Sui Southern Gas : Transmission of Quarterly Report for the Period Ended 30 September 2020

Un-Audited Condensed Interim Financial Information for the quarter ended September 30, 2020

Unconsolidated Condensed Interim Financial Information (Un-Audited)

for the quarter ended September 30, 2020

CORPORATE PROFILE

BOARD OF DIRECTORS

AS ON SEPTEMBER 30, 2020

Dr. Shamshad Akhtar	Chairperon
Mr. Muhammad Raziuddin Monem	Director
Mr. Faisal Bengali	Director
Ms. Nida Rizwan Farid	Director
Capt. (Retd.) Fazeel Asghar	Director
Mr. Imran Ahmed	Director
Dr. Ahmed Mujtaba Memon	Director
Dr. Sohail Razi Khan	Director
Mr. Manzoor Ali Shaikh	Director
Mr. Zuhair Siddiqui	Director
Mr. Ayaz Dawood	Director

ACTING MANAGING DIRECTOR (AMD)	CONTACT DETAILS
Mr. M. Amin Rajput	Ph: 92-21-99021000
COMPANY SECRETARY	Fax: [phone]
Email: [e-mail]
Mr. Shoaib Ahmed	Web: www.ssgc.com.pk

AUDITORS	SHARE REGISTRAR
M/s. BDO Ebrahim & Co., Chartered Accountants	CDC Share Registrar Services Limited,
LEGAL ADVISOR	CDC House, 99-B, Block B, SMCHS,
Main Sharah-e-Faisal, Karachi.
M/s. Orr, Dignam & Co. Advocates	Ph: 021-111-111-500
REGISTERED OFFICE	Fax: [phone]
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
Dr. Ahmed Mujtaba Memon	Director	Ms. Nida Rizwan Farid	Director
Dr. Sohail Razi Khan	Director	Mr. Manzoor Ali Shaikh	Director
Mr. Manzoor Ali Shaikh	Director	Mr. Zuhair Siddiqui	Director
Capt (R) Fazeel Asghar	Director	Mr. Ayaz Dawood	Director
Mr. Imran Ahmed	Director	Special Committee of Directors on UFG
Board Finance and Procurement Committee
Dr. Shamshad Akhtar	Chairperson
Dr. Ahmed Mujtaba Memon	Chairman	Mr. Faisal Bengali	Director
Ms. Nida Rizwan Farid	Director	Ms. Nida Rizwan Farid	Director
Mr. Ayaz Dawood	Director	Capt (R) Fazeel Asghar	Director
Dr. Sohail Razi Khan	Director	Mr. Imran Ahmed	Director
Mr. Zuhair Siddiqui	Director	Dr. Sohail Razi Khan	Director
Mr. Imran Ahmed	Director	Mr. Zuhair Siddiqui	Director
Board Audit Committee		Board Nomination Committee
Mr. Faisal Bengali	Chairman	Dr. Shamshad Akhtar	Chairperson
Dr. Ahmed Mujtaba Memon	Director	Dr. Ahmed Mujtaba Memon	Director
Dr. Sohail Razi Khan	Director	Mr. Faisal Bengali	Director
Mr. Manzoor Ali Shaikh	Director	Mr. Manzoor Ali Shaikh	Director
Mr. Ayaz Dawood	Director	Mr. Muhammad Raziuddin Monem	Director
		Mr. Imran Ahmed	Director

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DIRECTORS' REVIEW

For three months period ended September 30, 2020

Financial Overview

During the period, the Company recorded a net after tax loss of Rs. 721 Million after incorporating major disallowances by OGRA. This Loss is 84% less than comparative period of Quarter ended 30 September 2019.

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

	Sep 2020	Sep 2019		Variance
			Amount		%
		(Rupees in Million)
Loss before Taxation	(111)	(4,005)	3,894		(97)
Taxation	(610)	(587)	(23)		4
Loss after Taxation	(721)	(4,592)	3,871		(84)
Loss Per Share (Rs.)	(0.82)	(5.21)	4.39		(84)

SSGC Profitability is derived from the Guaranteed Return Formula prescribed by OGRA. Under this formula, SSGC is 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.

As compared to the corresponding period of last year in which loss of Rs. 4,592 million was reported, there is significant improvement in bottom line of current Quarter and reported Loss After Tax is Rs. 721 Million which is an improvement of 84% in Bottom-line. Improvement in bottom line is attributed to completion of absorption of staggered losses in June 2020 to the extent of Rs. 1,836 Million and Rs. 2,035 million reflects operational efficiency mainly due to reasons as under:

In line with OGRA Determination on Final Revenue Requirement (DFRR) for FY 2019-20 issued on March 28, 2022, total disallowances absorbed/ credits allowed in these three months financial results amounted to Rs. 3,016 million against Return on Assets of Rs. 3,879 million. Finance cost for the period is Rs. 974 million.

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 of 17.25% based on FRR of 2019-20.

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

OGRA allows provision against impaired debts as operating expense related to disconnected customers only. However, on adoption of IFRS-9, provision is being made on Expected Credit loss basis i. e. forward looking approach which also requires provisioning against Live Customers. Provision against Impaired Debts amounting Rs 648 million against live customers has been treated as not allowable expense by OGRA.

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Financial Cost

SSGC has to account for financial charges of Rs. 974 million against borrowing which is mainly due to the Long-Term Loan obtained to finance its Pipeline Infrastructure for transmission of RLNG from Karachi Port to Sawan delivering the RLNG volumes to SNGPL network for meeting the energy requirements of North.

An amount of Rs. 301 million has been allowed as Finance Cost on Short Term Borrowings with direct positive impact on bottom line.

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 wishes 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 soldiered 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.

Dr. Shamshad Akhtar	Muhammad Amin Rajput
Chairperson	Acting Managing Director
Dated: November 07, 2020
Place: Karachi

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