PR No.85 Islamabad High Court Vindicates PC In HEC Transaction Islamabad: March 10, 2016

The Islamabad High Court (IHC) on Wednesday, March 09, 2016, has dismissed the application of M/s Cargill Holding limited (CHL) and has vindicated Privatisation Commission’s decisions in the HEC transaction.

The Privatisation Commission (PC) has always reiterated its commitment to ensure the highest standards of integrity and transparency in conducting all its transactions. Recently, there has been a lot of factually incorrect dissemination of facts on the transaction process of Heavy Electrical Complex (HEC) run by PC. This criticism is unjustified, and needs to be clarified. Brief facts have been detailed below:

a. The challenge to sell HEC has mainly been due to the consistently dropping sales, i.e. from Rs 900 million in 2010 to Rs 40 million in 2014. Furthermore, HEC had also run out of cash to pay off salaries by January 2014, and required an instant cash injection of Rs 350 million for vital capital expenditure to run the factory, besides requiring working capital. In addition, this was the 4th attempt to sell HEC since 2006, as in all previous attempts not once did any bidder turn up and deposit Earnest Money, as was done this time by M/s CHL. Keeping in view HEC’s weak financial circumstances, PC along with the Finance Division and the Ministry of Industries & Production, pre-qualified all three interested parties and permitted them to be a part of the bidding to enhance competition and get the best possible value for the entity at the time of bidding. This recommendation of the Transaction Committee was approved by the PC Board in its meeting held on February 04, 2015.

b. However, two out of the three interested parties backed out from this transaction after conducting their own due diligence, leaving only M/s CHL as the sole bidder, who deposited the Earnest Money of Rs 25 million. The buyer subsequently failed to comply with the conditions stipulated in the Letter of Acceptance (“LOA”) and also deposited a cheque for the balance payment, which was not honoured. Under these circumstances, PC revoked the LOA on June 22, 2015 and the Earnest Money amounting to Rs 25 million was for feited by PC.

c. PC also got registered a FIR against the representative of M/s CHL on November 27, 2015, after the IHC vacated the Stay Order granted w.e.f June 30, 2015. However, M/s CHL again instituted a contempt petition before the IHC regarding violation of IHC orders and registration of FIR in December, 2015. After hectic follow-ups by PC, the IHC has on March 09, 2016, dismissed the applications of M/s CHL and has vindicated PC’s decisions in the HEC transaction. It must be noted that as far as PC is concerned, the privatisation of HEC stands terminated since the revocation of the LOA, i.e. June, 2015. The transaction went through all legal due processes. Furthermore, no loss to the GoP has been caused, instead the GoP has retained earnest money of Rs 25 million and also the entity. Had PC any mala-fide intentions to give

any benefit whatsoever to M/s CHL during the entire process, PC would have facilitated the buyer to take over HEC on their own given conditions, rather than revoking the LoA, forfeiting the Rs. 25 million Earnest Money, and getting criminal case registered against M/s CHL. PC strongly believes that the people of Pakistan deserve to be presented only with factually correct and unbiased information.