Friday, Apr 23, 2004
MARC has upgraded the long-term rating on Gas District Cooling (KLIA) Sdn Bhd’s (GDC KLIA) RM207 Million Murabahah Commercial Paper/Medium-Term Notes to AAID while the short term rating has been reaffirmed at 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 commendable 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., Malaysian Airline System Berhad and KL Airport Services Sdn Bhd which contributed 70%, 20% and 5% of total revenue respectively. GDC KLIA benefits from a captive market for its plant’s chilled water and electricity output. Based on the debtors ageing profile as at 30 November 2003, 79.1% of GDC KLIA’s debtors fell within the credit term of 30 days. This is reflective of the company’s strong credit control system as well as its two major offtakers’ resilient financial profile, even after incorporating the impact of SARS during 1H2003.
Revenue from chilled water sales accounted for the bulk of revenue in FY 2003 (66.5% or RM62.8 million), driven by higher demand charges (54.8%) while the balance was contributed by electricity sales. FY 2003’s revenue also accounted for backdated revenue effective from 1998, pursuant to the adjustment in tariff rates under the Airport Facilities Agreement. Despite the higher operating costs incurred in FYE 3/2003 which included a one-off concession fee payment of RM7.5 million, operating profit margin remained high at 37.7%. In the short to medium-term, revenue growth is expected to average at 3.0%, driven by conservative growth in passenger traffic.
Forecasted FSCR over the remaining tenure of the facility is expected to be higher than the covenanted level of 1.3x given the flexibility to rollover the CPs. Debt leverage position will continue to decline with the progressive redemption of the notes before it becomes debt free by FYE 3/2006.
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., Malaysian Airline System Berhad and KL Airport Services Sdn Bhd which contributed 70%, 20% and 5% of total revenue respectively. GDC KLIA benefits from a captive market for its plant’s chilled water and electricity output. Based on the debtors ageing profile as at 30 November 2003, 79.1% of GDC KLIA’s debtors fell within the credit term of 30 days. This is reflective of the company’s strong credit control system as well as its two major offtakers’ resilient financial profile, even after incorporating the impact of SARS during 1H2003.
Revenue from chilled water sales accounted for the bulk of revenue in FY 2003 (66.5% or RM62.8 million), driven by higher demand charges (54.8%) while the balance was contributed by electricity sales. FY 2003’s revenue also accounted for backdated revenue effective from 1998, pursuant to the adjustment in tariff rates under the Airport Facilities Agreement. Despite the higher operating costs incurred in FYE 3/2003 which included a one-off concession fee payment of RM7.5 million, operating profit margin remained high at 37.7%. In the short to medium-term, revenue growth is expected to average at 3.0%, driven by conservative growth in passenger traffic.
Forecasted FSCR over the remaining tenure of the facility is expected to be higher than the covenanted level of 1.3x given the flexibility to rollover the CPs. Debt leverage position will continue to decline with the progressive redemption of the notes before it becomes debt free by FYE 3/2006.