Fenaka can be made into a profitable company: STO

State Trading Organisation (STO)'s CEO Shimad Ibrahim today said that the transfer of Fenaka Corporation as a subsidiary of STO will improve the financial position of the company and make it a profitable one.

Speaking at a press conference held at STO, Shimad said that the government has accepted the company's proposal to purchase all shares of Fenaka Corporation, which was submitted to the Finance Ministry on August 15.

He said that once Fenaka begins operations as a subsidiary company of STO from January 2025 onwards, it would be significantly easier to improve the company's financial situation and make it a profitable company.

The current interim board of Fenaka includes representatives from the Finance Ministry, STO and the Environment Ministry. However, once the transition is made, Fenaka's board will be restructured according to the governance code and policies pertaining to the appointment of members to the boards of subsidiary companies.

Shimad, speaking further on the topic, said that STO is the biggest fuel importer in the country and that the diesel required by Fenaka to generate electricity is supplied by STO.

"Therefore, we foresee a huge synergy between Fenaka and STO. In the future, we plan to replace diesel with renewable energy under a separate plan," he said.

Shimad added that STO has many subsidiary companies even now and that Fenaka stands to benefit from its experience.

This comes as Fenaka remains one of STO's largest debtors, owing over MVR 2 billion for fuel purchases.

"The debt increased when Fenaka stopped payments to STO at a point. However, the new management is making payments within a feasible arrangement under a specific plan. We believe that once Fenaka comes under STO, we can recover a large portion of the debt in the long run by [increasing] efficiency and cost reduction," he said.

Including payments to STO and others, Fenaka's debt stands at MVR 4.1 billion.

Shimad said STO would right size the company after taking over and reduce its costs. He said the structure would be changed to create the best outcome for Fenaka.

"We have to assess the right scale. Fenaka has over 7,000 employees. It’s not about firing employees all at once. We will then explore better options for the employees," he said.

Shamid stated that Fenaka is expected to generate a profit for STO within the next three years.