KUALA LUMPUR: Dialog Group Bhd , which mooted the Pengerang Deepwater Terminal project, is seeking shareholders’ approval at its EGM on April 3 to raise up to RM2.65bil to take part in the next few phases of its development.
It was Dialog which reclaimed the 320-acre Johor land on which the petroleum terminal sits. And Dialog also owns 46% in the Phase 1 project, Pengerang Independent Terminal, which began operations in the second quarter of last year.
The Pengerang Deepwater Terminal is one of the main catalysts in the development of the country’s largest petrochemical complex, that is Pengerang Integrated Petroleum Complex (PIPC).
Basically, Dialog is now eyeing two projects part of the Pengerang Deepwater Terminal: the Pengerang Terminal Phase 2 and Pengerang LNG projects.
Pengerang Terminals (Two) Sdn Bhd or special-purpose vehicle 2 (SPV 2) will construct and operate facilities with a 2.1 million cubic metres of storage capacity and a deepwater jetty with 12 berths on 157 acres.
Construction and development of the RM6.3bil project will take three years, and the project is expected to be commissioned in line with the refinery complex by 2017.
Meanwhile, Pengerang LNG (Two) Sdn Bhd (SPV 3) will undertake the four-year, RM2.7bil Pengerang LNG project. It involves developing, building and operating LNG regasification facilities comprising a regasification unit and two LNG storage tanks with an initial send-out capacity of 3.5 million tonnes of natural gas per year.
In a circular to shareholders dated March 19, Dialog will have a 25% share in each SPV, with estimated proportionate contributions of RM1.89bil and RM750mil respectively.
The proposed investments, which shareholders will vote on in two weeks (April 3), include subscription of the SPV ordinary and redeemable preference shares, provision of shareholders’ loan to the SPVs, guarantees provided to financiers, or a combination of these.
The proposals are expected to be implemented during each of the Pengerang project peiod, i.e. estimated by calendar 2019 for SPV 2 and by calendar 2017 for SPV 3.
For the SPV 2 project, Dialog said it was expected to generate revenue stream from the engineering, procurement, construction and commissioning (EPCC) works of about RM5.5bil during construction plus long-term recurring income from operations following its commissioning by 2019.
Dialog also expects the LNG project, when operational by quarter four 2017, to contribute to the group’s long-term recurring income.
On the joint-venture risks, Dialog said SPV 2 and SPV 3 may have to divert financial management resources from existing operations.
“There is also no assurance that the anticipated benefits from the proposals will be realised, and that SPV 2 and SPV 3 will be able to generate sufficient revenue to offset the associated costs from the proposals,” it said in the circular.
When Dialog signed a memorandum of understanding with the Johor government and The State Secretary Johor (Inc) to develop the Pengerang Independent Terminal on 500 acres back in June 2009, its shares were trading at just under 40 sen. On Thursday, Dialog closed up one sen to RM1.56. Its highest closing price this year was RM1.70.
For the first half-year ended Dec 31, 2014, Dialog earnings rose13.6% to RM129.65mil on turnover of RM1.11bil.
In announcing its Q2 results to Bursa Malaysia, it noted: “The completion of Pengerang Deepwater Terminals Phases 1A and 1B in the last financial year had resulted in the lower engineering and construction activities and the overall lower revenue in Malaysia for the current reporting quarter.”