MARC Ratings has affirmed its AAAIS rating on Pengerang LNG (Two) Sdn Bhd’s (PLNG2) Islamic Medium-Term Notes (IMTN) Programme of up to RM3.0 billion. The rating outlook is stable.
PLNG2, 65%-owned by PETRONAS Gas Berhad, owns a regasification terminal with a capacity of 3.5 million tonnes per annum and has been supplying natural gas to the Pengerang Integrated Complex in Johor since November 2017.
The rating reflects PLNG2’s stable and sizeable revenue from regasification services under the Incentive-Based Regulation (IBR) framework, supported by low demand risk through a long-term agreement with PETRONAS Energy & Gas Trading Sdn Bhd (PEGT), a subsidiary of Petroliam Nasional Berhad (PETRONAS). It also takes into account PLNG2’s strong operating margins and incorporates a two-notch uplift based on expected support from the PETRONAS Group, as evidenced by significant financial and operational linkages.
PLNG2 reported total revenue of RM317.3 million in 1H2025 (1H2024: RM318.6 million). Regasification revenue, which made up 98% of the total, declined slightly to RM309.7 million (1H2024: RM311.5 million), as expected, due to a lower approved tariff for 2025. The Energy Commission had reduced the tariff to pass on 2024 cost savings to PLNG2’s customer, in accordance with the IBR framework. Based on the capacity reserved by its sole customer, PEGT, PLNG2 remains on track to achieve its full-year regasification revenue forecast of RM624.6 million for 2025.
The current three-year regulatory period (RP2) ends in December 2025. In the subsequent regulatory period (RP3, 2026-2028), revenue may decline due to depreciation of the regulated asset base, unless offset by new capex. Under the IBR framework, the asset base directly affects annual revenue, and a lower asset base could reduce overall income. However, revenue is still expected to be sufficient to cover operating costs, meet working capital requirements, and provide a reasonable return on investment.
Operating profit margin held firm at 52.2% in 1H2025. Operating cash flow totalled RM239.4 million, supporting healthy interest and debt coverage ratios of 5.67x and 0.22x. Total borrowings stood at RM1.8 billion, primarily comprising a RM1.3 billion outstanding sukuk, and are expected to decline gradually. Liquidity remains strong, with RM274.4 million in cash as of end-June 2025.