Privatisation Commission (PC) has failed to find suitable Financial Advisers for the proposed transaction of power Distribution Companies (Discos) in one year, well informed sources in PC told Business Recorder.
Sharing the details, sources said after approval of CCoP/ Cabinet for engaging Private Sector in management of Discos, the Expression of Interest (EoI) for hiring of Financial Advisory Consortium (FAC) for the transaction was floated in the national/ international press in September,202l.
In response, only two Consortiums showed their interest but pre-qualification Committee did not find them suitable for the transaction, which is not only multi-dimensional in nature but also requires an excellent undertaking of the dynamics of the power sector.
There are ten Power Distribution Companies (Discos), under the administrative control of Ministry of Energy (Power Division). These Discos are Public Sector Entities (PSEs) as defined under Section 2 (1) (54) of the Companies Act, 2017.
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The Cabinet Committee on Privatisation (CCoP) in its meeting held on January 04, 2021, directed Privatisation Commission (PC) to initiate privatisation/ management contracts relating to Discos in consultation with Power Division for consideration of CCoP.
Power Division indicated following objectives in this regard: (i) reduce ATC losses of each Disco to the level allowed by NEPRA ;( ii) improve quality of services delivery and consumer satisfaction; and (iii) raising monetary proceeds is not a consideration.
A Working Group, consisting of representatives from PC, Power Division, defunct Pepco, CPPA-G and NEPRA was constituted to develop a most optimal and prudent roadmap for the transaction. A team of professionals from across the globe was also engaged with the support of World Bank to facilitate the process.
The Working Group studied various international models, for bringing efficiency and effectiveness in operations of Discos and proposed the Concession Model for eight of the Discos whereas Management Contract Model was proposed for Qesco and Tesco.
The matter was considered in the meeting of PC Board held on March 24, 2021 which recommended the following course of action: (i) Concessions or Management contracts are the most optimal options for the private sector participation in management of Discos; (ii) PC to undertake the hiring of a Financial Advisory Consortium of international repute having pertinent experience of the sector in the technical, financial, legal & regulatory fields on priority basis;(iii) FAC to carry out a quick analysis of each Disco, keeping in view the specific state of affairs, including customer base, revenue stream, technical & operational assets base, financial health, investment requirements, legal & regulatory aspects, etc.; and (iv) on the basis of due diligence review, the FAC shall recommend a specific transaction structure (Concession or Management Contract) for each Disco, separately, along with sequencing of the transaction.
Recommendations of PC Board were approved by the CCoP in its meeting held on May12, 2021 and ratified by the Cabinet on June 08, 2021. Accordingly, Expression of Interest was published in the national and international print media on September 18, 2021 for hiring of Financial Adviser for the transaction.
Upon request received from Interested Parties (IPs), the EoIs were re-advertised twice, and the last date for submission of EoI was extended to November 30, 2021.
In response, only two Consortiums showed their interest. However, the pre-qualification Committee did not find them suitable for the transaction, which is not only multi-dimensional in nature but also requires an excellent understanding of the dynamics of the power sector.
The sources said that the Minister for Privatisation has now desired that the issue may be discussed with the Ministries of Finance, Economic Affairs, Planning & Development and Power Division to explore possibilities of engaging reputed international parties for the transaction by soliciting support from donor agencies/ development partners.