Highest bid of Rs99.99/share received: PC holds bidding of HEC ‘sans CCoP nod’

ISLAMABAD: The Privatisation Commission on Monday held bidding for Heavy Electrical Complex (HEC) without prior approval from the Cabinet Committee on Privatisation (CCoP), which received highest bid of Rs99.99 per share. Sources in the Finance Division said that a meeting of the CCoP was held soon after conclusion of bidding process but no statement was issued on acceptance of Rs99.99 per share highest offer in bidding of the HEC.

However, in a media talk, Hassan Nasir Jamy secretary Privatisation Division stated that the permission was already granted by the CCoP for the bidding.

Finance Minister Shaukat Tarin headed the CCoP.

IMS Engineering (Pvt) Limited offered highest bid of Rs99.99 per share out of three pre-qualified parties, which submitted their intention to bid documents and deposited an earnest money of Rs50 million each.

Second highest bid of Rs26.250 per share was received from Waves Singer Pakistan Limited, and Pak Elektron Limited (PLL) offered Rs17.731 per share against 96.6 percent of government-owned shares in the HEC.

Privatisation of HEC: CCoP is all set to approve reserve price

The PC Board has two options of Reference Price for bidding of HEC: (i) Reference Price of Rs82.35 per share, as per DCF method with terminal growth rate of 2.9 percent, equivalent to Rs1.202 billion; and (ii) Reference Price of Rs98.23 per share, as per DCF method with 4.5 percent terminal growth rate, equivalent to Rs1.434 billion.

The sources said the PC received earnest money from three potential bidders by the deadline of February 14, 2022.

The HEC was incorporated in 1991 and started its commercial operations in 1998.

Federal Minister for Privatisation Mohammaedmian Soomro and Chairman Privatisation Saleem Ahmad attended the meeting held here at a local hotel.

Responding to questions raised by media persons, Soomro said that Privatisation Commission would complete two other transactions of two other state-owned entities by end of current financial year depending on the marker conditions, adding the privatisation of Pakistan Steel Mills (PSM) would be completed by the end of 2022.

He said the commission has already shelved capital transaction of the Oil and Gas Development Company (OGDCL), Pakistan Petroleum Limited (PPL), and Mari Petroleum Ltd due to prevailing market conditions.

The government has committed with IMF that it had advanced plans to privatise two power plants using regasified LNG and two small public banks and complete the process by the end of June 2022, with proceeds to be channeled to debt reduction and poverty alleviation programmes.

Simultaneously, the government would complete the 2018-20 outstanding annual audits of the other banks by end-June and the 2021 annual audit by end-August, with the aim to complete the privatisation process by end 2022.

Later in a statement PC says PC successfully conducted the bidding for privatisation of HEC, the first entity-level strategic transaction since 2015. As per the transaction structure approved by Federal Cabinet in December 2020, all 96.6% Government shares in HEC were offered for sale. This was the fifth attempt at privatizing HEC with prior unsuccessful efforts in 2006, 2011, 2013 and 2015.

With the highest bid price of Rs 99.999 per share from IMS Engineering, HEC’s enterprise value is estimated to be around Rs 1,900 million. Valued as a going concern, reserve price was based on extensive diligence and financial modelling that incorporated demand outlook and supply constraints, and was approved by CCOP earlier in the day. PC Board will now meet tomorrow to discuss the outcome and recommend the transaction to CCOP for its approval before it is presented for Federal Cabinet’s consideration. PEL and Waves-Singer were unsuccessful bidders.