MISC to proceed with capex plan

MISC has 14 newbuilds on order for the next two years for its petroleum shipping division.

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Kuala Lumpur: MISC Bhd, the world's largest owner and operator of liquefied natural gas (LNG), will proceed with its committed capital expenditure of between RM4 billion and RM5 billion in mainly new vessels for the next two to three years despite the signs of a prolonged economic downturn. "We are not the sort of company that will not take deliveries (of committed programmes). Capital expenditure plans on new (intended) programmes, however, like clean petroleum production freight, have been deferred," MISC's president and chief executive officer Datuk Nasarudin Md Idris told reporters after the company's annual general meeting yesterday. According to its annual report, MISC has 14 newbuilds on order for the next two years for its petroleum shipping division. MISC recently saw both Standard and Poor's and Moody's rating agencies downgrade its debt paper ratings on concerns of continued operating losses in its petroleum, chemical and liner businesses and large capital expenditure plans. "It didn't come to us as a surprise, but what is important to note is that we are still investment grade. The strong support from Petronas gives us a much better position compared to other players in this space. Obviously, the downgrade will have an impact on our capability to raise funds in the future," MISC chairman Datuk George Manharlal Ratilal said. The company has over RM3 billion of cash, according to Ratilal. It also has a few unutilised credit lines to draw down from. MISC expects its petroleum, chemical and liner shipping divisions to continue to suffer losses this year, but is hopeful that its other divisions, mainly LNG shipping, tank terminal and offshore business, will help cushion the effects of it. "As we speak, we are working very hard to plug those losses... in its good times a very large crude carrier was earning US$200,000 (RM623, 000) a day, but today it is earning less than US$20,000 (RM63,000) a day. That's how the market has turned," Nasarudin said. On reports that MISC's subsidiary, Malaysia Marine and Heavy Engineering Holdings Bhd (MMHE), plans to lease out newly acquired Pasir Gudang fabrication yard to a third party, Nasarudin said there were no such plans. MMHE is awaiting full possession of the yard from Sime Darby Engineering Sdn Bhd, which is still in use by the company to complete contracts to customers before handing it over to MISC. MISC is hopeful that the yard will be handed over by March 2012.