The Privatisation Commission (PC) is under fire for relaxing the pre-qualification criterion, specifically for the bidders of Faisalabad Electric Supply Company (Fesco), as its privatisation is being reactivated, official sources told Business Recorder.
"The criteria adopted by the PC were not transparent; so, fresh LoIs should be invited, for transparency, and to avoid criticism," sources quoted Finance Ministry as advising the PC Board.
The government had approved sale of 56 percent shares of Fesco to a strategic investor, or a consortium of strategic investors, of which the investor would be required to sell 5 percent shares to the employees by instituting Employee Stock Ownership Program (ESOP).
The transaction was first taken to market in January 2003 and in response eight parties had submitted EoIs but only four parties, namely United Bank Limited (UBL), Fauji Foundation, National Power Generation and Supply Company (Crescent Group) and Rupali Polyester Limited were pre-qualified for the bidding. The pre-qualified parties completed due diligence, but the bidding could not take place due to non-determination of tariff by Nepra.
The transaction was, therefore, temporarily stopped in December 2004 and the financial advisory services of International Finance Corporation (IFC) were suspended.
Sources said the main reasons of sluggishness in the transaction were company's corporatisation such as finalisation of land transfer, lenders' consent, loan transfer agreements for transfer of government guarantees and re-lent foreign loans from Wapda to Fesco, Supplementary Business Transfer Agreement (SBTA). "Sometimes the transaction, and thus the financial advisory services agreement of IFC, had to be temporarily stopped or slowed down," they added.
The transaction and the financial advisory services of IFC were reactivated again in February 2006 on indication from Nepra that it was about to give tariff determination anytime realising that Fesco tariff was nowhere near.
However, during this period, fresh EoIs were invited and six new parties were pre-qualified and three of the four previously pre-qualified parties confirmed their continued interest in the transaction, making a total of nine parties interested in the transaction.
The six new parties were not informed of their pre-qualification due to uncertainty regarding Fesco tariff determination by Nepra and its notification, sources quoted PC as claiming. The Finance Ministry was of the view that to ensure transparency fresh LoIs should be invited with, the criteria clearly indicated, to allow participation of those who had not submitted Statement of Qualifications (SoQs) because of higher criteria set in the request of SoQs, sources said.
They said that now a consultant has been appointed to transfer Wapda's lands to Fesco and take up the matter with Revenue Department for early transfer of remaining lands. The Finance Ministry's representative was of the view that issues of land title must be settled before privatisation.
As for the lenders' consent and finalisation of loan transfer agreements, Fesco said that lenders' consent and loan transfer agreements in respect of all loans, except one, were final.
Fesco is pursuing the Economic Affairs Division (EAD) to resolve and finalise the lenders' consent and loan transfer agreement for the only remaining loan. According to sources, the committee for power sector transactions held another meeting recently and took several decisions to take up the transaction for privatisation.
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