LAHROE - The government has approved the issuance of Privately Placed Term Finance Certificates (PPTFCs) of Rs82 billion by Power Holding (Private) Limited (PHPL).
As per the notice issued by OGDC, the company has subscribed to the TFCs to settle its overdue receivables from oil refineries and gas companies.
Granular details of the PPTFC are as follows: Tenor of seven years with a grace period of three years; Interest rate of KIBOR +1 per cent, payable semi-annually.
As of June 30, 2012, OGDC receivables stood at Rs138 billion. Out of the same Rs82 billion (59 per cent) is likely to be converted into investments after the subscription of these PPTFCs.
As per the mapping plan, PHPL will net off Rs70 billion owed to Pakistan State Oil (PSO) and the remaining to the gas utilities. PSO will clear a similar amount to the oil refineries. Hence, PSO receivables have declined to Rs168 billion from Rs238 billion. However, experts highlight that as there will not be any actual flow of cash in this transaction, they do not see an improvement in the liquidity situation of the energy chain even though stock of receivables will decline.
They see a positive earnings impact of share on OGDC on account of interest income received from these PPTFCs. However, the three year grace period carries slightly negative connotation for the company.
For PSO, we believe it will be slightly positive on the bottomline owing to lower interest accrued on its payables.
KAPCO may also gain due to reduction in running finance requirement as its payables are at a higher rate i.e. 6M Tbill + 6 per cent vs. discount rate +4 per cent on its receivables. However, it may be neutral for HUBCO as its interest rates on receivables and payables is at the same rate at DR +2 per cent.