Puncak Niaga HoldingsBerhad Puncak Niaga Holdings Berhad 416087 U Wisma Rozali, No 4, Persiaran Sukan, Seksyen 13, 40100 Shah Alam, Selangor Darul Ehsan, Malaysia T +603 5522 8589 F +603 5522 8598 E [email protected] Report 2010 Annual www.puncakniaga.com.my/investors.html Sustainable Growth [email protected] follow@puspel on Annual Report 2010 Sustainable In everything we do, we, at Puncak Niaga Holdings Berhad (“PNHB”), are committed to achieving sustainable growth, Growth believing this to be our most fundamental duty. In 2010, we therefore continued to dedicate our best efforts to serving our shareholders and stakeholders in ways that are economically, environmentally and socially sustainable. Sustainable growg th goes way beyond delivering investor returns. Our corporate philosophy embraces enhancements to our business processes and the products and services we deliver to our customers, and is ultimately dependent on the ceaseless development of staff capabilities. At the same time, in the contribution we make to nation-building, sustainable growth means practicing the highest levels of environmental responsibility. In all these ways, we are able to nurture not just the Company and Group, but our environment and our relationships with the various stakeholders through the conduct of our business and corporate social activities. 14th Annual General Meeting Date 27 June 2011 (Monday) Time 10.00 am Venue Concorde 1 Concorde Hotel Shah Alam, Level 2 No. 3, Jalan Tengku Ampuan Zabedah C9/C 40100 Shah Alam Selangor Darul Ehsan To Be A Leading Regional Integrated Water, Wastewater Our And Environmental Solutions Provider And To Emerge As A Signifi cant Player In The Oil & Gas Sector. Vision To meet the increasing challenges in the demand for high Our quality water supply, wastewater and environmental systems Mission through the continuous implementation of high quality standards, efficient services, human capital development, innovative technologies and operational systems. To share our experience and offer our expertise through Smart Business Partnerships, Public Private Partnerships or other innovative business models. To actively participate in local, regional and global business opportunities with linkages to the Company’s core activities, waste water & solid waste management, environment management and oil & gas sectors. To actively support and participate in programmes and activities aimed at uplifting the community’s living standards and value systems in line with the aspirations of Vision 2020. To address national and international concerns pertaining to the protection, conservation and enhancement of the natural environment we live in. 2010 Key Highlights We operate, manage and maintain 29 WTPs with a combined capacity of 1,930 million litres per day. In 2010… Our WTPs achieved All our All our 29 WTPs delivered combined 99.9% 29 capacity of compliance with stipulated treated WTPs 692.19 water quality standards. performed well and achieved the expected MILLION levels as required cubic metres of under the Concession treated water. Agreements. SYABAS out- We distributed Our Operation performed all of its a daily average of Command key performance Centre is the targets SYABAS set for itself, which 4,063 ST are higher than 1 MLD and largest wireless the Concession of treated water Supervisory Agreement’s to about Control And Data requirements. Acquisition (“SCADA”) implementation for 7.5 water and wastewater We achieved a utilities in the region. Collection Effi ciency of MILLION consumers. 98.5%. Water News Water News cont’d Puncak Values Our Company’s values, the PUNCAK VALUES shape our organisational culture and guide the way we run our business. They are integrated into our business processes and our core values. At PUNCAK, we are and continuously seek to be: Passionate about our business for sustainable performance. United as one in our corporate responsibility strategy to align with our Vision to be the Leading Regional Integrated Water, Wastewater And Environmental Solutions Provider And To Emerge As A Signifi cant Player In The Oil & Gas Sector. Nurture our human capital towards an exemplary workforce. Corporate Governance guides the way we run our business in an evolving global business environment. Accountable for all our actions and engagement process with our stakeholders. Knowledgeable in all aspects of our business operations and continue to be the trusted and reliable provider of clean water supply. Table of Contents Executive Chairman’s Message 2 Accountability About This Report 11 Corporate Disclosure Policy 156 Statement On Corporate Governance 157 Corporate Profi le 14 Statement On Internal Control 174 Corporate Information 17 Audit Committee Report 177 Our Role In The Water Supply System 19 Risk Management Policy & Report 186 PNHB Fact Sheet 20 Investor Relations Policy & Report 190 Corporate Achievements 22 Quality Policy & Report 193 Corporate Structure 24 Health, Safety And Environmental Policy 195 Organisation Structure – PNSB 25 SYABAS’ Corporate Responsibility Policy 196 Organisation Structure – SYABAS 26 Board Of Directors’ Profi le 28 Distribution Schedule Of Equity Securities 197 Board Of Directors 39 List Of Properties 201 Key Personnel Profi le – PNSB 40 Key Personnel Profi le – SYABAS 48 Statement Of Directors’ Responsibility Key Personnel Profi le – Sino Water Pte Ltd 57 For Preparation Of Financial Statements 203 Five-Year Financial Highlights 58 Five-Year Group Performance 59 Financial Statements Share Price & Volume Traded 60 Financial Statements 206 Financial Calendar 61 Milestones 62 Notice Of Annual General Meeting 356 Statement Accompanying The Operations Review Notice Of Annual General Meeting 358 Puncak Niaga (M) Sdn Bhd 66 Syarikat Bekalan Air Selangor Sdn Bhd 71 GRI Index 360 Delivering Quality 83 Proxy Form Corporate Directory Business Expansion 94 Delivering Service Excellence 100 Valuing Our People 106 Engagement With Our Community 126 Corporate Events 137 Preserving Our Environment 139 2 Puncak Niaga Holdings Berhad Annual Report 2010 Executive Chairman’s Messageg Dear valued Shareholders and Stakeholders, In 2010, though challenged by a variety of issues beyond our control, Puncak Niaga Holdings Berhad (“PNHB”) and the Group (“PNHB Group” or the “Group”) once again managed to pursue its goals of achieving sustainable growth; contributing towards environmental conservation; and fulfi lling its commitments to its stakeholders as the nation’s leading and dynamic integrated water services company. Though there was a reduction in profi t, revenue rose and the Key Performance Indicators (“KPI”) were exceeded. In addition, through the professional conduct of our business, our commitment to corporate social activities, and the ceaseless development of staff capabilities, consumers continued to receive both a reliable and high quality water supply and an impressive level of customer service. All this is embodied by the theme for our Annual Report 2010, “Sustainable Growth”. YBHG TAN SRI ROZALI ISMAIL EXECUTIVE CHAIRMAN OF PNHB GROUP 3 Puncak Niaga Holdings Berhad Annual Report 2010 Executive Chairman’s Messageg cont’d BACKGROUND Global economic recovery slowed in the second half of 2010 with the fading of the effects of the quantitative easing programmes that had underpinned growth in the fi rst half of the year. In the major advanced economies, economic activity was fragile and growth restricted with private sector investment remaining cautious. The Asian economies achieved exceptionally strong growth in the fi rst half, which moderated in the second due to declining external demand. Domestic demand, however, held up well on the back of growing business and consumer confi dence, the availability of fi nancing and positive labour market conditions. In Malaysia, as elsewhere in Asia, the slowdown in the global economic revival led to some weakening in external demand. Nevertheless, in 2010, the Malaysian economy experienced rapid growth, driven by robust and expanding domestic activity supported by private sector spending. (Source: Bank Negara Malaysia Quarterly Bulletin, Third Quarter 2010.) Malaysia’s income growth was further assisted by the New Economic Model, Government Transformation Programme, 10th Malaysia Plan and Economic Transformation Programme launched during the year by our Honourable Prime Minister, YAB Dato’ Sri Mohd Najib Tun Haji Abdul Razak. Against this backdrop, on behalf of the Board of Directors of PNHB, I am pleased to present the Annual Report and Audited Financial Statements of the Company and Group for the fi nancial year ended 31 December 2010. FINANCIAL PERFORMANCE For the fi nancial year ended 31 December 2010, the Group recorded an increase in revenue, For the fi nancial year which climbed by 1.3% to RM1,911.5 million from RM1,887.0 million in 2009. This was mainly due to higher water consumption, and included in the revenue is our best estimate of the ended 31 December water tariff compensation for the year 2010 as stipulated in the Concession Agreement dated 2010, the Group 15 December 2004 signed between Syarikat Bekalan Air Selangor Sdn Bhd (“SYABAS”), the recorded an increase Federal Government and the State Government of Selangor Darul Ehsan (the “Selangor State in revenue, which Government”) (the “Concession Agreement”). climbed by 1.3% to Meanwhile, profi t before tax (“PBT”) for the fi nancial year ended 31 December 2010 decreased RM1,911.5 million from by 14.1% from RM312.6 million in 2009 to RM268.4 million in 2010, bringing down the basic RM1,887.0