Government’s plan to split Sui Gas companies into five will most likely not happen until January 2019. The government has issued a deadline of December 2018 for the new gas companies to become operational. However, due to the upcoming general elections, the deadline will most likely be missed.
The gas reforms were given a go-ahead by Prime Minister Abbasi on the recommendation of the World Bank. It now seems that due to elections and other systematic hurdles, the process will not be finished in due time.
Gas Reforms
As per the reforms, Sui gas companies – Sui Northen Gas Pipeline Limited (SNGPL) and Sui Southern Gas Company Limited (SSGCL) – have to be split into following entities;
- Four gas distribution companies.
- One gas transmission company.
The purpose of this split is to bring the private sector into the process. The control of distribution companies will be handed over to provinces while central government will control the transmission company. Oil and Gas Regulatory Authority has told that individual companies’ revenue will bear the cost of this split. World Bank is also assisting the government through these gas reforms.
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Government proposed an Expression of Interest (EOI) document asking the unbundling process of gas companies to be completed within six months. However, bidders say that the deadline won’t be met due to several hurdles along the way.
The government has already approved a transaction adviser that will oversee the whole process.
Reservations
The whole process is not expected to go smoothly as bidders have shown their reservations. One bidder said;
The project completion (New entities to start operations) timeline of December 2018 is very tight in view of the very wide-ranging scope of the assignment and is unlikely to be met keeping in view that it will take at least few months to award the contract to Transaction Advisers(TA) and elections in mid-2018.Therefore the transaction timeline of six months seems unrealistic.
The proposed Transaction Advisors suggested that the deadline needs to be updated as a lot of work needs to be done.
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Sui Gas responded by saying;
We Understand that it is uphill task but the timeline have been given by ministry and we cannot change the timeline and if there were some litigation issue in the due process then it is separate matter and the timeline will be adjusted accordingly but the additional date that need to follow is December 2018.
As per the directions we received from the Ministry of Energy (Petroleum Division) is quite clear and work needs to be completed till 31st December. Whatever the resources are required that needs to be engaged by the bidder and the cost should be included in the bid.
Accounts of both gas companies have been segregated and will be shared with the firm agreeing to meet the deadline, Sui gas company stated. The company further added that legislation will be handled by OGRA and World Bank.
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There were several domestic and international firms who showed interest in becoming transaction advisers for the process. However, most of them had reservations about government’s demand of staying in Pakistan for a longer period of time. Some of the firms that showed their interest include;
- EY Ford Rhodes,
- KPMG Taseer & Hadi,
- Deloitte Yousaf Adil,
- AF Ferguson Co,
- Raiz Ahmed & Co,
- Arif and Associates,
- Bridge Factor Corporate Finance,
- McKinsey & Co and Bridggit Pvt.
