The government has approved payment of Rs 82 billion to Oil and Gas Development Company Limited (OGDCL), representing the principal amount of the company’s investment in Privately Placed Term Finance Certificates (PPTFC) issued by Power Holding (Private) Limited (PHL).
The oil and gas giant informed the Pakistan Stock Exchange (PSX) through a notice on Thursday.
Further, the government has also approved repayment of interest of Rs 92 billion in 12 equal installments commencing from July 2025, the notice added.
As part of settlement, OGDCL has agreed to waive off Rs 72 billion on account of liquidated damages on the directives of government, it said.
“OGDCL had subscribed to these certificates for settling its overdue receivables from oil refineries and gas companies. The GOP’s initiative aimed at resolving the circular debt issue paves the way for sustainable growth and enhances shareholder value,” read the notice.
To recall, the government approved the issuance of TFCs of Rs82 billion by PHL in 2013 to partially reduce the circular debt in the energy sector.
Initially, these were supposed to mature in seven years, but in 2020, the Boarf of Directors of the OGDCL approved the extension of the tenure of TFCs from seven years to 10 years till June 2023.
According to a note by the Topline Pakistan Research, this clearance of TFC’s would further improve cashflow position of the company.
“We believe, either these funds will be used for announcing dividends or will be diverted for the exploration activities or for the purpose of clearing any other pending payables,” the brokerage firm said in its note.
As per news reports, Government is also planning Offshore bid round 2024 in 3Q2024, wherein, 12 blocks will be offered in competitive biding. These blocks comprises of shallow water, deep water, and ultra deep water blocks, which in our view will require higher capex commitments.
Furthermore, on the payables side, OGDC also has to pay Rs30.5 billion (Rs7/share) to the government on account of pending royalty payments. The above cashflows may also be diverted to settlement of royalty payments to the Government.
Since the markup payment is delayed as it will start from July 2025 instead of July 2024, OGDC has to book an estimated loss of Rs24 billion in FY24 under IFRS 9, albeit it is a non-cash expense, as per news reports.
