Difficult decision: Govt to divest 7.5% stake in OGDCL

Friday, October 31st, 2014 10:34:05 by



ISLAMABAD: 

Despite a dip in share prices, the government will complete its plan to divest 7.5% stake in the Oil and Gas Development Company Limited (OGDCL) in order to secure the next .1 billion tranche of the International Monetary Fund (IMF) loan, the country’s top privatisation czar said on Thursday.

Talking to reporters at a news conference in Islamabad, Privatisation Commission (PC) Chairman Muhammad Zubair said the next tranche of the .7 billion bailout programme was tied up with the OGDCL transaction.

“Yes, it is a depressing time… it isn’t the right time for a capital market transaction… but the government does not have the option of postponing the deal,” he said when asked about the significant decline in the share values of OGDCL.

The transaction will be carried out at London Stock Exchange and Karachi Stock Exchange (KSE) simultaneously and the book-building process will take place between November 5 and 7. The change in OGDCL’s share value has so far resulted in the anticipated loss of over 0 million or Rs10.3 billion.

Initially, the government was anticipating 5 million to 0 million in receipts by selling 7.5% shares of the company since its shares were being traded for Rs250 at the time, Khurram Schehzad, a member of the PC board, said.

On Thursday, the OGDCL’s shares dipped by 3.88% over previous day’s trading and closed at Rs227.77, according to KSE’s website. On the basis of the current value of the share, the anticipated earnings will be around 0 million. The indications are the government will also offer discount to the investors on the closing share value, which will further reduce its earnings.

“Sometimes one has to make a compromise on price on hope of better returns for the country in long terms,” said Zubair. He said there could be an argument that the transaction might be delayed for a better time but there was no surety that the markets will improve.

Still, he said, there were four working days left before the book building process begins and hoped that the share prices may recover.

On the other hand, he blamed Pakistan Tehreek-e-Insaf’s sit-in and a stay order issued by Peshawar High Court for the ‘loss of precious time’. “The government would have been in a better position if these two things didn’t happen,” the PC chairman said.

The OGDCL transaction has been planned to arrange funds for budget financing besides shoring up foreign currency reserves that are again on the decline. The reserves held by State Bank of Pakistan (SBP) decreased to .568 billion by October 24 – a dip of 9 million in a single week, according to SBP.

The next most important thing will be the floor price of the OGDCL share that will be determined on the eve of November 5 by the board of PC, said Zubair. He said the OGDCL’s share prices went down due to reduction in crude oil prices in the international market.  “The world equity markets are also depressing”, said Zubair.

“For the government, the most important thing at the moment is building foreign exchange reserves”, he added. He said the situation was precarious and urgent.

Zubair said talks for the IMF’s next loan tranche of .1 began in Dubai on Thursday. He told reporters that he would leave today [Friday] to update the IMF about progress on the privatisation programme. He appealed to the political parties and employees of the company to remain calm, as the government was not going to privatise OGDCL.

The company’s first quarter results were also announced on Wednesday, showing the quarterly profits at Rs28.3 billion – a reduction of 16% over previous quarter’s profit. But Mohammad Rafi, the Managing Director of the OGDCL, said that the company’s fundamentals were strong and the reduction in profit was due to increase in exploration activities.

Published in The Express Tribune, October 31st, 2014.



Peshawar News Sources -2

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