Govt to convert Rs283b power company debt to PIB

Government officials meet bank representatives.

KARACHI:

The government has decided to convert Rs283 billion debt of power companies to Pakistan Investment Bonds (PIB) on Saturday, a move that will easing the cash backlog hurting the energy sector’s operations.

The meeting also decided to convert Rs114 billion commodity finance to PIBs.

These decisions were chalked out after two meetings were held on Saturday between government officials led by Ministry of Finance Debt Policy Director General Masoor Qureshi and bank officials at the HBL head office.

Giving the break-up, the official said that 20% of the total debt will be issued in three-year PIBs, 30% in five-year PIBs while the remaining 50% with 10-year maturity. All 18 bank were invited to take part in the meeting.

The cut-off yield of the three-year bond will be 14 per cent, five-year 14.05 per cent and 14.09 per cent annually on the ten-year bond. The banks agreed on a lower yield as the PIB on offer brings KIBOR plus half a per cent whereas the earlier debt was being financed at KIBOR plus two per cent, official said.

The agreement removes the long-standing irritant between the government’s relations with domestic banks over failure to extend sovereign guarantee cover to the TFCs issued under power holding companies, said official.

In a similar situation, the government issued TFC worth Rs162 billion to settle part of circular debt of the energy sector in 2009.





Published in The Express Tribune, June 26^th, 2011.