PETRONAS Gas Berhad (PETGAS) Earnings Call Transcript & Summary

Good morning, everyone. Welcome to PETRONAS Gas Berhad's Analyst Briefing for the third quarter ended 30th September 2025. Thank you for joining today's session organized via the Microsoft Teams platform. First of all, I'd like to apologize for the late reschedule of the analyst briefing yesterday due to some unforeseen circumstances. But again, thank you for joining us today. I'm Suri, Head of Investor Relations, PGB. And I have together with me here today, Abdul Aziz Othman, Managing Director and CEO of PETRONAS Gas Berhad; Shahrul Bin Sukaiman, Chief Financial Officer. Unfortunately, Khairul Nizam, Head of Business Development and Commercial is unable to join us today for the meeting. PETRONAS Gas Berhad's analyst briefing for the third quarter of financial year 2025 is divided into 4 segments. In the first segment, Mr. Abdul Aziz will present the key highlights for PETRONAS Gas Berhad for the first 9 months. Next, in the second segment, the business updates and financial performance will be shared by Shahrul Azham. This will be followed by the third segment where Mr. Aziz will share PGB's focus moving forward. And finally, in the fourth segment, we will open the session for question and answer. [Operator Instructions] Presentation was also shared with you prior to the session through the Microsoft Teams channel and the PGB website. [Operator Instructions] For reference, our financial results is now available at both Bursa Malaysia and PGB websites. To continue with the briefing, I call upon Mr. Aziz to share his presentation.

Thank you, Suri, [Foreign Language] and good morning, ladies and gentlemen. Thank you once again for joining us for PETRONAS Gas Berhad Quarter 3 2025 performance results. So as always, before we go into the results, let's take some -- a look at some of the key development external development, which has had some impact to PGB business in the past quarter. Firstly, as we have informed in last quarter analyst briefing, Suruhanjaya Tenaga has announced the implementation of a new electricity tariff structure for Regulatory Period 4 that was effective on 1st July 2025, along with revised fuel cost adjustment as a new element. This new structure replaced previous tariff structure that has been in place since 2024 -- 2014. The new RP4 electricity tariff has resulted in unfavorable impact for the Utilities segment. We are currently assessing. And as always, we are developing mitigation strategies to manage the cost implication and maintain the operational efficiency under the new tariff regime. Second, we have seen the ringgit strengthening against U.S. dollar over the past 3 quarters. And in quarter 3, the ringgit was at an average of MYR 4.22 per U.S. dollar. Although the impact of ForEx fluctuation in our operations and projects remain minimal, this will provide some buffer in managing our projects, which has USD exposure. There are other factors with more muted impact now, such as geopolitics and trade policies. Apart from that, our cost of doing business is still high, while the market is adjusting to revised subsidy, revised electricity tariff as well as the SST new rate and broader coverage. So amidst the challenges with external environment, especially the element that I have highlighted, PGB continued to maintain a healthy performance throughout the first 9 months of financial year 2025. And with operational challenges during the year, Group continued to demonstrate resilience through disciplined operation, proactive asset management and sustained cost optimization efforts. Having said that, comparing to the first 9 months of 2024, first PGB group revenue stood at MYR 4.8 billion, a decrease of 2.4% or about MYR 119.7 million, mainly due to lower product price in the Utilities segment, first impacted by the external environment that I mentioned and lower gas transportation revenue following a downward tariff adjustment rising from train factor for prior year's lower internal gas consumption. Gross profit declined by 6.1%, MYR 109 million, primarily from lower margin in the Gas Transportation segment, and that is due to the reduced revenue costs incurred for gas supply restoration work following the Putra Heights fire incident in April 2025. Utilities segment margins was also tighter, in line with the lower revenue. PBT decreased also by 3.8% or MYR 71.5 million, reflecting on the lower gross profit. And nevertheless, this was partly cushioned by one-off income received from a customer settlement related to an electricity supply agreement dispute. Profit recorded of MYR 1.439 billion, a decline of 4.3% or MYR 65.1 million and again, primarily due to tighter margin in this segment and lower gas transportation revenue. And these are driven by the reduced product price for utility segment, pricing -- and for the gas transportation and downward tariff adjustment. Additionally, the group incurred costs related to gas supply restoration works following the Putra Heights fire incident. This impact were partially mitigated again, as mentioned, by a one-off settlement income received from a customer. EBITDA was lower by 1.7% or MYR 43.8 million, in line with the lower PBT. Subsequently, earnings per share decreased by 4%, reflecting lower profit attributable to shareholders of the company. Nevertheless, the Board of Directors has approved a third interim dividend of MYR 0.18 per ordinary share, and this amount to MYR 356.2 million in respect of the financial year ending 31st December 2025. On the business update for quarter 3 2025, following the Putra Heights incident, we have safely resumed gas supply to the affected customer on 1st July 2025 as per our commitment to the government via a bypass pipeline. PGB, as mentioned earlier, is impacted by costs associated with the incident, particularly for the temporary bypass pipeline and revenue adjustment due to availability of capacity during the incident. Total impact for the year is expected to be within the MYR 60 million as announced to Bursa early this year. Meanwhile, on the third LNG storage tank, we have completed work on the floating storage unit at the RGT Pengerang. And on August 20, we achieved commercial operation date for the project. This milestone creates opportunities for incremental revenue growth and margin enhancement from LNG storage services. PGB is disciplined in delivering our portfolio of growth projects aligned with our long-term strategy to strengthen operational excellence and deliver sustainable value creation. With focused execution on projects that have achieved FID such as the fiber optic infrastructure project, the 120-megawatt power plant in Labuan and the Coal Energy Separation Unit, ASU in Pengerang, we are progressing well within with our mitigation measures for these projects. Now we have come to the detail of our business and financial performance. This section will be presented by Shahrul. Over to you, Shahrul.

Good morning, everyone. I will take you through the individual business segment and financial performance for quarter 3 and year-to-date 9 months 2025. I'll start with Gas Processing segment. For Gas Processing segment, the gas processing plant Unit 3 and Unit 6 recently successfully completed the turnaround in comp with [indiscernible] and GP segment maintained high reliability, consistently meeting sales gas demand and gas supply. And this resulted in achieving nearly 100% of the overall equipment effectiveness and maximize our performance based incentive under this business segment. In terms of financial performance against the corresponding quarter, quarter 3, 2024, revenue increased marginally by about 0.5% contributed by higher IGC incentive following higher volume of IGC savings and gross profit rose by 7.4% or MYR 14.8 million driven by lower operating expenditure. Against the corresponding period 9 months 2024, gross profit increased by about 4.9% or MYR 30 million in [indiscernible]. Moving on to the next segment on Gas Transportation. Our pipeline network have been reliable during the quarter subsequent to the Putra Heights fire incident in quarter 2, signifying our commitment in ensuring uninterrupted gas supply. We have worked continuously to restore the pipeline services in the affected areas and have achieved gas for the temporary bypass on the 1st of July 2025, while the permanent pipeline work is still ongoing and progressing as planned. Having said that, our financial performance against the corresponding quarter, quarter 3, 2024, the revenue decreased by about 4.2% or MYR 12.5 million following downward tariff adjustment, as mentioned by Mr. Aziz earlier. And this is mainly due to the sharing factor for the prior year's lower [indiscernible] regulation framework by Suruhanjaya Tenaga. So gross profit fell by 23% or MYR 35 million from higher operating expenses mainly due to depreciation as well as increased utilities costs. Against corresponding period 9 months 2024, gross profit fell by 19.5% or MYR 91.6 million mainly attributable to the downward revenue adjustment as mentioned earlier, higher utilities costs as well as cost that we have incurred for the gas supply restoration work following Putra incident in April 2025. Moving on to the Regasification segment. Our LNG regasification infrastructure in Sungai Udang, Melaka and Pengerang, Johor, sustained their strong reliability performance as a result of our effective maintenance program. During the quarter, LNG regasification in Sungai Udang completed the LNG maintenance and this effective maintenance program will further enhance the operational safety and efficiency for our LNG activities, ensuring safe and reliable operations. And this is even more important as we have started commercial operations of the additional LNG storage services in Pengerang as mentioned by Aziz earlier. For the financial performance against the corresponding quarter, quarter 3, 2024, revenue was higher slightly by 1.9%, contributed by revenue from providing LNG -- additional LNG storage services in Pengerang, Johor, beginning August 2025. However, this increase was partly negated by the lower revenue following downward tariff adjustment for regasification business. However, gross profit declined slightly by 1.6%, mainly due to high operating expenses related to maintenance activities, which aim at maintaining facility reliability. Against the corresponding period 9 months 2024, gross profit reduced by 4.1% or MYR 19.4 million with high operating expenditure related to maintenance activities for the regasification infrastructure. Moving on to the next segment, Utilities. Our group's utilities plants registered close to 100% product delivery reliability for all our products to all the customers during the quarter. As mentioned by our CEO earlier, Suruhanjaya Tenaga has announced the implementation of RP4, electric tariff effective 1st July and the revised tariff resulted in impact to the segment following a lower average price for electricity product. Despite the high steam volume following higher demand, segment revenue declined for both quarter mainly due to the lower electricity revenue following the downward revision of tariff. And this is coupled with lower product prices for steam and industrial gases in line with lower fuel gas price under the Malaysia price. Against the corresponding quarter, quarter 3, 2024, gross profit declined by 37.9% in line with lower electricity revenue, coupled with higher operating costs from depreciation and maintenance activities. Similarly against preceding quarter 2 this year, gross profit was lower mainly due to electricity tariff adjustment, which was effective on the 1st of July. Against corresponding period 9 months 2024, gross profit fell by 11.8% or MYR 28 million lower revenue, but this was partly negated by favorable impact of lower gas costs following downward movement of average MRP. For PGB Group of companies, third group performance was underpinned by our strong operational reliability where gas processing achieved nearly 100% overall equipment effectiveness. Our gas transportation remained reliable with gas supply restoration after the Putra Heights incident and both of our regasification terminals sustained high reliability through preventive maintenance activities, while utilities delivered close to 100% product delivery reliability despite the lower tariff and product prices. Based on that, our PGB group performance against the corresponding quarter, quarter 3, 2024, group revenue for the quarter was at MYR 1.618 billion, a decrease of about 2.3% mainly from utilities segment in line with the lower product prices as well as the lower revenue from Gas Transportation segment following downward tariff adjustment because of the sharing of prior year lower IDC. Gross profit declined by 9.3% or MYR 55.8 million due to lower margins recorded at both Utilities and Gas Transportation segment. And this decline reflects the reduced revenue and increased operating costs mainly from higher depreciation expenditure. Profit for the quarter decreased by about 13.6%, mainly due to lower margin from lower utilities and also Gas Transportation segment. And this was further compounded by the increased cost mainly from depreciation, along with the lower favorable ForEx movement in the current quarter, but this was partly cushioned by the one-off settlement income from customer during the quarter. Against the corresponding period 9 months 2024, group revenue stood at MYR 4.8 billion, a decrease of 2.4%, mainly due to lower product prices in the Utilities segment and the lower gas transportation tariff. Gross profit declined by 6.1% or MYR 109 million primarily from the lower margin in the GT and also UT segment as well as the cost that we incurred following gas supply restoration works in GT segment. The group recorded profit of MYR 1.439 billion, a decline of 4.3% or MYR 65.1 due to the factor margins in the Utilities segment and Gas Transportation and we also incurred costs related to gas supply restoration works following the Putra Heights incident and the impact was partially mitigated by a one-off settlement income received from a customer in Utilities segment. Moving on to our balance sheet. Group total assets at MYR 19.7 billion was higher by 5%, driven by higher property, plant and equipment from higher CapEx expenditure as well as we recognized a new right of use of assets following the completion of additional LNG storage in Pengerang, Johor. Consequently, total liabilities increased by 11.6% or MYR 523 million, mainly due to recognition of new leasability on the productive storage unit in Pengerang, Johor. We sustained a strong dividend, leveraging on our robust earnings and efficient capital management. And the Board has approved, as mentioned by Aziz earlier, the interim dividend of MYR 0.18 per ordinary share payable on 23rd December 2025. We're still able to provide healthy level of payout more than what we are committed under our dividend policy. That is all for me. I will now pass over to Mr. Aziz to share on our company outlook.

Thank you, Shahrul. Ladies and gentlemen, as we look ahead, PGB as always, is steadfast in pursuing market opportunities aligned with our long-term growth strategy while reinforcing operational resilience and stakeholders' trust. Safety and disciplined project delivery continue to be our top priority, which enhance protocol in line with emerging risks to safeguard liability and integrity. Our company continued to demonstrate resilience through disciplined operations, proactive asset management and sustained cost optimization efforts, and this is despite operational challenges during the year. In supporting Malaysia energy transition, we are progressing on infrastructure expansion, and this is to meet rising national demand and exploring opportunities under RMK13 and method. And this include adding more capacity for regasification terminal as well as both modernization and upgrading of both gas processing and pipeline. Beyond gas infrastructure, we are unlocking value from our existing assets through targeted diversification to broaden revenue stream and deliver sustainable returns. While market conditions offer promising opportunities, we remain mindful of potential risk. We have heard a lot about carbon tax implementation, regulatory challenges -- changes and of course, global geopolitical developments, and we will approach each initiative with prudence and discipline to ensure sustainable outcome. That is all from me. I shall now pass it over to Suri for the next segment. Thank you.

Thank you, Aziz and Shahrul. [Operator Instructions] We have one raise hand there, Daniel from Hong Leong.

I have a couple of questions. First thing, I would like to know about your other income, about MYR 83.5 million, what are the other income exactly?

Shahrul here. Other income that you saw recorded during the quarter primarily related to the one-off settlement with our customer due to some commercial dispute and that has been actually recorded during the quarter.

And how much is this? Around MYR 40 million, MYR 50 million?

Yes, around that, I think if you look at our [indiscernible] about 2% of that.

I would be thinking it is MYR 40 million, MYR 50 million would be...

Yes.

Other utilities.

Yes, correct.

I See. So it's under utility under segment, but it's other income under the P&L.

Correct, correct. You're right.

Okay. I see. Second question, can you provide us more updates on this third LNG terminal that is supposed to be come in soon. I mean when -- any further details on this? Any updates on this LNG terminal?

This is still under assessment. Of course, we need to get alignment with the authorities on the timing and whatnot. So we'll make the necessary announcement when it come.

When is this project in fast forward counting or is -- I mean, by when suppose this project to come in COD? Is it by 2030 counting or when are we expecting looking -- operating this project?

This is depending on the government. So we can't say specifically what is the timing, subject to government -- alignment with the government.

I see. Okay. How about -- okay, maybe I change the question another way. So for Sungai Udang and also for Pengerang today, what is the utilization rate now for this plant? Utilization, not the committed. Utilization.

Between 30% to 50%, that's for Sungai Udang. For Pengerang...

Sorry, 30% to 50% for both Pengerang and Sungai Udang?

No. Udang is about 20% to 30% and then Pengerang is about 50% to 60%.

20% [indiscernible] low.

Yes. But I think the planning for the new capacity, as you all are aware, the government is looking for more power generation capacity to meet the demand by data center. That's why the expected utilization of our asset in the next few years could go up higher very soon. And as per your question, would necessitate more regas capacity.

Yes. For Pengerang and Sungai Udang...

Sorry?

For your gas processing plant, right, we do know that there is long-term concern on the exploration of production coming from the [indiscernible]. Is there -- how long do you think this utilization of this gas processing going to last?

We have a long-term, what we call gas processing agreement in place, which pay us what we call a reservation capacity -- reservation charge based on the booking capacity. I think we have made the announcement, the capacity of 1,750. So that capacity is booked on a long-term basis until after 2030s.

Until after 2030.

Yes.

I mean have you guys actually done a research studies on how long will the gas bill in outside of [indiscernible] going to last?

That's the responsibility of the shipper. As again, you must understand PETRONAS Gas is an infrastructure company. We only provide services on the capacity. So the capacity is booked well into 2030s.

I think next on the line is [indiscernible].

Two questions from me, both related to the Putra Heights fire incident. So firstly, can I get some clarity on whether there's any cost incurred or impairment for the Putra Heights fire incident in the third quarter? And if so, how much was that? And then on the second question, I noted that you have received a writ of summons from some plaintiffs. It was mentioned in the announcement that the quantum of special damages is MYR 68 million. I wanted to understand whether this is largely the potential size of the liability? Or does the other categories of damages and relief also pose risk of substantial liabilities? And any guidance on the time line for resolution on this case? Yes, those are my 2 questions.

I think I'll take the second question first. We have made the announcement to Bursa in regard to that someone, quite detailed. I suggest you refer to that. That's to understand better on this issue, yes. The time line in this court case, we have to follow the court proceeding and how this case typically progress. Very hard for us to say on this time line for now.

I'll take the first question. This is in relation to the any impairment in relation to the Putra incident. The answer is yes. We made impairment in relation to the damaged pipeline as well as some of the line pack of gas that we use as a line pack because of the incident and the magnitude is slightly less than MYR 10 million.

Yes, can I just follow up on that, sir? Sorry. So the MYR 10 million impairment, right, you said less than MYR 10 million impairment. Was that booked in the third quarter itself?

Second quarter.

Second quarter, okay. So regards to your initial guidance, right, that total of MYR 60 million will be -- in terms of cost, right, will be incurred for this financial year related to the incident. So far, how much have you booked in?

I think close to MYR 40 million because of the impairment as well as the repair cost itself, so close to that MYR 40 million. What's remaining is the, Encik Aziz mentioned this earlier because of the unavailable capacity during the incident. We are now finalizing with the shipper on the revenue adjustment. We should be finalizing it soon, and I think will be captured in quarter 4.

I see. So there will be something like a remaining MYR 20 million impact in quarter 4.

Yes, we're finalizing it with the shipper...

Okay. Understood. Understood. And I just want to ask you, right, I've read the announcement on the writ of summons. As you rightly mentioned, it's quite detailed, but I'm just trying to understand whether that MYR 68 million because you only mentioned for the special damages. The other damages, there was no sort of quantification on the amount. So I'm just wondering whether is it because that's all we know or we know that actually that MYR 68 -- the special damages of MYR 68 million would largely comprise the majority of the liability?

We are guided by what has been stated in the summon, and that is what being stated in the summon. Other than that, it's very hard for us to say otherwise or even to forecast.

We have next [indiscernible]

[indiscernible] Securities. So thanks for having me PET Gas and the team. So -- actually, I have quite a few questions. So I think I will go through one by one. First one is regarding the gas pipeline incident, right? Can I know is there any insurance claim already made -- I mean, already recorded in the third quarter? And also any time line that most likely is going to register if it is not yet?

You are talking about our cost for us on the repair, whatever on the damages right? Yes, yes. It's covered by insurance.

We submitted the claim, but it's still in...

It's still being under process by insurance.

It has not recorded any recovery as of today. The work is in progress.

Okay. Next question is on the settlement for dispute, right? If we follow -- it should be the BASF dispute, electricity dispute, which is according to announcement, MYR 53 million. Can I know if this is the amount which is registered in the third quarter and also whether this amount is tax deductible?

Yes, tax deductible.

I would love to have tax deductibles, but what you say is correct, the counter party.

Okay. So it's MYR 53 million, right, amount.

MYR 52 million. Don't add 1 more million.

Okay. Okay. It's my mistake over there. And next question is basically on -- both on the margins, right? So basically, for the gas transportation, right, the margin was down 10 percentage points year-on-year, which most likely is, I believe, due to the bypass pipeline, which has increased the operating costs. So can we expect moving forward, the operating margin to maintain at around 40% or can we expect it to go back to 50% like it was -- it used to be?

I have to correct you. As you know, we are under regulation, right? The margin is determined with whatever in the regulated regime that has been approved by ST. Then year-by-year, there's always adjustment what we have what we call annual revenue adjustment. So this year, we are impacted by the ARA, annual revenue adjustment, thereby affecting our margin. So what happened in the future is depending on what will be the landing with the authority with regard to each RP.

Okay. But then the gas transport margin was like 50% in the first quarter, then second quarter, it came down because of the restoration costs. Then third quarter is still at 40%. So I'm just wondering moving forward, will it still be more or less around 40% or can we expect to bounce back to first quarter level?

Explain. So basically, what Aziz mentioned earlier, the revenue adjustment. So what has happened under the incentive-based regulation, the tariff is fixed throughout the RP period. But year-on-year basis, the adjustment we made on a couple of items. But in relation to the internal gas consumption and the fuel gas that we used to run the operation. The saving that we made on the volume last year, that's a sharing factor. We keep 75%, we share with the shippers 25%. So the 25% sharing has a lagging impact which has been adjusted in this year -- in current year. So that's the first one. On the margin variation year-on-year, quarter-by-quarter, I think, there's margin. If you compare against corresponding period. If you think during the year, there's also impact of the cost relation to Putra Heights networks. And towards the third quarter, the cost also increased in line with the higher level of maintenance activities.

Okay. So this maintenance activity is expected to continue into the fourth quarter or it will reduce? Because I understand that seasonally, usually PET Gas does most of the ramp-up in the maintenance activities towards the year-end. So can we expect for this...

For this year, yes, but it is not the case for every year. It's not like tennis plan program. And when we have the window to do the activities, that's how things work for us.

Okay. So meaning to say, okay, so this is not regarding this transportation for most of the -- for most of the -- for all the segments, right, will there be increase in maintenance activities towards the year-end? Or it will be more or less the same as third quarter?

For this year, we anticipate...

For this year, yes.

Yes, slightly higher than quarter 3.

Okay. Last 2 questions. First is the -- sorry, utility side, can we -- because the margin also contracted, which is mainly due to the lower tariff and probably a bit of operating expense, right? So can I know if the utilities and also product prices maintain around more or less the same level, can we expect the margin to be around also this level, 10% in the upcoming quarters. Yes.

I think you -- we have explained quite a few times, there are suite of products in Utilities. So the -- other than electricity, which is back to TNB tariff, which will be impacted by the automatic price mechanism adjustment. The rest is back to the gas price. So it will move with that -- yes, the margin as well as the revenue, whatnot, will move with that.

Okay. So in general, if the gas price goes up, will it be better or worse off for Utility segment?

Yes, it depends how high is the gas price.