ISLAMABAD - The Cabinet Committee on Privatisation (CCoP) deferred the divestment of government of Pakistan’s share in PPL and OGDCL due to current depressed share of prices of both the companies. The CCoP instead of complete privatisation of Discos, approved the outsourcing of Discos Management, official source told The Nation.
The meeting of the Cabinet Committee on Privatization (CCoP) was chaired by Federal Minister for Finance and Revenue, Shaukat Fayyaz Ahmed Tarin. Federal Minister for Planning, Development and Special Initiatives Asad Umar, Federal Minister for Energy Muhammad Hammad Azhar, Federal Minister for Industries and Production Makhdum Khusro Bakhtyar, Federal Minister for Privatisation Muhammad Mian Soomro, Adviser to the PM on Institutional Reforms and Austerity Dr Ishrat Hussain, Adviser to the PM on Commerce Abdul Razak Dawood, SAPM on Finance and Revenue Dr Waqar Masood, SAPM on Power and Petroleum Tabish Gauhar, federal secretaries and other senior officers participated in the meeting.
The CCoP considered a summary presented by the Secretary, Petroleum Division titled Divestment of govt of Pakistan’s shares in PPL and OGDCL. The forum approved the proposal of the ministry indicating that divestment of shares is not feasible at this stage and should be considered only once issues like circular debt are resolved, even partially; thereafter, strategic sale to a reputable Exploration & Development (E&P) company would be a preferred option.
Pursuant to the decision of the Cabinet Committee on Privatisation (CCoP) dated 21-08-2020 (Annex-I), the Privatisation Commission intends to undertake divestment of 10 per cent shares in Pakistan Petroleum Limited (PPL) and 7per cent shares in Oil and Gas Development Company Limited (OGDCL) through public offering to the foreign and domestic institutional investors, high net-worth individuals and general public through the Pakistan Stock Exchange.
The Ministry of Energy is, however, of the view that both PPL and OGDCL are profitable companies and the current depressed share prices do not reflect the real worth of these companies. Furthermore, the Privatisation Commission should consider the sale to a reputable Exploration & Production company (E&P). In this regard, the Ministry of Energy vide its letter dated 14th February, 2020.
Given the current price of OGDCL’s share which is being traded at very low value, the ongoing divestment of GoP’s 7 per cent share in OGDCL may not be processed at this stage, and
In the summary the Privatisation Commission requested that it may kindly consider that the transaction is structured in a manner that instead of 7 per cent GoP’s shareholding in OGDCL, GoP’s 10 per cent shares in it may be offered to a strategic investor company preferably a well versed Oil & Gas sector Exploration & Development (E&P) company, which this Ministry understands would bring best industry practices and knowledge, state of the art exploration and production techniques in the larger interest of OGDCL and E&P sector in Pakistan.
The sale will result in the flow of foreign direct investment in the country. The strategic sale may also fetch a premium over the market price as usually the sale of a large interest to one investor in a profitable company comes with a premium.
The foreign investors’ confidence in the country will enhance after the purchase of interest by a large E&P company. It may also attract foreign investments and technological collaborations in other sectors. In view of the above considerations, the divestment of shares in PPL and OGDCL at the current share price level is not feasible. Resolution of the circular debt issue, even partially, should help in unlocking the market price of these companies. Thereafter, the strategic sale to a reputable E&P company with its representation through a Director shall be preferred.
The Privatisation Division tabled a summary regarding Private Sector Participation in Management of DISCOs based on a recommendation of the Privatisation Commission Board, regarding provision of funds for hiring of a Financial Advisory Consortium (FAC) of international repute having pertinent experience in the technical, financial, legal and regulatory fields to conduct the transaction of DISCOs and for carrying out an effective communication strategy effectively.
In the summary it was recommended that concessions or management contracts are the most optimal options for the private sector participation in management of DISCOs; PC to undertake the hiring of a FAC of international repute having pertinent experience of the sector in the technical, financial, legal & regulatory fields on priority basis; FAC to carry out a quick analysis of each DISCO, keeping in view the specific state of affairs, including customer base, revenue stream, technical & operational assets base, financial health, investment requirements, legal & regulatory aspects etc.; and On the basis of due diligence review, the FAC shall recommend a specific transaction structure (Concession or Management Contract) for each DISCO separately, along with sequencing of the transaction. The Committee considered and approved the summary.