114 YINSON HOLDINGS BERHAD | INTEGRATED ANNUAL REPORT 2023 A key enabler for all our businesses is ensuring that we have sufficient capital to continue delivering on our projects and exploring new opportunities. This is where our capital strategy remains consistent, with the recent reorganisation strengthening the execution of the strategies. Our capital strategy focuses on equity sell-down, refinancing and re-leveraging, which allows us to augment cash flows to enhance returns of our ongoing investments, thereby accelerating the returns to be deployed into new projects. Through the successful deployment of these capital strategies, Yinson has been able to grow our business and fund the capital requirements of our high capital expenditure projects, while continuing to provide our shareholders with stable and sustainable returns. On a platform level, Yinson’s long-term equity structure includes perpetual securities and Sukuk Mudharabah. These instruments allow us to raise capital while not diluting the equity of our existing shareholding. On top of these, we have also successfully raised corporate borrowings, which enable us to be flexible when providing funding for our equity requirements, allowing us to pursue business opportunities in a timely manner. To adapt to the constantly evolving oil & gas financing landscape, we have been actively innovating and exploring alternative financing options, including project-level preference shares, non-recourse project equity, junior loans and local currency financing. In the year under review, we successfully executed a RM1.19 billion rights issue together with free detachable warrants, which was oversubscribed by 22.31%. Financing and funding partners Through the diligent cultivation of relationships with our financing and funding partners, we are able to execute our capital strategy. One of Yinson’s Core Values is being ‘open’ – meaning we are committed to fostering an environment of trust and honest communications. This Core Value guides our approach to engaging and building relationships with banks and other funding partners, enabling them to gain a deeper understanding of our business and appreciate its resilience. Over time, we have established relationships with a network of banks that are actively involved in FPSO financing. These strong partnerships have been instrumental in the success of our capital-raising initiatives. Collaborating with banks has allowed us to devise innovative deal structures that have been well-received. Our expansion into renewables and green technologies, along with our unwavering focus on sustainability, has prompted us to actively broaden our network to include bankers and lenders who are eager to support our growth in these areas. Establishing and nurturing these new relationships is a vital strategy that will ensure the continued funding and growth of our other business units for years to come. During the year, we continued to expand our network of international financing and funding partners, accelerated through the expansion of our corporate management teams at the business unit level. Cash flow and liquidity management Having a solid free and readily available cash position serves as a strong foundation for Yinson’s growth and expansion. Moreover, it allows us to navigate any unforeseen cash requirements with ease. Our cash stems from a combination of cash flows generated from operations, financial capital raised, and loans and borrowings drawn down from pending projects deployment. We prioritise the availability of cash to fund our operational requirements based on cash flow predictions. Our liquidity management strategy includes: • Maintaining an appropriate mix of high-quality liquid investments and adequate cash buffers to meet unexpected cash outflows. • Maintaining 5-year cash flow projections to match the allocation of long-term financial capital with project capital expenditure needs. • Using reasonable assumptions on continuing operations and financing of projects secured, Yinson’s liquidity is sufficient for at least the next 5 years. • Conducting regular stress testing to assess cash flow vulnerability under distressing situations and deploying the necessary action plans. Managing financial risks Yinson has established and maintains a comprehensive risk management and internal control system that incorporates instruments, organisational structures, and procedures aimed at balancing risk and reward in relation to potential opportunities. An essential component of this system is the adoption and development of the ERM model, which Yinson has refined over time. The ERM model focuses on managing the key risks that could impact our strategic and management objectives, ensuring consistent methodologies and tools are in place to support risk management. Furthermore, Yinson’s Corporate Treasury Policy defines the guidelines for managing our free cash with the objective of preserving capital and maintaining liquidity. This policy sets out the parameters within which we manage our cash resources, enabling us to manage risk effectively and make informed decisions about our financial activities. In the year under review, risk profiles were added for YGT and YP, providing further granularity about the risks and mitigations required that are unique to their respective businesses. EMBRACING GOOD CORPORATE GOVERNANCE
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