1. INTRODUCTION
DIALOG Group Berhad ("DIALOG") is pleased to announce that its wholly owned subsidiary, Dialog Equity (Three) Sdn. Bhd. ("DE3SB") has on 17 January 2025, entered into:
(a) a Share Subscription Agreement (“SSA”) with Regas Terminal (Pengerang) Sdn. Bhd. (“RGTP”) to subscribe for 500 ordinary shares for subscription price of RM0.5 million and 9,724 redeemable preference shares for RM9.7 million;
(b) a Shareholders’ Agreement (“SHA”) with PETRONAS Gas Berhad (“PGB”) and RGTP to regulate the shareholders’ terms in relation to the special purpose vehicle, RGTP. RGTP is undertaking a project to design, build, and lease Air Separation Unit Facility (“ASU”) (“Project”). This Liquefied Natural Gas (“LNG”) driven Air Separation Unit Facility will have a combined capacity of 612 tonne per day (“TPD”) producing 460 TPD Liquid Nitrogen, 140 TPD Liquid Oxygen and 12 TPD Liquid Argon. The total awarded EPCC cost is RM368 million, (collectively “the Transaction”).
RGTP, a wholly owned subsidiary of PGB will undertake the Project. DE3SB will subscribe for 27.78% shares in RGTP. This proposed venture marks another collaboration with PGB following the successful joint venture of Pengerang LNG (Two) Sdn. Bhd. (“PLNG2”) which is LNG regasification facilities at Pengerang in 2014.
The Project will be located on reclaimed land next to PLNG2 facility in Pengerang Deepwater Terminals, State of Johor where DIALOG through its other wholly owned subsidiary, Dialog Pengerang Sdn. Bhd, has been granted the land rights and development rights by the State Government of Johor Darul Takzim and the State Secretary, Johor under a Development Cum Joint Venture Agreement dated 13 May 2011. This Project will be developed under design, build and lease model. Under this concept, the ASU will be leased to an experienced industrial gas market player for a 25-year tenure, during which they will handle the operation, maintenance and marketing of the industrial gases produced from the ASU. In return, RGTP will receive fixed monthly facility charges as revenue.
The proposed venture will be in line with DIALOG’s aspiration of achieving Net Zero Carbon emission by 2050 as the Project is able to reduce electricity consumption by approximately 25% and lower carbon emission by 15,000 tonnes per annum compared to conventional ASU plant. It is a continuation of the initiatives by DIALOG to achieve business sustainability and to fulfill its Environmental, Social and Governance (“ESG”) agenda through commercially viable ventures. DIALOG remains committed to its core values and key strategies of a sustainable business by capturing opportunities and mitigating risks through its diversified portfolio.
The SSA and SHA will pave way for PGB and DIALOG to be strategic business partners in the equity ownership and development of the Project. This venture is expected to provide additional sources of long term sustainable and recurring income in the future of DIALOG. The chosen business model of design, build and lease model will mitigate merchant risk exposure and operational complexities.
2. DETAILS OF THE SSA AND SHA
2.1 SALIENT TERMS OF THE SSA AND SHA
a. The current issued and paid-up share capital of RGTP is RM26.6 million, comprising 1,300 ordinary shares and 25,279 redeemable preference shares. RGTP is currently a wholly owned subsidiary of PGB.
b. The issued and paid-up share capital of RGTP will subsequently be increased from RM26.6 million to RM36.8 million comprising of 1,800 ordinary shares and 35,003 redeemable preference shares and will be held by PGB and DE3SB in the following shareholding proportion:-
2.2 ESTIMATED TIMEFRAME FOR COMPLETION
PGB and DE3SB are expected to become shareholders in the agreed shareholding proportion of RGTP upon completion.
2.3 SOURCES OF FUNDING
DE3SB’s estimated total equity investment in RGTP of RM37 million is to be financed by internally generated funds and/or external borrowings including sukuk proceeds.
2.4 LIABILITIES TO BE ASSUMED
Except for representations and warranties made by DE3SB to RGTP, there are no liabilities, including contingent liabilities and guarantees, to be assumed by DIALOG arising from SSA and SHA.
The eventual equity contribution by DE3SB is up to RM37 million based on debt-to-equity ratio of 70:30 to fund the Project.
3. RATIONALE AND PROSPECTS
The SSA and SHA will pave way for PGB and DIALOG to be strategic business partners in the equity ownership and development of ASU project. This venture is expected to provide additional sources of long term sustainable and recurring income in the future of DIALOG. The chosen business model of design, build and lease model will mitigate merchant risk exposure and operational complexities.
This venture marks the continuation of a proven and trusted partnership with PGB from the existing PLNG2 venture. The reduction of electricity consumption will indirectly reduce the carbon dioxide emission of ASU and will be in line with the initiatives by DIALOG to achieve business sustainability and to fulfill its ESG agenda through commercially viable ventures.
4. INFORMATION ON PGB, DE3SB AND RGTP
4.1 PGB
PGB is a public listed company and is a 51% owned subsidiary of Petroliam Nasional Berhad (“PETRONAS”), the national oil company of Malaysia. PGB is in the business of inter alia, separating natural gas into its components and storing, transporting and distributing such components thereof for a fee and the sale of industrial utilities.
4.2 DE3SB
DE3SB is a wholly owned subsidiary of DIALOG, which is listed on the Main Market of Bursa Malaysia. DIALOG is an integrated technical service provider to the energy sector in Malaysia and Internationally. The services provided range from Upstream Assets and Services, Midstream Assets and Services - Tank Terminals, Downstream Integrated Technical Services - Engineering, Procurement, Construction, Commissioning & Fabrication, Plant Maintenance & Catalyst Handling Services, Specialist Products & Services and Petrochemicals. Recognising the global transition towards a low carbon economy, DIALOG is expanding into renewables, including clean and green energy as well as recycling ventures.
4.3 RGTP
RGTP is currently a wholly owned subsidiary of PGB. RGTP was incorporated in Malaysia on 29 September 2011. The current issued and paid-up share capital of RGTP is RM26.6 million.
5. FINANCIAL EFFECTS
The SSA and SHA is not expected to have any effects on the share capital and substantial shareholders’ shareholding of DIALOG and is not expected to have any material effects on the earnings, net assets and gearing of DIALOG for the current financial year ending 30 June 2025. However, the proposed venture is expected to contribute positively to the long-term future earnings of DIALOG.
6. RISKS OF THE TRANSACTION
Risk factors affecting the proposed venture include but are not limited to execution risks, such as process safety, project viability and profitability, revenue risk, regulation and compliance risk, Basic and Detailed Engineering, Procurement, Construction and Commissioning execution and technical expertise, ESG risk, financing risk and partnership risk. Nevertheless, DIALOG will undertake all necessary effort to mitigate the various risk factors identified.
7. APPROVALS REQUIRED
The Transaction does not require approvals from either the relevant authorities or the shareholders of DIALOG.
8. HIGHEST PERCENTAGE RATIO
The highest percentage ratio applicable to the subscription of shares in RGTP pursuant to paragraph 10.02(g) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad is 0.62%, based on the audited financial statements of DIALOG for the financial year ended 30 June 2024.
9. INTEREST OF DIRECTORS, MAJOR SHAREHOLDERS AND PERSONS CONNECTED WITH THEM
In so far as the directors of DIALOG are able to ascertain, none of the directors of DIALOG, major shareholders of DIALOG and/or persons connected with them have any interest, whether direct or indirect, in the SSA and SHA.
10. STATEMENT BY THE BOARD OF DIRECTORS
The Board of Directors of DIALOG, after considering various aspects of the Transaction, is of the view that the Transaction is in the best interests of DIALOG.
This announcement is dated 17 January 2025.