Offloading: PC approves plan to sell over a dozen entities

Picks consortium to complete PIA transaction by June 2015.

ISLAMABAD:

The Board of Privatisation Commission (PC) has approved an ambitious agenda of privatising about one and a half dozen entities during the current fiscal year to raise $2 billion besides allowing the PC to hire services of four consortiums as financial advisers (FA) to complete as many transactions.

Among 16, the most significant transaction will be of Pakistan International Airlines (PIA) and the PC Board has picked a consortium led by Dubai Islamic Bank (DIB) to complete the transaction by June 2015.

Five international consortiums had shown interest to become the FA for selling a minimum of 26% government stake in the national flag carrier.



The consortium that emerged victorious is made up of the DIB, IATA Consulting, which has expertise in aviation business, audit firm Deloitte, local legal firm Haidermota BNR, international legal firm Freshfields Bruckhaus Deringer, human resource expert Abacus Consulting, local communication strategy firm APCO and Prestige – an international communication strategy firm.

There has been criticism that Deloitte has remained an auditor of the PIA, thus there was conflict of interest. The chairman Privatisation Commission Mohammad Zubair said Deloitte was the external auditor of the PIA till December 2013 and was eligible to become member of the consortium.

The incumbent PIA’s external auditors were the KPMG and the PWC, he added. Zubair said the auditors will have to play a critical role in restructuring, leading to privatisation of the PIA.



Under the $6.7 billion International Monetary Fund loan programme, Pakistan has committed to selling 26% shares in PIA to strategic investors. Initially, the deadline was June 2014, which has now been revised to June 2015.

The transactions have been planned to improve governance in these entities and ensure service delivery.

The board also approved to hire financial advisors for National Power Construction Company (NPCC), Northern Power Generation Company Limited (NPGCL) and Faisalabad Electric Supply Company Limited (Fesco). The government will sell the strategic assets of these companies.

The PC Board approved the new calendar at a time when Pakistan Peoples Party (PPP) has criticised the government’s privatisation plan, accusing it of violating the Constitution by selling entities that fall under the joint control of federal and provincial governments.

For NPCC, the consortium comprising KASB, HMCO and Deloitte obtained the highest scores of 95.19 and was pricked by the PC Board to perform the task. The government plans to complete the transaction by end of this year.

For selling Fesco the consortium comprising UBL, Earnest & Young, Lahmeyer, HMCO & BN&R and Excelerate got the maximum points of 99.75 and were appointed as the financial advisor.

Fesco will be the first power distribution company that the government wants to sell after Karachi Electric Supply Company. The deadline for privatising Fesco is May 2015. However, it is subject to resolution of outstanding issues, particularly post-privatisation regulatory framework.

The PC Board also hired the FA for the restructuring and privatisation of 1,350 megawatts thermal power station being run by Northern Power Generation Company Limited (NPGCL). The UBL-led consortium that has been picked for Fesco will also be the FA for NPGCL.

According to the privatisation programme approved by the board, the government will complete the Oil and Gas Development Company Limited (OGDCL) capital market transaction by October this year. It has already hired a financial advisor that is currently working on the transaction structure to sell 10% shares of the company at London Stock Exchange.

Allied Bank Limited, Habib Bank Limited, State Life Insurance Corporation, Pak-Arab Refinery Limited, Mari Petroleum Limited, Government Holding Company, Heavy Electric Complex, Lahore Electric Supply Company, Islamabad Electric Supply Company, PIA’s hotels in New York and Paris and Convention Centre Islamabad will also be privatised during the current fiscal year.

The federal government has budgeted Rs198 billion ($2 billion) earnings from these transactions. In the first year of the PML-N government, the PC completed two transactions and fetched over Rs53 billion after selling the shares of the UBL and the PPL.

Published in The Express Tribune, July 24^th, 2014.