Sui Southern Gas : Transmission of Quarterly Report for the Period Ended 30 September 2021

PERSEVERE

PROGRESS

PROSPER

Un-Audited Condensed Interim Financial Information for the quarter ended September 30, 2021

Unconsolidated Condensed Interim Financial Information (Un-Audited)

for the quarter ended September 30, 2021

CORPORATE PROFILE

BOARD OF DIRECTORS

AS ON SEPTEMBER 30, 2021

Dr. Shamshad Akhtar	Chairperson
Mr. Muhammad Raziuddin Monem	Director
Mr. Faisal Bengali	Director
Ms. Nida Rizwan Farid	Director
Mr. Hassan Mehmood Yousufzai	Director
Dr. Ahmed Mujtaba Memon	Director
Dr. Sohail Razi Khan	Director
Mr. Manzoor Ali Shaikh	Director
Mr. Zuhair Siddiqui	Director
Mr. Ayaz Dawood	Director
Mr. Mathar Niaz Rana	Director
MANAGING DIRECTOR		CONTACT DETAILS
Mr. Imran Maniar
COMPANY SECRETARY		Ph: 92-21-99021000
	Fax: [phone]
Mr. Shoaib Ahmed		Email: [e-mail]
AUDITORS		Web: www.ssgc.com.pk
	SHARE REGISTRAR
M/s. BDO Ebrahim & Co., Chartered Accountants
LEGAL ADVISOR		CDC Share Registrar Services Limited,
	CDC House, 99-B, Block B, SMCHS,
M/s. Orr, Dignam & Co. Advocates		Main Sharah-e-Faisal, Karachi.
REGISTERED OFFICE		Ph: 021-111-111-500

SSGC House, Sir Shah Suleman Road

Gulshan-e-Iqbal, Block 14, Karachi - 75300, Pakistan

BOARD OF DIRECTORS' COMMITTEES

Board HR and Remuneration Committee	Board Risk Management,
Dr. Shamshad Akhtar	Chairperson	Litigation and HSEQA Committee
Mr. Muhammad Raziuddin Monem	Director	Mr. Muhammad Raziuddin Monem	Chairman
Mr. Hassan Mehmood Yousufzai	Director	Ms. Nida Rizwan Farid	Director
Dr. Ahmed Mujtaba Memon	Director	Mr. Manzoor Ali Shaikh	Director
Dr. Sohail Razi Khan	Director	Mr. Zuhair Siddiqui	Director
Mr. Manzoor Ali Shaikh	Director	Mr. Ayaz Dawood	Director
Mr. Mathar Niaz Rana	Director	Mr. Mather Niaz Rana	Director
Board Finance and Procurement Committee	Special Committee of Directors on UFG
Dr. Ahmed Mujtaba Memon	Chairman	Dr. Shamshad Akhtar	Chairperson
Ms. Nida Rizwan Farid	Director	Mr. Faisal Bengali	Director
Mr. Ayaz Dawood	Director	Mr. Nida Rizwan Farid	Director
Dr. Sohail Razi Khan	Director	Mr. Mather Niaz Rana	Director
Mr. Zuhair Siddiuqi	Director	Mr. Hassan Mehmood Yousufai	Director
Mr. Hassan Mehmood Yousufzai	Director	Dr. Sohail Razi Khan	Director
Board Audit Committee		Mr. Zuhair Siddiqui	Director
Mr. Faisal Bengali	Chairman	Board Nomination Committee
Dr. Ahmed Mujtaba Memon	Director	Dr. Shamshad Akhtar	Chairperson
Dr. Sohail Razi Khan	Director	Dr. Ahmed Mujtaba Memon	Director
Mr. Manzoor Ali Shaikh	Director	Mr. Faisal Bengali	Director
Mr. Ayaz Dawood	Director	Mr. Manzoor Ali Shaikh	Director
		Mr. Muhammad Raziuddin Monem	Director
		Mr. Hassan Mehmood Yousufzai	Director

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DIRECTORS' REVIEW

For three months period ended September 30, 2021

Financial Overview

During the period, the Company recorded a Net Profit after Tax of Rs. 736 Million after incorporating major disallowances by OGRA.

The summary of financial highlights of the period is given below:

	Sep 2021	Sep 2020	Variance
			Amount
		(Rupees in Million)
Profit / (Loss) before	1,470	(111)	1,581
Taxation	(734)	(610)	(124)
Taxation	736	(721)	1,457
Profit / (Loss) after	0.84	(0.82)	1.66

SSGC Profitability is derived from the Guaranteed Return Formula prescribed by OGRA. Under this formula, SSGC was allowed 17.43% Return on its Average Net Operating Fixed Assets before Financial Charges and Taxes. However, OGRA makes disallowances/ adjustments while determining the revenue requirements based on efficiency related benchmarks viz a viz Un-accounted for Gas (UFG), Human Resource Benchmark Cost, Provision for Doubtful Debts and some other expenses/ charges. These disallowances/ adjustments affect the bottom-line of the Company.

In line with OGRA Determination on Final Revenue Requirement (DFRR) for FY 2020-21 issued on November 24, 2022, total disallowances absorbed/ credits allowed in these three month financial results amounted to Rs. 1,359 million against Return on Assets of Rs. 3,918 million. Finance cost for the period is Rs. 1,089 million.

As compared to the corresponding period of last year in which Loss after Tax of Rs. 721 million was reported, there is significant improvement in bottom line of current period with reported Net Profit after Tax of Rs. 736 Million. Improvement in bottom line is mainly attributed to the following factors:

Acceptance of UFG Allowance on RLNG Business

SSGC has been pursuing vigorously OGRA through the Ministry of Energy (Petroleum Division) as well as through Islamabad High Court to allow Actual UFG on RLNG

business in Distribution Network. As a result of IHC restraining Order, OGRA has allowed Actual UFG on RLNG Distribution business.

However, still high UFG disallowance is mainly due to the fact that OGRA is not accepting RLNG Volume Handling benefit allowed to SSGC vide a Summary approved by the Economic Coordination Committee (ECC) dated May 11, 2018. With vigorous follow-up of SSGC Management & Board of Directors, OGRA has engaged a Consultant to determine the extent of UFG on RLNG and its impact on each Sui Company, namely SSGC and SNGPL.

Provision against impaired debts

In past, OGRA had the practice to allow provision against impaired debts as operating expense related to disconnected customers only whereas, adoption of IFRS-9 requires provisioning on Expected Credit loss basis i. e. forward looking approach which also covers provisioning against Live Customers. Resultantly, bottom-line of the Company was significantly affected in last year comparative period.

In DFRR FY 2020-21, OGRA has allowed Provision against Impaired Debts as operating expense computed on the basis of average of last five year allowed provisions. Following the same principle, the provisions disallowed has been restricted to Rs. 46 million as compared to Rs. 648 million in last year comparative period.

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Financial Cost

SSGC has to account for financial charges of Rs. 1,089 million against borrowing which is mainly due to the Long-Term Loan obtained to finance its Pipeline Infrastructure Project for transmission of RLNG from Karachi to Sawan delivering the RLNG volumes to SNGPL network for meeting the energy requirements of North.

An amount of Rs. 452 million to be allowed by OGRA as per past practice to compensate the impact of delay in Tariff Notifications.

Future Outlook

Moving forward, reduction in UFG is the key factor for keeping the Company operationally and financially viable. Further, it is critical that the Company be allowed to calculate UFG allowance based on RLNG handling on volumetric basis based on the decision of ECC of the Cabinet.

Acknowledgements

The Board wish to express their appreciation for the continued support received from the shareholders and its valued customers. The Board also acknowledges the dedication of all the employees who hard work on, despite number of challenges confronting the Company. The Board also thanks the Government of Pakistan, the Ministry of Energy and the Oil and Gas Regulatory Authority, for their continued guidance and support.

On behalf of the Board.

Dr. Shamshad Akhtar	Imran Maniar
Chairperson	Managing Director
Dated: April 13, 2023
Place: Karachi

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