In a positive step, the Oil and Gas Regulatory Authority (OGRA) has approved 88 percent of the finance cost requested by Sui Northern Gas Pipeline Limited (SNGPL) for FY23, passing Rs. 8.5 billion of the Rs. 9.7 billion finance cost initially requested by the company.
This decision came after SNGPL provided an Independent Auditor's certificate for FY23, following a previous delay until the document was submitted.
SNGPL’s request was related to outstanding amounts resulting from RLNG diversion, RLNG sales at subsidized rates to sectors like fertilizer and export-oriented industries, as well as receivables from the power sector, which have contributed to the country's circular debt.
The directive, issued by OGRA on March 15, 2023, outlined the conditions under which the finance cost would be allowed as a pass-through. These include ensuring the financing addresses the circular debt-related shortfall and the differential due to RLNG subsidy payments.
This approval is also significant for SNGPL's FY25 accounts. As of December 17, 2024, OGRA had already granted 50 percent of the finance cost as a pass-through for SNGPL in the review of the Estimated Revenue Requirement.
If the same 88 percent pass-through is applied moving forward, the earnings estimate for FY25 will increase to Rs. 26.5 per share, with a PE ratio of 3.9x.
For the upcoming fiscal year, SNGPL continues to face a revenue shortfall of Rs. 589 billion and has requested an allowance of Rs. 150 billion in finance for borrowings.
OGRA may approve a significant portion of this finance cost, particularly to cover the shortfall related to circular debt, pending further clearance of these liabilities.
This move is aimed at alleviating the financial burden of SNGPL while ensuring the flow of energy and minimizing the impact of circular debt.
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