Petronas Gas earmarks RM1.4b capex for 2022, third LNG storage tank expected by year end

KUALA LUMPUR (April 27): Petronas Gas Bhd (PetGas) plans to set aside some RM1.4 billion in capital expenditure (capex) for the current year, compared with RM1.2 billion last year, as it expects a step-up in maintenance activities for major projects announced last year, in line with its growth aspirations.

"We are spending slightly higher (capex),” said PetGas managing director and chief executive officer Abdul Aziz Othman in conjunction with the group’s 39th annual general meeting held virtually on Wednesday (April 27), without disclosing the breakdown of the latest capex.

The five projects for which a final investment decision was made last year are a 42km lateral gas pipeline to Pulau Indah, new oxyalkylate facilities, a new lateral gas pipeline in Sepang, the Southern Peninsular Gas Utilisation expansion, a new compressor station in Kluang and the Terengganu Crude Oil Terminal off-gas rerouting project in Kerteh.

“As the country is transitioning into endemicity (Covid-19), we expect to have more maintenance activities and expect to see more progress in the growth projects that we announced last year,” said Abdul Aziz.

He added that current developments of the liquefied natural gas (LNG) business neccesitates more storage capacity due to rising demand.

"We have announced that we are looking for someone to provide us with the capacity, and this process is still ongoing.

"In Pengerang, we have two tanks. If everything goes well, by the end of the year we should be able to say whether we will go ahead with a third tank for LNG storage."

Abdul Aziz said the group would continue to seize opportunities to deliver gas solutions in a responsible and sustainable manner, while progressing and realising its identified growth projects.

These include pursuing integrated solutions for power and utilities in new industrial zones in Malaysia, growing power generation and regasification capacities in Malaysia and regionally, as well as opportunities brought about by the energy transition.

PetGas had a stellar FY21 as its profit after tax of RM2.11 billion surpassed the RM2 billion mark for the second consecutive year, and was 1% higher than the previous year.

The group declared total dividends of 82 sen per share for FY21, including a special dividend of 10 sen per share, which translated into a dividend payout ratio of 81.6%.

On another note, PetGas chairman Adnan Zainol Abidin said the one-off prosperity tax (Cukai Makmur) would not significantly impact the company’s ability to declare dividends.

The prosperity tax is a one-off tax measure proposed by the federal government in Budget 2022, whereby chargeable income above the RM100 million mark would be taxed at 33% instead of 24%. Tax is levied on chargeable income and not net profit.

Plan to further optimise capital structure, gearing levels still ongoing

PetGas chief financial officer Shariza Sharis Mohd Yusof, on the other hand, said the group needs to come up with a plan that is consistent with all the growth opportunities the group is pursuing to further optimise its capital structure and gearing levels.

“We had raised some sukuk for our regasification terminal in Pengerang and also raised some external financing facilities for our gas transportation business.

"If things align in terms of our internal financing requirements and external market conditions, we will optimise our capital structure or gearing level as it is relatively low compared to other infrastructure companies at the moment," she added.

Previously, AmInvestment Bank Bhd stated in a Feb 23 report that PetGas had reaffirmed its optimal gearing strategy to attain a debt-to-equity ratio comparable to other utilities/infrastructure companies at 55% over the next three years from a net gearing position of currently only 3%.

At the time of writing on Wednesday, PetGas was six sen or 0.36% higher at RM16.94, translating into a market capitalisation of RM33.52 billion.