Monday, Apr 22, 2002
Malaysian Rating Corporation Berhad (MARC) has reaffirmed PETRONAS Gas Berhad’s (PGB) RM900.0 million Al-Murabahah Commercial Paper/Medium Term Notes Programme (1999/2004) ratings at MARC-1ID / AAAID and the RM500.0 million Al-Bai Bithaman Ajil Bonds Issuance Facility (1999/2004) at AAAID. PGB’s Issuer Ratings have also been reaffirmed at AAA / MARC-1.
The reaffirmed 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, its 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 71% of the company’s total dry gas sales in FY2001. 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. The CUFs were completed at the end of year 2000.
Throughput fees continue to form the major source of income for the company. Total revenue, however, dropped 4.4% in FY2001 reflecting the effects of the revision made to the fee structure (which took effect from 1 April 2000) under the GPTA with PETRONAS. While the reservation charge component of the throughput fee was revised upwards from RM101.25 million per month to RM136.5 million per month, the flowrate fee can only be charged on volumes of gas processed in excess of 2 billion standard cubic feet per day (bscfd). The volume of gas processed is projected to reach 2 bscfd in FY2005. The balance of revenue was contributed by the sale of industrial utilities. Contribution from this revenue source is expected to increase with the commencement of full operations by the petrochemical plants in Kertih and Gebeng.
Transmission pipeline availability was 100% while processing plant availability was above 90% in FY2000 and FY2001; attesting to the company’s effective operation and maintenance efforts. Besides being awarded an ISO 9000 certification in respect of its gas transmission and processing operations, PGB also received a commendation from the UK-based Royal Society for Prevention of Accidents for being amongst the best three in the oil and gas industry sector. The security and availability of the gas supply network is enhanced with the installation of parallel pipelines i.e. PGU loops 1 and 2 to the main lines.
Despite the slight deterioration, PGB’s overall financial profile remains strong, underpinned by the fixed reservation fee component of throughput fee. At RM1.64 billion per annum, the reservation fee will sustain the company’s revenue base well into the medium term. Operating margin for fiscal year 2001 was trimmed to 42.7% (FY00: 61.3%) due to higher operating and depreciation charges arising from the full-year operation of the CUFs. Cash flow protection measures benefit from the stability afforded by the reservation fee and the minimum demand for processed gas. The minimum and average after-tax debt service coverage ratios over the remaining tenure of the facility have been projected at 1.4 times and 2.0 times respectively. Debt leverage has been maintained at a moderate level, averaging 0.6 times throughout the years under review. PGB’s financial flexibility is good, backed by sizeable liquid assets and the resources of its principal shareholder, PETRONAS.
The reaffirmed 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, its 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 71% of the company’s total dry gas sales in FY2001. 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. The CUFs were completed at the end of year 2000.
Throughput fees continue to form the major source of income for the company. Total revenue, however, dropped 4.4% in FY2001 reflecting the effects of the revision made to the fee structure (which took effect from 1 April 2000) under the GPTA with PETRONAS. While the reservation charge component of the throughput fee was revised upwards from RM101.25 million per month to RM136.5 million per month, the flowrate fee can only be charged on volumes of gas processed in excess of 2 billion standard cubic feet per day (bscfd). The volume of gas processed is projected to reach 2 bscfd in FY2005. The balance of revenue was contributed by the sale of industrial utilities. Contribution from this revenue source is expected to increase with the commencement of full operations by the petrochemical plants in Kertih and Gebeng.
Transmission pipeline availability was 100% while processing plant availability was above 90% in FY2000 and FY2001; attesting to the company’s effective operation and maintenance efforts. Besides being awarded an ISO 9000 certification in respect of its gas transmission and processing operations, PGB also received a commendation from the UK-based Royal Society for Prevention of Accidents for being amongst the best three in the oil and gas industry sector. The security and availability of the gas supply network is enhanced with the installation of parallel pipelines i.e. PGU loops 1 and 2 to the main lines.
Despite the slight deterioration, PGB’s overall financial profile remains strong, underpinned by the fixed reservation fee component of throughput fee. At RM1.64 billion per annum, the reservation fee will sustain the company’s revenue base well into the medium term. Operating margin for fiscal year 2001 was trimmed to 42.7% (FY00: 61.3%) due to higher operating and depreciation charges arising from the full-year operation of the CUFs. Cash flow protection measures benefit from the stability afforded by the reservation fee and the minimum demand for processed gas. The minimum and average after-tax debt service coverage ratios over the remaining tenure of the facility have been projected at 1.4 times and 2.0 times respectively. Debt leverage has been maintained at a moderate level, averaging 0.6 times throughout the years under review. PGB’s financial flexibility is good, backed by sizeable liquid assets and the resources of its principal shareholder, PETRONAS.