Pak-Saudi
Fertilizer bidding date in 2 weeks
LAHORE Following much-awaited fertilizer policy, bidding date
for the privatisation of Pak-Saudi Fertilizer will be made
public within two weeks.
According to the industry experts, the policy is not far away
from what they had expected. The government has smartly tried
to balance the pressure from the international financial
institutions, phasing out the subsidies, while attracting new
investments within the sector.
According to Sarwat Fatima, an economist "the main concern in
the policy was about the gas prices, which has now been solved
by linking it to the Middle East parity in US dollar terms".
According to the policy, Sarwat Fatima said, the subsidy would
be phased out gradually in five years after which the price
would be around $1.l0 / MMBTU against the current price of 83
cents / MMBTU (at the inter-bank exchange rate of $l against
Rs 64).
She said the prices would be calculated in Pak rupee at the
average inter-bank rate, which would be fixed twice a year.
The feedstock gas to the new plants will be available at 10
per cent discount to the Middle East parity, which at current
prices, come to around 70 cents / MMBTU. The prices are going
to remain fixed for the period of 10 years from the date of
commissioning.
" The policy is not a surprise to any one in the industry as
the government has been releasing policy drafts for quite a
long time now. The overall policy is likely to bring neutral
affect on the sector", Sarwat Fatima said.
The government is expecting to attract $1 .2 billion
investment in shape of three new plants. However, the golden
era of high profitability has surely ended, in our opinion,
the Return on Equity (RoE) should be normalised at 17-18 per
cent from a high of 40 per cent. This policy is a relief in a
sense that now the companies will be able to take decisions
for BMR, new expansions and about acquiring existing plants
available for privatisation.
September 5
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