National Refinery is the much sought after state-owned organization by the private investors


May 23 - 29, 2005



Strategic sale of 51 per shares of the National Refinery Limited (NRL) is estimated to bag an attractive price on the back of extra ordinary financial results achieved during first 9 months of the current financial.

Informed sources told PAGE that a hot contest is anticipated amongst 7 short listed contenders at the bidding which is likely to be called on May 31. The government is off-loading 51 percent of stake which comes to around 33,985,788 shares each at a tentative price of Rs370/, however, the actual worth would be known after the event.

Though the National Refinery is the only refining sector owned by the state which is a going concern showing handsome earnings with a bright future outlook, yet its privatization confirms the firm commitment of the present government that doing business was not the job of the government, hence it is adhered to its agenda to shift the responsibility of running state-owned corporation into the private hands whether they are running in losses or making profits.


A breakdown of the financial results during first nine months of the current financial year (July-March 2005) that its financial results portrayed a mammoth 93% growth in earnings to Rs2.24 billion as against Rs1.16 billion during the corresponding period of last year.

This translates Earning Per Share (EPS) at Rs33.56 as compared to Rs17.41 during previous year.

Generally speaking, the sales of different products during the said period were up 49% to Rs43.55 billion with gross margins improved by approximately 3pps. This resulted in the company's nine months gross profits to a quantum jump by over 2 times to Rs4.1 billion.

An impressive growth at 49% in NRL's sales ensued from the dual impact of increased output as well as higher product prices.

According to details, during the said period around 2.10 million tonnes of crude oil was processed which is 6.4% higher on YoY basis.



Production volumes of different grades of lube base oil and asphalt respectively stood at 0.151 million tonnes and 0.179 million tonnes respectively.

Sources at NRL said that international oil market was volatile while prices remained on the higher side during the period. The refining margins were also favorable with significant inventory gains, lower borrowing costs and growing demand for POL products in the country.

Privatization Commission (PC) is likely to conduct bidding for its 51% stake in National Refinery by May 31, 2005 in which seven companies may participate.

In the first phase of the privatization process 11 parties were pre-qualified for NRL to acquire 51% strategic stake against a list of 29 parties which had submitted Expression of Interests (EOIs) for the transaction. The seven serious contenders taking part in NRL's privatization are including Al Ghurair Investments, Attock Oil Group, Fauji Foundation, KPC Holdings, Orient Petroleum Inc Consortium, Pakistan Refinery Limited, GML Capital and Consortium including National Refinery Employees Trust.

Currently, NRL is expanding its lube base oil production base. The objective for expanding its lube base was to enhance capacity by at least 20% at an outlay of approximately Rs one billion.

According to informed sources, agreements have already been executed with Exxon Mobil for the Dill-Chill process license. The refinery has reported progress on the revamp project as satisfactory. The best estimate for completion and commissioning of the additional capacity is likely to be announced right on the occasion of bidding obviously to give a rosy picture of future business of the refinery.

Since the prices of Lube Base Oils (used to produce lubricants by Oil Marketing Companies) are deregulated, the National Refinery being the sole domestic LBO supplier is expected to reap windfall profits.

In view of the growing demand for LBO, the addition into production capacity in technical collaboration with Exxon/Mobil, the refinery is expected to produce 14,800 tonnes per year. The enhanced production capacity will exclusively deal with high viscosity bright stock grade of lube oil.

The successful buyers will enjoy the recently completed captive power plant of the refinery which has a capacity to generate 11 MW of power through its fuel oil and diesel oil based power plants. The newly energized power plant was an added attraction for the intended buyers which obviously ensure running the project without any interruption on account of power breakdowns or fluctuations. Moreover, higher income from lube refinery provides space to the management to make a higher payout as there is no cap on dividend distribution from the profits of this segment while fuel refinery's earnings are subject to a maximum payout limit of 50% of paid up capital.

Of the total shares, five government organizations hold 54.33 percent of shares with the principal shareholders were the PERAC, a state run organization holding over 16 percent shares, National Investment Trust another stake holders enjoy 30.53, State Life Insurance Corporation 6.91 percent, National Bank 1.54 percent and Investment Corporation of Pakistan 0.74 percent. Islamic Development Bank also holds 15 percent of NRL equity.