By Khaleeq Kiani
ISLAMABAD, Sept 24: Having agreed to provide ‘reasonable shareholding’ to Balochistan in the Pakistan Petroleum Limited (PPL), the government has decided to sell minority stakes of the country’s oldest gas producer in the international market.
Informed sources told Dawn on Monday that an agreement in principle has been reached between the federal and provincial governments to allow 15-20 per cent shareholding to Balochistan along with proportionate representation on its board of directors to end a long-standing provincial claim over the company.
PPL is the country’s oldest and largest exploration and production company with annual sales revenue touching Rs20 billion. It produces more than 300,000 million cubic feet of gas and more than 240,000 barrels of oil per year, besides substantial annual production of condensate, liquefied petroleum gas and other minerals.
It has been on the privatisation list, of course, with continued postponements since 1998 under a covenant with the World Bank’s International Finance Corporation (IFC), which has about seven per cent shareholding in the company.
According to an official statement, a meeting of the Privatisation Commission board held by the newly-appointed minister Wasi Zafar on Monday included PPL among three other major public sector entities in the ‘priority privatisation programme’ for listing on the international market through Global Depository Receipts (GDRs).
Other companies, for which GDRs are planned to be issued, include National Bank of Pakistan (NBP), Habib Bank Limited (HBL) and Kot Addu Power Company (Kapco), the statement said. All these entities are already listed on the domestic stock exchanges.
Informed sources said the decision to issue PPL’s GDRs was taken because of some technical and legal aspects that were delaying the strategic sale of PPL’s majority shareholding, including formal transfer of PPL shares to the Balochistan government.
More importantly, the decision about the GDR issue would give a political boost to the government because of a resultant appreciation of share value in the stock market. This will also be in line with the government’s claim about continuity and consistency of the economic policies.
“Had that not been a consideration, there was no logic to announce such a decision in the midst of election season and that too without a privatisation schedule, a participant of the PC board meeting told Dawn.Balochistan has been demanding of the federal government to transfer entire ownership of the PPL to the province on the ground that the provincial energy resource had kept on feeding the country’s energy requirements since independence and hence it was time to compensate the province.
The provincial assembly had also adopted a unanimous resolution to this effect.
However, the current provincial set up changed its stance to the extent that the major shareholding might go the private sector as the centre planned to sell but since it was a provincial resource, a minority shareholding to the province would be a source of revenue to the cash-starved province.
After a lengthy negotiation process the centre agreed in principle to this modified demand. A lot of legal paper work, however, would now be needed to implement this decision, “but politically this is a settled issue”, a senior government official said.
PPL is the operator of Pakistan’s oldest Sui gas field. The federal
government had taken over more than 63 per cent shares of the PPL from Barmah Oil Company in 1997 to raise its ownership to about 94 per cent.
Later, it decided to privatise the company but the Balochistan Assembly adopted a resolution asking the federal government to give its ownership to the province. The centre did not oblige the request then.
About two years ago, the federal government reduced its share in the company by 15 per cent through initial public offering (IPO) and planned to sell 51 per cent shares along with management control of the PPL. The plan was later put on the back burner because of structural lacunae in the gas pricing mechanism that also delayed the sale of Sui Southern and Sui Northern Gas companies.
Balochistan is currently in a classic debt trap – taking new loans to service old – and mostly relying on central banks overdraft to meet its running expenditures and interest repayments.
The official statement said the meeting also reviewed progress on the privatisation of National Power Construction Company (NPCC), Pakistan Tourism Development Corporation (PTDC) motels and restaurants, SME Bank, Heavy Electrical Complex (HEC), Faisalabad Electric Supply Company (FESCO) and Jamshoro Power Company (JPC).
The financial adviser for NBP GDR, the consortium of Deutsche Bank, Morgan Stanley and AKD Securities made a presentation before the PC board regarding the offering structure of the transaction, the statement concluded.
http://www.dawn.com/2007/09/25/ebr2.htm |
