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ISLAMABAD: Chairman Board of Management (BoM) of Pakistan State Oil (PSO), Asif Baig Mohamed will write a SOS (Save Our Ship) letter to the federal government for immediate payment of Rs 70 billion to the company to avert imminent default, well-informed sources told Business Recorder.

The decision was taken at a recent meeting of Board of Management specifically convened to discuss PSO’s dire liquidity situation.

Chairman BoM stated that he had held a meeting with the MoE-Petroleum Division along with PSO’s CFO on January 04,2024 wherein the following points were discussed and agreed however, there has been no tangible progress: (i) SNGPL will be directed to pay Rs 50 billion to PSO through external loan and there will be no further accumulation of debt by the SNGPL on PSO account; and (ii) modus operandi for implementation of levy on petroleum products for recovery of FE loans related exchange losses will be pursued for implementation.

Rs30.8bn ‘recovery’ from Hubco: PSO seeks PD’s intervention

Chief Financial Officer (CFO) PSO Gulzar Khoja made a presentation on PSO’s liquidity crisis. She apprised that PSO liquidity position is under severe stress as receivables are at an all-time high and have crossed Rs 852 billion mark with major contribution from SNGPL. Receivables from SNGPL have mounted to Rs 571 billion and are still rising. Power sector owes Rs 187 billion, PIA Rs 27.8 billion and exchange loss of Rs 57 billion on FE-25 loans is also due from GoP/MoF.

Currently PSO’s total borrowing is Rs 461 billion and after availing another loan of Rs 50 billion, the borrowing will increase to Rs 511 billion.

She said that in order to avoid default on international payments, the PSO has delayed deposit of funds to GoP on account of KPC supplies by an amount of Rs 35 billion and delayed on refinery payments of Rs 41 billion.

MD & CEO, Muhammad Taha added that the power sector owes PSO the second largest chunk of receivables i.e. Rs 187 billion after SNGPL.

He said that GoP will be making payments to CPPA-G and requested Secretary, Power Division who is also Member BOM, to issue instructions to IPPs and GENCOs to pay PSO’s dues from the money they receive. The CFO added that the power sector has made payments to Hubco but the latter has not paid to PSO.

He added that Weighted Average Cost of Gas(WACOG) was implemented from November 01, 2023. Despite it being the second billing month, the PSO is not receiving payments.

He requested an urgent intervention from the GoP, especially MoE-PD.

CFO stated that the situation is not sustainable and PSO cannot finance SNGPL anymore as PSO’s finance cost is expected to rise from Rs 3.6 billion in FY2022 to a staggering figure of Rs 64 billion in FY2024.

PSO’s funding requirement from January-March 2024 was shared with the BOM is as follows: (i) BOM was informed that in order to avoid default on international LC/LNG payments, PSO requires an immediate cash injection of Rs 70 billion by SNGPL using external borrowing against current year’s deficit amounting to Rs 84 billion; (ii) instructions need to be given to refineries by MoE-PD for continued supplies to PSO. Moreover, a plan needs to be formulated to pay the balance outstanding amount against SNGPL which currently stands at Rs 571 billion; (iii) MD & CEO added that given the company’s dire liquidity situation, PSO has had to reduce its inventory to a bare minimum level and will not be able to bail the industry out in the event of a fuel crisis as it has been doing consistently in the past.

He added that SOS letters are being regularly sent to the Ministry of Energy (Petroleum Division) and the Ministry of Finance.

The BOM suggested to the Chairman-BoM that another letter be written to GoP giving reference of the meeting held on January 04, 2024, making the following requests for support: (i) immediate release of Rs 70 billion in cash through SNGPL; (ii) strict directives to SNGPL to prevent further deficits against LNG supplies by PSO and any further shortfall in receipts to be financed through SNGPL’s internal cash flows or SNGPL borrowing; (iii) opening an escrow account for SNGPL’s collections for PSO, earmarking designated accounts; (iv) provision of an additional levy on Petroleum/LNG pricing for the recovery of outstanding LNG receivables (especially during declining prices trends); and (v) reimbursement of exchange losses amounting to Rs 57 billion against FE-25 loans as agreed.

After detailed discussion the BOM unanimously decided that SOS letter be written by the chairman BOM on behalf of PSO’s Board to the ministry covering the points discussed during the meeting. The members representing GoP assured that they are cognizant of the company’s issues and they will make every effort to not let a high performing and well-managed company like PSO default.

Copyright Business Recorder, 2024


Comments are closed.

Nawaz Mar 05, 2024 09:34am
jis ka aik Petrol Pump ha wo Ameer Admi ha aur JIs ki puri Company ha wo default ha.............
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Test Mar 05, 2024 11:48am
@Nawaz, PSO has no future should be sold to china
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Syed Babar Mumtaz Mar 05, 2024 03:01pm
very alarming situation.
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Sohail Mar 06, 2024 12:35pm
@Nawaz, hahahaha level hai na bhai.
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