minimisingdisruptions Nothing is perfect. Things will break down.

We’re perfecting our response time to deal with any eventuality. TNB Corporate Report 2002 58

President / Chief Executive Officer’s Report

It is my pleasure as your CEO to present the 2002 Annual Report. It could not have been a more memorable year. We belong in the category of those high profile strategic industries that bear the brunt of any external shocks. TNB, one can fairly say, is inured to emergencies, and has developed to a high degree the operational capability for dealing with the unexpected; to prevent any disruption in energy supply. But nothing could have prepared us for 911. Like the rest of the country, we are still assessing the impact both in economic terms, and in our concern for security, always a priority are now calling for increased vigilance.

I came to my present task in October 2001 in time to number of complex challenges. This validated the inherit this unique external situation. TNB meantime technical capability we have built up over long experience produced its share of operating issues that created a progressively enhanced by the most modern advances in fairly challenging scenario internally. As an omen of what power technology, and sustained new strategic thinking was in store for us, we had a major problem at Kapar on our part. caused by a transformer malfunction. We were not able to recommission the plant until July 2002. This was only The other basis for confidence lies in the progress we one of the many challenges we faced last year. We were made in the course of the year, towards positioning put squarely on our mettle. As the national power utility, ourselves for greater discipline and effectiveness, for we have to provide one of the most basic needs of both catalyzing new initiatives, and making ourselves more industry and households, with the obligation to keep the ready to power the future. The challenges that marked lights on. We recognise as our prime responsibility, the last year gave us an up to date problem analysis to task of ensuring the security and uninterrupted reliability ensure our future strategies were solutions driven. of energy supply. Shareholders may be assured our confidence in that future is well founded, and will find it well attested in the The main message of this year’s report is one of renewed Report that follows. and well proven confidence in both our present capacity and in the future outlook for the growth and enhanced We began with a proactive policy we adopted despite, in efficiency of TNB. fact in response to the problems that assailed the industry.

This theme is borne out first by the exceptional level The top story of the year is well named. This is the T7 of operational difficulty we encountered during the course strategy we communicated organisation wide, an innovative of the year, and the resilience shown in the way the 5 year initiative where the “T7” stands for tiger by the year company was able to respond to and surmount any 2007. In choosing the tiger as our symbol, we identified

TNB Corporate Report 2002 59 The main message of this year’s report is one of renewed and“ “well proven confidence in both our present capacity and in the future outlook for the growth and enhanced efficiency of TNB.

Dato’ Pian Sukro President/Chief Executive Officer TNB Corporate Report 2002 60 President/Chief Executive Officer’s Report (Continued)

fuels; such as fuel oil and distillate. We avoided going into load shedding. These measures afforded us a breathing space but were costly. The gas crunch had a rather severe impact on the third quarter results, which reported a net loss of RM352.7 million. This reflects the higher cost of alternative fuels.

The situation in the end was happily turned around. A new supply stream coming in from West Natuna, recently acquired by Petronas, proved most timely. I am pleased now to be able to report that the shortfall had narrowed to 120 mscfd by July whilst by August it was less than 100 mscfd.

“The T7 strategy we communicated organisation wide is an innovative 5 year initiative where the T7 stands for the tiger by the year 2007.”

with the animal Asia most associates with strength, agility, speed – and most appropriate of all for TNB – sheer power. At the same time, it also serves to remind ourselves that we have to deal with a very harsh environment.

Seven Structural Building Blocks were put in place to streamline the entire organisation.

The new business planning and budgeting process set objectives and a clear common direction for what – we have called the “Tiger” scenario, to fulfill the company Vision. Performance is key. This rests on the seven components designated the “Building Blocks” across the entire organisation. Shared values provide the essential foundation. The other elements needed to build the organisation to its peak are corporate culture, performance management, business process re- engineering, organisational structure, all contributing and building up to the final thrust in terms of strategy and direction. With the template in place, a more rigorous tracking system can now be used against key performance indicators.

Meanwhile there were pressures building on the operational front demanding immediate attention. The major challenge of the year was a threatened shortage of gas. In the first half of the year we were facing a worrying shortfall of 199 million standard cubic feet per day. TNB's immediate response to the problem was to resort to alternate TNB Corporate Report 2002 61

TNB itself responded quickly by speeding up the commissioning of In the course of the year environment impact studies were carried out the projected new coal fired plant at Janamanjung (first unit of and emissions were continuously treated to protect the atmosphere. 700MW) originally scheduled for April 2003 but now brought forward Our policy has always been to aim for clean as well as efficient fuels to the end of the present year. and we have a division dedicated to environmental quality and protection in the power sector. We have reason to be proud of the resilience and foresight that was shown, evident in the manner in which the gas supply problems were The second major challenge in the year under review was the problem handled with such dexterity that our customers were saved from of plants under performing, as witnessed by the number of outages electricity supply disruptions. We are now once again comfortable and the set back at Kapar. Some of this was down to teething troubles. with our fuel supply position, having adequate stocks of standby fuel The Kapar Phase III has two units of 500MW, which were designed and having gained experience in dealing with the problems of fuel oil to generate efficient base load energy requirements, and our priority and distillate delivery logistics. was to see that there were no disruptions in supply. We are now back to normal and our new organisation performance strategy should The gas supply shortfall incident had forcibly reminded us of our over ensure an unremitting monitoring and a more efficient delivery system. dependence on gas which currently supplies over 70% of the country's fuel for electricity generation. We are already well embarked In the transmission sector, we have upgraded the network by putting on a new strategy of rebalancing the industry’s generating fuel mix, in a 500kV system. We commissioned a high voltage direct current moving decisively from gas to coal and hydro electricity. The grid between and Thailand which, it is hoped, will contribute projected new Janamanjung Plant with 2100MW is part of the directly to regional aspirations for an Asian wide system. TNB favours aggressive effort to increase the use of coal. It will boost the coal a policy of increasing connectivity with its neighbours, and is component in the fuel mix from the current 12% up to 21% by 2005. positioning to take the lead in this area. To this can be added the future input from YTL Power’s 1,400MW Jimah power plant and SKS Ventures’ 2,100MW plant at Tanjong Bin Most of all, our focus remained on the TNB culture of customer service both based on coal. We anticipate the present 72% share of gas will excellence mandated by the national responsibility we hold to provide be slashed to 49% by 2010. an essential service and a quality service to our people. Customer service excellence has become the hallmark of our operations. There is a strong rationale for the shift to coal. There is an abundant supply of coal from multiple sources around the world. In addition the cost of coal today makes it cheaper than gas on a RM per GJ basis. Moreover, modern desulphurisation technology makes coal burning clean. TNB Corporate Report 2002 62 President/Chief Executive Officer’s Report (Continued)

Whilst probably the most important initiative was the study we undertook into the question of power quality – resulting in a Paper submitted to Government on the subject.

The third anxiety for a time last year was the concern for the possible impact of the deteriorating international situation, post 911, upon our Liberty power plant in Pakistan. This was TNB’s maiden investment overseas to the tune of more than RM1 billion. It had already had a chequered history. First pursued in 1995 it was actually completed in 1998 but changes in the Pakistan Government delayed the commercial start up. However, patience and perseverance paid off. Liberty Power is now a success story and has proven a good investment. It came on stream last year and in the first 8 months of operations chalked up sales of some RM196 million. The station is now running close to full capacity exceeding the 60% it committed to supply initially, and resulting in the production cost per unit being significantly reduced by 23%.

I would like particularly to thank both the Pakistan Government and most of all the Malaysian Government who have been supportive of the venture. This was TNB’s first international foray. We feel fully vindicated and are encouraged now to extend our global reach.

The ultimate challenge is to address the new security concerns especially after the tragic incident in such close proximity to us in Bali.

Exceptionally, TNB set up its internal security force over 20 years ago. There is also the 70 Regimental Force sponsored by the Government that undergoes regular army training. Power plants are potential targets of subversion. We have to be realistic about this. But we are fully confident not only of our technical equipment and our capability in dealing with any threat, but also of the unceasing vigilance of those responsible for security.

Finally since what follows is a financial accounting to shareholders, we still need to address the problem of burgeoning debt, which currently stands at RM28 billion. On the soft side of enterprise our human resources policy continued in importance. Much of the year was devoted to negotiating our Third We have high capex requirements over the next five years given the Collective Agreement, which finally reached an amicable conclusion. new projects we have in mind or already on the drawing board. We The Agreement was signed recently. We continue to empower our would like to reassure the shareholders that key financial initiatives staff in the relevant disciplines needed to meet the new demand of that we have taken since 1998 have started to show encouraging the K-Economy. This effort encompasses further education as well as results, of special significance is the reduction of gearing from 1.85 training and development for employees are encouraged to upgrade to 1.66. Implementation of TNB's Debt Liability Management Policies their individual academic attainments and the company grants the and Strategies is progressing as scheduled resulting in significant time and opportunity for this. improvement in TNB’s cash flow ratios.

TNB continued to discharge its corporate citizenship responsibilities throughout the year. TNB Corporate Report 2002 63

In promoting healthy lifestyle across its community, TNB sponsored a wide range of youth sporting events among which were the 21st SEA GROUP FINANCE Games in Kuala Lumpur; the Kilat Sixes & Sevens Hockey Opens 2002; UNITEN’s Premier Bakti Graduate Program; the Seremban The Group Finance Division is responsible for Group Budget, Financial District Youth Council’s Premier Excellence Award for Youth and the Reporting, Taxation, Funding, Forex & Money Market, Payments, Polis DiRaja Malaysia’s MESRA cross-country event. TNB also Financial System Support and Financial Controls and Risk Management. sponsored some world class events such as, Men’s World Cup Hockey 2001 and World Class Equestrian Events. For the year under review, Group Finance amongst other things, continued to focus on its core activities under Debt-Liability Apart from its involvement in sports, TNB is also highly committed Management, implementation of the recently approved Financial towards aiding and assisting health care programmes, such as Controls and Treasury Risk Management and providing accounting donating medical equipment and medical aid to Kosovo, the Hospital and financial support for new corporate initiatives designed to UKM Patients Welfare Fund, The Malaysian Red Crescent Society improve TNB’s competitive position and deliver value. Friends of Humanity Campaign, MAKNA Cancer Research Fund, and the Asian Medical Students Association, Malaysia for the 23rd Asian Medical Graduates Convention in Japan. TNB’s concern for the under FUNDING & DEBT LIABILITY privileged was evident in its contribution towards a hostel for orphans MANAGEMENT ACTIVITIES and children in Sik, Kedah. With the domestic interest rate environment having remained relatively stable during the period under review, TNB continued to take As a good corporate citizen, TNB has undertaken various publications, advantage of the short-term interest rate scenario as well as the such as “Malaysia, Nation of Islam”, The Art of Living in Malaysia” a medium to long-term rates to tap principally all of its funding collection of stunning home interiors and publishing the Alumni requirements in Ringgit. This is in line with its on-going exercise of Association of Malaysian Overseas Students for its Seminar “Shaping debt liability management thereby to better manage its cash inflows Malays of Excellence”, to name a few. against outflows.

In conclusion, may I thank the Board of Directors and the Government Funding activity during the period under review was generally low for their overwhelming support, our shareholders for their loyalty and compared to previous years partly due to the availability of various faith in us, and our hardworking and dedicated staff for helping us unutilised floating rate facilities such as RUF, CP/MTN, BAs and RCs through the bad times and placing us so securely on the path to as well as through management initiatives to monitor and control the recovery and guaranteeing the promise of the future. level of capital expenditure in Financial Year 2002. This resulted in new funds raised during the year totalling approximately RM1,250 million whilst total capital expenditure incurred by the Group for Financial Year 2002 was in the region of RM4,520 million.

The year commenced with the issuance of RM500 million Tranche B Tenaga Income Securities (“TIS”) in September 2001. Identical to the RM1,000 million, Tranche A TIS effected in Financial Year 2001, the cost of funding under this issuance is reduced through the servicing of debt by way of payment of net dividend to the holders of redeemable preference shares, thus resulting in an effective borrowing cost to TNB of 4.8% per annum as compared to 6.3% per annum under the then market rate. The funds raised were to meet the capital expenditure financing requirements. TNB Corporate Report 2002 64 President/Chief Executive Officer’s Report (Continued)

In December 2001, TNB completed the final part of its KWSP/Maybank repackaging exercise with the issuance of RM2,000 million 20-year Islamic papers in the domestic Private Debt Securities market at a yield of 7.1% per annum. New funds available under this issuance was RM375 million, the balance being restructuring of existing borrowings.

The low interest rate environment also brought about opportunities for TNB to sell a portion of its conventional staff housing loans to Cagamas Berhad under multiple tenors ranging from 3-10 years at interest rates ranging from 4.05% to 5.15% per annum. TNB is also contemplating on the sale of staff housing loans to Cagamas under an Islamic scheme in the near future.

On an on-going basis, TNB has already taken all necessary steps to put into place a RM1,500 million Murabahah Commercial Paper/Medium Term Note Facility which is expected to be effected in Financial Year 2003.

FINANCIAL RATIOS The efforts embarked on by TNB to restructure its debt, take advantage of short-term interest rates under the existing interest rate scenario as well as its more stringent monitoring and control over capital expenditure were the main contributing factors to the improvements in some of the financial ratios as shown below:-

Financial Year Financial Ratios 1998 1999 2000 2001 2002

Self-Financing Ratio 30:70 31:69 41:59 45:55 43:57

Weighted Average COF 6.9% 6.1% 5.9% 5.3% 5.3%

Currency Mix (RM:Foreign) 36:64 46:54 47:53 46:54 48:52

Debt Service Cover Ratio 1.6x 1.5x 1.5x 1.5x 1.8x

Debt Equity Ratio 1.80 1.94 1.88 1.71 1.66 TNB Corporate Report 2002 65

The improvements shown above have been acknowledged by the rating agencies in their recent reports on TNB:-

“TNB’s loan mix which had previously been heavily skewed towards foreign currency has been increasingly rebalanced in favour of Ringgit loans over the past few years...... the management has also moved to refinance TNB’s short-term borrowings with longer tenors in an effort to better match its debt obligations with its cash profile.... As a result of these initiatives, over 60% of its debt is now long-term, with repayment tenors of 5 to 90 years” – Rating Agency of Malaysia Berhad (“RAM”)

“Debt restructuring initiatives currently underway are expected to reduce interest cost and foreign exchange risk and extend debt maturities. ...The company continues to be proactive with its debt management as it has been able to reduce its cost of funding to 5.3% FINANCIAL RISK MANAGEMENT from 6.9% in 1998.” – Standard & Poors & CONTROLS The following manuals; • Group Financial Controls and Treasury Risk Management Guidelines, • Group Financial Policies and Procedures

which were drawn up in 2000 have been approved by the Board of Directors in April 2002.

These manuals establish the basic control requirements to provide the Group with the basic principles, concepts and standards for an effective system of financial management control as well as lays down the financial policies and procedures that are common and applicable throughout the Group so as to provide consistency in the treatment of accounting and financial operational matters.

The manuals also represent the basic standards required for TNB and Though TNB’s debt equity ratio is still relatively high, it has to be kept its subsidiaries to maintain an effective system of financial control in mind that this is the consequence of the severe depreciation of the and risk management. This will promote recognition and acceptance Ringgit and the reduction in reserves thereof. Nevertheless, the matter of management's responsibility for the establishment and is being addressed. maintenance of financial control and risk management systems and procedures within these guidelines. With the introduction of the new accounting rule under MASB 25 which had become effective from 1 July 2002 [and to be reflected in Following upon the approval by the Board of Directors, the manuals TNB’s 1st Quarter Results ending 30 November 2002], companies are were reviewed to ensure that they are in line with the recent changes required to fully provide for deferred taxation. There will be no impact in the Group's organisational structure and processes arising from the on TNB’s cash position, and as quoted by RAM:- strategic initiatives. The completion of this review process will enable “While this will have an obvious impact on its gearing ratio, ....We the formal launching of these initiatives in the early part of the next note that this is purely an accounting entry and will have no impact financial year. Management at all levels of TNB Group, particularly the on TNB's ability to service its debts.” operating units are then required to establish process and procedure operating manuals that meet or exceed these guidelines. This would TNB Corporate Report 2002 66 President/Chief Executive Officer’s Report (Continued)

“The successful implementation of ERMS will bring the benefit of an enterprise-wide integrated system and a single competency centre.”

effectively promote the internalisation of the financial risk management culture throughout the Group. Apart from the above, GROUP INTERNAL AUDIT collaborative initiatives were also undertaken with other business divisions in TNB Group to identify and assess the other areas of The revamped Listing Requirement of the KLSE have placed the business risk faced by the Company. function of internal audit greater prominence in terms of its roles and responsibilities. TNB Group Internal Audit is an independent function SUPPORTING CORPORATE reporting directly to the Board Audit Committee. It is entrusted to add value to operating business by assisting management to improve INITIATIVES TOWARDS BUSINESS controls, operations, effectiveness in managing risk and corporate EXCELLENCE governance processes consistent with the Group’s goals and objectives. Active accounting and financial advisory support were provided in the successful implementation of several corporate initiatives, particularly Group Internal Audit carry out audits of core and non-core in the areas of improved business planning and budgetary process subsidiaries and departments of TNB. The main objectives of the and clearer divisional/subsidiary performance reporting to reflect Audit are as follows: greater accountability. Substantial amount of financial staff resources • Assess effectiveness of the systems of Internal Control were also allocated for the IT based Enterprise Resource Management throughout the Group. System (ERMS). It is well recognised that the successful • Assess the effectiveness of risk management practices in the Group. implementation of ERMS will bring the benefit of an enterprise-wide • Assess utilisation of resources in ensuring effectiveness, efficiency integrated system and a single competency centre. and economy of Group’s operation and management processes. • Corporate governance, accountability and transparency of management in decision making process.

The audit carried out focussed not only on critical and high-risk areas that have significant and material impact on the Group’s performance, but also on the traditional routine or “house-keeping” activities which affect the basic internal controls.

During the financial year, 24 audit reports were submitted to the Board Audit Committee. The audit works covered all critical areas of the Group, such as: • Realiability of supply • Operational and efficiency •Tendering and award exercise • Project planning and implementation • Metering, billing and revenue collection • Funding • Corporate Governance process. TNB Corporate Report 2002 67

Phase 2 was commissioned to establish the mechanisms for realising CORPORATE PLANNING, the strategy set in Phase 1. First, the Business Planning and Budgeting process was reviewed. A new enhanced process is now in DEVELOPMENT AND place to drive the agreed 5-year strategic plan. The key initiatives identified in Phase 1 were further detailed into precise implementation SERVICES goals. Specific owners were identified against these initiatives and charged with their delivery. A special unit, the Organisation Transformation Unit (OUT) has been established to monitor, facilitate For the year 2001, the Corporate Planning, Development and Services and ensure the realisation of all the key initiatives, and goals. (CPDS) Division played on important role and was instrumental in supporting TNB in achieving its overall business goals. During Phase 2 of the T7 project, various communication platforms were established to keep the whole organisation informed of the The division is accredited in providing and implementing policies and changes expected. A process manual was developed to support the guidelines for Corporate Planning, Investor Relations, Corporate information task and ensure a continuous communication flow. The Communications, Procurement Services, Legal Services as well as the OTU is also entrusted to drive the communication campaign. Regulatory Department.

Performance measures were established for the President and each of CORPORATE PLANNING the Divisions. Performance targets are now being fine-tuned and finalised. A performance tracking system to monitor all the key Among the major projects undertaken by the department during the performance indicators (KPI) and the implementation status of the last financial year were the corporate planning project and the macro key initiatives has been established. organisation project.

The macro-organisation structure was launched in October 2001. The The corporate planning project, renamed T7 Project, was implemented Corporate Planning Department becomes responsible for cascading in two phases. Phase 1 sought to reconfirm and set the direction the application of this across the whole group. and strategy of the company. This involved identifying strategic initiatives company wide, assessing their potential impact and the value proposition. TNB Corporate Report 2002 68 President/Chief Executive Officer’s Report (Continued)

The Corporate Quality Unit successfully organised the annual Quality Convention, the President's Quality Award and TNB Productivity Award. In addition the Corporate Quality Unit undertook other quality control activities, advising on issues related to QCS-IT, cross- functional team development and environmental quality (5S).

Over and above its daily operational activities, the department provided support services to the offices of the Chairman, President and Vice President (CPDS).

INVESTOR RELATIONS Tenaga Nasional Berhad, as one of the largest public listed companies on the Kuala Lumpur Stock Exchange (in terms of market capitalisation) attracts major equity and fixed income investors from all over the world. Therefore, it has to ensure that shareholders and fund managers receive consistent and accurate information regarding the company. The Investor Relations Department (IRD) was set up in 1992 to assist the company in competing in the domestic and international capital markets through the enhancement of shareholder value.

In order to achieve this objective and to impart and demonstrate the values and strategies of the company clearly and accurately, the IRD enabling top management to take immediate action. Communication has applied every legitimate avenue of communication. A good with shareholders and the investment community has been example of this is through the new and improved IRD website - IRD standardised, using the latest technology available. The IRD has Online. IRD Online provides the public access to information such as improved its communication with investors by introducing the TNB current share price, annual reports, market snapshot, recent teleconferencing facility during the analyst briefings which are also press releases, online information and meeting requests as well as linked-up regionally with major financial cities such as Hong Kong information on other IRD services. and Singapore, aside from the regular meetings. This enables investment communities worldwide to listen to as well as participate Under the recent restructuring exercise, IRD is able to ensure more in the briefings. smooth and comprehensive communication within the company and with the shareholders, especially the investment community. The The department has drawn up a comprehensive and proactive annual department is able to provide prompt feedback and reports to top programme to meet members of the investment communities both management on investors’ concerns and market perceptions thus, locally and internationally, including shareholders. This year, the department, with support from top management and other departments within the company had successfully organised and participated in various events which include: (a) exhibitions and expos like those organised by ASLI and KLSE (b) conferences organised by various research houses including CIMB, CLSA, CSFB, JP Morgan, HSBC Securities, RHB and Deutsche Bank (c) in-house presentations for local and international fund managers, investors and trade mission delegates (d) one-on-one meetings with equity and fixed income investors. These types of meetings have proven to be the most effective medium to enhance investors’ understanding and perception of the company TNB Corporate Report 2002 69

The Investor Relations Department also played an important role in CORPORATE COMMUNICATIONS enhancing corporate governance and transparency within the The Corporate Communications Department has been instrumental in company. An example of this would be the organisation of a special fostering mutual relations with the energy industry, media and analyst briefing to address specific issues effecting investors. stakeholders.

Going forward, the IRD will continue to explore possible avenues of The department has a wide range of responsibilities incorporating increasing shareholder value through more proactive communication public relations, advertising and event management. Amongst the role with investors. Among the avenues that have been identified by the Corporate Communications undertake revolves around areas of IRD include through video conferencing, web casting and site visits publication; exhibition; sponsorships; audio visual services; media; to enable investors to better understand the operations of the government liaison; protocol services and event management as well business. as sports activities.

Corporate Communications has established its monthly in-house American Depository Receipts magazine, Tenagawan as the source of information for all the staff In January 1994, TNB launched its Level 1 American Depository throughout Peninsular Malaysia. Together with TNB-IT, the department Receipts (ADR) in New York, United States of America. Each ADR has also embarked on promoting the company worldwide through its carries an equivalent of four underlying TNB shares. The only web site. custodian bank for TNB's ADR programme is Malayan Banking Berhad. The Bank of New York in the USA, is the Depository Bank On the local front, the department establishes good relations with and the ADRs are traded over the counter. As at 30 September 2002, ministries, regulators and media. It undertakes the supporting role to a total of 160,702 ADRs were issues. Therefore, the total number of other departments within the company in matters pertaining to issues ordinary shares held through these ADRs was 642,808 which that affect the image of the company. represented less than one per cent of the issued and paid-up capital of the 3,111,825,300 shares of Tenaga Nasional Berhad. TNB Corporate Report 2002 70 President/Chief Executive Officer’s Report (Continued)

Through the various channels of communication, Corporate Communications has executed its functions in the best interest of the HUMAN RESOURCE company. Therefore, employees are given opportunities to participate in activities that are geared towards achieving company objectives. DEVELOPMENT

TNB recognises that its employees are responsible and would PROCUREMENT SERVICES continue to be responsible for the success or the failure of the DEPARTMENT Company. To ensure continuous success of the Company, the focus For the financial year ending 31 August 2002 TNB’s Procurement of the company has always been in realising the full potential of its Services department finalised the proposed review of the TNB employees through human resource development. Procurement Policy & Procedures as well as the revised General Condition of Contract for use in all future tenders by the TNB Group of companies. HUMAN RESOURCE DEVELOPMENT During the year, TNB continued with the greater fervour and enthusiasm The main objective of the TNB Procurement Policy & Procedures is by implementing programmes to enhance technical competencies and to provide more effective control over procurement exercises business acumen of its employees. TNB provides opportunities for including tendering, evaluation and awards processes to enable the employees to upgrade their educational status and their capabilities. Company to meet its business goals. Senior Managers are encouraged to acquire post-graduate qualifications. Likewise, the reviewed General Condition of Contract (GCC) addressed A total of 143 executives were sponsored to do Masters and Doctorate the importance of risk management and insurance in project programmes during the year such as the Corporate Finance for Top management. The new GCC provides for a clearer risk demarcation Management by Harvard Business School and Business Acumen between the contractor and purchaser (TNB) so that insurance Programme by Henley College of Management, as platforms to share coverage is able to cover the interests of both parties as well as any and exchange knowledge amongst its employees. third party involved. A new Executive Development Programme has been introduced based on a competency model for managers and executives in effectively carrying out their role in ensuring the continuous success of TNB.

TECHNICAL NON-TECHNICAL

Electrical Engineers 1,116 Accountants 154

Mechanical Engineers 416 Administrators 237 Civil Engineers 92 Information Technology 134 Others 965

Sub-Total = 1,624 Sub-Total = 1,490 TNB Corporate Report 2002 71

NON-EXECUTIVES TOTAL NUMBER OF EMPLOYEES

Technical 10,977 Total number of Employees at TNB Group and Wholly- Non Technical 6,680 Owned Subsidiaries 23,573

General Workers 2,802 Total number of Employees at Subsidiries not Wholly- Owned 2,113

Sub-Total = 20,459 Total Number Of Employees = 25,686

TNB has recently re-introduced the apprenticeship programme to address the aging workforce. During the year, 283 cadet technicians and 145 trained clerical staff graduated from the programme.

TNB has introduced an integrated career and development initiative. Employees are required to attend the mandatory programmes to improve their competencies and as a pre-requisite for career advancement.

TNB also organised conferences, seminars and forums. Distinguished world class speakers were also invited, making these programmes very valuable to the employees and the Company. The in-house seminars and forums acted as good training ground for TNB employees for their participation in international seminars and forums.

INDUSTRIAL RELATIONS There are three registered Trade Unions in TNB representing nearly 80% of the employees. Management and Unions have a very cordial and healthy relationship. The Unions are TNB’s strategic partners and are supportive of Company initiatives.

OCCUPATIONAL SAFETY AND HEALTH TNB has developed a work culture committed to Safety and Health practices formulated in the TNB Occupational, Safety and Health Policy.

The Company has appointed over 40 Safety and Health Officers throughout the organisation to implement the Safety and Health practices to its highest possible standard. TNB Corporate Report 2002 72 President/Chief Executive Officer’s Report (Continued)

Project planning and implementation, plant and equipment For the second consecutive year, the Sultan Mahmud Power Station, maintenance are all subject to safety procedures as laid down by our Kenyir, Terengganu, was honoured with the prestigious Gold Medal of Safety Excellence Management System (SEMS), which adheres strictly the Royal Society for the Prevention of Accidents (RoSPA) by the to global practice. Royal Society. This prestigious award was presented at the Annual Awards Ceremony in Birmingham, United Kingdom, in May 2002. Two of the plants, Serdang Power Station and the Sultan Mahmud Power Station in Kenyir, Terengganu were accredited last year with OHSAS 18000. In addition, the following stations were given the ENVIRONMENTAL MANAGEMENT Gold Award by the Malaysian Association of Occupational Safety and Environmental programmes are organised in TNB to ensure the Health (MSOSH). implementation of the environment friendly concept by employees. Environmental Week or Month is always an annual event in all • Sultan Ismail Power Station, Paka, Terengganu divisions and subsidiaries of TNB to promote awareness for • Sultan Mahmud Power Station, Kenyir, Terengganu employees and the public as the need and importance of the • Serdang Power Station, Selangor conservation of the environment. • Sungai Perak Power Station, Perak •Tuanku Jaafar Power Station, Port Dickson, Negeri Sembilan TNB Corporate Report 2002 73

Moving along with the disclosure-based regime, the Office upholds COMPANY SECRETARY the Company’s best corporate practices on disclosure and other compliance aspects in accordance with the guidelines laid down by the Malaysian Code on Corporate Governance which is synonymous The Company Secretary (“the Office”) fulfills its statutory with the deeply entrenched practices of the Office, derived from the responsibility to the Company (TNB) by providing corporate Company Secretary’s Code of Ethics. The Office also plays a role in secretarial and corporate advisory services to the Board of Directors steering TNB Group of Companies to adapt to new developments in of TNB and its Group of companies. The main focus of the Office is the corporate regulatory environment. to ensure effective functioning of the Board with respect to policy- making and other fiduciary duties to TNB Group within the purview of Company Laws, Securities Laws, Securities Commission Guidelines and Kuala Lumpur Stock Exchange Listing Requirements. EDUCATION AND RESEARCH The General Meetings, the Board of Directors’ meetings and various Board Committee meetings are convened and transacted in accordance with TNB Memorandum and Articles of Association and TNB RESEARCH SDN BHD all the applicable laws, rules and regulations. The Office effectively TNB Research Sdn Bhd (TNBR), deals with research in the areas of conveys the resolutions of the Board to the Management and plant and system reliability; quality of supply; equipment, plant and therefrom ensure effective execution by the Management. system efficiency; and provides services and consultancy in the areas of quality assurance; product certification; environmental management The statutory returns and relevant documents are lodged with the and conservation; new technology and information technology. Companies Commission within the stipulated deadlines. The Company’s statutory records are properly kept, maintained and In August 1997, TNBR was awarded the status of an R&D company regularly updated within prerequisite statutory periods by the Office by the Malaysian Industrial Development Authority (MIDA) and SIRIM and are in good order for due diligence purposes. Berhad. This status allows organisations using its services and expertise to enjoy a double taxation exemption for the amount spent The Office is also responsible for share administration matters such on this purpose. In 1999, TNB Research became the first R&D as record of substantial shareholders, maintainance of the register of company in the country to be awarded the MS ISO 9001 certification members and its statistical report, managing dividend entitlement and from SIRIM Berhad. Employees Share Option Scheme (ESOS) as well as providing advisory services to shareholders on matters pertaining to their shareholdings. TNB Corporate Report 2002 74 President/Chief Executive Officer’s Report (Continued)

“In August 1997, TNBR was awarded the status of an R&D company by the Malaysian Industrial Development Authority (MIDA) and SIRIM Berhad and in 1999, became the first R&D company in the country to be awarded the MS ISO 9001 certification from SIRIM Berhad.”

Today, TNBR has fully functional labs in the areas of advanced material studies, environment and renewable energy. To illustrate a materials; high voltage testing and diagnostics; combustion and fuel; few, TNBR has successfully conducted Computational Fluid Dynamics applied chemistry; environment and geoinformatics; power plant (CFD) studies to solve diverter damper problems at the Melaka Power technology; electronics, control and instrumentation; power systems; Station and has an on-going project to solve the draft and tube electric drives; and engineering design and prototyping. leakage and cavitation problem at the Temenggor hydro electric scheme. Other projects include improving flame profiling in gas fired The past year has seen the success of two of TNBR's innovations at boilers at the Sultan Iskandar Power Station and proposing national and international levels. The CPO:MFO formula and the optimisation alternatives for the Sungai Perak hydro plants. laboratory scale fluidised bed combuster have both won the bronze medal at the annual International Invention, Innovation, Industrial In the field of material diagnostics, TNBR has conducted life Design & Technology Exhibition (ITEX) in Kuala Lumpur, and gone on assessment studies at the Sultan Ismail Power Station in Paka to win the silver medal award at the 30th International Exhibition of Terengganu. In the area of power plant technology, TNBR has an on- Inventions (New Techniques and products) held in Geneva going project at the Sultan Mahmud Power Station in Kenyir for the Switzerland. Both innovations have environmentally friendly features design and development of an on-line cleaning mechanism for the and can potentially reduce SO2 and NOx from power plant emissions. plant's generator air cooler. The fluidised bed combustor can also be developed further for use by municipal councils to burn residential waste or be adapted to burn TNBR has also conducted studies in the field of coal blending. The other types of fuel such as biomass. These two innovations are in the findings from these studies are currently being used by TNB's coal process of being patented. fired power stations as a guideline for determining coal blending ratios. More initiatives in the field of clean coal technology will be In the last financial year, TNBR has successfully closed 37 projects expanded in the future as an effort to optimise fuel use and minimise which cover the area of plant and asset optimisation, reliability emission levels. centred maintenance, condition monitoring, system automation, TNB Corporate Report 2002 75

In the field of transmission and distribution, TNBR has completed and currently has on-going projects to assess and improve TNB's transmission & distribution (T&D) assets. TNBR has developed a computer based system which is able to diagnose and monitor partial discharge (PD) in gas insulated sub stations. Partial discharge is also used as a condition monitoring method to map cables. Other projects cover the areas of electro-magnetic field (EMF), vegetation management under high voltage lines (HVL), automation via retrofitting, losses and ferroresonance. Additionally, TNBR has completed an application research project on conductor uprating using the low-sag GTACSR conductor for a short 132kV overhead line section, without change of existing towers.

In the field of HVDC control studies, TNBR has also successfully simulated and calibrated dynamic performance studies to that of actual dynamic performance tests conducted during the commissioning of the TNB-EGAT 300MW HVD interconnection project. TNBR is also involved in the formulation of power quality standards for the Malaysian Electricity Supply Industry (ESI) together with the Malaysian Energy Centre (PTM) and SIRIM. TNBR also offers real-time lightning data and information and data analysis on lightning occurrences both to TNB and external customers such as Malaysia Airports Berhad and Telcos.

Amidst this, TNBR has successfully installed six pilot sites with a building integrated solar photovoltaic system to study the performance of grid connected solar photovoltaics in Malaysia. Findings have been encouraging, and efforts are currently underway to draw up a plan on the formulation of a Malaysian Standard for the integration of solar photovoltaics on Malaysian buildings. TNBR is also currently working on a project to remotely supply solar hybrid electricity to Kampung Denai, a village located 14 kilometres from Bandar Rompin in Pahang. The village covers an area of a square kilometer and has a population of 126. In the area of electric vehicle technology, TNBR is currently developing five electric trams for the Malaysian Wetlands Foundation. Additionally, TNBR is currently playing a significant role in the Nation's premier carbon sequestration project, spearheaded by TNB.

In product development, the locally designed and developed intelligent energy meter using smart card (METRONIX) has garnered much interest locally and from other Asian countries such as Bangladesh and the Philippines.

Effective April 2002, TNBR has taken over from TNB Distribution Sdn Bhd (TNBD) the responsibility of product acceptance for products supplied to TNBD under the Product Certification Scheme Program. The Scheme is run by the TNBR Quality Assurance Unit which is also responsible for the TNB Quality Assurance Inspector (QAI) Program. TNB Corporate Report 2002 76 President/Chief Executive Officer’s Report (Continued)

TNBR is currently executing a migration exercise to migrate our MS ISO 9001 system to the ISO 9000 version 2000 system. It is also engaged with UNITEN for the Master's Postgraduate program that will offer staff and students the opportunity to be involved in academic as well as problem solving research projects. Additionally, TNBR has set a target to win the Presidents Quality Award by the year 2004. As such, all company events contribute to the enhancement of its personnel's research acumen and above all to deliver with quality and to exceed the customer's expectation. TNBR is committed to enhancing its role as TNB's 'home doctor' in the coming year.

“Providing tertiary education in the fields of engineering, information technology and business management.”

UNIVERSITI TENAGA NASIONAL This year a total of 1,382 students received their scrolls at the convocation ceremony on the 17 & 18 of August with the majority of Universiti Tenaga Nasional is into its fifth year of operation with its them graduating in Electrical & Electronic Engineering (344) and total student enrolment approaching 7,000. Its main emphasis is to Accountancy (428). provide tertiary education in the fields of engineering, information technology and business management. For a relatively young institution, the University has produced a number of outstanding achievements. The university continues to attract students of high calibre and the competition for places is high. The Open Day that was held on the 9 On the co-curriculum front, the students outshined themselves when March 2002 simultaneously at both campuses, attracted more than the solar cycle team performed outstandingly, emerging second 4,000 visitors. Universiti Tenaga Nasional was heavily oversubscribed overall in the World Solar Cycle Challenge 2001 in Australia. The for the June/July 2002 intake for which more than 8,000 applications were received. Only 890 students were admitted for the Engineering & Information Technology courses at the Bangi campus, and 698 students for the Business Management and Accounting courses at the Muadzam Shah campus.

The College of Postgraduate Studies was formed this year. A record number of 104 students registered for the postgraduate programmes, a 3-fold increase over last year’s intake.

The second International University Business Management Conference 2002 was organised on 12 & 13 of August 2002 which saw the gathering of over 300 professionals and experts. The theme of the conference was “Issues & Challenges in the K-Economy: Towards Building World Class Entrepreneurs”. TNB Corporate Report 2002 77

TENAGA NASIONAL FOUNDATION The Tenaga Nasional Foundation is an ongoing Programme of benefits promoting staff welfare with the focus on education. The aim is to broaden the opportunities for further studies and self-development, predominantly but not exclusively to staff and children of staff. In the latter case the Programme begins from the earliest kindergarten years whilst tertiary education is offered to staff, children of staff and the general public.

The Foundation offers convertible loans to qualified candidates who are pursing their first degree at local universities although preference is given to those studying at the Tenaga Nasional University. The Foundation also sponsors outstanding students who have performed particularly well in their SPM, to further their studies at reputable universities abroad. This assistance is open to society at large. Engineering Society won second overall placing and was singled out for “the most marketable product” in the Engineering Invention & Under the supervision of the Foundation, nurseries and kindergartens Innovation Challenge 2002, organised by Universiti Malaya in January have been set up for the sole benefit of the staff and their children. 2002. In May 2002, the Student Representative Council successfully Extra educational classes are also provided. Children of staff who are organised a grand community project called “Program Bakti Siswa orphaned whilst still studying in primary or secondary schools qualify Perdana 2002”, where over 200 students were involved in 10 for a monthly allowance to meet their educational needs. locations throughout Peninsular Malaysia. On the sports field, the university achieved second overall placing in the Private Universities A notable highlight of the year under review was the successful Sports Carnival, held at Universiti Teknologi Petronas in May 2002, running of the Kem Remaja Bestari 2002. The camp was held for winning 4 golds, 7 silvers and 1 bronze medal. children of staff in Standard Five, Form Two and Form Four who will be sitting for public examinations during the following year. The Universiti Tenaga Nasional fosters a culture of excellence and an training stresses on learning skills, time management, examination all round performance in the academic, sporting and social fields techniques, and self-motivation. of endeavour. The Foundation’s staff welfare and educational programmes contribute to the well-deserved commendation earned by Tenaga Nasional Berhad as an outstanding employer. Generation GENERATION DIVISION The Generation Division of TNB is headed by the Vice President (Generation) who is responsible for the management, operations, maintenance and development of generation assets of TNB in Peninsular Malaysia and the TNB owned Independent Power Producer (IPP) in Pakistan. This is managed through:

1. TNB Generation Sdn Bhd • Runs the generation business of 7 thermal power plants in Peninsular Malaysia

2. TNB Hidro Sdn Bhd • Runs the generation business of 3 groups of hydro plants in Peninsular Malaysia

3. TNB Janamanjung Sdn Bhd • Responsible for developing and running the generation business of 2,100MW Manjung coal-fired power plant

4. Liberty Power Ltd • Owns and operates 235MW gas-fired combined cycle IPP in Pakistan

5. TNB Repair and Maintenance Sdn Bhd • Responsible for repair and maintenance services especially in power plants and distribution transformers

6. Generation Asset Development • Responsible for development of new generation assets for TNB TNB Corporate Report 2002 80

BUSINESS DESCRIPTION The generation of electricity in Peninsular Malaysia is undertaken by TNB and Independent Power Producers (IPPs), operating under Power Purchase Agreement (PPA) with TNB. TNB’s power generation capacity of 8,661MW contributes 60% of the total installed capacity of 14,024MW in Peninsular Malaysia. TNB’s power generation operations are undertaken through its subsidiaries, sub-subsidiaries, associates and investment companies.

TNB also owns and operates an IPP of 235MW gross capacity in Pakistan. TNB subsidiary, Sabah Electricity Sdn Bhd owns and operates power generation facilities in Sabah. Sabah Electricity Sdn Bhd also enters into PPAs with a number of IPPs in Sabah for the purchase of bulk power.

TNB’s electricity generating system in Peninsular Malaysia consists primarily of ten major generating stations. As of 31 August 2001, TNB had an aggregate installed capacity of 8,661MW. All of TNB’s major generating stations consist either thermal or hydro generators. TNB’s thermal plants produce power using TNB Corporate Report 2002 81

conventional steam turbine generators principally fired by coal, oil or TYPE OF PLANT AND CAPACITY OF INSTALLATION natural gas (steam power plant), gas-fired or diesel-fired open cycle – TNB GROUP gas turbine generators (open cycle gas turbines), and gas-fired or Gas Turbine 1,870.0MW 20.44% diesel-fired combined cycle turbine generators (combined cycle plant). Combined Cycle 1,720.0MW 18.80% TNB’s hydro stations consist both run-of-the-river and pondage Conventional Thermal (Oil/Gas) 1,560.0MW 17.06% stations. In addition to producing power from its own generating Conventional Thermal (Coal) 1,600.0MW 17.49% facilities and purchasing power from the IPPs, TNB also purchases Hydro 1,910.5MW 20.88% small amounts of electricity from the Electricity Generating Authority Sub Total 8,660.5MW 94.67% of Thailand and Singapore Power to satisfy peak demand. SESB 487.7MW 5.33%

Total 9,148.2MW 100.00%

“TNB’s power generation capacity of 8,661MW contributes 60% of the total installed capacity of 14,024MW in Peninsular Malaysia. All of TNB’s major generating stations consist either thermal or hydro generators.”

TNB GENERATION SDN BHD TNB Generation Sdn Bhd (TNBG) is entrusted with managing the thermal generation assets of TNB. With over 50 years of experience, TNBG is well geared with the technical expertise in power plant management including Operations & Maintenance (O & M) of various plant types and fuel mix.

TNBG manages seven of TNB’s thermal power stations, which are made up of conventional oil and coal-fired steam power plants as well as open and combined cycle gas power plants. With Sultan Salahuddin Abdul Aziz Power Station Phase III of 2 X 500MW coming on stream in 2001, TNBG's total installed capacity has now increased to 6,750MW.

All power plants operated and maintained by TNBG are ISO 9002 certified. Six of the plants are certified under ISO 14001 Environmental Management System. TNBG also collaborated with UNITEN and SIRIM to pilot ISO 18001 certification at the Serdang Power Station. This station is the first power station in the country to be awarded the Occupational Safety and Health Assessment Series, OHSAS 18001 accreditation in November 2000. TNB Corporate Report 2002 82

TNBG POWER PLANTS

Station Capacity Plant Type

Paka 1,139MW 3 x 290MW Combined Cycle 1 x 269MW Combined Cycle

Pasir 729MW 2 x 110MW Open Cycle Gas Turbine Gudang 1 x 269MW Open Cycle Gas Turbine 2 x 120MW Conventional Thermal (oil/gas)

Port 360MW 3 x 120MW Conventional Thermal Dickson (oil/gas)

Serdang 625MW 2 x 110MW Open Cycle Gas Turbine 3 x 135MW Open Cycle Gas Turbine

Kapar 2,420MW 2 x 300MW Conventional Thermal (oil/gas) 2 x 300MW Conventional Thermal (oil/gas/coal) 2 x 500MW Conventional Thermal (gas/coal) 2 x 110MW Open Cycle Gas Turbine

Connaught 832MW 1 x 312MW Combined Cycle Bridge 4 x 130MW Open Cycle Gas Turbine

Prai 645MW 3 x 120MW Conventional Thermal (oil) 2 x 110MW Open Cycle Gas Turbine 2 x 34MW Open Cycle Gas Turbine (diesel)

TOTAL 6,750MW

TNB has an ongoing maintenance and rehabilitation programme in TNB HIDRO SDN BHD order to maintain and increase the overall efficiency of its generating The core business of TNB Hidro Sdn Bhd (TNBH) is in hydro electric stations and to derive the maximum economic loading. This power generation through its three main schemes with a total maintenance programme includes, among other things, replacing installed capacity of 1,911MW. The head office of TNBH is located in heaters and cleaning parts to improve heat rates, maintaining Ipoh, Perak. equipment to reduce heat loss and modifying existing turbines to improve environmental quality and reduce air emission, as well as increasing the capacity of selected generation stations. An additional TNBH POWER PLANTS benefit of this maintenance programme is the extension of the useful Plant Capacity life of TNB’s plant. Sungai Perak 1,248MW

Cameron Highland 263MW

Kenyir 400MW

Total 1,911MW TNB Corporate Report 2002 83

TNB JANAMANJUNG SDN BHD TNB Janamanjung Sdn Bhd (TNBJ) is responsible for the development of the RM7 billion coal-fired, 2,100MW (3 x 700MW) Power Plant project in Manjung, Perak Darul Ridzuan. The project is being implemented based on the concept and approach of the Independent Power Producer.

The first 700MW unit for Manjung Power Plant is scheduled to be in commercial operation by the last quarter of 2002 and to be followed by successive units at six-monthly intervals. The power plant will generate electricity at a competitive rate whilst maintaining project viability and a fair return to shareholders. Coal will be imported from a number of countries through coal handling facilities at site, capable of unloading cape-sized vessels.

The Manjung Project has been designed to meet World Bank emission standards, which are far more stringent than Malaysian environmental regulations and guidelines, and will have minimal impact on the environment. TNB Corporate Report 2002 84

LIBERTY POWER LIMITED GENERATION ASSET DEVELOPMENT Liberty Power Limited (LPL) is an Independent Power Producer in The Generation Asset Department under VP (Generation) is Pakistan. It is a wholly owned subsidiary of TNB Power Daharki responsible for the development of new generation assets owned by Limited (PDL) which is an investment holding company of TNB. TNB. Current on-going projects under development are:

LPL is to develop and operate a 470MW gross capacity combined PROJECTS DESCRIPTION cycle natural gas-fired power plant in two phases. To date, Phase 1 with a gross capacity of 235MW has been completed and in Port Dickson To build a 750MW Combined Cycle commercial operation since 10 September 2001. The power plant Phase 1 plant replacing the old 4 x 60MW Conventional Thermal plants at Port complex is located at Mirpur Mathello, Province of Sindh, Pakistan. Dickson, Negeri Sembilan

LPL has entered into a PPA with Water and Power Development Gelugor To convert the 2 x 110 Open Cycle Gas Conversion Turbines in Gelugor, Pulau Pinang, into Authority (WAPDA) of Pakistan, and a Gas Supply Agreement with Sui a Combined Cycle Plant by adding 2 x Northern Gas Pipelines Limited (SNGPL). Heat recovery boilers and 1 x 110MW Steam Turbine (Combined Cycle Capacity will be 330MW)

Pulau BuntingTo build a 220MW Open Cycle Gas Turbine at a site on Pulau Bunting, Kedah

Kenyir II To add 2 x 150MW machines at Kenyir Power Plant in Kenyir, Terengganu TNB Corporate Report 2002 85

In the period under review, REMACO has embarked upon several strategic initiatives to contribute further to the TNB vision: •To increase service and product offerings to TNB core divisions •To minimise maintenance cost for TNB power plants •To increase sales to non-TNB market •To increase sales within ASEAN region •To penetrate Middle East market

Being a holder of ISO 9001:1994 accreditation demonstrates a long term commitment to Total Quality Management initiatives. Currently, the company is embarking on a benchmarking project of its services and practices, in addition to other quality efforts such as QCS-IT, 5S and Safety Excellence Management System.

TNB REPAIR AND MAINTENANCE SDN BHD (REMACO) TNB Repair and Maintenance Sdn Bhd (REMACO) is a wholly owned subsidiary of TNB, which provides repair and maintenance services to TNB group core activities especially in power plants and distribution transformer maintenance. It has strived vigorously to fulfill its functions efficiently and effectively, building a national reputation of excellence.

Currently, TNB Repair and Maintenance Sdn Bhd serves all TNB power plants on a regular basis for scheduled and breakdown maintenance. REMACO also actively endeavours to market its services beyond the internal TNB field, especially in the power generation sector and energy related industries. REMACO has secured contracts with several IPPs, the most recent being Petronas CUF in Kerteh and Gebeng for scheduled maintenance and gas turbine component refurbishment.

REMACO aspires to become a leading regional player in the maintenance service industry and capitalising on its reputation of In order to sustain competitive advantage in a highly competitive technical proficiency to enter the global market. To date, REMACO has global environment, REMACO has provided avenues for human completed a number of maintenance projects in the ASEAN region, resource development to further enhance the competencies and skills most notably in Myanmar. REMACO is confident that an aggressive of its workforce. marketing campaign within Malaysia and overseas will increase returns and enhance shareholder value. TTransmissionransmission The Transmission Division comprises of TNB Transmission Network Sdn Bhd, the Operations & Maintenance Operator and Asset Manager of the transmission network system for TNB; System Planning (SP) responsible for the short, medium and long term planning for TNB; Protection, Telecontrol and Telecommunications (PTT) responsible for the operations and management of the secondary equipment of TNB; and TNB Fuel Services Sdn Bhd, responsible for the procurement of fuel resources for TNB.

The Transmission Division manages and operates the 132kV, 275kV and 500kV transmission network of TNB and is responsible for the entire spectrum of transmission in TNB encapsulating planning, evaluation, implementation and maintenance of its transmission assets.

THE NATIONAL GRID TNB’s transmission system spans the whole of Peninsular Malaysia, connecting power stations owned by TNB and IPPs to customers. The system operates at 132kV, 275kV and 500kV voltage levels and forms an integrated network known as the National Grid.

The National Grid is interconnected to Thailand’s transmission system operated by the Electricity Generating Authority of Thailand (EGAT) in the North via a HVDC interconnection with a transmission capacity of 300MW and a 132kV AC overhead line with maximum transmission capacity of 80MW. In the South, the National Grid is connected to Singapore’s transmission system at Senoko via 2x230kV submarine cables with a firm transmission capacity of 200MW. TNB Corporate Report 2002 88

TELUK EWA (68 MW) TG 2x34 MW Sulingan

PRAI (360 MW) National Lazim 3x120 MW (Minyak) GELUGOR (220 MW) gridmap TG 2x110 MW Sulingan/Gas Kalumpang

SELANGOR / FEDERAL TERRITORY SELANGOR / WILAYAH PERSEKUTUAN

Bukit Sentosa

Rasa Ind. (Sel) Bukit Beruntung Batang Berjuntai

Bkt. Badong KTM-Rawang Kuala Selangor KAPAR (2,420 MW) Rawang

K.Lumpur Lazim 2x300 MW Gas/Minyak Kampong Subang East Lazim 2x300 MW Arang Batu/G/M N. Rawang TG 2x110 MW Gas

Lazim 2x500 MW Arang Batu/G/M Bukit Jelutong Sri Damansara Kampong Lanjut K.Lumpur Segambut Ladang Kundang North LRT Jelatek Titiwangsa Kg. KLCC Cempaka Dang Ampang Subang Wangi Galloway DCA K.Lumpur Damansara Pandan Maju Kapar Heights Bkt. Kapar Subang Jaya West Pudu Ulu Port Klang Switch Station TNB HQ Bkt. Mahkamah Meru Temasya Shah Alam North New Sea Park LRT Kerinchi Bdr. Tun Razak Malaysia Steel Work Antara Steel Batu Tiga Sea Park Malaysia Oxygen Mill Berhad SJ Town Centre KTM-Salak South Bkt. Rajah Shah Alam Bandar Subang Uda K.LumpurSelatan CONNAUGHT BRIDGE (832 MW) Pulau Indah KTM-Subang Jaya Connaught Shah Alam East Danau Desa Ingerback New Subang Bridge P/S Shah Alam South Cheras Jaya TG 4x130 MW Gas Ksas Proton UDA Bkt. Jalil Bkt Kemuning Petaling Jaya South TG 2x106 MW Gas North Klang Straits HICOM Semenyih Puchong Jaya Kajang TG 1x100 MW Gas Mega Balakong Air Hitam Steel Serdang Teluk Panglima Garang Kuala Langat National University Power Plant Abu Bakar Baginda Teluk Panglima Garang 2 Sg. Semenyih Beranang Water Works

Banting

Salak Tinggi

KLIA KLIA

SERDANG (625 MW) TG 2x110 MW Gas TG 3x153 MW Gas LOJI JANAKUASA 500kV T/A 275kV T/A Haba/Thermal 132kV T/A Khlong Ngae (HVDC) o da Sa PERLIS To 132kV Kabel Bkt. Ketri Cima Hidro/Hydro PTB/IPP 66kV T/A Kangar Bt. Kayu Hitam Teluk Ewa Kedah Cement Ulu Melaka Kuala Perlis Teluk Apau Chuping

Pauh

Mergong Kota Bahru Alor Setar PULAU Kota Setar KEDAH LANGKAWI Petronas Fertilizer Kota Sarang Semut Jeniang Lemal Gurun Pasir Puteh Perwaja Gurun Tanah Merah Bedong Aman Jaya Gurun East Taman Intan Pergau Sg. Petani Ind. Seberang Jertih Sg. Petani Kuala Krai Tikam Batu Laut China Butterworth North Sg. Air Terjun Pinang Bkt. Mertajam Farlim Prai Kulim Baling Gelugor Penang Bt. Tengah Bersia Temenggor Gong Badak Selatan PULAU Kuala Ketil Kulim Guthrie Southern Steel Hitech Bayan Baru Juru Prai Ind. Est. Bayan Lepas Praigis Kuala Terengganu PINANG Bkt. Minyak Simpang 4 Bkt. Tambun Valdor Nibong Tebal Kenering Chendering Junjong Sg. Piah Lower Parit Buntar KELANTAN Sg. Piah Upper Kuala Brang Bagan Serai PERAK Kenyir Grik (T) Bukit Merah Cenderoh

Kemunting Taiping Sg. Siput Perak Carbide Taiping Ind. Est. TERENGGANU New Khantan Perak Gua Musang Kg. Jawa Sbgs Dungun Industri Hanjoong Kuala Dungun Kangsar APMC Khantan (New) Kelebang Petronas Processing Tasek Santong Power Plant YTL Paka Paka Gopeng Road Papan Paka CUF Kerteh Kerteh Batu Gajah Rantau Petronas

GB3 Segari Malim Nawar Sultan Yusuf Power Station Ayer Tawar Bintang Telok Kalong Lumut Kg. Gajah Temoh Perwaja Steelmill PAKA (1139) Sultan Idris Power Station Kuala Lipis Kemaman PAHANG Gebeng KP 3x290 MW Gas Janamanjung Sg. Manik CUF Gebeng Benta KP 1x269 MW Gas Teluk Intan Jerantut MTBE (Gebeng) Kuantan Amoco Jikang Dimensi Tg. Gelang Hutan Melintang Pahang Cement Raub Bandar Kuantan Central Semambu Slim River Bdr. Indera Mahkota Raub Kuantan North Kuantan Jengka M.E.C City

Kalumpang Maran Kerayong SELANGOR Ketari Bentong Mentakab Pekan Bt. Tarik Bukit Bt. Tinggi Resort Karak Songsang KAPAR (2,420 MW) Beruntung Batang Berjuntai Rasa Ind. (Sel) Kg. Awah Genting Temerluh Jambu Rias(T) Ind. Park Bt. Tinggi Lazim 2x300 MW Gas/Minyak Kuala Selangor Bt. Badong Genting Highland K.Lumpur (East) Lazim 2x300 MW Arang Batu/G/M Sentul Raya Tanjung Batu K.Lumpur (North) TG 2x110 MW Gas Port Klang Lazim 2x500 MW Arang Batu/G/M Pudu Ulu Connaught Bridge K. Lumpur (South) N.SEMBILAN Bdr. Muadzam Shah Kuala Kelawang Serdang Simpang Pertang Kuala Langat Power Plant KTM Batang Benar Nilai Arab M'sian Ind. Dev. CONNAUGHT BRIDGE (832 MW) Banting Bahau Salak Tinggi Mantin Paroi Hualon Nilai N.Sembilan Cement Ind. Semarak Kilat KLIA Bt. Kepayang Senawang Kuala Pilah TG 1x312 MW Gas Taman Tuanku Jaafar Rasa Tuanku Jaafar Ind. Park Satria Pasir Besar TG 4x130 MW Gas Samsung Bukit Siput Cembong Gemas Port Dickson Power Station Lukut Rantau Tuanku Jaafar Power Station Shell Refinery PD Teluk Kemang Panglima Kg. Gadek Powertek MELAKA Masjid Tanah Kelemak SERDANG (625 MW) Matsushita Foundries Industrial Bt. RambaiJasin Caah Petronas Hualon Melaka Bkt. Kepong Tangga Batu Bandar Melaka Cheng Tangkak Petronas Malim Jaya Air Keroh East TG 2x110 MW Gas Melaka Power Station Mahkota Melaka Melaka Semabok Merlimau TG 3x135 MW Gas Batu Bona Vista Berendam North Kluang Ind. Teluk Mas Sg. Mati Nyior Sg. Abong Yong Peng North Kluang(O) Parit Yusof Kluang(N) Simpang Parit Jamil Yong Peng Air Hitam Johor Peserai Tanjung Renggam P0RT DICKSON (360 MW) Laboh Johor Tengah

Lazim 3x120 MW Minyak/Gas Pub Bulk Parit Raja Pasak Tanjong Langsat Selat Bt. Batu Titan Petrochemical Bdr. Penawar Bt. Batu Teluk Langsat Pontian Kota MajideePutri Tanjung Tampoi Cahaya Baru Pekan Nenas Kupang Melaka Darat Pusat Bandar YTL Pasir Gudang Darat Pasir Gudang P/S Pasir Gudang Larkin Senoko Ind. Est. Teluk Ramunia

PASIR GUDANG (729) Lazim 2x120 MW Minyak/Gas KP 1x269 MW Gas TG 2x110 MW Gas TNB Corporate Report 2002 90

TNB TRANSMISSION NETWORK SDN BHD TNB Transmission Network Sdn Bhd (TNBT) which commenced operations on 1 September 1999. TNBT is the Operations & Maintenance Operator and Asset Manager of the transmission network for TNB. TNBT is entrusted to ensure the reliable, safe and efficient operation of the National Grid network which is an integral part of the electricity infrastructure of the country and is responsible for the operations and maintenance of the grid system comprising transmission lines (132kV, 275kV and 500kV), equipment and substations.

During the year a number of critical transmission projects have been undertaken including the reinforcement of the 500kV Southern Corridor; commissioning of the KL (South) and Sentul Raya 275kV substations to strengthen the supply to the Central area; energising the 275kV Kelemak Substation to boost the supply to Melaka; and the commissioning of the 500kV line from Bukit Tarek to Janamanjung to channel power from the new Janamanjung Power Station and cater for the increasing demand for electricity.

“TNB’s transmission system spans the whole of Peninsular Malaysia, connecting power stations owned by TNB and IPPs to customers. The system operates at 132kV, 275kV and 500kV voltage levels and forms an integrated network known as the National Grid.”

TNBT participated in the International Transmission O&M Study (ITOMS) which examined 22 transmission utilities from North America, Europe, Australia, New Zealand and United Arab Emirates to benchmark itself with international transmission companies. The benchmark provides international best practice standards which will be used by TNBT to improve the transformer and line tripping rate, improve performance of secondary equipment and subsequently lower system minutes.

System resilience has improved substantially within the last five (5) years and security of supply remains one of the most critical elements affecting the Transmission Division. The goal of the division is not only to ensure that system security and reliability remains topmost priority but in addition to institutionalise a professional, efficient and transparent operation at the Control Centre towards consistent, auditable dispatch decisions and clear dispatch rules, policies and related processes like fuel and gas usage.

TNBT also institutionalise the Balanced Scorecard as the Management tool to create an environment for action where measures and targets are communicated to the staff of TNBT. The Balanced Scorecard is linked directly with the strategy and vision of TNB. TNB Corporate Report 2002 91

PROTECTION, TELECOMMUNICATIONS AND TELECONTROL The Protection, Telecommunications and Telecontrol Department is responsible for the operation, maintenance and commissioning of all the Protection, Telecommunication and Telecontrol equipment for the Generation, Transmission and Distribution Divisions.

The TNB Protection & Control Code of Practice (PCCoP) was reviewed and republished to standardise the policies, schemes and practices on the protection, control and supporting equipment for TNB.

The Telecommunication unit of PTT has been involved in several projects of upgrading of equipment and technology to better cater for future telecommunication requirement for TNB. The Optical Fibre on Ground Wire (OPGW), has resulted in easier and faster development of the fibre optic communication infrastructure at a lower cost than ever before. The outcome of this development, has resulted in an increase of 1000km in length of fibre optic lines from a previous length of 5000km, during the 2001/2002 financial year.

In the financial year 2001/2002, the Telecontrol Unit has undertaken the commissioning of SCADA facilities to 28 transmission substations. To date, a total of 272 (87%) transmission substations can be remotely controlled from the National Load Despatch Centre (NLDC). The unit has provided technical assistance to various other divisions and subsidiaries of TNB such as the TNBD Metro’s SCADA/DA project, SESB’s telecontrol problems and technical advice pertaining to SCADA system problems in Langkawi, Putrajaya and Malacca. TNB Corporate Report 2002 92

To date, 26 transmission substations have been commissioned with Substation Control System (SCS) and an additional 10 new substations within the next 18 months. Telecontrol equipment to be used in TNB has to undergo various testing processes to ensure conformity to TNB requirements.

SYSTEM PLANNING The main responsibility of the System Planning Department is the planning of the development and operation of the National Grid system. System Planning prepares the national demand forecast, generation and transmission development plan, fuel mix studies, and technical studies associated with transmission and generation system studies for medium and long term plans. System Planning comprises System Planning Development, Operation Production Planning and System Performance Audit. TNB Corporate Report 2002 93

The System Planning & Development Unit carries out feasibility TNB FUEL SERVICES SDN BHD studies for interconnection with other utilities and special TNB Fuel Services Sdn Bhd’s (TNBF) primary role is to supply fuel transmission and generation development projects. During the year, (coal, MFO and distillate) to TNB power plants. Consistent with its the Department collaborated with other ASEAN Utilities in carrying out role as the single purchaser of coal for the electricity industry, TNBF the ASEAN Interconnection Master Plan Study (AIMS) anticipated to procures coal for TNB and IPPs. In shouldering the responsibility for facilitate cross-border power transfer for the medium and long term coal procurement for the electricity industry, the transparency and and the Sumatra-Peninsular Malaysia Interconnection Study, jointly objectivity of TNBF is critical. undertaken by PT PLN (PERSERO) of Indonesia.

TNBF intends to leverage its knowledge, network and market The Operation & Production Planning Unit prepares daily operational intelligence in the fuel business to provide advisory and other related plans for implementation by the system operators at the NLDC. This services within the group or to external customers when the includes generation scheduling, outage management of generation opportunity arises. During the year TNBF signed TNB’s first Coal and transmission facilities, and scheduling the commissioning of new Supply and Transportation Agreement with SKS Tanjung Bin, an IPP. transmission plants. Actual operations are audited by the System Performance Audit together with NLDC, and the Operation & TNBF’s main objective is to ensure that fuel is procured and delivered Production Planning unit. at optimal costs taking into account quality and reliability. TNBF is also the contract manager for the sales and purchase agreement for gas between TNB and Petronas.