PIA sell-off halts as lone bidder offers paltry Rs10bn for stake
Business
The bid is far below the Privatisation Commission’s expectation of Rs85.03bn
KARACHI (Reuters / Dunya News) - The final bidding process for the privatisation of Pakistan International Airlines (PIA) opened on Thursday, with just one participant for a stake in the national carrier.
Saad Nazir, chairman of real-estate development company Blue World City, confirmed to Reuters that his group placed a bid at a ceremony at a hotel in Islamabad.
The real estate group has placed a bid of Rs10 billion, way below the Privatisation Commission’s expectation of Rs85.03bn. The bid has apparently put the privatisation of the national carrier in jeopardy.
The lone bidder has refused to increase the bid, stating that the government may continue to run the entity on its own if it did not want to sell it.
As per the procession, the Commission would inform the federal cabinet about details of the bidding. If it is rejected, the bidding process will be initiated anew.
Cash-strapped Pakistan is looking to offload a 51-100pc stake in the debt-ridden PIA, opens new tab to raise funds and reform bleeding state-owned enterprises as envisaged under a $7 billion International Monetary Fund programme.
Read also: Bidding date for PIA's sell-off extended to October 31
The government had pre-qualified six groups in June, but only Blue World City met the deadline to submit final documents to participate in the process.
Officials from three groups that chose not to bid told Reuters on condition of anonymity that there were concerns about the government's ability to stand by agreements made for the flag carrier in the long term.
One executive voiced concern about policy continuity once a new government came in. The government of Prime Minister Shehbaz Sharif has relied on a coalition of disparate political parties.
The disposal of PIA is a step former governments have steered away from as it has been highly unpopular given the number of layoffs that would likely result from it.
Read also: Process for PIA privatisation officially begins
Underpinning these concerns over policy continuity and honouring contracts was the government's termination of power purchase contracts with five private companies earlier this month, as well as the process of re-negotiating other sovereign guaranteed pacts.
Changes in Pakistan's decade-old agreements with private IPP projects, largely financed by foreign lenders, to address chronic power shortages, "raises the risk of investing as well as doing business in Pakistan, even in the presence of sovereign contracts as well as guarantees," said Sakib Sherani, an economist who heads private firm Macro Economic Insights.
Other concerns raised by potential bidders included inconsistent government communication, unattractive terms and taxes on the sector, in addition to PIA's legacy issues and reputation.
SHORTLISTING OF COMPANIES
The process of bidding for the privatisation of the Pakistan International Airlines (PIA) began on Thursday.
Reports said one of the six pre-qualified bidders had already submitted the required earnest money to participate in the process.
Earlier, the Privatisation Commission had pre-qualified six bidders - Fly Jinnah, a consortium led by YB Holdings (Pvt) Ltd, Airblue Ltd, a consortium led by Pak Ethanol (Pvt) Ltd, Arif Habib Corporation Ltd, and Blue World City.
The board shortlisted these companies based on technical, financial and documentary requirements, and invited them to proceed.
According to an agreement, the successful bidder will be eligible to acquire 51pc to 100pc of PIA’s share capital, along with management control.
The International Monetary fund had given September deadline to Pakistan to privatise the flag carrier but it failed to do so.
Later, the government promised to complete the process by Oct 31.
