10 firms prequalify for Fesco bidding

Chinese firm disqualified over Mandarin documents, KE withdraws, citing tariff delay

ISLAMABAD:

The Privatisation Commission has qualified 10 firms to bid for acquisition of Faisalabad Electric Supply Company (Fesco) but declared non-compliant a Chinese enterprise, which is a subsidiary of a Global Fortune 500 firm, for filing documents in Mandarin language.

The Privatisation Commission also did not list K-Electric (KE) among the enterprises that have been declared eligible for taking part in the privatisation of Fesco. The government wants to sell 51 to 100% shares of the profitable entity that supplies electricity to the nation's third-largest city and surrounding areas.

The board of the Privatisation Commission approved the prequalification of interested parties for the privatisation of Fesco, according to a statement issued by the commission on Friday. Adviser to the Prime Minister on Privatisation Muhammad Ali chaired the meeting.

The eligible companies have strong financial credentials to acquire the profitable and efficient power distribution companies. Among them are three Turkish firms. But none of the local companies have expertise in the power distribution sector, although some of them are into power generation business.

The only entity that had an experience of power distribution, KE, could not make it onto the list of prequalified bidders who would compete to acquire Fesco.

A Privatisation Commission official said that KE did not submit audited financial statements for the past three years. He said that KE's response was that the statements were not audited because of the National Electric Power Regulatory Authority's (Nepra) failure to approve its multi-year tariff.

The official said that to avoid disqualification, KE withdrew its expression of interest. KE's Kuwaiti and Saudi shareholders have also filed a $2 billion damage suit against the government of Pakistan for blocking the sale of their 66% stakes to Shanghai Electric. But a senior commission official said that the international arbitration was not a valid reason for disqualification.

In response to a query, a KE spokesperson stated, "K-Electric has withdrawn its Expression of Interest for Fesco's privatisation. The decision was taken as KE's audited financial statements are not yet available, pending the finalisation of the company's Multi-Year Tariff, which is beyond our control. However, we remain committed to pursuing opportunities that maximise value for our stakeholders."

The board of the Privatisation Commission also declared Jiangxi Electric Power Construction Company Limited, a subsidiary of Fortune Global 500 firm Power Construction Corporation of China, as non-compliant. Jiangxi had submitted documents in Mandarin language against the stated requirement of furnishing details in Pakistan's official English language.

The commission had given two-week time to the Chinese firm to submit the details afresh but the company did not comply, said the officials.

Three Turkish companies – Aktor Elektrik Enerji Yatirimlari San Ve Tic A S, Genvera Enerji A.S. and Cengiz Enerji Sanayi Ve Ticaret A S – have been qualified to submit the financial bids.

The commission said that the financial adviser of Fesco recommended 10 parties for prequalification and progression to the next stage of the transaction. The prequalified parties will now proceed to the next stage of the transaction in accordance with the approved process, including access to the Virtual Data Room for detailed buy-side due diligence.

A consortium of Nishat Mills of Pakistan's one of the richest persons Mian Mohammad Mansha has been declared eligible. Mian Mansha was also part of the last bidding process of 2015-16. Among the consortium members are Nishat Mills, Nishat Power, Nishat Chunian, Lalpir, Pak Elektron and Kohinoor Energy, said the commission.

Maple Leaf Cement and Kohinoor Textile of the Saigal family are also among the 10 final bidders.

Among the other Pakistani groups is Engro Energy Limited, owned by the Dawood family that runs multiple businesses. The Abdullah family's Sapphire Fibers Limited is also prequalified. Hub Power Holdings of the Habibullah Khan family, and Lucky Cement of Mohammad Ali Tabba family have also qualified.

The Shirazi Investments (Pvt) Limited, which also has stakes in the automobile sector, has also been qualified. Artistic Milliners (Private) Limited – Pakistan, owned by the Yaqoob family, is the 10th firm in the final list.

Last week, the Cabinet Committee on Privatisation (CCoP) had approved a restructuring plan for the sale of three power distribution companies, including Fesco.

Under the restructuring plan, the government would transfer Rs911 billion worth of assets of three firms to new buyers against Rs648 billion in liabilities, giving buyers net positive equity of Rs263 billion. The federal government would retain Rs257 billion worth of assets, mainly land, and Rs11 billion in liabilities.

For Fesco, the government approved transferring Rs290.5 billion of assets against Rs226.5 billion in liabilities, giving buyers Rs64 billion worth of equity. The government will retain Rs73 billion worth of Fesco land. Fesco's distribution losses were 8% or Rs1 billion in the last fiscal year.

The CCoP approved increasing authorised share capital of Fesco to Rs100 billion and directed the power division to set up a new company with a total authorised capital limit of Rs250 billion.

The government had given the end of August deadline to the management of three companies to separate core land from the non-core to give it on lease to the new buyers. However, the deadline is likely to be missed.