CCoP approves HEC, NPCC shares sell-off

The Cabinet Committee on Privatisation (CCoP), which met with Finance Minister Abdul Hafeez Shaikh in the chair on Friday, approved privatisation of 88 percent shares of National Power Construction Corporation (NPCC), and 96 percent shares of Heavy Electrical Complex (HEC).
Niagara Mill (Pvt) Limited Pakistan, and AREVA T&D Pakistan (Pvt) Ltd France and ALSTOM Grid Pakistan(Pvt) Ltd, France are considered as interested parties which have submitted Expressions of Interest (EoIs) to buy 88 percent GoP shares in HEC. NPCC is also among those public sector entities which have been offered for privatisation, but its reference price, which is about Rs 12-13 per share, is considered very high, which accounts for lack of investor interest.
The CCoP allowed Privatisation Commission for the sale of minimum 88 percent GoP shares in NPCC and divestment of minimum 96 percent GoP shares in HEC, together with management control. The committee also discussed the Benazir Employees Stock Option Scheme (BESOS) in detail and after due deliberation on this scheme CCoP approved two out of five recommendations made by Privatisation Commission whereby Finance Division is to release Rs 10 million on annual basis for BESOS and Rs 1.00 billion to pay the buyback claims in hand.
The committee decided not to hand over physical possession of bonus shares to the employees despite the fact that Federal Minister Khurshid Shah insisted on this option forcefully. The CCoP also agreed to the PC proposal and directed PPL Employees Empowerment Trust (PPLEET) to surrender bonus shares received by the entity-based trust to the PC. The PC explained to the CCoP that under Benazir Employees Stock Option Scheme (BESOS), 50 percent cash dividend is distributed among employees who receive free of cost unit certificates while shares are retained by the respective Trust.
Remaining 50 percent dividend is transferred to the Central Revolving Fund for subsequent payment of buyback claims. The Scheme, as such, envisages 50 percent cash dividend distribution to employees and not distribution of 50 percent shares (including bonus shares) to them. BESOS is designed as a special instrument, which operates under a dedicated framework approved by the Federal Cabinet for ensuring transfer of 12 percent GoP shares to entity based Trust free of cost for a specific period while employees are given unit certificates in lieu of the shares retained in the respective Trusts. These shares are subsequently transferred back to GoP for buyback of claims of the beneficiary employees.
CCoP constituted a sub-committee headed by the Federal Minister for Privatisation to further look into the details of the remaining three to four recommendations made by Privatisation Commission. National Power Construction Corporation (NPCC) was established in 1974 by the Government of Pakistan under the Federal Ministry of Water & Power. NPCC is registered under the Companies Ordinance 1984 and has its Branch Office in Saudi Arabia in the name of NPCC (Pakistan) Limited, registered under Foreign Capital Investment Regulations.
NPCC undertakes execution of large power construction projects including high and low voltage lines, distribution networks and electrification of large housing/commercial projects on turnkey basis in Saudi Arabia. KASB Bank was hired as Financial Advisor (FA) to conduct the transaction and based in their due diligence exercise. FA proposed following two options for strategic sale of NPCC; (i) sale of 88 percent shares; and (ii) sale of 51 percent shares.
Moreover, FA recommended option -1 whereby PC can proceed with a strategic sale of 88 per cent GoP shares in NPCC on " as is where is" basis. However, the remaining 12 per shares of the company will be allocated to the employees under the controversial BESOS. Minister for Privatisation, Chairman Board of Investment, Secretary Cabinet Division, Dy Chairman Planning Commission, Finance Secretary and other high officials were present in the meeting.