SOEs involved in Reko Diq project shielded from losses

The state-owned enterprises (SOEs) involved in Reko Diq copper and gold project have been entitled to indemnification in case of losses, administrative and legal matters.

In terms of definitive agreements, the SOEs had not been indemnified by project company Barrick Gold against any legacy liabilities to the extent they were related to a regulatory or administrative authority of the government of Pakistan or the government of Balochistan.

Since the SOEs had no connection with the legacy issues and the exposure would not be indemnified by Barrick, they sought an indemnification agreement with the government of Pakistan.

Consequently, the Petroleum Division asked the government to fully indemnify the SOEs which included Oil and Gas Development Company Limited (OGDCL), Pakistan Petroleum Limited (PPL) and Government Holdings (Private) Limited (GHPL) as well as the SOEs’ special purpose vehicle (SPV) namely Pakistan Minerals (Private) Limited from all losses, liabilities and damages that may be incurred directly or indirectly as a consequence of any charge, claim, proceedings or action against Tethyan Copper Company (TCC)/ Reko Diq Mining Company by any regulatory, administrative, judicial or quasi-judicial authority/ agency in Pakistan in the period prior to the acquisition of interest by the SOEs in Reko Diq Mining Company.

A draft summary, along with proposals, was sent to the Finance Division, State Bank of Pakistan, Securities and Exchange Commission of Pakistan, Ministry of Law, Public Procurement Regulatory Authority, Attorney General of Pakistan, government of Balochistan and SOEs for their views and comments.

The Petroleum Division sought waiver and relaxation from compliance with public sector companies’ rules and exemption from the Public Procurement Regulatory Authority Ordinance 2002 as well as the underlying rules and regulations. It called for issuing directives to the SBP for registering all issued and outstanding shares of the project company “on a repatriable basis”. At present, approximately 150,000 of the 61 million shares are not registered.

According to the Petroleum Division, Pakistan’s foreign exchange regulations should not apply to the Reko Diq Export Processing Zone, if the federal government notifies such a zone under the Export Processing Zones Authority Ordinance 1980.

It said that all foreign currency loans, including the repayment schedules and loan security created in favour of non-residents for financing the revived Reko Diq project, would be registered with the SBP.

The Petroleum Division proposed that the SBP allow the Balochistan government’s SPV to acquire Class-A shares representing 15% of the total issued capital of the project company from Tethyan Copper Company through the payment of $337.5 million together with interest.

The Balochistan government’s share should be arranged by the federal government from the funds deposited in an escrow account, it said. It was requested to allow the SOEs to acquire Class-A shares representing 25% of the issued capital of the project company from Tethyan through the payment of $562.5 million together with interest.

The AGP office, Finance Division and government of Balochistan endorsed the proposal. SECP also did not raise any objection. The cabinet too approved the proposal.

Published in The Express Tribune, December 22^nd, 2022.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.