RAM: Bintulu Port a key trade gateway in Sarawak and Malaysia

KUCHING: RAM Ratings has reaffirmed the AA1/Stable/P1 corporate credit ratings of Bintulu Port Holdings Bhd (BPHB) given its function as a key import and export gateway in Sarawak and in Malaysia.

In a statement, it said, the ratings mainly reflect its view of Bintulu Port as a government-linked entity and the high likelihood of extraordinary support from both the federal and Sarawak governments.

“Given Bintulu Port’s function as a key import and export gateway in Sarawak and in Malaysia, the group continues to enjoy a stable stream of income from port operations,” it added.

Bintulu Port operates the nation’s only liquefied natural gas (LNG) export terminal, which serves Petroliam Nasional Berhad (Petronas)’s LNG liquefaction plants.

LNG remained the primary cargo item handled at Bintulu Port.

In the first nine months of the financial year 2017 (9MFY17), RAM Ratings noted that LNG throughput surged 10.3 per cent year-on-year (y-o-y_ to 19.98 million tonnes (compared with 18.11 million tonnes in 9MFY16) due to strong demand from China and additional capacity from Petronas’s new LNG Train 9.

“However, as global LNG supply has risen subsequent to new LNG plants becoming operational in Australia and the US, we maintain our conservative stance in expecting the average volume of growth in LNG at Bintulu Port to remain in the single digits over the next few years,” it added.

Meanwhile, non-LNG throughput growth at Bintulu Port has been largely supported by increased palm oil throughput and rising raw material imports by Samalaju Industrial Park (SIP) users in 9MFY17, it said.

SIP, which began operations in June 2017, functions as a logistical hub for the import of raw materials and the export of finished products from heavy and energy-intensive industries at the park.

“The SIP is part of the Sarawak Corridor of Renewable Energy’s (SCORE) agenda of developing and transforming Sarawak into a developed state by 2020. Upon migration of the bulk cargo of the park’s users to SIP in June, we expect non-LNG cargo throughput growth at Bintulu Port to remain moderate, underlined by the continued growth of palm oil and crude oil throughput,” it said.

Overall, the ratings agency noted that BPHB’s adjusted gearing and funds from operations debt coverage (FFODC) ratios of 0.80 times and 0.39 times, respectively, as at end-9MFY17 were better than anticipated, against its previous expectations.

“This is mainly attributed to reduced debt envisaged to be incurred to fund Bintulu Port Sdn Bhd’s (BPSB) capex needs, which came in below our projections after the company delayed a tariff revision and deferred its capex plans,” it explained.

After factoring in new tariffs at Bintulu Port from 2018 onwards and funding for future capex at BPSB and SIP, it expected the group’s adjusted gearing and FFODC to deteriorate further to an average of 1.65 times and 0.21 times, respectively, over the next five years (base case: 1.23 times and 0.27 times, respectively).

“Notably, the Bintulu Port Privatisation Agreement (PA) is co-terminus with Bintulu Port’s operating licence, which is due to expire on December 31, 2022.

“The PA gives BPSB the option to extend the tenure of Bintulu Port’s operations for about 30 years, at the discretion of the Bintulu Port Authority.

“The risk of non-renewal of the licence is minimal, given that the Prime Minister’s Department has extended its approval in principle for the consideration of a renewal subject to terms and conditions to be further negotiated,” it noted.

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