TN B
TN B
TR A NS F ORM
LI V E S
INTEGRATED
ANNUAL REPORT
2018
Energy is powerful. Not only does it spark one’s desire for innovation and growth, it also spurs one’s
passion for excellence and success. Having proudly kept the nation progressing for the past seven
decades, we shall continue to do so for the next seven decades and beyond.
Financial Statements
Business Context 148 Directors’ Report
52 Corporate Information 153 Consolidated Statement of Profit or Loss
53 Organisational Structure 154 Consolidated Statement of Comprehensive Income
54 Group Corporate Structure 155 Consolidated Statement of Financial Position
56 Direct Value Added to Malaysia 157 Consolidated Statement of Changes in Equity
57 Awards & Recognition 160 Consolidated Statement of Cash Flows
163 Notes to the Financial Statements
308 Statement by Directors
Performance Review 308 Statutory Declaration
62 Simplified Group Statement of Financial Position 309 Independent Auditors’ Report
64 Core Revenue Financial Year Ended 31 December 2018
Additional Information
p.2
OUR DOMESTIC
BUSINESSES
DISTRIBUTION
GENERATION GRID
NETWORK
As the key component of our electricity The Grid Division links the power produced The Distribution Network Division is
production, the Generation Division is by our Company and IPPs throughout responsible for the asset lifecycle of the
entrusted to operate and maintain TNB’s Peninsular Malaysia with the Distribution Nation’s distribution electricity supply
portfolio of power generating assets, Division’s network. Electricity is also system to the end-users, ensuring
comprising of thermal generation facilities transmitted directly to large industrial an uninterruptible supply of power to
and major hydro-generation schemes customers via the National Grid. businesses and homes.
in Peninsular Malaysia. In addition, the
Division also supports the operations and
maintenance of six (6) Independent Power
18,338 MW LENGTH OF DOMESTIC
DISTRIBUTION NETWORK
Producers (IPPs). Maximum Demand on 15 August 2018
CAPACITY
660,038 KM
Circuit Kilometres of wholly-owned
distribution network in Peninsular Malaysia
Total Domestic Generating Capacity
23,082 KM
10,917.53 MW Length of Domestic Transmission Network SAIDI
SYSTEM AVAILABILITY
118,814.46 GWh
99.79% Units Sold in 2018
(Sales in Peninsular Malaysia, Sabah and
Labuan)
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p.3
OUR INTERNATIONAL
FOOTPRINT
- 50% equity ownership in a - REMACO O&M for the 225MW - 6% equity ownership in the - 30% equity ownership in GMR
UK Solar Portfolio via Vortex Sabiya Power Generation & Shuaibah Independent Water Energy Ltd with 2,299MW
Solar Investments S.à.r.l with Water Distillation Plant & Power Project (IWPP) with installed capacity of coal, gas
365MWp total installed capacity - REMACO O&M for the Shuaiba 900MW installed capacity and solar assets
- 80% equity ownership in a UK North Co-Gen 780MW Power; of conventional plant and - 50% equity ownership in JV
Wind Portfolio via Tenaga Wind 204,000 m3/day water 1,030,000m3/day water company between REMACO
Ventures UK Ltd with 26.1MW - REMACO O&M for the 210MW desalination assets and GMR Energy Ltd for plant
total installed capacity Doha West Power Generation & O&M services
- REMACO O&M Services for
Water Distillation Plant
Shuaibah IWPP
- Maintenance Service
Agreement (MSA) for
Instrumentation and Control
TURKEY PAKISTAN INDONESIA
for the Doha West Plant and
- 30% equity ownership in GAMA Shuwaikh Plant - Liberty Power Ltd 235MW - Development of the
Enerji A.Ș. with 1,102MW - MSA for Mechanical Works - REMACO O&M Services - Sumatra - Peninsular Malaysia
installed capacity of gas, wind, for the Doha West Plant and Balloki Power Plant High Voltage Direct Current
hydro and 274,000m3/day water Shuaiba Plant Interconnection
conveyance assets in Jordan
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ABOUT
OUR US
VISION As the largest utility in Malaysia, Tenaga Nasional
Berhad not only provides electricity to the
To be among the leading country’s homes, businesses and industries, but
corporations in energy is also a key contributor to Nation-building.
and related businesses We are present throughout the entire electricity production and supply value chain.
We have also embraced the sustainability agenda by entering into the Renewable
globally Energy space and at the same time undertaking other green and social initiatives
to ensure we deliver value to all our stakeholders. These efforts are underpinned
by our goal of ensuring the longevity of our business and the long-term well-being
of our community.
In all of our endeavours, we are driven by our firm belief that we have a
responsibility to improve the lives of the people of Malaysia. We therefore look
OUR
forward to continuing to ensure a better and brighter tomorrow for us all.
MISSION WHO WE
We are committed to
excellence in our products
SERVE
and services We have served our industrial, commercial and
residential customers in Malaysia for over 69 years.
INDUSTRIAL
COMMERCIAL
RESIDENTIAL
p.5
MEETING
No. 8, Jalan Dutamas 2, 50480 Kuala Lumpur,
Malaysia to transact the following businesses:
1. To receive the Audited Financial Statements for the Financial Year 5. To approve the payment of the following Non-Executive Directors’ fees
ended 31 December 2018 together with the Reports of the Directors from 1 January 2019 until the next Annual General Meeting (AGM) of the
and Auditors thereon. Company:
(Please refer to Note (a) of the
Explanatory Notes on Ordinary Businesses) (i) Director’s fee of RM30,000.00 per month for the
Non-Executive Chairman;
2. To re-elect the following Directors who retire by rotation in accordance (ii) Director’s fee of RM20,000.00 per month for each
with Clause 64(1) of the Company’s Constitution and being eligible offer Non-Executive Directors.
themselves for re-election: Ordinary Resolution 9
(i) Tan Sri Leo Moggie Ordinary Resolution 1 6. To approve the payment of benefits to the Non-Executive
(ii) Juniwati Rahmat Hussin Ordinary Resolution 2 Directors (excluding Non-Executive Directors’ fees) amounting to
RM2,258,100.00 from the 29th AGM until the next AGM of the Company.
3. To re-elect the following Directors who were appointed to Ordinary Resolution 10
the Board and retire in accordance with Clause 63(2) of the
Company’s Constitution and being eligible offer themselves for 7. To re-appoint Messrs PricewaterhouseCoopers PLT, having consented
re-election: to act, as Auditors of the Company, to hold office until the conclusion of
the next AGM and to authorise the Directors to fix their remuneration.
(i) Gopala Krishnan K.Sundaram Ordinary Resolution 3 Ordinary Resolution 11
(ii) Ong Ai Lin Ordinary Resolution 4
(iii) Datuk Ahmad Badri bin Mohd Zahir Ordinary Resolution 5 8. To transact any other business of which due notice shall have been
(iv) Dato’ Roslina binti Zainal Ordinary Resolution 6 given in accordance with the Companies Act 2016 (Act).
(v) Amir Hamzah bin Azizan Ordinary Resolution 7
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FURTHER NOTICE IS HEREBY GIVEN THAT for the are satisfied that they have complied with the independence criteria as required by the Main
purpose of determining a member who shall be entitled Market Listing Requirements of Bursa Malaysia Securities Berhad (MMLR) and continue to
to attend this 29th AGM, the Company shall be requesting bring independent and objective judgment to the Board deliberations.
Bursa Malaysia Depository Sdn. Bhd. (Bursa Depository)
in accordance with Clause 45(2) of the Company’s BNRC and the Board have also considered the Board Evaluation including the Self and
Constitution and Section 34(1) of the Securities Industry Peer Assessment results of Juniwati Rahmat Hussin, Gopala Krishnan K.Sundaram and
(Central Depositories) Act 1991 (SICDA) to issue a Ong Ai Lin and agreed that they have met the Board’s expectation in terms of experience,
General Meeting Record of Depositors (ROD) as at expertise, integrity, competency, commitment and individual contribution by continuously
7 May 2019. Only a depositor whose name appears on performing their duties diligently as Directors of the Company.
the ROD as at 7 May 2019 shall be entitled to attend the
said Meeting or appoint proxy/proxies to attend and/or Tan Sri Leo Moggie, Datuk Ahmad Badri bin Mohd Zahir and Amir Hamzah bin Azizan, being
vote on his/her behalf. Appointed Directors by the Minister of Finance (Incorporated), the Special Shareholder of
TNB, are also standing for re-election.
BY ORDER OF THE BOARD
TNB Board on 15 March 2019, had approved for the appointment of Dato’ Roslina
binti Zainal as the Non-Independent Non-Executive Director. Being the former TNB
NORAZNI BINTI MOHD ISA Vice President, Regulatory Economics and Planning, her inclusion to the Board shall
(LS 0009635) further strengthen the Board composition and give valuable insight on the future regulatory
Company Secretary landscape of the electricity industry.
Kuala Lumpur Subsequently, the Board on 26 March 2019 has approved, with the concurrence of TNB
12 April 2019 Special Shareholder for the appointment of Amir Hamzah bin Azizan as TNB President/Chief
Executive Officer/Executive Director for a period of three (3) years with effect from 2 April
2019. Pursuant to Clause 63(2) of the Company’s Constitution, Amir Hamzah bin Azizan also
EXPLANATORY NOTES ON ORDINARY standing for re-election.
BUSINESSES:
BNRC and the Board hereby recommend for the re-election of each Director who is retiring
(a) Agenda No. 1 is meant for discussion only as the at the 29th AGM.
provision of Section 340(1)(a) of the Act does not
require shareholders’ approval for the Audited (c) Ordinary Resolutions 8-10 – Non-Executive Directors’ Remuneration
Financial Statements. As such, it is not put forward
for voting. Section 230(1) of the Act stipulates among others that the fees and any benefits payable to
the Directors of a listed company and its subsidiaries shall be approved at a general meeting.
(b) Ordinary Resolutions 1-7 – Proposed Re-election As agreed by the Board, the shareholders’ approval shall be sought at the 29th AGM on the
of Directors in accordance with Clauses 64(1) Non-Executive Directors’ remuneration through three (3) separate resolutions as follows:
and 63(2) of the Company’s Constitution
(i) Ordinary Resolution 8 on the payment of Non-Executive Directors’ fees in respect of
Clause 64(1) of the Company’s Constitution the Financial Year ended 31 December 2018;
provides among others, that one-third (1/3) of the
Directors at the time being of whom have been (ii) Ordinary Resolution 9 on the payment of Non-Executive Directors’ fees for the
longest in office shall retire by rotation at the AGM Non-Executive Chairman and each Non-Executive Director from 1 January 2019 until
of the Company and shall be eligible for re-election. the next AGM of the Company;
Clause 63(2) of the Company’s Constitution (iii) Ordinary Resolution 10 on the payment of benefits (excluding Non-Executive
provides among others, that the Directors shall Directors’ fees) to the Non-Executive Directors from the 29th AGM until the next AGM
have power at any time and from time to time to of the Company.
appoint any other person to be a Director of the
Company either to fill a casual vacancy or as an TNB Board on 11 April 2018, had approved on the engagement of Willis Towers Watson
addition to the existing Directors. Any Director (WTW) to conduct a holistic and independent review of the Non-Executive Directors’
so appointed shall hold office only until the next Remuneration with the view to determine its market competitiveness and alignment with
following AGM of the Company and shall then be the latest regulations/corporate governance guidelines in Malaysia. TNB Non-Executive
eligible for re-election. Directors remuneration was last reviewed in 2013.
Board Nomination and Remuneration Committee Whilst there is no proposed revision to the existing Directors’ fees, the proposed Ordinary
(BNRC) and the Board have conducted an Resolution 8-9 for the Financial Year ended 31 December 2018 and payment of the fees
assessment on the independence of all Independent from 1 January 2019 until the conclusion of the next AGM are tabled herewith in line with the
Directors including Juniwati Rahmat Hussin, provision of the Act and best practices of corporate governance by ensuring full disclosure.
Gopala Krishnan K.Sundaram and Ong Ai Lin and
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Due to the limited listed company data in utilities industry in Malaysia, multiple data sources
which extend beyond the local market and industry were considered by WTW. In its review, NOTES:
overall, TNB is market competitive, for most of the compensation elements and WTW
1. A member of a Company shall be entitled to appoint
recommended that the existing remuneration policy remains and it is to be reviewed in another person as his/her proxy to exercise all or any of
one (1) to two (2) years to ensure the market competitiveness. his/her rights to attend, participate, speak and vote at a
meeting of members of the Company, in accordance with
Section 334(1) of the Act.
The existing remuneration policy of Non-Executive Directors is as follows:
2. Where a member is an authorised nominee as defined
in accordance with the provisions of the SICDA, it may
Description TNB Board TNB Subsidiaries
appoint up to two (2) proxies in respect of each Securities
Chairman Non-Executive Chairman Non-Executive Account it holds with ordinary shares in the Company
Directors Directors standing to the credit of the said Securities Account.
Monthly fixed fees RM30,000 RM20,000 Category I Category I 3. A member entitled to attend and vote at the Meeting is
per month per month – RM7,000 – RM5,000 entitled to appoint not more than two (2) proxies to attend
Category II Category II and vote on his/her behalf. Where a member appoints
two (2) proxies, the appointments shall be invalid unless
– RM5,000 – RM3,000 the proportion of the shareholdings to be represented by
*Meeting Allowances each proxy is specified.
(per meeting):
4. The instrument appointing a proxy/Proxy Form shall be in
(i) Board RM2,500 RM2,000 RM1,500 RM1,000 writing under the hand of the appointer or of his attorney
duly appointed under a power of attorney. Where the
(ii) Board Committees RM2,000 RM1,500 RM1,000 RM800 instrument appointing a proxy/Proxy Form is executed
Benefits Medical, Business Peripherals, by a corporation, it shall be executed either under its
common seal or under the hand of any officer or attorney
Electricity Bills, Travelling & duly appointed under a power of attorney.
Telecommunication and
other claimable benefits 5. A corporation which is a member may by resolution of
its Directors or other governing body authorise such
* subject to not more than three (3) payments in a month. person as it thinks fit to act as its representative at the
Meeting in accordance with Clause 51 of the Company’s
Constitution.
In determining the estimated total amount of benefits payable, the Board has considered
various factors including the number of scheduled and special meetings for the Board and 6. Duly completed Proxy Form must be deposited to
Board Committees. the Boardroom Share Registrars Sdn. Bhd., Level 6,
Symphony House, Pusat Dagangan Dana 1, Jalan PJU
1A/46, 47301 Petaling Jaya, Selangor Darul Ehsan,
Payment of Non-Executive Directors’ benefits will be made by the Company and its Malaysia not less than twenty-four (24) hours before the
subsidiaries on a monthly basis and/or as and when incurred, provided that the proposed time appointed for the taking of the poll or no later than
13 May 2019 at 12.00 p.m.
Ordinary Resolution 10 be passed at the 29th AGM. The Board is of the view that it is fair
and justifiable for the payment of benefits to the Non-Executive Directors be made as and 7. Pursuant to Paragraph 8.29A of the MMLR, voting at
when incurred, after the Non-Executive Directors have discharged their responsibilities and the 29th AGM of the Company will be conducted by poll.
Poll Administrator and Independent Scrutineers will be
rendered their services to the Company.
appointed respectively to conduct the polling/e-voting
process and to verify the results of the poll.
Details of the Directors’ Remuneration for the Financial Year ended 31 December 2018
are enumerated on page 131 of the Corporate Governance Overview Statement of this
Registration of Members/Proxies
Integrated Annual Report.
Registration of members/proxies attending the Meeting will start
from 7.00 a.m. on the day of the Meeting and shall remain open
(d) Ordinary Resolution 11 – Re-appointment of Auditors
until such time as may be determined by the Chairman of the
Meeting. At the closure thereof, no person will be allowed to
Based on the External Auditors Assessment Result for the Financial Year under review, register for the Meeting nor enter the Meeting venue. Members/
proxies are required to produce identification documents for
Board Audit Committee and the Board are satisfied with the quality of service, adequacy
registration.
of resources provided, communication, independence, objectivity and professionalism
demonstrated by the External Auditors in carrying out their functions.
Being satisfied with the External Auditors’ performance, the Board recommends their
re-appointment for shareholders’ approval at the forthcoming AGM.
Additional Information on the particulars of the retiring Directors, as required under Appendix 8A
of the MMLR is detailed out in the Statement Accompanying Notice of 29th AGM of this Integrated
Annual Report.
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p.8
STATEMENT ACCOMPANYING
NOTICE OF THE
29 TH ANNUAL GENERAL
MEETING
(Pursuant to Paragraph 8.27(2) of the Main Market Listing
Requirements of Bursa Malaysia Securities Berhad)
The Directors who are retiring by rotation in accordance with Clause 64(1) of the Company’s Constitution and seeking
re-election:
The Directors who were appointed to the Board and are retiring in accordance with Clause 63(2) of the Company’s Constitution and seeking
re-election:
The profiles of the above Directors are set out in A Committed Board on pages 100 to 109 of this Integrated Annual Report.
Save for Dato’ Roslina binti Zainal who holds 18,400 ordinary shares in the Company, none of the above Directors has any interest in the securities of
the Company or its Subsidiaries.
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p.9
ADMINISTRATIVE
NOTES OF THE
29 TH ANNUAL GENERAL
MEETING
HELP DESK
Registration will start at 7.00 a.m. and registration counters shall remain open until such time VOTING PROCEDURE
as may be determined by the Chairman of the Meeting. There will be signages to direct you
to the registration area. Please produce your original Identity Card (NRIC)/Passport during the The voting at the 29th AGM will be conducted via
registration. e-polling. Boardroom Share Registrars Sdn. Bhd. has
been appointed as Poll Administrator to conduct the
NO PERSON WILL BE ALLOWED TO REGISTER ON BEHALF OF THE REGISTERED polling process. An Independent Scrutineer will verify
SHAREHOLDER/PROXY. the result of the poll.
Upon verification and registration, you will be given a Wristband. No person will be allowed to Please follow the instructions given during the AGM for
enter the Meeting Hall without the Wristband. the e-polling process.
The registration counters will only handle verification of shareholdings and registration process.
You may proceed to the Help Desk for any other clarification or enquiry. REFRESHMENTS
NO SMOKING POLICY
From
Jalan
Jalan
Kuch
MITEC is a non-smoking building. Jalan Dutamas 2
ing
Kuch
ing
FIRST AID
Please refer to any of our staff/First Aiders should any Malaysia International Trade
Persiaran Dutamas
& Exhibition Centre (MITEC)
assistance be required.
ENQUIRY lim
l Ha
du
Ab
Jalan Dutamas ku
Any general queries in relation to the AGM, please an
From Publika
Masjid Wilayah
Tu
Persekutuan n
contact the Share Registrar during office hours from la
Ja
8.30 a.m. to 5.30 p.m. (Monday to Friday).
sar
ang
mB
Jalan Dutamas 1
Telephone : +603-7849 0777
Fro
Facsimile : +603-7841 8151/8152
The following major roads, Catch a Taxi/Grab from anywhere in T821 - MRT Semantan - Kompleks MRT Semantan
expressways and highways will Kuala Lumpur or Petaling Jaya and Mahkamah Jalan Duta LRT/Monorail Titiwangsa
conveniently direct shareholders/ request for a drop-off at North or (Only on weekdays) until 8.00 p.m.
proxies to MITEC: South Entrance.
852 - Titiwangsa Bus Hub - MATRADE
DUKE (Duta - Ulu-Kelang Expressway) Taxis or Airport Limo are also available (Everyday) until 11.30 p.m.
NKVE (New Klang Valley Expressway) from Kuala Lumpur International
SPRINT Highway Airport (KLIA) to MITEC and the drive 851 - Pasar Seni Bus Hub - Kompleks
Jalan Kuching to MITEC takes about an hour journey. Mahkamah Jalan Duta
(Only on weekdays) until 11.30 p.m.
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p.11
OUR
BUSINESS
12 Our Reporting Journey
13 Key Highlights
14 Key Financial Highlights
15 Six-Year/Period Group Financial Summary
16 Six-Year/Period Group Growth Summary
FROM OUR LEADERS
17 Chairman’s Letter to Shareholders
21 2018 Year in Review
• Group Business Model
• Our Strategy
- Future Generation Sources
- Grid of the Future
- Winning the Customer
- Future Proof Regulations
• Our Capitals
- Financial Capital
- Manufactured Capital
- Natural Capital
- Intellectual Capital
- Human Capital
- Social and Relationship Capital
44 Our Scorecard
45 Financial Calendar
46 Investor Relations
49 Net Book Value of Land & Buildings
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p.12
JOURNEY
REPORTING OF EACH OF THE SIX (6) VALUE
CREATION CAPITALS:
NATURAL CAPITAL
The report aims to provide concise and relevant information on the performance of our
• Protect our environment and
domestic and international operations within the context of our external environment, how
biodiversity
we are governed, our future prospects, as well as our long-term strategy to become a Top • Combat climate change through
10 Global Utility (by market capitalisation) by 2025. reduction of greenhouse gas
(GHG) emissions
Our IAR is to be read in conjunction with our Sustainability Report, which provides related
details on our sustainability journey and efforts that form an integral part in meeting our
INTELLECTUAL CAPITAL
global aspirations.
• Continued support for
technological advancement
In addition to the <IR> standard, the contents and development of this IAR and our
through research and
accompanying Sustainability Report, continues to be guided by Bursa Malaysia’s Main development
Market Listing Requirements and Sustainability Reporting Guide (2018); the Malaysian • Explore new efficiency drivers,
Code on Corporate Governance (2017); and the GRI Sustainability Reporting Standards products, services and business
(GRI Standards: Core Option). It also highlights the alignment of our sustainability models
performance and material matters with targeted United Nations Sustainable Development
Goals (UN SDGs) – under the global 2030 Agenda for Sustainable Development.
HUMAN CAPITAL
• Efficient management of human
The impacts and contributions of TNB’s business to the six (6) capitals of value creation,
capital resources
as described in the <IR> Framework, are presented in this IAR in an integrated manner. • Foster stable, safe and high
quality employment
• Development of our talent at all
levels
SOCIAL AND
RELATIONSHIP CAPITAL
• Build strong relationship
with stakeholders through
meaningful engagement
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p.13
KEY
HIGHLIGHTS
p.14
KEY FINANCIAL
HIGHLIGHTS
GR O U P C OMPA N Y
2018 2017* 2018 2017*
F I N ANCI AL YE AR/PERIOD * EN D ED 31 D EC EM B E R (Restated) (Restated)
P R OF I TAB I L I TY ( R M Millio n)
Revenue 50,392.5 15,692.2 47,063.3 14,718.2
Operating profit 6,875.6 3,014.0 6,070.8 2,668.2
Profit before taxation and zakat 5,046.6 2,843.5 4,314.1 2,625.4
Net profit attributable to owners of the Company 3,723.7 2,622.3 3,218.6 2,452.3
S H ARE I NF ORMATION
Per share (sen)
Basic earnings 65.6 46.3
Diluted earnings 65.4 46.2
Dividend (sen):
- Interim 30.27 -
- Final 23.00 21.4
Net assets per share attributable to owners of the Company 1,017.0 1,007.2
F I N ANCI AL RATI OS
Return on assets (%) 3.2 5.3
EBITDA margin (%) 26.5 32.3
Debt-equity (net of cash) ratio 0.50 0.4
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p.15
SIX-YEAR/PERIOD* GROUP
FINANCIAL SUMMARY
GR O U P
S H ARE I NF ORMATION
Per share (sen)
Basic earnings 114.6 108.4 130.6 122.0 46.3 65.6
Diluted earnings 114.6 108.4 130.2 121.5 46.2 65.4
Gross dividend 29.0 29.0 32.0 61.0 21.4 53.3
Net assets 765.9 836.5 928.3 1,009.2 1,007.2 1,017.0
Share price as at reporting date (RM) 12.4 11.2 14.7 14.3 15.3 13.6
F I N ANCI AL RATI OS
Return on assets (%) 6.2 6.6 6.4 5.4 5.3 3.2
Return on shareholders’ equity (%) 15.8 16.3 16.1 13.3 13.2 8.3
Gearing (%) 36.9 34.2 39.5 40.3 41.6 44.8
EBITDA margin (%) 28.2 32.2 33.2 32.6 32.3 26.5
Effective weighted average cost of funds (%) 4.9 4.8 5.1 4.7 5.0 5.0
Interest coverage (%) 13.8 14.7 14.2 10.6 9.5 7.9
Currency mix (RM:Foreign) 77:23 78:22 83:17 77:23 79:21 74:26
Debt-equity (net of cash) ratio(3) 0.3 0.3 0.3 0.4 0.4 0.5
p.16
SIX-YEAR/PERIOD* GROUP
GROWTH SUMMARY
REVENUE NET PROFIT ATTRIBUTABLE TO OWNERS SHAREHOLDERS’ EQUITY
(RM MILLION) OF THE COMPANY (RM MILLION)
(RM MILLION)
42,792 43,287 44,532 47,417 15,692 50,393 6,467 6,118 7,368 6,904 2,622 3,724 43,222 47,208 52,600 57,585 57,989 59,052
110,665 117,135 132,902 142,012 144,250 153,695 25,456 24,699 34,307 38,847 41,444 47,832 6.2 6.6 6.4 5.4 5.3 3.2
36.9 34.2 39.5 40.3 41.6 44.8 13.8 14.7 14.2 10.6 9.5 7.9 114.6 108.4 130.6 122.0 46.3 65.6
p.17
CHAIRMAN’S
LETTER TO SHAREHOLDERS
“Our diversified footprint and agility in providing innovative and creative
offerings will undoubtedly provide us the added advantage in capturing
opportunities in the geographies and areas that we serve.”
DEAR SHAREHOLDERS,
R EVENUE N ET PR O F I T D I VI D EN D
(RM million) (RM million) (Sen per ordinary share)
60,000.0 7,500.0 75
50,000.0
6,000.0 60
40,000.0
4,500.0 45
30,000.0
3,000.0 30
20,000.0
1,500.0 15
10,000.0
0 0 0
2017 FPE 2017* 2018 2017 FPE 2017* 2018 2017 FPE 2017* 2018
(Restated) (Restated)
We are excited with the growth prospects ahead that Through programmes such as My Brighter Future (MyBF), TNB continues to be a strong
proponent in bettering lives by offering scholarships and financial assistance to the
would see us delivering even better services, and
needy and those from the lower-income group.
catalyse new market growth by unlocking the value of
network assets, which will lead to improving sustainable
value for all our stakeholders. We see this as part of our
unwavering commitment and contribution to realise the ‘DERMASISWA MY BRIGHTER FUTURE (MYBF) We also continued to work with
Nation’s ambitions. PROGRAMME’ Yayasan AMIR and the Ministry of
Education for our ‘Trust Schools
IMPROVING SOCIAL AND ENVIRONMENTAL Programme’, where we helped
SUSTAINABILITY Total of 945 provide eight (8) rural schools
B40 students pursuing their tertiary education in the located in the vicinity of our power
In moving towards our Reimagining TNB aspiration STEM in local universities stations by guiding and coaching
to be among the Top 10 Global Utility Companies by 500 teachers and school personnel
market capitalisation in 2025, we are cognisant of our in adopting effective teaching
role as a responsible corporate citizen in enhancing skills and pedagogy which now is
social equity, helping the needy, conserving the benefiting 6,715 students who are
environment, and improving the livelihoods of the local Additionally, the ‘Dermasiswa My Brighter Future studying in these schools.
communities in which we operate, especially through (MyBF) Programme’, which was launched in August
better education. 2018, has seen a total of 945 B40 students pursuing Understanding the financial
their tertiary education in Science, Technology, constraints and emotional strife
Throughout the years, TNB has been a strong proponent Engineering and Mathematics (STEM) in local faced by lower-income families
in bettering lives through offering scholarships and universities, financed by TNB through Yayasan Tenaga whose family members undergo
financial assistance to the needy and those from the Nasional (YTN). The Dermasiswa sponsorship provided prolonged medical treatment
lower-income group. Beneficiaries from our TNB ‘Back for the B40 tertiary students includes allowances in a hospital, we decided to
to School’ programme include deserving B40 primary for board and lodging, tuition fees, and living play our part in giving back to
school students (from families with median household expenses throughout the duration of their studies. society by partnering with the
income not exceeding RM3,000 per month), who The Dermasiswa programme is in addition to YTN’s National Welfare Foundation
received assistance in terms of basic school supplies, ongoing scholarships and convertible loans, for which (Yayasan Kebajikan Negara) to
such as school uniforms and stationery. TNB provided for 1,974 students in FY2018. provide safe and comfortable
accommodation for those in need.
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The oncoming disruption to the energy supply value On behalf of the Board and TNB, I would like to To our valued 35,000 employees,
chain, underpinned by new technology breakthroughs, thank the Government for the continued support I would like to record my gratitude
changing regulatory environment and evolving of the IBR framework and ICPT mechanism which for your loyalty and utmost
customer expectations, present a whole new business have been instrumental in enabling the Company dedication in giving your best for
landscape for TNB in the coming years. to operate efficiently and provide reasonable tariffs the Company, as well as to my
to our customers. We look forward to continuing our fellow Board members for your
In commemorating our 70th anniversary of being a collaboration with the EC and relevant agencies in commitment and guidance. A
nation-builder, we remain confident that our highly achieving the MESI reform objectives to ensure long- word of appreciation goes to our
skilled workforce, coupled with the measures executed term energy security and a more equitable industry for suppliers, vendors and contractors
under our Reimagining TNB strategy will position us all stakeholders. for your cooperation that enabled
favourably in capturing new opportunities arising from smooth operations within TNB.
the industry’s journey towards a more sustainable I would also like to record a special tribute to Datuk And last, but not least, to all our
future. Seri Ir. Azman bin Mohd. Under his leadership, TNB shareholders and customers, for
has received numerous accolades, including the your continued support and trust
Moving ahead, the transformation of the global energy World Branding Award in 2018, bestowed by the in us.
supply industry will continue to accelerate as the forces prestigious London-based World Branding Forum.
of decarbonisation, decentralisation, deregulation During his tenure, TNB was ranked 22nd among global TNB would not have accomplished
and digitalisation of the industry further shape how utility players by Brand Finance, a renowned brand all the feats that we have set out
electricity is generated, distributed and consumed. We, valuation agency. TNB’s achievements throughout the to do without all your contributions.
at TNB, strive to be a reliable partner and an anchor years reflect Datuk Seri’s outstanding capabilities as
to our stakeholders and the nation in meeting the President/Chief Executive Officer (President/CEO).
challenges ahead.
At the same time, I would like to welcome our new
President/CEO, Amir Hamzah bin Azizan. He comes
with 28 years of industry and international experience,
as well as extensive knowledge of the oil and gas
industry and marine logistics sector. I share the Board’s
view that our new incumbent will take the Company
to greater heights and to a better and brighter future TAN SRI LEO MOGGIE
based on the foundation laid by his predecessors. Chairman
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p.21
2018 YEAR IN
REVIEW
The year in review saw us making great strides in our transformation, as we moved closer to
achieving the objectives and priorities set under Reimagining TNB (2017-2025). In our bid to realise
the long-term growth aspirations encapsulated under each of the four (4) strategic pillars of Future
Generation Sources, Grid of the Future, Winning the Customer and Future Proof Regulations, we
make a conscious effort to safeguard the values and interests of our stakeholders, while building
sustainability into our business, and acting with the highest ethical standards.
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p.22
FUTURE GENERATION SOURCES FINANCIAL CAPITAL For more information, please refer to page 32
Top Priorities Shareholders’ Funds Total Borrowings Effective Weighted Average Cost of Funds (%)
For more information, please refer to page 24 For more information, please refer to page 34
MANUFACTURED CAPITAL Oil: 239.34MW (1.7%)
Renewables: 321.05MW (2.3%)
Top Priorities
TECHNOLOGY AND
RESEARCH AND OPERATIONAL AND
• Enhancing customers’ experience BUSINESS MODEL
DEVELOPMENT SERVICE INNOVATIONS
INNOVATIONS
• Improving retail’s team productivity and efficiency
• Growth through innovations of new products and
services offering
Employees
Customers
Investors Vendors
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Input from the six (6) capitals ensure we maintain a sustainable business. We recognise that an organisation depends on all forms of capitals, not just financial
capital to contribute to the success of our business models. Our ability to enhance the stocks or values of these capitals are essential to the growth of our business.
9,364.0
9,072.0
6,875.6
RM 3,685.8
8,627.6
Fuel cost Shareholders Total dividends
million
RM 11,634.0 RM 2,931.9
7,181.0
million million
Government and Regulators
Other Operating cost Lenders Financial cost Taxes
3,014.0
RM 28,534.9 million RM 1,688.5 million RM 1,301.6 million
FPE 2017*
(Restated)
COMMUNITY
FY2018
FY2014
FY2015
FY2016
FY2017
26 2,919 13,040
Adopted Number of Graduate Number of Rural Primary
NET PROFIT ATTRIBUTABLE
Schools Students Assisted Students Assisted
TO OWNERS OF THE
COMPANY
CUSTOMERS
RM
3,723.7 million
7,367.6
Total Energy Units Sold(3): Customer Accounts(5): CSI:
6,904.0
118,814.46 9.65
6,467.0
3,723.7
SAIDI:
2,622.3
Total Energy Sold by Region
Peninsular Malaysia Sabah
International(4) Sabah(3) Peninsular Malaysia(3)
48.22 267.87
FPE 2017*
(Restated)
1,101.74
SYSTEM MINUTES:
FY2018
FY2014
FY2015
FY2016
FY2017
5,345.24
Peninsular Malaysia Sabah
0.35 42.97
113,469.22
* Financial Period Ended 31 December 2017
Notes:
For TNB operations in Peninsular
(1)
Emissions Intensity(6) Emissions Mitigated(6) Non-Carbon Energy controlling stake for period FY2018.
Intensity generation, (2) Energy efficiency across value capacity Peninsular Malaysia and 0.61 million
chain, (3) Clean coal technology, (4) Tree customers in Sabah.
replanting For TNB operations in Peninsular
(6)
Malaysia only.
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FUTURE GENERATION
SOURCES
Our “Future Generation Sources” strategic driver leads TNB’s generation capacity growth
strategy, as we actively diversify into energy sources that are able to meet the needs of the
future in a sustainable, reliable, and affordable manner.
OBJECTIVES
Our majority-owned plant, KEV, operates both coal-fired turbines and gas-fired turbines and appears as both coal and gas plant in this table
(1)
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STRATEGIC RISKS
DEVELOPMENTS IN FY2018
In January 2018, we established TNB Renewables Energy Sdn. Bhd. (TRe) to spearhead and
accelerate our RE business growth in Malaysia. Under TRe, we intensified efforts in progressing our
three-pronged RE strategy by capturing growth opportunities in utility-scale RE assets, small-scale
RE assets, and expanding our retail self-generation platform.
We also reviewed our international RE strategy, GSPARX, a fully-owned subsidiary of TRe, In streamlining our generation operations to be
resulting in a decision to focus on growing our was formed to grow our retail self-generation leaner and more cost-effective, our Generation
assets in five (5) selected locations, namely, business. Division’s Business Turnaround Programme’s
Turkey, India, the United Kingdom, Australia and pilot project at our TNB Janamanjung plant
For more information on GSPARX is available on
the ASEAN region. To step up our international page 29 in the Winning the Customer Section. continues to deliver positive traction.
presence, we are currently exploring collaboration
opportunities with several experienced partners To ensure sustainable value creation, we Following the encouraging results at TNB
with established footprint in these key markets. continued to demonstrate excellence in Janamanjung plant, the programme was
Concurrently, we have developed an international managing our generation assets through our extended to our TNB Prai plant, Connaught
operating model that is expected to enhance holistic asset optimisation methodology, which Bridge plant and Port Dickson plant, where our
our ability to push business growth and ensure aims to sustainably monetise value from each of turnaround team has completed Phase 1 while
effective management of our assets. our assets throughout its entire lifecycle. work for Phase 2 is currently in progress.
GRID OF
THE FUTURE
“Grid of the Future” strategic driver progresses our power transmission system to be
among the most technologically advanced and reliable in the world, and to meet future
challenges and growing demand in an increasingly liberalised generation market.
OBJECTIVES
We endeavour to future-
TNB continues to scale new heights with grid network improvement to meet rising
proof our energy transmission
demand and customer’s future expectations.
system by advancing our
grid architecture to be one of
the smartest, most efficient,
Grid Statistics
automated and digitalised
power networks. As the Nation’s
power utility provider, we aspire TRANSMISSION TRANSMISSION ELECTRICITY PEAK
to transform our customers’ LINES SUBSTATIONS TRANSMITTED DEMAND
experience through innovative
offerings that create trust, pride, Wholly-owned Wholly-owned Wholly-owned Wholly-owned
confidence and loyalty.
23,082.3 KM 443 substations 114,707.9 GWh 18,338.0 MWh
To-date, the first phase of our Majority-owned Majority-owned Majority-owned Majority-owned
‘Grid of the Future’ strategy
(2016-2020) is firmly in place
2,888.5 KM 45 substations 1,724.8 GWh 955.1 MWh
and involves the piloting
and rollout of the elements
that we believe will form the DISTRIBUTION LINES DISTRIBUTION SUBSTATIONS ELECTRICITY DISTRIBUTED
foundation of the modern Wholly-owned Wholly-owned Wholly-owned
grid, namely, the Advanced
Metering Infrastructure (AMI),
Distribution Automation (DA),
660,038.0 KM 81,327 substations 113,469.2 GWh
Majority-owned Majority-owned Majority-owned
Geospatial Information System
(GIS), Volt-Var Optimisation, and
Mobility Solutions for workforce
22,355.0 KM 7,957 substations 5,345.2 GWh
management.
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STRATEGIC RISKS
DEVELOPMENTS IN FY2018
In supporting our ‘Grid of the Future’ strategy, we have successfully completed the separation of the Distribution Division into
1. Distribution Network Division – to focus on improving operational efficiency and digitisation of the distribution grid; and
2. Retail Division – to focus on enhancing customer loyalty, developing new products and services and growing the retail energy business.
We established ‘Grid of the Future’ (GoTF) Steering Committee and GoTF Maturity Model to enable
centralised decision-making with clear accountability hierarchy and benchmarking against
world-class performing systems.
We also completed the enhancement of the iii. Improved grid fault diagnosis and sharpened and digitalisation of our distribution grid through
current ‘Transmission Grid Strategic Plan’ location precision to enable quicker grid the following initiatives:
that was carried out to align with our ‘Grid of restoration by the Grid System Operator and
the Future’ aspiration set under Reimagining our maintenance team; and • Completed the implementation of 190,000
TNB. Concurrent with this strategic plan, the iv. Continued certification of ISO 27001:2013 smart meters in Melaka. For 2019, the
‘Transmission Grid Digitalisation Transformation’ through the successful implementation installation programme will expand beyond
programme was also initiated this year, of three (3) cyber drills via cyber-attack Melaka with a focus on homes and
anchoring on three (3) core pillars, namely, Asset simulations, as well as organising businesses in the Klang Valley;
Management, Workforce Management and Grid awareness and training programmes to • Successfully fitted the 113 MVAr of capacitor
Operations, to achieve operational excellence. increase our support team’s proficiency and banks throughout our distribution network,
Among the initiatives implemented this year understanding on the importance of data in line with plans to optimise Volt-Var to
under this digitalisation exercise include: protection. improve the quality of electricity supply to
our customers;
i. Utilised an online monitoring and analysis In sustaining the excellent performance of our • Converted 3,672 distribution substations into
system for gas-insulated transformers transmission network, we have continued the Supervisory Control and Data Acquisition-
and switchgears to improve maintenance expansion and strengthening of our 500kV Grid enabled (SCADA-rised) substations, bringing
effectiveness and accuracy; Superhighway which will enable secure and the total number of distribution substations
ii. Scaled our drone fleet to carry out aerial efficient power transfer from other locations to equipped with DA technology to more than
patrolling of transmission towers and the Central Area region, which accounts for 45% 12,000 substations nationwide. Under
rentices across the distribution network and of Peninsular Malaysia’s electricity demand. the current GoTF strategy, TNB plans to
to uplift the efficacy of land planning and upgrade all distribution substations located
surveillance exercises carried out by our In addition to transmission grid upgrading works, in major cities by 2025; and
operation and maintenance teams; we also ensured the continued modernisation • Successful deployment of mobility solutions
for TNB meter management throughout
Peninsular Malaysia.
Through the world-class management of our transmission network and As we move towards a fully digitalised and automated grid and distribution
operational excellence, Malaysia’s power supply system is performing on par network in the near future, nurturing a continuous talent pipeline will be a
with developed nations, with SAIDI not exceeding 51 minutes per customer priority to realise the goals and ambitions we have set. In the coming year,
per year since 2015, accomplishing 12 consecutive years of zero major we look to establish our Grid Academy to focus on developing subject matter
disturbance, and nine (9) consecutive years of zero load loss tripping for the experts with the requisite financial, technical and leadership capabilities to
500kV Grid Superhighway. become future leaders of the Grid Division.
For more information on our grid performance, please refer to ‘Manufactured
Capital’ on pages 34 to 35 in Our Capitals section. In terms of infrastructure, we will continue to strengthen the functionality,
reliability and performance of our 500kV Grid Superhighway around the
Central Area to ensure continued power supply with minimal transmission
loss, as well as equipping 3,000 additional distribution substations with DA
technology. We will also strive to complete our Asset Investment Plan for the
grid and distribution network proposal to be submitted to the Government
and regulator, ahead of the upcoming Third Regulatory Period (2021-2023).
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WINNING THE
CUSTOMER
Our “Winning the Customer” strategic driver guides wins in the kWh and beyond
energy businesses by building a retailer with customer centricity anchored by quality
service, innovative solutions, enhanced stakeholder communications and cost leadership
throughout the customer journey to meet ever-evolving needs and values.
OBJECTIVES
stakeholders. Furthermore,
505,239
5,000,000
4,000,000
3,000,000
96,167
2,827
1,991
1,553
1,589
5,504
5,824
6,042
6,129
88,811
84,409
92,906
2,000,000
6,843,725
6,910,081
6,955,595
7,378,425
1,449,104
1,442,980
1,427,422
1,553,607
28,054
27,210
27,575
29,749
64,695
66,925
67,730
72,554
1,000,000
2,403
3,051
2,502
4,817
28
30
30
45
0
FY2018
FY2018
FY2018
FY2018
FY2018
FY2018
FY2015
FY2016
FY2017
FY2015
FY2016
FY2017
FY2015
FY2016
FY2017
FY2015
FY2016
FY2017
FY2015
FY2016
FY2017
FY2015
FY2016
FY2017
Domestic C om m e rc i a l I nd us t r i a l M i ni ng St re e t l i g h t F re e u n i t s
Others
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STRATEGIC RISKS
Unable to keep pace with changing customers’ Inability to adapt to changing market
Competency mismatch to drive strategy
expectations environment
ACHIEVEMENTS IN FY2018
Our customer base grew 2.79% year-on-year in FY2018. With rising demand, the total domestic
annual electricity sales grew to 118,814GWh.
The successful separation of our Distribution Network and Retail Divisions provides clear focus for our Retail Division to further strengthen our presence and
branding in the energy retail market.
We accomplished a CSI score of 8.1 for the third consecutive year in FY2018, comparing favourably with the level of customer satisfaction towards energy utilities
in the United States which stood at 75.2 (on a 100-point scale) in 2018, according to data released by the American Customer Satisfaction Index.
We continue developing products and services that will enable our customers to better manage their power consumption, such as:
• Home Energy Report: We continued to provide our customers with a detailed report of their home energy consumption that includes comparison with other
similar homes. The programme has been successful in promoting more efficient energy utilisation, with energy savings of 47,792 MWh achieved (October 2017
- September 2018).
• Making Electricity Visible (MaEVI): We provide interested customers with the option to use MaEVI, our internally developed app based smart home energy
management system.
• Energy Management Solutions: We continued to promote the solution to our business customers to help reduce their electricity cost by avoiding surcharges
through multiple solutions.
• myTNB mobile app: Downloaded by 540,000 TNB account holders. The app allows our customers to enjoy a seamless experience to interact with us.
• TNB Payment Kiosks: We further improved our payment facilities by adding both number of kiosks and number of functions offered.
• Full-Fledge Contact Centre: Raising the bar on customer engagement, we upgraded our call centre to become a full-fledge contact centre, known as TNB
CareLine (dial or SMS 15454) which has recently been awarded with 5 Global Business Services Asia Award during the year.
During the year, our Retail Division also carried out a total of 40 engagement sessions on energy conservation with 14,500 stakeholders including government agencies,
non-governmental organisations, social and community leaders, universities and school students, as well as TNB staff.
OUTLOOK
6 6
• In 2019, Retail Division will drive TNB’s aspiration to become the Retailer of
4 4
Choice;
• We will focus on Winning kWh, Winning Energy, Winning Utilities and Full
2 2
FY FY FY FY FY FY FY FY FY FY Suite of Services. The focus into differentiated areas will allow our Retail team
2014 2015 2016 2017 2018 2014 2015 2016 2017 2018
0 0
to provide greater customer empowerment and choice whilst sustaining and
Pe ni nsu l a r Malaysia Sabah growing in a dynamic and disrupted industry;
• Continue to provide high quality service experience and best innovative
solutions to customers with ever changing needs and values;
EXPANDING RE ADOPTION • Maximise business value by becoming cost leader anchoring on
cost-to-serve, cost-to-acquire, cost-to-retain, and cost-to-exit;
In 2018, we formed a new subsidiary to drive RE self-generation among Malaysian • Through a holistic approach on stakeholders engagement and communication,
residents and businesses: we aim to better communicate with our customers and other stakeholders as
well as to continuously promote customer centricity;
• We established GSPARX Sdn. Bhd. – a wholly-owned subsidiary to provide • Reskill and develop new retailer key capabilities such as customer experience,
self-generation/consumption solutions for the customers. Through the new Net marketing, sales, commercial and customer communications through Retail
Energy Metering (NEM) Scheme and Supply Agreement for Renewable Energy Academy; and
(SARE), GSPARX adds value by providing investment for its Zero Capex solutions • In anticipation of the increasing shift towards digitalisation, Retail will leverage
for commercial and industrial customers. GSPARX also provides quality solar new agile technologies in delivering digital customer care to adapt towards
PV system for residential customers, through cash and loan (leasing) options changing customer expectations.
. To date, some 1.3MWp worth of RE contracts have been confirmed under
GSPARX. GSPARX aspires to work with local reputable installers, enabling
green prosumers and contributing towards Malaysia’s RE target.
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FUTURE PROOF
REGULATIONS
“Future Proof Regulations” strategic driver navigates TNB’s efforts in ensuring the
sustainability of the future market as we move towards a transparent, liberalised and
democratised energy supply market.
OBJECTIVES
We also strive to safeguard CEPSI provided the opportunity to showcase our commitment
TNB’s regulatory play in and preparedness for the future to the world.
The Government announced in July 2018 the cancellation of four (4) Independent Power Producer (IPP) projects
awarded earlier due to non-compliance of the conditions stipulated. These cancellations are not expected to
impact Malaysia’s electricity supply security.
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2018 also saw concerted efforts by the In line with RP2, Energy Commission (EC) The Government of Malaysia has decided
Malaysian Government to provide a conducive published a revised framework on electricity tariff to continue with the implementation of the
environment to grow renewable energy (RE) determination for the Peninsular Malaysia which Imbalance Cost Pass-Through (ICPT) mechanism
through MESTECC’s announcement to push RE introduced the implementation of the Annual in the July 2018 and January 2019 cycles. This
generation capacity in Malaysia’s energy mix to Regulatory Adjustments, where TNB is allowed the pass-through of higher generation
20% by 2025 – equivalent to about 4GW of new required to return to the industry any excess costs owing to increased average global fuel
RE injection. revenue collected. Given this recent regulatory prices. The average costs of coal during the two
development, it is foreseen that profit in the next cycles were USD91.66 per MT as of June 2018
In line with the Government’s RE aspirations, two financial years (2nd and 3rd years of RP2) will and USD97.84 per MT as of December 2018, in
MESTECC has announced the following policies: be lower as compared to 2017 level. comparison with the base cost of USD75 per MT.
grid investments.
0
Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov
16 16 16 16 16 16 17 17 17 17 17 17 18 18 18 18 18 18
CEPSI 2018 We are proud to be given the opportunity to gather world-leading figures
from more than 30 countries to hold in-depth discussions on industry-
Attended by more than 2,000 industry delegates and above 4,500 visitors defining issues and challenges and to share the latest technological
from all over the world, the 22nd installment of CEPSI 2018 was a resounding innovations, strategies, and success stories.
success.
OUTLOOK
As the appointed chair (2017-2018) and on behalf of the Association of the
Electricity Supply Industry of East Asia and the Western Pacific (AESIEAP), • Malaysia’s Clean Air Regulations, gazetted in June 2014 is expected to
it was our honour to host the conference and concurrent exhibition, themed come into force in 2019. All power plants are expected to comply with
“Reimagining Utility of the Future”, which took place at the Kuala Lumpur the revised emission standards set under this new regulation.
Convention Centre from 17th to 22nd September 2018. • MESTECC will be undertaking a series of open tenders in 2019 to
install an estimate 500MW of new RE capacity under the third cycle of
We would like to take this opportunity to thank the Prime Minister of the Large Scale Solar scheme.
Malaysia, Tun Dr. Mahathir Mohamad, for delivering the special address, • TNB’s PAKA GF4 unit (257MW) is expected to retire with its PPA
and the Minister of MESTECC, Yeo Bee Yin, for her inspiring keynote expiring on 31st December 2019.
address. A special thanks also goes to all our partners and sponsors for • TNB is expected to submit its initial IBR RP3 proposal to EC by
their generous support, industry captains for their participation, as well as December 2019 in preparation of the commencement of negotiations
the relevant Government agencies and our employees for making CEPSI in early 2020.
2018 a memorable event.
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CAPITAL EB I T D A Ma rg in ( % )
40
FINANCIAL HIGHLIGHTS
30
Group revenue for Financial Year 2018, was recorded at
RM50.39 billion. This represented a revenue increase of 6.3% compared to
financial year ended 31 August 2017 (FY2017), on the back of 2.6% demand 20
growth. Among the main contributors for the growth in the Industrial sector 32.2 33.2 32.6 32.3
are the Electric and Electronic and paper-based product manufacturing 28.2
26.5
sectors. Meanwhile, the growth in the Commercial sector are contributed 10
by the business and accommodation services sectors.
Group EBITDA for FY2018 was RM13.37 billion with a margin of 26.5%, 0
FY2014 FY2015 FY2016 FY2017 FPE 2017* FY2018
compared to RM15.47 billion with a margin of 32.6% in FY2017. The
(Restated)
decrease was mainly due to higher operational expenses and one-off * Financial Period Ended 31 December 2017
adjustments.
1.3%
Group Profit After Tax, or PAT of RM3.75 billion was impacted by Other 5.3% RM0.61 billion
Regulatory Adjustment which was returned to the industry, forex translation RM2.53 billion
losses and adverse movement in share of losses in associates.
0.1%
19.3% RM0.06
FY2018 saw TNB’s renewable energy portfolio in United Kingdom (through RM9.21 billion
Tenaga Wind Ventures and Vortex Solar), recording favourable performance. billion
CAPITAL ALLOCATION
74.0%
RM35.42
TNB has a capital planning and allocation process that is essential in D e b t c u rre nc y mi x billion
translating TNB’s aspirations into viable achievements. R M4 7 . 8 3 b illi on
This capital allocation framework has enabled TNB to: MYR USD JPY GPB PKR
• Simplify and reduce time-consuming processes in the preparation 3,149.1 1,670.4 3,844.6 1,026.4 995.9
of TNB’s annual business plan and budgeting;
4,000
• Remain vigilant by continuously streamlining capital spending at
lower risk;
3,000
• Explore new business segments such as development and
investment in renewable energy assets (solar and wind); and
2,000
BORROWINGS DIVIDEND
Supported by strong credit rating of AAA rating by RAM, A by Moodys In 2017, TNB’s Board of Directors had approved a Revised Dividend Policy
and BBB+ by S&P, TNB has the flexibility to tap funding sources from the where dividends are to be paid out based on 30% to 60% of the TNB Group
capital market, banks and other financial institutions from both domestic Consolidated Net Profit Attributable To Shareholders After Minority Interest
and international fronts. (PATAMI). The revised TNB’s dividend policy has increased transparency of
the dividend pay out to stakeholder.
TNB had established a RM5.0 billion Islamic
In compliance to the Companies Act 2016, the management assessed the
Medium Term Note Sukuk Programme and company’s solvency before making a distribution to the shareholders and
a USD2.5 billion Multi-Currency Medium its ability to pay its debts as and when debts become due within twelve
months immediately after the distribution is made.
Term Note Sukuk Programme to meet its
funding requirements. The purposes of both Despite the challenges faced in FY2018, TNB has taken a view that the
one-off adjustments should not affect the dividend payout. Hence, the
programmes are to fund capex, general adjustments were normalised in order to compute the Adjusted PATAMI.
corporate purposes and investments. The
limits of both Programmes can be increased if For FY2018, the Board of Directors had approved a 55.8% dividend payout
ratio from the Group Adjusted PATAMI of RM5.42 billion, amounting to
there is a requirement in the future. RM3.03 billion. This translates to a total of 53.3 sen per share for FY2018, of
which 23.0 sen per share will be distributed as the final single-tier dividend.
In addition, various short term banking trade lines had been established
with most of the locally domiciled banks in Malaysia, which could form
another source of short term funding plan to support TNB’s working capital
requirements.
TNB is governed by its Treasury Policy in managing forex and interest rates
exposures with the objective to protect TNB group’s profit from material
adverse movements due to rates fluctuations. TNB has been managing
its short-term forex exposures through hedging a minimum of 50% of
known foreign currency exposure up to a 12-month period through forward
exchange contracts and natural hedges.
2018 Highlights
To t al Divi dend (R M s e n) Interim Final D ivid e nd d is t rib u t io n ( % ) Dividend payout of Dividend yield
Group PATAMI
55.8(1)
80 60
50.0
17.0 44.0
60 45
30.3
40 30
10.0
44.0 25.3 26.8
10.0 10.0 24.5
20 15
19.0 19.0 22.0 21.4 23.0 4.3
2.6 3.9
2.3 2.2 1.4
0 0
FY2014 FY2015 FY2016 FY2017 FPE FY2018 FY2014 FY2015 FY2016 FY2017 FPE FY2018
2017* 2017*
(1)
Dividend Payout of Adjusted Group PATAMI
* Financial Period Ended 31 December 2017
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MANUFACTURED
CAPITAL
TNB generation assets • ISO 55001 certification has successfully been renewed for TNB’s • Commencement of Large Scale Solar
consist of: wholly-owned domestic plants plant construction in Bukit Selambau
• Performance of TNB’s peninsular plants continue to improve with a 4% • Expansion of current generation
• 5 coal fired plants increase in overall average plant availability leadership development programme
• 14 gas fired plants • Successful completion of acquisition of 20.88MW wind capacity to create new batch of architect level
• 24 distillate fired plants • Successful COD of TNB’s pioneer Large Scale Solar plant in Sepang, leaders
• 128 non-carbon plants Selangor • Continued construction of Jimah East
of various technologies • Completion of initial phase of generation transformation programme Power (2,000MW) which is currently
(hydro, solar, and wind) • Upgrading of TNB’s current domestic power plants in meeting emission at 98.1% project progress and is
levels set out in the Clean Air Regulation 2014 expected to meet its target COD in
June 2019
• Continued construction of SPG
(1,440MW) which is currently at 73.7%
project progress and is expected to
meet its target COD in July 2020
TNB network assets • Maintained domestic networks at world-class performance with • Continued deployment of smart
consist of: transmission system minutes of 0.35, and distribution SAIDI of 48.22 meters in large city centres in
• Successfully completed RM6.372 billion worth of network enhancement in Peninsular Malaysia
• 25,971 circuit km of 2018 as allocated under the current regulatory period. Amongst the assets • Establishment of a Grid Academy that
Transmission network constructed are: will look to improve Grid leadership
• 488 Transmission and management capabilities
substations - 19,506.0 km of networks, and construction of 1,877 new substations • Implementation of Grid Digitalisation
• 682,393.0 circuit km of to better serve domestic customers transformation programme that was
Distribution network - Installation of 160,000 smart meters in line with Government approved in 2018, along four (4) focus
• 89,284 Distribution target of having 1.5 million smart meters by 2020 areas:
substations - SCADA-risation of 3,672 distribution substation in line with initiatives of
building the Grid of the Future - Digital Empowered Workforce,
• Implementation of Asset Performance Management System ensuring - Intelligent Asset Management,
holistic management of assets through its life cycle - Intelligent Grid Operation, and
• Review of the current Grid Strategic Plan that will cater to the enhancement - Grid Insight & Innovations.
to TNB’s transmission grid over the next 10 years
• Successful deployment of TNB’s geospatial information system to three
(3) regions, Kuala Lumpur, Kuala Selangor and Putrajaya that will enhance
network planning activities
Non-Power Assets
Amongst non-power assets • Establishment of REVD, entity within TNB specific to manage and optimises • Continued development of TNB HQ
managed by TNB are: savings from TNB’s real estate assets campus
• Laid over 700 km of fibre optic cable as part of TNB’s power network • Enhancement of TNB’s integrated
• TNB manages over 5.8 extension facilities management and real estate
million square feet of • Conducted high speed broadband pilot using TNB’s fibre optic cable in line project management control to unlock
office and operational with Government’s National Fiberisation and Connectivity Plan (NFCP) in value and optimise savings
work spaces Jasin, Melaka involving 1,100 homes • Complete NFCP pilot trial
• TNB manages over • Commencement of TNB HQ campus development works
16,000 km of fibre optic
network
• TNB manages over 4,100
vehicles
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120%
100%
40%
20%
0%
FY2016 FY2017 FY2018
(1)
Performance of TNB’s wholly-owned power plants in Peninsular Malaysia
(2)
Performance of TNB’s wholly-owned power plants internationally
12.0
10.0
10.4 10.2
8.0 9.6
6.0
System Minutes & System Average Interruption Duration Index (SAIDI) System Minutes SAIDI
NATURAL
CAPITAL
TNB takes responsibility • Monitoring of IUCN red list occupants within our power plant operating area • Continued protection, restoration, and
in protecting and • Conducted 18 biodiversity programmes within our Hulu Terengganu recovery of natural capital surrounding
preserving the flora and hydroelectric station area our area of activities
fauna associated with our • Conducted 11 biodiversity programmes within our Sungai Perak hydroelectric
activities station
• Partnership with National Hydraulic Research Institute of Malaysia
(NAHRIM) to enhance water management at Sungai Perak and Cameron
Highlands
• Protection programme for Kelah fish resources and Rafflesia plants within
the Royal Belum State Park
• Continued adoption of ISO 14001 standards in the operations of our
domestic plants
TNB is committed towards • 1% reduction in GHG emission per MWh produced in 2017 compared with • Increase emission-free capacity both
a low carbon economy by previous year domestically and internationally
embracing and supporting • Continued upgrading of TNB conventional power plants to be in line with • Completion of online GHG emission
renewable energy the Clean Air Regulations 2014 that is expected to be enforced in July 2019 management system
generation and reduction • Increased of emission-free capacity by 1.69%, with the acquisition of GVO • Completion of plant upgrading in line
of both GHG and non-GHG Wind Ltd and Bluemerang Capital Ltd with Clean Air Regulations 2014
emissions • Timely completion of our first Large Scale Solar
• Continued retrofitting of TNB offices to improve building energy efficiency
and management
• Continued implementation of our Home Energy Report programme that has
resulted in a carbon emission avoidance of 33,168 tonnes CO2 emissions
• Continued development of internal online GHG emission management
system that is expected to go live in 2019
2018 Highlights
CO 2 Emission Intensity Total TNB GHG Emissions (mtCO2e) GHG Emissions Intensity (tCO2e/MWh) Net Power Generation (TWh)
70.5 0.7
60.9
60.5 0.6
0.54 0.55 0.54
0.56 GHG Emissions per Power Generation
(Emission Intensity) (tCO2e/MWh)
GHG Emissions (mtCO2e) and
50.5 0.5
Net Power Generation (TWh)
51.8
43.8
40.5 0.4
39.3
29.1 33.5
30.5 0.3
23.9
22.7
20.5 0.2
10.5 0.1
0.0 0.0
FY2014 FY2015 FY2016 FY2017
Financial Year
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INTELLECTUAL
CAPITAL
Continued support of • Investment of more than RM117 million in R&D for 2018, focusing on • Continued investment in research
technological advancement renewable energy and environment, conventional generation, and grid and development as one of the key
through research and networks enablers in addressing the challenges
development • Launched collaboration between TNB Research (wholly-owned subsidiary facing the industry
of TNB) and Institute of Technology Petronas which look to explore joint
research and development in the energy sector
• Collaboration between TNB Research and Malaysian Global Innovation &
Creativity (MaGIC) with the aim of building a healthy micro-ecosystem for
the electricity supply industry
Explore and develop • Successfully completed eight (8) strategic Proof of Concept (POC) • Exploring retail energy marketplace
innovations that innovations on the application of emerging technologies such as model with the aim of delighting our
will optimise TNB’s blockchain, augmented reality and robotics which have potential of end customer
operations, enhance asset delivering • Develop initial sustainable products/
management, and reduce RM3.8 million cost savings per annum services for TNB Smart City solution
operation and maintenance • Introduction of new retail products/services to promote energy efficiency • Collaborate with local university
costs • Implementation of centralised billing has led to timely end-to-end billing (Universiti Tenaga Nasional) to
management establish a Smart Campus
Development of new
products and services for
both regulated and
non-regulated business
Invest in incubating • Establishment of Business Innovation Incubator (BII) entity with the purpose • Appointment of a venture capital
applications of new to incubate innovation and launch start-up prototypes with a focus on partner for innovation investment in
technology and disruptive commercialisation at scale the energy sector
business model, from • Establishment of internal committee to evaluate and endorse high-impact • Increasing the number of high impact
both internal and external innovation proposals proposal under incubation
sources • Endorsement of four (4) high-impact innovation proposals for incubation
by BII
• Establishment of a simplified internal innovation framework that is aimed
at increasing crowdsourcing of ideas and shortening steps from ideation to
actualisation
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2018 Highlights
100
80
60 R &D in ve s t m ent by
re s e a rc h a rea s
40
20
Grid network
52%
0
FY2014 FY2015 FY2016 FY2017 FY2018
Renewable energy and • Project on developing a technically, economically and environmentally feasible floating solar photovoltaic
environment system for domestic implementation
• Development of suitable carbon material use to improve the capturing of GHG emission in coal power
plants
• Design, development and commercialise improved impulse hydro turbine capable of higher turbine
efficiency
• Develop active management of distribution network with distributed renewables as a Distributed
Generation model
Conventional thermal generation • Development of conventional thermal boiler profile to further optimise performance and efficiency
• Optimisation of coal management systems to improve coal condition and transportation
• Development of improved dynamic cooling model for gas turbine power plants
• Development of model aimed at optimising power generation costs, energy conversion efficiency and
GHG emission
Grid network • Feasibility study on portable earthing for deployment of mobile substations
• Economic study on optimisation network performance vs asset life cycle cost for medium voltage
equipment
• Development of IEC 61850 Specification and Guidelines for the Implementation of Substation Protection,
Automation and Control Systems for local implementation
• Pilot implementation of internally developed demand response mechanism for local deployment
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HUMAN
CAPITAL
Development of a more strategic • Review of critical HR processes to facilitate the operationalisation of • Developing HR mid-term and long
and data-driven HR function HR shared services by TNB Global Business Solutions term strategy (2020-2025) to ensure
through creation of new Data • Successful migration of HR shared services functions from Group HR alignment to the new operating model
Analytics functions within HR’s to TNB Global Business Solutions • Embark on a HR culture transformation
Centre of Expertise • Full implementation of People-Matters Better Brighter online talent throughout TNB
management to cater for HR services from hire to retire • Promote a Data Driven HR through
Deployment of HR Business • Successful migration of TNB medical benefits management from analytics capability development
Partners for each business line external provider to internal team programmes
to facilitate strategic partnership • Establishment of HR Analytics team • Establishing the necessary data
between HR and the business governance framework and ICT tools
as analytics enablers
Centralisation of HR shared
services within TNB Global
Business Solutions entity to unlock
efficiency and productivity gains
Ensure the safety of individuals at • Introduction of Tenaga Safety Culture which emphasises practicing • Enhancement of our internal HSE
TNB facilities and areas of activities safety as a way of life platform to enable more functions and
• Strengthening the enforcement of TNB’s Life Saving Rules introduced services to be provide
Develop a health and safety in 2017 • Continuous efforts to improve the
generative culture that is aimed to • Development of an internal HSE platform that will allow for safety awareness and practices
achieve zero accident centralisation of HSE monitoring and tracking amongst employees and contractors
• Successful accreditation of eight (8) cafeterias within Company working within our premises
Foster a culture of global premise as “Healthy Cafeterias” by Minister of Health to ensure • Development of internal ergonomics
preventive health activities amongst provision of nutritious food based on the Malaysian Dietary guidelines
employees Guidelines and Recommended Nutrient Intake
• Continued promotion of corporate weekly wellness hour and annual
staff wellness check-up
Maintain core competencies and • Recruitment of the right talents with the right values locally and • Expansion of our Leadership Drive
building new capabilities in the globally programme to include junior manager
areas of new technology and • Development of talents through numerous technical and functional level
innovations training programmes attended by more than 70% of our employee • Enhancement of our corporate MBA
in 2018 programme and expansion of our
Building leadership capabilities • TNB leadership talents had undergone 2,486 training hours in 2018 leadership development programme
at every level anchored on the focused on enhancing their leadership capabilities • Enhancement of leadership
TNB leadership values of ‘Future, • Progress 1,300 employees through our Upward Mobility programme development programme to help our
Engage, and Deliver’ in which we provide employees with the opportunity to upgrade leaders embrace global disruptions
their qualification from a high school leaver to a degree or equivalent
industrial certification holder
• Continued support for the development of Malaysian graduates
through participation in SL1M internship programme. TNB enrolled
880 graduates into our SL1M development programme in FY2018
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2018 Highlights
15,000 18,000
10,000 12,000
5,000 6,000
0 0
Gen Z Millennials Gen X Baby Senior Management Executives Non-
Boomers Management Executives
* Baby Boomers (> 55 years old), Gen X (40-55 years old), Millennials (24-39
years old) and Gen Z (<24 years old)
E MP L OYE E TRAINING
Technician career development programme
Senior Management Management 1,173
92.3% 81.5%
Average training hours per Average training hours per Clerical career Technician degree
employee: 15.4 hours employee: 15.3 hours development programme programme
97 20
Executives Non-Executives
13 30
Average training hours per Average training hours per
employee: 24.7 hours employee: 17.2 hours
2 GENERATION: 1.6
TRANSMISSION: 3.1
1 DISTRIBUTION: 1.1
RETAIL: 6.9
0 OTHERS: 1.2
FY2016 FY2017 FY2018
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Forming strong societal connections based on shared values of trust, credibility, and reliability are core to TNB’s continuous efforts in building social capital with our
various stakeholders, who are at the heart of our value-creation process.
We continuously communicate, engage, and initiate outreach to our network of stakeholders – from communities residing near our power plants and our customers to
the authorities and non-governmental organisations (NGOs) – to enable opportunities to collaborate, develop co-ownership, and generate shared experiences within
which good faith and trust are further strengthened.
Developing strong relationship premised on shared values, concerns, and interests of all our stakeholders are central to who we are, what we do, and how we make
our decisions.
STAKEHOLDER GROUPS
CUSTOMERS
Our customers comprise INVESTORS TRADE-UNIONS
domestic, commercial, and Institutional and retail Three (3) registered unions and
industrial customers, including the investors, analysts, business two (2) workers’ associations
Government, Small & Medium- partners, and potential that cover all categories of staff.
Sized Enterprises (SMEs) and investors with interest.
large corporations.
GOVERNMENT COMMUNITIES
EMPLOYEES
The Malaysian Federal Local communities in
Our 35,574 employees
and State Governments, or near areas where
throughout TNB Group VENDORS
parliamentarians, municipal and we operate including
(Full-time employees 4,665 contractors
district councils, and regulators. those affected by
excluding contractors.) and suppliers.
our operations.
More information on our Stakeholder Engagement efforts and how we respond to stakeholder concerns can be found in our Sustainability Statement within this Integrated Annual
Report, and our upcoming Sustainability Report 2018.
TRANSFORMING THE COMMUNITY better, brighter lives that contribute to the betterment of our society. To this end,
we have set up initiatives to support youth advancement that will enable them
As a caring business that has been powering the Nation’s progress for the past to be more upwardly mobile, regardless of background, race, religion, or gender.
seven (7) decades, it is our purpose to support the sustainable development
of the communities within which we operate. TNB’s community-building and Good education can transform lives. We believe our social aspirations can be
community investment efforts encompass the following areas: achieved by enabling more disadvantaged youths to gain access to quality
education.
• Education;
• Environmental protection and biodiversity conservation; and TNB’s efforts in ensuring equitable access to quality education,
• Sustainable economic growth and social development. especially among youths and young children from vulnerable and
lower-income in line with the global sustainable development
In times of rapid societal changes and unsettling disruptions caused by agenda, particularly, Goal Four: Quality Education, under the 2030
technological advances, shifts in economic hierarchy, and climate change, the Agenda for Sustainable Development by the United Nations.
accelerated widening of social gaps calls for strategic interventions from both
the public and private sectors – to mitigate the effects of income inequality and Through the various education support programmes, scholarships, financial
ensure greater social mobility, while enhancing social integration. assistance, and school adoption initiatives carried out by TNB, we hope that
by 2030, we would have played a part in helping to ensure equal access to
This is what TNB has always been focusing on playing our role to help the less affordable technical, vocational and tertiary education for all young Malaysians –
privileged, so they in turn can help themselves. In doing so, we aspire to create including persons with disabilities, indigenous people, and the underprivileged.
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Education Programmes
• Back-to-School Programme
i. Through this programme, TNB helped B40 families prepare their children for the new schooling year by providing primary school students with the
necessary school supplies such as uniforms, stationery sets and school bags.
ii. More than 13,000 primary students across 50 locations nationwide benefited from this programme in FY2018.
Heena Niesha Bella Ravindran Ken Ak Abam Leong Kah Yau Nur Aleefah Shuhadah Azhar
• Yayasan Tenaga Nasional (TNB Foundation) Scholarships and Financial Assistance Programme
i. We have an annual commitment of RM50 million to develop the future leaders of our nation by enabling bright young Malaysians to pursue their tertiary
education in local and foreign universities.
ii. We are proud to be able to provide 1,974 students with scholarships and financial assistance needed to pursue their aspirations in 2018.
For more information about our environmental and biodiversity, as well as community investment and social development programmes, please refer to our Sustainability
Statement on pages 66 to 96 or our upcoming Sustainability Report 2018.
The advent of information technology and development of sophisticated smart wireless devices has given rise to opportunities to use social media as a vehicle for
better recognising the values, reaching out, and engaging a wider spectrum of stakeholders.
Effective social media strategy employed during the year saw TNB’s social media platforms gaining further traction with sizable organic growth in the number of
followers to:
p.44
OUR
SCORECARD
31.8.2014 31.8.2015 31.8.2016 31.8.2017 31.12.2017 31.8.2018
Equivalent unplanned outage factor(2) 7.09% 3.85% 4.44% 2.69% 4.46% 3.24%
(1)
For Peninsular Malaysia only.
(2)
Including TNB’s wholly-owned generating capacity in Peninsular Malaysia.
(3)
TNB did not conduct any Corporate Reputation Index prior to FY2014.
(4)
TNB conducts its employee engagement survey biennially. The scores for both FY2016 and FY2017 are based on survey conducted in FY2016.
(5)
The respective surveys was not conducted during this 4-month Annual Report period.
(6)
Financial Period Ended 31 December 2017 (Restated)
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p.45
FINANCIAL
CALENDAR
25 May 2018 27 November 2018
Unaudited consolidated results for the Unaudited consolidated results for the
first (1st) quarter ended 31 March 2018 third (3rd) quarter ended 30 September 2018
Announcement
of Consolidated
Results 30 August 2018 28 February 2019
Unaudited consolidated results for the Unaudited consolidated results for the
second (2nd) quarter ended 30 June 2018 fourth (4th) quarter ended 31 December 2018
Interim Single-Tier Dividend of 30.27 sen Final Single-Tier Dividend of 23.0 sen
per ordinary share for the Financial Year ended per ordinary share for the Financial Year ended
31 December 2018 31 December 2018
Notice of 28th Annual General Meeting and Notice of 29th Annual General Meeting and
Issuance of Integrated Annual Report 4-Month Issuance of Integrated Annual Report for the
Period ended 31 December 2017 Financial Year ended 31 December 2018
Annual General
Meetings
15 May 2018 14 May 2019
p.46
INVESTOR
RELATIONS
Our Investor Relations (IR) team strives to provide our stakeholders with timely updates on TNB’s business strategy, growth
direction and latest developments.
In FY2018, various engagement and communication activities were carried out to develop a positive relationship with our existing and potential investors.
These activities include our quarterly and full-year financial results announcements, Investor Relation programme, as well as one-on-one and group
meeting engagement sessions with investors and analysts.
To ensure that we receive appropriate feedback and sustain our excellence service to the investment community, we conduct our IR Annual Survey
regularly to gauge the team’s performance, as well as investors’ satisfaction level towards our performance.
461 81.6%
(FY2017: 454) (FY2017: 81.7%)
We are committed to deliver timely, accurate and transparent disclosures on material corporate updates to our shareholders and
the investment community. We also benchmark our processes and internal controls against global best practices in key areas,
including upholding high ethical values in handling information disclosure.
This is vital in shaping investors’ positive perception on the Group’s accountability, transparency and efficiency. In doing so, we aim to develop a close
rapport with our investment community to enable a better understanding of our business, strategy and performance.
As part of continuous improvement, we consistently strive to enhance the delivery of our material disclosures to ensure the stakeholders are well informed
on the latest developments in financial performance, local and international business performance, relevant environmental, social and governance (ESG)
practices and other related matters.
We maintain strong links with our 26 sell-side research analysts and four (4) credit rating agencies to ensure information outflow to the market is accurate
and consistent with the Group’s views and performance.
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The Group is dedicated to create sustainable value for our shareholders and has been consistently rewarding them through the
declaration of interim and final dividend in each financial year.
• An interim single-tier dividend of 30.3 sen per ordinary share amounting to RM1.72 billion (paid in October 2018); and
• A single-tier final dividend of 23.0 sen per ordinary share amounting to RM1.31 billion.
The total dividend payout in FY2018 is 53.3 sen per ordinary share, representing a 56% dividend payout ratio that is consistent with our current dividend
policy of between 30% and 60% of Group PATAMI.
SHAREHOLDERS INFORMATION
Legend 6.5%
14.2%
Khazanah
Nasional Berhad 12.7% Foreign shareholding breakdown
Permodalan
by geographical location
Nasional Berhad
Pacific Africa
Employees 0.2% 0.1%
Provident Fund
Board Europe
20.8% 22.0%
AS AT
Other
17.0% 31 DECEMBER 2018 Asia
Government
Agencies 39.6%
Other Local
Corp. & North
Malaysian Public America
38.1%
Foreign 28.8%
Shareholdings
4 JANUARY 2018 8 - 9 MARCH 2018 20 - 21 MARCH 2018 21 - 22 JUNE 2018 16 - 18 JULY 2018 7 AUGUST 2018
Sultan
CIMB 10th Credit Suisse Macquarie Mahmud
Daiwa Maybank
Malaysia Investment NDR Hydro Power
Capital Market Invest Asia
Corporate Day Conference (New York, Boston Plant Site Visit
(Japan) (London)
(Kuala Lumpur) (Hong Kong) & San Francisco) (Kenyir,
Terengganu)
TNB SHARE PRICE, FBM KLCI INDEX AND VOLUME TRADED IN FY2018
15.00
Analyst Briefing
1800.00
1Q PE Ended Dec’17
14.50 26 Jan’ 18
1750.00
140.0
1700.00
13.50
1650.00
13.00
40.0
20.0
0.0
Jan18 Feb18 Mar18 Apr18 May18 Jun18 Jul18 Aug18 Sep18 Oct18 Nov18 Dec18
p.49
NET BOOK VALUE OF
LAND AND BUILDINGS
AS AT 31 DECEMBER 2018
Tenaga Nasional Berhad
Integrated Annual Report 2018
LAND BUILDINGS
(1) (2) (3) (4) (5) (6) (1+4) (2+5) (3+6) (10) (11) (12)
LOCATION
About TNB
Perlis 50 156,976 1,833 439 88,183 11,631 489 245,159 13,464 74 11,369 21,260
Our Business
Business Context
Kedah 298 1,056,663 13,745 692 938,462 55,188 990 1,995,125 68,933 375 139,930 218,215
Pulau Pinang 195 719,709 63,212 676 985,302 79,670 871 1,705,011 142,882 346 135,470 859,289
Perak 795 6,164,665 334,582 667 4,432,922 311,365 1,462 10,597,587 645,947 951 691,789 2,758,940
Selangor 985 11,819,669 501,895 1,458 2,601,898 550,954 2,443 14,421,567 1,052,849 1,670 740,644 2,268,922
W. Persekutuan 384 297,326 67,716 565 630,249 191,934 949 927,575 259,650 580 274,895 719,271
N. Sembilan 284 2,066,500 79,656 551 1,154,814 76,788 835 3,221,314 156,444 261 459,968 507,761
Governance
Melaka 360 640,641 23,478 460 251,696 160,530 820 892,337 184,008 90 161,746 187,241
Johor 961 3,444,031 419,804 1,153 1,005,893 207,354 2,114 4,449,924 627,158 545 260,203 809,900
Performance Review
Sustainability Statement
Pahang 380 1,319,143 50,572 540 919,194 83,810 920 2,238,337 134,382 508 278,694 3,663,827
Terengganu 367 2,583,865 39,100 211 11,023,207 89,698 578 13,607,072 128,798 284 491,018 1,794,392
Kelantan 360 1,288,093 8,532 354 2,296,831 25,362 714 3,584,924 33,894 361 664,909 824,883
Sabah 316 6,261,621 76,641 60 4,501,754 35,488 376 10,763,375 112,129 2,587 651,954 428,414
Total 5,744 38,445,840 1,694,656 7,842 31,622,303 1,882,997 13,586 70,068,143 3,577,653 8,695 4,983,883 15,102,086
The land and buildings comprise power stations, mini hydros, jetties, dams, substations, residential houses, apartments, holiday bungalows, office buildings, warehouses, stores
Financial Statements
and workshops.
Additional Information
While our roots are firmly consolidated on accomplishments within Malaysia, we have also made inroads
into the international arena and our growth has already gained footholds in overseas markets which include
Pakistan, India, Turkey, Saudi Arabia and the United Kingdom.
We will continue to grow, move economies and drive the energy industry by transcending borders, shaping
a better brighter future for us and the generations to come.
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p.51
BUSINESS
CONTEXT
52 Corporate Information
53 Organisational Structure
54 Group Corporate Structure
56 Direct Value Added to Malaysia
57 Awards & Recognition
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p.52
CORPORATE
INFORMATION
BOARD OF DIRECTORS SENIOR INDEPENDENT REGISTERED OFFICE
NON-EXECUTIVE DIRECTOR Tenaga Nasional Berhad (200866-W)
TAN SRI LEO MOGGIE Noraini binti Che Dan Pejabat Setiausaha Syarikat, Tingkat 2
Chairman Email : norainicd.integrity@tnb.com.my Ibu Pejabat Tenaga Nasional Berhad
Non-Independent Non-Executive Director No. 129, Jalan Bangsar
COMPANY SECRETARY 59200 Kuala Lumpur
AMIR HAMZAH BIN AZIZAN
President/Chief Executive Officer Norazni binti Mohd Isa (LS 0009635) Malaysia
Non-Independent Executive Director Telephone : +603-2296 5566
(Appointed w.e.f. 2 April 2019) SHARE REGISTRAR Facsimile : +603-2283 3686
Boardroom Share Registrars Sdn. Bhd. (378993-D) Website : www.tnb.com.my
DATUK AHMAD BADRI BIN MOHD ZAHIR (formerly known as Symphony Share Registrars Sdn. Bhd.)
Non-Independent Non-Executive Director
TNB Careline : 15454
Level 6, Symphony House (for power outage or TNB
(Appointed w.e.f. 1 November 2018)
Pusat Dagangan Dana 1 street light malfunction)
AMRAN HAFIZ BIN AFFIFUDIN Jalan PJU 1A/46 : 1-300-88-5454
Non-Independent Non-Executive Director 47301 Petaling Jaya (for billing and account enquiries)
Selangor Darul Ehsan Whistle : wbis.tnb.com.my
NORAINI BINTI CHE DAN Malaysia
Senior Independent Non-Executive Director Blowing
(Redesignated w.e.f. 28 February 2019) Telephone : +603-7849 0777 (Help Desk) Information
Facsimile : +603-7841 8151/8152 System
GEE SIEW YOONG Toll Free : 1-800-888-862
Independent Non-Executive Director DIVIDEND SERVICE PROVIDER
JUNIWATI RAHMAT HUSSIN Bursa Malaysia Depository Sdn. Bhd. (165570-W) AGM HELP DESK
Independent Non-Executive Director 10th Floor, Exchange Square Telephone : +603-2180 4586/4587/4590
Bukit Kewangan (Share Administration Section
GOPALA KRISHNAN K.SUNDARAM 50200 Kuala Lumpur Company Secretary’s Office
Independent Non-Executive Director Malaysia Tenaga Nasional Berhad)
(Appointed w.e.f. 4 July 2018)
Telephone : +603-2034 7751
ONG AI LIN Facsimile : +603-2026 3712 INVESTOR RELATIONS
Independent Non-Executive Director Investor Relations Department
(Appointed w.e.f. 1 August 2018) PRINCIPAL BANKERS Tingkat 4, Ibu Pejabat
Malayan Banking Berhad (3813-K) Tenaga Nasional Berhad
DATO’ ROSLINA BINTI ZAINAL No. 129, Jalan Bangsar
Non-Independent Non-Executive Director
EXTERNAL AUDITORS 59200 Kuala Lumpur
(Appointed w.e.f. 15 March 2019)
Messrs PricewaterhouseCoopers PLT Malaysia
DATUK SERI HASHMUDDIN (LLP0014401-LCA & AF 1146) Telephone : +603-2296 6748
BIN MOHAMMAD Chartered Accountants Facsimile : +603-2284 0095
Non-Independent Non-Executive Director Level 10, 1 Sentral Email : tenaga_ird@tnb.com.my
(Resigned w.e.f. 1 April 2018) Jalan Rakyat
DATO’ ABD MANAF BIN HASHIM Kuala Lumpur Sentral STOCK EXCHANGE LISTING
Senior Independent Non-Executive Director P.O. Box 10192 Main Market of Bursa Malaysia Securities Berhad
(Cessation of Office as Director w.e.f. 15 May 2018) 50706 Kuala Lumpur (Listed since 28 May 1992)
Malaysia
DATUK SAKTHIVEL ALAGAPPAN CREDIT RATINGS
Independent Non-Executive Director
Telephone : +603-2173 1188
(Cessation of Office as Director w.e.f. 15 May 2018) Facsimile : +603-2173 1288 Local Rating Agency International Rating Agency
Issuer Rating Issuer Rating
TAN SRI DATO’ SERI CHOR CHEE HEUNG
Independent Non-Executive Director RAM Rating AAA Standard & Poor’s BBB+
(Resigned w.e.f. 30 June 2018) Services Ratings Services
Berhad (RAM) Stable (S&P) Stable
BADRUL ILAHAN BIN ABD JABBAR
Independent Non-Executive Director Malaysian AAAIS/ Moody’s
Rating Investors A3
(Resigned w.e.f. 30 June 2018)
Corporation AAA Service
Stable
DATUK SERI IR. AZMAN BIN MOHD
Berhad Stable (Moody’s)
(MARC)
President/Chief Executive Officer
Non-Independent Executive Director
(Resigned w.e.f. 31 March 2019) AMERICAN DEPOSITORY RECEIPTS
PROGRAMME (ADR)
ADR Level 1
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p.53
ORGANISATIONAL
STRUCTURE
BOARD OF DIRECTORS
COMPANY
CHIEF
RISK SECRETARY
OFFICER
BOARD
COMMITTEES
CHIEF
INTERNAL
AUDITOR
PRESIDENT/
CHIEF EXECUTIVE
Chief Generation Officer Chief Financial Officer
OFFICER
(Generation Division) (Group Finance Division)
HEAD HEAD
CHIEF TALENT OFFICER (Real Estate Ventures) (Career Enhancement Management)
HEAD HEAD
CHIEF INTERNATIONAL (Fleet Management) (Health, Safety & Environment)
OFFICER
HEAD
(Security Services)
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GROUP
CORPORATE
STRUCTURE
100% MALAYSIA TRANSFORMER MANUFACTURING SDN. BHD. 100% TNB RESEARCH SDN. BHD.
100% TNB INTEGRATED LEARNING SOLUTION SDN. BHD. 100% TNB LABS SDN. BHD. (Formerly known as TNBR QATS Sdn. Bhd.)
100% TNB FUEL SERVICES SDN. BHD. 70% MAEVI SDN. BHD.
100% TNB GLOBAL VENTURES CAPITAL BERHAD 20% JANA LANDFILL SDN. BHD.
100% TNB TOPAZ ENERGY SDN. BHD. 80% GVO WIND LIMITED*
100% TNB GLOBAL CAPTIVE (L) LTD 80% BLUEMERANG CAPITAL LIMITED*
100% TNB PRAI SDN. BHD. 100% LEKIR BULK TERMINAL SDN. BHD.
100% TNB NORTHERN ENERGY BERHAD 50% LESS 1 SHARE LUMUT MARITIME TERMINAL SDN. BHD.
100% BANGSAR ENERGY SYSTEMS SDN. BHD. 100% UNITEN R&D SDN. BHD.
100% TNEC OPERATIONS AND MAINTENANCE SDN. BHD. 100% TNB RENEWABLES SDN. BHD.
TOMEST ENERGY MANAGEMENT SDN. BHD. 100% TNB BUKIT SELAMBAU SOLAR SDN. BHD.
51% (In Members’ Voluntary Winding Up)
100% GSPARX SDN. BHD.
77% AIRPORT COOLING ENERGY SUPPLY SDN. BHD.
* % of holdings are based on equity structure. The economic interest is 100%. List of subsidiaries for GVO Wind Limited and Bluemerang Capital Limited are detailed out on pages 203 to 205 of
this Integrated Annual Report.
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LEGEND:
ASSOCIATES
100% TNB VENTURES SDN. BHD.
49% FIBRECOMM NETWORK (M) SDN. BHD.
76% TENAGA CABLE INDUSTRIES SDN. BHD.
20% TEKNOLOGI TENAGA PERLIS CONSORTIUM SDN. BHD.
100% POWER AND ENERGY INTERNATIONAL (MAURITIUS) LTD.
20% GB3 SDN. BHD.
100% GLOBAL POWER ENERJÎ SANAYÎ VE TÎCARET ANONÎM ȘÎRKETÎ PERUSAHAAN OTOMOBIL ELEKTRIK (MALAYSIA) SDN. BHD.
20% (In Winding Up)
30% GAMA ENERJI ANONÎM ȘÎRKETÎ
10% LABUAN REINSURANCE (L) LTD.
100% TNB REPAIR AND MAINTENANCE SDN. BHD.
8.91% FEDERAL POWER SDN. BHD.
100% TENAGA WHR 1 SDN. BHD.
TRUST FOUNDATIONS
100% TNB REMACO PAKISTAN (PRIVATE) LIMITED
YAYASAN TENAGA NASIONAL
100% TRICHY ENERGY LIMITED (Dormant)
RETIREMENT BENEFIT TRUST FUND
100% TRICHY POWER LIMITED (Dormant)
100% OASIS PARADE SDN. BHD. 100% TNB CAPITAL (L) LTD.
83% SABAH ELECTRICITY SDN. BHD. 100% TNB GENERATION SDN. BHD.
100% ELOPURA POWER SDN. BHD. 100% TNB DISTRIBUTION SDN. BHD.
60% TENAGA SWITCHGEAR SDN. BHD. 100% TNP CONSTRUCTION SDN. BHD.
60% TSG ORMAZABAL SDN. BHD. 40% KM METRO-TNB PROPERTIES SDN. BHD.
95% PT. TENAGA NUSA BAKTI (Dormant) 100% ORION MISSION SDN. BHD.
34% TENAGA MIDDLE EAST ELECTRIC CONTRACTING L.L.C 100% LAHAD DATU HOLDINGS SDN. BHD.
MANJUNG ISLAND ENERGY BERHAD (Subsidiary as defined by MFRS 10, 11 and 12)
p.56
DIRECT VALUE
ADDED TO MALAYSIA
31.12.2018 31.12.2017 31.08.2017
(Restated)
VALUE ADDED (RM Million)
To employees:
Employment cost 3,685.8 1,288.5 3,751.1
To the Government:
Taxation and zakat 1,301.6 235.0 1,369.7
To shareholders:
Dividends 2,931.9 2,493.0 2,205.5
Non-controlling interest 21.3 (13.8) 8.1
To reinvest to the Group:
Depreciation and amortisation 6,491.3 2,049.9 6,105.0
Retained profit 791.8 129.3 4,698.5
Total distributed 15,223.7 6,181.9 18,137.9
47.8% 24.2%
20.8% Legend
35.3%
To Employees: Employment Cost
To the Government: Taxation and Zakat
3.8%
Distribution of To Shareholders: Dividends and Non-Controlling Interest
Value Added
To Reinvest to the Group: Depreciation, Amortisation
and Retained Profit
40.1%
)
Fin
ed
nc
st
at
a
ial 8.6%
Pe (Re
riod 17
Ended 31.12.20
31.12.2018 19.4%
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p.57
AWARDS &
RECOGNITION
In keeping with the vision of Reimagining
TNB, our Company’s business performance
par excellence is reflected by the
prestigious accolades we garnered locally,
regionally, and internationally during the
financial year.
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2018 Australasian
Reporting Award
Gold Award for
Excellence in Content
Reporting
The 10 th Annual
Global CSR Summit
& Awards 2018
Special Recognition
13 th Employer
Award for 5
Branding
Consecutive Years of
Awards
CSR Excellence
Malaysia Best
Employer Brand
Awards 2018
The Golden
Globe Tigers
2018
The Golden Green Future
Globe Tigers Leadership - TNB
2018 Energy Services
Best in Managing Sdn. Bhd.
Health at Work
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Employers’
Federation of
Pakistan
Best Practices
Award on OSH
2017 – Power
& Utility Sector
- TNB Repair &
Maintenance
Human Resources
Minister Award 2018
Large Service Sector - TNB
Janamanjung Sdn. Bhd.
Share Guide
Association Malaysia
(SGAM) ICT Awards
2018
TNB Android Billing
Project
World Branding
Awards 2018 - 2019
Brand of the Year -
Energy - Power
HRDF
Conference
& Exhibition
2018
Innovation &
Creativity Award -
TNB Janamanjung
Sdn. Bhd.
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p.61
PERFORMANCE
REVIEW
p.62
SIMPLIFIED GROUP
STATEMENT OF
FINANCIAL POSITION
72.5%
16.6%
17.9%
5.6%
3.7%
4.4%
5.1%
0.6%
TOTAL ASSETS
0.9%
72.7%
Fi d)
na te
nc a
ial
Per R est
iod En 17 (
ded 31.12.20
31.12.2018
Property Plant and Inventories Trade and Other Deposits, Bank and Other Assets
Equipment Receivables Cash Balances
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0.8%
7.5%
5.2%
0.6%
2.1%
7.8%
31.8% 30.2%
5.7%
5.2% 1.9%
TOTAL LIABILITIES
5.3% & EQUITIES 6.3%
6.4%
0.1%
8.2%
7.7%
3.6% 0.1%
28.7%
3.7% Fi d)
na te
nc a
ial
Per R est
iod En 17 ( 31.1%
ded 31.12.20
31.12.2018
Trade and Current Total Consumer Employee Deferred Contract Other Current Share Non- Retained
Other Taxation Borrowings Deposits Benefits Taxation Liabilities and Non Capital Controlling Profits and
Payables Current Interest Reserves
Liabilities
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p.64
89.4%
94.1%
1.1%
6.0% CORE
1.0%
REVENUE
0.2%
3.8% d)
Fi n
0.8%
te
ci
an
ta
3.6%
al es
Pe
7 (R
rio
d En 201
ded 31.12.
31.12.2018
RM Million
81.7%
41.2% 34.7%
(Group/RM Million) (Group/GWh) (by Classification)
SUSTAINABILITY
STATEMENT
66 About This Statement
67 Managing Sustainability
68 Sustainability Governance
68 Supporting The United Nations Sustainable Development Goals (UN SDGs)
70 Engaging Stakeholders
71 What Matters to Us
72 Spirit of Responsibility
• Our Governing Principles
74 Delivering With Purpose
• The Future of Energy
• Customer Centricity
81 Environmental Stewardship
• Minimising Environmental Impact
• Climate Change
84 Embracing Relationship
• Unlocking People Value
• Generative Safety Culture
• Brightening Surrounding Communities
• Transforming Lives Through Education
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p.66
SUSTAINABILITY
STATEMENT
At TNB, we prioritise business operations that cater to the needs and
interests of our various stakeholders and also the environment we live
in. We aim to provide clear, transparent and comprehensive information
on all our efforts that highlight our commitment to sustainability, while
identifying areas for improvement.
We continue to share our sustainability performance and initiatives in relation The scope of this statement is mainly centered on TNB Company’s operations
to our journey of creating value for our stakeholders. We also disclose targets in Peninsular Malaysia, with selected highlights on our subsidiaries. This
for certain material matters, which are aligned to our corporate strategy and statement excludes any kind of outsourced, joint venture or suppliers’
also the United Nations Sustainable Development Goals (UN SDGs). activities unless otherwise stated.
The statement is prepared in accordance to Bursa Malaysia Securities The statement period covers our Financial Year 2018 (FY2018), which is from
Berhad's (Bursa Malaysia) Main Market Listing Requirements for Sustainability 1 January to 31 December. Where data for FY2018 is not available, the most
Statement. This statement is guided also by the Global Reporting Initiative recent data is provided.
(GRI) Standards. Various qualitative and quantitative data have been provided
in this statement for the material matters pertaining to TNB’s economic,
environmental and social performance.
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MANAGING SUSTAINABILITY
Our strategic plan for 2017-2025, Reimagining TNB, was developed to Goals (SDGs). In this regard, the TNB Sustainability Strategy includes our
help transform the organisation to be amongst the leading corporations in impactful contributions to four (4) SDGs namely; Goal 7 (Affordable and
energy and related business globally. In tandem with this, our economic, Clean Energy), Goal 8 (Decent Work and Economic Growth), Goal 13 (Climate
environmental and social commitments are fully aligned with our Reimagining Action), and Goal 17 (Partnerships for the Goals) as illustrated in the diagram
TNB strategy. below.
It is important to note that sustainability is a continuous and progressive This section will provide an overview of our governance structure, stakeholder
journey. With this in mind, in 2018, we are aligning our aspirations and engagement process, identification and management of material areas,
sustainability commitments to the United Nations Sustainable Development commitment to the SDGs and our sustainability initiatives.
The diagram below shows the linkages and alignment between Reimagining TNB and our sustainability commitments.
customers Sources
Economic
REIMAGINING TNB
• Supply energy locally
and internationally To be amongst
the leading
corporations in
energy and related
• Support transition to a business globally
low-carbon economy
• Minimise Winning the
Customer
Environmental environmental impact
07 AFFORDABLE AND
CLEAN ENERGY 08 DECENT WORK
AND ECONOMIC
GROWTH
13 CLIMATE
ACTION 17 PARTNERSHIPS
FOR THE GOALS
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SUSTAINABILITY GOVERNANCE
Sustainability is embedded in our company policies and is inextricably linked with our business strategy and decisions. It influences our investments,
operational efficiency programmes, stakeholder engagements and climate risk mitigation efforts, among others.
TNB Board of Directors is cognisant of the importance of ensuring sustainability is integrated in the strategic direction of the organisation,
decision-making processes and operational performance.
TNB’s sustainability initiatives fall under the purview of the respective committees – including Sustainability Development Committee (SDC), chaired by
the President/Chief Executive Officer (CEO).
The SDC’s role is to review, evaluate and advise on Sustainability and Green Energy related initiatives prior to further review from other relevant
committees including the Board. Decisions to escalate issues to higher approving authorities are subject to our Procurement & Supply Chain Policy and
Procedures, and Limits of Authority (LOA) guidelines.
Sustainability initiatives and their implementation are cascaded down to divisions and subsidiaries for incorporation into their respective business and
operational areas. Periodically, they will report on sustainability performance.
In 2015, as part of the United Nations (UN) 2030 Agenda for Sustainable Development, 17 Sustainable Development Goals (SDGs) were adopted by 193
countries of the UN General Assembly.
As a signatory to the UN SDGs, Malaysia is committed to aligning the Nation’s sustainability commitments towards the UN SDGs through partnership and
collaboration. At TNB, we continuously contribute towards Malaysia’s sustainability commitments and goals.
At TNB, we currently focus our contributions on four (4) UN SDGs, namely SDG 7, 8, 13 and 17. Our approach to the selection of these four (4) SDGs was based
on what is most material to us as an organisation, and the areas that are most relevant to our business and operations.
TNB’s contributions to the UN SDGs were not limited to the four (4) SDGs mentioned as various initiatives taken also address the other SDGs indirectly. These
are further showcased in the following section (What Matters to Us, page 71). Looking ahead, we will further enhance formulation and development of relevant
strategies, action plans and targets with regards to SDGs.
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03 GOOD HEALTH
AND WELL-BEING 04 QUALITY
EDUCATION
15 LIFE
ON LAND 16 PEACE, JUSTICE
AND STRONG
INSTITUTIONS We will continue to form partnerships with all stakeholders
including government agencies, industry experts, businesses
and NGOs, both within and outside the energy sector. This is
to meet future electricity demands in a sustainable manner, as
17 PARTNERSHIPS
FOR THE GOALS well as to give back to the community.
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ENGAGING STAKEHOLDERS
Stakeholder engagement process is an important component in sustainability. The purpose of this engagement is for fostering better relationships
and also for understanding their respective needs and concerns to continuously improve ourselves. At TNB, we engage with various stakeholders
on a regular basis, and when required.
Our customers comprise of domestic, Institutional and retail investors, analysts and Three (3) registered unions and two (2) workers
commercial and industrial customers including potential investors with interest associations that cover all categories of staff
Government, Small & Medium-Sized Enterprises
(SMEs) and large corporations
• Customer service outlets • Financial results announcements • Joint meetings and engagement sessions
• Call centre • Investor relation conferences and roadshows • Negotiation
• myTNB application & online portals • One-to-one engagements • Collective Agreements
• Customer surveys • Site visits • Direct contact
• Social networks
• Roadshows
• Campaigns
Local communities in or near areas where The Malaysian Federal and State Governments, Our 35,574 employees throughout TNB Group
we operate including those affected by our parliamentarians, municipal councils and
operations regulators Only full time employees excluding contractors
NON-GOVERNMENTAL
VENDORS
ORGANISATIONS (NGOS)
WHAT MATTERS TO US
In FY2017 (ending 31 August 2017), we have conducted a comprehensive Measures taken to manage these material matters are categorised into
materiality assessment to identify matters which could have significant eight (8) thematic topics across our four (4) sustainability reporting
economic, environmental and/or social impacts on our business and themes – Spirit of Responsibility, Delivering with Purpose, Environmental
stakeholders. Subsequently, we have reviewed the material matters for Stewardship and Embracing Relationships. In line with our aspiration to
FY2018 and concluded that matters reported previously remained our highlight our contribution to the SDGs, we have mapped our committed
priorities. We have also expanded our reporting scope by adding three (3) SDGs to focus on our material matters while illustrating the other SDGs
more material matters as endorsed by the Sustainability Development that our business also contributes to.
Committee. They are Sustainable Supply Chain, Asset Optimisation, and
Waste Management.
Spirit of Responsibility
Our Governing Principles
KEY HIGHLIGHTS
Launched
TNB Corporate Integrity
Management System (TCIMS)
Handbook
MATERIAL MATTERS
Promoting ethical and safe practices is driven by the TNB Board and shared
by our management with all our employees to reinforce sound business and a
forward-looking culture
OUR GOVERNING PRINCIPLES CORPORATE GOVERNANCE AT TNB of our business objectives. The design and
implementation of the TNB Risk Management
Integrity is at the forefront of everything we We have in place a robust Corporate Governance Framework is based on the principles and
do. It is one of our Shared Values and is driven Model which defines the boundaries within guidelines expressed in ISO 31000:2009 Risk
by our Board and top management. We aspire which our employees and external parties are Management – Principles and Guidelines.
every employee upholds the highest standards expected to work, and a common approach
of ethics in all our dealings. to how we conduct our business across the This is supported by our internal control
organisation. To read more, please refer to The framework to manage risks within tolerable
We comply with all relevant regulations to Strength of Our Governance section, which can levels. Group policies, codes and procedures
ensure integrity and good governance. These be found on pages 98 to 143 of our Integrated are regularly reviewed and approved by
include the Companies Act 2016, Bursa Annual Report (IAR). Management and the Board. The effectiveness
Malaysia Securities Berhad’s Main Market of implementation is consistently assessed and
Listing Requirements and the Securities RISK MANAGEMENT monitored for continual improvement.
Commission’s Malaysian Code on Corporate AND INTERNAL CONTROL
Governance 2017 (MCCG). Going beyond For more information please refer to the
regulatory requirements, we strive to create a At TNB, we believe in the importance of Statement of Risk Management and Internal
culture of ethics in which integrity is paramount integrating risk management into our processes Control in pages 144 to 146 of our IAR.
to everyone. and decision-making to enable the achievement
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Deputy Minister of Energy, Science, Technology, Environment and Climate Change, YB Isnaraissah Munirah Majilis
launched TNB Corporate Integrity Management System (TCIMS) handbook in conjunction with TNB Integrity Day.
HEIGHTENING AWARENESS
In 2017, TNB was one of the first corporations in Malaysia to embark on the ISO 37001:2016 Anti-Bribery Management System certification. Towards achieving
the certification, we launched TNB Corporate Integrity Management System (TCIMS) to drive an integrity-based culture and a high level of compliance with
local and international anti-bribery standards. On 15 November 2018, we obtained the certification from Standard and Industrial Research Institute of Malaysia
(SIRIM), and TCIMS is expected to be completed by late January 2019.
Further reinforcing a culture of integrity, the TCIMS handbook was launched on 19 December 2018 in conjunction with TNB Integrity Day. The handbook covers
TCIMS policies on anti-bribery, gifts, hospitality & related benefits, conflicts of interest, whistleblowing, and Integrity Pact & Committee Integrity Pledges Policy.
A key highlight for this year was the signing of Integrity Pledge by all employees annually for the purpose of awareness and accountability of their respective
assignments or works.
Our employees receive continuous training and awareness sessions to reinforce and instil a culture of integrity. In FY2018, 1,728 of our employees attended
Integrity Engagement Programmes that were conducted nationwide. Our goal is for all companies within the Group to adopt the ISO 37001 standard. Towards
this end, we will continue with various activities and programmes to inculcate integrity as part of our corporate DNA.
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Direct Contribution
07 08 13 CLIMATE
Delivering With Purpose
AFFORDABLE AND DECENT WORK
CLEAN ENERGY AND ECONOMIC ACTION
GROWTH
KEY HIGHLIGHTS
MATERIAL MATTERS
TNB’s strategic plan for 2017-2025, Reimagining TNB is anchored on maintaining our
growth trajectory to emerge as one of the world’s top 10 global utility by 2025
Our diversified generation fuel mix for Peninsular Malaysia is based on the optimal generation Fuel Mix
capacity development plan established by the Planning & Implementation Committee for Electricity (Peninsular
Malaysia)
Supply and Tariff (JPPPET) helmed by Ministry of Energy, Science, Technology, Environment and
Climate Change (MESTECC). This plan takes into consideration the economic, environmental and Natural
Gas Coal
energy security factors. Based on this plan, in the medium term, gas and coal will continue to be 40.17% 55.86%
the main fuel for power generation while renewables such as solar energy will grow in importance
in line with global trends.
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MESTECC has set a target to grow renewables’ proportion of the total TNB’s target is to grow our renewable capacity to 1,700MW - domestically
generation capacity mix from 2% currently to 20% by 2025. and internationally by 2025. In January 2018, we established TNB Renewables
Sdn. Bhd. (TRe) to spearhead and accelerate our renewables business
TNB seeks to be part of this growth, and has been making significant growth in Malaysia. This year also saw our 50MW LSS in Sepang, Selangor
investments into various renewable sources of energy in the country. While we began its operations.
see conventional assets as being relatively more economical in the short term,
we recognise the need to invest in renewables to help address climate change
issues as well as to prepare for gradual depletion of carbon-based fuels.
TNB RE Capacity (Local & International) for FY2018 Key Updates for FY18:
PROVIDING EXCELLENT OPERATIONAL TNB’s SAIDI has improved from 50.24 in FY2017 to 48.22 due to the reduction of breakdowns
PERFORMANCE and forced outages in 2018 whereas the SAIFI is recorded at 0.86 in 2018.
Together, our Business Continuity Management (BCM) To read more on our performance and initiatives, please refer to our 2018 Year in Review where
Framework, innovation and asset optimisation plans, we share our efforts towards improving our performance on pages 21 to 43.
enable us to improve on our operational performance.
In tandem with the expansion of our generation
System Average Interruption System Average Interruption
operations, our domestic wholly-owned generation
Duration Index (SAIDI)* Frequency Index (SAIFI)*
plants continued to demonstrate high reliability with Minutes/Customer/Year Frequency/Customer/Year
an increased Equivalent Availability Factor (EAF) of
89.92%, which is above our target. We also recorded 0.87 0.86
0.84
a 99.79% Transmission System Availability, as well as
0.35 Transmission System Minutes in FY2018. We will
continue to improve our operational performance as 49.71 50.24
48.22
our commitment to our stakeholders.
Our Asset Management Plan represents an integrated enterprise solution that enables TNB to achieve optimal asset performance at a sustainable cost. Using
this integrated plan, our key business units have attained ISO 55001 Asset Management certification. We have also implemented our Asset Performance
Management System (APMS) that would enable us to establish a holistic view of asset management through its life cycle.
Asset management • Preventive Maintenance (PM) and Condition-Based Maintenance (CBM) – ensures high
and optimisation reliability of electricity supply to the customers
initiatives for FY2018 • SAIDI 50 Initiatives – early detection for defects, asset replacement and introduction of new
technologies
• Business Turnaround Programme – aimed to unlock asset potential and enhance performance of
TNB’s generation power plants
• Intelligent Predictive and Diagnostic Monitoring (IPDM) System – system that enables plant
operators to detect anomalies from operating parameters of major assets
• Asset Mid-life Overhaul – introduced to prolong asset life, optimise resources and asset-reliability,
reduce equipment failures, decrease maintenance requirement and reduce loss of services
Innovation initiatives • Drones - used to enhance land planning functions with drones and improve Geospatial Information
for FY2018 System (GIS) data. 34 drones were purchased, while 34 personnel were certified as drone pilots by
the Civil Aviation Authority of Malaysia (previously DCA)
• Online Monitoring System for Gas Analysis – used in transformer bushing and gas insulated
switchgears
• “Automatic Fault Analysis and Fault Location Identification System” Project - to assist system
operator and maintenance team for decision making during restoration processes - pilot project is
in progress
Innovation lies at the forefront of transforming the energy supply industry, contributing to greater efficiencies. We also invest in advanced technology and
upgrade our infrastructure.
As electricity demand continues to increase in Peninsular Malaysia, we are safeguarding our ability to meet customers’ needs by building a 500kV
Grid Superhighway. Construction of the RM2 billion Grid Superhighway began in 2015 and is expected to be completed by 2020. The 500kV Grid
Superhighway, dubbed as the Backbone, will enable adequate and safe power transfer from other regions into Central Area. At present, Central
Area accounts for about 45% of Peninsular Malaysia’s electricity demand.
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Under Reimagining TNB’s Grid of the Future, we aim to introduce Smart Grid to customers - through modernising and digitalising our grid to cater for
emerging demands and services. TNB is currently improving its grid infrastructure and has embarked on several innovative projects that will improve
reliability, service quality and operational efficiency.
Projects
1 Advanced Metering Infrastructure (AMI) Installed 160,000 smart meters in Melaka. The installation programme will
enhance meter reading by introducing remote continue in Melaka and also be expanded to Klang Valley in 2019
automated readings and detailed load profile
information which enable better load management, For more information, please see page 78 under Customer Centricity
profiling and future tariff options
2 Mobility Solutions Successfully rolled out Mobility Solution applications for smart meter
provide a platform for increased work efficiency installation (AMI project) - 3MS and I-nett, a tool to automate the load
amongst field staff forecast and disaggregation process during Distribution Network Annual
Planning cycle programme
4 Geospatial Information System (GIS) GIS function successfully rolled out to various stations in Putrajaya,
provides accurate location information to manage, Cyberjaya and Kuala Selangor stations as per GIS Roadmap for 2018
operate and analyse TNB’s network assets
5 Distribution Automation For this year, 3,672 substations were converted into Supervisory Control and
provides real-time management of network operations Data Acquisition (SCADA) enabled substations
Direct Contribution
13 17 PARTNERSHIPS
Delivering With Purpose
07 AFFORDABLE AND
CLEAN ENERGY 08 DECENT WORK
AND ECONOMIC
GROWTH
CLIMATE
ACTION FOR THE GOALS
Customer Centricity
KEY HIGHLIGHTS
160,000 customers
experienced smart meters
MATERIAL MATTERS
• Customer Experience
• Energy Efficiency
We seek to win customer trust and loyalty over the long term through effective
engagement, quality service and exceptional customer experience
In line with Reimagining TNB, we strive to win our We have installed 160,000 smart meters in Melaka
TNB customers in
customers by building long-term and meaningful as of December 2018, with a further 180,000
Peninsular Malaysia FY2018
relationship through our ongoing customer- smart meters to be installed. Moving forward, we
centric approaches. To date, we serve a total of 7,362,967 Domestic will roll out smart meter in urban areas of Klang
9,029,385 customers in the domestic (residential), Valley.
1,552,709 Commercial
commercial and industrial segments.
29,687 Industrial SOLUTIONS BEYOND kWh
As part of efforts to enhance our customer
84,022* Others
experience, on 1 August 2018 we separated We are continuously working on winning the
our Distribution Network and Retail Divisions. 9,029,385 TOTAL CUSTOMERS customers through delivery of personalised
Our customer-centric Retail Division has been solutions, targeted to enrich their lifestyles and
Note:
entrusted with further entrenching our presence * Others consist of mining, street lighting, agriculture, RE generators improve their experience in better, brighter ways.
and free units
in the retail space through the levers of quality
customer service, innovative solutions together Energy Efficiency - Empowering Smarter
Deployment of Smart Meters - Choices for Our Customers
with customer and stakeholder communications.
Our Advanced Metering Infrastructure
We are continuously engaging the customers via In 2018, 40 Energy Efficiency sessions were
TNB is currently improving its grid infrastructure conducted by Retail Division targeting
various methods encompassing click, call and
in transition towards Smart Grid, where Advanced Government agencies, NGOs, community
come over channels as part of our efforts to reach
Metering Infrastructure (AMI) is being installed leaders, universities, schools, as well as TNB
out to all walks of customers, through outreach
rapidly. This will provide customers with more staff. We are not only equipping our customers
programmes, personal engagements and meet-
detailed and near real-time information on their with the knowledge to be energy efficient, but aim
ups with associations, consumer groups and all
energy consumption as well as promote energy to empowering them to manage energy efficiently
related stakeholders.
efficiency practices and related services. through customer offerings and solutions.
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Home Energy Report (HER) Making Electricity Visible (MaEVI) Energy Performance Contracts (EPCs)
Using analytics, HER provides customers This Home Energy Management System (HEMS) EPCs are formed between energy services
personalised energy usage reports. Customers helps domestic customers monitor their electricity companies and facility owners with the primary
can also access the HER online for tips on how to consumption, automate their home appliances and purpose of improving energy efficiency through
save energy in their home. improve their home security, through downloadable investment in energy efficient equipment.
app. TNB Energy Services (TNBES) has formed
During the implementation period of October MaEVI Sdn. Bhd. as a subsidiary to manage This year, TNBES has entered into an EPC with
2017 to September 2018, HER Phase II the business. To learn more, please refer to Universiti Putra Malaysia (UPM) under which it
programme saved a total of 47,792MWh of https://maevi.my/. will replace existing fluorescent light fixtures
electricity. This is more than triple the total with energy-saving LED tubes. This will help
energy savings achieved during the Phase I UPM to reduce its electricity consumption
Pilot. The total of carbon emission avoidance by about 890,000kWh a year, saving about
is estimated at more than 33,168 tonnes CO2 RM453,000.
emissions.
HER Features
1 2 3 4 5
We collaborate with the Sustainable Energy Development Authority (SEDA) to manage the Feed-in Tariff (FiT) programme, under which owners of solar
photovoltaic (PV) systems with Feed-in Approvals are able to supply electricity to the grid for a fixed price. To date, 9,354 FiT projects have been
commissioned with an installed capacity of 527.63 MW.
A new Net Energy Metering (NEM) Scheme and Supply Agreement for Renewable Energy (SARE) were announced in November 2018 to grow the solar
industry by opening the market and subsequently spur local players to become regional solutions providers. Through GSPARX Sdn. Bhd., TNB is able to
support the country to meet its new RE target of 20% by 2025 by assisting in the implementation of NEM and SARE. GSPARX Sdn. Bhd. provides a platform
through which TNB can implement beyond-the-meter transactions for SARE such as solar leasing, Power Purchase Agreement (PPA) or a hybrid of both,
as alternatives to direct purchases by customers. For more information on GSPARX Sdn. Bhd., please visit www.gsparx.com.
Benefits
We engage with our customers constantly in order to build trust, gather of the Year” award for 2018-2019, under the power category in the national
invaluable feedback to understand gaps in our systems, and subsequently to tier at the prestigious World Branding Awards.
take corrective action when necessary.
Customer Data Privacy
We are currently using the annual Customer Satisfaction Index (CSI) as a
measurement to gauge customer satisfaction levels with our service delivery, As a responsible organisation, we take our duty to protect the data of our
and how satisfied our customers are with our solutions. In addition, we also customers as a matter of priority and make every effort to comply with the
measure customer experience via the various touch points at the Kedai Personal Data Protection Act (PDPA) 2010. Meanwhile, greater digitalisation
Tenaga outlets, TNB CareLine, myTNB application and online portal. of our services has increased the need for cyber security. To date, we have
implemented over 100 security controls as part of initiatives to beef up our
As a testament for our high quality products and services, we have scored online payment security through the Payment Card Industry Data Security
8.1 in our 2018 CSI for the third year in a row. We have also won the “Brand Standard (PCI DSS).
TNB One Stop Engagement Centre offers a single point of contact to respond to customer enquiries and feedback on billing and account related matters.
Key Account
myTNB Mobile App Web & Self-Service
Managers
myTNB Portal Features Remote Meter Reading Portal Home Energy Calculator
Short Message Home Energy Report Account Management
Service (SMS) One-stop self-service portal TNB Payment Gateway Contractor Management
that integrates existing
Renewable Energy Application Supply Application
web services for greater
convenience and flexibility Bulk Payment Smart Billing Portal
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Direct Contribution
08 DECENT
Environmental Stewardship
WORK
AND ECONOMIC
GROWTH
KEY HIGHLIGHTS
MATERIAL MATTERS
TNB carried out various initiatives to protect a number of identified • Environment Management • Waste Management
endangered species of fish and terrestrial at their hydro stations. • Water Management • Biodiversity Management
TNB strives to protect and conserve the environment in our operations and decision-making
as our commitment to continuous improvement of environmental performance
Our Environmental Policy complemented by our Green We take responsibility in protecting and preserving the flora and fauna in our operating areas.
objectives underlines our environmental commitment
through sustainable practice. All our power plants and the Our initiatives are based on local contexts and in some cases, on the International Union for Conservation
Grid Maintenance Department have been ISO 14001:2015 of Nature (IUCN)’s Red List. The Red List guides us in monitoring and protecting the biodiversity at two (2)
Environmental Management Systems (EMS) certified. of our sites - the Hulu Terengganu Hydroelectric Station and Pergau Hydroelectric Station.
We adopt best environmental practices and have embarked At Hulu Terengganu Hydroelectric Station, a total of 18 biodiversity programmes were carried out in
on a journey to implement the Guided Self-Regulation (GSR) FY2018, 9 for fish and 9 for terrestrial, with a total budgeted amount of RM3.15 million and RM2.52
programme encompassing all our activities and subsidiaries. million respectively. Ikan Kelah (Tor tambra) has been identified as protected species in this site, with
a total count of 473 fishes as of FY2016. We also carried out various initiatives at other sites to protect
GSR was launched by the Department of Environment this species of fish.
(DOE) on 16 October 2017 to transform regulation
enforcement under the Environmental Quality Act 1974 and For the Sungai Perak Hydroelectric Station, specifically at the Temenggor Dam, a total of 11 biodiversity
enhance environmental awareness and management. It is programmes were carried out in FY2018, 8 for fish and 3 for terrestrial, with a total budgeted amount
accompanied by a set of environmental mainstreaming tools of RM1.13 million and RM2.40 million in FY2018 respectively. There are other study initiatives other
for organisations to achieve self-regulation. than the Kelah Sanctuary, at other sites such as the Rafflesia at X-Ray trail and the Saltlick at Sungai
Papan. TNB partners with National Hydraulic Research Institute of Malaysia (NAHRIM) to study the
WATER AND WASTE MANAGEMENT enhancement of water management at Sungai Perak and Cameron Highlands. We also launched the
“Pengurusan Lestari Sumber Asli Taman Negeri Royal Belum” programme to improve fish resource
Our power plants track water consumption on a monthly management and Rafflesia protection in Royal Belum State Park (RBSP).
basis under a plant optimisation and waste minimisation
programme in compliance with ISO 14001. Any deviation IUCN Red List
from the norm is investigated and accompanied by
corrective actions to stop unnecessary water loss. Site Key Findings
Hulu Terengganu Species Group Number of Species
We also monitor the consumption of materials such as fuel
Hydroelectric Fish 24 1 4
and the discharge of effluents and compare these against
station
baseline data on regular basis. Terrestrial 1 9 19 44 209
Sungai Perak Species Group Number of Species
Optimisation programmes are implemented to identify Hydroelectric Fish 22 2 1
and manage any discrepancies in consumption. Industrial station
waste produced at TNB is handled according to the relevant Terrestrial 5 4 5 30
regulations. Best practices have been incorporated into
Critically Endangered (CR) Endangered (EN) Vulnerable (VU) Near Threatened (NT)
our Health, Safety and Environment (HSE) Department’s
Guidelines on Scheduled Waste Management. Least Concern (LC) Data Deficient Not Evaluated
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Environmental Stewardship
07 AFFORDABLE AND
CLEAN ENERGY 13 CLIMATE
ACTION 17 PARTNERSHIPS
FOR THE GOALS
Climate Change
KEY HIGHLIGHTS
MATERIAL MATTERS
•
Centralised Energy Efficiency Monitoring
System (CEEMOS)
• Energy Efficient Lighting (LED)
• Power Factor Improvement
• Chiller Optimiser
• Variable Speed Drive (VSD) for centralised AC
system motors
INTERNAL AWARENESS
Direct Contribution
Embracing Relationship
08 DECENT WORK AND
ECONOMIC GROWTH
KEY HIGHLIGHTS
MATERIAL MATTERS
In line with designating 2018 as the Year of The People, TNB’s management invested even more
effort on employee engagement, and inspiring our people to embrace an “adaptive culture”. The
idea is to remain agile in the way we work and be open to new ways of doing things
EMPLOYER OF CHOICE
HUMAN RESOURCES LEAP 6
As we believe our people are our
most important asset, we seek to HR Leap 6 project is a strategy to support TNB towards its Reimagining TNB aspirations. HR Policies and Processes
attract and retain the best talents. are established and reviewed in light of the Leap 6 Pillars. The objective is to transform our HR culture into an
This, in turn, rests on being an adaptive and high-performing culture. Each of the 6 pillars have an identified North Star to guide its implementation:
“Employer of Choice”.
HR policies and process categorized into 6 Pillars
HR previously launched, the “HR
Guiding Principles - Focused on
Business Learning Adaptive
People with Care; Clarify of Actions Driven Organisation Mindset
with Knowledge; Simplicity of Recruit Retain Exit
TALENT ATTRACTION
We believe in recruiting bright and young talent and develop them within the organisation. This is reflected in the age
profile of our recruits where 98.9% of our new hires were millennials (total: 1,788).
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Our key initiatives for FY2018 were: TNB employees are provided extensive on-the-job development opportunities including stretch
assignments and is complemented by coaching and mentoring. One of the main focuses in FY2018
• Participated in five (5) career fairs in the is to develop cognitive skills on Business Strategy, Financial Acumen and Customer Centricity.
United Kingdom (UK) and Malaysia which also
included participation from our subsidiaries Career Enhancement Management
• Organised career talks and formed a strategic
partnership with iCube, a UK student society TNB’s Career Enhancement Management (CEM) facilitate towards ensuring all employees have roles
• Formed strategic partnerships with a number of based on their skill sets and competencies. Affected employees are upskilled for present and future
local academic institutions and organisations role requirements. Moving forward, CEM aligns its activities towards realising Reimagining TNB.
to regularly engage with students to spark an
interest in the energy industry specifically TNB
• Hosted “Tea with Tenaga” sessions at UNITEN
with undergraduates from 10 universities
43 project 90.29%
assignments in CEM platform CEM Engagement Score
• In support of the Government’s SL1M initiative
to train graduates who have yet to gain
employment, we brought in a total of 880 Establishing Facilitating assignment of manpower for
trainees (up until 31 August 2018) Renewable Energy Sabah Electricity
• Set up a dedicated onboarding team, enabling
Community Sdn. Bhd. (SESB)
each recruit to have a single contact person
and forecasting workforce Task Force SAIDI 150
pre-onboarding and on Day 1 requirements for
Renewable Energy initiatives
CAREER DEVELOPMENT AND TRAINING
12,890
East Malaysia Total number of employees
South Sabah for TNB Group
6 35,574
Note: All data provided excludes TNB subsidiaries
19 18.4 16.2 4
21.5
20 20.3 20.5 20
4
4
29.3 32 32.7 34.2
15.8 16.7 48
80 79.7 79.5 80 14.7 44
13.5
36 33
49.2 49 48.9 49.6
FY2016
FY2017
*FPE
31.12.2017
FY2018
FY2016
FY2017
*FPE
31.12.2017
FY2018
FY2016
FY2017
*FPE
31.12.2017
FY2018
FY2016
FY2017
*FPE
31.12.2017
FY2018
Direct Contribution
Embracing Relationship
08 DECENT WORK AND
ECONOMIC GROWTH
KEY HIGHLIGHTS
5 Integrated Community-Based
Disaster Management (ICBDM)
exercises conducted
MATERIAL MATTERS
Health and Safety will always be on top of our agenda and this shall be based on • Safety and Emergency Preparedness
respective each other and guided by rules. • Health and Well-being
We seek to create a Generative Safety Culture in which everyone is concerned not only of his or
her own safety, but also the safety of their colleagues to achieve zero accidents and fatalities
WHAT SAFETY MEANS TO US All our power plants and grid have been Occupational strive towards enforcing greater awareness and
Health and Safety Assessment Series certified inculcate a stronger safety culture to improve our
Our people are exposed to various risks in their (OHSAS 18001:2007) while our Distribution Network overall safety performance.
line of work, thus, we never compromise on Division has embarked on implementing this
safety and ensure everyone “Get Home Safe”. standard and expects to be certified by end 2019. Number of Number of Lost Days
We are guided by TNB’s Safety and Health Policy Lost Time Lost Days Severity Rate
Injuries (per million man
to produce a comprehensive safety governance Safety Performance hours)
framework. Safety and Health Committees
153 13,531 185.16
have been set up in all departments and all In FY2018, we have recorded a Lost Time Injury
committee members meet on a quarterly basis Frequency (LTIF) of 2.08 with higher accidents
Lost Time Injury Frequency (LTIF)
to discuss safety performance and address any reported throughout the Company. Unfortunately,
(Per Million Man-Hours)
shortcomings. we have recorded 2 employee fatalities and 4
fatalities involving contractors. Our statistics
As part of continuous efforts to improve our show that 48% of Lost Time Injury (LTI) cases are
safety procedures, we introduced a new HSE motor vehicle accidents.
management manual, namely the Health, Safety 2.08
and Environment Management System (HSEMS). To increase awareness and as part of mitigation
1.44 1.54
The manual is expected to be fully implemented efforts, we have conducted motorcycle safe 1.06
by end of 2020. Supplementing our aspiration for a riding programme for all meter readers in
safe work culture, we also have TNB’s Life-Saving collaboration with Malaysian Institute of Road
FY2016
FY2017
FPE
31.12.2017
FY2018
Rules (LSR), which comprises nine (9) rules focused Safety Research (MIROS) as well as audit for safe
on saving lives and preventing serious injuries. riding implementation. Moving forward, we will
Our group-wide business continuity is safeguarded by the TNB Business We promote a healthy lifestyle among employees and their families through
Continuity Management (BCM) Framework, which enables prompt and our Total Wellness Programme. To date, the Total Wellness Programme has
coordinated response and recovery in the event of a crisis. At the corporate been conducted at 135 stations nationwide, where face-to-face awareness
level, the effectiveness of the framework was tested through communication and education sessions are held with employees. We have also compiled
and full-scaled drills in response to electricity supply disruption scenarios. the health data of 16,634 employees based on screening results.
This framework is the focal point of reference for business units in Some of our highlights for FY2018 include:
formulating and implementing its BCM strategy and practices tailored to
its business objectives and critical functions. For example, power plants • TNB’s 71 Kelab Kilat around Malaysia organised various
are responsible to design, implement and regularly test their emergency health-promoting activities
response and recovery plans. In addition, our Integrated Community Based • Signatory to the Ministry of Health’s Healthy Community, Mighty
Disaster Management exercises are conducted for communities close to Country (KOSPEN) programme which focuses on weight management,
our hydroelectric power plants and in FY2018, these were conducted in health screening and maintaining a positive mental outlook
Cameron Highlands, Hulu Terengganu and Kuala Kangsar districts. • Organised TNB Family Wellness Day involving 9,657 TNB staff
• Eight (8) TNB cafeterias have been certified “healthy” by the Ministry
of Health
• A total of 61 TNB gyms were established across TNB offices
More initiatives are in the pipeline under the Total Wellness Programme as
we look to expand the reach of the programme and nurture healthy and
health-conscious workforce.
TNB encourages wellness in our workplace by adopting various approaches to monitor employees’ health and promote regular physical activities.
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Direct Contribution
08 17 PARTNERSHIPS
Embracing Relationship
DECENT WORK
AND ECONOMIC FOR THE GOALS
GROWTH
KEY HIGHLIGHTS
Total contributions/
sponsorships of approximately
RM14.2 million
MATERIAL MATTERS
We strive to make people’s lives better and brighter through our conviction in sustainability,
and commitment towards people and the environment. We do this by supporting them with
skill, sustaining the environment and enhancing their livelihood. We engage in a wide range of
programmes that seek to leave a long-lasting positive impact to people and communities
• 83 homes were refurbished at a cost of RM192,987.18 • Total of 110,335 units of LED lights have been installed nationwide
• TNB targets to rewire 1,000 underprivileged homes across to replace ordinary High Pressure Sodium Vapour (HPSV) lamps
Peninsular Malaysia
Rural Electrification Programme Village Street Lighting Project (Lampu Jalan Kampung (LJK))
(Bekalan Elektrik Luar Bandar (BELB))
• Programme benefited 150 families, from a total contribution of • Total sponsored in FY2018 is RM2.2 million
RM7.5 million • As of 2018, 19,857 people benefited from the Better Brighter
• Projek Baiti Jannati – 122 families benefited from a total contribution Dormitory for the Institut Jantung Negara (IJN)
of RM6.1 million • To date, 2,000 people benefited from the Better Brighter Anjung
• Program Mesra Rakyat – 28 families benefited from a total Kasih at Hospital Serdang, Yayasan Kebajikan Negara (YKN)
contribution of RM1.4 million • It is expected that this programme will be expanded to the state of
Melaka by 2019
• Total of RM1.9 million was disbursed in FY2018 in terms of • Invested a total of RM1.56 million to plant a total of 17,608 trees
Research & Development (R&D) since the programme’s inception
• Three (3) more villages were added in addition to Kampung
Kuantan (Selangor): Kampung Yak Yah, Kemaman (Terengganu),
Kampung Sungai Timun, Rembau (Negeri Sembilan) and Kampung
Dew, Taiping (Perak)
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Our educational efforts are undertaken by our foundation, Yayasan Tenaga Nasional (YTN) as well as our EduHub, which groups together Universiti Tenaga
Nasional (UNITEN); Leadership Development Centre (LDC) and our in-house capacity building centre, TNB Integrated Learning Solutions (ILSAS).
YTN was founded in 1993 to provide financial aid to various communities and organisations. Today, its focus is primarily on education, and specifically its
scholarship programmes.
• To establish, maintain and administer scholarship funds and to award scholarships for pre-university, undergraduate or postgraduate studies at any
institution
• To foster, develop and improve different types of education as approved under the Educational Law of Malaysia
• To grant donations to local and national institutions or organisations approved by the Director General of Inland Revenue
• To assist, aid and provide relief to the poor and needy
To date, more than 11,000 students have been able to pursue tertiary education, either locally or abroad. YTN runs motivational and thought-leadership programmes
for its scholars and other Malaysian youth. For further information on YTN’s initiative, visit https://ytn.tnb.com.my/.
UNITEN plays a significant role in offering local and international students quality engineering, IT and business management programmes at the foundation,
diploma, undergraduate and postgraduate levels. The university has also been at the forefront of energy research since it was established in 1997, leveraging
TNB’s extensive industry experience in power generation, grid and distribution network.
UNITEN Highlights
3,145
graduates produced for FY2018
UNITEN Initiatives
300 volunteers from UNITEN took part in Project UNITEN Smart UniverCity, implemented in 2018 UNITEN Research Hub was officially launched
Newspaper "There's No Planet B". Together with is a collaboration between UNITEN and TNB in 2018 which comprises six (6) research entities
visitors, they made 21,505 paper bags from used to enable UNITEN to become a living lab for namely the Institute of Power Engineering (IPE),
newspapers, earning an entry into the Malaysia smart city solutions. There are five (5) aspects of the Institute of Sustainable Energy (ISE), the
Book of Records for the Most Number of Paper Smart UniverCity, namely: Smart Lifestyle, Smart Institute of Energy Policy & Research (IEPRe), the
Bags made from Recyclable Newspapers. Infrastructure, Smart Energy, Smart Mobility and Institute of Informatics & Computing in Energy
Smart Education. (IICE), the Institute of Energy Infrastructure (IEI)
and the Innovation & Research Management
Centre (iRMC). The establishment of this hub
defines the determination of UNITEN in producing
cutting-edge research that will best serve the
society. The hub also highlights opportunities,
research and programmes that corresponds to the
long-term need of the university’s stakeholders.
TNB Integrated Learning Solution (ILSAS) Notable recognitions and achievements in FY2018
For further information on our sustainability performance and initiatives, please refer to our upcoming Sustainability Report.
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Back-To-School Programme
B40 Programme
p.97
THE
STRENGTH
OF OUR
GOVERNANCE
98 Chairman’s Introduction
100 A Committed Board
111 An Effective Leadership
118 Leadership & Effectiveness
- Nomination and Remuneration Committee Report
132 Accountability
- Audit Committee Report
- Risk Committee Report
- Internal Audit Function
141 Relations with Shareholders
144 Statement of Risk Management and Internal Control
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p.98
CHAIRMAN’S
INTRODUCTION
WE... The Board recognises its important
role in demonstrating high standards of
corporate governance and understands
that an effective, challenging and
BUILD RESPECT diverse Board is essential to enable
We build respect by the Company to deliver its strategy
communicating openly in line with shareholders’ and other
with each other and our stakeholders’ long-term interests, whilst
stakeholders, listening also generating confidence that the
effectively and providing business is conducting itself in an ethical
and responsible manner. The Board is
feedback and recognition in a
especially pleased that this unwavering
constructive way.
commitment to good governance
has resulted in the Company being
NURTURE RELATIONSHIPS awarded the ISO 37001 Anti-Corruption
TAN SRI LEO MOGGIE We work closely with our Management System by SIRIM. This
Chairman stakeholders – colleagues, award, coupled with the TNB Corporate
local communities, contractors, Integrity Management System Handbook
suppliers, governments, further strengthens our resolve to act with
5 1
insight on the future regulatory landscape
of the electricity industry. Further Independent Non-Independent
details of the appointment of the new Non-Executive Executive
Directors Director
Non-Executive Directors are provided
3 1
on pages 107 to 109. The Board also
Non-Independent Non-Independent
thanked the departing members for their Non-Executive Non-Executive
insightful contributions and for laying the Directors Chairman
foundations of strengthened governance
within the Group.
1
Age: 77 Gender: MALE Nationality: MALAYSIAN Date Appointed to the Board: 12 APRIL 2004
T Board Tender NR Board Nomination And R Board Risk L Board Long Term I Board Integrity
Committee Remuneration Committee Committee Incentive Plan Committee Committee
Age: 51 Gender: MALE Nationality: MALAYSIAN Date Appointed to the Board: 2 APRIL 2019
• Group Chief Executive Officer, Themed Attractions Resorts • President & Chief Executive Officer,
& Hotels Sdn. Bhd. (2017 - April 2019) AET Tankers Holding Sdn. Bhd. (2005 - 2008)
• Managing Director, Icon Offshore Berhad (2016 - 2017) • Regional Business Director, MISC Berhad (2004 - 2005)
• Vice President (Lubricants Business), Petroliam Nasional Berhad • General Manager, Corporate Planning, MISC Berhad (2000 - 2004)
(2013 - 2016) • Senior Treasury Advisor, Shell International Ltd. (1997 - 2000)
• Group Managing Director/Chief Executive Officer, • Manager, Planning & Support, Sarawak Shell Bhd. (1996 - 1997)
Petronas Lubricants International Sdn. Bhd. (2012 - 2016) • Performance Improvement Advisor, Sarawak Shell Bhd. (1996)
• Vice President (Downstream Marketing), • Head of Financial Services, Sarawak Shell Bhd. (1995 - 1996)
Petroliam Nasional Berhad (2011 - 2013) • Corporate Finance Advisor, Shell Malaysia Ltd. (1993 - 1995)
• Managing Director & Chief Executive Officer, • Marketing Credit Accountant, Shell Singapore Petroleum Company (Pte) Ltd.
Petronas Dagangan Berhad (2010 - 2011) (1992 - 1993)
• President & Chief Executive Officer, MISC Berhad (2009 - 2010)
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Age: 59 Gender: MALE Nationality: MALAYSIAN Date Appointed to the Board: 1 NOVEMBER 2018
T Board Tender NR Board Nomination And R Board Risk L Board Long Term I Board Integrity
Committee Remuneration Committee Committee Incentive Plan Committee Committee
Age: 44 Gender: MALE Nationality: MALAYSIAN Date Appointed to the Board: 22 JUNE 2017
• Executive Director, Investments, Khazanah Nasional Berhad (20 April 2018 - Present)
• Director, Investments, Khazanah Nasional Berhad (2013 - 2018)
• Senior Vice President, Investments (Property/Healthcare), Khazanah Nasional Berhad (2011 - 2013)
• Investment Manager, Ethos Capital Sdn. Bhd. (2009 - 2011)
• Principal Consultant/Advisor, Nusa Capital Sdn. Bhd. (2006 - 2009)
• Director, Juwana Group of Companies (2005 - 2006)
• Senior Vice President, Namirah Ventures Pte Ltd (2000 - 2005)
• Analyst, Equities Investment, Petroleum Nasional Berhad (1998 - 2000)
• Corporate Finance Executive, Group Finance Division, Petroleum Nasional Berhad (1997 - 1998)
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Age: 62 Gender: FEMALE Nationality: MALAYSIAN Date Appointed to the Board: 2 JANUARY 2016
T Board Tender NR Board Nomination And R Board Risk L Board Long Term I Board Integrity
Committee Remuneration Committee Committee Incentive Plan Committee Committee
Age: 69 Gender: FEMALE Nationality: MALAYSIAN Date Appointed to the Board: 2 JANUARY 2016
Age: 60 Gender: FEMALE Nationality: MALAYSIAN Date Appointed to the Board: 1 JUNE 2017
T Board Tender NR Board Nomination And R Board Risk L Board Long Term I Board Integrity
Committee Remuneration Committee Committee Incentive Plan Committee Committee
Age: 64 Gender: MALE Nationality: MALAYSIAN Date Appointed to the Board: 4 JULY 2018
ONG AI LIN
Independent Non-Executive Director
Age: 63 Gender: FEMALE Nationality: MALAYSIAN Date Appointed to the Board: 1 AUGUST 2018
T Board Tender NR Board Nomination And R Board Risk L Board Long Term I Board Integrity
Committee Remuneration Committee Committee Incentive Plan Committee Committee
Age: 56 Gender: FEMALE Nationality: MALAYSIAN Date Appointed to the Board: 15 MARCH 2019
• Senior Fellow, Khazanah Research & Investment Strategy, Khazanah Nasional Berhad (2018 - Present)
• Independent Council Member of Oversight Panel, Energy Commission of Malaysia (2016 - Present)
• Adjunct Professor, College of Business, Universiti Tenaga Nasional (2016 - Present)
• Vice President (Regulatory Economics & Planning), TNB (2015 - 2018)
• Vice President (Planning), TNB (2009 - 2015)
• General Manager (VPP/Energy Procurement), Planning Division, TNB (2008 - 2009)
• Has served Lembaga Letrik Negara/TNB for 33 years. Worked in various divisions in TNB such as Distribution, Planning, Business Strategy, Regulations,
Transmission and Corporate Planning
• Seconded to the Economic Planning Unit of the Prime Minister’s Department (1990 - 1992)
COMPANY SECRETARY
• Had more than 28 years of vast experience within TNB where she had served in various positions specifically in legal services, tender, contract management and
regulatory management
• Deputy Company Secretary and Joint Company Secretary, TNB (2011 - 2012)
• Head of Tender Management Unit, Procurement Division, TNB (2006 - 2011)
• Manager of Licensing and Compliance Unit, Corporate Communications Department, TNB (2003 - 2006)
• Manager of Contract Management, Procurement Division, TNB (2002 - 2003)
• Legal Executive in Legal Services Department, Company Secretary’s Office, TNB (1990 - 2001)
Additional Information: (iii) Other than traffic offences, any conviction for offences within the past
(i) Family Relationship with Director and/or Major Shareholder of TNB: Nil five (5) years and any public sanction or penalty imposed by the relevant
(ii) Conflict of interest with TNB: Nil regulatory bodies during the Financial Year under review: Nil
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AN EFFECTIVE LEADERSHIP
Age: 51 Gender: MALE Nationality: MALAYSIAN Age: 54 Gender: MALE Nationality: MALAYSIAN
Date Appointed to the Management Team: Date Appointed to the Management Team:
2 April 2019 14 February 2014
Qualification(s): Qualification(s):
• Bachelor of Science Degree in Management (Majored in Finance and • Bachelor of Commerce (Accounting) , University of Wollongong, Australia
Economics), Syracuse University, New York, • Certified Public Accountant of Malaysian Institute of Certified Public
United States of America Accountants
• Stanford Executive Programme, Stanford University, Stanford, • Certified Public Accountant of Australian Society of Certified Practising
United States of America Accountants
• Member of Malaysian Institute of Accountants
Directorships in Public Companies and Public Listed Companies:
• UEM Edgenta Berhad Directorships in Public Companies and Public Listed Companies:
• Integrax Berhad
Management Committee(s):
GECC GEMC Management Committee(s):
GECC GEMC ESC GMTC ComPEC ICTGC HSE
Working Experience:
AN EFFECTIVE LEADERSHIP
DATUK FAZLUR RAHMAN BIN ZAINUDDIN Ir. ROSLAN BIN ABD RAHMAN
Chief Strategy & Regulatory Officer Chief Generation Officer
Age: 49 Gender: MALE Nationality: MALAYSIAN Age: 55 Gender: MALE Nationality: MALAYSIAN
Date Appointed to the Management Team: Date Appointed to the Management Team:
1 July 2012 1 December 2018
Qualification(s): Qualification(s):
• Fellow of Association of Chartered Certified Accountants, • Master of Business Administration, Universiti Tenaga Nasional, Malaysia
United Kingdom • Bachelor of Science (Electrical Engineering), Syracuse University,
• Member of Malaysian Institute of Accountants New York, United States of America
Directorships in Public Companies and Public Listed Companies: Directorships in Public Companies and Public Listed Companies:
• Integrax Berhad • Integrax Berhad
• TNB Global Ventures Capital Berhad
Management Committee(s):
Management Committee(s): GECC GEMC ESC SDC GMTC ComPEC ICTGC HSE
GECC GEMC ESC SDC GMTC ComPEC ICTGC
• Datuk Fazlur Rahman served for four (4) years in public accounting • Ir. Roslan started his career with the Lembaga Letrik Negara in 1985 at
practices with three (3) years in PricewaterhouseCoopers Malaysia, the Perai Power Station in Penang. From then, his career progressed to
Kuala Lumpur, as a Tax Consultant. various roles and responsibilities within the power stations owned
• He later served in Shell Malaysia for a decade in various capacities by TNB.
within the corporate and financial management functions of the • After serving as General Manager for the TNB Connaught Bridge
company starting from 1995. Power Station and the TNB Tuanku Jaafar Power Station, he was
• He joined Telekom Malaysia Berhad in 2005 and served in several appointed as Senior General Manager (Asset Operation), Generation
senior roles with the last position as Vice President – Business Division (2014 - 2018).
Development. He became the Chief Financial Officer of Naza Group • Ir. Roslan was appointed as Chief Generation Officer with effect from
in 2010. 1 December 2018.
• He was appointed TNB’s Chief Financial Officer/Vice President, Group
Finance in July 2012, where he served for six (6) years.
• Datuk Fazlur was appointed as Chief Strategy & Regulatory Officer with
effect from 1 August 2018.
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DATUK Ir. HUSAINI BIN HUSIN DATUK Ir. BAHARIN BIN DIN
Chief Grid Officer Chief Distribution Network Officer
Age: 58 Gender: MALE Nationality: MALAYSIAN Age: 55 Gender: MALE Nationality: MALAYSIAN
Date Appointed to the Management Team: Date Appointed to the Management Team:
1 February 2019 1 January 2012
Qualification(s): Qualification(s):
• Master of Business Administration, Ohio University, • Master of Business Administration – joint MBA programme between
United States of America Universiti Tenaga Nasional, Malaysia and Bond University, Australia
• Bachelor of Engineering and Applied Science (Electrical Engineering), • Bachelor of Science (Electrical Engineering), Syracuse University,
Sussex University, United Kingdom New York, United States of America
• Diploma in Electrical Engineering, Brighton Technical College, United Kingdom
Directorships in Public Companies and Public Listed Companies:
Directorships in Public Companies and Public Listed Companies: • Nil
• Nil
Management Committee(s):
Management Committee(s): GECC GEMC ESC SDC GMTC ICTGC HSE
GECC GEMC ESC SDC GMTC ICTGC HSE
Working Experience:
Working Experience: • Datuk Ir. Baharin built his career in TNB serving in various engineering
and managerial positions within the company, including Business
• Datuk Ir. Husaini began his career with TNB as an Assistant Engineer Development, Network Maintenance, Network Planning, Construction
(Transmission Line) in the Asset Maintenance Department in Kluang, Services, Metering Service, and Engineering Services.
Johor, in 1984. • He was seconded to the Ministry of Energy, Green Technology and
• He spent 32 years serving in maintenance roles for TNB’s transmission Water (KeTTHA), for two (2) and a half years, where he served as the
overhead lines and cables, transmission substation equipment, Deputy Director for the Electrical Inspectorate Department in Sabah.
transmission substation secondary equipment, and high-voltage direct He then became the Director for the Electrical Inspectorate Department
current power lines. in Pahang.
• He was appointed as Senior General Manager (Asset Maintenance), • He was the Managing Director of Sabah Electricity Sdn. Bhd.
Transmission Division, from 2015 to 2016. He was later promoted from 2007 to 2011, and was promoted to Senior General Manager
to Senior General Manager (Asset Development), Grid Division, in (Customer Service & Metering) of TNB in December 2011.
February 2016. • Datuk Ir. Baharin was made Vice President, Distribution, in January
• Datuk Ir. Husaini was appointed as Chief Grid Officer, Grid Division with 2012 until July 2018, and was re-designated as Chief Distribution
effect from 1 February 2019. Network Officer with effect from 1 August 2018.
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AN EFFECTIVE LEADERSHIP
DATO’ NOR AZMAN BIN MUFTI Ir. MEGAT JALALUDDIN BIN MEGAT HASSAN
Chief Ventures Officer Chief Retail Officer
Age: 58 Gender: MALE Nationality: MALAYSIAN Age: 54 Gender: MALE Nationality: MALAYSIAN
Date Appointed to the Management Team: Date Appointed to the Management Team:
1 November 2014 1 August 2018
Qualification(s): Qualification(s):
• Master of Engineering Management, Universiti Tenaga Nasional, Malaysia • Bachelor of Engineering (Hons.) (Electrical Engineering), University of
• Bachelor of Engineering (Mechanical), University of Strathclyde, Wollongong, Sydney, Australia
Glasgow, Scotland, United Kingdom • Certified Professional Engineer of the Board of Engineers (BEM), Malaysia
• Diploma in Mechanical Engineering, University of Technology, Malaysia • Member of Institution of Engineers, Malaysia
Directorships in Public Companies and Public Listed Companies: Directorships in Public Companies and Public Listed Companies:
• TNB Global Ventures Capital Berhad • Nil
• Dato’ Nor Azman started his career in TNB as a Mechanical Technician • Ir. Megat Jalaluddin was our Head of Remote Meter Reading Project
in 1980, before moving to pursue his diploma and degree between under the Metering Services of the Distribution Division from 2006 until
1983 and 1987. 2008.
• He served in various technical and engineering capacities within the • He then joined Celcom as Senior Manager in the Project Management
Generation Division, following his graduation in 1987. Office (2008-2009), before rejoining as General Manager of the
• He was appointed as Chief Operating Officer of TNB Repair And Distribution Division for Negri Sembilan (2009-2010).
Maintenance Sdn. Bhd. (TNB REMACO) from 2009 to 2010, and went • He later became General Manager of Metering Services (2010-2012),
on to become Managing Director of TNB REMACO from 2010 to 2014. where he started the foundation for the smart grid project.
• Dato’ Nor Azman was appointed as Vice President, Energy Ventures • Ir. Megat Jalaluddin was the Chief Strategy Officer (2012-2018), before
Division in November 2014, and was re-designated as Chief Ventures being appointed as Chief Retail Officer with effect from 1 August 2018.
Officer with effect from 1 August 2018.
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DATO’ MUHAMMAD RAZIF BIN ABDUL RAHMAN DATUK WIRA ROSLAN BIN AB RAHMAN
Chief People Officer Chief Corporate Officer
Age: 56 Gender: MALE Nationality: MALAYSIAN Age: 61 Gender: MALE Nationality: MALAYSIAN
Date Appointed to the Management Team: Date Appointed to the Management Team:
24 December 2008 3 September 2012
Qualification(s): Qualification(s):
• Bachelor of Engineering (Hons.) (Electrical Engineering), • Bachelor of Science (Honours) (Electrical Engineering),
University of Liverpool, United Kingdom University of Southampton, United Kingdom
Directorships in Public Companies and Public Listed Companies: Directorships in Public Companies and Public Listed Companies:
• Nil • Nil
• Dato’ Muhammad Razif has served TNB for 34 years in various roles • Datuk Wira Roslan joined TNB in 1980 and held various positions
within the Group and its subsidiaries. Among the positions he has held within the Consumer, Planning, Construction, Operations, and
include Transmission Protection Engineer, Power Plant Engineer and Maintenance functions at the district level in Peninsular Malaysia.
Business Development Manager at TNB Workshop Services Sdn. Bhd. • He also held several senior positions in the areas of Quality,
Operations Manager at Perusahaan Otomobil Elektrik Malaysia; and Commercial, Customer Service, Marketing and Operations before
Head of Training at TNB Transmission Network Sdn. Bhd. being promoted to Chief Corporate Officer with effect from
• He was made as Head of Training & Development, Group Human 3 September 2012.
Resource Division, in 2002, and later became Head of Human • Datuk Wira Roslan currently oversees all internal and external Group's
Resource Planning and Staffing in 2006. Corporate Communication matters. He is also the Country Coordinator
• Dato’ Muhammad Razif was promoted to Vice President, Human for the Heads of ASEAN Power Utilities/Authorities (HAPUA).
Resource in December 2008, and was re-designated as Chief People
Officer, Group Human Resource Division with effect from1 August 2018.
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AN EFFECTIVE LEADERSHIP
Ir. SYED ABU HANIFAH BIN SYED ALWI FAZIL BIN IBRAHIM
Chief Procurement Officer Chief Information Officer
Age: 61 Gender: MALE Nationality: MALAYSIAN Age: 55 Gender: MALE Nationality: MALAYSIAN
Date Appointed to the Management Team: Date Appointed to the Management Team:
1 January 2013 1 September 2015
Qualification(s): Qualification(s):
• Advanced Diploma in Electrical Engineering (Power), • Master of Business Administration, Ohio University, Athens,
MARA Institute of Technology (now known as United States of America
MARA University of Technology), Malaysia • Bachelor of Science (Operations Management and Computer Science),
• Member of Institution of Engineers, Malaysia Australian National University, Australia
Directorships in Public Companies and Public Listed Companies: Directorships in Public Companies and Public Listed Companies:
• Nil • Nil
• Ir. Syed Abu Hanifah began his career with TNB as an Assistant • Fazil started his career with TNB in 1985 and has since served in
Engineer, where he was responsible for the operations and different capacities within various departments and divisions of the
maintenance of electrical systems for the Kuala Lumpur (South) Group, including Procurement, Corporate Services, Distribution, and
district. He later became a District Manager in Kulim, Kedah. Human Resource.
• He was later assigned to the role of Material Planning Manager in the • There on, he moved to managerial roles in the Materials Management
Material Resource Management Department, Distribution Division in Services division within the Procurement Department.
1998, and became the department’s Senior General Manager in 2008. • Among the special projects and Information Technology (IT)
• Ir. Syed Abu Hanifah was promoted to Chief Procurement Officer with initiatives he was involved in, include Tariff & Power Trading,
effect from 1 January 2013. Business Performance Statistics, HR System Support, Field Force
Automation, Corporate System & Application Support and the TNB
Geospatial Information System Project.
• He was promoted to Senior General Manager of the IT & Business
Solutions Department in June 2012.
• Fazil was appointed as Chief Information Officer with effect from
1 September 2015.
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MEMBERSHIP KEY
Age: 55 Gender: FEMALE Nationality: MALAYSIAN HEALTH, SAFETY AND ENVIRONMENT STEERING
HSE
COMMITTEE
Her profile is set out in Company Secretary on page 110.
ComPEC COMMODITY PROCUREMENT EXECUTIVE
COMMITTEE
Management Committee(s):
GEMC GEMC GROUP EXECUTIVE MANAGEMENT COMMITTEE
p.118
LEADERSHIP &
EFFECTIVENESS
TNB GOVERNANCE MODEL This statement is to be read together
with the Corporate Governance
The Company’s governance model is based on the principles of the Malaysian Code on Corporate Governance 2017 (MCCG). Report 2018 of the Company
The Board is collectively responsible to shareholders and stakeholders, for the long term success of the Company. It fulfils (CG Report) which is available on
this responsibility by providing leadership, setting the strategic goals for the Company and overseeing the execution of the our website: www.tnb.com.my.
strategy by Management. It ensures the Company has adequate resources to deliver its strategy and reviews the operating The CG Report elaborates on the
and financial performance of the Group. The Board ensures that the execution of the strategy and value creation are achieved Company’s application of each
within a framework of prudent and effective controls. Principle of the MCCG 2017 for the
Financial Year under review.
The Company’s Constitution and the regulatory environment set the external framework for how the Company operates. The
Board is assisted in fulfilling its responsibilities by delegating some of these to each of its Board Committees, which describes how
Our website contains the Board
the Committees discharge these responsibilities in this report. Both the Board and each Committees has a pre-set rolling annual
Charter inclusive of the Terms of
schedule of topics and items for discussion. The agendas for Board meetings are set by the Chairman, assisted by the Group
Reference (TOR) of Committees and
Company Secretary. The same process is adopted for each of the Board Committees.
copies of policies mentioned in the
Corporate Governance Overview
GOVERNANCE MODEL Statement. The website is updated
periodically to ensure that it reflects
SHAREHOLDERS
TNB’s current corporate governance
information.
TNB BOARD
Board Audit Board Finance And Board Tender Board Nomination And
Committee Investment Committee Committee Remuneration Committee The roles of the Chairman and
(BAC) (FIC) (BTC) (BNRC) President/Chief Executive Officer
(President/CEO) are separated and
R L I held by different individuals. Whilst
Board Risk Board Long Term Incentive Board Integrity the Chairman provides leadership
Committee (BRC) Plan Committee (BLTIP) Committee (BIC) of the Board, the day-to-day
management of the Company is
delegated to the President/CEO
BOARD RESERVED AUTHORITIES and his Top Management Team.
The Top Management Team assists
the President/CEO in operational
DELEGATED AUTHORITY TO MANAGEMENT
AUDIT AND and strategic decision-making and
FINANCIAL collectively reviews areas such as
GOVERNANCE PRESIDENT/CHIEF EXECUTIVE OFFICER strategy implementation, operational
RISK
MANAGEMENT and financial performance, budget
Internal GECC GEMC
and risk matters across the Group as
Audit Group Executive Council Committee Group Executive Management Committee
a whole.
ESC SDC
External STRATEGY
Energy Supply Committee Sustainability Development Committee
Audit
HSE GMTC
Financial Health, Safety and Environment Group Management Tender Committee
Controls Steering Committee
SUSTAINABILITY
ComPEC ICTGC
Commodity Procurement Information and Communication
Executive Committee Technology (ICT) Governance Council
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SENIOR INDEPENDENT NON-EXECUTIVE DIRECTOR (SID) ROLES • Providing strategic financial leadership of the
• Providing a sounding board for the Chairman; Company and day-to-day management of the
• An intermediary for other Directors when necessary and specifically serves as the finance function;
principal conduit between the Independent Non-Executive Directors and Chairman • Leading the finance management teams; and
on sensitive issues; • Representing TNB externally to stakeholders,
• Promote high standards of corporate governance and ensure that the Company’s shareholders, customers, suppliers, regulatory
obligations to shareholders are understood and complied with; and Government authorities and the
• Ensure the composition of the Board with regards to the number of Independent community.
Directors is in adherence to relevant requirements and regulations;
• Being available for confidential discussions with other Non-Executive Directors who
may have concerns which they believe have not been properly considered by the COMPANY SECRETARY ROLES
Board as a whole; • Managing all Board and Board Committee
• Being available to shareholders if they have any concerns which are unable to meetings logistic, attending and recording
be resolved through the normal channels of Chairman, President/CEO or Chief minutes of all Board and Committee meetings
Financial Officer, or if contact through these channels are deemed inappropriate; and facilitating Board communications;
and • Advising the Board on its roles and
• If necessary, the Senior Independent Non-Executive Director can be emailed at responsibilities;
norainicd.integrity@tnb.com.my. • Facilitating the orientation of new Directors
and assisting in Directors’ training and
development;
• Advising the Board on corporate disclosures
PRESIDENT/CEO ROLES and compliance with Companies Act 2016 and
• Delivering strategy as agreed by the Board; securities regulations and Main Market Listing
• Leading the Management Committees which oversee the operational and financial Requirements of Bursa Malaysia Securities
performance including issues faced by the Group; Berhad (MMLR);
• Leading and supporting each of TNB’s businesses and the functions of Human • Managing processes pertaining to the general
Resource, Strategy and Development and Corporate Affairs; meetings;
• Representing TNB externally to stakeholders, shareholders, customers, suppliers, • Monitoring corporate governance
regulatory and Government authorities and the community; developments and assisting the Board in
• Creating and implementing the Company’s vision and mission; applying governance practices to meet the
• Ensuring that the Company has appropriate systems to enable it to conduct its Board’s needs and stakeholders’ expectations;
activities both lawfully and ethically; and • Serving as a focal point for stakeholders’
• Ensuring the Directors are properly informed and that sufficient information is communication and engagement on corporate
provided to the Board to enable the Directors to form appropriate judgements. governance issues; and
• The Board Members have unlimited access
to the professional advice and services of the
Company Secretary.
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BOARD COMMITTEES Prior to each Board meeting, the Board shall receive reports from the Chairman
The Board has established its principal Committees to exercise oversight in of each Board Committee on their deliberations and recommendations of each
specific areas. Our Board Committees structure during the Financial Year is set meeting. This ensures that each Director is informed of the decisions made
out below. It includes the Committees’ Roles and Responsibilities, Membership, including views/comments raised. The Chairman of each Board Committee shall
Attendance and Composition. then table to the Board its report and present its recommendations for the Board’s
approval accordingly at each Board meeting. This permits the Board to raise any
comments/views (if any) on all deliberations.
Board of Directors
Tan Sri Datuk Seri Ir. Datuk Ahmad Amran Hafiz Noraini Gee Juniwati
Leo Moggie Azman bin Mohd Badri bin Mohd bin Affifudin binti Che Dan Siew Yoong Rahmat Hussin
Zahir1
Total Attendance
A BOARD AUDIT F BOARD FINANCE AND T BOARD TENDER NR BOARD NOMINATION AND
COMMITTEE (BAC) INVESTMENT COMMITTEE COMMITTEE (BTC) REMUNERATION COMMITTEE
(FIC) (BNRC)
Chairman
Noraini binti Che Dan Tan Sri Leo Moggie Datuk Ahmad Badri bin Mohd Zahir1 Juniwati Rahmat Hussin10
Attendance 18/18 (100%) Attendance 13/13 (100%) Attendance 2/2 (100%)
^
Attendance ^
5/5 (100%)
Datuk Seri Hashmuddin bin Mohammad4 Tan Sri Dato’ Seri Chor Chee Heung7
Attendance *3/3 (100%) Attendance *8/8 (100%)
Members
Gee Siew Yoong Amran Hafiz bin Affifudin Amran Hafiz bin Affifudin Datuk Ahmad Badri bin Mohd Zahir1
Attendance 17/18 (94%) Attendance 13/13 (100%) Attendance 12/12 (100%) (No meeting held since his appointment)
Gopala Krishnan K.Sundaram2 Noraini binti Che Dan Juniwati Rahmat Hussin Amran Hafiz bin Affifudin
Attendance ^
8/8 (100%) Attendance 12/13 (92%) Attendance 10/12 (83%) Attendance 10/10 (100%)
Ong Ai Lin 3 Datuk Sakthivel Alagappan 6
Gee Siew Yoong 9
Noraini binti Che Dan11
Attendance ^
7/7 (100%) Attendance *4/4 (100%) Attendance ^
8/8 (100%) Attendance ^
2/2 (100%)
Dato’ Abd Manaf bin Hashim 5 Tan Sri Dato’ Seri Chor Chee Heung7 Dato’ Abd Manaf bin Hashim 5 Dato’ Abd Manaf bin Hashim 5
Attendance *6/7 (86%) Attendance *6/6 (100%) Attendance *4/4 (100%) Attendance *5/5 (100%)
Datuk Sakthivel Alagappan 6
Attendance *7/7 (100%)
Tan Sri Dato’ Seri Chor Chee Heung7
Attendance *10/10 (100%)
Badrul Ilahan bin Abd Jabbar 8
Attendance *10/10 (100%)
To oversee the integrity of the financial Review, monitor and make recommendations To establish the framework of TNB’s Procurement To identify and recommend new nominees to
statements in compliance with legal and to the Board for approval of the annual and & Supply Chain Policy and Procedures. the Board, Board Committees and Board of TNB
regulatory requirements and applicable supplementary budgets, capital budgets and Group.
accounting standards. investments of TNB. To advise the Board regarding the details and
implementation of TNB’s Procurement & Supply To consider the Executive Director and Top
To assess the effectiveness of the Group’s Review and evaluate, as may be appropriate, Chain Policy and Procedures framework. Management’s succession planning.
internal control framework as well as internal information relating to the Company's investable
and external audit functions. assets, its investment policies, strategies, To assist the Board in regulating the compliance To assist the Board in reviewing the Board’s
objectives and activities. of Top Management and Executive Director with required mix of skills, experience and other
The BAC’s TOR is available on the TNB’s Procurement & Supply Chain Policy and qualities, including core competencies which
Company’s website at www.tnb.com.my. Monitor and review investments in subsidiaries Procedures. Non-Executive Directors should bring to the
and associated companies, and to evaluate and Board.
consider and make appropriate recommendations To ensure TNB complies with the applicable
on proposals for any new investments/ laws, regulations, rules and guidelines to achieve To implement the process formulated by the
divestments proposed by the Management. best business practices in its procurement of Board to assess the effectiveness of the Board,
equipments, materials, works and services. Board Committees, Self and Peer.
To provide input on the valuation of the proposed
investment/divestments taking into account To determine and recommend to the Board
compliance with the Investment Policy, risk the remuneration packages of Non-Executive
management analysis, findings of the due Directors/Executive Directors/Top Management.
diligence and written report from external
advisers, as applicable. The BNRC’s TOR is available on the Company’s
website at www.tnb.com.my.
BAC Meeting Hours 44.69 FIC Meeting Hours 25.26 BTC Meeting Hours 30.02 BNRC Meeting Hours 9.17
JANUARY 2018 FEBRUARY 2018 MARCH 2018 APRIL 2018 MAY 2018 JUNE 2018
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All deliberations and recommendations must be minuted and approved by each For this Financial Year under review based on the Board annual evaluation on
Board Committee and confirmed by the Chairman of each Board Committee at its Committees, the Board unanimously resolves that each Board Committee
their respective Board Committee meetings. and its members has discharged its roles and responsibilities effectively as
guided by its respective TOR.
Each Board Committee is entitled to seek information from any employee of the
Company and to obtain professional advice as the Board Committee deems Ad-hoc committees are also convened to consider matters of special
appropriate in its discretion. importance or to exercise the delegated authority of the Board.
Gopala Krishnan Ong Ai Lin3 Tan Sri Dato’ Badrul Ilahan bin Dato’ Abd Manaf Datuk Sakthivel Datuk Seri
K.Sundaram2 Seri Chor Chee Abd Jabbar8 bin Hashim5 Alagappan6 Hashmuddin bin
Heung7 Mohammad4
9/9
^ 100% 6/7
^ 86% *11/12 92% *12/12 100% *7/8 88% *8/8 100% *5/6 83%
41.98
Dato’ Abd Manaf bin Hashim 5 Tan Sri Dato’ Seri Chor Chee Heung7 Tan Sri Dato’ Seri Chor Chee Heung7
Attendance *6/6 (100%) Attendance *1/1 (100%) (No meeting held during his tenure/service)
Noraini binti Che Dan Datuk Ahmad Badri bin Mohd Zahir1 Juniwati Rahmat Hussin
Attendance 12/12 (100%) Attendance 0/1 (0%)
^
Attendance 3/3 (100%)
Juniwati Rahmat Hussin Amran Hafiz bin Affifudin Ong Ai Lin3
Attendance 11/12 (92%) Attendance 2/2 (100%) Attendance 3/3 (100%)
Gopala Krishnan K.Sundaram2 Noraini binti Che Dan11 Datuk Sakthivel Alagappan6
Attendance 5/5 (100%)
^
Attendance 1/1 (100%)
^
(No meeting held during his tenure/service)
Ong Ai Lin3 Dato’ Abd Manaf bin Hashim 5 Badrul Ilahan bin Abd Jabbar 8
Attendance 4/4 (100%)
^
Attendance *1/1 (100%) (No meeting held during his tenure/service) OVERALL
Datuk Seri Hashmuddin bin Mohammad4 PERCENTAGE
Attendance *4/5 (80%)
Badrul Ilahan bin Abd Jabbar 8
OF THE BOARD
Attendance *7/7 (100%) MEETINGS
ATTENDED BY
DIRECTORS
To oversee the establishment and implementation To oversee the administration of TNB LTIP and the To manage disciplinary issues and actions with
90%
of the risk management framework that is shares granted (LTIP Shares) subject to the By-Laws. regard to employees’ misconduct, except for
embedded into the culture, processes and the hearing of appeal of executives of grade
structures of the Company and is responsive to To approve and determine the manner in which the M15 and above or equivalent grade with regard
changes in the business environment. LTIP Shares are granted and subsequently vested to disciplinary cases, for which the power lies
to the selected employees in accordance with the with the Board.
To approve the Risk Management Policies on By-Laws, including inter alia, the determination of
behalf of the Board. eligibility, grant level, terms of acceptance of offers, To review the disciplinary procedures, whenever
terms of vesting of shares, performance conditions applicable, subject to the Board’s approval.
To ensure the principles and requirements of and any other terms and conditions imposed at the TOTAL HOURS
managing risk are consistently communicated discretion of the BLTIP.
and adopted throughout the Company.
OF THE BOARD
& BOARD
COMMITTEES’
NOTES 7
Resigned as Director, ceased as Chairman of BNRC, BLTIP & BIC and Member of
1
Appointed as Director, Chairman of BTC and Member of BNRC & BLTIP BAC & FIC w.e.f. 30 June 2018 MEETINGS
203.54
w.e.f. 1 November 2018 8
Resigned as Director and ceased as Member of BAC, BRC & BIC
2
Appointed as Director w.e.f. 4 July 2018, Chairman of BIC and Member of w.e.f. 30 June 2018
BAC & BRC w.e.f. 1 August 2018 9
Appointed as Chairman of BRC and Member of BTC w.e.f. 16 May 2018
3
Appointed as Director w.e.f. 1 August 2018 and Member of BAC, BRC & BIC 10
Appointed as Chairman of BNRC & BLTIP w.e.f. 1 August 2018
w.e.f. 15 August 2018 11
Appointed as Member of BNRC & BLTIP w.e.f. 1 August 2018
4
Resigned as Director, ceased as Chairman of BTC and Member of BRC * Reflects the number of meetings during the time the Director held office/was
w.e.f. 1 April 2018 Chairman/Member of Committee
5
Cessation of office as Director, Chairman of BRC and Member of BAC, BTC, BNRC ^
Reflects the number of meetings since his/her respective appointment on the Board/ All Directors have
& BLTIP w.e.f. 15 May 2018 relevant Board Committee
6
Cessation of office as Director and Member of BAC, FIC & BIC w.e.f. 15 May 2018 complied with
the minimum
attendance as
BRC Meeting Hours 42.92 BLTIP Meeting Hours 1.83 BIC Meeting Hours 7.67
stipulated in the
MMLR, of which
being present not
BOD 24 24 24 24 BOD BOD less than 50% of
BOD 14 14 30 30 12 12 18 18 21 21 21 4 4 10 10 the Board meetings
30 BOD BOD held during the
BOD 27 27 11 11 BOD 27 27 BOD Financial Year.
17 19 31 6 16 23 7 17 31 2 8 16 5 7 17
JULY 2018 AUGUST 2018 SEPTEMBER 2018 OCTOBER 2018 NOVEMBER 2018 DECEMBER 2018
About TNB Performance Review Financial Statements
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BOARD ACTIVITIES
TNB is built on strong foundations and operates with a clear strategic framework comprising a balance range of businesses in core markets and a commitment
to efficient operations and disciplined investment. Some of the matters considered by the Board in relation to these strategic priorities are set out below:
Formulating, reviewing and approving the Identifying and managing principal risks affecting
Company’s strategic business plan the Company
The Board plays a pivotal role in reviewing the Company’s strategic direction and The BRC assists the Board in overseeing the establishment, implementation and
approving corporate strategic initiatives developed by the Management. The Board effectiveness of the risk management system. The BRC on behalf of the Board, also
deliberates annually on the Company’s strategic and business plan as proposed by the approves risk management policies/practices, reviews periodic reports on risk management
Management, including the annual capital and revenue budget for the ensuing year as and makes relevant recommendations to the Board for its approval.
well as the Key Performance Indicators (KPIs). This will ensure that the KPIs correspond
with the Company’s annual strategic and business plan. The Board reviews and The Risk Management Department (RMD), led by the Chief Risk Officer, is responsible
deliberates on the Management’s views/assumptions in ensuring the best decisions are for the effective implementation of the TNB Risk Management Framework for informed
reached after considering all relevant aspects. decision-making. Additionally, RMD manages the insurance programmes for the Company
and its subsidiaries. RMD had implemented various initiatives in Financial Year 2018 in
A separate and informal session between the Board and Top Management, known as alignment with the BRC’s objective, which is to ensure that the Company has in place a
the Board Breakout Session (BBO), is held to discuss in-depth and exchange views on sound and robust enterprise risk management framework and such framework has been
the Company’s strategic issues/challenges. The BBO is coordinated by the Company effectively implemented to enhance the Company’s ability to achieve its strategic objectives.
Secretary’s Office as and when the need arises and is a platform for the Board and
Management to deliberate and exchange views as well as opinions in formulating There has been strong and consistent mandate from the BRC and TNB Top Management
strategic plans and to chart the direction of the Group, including the reporting of its in driving effective risk management across the Company and its subsidiaries. In Financial
progress. Year 2018, BRC communicated its mandate through the TNB Top Management Risk Forum
2018 held on 23 January 2018. About 100 Senior including Top Management personnel
During the Financial Year under review, two (2) BBOs were held on 10 October 2018 and from business units and subsidiaries dialogued with the BRC members regarding risks and
11 December 2018, specifically to discuss on the TNB International Investment Strategy opportunities in the coming year.
Refinement and Regulatory Landscape & Challenges under Malaysia Electricity Supply
Industry. Additionally, there were 12 BRC sittings in Financial Year 2018 to deliberate risk management
matters and mitigations across the organisation. Business units had numerous opportunities
During the BBOs, the Management shared with the Board of the Regulatory Landscape, to provide assurances to BRC of its risk management efforts, assisting the Board in its
its Current Challenges and Cost of Service & Tariff Design Study as well as Strategies in decision-making, especially in the management of strategic risks that may prevent TNB from
Refining TNB’s International Investment. achieving its Reimagining TNB outcomes.
In return, the Management gained constructive inputs/guidance from the Board on BRC were provided with timely alerts on the health of the organisation in achieving its
way forward of these investments and regulatory landscapes & challenges of utility strategic objectives through the quarterly Risk Dashboard reports. RMD collated and
industry in Malaysia. More information on the Strategic Direction is available in the 2018 highlighted the status of 28 Key Risk Indicators (KRI) identified by the business units.
Year in Review on pages 21 to 43 of this Integrated Annual Report. Indicators at triggering and breaking points were deliberated for accelerated mitigating
actions to manage the potential impacts. Moreover, RMD facilitated the review of the KRIs
Half-year reviews of the business plan and the budget were conducted whereby to ensure they remain relevant to the present business and strategic objectives as well as
comparison of approved targets against the Company’s actual performance was made. adaptive to the changing industry and global scenarios.
Based on the evaluation for Financial Year under review, the Board collectively concurs Based on the evaluation for the Financial Year under review, the Board collectively agrees
that it has reviewed the Company’s strategic and financial plan as well as monitored that it has discharged its roles in identifying principal risks and in ensuring that the Group
its implementation, including the setting of suitable KPIs in achieving the Company’s has put in place an adequate risk management framework to effectively monitor and manage
objectives. the risks of its operational businesses.
The Board is responsible for ensuring that a sound The President/CEO is responsible for managing the day- The Board, through the BNRC is entrusted to review
reporting framework of internal controls and regulatory to-day operations of the Company and implementing potential candidates for Top Management positions and
compliance is in place throughout the Company. Based the Group strategies and policies as agreed by the establish their remuneration. The Group’s nomination,
on the evaluation for the Financial Year under review, the Board. In doing so he is well supported by the respective selection and succession policies are formulated by the
Board collectively concurs that it has discharged its roles Management Committees. The performance of the BNRC.
through the BRC/BAC whereby regular meetings were Management is measured through the Company’s and
held in reviewing the effectiveness of the Company’s Group’s quarterly financial reports. The Board, on a During the Financial Year under review, there were three
internal control system. Details of the Company’s internal (3) new additions to the Board, duly appointed by the
continuous basis, is well informed of the progress of the
BNRC/Board.
control system and its effectiveness are provided in the Company’s strategic initiatives and critical operational
Statement of Risk Management and Internal Control in issues as well as of the Group’s performance based on
Gopala Krishnan K.Sundaram and Ong Ai Lin were
this Integrated Annual Report. approved KPIs. appointed as Independent Non-Executive Directors with
effect from 4 July 2018 and 1 August 2018 respectively, while
Datuk Ahmad Badri bin Mohd Zahir, a Non-Independent
Non-Executive Director was appointed on 1 November
2018, as Appointed Director of the Minister of Finance
(Incorporated) (MoF Inc.), the Special Shareholder of TNB.
BOARD MEETINGS
The Board schedules meetings on a monthly basis. Additional meetings are held to discuss specific issues that require deliberation in between the
scheduled meetings. The Board held 21 Board meetings during the Financial Year under review.
The calendar for Board and Board Committee meetings is scheduled well in advance, which include the BBO, Pre-Board meetings and Annual General
Meeting (AGM), with dates for the year circulated to the Board in the month of October of the preceding year to give the Directors ample time to plan
their attendance. A Pre-Board meeting is held prior to any Board meetings for the Management to provide the Chairman with insights into the papers
that will be deliberated.
The agenda of Board meetings is drawn up after consultation between the Chairman, President/CEO and Company Secretary at the Pre-Board meeting.
Copies of the agenda and Board papers are circulated to Board Members electronically and in hard copies at least five (5) working days prior to the
meetings. This permits prior review by the Directors and if necessary, the provision of further information for deliberation at the meeting to ensure
informed decision-making. Any Director may request matters to be included in the agenda.
Top Management and external advisors may be invited to attend Board meetings to advise the Board when matters under their purview are being
considered, or as otherwise requested by the Board to enable informed decision-making. Should a Director be unable to attend a meeting, his/her views
are sought in advance and put to the meeting to facilitate a comprehensive discussion. Thereupon, each Director makes himself/herself available to
fellow Directors and may contribute to all major decisions before the Board.
A comprehensive Board paper comprising the objectives, background, issues, implications, risks, appropriate analysis/statistics, recommendations and
other relevant information is prepared to enable the Board to make informed and effective decisions.
The Board and Board Committee meetings are also held at various business operating units or sites of major/new projects to allow the Board to better
assess progress made and note any other important issue raised. As at to date, the Board/respective Board Committees visited the following business
operations/on-going projects:
BOARD
Date Venue
23 April 2018 TNB Sepang Solar Sdn. Bhd. Large Scale Solar Project at Lot 32888, Mukim Tanjung Dua Belas, Daerah Kuala Langat, Selangor
19 November 2018 Track 4A 1440MW Combined Cycle Power Plant in Pasir Gudang, Johor
BAC
Date Venue
7 September 2018 (i) PMU Kimanis, Daerah Papar, Sabah
(ii) Kimanis Power Sdn. Bhd. (Independent Power Producer), Kota Kinabalu, Sabah
Decisions of the Board and Board Committees are made unanimously or by consensus. These decisions and conclusions are recorded in the Board
minutes. In the case of a tied vote, the Chairman has a second or casting vote. The Board’s decisions may also be obtained via circulation depending
on the urgency and availability of the Directors as well as the nature of the proposal/subject matter.
Minutes of the meetings are circulated earlier to all Directors for their perusal prior to the meetings. The Directors may request for clarification or raise
comments on the minutes prior to their confirmation. After the Directors’ confirmation, the Chairman of the meeting signs the minutes as a correct record
of the proceedings. The Directors are also informed of announcements made to Bursa Malaysia Securities Berhad for their notification.
The Board recognises the importance of independent judgement and constructive debate on all issues under consideration. Where necessary, the
Board collectively and individually has the right to obtain external independent legal, accounting or other professional advice at the Company’s expense
to assist with its decision-making process.
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AND REMUNERATION The Committee has a dual role. Firstly, the Committee ensures there is a formal and appropriate
procedure for the appointment of new Directors to the Board. The Committee is responsible
COMMITTEE for leading this process and making recommendations to the Board. Secondly, the Committee
determines and makes recommendations to the Board on the Company’s framework and policy
CHAIRMAN
for the remuneration of the Non-Executive Directors, the Executive Director and Top Management.
Juniwati Rahmat Hussin
Independent Non-Executive Director
(Appointed as Chairman w.e.f. 1 August 2018)
SUMMARY OF ACTIVITIES FOR THE FINANCIAL YEAR UNDER REVIEW
Tan Sri Dato’ Seri Chor Chee Heung Juniwati Rahmat Hussin, an Independent Non-Executive Director was appointed as the Chairman
Independent Non-Executive Director of BNRC with effect from 1 August 2018. She is well supported by three (3) Members, of which
(Ceased as Chairman w.e.f. 30 June 2018) half of the BNRC members are Independent Non-Executive Directors.
During the Financial Year under review, the BNRC held 10 meetings on matters including the
MEMBERS
following:
Amran Hafiz bin Affifudin
Non-Independent Non-Executive Director • Appointment of new Board Members;
• Re-election and re-appointment of Independent Non-Executive Directors;
• Review of the status of independence of the Independent Non-Executive Directors;
Noraini binti Che Dan • Findings of Annual Assessment of the Board, its Committees, Self and Peer;
Senior Independent Non-Executive Director • Review of composition of the Board Committees;
(Appointed w.e.f. 1 August 2018) • Review of composition of the Boards of TNB Group of Companies;
• Review and assess the performance and make recommendation to the Board with regards to
Directors who seek re-election and re-appointment at the AGM;
Datuk Ahmad Badri bin Mohd Zahir • Assess and recommend to the Board the renewal of service contracts of Top Management;
Non-Independent Non-Executive Director • Appointment of Senior Independent Non-Executive Director;
(Appointed w.e.f. 1 November 2018) • Oversee the appointment, succession planning and performance evaluation of President/CEO
and Top Management; and
• Review of TNB Non-Executive Directors remuneration by an independent expert.
Dato' Abd Manaf bin Hashim
Senior Independent Non-Executive Director The BNRC annually reviews the size, composition and diversity of the Board as well as the mix of
existing and desired competencies of Members, and reports its conclusions to the Board.
(Ceased as Member w.e.f. 15 May 2018)
Through its annual assessment and recommendations made by the BNRC, the Board believes
that the current size and composition of the Board is conducive to appropriate decision-making
KEY RESPONSIBILITIES
and incorporates a diversity of perspectives and skills in order to represent the best interests of
• To identify and recommend new nominees to the Company as a whole.
the Board, Board Committees and Boards of
TNB Group. In view of the need to ensure proper processes are in place to manage succession issues at the
• To consider the Executive Director and Top Board level, an appropriate process for the selection, nomination and appointment of suitable
Management’s succession planning. candidates to the Board has been put in place.
• To assist the Board in reviewing the Board’s
required mix of skills, experience and other
The BNRC is entrusted with the responsibility of assessing and considering the capabilities,
qualities, including core competencies which
Non-Executive Directors should bring to the commitment and qualities of candidates to be appointed as Board Members as well as
Board. Committees’ Members, taking into account the required mix of skills, background, experience/
• To implement the process formulated by expertise/knowledge relevant to Company’s business, existing commitment and potential conflict
the Board to assess the effectiveness of the of interest prior to recommending to the Board.
Board, the Board Committees, Self and Peer.
• To determine and recommend to the Following each appointment, a letter of appointment will be issued and the Company Secretary
Board the remuneration packages of shall undertake the necessary as authorised by the Board, so as to ensure the appointment is
Non-Executive Directors/Executive Directors/ in accordance with the statutory requirements and as prescribed by the MMLR. All necessary
Top Management. information will be obtained from the newly appointed Director for the Company’s records and for
• The BNRC’s duties and responsibilities are set meeting the statutory requirements and other applicable rules and regulations.
out in its TOR which is also available on the
Company’s website at www.tnb.com.my.
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With that the BNRC/Board collectively resolved to recommend the re-election of each
Director who is standing for re-election at AGM 2019.
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(b) is employed, or has previously been employed within the last New Board Members are provided with the opportunity to experience the
two (2) years in an executive capacity by the Company; Company’s operations first-hand and to meet and discuss all aspects of this
(c) has been engaged as an adviser by the Company or is presently with the Top Management. The Company Secretary facilitates the induction
a partner, director (except an Independent Director) or major programme by providing the new Board Members with access to information on
shareholder, as the case may be, of a firm or corporation which areas such as operations, finance, treasury and risk management, as required.
provides professional advisory services to the Company; or
There were a number of induction sessions arranged by the Company
(d) has engaged in any transaction with the Company or is Secretary’s Office between the Directors with the respective Top Management
presently a partner, director or major shareholder, as the case during the Financial Year under review to better assist them in understanding
may be, of a firm or corporation which has engaged in any the Company’s core businesses and its whole operation. The details are as
transaction with the Company. follows:
The Board also concurs that the continuous contributions of the DATE INDUCTION PROGRAMME DIRECTOR(S) IN ATTENDANCE
Directors are beneficial to the Board and the Company as a whole. 26 February 2018 ICT Division Overview Briefing 1. Amran Hafiz bin Affifudin
2. Juniwati Rahmat Hussin
The BNRC shall assess the independence of Independent 1 March 2018 TNB Repair And Maintenance Sdn. Bhd. 1. Amran Hafiz bin Affifudin
Non-Executive Directors annually. The independence status of (REMACO), TNB Energy Services Sdn. 2. Juniwati Rahmat Hussin
Independent Non-Executive Directors standing for re-election is Bhd. (TNBES) dan TNB Engineering
Corporation Sdn. Bhd. (TNEC)
disclosed in the Notice of the 29th AGM. Overview Briefing
23 July 2018 Group Finance Division Overview Briefing 1. Gopala Krishnan K.Sundaram
The Board adopts the policy that limits the tenure of its Independent 2. Ong Ai Lin
Non-Executive Directors to nine (9) years, pursuant to Step Up 4.3
23 July 2018 Strategic Management & Performance 1. Gopala Krishnan K.Sundaram
of MCCG 2017. Department Overview Briefing 2. Ong Ai Lin
Details of Directors’ training, including the Company Secretary’s training for the Financial Year under review are listed below:
BOARD EVALUATION
The Board recognises an objective and well-managed board evaluation process can lead to substantial improvement in board effectiveness, bringing
significant benefits to the Company. This is achieved through annual performance evaluations, induction programmes for new Board members and on-going
Board development activities.
In 2018, the Board with the assistance of BNRC, had undertaken a formal and extensive Board Evaluation Assessment (BEA) of its own performance, its
Committees and Individual Directors, for the Financial Year ended 31 December 2018.
These evaluations were conducted through the BEA questionnaires and the results were subsequently collected and analysed.
The BEA questionnaires towards an Effective Board cover the following parameters:
Overall the Board operates effectively as a team as evident in the synergies of its Members whereby it has remained
Each Director highly effective and have consistently met high performance standards and all expectations. This indicates that the
completed the Directors have continuously fulfilled their responsibilities as Members of the Board. The Board also has identified some
BEA for the Board areas of improvements for the effectiveness of its operation of which among others, in managing the regulatory outcome
and its respective and industry reformation, the Company’s restructuring and the succession planning of Board and Top Management.
Committees
including Self and The respective Board Committees in average have been regarded as very effective in assisting the Board to carry out
Peer Assessment its duties. This indicates that each Committee member has continuously fulfilled his/her responsibilities as Member of
the Board Committee.
The BEA 2018 also inclusive of Directors’ Self and Peer Assessment whereby the results in general reflected the
Board’s consensus that each of the Director’s level of performance was good and that they had also met the prescribed
performance criterias.
In conclusion, the Board and Board Committees are satisfied with their existing composition and are of the view that,
with the current mix of skills, knowledge, experience and strength of the existing Directors, the Board and respective
Board Committees are able to discharge their duties effectively.
The BEA analysis The performance of each Director who is retiring at the next AGM is taken into account by the Board in determining
was presented whether or not the Board should support the re-election or re-appointment of the Director.
to the BNRC for
deliberation
OUR REMUNERATION APPROACH
The overall objectives of the BNRC are to determine an appropriate remuneration policy that aligns remuneration with
strategy to drive the long-term success of the Company and ensures that the Company can continue to attract, retain
and motivate quality leaders.
REMUNERATION POLICY
Fixed Remuneration
Benefits-In-Kind
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EXECUTIVE DIRECTOR’S REMUNERATION The level of remuneration of Non-Executive Directors reflects the current
demanding challenges in discharging their fiduciary duties, roles and
The remuneration package for the Executive Director is structured to link rewards responsibilities, whether individually or collectively, as well as the complexity
to corporate and individual performance. It comprises salary, allowances, of the Company’s operations and the industry. The existing remuneration by
bonuses and other customary benefits as accorded by comparable companies. the Board, was last reviewed on 31 January 2013.
A significant portion of an Executive Director’s compensation package has
been made variable and is determined by performance during the year against In 2018, the Board engaged Willis Towers Watson (WTW) to conduct a holistic
individual KPIs in a scorecard aligned with the corporate objectives as approved and independent review of the Non-Executive Directors’ Remuneration with
by the Board. The Executive Director recuses himself from deliberation and the view to determine its market competitiveness and alignment with the
voting on his remuneration at Board meetings. latest regulations/corporate governance guidelines in Malaysia.
The BNRC reviews the performance of the Executive Director annually and Due to limited listed company data in utilities industry in Malaysia, multiple
submits views/recommendations to the Board on adjustments in remuneration data sources, combining of local and regional listed companies, beyond the
and/or rewards to reflect the Executive Director’s contributions towards the local market and industry, are considered and benchmarked.
Group’s achievements for the year.
From the study, overall, TNB is at par with the market for most of the
compensation elements offered to the Non-Executive Directors. With that
NON-EXECUTIVE DIRECTORS' REMUNERATION the current remuneration framework of TNB Non-Executive Directors be
The Board as a whole shall determine and recommend the remuneration retained, and to be reviewed in the next one (1) or two (2) years time to
of the Non-Executive Directors for shareholders’ approval at the AGM. The ensure its market competitiveness, as recommended by WTW.
Non-Executive Directors are remunerated through fixed monthly fees, meeting
allowances and benefits-in-kind, inclusive of the reimbursement of electricity
bills, telephone bills and business peripherals.
DETAILS OF EACH DIRECTOR’S REMUNERATION FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018:
Director’s Fees Meeting Allowances
Benefits-
Salary Company Subsidiaries Company Subsidiaries Emoluments1 in-Kind2 Total
Name of Directors (RM) (RM) (RM) (RM) (RM) (RM) (RM) (RM)
Executive Director
Datuk Seri Ir. Azman bin Mohd 2,760,000.00 - - - - 8,694,961.00 44,500.223 11,499,461.22
2,760,000.00 - - - - 8,694,961.00 44,500.22 11,499,461.22
Non-Executive Directors
Tan Sri Leo Moggie - 360,000.00 300,000.00 78,500.00 32,800.00 - 111,739.71 883,039.71
Datuk Ahmad Badri bin - 40,000.00 - 8,000.00 - - - 48,000.00
Mohd Zahir
(Appointed w.e.f. 1 November 2018)
Amran Hafiz bin Affifudin - 240,000.004 - 101,500.004 - - 33,460.70 374,960.70
Noraini binti Che Dan - 240,000.00 - 116,500.00 - - 27,657.33 384,157.33
(Redesignated w.e.f. 28 February 2019)
Gee Siew Yoong - 240,000.005 - 102,500.00 - - 18,313.96 360,813.96
Juniwati Rahmat Hussin - 240,000.00 - 84,500.00 - - 18,931.18 343,431.18
Gopala Krishnan K.Sundaram - 118,064.51 - 43,500.00 - - 23,294.40 184,858.91
(Appointed w.e.f. 4 July 2018)
Ong Ai Lin - 100,000.005 - 33,000.00 - - 18,541.43 151,541.43
(Appointed w.e.f. 1 August 2018)
Datuk Seri Hashmuddin bin - 60,000.00 - 22,000.00 - 200,000.00 4,849.20 286,849.20
Mohammad
(Resigned w.e.f. 1 April 2018)
Dato’ Abd Manaf bin Hashim - 89,677.42 33,333.33 50,000.00 5,000.00 568,500.003 67,411.603 813,922.35
(Cessation of Office as Director w.e.f.
15 May 2018)
Datuk Sakthivel Alagappan - 89,677.42 - 32,500.00 - 200,000.00 71,193.97 393,371.39
(Cessation of Office as Director w.e.f.
15 May 2018)
Tan Sri Dato’ Seri Chor Chee - 120,000.00 - 66,000.00 - 200,000.00 43,782.25 429,782.25
Heung
(Resigned w.e.f. 30 June 2018)
Badrul Ilahan bin Abd Jabbar - 120,000.00 - 51,500.00 - 60,000.00 67,630.64 299,130.64
(Resigned w.e.f. 30 June 2018)
Total 2,760,000.00 2,057,419.35 333,333.33 790,000.00 37,800.00 9,923,461.00 551,306.59 16,453,320.27
NOTES
1 Contribution to EPF, Bonus, Car Allowance, Flexi Benefits, LTIP and Gratuity.
2 Electricity Bills, Telephone Bills, Business Peripherals, Purchase of Handphone, Medicals and Travelling Expenses.
3 Include Subsidiary.
4 Paid to Khazanah Nasional Berhad, in respect of Director’s Fees and Meeting Allowances provided for Amran Hafiz bin Affifudin.
5 Receivable by the Directors upon shareholders’ approval.
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p.132
ACCOUNTABILITY
A AUDIT COMMITTEE REPORT
The Board Audit Committee (BAC) was established on 9 December 1990 by the Board of Directors to assist the Directors to carry out their responsibilities.
The BAC is guided by its Terms of Reference.
The BAC comprises four (4) Independent Directors as at 31 December 2018, all of whom are Non-Executive Directors. The Chairman of BAC is not the
Chairman of TNB’s Board of Directors. This composition is aligned with Paragraph 15.09 (a) and (b) of the MMLR.
Details of BAC members and their attendance record at BAC meetings held during the Financial Year ended 31 December 2018 (FY2018) are as follows:
During the financial year under review, 18 BAC meetings were held. This satisfies Paragraph 5.1 of the BAC Terms of Reference, which requires the
Committee to meet at least six (6) times a year.
The Company Secretary, who is the secretary to the BAC, and the Chief Internal Auditor (CIA) were in attendance during the meetings. The President/CEO
and other officers were invited to the meetings to deliberate on matters within their purview.
After each meeting, the BAC Chairman submits a report to the Board of Directors on the matters deliberated. Matters reserved for the Board’s approval are
tabled at the TNB Board meetings. Action sheets are issued by the Company Secretary on the decisions made and the actions required. These are circulated
to the Management for their further action.
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p.133 Accountability
SUMMARY OF ACTIVITIES OF THE BOARD AUDIT COMMITTEE • BAC was updated quarterly on GIA’s performance, which included
percentage completion of the audit plan, cycle time of audit
Principal activities performed by the BAC during FY2018 are summarised as completion, and contribution(s) to the organisation in terms of cost
below: savings/recoveries and/or business process improvements.
Internal Audit Among other matters reported during the meeting were Auditee
• Approved the 2019 Group Internal Audit (GIA) Annual Audit Plan in Satisfaction Survey results, budget utilisation status, summary of
November 2018, in which 90 audits were proposed to be conducted. The trainings attended by auditors, number of auditors with/currently
plan consists of audits in the form of full scope, design reviews, surprise pursuing professional certifications, and improvement initiatives
audits, and external assessments. undertaken by GIA.
Reviewed GIA’s methodology in assessing the risk levels of various • Approved the revised Group Internal Audit Charter, after taking into
auditable areas based on a number of considerations, including high and consideration the changes made to the Internal Audit Activity Model
significant risk rating, TNB’s strategic objectives, business landscape, Charter 2017, issued by the Institute of Internal Auditors (IIA) Global.
regulatory requirements, and inputs from BAC and the Senior Management.
Key revisions made were in the areas of the mission statement of GIA,
The approved plan was established based on an estimated requirement of BAC’s authority on GIA, conditions that may impair the objectivity
9,345 man-days and a projected operating cost of RM20.5 million. and independence of internal auditors, and quality assurance and
improvement programme.
• Approved the FY2019 Key Performance Indicators (KPI) for CIA, relating to
TNB’s stakeholders, namely, our shareholders, employees and customers. • BAC reviewed GIA’s organisational independence declaration for
FY2018, which was prepared in accordance with the IIA Standards 1110
• Approved the revised FY2018 Annual Audit Plan in September 2018 to (Organisation Independence) and 1130 (Impairment to Independence
ensure its pertinence and in consideration of changes in current business and Objectivity).
requirements, as well as to meet requests from BAC and the Management.
It was brought to the BAC’s attention that there had been no conflicts
• Deliberated on the internal audit reports for TNB and its subsidiaries of interest arising from GIA’s audit engagements in FY2018. In the event
issued by GIA, which, among others, focused on the effectiveness and the CIA determines that GIA’s independence or objectivity may be
adequacy of governance, risk management, and internal controls, audit impaired in fact or appearance, details of impairment will be disclosed
recommendations, and the Management’s response towards the issues to the appropriate parties as stated in the Internal Audit Charter.
highlighted in the presence of Management. Among the reports presented
include security assessment for SCADA control, cyber security strategy, External Audit
personal data protection, and international investment. • Deliberated and recommended for the Board’s approval, the external
auditor’s 2018 Audit Plan encompassing the proposed audit approach,
• Two (2) BAC meetings were held at Sabah Electricity Sdn. Bhd. (SESB) on the nature and scope for the year’s audit, audit fees, reporting schedule,
16 April 2018 and 7 September 2018, respectively, to deliberate on audit and potential key audit matters. The external auditor informed that
findings related to fuel management, human resources, long-term incentive focus will be placed on areas related to information technology risk
plan, generation planning, collection and credit management, as well as assurance i.e. security, application control, sales and service tax, and
safety. change of handled devices.
• BAC took note of the status of actions taken by the Management on matters • Evaluated the independence and objectivity of the external auditor by
arising from previous meetings. reviewing the fees and the list of non-audit services provided by the
external auditor to TNB and the Group on a quarterly basis.
• Reviewed TNB’s State of Internal Controls, tabled by GIA on a quarterly
basis. Matters reported include audit plan coverage status, audit scope BAC requested that justifications are to be provided by the Management for
and the risks covered as at the date of the reports, audit rating summary the appointment of external auditors for non-audit services. Additionally,
for completed audits, significant audit findings, findings escalated for the allocation of non-audit services to the external auditor that exceeds the
Management’s immediate action, and the status of corrective actions. threshold set (i.e. 50% of audit and audit-related services), will need to be
reported to BAC and the Board.
About TNB Performance Review Financial Statements
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p.134 Accountability
During the year, BAC was informed that the non-audit services amount • Recommended the proposed final dividend for the period ended
for external auditors had exceeded the threshold limit. This was due to 31 December 2017 and Interim 1 Single-Tier Dividend for the quarter
contracts awarded prior to the implementation of the threshold limit. ended 30 June 2018. BAC reviewed and received assurance from
Subsequently, the appointment of PricewaterhouseCoopers (PwC) as the Management, based on the solvency test conducted, that the
TNB’s tax advisor for year assessment 2019 and 2020 was deferred as the distribution of dividends was in accordance with the provisions made
non-audit services amount had exceeded the threshold set, and to avoid under the Companies Act 2016.
potential impairment of independence.
Related Party Transactions
• BAC exercised its rights, as stipulated in its Terms of Reference, to hold • In February 2018, BAC reviewed all related party/recurrent related party
meetings with the appointed external auditor without the presence of transactions entered into by TNB Group for the Financial Year ended
Management to enable open discussions with the BAC. 31 December 2017, and recommended to the Board that TNB Group
complied with the MMLR.
During the year, three (3) meetings were held without the Management’s
presence, namely, on 28 February 2018, 30 August 2018 and Annual Reporting
27 November 2018. • Reviewed and endorsed the BAC Report, Statement on Internal Audit
Function, TNB Sustainability Statement and Corporate Governance
• Reviewed the overall performance of the external auditor for the period Overview Statement for the Board’s approval.
from 1 September 2017 to 31 December 2017.
Others
A survey was coordinated by GIA, and assessments on the effectiveness • Discussed and adviced newly-acquired subsidiaries on compliance
of the external auditor was performed by members of BAC and the with the Group External Auditors Policy for the appointment of external
Management. The external auditor was assessed based on: auditors.
(1) Quality of service; • Reviewed the proposal for the granting and vesting of performance
(2) Sufficiency of resources; shares, as well as restricted shares under TNB’s Long Term Incentive
(3) Communication and interaction; and Plan (LTIP) for the Board’s approval.
(4) Independence, objectivity and professional scepticism.
• During the BAC meeting in March 2018, key highlights and findings of
Based on the assessments, the external auditor was informed on areas the Regulatory Compliance Audit (RCA) 2016, carried out in conjunction
that required further improvement to enhance their services. with the requirement of the Malaysian Electricity Supply Act 1990 and
the operator license granted to TNB were discussed. BAC commented
• Deliberated and endorsed the revised policy on external auditors for the that the RCA 2016 results were satisfactory, as the initiatives planned
Board’s approval. Changes made took into consideration the provisions by TNB showed consistent improvements as compared to previous
under the Malaysian Code on Corporate Governance (MCCG) 2017 and audit results.
the TNB Implementation Guidelines on External Auditors’ Independence.
Financial Results
• In February 2018, BAC endorsed and recommended the audited
financial statements of the Company and the Group for the Financial
Year ended 31 December 2017 for the Board’s approval.
p.135 Accountability
The Limits of Authority outline principles to govern decision making To foster ethical and independent decision-making, the Company requires
within the Group, including appropriate escalation and reporting to the Directors with any direct or indirect interest in a proposal or transaction
Board. The Board has also delegated to the President/CEO, and through being considered by the Board or its Committees to declare that interest
the President/CEO to other Executives, responsibility to manage the and recuse himself/herself from the deliberations. The affected Director
Company’s day-to-day activities. The Limits of Authority encompass will take no part in the decision-making.
both monetary and non-monetary limits of authority for recommending
and approving operational and management decision-making activities WHISTLE BLOWING PROCEDURE
prior to its execution. This allows for balanced effective oversight with
appropriate empowerment and accountability of the Management. The Whistle Blowing Procedure embodies TNB’s commitment to
maintaining an open working environment in which employees, contractors
CODE OF ETHICS and members of the public are able to report instances of unethical,
unlawful or undesirable conduct on a confidential basis without any fear
The Board of Directors is guided by a high standard of ethical conduct in of intimidation or reprisal. An independent investigation team investigates
accordance with the Code of Ethics for Company Directors as established all reported concerns and where applicable, provides feedback regarding
by the Companies Commission of Malaysia. the investigation’s outcome.
Each Non-Executive Director is supplied with the Non-Executive Directors’ The objectives of the Whistle Blowing Procedure are as follows:
Handbook as reference of their professional responsibilities as well as
the terms and conditions of their service. The Non-Executive Directors’ • to detect and address unacceptable conduct;
Handbook is updated as and when the need arises to reflect any changes • to provide employees and contractors with a supportive working
of the applicable rules and regulations as well as in the policies/procedures environment in which they feel able to raise issues of legitimate concern
that govern the conduct of the Directors. to them and to TNB; and
• to protect people who report unacceptable conduct in good faith.
TNB has a Code of Ethics to govern the conduct of its employees. The
provisions set out in the Code of Ethics ensure compliance with laws and Complaints can be channeled online via wbis.tnb.com.my or
regulations, sound employment practices, confidentiality and privacy. norainicd.integrity@tnb.com.my or by calling the toll-free line at
It also includes provisions on conflicts of interest, giving and accepting 1-800-888-862.
business courtesies and the protection and proper use of TNB’s assets
and resources. TNB had been awarded the ISO 37001 Anti-Corruption Management
System from SIRIM on 15 November 2018, strengthening its integrity
TNB’s Code of Ethics also defines how TNB relates to its shareholders, values through the publication of the TNB Corporate Integrity Management
employees, customers, suppliers and the communities in which it System (TCIMS) Handbook.
operates. It includes TNB’s general principles on business integrity. All
employees are expected to conduct business in accordance with the The objectives for the TCIMS are summarised below:
applicable laws, rules and regulations and in a manner so as to enhance
and protect the reputation of TNB. • Bring TNB up to international standards of integrity infrastructure
• Impact corruption costs; and
TNB’s Procurement Code of Conduct guides TNB’s Directors and • Improve Company culture.
employees as well as all existing and potential suppliers/contractors
including their directors and employees. TNB believes that all supplier/ The TCIMS Handbook was launched by the Deputy Minister of Energy,
contractor relationships should be based on principles of good Science, Technology, Environment and Climate Change (MESTECC),
governance such as integrity, accountability, fairness and a zero-tolerance Isnaraissah Munirah Majilis, in conjunction with TNB’s Integrity Day
rule towards bribery and corruption. These principles are enforced in the 2018, which was held on 20 December 2018, at Dewan Serbaguna,
Procurement Code of Conduct, which is constantly revised to reflect Kompleks Sukan TNB, Jalan Pantai Baru, 59200 Kuala Lumpur. The
changes in regulations, reputational demands and business challenges. TCIMS Handbook, is based on the ISO 37001 standard, covers elements
such as due diligence, financial and non-financial controls, policies on
The Procurement & Supply Chain Policy and Procedures provides a set specific high-risk bribery areas, whistleblowing policy, and training and
of general policy and procedures as guidance in executing procurement communication.
within TNB. The Policy and Procedures enables TNB to obtain the best
value in procurement, adopt leading business practice, advance TNB’s The 61-page book covers five (5) TCIMS policies; Anti Bribery Policy,
business priorities, add value to customers and uphold good corporate Gifts, Hospitability and Related Benefits Policy, Conflicts of Interest
governance. Policy, Whistleblowing Policy and Integrity Pact and Committee Integrity
Pledges Policy.
TNB’s Code of Ethics and Procurement Code of Conduct are available at
their respective sections of the Company’s website at www.tnb.com.my.
About TNB Performance Review Financial Statements
Our Business Sustainability Statement Additional Information
Business Context The Strength of Our Governance
p.136 Accountability
COMMITTEE The Board Risk Committee (BRC) was established on 5 June 2013
by the Board of Directors (Board) to assist the Board to carry out
its responsibilities. The Board, through the BRC, is responsible
CHAIRMAN
Gee Siew Yoong to oversee the effectiveness and adequacy of the Group’s risk
Independent Non-Executive Director management framework and ensure it forms part of the corporate
(Appointed as Chairman w.e.f. 16 May 2018) culture. This is in line with the requirements stated in the Malaysian
Code on Corporate Governance and Bursa Malaysia’s Main Market
Listing Requirements.
Dato’ Abd Manaf bin Hashim
Senior Independent Non-Executive Director
(Ceased as Chairman w.e.f. 15 May 2018) The main role of the BRC is to assist the Board in ensuring that the
Group has in place a sound and robust enterprise risk management
framework and such framework has been effectively implemented to
MEMBERS
enhance the Group’s ability to achieve its strategic objectives.
Noraini binti Che Dan
Senior Independent Non-Executive Director
KEY RESPONSIBILITIES
SUMMARY OF ACTIVITIES FOR FY2018
• Oversees the establishment and implementation of the risk management
framework that is embedded into the culture, processes and structures of The BRC principal activities in the year under review are summarised
the Group and is responsive to changes in the business environment. below:
• Approves the risk management framework and policies on behalf of the • Reviewed the Statement of Risk Management and Internal
Board. Control, which summarised the risk management practices and
• Ensures that the principles and requirements of managing risk are internal controls implemented by Management. Assurances from
consistently communicated and adopted throughout the Group. the President/CEO and CFO were given to the Board that the
• Deliberates the Group’s strategic risks as well as key operating risks Group’s risk management and internal control system is operating
and risk issues through timely and regular reports and ensures the adequately and effectively, in all material aspects.
implementation of appropriate systems to manage these risks. It has • Deliberated the Group’s key operational risks and key controls
the authority to direct special investigations, on behalf of the Board, into taken to manage the risks. Additional mitigations to strengthen the
significant risk management activities, as and when necessary. management of existing and emerging risks were recommended
• Approves on behalf of the Board, the risk appetite for the strategic risks for further action.
and key operating risks and ensures that actions are taken in a timely • Reviewed and deliberated Key Risk Indicators that were reported
manner when risks are outside tolerable ranges. through a Quarterly Risk Dashboard. Relevant business units
• Reviews the adequacy of and to provide independent assurance to reported the status of action taken to mitigate potential adverse
the Board of the effectiveness of the risk management framework impacts.
implemented in the Group on an annual basis.
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p.137 Accountability
• Reviewed reports on risk incidents and deliberated the adequacy Moreover, in the effort to inculcate a risk-thinking mentality amongst TNB
and effectiveness of preventive and corrective action. employees, two (2) risk conferences for executives were organised in Johor
• Reviewed the risk profiles and mitigation plans for projects and Bahru and Kuala Lumpur with the theme “Let’s Manage Risk Together”.
proposed investments with recommendations for further action Furthermore, an inaugural TNB Cyber Security Risk Conference was organised
and/or study of the feasibility and commerciality of the projects and to heighten the mindfulness of decision makers of cyber security risks and
investments in meeting the Group’s strategic objectives. related mitigation in view of the potential catastrophic impact to business
• Reviewed the Group’s insurance programmes and recommended and reputation. In addition, 376 non-executives in total attended three (3) risk
improvements for an adequate and effective risk transfer mechanism forums held across Peninsular Malaysia. Besides learning lessons from case
in the interests of the Group. studies, the non-executives had the opportunity to brainstorm potential risks
and mitigations related to their areas of responsibility.
RISK MANAGEMENT
CONCLUSION
BRC is assisted by the CRO and the Risk Management Department
(RMD) in discharging its duties and responsibilities. The BRC continues to diligently exercise its risk oversight responsibilities by
ensuring that risk management is an integral part of strategic planning and
RMD is responsible for the effective implementation of the TNB Risk decision making for the achievement of the Group’s strategic outcomes and
Management Framework for informed decision-making. The TNB Risk long-term objectives.
Management Framework had been developed in alignment with the ISO
31000 international standard. RMD is responsible to consolidate, assess This statement was made in accordance with the resolution of the Board of
and report risk information from across the Group. The implementation Directors dated 28 February 2019.
of the TNB Risk Management Framework in the Group is subjected
to the independent assurance and assessment of the Group Internal
Audit Department. Additionally, RMD establishes appropriate insurance
programmes as an effective risk transfer mechanism for the Group.
In the year under review, RMD assessed the risk maturity of 12 business
units and subsidiaries with the objective of gauging the risk culture and
risk management effectiveness of the organisation and providing value-
added recommendations for risk management improvements.
About TNB Performance Review Financial Statements
Our Business Sustainability Statement Additional Information
Business Context The Strength of Our Governance
p.138 Accountability
TNB’s internal audit function, which is under the purview of the Group SCOPE AND COVERAGE
Internal Audit Department (GIA), is established by TNB’s Board of
Directors to provide independent, objective assurance, and consulting GIA formulated its annual audit plan using a risk-based approach,
services designed to add value and improve TNB’s operations. taking into consideration TNB’s strategic objectives, business
landscape, regulatory requirements, as well as inputs from the BAC
GIA is currently headed by Rosli bin Mohd Rose, who is the Chief and the Senior Management.
Internal Auditor (CIA). He joined GIA as the Deputy CIA (Core Business)
in 2006, and was appointed as the CIA in 2014. He holds a Degree The audit universe covered during the FY2018 includes, but not limited
of Electrical and Electronic Engineering from Brighton Polytechnic to, departments, divisions, and corporate functions, such as: generation,
(currently known as University of Brighton), United Kingdom, and a grid, distribution, procurement, projects, engineering, accounting and
Master of Engineering from Universiti Tenaga Nasional, Malaysia. finance, human resources, information and communication technology,
Prior to joining GIA, he had extensive experience in various aspects strategy and regulatory, corporate communications, energy ventures,
of TNB’s operations, such as operations and maintenance, project and subsidiaries.
management, asset management, human resources, and business
development. Additionally, he is an Associate Member of Institute of Among the key operational areas reviewed during FY2018 include:
Internal Auditors Malaysia. • Operations and maintenance;
• Project management;
• Fuel/coal management;
PRACTICES AND FRAMEWORK • Production and quality assurance;
• Corporate governance;
GIA endeavours to enhance and protect TNB Group’s organisational • System security and data centre management;
value by providing independent, risk-based and objective assurance, • Financial management;
advice and insight. GIA helps TNB accomplish its objective by bringing • Key leadership management;
a systematic, disciplined approach to evaluate and improve the • Human resource and compensation/benefit management;
effectiveness of governance, risk management, and internal control • Strategic risk management;
processes. • Procurement and contract management;
• Supplier management;
GIA is guided by internal policies and procedures, as well as the • Fleet management;
Internal Control Framework of Committee of Sponsoring Organisation • Regulatory compliance management;
of the Treadway Commission (COSO) and the Control Objectives • Insurance management;
for Information and Related Technologies (COBIT), in assessing • Management of security services;
and reporting the adequacy and effectiveness of the design and • Meter installation management;
implementation of the organisation’s overall system of internal controls, • Collection and credit management;
risk management, and governance. • Investment management;
• Integrity management; and
Additionally, to effectively manage its functions and perform audit • Health, safety and environmental management.
engagements, GIA adopts the standards and principles outlined in the
International Professional Practices Framework (IPPF) of the Institute Based on the audits carried out in FY2018, among the key risks
of Internal Auditors (IIA) Global, which comprises the Core Principles covered include non-compliance with regulatory requirements, fraud,
for the Professional Practice of Internal Auditing, the International cyber threat including data manipulation/security breach, ineffective
Standards for the Professional Practice of Internal Auditing, the credit management and delay in collections, competency mismatch
definition of Internal Auditing, and our Code of Ethics. to drive strategy, inability to adapt to changing market environment,
incapability to leverage on available technology, and ineffective
engagements and communications with stakeholders.
About TNB Performance Review Financial Statements
Tenaga Nasional Berhad
Our Business Sustainability Statement Additional Information
Integrated Annual Report 2018 Business Context The Strength of Our Governance
p.139 Accountability
RESOURCES
As at 31 December 2018, GIA is staffed with 63 auditors from diverse disciplines, as summarised below:
The total cost incurred in managing the internal audit function for FY2018 was RM18.4 million, comprising mainly staff costs and spending related
to audit activities, as follows:
During FY2018, GIA issued a total of 196 reports arising from 70 planned audits, three (3) investigation audits, two (2) surprise audits, and
121 follow-up audits.
GIA continuously encourages its auditors to uphold professional skills and proficiency by obtaining the relevant professional qualifications
and/or certifications, namely, Certified Internal Auditor (CIA), Certified Information System Auditor (CISA), Certification in Risk Management
Assurance (CRMA), Chartered Accountant (CA) and Professional Engineer.
As at 31 December 2018, GIA had in its team a total of 19 qualified professionals who possess various professional qualifications and/or certifications,
as shown below:
Note: CPA – Certified Public Accountant, ACCA – Association of Chartered Certified Accountant, CIMA – Chartered Institute of Management
Accountant, MICPA – Malaysian Institute of Certified Public Accountant
About TNB Performance Review Financial Statements
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p.140 Accountability
In addition to the above, 33% (equivalent to 21 auditors) are in the • Provided independent and objective assurance on the adequacy of
midst of pursuing their respective professional qualifications and/or internal controls implemented to mitigate risk exposures. Reports
certifications at various levels. on audits performed, which consist of observations, improvement
opportunities, Management responses, deadlines and the persons-
GIA commits to ensure that the level of its auditors’ skills, knowledge, in-charge for the implementation of corrective actions were issued
and competencies are maintained as stipulated in GIA’s Charter. to the respective auditees, Senior Management and BAC.
These are accomplished through the following:
• Performed follow-up audits on corrective actions agreed by the
• Involvement of auditors in conferences and trainings in the area Management to assess whether the necessary actions have been
of auditing skills, technical skills, leadership and communication implemented adequately and in a timely manner.
skills, business acumen, strategic management and personal
development; • Conducted quality assurance and improvement activities,
including:
• Assignment of auditors to other divisions/special projects to gain
operational experience; and (1) Internal quality assessment on the audit function to assess
conformance to the IPPF; and
• Participation in knowledge sharing sessions with government- (2) Established quality assurance and improvement programmes
linked companies and presentation of audit papers in conferences. which are monitored on a quarterly basis and reported to the
BAC.
As at 31 December 2018, GIA incurred a total cost of RM201,000 on
such trainings and conferences. • Rolled out electronic updating/monitoring of corrective actions via
TeamCentral, as part of Management updates.
SUMMARY OF GIA’S ACTIVITIES IN FY2018 • Enhanced GIA’s audit approach and coverage through the use
of technology (i.e. Audit Management System and Computer-
The following summarises the activities undertaken by GIA in Assisted Audit Tools) and carried out resource optimisation to
FY2018: further improve audit efficiency and effectiveness.
p.141
RELATIONS WITH
SHAREHOLDERS
COMMUNICATION AND ENGAGEMENT ANNUAL GENERAL MEETING
WITH SHAREHOLDERS
Our Annual General Meeting is attended by our Board and Top Management and
The Group values engagement with investment community and all our eligible shareholders are welcomed to attend.
consistently improving transparency by having various channels of
communication for shareholders and investors. The Group believes A presentation of the Company’s financial and technical/operational highlights
that having continues effective relationship with investors, as well as is given before the Chairman deals with the formal business of the meeting.
acknowledges the importance of timely, accurate and transparent Shareholders are encouraged to attend the AGMs and to use the opportunity to
in disseminating information to the investment community are the ask questions on the Company's performance under review and to vote on the
fundamentals in maximising the shareholder value. proposed resolutions including but not limited to the receipt of the audited financial
statements and the reports of Directors and Auditors, re-election of Directors of
The Board encourages continuous disclosure and communication of those retiring and the fixing of the fees of Directors. TNB conducts its AGM by poll/
information to its stakeholders. This is essential to strengthen the e-voting in accordance with Paragraph 8.29A of the MMLR (voting by poll). The
Group relationship with the stakeholders in realising the Company’s outcomes of voting on the proposed resolutions are disclosed to the market and
aspiration to become a Global Top 10 Utility by 2025. Keeping that in posted on the Company’s website after the AGM. The External Auditors attend
mind, the Group proactively sets investor engagement sessions with the AGM to answer shareholders’ questions on the conduct of the audit, the
the investment community to instill confidence and enhancing their preparation and content of the audit report, the accounting policies adopted by
understanding of the Company’s strategic decisions. the Company and the independence of the auditors in the audit process. TNB
further encourages shareholders to access the Integrated Annual Report online
The Group has outlined various extensive channels, which allows to complement the Group’s commitment to the environment, as well as to achieve
TNB Senior Management and Investor Relations (IR) team to greater cost efficiencies. Nevertheless, shareholders are still provided with the
communicate relevant and material information in order to maintain Integrated Annual Report in CD-ROM format together with a summarised version
close and transparent relationships with our institutional and retail of the Financial Statements, Notice of AGM and Proxy Form.
investors, fund managers and research analysts.
INVESTOR RELATIONS
These channels include:
TNB strives to continuously aim and building strong and long-term relationships
• Quarterly and Full Year Financial Results Announcements
with our various stakeholders, especially the financial community. TNB are
• Engagement session with investors and analysts through One-on-One/
committed in maintaining high standard in the dissemination of relevant and
Group Meetings, IR Conferences and Non-Deal Roadshows
material information on the Company’s development through effective engagement
• Interactive session with investors at Annual General Meeting
and communication, while ensuring these information are comprehensive, timely
• Site Visits
and transparent. The information communicated to the financial community
• IR section of the website
consists mainly of TNB business strategies and directions, regulatory updates,
• Bursa filings and Press Release
financial and technical performance.
• Annual reports
IR uses numerous platforms to maintain our engagements with shareholders and
stakeholders through Quarterly and Full Year Financial Announcements, Analysts
Briefing Presentations, Conference Calls, One-on-One and Group Meetings at
CORPORATE DISCLOSURE POLICY
Investor Conferences, Non-Deal Roadshows (NDR) and In-House Meetings.
The Corporate Disclosure Policy, as well as associated guidelines,
reinforce TNB’s commitment to continuous disclosure and outline FINANCIAL REPORTING
Management’s accountabilities and the processes to be followed
The Board aims to provide a clear, balanced and comprehensive assessment of
in ensuring compliance.
the Group’s financial performance and prospects to shareholders, investors and
relevant regulatory authorities via the quarterly financial reports, audited financial
TNB’s practice is to release all price-sensitive information to Bursa
statements, annual reports and other reports or statements as well as through
Malaysia Securities Berhad in a timely manner as required under
material disclosures made in accordance with the MMLR.
the MMLR and to the market and community generally through
TNB’s media releases, website and other appropriate channels.
The BAC assists the Board in overseeing the integrity of the Group’s financial
reporting, including the operation of the financial reporting processes. The
For disclosure purposes, price-sensitive information is information
processes are aimed at providing assurance that the financial statements and
that a reasonable person would expect to have a material effect
related notes are completed in accordance with applicable legal requirements
on the price or value of TNB’s securities. The Company Secretary
and accounting standards and give a true and fair view of the Group’s financial
is responsible for reviewing proposed disclosures and making
position.
decisions in relation to the disclosure of information to the market.
Each Division in TNB is required to inform the Company Secretary
of any potential price-sensitive information concerning TNB as
soon as this becomes known.
About TNB Performance Review Financial Statements
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RELATIONSHIP WITH EXTERNAL AUDITORS The Auditors’ Remuneration including Non-Audit Fees for the Company and
the Group for the Financial Year ended 31 December 2018 is as follows:
The Board maintains a transparent and professional relationship with
the External Auditors, with the BAC responsible for recommending the
appointment or removal of the External Auditors, the approval of their Group Company
remuneration and the terms of their engagement to the Board. RM ‘Million RM ‘Million
Statutory Audit 3.5 1.5
As underlined by its TOR, the BAC shall meet the External and Internal Audit Related Services 2.6 2.6
Auditors or both at least twice a year to discuss issues arising out of audits
Non-audit Services:
and any matters that the auditors may wish to discuss in the absence of the
Management. - Tax Related Services 2.8 2.4
- Other Non-Audit Services* 4.8 4.4
For the Financial Year under review, three (3) sessions between the BAC and
the External Auditors in the absence of Management was held for greater * Other non-audit services primarily relates to consultancy services and
exchange of views and opinions between both parties in relation to financial project management.
reporting.
All services were procured competitively in accordance with TNB’s
The Board/BAC are responsible for reviewing, assessing and monitoring the Procurement & Supply Chain Policy and Procedures and External Auditors
performances, suitability and independence of External Auditors. The Board Policy. Non-audit services can be offered by the External Auditors of the
has set a policy on External Auditors which stipulates the guidelines and Group if there are clear efficiencies and value added benefits to the Group.
procedures for the Board/BAC to assess and monitor the performances and
independence of External Auditors. Based on the External Auditors Assessment Results for the Financial Year
under review, the Board/BAC are satisfied with the quality of service,
The policy covers Selection and Appointment, Independence, Conflict of adequacy of resources provided, communication, interaction skills and
Interest, Non-Audit Services, Rotation of Audit Partner (applies to lead audit independence, objectivity and professionalism demonstrated by the External
engagement partner), Annual Reporting, Annual Assessment and Audit Fees. Auditors in carrying out their functions.
The appointed Audit Partner by the External Auditors is subject to rotation at Being satisfied with the External Auditors’ performance, the Board recommends
least every five (5) financial years. their re-appointment for shareholders’ approval at the AGM.
The External Auditors can also be engaged to perform non-audit services INSIDER TRADING
provided such services do not impair either in fact or appearance, the
The Directors and Top Management of TNB are prohibited from trading in
auditors’ objectivity, judgment or independence.
securities or any kind of price-sensitive information and knowledge which
have not been publicly announced in accordance with the MMLR and
The External Auditors are required to provide their written assurance
relevant provisions of the Capital Markets & Services Act 2007. Where
of meeting the independence requirements for each non-audit service
applicable, notices on the closed period for trading in TNB’s securities
undertaken by them for TNB Group.
are circulated to Directors and Top Management who are deemed to be
privy to any price-sensitive information and knowledge, in advance of the
The prohibition of non-audit services is based on three (3) basic principles that
closed period.
the External Auditors cannot function in the role of Management; cannot audit
their own work; and cannot serve in an advocacy role of TNB Group.
PROMOTING SUSTAINABILITY
The External Auditors shall observe and comply with the By-Laws of the The Board recognises that the Company’s stakeholders are increasingly
Malaysian Institute of Accountants in relation to the provision of non-audit interested in understanding its approach and performance in embedding
services and if necessary, apply safeguards as stipulated in the By-Laws. sustainability in the organisation.
The BAC assists the Board in assessing whether the independence of the For this Financial Year, TNB has published a Sustainability Statement which
External Auditors has been maintained, having regard to any non-audit discloses TNB’s efforts and initiatives in managing its material economic,
related services. The BAC has considered the provision of non-audit fees by environmental and social risks and opportunities. The reporting is guided by
the External Auditors for the non-audit services provided to the Group and the Global Reporting Initiative (GRI) standard. The Sustainability Statement
the Company during the Financial Year and has concluded that the provision is on pages 66 to 96 of this Integrated Annual Report.
of these fees does not compromise and impair the External Auditors’
independence or objectivity.
About TNB Performance Review Financial Statements
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Our Business Sustainability Statement Additional Information
Integrated Annual Report 2018 Business Context The Strength of Our Governance
RESPONSIBILITY STATEMENT IN RESPECT OF THE FINANCIAL YEAR STATEMENT ON COMPLIANCE WITH THE REQUIREMENTS OF BURSA
UNDER REVIEW MALAYSIA IN RELATION TO APPLICATION OF PRINCIPLES AND
ADOPTION OF BEST PRACTICES LAID DOWN IN THE MALAYSIAN
The Board is fully accountable for ensuring the Audited Financial Statements
CODE ON CORPORATE GOVERNANCE 2017
are prepared in accordance with the Companies Act 2016 and the applicable
approved accounting standards set out by the Malaysian Accounting (Pursuant to paragraph 15.25 of the MMLR)
Standards Board so as to present a true and fair view of the Group’s state of
affairs and of the profit or loss and cash flow as at the end of the accounting The Board has reviewed, deliberated and approved this Statement. The Board
period. is pleased to report to its shareholders that to the best of its knowledge, the
Company has complied with and shall remain committed to attaining the
In preparing the Audited Financial Statements, the Directors are satisfied highest possible standards of corporate governance through the continuous
that the applicable approved accounting standards in Malaysia have been adoption of the principles and best practices of the MCCG 2017 and all other
complied with and reasonable and prudent judgements and estimates have applicable laws.
been made. The Audited Financial Statements are also prepared on a going
concern basis as the Board has a reasonable expectation, after having made Signed on behalf of the Board of Directors in accordance with their resolution
enquiries that the Group has adequate resources to continue its operational dated 28 February 2019.
existence for the foreseeable future.
The Group did not seek any mandate of its shareholders pertaining to
related party transactions during the Financial Year under review.
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p.144
STATEMENT OF
RISK MANAGEMENT
AND INTERNAL CONTROL
For the Financial Year ended 31 December 2018
In the same manner, the Group’s strategic risk profile was developed, reflecting six (6) risks that may prevent the Group from achieving its strategic
and long-term objectives. Mitigations listed in the table below provides an indication of the strategies put in place to manage these strategic risks.
Monitoring, Review and Reporting • TNB ICT Codes of Practice and Guidelines
The risks assessed from applying the Risk Management Process are • TNB Safety & Health Policy
registered and monitored through the TNB Risk Information System (TRIS), • TNB Environmental Policy
an online real-time tool and database for risk management accessible by all • TNB Communication Policy
employees. These risks are reviewed on a regular basis by the respective • TNB Personal Data Protection Policy
risk owners with 24 reviews facilitated by Risk Management Department in • TNB Disciplinary Procedures
the year under review. • TNB Group Financial Policies and Procedures
• TNB Group Human Resource Circulars and Guidelines
Business units reports its risk profiles on a half-yearly basis and highlights
from these reports are respectively deliberated at the Group Risk Financial and Operational Control Framework
Management Working Committee and the Subsidiaries Risk Management TNB Group Financial Policies and Procedures (GFPP) serves as a
Working Committee. In addition, in the year under review, Risk Management compulsory source of reference for the Group in conducting its operations
Department assessed the risk maturity of 12 business units. The objective to manage associated risks. The Group has acted in accordance with
of the assessment was to evaluate the risk culture and risk management generally accepted accounting principles and the Malaysian Financial
effectiveness of the organisation in view of creating a matured risk based Reporting Standards (MFRS). Periodic reviews of actual performance
organisation. versus budgets, targets, and performance in prior periods for key functions
and major initiatives are carried out and appropriate mitigating and
Communication and Continual Improvement follow-up action are taken.
Business units regularly communicate with internal and external
stakeholders with up-to-date risk information and timely feedback is collated The Board Audit Committee (BAC) reviews the Group’s quarterly financial
for opportunities for continual improvement. Risk Management Department performance together with management, and these are subsequently
developed and implemented an annual risk and insurance communication reported to the Board. The quarterly reviews enable the BAC to deliberate
plan throughout the year under review with the purpose of inculcating a and assess the Group’s financial results and operational performance.
risk-thinking mind-set among internal stakeholders and communicating
TNB’s risk management initiatives to relevant external stakeholders. TNB continues to proactively engage with relevant stakeholders for smooth
implementation of the Incentive Based Regulation (IBR) framework and
Specifically, two (2) risk conferences, with the theme “Let’s Manage Risk Imbalance Cost Pass-Through (ICPT) mechanism. The performance of the
Together”, were attended by approximately 220 TNB executives in total. regulated business is meticulously monitored through the IBR performance
The executives had the opportunity to dialogue with several C-suites who indicators and dashboards. These are reported regularly to relevant
shared their experience and emphasised the importance and benefits of decision-making councils and committees to ensure effective
effective risk management in propelling the Group towards its aspirations. In implementation of the IBR framework as well as to the Energy Commission
addition, an inaugural TNB Cyber Security Risk Conference was organised in compliance to the IBR guidelines.
to heighten the mindfulness of decision makers of cyber security risks and
related mitigation. Moreover, 376 non-executives in total attended three The procedures for critical functions and key activities are documented,
(3) risk forums held across Peninsular Malaysia. Besides learning lessons communicated to employees and periodically reviewed. Relevant divisions,
from case studies, the non-executives had the opportunity to brainstorm departments and subsidiaries have been consistently maintaining its
potential risks and mitigations related to their areas of responsibility. certification in ISO 9001, ISO 14001, ISO 27001, OHSAS 18001 and ISO
55000. The compliance management department in several divisions
conducts audits and reviews within its division to ensure compliance with
INTERNAL CONTROL relevant standards and procedures.
p.148
DIRECTORS’
REPORT
The Directors hereby submit their report and the audited financial statements of the Group and of the Company for the financial year ended
31 December 2018.
PRINCIPAL ACTIVITIES
The Group and Company are primarily involved in the business of the generation, transmission, distribution and sales of electricity and those
tabulated in Note 15 to the financial statements, which also includes the details of the subsidiaries of the Group.
There have been no significant changes in these activities during the financial year.
FINANCIAL RESULTS
Group Company
RM’million RM’million
DIVIDENDS
The dividends paid or declared since the previous financial period ended 31 December 2017 were as follows:
RM’million
The Directors have proposed a final single tier dividend of 23.0 sen per share, on 5,686,888,771 ordinary shares in respect of the financial year
ended 31 December 2018 amounting to a total of RM1,308.0 million. The books closure and payment dates will be announced in due course.
All material transfers to or from reserves and provisions during the financial year are shown in the financial statements.
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ISSUE OF SHARES
During the financial year, the paid-up share capital of the Company increased due to the vesting of Long Term Incentive Plan (‘LTIP’) granted to
eligible employees, details of which are disclosed in Note 7 to the financial statements. The new ordinary shares rank pari passu in all respects
with the existing ordinary shares of the Company.
The Company implemented a LTIP on 30 April 2015 for a period of 10 years. The LTIP is governed by the by-laws, which were approved by the
shareholders at an Extraordinary General Meeting on 18 December 2014.
The main features and details of the number of grants over the shares of the Company are set out in Note 7 to the financial statements.
The Company has been granted an exemption by the Companies Commission of Malaysia via letter dated 18 February 2019 from having to
disclose in this report the names of the persons to whom LTIP have been granted under the scheme and details of their holdings pursuant to
Section 255(1) Paragraph 5, Part 1, Fifth Schedule of the Companies Act 2016 except for information on employees who were granted the
offering of up to 133,200 and more ordinary shares under the LTIP scheme.
The employees of the Company who were granted the offering of up to 133,200 and more ordinary shares under the LTIP scheme are as follows:
Number of Number of
ordinary ordinary
shares shares
granted granted
under PS* under RS** Total
None of the subsidiaries’ employees were granted offering representing 133,200 or more ordinary shares under the LTIP scheme.
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DIRECTORS
The Directors who have held office during the financial year and during the period from the end of the financial year to the date of the report are:
Tan Sri Leo Moggie
Datuk Seri Ir. Azman bin Mohd
Datuk Ahmad Badri bin Mohd Zahir Appointed w.e.f. 1 November 2018
Amran Hafiz bin Affifudin
Gee Siew Yoong
Noraini binti Che Dan
Juniwati Rahmat binti Hussin
Gopala Krishnan K. Sundaram Appointed w.e.f. 4 July 2018
Ong Ai Lin Appointed w.e.f. 1 August 2018
Dato’ Roslina binti Zainal Appointed w.e.f. 15 March 2019
Tan Sri Dato’ Seri Chor Chee Heung Resigned w.e.f. 30 June 2018
Badrul Ilahan bin Abd Jabbar Resigned w.e.f. 30 June 2018
Dato’ Abd Manaf bin Hashim Cessation of office w.e.f. 15 May 2018
Datuk Sakthivel Alagappan Cessation of office w.e.f. 15 May 2018
Datuk Seri Hashmuddin bin Mohammad Resigned w.e.f. 1 April 2018
The Directors of subsidiaries who have held office during the financial year and during the period from the end of the financial year to the date of
the report are set out in the respective subsidiary’s statutory accounts and the said information is deemed incorporated herein by such reference
and made part thereof.
DIRECTORS’ BENEFITS
During and at the end of the financial year, no arrangements subsisted to which the Company is a party, being arrangements with the object or
objects of enabling Directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any
other body corporate.
Since the end of the previous financial period, no Director has received or become entitled to receive a benefit (other than benefits shown under
Directors’ Remuneration below and in Note 6 to the financial statements) by reason of a contract made by the Company or a related corporation
with the Director or with a firm of which the Director is a partner, or with a company in which the Director has a substantial financial interest.
TNB Group and Company have their own Directors and Officers Liability Insurance at a premium of RM283,125 to cover the liability of Directors
and Officers in discharging their duties for the period of 1 November 2018 until 31 October 2019.
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According to the Register of Directors’ Shareholdings required to be kept under Section 59 of the Companies Act 2016, none of the Directors
who held office at the end of the financial year held any shares or debentures in the Company or its subsidiaries during the financial year except
as follows:
Number of ordinary shares
As at As at
1.1.2018 Acquired Disposed 31.12.2018
Ordinary shares granted pursuant to the Company’s LTIP granted to the Director during the financial year are as follows:
Number of ordinary shares
As at As at
1.1.2018 Granted Vested 31.12.2018
DIRECTORS’ REMUNERATION
Group Company
31.12.2018 31.12.2017 31.12.2018 31.12.2017
RM RM RM RM
(a) Before the financial statements of the Group and of the Company were prepared, the Directors took reasonable steps:
(i) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of provision for doubtful debts
and satisfied themselves that all known bad debts had been written off and that adequate provision had been made for doubtful debts;
and
(ii) to ensure that any current assets, which were unlikely to be realised in the ordinary course of business, including the values of current
assets as shown in the accounting records of the Group and of the Company had been written down to an amount which the current
assets might be expected so to realise.
(b) At the date of this report, the Directors are not aware of any circumstances:
(i) which would render the amount written off for bad debts or the amount of the provision for doubtful debts inadequate to any substantial
extent; or
(ii) which would render the values attributed to current assets in the financial statements of the Group and of the Company misleading; or
(iii) which have arisen which would render adherence to the existing method of valuation of assets or liabilities of the Group and of the
Company misleading or inappropriate.
(d) No contingent or other liability of any company in the Group has become enforceable or is likely to become enforceable within the period
of twelve months after the end of the financial year which, in the opinion of the Directors, will or may affect the ability of the Group and its
subsidiaries to meet their obligations when they fall due.
(e) At the date of this report, the Directors are not aware of any circumstances not otherwise dealt with in this report or the financial statements
of the Group and of the Company which would render any amount stated in the respective financial statements misleading.
AUDITORS
The auditors, PricewaterhouseCoopers PLT (LLP0014401-LCA & AF 1146), have expressed their willingness to accept re-appointment as auditors.
Details of the auditors’ remuneration are set out in Note 6 to the financial statements.
This report was approved by the Board of Directors on 19 March 2019. Signed on behalf of the Board of Directors:
TAN SRI LEO MOGGIE DATUK SERI IR. AZMAN BIN MOHD
CHAIRMAN PRESIDENT/CHIEF EXECUTIVE OFFICER
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p.153
CONSOLIDATED
STATEMENT OF
PROFIT OR LOSS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018
Group Company
Financial Financial Financial Financial
year ended period ended year ended period ended
31.12.2018 31.12.2017 31.12.2018 31.12.2017
Note (Restated) (Restated)
RM’million RM’million RM’million RM’million
(Restated)
Sen Sen
The notes set out on pages 163 to 307 form an integral part of these consolidated financial statements.
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p.154
CONSOLIDATED
STATEMENT OF
COMPREHENSIVE INCOME
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018
Group Company
Financial Financial Financial Financial
year ended period ended year ended period ended
31.12.2018 31.12.2017 31.12.2018 31.12.2017
Note (Restated) (Restated)
RM’million RM’million RM’million RM’million
Attributable to:
- Owners of the Company 3,587.7 2,386.5 3,175.0 2,349.9
- Non-controlling interests 21.3 (13.8) 0 0
Total comprehensive income 3,609.0 2,372.7 3,175.0 2,349.9
The notes set out on pages 163 to 307 form an integral part of these consolidated financial statements.
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p.155
CONSOLIDATED
STATEMENT OF
FINANCIAL POSITION
AS AT 31 DECEMBER 2018
Group Company
31.12.2018 31.12.2017 1.9.2017 31.12.2018 31.12.2017 1.9.2017
Note (Restated) (Restated) (Restated) (Restated)
RM’million RM’million RM’million RM’million RM’million RM’million
NON-CURRENT ASSETS
Property, plant and equipment 14 111,445.5 104,807.6 103,083.7 83,921.1 81,792.6 75,841.9
Subsidiaries 15 0 0 0 8,603.8 9,799.2 8,820.2
Joint ventures 16(a) 166.0 153.1 152.3 0 0 0
Associates 17 1,543.7 2,799.2 2,937.8 59.9 70.3 70.3
Goodwill on consolidation 18 240.7 211.0 211.0 0 0 0
Investment in unquoted debt security 19 326.7 318.5 275.7 8.7 0 0
Tax recoverable 1,765.1 1,765.1 1,765.1 1,765.1 1,765.1 1,765.1
Deferred tax assets 20 87.7 68.3 77.0 0 0 0
Long term receivables 21 1,245.5 829.4 549.7 260.5 197.0 200.6
Amounts due from subsidiaries 22(a) 0 0 0 1,052.0 1,213.4 2,209.8
Finance lease receivables 23(a) 12.4 13.4 13.8 0 0 0
Prepaid operating leases 24(a) 5,944.1 5,505.2 5,353.7 5,934.9 5,417.0 5,241.2
AFS financial assets 25 0 69.3 71.9 0 68.6 71.2
Financial assets at FVOCI 25 76.4 0 0 75.7 0 0
Contract cost assets 26(a) 0.5 0.1 0 0 0 0
Financial assets at fair value through
profit or loss (‘FVTPL’) 27 90.9 0 0 90.9 0 0
Derivative financial instruments 28(c) 0.2 0 0 0 0 0
122,945.4 116,540.2 114,491.7 101,772.6 100,323.2 94,220.3
CURRENT ASSETS
Group Company
31.12.2018 31.12.2017 1.9.2017 31.12.2018 31.12.2017 1.9.2017
Note (Restated) (Restated) (Restated) (Restated)
RM’million RM’million RM’million RM’million RM’million RM’million
CURRENT LIABILITIES
NON-CURRENT LIABILITIES
EQUITY
The notes set out on pages 163 to 307 form an integral part of these consolidated financial statements.
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p.157
CONSOLIDATED
STATEMENT OF
CHANGES IN EQUITY
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018
Group
At 31 December 2017 (restated) 11,199.6 (6,373.0) 52,239.2 923.2 57,989.0
Effects of adoption of MFRS 9 47 0 0 (189.4) (3.4) (192.8)
At 1 January 2018 (restated) 11,199.6 (6,373.0) 52,049.8 919.8 57,796.2
Profit for the financial year 0 0 3,723.7 21.3 3,745.0
Foreign currency translation reserve 40 0 (13.1) 0 0 (13.1)
Fair value of financial assets at OCI 40 0 7.1 0 0 7.1
Share of OCI of associates accounted for
using the equity method 40 0 74.3 0 0 74.3
Employee benefits reserve 40 0 (204.3) 0 0 (204.3)
Total comprehensive (expense)/income for the
financial year 0 (136.0) 3,723.7 21.3 3,609.0
LTIP share-based payment expense 7 0 267.8 0 0 267.8
LTIP shares issued 39 246.5 (246.5) 0 0 0
Dividends paid:
- Final dividend for FPE 31.12.2017 13 0 0 (1,213.1) 0 (1,213.1)
- Interim dividend for FY2018 13 0 0 (1,718.8) 0 (1,718.8)
Dividend paid to NCI 0 0 0 (2.0) (2.0)
Exercise of put option on shares of a
subsidiary by NCI 0 95.0 (57.2) (37.8) 0
Acquisition of additional equity by NCI 0 0 0 312.8 312.8
Total transactions with owners 246.5 116.3 (2,989.1) 273.0 (2,353.3)
At 31 December 2018 11,446.1 (6,392.7) 52,784.4 1,214.1 59,051.9
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Group
At 31 August 2017 (as previously reported) 11,124.9 (6,128.8) 52,115.3 473.4 57,584.8
Effects of adoption of MFRS 15 47 0 0 (5.4) 0 (5.4)
At 1 September 2017 (restated) 11,124.9 (6,128.8) 52,109.9 473.4 57,579.4
Profit for the financial period 0 0 2,622.3 (13.8) 2,608.5
Foreign currency translation reserve 40 0 (219.8) 0 0 (219.8)
Fair value of AFS financial assets 40 0 (2.6) 0 0 (2.6)
Share of OCI of associates accounted for
using the equity method 40 0 94.2 0 0 94.2
Employee benefits reserve 40 0 (107.6) 0 0 (107.6)
Total comprehensive (expense)/income for the
financial period 0 (235.8) 2,622.3 (13.8) 2,372.7
LTIP share-based payment expense 7 0 66.3 0 0 66.3
LTIP shares issued 39 74.7 (74.7) 0 0 0
Final dividend paid for FY2017 0 0 (2,493.0) 0 (2,493.0)
Subscription of shares in a subsidiary 0 0 0 4.9 4.9
Acquisition of additional equity by NCI 0 0 0 458.7 458.7
Total transactions with owners 74.7 (8.4) (2,493.0) 463.6 (1,963.1)
At 31 December 2017 (restated) 11,199.6 (6,373.0) 52,239.2 923.2 57,989.0
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Company
At 31 December 2017 (restated) 11,199.6 (5,301.7) 45,844.9 51,742.8
Effects of adoption of MFRS 9 47 0 0 (523.6) (523.6)
At 1 January 2018 (restated) 11,199.6 (5,301.7) 45,321.3 51,219.2
Profit for the financial year 0 0 3,218.6 3,218.6
Fair value of financial assets at FVOCI 40 0 7.1 0 7.1
Employee benefits reserve 40 0 (50.7) 0 (50.7)
Total comprehensive (expense)/income for the financial year 0 (43.6) 3,218.6 3,175.0
LTIP share-based payment expense 0 267.8 0 267.8
LTIP shares issued 246.5 (246.5) 0 0
Dividends paid:
- Final dividend for FPE 31.12.2017 0 0 (1,213.1) (1,213.1)
- Interim dividend for FY2018 0 0 (1,718.8) (1,718.8)
Total transactions with owners 246.5 21.3 (2,931.9) (2,664.1)
At 31 December 2018 11,446.1 (5,324.0) 45,608.0 51,730.1
The notes set out on pages 163 to 307 form an integral part of these consolidated financial statements.
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p.160
CONSOLIDATED
STATEMENT OF
CASH FLOWS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018
Group Company
Financial Financial Financial Financial
year ended period ended year ended period ended
31.12.2018 31.12.2017 31.12.2018 31.12.2017
(Restated) (Restated)
RM’million RM’million RM’million RM’million
Group Company
Financial Financial Financial Financial
year ended period ended year ended period ended
31.12.2018 31.12.2017 31.12.2018 31.12.2017
(Restated) (Restated)
RM’million RM’million RM’million RM’million
Group Company
Financial Financial Financial Financial
year ended period ended year ended period ended
31.12.2018 31.12.2017 31.12.2018 31.12.2017
(Restated) (Restated)
RM’million RM’million RM’million RM’million
The notes set out on pages 163 to 307 form an integral part of these consolidated financial statements.
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p.163
NOTES TO THE
FINANCIAL STATEMENTS
31 DECEMBER 2018
1 GENERAL INFORMATION
The Group and Company are primarily involved in the business of the generation, transmission, distribution and sales of electricity and those
tabulated in Note 15 to these financial statements, which also includes the details of the subsidiaries of the Group.
There have been no significant changes in these activities of the Group and Company during the financial year.
The Company is a public limited liability company, incorporated and domiciled in Malaysia and is listed on the Main Market of Bursa Malaysia
Securities Berhad.
The address of the registered office of the Company is Pejabat Setiausaha Syarikat, Tingkat 2, Ibu Pejabat Tenaga Nasional Berhad,
No. 129, Jalan Bangsar, 59200 Kuala Lumpur, Malaysia.
2 BASIS OF PREPARATION
The financial statements of the Group and Company have been prepared in accordance with the provisions of the Malaysian Financial Reporting
Standards (‘MFRS’), International Financial Reporting Standards (‘IFRS’) and the requirements of the Companies Act 2016 in Malaysia.
The financial statements have been prepared under the historical cost convention, except as disclosed in this summary of significant accounting
policies.
The preparation of financial statements in conformity with MFRS requires the use of certain critical accounting estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reported period. It also requires Directors to exercise their judgement in the process of
applying the Group and Company’s accounting policies. Although these estimates and judgement are based on the Directors’ best knowledge of
current events and actions, actual results may differ. The areas involving a higher degree of judgement or complexity, or areas where assumptions
and estimates are significant to the financial statements are disclosed in Note 4.
The Group and Company had changed its financial year end from 31 August to 31 December effective from the previous reporting period.
Consequently, the comparative figures are the previous 4 months period from 1 September 2017 to 31 December 2017. The current financial
statements are for a period of 12 months from 1 January 2018 to 31 December 2018. Due to the change in the financial year end, the amounts
presented in the financial statements are not entirely comparable.
(b) New standards, amendments and improvements to published standards that are effective and applicable to the Group and Company.
The Group and Company have applied the following new standards, amendments and improvements to the published standards that are
applicable to the Group and Company for the first time for the financial year beginning on 1 January 2018:
(i) MFRS 9 ‘Financial Instruments’ (‘MFRS 9’)
(ii) MFRS 15 ‘Revenue from Contracts with Customers’ (‘MFRS 15’)
(iii) IC Interpretation 22 ‘Foreign Currency Transactions and Advance Consideration’ (‘IC 22’)
(iv) Amendments to MFRS 128 ‘Investments in Associates and Joint Ventures’ (‘MFRS 128’) in ‘Annual Improvements to MFRS Standards
2014-2016 Cycle’
(v) Amendments to MFRS 2 ‘Share-Based Payment’ (‘MFRS 2’) on ‘Classification and Measurement of Share-Based Payment Transactions’
The Group and Company had to change its accounting policies and make certain retrospective adjustments following the adoption of MFRS
9 and MFRS 15. This is disclosed in Note 47. The other amendments listed above did not have any impact on the amounts recognised in
prior periods and are not expected to significantly affect the current or future periods.
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(c) New standards, amendments to published standards, interpretations and improvements to existing standards that are applicable to
the Group and Company but not yet effective.
The Group and Company will apply the new standards, amendments to published standards, interpretations and improvements to
existing standards in the following periods:
• MFRS 16 ‘Leases’ (‘MFRS 16’) supersedes MFRS 117 ‘Leases’ (‘MFRS 117’) and the related interpretations.
Under MFRS 16, a lease is a contract (or part of a contract) that conveys the right to control the use of an identified asset
for a period of time in exchange for consideration.
MFRS 16 eliminates the classification of leases by the lessee as either finance leases (on balance sheet) or operating
leases (off balance sheet). MFRS 16 requires a lessee to recognise a ‘right-of-use’ of the underlying asset and a lease
liability reflecting future lease payments. The only exceptions are short term and low-value leases.
The right-of-use asset is depreciated in accordance with the principle in MFRS 116 ‘Property, Plant and Equipment’
(‘MFRS 116’) and the lease liability is accreted over time with interest expense recognised in the income statement.
The standard will affect primarily the accounting for the Group and Company’s leases previously recognised as operating
leases under MFRS 117 disclosed in Note 24 and Note 41(b) and other rentals of buildings and equipments.
The Group and Company will apply the standard from 1 January 2019 and intends to apply the simplified transition
approach and will not restate comparatives for the year prior to first adoption. All right-of-use assets will be measured at
the amount of the lease liablity on adoption (adjusted for any prepaid or accrued lease expenses).
At 1 January 2019, the Group and Company is estimated to recognise lease liabilities of RM29,404.7 million and
RM41,147.4 million respectively with a corresponding estimated ROU assets of RM35,358.7 million and RM47,065.7
million respectively.
For lessors, MFRS 16 retains most of the requirements in MFRS 117. Lessors continue to classify all leases as either
operating leases or finance leases and account for them differently. As such, the Group and Company does not expect
any significant impact from activities as a lessor on the financial statements. However, some additional disclosures will be
required from next year.
• IC Interpretation 23 ‘Uncertainty over Income Tax Treatments’ (‘IC 23’) provides guidance on how to recognise and
measure deferred and current income tax assets and liabilities where there is uncertainty over a tax treatment.
If an entity concludes that it is not probable that the tax treatment will be accepted by the tax authority, the effect of the
tax uncertainty should be included in the period when such determination is made. An entity shall measure the effect of
uncertainty using the method which best predicts the resolution of the uncertainty.
• Amendments to MFRS 128 on Long-term Interests in Associates and Joint Ventures clarifies that MFRS 9, including its
impairment requirements shall be applied when accounting for long-term interests in an associate or joint venture that, in
substance, form part of the net investment in the associate or joint venture to which the equity method is not applied.
The amendments shall be applied retrospectively with transitional reliefs available. Earlier application is permitted and
should be disclosed.
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(c) New standards, amendments to published standards, interpretations and improvements to existing standards that are applicable to
the Group and Company but not yet effective. (continued)
• Amendments to MFRS 9 on Prepayment Features with Negative Compensation allows the measurement of prepayable
financial assets with negative compensation to be at amortised cost or at FVOCI if certain conditions are met.
The amendments shall be applied retrospectively with transitional reliefs available. Earlier application is permitted and
should be disclosed.
• Amendments to MFRS 3 ‘Business Combinations’ (‘MFRS 3’) in Annual Improvements to MFRS Standards 2015-2017
Cycle clarify that obtaining control of a business that is a joint operation (as defined in MFRS 11 ‘Joint Arrangements’
(‘MFRS 11’)) is a business combination achieved in stages. The acquirer must remeasure its previously held interest in the
joint operation at its acquisition-date fair value. Accordingly, the acquirer effectively:
- derecognises its previously held interest in the joint operation; and
- recognises a controlling interest in all of the assets and liabilities of the former joint operation.
These amendments shall be applied to business combinations with acquisition dates on or after 1 January 2019. Earlier
application is permitted and should be disclosed.
• Amendments to MFRS 11 in Annual Improvements to MFRS Standards 2015-2017 Cycle clarify that when the party that
participates in (but does not have joint control over) a joint operation, obtains joint control over that joint operation that is
a business (as defined in MFRS 3), it should not remeasure its previously held interest in the joint operation.
These amendments shall be applied to transactions resulting in obtaining joint control on or after 1 January 2019. Earlier
application is permitted and should be disclosed.
• Amendments to MFRS 112 ‘Income Taxes’ (‘MFRS 112’) in Annual Improvements to MFRS Standards 2015-2017 Cycle clarify
that all income tax consequences of dividends should be recognised either in profit or loss, other comprehensive income (‘OCI’)
or equity, depending on where the past transactions or events that generated the distributable profits were recognised.
These amendments shall be applied to income tax consequences of dividends recognised on or after the beginning of the
earliest comparative period. Earlier application is permitted and should be disclosed.
• Amendments to MFRS 123 ‘Borrowing Costs’ (‘MFRS 123’) in Annual Improvements to MFRS Standards 2015-2017 Cycle
clarify that if a specific borrowing remains outstanding after the related qualifying asset is ready for its intended use or
sale, it becomes part of the funds an entity borrows generally.
Based on the assessment performed to date, the application of this amendment is expected to increase profit by 1.0% to
2.0% for the Group and Company. The amendment is also expected to not have a material impact on the property, plant
and equipment (‘PPE’) for the Group and Company.
These amendments shall be applied prospectively. Earlier application is permitted and should be disclosed.
• Amendments to MFRS 119 ‘Employee Benefits’ (‘MFRS 119’) on Plan Amendments, Curtailment or Settlement requires
an entity to use updated actuarial assumptions to determine current service cost and net interest for the remainder of the
annual reporting period after a plan amendment, curtailment or settlement. In addition, the amendments require the entity
to recognise in profit or loss as part of past service cost, or a gain or loss on settlement, any reduction in a surplus, even if
that surplus was not previously recognised because of the impact of the asset ceiling. These amendments shall be applied
prospectively. Earlier application is permitted and should be disclosed.
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(c) New standards, amendments to published standards, interpretations and improvements to existing standards that are applicable to
the Group and Company but not yet effective. (continued)
• Amendments to References to the Conceptual Framework in MFRS Standards are to update the references and quotations
in these Standards so as to clarify the version of the Conceptual Framework these Standards refer to.
The Revised Conceptual Framework for Financial Reporting comprises of a comprehensive set of concepts for financial
reporting. It is built on the previous version issued in 2011. The changes to the chapters on the objective of financial reporting
and qualitative characteristics of useful information are limited, but with improved wording to give more prominence to the
importance of providing information needed to assess management’s stewardship of the entity’s economic resources.
Other improvements include a new chapter on measurement, guidance on reporting financial performance, improved
definitions and guidance – in particular the definition of a liability – and clarifications in important areas, such as the role
of prudence and measurement uncertainty in financial reporting.
The amendments to the following Standards which are applicable to the Group and Company are as follows:
- Amendments to MFRS 2
- Amendment to MFRS 3
- Amendments to MFRS 101 ‘Presentation of Financial Statements’ (‘MFRS 101’)
- Amendments to MFRS 108 ‘Accounting Policies, Changes in Accounting Estimates and Errors’ (‘MFRS 108’)
- Amendments to MFRS 134 ‘Interim Financial Reporting’ (‘MFRS 134’)
- Amendment to MFRS 137 ‘Provisions, Contingent Liabilities and Contingent Assets’ (‘MFRS 137’)
- Amendment to MFRS 138 ‘Intangible Assets’ (‘MFRS 138’)
- Amendment to IC Interpretation 12 ‘Service Concession Arrangements’ (‘IC 12’)
- Amendment to IC Interpretation 19 ‘Extinguishing Financial Liabilities with Equity Instruments’ (‘IC 19’)
- Amendment to IC 22
- Amendments to IC Interpretation 132 ‘Intangible Assets – Web Site Costs’ (‘IC 132’)
The amendments are effective for annual periods beginning or after 1 January 2020. Earlier application is permitted if
at the same time an entity also applies all other amendments made by Amendments to References to the Conceptual
Framework in MFRS Standards.
• Amendments to MFRS 3 on Definition of a Business clarifies the definition to determine whether a transaction should be
accounted for as a business combination or as an asset acquisition. The distinction is important as an acquirer does not
recognise goodwill in an asset acquisition.
The amendments clarify that to be considered a business, an acquired set of activities and assets must include, at a
minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. The
amendments also add an optional concentration test that permits a simplified assessment of whether an acquired set of
activities and assets is not a business.
The amendments shall be applied to business combinations with acquisition dates on or after the beginning of the first
annual reporting period beginning on or after 1 January 2020 and to asset acquisitions that occur on or after the beginning
of that period. Earlier application is permitted and should be disclosed.
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(c) New standards, amendments to published standards, interpretations and improvements to existing standards that are applicable to
the Group and Company but not yet effective. (continued)
• Amendments to MFRS 101 and MFRS 108 on Definition of material refines the definition by including ‘obscuring information’
to address the issue of including immaterial information should not reduce the understandability of a company’s financial
statements. The prior definition focuses only on information that cannot be omitted (material information) and does not
also consider the effect of including immaterial information.
The amendments also align the definition of material across MFRS Standards and other publications.
These amendments shall be applied prospectively. Earlier application is permitted and should be disclosed.
• MFRS 17 ‘Insurance Contracts’ (‘MFRS 17’) introduces consistent accounting for all insurance contracts based on a
current measurement model. MFRS 17 requires entities that issue insurance contracts to recognise and measure a group of
insurance contracts at: (i) a risk-adjusted present value of future cash flows that incorporates information that is consistent
with observable market information; plus (ii) an amount representing the unearned profit in the group of contracts. Profits
from the group of insurance contracts are recognised over the insurance coverage period. MFRS 17 also changes the
financial statements presentations of insurance service results – insurance revenue is presented separately from insurance
financial income or expenses.
For insurance contracts with coverage period of one year or less, MFRS 17 allows an entity to measure the amount relating
to remaining service by allocating the premium over the coverage period.
MFRS 17 shall be applied with transitional reliefs available. Earlier application is permitted provided the entities have
applied MFRS 9 and MFRS 15 on or before the date of initial application of MFRS 17. If MFRS 17 is applied earlier, that
fact should be disclosed.
• Amendments to MFRS 10 ‘Consolidated Financial Statements’ (‘MFRS 10’) and MFRS 128 on Sale or Contribution of
Assets between an Investor and its Associate or Joint Venture.
The adoption of the above applicable new standards, amendments to published standards, interpretations and improvements to
existing standards are not expected to have a material impact on the financial statements of the Group and Company except for
MFRS 16 and MFRS 123.
There are no other standards, amendments to published standards and interpretations to existing standards that are not effective
that would be expected to have a material impact on the Group and Company.
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Unless otherwise stated, the following accounting policies have been applied consistently in dealing with items that are considered
material in relation to the financial statements. These policies have been consistently applied to all the year/period presented, unless
otherwise stated.
(i) Subsidiaries
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when
the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those
returns through its power to direct the relevant activities of the entity. The existence and effect of potential voting rights are
considered only when such rights are substantive when assessing control.
The amounts due from subsidiaries of which the Company does not expect repayment in the foreseeable future are considered
as part of the Company’s investment in subsidiaries.
In the Company’s separate financial statements, investments in subsidiaries are stated at cost less accumulated impairment
losses. On disposal of such investments, the difference between net disposal proceeds and their carrying amounts is included
in the statement of profit or loss.
The consolidated financial statements comprise the financial statements of the Company and its subsidiaries. The financial
statements of the subsidiaries are prepared for the same reporting date as the Company.
Subsidiaries are consolidated from the date on which the Group obtains control, and continue to be consolidated until the date
that such control ceases. In preparing the consolidated financial statements, intragroup balances, transactions and unrealised
gains or losses are eliminated in full. Uniform accounting policies are adopted in the consolidated financial statements for like
transactions and events in similar circumstances.
The Group applies the acquisition method to account for business combinations. The consideration transferred for acquisition
of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The
consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement
and fair value of any pre-existing equity interest in the subsidiary. Acquisition-related costs are expensed as incurred. Identifiable
assets acquired, liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured
initially at their fair values at the acquisition date.
In a business combination achieved in stages, the carrying value of the acquirer’s previously held equity interest in the acquiree
is remeasured at its acquisition date fair value and the resulting gain or loss is recognised in the statement of profit or loss.
The excess of the consideration transferred, the amount of any Non-Controlling Interest (‘NCI’) in the acquiree and the
acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the Group share of the identifiable
net assets acquired is recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case
of a bargain purchase, the gain is recognised in the statement of profit or loss. Refer to Note 18 for accounting policy on goodwill.
NCI is the equity in a subsidiary not attributable, directly or indirectly, to a parent. On an acquisition-by-acquisition basis, the
Group measures any NCI in the acquiree either at fair value or at the NCI’s proportionate share of the acquiree’s identifiable net
assets. At the end of reporting period, NCI consists of amount calculated on the date of combinations and its share of changes
in the subsidiary’s equity since the date of combination.
All earnings and losses of the subsidiary are attributed to the parent and the NCI, even if the attribution of losses to the NCI
results in a debit balance in the shareholders’ equity.
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When the Group ceases to consolidate because of a loss of control, any retained interest in the entity is remeasured to its fair value
with the change in carrying amount recognised in the statement of profit or loss. This fair value becomes the initial carrying amount
for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition,
any amounts previously recognised in OCI in respect of that entity are accounted for as if the Group had directly disposed of the
related assets or liabilities. This may mean that amounts previously recognised in OCI are reclassified to profit or loss. Gains or
losses on the disposal of subsidiaries include the carrying amount of goodwill relating to the subsidiaries sold.
Transactions with NCI that do not result in loss of control are accounted for as transactions with equity owners of the Group. A
change in ownership interest results in an adjustment between the carrying amounts of the controlling and NCI to reflect their relative
interests in the subsidiary. Any differences between the amount of the adjustment to NCI and any consideration paid or received are
recognised in equity attributable to owners of the Group.
Assets that are subject to amortisation are reviewed for impairment losses whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. Impairment loss is recognised in the statement of profit or loss for the amount
by which the carrying amount of the asset exceeds its recoverable amount. The recoverable amount is the higher of fair value less
cost to sell and its value-in-use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there
are separately identifiable cash flows which are largely independent of the cash inflows from other assets or groups of assets
(cash-generating units). Non-financial assets other than goodwill previously impaired are reviewed for possible reversal of the
impairment at each reporting date. Any subsequent increase in recoverable amount is recognised in the statement of profit or loss.
Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding,
is recognised in the statement of profit or loss as an expense as incurred.
Expenditure on development activities, whereby the application research findings are applied to a plan or design for the production
of new or substantially improved products and processes, is capitalised only when all the following criteria are fulfilled:
(i) it is technically feasible to complete the intangible asset so that it will be available for use or sale;
(ii) management intends to complete the intangible asset and use or sell it;
(iii) there is an ability to use or sell the intangible asset;
(iv) it can be demonstrated how the intangible asset will generate probable future economic benefits;
(v) adequate technical, financial and other resources to complete the development and to use or sell the intangible asset are
available; and
(vi) the expenditure attributable to the intangible asset during its development can be reliably measured.
Capitalised development costs are recognised as intangible assets and amortised from the point at which the asset is ready for use
on a straight line method over its useful life.
The expenditure capitalised includes the cost of materials, direct labour and overheads costs that are directly attributable to
preparing the assets for its intended use. Other development expenditure is recognised in the statement of profit or loss as incurred.
Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.
All other significant accounting policies are disclosed in their respective notes.
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Estimates and judgements are continuously evaluated by the Directors and are based on historical experience and other factors, including
expectations of future events that are believed to be reasonable under the circumstances.
The Group and Company make estimates and assumptions concerning the future. The resulting accounting estimates will, by definition,
rarely equate to the related actual results. To enhance the information content of the estimates, certain key variables that are anticipated
to have a material impact on the Group and Company’s results and financial position are tested for sensitivity to changes in the underlying
parameters.
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are outlined below:
Electricity revenue for energy supply activities includes an assessment of energy supplied to customers between the date of the
last meter reading and the financial year end of the Group and Company (unread and unbilled). An assessment is also made on any
factors that are likely to materially affect the ultimate economic benefits which will flow to the Group and Company, including bill
cancellations and adjustments. These assessments will have a corresponding adjustment to trade receivables. To the extent that the
economic benefits are not expected to flow to the Group and Company, the value of that revenue is not recognised.
Included in the receivables, deposits and prepayments balance in Note 30 is the estimated under-recovery of costs under the
Imbalance Cost Pass-Through (‘ICPT’) mechanism. The Group and Company continuously assess the balances by considering
factors such as changes in the applicable regulatory implementation guidelines and political environment, the ability to recover costs
through regulated rates, and the status of any pending or potential deregulation legislation. Based on this continuous assessment,
the Company believes the existing balances reflects the best estimate of the Company’s receivable from the Government. This
assessment reflects the current political and regulatory climate, and may be subject to change in the future.
Included in the revenue, is the Annual Regulatory Adjustment (‘ARA’) for the over recovery of revenue and other income earned during the
financial year. The Company has taken into account the principles laid out in the Guidelines on Electricity Tariff Determination (‘Guidelines’)
under the Incentive Based Regulation (‘IBR’) for Peninsular Malaysia 2018, where the allowed revenue in each year is calculated as the
sum of actual revenue earned and any applicable adjustments, such as those related to the revenue-cap, price-cap and other income
adjustment mechanisms as described in the Guidelines. Other Income which is earned from services not directly related to electricity
supply, but which are provided using the assets and/or staff of a licensee is deducted from the revenues to be earned from regulated tariffs.
The Group and Company regularly reviewed the estimated useful lives of PPE based on factors such as business plans and strategies,
expected level of usage and future technological developments. Future results of operations could be materially affected by changes
in these estimates brought about by changes in the factors mentioned above. A reduction in the estimated useful lives of PPE would
increase the recorded depreciation and decrease the net book value (‘NBV’) of PPE.
The Group and Company assess impairment of assets whenever the events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable, i.e., the carrying amount of the asset is more than the recoverable amount.
Recoverable amount is measured at the higher of the fair value less cost to sell for that asset and its value-in-use.
The value-in-use is the net present value of the projected future cash flows derived from that asset discounted at an appropriate
discount rate. Projected future cash flows are based on the Group and Company’s estimates calculated based on historical, sector
and industry trends, general market and economic conditions, changes in technology and other available information.
In particular for TNB Liberty Power Limited (‘LPL’), as disclosed in Note 14(a), the appropriateness of the assumptions required for
impairment purpose is dependent on the extension of the Gas Supply Agreement (‘GSA’) by the Government of Pakistan where the
subsidiary is operating, till the end of the Power Purchase Agreement (‘PPA’) term. The Government of Pakistan through its Economic
Coordination Committee (‘ECC’) has approved the extension for gas allocation from Oil and Gas Development Company Limited
(‘OGDCL’) Qadirpur gas field until the end of the PPA in 2026. Accordingly, the Group is of the view that the carrying amount of the
subsidiary’s PPE is recoverable.
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The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are outlined below: (continued)
The Group and Company assess impairment of its investment in subsidiaries and associates whenever the events or changes in
circumstances indicate that the carrying amount may not be recoverable i.e. the carrying amount is more than the recoverable
amount. Recoverable amount is measured at the higher of the fair value less cost to sell and its value-in-use. The value-in-use is the
net present value of the projected future cash flow derived discounted at an appropriate discount rate.
Projected future cash flows are based on the Group and Company’s estimates calculated based on historical, sector and industry
trends, general market and economic conditions, changes in technology and other available information.
The Group tests goodwill for impairment annually in accordance with its accounting policy and whenever events or change in
circumstances indicate that this is necessary within the financial period. This requires an estimation of the value-in-use of the Group
as the cash generating unit to which the goodwill is allocated. Estimating the value-in-use requires the Group to make an estimate
of the expected future cash flows from the Group and also to apply a suitable discount rate in order to calculate the present value of
those cash flows. The assumptions used, results and sensitivity of the impairment assessment of goodwill are disclosed in Note 18
to the financial statements.
(f) Measurement of expected credit loss (‘ECL’) allowance for financial assets
The loss allowances for financial assets are based on assumptions about risk of default and expected loss rates. The Group and
Company use judgements in making these assumptions and selecting the inputs to the impairment calculation, based on the Group
and Company’s past history, existing market conditions as well as forward looking estimates at the end of each reporting period.
Details of key assumptions and inputs used are disclosed in Note 45.
As a result of adopting IC Interpretation 4 ‘Determining Whether an Arrangement Contains a Lease’ (‘IC 4’), certain of the Group
and Company’s power purchase agreements have been accounted for as a finance lease rather than the normal sale and purchase
arrangements. This has resulted in finance lease accounting being applied to these power purchase agreements.
To apply finance lease accounting, a number of assumptions in the lease models have been made, such as the determination of
minimum lease payments, implicit interest rates and residual values of the power plants at the end of contract periods. Any changes
to these assumptions will affect the lease income and expenses.
Certain financial instruments such as investments and derivative financial instruments are carried on the statement of financial
position at fair value, with changes in fair value reflected in the statement of profit or loss.
Fair values are estimated by reference in part to published price quotations and in part by using valuation techniques. The fair value
of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using
valuation techniques.
The Group and Company use its judgement to select a variety of methods and make assumptions that are mainly based on market
conditions existing at the end of each reporting periods, as disclosed in Note 45 to the financial statements.
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The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are outlined below: (continued)
Income tax is estimated based on the rules governed under the Income Tax Act, 1967.
Differences in determining the capital allowances, deductibility of certain expenses and subsequent utilisation of reinvestment
allowance may arise during the estimation of the provision for income tax between tax calculated at the statement of financial
position date, and the final submission to the tax authority as a result of obtaining further detailed information that may become
available subsequent to the statement of financial position date.
Where the final tax outcome of these matters is different from the amounts that were initially recognised, such differences will
impact the income tax provisions and deferred tax balance in the period in which such determination is made.
The Group and Company have recorded tax recoverable for which the Group and Company believe that there is a reasonable
basis for recognition. Where the final tax outcome of this matter is different from the amount that was initially recorded, such
difference may cause a material adjustment to the carrying amount of the tax recoverable balance recorded in the period in
which such determination is made.
On 23 November 2015, Inland Revenue Board (‘IRB’) had disallowed the Company’s reinvestment allowance (‘RIA’) claims
for Year Assessment 2013 and 2014 and had issued notices of additional assessments (‘Notices’) of RM2,068.2 million to the
Company. The Company had filed an appeal to the Special Commissioners of the Income Tax (‘SCIT’) on the Notices.
As at 31 December 2018, the Group and Company recorded a tax recoverable of RM1,765.1 million from Inland Revenue Board
(‘IRB’) arising from the resubmission of tax computations in the financial year ended 31 August 2014, pursuant to the explicit
approval given by IRB on 21 January 2013 on the eligibility of the Company in claiming the RIA.
In addition, the Group and Company have not recorded the potential additional tax liability arising from the tax impact if the RIA
claimed is disallowed and the Company loses its appeal. The realisation of this tax recoverable and the potential tax liability is
dependent on the outcome of judgement on the RIA claims by the SCIT and by the Kuala Lumpur High Court, including if there
is a subsequent appeal by either party, as disclosed in Note 42 to the financial statements.
The Directors have performed an assessment on the tax recoverable of RM1,765.1 million and the potential tax liability based
on a legal view obtained from external legal counsel and the facts surrounding its RIA claims. The Directors have exercised
judgement that there is sufficient evidence and case law to support the Company’s appeal against the Notices.
Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the
deductible temporary differences or unused tax losses can be utilised. This involves judgement regarding the future financial
performance of the particular entity in which the deferred tax asset has been recognised.
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The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are outlined below: (continued)
The Group and Company provide both Retirement Benefit Plan and Post Retirement Medical Plan for certain employees. The present
value of the employee benefits obligations depends on a number of factors that are determined on an actuarial basis using certain
assumptions. The key assumptions used in determining the net cost/(income) for the employee benefits include discount rate,
medical claim inflation rate and salary increment rate. Any changes in these assumptions will impact the carrying amount of employee
benefits obligations, as disclosed in Note 33.
• Discount rate
The Group and Company determine the appropriate discount rate at the end of each financial period. This is the interest rate
that should be used to determine the present value of estimated future cash outflows expected to be required to settle the
pension obligations. In determining the appropriate discount rate, the Group and Company consider the interest rates of high-
quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity
approximating the terms of the related employee benefits obligation.
The medical claim inflation rate for general practitioner, hospitalisation, specialist and dialysis medical claims, as determined
by the Group and Company are based on the annualised increase in average claims over the past 7 years.
The salary increment rate for employees receiving the Retirement Benefit Plan as determined by the Group and Company is
based on the average salary increment rate for the past 8 years and considerations for price inflation, real salary increase,
promotions and Collective Agreement (‘CA’) negotiation.
The Group introduces an equity-settled share-based compensation plan under which the entity receives services from employees as
consideration for equity instruments of the Group.
The Group and Company measure the equity-settled share-based payments by reference to the fair value of the equity instruments
at the date which they are granted, and revise the estimated number of shares that are expected to vest at the reporting period.
Estimating fair value for share-based payment transactions requires determining the most appropriate valuation model (i.e. Monte
Carlo simulation model). The estimate requires determining the most appropriate inputs to the valuation model including the expected
life of the share scheme, volatility and dividend yield and making assumptions about them, as disclosed in Note 7 to the financial
statements.
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5 REVENUE
Accounting Policy
Revenue which represents income arising in the course of the Group’s and Company’s ordinary activities is recognised by reference to
each distinct performance obligation promised in the contract with customer. Revenue from contracts with customers is measured at its
transaction price, being the amount of consideration which the Group and Company expect to be entitled in exchange for transferring
promised goods or services to a customer, net of goods and service tax, returns, rebates and discounts. Transaction price is allocated
to each performance obligation on the basis of the relative stand-alone selling prices of each distinct good or services promised in
the contract. Depending on the substances of the respective contract with the customer, revenue is recognised when the performance
obligation is satisfied, which may be at a point in time or over time.
The Group and Company do not expect any contracts where the period between the transfer of the promised goods or services to the
customer and payment by the customer exceeds one year. As a consequence, the Group and Company do not adjust any of the transaction
prices for the time value of money.
Revenue from the supply of electricity in Peninsular Malaysia is regulated based on certain formulae and parameters as set out in
the regulatory implementation guidance under the Incentive Based Regulation (‘IBR’) framework and as agreed with the Ministry of
Energy, Science, Technology, Environment and Climate Change.
The contract with customers is for the supply of electricity in accordance to the Tariff rates pursuant to the provision of the Electricity
Supply Act 1990. Collection of the contract consideration from customers is considered probable.
The promise to supply electricity represents a promise to transfer a series of distinct goods that are substantially the same and
that have the same pattern of transfer to the customer. The performance obligation to deliver electricity is satisfied over time as
the customers simultaneously received and consumed the benefits provided by the Group and Company’s performance. Hence,
electricity revenue is recognised over time by the Group and Company when electricity is consumed by customers.
Generally, customers are billed on a monthly basis. As the amount at which the Group and Company have a right to invoice,
corresponds directly with the value to the customer, the revenue from electricity sales is also recognised on a monthly basis. Payment
should be made by customers within 30 days from the date the bill is issued. A penalty charge will be imposed if payment is made
later than 30 days after the bill date.
Electricity revenue includes an estimated value of the electricity consumed by customers from the date of their last meter reading and
reporting period end. Accrued unbilled revenues recognised as contract assets are reversed the following month when actual billings
occur.
ICPT, a mechanism established under the IBR allows the Company to pass through the volatility in fuel and other generation specific
costs (termed as the ‘Single Buyer Generation Cost’) to the consumers, such that the Company remains financially neutral. The
Company’s claims and undertakings under the ICPT mechanism are such that any over or under-recovery of costs would be payable
to or reimbursable from the Government, and would be recognised as part of revenue in the period the costs are incurred. Actual base
tariff billed to the customer remains unchanged.
Included in the revenue, is the ARA for the over recovery of revenue and other income earned during the year. The Company has
taken into account the principles laid out in the Guidelines on Electricity Tariff Determination under the IBR for Peninsular Malaysia
2018, where the allowed revenue in each year is calculated as the sum of actual revenue earned and any applicable adjustments,
such as those related to the revenue-cap, price-cap and other income adjustment mechanisms as described in the Guidelines. Other
income which is earned from services not directly related to electricity supply, but which are provided using the assets and/or staff of
a licensee is deducted from the revenues to be earned from regulated tariffs.
Sale of goods is recognised when control of the products has transferred, being when the products are delivered to the customer
and there is no unfulfilled obligation that could affect the customer’s acceptance of the products. Delivery occurs when the
products have been transported to the specific location, the risks of obsolescence and loss have been transferred to the customer,
and either the customer has accepted the products in accordance with the sales contract, the acceptance provisions have lapsed,
or the Group has objective evidence that all criteria for acceptance have been satisfied.
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5 REVENUE (CONTINUED)
Revenue from these sales is recognised based on the price specified in the contract, net of the estimated discounts. Accumulated
experience is used to estimate and provide for the discounts, using the expected value method, and revenue is only recognised
to the extent that it is highly probable that a significant reversal will not occur. No element of financing is deemed present as the
sales are made with a credit term of on average 30 to 60 days, which is consistent with market practice. The Group’s obligation
to repair or replace faulty products under the standard warranty terms is recognised as a provision.
A receivable is recognised when the goods are delivered as this is the point in time that the consideration is unconditional
because only the passage of time is required before the payment is due.
Revenue from providing services is recognised over the period in which the services are rendered. Revenue is recognised based
on the actual service provided to the end of the reporting period as a proportion of the total services to be provided because
the customer received and uses the benefits simultaneously.
In cases of fixed-price contracts, the customer pays the fixed amount based on a payment schedule. If the services rendered
exceed the payment, a contract asset is recognised. If the payments exceed the services rendered, a contract liability is
recognised.
If the contract includes hourly fees, revenue is recognised in the amount to which the Group has a right to invoice. The amounts
are billed within 60 to 180 days from satisfying the performance obligation and payment is expected within 30 days from the
billing date.
Construction contracts revenue is recognised over time or at a point in time in accordance to performance obligations satisfied.
Where revenue is recognised over time, the satisfaction of performance obligation is by reference to the stage of completion which
is assessed by reference to the contract costs incurred over the total estimated costs for each contract as at the reporting date.
Otherwise, revenue is recognised at a point in time when the customer obtains control of the assets. The related costs are recognised
in profit or loss when they are incurred.
Where the contracts include multiple performance obligations, the transaction price will be allocated to each performance obligation
based on the stand-alone selling prices. Where these are not directly observable, they are estimated based on expected cost plus
margin. If contracts include sale of goods as a separate performance obligation, revenue from this sale is recognised at a point in time
when the goods are delivered, the legal title has passed and the customer has accepted the goods.
When the consideration of a construction contract cannot be estimated reliably, contract revenue is recognised only to the extent of
contract costs incurred that are likely to be recoverable. An expected loss on a contract is recognised immediately in the statement
of profit or loss.
Estimates of revenues, costs or extent of progress toward completion are revised if circumstances change. Any resulting increases or
decreases in estimated revenues or costs are reflected in profit or loss in the period in which the circumstances that give rise to the
revision become known by management.
The amounts will be billed within 60 to 180 days for satisfying the performance obligations and payment is expected within
30 days from billing date.
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5 REVENUE (CONTINUED)
Contributions received from customers consist of cash and assets in the form of PPE. It is an upfront capital contributions for the
construction of assets, used to connect the customers to a network or to provide them with the service.
Contributions received prior to 1 January 2011 are amortised over 15 years, being the average useful life of the asset.
From 1 January 2011 to the adoption of MFRS 15, in compliance with IC Interpretation 18 ‘Transfers of Assets from Customers’
(‘IC18’), all contributions received from customers, where that amount of contributions must be used only to construct or acquire an
item of PPE, and the item of PPE is used to either connect the customer to a network or to provide the customer with ongoing access
to supply of electricity, or to do both, the contributions received are recognised as revenue.
Under MFRS 15, the customers’ contribution are viewed as indirectly related to the promise of providing supply of electricity to the
customers. Supply of electricity and customers’ contributions are not distinct because the customers cannot benefit from these two
services on their own. The connection infrastructures are to fulfil the obligation to supply electricity to the customers. Both the supply
of electricity and customers’ contribution are substantially the same, and have the same pattern of transfer to the customers.
Therefore, connection and the supply of electricity are one performance obligation. It is considered as part of the transaction price
for the overall service provided to the customers’ revenue and is recognised over time. The customers’ contributions are deferred
and recognised over the period the constructed assets used to provide electricity to the customers. In compliance with MFRS 15, the
assets are recognised as contract liabilities and amortised over 20 years, being the revised estimate of the average useful life of the
assets.
Disaggregation of revenue from contracts with customers for the Group and Company are categorised as follows:
Group Company
Financial Financial Financial Financial
year ended period ended year ended period ended
31.12.2018 31.12.2017 31.12.2018 31.12.2017
(Restated) (Restated)
RM’million RM’million RM’million RM’million
Sales:
- Electricity* 49,487.4 15,380.4 46,833.9 14,622.1
- Goods and services 554.7 192.0 0 0
Construction contracts 87.0 4.2 0 0
Customers’ contributions 263.4 115.6 229.4 96.1
50,392.5 15,692.2 47,063.3 14,718.2
The revenue of the Group and Company are predominantly derived in Malaysia. The revenue derived from outside of Malaysia is regarded
as not material.
About TNB Performance Review Financial Statements
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6 OPERATING EXPENSES
Group Company
Financial Financial Financial Financial
year ended period ended year ended period ended
31.12.2018 31.12.2017 31.12.2018 31.12.2017
(Restated) (Restated)
RM’million RM’million RM’million RM’million
Cost of sales:
- Energy cost 30,654.9 9,214.2 30,303.8 9,077.9
- Transmission cost 1,788.1 521.3 1,650.7 476.5
- Distribution cost 5,832.8 1,837.0 5,531.1 1,761.0
38,275.8 11,572.5 37,485.6 11,315.4
Administrative expenses 2,441.1 839.7 1,535.7 571.3
Other operating expenses 3,137.8 615.2 2,824.2 388.4
43,854.7 13,027.4 41,845.5 12,275.1
Purchases from Independent Power Producers (‘IPPs’)^ 16,057.7 4,970.4 25,349.8 7,621.2
Fuel costs 11,634.0 3,378.2 2,714.7 778.8
Operating lease expenses 3,978.5 1,308.0 4,694.7 1,551.4
Directors’ remuneration:
- Fees and allowances 4.4 1.3 4.0 1.2
- Other emoluments 0.5 0.2 0.5 0.2
Auditors’ remuneration:
- Statutory audit:
- PricewaterhouseCoopers PLT, Malaysia 3.5 2.5 1.5 1.1
- Others 1.1 0.1 0 0
- Audit related services 2.6 1.0 2.6 0.5
- Non-audit services:
- Tax related services 2.8 0.1 2.4 0.1
- Other non-audit services 4.8 3.1 4.4 3.1
Staff costs (Note 7) 3,685.8 1,288.5 2,833.0 1,054.8
Property, plant and equipment:
- Depreciation 6,491.3 2,049.9 5,507.6 1,785.3
- Written off 83.4 9.6 75.8 9.6
- Abandoned projects 2.8 14.9 2.8 14.9
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The estimated monetary value of benefits received by the Directors was RM506,806 (FPE 31.12.2017: RM202,090) for the Group and
Company.
All non-audit services were procured competitively in accordance with TNB Procurement Policies and Procedures. Non-audit services can
be offered by the external auditors of the Group if there are clear efficiencies and value added benefits to the Group.
7 STAFF COST
Group Company
Financial Financial Financial Financial
year ended period ended year ended period ended
31.12.2018 31.12.2017 31.12.2018 31.12.2017
RM’million RM’million RM’million RM’million
Details of the retirement benefit and retirement medical plans of the Group and Company are set out in Note 33 to the financial statements.
The Group operates an equity-settled share-based compensation plan under which the entity receives services from employees as
consideration for equity instruments of the Group.
The fair value of the employee services received in exchange for the grant of the Company’s shares is recognised as an expense in the
statement of profit or loss over the vesting period of the grant, with a corresponding increase in share-based payment reserve in equity.
The total amount to be expensed over the vesting period is determined by reference to the fair value of the shares granted.
Non-market vesting conditions are included in the assumptions to arrive at the number of shares that are expected to vest. At the end
of the reporting period, the Group and Company revise its estimate of the number of shares that are expected to vest. The impact of
the revision of original estimates, if any, is recognised in the statement of profit or loss, with a corresponding adjustment to share-based
payment reserve in equity.
The fair value of shares granted to employees of subsidiaries is allocated to the subsidiaries.
The Company implemented a LTIP on 30 April 2015 for a period of 10 years. The LTIP is governed by the by-laws, which was approved by
the shareholders at an Extraordinary General Meeting on 18 December 2014. LTIP is intended to allow the Company to award the grant of
new shares to be vested to selected employees for the attainment of identified performance objectives.
The LTIP comprises a Restricted Share Grant (‘RS Grant’) and a Performance Share Grant (‘PS Grant’). The main difference in the
features of the RS Grant and the PS Grant is the eligibility of the selected employees in terms of their job grades in the Group and the
performance targets and/or performance conditions to be met prior to the offer and vesting of the grant to the selected employees.
(i) RS Grant
The RS Grant is a restricted share grant for all eligible employees selected on a basis designated by the LTIP Committee. The
RS Grant will be awarded annually to the selected employees to be vested over a period of 3 years on pro-rata basis and
after fulfillment of individual performance targets based on the Group’s performance management system (such as individual
performance rating) and certain performance conditions (such as financial targets) as determined by the LTIP Committee from
time to time at its discretion in accordance with the terms and conditions of the LTIP.
(ii) PS Grant
The PS Grant is a performance share grant for senior executives of the Group and Executive Director as well as key employees
of the Group selected on a basis designated by the LTIP Committee. The PS Grant will be awarded annually to the selected
employees to be vested at the end of the 3-year period and after fulfilment of certain performance targets and/or conditions at
the time of grant and vesting, which may include, among other factors, total shareholders’ return and the long term financial
performance targets/ratios of the Group as determined by the LTIP Committee from time to time at its discretion in accordance
with the terms and conditions of the LTIP. At the point of vesting, the final award of the PS Grant is based on a multiple of
the initial grant whereby the multiple is determined according to the performance targets and/or conditions. In the event the
performance targets and/or conditions are not met by the selected employees, the grant will not be vested to them at the end
of the performance period.
The new ordinary shares to be allotted and issued upon the vesting of the ordinary shares pursuant to the RS Grant and PS
Grant will not be subjected to any retention period or restriction on transfer.
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In implementing the LTIP, the grant will be satisfied by way of allotment and issuance of new ordinary shares to the respective RS and
PS grantees upon vesting of the grant.
The LTIP Committee shall decide from time to time at its discretion to determine or vary the terms and conditions of the offer, such
as the eligibility criteria and allocation in each grant, the timing and frequency of the award of the grant, the performance targets and/
or performance conditions to be met prior to the offer and vesting of the grant and the vesting period.
(b) Maximum number of new ordinary shares available under the LTIP
The maximum number of new ordinary shares which may be made available under the LTIP and/or allotted and issued upon vesting of
the new ordinary shares under the LTIP shall not be more than 10.0% of the issued and paid-up ordinary share capital of the Company
(excluding treasury shares) at any point in time during the duration of the LTIP.
The total number of new ordinary shares that may be offered to any one of the selected employees and/or to be vested in any one of the
grantees under the LTIP at any time shall be at the discretion of the LTIP Committee (subject to the by-laws and any applicable law).
(d) Eligibility
Employees of the Group and Company (including the Executive Director) who meet the following criteria as at the date of offer shall be
eligible to be considered as an eligible employee to participate in the LTIP:
(i) has attained the age of 18 years;
(ii) has entered into a full-time or fixed-term contract of employment with, and is on the payroll of any company within the Group and
has not served a notice of resignation or received a notice of termination;
(iii) whose service/employment has been confirmed in writing;
(iv) is not a non-executive or independent director of the Company; and
(v) has fulfilled any other eligibility criteria which has been determined by the LTIP Committee at its discretion from time to time, as the
case may be.
The LTIP Committee may determine any other eligibility criteria for the purpose of selecting an eligible employee at any time and from time
to time, at its discretion.
The new ordinary shares to be allotted and issued pursuant to the LTIP shall, upon allotment and issuance, rank equally in all respects with
the then existing issued ordinary shares.
The new ordinary shares to be allotted and issued pursuant to the vesting of the grant under the LTIP shall not be entitled to any dividends,
rights, allotments and/or any other distributions, for which the entitlement date is prior to the date on which the new ordinary shares are
credited into the Central Depository System (‘CDS’) accounts of the respective grantees upon vesting of the grant under the LTIP.
If the LTIP Committee so decides (but not otherwise), in the event of any alteration in the capital structure of the Company during the
duration of LTIP, which expires on 29 April 2025, such corresponding alterations (if any) may be made to the LTIP in:
(i) the number of unvested new ordinary shares comprised in a grant; and/or
(ii) the method and/or manner in the vesting of the new ordinary shares comprised in a grant.
About TNB Performance Review Financial Statements
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The movement in the total number of share grants during the financial year/period is as follows:
Group Company
At At At At
1.1.2018 Granted Additional* Forfeited Vested 31.12.2018 1.1.2018 Granted Additional* Forfeited Vested 31.12.2018
‘000 ‘000 ‘000 ‘000 ‘000 ‘000 ‘000 ‘000 ‘000 ‘000 ‘000 ‘000
LTIP 1
RS Grant 5,938.2 0 0 (398.6) (5,539.6) 0 4,556.7 0 0 (365.0) (4,191.7) 0
PS Grant 2,067.0 0 1,575.5 (473.9) (3,168.6) 0 1,817.4 0 1,355.7 (416.7) (2,756.4) 0
LTIP 2
RS Grant 10,619.6 0 0 (667.8) (5,386.3) 4,565.5 8,446.6 0 0 (602.8) (4,270.5) 3,573.3
PS Grant 1,883.1 0 0 (282.2) 0 1,600.9 1,697.8 0 0 (268.6) 0 1,429.2
LTIP 3
RS Grant 20,299.7 0 0 (1,663.7) (6,808.0) 11,828.0 15,381.3 0 0 (1,322.6) (5,238.0) 8,820.7
PS Grant 2,123.4 0 0 (209.5) 0 1,913.9 1,875.8 0 0 (202.7) 0 1,673.1
LTIP 4
RS Grant 0 18,571.6 0 (540.7) 0 18,030.9 0 14,148.3 0 (463.2) 0 13,685.1
PS Grant 0 2,058.1 0 (73.4) 0 1,984.7 0 1,822.0 0 (63.2) 0 1,758.8
* The final amount of vesting under PS01 is in accordance with terms and condition approved by the Board Nomination and Remuneration
Committee (‘BNRC’) LTIP/Board as stated in Note 7(a)(ii) above.
Group Company
At At At At
1.9.2017 Transfer Forfeited Vested 31.12.2017 1.9.2017 Transfer Forfeited Vested 31.12.2017
‘000 ‘000 ‘000 ‘000 ‘000 ‘000 ‘000 ‘000 ‘000 ‘000
LTIP 1
RS Grant 13,177.8 0 (268.4) (6,971.2) 5,938.2 10,229.7 (153.7) (130.9) (5,388.4) 4,556.7
PS Grant 2,067.0 0 0 0 2,067.0 1,815.7 1.7 0 0 1,817.4
LTIP 2
RS Grant 10,815.6 0 (196.0) 0 10,619.6 8,679.2 (130.8) (101.8) 0 8,446.6
PS Grant 1,883.1 0 0 0 1,883.1 1,692.8 5.0 0 0 1,697.8
LTIP 3
RS Grant 20,609.9 0 (310.2) 0 20,299.7 15,785.3 (159.1) (244.9) 0 15,381.3
PS Grant 2,123.4 0 0 0 2,123.4 1,879.5 (3.7) 0 0 1,875.8
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The fair value of the share granted is estimated using the Monte Carlo Simulation Model with the following inputs:
Group and Company
LTIP 1 LTIP 2 LTIP 3 LTIP 4
RS Grant PS Grant RS Grant PS Grant RS Grant PS Grant RS Grant PS Grant
Fair value at grant date RM10.46 - RM8.70^ RM12.87 - RM12.04^ RM12.33 - RM11.67^ RM13.96 - RM12.60^
RM10.96 RM13.53 RM13.21 RM15.21
Share price at grant date RM11.18 RM11.18 RM13.88 RM13.88 RM13.74 RM13.74 RM15.92 RM15.92
Expected volatility* 18.5% 18.5% 18.9% 18.9% 16.5% 16.5% 13.3% 13.3%
Expected dividend yield 2.3% 2.3% 2.5% 2.5% 3.6% 3.6% 4.4% 4.4%
Risk-free interest rate** 3.8% 3.8% 3.0% 3.0% 3.5% 3.5% 3.4% 3.5%
Grant date 3 August 3 August 1 April 1 April 28 March 28 March 18 April 18 April
2015 2015 2016 2016 2017 2017 2018 2018
Vesting date 28 November 30 April 30 April 30 April
2018 2019 2020 2021
- Tranche 1 15 November - 2 May - 30 April - 30 April -
2016 2017 2018 2019
- Tranche 2 23 November - 30 April - 30 April - 30 April -
2017 2018 2019 2020
- Tranche 3 28 November - 30 April - 30 April - 30 April -
2018 2019 2020 2021
^
Market considerations have been included in the consideration of fair value.
* Expected volatility is based on TNB’s 3 year average daily historical volatility.
** Risk-free interest is based on Malaysian Government Securities yield.
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Accounting Policy
Other operating income are the non-core revenue received for sales of goods and services rendered by the Group and Company.
Leasing income is accrued, unless collectability is in doubt. Dividend income is recognised when the shareholders’ rights to receive
payment is established. All others are recognised upon completion of the rendering of services or sale not in ordinary course of the
Group and Company’s business.
Group Company
Financial Financial Financial Financial
year ended period ended year ended period ended
31.12.2018 31.12.2017 31.12.2018 31.12.2017
RM’million RM’million RM’million RM’million
Accounting Policy
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary
economic environment in which the entity operates (the ‘functional currency’). The financial statements are presented in
Ringgit Malaysia (‘RM’), which is the Company’s functional and presentation currency.
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of
the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of
such transactions and from the translation at year/period end exchange rates of monetary assets and liabilities denominated
in foreign currencies are recognised in the statement of profit or loss. However, exchange differences are deferred in OCI when
they are attributable to items that form part of the net investment in a foreign operation.
The results and financial positions of the Group’s entities (none of which has the currency of a hyperinflationary economy) that
have functional currencies which are different from the presentation currency are translated into the presentation currency as
follows:
(i) assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of
that statement of financial position;
(ii) income and expenses for each statement of profit or loss and OCI are translated at average exchange rates (unless this
average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in
which case income and expenses are translated at the rate on the dates of the transactions); and
(iii) all resulting exchange differences are recognised as a separate component of equity.
Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the
foreign operation and translated at the closing rate. Exchange differences arising are recognised in OCI.
On consolidation, exchange differences arising from the translation of the net investment in foreign operations are taken to
shareholders’ equity.
On the disposal of a foreign operation (that is, a disposal of the Group’s entire interest in a foreign operation, or a disposal
involving loss of control over a subsidiary that includes a foreign operation, a disposal involving loss of joint control over a joint
venture that includes a foreign operation, or a disposal involving loss of significant influence over an associate that includes
a foreign operation), the cumulative amount of the exchange differences relating to that foreign operation recognised in OCI,
and accumulated in the separate component of equity, are reclassified from equity to profit or loss, as part of the gain or loss
on disposal.
In the case of a partial disposal that does not result in the Group losing control over a subsidiary that includes a foreign
operation, the proportionate share of accumulated exchange differences recognised in OCI are re-attributed to NCI in that
foreign operation, and are not recognised in profit or loss. For all other partial disposals (that is, reductions in the Group’s
ownership interest in associates or joint ventures that do not result in the Group losing significant influence or joint control) the
proportionate share of the accumulated exchange difference is reclassified to profit or loss.
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Group Company
Financial Financial Financial Financial
year ended period ended year ended period ended
31.12.2018 31.12.2017 31.12.2018 31.12.2017
RM’million RM’million RM’million RM’million
Accounting Policy
Finance income are interests and dividends received from investments or financial instruments.
Investment income earned on the temporary investment of specific borrowing pending their expenditure on qualifying assets is
deducted from the borrowing costs eligible for capitalisation.
General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset
are capitalised during the period of time that is required to complete and prepare the asset for its intended use. Qualifying assets
are assets that necessarily takes substantial period of time to get ready for their intended use.
Other borrowing costs are expensed in the period in which they are incurred.
MFRS 9 requires the fair value of financial instruments to be calculated by using the effective interest method to the gross carrying
amount of a financial asset except for financial assets that subsequently become credit-impaired. For credit-impaired financial
assets the effective interest rate is applied to the net carrying amount of the financial asset (after deduction of the loss allowances).
Accounting policy on finance cost for finance lease and government grants are disclosed in Note 23 and Note 37 respectively.
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Group Company
Financial Financial Financial Financial
year ended period ended year ended period ended
31.12.2018 31.12.2017 31.12.2018 31.12.2017
RM’million RM’million RM’million RM’million
Accounting Policy
Current tax expense is determined by the expected income taxes payable in respect of the taxable profit for the financial
year and is measured using the applicable tax rates according to the tax laws of the countries in which the Company and its
subsidiaries operate and generate the taxable profits.
Management periodically evaluates positions taken in tax returns with respect to situation in which applicable tax regulation
is subject to interpretation. Provisions are established where appropriate on the basis of amounts expected to be paid to the
tax authorities.
Tax is recognised in the profit or loss except to the extent that it relates to items recognised directly in OCI. In this case, the
item is recognised in OCI, net of tax.
(b) Zakat
The Group and Company recognise its obligation towards the payment of zakat on business income in the statement of profit
or loss. Zakat payment is an obligation and is accrued based on 2.5% of profit before tax and determined according to the
percentage of Muslim shareholding in the Company.
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The taxation and zakat for the Group and Company comprise:
Group Company
Financial Financial Financial Financial
year ended period ended year ended period ended
31.12.2018 31.12.2017 31.12.2018 31.12.2017
Note (Restated)
RM’million RM’million RM’million RM’million
Current tax:
- Malaysian corporate income tax 960.5 277.4 597.5 191.6
Deferred tax 20 266.8 (42.4) 423.7 (18.5)
Tax expense 1,227.3 235.0 1,021.2 173.1
Zakat 74.3 0 74.3 0
1,301.6 235.0 1,095.5 173.1
The explanation of the relationship between tax expense and profit before taxation and zakat is as follows:
Group Company
Financial Financial Financial Financial
year ended period ended year ended period ended
31.12.2018 31.12.2017 31.12.2018 31.12.2017
(Restated) (Restated)
RM’million RM’million RM’million RM’million
Group
Defined benefit plan actuarial loss (Note 33) (220.3) 16.0 (204.3) (139.2) 31.6 (107.6)
Foreign currency translation differences (13.1) 0 (13.1) (219.8) 0 (219.8)
AFS financial assets 0 0 0 (2.6) 0 (2.6)
Financial assets at FVOCI 7.1 0 7.1 0 0 0
Share of OCI of associates accounted for using
the equity method 74.3 0 74.3 94.2 0 94.2
(152.0) 16.0 (136.0) (267.4) 31.6 (235.8)
Company
Defined benefit plan actuarial loss (Note 33) (66.7) 16.0 (50.7) (131.3) 31.5 (99.8)
AFS financial assets 0 0 0 (2.6) 0 (2.6)
Financial assets at FVOCI 7.1 0 7.1 0 0 0
(59.6) 16.0 (43.6) (133.9) 31.5 (102.4)
Basic earnings per share is calculated by dividing the profit attributable to owners of the Company for the financial year/period by
the weighted average number of ordinary shares issued during the financial year/period.
Group
Financial Financial
year period
ended ended
31.12.2018 31.12.2017
(Restated)
For the purpose of calculating diluted earnings per share, the profit attributable to owners of the Company for the financial year/
period and the weighted average number of ordinary shares issued during the financial year/period has been adjusted for the dilutive
effects of all potential ordinary shares such as the LTIP granted to employees.
Group
Financial Financial
year ended period ended
31.12.2018 31.12.2017
(Restated)
13 DIVIDENDS
Interim single tier dividend for the financial year 2018 of 30.27 sen per share
on 5,678,180,571 ordinary shares
(FPE 31.12.2017: interim single tier dividend of NIL) 1,718.8 0
Proposed final single tier dividend for the financial year 2018 of 23.0 sen per share
on 5,686,888,771 ordinary shares
(FPE 31.12.2017: final single tier dividend of 21.41 sen per share on 5,665,986,271 ordinary shares) 1,308.0 1,213.1
3,026.8 1,213.1
Interim dividends are paid and accounted for in shareholders’ equity as an appropriation of retained profits in the financial year.
The Directors have proposed a final single tier dividend of 23.0 sen per share, on 5,686,888,771 ordinary shares in respect of the financial year
ended 31 December 2018 amounting to a total of RM1,308.0 million. The books closure and payment dates will be announced in due course.
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Accounting Policy
PPE are stated at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is
directly attributable to the construction or acquisition of the items and bringing them to the location and condition so as to render
them operational in the manner intended by the Group. The Group allocates the cost of an item of PPE to its significant system and
component parts.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured
reliably. The carrying amount of the replaced part is derecognised.
The cost of major overhaul/inspection is recognised in the asset’s carrying amount as a replacement and the remaining carrying
amount of the previous major overhaul/inspection is derecognised.
Major spare parts and standby equipment are recognised as assets when the Group expects to use them during more than one
period. Similarly, if the spare parts and servicing equipment can be used only in connection with an item of PPE, they are accounted
for as PPE.
Gains or losses on disposal of PPE are determined by reference to their carrying amount and are included in profit or loss.
Freehold land and capital work-in-progress are not depreciated. Leasehold land classified as finance lease (Note 23) is amortised
over the remaining period of the respective leases ranging from 5 to 99 years on the straight line method. Land with lease period
less than 50 years is classified as short leasehold land and land with lease period greater than or equal to 50 years is classified as
long leasehold land.
Other property, plant and equipment are depreciated on the straight line method to allocate the cost to their residual values over
their estimated useful lives, summarised as follows:
Buildings and civil works 10 - 60 years
Plant and machinery 3 - 40 years
Lines and distribution mains 10 - 60 years
Distribution services 20 years
Meters 10 - 15 years
Public lighting 15 - 20 years
Furniture, fittings and office equipment 3 - 15 years
Motor vehicles 5 - 15 years
Residual values and useful lives of assets are reviewed, and adjusted if appropriate, at the end of the reporting period.
At the end of the reporting period, the Group assesses whether there is any indication of impairment. If such indication exist, an
analysis is performed to assess whether the carrying amount of the asset is fully recoverable. A write down is made if the carrying
amount exceeds the recoverable amount (Note 3(c)).
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Transfers/
Adjustments/
Exchange Acquisition Reclassi-
As at rate of fication/ As at
1.1.2018 adjustments subsidiaries Additions Disposals Write offs 31.12.2018
31.12.2018 RM’million RM’million RM’million RM’million RM’million RM’million RM’million
Group
Cost
Freehold land 1,478.2 (0.3) 0 405.1 0 0 1,883.0
Long leasehold land 1,889.1 0 0 100.0 (12.0) 1.0 1,978.1
Short leasehold land 186.6 0 0 0 0 3.1 189.7
Buildings and civil works 20,884.8 (0.5) 0 21.4 (131.0) 1,293.5 22,068.2
24,438.7 (0.8) 0 526.5 (143.0) 1,297.6 26,119.0
Plant and machinery:
- Owned 69,948.6 (112.2) 1,039.0 381.7 (1,324.3) 2,141.8 72,074.6
- Leased 8,163.6 0 0 0 0 0 8,163.6
Lines and distribution mains 44,215.2 0 0 72.8 (25.5) 2,251.3 46,513.8
Distribution services 4,411.7 0 0 8.2 0 210.8 4,630.7
Meters 2,812.3 0 0 6.1 (15.9) 177.0 2,979.5
Public lighting 688.4 0 0 0.1 (0.2) 215.3 903.6
Furniture, fittings and office
equipment 2,221.3 (1.2) 0.2 386.1 (10.6) 5.9 2,601.7
Motor vehicles 647.3 0.8 0 26.8 (25.6) 5.5 654.8
157,547.1 (113.4) 1,039.2 1,408.3 (1,545.1) 6,305.2 164,641.3
Capital work-in-progress 18,820.4 0 0 11,087.1 (35.8) (6,547.6) 23,324.1
176,367.5 (113.4) 1,039.2 12,495.4 (1,580.9) (242.4) 187,965.4
Released on
Charged disposals/
As at for the Transfers/ As at
1.1.2018 financial year Write offs 31.12.2018
31.12.2018 RM’million RM’million RM’million RM’million
Group
Accumulated depreciation
Long leasehold land 332.2 28.4 (11.7) 348.9
Short leasehold land 117.0 7.2 0 124.2
Buildings and civil works 6,536.9 528.4 (99.2) 6,966.1
6,986.1 564.0 (110.9) 7,439.2
Plant and machinery:
- Owned 32,079.0 3,157.1 (1,353.2) 33,882.9
- Leased 2,393.2 512.4 0 2,905.6
Lines and distribution mains 22,507.3 1,663.0 (14.0) 24,156.3
Distribution services 2,664.8 175.2 0 2,840.0
Meters 1,797.4 145.8 (8.6) 1,934.6
Public lighting 356.8 46.1 (0.2) 402.7
Furniture, fittings and office equipment 1,859.0 186.3 (18.2) 2,027.1
Motor vehicles 530.7 41.4 (26.2) 545.9
71,174.3 6,491.3 (1,531.3) 76,134.3
Transfers/
Adjustments/
Exchange Reclassi-
As at rate fication/ As at
1.9.2017 adjustments Additions Disposals Write offs 31.12.2017
31.12.2017 RM’million RM’million RM’million RM’million RM’million RM’million
Group
Cost
Freehold land 1,353.9 (0.2) 103.6 (1.4) 22.3 1,478.2
Long leasehold land 1,759.4 0 126.8 0 2.9 1,889.1
Short leasehold land 186.6 0 0 0 0 186.6
Buildings and civil works 20,814.9 (0.3) 2.8 (3.8) 71.2 20,884.8
24,114.8 (0.5) 233.2 (5.2) 96.4 24,438.7
Plant and machinery:
- Owned 64,377.1 (71.6) 17.5 (22.5) 5,648.1 69,948.6
- Leased 8,163.6 0 0 0 0 8,163.6
Lines and distribution mains 43,517.8 0 4.8 0 692.6 44,215.2
Distribution services 4,373.8 0 2.3 0 35.6 4,411.7
Meters 2,780.6 0 1.2 (0.5) 31.0 2,812.3
Public lighting 664.4 0 0 0 24.0 688.4
Furniture, fittings and office equipment 2,193.9 (1.1) 31.2 (1.0) (1.7) 2,221.3
Motor vehicles 657.8 (0.2) 0.7 (4.0) (7.0) 647.3
150,843.8 (73.4) 290.9 (33.2) 6,519.0 157,547.1
Capital work-in-progress 21,819.7 0 3,498.6 (29.4) (6,468.5) 18,820.4
172,663.5 (73.4) 3,789.5 (62.6) 50.5 176,367.5
Charged Released on
for the disposals/
As at financial Transfers/ As at
1.9.2017 period Write offs 31.12.2017
31.12.2017 RM’million RM’million RM’million RM’million
Group
Accumulated depreciation
Long leasehold land 324.2 8.0 0 332.2
Short leasehold land 114.6 2.4 0 117.0
Buildings and civil works 6,365.4 173.4 (1.9) 6,536.9
6,804.2 183.8 (1.9) 6,986.1
Plant and machinery:
- Owned 31,151.5 979.6 (52.1) 32,079.0
- Leased 2,222.4 170.8 0 2,393.2
Lines and distribution mains 21,970.7 536.6 0 22,507.3
Distribution services 2,609.4 55.4 0 2,664.8
Meters 1,752.4 45.4 (0.4) 1,797.4
Public lighting 346.1 10.7 0 356.8
Furniture, fittings and office equipment 1,810.6 52.8 (4.4) 1,859.0
Motor vehicles 526.9 14.8 (11.0) 530.7
69,194.2 2,049.9 (69.8) 71,174.3
Transfers/
Adjustments/
Reclassi-
As at fication/ As at
1.1.2018 Additions Disposals Write offs 31.12.2018
31.12.2018 RM’million RM’million RM’million RM’million RM’million
Company
Cost
Freehold land 1,480.5 405.1 0 0 1,885.6
Long leasehold land 1,431.7 26.7 (0.4) 0.1 1,458.1
Short leasehold land 4.5 0 0 0 4.5
Buildings and civil works 17,099.5 0 (130.6) 304.2 17,273.1
20,016.2 431.8 (131.0) 304.3 20,621.3
Plant and machinery:
- Owned 42,865.6 0 (1,203.2) 2,452.0 44,114.4
- Leased 25,018.6 0 0 0 25,018.6
Lines and distribution mains 42,040.1 0 (25.2) 2,219.1 44,234.0
Distribution services 4,118.3 0 0 197.5 4,315.8
Meters 2,710.5 0 (15.6) 177.0 2,871.9
Public lighting 688.4 0 (0.2) 215.3 903.5
Furniture, fittings and office equipment 1,892.8 362.0 (6.9) (0.1) 2,247.8
Motor vehicles 520.2 21.3 (20.2) 5.1 526.4
139,870.7 815.1 (1,402.3) 5,570.2 144,853.7
Capital work-in-progress 7,868.7 6,962.4 (44.4) (5,588.3) 9,198.4
147,739.4 7,777.5 (1,446.7) (18.1) 154,052.1
Released on
Charged disposals/
As at for the Transfers/ As at
1.1.2018 financial year Write offs 31.12.2018
31.12.2018 RM’million RM’million RM’million RM’million
Company
Accumulated depreciation
Long leasehold land 320.7 19.5 0 340.2
Short leasehold land 2.6 0.1 0 2.7
Buildings and civil works 5,451.3 356.3 (98.5) 5,709.1
5,774.6 375.9 (98.5) 6,052.0
Plant and machinery:
- Owned 22,832.4 1,850.9 (1,175.4) 23,507.9
- Leased 9,067.5 1,176.3 0 10,243.8
Lines and distribution mains 21,645.9 1,578.1 (14.0) 23,210.0
Distribution services 2,498.8 159.8 0 2,658.6
Meters 1,735.9 138.8 (8.4) 1,866.3
Public lighting 356.8 46.1 (0.2) 402.7
Furniture, fittings and office equipment 1,594.1 152.7 (6.9) 1,739.9
Motor vehicles 440.8 29.0 (20.0) 449.8
65,946.8 5,507.6 (1,323.4) 70,131.0
About TNB Performance Review Financial Statements
Our Business Sustainability Statement Additional Information
Business Context The Strength of Our Governance
Transfers/
Adjustments/
Reclassi-
As at fication/ As at
1.9.2017 Additions Disposals Write offs 31.12.2017
31.12.2017 RM’million RM’million RM’million RM’million RM’million
Company
Cost
Freehold land 1,356.0 103.6 (1.4) 22.3 1,480.5
Long leasehold land 1,426.4 5.3 0 0 1,431.7
Short leasehold land 4.5 0 0 0 4.5
Buildings and civil works 17,028.9 0 (0.1) 70.7 17,099.5
19,815.8 108.9 (1.5) 93.0 20,016.2
Plant and machinery:
- Owned 43,273.2 0 (21.9) (385.7) 42,865.6
- Leased 18,763.1 6,255.5 0 0 25,018.6
Lines and distribution mains 41,349.5 0 0 690.6 42,040.1
Distribution services 4,084.0 0 0 34.3 4,118.3
Meters 2,679.5 0 0 31.0 2,710.5
Public lighting 664.3 0 0 24.1 688.4
Furniture, fittings and office equipment 1,868.6 28.7 (0.4) (4.1) 1,892.8
Motor vehicles 524.9 0.1 (4.0) (0.8) 520.2
133,022.9 6,393.2 (27.8) 482.4 139,870.7
Capital work-in-progress 7,608.0 1,648.8 0 (1,388.1) 7,868.7
140,630.9 8,042.0 (27.8) (905.7) 147,739.4
Charged Released on
for the disposals/
As at financial Transfers/ As at
1.9.2017 period Write offs 31.12.2017
31.12.2017 RM’million RM’million RM’million RM’million
Company
Accumulated depreciation
Long leasehold land 313.8 6.9 0 320.7
Short leasehold land 2.6 0 0 2.6
Buildings and civil works 5,322.5 128.8 0 5,451.3
5,638.9 135.7 0 5,774.6
Plant and machinery:
- Owned 22,861.3 590.5 (619.4) 22,832.4
- Leased 8,675.4 392.1 0 9,067.5
Lines and distribution mains 21,136.7 509.2 0 21,645.9
Distribution services 2,448.2 50.6 0 2,498.8
Meters 1,692.8 43.1 0 1,735.9
Public lighting 346.1 10.7 0 356.8
Furniture, fittings and office equipment 1,554.7 42.9 (3.5) 1,594.1
Motor vehicles 434.9 10.5 (4.6) 440.8
64,789.0 1,785.3 (627.5) 65,946.8
About TNB Performance Review Financial Statements
Tenaga Nasional Berhad
Our Business Sustainability Statement Additional Information
Integrated Annual Report 2018 Business Context The Strength of Our Governance
Group Company
31.12.2018 31.12.2017 31.12.2018 31.12.2017
RM’million RM’million RM’million RM’million
The title deeds of certain lands are in the process of being registered in the name of the Company and certain subsidiaries.
Net book value of PPE pledged as security for borrowings are disclosed in Note 36.
Inclusive in the capital work-in-progress is interest capitalised during FY2018 for the Group and the Company of RM915.8 million
(FPE 31.12.2017: RM123.0 million) and RM260.5 million (FPE 31.12.2017: RM83.4 million) respectively.
The capitalisation rate used to determine the amount of borrowing cost eligible for capitalisation is 5.8% (FPE 31.12.2017: 6.0%).
TNB Liberty Power Limited (‘LPL’) has recognised in prior years, a provision for impairment totalling RM385.6 million. Current financial
period assessment showed that no further impairment loss is required for the carrying amount of PPE assessed. The carrying value
of the PPE at statement of financial position date is RM227.2 million (FPE 31.12.2017: RM233.5 million). The recoverable amount of
the PPE is determined based on value in use.
About TNB Performance Review Financial Statements
Our Business Sustainability Statement Additional Information
Business Context The Strength of Our Governance
15 SUBSIDIARIES
Company
31.12.2018 31.12.2017 1.9.2017
Note (Restated) (Restated)
RM’million RM’million RM’million
At cost:
Unquoted ordinary shares (a)(b)(c) 2,344.5 2,293.4 2,288.3
Redeemable preference shares (d)(e)(f)(g) 8,728.9 8,376.1 7,375.3
Shares/Options granted to employees of subsidiaries 206.1 143.8 127.6
11,279.5 10,813.3 9,791.2
Less: Accumulated impairment losses (i) (2,675.7) (1,014.1) (971.0)
8,603.8 9,799.2 8,820.2
(a) On 3 January 2018, the Company subscribed to an additional 3,000,000 new ordinary shares issued by TNB Fuel Services Sdn. Bhd.
by conversion of amounts due from TNB Fuel Services Sdn. Bhd. amounting to RM3.0 million.
(b) On 8 March 2018, the Company had completed the acquisition of 100.0% equity interest in Allo Technology Sdn. Bhd. (formerly known
as Setia Haruman Technology Sdn. Bhd.) from Setia Haruman Sdn. Bhd. (‘SHSB’), for a cash consideration of RM28.0 million (Note 48).
(c) On 4 April 2018, the Company subscribed to an additional 20,000,000 new ordinary shares issued by Universiti Tenaga Nasional
Sdn. Bhd. (‘UNITEN’), a wholly owned subsidiary by conversion of amounts due from UNITEN amounting to RM20.0 million.
(d) On 5 March 2018, the Company subscribed to 23,875,283 new Redeemable Preference Shares (‘RPS’) issued by Southern Power
Generation Sdn. Bhd. by cash of RM23.9 million.
(e) On 30 July 2018, TNB Janamanjung Sdn. Bhd. had redeemed 4,861,111 units of RPS from the Company for RM700.0 million.
(f) On 27 August 2018, the Company subscribed an additional 5,950 RPS issued by Jimah East Power Sdn. Bhd. (‘JEP’) for RM595.0
million via conversion of amounts due from JEP.
(g) On 11 December 2018, the Company subscribed to 5,000,000 RPS issued by TNB Pasir Gudang Energy Sdn. Bhd. via transfer of asset
and materials amounting to RM220.0 million.
(h) During the financial year, the Group completed the acquisitions of 100.0% economic interest in GVO Wind Limited (‘GVO’) and Bluemerang
Capital Limited (‘BCL’) (companies incorporated in the United Kingdom) for a total consideration of RM498.6 million (Note 48).
During the financial year, the Company had undertaken the impairment assessment of its investment in ASI, an investment
holding company, following an impairment done to its indirect associate Gama Enerji Anonîm Şîrketî (‘Gama Enerji’). The
impairment made was due to impairment indicator arising from the adverse foreign exchange movements which resulted
in volatility of electricity prices and fuel prices and translation losses arising from borrowings of Gama Enerji denominated
in foreign currencies. An impairment charge of RM1,085.8 million was recognised for the carrying amount of ASI as at
31 December 2018 as its recoverable amount is lower than its carrying amount.
The recoverable amount was determined based on value in use (‘VIU’) calculation, which apply a discounted cash flow model
based on management’s forecasts and projections. These forecasts and projections reflect management’s expectations based on
the current assessment of macroeconomics trends, currency movement, expectations of market growth and industry growth as
benchmarked with external sources.
About TNB Performance Review Financial Statements
Tenaga Nasional Berhad
Our Business Sustainability Statement Additional Information
Integrated Annual Report 2018 Business Context The Strength of Our Governance
15 SUBSIDIARIES (CONTINUED)
The Company’s review includes on impact assessment of changes in key assumptions. The effect of the movement in the key
assumptions to the recoverable amount is as follows:
Impact to recoverable amount
Changes in Increase Decrease
Key assumptions: assumptions RM’million RM’million
(ii) Impairment test on Power and Energy International (Mauritius) Ltd. (‘PEIM’)
During the financial year, the Company had undertaken the impairment assessment of its investment in PEIM, an investment
holding company, following an impairment done to its associate GMR Energy Limited (‘GEL’). The impairment made was due to
an impairment indicator arising from the delay in commencement of operations for certain power plants in GEL group and the
shortage of fuel supply. An impairment loss of RM535.6 million was required for the carrying amount of PEIM as at 31 December
2018 as its recoverable amount is lower than its carrying amount.
The recoverable amount was determined based on VIU calculation, which apply a discounted cash flow model of PEIM for the
period of the remaining useful lives of the respective power plants of the group which range between 15 to 40 years. The cash
flows used are the most recent forecast and projections approved by management of PEIM.
The cash flows are discounted using cost of equity based on the risk specific to the investments. The key assumptions take into
account the macroeconomic environment in India.
The Company’s review includes on impact assessment of changes in key assumptions. The effect of the movement in the key
assumptions to the recoverable amount is as follows:
Impact to recoverable amount
Changes in Increase Decrease
Key assumptions: assumptions RM’million RM’million
15 SUBSIDIARIES (CONTINUED)
TNB Janamanjung Sdn. Bhd. 100% 100% Generate and deliver electricity energy and Malaysia
maintain generating capacity to TNB
TNB Power Daharki Ltd.# 100% 100% Investment holding company Mauritius
TNB Fuel Services Sdn. Bhd. 100% 100% Supplying fuel and coal for power generation Malaysia
TNB Energy Services Sdn. Bhd. 100% 100% Generating, distributing, supplying, dealing, Malaysia
selling of different kinds of energy sources and
related technical services
TNB Research Sdn. Bhd. 100% 100% Research and development, consultancy and Malaysia
other services
TNB Ventures Sdn. Bhd. 100% 100% Investment holding company Malaysia
TNB Engineering Corporation 100% 100% Principally engaged as turnkey contractors, Malaysia
Sdn. Bhd. energy project development specialising in
district cooling system and co-generation
including operation and maintenance works
TNB Repair And Maintenance 100% 100% Providing repair and maintenance services to Malaysia
Sdn. Bhd. heavy industries and other related services
TNB Capital (L) Ltd. 100% 100% Investment holding company Malaysia
Universiti Tenaga Nasional Sdn. Bhd. 100% 100% Providing higher education Malaysia
Malaysia Transformer Manufacturing 100% 100% Principally engaged in the business of Malaysia
Sdn. Bhd. manufacturing, selling and repairing
distribution, power and earthing transformers
Power and Energy International 100% 100% Investment holding Mauritius
(Mauritius) Ltd.*
Orion Mission Sdn. Bhd. 100% 100% Investment holding company Malaysia
Sabah Electricity Sdn. Bhd. (‘SESB’) 83% 83% Business of generation, transmission, distribution Malaysia
and sale of electricity and services in Sabah
and the Federal Territory of Labuan
Tenaga Switchgear Sdn. Bhd. 60% 60% Principally engaged in the business of Malaysia
assembling and manufacturing of high voltage
switchgears and contracting of turnkey
transmission substations
Kapar Energy Ventures Sdn. Bhd. 60% 60% Generate and deliver electricity energy and Malaysia
(‘KEV’) generating capacity to TNB
TNB Integrated Learning Solution 100% 100% Providing training courses Malaysia
Sdn. Bhd.
TNB Prai Sdn. Bhd. 100% 100% Generate and deliver electricity energy and Malaysia
maintain generating capacity to TNB
TNB Pasir Gudang Energy Sdn. Bhd. 100% 100% Carry business of any matter relating to electricity Malaysia
especially the business of generation and
supply of electricity for any purpose in Malaysia
TNB Manjung Five Sdn. Bhd. 100% 100% Generate and deliver electricity energy and Malaysia
maintain generating capacity to TNB
TNB Connaught Bridge Sdn. Bhd. 100% 100% To generate and deliver electricity energy and Malaysia
maintain generating capacity to TNB
About TNB Performance Review Financial Statements
Tenaga Nasional Berhad
Our Business Sustainability Statement Additional Information
Integrated Annual Report 2018 Business Context The Strength of Our Governance
15 SUBSIDIARIES (CONTINUED)
15 SUBSIDIARIES (CONTINUED)
15 SUBSIDIARIES (CONTINUED)
15 SUBSIDIARIES (CONTINUED)
15 SUBSIDIARIES (CONTINUED)
15 SUBSIDIARIES (CONTINUED)
15 SUBSIDIARIES (CONTINUED)
15 SUBSIDIARIES (CONTINUED)
Capital and other commitments for the subsidiaries are disclosed in Note 41. There are no material contingent liabilities relating to the
subsidiaries.
The NCI is not material to the financial performance, financial position and cash flows of the Group. The NCI information for KEV, SESB
and JEP, which contribute to substantial portion of total NCI is set out below:
Other
individually
KEV SESB JEP immaterial NCI Total
31.12.2018 31.12.2017 31.12.2018
31.12.2017 31.12.2018 31.12.2017 31.12.2018 31.12.2017 31.12.2018 31.12.2017
(Restated) (Restated)
RM’million RM’million RM’million RM’million RM’million RM’million RM’million RM’million RM’million RM’million
Carrying amount
of NCI 186.5 218.7 231.5 175.6 688.6* 449.6 107.5 79.3 1,214.1 923.2
Financial year/
period ended
Total comprehensive
(expenses)/
income allocated
to NCI (32.2) (12.0) 55.9 25.5 (16.0) (3.6) 13.6 (23.7) 21.3 (13.8)
* Included in carrying amount of NCI in JEP is a subscription of RPS by NCI via conversion of amount due to NCI amounting to
RM255.0 million.
About TNB Performance Review Financial Statements
Tenaga Nasional Berhad
Our Business Sustainability Statement Additional Information
Integrated Annual Report 2018 Business Context The Strength of Our Governance
15 SUBSIDIARIES (CONTINUED)
The summarised financial information of KEV, SESB and JEP before inter-company eliminations are as follows:
KEV SESB JEP
31.12.2018 31.12.2017 31.12.2018 31.12.2017 31.12.2018 31.12.2017
(Restated)
RM’million RM’million RM’million RM’million RM’million RM’million
16 JOINT ARRANGEMENTS
Accounting Policy
A joint arrangement is an arrangement over which there is contractually agreed sharing of control by the Group with one or more
parties where decisions about the relevant activities relating to the joint arrangement require unanimous consent of the parties
sharing control. The classification of a joint arrangement as a joint operation or a joint venture depends upon the rights and
obligations of the parties to the arrangement. A joint venture is a joint arrangement whereby the joint venturers have rights to the
net assets of the arrangement. Joint operations are joint arrangements whereby the Company has the rights to the assets and
obligations for the liabilities. In respect of its interests in joint operations, the Company shall recognise in its financial statements
the assets that it controls and the expenses and liabilities that it incurs and its share of the income that it earns from the sale of
goods or services.
The Group’s interest in joint ventures is accounted for in the consolidated financial statements using the equity method of accounting.
Equity accounting involves recognising in the consolidated statement of profit or loss, consolidated statement of OCI and
consolidated statement of changes in equity, the Group’s share of profits less losses of the joint ventures based on the latest
audited financial statements or management accounts of the joint ventures, made up to the financial year end of the Group. Where
necessary, adjustments are made to the results and net assets of the joint ventures to ensure consistency of accounting policies
with those of the Group. The Group’s investments in joint ventures are recorded at cost inclusive of goodwill and adjusted thereafter
for accumulated impairment losses and the post-acquisition change in the Group’s share of net assets of the joint ventures.
Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group’s interest in joint
ventures. Unrealised losses are also eliminated on the same basis but only to the extent of the costs that can be recovered, and the
balances that provide evidence of reduction in net realisable value or an impairment of the asset transferred are recognised in the
consolidated statement of profit or loss.
Group Company
31.12.2018 31.12.2017 31.12.2018 31.12.2017
RM’million RM’million RM’million RM’million
None of the joint ventures are material individually to the financial position, financial performance and cash flows of the Group.
17 ASSOCIATES
Accounting Policy
Associates are all entities over which the Group has significant influence but not control or joint control, generally accompanying a
shareholding of between 20.0% and 50.0% of the voting rights.
Investments in associates are accounted for in the consolidated financial statements using the equity method of accounting and are initially
recognised at cost. Equity accounting is discontinued when the Group ceases to have significant influence over the associates.
The Group’s share of its associates’ post-acquisition profits or losses is recognised in the statement of profit or loss, and its share of
post-acquisition movements is recognised in OCI. The cumulative post-acquisition movements are adjusted against the carrying amount of
the investment. When the Group’s share of losses in an associate equals or exceeds its interests in the associate, including any long-term
interests that, in substance, form part of the Group’s net investment in the associate, the Group does not recognise further losses, unless
it has incurred legal or constructive obligations or made payments on behalf of the associate. If the associate subsequently reports profits,
the Group resumes recognising its share of those profits only after its share of the profits equals the share of losses not recognised. The
Group’s investments in associates include goodwill identified on acquisition, net of any accumulated impairment losses (Note 3(c)).
Profits and losses resulting from upstream and downstream transactions between the Group and its associates are recognised in the
Group’s financial statements only to the extent of unrelated investor’s interests in the associates. Unrealised losses are eliminated unless
the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where
necessary to ensure consistency with the policies adopted by the Group.
Dilution of gains and losses in associates are recognised in the consolidated statement of profit or loss.
If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously
recognised in OCI is reclassified to profit or loss where appropriate.
Group Company
31.12.2018 31.12.2017 31.12.2018 31.12.2017
RM’million RM’million RM’million RM’million
17 ASSOCIATES (CONTINUED)
In the opinion of the Directors, the associates that are material to the Group are Gama Enerji and GEL. The following summarises the
financial information of material associates to the Group and reconciles the information to the carrying amount of the Group’s interest in
the associates.
(a) The summarised statement of comprehensive income from material associates that is significant to the Group:
Gama Enerji GEL
Financial Financial Financial Financial
year ended period ended year ended period ended
31.12.2018 31.12.2017 31.12.2018 31.12.2017
RM’million RM’million RM’million RM’million
(b) The summarised statement of financial position from material associates that is significant to the Group:
Gama Enerji GEL
31.12.2018 31.12.2017 31.12.2018 31.12.2017
RM’million RM’million RM’million RM’million
(c) Reconciliation of the summarised financial information of material associates presented to the carrying amount of its interest in the
associates:
Gama Enerji GEL
31.12.2018 31.12.2017 31.12.2018 31.12.2017
RM’million RM’million RM’million RM’million
17 ASSOCIATES (CONTINUED)
The Company via the shareholders agreement, granted the other NCI of Gama Enerji a put option which allows the NCI to sell all or
part of their equity interest respectively to the majority shareholder and the Company at a price based on the fair market value at the
exercised date (exercisable at any time for the period from 1 July 2019 to 31 December 2020) or at a price determined at higher of
Earnings Before Interest, Tax, Depreciation and Amortisation (‘EBITDA’) with a fixed multiple or the adjusted initial cost of investment
of the NCI (exercisable at any time if the Company defaults on the shareholders agreement). The fair value of the put option is not
significant as at 31 December 2018.
Teknologi Tenaga Perlis Consortium 20% 20% Design, construction, divesting, operation and Malaysia
Sdn. Bhd. maintenance of electricity generating facility
GB3 Sdn. Bhd. 20% 20% Design, construction, operation and maintenance Malaysia
of electricity generating facility
Fibrecomm Network (M) Sdn. Bhd. 49% 49% Provision of fibre optic transmission network Malaysia
services
Jimah Energy Ventures Holdings 20% 20% Investment holdings Malaysia
Sdn. Bhd.
17 ASSOCIATES (CONTINUED)
17 ASSOCIATES (CONTINUED)
Gama Enerji
Letters of guarantee 345.2 493.3
The letters of guarantee are mainly provided to certain regulators within the energy market and Ministry
of Water and Irrigation of Jordan.
GEL
(a) Corporate guarantees 357.6 381.1
(b) Bank guarantees outstanding/Letter of credit outstanding 226.4 880.8
(c) Claims against the GEL Group not acknowledged as debts 1,039.4 165.2
(d) Matters relating to income tax under dispute 52.4 55.8
(e) Disputed arrears of electricity charges 6.2 0
(f) Disputed entry tax liabilities 95.9 0
(g) Disputed demand for deposit of fund setup by Water Resource department 31.3 0
(h) Custom duties refunds 35.2 37.5
In 2010, a subsidiary of GEL was granted a refund of customs duty which was paid earlier towards
the import of plant and machinery. In 2011, the subsidiary received an intimation from the Office of
the Joint Director General of Foreign Trade (‘DGFT’) for cancellation of duty drawback refund order
granted thereby seeking refund of the amount that has been received earlier.
In the opinion of experts, the management is confident that the duty drawback refund granted earlier
was appropriate and that the cancellation of the duty drawback refund is not tenable. During the
financial year ended 31 March 2015, the matter has been transferred to the Hon‘ble Supreme Court of
India and will be concluded along with other similar cases and is pending finalisation.
(i) Payment of electricity duty towards Chief Electrical Inspectorate, Government of Andhra Pradesh (‘GoAP’) 46.3 49.4
The associate and a subsidiary received demands from the Chief Electrical Inspectorate, GoAP for
electricity duties on generation and sale of electrical energy since the commencement of commercial
operations date of its plants.
Based on internal assessment and expert legal opinion, the management of GEL is confident that
the provisions of Electricity Duty Act and Rules, 1939 in respect of payment of electricity duty are not
applicable to GEL.
(j) Appeals and disputes 162.5 173.2
GEL is in dispute with its fuel supplier which is currently being heard at the District Civil Court of Bangalore.
Based on independent legal opinion and internal assessment, the management of GEL is confident
that it has a strong defense against these claims.
(k) Amount payable to vendors 14.6 0
GEL group has an amount payable in foreign currency to certain vendors, which is outstanding for
more than 3 years. The Group has applied for condonation of delay with the Reserve Bank of India.
Total exposure 2,067.8 1,743.0
17 ASSOCIATES (CONTINUED)
During the financial year, the Group had undertaken the impairment assessment of its investment in Gama Enerji following an
impairment indicator arising from the adverse foreign exchange movements which resulted in volatility of electricity prices and fuel
prices and translation losses arising from borrowings denominated in foreign currencies. An impairment charge of RM498.0 million
was recognised for the carrying amount of Gama Enerji as at 31 December 2018 as its recoverable amount is lower than its carrying
amount.
The recoverable amount was determined based on VIU calculation, which apply a discounted cash flow model based on management’s
forecasts and projections. These forecasts and projections reflect management’s expectations based on the current assessment of
macroeconomics trends, currency movement, expectations of market growth and industry growth as benchmarked with external
sources.
The Group’s review includes impact assessment of changes in key assumptions. The effect of the movement in the key assumptions
to the recoverable amount is as follows:
Impact to
recoverable amount
Changes in Increase Decrease
Key assumptions: assumptions RM’million RM’million
During the financial year, the Group had undertaken the test of impairment of its investment in GEL following an impairment indicator
arising from the delay in commencement of operations for certain power plants in GEL group and the shortage of fuel supply. An
impairment loss of RM304.7 million was required for the carrying amount of GEL as at 31 December 2018 as its recoverable amount
is lower than its carrying amount.
The recoverable amount was determined based on VIU calculation, which apply a discounted cash flow model of GEL for the period
of the remaining useful lives of the respective power plants of the group which range between 15 to 40 years. The cash flows used
are the most recent forecast and projections approved by management of GEL.
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17 ASSOCIATES (CONTINUED)
The cash flows are discounted using cost of equity based on the risk specific to the investments. The key assumptions take into
account the macroeconomic environment in India.
The Group’s review includes impact assessment of changes in key assumptions. The effect of the movement in the key assumptions
to the recoverable amount is as follows:
Impact to
recoverable amount
Changes in Increase Decrease
Key assumptions: assumptions RM’million RM’million
18 GOODWILL ON CONSOLIDATION
Accounting Policy
Goodwill arises from a business combination and represents the excess of the aggregate of fair value of consideration transferred,
the amount of any non-controlling interest in the acquiree and the fair value of any previous equity interest in the acquiree over the
fair value of the net identifiable assets acquired and liabilities assumed on the acquisition date. If the fair value of consideration
transferred, the amount of non-controlling interest and the fair value of previously held interest in the acquiree are less than the fair
value of the net identifiable assets of the acquiree, the resulting gain is recognised in profit or loss.
Goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be
impaired, and carried at cost less accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a
business combination is allocated to each of the cash generating units (‘CGU’s), or groups of CGUs, that is expected to benefit
from synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within
the entity at which the goodwill is monitored for internal management purposes. The carrying value of goodwill is compared to
the recoverable amount, which is the higher of value in use and the fair value less costs of disposal. Any impairment is recognised
immediately to the statement of profit or loss and is not subsequently reversed. Gains and losses on the disposal of an entity include
the carrying amount of goodwill relating to the entity disposed.
Group
31.12.2018 31.12.2017
RM’million RM’million
Annual impairment test is conducted on the Group as a whole excluding its operations and investments in overseas, as it is treated as a
CGU. No impairment loss was required as at 31 December 2018 as the recoverable amount exceeded the carrying amount.
The recoverable amount of the CGU including goodwill, is determined based on its VIU. This VIU calculation applies a discounted cash
flow model using cash flow projection based on forecast approved by management covering a five-year period. The forecast reflects
management’s expectation of revenue growth, operating costs and margins for the Group based on current assessment of market share,
expectations of market growth and industry growth. Cash flows beyond the fifth year are extrapolated using an estimated terminal growth
rate.
The discount rate applied to the cash flow forecast refers to the industry’s pre-tax Weighted Average Cost of Capital (‘WACC’).
The following key assumptions have been applied in the VIU calculation:
31.12.2018 31.12.2017
% %
The Group’s review includes an impact assessment of changes in key assumptions used. Based on the sensitivity analysis performed,
it was concluded that no reasonable change in the base case assumptions would cause the carrying amount of the CGU to exceed its
recoverable amount.
No impairment assessment performed on goodwill which arose from the acquisition of the newly acquired foreign subsidiaries as the
amount is not material.
Accounting Policy
Investment in unquoted debt security is a financial instrument and the accounting policy is disclosed in Note 45.
Group Company
31.12.2018 31.12.2017 31.12.2018 31.12.2017
RM’million RM’million RM’million RM’million
The PEC earns interest of 8.0% (FPE 31.12.2017: 8.0%) per annum and has a maturity period of 12 years.
Credit risks relating to debt instruments above are disclosed in Note 45(b) to the financial statements.
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20 DEFERRED TAXATION
Accounting Policy
Deferred tax is recognised on temporary difference arising between the tax bases of assets and liabilities and their carrying amounts
in the financial statements including those arising from business combinations. Deferred tax is not recognised on goodwill and
those arising from initial recognition of an asset or liability which at the time of the transaction affects neither accounting nor taxable
profit or loss.
Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible
temporary differences, unused tax losses and unutilised tax credits can be utilised. Deferred tax is recognised on temporary
differences arising on investment in subsdiaries, joint ventures and associates except where the timing of the reversal of the
temporary difference can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
Under the Malaysia Finance Act 2018 which was gazetted on 27 December 2018, the Group’s unutilised tax losses with no expiry
period amounting to RM2,598.3 million as at 31 December 2018 will be imposed with a time limit of utilisation. Any accumulated
unutilised tax losses brought forward from year of assessment 2018 can be carried forward for another 7 consecutive years of
assessment (i.e. from year of assessments 2019 to 2025).
Tax benefit from reinvestment allowance is recognised when the tax credit is utilised and no deferred tax asset is recognised when
the tax credit is receivable.
Deferred tax is measured at the tax rates (and laws) that have been enacted or substantially enacted at the end of the reporting
period and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax
liabilities and when the deferred taxes relate to the same tax authority. The following amounts, determined after appropriate offsetting, are
shown in the statement of financial position:
Group Company
31.12.2018 31.12.2017 1.9.2017 31.12.2018 31.12.2017
(Restated) (Restated)
RM’million RM’million RM’million RM’million RM’million
The movements during the financial year/period relating to deferred tax are as follows:
Group Company
31.12.2018 31.12.2017 31.12.2018 31.12.2017
(Restated)
RM’million RM’million RM’million RM’million
Group Company
31.12.2018 31.12.2017 1.9.2017 31.12.2018 31.12.2017
(Restated) (Restated)
RM’million RM’million RM’million RM’million RM’million
The amount of deductible temporary differences, unused tax losses, reinvestment allowance and investment tax allowance for which no
deferred tax asset is recognised in the statement of financial position are as follows:
Group Company
31.12.2018 31.12.2017 1.9.2017 31.12.2018 31.12.2017
(Restated) (Restated)
RM’million RM’million RM’million RM’million RM’million
Accounting Policy
Long term receivables is a financial instrument and the accounting policy is disclosed in Note 45.
Group Company
31.12.2018 31.12.2017 31.12.2018 31.12.2017 1.9.2017
Note (Restated) (Restated)
RM’million RM’million RM’million RM’million RM’million
Financial assets:
- Other receivables (a) 102.7 249.5 86.1 197.0 200.6
Non-financial assets:
- Advance payment to contractors (b) 292.8 319.0 0 0 0
- Indirect tax (c) 850.0 260.9 174.4 0 0
1,245.5 829.4 260.5 197.0 200.6
(a) Included in the Group and Company are advances given to staff and other non-trade receivables, which are not expected to be
received within 12 months from the statement of financial position date.
In the previous financial period/year, other debtors include loans to students. These balances have been reclassified to FVTPL on
adoption of MFRS 9.
(b) Advance payment to contractors primarily relates to construction of plants which will be utilised against milestone payment invoices,
which is more than 12 months.
(c) Included in the Group and Company are indirect tax receivables which are not expected to be received within 12 months from the
statement of financial position date.
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Company
31.12.2018 31.12.2017 1.9.2017
Note (Restated) (Restated)
RM’million RM’million RM’million
Non-current
Amounts due from subsidiaries 2,494.6 2,467.1 3,460.0
Less: Loss allowances (1,442.6) (1,253.7) (1,250.2)
(a) 1,052.0 1,213.4 2,209.8
Current
Amounts due from subsidiaries 4,674.7 4,990.9 3,906.0
Less: Loss allowances (971.8) (804.0) (808.7)
(b) 3,702.9 4,186.9 3,097.3
(a) Amount due from SESB is subject to interest rates of 6.0% (FPE 31.12.2017: 6.0%) per annum, is unsecured and has no fixed term
of repayment.
Amount due from KEV relating to the Redeemable Unsecured Loan Stocks (‘RULS’) bears interest at 8.0% (FPE 31.12.2017: 8.0%)
per annum on the outstanding nominal value of the principal. The principal and interest due from KEV are amounting to RM744.6
million (FPE 31.12.2017: RM781.4 million). Refer to Note 36(c) for the RULS terms.
(b) Amounts due from/(to) all subsidiaries are classified as current are unsecured, interest free and repayable on demand.
23 FINANCE LEASES
Accounting Policy
A lease is an agreement whereby the lessor conveys to the lessee in return for a payment, or series of payments, the right to use
an asset for an agreed period of time.
The Group and Company enter into lease agreements as lessees for certain PPE. Leases of PPE where the Group and Company
have substantially transferred all the risks and rewards of ownership (i.e. the Group is the lessor), and leases of PPE where the
lessors have substantially transferred all the risks and rewards of ownership to the Group and Company (i.e. the Group is the
lessee), are classified as finance leases.
When assets are leased out under finance lease, the Group derecognises the leased asset and recognises the net investment in
the lease as a receivable. The difference between the gross receivable and the present value of the receivable is recognised as
unearned finance income. Lease income is recognised over the term of the lease using the net investment method, which reflects
a constant periodic rate of return.
When external assets are leased, finance leases are capitalised at the leases’ commencement at the lower of the fair value of the
leased assets and the present value of the minimum lease payments. Each lease payment is allocated between the liability and
finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of
finance charges, are included in other short term and long term payables. The interest element of the finance cost is charged to
the statement of profit or loss within finance cost over the lease period so as to produce a constant periodic rate of interest on the
remaining balance of the liability for each period. The PPE acquired under finance leases are depreciated or amortised over the
lease term. Initial direct costs incurred by the Group in negotiating and arranging finance leases are added to the carrying amount
of the leased assets and recognised as an expense in the statement of profit or loss over the lease term on the same basis as the
lease expense.
The Group’s finance lease receivables arises predominantly from a Cooling Energy Supply Agreement (‘CESA’). This CESA is
accounted for as a finance lease in accordance with IC 4 and MFRS 117.
Group
Minimum Present value of minimum
lease payments lease payments
31.12.2018 31.12.2017 31.12.2018 31.12.2017
RM’million RM’million RM’million RM’million
The effective interest rate implicit in the finance lease is approximately 9.5% (FPE 31.12.2017: 9.5%). The carrying amount of the
finance lease receivable approximate to its fair value.
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Group Company
Note 31.12.2018 31.12.2017 31.12.2018 31.12.2017
RM’million RM’million RM’million RM’million
(i) The Group and Company’s obligations under finance lease liabilities arise predominantly from the power purchase agreements
with several IPPs. These power purchase agreements are accounted for as a finance lease in accordance with IC 4 and MFRS 117.
Group Company
31.12.2018 31.12.2017 31.12.2018 31.12.2017
RM’million RM’million RM’million RM’million
The finance charges associated with the finance leases were charged to the statement of profit or loss in the financial year/
period in which they were actually incurred. As at 31 December 2018, the net book value of assets under finance leases for the
Group and Company are as disclosed in Note 14 to the financial statements. The fair value of the finance lease liabilities are
RM5,213.8 million (FPE 31.12.2017: RM6,808.8 million) for the Group and RM18,435.7 million (FPE 31.12.2017: RM19,486.5
million) for the Company.
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(ii) This represents future instalments under hire purchase of motor vehicles, repayable as follows:
Group
31.12.2018 31.12.2017
RM’million RM’million
Hire purchase liabilities are effectively secured as the rights to the assets revert to the lessors in the event of default.
The weighted average effective interest rate applicable to the lease liabilities as at the financial year end is 5.1% (FPE 31.12.2017:
5.1%) per annum and interest for the financial year is at 2.7% (FPE 31.12.2017: 2.7%) per annum for the Group. The carrying
amounts of the hire purchase payables approximate to their fair values.
Accounting Policy
Operating leases - where the Group and Company are the lessees
Leases where substantially all of the risks and rewards of ownership are not transferred to the Group are classified as operating
leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the statement of profit
or loss within other operating expenses on the straight line basis over the period of the lease.
Operating leases - where the Group and Company are the lessor
Leases where substantially all of the risks and rewards of ownership are not transferred to the lessee (i.e. the Group is a lessor) are
classified as operating leases. Payments received under operating leases that relate to sales of electricity are recognised in the
statement of profit or loss within revenue on the straight line basis over the period of the lease. All other payments received under
operating leases are presented in the statement of profit or loss within other operating income.
Group Company
31.12.2018 31.12.2017 31.12.2018 31.12.2017
RM’million RM’million RM’million RM’million
Non-current
Prepaid operating leases 5,944.1 5,505.2 5,934.9 5,417.0
Current
Prepaid operating leases 164.8 146.2 156.5 137.6
Payments made in advance to IPPs are primarily to reserve generating capacity for future goods and services. There is no contractual
right to receive a refund in cash or another financial instrument from the IPPs.
Group Company
31.12.2018 31.12.2017 31.12.2018 31.12.2017
RM’million RM’million RM’million RM’million
Non-current
Lease payables* (Note 38) 139.3 128.6 157.5 140.0
Prepayment by lessee** (Note 38) 215.9 301.9 0 0
355.2 430.5 157.5 140.0
Current
Lease payables* (Note 32) 15.6 12.2 15.6 12.2
Prepayment by lessee** (Note 32) 32.4 39.4 0 0
48.0 51.6 15.6 12.2
* The Group and Company as lessees
** The Group as lessor
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Accounting Policy
Financial assets at FVOCI or previously classified as available-for-sale financial assets are financial instruments and the accounting
policy is disclosed in Note 45.
Group Company
31.12.2018 31.12.2017 31.12.2018 31.12.2017
RM’million RM’million RM’million RM’million
The Group and Company have irrevocably elected non-trading equity securities above at initial recognition to present its fair value changes
in OCI. The Group and Company consider this classification to be more relevant as these instruments are strategic investments of the
Group and Company and not held for trading purposes. Previously, these investments were classified as available-for-sale.
During the finanical year, no dividend income was recognised and no investment was disposed.
Group Company
Fair value at Fair value at
31.12.2018 31.12.2018
RM’million RM’million
26 CONTRACT BALANCES
Accounting Policy
With the adoption of MFRS 15, contract balances are disclosed separately in the statement of financial position.
A contract asset is recognised when the Group and Company’s right to consideration is conditional on something other than
the passage of time. A contract asset is subject to impairment in accordance to MFRS 9 (Note 45). Typically, the amount will be
billed within 30 days of the supply of electricity for electricity customers and 60 to 180 days from satisfying the performance
obligation for other revenue streams. The amounts of the electricity supplied before the bills are issued is recognised as
contract asset. Payment is expected within 30 days from the billing date for all trade receivables.
A contract liability represents the obligation of the Group and Company to transfer goods or services to a customer for which
consideration has been received (or the amount is due) from the customers.
Contract liabilities primarily relate to contributions paid in advance by electricity customers for the construction of electricity
network assets. The customers’ contribution are expected to be recognised as revenue over a period of 20 years, being the
estimated average useful life of the electricity network assets used to connect the customers to the electricity supply. Other
contract liabilities within the Group are relating to students fees. All other contract liabilities are expected to be recognised as
revenue over the next 12 months.
The Group and Company have recognised the following assets and liabilities related to contracts with customers:
Group Company
31.12.2018 31.12.2017 31.12.2018 31.12.2017
Note (Restated) (Restated)
RM’million RM’million RM’million RM’million
The Group and Company have recognised the following assets and liabilities related to contracts with customers: (continued)
Group Company
31.12.2018 31.12.2017 31.12.2018 31.12.2017
Note (Restated) (Restated)
RM’million RM’million RM’million RM’million
Group Company
31.12.2018 31.12.2017 1.9.2017 31.12.2018 31.12.2017 1.9.2017
(Restated) (Restated) (Restated) (Restated)
RM’million RM’million RM’million RM’million RM’million RM’million
In addition to the contract balances disclosed above, the Group and Company have also recognised assets in relation to costs to
fulfil a contract.
Group
31.12.2018 31.12.2017
(Restated)
RM’million RM’million
Contract assets have increased as the Group and Company have provided more services ahead of the agreed payment schedules
for fixed-price contracts. The Group and Company also recognised a loss allowance for contract assets following the adoption of
MFRS 9, see Note 45(b)(i) for further information.
Contract liabilities have increased for the Group and Company due to larger prepayments or contributions received from customers.
The following table shows how much of the revenue recognised in the current financial year/period relates to carried-forward contract
liabilities and how much relates to performance obligations that were satisfied in a prior financial year/period:
Group Company
Financial Financial Financial Financial
year ended period ended year ended period ended
31.12.2018 31.12.2017 31.12.2018 31.12.2017
(Restated) (Restated)
RM’million RM’million RM’million RM’million
The following table shows unsatisfied performance obligations resulting from long term contracts:
Group Company
31.12.2018 31.12.2017 31.12.2018 31.12.2017
RM’million RM’million RM’million RM’million
Management expects 8.8% of the transaction price allocated to the unsatisfied contracts as at 31 December 2018 will be recognised as
revenue during the next financial year. The remaining 91.2% will be recognised from FY2020 to FY2039.
All contracts for periods of one year or less are billed based on services provided. As permitted under MFRS 15, the transaction price
allocated to these unsatisfied contracts is not disclosed.
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Accounting Policy
Financial assets at FVTPL is a financial instrument and the accounting policy is disclosed in Note 45.
Group Company
31.12.2018 31.12.2017 31.12.2018 31.12.2017
RM’million RM’million RM’million RM’million
Financial assets at FVTPL represents investments in unit trusts and students’ loan.
Note 47 explains the changes in accounting policy and reclassification of certain financial assets from loans and receivables to FVTPL
following the adoption of MFRS 9.
Credit risks relating to financial assets at FVTPL are disclosed in Note 45(b) to the financial statements.
Accounting Policy
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured
at their fair value at the end of each reporting period.
Fair value changes on derivatives that are not designated or do not qualify for hedge accounting are recognised in the statement of
profit or loss when the changes arise.
National
Note amount Assets Liabilities
RM’million RM’million RM’million
31.12.2017
Group
Forward foreign currency contracts - current (a) 975.1 0 (47.3)
Company
Forward foreign currency contracts - current (d) 19.8 0 (0.2)
(a) The Group entered into forward foreign currency contracts with forward rates ranging from RM4.1627 to RM4.4100 (FPE 31.12.2017:
RM4.0880 to RM4.4100) for 1 US Dollar, RM3.6540 to RM3.7890 (FPE 31.12.2017: RM3.6209 to RM3.8271) for 100 Japanese Yen
and NIL (FPE 31.12.2017: RM4.8736) for 1 Euro.
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(b) The Group entered into two Interest Rate Swap (‘IRS’) contracts transaction that entitled the Group to received interest at floating
rates, and oblige to pay interest at fixed rate of 1.3% and 1.7% on aggregate notional principal of GBP30.7 million and GBP89.3
million respectively.
(c) The put option is a right to sell back an asset as a protection to the Group against any unfulfilment in the stipulated conditions of
agreements entered from the acquisition of GVO and BCL.
(d) The Company entered into forward foreign currency contracts with forward rates RM4.0889 for 1 US Dollar.
Credit risks relating to derivations are disclosed in Note 45(b) to the financial statements.
29 INVENTORIES
Accounting Policy
Inventories are stated at the lower of cost and net realisable value.
Cost of work-in-progress and finished goods comprise raw materials, direct labour and a proportion of the production overheads.
Cost is determined on the weighted average basis and comprises all costs of purchase and other costs incurred in bringing the
inventories to their present location and condition.
Net realisable value is the estimated selling price in the ordinary course of business, less the costs of completion and selling expenses.
Group Company
31.12.2018 31.12.2017 31.12.2018 31.12.2017
RM’million RM’million RM’million RM’million
Accounting Policy
Trade and other receivables are amounts due from customers for goods sold or services performed in the ordinary course of
business. Other receivables generally arise from transactions outside the usual operating activities of the Group and Company. If
collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current
assets. If not, they are presented as non-current assets.
Trade and other receivables are recognised initially at fair value, which is the amount of consideration that is unconditional unless
they contain significant financing components. The Group and Company hold the trade receivables with the objective to collect
the contractual cash flows and therefore measures them subsequently at amortised cost less accumulated impairment losses. The
impairment is determined based on the expected credit loss (‘ECL’) model and is further disclosed in Note 45.
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Group Company
31.12.2018 31.12.2017 1.9.2017 31.12.2018 31.12.2017 1.9.2017
(Restated) (Restated) (Restated) (Restated)
RM’million RM’million RM’million RM’million RM’million RM’million
The Group and Company’s credit policy provides trade receivables with a 30 days (FPE 31.12.2017: 30 days) credit period.
Credit risks relating to receivables are disclosed in Note 45(b)(i) to the financial statements.
Included in other receivables of the Group and Company are amounts due from the Government amounting to RM1,670.9 million under
the ICPT mechanism.
Accounting Policy
For the purpose of the consolidated statement of cash flows, cash equivalents are held for the purpose of meeting short term cash
commitments rather than for investment or other purposes. Cash and cash equivalents comprise cash in hand, deposits held at
call with financial institutions, other short term investments with original maturity of 3 months or less that are readily convertible to
known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. In the statement of
financial position, bank overdrafts are shown within borrowings in current liabilities.
Group Company
31.12.2018 31.12.2017 31.12.2018 31.12.2017
RM’million RM’million RM’million RM’million
The interest rates per annum of bank balances and deposits with licensed banks that were effective as at the end of the reporting date
were as follows:
Group Company
31.12.2018 31.12.2017 31.12.2018 31.12.2017
% % % %
Bank balances 0.1 - 3.3 0.1 - 3.3 0.1 - 3.3 0.1 - 3.3
Deposits with licensed banks 0.8 - 4.1 1.4 - 4.0 0.8 - 3.0 1.5 - 1.7
Deposits with licensed banks have maturity periods ranging from 1 to 90 days (31.12.2017: 14 to 90 days) for the Group and 1 to 85 days
for the Company (31.12.2017: 32 to 90 days).
Group Company
31.12.2018 31.12.2017 31.12.2018 31.12.2017
RM’million RM’million RM’million RM’million
Cash and cash equivalents at the end of the financial year/period comprise:
Cash in hand and at bank 3,430.1 1,488.0 1,798.9 361.0
Deposits with licensed banks 5,240.7 3,927.0 4,053.5 2,640.3
Deposits, bank and cash balances 8,670.8 5,415.0 5,852.4 3,001.3
Debt reserve account* (Note 36(b)(iii)) (246.0) (249.8) 0 0
Cash at bank held in trust** (248.9) (289.8) 0 0
Restricted cash (16.3) 0 0 0
Deposits with maturity 90 days and more (561.0) 0 0 0
Total cash and cash equivalents at the end of the financial year/period 7,598.6 4,875.4 5,852.4 3,001.3
* Debt reserve account relate to deposits placed with licensed financial institutions as part of security obligations for bond financing.
** The cash at bank held in trust is in respect of grants received from the Government of Malaysia by a subsidiary for designated capital
projects.
32 PAYABLES
Accounting Policy
Trade and other payables are obligations to pay for goods or services that have been acquired in the ordinary course of business
from suppliers. Other payables generally arise from transactions outside the usual operating activities of the Group. Trade and other
payables are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business
if longer). If not, they are presented as non-current liabilities.
Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost, which is the fair value of
the consideration to be paid in the future for the goods and services received.
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that
an outflow of resources will be required to settle the obligation and a reliable estimate of the amount can be made.
Where the Group expects a provision to be reimbursed by another party, the reimbursement is recognised as a separate asset but only
when the reimbursement is virtually certain. Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering
the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included
in the same class of obligations may be small.
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32 PAYABLES (CONTINUED)
Group Company
31.12.2018 31.12.2017 1.9.2017 31.12.2018 31.12.2017
(Restated) (Restated)
RM’million RM’million RM’million RM’million RM’million
Included in trade payables of the Group and Company are obligations amounting to RM662.3 million (FPE 31.12.2017: RM1,032.6 million)
relating to the Electricity Industry Fund under IBR mechanism.
Credit terms of trade payables of the Group and Company vary from 30 to 60 days (FPE 31.12.2017: 30 to 60 days) depending on the terms
of the contracts.
Included in provisions is an accrual amounting to RM124.1 million in relation to project management and consultancy services payable to
NCI of a subsidiary.
The loss allowance on financial guarantee contracts are mainly from financial guarantee provided by the Company to an associate arising
from the ECL model (Note 45(b)(iv)).
33 EMPLOYEE BENEFITS
Accounting Policy
Wages, salaries, paid annual leave, bonuses, and non-monetary benefits that are expected to be settled wholly within 12
months after the end of the period in which the employees render the related services are recognised in respect of employees’
services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are
settled.
The Group and Company have various post-employment benefit schemes which are either defined contribution or defined
benefit plans. A defined contribution plan is a pension plan under which the Group and Company pay fixed contributions
into a separate entity (a fund) on a mandatory, contractual or voluntary basis and the Group and Company have no legal or
constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees benefits
relating to employee service in the current and prior periods.
The Group and Company’s contributions to the defined contribution plans are charged to the statement of profit or loss in the
financial year to which they relate. Once the contributions have been paid, the Group and Company have no further payment
obligations.
The Group and Company make contributions to the Company’s Retirement Benefit Plan, a defined benefit plan and approved
fund independent of the Company’s finances. A book provision is also provided by the Group and Company as the contribution
rate required to fund the benefits under the said plan is in excess of the Inland Revenue maximum limit. The Group and
Company also provide for a Post-Retirement Medical Plan for certain employees, which is unfunded.
The liability in respect of a defined benefit plan is the present value of the defined benefit obligation at the statements of
financial position date minus the fair value of plan assets. The Group and Company determine the present value of the defined
benefit obligation and the fair value of any plan assets with sufficient regularity such that the amounts recognised in the
financial statements do not differ materially from the amounts that would be determined at the end of reporting date.
The defined benefit obligation, calculated using the Projected Unit Credit Method, is determined by an independent actuarial
firm, considering the estimated future cash outflows using market yields at statement of financial position date of high-quality
corporate bonds which have currency and terms to maturity approximating the terms of the related liability.
The current service cost of the defined benefit plan reflects the increase in the defined benefit obligation resulting from
employee service in the current year. It is recognised in the statement of profit or loss in employee benefits expense.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefits obligation and the
fair value of plan assets. This cost is included in employee benefit expense in the statement of profit or loss. Actuarial gains
and losses arising from experience adjustments and changes in actuarial assumptions are recognised directly to the OCI in the
period in which they arise. The actuarial gains and losses are not subsequently reclassified to the statement of profit or loss.
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The Group and Company operate a final salary defined benefit plan. The benefit is made as lump sum payment at
retirement or earlier exits due to death and early retirement. The RBTF has been closed to new entrants since January
2008. Currently, there is no minimum funding requirement under the law.
The RBTF exposes the Group and Company to risks from interest rates from defined benefit being greater than expected
due to assumptions such as salary increment or turnover rates not being borne out. The RBTF is also exposed to
investment risks in relation to the assets of the plan.
The funding of the RBTF is based on recommendation of the actuary and approved by the Group and Company. The
contribution by the Group and Company is based on 7.0% of the annual basic salaries of the members. The employees
are not required to contribute to the plan.
The Group and Company expect to contribute 6.0% of the annual basic salaries of members to the plan in the next financial
year.
The Group and Company operate a post-retirement medical benefits plan in Malaysia. The PRMBS is closed to new
entrants. There is no minimum funding requirement under the current law. The PRMBS is unfunded.
The PRMBS exposes the Group and Company to risk from interest rates and from defined benefit being greater than
expected due to assumptions such as projection of medical benefit costs and mortality not being borne out.
There has not been any settlement or curtailment during the current financial year.
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Group
At 1 January 2018 2,786.3 (1,600.5) 1,185.8 10,599.3 11,785.1
Included in profit or loss
Current service costs 113.9 0 113.9 0 113.9
Interest cost/(income) 132.4 (80.7) 51.7 561.8 613.5
246.3 (80.7) 165.6 561.8 727.4
Included in OCI
Remeasurement of loss (Note 11):
- Actuarial (loss)/gain arising from:
- financial assumptions (16.9) 0 (16.9) 225.0 208.1
- experience assumptions 20.7 0 20.7 (67.4) (46.7)
- Return on plan assets excluding interest income 0 58.9 58.9 0 58.9
3.8 58.9 62.7 157.6 220.3
Others
Contribution paid by the employer 0 (361.8) (361.8) 0 (361.8)
Benefits paid (377.7) 375.0 (2.7) (460.1) (462.8)
(373.9) 72.1 (301.8) (302.5) (604.3)
At 31 December 2018 2,658.7 (1,609.1) 1,049.6 10,858.6 11,908.2
Group
At 1 September 2017 2,804.0 (1,562.5) 1,241.5 10,395.7 11,637.2
Included in profit or loss
Current service costs 39.2 0 39.2 0 39.2
Interest cost/(income) 46.6 (26.5) 20.1 189.5 209.6
85.8 (26.5) 59.3 189.5 248.8
Included in OCI
Remeasurement of loss (Note 11):
- Actuarial gain arising from financial assumptions 0 0 0 138.8 138.8
- Return on plan assets excluding interest income 0 0.4 0.4 0 0.4
0 0.4 0.4 138.8 139.2
Others
Contribution paid by the employer 0 (113.7) (113.7) 0 (113.7)
Benefits paid (103.5) 101.8 (1.7) (124.7) (126.4)
(103.5) (11.5) (115.0) 14.1 (100.9)
Company
At 1 January 2018 2,749.1 (1,600.9) 1,148.2 10,170.6 11,318.8
Included in profit or loss
Current service costs 95.0 0 95.0 0 95.0
Interest cost/(income) 130.9 (80.7) 50.2 538.4 588.6
225.9 (80.7) 145.2 538.4 683.6
Charged to subsidiaries 15.7 0 15.7 0 15.7
241.6 (80.7) 160.9 538.4 699.3
Included in OCI
Remeasurement of loss (Note 11):
- Actuarial (loss)/gain arising from:
- financial assumptions (16.5) 0 (16.5) 75.5 59.0
- experience assumptions 20.7 0 20.7 (71.9) (51.2)
- Return on plan assets excluding interest income 0 58.9 58.9 0 58.9
4.2 58.9 63.1 3.6 66.7
Others
Contribution paid by the employer 0 (361.8) (361.8) 0 (361.8)
Benefits paid (375.0) 375.0 0 (443.2) (443.2)
(370.8) 72.1 (298.7) (439.6) (738.3)
At 31 December 2018 2,619.9 (1,609.5) 1,010.4 10,269.4 11,279.8
Company
At 1 September 2017 2,767.2 (1,562.5) 1,204.7 9,976.1 11,180.8
Included in profit or loss
Current service costs 32.2 0 32.2 0 32.2
Interest cost/(income) 46.0 (26.5) 19.5 181.7 201.2
78.2 (26.5) 51.7 181.7 233.4
Charged to subsidiaries 5.5 0 5.5 0 5.5
83.7 (26.5) 57.2 181.7 238.9
Included in OCI
Remeasurement of loss (Note 11):
- Actuarial gain arising from financial assumptions 0 0 0 131.3 131.3
Others
Contribution paid by the employer 0 (113.7) (113.7) 0 (113.7)
Benefits paid (101.8) 101.8 0 (118.5) (118.5)
(101.8) (11.9) (113.7) 12.8 (100.9)
At 31 December 2017 2,749.1 (1,600.9) 1,148.2 10,170.6 11,318.8
The latest actuarial revaluation for RBTF and PRMBS was carried out in February 2019. The principal actuarial assumptions used in
respect of defined benefit plans were as follows:
Group Company
RBTF PRMBS RBTF PRMBS
% % % %
31.12.2018
Discount rates 5.0 - 13.3 5.4 - 5.5 5.2 5.4
Salary increment rate 5.0 - 13.3 N/A 7.0 N/A
Medical cost inflation:
- Inpatient N/A 5.5 N/A 5.5
- Outpatient N/A 4.5 - 5.8 N/A 4.5
Others:
- Specialist N/A 4.5 N/A 4.5
- Dialysis N/A 5.5 N/A 5.5
31.12.2017
Discount rates 5.0 - 7.8 5.4 - 5.5 5.1 5.4
Salary increment rate 5.0 - 7.8 N/A 7.0 N/A
Medical cost inflation:
- Inpatient N/A 5.5 N/A 5.5
- Outpatient N/A 5.8 N/A 5.8
Others:
- Specialist N/A 4.5 N/A 4.5
- Dialysis N/A 5.5 N/A 5.5
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The effect of a 1.0% movement in the key assumptions to the defined benefit obligation balances are as follows:
RBTF PRMBS
Increase Decrease Increase Decrease
RM’million RM’million RM’million RM’million
Group
Medical cost trend rate N/A N/A 1,471.6 (1,232.2)
Discount rate (155.3) 173.6 (1,256.9) 1,533.2
Salary increment rate 158.9 (145.1) N/A N/A
Company
Medical cost trend rate N/A N/A 1,374.5 (1,153.3)
Discount rate (155.3) 173.6 (1,176.9) 1,432.7
Salary increment rate 158.9 (145.1) N/A N/A
The sensitivity analysis has been provided based on membership data as at 31 December 2018 and considered a change of each principal
assumption in isolation. The method and types of assumptions used in preparing the sensitivity analyses did not change compared to the
previous period.
The weighted average duration of the Group and Company’s liability is estimated at approximately 7 and 14 years for RBTF and
PRMBS respectively.
The plan assets for RBTF did not include any ordinary share of the Company.
The Group and Company’s RBTF are conditional on future employment of the members of the plan. The Group and Company’s PRMBS is
not conditional on future employment and has been fully vested as at 31 December 2018.
34 CONSUMER DEPOSITS
Consumers (with the exception of employees and government departments/agencies) are required to deposit a sum sufficient to cover
charges for two months supply of energy as allowed under the regulation of the Licensee Supply (Amendment) regulations 2002. In default
of payment of the deposit within the time specified, the supply to the consumer’s installation may be disconnected, subject to certain
conditions laid out in the regulations.
In January of every calender year, the Company and SESB pay an interest of 2.5% per annum on the amount of cash deposits.
Consumer deposits are classified as current liabilities as the amounts shall be refunded within 30 days upon request for termination of
electricity supply by the consumer.
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Accounting Policy
Borrowings are recognised initially at fair value, net of transaction costs incurred. In subsequent periods, borrowings are stated at
amortised cost using the effective interest method, any differences between proceeds (net of transaction costs) and the redemption
value are recognised in the statement of profit or loss over the period of the borrowings.
Borrowings are classified as current liabilities unless the Group and Company have an unconditional right to defer settlement of the
liability for at least 12 months after the statement of financial position date.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that
some or all of the facilities will be drawdown. In this case, the fee is deferred until the drawdown occurs.
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that
necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets,
until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in the
statement of profit or loss in the period in which they are incurred.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is
deducted from the borrowing costs eligible for capitalisation.
Group Company
31.12.2018 31.12.2017 31.12.2018 31.12.2017
RM’million RM’million RM’million RM’million
The short term borrowings carry interest at rates ranging from 0.8% to 10.2% (FPE 31.12.2017: 0.8% to 8.2%) per annum for the Group
and from 0.8% to 8.0% (FPE 31.12.2017: 0.8% to 7.5%) per annum for the Company.
About TNB Performance Review Financial Statements
Tenaga Nasional Berhad
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36 BORROWINGS
Accounting Policy
Group Company
31.12.2018 31.12.2017 31.12.2018 31.12.2017
RM’million RM’million RM’million RM’million
Secured:
- Term loans (Note (a)) 2,750.1 1,955.8 0 0
- Bonds (Note (b)) 21,357.2 22,115.9 0 0
24,107.3 24,071.7 0 0
Unsecured:
- Term loans (Note (a)) 6,700.4 6,664.3 6,578.0 6,562.5
- Bonds (Note (b)) 16,052.2 9,784.5 15,059.0 8,785.6
- Redeemable Unsecured Loan Stocks (Note (c)) 513.4 520.9 0 0
23,266.0 16,969.7 21,637.0 15,348.1
47,373.3 41,041.4 21,637.0 15,348.1
Group
31.12.2018 31.12.2017
RM’million RM’million
36 BORROWINGS (CONTINUED)
(i) The Federal Government loans obtained by SESB are secured by the following:
• A debenture creating:
- a first fixed charge over all present and future freehold and leasehold properties including all buildings and fixtures;
and
- a first floating charge over all present and future assets of SESB not effectively charged by way of the fixed charge.
• A deed of assignment transferring all SESB’s present and future rights and interests in all sales proceeds or revenue
derived from the sale of electricity generated from the projects funded.
• A deed of assignment transferring all SESB’s present and future rights and interests in the bank accounts in which the loan
proceeds are credited.
The tenure of the loans ranges from 20 to 25 years with a profit rate of between 0% to 4.0% per annum.
On 20 December 2010, TNB Engineering Corporation Sdn. Bhd. (‘TNEC’) entered into a 15-year RM73.3 million secured loan,
paying interest at a fixed rate of 5.9%. The loan will mature on 24 December 2025. The principal is payable in 12 annual
instalments.
The term loan is secured by a corporate guarantee from the Company. The term loan also requires TNEC to comply with certain
affirmative and restrictive non-financial covenants.
On 30 March 2016, the Company entered into a 3-year USD300.0 million unsecured loan, paying interest at a floating interest
rate with margin of 0.7%. The loan will mature on 30 March 2019.
On 2 May 2017, Malaysia Transformer Manufacturing Sdn. Bhd. entered into a RM25.0 million unsecured loan, with a floating
interest rate of 1.6% plus prevailing Kuala Lumpur Interbank Offered Rate (‘KLIBOR’) to part finance the construction and
development of a new plant at Kapar, Klang.
On 19 July 2017, TNB Sepang Solar Sdn. Bhd. (‘TSS’) obtained a RM323.0 million Islamic facility agreement to finance the
construction of a 50MW solar power plant. The tenure of the facility agreement is up to 20 years with a periodic distribution rate
for pre Commercial Operation Date (‘COD’) (KLIBOR+1.2%) and post COD (KLIBOR+1.3%) per annum.
On 23 March 2018, Tenaga Wind Ventures UK Ltd obtained bank loans and overdrafts which are secured by a fixed and floating
charge over the assets held by Tenaga Investments UK Ltd and Tenaga Wind Ventures UK Ltd (‘TWV’). TWV has bank loans
with Bayerische Landesbank for the amount of GBP119.1 million with a tenure of 15 years. The rate of interest is at a margin of
1.8% over LIBOR subject to interest rate swap agreements.
About TNB Performance Review Financial Statements
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36 BORROWINGS (CONTINUED)
(b) Bonds
On 25 November 2011, TNB Janamanjung Sdn. Bhd. (‘TNBJ’) obtained a RM4.9 billion Islamic Securities Programme to finance
the construction of a 1,010MW coal fired power plant. The tenure of the Islamic Securities Programme ranging from 5 to 20
years with profit rates between 3.8% and 4.9% per annum.
The Islamic Securities Programme was issued by Manjung Island Energy Berhad (‘MIEB’) which is a special purpose vehicle
company incorporated in Malaysia with a paid up ordinary share capital of RM2.00. All of the issued shares of MIEB are held by
Equity Trust (Malaysia) Berhad as share trustee for the benefit of certain specified charities, under the terms of a declaration of
trust.
The Islamic Securities Programme consists of 2 series and the details of the series are as follows:
• Series 1 consists of 15 tranches, with tenures ranging from 5 to 19 years.
• Series 2 consists of 1 tranche, with a tenure of 20 years.
The Islamic Securities Programme Series 2 is unsecured and has the benefit of unconditional and irrevocable guarantee from
the Company, to meet the payment obligations of TNBJ.
On 22 May 2013, TNB Northern Energy Berhad (‘TNEB’) entered into a RM1.6 billion sukuk facility agreement to finance the
construction of a 1,071MW gas fired power plant. The tenure of the facility agreement is 23 years with periodic distribution rates
between 3.6% and 4.8% per annum. The sukuk facility agreement consists of 39 tranches with tenures ranging from 4 to 23 years.
On 5 July 2013, Kapar Energy Ventures Sdn. Bhd. (‘KEV’) issued a sukuk facility based on the Shariah principles of Ijarah
(‘Sukuk Ijarah’) of RM2.0 billion in nominal value. The tenure of the sukuk ranging from 1 to 13 years with profit rates of 3.8%
to 5.0%.
On 24 January 2014, TNB Western Energy Berhad (‘TWEB’) entered into a RM3.7 billion sukuk facility agreement to finance the
construction of a 1,000MW coal fired power plant. The tenure of the facility agreement is 23 years with periodic distribution
rates between 5.1% and 5.8% per annum. The sukuk facility agreement consists of 20 tranches with tenures ranging from 10
to 20 years.
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36 BORROWINGS (CONTINUED)
On 4 December 2015, Jimah East Power Sdn. Bhd. (‘JEP’) issued a Sukuk Murabahah of RM9.0 billion nominal value. The
proceeds from the Sukuk Murabahah shall be utilised by JEP for shariah-compliant purposes in connection with the financing,
design, engineering, procurement, construction, installation, testing, commissioning, ownership, operation and maintenance
of a 2,000MW coal fired power plant and associated facilities, including the transmission line and interconnection facilities.
The tenure of the facility agreement is 23 years with periodic distribution rates between 5.0% and 6.8% per annum. The sukuk
facility agreement consists of 36 tranches with tenures ranging from 6 to 23 years.
On 3 August 2017, the Company issued RM2.0 billion Islamic Medium Term Note Sukuk Wakalah to finance capital expenditure,
investment, general corporate purpose, working capital requirements and equity injection into Tenaga Nasional Berhad’s power
plant projects. The issuance comprises RM500.0 million 15 years tranche and RM1.5 billion 20 years tranche, with periodic
distribution rates between 5.0% and 5.2% respectively.
On 29 August 2018, the Company issued a RM1.0 billion 15 years tranche and RM2.0 billion 20 years tranche, with a fixed
periodic distribution rate of 4.8% and 5.0% respectively.
On 19 October 2016, TNB Global Ventures Capital Berhad (‘TGVC’) established a USD2.5 billion Multi-Currency Medium Term
Note Sukuk Programme to provide flexibility to Tenaga Nasional Berhad fund raising exercise for its future investment.
The Sukuk Programme is unsecured and has the benefit of unconditional and irrecoverable guarantee from Tenaga Nasional
Berhad, to meet the payment obligations of TGVC.
On 19 October 2016, the Company issued a USD750.0 million sukuk with a tenure of 10 years with fixed periodic distribution
rate of 3.2%.
On 1 November 2018, the Company had a second issuance of USD750.0 million for 10 years with a periodic distribution rate of 4.9%.
On 31 October 2017, Southern Power Generation Sdn. Bhd. (‘SPG’) issued a Sukuk Wakalah of RM3.7 billion in nominal value. The
proceeds from the Sukuk Wakalah shall be utilised for the following shariah-compliant purposes in connection with the financing,
design, engineering, procurement, construction, installation, testing, commissioning, ownership, operation and maintenance of a
1,440MW coal-fired power plant and associated facilities, including the transmission line and interconnection facilities.
The tenure of the facility agreement is 18 years with a periodic distribution rate between 4.7% and 5.6% per annum. The sukuk
facility agreement consists of 28 tranches with tenures ranging from 4.5 years to 18 years.
(c) RULS
On 29 June 2004, KEV issued RM957.6 million of RULS to the Company and Malakoff Corporation Berhad to finance the acquisition
of Stesen Janaelektrik Sultan Salahuddin Abdul Aziz, Kapar.
36 BORROWINGS (CONTINUED)
Reconciliation of borrowings from financing activities during the financial year/period is as follows:
Group Company
31.12.2018 31.12.2017 31.12.2018 31.12.2017
RM’million RM’million RM’million RM’million
Accounting Policy
Grants from the government are recognised at their fair values where there is a reasonable assurance that the grants will be received
and the Group will comply with all attached conditions.
Government grants relating to costs are deferred and recognised in the statement of profit or loss over the period necessary to
match them with the costs they are intended to compensate.
Government grants relating to construction of PPE are included in non-current liabilities as deferred income and are credited to the
statement of profit or loss on the straight line method over the expected lives of the related assets.
A subsidiary of the Group obtained Government loans at an interest rate which is below the market rate of interest. The differential
between the initial carrying value of the loan based on market rate and the Government rate is recognised as a deferred income and
is credited to the statement of profit or loss over the period necessary to match the interest costs.
Group
31.12.2018 31.12.2017
RM’million RM’million
The development grants are provided by the Government to a subsidiary mainly for the construction of PPE of RM728.8 million
(FPE 31.12.2017: RM705.5 million) and government loan below market interest of RM244.4 million (FPE 31.12.2017: RM258.6 million).
Reconciliation of Government development grants from financing activities during the financial year/period is as follows:
Group
31.12.2018 31.12.2017
RM’million RM’million
38 OTHER LIABILITIES
Group Company
31.12.2018 31.12.2017 31.12.2018 31.12.2017
Note RM’million RM’million RM’million RM’million
Payable to:
- Federal Government 0 15.3 0 0
- State Government 22.8 26.0 22.8 26.0
Lease payables 24(b) 139.3 128.6 157.5 140.0
Prepayment by lessee 24(b) 215.9 301.9 0 0
Retention monies 602.0 517.2 536.9 473.5
Others* 416.2 368.4 2.8 2.8
1,396.2 1,357.4 720.0 642.3
* Included in Others is the deferred consideration arising from the acquisition of GVO and BCL by a subsidiary (Note 15) amounting to
RM66.2 million.
About TNB Performance Review Financial Statements
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39 SHARE CAPITAL
Accounting Policy
(a) Classification
Ordinary shares and non-redeemable preference shares with dividends are classified as equity. Other shares are classified as
equity and/or liability according to the economic substance of the particular instrument.
Distributions to holders of a financial instrument classified as an equity instrument are charged directly to equity.
Incremental external costs directly attributable to the issuance of new shares or options are shown in equity as a deduction,
net of tax, from the proceeds.
Dividends are recognised as liability in the period in which they are declared.
Ordinary shares
As at the beginning of the financial year/period 5,666.0 11,199.6 5,659.0 11,124.9
LTIP shares issued during the financial year/period (b) 20.9 246.5 7.0 74.7
As at the end of the financial year/period 5,686.9 11,446.1 5,666.0 11,199.6
About TNB Performance Review Financial Statements
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(i) The Special Share would enable the Government of Malaysia through the Minister of Finance Incorporated (‘MOF Incorporated’)
to ensure that certain major decisions affecting the operations of the Company are consistent with the Government’s policies.
The Special Shareholder, which may only be the Government or any representative or person acting on its behalf, is entitled to
receive notices of meetings but not to vote at such meetings of the Company. However, the Special Shareholder is entitled to
attend and speak at such meetings.
The Special Shareholder has the right to appoint any person, but not more than six at any time, to be a member of the Board
of Directors of the Company.
(ii) Certain matters, in particular the alteration of the Articles of Association of the Company relating to the rights of the Special
Shareholder, creation and issue of additional shares which carry different voting rights, the dissolution of the Company,
substantial disposal of assets, amalgamations, merger and takeover, require the prior consent of the Special Shareholder.
(iii) The Special Shareholder does not have any right to participate in the capital or profits of the Company.
(iv) The Special Shareholder has the right to require the Company to redeem the Special Share, at par, at any time.
(b) The Company issued and allotted 12,194,300 on 30 April 2018 and 8,708,200 on 28 November 2018 ordinary shares in the Company
to eligible executives or eligible employees, pursuant to the letter of offer dated 1 April 2016, 28 March 2017 and 3 August 2015
respectively in accordance with the By-laws of the LTIP scheme of the Company. Subsequent to the above, the issued and paid up
share capital of the Company increased to 5,686,888,771 ordinary shares.
40 OTHER RESERVES
Group Company
31.12.2018 31.12.2017 31.12.2018 31.12.2017
RM’million RM’million RM’million RM’million
Group
31.12.2018
As at the beginning of the financial year 287.4 (5,830.5) (766.2) 31.3 (95.0) (6,373.0)
Arising in the financial year 21.3 (204.3) 61.2 7.1 95.0 (19.7)
As at the end of the financial year 308.7 (6,034.8) (705.0) 38.4 0 (6,392.7)
31.12.2017
As at the beginning of the financial period 295.8 (5,722.9) (640.6) 33.9 (95.0) (6,128.8)
Arising in the financial period (8.4) (107.6) (125.6) (2.6) 0 (244.2)
As at the end of the financial period 287.4 (5,830.5) (766.2) 31.3 (95.0) (6,373.0)
Employee FVOCI/
LTIP benefits AFS
reserve reserve reserve Total
RM’million RM’million RM’million RM’million
Company
31.12.2018
As at the beginning of the financial year 287.4 (5,619.7) 30.6 (5,301.7)
Arising in the financial year 21.3 (50.7) 7.1 (22.3)
As at the end of the financial year 308.7 (5,670.4) 37.7 (5,324.0)
31.12.2017
As at the beginning of the financial period 295.8 (5,519.9) 33.2 (5,190.9)
Arising in the financial period (8.4) (99.8) (2.6) (110.8)
As at the end of the financial period 287.4 (5,619.7) 30.6 (5,301.7)
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41 COMMITMENTS
Group Company
Financial Financial Financial Financial
year ended period ended year ended period ended
31.12.2018 31.12.2017 31.12.2018 31.12.2017
RM’million RM’million RM’million RM’million
The Group and Company lease a number of plant and machineries, office buildings and equipment under operating leases. These
leases have average tenures between 3 and 25 years.
Future minimum rental payable under non-cancellable operating leases at the reporting date are as follows:
Group Company
Financial Financial Financial Financial
year ended period ended year ended period ended
31.12.2018 31.12.2017 31.12.2018 31.12.2017
RM’million RM’million RM’million RM’million
The Group and Company lease out its plant and equipment under non-cancellable operating leases. The lessees are required to
pay absolute fixed lease payments during the lease period. Total future minimum lease receivables under non-cancellable operating
leases contracted for at the reporting date but not recognised as receivables, are as follows:
Group Company
Financial Financial Financial Financial
year ended period ended year ended period ended
31.12.2018 31.12.2017 31.12.2018 31.12.2017
RM’million RM’million RM’million RM’million
42 CONTINGENT LIABILITIES
Accounting Policy
The Group and Company do not recognise contingent assets and liabilities other than those arising from business combinations,
but disclose its existence in the financial statements. A contingent liability is a possible obligation that arises from past events
whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control
of the Group and Company or a present obligation that is not recognised because it is not probable that an outflow of resources will
be required to settle the obligation. A contingent liability also arises in the extremely rare case where there is a liability that cannot
be recognised because it cannot be measured reliably. However, contingent liabilities do not include financial guarantee contracts.
A contingent asset is a possible asset that arises from past events whose existence will be confirmed by the occurrence or non-
occurrence of one or more uncertain future events beyond the control of the Group and Company. The Group and Company do not
recognise contingent assets but disclose its existence where inflows of economic benefits are probable, but not virtually certain.
Determination of the treatment of contingent liabilities is based on the Group and Company’s view of the expected outcome of the
contingencies after consulting legal counsel for litigation cases and internal and external experts to the Group and Company for
matters in the ordinary course of business.
Group Company
31.12.2018 31.12.2017 31.12.2018 31.12.2017
RM’million RM’million RM’million RM’million
All third party claims are being resolved and the Directors are of the opinion that their outcomes will not have a material adverse effect on
the financial positions of both the Group and Company.
On 7 December 2016, the Company and the Inland Revenue Board (‘IRB’) entered into a consent judgement before the Kuala Lumpur High
Court to substitute the judicial review proceedings with regard to the notices of additional assessment dated 23 November 2015 (‘Notices’)
arising from the disallowance of the Company’s re-investment allowance (‘RIA’) claims by filing an appeal to the Special Commissioners
of Income Tax (‘SCIT’). The consent judgement also provides that the IRB will not commence any proceedings relating to the Notices until
this matter is determined by the SCIT and by the High Court, if there is a subsequent appeal by either party. On 15 December 2016, the
Company filed notices of appeal against the Notices to the SCIT according to Section 99(1) of the Income Tax Act 1967. The appeals have
since been registered before the SCIT. The Company has obtained legal advice from its tax solicitors on the merits of the appeals and on
this basis, the Directors are of the opinion that no provision is required in the financial statements for the potential tax liability up to the
reporting date.
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For the purposes of these financial statements, parties are considered to be related to the Group or the Company if the Group or the
Company has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and
operating decisions, or vice versa, or where the Group or the Company and the party are subject to common control or common significant
influence.
Associate companies are those entities in which the Group has significant influence but not control as disclosed in Note 17.
KMP are defined as those persons having authority and responsibility for planning, directing and controlling the activities of the
Group and Company either directly or indirectly. The KMP of the Group or of the Company includes Executive Directors and
Non-Executive Directors of the Company and certain members of senior management of the Company.
Whenever exist, related party transactions also include transactions with entities that are controlled, jointly controlled or significantly
influenced directly or indirectly by any key management personnel or their close family members.
Government-linked corporations are related to the Group and Company by virtue of the substantial shareholdings of Khazanah
Nasional Berhad (‘KNB’), with 28.8% (2017: 28.1%) equity interest. KNB is a wholly-owned entity of MoF Incorporated which is in
turn owned by the Ministry of Finance. KNB and entities directly controlled by the Government of Malaysia are collectively referred
to as government-related entities to the Group and Company.
The Government of Malaysia and bodies controlled or jointly controlled by the Government of Malaysia are related parties of the
Group and Company. The Group and Company enter into transactions with many of these bodies, which include but are not limited
to purchasing of goods, including use of public utilities and amenities, and the placing of bank deposits.
All the transactions entered into by the Group and Company with the government-related entities are conducted in the ordinary
course of the Group and Company’s businesses on negotiated terms or terms comparable to those with other entities that are not
government-related, except otherwise disclosed elsewhere in the financial statements.
The Group and Company are principally involved in the provision of electricity as part of their ordinary operations. These services are
carried out generally on commercial terms that are consistently applied to all customers. These transactions have been established on
terms and conditions that are not materially different from those obtainable in transactions with unrelated parties.
Apart from the individually significant transactions and balances as disclosed elsewhere in the financial statements, the Group and
Company have collectively, but not individually significant transactions with related parties.
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In addition to the transactions detailed elsewhere in the financial statements, the Group and Company had the following significant
transactions with the following related parties based on agreed terms during the financial year/period:
Associate companies KMP
Financial Financial Financial Financial
year ended period ended year ended period ended
31.12.2018 31.12.2017 31.12.2018 31.12.2017
RM’million RM’million RM’million RM’million
Group
Income:
- Sales of electricity 1.2 0.4 0 0
- Interest income 14.8 3.6 0 0
- Dividend income 29.6 18.0 0 0
- Rental income 8.4 4.7 0 0
- Leasing income 14.1 8.5 0 0
Expenses:
- Purchase of electricity 3,736.5 1,269.9 0 0
- Key management compensations:
- Salaries, allowances and bonuses 0 0 27.4 6.7
- Benefits-in-kind 0 0 1.7 0.2
- Defined contribution retirement plan 0 0 3.5 0.9
- Other staff benefits 0 0 0.7 0.6
- LTIP expense 0 0 11.6 2.4
- Leasing expense 18.2 5.6 0 0
In addition to the transactions detailed elsewhere in the financial statements, the Group and Company had the following significant
transactions with the following related parties based on agreed terms during the financial year/period: (continued)
Subsidiary companies Associate companies KMP
Financial Financial Financial Financial Financial Financial
year ended period ended year ended period ended year ended period ended
31.12.2018 31.12.2017 31.12.2018 31.12.2017 31.12.2018 31.12.2017
RM’million RM’million RM’million RM’million RM’million RM’million
Company
Income:
- Sales of electricity 42.8 13.5 1.2 0.4 0 0
- Interest income 45.9 16.0 0.6 3.6 0 0
- Dividend income 64.0 0 26.4 18.0 0 0
- Rental income 25.4 8.4 8.4 4.7 0 0
- Leasing income 0.1 0.3 14.1 8.5 0 0
- Redemption of RPS 213.9 30.6 0 0 0 0
- Project management and consultancy 277.1 0 0 0 0 0
Expenses:
- Purchase of electricity 11,917.3 3,430.5 3,736.5 1,269.9 0 0
- Training fees 61.3 28.9 0 0 0 0
- Finance lease interest 1,025.1 329.9 0 0 0 0
- Key management compensations:
- Salaries, allowances and bonuses 0 0 0 0 27.0 6.5
- Benefits-in-kind 0 0 0 0 1.7 0.2
- Defined contribution retirement plan 0 0 0 0 3.5 0.9
- Other staff benefits 0 0 0 0 0.6 0.6
- LTIP expense 0 0 0 0 11.6 2.4
- Leasing expense 14.5 0 18.2 5.6 0 0
44 SEGMENTAL REPORTING
Segmental reporting is not presented as the Group is principally engaged in the generation, transmission, distribution and sales of
electricity and the provision of other related services, which are substantially within a single business segment and this is consistent with
the current practice of internal reporting. The Group operates primarily in Malaysia.
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45 FINANCIAL INSTRUMENTS
Accounting Policy
Financial assets
(a) Classification
From 1 January 2018, the Group and Company classify its financial assets in the following categories: at amortised cost (‘AC’),
at FVOCI and at FVTPL. The classification depends on the entity’s business model for managing the financial assets and the
contractual terms of the cash flows.
The Group and Company reclassify debt investments when and only when its business model for managing those assets
changes.
See Note 47 for the impact of the change in accounting policy following the adoption of MFRS 9 on the classification of
financial assets.
Regular purchases and sales of financial assets are recognised on the trade-date, the date on which the Group and Company
commit to purchase or sell the assets. Financial assets are derecognised when the rights to receive cash flows from the
financial assets have expired or have been transferred and the Group and Company have transferred substantially all the risks
and rewards of ownership.
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(c) Measurement
At initial recognition, the Group and Company measure a financial asset at its fair value plus, in the case of a financial
asset not at FVTPL, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction
costs of financial assets carried at FVTPL are expensed in the statement of profit or loss.
Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows
are solely payment of principal and interest.
• Debt instruments
Subsequent measurement of debt instruments depends on the Group and Company’s business model for managing
the asset and the cash flow characteristics of the asset. There are three measurement categories into which the
Group and Company classify its debt instruments:
- AC: Interest income from financial assets at AC is included in finance income using the effective interest rate
method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other
gains/(losses) together with foreign exchange gains and losses. Impairment losses are presented as separate
line item in the statement of profit or loss.
- FVOCI: Movements in the carrying amount of debt instruments classified under FVOCI are taken through OCI.
Upon derecognition of the assets, the cumulative gain or loss previously recognised in OCI is recognised
to the statement of profit or loss. The interest income from these financial assets is included in the finance
income using the effective interest rate method. The foreign exchange gains and losses are presented in other
gains/(losses) and impairment expenses are presented as a separate line item in the statement of profit or
loss.
- FVTPL: Financial assets that do not meet the criteria for AC or FVOCI are measured at FVTPL. A gain or loss
on debt instruments which are measured at FVTPL are recognised in the profit or loss.
• Equity instruments
The Group and Company have elected to present fair value gains and losses on equity instruments in OCI. The fair
value gains and losses of these instruments will not be reclassified subsequently to the profit or loss. Dividends
from such investments are recognised in the profit or loss as other income. Impairment losses (and reversal of
impairment losses) on equity instruments measured at FVOCI are also reported as other changes in fair value.
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(d) Impairment
From 1 January 2018, the Group and Company assess on a forward looking basis the expected credit losses associated with
its debt instruments carried at AC and FVOCI. The impairment methodology applied depends on whether there has been a
significant increase in credit risk.
The Group and Company have four broad types of financial instruments that are subject to the ECL model:
(i) Trade receivables
(ii) Contract assets
(iii) Non-trade receivables
• intercompany loans/advances
• rechargeable job orders (‘RJO’) debtors
• sundry deposits for rental spaces
• rental receivables
• staff loans/advances
• investment in unquoted debt security
(iv) Financial guarantee contracts issued
While cash and cash equivalents are also subject to the impairment requirements of MFRS 9, the identified impairment loss
was immaterial.
ECL represents a probability-weighted estimate of the difference between the present value of the cash flows according to
the contract and present value of the cash flows the Group and Company expected to receive, over the remaining life of the
financial instruments. For financial guarantee contracts, the ECL is the difference between the expected payments to be
reimbursed to the holder of the guaranteed debt instrument less any amounts that the Company expects to receive from the
holder, the debtor or any other party.
For trade receivables, the Group and Company apply the simplified approach, which requires expected lifetime losses to be
recognised from initial recognition of the receivables, except for those which are in default or credit impaired are assessed
individually.
For non-trade receivables, at each reporting date the Group and Company measure ECL through a loss allowance at an
amount equal to 12 month ECL if credit risk on a financial instrument or a group of financial instruments has not increased
significantly since initial recognition.
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The Group and Company use the three-stage approach for non-trade receivables which reflect their credit risks and how
the loss allowances are determined for each of those stages. Summary of the assumptions underpinning the Group and
Company’s ECL model for non-trade receivables are as follows:
Stage 2
Stage 1 Significant Stage 3
Low credit risk increase in credit risk Credit impaired
Types of non-trade receivables (12 month ECL Model) (Lifetime ECL Model) (Lifetime ECL Model)
• Rechargeable job orders (‘RJO’) debtors Covered by indent/ No indent/ Accident cases
downpayment/Letter downpayment/LOU
of Undertaking (‘LOU’)
• Sundry deposits for rental spaces Active contracts Inactive contracts and Inactive contracts and
amounts outstanding amounts outstanding
less or equal to 12 more than 12 months
months
• Rental receivables Active contracts and Active contracts and Inactive contracts
amounts outstanding amounts outstanding
less or equal to more than 3 months
3 months
• Investment in unquoted debt security No history of default and History of default but no History of default and
no current default current default currently defaulted
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When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when
estimating ECL, the Group and Company consider reasonable and supportable information that is relevant and available
without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group’s
historical experience and informed credit assessment including forward-looking information, where available. Regardless of
the analysis above, a significant increase in credit risk is presumed if the financial asset is past due in making a contractual
payment.
The gross carrying amount of a financial asset is written off (either partially or fully) to the extent that there is no realistic
prospect of recovery. This is generally the case when either the Group or Company determines that the debtor does not
have assets or sources of income that could generate sufficient cash flows to repay the amounts subjected to the write-off.
However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Group
or Company’s procedures for recovery of amounts due.
Financial liabilities
MFRS 9 retains most of the MFRS 139 requirements for financial liabilities. From 1 January 2018, the Group and Company classify
its financial liabilities in the following categories: at amortised cost (‘AC’) and at FVTPL.
Financial assets and liabilities are offset and the net amount presented in the statement of financial position (‘SOFP’) when there is
a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and
settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in
the normal course of business and in the event of default, insolvency or bankruptcy.
Financial guarantee contracts are contracts that require the Group or the Company to make specified payments to reimburse the
holder for a loss it incurs because a specified debtor fails to make payments when due, in accordance with the terms of a debt
instrument.
Financial guarantee contracts are recognised as a financial liability at the time the guarantee is issued. The liability is initially
measured at fair value and subsequently at the higher of;
(i) the amount determined in accordance with the expected credit loss model under MFRS 9; and
(ii) the amount initially recognised less, where appropriate, the cumulative amount of income recognised in accordance with the
principles of MFRS 15.
The fair value of financial guarantees is determined as the present value of the difference in net cash flows between the contractual
payments under the debt instrument and the payments that would be required without the guarantee, or the estimated amount that
would be payable to a third party for assuming the obligations.
Where guarantees in relation to loans or other payables of associates are provided for no compensation, the fair values are
accounted for as contributions and recognised as part of the cost of the investment.
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Financial assets
The Group and Company have applied MFRS 9 retrospectively, but have elected not to restate comparative information. As
a result, the comparative information provided continues to be accounted for in accordance with the Group and Company’s
previous accounting policy.
(i) Classification
Until31 December 2017, the Group and Company classified its financial assets in the following categories:
• financial assets at FVTPL;
• loans and receivables (‘L&R’); and
• available-for-sale (‘AFS’) financial assets.
The classification depended on the purpose for which the investments were acquired. Management determined the
classification of its investments at initial recognition.
Financial assets at FVTPL are financial assets held-for-trading. A financial asset is classified in this category if it is acquired
or incurred principally for the purpose of selling or repurchasing it in the near term. Derivatives are also categorised as
held-for-trading unless they are designated as hedges.
• L&R
L&R are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. If
collection of the amounts is expected in one year or less, they are classified as current assets. If not, they are classified
as non-current assets.
AFS financial assets are non-derivatives that are either designated in this category or not classified in any of the other
categories. They are included in non-current assets unless the investments mature or management intends to dispose it
within 12 months of the end of the reporting period.
(ii) Reclassification
The Group and Company could choose to reclassify a non-derivative trading financial asset out of the held for trading category
if the financial asset was no longer held for the purpose of selling it in the near term. Financial assets other than L&R were
permitted to be reclassified out of the held for trading category only in rare circumstances arising from a single event that was
unusual and highly unlikely to recur in the near term. In addition, the Group and Company could choose to reclassify financial
assets that would meet the definition of L&R out of the held for trading or AFS categories if the Group and Company had the
intention and ability to hold these financial assets for the foreseeable future or until maturity at the date of reclassification.
Reclassifications were made at fair value as of the reclassification date. Fair value became the new cost or AC as applicable,
and no reversals of fair value gains or losses recorded before reclassification date were subsequently made. Effective interest
rates for financial assets reclassified to L&R category were determined at the reclassification date. Further increases in
estimates of cash flows adjusted effective interest rates prospectively.
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AFS financial assets and financial assets at FVTPL are subsequently carried at fair value. L&R financial assets are
subsequently carried at AC using the effective interest method.
Changes in the fair values of financial assets at FVTPL, including the effects of currency translation are recognised in the
statement of profit or loss in the period in which the changes arise.
The Group and Company assess at the end of the reporting period whether there is objective evidence that a financial
asset or a group of financial assets is impaired. A financial asset or a group of financial assets is impaired and an
impairment loss is incurred only if there is objective evidence of impairment as a result of one or more events that
occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the
estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.
- Assets carried at AC
Evidence of impairment may include indications that the debtors or a group of debtor is experiencing significant
financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter
bankruptcy or other financial reorganisation, and where observable data indicates that there is a measurable
decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with
defaults.
The amount of the loss is measured as the difference between the asset’s carrying amount and the present value of
estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial
asset’s original effective interest rate method. The asset’s carrying amount is reduced and the amount of the loss
is recognised in the statement of profit or loss. If L&R have a variable interest rate, the discount rate for measuring
any impairment loss is the current effective interest rate determined under the contract. As a practical expedient,
the Group and Company may measure impairment on the basis of an instrument’s fair value using an observable
market price.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be objectively
related to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit
rating), the reversal of the previously recognised impairment loss is recognised in the statement of profit or loss.
When an asset is uncollectible, it is written off against the related accumulated impairment losses account. Such
assets are written off after all the necessary procedures have been completed and the amount of the losses have
been determined.
For debt securities, the Group and Company use criteria and measurement of impairment loss applicable for ‘assets
carried at AC’ above. If, in a subsequent period, the fair value of a debt instrument classified as AFS increases
and the increase can be objectively related to an event occurring after the impairment loss was recognised in the
statement of profit or loss, the impairment loss is reversed through the statement of profit or loss.
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In the case of equity securities classified as AFS, in addition to the criteria for ‘assets carried at AC’ above, a
significant or prolonged decline in the fair value of the security below its cost is also considered as an indicator
that the assets are impaired. If any such evidence exists for AFS financial assets, the cumulative losses that had
been recognised directly in equity is removed from equity and recognised in the statement of profit or loss. The
amount of cumulative losses that is reclassified to the statement of profit or loss is the difference between the
acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in
the statement of profit or loss. Impairment losses recognised in the statement of profit or loss on equity instruments
classified as AFS are not reversed through the statement of profit or loss.
(iv) Derecognition
Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been
transferred and the Group and Company have transferred substantially all risks and rewards of ownership to related party.
Financial liabilities
The Group and Company classify its financial liabilities in two categories, at FVTPL or other financial liabilities. The Group and
Company determine the classification of its financial liabilities at initial recognition.
Other financial liabilities are non-derivative financial liabilities, initially recognised at fair value plus transaction costs and subsequently
carried at amortised cost using the effective interest method. Changes in the carrying value of these liabilities are recognised in the
statement of profit or loss.
The Group and Company’s other financial liabilities comprise trade and other payables and borrowings in the statement of financial
position. Financial liabilities are classified as current liabilities; except for maturities more than 12 months after the reporting date,
in which case they are classified as non-current liabilities.
Financial liabilities are derecognised when the liability is either discharged, cancelled, expired or has been restructured with
substantially different terms.
Financial guarantee contracts are recognised as a financial liability at the time the guarantee is issued. The liability is initially
measured at fair value and subsequently at the higher of the amount determined in accordance with MFRS 137 and the amount
initially recognised less cumulative amortisation, where appropriate.
The fair value of financial guarantees is determined as the present value of the difference in net cash flows between the contractual
payments under the debt instrument and the payments that would be required without guarantee, or the estimated amount that
would be payable to a third party for assuming the obligations.
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(a) Categories of financial instruments in compliance to MFRS 9 with comparative of MFRS 139 compliance.
Carrying
amount AC FVTPL FVOCI
31.12.2018 RM’million RM’million RM’million RM’million
Group
Financial assets
Investments in unquoted debt securities 326.7 326.7 0 0
Long term receivables 102.7 102.7 0 0
Finance lease receivable 13.4 13.4 0 0
Financial assets at FVOCI 76.4 0 0 76.4
Receivables 4,620.9 4,620.9 0 0
Amounts due from joint ventures 10.8 10.8 0 0
Amounts due from associates 364.9 364.9 0 0
Financial assets at FVTPL 9,743.3 0 9,743.3 0
Deposits, bank and cash balances 8,670.8 8,670.8 0 0
Derivative financial instruments 1.4 0 1.4 0
23,931.3 14,110.2 9,744.7 76.4
Company
Financial assets
Investment in unquoted debt security 8.7 8.7 0 0
Long term receivables 86.1 86.1 0 0
Financial assets at FVOCI 75.7 0 0 75.7
Receivables 2,822.1 2,822.1 0 0
Amounts due from subsidiaries 4,754.9 4,754.9 0 0
Amounts due from associates 7.5 7.5 0 0
Financial assets at FVTPL 5,224.6 0 5,224.6 0
Deposits, bank and cash balances 5,852.4 5,852.4 0 0
18,832.0 13,531.7 5,224.6 75.7
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Carrying
amount L&R FVTPL AFS
31.12.2017 (Restated) RM’million RM’million RM’million RM’million
Group
Financial assets
Investment in unquoted debt security 318.5 318.5 0 0
Long term receivables 249.5 249.5 0 0
Finance lease receivable 14.2 14.2 0 0
AFS financial assets 69.3 0 0 69.3
Receivables 6,016.2 6,016.2 0 0
Amounts due from joint ventures 1.1 1.1 0 0
Amounts due from associates 332.0 332.0 0 0
Financial assets at FVTPL 10,490.2 0 10,490.2 0
Deposits, bank and cash balances 5,415.0 5,415.0 0 0
22,906.0 12,346.5 10,490.2 69.3
Company
Financial assets
Long term receivables 197.0 197.0 0 0
AFS financial assets 68.6 0 0 68.6
Receivables 3,233.3 3,233.3 0 0
Amounts due from subsidiaries 5,400.3 5,400.3 0 0
Amounts due from associates 9.2 9.2 0 0
Financial assets at FVTPL 3,850.5 0 3,850.5 0
Deposits, bank and cash balances 3,001.3 3,001.3 0 0
15,760.2 11,841.1 3,850.5 68.6
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Carrying
amount AC FVTPL
31.12.2018 RM’million RM’million RM’million
Group
Financial liabilities
Payables 9,166.2 9,166.2 0
Financial guarantee contract 270.3 0 270.3
Finance lease payables 4,874.1 4,874.1 0
Amounts due to associates 656.3 656.3 0
Amounts due to joint ventures 0.5 0.5 0
Borrowings 47,832.4 47,832.4 0
Derivative financial instruments 55.5 0 55.5
Other liabilities 602.0 602.0 0
63,457.3 63,131.5 325.8
Company
Financial liabilities
Payables 5,635.9 5,635.9 0
Financial guarantee contracts 272.7 0 272.7
Finance lease payables 16,668.8 16,668.8 0
Amounts due to subsidiaries 1,459.4 1,459.4 0
Amounts due to associates 646.4 646.4 0
Borrowings 21,637.0 21,637.0 0
Other liabilities 536.9 536.9 0
46,857.1 46,584.4 272.7
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Carrying
amount OL FVTPL
31.12.2017 (Restated) RM’million RM’million RM’million
Group
Financial liabilities
Payables 8,668.3 8,668.3 0
Finance lease payables 5,210.5 5,210.5 0
Amounts due to associates 691.2 691.2 0
Borrowings 41,443.7 41,443.7 0
Derivative financial instruments 47.3 0 47.3
Other liabilities 517.2 517.2 0
56,578.2 56,530.9 47.3
Company
Financial liabilities
Payables 5,491.1 5,491.1 0
Finance lease payables 17,790.9 17,790.9 0
Amounts due to subsidiaries 1,086.3 1,086.3 0
Amounts due to associates 683.0 683.0 0
Borrowings 15,348.1 15,348.1 0
Derivative financial instruments 0.2 0 0.2
Other liabilities 473.5 473.5 0
40,873.1 40,872.9 0.2
The Group and Company have exposure to the following risks from their use of financial instruments:
• Credit risk;
• Liquidity risk; and
• Market risk.
Credit risk
Credit risk is the risk of a financial loss to the Group and Company if a customer or counterparty to a financial instrument fails to meet
its contractual obligations. The Group and Company’s exposures to credit risk arise principally from its receivables from customers,
investments in unquoted debt securities, deposits, bank and cash balances and derivative financial instruments. In addition, the
Company’s exposure to credit risk arises principally from loans and advances to subsidiaries and financial guarantees given to banks
in respect of banking facilities granted to certain subsidiaries and an associate.
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Net loss on impairment of financial instruments and contract assets are mainly from:
Group Company
31.12.2018 31.12.2017 31.12.2018 31.12.2017
RM’million RM’million RM’million RM’million
Contract assets
- recognised in profit or loss (83.7) (56.4) (78.4) (56.1)
- reversed 76.1 14.2 75.8 14.2
Intercompany loans/advances
- recognised in profit or loss 0 0 (86.9) (13.3)
- reversed 0 0 79.4 14.5
Risk management objectives, policies and processes for managing the risk
The Group and Company have a credit policy in place and the exposures to credit risk are monitored on an ongoing basis.
Normally, financial guarantees given by banks, shareholders or directors of customers are obtained, and credit evaluations are
performed on customer requiring credit over a certain amount.
The Group and Company’s credit policy provide trade receivables with a 30 days (FPE 31.12.2017: 30 days) credit period. The
Group and Company have no major significant concentration of credit risk due to their diverse customer base. An impairment
has been made for estimated unrecoverable amounts, determined by reference to past default experience of individual debtor
and collection portfolio.
The total trade receivables and contract assets and the impairment provided are as follows:
Group Company
31.12.2018 31.12.2017 31.12.2018 31.12.2017
(Restated) (Restated)
RM’million RM’million RM’million RM’million
Given the varied nature of the Group and Company’s customer base, the following analysis of trade receivables by type of
customer is considered the most appropriate disclosure of credit concentration.
Group Company
31.12.2018 31.12.2017 31.12.2018 31.12.2017
(Restated) (Restated)
RM’million RM’million RM’million RM’million
Impairment losses
The loss allowance for the trade receivables and the contract assets as at 31 December 2018 and 1 January 2018
(on adoption of MFRS 9) was as follows:
Individual Expected Collective
Gross impairment loss rate impairment Net
31.12.2018 RM’million RM’million % RM’million RM’million
Group
Not past due 1,659.3 (35.9) 1.3 (20.4) 1,603.0
Past due 0 - 30 days 522.3 (0.9) 2.7 (14.0) 507.4
Past due 31 - 120 days 914.3 (86.2) 8.2 (67.9) 760.2
Past due 121 - 240 days 487.0 (64.3) 31.4 (132.6) 290.1
Past due 241 - 365 days 347.1 (54.4) 62.9 (184.0) 108.7
Past due more than 365 days 1,348.7 (292.6) 65.0 (686.9) 369.2
Trade receivables 5,278.7 (534.3) (1,105.8) 3,638.6
Company
Not past due 1,329.6 (34.8) 1.4 (17.5) 1,277.3
Past due 0 - 30 days 294.4 (0.9) 4.1 (12.0) 281.5
Past due 31 - 120 days 610.8 (86.2) 11.1 (58.3) 466.3
Past due 121 - 240 days 379.3 (61.9) 35.8 (113.8) 203.6
Past due 241 - 365 days 263.7 (51.9) 74.6 (158.0) 53.8
Past due more than 365 days 953.9 (287.0) 88.4 (589.5) 77.4
Trade receivables 3,831.7 (522.7) (949.1) 2,359.9
The loss allowance for the trade receivables and the contract assets as at 31 December 2018 and 1 January 2018
(on adoption of MFRS 9) was as follows: (continued)
Individual Expected Collective
Gross impairment loss rate impairment Net
1.1.2018 (Restated) RM’million RM’million % RM’million RM’million
Group
Not past due 1,889.7 (41.2) 1.1 (20.1) 1,828.4
Past due 0 - 30 days 592.2 (7.3) 2.6 (15.2) 569.7
Past due 31 - 120 days 1,306.4 (85.9) 7.7 (93.6) 1,126.9
Past due 121 - 240 days 461.5 (46.5) 40.6 (168.3) 246.7
Past due more than 240 days 1,447.2 (405.2) 74.9 (780.2) 261.8
Trade receivables 5,697.0 (586.1) (1,077.4) 4,033.5
Company
Not past due 1,473.4 (40.4) 1.2 (17.3) 1,415.7
Past due 0 - 30 days 372.7 (6.4) 3.5 (13.0) 353.3
Past due 31 - 120 days 827.2 (83.2) 10.8 (80.2) 663.8
Past due 121 - 240 days 408.0 (43.6) 39.6 (144.3) 220.1
Past due more than 240 days 1,167.6 (397.4) 86.8 (668.8) 101.4
Trade receivables 4,248.9 (571.0) (923.6) 2,754.3
The Group and Company apply MFRS 9 simplified approach to measure expected credit losses which uses a lifetime expected
loss allowance for all trade receivables and contract assets.
For certain large customers with high risk of default, the Group and Company assessed the risk of loss of each customer
individually based on their financial information, past trend of payments and external credit ratings, where applicable.
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To measure the expected credit losses, trade receivables and contract assets have been grouped based on shared credit risk
characteristics and the days past due. The contract assets relate to unbilled customers are substantially have the same risk
characteristics as the trade receivables for the same types of contracts. The Group and Company have therefore concluded
that the expected loss rates for trade receivables are a reasonable approximation the loss rates of the contract assets.
The expected loss rates are based on the payment profiles of sales over a period of 2 to 6 years and the corresponding
historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current and
forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables. The
Group and Company have identified growth rates of real Gross Domestic Product (‘GDP’) of Malaysia to be the most relevant
factor, and accordingly, adjusts the historical loss rates based on the expected changes in this factor. As at 31 December
2018, for non-government customers, a combination of growth rates of real GDP and inflation rates were identified as the most
relevant factors.
On that basis, the loss allowance was determined as follows for both trade receivables and contract assets are reflected in the
tables above.
The closing loss allowances for trade receivables and contract assets as at 31 December 2018 reconcile to the opening loss
allowances on 1 January 2018 and to the closing loss allowances as at 31 December 2018 as follows:
Trade receivables
Group Company
31.12.2018 31.12.2017 31.12.2018 31.12.2017
(Restated) (Restated)
RM’million RM’million RM’million RM’million
The closing loss allowances for trade receivables and contract assets as at 31 December 2018 reconcile to the opening loss
allowances on 1 January 2018 and to the closing loss allowances as at 31 December 2018 as follows: (continued)
Contract assets
Group Company
31.12.2018 31.12.2017 31.12.2018 31.12.2017
(Restated) (Restated)
RM’million RM’million RM’million RM’million
Trade receivables are secured by deposits in the form of cash and bank guarantees. ECL is not provided on receivable balances
fully secured by deposits. The deposits amount are reviewed on an individual basis periodically.
Of the above impairment losses, RM83.7 million (FPE 31.12.2017: RM56.4 million) for the Group and RM78.4 million
(FPE 31.12.2017: RM56.1 million) for the Company are related to receivables arising from contracts with customers.
Individual receivables which were known to be uncollectible were written off by reducing the carrying amount directly.
Impairment losses on trade receivables and contract assets are presented as net impairment losses within operating profit.
Subsequent recoveries of amounts previously written off are credited against the same line item.
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(ii) Investments in unquoted debt securities, deposits, bank and cash balances, derivative financial instruments and financial
assets measured at FVTPL
Risk management objectives, policies and processes for managing the risk
Investments, deposits, bank and cash balances, derivative financial instruments and financial assets measured at FVTPL are
allowed only in liquid securities and only with reputable financial institutions.
Investment in unquoted debt security is an investment in an associate’s financial instruments. The credit risk of this associate
is monitored on a quarterly basis.
For investment in unquoted debt security, there has been no history of default and there are no indicators that this financial
instrument may default. The Group is of the view that the loss allowance is not material, and hence, it is not provided for.
The maximum exposure to credit risk is represented by the carrying amounts in the statement of financial position.
In view of the sound credit rating of counterparties, the Group and Company do not expect any counterparty to fail to meet its
obligations. The Group and Company do not have overdue investments that have not been impaired.
The investments, deposits, cash and bank balances and derivative financial instruments are unsecured.
Bank and cash balances are held with banks and financial institutions which have lower credit risks. In addition, some of the
bank balances are insured by Government agencies. Consequently, the Group and Company are of the view that the loss
allowance is not material and hence, it is not provided for.
Impairment losses
The impairment for investment in unquoted debt security during the financial year and previous financial period was insignificant.
• Intercompany loans/advances
Risk management objectives, policies and processes for managing the risk
The Company provides unsecured loans and advances to subsidiaries. The Company monitors the results of the
subsidiaries regularly.
As at the end of the financial year, the maximum exposure to credit risk is represented by their carrying amounts in the
statement of financial position.
The total amounts due from subsidiaries and impairment provided are as follows:
Company
31.12.2018 31.12.2017
(Restated)
RM’million RM’million
Impairment losses
Generally, the Company considers loans and advances to subsidiaries have low credit risk. The Company assumes that
there is a significant increase in credit risk when a subsidiary’s financial position deteriorates significantly based on stages
determined in the accounting policy part (d) of this note. As the Company is able to determine the timing of payments
of the subsidiaries’ loans and advances when they are payable, the Company considers the loans and advances to be
in default when the subsidiaries are not able to pay when demanded. The Company considers a subsidiary’s loan or
advances to be impaired when:
- The subsidiary is unlikely to repay its loans and advances to the Company in full;
- The subsidiary is having a negative operating cash flows and is in a net tangible liabilities position; or
- The subsidiary is a dormant entity or has a history of default.
As at the end of the financial year, there was no indication that the loans and advances to the subsidiaries are not
recoverable other than those which have already been impaired. The Company does not specifically monitor the ageing
of advances to the subsidiaries.
The closing loss allowances for intercompany balances as at 31 December 2017 reconcile to the opening loss allowances
on 1 January 2018 and to the closing loss allowances as at 31 December 2018 as follows:
Company
31.12.2018 31.12.2017
(Restated)
RM’million RM’million
The loss allowances for intercompany loans/advances using the general 3-stage approach as at 31 December 2018
reconcile to the opening loss allowances for that provision as follows:
Stage 1 Stage 2 Stage 3 Total
RM’million RM’million RM’million RM’million
The impact on the carrying value of the intercompany loans/advances presented by the stages are as follows:
Stage 1 Stage 2 Stage 3 Total
RM’million RM’million RM’million RM’million
Risk management objectives, policies and processes for managing the risk
Credit risks on other non-trade receivables are mainly arising from rechargeable job orders (‘RJO’) debtors which are
receivables from specific works requested by customers.
Credit risks also arises from sundry deposits for rental of office spaces from third parties and rental receivables. The
Company manages the credit risk together with the specific leasing arrangements.
Staff advances and staff loans have low credit risks as these are mostly provided to existing staff. These are managed on
a monthly basis.
Amounts due from associates are mostly due to transactions within the Group and have a low credit risks. These balances
are managed on a monthly basis.
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As at the end of the financial year, the maximum exposure to credit risk is represented by their carrying amounts in the
statement of financial position.
The Company receives down payments, letters of undertaking (‘LOU’) or indents for RJO debtors where works are
requested by customers.
The Company receives deposits from third parties for rental of office spaces. For staff loans and staff advances, any
repayment is done through monthly payroll deductions.
In cases of RJO debtors arising from accidental damages to the Company’s assets whereby the third party is identifiable,
however, these amounts are fully impaired as there is very low prospect of recovery.
The total other non-trade receivables and amounts due from associates and impairments provided are as follows:
Group Company
31.12.2018 31.12.2017 31.12.2018 31.12.2017
(Restated) (Restated)
RM’million RM’million RM’million RM’million
Impairment losses
Generally, the Group and Company considers other non-trade receivables as having low credit risk. The Company assumes
that there is a significant increase in credit risk when there is a history of default in payments.
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The closing loss allowances for other non-trade receivables as at 31 December 2017 reconcile to the opening loss
allowances on 1 January 2018 and to the closing loss allowances as at 31 December 2018 as follows:
Group Company
31.12.2018 31.12.2017 31.12.2018 31.12.2017
(Restated) (Restated)
RM’million RM’million RM’million RM’million
The loss allowances for other non-trade receivables using the general 3-stage approach as at 31 December 2018 reconcile
to the opening loss allowances for that provision as follows:
Stage 1 Stage 2 Stage 3 Total
RM’million RM’million RM’million RM’million
Group
At 31.12.2017 before restatement
(calculated under MFRS 139) 0 0 (229.8) (229.8)
Amounts restated through opening retained profits (26.3) (1.3) (7.2) (34.8)
Opening loss allowances as at 1.1.2018
(calculated under MFRS 9) (26.3) (1.3) (237.0) (264.6)
Current year movements 2.8 0.3 75.9 79.0
Closing loss allowances as at 31.12.2018 (23.5) (1.0) (161.1) (185.6)
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The loss allowances for other non-trade receivables using the general 3-stage approach as at 31 December 2018 reconcile
to the opening loss allowances for that provision as follows: (continued)
Stage 1 Stage 2 Stage 3 Total
RM’million RM’million RM’million RM’million
Company
At 31.12.2017 before restatement
(calculated under MFRS 139) 0 0 (201.7) (201.7)
Amounts restated through opening retained profits (25.8) (1.3) (7.0) (34.1)
Opening loss allowances as at 1.1.2018
(calculated under MFRS 9) (25.8) (1.3) (208.7) (235.8)
Current year movements 4.3 0.5 116.6 121.4
Closing loss allowances as at 31.12.2018 (21.5) (0.8) (92.1) (114.4)
The impact on the carrying value of other non-trade receivables presented by the stages are as follows:
Stage 1 Stage 2 Stage 3 Total
RM’million RM’million RM’million RM’million
Group
Gross carrying amount 996.2 70.5 203.9 1,270.6
Loss allowances (23.5) (1.0) (161.1) (185.6)
Net carrying amount 972.7 69.5 42.8 1,085.0
Company
Gross carrying amount 534.7 29.9 98.1 662.7
Loss allowances (21.5) (0.8) (92.1) (114.4)
Net carrying amount 513.2 29.1 6.0 548.3
Risk management objectives, policies and processes for managing the risk
The Company provides financial guarantees to banks in respect of banking facilities granted to certain subsidiaries and an
associate. The Company monitors the ability of the subsidiaries and the associate to service their loans on an individual basis.
The maximum exposure to the Company amounts to RM3,330.0 million (FPE 31.12.2017: RM1,968.5 million) representing
banking facilities utilised by the subsidiaries and an associate as at the end of the financial year/period.
The financial guarantees are provided as credit enhancements to the subsidiaries’ and associate’s secured loans.
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The total financial guarantees and loss allowances provided are as follows:
Group Company
31.12.2018 31.12.2017 31.12.2018 31.12.2017
RM’million RM’million RM’million RM’million
Impairment losses
The Company assumes that there is a significant increase in credit risk when a subsidiary or associate has indication of
defaulting on its banking facilities. The Company considers a financial guarantee to be credit impaired when the subsidiary or
associate is unlikely to repay its credit obligation to the bank in full.
The Company determines the probability of default of the guaranteed loans individually using internal information available.
Loss allowance has been recognised in the profit or loss during the financial year mainly arising from the financial guarantee
provided by the Group in 2016 to support the loan facility offered to İç Anadolu Doğalgaz Elektrik Üretim ve Ticaret A.Ş. (‘ICAN’),
a subsidiary of Gama Enerji. The expected credit losses is determined based on an internal assessment of Gama Enerji’s debt
servicing ability taking into account of the current adverse macro-economic conditions in Turkey.
The movement in the loss allowances of financial guarantees during the financial year/period was:
Group Company
31.12.2018 31.12.2017 31.12.2018 31.12.2017
RM’million RM’million RM’million RM’million
Liquidity risk
Liquidity risk is the risk that the Group and Company will not be able to meet its financial obligations as they fall due. The Group and
Company’s exposures to liquidity risk arise principally from its various payables, loans and borrowings.
The Group and Company maintain a level of cash and cash equivalents and bank facilities deemed adequate by the Group and
Company to ensure, as far as possible, that they will have sufficient liquidity to meet their liabilities when they fall due.
As at 31 December 2018, the Company has sufficient financial capacity and available facility to meet its obligations as and when they
fall due within 12 months from the financial statement date.
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The table below summarises the maturity profiles of the Group and Company’s financial liabilities as at the end of the financial
year/period based on the undiscounted contractual payments:
Carrying Contractual Below More than
amount cash flows 1 year 1 - 2 years 3 - 5 years 5 years
31.12.2018 RM’million RM’million RM’million RM’million RM’million RM’million
Group
Non-derivative financial liabilities
Payables 9,166.2 9,166.2 9,166.2 0 0 0
Finance lease payables 4,874.1 7,507.6 698.8 698.4 2,078.7 4,031.7
Amounts due to associates 656.3 656.3 656.3 0 0 0
Borrowings 47,832.4 71,377.3 5,671.6 4,679.4 12,134.7 48,891.6
Financial guarantee contracts 270.3 410.4 410.4 0 0 0
Other financial liabilities at
amortised cost 602.0 618.6 304.2 306.6 2.6 5.2
63,401.3 89,736.4 16,907.5 5,684.4 14,216.0 52,928.5
Derivative financial liabilities
Interest rate swap 11.5 622.4 622.4 0 0 0
Forward exchange contracts
(gross settled):
- Outflows 44.0 907.0 907.0 0 0 0
- Inflows (1.2) (42.7) (42.7) 0 0 0
Put option (0.2) (14.2) (14.2) 0 0 0
63,455.4 91,208.9 18,380.0 5,684.4 14,216.0 52,928.5
Company
Non-derivative financial liabilities
Payables 5,635.9 5,635.9 5,635.9 0 0 0
Finance lease payables 16,668.8 26,494.6 2,142.1 1,932.5 5,270.8 17,149.2
Amounts due to subsidiaries 1,459.4 1,459.4 1,459.4 0 0 0
Amounts due to associates 646.4 646.4 646.4 0 0 0
Borrowings 21,637.0 30,486.8 3,028.9 1,707.9 4,651.1 21,098.9
Financial guarantee contracts 272.7 3,330.0 3,330.0 0 0 0
Other financial liabilities at
amortised cost 536.9 553.5 272.2 274.3 2.3 4.6
46,857.1 68,606.6 16,514.9 3,914.7 9,924.2 38,252.7
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The table below summarises the maturity profiles of the Group and Company’s financial liabilities as at the end of the financial
year/period based on the undiscounted contractual payments: (continued)
Carrying Contractual Below More than
amount cash flows 1 year 1 - 2 years 3 - 5 years 5 years
31.12.2017 RM’million RM’million RM’million RM’million RM’million RM’million
Group
Non-derivative financial liabilities
Payables 8,668.3 8,668.3 8,668.3 0 0 0
Finance lease payables 5,210.5 8,205.5 697.9 701.3 2,093.1 4,713.2
Amounts due to associates 691.2 691.2 691.2 0 0 0
Borrowings 41,443.7 48,136.6 2,753.5 6,075.5 9,481.0 29,826.6
Other liabilities 517.2 531.0 263.8 264.3 0.7 2.2
56,530.9 66,232.6 13,074.7 7,041.1 11,574.8 34,542.0
Derivative financial liabilities
Forward exchange contracts
(gross settled):
- Outflows 47.3 975.1 975.1 0 0 0
56,578.2 67,207.7 14,049.8 7,041.1 11,574.8 34,542.0
Company
Non-derivative financial liabilities
Payables 5,491.1 5,491.1 5,491.1 0 0 0
Finance lease payables 17,790.9 28,742.0 2,247.5 2,142.1 5,703.5 18,648.9
Amounts due to subsidiaries 1,086.3 1,086.3 1,086.3 0 0 0
Amounts due to associates 683.0 683.0 683.0 0 0 0
Borrowings 15,348.1 21,854.0 765.7 2,661.5 5,243.5 13,183.3
Other liabilities 473.5 487.3 242.1 242.6 0.6 2.0
40,872.9 58,343.7 10,515.7 5,046.2 10,947.6 31,834.2
Derivative financial liabilities
Forward exchange contracts
(gross settled):
- Outflows 0.2 19.8 19.8 0 0 0
40,873.1 58,363.5 10,535.5 5,046.2 10,947.6 31,834.2
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Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and other prices will affect the
Group and Company’s financial positions or cash flows.
The Group and Company are exposed to foreign currency risk on sales, purchases and borrowings that are denominated in
currencies other than the respective functional currencies of the Group and Company. The currencies giving rise to this risk are
primarily USD, JPY, GBP, PKR and EUR.
Risk management objectives, policies and processes for managing the risk
The Group and Company are required to hedge a minimum of 50.0% of TNB’s known foreign currency exposure up to
12 months period. The Group and Company use forward exchange contracts and maintains foreign currencies float to hedge
its foreign currency risk.
The currency exposure of financial assets and financial liabilities of the Group and Company that are not denominated in the
functional currency of the respective companies is set out below:
USD JPY GBP EUR Others
31.12.2018 RM’million RM’million RM’million RM’million RM’million
Group
Financial assets
Financial assets at FVOCI 0 0 0 0 0.4
Deposits, bank and cash balances 4,061.0 1.2 134.9 0.5 0.8
4,061.0 1.2 134.9 0.5 1.2
Financial liabilities
Payables 25.1 2.5 0 2.7 0.5
Borrowings 9,210.1 2,526.2 609.1 0 66.1
9,235.2 2,528.7 609.1 2.7 66.6
Company
Financial assets
Amounts due from subsidiaries 303.9 0 0 0 0
Deposits, bank and cash balances 4,027.8 0 134.9 0 0
4,331.7 0 134.9 0 0
Financial liability
Borrowings 9,210.1 2,526.2 0 0 0
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The currency exposure of financial assets and financial liabilities of the Group and Company that are not denominated in the
functional currency of the respective companies is set out below: (continued)
USD JPY PKR EUR Others
31.12.2017 RM’million RM’million RM’million RM’million RM’million
Group
Financial assets
AFS financial assets 0 0 0 0 0.7
Deposits, bank and cash balances 2,676.3 1.2 0 1.0 0
2,676.3 1.2 0 1.0 0.7
Financial liabilities
Payables 47.7 22.2 0 3.8 10.9
Borrowings 5,958.5 2,542.0 68.4 0 2.9
6,006.2 2,564.2 68.4 3.8 13.8
Company
Financial assets
Amounts due from subsidiaries 112.1 0 0 0 0
Deposits, bank and cash balances 2,644.9 0 0 0 0
2,757.0 0 0 0 0
Financial liability
Borrowings 5,958.5 2,538.5 0 0 0
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A 10.0% strengthening of the foreign currencies against RM at the end of the financial year/period would have decreased
post-tax profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates,
remained constant and ignores any impact of forecasted sales and purchases.
Profit or loss/equity
Financial Financial
year ended period ended
31.12.2018 31.12.2017
RM’million RM’million
Group
USD (566.9) (275.1)
JPY (354.9) (55.3)
Company
USD (534.4) (275.1)
JPY (354.7) (55.4)
A 10.0% weakening of the foreign currencies against RM at the end of the financial year/period would have had equal but
opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remained constant.
Foreign currency risk for the Group and Company which have a functional currency other than USD and JPY are not material
and hence, sensitivity analysis is not presented.
The Group and Company’s investments in fixed rate debt securities and its fixed rate borrowings are not exposed to a significant
risk of change in their fair values due to changes in interest rates. The Group and Company’s variable rate borrowings are
exposed to a risk of change in cash flows due to changes in interest rates. Investment in equity securities and short term
receivables and payables are not significantly exposed to interest rate risk.
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The interest rate profile of the Group and Company’s significant interest-bearing financial instruments, based on carrying
amounts as at the end of the financial year/period was:
Group Company
31.12.2018 31.12.2017 31.12.2018 31.12.2017
RM’million RM’million RM’million RM’million
A 5.0% change in the interest rates of the financial liabilities with floating interest rates at the end of the financial year/period
would have affected the Group and Company’s profit or loss and equity by RM0.4 million (FPE 31.12.2017: RM0.5 million). This
analysis assumes that all other variables, in particular foreign currency rates remained constant.
Other price risk arises from the Group and Company’s investments in equity securities, debt securities and unit trust funds.
Risk management objectives, policies and processes for managing the risk
The Group and Company are exposed to price risk because the investments held are classified on the statement of financial
position as FVOCI and FVTPL. The Group and Company mainly invest in unit trust funds, primarily in short term deposits as
underlying instruments with minimal price risk.
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The carrying amounts of deposits, bank and cash balances, short term receivables and payables, short term borrowings and short
term derivative financial instruments approximate their fair values and are equivalent to nominal values due to the relatively short term
nature of these financial instruments.
The table below analyses financial instruments carried at fair value and those not carried at fair value for which fair value is disclosed,
together with their fair values and carrying amounts shown in the statement of financial position.
The classifications in the fair value hierarchy of the Group and Company’s assets and liabilities measured at fair value are summarised
in the table below:
Fair value of financial Fair value of financial
instruments carried at fair value instruments not carried at fair value Total fair
Carrying
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Totalamount value
31.12.2018 RM’million RM’million RM’million RM’million RM’million RM’million RM’million RM’million RM’million RM’million
Group
Financial
assets
Investment in
unquoted
debt security 0 0 0 0 0 326.7 0 326.7 326.7 326.7
Long term
receivables 0 0 0 0 0 139.2 0 139.2 139.2 102.7
Derivative
financial
instruments 0 0.2 0 0.2 0 0 0 0 0.2 0.2
Financial
assets at
FVOCI 0 76.4 0 76.4 0 0 0 0 76.4 76.4
Financial
assets at
FVTPL 9,743.3 0 0 9,743.3 0 0 0 0 9,743.3 9,743.3
9,743.3 76.6 0 9,819.9 0 465.9 0 465.9 10.285.8 10,249.3
Financial
liabilities
Borrowings 0 0 0 0 1,972.1 47,298.2 0 49,270.3 49,270.3 47,832.4
Other financial
liabilities at
amortised
cost 0 0 0 0 0 606.1 0 606.1 606.1 602.0
Derivative
financial
instruments 0 11.5 0 11.5 0 0 0 0 11.5 11.5
0 11.5 0 11.5 1,972.1 47,904.3 0 49,876.4 49,887.9 48,445.9
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The classifications in the fair value hierarchy of the Group and Company’s assets and liabilities measured at fair value are summarised
in the table below: (continued)
Fair value of financial Fair value of financial
instruments carried at fair value instruments not carried at fair value Total fair
Carrying
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Totalamount value
31.12.2018 RM’million RM’million RM’million RM’million RM’million RM’million RM’million RM’million RM’million RM’million
Company
Financial
assets
Investment in
unquoted
debt
securities 0 0 0 0 0 8.7 0 8.7 8.7 8.7
Long term
receivables 0 0 0 0 0 104.7 0 104.7 104.7 86.1
Financial
assets at
FVOCI 0 75.7 0 75.7 0 0 0 0 75.7 75.7
Amounts
due from
subsidiaries 0 0 0 0 0 1,142.1 0 1,142.1 1,142.1 1,052.0
Financial
assets at
FVTPL 5,224.6 0 0 5,224.6 0 0 0 0 5,224.6 5,224.6
5,224.6 75.7 0 5,300.3 0 1,255.5 0 1,255.5 6,555.8 6,447.1
Financial
liabilities
Borrowings 0 0 0 0 1,972.1 20,183.0 0 22,155.1 22,155.1 21,637.0
Other liabilities 0 0 0 0 0 541.1 0 541.1 541.1 536.9
0 0 0 0 1,972.1 20,724.1 0 22,696.2 22,696.2 22,173.9
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The classifications in the fair value hierarchy of the Group and Company’s assets and liabilities measured at fair value are summarised
in the table below: (continued)
Fair value of financial Fair value of financial
instruments carried at fair value instruments not carried at fair value Total fair
Carrying
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Totalamount value
31.12.2017 RM’million RM’million RM’million RM’million RM’million RM’million RM’million RM’million RM’million RM’million
Group
Financial
assets
Investment in
unquoted
debt security 0 0 0 0 0 318.5 0 318.5 318.5 318.5
Long term
receivables 0 0 0 0 0 214.3 0 214.3 214.3 249.5
AFS financial
assets 0 69.3 0 69.3 0 0 0 0 69.3 69.3
Financial
assets at
FVTPL 10,490.2 0 0 10,490.2 0 0 0 0 10,490.2 10,490.2
10,490.2 69.3 0 10,559.5 0 532.8 0 532.8 11,092.3 11,127.5
Financial
liabilities
Borrowings 0 0 0 0 2,023.1 40,711.2 0 42,734.3 42,734.3 41,443.7
Other
liabilities 0 0 0 0 0 520.6 0 520.6 520.6 517.2
Derivative
financial
instruments 0 47.3 0 47.3 0 0 0 0 47.3 47.3
0 47.3 0 47.3 2,023.1 41,231.8 0 43,254.9 43,302.2 42,008.2
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The classifications in the fair value hierarchy of the Group and Company’s assets and liabilities measured at fair value are summarised
in the table below: (continued)
Fair value of financial Fair value of financial
instruments carried at fair value instruments not carried at fair value Total fair
Carrying
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Totalamount value
31.12.2017 RM’million RM’million RM’million RM’million RM’million RM’million RM’million RM’million RM’million RM’million
Company
Financial
assets
Long term
receivables 0 0 0 0 0 183.9 0 183.9 183.9 197.0
AFS financial
assets 0 68.6 0 68.6 0 0 0 0 68.6 68.6
Amounts
due from
subsidiaries 0 0 0 0 0 584.4 0 584.4 584.4 1,213.4
Financial
assets at
FVTPL 3,850.5 0 0 3,850.5 0 0 0 0 3,850.5 3,850.5
3,850.5 68.6 0 3,919.1 0 768.3 0 768.3 4,687.4 5,329.5
Financial
liabilities
Borrowings 0 0 0 0 2,023.1 14,112.9 0 16,136.0 16,136.0 15,348.1
Other
liabilities 0 0 0 0 0 476.7 0 476.7 476.7 473.5
0 0 0 0 2,023.1 14,589.6 0 16,612.7 16,612.7 15,821.6
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The fair value of an asset to be transferred between levels is determined as of the date of the event or change in circumstances
that caused the transfer.
Level 1 fair value is derived from quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can
access at the measurement date.
Level 2 fair value is estimated using inputs other than quoted prices included within Level 1 that are observable for the financial
assets or liabilities, either directly or indirectly.
The fair value is estimated by the difference between the contractual forward price and the current forward price for the residual
maturity of the contract.
Fair value, which is determined for disclosure purpose, is calculated based on the present value of future principal and interest
cash flows, discounted at the market rate of interest at the end of the reporting period.
Level 3 fair values for the financial assets and liabilities are estimated using unobservable inputs.
The interest rates used to discount estimated cash flows, when applicable, ranging between 0.1% to 10.0% (FPE 31.12.2017:
0.1% to 8.9%).
Although the Group and Company believe that their estimates of fair value are appropriate, the use of different methodologies
or assumptions could lead to different measurements of fair value.
The favourable and unfavourable effects of using reasonably possible alternative assumptions have been calculated by
recalibrating the model values using expected cash flows and risk-adjusted discount rates based on the probability weighted
average of the Group and Company’s ranges of possible outcomes.
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The following financial assets and financial liabilities are subject to offsetting arrangements based on Group policies and procedures:
Group Company
Gross Net Gross Net
Gross amounts amounts Gross amounts amounts
amounts set-off in presented in amounts set-off in presented in
recognised the SOFP the SOFP recognised the SOFP the SOFP
RM’million RM’million RM’million RM’million RM’million RM’million
Financial assets
31.12.2018
Amounts due from associates 364.9 0 364.9 7.5 0 7.5
Amounts due from subsidiaries 0 0 0 7,816.0 (3,061.1) 4,754.9
31.12.2017
Amounts due from associates 337.4 (5.4) 332.0 14.6 (5.4) 9.2
Amounts due from subsidiaries 0 0 0 6,312.7 (912.4) 5,400.3
Financial liabilities
31.12.2018
Amounts due to associates (656.3) 0 (656.3) (646.4) 0 (646.4)
Amounts due to subsidiaries 0 0 0 (2,116.2) 656.8 (1,459.4)
31.12.2017
Amounts due to associates (691.2) 0 (691.2) (683.0) 0 (683.0)
Amounts due to subsidiaries 0 0 0 (4,130.5) 3,044.2 (1,086.3)
The Group and Company’s main objective of capital management is to safeguard the Group and Company’s ability to continue as a going
concern in order to provide returns for shareholders and benefits for other stakeholders. The Group and Company will also strive to
maintain an optimal capital structure to reduce the cost of capital.
For the purpose of sustaining or changing the capital structure, the Group and Company may adjust the amount of dividends paid to
shareholders, issue new shares or return capital to shareholders.
In order to be consistent with industry norms, the Group and Company monitor its capital structure on the basis of the gearing ratio. This
ratio is calculated as total borrowings divided by capital employed. Total borrowings include non-current borrowings, current borrowings
and hire purchase as shown in the consolidated statement of financial position. Capital employed is the summation of total equity and total
borrowings.
The Group and Company have met all externally imposed capital requirements.
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During the year, the Group and Company adopted MFRS 15 and MFRS 9 on their financial statements. The Group and Company generally
applied the requirements of these standards retrospectively with practical expedients and transitional exemptions as allowed by the
standards.
As a result of the adoption of the new MFRS, prior year financial statements had to be restated. Nevertheless, as permitted by
MFRS 9, comparative information was not restated. The reclassifications and the adjustments arising from the new impairment
rules are therefore not reflected in the stated balance sheet as at 31 December 2017, but are recognised in the opening balance on
1 January 2018.
The following tables show the adjustments recognised for each individual line item. Line items that were not affected by the changes
have not been included. As a result, the sub-totals and totals disclosed cannot be recalculated from the numbers provided.
Group
Revenue 15,827.1 (134.9) 0 15,692.2
Operating expenses (13,191.1) (0.9) 164.6 (13,027.4)
Net loss on impairment of financial instruments 0 0 (163.4) (163.4)
Finance income 133.5 0 (38.6) 94.9
Finance cost (576.0) 0 44.6 (531.4)
Fair value changes of financial instruments 0 0 (7.2) (7.2)
Taxation and zakat (235.4) 0.4 0 (235.0)
Profit for the financial period:
- Owners of the Company 2,755.7 (133.4) 0 2,622.3
- Non-controlling interests (11.8) (2.0) 0 (13.8)
2,743.9 (135.4) 0 2,608.5
Company
Revenue 14,820.6 (102.4) 0 14,718.2
Operating expenses (12,411.9) 0 136.8 (12,275.1)
Net loss on impairment of financial instruments 0 0 (135.6) (135.6)
Finance income 101.0 0 (29.1) 71.9
Finance cost (564.2) 0 0.2 (564.0)
Fair value changes of financial instruments 0 0 27.7 27.7
Profit for the financial period 2,554.7 (102.4) 0 2,452.3
Group
Total comprehensive income 2,508.1 (135.4) 2,372.7
Company
Total comprehensive income 2,452.3 (102.4) 2,349.9
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Group
Non-current assets
Contract cost assets 0 0.1 0 0.1 0 0.1
Current assets
Receivables, deposits and prepayments 10,362.1 (3,086.6) 0 7,275.5 (203.3) 7,072.2
Contract assets 0 3,059.3 0 3,059.3 (19.7) 3,039.6
Amounts due from associates 332.0 0 0 332.0 (0.4) 331.6
Current liabilities
Payables (9,065.2) 28.8 0 (9,036.4) (1.9) (9,038.3)
Contract liabilities (Deferred income) (1,487.2) 1,199.7 0 (287.5) 0 (287.5)
Consumer deposits 0 0 (5,209.2) (5,209.2) 0 (5,209.2)
Non-current liabilities
Contract liabilities (Deferred income) (1,107.6) (1,342.4) 0 (2,450.0) 0 (2,450.0)
Deferred tax liabilities (7,646.0) 0.3 0 (7,645.7) 32.5 (7,613.2)
Consumer deposits (5,209.2) 0 5,209.2 0 0 0
Equity
Retained profits (52,378.0) 138.8 0 (52,239.2) 189.4 (52,049.8)
Non-controlling interests (925.2) 2.0 0 (923.2) 3.4 (919.8)
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Group (continued)
Current assets
Receivables, deposits and prepayments 8,962.2 (3,227.6) 0 5,734.6
Contract assets 0 3,222.3 0 3,222.3
Current liabilities
Payables (10,245.0) 16.2 0 (10,228.8)
Contract liabilities (Deferred income) (1,460.9) 1,184.2 0 (276.7)
Consumer deposits 0 0 (5,073.4) (5,073.4)
Non-current liabilities
Contract liabilities (Deferred income) (993.9) (1,200.4) 0 (2,194.3)
Deferred tax liabilities (7,728.3) (0.1) 0 (7,728.4)
Consumer deposits (5,073.4) 0 5,073.4 0
Equity
Retained profits (52,115.3) 5.4 0 (52,109.9)
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Company
Non-current assets
Subsidiaries 9,991.5 0 (192.3) 9,799.2 0 9,799.2
Amounts due from subsidiaries 527.6 0 685.8 1,213.4 (106.6) 1,106.8
Long term receivables 690.5 0 (493.5) 197.0 0 197.0
Current assets
Receivables, deposits and prepayments 6,260.9 (2,925.7) 0 3,335.2 (142.8) 3,192.4
Contract assets 0 2,925.7 0 2,925.7 (19.7) 2,906.0
Amounts due from subsidiaries 4,186.9 0 0 4,186.9 (284.4) 3,902.5
Amounts due from associates 9.2 0 0 9.2 (0.4) 8.8
Current liabilities
Payables (5,819.8) 0 0 (5,819.8) (1.9) (5,821.7)
Contract liabilities (Deferred income) (1,377.7) 1,154.2 0 (223.5) 0 (223.5)
Consumer deposits 0 0 (4,910.9) (4,910.9) 0 (4,910.9)
Non-current liabilities
Contract liabilities (Deferred income) (826.0) (1,256.6) 0 (2,082.6) 0 (2,082.6)
Deferred tax liabilities (6,289.9) 0 0 (6,289.9) 32.2 (6,257.7)
Consumer deposits (4,910.9) 0 4,910.9 0 0 0
Equity
Retained profits (45,947.3) 102.4 0 (45,844.9) 523.6 (45,321.3)
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Company (continued)
Non-current assets
Subsidiaries 10,081.5 0 (1,261.3) 8,820.2
Amounts due from subsidiaries 455.0 0 1,754.8 2,209.8
Long term receivables 694.1 0 (493.5) 200.6
Current assets
Receivables, deposits and prepayments 6,119.1 (3,051.8) 0 3,067.3
Contract assets 0 3,051.8 0 3,051.8
Current liabilities
Contract liabilities (Deferred income) (1,384.9) 1,144.6 0 (240.3)
Consumer deposits 0 0 (4,778.2) (4,778.2)
Non-current liabilities
Contract liabilities (Deferred income) (691.5) (1,144.6) 0 (1,836.1)
Consumer deposits (4,778.2) 0 4,778.2 0
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Group
Profit for the financial period 2,743.9 (135.4) 0 2,608.5
Taxation and zakat 235.4 (0.4) 0 235.0
Interest on:
Finance leases 0 0 123.4 123.4
Consumer deposits 0 0 44.0 44.0
Release of:
Customers’ contribution (142.5) 26.9 0 (115.6)
Deferred income (116.8) 34.5 0 (82.3)
Receivables (2,006.3) (135.8) 0 (2,142.1)
Contract assets 0 163.0 0 163.0
Payables (995.7) (17.9) 108.6 (905.0)
Cash generated from operations 1,940.8 (65.1) 276.0 2,151.7
Company
Profit for the financial period 2,554.7 (102.4) 0 2,452.3
Interest on:
Finance leases 0 0 365.4 365.4
Consumer deposits 0 0 41.6 41.6
Release of:
Customers’ contribution (120.9) 24.8 0 (96.1)
Deferred income (77.6) 77.6 0 0
Receivables (455.4) (126.1) 0 (581.5)
Contract assets 0 126.1 0 126.1
Payables (1,268.4) 0 273.2 (995.2)
Cash generated from operations 1,420.1 0 680.2 2,100.3
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(b) Adoption of MFRS 15 ‘Revenue from Contracts with Customers’ (‘MFRS 15’)
The Group and Company have adopted MFRS 15 from 1 January 2018 which resulted in changes in accounting policies and
adjustments to the amounts recognised in the current and prior financial year/period’s financial statements. In accordance with
the transition provisions in MFRS 15, the Group and Company have adopted the new rules retrospectively and have restated
comparatives for the 2017 financial period.
The Group and Company used the following practical expedients as permitted under the Standard:
• effects of significant financing component are disregarded if at contract inception the period between customer payment and
the transfer of goods or services is expected to be one year or less
• incremental costs of obtaining a contract are expensed if the amortisation period of the asset is one year or less
• revenue is recognised at the invoice amount if billing corresponds directly with performance to date
• completed contracts at the beginning of the earliest period presented are not restated
• completed contracts with the variable consideration will use the transaction price at the date the contract was completed
• completed contracts for customers’ contributions received from customers and customers are connected to the network
between 1 September 2017 to 31 December 2017
• contracts modified before the beginning of the earliest period presented will reflect the aggregate effect of all of the modifications
that occurred
• for all reporting periods presented before the date of initial application, the amount of the transaction price allocated to the
remaining performance obligations and an explanation of when the entity expects to recognise that amount as revenue need
not be disclosed
The impact on the Group and Company’s retained profits as at 31 December 2017 and 1 September 2017 are as follows:
Group Company
31.12.2017 1.9.2017 31.12.2017
RM’million RM’million RM’million
(b) Adoption of MFRS 15 ‘Revenue from Contracts with Customers’ (‘MFRS 15’) (continued)
Prior to MFRS 15, revenue from customers’ contribution are recognised upon the connection of electricity supply. With effect from
1 September 2017, in compliance with MFRS 15, the contributions received from customers are recognised over time, through
the amortisation over the estimated useful life of the constructed assets [Note 5(d)]. To reflect this change, the adjustments
of RM113.9 million and RM102.4 million for the Group and Company respectively were made to the retained profits as at
31 December 2017 for the Group and Company.
Customers’ contributions received from customers and these customers are connected to the network within the reporting period
from 1 September 2017 to 31 December 2017 are considered as completed contracts and will not be restated. Furthermore,
revenue from customers’ contributions recognised prior to 1 September 2017 are also considered completed contracts and will
not be restated.
Revenue from other streams based on performance obligations satisfied has changed the timing of revenue recognition for
some subsidiaries. To reflect this change of accounting policy, the adjustment of RM5.3 million was made to the opening
retained profits as at 1 September 2017 and a further adjustment of RM27.2 million was made to the retained profits as at
31 December 2017.
• Contract assets recognised in relation to unbilled revenue were previously presented as part of receivables, deposits and
prepayments (RM3,039.6 million as at 31 December 2017 and RM3,222.3 million as at 1 September 2017 for the Group;
RM2,906.0 million as at 31 December 2017 and RM3,051.8 million as at 1 September 2017 for the Company).
• Contract liabilities in relation to customers’ contribution were previously presented as part of deferred income
(RM2,708.7 million as at 31 December 2017 and RM2,454.8 million as at 1 September 2017 for the Group;
RM2,306.1 million as at 31 December 2017 and RM2,076.4 million as at 1 September 2017 for the Company).
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MFRS 9 replaces the provisions of MFRS 139 that relate to the recognition, classification and measurement of financial assets and
financial liabilities, derecognition of financial instruments and impairment of financial assets.
The adoption of MFRS 9 from 1 January 2018 resulted in changes in accounting policies and adjustments to the amounts recognised
in the financial statements. The new accounting policies are set out in Note 45 above. In accordance with the transitional provisions
in MFRS 9, comparative figures have not been restated.
The total impact on the Group and Company’s retained profits are as follows:
Group Company
RM’million RM’million
Closing retained profits 31 December 2017 after restatement for MFRS 15 52,239.2 45,844.9
Increase in provision for receivables, deposits and prepayments (203.3) (142.8)
Increase in loss allowances for contract assets (19.7) (19.7)
Increase in provision for amounts due from subsidiaries 0 (391.0)
Increase in provision for amounts due from associates (0.4) (0.4)
Loss allowances on financial guarantee contract (1.9) (1.9)
Decrease in deferred tax liabilities 32.5 32.2
Decrease in NCI 3.4 0
Adjustments to retained profits from adoption of MFRS 9 on 1 January 2018 (189.4) (523.6)
Opening retained profits 1 January 2018 – MFRS 9 52,049.8 45,321.3
On 1 January 2018 (the date of initial application of MFRS 9), the Group and Company’s management had assessed which
business models apply to the financial assets held by the Group and Company and had classified its financial instruments into
the appropriate MFRS 9 categories. The main effects resulting from this reclassification are as follows:
• Reclassification from AFS to FVOCI
Investment in unquoted shares are investments that the Group and Company intend to hold for long term strategic
purposes. As permitted by MFRS 9, the Group and Company have designated these investments as measured at FVOCI
at the date of initial application.
On the date of initial application, 1 January 2018, the financial instruments of the Group and Company were as follows, with any
reclassification noted:
Group Company
Measurement category Measurement category
Original New Original New
MFRS 139 MFRS 9 MFRS 139 MFRS 9
Financial assets
Investment in unquoted debt security L&R AC L&R AC
Long term receivables L&R AC L&R AC
Finance lease receivables L&R AC L&R AC
AFS financial assets AFS FVOCI AFS FVOCI
Trade and other receivables L&R AC L&R AC
Amounts due from subsidiaries - - L&R AC
Amounts due from joint ventures L&R AC L&R AC
Amounts due from associates L&R AC L&R AC
Financial assets at FVTPL FVTPL FVTPL FVTPL FVTPL
Deposits, cash and bank balances L&R AC L&R AC
Derivative financial instruments FVTPL FVTPL FVTPL FVTPL
Financial liabilities
Trade and other payables AC AC AC AC
Finance lease payables AC AC AC AC
Amounts due to subsidiaries - - AC AC
Amounts due to associates AC AC AC AC
Borrowings AC AC AC AC
Derivative financial instruments FVTPL FVTPL FVTPL FVTPL
Other liabilities AC AC AC AC
The changes in the measurement category above did not have any impact on the carrying amount of the financial assets and liabilities.
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The Group and Company have four types of financial instruments that are subject to MFRS 9’s new ECL model:
- trade receivables;
- contract assets;
- related company balances;
- non-trade receivables carried at amortised cost; and
- financial guarantee contracts.
The Group and Company also have financial gurantee contracts that are subject to MFRS 9’s new ECL model.
The Group and Company were required to revise its impairment methodology under MFRS 9 for each of these classes of assets.
The impact of the change in impairment methodology on the Group and Company’s retained profits and equity is disclosed in
the table in Note 45 above.
While cash and cash equivalents are also subject to the impairment requirements of MFRS 9, the identified impairment loss was
immaterial.
The Group and Company apply the MFRS 9 simplified approach to measuring expected credit losses which uses a lifetime
expected credit loss allowance for all receivables and financial guarantee contracts. This resulted in an increase in the loss
allowance on 1 January 2018 by RM225.3 million for the Group and RM555.8 million for the Company. Note 45 provide details
about the calculation of the allowance.
The loss allowance increased by RM223.0 million and RM162.5 million for the Group and Company for trade receivables and
contract assets on 1 January 2018. Loss allowance on contract assets is referring to impairment on unbilled revenue.
Applying the ECL model for non-trade receivables (amounts due from subsidiaries and associates) carried at amortised cost
resulted in the recognition of a loss allowance of RM0.4 million and RM391.4 million on 1 January 2018 for the Group and
Company. Note 45 provides the details on non-trade receivables.
Financial guarantee contracts (i.e. contracts that require the Company to make specified payments to reimburse the holder for
a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms of a debt instrument)
are also subject to impairment requirements under the ECL model.
Applying the ECL model for financial guarantee contracts resulted in the recognition of a loss allowance of RM1.9 million on
1 January 2018 for the Group and Company. Note 45 provides the details on financial guarantee contracts.
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(a) Subsidiaries acquired by the Group during the financial year ended 31 December 2018 are as follows:
Group’s
effective Effective
Purchase interest acquisition
Note consideration acquired date
RM’million
Name of subsidiaries
(i) Tenaga Wind Ventures UK Ltd (‘TWV’), a wholly owned subsidiary of TNB International Sdn. Bhd. (‘TNBI’) completed its
acquisition of two United Kingdom (‘UK’) renewable energy companies; GVO and BCL for a purchase consideration of GBP77.4
million in cash and future consideration of GBP13.4 million, through two Share Purchase Agreements (‘SPAs’) with George von
Opel and Tanzanite B.V. & Cataline Breaban (‘the Sellers’) respectively. Refer to Note 15 for the principal activities of these
companies.
The Group’s profit after tax for the financial year ended 31 December 2018 would have been estimated at RM3,745.1 million if
GVO and BCL had been consolidated at the beginning of the financial year ended 31 December 2018. From the acquisition date
up to 31 December 2018, GVO and BCL contributed a loss after tax of RM48.0 million.
(ii) The Company has completed the 100.0% equity acquisition of Allo representing 1,000,002 ordinary shares, a wholly owned
subsidiary of Setia Haruman Sdn. Bhd. (‘SHSB’), for a cash consideration of RM28.0 million. Allo is principally involved in
information technology related services as disclosed in Note 15.
The Group’s profit after tax for the financial year ended 31 December 2018 would have been estimated at RM3,745.4 million
if Allo had been consolidated at the beginning of the financial year ended 31 December 2018. From the acquisition date up to
31 December 2018, Allo contributed a profit after tax of RM3.0 million.
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(b) Details of the assets, liabilities and net cash outflow as at the date of the acquisition of these subsidiaries by the Group during the
financial year ended 31 December 2018 are as follows:
GVO and BCL Allo
Book value Fair value Book value Fair value
RM’million RM’million RM’million RM’million
There were no acquisition during the preceding financial period ended 31 December 2017.
On 10 January 2019, the Company announced that through its wholly-owned subsidiary, TNB Bukit Selambau Solar Sdn. Bhd. (‘TBSS’), it has
secured a RM144.0 million financing for its second Large Scale Solar (‘LSS’) project in Malaysia in Bukit Selambau, Kuala Muda, Kedah. TBSS
together with MUFG Bank (Malaysia) Berhad (formerly known as Bank of Tokyo-Mitsubishi UFJ (Malaysia) Berhad) has recently achieved
financial close for financing the project. The bank will be providing funding and working capital requirements for the LSS project.
TNB and TBSS inked a 21 year Power Purchase Agreement (‘PPA’) for the project in early March 2018. The project is scheduled to be completed
in the fourth quarter of 2020. This LSS has a generation capacity of 30 megawatt (‘MW’) with DC install capacity of 45 megawatt peak (‘MWp’).
About TNB Performance Review Financial Statements
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p.308
STATEMENT BY
DIRECTORS
PURSUANT TO SECTION 251(2) OF THE COMPANIES ACT 2016
We, Tan Sri Leo Moggie and Datuk Seri Ir. Azman bin Mohd, the Directors of Tenaga Nasional Berhad, do hereby state that, in the opinion of the
Directors, the financial statements set out on pages 153 to 307 are drawn up so as to give a true and fair view of the financial position of the
Group and of the Company as at 31 December 2018 and financial performance of the Group and of the Company for the financial year ended
31 December 2018 in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the
requirements of the Companies Act 2016 in Malaysia.
Signed on behalf of the Board of Directors, in accordance with their resolution dated 19 March 2019.
TAN SRI LEO MOGGIE DATUK SERI IR. AZMAN BIN MOHD
CHAIRMAN PRESIDENT/CHIEF EXECUTIVE OFFICER
STATUTORY
DECLARATION
PURSUANT TO SECTION 251(1) OF THE COMPANIES ACT 2016
I, Nazmi bin Othman, the Officer primarily responsible for the financial management of Tenaga Nasional Berhad, do solemnly and sincerely
declare that the financial statements set out on pages 153 to 307 are, in my opinion, correct and I make this solemn declaration conscientiously
believing the same to be true, and by virtue of the provisions of the Statutory Declarations Act, 1960.
Subscribed and solemnly declared by the abovenamed Nazmi bin Othman at Kuala Lumpur, Malaysia on 19 March 2019, before me.
p.309
INDEPENDENT
AUDITORS’ REPORT
TO THE MEMBERS OF TENAGA NASIONAL BERHAD
(Incorporated in Malaysia)
(Company No. 200866-W)
Our opinion
In our opinion, the financial statements of Tenaga Nasional Berhad (‘the Company’) and its subsidiaries (‘the Group’) give a true and fair view
of the financial position of the Group and of the Company as at 31 December 2018, and of their financial performance and their cash flows for
the financial year then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the
requirements of the Companies Act 2016 in Malaysia.
We have audited the financial statements of the Group and of the Company, which comprise the statements of financial position as at
31 December 2018 of the Group and of the Company, and the statements of profit or loss, statements of comprehensive income, statements of
changes in equity and statements of cash flows of the Group and of the Company for the financial year then ended, and notes to the financial
statements, including a summary of significant accounting policies, as set out on pages 153 to 307.
We conducted our audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing. Our
responsibilities under those standards are further described in the “Auditors’ responsibilities for the audit of the financial statements” section
of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We are independent of the Group and of the Company in accordance with the By-Laws (on Professional Ethics, Conduct and Practice) of the
Malaysian Institute of Accountants (‘By-Laws’) and the International Ethics Standards Board for Accountants’ Code of Ethics for Professional
Accountants (‘IESBA Code’), and we have fulfilled our other ethical responsibilities in accordance with the By-Laws and the IESBA Code.
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements of the
Group and the Company. In particular, we considered where the Directors made subjective judgements; for example, in respect of significant
accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits,
we also addressed the risk of management override of internal controls, including among other matters, consideration of whether there was
evidence of bias that represented a risk of material misstatement due to fraud.
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the financial statements as a whole,
taking into account the structure of the Group and of the Company, the accounting processes and controls, and the industry in which the Group
and the Company operate.
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Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the
Group and of the Company for the current financial year. These matters were addressed in the context of our audit of the financial statements
of the Group and of the Company as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matters How our audit addressed the key audit matters
Refer to Note 4 – Critical Accounting Estimates and Judgements and We performed the following audit procedures:
Note 5 – Revenue
• Tested the overall information technology general controls
Sales of electricity of RM49,487.4 million and RM46,883.9 million is of the billing and accounting systems recording the revenue
the most significant component of the Group’s and Company’s revenue transactions.
respectively for the financial year ended 31 December 2018.
• Tested the application controls within the billing systems over the:
Revenue from sales of electricity is based on the end customers’ - maintenance of tariff rates in the billing systems;
consumption and the related tariff rates, which are governed by the - accuracy of calculation of amounts billed to customers; and
Incentive Based Regulations imposed by the Suruhanjaya Tenaga. - recording of revenue transactions.
We focused on the revenue recognition for sales of electricity as it • Tested the billings and revenue adjustments on a sampling
involves the use of complex billing and accounting systems to process basis to assess whether the revenue recognised and revenue
large volumes of data with different tariffs based on respective customer adjustments are valid and recorded accurately.
categories and consumption.
Based on the above procedures performed, we did not find any
material exceptions.
Reinvestment allowance (‘RIA’) claims
Refer to Note 4 – Critical Accounting Estimates and Judgements and We evaluated the Directors’ assessment on the basis of recoverability
Note 42 – Contingent Liabilities of the tax recoverable of RM1,765.1 million and the potential tax
liability by assessing the independent legal confirmation obtained
On 23 November 2015, Inland Revenue Board (‘IRB’) had disallowed from management’s external legal counsel.
the Company’s RIA claims of RM2,068.2 million for Year Assessment
2013 and 2014 and had issued notices of additional assessments Examined the correspondence between the Company and the tax
(‘Notices’) to the Company. The Company had filed an appeal to the authority and assessed the matters in dispute based on advice
Special Commissioners of the Income Tax (‘SCIT’) on the Notices.
received from our own tax experts to review the basis of application
of the relevant tax laws.
As at 31 December 2018, the Group and Company recorded a
tax recoverable of RM1,765.1 million from IRB arising from the
Based on the procedures performed above, we did not find any
resubmission of tax computations in the financial year ended
material exceptions to the Directors’ judgement in the treatment of
31 August 2014, pursuant to the explicit approval given by IRB on 21
the tax recoverable balance and the potential tax liability.
January 2013 on the eligibility of TNB in claiming RIA, and based on
a legal view obtained from external legal counsel.
In addition, the Group and Company have not recorded the potential
tax liability arising from the tax impact if the RIA claimed is disallowed
and the Company loses its appeal.
Key audit matters How our audit addressed the key audit matters
Refer to Note 4 – Critical Accounting Estimates and Judgements and We performed the following audit procedures:
Note 33 – Employee Benefits
• Obtained an understanding of the terms and conditions of the
As at 31 December 2018, the Group and Company recorded post- post-employment benefit plans.
employment benefits of RM11,908.2 million and RM11,279.8 million
respectively. • Tested the present value of post-employment benefit plans
based on the actuarial valuation reports by performing the
Management assessed the present value of post-employment following:
benefit plans by relying on the actuarial valuation reports from an
actuary. The actuarial valuation reports estimated the present value - Discussed with actuary the valuation method used and
of post-employment benefit plans based on key assumptions that checked that the valuation method is acceptable in
comprised expected rate of salary increases, medical cost inflation accordance with MFRS 119 ‘Employee Benefits’;
and discount rates.
- Discussed with actuary on the key assumptions used in
We focused on this area because of the significant estimates made by the actuarial valuation and checked the reasonableness
management in determining the present value of post-employment by comparing to historical data;
benefit plans.
- Checked the reasonableness of the discount rates with
the assistance of our valuation experts by comparing to
market yields of high quality government securities at
reporting date;
Key audit matters How our audit addressed the key audit matters
Refer to Note 4 – Critical Accounting Estimates and Judgements, We have assessed management’s impairment assessments. Our
Note 15 – Subsidiaries and Note 17 – Associates procedures in relation to management’s impairment assessment
includes the following:
Management performed impairment assessments of certain
non-current assets of the Group and Company, other than goodwill, • We assessed the reliability of management’s forecast through
which had impairment indicators. As a result, the following impairment the review of past trends of actual financial performances
losses were recognised during the financial year ended 31 December against previous forecasted results;
2018:
• We assessed the key assumptions used by management in the
• Impairment totalling RM802.7 million at TNB Group in respect of discounted future cash flows projections, in particular, plant
the Group’s investments in Gama Enerji Anonîm Şîrketî (‘Gama load factor, plant availability factor and terminal growth rate, by
Enerji’) and GMR Energy Limited (‘GEL’), associates in Turkey comparing with historical results and market outlook;
and India respectively.
• We performed sensitivity analysis on discount rates, plant load
• Impairment totalling RM1,621.4 million at TNB Company in factors and terminal growth rate used to evaluate the impact
respect of the Company’s investments in Aruna Servicios on the impairment assessment; and
Integrales S.L.U. (‘ASI’) and Power and Energy International
(Mauritius) Ltd. (‘PEIM’), wholly owned subsidiaries of TNB • We assessed the adequacy and reasonableness of the
Company. disclosures in the financial statements.
We focused on this area as the recoverable amounts of the non-current Based on the procedures performed, we noted no significant
assets are determined based on discounted cash flows projections, exceptions.
which require judgement on the part of management on the future
financial performance and the key assumptions used, in particular,
plant load factor, plant availability factor and terminal growth rate.
Information other than the financial statements and auditors’ report thereon
The Directors of the Company are responsible for the other information. The other information comprises Directors’ Report, Statement on Risk
Management and Internal Control, Board Risk Committee Report and the Chairman’s Statement, which we obtained prior to the date of this
auditors’ report, and the remaining Annual Report 31 December 2018 of Tenaga Nasional Berhad, which is expected to be made available to us
after that date. Other information does not include the financial statements of the Group and of the Company and our auditors’ report thereon.
Our opinion on the financial statements of the Group and of the Company does not cover the other information and we do not express any form
of assurance conclusion thereon.
In connection with our audit of the financial statements of the Group and of the Company, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial statements of the Group and of the Company or
our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report
that fact. We have nothing to report in this regard.
About TNB Performance Review Financial Statements
Tenaga Nasional Berhad
Our Business Sustainability Statement Additional Information
Integrated Annual Report 2018 Business Context The Strength of Our Governance
The Directors of the Company are responsible for the preparation of the financial statements of the Group and of the Company that give a true
and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements
of the Companies Act 2016 in Malaysia. The Directors are also responsible for such internal control as the Directors determine is necessary to
enable the preparation of financial statements of the Group and of the Company that are free from material misstatement, whether due to fraud
or error.
In preparing the financial statements of the Group and of the Company, the Directors are responsible for assessing the Group’s and the
Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis
of accounting unless the Directors either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative
but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements of the Group and of the Company as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit conducted in accordance with approved standards on auditing in Malaysia and
International Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users
taken on the basis of these financial statements.
As part of an audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing, we exercise
professional judgement and maintain professional scepticism throughout the audit. We also:
(a) Identify and assess the risks of material misstatement of the financial statements of the Group and of the Company, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to
provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
(b) Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the Group’s and the Company’s internal control.
(c) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made
by the Directors.
(d) Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained,
whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s or the Company’s
ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’
report to the related disclosures in the financial statements of the Group and of the Company or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future
events or conditions may cause the Group or the Company to cease to continue as a going concern.
(e) Evaluate the overall presentation, structure and content of the financial statements of the Group and of the Company, including the
disclosures, and whether the financial statements of the Group and of the Company represent the underlying transactions and events in a
manner that achieve fair presentation.
(f) Obtain sufficient appropriate audit evidence regarding the financial statements of the entities or business activities within the Group to
express an opinion on the financial statements of the Group. We are responsible for the direction, supervision and performance of the
group audit. We remain solely responsible for our audit opinion.
About TNB Performance Review Financial Statements
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We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings,
including any significant deficiencies in internal control that we identify during our audit.
We also provide the Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to
communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable,
related safeguards.
From the matters communicated with the Directors, we determine those matters that were of most significance in the audit of the financial
statements of the Group and of the Company for the current financial year and are therefore the key audit matters. We describe these matters
in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
In accordance with the requirements of the Companies Act 2016 in Malaysia, we report that the subsidiaries of which we have not acted as
auditors, are disclosed in Note 15 to the financial statements.
OTHER MATTERS
This report is made solely to the members of the Company, as a body, in accordance with Section 266 of the Companies Act 2016 in Malaysia
and for no other purpose. We do not assume responsibility to any other person for the content of this report.
Kuala Lumpur
19 March 2019
About TNB Performance Review Financial Statements
Tenaga Nasional Berhad
Our Business Sustainability Statement Additional Information
Integrated Annual Report 2018 Business Context The Strength of Our Governance
p.315
ADDITIONAL
INFORMATION
p.316
STATISTICS OF
SHAREHOLDINGS
AS AT 18 MARCH 2019
SHARE CAPITAL
DIRECTORS’ SHAREHOLDINGS
No. of Shares
No. Name of Directors
Direct Interest %
Notes:-
* Registered with Citigroup Nominees (Tempatan) Sdn. Bhd.
** Registered with AmanahRaya Trustees Berhad
*** Kumpulan Wang Persaraan (Diperbadankan)
- Registered with Citigroup Nominees (Tempatan) Sdn. Bhd. (40,562,000)
I/We,______________________________________________________________________________________________________________________________________________________
(FULL NAME OF SHAREHOLDER AS PER NRIC/CERTIFICATE OF INCORPORATION IN CAPITAL LETTERS)
__________________________________________________________________________________________________________________________________________________________
(FULL ADDRESS)
FULL NAME OF PROXY AS PER NRIC IN CAPITAL LETTERS NO. OF SHARES PERCENTAGE (%)
Proxy
1 or failing him/her
NRIC No./Passport No.:
Proxy
2 or failing him/her
NRIC No./Passport No.:
TOTAL 100%
the *Chairman of the Meeting, as my/our proxy, to attend and vote for me/us and on my/our behalf at the 29 TH ANNUAL GENERAL MEETING (29 TH AGM) of
TENAGA NASIONAL BERHAD (“TNB” or “the Company”) to be held at mySpace1@Ballroom, Level 3, The Malaysia International Trade & Exhibition Centre
(MITEC), Kompleks MITEC, No. 8, Jalan Dutamas 2, 50480 Kuala Lumpur, Malaysia on TUESDAY, 14 MAY 2019 at 10.00 a.m. and/or at any adjournment thereof.
Please indicate with an “X” in the box provided for each Resolution as how you wish your votes to be cast. If no voting instruction is given, the proxy(ies) is/are hereby authorised
to vote, or abstain from voting at his/her/their discretion.
*If you do not wish to appoint the Chairman of the Meeting as your proxy/one (1) of your proxies, please strike out the words “the Chairman of the Meeting” and insert the
name(s) of the proxy(ies) you wish to appoint in the blank spaces provided.
1. A member of a Company shall be entitled to appoint another person as his/her proxy to exercise all or any of his/her rights to attend, participate, speak and vote at a
meeting of members of the Company, in accordance with Section 334(1) of the Companies Act 2016.
2. Only members whose names appear in the Record of Depositors as at 7 May 2019 shall be entitled to attend the AGM or appoint proxy(ies) to attend and/or vote on
their behalf. There shall be no restriction as to the qualification of a proxy.
3. Where a member is an authorised nominee as defined in accordance with the provisions of the Securities Industry (Central Depositories) Act 1991, it may appoint up
to two (2) proxies in respect of each Securities Account it holds with ordinary shares in the Company standing to the credit of the said Securities Account.
4. A member entitled to attend and vote at the Meeting is entitled to appoint not more than two (2) proxies to attend and vote on his/her behalf. Where a member appoints
two (2) proxies, the appointments shall be invalid unless the proportion of the shareholdings to be represented by each proxy is specified.
5. The instrument appointing a proxy/Proxy Form shall be in writing under the hand of the appointer or of his attorney duly appointed under a power of attorney. Where the
instrument appointing a proxy/Proxy Form is executed by a corporation, it shall be executed either under its common seal or under the hand of any officer or attorney
duly appointed under a power of attorney.
6. A corporation which is a member may by resolution of its Directors or other governing body authorise such person as it thinks fit to act as its representative at the
Meeting in accordance with Clause 51 of the Company’s Constitution.
7. Duly completed Proxy Form must be deposited to the Boardroom Share Registrars Sdn. Bhd., Level 6, Symphony House, Pusat Dagangan Dana 1, Jalan PJU 1A/46,
47301 Petaling Jaya, Selangor Darul Ehsan, Malaysia not less than twenty-four (24) hours before the time appointed for the taking of the poll or no later than
13 May 2019 at 12.00 p.m.
8. Pursuant to Paragraph 8.29A of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, voting at the 29 th AGM of the Company will be conducted
by poll. Poll Administrator and Independent Scrutineers will be appointed respectively to conduct the polling/e-voting process and to verify the results of the poll.
9. Registration of members/proxies attending the Meeting will start from 7.00 a.m. on the day of the Meeting and shall remain open until such time as may be determined
by the Chairman of the Meeting. At the closure thereof, no person will be allowed to register for the Meeting nor enter the Meeting venue. Members/proxies are required
to produce identification documents for registration.
1. Fold Here
AFFIX
STAMP
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