Yinson Annual Report 2018

Stewardship PROPELLING FUTURE GROWTH The FPSO/FSO business is capital intensive in nature during the construction and conversion stage so fostering good and reliable relationships with investors and financial institutions is critical for our business expansion. Steps taken to enhance our financial reserves include monetisation of our investment in FPSO JAK, engaging in conventional borrowings and increasing leverage on financial instruments that benefit the Group in equity treatment recognition. The Group expects completion of the 26% equity interest disposal in our wholly owned subsidiary which owns FPSO JAK to the Japanese consortium no later than June 2018. This will be testimony to the Group’s strategic concept of “capital asset velocity” where the proceeds would be available to free up financial resources to expand and bid for future projects, with continued participation and benefit from the prospect of FPSO JAK. Yinson and Sumitomo Corporation – a member of the Japanese consortium – have already entered into a Memorandum of Understanding for collaboration in FPSO and FSO business with a view to jointly pursue and collaborate in the leasing and operations of FPSO and FSO projects worldwide, where Yinson will oversee and conduct the overall project implementation while Sumitomo will seek competitive logistics and financing. We believe that the newcollaborationwill significantly enhance the equity capacity of Yinson to take on larger FPSO and FSO projects and provide benefits from Sumitomo’s global business network and local expertise with its 108 operational bases spread across 65 countries in the world. This strategic combination of Yinson’s knowledge and expertise in FPSO and FSO business and Sumitomo’s financial strength and network will enhance our potential when bidding for new projects. In July 2017, Yinson launched aUSD500millionmulti-currency perpetual bonds (“perpetual securities”) programme as part of our efforts to increase the Group’s financial reserves for corporate purposes and extend our accessibility to a greater pool of overseas bond investors. First issuance of USD100 million perpetual securities was completed in October 2017 amidst challenging market conditions, but the success demonstrates the confidence of investors in the Group and our business prospects. The unique characteristics of the USD100 million issue of perpetual securities has effectively helped lower the Group’s gearing levels while buffering our equity base and extending the maturity of our financial obligations. In February 2018, the Group further established a Perpetual Sukuk Mudharabah Programme with a limit of RM1.5 billion in nominal value, with the objective of refinancing certain debts and to ensure we are adequately prepared to fund new projects. Backed by the Group’s future cash flow prospect, we believe it will be well received by the investing community. We believe that the new collaboration between Yinson and Sumitomo Corporation will significantly enhance our equity capacity to take on larger FPSO and FSO projects Management Discussion and Analysis (Cont’d) 46 Yinson Holdings Berhad Annual Report 2018