Gas District Cooling (Putrajaya) Sdn Bhd - 2013

MARC has affirmed its AAAID long-term rating on Gas District Cooling (Putrajaya) Sdn Bhd’s (GDC Putrajaya) RM300 million Al-Bai’ Bithaman Ajil Islamic Debt Securities (BaIDS) with a stable outlook. The rating reflects the continued support of parent company Putrajaya Holdings Sdn Bhd (PJH) and ultimate holding company Petroliam Nasional Berhad (PETRONAS) which enables GDC Putrajaya to remain current on timely repayment obligations as well as assured chilled water offtake volume by the federal government and PJH based on contracted volume. MARC maintains a long-term credit rating of AAA/Stable on PJH and public information rating of AAA/Stable on PETRONAS.

PJH is the master developer of the federal government administrative centre of Putrajaya whereby PJH undertakes to plan, design, construct and sublease the government buildings to the Federal Government of Malaysia for 25 years as stipulated under the Concession Agreement and Lease Arrangement between the two parties. As GDC Putrajaya is the concessionaire of the Putrajaya district cooling system, PJH has integrated GDC Putrajaya’s district cooling system into the master plans of the respective buildings. As part of the service concession, GDC Putrajaya charges for its chilled water services based on two components: (i) the demand charge rate factor, which is based on the agreed upon maximum cooling load demand of the respective facilities; and (ii) the variable charge rate factor, which is based on the actual chilled water consumptions of the offtakers. Therefore, demand risk is largely mitigated by the contracted demand and anticipated demand growth of chilled water sales to government buildings which currently amount to 89.4% of GDC Putrajaya’s total revenue.

On an annualised basis, the aggregate contracted demand for chilled capacity stood at 955,476 refrigeration tonnage (RT) for the first half of 2013 (1H2013) compared to 935,316 RT in 2012 whereas the actual volume of chilled water delivered was 91,384,008 refrigeration tonnage hours (RTh) compared to 90,071,228 RTh in 1H2012. The marginal 1.5% year-on-year growth in demand load was largely due to the increased number of new offtakers following the completion of new commercial buildings on Parcel Z10 as well as Menara PJH on Lot 2C2. The contracted demand for chilled capacity is projected to rise further in 2014 and 2015 with the expected completion of various buildings on Parcel F and Z in Precinct 1, Precinct 2 and Precinct 3. In anticipation of future demand, GDC Putrajaya has expanded its capacity with the commissioning of Plant 4 in March 2013.

On an annualised basis, actual revenue from chilled water sales decreased by 2.8% due to realisation of chilled water shortfall charges which were accounted for in December 2012 and also lower variable RTh. The  non-materialisation of  an anticipated gas price revision  had helped GDC Putrajaya to contain utility costs, which accounted for 36.0% of operating expenses. However, MARC opines that natural gas prices are likely to be revised over the next few years given the government’s intention to rationalise fuel subsidies which is likely to have an impact on GDC Putrajaya’s profit margin. Therefore, the company’s profitability would heavily hinge on its ability to pass through the gas cost increases in the revision of new tariffs to its customers. Net cash balance rose to RM27.1 million in 1H2013 as a result of lower capital expenditure following the commissioning of Plant 4 in March 2013. In 2012, GDC Putrajaya incurred higher-than-projected capital expenditure of RM32.4 million against the projected amount of RM20.8 million; the additional capital expenditure was the carried forward amount from 2011 in relation to construction of Plant 4. MARC opines that GDC Putrajaya’s repayment schedule allows the company ample time for the build-up of cash reserves to meet its next redemption of RM50.0 million in December 2014.

The stable rating outlook continues to incorporate the rating agency’s view that GDC Putrajaya will continue to enjoy support from its immediate and/or ultimate parent in relation to its debt service obligations. A material change in the support assumption will result in revision of GDC Putrajaya’s rating.

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