ISLAMABAD   -  The PTI government on Monday sold all its 96.6 per cent shares in Heavy Electrical Complex (HEC) at Rs1.900 billion.

With the highest bid price of Rs. 99.999 per share from IMS Engineering, HEC’s enterprise value is estimated to be around Rs 1.900 billion. Valued as a going concern, reserve price was based on extensive diligence and financial modeling that incorporated demand outlook and supply constraints, and was approved by CCOP earlier in the day.

Privatisation Commission (PC) successfully conducted the bidding for privatisation of Heavy Electrical Complex (HEC), the first entity-level strategic transaction since 2015. As per the transaction structure approved by Federal Cabinet in December 2020, all 96.6% government shares in HEC were offered for sale. This was the fifth attempt at privatising HEC with prior unsuccessful efforts in 2006, 2011, 2013 and 2015.

Chairing the bidding ceremony, Federal Minister for Privatisation Mohammedmian Soomro said that all privatisation transactions are carried out strictly as per PC Ordinance, 2000 and applicable rules. All processes are kept transparent and extensive deliberations are undertaken at each phase. He also highlighted that HEC once operative will enhance the competition among the transformer manufacturers which will reduce the capex cost for the DISCOs besides saving the valuable foreign exchange which is presently being spent on import of transformers. He also expressed that successful bidding of HEC reflects the positive investor sentiment and confidence in the economic and sectoral outlook. The minister expressed that this momentum will be sustained for the other transactions including HBFCL, Pak Re-insurance, NPPMCL and the revival of Pakistan Steel Mills.

In his closing remarks, Saleem Ahmad, Chairman, Privatisation Commission, congratulated the IMS team on their successful bid: “I wish IMS great success in effectuating their growth strategy which will yield attractive investment returns, insha’Allah, and generate gains in productivity, employment and wages.” Speaking about the future pipeline, he said, “Accelerating the execution of privatisation programme is a key strategic priority of the present government. Our upcoming pipeline is not only attractive for the right investors but is also aimed at stemming the losses to the exchequer, creating jobs, increasing wages and enhancing economic activity that supports Pakistan’s long-term economic development.”

Valued as a going concern, reserve price was based on extensive diligence and financial modeling that incorporated demand outlook and supply constraints, and was approved by CCOP earlier in the day. PC Board will now meet today (Tuesday) to discuss the outcome and recommend the transaction to CCOP for its approval before it is presented for Federal Cabinet’s consideration. PEL and Waves-Singer were unsuccessful bidders.

HEC is the second public sector entity of which privatization has completed in so far tenure of the incumbent government. Earlier, the government had privatized only entity Services International Hotel besides selling few government owned properties in last three years. Services International Hotel, Lahore transaction was also successfully completed and sold it M/s. Faisal Town Pvt. Ltd at Rs1.951 billion after open bidding.

In January 2020, Financial Advisory Services Agreement (FASA) was signed and consequently started the due diligence of the entity. On 16 November 2020, the CCoP approved the transaction structure for the divestment of all government shares (96.6 percent shares) in HEC. In December 2020, the Expression of Interest (EOIs) from investors was sought. As many as 14 parties submitted their EOIs, and a dozen of them were pre-qualified and later asked to provide relevant documentation and corporate approvals for the process (Statements of Qualifications or SOQs). Subsequently, seven investors submitted their SOQs in March 2021, and among them, the required documents from six parties were found complete for confirming their eligibility for bidding. It bears mentioning that during the process, M/s El-Sewedy and M/s Associated Technologies Pvt. Ltd. withdrew their EOI for bidding during May-August 2021.