PIA bidders worried over EU ban
PIA’s privatisation process is at the final stage as the government has held a pre-bid conference with investors. Six companies are engaged in due diligence process. Photo: app
As the government seeks an apology from former chief justice Iftikhar Muhammad Chaudhry for scuttling the privatisation process, the prospective buyers of Pakistan International Airlines (PIA) have expressed concern over the European Union decision to keep the ban on PIA flights in place.
Privatisation Commission Secretary Usman Bajwa said on Wednesday that the EU decision to keep the ban on PIA intact became a matter of concern for bidders.
“The ban on flights to Europe has been identified as a concern by the investors during a pre-bid conference on Monday,” said the secretary. Bajwa, along with Privatisation Minister Abdul Aleem Khan and Privatisation Division Secretary Jawad Paul, gave the first comprehensive briefing to the media on privatisation.
In order to address concerns of the six shortlisted bidders, the government has decided to arrange a briefing for them by the Civil Aviation Authority, he said.
Investors expressed concern about a month before the expected bidding for the sale of a majority stake in PIA, which would mark the first major transaction in years of a loss-making entity. The EU slapped the ban on PIA flights after the Pakistan Tehreek-e-Insaf (PTI) government’s aviation minister Ghulam Sarwar Khan claimed that PIA pilots had fake degrees.
Pakistani pilots are the best in the world and there are no complaints against them, emphasised the privatisation minister. PIA’s privatisation process is at the last stage and the government has also held a pre-bid conference with the investors. Six companies are currently in the due diligence process including Fly Jinnah, airblue and the Yunus Brothers Group.
To a question about pricing, Aleem Khan said that PIA’s international routes were part of the evaluation for price discovery.
The Privatisation Commission secretary said that the international routes had been factored in while making projections about revenues and investments for the next six years. “We have an option to either keep PIA flying or shut it down and we will keep it flying through privatisation,” remarked the minister, adding that the government did not want to offload 100% stake in PIA and would keep some of the shares. Bajwa said that after the completion of due diligence, the government would ask those companies to submit bids and the entire process would be completed next month.
“We believe there is very serious interest from investors, who are serious about moving ahead and participating in bidding,” he said.
The minister stressed that PIA offered a very good opportunity to its buyer to earn profit given that the airline had great potential which only required fresh investment.
He lamented the delay in the privatisation of certain entities in the past as it caused losses of billions of rupees. The minister criticised the negative role that former chief justice Iftikhar Chaudhry played in the privatisation process. “Had it been in my control, I would have registered an FIR against Iftikhar Chaudhry,” said Aleem Khan while responding to a question.
He urged the former judge to apologise for his decisions that derailed investment in PIA, Pakistan Steel Mills and the Reko Diq project. “We not only gave money but also our reputation when we had to beg investors for a deal against the $6 billion fine in the Reko Diq case,” said the minister.
Iftikhar Chaudhry struck down the deal and the original investors went to the international court and won an award. However, the government subsequently settled the matter with a payment of $1 billion.
Roosevelt Hotel
Bajwa said the privatisation process for Roosevelt Hotel was also picking up pace and the Cabinet Committee on Privatisation (CCOP) had already included the entity in the list of active privatisation programme.
Financial adviser JLL has submitted its due diligence report, which will be presented to the CCOP for its decision, he said. The adviser has proposed three options including outright sale, managing the hotel as a joint venture and giving it on a long-term lease.
Once the Economic Coordination Committee (ECC) makes a decision on any of these options, the commission will invite Expressions of Interest (EOIs) from the interested parties. Depending on the CCOP’s approval, the government plans to invite EOIs by the first week of August, said Bajwa. The adviser has recommended that the existing floor area can be doubled to 1.3 million square feet, which will significantly increase the proceeds from the transaction, he added.
Power sector
The federal minister revealed that the government had made up its mind to privatise power distribution companies (DISCOs), of which three entities – Hesco, Pesco and Sepco – would be offered on a long-term concession.
Six remaining entities namely Iesco, Fesco, Gepco, Lesco, Mepco and Hazeco will be completely privatised and the Ministry of Privatisation will initiate the process in due course in consultation with the Power Division, he added. “The privatisation of DISCOs is very important and at the same time it is a very complicated transaction,” said Bajwa
The secretary added that the negotiated sale of House Building Finance Company to Pakistan Mortgage Refinance Company was expected to be concluded by the end of July 2024. The negotiation committee met on Wednesday to finalise conditions for the negotiated sale.
The minister declared that the government was committed to openness and transparency in the privatisation transactions. All the bidding will be telecast live.