Sell-off: Difficult transactions lie ahead, Zubair says

Privatisation Commission chairman highlights issues regarding plan to privatise DISCOs, OGDCL .

KARACHI:

Pakistan expects to privatise two state-owned organisations within the next four months as part of the government’s effort to plug revenue leakage in inefficiently run companies, Privatisation Commission Chairman Mohammad Zubair said on Tuesday.

Sale of Heavy Electrical Complex, which makes power equipment like transformers, will be completed by the end of October and the National Power Construction Company would be sold in January 2015, he said at a pre-bidding presentation for sale of shares in Oil and Gas Development Company Limited (OGDCL).

“Eventually, we want to privatise the DISCOs (power distribution companies) where the loss is maximum,” he said, explaining that 19% of whatever power these firms receive is wasted because of the outdated system.



“Due to this alone, we lost Rs211 billion last year and then another Rs200 billion was the loss for non-collection of bills,” he said.

Selling the power distribution companies like Hyderabad Electric Supply Company and Multan Electric Power Company is not going to be an easy task especially as the government has to keep the matter of thousands of employees in mind, he said.

“But we shouldn’t forget that the livelihood of hundreds of thousands of people entering the job market and not finding any is important than theirs (Wapda workers),” Zubair said.

About the upcoming sale of over 322 million shares of OGDCL to global and local investors, he added that the government was hoping to raise around $800 million from the transaction.

“OGDCL was always supposed to be a difficult transaction. Nothing like this has been tried in the past eight years,” he said, emphasising that the sale would bode well for Pakistan’s image abroad especially as it tries to sell strategic assets like Pakistan International Airlines.

The government is selling down 7.5% of the paid-up capital in Pakistan’s largest oil and gas producer. KASB Securities is the lead manager for secondary public offering in local capital markets and Bank of America Merrill Lynch and Citigroup will handle the sale of global depository shares.

Referring to the criticism placed on the timing of the ODCGL transaction, he said that it was a matter of opinion. “At any given time, someone is selling the shares, someone wants to buy them and there are those who want to hold on to them.”

But he insisted that 90% of the proceeds from the sale will go towards debt servicing and the remaining amount would be used for programmes related to poverty alleviation.

“This will also help build much-needed foreign exchange reserves.

“We are already short of our foreign exchange estimation by $2.3 billion as Sukuk transaction and proceeds from IMF didn’t materialise,” he said.

OGDCL CEO Muhammad Rafi said the company plans to spend Rs105 billion in the ongoing fiscal year with nearly half of it earmarked for drilling over 30 wells.

Published in The Express Tribune, October 1^st, 2014.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.