268 YINSON HOLDINGS BERHAD ACCOUNTABILITY 43. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) (b) Credit risk (continued) (iii) Financial guarantee contracts The Company has issued financial guarantees to banks for borrowings of its subsidiaries. These guarantees are subject to the impairment requirements of MFRS 9. The amounts disclosed below represent the Company’s maximum exposure to credit risk on financial guarantee contracts. Company 2025 RM million 2024 RM million Financial guarantee contracts 3,718 4,335 The Company has assessed that its subsidiaries have strong financial capacity to meet the contractual cash flow obligations and hence, does not expect significant credit losses arising from these guarantees. (iv) Financial assets at fair value through profit or loss The Group is exposed to credit risk in relation to other investments and derivatives that are measured at fair value through profit or loss. The impact of this exposure has been assessed as immaterial for both the current and previous financial year. As at 31 January 2025, the credit risk of the Group primarily relates to the Group’s 5 (2024: 5) largest customers which accounted for 90% (2024: 92%) of the outstanding trade receivables, contract assets and finance lease receivables at the end of the reporting period. The Group believes the counterparties’ credit risk is low taking into consideration of their financial position, past collection experiences and other factors. Except for the impairment loss provided as disclosed in Note 25(a) to the financial statements, management does not expect any counterparty to fail to meet their obligations. (c) Liquidity risk Liquidity risk is the risk that the Group and the Company will encounter difficulty in meeting financial obligations due to shortage of funds. The Group’s and the Company’s exposure to liquidity risk arises primarily from mismatches of the maturities of financial assets and liabilities. The Group’s and the Company’s objectives are to maintain a balance between continuity of funding and flexibility through the use of bank loans and perpetual securities. The Group mitigates its liquidity risk by maintaining ample cash reserves and ensuring access to sufficient banking facilities to support its operations and investment activities. Operating in an environment that necessitates substantial cash outflows during the initial stages of an FPSO project, the Group finances the construction of the FPSO through short to medium term loans. Once the project achieves first oil and the charter begins, the loan transitions to a non-recourse status for the Group. At this stage, the Group refinances the loan into a long-term facility, aligning the repayment schedule to approximate lease term of the charter. This strategy allows the Group to adequately recoup its capital investment and repay loan installments using the charter fees received during the lease period. In ensuring that the Group manages its overall liquidity risk it has undertaken the following during the financial year: - The Group entered into various financing agreements during the year in which the Group has drawn down RM11,624 million (2024: RM7,100 million) in borrowings; - The drawdown of the borrowings was used to finance EPCIC construction cost of RM3,797 million (2024: RM7,604 million) for the ongoing construction of 3 FPSO vessels whilst enabling the fourth FPSO to achieve first oil.
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