Govt Has No Money so Equity Swaps only Option to Settle Pending Dues: PSO

Govt Has No Money so Equity Swaps only Option to Settle Pending Dues: PSO

Pakistan State Oil (PSO) has proposed equity swaps to settle its receivables balance with the federal government.

The federal government doesn’t have cash and the only viable option to settle the circular debt balance amount is to swap receivables of PSO with government assets, the stat-run enterprise said in its corporate briefing session today.

Timely LNG receivables amid rising consumer gas prices are expected to enhance PSO’s liquidity.

PSO’s total receivables amount to Rs. 810 billion, including Rs. 500 billion from SNGPL, Rs. 150 billion from GENCO, and Rs. 27 billion from HUBCO and PIA.

PSO management anticipates a modest year-over-year increase in oil consumption for FY25, Topline Securities said in a brief note.

The state-run enterprise said liquid oil consumption in Pakistan fell from 13,005K tons in 9MFY23 to 11,485K tons in 9MFY24, marking an 11.7 percent drop. High-Speed Diesel (HSD) volumes decreased by 249K tons, and PMG volumes fell by 302K tons, with HSD demand reduced by 3-4K tons daily due to lower industrial demand and smuggling.

Furnace Oil usage dropped by 982K tons as its use in electricity generation declined significantly.

PSO saw a 6 percent year-over-year rise in sales to Rs. 2.67 trillion and a 30 percent increase in profit to Rs. 13.4 billion in 9MFY24. The EPS for Q3FY24 was Rs. 12.03/share, bringing 9MFY24 EPS to Rs. 28.54/share.

The company’s market share in the white oil market increased by 1.3 percentage points, reaching 52.4 percent in 9MFY24. Product-wise, HSD market share was 54.5 percent, and PMG market share was 46.2 percent.

PSO said it adopts a ‘zero-sum game’ approach, with a minimum of 20 days of stock maintained to avoid inventory gains/losses.

Under the FE-25 borrowing mechanism, PSO borrows dollars from banks, bearing exchange gains/losses while the Government of Pakistan covers the interest costs. Currently, 60% of PSO’s total borrowing is from FE-25.

PSO has added 37 new outlets and further plans to diversify into fintech, NBFC, renewable energy, electric charging stations, and automation. Investments are also being made in pipeline projects and storage developments.

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