Fauji Foundation seeks govt’s nod on MPCL management control

KARACHI: Fauji Foundation, the majority shareholder of Mari Petroleum, sought the petroleum ministry’s assurance that its management rights would not be encroached in case the government divests its shares from the oil and gas exploration company, The News learnt on Monday.    

Fauji Foundation, in a letter to the ministry of petroleum and natural resources, requested the government, “to clarify as to how it intends to ensuring protection and preservation of Fauji Foundation’s rights and interests… in case whole or any part of the GOP (government of Pakistan) shareholding is transferred to the approved third parties.”  Fauji Foundation holds 40 percent shareholdings in Mari Petroleum Company Limited (MPCL), followed by Oil and Gas Development Company Limited (20 percent) and government (18.39 percent). Remaining 21.61 percent shares are owned by public.

On January 27, the cabinet committee on privatisation approved the divestment of government stake in MPCL. Consequently, the government served transfer notices to both OGDCL and Fauji Foundation, seeking their buying intent.  

The government served the notice to Fauji Foundation, pursuant to Article 3 of the participation and shareholders agreement dated June 3, 1985.   The government offered the joint-venture partners Fauji Foundation and OGDC the shares at a 7.5 percent discount to the MPCL’s closing stock price on January 27. The share value stood at Rs1,427/share. The government was expected to generate Rs26.28 billion through the divestment. 

Sources said the share was overpriced and none of the key shareholder is interested to buy the stake at this price. Fauji Foundation’s letter, quoting the shareholders agreement, said no transfer/disposal of shares should be made except to a third party approved by the remaining shareholders.

The agreement further provides that it is a “basic and fundamental condition that the management of the affairs and business of the company shall vest in and be conducted by Fauji Foundation through a managing director exclusively nominated by Foundation from time to time.”

The Fauji Foundation said the company will respond to the transfer notice only after receiving the clarification from government.  MPCL is a country’s leading oil and gas exploration and production company, operating in Mari field located in Ghotki, Sindh. It is a profitable company. 

MPCL’s profit surged 46 percent to Rs2.765 billion for the first quarter ended September 30, 2016 over the same quarter a year earlier.   Currently, the government is focused to privatise or restructure loss-making state-owned entities in order to get rid of the burden on national exchequer and to finance budget deficit from the fund generated from the sell-off. 

The government received more than Rs172 billion as privatisation proceeds from five state-owned enterprises during the past three years.    In the past, the government also decided to sell its minority stakes from profitable state entities to generate money for budget financing. Sale of stakes from Gujranwala power distribution company and residual shares from OGDCL can be cited as two recent examples.