Pakistan Credit Rating Agency Limited Maintains Ratings of Sui Northern Gas Pipelines Limited

Lahore: The Pakistan Credit Rating Agency (PACRA) has maintained the long-term and short-term entity ratings of Sui Northern Gas Pipelines Limited (SNGPL) at “AA” (Double A) and “A1+” (A One Plus) respectively. The ratings denote a very low expectation of credit risk emanating from very strong capacity for timely payment of financial commitments.

The ratings reflect SNGPL’s sovereign ownership structure and strategic importance, implying strong sponsor support. The ratings also incorporate the company’s low business risk, attributable to its monopolist position in its area of franchise (Punjab, Khyber Pakhtunkhwa and Azad Jammu and Kashmir) – and guaranteed return on its net operating assets.

The company’s UFG losses have increased. Lately, the management has had some success in its curtailment. SNGPL maintains robust cash flows and a moderately leveraged capital structure. The company plans to borrow additional funds to finance its CAPEX requirement which may impact SNGPL’s financial profile. However, comfort can be drawn from the fact that the additional borrowing would be used in the expansion of the transmission network, which is expected to positively impact the overall returns of the company.

The ratings are dependent on effective curtailment of gas losses to keep profitability intact and uninterrupted gas supplies for continued network expansion. Excessive leveraging, impacting SNGPL’s financial profile, would remain critical.

Meanwhile, the ratings have been placed under Rating Watch on account of pending adjudication of the court case with OGRA on UFG benchmark. Any unfavourable decision would trigger a negative rating action.

For more information, contact:
Hammad Rashid
Analyst
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425
Email: hammad.rashid@pacra.com
Web: www.pacra.com

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