ECC seeks SNGPL Cash Flows Projections
By Salman Khan
Islamabad: The Economic Coordination Committee (ECC) has sought the projections of cash flows of Sui Northern Gas Pipeline Limited (SNGPL) to retire Rs 50 billion bank loans secured for payment of RLNG.
ECC has directed the Petroleum Division to provide projections of cash flows to ascertain the capacity of the SNGPL to retire the loan on expiry of the term.
In a recent meeting of ECC, the ECC noted that short term borrowing from Commercial Banks was solicited to meet the financing needs, despite the fact that sufficient cash flow was not anticipated for the period.
The ECC also expressed concern that instant case had been moved after one year of expiry of the financing. It was explained that ‘NGPL would be able to pay off the amount in one year.
The Petroleum Division further informed that the cash flows of Energy Management Companies had also shown considerable improvement, and that the sufficient cash flows would be available with the Petroleum Division to retire the lost. The ECC directed the Petroleum Division to share projection of SNGPL cash flows with the ECC in its upcoming meeting.
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The Petroleum Division briefed that the ECC while considering a summary submitted by the Petroleum Division on 14.03.2023 inter-ala approved that Finance Division to provide sovereign guarantee along with letter of comfort in favor of M/ SNGPL for commercial borrowing of Rs.50 billion on immediate basis.
Pursuant to the decision of the ECC, Finance Division issued sovereign guarantee on 04-7-2023 in favor of Allied Bank Limited (ABL), Faysal Bank Limited (FBL) and National Bank of Pakistan (NBP) amounting to Rs. 20 billion, 20 billion and 10 billion respectively against running financing facilities obtained by M/s Sui Northern Gas Pipelines Limited (SNGPL) on account of RLNG payments to Pakistan State Oil (PSO) and Pakistan LNG Limited.
The tenor of above referred financing facilities was one year which had been expired on 12 April, 2024. Currently, Sui Northern Gas Pipelines Limited (SNGPL) is facing severe liquidity crises due to huge amount being stock up in circular debt from various stakeholders, subsidies to export/fertilizer sector, RLNG diversion to domestic sector, financing cost and was not in a position to refund said amount to lender banks, hence requested for extension of validity period of the said guarantees for on year from the expiry dates.
Finance Division had conveyed that Petroleum division submitted a summary for ECC for seeking approval of extension in sovereign guarantee and SNGPL may be advised to apprise the form on the plan that envisage the servicing and retiring of Guaranteed facility for FY 2024-25.
In response to Finance Division’s said letter, SNGPL said that their ability for repayment of facility was compromise due to gas circular debt and recent consumer pace.
SNGPL had submitted the following position for repayment of loan and settlement on circular debt stock by GoP.
It proposed to convert the running finance facility into a long term loan with a period of 5-10 years
The Petroleum division further briefed that the instant matter was not a new case for allocation of GoP guarantee rather it is an extension in the validity period of already issued guarantees.
The summary was circulated to Finance Division for comments. Finance Division had endorsed the proposal for extension in validity period of already issued sovereign guarantee amounting to Rs.50 billion in favor of SNGPL for one-year.
Finance Division had also stated that this extension would be construed as a new financing facility and the Petroleum Division may direct SNGPL to ensure the Finance guidelines on issuance of sovereign guarantee dated 03.02.2020 are strictly complied with while renewing financing facilities for another year, after its approval.
The Petroleum Division proposed that the ECC may consider approval of extension in validity period for one-year we.f 13th April, 2024 of already issued sovereign guarantees of Government of Pakistan in favor of Allied Bank Limited (ABL), Faysal Bank Limited (FBL) and National Bank of Pakistan (NBP) amounting to Rs.20 billion, 20 billion and 10 billion respectively against running finance/musharakah facilities enabling SNGPL to remain afloat in its payment obligations to LNG suppliers as well as to avoid any threat towards breakdown of LNG supply.
The Economic Coordination Committee (ECC) of the Cabinet considered the summary regarding “Extension in Validity Period of Sovereign Guarantees issued against Running Finance/Musharakah Facility of PKR 50 billion obtained from Allied Bank Limited, Faysal Bank Limited and National Bank of Pakistan for RLNG Payments” and approved the extension in the validity period of the Sovereign Guarantee upto June, 2026, with the stipulation that it shall be a new facility and that the Petroleum Division shall comply with the guidelines of the Finance Division regarding issuance of sovereign guarantee.
