PSO to get stakes in Guddu, Nandipur plants
Aftab Ahmed
Pakistan State Oil (PSO) is likely to get Guddu and Nandipur power plants’ management control after getting shares under the equity swap arrangement.
The government is currently working on an inter-company equity swap model to clear the circular debt that rises to Rs 1.6 trillion.
Nadeem Babar, Special Assistant to Prime Minister on Petroleum, informed during a recent meeting that PSO’s receivables are stuck in Genco-3. It would be a good option to consider giving stakes in power plants to PSO.
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It was suggested that the privatization commission would be requested to intimate financial due diligence through an external expert to determine the swap price for Guddu/Nandipur power plants.
For equity swap in Guddu and Nandipur, Pakistan State Oil (PSO) will have to do proper financial due diligence through external experts after seeking ECC’s approval.
This is part of an equity swap model. Pakistan State Oil (PSO) had proposed the government transfer its shares to Mari, OGDCL, and PPL under an equity swap arrangement. The proposed arrangement would help clear the circular debt of Rs 100 billion.
In a letter sent to Asad Hayauddin, Secretary Petroleum Ministry of Energy (Petroleum Division), PSO management had said its circular debt had touched an alarming level. It further said that the company appreciated the Ministry of Energy’s support towards resolving the chronic issue of circular debt.
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The state-run oil marketing company (OMCs) said it is imperative to create fiscal space within the energy supply chain. The management said that there were different options available to resolve the circular debt. Accordingly, it suggested the options of equity swap to settle PSO’s receivable of Rs 100 billion.
READ Circular debt: Plan unveiled to pay Rs 323b to PSO
PSO said that circular debt had financially crippled it for years. Consequently, the company’s financing costs had also escalated significantly, with last year’s interest payments recorded at Rs 15 billion. This chronic situation had also adversely affected profitability and hindered the infrastructural development investments of the company.
As a viable option, PSO management said that the government of Pakistan could transfer a certain portion of its shareholding in MARI Petroleum Corporation, OGDCL, and/or PPL against receivables of PSO.
However, it further said that the settlement of circular debt by transfer of these shares would not require the government to arrange any funds while keeping control of these strategic assets through PSO.
Furthermore, PSO believed that the above market value might not reflect the fair value of these entities. Therefore, it proposed that the government appoint an independent financial adviser to assess these shares’ fair value and finalize other terms and conditions.
The circular debt had hit the financial position as its receivables had touched Rs 318.9 billion.
