OGRA approves WACC based tariff for SSGC, SNGPL at 17 percent

Oil and Gas Regulatory Authority (OGRA) has approved new tariff for Sui companies applicable during the fiscal year 2019 and onwards. Under the new tariff, Sui Companies – Sui Southern Gas Company & Sui Northern Gas Pipelines – will receive market based rate of return i.e. Weighted Average Cost of Capital (WACC) on the value of their net regulated fixed assets in operations.

According to Mr. Danish of Alfalah Securities, “the approved WACC for transmission and distribution network stands at 16.28 percent and 17.43 percent respectively.” He also said that “this is a major positive for Suis as the cost of debt will now be built in the return calculation making them immune to the rising cost of debt.”

“The return is significantly higher than ROA (12 percent) circulating during OGRA’s last public session held last year” says Mr. Danish. He said that this move is positive for the Sui companies.

In addition to that, the companies have also classified “meter rental charges, late payment surcharges, royalty, and transportation charges as operating income.” 

Alfalah Securities sees an upside for Sui Southern Gas Company (SSGC) as “50 percent income from meter manufacturing, net income from LPG, sale of condensate, recoating of plant will be treated as operating income.”

Since SSGC earns significant income from LPG, sale of condensate and metering, it will be considerably positive for the gas supplier.