AKD Research has released an important analysis report on the Analyst Briefing of Sui Southern Gas Company Ltd (SSGC) regarding the fiscal year 2024 (FY24) and 9MFY25. SSGC held its analyst briefing yesterday, where several key points were discussed:
1. **Financial Performance**: SSGC reported an unconsolidated Net Profit After Tax (NPAT) of PKR 6.8 billion (Earnings Per Share: PKR 7.76) for FY24, marking a significant recovery from a net loss of PKR 1.6 billion (Loss Per Share: PKR 1.80) in FY23. For 9MFY25, the company achieved a net profit of PKR 6.9 billion (EPS: PKR 7.88), reflecting a 5% year-over-year increase.
2. **Core Business Segments**: The company’s core business includes:
– Transmission, distribution, and supply of natural gas
– Design and construction of Transmission & Distribution (T&D) projects
– RLNG (Re-gasified Liquefied Natural Gas) handling.
Additionally, SSGC is involved in ventures like SSGC LPG and SSGC Alternate Energy Ltd.
3. **Customer Base and Network**: SSGC serves 3.2 million customers through a transmission and distribution network spanning 4,200 kilometers and 49,800 kilometers. The current customer mix is as follows: Domestic (49.2%), Process Industries (19.5%), Captive Power (15.4%), Fertilizer (11.2%), and Commercial (1.6%). Notably, the share of captive power has decreased by 7.1% compared to FY24, while the domestic and fertilizer sectors have increased by 4.9% and 4.1%, respectively. Management indicated that no further growth in the domestic segment is planned.
4. **Gas Supply Agreement**: Discussions with K-Electric regarding a Gas Supply Agreement (GSA) remain unresolved due to K-Electric’s increased reliance on national grid supply and the requirement for a firm commitment. Separate negotiations with another bulk customer are also ongoing.
5. **Gas Flows and Availability**: SNGPL is currently not evacuating approximately 300 mmcfd of gas due to line-pack constraints, while SSGC continues to uplift gas as per allocations. As gas flows to captive power plants have decreased, gas availability for industrial units has improved, resulting in minimal shortfalls and balanced line-pack levels.
6. **Government Commitment**: The government is dedicated to halting the accumulation of further gas circular debt, supported by upward revisions to gas prices, which have notably enhanced SSGC’s payment capacity to Exploration and Production (E&P) companies. However, recent curtailments to captive power have again put pressure on payment flows.
7. **Gas Sector Reforms**: The national task force on gas sector reforms has addressed the issue of outstanding dues from Sui companies to E&P companies. Management believes discussions are progressing positively without burdening consumers. The Ministry of Energy (Petroleum Division) has engaged KPMG and World Bank consultants to monitor and address circular debt flows.
8. **Unaccounted for Gas (UFG)**: SSGC’s UFG has significantly declined in FY24 to 10.59% (compared to 16.56% in FY23), with a volumetric reduction of 41 bcf between FY19 and FY24. Management estimates that each 1 bcf reduction in UFG results in savings of approximately PKR 3.0 billion. For 9MFY25, UFG rose to 12.86% (up from 11.29% in the same period last year), attributed to increased winter demand, particularly in Balochistan.
9. **LPG Revenue Growth**: SSGC LPG recorded revenue and profitability growth of 96% and 67% year-over-year in FY24, with revenues reaching PKR 34 billion and NPAT at PKR 1.3 billion.
10. **Capital Expenditure**: Planned capital expenditures for the next two years are set at PKR 40 billion, following capex of PKR 37 billion in FY25. Management is optimistic about permitting RLNG supplies to domestic customers, noting that UFG is a pass-through cost under RLNG pricing formulas.
11. **Revival of Gas Processing Plant**: The Board has approved the revival of the JJVL (Jamshoro Joint Venture Ltd) gas processing plant, which was shut down for the past five years. The facility is expected to resume operations within two months, with 50% of the income from this project classified as non-operating income under OGRA’s current tariff regime.
This summary outlines the key developments and insights from the analyst briefing and gives an overview of SSGC’s current operations and future prospects.
