Govt scraps process of OGDC share sale at PSX

It will offer one-tenth shares to international firm having expertise in sector

ISLAMABAD: The federal government on Thursday decided to scrap an ongoing process for offloading its stake in Oil and Gas Development Company (OGDC) in the stock market and instead would offer one-tenth of its shares to an international firm having sector expertise.

The decision was taken during a meeting held at the Ministry of Privatisation, chaired by Privatisation Minister Mohammad Mian Soomro. The meeting reviewed the options whether to offload 7% stake in the stock market or sell 10% shares to a strategic investor.

“The option of strategic sale of up to 10% shares in OGDC was also deliberated upon and it was decided that the better option would be the strategic offer of up to 10% shares to reputable international exploration and production (E&P) companies,” according to a statement issued by the ministry.

The meeting reviewed OGDC’s share price trend in the capital market and also the extent to which the capital market was conducive for such share divestment.

This will partially dent the government’s non-tax revenue this year as the finance ministry had expected raising at least Rs45 billion from the OGDC divestment transaction. Now, the government will have to start the OGDC privatisation process afresh, including the hiring of financial advisers.

Offloading the 7% stake of OGDC at the Pakistan Stock Exchange (PSX) was part of the government’s privatisation programme undertaken to raise money for containing the budget deficit in the current fiscal year. The government had set the non-tax revenue target at Rs895 billion in the budget, which the adviser to PM on finance increased to Rs1.5 trillion in the hope of completing major privatisation transactions.

The government had expected to earn a minimum of Rs45 billion from the OGDC transaction and another Rs300 billion from the privatisation of two liquefied natural gas (LNG)-fired power plants.

Privatisation proceeds are crucial for the finance ministry to keep the International Monetary Fund (IMF) programme on track after it has faced setbacks due to a massive shortfall in tax collection.

Offering 10% shares to a strategic investor is likely to have multi-faceted benefits including the opening of E&P sector to foreign direct investment and the induction of new expertise into the largest national oil and gas exploration company, said the privatisation ministry.

It was decided that the matter would be submitted in the upcoming meeting of the Cabinet Committee on Privatisation (CCOP).

Last month, the Petroleum Division had asked the CCOP to stop the OGDC divestment process due to a steep fall in share price of the blue-chip company. OGDC’s share price slightly recovered to Rs123.76 at the close of Thursday’s trading, which was 42% below the 2014 level of Rs216 when the Pakistan Muslim League-Nawaz (PML-N) government also attempted to sell stake in the company. The CCOP in August 2019 had decided to divest up to 7% government shares in OGDC.

The meeting also reviewed the existing process and progress on the plan of divesting shares in Pakistan Petroleum Limited (PPL).

In the meeting, de-capping of dividends of Mari Petroleum Company (MPCL) was also deliberated. It was decided that the matter should be placed before the upcoming Economic Coordination Committee (ECC) meeting by the Petroleum Division with all the associated aspects of de-capping of dividends.

The privatisation minister held a separate meeting with representatives of the International Finance Corporation (IFC). Senior representatives discussed the privatisation of two power plants and issues related to the circular debt. The federal minister said the prime minister, in a recent meeting regarding privatisation, stressed the need for privatising the loss-making public sector enterprises (PSEs).

The minister apprised the IFC representatives of the current status of the privatisation programme, which initially focused on the privatisation of PSEs in different sectors like energy, banking, insurance, hospitality and industries.

Soomro said the privatisation process of the entities included in the active programme and other land/assets was at an advanced stage and was likely to fetch Rs150 billion in the current financial year. 

Published in The Express Tribune, March 6^th, 2020.

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