ISLAMABAD: Privatisation Commission’s (PC’s) Board of Directors (BoD) is all set to give final nod to the long-awaited revival plan of Pakistan Steel Mills (PSM) on Friday (tomorrow), sources close to Minister for Industries and Production (MoI&P) told Business Recorder.
The federal government has earmarked Rs 16 billion for PSM in the budget 2021-22, to be spent for payment to the retrenched employees and other related expenses.
The draft revival plan has several controversies commencing from resignation of PSM Board Chairman, Aamir Mumtaz from Transaction Committee to putting pressure on the valuer to revise down value of PSM assets. Sharing the details, sources said, Cabinet Committee on Privatisation on December 24, 2020, duly ratified by Federal Cabinet on December 29, 2020, approved the following transaction structure for PSMC: “transferring of identified core operating assets into wholly owned subsidiary of PSMC through scheme of arrangement (as provided in the Companies Act 2017) followed by sale of majority shares of the newly formed subsidiary (without transferring of full ownership) to strategic private sector partner.”
Accordingly, the Financial Advisor highlighted following key corporate actions required to be completed by MOI&P & PSMC, for filing of Scheme of Arrangement (SOA) with SECP: (i) formation of new subsidiary by the PSMC and associated corporate actions; (ii) identification of Key Operating Assets (KOA) and corresponding Fair Market Valuation (FMV) conducted by third party valuer; (iii) determination and identification of core land to be provided on lease to the new subsidiary by the PSMC and corresponding lease deed; (iv) audit of financial statements for period ending June 30, 2020 and December 2020 (duly incorporating list of KOA and corresponding FMV); (v) lease agreement of jetty and Right of Way (RoW) between PSMC and Port Qasim Authority (PQA) with assignment clause; (vi) transfer of utility connections to new subsidiary or provision of new connections, where applicable; (vii) confirmation by SSGC for provision of indigenous gas or RLNG; (viii) No Objection Certificate (NOC) by Nepra for transfer of power generation licence to new subsidiary; and (ix) NOC from NBP and SSGC after vacation of stay order and lien/charges/encumbrances/etc on the movable and immovable assets envisaged to be transferred to new subsidiary.
During the period from January to May 2021, Minister for Privatisation and Minister for Industries and Production co-chaired a series of review meetings to ensure efficient progress and to provide guidance wherever required.
The sources said, PC Board would deliberate and decide on the following: (i) consideration of PSMC Board decision of May 06, 2021 regarding key operating assets and corresponding Fair Market Valuation (proposed transfer of core assets to new subsidiary) and audited financial statement of PSMC for period ending December 31, 2020 including list of key operating assets; (ii) consideration of PSMC Board decision of May 06, 2021 regarding core land comprising 1,229 acres as determined by the PSMC Board; (iii) consideration of PSMC Board decision of May 06, 2021, “the right of use of land (1229 acres) to be awarded without entering into a lease agreement as per the standard terms to subsidiary until the strategic partner comes in thereafter the terms and conditions of the land lease will be decided at arm’s length principle with the strategic partner; and (iv) endorsement of the PSMC and PQA decisions regarding jetty and ROW agreement specifically with reference to clause 6 of the agreement, “the PSMC may assign/sub-let its rights under the agreement to its subsidiary for the purpose of handling of cargo at IOCB or PSMC steel production only subject to the approval of PQA. In such case, terms and conditions will differ” to execute jetty and ROW agreement with the Steel Corp including terms and conditions at arm’s length upon buy side due diligence and prior to conducting the bidding.
The Board will approve transfer of existing utility connections and power generation licence to Steel Corp (Pvt) Ltd, unencumbered along with effective date of SOA as January 01, 2021. In addition, the Board will approve Steel Corp (Pvt) Ltd either to be retained by PSMC in the light of approval of PSMC Board or shares to be issued to GoP in lieu of its outstanding loan to the PSMC. Approval regarding quantum or range of equity stakes of Steel Corp (Pvt) Ltd to be divested i.e. (1) 51-74 percent or (2) 51 percent-100 percent. Approval of paid up capital of Steel Corp (Pvt) Ltd to be equal to Net Assets (Rs 9.451 billion as at December 31, 2020). Privatisation Commission shall invite Expression of Interest (EoI) from interested parties after filing of Scheme of Arrangement (SOA) by PSMC with SECP, duly incorporating decisions of the PC Board/CCoP/Cabinet on the items.—MUSHTAQ GHUMMAN