ISLAMABAD: The Oil and Gas Development Company Limited (OGDCL) has imposed stringent conditions on the proposed rollover of an Rs 82 billion term finance facility with Power Holding Limited (PHL) until June 2024.
In a letter to the Secretary of the Power Division, Managing Director/CEO Ahmed Hayat Lak referred to the long-overdue Terms Finance Certificates (TFCs) of Rs 82 billion issued by PHL to OGDCL in 2012 under a Government of Pakistan-backed partial settlement of circular debt. The TFCs bear a markup of KIBOR +1%, payable semi-annually, with liquidated damages (LDs) at 20% per annum for delayed payments. The TFCs were originally set for a 7-year tenure with a 3-year grace period, but PHL defaulted on payments.
The Economic Coordination Committee (ECC) extended the facility’s tenor from seven to ten years in 2017 without OGDCL’s consent, yet PHL failed to comply, leaving Rs 82 billion in principal, Rs 92.906 billion in markup, and Rs 71.901 billion in LDs unpaid as of June 30, 2024.
In response to a draft ECC summary from June 4, 2024, which recommended rolling over the facility to June 30, 2024, OGDCL outlined its conditions in a June 7, 2024 letter. OGDCL insisted on board approval for the waiver of LDs, suggested that the entire markup be paid by the settlement date to avoid a financial loss of Rs 9.2 billion under IFRS 9, and emphasized linking the waiver of LDs to full compliance by PHL with the proposed settlement terms.
Despite PHL’s draft addendum aligning with the ECC summary, OGDCL maintained that LDs should apply if PHL defaults. OGDCL expressed concerns over deviations in the approved ECC summary, which changed the markup repayment start date from July 2024 to July 2025, potentially resulting in a Rs 24.242 billion financial loss for 2023-24.
OGDCL’s board committee, meeting on June 24, 2024, requested that the Power Division consider either full markup payment by the settlement date or installment payments starting July 2024, with LDs imposed for any default.
The Finance Division has authorized the payment of Rs 82 billion to enable PHL to repay OGDCL in FY 2023-24, following the ECC’s decision on June 13, 2024.
