Sui Southern Gas Reports Significant Net Loss Due to Regulatory Adjustments and High Financial Costs

Karachi, Sui Southern Gas Company Limited (SSGC) experienced a substantial net loss of Rs. 5,595 million for the three months ending September 30, 2022, as detailed in the company’s latest financial statements. This loss marks a dramatic reversal from the profit reported in the same period the previous year. The loss is primarily attributed to major disallowances made by the Oil and Gas Regulatory Authority (OGRA) and significant financial costs incurred by the company.

During the period under review, SSGC reported a loss before taxation of Rs. 4,691 million, compared to a profit of Rs. 1,470 million in September 2021. The company’s earnings per share also declined sharply, registering a loss of Rs. 6.35 per share against a profit of Rs. 0.84 per share in the prior year. According to information available from the Pakistan Stock Exchange (PSX), the financial downturn is largely due to adjustments and disallowances related to Unaccounted for Gas (UFG), which totaled Rs. 8,168 million for the quarter.

SSGC’s profitability calculations are based on a Guaranteed Return Formula prescribed by OGRA, which considers the Weighted Average Cost of Capital (WACC). Despite this, OGRA’s adjustments, including those for UFG, human resource benchmark costs, provision for doubtful debts, and other expenses, have significantly impacted the company’s bottom line.

Moreover, the report highlights that UFG, especially in the Balochistan region, remains a substantial issue, with UFG rates increasing significantly from the previous year. The high level of UFG in this region has negated efforts to reduce losses across the company’s operations. Additionally, the depreciation of the Pakistani Rupee against the US Dollar has further exacerbated financial strains, particularly influencing the cost calculations for UFG penalties, which are largely dollar-denominated.

The company continues to pursue regulatory relief for its RLNG business through legal and administrative channels, including a significant case pending before the Islamabad High Court. Efforts to address financial challenges include rigorous measures to reduce UFG and strategic initiatives aimed at improving operational efficiency across its distribution network.

SSGC acknowledges the continued support from shareholders, customers, and regulatory bodies and remains committed to implementing comprehensive strategies to mitigate UFG and enhance financial stability moving forward.