2016 Annual Report
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Power to Grow SUSTAINABLE ENERGY FOR SARAWAK AND BEYOND ANNUAL REPORT 2016 SUSTAINABLE ENERGY FOR SARAWAK AND BEYOND “Sustainable energy for Sarawak and beyond” captures our ambition to provide clean and reliable power for the growth and prosperity of the region. This year, we officially opened the Murum Hydroelectric Plant, enabling us to deliver an additional 944MW of energy to Sarawak; began to export power to West Kalimantan in Indonesia; signed a letter of intent with the Northern Province of Kalimantan and continued our plans to work with Brunei and Sabah to advance the Borneo Grid. As we develop our indigenous natural resources in pursuit of economic and social progress, renewable, reliable and affordable energy will play an increasingly vital role in accelerating sustainable development for Sarawak and the region. Murum HEP is located on the Murum River in the upper Rajang River basin, 200km from Bintulu. It is designed to produce 711MW (constant) and 944MW (peak) from a 2,750sq km catchment area feeding a 270sq km reservoir. Construction began in 2008 and by mid-2015 the station was fully operational, delivering its specified power into the State Grid. INSIDE THIS REPORT About this Report 03 Chairman’s Message 20 2016 Key Highlights 06 Group CEO’s Message 24 About Sarawak Energy 08 Management Discussion & Analysis 28 Corporate Information 09 Developing Our People, Leadership Vision, Mission & Living Our Values 11 and Teamwork 31 OVERVIEW Five-Year Group Financial Highlights 12 Health, Safety and Environment 35 OF SARAWAK ENERGY Energy for Sarawak 14 Sustainability 44 Brand and Recognition 58 Economic, Environmental, Social 48 Corporate Event Highlights 60 Corporate Responsibility 50 GENERATING SUSTAINABLE VALUE Board of Directors 65 Statement of Corporate Governance 74 Group Organisation Structure 68 Statement of Risk Management Our Management Team 69 & Internal Control 78 Chairman’s Introduction 73 Board Audit Committee Report 80 HOW WE ARE GOVERNED Directors’ Report 83 Statements of Financial Position 92 Statement by Directors 86 Statements of Changes in Equity 94 Statutory Declaration 86 Statements of Cash Flows 97 Independent Auditors’ Report 87 Notes to the Financial Statements 99 Statements of Profit or Loss and Other FINANCIAL Comprehensive Income 90 STATEMENTS In Memoriam Sarawak Energy would like to acknowledge the passing of the late YAB Datuk Patinggi Tan Sri (Dr) Haji Adenan Bin Haji Satem on 11 January 2017. As Chief Minister, he inspired us with his leadership, vision and tremendous support to strive together for a greater Sarawak and touched us all with his kindness and humour. He will be missed. ABOUT THIS REPORT As the sole provider of electricity in Sarawak, serving a population of This icon will help you quickly navigate through the Annual Report for references more than 2.6 million people and more than 630,000 customers across and related information. the state, maintaining and building on the trust of our stakeholders is central to our success. To this end, we recognise the importance of presenting an Annual Report for transparency of our activities to all our stakeholders. SCOPE AND BOUNDARY OUR COMMITMENT TO TRANSPARENCY Our Annual Report for 2016 covers the period 1 January 2016 to 31 December 2016. It presents comprehensive and detailed information on our activities Sarawak Energy is committed to a policy of responsibility through over the past 12 months. transparency of our activities and our financial accounts. The report gives our stakeholders detailed information on our financial, Sarawak Energy is not a listed public entity and is therefore not subject to environmental and social performance in 2016. It highlights our successes the disclosure requirements of the Securities Commission. Nonetheless, a and seeks to provide an understanding of our challenges. It also presents key priority is accountability to all our stakeholders in the desire to create our expectations of our future successes and our strategy for achieving this. effective partners that can help guide us towards opportunity and success. The report aims to enable all our stakeholders to reach a clear understanding To this end, we make a wide range of documents and reports regularly of our present condition and future plans and will be of particular interest to available to our stakeholders in which we disclose in detail our strategies and all our stakeholders in Sarawak and Malaysia, as well as those further afield outcomes and invite feedback on our progress. in neighbouring Indonesia. Our Annual Report for 2016 showcases our goals and targets throughout Our financial statements are independently audited and present an in-depth the year and presents an understanding of our operations, direction and picture of our financial health. accomplishments. MATERIALITY DETERMINATION STATEMENT OF THE BOARD OF DIRECTORS OF SARAWAK ENERGY This Annual Report presents a fair and balanced analysis of our overall performance throughout the year and our future prospects. The Board acknowledges its responsibility to ensure the integrity of the Annual Report. In the Board’s opinion, the report addresses all material issues The aspects we have selected to report are based on our ability to achieve and matters and fairly presents Sarawak Energy’s performance. our strategic objectives and fulfil the expectations of our key stakeholders. Approved by the Board of Directors and signed on behalf of the Board Datuk Amar Abdul Hamed Sepawi Sharbini Suhaili Chairman Group Chief Executive Officer 4 SUSTAINABLE ENERGY A balanced generation mix FOR SARAWAK AND BEYOND Thermal Hydro Thermal Hydro 25% 75% 40% 60% 1 MURUM HEP OFFICIALLY LAUNCHED Current Long-term target Sarawak Energy’s Generation Capacity 2 BALEH HEP ENDORSED Currently Projected to reach BY THE STATE CABINET 4,652MW 5,300MW by 2020 3 STRENGTHENING ENERGY SECURITY - Construction of Balingian Coal-Fired Power Plant commences Tariff reductions give lowest Power theft electricity tariffs in the region to decreased by all domestic, commercial and industrial customers 86.7% 4 New export customer - from 2010 FIRST POWER EXPORT TO WEST KALIMANTAN, INDONESIA 5 Regional partnership - SIGNING OF LETTER OF INTENT WITH NORTH KALIMANTAN, INDONESIA 5 Carbon intensity for electricity supply decreased by 72% since 2009 Expected to increase to Murum HEP began full commercial 7,000MW operations in 2015 by 2025 Distribution & Transmission System Average Interruption Duration Index (SAIDI) Distribution SAIDI Transmission SAIDI Overall SAIDI 125 minutes 117 minutes 242 minutes in 2016 in 2016 in 2016 6 2016 KEY HIGHLIGHTS 1 PROGRESSING SCORE • New SCORE customer - Signing of Power Purchase • Growing our presence - Participant and Agreement with Malaysian Phosphate Additives sponsor of the International Mining and (Sarawak) Sdn Bhd Resources Conference (IMARC) in Melbourne and Mines and Money Asia in Hong Kong • 20-year Gas Sales Agreement signed with PETRONAS 2 ENERGY 3 COMMITMENT AC C E S S TO HSE State electricity Making safety coverage now our top priority - 94% EVERYBODY GOES HOME SAFELY 7 4 CUSTOMER FOCUS Leveraging on Commitment to serve - Customer Care Centre Service Level technology - launch of More than 81.45% calls answered Sarawak Energy’s first within 20 seconds mobile application 630,000 ‘SEB cares’ customers across Customer Satisfaction Index the state 77.42% 5 SUSTAINABILITY AND CSR Sharing expertise - member of GlobaI Reporting Initiative Gold Community Batu Tungun Ritual Platform at Murum HEP 6 AWARDS 7 ORGANISATIONAL GROWTH 7th Sarawak Chief Minister’s 7th Sarawak Chief Minister’s Environmental Award 2015- Environmental Award 2016 (Platinum) for Sejingkat 2015-2016 (Gold) for Mukah 4,468 Power Plant Power Plant employees 16th Malaysian Construction 8th Annual Global CSR Summit & Industry Excellence Awards Awards 2016, Bali, Indonesia (Best Project for Medium Baram Literacy Programme Infrastructure Category) (Silver) for Murum Junction Corporate and Substation leadership restructuring 8 ABOUT SARAWAK ENERGY Built on a strong foundation of almost 100 years, Sarawak Energy has cemented a reputation as a provider of reliable, safe and competitively-priced power. Our energy predominantly comes from Sarawak’s rich hydropower resources, making our energy supply environment-friendly and sustainable. For enhanced security of supply, the balance of the generation mix comes from thermal power plants powered by indigenous gas and coal resources. We are the sole provider of electricity in Sarawak, with a fast-growing consumer base of more than 630,000 account holders throughout the state and a multidisciplinary workforce of 4,500 people and growing. Sarawak Energy plays a leading role in accelerating the industrial and economic development of Sarawak, by supplying power to the Sarawak Corridor of Renewable Energy (SCORE). As SCORE continues to draw foreign investment and create job and business opportunities, it remains integral to Sarawak’s determined march to become a developed state by the year 2030. Our initiatives make a key contribution to enhancing the daily lives of Sarawak’s diverse communities. We support the Federal and State Governments in the rural electrification agenda and each year we expand the reach of our electricity supply to more remote areas of the state. With the State Government, we aim to electrify the whole of Sarawak by 2025. In community development, we are investing in programmes that aim to preserve Sarawak’s cultural identity, promote diversity and inclusiveness and empower