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The Cabinet Committee on Privatisation (CCOP) while approving the reference
price had authorized the Privatisation Commission (PC) prior to holding the
bidding for Pakistan Steel Mills Corporation (PSMC), to issue Letter of
Acceptance (LOA) in case the highest bid is above than the reference price
determined by the CCOP. Mr. Awais Ahmed Khan Leghari Federal Minister for
Privatisation & Investment said here today while talking to a group of media
representatives.
He said that all standard procedures were observed before and after the
bidding of PSMC. The privatisation of Pakistan Steel Mills Corporation (PSMC)
was among the most transparent and successful transactions, he maintained.
PC advertised for the appointment of Financial Advisor on April 01, 2005 as a
result of which eighteen (18) Expression of Interest were received while only
nine (9) parties submitted their technical and financial proposals. As a
result of evaluation only six (6) parties were qualified and the highest
ranked party Citigroup Global Markets were appointed Financial Advisor (FA)
for handling PSMC privatisation. Citigroup was associated with Technical
Consultants i.e. Corus Consultants, UK (Corus Consulting had already carried
out detailed technical study of the PSMC, A.F. Ferguson the Financial
Associates and Orr Dignam & Co, the Legal Associates. Citi Group was therefore
equipped with highly professional team to advise PC on this transaction and
any question, as regard to the evaluation of the entity inclusive of land
could have been any body's guess, he said.
The Minister while replying to a question clarified that as far as land
evaluation was concerned it may be kept in mind that the plant has been sold
as a going concern and although the figure of land cannot be worked out
separately for such a big chunk of land of 4,457 acres, yet it works out, to
more specific above the going rate of land being given to National Industrial
Park (NIP) out of the unbundled PSMC land i.e. Rs.3 million per acre for
developed land and Rs. 1.5 million per acre for undeveloped land.
He added that it was also pertinent to mention that out of 4,457 Acres of Land
the Core Steel Plant occupies only 1.034 Acres land. 1,733 Acres of Land was
for Slag dumping, slag Granulation and Skull breaking etc. This land cannot be
used for any other purposes. It as also been ensured through the Share
Purchase Agreement that the Steel making process shall continue and in case of
default the land shall revert to the Province, he said.
The Minister stated that standard methods used for valuation were Discounted
Cash Flow (DCF) Basis, Comparable Companies Analysis and Precedents
Transaction methodology. however, DCF is the most recognized method to value
the concerns on a going basis. The financial Projections were prepared for ten
years basis with sensitivity analysis, he informed. The value of US $ 362
million received from the highest bidder for a 75 % equity stake (or US $ 483
million on 100 % basis) reflected the value of PSMC on a going concern basis,
it took into account its ability to generate cash flows in the future after
taking into account the substantial investments, he further stated.
The Minister further stated that PSMC received the highest offer above than
the approved price, therefore, it could not be termed a sale at a throw away
price. The Privatisation Commission was bound under its rules and regulation,
not to disclose the reference price of any entity at any forum, he replied to
a question.
Mr. Awais Ahmed Khan Leghari further stated all the phases of transaction i.e.
inviting Expression of Interest from all local and international investors
including PSMC EMG, pre-qualification, due diligence by the investors, pre-bid
conference and bidding were widely publicized, which kept all the stakeholders
well informed.
Those who could not deposit the basic processing fee or were not able even to
submit earnest money within the stipulated timeframe to become eligible for
participating in the privatisation process of PSMC have missed the train, the
Minister said.
He expressed his astonishment that now when the process of privatisation of
PSMC has been successfully completed, the individuals with vested interest
were suggesting new and out of process offers, which would never be considered
appropriate, justified and transparent by any economic writer, analyst or
critic.
Our government considered employees of Public Sector entities as the important
and strong stakeholders and we offered Golden Handshake scheme to the
interested workers to ensure that they should not be left high and dry, he
stated.
The Minister informed that as a result of such post privatisation benefits to
the employees so far a huge amount of Rs.6.794 billion has been disbursed as
GHS among 31727 employees of the privatised Units. With this money either they
can establish some new way of earning or spend it till they get any new job.
The buyers of the privatised units were bound to retain these workers for a
period of one year after the privatisation of any entity except in case
of Voluntary Separation Scheme (VSS) and not to expel these employees
immediately even in case of excess work force or inefficiency, he added.
He said that financial impact of GHS/VSS for the employees of PSMC was Rs.15.6
billion, which was unprecedented in the privatisation history of the country.