Two RLNG plants: border tensions delay FA''s appointment

The Privatization Commission (PC) has delayed the process of appointment of Financial Advisor (FA) for privatization of two RLNG power plants, well-informed sources told this correspondent. A senior Board member told Business Recorder that the process of privatization may have been delayed due to the prevailing tensions between India and Pakistan.
The Commission had earlier planned to complete the process of hiring FA for the privatization of two RLNG Power Plants by 7 March 2019 - 1,230 MW Haveli Bahadur Shah and 1223 MW Balloki Power Plant owned by National Power Parks Management Company Limited (NPPMCL).
Around 8 to 10 international investment companies, banks and consortiums had applied for the position of FA for the privatization of the two power plants. An official revealed that once appointed the FA would undertake due diligence and road shows and thereby advise the Privatization Commission to either go for a strategic sale or privatize the entire plants.
He further said the delay in privatization of these power plants could negatively affect their efficiency as they were running in the public sector and thereby it may reduce their current estimated value of $ 2 billion. The PML-N administration has approved the privatization of the two power plants in 2016 but the construction of the two plants was till ongoing at the time. On November 19, 2018, the Council of Common Interests (CCI) re-approved the proposed privatisation of two newly-established RLNG-based power plants with production capacity of more than 2,400 megawatts.
Saudi Arabia has shown an interest in RLNG power plants at Haveli Bahadur Shah and Balloki but would have to participate in the bidding process. As per plan, the two RLNG power plants will be privatized in fiscal year 2019-20, sources said.
The Board official, while responding to a question, said that the interest in the purchase of the two plants by foreign companies and investors may be reduced due to the downgrading of Pakistan''s credit rating by Standard and Poor''s (S&P)''s and Fitch by a notch however he said that the transaction managers would enhance their fee by including the higher risk factor in such a condition.
The PC Ordinance specifies that 90 percent of privatisation proceeds will be used for debt retirement and 10 percent for poverty alleviation. Privatization proceeds have been budgeted at zero for 2018-19, while Rs 50 billion was budgeted though not realized under this head in the last fiscal year 2018-19.