1.0 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 GasNatural 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,

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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

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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

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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.

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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 Pakistan’s 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 ProjectSui 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.

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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.

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1.9 RegulationsRegulatory 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.

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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-RehmanChairmanMr. A. Rashid Lone Chief Executive/Managing DirectorMr. Dr. Faizullah Abbasi DirectorMr. Mansoor Muzaffar AliDirectorMr. S. M. AsgharDirectorMr. Muhammad Iqbal Awan DirectorMr. A. Samad DawoodDirector

Mr. Abdul Bari KhanDirectorMr. Tariq Iqbal KhanDirectorMian Raza ManshaDirectorMr.Inam ur RahmanDirectorMalik Tahir Sarfraz DirectorJoint Secretary (Admin), Ministry of Petroleum & Natural Resources Mr. Syed Zahir Ali Shah

Director

1.12 Message From Managing Director 

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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 Operation Project Total2005 6904 264 71682006 6852 249 71012007 6712 209 69212008 6916 224 71402009 6652 342 6994

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Profile of Employees

0

10000

20000

30000

40000

50000

60000

2005

2006

2007

2008

2009

Years

No

.of

Em

plo

ye

es

Operation

Prpject

The other department wise details are as under: (under the August, 2009)

Department Executive Subordinate TotalMANAGEMENT 5 7 12DMD 3 5 8SGM (HR) 2 2 4CFO 1 0 1SGM (ES)2 2 2 4ACCOUNTS 67 317 384LOGISTIC SUPPORT 49 544 593AUDIT 32 39 71BILLING 67 866 933CIVIL CONST 3 74 77COMPRESSION 40 249 289CORP. AFTER 6 12 18DISTRIBUTION 123 2109 2232FINANCE 13 20 33IT/MS 37 82 119

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H.S & ENV 4 2 6TRAINING & DEVELOPMENT 5 0 5LEGAL 4 10 14METERING 11 221 232PLANNING & DEVELOPMENT 9 5 14HUMAN RESOURCE OPS 11 32 43PROJECTS 42 127 169PURCHASE & STORE 41 245 286QUALITY & CONTROL 9 109 118SALES 45 292 337TELECOM 17 51 68TRANSMISSION 79 593 672UFG CONTROL 8 7 15CORROSION 28 209 237TOTAL 763 6231 6994

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Chapter 2

Business Operation

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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

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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

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2.3 Core Business

2.3.1 Gas Sources

DESCRIPTION Total (MMCF) Avg/Day (MMCF)BALOCHISTAN

Sui(SML) 139,795 383Sui(SUL) 10,160 27.84Pirkoh+Loti 15,664 42.92TOTAL 165,619 453.76

PUNJABDhodak 2,120 5.81Meyal 518 1.42Dhurnal  149 0.41Dakhni 17,279 47.33Adhi 14,355 39.33Bhanghali  54 0.15Sadqal 723 2Ratana 366 1Pariwali 5,166 14.15Pindori 653 1.78Dhullian 692 1.9Salsabil 13,807 37.82TOTAL 55,882 153.1

N.W.F.PChanda  2,608 7.14Mela 5,775 15.82Makori 8,865 24.3Gurguri 12,949 35.5TOTAL 30,197 82.76

SINDHHassan 5,414 14.83Zamzama 68,735 188.32Sawan  89,453 245.1Tajjal 4,027 11.03Qadirpur 175,589 481Qadirpur(RAW GAS) 15,247 41.77Qadirpur (DEHYDRATED) 8,345 22.86Kandhkot 21,464 58.8Chachar 3,401 9.32Rehmat 4,513 12.36Badar 5,272 14.44

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TOTAL 401,460 1,100GRAND TOTAL 653,157 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% Age Increase Over

Previous Year% Age Increase

from 19931993 3,311 - -1994 3,614 9.15% 9%1995 3,865 6.95% 17%1996 4,243 9.78% 28%1997 4,687 10.46% 42%1998 4,920 4.97% 49%1999 5,112 3.90% 54%2000 5,217 2.05% 57%2001 5,122 -1.82% 55%2002 5,405 5.53% 63%2003 5,759 6.55% 73%2004 5,776 0.30% 74%2005 6,121 5.97% 84%2006 6,195 1.20% 87%2007 6,625 6.94% 100%2008 7,016 5.90% 112%2009 7,347 4.50% 122%

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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. REGIONCAPACITY (MMCFD)

TOTAL CONTRACTED AVAILABLE1 Bahawalpur 306 236 702 Multan 610 471 1393 Faisalabad 530 408 1224 Lahore 909 885 245 Gujranwala 316 258 586 Islamabad 381 223 1587 Peshawar 237 172 658 Abbottabad 150 134 16

TOTAL 3439 2787 652 The Distribution System Capacity as on 30.06.2009 is as follow. 

SR. No. REGIONCAPACITY (MMCFD)

TOTAL CONTRACTED AVAILABLE1 Bahawalpur 205 234 -292 Multan 596 465 1313 Faisalabad 514 396 1184 Lahore 821 865 -44

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5 Gujranwala 300 240 606 Islamabad 370 213.5 156.57 Peshawar 229 166 638 Abbottabad 148 131.6 16.4

TOTAL 3183 2711.10 471.90

2.3.3.2 Distribution Network

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

2.3.4 Year Wise Increase in Gas Consumers

Year Wise Increase in Gas Consumers as on 29.02.2008

Year No. of

ConsumersIncrease from Previous Year

% Age Increase Over Previous Year

1997-98 1,637,803 - -1998 -99 1,747,320 109,517 7%1999 -00 1,887,009 139,689 8%2000-01 1,986,583 99,574 5%2001-02 2,113,847 127,264 6%

Year  KmsIncrease Over the Previous

Year% Age Increase

1998 28,661 - -1999 29,954 1,293 4%2000 31,477 1,523 5%2001 32,825 1,348 4%2002 34,093 1,268 4%2003 35,814 1,721 5%2004 38,284 2,470 6%2005 42,192 3,908 9%2006 46,671 4,479 10%2007 51,866 5,195 10%2008 57,395 5,529 10%

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2002-03 2,208,968 95,121 4%2003-04 2,340,872 131,904 6%2004-05 2,516,795 175,923 8%2005-06 2,723,225 206,430 8%2006-07 2,953,818 230,593 8%2007-08 3,102,667 148,849 5%

2.3.5 Year Wise Increase in Gas Sales

Year  KmsIncrease from Previous Year

Vol. in MMCF % Age1998-99 253,104 - -1999-00 284,338 31,234 11%2000-01 308,111 23,773 8%2001-02 321,957 13,846 4%

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2002-03 341,643 19,686 6%2003-04 452,338 110,695 24%2004-05 537,086 84,748 16%2005-06 571,481 34,395 6%2006-07 576,658 5,177 1%

2.3.6 Projects

Sr. No Activity DIA (Inch)Length (KM)Commissioned On

1D.G Cement Line (Dera Ghazi Khan)

8 26.00 03.01.2006

2 Shakardara- Lachi Line 8 25.50 06.08.2005    TOTAL 51.50  

Budgeted Cost (Million Rs.)

2.3.7 Construction Activities in Progress

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  Sr. No

ActivityDIA

(Inch)Length (KM)

Commissioned On

1 Rawat – Murree Line 12 58.00 77%2 Sukho – Rawat Line 16 35.50 23%

3Choa – Bestway Cement- D.G Cement –Chakwal Cement Line

10 23.00 98%

4 Makori Line for M/s MOL Pakistan 10 9 -

5Badar Gas Field – Qadirpur Gas Field Line for M/s Pakistan Explorations Ltd.

8 20.50 99%

    Total 145.50  Budgeted Cost (Million Rs) 1125.00

2.3.8 Upcoming Construction Activities 

Sr. No ActivityDIA

(Inch)Length (KM)

Commissioned On

1 Hattar – Abbottabad Line 16 62.50

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

2Mian Channun – Hasilpur Line

12 90.00 As above

3Hasilpur – Chistaian Mandi Line

8 35.00 As above

4 Lachi – Manjuwala Line 12 85.00 As above5 Hangu Line 8 35.00 As above6 Manjuwala – End Point Line 8 195.00 As above

Total 502.05  Budgeted Cost (Million Rs) 4200.00

2.3.9 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 SNGPL’s

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

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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 6,652 6,916   Project 342 224Total 6,994 7,140     

Gas Sales (in MMCF)584,895 597,913

     

Consumers (in numbers)3,451,142 3,190,181

     Customers (in numbers)       Industrial 5,953 5,442   Commercial 52,242 49,176   Domestic 3,358,439 3,101,303Total 3,416,634 3,155,921     Transmission and Distribution System (in Kilometers)       Transmission main 7,347 7,016   Distribution main and services 67,449 59,951

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 Performance for the Year (FY 2007-08)

2008 2007  (Rupees in Thousand)No of employees   Operation 6,916 6,712   Project 224 209Total 7,140 6,921     

Gas Sales (in MMCF)597,913 576,658

     

Consumers (in numbers)3,190,181 2,953,818

     Customers (in numbers)       Industrial 5,442 4,425   Commercial 49,176 45,925   Domestic 3101,303 2,869,208Total 3,155,921 2,919,558     Transmission and Distribution System (in Kilometers)       Transmission main 7,016 6,625   Distribution main and services 59,951 52,394

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

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.

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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 Rs. 99.74

Commercial Rs. 1046.96

Special Domestic Rs. 99.74

General Industry Rs. 6646.43

Cement Industry Rs. 7657.34

Bulk Domestic Rs. 406.69

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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

29

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.

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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. Re-

imbursement 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

31

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

Supplier’s payments

Contractor’s 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

Cash in hand

Outstanding advances

32

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 Supplier’s payments

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

33

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.

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.

34

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 company’s 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

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

35

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 organization’s treasury. Cash flow can be

expedited

   

36

37

Chapter 4Financial Statements and Analysis

4.1 Balance sheet (Liabilities)

Sui Northern Gas Pipeline LtdBalance SheetAs on June 30,

2009 2008 2007 2006

Equity and Liabilities

Share Capital and Resrves

Authorized share capital1500000000 (2006: 1500000000)Ordinary Shares of Rs 10. each 1,500,000, 1,500,000, 1,500,000, 1,500,000,

Issued Subscribed and

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

Non Current Liabilites

Long Term Financing

38

Secured 0 62,500 662,500 1,949,084

Unsecured 1,798,312 2,717,963 3,710,181

5,474,096

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

Current Liabilities

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 0 0 0

Current portion of long financing 1,102,980 1,561,895 2,281,243 2,559,650

Taxation-net 0 0 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 0 0 0 0

Total Equity and liabilities 122,348,124 97,647,643 83,650,858 77,236,569

39

4.2 Balance sheet (Assets)

Sui Northern Gas Pipeline LtdBalance SheetAs on June 30,

2009 2008 2007 2006Non Current Assets

Property Plant and Equipments 78,345,432 62,025,792 50,053,930 43,568,193

Intangible assets 270,845 168,825 0 0

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 0 0

Long term Deposits and prepayments 7,482 7,138 6,406 7,073

79,211,266 62,788,440 50,287,624 43,789,649

Current assets

Stores and spare parts 2,171,953 2,287,084 1,089,526 1,184,140

Stock in trade- gas in pipelines 783,362 525,370 473,404 445,772

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

40

Loan and advances 136,766 148,403 181,414 82,111

Deposits and short term prepayments 93,573 95,428 33,293 31,926

Interest accrued 13,634 40,988 72,756 60,760

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

Taxation-net 1,302,429 764,521 134,079 0

Sales tax recoverable 434,915 1,356,339 263,233 743,507

Short term investments 0 511,096 0 0

Cash and bank balances 1,316,877 8,137,148 13,546,228 15,400,518

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 LtdProfit and Loss Account

As on June 30,

Profit & Loss Account 2009 2008 2007 2006

Gross Sale 160,714,737

123,404,537

122,091,652

107,897,291

Add: Differential Margin 8,219,094 750,496 - - 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

13,408,802

13,864,796

Rental and service income 990,101 916,351 828,140 744,955

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

41

Operating Expenses

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

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 653,182 789,247 860,715

1,180,203

Profit before taxation and share from associate

1,730,240

3,980,809

4,249,572

5,119,060

Share in profit of associate-before tax - 422 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

42

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 AnalysisSui 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

Profit and loss items

(Figure in

percentage)  

Gas sales 100 100 100 100

Add / ( Less) : Differential Margin/  

(Gas Development surcharge) -1.9 -7.79 0.61 5.11

  98.1 92.21 100.61 105.11

Cost of Gas Sold 85.25 81.22 88.41 94.17

Gross Profit 12.85 10.98 12.19 10.95

Rental and Service income 0.69 0.68 0.74 0.62

Surcharge and interest on gas sale arrears 0.5 0.55 0.57 0.75

Amortization of deferred credit 0.44 0.48 0.64 0.68

  14.47 12.7 14.15 12.99

Less: operating expenses  

Distribution Cost 8.92 8.76 9.56 9.34

43

Administrative expenses 1.09 1.08 1.12 1.07

  10.01 9.83 10.68 10.41

  4.46 2.86 3.47 2.58

Other operating expenses 0.32 0.2 0.78 1.85

  4.14 2.67 2.69 0.73

Other operating income 1.69 1.52 1.17 0.75

Operating profit 5.84 4.19 3.87 1.48

Finance cost 1.09 0.7 0.64 0.41

Profit before tax and share from associate 4.74 3.48 3.23 1.08

share in profit of associates-before tax 0 0 0 0

profit before taxation 4.74 3.48 3.23 1.08

less: tax 1.29 1.29 1.2 0.5

profit after tax 3.45 2.19 2.02 0.58

4.4.1 Vertical AnalysisSui Northern Gas Pipeline Ltd

Vertical Analysis (Balance Sheet)As on June 30,

 

June

30,2006

June

30,2007

June

30,2008

June

30,2009

BALANCE SHEET ITMES (Figre in percentage)  

ASSETS  

Non - current assets  

Property, plant and equipment 56.41 59.79 63.66 64.03

Intengible assets 0 0.02 0.03 0.22

Investment in associate 0.01 0.01 0.01 0

Long term loans 0.27 0.27 0.23 0.19

Employee benefits 0 0.07 0.37 0.28

Long term deposits and prepayments 0.01 0.01 0.01 0.01

  56.7 60.16 64.3 64.74

Current Assets  

Stores and spare parts 1.53 1.3 2.34 1.78

44

Stock in trade-gas in pipelines 0.58 0.57 0.54 0.64

Trade debts 18.8 19.39 19.21 21.01

Loans and advances 0.11 0.22 0.15 0.11

trade deposits and short term

prepayments 0.04 0.04 0.1 0.08

interest accrued 0.08 0.09 0.04 0.01

Other receivables 1.27 1.58 2.29 9.14

Income tax recoverable-net 0 0.16 0.78 1.06

Sales tax recoverable 0.96 0.31 1.39 0.36

Short term investments 0 0 0.52 0

Cash and bank balances 19.94 16.19 8.33 1.08

  43.3 39.84 35.7 35.26

Total assets 100 100 100 100

4.4.2 Vertical Analysis

Sui Northern Gas Pipeline LtdVertical 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

6.46 6.56 5.62 4.49

Revenue reserves 13.1 12.9 11.93 8.71

Total Equity 19.56 19.47 17.55 13.2

Non-Current Liabilities  

Long term financing  

-Secured 2.52 0.79 0.06 0

-Unsecured 7.09 4.43 2.78 1.47

Security deposits 7.59 8.69 9.29 9.35

45

Deferred credit 21.57 27.61 32.14 26.15

Deferred tax 7.83 8.07 7.74 6.68

Employee bebefits 0.4 0.4 0.34 0.32

  47.01 49.99 52.37 43.98

Currenat Liabilities  

Trade and other payable 28.52 27.26 28.08 40.69

Interest / mak up accrued 0.71 0.56 0.41 0.45

Current portion of long term financing 3.31 2.73 1.6 0.78

Taxation-Net 0.88 0 0 0.9

  33.42 30.54 30.08 42.82

Total Liabilities 80.44 80.53 82.45 86.8

Contingencies and commitments 0 0 0 0

Total Equity and Liabilities 100 100 100 100

InterpretationFrom 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.

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

46

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 LtdHorizontal Analysis (P&L Account)

As on June 30,

 

June

30,2006 June 30,2007

June

30,2008

June

30,2009

Profit & loss items(Figure in

Percentage)  

Gas Sales 168 190 192 250

Add / (Less):Differential Margin /   13580 -1071 -11731

(Gas Development Surchage) 2920 175 193 263

  165 188 207 288

Cost of Gas Sold 175 116 130 152

Gross Profit 120  

Rental and Service Income 117 130 143 155

Surchage and Interest on Gas

Sales Arrears 101 128 134 228

Amortization of Deferred Credit 132 165 220 305

  119 118 133 159

Less: Operating Expenses  

47

Distribution Cost 124 138 152 194

Administrative Expenses 125 139 146 183

  124 138 152 193

  109 79 97 94

Other Operating Expenses 176 123 486 1512

  106 77 79 28

Other Operating Income 450 457 356 298

Operating Profit 136 110 103 51

Finance Cost 122 89 81 67

Profit before Taxation 140 116 109 47

Less:Taxation 102 115 109 59

Profit after Taxation 162 117 109 41

Earning per Share-Basic and

Diluted (Rupees) 147 106 99 37

4.5.1 Horizontal Analysis

Sui Northern Gas Pipeline LtdHorizontal Analysis (Balance Sheet)

As on June 30,

BALANCE SHEET ITEMS

June

30,2006

June

30,2007

June

30,2008

June 30

2009

ASSETS (Figure in percentage)  

Non - current assets  

Property, plant and equipment 118 135 168 212

Intengible assets 0 0 0 0

Investment in associate 100 102 100 100

Long term loans 92 98 99 103

Employee benefits 0 0 0 0

Long term deposits and prepayments 113 102 114 119

  118 124 169 213

Current Assets  

Stores and spare parts 197 182 381 362

48

Stock in trade-gas in pipelines 162 172 190 284

Trade debts 149 167 193 264

Loans and advances 58 129 105 97

Trade deposits and short term prepayments 91 95 273 268

interest accrued 175 209 118 39

Other receivables 274 369 626 3128

Income tax recoverable-net 0 0 0 0

Sales tax recoverable 0 0 0 0

Short term investments 0 0 1108 0

Cash and bank balances 181 159 96 15

  169 169 176 218

Total Assets 136 147 172 215

4.5.2 Horizontal Analysis

Sui Northern Gas Pipeline LtdHorizontal 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) 100 100 100 100

Issued subscribed and paid up share

capital 100 110 110 110

Revenue reserves 173 137 199 182

Total equity 139 150 158 149

Non-Current Liabilities  

Long term financing 39 13 1 0

-Secured 91 62 45 30

-Unsecured 132 164 204 258

Security deposits 206 285 388 395

49

Deferred credit 109 122 136 147

Deferred tax 16 17 17 20

Employee benefits 117 134 164 173

Current Liabilities  

Trade and other payable 168 174 209 380

Interest / mark up accrued 354 301 256 356

Short term borrowings 0 0 0 0

Current portion of long term financing 159 142 97 68

Taxation-Net 912 0 0 0

  173 171 197 351

Total liabilities 135 146 175 231

Total Equity and Liabilities 136 147 172 215

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?

50

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.

51

RATIO ANALYSIS

RATIO ANALYSIS

LIQUIDITY RATIOS

ACTIVITY RATIOS

LEVERAGE RATIO

PROFITABILITY RATIOS

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 Company’s 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

52

The Current Ratio expresses the relationship between the firm’s 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

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

Current Liabilities 52,391,734 29,374,602 25,559,287 25,815,502         Current Ratio 0.82 1.19 1.31 1.30

Curremt Ratio

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

2009 2008 2007 2006

Year

Rati

o

Curremt Ratio

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.

53

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

  2009 2008 2007 2006Current Assets 43,136,858 34,859,203 33,363,234 33,446,920         Inventory 783,362 525,370 473,404 445,772         Current Liabilities 52,391,734 29,374,602 25,559,287 25,815,502         Acid Test Ratio 0.81 1.17 1.29 1.28

Acid Test Ratio

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

2009 2008 2007 2006

Year

Rati

o

Acid Test Ratio

54

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

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

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

Net Working Capital

01,000,0002,000,0003,000,0004,000,0005,000,0006,000,0007,000,0008,000,0009,000,000

2009 2008 2007

Year

Rs

Net Working Capital

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.

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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 -------------------------

Total Receivable

  2009 2008 2007 2006Receivable 25,706,362 18,757,385 16,229,067 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 Turn Over 7.2 7.1 7.9 7.4

Receivable Turn Over

6.6

6.8

7.0

7.2

7.4

7.6

7.8

8.0

8.2

2009 2008 2007 2006

Year

Tu

rn o

ver

Receivable Turn Over

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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

  2009 2008 2007 2006Cost of goods sold 151337339 109107461 108682850 94032495         Inventory 783,362 525,370 473,404 445,772         Average Inventory 654366 499387 459588 445,772         Inventory Turn Over Ratio 231.27 218.48 236.48 210.94

Inventory Turn Over

195.00200.00205.00210.00215.00220.00225.00230.00235.00240.00

2009 2008 2007 2006

Year

Tu

rn

over

Inventory Turn Over

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.

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4.6.2.3 Total Asset Turn Over

Sales --------------

Total Assets

  2009 2008 2007 2006Total sale 160714737 123404537 122091652 107897291         Total Assets 122,348,124 97,647,643 83,650,858 77,236,569         Total Asset Turn Over 1.31 1.26 1.46 1.40

Total Asset Turn Over

1.15

1.20

1.25

1.30

1.35

1.40

1.45

1.50

2009 2008 2007 2006

Year

Tu

rn O

ver

Total Asset Turn Over

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 firm’s sales by its total assets.

Generally, the higher the firm’s total asset turnover, the more efficiently its assets

have been utilized.

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4.6.2.4 Fixed Asset Turn Over

Total sale / Fixed Asset

  2009 2008 2007 2006Total sale 160714737 123404537 122091652 107897291         Fixed Asset 79,211,266 62,788,440 50,287,624 43,789,649         Fixed asset turn over 2.03 1.97 2.43 2.46

Fixed Asset Turn Over

0.00

0.50

1.00

1.50

2.00

2.50

3.00

2009 2008 2007 2006

Year

Tu

rn o

ver

Fixed Asset Turn Over

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 owner’s 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.

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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.

4.6.3.1 Debt to Share holder equity Ratio

Total Debt ----------------------- Equity

  2009 2008 2007 2006Total Debt 106,200,608 80,508,794 67,361,383 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%

Leverage / Debt Ratios

0%

100%

200%

300%

400%

500%

600%

700%

2009 2008 2007 2006

Year

Perc

en

tag

e

Leverage / Debt Ratios

INTERPRETATION

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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 company’s

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 company’s 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

Earning Before Interest And Tax ---------------------------------------------Interest Expense

  2009 2008 2007 2006EBIT 2383422 4770056 5110287 6299263

Interest Expense 653182 789247 860715 1180203         Interest Coverage Ratio 3.65 6.04 5.94 5.34

Interest Coverage

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

2009 2008 2007 2006

Years

Rati

o

Interest Coverage

Interpreatation

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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.

The company’s 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.

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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

4.6.4.1 Gross Profit Margin Ratio

Gross profit------------------ X 100 sale

  2009 2008 2007 2006         Sale 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%

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10%10%11%11%12%12%13%13%

2009 2008 2007 2006

Gross Profit Ratio

Gross Profit Ratio

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

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

  2009 2008 2007 2006Sale 160,714,737 123,404,537 122,091,652 107,897,291         Operating Profit 2383422 4770056 5110287 6299263         Operating Profit Ratio 1% 4% 4% 6%

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0%

1%

2%

3%

4%

5%

6%

2009 2008 2007 2006

Operating Profit Margin

OperatingProfitMargin

InterpreationIt 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.

4.6.4.3 Net Profit Margin

Net Profit after tax x 100

Net Sales

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

Net Profit after taxes 930536 2495840 2678187 3722244         Net Profit Margin 1% 2% 2% 3%

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Net Profit Margin

0%

1%

1%

2%

2%

3%

3%

4%

4%

2009 2008 2007 2006

Year

Per

cen

tag

e

Net Profit Margin

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

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

66

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

  2009 2008 2007 2006Net profit after tax 930536 2495840 2678187 3722244         Share holder equity 16,147,516 17,138,849 16,289,475 15,108,692         Return on equity 6% 15% 16% 25%

Return on Equity

0%

5%

10%

15%

20%

25%

30%

2009 2008 2007 2006

Year

Per

cen

tag

e

Return on Equity

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

  2009 2008 2007 2006Net profit after tax 930536 2495840 2678187 3722244No. of shares 549105 549105 549105 499187

67

outstanding         Earning Per Share 1.69 4.55 4.88 7.46

Earning Per share

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

2009 2008 2007 2006

Year

E.P

.S

Earning Per share

4.6.4.6 Break Up value per share

Share holder's equity / No. of share outstanding

  2009 2008 2007 2006Share holder's equity 16,147,516 17,138,849 16,289,475 15,108,692No. of share out standing 549105 549105 549105 499187         Break up value per share 29.41 31.21 29.67 30.27

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Break Up value per share

28.50

29.00

29.50

30.00

30.50

31.00

31.50

2009 2008 2007 2006

Years

Bre

ak U

p v

alu

e

Break Up value pershare

CHAPTER NO.5

SWOT ANALYSIS

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5.1 SWOT ANALYSIS

5.1.1 Internal and External factors .

The Internal component of Analysis is concerned with the basic

strengths and weaknesses 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

70

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 company’s

present business situation. It provides us with an overview of company’s

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.

5.2.2 Weaknesses:

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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

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CHAPTER NO.6

73

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. Company’s 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

& 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.

74

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.

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

75

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 report1- Annual Report 2007, 2008, 20092- Monthly report of financial year 2007,2008, 20093- Sui Northern Gas website (www.sngpl.com.pk)4- Staff Members of Sui Gas Northern

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