Teetering on the edge: PSO defaults on payments to international suppliers
As L/Cs mature, PSO finds itself severely short of cash to finance operations.
PSO is facing pressure financing its operations due to the non-payment of its dues. It received only Rs10b last week when it required Rs15b to avoid a default on international payments. PHOTO: FILE
ISLAMABAD:
Cash-strapped oil marketing giant Pakistan State Oil (PSO) has defaulted on international fuel supply payments, and suppliers have started imposing fines over the late payment of their dues, The Express Tribune has learnt.
“PSO has technically defaulted to fuel suppliers and the Kuwait Petroleum Corporation (KPC) has imposed a fine of $10,000 on the entity last week,” sources told The Express Tribune; adding that the State Bank of Pakistan had raised questions on the payment made on account of the fine to KPC. Officials also said that other international fuel suppliers were now charging late payment surcharges from PSO.
PSO is facing pressure financing its operations due to the non-payment of its dues. It received only Rs10 billion on Thursday last week when it required Rs15 billion to avoid a default on international payments on maturing Letters of Credit (L/Cs).
“PSO has received another Rs13.9 billion on Tuesday,” sources added. “An amount of Rs 10 billion is still required in order to retire L/Cs opened for the month of February,” sources said.
They said that PSO requires Rs50 billion to retire all L/Cs for the month of February, and has to pay nearly Rs120 billion to clear back L/Cs for the import of all petroleum products in the month of March. Sources added that the prime minister has approved the release of Rs40 billion to pay to oil and gas companies.
Sources revealed that banks are unwilling to provide loans to PSO because of its poor financial health. CitiBank and Standard Chartered have already refused to open L/Cs for the import of petroleum products since October 2012 due to the poor financial position PSO finds itself in. Sources also said that PSO has exhausted its limit of banks loans, and banks are therefore not ready to give more money for the import of oil.
“Had banks still been willing to extend loans to PSO, no payment would have been delayed to international fuel suppliers,” sources added.
PSO has been sending SOS messages to the Government of Pakistan, the power sector, Pakistan International Airlines (PIA) and Pakistan Railways for the past few weeks; however, no substantial payment has been forthcoming that may help it avoid further defaults.
As of February 26, PSO is to receive Rs50.8 billion from the Water and Power Development Authority, Rs55.8 billion from the Hub Power Company, Rs10.4 billion from the Kot Addu Power Company, Rs1.8 billion from PIA, Rs1.23 billion from Pakistan Railways, Rs1.23 billion from independent power producers, and Rs9.08 billion from the Karachi Electric Supply Company.
On the other hand, PSO is to pay Rs83.6 billion to KPC and other international fuel suppliers in order to retire L/Cs, and another Rs35.2 billion to local refineries.
Published in The Express Tribune, March 2nd, 2013.
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Cash-strapped oil marketing giant Pakistan State Oil (PSO) has defaulted on international fuel supply payments, and suppliers have started imposing fines over the late payment of their dues, The Express Tribune has learnt.
“PSO has technically defaulted to fuel suppliers and the Kuwait Petroleum Corporation (KPC) has imposed a fine of $10,000 on the entity last week,” sources told The Express Tribune; adding that the State Bank of Pakistan had raised questions on the payment made on account of the fine to KPC. Officials also said that other international fuel suppliers were now charging late payment surcharges from PSO.
PSO is facing pressure financing its operations due to the non-payment of its dues. It received only Rs10 billion on Thursday last week when it required Rs15 billion to avoid a default on international payments on maturing Letters of Credit (L/Cs).
“PSO has received another Rs13.9 billion on Tuesday,” sources added. “An amount of Rs 10 billion is still required in order to retire L/Cs opened for the month of February,” sources said.
They said that PSO requires Rs50 billion to retire all L/Cs for the month of February, and has to pay nearly Rs120 billion to clear back L/Cs for the import of all petroleum products in the month of March. Sources added that the prime minister has approved the release of Rs40 billion to pay to oil and gas companies.
Sources revealed that banks are unwilling to provide loans to PSO because of its poor financial health. CitiBank and Standard Chartered have already refused to open L/Cs for the import of petroleum products since October 2012 due to the poor financial position PSO finds itself in. Sources also said that PSO has exhausted its limit of banks loans, and banks are therefore not ready to give more money for the import of oil.
“Had banks still been willing to extend loans to PSO, no payment would have been delayed to international fuel suppliers,” sources added.
PSO has been sending SOS messages to the Government of Pakistan, the power sector, Pakistan International Airlines (PIA) and Pakistan Railways for the past few weeks; however, no substantial payment has been forthcoming that may help it avoid further defaults.
As of February 26, PSO is to receive Rs50.8 billion from the Water and Power Development Authority, Rs55.8 billion from the Hub Power Company, Rs10.4 billion from the Kot Addu Power Company, Rs1.8 billion from PIA, Rs1.23 billion from Pakistan Railways, Rs1.23 billion from independent power producers, and Rs9.08 billion from the Karachi Electric Supply Company.
On the other hand, PSO is to pay Rs83.6 billion to KPC and other international fuel suppliers in order to retire L/Cs, and another Rs35.2 billion to local refineries.
Published in The Express Tribune, March 2nd, 2013.
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