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July 24, 2020

Govt considers 100pc divestment from RLNG plants

Business

July 24, 2020

ISLAMABAD: Banks were persuaded on Thursday to participate in the privatisation of two mega RLNG-run power plants that the government planned to completely sell off along with the management control.

Minister for Privatisation Mohammadmian Soomro said the Privatisation Commission would appreciate the cooperation of commercial banks/lenders to facilitate a successful transaction within the envisaged timeline considering the importance of the privatisation of these power plants for the government.

In December 2018, the government approved privatisation of the two RLNG power plants, which include the 1,223 megawatts (MW) of combined cycle power plant in Balloki, Kasur and another of 1,230MW in Haveli Bahadur Shah in Jhang. The sell-off was previously estimated to fetch $2 billion.

The banks were asked to participate as lenders to successfully complete the transaction during a meeting of Minister Soomro and Special Assistant to Prime Minister Nadeem Baber with the heads of international and local banks in Karachi, according to a statement. Board members, members of financial advisory consortium, deputy governor State Bank, presidents and group chiefs of NBP, MCB, UBL, ABL, Habib Metropolitan, Bank Al Habib, Bank Alflah, Bank of Punjab, HBL, Meezan Bank and Faysal Bank attended the meeting.

It is critical to ensure that potential bidders are able to secure sufficient rupee-denominated financing to successfully complete the transaction. Therefore, participation of local banks is important to provide additional confidence to potential bidders for successfully closing the transaction.

Heads of banks were asked to raise the requisite long-term financing within the benchmark approved by National Electric Power Regulatory Authority, and also support potential bidders in obtaining no-objection certificates for continuation of working capital lines, which are in addition to the long-term financing.

The banks proposed the government to consider the terms of tariff to encourage bank interest in the subject transaction.

In the meeting debt arrangement for the two RLNG power plants of National Power Parks Management Company Limited. (NPPMCL) was discussed.

The meeting was told that 12 interested parties were shortlisted for bidding NPPMCL that was formed with an objective to reduce the electricity/power demand and supply gap in Pakistan.

The government is considering divesting up to 100 percent of its shareholding in NPPMCL to a potential investor, along with management control. As part of the privatisation process, the potential bidders will be required to re-finance government’s funding and NPPMCL existing commercial debt through foreign and/or local debt financing.

The meeting was told that the government was in its reform process to address the issues of circular debt. However, due to pandemic the process remained stalled for some time. It was also discussed that negotiation with the older independent power producers are in progress to find ways to address cost of generation.