PC to seek EoI from investors: minister
WASIM IQBAL &
ZAHEER ABBASI
ISLAMABAD: Privatiz-ation Commission will seek expression of interest (EoI) from private investors for Pakistan International Airline (PIA) minority shareholding within three months, subject to the approval of Cabinet Committee on Privatization (CCoP).
This was disclosed to a parliamentary panel during a briefing about the prospects of privatization of the national flag carrier by the present government.
A meeting of National Assembly’s Standing Committee on Privatization presided over by Syed Imran Ahmed Shah was informed on Wednesday by Minister for Privatization Daniyal Aziz and secretary privatization that PC has sought permission from CCoP for inviting EoI from private sector partners and investors for 49 percent government shares in PIA within three months.
Later, a shareholders’ agreement will be executed to outline a method to exercise management control by the federal government in line with best international practices, according to PC privatization plan.
Responding to a question regarding various phases of privatization of PIA, Minister for Privatization Daniyal Aziz said restructuring of PIA has been completed in phase-I and now the phase-II regarding the sale of PIA to a third party is under way.
He explained, “As per law, PC is completing all the legal and financial prerequisites for the privatization of PIA and it is not necessary that it will be sold out by the present government.”
Daniyal Aziz said that as per rules and business of the government, the PC is forming a new company where loans and other liabilities will be parked. This will turn PIA air transport business into a positive company and bring ease to attract third-party investment/shareholding in the company.
Talking about losses of PIA, he said that PIA is facing losses of Rs150 million daily while $300 million are annual losses of Pakistan Steel Mills Corporation and there is a need to take quick decision.
Based on December 31, 2015 data, liabilities of PIA were Rs324 billion, assets were worth Rs115 billion while equity was Rs209 billion during pre-restructuring of PIA. But liabilities reduced to Rs72 billion and assets went down to Rs96 billion and equity reached Rs24 billion in post-restructuring.
In October 2014, the PC appointed a consortium of M/s Dubai Islamic Bank, IATA Consulting, Deloitte, Haidermota BNR, Freshfields Bruckhaus Deringer, Abacus Consulting, APCO, and Prestige as FA.
In a draft restructuring and implementation plan, the consortium envisages that transaction should be carried out in two phases. In Phase I, formulation of restructuring and divestment strategy and its implementation should be completed while in phase-II, private sector partnership in the core operations of PIAC should be facilitated for closure of the transaction.
“To proceed ahead with the privatization of PIA, the PC will have to undertake necessary actions to re-engage the services of financial advisors, since the financial advisory services agreement stands expired on October 3, 2017,” according to the brief.
The minister said the services of financial advisors expired during the period when Ahmed Nawaz Sukhera was appointed as interim secretary Privatization, adding no process was initiated for financial advisors’ re-engagement.
He said that advisors have prepared a draft scheme of arrangements, for transfer of specified assets into a new entity, and a draft memorandum of association and draft articles of association for incorporation of new entity.
He further said that the case of re-engagement of the services of financial advisors under same terms and conditions would be sought from Cabinet Committee on Privatization following approval from the PC Board.
He said that PC Board on November 02, 2017 recommended that for the privatization of PIA, sub-section 4 of section 4 of the PIA (Conversion) Act 2016 may be amended, however, the same may not be attainable as PML-N has no majority in the Senate.
He said that PC will take its recommendations again to CCOP for its approval as per law which are: transmission of scheme of arrangement/ order to PIACL, pursuant to section 4 of the PIAC (Conversion) Act will be completed in three weeks; the request by PIA to federal government in accordance with section 4 of the PIAC (Conversion) Act to be issued within 4 weeks and valuation of assets pertaining to airline business of PIA will be carried out within 6 weeks.
On November 2016, PC, Aviation Division, PIACL and financial advisors agreed on carving out of non-essential business segment of PIACL, including hotels, real estate, precision engineering and legacy financing (including debt like liabilities).
Secretary PC Syed Irfan Ali Shah said that they are running against the time but it does not mean that they would compromise transparency by taking decision in haste.
He said, “We are running against the time but we have to ensure transparency and will not take any decision in haste.”
The secretary maintained that Parliament has given PC a mandate to complete the transaction of PIA by April 15, 2018, adding the PC has still re-engaged the services of financial advisors and PIA also required three months to look into draft implementation plan submitted by financial advisors and come up with some option.
