IESCO backs transfer of assets, liabilities to PHL ahead of sell-off

ISLAMABAD: Islamabad Electric Supply Company (IESCO) has given its no-objection to the government’s plan to transfer selected assets, liabilities and pension obligations to Power Holding Limited (PHL) as part of a restructuring exercise aimed at facilitating privatisation of the distribution company.

In a letter to one of its creditors titled “Reconstruction of Islamabad Electric Supply Company Limited”, IESCO, which is among the first batch of distribution companies (DISCOs) slated for privatisation, has outlined the restructuring plan approved by the Cabinet Committee on Privatisation (CCoP) in August 2026 and ratified by the Federal Cabinet on September 23, 2026.

The plan envisages separation of selected assets, liabilities and obligations from IESCO through a scheme of arrangement under the Companies Act, 2017, before the government’s proposed divestment of its shareholding in the company.

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According to the restructuring framework, PHL has been nominated as a government-owned special purpose vehicle into which specified rights, liabilities and assets of IESCO, Faisalabad Electric Supply Company (FESCO) and Gujranwala Electric Power Company (GEPCO) will be transferred ahead of their proposed privatisation.

The Privatisation Commission is implementing a privatisation programme for the three Batch-I DISCOs, under which the government intends to divest its shareholding in each company to private investors.

The CCoP approved restructuring plans and principles for the three distribution companies in meetings held on August 11, 19 and 22, 2026, which were subsequently ratified by the Federal Cabinet on September 23, 2026.

Under the approved restructuring plan, all land owned by IESCO will be transferred to PHL, while the distribution company will subsequently take the land back on a long-term lease.

The restructuring also provides for separation of pension liabilities between serving and retired employees.

Retirement benefit liabilities relating to current employees will remain with the respective distribution companies, whereas pension and other retirement benefit liabilities of retired employees will be transferred to PHL.

The funds currently held in IESCO’s existing retirement benefit trusts will also be reorganised under the arrangement. An amount of Rs1.5 billion will be retained for current employees, while the remaining funds will be transferred to a trust established by PHL.

The approved restructuring plan further provides for transfer of the Punjab government’s payables and receivables to PHL for subsequent settlement.

Similarly, the overdue portion of debt servicing liability (DSL) re-lent loans, along with markup, owed by each Batch-I DISCO will be carved out and transferred to PHL. However, the non-due portion of IESCO’s DSL re-lent loans will remain on its balance sheet.

Another major component of the restructuring involves transfer of tax receivables from the Federal Board of Revenue (FBR) appearing on IESCO’s balance sheet to PHL, along with the related court cases.

The CCoP has also directed all relevant federal agencies and authorities to facilitate necessary consents, in accordance with law, for implementation of the approved restructuring plan and filing of the schemes of arrangement.

The scheme of arrangement will be processed under Sections 279 to 283 and Section 285(8) of the Companies Act, 2017, for sanction and appropriate facilitating orders from the Securities and Exchange Commission of Pakistan (SECP).

Approval of the scheme will be sought from members of the companies concerned, while relevant authorities will be approached for necessary consents and approvals.

Under the proposed arrangement, PHL will assume responsibility, from the effective date of the scheme, for discharging debts, obligations and liabilities relating to the items transferred under the approved restructuring plan. Consequently, IESCO will stand released and discharged from these obligations, subject to the terms of the scheme of arrangement.

In this connection, IESCO has approached its creditors, including those having outstanding claims as of June 30, 2026, to seek their no-objection to the proposed restructuring and scheme of arrangement.

The communication notes that these creditors may also retain their creditor status when the scheme is considered by the SECP and other relevant authorities.

Copyright Business Recorder, 2026