PIA receives single bid of Rs. 10b ($36 million) for privatization
Pakistan’s final bidding process for privatizing Pakistan International
Airlines (PIA) attracted a single offer of 10 billion Pakistani rupees ($36
million) for a 60% stake in the national airline, the Privatization Ministry
announced Thursday. Despite pre-qualifying six groups in June, only Blue World
City, a real estate development firm, submitted a bid, which was below the
government's set minimum of 85 billion rupees.
With its finances strained, Pakistan aimed to sell a 51-100% stake in its
heavily indebted flag carrier (PIAHa.PSX), aiming to raise funds and reform
state-owned enterprises under a $7 billion International Monetary Fund (IMF)
program. The Privatization Commission requested Blue World City to meet the
minimum bid, but the company’s chairman, Saad Nazir, declined, stating,
"We wish the government all the best if they don’t want to accept our
bid."
Nazir later told Reuters that raising the bid didn’t make commercial sense.
"If the cabinet rejects our offer, we’ll launch our own airline," he said,
questioning the 85 billion minimum as unrealistic for an airline with
“significant leakages.”
Read More No
change likely in schedule of PIA sale
Mohammed Sohail, CEO of Topline Securities, remarked that the disparity
between the bid and reference price might prompt the government to either
reconsider the bid or reevaluate their privatization strategy for PIA.
Officials from three other groups who opted out cited concerns about the
government’s reliability in upholding agreements for PIA long-term, with one
executive noting uncertainty over policy continuity if a new government takes
office. Prime Minister Shehbaz Sharif’s administration relies on a coalition of
diverse political parties, making future stability uncertain.
Concerns about policy consistency stemmed from recent government actions,
including the termination of power purchase agreements with private companies
and ongoing renegotiations on sovereign-guaranteed contracts. Economist Sakib
Sherani highlighted that revisions to long-standing power agreements signal a
risk for investors in Pakistan, even with sovereign guarantees.
Read More PIA’s
operational fleet shrinks to 16 aircraft for domestic and international flights
While Pakistan’s power ministry asserted that contract adjustments would be
by "mutual consent," potential PIA investors voiced concerns over
unclear government communication, unattractive terms and taxes on the aviation sector,
and the airline's legacy issues.
($1 = 277.8500 Pakistani rupees)
Source: Reuters