It has been alleged that Cargill Holdings was allowed to participate in privatisation of Heavy Electric Complex (HEC) despite the weak portfolio of the company. Azeem Qadir Haye, Transaction Manager of HEC, disclosed before a four-member Senate sub-committee on Finance led by Senator Ilays Bilour that if PC would have gone strictly by the laid down procedure, Cargill Holdings Company would not have qualified for the privatisation process due to weak credentials.
"Cargill Holdings Portfolio was not up to the mark," Azeem said. Additional Secretary Incharge Privatisation Commission Ahmed Nawaz Sukhera said that no one was ready to buy the company and three attempts made previously failed and this was the fourth effort. A judgement call was made in the case of HEC and decision making was done on the point that if qualified bidder did not submit payment, it would be eventually dropped.
"We want to know whether this was a deliberate effort to get rid of from the company," the committee observed, inquiring about whether there was consideration at any level to revive the company because transformers were still a very good business in Pakistan. The committee wants this to be first decided whether Cargill Holdings Company was fake or genuine before going into details, said Senator Ilyas Balour. Sukhera said this was the only transaction for which three meetings of the Cabinet Committee on Privatisation (CCoP) were held because everyone was mindful of taxpayers' money's drainage. The investment could not be made to revive the company, he added.
He said the company had no money to pay even employees' salaries and was not able to compete with its sole rival in private sector. Secretary PC said that they have carried out financial, legal and technical due diligence and even a USAID consultant report was also sought before decision-making. The sub-committee was constituted by the main committee to investigate the HEC process and submit a report has directed the PC to provide details of the Cargill Holdings Board of Directors (BoDs) as well as financial records. Sub-committee was informed that the meeting of the HEC's transaction committee in January 27, 2015 held pre-qualification of interested parties and thoroughly deliberated upon the statement of qualification (SOQ) submitted by M/s CHL as well as the other two interested parties.
The transaction committee also considered depleting financial facts of HEC during the pre-qualification process and was informed that HEC incurred losses of Rs 4 million per month in the last financial year 2012-13 and losses for fiscal year 2013-14 stood at Rs 125 million.
The transaction committee was also informed about the requirement of Rs 350 million to HEC for capital expenditure (CAPEX), non-payment of salaries to employees for January 2015, utilisation of Rs 400 million under Letter of Guarantees (LG's) as well as another Rs 400 million for running finance from the Bank of Khyber till January 2015, stated Ahmed Nawaz Sukhera. He said the demand of traditional transformers, main product of HEC, is decreasing over a period of time as smart transformers are increasingly more in demand.
The pre-bid meeting of HEC was convened on 3rd March 2015 in the Privatisation Commission, wherein representatives of Cargill Holdings Ltd and Elahi Group of Companies participated. Representatives from Fauji Fertilizer Company Limited again did not attend the meeting. As per the transaction timelines, the qualified parties were required to deposit an amount of Rs 25 million as earnest money along with the bid application for the HEC whose value according to independent market evaluators was estimated at Rs 1,248 million (Rs 85.57/Share) as forced sale value, and Rs 1,475 million (Rs 101.08/share) as fair market value. The revised report reflects figures of Rs 1,187 million (Rs 81.34/Share) as forced sale value, and Rs 1,413 million (Rs 96.86/share) as fair market value.
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