ISLAMABAD: Privatisation Commission (PC) is all set to issue Expression of Interest (EoI) on Tuesday (today) for divestment of equity shares of Steel Corp. (Pvt) Ltd up to 74 per cent through bidding process, meant to revive the non-operational Pakistan Steel Mills (PSM).
The LoI’s issuance process passed through several challenges that included accusations on the PC for pressurizing PSM Chairman for revaluation of the PSM assets through its officials, Chairman PSM’s Board’s resignation from Transaction Committee, and his letter to the PC Board members and Secretary to PM on the capacity and capability of the PC in dealing with such transactions.
According to the PC, the decision of Cabinet Committee on Privatisation (CCoP) taken on December 24, 2020 was duly ratified by Federal Cabinet on December 29, 2020 and the following Transaction Structure for PSMC was approved: i.e. “transferring of identified core operating assets into wholly-owned subsidiary of PSMC through Scheme of Arrangement (SoA), as provided in the Companies Act 2017) followed by sale of majority shares of the newly formed subsidiary (without transferring of full ownership) to strategic private sector partner.”
The CCoP meeting was held on August 10, 2021 wherein following transaction features were approved, which were ratified by the Federal Cabinet on August 17: (i) the quantum of range of equity stakes of new subsidiary namely Steel Corp. (Pvt) Ltd. shall be 51-74% for divestment through bidding process; (ii) Steel Corp. (Pvt) Ltd. shall be owned by Government of Pakistan (Ministry of Industries and Production); (iii) the paid-up capital of Steel Corp. (Pvt) Ltd. shall be equal to its Net Equity as on December 31, 2020; (iv) the effective date of SoA shall be January 01, 2021; (v) the existing utility connections (electricity and gas) and power generation license shall be transferred to Steel Corp. (Pvt) Ltd, unencumbered. Petroleum Division/ SSGC shall confirm in writing that the gas supply to Steel Corp.(Pvt) Ltd shall be RLNG or otherwise. The PSMC shall install a new dedicated meter of fresh water for Steel Corp. (Pvt) Ltd; (vi) the use of Jetty (including any expansion/extension and conveyor belt system, including any expansion /extension thereof) shall be available to Steel Corp. (Pvt) Ltd on arms-length basis. The draft jetty-related Agreement including the commercial terms and conditions shall be made available to the pre-qualified bidders as part of bidding documents for their review and comments. The agreement shall be finalized prior to the bidding process between the PSMC and PQA; (vii) total land of 1229 acres shall be leased by PSMC to the Steel Corp (Pvt) Ltd. through the land lease deed on arms-length basis. The draft land lease deed including the commercial terms and conditions shall be made available to the pre-qualified bidders as part of bidding documents for their review and comments. The land lease deed shall be finalized prior to the bidding process; (viii) the Core Operating Assets (COA) approved by the PSMC Board of Directors (BoD) in its meeting held on July 13, 2021 shall be transferred to Steel Corp. (Pvt) Ltd. However, the Mol&P/ PSMC shall ensure reconciliation of COA and corresponding Fair Market Valuation (FMV) for transfer of COA to new subsidiary as per audited financial statements of PSMC for the period ending December 31, 2020; (ix) Petroleum and Finance Divisions to hold meetings with relevant stakeholders for resolution and settlement of SSGCL payables subject to issuance of Letter of Comfort (LC) by Finance Division. SSGCL shall withdraw litigation/ stay order against PSMC. It was also directed that National Bank of Pakistan (NBP) shall issue requisite NOC to facilitate transfer of COA to Steel Corp. (Pvt) Ltd; (x) Mol&P/PSMC shall ensure fulfilment of all the corporate actions/regulatory requirements for the approval of SOA for efficient and successful completion of this important transaction; and (xi) Privatisation Commission to invite the Expression of Interest (EoI) from interested parties for revival of PSMC, after filing of SOA with SECP by PSMC.
Pursuant to the CCoP decision mentioned the Privatisation Commission has been directed to invite the Expression of Interest (EoI) from the interested parties for revival of PSMC, after filing of SOA with SECP by PSMC. As per Sr (ii) of sub-clause (8) of clause (3) of the PC (Delegation of Powers) Regulation 2002, approval/decision of the PC Board was obtained last week with regards to the “pre-qualification criteria for pre-qualification of the prospective bidders.”
Chairman PSM Board Aamir Mumtaz, in his letter had stated that the members of CCoP forum are very busy people and they do not have the time for in-depth evaluation, suggesting that the government should consider and implement reforms and transformation of Privatisation Commission to make it operations result-oriented, pragmatic and efficient.
The Chairman CCoP/Finance Minister, Shaukat Tarin, at a recent meeting of CCoP conveyed serious concern on the non-compliance of directions by the Chairman PSMC BoD regarding taking up the matter in PSMC BoD for conducting additional valuations of PSMC core operating assets. The Chairman CCoP argued that the investors will evaluate the value of the assets after their due diligence. The Privatisation Commission was accordingly directed to proceed further with the valuation incorporated in the December 31, 2020 audited accounts of PSMC.
The sources said the PSM’s assets sans land value would be offered to the new investors, adding that value of land will be determined at a later stage.
According to sources, efforts were made to reduce the value of PSM assets by Rs50 billion through third party valuation but Chairman PSM Board did not follow the directions of concerned authorities.
Copyright Business Recorder, 2021