Monday, Apr 02, 2001
Gas District Cooling (KLIA) Sdn Bhd’s (GDC KLIA) ratings are supported by the captive market for its products, namely chilled water and electricity; strong supportive shareholders; efficient operation and strengthened financial profile. The ratings are, however, moderated by the late collection of accounts receivable and high, though declining debt leverage. The ratings outlook is stable, reflecting the sustained strength of GDC KLIA’s business risk profile and the improvement of its financial profile.
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) in Sepang, under a 20-year government concession (effective from January 1998). Shareholder backing is strong, provided by PETRONAS (with an effective shareholding of 72.5%), and takes the form of advances and the secondment of experienced personnel to manage the plant operations.
The utilities supply arrangement is governed by an Airport Facilities Agreement between GDC KLIA and the operator of KLIA, Malaysia Airport Sepang (MA Sepang) Sdn Bhd. Under the Agreement, GDC KLIA’s entire electricity rated capacity is sold to MA Sepang whilst 70% of its chilled water production is taken up by KLIA’s core facilities with the remaining 30% consumed by Privatized Facilities. The tariff for chilled water incorporates a demand charge and a variable charge. Annual revenue derived from the demand (or capacity charge) lends an element of stability to the company’s cash flow. The variable charge is based upon consumption and is expected to contribute an increasing proportion of operating revenue, going forward.
The facilities at the KLIA complex are dependent on the company for the supply of chilled water to meet their air-conditioning needs. A captive market is thus established for the company’s products. The major offtakers are Malaysia Airports Bhd., Malaysian Airline System and KL Airport Services Sdn Bhd. Delays, however, have been experienced by the company in the collection of its accounts receivable.
The supply of gas to the co-generation plant has been secured from PETRONAS for the duration of the concession. Changes in the cost of gas, the plant’s major operating cost, are passed through to end-users under the tariff formula, protecting the company’s operating margin. While the prime source of energy is gas, the co-generation plant is also configured to run on distillate jet fuel in the event of an interruption or delay in the delivery of natural gas.
Equipment selected and installed at the plant have been technically, technologically and commercially proven. The availability and service life of the project assets are supported by appropriate operating policies for preventive maintenance, equipment redundancy and spares availability. Major maintenance works have been sub-contracted to the main equipment suppliers.
GDC KLIA’s profitability measures have been trending upwards since the commissioning of the plant in December 1997; driven by rising sales of chilled water and electricity. Operating profit margin, however, slipped to 28.4% (FY99: 32.6%) on account of higher operating costs. With no major capital expenditure planned in the immediate future, free operating cash flow can be expected to grow; providing an increasing coverage over the company’s debts. Debt leverage; as represented by debt to equity at 2.9 times; remains high for the rating category. This is, nevertheless, a significant improvement over the 4.4 times recorded in FY98.
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) in Sepang, under a 20-year government concession (effective from January 1998). Shareholder backing is strong, provided by PETRONAS (with an effective shareholding of 72.5%), and takes the form of advances and the secondment of experienced personnel to manage the plant operations.
The utilities supply arrangement is governed by an Airport Facilities Agreement between GDC KLIA and the operator of KLIA, Malaysia Airport Sepang (MA Sepang) Sdn Bhd. Under the Agreement, GDC KLIA’s entire electricity rated capacity is sold to MA Sepang whilst 70% of its chilled water production is taken up by KLIA’s core facilities with the remaining 30% consumed by Privatized Facilities. The tariff for chilled water incorporates a demand charge and a variable charge. Annual revenue derived from the demand (or capacity charge) lends an element of stability to the company’s cash flow. The variable charge is based upon consumption and is expected to contribute an increasing proportion of operating revenue, going forward.
The facilities at the KLIA complex are dependent on the company for the supply of chilled water to meet their air-conditioning needs. A captive market is thus established for the company’s products. The major offtakers are Malaysia Airports Bhd., Malaysian Airline System and KL Airport Services Sdn Bhd. Delays, however, have been experienced by the company in the collection of its accounts receivable.
The supply of gas to the co-generation plant has been secured from PETRONAS for the duration of the concession. Changes in the cost of gas, the plant’s major operating cost, are passed through to end-users under the tariff formula, protecting the company’s operating margin. While the prime source of energy is gas, the co-generation plant is also configured to run on distillate jet fuel in the event of an interruption or delay in the delivery of natural gas.
Equipment selected and installed at the plant have been technically, technologically and commercially proven. The availability and service life of the project assets are supported by appropriate operating policies for preventive maintenance, equipment redundancy and spares availability. Major maintenance works have been sub-contracted to the main equipment suppliers.
GDC KLIA’s profitability measures have been trending upwards since the commissioning of the plant in December 1997; driven by rising sales of chilled water and electricity. Operating profit margin, however, slipped to 28.4% (FY99: 32.6%) on account of higher operating costs. With no major capital expenditure planned in the immediate future, free operating cash flow can be expected to grow; providing an increasing coverage over the company’s debts. Debt leverage; as represented by debt to equity at 2.9 times; remains high for the rating category. This is, nevertheless, a significant improvement over the 4.4 times recorded in FY98.