SINGAPORE - Government of Pakistan plans to raise up to $816 million from selling a stake in state-owned Oil & Gas Development Co. Ltd., in the country’s biggest share sale in eight years.
The government will sell up to a 7.5pc stake in OGDCL in the domestic and international markets, providing much-needed foreign exchange in the country’s flagging economy.
According to a term sheet seen by The Wall Street Journal, OGDCL began testing investor appetite for the sale of its London-listed global depositary shares on Tuesday, with bankers taking orders from institutional investors from Oct. 2. The Pakistan government currently owns 75pc of the oil and gas company. OGDCL is the latest firm to be on the block after Pakistan sold a 19.8pc stake in United Bank Ltd., one of the country’s largest banks, to raise $387 million in June. That sale was Pakistan’s first transaction in the global equity market in almost eight years. In February this year, Finance Minister Ishaq Dar said in an interview that the country expects to complete a series of large privatisation transactions this spring in a bid to dispel growing concerns of a slow pace of reforms.
Pakistan Prime Minister Nawaz Sharif, who came to power in May last year, inherited a troubled economy, which was suffering from an energy crisis that left industries without power and a deteriorating security situation. Since then, the government has been taking major steps to cut subsidies and eliminate debt in the electricity sector, reducing blackouts. It also negotiated a $6.6 billion deal with the International Monetary Fund, staving off default.
Apart from OGDCL, the government is also planning to sell stakes in Pakistan Petroleum Ltd. and banks such as Habib Bank Ltd. and Allied Bank Ltd. The government expects to raise over $2 billion via stake sales as part of its efforts to boost economic activity. According to the International Monetary Fund, Pakistan’s economy is expected to grow 4.3pc in the fiscal year that started July, compared with a provisional estimate of 4.1pc growth in the last fiscal year. OGDCL, which is listed on the Karachi, Lahore and the Islamabad stock exchanges, has had its global depositary shares listed on the London Stock Exchange since Dec. 6, 2006. The sale of OGDCL shares includes a domestic tranche to public and large local investors as well as an international tranche through the issuance of global depositary shares. The exact split on how much each tranche will be allocated is yet to be determined.
OGDCL’s net profit for the year ended June 30 stood at $1.2 billion, up 36pc on the year. The company holds 58pc of Pakistan’s recoverable oil reserves and 41pc of the country’s recoverable gas reserves as of Dec. 31, 2013. Apart from having oil and gas fields in various parts of Pakistan, the company is also involved in related engineering.