ISLAMABAD: The Sui Northern Gas Pipelines Limited (SNGPL) has sent SOS to the Petroleum Division against less payment by the power sector against RLNG supplies and other financial obligations, well-informed sources told Business Recorder.
The gas utility company, sources said, has approached the Directorate General of Gas and brought financial matters of the company and described the financial challenges being faced by it in managing payment obligations towards RLNG and indigenous gas supply chain.
According to the SNGPL, since gas price revision in Nov-23, the SNGPL has been making payments to PSO as per commitment and have made disbursement of around Rs1,093 billion till August-24 equating the value of supplies made by PSO.
SNGPL seeks PD’s help to deal with surplus RLNG
However, during the month of September-24, target of 100 per cent payment to RLNG suppliers against the current supplies may not be achieved and a gap of around Rs22 billion is expected due to following issues: (i) reduced demand of power sector has created RLNG surplus situation.
For optimisation of RLNG supply chain, the excess RLNG is acquired by PLL for onward supply to K- Electric as PLL has shifted its cargo to later months.
However, PLL is not making any payment and intends to return this gas in future months leaving a payment gap of approximately Rs13 billion in the current month (Sep-24);(ii) pending cost equalisation arrangement with SSGC due to which SNGPL is facing challenges in meeting payment obligations towards gas/RLNG suppliers.
Therefore, to prevent any default in the RLNG supply chain and ensure its uninterrupted operation especially in upcoming winter, it is essential to expedite the finalisation of the cost equalisation arrangement; and (iii) despite principally agreeing on allowing finance cost on short term borrowings made by Sui for managing RLNG payments, OGRA has not yet allowed the related cost in revenue requirement for recovery through RLNG tariff.
The SNGPL is of the view, the finance cost of around Rs40 billion has been met by the SNGPL so far out of its own pocket creating liquidity challenges. Currently, the SNGPL has no room for further financing due to debt equity ratio limitations in view of carrying existing borrowings of around Rs150 billion on its balance sheet.
During the month of September 2024, funds released to power plants are Rs39 billion, whereas, billing against RLNG supplies to power sector during September2024 is expected to be Rs54 billion on the basis of current average daily consumption by RLNG-based power plants leaving shortfall of Rs15 billion. Total receivable from power sector has surged to Rs176 billion.
After explaining current financial situation, the SNGPL has requested support of the Directorate General of Gas and intervention for full payment to PSO against current month supplies to avert any disruptions in the RLNG supply chain.
The SNGPL has submitted the following proposals;(i) expeditious finalisation of the cost of gas equalization arrangement with SSGC and directing SSGC to continue provisional payments until the formalization of the agreement with an immediate payment of Rs12 billion on this account; (ii) Power Division may be requested to make additional payment against arrears to the tune of Rs10 billion; and (iii) OGRA may be requested to allow finance cost as operating cost in revenue requirement enabling early recovery through RLNG tariff.
Copyright Business Recorder, 2024
Comments