HEC sale deal cancelled due to buyer’s failure to deposit money

ISLAMABAD: In a major blow to the privatisation programme, the government has scrapped the sale deal of Heavy Electrical Complex (HEC) after failure of Cargill Holdings to deposit the due amount of Rs225 million into the national kitty.
“Yes we have canceled the HEC deal as the buyer remained unable to deposit the due amount within the stipulated timeframe of June 19, 2015,” Minister for Privatization Mohammad Zubair confirmed to The News when contacted to seek his comments on Tuesday.
The Privatization Commission has forfeited Rs25 million earnest money deposited by the Cargill Holdings that had purchased the HEC, added the minister.
He further said that there were allegations leveled against this deal but the government adopted a transparent path and scrapped the deal when the buyer did not deposit the due amount under the law.
“The HEC will be again taken up with the PC in accordance with rules and regulations,” he said and added that the PPRA rules probably barred few months’ limits before moving ahead in case of a scrapped deal.
Meanwhile, a parliamentary panel of Upper House has summoned the Privatization Commission high-ups on Wednesday (today) to ascertain the facts about some transactions undertaken by them during the last couple of years.
“We will ask relevant questions from the PC authorities regarding privatisation of shares of certain state owned entities in order to meet deficit,” the Chairman Senate Standing Committee on Finance Saleem Mandviwalla told The News.
However, on the HEC deal, top official sources said that the buyer of the HEC got an extension up to June 19 for depositing the remaining due amount of Rs225 million into the national exchequer and submitted a cheque which bounced back.
“After the lapse of extended due date, the PC has been left with no other option but to scrap this deal,” said the official.“The PC reserves the right to initiate any legal action against you and M/s Cargill

Holdings Limited...as consequence of the cheque, provided by you for and on behalf of M/s Cargill, not being honored”, wrote the commission to Syed Sabur Rehman, the Advisor of the company, while informing him about cancelling the deal.
But insiders say that the ongoing operation in Sindh led by military has caused panic among the top functionaries so after witnessing severe criticism from the opposition benches of parliament, the relevant authorities decided to back track from any deal which had caused ripples of having any shady transaction.
The Cabinet Committee on Privatisation in its meeting held under chairmanship of Finance Minister Ishaq Dar on March 26, 2015 had approved the strategic sale of 97% shares of HEC to Cargill Holdings Ltd for Rs905 million with cash amount of just Rs250 million.
The opposition parliamentarians, especially Senator Saeed Ghani of PPP, had severely criticised the HEC deal by not incorporating the value of land into this transaction.
Cargill’s offer had also assumed liabilities of Rs435 million, Rs250 million in cash ‘up front’ and, in addition, another Rs30 million to cover employee gratuity and provident fund obligations. Finally, Cargill will forego tax benefits associated with five years of losses amounting to Rs190 million.
Several efforts were made in the past since 1990s to privatise HEC that could not succeed. Again this time the government failed to deliver on this front.In recent years, in 2006-07, four investors initially expressed interest, two interested parties pre-qualified, but neither put up ‘earnest money.’ In 2011-12, four parties expressed interest, however, none met pre-qualification criteria apart from one which failed to deposit the earnest money after conducting due diligence.
Again, in 2013 three parties pre-qualified, only two conducted due diligence, but neither deposited the earnest money required after conducting the due diligence due to the weak condition of the company.