LAHORE – Fed up with constant suspension of gas supply to fertilizer units, Dawood Hercules Corp. (DAWH) has announced to enter into a Memorandum of Understanding (MoU) with Pakarab Fertilizers (PFL), which is managing to get gas supply due to political influence, to sell its 100 per cent stake in DH Fertilizers (DHFL) to Pak Arab, a notification sent to the KSE.

The acquisition of DHFL will add 445.5k tons of urea capacity, leading to a total urea capacity of 537.9k tons and total fertilizer capacity of 1,292.4k tons. This will make PFL the 4th largest urea producer in the country.

Experts said that DHFL bought 102.26 million shares in Hub Power Company (HUBC) in a recent transaction and it is believed these shares would not be a part of sale of DHFL to PFL, and would be retained by DAWH. DAWH carries DHFL on their books at the cost of Rs1.6 billion. It is premature to comment on the price of this transaction, however, the sale may lead to a hefty one time gain for DAWH. PFL has combined fertilizer capacity, including urea, CAN and NP of 846.9k tons.

It is pertinent to note that fertilizer companies like Agritech, Engro, Dawood Hercules and others, which are getting natural gas from SNGPL network, have continuously been warning government that a huge urea shortage will happen in future if government fails to provide gas to their fertilizer plants. They also blamed that some specific fertilizer companies are receiving uninterruptible gas supply.

The spokesman of urea industry was of the view that fertilizer industry is well aware of gas crisis in the country but policy makers should give first priority to fertilizer plants rather than CNG stations as vehicles could be run by alternative fuels whereas natural gas is the basic raw material for fertilizer plants and they cannot be run by any other alternative. He further said that so far three fertilizer plants had been closed and if the situation remained the same, farmers would not be able to get urea proper for their next crops and government has to import urea from other countries by spending hefty amount and by giving colossal amount in the shape of subsidies, he said adding that process of importing urea usually takes three to four months.

He warned that if government does not change its current policy of gas curtailment to fertilizer plants not only Dawood Hercules plant would be sold out but with this local and global investors’ confidence would be shattered and new investment in this sector would be impossible.

He said as management of Dawood Hercules is gravely disappointed with the government’s gas curtailment decision, now they have no option but to sell their fertilizer stakes to other entity which would certainly create uncertainty among investors and workers, he added.