ISLAMABAD: The government has planned to place assets of Nandipur power plant (NPP) in a separate entity in order to hand over its controlling interest to Pakistan State Oil (PSO) for paying some of its outstanding dues.
This will help the cash-starved PSO, the country’s largest oil marketing company, to reduce its huge circular debt receivables.
Finance Division, in an office memorandum, said that it had considered the proposal in a draft summary and the proposed transaction was meant to settle PSO’s claims of receivables against NPP and Guddu Power Plant (GPP).
However, it stated that the summary proposed the transfer of Gujranwala Electric Power Company’s (Gepco) controlling interest, instead of GPP, in deviation from the federal cabinet’s decision.
“The Ministry of Energy (Petroleum Division) may, therefore, provide justification for proposing Gepco, instead of GPP, for the purpose,” the Finance Division said, adding that the proposed NPP transaction structure suggested that “the government would carve out assets of the power plant in a separate entity”, after clearing all its active and contingent liabilities.
It pointed out that the financial impact of clearing all liabilities of NPP and GPP was not available for comparative evaluation while Power Division’s comments on the proposal may also be shared.
According to sources, the Petroleum Division had prepared a summary for seeking approval of the Economic Coordination Committee as well as the cabinet.
It sought comments of the Finance Division on the transfer of shares to clear PSO’s dues, which had piled up to an all-time high due to failure of mainly power producers and Sui Northern Gas Pipelines Limited (SNGPL) to make payments on time.
PSO’s receivables from its clients have crossed Rs762 billion. Of this, SNGPL is a key defaulter that has to pay Rs487 billion on account of LNG supply by PSO.
Since 2015, PSO has been importing LNG from Qatar under a long-term government-to-government contract and is bound to make timely payments.
However, the receivables against LNG supply to SNGPL continued to pile up with the passage of time and reached around Rs487 billion. It included exchange loss of Rs6.7 billion that PSO claimed due to depreciation of the rupee.
On the other hand, SNGPL had been supplying LNG to domestic consumers in the wake of directives of the federal government to overcome gas crisis over the past few winter seasons. However, it was not able to recover consumer dues owing to the lack of any legal backing for the arrangement.
The previous PTI government, in its tenure, passed a bill in parliament that called for the recovery of entire LNG cost from consumers, including the domestic ones, by adding it to the average gas price. However, it drew opposition from provinces like Sindh, Balochistan and K-P, who contended that they could not subsidise the consumers of Punjab.
