PAKISTAN: New problems hamper Kot Addu sell-off

15 September 1995

The privatisation of the 1,600-MW Kot Addu thermal power plant, near Multan i n the Punjab, has run into fresh difficulties in spite of an agreement reached between the employees' union and the Privatisation Committee (MEED 1:9:95). The union representing the plant's 800 workers had opposed management control by overseas investors, fearing that jobs would be lost.

The original plan envisaged incorporating the plant and selling a 26 per cent stake to a foreign strategic investor, which would also take over the plant's $756 million debt from the Water & Power Development Authority (WAPDA).

However, no private investors are willing to sign the deal, or even take part in bidding, until experts from the UK and US offices of Stone & Webster Management Consultants have made a full inspection of the plant in order to make a valuation. But, the workers, who have apparently not accepted all the Privatisation Committee's conditions, are denying access to some parts of the plant, preventing such an inspection from taking place.

Besides labour problems there are also environmental obstacles. The most important of these is that the plant's sulphur emissions are four times higher than international standards, and there have been suggestions that the Privatisation Commission should resolve this issue before inviting bids.

On top of this, the World Bank and Germany's Kreditanstalt fuer Wiederaufbau - which together provided over 67 per cent of the loans for the plant - are said to be concerned as they were not consulted about the privatisation scheme.

The companies expected to take part in bidding are British Gas and National Power, both of the UK, the US-led CMS group, and Mission Energy and Southern Electric, both of the US.

However, a Privatisation Commission official said that shortlisting of the bidders is not yet complete. The privatisation process is expected to take three-six months, depending on the resolution of the outstanding problems, the official said.

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