Two power companies: PC appoints financial advisers for privatisation

UK consultant seeks 20% share in profit for turning around electricity firms

ISLAMABAD:

As the United Kingdom-based Renoir Consulting offers to turn around two electricity supply companies in return for a 20% share in profit, the board of Privatisation Commission (PC) has approved appointment of a consortium as financial advisers to privatise Lahore and Islamabad power distribution companies.

The board took the decision at a time when Pakistan has made a commitment to the International Monetary Fund (IMF) to privatise three electricity supply companies within this year. The PML-N government decided to advance the privatisation calendar of the power sector after facing resistance in selling off Pakistan International Airlines and Pakistan Steel Mills – the two entities causing colossal losses to the exchequer.

The commitment to privatise Faisalabad, Lahore and Islamabad power distribution companies was given during the recently concluded talks, which were held in Dubai, said officials of the Ministry of Finance and Privatisation. All the three entities are considered best among nine power distribution companies in the public sector.



The government has already hired a financial adviser for privatising Faisalabad Electricity Supply Company and it aims to complete the transaction by July this year. In order to fast-track work on Lahore and Islamabad companies, the PC board has also approved appointment of a consortium of Pak-China Investment Company, China Development Bank Securities and BMA Capital as financial advisers.

The board had no choice but to give the assignment of both the entities to a single party after the consortium emerged successful against competitors. The consortium obtained 97.17 marks, slightly higher than the second lowest bidder that got 96.46 marks.

However, the board members were sceptical about the abilities of the consortium that it would be able to successfully handle the challenging task of facilitating the privatisation of power companies at a swift pace.

In its earlier meetings, the board had recommended further assessment of the consortium.

After completing the Faisalabad Electricity Supply Company transaction in July, the government intends to sell Lahore and Islamabad companies by the end of this year.

The evaluation committee of the PC put its weight behind the Chinese consortium and argued that the consortium was very much capable of conducting the transaction. The same evaluation committee also recommended the appointment of the consortium of Pak-China Investment Company as financial adviser for the Lesco transaction, subject to successful contract negotiations.

The consortium obtained 96.06 marks against 95.10 obtained by the second lowest party.

The PC has asked the selected consortium to appoint two separate teams for Lahore and Islamabad power distribution companies in order to fully justify the task, said PC Chairman Mohammad Zubair. He said the consortium has assured the PC that all its concerns will be addressed.

Meanwhile, the UK-based Renoir Consulting has approached the PC, offering its services to turn around two power sector entities, confirmed a top official of the commission. Renoir has offered to turn around the companies and in return seek a 20% profit after the entities are restructured.

The firm is seeking preferential treatment and does not want to participate in the competitive bidding process, said Zubair. He said Public Procurement Regulatory Authority (PPRA) rules do not allow giving preferential treatment to any party.

The government has embarked on an ambitious plan to sell all the power distribution and generation companies. It has already advertised for financial and technical bids from prospective financial advisers to sell the other public sector power distribution companies.

As part of its plan to engage the International Finance Corporation of the World Bank Group, the government entered into a consultancy services agreement with the IFC last week. However, in the absence of a waiver from the PPRA, the government earlier could not appoint IFC as the financial adviser for either Islamabad or Lahore power distribution companies.

Published in The Express Tribune, February 6^th, 2015.

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