The Privatisation Commission (PC) faces annoyance of its own Board and the Cabinet Committee on Privatisation (CCoP) for recommending 'under-estimated' reference price for National Power Construction Corporation (NPCC) carried out by Chartered Accountants Riaz Ahmad and Company, official sources told Business Recorder.
The CCoP, which met on December 21, with Prime Minister Shaukat Aziz in the chair, had endorsed the reference price of the Board based on 5 percent terminal growth, instead of 3 percent terminal growth, sources said.
"The NPCC's management and the Ministry of Water and Power were the main opponents of the reference price estimated by the Chartered Accountant firm," sources added.
The CCoP also directed the PC that in future profit and loss statements and balance sheets of all entities should invariably be annexed with the summary, sources said.
They said that the CCoP in its meeting of September 1, 2005 had approved that NPCC should be privatised in such a manner that 49 percent ownership should remain with the government and 51 percent be awarded to a consortium comprising financially sound Pakistani companies.
The PC invited Expressions of Interest/Statements of Qualifications (SoQs) from parties interested in the transaction and, after evaluation, the PC approved the pre-qualification of five parties. These were ICC (Pvt.) Limited, Pakistan; Sachal Engineering Works Limited; Nazir and Company Limited; Pak Electron Limited; and consortium of Technical Associates Pakistan Limited.
Riaz Ahmad and Company carried out valuation and proposed Rs 292.89 value per share, as per assets-based method, and Rs 422.33 as Discounted Cash Flow (DCF) method based on 14 percent discount rate with 3 percent terminal growth ascertained under the DCF method as reference price, sources said. They said that the PC Board, in its meeting held on December 19 considered the proposal of the Chartered Accountant firm in detail and the views of NPCC management/Ministry of Water and Power in this respect.
"The Board felt that the reference price was under-estimated, and raised it to a reasonable level, based on 14 percent discount rate and 5 percent terminal growth, instead of 3 percent," sources said.
On a point raised in the meeting of CCoP, the PC informed that the average net profit of NPCC, for past 10 years was 2.6 per cent of contract revenue.
It was further informed that the revenue trend during the last ten years had shown an annual growth rate of around 8 to 9 percent.
The CCoP was told that the percentage completion method, which is the international accounting method, was used to recognise costs/revenues during each projected financial year.
The CCoP was also informed that on completion of the already awarded two contracts worth SR 335 million (Rs 5.36 billion), the company would secure contracts in Saudi Arabia worth SR 100 million (Rs 1.6 billion) per annum, on average basis.
It was noted that through the sale of 51 percent shares to the private sector, the company would grow to its optimum potential as well as internationally.
According to sources, the PC had assured the CCoP that pre-qualification and evaluation of bids were carried out in a transparent manner. However, the CCoP stressed for due diligence, pre-screening of potential bidders on the basis of financial and technical capability.
Regarding employees' issue, sources said that the CCoP emphasised that, in the privatisation process, fair treatment to the employees of the company should be ensured.
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