KARACHI - AES, an American global power company, which deals in generation and distribution businesses, has decided to sell its power plants in Pakistan, sources told The Nation on Wednesday. Currently, the proposed power plants are generating 700 MW of electricity. According to sources, AES is seeking bids for AES LalPir and AES Pak Gen. Sources said that Citi, the leading global financial services co and HSBC, one of the largest banking and financial services providers, are believed to be advising them financially on this transaction. Sources further said that several investors have shown interest including ABRAJ, Nishat Group and Int'l Power Company being some of the groups, which are inclined to get into this transaction. With the acquisition of AES, LalPir and AES Power Gen, power generation under the control of International Power would exceed 4,000 MW in Pakistan, sources added. This transaction is being watched by investors with keen interest due to the international nature of this deal, sources added. Worth noting is that Nishat Group is a recent entrant into energy sector and is being set up two power plants having capacity of 200 MW each. ABRAJ has already acquired KESC, International Power Company has been operating in Pakistan for many years and is involved in the ownership and operation management of KAPCO, HUBCO and UCH which in total generate over 3,000 MW of electricity. It is important to note that Nishat Group has undertaken a few projects in the power generation sector of the economy. Nishat has already announced plans for a 200MW Power plant which should be operational in the latter part of CY10. With Nishat Power expected to come online during FY10 we can see some increase in income for NML. This increase will be part of recurring income and should therefore increase the overall profitability of the company. While selling company, AES has diverse portfolio of thermal and renewable fuel sources, providing affordable and sustainable energy in 29 countries. Nishat Mils Limited, reported profit after tax of Rs1.26b with EPS of Rs5.23 during FY09 compared to Rs5.85b for FY08. The company also reported 4QFY09 Rs51million compared to Rs5,103 million for the corresponding period last year. NML also announced a final dividend of 20 per cent at Rs2.00 per share. NML revenues reported an impressive 22 per cent growth YoY and stood at Rs23.9 billion for FY09. NML has also indicated its interest to restore its share holding in MCB from 6.92 per cent to 8.03 per cent. In a second review on Pakistan about recent economic developments, IMF has said despite earlier restructuring attempts and the establishment of a regulatory agency, the financial situation of Pakistans electricity sector remains weak. This reflects insufficient tariff adjustments, non-payment by the government of tariff differential subsidies, low collection rates in some regions (e.g., in the FATA due to the security situation), and weaknesses in governance. Moreover, with frequent power outages and high tariffs paid by industrial producers on account of cross-subsidisation between consumer groups, the power sector is a drag on growth. IMF further reports that substantial new investment is required to ensure that generation capacity keeps pace with demand, but private investors are reluctant to invest owing to unsustainable sector financing. To restore the financial viability of the sector, the authorities had committed under the SBA to eliminate electricity tariff differential subsidies by end-June 2009. Reflecting rising fuel costs and the decision to refrain from adjusting tariffs, electricity subsidies rose to 1.3 percent of GDP in 2007/08 and contributed (together with rising fuel subsidies) to an increasingly unsustainable fiscal position. In the 2008/09 budget the authorities stated their intention to phase out electricity tariff differential subsidies by end-June 2009 and in November 2008 they increased average tariffs by 18 percent. In January 2009, the authorities announced their intention to raise tariffs by 4pc in the first half of 2009 to phase out these subsidies by end-June 2009. However, tariffs were only raised by 1 percent in February. In the face of a perceptible increase in fuel and nonfuel cost components, the authorities reached an agreement with WB and ADB staffs on May 21, 2009 on higher tariff increases. Revised calculations of the PEPCO had suggested that the required tariff increase would be between 17.5 and 41.5pc, depending on the degree of load shedding, the extent of replacement of imported furnace oil with (less expensive) gas in electricity generation, and the assumption of electricity sector debt by the budget. According to this agreement, electricity tariffs were to be raised to eliminate tariff differential subsidies in 2009/10 and more gas would be used for electricity generation. However, in the aftermath of the difficult parliamentary debate on the budget, the authorities considered the agreed tariff increases as politically too costly. In particular, they decided that the bulk of the required tariff increases would need to be postponed until after load-shedding had been reduced through additional generation capacity coming on stream. On July 15, 2009, the authorities reached a revised agreement with World Bank and ADB staffs on a schedule for tariff increases that postpones the elimination of tariff differential subsidies to 2010/11.