PACRA Upgrades Entity Ratings of Sui Southern Gas Company Limited

The ratings upgrade of Sui Southern Gas Company Limited (SSGC) portrays the enhancement in the Company’s operational efficiency along with the turnaround in the financial performance which is expected to strengthen in the coming periods. SSGC is one of the two government-owned entities that possess the integrated license for the transmission, distribution, and sale of natural gas and RLNG. The Company being the sole operator in Sindh and Balochistan, has been provided a guaranteed return by OGRA on its net operating assets. The Company’s profitability is highly susceptible to the aforementioned guaranteed return and the UFG losses that result from meter tampering, theft, and leakages. Through rigorous measures and comprehensive strategy implementation by the management, the Company has recorded a consecutive decline in reported UFG losses for the past four years. Extensive initiatives undertaken by the management resulted in a significant decline in the Balochistan region during FY24, along with notable success in Karachi with UFG percentage loss restricted to a single digit. Subsequently, the Company’s Net loss has decreased from PKR 11.44bln during FY22 to PKR 1.60bln during FY23. Although still above its regulatory benchmark, the Company remains optimistic about its future trajectory of UFG losses. Furthermore, the Company has initiated a massive rehabilitation program to address system leakages and strengthen network integrity. Timely settlement of pending receivables is also important as the Company’s liquidity profile is significantly stretched. In addition, the Company is continuously working to diversify its business streams in order to manage/earn non-operating income. SSGC LPG (Pvt) Limited is a wholly owned subsidiary of SSGC engaged in LPG marketing and distribution across the country. It recorded the highest volumes in LPG sales, increasing by 98,700 MT during FY23, and the market share rose to 7.7%. Furthermore, SSGC AE (Pvt) Limited is another venture by SSGC to bring unallocated gas through alternate ways to the customers on competitive terms. This would further provide a sustainable source of income generation for the parent company in the future. Due to the delayed OGRA decision on the SSGC petition for the Final Revenue Requirement (FRR), the Company has recently published its audited financial statements for FY23. Audited accounts for FY24 are expected to be published by last quarter of FY25. The Company has shown substantial recovery in its financial performance through improvement in its bottom line, which is evident from the Net profit of PKR 4,158mln reported during 1QFY24 which has translated towards positive equity of PKR 1,497mln at the end of September 2023.
The assigned ratings encompass the strong ownership structure along with the commitment from GoP to extend necessary financial support to the Company. Furthermore, the assigned upgrade captures the improvement in operational efficiency of the Company that subsequently translated towards the financial performance. Going forward, the management is confident it can sustain and improve the performance in the coming years, as shared in the Business plans approved by the board.

About the Entity
Sui Southern Gas Company (SSGC) is Pakistan’s leading integrated public-limited large-scale natural gas utility company. The GoP directly and indirectly owns the majority of the shareholding of the Company. 54% of the ownership stake is held by government through the President of Pakistan while 7.25% is held by SSGC Employees Empowerment Trust. Mr. Muhammad Amin Rajput is currently the Acting Managing Director of the Company.