The Petroleum Division has sought the Securities and Exchange Commission of Pakistan’s (SECP) advice about a foolproof mechanism for the provision of funds by Hubco for the transfer of Eni Pakistan assets to Prime International Oil and Gas Company Limited (PIOGCL).
It came after Hubco submitted an undertaking to the Petroleum Division that lacked the required unconditional financial support to PIOGCL for acquiring the assets of Eni Pakistan.
In a letter sent to the SECP chairman, the Petroleum Division said Eni Pakistan was disposing of its entire share capital to PIOGCL. PIOGCL is a consortium of Hub Power Holding Limited (Hubco) and Eni Employees Buyout Group (EBO Group).
“SECP may also like to advise us as to what could be a foolproof mechanism to make Hubco obligated to provide requisite funding, if required due to any financial inability of EBO Group,” DG petroleum said in the letter.
In order to establish the financial strength of the sponsors of PIOGCL regarding the future operations of petroleum exploration licences and development and production leases, the Petroleum Division had asked Eni Pakistan to provide an undertaking of Hubco, that in case PIOGCL fell short of meeting the financial obligations in respect of running the operations in future, Hubco would provide such financial support.
In response, Hubco stated that they could provide support for PIOGCL including the EBO’s share with regard to the acquisition price, however, it did not provide an undertaking for future operations as, according to the company, giving such an open-ended undertaking was against the Companies Act 2017.
“It is, therefore, requested to clarify whether the Companies Act 2017 restricts companies from providing undertaking to another company regarding financial support for future operations or otherwise,” the Petroleum Division said, adding that the SECP may also like to advise as to what could be a foolproof mechanism.
The transfer of Eni shares to PIOGCL had been delayed due to the questions raised over the financial health of the new entity. The deal between Eni and PIOGCL matured at $16.4 million.
It is essential to determine the actual worth of Eni Pakistan’s assets by a foreign firm as the determination of the actual worth can benefit the national exchequer to the tune of billions of rupees and will also be helpful in maintaining Eni’s oil and gas reserves in a safe manner.
Eni Pakistan entered into a sale-purchase agreement with PIOGCL on March 8, 2021 in respect of the sale of entire share capital.
Published in The Express Tribune, July 6th, 2022.