Lahore, December 30, 2019 (PPI-OT): SNGPL’s enjoys high ratings due to its strategic importance as country’s largest gas utility company. The business profile of the company draws strength from its established franchise network, and guaranteed return on its net operating assets. In last few years, the company has witnessed improvement in its profitability on account of substantial reduction in UFG losses. The company has pursued a multi-dimensional framework to sustainably reduce the absolute quantum of un accounted for gas and percentage proportion.
Consequent to UFG study conducted by OGRA and revision of UFG benchmark calculation, the UFG percentage of the company has increased; yet the company’s delta (actual vs. allowed) is same. Further, the company, being part of circular debt, has significant receivables and payables on its balance sheet. Though working capital cycle is being managed but this might create liquidity challenge for the company in future.
Rating watch takes into account the delay in finalisation of financial statements for year ending June, 2019 attributable to time being taken finalization of Final Revenue Requirement (FRR) by OGRA. It is also pertinent to mention that after the receipt of technical opinion from ICAP and in line with other legal requirement, OGRA will determine company’s final revenue requirement based on which company’s final accounts will be published. It is expected that after OGRA’s determination, the company will be able to complete the remaining formalities within 45 days including statutory period of 21 days required to convene the Annual General Meeting.
SNGPL is part of Re-gassified Liquid Natural Gas (RLNG) project. The company has completed Phase-I and II. Both projects are 100% debt financed. OGRA has allowed guaranteed return on LNG pipeline infrastructure. Hence, incremental cashflows are supplementing SNGPL’s financial risk profile. Meanwhile, ratings continue to draw comfort from sovereign ownership of the company. Ratings are dependent on the management’s ability to prudently manage its financial risk profile, particularly post acquisition of LNG related debt.
For more information, contact:
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Category: General Business News