Mohd Faizan Zain  

Good evening, ladies and gentlemen. Thank you for joining our fourth quarter financial year 2024 analyst briefing. My name is Faizan from MISC's Investor Relations team. We're pleased to have with us today Zahid Osman. President and Group CEO; Mr. Raja Azlan, Chief Strategy and Sustainability Officer; Afendy Ali, Chief Financial Officer; and Ms. Gurkiran Kaur, Head Strategy and Investor Relations.

Before we begin the proceedings, I would like to invite Zahid Osman, our President and Group CEO, to deliver his opening remarks. Zahid?

Zahid Osman   CEO, President & Executive Director

Thanks, Faizan. [Foreign Language] and good evening, everyone. Thank you for making the time to be with us this afternoon, and certainly to join us for our quarter 4 analyst briefing where we will be sharing key updates on our operational highlights, financial performance and outlook of the market for the quarter.

2024 has been a year marked by both key strategic achievements and challenges for us in MISC. The group full year 2024 financial performance are affected by headwinds in the gas and challenges in completing mega project in the Offshore segment. The results, however, supported by a strong performance of petroleum business and a turnaround in the marine and Heavy Engineering segment of the group.

While this quarter presents challenges, we remain resilient and dedicated to our delivering value to our shareholders. With our cash flow remaining strong this year, I'm pleased to inform you that in 2024, we declared a total dividend of $0.50 per share, consistent with last year.

The Gas Market segment significantly faced challenges mainly due to the weak LNG carrier spot market. This downturn is driven by the imbalance between demand and supply for the LNG vessels. The demand for LNG vessels in the near term is lower since many of the LNG project that was supposed to come on the street were delayed. And on the other hand, the supply of this project -- supply of this new build vessel that's supposed to support LNG project into the market as per plan.

I think when our long-term charter contract expires, I mean our vessels forced to compete in the spot market, certainly spending that's already a weak LNG market. So as a result of that, our financial performance for the Gas segment has been impacted, resulting in impairments and lower revenue due to this lower market conditions. I think in addition to that, I mean, I think we also see a lower earnings base for our vessels following the disposal of 3 vessels in 2024.

The Offshore segment faced financial pressure due to lower construction profit from our Mero-3 project if you compare to last year as project basically mean approach the final stage of completion. On one hand, we're very happy to see the first oil coming from the project end of October, but we also recognize in terms of the impact on the construction profit.

I think in the other things that need to -- worthwhile for you to note is the higher cost provision for the FPSO projects and the asset impacted profitability this year. Notwithstanding that, I think for us in MISC to maintain our resilience despite this headwind in the LNG shipping market. We continue to focus navigating this evolving environment while continuing to pursue long-term growth opportunities to strengthen our portfolio as well as our position in the market.

We continue to be proactive to rejuvenate our LNG fleet with modern and efficient vessels. Based on the announcement that we have made so far, by 2027, our Gas segment will take delivery of 19 new LNG carriers on long-term charter. These deliveries are expected to strengthen our Gas segment revenue and cash flow going forward.

In addition to that, I think being part of the PETRONAS Group Gas and Maritime division, we constantly explore opportunities and synergies with the group by aligning our core aspect of our business. A testament to this is the recent announcement, I think, later part of last year for the areas that we will build along charter to PETRONAS LNG.

For the gas expiring vessels, I think we are exploring a conversion project to repurpose this vessel into either floating storage solutions or other purposes. I think the other options that are available for us to deal with this older vessel to lay up or dispose the vessel so that we can contain costs. We only will fit this vessel if we see the spot market or the short-term market coming up, going forward.

As I said earlier, we are very pleased as an organization when our Mero-3 project delivered its first oil around end of October. This is critical for us because it shows the commencement of the project and also a long-term steady and secure cash flow for the group. However, with the key construction challenges for the project is successfully addressed, we expect a smooth execution of operation, and we certainly look forward for Mero-3 to be an anchor contribution to our financial performance going forward.

I think in -- if you recall, in November last year, we announced that MISC has entered into a nonbinding MoU with Bumi Armada to mutually explore prospective share this merger of our FPSO business as well as with Bumi Armada. I think the MoU is effective for a period of 9 months. And just to update all of you, the discussions are still ongoing. We are at the beginning of starting a detailed due diligence process so that we can confirm the -- on both sides, how this opportunity will be pursued going forward.

So for now, I think that's the only thing I can say on that aspect. I think despite the challenges faced by our gas and Offshore segment, in 2024 you will see achievements and positive development, highlighting our successes in delivering and executing our delivering progress strategy. In AET, last year celebrated its 30th anniversary. This is important for us to see our Petroleum segment continue to deliver its performance for the overall group.

2024 marked one of AET's strongest year, leveraging on a robust tanker market to achieve its best financial performance in more than 15 years. Revenue, cash flow and net profit after tax were exceptionally strong, underscoring its ability to navigate the market dynamics effectively.

In 2024, I think in our Petroleum segment continue to make progress in this New Energy segment when it's signed 2 FID on 3 ammonia dual-fuel Aframax tankers, and with 2 of them are on long-term charter to PETRONAS trading company.

On MHB, we're certainly pleased with the current turnaround of MHB and also, I mean, the steady inroad into the renewable energy sector. So we certainly hope the MHB continue to sustain its performance going forward. I think -- and just to close, our financial performance for this year reflect the challenges of us navigating the volatile market environment, resulting in lower revenue, operating profit and cash flow compared to the previous year.

What it has been a challenging year, we see this an opportunity for us to reevaluate and strengthen our delivery capacity in executing our delivering progress strategy. We would like to thank our stakeholders and shareholders for their continued trust and support to MISC throughout 2024.

As we move forward into 2025 with a firmer footing, we will continue to intensify our efforts across all business segments, strive towards operational and safety excellence while focusing on delivering value to our stakeholders. I look forward to a productive discussion and briefing today, and certainly welcome any questions at the end of our presentation to all of you.

Now I will pass back to the management where we will take you through in more detail on the performance of different segments as well as the detailed performance of our financial results for 2024. Thank you.

Mohd Faizan Zain  

Thank you, Zahid. Before we proceed to the presentation, I would like to bring your attention to the disclaimer slide. This presentation contains some forward-looking statements with reference to our plans and expectations, whereby actual results would differ due to unknown risks, uncertainties and other factors that may -- that are, in many cases, beyond MISC's control.

Now I would like to invite Raja Azlan for his introductory remarks on the quarter's highlights and business updates. Raja Azlan?

Raja Azlan Bin Raja Azwa   Chief Strategy & Sustainability Officer

Thank you, Faizan. [Foreign Language] and a very good evening to our shareholders and our analysts. As mentioned by Zahid, this quarter has indeed presented a share of challenges and achievements. However, I would like to highlight at this point the decline in revenue and profits, we have been able to maintain stable cash flow, and we have continued to deliver shareholder returns.

Despite revenue has been down, we can see [Technical Difficulty] is down, loss after tax as well based on what we reported is also down quarter-on-quarter as well as year-on-year. However, if we exclude the one-off impairment provisions, there was about $58 million in 2023 compared to $215 million in 2024. We are more or less flat at $487 million of profit before impairment in '23 versus a profit before impairment of $485 million in 2024.

As such, we have been able to maintain our dividends at $0.36 per share, given that stable profit before noncash items. In terms of GHG intensity, in the fourth quarter of 2024, we recorded 5.25 grams of carbon dioxide equivalent per tonne nautical mile in our GHG intensity across our gas and petroleum shipping units, and this represented a 12% reduction year-on-year, which is quite commendable and it is putting us on track to our promise of 50% reduction by 2030.

In terms of business highlights, the FPSO Marechal Duque de Caxias has achieved its first oil in offshore Brazil, the successful commencement of its operations ensures a steady and long-term cash flow to the MISC Group. And despite having to close the books with some additional costs, it was within our original expectations, as we had highlighted before, back in 2022, we are still within the same CapEx number that we highlighted -- we guided management analysts with.

We also managed to complete the acquisition of Kikeh and also the divestment of Espirito Santo at the end of January 2025. And now we are 100% shareholder of FPSO Kikeh. The transactions are in line with our initiative to streamline business activities by having full operational control of strategic assets within our portfolio.

We also signed 2 TCPs for the 2 LNG series with PETRONAS on the 16th of December 2024, which is scheduled for delivery in 2027 and this is in line with our plan to rejuvenate our fleet. As mentioned is now, by the end of 2027, we look to have an additional 19 new vessels based on the latest technology under the gas business unit, which will help us with our emissions and our cash flow for the gas unit going forward.

On the 26th of November, we entered into a strategic collaboration agreement with the clean energy solutions provider Gentari Hydrogen to jointly explore the development of integrated shipping and floating solutions for clean ammonia targeted for completion at the earliest by 2027.

Now looking back at 2024. So far as cash flow, yes, there was a decrease in cash flow. You can see from the slide that cash flow has decreased by 23%, but we need to remember that last year, there was a one-off FSG prepayment of about $240 million. And if we look at the post adjusted cash flow from operations in 2023, our CFO has declined by 10%, mainly because of higher payments to creditors.

These are mainly timing issues, but we should see an uplift in 2025 with the recognition of the cash flows from FPSO Mero. And as I mentioned just now, our dividend is declared for the whole year of $0.36 is consistent with the payoff in 2023 despite the lower profit after tax reported.

As you can see at the bottom of the slide, these are among the awards and recognitions received during the year, demonstrating our strong commitment to operational excellence, safety, sustainability and governance.

We can go to the next slide. In relation to our key achievements in 2024, these are the main key achievements that we would like to highlight during the year. Number one, AET has successfully delivered the third and final LNG dual-fuel VLCC, the Eagle Veracruz in '23, January 2024 to Shell tankers, Singapore, and this supports the group's strategy of rejuvenating the petroleum tanker fleet and reinforcing our commitment to reducing our carbon footprint.

We also have been proactive in rejuvenating our LNGC fleet with modern and efficient LNGC. As mentioned earlier, we signed the 2 long-term TCPs with a period of 15 years with QatarEnergy with options from -- with options. This will be taken for delivery in 2026 onwards. And in line with our 2030 ambition of achieving a 50% reduction in GHG emissions for shipping operations, AET signed the TCP with PETCO Trading Labuan Limited for the world's first 2 ammonia dual-fuel Aframaxes.

MHB has further strengthened its involvement in the renewable energy space by securing a second offshore wind project to build the OSS HVDC platform in support of TenneT's? 2-gigawatt programming and also AET and the Singapore Maritime Foundation signed an MoU to jointly develop Singapore's Maritime talent pool and under this MoU, AET was [Technical Difficulty] 4 scholarships with 2 internships per year from '25 to '27 furthering its support for AET Maritime One partnership.

Lastly, ALAM has partnered with Maldives State Shipping towards a shared mission to nurture next generation of maritime professionals and the signing of this MoU marks a historic milestone for ALAM as we expand our reach beyond Southeast Asia for the first time, solidifying our position as a global leader in maritime education.

In terms of the market outlook for 2025, as we had reported in our announcement outlook for LNGC rates is expected to remain soft in 2025, driven by the continued influx of new vessels and delays in the additional supply from the new LNG liquefaction projects. However, we believe that the rates are expected to recover post 2026 driven by the gradual increase in LNG supply as the delayed projects become operational based on the outlook as reported by the consultants and the research houses.

We are looking at a 12% CAGR over the next 5 years in terms of the liquefaction capacity. In terms of petroleum business, the overall tanker market outlook for 2025 remains positive, supported by high tonne-mile demand from the continuous vessel rerouting that we see and also from the long-haul Atlantic Asia trade as well as minimal fleet expansion.

And within the offshore space, steady oil prices and sustained global oil demand continue to encourage investments in the offshore projects, supporting a positive outlook for the Offshore segment. And these favorable conditions drive the ongoing growth of the FPSO vessels projects in South America, West Africa and the Asia Pacific.

And in terms of MHB, the Heavy Engineering subsegment is poised to capitalize on the sustained strength of the upstream oil and gas demand and pursue growth opportunities to ensure a well-balanced portfolio both across conventional and new energy sectors, meanwhile the Marine subsegment with the increase in upstream activity is expected to drive further opportunities for conversion, repair and maintenance services.

With that, I will end my presentation and pass back to Faizan. Thank you.

Mohd Faizan Zain  

Thank you, Raja Azlan. Next, we'll have a presentation on financial performance by Afendy, followed by a market outlook by Ms. Gurkiran. Afendy?

Afendy Bin Mohamed Ali   CFO

Thank you, Faizan. [Foreign Language] everyone. So I'll share with you the financial highlights. We go through the quarter numbers, followed by the figures. For revenue, MISC Berhad recorded a decrease in revenue of $162 million in quarter 4 compared to the corresponding quarter. Since reduction was primarily driven by the offshore business, the strong decline in construction revenue attributed to FPSO Marechal Duque de Caxias, which reached its first oil in quarter 4 last year.

Following this, revenue from ongoing construction activities tapered off, resulting in a lower revenue contribution from this segment in quarter 4, 2024. Additionally, the Heavy Engineering segment also experienced a revenue decline. This was due to several projects in the segment nearing completion, which led to the reduced activity and therefore, a decrease in revenue for the quarter.

Against the preceding quarter, higher revenue in the current quarter compared to the preceding quarter [Technical Difficulty] of construction revenue for floating storage unit in our Gas segment and revenue recognition from the commencement of a charter hire for FPSO Marechal Duque de Caxias in the Offshore segment after the successful production of first oil at the end of October 2024.

For the operating profit, the group reported a decrease in operating profit by USD 98 million in current quarter primarily attributable as well as the Gas segment. The Offshore business segment recorded an operating loss as compared to operating profit in the same quarter last year. This was primarily due to the lower project progress as well as increased [Technical Difficulty]. Meanwhile, the decline in operating profit for Gas segment was due to higher receivable impairment in the current quarter.

On a positive note, the Heavy Engineering segment contributed to a higher operating profit on which the improvement was driven by the recognition of cost recovery claim, which partially helped to offset a decline in the earlier 2 segments.

Against the preceding quarter, the group operating profit declined quarter-on-quarter by USD 36 million, primarily driven by the high cost provision for Offshore business segment as well as a higher receivable impairment for Gas segment as I stated earlier.

The profit after tax, MISC recorded a group loss after tax of $91 million for the current quarter as compared to the profit after tax in both corresponding and preceding quarter. The primary driver behind this shift was the high impairment provision in Gas segment which further exacerbated the lower operating profit in the current quarter, leading to overall loss after tax.

Excluding impairment, the group reported an adjusted profit after tax of $71 million in current quarter, 53% lower than the -- of the same period last year as well as 60% lower compared to the preceding quarter.

CFFO, higher cash flow from operation in the current quarter by $27 million as compared to corresponding quarter, mainly higher collection on the Offshore business segment coming from the operation of our FPSO Marechal Duque de Caxias.

Against preceding quarter, cash flow from operation was higher in the current quarter by $169 million, mainly from the high collection of our offshore business as well as Drilling and Heavy Engineering segment.

For the full year, MISC Berhad recorded a decrease in revenue by USD 230 million compared to the corresponding year. This reduction was primarily attributed by the Offshore business segment, which saw a decline in construction revenue attributed to FPSO Marechal Duque de Caxias, which reached its completion on 31st October. As the project reached completion, the associated revenue from ongoing construction activities tapered off, resulting in a lower revenue contribution from this segment in the current year.

The group operating profit of $568 million, which was lower than the previous year operating profit of $631 million. The decline was mainly due to the profit in the Offshore business segment, followed by a lower project progress as well as a higher cost provision.

Additionally, the Gas segment also recorded a low operating profit from lower earnings base and charter rates, coupled with higher receivable impairment. The decline was partially offset by the Petroleum segment benefited from higher margins contributed positively to the overall performance coupled with stronger performance in Heavy Engineering segment.

The segment returned to black in current year as compared to operating loss in the same period last year. The improvement was driven by recognition of cost recovering claims and better cost discipline.

MISC Berhad recorded a group profit after tax of $270 million in current year, 37% lower than the corresponding year due to low operating profit and high impairment provision in the Gas segment, which had a significant impact on the overall profit.

Excluding impairment, the group reported a profit after tax of $443 million, which narrowed the adverse gap between the current year against corresponding year and CFFO against prior year, cash flow from operation was lower in the current quarter, mainly due to the one-off FSE prepayment that took place in 2023. Excluding the one-off repayments, CFFO was only lower by 10%, and this is due to the high payments made to the creditors this year.

Our balance sheet, total asset as at December '24 compared to December '23, mainly due to the amortization of finance fees income, impairment and depreciation charge, which led to the reduction in asset value. Total liabilities reduced over the same period, primarily due to higher net repayments and [Technical Difficulty] year. As a result of the lower liabilities and the higher repayment of borrowings, the group gearing ratio has improved as of December 2024.

As mentioned earlier, our debt balance as of December 2024 was lower as compared to December 2023, followed by the higher net repayment of loans and borrowings, while the decline to the cash balance as of December '24, resulting from the higher payment to creditors in addition to the higher net repayments of loan and borrowings, partly offsetting the low payment of CapEx in the year.

So these are additional information analysis that we are sharing with all of you. So if you look -- I'll just give you an incremental information on here. If you look at Gas segment, we recorded $128 million profit -- or loss after tax in quarter 4 of 2024, that is because of the one-off asset impairment of $161 million in [indiscernible] in quarter 4. If we were to remove that, the normalized PAT would have been $33 million, which is comparable to at least the preceding quarter in quarter 3 of 2024.

The financing for the offshore business, the financing cost is about $26 million, right? And for both Petroleum and Heavy Engineering provided a very strong performance with higher vessel utilization for petroleum and cost discipline for both Petroleum and Heavy Engineering.

Next. So for the full year, similarly, if you look at the Gas segment, if we were to remove the asset impairment of $173 million, the profit would have been $173 million compared to $74 million in the previous year, right? And for the offshore business, this included in the $92 million loss for the offshore business financing of $110 million.

I think that's all that I have for the financial [indiscernible]. Thank you.

Gurkiran Kaur  

So good evening, ladies and gentlemen. Let me take you through to the market environment slides. Let's start with the LNG shipping side, in the fourth quarter of 2024, LNGC spot rates, as already mentioned, we experienced a further decline. And this is primarily due to the higher availability of vessels resulting from the 30 new LNG deliveries.

And these oversupplies as we mentioned, that has impacted our long-term valuation of our assets, particularly affecting the Gas segment. But looking ahead, the LNG shipping market is expected to remain soft in 2025. This outlook is driven by the influx of new vessels and also the delay in the additional supply of new LNG liquefaction projects.

So specifically, the outlook for LNGC with steam turbines are expected to decline further, reflecting the market shift towards more energy technologies. Conversely, the spot rates for DFTF and the XDF MEGI carriers, they are anticipated to increase as these vessels offer better fuel efficiency and flexibility.

So this trend highlights that the industry's preference is towards advanced systems that adapt to rearing market conditions. So despite these challenges, the Gas segment remains proactive in exploring strategic opportunities for spot vessels, and this includes repurposing our vessels as well as finding opportunities in the spot market. Yes.

Moving on to the next slide. In 2024, for FIDs for LNGC projects has slowed down. Primarily, this is due to the temporary pause imposed by the U.S. government on new licensing LNG projects. This pause has definitely created uncertainty in the market affecting investment decisions. However, outlook for FIDs for the next 2 years remains positive. And with the lifting of the current pause on the U.S. LNG export permits as indicated by Trump's administration, it is expected to add on additional support and drive new investments in this sector.

So globally, liquefaction capacity is projected to grow to about CAGR of 11% to 12% between 2024 and 2029. And this growth is supported by the increase in vessel deliveries that we will see and also development of new liquefaction capacities. The expansion of these global capacity will definitely improve supply chain and also meet the rising demand of [indiscernible].

Next slide, please. So as more LNG -- so as more FID or liquefaction projects come, if you say, there will be new building orders for LNGC carriers, which is anticipated to remain strong or robust, starting from 2025 and beyond. And this trend reflects the growing confidence in LNG market and the need for additional shipping capacity to support new projects.

So in the next 2 years, a higher number of LNGs expected to be delivered. However, despite a strong order book, there could be slippages simply due to shipyard capacity as well as the high demand from delayed projects. So as a result, strong deliveries will be pushed to subsequent [Technical Difficulty] affecting the overall supply time line.

Next slide, please. So despite experiencing a quarter-on-quarter improvement, the spot rates for crude tankers in quarter 4 remains subdued -- everything is Petroleum segment, sorry, [indiscernible] shipping, so remains subdued compared to the first half of the year. And this is primarily due to the softer or demand from China and also the ongoing output curves by OPEC.

However, the overall outlook for the tanker market remains positive. And this is supported by the high tonne-mile demand resulting in continuous vessel rerouting and long-haul trades between the Atlantic and Asia. And additionally, fleet -- minimal fleet expansion has also contributed to a more favorable market balance supporting this positive outlook.

The overall order book for crude tankers is expected to grow during the forecast period and for the need for replacements to meet the tonnage demand, and this requirement will encourage ship owners to invest in more new orders and showing the fleet handling future demand. So the tanker segment in particular is projected to receive about 400 new deliveries throughout 2029. And these new vessels will help meet the rising tonne-mile demand and replace the aging global fleet.

And this segment is expected to grow at a CAGR of 1% through 2029, reflecting steady expansion and modernization efforts in this segment. Demolitions are also expected to be weak in 2025. And this is due to the positive spot rates, which encourage older vessels to continue operating. So these favorable market conditions provide little incentive for ship owners like us to retire our aging fleet. And with the lack of replacement tonnage that will contribute to the slowdown in demolitions over the next 2 years.

Moving on to the Offshore segment. As you know, the Offshore segment has always been positive, and there is a significant uptrend in the E&P spending driven by the industry's ongoing commitments to explore and develop new offshore resources despite the challenges and higher costs. And this industry is very resilient and is determined to secure future energy supplies.

So this upward trend in the global FPSO market in the upcoming years is expected to be seen in South America, Africa and Asia Pacific. And these regions are poised to become key players -- key markets in the FPSO space and will overall contribute to expansion of the oil and gas activities.

And moving on to my last slide. This basically explains that the overall FPSO award remains strong over the next 3 years. Operators are increasingly focusing on securing large FPSOs, especially in 3 areas, South America, Africa and Asia Pacific. And these are strategic places for us for expansion in production capabilities.

So in South America, we're looking at -- there's a drive for demand for large [Technical Difficulty]. Similarly, for Africa, there is potential for -- to capitalize on untapped reserves. And in Asia Pacific, it is more to boost the energy security.

So this comes to the end of my presentation. Thank you.

Mohd Faizan Zain  

[Operator Instructions] First, we have Raymond from CGS.

Raymond Yap   CGS International

So I'd just like to ask about the impairment. The impairment of $161 million is entirely LNG, right? And will you be making any further impairments in future quarters or future years? Or did you do a kitchen sinking and get all the impairments done immediately?

And the second question is on the Offshore side. I do notice that the Offshore revenue has gone up because of the contribution from the Mero-3 for 2 months. But why is it that the Offshore loss actually widened from the third quarter? Third quarter was a $34 million negative. And in the fourth quarter, it became a $43 million negative. So what happened there?

Afendy Bin Mohamed Ali   CFO

Thank you for the question, Raymond. So let me attempt the first question, which is impairment. Yes, the -- all of the impairment is relating to our LNG vessels, right? So I think what has actually happened in quarter 4 is because of the macroeconomics that has impacted the industry, like what Zahid mentioned during his opening, which is too many vessels, but not enough LNG volume for the new [Technical Difficulty], right? That's number one.

Number two, there was a disposal by SK Shipping of the old steam vessels. So I think that was one of the primary reasons why the valuation that we got from the third-party came down by about 40% in quarter 4.

If you were to compare, because what we do when we prepare our financials on a quarterly basis, we compare with the third party, right? The first 3 quarters of last year 2024, the reduction is only about 3% quarter-to-quarter. I mean quarter 4, the market value dropped by about 40%, right? So that's the reason why -- when we do our fair value of our assets, we do compare our net book value against the market value, hence, because that's the independent valuation. So from an accounting standpoint, we have to make that provision.

On the -- your second question on OBU, as you can appreciate, as we completed FPSO Mero-3, right? So there were a lot of settlement of cost with our contractors. Hence, we have accrued most, if not all the cost to completion for our Mero-3 project, which is contributed to the [Technical Difficulty] the business.

Raymond Yap   CGS International

Okay. So essentially, you provided for some of the cost of bringing the Mero-3 to operations, but not all. So you ramped up the [indiscernible] and booked all the provisions into the fourth quarter. So presumably, for the first quarter next year -- this year, you should see the full contribution in terms of the normal run rate of the profit for Mero-3.

And then just to follow up as well on the LNG, right? So since you marked down the LNG vessels to the market value, can I say that the market value is now lower than the value in use? So that's why you marked down to market value. And in the future, the -- if the market value decline further, then you might have to mark down and make another round of impairment. But if the market value go up, for some reason if it goes up, can you actually write back your impairment that you made in the fourth quarter?

Afendy Bin Mohamed Ali   CFO

Yes, the answer is yes, Raymond. So in fact, the market value goes up, so we will be able to write back to the extent our book value at a point in time, right? Yes.

Raymond Yap   CGS International

And how about the provision for the Mero-3? Is that all completed in the first quarter will be very clean.

Afendy Bin Mohamed Ali   CFO

Yes, we have made most of the provision for the cost of Mero-3 fist quarter last year 2024, 2024, Raymond, correct.

Raymond Yap   CGS International

Okay. Maybe I'll just deal with one more question because the LNG vessels, the rates are very weak. So if you do layup your vessels in preparation for sale, how much is the cost of layup on an annual basis?

Raja Azlan Bin Raja Azwa   Chief Strategy & Sustainability Officer

$400,000 incremental cost [Technical Difficulty] $400,000.

Raymond Yap   CGS International

USD 400,000 per year?

Raja Azlan Bin Raja Azwa   Chief Strategy & Sustainability Officer

Yes.

Mohd Faizan Zain  

[Operator Instructions] We have a question from -- in the chat from Vince. Not sure if this has been asked before. Could the management elaborate on its plans to reactivate its share buyback program?

Zahid Osman   CEO, President & Executive Director

I mean, currently, I mean, we do have the shareholder approval of 10% for share buyback program. I think the approval still valid until the next AGM. We are actively planning to exercise that or to make use of that for the time being.

Raja Azlan Bin Raja Azwa   Chief Strategy & Sustainability Officer

Yes, the intent is to conserve the resource for our growth of the business.

Mohd Faizan Zain  

We have another question from [indiscernible]. Could you provide more details on the impairment of receivables?

Afendy Bin Mohamed Ali   CFO

Yes. So the -- if you look at the [Technical Difficulty] that we shared, there were 2 impairments, [indiscernible]. The impairment of book of the profit is in relation to the receivables, right? So this is the receivables impairment that we have made in quarter 4 despite of our amount due from our Yemen LNG that we have been accruing.

So given the outstanding discussion on amount from YLNG and given the instability of the geopolitics in the region, we have taken the decision to make a full impairment amount due from Yemen LNG. Having said that, our discussion negotiation with Yemen LNG continue and we obviously aspire to get something out of the discussion that is ongoing with Yemen LNG.

Mohd Faizan Zain  

I will take one more -- I will read one more question from the chat before I go back to the raise hand queue. There is a question from [indiscernible] on the clarification on the provisions for whether $735 million is for LNG and $241 million is for receivables?

Raja Azlan Bin Raja Azwa   Chief Strategy & Sustainability Officer

Yes, the answer is yes.

Mohd Faizan Zain  

All right. We'll go back to the queue. Go ahead, Ho Meng with your question.

Kong Ho Meng  

Yes, just want to clarify again that $735 million impairment is for 1 ship or how many ships is that being applied to?

Afendy Bin Mohamed Ali   CFO

Yes, it's certainly not 1 ship, Ho Meng, that is [indiscernible] but certainly not 1 ship. Yes.

Kong Ho Meng  

Okay. But I guess your -- is it easy to say that [indiscernible] and all those who are undergoing conversion now to FSU, but the [indiscernible] for that or not?

Afendy Bin Mohamed Ali   CFO

I think most of the LNG carrier that was impaired is relating to our [indiscernible] as well as 3B plus, so about 10 vessels in total.

Kong Ho Meng  

10 vessels in total? Okay, okay. Does it mean that for some of your existing vessels you also impaired because of the utilization rates as well? Or how do you see it? Because I think they are still being chartered, right?

Afendy Bin Mohamed Ali   CFO

Yes. So the impairment provision of the accounting is that we have a net book value and we compare the net book value against the higher value in use or the market value, right? So most of these vessels are only contracted. They are at the tail end of their contract. So the value in use is actually lower than the market value. Hence, when the market value drop, the difference between the market value and the net book value, that's the amount that we had to impair.

Kong Ho Meng  

I see. Okay. Okay. My next question is, thank you for sharing your outlook in terms of the current market situation. But have you done your studies in case -- in scenarios of whether Trump may do this or do that or what do you call that so-called maximum charge the other way, what may -- what opportunities that you see, especially for your lightering business?

Zahid Osman   CEO, President & Executive Director

I think, let me just try to answer that. I mean everyone has seen that the new administration has used tariff in term of how to balance back the trade between U.S. and the rest of the world. I think based on what we have seen in his -- Trump's first time as a President, that tariff has certainly disturbed the flow of international trade. And we expect the same thing with the tariff coming from U.S. and as well, there is a good tariff from the other countries, they certainly have a negative impact on the flow of trade globally.

But at the moment, we feel that it's a bit too early for us to make a full assessment of what it means for our [Technical Difficulty] certainly will monitor the sequence of this tariff war, if I can use the term, closely. For our lightering operation, I mean, at the moment, most of the lightering is reverse lightering basically with the vessel, the volume coming from the U.S. and then we exported out. So the chances that it's just too early for the time being to make a full assessment.

Kong Ho Meng  

Because I noticed -- I also noticed a trend of all the other public listed tanker companies, right? The way they report their contracts nowadays is like they report a range like we employed for, let's say, 5 months under this rate or 2 months under the rate, for example, because they are reporting a range now because of this geopolitical uncertainties. So are you seeing the same thing? And how would that impact your accounting for your [indiscernible] if this happens?

Zahid Osman   CEO, President & Executive Director

I'm not sure I understand how other companies [Technical Difficulty]. We certainly whatever is the impact that we have seen, we will report. But the future forecast, that's why we are not putting anything on our future outlook or we do share, but that is just an outlook for guidance -- I mean, not even for guidance in terms of our view on the market in the short to the medium term.

Kong Ho Meng  

I mean, is it like the new contract terms for tankers now? Is it like lot negotiated in such a basis where it is no longer lock in for a certain tanker, but it's like a few scenarios, the kind of thing arrange?

Zahid Osman   CEO, President & Executive Director

We -- based on what we have seen idea for the LNG, for the petroleum side, I mean the charter rate or the content that we have signed is the framework, the commercial framework remain unchanged. The level may be different depending on the market at that time. But we don't see any suddenly new commercial structure of framework we introduced just because of this tariff supporting uncertainty in the market.

Kong Ho Meng  

Okay. Okay. And just one more question from me. For the -- your Mero-3, because the first oil was on end of October, right? So by right, you should have at least 2 months of full contribution from Mero-3, but then you have the provision accrued for your -- to pay off your vendors and everything. So what is the total provision again -- the one-off provision for Mero-3 in the quarter?

Afendy Bin Mohamed Ali   CFO

Well, we have incorporated all the costs by requiring total cost for Mero-3 that we have $150 million, approximately around that number, Ho Meng.

Kong Ho Meng  

Okay. $150 million in fourth quarter alone, is it?

Raja Azlan Bin Raja Azwa   Chief Strategy & Sustainability Officer

Basically there were -- probably I can help, Afendy. There were some plus and some minus, right? So what Afendy mentioned, those are the additional total costs, but then there were some minus, which was removal of certain cost provisions that are no longer applicable. So net-net, probably you're seeing maybe somewhere between 50 to 80 total impact to Mero-3.

Kong Ho Meng  

50 to 80, and that's why that also entirely offset the 2 months of the first oil income from [indiscernible], right? I think.

Afendy Bin Mohamed Ali   CFO

Yes.

Mohd Faizan Zain  

I have a question from Raymond back in the queue.

Raymond Yap   CGS International

Yes. Just a quick one about the Gumusut Kakap and the Mero-3 intercompany loans. So when you repay the Gumusut Kakap project financing that in 2022, I think the size of the debt at the moment -- at that time was about $3 billion. Could I just understand how much of that is actually left as the intercompany loan right now? And what kind of interest rates are you charging from MISC Berhad to Gumusut Kakap?

And a similar question for Mero-3 as well. How much is the interco loan? And how much is the interest cost on that? As I'm trying to work out what your offshore profit would have been, if not for the intercompany interest expense.

Raja Azlan Bin Raja Azwa   Chief Strategy & Sustainability Officer

Okay. If you go back to 2022, we raised $1 billion of bonds, right? Not only $1 billion, about $700 million or so was for GK and about $300 million was for Mero, right? So since then, for GK, maybe they have payback, I think, about $200 million plus, $200 million to $300 million plus. But for Mero, the company has continued to plow in cash into Mero. We have put in our own cash flow into Mero.

So if you look at Mero, the intercompany is more than $1 billion. More than $1 billion. The interest rate that we charge internally will be based on market rate plus the margin and market rates we're talking -- you can refer to the USD 10 years, for example, plus the margin, for example. So it's going to be more than 5% to 6%.

Raymond Yap   CGS International

Okay. So if Mero-3 is $1,000 million or $1 billion, the mix is about 50% geared in that sense.

Raja Azlan Bin Raja Azwa   Chief Strategy & Sustainability Officer

More than that. It's more than that. I mean, at the end of the day, it needs to be geared at 70%.

Raymond Yap   CGS International

Right. But the CapEx is about $2 billion, so 70% of $2 billion will be $1.4 billion, so it should be around there?

Raja Azlan Bin Raja Azwa   Chief Strategy & Sustainability Officer

I mean at this moment is slightly below that, but when we refinance it, then we will take it to that level.

Raymond Yap   CGS International

Okay. I understand.

Afendy Bin Mohamed Ali   CFO

So Raymond from a group perspective, Mero-3 is only external finance, it's only about $300 million. The rest is internally funded agreement.

Raymond Yap   CGS International

Oh, there is an internal finance for Mero, $300 million, right? Okay. Okay. The $300 million remains at the value because it hasn't been paid off yet.

Afendy Bin Mohamed Ali   CFO

That is making reference to the a $1 billion bond that I mentioned.

Mohd Faizan Zain  

We have some more questions from the chat, 4 to 5 more. First one being the term to spot ratio for the LNG and the [indiscernible] trade.

Gurkiran Kaur  

It's about 85% long term, and there remaining spot, and it's overall for gas.

Mohd Faizan Zain  

Next will be what will be the normalized profit after tax for the -- from offshore segment, excluding the cost provisions?

Afendy Bin Mohamed Ali   CFO

For the full year -- I mean if you look at the Offshore segment, it's about $92 million loss for the full year of '24, [indiscernible] that's USD 50 million profit for Offshore business. If you want to normalize that in that sense, that's integrated.

Mohd Faizan Zain  

We have a question on the LNG spot vessel utilization rate.

Gurkiran Kaur  

For the LNG utilization spot vessel rate, we have about 50% to 55%.

Raymond Yap   CGS International

Sorry, Afendy. Just now you said that the normalized profit for offshore is $15 million for the whole year, is it? Or is it $50 million?

Afendy Bin Mohamed Ali   CFO

$50 million. Because I mentioned earlier the additional cost is about $150 million, right? So if you look at our slides for the full year 2024 Offshore business, loss after tax is about $92 million. So that's minus $92 million plus $150 million is about $50 million thereabouts, Raymond.

Mohd Faizan Zain  

We have 2 questions. Okay. So we have Max Koh on the line.

Ken Wui Koh   Macquarie Research

I think some of the questions were already answered in the chat. But maybe just to check, can I just check what -- how many vessels for both segments do you think will be after this year? I know they already have some really pretty big actions. But yes, can you just give a sense of this?

Mohd Faizan Zain  

Max, can you repeat your question, please? It's not clear.

Ken Wui Koh   Macquarie Research

Yes. Can I just check if -- in terms of how many vessels that will be ending their charters this year?

Afendy Bin Mohamed Ali   CFO

Yes, LNG vessels that we're ending the charter this year, I think about 4 -- about 3 vessels.

Mohd Faizan Zain  

We will take the last question. Okay. Ho Meng, go ahead.

Kong Ho Meng  

At the beginning of the presentation, you mentioned you are in the process of the due diligence, right, for the merger. So just to make it clear for everybody, what businesses are being under the diligence and what are not, especially for your new energy side, are those also going to be part of the process? Yes.

Raja Azlan Bin Raja Azwa   Chief Strategy & Sustainability Officer

So it's just the Offshore business is going to be -- the merger of the Offshore business.

Kong Ho Meng  

Okay. So New Energy is because it's still on its own and it's not going to be part of the discussion at all?

Raja Azlan Bin Raja Azwa   Chief Strategy & Sustainability Officer

Yes. Gas, petroleum, New Energy will be excluded from the discussion.

Zahid Osman   CEO, President & Executive Director

Thank you. It's coming to the end of our briefing session. So thank you, everyone, for your support and your questions. I mean, certainly, I mean quarter 4 has been a tough year for us, but we also made progress in our efforts to rejuvenate, refresh our asset so that we can continue to ensure a more sustainable value generation going forward. So thank you very much, everyone. Have a good weekend.

Afendy Bin Mohamed Ali   CFO

Thank you.

Raja Azlan Bin Raja Azwa   Chief Strategy & Sustainability Officer

Thank you.