Monday, Feb 24, 2003
MARC has reaffirmed the ratings of Petronas Gas Berhad’s (PGB) issuer rating at MARC-1/AAA and its RM900 million Murabahah Commercial Paper/Medium Term Notes Programmes (1999/2004) (MUNIF) at MARC-1/AAAID (Islamic Debt) and RM500 million Al-Bai Bithaman Ajil Bonds Issuance Facility (1999/2004) (ABBA) at MARC-1/AAAID (Islamic Debt).
The reaffirmation of the ratings are supported by the company’s dominant position in the gas processing and transmission business, stability of earnings afforded by a long-term Gas Processing and Transmission Agreement (GPTA) executed with PETRONAS (principal shareholder), expected growth in revenue from Centralized Utility Facilities, low commodity risk, efficient operations and a strong financial profile.
PGB operates as a throughput service company; processing natural gas supplied by the gas fields offshore Terengganu and transmitting the processed gas to end-users on behalf of its parent company, PETRONAS. The end-users of natural gas can be broadly categorized into the power and non-power sectors. The local power sector accounted for 70% of the company’s total dry gas sales in FY2002. The gas supply contracts with electricity producers are long term in nature, ranging from 15 to 21 years, and are on a ‘take-or-pay’ basis, providing stability to gas demand from this sector and alleviating the risk of under-utilization of PGB’s processing and transmission facilities. Demand by the non-power sector emanates from the sale of industrial utilities, via the Centralized Utility Facilities (CUFs), to various petrochemical plants in Kertih and Gebeng.
Throughput fees continued to form the major source of income for the company, accounting for 85% of total revenue in FY2002 (FY2001:94%). The balance, 15%, was contributed by the sale of industrial utilities (FY2001:6%). The contribution from this second revenue source is expected to increase considerably in line with the projected growth in customers’ demand as the Integrated Petrochemical Complexes in Kerteh and Gebeng started their operation in FY2002.
Revenue improved to RM1,949.6 million in FY2002, representing a 10% hike over the last year’s figure. The improved revenue was mainly attributed to increased sales from CUF as new customers at the Integrated Petrochemical Complexes began their operation as well as increased demand from existing customers. Pre-tax profit, meanwhile, was registered at RM586.8 million declining by 11.6% compared to the previous year of RM663.9 million. The lower pre-tax profit was largely due to higher depreciation charges resulting from the full year effect of the capitalization of additional CUF modules and PGU Loop 2 facilities that were completed during FY2001. Depreciation charges were the main cost borne by PGB, accounting for nearly half of the total operating expenses. Consequently, operating margin for FY2002 was trimmed to 37.4% from 42.7% previously.
PGB’s debt leverage position is modest, never exceeding 1.0 time throughout the years under review. Cash flow protection measures remain strong, underpinned by the stable and predictable cash flow. Stability of the cash flow stems from the throughput fee structure, supported by the end users’ ‘take or pay’ quantities which represent more than 80% of PETRONAS’ aggregate firm annual feedgas deliveries as well as the superior credit quality of the off-taker, PETRONAS (rated AAA). PGB’s financial flexibility is strong with total liquid assets (cash and cash equivalents) as at 30 September 2002 standing at RM354.2 million as well as shareholders’ support, in particular PETRONAS.
Going forward, the growth in PGB’s revenue base will be driven by the gradual increase in dry gas demand from the power sector and industrial utilities demand from the petrochemical plants. Consequently, profitability is expected to record improvement in the near to medium term.
The reaffirmation of the ratings are supported by the company’s dominant position in the gas processing and transmission business, stability of earnings afforded by a long-term Gas Processing and Transmission Agreement (GPTA) executed with PETRONAS (principal shareholder), expected growth in revenue from Centralized Utility Facilities, low commodity risk, efficient operations and a strong financial profile.
PGB operates as a throughput service company; processing natural gas supplied by the gas fields offshore Terengganu and transmitting the processed gas to end-users on behalf of its parent company, PETRONAS. The end-users of natural gas can be broadly categorized into the power and non-power sectors. The local power sector accounted for 70% of the company’s total dry gas sales in FY2002. The gas supply contracts with electricity producers are long term in nature, ranging from 15 to 21 years, and are on a ‘take-or-pay’ basis, providing stability to gas demand from this sector and alleviating the risk of under-utilization of PGB’s processing and transmission facilities. Demand by the non-power sector emanates from the sale of industrial utilities, via the Centralized Utility Facilities (CUFs), to various petrochemical plants in Kertih and Gebeng.
Throughput fees continued to form the major source of income for the company, accounting for 85% of total revenue in FY2002 (FY2001:94%). The balance, 15%, was contributed by the sale of industrial utilities (FY2001:6%). The contribution from this second revenue source is expected to increase considerably in line with the projected growth in customers’ demand as the Integrated Petrochemical Complexes in Kerteh and Gebeng started their operation in FY2002.
Revenue improved to RM1,949.6 million in FY2002, representing a 10% hike over the last year’s figure. The improved revenue was mainly attributed to increased sales from CUF as new customers at the Integrated Petrochemical Complexes began their operation as well as increased demand from existing customers. Pre-tax profit, meanwhile, was registered at RM586.8 million declining by 11.6% compared to the previous year of RM663.9 million. The lower pre-tax profit was largely due to higher depreciation charges resulting from the full year effect of the capitalization of additional CUF modules and PGU Loop 2 facilities that were completed during FY2001. Depreciation charges were the main cost borne by PGB, accounting for nearly half of the total operating expenses. Consequently, operating margin for FY2002 was trimmed to 37.4% from 42.7% previously.
PGB’s debt leverage position is modest, never exceeding 1.0 time throughout the years under review. Cash flow protection measures remain strong, underpinned by the stable and predictable cash flow. Stability of the cash flow stems from the throughput fee structure, supported by the end users’ ‘take or pay’ quantities which represent more than 80% of PETRONAS’ aggregate firm annual feedgas deliveries as well as the superior credit quality of the off-taker, PETRONAS (rated AAA). PGB’s financial flexibility is strong with total liquid assets (cash and cash equivalents) as at 30 September 2002 standing at RM354.2 million as well as shareholders’ support, in particular PETRONAS.
Going forward, the growth in PGB’s revenue base will be driven by the gradual increase in dry gas demand from the power sector and industrial utilities demand from the petrochemical plants. Consequently, profitability is expected to record improvement in the near to medium term.