[Non-English content] and good morning, everyone. Welcome to PETRONAS Gas Berhad's earnings briefing for the first quarter ended 31st March 2025. Thank you for joining today's session organized via 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 confirmation. My name is Suri, Head of the Investor Relations, PGB. 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 earnings 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 update 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. Finally, in the fourth segment, we will open the session for question and answers. All participants are reminded to obey the session's rule where everyone should be on mute throughout the presentation. 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 being answered.
For reference, our financial result is now available at both Bursa Malaysia and SC websites. To start off the first segment, I call upon Encik Aziz to share the key highlights.
Thank you, Suri. [Non-English content] and very good morning to everyone. Thank you for being with us for PETRONAS Gas Berhad quarter one 2025 earnings briefing. Before we delve into the financial and operations, I would like to take a moment to address the recent pipeline incident at Putra Heights, acknowledge its impact on not only our operations, but also on our stakeholders and the communities affected. This has been a troubling event for us, 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.
For 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. The present best restoration of gas supply, which is through Putra Heights, connecting between the south and central system to the northern region. It, 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 chaired 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 independent audits 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. We will make further announcement 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 influence PGB's business operating environment in the past quarter. Continuing from Q4 2024, cost of doing business remained elevated throughout the period. In Q1 2025, the Malaysia Reference Price dropped to MYR 40.34/ MMBtu. It is expected to further decline to MYR 39.05/ MMBtu in quarter two. This is in line with current plans. However, compared to the historical numbers, the MRP remains elevated at this juncture. Meanwhile, the Services Producer Price Index, the SPI, rose to 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, MYR 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 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 continues to maintain a healthy performance throughout first quarter of FY 2025. Similar to previous quarters, our success in delivering strong numbers anchored on our consistent operational performance across our business segments. 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 increase of 1.5% or MYR 24.3 million. This is mainly attributable to lower revenue from Gas Transportation and regas segment. 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 gas transportation and regasification segment as a result of the lower revenue. PBT increased by 2.4% or MYR 14.6 million. This is contributed by 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 PBT. 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. Board of directors has approved 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 in line with the growth strategy that we have regularly shared with you. First, the Pengerang LNG-driven ASU. In January, our wholly-owned subsidiary, Regas Terminal (Pengerang) Sdn. Bhd. has completed a share subscription agreement with Dialog Equity (Three) Sdn. Bhd. for the development of Malaysia's first liquid natural gas-driven air separation unit in Pengerang, Johor. This cutting-edge project is expected to reduce electricity consumption by approximately 25% and lower carbon emission by 15,000 tonnes annually compared to the traditional air separation unit plant. The final investment decision on the ASU project was obtained in December 2023 and targeted or the scheduled commercial operation date is November 2026. Second, the 120 MW power plant in Labuan. In February, we received letter of notification from Ministry of Energy Transition and Water Transformation to develop a new power plant with capacity of 120 MW in Labuan.
Target commercial operation date for the plant is set for no later than 1st January 2028. 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, the joint venture company has awarded the EPC contract. This shows that we are making headway into our power plant projects in Sabah, including the Kimanis Power (Dua) Sdn. Bhd. The downward adjustment of 2025 RP2 tariff. As most of you are aware, ST 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 due to sharing factor for prior year lower internal gas consumption. Under the IBR framework, the saving of IGC will be shared with shippers, resulting in lower tariff.
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, sir.
Thank you, Encik Aziz. Good morning, everyone. I will take you through the business and financial performance for first quarter 2025. For this quarter, we start with gas processing. Gas processing segment has maximized its performance this incentive, with 100% overall equipment effectiveness, sustained the plant reliability with higher recoveries of the gas and lower plant slowdown, and also zero interruption to customers. In addition, the optimization in overall energy consumption by driving and sustaining energy efficient initiative while operating with best equipment configuration, helps resulted in improved energy incentive for gas processing. Against the corresponding 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.
Against the preceding quarter four 2024, segment revenue was comparable at MYR 486 million, while segment results increased by 18% on the back of lower level of maintenance activities as compared to quarter four. Moving on to pipeline network. Our group's pipeline 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 of April 2025, we have been working with the shippers and key stakeholders to minimize impact, to maintain uninterrupted gas supply and facilitate the restoration works that currently ongoing. For financial results against the corresponding quarter one 2024, GT 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 level of maintenance activities.
Against the preceding quarter four 2024, segment revenue decreased by 7% following downward tariff adjustment due to sharing factor for prior year's 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. The segment results increased by 15.9% 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 LNG regasification terminal in Sungai Udang, Melaka, and Pengerang, Johor, sustained their strong reliability performance during the quarter. Our regasification terminal ensures strong equipment and plant reliability by strictly following preventive maintenance programs and analyzing failure trends and conducting root cause analyses on critical incidents.
Against the corresponding quarter one 2024, segment revenue was lower by 1% following downward tariff adjustment, using the mechanism similar to gas transportation, as explained earlier. Segment results declined by 7.6% or MYR 11.9 million due to lower revenue, coupled with higher operating expenses following higher level maintenance activities and also upward revision of our FSU OpEx hiring during the quarter. The FSU OpEx hiring has an annual contractual increment which explains the increase. Against the preceding quarter four 2024, segment revenue was lower by 2.6% or MYR 8.9 million following downward tariff adjustment. Segment results increased by 12.9% or MYR 16.5 million as a result of lower levels of maintenance activities as well as lower depreciation expenses incurred in quarter one 2025. Moving on to the utility segment.
Our group's Utilities plant achieved 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 off take by our customers. For electricity, the off take for the quarter was higher due to higher export to TNB following renewed off take by that same customer in January 2025. For the financial results Utilities segment against corresponding quarter one 2024, revenue is comparable at MYR 514.8 million, mainly due to lower production of industrial gases, but it was mitigated by higher steam off takes 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 H2O disruption period in January.
With a match against preceding 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 off take from customers and partially offset with lower industrial gases. Against quarter four 2024, the segment result rose by 47% or MYR 25.2 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 export offsetting lower industrial gases output due to an earlier unplanned shutdown. Our Gas Transportation segment remained level. We still respond to the Putra Heights incident, ensuring continuous service to our customers.
Having said that, against the corresponding quarter one 2024, group revenue stood at MYR 1.595 billion, a slight decrease of 1.5%, mainly attributable to lower revenue from Gas Transportation and the Utilities segment due to the lower carried investment. Gross profit declined by 4.2% or MYR 25.5 million due to tighter margins recorded at GP 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 profit from our joint venture companies due to higher repair and maintenance activities incurred in the corresponding quarter. In quarter one last year, all our JV had major maintenance activities, hence the high activity during that quarter.
Against preceding quarter four 2024, group revenue decreased by 1.2% or MYR 20.9 million, mainly attributable to lower revenue from Gas Transportation and the Utilities segment because of the lower carried investment. Gross profit, nevertheless, improved by 19.4% or MYR 33.4 million, driven by lower operating expenditure, mainly in relation to repair and maintenance, following lower levels 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 the preceding quarter, but was partly mitigated by one-off recognition of investment tax allowance in the preceding quarter. Moving on to the balance sheet. Total asset was comparable at MYR 18.8 billion with higher receivables and property, plant and equipment, mitigated with lower cash balance.
The cash balance remains healthy with some headroom for existing and upcoming growth projects. Liabilities increased slightly by 2% following higher journal accrued and other payables. PGB sustained a strong dividend, leveraging on our robust earnings and efficient capital management. As mentioned by Aziz earlier, the board has approved our first interim dividend of MYR 0.16 per ordinary share payable on 21st of June 2025, amounting to MYR 316.6 million in respect of financial year ending 31st December 2025. This 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 50%. That's basically it for me. I will now pass the mic over to Aziz to share on the company outlook going forward.
Thank you, Shahrul. Moving forward, we are consequently monitoring the market opportunities that align with the growth strategy, while first strengthening our foundation in PGB 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 the integrity of our operations. In line with Malaysia's energy transition towards a more sustainable future, we are also focusing on infrastructure expansion to help meet projected national energy demand. As highlighted in our business highlights 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 stream, and enhance long-term shareholder returns. 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 conditions closely, particularly recent trade policy announcements from the U.S. 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 Suri for the question and answer. Thank you.
Thank you, Encik Aziz 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 session room where everyone should be on mute to ask questions. Please press the Raise Hand button and we will open the microphone for the selected participant. 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 Zhe Hern. Do we have Ong Zhe Hern, please?
Hi, good morning.
Good morning.
Thank you, PETGAS, for the presentation of the results. First is regarding the share of results for associates and JVs. 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 36 million. Can I know where does this difference come from?
Okay. From the share of profit of joint venture associates, as mentioned earlier, in quarter one last year, we had a high level of maintenance activities in our equipment for plant. They had heavy maintenance and at the same time we had one of the equipment issues, which took some time and it increased higher level of maintenance costs in the first quarter. In the management venture in Johor, we did some provision on receivables as part of the financial prudence of the company. Hence, that's why comparing against the first quarter, we saw a higher contribution in quarter one 2025.
Okay, Shahrul. Just to confirm, how much is the provision?
Provision, I think slightly less than MYR 7 million, around that number. Yeah.
Okay. Can I say that the current quarter's result, the share of associate should be more or less the sustainable run rate moving forward?
Correct.
Okay. Thank you. A few more questions I'll just quickly go through. Can I know for the Gas Transportation and Regasification segments, 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.
Zhe Hern? Did you go off? Hello? I think he's gone. I think we will.
Breaking.
Yeah, you're breaking, Zhe Hern.
Hello, Zhe Hern. I think we lost you. Can you repeat again the question?
Yeah. I think, we're waiting for Zhe Hern to come back. I think the next question.
Can you hear me?
Zhe Hern? Okay, I think we'll go to [Anshu] first. We're waiting for Zhe Hern.
Hi. Good morning. Can you hear me?
Yes. [Anshu]?
Yes. Thank you for the presentation. Maybe, let me just perhaps start with the incident and the questions related to that. You identified around MYR 60 million.
Hi. Can you hear me?
Zhe Hern, because we lost you just now.
Excellent.
Your sound is breaking. Can we proceed with [Anshu], and then we'll come back to you later?
Okay.
Okay, [Anshu]?
Yep. Yes. Thank you. As I was saying, you recognize around MYR 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 MYR 60 million, we will recognize progressively during the remaining quarters because there are two main components of the shocking fact for this year. First is the revenue loss that we-
Hello?
[Anshu], you're still with us, right?
Yes. I am here. I can hear you clearly.
Okay. First is the revenue loss, and secondly is the cost related to the temporary repair of the gas pipeline in Putra Heights. The temporary repair will not be capitalized, but we'll incur the cost as we progress with the work. I would say the majority of costs will be incurred in quarters two and quarter three of this year.
In the gas transportation segment.
In the gas transportation segment.
Yeah.
Yes. Perfect. You also mentioned about the insurance claim. If you could share what the approximate amount could be as well as a 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 you know the key activities such as the loss adjusters visit, investigation progress.
Hey, [inaudible].
Completion is pending confirmation of the investigation. We expect the recovery from insurance subject to the investigation and so on. The amount, I think slightly less than MYR 50 million.
Yeah.
Less than MYR 15 million?
MYR 50 million.
five zero, MYR 50 million.
five zero.
Yeah.
Thank you. five zero, MYR 50 million.
Less than.
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 there'll be process of investigation, what not. There will be investigation report that's coming out. We don't know yet on the timing yet.
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 access arrangement, there are certain KPI that are being monitored by ST. If we don't meet that, 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 KPI and penalty that can be imposed. Yeah.
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.
The matter is still under discussion, [Anshu]. Because again, depending on the investigation and whatnot, so I think we will provide the necessary details in due course. It is because of the investigation and whatnot, so 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—
Yeah.
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 ST. If everything is smooth, then we expect the new RP to start in quarter one next year, based on the agreement on the new package.
Understood. Let me head back into the queue. Thank you so much.
Thank you.
Thank you, [Anshu]. Next in line is Alvin Lim. Actually, the question is in the chat box. Can I check any new update on regas Terminal 3 project in Lim Chu Kang? The 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 sooner. It is still under assessment by our side, and whatever the timeline is depending on the government's decision.
Second question from Alvin is, will PETGAS see more regas activity in the future, as there are reports that PETRONAS is importing more LNG gas from the U.S.?
I'm not sure about the PETRONAS importing natural gas or LNG from U.S. As a country, obviously, the current regas terminal will not be sufficient to meet the demand for gas. Going into 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 price as well as the timing.
Last question from Alvin. When will the next RP3 price negotiation start as the change takes effect for adjustment in 2026? Finally, why is PETGAS trying to increase exposure to power generation? Is PETGAS having more role in power generation than TNB? What is the difference between PETGAS and TNB?
First question on the RP3, as I mentioned to [Anshu] just now, we have submitted the package. As with the previous RP, the negotiation for the discussion is ongoing, and we hope to have alignment before the start of the new RP expected in quarter one next year. In regard to power generation, as you have seen from my presentation, it's an area as part of PETGAS's growth expansion. We are looking at this closely because with the new requirement by the country, it is an opportunity for PETGAS 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 information cost is expected to be capitalized, and how much is to recover through insurance claims?
Thank you, Isaac, for the question. I think I answered the question on how much we recover from insurance. I think just on how much the government will capitalize 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 CapEx. Yeah.
Next, we have Daniel Lim on the line. We have your mic open. Okay. Hi, Daniel.
Hello. Morning. Can you guys hear me?
Yeah.
Yeah. Sorry, just now I think I lost you 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 workshop, which will not be capitalized because it's not permanent. It will be expensed off during the year. It's also a minor portion of it related to the impairment of the asset. MYR 40 million is for repair and maintenance, which is expected to be expensed out. Not the whole amount. It's the repair, there's a temporary repair. There's also investigation, as Aziz said that we incurred during this period, as well as a minor portion of it related to impairment of the asset.
Yeah. Okay. It's three items here. Repair, investigation, and impairment.
The biggest one is the repair and the investigation.
This one is impairment of the assets. This MYR 40 million is nothing to do with the MYR 130 million asset that is going to be capitalized?
The restoration cost that is going to be capitalized.
It's different. Yeah.
Yeah.
It's different.
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 + MYR 0.16 surcharge, correct?
Yes. You talk about ICPT, right?
Yes, correct.
Yes.
If we enter into second half of the year, our base tariff is going to increase to MYR 0.456. If there's 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 ought to spec to TNB tariff. Whatever tariff that the government provides to TNB for industrial segments, if it includes surcharge or if it adjusted the base tariff.
That will be the tariff that will be applied for our utilities segment.
Can I rephrase it? Entering the second half, as long as the total net tariff, which is go to the base tariff plus the surcharge, is equal the same amount as the first half, that means you guys will not be affected.
Exactly.
I see. Okay, understand. The follow-up question is on the Labuan plant and the Sabah plant. When do we expect it to start construction period?
Both have started the construction. Kimanis, we started last year, based on the mandate by the government, it should come on stream this 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 that to be on stream no later than January 1st, 2028.
I understand. Energy Commission said they open up the tender for this new power plant, which are under category two. You guys actually have interest on this new power plant tender, and you guys already submit for it, is it? Submit a tender for it.
We will back the necessary announcements, if there are developments in this area, Leonard. As I mentioned just now, it is an area that fits with our strategic intention.
Sure.
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 will look at the opportunity and whatever fits with our business 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. Thank you.
Thank you.
I think let's get back to Zhe Hern.
Hi. Thanks for having me. Sorry, just now the line a bit broken. I just want to follow up on the questions on fire incident. I just want to know how often does the pipelines need to be replaced, and will there be any major replacement for the PGS since it's finished construction, I think it's 1970 or 1980s?
Okay. Thank you. Thank you, Zhe Hern. If you look at our pipeline profile, we started the operation in the 1980s. The oldest of which, the stretch from Kerteh to Kemaman . Actually, we have replaced it. It is about 40+ years in operation. The newer pipeline that travels the Peninsular Malaysia age between 20+ to 30+ 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. Because of the age, you will see that this will come sometime in the future, depending on the age and inspection that we regularly undertake for the pipeline.
Okay. Understand. Meaning to say, usually, the replacement will be around 50 years, and you will just replace it over time if necessary. Am I right?
Yeah.
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.
50 years.
Yeah.
If you replace it earlier, how does it work on the financials?
I think if you replace it earlier, take the remaining net value to the P&L.
Typically, what you are left with if you replace before 50 years.
Yeah.
Very minimal. Yeah.
Okay. Understand. Also since you mentioned that you submitted 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?
Well, 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. Whatever enhancement is needed really because of Putra Heights, that has yet to be included in our proposal.
Okay. 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. This will be under the unexpected CapEx because you already submitted a proposal earlier. Am I right?
It could be, subject to ST approval. Yeah.
Okay. Understand.
Yeah.
I just also want to confirm for the RAB for the transportation segment. Because previously, it was mentioned that since there is a shift towards historic 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 correctly, originally it was based on replacement value, and then it transitioned to net book value.
Yeah.
Now onwards, it will remain on net book value.
Yeah. I think the transition is completed by the end of this RP. Then going into the future, purely on the net book value. Whatever CapEx you put in, it'll be translated into net book value and the RAB, whatever the tariff will be calculated based on that.
Okay. Understand.
Going into the future. Yeah.
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. Basically, I read through the IBR framework. I think if it's volume saving, you get to share 75%. 25% has to pay back to the customer. If it's price, it will be basically passed through completely to customers. Since the tariff is downward adjustment and MRP is on the uptrend, can I just confirm that the downward adjustment tariff is mostly from the volume saving?
You are very informative, Zhe Hern. You are correct. We were efficient, we get the benefit, 70%. 30%, the remaining will retail. That's why you see that adjustment.
Okay, sure. That's all from me. Thank you, Encik Abdul Aziz and Encik Shahrul.
Thank you.
Thank you again. I think we're coming to 9:55 A.M. now. We'll take one last question from [Tsun Yu Shin]. Sorry if I'm mispronouncing your name here on the chat. With regards to the MYR 170 million financial impact of 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, not MYR 175 million.
MYR 170 million.
I think, as you can see, it's purely for repair cost. I think as you mentioned, I think communication is 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 also the assessment by the authorities.
Yeah. I think that would answer the next question, what would be the expected amount to be compensated?
Yeah.
Okay. We take one more question, at least. We have four minutes.
Okay.
Okay, Daniel, we're back to you.
Can you hear me?
Last one. Last question.
Okay, sure. Okay. I read a report on media saying that PETRONAS has secured additional gas supply from Thailand through this Thailand-Malaysia gas pipeline because of this Putra Heights incident. I'm 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 Kerteh gas processing plant. Why do we need additional gas from Thailand?
Thank you. Thank you, Daniel. First and foremost, PGB 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 Putra Heights incident, I think as I mentioned, the segment between southern and central separated with the northern segment. The supply of gas in Peninsular Malaysia, typically from Kerteh 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 northern sector. To mitigate that, we bring more gas from the joint development area.
That's how the arrangement work, 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 insofar as interruption is concerned.
I see. Awesome. Thank you very much for the explanation.
Thank you.
Right. We are right on time. Thank you so much for your participation. With that, thank you, Encik Aziz, Encik Shahrul, and we end the session now and see you next quarter. Thank you, everyone.