Regarding gas circular debt, management stated that KPMG has completed its work and submitted its report. From the management’s perspective, the key issue is the lack of clarity about the source of cash inflows, while they expect the gas circular debt to be resolved in 3 months.
Management plans to add 50,000 RLNG connections starting from FY26. They highlighted that RLNG is around 30% cheaper than LPG. The company has received ~12,000 applications, while 6,000 connections for multistory buildings are currently underway. Management also mentioned that RLNG is sold to industrial customers under a blended mix of natural gas and RLNG, with the blending ratio varying during the winter months.
OGRA has determined UFG for SSGC at 12.07% (34.80 BCF) for FY25. However, the company is contesting this determination with OGRA and believes it has strong grounds to reduce the UFG to 10% (29 BCF). To highlight, every 1 BCF reduction in UFG results in ~Rs1bn in savings.
The company noted that its quarterly earnings are usually higher in the September quarter, as UFG increases during winter due to harsh conditions, particularly in Balochistan. As SSGC operates under a regulated regime, it initially prepares accounts based on expected numbers, with actual adjustments made at year-end.
Company’s mega project includes rehabilitation of 2,500 km of distribution network across Karachi and Interior Sindh with an estimated CAPEX of Rs28bn. Company plans some transmission pipeline and compression with a cost of Rs10bn. Management expects annual CAPEX of Rs40 billion to continue in the coming years, subject to the availability of cash flows.
Captive customers volumes have declined from 180MMCFD to 100MMCFD due to the imposition of an off-grid levy of Rs500/MMBTU, in addition to gas prices of Rs3,500/MMBTU. Management stated that customers’ key requirement is uninterrupted power supply, which remains unresolved in Grid; therefore, they expect captive demand to sustain at current levels.
The company has signed agreements with K-Electric and National Steel Complex (formerly Tuwairqi Steel Mills Ltd) for gas supply of 45–60 MMCFD, which could potentially fill the gap left by captive customers, who were previously high-paying clients.
Management stated that with JJVL coming online, it is expected to contribute Rs2bn in earnings. However, only 50% of this, or Rs 1bn, will flow to the company’s bottom line, in accordance with regulations related to non-operating income.
Under SSGC Alternative Energy (non-regulated), company is planning to source 10MMCFD from E&Ps companies with SSGC acting as a transporter.
The company highlighted that its tax expense remains high in FY25 due to a 0.75% turnover tax.
Regarding changes to the asset model, management stated that it is not possible to modify a single component such as Return on Assets (ROA) so entire regime will be changed.
