Commercial loans to replace government equity in NPPMCL
ISLAMABAD: The Privatization Commission Council on Wednesday approved commercial loans from local banks to replace excess government equity and loans from the National Power Parks Management Company Limited (NPPMCL).
The PC board which met with Federal Minister of Privatization Muhammadmian Soomro under the presidency discussed various issues relating to the NPPMCL, the Jinnah Convention Center (JCC) and the corporatization of the State Life Insurance Corporation (SLIC) .
He was informed that the privatization of two power plants (Haveli Bahadur Shah and Balloki) of NPPMCL is at an advanced stage, but in order to align the capital structure with the tariff, 70 percent of the cost of the project would be based on financing . In accordance with the authorized benchmark, the long-term financing requirements, including the repayment / adjustment of the loan guaranteed by the federal government, currently amount to 103.765 billion rupees.
The question of long-term financing arrangements and its capital structure with the determined tariff of NEPRA and repayment of government loans, State Bank of Pakistan and local banks have been contacted for commercial loans.
A committee for this purpose has also been formed by the Pakistan Competition Commission (CCoP) to resolve the issue, according to a statement issued by the privatization commission.
The recapitalization of the debt and the refinancing of NPPMCL with local banks, formal approval would now be requested from the CCoP. Board terms would be followed, including Expressions of Interest (EoIs) to invite banks and DFIs programmed in the amount of Rs 103.765 billion for a period of up to 7 years (aligned with the NEPRA debt schedule) in accordance with the tariff determined by the regulator. maximum of KIBOR + 1.8 percent.
The standard security package including the charge on NPPMCL’s assets and cash flow would be without any recourse to the government of Pakistan. Banks and scheduled DFIs, which submit EoIs, will receive a request for proposal. At its recent meeting, NPPMCL’s transaction committee approved the local financing scheme prior to the transaction’s equity-accounting process.
The PC Board recommended NPPMCL’s debt recapitalization and refinancing plan in accordance with the recommendations of the transaction committee.
The PC Board approved the list of 12 potential bidders / investors who have expressed interest in the JCC transaction. Prequalified parties would be allowed to exercise due diligence of the JCC property to later participate in the tendering process.
The issue of the corporatization of SLIC was also discussed. The CCoP and the Federal Cabinet have approved the divestment of up to 20% of the government shares in the company.
In order to go further in the divestment of 20 percent of the shares of SLIC as part of the proposed privatization, the corporatization of SLIC is a prerequisite. The Ministry of Commerce would proceed with corporatization and related legislation.
The PC Board decided to take up the issue with the CCoP as the competent forum.