Sell-off process shelved

The federal government has reportedly shelved privatisation process almost entirely, inclusive of power sector companies, for the remaining PML-N tenure due to political uncertainty, well informed sources told Business Recorder.
The government's lack of interest in privatisation of public sector companies including loss-making entities, including PSM, can be gauged from the fact that no full-time Minister or Secretary has been appointed for the recently created Ministry of Privatisation. Prime Minister Shahid Khaqan Abbasi has taken back most of the powers from Finance Minister Ishaq Dar, including decision-making on privatisation.
On January 27, the Cabinet Committee on Privatisation (then headed by Finance Minister, Senator Ishaq Dar) granted approval to initiate the process of listing only Gujranwala Electric Power Company (GEPCO) shares on Pakistan Stock Exchange through an IPO as the three other public sector power distribution companies targeted for privatization had become unprofitable with financial losses of Rs 31 billion for fiscal year 2015-16. These three companies were Faisalabad Electricity Supply Company (Fesco), Islamabad Electricity Supply Company (Iesco) and Multan Electricity Power Company (Mepco).
Out of nine government-owned power distribution companies, seven are now running in losses. The only remaining government-owned profitable companies are Lahore (although its balance sheet is not publicly available) and Gujranwala power distribution companies. The CCoP considered the strategic sale of KAPCO with the instructions to Privatization Commission and Ministry of Water & Power to complete all formalities before formal approval. However, the fate of Kapco is also in the dark as no progress has been made in this regard so far.
On February 27, 2017 Secretary Privatisation, Sardar Ahmad Nawaz Sukhera, who is now Secretary Information with additional charge of Privatisation, informed the then Secretary Water and Power Younus Dagha, that the CCoP in its meeting held on January 27, 2017 had directed the Privatisation Division and the Ministry of Water and Power to immediately finalise comfort letters for investors, and requested draft PPAs subsequent to settling all issues regarding terms and conditions and other modalities required in a comfort letter; the CCoP further directed that it should be updated after issuance of the comfort letter by the Water and Power Ministry.
"There is no progress on the Kapco issue so far," said an official on condition of anonymity. He further stated that privatisation of power sector entities remains stalled after former Prime Minister Nawaz Sharif directed that there be no further privatisation of power sector entities without taking the employees into confidence.
An official in Ministry of Privatisation confirmed to Business Recorder on Thursday that privatisation process of all entities is "dead" and no further progress is expected on this front due to uncertainty within the government and general elections in the country scheduled in 10 months. The sources said, out of nine government-owned power distribution companies, seven are now running in losses.
As per documents submitted to the CCoP in January this year, Fesco reported Rs 13.31 billion loss last fiscal year compared to Rs 5.22 billion profit in the preceding year, according to the company's balance sheet. Iesco, once the jewel of the distribution sector, reported Rs 7.75 billion losses in fiscal year 2015-16 as against Rs 2.74 billion profit the previous year. Their boards approved the audited accounts of Fesco and Iesco two months ago.
Mepco, which showed a Rs 9.8-billion profit in fiscal year 2014-15, also became unprofitable in fiscal year 2015-16 and booked Rs 10.3 billion losses according to a company official. He said that delay in determination and notifications of electricity tariffs and subsequent reimbursements to customers were the reasons for the losses. Reports also suggest that " freezing" of power sector privatisation may have adverse implications for the $37 billion energy projects of the China-Pakistan Economic Corridor (CPEC), as Pakistan had committed with China for 'selective privatisation' of distribution companies.