ISLAMABAD: The Cabinet Committee on Privatization (CCoP) on Monday allowed the Privatization Commission to proceed towards the successful conclusion of the Services International Hotel (SIH) transaction and proceed with single source/negotiated transaction for the privatisation of House Building Finance Company Ltd (HBFCL).
Federal Minister for Finance and Revenue Mohammad Ishaq Dar chaired the CCoP meeting here on Monday, which deferred the summary of the Commission on the privatisation process of Roosevelt Hotel, with the direction to submit an update after consultation with the Aviation Ministry.
Federal Minister for Power Khurram Dastgir Khan, Federal Minister Commerce Syed Naveed Qamar, Federal Minister for Privatization/Chairman Privatization Commission Abid Hussain Bhayo, SAPM on Finance Tariq Bajwa, SAPM on Revenue Tariq Mehmood Pasha, Chairman RRMC Ashfaq Yousuf Tola, federal secretaries and senior officials attended the meeting.
SIH: CCoP to take final decision on sell-off process on fresh advice basis
Sources revealed the Privatization Commission submitted a summary regarding the privatisation of SIH and updated the committee on its privatisation process.
On the directions of Prime Minister’s Office, the PC presented the details of the SIH transaction to CCoP on June 24, 2022. The CCoP constituted a sub-committee under the chairmanship of the Minister for Privatisation to review the SIH transaction.
The sub-committee, after detailed deliberations, decided to conduct a fresh valuation of the property through an independent valuer from the Punjab-based valuers on the Panel-I list of Pakistan Banks’ Association. M/S AJ Valuers Associates (Pvt) Ltd was selected under the PPRA Rules on 28th July 2022.
The valuer submitted its valuation report on 15th August 2022 and assessed the fresh value of Rs1,951,076,000 adopting “Market Value Approach” and Rs1,461,000,000 based on “Residual Land Value” or “Discounted Cash flow Method”. The committee after due deliberations concluded that the previous valuation was reasonable at the time the property was auctioned.
The report of the sub-committee was presented before the CCoP in its meetings held on 7th September 2022 and 13th September 2022, wherein, the PC was directed to re-submit the summary to the CCOP after seeking inputs from the Law and Justice Division.
Accordingly, comments were sought from the Ministry of Law and Justice, which suggested that a fresh valuation matter be referred to Federal Investigation Agency (FIA) to deeply probe and determine that the valuation as per the prevailing market rate and in conformity with the proposed structure for construction.
In the meantime, the buyer, (M/s Faisal Town (Pvt) Ltd), also issued a legal notice on 4th October 2022 due to the delay in signing of the sale deed, transfer of title and handing over property to it. The buyer has now filed a suit for declaration and specific performance in the Islamabad High Court against PC which is pending adjudication.
The CCoP in its meeting held on December 26, 2022, decided the following which was also ratified by the Federal Cabinet: “directed Ministry of Privatisation to refer the case to Law & Justice Division for its review and confirm whether due privatisation process of SIH was carried out in accordance with prescribed privatisation laws/rules/procedure and submit a report thereon within a week to the CCoP for consideration.”
The PC referred the CCoP decision to the Ministry of Law and Justice. The ministry reverted to PC, wherein, it was stated that: “The record placed on the reference reveals that all the requisite steps/procedures and codal formalities required under the Privatisation Ordinance, 2000 (LII 2000) have been complied with. This Division is therefore, of the view that the referring Division may proceed further in the matter, accordingly.”
Foregoing in view, the following requests are placed before the CCoP: a. Allow PC to proceed towards successful conclusion of SIH transaction with completion of transfer/mutation process in the name of the purchaser. b. Ratify the decisions made in the stakeholders meeting dated February 17, 2022, as follows: I. Tripartite Agreement of April 2006 is a valid and binding agreement; II. Approved LDA’s claim of 1/3rd of net sale proceeds and payment of the remaining proceeds in ratio of 75:25 to NICL and PCBL, respectively and III. Net sale proceeds to be distributed after deducting PC transaction charges and applicable taxes.
The CCoP after a detailed discussion allowed Privatisation Commission to proceed towards the successful conclusion of the SIH transaction with completion of transfer/mutation process in the name of the purchaser.
The Privatization Commission also presented a summary on the privatization of HBFCL with one single (pre-qualified) bidder. Sources revealed that upon recommendation of the pre-qualification report dated Jan 31, 2023, the PC Board on Mar 21, 2023 approved PMRC and PHFCL as pre-qualified bidders subject to completion of Fit and Proper Test (FPT) from the regulator. Subsequently, SBP & SECP were approached to solicit FPT Clearance. While the SECP has cleared both the pre-qualified bidders, the SBP informed about non-compliance status of PHFCL and hence did not recommend it to proceed further with bidding process.
The Chairman Transaction Committee briefed the PC-Board on June 15, 2023, about opinion of the FAC on single source bidding and sought approval/way forward of the PC-Board.
The PC Board in the same meeting recommended to the CCoP to: consider a single source/negotiated transaction for the privatisation of House Building Finance Company Ltd with a sole pre-qualified investor namely, Pakistan Mortgage Refinance Company Ltd (PMRCL). After detailed deliberations, the CCoP decided to allow the Privatization Commission to proceed with a single source/negotiated transaction for the privatization of the HBFCL with the sole pre-qualified investor namely, Pakistan Mortgage Refinance Company Ltd (PMRCL).
The Privatisation Commission tabled a summary related to budget estimates of the Privatization Commission for Fiscal Year 2023-24 to the tune of Rs1,248.8 million. The CCoP after detailed deliberation approved the summary.
The Privatisation Commission also presented summaries on the privatisation of Pakistan Engineering Company (PECO) and the privatization of Sindh Engineering Limited (SEL) and briefed the meeting on their status. The CCoP after discussion deferred both summaries with directions that the secretary Privatization Commission, Secretary Law and Justice and secretary Industries and Production may hold mutual consultations and come up with a future course of action in both cases.
The Privatization Commission also updated the CCoP on the status of the privatisation process of Roosevelt Hotel. Official documents revealed that the PC Board considered the comments of the stakeholders and approved the TORs along with the mode of hiring of FA in its meeting held on 25th January 2023. Draft Request for Proposal (RIP) Package containing TORs and advertisement for inviting technical and financial proposals of the interested parties were approved by chairman PC on 22nd March 2023-pursuant to PC (Delegation of Powers) 2002.
The advertisement for the invitation of technical and financial proposal was to be published in leading local daily newspapers and one publication in New York leading newspaper. Accordingly, the PC requested Finance Division to approve US dollar component required for publishing advertisement in a leading New York Daily.
The Economic Coordination Committee (ECC) on May 30, 2023, on a summary of Aviation Division approved to negotiate leasing of Roosevelt Hotel, NY to New York City Health and Hospitals Corporation for a period of three years to provide residential facilities to “housing migrants’ in the Hotel. Subsequently, the Finance Division also sought clarification from PC regarding the foreign exchange requirement in wake of lease of three years of Roosevelt Hotel being approved by the Government.
The secretary PC on 13th June 2023 requested Aviation Division to confirm whether PC may continue with the process for the appointment of financial adviser and the reported lease of the facility will not impede the privatisation process and timelines, response is awaited. The PC will proceed with the hiring of FA for the privatisation of the Roosevelt Hotel in view of feedback of the Aviation Division and the decision of the government.
The CCoP, after discussion, deferred the summary with the direction to submit an update on the privatization of Roosevelt Hotel after consultation with the Aviation Ministry.
Copyright Business Recorder, 2023