ISLAMABAD: The Privatisation Commission has decided to appoint a consortium, led by Dubai Islamic Bank, as financial advisers for the privatisation of Pakistan International Airlines (PIA).

Another consortium, led by Earnst & Young and United Bank Limited, has been appointed as financial advisers for Faisalabad Electric Supply Company (Fesco).

A formal approval to induct the two consortia would be accorded by the Board of Privatisation which is expected to meet on Tuesday (July 22), an official said.

Bids of five parties competing for the financial advisory of PIA were opened at a meeting on Friday in which the consortium, led by Dubai Islamic Bank and its partners IATA consulting, Deloitte, Haidermota, Freshfields Bruskhaus Deringer, Abacus and APCO, was given 100 per cent marks in both technical and financial bids while technical bids of two consortia, led by Rothschild Group and Oliver Wymann and another by Mckinsy, MCB and Deloitte, were rejected for failing to secure mandatory 70pc marks and their financial proposals were not opened.

The consortium, led by Dubai Islamic Bank, offered to charge Rs250 million for first phase of restructuring, followed by Rs180m for second round along with 1.5pc of success fee.

Interestingly, the Privatisation Commission had earlier clarified to the bidders that “selected accounting firm as part of the consortium should preferably not be an incumbent auditor of PIA.”

It, however, emerged that Deloitte had been working as accounting firm of the PIA until a few days ago and was responsible for concluding PIA’s accounts for financial year ending June 30.

In that capacity, the auditing firm would obviously have an edge over other competing firms.

Deloitte and Haidermota BNR were part of two consortia each that took part in the bidding.

A Privatisation Commission official said it was not clear if Dubai Islamic Bank had an independent restructuring team or not and so was its unclear record about experience in aviation sector though the Commission had sought services of top-tier financial institutions with aviation expertise.

Another group, led by Earnst & Young, Haidermota BNR, United Bank Limited, Seabury and Excelerate and Freshfield Bruckaus, got 95 marks in technical bid, but ended up with 67.59pc overall marks as it offered to charge Rs400m fee for restructuring, Rs63m for sale along with 3.5pc of privatisation proceeds as success fee.

The bidder, led by Jefferies, an international investment bank, and comprising ICH SH&E, Shajar Capital, Charles Russel, Irfan & Irfan and BDO Ebrahim-Hewitt, was able to secure 80.8pc marks in technical evaluation and ended up putting together 39.8pc marks as it had offered a fee of Rs700m for the first phase only.

Fesco: Five parties were in competition for financial services of Faisalabad Electric Supply Company (Fesco), including BMA, Consortium of UBL and Earnst & Young, SSJBL and Burj Power, Alma Capital and Grant Thornton.

Burj Power, Earnst & Young and BMA were finally left in race, but a consortium of Earnst & Young and UBL is poised to be selected as financial adviser for Fesco.

Likewise, Burj Power and ICB of the Islamic Development Bank are most likely to be accommodated as financial advisers for Northern Power Generation Company.

Under the IMF programme, the government had agreed to appoint a financial adviser for privatisation of PIA by end-March and divest 26pc shares of PIA to a strategic investor by end-December 2014. Though appointment of financial adviser was later revised to June 2014, the government missed the target twice.

Published in Dawn, July 19th , 2014