secretary Arif Ibrahim gave 33 points to KASB Securities and 32.40 to Next Capital. HEC managing director gave 31 points to KASB and 29 to Next Capital. State Engineering Corporation Chief Executive Officer Syed Kaukab Mohyuddin gave 30 points to KASB Securities and 28 to Next Capital.

There was another interesting pattern. Except for two representatives of the PC, all members of the evaluation committee including the Ministry of Industries gave highest marks to KASB Securities.

Azeem Qadir Haye, the transaction manager gave 70 marks to KASB Securities and 75 to Next Capital. Noman Farooqi, the Legal Consultant of the PC, gave 71 marks to KASB Securities and 75 to Next Capital.

Sources said the PC board, while observing the response of the Ministry of Industries and its attached departments, had asked them to get the entity removed from the privatisation list, if the ministry was not keen to get it privatised.

Sources said the PC board constituted another evaluation committee comprising three members of the board to make a fair assessment of the bidders. The new committee met this week and would give its findings to the board.

Owing to the collective low score obtained by the bidders, the government has the option either to re-advertise or cancel the HEC privatisation. However, the re-advertisement process would be expensive, both in terms of cost and time.

This was the fifth attempt that the government was making to privatise HEC. Last year, in a negotiated sale, it had agreed to sell the company at a meagre cash price of Rs250 million to Cargill Holdings Limited. However, the deal was cancelled after the Rs225-million cheque submitted by the bidder was dishonoured.

Apart from this, the PC expelled its official who tried to manipulate the deal allegedly in return for kickbacks. The PC management took the position that the privatisation transaction was free of any wrongdoing, as no loss was inflicted on the state, while Rs25 million of the bidder was forfeited.

Published in The Express Tribune, December 3rd, 2016.

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