ISLAMABAD, Sept 26: The cabinet committee on privatisation (CCOP) on Monday approved the sale of 73 per cent stake along with management control of the Karachi Electric Supply Corporation (KESC) to a consortium of Hassan Associates, Al-Jomaih Group of Saudi Arabia and Premier Mercantile at a “matched highest” bid of about Rs15 billion or Rs1.65 per share.
A federal minister told Dawn after the meeting that CCOP approved the sale of KESC to a mix of old and new investors forming the consortium but the decision is subject to final ratification by the federal cabinet.
Minister for Privatisation and Investment Dr Abdul Hafeez Sheikh, who made a commitment in the morning to brief newsmen after the CCOP meeting about the sale of KESC and PTCL, did not do so and was also not available on his official, residential and mobile telephones. Secretary of Privatization Commission Tehsin K. Iqbal also avoided taking calls from the media.
Authoritative sources said the CCOP presided over by Prime Minister Shaukat Aziz did not discuss at all the privatization of PTCL owing to some problems in the finalization of post-bidding details.
The CCOP, however, approved the highest bids of Mustehkum Cement and Javedan Cement at Rs3.2 billion (Rs305 per share) and Rs4.315 billion (Rs80 per share) to Bestway Cement and Haji Usman Group, respectively.
The decisions are also subject to clearance by the courts because some interested parties had challenged the sale process before the bidding. The courts had allowed the bidding but subject to final clearance.
The CCOP authorized the Privatization Commission to make an offer to the three highest bidders of Bolan Textile Mills to further increase their bid for the disposal of equipment and machinery. The sources said the CCOP’s proceedings predominantly revolved around the sale and composition of the consortium of the KESC. The meeting was informed that original partners of Hassan Associates were not ready to be part of the consortium because of a matching highest price and had provided written no objection certificates (NOCs) in this regard.
General Electric (GE) and ABB would continue to be the technical partners of the consortium while Siemens of Germany would be the operation and maintenance contractor. Hassan Associates and Premier Mercantile are the original consortium members while Al-Jomaih Group is a new entrant.
Informed sources said the Hassan Associates Consortium was asked to match the highest bid of Rs1.65 per share and make payment as per agreed additional instruction to bidders.
The re-constituted consortium accepted the offer of matching the highest bid and formally submitted NOCs from the original partners.
The reconstituted consortium also proposed some amendments in the transaction which have been accepted by the government with minor changes.
The amendments included acceptance of payment of $100 million towards the first instalment of the sale consideration on the day of issue of Letter of Acceptance (LoA), payment of balance by sale of ordinary shares in the ratio of 4:3 instead of 2:1, substitution of immediate payment of the subscription amount of redeemable preference shares of Rs4.38 billion by an irrevocable bank guarantee of first class Pakistani bank like the National Bank of Pakistan (NBP).
A monitoring committee has been constituted consisting of representatives of the Finance Division, Ministry of Water and Power and Privatization Commission to monitor proper and timely utilization of subscription amount injected by the government.
The sources said the government had also accepted a request of the consortium that the timing of FIP funding be updated and FIP fund be provided directly to the KESC which would have a positive impact on the utility’s balance sheet and its borrowing capability.
The KESC was put to auction on February 4 in which a Saudi investors group offered the highest bid of Rs1.65 a share amounting to about Rs15 billion for 73 per cent shares. The bid was formally approved on February 6 by the CCoP and a letter of approval was issued more than two weeks later. The Saudi group later backed out and the Hasan Associates was given an opportunity to match the bid.