Government opens door to sale of up to 100pc stake in FESCO

Investors given until August 7 to show interest; bidders demand stronger NEPRA and clear electricity rules

Islamabad: The government has moved closer to handing over control of Faisalabad Electric Supply Company to a private investor, having already approved the sale of between 51 and 100 per cent of the company’s shares. The move means a private investor could gain full control of FESCO, one of Pakistan’s major electricity distribution companies.

However, the government has not yet decided whether it will sell 51 per cent, 100 per cent or another percentage within that range. The final shareholding percentage will be decided after talks with potential investors.

The details were presented during a meeting of the Senate Standing Committee on Privatization, chaired by Senator Dr Afnan Ullah Khan. The committee was informed that investors have until August 7 to submit Expressions of Interest for FESCO.

An Expression of Interest is a formal document through which a company tells the government that it wants to take part in the privatization process. Only investors who meet the required conditions will move to the next stage.

Qualified bidders will then be allowed to carry out due diligence. During due diligence, investors will examine FESCO’s financial position, assets, debts, operations, workforce and other important records before deciding whether to submit a final bid.

The privatization process for FESCO and other selected electricity distribution companies began in August 2024. Officials said the financial adviser had completed detailed review reports on the companies included in the privatization programme.

The Cabinet Committee on Privatization has approved the sale of between 51 and 100 per cent shares in the selected power companies. To prevent any single business group from gaining excessive control over the electricity market, each investor will be allowed to purchase only one distribution company.

This means that an investor buying FESCO will not be permitted to acquire another selected DISCO under the same privatization programme. Selling a controlling stake could give the new owner major authority over FESCO’s management and business decisions.

However, electricity tariffs and other regulated matters would continue to remain linked with government policy and decisions taken by the National Electric Power Regulatory Authority. The government also presented the FESCO privatization proposal to foreign investors.

Investment roadshows were organised in China, Türkiye and Saudi Arabia to attract companies interested in Pakistan’s electricity sector. Officials told the committee that both local and international investors had shown significant interest.

But potential buyers also raised concerns about Pakistan’s existing electricity rules and regulatory system. Investors demanded that Pakistan bring its power-sector rules closer to international standards.

They also called for a stronger and more independent role for NEPRA. According to the briefing, investors want a regulatory system that is transparent, competitive and predictable.

A predictable system means that electricity rules, business conditions and government policies should not change suddenly after an investor has placed money in the company. Investors also demanded greater competition in the electricity market.

At present, power distribution companies mainly supply electricity within their own areas. The Privatization Commission said it was working with the Power Division and NEPRA on wider reforms to open the electricity supply market to greater competition.

Officials said these reforms would be important for attracting serious investors and making the privatization process successful. The government expects private management to improve efficiency and services in power distribution companies.

However, the possible sale of up to 100 per cent of FESCO also raises important public questions about future control, worker protection, electricity services and accountability. The committee was told that the process would move forward after the August 7 deadline.

Interested investors will first be examined to determine whether they have the financial strength and technical experience needed to manage a major electricity company. Only qualified investors will be given access to FESCO’s detailed records.

The final percentage of shares, transaction terms and successful buyer will be decided during later stages of the privatization process. The Senate committee said privatization decisions must remain transparent and protect the public interest.

It stressed that the process should promote fair competition rather than replacing a government monopoly with a private one. The meeting was attended by Senators Umer Farooq, Khalil Tahir Sandhu and Palwasha Mohammad Zai Khan, along with senior government officials.