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The present status makes the Complex very attractive and financially viable for inviting overseas investment and domestic capital market mobilisation. But the challenge lies ahead for the private sector investor to maintain market leadership thereby meeting future demand of higher voltage power transformers and cater to increased operational level accordingly.
The future market prospects are promising, as demand is growing fast. WAPDA's Sixth Power Project envisages installation of power transformers of cumulative capacity of over 18,000 MVA during the next five years.
This means there would be a demand of about 580 transformer units valuing Rs 14 billion at current market price. To connect new electricity generation capacity to the transmission grid a number of 500 kV and 220 kV transmission lines are planned to construct either by WAPDA or the new Independent Power Producers (IPPs) as per the Power Policy in vogue. Export markets can also be explored as many electricity transmission projects are coming up in Afghanistan and Central Asian Republics.
It is, therefore, imperative for HEC to widen its product range by going for manufacturing of higher capacity (160 MVA, 200 MVA) and higher voltage (500/220 kV, 220/132 kV) power transformers also.
This, nonetheless, will require plant modernisation, technological improvement including acquisition and assimilation of technology, and augmenting the in-house testing facilities. With creation of some additional manufacturing facilities, production programme can also be widened, simultaneously, to cover other grid station equipment, such as circuit breakers, disconnectors, isolators, current transformers, instrument transformers, lightening arrestors and power factor improvement panels.
At this juncture, however, the PC may not lose the sight of fact that an earlier attempt to privatise the Complex did not yield results, and it should, in all earnestness, learn from that experience. Realising the need of adopting a different methodology to divest heavy engineering units, instead of direct sell-off, it was decided some time back to explore possibilities to establish a joint venture with world-renowned companies already active in similar field.
The spadework to identify such companies and to invite them to agree to invest in HEC, both as equity and technology partner, was entrusted to State Engineering Corporation, the holding corporation of HEC.
Concerted efforts were made in this direction, and logically, first a proposal was made to the Chinese partners, in the last quarter of 1995, to convert their loan into equity participation and thus taking over the management.
The proposal was discussed at the government level also, and subsequently at the Pak-China Joint Economic Commission meetings held at Beijing and Islamabad. Though the initial response of the Chinese was encouraging, there could be no further headway.
Then, the major global key players in the field were contacted, and, fortunately, three giants namely Siemens, ABB and Skoda showed their willingness to form proposed joint venture with the HEC, in a bid to finally acquire HEC through privatisation.
Respective top-level teams from Europe, including Chairman/Chief Executive of Skoda, visited Pakistan in late 1996/early 1997, to conduct due diligence, and subsequently all the three Groups asked the PC to pre-qualify them to present their proposals. But, when PC invited proposals only Skoda made a financial offer, which was not accepted being single offer.
It transpired later that someone at the PC had put a spanner in the whole process by asking Siemens, ABB and Skoda to submit additional documents, which were required duly translated in English and duly attested by the Pakistan Embassy.
The documents demanded included certificate of company incorporation, financial credibility, bio-data of Board Directors, and alike. Naturally, the two companies namely Siemens and ABB, taking offence to the demand, withdrew themselves from making a financial offer. We thus lost an excellent opportunity to corporatize the HEC years ago.
Efforts can be made by the PC to revive interest of these Groups once again, along with other pre-qualified investors. It is thus important that strong base created for the development of high voltage electrical equipment was not eroded and remains operational.
The PC should ensure that prospective/pre-qualified investors have background of manufacturing similar products and a visible commitment to further develop these capabilities indigenously.
(Concluded)
(The writer is former Chairman of the Heavy Electrical Complex.)

Copyright Business Recorder, 2006

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