Privatisation Commission has reportedly refused to allow M/s Kot Adu Power Company (Kapco) to participate in bidding of power projects in Punjab, saying that permission does not fall in its domain, well informed sources told Business Recorder.
This viewpoint has been conveyed by an official of Privatisation Commission, Muhammad Jamil in a letter to CEO, Kapco, Aftab Butt.
Kapco was privatised in June 1996 through the Privatisation Commission (PC) under International Competitive Bidding (ICB). At the time of Kapco's privatization, a number of agreements were signed which included the facilitation agreement on June 27, 1996 between Kapco and the Government of Pakistan (GoP) through PC.
The company was listed on the stock exchange in 2005 and has around 56,000 shareholders and Wapda is its largest shareholder holding around 41 per cent shareholding in Kapco.
Kapco is KSE 100 Index Company. Kapco's Power Purchase Agreement (PPA) is scheduled to expire in 2021. Notwithstanding Kapco's position to seek an extension of the term of its PPA, Kapco's management and Kapco's Board of Directors have been viewing opportunities for an increase in shareholder value by expanding its portfolio.
M/s Kapco's CEO, in his letter to the Privatisation Commission titled "withdrawal of consent by Privatisation Commission under facilitation agreement to incur additional debt by Kapco" intimated that the company has participated in the bidding process of 135 MW Taunsa Hydropower projects being conducted by Punjab Power Development Board (PPDB). CEO Kapco, in another letter of December 12, 2019, stated that the company has also submitted Expression of Interest (EoI) for the two Re-gasified Liquefied Natural Gas (RLNG) power plants scheduled to be privatised by the Privatisation Commission.
The official of Privatisation Commission has conveyed to the CEO, Kapco, "It is on record that directions of the Prime Minister were issued on November 3, 2017 through letter, which say that any purchase or sales of asset in future by Wapda or by entities in which it holds major or significant shares, are only made with the prior approval of the Federal Government."
Privatisation Commission, in its letter, advised the CEO Kapco to approach Power Division and Wapda to get permission for making investments as was conveyed in 2017. However, informed sources told this scribe that M/s Kapco has to seek permission from the Federal Government if the company has any plan to seek loans from banks for future investment in other projects.
The sources said Kapco has approached Water and Power Development Authority as shareholder, to get permission from the Federal Government to participate in power sector projects, adding that Wapda has promised to take up the issue with the relevant authorities.
In early 2019, M/s Kapco had approached the Privatisation Commission saying that as part of the company's business growth and strategic planning, Kapco entered into a Sale Purchase Agreement (SPA) with some shareholders of the Hub Power Company Limited (Hubco) who were selling 17.4 per cent shareholding in Hubco. The closing of the transaction was subject to various contractual, regulatory and legal approvals/ permissions/consents. As part of its compliance requirements under the facilitation agreement, Kapco applied to PC for requisite consent/ approval in terms of the requirements of the facilitation agreement.
After explaining its case, Kapco has requested that the embargo on Kapco's future growth plans be lifted and to provide level playing field with other IPPs so as to enable Kapco to participate in and, if considered appropriate, to invest in any of the Greenfield or Brownfield projects as it is one of the most experienced players in the power generation industry.
In the past, the power firm had requested PC to seek the withdrawal of the letter from the Prime Ministers' office of November 3, 2017 and be enabled not to withhold any future consent/approval unnecessarily which Kapco may seek in future. However, the PC did not give weight to the company's request.
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