Power distribution companies: PC fails to attract a single bid for financial advisers

[Qalandari]

The government aims to complete the first power sector transaction by July this year and wants to sell one of the few efficient companies, the Faisalabad Electric Supply Company. STOCK IMAGE

Power distribution companies: PC fails to attract a single bid for financial advisers

ISLAMABAD:
The government’s ambitious plan to privatise the electricity distribution network has received a first blow, as the deadlines set to hire financial advisers for three loss-making companies lapsed without attracting a single bid from prospective financial consultants.

After the poor response, the Privatisation Commission (PC) decided to take another chance and extended the deadlines for receiving technical and financial bids by two more weeks, said PC officials.

The deadline for hiring financial advisers for the Hyderabad Electricity Supply Company (Hesco), Sukkur Electric Power Company (Sepco) and Quetta Electricity Supply Company (Qesco) expired last week.

The PML-N government had wanted to fast track the privatisation process and gave advertisements to hire financial advisers for all power generation and distribution companies.

It aims to complete the first power sector transaction by July this year and wants to sell one of the few efficient companies, the Faisalabad Electric Supply Company. It will be followed by the strategic sale of Lahore and Islamabad distribution companies.

The PC has already hired financial advisers for these three profitable companies, as they have comparatively low line losses and better recoveries, making them the perfect business case for potential investors.

But employees’ unions and the leading opposition party, the Pakistan Peoples Party, are against the privatisation of the power distribution companies. Labour unions of all the power distribution companies held a protest rally in the capital last month, which was also addressed by Syed Khursheed Shah of the PPP.

Shah in his capacity as chairman of the Public Accounts Committee recently condoned illegal hiring of 7,000 PPP loyalists in three power distribution companies in 2008-09.

In terms of financial performance and efficiency, Sukkur, Quetta and Hyderabad companies are at the bottom of the country’s power distribution network, having higher line losses and less recovery of electricity bills.

For instance, in December last year, Qesco reported line losses of 22.5% while its recovery of bills was alarmingly low at only 21.7%.

In addition to the consultancy charges, the financial advisers are also eligible to receive at least 0.25% of the total cost as success fee.

According to experts, in case the government remains unable to hire the financial advisers for the loss-making entities even after the expiry of the second deadline, it should allow direct due diligence by prospective investors.

The other option is to list these companies on stock markets prior to their privatisation.

The government’s privatisation agenda remains successful only to the extent of divestment of shares in profitable entities, mainly in commercial banks and the oil producing firm – Pakistan Petroleum Limited. It has not yet completed any strategic sale in its 21-month tenure.

PSM setback

In yet another setback, the PC also did not receive any technical and financial bids from prospective financial advisers for the privatisation of Pakistan Steel Mills (PSM). The PSM’s fourth deadline extension ended on Monday.

Earlier, the only consortium that came forward to undertake the job was disqualified on technical grounds by the PC.

The PML-N government has so far injected Rs20 billion in the name of paying salaries to the employees and restructuring the PSM before privatisation.

A committee of bureaucrats has also been set up to look into the affairs of PSM and recommend whether the entity needs Rs7 billion more in cash on an immediate basis.

Published in The Express Tribune, March 3rd, 2015.

 

[SBD-3]

And it happened exactly as I said

 

[ziaulislam]

And it happened exactly as I said

Those companies that are doing heavy losses failed to attract bidding. I think Islamabad electric supply company and some others will be privatized easily

 

[I FLY HIGH]

Those companies that are doing heavy losses failed to attract bidding. I think Islamabad electric supply company and some others will be privatized easily

yes u r right , that was my point the other day , Govt could easily privatise Fesco, Iesco , Gepco and Lesco , I think govt should do it which ever is possible first and the trend could follow .

 

[SBD-3]

Those companies that are doing heavy losses failed to attract bidding. I think Islamabad electric supply company and some others will be privatized easily

IESCO,LESCO,FESCO,MEPCO,GEPCO

 

[ziaulislam]

yes u r right , that was my point the other day , Govt could easily privatise Fesco, Iesco , Gepco and Lesco , I think govt should do it which ever is possible first and the trend could follow .

but would that solve the problem? no.

problem doesn't lie in those companies
yes they should be privatized but they are not the problem right now.

 

[I FLY HIGH]

but would that solve the problem? no.

problem doesn't lie in those companies
yes they should be privatized but they are not the problem right now.

agreed , but what is the option left for the govt? 1- try to sell heavy losses making companies and it might take unlimited time . 2- privatise less loss making companies and gradually improve other loss making companies 3- Dont privtise any one and try to improve losses ? what is ur opinion?

 

[ziaulislam]

agreed , but what is the option left for the govt? 1- try to sell heavy losses making companies and it might take unlimited time . 2- privatise less loss making companies and gradually improve other loss making companies 3- Dont privtise any one and try to improve losses ? what is ur opinion?

solution was that govt should have followed what it said in its election manifesto. that it would work on reforming power companies. 2 year is much more than enough to implement good smart meter system. atleast in just 1 company as road model if it was too lazy. but the govt decided not to for politics sake
if we wait for graduall imporvement of companies that losing 400 billion rupees every year than GOD HELP US.
anyway the word gradually means starting, they havent started yet despite open offers from asian bank for fully financing the project

i think the govt is just privatizing to raise money, not solving the problem.
the habib bank portfolio, the oil companies etc shows that trend. it would do some good election work with that money and Voilà, the next general elections.

 

[I FLY HIGH]

solution was that govt should have followed what it said in its election manifesto. that it would work on reforming power companies. 2 year is much more than enough to implement good smart meter system. atleast in just 1 company as road model if it was too lazy. but the govt decided not to for politics sake
if we wait for graduall imporvement of companies that losing 400 billion rupees every year than GOD HELP US.
anyway the word gradually means starting, they havent started yet despite open offers from asian bank for fully financing the project

i think the govt is just privatizing to raise money, not solving the problem.
the habib bank portfolio, the oil companies etc shows that trend. it would do some good election work with that money and Voilà, the next general elections.

i dont want that political rhetoric , i just want to hear solution , u mean then govt must not privatise and try to improve the losses .(though late ).

 

[ziaulislam]

i dont want that political rhetoric , i just want to hear solution , u mean then govt must not privatise and try to improve the losses .(though late ).

what i mean govt should
1. reform companies to minimize losses through smart meters etc
2. privatize all companies
3. build water storage dams
4. Ask NEPRA to speed up tariff determination
5. release foreign bonds to build hydro project, if international bidding fails

govt is simply going for easy things. privatizing profit making companies is an easy out and give govt money, IT DOESNT SOLVE THE POWER PROBLEM. We will still be doing the same amount of lossess as before. the govt simply will get some money on its hand.

in nutshell i dont see the govt solving the problem not today and not in next few years. even by some chance govt does solve power crisis due to favorable condition in LNG market, it still will not be an achievement unless it can do whats difficult, i.e reforming power distribution sector and increasing its power producers efficiency which combined is causing a loss of 600 billion rupees to nation every year(twice our development project)