OGDC: Privatisation Commission picks financial adviser for $1b share float

Also approves advisers for selling PPL and UBL stakes.

ISLAMABAD: The Privatisation Commission (PC) board approved on Tuesday the hiring of a consortium of Merrill Lynch, Citigroup Global Markets and KASB Bank as financial adviser for issuing Global Depository Receipts of Oil and Gas Development Company (OGDC) on the London Stock Exchange to raise $1 billion.

The board, which met here under the chairmanship of PC Chairman Mohammad Zubair, also gave a green signal for appointing financial advisers for floating shares of Pakistan Petroleum Limited (PPL) and United Bank Limited (UBL) in domestic capital markets.

The government is running against time to earn revenues of about Rs150 billion before the end of June by selling shares of these three companies – a task that appears highly challenging given the nature of transactions.

The money will come as part of non-tax revenues aimed at restricting budget deficit to 5.8% of gross domestic product.



Under the law, 90% of the revenues raised through privatisation should be utilised to retire public debt and the remaining 10% on the social sector.

The PC will shortly offer Letters of Intent to the selected consortia. The financial advisers will be responsible for structuring the transactions.

The three companies are part of a group of five that has been selected for share float in capital markets to raise about $2.5 billion by December this year. The other two are Habib Bank Limited (HBL) and Allied Bank Limited (ABL).

Since 1991, a significant number of shares of all these entities had been sold in stock markets, generating revenues of Rs150.3 billion, showed the PC documents.

The consortium of Merrill Lynch, Citigroup Global Markets – the US-based brokerage and securities arm of Citibank, and KASB Bank would work as financial adviser for offloading 10% shares of OGDC on the London Stock Exchange, said PC Chairman Zubair while talking to The Express Tribune.

The consortium has been picked out of three bidders. The second consortium comprised UBS Bank, Nomura Group, Dubai Islamic Bank and Topline Securities. The third consisted of Barclays Bank, Credit Suisse and Deutsche Bank.

The PC board has already approved sale of 10% shares of OGDC out of a total 85% held by the government. Minimum expected earnings from the sale are put at around Rs90 to Rs100 billion ($1 billion), according to officials privy to the discussions.

From 2003 to 2007, the Musharraf government sold 15% shares in domestic and international markets in three transactions and earned Rs56.25 billion.

In reply to a question, Zubair said the PC would try its best to sell OGDC shares before the end of June. However, he cautioned that nothing could be said with certainty as the London Stock Exchange had stringent requirements that had to be met.

He said OGDC’s audit until April would have to be conducted in addition to certification of oil and gas reserves by a UK-based company.

LSE authorities will also require at least four to six weeks for completing formalities. “If there is a delay, it will not be because of lack of efforts,” he added.

The PC board also approved a consortium of BMA Capital, Foundation Securities, Arif Habib, Bank Alfalah and HBL as financial adviser for offloading 5% shares of PPL in domestic capital markets.

At present, the government has a 78% stake in PPL and the share sale is expected to earn Rs20 to Rs25 billion. In 2004, the government had sold 15% shares of PPL for Rs5.6 billion.

The board also cleared for appointment as financial adviser a consortium of Credit Suisse, Arif Habib and Elixir Securities for offloading 10% out of remaining 20% government shares in UBL. It is expected that a minimum of Rs15 billion will be earned from the process.

Published in The Express Tribune, April 23^rd, 2014.

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