KARACHI, Nov 8: It is still five weeks to December 13 - the deadline, which the Privatiztion Commission has set for receiving Expression of Interests (EOIs) for purchase of 51 per cent controlling shares in National Refinery Limited (NRL). But investors are already watching with interest the upcoming parties to the contest.

A consortium led by Citigroup Global Market Limited is acting as the financial adviser for the transaction. "The Attock Group companies namely, Attock Refinery Limited (ARL) and Pakistan Oilfields Limited (POL) have called extraordinary general meetings during November 2004 to authorise their respective boards to participate in the bidding process for the acquisition of shares in NRL", says Faraz Farooq, analyst at Jahangir Siddiqui Capital Markets Limited.

In the company's 'Morning briefing' of Monday, the analyst observes that ARL and POL as part of their respective horizontal and vertical-forward integration strategies intend to attain up to a maximum of 35 and 25.5 per cent equity stake. NRL is the only domestic Lube Base Oils (LBO) refinery that caters to about 80 per cent of the domestic market. That ensures stability in NRL's earnings unlike the volatility witnessed in fuel-only refineries profitability on account of the fluctuation in oil prices. Moreover, while the cash dividends of fuel refineries are capped at Rs5 per shares, NRL is able to make higher payouts as its lube operations are completely deregulated and thus exempt from payout restrictions.

Sarwat Fatima, analyst at Elixir Securities, while denying that she was speculating on expected offer price of NRL, said in her Nov 5 report that even if POL were to bid for NRL at current market price (28 per cent premium to last six months' average price), POL would need to invest about Rs2.4 billion to purchase 25.5 per cent stake in the refinery. "We are of the view that POL is clearly in a position to arrange finances for such investment without affecting its payout policy or having to opt for a cash call (right issue)," says Ms Fatima.

The analyst notes that balance sheet size of POL is Rs12.7 billion; it has no long term debt on its books and generates Rs3 to Rs3.5 billion cash annually. POL has also announced plans to offer 1.193 million shares out of its shareholding in Attock Petroleum Limited (APL) to the general public at the time of APL's public offer.