The government on Monday shelved a plan to sell two LNG-fired power plants to Qatar and instead decided to offer 51% stakes in the Roosevelt Hotel, New York, and the Pakistan International Airlines (PIA).
Prime Minister Shehbaz Sharif took these decisions during a meeting convened to make preparations for his visit next week to Qatar, which is tentatively planned for August 22 to 23, highly placed sources told The Express Tribune.
Finance Minister Miftah Ismail and former prime minister Shahid Khaqan Abbasi also attended the meeting.
The premier has also constituted a committee to finalise these proposals by end of this week and complete all the paperwork before his departure next week, they added.
The sources said that the meeting discussed the possibility of selling the two LNG power plants to Qatar. But some of the participants were of the view that the country may not fetch the best price net of the Rs104 billion debt that these power plants owe and needed to be retired or converted into long-term financing.
After excluding the liabilities, the government might get $500 million to $600 million at best, which was politically difficult to sell to the people as the best price, they added.
The National Power Parks Management Company Limited (NPPMCL) owns 1,230 megawatts (MW) Haveli Bahadur Shah and 1,223MW Balloki power plants. These power plants were set up with government funding instead of the 70:30 debt-to-equity ratio. The Ministry of Finance had bought the equity of these power plants a few years ago through the Pakistan Development Fund proceeds.
The government’s debt of Rs103.7 billion has to be replaced through bank borrowings, which will substantially reduce the final price, according to the sources. The 70% cost of the projects need to be converted into long-term financing for the privatisation of the power plants in line with the tariff-based capital structure.
A senior government official said that the LNG plants’ price discovery was not immediately possible; therefore, these plants might not be offered to the Qatari government for investment purposes.
Finance Minister Ismail had accounted for the sale proceeds of the LNG power plants in his $8.5 billion foreign inflow estimates, which he wanted to raise in this fiscal year to meet the $35 billion gross external financing requirements.
The sources said that it was decided that Pakistan should offer 10% stakes to Qatar in the government-owned listed companies, in line with the similar offer that it has made to the United Arab Emirates.
The UAE is keen to get up to 20% stakes in the Pakistani oil and gas exploration companies and has already handed over a list. Last week, the UAE government showed its intention to invest $1 billion in these companies. The UAE had in May refused to give cash deposits due to Islamabad’s inability to return previous loans and instead asked to open its companies for investment.
It was also decided on Monday that Pakistan should offer 51% stakes in The Roosevelt Hotel, New York, and the PIA along with the management control to Qatar. But the PIA law bars selling more than 49% stakes and giving management control to any other party.
It was decided that the legal process to amend the PIA law should immediately be initiated to do away with the restricting clause.
The Roosevelt Hotel is owned by the PIA through a PIA-Investment Limited. The PIA-IL holds its stakes through a subsidiary which is registered in the British Virgin Islands. The hotel, located at a highly priced location, was closed in December 2020.
The sources said that it was also decided that the management of the Islamabad International Airport should also be offered to Qatar along with handling of air and cargo business. A meeting participant suggested that Pakistan should also offer more flights to Qatar under open skies policy to make the bid attractive, according to the sources.
In order to fast track the sale of these assets, the federal cabinet has already approved a bill –the Inter-Governmental Commercial Transactions Bill 2022 – to bypass all the procedures for the process and also abolished regulatory checks including the applicability of six relevant laws.
Through the proposed piece of legislation, the Centre also wants to empower itself to issue binding instructions to the provincial governments for land acquisition. The government has also proposed to bar the courts of the country not to entertain any petition against the sale of assets and shares of government companies to foreign countries.
The sources said that the government also discussed the proposal to request the Qatari government to set up a $1 billion food and livestock security fund for investment in Pakistan aimed at producing goods here and then export them to Qatar. Qatar was keen to buy land in Pakistan for agriculture purposes but the provincial laws are a hurdle in having direct ownership.
Some of the potential areas for investment are production of vegetables, fruits and setting up meat processing plants, they added.