The Privatisation Commission (PC) board on Friday approved the hiring of an Ernst & Young-led consortium for preparing a plan for the privatisation of Pakistan International Airlines (PIA), as the government was scrambling to sell the loss-making entity by the end of February.

The decision to pick the top ranking firm as the financial adviser was made a day after Pakistan told the International Monetary Fund (IMF) that it would complete the transaction at the earliest possible time.

The board’s decision marked the achievement of the first important milestone, although some matters would be decided by a negotiation committee regarding success fee and the commitment to achieving the deadlines. The actual fee will be known after an agreement with the firm.

A meeting of the PC board, held under the chairmanship of Federal Minister for Privatisation Fawad Hasan Fawad, granted approval for the appointment of financial adviser for the divestment of Pakistan International Airlines Corporation Limited (PIACL), according to a statement issued by the privatisation ministry.

It added that on the basis of laid-down criteria, the evaluation committee declared the consortium led by Ernst & Young as the “top-ranked interested party”. The board formed a negotiating committee and asked it to conclude a financial services agreement with the top-ranked bidder.

Read Eight global firms offer services for PIA privatisation

The ministry said that eight interested parties submitted technical and financial proposals for hiring as financial adviser.

Sources said that out of the eight four qualified for the technical round and the Ernst & Young and Haidermota consortium topped the list. The other three firms included Rothschild & Co, Houlihan Lokey and Ceabury Securities.

Haidermota was a partner of Dubai Islamic Bank (DIB) that had done a detailed assessment of PIA a few years ago when the entity was on the active privatisation list. The new financial adviser is required to update the DIB study and make the entity ready for sale in about two months.

The interim government plans to split PIA into two entities and is eager to sell core assets by the end of February – weeks after the end of the caretaker government’s term on February 8. Efforts are underway to prepare the entity for bidding so that when the new government comes to power, it may go ahead with plans to sell a majority stake.

Sources said that there were still some outstanding issues, which the negotiation committee would settle during its engagements with the consortium before the financial advisory services agreement.

A day earlier, the privatisation ministry had assured the IMF that PIA’s privatisation was its top priority and it would try to complete it at the earliest possible time.

“We would try to sell the core PIA by the end of February but without deviating from the legal course,” said the privatisation minister. He added that it may take 20 to 26 weeks to assess the value of all assets of PIA.

PIA incurred losses of Rs86 billion last year and this year’s estimate is a staggering Rs153 billion, making privatisation or grounding the airline a necessity. The government is considering selling at least 51% shares along with management control.

The board also decided to extend the financial advisory contracts of two firms that had earlier been hired for the privatisation of House Building Finance Company (HBFC) and the First Women Bank Limited (FWBL).

Published in The Express Tribune, November 11^th, 2023.

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