PSM’s revival moves to next step with due diligence completion

ISLAMABAD: The financial adviser has completed the due diligence of state-owned Pakistan Steel Mills (PSM) for its revival and its transaction structure would be discussed in a meeting this week, officials said on Tuesday.

The officials told a meeting that transaction structure of PSM is under consideration in the Privatisation Commission and would be discussed in the meeting of transaction committee on Thursday (14 May, 2020).

Minister for Privatisation Mohammedmian Soomro presided over the meeting to review progress on privatisation program with special focus on some of the priority transactions.

The minister said revival of PSM is one of the priorities of the government to minimise losses being borne out of public exchequer.

The meeting was told that financial adviser hired for the purpose completed due diligence of the entity and reports received in this regard are under review by concerned stakeholders.

“Based on due diligence FA (financial adviser) has formulated a draft transaction structure for inviting EOI (expression of interest) from the potential investors,” a statement said. “The draft transaction structure is to be discussed during meeting of the transaction committee during the current week. The structure would be placed for approval from cabinet committee on privatisation.

The government is weighing an option to rejuvenate the PSM under the public-private partnership mode in phases that was estimated to cost around $800 million. The plant would be revived to achieve its built-in capacity in the first phase within one and a half-year, while the production capacity would be jacked up to three million tons in the second phase.

The PSM shut down its furnaces in 2015 and it consumed at least Rs200 billion of state funds on various heads from 2008 when it used to be a profitable organisation. The government has to pump an estimated Rs400 million every year to pay salaries of the PSM’s employees.

Minister directed the officials to expedite the process for early conclusion of the revival plan of PSM.

The meeting was told that the auction of 28 properties owned or controlled by the federal government would be conducted as and when Covid 19 situation gets better.

“Due to outbreak of COVID 19, the timelines had to be rescheduled. A revised schedule has also been shared with PM office,” the statement said.

The minister, in January, unveiled a plan to open auctions of state-owned unproductive properties with an estimated value of around seven billion rupees, in a bid to increase nontax revenue. The bidding process was expected to be completed by the end of this April. This would complement the plan to privatise 33 state-owned enterprises to service debts and fund public welfare projects.

Targets were again set for the FY 2020/21. The meeting was told that substantial progress was made to conclude the transactions, including National Power Parks Management Company Limited (NPPMCL), SME Bank and Jinnah Convention Centre, Services International Hotel.

The meeting was told transactional activities continued through technological means and prequalified bidders for NPPMCL remained engaged and they were provided necessary informations and assistance in completion of buyer side due diligence. However, pandemic situation has changed the overall macroeconomic outlook of the global economies where Pakistan is not an exception and this has affected overall privatisation program.

The due diligence reports of Heavy Electrical Complex’s transaction are being finalised and transaction structure is being developed by a consortium.