Pakistan State Oil (PSO) is actively pursuing a strategy to acquire stakes in public-sector energy companies to offset the significant debts accrued by various entities, including the national airline.
The strategy is part of a broader effort to address the growing unresolved debt problem within the nation’s power sector, a critical issue highlighted by the International Monetary Fund (IMF). Debt resolution is imperative as the government prepares to enter negotiations for a new long-term loan agreement with the IMF this month.
In an interview with Reuters, Syed Muhammad Taha, the MD and Chief Executive (CEO) of PSO, outlined the plan, stating, “We intend to pursue competitive bidding to acquire stakes, which would then be used to offset PSO’s receivables.”
The government owns approximately 25% of PSO, making it the largest shareholder, while private investors hold the remainder.
As of June 2023, the IMF reported that Pakistan’s circular debt within the power and gas sectors had reached Rs4.6 trillion, accounting for about 5% of GDP. Circular debt arises from non-payments within the power sector chain, impacting consumers, distribution companies, power plants, and ultimately, PSO as the fuel supplier.
Since the government holds majority shares in many companies, fiscal constraints make resolving these debts challenging. The government has increased energy prices to mitigate debt accumulation, although the outstanding debts remain unresolved.
Taha noted that IMF-led reforms have already improved the sector’s payment capabilities, a trend that is expected to continue.
PSO’s receivables from various government agencies and autonomous bodies currently stand at Rs499 billion, with the largest portion owed by Sui Northern Gas, a government-majority-owned entity.
According to PSO’s last annual report, the ongoing debt crisis remains a serious concern for the company. Taha mentioned that PSO had proposed acquiring full ownership or stakes in power plants in Nandipur and Guddu, as well as a government-owned holding company for power generation.
On the privatization of Pakistan International Airlines (PIA), Taha revealed that PSO is part of a broader settlement framework which could involve a “clean asset swap” and acquiring stakes in PIA’s non-core assets like property. The government plans to offer between 51% to 100% stake in the financially troubled airline as part of public sector reforms mandated by the IMF.
Reports from March indicated that PIA’s outstanding principal debt to PSO for fuel supply was approximately Rs15.8 billion. PSO has a network of 3,528 retail outlets, 14 airport refuelling facilities, 19 depots and activities at two seaports. It has the largest storage capacity in the country, at 1.14 million tonnes.
 is negotiating with the government to acquire stakes in public sector energy companies to counterbalance the large debts owed by entities such as the national airline, aiming to address the significant circular debt in the power sector as reported by the IMF.){kind=link}