Cash-strapped PSO seeks Rs 50 billion from Pepco: receivables stand at Rs 128.6 billi

[Lahore_Real_Estate]

Cash-strapped PSO seeks Rs 50 billion from Pepco: receivables stand at Rs 128.6 billion
ZAFAR BHUTTA
ISLAMABAD (July 13 2010): Pakistan State Oil (PSO), fearing default to international fuel suppliers that would break the entire fuel supply chain to the country has requested Pakistan Electric Power Company (Pepco) to immediately provide Rs 50 billion to bail out it from financial woes, Business Recorder has learnt.

In addition to request sent to Pepco, PSO has already sought Rs 55 billion from two major power generation companies - Rs 40 billion from Hubco and Rs 15 billion from Kapco. In a letter sent to Pepco on July 8, PSO accused the power sector of not fulfilling its payment commitments that were made in a meeting held on June 14, 2010 with the Prime Minister in the chair.

PSO revealed that the power sector had paid Rs 31.2 billion by June 30, 2010 against a total commitment of Rs 41.4 billion. "PSO has made additional supplies to power sector amounting to Rs 30 billion," the letter says. PSO receivables against power sector stood at Rs 114 billion till July 8 which surged to over Rs 128 billion on July 12.

"Piecemeal payments from the government and Pepco, which is not a permanent solution, can only delay untoward situation of L/C expiry for a few weeks," PSO authorities said adding that its fuel supply chain and import are affected as a result of huge receivables. Similarly, PSO cannot reserve or allocate any funds for infrastructure development due to consistent liquidity woes.

"It is therefore requested that a substantial chunk of at least Rs 50 billion be released immediately to liquidate PSO financial position," PSO said adding that it would result in streamlining payments of L/C and refineries. In another letter sent to Hubco on July 8, 2010, PSO said that its receivables had touched Rs 50.9 billion. The constant default and inability of Hubco to pay dues is leading to financial crunch affecting furnace oil supply to Hubco complex. "Non payment from Hubco would put PSO in default to its international fuel suppliers causing breakdown in our entire supply chain," the letter maintains.

"In view of the above situation, you are requested to take serious note of it and firm arrangements be made to remit Rs 40 billion for ensuring smooth and uninterrupted supplies to power sector," the letter adds. According to sources, cash-strapped PSO banks overdraft, which stands at around over Rs 35 billion, may touch the limit of Rs 40 billion on July 19 due to non payment of dues by power sector. According to financial capacity, PSO borrowing limit from banks is Rs 40 billion.

"PSO will not be able to receive more borrowing from banks if its overdraft reaches Rs 40 billion," sources said adding that it will result in more financial crisis for the company. PSO has warned power generation companies of a severe fuel shortage if they do not provide funds immediately.

As on July 12, PSO receivables from different clients stood at Rs 128.6 billion against payables of Rs 117.3 billion. "PSO is also in urgent need of money amounting to over Rs 31.4 billion to make payment on account of fuel supply by international suppliers," the sources maintained.