For the gas transportation segment, the tariff was increased to RM1.129 per GJ from RM1.072 per GJ currently under the IBR based framework. As of 9MFY19, the PGU system contributes about 21 and 34 per cent in terms of revenue and profit to Petronas Gas respectively.
KUCHING: Petronas Gas Bhd’s (Petronas Gas) has received approval of a new set of tariffs for the Regulatory Period 1 (RP1) for its facilities which includes tariffs for Peninsular Gas Utilisation (PGU), Regasification Terminal Sungai Udang (RGTSU) and Regasification Terminal Pengerang, Johor (RGTP).
The new tariffs for RP1 will commence from January 1, 2020 and will last until December 31, 2022.
MIDF Amanah Investment Bank Bhd (MIDF Research) initially anticipated a potentially slightly reduced tariff or at best, a status-quo tariff for the RP1 for all Petronas Gas facilities.
“However, when compared against the current tariffs for the Incentive-Based Regulation (IBR) pilot period, the tariffs for PGU and RGTP saw an increase for the RP1,” it said in its notes yesterday.
“Only RGTSU’s tariff was lowered slightly to RM3.455 per GJ from RM3.518 per GJ currently. That said, we are upbeat on the announcement as we opine that it will assist in lifting the earnings of Petronas Gas during the RP1.”
For the gas transportation segment, the tariff was increased to RM1.129 per GJ from RM1.072 per GJ currently under the IBR based framework. As of 9MFY19, the PGU system contributes about 21 and 34 per cent in terms of revenue and profit to Petronas Gas respectively.
“Assuming that the volume remains the same, we estimate that this will increase the segment’s revenue by four to five per cent for FY20-21F respectively,” it added.
“Similarly, the regasification segment will also be impacted with the revision of tariffs on both RGTSU and RGTP.
“Due to the implementation of IBR, segment revenue was flat year-over-year whilst profit was down by 10.9 per cent year on year, attributable to higher depreciation upon recognition of jetty facilities at RGTP and higher plant maintenance expenses.
“As of 9MFY19, the regasification segment contributes 23 and 26 per cent to Petronas Gas’s total revenue and profit. With the downward revision in tariff for RGTSU – to RM3.455 per GJ and upward revision in tariff for RGTP to RM3.485 per GJ, we estimate that the revenue for the segment will increase by 7.6 to eight per cent for FY20 and FY21F respectively.”
Meanwhile,the new tariff took Kenanga Research by surprise given that the new PGU base tariff rate is 5.3 per cent higher in 2019, as the base tariff rate was highly expected to be reduced severely over the next six years.
“This is given the change of the regulated asset base’s (RAB) valuation method to net book value (NBV) from optimised replacement cost currently as the pipelines are mostly 20 to 30 years old assets with low carried values.”
Based solely on the tariff rates, Kenanga Research deduced that Petronas Gas’ earnings trend will revert back to the previous organic growth rates of one or two per cent instead of sharp declines over RP1 and RP2 before the base tariff rate stabilises after 2026 when the RAB is fully valued based on net book value.
The new higher tariff rates would lead the research firm to upgrade its FY20E earnings for Petronas Gas by 19 per cent as its current earnings assumption is based on PGU tariff rates going down sharply by 60 per cent over the next six years.