Thursday, Mar 08, 2001
Malaysian Rating Corporation Berhad (MARC) has affirmed PETRONAS Gas Bhd’s (“PGB”) RM900.0 million al-Murabahah Commercial Paper/Medium-Term Notes Programme’s (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 affirmed at AAA/MARC-1, with a stable outlook.
The ratings reflect the excellent credit of PGB’s principal shareholder, PETRONAS, which holds over 50% of equity; 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; low commodity risk; efficient operations and a strong financial profile.
PGB processes natural gas supplied by the gas fields offshore Terengganu and transmits the processed gas to end-users, that can be broadly divided into the power and non-power sectors. The local power sector accounted for 77% of the company’s total average gas sales in FY2000. 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. Gas demand by the non-power sector is driven by petrochemical plants and is expected to increase with the completion of the Centralized Utility Facilities (CUF) in Kerteh and Gebeng. Completed as scheduled at the end of 2000, the CUFs will provide utilities such as steam, electricity and industrial gases, water, compressed air, condensate returns and waste water treatment to various petrochemical plants in
Kertih and Gebeng. The engineering procurement, construction and management contractor was Foster Wheeler (M) Sdn Bhd, a member of the Foster Wheeler International Corporation.
A new throughput fee formula came into effect on 1 April 2000 (to 31 March 2005). While the fixed reservation fee was increased by 34.8%, the flowrate fee (which was previously based upon per unit of gas consumption) will now only be earned provided volumes of gas processed is in excess of 2 billion standard cubic feet per day. The near-term effect of the new formula will be a contraction in PGB’s revenue base. In the medium to longer term, the throughput fee is expected to rise on the back of an increase in gas consumption by the then fully operational new petrochemical plants.
Transmission pipeline availability was above 99% while processing plant availability was above 90% in FY99 and FY2000; attesting to the company’s effective operation and maintenance efforts. PGB also possesses an ISO 9000 certification for its gas transmission and processing operations. The security and availability of the gas supply network is enhanced with the installation of parallel pipelines; that is, 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, this fee component will sustain the company’s revenue base well into the medium term. Operating margin averaged a high 65.2% over the past four fiscal years. Cash flow protection measures benefit from the stability afforded by the throughput fee structure, the minimum demand for processed gas as well as the excellent credit quality of its off-taker, PETRONAS. The minimum and average after-tax, debt service coverage ratios over the next five years have been projected at 1.4 times and 2.6 times respectively. Debt leverage has been maintained at a moderate level, with total debt to capital (debt + equity) at around 40%. PGB’s financial flexibility is strong, backed by sizeable liquid assets and the resources of its principal shareholder, PETRONAS.
The ratings reflect the excellent credit of PGB’s principal shareholder, PETRONAS, which holds over 50% of equity; 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; low commodity risk; efficient operations and a strong financial profile.
PGB processes natural gas supplied by the gas fields offshore Terengganu and transmits the processed gas to end-users, that can be broadly divided into the power and non-power sectors. The local power sector accounted for 77% of the company’s total average gas sales in FY2000. 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. Gas demand by the non-power sector is driven by petrochemical plants and is expected to increase with the completion of the Centralized Utility Facilities (CUF) in Kerteh and Gebeng. Completed as scheduled at the end of 2000, the CUFs will provide utilities such as steam, electricity and industrial gases, water, compressed air, condensate returns and waste water treatment to various petrochemical plants in
Kertih and Gebeng. The engineering procurement, construction and management contractor was Foster Wheeler (M) Sdn Bhd, a member of the Foster Wheeler International Corporation.
A new throughput fee formula came into effect on 1 April 2000 (to 31 March 2005). While the fixed reservation fee was increased by 34.8%, the flowrate fee (which was previously based upon per unit of gas consumption) will now only be earned provided volumes of gas processed is in excess of 2 billion standard cubic feet per day. The near-term effect of the new formula will be a contraction in PGB’s revenue base. In the medium to longer term, the throughput fee is expected to rise on the back of an increase in gas consumption by the then fully operational new petrochemical plants.
Transmission pipeline availability was above 99% while processing plant availability was above 90% in FY99 and FY2000; attesting to the company’s effective operation and maintenance efforts. PGB also possesses an ISO 9000 certification for its gas transmission and processing operations. The security and availability of the gas supply network is enhanced with the installation of parallel pipelines; that is, 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, this fee component will sustain the company’s revenue base well into the medium term. Operating margin averaged a high 65.2% over the past four fiscal years. Cash flow protection measures benefit from the stability afforded by the throughput fee structure, the minimum demand for processed gas as well as the excellent credit quality of its off-taker, PETRONAS. The minimum and average after-tax, debt service coverage ratios over the next five years have been projected at 1.4 times and 2.6 times respectively. Debt leverage has been maintained at a moderate level, with total debt to capital (debt + equity) at around 40%. PGB’s financial flexibility is strong, backed by sizeable liquid assets and the resources of its principal shareholder, PETRONAS.