The government is working on a proposal to transfer its stakes in some power plants to Pakistan State Oil (PSO) to help the company settle its Rs. 937 billion circular debt receivables.
The coalition government, in line with the International Monetary Fund (IMF), is working on this proposal to adjust receivables of nearly Rs. 153 billion owed to public sector powerhouses, reported a national daily.
The government wants to offload its equity in Nandipur Power Plant and Guddu Power Plant (GPP). The proposed transaction would settle PSO claims against the two entities, said the Finance Ministry in its letter to the Petroleum Division dated February 20, 2023.
But instead of the GPP, PSO wishes to control Gujranwala Electric Power Company (GEPCO). The letter asked the Petroleum Division to explain why they wanted to control GEPCO rather than GPP. Furthermore, the proposed transaction structure of NPP suggests that the government carve out the power plant into a separate entity after clearing all active liabilities.
Regarding the proposed acquisitions, PSO may also be allowed to sell 30 percent of the power generated under the B2B arrangement, with the remainder being dispatched to the national grid. Based on the proposed transaction structure and modalities for NPP and GEPCO, PSO intends to refurbish the asset in the future to improve its efficiency and position it for the merchant market.
The aforesaid proposal would benefit both parties by reducing PSO’s circular debt receivables while requiring no cash outflow.
Sui Northern Gas Company Limited (SNGPL) is another defaulter that owes Rs. 487 billion to PSO. Pertinently, PSO’s receivables have crossed Rs. 762 billion.
PSO has been buying liquefied natural gas (LNG) from Qatar under a long-term government-to-government contract since 2015 and is required to make timely payments. But receivables against LNG supplies to SNGPL accumulated over time and surged above Rs. 487 billion, including an Rs. 6.7 billion exchange loss claimed by PSO due to rupee devaluation.