Govt moves NPP, GPP sell-off process forward

ISLAMABAD: The Cabinet Committee on Privatisation (CCoP) has directed Power Division to submit timelines for each of the issues hindering the process of privatisation of Nandipur Power Plant (NPP) and Guddu Power Plant (GPP), official sources told Business Recorder.

On February 15, 2024, Ministry of Privatisation, in its summary to the CCoP noted that the latter in its meeting held on August 8, 2019, subsequently ratified by the Federal Cabinet on August 20, 2019, directed the Privatisation Division to select any ten Public Sector Enterprises (PSEs) from the privatisation list approved in CCoP meeting on October 31, 2018, ratified by Cabinet on November 1, 2018, and initiate process of hiring Financial Advisors (FAs) collectively or selectively as per legal requirement. Power Division, in a letter of August 19, 2019 referred to Nandipur Power Plant (425MW) and Guddu Power Plant (747 MW) as candidate projects for privatisation.

PSO may acquire govt stakes in NPP, Gepco

PC Board, in its meeting held on August 26, 2019 approved ten PSEs including Nandipur Power Plant (NPP) and Guddu Power Plant (GPP) for inclusion in active privatisation list and directed to initiate the process for publishing of Expression of Interest (EoI) for hiring of FA, on case to case basis. EoI for hiring the FA for privatisation of NPP and GPP were separately advertised on August 29, 2019. PC Board in its meeting held on December 27, 2019 approved appointment of Consortium of United Bank Limited (UBL), EY Ford Rhodes (EY), Haider Mota & Co, and M/s NESPAK as FA for privatisation of the NPP. Financial Advisory Services Agreement (FASA) was signed on February 19, 2020 with Consortium of M/s UBL and M/s EY for the initial period of 18 months (from February 19, 2020 to August 2021) unless extended in writing with mutual consent of the parties.

The process of hiring for GPP, FA was initiated three times - in August, 2019, December, 2019 and October 2020 respectively but it could not be materialised. Concurrently, multiple issues faced by these entities surfaced which necessitated prior redressal for any meaningful progress. In light of these challenges, it was decided to shelve the hiring process of FA for GPP.

The due diligence reports, submitted by FA in December, 2020, highlighted key issues in NPP’s proposed transaction which are as follows: (i) removal of charge created on assets of the power plants for Sukuk Bond issued by GoP; (ii) separate corporate entities to be established each for GPP and NPP, carving out from CPGCL (Genco-II) and NPGCL (Genco-III), respectively; (iii) separate Power Purchase Agreements (PPAs) to be entered into for GPP and NPP with CPPA-G; (iv) Implementation Agreement (IA) or GoP guarantee, similar to GoP’s with IPPs for both GPP and NPP; (v) separate gas allocation, specific for these power plants; (vi) separate GSPA (post gas allocation); (vii) creation of separate gas headers; (viii) separate power generation licence to be applied to Nepra, carving out from consolidated licence of NPGCL and CPGCL; and (ix) transfer of land and assets in the name of new NPP and GPP companies.

In the case of GPP, Ministry of Privatisation, in its summary of February 24, 2020 requested the CCoP for a way forward on possibility of removing the charge on assets of GPP and accordingly addressing other core issues for the envisaged privatisation of GPP. CCoP in its decision of February 25, 2020 directed Finance Division to remove the charge earlier created on the assets of GPP for issuance of Sukuk bond. Subsequently, Ministry of Privatisation submitted another summary dated August 19, 2020, requesting the CCoP to direct concerned Divisions to resolve issues of GPP to facilitate the privatisation process.

The CCOP, vide its decision dated 21 August, 2020 directed the Power Division and Petroleum Division to address all issues related to GPP which are hindering its privatisation process within two months.

The matter relating to privatisation of both power plants, was again discussed in CCoP’s meeting held on 18th March, 2021 in which CCOP directed Power Division to submit a summary to the CCOE, in light of PSO’s claim over NPP & GPP in lieu of receivables, as informed by SAPM on Power and reiterated its decisions to expedite the process by removing the bottlenecks.

The matter was also subsequently taken up with the Ministry of Energy (Petroleum/ Power) whereby the decisions of CCOP, to place the summary before the CCOE, were reiterated in a meeting chaired by Minister for Privatisation and attended by SAPM on Power and Petroleum on May 6, 2021.

The same issue was again highlighted in CCoP’s meeting on 31 December 31, 2021 whereby CCoP directed the Privatisation Division to continue the process of financial evaluation of NPP and GPP along with their assets and in the meanwhile, Petroleum Division, in consultation with Power and Finance Divisions, was to examine the matter of equity transfer to PSO against its receivables and present the issue before CCoE. However, the Cabinet, in its decision of January 11, 2022 directed that the financial evaluation of Nandipur and Guddu Power Plants would be carried out subsequent to CCoE’s decision.

In December, 2022 the Petroleum Division initiated a summary for the ECC for Partial Settlement of PSO’s circular debt receivables by transferring controlling stake of Government’s equity in power plants in which it was also proposed to acquire GEPCO (a-DISCO) in place of GPP. The Ministry of Privatisation, in response, reminded Petroleum Division of the directions of CCoP and Cabinet in the past.

The Petroleum Division was also advised to carry out its own due diligence and the valuation methods besides the proposed “provincialisation of Discos” keeping in view directions of CCoP on the subject in its meeting of June 24, 2022. Subsequently, the Prime Minister being Minister Incharge of Petroleum Division, raised observations on a draft summary for CCoE on PSO’s proposal for partial settlement of its circular debt through acquiring controlling stake in power plants.

The observations were responded by Privatisation Division wherein it was clarified that in terms of provisions of Privatisation Commission Ordinance, 2000 PSO cannot participate in the privatisation process of an entity and an enterprise that has been included in the privatisation program, and the same cannot be sold/ disposed under any other mechanism till it has been excluded from the privatisation programme by the Federal Government/ Cabinet.

The sources said, directions/ decisions of the Federal Cabinet and its committees, which are in field have not been complied by various Ministries/ Divisions, till date thereby impeding the privatisation process for NPP and GPP.

Privatisation Division argues that from the background of the issue, it is clear that multiple directions from multiple fora have been passed, since 2018 for the privatisation of the NPP and GPP, for resolution of key issues related to the transaction(s) to various Ministries/ Divisions. In addition, a separate proposal for partial settlement of PSO’s circular debt through acquiring controlling stake in power plants was also deliberated at various fora, which will not be possible as long as these power plants remain on the active privatisation list.

No progress on the directions of Cabinet and Committee has been made despite a lapse of five years. The agreement with FA, hired for NPP, has long expired and there seems to be no justifications for re-hiring of FA as long as the identified issues, related to the privatisation transactions remain unresolved.

The Privatisation Ministry from time to time reminded the concerned Ministries/ Divisions and briefed the relevant fora, including cabinet and its Committees, but no progress was made. These power plants continue to be on the active privatisation list with pending issues, which remain unresolved thus making it impossible for Privatisation Ministry to carry the privatisation process further.

The matter was placed before the Privatisation Commission Board on December 1, 2023, which after thorough deliberations and keeping in view the circumstances brought into its notice, approved the following proposals for consideration of the Federal Cabinet: (i) NPP and GPP, placed on the privatisation program vide CCoP/ Cabinet’s decision of October 31, 2018/ November 1, 2018 may be delisted; (ii) Power Division being the concerned Ministry/ Division shall consider viable options for the entity in consultation with relevant stakeholders including PSO’s proposal for partial settlement of PSO’s circular debt through acquiring controlling stake in power plants as the same cannot be carried out under the Privatisation Commission Ordinance, 2000; and (iii) in future, NPP and GPPs shall not be placed on the active privatisation program/ list till existing issue, related to its privatisation under the PC Ordinance 2000 and resolved by the concerned Ministries/ Divisions including Finance, Power and Petroleum Divisions.

The sources said, CCoP in its meeting held on February 7, 2024 discussed the issue of both power plants threadbare and directed Power Division to submit the timelines for each of the issues, hindering the process of privatisation as mentioned in the summary to the Privatisation Division within three days which shall subsequently be submitted to the CCoP in the next meeting for its consideration and decision. The CCoP decision was duly ratified by the Cabinet on February 15, 2024.

Power Division has not yet shared anything in writing on this issue with the Ministry of Privatisation, which has now asked Power Division that requisite action to implement the decision, under rule 24 of the Rules of Business, 1973, in coordination with other Divisions, where necessary, be initiated immediately and to furnish implementation within three days for further necessary action.

Copyright Business Recorder, 2024