The Privatisation Commission (PC) has prepared a plan for the revival of country’s biggest industrial complex – the Pakistan Steel Mills (PSM).
A senior official in the PC disclosed that under the approved transaction structure, core operating assets include steel mills plant and machinery, coke oven, by-product plan, sintering plant, iron making department, steel making plant, billet mill, gold rolling mill, galvanizing plant, gold formed section, refractory plant and oxygen plant.
It also included power generation plant and 1,268 acres of land comprising only seven per cent of the total PSM area of over 19,000 acres to be leased out by Pakistan Steel Mills Corporation (PSMC) to its newly formed subsidiary/special purpose vehicle (SPV).
The plan stated that the right of use of jetty and associated infrastructure will be assigned to the SPV.
The PSM has been closed since June 2015 when its gas supply was drastically curtailed for non-payment of bills. The authorities maintained that entity had been incurring losses worth billions of rupees every month.
Last year, the government decided to sack about 9,350 employees of the mega industrial unit and issued retrenchment letters to 4,544 staff in the first phase.
The decision was challenged in the Supreme Court by the PSM workers’ union, which urged the court to declare the terminations illegal.
The PC plan stated that both the Ministry of Industries and Production and PSMC management were actively engaged in completing a number of corporate actions including but not limited to incorporation of SPV.
Bifurcation, audit of accounts, verification, certification and valuation of core operating assets and obtaining NOC from lenders as part of fulfilling the requirements of carving out of identified core operating assets into wholly owned subsidiary of PSM through scheme arrangements as provided for in the Companies Act 2017 are included in the plan.
The Privatisation Commission official revealed that subject to successful filing of scheme of arrangements with SECP, the PC envisages to invite expression of interest (EOI) by the end of March from prospective strategic investors for acquisition of majority equity stakes in the SPV along with management control.
According to the draft of information memorandum, request for statement OTLF qualification delineating criteria for pre-qualification of investors and EOI for investors are being finalised in consultation with the stakeholders, like Ministry of Industries and Production, PSM and others.
The official revealed that PC plans to undertake the pre-qualification of investors who submitted the interest in response to the EOI and statement of qualification, followed by inviting the pre-qualified interested parties to conduct, buy side, due diligence while scheme of arrangements is being viewed and decided upon by the competent forum.
He added that it was subject to receiving award on scheme of arrangement and satisfactory completion of due diligence by pre-qualified investors.
The PC envisages conducting bidding in the third quarter of the current year. Financial closure and commencement of business will depend on the timelines agreed with the successful bidder in the share purchase agreement.
The primary objective of transferring the core operating assets to the PSM subsidiary SPV free of all encumbrance, liens charge and others is that strategic private investor shall undertake the commitment to make the required capital investment to revive the existing steel mill plant to its production capacity of 1.1 Metric Ton (MTPs) and enhancing it to 3 MTPs in phased manner by bringing in efficient modern technology besides creating job opportunities for professional and skilled manpower, the official said.
SC seeks PSM revival plan
The Supreme Court has sought revival plan from federal government regarding PSM within two weeks.
The court made it clear that privatisation of PSM will not be allowed without following SC 2005 judgment in the matter.
A three-judge bench of the apex court led by Chief Justice Gulzar Ahmed while hearing a service matter took up notice regarding poor state of affairs in the mega industrial unit.
“What is your plan for the revival of steel mills? Rs25 million is being given from the public exchequer per day. Economy is already bleeding,” Justice Ijazul Ahsan said in his remarks.
The chief justice expressed anger over the PC secretary for not evolving a plan on the PSM.
If you are not competent then go home, the CJ said.
He asked why the 400 officers of the PSM were still working and remarked that they should be dismissed.
The chief justice wondered why the PSM management was receiving salary when the mill was closed.
During the hearing, the PC secretary stated that $500 million were required for the production of one metric ton of steel.
The Cabinet has decided to privatise the PSM within 14 months.
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