Karachi October 16 2022: Sui Southern Gas Company Limited management believes that the adjustment of RLNG losses on handling basis along with devised strategy to control UFG in coming years will improve company’s profitability.
During the first nine months of 2021, the Company has incurred a loss after tax of Rs, 2,249 million resulting in increase in its accumulated losses to Rs. 64,147 million and diminishing equity to Rs. 25,929 million. As at period end, current liabilities exceed its current asset by Rs.96,777 million.
However, the amount of loss during the first nine months of 2021 is 88.2 percent lower when compared with loss of Rs 19,099 million in the same period last year.
The Company's financial performance for the period has been deteriorated mainly because of higher UFG due to RLNG off load into SSGC franchise area which was sold to indigenous gas customers.
Under the provisions of license given by the Oil and Gas Regulatory Authority (OGRA), the Company is provided a minimum annual return before taxation of 17.43% per annum of the net average operating fixed assets (net of deferred credit) for the year, excluding financial cost and other non-operating expenses and non-operating income.
The determination of annual required return is reviewed by OGRA under the terms sf the license for transmission, distribution and sale of natural gas, targets and parameters set by OGRA. Income earned in excess or short of the above guaranteed return is payable to or recoverable from the Government of Pakistan (GoP) and is adjusted from or to the gas development surcharge balance payable to / receivable from the GoP
In order to improve the financial position and performance of the Company, the management / Board of Directors (Board) have taken / planned following steps:
- Economic Coordination Committee (ECC) in its meeting dated May 11, 2018 approved the summary submitted by the Petroleum Division under which the Company was allowed UFG based on RLNG handling basis (volumetric basis) in the sale price of RLNG in the form of distribution loss due to swapping arrangements and consumption of RLNG in its franchise area. However, in its determination on Final Revenue Requirement for (FRR) FY 2017-18 OGRA did not consider implementing the aforementioned decision and advised the Company to take up the matter with SNGPL in consultation with Ministry of Energy (Petroleum Division). The Company has reiterated its earlier position of higher UFG due to RLNG and another summary is being considered at ECC to reinforce earlier ECC decision with multiple options for its implementation.
- Government of Pakistan (Finance Division) in its letter dated July 06, 2020, GoP being majority shareholder has acknowledged the funding requirements of the Company and has shown commitment to extend all support to maintain the going concern status of the Company.
- The Company has devised a strategy to control UFG in coming years and the same is under implementation with the approval of Board of Directors.
- Under new tariff regime, the Company will also be entitled to the guaranteed return on operating asset from 17% to 17 .43% from FY2019 for next three years.
- Banks have also waived debt to equity covenant for financial years 2018-19 and 2019-20. However, the Company has never defaulted in payment of any installment of principal and interest thereon and few of the loans have been totally paid off to date.
Board / management believes that in view of above-mentioned steps/plans, the Company's profitability and financial position will improve in the next few years.
About the company
Sui Southern Gas Company Limited is a public limited Company incorporated in Pakistan and is listed on Pakistan Stock Exchange. The main activity of the Company is transmission and distribution of natural gas in Sindh and Balochistan. The Company is also engaged in certain activities related to the gas business including the manufacturing and sale of gas meters and construction contacts for laying of pipelines.
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