Credit period for payment: SSGC rejects KE's request for extension

Sui Southern Gas Company Limited (SSGCL) has turned down K-Electric's request for extension in credit period for payment of monthly bills, saying that it would compromise its recovery and lead to sovereign default.
This has been conveyed by the SSGC's Deputy Managing Director (F&A)/CFO, Amin Rajput, in a letter to KE's head of treasury and corporate finance, Rizwan Pesnani.
K-Electric in a letter to the SSGC on March 24, 2020 had sought extension in credit period due to Covid-19 emergency. The SSGC in its reply stated that it understands KE's concern over the current situation of increasing threat of Covid-19. The world has become victim of this pandemic and definitely its economic impacts would be severe, especially on developing countries.
According to the gas utility company, the impeding effects of the virus will result in financial constraints for many companies. The SSGCL being a public sector utility company is supplying gas to the franchise areas of Sindh and Balochistan. The SSGC is already undergoing recovery crisis, with KE and Pakistan Steel Mills (PSM) owing Rs 107 billion and Rs 67 billion respectively. Further, federal government's direction to provide relief in payment time to consumers will also make a dent on already precarious cash flow of the SSGC since it will halt its recoveries from customers under domestic category. On the other hand, the SSGC understands that the ECC has announced Rs 26 billion subsidy for KE and approved quarterly tariff adjustment.
Amin Rajput further stated that the KE is very well aware of the fact that the SSGC diverts its recoveries to gas purchases under sovereign guarantee. The time barred recoveries from KE with anticipated slow collections especially from industrial and commercial customers, under current situation would aggravate the already over stretched cash flow and would hamper SSGC's ability to timely gas purchase payments under sovereign guarantee and therefore, would lead to sovereign default.
In this hard time, the SSGC needs complete cooperation from KE management in making it possible to run its operations and provide uninterrupted supply of gas and this is only possible through timely payment against their gas bill invoices. The emerging situation calls for astute planning and execution on the part of various stakeholders to avert any sovereign default.
The SSGC has made it clear that it will not be able to allow the requested extension to KE to avert the sovereign default and keeping in view of the fact that the ECC has already allowed subsidy to the tune of Rs 26 billion to KE. "We hope, KE understands the gravity of the situation and would be timely releasing gas bills payments for uninterrupted supply of gas, otherwise SSGC will directly hold KE responsible for any negative fallout from non-payment of its monthly bills which can trigger sovereign default to foreign E&P companies which will have far reaching negative implications for the company and the country at large," wrote Amin Rajput.