Gas company, SNGPL, encounters cash flow problems
The Sui Northern Gas Pipelines Limited (SNGPL) is grappling with a severe liquidity crisis, with outstanding dues from the power sector being a major contributing factor. The total amount owed to SNGPL by the power sector stands at an approximate Rs148.5 billion [1].
At the heart of this issue lies the delayed payment of funds from the Central Power Purchasing Agency (CPPA-G) to the power sector. This delay in funding has resulted in a cascading liquidity crunch for SNGPL, as Wapda power plants and private Independent Power Producers (IPPs) are unable to clear their liabilities to the gas utility [1].
Wapda power plants, including Guddu, Nandipur, and others, owe a substantial Rs50.431 billion to SNGPL, while large amounts are also owed by private IPPs such as Liberty Power, Kapco, Engro Energy, Orient Power, FKPCL, Sapphire Power, Saif Power, Davis Energen, and M/s Halmore Power [1].
The power sector's outstanding dues to SNGPL amount to approximately Rs76.523 billion, with Rs18.119 billion of the receivables being disputed gas charges, while Rs31.462 billion are regular gas charges [1].
The root cause of these outstanding dues can be traced back to systemic inefficiencies and financial shortfalls within the power sector. These issues include outdated infrastructure, high line losses, and costly generation methods, particularly oil-based IPPs that are operating inefficiently despite high tariffs [3].
Other challenges contributing to this crisis include difficulties in gas demand forecasting, LNG contract pricing, and coordination issues between SNGPL and other agencies like NPCC [2]. The government is currently reviewing measures to address gas firms' revenue needs and mitigate circular debt schemes, reflecting deeper structural problems in energy sector financial management [2].
The implications of this liquidity crisis for SNGPL are severe. If the gas utility is unable to meet its own financial obligations to gas suppliers, it could disrupt gas supply stability. This crisis may also force SNGPL to increase consumer tariffs or curtail gas supply to various sectors, impacting industrial and power generation capacities [1][3].
In an effort to alleviate the crisis, CPPA-G has been requested to release funds to Wapda, IPPs, and GPPs earlier to help SNGPL honour its commitments to gas suppliers [1].
In addition to the power sector, SNGPL also has outstanding dues against QATPL (Rs3.441 billion) and NPPMCL (HBS) (Rs269 million) [1]. The issue of SNGPL's liquidity crisis is severe and is mainly due to lesser fund release by CPPA-G to the power sector [1].
References:
[1] Dawn. 2021. SNGPL faces severe liquidity crisis due to power sector debt. [online] Available at: https://www.dawn.com/news/1654681
[2] The Express Tribune. 2021. SNGPL's liquidity crisis: CPPA-G asked to release funds to power sector. [online] Available at: https://tribune.com.pk/story/2360876/snpl-s-liquidity-crisis-cppa-g-asked-to-release-funds-to-power-sector
[3] The News. 2021. SNGPL's liquidity crisis: Power sector inefficiencies, financial shortfalls causing problems. [online] Available at: https://www.thenews.com.pk/print/810018-snpl-s-liquidity-crisis-power-sector-inefficiencies-financial-shortfalls-causing-problems
- The index of the power sector's failure to clear its liabilities to Sui Northern Gas Pipelines Limited (SNGPL) has significantly impacted the finance industry, as the total outstanding dues from the power sector to SNGPL amounts to an approximate Rs148.5 billion.
- The delay in funding from the Central Power Purchasing Agency (CPPA-G) to the power sector has caused a ripple effect, leading to liquidity issues for SNGPL, as Wapda power plants and private Independent Power Producers (IPPs) are unable to clear their liabilities to the gas utility.
- In the energy sector, the liquidity crisis faced by SNGPL is a result of several factors, including the power sector's systemic inefficiencies, financial shortfalls, outdated infrastructure, high line losses, and costly energy production methods.
- The liquidity crisis of SNGPL threatens to disrupt gas supply stability, potentially leading to increased consumer tariffs or gas supply cuts for various sectors, impacting both industrial and power generation capacities.
