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Thursday, October 7, 2010

Sri Lanka to sell down re-taken gas firm to public: Update

Oct 07, 2010 (LBO) - Sri Lanka's government will sell down a 49 percent stake in a liquid petroleum gas distributor after buying out a controlling stake held by Royal Dutch Shell for 63 million US dollars, a government minister said.

Media minister Keheliya Rambukwella said the government is buying back a 51 percent stake of Shell Gas Lanka and also a 100 percent of Shell Terminal Lanka, a storage firm.

The government which previously owned 49 percent of Shell Gas Lanka - left over from a previous privatization exercise - now has 100 percent of both firms, but will sell down its share, the minister said.

"We will have a controlling interest and the private sector participation will also come in," Rambukwella told a news conference.

"The balance 49 percent shares will be (sold to the public). It will be an effective public-private partnership."

State-run National Savings Bank, Bank of Ceylon and Sri Lanka Insurance Corporation will finance the buy back.

The government committee which negotiated with Shell will decide on listing the minority stake on the stock exchange, he said.

But for a firm to be listed it has to make profits.

Shell had had running battles with the state over pricing until the island's Supreme Court ruled that gas should be re-priced bi-monthly on a price formula.

Minister Rambukwella said after the state take-over the government will ensure that gas will be sold at a "reasonable price."

Sri Lanka's state-run Ceylon Petroleum Corporation, Ceylon Electricity Board and even the Indian-owned Lanka Indian Oil Corporation are running losses due to state price controls.

"It is certainly a welcome announcement because it will be a large IPO and can be an ideal conduit for the surplus liquidity in the system," Murtaza Jafferjee head of JB Securities.

"What I would like to find out is whether there is a transparent LPG pricing policy that LIOC faced and that there will be professional.

"Investors pay a premium for quality management."

It was not yet clear whether a technical partner will be brought to manage the firm, though the second gas distributor in the country, Laugfs, has had talks with the government about the possibility of managing the firm.

source - www.lbo.lk