PACRA Updates the Entity Ratings of Sui Southern Gas Company Limited | Outlook Stable

SSGC business profile is considered adequate owing to its exclusive license to operate in areas of the franchise (provinces of Sindh and Balochistan) and guaranteed return on its net operating assets. However, the Company's profitability has been significantly impacted over the period on account of substantially high UFG disallowances and other matters pertaining to operating / non-operating income. The management of the Company is focusing to re-strategize its operations; i) eliminating the inefficiencies which includes the establishment of UFG hub on DMD level; reflecting the effectiveness of controls, ii) diversifying its business streams in order to manage/ earn Non-Operating Income and ultimately improve the Company’s financial position. The management believes that the Company’s existing experience and expertise complement the development of new revenue streams and ultimately supplement the adverse bottom line. The multi pronged strategy is being adopted. This will enable new gas addition to the system, primarily from bio material and secondarily from the non-functional wells. To accomplish this, the company already incorporated a fully owned subsidiary; SSGC Alternate Energy (Pvt.) Ltd. Under the proposition, revenue will be generated through toll charges by using current infrastructure. In addition, the Company has successfully reported operating profits consistently in last three quarters of FY21. However, timely settlement of pending receivables is also important as the company’s liquidity profile is significantly stretched. The management has been working vigorously to resolve the liquidity issues. Furthermore, SSGC has not issued its financial statements for FY21 & FY22; quarterly financials are also pending. The management is obligated to issue its quarterly statements and yearly financial statements in due time, however; the company sought an extension on issuing of accounts owing to the finalization of a petition filed with OGRA.
The company's financial risk profile is deteriorated owing to consistent losses that have been made for the last few years. However, company’s resilience shown in operating profits reflects in “Stable” outlook. Also, the delay in the publishing of financial statements is a consideration for rating watch. Going forward, consistency in operating profits and vigorous follow up on the initiatives will reflect positively on the Ratings.

About the Entity
SSGC is engaged in the business of purchase, transmission, and distribution of natural gas. The company is catering to the requirements of ~2.8mln customers. The government holds the largest direct stake (~53%). The eleven-member board comprises NEDs. Dr. Shamshad Akhtar is the chairperson of the board and Mr. Muhammad Imran Maniar took the position of MD in Feb 21. He is accompanied by an experienced team.