Lahore, June 28, 2019 (PPI-OT): 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 six months ending December, 2018 and nine months ending March, 2019 attributable to late finalization of Final Revenue Requirement (FRR) by OGRA. The Company received FRR in January, 2019 and the management is eyeing finalization of accounts in the month of July 2019.
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.
For more information, contact:
Analyst
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425
Email: hammad.rashid@pacra.com
Web: www.pacra.com