Offloading govt stake: PIA sell-off clears the last hurdle

Privatisation Commission also approves commercial takeover of two state-owned entities.

ISLAMABAD: The Board of Privatisation Commission approved the appointment of a financial adviser to sell 26% shares of the Pakistan International Airlines to a strategic investor, marking the beginning of the privatisation of 32 state-owned entities.

Headed by its Chairman Mohammad Zubair Umar, the Board also approved the strategic sale of Heavy Electric Complex (HEC) and National Power Construction Company (NPCC). Out of six board members, four attended the first round of meeting.

The Board will meet again today (Thursday) to consider the cases of Oil and Gas Development Company (OGDC) and to offload the government’s shares in a few commercial banks.

PIA’s 26% shares will be privatised on the model adopted to privatise Pakistan Telecommunication Limited, according to an official of the Commission. The government would not transfer the liabilities of the national-flag carrier to the buyer, he added.



The Board resolved to divest the government of the minimum 26% shares and gave the go-ahead for the selection of the financial adviser who would carry out the process, according to a brief statement issued by the Privatisation Commission. The Board resolved that the employees’ interests would be protected in the process, it added.

The financial adviser will conduct due diligence and determine the base price. After the Board’s approval, the matter will now go to the Cabinet Committee on Privatisation (CCOP). The CCOP meeting is often considered a mere formality as all the issues are mainly decided by the PC Board.

Meanwhile, the Board also approved the strategic sale of the minimum 88% government shares in the NPCC and the divestment of minimum 96% government shares in the HEC together with management control. These two entities were at the last stage of privatisation during the  regime of the Pakistan Peoples Party. However, the previous government did not complete the process.

The HEC is one of the industrial units of the State Engineering Corporation (SEC) engaged in the manufacturing of power transformers of different types with primary voltage rating of 66 KV and 132 KV.

Under an agreement with the International Monetary Fund, signed for $6.7 billion loan, the government has committed to sell off 32 entities in the next three years. It has finalised a three-pronged strategy, which consists of 11 capital market transactions, 17 strategic private-sector partnerships, including PIA and Pakistan Steel Mills, and restructuring three entities, which is to be completed in three to five years.

The majority of the revenue will come from capital market transactions. As many as 11 enterprises in oil and gas, banking and insurance and power sector have been identified for privatisation in block sales, in primary or secondary public offerings to institutional and individual investors in domestic or international listings.

Minister for Finance and Privatisation Ishaq Dar recently stated that the government was expecting over Rs100 billion in revenues from the capital market transactions.

According to Privatisation Commission officials, the authorities were estimating a minimum gain of Rs80 billion from the 10% sale of OGDCL shares, Rs20 billion by offloading 5% shares of Pakistan Petroleum Limited, Rs15 billion from 10% shares of United Bank Limited, Rs50 billion by offloading 20% shares of Habib Bank and Rs10 billion by selling 10% shares of Allied Bank Limited.

According to the Privatisation Ordinance 2000, 90% of net privatisation proceeds would be allocated to debt retirement and 10% to poverty alleviation programmes.

Published in The Express Tribune, January 9^th, 2014.