Engro Polymer & Chemicals Limited (EPCL) has entered into an interim agreement with Sui Southern Gas Company Limited (SSGC) for supply of gas till February 28, 2023, a statement said on Tuesday.
The price would be charged to EPCL at a rate on industrial/commercial pricing notified by the Oil and Gas Regulatory Authority (OGRA), EPCL informed the Pakistan Stock Exchange in a notice.
Currently, EPCL is being charged Rs1,087/mmbtu while the current (Nov’22) rate of RLNG notified by OGRA is $14.81/mmbu (Rs3,318/mmbtu). Rao Amir Ali at Arif Habib Limited said in a note that the company had already planned an annual turnaround during Dec’22 for 30 days to manage expected gas shortages in the winter season. Normally, the company holds one month’s inventory (15-20K tons), he added. On the basis of the development, calculated potential financial impact on EPCL indicated that it would have to increase PVC prices by $285/tonne to fully pas on the impact of higher gas prices.
However, due to lower international PVC prices, Amir noted that EPCL would only pass on half of the impact of higher gas prices, translating to a negative earnings impact of Rs0.91/share (assuming 40,000 tonnes of PVC production during the RLNG pricing period). In case the company absorbs the full impact of higher gas prices, the profitability will then decline by Rs1.82/share, the note stated.