Privatisation Commission approves PSM’s 30-year lease plan

ISLAMABAD: The Privatisation Commission board on Tuesday agreed to a proposal to hand over the plant and machinery of the loss-making Pakistan Steel Mills (PSM) to a prospective investor on a 30-year lease to bring the PSM out of its financial woes. 

Officials said the board of Privatisation Commission approved the transaction structure proposed by its financial advisors for the PSM restructuring.

The proposed structure will be presented to the Cabinet Committee on Privatisation in a few days for the approval. 

The proposed structure includes a tripartite concession agreement between the government, Pakistan Steel Mills management and the investor for a period of 30 years on the basis of revenue sharing. 

Under the structure, PSM’s land will remain with the government while the plant and machinery will be handed over to the new company for a maximum of 30 years. No asset of PSM will be sold under the structure.

The board also approved the transaction structure of SME Bank, which includes sale of 93.88 percent shareholding of the government into the bank.

Based on the proposed structure, the State Bank of Pakistan is to allow a reduced minimum capital requirement of six billion rupees on staggered basis over the five years with two billion rupees upfront and one billion rupees each for the next four years.

The SBP will also issue a new banking licence of a specialised nature with at least 60 percent advances for small and medium enterprise (SME) sector to the investor, while also allowing capital adequacy ratio at 10 percent for five years post-privatisation.

The board also approved the initiation of process for hiring of financial advisors for Pakistan Re-Insurance Co Ltd, National Insurance Co Ltd, and Heavy Electrical Complex.

The board members also approved the initiation of transaction of the Oil and Gas Development Company’s shares up to a maximum of five percent into the capital market. This will be a domestic offering.

After the request from the ministry of information, the board agreed to delist Shalimar Recording and Broadcasting Co Ltd from the privatisation programme, while it agreed to constitute a committee to evaluate the viability of delisting Sindh Engineering Limited, which was requested by the ministry of industries and production.

The committee will assess the legal status of Sindh Engineering’s assets and provide a comparative analysis in case of privatisation and restructuring or delisting of the entity.