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VIS Credit Rating Reaffirms High Ratings for Sui Northern Gas Pipelines Limited

Karachi, VIS Credit Rating Company Limited has reaffirmed the entity ratings of Sui Northern Gas Pipelines Limited (SNGPL) at 'AA+/A-1+' (Double A Plus/A- One Plus), indicating high credit quality and strong protection factors. The outlook on the assigned ratings remains ‘Stable’, following the previous rating action announced on November 2, 2022.

According to VIS Credit Rating Company Limited, the medium to long-term rating of 'AA+' reflects SNGPL's high credit quality with strong protection factors and modest risk, subject to slight variations due to economic conditions. The short-term rating of 'A-1+' denotes the highest certainty of timely payment, with outstanding short-term liquidity and safety just below the risk-free Government of Pakistan’s short-term obligations.

SNGPL, established in 1963 and listed on the Pakistan Stock Exchange, is a key player in the transmission and distribution of natural gas within North Central Pakistan, serving nearly 7.5 million consumers. The company's network spans 9,052 KM of transmission and 146,327 KM of distribution infrastructure.

The company's strategic position in Pakistan's gas distribution sector, operating in a monopolistic market structure alongside Sui Southern Gas Company Limited (SSGC), is underscored by its semi-government ownership status. Approximately 58% of SNGPL’s shares are held directly or indirectly by the government, indicating strong sovereign support.

The financial assessment is based on FY22 financial statements, with the FY23 audited financial statements expected to be delayed. SNGPL has improved its capitalization profile with reduced total debt and increased equity. However, the company faces challenges due to circular debt, with significant receivables and payables. The recent gas tariff increase, effective from November 1, is anticipated to lessen the tariff differential and reduce the accumulation of circular debt.

SNGPL's ratings also consider the company's efforts to reduce Unaccounted for Gas (UFG) losses and its capital expenditure plans to invest in network infrastructure and new gas discoveries. The ratings remain sensitive to the resolution of inter-corporate circular debt and the maintenance of the company’s financial risk profile.

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