OGRA’s reduction in ROA likely to hit SNGPL’s profitability

August 20, 2021 (MLN): Oil and Gas Regulatory Authority (OGRA), in its decision dated August 17, 2021, in line with the tariff regime in vogue, reworked the Rate of Return on Average Net Assets (ROA) for the year 2021-22 at 16.60% as compared to the previous ROA rate of 17.43% determined up to 2020-21. Accordingly, the reduction in the net rate of return will likely have a negative impact on the profitability of Sui Northern Gas Pipelines Limited (SNGPL) for FY22.

The above decision of Authority came while determining the SNGPL petition for determination of estimated revenue requirement (DERR) FY22, the notice issued to PSX said.

At the same time, OGRA has also advised the reduction in depreciation rates of the various operating assets particularly transmission and distribution network of the company from present rates of nearly 6% per annum to rates ranging from 2.5% to 5% per annum. This will result in an increase in the asset base of the company and a higher amount of returns over a longer period of time and consequently will have a positive impact on the profitability of the company.

While the change in the rate of depreciation would have a long-term impact on the asset base and profitability of the company, the net adverse impact on the profitability of FY 2021-22 due to the reduction of rate is estimated to be Rs400 million.

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