TNB HANDBOOK

Prepared by: COE Investor Relations CONTENTS

1. INTRODUCTION TO TENAGA

2. INCENTIVE BASED REGULATION (IBR)

3. BUSINESS STRATEGY & DIRECTION

4. DIVIDEND POLICY

5. FINANCIAL HIGHLIGHTS

2 INTRODUCTION TO TENAGA

Sabah Sdn Bhd Bhd (A 83% TNB Subsidiary) 1,290MW* 24,124MW PENINSULAR 4,437MW

* Based on dependable capacity

6.4% INSTALLED CAPACITY TNB : 54.3% IPP : 45.7% Period FY’14 FY’15 FY’16 FY’17 Ended Dec’17 10% 37.2% TNB - Peninsula Installed Capacity 10,814 11,708 12,904 12,880 13,108 48% (MW) 42% Total units sold (Gwh) 108,102 110,837 115,505 116,586 39,562

56.0% Total customers (mn) 8.64 8.94 9.01 9.08 9.04 MARKET SHARE TNB : 55.7% Total employees IPP: 44.3% 36.1 36.0 35.6 35.0 35.0 (‘000) Gas & LNG Coal Hydro & Others Oil & Distillate Total assets (RM bn) 110.7 117.1 132.9 142.0 144.3

Peninsula Installed Capacity vs. Generation mix 3 INTRODUCTION TO TENAGA TNB Sectoral Sales Analysis

Sectoral Sales Analysis (Gwh)

Period Ended Dec’17 Period Ended Dec'17 40.8 35.0 22.2 2.0 0.8% 1.6% 2.0%

18.4% 22.2% FY'17 39.9 35.7 22.5 1.9

FY'16 39.6 35.3 23.3 1.8

82.2% 41.9% 35.0% FY'15 41.8 34.6 21.8 1.8

FY'14 42.0 34.5 21.6 1.8

FY'13 42.5 34.4 21.3 1.8 38.1% 40.8% FY'12 43.6 34.1 20.6 1.7 16.7% 0.3% FY'11 44.3 33.8 20.3 1.6 No of Sales (RM) Sales (Gwh) Customer 0% 20% 40% 60% 80% 100%

Industrial Commercial Domestic Others Industrial Commercial Domestic Others

4 INTRODUCTION TO TENAGA Industry Regulatory Framework

PRIME MINISTER /CABINET Holds ‘Golden’ Share

28.1% MINISTRY of ENERGY, Ministry of Finance/ SEDA GREEN TECHNOLOGY Malaysia Berhad AND WATER (KeTTHA)

33.7% 14.1% 24.1% Other Corporations & Govt. Agencies : ECONOMIC PLANNING UNIT (EPU) Public Foreign EPF 11.8% - Develops and complements Privatisation Policy PNB 14.6% ENERGY COMMISSION - Evaluates and selects IPPs Others 7.3% (Regulator) - Recommends ESI policies - Promote competition - Protect interests of consumers Policy Maker Shareholders - Issue licenses - Tariff regulation As at Dec’17

% Based on Top 100 Shareholders

Tenaga Nasional Berhad IPPs

Latest Market Cap. RM89.2bn (2nd) 22.9USDbn Consumers - As at 26th Feb’18 - 5 CONTENTS

1. INTRODUCTION TO TENAGA

2. INCENTIVE BASED REGULATION (IBR)

3. BUSINESS STRATEGY & DIRECTION

4. DIVIDEND POLICY

5. FINANCIAL HIGHLIGHTS

6 INCENTIVE BASED REGULATION (IBR) The Move Towards Better Regulation

IBR mechanism to strengthen the following:

The Economic Regulatory Framework for Regulating TNB

The Tariff Setting Mechanism and Principles for Tariff Design

Incentive Mechanisms to Promote Efficiency and Service Standards

The Process of Tariff Reviews

Creation of Regulatory Accounts and Its Annual Review Process

Business entities under IBR (Accounting Separation)

11 Regulatory Implementation Guidelines (RIGS) were Developed for IBR Implementation *Source: EC 7 INCENTIVE BASED REGULATION (IBR) Electricity Tariff Review = Base Tariff + Imbalance Cost Pass-Through (ICPT)

*Source: EC 8 INCENTIVE BASED REGULATION (IBR) Imbalance Cost Pass-Through (ICPT) Comprises Two Components

Imbalance Cost Pass-Through (ICPT)

Generation Specific Fuel Cost Pass Through Cost Adjustment (FCPT) (GSCPT)

Adjustment in the Adjustment in the FCPT following 6 month following 6 month Actual cost of (gas/LNG and coal period, subject to period, subject to generation only) government approval government approval Changes in gas/LNG and coal costs Changes in: • Other fuel costs such as distillate and fuel oil • All costs incurred by SB under the power procurement agreements (PPAs, SLAs and etc.) and fuel procurement agreements (CSTA, CPC, PPAs Power Purchase Agreements GFA/GSA and etc.) SLAs Service Level Agreements CSTA Coal Supply and Transportation Agreement • Renewable energy FiT displaced cost CPC Coal Purchase Contract GFA Gas Framework Agreement GSA Gas Supply Agreement

9 TNB REMAINS NEUTRAL FROM FUEL FLUCTUATION Incentive Based Regulation (IBR) & Imbalanced Cost Pass-Through (ICPT)

Interim First Second Regulatory Regulatory Regulatory Period Period (RP1) Period (RP2)

2014 2015 2016 2017 2018

Jan Jul Dec JanMar Jun Jul Dec Jan Jun Jul Dec Jan Jun Jul Dec Jan P1 P2 P3 P4 P5 P6 P7 P8 RP2 sen/kWh 2.25 2.25 1.52 1.52 1.52 1.52 rebate rebate rebate Base Tariff rebate rebate rebate 38.53 ICPT review sen/kWh RM mn (726.99) (1,085.67) (762.03) (758.03) (766.33) *(1,303.23) every 6 months

RM5.4 billion Total ICPT Rebate Approved to be Passed Through to Customers up to December 2017

Source: Regulatory Economics & Planning, TNB

* Comprises of: RM 523.23 million total imbalance cost for period Jan- Jun 2017 and RM 780 million to continue the current ICPT rebate of 1.52 sen/kWh. 10 INCENTIVE BASED REGULATION (IBR) IBR ENTITIES

1

1 In RP1, these 2 entity are grouped as Price –Cap entity

11 INCENTIVE BASED REGULATION (IBR) BASE TARIFF Average Tariff by IBR Entities (sen/kwh)

RP1 (2015 – 2017) RP2 (2018 – 2020) Single Buyer Generation 26.76 27.05 Transmission/Grid 4.03 3.66 Distribution Network & 7.15 Customer Services 7.87 Distribution Network 0.96 0.19 Customer Services 0.19 Single Buyer Operations 0.05 0.06 Grid System Operations 38.53 sen/kwh 39.45 sen/kwh

Average Tariff by Sectors (sen/kwh)

39.45 Base Tariff 38.53 46.93 Commercial 47.92 36.85 Industrial 36.15 32.95 Domestic 31.66

RP2 RP1 12 INCENTIVE BASED REGULATION (IBR) WACC, RAB, CAPEX & OPEX

No Item RP2

1. WACC 7.3%

2. Avg. Regulated Asset Based (RAB) RP2 Approved RAB = RM54.8 bn

CAPEX 3. RP2 Approved CAPEX = RM18.8 bn

OPEX RP2 Approved OPEX = RM18.2 bn 4.

13 INCENTIVE BASED REGULATION (IBR) GENERATION MIX

RP1 RP2

1% 1% 0.1%

5% 4% 4%

44% 33%

61% 47%

Coal Gas Hydro Other

Coal Gas Hydro RE LTM LSS

14 CONTENTS

1. INTRODUCTION TO TENAGA

2. INCENTIVE BASED REGULATION (IBR)

3. BUSINESS STRATEGY & DIRECTION

4. DIVIDEND POLICY

5. FINANCIAL HIGHLIGHTS

15 TNB 2025 GROWTH ASPIRATION Aspire to Grow our EBIT to RM20.0 billion by 2025 through Domestic & International Investment

16 SHAPING SUSTAINABLE FUTURE Our Strategic Plan 2017

3 STRATEGIC PILLARS

17 EXPANDING GLOBAL FOOTPRINT TO ACHIEVE ASPIRATION TNB is currently present in more than 5 countries

REMACO O&M for 225MW REMACO O&M for 210MW Sabiya Power Generation & Doha West Power Generation Water Distillation Plant & Water Distillation Plant (Kuwait) (Kuwait)

REMACO O&M for Shuaiba North Co-Gen 780MW Power; 204,000 m3 / day water (Kuwait)

IPP: Liberty Power Ltd 30% equity ownership 235MW in GAMA Enerji A.S.

50% equity ownership REMACO O&M services 80% equity ownership in Vortex Solar Investments S.a.r.l.. for 1,223 MW Balloki Power Plant in in Operational Onshore Wind Portfolio in UK REMACO O&M Services for Shuaibah IWPP 30% equity ownership in GMR Energy Limited IWPP: Shuaibah 900MW Power 880,000 m3 / day water 150,000 m3 / day water Development of the Sumatera – HVDC Interconnection, coal-fired power plant & coal mine mouth projects

REMACO O&M services for Equity ownership Bong Hydro Plant in Pakistan IPP, IWPP & Development Projects

Supply & Services

18 INTERNATIONAL ACQUISITION Four International Acquisitions to Support Aspiration

30% 30% Equity interest of GAMA Enerji A.S. Equity interest of GMR Energy Limited.

Assets include a 840MW natural gas- Assets include 2,298MW coal, gas and fired plant and 117.5MW wind plants solar plants.

Vortex Solar UK Tenaga Wind Ventures 50% 80% Equity interest of Vortex Solar Equity interest of GVO Wind Limited & Investments S.a.r.l. Blumerang Capital Limited

Assets include 24 operational solar PV Assets include 53 operational onshore Farm across England and Wales with net medium wind turbines with a total installed capacity of about 365MW combined capacity of 26.1MW 16 19 RENEWABLE GENERATION Government Green Policy & Initiatives

Evolution on National Energy Policies

• Minimise negative • Green Technology as the impacts on the driver to accelerate the environment national economy

• Promote efficient • Promote Sustainable utilisation of energy Development

Government Green Development Plan

11th Malaysia Plan (2016-2020)

Reduction in GHGs emission 8th Malaysia Plan 9th Malaysia Plan 10th Malaysia Plan intensity of GDP compared to 2013 : 33% (2001-2005) (2006-2010) (2011-2015) 2005 level •RE as the fifth fuel •RE Grid-connectivity •RE installed capacity •Target: 5% RE in •Target: •Target: 985 MW of Formulation of a energy mix . Peninsula 300 MW RE by 2015 comprehensive demand side . Sabah 50 MW management master plan

In renewable energy installed As at Dec 2017 : capacity by 2020 (7.5% energy 431MW mix) 20 BUILDING RENEWABLE ENERGY PORTFOLIO FOR BETTER FUTURE TNB Green Policy & Initiatives

TNB Green Policy

“TNB is committed to support the national green agenda and minimise the environmental impact of our business by applying sustainable, efficient operations and delivering green energy through the application of appropriate technologies and investments”

TNB RE Targets by 2025

1,700MW Actual as at to date 280MW

21 BUILDING RENEWABLE ENERGY PORTFOLIO FOR GREENER FUTURE 50MW and 30MW Large Scale Solar (LSS) Photovoltaic Plants

TNB SEPANG SOLAR BUKIT SELAMBAU, KEDAH

50MW 30MW LSS Photovoltaic Plant LSS Photovoltaic Plant

Expected COD: 1 November 2018 TNB received a Letter of Acceptance PPA Tenure: 21 years of Offer from Energy Commission (EC) to develop a 30MW LSS Plant

22 CONTENTS

1. INTRODUCTION TO TENAGA

2. INCENTIVE BASED REGULATION (IBR)

3. BUSINESS STRATEGY & DIRECTION

4. DIVIDEND POLICY

5. FINANCIAL HIGHLIGHTS

23 FY2017 MARKS THE HIGHEST DIVIDEND PAYOUT TO DATE Continue to Maximise Shareholders Value Through Consistent and Sustainable Dividend Payout Ratio at 50%

Dividend Policy

Distribution of dividend is based on 30% to 60% dividend payout ratio, based on the reported Consolidated Net Profit Attributable to Shareholders After Minority Interest, excluding Extraordinary, Non-Recurring items

Dividend Payout 50.0% 50.0% (PATAMI) 25.5% 26.1% 27.0% 24.7% 61.0

Dividend Paid 29.0 29.0 32.0 Per Share (sen) 25.0 21.4

FY2013 FY2014 FY2015 FY2016 FY2017 Period Ended Dec'17

24 CONTENTS

1. INTRODUCTION TO TENAGA

2. INCENTIVE BASED REGULATION (IBR)

3. BUSINESS STRATEGY & DIRECTION

4. DIVIDEND POLICY

5. FINANCIAL HIGHLIGHTS

25 FINANCIAL HIGHLIGHTS Solid Finish for a Short Financial Year

Revenue (RM bn) EBITDA (RM bn)

33.7% 31.2% 34.2% 31.2% 31.3% 15.83 15.50 5.20 12.55 12.46 11.24 11.16 11.61 11.00 4.30 3.79 3.89 3.86 3.49 6.50

2.00 1Q 2Q 3Q 4Q Period Period * 1Q 2Q 3Q 4Q Period Period FY'17 FY'17 FY'17 FY'17 Ended Ended FY'17 FY'17 FY'17 FY'17 Ended Ended Nov'17 Dec'17 Nov'17 Dec'17

* Period of 4 months (Sep-Dec’17) 26 FINANCIAL HIGHLIGHTS Financial Position Remain Intact

PAT (RM bn) Normalised PAT (RM bn)

2.74 2.02

2.16 1.69 1.65 1.95 1.51 1.79 1.75 1.47 1.44 1.22

1Q 2Q 3Q 4Q Period Period * 1Q 2Q 3Q 4Q Period Period FY'17 FY'17 FY'17 FY'17 Ended Ended FY'17 FY'17 FY'17 FY'17 Ended Ended Nov'17 Dec'17 Nov'17 Dec'17

* Period of 4 months (Sep-Dec’17) 27 FINANCIAL HIGHLIGHTS Key Performance Indicators

Period Ended Aug’17 31 Dec’17

• Return on Assets (ROA) (%) 5.6 5.4

• Company CPU (sen/kwh) 37.3 36.6

• Revenue from Non-Regulated 0.9 3.3 Business (RM bn) *

• Equivalent Plant Availability 85.7 89.5 Factor (EAF) (%)

• Transmission System Minutes (mins) 0.05 0.23

• Distribution SAIDI (mins) 18.1 50.2

* Gross revenue of all subsidiaries excluding SESB, KEV, TNBJ & TNB Capital 28 FINANCIAL HIGHLIGHTS Growing Market Capitalization

Shareholding as at Dec’17 Foreign Shareholding (%)

Khazanah Nasional Berhad 7.3 14.1 Permodalan Nasional 11.8 Bhd Employees Provident Fund Board (%) 24.1 Other Government 14.6 Agencies Other Corp. & 22.81 28.28 24.38 24.33 24.31 24.23 24.06 Malaysian Public 28.1 Foreign Aug'15 Aug'16 Aug'17 Sept'17 Oct'17 Nov'17 Dec'17

Market Capitalization as at Dec’17

RM105.5bn RM86.5bn Malayan Banking Bhd RM80.2bn Tenaga Nasional Bhd RM61.6bn Public bank Bhd RM60.3bn Chemicals Group Bhd RM49.7bn CIMB Group +7.1% RM48.3bn Holdings Bhd Group Bhd RM46.9bn IHH Healthcare Bhd RM40.8bn Maxis Bhd RM39.7bn Plantation Bhd DiGi.Com Bhd TNB Latest Market Cap. RM89.2bn (2nd), as at 26th Feb’18 29 DISCLAIMER

All information contained herein is meant strictly for the use of this presentation only

and should not be used or relied on by any party for any other purpose and without the

prior written approval of TNB. The information contained herein is the property of

TNB and it is privileged and confidential in nature. TNB has the sole copyright to such

information and you are prohibited from disseminating, distributing, copying,

re-producing, using and/or disclosing this information. CONTACT DETAILS For further enquiries, kindly contact us at:

CoE INVESTOR RELATONS GROUP FINANCE DIVISION Tenaga Nasional Berhad 4th Floor, TNB Headquarters No.129, Jalan , 59200 , MALAYSIA Tel : +603 2296 6748 Fax : +603 2284 0095 Email : [email protected] Website : www.tnb.com.my

IR OFFICERS:

Anis Ramli +603 2296 6821 [email protected] Mimi Norliyana +603 2296 6698 [email protected] Nizham Khan +603 2296 6951 [email protected] THANK YOU

Prepared by: CoE Investor Relations