Pakistan Credit Rating Agency Limited Maintains Ratings of Sui Southern Gas Company Limited

Lahore: The Pakistan Credit Rating Agency (PACRA) has maintained the long-term and short-term entity ratings of Sui Southern Gas Company Limited (SSGC) at “AA-” (Double A Minus) and “A1+” (A One Plus) respectively.

PACRA has also maintained the ratings of the Sukuk of PKR 4,700mln at “AA” (Double A). The ratings denote a very low expectation of credit risk emanating from very strong capacity for timely payment of financial commitments.

The ratings reflect SSGC’s robust business profile characterized by its monopolistic position in its area of franchise (Sindh and Balochistan) and guaranteed return on its net operating assets. At the same time, the company enjoys strong cash flows and a moderately leveraged capital structure which lend it financial flexibility. However, circular debt issues along with the rising trend in UFG losses, both in term of gas leakages and theft, pose major risks to the overall profile of the company.

Effective management of the company’s debt profile is important in the wake of high Capex requirements. Nevertheless, the company’s strategic importance supplemented by its sovereign ownership structure remains a key rating factor.

The ratings are dependent on effective curtailment of gas losses to keep profitability intact and uninterrupted gas supplies for continued network expansion.

Meanwhile, the ratings have been placed under Rating Watch due to pending adjudication of the court case with OGRA mainly 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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