Hiring of FAs for Reko Diq project: PMPL given relaxation of investment rules

ISLAMABAD: The federal government has extended special relaxation to Pakistan Minerals Private Limited (PMPL) of the Petroleum Division from prevalent investment rules for hiring of Financial Advisors (FAs) for complicated Reko-Diq project as high level talks are under way with Saudis, closely monitored by a committee which includes Director General Military Intelligence (MI), sources close to Secretary Petroleum told Business Recorder.

Sharing the details, sources said, Petroleum Division in a letter on September 19, 2023 requested for exemption to Pakistan Minerals Private Limited under section 21 of the PPRA Ordinance 2002 for hiring services of a financial advisor for the purpose of potential divestment in the Reko-Diq project from the applicability of PPRA Ordinance, any rules or regulations thereunder and any law regulating public procurement.

Earlier, PMPL requested Petroleum Division to seek the said exemption under Section 10 F of the Board of Investment (Amendments) Act, 2023 related to power of Special Investment Facilitation Council (SIFC) and provided the following excerpt of Section 10F of the said Act: “10 F Power to relax or exempt from regulatory compliance.

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The Federal Government, upon recommendation of the SIFC by notification in the official Gazette and subject to such conditions, limitations or restrictions if any as may be specified therein, may relax or exempt from a regulatory requirement or operation necessitated by any law for the time being in force for implementing projects, transactions, arrangements and agreements under this chapter, provided that the relaxation of exemption, granted under this section, shall be granted in accordance with the provisions of the respective laws.“

The sources said, in view of approval of SIFC, Petroleum Division sought exemption on the following justifications: (i) Apex Committee of SIFC in its meeting held on August 07, 2023, directed the State-Owned Enterprises (SOEs) comprising OGDCL, PPL and GHPL and their SPV namely PMPL to consider divestment from the Reko-Diq project, engage advisors for due diligence, engage an additional financial advisor based on the complexity of the project and regional considerations, and complete the transaction by December 25,2023; and (ii) Apex Committee of SIFC in its meeting held on August 28, 2023 directed the Petroleum Division to seek exemption from PPRA for engagement of the additional financial advisor.

The sources said Section 10F enshrines the SIFC’s power to relax or exempt from regulatory compliance.

On August 28, 2023, SIFC approved Petroleum Division for exemption of PPRA Rules under Section 21 of the PPRA Ordinance, 2OO1 for hiring additional financial advisor by SOEs/PMPL to meet the tight timelines. According to sources, it is clear from the decision that SIFC has not directed the Petroleum Division to place the case before PPRA Board, rather SIFC approved the request of the Petroleum Division.

On October 6, 2023, Managing Director informed the PPRA Board that SIFC under Section 10F has already exercised its power and may forward the case to Federal Government for notification.

Moreover, PPRA Board may recommend this exemption and then Federal Cabinet shall approve the Summary as per requirement of Section 21 of PPRA Ordinance, 2002.

He further stated that SIFC is a higher forum and the said forum has already accorded approval and questioned whether any subsequent approval by the PPRA Board is necessary or otherwise.

MD PMPL stated that PPRA Board was not categorically mentioned in the minutes of SIFC rather the term “relevant forum” was mentioned and PMPL interpreted that ‘relevant forum’ as ‘PPRA Board’ which is why the case was moved to PPRA Board. Four out of the five required Advisors have been appointed in this project. They are already working under the continuity principal provided for under the Consultancy Regulations of PPRA.

This request is for the hiring of additional Financial Advisor. For this PMPL requires exemption under Section 21 of PPRA Ordinance, 2002.

One of the Board Members inquired about the previous procedure adopted for appointment of Four Advisors. MD PMPL apprised the Board that four advisors were already working and were hired on the direction of Economic Coordination Committee (ECC) under Reko-Diq reconstitution transaction.

These Advisors were already working with the Attorney General’s Office of the Federal Government. Their names were placed before ECC and PMPL hired them on the ECCs recommendation. Another Board Member inquired whether exemption was sought at that time or otherwise. MD PMPL responded that as explained earlier they were hired on the direction of ECC.

Out of four hired advisors three of them were international advisors whereas the fourth one was a local advisor who was previously on the panel of one of the SOEs. PPRA consultancy rules provide enabling clauses on the continuity principal through which these Advisors were engaged for this particular Saudi assignment as well.

Similarly, one more financial advisor is required to be hired because the transaction is very complex and PMPL needs another Financial Advisor who has regional experience of mid-eastern parties and extensive knowledge of Pakistan as well.

Another Board Member inquired whether PMPL considered emergency clauses of PPRA Rules, 2004 which do not require any approval of the board. MD PMPL responded that emergency relates to natural calamities like war, flood, etc. whereas, the instant procurement is more like an investment that is required in national interest.

SIFC directed PMPL to consider this transaction because it was logical for them to move to that forum. Another Board Member invited attention of the Board to the fact that the letter of Ministry of Energy does not mention national interest.

Secretary Petroleum apprised the Board that this is a very complex transaction which is important both strategically and financially. In order to enable the Board to reach a logical conclusion he explained the backdrop of the transaction. He further apprised the Board that recently two committees have been formed.

One is the negotiation committee which negotiates with the Saudis and the two sides talk to each other with intermediaries.

Both sides have very high end consultants. These interlocutors have to talk to each other and their upcoming round of dialogue is scheduled in London. Previously, they had a meeting in Istanbul. The initial meeting in Istanbul has broken the ice tremendously.

Secretary Petroleum further apprised the Board that this transaction activity includes an oversight committee for proper supervision and also involves a representative of Finance Division at the level of Joint Secretary. The oversight committee is co-chaired by Secretary Petroleum and DG Military Intelligence. After due analysis SIFC noted all this with great satisfaction.

Secretary Petroleum further apprised that the Ministry had to route the case through ECC but then after due consultation it was recommended that PPRA Board is the right forum which can recommend exemption in the instant case. Secretary Petroleum stated that although plain reading of Section 10F of Board of Investment (Amendments) Act, 2023 clarifies that SIFC has the power and mandate to recommend exemption and the next course of action would be to place it before Federal Cabinet for the exemption however varied instructions from different forums need to be aligned.

He further stated that the remaining one consultant is from RBNA partners, which is a very high end consultancy firm that has worked in Mongolia.

They are ex bankers with more than 30 years of experience. “Since this transaction might be one of the biggest transactions in the history of Pakistan hence gravity of the situation demands to have qualified consultants to perform this particular transaction,” the sources added.

One of the Board Members stated that representative of Petroleum Division may like to apprise the Board about the details and number of RBNA consultant(s) and other consultants engaged so far, their faculties and what is missing in them and how long they have been engaged with RBNA and then make the Board understand this process with timeline.

Another Board Member pointed out that if Section 10F of the of Board of Investment (Amendments) Act, 2023 provides SIFC the power to relax or exempt from regulatory compliance and it accorded approval for exemption then Secretary Petroleum may forward the Summary to Federal Government directly.

The case is not required to be discussed here as SIFC being higher forum has already accorded approval of the exemption and the next forum to accord exemption is the Federal Cabinet. MD (PPRA) apprised that both PPRA Board and SIFC are the recommending forums. Subsequent to that recommendation next forum for grant of exemption is the Federal Government. Secretary Finance/Chairman PPRA Board asked to read Section 21 of PPRA Ordinance, 2002.

Accordingly, MD (PPRA) read Section 21 of PPRA Ordinance, 2002 as follows: Section 21 of PPRA Ordinance, 2002 - Provided that the relaxation or exemption, granted under this section, shall be granted in accordance with the provisions of the respective laws.

Secretary Finance/Chairman PPRA Board maintained that according to the proviso relaxation or exemption, granted under this section, shall be granted in accordance with the provisions of the respective laws. Another Board Member responded that SIFC has exercised its power within the provisions of the respective law. The decision to accord exemption has been given to SIFC which has accorded approval.

Board argued that since SIFC has already accorded approval under Section 10F of the Board of Investment (Amendments) Act, 2023, Secretary Petroleum may move a summary for the Cabinet regarding exemption to Pakistan Minerals Private Limited (PMPL) under section 21 of the PPRA Ordinance 2OO2 from the applicability of PPRA Ordinance, any rule or regulations thereunder for hiring services of a financial advisor for the purpose of the potential divestment in the Reko-Diq project in accordance with Section 10F of the Board of Investment (Amendments) Act, 2023.

Copyright Business Recorder, 2023