Govt sells 96.6pc of its stake in HEC at Rs99.99/share

ISLAMABAD: Privatisation Commission on Monday successfully executed the bid for selling 96.6 percent shares in the Heavy Electrical Complex (HEC) to IMS Engineering at Rs99.999/share that would fetch Rs1.41 billion for the cash-starved government.

The bid for the government’s 14.4 million shares was carried out as per the transaction structure approved by Federal Cabinet in December 2020. This would be the first entity-level strategic transaction since 2015, a statement issued by the Ministry of Privatisation said.

This was the fifth attempt at privatising the HEC with prior unsuccessful efforts in 2006, 2011, 2013 and 2015. With the highest bid price of Rs99.999/share from IMS Engineering, HEC’s enterprise value is estimated to be around Rs1,900 million, the statement added.

The Privatisation Commission board would meet on Tuesday to discuss the outcome and recommend the transaction to the Cabinet Committee on Privatisation (CCoP) for its approval before it is presented for the federal cabinet’s consideration. PEL and Waves-Singer were unsuccessful bidders.

Federal Privatisation Minister Mohammed Mian Soomro, and Privatisation Commission Chairman Saleem Ahmad were present during the bidding process, along with other members of the government and media partners.

Talking to media after the event, Soomro said that other proposed transactions were also progressing. However, the process of divestment of the government’s remaining shares in Mari Petroleum has been kept on hold for the time being “the reason being the high volatility in its share price”.

This would be the Pakistan Tehreek-e-Insaf government’s third privatisation deal. Last year it sold some public properties to the private sector and the latest one was the transaction of Services International Hotel, Lahore.

In an auction on August 26, 2021, M/s Faisal Town Pvt Ltd submitted the highest bid amounting to Rs1,951.7 million and deposited the earnest money of Rs100 million at that time, while the remaining was cleared later. On January 6, 2022, the commission announced its completion.

HEC is located in Hattar Industrial Estate, Haripur in close proximity to the China-Pakistan Economic Corridor route, 2km from Kot Najeebullah Interchange on the Hazara Expressway. This provides HEC ready access to several key customers, including electricity distribution companies, while approximately 20 acres of additional land is available for diversification and expansion. HEC has a high-quality power transformer manufacturing facility with an annual production capacity of 3,000 MVA. An official said that after approval from the CCoP today, the bidding process was commenced. This price of Rs99.99/share was almost the same as what the government had already decided, but the source did not disclose it.

It is to be noted that in August 2019, the CCoP had placed the HEC on the active privatisation list. Later a Financial Advisors Consortium led by M/s Bridge Factor and National Bank of Pakistan (NBP) was selected.

In January 2020, Financial Advisory Services Agreement (FASA) was signed and consequently started the due diligence of the entity. On November 16, 2020, the CCoP approved the transaction structure for the divestment of all government shares (96.6 percent) in HEC. In December 2020, the expression of interest (EOIs) from investors was sought.

According to the document available with The News, 14 parties submitted their EOIs, and a dozen of them were pre-qualified and later asked to provide relevant documentation and corporate approvals for the process (Statements of Qualifications or SOQs).

Subsequently, seven investors submitted their SOQs in March 2021, and among them, the required documents from six parties were found complete for confirming their eligibility for bidding. It bears mentioning that during the process, M/s El-Sewedy and M/s Associated Technologies Pvt Ltd withdrew their EOI for bidding during May-August 2021.

Privatisation Commission chairman congratulated the IMS team on their successful bid. Speaking about the future pipeline, he said,

“Accelerating the execution of privatisation programme is a key strategic priority of the present government. Our upcoming pipeline is not only attractive for the right investors but is also aimed at stemming the losses to the exchequer, creating jobs, increasing wages and enhancing economic activity that supports Pakistan’s long-term economic development.”