Govt to pay Rs82bn under circular debt settlement: OGDCL

KARACHI: The government has given the green light to the payment of Rs82 billion to Oil and Gas Development Company Ltd (OGDC), which is the principal amount of the company’s investment in privately placed term finance certificates (PPTFC) issued by Power Holding Company Pvt Ltd (PHL), according to the announcement by the company on the PSX on Thursday.

The company secretary of the OGDCL stated, “As part of the circular debt settlement plan, the government has approved the payment of Rs82 billion to Oil and Gas Development Company Limited, representing the principal amount of the company’s investment in privately placed term finance certificates (PPTFC) issued by Power Holding (Private) Limited (PHL).”

In addition to this, the government has also approved the repayment of interest of Rs92 billion in 12 equal instalments, commencing from July 2025. “As part of settlement, the OGDC has agreed to waive off Rs72 billion on account of liquidated damages on government directives. The OGDC had subscribed to these certificates for settling its overdue receivables from oil refineries and gas companies,” said the notice.

According to Arif Habib Limited Research, the government in 2013 approved the issuance of TFCs amounting to Rs82 billion by Power Holding Limited (a government-owned entity) for partial circular debt settlement (overdue receivables from oil refineries and gas companies).

TFCs, which were initially issued for seven years with a 3-year grace period, were extended further to 10 years’ period with a grace period of six years in 2017.

As of March 24, the principal amount and the interest receivable arrived at Rs170 billion.“Given the government has granted the approval of funds to the OGDC, a cashflow impact of Rs19.07/share is expected, however, the OGDC also needs to settle government payables on account of royalty amounting to Rs31 billion (Rs7.11/share), we view,” stated AHL.