As per the latest notice disseminated to the stock exchange by Sui Northern Gas Pipelines Limited (SNGP), the company’s Board has approved to lay a 295 KMs gas pipeline to add newly discovered 50-70 MMCFD gas near North Waziristan and Lakki Marwat area to the system.

Estimated cost of the pipeline is set at PKR 23.4bn and assuming annual depreciation at 7%, ROA at 16.6%, UFG at 8% (with ~7% approved by OGRA upon meeting KPIs), finance cost at 15% of the assumed 70% debt component, this project will generate a post-tax return of PKR 820mn. This translates to a per share impact of PKR 1.06. The project is subject to approval of the regulatory authority (OGRA).

Apart from SNGP, local steel pipe manufacturers, such as INIL or CSAP, can also benefit from the construction of this pipeline.

Courtesy – AHL Research