After two and a half years, SNGPL announces disappointing results

Gas utility reports Rs9.75 billion in losses during fiscal year 2013

ISLAMABAD: After a gap of almost two and a half years, Sui Northern Gas Pipelines Limited (SNGPL) - which is engaged in the transmission and distribution of natural gas in Punjab and Khyber-Pakhtunkhwa (K-P) - has reported its financial results for the fiscal year that ended on June 30, 2013.

In a notice sent to the Karachi Stock Exchange (KSE) on Monday, the company reported that it incurred a loss of Rs9.75 billion in fiscal year 2013, compared to a profit of Rs3.04 billion in the comparative period of the previous year, putting a stamp on its loss-making status that has for long been stated, but not declared through financial results.



The company’s sales decreased slightly from Rs230.27 billion to Rs224 billion, but increased gas development surcharge and higher finance cost meant the utility suffered during the year. An official said lowering the unaccounted for gas (UFG) ceiling has caused the entity to become a loss-making one.

The UFG ceiling issue

The Oil and Gas Regulatory Authority (Ogra), headed by Tauqir Sadiq at the time, raised the UFG ceiling - that covers gas theft and leakage - from 5 to 7% for 2009-10. However, a month later the decision was taken back and the ceiling was set back at 5%.

The Lahore High Court then granted a stay order over the reversal, which continued for three years before it was vacated in 2013. The regulator then allowed a 4.5% UFG ceiling for SNGPL.



“The company made a profit of Rs3 billion in fiscal year 2012 due to the stay order granted by the court,” said the SNGPL official. “However, it has turned into a loss-making entity due to the UFG being revised downward to 4.5%.”

The official said SNGPL bore the brunt of the accumulated UFG impact of those three years.

In contrast, the Sui Southern Gas Company - responsible for Balochistan and Sindh - is being allowed a UFG ceiling of 7% due to the stay order granted by the Sindh High Court.

SNGPL’s loss per share was reported at Rs15.37 during fiscal year 2013, compared to earnings per share of Rs4.8 the previous year.



The share price of SNGPL also took a hit on Monday, following the results announcement, as it came down from Rs24.9 to Rs24.13 even though the benchmark-100 index rose 173 points or 0.53%. A total of 6.296 million shares were traded as SNGPL saw its price lose 3.1% of the value.

Bailing out

The present government had directed Ogra to follow policy guidelines to bail out gas companies by passing on Rs49 billion cost to the gas consumers. But the regulator has not implemented these policy guidelines yet, which led gas companies to recover an additional 3% impact of UFG from consumers.

“The decision was followed by SNGPL seeing its share price jump from Rs22 to Rs36, but Ogra refused to implement policy guidelines and company faced a loss in 2013,” the official said, adding that SNGPL would continue facing losses in results for 2014-15 and 2015-16.



Officials say the UFG of SNGPL stood at 11% and major factors behind this loss are the “no-go areas” in K-P.

The other reason is the change in composition of gas supply between retail and bulk consumers. In 2003, retail consumers got 30% whereas bulk consumers formed the rest. However, over the year, the supply of gas to retail consumers has gone up to 70%, leading to increased losses.

Shareholders in SNGPL

MCB Bank is a major shareholder in SNGPL having 8.69% (55.12 million) shares, while National Bank of Pakistan (NBP) owns 8.06% (51.12 million) shares. Pakistan Industrial Development Corporation holds 6.02% (38.16 million) shares and SNGPL Employees Empowerment Trust has 4.32% (27.40 million) shares. The number of major shareholders in the company is 167.

In SSGC, the SSGC Employees Empowerment Trust owns 7.25% shares, State Life Insurance Corporation holds a 6.56% stake, NBP has 3.35% shares, Viability Gap Fund holds 1.93% shares, Arif Habib Corporation has 1.42% shares and Arif Habib Limited has 1.14% shares.

Published in The Express Tribune, December 29^th, 2015.

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