Another valuation to lure investors on the cards

ISLAMABAD: Privatisation Commission (PC) is said to have decided to go for another valuation of core assets of Pakistan Steel Mills (PSM), fearing that investors will not show an interest in purchase of 51- 74 per cent stakes on the basis of first valuation, well informed sources told Business Recorder.

A Scheme of Arrangements (SoAs) was submitted by PSMC to Securities and Exchange Commission of Pakistan (SECP) on August 27, 2021, while Expression of Interest (EoI) for prospective investors was published on August 31, 2021, wherein the deadline for submission of EoI was given as September 30, 2021, and Statement of Qualification was to be submitted by October 15, 2021.

Shaukat Tarin, the top boss at the Ministry of Finance, had also conveyed his annoyance to Chairman PSM Board for resisting fresh valuation of PSM assets as he was not satisfied with the first valuation.

On June 7, 2021, after detailed deliberations, the following decisions were made: Privatization Commission (PC) shall undertake two more valuations of the core assets with the approval of Cabinet Committee on Privatisation (CCoP), if required. One valuation may be assigned to Nespak while the other valuation may be undertaken by one of the top five valuers on the approved list of Pakistan Banks Association.

On November 2, 2021, PSM Transaction Committee also held a meeting to evaluate progress on the privatisation of entity in which participants offered their viewpoint.

Sources close to PSMC said that the second valuation is being conducted at the behest of FA who earlier had advised to liquidate PSMC if this valuation is booked for the purpose of privatisation.

The value determined by PSMC and entered in the books after approval of PSM Board and concurred by the auditors cannot provide any incentive for investors in this privatisation. The pressure by the PC management on the change in the earlier valuation was also resisted by PSMC.

“The legal position will become questionable if a new value becomes the basis of bidding or reserved price for privatization,” said one of the insiders. This will also attract criticism and may sustain its debate in the market, if the lower valuation being attempted becomes the reference price for privatisation.

“It is also strange that the expression of interest has been invited on the basis of approval of all due diligence reports but still the PC continues to clear the backlog,” he added

The lease rights of use of jetty and land are also kept open, which are reported to be negotiated with the investors. A person conversant with the PPRA rules said that no negotiation is allowed in PPRA except with the permission of Cabinet. However, he said that questions will arise in this respect during negotiation as the value of supply or services rendered or provided are contingent upon open and fair competitive bidding.

“Many things will remain questionable including the fact that the same Chairman of Board of PSMC has taken over charge of Board of new entity which is being privatised. The CEO of PSMC is also CEO of the new company created for the purpose which implies he may compromise on the legal right of the entity for continuation of his job,” he continued.

The Minister for Privatisation, Mohammed-mian Soomro has already commenced road shows in different places including Karachi to share the government’s plan. The Minister replied to the queries of investors who feared that litigation like in the past will have negative impact on their investment. Major global companies involved in steel production have participated in the road shows.

The sources said PC extended the deadline of EoI on the recommendations of investors as some of the interested parties appeared reluctant to submit their interest.

The PC’s Transaction Committee has also discussed different matters related to PSM’s revival plan, which is still under process.

Pakistan Steel Mills Corporation includes around 18,600 acres of land on which not only the main steel plant but also downstream industries related to Steel Mills, Steel Town and Gulshan-e-Hadeed residential colonies, extensive transmission system of water, electricity and gas, Makli Limestone and Jhimpir dolomite projects and related residential colonies, etc., are also located.

The land was acquired by the Federal government through an agreement with the Sindh government before the establishment of steel mills in the 1970s and 1980s. Sindh government has repeatedly reiterated its stance on several occasions that PSMC land cannot be used for any purpose other than Steel Mills by the Federal government; otherwise it reserves the right to reclaim these lands through litigation.

Recently an advertisement was published by Pakistan Industrial Development Corporation (PIDC) dated October 10, 2021 in which Expression of Interest (EoI) for pre-qualification were invited from reputed national and international consultants/ consortia for designing and setting up industrial zones on Pakistan Steel Mills Karachi lands. The PIDC calls for feasibility study, master planning, designing and construction supervision of an industrial park on 1,500 acres of Pakistan Steel Mills land and additional master planning of an industrial township on approximately 7,500 acres of PSM land including various types of special industrial zones and allied facilities/ infrastructure. The last date for submission of EoIs from the bidders has been extended to November 22, 2021 by the PIDC through a corrigendum.

Sources further revealed that the present management and board of directors of Pakistan Steel Mills are ‘silent spectators’ in this matter and all this work is being done with their connivance by the officials of PIDC and Ministry of Industries and Production without any legal authority whereas no NOC has been obtained from Government of Sindh for this purpose.

The incumbent CEO Steel Mills Brigadier (retd) Shuja Hassan Khurazmi has received a one-year service contract extension from the Federal Cabinet, whereas his initial appointment was already declared irregular in the light of Auditor General of Pakistan’s report 2020-21 due to not having the required qualification, experience and compliance with the provisions of the Companies Act 2017.

At present, the affairs of the Pakistan Steel Mill’s Land Department are being run in a highly unprofessional manner. After forced retrenchment of the concerned regular serving civil engineer officers, now a daily wage non-qualified officer, Muhammad Iqbal, and the contracted non-qualified Company Secretary are looking after all the affairs of PSMC land and reportedly, by neglecting the rules and regulations they are working as rubber stamps to the instructions from the present management, while thousands of acres of land of steel mills have already been encroached upon by illegal occupants from whom these lands have yet to be relinquished.

Convener PSM Stakeholders Group, Mumrez Khan, told Business Recorder that he would challenge the privatisation of PSM assets in all the appropriate legal forums as according to him the process adopted by the PC is non-transparent.

PC spokesperson was sent a message for an update on PSM revival plan, but no response was received till the filing of this report.—MUSHTAQ GHUMMAN