Advisor asks SSGC to prevail on KESC to settle its rising receivables

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KARACHI (PR): Senator Dr. Asim Hussain, Advisor to the Prime Minister on Petroleum and Natural Resources has instructed SSGC Board of Directors and Management to take all possible steps to ensure that KESC starts to settle its dues. The Advisor reiterated that KESC must be told by SSGC in no uncertain terms to sign the Term Sheet with SSGC, failing which the Company will be entitled to curtail gas and take requisite legal steps. The Advisor was chairing a joint meeting of the Board of Directors of SSGC and SNGPL at SSGC House, Karachi on September 1, 2012. 

Salim Abbas Jilani, Chairman, SSGC and Mian Misbah-ur-Rehman, Chairman, SNGPL led their respective Boards during the meeting.  Some major issues related to both the Companies’ return on assets and nagging problem of mounting KESC’s receivables were discussed in the joint meeting during which the Advisor passed on the spot instructions for implementation. Mr. Arif Hameed, MD, SNGPL and Mr. Azim Iqbal Siddiqui, MD, SSGC actively participated in the meeting by discussing important issues requiring urgent attention. 

The meeting noted with concern KESC’s inability in clearing past dues to SSGC that has led to receivables mounting to a staggering Rs. 39 billion including late payment surcharge legally due to SSGC. KESC’s failure in settling overdues is making it increasingly difficult for SSGC to make payments to local and foreign E&P companies from which it purchases gas, a scenario that is clearly leading to an imminent default. KESC for the last few months is only paying current bills.  SSGC’s directors confirmed to the Advisor that a Term Sheet has already been sent to KESC about two weeks ago.

Addressing the joint boards, the Advisor stated that the Government wants both the companies to deal with LNG and Synthethic Natural Gas (SNG) projects on priority so that gas shortages in the country can be mitigated.

Dr. Asim Hussain also asked SSGC to expedite work on solar energy geysers, by entering into joint venture with specialized firms. MD, SSGC added that already considerable spade work has been done on the project. The Advisor said that in order to get out of the current natural gas crisis, it is important for both the Companies to take quick measures and initiatives.

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Earlier the Advisor reiterated that the Boards of SSGC and SNGPL were autonomous, independent and empowered and should conduct their business on purely common considerations. They should thus move out of the current return on assets formula, and instead adopt a margin on sale on gas formula which will not only bring gas tarrifs under control, hence reducing the impact of changes in gas prices for the consumer but will also release considerable pressure from the both Companies’ operating margins, the Advisor stressed.  He said that the Boards of both the Companies must draft a proposal to his Ministry following which it will be presented to ECC for approval.