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SNGP - Analyst Briefing Takeaway, (AKD Off the Analyst's Desk Aug 22, 2023)

AKD, Off the Analyst's Desk

SNGP - Analyst Briefing Takeaway

 

Sui Northern Gas Pipelines Ltd held its analyst briefing earlier today, wherein the management discussed the following:

 

• SNGP holds the distinction of being the largest gas distribution company in the country, catering to 30% of the total energy requirements. Company's pipeline network spans over 145k km, extending throughout the nation.
• Country’s energy mix consists 43.5% of gas, with RLNG accounting for 10.3% of the total share. SNGP commands 68% of the country’s gas supply market share. Company’s reliance on RLNG in its sales mix has increased significantly over the years.
• The power, domestic, and fertilizer sectors stand as the three primary consumers of natural gas.  The dependable accessibility of natural gas is essential for ensuring national food security and affordability.
• Company’s UFG has declined considerably from 12.32% in FY20 to 8.06% in FY22. Reduction is majorly attributed to measures such as theft control, measurement error management and leakage control.
• Average consumer tariff for SNGP presently stands at PkR750/mmbtu, with approximately PkR180/mmbtu charged towards protected consumers of gas. In terms of costs, average system gas charge is around PkR1,200/mmbtu.
• With regards to the Gas circular debt, the government's primary focus is directed towards curbing the future buildup of GCD by rationalizing consumer end tariffs.
• The influence of UFG losses on WACOG's implementation is a potential risk factor, although it is premature to calculate the impact presently. Company has flagged this phenomenon as a risk to the relevant authorities.
• As per the law, consumer gas tariffs are subject to bi-annual reviews/revisions. Gas price increases for the second half of the calendar year is in the offing, expected to be announced anytime soon.
• With regards to future enhancements in natural gas production, Wali Gas field (OGDCL: 100%) and Shewa-1 (MARI: 55%) are expected to augment and provide sustainability to the country’s natural gas supplies going forward. Production from Wali gas field has already commenced, while Shewa-1 field is targeted for Dec’23.
• With regards to speculations about a dividend claw back plan by the Govt. management commented there is no information to disseminate as of yet.
• WACC for FY22/23 was 16.6% while for FY23/24 stands at 20.6%. The calculation does not currently include the impact of the recently introduced super tax.
• Commenting on the company’s LT loan repayments, debt servicing toward lenders remains on schedule.

 

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