PSM revival for three Chinese firms: Pakistan

China's President Xi Jinping shakes hands with Pakistan's Prime Minister Imran Khan before a meeting at the Great Hall of the People in Beijing, China April 28, 2019. Madoka Ikegami/Pool via REUTERS - RC1F88614D00

ISLAMABAD: Federal Minister for Privatisation Mir Abid Hussain Bhayo held meetings with pre-qualified bidders here while Chairman Privatisation Saleem Ahmad, federal secretary, senior officials and financial advisors were present. These three Chinese pre-qualified bidders are Bao Steel Group Xinjiang Bayi Iron & Steel Co. Ltd, (China), Tangshan Donghua Iron and Steel Enterprise Group Co. Ltd (China), and Maanshan Iron and Steel Co. Ltd.

Earlier, six companies from Russia and China had submitted their documents to get the contract for the revival of the steel entity, but all the Chinese companies were shortlisted. When ‘The News’ asked a senior official of the Privatisation Commission whether the Russian companies were not shortlisted due to any international political pressure, the official did not say anything about it. However, he said that as the Russian companies had formed a consortium with the state-run Pakistan State Oil (PSO), due to this reason they were not qualified.

It may be noted that the Soviet Union (now Russia) in the 1970s had built this facility, which has not produced steel at its 19,000-acre facility since June 2015. It also owns 1,229 acres of land. The government is offering at least 51 percent or up to 74 percent shares capital of Steel Corporation together with management control through a bidding process.

The government has already appointed two firms, including Pak-China Investment Company and Bank of China International Co. Ltd, as joint advisers for the transaction. The minister said that that the government of Pakistan is keen to share with our time-tested Chinese friends the advantages accruing from the strategic position of Pakistan. The pre-qualified parties are among the leading global manufacturers and Pakistan is offering these pre-qualified bidders access to a huge market of steel with potential for exports across the globe. The federal minister further added, “The biggest advantage for the potential bidder would be the encumbrances-free entity as the company (Steel Corp) has been insulated from all legacy issues, including financial and HR liabilities.”

In the meeting, the federal minister, chairman, secretary and FAs responded to the queries/enquiries from the pre-qualified bidders. The pre-qualified bidders inquired about the potential timeline for the approval of the Scheme of Arrangement (SOA) (that is included in the transaction structure of PSMC), valuation procedure, and likely dilution of the government of Pakistan shares, utility connections, and use of jetty and land lease agreements.

After the pre-qualification of bidders, the buyer side due diligence was initiated by granting access to Virtual Data Room (VDR) in March 2022. A request was also made for the technical professionals of each Pre-Qualified Bidder to visit PSMC for inspection/assessment of the steel plant, jetty, etc. Presently, buy-side due diligence is ongoing, however, confirmation of the site visit is still awaited.

Abid Hussain Bhayo further said that the government’s investment policy provides both domestic and foreign investors the same incentives, concessions, and facilities for industrial development. Pakistan is an ideal place for foreign investment and we are much keen to provide an investor-friendly regime as we believe in ease of doing business. He added that we shall facilitate the investors up to the maximum and will welcome the site visit of PSM by the pre-qualified bidders.

Chairman Privatisation Saleem Ahmed commented that the revitalisation of Pakistan Steel Mills is vital for Pakistan’s economic growth. Our proposed plan will not only envisage foreign direct investment and employment generation but also the creation of productive capacity necessary to sustain domestic infrastructure development with access to steel slated for export from Pakistan’s strategic geo-location.

Later, Abid Hussain Bhayo and Minister for Industries & Production Syed Murtaza Mahmud jointly chaired another meeting on reviewing the progress of the revival of Pakistan Steel Mills. The meeting was held to discuss corporate matters which are to be resolved in collaboration with the Ministry of Industries, Ministry of Maritime Affairs and Pakistan Steel Mills Corporation. Federal Minister for Industries & Production said that the corporate matter for the completion of the transaction would be resolved on a priority basis with the active engagement of all stakeholders. It may be noted that Steel Mills had booked accumulated losses of over Rs45 billion and Rs96 billion in liabilities from July 2018 to December 2020.

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