April 7, 2010 2:27 pm

Pakistan Petroleum Limited could be privatized within six months, minister says

This article is provided to FT.com readers by mergermarket—a news service focused on providing actionable, origination intelligence to M&A professionals. www.mergermarket.com
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Pakistan Petroleum Limited (PPL), the state-owned energy company, could be privatized in the next six months if not sooner, Minister of Privatisation Waqar Ahmed Khan told mergermarket.

”We are putting a number of companies on a fast-track privatization process,” the Minister said. The government is ramping up its privatization plans for 58-state owned entities. The Minister said the ones that have been shown the most interest are companies involved in power plants, basic utilities, oil and gas and mining.

He added that Faisalabad Electric Supply Company (FESCO) could also be privatized as soon as within three months. Nomura was nominated in mid-March as the government’s strategic advisors for this deal, he added.

The Government of Pakistan (GoP) intends to privatise FESCO through the sale of 56% of its shareholding in the company to a strategic investor or a consortium of strategic and financial investors of which the investor would be required to sell 5% shares to the employees by instituting an Employee Stock Ownership Program within one year of taking over FESCO,’ read a GoP statement. The government intends to hold 44% of the equity beyond privatsiation, it added.

A person close to the situation pointed out that Nomura has been mandated as strategic advisor to the government in the privatization of 25 state-owned entities, however not for PPL. KASB Bank and Merrill Lynch were appointed as advisors for PPL’s privatization, according to the Privatisation Commission.

PPL has attracted a lot of interest from domestic players alongside four overseas strategic buyers. The government “was taking the interest only from global players seriously” because of their financial strength, a source close to PPL pointed out.

British Virgin Islands-based Orient Petroleum Limited is understood to be interested in PPL and might consider partnerships with international players for a joint bid. Orient would look to create a partnership with one of such global players if they were seeking local Pakistani expertise, a person with knowledge of Orient said.

Previously mentioned parties also include the Austrian OMV and Hungarian MOL.

The spokesperson for OMV declined to comment on a deal with PPL adding that “as is every international company, [OMV is] screening the market for business opportunities”. MOL’s spokesperson could not be reached for comment.

The privatization process of various Pakistani government entities had been put on hold for the last two years, when the present government assumed office, because of political issues, the source close to PPL said.

The government controls 68.99% of PPL and Benazir Employees Empowerment Trust holding a 9.41% stake and 21.6% held by private shareholders, according to PPL’s website.

Under a previous administration, in 2007, Pakistan wanted to put a 15%-20% stake in the state-owned energy company on the market. The stake that could be on offer this year has not been specified.

PPL reported, in its annual report published in 2009, net sales revenue of the PKR 61.6bn (USD 733m) - a 35% increase on the previous year. Profit before tax stood at PKR 41.9bn (USD 498m) - 38% up on the previous year while post-tax profit was PKR 27.7bn (USD 330m) - an increase of 41% on 2008.

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