Introduction to the Privatisation Program

Privatisation Commission

November 2015

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• Enhance service delivery to the people of Pakistan

• Strengthen Pakistan’s fiscal position

• Attract private capital, technology and management

• Deepen Pakistan’s capital markets

Objectives of Privatisation

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• Privatisation as an important economic reform policy tool, for generating growth and to expunge structural inefficiencies, by removing false barriers and opening up the economy to competition

• Privatisation Commission was established as a Body Corporate under the provisions of Section 3(1) of the Privatisation Commission Ordinance, 2000

• The Privatisation Commission, under the PC Ordinance, is entrusted with the statutory mandate of implementing the Privatisation Policy of the Federal Government

Establishment of Privatisation Commission

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• 14 members of the Board belong to the corporate sector, and are amongst the best known corporate leaders of Pakistan

• Chairman is Mr. Mohammad Zubair, who has worked with IBM as CFO in Europe, MENA region and Pakistan for 28 years

• Secretary is a career civil servant with 31 years of service, and is in the rank of Secretary to the government

Board of Privatisation Commission

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Strategic Sale / Public-Private Partnership• Complete or partial sale of assets and business with

transfer of management control• Lease, Management or Concessions contracts• Management or employee buyouts

Capital Markets• Sale of shares through public auction or tender• Public offering of shares through a stock exchange• Global Depositary Receipts (GDRs)• Exchangeable / Convertible bonds

Modes of Privatisation

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1. Approval of Council of Common Interest (CCI) / Cabinet Committee on Privatisation (CCoP)

2. Hiring of Financial Advisor (FA) or Valuator3. Due diligence by FA and Privatisation Commission (PC)4. Finalization of Transaction Structure5. Restructuring and regulatory reforms, if needed6. Invitation of Expressions of Interest (EOI) from potential

bidders7. Submission of Statement of Qualifications (SOQs)8. Pre-qualification of firms9. Due diligence by potential buyers

(cont'd…)

Privatisation Process

10. Sharing of Bid Documents / Instructions with pre-qualified bidders

11. Pre-Bid Conference

12. Approval of Valuation (Reference Price) by PC Board & CCOP

13. Bidding process (media invited to observe bidding)

14. Approval of bidding results by PC Board and CCOP

15. Issuance of Letter of Intent to successful bidder

16. Finalization of Sale Agreement between PC and Buyer

17. Handing over of the entity after receipt of full payment7(…cont'd)

Privatisation Process

• Process of check & balance and controls is in place

• Every transaction goes through various forums such as:

Evaluation Committee

Transaction Committee

Board of the Privatisation Commission

Cabinet Committee on Privatisation (CCOP)

• Other forums taken on board at various stages, including submission of documents:

National Accountability Bureau (NAB)

Public Procurement Regulatory Authority (PPRA)

Competition Commission of Pakistan (CCP)

Public Accounts Committee / Standing Committees on Finance, Revenue, Economic Affairs, Statistics & Privatisation of the Senate and National Assembly 8

How Transparency is Ensured

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• Pakistan was one of the first countries in the region to start the privatisation process

• There have been some important privatisation successes in the industrial, telecom and financial sectors, since the start of this process in the early 1990s

• The telecom and banking sectors in particular have become major contributors to the national exchequer

• Between 1991 and 2013, proceeds of Rs. 476 billion (over $9 bn) were raised from 167 privatisation transactions

Pakistan’s Past Experience with Privatisation

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Description Total

Total entities under the CCOP-approved Privatisation Program 69

Total entities approved by CCOP for Early Implementation 39

No. of Transactions already initiated during Present Government 23

No. of Transactions completed so far(UBL, PPL, ABL, HBL, NPCC) 5

Proceeds raised so far during Present Government$1.715 bn

($1.124 bn in FX)

No. of ongoing Transactions (PSM, PIAC, FESCO, IESCO, LESCO, GEPCO, QESCO, PESCO, MEPCO, HESCO, SEPCO, KAPCO, NPGCL, JPCL, LPGCL, CPGCL, SLIC)

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No. of additional Transactions planned to be initiated in CFY(including SME Bank and Mari Petroleum) 10

Privatisation Program Current Snapshot

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1. Faisalabad Electric Supply Company (FESCO)

2. Pakistan International Airlines (PIA)

3. Islamabad Electric Supply Company (IESCO)

4. Lahore Electric Supply Company (LESCO)

5. Pakistan Steel Mills (PSM)

6. Kot Addu Power Company (KAPCO)

7. Northern Power Generation Company (NPGCL)

8. SME Bank

9. State Life Insurance Corporation (SLIC)

10. Mari Petroleum

Transactions To Be Advertised For Investors Within Next 6 Months

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1. Gujranwala Electric Power Company (GEPCO)

2. Quetta Electric Supply Company (QESCO)

3. Peshawar Electric Supply Company (PESCO)

4. Multan Electric Power Company (MEPCO)

5. Hyderabad Electric Supply Company (HESCO)

6. Sukkur Electric Power Company (SEPCO)

7. Jamshoro Power Generation Company (JPCL)

8. Lakhra Power Generation Company (LPGCL)

9. Central Power Generation Company (CPGCL)

Transactions To Be Advertised For Investors In Next Fiscal Year

13(cont'd…)

CCOP Approved Privatisation Program

14(…cont'd…)

CCOP Approved Privatisation Program

15(…cont'd…)

CCOP Approved Privatisation Program

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* Cotton Export Corporation of Pakistan and Rice Export Corporation of Pakistan were part of the CCI-approved list of 69 entities, however, both entities have merged into the Trading Corporation of Pakistan (TCP)

(…cont'd)

CCOP Approved Privatisation Program

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Sr No Transaction Transaction

Completion Date

Revenues raisedFX raised

(USD)PKR USD

equivalent

1. UBL June 2014 Rs. 38.2 bn $388m $315m

2. PPL June 2014 Rs. 15.4 bn $153m -

3. ABL December 2014 Rs. 14.4 bn $144m $20m

4. HBL April 2015 Rs. 102.4 bn $1,005m $764m

5. NPCC August 2015 Rs. 2.5 bn $25m $25m

GRAND TOTAL Rs. 172.9 bn $1.715bn $1.124bn

Transactions Completed So Far

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• PC has received international recognition for privatisation

transactions in the form of the following awards in 2014:

Award of ‘Issuer of the Year’ given to Pakistan by

IFR Asia

UBL transaction received ‘Best Deal Award’ for Pakistan

by The Asset, one of Asia’s most prestigious corporate

ranking journals

International Recognition For Privatisation Transactions

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Thank You