TFCs: A timely shot for energy companies

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Pakistan State Oil (PSO) is likely to benefit by Rs27 billion, KAPCO by Rs17 billion and HUBCO by Rs15.5 billion directly from the government’s decision of converting loans of the energy companies into Term Finance Certificates (TFCs) by the end of this month. However, the full impact on PSO is anticipated to be much larger owing to pass through from power companies. This step by the government will be a timely shot in the arm of the energy companies, as the circular debt has substantially restricted their liquidity position. Power Holding Company (PHC) is likely to issue these papers to the banks against the portion of their outstanding debt. However, the analysts remain wary of accumulation of circular debt going forward.