Friday, Jan 30, 2004
MARC has reaffirmed the rating of Kertih Terminals Sdn Bhd’s (KTSB) RM500 million revolving underwritten facility with term loan conversion (1999/2004) at MARC-1. The rating reflects the company’s strong financial position, stable and predictable cash flows generated from the long term contracts by the terminal users as well as financially strong and established shareholders.
KTSB was incorporated to undertake the construction and operation of a Centralized Tankage Facility (CTF) for PETRONAS’ Integrated Petrochemical Complex (IPC) in Kertih, Terengganu. The presence of PETRONAS as a shareholder for KTSB and the petrochemical ventures set up in Kertih, provide important support for the viability of the CTF. By utilizing the storage facilities provided by the terminal, users are able to realize substantial cost savings through reduction in infrastructure investment and operating expenses.
The sponsors of the petrochemical venture companies, which include PETRONAS and British Petroleum, are reputable multinational companies, occupying leading positions in a wide range of businesses with strong financial profiles.
The terminal usage agreement requires the users to pay a minimum warehouse charge (MWC) irrespective of the rate of utilization for 20 years, hence ensuring a steady stream of income over the tenure of the facility. By revising the MWC annually based on changes in the Consumer Price Index, Utilities Average and wages, price risk is substantially mitigated. Revenue growth, thus, will be driven by the escalation factor on the warehousing charges and the growth in tank truck loading operations. The likelihood of early termination by the users is remote given that the terminals are custom made for each client and penalties are imposed on the respective user in the event of early termination.
Revenue continued on an upward trend. The facilities’ highly automated operations, built-in cost pass-through mechanisms and economies of scale contributed to KTSB’s robust operating margin.
MARC’s sensitivity analyses reveal that net cash flow from operations is more than sufficient to meet interest and principal payments even in the cases of delays in receivables of varying durations, attributable to the element of stability from KTSB’s long term contracts and low debt obligations.
KTSB was incorporated to undertake the construction and operation of a Centralized Tankage Facility (CTF) for PETRONAS’ Integrated Petrochemical Complex (IPC) in Kertih, Terengganu. The presence of PETRONAS as a shareholder for KTSB and the petrochemical ventures set up in Kertih, provide important support for the viability of the CTF. By utilizing the storage facilities provided by the terminal, users are able to realize substantial cost savings through reduction in infrastructure investment and operating expenses.
The sponsors of the petrochemical venture companies, which include PETRONAS and British Petroleum, are reputable multinational companies, occupying leading positions in a wide range of businesses with strong financial profiles.
The terminal usage agreement requires the users to pay a minimum warehouse charge (MWC) irrespective of the rate of utilization for 20 years, hence ensuring a steady stream of income over the tenure of the facility. By revising the MWC annually based on changes in the Consumer Price Index, Utilities Average and wages, price risk is substantially mitigated. Revenue growth, thus, will be driven by the escalation factor on the warehousing charges and the growth in tank truck loading operations. The likelihood of early termination by the users is remote given that the terminals are custom made for each client and penalties are imposed on the respective user in the event of early termination.
Revenue continued on an upward trend. The facilities’ highly automated operations, built-in cost pass-through mechanisms and economies of scale contributed to KTSB’s robust operating margin.
MARC’s sensitivity analyses reveal that net cash flow from operations is more than sufficient to meet interest and principal payments even in the cases of delays in receivables of varying durations, attributable to the element of stability from KTSB’s long term contracts and low debt obligations.