ISLAMABAD: Three Chinese pre-qualified bidders contesting to win upto 74 percent stakes in Pakistan Steel Mills Corporation (PSMC) have started their due-diligence processes and on-site visits to the country’s largest non-functional industrial unit. These parties were interested to revive this stalled entity and increase its production capacity to three million tonnes.
They were granted access to Virtual Data Room (VDR) in March 2022. And the parties have been visiting PSMC for inspection/assessment of the steel plant, jetty, etc. The government is offering at least 51 percent or up to 74 percent shares capital of Steel Corporation together with management control through a bidding process.
Officials of the Privatisation Commission on Wednesday apprised Federal Minister and Chairman Privatisation Abid Hussain Bhayo in a meeting about the privatisation process of various public entities, including the steel manufacturing entity. Officials told the meeting that the process of the meetings with the pre-qualified parties was underway and discussed various matters pertaining to PSM’s privatisation.
“PC (Privatization Commission) should focus in order to resolve all the pending matters for the early revival of PSMC, as it is one of the biggest entities on the active privatisation list, and has incurred huge losses to the national exchequer since 2015,” the minister said.
It should be noted that the government has finalised three Chinese companies as pre-qualified bidders, of which one would be given the stakes in PSMC. These bidders are Bao Steel Group Xinjiang Bayi Iron & Steel Co Ltd, (China), Tangshan Donghua Iron and Steel Enterprise Group Co Ltd (China), and Maanshan Iron and Steel Co Ltd.
The government has also appointed two firms, including Pak-China Investment Company and Bank of China International Co Ltd, as joint advisers for the transaction.
In the 1970s, the Soviet Union (now Russia) built this facility. It has not produced steel at its 19,000 acre facility since June 2015. It also owns 1,229 acres of land.
The PSM last posted a profit of Rs9.5 billion in financial year 2007-08. After that its financial health crumbled and the entity accumulated huge losses. Ultimately, in June 2015, the Pakistan Muslim League-Nawaz government closed this major industrial unit.
In the review meeting, the transaction status of National Power Parks Management Company Limited (NPPMCL) was also discussed. It targets to divest up to 100 percent of its shareholding in NPPMCL under which, two power plants, including 1,230MW combined cycle power plant Haveli Bahadur Shah in Jhang and 1,223MW combined cycle Balloki in Kasur, are operating.
A series of meetings with stakeholders have been held on the debt and equity matters. For that purpose, a plan of action has already been agreed upon regarding debt-refinancing for the plant from local and commercial banks. Once the debt-refinancing and recapitalisation are finalised, the sale of equity shares will quickly follow, the minister was informed.
In March 2022, a syndicate of banks offered Rs100 billion worth of commercial loans to replace its excess equity and loan in NPPMCL. The bank syndicate comprised of eight conventional and Islamic banks including Habib Bank, Meezan Bank, National Bank, Faysal Bank, Bank Alfalah, Bank of Punjab, BankIslami, United Bank, and a development finance firm namely Pak Kuwait Investment Company.
The minister also reviewed the privatisation of House Building Finance Corporation Limited (HBFCL) and First Women Bank Limited (FWBL).
The privatisation of HBFCL would likely be completed in the current fiscal year, as national and international investors have shown keen interest in it. The expression of interest (EOIs) for FWBL would be published after completion of the audit of its financials up to June 2022, the minister was briefed.
The privatisation of power distribution companies (DISCOs) was also discussed. The working group formed for the revival of DISCOs had already given its proposals and subsequently, the Cabinet Committee on Privatization (CCoP) approved the concession model and management contract model for the privatisation of 10 DISCOs.
The role of local and provincial governments in salvaging the DISCOs was also discussed as it has become more crucial after the National Electrical Policy-2021.
