PACRA Maintians the Entity Ratings of Sui Southern Gas Company Limited

Sui Southern Gas Company Limited (“SSGC” or “the Company”) is one of the two state-owned entities that hold an integrated license for the transmission, distribution, and sale of natural gas and RLNG. As the sole operator across Sindh and Balochistan, the Company plays a critical role in the national gas supply chain. Operating in a regulated environment, SSGC earns a guaranteed return on its net operating assets as determined by OGRA. The ratings reflect this strategic importance, alongside improving operational efficiency and a gradual financial recovery that is expected to strengthen over the medium term. During FY25, SSGC sustained the recovery momentum by posting a positive bottom line for the second consecutive time. The improvement was driven primarily by stronger operational controls and enhanced capitalization of PKR 37bln in FY25 against a target of PKR 40bln (FY24: PKR 24 billion), which directly supported regulated returns. The investments focused on network expansion, modernization, and system rehabilitation, with around PKR 29 bln allocated to the distribution network. UFG losses remain SSGC’s key operational challenge, driven primarily by theft, meter tampering, leakages, and system inefficiencies. For reference, OGRA’s benchmark for UFG is 7.46%. The Company claimed a UFG of 10.09% in FY25, while OGRA’s assessment placed it at 12.07%. SSGC has filed a Motion for Review (MFR) contesting certain aspects of OGRA’s determination, and an expected favorable outcome would support profitability. Balochistan continues to contribute the largest share of disallowed UFG, although it represents less than 14% of total gas volumes. Management remains confident that ongoing network rehabilitation and enforcement initiatives will further reduce UFG losses. FY25 also presented operational challenges, including a sharp decline in bulk business from captive power plants, exerting pressure on cash flows. The Company’s working capital cycle remains stretched due to delayed receivables from the government related to tariff differentials and various customer categories, while timely payments to E&P suppliers must be maintained. Liquidity pressures persist despite sizeable working-capital lines, reflected in a modest current ratio and a large current maturity in FY26 related to a one-year borrowing facility. Although monthly inflows are expected to support loan repayment, overall cash-flow flexibility remains tight. The long-term borrowings remain limited relative to the asset base. The Company continues to pursue diversification to strengthen income streams. Its wholly owned subsidiary, SSGC LPG Limited, reported significant growth in FY25, with sales rising to 112,830 MT (FY24: 81,376 MT). SSGC AE (Pvt.) Limited, focused on emerging renewable initiatives in the gas sector, forms a key part of the Company’s long-term strategy to diversify revenue sources. Governance practices have improved, as reflected in the timely publication of FY25 financial statements. The delay in 1QFY26 statements is due to pending regulatory decisions; however, the Company remains committed to meeting reporting timelines, supported by more predictable tariff determinations from OGRA. FY25 financial statements carry a qualified opinion owing to IFRS-14 implications and legacy receivable issues. With board elections scheduled for December 23rd, the Company expects the appointment of a permanent MD for a three-year term, which should support governance continuity going forward.
The ratings remain anchored on the support from the Government of Pakistan and the likelihood of timely financial assistance when required. Continued improvement in operational performance, strengthening of financial discipline, and further enhancement of governance practices will be critical to sustaining and potentially enhancing the ratings going forward.

About the Entity
Sui Southern Gas Company (SSGC) is Pakistan’s leading integrated public-listed natural gas utility. The Government of Pakistan holds the majority stake, with 54% owned through the President of Pakistan and 7.25% via the SSGC Employees Empowerment Trust. Mr. Muhammad Amin Rajput currently serves as the Acting Managing Director.