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ISLAMABAD: Privatisation Commission (PC) is reportedly facing a catch 22 situation with respect to privatisation of Heavy Electrical Complex (HEC) as on the one hand Faisalabad Electric Supply Company (FESCO) is mulling blacklisting the HEC while on the other hand controversies on assets valuation of Pakistan Steel Mills (PSM) and Services International Hotel (SIH) continue to stay, well informed sources told Business Recorder.

According to a senior official of PC, privatisation of HEC is at an advanced stage and the bidding is scheduled to be held shortly; any adverse action, including blacklisting of HEC at this stage shall have an adverse impact on the privatisation process and subsequent privatisation proceeds.

"Blacklisting should not be carried out in any case, till the option of Arbitration has been exhausted under applicable PPRA Rules (l9b)," the sources quoted PC as saying.

Meanwhile, a meeting of the HEC's Transaction Committee (TC) was held on October 20, 2021 which was attended by the members of TC and Financial Advisory (FA) Consortium.

The representative from the MOI&P informed the forum that: (i) amount payable by HEC to KPEZDMC has been duly agreed and Rs84.890million stands payable by HEC; (ii) no progress could be made on the pending issue of 513 Kanal Taxila land still in the name of HEC.

Source documents and historical record as agreed by Strategic Plans Division (SPD)/ Heavy Mechanical Complex (HMC) in the meeting held on Sept 7, 2021, under the chairmanship of Secretary MOI&P, have not yet been received; and (iii) the annual accounts of HEC for FY 2020-21 have been initialled by Auditors and shared with FA consortium for their perusal for the HEC's Reserve Price computation.

Privatisation of Heavy Electrical Complex: PC may fix Rs81.06 as reserve price per share

The MOI&P was also asked to follow up again with SPD/ HMC on provision of pending information regarding land located in Taxila to enable the preparation of summary for the competent forum.

Chairman TC, Zafar Iqbal Sobhani asked whether the matter has been adequately addressed in revised SPA and the affidavit prepared to be received from bidders.

Legal Advisor of FA consortium reiterated earlier concern expressed on processing the HEC transaction without transferring referred land in Taxila, which is still in the name of HEC. He also emphasized that addressing this issue through SPA or obtaining the affidavit from bidders might not serve the purpose.

The representative from MOI&P noted that they are considering to seek formal approval from HEC Board to transfer the referred land to the parent company of HEC i.e., State Engineering Corporation (SEC) at a notional value.

The meeting also discussed the legal ramifications of this course of action, particularly in view of an appeal already filed by HMC before Additional District Collector (Revenue), Rawalpindi.

It was also briefed that since SPD/ HMC have not provided the documents, as was agreed in the meeting held on September 7, 2021; therefore, they have to take this course of action.

After deliberations DG (I&T) suggested that MOI&P may initiate a summary on this pending issue for consideration and decision of ECC without waiting further for the documents from HMC.

The Chairman of Transaction Committee directed FA consortium to present the revised Reserve Price computations in view of the changes/ adjustment directed in the last meeting of TC and in accordance with figures reconciled with Audited Accounts for the year ended June 30, 2021.

DG (I&T), PC pointed out that audited accounts being referred to are in fact only initialled accounts by statutory auditors of HEC without any Board letter from Auditors, adding that these are neither considered nor approved by HEC Board.

PC holds pre-bid meeting of HEC

He further highlighted that recently in case of Pakistan Steel Mills transaction, the initialled accounts were used for seeking approvals for processing the transaction but the entire process had to be carried out again since variance between initialled and approved/ signed financial statements were pointed out and PSMC & PC Board meeting were convened again to obtain approvals.

It was discussed in the meeting that HEC's initialled accounts have highlighted no major adjustments or dividend decisions to be taken so these can be used for the purpose of Reserve Price valuation. However, after discussion it was decided that Board's approval of audited accounts is a mandatory requirement as per the applicable corporate laws.

The meeting was also informed that the CA Firm in FA Consortium has reviewed the amount claimed of Rs104.87 million by MOI&P in the summary draft for ECC for seeking funds for HEC routine payment.

It was informed by MD HEC that out of the claimed amount, salary for the month of July and August 2021 have been paid by HEC out of Sales Tax refund so the claimed amount of Rs104.87 million will be reduced, accordingly.

It was highlighted by Senior Consultant PC that this amount to be claimed from ECC should not be a loan on balance sheet of HEC at this stage. These payments of salaries are due regardless of privatisation.

The sources said issue of Services International Hotel has not yet been resolved as the Cabinet rejected sale of hotel and directed the CCoP to reconsider it. However, the issue has not been resubmitted to the CCoP so far.

Likewise, PSM's assets have been evaluated twice which according to some of the private sector people, is illogical and may attract litigation in future. The investors have already expressed their concerns on expected litigation.

Copyright Business Recorder, 2021

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