KARACHI, Jan 6: National Bank of Pakistan has rolled over a $100 million letter of credit-cum loan facility for Pakistan State Oil. But the rollover has been made on fresh terms and conditions that according to NBP officials make it a fresh financing facility.

NBP President Syed Ali Raza and PSO Managing Director Tariq Kirmani signed an agreement for the said facility at a local hotel here on Monday. Kirmani said PSO would be using this facility to finance its fuel oil imports. PSO imports $600-$800 million worth of fuel oil per year. Its total imports including diesel imports stand around $1-$1.2 billion.

Ali Raza told Dawn that NBP would charge 1.15 per cent over three-month LIBOR on this LC-cum loan facility. This means that PSO will be paying about 2.55 per cent interest on this facility as three-month LIBOR is around 1.4 per cent.

NBP Relationship Manager for PSO Farheena Chaudhry told Dawn that the LC-cum loan facility has been arranged by NBP Bahrain for two years on roll-over basis. PSO had first secured this facility back in June 2001 which expired in October 2002. Now it has decided to roll-over the same facility for another two years.

Sources in PSO said the company financed fuel oil imports between October-December 2002 out of an IDB loan as well as through cash allocations of foreign exchange made by the ministry of finance.

But Farheena said since the terms of loan have been entirely renegotiated it is sort of a fresh facility.

She said this facility would be used by PSO as a cushion to repay the letters of credit it would be opening for imports of fuel oil. The repayment can be made anytime between 30-180 days.

Speaking at the signing ceremony, Tariq Kirmani said PSO had renegotiated the $100 million LC-cum loan facility with NBP on purely commercial basis. “We have got very good rates and PSO has saved some money,” he remarked.

Sources in NBP and PSO said when PSO had first secured $100 million facility from NBP in June 2001 it had paid a high interest rate of 2.75 per cent over three-month LIBOR but that also included the upfront fee. This time around the company is going to pay 1.65 per cent over three-month LIBOR including the upfront fee.

“This is a reflection of the fact that Pakistan’s risk profile has improved significantly,” said Ali Raza referring to recent upgrading of Pakistan’s long term ratings by Standard & Poor’s.

Speaking on the occasion, he said the fact that a Pakistani bank has arranged a $100 million facility for the largest public sector organisation shows that banking institutions in Pakistan have improved their competitiveness in the world capital market.

While admitting that PSO was able to negotiate better terms for this facility he said this shows that the public sector in Pakistan is emerging as a viable segment of the macroeconomic framework.

Tariq Kirmani said PSO is now a profit-driven institution and has left behind its earlier image of a supply-driven oil marketing company. Elaborating he said that his company was now more focussed on developing such products and adopting such marketing strategy that ensure higher profits: it no longer attempts to remain the market leader in terms of overall supply.