Muhammad Danish Sultan

Internship Report
Finance Department
Education: CMA Partially
Qualified
Dated: 26-Feburary-2019
 INTRODUCTION TO SSGC

Sui Southern Gas Company (SSGC) is Pakistan's leading integrated gas

Company. The company is engaged in the business of transmission and
distribution of natural gas besides construction of high pressure transmission
and low pressure distribution systems.

SSGC is a model utility company responsible for supplying uninterrupted

natural gas to domestic, commercial, industrial and bulk customers in Sindh
and Baluchistan.

SSGCL transmission system extends from Sui in Baluchistan to Karachi in

Sindh comprising over 3,200 KM of high pressure pipeline ranging from 12”-
24" in diameter. The distribution activities covering over 1200 towns in the
Sindh and Baluchistan are organized through its regional offices. An average
of about 378,468 million cubic feet (MMCF) gas was sold in 2007-08 to over
2.040 million (industrial 3,448, commercial 22,192 and domestic 2,014,827
consumers) in these regions through a distribution network of over 31,877
Km. The company also owns and operates the only gas meter manufacturing
plant in the country, having an annual production capacity of over 550,150
meters. The Company has achieved another milestone at the meter plant. It
has obtained ISO 9001: 2000 certifications.
The Company has an authorized capital of Rs. 10 billion of which Rs 6.7117
billion is issued and fully paid up. The Government owns the majority of the
shares which is presently over 70%.

The Company is managed by an autonomous Board of Directors for policy

guidelines and overall control. Presently, SSGC's Board comprises of 14
members. The Managing Director/Chief Executive is nominee of GOP and
has been delegated with such powers by the Board of Directors as are
necessary to effective conduct the business of the company.
 COMPANY’S OBJECTIVE

The Company aims to supply natural gas wherever there is sufficient load to
justify the cost of infrastructure. In many places the gas network is being
expanded to meet economic and social requirements through active funding
support from the Federal and Provincial governments. In 2003, the Company
launched a comprehensive five-year gas network development and expansion

 Plan to connect hundreds of small towns and villages in remote areas of

Sindh and Baluchistan, which currently are deprived of piped natural gas.

 Every year, the Company adds nearly 75,000 new customers (industrial,
commercial & domestic) to its customer base and lays hundreds of
kilometers.

 Transmission pipelines and distribution network and installs other

facilities such as metering / billing stations in its system using its staff of
technically qualified and skilled personnel.
 PERFORMANCE

 Over the period 2000-01 2006-07, the Transmission Network has

increased from 2, 777 km to 3,290 km i.e. an addition of 285 km (10%)
and the Distribution Network has increased from 22,159 kms to 29,832
kms showing an addition of 7,673 km (26%).

 The above expansion has contributed towards increasing the number of

customers from 1.57 million in 2000-01 to 2.040 million in 2007-08.
Yearly gas sales have shown an increase from 206,967 MMCF in FY 2000
to 409,375 MMCF in FY 2008. Furthermore, with an addition of around
550 new towns / villages since 2000-01, the total strength of towns and
villages on gas has reached 1260 by the close of FY 2007-08.

 Annual gas sale revenue has increased from Rs. 29.237 billion in FY
2000-01 to Rs. 85.716 billion in FY 2006-07, showing an increase of
(56.479 billion) over the past seven years. This increase is mainly due to
connecting newly discovered gas fields through transmission system
network enhancement and optimizing gas flows.

 Meter manufacturing capacity has increased from around 292,750 in FY

2000-2001 to over 513,250 in FY 2007-08 fully meeting increased
requirements of SNGPL and SSGC.
 GAS PURCHASE
As SSGC Purchase gas from different field and its main business is
transmission and distribution of different typers of gas, to its customers.Its
customers includes house holf, industrial ,retail and others.
TYPES Of Gas:
 Natural Gas- Methane
 LPG-Liquid Petrolium Gas
 CNG-Compress Natural Gas
 RING
Unit:
 mmbtu
 mcf
 STORES SECTION

The store is responsible for receiving, keeping and sending all the necessary
materials the company uses for its operations in various locations throughout
the country. All the items have a 9-digit index number.

Purpose:

To check the store balances, maintain and control the records of every kind of
stock/material placed in stores at different locations of company.

Here, in SSGC Head Office record of each store all location in company is
controlled and checked for proper receipt and issue of items.

Working:

1. Extracting stores balances in ERP.

2. Checking of stores balances with ledger balances on ERP.
3. Reconciliation store stock loan balances with ledger balances for the
more accuracy.
4. Checking of miscellaneous reports of stores balances for confirmation.
5. Preparation of reports of stores stock on quarterly, half yearly and
annually.
Functions Performed By Company Stores:

Major functions are performed by company includes:

 Receipt of stores
 Issuance of stores for Distribution Projects
 Issuance of stores for Transmission Projects
 Issuance of stores for Meter Plant Projects
In order to fulfill these functions, company has several stores ate different
locations. And here we go in the detail of these stores by using tables.
 GENERAL LEDGER SECTION

Function:

 Processing of all journal voucher (JV) from different section and location
in finance department
 Resolution of queries raised by the ERP system during JV processing
 Posting of all financial modules to general ledger
 Processing of reports from oracle on monthly, quarterly, yearly basis for
top management
 Processing of reports from oracle on monthly, quarterly, yearly basis for
oil and gas regulatory authority (OGRA)
Purpose:

 To maintain proper and accurate, books of accounts.

 To facilitate and co-ordinate the annual audit
 To comply with the policies and the procedure notified by OGRA from
time to time.
 To comply with the policies and the procedure notified by Security and
Exchange Commission of Pakistan (SECP).
 To report the results to board of directors and share holders of the
company
Accounts Analysis Reports:
These reports list the accumulated balances of a range of Accounting Flex
fields and all journal entries that affect that range. Detailed information is
provided for each journal entry line which includes the source, batch name,
and description.

Trial Balance Reports:

Use trial balance reports to review account balances and activity in summary
or detail.

Journal Report:

These reports print journal entry batches and include journal entry subtotals,
and descriptions and reference information for each journal entry line. You
can report on foreign currency, posted, non-posted or error journal entries and
report on a specific batch or on journal entries from a specific source.

Reports can be generated in clusters and groups by entering any of the

following:

 Company
 Function
 Location
 Organization Unit
 Project
After selecting the type of report that we want view, we need to enter the
details of the projects that we want to view. Details like segment, Account
type, Period Currency etc.
 FIXED ASSEST

Responsibilities of Fixed Assets:

Following are the main responsibilities of fixed assets:

1. Making proposed budget (CAPEX), department wise, account wise,

company wise.
2. To maintain the capitalization, depreciation, retirement and disposal of all
the fixed assets.
3. Preparation of capitalization and WIP schedules of all the companies i.e.
Karachi distribution, Hyderabad distribution, Baluchistan distribution,
Transmission and Head Office.
4. Prepare quarterly, half yearly and yearly accounts and schedules of
organization.

Budget Phase:

“Budget is a financial statement which is prepared before the starting of the

financial year containing the plans and policies to be pursued during that
period.”

The budget section of finance department prepares capital expenditure budget

(CAPEX) annually for all the departments of SSGCL. When budget section
starts to create the budget, all the departments are notified to make the
proposed budget themselves for there departments according to the
requirement of their department and send it to budget section. After receiving
the proposed budgets from the departments, the budget section examines it &
discusses all particulars with the related head of department & staff giving
special consideration to the justification of fixed asset requirement & funds
available in the company. The budget section can increase or decrease the
proposed amount of budget keeping in view, the available amount in the
budget for that department.

After the proposed budget is prepared by the Budget Section, budget is then
sent to GM & SGM for its approval/changes & finally to the M.D for
approval. When the budgets for all the departments have been finalized and
approved by MD, then the agenda is prepared by budget section, which is
reviewed by finance committee. Board of directors grants approval to the
agenda after which the budget is authorized to be followed. Each department
is then informed through inter departmental note along with a copy of their
budget.

FIXED ASSET ADITION PROCESS

Capitalization:

Whenever a budget is to be prepared for any department, the budget section

notifies the department to prepare list of assets required by them for the
coming year. After the approval of the budget, the concerned department will
be only allowed to purchase the assets listed in the budget for the whole year.

In order to purchase an asset, fixed asset requisition (FAR) is required to be

filed by concerned department, which should be approved by the head of that
department. FAR contains details of assets required by the department.
The FAR is then forwarded to Material Management department, where
Deputy Manager checks whether the FAR falls within the budget or not. If
the amount for the required asset is available in the budget then the Material
Management department invites quotations through tender (if not available in
store) and on the basis of commercial and technical evaluation and lowest
bidders, a supplier is selected (all such procedures documented in Evaluation
Report) and then Purchase order (PO) is prepared and sent to supplier.

All assets are received by the KT stores department, where quality inspection
is conducted (however not documented) and then a Material Receiving
Statement (MRS) is generated and a copy of which is forwarded to the
finance department.

Depreciation:

Once an asset has been capitalized, working for its depreciation starts. Full
year depreciation is charged for the first year regardless of its purchase data.
The company uses the straight line method of depreciating except for meter
plant, where reducing balance method is used. Depreciation rates differ for
different assets. It even differs for same assets in different cities.

In the certain situation we call for making adjustments e.g. transfer of

an asset from one unit to another, different between assets in books and
its physical existence etc.
 Fixed Asset Retirement process

After the completion of life of asset which is fixed by company we retire it.
1st the Assets Retirement Requisition (ARA) is prepared by the user
department and it is sent to the fixed asset section of finance to retire that
asset. The company SSGC’s follows certain policies for retire of asset e.g.
only those asset which have a zero book value can be retired. After checking
the book value the inspection team is to be formulated. That inspection team
inspects the asset, which is to be retired for verification of the condition of
the asset. After inspection the report sent to the fixed asset section along with
ARA. It is approved / disapproved on the basis of inspection report by GM,
DGM and MD. After approval the asset sent to store at Karachi Terminal
(KT) for disposal. In case an employee of the company buys it, it is sold on
written down value or at 7.5% of its cost, whichever is higher. And some old
assets, which are fully scraped and not present physically, are deleted from
the books through approval of the management.
 Insurance Section

In the present world, where life is full of anxiety, dangers and risks, insurance
is essential to protect and compensate for sudden loss of life and property. It
has also been made compulsory by law in most of the countries to protect
assets/property of Government concerns and corporate bodies.

Basically insurance cover is confirmed when premium is fully paid and

POLICY is issued by the insurers, but in case of very huge volume of
business like that of Sui Gas Southern Gas Company Limited, a HOLD
COVER letter from the insured is enough for confirmation of insurance
cover.

Responsibilities of Insurance Section:

Following are the responsibilities of insurance section:

1. Insurance coverage of All the Assets and Employees of SSGCL under:

a. Fire Insurance
b. Motor Vehicles
c. Employees Benefit

i. Group Insurance
ii. Personal Accident
 d. Marine Insurance
e. EAR Insurance
f. Casual / contract labor Insurance

2. Lodging and settling of Insurance claims under above mentioned policies.

3. Renewal of Fire Insurance and other policies on Annual Basis.

4. Preparing Budget of Insurance on Annual Basis of following:

a. Fire Insurance
b. Motor Vehicle Insurance
c. Employees Benefit

5. Payment of Debit Notes to NICL and Adamjee Insurance throughout the

year.

6. Passing Recurring JV of Fire Insurance and Motor Vehicle on Monthly

basis.

7. Correspondence with NICL.

8. Correspondence with Surveyors.

9. Correspondence with other departments.

10. Preparing Reports for Management.

 CAPITAL BUDGETING
Capital budgeting, and investment appraisal, is the planning process
used to determine whether an organization's long term investments
such as new machinery, replacement of machinery, new plants, new
products, and research development projects are worth the funding of
cash through the firm's capitalization structure.

 NPV
 IRR
 WACC
 Return on Capital Employed
 PayBack Period

Capital structure
Is this the optimal capital structure, where the cost of capital is minimum? If
not then, probably we need to think about our financing decisions. Is Pecking
Order taken into consideration? Whether they use cost of capital approach or
adjusted present value approach?

Mechanics of cost of capital estimation

 Estimate cost of debt at different levels of debt
 Use Interest Coverage Ratio (EBIT / Interest) for bond ratings
Estimate cost of capital at different levels of debt