KARACHI, June 20: Japan Power Generation Limited, a stock market listed company, would convert interest-free loan amounting to Rs84 million advanced by four parties into equity. The company said it would place the proposal before the members at the extraordinary general meeting to be held on June 27.

Japan Power, an independent power producer (IPP), identified the parties who would be issued shares to replace their loans as follows: Pak Oman Investment company Ltd -- 3.2 million shares; Saudi Pak Industrial & Agricultural Investment Company (Pvt) Ltd -- 1.4 million shares; National Logistic Cell -- 3.2 million shares and Patagonia Corporation (Pvt) Ltd --0.648 million shares.

“The above shares would be issued in proportion to the existing shares held by the said members, who have given their consent in this regard,” the company announced on Friday.

Following the issue of 8.4 million additional shares to replace debt owed by the company, the aggregate shareholding of the four respective parties in Japan Power would stand as follows: POICL 28.8 million shares; SPIAICL 11.6 million shares; NLC 4.2 million shares and PCL 4.2 million shares, all of which would aggregate to 71.1 million shares. The parties would then collectively hold 45.58 per cent stake in Japan Power, which effectively mean that the control would continue to vest in the current sponsors.

In order to accommodate the new shares, the authorised capital of the company would be raised by Rs100 million to Rs1.6 billion, from Rs1.5 billion. The company said that debts were decided to be converted into equity without the issue of right shares.

“The current market price of the share in Japan Power is Rs7,” the company explained. It noted that the average share price in the last twelve months had been the same. In view of the 30 per cent discount over the par value of Rs10 per share, shareholders may be in no mood to offer cash in exchange for a right issue.

“It is therefore, in the interest of the company to have its liabilities reduced without any impact on its cash flows,” the company stated.

The proposal to convert debt into equity would of course be subject to the approval of SECP as required under the first proviso to Section 86(1) of the Companies Ordinance.