Islamabad December 29 2021: A meeting was held under the joint chairmanship of Federal Minister for Privatisation Mohammed Mian Soomro and Federal Minister for Energy Hammad Azhar to discuss matters related to the transaction of PSM and HEC.
It was briefed that the transaction of Pakistan Steel Mills is at advanced stage along with the status of corporate actions to be completed prior to the revival of PSMC. The major focus was on the availability of utility connections to the newly formed subsidiary of PSMC, its liabilities towards Sui Southern Company and issuance of NOC from Sui Southern Gas Company Limited, which is mandatory for seeking approval for scheme of arrangement (SOA) from SECP.
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This provides an opportunity for Sui Southern Gas Company to recover its defaulted receivables of worth PKR 66 Billion from Pakistan Steel Mills. However, in current scenario of tight fiscal space chances of recovery of these receivables from Government of Pakistan seems difficult.
These defaulted receivable situation of Pakistan Steel Mills Limited (PSML) remained a concern for liquidity position of SSGC. SSGC is vigorously pursuing recovery suit filed against PSML. At the same time, the SSGC Management is in constant liaison with the concerned ministries to expedite the recovery of outstanding dues from PSML.
The claim of the Company including LPD against PSML, as of March 30, 2020 (latest available documents) is PKR 66 billion.
As Pakistan Steel Mills Corporation (Private) Limited (PSML) has been defaulting and not making payment of Late Payment Surcharge (LPS), the Company effective from July 01, 2012 decided to account for LPS from PSML on receipt basis.
In accordance with the revised accounting treatment, the trade debts includes Rs. 24,420 million (June 30, 2019: Rs. 23,661 million) including overdue balance of Rs. 24,333 million (June 30, 2019: Rs. 23,598 million) receivable from PSML. However, the aggregate legal claim of the Company from PSML amounts to Rs. 66,256 million (June 30, 2019: Rs. 61,217 million). This amount has been arrived at as per the practice of the Company to charge LPS to customers who do not make timely payments.
The Company filed a suit in the High Court of Sindh in April 2016, for recovery of its aggregate claim amounting to Rs. 41,354 million along with LPS. On April 6, 2016, the High Court of Sindh passed an order restraining PSML from creating any third party interest in relation to its assets including but not limited to immovable assets owned by it.
PSML has filed its counter claim of Rs. 38,660 million approximately on account of losses due to low gas pressure provided to PSML from March 2015 to December 2016. Legal counsel of the Company is of the view that due to vagaries of litigation nothing could be expressed with any degree of certainty in the contested matters.
Although PSML’s financial position is adverse, and it has no capacity to repay its obligations on its own, management is confident that the entire amount will be ultimately recovered because PSML is a Government owned entity and is continuously being supported by the Government of Pakistan.
Sui Southern was asked to take up the matter in its Board meeting and issue the requisite NOC so that the process of privatisation/revival of PSM could be completed without hindrance in stipulated time. The matter regarding the extension of the validity of type testing licence for HEC by Power Division was also discussed.
The Federal Minister Mohammedmian Soomro said that this extension would incentivize the potential buyer(s) of HEC and also would provide them a ground to start manufacturing the transformers without any break. It was proposed that the subject matter would be taken up with National Transmission & Dispatch Company Limited (NTDC) and after exhausting this option it would be taken to CCoP for clear directions, before the bidding date of HEC. Later on, Federal Minister for Privatisation also chaired a meeting to review the progress in various ongoing transactions.
The Minister was briefed that the bidding of Heavy Electrical Complex is expected in mid-January, 2022. He was also briefed that top international Investors are pre-qualified for Pakistan Steel Mills (PSM) and a report will be formulated for the approval pre-qualification committee and PC Board. Regarding National Power Parks Management Company Limited (NPPMCL) it was briefed that the, debt-refinancing process will be started soon after approval of CCoP. The Federal Minister was also briefed about the updated status of House Building Finance Corporation Limited (HBFCL), First Women Bank Limited (FWBL), Pak re-insurance Limited (PRCL), HEC and DISCOs.
In the meeting, Federal Secretaries of Privatisation, Power Division, Petroleum Division, Industries and the representatives of the Ministry of Industries & Production, Finance, SSGCL, HEC and Financial Advisors were present.
