Geo News ‘Aaj Shahzeb Khanzada Kay Sath’: LNG terminal causing $1.5b loss to country a fallacy

KARACHI: The Geo News talk show Aaj Shahzeb Khanzada Key Saath has exposed fallacies around LNG terminal's huge profits and shown that the talk about excessive profits is untrue.

Talking in the show, Shahzeb Khanzada asserted that the talk of $1.5 bn corruption in the LNG deal is just a hearsay. Engro would earn a profit of $2 million in 15 years and not $1.5 bn. The Engro accounts tell a different tale. According to them, the LNG terminal is producing cheaper gas in comparison to other terminals across the world, which is benefitting the country to the tune of two billion dollars annually.

The assertion of Engro LNG earning a benefit of $1.5 bn is contradictory to the facts. Khanzada said the accusation that Miftah Ismail and Shahid Khaqan Ismail were helped by Engro’s former CEO Imranul Haq to establish the terminal at rates far over and above those at the market. Imran in return was made MD PSO by Abbasi. The accusation is that the trio helped Engro earn a profit of $1.5 bn in 15 years.

Discussing the allegations, Khanzada mentioned details of the company accounts which tell that the company would only earn a profit of $2 million in 15 years. Engro being listed in the Karachi stock market and is likewise bound to produce all its the financial details and deals in public. It produces all its financial details and deals in public after every three months. It is similarly bound to inform any major deal to its shareholders. So it is simply not possible that the company whose accounts are regularly audited and are available for public preview on Engro's website can hide its annual profits and earnings from public scrutiny.

The investigations by the Geo News programme determine if the project was very expensive, did Pakistan suffer as a result of the project and if Miftah Ismail, Shahid Khaqan Abbasi and Shaikh Imranul Haq benefitted Engro to the detriment of the country to the tune of billions of dollars. Furthermore, in order to find the real picture, the entire financial picture of the project could be compared with the LNG terminals set up globally.

The programme reviewed the accounts of the Engro Corporation to find out if the company can continue to earn an annual profit of Rs16 billion or $100 million in 15 years form the terminal in question. This would become $1.5 bn or Rs240 billion in the period.

The Engro Corporation comprises Engro Fertilizer, Engro Polymer, Engro Energy and Engro Terminal. The total revenue from all these companies is Rs 171 bn and their profit stands at Rs23.60 bn. Of this, Engro Fertilizer shares Rs 109 billion, Rs35 billion of Engro Polymer makes it stand at number two and Engro Terminal shows an annual earning of Rs 15.8 bn and Engro Energy shows an earning of Rs11.9 bn.

Some journalists claimed that Engro Terminal alone has an annual profit of $1.5 bn meaning $100 million or Rs15.70 billion, which alone forms a 60 per cent chunk of the Engro Corporation. This is against the Engro Fertilizer’s profit of Rs 17.50 bn, which is 70 per cent earning of the corporation.

In this context, if Engro Fertilizer’s profit is removed, that leaves Rs six billion out of Rs23 billion raising a question where is the remaining Rs15 billion. This goes on to prove that the Rs15 billion profit being wrongfully mentioned is not the profit but the revenue.

This raises another query as to how much profit the LNG terminal is offering to Engro Corporation. According to the audited accounts of the corporation in 2018, the LNG Terminal’s total revenue was Rs 12.60 bn. The same trend was reflected in the last fiscal as well. The profit in 2018 was Rs1.5 billion, in 2017 it was Rs1.80 bn, 2016 Rs 1.5 bn and in 2015 it stood at Rs 1.9 bn.

Now if an average profit of Rs 1.7 bn is taken as baseline, then in 15 years, it comes to Rs 25 bn. Adding 20 per cent devaluation of all these years would further show a profit of Rs30 bn which comes to estimatedly $200 million or Rs 20 crores and not $1.5 bn. The Engro Terminal’s 60 percent profit goes into the monthly rent for Floating Storage Regasification Unit (FSRU).