The government has decided to sell the Precession Engineering Complex (PEC), a business unit of Pakistan International Airlines (PIA), to the Pakistan Air Force (PAF) for Rs2.5 billion in cash. This sale price equals only one-fourth of the Rs10 billion bid earlier received for a 60% stake in PIA.
Details of the Sale
The government has valued PEC at Rs6.5 billion, which includes Rs4 billion in pension-related liabilities for current and retired employees. PAF will pay Rs2.5 billion in cash over five years and will assume Rs4 billion in liabilities, covering pensions and provident funds for 259 retired employees and 251 current employees.
The government separated PEC, a unit specializing in high-precision manufacturing for aerospace and other industries, from PIA as part of the national carrier’s non-core assets. PIA’s holding company now manages these assets along with Rs623 billion in liabilities.
Asset Valuation and Liabilities
By December 2023, PEC’s assets amounted to Rs1.2 billion, while its liabilities totaled Rs2.9 billion, leaving a net negative equity of Rs1.73 billion. Despite this, the government finalized the sale to PAF at Rs6.5 billion based on a discounted cash flow method.
PEC’s assets include:
- Property, plant, and equipment valued at Rs199 million
- Spare parts worth Rs154 million
- Trade receivables totaling Rs742 million
- Cash deposits amounting to Rs93 million
Its liabilities consist of Rs1.1 billion in employee-related obligations and Rs1.8 billion in trade payables.
Ministerial Committee Oversight
Finance Minister Muhammad Aurangzeb led a four-member ministerial committee that approved the sale. The committee also included the ministers for defence, aviation, and privatisation. A sub-committee led by the Additional Secretary of Corporate Finance assessed PEC’s assets and liabilities.
The Pakistan Air Force will create a special purpose vehicle (SPV) to manage the transaction. It will maintain the existing employment contracts for PEC employees, ensuring continuity in pay, allowances, medical benefits, and pension plans.
Failed Privatisation Attempts
Earlier, the government attempted to privatize PIA but failed. Five of the six shortlisted bidders withdrew, while the sole bidder—a real estate developer—offered Rs10 billion, far below the Rs85.03 billion reserve price.
Privatisation Minister Abdul Aleem Khan criticized the failed privatisation attempt, blaming it on a faulty transaction structure and lack of support from the Ministry of Finance. The bidders demanded the government write off Rs45 billion in liabilities, which the finance ministry refused to accept.
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