OGRA gives the nod to prescribed prices

OGRA has set the prescribed prices for FY26 at PKR 1,895/mmbtu for SNGP and PKR 1,659/mmbtu for SSGC, depicting a 6.57% increase for SNGP and a 5.90% decrease for SSGC. However, SNGP and SSGC had requested significantly higher PKR 2,486/mmbtu rates and PKR 4,161/mmbtu, respectively. The recommendations have been forwarded to the federal government for approval and, once cleared, are expected to positively impact the cash flows of SNGP, SSGC, OGDC and PPL.
The determined price reflects changes in international crude oil prices, to which local gas fields are linked, along with the PKR to USD exchange rate, revised projections of gas purchases and sales volumes, and the projected cost of gas. For SNGP, including RLNG has contributed to an increase in price.
Moreover, OGRA has approved a revenue shortfall of PKR 34bn for SSGC for the previous year, significantly lower than the PKR 499bn claimed by the company. No such amount was mentioned for SNGP.
Additionally, the utilities had filed a petition for higher capex requirements in FY26 at PKR 67.3bn by SNGP and PKR 56.5bn by SSGC but have only been allowed PKR 22.8bn and 19.2bn, respectively.
We also highlight that OGRA has revised the SNGP’s assumptions for average crude prices at USD 75.33/bbl., and the PKR/USD parity at PKR 280.00/USD for FY26. Similarly, the OGRA has revised SSGC’s average crude prices at USD 75.33/bbl and USD 280.00/bbl for FY26. However, the Arab Light is currently hovering near USD 65/bbl, where the OGRA has considered risks associated with geopolitical issues in approving a higher crude oil assumption. Meanwhile, we estimate the parity to average at PKR 291.5/USD in FY26.
OGRA noted that SNGP initially projected ROA at 23.39% for FY26. However, the company later revised its WACC calculation, reporting a corrected ROA of 24.09% after identifying errors in the earlier estimate. These included an understated market return assumption of 17.36% (15-year KSE-100 average) instead of 21%, and a 6-month KIBOR of 18.36% instead of 18.17%. The revised WACC of 24.09% for FY26 reflects a 1.83% decrease from 25.92% in FY25.

Courtesy- AHL Research