Research Analyst
Jan 16 - 22, 2012

Sui Southern Gas Company (SSGC) is engaged in the business of transmission and distribution of natural gas besides construction of high pressure transmission and low pressure distribution systems.

Presently, the company continues to face shortage of natural gas mainly due to decreased supplies from producers and increased gas demand.

Despite increase in the number of gas producing fields from 16 to 17 compared to corresponding period last year, the supply of gas decreased by four per cent to 98.8 BCF. The average well head purchase price increased by 12 per cent and stood at Rs297.76 per MMBTU.

The gas distribution system was extended by 470 km while another 42 km of distribution lines were laid under the rehabilitation projects to curtail leakages.

During the period under review, the company's customer base increased to 2.384 million. The company provided 30,678 domestic connections in the first three months of the current financial year. The meter manufacturing plant produced 167,607 meters versus 168,250 meters in the corresponding period last year, i.e. a decrease of 643 meters or nearly 0.4 per cent.


2 19.29 19.59 19 19.18 6,345
3 19.18 19.49 19 19.3 13,852
4 19.3 19.45 19.15 19.27 1,550
5 19.27 19.25 18.85 18.9 8,795
6 18.9 19.24 18.75 18.85 3,497
9 18.85 19.22 18.67 18.87 7,687
10 18.87 18.8 18.39 18.49 45,690
11 18.49 18.8 18.5 18.79 2,599

The sale to SNGPL declined by nine per cent to 97,200 meters as compared to 107,100 meters in the corresponding period last year. The increase in cost of production by 14 per cent resulted in decrease in profit to Rs17 million as compared to profit of Rs46 million for the corresponding period.

In the three months period, the capital expenditure was Rs1,398 million as compared to Rs2,784 million for the previous corresponding period.

Addition to operating fixed assets was Rs224 million versus Rs929 million in the corresponding period last year. SSGC has posted after tax profit of Rs796 million during the same months as compared to profit of Rs1,113 million for corresponding period in 2010.

The basic earnings per share (EPS) decreased to Rs0.95 during first quarter ended 2011 as compared to Rs1.66 on 30 September 2010, mainly due to excess of unaccounted for gas (UFG).

UFG reached to the level of 10.22 per cent as against a limit of seven per cent allowed by OGRA. Thus, the company suffered a reduction in revenue of Rs900 million in its tariff return (2011: 584 million) in the three months period on account of UFG. The company plans to maintain its focus on UFG projects and is planning to initiate major capital expenditure project with primary objectives of UFG reduction.

Due to continued supply constraints, year to date, gas sales decreased by five per cent to 88.3 BCF as compared to 92.6 BCF in the corresponding period last year. The average sales price per MMBTU increased by eight per cent to Rs367.44 versus Rs341.51 due to increase in consumer prices by OGRA, thus gas sales revenue (net of GST) increased only three per cent.

KESC is the single largest customer and debtor of the company with over-due amount of Rs32.7 billion. SSCG management has been proactively taking up the matter at all forums for an early recovery of the massive liabilities. Management is treating this outstanding amount from KESC as part of the inter-corporate circular debt. In addition, the management has pro-actively taken up the issue with the federal and provincial governments for resolution of the KESC dues and inter-corporate circular debt.

More recently, in a meeting of the national assembly standing committee on textile industry, the management of KESC stated that the SSGC was responsible for load shedding in the industrial areas of the metropolis, as KESC was not provided 180-mmcfd gas as promised, which was the main cause of 300MW shortage.

The power generation reduced due to non-provision of 180-mmcfd promised gas to KESC. On the contrary, only 70-80 mmcfd gas was being provided to the company. If the company goes for power generation through furnace oil, the cost of power might increase that would overburden consumers with high tariff rates.

The national assembly standing committee urged the gas utility and the government to review its decision of total curtailment of gas to industrial sector and provide some share to the industry so that the country's textile export target could be achieved.

KESC's installed power generation capacity is more than 2000 mw but the available capacity is less due to multiple reasons including shortage of gas.


The company is actively engaged with project developers for setting up LNG infrastructure in Pakistan for the purpose of importing natural gas, through a third party access regime on fast track bases. Implementation of LNG project will usher a new era of sustainability while providing numerous advantages including fast track solutions to energy crises and a secured supply of natural gas.


ENDED 2011
Operating results (Rs. millions) 725 542
Non-operating income (Rs. millions) 2,301 2,239
Profit after tax (Rs. millions) 796 1,114
Earnings per share (Rupees)- Basic 0.95 1.66
Earnings per share (Rupees) - Diluted 0.90 1.33