PAF to buy PIA’s Precision Engineering Complex for rs6.5 billion
The government has finalized plans
to sell the Precision Engineering Complex (PEC), a subsidiary of Pakistan
International Airlines (PIA), to the Pakistan Air Force (PAF) for Rs6.5
billion. The transaction includes a Rs2.5 billion cash payment, alongside the
assumption of employee-related liabilities and pensions.
A ministerial committee has approved
the sale, with a summary being prepared for federal cabinet approval. The
committee, chaired by Finance Minister Muhammad Aurangzeb, included defense,
aviation, and privatization ministers. A sub-committee assessed PEC's assets
and liabilities to finalize the terms.
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PAF will set up a special-purpose
vehicle to manage PEC operations and ensure financial stability. PEC, known for
producing high-precision parts for aerospace and other industries, was
previously separated from PIA's core business and transferred to a holding
company managing PIA's non-core assets, which include liabilities of Rs623
billion.
As of December last year, PEC's
assets totaled Rs1.2 billion, while its liabilities reached Rs2.9 billion,
resulting in a net negative equity of Rs1.73 billion. The sale price was
calculated using the discounted cash flow method and includes PEC’s land,
infrastructure, machinery, equipment, and workforce.
Under the agreement, PAF will pay
Rs2.5 billion in cash over five years while assuming Rs3 billion in pension and
provident fund liabilities for 259 retired employees over the next decade.
Additionally, Rs1.1 billion in obligations for 251 current employees will also
transfer to PAF, with employee contracts and benefits remaining unchanged.
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Earlier attempts to privatize PIA
failed when five of six shortlisted bidders withdrew, and the sole remaining
bidder offered Rs10 billion for a 60% stake—far below the Rs85.03 billion
reserve price.
This transaction is part of the
government’s broader plan to restructure PIA by divesting non-core assets and
addressing its financial woes. The PEC sale includes assets worth Rs199 million
in property and equipment, Rs742 million in trade receivables, and Rs93 million
in cash deposits, along with Rs1.1 billion in employee obligations and Rs1.8
billion in trade payables.
Source: Profit Pakistan