ISLAMABAD: The Competition Commission of Pakistan (CCP) has approved the acquisition of 11.9% of the paid-up ordinary share capital of Sindh Engro Coal Mining Company (SECMC) by International Electric Power (Private) Limited under a Share Purchase Agreement (SPA).
As per details International Electric Power (Private) Limited, established in March 2024 specifically for this transaction, is jointly owned by Liberty Power Holding, Soorty Enterprises, and Procon Engineering. SECMC is a major player in coal mining and supply, while the seller, Engro Energy Limited, a subsidiary of Engro Corporation, is a significant investor in Pakistan’s energy sector.
In April 2024, Engro Energy Limited signed an SPA with the Liberty Power led consortium. The deal included the sale of Engro’s 68.9% shareholding in Engro Powergen Qadirpur Limited (EPQL), 50.1% shareholding in Engro Powergen Thar (Private) Limited (EPTL), and 11.9% shareholding in Sindh Engro Coal Mining Company Limited (SECMC).
The CCP is yet to approve the first two sales of Engro. The sale of its share in SECMC alone was valued at Rs 6.21 billion (620 crores). On its divestment from major thermal energy assets in Pakistan at a financially crucial point for the country, the CEO and Chairman Ghias Khan stated that “It is important that we constantly reevaluate our business portfolio and optimise it to ensure that we remain focused on helping solve the most pressing issues of our time.”
It is important to note that SECMC, while it does have the name of the Engro group associated with it, is currently a joint venture between the Government of Sindh, Engro Energy, Hub Power Company, Habib Bank and Thal Limited, and China’s CMEC.
Over the last 10 years, Engro Powergen (now Engro Energy) has strategically exited the JV by selling off its shares. When started, SECMC was a venture owned more than 26% by Engro Powergen, making it the only company to have a stake in the JV along with the Sindh government at the onset. The approval of the current sale hence marks a complete exit of Engro from the Sindh Engro Coal Mining Company.
SECMC
The JV itself presents the picture of a stable and growing mining company over the last year. As of the company’s last financial statements, not only is it profitable but also grew significantly in CY23. The net profit margin during this year for the company was almost 27%, a stark 11% nominal increase from the CY22. Similarly, the gross profit grew by more than 5%. The net profit was recorded at Rs 29.16 billion. Engro’s share of the profits amounts to almost Rs 2.5 billion, a whopping 40% of the amount that Engro sold its entire share for.
The company’s asset turnover was calculated at around 0.46 during this period. A ratio quite healthy for a capital intensive business such as mining. The share of debt and equity driving the aggressive growth of the company was almost half and half, all while maintaining stable liquidity ratios. According to the company’s director’s reports from 2022, the earning per share of the company was Rs 4.47.
At the current share price of Rs 46.9, Engro sold its shares for almost 2.7 billion less than its paper value. However, SECMC is not publicly listed hence cannot be gauged on the same metrics. The company’s official stance is that the restructuring of thermal assets is part of Engro’s ongoing efforts to streamline and optimise capital and resource allocation.
One thing becomes certain with this trade, Engro wants to get rid of its thermal assets. Does it no longer believe in the potential of non-renewables? Is one of the biggest players in the thermal energy market going green? Or is the uncertainty getting to Engro as well?
CCP’s Remarks
The transaction progressed smoothly. In its competition assessment, the CCP identified the relevant market as the ‘coal mining’ sector within Pakistan. SECMC operates under the regulatory oversight of the Thar Coal Energy Board and the Government of Sindh, which regulate coal pricing for Thar-based power plants. This acquisition strengthens International Electric Power’s position in the coal mining industry, while SECMC’s market share is expected to remain stable post-transaction.
The coal mining industry in Pakistan, especially in the Thar region, plays a pivotal role in the nation’s energy security and economic development. As International Electric Power enters this sector, the acquisition is set to bolster the energy infrastructure with new innovation, enhancing domestic coal production and reducing reliance on imported fuels.
