Pakistan's economic managers have emphasised the importance of prioritising the settlement of audit and asset transfer issues of power distribution companies (DISCOs) to pave the way for privatisation of state-owned utilities.
The Power Division informed the economic managers that all formalities relating to the balance sheets of DISCOs had been completed and the Water and Power Development Authority (Wapda) and DISCOs' boards had been updated in that regard.
During discussion in a recent meeting of the Economic Coordination Committee (ECC), the Power Division emphasised that all issues related to privatisation should be addressed beforehand to avoid any complications later.
The economic managers suggested that matters concerning audit and asset transfer should be settled on a priority basis. They also stressed the need for carrying out a reconciliation process prior to the transfer of shares to the president.
The ECC was told that opinion of the Law and Justice Division must be obtained before granting retrospective approval to share transfer to ensure that no financial implications were associated with it.
The meeting inquired about the updated status of balance sheets and fixed assets of the companies. In response, the Power Division confirmed that all formalities had been completed and reconciliation had been done.
It revealed that the respective boards had been updated and the proposal did not require any retrospective approval of shares already transferred, nor were there any financial implications. It was noted that Wapda was fully on board with the proposal.
The division informed the economic managers that the government had approved the privatisation of DISCOs, as part of which Faisalabad Electric Supply Company (Fesco), Gujranwala Electric Power Company (Gepco) and Islamabad Electric Supply Company (Iesco) would be privatised in the first phase.
At the time of creation of DISCOs, supplementary business transfer agreements were signed by Wapda and DISCOs, except for Hyderabad Electric Supply Company (Hesco) and Sukkur Electric Power Company (Sepco), which were to be followed by the transfer of shares in the name of the president of Pakistan.
So far, only Iesco, Lahore Electric Supply Company (Lesco) and Multan Electric Power Company (Mepco) have partly completed the process by issuing shares to Wapda, but the next step – transferring shares to the president – has not been taken. Meanwhile, other DISCOs, including Fesco and Gepco, have not made any progress.
Besides being a mandatory requirement of the Securities and Exchange Commission of Pakistan (SECP), it was also a condition that prior to privatisation shares of DISCOs should be transferred to the president. The SECP, in its comments, advised the division to follow Section 74 of the Companies Act 2017 and complete Form-3 as per Regulation 41 of the Companies Regulations 2024.
It recommended that the transfer of shares must align with the agreements executed between Wapda and DISCOs and suggested that the shares should be in book-entry form in accordance with Section 72 of the Companies Act 2017.
Wapda, in its comments, proposed changes to the initial draft summary, which were incorporated in paragraph 5 of the summary. The Finance Division also endorsed the summary.
The Power Division submitted the proposals for consideration and approval of the ECC, which included allowing Wapda to transfer shares of Iesco, Lesco and Mepco to the president of Pakistan, so that Wapda and DISCOs may update and clear their books.
Approval was also sought to allow Gepco, Fesco, Qesco, Pesco, Tesco, Hesco and Sepco to issue shares to Wapda after completing the process outlined in the Supplementary Business Transfer Agreements, enabling Wapda and DISCOs to update and clear their books.
The ECC considered the proposal titled "Transfer of Shares of DISCOs in the Name of the President of Pakistan," and approved it. It allowed Gepco, Fesco, Qesco, Pesco, Tesco, Hesco and Sepco to issue shares to Wapda after completing the process outlined in the supplementary agreements to enable Wapda to transfer shares in the name of the president.
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