Day: December 14, 2021

Sui Northern Gas Pipelines Ltd (SNGPL) lost claims of approximately Rs. 19 billion against National Power Parks Management Company Pvt. Ltd. (NPPMCL) in two arbitrations before the London Court of International Arbitration (LCIA).

According to the details, NPPMCL owns and operates two 1200 MW RLNG based power plants in Punjab, situated in Haveli Bahadur Shah, Jhang, and Balloki, Sheikhupura, and procures RLNG for power generation from SNGPL.

The disputes arose when in May 2018, SNGPL raised take or pay invoices against NPPMCL and subsequently proceeded to recover Rs. 10.37 billion from the gas supply deposit maintained by NPPMCL under its Gas Supply Agreements.

Disputing SNGPL’s claims, NPPMCL contested the assertions of SNGPL on multiple forums and ultimately submitted the disputes for final resolution to the London Court of International Arbitration (LCIA) as per the agreed mechanism under the Gas Supply Agreements.

The sole arbitrator issued its final awards related to these disputes earlier this week, holding that the documents produced by SNGPL in support of its claims “are little more than selfserving evidence.” The sole arbitrator also held that SNGPL wrongly drew down the amount of approximately Rs. 10.37 billion and directed SNGPL to pay the same to NPPMCL with interest from the date of recovery until full payment, which amounts to approximately Rs. 15.3 billion.

In addition, the sole arbitrator also dismissed the counterclaims raised by SNGPL against NPPMCL, including an additional claim of Rs. 4.38 billion, and noted that SNGPL had failed to discharge “its burden of proving their quantum.”

The final hearing for the LCIA Arbitrations initiated by NPPMCL took place from 20 September to 25 September 2021.

The hearing was attended by officials of NPPMCL and SNGPL and expert witnesses, including the renowned power sector expert heading AMA Energy Services, Mr. Abid Latif Lodhi, and gas sector expert, Mr. Mustafa Abdullah. NPPMCL was represented in the LCIA arbitrations by ‘Cornelius, Lane & Mufti, Advocates and Solicitors’ (CLM). The team from CLM comprised of Barrister Munawar-us-Salam, Barrister Waleed Khalid, Barrister Usman Akram Sahi, Barrister Faizan Daud, Amna Salam, and Asad Ullah Khan.

Update:

In a press release, the Sui Northern Gas Pipelines Limited (SNGPL) said that “misleading reports” are circulating regarding two arbitration awards involving SNGPL and NPPMCL.

“It must be noted that arbitration and awards are private and confidential. A selective and misleading disclosure has been made part of the awards. SNGPL will not violate the confidentiality commitment enshrined in the relevant rules, however, it has been constrained to respond given the ongoing speculation,” reads the statement.

It said that under the terms of the license granted to SNGPL by the Oil and Gas Regulatory Authority (OGRA) read with the decision of the Economic Coordination Committee (ECC) of the cabinet dated May 11, 2018, and in line with the tariff regime in vogue, the company after exhausting all the legal remedies available under the law, will take up the matter with the OGRA for determining the impact of the case in revenue requirement of the company.

“Since the Take or Pay revenues billed to NPPMCL were earlier offered to OGRA as an operating revenue, therefore, reversal of the same, if any, may not have any material adverse impact on the profitability of the company”, the statement added.

For the record, the arbitrations arose from a decision of an expert who was a retired Supreme Court Judge who had decided all issues in favor of SNGPL, it said.

Source: Pro Pakistani

The Pakistani Rupee (PKR) finally held out against the US Dollar (USD) after five consecutive days of losses, and appreciated by one paisa against the greenback in the interbank market today. It hit an intra-day low of Rs. 178.20 against the USD during today’s open market session.

The PKR appreciated by 0.01 percent against the USD and closed at Rs. 177.88 today after it posted losses of 18 paisas and closed at an all-time low of Rs. 177.89 in the inter-bank market on Monday, 13 December.

Today’s holdout offers a temporary breather for the exchange ledger as numerous financial indicators, including the Central Bank’s Monetary Policy Decision and related inflationary outliers that have made little room for the rupee to settle at comfortable levels.

Although today’s holdout looked brief from the outset, the local unit’s drop has halted on the back of rising uncertainty about the State Bank’s monetary policy decision for another interest rate hike.

In extension, the Asian Development Bank (ADB) has forecast a higher inflation projection for Pakistan, saying that adjustments to energy tariffs and higher global commodity prices are expected to exert upward pressure on domestic prices.

Moreover, with $2.4 billion of inflows during November, workers’ remittances have also continued their incredible streak of remaining above $2 billion since June 2020. In terms of growth, on a Year-over-Year basis, remittances increased by 0.6 percent in November 2021.

It is expected that the inflows of remittance may be volatile and will improve in the coming months due to the incentives under the newly launched Sohani Dharti Remittance program. The reopening of business in the global market and the resumption of the export of manpower to various countries might have a positive impact on the growth front.

Regarding the PKR’s interbank performance during the trading hours earlier today, the former Treasury Head of Chase Manhattan Bank, Asad Rizvi, said, “In today’s MONETARILY POLICY, SBP will increase its INFLATION TARGET from 7-9% to DOUBLE-DIGIT[s]. In November there was plenty of room for upward adjustment, but SBP knowingly did not act to calm the sentiment. However, [a] 75-100bps hike may not be enough to meet IMF demand”.

The PKR maintained its blanket performance against the other major currencies as well and posted gains in the interbank currency market today.

It gained 41 paisas against the Euro (EUR), 20 paisas against the Malaysian Ringgit (MYR), and held out against the Chinese Yuan (CNY).

It also held out against both the UAE Dirham (AED) and Saudi Riyal (SAR) in today’s interbank currency market.

Besides this, the PKR posted gains of 80 paisas against the Canadian Dollar (CAD), 56 paisas against the Pound Sterling (GBP), and 45 paisas against the Australian Dollar (AUD).

Source: Pro Pakistani

The State Bank of Pakistan’s (SBP) Monetary Policy Committee (MPC) on Tuesday raised the policy rate by 100 basis points to 9.75 percent from 8.75 percent, according to a statement issued by the bank.

The central bank said that monetary policy settings are likely to remain broadly unchanged in the near-term now, having already lifted the policy rate by 150 basis points at its meeting last month.

In its Monetary Policy Statement, the central bank said that the decision to raise the policy rate was taken to “counter inflationary pressures and ensure that growth remains sustainable”.

Since the last meeting on 19th November 2021, “indicators of activity have remained robust while inflation and the trade deficit have risen further due to both high global prices and domestic economic growth,” the SBP said in the statement.

In November, headline inflation increased to 11.5 percent year-on-year. Core inflation in urban and rural areas also rose to 7.6 and 8.2 percent, respectively, reflecting domestic demand growth, it said.

“On the external side, despite record exports, high global commodity prices contributed to a significant increase in the import bill. As a result, the November trade deficit rose to $5 billion based on Pakistan Bureau of Statistics (PBS) data”, the statement said.

The SBP said that recent data releases confirm that the emphasis of monetary policy on moderating inflation and the current account deficit remains appropriate.

The central bank said that high-frequency indicators of domestic demand released since the last meeting, including electricity generation, cement dispatches, and sales of fast-moving consumer goods and petroleum products, and continued strength in imports and tax revenues suggest that economic growth remains robust.

The outlook for agriculture continues to be strong, supported by better seed availability and an expected increase in the area under wheat cultivation, it noted.

The SBP said robust growth in sales tax on services also suggests that the tertiary sector is recovering well.

“While some activity indicators are moderating on a sequential basis, partly as a result of recent policy actions to restrain domestic demand, growth this fiscal year is expected to be close to the upper end of the forecast range of 4-5 percent,” the statement said.

The SBP said that the emergence of Omicron poses some concerns but at this stage, there is limited information about its severity. Pakistan had successfully coped with multiple waves of the coronavirus, which supported a positive outlook for the economy, it noted.

It said that despite strong exports and remittances, the current account deficit has increased sharply this year due to a rise in imports, and recent outturns have been higher than earlier expected.

“Around 70 percent of this increase in imports stems from the sharp rise in global commodity prices, while the rest is attributable to stronger domestic demand. Due to the higher recent outturns, the current account deficit is projected at around 4 percent of GDP, somewhat higher than earlier projected,” the statement said.

SBP said that in the near term it expects the monthly current account and trade deficit figures to remain high, however, they are expected to gradually moderate in the second half of fiscal year 2022 (FY22) as global prices normalize with the easing of supply disruptions and tightening of monetary policy by major central banks.

Calling the monetary policy response timely, it said that recent policy actions to moderate domestic demand-including policy rate hikes and curbs on consumer finance-and proposed fiscal measures, will help moderate growth in import volumes through the rest of the year.

The central bank said that the current account deficit is expected to be fully financed from external inflows. As a result, foreign exchange reserves will remain at adequate levels through the rest of the fiscal year and resume their growth trajectory as global commodity prices ease and import demand moderates.

The SBP noted that July-November FY22, fiscal revenue growth has been strong, driven by a broad-based and above-target increase in Federal Board of Revenue (FBR) tax collections. However, lower petroleum development levy (PDL) collection led to a decline in non-tax revenues, it added.

It said that development spending and subsidies and grants have increased significantly during this period.

“The government intends to introduce legislation to increase revenues through elimination of certain tax exemptions and reduce current and development expenditures. These measures would help moderate domestic demand, improve the current account outlook, and complement recent monetary policy actions,” the statement said.

It said that despite moderation in consumer loans, overall credit growth has remained supportive of growth. The statement called the significant increase in secondary market yields, benchmark rates and cut-off rates in the government’s auctions “unwarranted”.

The SBP said that it expects inflation to average 9–11 percent in the current fiscal year.

“As global commodity prices retrench, administered price increases dissipate, and the impact of demand-moderating policies materializes, inflation is expected to decline toward the medium-term target range of 5-7 percent during FY23,” it added.

Source: Pro Pakistani

The government has been given a suggestion to impose a sales tax on the actual sales price of sugar to deal with possible tax evasion.

According to details, a report containing various suggestions about the sugar sector was presented to the federal cabinet in its meeting held with Prime Minister Imran Khan in the chair on Tuesday.

The report suggested imposing sales tax on actual sales prices of sugar through an SRO by the Federal Board of Revenue (FBR).

The report highlighted the possible cartelization in the sugar sector, wherein the association of sugar mills owners were generally frontrunners of cartels. The report read, “Section 38 of Competition Act 2010 may be amended suitably, adding a minimum penalty of Rs. 75 million for violations by the associations. The penalty may be enhanced as a certain percentage of the combined turnover of the member undertakings.”

“The Competition Appellate Tribunal needs to be revised and made fully functional with regular members. This will end delays in decisions under the competition law,” added the report.

The Securities & Exchange Commission of Pakistan (SECP) has also been given a suggestion to amend the law for allowing an audit of cost accounts of the company. The report said that administrative ministries should have the power to request to SECP for cost audit for required commodities.

To deal with possible Satta [gambling/betting] in sugar, the report said, “the inspection regime should be strengthened to ensure that no sugar remains unlifted after the expiry of the forward contract.” It added that FBR should implement an IT-based track and trace system and there should be mandatory registration of brokers, sugar dealers, wholesalers with NTN and STRN linked to their bank accounts with mandatory registration of godown and automated online inventory management system. FBR should also develop a digital dashboard of stocks of sugar, according to the report.

The provincial governments, proposed the report, should ensure that no hoarding is possible. It maintained that the State Bank of Pakistan should issue advisory to commercial banks to inspect their pledged sugar stocks and to verify their presence with the collaborations with FBR and Cane Commissioners. Joint inspection teams of concerned banks, SBP, FBR, and provincial governments should be formed to verify the pledged stock after every three months, the report further said and added that the matter might be referred to Federal Investigation Agency in case of any misappropriation.

The report also suggested that the government should enhance financial penalties for late sugar crushing, and a fine of Rs. 5 million along with 12-month imprisonment should be imposed in this connection.

Source: Pro Pakistani

The Pakistan Stock Exchange (PSX) has witnessed eight initial public offerings (IPOs), including two GEM Board offerings, in 2021. These are the record highest offerings after 2015, which have raised Rs. 20 billion, according to a research report by Topline Securities.

In 2015, there were eight offerings, totaling Rs. 116 billion, raised through primary and secondary issues including the Government of Pakistan’s secondary offering of Habib Bank (HBL), which had added Rs. 102 billion. Throughout the year, the market was enthralled by these offerings, which were all oversubscribed.

Octopus Digital (OCTOPUS) had the highest return of 46 percent after its debut, followed by Citi Pharma (CPHL) with a return of five percent. On the other hand, Pak Agro (GEMPAPL) and Panther Tyres (PTL) saw 35 percent and 33 percent declines respectively.

Interestingly, despite the benchmark KSE-100 index’s lackluster performance in 2021, which witnessed a two percent decline in PKR terms and a 12 percent decline in dollar terms, these offerings attracted a large amount of investor interest in 2021.

Outlook for 2022: If the macroeconomic situation in Pakistan stabilizes after the resumption of the International Monetary Fund (IMF) program, Topline Securities suggests that the market will continue to see new offerings in 2022. Still, there are a few IPOs in the pipeline as companies plan to expand their capacities, however, their outlook will depend on the overall economic and market conditions in 2022.

On the mainboard, six companies raised funds. These companies represented various sectors including Auto, Footwear, Technology & Communication, Pharmaceutical, Packaging, and Logistics.

Panther Tyres (PTL): PTL was the first IPO of 2021 and it came at a strike price of Rs. 65.8. The company offered 40 million shares and raised Rs. 2.6 billion to fund its tire capacity expansion.

Service Global Footwear (SGF): SGF raised Rs. 2.1 billion by selling 41 million shares at Rs. 53.2 strike price. The goal of this IPO was to acquire a 19 percent shareholding in Service Long March Tyres (PVT) Limited (SLM), bringing SGF’s stake in SLM to 51 percent. SLM is the first business in Pakistan to introduce modern TBR [Truck & Bus Radial] tire manufacturing technology.

Citi Pharma (CPHL): CPHL raised Rs. 2.3 billion by selling 73 million shares at a strike price of Rs. 32. The goal of this issuance was to increase the company’s paracetamol capacity and expand its product line. In addition, the corporation planned to grow its formulations business and build a state-of-the-art 50-bed hospital in Gulberg, Lahore.

Pakistan Aluminum Beverage Cans Limited (PABC): PABC raised Rs. 4.6 billion via a 94 million share sale at a strike price of Rs. 49. The main goal of this Offer for Sale was to get PABC listed on PSX and expand the company’s shareholder base. The money was given to Ashmore, a UK-based company that planned to sell 26 percent of its 51 percent ownership in the auction.

Air Link Communication Limited (AIRLINK): The largest IPO of 2021 was AIRLINK, which raised Rs. 6 billion from investors by selling 90 million shares at a strike price of Rs. 71.5. The goal of this IPO was to raise money for more retail stores and to provide working capital for future expansion.

Octopus Digital Limited (OCTOPUS): OCTOPUS was perhaps the most popular IPO of the year, with over Rs. 30 billion worth of bids received against a total offering size of Rs. 1.1 billion (27.3 million shares offered at Rs. 40.6). The company needed money to create intellectual properties (IPs) and offer numerous digital dashboard platforms, so it needed to raise money. It was the best-performing IPO of the year, with a 46 percent return.

SME Listings

Companies began offering shares through the GEM Board, which resulted in significant growth for PSX. The GEM Board’s goal was to promote SMEs, greenfield projects, and technology businesses to list on the exchange and raise finance. Previously, SMEs found it difficult to list on PSX, but with fewer regulatory criteria, the GEM Board witnessed two listings in 2021.

The two listings on the GEM Board were Pak Agro Packaging (GEMPAPL) and Universal Network Systems Limited (GEMUNSL).

Pak Agro Packaging Limited (GEMPAPL): GEMPAPL, Pakistan’s first GEM Board listing, raised Rs. 198 million by selling 8 million shares at a strike price of Rs. 24.75 per share, raising Rs. 198 million. The goal of this IPO was to increase fish-net manufacturing capacity by 600 MTPA while also meeting working capital requirements.

Universal Network Systems Limited (GEMUNSL): The first e-commerce and tech-enabled logistics company to be listed on PSX was GEMUNSL. The company raised Rs. 446 million by selling 6.9 million shares at a price of Rs. 65 each, for a total of Rs. 446 million. The goal of this IPO was to raise capital to expand the company’s national network and invest in technology.

Source: Pro Pakistani

Federal Minister for Information and Broadcasting Fawad Chaudhry on Tuesday warned that “Pakistan will have no gas in years to come”, as the resource was depleting by nine percent every year.

Briefing the media after the cabinet meeting, the Minister said the government will have to restructure its gas system, as due to the depleting gas resources, there will be no gas in the country in the coming years.

He disclosed that the government was providing gas to 28 percent of people, living in the major cities, at subsidized rates, whereas the remaining 78 percent were using liquefied petroleum gas (LPG) and coal.

The minister said the people living in big cities will have to change their habits in terms of the usage of gas. “This trend will not continue for long,” he said.

He said that the government will issue licenses to 10 companies to import gas.

Chaudhry said the cabinet has allowed the replacement of old design currency notes of Rs. 5, 10, 50, and 100 for another year, contrary to six years proposed by the State Bank of Pakistan (SBP).

The federal minister said that inflation has declined in the last three weeks. He mentioned that there has been a visible decrease in the prices of tomatoes and potatoes while the prices of sugar and flour have also remained stable.

He criticized the Sindh government for not controlling the prices of basic commodities, especially in Karachi. He said the prices of flour and sugar were higher in Karachi compared to the rest of the country, adding that the price of flour was Rs. 1,347 per 20 kilograms in Karachi, compared to Rs. 1,100 in other cities.

He added that sugar was being sold for Rs. 97 per kilogram in Karachi compared to Rs. 90 in other cities. He asked the Sindh government to control the prices of milk, flour, and sugar in Sindh, especially in Karachi, as the metropolitan city contributed 40 percent to the sensitive price indicator.

He informed that the Prime Minister has directed Federal Ministers Asad Umar and Zubaida Jalal to visit Gwadar to listen to the issues of the people.

Source: Pro Pakistani