The government is expecting to get a minimum of $700 million in net proceeds from the sale of Roosevelt Hotel New York and Hotel Scribe Paris, owned by Pakistan International Airlines (PIA), and deals could be struck as early as January next year, says Mohammad Zubair, the prime minister’s privatisation wizard.
The money raised by selling both the assets will be used to clear PIA’s debt, which currently stands at Rs191 billion (about $2 billion).
Zubair, chairman of the Privatisation Commission, was speaking about the government’s privatisation plans during an interaction with media on Wednesday.
He said the deadline of December 2014 for selling a minimum 26% shares of PIA to strategic investors could not be achieved and the date had been extended by another six months.
This is the second extension as under the original plan PIA was to be privatised by June this year. However, the plan to raise at least $430 million by selling 20% shares of United Bank Limited to institutional investors before the end of June remains on track.
According to Zubair, both PIA hotels could be sold by January next year and receipts will be far more than the estimates. The hotels are situated at prime locations in New York and Paris – the cities that are major tourist attraction.
“To kick-start the process, we will hire a financial adviser by mid-May,” he said. The government will not transfer PIA’s liabilities to the buyers and only its core business will be up for grabs.
“My assessment is that if we sell 50% of shares, the airline will become profitable from day one after privatisation,” he said.
Those employees that were not associated with the core business would be kept in the PIA holding company and nobody would be laid off before and after privatisation, he added.
Over the years, PIA’s cumulative losses have swelled to Rs191 billion. In 2013, the national flag carrier posted a loss of Rs43.65 billion.
However, it reduced losses by 77% in the first quarter (January-March) of this year as they came down to Rs1.98 billion compared to Rs8.62 billion in the comparative period in 2013.
The focus was on restructuring and privatisation at the same time, Zubair said.
UBL and OGDC
From next week, the government will kick off the process to sell 20% shares of United Bank Limited. The Privatisation Commission chairman will hold roadshows in seven major cities around the world and at least $430 million is expected to be collected in revenue. This offer will be closed by the first week of June.
The government is running against time to earn a minimum of $850 million by issuing Global Depository Receipts equal to 10% shares of Oil and Gas Development Company on the London Stock Exchange.
Zubair acknowledged that there were difficulties in meeting regulatory requirements of London authorities by May 15 and if the deadline was missed, the share float would be delayed until September.
However, the government was confident of finalising the deal for offloading 5% shares of Pakistan Petroleum Limited in domestic capital markets by the third week of June.
Discussing the privatisation of power companies, Zubair stressed that the sell-off alone would not solve the problems, but agreed that privatisation was an important part of power sector reforms.
He said they were also focusing on the post-privatisation regulatory framework for the sector.
He pointed out that the government had advanced the privatisation calendar of power distribution companies and now the process would begin next year. The Faisalabad Electricity Supply Company will be privatised by March 2015.
Published in The Express Tribune, May 1st, 2014.