Pengerang RGT to produce 3.5 million metric tonnes annually

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KUCHING: The capacity for the Pengerang RGT will be fully underwritten by Petronas, which is positive that cost overrun risks should be minimal since this is Petronas Gas Bhd’s (PGas) second regasification terminal (RGT).

Affin Hwang Investment Bank Bhd’s research division (Affin Hwang Research) said that PGas management indicated that the RGT in Johor will be fully underwritten by Petronas, which has been similarly done with the Melaka RGT.

Although the Pengerang RGT is expected to cater mostly for RAPID, the research house views this positively as it removes the risks of capacity underutilisation.

The Pengerang RGT will have a capacity of 3.5 million metric tonnes per annum.

“The Pengerang RGT is expected to contribute six to seven per cent of 2018 earnings upon being operational by fourth quarter 2017 (4Q17).

The financing mix for the Pengerang RGT is still undetermined, but management expects it to be typical of an infrastructure company.

“Nonetheless, with a net cash position, we think PGas may opt to use more debt to optimise its balance sheet given that the projected IRR for the Pengerang RGT is high-single digit,” said the research house.

Management expects to properly manage the Pengerang RGT costs totalling RM2.7 billion upon taking extra steps to minimising cost escalation.

Besides that, the Pengerang RGT is not done on a fast track basis like Melaka RGT, which had faced construction issues and cost overruns.