The Pakistan Credit Rating Agency Limited
31-Dec-18
Analyst
Sehar Fatima
sehar.fatima@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
- Methodology | Corporate Ratings | Jun-18
- Methodology | Criteria | Rating Modifier | Jun-18
- Methodology | Correlation Between Long-Term And Short-Term Rating Scale | Jun-18
Related Research
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PACRA Maintains Entity Ratings of Sui Northern Gas Pipelines Limited
| Rating Type | Entity | |
|
Current (31-Dec-18 ) |
Previous (30-Jun-18 ) |
|
| Action | Maintain | Maintain |
| Long Term | AA- | AA- |
| Short Term | A1 | A1 |
| Outlook | Stable | Stable |
| Rating Watch | Yes | - |
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 FY18 as the company has not yet received Final Revenue Requirement by OGRA.
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.
About
the Entity
SNGPL, the largest gas transmission & distribution company in Pakistan, is engaged in the business of purchase, transmission, and distribution of natural gas. The Government of Pakistan has direct shareholding of ~32% in the company. Among the private business groups, Nishat Group has a 4.56% stake through MCB Bank. The fourteen member Board comprises one ED and thirteen NEDs including five independent directors. Mr. Amjad Latif; MD of the company has an experience of more than three decades. He is accompanied by an experienced team.