PACRA Maintains Entity Ratings of Sui Northern Gas Pipelines Limited

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.

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. The fourteen member Board comprises one ED and thirteen NEDs including five independent directors. Mr. Amer Tufail replaced Mr. Mahmood Zia Ahmad for the position of CEO/MD on acting basis with effect from October 03, 2019. He is accompanied by an experienced team. On 20th November 2019, Mrs. Roohi Raees Khan, Director of SNGPL has been appointed as Chairperson of the Board in place of Late Mr. Syed Dilawar Abbas. At present two casual vacancies on the Board have occurred, one due to the sad demise of ex-chairmen and the other due to resignation. Both vacancies will be filled up by the board within the given time as per statute.