Assalamualaikum and good morning, everyone. Welcome to Petronas Gas Berhad's annual briefing for the first quarter ended 31st March 2025. Thank you for joining today's session organized by the Microsoft Teams platform. Before I proceed any further, can we have a show of hands or say if you can hear us clearly? Okay, thank you for your confirmation. My name is Suriy, Head of Industrial Relations PGB, and this morning I have with me Encik Abdul Aziz Othman, Managing Director and CEO of Petronas Gas Berhad, and Encik Shahrul Azham Sukaiman, Chief Financial Officer as well. The Petronas Gas Berhad's annual briefing for the quarter ended 31st March 2025 is divided into four segments. In the first segment, Encik Aziz will present the key highlights for Petronas Gas Berhad for quarter one 2025.
Next, in the second segment, the business updates and financial performance will be shared by Encik Shahrul Azham . This will be followed by the third segment where Encik Aziz will share PGB's focus moving forward, and finally, in the fourth segment, we will open the session for questions and answers. All participants are reminded to obey the session's rules where everyone should be on mute throughout the presentation, and the presentation was also shared with you prior to the session through this Microsoft Teams channel for your reference. You are allowed to ask questions during the question and answer. Please be reminded to press the raise hand button, and we will open the microphone for the selected participant. You may also post your question in the chat box, and we will select any question to be answered.
For reference, our financial results are now available at both Bursa Malaysia and PGB websites. To start off the first segment, I call upon Encik Aziz to share the key highlights.
Thank you, Suriy. Assalamualaikum and very good morning to everyone. Thank you for being with us for Petronas Gas Berhad quarter one 2025 annual briefing. Before we delve into the financial and operations, I would like to take a moment to address the recent part-time incident at Putra Heights and acknowledge its impact not only on our operations but also on our stakeholders and the communities affected. This has been a troubling event for us, and I want to personally reiterate PGB's commitment to managing this situation with full transparency, accountability, and care. Based on current assessments and subject to the final outcome of the investigation, total financial impact arising from the asset damage and repair works is estimated to be around MYR 170 million, a substantial portion of which will be capitalized under the company's capital expenditure. We also anticipate a partial cost recovery through insurance.
Revenue loss related to service interruption is expected to remain minimal at MYR 20 million. This is thanks to swift coordination with authorities, gas keepers, and gas distributors, which allowed us to stabilize the supply network efficiently. As a result, the total profit impact on the group in 2025 is estimated at approximately MYR 60 million. Now, the present best restoration of gas supply, which is through Putra Heights, connecting between the south and central system to the northern region, is at the earliest will be 1st July 2025, in line with our announcement sometime in April this year. This is pending the conclusion of the official investigations and regulatory clearance. To ensure integrity in our response and future prevention efforts, an independent task force headed by our independent non-executive director has been formed to oversee the post-incident investigation and advise the board on strategic measures moving forward.
This task force is dedicated to maintaining transparency and independence throughout the review process. We remain fully committed to adopting all necessary improvements recommended by the investigation team. We will continue to provide timely and clear updates as the situation progresses and will make further announcements should any material development arise. Above all, our thoughts remain with the families and individuals who have been directly impacted. We are committed to supporting them and to emerge from this stronger, safer, and more connected to the communities we serve. With that, let us now proceed to the group quarter one performance results. I'm pleased to share with you, I'll begin with the factors that influenced PGB's business operating environment in the past quarter. Continuing from quarter four 2024, cost of new business remained elevated throughout the period.
In quarter one 2025, the Malaysia Reference Price dropped to MYR 40.34 per MMBtu and is expected to further decline to MYR 39.05 per MMBtu in quarter two. This is in line with grand plans. However, compared to the historical numbers, the MRP remained elevated at this juncture. Meanwhile, the Services Producer Price Index (SPPI) rose to MYR 116.5, indicating elevated business costs. Although there are no direct impacts from the recent Trump tariffs, yet we will closely monitor the situation as we move into the future. In quarter one, Ringgit held firm at an average of MYR 4.45 against USD. At this stage, forex fluctuations' impact on our projects remains minimal. Our team continues to monitor development in the forex market and is well prepared with mitigation measures to manage any situation.
Ladies and gentlemen, amidst the challenging market conditions impacting our business operations, PGB continued to maintain a healthy performance throughout the first quarter of financial year 2025. Similar to previous quarters, our success in delivering strong numbers anchored on our consistent operational performance across our business segment. Key to our achievement in quarter one also stems from disciplined cost management and effective risk mitigation. Having said that, comparing to quarter one of 2024, the group revenue stood at MYR 1.594 billion, a slight decrease of 1.5% or MYR 24.3 million. This is mainly attributable to lower revenue from gas transportation and regasification segment, and this is following a downward tariff adjustment arising from sharing factor for prior years' lower internal gas consumption. Gross profit declined by 4.2% or MYR 25.5 million due to tighter margins recorded at the gas transportation and regasification segment as a result of the lower revenue.
Nevertheless, PGB increased by 2.4% or MYR 14.6 million. This is contributed by a higher share of profit from joint venture companies due to the higher repair and maintenance incurred in the corresponding quarter. Profit for the quarter rose by 4.2% or MYR 19.8 million, in line with the higher period. EBITDA was comparable at MYR 852.1 million while EPS increased by 2.6%. This is a reflection of higher profit attributable to shareholders of the company. The Board of Directors has approved a first interim dividend of MYR 0.16 per ordinary share, amounting to MYR 316.6 million in respect of the financial year ending 31st December 2025. On the business update for quarter one 2025, we are continuously expanding our asset base. This is aligned with the growth strategy that we have regularly shared with you. First, the in Pengerang, called LNG- ASU .
In January, our wholly owned subsidiary, Regas Terminal Pengerang Sdn Bhd, has completed a share subscription agreement with Dialog Equity 3 Sdn Bhd for the development of Malaysia's first liquefied natural gas-driven air separation unit in Pengerang , Johor. This carbon-based project is expected to reduce electricity consumption by approximately 25% and lower carbon emissions by 15,000 tons annually compared to the traditional air separation unit plan. The final investment decision on the ASU project was obtained in December 2023 and targeted for the scheduled commercial operation date is November 2026. Second, the 120 MW power plant in Labuan. In February, we received a letter of notification from the Minister of Energy Transition and Water Transformation to develop a new power plant with a capacity of 120 MW in Labuan. The target commercial operation date for the plant is set for no later than 1st January 2026.
Subsequent to the LON, in May, we entered into a shareholders' agreement with our partners to further progress the project. To date, we have achieved final investment decision, and the joint venture company has awarded the EPCC contract. This shows that we are making headway into our power plant projects in Sabah, including the Kimanis Power Dua Sdn Bhd. Third, the downward adjustment of 2025 RP2 tariff. As most of you are aware, SE has announced the adjusted tariff for our gas transportation and regasification facilities effective January 1st to December 31st, 2025, under the RP period framework. The lower tariff is due to the sharing factor for prior years' lower internal gas consumption. Under the IBR framework, the savings of IGC will be shared with shippers, resulting in lower tariff. However, with our prudent cost management, we believe we can partly mitigate the impact of lower tariff.
I think that's my update. I shall now hand over to our CFO for the business and financial performance. Over to you, Shahrul.
Thank you, Encik Ali. Good morning, everyone. I will take you through the business and financial performance for the first quarter 2025. For this quarter, we start with gas processing. The gas processing segment has maximized its performance-based intensity with 100% overall equipment effectiveness, sustaining their plant reliability with high recoveries of the gas and lower plant slowdown, and also zero interruption to customers. In addition, the optimization in overall energy consumption by varying and sustaining energy efficiency initiatives while operating with best equipment configuration helps result in improved energy intensity for gas processing. Again, the quarter two, quarter one 2024, segment revenue was comparable at MYR 466 million, while segment results increased by 5.9% or MYR 12.5 million at MYR 219 million on the back of lower operating expenditure.
Again, the preceding quarter, quarter four 2024, segment revenue was comparable at MYR 466 million, while segment results increased by 18% on the back of lower level of maintenance activities as compared to quarter four. Moving on to partner network, our group's partner network has been reliable during the quarter under review. However, as mentioned by Encik Aziz earlier, in response to the Putra Heights fire incident on 1st April 2025, we have been working with the shippers and key stakeholders to minimize the impact, to maintain uninterrupted gas supply, and facilitate the restoration works that are currently ongoing. Regarding financial results, again, the corresponding quarter, quarter one 2024, GC segment revenue decreased by 6.1% or MYR 18 million following downward tariff adjustment, as explained earlier. Correspondingly, segment results decreased by 12% or MYR 20 million in line with lower revenue coupled with higher levels of maintenance activities.
Again, the preceding quarter, quarter four 2024, segment revenue decreased by 7% following downward tariff adjustment due to sharing factor for prior years' lower internal gas consumption. There is also a lagging impact to the sharing factor as it is calculated based on actual IGC during the previous financial year. However, the segment results increased by 16.9% or MYR 20.6 million as a result of lower levels of maintenance activities as well as lower internal gas consumption. Moving on to the regasification segment, group's energy regasification terminals in Melaka and Penegerang, Johor, sustained their strong reliability performance during the quarter. Our regasification terminal ensures strong equipment and plant reliability by strictly following preventive maintenance programs, analyzing failure trends, and conducting root cause analysis on critical incidents.
Again, the corresponding quarter, quarter one 2024, segment revenue was lower by 1% following downward tariff adjustment using the mechanism similar to gas transportation, as mentioned earlier. Segment results declined by 7.6% or MYR 11.9 million due to lower revenue coupled with high operating expenses following higher level maintenance activities and also outward revision of our FSU OPEX hire during the quarter. The FSU OPEX hire has annual contractual increment, which explains the decrease. Again, the preceding quarter, quarter four 2024, segment revenue was lower by 2.6% or MYR 8.9 million following downward tariff adjustment. However, segment results increased by 5.9% or MYR 16.5 million as a result of lower level of maintenance activities as well as lower depreciation expenses incurred in quarter one 2025.
Moving on to the utilities segment, our group's utilities planned to see consistent product delivery reliability during the quarter except for industrial gases product due to unplanned plant shutdown in January. This plant downtime resulted in lower production of industrial gases, but it was compensated with higher steam offtakes by our customers. While for electricity, the offtake for the quarter was higher due to high export to TNB following minimum offtake by gas customers in January 2025. For the financial results of the utilities segment, again, corresponding quarter, quarter one 2024, revenue is comparable at MYR 514.8 million, mainly due to slow production of industrial gases, but it was negated by higher steam offtakes by our customers. Nonetheless, segment results declined by 7.5% or MYR 5.7 million, primarily due to one-off purchase of liquid nitrogen to ensure continuity of our industrial gas supply during the ASU recovery period in January.
Within that, again, preceding quarter, quarter four 2024, segment revenue is slightly higher by 1.8% or MYR 9.3 million at MYR 514 million, mainly attributable to higher steam optics from customers and partially offset with lower industrial gases. Again, quarter four 2024, the segment results rose by 47% or MYR 2.5 million, mainly due to lower level of maintenance activities incurred during the quarter. Moving on to the group's financial performance, this quarter, our group level performance was driven by our gas processing, which achieved 100% overall equipment effectiveness with improved energy efficiency and no supply disruptions. Our utilities performance was steady with higher electricity exports offsetting lower industrial gases output due to an earlier unplanned shutdown. Our gas transportation segment remained reliable with still response to the Putra Heights incident, ensuring continued service to our customers.
Having said that, again, the corresponding quarter, quarter one 2024, group revenues stood at MYR 1.595 million, a slight decrease of 1.5%, mainly attributable to lower revenue from gas transportation and regasification segment due to the downward tariff adjustment. Gross profit declined by 4.2% or MYR 25.5 million due to tighter margins recorded at GC and also regas segment because of the lower revenue. Profit for the quarter rose by 4.2% or MYR 19.8 million at MYR 492 million as a result of higher share of profit from our joint venture companies due to higher repair and maintenance activities incurred in the corresponding quarter. In quarter one last year, while our JV had major maintenance activities, hence the high expenditure during that quarter. Again, preceding quarter, quarter four 2024, group revenue decreased by 1.3% or MYR 20.9 million, mainly attributable to lower revenue from gas transportation and regasification segment because of the shallow tariff adjustment.
Gross profit nevertheless improved by 19.4% or MYR 93.4 million driven by lower operating expenditure, mainly in relation to repair and maintenance following lower level of activities during the quarter. Profit for the quarter was higher by 17.4% or MYR 72.9 million in line with higher gross profit coupled with higher share of profit from joint ventures following higher repair and maintenance activities in preceding quarter, but it was partly negated by one-off recognition of investment tax allowance in the preceding quarter. Moving on to the balance sheet, total assets was comparable at MYR 18.8 million with higher receivables and property side equipment negated with lower cash balance. The cash balance remained healthy with some returns for existing and upcoming group projects. Liabilities decreased slightly by 2% following higher settlement of trade and other payables. PGP sustained a strong dividend leveraging on our robust earnings and efficient capital management.
As mentioned by Encik Aziz earlier, the board has approved our first increment dividend of MYR 0.16 per ordinary share payable on 21st June 2025, amounting to MYR 316.6 million in respect of financial year ending 31st December 2025. It is a dividend demonstrates our commitment to ensure sustained level of returns to our shareholders. We are still able to provide healthy level payout more than our committed dividend policy of 2%. This is all for me. I will now pass the line over to Encik Aziz to share on the summary outlook forward.
Thank you, Shahrul. Moving forward, we are consistently monitoring the market opportunities that align with the growth strategy while first strengthening our foundation in PGP business structure and stakeholders management. First, we continue to prioritize safety, operational, and project delivery excellence. We are enhancing protocols and procedures across the board with particular attention to lessons learned from the recent incidents. The aim is clear: to fortify trust, ensure integrity of our operation. In line with Malaysia's energy transition towards a more sustainable future, we are also focusing on infrastructure and expansion to help meet projected national energy demand. As highlighted in our business highlight earlier, we are progressing steadily in the development of our power plant projects in Sabah.
Now, the recent request for proposal that was issued by Suruhanjaya Tenaga is presenting a timely opportunity for PGB to strengthen our energy portfolio while contributing to the nation's energy resilience and low carbon aspirations. Beyond our core gas infrastructure business, we are actively exploring ways to unlock further value from our existing assets. This includes identifying opportunities for diversification that leverage on our current strength, expand revenue streams, and enhance long-term shareholder retention. While the market presents promising opportunities, we are also realistic about the risks that lie ahead. We are approaching each initiative with prudence and discipline to ensure that our ambitions are both achievable and sustainable. Following the Putra Heights incident, we are undertaking a comprehensive assessment of the operational and financial implications, particularly in relation to the second quarter.
The event has underscored the importance of safety and integrity of our assets, and we are focused on restoring stakeholder confidence through transparency, decisive action, and sustained engagement. On the global front, we are monitoring the macroeconomic condition closely, particularly recent trade policy announcements from the United States that may influence the global demand dynamics and input costs. As geopolitical risks continue to evolve, we are ensuring our business to remain agile with strategic mitigation plans in place to safeguard the supply chain continuity and, of course, our operational resilience. With that, thank you. I shall now pass it over to Suriy for the question and answer. Thank you.
Thank you, Encik A ziz and Encik Shahrul. We have now come to the question and answer session. We have about 30 minutes. Please be reminded to continue to obey the second room where everyone should be on mute. To ask a question, please press the raise hand button and we will open the microphone for the selected participants. You may also type your question in the chat box and we will read it out loud for you. We have already two here. I think Zhiyan, can you have all Zhiyan, please?
Hi, good morning. Yeah, thank you, and guess for the presentation of the results. I have a few questions about the result. First is regarding the share of result for associates and JV, right? If I look at it on a quarter-on-quarter basis, it basically quadrupled from MYR 14 million to MYR 56 million. If I remove around, I think last quarter it was mentioned around MYR 10 million was from early refinancing costs. Also, if I remove the slightly lower result from the associate Gas Malaysia, the difference is still MYR 30 million. Can I know where does this difference come from?
Okay, for the share of profit for our JV and associates, as mentioned earlier, in quarter one last year, we had a higher level of maintenance activities in our equipment for the plant because they had major maintenance. Also, at the same time, we had one of the equipment issues within the plant. We increased higher level of maintenance costs in the first semi quarter. In another joint venture in Johor, we did some provision on receivable as part of the financial prudence of the company. Hence, that's why it's comparing against the first semi quarter, we saw higher contribution in quarter one 2025 .
Okay, Shahrul, so just to confirm, how much is the provision?
Provision, I think slightly less than MYR 7 million from that number. Yeah.
Okay, so can I say that the current quarter's result is the associate share of associate should be more or less the sustainable run rate moving forward?
Correct.
Okay. Okay. Thank you. So a few more questions I'll just quickly go through. Can I know for the gas transportation and regasification segments, right, it was mentioned that there is this downward tariff adjustment arising from the sharing factor. I mean, if I read through the IBR framework guideline by Suruhanjaya Tenaga, the.
Zhiyan? Can you drop off? Hello? Thank you. Yeah, you're breaking in.
Hello, I think we lost you. Can you repeat the question?
Yeah. I think while waiting for you to come back, I think the next question is.
Can you hear me?
Zhiyan? Okay, I think we'll go to Anshu first. While waiting for you.
Hi, good morning. Can you hear me?
Yes.
Anshu?
Yes. Yes. Thank you for the presentation. Maybe let me just perhaps start with the incident and the questions related to that. You identified around RM 60 million of, and net.
You hear me?
Ian, can you, because we lost you just now because your sound is breaking, can you proceed with Anshu and then we'll come back to you later?
Okay.
Okay, Anshu?
Yeah. Yep. Yes. Thank you. As I was saying, you recognized around RM 60 million as your earnings impact this year. Maybe if you could share when are you going to recognize this extra cost as well as is this going to be fully recognized in the gas transportation segment?
Okay. The RM 60 million we will recognize progressively for the remaining quarters because there are two main components of the profit pack for this year. First is the revenue loss that we.
Hello?
Anshu, you still with us, right?
Yes. Yeah, I'm here. I can hear you clearly.
Okay. First is the revenue loss. Secondly is the cost related to the temporary repair of the gas pipeline in Putra Heights. The temporary repair is not ruled out to be capitalized, but will incur the cost as we progress through the work. I would say the majority of cost will be incurred in quarter two and quarter three of this year.
In the gas transportation segment?
In the gas transportation segment.
Yes. Perfect. You also mentioned about the insurance claim. If you could share what the approximate amount could be as well as potential timing for that claim, is there a timeline in terms of when will this be processed?
At the moment, the insurance processes are ongoing. I think the key activities such as the loss adjuster's visit for the team is in progress.
Hey, Ibunda.
Completion is pending confirmation of the investigation. We expect the recovery from insurance subject to the investigation and so on. The amount, I think, is slightly less than MYR 50 million.
Yeah. Less than MYR 15 million?
Less than MYR 50.
Less than MYR 50. Thank you. Thank you. MYR 50, MYR 50 million. Less than MYR 50 million, I understand. The timing is still not sure.
Yeah. Because as Shahrul mentioned, the process will take some time. We've got to bring in adjusters, then the process of verification and whatnot. There will be investigation report that's coming out. We don't know yet on the timing.
Understood. Maybe just a clarification. You mentioned that you would see some revenue loss as well as some incremental expenses related to the repairs. Apart from there, is there any sort of penalty that you guys have to pay for the issues in the network, or is this all the exposure you have to the incident?
Yes. Under the excess arrangement, there are certain KPIs that we are being monitored by SP. If we do not meet that, then there will be some sort of penalty. You can actually refer to the AA to see what the IBR framework, to see what kind of KPIs and penalty that can be imposed.
Understood. My final question. If you could share what the impact is on the asset base and are there any implications heading into the next regulatory period? I believe you guys are also in the discussion period for the next regulatory period metrics. If you could share something on that.
Yeah. The matter is still under discussion, Anshu, because again, depending on the investigation and whatnot. I think we will provide the necessary data and due cost. It is because of the investigation and whatnot. The discussion is ongoing.
Understood. Maybe just if you could share what the timelines for the next RP is, you'll probably submit your proposal or is that already done? When will you hear back first from the regulator?
I think you're aware, the current RP will be completed end of this year. As required by the regulator, we have submitted the proposal in December last year or in, I think, early this year. Of course, our submission has not taken into consideration whatever implication from this incident. Yeah. The package is with SP. If everything is smooth, we expect the new RP to start in quarter one next year with whatever the agreement on the new package.
Understood. Let me head back into the queue. Thank you so much.
Thank you, Anshu. Next in line is Alvin Lim. Actually, the question is in the chat box. Can I check any update on Regas Terminal 3 project in Lumut? Is there a timeline for the launch of the project?
Thank you, Alvin. I think the Regas Terminal is still under study. Of course, the government would like this facility to come up to us. It is still under assessment by our side. Whatever the timeline is depends on the government decision.
Okay. Second question from Alvin is, will Petronas see more regas activity in the future as there are reports that Petronas is importing more natural gas from the US?
I'm not sure about Petronas importing natural gas or LNG from the U.S. As the country, obviously, the current regas terminal will not be sufficient to meet the demand for gas. Going to the future, definitely there will be new regas terminal required. The decision, of course, will be with the government in as far as what will be the size as well as the timing.
Last question from Alvin. When will the next RP3 current negotiation start as the change kicked in for adjustment in 2026? Finally, what is Petronas plan to increase the exposure to power generation? Is Petronas having more role in power generation than TNB? Will it take time to integrate between Petronas and TNB?
First question on the RP3, as I've mentioned to Anshu just now, we have submitted the package as with the previous RP. The negotiation or the discussion is ongoing. We hope to have alignment before the start of the new RP expected in quarter one next year. In regards to power generation, as you have seen from my presentation, it's an area as part of the growth expansion. We are looking at this closely because with the new requirement by the country, it is an opportunity for PGB to further leverage on our experience in power generation to grow in this segment. We will be collaborating with potential partners, including TNB, if there is any such opportunity.
Okay. That's all from Alvin. The next set of questions comes from Isaac. How much of the MYR 170 million repair works or asset restoration cost is expected to be capitalized? How much is to recover through insurance claims?
Again, thanks for the question. I think I've answered the question on how much to recover from insurance. I think as for how much the amount to be capitalized, out of MYR 170 million expected cost of the repair, the amount to be capitalized is slightly above MYR 100 million that's going to be capitalized as part of repair. Yeah.
Next, we have Daniel Lim on the line. Can we have your mic open? Okay. Hi, Daniel.
Hello. Morning. Can you guys hear me?
Yeah.
Okay. Yeah, sorry, I just know I think I lost on the Putra Heights thingy. It was mentioned that your loss of profit, I mean, the overall bottom line impact was MYR 60 million estimated for FY 2025. That includes MYR 20 million loss of revenue. Can I check what the MYR 40 million expected was, what was it for? What is it for?
The remaining MYR 40 million is mainly related to the repair work itself, which will not be capitalized because it's not permanent, to be expensed off during the year. Plus, it's also minor costing of it in relation to the impairment of the repair.
MYR 40 million is for repair maintenance, which is expected to be expensed off.
Not the whole amount. It's the repair, the temporary repair, there's also investigation expenditure that will incur during this period as well as minor costing of it related to impairment of the asset.
Yeah, I'm clear now as well.
Yeah.
Oh, okay. So it's three items here. Repair, investigation, and impairment.
The biggest part is the repair and the investigation.
This time is okay. This MYR 60 million, this MYR 40 million is nothing to do with the MYR 130 million asset that is going to be capitalized or the restoration cost that is going to be capitalized.
It's different there.
Yeah, it's different.
Okay. Okay. My follow-up question on the utility pricing. We know that current this quarter tariff is still based on the base tariff MYR 0.40 plus the MYR 0.16 surcharge, correct?
Yes.
Then if.
You're talking about ICPT, right?
Yes, correct.
Yes.
If we enter into the second half of the year, our base tariff is going to increase to MYR 0.456. And then if there is no surcharge, does that mean overall your utility pricing is going to follow the same level, no surcharge at all?
I think the price of electricity from utility or is pegged to TNB tariff. So whatever tariff that the government provides to TNB for industrial segments, if it includes surcharge or if it adjusts the base tariff, that will be the tariff that will be applied for our utility segment.
Can I rephrase it? Entering the second half, as long as the net tariff, which is equal to the base tariff plus the surcharge, is equal to the same amount as the first half, that means you guys will not be affected.
Exactly.
I see. Okay. Understood. The follow-up question is on the Labuan plant and the Sabah plant. When do we expect it to start construction period?
Actually, both have started the construction. The demand list we started last year. Based on the mandate by the government, it should come on stream in quarter one next year. The Labuan, as I think mentioned in my presentation, we have awarded the EPCC this quarter. Under the LON from the government, it needs to be on stream no later than January 1st, 2028.
Okay. I understand. Okay. The Energy Commission said they opened up the tender for this new power plant, which is under category two, which is. You guys actually have interest on this new power plant tender. You guys already submit for it, is it? Submit a tender for it?
We will make the necessary announcement if there are developments in this area. I mean, as I mentioned just now, it is an area that fits with our strategic intention. We'll see.
Okay. I just want to know, do you guys have the land available to build a power plant, or you guys actually need to get a party to work together or lease a new land just for this power plant?
We look at the opportunity. Whatever the business arrangement, whatever fits with our business arrangement as a growth in our power generation business, we will look at it and make the necessary proposal if it's relevant.
Okay. I think that's all for me. Thank you.
Thank you, Daniel.
I think we'll get back. Let's get back to Zhiyan.
Hi, thanks for having me. Sorry, just now the line a bit broken. Yeah, I just want to follow up on the questions on the fire incident. I just want to know how often does the pipelines need to be replaced? Will there be any major replacement for the PGU since it finished construction? I think it's like 1970 or 1980s.
Okay. Thank you. Thank you, Zhiyan. I think if you look at our pipeline profile, we started the operation in the 1980s, the oldest of which, the stretch from PETRIS to Kembaman, actually, we have replaced it. It is about 40-plus years in operation. The newer pipeline that traverses Peninsular Malaysia, aged between 20-plus to 30-plus years, we are assessing the condition of the pipeline. I think based on the experience of the replacement that we have had, we are looking at 50 years or thereabout when the replacement program needs to happen. Yeah. This would come, I mean, because of the age, you will see that this would come sometime in the future, depending on the age and inspection that we regularly undertake for the pipeline.
Okay. Okay. I understand. So, me to say, usually, the replacement will be around 50 years, and you'll just replace it over time if necessary. Am I right?
Yeah. Yeah.
Okay. Okay. Also, just to confirm, does this mean for your depreciation of the pipelines, right, how long do you depreciate it over?
Around 50 years, yeah. Around 50 years.
50 years.
Yeah.
If you replace it earlier, how does it work on the financials?
I think if you replace it earlier, then take the remaining net worth to the tender.
Typically, what you're left with if you replace before 50 years, very minimal. Yeah.
Okay. Okay. I understand. I understand. Also, since you mentioned that you submitted a proposal already for the RP3, right, can I know, is there any possibility for you to propose even greater CapEx just to upgrade and improve the safety of the pipelines if you find it necessary to do so?
As I mentioned, depending on our inspection, that will guide us into the proposal for replacement or upgrading or even strengthening. At this moment, we are guided by that, yeah, whatever the proposal. Now, whatever enhancement, if needed be because of Putra Heights, that has yet to be included in our proposal.
Okay. So meaning to say, can I just confirm, you can submit another proposal with higher CapEx if you think necessary?
Under the IBR, there are certain guidelines.
Yeah, in as far as how you tackle with the unplanned, unpredictable CapEx.
Unexpected CapEx, right?
Correct.
Yeah. Okay. Okay. So this will be under the unexpected CapEx because you already submitted a proposal earlier. Am I right?
It could be, but subject to ST approval, yeah.
Okay. Okay. I understand. I just also want to confirm for the RAB for the transportation segment, right, because previously, it was mentioned that since there is a shift towards historical cost rather than using the optimized replacement cost, causing basically the transportation RAB to come down. Can I just confirm that it should theoretically go up from 2026 onwards in the new RP3?
If I understand your question, but I think earlier it was with the replacement venue, and then it transitioned to network venue.
Yeah, yeah.
Now onwards, it will remain on network venue. Yeah. We already, I think the transition is completed by the end of this RP3. Going into the future, purely on the net book value. Whatever CapEx you put in, it will be translated into net book value. The RAB, whatever the tariff, it will be calculated based on that.
Okay. Okay. I understand.
Going into the future, yeah.
Understand. Understand. Very clear. Last question from me. During presentation, you mentioned that there was downward tariff adjustment for transportation and regasification arising from the sharing factor for this lower IGC, right? Basically, I read through the IBR framework. I think if it is volume saving, you get to share 75% and 35% has to pay back to the customer. If it is price, it will be basically passed through completely to customers. Since the tariff is downward adjustment and MRP is on the uptrend, right, can I just confirm that the downward adjustment in tariff is mostly from the volume saving?
You are very informative, Zhiyan. You did the IVR. You are correct. We were efficient, so we get the benefit, 70%-75%. The remaining will return. That is why you see that adjustment.
Okay. Sure. That's all from me. Thank you, Encik Abdul Aziz and Encik Shahrul.
Thank you.
Thank you, Zhiyan. I think we're coming to 9:55 now. We'll take one last question from Sun Yu Shen. Sorry, I mispronounced your name here on the chat. With regards to the MYR 170 million financial impact for the Putra Heights incident, does it include cost provisions made to compensate for damages caused to third-party properties or assets?
Thank you for the question. I think the impact is MYR 170 million or MYR 175 million.
MYR 170.
MYR 170 million. I think, as you can see, it's purely for repair costs. I think as you translated by the IDS investigation, it's still ongoing. There's no any third-party liability being discussed or being included in our consideration for now. It's all pending the investigation and the assessment by the authorities.
Yep. Thank you. That would answer the next question, what would be the expected amount to be compensated?
Yeah.
Okay. Okay. We take one more question, at least, for me.
Okay.
Okay, Daniel. We'll get back to you.
Can you hear me?
Last one. Last question.
Okay. Sure. Okay. I read through on media saying that Putra Heights has secured additional gas supply from Thailand through this from Thailand-Malaysia pipeline, gas pipeline. Okay. Because of this Putra Heights incident. I am just trying to understand the pipeline is affected. Yes, it will affect the transmission, but how does it affect the overall supply of gas to Malaysia? Malaysia, we go through import from the regasification plant and also get the supply from your PETRIS gas processing plant. Why do we need additional gas from Thailand?
Thank you. Thank you, Daniel. First and foremost, PDB is an infrastructure company. We own and operate the pipelines, but we work closely with the shippers to make sure that any interruption can be mitigated accordingly.
In the case of the Putra Heights incident, the segment between, I think, as I mentioned in my presentation, the segment between northern and central separated with the northern segment. The supply of gas in Peninsular Malaysia, typically from [PETRIS] in Terengganu, from the two regas terminal, and from Thailand, from JDA area. After the incident, the two segments were separated, and you'll see that what we have been taking from the joint development area was at a number that is not sufficient to meet the demand in the northern sector. To mitigate that, we bring more gas from the joint development area. That's how the arrangement works, and that kind of mitigated the supply shortfall for the whole Peninsular Malaysia. Yeah. We have those flexibilities, but of course, when we manage the molecule, it has to be from the shipper's instruction.
It was the shippers who went out and secured the volume. We just facilitate the movement of the molecule to make sure that whatever the shipper's obligation can be met or minimized in as far as interruptions concerned.
I see. Thank you very much for the explanation.
Thank you.
Right. We are right on time. Thank you so much for your participation. Thank you, Encik Aziz, Encik Shahrul. We end the session now and see you next quarter. Thank you.
Thank you.