PSO calls equity swaps ‘only viable option’ for circular debt resolution

KARACHI: Pakistan State Oil (PSO) sees equity swaps as the only viable option to settle its circular debt balance amount.

PSO discussed this during a corporate briefing session held on Monday where its management discussed the country’s financial performance and future outlook, according to a note released by Topline Research, one of the attendants of the meeting.

As per the PSO management, the government does not have cash so the only solution to settle a circular debt balance amount is to swap PSO’s receivables with the government’s assets. “The management takes this as the only viable option,” the note said.

Circular debt is the net unfunded outstanding liabilities of power distribution companies (DISCOs), which have to pay off their dues to the fuel supplier, PSO.PSO’s total receivables are Rs810 billion. The party-wise breakdown for receivables is: Rs500 billion from SNGPL; Rs150 billion from Genco; and Rs27 billion from Hubco and PIA.

According to Topline, the management highlighted that PSO’s liquidity condition is likely to improve due to the timely payment of LNG receivables amidst a sharp increase in consumer gas prices.

The company also highlighted during the meeting that “liquid oil consumption in Pakistan has dropped from 13,005K tonnes in 9MFY23 to 11,485K tonnes in 9MFY24, a 11.7 per cent fall. High speed diesel (HSD) volumes saw a decline of 249K tons and PMG volumes fell by 302K tons. HSD demand is being reduced by 3-4K tons everyday mainly due to lower demand by industries and smuggling.”

Furnace oil (FO) also saw a fall of 982K tons as its usage in electricity generation has been reduced significantly, per the note. The management expects a small YoY increase in oil consumption in FY25.

The company also shared that it had added 37 new outlets. It shared its future outlook and added that the management is working on various options, including setting up electric charging stations, diversifying into fintech, NBFC and renewable energy sectors, rehabilitation and development of new storages, exploring investment in a white oil pipeline project in northern Pakistan, and automation and digitization at locations and retail outlets.