ISLAMABAD, 20 May — Sale of multi-billion dollar state-owned Pakistani oil, gas, electricity and fertilizer projects, slated for the next few weeks, offers good investment opportunities.
The energy and fertilizer sectors are high-yield entities, rated quite high as indicated by their share prices on the bourses. Investment in these fields will be financially and strategically rewarding. This is because of Pakistan’s geographical location and the emerging realities of energy-starved South and East Asia that international economists describe as the engine of economic growth in the 21st century.
FDI in oil and gas is picking up. Pakistan received $210 million as FDI during the first six months of the current fiscal 2002. Of this, $80 million were invested in oil and gas projects. Another $30 million were invested in electricity.
The government’s Privatization Commission (PC) has now placed more than one and a half dozen major projects on the auctioneer’s block for sale within the next few months — some within weeks.
Privatization Minister Altaf M. Saleem, says besides oil, gas, and fertilizer projects, also offered for sale are other state owned enterprises (SOEs) including telecom and banking units. Saleem is quite upbeat on the sale prospects. “Investment climate had come under a bit of a shadow following the Sept. 11 incidents and war against terrorism. But, it has brightened a great deal in the last few months. This is reflected in the number of bids we are receiving for various projects that we have offered for sale. The prospective investors come from all parts of world, ranging from UK to Australia, and Saudi Arabia to Canada,” he says.
Pakistani optimism over getting a good price for SOEs on sale is based also on the fact that a number of investors’ teams, both private and government, as well as FDI managers have visited this country over the last four months, as operation against terrorism scaled down.
Some of the key groups were those of US Exim Bank, Overseas Private Investment Cooperation (OPIC), Trade and Development Agency (TDA). Officials of these organizations informed Saleem, “American investors are keen to invest in Oil & Gas Development Company Ltd. (OGDCL), Pakistan State oil (PSO), Pakistan Petroleum Ltd. (PPL), Pakistan Oil Fields and nine oil wells. We are happy to see a number of American companies already operating in Pakistan. These are also interested in investing in state-owned companies that are now being sold by the government.”
Saleem assures his visitors and prospective investors that Islamabad has established a credible and transparent system to sell its SOEs to resident and expatriate Pakistanis as well as foreign investors. “The investors confidence has been restored to a large extent because of the prudent economic and financial policies of the present government,” says Saleem.
Domestic investors are also coming forward to buy shares of SOEs, being offered for sale directly or through the bourses. The government, for instance, recently offered 37 million shares of the country’s biggest state-owned bank, National Bank of Pakistan, against which applications for one billion shares were received. As a result, the government had to decide that preference should be given to those who have applied for upto 1,000 shares each.
International Financial Institutions are also assisting Pakistan in improving and restructuring the energy sector. This assistance has come through a $350 million structural adjustment credit and nearly $1.0 billion energy restructuring program financed by the World Bank and Manila-based Asian Development Bank. The energy sector projects for sale include, among others, the giant Pakistan State Oil (PSO), Oil & Gas Development Company Ltd.(OGDCL), Pakistan Petroleum Ltd. (PPL), Sui Northern Gas Pipelines Ltd. (SGNPL), Sui Southern Gas Co. Ltd. (SSGCL), Karachi Electric Supply Corporation (KESC), Faisalabad Electric Supply Company (FESCO), and Jamshoro Thermal Power General Company known as Genco-1. Government is also offering nine state-owned oil and gas fields for sale. The PC expects to receive between $2.5 to $3.0 billion by selling its oil and gas sector shares.
Several international oil companies, doing upstream exploration in this country are eyeing with interest privatization of its 30 percent share by the government in oil and gas entities.
France-based TotalFinaElf, for instance, is interested in buying Oil & Gas Development Company Ltd. (OGDCL), according to M. Michel Seguin, the company’s senior vice president for Far East. “We wish to expand our operations in Pakistan and to invest in the petroleum sector,” M. Seguin said. The company is already operating in Pakistan and was recently awarded two offshore petroleum concessions.
Alongside these SEOs, sale of 15 to 26 percent shares of top of the line Pakistan Telecommunications Company Ltd. (PTCL), the state telecom monopoly is planned to be finalized by June. Lebanese, Saudi Arabian and Egyptian groups top the list of prospective buyers. Bidding for the sale of the United Bank Ltd. (UBL), one of the three biggest state-owned banks, is due within the next few days. Two UAE groups are among those interested in buying it. Sale of 49 percent shares of the Allied Bank Ltd. (ABL) is also scheduled for June. Sale of 51 percent shares, along with strategic management transfer of Habib Bank Ltd. (HBL), the second largest bank, will be completed in the first quarter of 2003, according to the PC’s plans.
Fifty-one percent shares each of Pakistan State Oil (PSO) and OGDC are due to be sold by September this year. PC Officials say, PSO has 85 percent market share in fuel oil, 60 percent in diesel, 40 percent in motor spirit, 60 percent in aviation fuel, and 40 percent of lubricants. Rest of the business is shared between Shell, the front ranking foreign company, and Caltex. Investors from Western countries, Middle East and China have shown interest in buying PSO, PC officials say.
The country’s largest natural gas producer, Pakistan Petroleum Ltd. (PPL), a blue-chip SOE, will be privatized during the fourth quarter of this year. Next in line are Sui Northern Gas Pipelines Ltd. and Sui Southern Gas Co., that monopolize sale of natural gas in the country, are scheduled to be sold by March 2003.
Sale of 51 to 74 percent shares and transfer of management control of Karachi Electric Supply Corporation, that dominates power supply in Karachi and the southern Sindh province is to be completed by September this year.
Fesco, based in the industrial city of Faisalabad, will be sold along with management control by December this year. Twenty- six percent shares, along with management control of Jamshoro-based Genco-1 will be completed by June, 2003.
The hopes of PC and the government got a good boost when they recently sold the big fertilizer producer, Pak-Saudi Fertilizer Ltd. (PSFL), to Fauji Fertilizer Company (FFC). FCC is owned by Fauji Foundation that manages funds and undertakes welfare of war veterans and retired personnel of the armed forces.
The PSFL sale is priced Rs.7.3 billion, at the rate of Rs.135.85 per share. It was close to the asking price of Rs.147 a share. The next bid, by Dawood Hercules Chemicals Ltd. was Rs.3.78 billion at the rate of Rs.70 a share. PSFL will buy 90 percent of shares that come to 54 million shares. The remaining 10 percent shares will be sold to the general public.
