September 10, 2021 (MLN): Pakistan State Oil Company Limited (PSO) has aimed to reach a 50% market share in Oil and Marketing Companies (OMC) space as it expects MS and HSD demand to grow by around 5% each during FY22. Whereas the volumes for FO are expected to remain unchanged for FY22, says management of the company during a corporate briefing session held yesterday.
For this purpose, the company has increased its storage capacity by 50k tons at Machike which will come online in Dec’21. The company has also set Rs6bn – 7bn as CAPEX
for expansion projects.
As per the management, the company is also keen on growing its share in the high-margin lube oil market, which contributed Rs1bn to revenues in FY21.
To recall, the company posted a record-breaking gross revenue of Rs1.4 trillion and the highest ever profit after tax of Rs29.1 billion for FY21 after a loss after tax of Rs6.5 billion in the preceding year. The increase in profits was attributable to higher volumetric sales, 24%YoY decline in finance cost, and better margins on HSD and MS. Meanwhile, other income also increased by 84%YoY.
According to the key takeaways of the briefing covered by Insight Securities, during the year, connections of operational areas to PSO’s white oil pipeline were completed, launched a fully integrated oil terminal at Kemari, commissioned 43k MT of new storage capacities, and rehabilitated 131k MT of existing capacities. Upgradations in existing capacities include converting 180k MT (out of 360k MT) of furnace oil storage to white oil storage capacities (mainly HSD), the rest of the conversion is expected to be completed during the
present fiscal year.
Regarding market presence, management commented that the company had opened 71 new retail outlets during the period alongside 30 new C-stores (Convenience stores) and 13 additional QSRs (Quick Service Restaurants). PSO is the first OMC in the country to launch environment-friendly EURO-5 products (HOBC/MS/HSD). The company also launched its first EV charging unit in Islamabad.
As per the management, Power receivables fell during the year from Rs98.8bn to Rs85.4bn, majorly due to payments recovered from HUBCO, while receivables from SNGP (RLNG) and PIA stood at Rs98.6bn and Rs12.9bn, respectively. Payments from HUBCO stood at Rs24bn of which around Rs8.2bn were Late Payment Surcharge (LPS), total outstanding LPS stand at Rs100bn as of FY21. During the final quarter of FY21, PSO incurred massive financial charges due to late payments charges towards refineries and increased borrowings.
With regards to refinery policy, the management expected it to be finalized and approved within 1-2 weeks and anticipates that the new policy would be beneficial for all players in the energy chain.
Regarding PRL, the company informed that it will set up two sets of refineries, new and pre-owned with an estimated cost between $500mn to $1.2bn and space allocation of 200 acres. Furthermore, the government has extended the time for refineries to submit their proposals regarding up-gradation plans (the previous deadline was Dec’21), the company said.
On the circular debt front, the company is exerting pressure on the government for a timely resolution as the management acknowledges that circular debt is a smear on their balance sheet. Management believes that the problem is fundamentally from the gas sector and the proposed ‘Weighted Avg Cost of Gas’ (WACG) plan may be a glimpse of hope to make amends. Although there has been a push back from the provinces, mainly Sindh and KPK regarding its implementation, it added.
Moreover, the company plans to install EV charging stations on motorways initially. In this regard, management informed that EV technology requires a hefty investment, a single charging unit (European standard) costs Rs20mn, hence selling electricity at these costs are unfeasible. For this reason, NEPRA needs to step up and work out a tariff specifically for electric charging units. There are 3 charging unit installations in the plan for the M2 motorway during FY22, management said.
Copyright Mettis Link News
26793
