SSGCL: PSM sell-off process hits a snag

Sui Southern Gas Company Limited (SSGCL) has not yet issued requisite No Objection Certificate (NOC) to Pakistan Steel Mills Corporation (PSMC), which is necessary to move forward on privatisation process, despite strong recommendations by Finance Minister Shaukat Tarin, well informed sources told Business Recorder.

On February 16, 2022, Finance Minister, while presiding over a meeting on pending issues had snubbed Managing Director, SSGC for delaying the issue of NOC to be submitted to SECP for approval of Scheme of Arrangement (SoA).

“SSGCL has not issued NOC as of today as the gas utility is demanding ownership of 8000 acres of land of PSM against the NOC, which is not possible,” the sources said, adding SSGCL had been requested to remove claim on 1229 acres of Steel Corp land only and shift the claim to remaining 18000 acres to recover outstanding receivables. SSGCL Board of Directors is headed by former Caretaker Finance Minister Shamshad Akhtar.

On Tuesday, the newly appointed Chairman PC met Shehzad Arbab, SAPM and informed him that PSM transaction cannot move ahead until SSGCL issues NOC on 1229 acres of land of Steel Corp, the new company, which is responsible for privatisation of PSM.

On February 16, 2022, during discussion on a reference moved by Privatisation Commission for resolution of pending issues relating to various transactions, Secretary PC highlighted the issue of receipt of NOC from SSGC in favour of PSMC for the transfer of core operating assets to Steel Corp (Pvt) Ltd, as envisaged in the SoA filed by PSMC with the SECP in August 2021, besides withdrawal of litigation/stay order by SSGC against PSMC, is pending since long.

SoA for PSM privatization: SSGC MD grilled for ‘delaying’ NOC

Secretary PC maintained that the CCoP in its meeting held on August 10, 2021 had directed the Petroleum and Finance Divisions to hold meetings with relevant stakeholders for resolution and settlement of SSGCL payables. It was also directed that subject to issuance of Letter of Comfort (LoC) by Finance Division, SSGC shall withdraw litigation/stay orders against PSMC.

These decisions were ratified by the Federal Cabinet on August 17, 2021. Finance Division had issued LoC in this regard but it was conveyed by Petroleum Division that it is not acceptable to the SSGCL Board and the Board suggested alternate options for consideration.

Subsequently, Finance Division, through a letter of February 3, 2022 addressed to MD SSGC issued revised LoC, stating that “Finance Division is fully cognizant of SSGC receivables against Pakistan Steel Mills and assures to take all necessary steps for early and judicious settlement of liabilities by PSM to SSGC according to the following parameters: (i) PSM to repay principal amount of duly reconciled outstanding amount between PSM and the SSGC in annual installments within a period of 10 years, starting after one year from the date of privatization; and (ii) Late Payment Surcharge (LPS) against the principal amount will be determined in accordance with the opinion of Law Division on the issue solicited by the Petroleum Division and Finance Division which shall extend all necessary support from an agreed settlement plan of the LPS among the PSM and the SSGC.”

However, SSGC, in a letter of February 14, 2022 sent the following response: (i) SSGC will appreciate if Finance Division endorses/assures judicious settlement of SSGC outstanding receivables against PSMC as ‘Guarantor’; (ii) moreover, draft LoC shared by Ministry of Finance, the contingency plan must be included in case of non-payment by PSMC.

MoF may include the option of transfer of PSMC land in favour of SSGC if the agreed payment plan is not rigorously followed by PSMC; and (iii) Comfort Letter must include payment plan of LPS either on the same terms mentioned in the LoC regarding principal payment or the amount of LPS can be adjusted against PSMC land which could be transferred to SSGC without any encumbrances. As per our understanding the ascertainment of LPS amount will however be based upon and subsequent to the opinion of the Law Division regarding applicable rate of LPS.

Secretary PC has proposed that SSGC should consider amending its recovery suit/claim by excluding the charge on the Core Operating Assets i.e., steel plant & machinery and land measuring 1,229 acres envisaged to be transferred to Steel Corp (PVt) Ltd and the remaining land assets of the PSMC will be sufficient to cover the amount claimed by the SSGC.

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