53 LEADERSHIP MESSAGES FINANCIAL REVIEW The Group applies Net Gearing Ratio (calculated as ‘Total Loans and Borrowings’ less ‘Cash and Bank Balances plus Liquid Investments’ divided by ‘Total Equity’) as a key indicator to manage its operations funding structure. Despite the higher leverage on additional loans drawn down to fund project execution needs, the ratio remained stable at 1.23 times in FYE 2023 due to the Group’s enhanced total equity position of RM6.5 billion subsequent to the rights issue completed on 28 June 2022. As at 31 January 2023, RM6.7 billion of loans and borrowings comprised project financing loans for FPSO JAK, FPSO Helang, FPSO Anna Nery, Rising Bhadla 1 & 2 Solar Parks and Nokh Solar Park, which were structured to ensure smooth repayment over the course of the assets’ contracted periods. Some key features of Yinson’s project financing loans are listed below: • Project financing loans are non-recourse to Yinson once operational, with Yinson’s guarantee being released from the project financing loan, which minimises the risk of these loans to Yinson’s liquidity. • Once the project financing loans become non-recourse, the project financing lenders are only entitled to repayments from cash flows of the projects the loan is financing, and not from any other assets of Yinson. • The project financing loans for FPSO JAK, FPSO Helang and Rising Bhadla 1 & 2 Solar Parks are non-recourse. The project financing loan for FPSO Anna Nery is expected to become non-recourse in FYE 2024. In assessing the Group’s ability to repay its loans and borrowings, we refer to the Adjusted Net Debt/Adjusted Core EBITDA ratio. This ratio indicates the number of years’ profits that are needed to cover outstanding loans and borrowings. FYE 2023’s ratio increased to 3.94 times as compared to 3.85 times in FYE 2022, as the FPSO Anna Nery project neared completion and the FPSO Maria Quitéria and FPSO Atlanta projects commenced construction in the current financial year. During the construction phase, this ratio is temporarily elevated as collections from operations have not yet commenced whereas the project financing loan is being drawn to finance the construction. This increase in Adjusted Net Debt/Adjusted Core EBITDA ratio is manageable because FPSO Anna Nery’s project financing loan repayments are only scheduled to commence after first oil is expected to be achieved. As the Group continues to grow, we will continuously assess and determine the appropriate financing strategy for the Group to ensure an optimal mix of debt and equity funding to support future projects. Adjusted Net Debt/Adjusted Core EBITDA (times) FYE 3.94 3.85 2.68 2.86 2.07 FYE 7,778 5,683 4,102 2,475 1,854 Adjusted Net Debt (RM million) 2023 2022 2021 2020 2019 2023 2022 2021 2020 2019
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