Engro Fertilizers requests extension of loan deadline

Published: July 27, 2012
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HEAVY EXPENSE: Rs26.5b
is the amount Engro Fertilizers
has made in principal
repayments and interest
payments in the last 18 months. PHOTO: FILE

HEAVY EXPENSE: Rs26.5b is the amount Engro Fertilizers has made in principal repayments and interest payments in the last 18 months. PHOTO: FILE

KARACHI: 

Engro Fertilizers has approached banks to “re-profile” its debt and extend the loan repayment dates by about two and a half years, as the company is trying to reach an agreement with the government to shift its $1.1 billion Enven fertiliser plant from the Sui Northern Gas Pipelines Limited (SNGPL) network to non-network gas fields.

Engro Fertilizers – part of Pakistan’s largest private-sector conglomerate Engro Corporation – has to make principal repayments of Rs10 billion and interest payments of Rs8 billion in 2012, Engro Corporation Chief Financial Officer (CFO) Naz Khan said on Thursday.

While ruling out market speculations that Engro Fertilizers may default on its debt repayments in the ongoing calendar year, Khan told The Express Tribune that gas curtailment at Enven had indeed hurt cash flows of Engro Fertilizers, which set up the world’s largest single-train urea plant in 2011 with total production capacity of 1.3 million tons a year.

“We’re running short of cash because the original debt repayment schedule was based on regular gas supplies of 100mmbtu from the SNGPL,” she said, adding that Enven received gas for only five and a half months last year. It has received gas for 44 days in 2012, of which production could take place for 33 days only, as the firing up and shutting down the plant takes considerable time.

Engro Fertilizers has made principal repayments and interest payments amounting to Rs26.5 billion in the last 18 months since Enven became operational.

She says she is optimistic that Engro Fertilizers will be able to strike a deal with the government to shift Enven to non-network gas fields within the next six months. Making arrangements for the treatment of low BTU gas, so that it can be used to produce urea, can take anywhere between six months and two years, Khan added.

“That’s the reason why we have approached banks to reschedule repayments for the interim period, which will be approximately two and a half years. About five payments totalling Rs28 billion are due every six months,” she said.

Engro Fertilizers was allocated 100 mmcfd of gas upon payment of a licence fee after an international competitive bidding conducted by the government. It also enjoys the SNGPL’s guarantee of uninterrupted gas supply with a right to have the first 100 mmcfd of gas production from Qadripur field.

Engro’s alternative non-network gas solution calls for shifting Enven from the Qadirpur field to Lateef and two other adjacent gas fields. Another suggestion that is part of Engro’s proposal is to shift gas supplies of the plant to Mari field which, like many other major gas fields, is located within 50km of Enven.

Khan took pains to explain that no Term Finance Certificate (TFC) repayments will be affected by the proposed restructuring of Engro Fertilizers’ long-term debt. “Engro Corporation has many subsidiaries, and there is no possibility of a default on payments whatsoever,” she said, adding that no major TFC repayments are due in the near future anyway.

“The problem with the fertiliser sector is that it doesn’t enjoy the political clout like the textile and many other lobbies do,” she said, while referring to the recurring gas curtailment problem that has affected the Enven plant since its inception.

Published in The Express Tribune, July 27th, 2012. 

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Reader Comments (19)

  • Falcon
    Jul 27, 2012 - 7:49AM

    I think they will be able to pull it off easily. A significant benefit of being part of a diverse conglomerate is that they are able to shield themselves from capital and revenue risks.

    Recommend

  • Fed Up Baloch
    Jul 27, 2012 - 8:30AM

    … now, is it our Enron … Engron??Recommend

  • Wellwisher
    Jul 27, 2012 - 8:53AM

    The Company is showing great resilience !
    Wish them all the best

    Recommend

  • Fawad Ahmed Mukhtar, Fatima Fertilizer
    Jul 27, 2012 - 10:01AM

    @Bilal Moti, Arif Habib Securities:

    Thanks Bilal bhai! :)

    Recommend

  • Farid Khan, AKD Securities
    Jul 27, 2012 - 10:02AM

    Oh plz dont short Engro! Our seith has huge position in the stock.

    Recommend

  • Saba Amin
    Jul 27, 2012 - 11:36AM

    Long Live Engro,
    Long Live Pakistan:-)

    Recommend

  • Saba Amin
    Jul 27, 2012 - 11:38AM

    Long Live Engro,
    Long Live Pakistan :-)

    Recommend

  • Saba Amin
    Jul 27, 2012 - 11:43AM

    Long Live Engro,
    Long Live Pakistan
    :-)

    Recommend

  • Wisdon
    Jul 27, 2012 - 11:54AM

    That is why its ex-CEO and President Umar Asad left company. Very shrewd step as he knew that company is entering into bad times and what he earned reputation for bringing heights to the company will be now lost. Good Step man !! Good Luck in Politics now !!

    Recommend

  • Spy Master
    Jul 27, 2012 - 11:56AM

    While Fauji Fertilizer made a profit of PKR 10 billion in 1st Quarter from SSGC network , Engro was at the mercy of SNGPL. (A key strategic mistake to put a fertilizer plant without taking into account the gas reserves and energy outlook for next 50 years).

    They should have done the investment of USD 1 billion in Australia, Georgia or Turkey.

    Recommend

  • Allah Ditta Pakistani
    Jul 27, 2012 - 12:18PM

    @ Every One,

    Just observe the comments of these stock broker employees , thinking short term, not understanding that the ENVEN is the largest production plant in the country which is being played with power brokers of current government and lack of gas reserves at the same time.

    If ENGRO runs short then the consequences will be huge, seiths and their positions will only limit to a red mark of down index, and their homes run on that.

    Recommend

  • engronian
    Jul 27, 2012 - 3:38PM

    Keep burning gas to drive auto rickshaws ! and let the industry die

    Recommend

  • Allah Ditta Pakistani
    Jul 27, 2012 - 11:12PM

    @ engronian

    And also for making Chicke Karahi.

    Recommend

  • blithe
    Jul 28, 2012 - 2:39AM

    No wonder Asad Omar was fired from his job!

    Recommend

  • Tring Tring Tring
    Jul 28, 2012 - 2:39AM

    Engro, the only Pakistani company to invest over 1bn dollars in the country gets a slap from Govt. Engro earns money and reinvests in this country..unlike Telenor, Mobilink etc..and this is what happens..lack of government support, where rehman maliks are all investing our money in UK.

    Recommend

  • blithe
    Jul 28, 2012 - 2:40AM

    is Asad Omar really that good a financial manger?!?!?!?! I think not!!!

    PTI trolls duped,,,

    Recommend

  • Adnan
    Aug 1, 2012 - 1:08PM

    Why do our goverment give letter of support (LOS) being empty handed? Why do SNGPL makes new contract when it knows it can’t fulfill the contracted dispatch? Private investors does not, in any case, undermine the future risks. In this instance, they must had a forecast and research work of Gas supplies/forecast. I put all the blame to SNGPL & GoP to let Enven down. This case is not restricted to just Enven but to IPP’s & future investments. GoP must expedite the iran gas pipeline project and may think about Import of LNG (Both will serve as alternatives to SNGPL gas supplies). I hardly see any new investment in power sector especially any IPP who is gas fired.

    Recommend

  • Hussain
    Sep 3, 2012 - 12:12PM

    Is it not oppressing news through the banks either to stop two years dividend to the shareholders for the debt settlement deal?

    Recommend

  • Ali
    Sep 16, 2012 - 11:18AM

    Local industry is at the the verge of collapse. The whole drama of shortage is created in order to have grounds for urea to be imported. The imported urea and the subsidy , where the officials can earn commissions. The major investors political allies invest in imported urea and make millions. The imported urea is not there to give relief to farmers. even after the billions of rupees subsidy it sell equals to banded urea.

    Recommend

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