MARC has reaffirmed the long term and short term ratings on Gas District Cooling (KLIA) Sdn Bhd’s (GDC KLIA) CP/MTN at AAID/MARC-1. The ratings reflect GDC KLIA’s captive offtake demand for its chilled water and electricity, strong shareholder support, consistent financial performance reflected by improving debt leverage position and robust profit margin.

GDC KLIA operates and maintains the District Cooling System/co-generation plant that supplies chilled water and electricity to facilities at the Kuala Lumpur International Airport (KLIA) under a 20-year government concession (effective from 1998). Strong shareholder backing is provided by PETRONAS, with an effective shareholding of 75.0%.

The tariff for chilled water incorporates a demand charge and a variable charge. Annual revenue derived from the demand (or capacity) charge, a function of the contractual cooling load demand, lends an element of stability to the company’s cash flow while the variable charge is based upon consumption. The sale and purchase agreements for chilled water and electricity allow GDC KLIA to pass through increases in gas costs to its users. Given that gas cost forms the bulk of the company’s operating cost, the automatic pass through mechanism mitigates the company’s exposure to escalating gas prices.

The facilities at the KLIA complex are dependent on the company for the supply of chilled water to meet their air-conditioning needs. GDC KLIA’s major offtakers are Malaysia Airports (Sepang) Sdn Bhd (MA Sepang) and Malaysian Airline System Berhad (MAS) which contributed 69.0% and 22.0% of total revenue respectively. Based on the debtors ageing profile as at 30 September 2004, 73.9% of GDC KLIA’s outstanding debts fell within the credit term of 30 days, reflecting the company’s strong credit control system as well as its two major offtakers’ improving financial profile aided by the improving sentiments in the travel industry.

Revenue continued to exceed the RM90.0 million mark for FY2004. Pre-tax profit, however, slipped by 16.1% owing to a plant overhaul costing RM10.0 million. Nonetheless, operating profit margin is robust at 31.9% (FY2003: 37.7%). Chilled water sales accounted for 62.1% (FY2003: 66.5%) of revenue while the balance of 37.9% was derived from electricity sales (FY2003: 33.5%).

Debt leverage position has been on a downward trend, reflecting the growth in retained earnings and gradual reduction of the CP/MTN facility. Given that the project is self funding in nature, the company does not expect further borrowings for the operation of the plant.