New income stream for Gas Malaysia in pipeline

KUALA LUMPUR: Gas Malaysia Bhd expects its three new businesses within the non-regulated segment to contribute 20% to 30% to its bottom line by 2020.
Analysts have expected the group’s profitability is expected to trend lower after the incentive-based regulation implementation (IBR) for its core business of marketing and selling of natural gas.
Gas Malaysia, however, will start to see contribution from its three new investments, namely combined heat and power, virtual pipeline and bio-compressed natural, which are expected to be operational within the year.
“The three new businesses that we embarked on two years ago are almost ready now, the combined heat and power in Penang will be ready in Q3, virtual pipeline will commission in Q3 as well and the bio-compressed natural gas will be some time middle of the year,” CEO Ahmad Hashimi Abdul Manap told reporters after the group’s AGM here yesterday.
Gas Malaysia reported a 36.7% decline in net profit to RM106.1 million for 2015 against RM167.6 million in 2014 mainly due to margin compression arising from one-off additional billing for price differential between market price and regulated price for liquefied natural gas for the full-year adjustment.
“Margin compression is the decision by the government, so we’ve no authority to comment on margin compression,” Ahmad Hashimi said when asked if the group is expected to see a further margin compression.
“We believe that is about the lowest that we get. We’re in close consultation with the government and regulator to ensure that we’ve a sustainable margin moving forward,” he added.
Nevertheless, he is hoping 2016 will be a better year for Gas Malaysia in anticipation of natural gas volume growth.
Ahmad Hashimi also opined that IBR will provide transparency and predictability to the group’s financial results while the market is expected to see more stable natural gas tariff.
This year is a trial period for IBR and will “officially” start next January over a period of three years from 2017 to 2019.
It will provide better earnings clarity and stability for Gas Malaysia, particularly through the implementation of the gas cost pass through mechanism.
On another note, Ahmad Hashimi said the group has set aside RM130 million to RM140 million in capital expenditure this year to build gas pipelines in Peninsular Malaysia.
“We anticipate to build another 80km to 100km of pipelines this year,” he said, noting that the group has over 2,100km of gas pipelines at the moment.