The government has quietly delisted two power plants, which over four years ago, had been put on an active list for privatisation to raise an estimated $1.5 billion, aimed at selling these state assets to Qatar in a direct deal to avoid a looming sovereign default.
The development came two days after the government constituted a new cabinet committee aimed at selling the state assets on a fast-track basis. The 2460 megawatts (MW) capacity LNG-fired power plants will now be handed over to this committee to find a suitable foreign nation buyer.
Sources told The Express Tribune that a meeting of the Privatisation Commission Board (PCB) was called on Thursday to remove the plants from the privatisation programme. The Minister for Privatisation, Abid Hussain Bhayo, who is also the chairman of the board, was not even present in the city and virtually chaired the meeting.
Usually, the PCB issues a press statement after a board meeting – this time, however, no statement was issued, apparently to keep the matter confidential.
Neither the privatisation minister nor the secretary of privatisation responded to requests for comments. The sources said that the board has recommended the delisting of the power plants from the privatisation list to the Cabinet Committee on Privatisation (CCOP).
These were the only two valuable assets in the privatisation list. After their removal, the existence of a Privatisation Ministry or a Privatisation Commission will come into question.
The previous government, of the PTI, had put both the power plants on the active list of privatisations in an effort to raise roughly $1.5 billion for budget financing. In the past over four years, however, it could not address the issues or raise Rs103 billion in new debt to retire the government equity. These plants had been setup with government funding during the last PML-N government and are owned by the National Power Park Management Company (Private) Limited (NPPMCL), instead of the 70:30 debt to equity ratio benchmark allowed in NEPRA’s tariff for NPPMCL’s power plants. The sources said that the board meeting was informed that the PM’s office desired the delisting so that the plants can be sold under the Inter-governmental Commercial Transaction Act of 2022.
The 2022 law authorises the direct sale of assets to the foreign nations, instead of following the long and cumbersome process set under the Privatisation Ordinance of 2000. The long process, however, ensures transparency while the direct sale arrangement may raise transparency concerns, as the decision will be taken mostly by the government, without following any competitive process.
There is one view that only 30% equity will be sold to Qatar and the price discovery will be based on known factors, reducing the element of discretion.
Pakistan faces an imminent threat of sovereign default due to a delay in the revival of the International Monetary Fund programme (IMF). Finance Minister Ishaq Dar has listed the sale of the LNG-fired power plants among the “low-hanging fruits” that will be sold to arrange foreign currency. Dar has vehemently denied that Pakistan will default on its debt obligations.
Meanwhile, Pakistan’s gross official foreign exchange reserves have slipped below $4.5 billion, after the country made two payments commercial loan debt payments valuing $1.02 billion on Friday. For the current fiscal year, the total debt repayments stand at $23 billion, according to the central bank.
In September 2022, the PCB had decided to re-engage Credit Suisse, Singapore to determine the price of the multibillion-dollar LNG-fired power plants that Qatar has wanted to purchase for the last four years.
Credit Suisse, however, has set the condition of clearing its outstanding dues of around $1.7 million and resolving three key pending issues that have obstructed the privatisation of two LNG power plants that have a combined generation capacity of 2,560MWs.
Pakistan had engaged Credit Suisse in April 2019 to sell the plants, but the contract expired in October 2020 and was extended for a period of one and a half years. The contract, however, expired again on April 29, 2022, reflecting the poor performance of all stakeholders involved.
In August this year, Qatar assured the IMF board of making a $3 billion investment in Pakistan, including purchasing both the plants, aimed at bridging a financing gap identified by the IMF staff.
Meanwhile, the Prime Minister Shehbaz Sharif approved the establishment of a new Cabinet Committee on Intern-governmental Transactions.
According to the notification, Finance Minister Ishaq Dar will be the convener of the committee. Among the members will be the minister for commerce, minister for communication, minister for power, minister for law and justice, minister for the Board of Investment and minister of State for Petroleum.
The Cabinet Committee will authorise negotiations for a government-to-government agreement between the federal government and government of a foreign state, according to the notification. It will also constitute a negotiation committee for direct agreements or commercial agreements, as the case may be, and approve the price discovery mechanism, it added.
Published in The Express Tribune, January 7th, 2023.
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