HEC privatisation: Govt hints at accepting Cargill Holdings’ offer
Seeks solid guarantees for picking up all liabilities of the state-owned company along with Rs250 million in cash
The company is engaged in the manufacturing of power transformers with annual capacity at 3,000MVA and is spread over 61 acres. STOCK IMAGE
ISLAMABAD:
The federal government on Tuesday hinted at accepting Cargill Holdings Limited’s offer of Rs250 million in cash for Heavy Electrical Complex (HEC) provided the buyer gives solid guarantees for picking up all the liabilities of the company besides keeping its employees.
Headed by Minister for Finance and Privatisation Ishaq Dar, the Cabinet Committee on Privatisation (CCOP) deferred a final decision on the offer of Cargill Holdings. The Kenya-based Cargill Holdings – the sole bidder – has offered that it will take over all the existing bank liabilities of HEC, keep all employees and pay Rs250 million in cash.
Hours before the CCOP meeting, the Privatisation Commission (PC) board met under the chairmanship of Mohammad Zubair and recommended the CCOP to accept the company’s offer. The PC had calculated the total value of the bid at Rs1 billion including Rs250 million in cash.
The other two options before the board were either to re-invite bids for HEC or remove it from the list of state-owned enterprises to be privatised.
The government is of the view that it can spare capital by selling loss-making entities for spending on poverty alleviation.
“The finance minister directed the PC chairman to urgently come up with necessary clarifications on the queries raised by members of the CCOP,” said a brief statement issued by the Ministry of Finance.
The members sought clarifications about the exact amount of liabilities, the guarantees that the buyer would retain the core business of HEC – the manufacturing of transformers – and solid assurances that it would not lay off the employees for at least one year, said an official who attended the CCOP meeting.
In case of lay-offs after one year, the buyer will pick the cost of voluntary separation scheme estimated at Rs50 million. There was healthy discussion in the meeting aimed at maximising gains for the state, said another CCOP member. The government was also keen that the buyer should export the transformers as it itself had indicated.
“We want a full and final settlement,” said Dar after the meeting. His statement indicates that the government wants to keep the deal transparent and avoid any litigation with the buyer after the deal, probably learning lessons from the Etisalat deal of PTCL.
One of the unaddressed issues was the exact amount of outstanding liabilities. According to one estimate, the outstanding liabilities were Rs650 million.
However, the Bank of Khyber that has extended running finances and long-term guarantees put the figure at Rs885.2 million.
HEC had also imported material for manufacturing of transformers, which is stuck at the port due to non-payment of duties and demurrage charges. This also runs into millions of rupees and has to be decided before the government strikes the deal, said the officials.
The finance minister directed that the CCOP meeting should be reconvened within this week for further consideration of the recommendations of the PC board in the light of fresh input, said the Ministry of Finance.
Federal Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi, Commerce Minister Khurram Dastgir, Finance Secretary Dr Waqar Masood and Privatisation Commission Secretary Ahmed Nawaz Sukhera were among those who attended the meeting.
HEC is among 69 enterprises that have been shortlisted for privatisation or share float by the PML-N government. It is the fourth attempt to privatise the loss-making company as the board – headed by Zubair – is working on the first strategic sale in the last nine years.
Published in The Express Tribune, March 25th, 2015.
The federal government on Tuesday hinted at accepting Cargill Holdings Limited’s offer of Rs250 million in cash for Heavy Electrical Complex (HEC) provided the buyer gives solid guarantees for picking up all the liabilities of the company besides keeping its employees.
Headed by Minister for Finance and Privatisation Ishaq Dar, the Cabinet Committee on Privatisation (CCOP) deferred a final decision on the offer of Cargill Holdings. The Kenya-based Cargill Holdings – the sole bidder – has offered that it will take over all the existing bank liabilities of HEC, keep all employees and pay Rs250 million in cash.
Hours before the CCOP meeting, the Privatisation Commission (PC) board met under the chairmanship of Mohammad Zubair and recommended the CCOP to accept the company’s offer. The PC had calculated the total value of the bid at Rs1 billion including Rs250 million in cash.
The other two options before the board were either to re-invite bids for HEC or remove it from the list of state-owned enterprises to be privatised.
The government is of the view that it can spare capital by selling loss-making entities for spending on poverty alleviation.
“The finance minister directed the PC chairman to urgently come up with necessary clarifications on the queries raised by members of the CCOP,” said a brief statement issued by the Ministry of Finance.
The members sought clarifications about the exact amount of liabilities, the guarantees that the buyer would retain the core business of HEC – the manufacturing of transformers – and solid assurances that it would not lay off the employees for at least one year, said an official who attended the CCOP meeting.
In case of lay-offs after one year, the buyer will pick the cost of voluntary separation scheme estimated at Rs50 million. There was healthy discussion in the meeting aimed at maximising gains for the state, said another CCOP member. The government was also keen that the buyer should export the transformers as it itself had indicated.
“We want a full and final settlement,” said Dar after the meeting. His statement indicates that the government wants to keep the deal transparent and avoid any litigation with the buyer after the deal, probably learning lessons from the Etisalat deal of PTCL.
One of the unaddressed issues was the exact amount of outstanding liabilities. According to one estimate, the outstanding liabilities were Rs650 million.
However, the Bank of Khyber that has extended running finances and long-term guarantees put the figure at Rs885.2 million.
HEC had also imported material for manufacturing of transformers, which is stuck at the port due to non-payment of duties and demurrage charges. This also runs into millions of rupees and has to be decided before the government strikes the deal, said the officials.
The finance minister directed that the CCOP meeting should be reconvened within this week for further consideration of the recommendations of the PC board in the light of fresh input, said the Ministry of Finance.
Federal Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi, Commerce Minister Khurram Dastgir, Finance Secretary Dr Waqar Masood and Privatisation Commission Secretary Ahmed Nawaz Sukhera were among those who attended the meeting.
HEC is among 69 enterprises that have been shortlisted for privatisation or share float by the PML-N government. It is the fourth attempt to privatise the loss-making company as the board – headed by Zubair – is working on the first strategic sale in the last nine years.
The government wants to sell 97% or 14.1 million shares in HEC. The company is engaged in the manufacturing of power transformers with annual capacity at 3,000MVA and is spread over 61 acres.
Published in The Express Tribune, March 25th, 2015.