The Cabinet Committee on Energy (CCOE) is likely to approve transfer of shares of Guddu and Nandipur power plants with management control to Pakistan State Oil (PSO) under an equity swap arrangement to clear circular debt.

Sources told The Express Tribune that a deal would be struck to cover PSO’s receivables from the two power plants. They said that the Cabinet Committee on Privatisation (CCOP) had given directives for placing a summary before the cabinet body on energy for formal approval.

PSO was supplying fuel to the two power plants. But they failed to make due payments to the state-run oil marketing company.

The circular debt in the energy sector amounts to Rs1.6 trillion. The government is currently working on an inter-company equity swap model to clear the circular debt. The government had formed a committee to consider options to clear the debt. One option was the equity swap arrangement.

Officials said that the government would conduct due diligence through an external expert to determine the swap price for Guddu/ Nandipur power plants.

PSO had also proposed to the government that it should transfer its shares in Mari Petroleum, Oil and Gas Development Company (OGDCL) and Pakistan Petroleum Limited (PPL) under an equity swap arrangement to cover PSO receivables.

The proposed arrangement will help clear the circular debt amounting to Rs100 billion. This plan will create fiscal space within the energy supply chain.

PSO was facing a default-like situation due to its all-time high receivables worth over Rs300 billion from different entities. The power sector was the major defaulter.

The company paid Rs15 billion in interest payments last year. It also eroded profitability of the company.


The government faces a setback in the case of divesting shares in OGDCL and PPL as the Petroleum Division has objected to the divestment through public offering.

Following a decision of the government to divest 10% shares, share values of the two companies had declined sharply.

The Privatisation Commission had informed the CCOP that the Petroleum Division had opposed the divestment through a public offering.

The federal government in August last year had approved the offer of a 7% stake in OGDCL and 10% in PPL through public offering. However, the CCOP noted that the cabinet had already notified the decision of offloading shares in the two energy companies through public offering.

Petroleum Division officials were of the view that brokers had manipulated share prices of the two companies that stood at the lowest levels in the market.

They said that the government should offer shares of the two companies to strategic investors to fetch a better price. They added that the strategic investors would also commit to investing in oil and gas exploration companies.

Hence, the decision to offer shares to the strategic investors will also bring investment in addition to a better price offer.

They said that it was not an ideal time as share prices were very low. In 2014, share prices of these companies were double but the past government did not offload the shares. Now, share prices have been reduced to less than half.

Heavy Electrical Complex

The CCOP had also given directives to resolve the pending issues of Heavy Electrical Complex (HEC) to complete the transaction in time.

At present, the government is facing four issues in the HEC transaction. These issues relate to employees, settlement of obligations towards HEC employees under laws and Peshawar High Court (PHC) order, amicable settlement of liabilities compounded towards KPEZDMC and transfer of land located in Taxila.

The Ministry of Industries has been tasked to resolve these issues to expedite the transaction of the complex.

Published in The Express Tribune, March 30th, 2021.

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