Govt to sell steel mills, 11 other PSEs under IMF terms

ISLAMABAD: Pakistan has signed an agreement with the IMF to privatise as well as undertake strategic sale of 12 public sector enterprises (PSEs) during the ongoing financial year 2015-16, including the sale of 26 percent shares of the national flag carrier PIA.
Now the tough phase of privatisation under the IMF’s condition will start, as the government has committed to sell the Pakistan Steel Mills (PSM) and State Life Insurance Corporation (SLIC) during the ongoing financial year.
Under the new structural benchmark placed by the IMF, the National Electric Power Regulatory Authority (NEPRA) will determine and notify multi-year tariff for Faisalabad, Islamabad and Lahore Electric Power companies till end-November 2015, which will pave the way for the completion of privatisation deals.
The 12 PSEs with envisaged timeline to privatise include strategic and asset sale of PSM by December 2015, sale of 18.39 percent shares of Mari Petroleum by end-September 2015, sale of 10-15 percent shares of Pak Arab Refinery by end December 2015, strategic and asset sale of Northern Power Generation Company Limited (NPGCL) by end-December 2015, sale of 40.25 percent shares of Kot Addu Power Company by December 2015, sale of 26 percent shares of Pakistan International Airlines (PIA) by end December 2015, strategic and asset sale of Faisalabad Electric Supply Company (Fesco) beyond March 2016, strategic and asset sale of Jamshoro Power Generation Company Limited by April 2016, strategic and asset sale of State Life Insurance Corporation by end June 2016, strategic and asset sale of Islamabad Electric Supply Company (Iesco) and Lahore Electric Supply Company (Lesco) by end June 2016. The government had made a commitment to sell 88 percent shares of the National Power Construction Corp (NPCC) by end June, which could not be accomplished.
According to the signed Memorandum of Economic and Financial Policies (MEFP) under the $6.64 billion Extended Fund Facility, Pakistan’s economic managers have given a written commitment to the IMF that they have appointed financial advisers for share sales of the Faisalabad Electric Supply Company (FESCO) in July 2014 and plan to complete the transaction by end-March 2016.
For the Islamabad Electric Supply Company (Iesco) and Lahore Electric Supply Company (Lesco), financial advisers were hired in January 2015 for expected completion of transaction by end-June 2016.
In April 2015, the government hired financial advisers for the Gujranwala Electric Power Company (Gepco) for expected completion of the transaction by end-September 2016. It has advertised for financial advisers for Hyderabad, Peshawar, Quetta, Sukkur, and Multan Electric Supply Companies (Hesco, Pesco, Qesco, Sepco, and Mepco) to complete the process by late 2016.
Other companies: The government had finalised the sale of Heavy Electric Complex (HEC) by May 2015 but it had to be canceled because the buyer failed to deposit due amount of Rs225 million. The offer for the National Power Construction Co (NPCC) was to be finalised by end-June 2015. Financial advisers for the Northern Power Generation Company Limited
(NPGCL) were appointed in July 2014 and transaction is expected to be completed by end-December 2015.
Similarly, financial advisers for the Jamshoro Power Generation Company Limited (JPCL) were appointed in April 2015 with expected completion of the transaction by end-April 2016. In May 2015, the hiring of financial advisers for the Lakhra Power Generation Company Limited (LPGCL) and Central Power Generation Company Limited (CPGCL) was finalised with expected sale to be completed by end-December 2015.
Restructuring: The government has developed restructuring plans for the Pakistan Steel Mills (PSM) and Pakistan Railways (PR), and financial advisers are also finalising a plan for the Pakistan International Airlines (PIA). Specifically,
financial advisers for PIA were appointed in July 2014 to explore potential options for restructuring and strategic private sector participation in the core airline business by end-December 2015. The diligence process will be completed by end-June 2015. Plans for private participation will be developed thereafter.
Pakistan Steel Mills: The government has appointed a professional board and a new chief executive officer and approved a comprehensive restructuring plan to prepare for potential strategic private sector participation in the company. Operational efficiency has begun to improve and capacity utilisation has already climbed from 18 to 40 percent. The government hired financial advisers in April 2015 and it expects the completion of the due diligence process by end-August 2015, and finalise the transaction by end-December 2015.
Pakistan Railways: Ageing and shortage of equipment, overstaffing, and large debts continue to weigh on railway operations. Nevertheless, the government improved revenue in FY 2013/14 by 32 percent through rationalisation of tariffs and expenditures and improved occupancy rates. It further increased the revenue by over 50 percent in the first nine months of FY 2014/15. Since April 2014, the government is moving forward with a comprehensive restructuring plan, which includes improvements in business processes and the institutional framework, financial stability, and service delivery. Appointment of the Railway Board was completed in February 2015. In the short-term, the government is focusing on improvements in freight transportation through creation of a freight company, and adding more locomotives and wagons. In the first nine months of FY2014/15, it added 15 new locomotives for both passenger and freight service, and doubled the revenues from freight operations.