Sui Northern Gas Pipeline is looking to diversify into LPG business

SNGP held its conference call today whereby the management discussed the FY21 financials and its future outlook. The call was led by the MD Mr. Ali Hamdani.

Brief Takeaways

·      The company has a network of 7.4bn consumers.

·      43% of Pakistan’s energy mix relies on gas provided by SNGP (68%) and SSGC (32%) of which 33% is Indigenous gas and 10.3% in LNG. Remainder is Oil (22.6%), Coal (18.2%), Hydro (9.9%), Nuclear (3.2%), LPG (1.3%) and Renewable energy (1.2%).

·      RLNG is 53% of SNGP’s mix, while 47% is indigenous (FY22). Back in 2015 when RLNG was first imported, it was just 3% of overall sales.

·      Power sector is the largest consumer (34% of sales mix), followed by Domestic (30%), Industry / Cement (21%), Fertilizer (8%) and CNG (4%).

·      30% reduction was witnessed in UFG in FY21 to 8.6% compared to 12.32% in FY20. As a result, an 83% YoY growth in company bottom-line was seen in FY21.

·      During 1QFY22, UFG was curtailed by 5% YoY to 9.63% vs. 10.10% in SPLY. It was higher compared to annual average of 8.6% due to seasonality factor in the quarter.

·      Capitalization in FY21 arrived at PKR 24bn and in 1QFY22 settled at PKR 3.8bn (+68% YoY).

·      Since FY17 to date, the company has on average distributed 40% of its earnings as dividend payouts.

·      The company has also improved its debt to equity to 74.98% in FY21 from 84.14% in FY17.

·      Working capital requirement has gone down by PKR 23bn in 1QFY22 as a result of reduction in bank loans by PKR 65bn.

·      Future prospects: company has launched a new mobile app, kiosks have been opened in malls of major cities to help facilitate clients, and the company is robustly investing in technology and digitization (new transformation and distribution systems installed – better UFG mapping).

·      The new GIS maps will be completely installed within the next 12-16 months. This will help identify gas leakages and gas theft and will further curtail UFG.

·      Management expects UFG to remain in single digit going forward.

·      The company is looking to diversify (will go into LPG as indigenous gas is depleting).

·      Matter of gas price hike is pending with the ECC and the management expects it to be approved soon.

·      North South pipeline has been proposed by the company before but direction will be only given by the government.

·      OGRA is waiting for guidelines for the implementation of WACOG from the government and unless that comes through, possibility of implementing WACOG is unlikely.

·      There is an ongoing discussion on unbundling of gas utilities but the management does not know how and when this will be implemented.

Courtesy – AHL Research


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