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ISLAMABAD: Privatisation Commission (PC) has reportedly decided to shelve privatisation of Pakistan Engineering Company (PECO) plan until the entity is free from inherent issues and encumbrances, well-informed sources told Business Recorder.

The decision was taken by the PC Board in its meeting held on June 4, 2021, presided over by Minister for Privatisation, Mohammedmian Soomro.

Sharing details, sources said Cabinet Committee on Privatisation (CCoP), in its meeting held on 8 August, 2019, directed the PC to select any ten PSEs from the privatisation list approved in CCoP meeting, held on October 31, 2018, for privatisation and initiate the process for hiring of Financial Advisors collectively or separately, as per legal requirements, for selected PSEs.

MOI&P, in its letter of 8 August, 2019, provided a list of SOEs to be placed on active privatisation list, which included PECO. PC Board on 26 August, 2019 approved ten PSEs, including PECO for inclusion in active privatisation list and directed for divestment of up to 33.24 per cent of GoP equity stake in PECO.

Accordingly, advertisement inviting Expression of Interest (EoI) for appointment of Financial Advisor (FA) was published in press in August 2019. However, owing to some technical reasons, the PC Board in its meeting held on 27 December, 2019 cancelled this process and instructed to invite EOI afresh for hiring of FA for PECO. Thus the advertisement inviting EoI for appointment of FA was again published in the press in January 2020. After a thorough evaluation, the Consortium led by Faysal Bank & InvestConsult emerged as the "Top-Ranked IP".

According to sources, owing to various issues inherent in the privatisation of PECO, a stakeholders' meeting was held on 7 May, 2020 and the Ministry of Industries & Production was required to present a plan regarding the way forward, within one month. This plan was to mainly address the following issues: (i) sale of shares by NIT, NAB investigations & PAC review/directions; (ii) BOD approvals of 5 GoP entities to sell 33 .24 per cent PECO shares; (iii) GoP liabilities of Rs7.2 billion (Rs2.3 billion of PC and Rs.4.9 billion of Finance Division) approximately; and (iv) sale of Badami Bagh, Lahore land to settle the outstanding liabilities.

Follow-up meetings were held on 1 July, 2020 and 22 July, 2020 wherein MoI& P stated that the plan is not ready and they have not received any input from State Engineering Corporation (SEC) nor from PECO Management.

PC Board in its meeting held on July 29, 2020 was apprised about the ongoing progress and informed that several requests were made to MoI&P, being administrative Ministry of PECO, to present a plan to address the inherent issues which had a material impact on the transaction. It was further stated that the process of hiring of Financial Advisor was deferred and the timeline for validity of the proposals of Top Ranked IP was extended up to 20 August, 2020. The Board decided to wait till 20 August, 2020 for stakeholders' response and directed that the issue of delisting may be taken up with the administrative Ministry for placing before CCoP for a decision.

Pursuant to PC Board decision, meetings were held with stakeholders at Ministry of Industries and Production regarding information/business plan justifying the deferment/request for delisting PECO from the list of privatisation and resolution of issues, including Settlement of GoP liabilities, but new issues emerged to the forefront.

PC Board in its meeting held on 21 October, 2020 reviewed the development so far and recommended that the matter may be placed before the CCoP for guidance/directions with or without prior consultation with Ministry of Industries & Production.

The sources said, along with the complexity and seriousness of the issues, following new issues also surfaced during meetings with MOI&P and PECO: (i) legal case in Islamabad High Court (IHC); (ii) default on repayment of NBP loan; (iii) defaulters' status on Pakistan Stock Exchange; (iv) mutation of land in the name of PECO; (v) non-availability of audited/approved financial statements from June 2018 onwards; (vi) verification of valuation of assets (including Badami Bagh & Kot Lakhpat Land); (vii) unauthorised JV between MD and a private firm; and (viii) inquiry initiated by SECP for non-compliances on March 26, 2021.

Meanwhile, several inter-ministerial progress review meetings were held with MOI&P wherein the matter was put on the agenda, but did not come under discussion. Accordingly, the matter was placed before CCOP for guidance/direction in the meeting held on March 21, 2021, which directed MoI&P to resolve all pending issues of SEL & PECO, at the earliest. Further, Public Accounts Committee (PAC) on 11 March, 2021, also issued a directive related to PECO wherein privatisation of PECO came under discussion cited as follows: "the Finance Division to get back the shares and take appropriate action against the concerned MD/BOD or whoever is responsible. A report in this regard would be submitted to PAC Secretariat apprising as to what action has been taken. PECO will not be privatised till the logical conclusion."

In light of the confronting issue, the PC Board on 4 June, 2021 discussed the following proposals: (i) PECO may be delisted from the privatisation list; (ii) PECO may sell its land in light of Cabinet decisions of 30 May, 1994 and 31 December, 2004 and subsequent PECO's Board decision for implementation on 12 March, 2005 to settle GoP liabilities; and (iii) privatisation may be considered when the entity is free from inherent issues and encumbrances.

After a detailed discussion the PC Board decided to shelve sell-off process of PECO until its inherent issues are resolved.

Copyright Business Recorder, 2021