Friday 29 Mar 2024
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SINGAPORE: Yinson Holdings Bhd said its floating, production, storage and offloading (FPSO) chartering contract in Ghana, West Africa is still feasible.

Its executive director and group chief executive officer Lim Chern Yuan said the group’s business does not have a take on oil price risk, but a risk on its counterparty — Eni Ghana Exploration & Production Ltd — instead.

“As long as our counterparty has a strong balance sheet and they continue to run well, there is no risk. Low oil price may mean that there are fewer projects, but this does not hurt our current order book or profits in the pipeline that we already have,” he told reporters after the signing of a term-loan facility mandate letter between Yinson and five banks yesterday.

To recap, Yinson was awarded a contract for the chartering, operation and maintenance of its FPSO by Eni Ghana at the Offshore Cape Three Points Block located in the Tano Basin, offshore Ghana.

The contract, which is Yinson’s first West African job has a charter period of 15 years with a five-year extension option. The firm charter period translates into a value of US$2.54 billion (RM9.35 billion) and should the extension option be exercised the value will increase to US$3.26 billion.

“I think our counterparty is very credible and it is a reputable company, being an oil major themselves. Oil price can be low but a big part of the project is the gas project. Eni has signed an agreement with the government of Ghana on the gas sales for a period of more than 18 years and therefore the big part of the project is the gas.

“Not only Ghana but West Africa alone has a lot of electricity shortage and this project is to eventually service the power plants to provide the necessary electricity for the country. The oil is like a bonus for the entire project,” said Lim.

Yinson’s order book currently stands at US$5 billion, which will keep the group busy for the next 20 years. Its Ghana contract will start contributing positively to the group’s earnings for its financial year ending Jan 31, 2018.

Yesterday, Yinson and the five banks — CIMB Investment Bank Bhd, Maybank Kim Eng Securities Pte Ltd, Overseas-Chinese Banking Corp Ltd, Standard Chartered Bank and United Overseas Bank Ltd — signed a US$780 million term-loan facility to partly finance the conversion and refurbishment of the FPSO vessel which is slated for its Ghana project in Singapore.

Yinson chief strategy officer Daniel Bong said the total cost to convert and refurbish the FPSO will be about US$950 million.

When asked on how the group will be funding the remaining cost, he said Yinson has a sufficient internal source to finance the project.

Its FPSO will be integrated in Singapore and takes about two and a half years to build. The vessel is currently undergoing repair works in China.

On the term-loan facility’s impact on the group’s gearing, Bong said: “It would not affect [the gearing] immediately now. It’s a progressive drawdown throughout the next three years. I think by then you will see the group’s internal gearing below two times.”

Currently, Yinson’s gearing is about 0.3 times.

Bong added that the group is looking at some hedging strategies to ensure that Yinson will not be heavily impacted by the uprising interest rates and foreign exchange rates.

“I think so far the group has a very active strategy in having a balanced portfolio of a 50% to 80% hedging strategy. So in any case, I think we will be cushioned by the rising cost of interests,” he said. 

Separately, Yinson chairman Lim Han Weng thanked the group’s second-largest shareholder, Tan Sri Mokhzani Mahathir, for his continuing support.

Mokhzani owns a 18.56% stake in Yinson via Kencana Capital Sdn Bhd. He emerged as a shareholder in Yinson in June 2013, when Kencana Capital purchased a 14.64% stake for RM106.6 million via a private placement.

Kencana Capital is Yinson’s second-largest shareholder after Han Weng’s personal direct stake of 22.04%. Han Weng’s spouse, Bah Kim Lian, owns 8.82%.

 

This article first appeared in The Edge Financial Daily, on March 13, 2015.

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