The Ministry of Finance will issue a Letter of Comfort (LoC) to Sui Southern Gas Company Limited (SSGC) to withdraw litigation and stay order against Pakistan Steel Mills (PSM).

SSGC has filed a case against Pakistan Steel Mills over issue of outstanding dues that may hamper government’s plan of transferring assets to new subsidiary company of PSM.

Sources told The Express Tribune that the Cabinet Committee on Privatisation (CCOP) had directed the Finance and Petroleum Divisions to hold meetings with relevant stakeholders for resolution and settlement of SSGC payables.

The cabinet body on privatisation also directed that subject to issuance of Letter of Comfort by the Finance Division, SSGC shall withdraw litigation/stay order against PSMC. It was also directed that the National Bank of Pakistan (NBP) shall issue requisite NOC to facilitate transfer of Core Operating Assets (COA) to Steel Corp (Pvt) Ltd.

The CCOP directed the Ministry of Industries & Production/PSMC to ensure fulfilment of all the corporate actions/regulatory requirements for the approval of Scheme of Arrangement (SOA) for efficient and successful completion of this important transaction.

Revival of PSM

The CCOP directed the Privatization Commission to invite an Expression of Interest (EOI) from interested parties for revival of PSMC, after filing of SOA with the Securities and Exchange Commission of Pakistan (SECP) by PSMC.

The quantum of range of equity stakes of new subsidiary namely Steel Corp (Pvt) Ltd shall be 51-74% for divestment through bidding process.

Total land of 1,229 acres shall be leased by PSMC to the Steel Corp (Pvt) Ltd through the land lease deed on arms-length basis. The draft land lease deed including the commercial terms and conditions shall be made available to the pre-qualified bidders as part of bidding documents for their review and comments.

The land lease deed shall be finalised prior to the bidding process.

The Steel Corp (Pvt) Ltd shall be owned by the government of Pakistan. The paid-up capital of Steel Corp (Pvt) Ltd shall be equal to its net equity as on December 31, 2020. The effective date of filing of SOA with SECP by PSMC shall be January 1, 2021.

The existing utility connections (electricity and gas) and power generation license shall be transferred to Steel Corp unencumbered.

The Petroleum Division/SSGC shall confirm in writing that gas supply to Steel Corp shall be RLNG. PSMC shall install a new dedicated meter of fresh water for Steel Corp.

The use of Jetty (including any expansion/extension thereof) and conveyor belt system (including any expansion / extension thereof) shall be available to Steel Corp on arms-length basis.

The draft jetty-related agreement including the commercial terms and conditions shall be made available to the pre-qualified bidders as part of bidding documents for their review and comments.

The agreement shall be finalised prior to the bidding process between the PSMC and PQA.

The COA approved by the PSMC board of directors in its meeting held on July 13, 2021 shall be transferred to Steel Corp.

However, the industries ministry/PSM shall ensure reconciliation of COA and corresponding Fair Market Valuation (FMV) for transfer of COA to new subsidiary as per audited financial statements of PSMC for the period ending December 31, 2020.

The Privatization Division had briefed the cabinet body on privatisation that pursuant to the decisions of the meetings of the PSMC board/PC Board and the recommendations of the financial adviser, transaction structure details were submitted for consideration of CCOP.

The CCOP observed that the valuation of the PSMC core operating assets conducted by the third-party valuer appointed by PSMC was on the higher side, which may not be attractive for prospect of investors.

Published in The Express Tribune, August 19th, 2021.

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