Gov’t Will Sell Stakes in Oil Firms to Settle Debts

EghtesadOnline: The government is planning to repay its debts to private companies by selling its stakes in state-controlled petrochemical and refinery companies, according to a member of Tehran Chamber of Commerce, Industries, Mines and Agriculture.

News ID: ۷۸۴۹۷۹

28 October 2019

Reza Padidar, head of TCCIM’s Energy Commission, pointed to the Oil Ministry’s initial agreement to a proposal by the commission based on which the government sells its shares in refineries and petrochemical companies to settle its mountain of debts.

“The plan is being reviewed by the Plan and Budget Organization and the Ministry of Economy,” IRNA quoted him as saying.

Padidar noted that the Oil Ministry is positive about the new approach, according to Financial Tribune.

Many private businesses and contractors in the energy sector are struggling to get paid following economic problems sparked largely by the new US sanctions.

According to Padidar, some of the companies are operating at a quarter of their normal capacity and are on the brink of pulling down their shutters.

In the past, the government made several attempts to sell its shares in several specified companies, including six refineries. However, as expected there were no buyers apparently due to snags in the divestiture systems.

Earlier in the month, the Economy Minister Farhad Dejpasand spoke of plans to offer the remaining government shares in state-owned companies after tweaking rules governing divestiture rules and procedures.

Dejpasand said the plan to offer the government’s residue stake in six refineries would start soon based on the “adjusted framework”.  It was not clear what this framework would be.

Jafar Rabiei, CEO of Persian Gulf Petrochemical Industries Company said Monday that two more petrochemical companies, associated with a petrochemical holding company, will be listed on the stock market before the current fiscal year is out  in March 2020.

Previously the government had offered shares in blocks of millions of dollars each and required investors to buy the blocks. That simply flopped because buyers couldn’t afford it.

Affordable Blocks

In the new mechanism shares of six refineries will be offered in smaller and affordable bocks to also allow people with small savings to come forward.

Recalling the government’s past failure to find buyers for its  shares, deputy economy minister, Muhammad Ali Dehqan, said the government has plans to offer shares via exchange-traded funds.

“The government is also looking at other options. Divestiture in the current framework was not attractive to private companies,” he said, highlighting the function of ETFs as a viable solution.

An ETF can own hundreds or thousands of stocks across various industries, or can be isolated to one particular industry or sector.

ETFs own underlying assets (shares, stocks, bonds, oil futures, gold bullion and foreign currency) rather than only one, like a stock.

The plan was earlier backed by the PBO as part of broader package to help government cope with its expenditures and partly plug deep holes in its budgets.

PBO hailed the role of ETFs as it lets the government undertake management of ETF portfolios, and in turn, maintain control of the holdings.

So far, the government has offered its remaining shares in Shiraz Oil Refining Company, Lavan Oil Refining Company, Tehran Oil Refinery Company, Isfahan Oil Refinery. But as for buyers, they are nowhere around.

According to media reports, the government’s arrears to banks, contractors and manufacturing units reaches 3,200 trillion rials ($28.5 billion).