Yinson Annual Report 2019

STRATEGY FOR CONTINUED GROWTH Building solid credit strengths Due to the capital-intensive nature of the FPSO industry, it is pertinent that the Group builds and maintains good relationships with domestic banks while extending our reach to international banks in order to broaden our financial resources for future growth. The team has worked hard to ensure Yinson is well-banked, allowing us to tap both international and domestic capital markets as well by ensuring the bankability of all our projects are observed strictly during the tender process. On 8 May 2018, Yinson TMC Sdn Bhd, the Group’s wholly-owned subsidiary, successfully made its maiden issuance of Sukuk Mudharabah of RM950.00 million under the RM1.50 billion Sukuk Mudharabah Programme. The Sukuk Mudharabah’s first call date is on the 15 th anniversary of its first issuance. The innovative aspect of this deal as well as the significant issuance amount has been recognised through several accolades, including the Alpha Southeast Asia Awards 2018 for Best Mudarabah Deal, IFR Asia Awards 2018 for Best Malaysia Capital Markets Deal and IFNDeals of the Year Award 2018 for Mudarabah Deal of the Year. Respectively on 29 March 2019 and 5 April 2019, Yinson Juniper Ltd, another wholly-owned subsidiary of the Group, completed a total issuance of USD120.00million perpetual securities. This is the second and third tranche issued under its USD500.00 million Multi-Currency Perpetual Securities Programme set up in July 2017. Both issuances by Yinson Juniper Ltd and Yinson TMC Sdn Bhd have served to strengthen the Group’s financial reserves. As may be observed, perpetual securities is gaining importance as a capital strategy for Yinson. The strategy is able to enhance equity and maximise leverage potential without the need for further cash calls on our equity holders when undertaking new projects to complement the Company’s growth. While there may have been debates on how perpetual securities should be viewed or accounted for in the capital structure of a company, the specific terms and conditions for each instrument determines its accounting classification of debt or equity. Proceeds from perpetual securities will serve to fulfil long term funding of equity contributions and capital expenditure in projects during the process of Yinson’s business expansion. We will continue to carefully consider how to maintain a good balance of the investment’s internal rates of return against distributions to perpetual securities holders in the employment of this strategy. Yinson’s credit standing is closely related to its contracting party, hence we also endeavour to protect ourselves against contract counterparty credit risks by assessing the counterparty’s financial ability to fulfil obligations in the event of a termination. Termination payments are contractually structured and compensated based on loss of future revenues. The diligence with which we draw contract termination clauses into our contracts has resulted in Yinson’s original investment being safeguarded, as seen by the full early termination payments received for FPSO Lam Son in early FYE 2019. We believe the protective clauses and strong credit standing of our counterparties will continue to provide sufficient cover to the Group in the event of unforeseen circumstances that are beyond our control. 37 Yinson Group Overview Strategy and Sustainability Governance Accountability Annual General Meeting