Federal government has changed the mode of privatisation of power Distribution Companies (Discos) and initiated the process through Initial Public Offerings (IPOs) by listing of shares of Faisalabad Electric Supply Company (Fesco) and Islamabad Electric Supply Company (Iesco) on the Pakistan Stock Exchange (PSE), said a senior government official.
The comments came a day after the Minister for Planning, Development and Reforms, Ahsan Iqbal opposed privatisation of Discos on the plea that the sell-off of distribution companies will discourage investment at this stage.
Power sector analysts argue that privatisation of Discos is the only way to improve their performance through investment and the buyer will invest in the distribution system.
“The proposal of Planning Minister is not reasonable as the government should give the companies to private sector after restructuring,” said one of the analysts on condition of anonymity.
The official said that the Cabinet Committee on Privatisation (CCoP), in its meeting on July 14, 2016 took a principled decision to proceed with the sale of shares of Discos.
“CCoP has decided not to opt for strategic sale of Discos; instead their shares will be offered through IPO on stock exchange,” the official said adding that initially CCoP selected Fesco and Iesco for this purpose.
According to the official, management and majority shares will remain with the Government of Pakistan (GoP). This decision has also been reflected in the minutes of the CCOP issued by the Cabinet Division.
According to the SECP rules, the shares of the entity which are to be offered through an IPO, must have been in profit for the last five years.
This implies that only those Discos will be offered for IPO which meet with the prescribed rules. Minister for Finance, Revenue and Privatisation, Senator Ishaq Dar, who is also the chairman of CCoP could not be reached for his comments on Minister of Planning’s statement.
The sources said, at the beginning of 2015 , Prime Minister Nawaz Sharif had directed the Privatisation Commission to complete the privatisation process of Discos, Gencos, Lakhra Power Plant and Kot Addu Power Plant during the calendar year but the process was halted after trade unions took to the streets against the sell-off process.
Later on, the leaders of trade unions held meetings with the Prime Minister and subsequently with the Minister for Water and Power to put the privatisation of Discos on ice.
In April 2016, the Prime Minister halted the privatisation of power sector State Owned Entities (SoEs) without taking the PC on board.
According to sources, due diligence of the entities was under process and in most cases had already reached an advanced stage by November 2015.
In the case of Fesco transaction, Expression of Interests (EoIs) were floated on November 2, 2015 but the repeat advertisement was not placed as the Ministry of Water and Power had conveyed to the PC that the Prime Minister had directed to withhold it till further orders.
In the meantime, seven local and international parties had submitted their EoIs in order to participate in the privatisation process of Fesco and had deposited $10,000 each with the PC in this regard.
A couple of months ago, PC had proposed to the CCOP to pay the amount back to interested parties after withholding the sell-off process but the committee deferred the proposal. -Business Recorder