Amendment in financial covenants including a condition whereby dividend may be

Amendment in financial covenants including a

This preview shows page 47 - 49 out of 94 pages.

Amendment in financial covenants including a condition whereby dividend may be paid after repayment of 33% of the senior loans representing Rs. 13.0 billion (as of Sep 30, 2013) out of the amount outstanding as at June 30, 2012. Based on the revised repayment schedule, the Company is expected to achieve this milestone in 3Q 2015. Furthermore, the USD 30 m International Finance Corporation (IFC) loan required listing of 10% of the Company’s shares by December 31, 2012. Additional interest at 4% was to be charged from June 2011 in case of non-compliance of this condition. As part of the restructuring negotiations, IFC has in principle waived the interest rate step-up till December 31, 2013 subject to agreement on revised pricing of its conversion option and listing criteria (see Section 3.1 of the Prospectus).
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Page 48 of 94 5.4 RISK FACTORS 5.4.1 Raw Material (Gas) Availability Risk Long Term Gas Solution Pakistan is facing acute shortage of gas, furthermore, demand is likely to remain above supply until new discoveries or gas import projects come online, thus putting more pressure on gas availability to the fertilizer sector. Historically, agreements signed with the government for supply of gas have been honored except in some instances where contracts have been breached due to non-availability of gas. The delay in the execution of the Long Term Gas Solution as approved by the ECC may increase the risk of excessive curtailment in the supply of gas. Mitigants The Company has and is working on multiple fronts simultaneously to tackle this issue and its resultant impact on cash flows & profitability. During the current year, the Company explored other gas alternatives and consequently ECC approved allocation of gas from four dedicated gas fields namely Mari (SML), Makori East, Reti Maru and Kunar Pasaki Deep (KPD) to the FFM Consortium. The Company has signed long term GSAs with operators of three gas fields (Makori East, KPD and Reti Maru) in addition to a term sheet for short term supply of 22 MMSCFD from Mari (SML). The Company has asked the new Government to reconfirm the allocation under the Long Term Gas Solution as explained above. a. The allocation from off-network fields is likely to provide reliance over continued supply given the limited use of this gas. b. The Company has directly entered into GSAs with Makori East (March 15, 2013), KPD (February 21, 2013) and Reti Maru (March 6, 2013) instead of gas distribution companies. The gas distribution companies will only act as the carriers of gas through tolling arrangement for which separate agreements have been entered into with SSGC and SNGPL however, the SNGPL agreements awaits formal ratification from its Board. This will establish increased transparency over ownership of the gas. In addition, the gas fields are dedicated to the use by the fertilizer consortium only.
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