KUALA LUMPUR (Jan 21): RAM Ratings has reaffirmed the AA1/Stable/P1 corporate credit ratings of Bintulu Port Holdings Bhd, with the reaffirmation premised on Bintulu Port's crucial role as the operator of Malaysia's only export terminal for liquefied natural gas (LNG) and a facilitator of the development of the Sarawak Corridor of Renewable Energy (SCORE).

According to a statement issued by RAM Ratings dated Dec 22 last year, which was filed with Bursa Malaysia on Friday (Jan 21), Bintulu Port's strong relationship with the government reinforces the ratings.

Based on RAM Ratings' rating methodology for government-linked entities, the credit rating firm noted Bintulu Port's rating benefits from a lift beyond its stand-alone credit strength as it believes that extraordinary government support will be forthcoming in the event of financial distress.

This, the firm said is on account of Bintulu Port's crucial role and strong relationship with both the Sarawak and federal governments.

Bintulu Port Sdn Bhd (BPSB), a wholly-owned subsidiary of Bintulu Port, operates the LNG export terminal at Bintulu Port, which serves the LNG liquefaction plants of Petroliam Nasional Bhd (Petronas).

Samalaju Port, which is operated by Samalaju Industrial Port Sdn Bhd, also a wholly-owned subsidiary of Bintulu Port, functions as a logistical hub for the import of raw materials and export of finished products from heavy and energy-intensive industries based at Samalaju Industrial Park.

The park is part of the SCORE's agenda of developing and transforming Sarawak into a developed state by 2030.

"Moving forward, we expect cargo throughput growth to mainly stem from the handling of bulk cargo at Samalaju Port, backed by expansions undertaken by the port's anchor customers and new investors in the near to medium term.

"Demand for LNG is envisaged to be supported by a global transition to lower-carbon energy systems," it said.

As at end-June 2021, RAM Ratings said Bintulu Port registered respective adjusted gearing and adjusted funds from operations debt coverage (FFODC) ratios of 0.98 times and 0.30 times against a total adjusted debt load of RM1.36 billion.

"We expect these ratios to deteriorate in the coming years on the back of higher projected capital spending and a spike in Bintulu Port's lease liabilities to take effect in 2023 after the renewal of its new Privatisation Agreement (PA).

"Bintulu Port's liquidity however is considered superior. Its RM997.76 million of cash and cash equivalents, which exceed the group's RM950 million of external debt, comfortably supported RM144.47 million of short-term lease liabilities as at end-June 2021. The group's next debt repayment of RM60 million is due only in December 2023," it said.

RAM Ratings further noted the PA for Bintulu Port among BPSB, the Bintulu Port Authority (BPA) and the federal government is coterminous with the port's operating licence, which will expire on Dec 31, 2022.

The firm said the PA gives BPSB the option to extend the tenure of Bintulu Port's operations for 30 years, at the discretion of the BPA.

"The risk of non-renewal of the licence is minimal as the federal government has in principle approved its renewal. However, the PA's terms and conditions and commercial considerations are subject to negotiation, which moderates the ratings," it said.

RAM Ratings added that the group is exploring opportunities that may entail the construction of new handling wharfs although no major expansion plans have been finalised as yet.

"While heavy industries at Samalaju Industrial Park are vulnerable to global downturns and customer concentration risk, customers continue to invest significantly while revamping and expanding their facilities at the park, given attractive investment incentives," it said.

Likewise, RAM Ratings has also reaffirmed the AA1(s)/Stable rating of Samalaju Industrial Port Sdn Bhd's (SIPSB) sukuk murabahah programme of up to RM950 million (2015/2036).

The suffix "(s)" denotes support afforded by an unconditional and irrevocable corporate guarantee from Bintulu Port — SIPSB's parent company.

Notwithstanding that, the firm said Samalaju is subject to customer concentration risk as its business hinges solely on the park's tenants.

"Demand at Samalaju Port is currently spurred by six customers — Press Metal Aluminium Holdings Bhd, OM Materials Sdn Bhd, Sakura Ferroalloys Sdn Bhd, Pertama Ferroalloys Sdn Bhd, PMB Silicon Sdn Bhd, and Malaysian Phosphate Additives Sdn Bhd.

"Any severe deterioration in the business and/or financial profiles of these entities may affect the company's performance," it said.

Barring extreme shifts in economic conditions, RAM Ratings said the risk associated with the potential departure of any of these customers is moderated by their significant investments in establishing facilities at the park.

Looking ahead, RAM Ratings said the Sarawak state government plays a key role in determining Samalaju's strategic direction and is represented on the company's board.

By extension, it said regulatory oversight of the port rests with the Samalaju Port Authority, a state statutory body.

"In view of Bintulu Port's diverse shareholding through the Sarawak state government, Petronas, and government-related agencies, the incentive to provide the company with financial assistance if and when required is strong.

"This will facilitate the success of the SCORE while ensuring Samalaju meets its financial and operational obligations," it said.