OGDCL divestment: PC to float shares in the midst of political chaos

Global Depository Receipts will be offered at London exchange in early Oct

ISLAMABAD:

The government has decided to press ahead with the planned share float of Oil and Gas Development Company Limited (OGDCL) at the London Stock Exchange to raise about $850 million, throwing the most serious challenge to the Privatisation Commission (PC) in the face of a deepening political crisis.

Global Depository Receipts (GDRs) of the blue-chip company will be issued in the first week of October against the previous plan to complete the offer on September 25, say senior PC officials.

This comes following a suggestion by the financial advisers that called for slightly delaying the programme because of the time consumed in meeting procedural requirements.

In April, the PC board approved the appointment of a consortium of Merrill Lynch International, Citigroup Global Markets and KASB Bank and Securities Limited as financial advisers for selling up to 10% shares of OGDCL.

Accordingly, the road shows aimed at encouraging foreign investors have also been delayed by 10 days. Now, PC teams will leave to conduct the road shows on September 18 and 19.

“It was a difficult decision but the government would complete the OGDCL share sale with only a slight delay,” said Mohammad Zubair, the PC Chairman, who also enjoys the status of minister of state.

The PC had desired to complete the share sale in June this year, but could not meet regulatory requirements of the London Stock Exchange. Zubair, however, said the exchange’s conditions such as an oil and gas reserve certification and audit of financial results by an international firm had been met.

The government is expected to raise $850 million by selling the company’s shares. However, Zubair said the PC board was likely to offer a discount on the share price.

On Wednesday, average OGDCL share price at the Karachi Stock Exchange (KSE) was Rs249.45, which was 2.1% below the previous day’s level.

From 2003 to 2007, the Musharraf government sold 15% shares of OGDCL in domestic and international markets in three phases and earned Rs56.25 billion. However, the political uncertainty stemming from the ongoing sit-ins staged by the Pakistan Tehreek-e-Insaf and Pakistan Awami Tehreek has adversely affected the country’s position in currency and stock markets.

The downslide on the KSE continued on Wednesday as well and the 100-share index fell 1.53% to 27,811 points. The government has so far estimated the losses to investors at over Rs450 billion.

“Businessmen’s confidence has been shaken and the process of reforms has slowed down due to what is going on outside parliament,” said Prime Minister Nawaz Sharif while speaking in the National Assembly on Wednesday. Now, he added, the country’s international development partners had started raising questions.

However, in the middle of the political instability, the PC will be presenting its case to the foreign investors during the road shows.

“During the road shows held for the sale of shares of Pakistan Petroleum Limited and United Bank Limited, I used to sell a story of Pakistan where political stability had returned and democracy had strengthened,” said Zubair.

He hoped that by the time Pakistan’s delegation left for the road shows, political normality would return, which would strengthen their hands again.

Earlier, the PC completed two transactions, one of PPL and another of UBL, and raised over Rs53 billion amid political stability and a bullish domestic stock market.

Published in The Express Tribune, August 28^th, 2014.

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