ECC removes Mari’s dividend cap

Move aimed at selling 18.4% stake in company

ISLAMABAD:

The federal government on Wednesday allowed Mari Petroleum Company Limited to fully distribute its dividend among shareholders - three years ahead of schedule - aimed at selling its remaining 18.4% stake to either existing shareholders or through the stock exchange.

The Economic Coordination Committee (ECC) agreed that the dividend distribution cap may be removed to ensure that the divestment transaction generated optimum sale proceeds for the government, according to the Ministry of Finance.

It added that the Petroleum Division had moved a summary for the removal of dividend distribution cap on Mari Petroleum under the gas pricing agreement, as the company was being considered for privatisation.

The committee also decided that Mari Petroleum would ensure dividend distribution in accordance with the provisions of Companies Act 2017 and Companies (Distribution of Dividends) Regulations 2017.

The government has 18.39% shares in Mari Petroleum, which it wants to offload to raise money for budget deficit financing. The Fauji Foundation controls 40% shareholding and Oil and Gas Development Company (OGDC) has 20% shares.

Under the shareholders agreement, both the companies have the “first right of refusal”. Both of these companies had exercised the first right of refusal in 2017 when the then government offered to sell the shares. It is not clear whether the 2017 first right of refusal is still relevant.

In 2017, the Cabinet Committee on Privatisation approved the transfer price for selling 18.3% stake at a 5% discount to the closing stock price on the day prior to which the transfer notice was served to the joint-venture partners. At that time, the stock stood at Rs1,427 and the transfer price came in at Rs1,355 per share.

According to the original decision, till 2024, the company was barred to pay dividend beyond a certain threshold, which had built sufficient capital for future investment. The dividend was capped after the government paid relatively higher tariffs to the company on its exploration activities.

The Petroleum Division placed a summary before the ECC regarding renewal of gas supply agreement (GSA) between Sui Southern Gas Company (SSGC) and Fauji Fertiliser Bin Qasim Limited. After detailed discussion, the ECC approved it with a condition that the renewal would be allowed on “as and when available basis” for a period of five years, according to the finance ministry.

SSGC may restore gas supply to Fauji Fertiliser till December 2021 or until a uniform rate for the whole fertiliser sector is determined after the rationalisation of tariffs (whichever is earlier), according to the ministry.

The ECC approved Rs141.3 million in supplementary grant for the Ministry of Information and Broadcasting for an expenditure incurred on media campaigns to create awareness among public during the Covid-19 pandemic.

Published in The Express Tribune, February 4^th, 2021.

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