2. • Arif Mustafa (BBA Finance, SZABIST)
• Raza Ravjani (ACCA till date)
• M. Raza Banani, BBA(Finance) 3rd year, ACCA till
date (Iqra University)
• Soomal Memon, (ACCA Finalist)
PSO Winter Internship program 2010 (FR-MIS) 2

3. • What is Circular Debt?
• Causes of Circular Debt.
• Entities involved in Circular Debt.
PSO Winter Internship program 2010 (FR-MIS) 3

4. • Facing problems in cash inflows.
• One entity influencing the other.
• Every participant is debtor as well as a creditor.
4PSO Winter Internship program 2010 (FR-MIS)

5. 5
PSO Winter Internship program 2010
(FR-MIS)
Source : The Lahore Journal of Economics, ‘Dynamics of Circular Debt in Pakistan and its resolution’
by Syed Sajid Ali and Sadia badar

6. 6
PSO Winter Internship program 2010
(FR-MIS)
Source : JS Global Capital Limited ‘PSO company update’

7. • Oil Prices
• Government Policies
• Cash flows of PEPCO
 Recovery from FATA
 Recovery from government institutions.
 Recovery from KESC
7
PSO Winter Internship program 2010
(FR-MIS)

8. 8PSO Winter Internship program 2010
(FR-MIS)
Source: The Lahore Journal of Economics, ‘Dynamics of Circular Debt in Pakistan and its resolution’ by Syed Sajid Ali and
Sadia badar
June 2006
November 2008
August 2006
August 2008
June 2007
June 2008
July 2008
PEPCO was forced to obtain bank loans against government
guarantee
PEPCO delayed payments to IPPs
IPPs started borrowing from banks
IPPs payable to OMCs (mainly PSO) started building up
OMCs deferred their payments to refineries
OMCs and Refineries started to obtain loans from banks
A few refineries (e.g. Bosicor) were unable to open oil
import LCs due to exhaustion of their exposure with banks

9. 189
371
884
1,158
1,368
6,232
9,882
0.00
2,000.00
4,000.00
6,000.00
8,000.00
10,000.00
12,000.00
2004 2005 2006 2007 2008 2009 2010
Rupees in ‘000’
Year
Financial Charges
Financial Charges (Rs. Million)
9
PSO Winter Internship program 2010
(FR-MIS)
Source : PSO Financial reports

10. 2.20 2.20
2.10
1.10
2.40
-0.93
1.00
-1.50
-1.00
-0.50
0.00
0.50
1.00
1.50
2.00
2.50
3.00
2004 2005 2006 2007 2008 2009 2010
Year
Net Profit Margin (%)
Net Profit Margin (%)
10
PSO Winter Internship program 2010
(FR-MIS)
Source : PSO Financial reports

11. 11PSO Winter Internship program 2010 (FR-MIS)
(10,000,000)
(8,000,000)
(6,000,000)
(4,000,000)
(2,000,000)
-
2,000,000
4,000,000
6,000,000
8,000,000
2006 2007 2008 2009 2010Rupees in '000'
Number of years
Free Cash Flow analysis (Liquidity status of the company)
5 years at a glance (PSO)
CFO
FCFF
FCFE
CFI
CFF
Source : PSO Financial reports

12. 12
PSO Winter Internship program 2010
(FR-MIS)

13. Short to Medium Term:
• Increase in tariff.
• Flotation of TFCs
• Transmission/Distribution Losses
• Control of theft.
• Improvement in cash flows of PEPCO
13
PSO Winter Intership program 2010
(FR-MIS)

14. Long Term:
• Production of electricity from coal.
• Infrastructure development.
• Removal of subsidies from Tariffs.
• Issue of tax exempt energy bonds.
14
PSO Winter Internship program 2010
(FR-MIS)