PSO may not continue credit supplies to power sector: Rs 80-100 billion sought to avoid default

The cash strapped Pakistan State Oil (PSO), with receivables accumulated to over Rs 154 billion, has warned Pakistan Electric Power Company (Pepco) to suspend fuel supplies on credit to power sector from February 14 if the latter fails to pay half of the amount under circular debt, Business Recorder has learnt.
"PSO is on the verge of international L/C default and other liabilities, and needs substantial payment to the tune of Rs 80 to 100 billion on immediate basis to avoid default," Managing Director (MD) PSO Irfan K Qureshi said in a letter sent to MD Pepco Rasool Khan Mehsood on Thursday.
"Therefore it is requested that Gencos, Hubco and Kapco be advised to release payments along with financial charges to PSO on urgent basis and in case of non-payments PSO will be forced to discontinue credit supplies to these entities, w.e.f February 11, 2011," letter adds. However deadline of payment has been extended to February 14, sources maintained.
PSO under huge financial crunch had repeatedly communicated correspondences to power sector to clear its dues to continue smooth supply of oil. "Please recall our previous correspondence wherein we have highlighted PSO's critical financial position. As of date no payment has been received from Pepco/GOP and our receivables have reached an unbearable stage, total outstanding amount against power sector is in excess of Rs 154 billion, Qureshi said.
As on February 10,2011, PSO's receivables against power sectors and some other clients stand at Rs 154.37 billion that are as Wapda Rs 46.8 billion, Hubco Rs 70.4 billion, Kapco Rs 31.49 billion, KESC Rs 1.7 billion and KESC-Price differential claims Rs 3.9 billion.
"In this very critical situation the circular debt has started to have devastating spill over effects. PSO has been the most affected party as it has to arrange deficit product by imports to cater fuel needs of the country," MD PSO in letter says adding, "we have been instructed to provide uninterrupted supplies to Gencos and major IPP's irrespective of payments against supplies".
Qureshi said that now financial crisis of PSO had reached to such a critical level that it was no longer possible for PSO to continue uninterrupted credit supplies to power sector. "If PSO does default than credit rating of PSO will go down as negative and we will not be allowed to do international business/Imports for the next 4 months," letter adds.