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1.

Introduction of Organization

1.1 Nature of Organization


Sui Northern Gas Pipelines Limited is the largest integrated gas company serving more
than 2.7 million consumers in north central Pakistan through an extensive network in
Punjab and North West frontier province. The company has over 43 years of experience
in operation and maintenance of high pressure gas transmission and distribution system.
It also has expanded its activities to undertake the planning, designing and construction of
pipelines, for both itself and other organization.
Sui Northern Gas Pipelines Limited in a region of the nation that has a rapidly growing
demand for natural gas and power generation due to significant industrial development.

1.2 Natural Gas


Natural gas, as the name implies, is found in gaseous form naturally, underground at
varying depths and geographical formations. It is one of the most abundant energy
sources in Pakistan, and because it is produced domestically, it is not subject to foreign
disruptions of price or supply. Comprised primarily of methane, natural gas is odorless
and colorless when it comes out of the ground. After impurities are removed, the natural
gas is introduced into the pipeline system where it is transported to the consumers.
Prior to distribution, a harmless odorant is added to the gas so any leakage can be easily
detected before an unsafe situation occurs. In addition to this "rotten egg" odor, natural
gas has some built-in safety features. It is lighter than air, so it will rise and dissipate into
the atmosphere in the event of a leak. And it has a very narrow combustion range,
igniting only when mixed with air at a ratio of between 4 and 14 percent. Any mixture
higher or lower than that range and natural gas simply won't burn. It also requires a very
high degree of heat, at least 1200 degrees Fahrenheit, before it will ignite.
Once combustion occurs, natural gas is one of the cleanest-burning fuels available today.
When it is burned properly, the only emissions are carbon dioxide (which is what we
exhale when we breathe) and water vapor. Because of its clean-burning properties,
natural gas has become the environmental fuel of choice for many residential,
1

commercial and industrial applications. Such applications include: space heating, water
heating, cooking, and as a fuel for fireplaces, vehicles, power plants, commercial and
industrial boilers, as well as commercial and industrial processing.

1.3 Establishment of OGRA


The federal government promulgated the natural gas regulatory authority ordinance in
January 2000 based on the bill already passed by the national assembly in1999. Under the
ordinance, natural gas regulatory authority ordinance was established to regulator the
transmission, distribution and sale of natural gas, including determination of gas tariffs of
the companies with the prime objective of safeguarding the consumer's interest. later,
federal government decided to enlarge the scope of natural gas authority and
consequently the oil & gas regulatory authority ordinance was promulgated in march,
2002 which included the technical regulations of refineries, oil storages, oil pipelines, oil
marketing companies, compressed natural gas and liquefied petroleum gas and natural
gas regulatory authority ordinance was subsumed in oil & gas regulatory authority.
consequent upon oil & gas regulatory authority was establishment on 28th march, 2002
and with effect from march 15, 2003 federal government assigned to oil and gas
regulation authority for the regulation of liquefied petroleum gas and compressed natural
gas sectors in the country and has designated the oil & gas regulatory authority as an
authority in place of the director general (gas) of the ministry of petroleum and natural
resources. ten main gas companies are working in Pakistan under the oil & gas regulatory
authority,
1. Sui Northern Gas Pipelines Limited.
2. Sui Southern Gas Company Limited.
3. Oil and Gas Development Company Limited (Such Gas Field).
4. Oil and Gas Development Company Limited (Bhal Syedan Field).
5. Oil and Gas Development Company Limited (Nandpur & Panjpir Fields).
6. Central Power Generation Company Limited.
7. Engro Chemical Pakistan Limited.
8. Fuji Fertilizer Company Limited.
9. Pakistan Petroleum Limited.
10. Meri Gas Company Limited

1.4 Overview of organization


I am discussing about the sui Northern Gas Pipelines Limited, which is working in
province Punjab and north west province. Sui Northern Gas Pipelines Limited was
incorporated as a private company in June 1963 with the object of transmission and
distribution of natural gas in Punjab, North West frontier province, and the federal capital
area. Sui Northern Gas Pipelines Limited was later converted into a public limited
company in January 1964 under the companies act 1913 (now companies ordinance
1984), and is listed on three stock exchange of the company. The company took over the
existing Sui-Multan system (349 Kms of 16 inch and 129 Kms of 10 inch diameter
pipeline) from Pakistan industrial development corporation and Dhulian-Rawalpindi-Wah
system (132 Kms of 6 inch diameter pipeline) from Attock Oil Company limited. the
company's commercial operations commenced by selling an average 47 MMCFD gas in
two regions viz. Multan and Rawalpindi, serving a total number of 67 consumers. Sui
Northern Gas Pipelines Limited is the largest integrated gas company with an existing
transmission system of 6,195 Kms and distribution system of 46871 Kms. The company
serves more than 2.7 million consumers in north central Pakistan through an extensive
network in Punjab and North West frontier province. The company has over 43 years of
experience and maintenance of high pressure gas transmission and distribution system. it
has also expanded its activities to undertake the planning, designing and construction of
pipelines, both for itself and other organizations.

1.5 Company Profile


Sui Northern Gas Pipelines Limited (SNGPL) is the largest integrated gas company
serving more than 3.4 million consumers in North Central Pakistan through an extensive
network in Punjab and NWFP. The Company has over 46 years of experience in
operation and maintenance of high-pressure gas transmission and distribution systems. It
has also expanded its activities to undertake the planning, designing and construction of
pipelines, both for itself and other organizations. SNGPL operates in a region of the
nation that has a rapidly growing demand for natural gas and power generation due to
significant industrial development.
SNGPL was incorporated as a private limited Company in 1963 and converted into a
public limited company in January 1964 under the Companies Act 1913, now Companies
3

Ordinance 1984, and is listed on all the three Stock Exchanges of the Country.
SNGPL transmission system extends from Sui in Baluchistan to Peshawar in North West
Frontier Province (NWFP) comprising over 7,347 KM of Transmission System (Main
lines & Loop lines). The distribution activities covering 1,624 main towns along with
adjoining villages in Punjab & NWFP are organized through 8 regional offices.
Distribution system consists of 67,449 KM of pipeline.
SNGPL has 3,451,142 consumers comprising Commercial, Domestic, General Industry,
Fertilizer, and Power & Cement Sectors. Annual gas sales to these consumers were
584,895 MMCF worth Rs. 168,933 million during Jul 08 - Jun 09.

1.6 Company Overview

Regional Establishment
Administrative Structure
Organizational Structure

1.6.1 Regional Establishment


Sui Northern Gas Pipelines Limited was incorporated as a private company in June 1963
with the object of transmission and distribution of natural gas in Punjab, North West
frontier province, and the federal capital area. Sui Northern As Pipelines Limited was
later converted into a public limited company in January 1964 under the companies act
1913 (now companies ordinance 1984), and is listed on the three stock exchanges of the
company.
In Sui Northern Gas Pipelines Limited, three main departments are working.
1. Transmission.
2. Distribution.
3. Project.
1.6.1.1

Transmission

basically on operational out lift, the company handles the entire operation of a lengthy
network of high pressure gas lines comprising 6195 km in length, varying from 6 inch to
36 inch of diameter in accordance with the mineral gas safety rules, oil and gas regulatory
authority regulations and international gas transmission industry's standards.

1.6.1.2

Distribution

The company's business strategy is to maximize sales of gas by entering in to new areas
through development/expansion of its infrastructure. in accordance with the policy of
government of Pakistan. The company has focused on country's economic revival by out
reaching industries for gas supply. During the last fiscal year, the company has provided a
record number of 531 industrial gas connections resulting in displacement of imported
liquid fuels to save precious foreign exchange.
The share of natural gas in Pakistans energy supply mix has increased from 41 % to 51,
whereas that of oil has decreased from 43 % to 29 % during the last three years. The
company has its gas distribution network in 831 difference towns and villages of Punjab
and North West frontier province. As on June 30, 2006, the total length of distribution
network of Sui Northern Gas Pipelines Limited stands at 46964 km.
1.6.1.3
Project
Sui Northern Gas Pipelines Limited, as contractor, carried out construction of pipelines
8 dia, 20 km Badar gas field to Qadir pur field. Similarly an engineering, procurement
and construction. Contract was successfully executed from M/s. MOL Pakistan in the
shape of 10 dia, 8.75 km Makori-Kharrapa, and gas pipelines. During the year, the
company successfully completed various mega projects like gas supply to Murree, Kot
Radha Kishan, Lilla town (through CNG) and many other projects in difference regions
of Punjab and the North West frontier province.
The company has planned to undertake the project of gas supply t various southern
districts of north west frontier province (with estimated cost of rs.2.1 billion) viz Hangu,
Karak, Lakhi, Bannu, Dera Ismail Khan, Tank and southern district of Punjab (with
estimated cost rs.3.7 billion) viz Hasilpur, Chishtian, Mandi, Bahawalnagar, Burewala,
Pak Pattan, Haroonabad, Duniapur, Karor Pakka, Vehari, Tibu Sultan, Khairpur
tammawali, Yazman, Minchinabad and Fort Abbas through construction of transmission
lines of 315 km and 115 km, respectively and distribution supply mains of 460 km.

1.7 Administrative Structure


Policy guidelines and overall control is vested in the elected Board of Directors as
provided for in the Companies Ordinance 1984
1.8 Organizational structure
Head office of the company is situated in Lahore, chairman, managing director, other
departmental senior general managers and all directors offices are there. They control all
the areas offices from there. All the financial and non financial matters i.e. credit from
bank casting budgeting, allocation of funds matter, taxes, training to employees etc, are
made under the supervision of the chief financial officer. Company has the separate
internal audit department. The audit department checks that the work is being done
according to the company policies, departmental procedures. The audit department
periodically conducts the audit of different departments but on the other hand the audit
department transfers the pre-audit function to the accounts department of limited
payments. Chief financial officer is being appointed according to the clause (xv) of code
of corporate governance by Securities and Exchange Commission of Pakistan. Audit
committee is being established according to the clause (xxx) of code of corporate
governance by securities exchange commission of Pakistan. These committees are
established for the purpose of improving transparency and discourse in financial
reporting of companies and for improving their governance to protect the interests of
investors.
Board of directors is elected by the share holder of the company. The managing director
and the chief executive officer of the company is working under umbrella of board of
directors. The board of directors who made the decision for the entire satisfaction of the
investors as well as the consumer. Other the senior general managers are working under
the deputy managing director who directly reports to the managing director and chief
executive officer.

1.9 Regulations
Regulatory Regime comprises of:
Code of Corporate Governance.
Oil & Gas Regulatory Authority Ordinance (XVII of 2002) dated 28th March 2002
Natural Gas Regulatory Authority (Licensing) Rules 2002 dated 26th February 2002.
Natural Gas Tariff Rules 2002 (Draft 5 July 2002).
Such other Rules and Regulatireons which the Oil & Gas Regulatory Authority
(OGRA) may prescribe. Under the existing pricing and regulatory regimes, following
operating conditions have been laid down:
Allocation of gas from different sources is made by GOP while the wellhead prices are
fixed by the OGRA per Petroleum Concession Agreements/contracts.
Consumer selling price including sales to major consumers (i.e. power, fertilizers etc)
are notified by the GOP/OGRA.
SNGPL is guaranteed a rate of return @ 17.5% on its net fixed assets in operation
(ROA) for meeting financial charges, taxation and a reasonable return to the
shareholders.
The prescribed price i.e. the price which the company is allowed to retain out of
consumers selling price to meet the covenanted rate of return, is determined by OGRA.

1.10 Statements
Core Values
Objectives
Vision & Mission Statements
1.10.1Core Value
COMMITMENT
We are committed to our vision, mission, and to creating and delivering
stakeholder value.

COURTESY
We are courteous - with our customers, stakeholders and towards each
other and encourage open communication.
COMPETENCE
We are competent and strive to continuously develop and improve our
skills and business practices.
RESPONSIBILITY
We are responsible as individuals and as teams - for our work and our
actions. We welcome scrutiny, and we hold ourselves accountable.
INTEGRITY
We have integrity - as individuals and as teams - our decisions are
characterized by honesty and fairness.

1.10.2 Key Objectives


Sui northern gas pipelines limited committed for;
1. Enhancement of System Capacity
2. Expansion of Transmission and Distribution Network.
3. Increase in Gas Sales.
4. Rehabilitation of Transmission and Distribution Network.
5. Reduction in Unaccounted for Gas Losses.
6. Improvement in Profitability.
7. Improvements in Consumer Services.
8. Adoption of Information Technology.
9. Human Resource Development.
10. Pursue Pipelines construction and Advisory Business

1.10.3 Vision Statement


To be the leading integrated natural gas provider in the region seeking to improve the
quality of life of our customers and achieve maximum benefit for our stakeholders by
providing an uninterrupted and environment friendly energy resource.

1.10.4 Mission Statement


A commitment to deliver natural gas to all door steps in our chosen areas through

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continuous expansion of our network, by optimally employing technological, human and


organizational resources, best practices and high ethical standards.

1.11 Board of Directors


Mian Misbah-ur-Rehman
Chairman
Mr. A. Rashid Lone Chief Executive/Managing Director
Mr. Dr. Faizullah Abbasi
Director
Mr. Mansoor Muzaffar Ali
Director
Mr. S. M. Asghar
Director
Mr. Muhammad Iqbal Awan
Director
Mr. A. Samad Dawood
Director
Mr. Abdul Bari Khan
Director
Mr. Tariq Iqbal Khan
Director
Mian Raza Mansha
Director
Mr.Inam ur Rahman
Director
Malik Tahir Sarfraz
Director
Joint Secretary (Admin), Ministry of Petroleum & Natural Resources
Mr. Syed Zahir Ali Shah
Director

1.12 Message From Managing Director

11

Welcome to the official website of Sui Northern Gas Pipelines Limited (SNGPL), we
invite you to get to know our Company by exploring this site on which you will learn
about our mission, vision, objectives, core values and a host of other information.
Since its inception in 1963, SNGPL has grown manifold as a result of sustained
efforts, progressive outlook and dynamic approach in its operations. Our human
resource capital is always there to serve you with passion and dedication. As we look
ahead, we believe that SNGPL is ideally positioned for continued growth.
The wealth of our Company is our customers. We view them as our stakeholders. I
would welcome email messages from all stakeholders giving suggestions on ways to
provide you with a better service. Should your suggestion be of particular interest to
us, I would be pleased to have an opportunity to meet with you and explore them in
more detail.

1.13

Profile of Employees

As on monthly report of August, 2009 there are 6994 employees are working in which
6652 employees are working as an operation, and 342 employees are working as a
project.

Years
2005
2006
2007
2008
2009

Operation
6904
6852
6712
6916
6652

Project
264
249
209
224
342

Total
7168
7101
6921
7140
6994

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The other department wise details are as under: (under the August, 2009)
Department
MANAGEMENT
DMD
SGM (HR)
CFO
SGM (ES)2
ACCOUNTS
LOGISTIC SUPPORT
AUDIT
BILLING
CIVIL CONST
COMPRESSION
CORP. AFTER
DISTRIBUTION
FINANCE
IT/MS

Executive
5
3
2
1
2
67
49
32
67
3
40
6
123
13
37

Subordinate
7
5
2
0
2
317
544
39
866
74
249
12
2109
20
82

Total
12
8
4
1
4
384
593
71
933
77
289
18
2232
33
119
13

H.S & ENV


TRAINING & DEVELOPMENT
LEGAL
METERING
PLANNING & DEVELOPMENT
HUMAN RESOURCE OPS
PROJECTS
PURCHASE & STORE
QUALITY & CONTROL
SALES
TELECOM
TRANSMISSION
UFG CONTROL
CORROSION
TOTAL

4
5
4
11
9
11
42
41
9
45
17
79
8
28
763

2
0
10
221
5
32
127
245
109
292
51
593
7
209
6231

6
5
14
232
14
43
169
286
118
337
68
672
15
237
6994

14

Chapter 2
Business Operation

15

2.0

Business Operation

2.1

Product Line

Although the company sales only natural gas. The main source through the Sui Northern
Gas Pipelines Limited is obtaining gas PPL (Pakistan Petroleum Limited). However, if
we think there are two types of gas.
1. Liquid Petroleum Gas (LPG)
2. Compressed Natural Gas (CNG)
There details are as under;

2.1.1

Liquid Petroleum Gas (LPG)

Liquid petroleum gas it is used for filling cylinders and it is liquid from gas. Before
filling the cylinders, the gas temperature is reduced and then fills the cylinders, which
used for domestic purpose, welding purpose etc
.

2.1.2

Compressed Natural Gas (CNG)

Now a day every one knows about this type of gas. It is using in vehicles; it is filled
through compressed function and fill in specific pressure.

2.2

Main offices of Sui Northern Gas Pipelines Limited

Head office Lahore


Gas house
21 Kashmir road,
P.O.boxno.56,
Lahore- 54000, Pakistan.
Ph: (+92-42) 99080000 & 99082000
Facsimile: (+92-42) 99201369 & 99201302
Website: www.sngpl.com.pk

16

Faisalabad
Sargodha road.
Ph: 041-9210033-35
Fax: 041-9210037
Islamabad
28-30 sector 1-9, industrial area.
Ph: 051-9257710-19
Fax: 055-9257770
Lahore
21- industrial area
Gurumangat road, gulberg III
Ph: 042-99263361-80
Fax: 042-99263400
Multan
Piran ghaib road.
Ph: 061-9220081-86
Fax: 061-9220090

17

2.3

Core Business

2.3.1 Gas Sources


DESCRIPTION
Sui(SML)
Sui(SUL)
Pirkoh+Loti
TOTAL
Dhodak
Meyal
Dhurnal
Dakhni
Adhi
Bhanghali
Sadqal
Ratana
Pariwali
Pindori
Dhullian
Salsabil
TOTAL
Chanda
Mela
Makori
Gurguri
TOTAL
Hassan
Zamzama
Sawan
Tajjal
Qadirpur
Qadirpur(RAW GAS)
Qadirpur (DEHYDRATED)
Kandhkot
Chachar
Rehmat
Badar
TOTAL
GRAND TOTAL

Total (MMCF)
BALOCHISTAN
139,795
10,160
15,664
165,619
PUNJAB
2,120
518
149
17,279
14,355
54
723
366
5,166
653
692
13,807
55,882
N.W.F.P
2,608
5,775
8,865
12,949
30,197
SINDH
5,414
68,735
89,453
4,027
175,589
15,247
8,345
21,464
3,401
4,513
5,272
401,460
653,157

Avg/Day (MMCF)
383
27.84
42.92
453.76
5.81
1.42
0.41
47.33
39.33
0.15
2
1
14.15
1.78
1.9
37.82
153.1
7.14
15.82
24.3
35.5
82.76
14.83
188.32
245.1
11.03
481
41.77
22.86
58.8
9.32
12.36
14.44
1,100
1,789
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2.3.2 Transmission System

Year Wise Increase in Transmission System

Transmission Network Map

Segment-Wise Transmission Break-up

Province-Wise Transmission Breakup

2.3.2.1

Year Wise Increase in Transmission System

Year

Kms

1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009

3,311
3,614
3,865
4,243
4,687
4,920
5,112
5,217
5,122
5,405
5,759
5,776
6,121
6,195
6,625
7,016
7,347

% Age Increase Over


Previous Year
9.15%
6.95%
9.78%
10.46%
4.97%
3.90%
2.05%
-1.82%
5.53%
6.55%
0.30%
5.97%
1.20%
6.94%
5.90%
4.50%

% Age Increase from


1993
9%
17%
28%
42%
49%
54%
57%
55%
63%
73%
74%
84%
87%
100%
112%
122%

19

2.3.3 Distribution System

Gas Distribution Capacity

Distribution Network

2.3.3.1

Gas Distribution Capacity

The Distribution System Capacity as on 31.12.2009 is as follow.


SR. No.
1
2
3
4
5
6
7
8

REGION

Bahawalpur
Multan
Faisalabad
Lahore
Gujranwala
Islamabad
Peshawar
Abbottabad
TOTAL

TOTAL
306
610
530
909
316
381
237
150
3439

CAPACITY (MMCFD)
CONTRACTED
AVAILABLE
236
70
471
139
408
122
885
24
258
58
223
158
172
65
134
16
2787
652

The Distribution System Capacity as on 30.06.2009 is as follow.


SR. No.
1
2
3
4
5
6
7
8

REGION

Bahawalpur
Multan
Faisalabad
Lahore
Gujranwala
Islamabad
Peshawar
Abbottabad
TOTAL

TOTAL
205
596
514
821
300
370
229
148
3183

CAPACITY (MMCFD)
CONTRACTED
AVAILABLE
234
-29
465
131
396
118
865
-44
240
60
213.5
156.5
166
63
131.6
16.4
2711.10
471.90

20

2.3.3.2 Distribution Network


Year Wise Increase In Distribution Network (Status as on 29.02.2008)
Year

Kms

1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008

28,661
29,954
31,477
32,825
34,093
35,814
38,284
42,192
46,671
51,866
57,395

2.3.4

Increase Over the Previous


Year
1,293
1,523
1,348
1,268
1,721
2,470
3,908
4,479
5,195
5,529

% Age Increase
4%
5%
4%
4%
5%
6%
9%
10%
10%
10%

Year Wise Increase in Gas Consumers

Year Wise Increase in Gas Consumers as on 29.02.2008

21

Year
1997-98
1998 -99
1999 -00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08

2.3.5

No. of
Consumers
1,637,803
1,747,320
1,887,009
1,986,583
2,113,847
2,208,968
2,340,872
2,516,795
2,723,225
2,953,818
3,102,667

Increase from Previous Year


109,517
139,689
99,574
127,264
95,121
131,904
175,923
206,430
230,593
148,849

% Age Increase Over


Previous Year
7%
8%
5%
6%
4%
6%
8%
8%
8%
5%

Year Wise Increase in Gas Sales

22

Year

Kms

1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07

253,104
284,338
308,111
321,957
341,643
452,338
537,086
571,481
576,658

2.3.6

Projects

Sr. No

Activity
D.G Cement Line (Dera Ghazi
Khan)
Shakardara- Lachi Line

1
2

Increase from Previous Year


Vol. in MMCF
% Age
31,234
11%
23,773
8%
13,846
4%
19,686
6%
110,695
24%
84,748
16%
34,395
6%
5,177
1%

DIA (Inch)Length (KM)Commissioned On


8

26.00

03.01.2006

25.50

06.08.2005
23

TOTAL
Budgeted Cost (Million Rs.)

2.3.7

51.50

Construction Activities in Progress

Sr.
Activity
No
1 Rawat Murree Line
2 Sukho Rawat Line
Choa Bestway Cement- D.G Cement
3
Chakwal Cement Line
4 Makori Line for M/s MOL Pakistan
Badar Gas Field Qadirpur Gas Field Line
5
for M/s Pakistan Explorations Ltd.

DIA
(Inch)
12
16

Length
(KM)
58.00
35.50

Commissioned
On
77%
23%

10

23.00

98%

10

20.50

99%

Total

145.50

Budgeted Cost (Million Rs)

2.3.8
Sr. No
1
2
3
4
5
6

2.3.9

1125.00

Upcoming Construction Activities


Activity
Hattar Abbottabad Line

DIA
(Inch)
16

Mian Channun Hasilpur


12
Line
Hasilpur Chistaian Mandi
8
Line
Lachi Manjuwala Line
12
Hangu Line
8
Manjuwala End Point Line
8
Total
Budgeted Cost (Million Rs)

Length
(KM)
62.50

Commissioned On
Procurement of Material /
Acquisition of Land and
Preparation of Design
Drawings in progress

90.00

As above

35.00

As above

85.00
35.00
195.00
502.05

As above
As above
As above
4200.00

Future Projects

The conceptual study of Project-IX is underway to carry maximum gas beyond Multan ,
to facilitate gas consumers from all walks of life in central Punjab and Northern areas of
the country. The basic intent of Project-IX is the elimination of bottle necks in SNGPLs

24

existing transmission network and to transport gas to independent Power Plants in Punjab
province, through system up-gradation with loop lines and system compression
enhancement, beside construction of pipelines to absorb additional gas available from gas
sources of Potohar region and newly discovered Gurguri-Makori field in Karak District
of NWFP province

2.3.10 Performance

Performance for the Year (FY 2008-09)

Performance for the Year (FY 2007-08)

Performance for the Year (FY 2008-09)


2009
2008
(Rupees in Thousand)
No of employees
Operation
Project
Total

6,652
342
6,994

6,916
224
7,140

584,895

597,913

3,451,142

3,190,181

5,953
52,242
3,358,439
3,416,634

5,442
49,176
3,101,303
3,155,921

Gas Sales (in MMCF)

Consumers (in numbers)


Customers (in numbers)
Industrial
Commercial
Domestic
Total

25

Transmission and Distribution System (in Kilometers)


Transmission main
Distribution main and services

7,347
67,449

7,016
59,951

Performance for the Year (FY 2007-08)


2008
2007
(Rupees in Thousand)
No of employees
Operation
Project
Total

6,916
224
7,140

6,712
209
6,921

597,913

576,658

3,190,181

2,953,818

5,442
49,176
3101,303
3,155,921

4,425
45,925
2,869,208
2,919,558

7,016
59,951

6,625
52,394

Gas Sales (in MMCF)

Consumers (in numbers)


Customers (in numbers)
Industrial
Commercial
Domestic
Total
Transmission and Distribution System (in Kilometers)
Transmission main
Distribution main and services
2.3.11 Bill types
There are different four types of bill.
1) Normal Bill
2) Provisional Bill
3) Minimum Bill
4) Estimated Bill

2.3.11.1

Normal Bill

Bill is issued as per meter reading supplied by the meter reader and calculated as per rates
provided by govt. for all categories of consumer. Pressure factor is applied for the

26

calculation of volume of gas consumed for commercial consumers, while pressure,


temperature & super compressibility factor is also applied to work out volume of gas
consumed by Industrial / bulk supply consumers.

2.3.11.2

Provisional bill

When meter reading could not be recorded due to following reasons, a Provisional Bill is
issued to the consumer.
1) Index glass dirty/misty.
2) Water inside meter.
3) Meter covered with dust.
4) Meter covered with bushes.
5) Meter under rain water.
6) Meter installed above normal height.
7) Meter position is not approachable.
8) Meter locked inside the premises.
9) Dog at site.
10) Not allowed by the consumer.
11) Premises not found.
These 11 reasons are recorded by meter reader and reflected on your monthly bill.
Provisional bill amount is 110% of the previous bill.
Provisional bill amount is adjusted in next normal bill when proper reading is provided.

2.3.11.3

Minimum bill

Bill is charged as minimum due to zero consumption of gas. Bill is charged as minimum
due to the gas consumption below the minimum consumption limit as per Govt.
notification of minimum charges as defined below (without Meter Rent/GST):
Domestic
Commercial
Special Domestic
General Industry
Cement Industry

Rs. 99.74
Rs. 1046.96
Rs. 99.74
Rs. 6646.43
Rs. 7657.34
27

Bulk Domestic

Rs. 406.69

It is subject to change

2.3.11.4

Estimated bill

Estimated Bill is charged due to any violation of Gas Connection Rules & Regulation
such as theft or if meter is sticky (Out of Order) and is unable to record the gas passing
through it.
Bill is charged on seasonal annual consumption. In this case average of previous year's
seasonal consumption is used.
There are two types of seasonal average:
Summer Average = Average of ( Mar to Nov).
Winter Average =Average of (Dec to Feb).

Chapter 3
28

Structure of Finance Department

3.1

Structure of finance department

In the finance department, about 1331 employees are working under the supervision of
chief financial officer and senior general manager finance. In the distribution office
Faisalabad, employees are working under the senior area accountant and senior billing
officer. The corporate structure of finance department to ensure accurate, timely, efficient
and effective discharge of accounting functions. The depart; mental head is chief
financial officer. General Manager Accounts and general manager finance are being
working under the umbrella of chief financial officer. Down the line duties and
responsibilities are assigned to chief accountant, deputy chief accountants, senior
accountants, sectional head, executive and support staff. The structure chart of finance
department is given as:

3.1.2 Finance & accounts functions


The finance and accounts department is primarily responsible to keep proper books of
accounts with respect to:
All sums of money received and expended by the company and the matters in
respect of which the receipt and expenditures takes place.

29

All sales and purchases of goods by the company.


All assets of the company.
All liabilities of the company.
In pursuit of the achievement of corporate objectives and targets fixed, the accounts
department transacts all the activities of the company in the financial terms, record it with
accuracy, manage to provide requisite funds at minimum cost, plae the surplus funds with
the secured financial institutions in accordance with the approved policies of the board of
directors and on overall basis acts as financial controller by establishing effective and
budgetary controls.

3.1.3 Organization
The corporate structure of sui northern gas pipelines limited provides for establishment of
finance and accounts department to ensure accurate, timely. Efficient and effective
discharge of accounting functions. The department is headed by chief financial officer.
He is assisted by the general manager (finance) and general manager (accounts). Down
line duties and responsibilities have been assigned to chief accountants, deputy chief
accountants, senior accountants, section heads and the support staff.
3.1.3

Accounting for areas

3.1.3.1 Introduction
In order to facilitate smooth operation of the area offices imp rest accounts are approved
by the head office for making payments to contractors, suppliers, and other outside
agencies and for staff claims. The cheques sent by head office are deposited in bank
account which is operated jointly by the imp rest holder (area general manager) and the
senior area accountant. All payments in the area are made out of imp rests on the basis of
payments vouchers duly approved by the area general manager and signed by the area
accountant. Each voucher is serially numbered and entered in the imp rest cash book. Reimbursement from head office is claimed on the basis of voucher entered in the imp rest
cash book showing the accounts heads/job numbers and the amounts paid. Similarly
receipts are recorded through credit vouchers which are also entered in the imp rest cash
book. The area accountant is also responsible to monitor gas bill collection and its
reconciliation, receive amounts from consumers on account of securities, and cost sharing

30

jobs and relocation of service line jobs. The request for job cost numbers for cost sharing
cases are also processed by the respective area accountants.
Functions and accounting procedures
Fixation of imprest lmit _ new areas
Enhancement of imprest limited
Approval of imprest
Imprest payment at areas
Work orders/contracts
Suppliers payments
Contractors payments
Receipts from outside parties
Completion of cash book
Phusical checking of cash and monitoring of bank accounts
Gas bills collection and security accounts reconciliation
Issuance of job numbers for cost sharing works
Pre-audit
Tax deduction
Books and records

3.1.3.2

Fixation of imprest limit _ new areas

The limit for new imprest is fixed taking into account the future estimated volume of
expenses. The basis considered for this purpose is in transit period / amount and
reimbursement period, which is normallu one third of total expenses in month.

3.1.3.3

Enhancement of imprest limited

The trend of expenses incerred at the area during last one year / 6 months is considered
taking into account the following data for the said period which represent the total
existing limit:
Expenses incurred
Bank balance

31

Cash in hand
Outstanding advances
In transit

3.1.3.4

Approval if imprest

On the request of area accounts, the approval from chief financial officer is obtained and
new bank account is opened with the signatures of competent authority as approved by
the board of directors. For enhancement of imprest, limited the justification on the basis
of required data is prepared and if found feasible the approval from chief financial officer
is obtained and this increase is continuously monitored.

3.1.3.5

Imprest payments at areas

Payments out of imprest are to be made by the area accountants to contractors, suppliers
and for other services and to staff after approval of the competent authority.

3.1.3.6

Work orderd/contractors

Payments are made to contractors for laying distribution network, civil works,
transmission lines, haulage works and for miscellaneous activities. Distribution
contractors for performing various activities are approved by the company for each area
from time to time. Rates for each activity are also approved / revised by the company
after every two years. Works orders are issued by the area general manager assigning
work to each contractor. Copies of work orders are sent to accounts department.
In other departments, like projects, transmission and civil contracts / work orders are
awarded on the basis of competitive bidding according to the approved procedures and
copies sent to accounts department.
Similarly contracts for haulage of goods and for hiring of equipment are awarded on
annual basis by purchase & store department according to the purchase & stores
procedures and copies sent to accounts.
Check that the contract / work order has been approved by the competent
authority.
Check computation and keep it in an area-wise contractors file.

3.1.3.7

Suppliers payments

32

Payment to suppliers against local purchase orders should be checked with the supporting
documents i.e. Local purchase order and receiving statement etc. A monthly bill paid
register should be submitted to head office (bills section) duly reconciled with the
payments debited to sundry creditors account in the imprest cash book.
Contractor payments
Above payments dully approved by the competent authority will be made after due
checking of supporting documents and included in job cost columns of imprest cash
book.
Check that the supporting documents attached to the vouchers/claims are in agreement
with the claim amount and cash memos attached, if any are proper.
Receipts from outside parties
Receipts on accounts of cost sharing charges, service line relocation charges etc. recorded
through credit vouchers showing the appropriate account head. It will be ensured that all
receipt in the form of cheques, demand draft, pay orders and cash received on company
account will be deposited into bank on daily basis. The receipt if any collected after
banking hours is to be deposited in company account on next working day.
Completion of cash book

All payments vouchers and credit vouchers must be serially numbered accurately
and entered in the imprest cash book. A data control slip should be completed and
attached to the imprest cash book sent to head office for re-imbursement.

Before sending the imprest cash book for re-imbursement the computations and
balances carried forwarded to next sheets must be confirmed. The imprest cash
book must be signed by area general manager and the senior area accountant.

3.1.3.8

Physical checking of cash and monitoring of bank accounts

The account should check the cash physically on daily basis at the end of each
day. Cash physically checked should be recorded in a register kept for this
purpose and signed by the cashier and accountant showing the denomination of
notes.

Duplicate keys for the cash chest will be held and one each will be retained by the
cashier and the accountant/incharge.

33

The area accountant must monitor the bank account on continuous basis so that
the balance is kept reconciled. The area accountant sends bank reconciliation by
7th of each month with amount appearing in the cash book.

The area accountant should monitor the regular receipt of bank statements for
checking and pointing out discrepancies e.g. time barred cheques; bank charges or
some other receipt not recorded in the imprest cash book.

3.1.3.9

Gas bills collection and security accounts reconciliation

Company has authorized various banks to collect gas bills. As per standing
instructions all banks are required to transfer all collections to companys main
collection accounts on daily basis. The area accountant is required to obtain bank
statements for each accounts on monthly basis and prepare proper reconciliation
so as to ensure that all funds collected on behalf of the company have been
transferred as per instructions. All outstanding items will be pursued for final
settlement.

The reconciliation of the gas sales collection account will be submitted to head
office by 15th of each month.

The area accounts received amounts from the prospective consumers and the
connected consumers under the following heads of accounts.

Gas connection application fee for domestic and commercial connections.

Security for domestic, industrial, domestic and special domestic consumers.

Service line charges.

Additional security as and when due.

Re-connection fee.

A separate security account for depositing the amount collected in connection


with gas connections and other heads as stated above has also been opened in the
area. The accountant is required to collect bank statements for each account on
monthly basis and prepare reconciliation. All outstanding items will pursue for
settlement.

3.1.3.10

Issuance of job numbers for cost sharing works

34

Company undertakes cost sharing jobs and service-line relocation works on payment by
consumers. Proper job number is slotted by the area accountant so as to record all cost
and facilitate subsequent refund/recovery. On receipt of the completion reports these will
be checked by area accounts and recovery/refund will be arranged.
Pre-audit
Managing director office note 921 dated November 5, 2003 pre audit functions have been
transferred to accounts. The area accountant is responsible for evaluation of all purchases
orders as per procedure. Pre-audit of all contract payments including partial payment
certificate/final payment certificate and other purchases will be carried out as per
company procedure and instructions issued from time to time.
Tax deduction
Deduction of tax should be made according to the relevant section of income tax
ordinance, 2001 keeping in view the different rates applicable to contractors, suppliers
and service contracts.

3.1.3.11

Books and record

Serial number-wise paid imprest voucher kept in bound form.

Imprest cash books pertaining to each area.

Bank reconciliation statements pertaining to cash account.

Daily cash reconciliation registers.

Security registers.

Stock of received goods.

Serial number and date wise paid and receipt vouchers.

3.1.3.12

Mobilization of funds

Cash mobilization techniques fall into two areas:

Acceleration of receivables

Control of disbursements

Receivable are those funds that come into the organizations treasury. Cash flow can be
expedited

35

36

Chapter 4
Financial Statements and Analysis

4.1 Balance sheet (Liabilities)


Sui Northern Gas Pipeline Ltd
Balance Sheet
As on June 30,
2009

2008

2007

2006

1,500,000,

1,500,000, 1,500,000,

Equity and Liabilities


Share Capital and Resrves
Authorized share capital
1500000000 (2006: 1500000000)
Ordinary Shares of Rs 10. each 1,500,000,
Issued Subscribed and

37

paid up capital

5,491,053

5,491,053

5,491,053

4,991,866

Revenue Reserves

10,656,463

11,647,796

10,798,422

10,116,826

Total Equity

16,147,516

17,138,849

16,289,475

15,108,692

Secured

62,500

662,500

1,949,084

Unsecured

1,798,312

2,717,963

3,710,181

Security Deposit

11,439,969

9,068,102

7,270,407

5,865,779

Deffered Credit

32,000,133

31,386,548

23,108,412

16,663,770

Deffered Liabilities

Deffered Tax

8,178,211

7,562,412

6,752,570

6,046,992

Employee benefits

392,249

336,667

298,026

312,654

53,808,874

51,134,192

41,802,096

36,312,375

Trade and other payable

49,785,736

27,416,384

22,810,592

22,031,290

Accured Mark up/interst

552,160

396,323

467,452

548,217

Short Term Borrowing

950,858

2,281,243

2,559,650

Non Current Liabilites


Long Term Financing

5,474,096

Current Liabilities

Current portion of long financing


Taxation-net

1,102,980 1,561,895
0

676,345

52,391,734

29,374,602

25,559,287

25,815,502

Total Liabilities

106,200,608

80,508,794

67,361,383

62,127,877

Contingencies and commitments

Total Equity and liabilities

122,348,124

97,647,643

83,650,858

77,236,569

38

4.2 Balance sheet (Assets)


Sui Northern Gas Pipeline Ltd
Balance Sheet
As on June 30,
2009

2008

2007

2006

Non Current Assets


Property Plant and Equipments

78,345,432 62,025,792 50,053,930 43,568,193

Intangible assets

270,845

168,825

Investment in an associate company

4,900

4,900

4,978

4,900

Long term loans

235,060

224,645

222,310

209,483

Employee Benefits

347,547

357,140

Long term Deposits and prepayments

7,482

7,138

6,406

7,073
39

79,211,266

62,788,440 50,287,624 43,789,649

Stores and spare parts

2,171,953

2,287,084 1,089,526 1,184,140

Stock in trade- gas in pipelines

783,362

525,370

Trade debts

25,706,362 18,757,385 16,229,067 14,517,536

Loan and advances

136,766

Current assets

Deposits and short term prepayments

93,573

473,404

445,772

148,403

181,414

82,111

95,428

33,293

31,926

40,988

72,756

60,760

Interest accrued

13,634

Other receivables

11,176,987 2,235,441 1,340,234 980,650

Taxation-net

1,302,429

764,521

Sales tax recoverable

434,915

1,356,339 263,233

743,507

Short term investments

511,096

Cash and bank balances

1,316,877

8,137,148 13,546,228 15,400,518

134,079
0

43,136,858 34,859,203 33,363,234 33,446,920


Total Assets

122,348,124 97,647,643 83,650,858 77,236,569

4.3 Profit and Loss Account


Sui Northern Gas Pipeline Ltd
Profit and Loss Account
As on June 30,
Profit & Loss Account

2009

Gross Sale

160,714,737

Add: Differential Margin

8,219,094

2008

2007

2006

123,404,537 122,091,652 107,897,291


750,496

168,933,831

124,155,033 122,091,652 107,897,291

Cost of gas sold

151,337,339

109,107,461 108,682,850 94,032,495

Gross profit

17,596,492

15,047,572

Rental and service income

990,101

916,351

13,408,802

13,864,796

828,140

744,955
40

Surcharge and interest on gas sales


arrears

1,200,822

703,328

673,241

534,470

Amortization of deferred credit

1,096,033

790,289

591,354

472,879

3,286,956

2,409,968

2,092,735

1,752,304

20,883,448

17,457,540

15,501,537

15,617,100

Distribution cost

15,011,529

11,797,778

10,692,061

9,627,076

Administrative expenses

1,723,200

1,379,080

1,312,983

1,172,860

16,734,729

13,176,858

12,005,044

10,799,936

4,148,719

4,280,682

3,496,493

4,817,164

Operating Expenses

Other operating expenses

2,975,305

957,194

241,324

346,300

1,173,414

3,323,488

3,255,169

4,470,864

Other Operating Income

1,210,008

1,446,568

1,855,118

1,828,399

Operating profit

2,383,422

4,770,056

5,110,287

6,299,263

Finance cost
653,182
Profit before taxation and share from
associate
1,730,240
Share in profit of associate-before
tax

789,247
3,980,809
-

422

860,715 1,180,203
4,249,572

5,119,060

78

Profit before taxation

1,730,240

3,980,387

4,249,494

5,119,060

Taxation

799,704

1,484,547

1,571,307

1,396,816

Profit after taxation

930,536

2,495,840

2,678,187

3,722,244

Earrings per share- basic and diluted

1.69

4.55

4.88

6.76

41

4.4

Vertical/Cross-Sectional/Common Size Analysis Techniques

Vertical/Cross-sectional/Common size statements came from the problems in comparing


the financial statements of firms that differ in size.

In the balance sheet, the assets as well as the liabilities and equity are each
expressed as a 100% and each item in these categories is expressed as a
percentage of the respective totals.

In the common size income statement, turnover is expressed as 100% and every
item in the income statement is expressed as a percentage of turnover (sales).

4.4 Vertical Analysis


Sui Northern Gas Pipeline Ltd
Vertical Analysis (P&L Account)
As on June 30,
June,30,2006
June,30,2007 June,30,2008 June,30,2009
(Figure in
Profit and loss items
Gas sales
Add / ( Less) : Differential Margin/
(Gas Development surcharge)
Cost of Gas Sold
Gross Profit
Rental and Service income
Surcharge and interest on gas sale arrears

Amortization of deferred credit

percentage)

100

100

100

100

-1.9
98.1
85.25
12.85
0.69
0.5
0.44
14.47

-7.79
92.21
81.22
10.98
0.68
0.55
0.48
12.7

0.61
100.61
88.41
12.19
0.74
0.57
0.64
14.15

5.11
105.11
94.17
10.95
0.62
0.75
0.68
12.99

Less: operating expenses

42

Distribution Cost
Administrative expenses

Other operating expenses


Other operating income
Operating profit
Finance cost
Profit before tax and share from associate

share in profit of associates-before tax


profit before taxation
less: tax
profit after tax

8.92
1.09
10.01
4.46
0.32
4.14
1.69
5.84
1.09
4.74
0
4.74
1.29
3.45

8.76
1.08
9.83
2.86
0.2
2.67
1.52
4.19
0.7
3.48
0
3.48
1.29
2.19

9.56
1.12
10.68
3.47
0.78
2.69
1.17
3.87
0.64
3.23
0
3.23
1.2
2.02

9.34
1.07
10.41
2.58
1.85
0.73
0.75
1.48
0.41
1.08
0
1.08
0.5
0.58

4.4.1 Vertical Analysis


Sui Northern Gas Pipeline Ltd
Vertical Analysis (Balance Sheet)
As on June 30,

BALANCE SHEET ITMES


ASSETS
Non - current assets
Property, plant and equipment
Intengible assets
Investment in associate
Long term loans
Employee benefits
Long term deposits and prepayments

June

June

June

30,2006

30,2007
30,2008
(Figre in percentage)

June
30,2009

56.41
0
0.01
0.27
0
0.01
56.7

59.79
0.02
0.01
0.27
0.07
0.01
60.16

63.66
0.03
0.01
0.23
0.37
0.01
64.3

64.03
0.22
0
0.19
0.28
0.01
64.74

Current Assets
Stores and spare parts
Stock in trade-gas in pipelines
Trade debts
Loans and advances
trade deposits and short term

1.53
0.58
18.8
0.11

1.3
0.57
19.39
0.22

2.34
0.54
19.21
0.15

1.78
0.64
21.01
0.11

prepayments
interest accrued
Other receivables
Income tax recoverable-net
Sales tax recoverable
Short term investments
Cash and bank balances

0.04
0.08
1.27
0
0.96
0
19.94

0.04
0.09
1.58
0.16
0.31
0
16.19

0.1
0.04
2.29
0.78
1.39
0.52
8.33

0.08
0.01
9.14
1.06
0.36
0
1.08

43

43.3
100

Total assets

4.4.2

39.84
100

35.7
100

35.26
100

Vertical Analysis
Sui Northern Gas Pipeline Ltd
Vertical Analysis (Balance Sheet)
As on June 30,

EQUITY AND LIABILITIES


Share capital and reserves
Authorized share capital
(1,500,000,000 ordinary shares of Rs.10
each)
Issued subscribed and paid up share
capital
Revenue reserves
Total Equity
Non-Current Liabilities
Long term financing
-Secured
-Unsecured
Security deposits
Deferred credit
Deferred tax
Employee bebefits
Currenat Liabilities
Trade and other payable
Interest / mak up accrued
Current portion of long term financing
Taxation-Net
Total Liabilities
Contingencies and commitments
Total Equity and Liabilities

6.46
13.1
19.56

6.56
12.9
19.47

5.62
11.93
17.55

4.49
8.71
13.2

2.52
7.09
7.59
21.57
7.83
0.4
47.01

0.79
4.43
8.69
27.61
8.07
0.4
49.99

0.06
2.78
9.29
32.14
7.74
0.34
52.37

0
1.47
9.35
26.15
6.68
0.32
43.98

28.52
0.71
3.31
0.88
33.42
80.44
0
100

27.26
0.56
2.73
0
30.54
80.53
0
100

28.08
0.41
1.6
0
30.08
82.45
0
100

40.69
0.45
0.78
0.9
42.82
86.8
0
100

Interpretation
From the vertical analysis above, we can compare the percentage mark-up of asset items
and how they have been financed. The strategies may include increase/decrease the
holding of certain assets. We may as well observe the trend of the increase in the assets
and liabilities over several years.

44

4.5

Horizontal Financial Statement Analysis

This technique is also known as comparative analysis. It is conducted by setting


consecutive balance sheet, income statement or statement of cash flow side-by-side and
reviewing changes in individual categories on a year-to-year or multiyear basis. The most
important item revealed by comparative financial statement analysis is trend.
A comparison of statements over several years reveals direction, speed and extent of a
trend(s). The horizontal financial statements analysis is done by restating amount of each
item or group of items as a percentage.
Such percentages are calculated by selecting a base year and assign a weight of 100 to the
amount of each item in the base year statement. Thereafter, the amounts of similar items
or groups of items in prior or subsequent financial statements are expressed as a
percentage of the base year amount. The resulting figures are called index numbers or
trend ratios. From the balance sheet statement in exhibit 1. The following indexed
balance sheet can be established.

4.5

Horizontal Analysis
Sui Northern Gas Pipeline Ltd
Horizontal Analysis (P&L Account)
As on June 30,
June
30,2006

June 30,2007

June

June

30,2008

30,2009

45

(Figure in

Profit & loss items


Gas Sales
Add / (Less):Differential Margin /
(Gas Development Surchage)

Percentage)
190
13580
175
188
116

192
-1071
193
207
130

250
-11731
263
288
152

130

143

155

101
132
119

128
165
118

134
220
133

228
305
159

124
125
124
109
176
106
450
136
122
140
102
162

138
139
138
79
123
77
457
110
89
116
115
117

152
146
152
97
486
79
356
103
81
109
109
109

194
183
193
94
1512
28
298
51
67
47
59
41

147

106

99

37

168
2920
165
175
120
117

Cost of Gas Sold


Gross Profit
Rental and Service Income
Surchage and Interest on Gas
Sales Arrears
Amortization of Deferred Credit
Less: Operating Expenses
Distribution Cost
Administrative Expenses

Other Operating Expenses


Other Operating Income
Operating Profit
Finance Cost
Profit before Taxation
Less:Taxation
Profit after Taxation
Earning per Share-Basic and
Diluted (Rupees)

4.5.1 Horizontal Analysis


Sui Northern Gas Pipeline Ltd
Horizontal Analysis (Balance Sheet)
As on June 30,
June
BALANCE SHEET ITEMS
ASSETS
Non - current assets
Property, plant and equipment
Intengible assets
Investment in associate
Long term loans
Employee benefits

June

June

30,2006
30,2007
30,2008
(Figure in percentage)
118
0
100
92
0

135
0
102
98
0

June 30
2009

168
0
100
99
0

212
0
100
103
0

46

Long term deposits and prepayments


Current Assets
Stores and spare parts
Stock in trade-gas in pipelines
Trade debts
Loans and advances
Trade deposits and short term prepayments

interest accrued
Other receivables
Income tax recoverable-net
Sales tax recoverable
Short term investments
Cash and bank balances
Total Assets

113
118

102
124

114
169

119
213

197
162
149
58
91
175
274
0
0
0
181
169
136

182
172
167
129
95
209
369
0
0
0
159
169
147

381
190
193
105
273
118
626
0
0
1108
96
176
172

362
284
264
97
268
39
3128
0
0
0
15
218
215

4.5.2 Horizontal Analysis


Sui Northern Gas Pipeline Ltd
Horizontal Analysis (Balance Sheet)
As on June 30,
EQUITY AND LIABILITIES
Share capital and reserves
Authorized share capital
(1,500,000,000 ordinary shares of Rs.10
each)
Issued subscribed and paid up share

100

100

100

100

capital
Revenue reserves
Total equity
Non-Current Liabilities
Long term financing
-Secured
-Unsecured
Security deposits
Deferred credit
Deferred tax
Employee benefits
Current Liabilities
Trade and other payable
Interest / mark up accrued
Short term borrowings
Current portion of long term financing

100
173
139

110
137
150

110
199
158

110
182
149

39
91
132
206
109
16
117

13
62
164
285
122
17
134

1
45
204
388
136
17
164

0
30
258
395
147
20
173

168
354
0
159

174
301
0
142

209
256
0
97

380
356
0
68
47

Taxation-Net
Total liabilities
Total Equity and Liabilities

912
173
135
136

0
171
146
147

0
197
175
172

0
351
231
215

Interpretation
As basis of Analysis, the analyst may seek variables which seem to improve or
deteriorate and bring a challenge to the stakeholders in their various decisions. Example
from the previous table one can ask the following questions?

Why is there an increase in the stock of the company? Has the company changed
its inventory policy?

Why did taxation increase so tremendously? Were there any changes in taxation?
Is it reflected by the increase in sales? Profit?

Why is there an increase in the fixed assets and at the same time decrease in the
long-term debt? How were these assets financed?

48

4.6

Ratio Analysis

Ratio analysis is one of the techniques of financial analysis where ratios are used as a
yardstick for evaluating the financial condition and performance of a firm. Analysis and
interpretation of various accounting ratios gives skilled and experienced analyst a better
understanding of the financial condition and performance of the firm than what he could
have obtained only through a perusal of financial statements.

RATIO
RATIO
ANALYSIS
ANALYSIS
LIQUIDITY RATIOS

ACTIVITY RATIOS

LEVERAGE RATIO

PROFITABILITY
RATIOS

49

4.6.1 LIQUIDITY RATIOS


Liquidity represents the ability of a company to efficiently and economically
accommodate deposits withdrawal as well as fund increase in assets. A company has a
liquidity potential when it has the ability to obtain sufficient funds in a timely manner at a
reasonable cost. Illiquidity is a primary factor leading to a Companys failure whereas
high liquidity helps otherwise weak institutions to remain funded during the period of
difficulty.

Liquidity refers to the ability of a firm to meet its short-term financial obligations
when and as they fall due.

The main concern of liquidity ratio is to measure the ability of the firms to meet
their short-term maturing obligations. Failure to do this will result in the total
failure of the business, as it would be forced into liquidation.

I. Current ratio
II. Quick Asset to Deposit ratio

4.6.1.2

CURRENT RATIO

The Current Ratio expresses the relationship between the firms current assets and its
current liabilities.
Current assets normally include cash, marketable securities, accounts receivable and
inventories. Current liabilities consist of accounts payable, short term notes payable,
short-term loans, current maturities of long term debt, accrued income taxes and other
accrued expenses (wages).
Current Ratio :-

Current Assets
Current Liabilities

Current Asset

2009
43,136,858

2008
34,859,203

2007
33,363,234

2006
33,446,920
50

Current Liabilities
Current Ratio

52,391,734

29,374,602

25,559,287

25,815,502

0.82

1.19

1.31

1.30

INTERPRETATION
This ratio shows that whether the current assets of the company are Sufficient to meet the
current liabilities or not. In 2006 it was 1.30 that shows low liquidity but comparatively
better other years because this ratio is above standard that is 2. In 2007 it was 1.19, that
shows that firm use financing leverage in 2007 and approximately to 0.82 in 2008, that
shows that firm take more short term loans from market.

4.6.1.2

QUICK RATIO OR TEST ACID RATIO

Measures assets that are quickly converted into cash and they are compared with current
liabilities. This ratio realizes that some of current assets are not easily convertible to cash
e.g. inventories.
The quick ratio, also referred to as acid test ratio, examines the ability of the
business to cover its short-term obligations from its quick assets only (i.e. it
ignores stock). The quick ratio is calculated as follows
Quick Ratio:-

Quick assets
Current Liabilities

51

Current Assets
Inventory
Current Liabilities

2009
2008
2007
2006
43,136,858 34,859,203 33,363,234 33,446,920
783,362

525,370

473,404

445,772

52,391,734 29,374,602 25,559,287 25,815,502

Acid Test Ratio

0.81

1.17

1.29

1.28

INTERPRETATION
This ratio shows that how much quick assets are available to meet the demand of the
accountholders. This ratio was 1.29% in 2007 and decreased to 1.17% in 2008. It shows
that in 2007 the immediate liquidity position of the company was comparatively weak.
But it is also more decreases in 2009.
4.6.1.3 Net Working Capital
Current Assets - Current Liabilities

Current Asset

2009
43,136,858

2008
34,859,203

2007
33,363,234

2006
33,446,920

52

Current Liabilities

52,391,734

29,374,602

25,559,287

25,815,502

Net Working Capital

(9,254,876)

5,484,601

7,803,947

7,631,418

4.6.2

Activity Ratio

If a business does not use its assets effectively, investors in the business would rather
take their money and place it somewhere else. In order for the assets to be used
effectively, the business needs a high turnover.
Unless the business continues to generate high turnover, assets will be idle as it is
impossible to buy and sell fixed assets continuously as turnover changes. Activity ratios
are therefore used to assess how active various assets are in the business.
Note: Increased turnover can be just as dangerous as reduced turnover if the business
does not have the working capital to support the turnover increase. As turnover increases
more working capital and cash is required and if not, overtrading occurs.

4.6.2.1 Receivable Turn Over Ratio


Annual Credit Sale
53

------------------------Total Receivable

2009
25,706,362

2008
18,757,385

2007
16,229,067

2006
14,517,536

Sale

160,714,737

123,404,537

122,091,652

107,897,291

Average
Receivables

22,231,874

17,493,226

15,373,302

14,517,536

Receivable

Receivable Turn
Over

7.2

7.1

7.9

7.4

INTERPRETATION
This ratio measures the number of times, on average, receivables (e.g. Accounts
Receivable) are collected during the period.
In 2008 & 2009 this ratio is decreased .07 & .06 from last year 2007. It shows that firm
has change its account receivable policy.
4.6.2.2 Inventory Turnover Ratio
Cost of Goods Sold
---------------------------Average Inventory

Cost of goods sold


Inventory

2009
151337339

2008
109107461

2007
108682850

2006
94032495

783,362

525,370

473,404

445,772

54

Average Inventory

654366

499387

459588

445,772

Inventory Turn Over Ratio

231.27

218.48

236.48

210.94

Interpreatation
This ratio measures the stock in relation to turnover in order to determine how often the
stock turns over in the business.
It indicates the efficiency of the firm in selling its product. It is calculated by dividing he
cost of goods sold by the average inventory.

4.6.2.3

Total Asset Turn Over


Sales
-------------Total Assets

Total sale
Total Assets
Total Asset Turn Over

2009
160714737

2008
123404537

2007
122091652

2006
107897291

122,348,124

97,647,643

83,650,858

77,236,569

1.31

1.26

1.46

1.40

55

Interpretation
Asset turnover is the relationship between sales and assets

The firm should manage its assets efficiently to maximize sales.

The total asset turnover indicates the efficiency with which the firm uses all its
assets to generate sales.

It is calculated by dividing the firms sales by its total assets.

Generally, the higher the firms total asset turnover, the more efficiently its assets
have been utilized.

4.6.2.4

Fixed Asset Turn Over


Total sale / Fixed Asset

Total sale

2009
160714737

2008
123404537

2007
122091652

2006
107897291

Fixed Asset

79,211,266

62,788,440

50,287,624

43,789,649

2.03

1.97

2.43

2.46

Fixed asset turn over

56

4.6.3

Leverage ratio
The ratios indicate the degree to which the activities of a firm are supported by
creditors funds as opposed to owners.

The relationship of owners equity to borrowed funds is an important indicator of


financial strength.

The debt requires fixed interest payments and repayment of the loan and legal
action can be taken if any amounts due are not paid at the appointed time. A
relatively high proportion of funds contributed by the owners indicates a cushion
(surplus) which shields creditors against possible losses from default in payment.
Note: The greater the proportion of equity funds, the greater the degree of
financial strength. Financial leverage will be to the advantage of the ordinary
shareholders as long as the rate of earnings on capital employed is greater than the
rate payable on borrowed funds.
The following ratios can be used to identify the financial strength and risk of the
business.

57

4.6.3.1

Debt to Share holder equity Ratio


Total Debt
----------------------Equity
2009
106,200,608

2008
80,508,794

2007
67,361,383

2006
62,127,877

Shareholders Equity

16,147,516

17,138,849

16,289,475

15,108,692

Debt to Equity Ratio

658%

470%

414%

411%

Total Debt

INTERPRETATION
This ratio indicates the extent to which debt is covered by shareholders funds. It reflects
the relative position of the equity holders and the lenders and indicates the companys
policy on the mix of capital funds.
This ratio shows that how much company is financed more by debt than its own equity.
From 2006 to2009 it goes on raising which shows that gradually companys operations
are more financed by its debts than by equity, this is due to increases in short term
finances

4.6.3.2 Interest Coverage

58

Earning Before Interest And Tax


--------------------------------------------Interest Expense

EBIT
Interest Expense
Interest Coverage Ratio

2009
2383422

2008
4770056

2007
5110287

2006
6299263

653182

789247

860715

1180203

3.65

6.04

5.94

5.34

Interpreatation
This ratio measure the extent to which earnings can decline without causing financial
losses to the firm and creating an inability to meet the interest cost.

The times interest earned shows how many times the business can pay its interest
bills from profit earned.

Present and prospective loan creditors such as bondholders, are vitally interested
to know how adequate the interest payments on their loans are covered by the
earnings available for such payments.

Owners, managers and directors are also interested in the ability of the business to
service the fixed interest charges on outstanding debt.

59

The companys major forms of credit are non-interest bearing (trade creditors) which
results in the business enjoying very healthy interest coverage rates. In 2006 the company
could pay their interest bill 5.34 times from earnings before interest and tax. However
this is a massive drop from 5.94 times and in 2001 and 3.69 times in 2009.

4.6.4

PROFITABILITY RATIOS

Profitability is the ability of a business to earn profit over a period of time.


Although the profit figure is the starting point for any calculation of cash flow, as
already pointed out, profitable companies can still fail for a lack of cash.
Note: Without profit, there is no cash and therefore profitability must be seen as a critical
success factors.

A company should earn profits to survive and grow over a long period of time.

Profits are essential, but it would be wrong to assume that every action initiated
by management of a company should be aimed at maximising profits, irrespective
of social consequences.

The ratios examined previously have tendered to measure management efficiency and
risk.
Profitability is a result of a larger number of policies and decisions. The profitability
ratios show the combined effects of liquidity, asset management (activity) and debt
management (gearing) on operating results. The overall measure of success of a business
is the profitability which results from the effective use of its resources.
Following profitability ratios have been calculated
I. Gross Profit Margin Ratio
II. Net Operating Income Ratio
III. Net Profit Ratio
IV. Return on equity

60

4.6.4.1 Gross Profit Margin Ratio


Gross profit
------------------ X 100
sale
2009
Sale

2008

2007

2006

160,714,737 123,404,537 122,091,652 107,897,291

Gross Profit

17,596,492

15,047,572

13,408,802

13,864,796

Gross Profit
Ratio

11%

12%

11%

13%

Interpretation
Normally the gross profit has to rise proportionately with sales.

It can also be useful to compare the gross profit margin across similar businesses
although there will often be good reasons for any disparity.

The ratio above shows the increasing trend in the gross profit since the ratio has
decreased from 13% in 2006 to 13% on 2007. This indicates that the rate in
61

increase in cost of goods sold are less than rate of increase in sales, hence the
increased efficiency.

4.6.4.2

Net Operating Margin


Operating Income
------------------------ x 100
Sale

Sale
Operating Profit

2009
160,714,737

2008
123,404,537

2007
122,091,652

2006
107,897,291

2383422

4770056

5110287

6299263

1%

4%

4%

6%

Operating Profit Ratio

Interpreation
It is a measurement of what proportion of a company's revenue is left over, before taxes
and other indirect costs (such as rent, bonus, interest, etc.), after paying for variable costs
of production as wages, raw materials, etc. A good operating margin is needed for a
company to be able to pay for its fixed costs, such as interest on debt. A higher operating
margin means that the company has less financial risk.
In 2006 company has ratio 6% but it has been constantly decreasing with time being to
1%, which very danger for firm.
62

4.6.4.3

Net Profit Margin

Net Profit after tax

x 100

Net Sales

Sales
Net Profit after taxes
Net Profit Margin

2009
2008
2007
2006
160,714,737 123,404,537 122,091,652 107,897,291
930536

2495840

2678187

3722244

1%

2%

2%

3%

INTERPRETATION
This is a widely used measure of performance and is comparable across companies in
similar industries. The fact that a business works on a very low margin need not cause
alarm because there are some sectors in the industry that work on a basis of high turnover
63

and

low

margins,

for

examples

supermarkets

and

motorcar

dealers.

What is more important in any trend is the margin and whether it compares well with
similar businesses.
Net profit ratio indicates that how much net sales are contributing towards generating Net
Profit. In 2006 it was 3% and decreased to 2% in 2007. It is decreasing constantly and in
2009, it is only 1%. It shows the firm crises.

4.6.4.4

Return on Equity

This ratio shows the profit attributable to the amount invested by the owners of the
business. It also shows potential investors into the business what they might hope to
receive as a return. The stockholders equity includes share capital, share premium,
distributable and non-distributable reserves. The ratio is calculated as follows:
Net Profit
------------------Equity

Net profit after tax


Share holder equity
Return on equity

2009
930536

2008
2495840

2007
2678187

2006
3722244

16,147,516 17,138,849 16,289,475 15,108,692


6%

15%

16%

25%

64

INTERPRETATION
The ratio shows that how much equity is contributing towards generating Net Income. In
2006 it was 25% and decreased to 16% in 2007 but in 2008 it also decreased to 16% in
2009 it was too much decreased to 6%. This shows that in organization increases debt
financing.

4.6.4.5

Earning Per Share

Net profit after tax


No. of shares
outstanding
Earning Per Share

4.6.4.6

2009
930536

2008
2495840

2007
2678187

2006
3722244

549105

549105

549105

499187

1.69

4.55

4.88

7.46

Break Up value per share


Share holder's equity / No. of share outstanding

Share holder's equity


No. of share out standing

2009
16,147,516
549105

2008
17,138,849
549105

2007
16,289,475
549105

2006
15,108,692
499187

Break up value per share

29.41

31.21

29.67

30.27

65

CHAPTER NO.5
SWOT ANALYSIS

66

5.1 SWOT ANALYSIS


5.1.1 Internal and External factors .
The Internal component of Analysis is concerned with the basic
strengths and w eaknesses of the organization. Thus, it depicts the
internal environment of the company. The strengths of the company may
be its financial or human resources, processes, operational methods,
marketing strategies, segmentation techniques or any expertise that the
company may feel as its core competencies. Contrary to this, any
discrepancies in these factors, at the same time, may become the
weaknesses of the company. Hence, it is the internal environment of the
company that shapes its business strategies and provides direction to
survive in the marketplace.
The external component deals with the factors that the company faces in
its external competitive environment. These factors are categorized as
opportunities available for the company in the market place and the
threats strained by its competitors. The opportunities of the company
may by its ability to satisfy the ever arising needs of its customers better

67

than its competitors, new available markets, room for setting new
operations, falling of barriers due to globalization trend etc. If a firm fails
to avail the opportunities as soon as they arrive, these opportunities
become threats for that company. This is because your competitors will
avail that opportunity in their first attempt and attain first mover
advantage over you.

SWOT Analysis is a popular technique used to analyze some companys


present business situation. It provides us with an overview of companys
major strengths and its critical weaknesses. The external opportunities and
threats that the company faces in the external environment are also
highlighted in this approach.

5.2 SWOT Analysis


5.2.1

Strengths:

Government Organization
High Cumulative Customer retention rate since the start of operations
Sustained growth rate of annual sales turnover.
Consistent Quality
Vertically integrated.
Excellent market image in the local and international market.
Highly qualified management.
Adequate financial resources.
Adopting information technology.
Skilled Labor.
Broad and motivational vision.

68

5.2.2

Weaknesses:

High employee turnover


Low production capacity.
De-motivated Staff.
Less promotional activities.
Non-Corporative culture.
Insufficient benefits for the employees.
Stereotype machinery for processing.
Communicational gap among different departments.
No Proper Training to employees
Manual Work
Mineral Stocks
5.2.3

Opportunities:

Can expand its division such as finding new minerals


Can reduce the cost by proper utilization of resources.
Can hire well-educated and experienced staff.
5.2.4

Threats:

New plans to take gas from outside the country


Buyer need and demand changes.
Political instability.
Changing geopolitical situation.
Change of government policies.
Less stocks of minerals

69

70

CHAPTER NO.6
CONCLUSION AND RECOMMENDATION

6.1

CONCLUSION

The company earned Rs 1,730,240 thousand pre tax profit, which is decrease than the last
year. The revenue from sales was Rs 160,714,737 thousands during the year, which is
also decrease than the previous year. This year the company has taken a tax refund of Rs
799,704 thousands from the tax authority on different accounts. Companys current ratio
also decreased 1.19 to 0.82 further more the company has tried its best optimize
utilization of all its available resources to the maximum level resulting in improvement of
the inventory turnover ration from 218.48 To 231.27 the company need to be taken
effective measures to recover its old situation and improve its financial position.

6.2

RECOMMENDATIONS

Before joining this organization I know a little about the organization work, its working
system and environment, so I learned a lot from this experience. Based on my experience

71

& observation regarding the operations and policies of organization, there are some
recommendations which include short term as well as long term issues for the
improvement.

6.2.1

Assess the Performance of employees

There is no efficient method introduced by organization for his assessment of


performance of employees. Promotions are completely relying on higher management
like managers .s there can be some sort of favoritism. So to avoid all this, there should be
a proper method to judge the employees.
6.2.2

Improve Information Technology System

Sui Gas Northern Ltd. should immediately improve its Information Technology System.
The soft wares currently in use should be made error free as it is the need of the hour.
6.2.3

Computerized Accounting System

As far as accounting is concerned, although the entire system is computerized, but there
still involves lots of paperwork. So this should be minimized b acquiring more advanced
accounting software
6.2.4

Job Rotation

There is no rotation of employees within departments and cross departments. So the top
management should immediately start thinking in terms of rotating the employees in
various departments, as this transforms work force into human capital.
6.2.5

Distribute Work Equally

Management should distribute work equally among different employees. Some of the
employees are overburdened while some sections are overstaffed.
6.2.6

Improve its Website

Sui Gas Northern Ltd needs to improve its website. More information relating to financial
performance and sale of the organization should be available on the website.
6.2.7

Evolve Management Policy

Sui Gas Northern Ltd should evolve a very serious management policy to attract multi
national corporations as its clients. This action, if actualized, would not only prove to be
highly profit generating, but it would also contribute a lot towards Gohar Textile image
building.

72

6.2.8

Advertise

One of the most pressing needs of the time is to advertise Sui Gas Northern Ltd in the
electronic media. Sui Gas Northern Ltd has not, till date, employed advertisement in
electronic media as a full fledge marketing tool. I think it is high time that organization
does this
6.2.9

Market Survey

The management should make the market survey time to time to get more and latest
information about the market factors like the price, demand, current consumer trends etc.

Reference and source used


The following sources are used for preparing this internship report
1Annual Report 2007, 2008, 2009
2Monthly report of financial year 2007,2008, 2009
3Sui Northern Gas website (www.sngpl.com.pk)
4Staff Members of Sui Gas Northern

73