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The Cabinet Committee on Privatisation (CCOP), which met here today under
the chairmanship of Prime Minister Shaukat Aziz approved the highest bid of
Rs.20. 24 billion received from Kanooz Al-Watan of Saudi Arabia in
consortium with long time German technical operator (Siemens) in Pakistan
for 73 % shares of Karachi Electric Supply Company (KESC).
The Prime Minister noted that KESC had been running into huge losses for about
a decade. As a part of its effort to keep KESC as a going concern and continue
to supply power to its consumers, the GoP injected Rs.108 billion in KESC
during the last three years. All this amount could have been spent on social
sector projects such as education, health and infrastructure, he observed. The
company was causing an annual loss of about Rs.15 billion for the GoP. He
hoped that now consumers of KESC would have the benefit of uninterrupted
supply of electricity of the right voltage as a result of committed
professional management that is certain to be more efficient and
responsive to the consumers demand. The new investor would also inject
additional investment that is required for upgrading the system.
The meeting was informed that NEPRA approves tariff for power sector
entities irrespective of whether these were run by the public or private
sector. The tariff formula for KESC has already been approved by NEPRA for a
period of seven years. The tariff formula also envisages reduction of tariff
if the company starts, and there is every likelihood for that, making profits
beyond a certain level of profit.
The employees of KESC on contract will get an increase of 20 % in their
salaries. It was noted that the company is not over staffed, as such no
employee is likely to be laid off by the new management even after one year.
The employees will get an additional benefit of 10 % shares of KESC and
retrain the workforce. The trade union activities, which had been suspended
since long would be allowed to resume after six months of transfer of
management to the new owner.
As a matter of fact no employees lay off was done in any of the 18 units
privatised during the last three years, the meeting was informed. Dr. Abdul
Hafeez Shaikh Federal Minister for Privatisation & Investment, Mr. Liaquat Ali
Jatoi, Federal Minister for Water & Power, the Governor State Bank of
Pakistan, Chairman Board of Investment and other senior officials of the
ministries concerned attended the meeting.
Kanooz Al-Watan for Project Consortium, Saudi Arabia shall pay Rs.15. 85
billion within one month after the issuance of Letter of Acceptance (LOA),
which is being issued. In addition the new owner will inject Rs.4. 3 billion
in the form of preference shares. It may be pertinent to mention that the
new owner would not be allowed to transfer the ownership / management to any
other entity without prior consent of the GoP and NEPRA. The Government of
Pakistan will retain a minimum 26 % stake in KESC for the time being to
ensure commitment as a measure of comfort to the prospective buyer of the
utility.