Sui Southern Gas : Transmission of Quarterly Report for the Period Ended 31 March 2021

Un-Audited Condensed Interim Financial Statements for the nine months period ended March 31, 2021

Unconsolidated Condensed Interim Financial Information (Un-Audited)

for the nine months period ended March 31, 2021

CORPORATE PROFILE

BOARD OF DIRECTORS

AS ON MARCH 31, 2021

Dr. Shamshad Akhtar	Chairperson
Mr. Muhammad Raziuddin Monem	Director
Mr. Faisal Bengali	Director
Ms. Nida Rizwan Farid	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
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. Imran Ahmed	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. Imran Ahmed	Director
Mr. Imran Ahmed	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. lmran Ahmed	Director

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DIRECTORS' REVIEW

For Nine Months Period Ended March 31, 2021

We are pleased to share the Company's results for nine months period ended March 31, 2021.

The Company continued to face serious challenges, however, financial results have been improved significantly due to various actions taken by the Management under the guidance of the Board of Directors.

Financial Overview

The Company recorded Net after tax loss of Rs. 2,249 million after incorporating major disallowances by OGRA. This Loss is 88% less than the comparative period loss of nine months ended March 31, 2020.

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

	March 2021	March 2020		Variance
		Amount			%
		(Rupees in Million)
Loss before Taxation	(494)	(17,410)	16,916		(97)
Taxation	(1,755)	(1,689)	(66)		4
Loss after Taxation	(2,249)	(19,099)	16,850		(88)
Loss Per Share (Rs.)	(2.55)	(21.68)	19.13		(88)

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 After Tax of Rs. 19,099 million was reported, there is significant improvement in bottom line of current period and reported Loss After Tax is Rs. 2,249 million which is an improvement of 88% in Bottom-line. Improvement in bottom line is attributed to complete absorption of staggered losses in June 2020 to the extent of Rs. 5,508 million and Rs. 11,342 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 nine months financial results amounted to Rs. 8,901 million against Return on Assets of Rs. 11,727 million. Finance cost for the period is Rs. 3,320 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 DFRR 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, resultantly, bottom-line of the Company was badly affected in previous periods. In current period, after rigorous disconnection efforts, the Company has saved disallowance against live customers and bottom-line has improved by Rs. 265 million in comparison to last year comparative period disallowance of nine months ended March 31, 2020.

High Financial Cost

SSGC has to account for financial charges of Rs. 3,320 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. 998 million has been allowed as Finance Cost on Short Term Borrowings with direct positive impact on bottom line.

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Future Outlook

Moving forward, reduction in UFG is the key to keeping the Company operationally and fi-nancially 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 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.

On behalf of the Board.

Dr. Shamshad Akhtar	Imran Maniar
Chairperson	Managing Director
Dated: October 13, 2022
Place: Karachi

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