PetGas expects the gas tariffs approved by the EC for the pilot regulatory period this year to affect the group’s revenue

by MARK RAO

PETRONAS Gas Bhd’s (PetGas) second-quarter (2Q) earnings slipped 1.3% year-on-year (YoY) on higher tax expenses, while the latest gas tariffs are expected to weigh on its transportation and regassification revenue.

Malaysia’s largest gas infrastructure and utilities firm posted RM502.9 million in net profit for the 2Q ended June 30 (2Q19) despite revenue growing 1.5% YoY to RM1.38 billion over the same period.

Note that the corresponding quarter last year also recognised a tax incentive granted for the company’s LNG Regassification Terminal Pengerang (RGTP) in Johor.

PetGas’ operating profit came in 2.9% stronger YoY at RM651.29 million for the period on higher revenue and share of profit from a joint venture company.

PetGas expects the gas tariffs approved by the Energy Commission (EC) for the pilot regulatory period this year to affect the group’s revenue from the transportation and regassification businesses.

The EC set the base tariff for the Peninsular Gas Utilisation at RM1.072 per giga joule; the Regassification Terminal Sg Udang, Melaka, at RM3.518 per million British thermal units (btu); and RGTP at US$0.637 (RM2.68) per million btu.

Nonetheless, PetGas anticipates both segments to contribute positively to earnings in 2019, while the gas processing business is expected to deliver improved earnings for the year.

The latter is due to the higher fixed reservation charge under the second term of the 20-year gas processing agreement which is effective from 2019 up to 2023.

PetGas MD and CEO Kamal Bahrin Ahmad (picture) said the commencement of gassing-up-cooling-down services at RGTP since April enhanced the group’s revenue stream and, concurrently, increased the utilisation of its assets.

“We look forward to further developing our RGTP facility as a solutions hub since it is strategically located along the Straits of Johor and close to the nearby Pasir Gudang and Singapore dockyards,” he said in a statement yesterday.

RGTP is also slated to deliver primary gas supply to the Petronas Refinery and Petrochemical Integrated Development, which is part of the larger US$27 billion Pengerang Integrated Complex, and the Pengerang cogeneration plant.

PetGas’ revenue for the quarter benefitted from higher contributions from the utilities and gas processing divisions.

This was partially offset by lower revenue from gas transportation and RGTP under the incentive-based regulation framework.

The group’s plants and facilities performed above 99% reliability in 2Q19.

For the first half of the year (1H19), PetGas’ net profit rose 2.8% YoY to RM1.02 billion, while revenue improved 1.5% YoY to RM2.75 billion.

It declared a 16 sen dividend for the quarter, bringing total dividends declared in 1H19 to 32 sen. PetGas closed 34 sen or 2.17% lower at RM15.36 yesterday.

PetGas is 60.66%-owned by Petroliam Nasional Bhd (Petronas) and is one of the four Petronas-owned companies listed on the local stock exchange.

The 2Q saw reduced profitability for three of Petronas’ listed downstream subsidiaries, namely PetGas, Petronas Chemicals Group Bhd and Petronas Dagangan Bhd.

This is expected to weigh on Petronas’ own 2Q19 performance as the downstream business makes up 44% of the national energy company’s revenue.

Volatile oil prices over the quarter are also expected to impact Petronas’ upstream segment.

MISC Bhd was the only Petronas-linked company to register both higher profitability and revenue for 2Q19, as its net profit jumped 24.5% YoY to RM399.8 million.

However, revenue for the energy-related shipping and maritime solutions and services provider rose 0.9 YoY to RM2.16 billion on higher turnover from the liquefied natural gas (LNG) and heavy engineering businesses were offset by weaker contributions from the petroleum and offshore divisions.