Good morning, everyone. Welcome to PETRONAS Gas Berhad Analysis Briefing for the second quarter ended 30th June 2026. Thank you for joining us today's session organized by the Microsoft Teams platform. I am Priya Vasu, investor relations manager for PETRONAS Gas Berhad. I have here with me Encik Abdul Aziz Othman, Managing Director and CEO of PETRONAS Gas Berhad, Encik Shahrul Azham Sukaiman, Chief Financial Officer, as well as Encik Wan Khairul Nizam Wan Kassim, Head of Business Development and Commercial. I would also like to introduce Encik M Fairos Roslan, our Chief Operating Officer for Gas Processing and Utilities, and Encik Azrul Roshazli Abdul Rahman, our Chief Operating Officer for Gas Transportation and Regasification. The PETRONAS Gas Berhad analysis briefing for the second quarter will be presented in four segments. In the first segment, Encik Aziz will present the key highlights and the shared updates.
This will be followed by the second segment, where Encik Shahrul Azham will take you through segment financial performance. In the third segment, Encik Aziz will share PGB's focus moving forward. Finally, in the fourth segment, we will open the floor for question and answer session. Before we begin, a quick reminder for all participants to kindly remain on mute throughout the presentation. During the Q&A session, you may raise your question by clicking the raise hand button, and we will call your name to ask your question. Alternatively, you may submit your questions via the chat box. For your information, our financial results are now available on the Bursa Malaysia and PETRONAS Gas Berhad's website. We have also published today's presentation deck on our website for your further reference. Without further ado, I would like to invite Encik Aziz to proceed with his presentation.
Encik Aziz, over to you.
Thank you, Priya. Assalamualaikum and good morning, everyone. Thank you for joining us. I am pleased to present PETRONAS Gas Berhad's financial performance for the second quarter of 2026. Let me first touch on the external factors influencing PGB's operating environment during the quarter. Overall, quarter two 2026 saw PGB operating in a mixed environment, mixed cost environment. While lower MRP and a relatively supportive ringgit provided some relief, service-related costs and electricity costs continued to trend higher. Despite a moderation in the Malaysia Reference Price, gas price, during quarter two 2026, the ongoing geopolitical tensions in West Asia continued to pose an upside risk to the global energy prices. Brent crude remaining above $80 per barrel for much of the quarter.
Given the lack of pricing mechanism for MRP, we anticipate MRP to rise progressively in the second half of 2026 as the higher energy price flow through the system. On electricity tariff, the automatic fuel adjustment or AFA moved from rebates during the January to April period to surcharges beginning in May, indicating rising fuel-related cost pressure. As you all know, net impact of tariff movement, especially to our utilities segment, depends on the balance between revenue uplift, fuel and operating costs, customer demand and operational performance. Meanwhile, the ringgit remains relatively resilient despite the global market uncertainties, averaging MYR 4 per USD in quarter two 2026, helping to partially offset imported cost pressures and support projects economics. Finally, FPPI rose further to 120.3, signaling a persistent inflation in service-related costs, affecting us in area like maintenance, engineering, and other contracted services and projects execution costs.
Overall, while certain indicators remain supportive in the quarter, the cost of doing business continues to remain elevated. As such, we remain focused on disciplined cost management, operational efficiency, and proactive mitigation measures to preserve margins and sustain long-term value creation for the shareholders. Amid all this, PGB delivered a healthy performance in quarter two 2026, underpinned by disciplined operation, proactive asset management, and our continued cost optimization efforts. Group revenue stood at MYR 3.086 billion, a decline of 3.1% or MYR 98.8 million. This is mainly attributable to lower revenue from utilities segment, following the lower sales volume, and this is associated with the planned regulatory turnaround activities, coupled with reduced product prices in line with decrease in fuel gas price.
This impact was cushioned by higher revenue from the gas transportation segment, and this is following the upward tariff adjustment and increased contribution from regasification segment, rising from the liquid natural gas or the LNG storage services at Pengerang, Johor. As you all recall, commenced the operation in August 2025. Gross profit declined by 2.8% or MYR 31.6 million, and this is mainly due to tighter margins in the GP segment, as mentioned, due to lower revenue coupled with increased depreciation cost across all segments upon completion of quite a few capital projects. These impacts were cushioned by lower fuel gas cost in tandem with lower volume and fuel gas price. Overall, the group recorded a profit of MYR 942 million, a decline of just 3% or MYR 29.6 million, in line with the decline in gross profit, as I mentioned.
EBITDA, however, was higher by 3.1% or MYR 53 million, and this reflects a resilient operating performance despite lower profit before tax. Earning per share decreased by 2.9%, reflecting lower profit attributable to shareholders to the company. Board of directors has approved a second interim dividend of MYR 0.16 per ordinary share. This amount to MYR 316.6 million in respect of the financial year ending 31st December 2026. Moving on the business update for second quarter 2026. If you recall last quarter, we announced the FID for RGT3. Today, RGT3 continues to advance according to schedule and remains a key strategic project for PGB. Engineering works for FSRU and jetty development activities are underway, while the shareholders agreement with Integrax, a subsidiary of TNB, is being finalized.
Targeted for operation in second quarter of 2029 under the IBR framework, project is expected to enhance gas supply flexibility and provide stable long-term earnings for PGB. Second, on PGB Lingkaran Fiber. Our fiber optic projects have successfully installed about 750 km of fiber optic cables out of the total 880 kilometer, and this represent about 85% completion. Project is progressing as planned and is well-positioned to capitalize on emerging opportunities driven by growing demand for digital infrastructure, particularly from the data center development across the region. Third, Kimanis Power. The AP2SB successfully completed the issuance of MYR 580 million sukuk in April 2026, and this is to finance the development of the 100 MW gas engine power plant that we are building in Kimanis, Sabah. Project is strategically important in supporting Sabah's growing power demand and enhancing the grid reliability for Sabah.
On completion, it will complement the existing Kimanis power plant, strengthening PGB's presence in Sabah energy infrastructure. Next is on the power projects. At the same time, our power plant projects in Sipitang and Labuan continue to progress according to plan and are expected to support future demand growth in Sabah and Labuan. Lastly, on our operational excellence and asset integrity. During the quarter, our gas processing and utility segment successfully achieved Pressure Scheme of Inspection certification and completed the planned regulatory ASU2 turnaround at our utility segment in alignment with customers' turnaround activities within the Kerteh Integrated Petrochemical Complex. This milestone demonstrated our continued focus on operational excellence, asset integrity, and reliable supply to our customers. With that, we now come to the details of our business and financial performance. This section, as always, will be presented by Shahrul. Over to you, Shahrul.
Thank you. Thank you, Aziz. Good morning, everyone. Before we go to the individual segment business and financial performance, quarter 2026 was another quarter where our operational excellence strongly supported both our reliability and financial resilience. We maintained reliability levels of 99.8%-99.9% across all of our business segments, reflecting the strength of our assets and disciplined maintenance practices. This has enabled us to sustain higher gas deliveries to improve recovery at the gas processing facilities, as well as higher energy deliveries from the regasification terminals, reinforcing supply reliability and supporting the energy needs of Peninsular Malaysia. This operational achievement supported the group's financial performance during the quarter. While operating costs increased, as explained by Aziz earlier, our high asset availability and throughput levels continued to underpin our earnings and cash generation.
Overall, our focus remains unchanged, ensure safe, reliable, and efficient operations that support Malaysia's energy security while delivering sustainable long-term value creation to our shareholders. Moving on to the segment performance. Start with the gas processing segment. Our gas processing plants, as mentioned earlier, sustained strong reliability and achieved 99.99% of overall equipment effectiveness or OEE during the quarter under review. Our effort in investing into intelligent analytics continue to provide our gas processing plant strong reliability as well as ability to be cost efficient. Having said that, against the corresponding quarter two 2025, segment revenue declined slightly by about 0.8% or MYR 3.9 million due to lower internal gas consumption incentive following reduced fuel gas price, and this was offset by the favorable volume savings.
Segment results decreased by 4.3% or MYR 9.1 million due to high operating expenses, mainly from high depreciation expenses following the completion of several key projects last year. Against the preceding quarter one 2026, segment revenue declined slightly by 0.9% or MYR 4.4 million due to lower internal gas consumption incentive. This is mainly due to unavailability of gas processing plant, which was undergoing plant shutdown for maintenance, coupled with the lower prices of MRP hot gas compared to quarter one this year. However, segment results increased by 2.4% or MYR 4.7 million following lower maintenance cost during the quarter, and this was partly offset by lower price for internal gas consumption incentive. Moving on to the next segment of gas transportation.
We continue to leverage on technology, data-driven insights, and asset integrity initiatives, and this has helped PGB to further enhance our network resilience, reliability, and operational performance of our gas pipeline system. In terms of financial performance against the corresponding quarter two 2025, segment revenue increased by 12.7% or MYR 36.2 million. This is mainly due to higher Regulatory Period 3 or RP3 tariff, supported by growth in the regulated asset base following successful execution of RP2 projects, which was completed last year. This was further complemented by upward tariff adjustment, primarily related to sharing factor for prior years under recovery of IGT price. This is in accordance with the incentive-based regulation framework by Suruhanjaya Tenaga. Correspondingly, segment results grew by 32.2% or MYR 38.4 million, in line with the higher revenue along with a slightly lower operating expenses.
Depreciation expense for the quarter increased following the completion of several capital projects, while repair and maintenance cost was notably higher in the corresponding quarter due to gas supply restoration works following Putra Heights gas fire incident last year. Against the preceding quarter one 2026, segment revenue was largely stable, slightly higher by 0.7% or MYR 2.1 million. This is due to higher number of operating days. Segment results, however, rose by 20% or MYR 26.3 million following lower integrated cost in internal gas consumption as well as electricity sales. Moving on to the regasification segment. Our LNG regasification in Sungai Udang, Melaka, and Dungun, Johor, sustained strong reliability performance following effective maintenance program and continued to operate reliably. While many markets experience supply uncertainties amid the West Asia crisis, Malaysia gas supply remains stable.
Our ability to deliver higher LNG into the PGU system in quarter two this year reflects the resilience of our assets and our commitment to safeguarding national energy security. Financial performance for our regasification segment against the corresponding quarter two 2025- The revenue increased by 6.9%, or MYR 23 million. This is mainly contributed by the new revenue stream from providing LNG storage services at Pengerang, Johor, which was commenced in August 2025, last year, coupled with the increased revenue from regasification service following higher RP3 tariffs, supported by the growth in the regulated asset base last year. Correspondingly, the segment result grew by 5.9%, or MYR 9 million in line with the higher revenue, but this was partially offset by higher depreciation expense following completion of capital projects last year.
Against the preceding quarter one 2026 revenue increased marginally, contributed by higher regasification tariff recognition on a higher number of operating days. This was further supported by favorable foreign exchange translation on the LNG storage service fee, which is denominated in US dollar, arising from the weaker ringgit. Segment result correspondingly improved by 2.6% or MYR 4 million, flowing directly from the revenue growth with operating expenses kept broadly stable. For our utility segment, our utility stand registered 99.9% product delivery reliability for all products during the quarter. In terms of financial performance against the corresponding quarter two 2025, revenue declined by 28.6%, or MYR 144.7 million attributable to certain integrated petrochemical complex regulatory turnaround activities, which reduced sales volume for all products following lower demand and off take by customers. Results fell by 61.3% or 52.3 million, due to the regulatory turnaround activities, as mentioned earlier.
Against the preceding quarter one 2026, the segment revenue declined similarly due to lower sales volume from the planned regulatory turnaround activities, but it was partially offset by the higher automatic fuel adjustment or AFA surcharge from May onwards, as explained by Aziz earlier. Segment result decreased in line with the lower revenue, partially mitigated by lower operating expenses from reduced fuel gas cost in tandem with the lower volume. Coming to our group performance. Group performance against the corresponding quarter two 2025. Revenue stood at MYR 1.5 billion, a decrease of 5.6% or MYR 89.4 million, in line with the planned regulatory turnaround activities in the utility segment during the quarter.
Our gross profit declined by 2.5% or MYR 14 million, attributable to the tighter margins in the utility segment, as well as increase in depreciation cost across all segments, with the impact cushioned by the absence of repair and maintenance costs, which was incurred for the gas supply restoration works following two 5HG incident in the corresponding quarter. Overall, the group recorded a profit for the quarter of MYR 476 million, a slight decrease of 0.7%, in line with the lower gross profit, and this was cushioned by the higher share of profit from joint ventures. Against the preceding quarter one 2026, the group revenue recorded a decrease of 5.3% or MYR 84.1 million. This is reflecting the lower utility sales volume because of the turnaround activities. Gross profit declined slightly by about 0.5% or MYR 2.9 million, mainly due to lower revenue.
The impact of lower revenue was cushioned by lower fuel gas cost because of the lower volume, as well as the lower repair and maintenance activities undertaken in the current quarter as compared to the preceding quarter. Nevertheless, the group recorded a higher profit for the quarter, an increase of 2.1% or MYR 10 million, primarily attributable to higher other income recognized during the quarter. For the six-month period corresponding year-to-date, PGB Group recorded a decrease in revenue of 3.1% or MYR 98.8 million, reflecting lower income from utility segment following the lower sales volume because of the turnaround activities, as mentioned earlier. Coupled with the reduced product prices in line with the lower MRP. This lower revenue from utility segment was cushioned by the higher revenue from GP and regasification segment following respective upward tariff adjustment, as well as increased contribution from the energy storage users in Pengerang, Johor.
Our gross profit declined by 2.8% or MYR 31.6 million due to tighter margin in utility segment, with increased depreciation cost across all segment upon completion of capital projects. Remember last year, we recorded CapEx of about MYR 2.5 billion, one of the highest for the past decade. This impact was cushioned by lower fuel gas cost in tandem with the lower volume and also lower fuel gas price. Profit for the six-month period stood at MYR 942 million, lower by 3% or MYR 30 million due to tighter margin in utility segment as well as the reduced product prices in line with the decrease in fuel gas price. In addition, depreciation cost was higher across our segment and lower profit was generated from fund investment in line with the lower cash balance.
Nevertheless, this impact was partially cushioned by higher revenue from GP and gas transportation segment, coupled with a lower fuel gas cost in tandem with the lower volume and lower MRP price. Moving on to the balance sheet. Our total assets of MYR 19.9 billion was marginally higher by MYR 62.7 million, driven by higher property, plant and equipment from the additional CapEx spent incurred with additional investment in the joint venture. This was partially offset by the lower cash balance. Current liabilities decreased by 1.2% or MYR 63.7 million, mainly from the higher settlement of trade and other payables, offset by higher borrowings following sukuk issuance for our PNMG2 Sendirian Berhad. Having discussed our operational and financial performance, it is equally important to provide a context how we are funding our growth ambition while maintaining a prudent financial position.
As mentioned earlier, PGB is executing a number of sanctioned growth projects alongside ongoing investment required to sustain and expand our regulated asset base. These investments are critical to supporting future earnings growth and reinforcing our long-term competitive position. At the same time, we remain focused on the optimization of our cost structure and capital allocation to enhance efficiency and preserve financial flexibility. To fund this commitment, our group gearing has increased from 9% by end of last year to approximately 13% as at 30th June 2026. Importantly, the increase in gearing is driven by planned investment in growth projects and internal funding requirements rather than any deterioration in group's underlying financial position. This reflects our disciplined approach to funding our growth projects, supported by ongoing cost structure optimization initiatives and a strong financial foundation. That's all for me.
I will now pass the mic over to Encik Aziz to share on the company outlook.
Thank you, Shahrul. Following what I have shared earlier, our focus remains on delivering a sustainable value creation through growth, discipline, and efficiency. Looking ahead, we will remain firmly focused on five key priorities. First, executing our approved internal reorganization, which will create a more agile operating structure, enhance cost competitiveness, and strengthening our flexibility to fund future growth. Second, maintaining a disciplined capital allocation, ensuring that every investment is aligned with our return thresholds while preserving a strong balance sheet and sustainable shareholder values, shareholder return. Third, unlocking a greater value from our existing assets and capabilities, maximizing return from our infrastructure, and leveraging our strategic position as Malaysia's leading gas infrastructure provider. Fourth, reinforcing a safe, reliable, and efficient operations while continuing to deliver our projects safely, on time, and within budget.
Finally, pursuing selective growth opportunities, both within our core business and in adjacent infrastructure sectors that strengthen the energy security and to create a long-term earning growth for the company. Together, these priorities will position PGB to navigate the current challenges while creating a long-term value for our shareholders. That is all from me. I will now pass it over to Priya.
Thank you, Encik Aziz and Encik Shahrul. We have now come to the Q&A session. Please be reminded to continue to obey the session rule that everyone should be on mute to ask. Please press the raise hand button, and we will call your name to ask your question. You may also type your question in the chat box, and we will read it out loud for you. Let us start. Can we have the first question? Hasni. Hasni from CLSA. Please go on.
Hi. Thank you, everyone. Thank you, Encik Aziz and team. Congrats on the results. Just a couple of questions to start. May I know in terms of the gas transportation segment, what is of the quantum on the one-offs, the non-recurring part during the quarter, like the IGC true-ups and all that? I just want to gauge what is the sustainable margins for gas transportation segment going forward. I guess just also want to get a better color in terms of the improvement. How much does it roughly, percentage-wise, comes from the underlying increase in RP3 and also other factors as well? Should we expect any further sort of IGC true-ups in the second half as well? I will start with that first.
Okay. I will let Shahrul to answer that.
Thank you, Hasni, for the question. If I understand your question correctly, you were questioning the one-off item for that quarter or perhaps also it was trending quarter. I think you remember what happened last year was, first, the Putra Heights incident in April.
We actually incurred around MYR 27 million of the temporary repair cost of that project incident while waiting for the permanent repair work to be completed by this year. That is one-off item in the quarter two last year. For quarter two this year, there is no one-off items per se. As you rightly mentioned, I think for GT segment this year, what is notably different compared to last year is the increase in RP3 tariff. That is going to be consistent throughout the year to the end of RP3 by the end of 2028. For the second half of the year, we anticipate a higher MRP that will have impact to the IGC cost for our GT segment. But given the optimization effort and the availability on AI, on technology to minimize the transmission of gas, we don't foresee the impact will be significant.
But definitely, there will be an impact from the price hike of the MRP.
Right. Just to understand this better, RP3 was already kicked in and reflected in the previous quarter, in the first quarter.
Yeah.
The reason why it is being reflected more this quarter is because the cost is lower, from some-
Yes. I think, as I mentioned earlier, a lower utilities cost, but we foresee the effect of quarter two will probably continue, except for the price impact that probably will be recognized in the segment.
Just to understand in terms of impact of gas price on MRP. Typically, if the MRP increase the net for bad gas, is it positive or neutral or negative?
You know, there are a few segments. For GT and Regas, you will see the impact this year, but obviously under the IBR, that can be recovered in the following year. For UT, you will see the impact immediately. Because if you recall, let's say tariff is pegged to Tenaga Nasional Berhad, so unless that tariff is changed, which today you see the FA mechanism, some of it probably can be recovered through FA. If the FA is not enough, then the margin will be affected only for the utility segment. Yeah.
Thanks. Chair, I think just two more questions. On the utility segment, in terms of the customer turnaround, you mentioned already. Have you seen the gas volume? I mean, like the demand already recovering in July, August so far?
Yeah, it should be. Because if you recall, the second quarter is where the turnaround happened. So you should see a normal volume back in the new quarter.
Just lastly, on my question. My last question, just going into 2027 in terms of growth projects, you mentioned like Kimanis, Sipitang, the fiber business, the ASU and all this. Can you just share in terms of when specifically the earnings will start to flow in, like which quarters and what kind of quantum internally that you'd expect from these new growth segments?
Typically, the projects that you listed, by next year, you will see the earnings start to contribute to the group. As far as the impact, I will let the CFO.
I think a couple of projects will come on stream by end of this year, early last year, as mentioned by Chair earlier. Most of these projects are actually joint venture in nature. With that, we anticipate the contribution will be around 5%-6% of the total PBT profitability.
Okay. Thanks. Lastly, I need updates on RGT. Any new updates on anything?
You are talking about the RGT3, right?
Yes. Sorry. RGT3, the new one.
As mentioned in my presentation just now, we are progressing according to schedule. Again, this is very early in the project. We just FID last quarter. So the work today primarily is on the engineering side.
Right.
Thank you, Hasni. That is the second question from Daniel from Hong Leong Investment Bank. Daniel, please proceed.
Good morning. Hi, can you guys hear me?
Yes.
Yes.
That is quite good. Firstly, can I check, Aziz, what caused the admin cost to decrease and the other income to increase on a quarter-over-quarter basis? With the second quarter versus the first quarter, what has caused the admin cost to come down and the other income to increase?
Okay. You are looking to. This is previous quarter or first quarter?
Yeah. Second quarter versus the first quarter.
Okay. Other income to decrease and other expense.
Income increase. Other income increase.
Other income increased because that is a one-off item, second time, from some settlement of our contractual settlement with our customers.
Admin expense decreased because of lower operating expenses.
Lower operating expenses for the group, is it? Or for the holding co., or for a certain segment?
From comparatively, what happened, we normally pay the bonuses in quarter one, so that partly contributed to the lower admin costs in quarter two.
I see. Can you give us more color on this certain self-regulation routing. Does this happen every five years kind of thing, or what? How long has this activity of turnaround been happening?
Okay, as you recall in my presentation, we have gone for a new scheme called SSI or self-regulation. With that, our turnaround is expected to be at least 72 months rather than a more frequent interval. Some of the turnaround, you have to do today because the previous cycle has completed. But going forward, you will be looking at a lesser frequency when it comes to turnaround. Of course, some of the shutdown will depend on the customer also. If the customer does their turnaround, sometimes we do take advantage also to shut down to do some of the maintenance work.
I would like to check. Your main client in Sepang, all these are mainly Petchem, right?
Yes.
Just wondering, has Petchem activities actually slowed down during the second quarter, or maybe slowed down due to this Middle East event?
No, in quarter two, as you recall, it was a planned turnaround. So that is not a reflection of a reduction in their business activities. So that is a normal one. Now whether they will have any impact because of Middle East, so far, we have not seen any indication from their side. What we have seen from their nomination, whatnot, it seems everything is normal. Yeah.
I see. Can we get some update on the Okay, first thing, Sipitang power and Labuan power, when are they COD already? Sorry.
The Sipitang we are looking at end of the year. Labuan is still end of 2027 or early 2028.
2028. How about this Kimanis power 2?
Within this year also.
Kimanis power 2, this year, end of this year.
Within this year.
I thought it was supposed to be early 2026, I remember. This year.
Go ahead.
Lingkaran Fiber, how Sorry?
Okay, go ahead.
I was checking this Kimanis power too. Last time I remembered it was supposed to be early this year, the COD. Is this still early this year or as of today, has it already been COD?
No, the project is progressing. There are some delays. There is a recovery plan in place. We have taken additional action to accelerate the remaining work. We are looking at no longer than the end of this year for this unit to come on stream.
Also, I see this Lingkaran Fiber, already done 750 km out of 880 km. It is very fast. By end of this year, it will start operation. Can I check how much is their CapEx and how do we look into their depreciation?
Thank you. Indeed, we are progressing quite fast with the construction. Just slight correction to you, we will bring it online quarter one next year instead of end of this year.
Just check, yes.
CapEx, I think we have made the announcement.
Oh.
For business reasons, we are not disclosing CapEx, knowing the nature of the-
Negotiating, yes.
nature of the business. We are not disclosing the CapEx.
Sure. No worry. I am just trying to understand. In terms of contribution, just now you mentioned that the contribution from all these projects, Sipitang, Labuan, Kimanis, and PGB, then the Lingkaran Fiber, overall, roughly about 5%-6% growth in earnings in coming 2026. Sorry, in coming 2037, correct?
Yeah. Daniel, if I can also provide the context. I think for the three power plants, it is quite straightforward because it is typically like income, so to say. For Lingkaran, I think it is progressive. We will continue to secure customers from time to time, the customer base. But we cannot really have a specific prediction how much will be onboard next year. But I think there is still potential upside from Lingkaran over and above what we have.
Above, over and above of the 5%.
Yeah.
-Shahrul mentioned. Yeah. Oh, means the Lingkaran could provide higher growth since the take-up rate is increasing.
Yep.
That is all. Thank you.
Thank you.
Thank you so much, Daniel. Also Hong Leong. Next question. You may raise your hand, or you can alternatively type your question in the chat box as well. We may have time for one more question. I guess we are good. In that case, this is all the time we have for today. Thank you so much for your active participation, fellow analysts, and your engagement. We hope to see you again all in the next quarter analyst briefing in November 2026. Have a good day and goodbye, everyone.
Thank you.