The Cabinet Committee on Energy (CCOE) is likely to approve the transfer of the shares of the Guddu and Nandipur power plants with management control to the state-run oil marketing company Pakistan State Oil (PSO), Express Tribune reported.

This will be done under an equity swap arrangement to clear the circular debt through a deal to cover the PSO’s receivables from both the power plants. The PSO had been supplying fuel to the two power plants, for which they had failed to make their due payments.

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The Cabinet Committee on Privatisation (CCOP) has also reportedly issued directives for the presentation of a summary to the CCOE for formal approval.

The overall circular debt in the energy sector has ballooned to Rs. 1.6 trillion, and the government is working on settling the debt through an inter-company equity swap model.

The news report added that the government will ensure due diligence through an external expert to determine the swap price for the Guddu and Nandipur power plants.

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The PSO had also proposed to the government that it should transfer its shares in the Mari Petroleum, Oil and Gas Development Company (OGDCL), and Pakistan Petroleum Limited (PPL) under an equity swap arrangement to cover the PSO receivables. The proposed arrangement will help to clear the circular debt of Rs. 100 billion.