Sui Southern Gas Company Limited (SSGC)

The Privatisation Commission began soliciting Expressions of Interest for SSGC on 4 January 2006.  The requirements that a company must present to the Commission in order to register its interest are described in the EOI advertisement [insert hyperlink to EOI].  The Statement of Qualification from Potential Bidders must be received by the Commission no later than 4 March 2006 at 3 PM.

Sui Southern Gas Company Limited (the Company) is Pakistan’s leading integrated gas company having an exclusive distribution and sale license in the provinces of Sindh and Balochistan. The Company’s core business is to buy natural gas in bulk from E&P companies, transmit it to load centres over its high pressure transmission system, distribute and sell it to its customers through its supply network.

The transmission system of the Company extends from Sui in Balochistan to Karachi in Sindh comprising 2,942 Km of high pressure pipeline ranging from 12” - 24" in diameter. The distribution network of over 25,764 Km covers 120 towns and 930 villages in Sindh and Balochistan. The Company sold 337,638 million cubic feet (MMCF) of natural gas during the year 2004-2005 to about 1.8 million industrial, commercial and domestic consumers. The Company also owns and operates the only gas meter manufacturing plant in the country, under an agreement with Schlumberger Industries-France.  The plant has an annual production capacity of over 400,000 domestic meters. SSGC is also examining the feasibility of installing a pilot project of 500 numbers of Radio Frequency type and 500 numbers of prepayment type meters manufactured by ACTARIS, a French Company. Following the successful test-launch of 1,000 imported prepaid meters in 2004-05, the company is proceeding aggressively to set up more pilot projects before rolling out these meters at a faster rate in 2005-06. The Company has achieved another milestone at the meter plant.  It has obtained ISO 9001: 2000 certification.

The Company is a public limited company listed on the Karachi, Lahore and Islamabad Stock Exchanges with 60.43% direct share holding by Government of Pakistan (GOP). It has an authorised capital of Rs.10 billion, out of which Rs. 6.7 billion is issued and fully paid up and is managed by an autonomous Board of Directors having overall control. Presently, SSGC's Board has 14 members drawn both from public and private sectors. The Managing Director/Chief Executive is nominated by GOP and has been delegated with such powers by the Board of Directors as are necessary to effectively conduct the business of the Company.

The Company in its present shape was formed on March 30, 1989 following a series of mergers of three pioneering companies, namely Sui Gas Transmission Company Limited, Karachi Gas Company Limited and Indus Gas Company Limited.

Sui Gas Transmission Company Limited was formed in 1954 with the primary responsibility of gas purification at the Sui field in Balochistan and its transmission to the consumption centres at Karachi. Two distribution companies were established in 1955 and were responsible for the distribution of gas to consumers in Karachi and in other towns along the route of the transmission pipeline between Sui and Karachi. In 1985, these two distribution companies were merged to form Southern Gas Company Limited and later, in 1989, Southern Gas Company Limited and Sui Gas Transmission Company Limited were merged to form the Sui Southern Gas Company Limited.  

The Company is organized into six functional divisions -Transmission, Distribution, Commercial, Engineering Services, Management Services, and Finance. Each division is headed by a Senior General Manager assisted by a team of professional staff, with the exception of Finance, which is headed by the Deputy Managing Director. Policy matters relating to the natural gas sector are handled by the GOP. OGRA is responsible for regulation, pricing, revenue determination and compliance to service standards. The Board of Directors has the overall responsibility for the management and control over the Company. The management enjoys operational autonomy. The major portion of the work force consists of technically qualified and skilled personnel.

The Company aims to supply natural gas wherever there is sufficient load to justify the cost of infrastructure. In many places the gas network is being expanded to meet economic and social requirements through active funding support from the Federal and Provincial governments. In 2003, the Company launched a comprehensive five-year gas network development and expansion plan to connect hundreds of small towns and villages in remote areas of Sindh and Balochistan, which currently are deprived of piped natural gas.

Every year, the Company adds nearly 66,000 new customers (industrial, commercial & domestic) to its customer base and lays hundreds of kilometres of transmission pipelines and distribution network and installs other facilities such as metering/ billing stations in its system using its staff of technically qualified and skilled personnel.

The Company is pursuing an ambitious five year development and expansion plan estimated at Rs 42.9 billion. Key objectives of the strategic plan for the next five years (2005-06 to 2009-10) are the following:

·          Expansion of transmission network by 608 kms from 2,942 km in 2005 to 3,550 km by 2010, enhancing capacity from 1,300 MMCFD in 2005 to 1,700 MMCFD by 2010.

·          Expansion of distribution network and supply mains by 5,236 km from 25,764 km in 2005 to 31,000 km by 2010 connecting 600 new towns and villages in Sindh and Balochistan

·          Enhancement of gas supply to power plants, industrial and commercial sectors including supply of gas to previously deprived areas in the domestic sector.

·          Increase of the customer base from nearly 1.8 million to 2.2 million by adding 447,000 new customers to the Company’s system.

·          Consistent appreciation in shareholder’s value by increasing the company’s asset base and significant improvement in productivity and efficiency.

·          Focus on improved, friendly and efficient customer services under the vision of “Service with a smile”;

·          Establishment of 16 fully automated (additional 8 in progress) on line customer facilitation centres;

·          Multiple bill payment options and channels (ATM, Call Centres, ORIX POS, Internet, Drop Boxes, NADRA-Kiosk);

·          Latest technology digital prepaid meters with improvement of  call centres to include an online customer information system.

·          Revamp the current business processes, to improve company efficiency and implement ERP, CIS, GIS and the best business policies for ISO 9000 certification;

·          Increase surveillance and introduce an automated emergency response system (ERS) and SCADA for the security of company assets including the transmission and distribution networks;

·          Improve the quality of human resource through career planning, training of employees and development of management;

·          Implement environment management system, occupational health and safety system as required under Certification ISO 14001 and OHSAS 18001 standards;

·          Set up Enterprise Information System (EIS) in all areas of business using state of the art technology to make SSGC the “Most IT Enabled Company;”

·          Human resource development and empowerment of employees through career planning and continuous management/vocational training.

·          Community support services and corporate communication initiatives to meet the national and social responsibilities, as a good corporate citizen.

Substantial expansion and enhancement in the existing distribution network will also be undertaken under the five-year development plan. As a consequence, the net operating fixed assets of the Company will increase to about Rs.36 billion by the Year 2008 while there will be a substantial increase in net sales from gas expected to become available from new fields.

With additional capacity in pipeline network under the GIREP – II coming on stream, sales will increase at a higher rate per year moving to about 1,700-1,800 MMCFD from the current 1,300 MMCFD in the next few years.

SSGC is also actively involved in LNG import development for the Karachi region. The LNG project consultants have been retained and will be following a fast-track schedule for policy framework formulation for the government and project development. It is expected that the implementation agreement for the LNG project would be finalized after approval of the Board of Directors involving new owners.  This would be in mid-2006.

The Company’s strategic five-year business plan has been launched at a most appropriate time while financing is available to the Company at extremely attractive rates, which are currently below 3%. The Company enjoys inherent financial strength with a debt equity ratio of 41:59, which provides it with a good leverage to finance expansion at lower interest rates.

The Company has undertaken further new initiatives, which will significantly improve its productivity and revenue through improved corporate governance and implementation of technology-based solutions in various business areas. Through a gas price equalization agreement with the other major gas company, the Company is now assured of an equitable cost of gas, which should facilitate maintenance of adequate operating margins in the coming years.

Significant Financial Information for the Past Ten Years