Tuesday, Jan 14, 2003
Malaysian Rating Corporation Berhad has reaffirmed the short-term rating of MARC-1 for Kertih Terminals Sdn Bhd’s (KTSB) RM500.0 million Revolving Underwritten Facility (RUF) with term loan conversion (1999/2004). The reaffirmation of the rating reflects the completion of Phase 2 of the Centralized Tankage Facility (CTF) which provides additional stream of revenue to Kertih Terminals Sdn Bhd (KTSB), the strong financial position, stable and predictable cash flows generated by the take-or-pay contracts for terminal usage and financially strong and experienced shareholders.
KTSB was incorporated to undertake the construction and operation of the CTF for PETRONAS’ Integrated Petrochemical Complex 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 (that is, the petrochemical venture companies) are able to realize substantial cost savings through the reduction in infrastructure investment and operating expenses.
In operating petrochemical plants like KTSB’s, emphasis on safety of their workers is very important. KTSB has a well documented occupational safety and health (OSH) procedures which is a combination of PETRONAS’ Technical Standard and Royal Vopak’s minimum standard. The procedures are audited regularly by KTSB’s customers and the Department of Occupational Safety & Health.
The sponsors of the petrochemical venture companies; which include PETRONAS, British Petroleum, Dow, Mitsui and Mitsubishi; are reputable multinational companies, occupying leading positions in a wide range of businesses and with strong financial profiles. Credit risks of the terminal users are, thus, mitigated. Also, the 20-year terminal usage contract period ensures a long-term demand for the facilities. Despite the current slack in global demand and slowdown in regional economic growth, Asia is still regarded as a strategically important area for petrochemical companies given its proximity to feedstocks and end users. Hence, the long term outlook for petrochemical producers in Asia remains generally positive.
The overall financial profile of KTSB remained strong, with revenue growth of 43% recorded for financial year ended (FY) 2002. Factors such as economies of scale, highly automated operations, and continuous improvement in operating standards, have enabled KTSB to sustain its profitability.
Going forward, MARC believes that KTSB’s operating cash flows will continue to improve further, which would enhance its debt servicing capacity. As at 31 March 2002, KTSB’s total borrowings were made-up of the RUF. MARC expects the current gearing position of the company to gradually improve in the near-to-medium term as a result of retention of earnings.
KTSB was incorporated to undertake the construction and operation of the CTF for PETRONAS’ Integrated Petrochemical Complex 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 (that is, the petrochemical venture companies) are able to realize substantial cost savings through the reduction in infrastructure investment and operating expenses.
In operating petrochemical plants like KTSB’s, emphasis on safety of their workers is very important. KTSB has a well documented occupational safety and health (OSH) procedures which is a combination of PETRONAS’ Technical Standard and Royal Vopak’s minimum standard. The procedures are audited regularly by KTSB’s customers and the Department of Occupational Safety & Health.
The sponsors of the petrochemical venture companies; which include PETRONAS, British Petroleum, Dow, Mitsui and Mitsubishi; are reputable multinational companies, occupying leading positions in a wide range of businesses and with strong financial profiles. Credit risks of the terminal users are, thus, mitigated. Also, the 20-year terminal usage contract period ensures a long-term demand for the facilities. Despite the current slack in global demand and slowdown in regional economic growth, Asia is still regarded as a strategically important area for petrochemical companies given its proximity to feedstocks and end users. Hence, the long term outlook for petrochemical producers in Asia remains generally positive.
The overall financial profile of KTSB remained strong, with revenue growth of 43% recorded for financial year ended (FY) 2002. Factors such as economies of scale, highly automated operations, and continuous improvement in operating standards, have enabled KTSB to sustain its profitability.
Going forward, MARC believes that KTSB’s operating cash flows will continue to improve further, which would enhance its debt servicing capacity. As at 31 March 2002, KTSB’s total borrowings were made-up of the RUF. MARC expects the current gearing position of the company to gradually improve in the near-to-medium term as a result of retention of earnings.