ISLAMABAD: The federal government will approve divestment of 51-74% equity stakes of Steel Corp. (Pvt) Ltd, a subsidiary of Pakistan Steel Mills (PSM), on Tuesday (today), sources close to Minister for Privatisation told Business Recorder.
On August 10, 2021, the Cabinet Committee on Privatisation (CCoP) headed by Finance Minister approved the issuance of Scheme of Arrangement (SoA).
The Committee also directed Privatisation Commission to expedite the process of soliciting Expression of Interest (EoI) and make efforts to complete the transaction at the earliest.
The two letters written by Chairman, Pakistan Steel Mills (PSM) Board, Aamir Mumtaz, had jolted policy and decision-makers. In the first letter, he resigned as a member of Transaction Committee on the grounds that his views are not being given due respect, whereas in the second letter, he raised several questions on the transaction’s sanctity.
“The members of forums such as the CCoP are very busy people and do not have the time and wherewithal to do an in-depth evaluation and deserve to hear dissenting opinions and recommendations from other stakeholders so that the right decisions are made. These decisions are then used to overrule and push aside dissenting and potentially valid arguments from other stakeholders. I believe this is not a practice that would result in the best outcome for Pakistan Steel and the Government of Pakistan,” wrote Chairman PSM Board.
According to sources, in view of the variance in the initialed and signed audited accounts of PSMC up to December 31, 2020, Mol&P and PSMC were asked by the PC Board to provide the following after approval from PSMC Board: (i) audited accounts up to December 31, 2020 duly approved by PSMC Board and signed by CEO and one nominated Director; and (ii) itemized list of Key Operating Assets (KOA) along with corresponding Fair Market Value (FMV) of each listed item to be transferred to the new subsidiary namely Steel Corp (Pvt) Ltd, duly approved by PSMC Board, signed and stamped by CEO of PSMC and initialed by the Valuer and the PSMC Auditor. This will form an integral component of the Scheme of Arrangement (SoA) to be submitted to the SECP by PSMC after requisite approvals.
The sources said PSMC Board’s decision of 6 May 2021 (with reference to core land comprising 1,228 acres to be leased to Steel Corp Pvt Ltd) directed PSMC management to provide amended decision of the PSMC Board revising core land to 1,229 acres.
On 6 May 2021, PSMC Board also decided that “the right of use of land (1229 acres) to be awarded without entering into a lease agreement as per the standard terms to the new subsidiary namely, Steel Corp (Pvt) Ltd. until the strategic partner comes in, thereafter the terms and conditions of the land lease will be decided at arm’s length principle with the strategic partner,” besides resolving that the lease agreement will be finalized upon buy-side due diligence and prior to conducting bidding.
The other decisions taken by the PSM Board were as follows: (i) agreement on Jetty and Right of Way (RoW); (ii) the existing utility connections and power generation licence will be transferred to Steel Corp (Pvt) Ltd unencumbered; (iii) effective date of SOA will be January 1, 2021; (iv) the ownership of Steel Corp (Pvt) Ltd will be retained by PSMC in light of the approval of PSMC Board; (v) paid-up capital of Steel Corp (Pvt) Ltd will be equal to net equity as at December 31, 2020; and (vi) divestment of 51-74 percent equity stakes of Steel Corp (Pvt.) Ltd.
The PC Board has also directed that the PSMC Management should ensure reconciliation of Key Operating Assets and corresponding Fair Market Valuation for proposed transfer of core assets to new subsidiary, as narrated in the audited financial statement of PSMC for period ending 31 December 2020 including list of KOA with the Financial Advisers of PC to avoid any variance in this regard.
The PC Board directed the Privatisation Commission to place before the Cabinet Committee on Privatisation all relevant transaction details including the recommendation for divestment of 51-74% equity stakes of Steel Corp. (Pvt) Ltd. for consideration.
PSM BoD selected three Executives - Brig Shujah Hassan Khurazmi (retd) as CEO, Lt-Col Tariq Khan (retd), PEO (A&P) and Capt Baber Barnard (retd) as GM (Security) for PSM in January 2020.
Tariq Khan and Babar Barnard joined (one year contract) PSM on January 20, 2020 and their services and pay-perks were further extended up to January 19, 2022.
Shujah Hassan Khurazmi, joined as CEO, on August 20, 2020 whose contract will expire on August 19, 2021. The BoD proposed further extension of CEO without evaluating his performance.
PSMC Stakeholders Group has appealed to Secretary MOI&P for investigation through NAB against CEO, PSM, PEO (A&P) GM (Security) and others illegal appointments through tailor-made advertisement involved in alleged corrupt practices, theft of materials and abuse of authority. PSM losses/liabilities further increased to more than Rs 141 billion in a period of 30 months from July 2018 to December 2020 whereas the increase in the entity’s losses and liabilities from January to August 2021 are not yet known.
Copyright Business Recorder, 2021