Consolidating Resources for Future Growth Annual Report 2008 Contents
2 Message to Shareholders 4 Ranhill Leadership 5 Group Financial Highlights 6 Corporate Information 7 Board of Directors 8 Directors’ Profi le 12 Our Global Reach 14 Overview 21 Report and Statutory Statements Form of Proxy “From building power plants in Malaysia to constructing residential apartments in Libya; from treating recycled water in China to upgrading oil and gas facilities in Sudan; we’re putting in place the infrastructure that’s propelling nations forward.
With a wealth of regional experience and some solid expertise to boot, we keep giving of our best and delivering on our promises. This simple formula has served us well wherever we’ve gone and it’s probably the reason why clients keep coming back to Ranhill.”
Ranhill Berhad (430537-K) 1 Message to Shareholders
Dear Shareholders, whereby SAJH will surrender its build-operate-transfer concession in Johor in return The year 2008 was both a challenging and opportunistic one for Ranhill. for a license to operate as a water operations and maintenance operator. SAJH will sell We took measures to rationalise our operations and consolidate our resources for off all their assets at a one-time book value and transfer RM2.5 billion of its liabilities future growth. to the Government. The Government will lease the assets back to SAJH.
In the 2008 financial year (“FY2008”), we grew our revenues by 30% to a record As such, SAJH will migrate from being an asset heavy utility to becoming an asset of RM1.9 billion and produced a gross profit of RM72.9 million. The Group’s results light company, focused purely on operations and maintenance services to better serve for FY2008 were impaired mostly by the impact of a significant provisions for non- the people of Johor. This will enable us to unlock equity investments in our assets recoverability of cost overruns in respect of the Melut Basin project in Sudan. These at the point of transfer, accelerate cash distribution as well as minimise future lease provisions were attributable to costs that we incurred directly on the project and to rentals and tariffs. All in all, this approach will put us in a stronger financial position shared costs recoverable from our joint venture partner. While we will continue to and will provide better return to our shareholders. pursue recovery of these costs through the earnings from the additional scope of works and negotiations with our joint venture partner, the Board believes that the decision Another major event this year was the commissioning and commencement of to make the provision is both prudent and conservative given the uncertainties in commercial operation of the combined cycle gas turbine (“CCGT”) Ranhill Powertron I recovering these costs. On a positive note, Ranhill has gathered a wealth of experience (“RPI”) power plant in Sabah which was converted to 190MW from 120MW; plus the in one of Africa’s harshest geographic regions and we continue to serve as Malaysia’s commencement of the construction of a second 190MW CCGT due for commercial ambassador to such a challenged area. operation in 2010. When both the 190MW CCGT RPI and RPII plants are completed and online, Ranhill will have a total power generating capacity of 380MW, making us FY2008 was also impacted by losses and provisions amounting to RM78 million the largest independent power producer in Sabah. associated with the decision to exit from active participation in the Oil and Gas exploration business. This decision eliminates the negative cash flow from future In 2008, we restructured the Group into two strategic business units (“SBUs”), the exploration costs, which have risen substantially since Ranhill first entered this sector Infrastructure and Energy SBUs, thus emerging a leaner entity. Our Infrastructure, and through Ranhill’s residual carried interest, preserves the Group’s exposure to Highway, Bridges, Building, Water, Waste Water Engineering, Construction and future upside from exploration success. Operations and Maintenance activities now fall within the ambit of our Infrastructure SBU; while the Oil and Gas, Process, Power Engineering, Construction and Operations CHALLENGES AND OPPORTUNITIES and Maintenance activities now come under the umbrella of our Energy SBU. A very recent development and the most significant event for the Group since our last We envisage that Ranhill’s Water and Power concession businesses within the annual report, is the approval by the Malaysian Government of the migration of Group Infrastructure and Energy SBUs will continue to provide steady and recurring cash subsidiary SAJH’s water business in the state of Johor to the new licensing regime, flows to the Group and we will continue to look for opportunities to expand such
2 Ranhill Berhad (430537-K) concession businesses by capitalising on our existing strengths in these sectors. The ten principles cover four areas, Human Rights, Labour Standards, Ranhill’s recent strategic tie-up with Aqua Resources Limited, a company managed Environment and Anti-Corruption. The principles are: • Principle 1: Businesses by global asset management specialist FourWinds Capital Management, is expected should support and respect the protection of internationally proclaimed human to further strengthen the Group’s foothold in China and enable us to tap into their rights; • Principle 2: Make sure that they are not complicit in human rights abuses; burgeoning water and wastewater markets, while taking on larger scale projects. Our • Principle 3: Businesses should uphold the freedom of association and the effective Energy portfolio will, however, continue to be fuelled by a steady stream of EPC and recognition of the right to collective bargaining; • Principle 4: The elimination of all Engineering, Procurement and Construction Management (“EPCM”) projects with forms of forced and compulsory labour; • Principle 5: The effective abolition of child Ranhill WorleyParsons (“RWP”) leading the way in world class quality, innovation labour; • Principle 6: The elimination of discrimination in respect of employment and and cost effectiveness. occupation; • Principle 7: Businesses should support a precautionary approach to environmental challenges; • Principle 8: Undertake initiatives to promote greater Ranhill is now poised to be in the strongest position it has been since it commenced environmental responsibility; • Principle 9: Encourage the development and diffusion business 35 years ago. Going forward, future revenue and profit are expected to of environmentally friendly technologies; and • Principle 10: Businesses should work be generated equally from within Malaysia and from overseas and equally from against corruption in all its forms, including extortion and bribery. the Infrastructure and Energy SBUs with a good balance between the Assets and Operation and Maintenance businesses, as well as Engineering and Construction By joining this vibrant and practice-oriented global network that offers a variety of business. Continuing strong performances from our Water, Power Generation and opportunities for active engagement, Ranhill will have access to opportunities on a Energy Engineering activities within these SBUs, together with the size of our order global level as well as more than 50 active local networks on the ground. backlog, are also expected to underpin future revenue and profit growth and enhance cash generation. On top of this, the Group’s financial position remains strong with PROSPECTS cash balances at 30 June 2008 in excess of RM900 million and enhanced by the The recent turmoil in financial markets is unprecedented and is likely to lead to many surplus net asset value from the migration of SAJH’s concession. challenges ahead particularly in projects requiring financing. In addition, the rapid rise in commodity prices, in particular oil, and their subsequent decline will impact our BACKLOG Energy business in both EPC and EPCM projects and in the Infrastructure sector. To Over the course of FY2008, we leveraged upon our business restructuring and offset increases in the cost of construction materials, we are working with our clients consolidated resources to complete existing projects and embark on new ones. As to make mutually beneficial price revisions to our current and future construction of 30 June 2008, we had a backlog of contracts valued at approximately RM6 billion contracts. spread throughout South East Asia, China, the Middle East and Africa. The strategy of spreading our backlog across many regions and across diverse sectors has enabled us We continue to invest in Energy and Infrastructure businesses that include operations to mitigate our risk and guard against the caprices of each region and market cycles. and maintenance activities which complement our EPC businesses, and where This is all the more important given the current volatile global economic environment our technical expertise represents a distinctive advantage. This combination of we are operating in. our technical and financial expertise, positions us strongly for future concession investment opportunities. We have developed an excellent track record in both the Around 70% of our backlog falls under the ambit of our Infrastructure SBU while the Infrastructure and Energy business segments and will continue to focus our efforts on remaining 30% is under the Energy SBU. Of our total backlog, some 27% comes from these two areas in the near future. local projects which included the Senai-Pasir Gudang-Desaru Expressway in Johor; the landmark 600-bed Specialist Women and Children’s Hospital in Kuala Lumpur; However, with the strength, economic and geographical diversity of our large order and a major engineering contract for an oil and gas project offshore Sarawak within backlog and the positive effects of the significant de-leveraging of the Group after the Kumang Clusters Development for Petronas Carigali; among others. completion of the SAJH migration, Ranhill has the commercial, technical and financial resources required to prosper in this challenging environment. International projects account for 73% of our backlog and these include the expansion and upgrading of the Melut Basin Oil Development in Sudan; detailed engineering APPRECIATION services for Hyundai Heavy Industries’ gas injection facilities project offshore Abu On behalf of Ranhill’s Board of Directors, we wish to express our sincere gratitude Dhabi; and an EPCM contract for BP’s Lan Tay Platform in Vietnam. In Libya, the Tajura to our business partners, bankers and financiers, the authorities, our customers Housing Project is on track following our successful securing of an extension of time and shareholders for their steadfast support and continued confidence in Ranhill. To and price increase. The project is scheduled to be completed within 52 months from Ranhill’s committed management team and our 4,500 loyal employees, please accept September 2008. our heartfelt thanks for your perseverance and efforts despite the challenges of this past one year. Last but not least, our heartfelt gratitude to our esteemed colleagues on CORPORATE GOVERNANCE the Board for their sound counsel and guidance. We trust that all our stakeholders will Ranhill is committed to upholding the tenets of transparency, integrity and continue to give us their unwavering support and commitment as we work together accountability. We have in place strong corporate governance practices that guide us face all challenges and drive Ranhill steadfastly forward. in the management of the Group’s business affairs. To ensure the long term viability of our businesses and to create sustainable shareholder value, we have aligned our corporate governance controls in line with the best practices identified in the Malaysian Code on Corporate Governance.
CORPORATE RESPONSIBILITY As part of our commitment to good Corporate Responsibility practices, Ranhill has become a member of the UN Global Compact Board, the world’s largest voluntary corporate citizenship initiative. This initiative will see us committing to responsible business practices through the implementation of ten principles that will contribute to generating sustainable value for Ranhill while helping create the enabling environment Tan Sri (Dr) Sallehuddin Mohamed Hamdan Mohamad that is essential for our business to thrive. Chairman President & Chief Executive
Ranhill Berhad (430537-K) 3 Ranhill Leadership
EXECUTIVE COMMITTEE / THE MANAGEMENT TEAM RANHILL GROUP KEY MANAGEMENT PERSONNEL Tan Sri Hamdan Mohamad CHIEF EXECUTIVE OFFICERS / Tan Sri Hamdan Mohamad President and Chief Executive CHIEF OPERATING OFFICERS / President and Chief Executive CHIEF FINANCIAL OFFICERS Amran Awaluddin Ranhill Utilities Berhad / Amran Awaluddin Chief Operating Officer SAJ Holdings Sdn Bhd Chief Operating Officer Senator Datuk Chandrasekar Suppiah Ahmad Zahdi Jamil Senator Datuk Chandrasekar Suppiah Executive Vice-president Chief Executive Officer Executive Vice-president Group Head – Energy Division, Strategic Business Group Head – Energy Division, Strategic Business Development & Corporate Communications Abdul Wahab Abdul Hamid Development & Corporate Communications Chief Operating Officer Ahmad Zahdi Jamil Ahmad Zahdi Jamil Executive Vice-president Koh Boon Sian Executive Vice-president Infrastructure and Utilities Chief Financial Officer Infrastructure and Utilities Nicholas John Lough @ Ranhill Powertron Sdn Bhd / Nicholas John Lough @ Sharif Lough Abdullah Ranhill Power Sdn Bhd Sharif Lough Abdullah Executive Director Norlian Abdul Rahim Executive Director Libyan Housing Projects, Senior Vice-president Libyan Housing Projects, Amona Ranhill Consortium Sdn Bhd Amona Ranhill Consortium Sdn Bhd; and Ahmad Zakiruddin Mohamed Chief Executive Officer, Energy Division Dato’ Amdan Hj Mat Din Vice-president, Projects Ranhill Engineers and Constructors Sdn Bhd Chief Corporate Officer Ranhill Engineers and Constructors Victor McCluskey Victor McCluskey Sdn Bhd Chief Financial Officer Chief Financial Officer Group Finance Group Finance Nicholas John Lough @ Sharif Lough Abdullah Wong Bee Siah Chief Executive Officer Senior Vice-president Energy Division Group Legal and Secretarial Tarique Azam Muhd Ikmal Hisham Rahim Chief Executive Officer Vice-president Infrastructure Division Group Human Resource and Admin Manuguntha Prabhakara Reddy Mohd Khalid Abdul Rahman Chief Operating Officer Vice-president Energy Division Group Corporate Assurance Monindar Kaur Lau Bey Ling Chief Financial Officer Company Secretary Ranhill WorleyParsons Sdn Bhd Roni Adrian Chief Executive Officer
Simon Taylor Chief Operating Officer
Ranhill Bersekutu Sdn Bhd Yap Yuen Thye Chief Executive Officer
Ng Wye Kong Chief Operating Officer
Senai-Desaru Expressway Berhad Mustaza Salim Chief Executive Officer
Mediglobal Malaysia Sdn Bhd Wan Pauzi Yahya 4 Ranhill Berhad (430537-K) Chief Executive Officer
Group Financial Highlights
• Record revenue RM1.9 billion
• Order book remains strong
Profit from operations (RM’000) Revenue (RM’000) 2008 ** 350,455
2008 1,909,937 2008 (285,033)
2007 1,470,412 2007 442,505
2006 1,361,633 2006 223,869
2005 1,492,251 2005 171,200
2004 792,944 2004 86,248
Net profit/(loss) for the year (RM’000) Total assets (RM’000)
2008 (715,425) 2008 11,431,025
2007 116,833 2007 11,982,672
2006 49,984 2006 11,160,730
2005 33,134 2005 10,524,246
2004 48,429 2004 1,342,544
2004 2005 2006* 2007 2008 2008 ** RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Revenue 792,944 1,492,251 1,361,633 1,470,412 1,909,937 1,909,937 Profit from operations 86,248 171,200 223,869 442,505 (285,033) 350,455 Net profit for the financial year 48,429 33,134 49,984 116,833 (715,425) (79,937) Weighted average number of ordinary 355,500 528,378 597,265 597,265 597,265 597,265 shares (‘000) Basic earnings per ordinary share (sen) 13.62 6.27 8.37 19.56 (119.78) (13.38) Total Assets 1,342,544 10,524,246 11,160,730 11,982,672 11,431,025 11,431,025 Shareholders’ Equity 300,703 953,623 994,662 1,192,019 468,631 468,631 Net Assets per share 0.85 1.80 1.67 2.00 0.78 0.78
* The Net Profit and Earnings per share for FYE 2006 is before a provision of RM62.7 million for costs associated with the proposed acquisition of the Masinloc. ** The Net Profit and Earnings per share for FYE 2008 is before a provision of Sudan RM556 million and loss on disposal of oil and gas properties of RM78 million
Ranhill Berhad (430537-K) 5 Corporate Information
BOARD OF DIRECTORS BOARD COMMITTEES Auditors Tan Sri Sallehuddin Mohamed Audit Committee Messrs PricewaterhouseCoopers Independent Non-Executive Chairman Datuk Ramli Ibrahim - Chairman Chartered Accountants Tan Sri Sallehuddin Mohamed Level 10, 1 Sentral, Jalan Travers Tan Sri Hamdan Mohamad Datuk Razman Md Hashim Che Kuala Lumpur Sentral Executive Director/President and Chief Executive Din Md Hashim P.O. Box 10192 50206 Kuala Lumpur Datuk Ramli Ibrahim Nomination Committee Tel: (603) 2173 1188 Independent Non-Executive Director Tan Sri Sallehuddin Mohamed - Chairman Fax: (603) 2173 1288 Datuk Ramli Ibrahim Senator Datuk Chandrasekar Suppiah Datuk Razman Md Hashim Che Solicitors Executive Director/Executive Vice President, Din Md Hashim Abu Talib Shahrom Group Head – Energy Division, Strategic Business Dato’ Seri Abdul Azim Albar & Partner Mohd. Zabidi Development & Corporate Communications Lee Hishammuddin Allen & Gledhill Chew Seng Kok Datuk Razman Md Hashim Che Din Zaid Ibrahim & Co. Remuneration Committee Md Hashim Zul Rafique & Partners Tan Sri Sallehuddin Mohamed - Chairman Independent Non-Executive Director Registrar Datuk Ramli Ibrahim Symphony Share Registrars Sdn Bhd Amran Awaluddin Datuk Razman Md Hashim Che Din Md Hashim Level 26, Menara Multi Purpose Executive Director/Chief Operating Officer Nicholas John Lough @ Capital Square Nicholas John Lough @ Sharif Lough Abdullah No. 8, Jalan Munshi Abdullah 50100 Kuala Lumpur Sharif Lough Abdullah Company Secretaries Tel: (603) 2721 2222 Executive Director Wong Bee Siah Fax: (603) 2721 2530 Lau Bey Ling Dato’ Seri Abdul Azim Mohd. Zabidi Principal Bankers Independent Non-Executive Director Registered Offi ce Affin Bank Berhad 36th Floor, Empire Tower Chew Seng Kok Alliance Bank Berhad No. 182, Jalan Tun Razak Non-Independent Non-Executive Director AmInvestment Bank Berhad 50400 Kuala Lumpur Bank Muamalat Malaysia Berhad Tel: (603) 2171 2020 Nadzru Azhari British Arab Commercial Bank Limited Fax: (603) 2164 2235 Non-Independent Non-Executive Director CIMB Bank Berhad Website: www.ranhill.com.my (appointed with effect from 16 August 2007) CIMB Investment Bank Berhad Email: [email protected] EON Bank Berhad Export-Import Bank of Malaysia Berhad Malayan Banking Berhad OSK Investment Bank Berhad RHB Bank Berhad Standard Chartered Bank Malaysia Berhad The Royal Bank of Scotland Berhad
Stock Exchange Listing Main Board of Bursa Malaysia Securities Berhad Stock name: Ranhill Stock code: 5030 Listing date: 15 February 2001
6 Ranhill Berhad (430537-K) Board of Directors
Nadzru Azhari, Dato’ Seri Abdul Azim Mohd. Zabidi, Datuk Razman Md Hashim Che Din Md Hashim
Senator Datuk Chandrasekar Suppiah, Amran Awaluddin, Nicholas John Lough @ Sharif Lough Abdullah
Chew Seng Kok, Datuk Ramli Ibrahim
Tan Sri Sallehuddin Mohamed, Tan Sri Hamdan Mohamad
Ranhill Berhad (430537-K) 7 Directors’ Profi le
Tan Sri Sallehuddin Mohamed, a Malaysian, aged 76, was Tan Sri Hamdan Mohamad, a Malaysian, aged 52, was appointed appointed to the Board of Ranhill Berhad (Ranhill) as an Independent to the Board of Ranhill as an Executive Director on 15 November Non-Executive Director on 14 February 2001. He is the Chairman of 2000. He is the President and Chief Executive of Ranhill. the Board of Ranhill. His illustrious career started in 1981 as a structural engineer, at the He holds a Bachelor of Arts in Economics (Honours), from University engineering consulting firm of Ranhill Bersekutu Sdn Bhd (Ranhill Of Malaya, Singapore in 1959. He was conferred an Honorary Bersekutu), after completing his Engineering Degree programme Doctorate in Management from Universiti Teknologi Malaysia in 1997. at the University of Western Australia. He then pursued his study in He joined the Malaysian Civil Service in 1959 (now known as the engineering at the Imperial College, University of London between Administrative and Diplomatic Service) and had held various senior 1985 to1986 and obtained his Masters Degree in Advanced positions in the Federal Government. Amongst these, were senior Concrete Structures. On returning to Malaysia, he went on to head positions in the Ministry of Finance (1965-1982), the Director General, the Structural Department in Ranhill Bersekutu and was subsequently Economic Planning Unit, Prime Minister’s Department (1982-1984) appointed a Director in 1988. Eventually he became its President and and the Chief Secretary to the Government of Malaysia until he retired Chief Executive Officer in 1995. from the Government Service in 1990. After retirement, he was initially appointed as the Non-Executive Chairman, and subsequently made He is a Fellow of the Institution of Engineers, Malaysia and a an Executive Chairman of the Employees’ Provident Fund where he professional engineer registered with the Board of Engineers, served until end of January 2000. Malaysia. He is also a Fellow of the Institute of Civil Engineers, United Kingdom and a Chartered Engineer registered with the Institute of Civil He has also served in the capacity of Chairman of the Board of a Engineers, United Kingdom. number of statutory bodies and Government-owned companies including Tenaga Nasional Berhad, Industrial Bank of Malaysia, He sits on the Board of Ranhill Utilities Berhad, Senai-Desaru Universiti Teknologi MARA – “UiTM” and Universiti Teknologi Malaysia. Expressway Berhad and several other private limited companies including Ranhill Corporation Sdn Bhd (RCorp), Ranhill Consulting Tan Sri also sits on the Board of Ranhill Utilities Berhad. Sdn Bhd, Lambang Optima Sdn Bhd (LOSB).
He holds a direct interest of 13,604,900 ordinary shares in Ranhill and is deemed interested in 295,311,071 ordinary shares in Ranhill by virtue of his substantial shareholdings in RCorp and LOSB. By virtue of his interest in the shares of Ranhill, he is also deemed to have substantial interests in the shares of the subsidiaries of Ranhill to the extent Ranhill has an interest.
8 Ranhill Berhad (430537-K) DIRECTORS’ PROFILE
Datuk Ramli Ibrahim, a Malaysian, aged 68, Senator Datuk Chandrasekar Suppiah, a Datuk Razman Md Hashim Che Din Md was appointed to the Board of Ranhill as an Malaysian, aged 46, was appointed to the Hashim, a Malaysian, aged 69, is a member Independent Non-Executive Director on 1 Board of Ranhill on 25 February 2002 as an of the Institute of Bankers. He was appointed December 2000. Executive Director. He is also the Executive to the Board of Ranhill as an Independent Vice-President, Group Head – Energy Division, Non-Executive Director on 25 February 2002. He is a Fellow of the Institute of Chartered Strategic Business Development & Corporate Accountants, Australia and also a member Communications. On completing his early secondary education of the Malaysian Institute of Accountants. He in Australia, he studied banking where he was the Senior Partner of KPMG Malaysia He holds a Bachelor of Law Degree from the became a member of the Australian Institute until 1995. From 1996 to 2000, he served as University of Buckingham, United Kingdom. of Bankers. the Executive Chairman of the Kuala Lumpur On 15 July 2008, he was appointed a Options and Financial Futures Exchange Senator to the Dewan Negara, Parliament of On his return to Malaysia, he joined Berhad, which has since been absorbed by Malaysia. Standard Chartered Bank as a Trainee Officer Bursa Malaysia Securities Berhad. in 1967. Throughout his 34 years in banking, Before joining the Ranhill Group, he held he served in various capacities including He also sits on the Board of Aeon Co. (M) various top-level executive positions in the secondments to the Bank’s branches in Berhad, HSBC Bank Malaysia Berhad, private sector including Pro Majestic Sdn London, Europe, Hong Kong and Singapore. MEASAT Global Berhad, BCT Technology Bhd (a subsidiary of Pembinaan Redzai He held various senior positions and was Berhad and Aeon Credit Service (M) Berhad. Sdn Bhd, owner and operator of Westports appointed as Deputy Chief Executive/ Malaysia Sdn Bhd). His exposure at the Executive Director of Standard Chartered international arena with key government Bank Malaysia Berhad in 1994 until he retired officials, construction conglomerates, banking in 1999. In 1999, he was appointed by institutions and reputable consultants had Bank Negara Malaysia as Chairman of MBF been instrumental in securing various large Finance Berhad until 2001 when the finance power projects in India. company was sold to the Arab Malaysian Group. He remains a corporate figure till to-date. Other public companies in which he is also a director are Multi-Purpose Holdings Berhad, Sunway City Berhad, Sunway Infrastructure Berhad, Affin Bank Berhad, Berjaya Land Berhad and MAA Holdings Berhad.
Ranhill Berhad (430537-K) 9 DIRECTORS’ PROFILE
Amran Awaluddin, a Malaysian, aged 39, Nicholas John Lough @ Sharif Lough Dato’ Seri Abdul Azim Mohd. Zabidi, a was appointed as the Executive Director Abdullah, a British with permanent residence Malaysian, aged 49, was appointed to the and Chief Operating Officer of Ranhill on in Malaysia, aged 56, was appointed to the Board of Ranhill as an Independent Non- 1 September 2004. Board of Ranhill on 22 September 2005 as Executive Director on 13 December 2005. a Non-Independent Non-Executive Director. He graduated in 1992 with a Bachelor of He was re-designated to Executive Director He is a Fellow of the Institute of Chartered Science (Honours) Degree in Industrial and on 1 December 2006. Secretaries and Administrators, United Business Economics from London School Kingdom, and holds a Master of Arts of Economics, University of London. He is He is a Fellow of the Gemological Association in Business Law from London Guildhall a Chartered Accountant of the Malaysian of Great Britain and a member of The University, United Kingdom. Institute of Accountants and an Associate National Association of Goldsmiths London. of the Chartered Institute of Management He is currently the Chairman of Bank Accountants. He has extensive experience in the corporate Simpanan Nasional (BSN), Malaysia’s National sector, serving in various senior capacities Savings Bank. He was appointed as the He started his professional career as a including as the Group Executive Director of President (Asia Pacific) of the World Savings Consultant with the Strategy and Operations the Melewar Group which he joined in 1985. Banks Institute (WSBI) in 2000 and was Department at Kassim Chan Management subsequently elevated to its Board of Consultants Sdn Bhd in 1993. He later He is currently a director of M3Nergy Berhad, Directors in 2003. In 2006, he was elected joined the Privatisation and Project Advisory MAA KL Mutual Berhad and Langkawi Yacht Vice President and Treasurer of WSBI. He Department, RHB Sakura Merchant Bankers Club Berhad. was also the President of the Federation of Berhad in 1996 where he was involved in Malaysian Unit Trust Managers, a post he several privatisation and project advisory held from 1998 to 2003. exercises. Dato’ Seri also sits on the Board of He also sits on the Board of Senai-Desaru Permodalan BSN Berhad, Wijaya Baru Expressway Berhad. Global Berhad, M3Nergy Berhad, Kumpulan Europlus Berhad, OSK Ventures International Berhad, Timberwell Berhad and Innosabah Securities Berhad.
10 Ranhill Berhad (430537-K) DIRECTORS’ PROFILE
Chew Seng Kok, a Malaysian, aged 48, Nadzru Azhari, a Malaysian, aged 55, was OTHER INFORMATION OF DIRECTORS was appointed to the Board of Ranhill as a appointed to the Board of Ranhill as a Non- Any Family Relationship with any Directors Non-Independent Non-Executive Director on Independent Non-Executive Director on 16 and/or substantial shareholders of Ranhill 13 December 2005. August 2007. Berhad There are no family relationships between the He is an advocate and solicitor of the High He holds a Bachelor of Science in Chemical Directors and/or major shareholders of the Court of Malaya and holds a Bachelor of Law Engineering from University of Manchester Company. (Honours) degree and a Master of Law (First (UMIST) and a Diploma–Ing, (Diplome Class Honours) from Victoria University in Ingenieur), Institutul de Petrol si Gaze (IPG) Conflict of interest Wellington, New Zealand. from University of Bucharest. Save as disclosed in the related party transactions of this Annual Report and Mr Chew is currently the Managing Partner He is a Chartered Engineer and a Member of the Circular to the Shareholders dated 6 of Messrs Zaid Ibrahim & Co., Kuala Lumpur, the Institution of Chemical Engineers, United December 2008, none of the other Directors one of the leading law firm in Malaysia with Kingdom and KIVI (Koninklijk Instituut Van have any conflict of interest with the offices interalia in Singapore, Jakarta and Ingenieurs) Royal Netherlands Institution of Company. Bangkok, a firm which he joined since 1991. Engineers and also a Fellow of the Institute of Petroleum. List of Convictions for Offences within the Besides being recognised as a leading lawyer, past 10 years other than traffic offences he has advised on privatisations and the He started his career as an Executive Engineer All Directors maintain a clean record with development and financing of infrastructure in PETRONAS in 1976. Subsequently, he was regard to convictions for offences. projects in private power generation, water appointed as an Executive Director of Protek supply, sewerage services, urban transport, Engineers Sdn Bhd, a Consulting Engineers Attendance at Board Meetings waste disposal, land development or company in the Oil and Gas industry from The details of the attendance of Directors at reclamation and highways. He also advises 1982 to 1988. Currently, his portfolio includes Board Meetings are set out in the Statement clients on a broad range of legislative and being a director and member of the Board on Corporate Governance. regulatory matters in dealing with the Federal of Commissioners of PT Gunanusa Utama and State Government agencies in Malaysia. Fabricators and a director of Elpiji Group of companies.
He also sits on the Board of Borcos Berhad.
Ranhill Berhad (430537-K) 11 Our Global Reach
A MALAYSIA C THAILAND H INDIA
1. Source to Tap Water Supply Concession 1. Amata Nakorn Industrial Park 1. NPROD Expansion Engineering and for the State of Johor • BOT of Recycled W.T.P. (10.5MLD) Procurement Assistance – British Gas Total Customers: 875,000 • BOT of W.T.P. (20MLD) Exploration and Production Indian Ltd Population: 3.2 million • BOT of Wastewater Treatment Plant (16MLD) Engineering services to provide the detailed • BOT of W.T.P. (Phase 6) (10.5MLD) design deliverables and procurement 2. ExxonMobil - Tabu Non-Associated assistance services Gas (NAG) project, offshore Kerteh, 2. Amata City Industrial Estate Terengganu • BTO of Wastewater Treatment Plant (9.6MLD) 2. 25 years Water Supply Concession in Preliminary and detailed design • BTO of W.T.P. (10.5MLD) Haldia, West Bengal, India inclusive of constructing 113.5MLD Potable Water 3. Senai-Pasir Gudang-Desaru Expressway 3. Safeskin Medical & Scientifi c (Thailand) Treatment Plant Development, operation and ownership Ltd and Safeskin Corporation Ltd Currently in design stage and expected of infrastructural assets via 33-year BOT Operations & Maintenance two year renewable completion in July 2010 project for SDE in southern region of Johor, contract whereby the construction contract worth I LIBYA RM1.06 billion D VIETNAM 1. Libya Housing Project 1. BP’s Lan Tay Compression Module, Design and Construction of 10,680 Housing 4. Ranhill Powertron I & II, Sabah Offshore Vietnam Units in Tajura including Earthwork & • Upgrading of 120MW to 190MW CCGT, RPI Phase 2 of the incentives EPCM contract for Infrastructure Work • Proposed 190MW CCGT, RPII two train gas compression module J UNITED KINGDOM B CHINA E INDONESIA 1. Workshare for Iran South Pars 1. Xiao Lan Wastewater Treatment Plant 1. EPC Contracts with PT Musim Mas 12 Onshore Development It consists of two phases: Design, Supply, Delivery, Testing and FEED and EPC/EPCI CFT Engineering Phase 1 – 30MLD and Phase 2 – 30MLD. Commissioning of 480m3/day wastewater The plant will serve industries within treatment plant K SUDAN Xiao Lan Industrial Park located in Nanchang City, Jiangxi Province China 1. Melut Basin Oil Development Expansion F AUSTRALIA EPCC for the AL-Jabalyn & Palouge Oil 2. Hefei Wastewater Treatment Plant 1. Lynas Corp. Ltd, Australia Processing Facilities & Expansion from Hefei Wastewater Treatment Plant consists Engineering, procurement and construction 220,000 bpd to 300,000 bpd of 30MLD capacity located at Hefei City, management on Rare Earth Jangsu Province of China L UGANDA G QATAR Lake Victoria Resort 3. Yichun Water Treatment Plant 1. 1. Occidental Petroleum of Qatar Yichun Water Treatment Plant consists of Detailed engineering design Detailed design of Living Quarters Platform 50MLD capacity located at Yichun City, SAUDI ARABIA Jiangxi Province of China M 1. King Abdullah University of Science and 4. Xinxiang Industrial Park Technology (KAUST) A 30 year concession for a 50MLD WWTP at Total Project Management Services Xinxiang Industrial Park in the Henan Province 2. Madinah City Completion of full operational audit for Water & Wastewater in Madinah City
3. King Saud University for Girls in Riyadh Management Consultancy Services for contruction of Phase 1
12 Ranhill Berhad (430537-K) J
B I M G K H C D
A A L E
F
Ranhill Berhad (430537-K) 13 Infrastructure & Building
On the engineering, procurement and construction (“EPC”) front, Ranhill continues to build up a strong portfolio with several ongoing landmark projects that include Libya’s Tajura Housing project; Malaysia’s pioneering specialist Woman and Child Hospital; the 1,700m long Cable-stayed Bridge in Johor - the longest single plane cable-stayed bridge in the world; and several multi-purpose community sports complexes throughout Malaysia. With a steady stream of contracts already in hand and several others in the offing, Ranhill expects to be kept busy with EPC projects over the next four to five years. On the asset ownership side, Ranhill holds the concession to collect toll for the Senai-Pasir Gudang-Desaru Expressway in Johor.
INFRASTRUCTURE GROUP OVER
Water & Wastewater Treatment
Ranhill’s Water and Wastewater Treatment businesses remain the underlying engine of growth for the Group. Even as concession activities in Malaysia, Thailand and China continue to bring in steady returns, we are reaping the fruit of our efforts from non-revenue water (“NRW”) reduction services and EPC projects in Malaysia, India, Indonesia, the Middle East and elsewhere. With Ranhill Utilities fast gaining recognition as one of Asia’s leading water utilities, we anticipate that the water sector opportunities will continue to drive Ranhill’s growth.
14 Ranhill Berhad (430537-K) Oil & Gas
Ranhill’s Oil & Gas portfolio continues to be fuelled by a steady stream of international engineering design, EPC and engineering, procurement and construction management (“EPCM”) projects. Following the rationalisation of the Group’s exploration and production activities, we have realigned our focus and strengthened our capability as a global engineering design hub and cost effective platform for international oil & gas projects. With strong project execution skills and cross-regional expertise, Ranhill WorleyParsons has established itself as a strong player for engineering design services and EPCM works in Sudan, the Middle East, Pakistan, Vietnam and Malaysia and is steadfastly exploring new ventures elsewhere.
VIEW ENERGY GROUP Power
In the Power segment, Ranhill’s focus on ongoing power generation and asset ownership activities in East Malaysia continues to power our progress while positioning us to be the largest independent power producer in the state of Sabah in time to come. Currently, the Ranhill Powertron I combined cycle plant in Sabah is generating at its full 190 MW capacity, while the Ranhill Powertron II is scheduled for open cycle commercial operation in 2009, and subsequently, full combined cycle commercial operation in 2010. Through our ongoing asset ownership activities in Sabah, we are helping ease the acute shortage of power in the state while bolstering our capabilities for future growth.
Ranhill Berhad (430537-K) 15 Infrastructure Group
Infrastructure and Building
In Malaysia, Ranhill is involved in the development, operation and issued progressively since December 2005. Ranhill and the Islamic ownership of infrastructural assets via the 33-year Build-Operate- Development Bank Infrastructure Fund are subscribers of the Transfer (“BOT”) project for the Senai-Pasir Gudang-Desaru ICULS. Over the course of the year, Ranhill subscribed to a total Expressway (“SDE”) in Johor. The design and build component of RM184.90 million nominal value ICULS. The eleventh tranche of the 77 km-long project, which is being undertaken by Ranhill of RM15.91 million ICULS will be subscribed by December 2008 Engineers & Constructors (“REC”), consists of a landmark 1.7 km with the final tranche of RM14.19 million in March 2009. long cable-stayed bridge with a 500 m mid-span across the Johor River; five interchanges, 35 bridges, four toll plazas and two rest In an effort to encourage youth participation in healthy recreational and service areas. As of August 2008, approximately 82.3% of the and sporting activities, the Ministry of Youth and Sports has SDE had been completed against the revised completion date of decided to implement purpose-built community sports complexes 30 June 2009. The earthworks had reached the formation level nationwide. The Ministry hopes that these complexes will help in most areas while the construction of the bridges, buildings, toll uncover potential new athletes in local sports, provide a safe and plazas and pavement works were well underway. The structural healthy environment for recreational activities and also serve as works for the mainline land and river bridges too have almost been dynamic new hubs for the surrounding neighbourhoods. On 9 completed. November 2006, REC received the Letter of Intent to design and build 30 units of such multi-purpose community sports complexes All the nine bridges in Package 2 have been completed while the throughout Malaysia. REC has been tasked with ensuring optimum remaining bridges under Packages 1 and 3 are scheduled for site usage and a highly-efficient internal layout within a total built- completion by February 2009. Work on the toll plazas and canopy up area of 1,770 m2 comprising a 1,340 m2 sports hall and 360 m2 at Package 1 and 2 is making good headway while work on the toll office space. The sports hall will be able to accommodate two futsal plaza under Package 3 is scheduled for completion by March 2009. courts, four badminton courts, four sepak takraw courts as well as Works on the 49 km section of the expressway under Packages 1 a netball and volleyball court. The 30 units will be implemented and 2 are also expected to be completed by May 2009 timeframe, in packages as and when suitable sites have been identified. while works on the remaining length of the expressway under REC completed the first package involving complexes at Kota Package 3 (inclusive of the cable-stayed bridge), is scheduled for Tinggi, Muar, Pagoh, Bukit Katil, Sg. Siput, Bentong and Besut. completion by end-June 2009. We are currently awaiting the go ahead on Package 2 for another 12 complexes throughout the nation. Project financing for the SDE has been forthcoming mainly by way of the issuance of Islamic Bonds and Irredeemable Ranhill has also made good progress on design, procurement, Convertible Unsecured Loan Stocks (“ICULS”) that have been construction, commissioning and maintenance works for the 600- bed Specialist Woman and Child Hospital within the envelope of
16 Ranhill Berhad (430537-K) the existing Kuala Lumpur General Hospital development. When in securing work in Qatar (for the Office and Residential Tower completed, this hospital will provide a level of service on par with at Marina District in Doha), the United Arab Emirates (for the that offered in developed countries. As at 15 August 2008, Package Healthcare City in Dubai and Royal Group Headquarters in Abu 1 of the project worth RM15.5 million involving site clearing as well Dhabi), Saudi Arabia (for the King Abdullah University of Science as demolition and relocation works had been 100% completed. and Technology in Thuwal) and India (for the Space Station1 In March 2008, Ranhill was awarded a RM704.8 million contract Residential and Commercial Development in Hyderabad), has for Package 2 (Phase I) comprising main piling and building works provided the Group a solid platform to showcase our extensive complete with M&E works, Total Hospital Information System expertise in engineering design and project management services (“THIS”), external works, as well as specialist medical equipment, and further build Ranhill’s reputation in the international arena. non-medical equipment and furniture. Package 2 (Phase II) of the project is being negotiated and will involve loose medical equipment, Apart from that, Ranhill Bersekutu was recently awarded project vehicles and the clinical software component of the THIS. management consultancy services for the construction of Phase 1 of the King Saud University for Girls in Riyadh, Saudi Arabia. The The Tajura Housing Project encompasses the design, construction project entails the construction of a university exclusively for girls and handover of 10,680 apartments in Tripoli, Libya. This USD1.2 for a final population of 30,000 students. The estimated cost of the billion project has been contracted out by the Housing and project is USD250 million. Infrastructure Board of the Libyan Government to Amona Ranhill Consortium (“ARC”), a Ranhill Berhad subsidiary. This landmark In the longer term, the company is posturing to be a truly “global” housing project includes the provision of consultancy services for player with activities in more than 10 countries and offices in various the master planning and the design of facilities, buildings as well regions. In connection with this, the company is continuously as common and local infrastructure. ARC has been requested to pursuing joint ventures/alliances and exploring the potential of make a number of changes to the original design and scope of acquiring international practice to enable it to make a quantum work, including the provision of central gas heating facilities. Due leap into the international arena. to these changes, the completion of the project has been extended to November 2012, with sectional completion and handover Keeping abreast of the latest trends, the company promotes and beginning September 2009. advocates an Ecologically Sustainable Design (“ESD”) or Green technology that ensures the most sustainable environment while Ranhill Bersekutu continues to explore and make significant fulfilling developmental needs. A project currently being designed inroads into new overseas markets for its engineering design and in India includes ESD technology as well as Leadership in Energy & project management services business. The company’s success Environmental Design (“LEED”) Certification.
Ranhill Berhad (430537-K) 17 Water & Wastewater Treatment
Ranhill Utilities Berhad (“Ranhill Utilities”) is one of Malaysia’s leading the Operations and Maintenance (“O&M”) aspects of the state’s water engineering, construction and asset ownership businesses sewerage services focusing on Majlis Bandaraya Johor Bahru and and the only company in Malaysia to have total source-to-tap and Pihak Berkuasa Tempatan Pasir Gudang in the initial period. wastewater treatment capabilities and services. Ranhill Utilities’ non-concession business focuses on providing Locally, Ranhill Utilities continues its strong performance through water and wastewater process engineering through EPC projects its 30-year potable water supply concession (2000-2029) for the and the provision of NRW reduction services. During the period state of Johor. As at 30 June 2008, the registered customer base under review, Ranhill Utilities completed three EPC projects with in Johor stood at 874,127 customers. The company’s collection a combined worth of RM18.3 million. The projects included the efficiency rate has consistently been above 98% and in FY2008 it first public water treatment plant on Pulau Tioman, Pahang; a posted a collection of RM564.82 million. To date, Ranhill Utilities demineralised water plant with a chemical dosing system for a power has installed a total of 17,500 km of pipeline in the state and plant project at Teluk Salut, Sabah; and a water and wastewater achieved a NRW level of 30.8% in comparison to 45% at the time treatment plant for Hartalega, a rubber glove factory in Batang of takeover. There is today 100% urban coverage and 99.7% rural Berjuntai Selangor. The combined capacity for the three plants is coverage, and 818 planned district meter zones (“DMZs”) have 520m³/hr. The Group’s operational and management outsourcing been established. services business has been awarded two NRW contracts: a RM39 million contract for the Kedah Central Zone and a RM36 million In line with the restructuring of the national water services sector contract for Malacca. The scope of works for both states includes and to enhance its sewerage expertise, Ranhill Utilities collaborated DMZ establishment, active leakage detection, repairs, reservoir with Dansk Geo-servEx a/s (“DGE”) under the Danish International monitoring and flow balancing. Development Agency Partnership Facility Programme (“PFP”). A joint-study, undertaken by Ranhill Utilities and DGE, and On the international front, Ranhill Utilities has secured four BOT commissioned by the state Economic Planning Unit (“EPU”) will be concession projects in China. These include a fully operational completed by the end of 2008. It will outline the improvement works 29-year concession for a 50 million litres per day (“MLD”) project at and strategies for the integration of services under an operational Yichun City within the Jiangxi Province; and a 29-year concession master plan for Johor Bahru City and Pasir Gudang. Ranhill Utilities for a 30 MLD wastewater treatment plant (“WWTP”) at the Xiao Lan has expressed its interest to the state government to take over Economic Development Zone also within the Jiangxi Province. The
18 Ranhill Berhad (430537-K) latter plant is almost completed and is expected to be operational Ranhill Utilities’ non-concession business has also expanded into by early 2009. The company also holds a 25-year concession for two new markets, namely India and Indonesia. The combined value a 30 MLD WWTP at Hefei Chemical Industrial Park in the Anhui of the EPC contracts for both countries is RM31 million for WTPs Province; plus a 30-year concession for a 50 MLD WWTP at with a total capacity of 114 MLD. Xinxiang Industrial Park in the Henan Province. The O&M division continued its two-year renewable O&M contract In Thailand, Ranhill Utilities holds three 20 years concessions for water and wastewater treatment for Safeskin Medical & under BOT contracts for water, wastewater and recycled water Scientific (Thailand) Ltd and Safeskin Corporation (Thailand) Ltd., projects at Amata Nakorn Industrial Park with a combined capacity contributing RM4.4 million in the period under review. of 46.5 MLD. In addition, there are another three Build-Transfer- Operate (“BTO”) contracts – two within the Amata City Industrial Following the successful completion of the operational audit for Estate and one within the Amata Nakorn Industrial Park – with a water and wastewater services in Madinah City, Ranhill Utilities has total combined capacity of 30.6 MLD. For FY2008, the six Thai furthered its business expansion in the Kingdom of Saudi Arabia. concessions and long-term contracts brought the company an Ranhill Utilities has been invited by Saudi Tumpane Company annual turnover of RM9 million in total. Limited (“STCL”) to participate in its SAR120 million contract for leakage detection and reduction works in Riyadh City. Ranhill Ranhill Utilities marked its entry into the Indian market by securing Utilties’ scope includes the district metering design and leakage a 25-year water supply concession through associate company detection programme. Ranhill Utilities is anticipating the award Haldia Water Management Limited (“HWML”). HWML has signed of a five-year contract management by second quarter of 2009. a Concession Agreement with Haldia Development Authority This contract is part of the second phase of Saudi Arabia’s water (“HDA”) to construct a 113.5 MLD WTP on a Design-Build- restructuring programme Finance-Operate (“DBFO”) basis and to operate and maintain the existing 113.5 MLD WTP and the entire distribution network and Ranhill Utilities continues to explore new water and wastewater customer services in Haldia for a period of 25 years. HWML is a treatment opportunities throughout the Asia Pacific Region. With a special purpose company formed by Ranhill Utilities and its two strong management team at its helm, the company is optimistic of local partners, Infrastructure Development Finance Company Ltd securing new projects in the year ahead. (“IDFC”) and Jamshedpur Utilities and Services Company Ltd. (“JUSCO”), a TATA Steel subsidiary.
Ranhill Berhad (430537-K) 19 Energy Group
Oil & Gas Power
REC has commenced works on the USD149 million engineering, For the Combined Cycle Conversion project in Sabah, Block 1 procurement, construction and commissioning (“EPCC”) project in achieved commercial operation on 25 April 2008, while Block 2 Sudan for Petrodar Operating Company Limited. The project involves achieved commercial operation on 25 October 2008. The plant is the expansion of the existing Al-Jabalayn central processing facility now generating at its full capacity in combined cycle mode with a (“CPF”) from 220,000 barrels of oil per day (“BOPD”) to 300,000 total net capacity of190 MW. BOPD and the upgrading of field production facilities (“FPF”) at Palouge to cater for increased fluid intake. As of November 2008, Land acquisition issues pertaining to the proposed 190MW Ranhill basic engineering works on both the CPF and FPF construction Powertron II (“RPII”) CCGT plant has been resolved and the project sites had been completed while detailed engineering is expected to is back on track. Ranhill Power has successfully signed mutually be completed by February 2009. Major additional equipment and beneficial agreements with various parties. These agreements their related works are required to optimise the plant’s capacity and include a supplemental agreement with Sabah Electricity Sdn Bhd positive changes to the contract value are expected. The project is (“SESB”) signed on 16 July 2008, an EPCC contract with China expected to be completed by August 2009. National Electric Equipment Corporation (“CNEEC”) signed on 1 July 2008, and a Gas Turbine supply contract with General Ranhill Worley Parsons (“RWP”) is undertaking detailed engineering Electric (“GE”) signed on 21 July 2008, among others. The RPII services for Hyundai Heavy Industries’ (“HHI”) Umm Shaif gas project is scheduled to achieve commercial operation for open cycle injection facilities project offshore Abu Dhabi. RWP’s scope-of-work GT1 in November 2009, open cycle GT2 in April 2010 and finally for HHI’s USD1.6 billion EPCC project covers detailed engineering scheduled to achieve full combined cycle commercial operation in design for the collector separator platform, water disposal tower, September 2010. compression platform, accommodation platform, flare towers and intra-field pipelines/subsea cable components, as well as the When both the 190MW CCGT RPI and RPII plants are completed tie-ins to the existing wellhead towers and Umm Shaif Super Complex. and online, Ranhill will have a total power generating capacity of The project is targeted for completion in the third quarter of 2009. 380MW, making us the largest independent power producer in Sabah. RWP is also scoping out the front end engineering requirements for the Kumang Clusters Development (offshore Sarawak) for Petronas Carigali in the hope of securing the subsequent EPCC phase of the project. In Vietnam, RWP is undertaking Phase 2 of the incentives EPCM contract for two train gas compression modules on BP’s Lan Tay Platform. To date, RWP has completed the front-end engineering design within the prescribed 18 to 20 weeks and is on track to complete all EPCM activities for this facility that provides some 40% of Vietnam’s total power supply.
20 Ranhill Berhad (430537-K) Reports and Statutory Statements
22 Statement on Corporate Governance 28 Audit Committee Report
29 Terms of Reference of the Audit Committee 31 Statement on Internal Control
32 Corporate Responsibility Report 35 Reports and Financial Statements
133 Analysis of Shareholdings 136 Properties Held by the Group 137 Ranhill Global Offices
138 Notice of Annual General Meeting 142 Statement Accompanying the Notice of Annual General Meeting
Form of Proxy
Ranhill Berhad (430537-K) 21 Statement on Corporate Governance
The Board of Directors (“Board”) continually practices good corporate The positions and roles of the Chairman and the President & Chief governance to manage the business and affairs of the Group and Executive held by two (2) persons, are distinct and separate. The takes measures to promote the Company’s compliance with the Best Independent Non-Executive Chairman is primarily responsible for Practices in Corporate Governance as identifi ed in the Malaysian providing clarifi cation on issues that are raised by shareholders Code on Corporate Governance (“Code”). Hence, the Board considers and investors and ensuring the integrity and effectiveness of the that it has complied with the Code. governance process of the Board. The President & Chief Executive is responsible for the day-to-day operations and management of the Company and implementation of Board policies and decisions. DIRECTORS Board Composition and Balance The Executive Directors are generally responsible for implementing As at the date of this Annual Report, the Board consists of ten (10) the policies and decisions of the Board, overseeing operations and members, comprising four (4) Executive Directors, four (4) Independent administration, and initiating the business development efforts for Non-Executive Directors and two (2) Non-Independent Non-Executive the Group. The Non-Executive Directors complement the skills and Directors. experience of the Executive Directors, contributing to the formulation of policies and decision-making through their knowledge and The Board, consisting of members from a wide range of professions experience of other business sectors. including engineers, lawyers, accountants and bankers; are persons of high calibre and credibility and possess the necessary skills and More than one-third of the Board is represented by Independent experience to effectively discharge the Board’s responsibilities for the Non-Executive Directors, who are independent of management and Company’s stewardship and for driving the Group’s growth and future free from any business relationship which could materially interfere direction. with the exercise of their independent judgements. They play a strong and vital role on the Board by entrenching good governance practices The profi le of each Director is set out under the Directors’ profi le in the affairs of the Company and the Group. section of this Annual Report. Board Meetings The Board is of the opinion that the current composition and size The Board meets at least once every quarter with additional meetings constitutes an effective Board. The Company practices a clear demarcation convened, as and when required. During the fi nancial year ended of responsibilities while maintaining a balance of power and authority. 30 June 2008, ten (10) Board meetings were held. Details of each Director’s meeting attendance during the fi nancial year are as follows:
Name of Director Designation No of Percentage Meetings Attended Tan Sri Sallehuddin Mohamed Independent Non-Executive Chairman 10/10 100% Tan Sri Hamdan Mohamad Executive Director/President and Chief Executive 10/10 100% Datuk Ramli Ibrahim Independent Non-Executive Director 9/10 90% Senator Datuk Chandrasekar Suppiah Executive Vice-president, Group Head - Energy Division, 8/10 80% Strategic Business Development & Corporate Communications Datuk Razman Md Hashim Che Din Md Hashim Independent Non-Executive Director 9/10 90% Amran Awaluddin Executive Director/Chief Operating Offi cer 10/10 100% Nicholas John Lough @ Sharif Lough Abdullah Executive Director 8/10 80% Dato’ Seri Abdul Azim Mohd. Zabidi Independent Non-Executive Director 5/10 50% Chew Seng Kok Non-Independent Non-Executive Director 5/10 50% Nadzru Azhari (appointed on 16.08.2007) Non-Independent Non-Executive Director 8/9 89%
22 Ranhill Berhad (430537-K) STATEMENT ON CORPORATE GOVERNANCE
Supply of Information and Access to Advice Apart from those training programmes conducted externally, the The agenda for each Board meeting, together with detailed reports Directors also benefi ted from various technical updates and briefi ngs and proposition papers to be tabled at the Board meeting, are which were undertaken internally from time to time, particularly on circulated to the Directors for their review prior to any Board meeting. fi nancial, related industries, regulatory and legal related developments, Senior Management are invited to attend Board meetings as and with an intention to keep the Directors abreast with the industry when appropriate to brief the Board on certain matters that are tabled developments, as well as the changes in related laws and regulations. to the Board. Re-Election of Directors All Board members have direct access to the advice and services of In accordance with Article 100 of the Company’s Articles of Association, the Company Secretaries, Group Legal Advisors and Internal Auditors one-third of the Directors shall retire from offi ce by rotation at each and where necessary, to seek independent professional advice if they Annual General Meeting (“AGM”) and may offer themselves for re- so require. election. Directors who are appointed by the Board, either to fi ll a casual vacancy or as an addition to the existing Directors, are subject Appointment of Directors to election by the shareholders at the next AGM following their The appointment of new Directors is carried out in a formal and appointment, in accordance with Article 84 of the Company’s Articles transparent manner under the purview of the Nomination Committee, of Association. which is responsible for making the necessary recommendations to the Board on suitable candidates for appointment. Pursuant to Section 129(6) of the Companies Act 1965, Directors over seventy (70) years of age retire at every AGM and shall be eligible Directors’ Training for re-appointment to hold offi ce until the next AGM. During the fi nancial year ended 30 June 2008, various seminars and conferences were identifi ed for the Directors’ continuous training BOARD COMMITTEES programme for purposes of enabling them to effectively discharge The following Board Committees were established to assist the Board their duties to the Group and/or that are relevant to the Group’s in the execution of its responsibilities. The terms of reference for business activities. Among those training programmes attended by each Committee have been approved by the Board. The Chairman the respective Directors are as follows: of the various committees report to the Board the outcomes of the • Asia Water 2008 Seminar; Committee meetings and such reports are incorporated in the minutes • Improving Board Directors’ Performance, Leadership and of the Board meeting. Governance; • ASEAN Business Dialogue; 1. Audit Committee The terms of reference of the Audit Committee and the number • National Accountants Conference 2007; of meetings held during the fi nancial year ended 30 June 2008 • Risk Awareness Program; are disclosed in the Audit Committee Report set out in this • Private Equity; Annual Report. • Malaysian Islamic Finance – Issuers and Investors Forum 2007; and • The Next Wave in Infrastructure Financing
Ranhill Berhad (430537-K) 23 STATEMENT ON CORPORATE GOVERNANCE
2. Remuneration Committee 3. Nomination Committee The composition of the Remuneration Committee is as follows:- The composition of the Nomination Committee is as follows:- Chairman : Tan Sri Sallehuddin Mohamed Chairman : Tan Sri Sallehuddin Mohamed Members : Datuk Razman Md Hashim Che Din Md Hashim Members : Datuk Razman Md Hashim Che Din Md Hashim Datuk Ramli Ibrahim Datuk Ramli Ibrahim Nicholas John Lough @ Sharif Lough Abdullah Dato’ Seri Abdul Azim Mohd. Zabidi Chew Seng Kok The Ranhill Group’s remuneration policy is based on the following core principles:- The role and responsibilities of the Nomination Committee are to:- (a) Enhance shareholders’ value by ensuring individual performances (a) Identify, nominate and recommend suitable individuals for and rewards refl ect and reinforce the business objectives and long appointment to the Board of the Company; term aspirations of the Group; (b) Prescribe the role and responsibilities of the nominated Directors; (b) Support the recruitment, motivation, development and retention of (c) Make recommendations to the Board for nominations to the high quality senior executives; various committees of the Board; (c) Ensure that performance is the key factor in determining individual (d) Assess Directors on an ongoing basis in determining the rewards, taking into account internal relativities and market data effectiveness of the Board as a whole, the committees of the of external comparable entities; and Board, and the contribution of each Director; and (d) Communicate the reward structure clearly and effectively to (e) Review annually the required mix of skills and experience and executives and shareholders. other qualities including core competencies which Non-Executive Directors should bring to the Board. The Remuneration Committee’s authority to make recommendations to the Board encompasses the following:- The Nomination Committee met two (2) times during the fi nancial year (a) Remuneration policy and specifi c remuneration packages ended 30 June 2008. (including any compensation packages) for Executive Directors; (b) Remuneration policy and specifi c packages for certain senior key executives of the Group; and DIRECTORS REMUNERATION (c) Benefi ts and long term incentive schemes for the employees of Level and Make-up of Remuneration the Group. The policy on Directors’ remuneration is developed to provide the packages necessary to attract, retain and motivate Directors needed The Remuneration Committee is not responsible for setting the level to run the Group effectively. The components of their remuneration of remuneration of Non-Executive Directors as it will be determined are structured so as to link rewards to corporate and individual by the Board. The Remuneration Committee will seek advice from performance in the case of Executive Directors. In the case of Non- external consultants as experts in their fi elds, if deemed necessary. Executive Directors, the level of remuneration refl ects the experience and level of responsibilities undertaken by them. The Remuneration Committee met two (2) times during the fi nancial year ended 30 June 2008.
24 Ranhill Berhad (430537-K) STATEMENT ON CORPORATE GOVERNANCE
Disclosure of Remuneration The details of the remuneration of Directors received from the Company during the fi nancial year ended 30 June 2008 are as follows:-
Bonus & Benefi ts- Other Salaries Fees Incentives in-kind Emoluments Total RM RM RM RM RM RM Executive Directors 2,505,000.00 – – 213,694.00 752,207.00 3,470,901.00 Non-Executive Directors – 567,097.00 – 33,527.00 74,500.00 675,124.00
Directors’ Remuneration in applicable bands is set out below:
Directors’ Remuneration Inclusive of Benefi ts-in-kind (No. of Directors)
Range Non-Executive Directors Executive Directors Total
0 – RM50,000 ––– RM50,001 – RM100,000 1–1 RM100,001 – RM150,000 4–4 RM150,001 – RM200,000 1–1 RM200,001 – RM500,000 ––– RM500,001 – RM550,000 –11 RM550,001 - RM700,000 ––– RM700,001 – RM750,000 –11 RM750,001 – RM900,000 ––– RM900,001 – RM950,000 –11 RM950,001 – RM1,250,000 ––– RM1,250,001 – RM1,300,000 –11 Total 6 4 10
INVESTORS RELATIONS & SHAREHOLDERS COMMUNICATION Investor Relations The Board and Management ensure timely dissemination of information on the Company’s performance and other matters affecting shareholders’ interests to the shareholders and investors through appropriate announcement (where necessary), quarterly announcements, relevant circulars, press releases and distribution of annual reports.
In addition, the Company conducts dialogues with fi nancial analysts, media conferences as well as analyst and fund manager briefi ngs from time to time as a means to convey information, strategy, matters affecting shareholders’ interests as well as future business direction of the Group.
Shareholders and investors can obtain information on the Group by accessing the Group’s website at www.ranhill.com.my.
Ranhill Berhad (430537-K) 25 STATEMENT ON CORPORATE GOVERNANCE
Annual General Meeting In preparing the fi nancial statements, the Directors have:- The principal forum for dialogue with shareholders remains at the AGM, (a) Applied the appropriate and relevant accounting policies on a during which shareholders are encouraged to raise questions and consistent basis; participate in discussions pertaining to the operations and fi nancials (b) Made judgements and estimates that are reasonable and prudent; of the Company. (c) Prepared the fi nancial statements on a going concern basis; and (d) Ensured that proper accounting records are kept so as to enable The external auditors are also present to provide their professional the preparation of the fi nancial statements with reasonable accuracy. and independent clarifi cation on issues and concerns raised by the shareholders. The Directors are also responsible for taking reasonable steps to safeguard the assets of the Group and Company, to prevent and detect fraud and other irregularities. ACCOUNTABILITY AND AUDIT Financial Reporting The Company’s fi nancial statements are prepared in accordance with COMPLIANCE WITH THE CODE the requirements of the applicable approved accounting standards in The Group has committed to comply throughout the fi nancial year Malaysia and the provisions of the Companies Act, 1965. The Board ended 30 June 2008 with the principles and best practices of is responsible for ensuring that the fi nancial statements of the Group corporate governance set out in Part 2 of the Code. and Company give a true and fair view of the state of affairs of the Group and Company. This statement is made in accordance with the resolution of the Board dated 29 October 2008. Internal Control Information on the Company’s state of internal control is presented in The Code has been revised effective from 1 October 2007. The the Statement on Internal Control as detailed in this Annual Report. Company will take steps to ensure compliance with the revised Code.
Relationship with Auditors The Audit Committee has established a formal and transparent ADDITIONAL COMPLIANCE INFORMATION arrangement for maintaining an appropriate relationship with the Utilisation of Proceeds Company’s auditors. Key features underlying the relationship of the During the fi nancial year ended 30 June 2008, there were no Audit Committee and the Company’s auditors are set out in the Audit proceeds raised from any corporate proposal. Committee Report of this Annual Report. Share Buy-back Directors’ Responsibility Statement The Company had obtained its Shareholders’ approval at the The Directors are responsible for ensuring that the annual fi nancial Company’s Annual General Meeting held on 30 November 2007 in statements of the Group and Company are drawn up in accordance respect of the share buy-back of up to 10% of the Company’s total with the requirements of the applicable approved accounting issued and paid-up share capital. standards in Malaysia, the provisions of the Companies Act, 1965 and the Bursa Securities Listing Requirements. During the fi nancial year ended 30 June 2008, there were no share buy-backs undertaken by the Company. The Board is responsible for ensuring that the fi nancial statements of the Group and Company give a true and fair view of the state of affairs The Company is seeking the renewal of the Shareholders’ mandate of the Group and Company. on the share buy-back proposal at the Company’s forthcoming Annual General Meeting.
26 Ranhill Berhad (430537-K) STATEMENT ON CORPORATE GOVERNANCE
Options, Warrants or Convertible Securities Variation in Results for the Financial Year The Company had at the Company’s Extraordinary General Meeting There was no material variation of the announced unaudited and the held on 26 September 2005 obtained the Shareholders’ approval audited fi nancial statements for the fi nancial year ended 30 June 2008. for the proposed subscription of RM215,000,000 nominal value of Irredeemable Convertible Unsecured Loan Stocks (“ICULS”) to be Profi t Guarantee issued by Senai-Desaru Expressway Berhad. There were no profi t guarantees given by the Company during the fi nancial year ended 30 June 2008. During the fi nancial year ended 30 June 2008, the Company has subscribed for its portion of the above ICULS which amounted to Material Contracts/Loan involving Directors/Major Shareholders’ RM184,900,000.00. Interests There were no material contracts/loans entered into by the Company Save as disclosed above, there were no other options, warrants or or its subsidiaries involving Directors’ and/or major shareholders’ convertible securities exercised by the Company, during the fi nancial interest, either subsisting at the end of the fi nancial year ended 30 year ended 30 June 2008. June 2008 or which were entered into since the end of the previous fi nancial year. American Depositary Receipt (“ADR”) or Global Depositary Receipt (“GDR”) Programme Recurrent Related Party Transactions of a Revenue or Trading The Company did not sponsor any ADR or GDR programme during Nature the fi nancial year ended 30 June 2008. Save as disclosed in Note 56 of the Notes to the Audited Financial Statements as set out in this Annual Report, and the Circular Imposition of Sanctions and/or Penalties to Shareholders (Recurrent Related Party Transactions) dated There were no sanctions and/or penalties imposed on the Company 6 December 2008, there is no other transaction conducted pursuant and its subsidiary companies, directors or management by the relevant to the shareholders’ mandate during the fi nancial year ended 30 June regulatory bodies during the fi nancial year ended 30 June 2008. 2008.
Non-Audit Fees This statement is made in accordance with a resolution given by the The amount of non-audit fees paid to the external auditors by the Board dated 29 October 2008. Group and by the Company for the fi nancial year ended 30 June 2008 amounted to RM1,417,450.41 and RM107,378.15 respectively.
Revaluation Policy Land and buildings are revalued by external independent valuers every fi ve (5) years. Surpluses arising on revaluation are credited to a revaluation reserve. Any defi cit arising from revaluation is charged against the revaluation reserve to the extent of a previous surplus held in the revaluation reserve for the same asset. In all other cases, a decrease in the carrying amount is charged to the income statement. On disposal of revalued assets, amounts in the revaluation reserve relating to those assets are transferred to retained profi ts.
Ranhill Berhad (430537-K) 27 Audit Committee Report
MEMBERSHIP 2. Reviewed the audit report for the Group and the Company prepared The Audit Committee (“Committee”) was established on 15 December by the internal and external auditors and considered their major 2000 to act as a Committee of the Board of Directors in fulfi lling its fi ndings and the management’s responses thereto; oversight function. 3. Reviewed the 2007 Annual Report and the audited fi nancial statements of the Company prior to submission to the Board for The Committee currently comprises the following members:- their consideration and approval. The review was to ensure that the Chairman : Datuk Ramli Ibrahim audited fi nancial statements were drawn up in accordance with the (Independent Non-Executive Director) provisions of the Companies Act, 1965 and the applicable accounting standards approved by the Malaysian Accounting Standards Board; Members : Tan Sri Sallehuddin Mohamed (Independent Non-Executive Director) 4. Reviewed the quarterly unaudited fi nancial result announcements before recommending them for the Board’s approval; Datuk Razman Md Hashim Che Din Md Hashim (Independent Non-Executive Director) 5. In respect of the quarterly and year-end fi nancial statements, reviewed prior to the approval by the Board, the changes in or implementation of major accounting policies; signifi cant or unusual events; and MEETINGS compliance with the Bursa Securities Listing Requirements (“BSLR”), During the fi nancial year ended 30 June 2008, the Committee held a accounting standards and other legal requirements; total of seven (7) meetings, of which fi ve (5) were meetings amongst others, to deliberate the quarterly fi nancial statements. The meetings 6. Reviewed the related party transactions entered into by the Group and were appropriately structured through the use of agendas, which were the Company and the disclosure requirements of such transactions; distributed to members with suffi cient notifi cation. 7. Reviewed the circulars to shareholders with regards to shareholders’ mandate in respect of the related party transactions of a revenue/ The details of attendance of the Committee members are as follows: trading nature for the Board’s approval;
Name of Committee Members No. of Meetings Attended 8. Reviewed the list of fi nancial assistance rendered during the fi nancial Datuk Ramli Ibrahim 7/7 year for Board’s approval; Tan Sri Sallehuddin Mohamed 7/7 9. Reviewed and approved the budget and staffi ng requirements of the Tan Sri Hamdan Mohamad 3/3* Corporate Assurance Department in relation to optimisation of staffi ng (Ceased w.e.f. 26/11/2007) level and technical competencies to effectively discharge its auditing function on the Group; Datuk Razman Md Hashim Che Din Md Hashim 6/7 10. Evaluated the performance of internal auditors and external auditors and made recommendations to the Board on their appointment, * Tan Sri Hamdan Mohamad attended three (3) out of three (3) scope of work and audit fees; Committee meetings held prior to his cessation as a Committee 11. Reviewed and reported to the Board the extent of the Group’s member on 26/11/2007 in compliance with the revised Malaysian compliance with the provisions set out under the Malaysian Code on Code on Corporate Governance requirement. Corporate Governance for the purpose of preparing the Corporate Governance Statement and Statement on Internal Control pursuant to The Chief Operating Offi cer, the Chief Financial Offi cer, the Chief Executive the BSLR, for Board’s approval; Offi cers of subsidiaries, the relevant operating Head of Department, the Head of Corporate Assurance and the representatives of the external 12. Commissioned special reviews on specifi c areas of operations; and auditors, were invited to attend the relevant Committee meetings. The 13. Held a separate meeting with the internal and external auditors Company Secretaries are the secretaries to the Committee. without the presence of the Management.
SUMMARY OF ACTIVITIES DURING THE FINANCIAL YEAR INTERNAL AUDIT FUNCTION The Committee carried out its duties in accordance with its terms of The review on the systems of internal control is undertaken by the reference during the fi nancial year ended 30 June 2008. Corporate Assurance Department whose head reports directly to the Committee. The principal role of the department is to undertake The main activities undertaken by the Committee were as follows: independent, regular and systematic reviews of the internal control, risk management and governance processes within the Group so as to 1. Reviewed and discussed on the external auditors’ scope of work and provide reasonable assurance that such processes continue to operate audit plans for the fi nancial year and approved the annual internal satisfactorily and effectively. audit plan; Further details of the roles of the Corporate Assurance Department are set out in the Statement on Internal Control of this Annual Report.
28 Ranhill Berhad (430537-K) Terms of Reference of the Audit Committee
The authority, functions and duties of the Committee extend to Ranhill The Chairman of the Committee shall be an Independent Non- Berhad and all its subsidiary companies (“the Group”). Executive Director. No alternate director of the Board shall be appointed as a member of the Audit Committee. 1. Purpose The primary function of the Committee is to assist the Board in fulfi lling If a member of the Committee resigns, dies, or for any reason ceases its overall responsibilities for the Group’s activities. Consistent with to be a member with the result that the number of members is this function, the Committee shall encourage continuous improvement reduced below three (3), the Board shall within three (3) months of the of, and shall foster adherence to, the Group’s policies, procedures, event, appoint such number of new member as may be required to fi ll and practices as well as applicable laws and regulations. the vacancy.
The Committee shall primarily fulfi ll these responsibilities by carrying 3. Meetings out the activities enumerated in Section 5 of the terms of reference as The Committee shall meet at least four (4) times annually, or more set out herein. frequently as circumstances dictate.
2. Composition The quorum for a meeting shall be two (2) members, both of whom The Committee shall be appointed by the Board from amongst their shall be Independent Non-Executive Directors including the Chairman number and shall comprise no fewer than three (3) members, of whom of the Committee. In the absence of the Chairman, the members all must be non-executive directors, with a majority of them being present shall elect a Chairman for the meeting from amongst the independent directors. In this respect, the Board adopts the defi nition members present. of “independent director” under the BSLR. At least one member of the Audit Committee shall:- The Company Secretaries shall be appointed Secretaries of the
a) Be a member of the Malaysian Institute of Accountants (“MIA”); or Committee. The Secretaries, in conjunction with the Chairman, shall draw up an agenda, which shall be circulated at least one week b) Have at least 3 years of working experience and: prior to each meeting to the members of the Committee. Minutes • have passed the examinations specifi ed in Part I of the 1st of the meetings shall be duly entered in the books provided, and be Schedule of the Accountants Act 1967;or circulated to members of the Board. • be a member of the associations of the accountants specifi ed in Part II of the Accountants Act 1967; or The Committee shall meet at least twice a year with the Head of c) Fulfi ls the following qualifi cations as follows: Corporate Assurance and external auditors in separate sessions • A degree/masters/doctorate in accounting or fi nance and at to discuss any matters that the Committee or these groups believe least 3 years’ post qualifi cation experience in accounting or should be discussed privately. fi nance; or 4. Authority • At least 7 years’ experience being a chief fi nancial offi cer The Committee is authorised by the Board:- of a corporation or having the function of being primarily responsible for the management of the fi nancial affairs of a a) to investigate any matter within its terms of reference; corporation; or b) to have the resources which are required to perform its duties;
• Such other requirements as prescribed or approved by the c) to have full and unrestricted access to any information pertaining Exchange. to the Company;
d) to have direct communication channels with both the internal and external auditors and all employees of the Company;
e) to obtain independent professional or other advice; and
f) to convene meetings with the external auditors, the internal auditors or both, excluding the attendance of other directors and employees of the Company, whenever deemed necessary.
Ranhill Berhad (430537-K) 29 TERMS OF REFERENCE OF THE AUDIT COMMITTEE
5. Responsibilities and Duties k) The quarterly results and year end fi nancial statements, prior to To fulfi ll its responsibilities and duties, the Committee shall review the the approval by the Board, focusing on: following and report the same to the Board of Directors: • changes in or implementation of major accounting policies; a) The terms of reference for the Committee at least annually, as • signifi cant or unusual events; and conditions dictate; b) The audit scope and plan of the external auditors and the • compliance with accounting standards and other legal internal auditors, including any changes in the planned scope of requirements; the audit plan; l) Procedures in place to ensure that the Group is in compliance c) Signifi cant audit fi ndings during the fi nancial year with with the Companies Act,1965, BSLR and other legislative and Management, external auditors and internal audit, including the reporting requirements; status of previous audit recommendations; m) Related party transactions and confl ict of interest situations d) The external and internal audit reports to ensure that where that may arise within the Company and/or the Group including major defi ciencies in controls or procedures have been any transaction, procedure or course of conduct that raises identifi ed, appropriate and prompt remedial action is taken by questions of Management integrity; Management; n) Any other activities consistent with its terms of reference, as the e) Any diffi culties encountered in the course of audit work, Committee or the Board deem necessary or appropriate; including any restrictions on the scope of activities or access to o) The appraisal or assessment of the internal audit function and required information; competency, approval of any appointment or termination of f) Any nomination, appointment, resignation and performance of senior staff members and be informed of the staff movement the external auditors; within the internal audit function; and g) The Internal Audit Charter, budget and staffi ng; p) Where the Committee is of the view that a matter reported by it h) Business risk assessment and internal controls instituted; to the Board, has not been satisfactorily resolved resulting in a breach of the requirement, the Committee must promptly report i) The establishment of an appropriate internal control framework, such matter to the Bursa Malaysia Securities Berhad. including information systems, and potential enhancements; j) Investigation reports on any major defalcations, frauds and thefts from the Group;
30 Ranhill Berhad (430537-K) Statement on Internal Control
INTRODUCTION RISK MANAGEMENT The Board is committed to maintaining a sound system of internal The Board recognises that risk management is an integral part of control in the Group and is pleased to provide the following statement, the Group’s business operations and is in the process of enhancing which outlines the nature and scope of internal control of the Group the existing Enterprise Risk Management (“ERM”) framework for during the fi nancial year. identifying, evaluating, monitoring and managing the signifi cant risks faced by the Group. The key elements of the Group’s internal control system include: The Group has appointed an independent consultant to assess the • Responsibilities are clearly defi ned and delegated to the Board ERM framework, focusing on an assessment of the current state risk Committees, the Management and the operating units of the inventory and developing an implementation plan to address the identifi ed Group. Clearly defi ned authority limits have been established for improvement opportunities in enhancing the ERM within the Group. all aspects of the businesses. These delegations of responsibilities and authority limits are subject to periodic review throughout the Issues on signifi cant risks or changes affecting the Group’s businesses fi nancial year as to their implementation and for the continuing and the external environment including its mitigating factors are suitability; presented and deliberated at the Board of Directors Meeting. • Policies and procedures for key business processes are formalised and documented for each of its signifi cant operating unit; INTERNAL AUDIT FUNCTION • Internal audit visits are systematically organised over a period, to It is the responsibility of the Corporate Assurance Department to monitor compliance with procedures and assess the integrity of perform independent and objective reviews on the state of internal fi nancial information provided; control of the various operating units within the Group and the extent of compliance of the units with the Group’s established Discretionary • Regular and comprehensive information are provided to the Board Authority Limits, Policies and Procedures as well as the relevant of Directors, covering fi nancial performance and key business statutory requirements. indicators; and
• Operating units prepare budgets for the coming year using The Audit Committee, assisted by the Corporate Assurance detailed budgeting processes in consultation with the Group Department, provides the Board with the assurance it requires on the Finance Offi ce for approval. adequacy and integrity of the system of internal controls.
BOARD RESPONSIBLITY CONTROL ENVIRONMENT The Board acknowledges its responsibility for the Group’s system of The Audit Committee reviews the risk management and compliance internal control, which includes the establishment of an appropriate processes by considering reports from the Corporate Assurance control environment and framework as well as reviewing its adequacy Department and the Management before reporting and making and integrity. Because of the limitations that are inherent in any recommendations to the Board in relation to any improvement system of internal control, this system is designed to manage, rather opportunities identifi ed. than eliminate, the risk of failure to achieve corporate objectives. Accordingly, it can only provide reasonable but not absolute assurance At least once a year, the Audit Committee will meet the internal and against material misstatement or loss. The system of internal control external auditors without the presence of the Management. Based covers, inter alia, risk management and fi nancial, organisational, on on-going and separate evaluation conducted by Management on operational and compliance controls. businesses within the Group, the Audit Committee observed several areas for improvement within the internal control environment of The Board recognises that the Group is growing and thus the system certain operational divisions of the Group that the Management is in of internal control will continue to be enhanced to suit the needs and the process of rectifying. requirements of the expanding Group. The Board will continue to ensure that measures are taken to strengthen the internal control environment for its ongoing effectiveness and integrity to safeguard shareholders’ investments and the Group’s assets.
This statement is made in accordance with a resolution given by the Board of Directors dated 29 October 2008.
Ranhill Berhad (430537-K) 31 Corporate Responsibility Report
With operations spread across Asia Pacific and Africa, Ranhill is fast gaining recognition as an international Infrastructure and Energy player. To bolster our position in the international business arena, Ranhill Group has adopted a sustainable growth approach throughout every facet of our operations. We underscore this with a commitment to employing Corporate Responsibility (“CR”) best practices that impact positively upon our stakeholders, the environment and the communities that we operate in. In the year under review, we followed through on the “Environmental” CR theme that was established in the previous year.
OUR COMMITMENT TO OUR ENVIRONMENT Ranhill is fully committed to environmental compliance and conservation efforts to protect the ecosystems we operate in. The Group employs environmental best practices during project implementation and construction, and ensure that we comply with all regulatory requirements of the domestic jurisdictions that we operate in. We constantly monitor environmental performance, undertake control measures to minimise the adverse impact of our activities, and build in safeguards to keep the environment protected long after projects are handed over to our clients.
Noise Control Due to extensive movement of heavy machinery and vehicles at our various project sites, it is imperative that noise pollution is properly managed. The various measures implemented to reduce the impact of noise from our activities include the strategic planning of construction activities to prevent interruption to the surrounding communities; the installation of hoarding at construction sites; and regular maintenance of machinery and vehicles.
Water Pollution Control Our water and wastewater treatment plants all continue to meet regulatory requirements. All discharged water is monitored closely and residue treatment equipment is installed at all new water treatment plants. We also pay serious attention to the hazards of accidental discharge of chlorine and address this via emergency response plans and procedures as well as through regular training and emergency drills.
At our construction sites, surface run-off from cleared project sites is channelled to retention ponds or silt traps before being discharged to nearby drainage systems or receiving water bodies. Prior to earthworks activities, we ensure potential soil erosion and water pollution studies are carried out.
Emissions Control Ranhill Power is embracing environmental protection efforts by ensuring that its open cycle plant in Teluk Salut, Sabah, employs the necessary technology to control potential emissions into the environment. The station’s ongoing conversion to a combined cycle gas turbine plant is an attempt to conserve energy for our future generation. The plant will eventually be able to achieve better thermal efficiency and reduce its dependency on additional fuel.
Energy Conservation Our water treatment plants utilise the local utility’s power supply as opposed to tapping diesel power which is rather expensive and not so environmentally-friendly. Most of the motors that Ranhill Utilities uses are of the high efficiency type, so less energy is consumed. We also employ energy consumption measurements and analysis tools to easily detect unusual energy consumption.
32 Ranhill Berhad (430537-K) CORPORATE RESPONSIBILITY REPORT
OUR COMMITMENT TO OUR PEOPLE As part of Ranhill’s commitment to instilling high performance culture among our workforce, we continue to roll out the various initiatives outlined in our Human Resource Development Plan which include our regular training and development programmes as well as initiatives such as our Six Sigma programme and the Balanced Scorecard (“BSC”).
Six Sigma and BSC Implementation Our Six Sigma implementation has been aligned with Ranhill’s strategic goals and top management is now responsible for leading and facilitating Performance Excellence Improvement teams throughout the organisation. Sixty potential Six Sigma improvement projects with high business impact have been identified and 30 of our top management selected to undergo a 20-day Executive Black Belt training programme. All employees are being engaged so that the Six Sigma culture can be inculcated throughout Ranhill. The Ranhill BSC for the years 2007-2010 has been adopted to clarify the vision and mission of Ranhill and its companies and this has been embraced by every department and subsidiary.
Succession Planning To ensure leadership continuity for key or critical positions, Ranhill Utilities’ subsidiary, SAJ Holdings Sdn Bhd (“SAJH”), has started to implement a complete and systematic succession planning programme. All potential successors must complete their Leaders’ Development Programme and undergo continuous assessment by SAJH’s Succession Planning Committee to ensure the transition process runs smoothly.
Knowledge Management Ranhill Utilities has embarked on a group-wide knowledge management initiative. Its purpose is to make the company more competitive in the water industry by sharing both tacit and explicit information and knowledge internally. To further enhance the programme, a knowledge management portal is now being developed and is expected to be fully functional in the first quarter of next year. For its efforts in adopting a structured roadmap to pioneer the practice of knowledge management, SAJH recently received the “Global Emerging Knowledge Organisation Award” from the JT Frank Academy.
OUR COMMITMENT TO GOOD OHSE PRACTICES Throughout our business operations, we are committed to ensuring that we conform to all safety regulations. As such, Ranhill employs good Occupational Health, Safety and Environmental (“OHSE”) practices when executing all projects. We believe that every accident and injury is preventable and we have embedded this philosophy in our work culture through a combination of technical field procedures and ongoing training programmes. We also require our sub-contractors and partners to adopt our commitment to OHSE.
To this end, Ranhill is promoting OHSE management with a particular emphasis on the following:
• The establishment of Project OHSE Committees for all project sites to monitor and implement the OHSE performance of projects;
• The development of a Corporate OHSE Manual that outlines the Group’s OHSE policies as well as describes the company-wide OHSE management control system that is in place to satisfy the requirements of OHSAS 18001:2007 and ISO 14001:2004 guidelines.
• The development of a Project OHSE Plan that ensures that high standards of OHSE compliance are maintained throughout projects and which outlines the arrangements designed to eliminate or control potential OHSE risks.
Ranhill Berhad (430537-K) 33 CORPORATE RESPONSIBILITY REPORT
OUR COMMITMENT TO OUR CUSTOMERS All Ranhill’s customers are integral to our success. To this end, we have implemented several initiatives to ensure both customer service and customer satisfaction are at optimum levels.
Customer Charter SAJH has its own Customer Charter that spells out the ten areas aimed at enhancing the satisfaction level of its customers. Each department within SAJH has its own documented Internal Customer Charter which keeps track of the targets set and the results achieved. All these are presented during management reviews and form part of departmental BSC progress reports.
To help SAJH fulfill its Customer Charter, it has developed the Integrated Geographical Information System (“IGIS”), the first in the Water industry in Malaysia. The IGIS features integrated information on water quality and incorporates a customers’ water billing system, a complaints system as well as a remote monitoring system within a comprehensive mapping system.
Customer Perception Survey SAJH conducts an annual Customer Perception Survey to better understand its customers so that the company can provide them with services that are relevant to their needs. The survey involves determining public perception of its services, views on its charges, water quality, service satisfaction and acceptance of the Customer Charter.
MOVING AHEAD We realise the fact that incorporating CR into every aspect of our business involves undivided commitment and as such, Ranhill has become a signatory to the UN Global Compact, the world’s largest voluntary corporate citizenship initiative. As a hat will contribute to generating sustainable value for Ranhill’s businesses. Our commitment to the Global Compact is an apt illustration that we are committed to ensuring good CR practices are fully embedded within the Ranhill Group.
34 Ranhill Berhad (430537-K) Report and Financial Statements
36 Directors’ Report 41 Statement by Directors 41 Statutory Declaration
42 Independent Auditors’ Report 44 Income Statements 45 Balance Sheets
47 Consolidated Statement of Changes in Equity 48 Company Statement of Changes in Equity
49 Cash Flow Statements 51 Notes to the Financial Statements
Ranhill Berhad (430537-K) 35 Directors’ Report
The Directors hereby submit their report to the members together with the audited financial statements of the Group and Company for the financial year ended 30 June 2008.
PRINCIPAL ACTIVITIES The principal activities of the Company are investment holding, provision of management services to its subsidiaries and provision of engineering, procurement and construction services.
The principal activities of the Group are the provision of engineering and construction services, as well as asset management and ownership, with focus on power, utilities and other infrastructure and resource assets. The Group has also undertaken oil and gas exploration, development and production activities.
The principal activities of the subsidiaries are as set out in Note 21 to the financial statements.
FINANCIAL RESULTS Group Company RM’000 RM’000 (Loss)/profit attributable to equity holders of the Company (715,425) 4,533 Profit attributable to minority interests 72,787 0 (Loss)/profit for the financial year (642,638) 4,533
DIVIDEND The dividend on ordinary shares paid or declared by the Company since 30 June 2007 was as follows: RM’000 In respect of the financial year ended 30 June 2007, as shown in the Directors’ report of that year, first and final gross dividend of 1.5 sen per share on 597,264,816 ordinary shares, less income tax at 27%, paid on 18 January 2008 6,540
The Directors now recommend the payment of a first and final gross dividend of 1.0 sen per share on 597,264,816 ordinary shares (see Note 46), less income tax at 26%, amounting to RM4,419,760 for the financial year ended 30 June 2008 which, subject to the approval of shareholders at the forthcoming Annual General Meeting of the Company, will be paid on a date to be determined.
RESERVES AND PROVISIONS All material transfers to or from reserves and provisions during the financial year are shown in the financial statements.
ISSUE OF SHARES The Company did not issue any new shares or debentures during the financial year.
36 Ranhill Berhad (430537-K) DIRECTORS’ REPORT
DIRECTORS The Directors who held office during the financial year since the date of the last report are as follows:
Executive Tan Sri Hamdan Mohamad Senator Datuk Chandrasekar Suppiah Amran Awaluddin Nicholas John Lough @ Sharif Lough Abdullah
Non-Executive Tan Sri Sallehuddin Mohamed Datuk Ramli Ibrahim Datuk Razman Md Hashim Che Din Md Hashim Dato’ Seri Abdul Azim Mohd. Zabidi Chew Seng Kok Nadzru Azhari
In accordance with Section 129(6) of the Companies Act, 1965, Tan Sri Sallehuddin Mohamed, who has attained the age of seventy (70), retires at the forthcoming Annual General Meeting, and being eligible, offers himself for re-appointment.
In accordance with Article 100 of the Company’s Articles of Association, Dato’ Seri Abdul Azim Mohd Zabidi, Chew Seng Kok and Nicholas John Lough @ Sharif Lough Abdullah retire by rotation at the forthcoming Annual General Meeting, and being eligible, offer themselves for re-election.
DIRECTORS’ BENEFITS During and at the end of the financial year, no arrangements subsisted to which the Company is a party, being arrangements with the object or objects of enabling Directors of the Company to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate.
Since the end of the previous financial year, no Director has received or become entitled to receive a benefit (other than Directors’ remuneration disclosed in Note 10 to the financial statements) by reason of a contract made by the Company or a related corporation with the Director or with a firm of which he is a member, or with a company in which he has a substantial financial interest except for any benefits that may have deemed to have arisen from the transactions disclosed in Note 56 to the financial statements.
Ranhill Berhad (430537-K) 37 DIRECTORS’ REPORT
DIRECTORS’ INTERESTS IN SHARES AND DEBENTURES According to the Register of Directors’ Shareholdings, the particulars of interests of the Directors’ (who held office at the end of the financial year) interest in shares in the Company and its related corporations are as follows:
Number of ordinary shares of RM1.00 each in the Company As at As at 1 July 2007 Bought Sold 30 June 2008 Shareholding in the name of the Directors:
Direct interest: Tan Sri Sallehuddin Mohamed 70,000 10,000 0 80,000 Tan Sri Hamdan Mohamad 59,394,943 0 0 59,394,943 Datuk Ramli Ibrahim 36,000 0 0 36,000 Amran Awaluddin 603,000 0 0 603,000 Senator Datuk Chandrasekar Suppiah 3,666,200 55,000 (210,000) 3,511,200
Indirect interest: Tan Sri Hamdan Mohamad 324,347,028(1) 0 (46,877,000) 277,470,028(1)
(1) Deemed interest through his direct interest in Ranhill Corporation Sdn Bhd, and Lambang Optima Sdn Bhd, and indirect interest in Business Booster Inc, pursuant to Section 6A of the Companies Act, 1965.
By virtue of Tan Sri Hamdan’s direct and deemed interest in the shares of the Company, he is also deemed to have an interest in the shares of the subsidiaries of the Company to the extent the Company has an interest pursuant to Section 6A of the Companies Act, 1965.
Number of ordinary shares of RM1.00 each in Ranhill Power Berhad (“RPB”) As at As at 1 July 2007 Bought Sold 30 June 2008 Shareholdings in the name of the Directors: Indirect Interest: Tan Sri Hamdan Mohamad 104,245,000(2) 16,455,000# 0 120,700,000(2)
(2) Deemed interest through his direct and deemed interest in the Company, a substantial shareholder of RPB, pursuant to Section 6A of the Companies Act, 1965. # Shares acquired by the Company pursuant to the Conditional Voluntary Take-Over offer of RPB.
By virtue of Tan Sri Hamdan Mohamad’s deemed interest in the shares in RPB, he is also deemed to have an interest in the shares of the subsidiaries of RPB to the extent RPB has an interest pursuant to Section 6A of the Companies Act, 1965.
38 Ranhill Berhad (430537-K) DIRECTORS’ REPORT
DIRECTORS’ INTERESTS IN SHARES AND DEBENTURES (CONT’D)
Number of ordinary shares of RM1.00 each in Ranhill Utilities Berhad (“RUB”) As at As at 1 July 2007 Bought Sold 30 June 2008 Shareholdings in the name of the Directors:
Direct interest: Tan Sri Sallehuddin Mohamed 100,000 0 0 100,000 Tan Sri Hamdan Mohamad 9,573 0 0 9,573 Senator Datuk Chandrasekar Suppiah 55,000 36,000 0 91,000
Indirect interest: Tan Sri Hamdan Mohamad 228,804,966(3) 24,250,900(4) (21,500,000) 231,555,866(3) & (4)
(3) Deemed interest through his direct and deemed interest in the Company, a substantial shareholder of RUB, pursuant to Section 6A of the Companies Act, 1965. (4) Deemed interest pursuant to Section 6A of the Companies Act, 1965 through his indirect shareholding in LOSB Cayman Ltd via Lambang Optima Sdn Bhd.
By virtue of Tan Sri Hamdan Mohamad’s direct and deemed interest in the shares in RUB, he is also deemed to have an interest in the shares of the subsidiaries of RUB to the extent RUB has an interest pursuant to Section 6A of the Companies Act, 1965.
Except as disclosed in this report or in the financial statements, none of the other Directors in office, at the end of the financial year, held any interest in shares of the Company and its related corporations.
STATUTORY INFORMATION ON THE FINANCIAL STATEMENTS Before the income statements and balance sheets were made out, the Directors took reasonable steps: (a) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate allowance had been made for doubtful debts; and (b) to ensure that any current assets, other than debts, which were unlikely to realise in the ordinary course of business their values as shown in the accounting records of the Group and Company had been written down to an amount which they might be expected so to realise.
At the date of this report, the Directors are not aware of any circumstances: (a) which would render the amounts written off for bad debts or the amount of the allowance for doubtful debts in the financial statements of the Group and Company inadequate to any substantial extent; or (b) which would render the values attributed to current assets in the financial statements of the Group and Company misleading; or (c) which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and Company misleading or inappropriate.
No contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the Directors, will or may substantially affect the ability of the Group and Company to meet their obligations as and when they fall due.
Ranhill Berhad (430537-K) 39 DIRECTORS’ REPORT
STATUTORY INFORMATION ON THE FINANCIAL STATEMENTS (CONT’D) At the date of this report, there does not exist:
(a) any charge on the assets of the Group and Company which has arisen since the end of the financial year which secures the liability of any other person; or
(b) any contingent liability of the Group and Company which has arisen since the end of the financial year, except as disclosed in Note 55 to the Financial Statement
At the date of this report, the Directors are not aware of any circumstances not otherwise dealt with in this report or the financial statements which would render any amount stated in the financial statements misleading.
In the opinion of the Directors,
(a) The results of the Group’s and Company’s operations during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature; and
(b) there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely to affect substantially the results of the operations of the Group and Company for the financial year in which this report is made.
AUDITORS The auditors, PricewaterhouseCoopers, have expressed their willingness to continue in office.
Signed on behalf of the Board of the Directors in accordance with a resolution dated 31 October 2008.
TAN SRI SALLEHUDDIN MOHAMED TAN SRI HAMDAN MOHAMAD Chairman Director
Kuala Lumpur
40 Ranhill Berhad (430537-K) Statement by Directors
Pursuant to Section 169(15) of the Companies Act, 1965
We, Tan Sri Sallehuddin Mohamed and Tan Sri Hamdan Mohamad, being two of the Directors of Ranhill Berhad, state that, in the opinion of the Directors, the financial statements set out on pages 44 to 132 are drawn up so as to give a true and fair view of the state of affairs of the Group and Company as at 30 June 2008 and of the results and cash flows of the Group and Company for the financial year ended on that date in accordance with the MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities and the provisions of the Companies Act, 1965.
Signed on behalf of the Board of the Directors in accordance with their resolution dated 31 October 2008.
TAN SRI SALLEHUDDIN MOHAMED TAN SRI HAMDAN MOHAMAD Chairman Director
Kuala Lumpur
Statutory Declaration
Pursuant to Section 169(16) of the Companies Act, 1965
I, Victor Edmond McCluskey, the Officer primarily responsible for the financial management of Ranhill Berhad, do solemnly and sincerely declare that the financial statements set out on pages 44 to 132 are, in my opinion, correct, and I make this solemn declaration conscientiously believing the same to be true, and by virtue of the provisions of the Statutory Declarations Act, 1960.
VICTOR EDMOND MCCLUSKEY
Subscribed and solemnly declared by the abovenamed Victor Edmond McCluskey at Kuala Lumpur in Malaysia on 31 October 2008, before me.
WONG AH YING (W334) Commissioner for Oaths
Ranhill Berhad (430537-K) 41 Independent Auditors’ Report
to the members of Ranhill Berhad (Company No. 430537 K)
REPORT ON THE FINANCIAL STATEMENTS We have audited the financial statements of Ranhill Berhad, which comprise the balance sheets as at 30 June 2008 of the Group and of the Company, and the income statements, statements of changes in equity and cash flow statements of the Group and of the Company for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 44 to 132.
Directors’ Responsibility for the Financial Statements The directors of the Company are responsible for the preparation and fair presentation of these financial statements in accordance with MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities and the Companies Act, 1965. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
Auditors’ Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion In our opinion, the financial statements have been properly drawn up in accordance with MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities and the Companies Act, 1965 so as to give a true and fair view of the financial position of the Group and of the Company as of 30 June 2008 and of their financial performance and cash flows for the year then ended.
42 Ranhill Berhad (430537-K) INDEPENDENT AUDITORS’ REPORT
to the members of Ranhill Berhad (Company No. 430537 K)
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following:
(a) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act.
(b) We have considered the financial statements and the auditors’ reports of all the subsidiaries of which we have not acted as auditors, which are indicated in Note 21 to the financial statements.
(c) We are satisfied that the financial statements of the subsidiaries that have been consolidated with the Company’s financial statements are in form and content appropriate and proper for the purposes of the preparation of the financial statements of the Group and we have received satisfactory information and explanations required by us for those purposes.
(d) The audit reports on the financial statements of the subsidiaries did not contain any qualification or any adverse comment made under Section 174(3) of the Act.
OTHER MATTERS This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.
PRICEWATERHOUSECOOPERS SHIRLEY GOH (No. AF: 1146) (No.1778/08/10 (J)) Chartered Accountants Chartered Accountant
Kuala Lumpur 31 October 2008
Ranhill Berhad (430537-K) 43 Income Statements for the financial year ended 30 June 2008
Group Company Note 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 Revenue 6 1,909,937 1,470,412 102,557 68,294 Cost of sales 7 (1,837,004) (979,163) (34,056) (1,303) Gross profit 72,933 491,249 68,501 66,991 Other operating income 123,859 85,107 41,089 25,201 Amortisation of deferred capital consideration from the State Government 44 78,955 76,981 0 0 Administrative expenses (512,132) (203,176) (48,441) (37,238) Tendering and marketing expenses (14,927) (7,656) (844) (1,995) Finance costs 8 (287,545) (213,234) (42,669) (31,643) Loss on disposal of associated co, Ellipse Energy Jatirarangon Wahana Ltd (33,721) 0 0 0 Share of results of associates 544 208 0 0 (Loss)/profit before taxation 11 (572,034) 229,479 17,636 21,316 Zakat (2,623) 0 0 0 Taxation - Company and subsidiaries 12 (67,981) (38,723) (13,103) (13,024)
(Loss)/profit after taxation (642,638) 190,756 4,533 8,292
Discontinued operations (Loss)/profit for the year from discontinued operations after taxation 35 0 5,312 0 0 (642,638) 196,068 4,533 8,292
Attributable to: Equity holders of the Company (715,425) 116,833 4,533 8,292 Minority interests 72,787 79,235 0 0 (642,638) 196,068 4,533 8,292
Basic (loss)/earnings per share (sen) attributable to equity holders of the Company 15 - From continuing operations (119.78) 18.79 - From discontinued operations 0 0.77 (119.78) 19.56
The notes on pages 51 to 132 form an integral part of the financial statement.
44 Ranhill Berhad (430537-K)
Balance Sheets
as at 30 June 2008
Group Company Note 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 (Restated) Non Current Assets Property, plant and equipment 16 8,207,875 8,070,912 2,255 3,878 Prepaid lease payment 17 6,000 6,142 0 0 Investment properties 18 0 14,688 0 0 Intangible assets 19 22,485 25,398 0 0 Goodwill 20 43,793 29,663 0 0 Investments in subsidiaries 21 0 0 864,661 829,280 Investments in associates 22 3,271 48,966 678 678 Other investments 23 195,593 139,627 184,900 135,880 Long term receivables 24 13,455 32,061 0 0 Investment in oil and gas properties 25 16,480 78,587 0 0 Receivable from the State Government 26 809,923 752,571 0 0 Deferred tax assets 27 83,973 85,306 0 0 9,402,848 9,283,921 1,052,494 969,716
Current Assets Inventories 28 17,001 22,391 0 0 Trade and other receivables 29 589,979 433,430 34,027 19,799 Amount due from customers on contracts 30 405,147 783,925 15,153 26,642 Prepayments 67,763 47,016 12,212 1,076 Tax recoverable 7,817 6,844 1,506 3,114 Amounts due from subsidiaries 31 0 0 775,585 699,988 Amounts due from jointly controlled entities 32 2,406 230,799 0 0 Amounts due from an associate 33 4 9,808 4 4 Deposits, bank and cash balances 34 903,633 1,140,632 (255) 11,539 1,993,750 2,674,845 838,232 762,162
Assets classified as held for sale 35 34,427 23,906 0 0 Total Current Assets 2,028,177 2,698,751 838,232 762,162
The notes on pages 51 to 132 form an integral part of the financial statement.
Ranhill Berhad (430537-K) 45 BALANCE SHEETS
as at 30 June 2008
Group Company Note 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 (Restated) Less: Current Liabilities Trade and other payables 36 922,788 1,092,053 143,610 39,170 Amount due to customers on contracts 30 570,859 320,922 0 0 Amounts due to subsidiaries 31 0 0 884,546 830,863 Amounts due to an associate 33 366 1,140 0 0 Short-term borrowings 38 258,051 295,857 65,399 60,056 Current tax liabilities 10,835 6,448 0 0 Provision for retirement benefits 39 987 2,078 0 0 Concession liabilities 40 31,029 31,086 0 0 1,794,915 1,749,584 1,093,555 930,089
Liabilities directly associated with assets classified as held for sale 35 6,712 17,021 0 0
Total Current Liabilities 1,801,627 1,766,605 1,093,555 930,089
Net Current Assets/(Liabilities) 226,550 932,146 (255,323) (167,927)
Less: Non Current Liabilities Consumer deposits 37 51,536 45,246 0 0 Provision for retirement benefits 39 34,278 27,927 0 0 Concession liabilities 40 3,607,083 3,638,141 0 0 Deferred tax liabilities 27 288,479 246,767 7,375 9,406 Finance lease liabilities 41 453,777 375,758 806 1,386 Long-term loans 42 3,261,183 3,230,253 0 0 Convertible unsecured loan stocks 43 5,800 5,800 0 0 Deferred capital consideration from the State Government 44 538,331 559,933 0 0 Deferred income 45 348,374 372,211 0 0 8,588,841 8,502,036 8,181 10,792 1,040,557 1,714,031 788,990 790,997
Capital and reserves attributable to equity holders of the Company Share capital 46 597,265 597,265 597,265 597,265 Share premium 47 185,333 185,333 185,333 185,333 Other reserves 48 2,199 2,732 0 0 Retained profits 49 (316,166) 404,704 6,392 8,399 Equity associated with assets classified as held for sale 35 0 1,985 0 0 468,631 1,192,019 788,990 790,997 Minority interests 571,926 522,012 0 0 Total equity 1,040,557 1,714,031 788,990 790,997
The notes on pages 51 to 132 form an integral part of the financial statement.
46 Ranhill Berhad (430537-K) Consolidated Statement of Changes in Equity
for the financial year ended 30 June 2008
Issued and fully paid Equity ordinary share of RM1 each associated with assets Number Share Share Other Retained classified as Minority Note of shares capital premium reserves profits held for sale Sub-total interest Total ‘000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 2008 At 1 July 2007: - as previously reported 597,265 597,265 185,333 2,732 254,906 1,985 1,042,221 467,087 1,509,308 - adoption of FRS 112 0 0 0 0 149,798 0 149,798 54,925 204,723 597,265 597,265 185,333 2,732 404,704 1,985 1,192,019 522,012 1,714,031 Acquisition of share in subsidiary 0 0 0 (775) (171) 0 (946) (16,464) (17,410) Additional share in jointly control entity 0 0 0 0 (719) 0 (719) 0 (719) Disposal of jointly control entity 0 0 0 0 1,985 (1,985) 0 0 0 Net expense recognised directly in equity - currency translation differences arising during the financial year 48 0 0 0 242 0 0 242 305 547
(Loss)/profit attributable to shareholders 0 0 0 0 (715,425) 0 (715,425) 72,787 (642,638)
Dividends for the financial year ended 30 June 2007 14 0 0 0 0 (6,540) 0 (6,540) (6,714) (13,254) At 30 June 2008 597,265 597,265 185,333 2,199 (316,166) 0 468,631 571,926 1,040,557
2007 At 1 July 2006 As restated 597,265 597,265 185,333 3,026 146,386 0 932,010 388,620 1,320,630 Previously recognised negative goodwill, now charged out 48 0 0 0 (3,097) 3,097 0 0 0 0 Effect of adopting FRS 112 0 0 0 0 149,798 0 149,798 54,925 204,723 597,265 597,265 185,333 (71) 299,281 0 1,081,808 443,545 1,525,353 Acquisition of subsidiary 0 0 0 0 0 0 0 9 9 Classification of equity associated with assets held for sale 0 0 0 0 (1,985) 1,985 0 0 0 Net expense recognised directly in equity - transfer to capital reserve on share bonus issue of subsidiaries 0 0 0 2,975 (2,975) 0 0 0 0 - currency translation differences arising during the financial year 48 0 0 0 (172) 0 0 (172) (357) (529)
Profit attributable to shareholders 0 0 0 0 116,833 0 116,833 79,235 196,068
Dividends for the financial year ended 30 June 2006 14 0 0 0 0 (6,450) 0 (6,450) (420) (6,870) At 30 June 2007 597,265 597,265 185,333 2,732 404,704 1,985 1,192,019 522,012 1,714,031
The notes on pages 51 to 132 form an integral part of the financial statement.
Ranhill Berhad (430537-K) 47 Company Statement of Changes in Equity for the financial year ended 30 June 2008
Issued and fully paid ordinary shares Non- of RM1 each distributable Distributable Note Number Share Share Retained of shares capital premium profits Total ‘000 RM’000 RM’000 RM’000 RM’000 2008 At 1 July 2007 597,265 597,265 185,333 8,399 790,997 Profit for the financial year 0 0 0 4,533 4,533 Dividend for the financial year ended 30 June 2007 14 0 0 0 (6,540) (6,540) At 30 June 2008 597,265 597,265 185,333 6,392 788,990
2007 At 1 July 2006 597,265 597,265 185,333 6,557 789,155 Profit for the financial year 0 0 0 8,292 8,292 Dividend for the financial year ended 30 June 2006 14 0 0 0 (6,450) (6,450) At 30 June 2007 597,265 597,265 185,333 8,399 790,997
The notes on pages 51 to 132 form an integral part of the financial statement.
48 Ranhill Berhad (430537-K) Cash Flow Statements
for the financial year ended 30 June 2008
Group Company Note 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 Cash flows from operating activities Cash receipts from customers 1,261,967 1,084,222 7,907 191 Cash paid to suppliers and employees (881,509) (668,220) 10,313 (54,402)
Cash generated from/(used in) operations 380,458 416,002 18,220 (54,211) Tax paid (22,345) (14,749) (13,563) (5,589) Tax refund 838 4,533 37 4,533
Net cash flow generated from/(used in) operating activities - Continuing operations 358,951 405,786 4,694 (55,267) - Discontinued operations 0 (95) 0 0 358,951 405,691 4,694 (55,267)
Cash flows from investing activities Purchase of property, plant and equipment 51 (223,355) (320,092) (103) (34) Proceeds from disposal of property, plant and equipment 1,515 14,884 0 0 Acquisition of oil and gas properties (53,582) (43,528) 0 0 Investment in jointly controlled entities (1,320) (228) 0 0 Net cash outflow arising from acquisition of subsidiaries (35,381) (3,441) 0 (3,800) Acquisition of additional interest in a subsidiary 0 0 (35,381) 0 Net cash inflow arising from disposal of shares in subsidiary/jointly controlled entities 52 41,394 3,367 0 0 Purchase of other investment (48,578) (76,755) (49,020) (76,755) Withdrawal/(placement) of fixed deposits pledged 88,615 48,921 (39) 52,342 Dividends received from subsidiaries 0 0 7,610 0 Disposal of an associate 12,518 0 0 0 Net cash inflow arising from asset held for sale 3,118 0 0 0 Balance of purchase consideration of acquisition of Amona Ranhill Consortium Sdn Bhd (15,200) 0 0 0
The notes on pages 51 to 132 form an integral part of the financial statement
Ranhill Berhad (430537-K) 49 CASH FLOW STATEMENTS
for the financial year ended 30 June 2008
Group Company Note 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 Dividend received from associated 0 0 0 338 Repayment from subsidiaries 0 0 73,027 531,500 Interest received 31,021 22,084 0 7,078
Net cash flow (used in)/generated from investing activities - Continuing operations (199,235) (354,788) (3,906) 510,669 - Discontinued operations 0 (258) 0 0 (199,235) (355,046) (3,906) 510,669
Cash flows from financing activities Interest paid (232,475) (135,366) (37,428) (35,517) Funds from borrowings 104,481 859,309 35,381 50,000 Repayment of term loans (143,957) (524,931) (30,000) (449,685) Payments of finance lease liabilities (39,143) (30,732) (997) (1,210) Dividends paid to shareholders (6,540) (6,450) (6,540) (6,450) Dividends paid to minority interests (6,714) (420) 0 0 Proceeds from swap transaction 0 0 27,000 0 Net cash flow generated from/(used in) financing activities - Continuing operations (324,348) 161,410 (12,584) (442,862) - Discontinued operations 0 (333) 0 0 (324,348) 161,077 (12,584) (442,862)
Net increase/(decrease) in cash and cash equivalents (164,632) 211,722 (11,796) 12,540 Effect of foreign exchange rate changes (3,289) (9,743) 0 0 Cash and cash equivalents at the beginning of the financial year 893,059 691,080 1,483 (11,057)
Cash and cash equivalents at the end of the financial year 53 725,138 893,059 (10,313) 1,483
The notes on pages 51 to 132 form an integral part of the financial statement.
50 Ranhill Berhad (430537-K) Notes to the Financial Statements
30 June 2008
1 GENERAL INFORMATION The Company is a public limited liability company, incorporated and domiciled in Malaysia, and listed on the Main Board of the Bursa Malaysia Securities Berhad.
The principal activities of the Company are investment holding, provision of management services to its subsidiaries and provision of engineering, procurement and construction services.
The principal activities of the Group are the provision of engineering and construction services, as well as asset management and ownership, with focus on power, utilities and other infrastructure and resource assets. The Group has also undertaken oil and gas exploration, development and production activities.
The principal activities of the subsidiaries are as set out in Note 21 to the financial statements.
There has been no other significant change in the nature of the principal activities during the financial year.
2 BASIS OF PREPARATION The financial statements of the Group and Company have been prepared in accordance with the provisions of the Companies Act, 1965 and Financial Reporting Standards (“FRS”), the MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities.
The financial statements have been prepared under the historical cost convention except as disclosed in this summary of significant accounting policies in Note 3 to the financial statements.
The preparation of financial statements in conformity with Financial Reporting Standards requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of the revenues and expenses during the reported period. It also requires Directors to exercise their judgement in the process of applying the Company’s accounting policies. Although these estimates and judgement are based on the Directors’ best knowledge of current events and actions, actual results may differ.
The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 4 to the financial statements.
(a) Standards, amendments to published standards and interpretations that are effective The new accounting standards, amendments to published standards and interpretations to existing standards effective for the Company’s financial year ended 30 June 2008 are as follows:
• FRS 117 Leases (early adopted in the previous financial year) • FRS 6 Exploration for and Evaluation of Mineral Resources • Amendment to FRS 119 Employee Benefits - Actuarial Gains and Losses, Group Plan and Disclosures • FRS 124 Related Party Disclosures • Amendment to FRS 107 – Cash Flow Statements • Amendment to FRS 111 – Construction Contracts • Amendment to FRS 112 – Income Taxes • Amendment to FRS 118 – Revenue • Amendment to FRS 120 – Accounting for Government Grants and Disclosure of Government Assistance • Amendment to FRS 121 The Effects of Changes in Foreign Exchange Rates – Net Investment in a Foreign Operations • Amendment to FRS 134 – Interim Financial Reporting • Amendment to FRS 137 – Provisions, Contingent Liabilities and Contingent Assets • IC Interpretation 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities • IC Interpretation 2 Members’ Shares in Co-operative Entities and Similar Instruments • IC Interpretation 5 Rights to Interests arising from Decommission, Restoration and Environmental Rehabilitation Funds • IC Interpretation 6 Liabilities arising from Participating in a Specific Market – Waste Electrical and Electronic Equipment
• IC Interpretation 7 Applying the Restatement Approach under FRS 1292004 Financial Reporting in Hyperinflationary Economies • IC Interpretation 8 Scope of FRS 2
Ranhill Berhad (430537-K) 51 NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
2 BASIS OF PREPARATION (CONT’D) (a) Standards, amendments to published standards and interpretations that are effective (Cont’d) All changes in accounting policies have been made in accordance with the transition provisions in the respective standards, amendments to published standards and interpretations. All standards, amendments and interpretation adopted by the Group required retrospective application except for IC Interpretation 8 which requires retrospective application subject to the transitional provision of FRS 2. FRS 2 requires retrospective application for all equity instrument granted after 31 December 2004 and not vested at commencement date of the financial year beginning on or after 1 July 2006.
A summary of the impact of the new accounting standards, amendments to published standards and interpretations to existing standards on the financial statements of the Group and Company is set out in Note 50.
(b) Standards, amendments to published standards and interpretations to existing standards that are not yet effective and have not been early adopted The new standard that is applicable to the Group, but which the Group has not early adopted, is as follows:
• FRS 139 Financial Instruments: Recognition and Measurement (effective for accounting period beginning on or after 1 July 2010). The Group will apply this standard when effective. The Group has applied the transitional provision in FRS 139 which exempts entities from disclosing the possible impact arising from the initial application of this standard on the financial statements of the Group and Company.
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Unless otherwise stated in Note 50 to the financial statements, the following accounting policies have been used consistently in dealing with items which are considered material in relation to the financial statements. (i) Economic entities in the Group The Group financial statements include the financial statements of the company, its subsidiaries, its associates and its jointly controlled entities for the entire financial year. (a) Subsidiaries Subsidiaries are those enterprises in which the Group has power to exercise control over the financial and operating policies so as to obtain benefits from their activities, generally accompanying a shareholding of more than one half the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.
Subsidiaries are consolidated using the purchase method of accounting except for certain subsidiaries, as disclosed in Note 21 to the financial statements, which were consolidated using the merger method of accounting for business combination consolidated on/after 1 July 2006 but with agreement dates before 1 January 2006 that meet the condition of a merger set out
in FRS 1222004 “Business Combination”.
The Group has taken advantage of the exemption provided by FRS 1222004 and FRS 3 to apply these standards prospectively. Accordingly, business combinations entered into prior to the respective effective dates have not been restated to comply with these standards.
Under the purchase method of accounting, subsidiaries are fully consolidated from the date on which control is transferred to the Group and are de-consolidated from the date that control ceases. The cost of an acquisition is measured as fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition.
52 Ranhill Berhad (430537-K) NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (i) Economic entities in the Group (Cont’d) (a) Subsidiaries (Cont’d) Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired at the date of acquisition is reflected as goodwill. See the accounting policy Note 3 (ii) (a) on goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement.
Minority interest represents that portion of the profit or loss and net assets of a subsidiary attributable to equity interests that are not owned, directly or indirectly through subsidiaries, by the parent. It is measured at the minorities’ share of the fair value of the subsidiaries’ identifiable assets and liabilities at the acquisition date and the minorities’ share of changes in the subsidiaries’ equity since that date. Where more than one exchange transaction is involved, any adjustment to the fair values of the subsidiary’s identifiable assets, liabilities and contingent liabilities relating to previously held interests of the Group is accounted for as a revaluation.
Under the merger method of accounting, the results of subsidiaries are presented as if the merger had been effected throughout the current and previous years. The assets and liabilities combined are accounted for based on the carrying amounts from the perspective of the common control shareholder at the date of transfer. On consolidation, the cost of the merger is cancelled with the values of the shares received. Any resulting credit difference is classified as equity and regarded as a non-distributable reserve. Any resulting debit difference is adjusted against any suitable reserve. Any share premium, capital redemption reserve and any other reserves which are attributable to share capital of the merged enterprises, to the extent that they have not been capitalised by a debit difference, are reclassified and presented as movement in retained profit.
Intragroup transactions and balances, and resulting unrealised gains are eliminated on consolidation. Unrealised losses resulting from intragroup transactions are eliminated on consolidation to the extent of the cost of the asset that can be recovered. The extent of the costs that cannot be recovered is treated as write down or impairment losses as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to ensure consistency of accounting policies with those of the Group.
On disposal, the difference between the net disposal proceeds and the Group’s share of the subsidiary’s net assets together with any unamortised goodwill is reflected as gain or loss on disposal in the consolidated income statement.
Transactions with minority interests The Group applies a policy of treating transactions with minority interests as transactions with parties external to the Group. Disposals to minority interests result in gain and losses for the Group that are recorded in the income statement. Purchases from minority interests result in goodwill, being the difference between any consideration paid and the relevant shares of the carrying value of net assets of the subsidiary acquired.
Ranhill Berhad (430537-K) 53 NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (i) Economic entities in the Group (Cont’d) (b) Jointly controlled entities Jointly controlled entities are enterprises in which the Group has contractually agreed to share its control with one or more parties, where the strategic financial and operating decisions relating to the jointly controlled entity requires unanimous consent of the parties.
The Group’s interests in jointly controlled entities are accounted for by proportionate consolidation. The Group combines its share of the jointly controlled entities’ individual income and expenses, assets and liabilities and cash flows on a line-by-line basis with similar items in the Group’s financial statements.
The Group recognises its portion of gains or losses on the sale of assets by the Group to the joint venture that is attributable to the other ventures. The Group does not recognise its share of profits or losses from the joint venture that results from the purchase of assets by the Group from the joint venture until it resells the assets to an independent party. However, if a loss on the transaction provides evidence of a reduction in the net realisable value of current assets or an impairment loss, the loss is recognised immediately.
Where necessary, adjustment has been made to the financial statements of jointly controlled entities to ensure consistency with the policies by the Group.
(c) Associates Associates are those corporations, partnerships or other entities in which the Group exercises significant influence, but which it does not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Significant influence is the power to participate in the financial and operating policy decisions of the associates but not the power to exercise control over those policies.
Investments in associates are accounted for using the equity method of accounting and are initially recognised at cost.
The Group’s share of its associates’ post-acquisition profits or losses is recognised in the income statement, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group’s interest is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate.
Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates; unrealised losses are also eliminated on the same basis but only to the extent of the costs that can be recovered. Where necessary, in applying the equity method, adjustments are made to the financial statements of associates to ensure consistency of accounting policies with those of the Group.
On disposal, the difference between the disposal proceeds and the carrying value of the investment in the associate is reflected as gain or loss on disposal in the consolidated income statement.
54 Ranhill Berhad (430537-K) NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (ii) Intangible assets (a) Goodwill Goodwill represents the excess of the cost of acquisition of subsidiaries, jointly controlled entities and associates over the fair value of the Group’s share of the identifiable net assets at the date of acquisition.
Goodwill is tested annually for impairment and when there are impairment indicators and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units on group of cash-generating units that are expected to benefit from the synergies of the business combination in which the goodwill arose. The Group allocates goodwill to each business segment. See accounting policy Note 3(vi) on impairment of assets.
(b) Licenses (1) Excess of current liabilities over current assets assumed from Syarikat Air Johor Sdn Bhd, pursuant to the Concession Agreement whereby SAJ Holdings Sdn Bhd was granted the sole and exclusive rights to use the water infrastructure assets and to carry out water supply services for 30 years commencing from 1 March 2000. This is amortised over the Concession Period.
(2) The capitalisation of the license (“operating rights”) to operate two water treatment plants in Amata City Industrial Estate and Amata Nakorn Industrial Estate, both located in Thailand. The operating rights are stated at cost and are amortised on a straight-line basis over its estimated useful life of 15 years.
(c) Contractual rights The contractual rights are to develop residential apartment units, consultancy services for the master planning and design of related facilities buildings and infrastructure work awarded by Great Arab Socialist Republic of Libya. The contractual rights are stated at cost and are amortised on straight line basis over its estimated useful life of 6 years.
(iii) Property, plant and equipment Property, plant and equipment are initially stated at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the property, plant and equipment. The costs of certain property, plant and equipment items included the costs of dismantling and removing the item and restoring the sites on which these items are located. These costs are due to obligations incurred or either when the items were installed or as a consequence of having used all these assets during a particular period.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial year in which they are incurred.
Ranhill Berhad (430537-K) 55 NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (iii) Property, plant and equipment (Cont’d) (a) Infrastructure assets Infrastructure assets comprise a network of specialised assets used in the water supply business represented by Concession Assets and Project development assets as set out in Note 16 to the financial statements. Infrastructure assets include source works, water treatment works and supply network systems operated and maintained by the Group. The Group has, on an ongoing basis, recognised improved information regarding these assets.
Infrastructure assets are depreciated over the Concession Period using the unit of water revenue method. The Group has adopted the unit of water revenue method which reflects the pattern in which the assets’ economic benefits are consumed by the Group.
Infrastructure assets are depreciated according to the following formula:
Water revenue for the year X Infrastructure assets Projected total water revenue over the Concession Period / from year of completion to the end of the Concession Period
The projected total water revenue is estimated based on the Scheduled Tariff and projected water consumption.
(b) Construction works in progress Construction Works in Progress are stated at cost and are not depreciated until it is ready for its intended use. Upon completion, Construction Works in Progress are transferred to categories of property, plant and equipment, depending on the nature of the assets.
(c) Freehold land Freehold land is not depreciated as it has an infinite life.
(d) Power station Power station costs are amortised on a straight line basis over the remaining licence period commencing from the COD.
A subsidiary company performs major maintenance and periodical inspections of the power station in accordance with the establishment maintenance plan through an operating and maintenance contractor (O&M). Cost incurred for major maintenance and inspections are charged to the income statement based on fired factored hours.
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3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (iii) Property, plant and equipment (Cont’d) All other property, plant and equipment are depreciated on a straight line basis to write off the cost of each asset, or their revalued amounts, to their residual values over their estimated useful lives at the following annual depreciation rates:
% Buildings 2 Construction equipment 20 - 33 Plant and machinery 4 - 20 Office equipment 2 - 33 Computers 20 - 33.3 Renovation, furniture and fittings 2 - 33 Motor vehicles 10 - 25 Telecommunication equipment 33 Moulds 20
Gains and losses on disposals are determined by comparing proceeds with the carrying amount of the asset. Gains and losses on disposals are included in the income statement.
Residual values and useful lives of property, plant and equipment are reviewed, and adjusted if appropriate, at each balance sheet date. The effects of any revisions of the residual values and useful lives are included in the income statement for the financial year in which the changes arise.
At each balance sheet date, the Group assesses whether there is any indication of impairment. If such indications exist, an analysis is performed to assess whether the carrying amount of the asset is fully recoverable. A write down is made if the carrying amount exceeds the recoverable amount.
Repairs and maintenance are charged to the income statement during the period in which they are incurred.
(iv) Investment properties Investment properties comprising principally land and office building, are held for long term rental yields or for capital appreciation or both, and are not occupied by the Group.
Investment properties are stated at cost less any accumulated depreciation and impairment losses. Investment properties are depreciated on the straight line basis to write off the cost of the assets to their residual values over their estimated useful lives at annual depreciation rates of 2%.
On disposal of an investment property or when it is permanently withdrawn from use and no future economic benefits are expected from its disposal, it shall be derecognised (eliminated from the balance sheet). The difference between the net disposal proceeds and the carrying amount is recognised in profit or loss in the period of the retirement or disposal.
Ranhill Berhad (430537-K) 57 NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (v) Investments Investments in subsidiaries, jointly controlled entities, associates and other investments are carried at cost which includes all costs directly attributable to the acquisition of the investments. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. See accounting policy Note 3(vi) on impairment of assets.
Investment in other non-current investments are shown at cost and an allowance for diminution in value is made where, in the opinion of the Directors, there is a decline other than temporary in the value of such investment. Where there has been a decline other than temporary in the value of an investment, such a decline is recognised as an expense in the period in which the decline is identified.
Marketable securities (within current assets) are carried at the lower of cost and market value. Market value is calculated by reference to stock exchange quoted selling prices at the close of business on the balance sheet date. Increases/decreases in the carrying amount of marketable securities are credited to the income statement.
On disposal of an investment, the difference between net disposal proceeds and its carrying amount is charged or credited to the income statement.
(vi) Impairment of assets Property, plant and equipment, goodwill and investments in subsidiaries, jointly controlled entities and associates are assessed at each balance sheet date to determine whether there is any indication of impairment. If such an indication exists, impairment losses is recognised to the extent of the carrying amount that is not covered by the estimated discounted cash flows resulting from continued use of the asset, or from the estimated net disposal proceed of the asset.
The impairment loss is charged to the income statement. Any reversal of an impairment loss as a result of subsequent increase in recoverable amount should not exceed the carrying amount that would have been determined (net of accumulated amortisation or accumulated depreciation, if applicable) had no impairment loss been previously recognised for the asset.
(vii) Investment in oil and gas properties Oil and natural gas exploration and evaluation expenditures are accounted for using full costs method of accounting. Costs are accumulated on a field-by-field basis.
Investments in oil and gas properties can be classified as follows: (a) Tangible assets Tangible assets comprise of geological and geophysical costs, and exploratory drilling costs, including drilling materials, supplies and equipment.
(b) Intangible assets Intangible assets represent expenditure on construction, licence acquisition, seismic studies, exploration studies, other costs of exploration and appraisal including directly related overhead costs, installation or completion of infrastructure facilities, and the bonus payments made for acquiring the Production Sharing Contract (“PSC”) rights, such as signature bonus, education bonus, equipment and service bonus.
Once commercial reserves are found, exploration and evaluation assets are tested for impairment and transferred to development tangible and intangible assets. No depreciation and/or amortisation are charged during the exploration and evaluation phase.
58 Ranhill Berhad (430537-K) NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (vii) Investment in oil and gas properties (Cont’d) (b) Intangible assets (Cont’d) Oil and gas properties are depreciated/amortised using the unit-of-production method. Unit-of-production rates are based on proved developed reserves, which are oil, gas and other mineral reserves estimate to be recovered from existing facilities using current operating method. Oil and gas volumes are considered produced once they have been measured through meters at custody transfer or sales transaction points at the outlet valve on the field storage tank.
Signature bonus, education bonus, equipment and service bonus are not cost recoverable from BPMIGAS and only these bonus payments are amortised using the straight line method, over the estimated useful life of the PSC not exceeding a period of 30 years. If it is determined that commercial discovery has not been achieved, an impairment loss is recognised.
Exploration and evaluation assets are tested for impairment when reclassified to development tangible or intangible assets or whenever facts and circumstances indicate impairment. An impairment loss is recognised for the amount by which the exploration and evaluation assets’ carrying amount exceeds their recoverable amount. The recoverable amount is the higher of the exploration and evaluation assets’ fair value less costs to sell and their value in use. For the purposes of assessing impairment, the exploration and evaluation assets subject to testing are grouped with existing cash-generating units of production fields that are located in the same geographical region.
Previously the successful efforts method was adopted. The accounting treatments for successful efforts method were as follows:
Exploration expenditure for each area of interest is carried forward as an asset provided that one of the following conditions is met:
• Such costs are expected to be recouped through successful development and exploitation of the area of interest or, alternatively, by its sale: or
• Exploration activities in the area of interest have not yet reached a stage which permits a reasonable assessment of the existence or otherwise of recoverable reserves, and active and significant operations in relation to the area are continuing.
Exploration expenditure which fails to meet at least one of the conditions outlined above is written off. Evaluation expenditure for each area of interest is carried forward, but only to the extent to which recoupment out of revenue to be derived from the relevant area of interest, or from the sale of that area of interest, is reasonably assured. Exploration and evaluation expenditure that is carried forward as an asset is amortised over the economic benefits derived from the unit of production of oil reserve in the respective area of interest. However, the Directors are of the opinion that the full cost method better reflects of the activities of the investment in the Group’s oil and gas segment.
(viii) Inventories Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first in, first out basis for engineering inventories and weighted average basis for manufacturing and water related inventories. The cost comprises the purchase price plus cost incurred to bring the inventories to their present locations and conditions. The cost of work-in-progress and finished goods consists of raw materials, direct labour and a proportion of manufacturing overheads.
Net realisable value is the estimate of the selling price in the ordinary course of business, less the costs of completion and selling expenses.
Ranhill Berhad (430537-K) 59 NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (ix) Receivables Receivables are carried at anticipated realisable value. Allowance is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables.
Trade receivables that are factored to finance institutions for a single non returnable fixed sum with no recourse to the Group are treated as being fully settled. The corresponding payment from the finance institution is recorded as a cash receipt from customers and no liability is recognised. Any fee incurred to effect the factoring is recognised as an expense in the period in which the factoring takes place.
(x) Construction contracts A construction contract is a contract specifically negotiated for the construction of an asset or a combination of assets that are closely interrelated or interdependent in terms of their design, technology and functions or their ultimate purpose or use.
When the outcome of a construction contract can be estimated reliably, contract revenue is recognised by using the stage of completion method. The stage of completion is measured by reference to the proportion that contract cost incurred for work performed to date bear to the estimated total costs for the contract. Costs incurred in the year in connection with future activity on a contract are excluded from contract costs in determining the stage of completion. They are presented as inventories, prepayments or other assets, depending on their nature.
When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised only to the extent of contract costs incurred that is probable will be recoverable.
A claim for variation orders (“VOs”) is an amount that the Group seeks to collect from the customer as reimbursement for costs incurred that were not originally included in the contract value. The settlement of claims is subject to a high level of uncertainty relating to the outcome of future negotiations. In view of this, costs incurred are carried forward and recognised in the income statement together with claims for VOs when entitlement has been established, i.e. received or if certified for payment.
Irrespective of whether the outcome of a construction contract or VOs can be estimated reliably, when it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.
The aggregate of the costs incurred and the profit/loss recognised on each contract is compared against the progress billings up to period end. Where costs incurred and recognised profits (less recognised losses) exceed progress billings, the balance is shown as amounts due from customers on construction contracts under receivables. Where progress billings exceed costs incurred plus recognised profits (less recognised losses), the balance is shown as amounts due to customers on construction contracts under payables (within current liabilities).
(xi) Payables Payables including borrowings (but excluding leases), trade and non-trade payables are stated at cost.
60 Ranhill Berhad (430537-K) NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (xii) Leases (a) Finance leases Leases of property, plant and equipment where the Group assumes substantially all the benefits and risks of ownership are classified as finance leases.
Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased property and the present value of the minimum lease payments. Each the lease payment is allocated between the liability and finance charges so as to achieve a periodic constant rate of interest on the balance outstanding. The corresponding rental obligations, net of finance charges, are included in borrowings. The interest element of the finance charge is charged to in the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Property, plant and equipment acquired under finance leases are depreciated over the shorter of the estimated useful life of the asset and the lease term.
The upfront payments made for the leasehold land and building represent prepaid lease payments and are amortised on a straight line basis over the lease term i.e. 50 years or 2%.
(b) Operating leases Leases of assets were a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on the straight line basis over the lease period.
(xiii) Employee benefits (a) Short term employee benefits Short term employee benefits such as wages, salaries, social security contributions, paid annual leave and sick leave, bonuses and non-monetary benefits are recognised as an expense in the period in which services are rendered by the employees.
(b) Post-employment benefits The Group has various post-employment benefit schemes in accordance with local conditions and practices in Malaysia and overseas. These benefit plans are either a defined contribution or defined benefit plan.
Defined contribution plan A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity (a fund) and will have no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees benefits relating to employee service in the current and prior periods.
The Company’s and its Malaysian subsidiaries’ obligation under post employment benefits is limited to a monthly contribution to Employees’ Provident Fund (“EPF”) based on a prescribed statutory rate for all eligible employees. Overseas subsidiaries make contributions to their respective countries’ statutory pension scheme based on their statutory obligation.
The Group’s contributions to a defined contribution plan are charged to the income statement in the period to which they relate. Once the contributions have been paid, the Group has no further payment obligations. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.
Ranhill Berhad (430537-K) 61 NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (xiii) Employee benefits (Cont’d) (b) Post-employment benefits (Cont’d) Defined benefit plan A defined benefit plan is a pension plan that defines an amount of retirement benefit to be provided, usually as a function of one or more factors such as age, years of service or compensation. The liability in respect of a defined benefit plan is the present value of the defined benefit obligation at the balance sheet date minus the fair value of plan assets, together with adjustments for actuarial gains/losses and past service cost. The Group determines the present value of the defined benefit obligation and the fair value of any plan assets with sufficient regularity such that the amounts recognised in the financial statements do not differ materially from the amounts that would be determined at the balance sheet date.
The defined benefit obligation, calculated using the projected unit credit method, is determined by an independent actuary, considering the estimated future cash outflows using market yields at balance sheet date of government securities which have currency and terms to maturity approximating the terms of the related liability.
Plan assets in excess of the defined benefits obligations are subject to the asset limitation specified in FRS 119. Actuarial gains and losses arise from experience adjustments and changes in actuarial assumptions. The amount of net actuarial gains and losses recognised in the income statement is determined by the corridor method in accordance with FRS 119 “Employee Benefits” and is charged or credited to income statement over the average remaining service lives of the related employees participating in the defined benefit plan.
Past service costs are recognised immediately in income, unless the changes to the plan are conditional on the employees remaining in service for a specified period of time (the vesting period). In this case, the past service costs are amortised on a straight-line basis over the vesting period.
Upon initial adoption of FRS 119, the increase in defined benefit liability is recognised as an expense on a straight-line basis over the vesting period.
(xiv) Taxation Current tax expense is determined according to the tax laws of each jurisdiction in which the Group operates and include all taxes based upon the taxable profits, including withholding taxes payable by a foreign subsidiary, associate or joint venture on distributions of retained earnings to companies in the Group, and the real property gains taxes payable on disposal of properties.
Deferred tax is recognised in full, using the liability method, on temporary differences arising between the amounts attributed to assets and liabilities for tax purposes and their carrying amounts in the financial statements. In addition, deferred tax is recognised on investment tax credits claimed by certain subsidiary companies Approved Service Project (“ASP”) scheme. However, deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of transaction affects neither accounting nor taxable profit nor loss.
Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.
Deferred tax is recognised on temporary differences arising on investments in subsidiaries, associates and joint ventures except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax is determined using tax rates (and tax laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.
Investment tax credit is recognised as deferred tax asset to the extent that is probable that future taxable profit will be available against which the temporary differences can be utilised.
62 Ranhill Berhad (430537-K) NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (xv) Provisions Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, when it is probable that an outflow of resources will be required to settle the obligation, and when a reliable estimate of the amount can be made. Where the Group expects a provision to be reimbursed, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.
(xvi) Government grants Government grants are recognised at their fair value where there is a reasonable assurance that the government grant will be received and the Group will comply with all attached conditions.
Government grants relating to costs are deferred and recognised in the income statement over the period necessary to match them with the costs they are intended to compensate.
Government grants relating to the purchases of assets are included in non-current liabilities as deferred income and are credited to the income statement on a systematic basis over the expected lives of the related assets.
(xvii) Share capital Ordinary shares are recorded at the nominal value and consideration in excess of the nominal value of shares issued, if any, is accounted for as share premium. Both ordinary shares and share premium are classified as equity.
Cost incurred directly attributable to the issuance of the shares are accounted for as a deduction from share premium, if any, otherwise it is charged to the income statement.
(xviii)Foreign currencies (a) Functional and presentation currency Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The financial statements are presented in Ringgit Malaysia, which is the Company’s functional and presentation currency.
(b) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.
Ranhill Berhad (430537-K) 63 NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (xviii) Foreign currencies (Cont’d) (c) Group companies The results and financial position of all the group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: • assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet; • income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and • all resulting exchange differences are recognised as a separate component of equity.
On consolidation, exchange differences arising from the translation of the net investment in foreign operations are taken to shareholders’ equity. When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity are recognised in the income statement as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.
(d) Closing rates The principal closing rates used in the translation of foreign currency amounts are as follows:
Foreign currency 30 June 2008 30 June 2007 RM RM 1 Australian Dollar 3.14 2.93 1 US Dollar 3.27 3.45 1 Euro 5.16 4.64 1 UAE Dirham 0.89 0.94 1 Sudanese Dinar 0.02 0.02 1 Libyan Dinar 2.80 2.77 1 Saudi Arabian Riyal 0.87 0.92 100 Pakistan Rupee 4.81 5.71 100 Chinese Renminbi 47.64 45.35 100 Thai Baht 9.74 10.90 100 Indonesian Rupiah 0.04 0.04 100 Philippine Peso 7.29 7.45
(xix) Dividend Dividend income is recognised when the Group’s right to receive payment is established.
64 Ranhill Berhad (430537-K) NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (xx) Revenue recognition Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group’s activities. Revenue is shown net of value – added tax, returns, rebates and discounts and after eliminating sales within the Group.
The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the Group’s activities as described below. The amount of revenue is not considered to be reliably measurable until all contingencies relating to the sale have been resolved. The Group bases its estimates on historical results, taking into consideration the type of customers, the type of transaction and the specifics of each arrangement.
Included in the revenue recognition are the following:
(a) Revenue from engineering, procurement, construction, construction management services and project management services Revenue relating to long-term contracts is recognised based on the stage of completion of the contracts. The stage of completion of a contract is determined based on the proportion of contract costs incurred for work performed to date to the estimated total contract costs for the contracts.
Procurement service fee is recognised at the time of customer acceptance.
(b) Revenue from facilities management and services Revenue is recognised upon delivery of spares and customer acceptance, or performance of services represented by invoiced value of services and spares supplied net of discounts.
(c) Revenue from sale of goods Revenue is recognised upon delivery of products and customers’ acceptance, net of discounts and returns and when the risk and rewards of ownership have passed to the buyer.
(d) Revenue from power generation Income from power generation is recognised upon delivery of electricity.
(e) Revenue from water Water revenue is recognised when the treated water is recorded through customers’ water meters.
Contributions by housing developers are recognised on an accruals basis in accordance with the respective commercial agreements.
Special works (mainly comprising reconnection fees, repair works and other related works charged to consumers) are recognised upon performance of services.
Revenue relating to services and sales of parts is recognised upon delivery of products and customer acceptance, if any, or performance of services.
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3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (xx) Revenue recognition (Cont’d) (f) Other income Other income earned by the Group is recognised on the following basis:
Rental income is recognised on an accruals basis in accordance with the substance of the relevant agreements.
Interest income is recognised upon establishment of right to receive, unless collectability is in doubt.
Management fee is recognised on performance of services.
Dividend income is recognised when the right to receive payment is established.
(xxi) Borrowing (a) Classification Borrowings are initially recognised based on the proceeds received, net of transaction cost incurred. In subsequent periods, borrowings are stated at amortised cost using the effective yield method; any difference between proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings.
Interest, dividends, losses and gains relating to a financial instrument, or a component part, classified as a liability is reported within finance cost in the income statement.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet.
(b) Capitalisation of borrowing cost Borrowing costs incurred to finance the construction of property, plant and equipment are capitalised as part of the cost of the asset during the period of time that is required to complete and prepare the asset for its intended use. Borrowing costs incurred to finance property development activities and construction contracts are accounted for in a similar manner. All other borrowing costs are expensed.
(c) Convertible Unsecured Loan Stock On issue of a financial instrument that contains both a liability and an equity component, the fair value of the liability portion is determined using a market interest rate for an equivalent financial instrument; this amount is carried as liability on the amortised cost basis until extinguished on conversion or maturity of the instrument. The remainder of the proceeds is allocated to the conversion option which is recognised and included in shareholders’ equity; the value of the conversion option is not changed in subsequent periods.
The Group has taken advantage of the exemption provided by FRS 132 “Financial Instruments: Disclosure and Presentation” not to reclassify compound instruments issued by the Group prior to 1 July 2007 into liability and equity components. These instruments (together with the associated interest, dividends or other distributions) continue to be classified according to their legal form.
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30 June 2008
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (xxii) Cash and cash equivalents For the purposes of the cash flow statement, cash and cash equivalents comprise cash in hand, bank balances, fixed deposits, demand deposits, bank overdrafts and short term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are included within borrowings in current liabilities on the balance sheet.
(xxiii) Segment reporting Segment reporting is presented for enhanced assessment of the Group’s risks and returns. A business segment is a group of assets and operation engaged in providing products of services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and returns that are different from those components.
Segment revenue, expense, assets and liabilities are those amounts resulting from the operating activities of a segment that are directly attributable to the segment and the relevant portion that can be allocated on a reasonable basis to the segment.
Segment revenue, expense, assets and liabilities are determined before intra-group balances and intra-group transactions are eliminated as part of the consolidation process, except to the extent that such intra-group balances and transactions are between operating units within a single segment. Segment revenue and segment expense exclude dividends from within the Group.
All income, expenses, assets and liabilities are directly allocated to each reported segment. Interest income and other income and expenses which cannot be allocated to respective segment on a reasonable basis are disclosed as either unallocated income or unallocated expenses, while the related assets and liabilities are disclosed as unallocated assets and unallocated liabilities.
The accounting policies used in deriving the individual segment revenue, segment results, segment assets and segment liabilities are the same as those disclosed in the summary of significant accounting policies.
Transfers between segments are priced at the estimated fair value of the products or services as negotiated between the operating units.
(xxiv) Financial instruments (a) Financial instruments recognised on the balance sheet Financial instruments carried on the balance sheet include deposits, bank and cash balances, investments, receivables, payables, borrowings and share capital. The particular recognition methods adopted are disclosed in the individual accounting policy statements associated with each item.
(b) Financial instruments not recognised on the balance sheet The Group is a party to financial instruments comprising of interest rate swap agreements.
Interest rate swaps are designed to manage the Group’s exposure to protect the Group from movements in interest rates. The notional principal of these contracts are off balance sheets. Any differential to be paid or received on an interest rate swap contract is recognised as a component of interest income or expense at the settlement date. Gains and losses on early termination of interest rate swaps or on repayment of the borrowing are taken to the income statement.
Ranhill Berhad (430537-K) 67 NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (xxiv) Financial instruments (Cont’d) (c) Fair value estimation for disclosure purposes The fair value of publicly traded securities is based on quoted market prices at the balance sheet date.
In assessing the fair value of financial instruments, the Group and Company use a variety of methods and make assumptions that are based on market conditions existing at each balance sheet date. Quoted market prices or dealers quotes for the specific or similar instruments are used for long term debt. Other techniques, such as the discounted value of future cash flows, are used to determine the fair value for the remaining financial instruments. In particular, the fair value of financial liabilities is estimated by discounting the future contractual cash flows at the current market interest rate available to the Group and Company for similar financial instruments.
The face values for financial assets and liabilities with a maturity period of less than one (1) year are assumed to approximate their fair values.
(d) On balance sheet Financial assets The fair value of long term receivables is lower than carrying amount at balance sheet date as the Company gives its subsidiaries advances at below current market rate. The Directors consider the carrying amount fully recoverable as they do not intend to realise the financial assets via exchange with counterparty.
Financial liabilities The fair value of quoted bonds has been estimated using the respective quoted offer price. For unquoted borrowings with fixed interest rate, the fair values have been estimated by discounting the estimated future cash flows using the prevailing market rates for similar credit risks and remaining period to maturity. For unquoted borrowings with floating interest rate, the carrying values are generally reasonable estimates of their fair values.
(e) Off balance sheet The financial derivative instruments are used to hedge foreign exchange and interest rate risks associated with certain long-term foreign currency borrowings. The contract notional principal amounts of the derivative and the corresponding fair value adjustments are analysed as below.
Fair values of financial derivative instruments are the present values of their future cash flows and are arrived at based on valuations carried out by the Company’s bankers. Favourable fair value indicates amount receivable by the Company if the contracts are terminated as at 30 June 2008 or vice versa.
(xxv) Non-current assets (a disposal group) classified as assets held for sale Non-current assets (or disposal groups) are classified as assets held for sale and stated at the lower of carrying amount and fair value less costs to sell if their carrying amount is recovered principally through a sale transaction rather than through a continuing use.
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3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (xxvi) Contingent liabilities and contingent assets The Group does not recognise a contingent liability but discloses its existence in the financial statements. A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Group or a present obligation that is not recognised because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in the extremely rare case where there is a liability that cannot be recognised because it cannot be measured reliably.
In the acquisition of subsidiaries by the Group under a business combination, the contingent liabilities assumed are measured initially at their fair value at the acquisition date, irrespective of the extent of any minority interest.
(xxvii) Zakat The Group recognised its obligation towards the payment of zakat on business. Zakat for the current year is recognised when the Group has a current zakat obligation as a result of a zakat assessment. The amount of zakat expenses shall be assessed when the Group has been in operation for at least 12 months, ie for the period known as haul.
Zakat rates enacted or substantively enacted by the balance sheet date are used to determined the zakat expense. The rate of zakat on business, as determined by the National Fatwa Council for 2008 is 2.5% on the zakat base. The zakat base of the Group is determined based on net current assets, adjusted for items that do not meet the conditions for zakat assets and liabilities.
4 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS Estimates and judgements are continually evaluated by the Directors and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Below are other key estimates and judgments made by Directors.
(i) Critical accounting estimates and assumptions The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equal the related actual results. To enhance the information content of the estimates, certain key variables that are anticipated to have material impact to the Group’s results and financial position are tested for sensitivity to changes in the underlying parameters. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below.
(a) Construction contracts and revenue recognition The Group recognises contract revenue from its fixed price contracts based on percentage of completion method. The stage of completion is measured by reference to the contract costs incurred to date to the estimated total costs for the contract. Use of the percentage of completion method requires the Group to estimate the stage of completion, the extent of the contract costs incurred, the estimated total contract revenue including variation orders and contract claims and contract costs. In making the estimates, the Group relies on past experience, the use of engineering tools and the work of specialists.
Any variation to the final contract sum and estimated cost to completion will have a corresponding effect on the contract profit or loss.
Ranhill Berhad (430537-K) 69 NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
4 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONT’D) (i) Critical accounting estimates and assumptions (Cont’d) (b) Depreciation of property, plant and equipment Infrastructure assets Infrastructure assets (included within property, plant and equipment) are depreciated over the concession period using the unit of water revenue method as disclosed in Note 3(iii)(a). Significant estimation is involved in determining the projected total water revenue of the concession. The projected total water revenue is estimated based on the Scheduled Tariff and projected water consumption.
The projected water consumption is derived based on the following parameters: (a) population estimates, (b) estimated per capital consumption, (c) water use rates for industries based on per unit area, and general economic performance of the State of Johor.
The projected water consumption is expected to grow at an estimated 30 years Compound Annual Growth Rate (“CAGR”) of 4.7% over the Concession Period which is benchmarked against the medium and low growth rates projected in the National Water Resource Study (“NWRS”).
Water tariff in Johor is based on the Scheduled Tariff as stipulated in the Concession Agreement. The latest Scheduled Tariff indicated that the future water tariff is subject to an adjustment of 1% to 20% on every three-year intervals until the expiry of the Concession Agreement.
Owing to the long remaining Concession Period, the Group does not expect a significant change in the projected total water revenue which may cause a material adjustment to the depreciation of infrastructure assets in the coming financial years. A decrease by 5% in projected water revenue would result in increase in depreciation charge by RM4.2 million for the financial year.
Other property, plant and equipment The estimation of the useful lives of other property, plant and equipment are based on expected usage, physical wear and tear, technical and commercial obsolescence and experience with similar assets. The estimated useful lives property, plant and equipment are reviewed annually and are updated if expectations differ from previous estimates. The Directors have relied upon past experience and industry practices in exercising their judgement.
(c) Taxation Significant estimation is involved in determining the provision for income taxes. Due to complexity of transactions entered into by the Group, the deductibility of certain expenses and chargeability of certain income are subject to interpretation. The Directors have exercised judgement in determining the tax treatment of these transactions and have relied upon industry practice and experts opinion in estimating the tax liability. Queries raised by the Inland Revenue Board are being attended to, and based on current circumstances, the Directors are of the view that the provision for tax liabilities are adequate.
Deferred tax asset is recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. This involves judgement regarding the future financial performance of the particular entity in which the deferred tax asset has been recognised.
70 Ranhill Berhad (430537-K) NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
4 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONT’D) (i) Critical accounting estimates and assumptions (Cont’d) (d) Impairment of goodwill The Group tests goodwill for impairment annually in accordance with its accounting policy Note 3(ii)(a), and whenever events or changes in circumstances indicate that the goodwill may be impaired.
For the purposes of assessing impairment, goodwill is allocated to cash-generating units or groups of cash-generating units that are expected to benefit from the synergies of the business combination in which the goodwill arose.
Significant judgement is required in the estimation of the present value of future cash flows generated by the cash-generating units or groups of cash-generating units, which involves uncertainties and are significantly affected by assumptions used and judgement made regarding estimates of future cash flows and discount rates. Changes in assumptions could significantly affect the results of the Group’s tests for impairment of goodwill.
(e) Estimation of useful life The Company depreciates its property, plant and equipment over the estimated useful life. The Company has exercised judgment in estimation of useful life based on historical experience and useful life of comparable asset in similar industries. An increase in the useful life would lead to a decrease depreciation in charge to the income statement and vice-versa.
The existing 120MW Open Cycle power plant has been depreciated over 21 years with regards to the 120MW PPA’s concession period which will end in 2019. However, Ranhill Powertron Sdn Bhd, had entered into a Combined Cycle Power Purchase Agreement (“PPA”) signed with Sabah Electricity Sdn Bhd (“SESB”) on 9 December 2004, and fully converted the 120MW Open Cycle Power Plant to 190MW Combined Cycle Power Plant and achieved its Commercial Operation Date (“COD”) with the achievement of the Commercial Operations Date (“COD”) of its 2 Blocks of 95MW each on 25 October 2008. Due to the achievement of COD, the useful life for the open cycle plant has been revised to the new combined cycle concession period of 21 years from the COD. The revision was accounted for as change in accounting estimate and as a result, the depreciation charge for current and future periods will reduce by RM7.21 million per annum.
(ii) Critical judgement in applying the Group’s accounting policies In determining and applying accounting policies, judgement is often required in respect of items where the choice of specific policy could materially affect the reported results and financial position of the Group. The following accounting policies require subjective judgement, often as a result of the need to make estimates about the effect of the matters that are inherently uncertain.
Depreciation of property, plant and equipment Infrastructure Assets (a) Infrastructure Assets are depreciated over the Concession Period using the unit of water revenue method. The rationale for using the unit of water revenue is in line with the increase in water revenue that the Group is expected to earn over the Concession Period as a result of tariff adjustments and increase in demand over time. Therefore, the Group has adopted the unit of water revenue method which reflects the pattern in which the assets’ economic benefits are consumed by the Group.
Ranhill Berhad (430537-K) 71 NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
4 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONT’D) (ii) Critical judgement in applying the Group’s accounting policies (Cont’d) (b) Water supply and lease agreement (“WSA”) As disclosed in Note 40 to the financial statements, under the WSA, SAJ Holdings Sdn Bhd (“SAJH”) was discharged of the obligation to pay Fixed Monthly Payment (“FMP”) and Bulk Sales Rate (“BSR”) to the State Government and Syarikat Air Johor Sdn Bhd (“SAJSB”). The Group has taken guidance from IC – 127 - Evaluating substance of transactions involving the legal form of a lease, and accordingly has treated the WSA and lease agreement as a single arrangement. The arrangement is considered as a lease since Johor Special Water Sdn Bhd (“JSW”), a party to the WSA, is required to sell treated water purchased from bulk water suppliers to SAJH on a back-to-back basis to enable SAJH to meet its obligations under the Concession Agreement (“CA”).
5 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES Exposure to a variety of financial risks, including foreign currency exchange risk, interest rate risk, credit risk, liquidity and cash flow risk arises in the normal course of the Group’s business. The Group acknowledges the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. Financial risk management is carried out through risk reviews, internal control systems, an insurance programme and adherence to the Group’s financial risk management policies.
(a) Foreign currency exchange risk The Group has minimum exposure to currency risks as the majority of goods and services are sourced locally within Malaysia, denominated in Ringgit Malaysia.
The Group has significant operations in Malaysia. The Group is exposed to foreign currency risk for local operations on certain transactions that are denominated in currencies other than Ringgit Malaysia. The currencies giving rise to this risk are disclosed in Note 3(xviii)(d).
Where possible the Group has a natural hedge to the extent that receipts for foreign currency receivable will be matched against payables denominated in the same foreign currency or where possible, by intragroup arrangement and settlements.
(b) Interest rate risk The Group’s income and operating cash flows are substantially independent of changes in market interest rates. The Group minimised its exposure to any increase in interest rates by substantially borrowing on a fixed rate basis under the terms of the Islamic Murabahah Commercial Paper/Murabahah Medium Term Note (“MCP/MMTN”), Islamic Medium Term Note (“MTN”), BaIDS and US Dollar denominated Bonds.
The Group has also entered into financial derivative contracts designed to manage the Group’s exposure and to protect the Group from movement in interest rates.
72 Ranhill Berhad (430537-K) NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
5 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT’D) (c) Credit risk Customer credit risk arises when services are rendered and sales are made on credit terms. Default by customers may lead to material loss but risks are mitigated by ensuring sales and services are made to customers with appropriate credit history. Credit limit, deposit placement and guarantee in the form of letter of credit from banks are imposed in accordance with the Group’s credit risk management policy. The Group monitors exposure to credit risk on an on-going basis. The Group considers the risk of default by customers to be low.
Credit risk, when making deposits at financial institutions are minimised through careful selection of interest bearing investments and selection of reputable in financial institutions.
(d) Liquidity and cash flow risk Liquidity and cash flow availability are important requirements of the business. The Group mitigates liquidity and cash flow risk through a commitment to the Group cash flow planning for the future after taking any action necessary to bring the planning into conformity with the overall Group Business Plan. The Group’s borrowing and debt to equity level has been kept at a manageable level so as not to breach any of the existing loan covenants.
6 REVENUE Group Company 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 Contract revenue (described as EPC and EPCM/PMC) 1,134,386 733,677 11,564 0 Power generation 149,262 146,171 0 0 Water and water related revenue 623,298 589,937 0 0 Dividends - subsidiaries 0 0 51,834 21,169 - associated company 0 469 0 0 Management fee 0 0 39,159 47,125 Others 2,991 158 0 0 1,909,937 1,470,412 102,557 68,294
7 COST OF SALES Group Company 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 Contract costs (described as EPC and EPCM/PMC) (including unrecoverable cost from MBOD project of RM316.0 million (2007: Nil)) 1,459,723 575,612 34,056 1,303 Power generation 103,909 107,979 0 0 Water 270,006 293,502 0 0 Others 3,366 2,070 0 0 1,837,004 979,163 34,056 1,303
Ranhill Berhad (430537-K) 73 NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
8 FINANCE COSTS Group Company 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 Interest expense: - Term loan 272,256 226,561 91,306 53,199 - Bank overdraft 3,457 2,090 757 1,314 - Revolving credit 1,424 237 0 0 - Banker’s acceptance/trust receipts 138 421 (3,368) (18) - Amortisation of discount on issuance of BalDS 12,620 11,582 0 0 - Convertible unsecured loan stock 725 725 0 0 - Finance lease 41,273 29,810 125 161 - Others 7,473 365 1,241 1,240
339,366 271,791 90,061 55,896 Interest expense included in cost of sales (3,304) (2,513) 2,617 51 Interest expense charged to subsidiaries 0 0 (50,009) (24,304) Interest income capitalised as part of property, plant and equipment (Note 16) 323 1,059 0 0 Borrowing costs capitalised as part of property, plant and equipment (Note 16) (48,840) (57,103) 0 0
287,545 213,234 42,669 31,643
9 STAFF COSTS Group Company 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 Salaries, wages and other benefits 262,487 239,780 16,978 12,245 Defined contribution plan 17,320 15,715 1,386 1,131 Unfunded defined benefit plan (Note 39) - current service cost 3,061 2,977 0 0 - interest cost 2,444 2,240 0 0 - amortisation of transitional liability 1,582 3,165 0 0 - settlement loss 0 1,355 0 0 - actuarial loss recognised 470 545 0 0 287,364 265,777 18,364 13,376
Included in staff costs is Executive Directors’ remuneration (Note 10).
74 Ranhill Berhad (430537-K) NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
10 DIRECTORS’ REMUNERATION The aggregate amount of emoluments receivable by Directors of the Company during the period is as follows: Group Company 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 Executive Directors: Fees 0 20 0 20 Salaries and bonuses 3,273 2,906 2,505 2,138 Defined contribution plan 370 344 278 252 Other emoluments 474 349 474 349 4,117 3,619 3,257 2,759
Non-Executive Directors: Fees 783 1,513 567 356 Other emoluments 75 430 75 59 858 1,943 642 415 Total Directors’ remuneration (Note 11) 4,975 5,562 3,899 3,174
The estimated monetary value of benefits-in-kind not included in the Directors’ remuneration above is as follows: Group Company 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 Executive Directors 225 169 214 157 Non-Executive Directors 34 260 34 35
11 (LOSS)/PROFIT BEFORE TAXATION Group Company 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 The profit before taxation is arrived at after charging: Allowance for doubtful debts 5,597 9,750 0 1,645 Allowance for slow moving and obsolete inventories 27 132 0 0 Amortisation of intangible assets 2,718 183 0 0 Auditors’ remuneration - statutory audit – current year 846 822 69 60 - statutory audit – prior year 217 21 9 0 - audit related services 103 65 0 0 Bad debts written off 10,401 1,595 0 0 Depreciation of property, plant and equipment, investment property and prepaid lease payment 153,735 152,219 1,957 1,578 Directors’ remuneration (Note 10) 4,975 5,562 3,899 3,174 Loss on disposal of property, plant and equipment 27 93 0 0 Property, plant and equipment written off 114 88 0 0 Realised foreign exchange loss 2,551 5,263 4 3,211 Unrealised foreign exchange loss 23,460 6,566 16,778 1 Rental of land and buildings 10,495 12,224 1,827 1,576 Rental of plant and equipment 6,250 6,203 1,308 1,887 Inventories written off 0 213 0 0 Impairment loss on property, plant and equipment 6,131 884 0 0 Loss on disposal of oil and gas property 45,454 0 0 0 Provision for foreseeable losses 3,765 0 0 0 Provision for non-recoverability of amount due from joint venture partner 240,245 0 0 0
Ranhill Berhad (430537-K) 75 NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
11 (LOSS)/PROFIT BEFORE TAXATION (CONT’D) Group Company 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 And crediting: Amortisation of deferred income (Note 45) 23,837 20,240 0 0 Gain on disposal of property, plant and equipment 1,218 127 0 0 Interest income 41,504 27,499 0 4,120 Rental income 1,032 991 0 0 Realised foreign exchange gain 2,257 1,561 1,971 1,100 Unrealised foreign exchange gain 38,476 20,781 38,491 19,789 Write back of allowance for doubtful debts 130 242 0 0 Write back of diminution in value of investments 412 50 0 0 Write back of allowance for inventories 0 124 0 0 Dividends - subsidiaries 0 0 51,834 20,700 - associated company 0 469 0 469
For the financial year ended 30 June 2008, the Group has made provisions for the non recoverability of the amount due from customer and Joint Venture partner for the Melut Basin Oil Development project amounting to RM316 million (2007: Nil) and RM240 million (2007: Nil) respectively.
Ranhill Petroneeds Joint Venture (“RPJV”) signed a Settlement Agreement (“SA”) in respect of the Melut Basin Oil Development Project (“MBOD Project”) with Petrodar Oil Development Company (“PDOC”) which stipulates that RPJV will receive USD20.0 million (RM65.3 million), an extension of time for the completion of the existing work amounting to USD25.0 million (RM81.6 million) under the original base contract and will be awarded several various expansion contracts. PDOC had also approved 3 change orders amounting to USD9 million on the original contact. To-date, a total of USD54.0 million (RM176.31 million) has been received by RPJV pursuant to the SA and a letter of award for additional works amounting to USD149.2 million (RM487.14 million) was also accepted on 26 Sept 2007 (the “SA I Project”). In addition, the company is also in the midst of finalizing the negotiation of an additional variation order to the SA, namely the Water Injection Packages Works, for an additional contract value of USD166.8 million (RM544.6 million) (the “SA II Project”) of which USD16.4 million (RM56.6 million)has been included as part of the contract price of USD149.2 million. As the negotiation to conclude the said packages have been delayed, management has decided to provide for the estimated unrecoverable cost of RM316.0 million.
Further to the Joint Venture Agreement entered into between Ranhill Group and Petroneeds Services International (“Petroneeds”) on 8 June 2004 (the “JVA”) to carry out the MBOD project, the parties entered into a Supplementary Agreement dated 27 January 2007 (the “SA”) setting out the process to agree and settle the additional costs incurred by RPJV under the MBOD Project. Audits of the financial statements of RPJV for 2005 & 2006 have been completed and agreed while audit for the 2007 financial statement is currently in progress. Accordingly, Group is now pursuing the recovery of amounts owing by Petroneeds. However, since the recovery process may be lengthy and time consuming and the outcome of recovery is uncertain, management has decided to provide for the amount due from Petroneeds amounting to RM240 million in the year under review.
76 Ranhill Berhad (430537-K) NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
12 TAXATION Group Company 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 Current taxation: - Malaysian tax 21,606 17,754 15,134 3,618 - Foreign tax 3,330 257 0 0 Deferred taxation (Note 27) 43,045 20,712 (2,031) 9,406
67,981 38,723 13,103 13,024
Current taxation Current year 19,727 21,366 15,083 4,205 Benefits from previously unrecognised tax losses and capital allowance (2,864) (2,972) (1,520) (1,543) (Over)/under accrual in prior years 8,073 (383) 1,571 956
Deferred taxation Origination and reversal of temporary differences 52,286 45,944 (2,031) 9,553 Change in tax rate (9,241) (25,232) 0 (147)
67,981 38,723 13,103 13,024
The explanation of the relationship between the taxation and profit before taxation is as follows: Group Company 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 % % % % Numerical reconciliation between the average effective tax rate and the applicable tax rate
Statutory income tax rate of Malaysia (26) 27 26 27 Income not subject to tax (5) (11) 0 0 Export services incentive (1) (4) 0 0 Expenses not deductible for tax purposes 15 12 48 38 Temporary differences and tax losses not recognised 29 6 0 0 Utilisation of unrecognised tax losses and capital allowance (1) (2) (9) (8)
Different tax rates in other countries 1 0 0 0 Over/(under) accrual of tax in prior year 1 0 9 5 Effect on changes in tax rate (1) (11) 0 (1)
Average effective tax rate 12 17 74 61
In year 2008, the government enacted a change in the corporate income tax rate from 27% to 26%.
Ranhill Berhad (430537-K) 77 NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
13 SEGMENT REPORTING The Group is organised into four (4) main business segments: (a) EPC & EPCM/PMC - Engineering, procurement, construction,construction management services and project management services.
(b) Power generation, - Operation of a 120MW open cycle gas-fired power station; Engineering and installation of power distribution transmission and generation facilities and design, engineering and construction of power transmission infrastructure; and distribution Distribution of electricity and design, engineering, construction and project management of power distribution systems; Operation and maintenance services for power distribution systems and provision of maintenance services to electrical substations.
(c) Water - Processing and treatment of raw water and supply treated water to consumers; Builds, installs and provides services in wastewater treatment and potable water supply; Provision of water supply and distribution business solutions, consultancy and water related services.
(d) Others - Oil and gas exploration, extraction and production, facilities management, provision of management services, investment holding and property holding.
Intersegment revenue comprise rendering rental of office space and management fees to other segments and provide engineering, procurement and construction for projects. These transactions are conducted at arms length basis under terms, conditions and prices not materially different from transaction with unrelated parties.
(a) Primary reporting format - business segments EPC & Power Adjustment / EPCM/PMC generation Water Others Eliminations Total 2008 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Revenue External revenue 1,134,386 149,262 623,298 2,991 0 1,909,937 Intersegment revenue 6,810 0 12,049 84,796 (103,655) 0 Total revenue 1,141,196 149,262 635,347 87,787 (103,655) 1,909,937
Segment results (758,941) 44,691 358,829 (325) 62,930 (292,816) Unallocated income: Interest income 41,504 Loss on disposal of associated co, EEJW (33,721) Finance costs (287,545) Share of results of associates 1 543 544
Profit before taxation (572,034) Zakat (2,623) Taxation (67,981) Net profit for the financial year (642,638)
Attributable to: Equity holders of the parent (715,425) Minority interests 72,787 (642,638)
78 Ranhill Berhad (430537-K) NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
13 SEGMENT REPORTING (CONT’D) (a) Primary reporting format - business segments (Cont’d) EPC & Power Adjustment / EPCM/PMC generation Water Others Eliminations Total 2008 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Other information Segment assets 1,349,576 734,638 8,642,740 937,135 (1,054,927) 10,609,162
Associates 486 0 0 2,785 0 3,271 Total assets classified as held for sale 0 26,127 0 8,300 0 34,427
Unallocated assets: Deferred tax assets, tax and vat recoverable 91,790 Deposits with licensed banks 692,375 Total assets 11,431,025
Segment liabilities 1,475,020 85,112 4,787,949 809,542 (1,054,927) 6,102,696 Total liabilities associated with assets classified as held for sale 0 6,712 0 0 0 6,712
Unallocated liabilities Deferred tax liabilities and current tax liabilities 299,313 Borrowings 3,981,747 Total liabilities 10,390,468
Capital expenditure 20,093 34,475 254,282 53,988 0 362,838 Non-cash expenses: Depreciation 7,153 13,665 129,273 3,644 0 153,735 Amortisation of intangible assets 0 0 636 0 (18) 618 Impairment losses 0 0 0 51,585 0 51,585 Others 14,197 100 3,776 22,889 0 40,962
Ranhill Berhad (430537-K) 79 NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
13 SEGMENT REPORTING (CONT’D) (a) Primary reporting format - business segments (Cont’d)
Power generation EPC & transmission Adjustment / EPCM/PMC and distribution Water Others Eliminations Total 2007 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Revenue External revenue 733,677 146,171 589,937 627 0 1,470,412 Intersegment revenue 137,164 0 48,496 61,387 (247,047) 0 Total revenue 870,841 146,171 638,433 62,014 (247,047) 1,470,412 Segment results 8,204 27,813 367,498 33,444 (21,953) 415,006
Unallocated income: Interest income 27,499 Finance costs (213,234) Share of results of associates 1 0 0 207 0 208 Profit before taxation 229,479 Taxation (38,723)
Profit after taxation 190,756 Discontinued Operations Loss for the year from discontinued operations after taxation 0 11,865 0 (6,553) 0 5,312 Net profit for the financial year 196,068
Attributable to Equity holders of the parent 116,833 Minority interests 79,235 196,068
80 Ranhill Berhad (430537-K) NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
13 SEGMENT REPORTING (CONT’D) (a) Primary reporting format - business segments (Cont’d)
Power generation EPC & transmission Adjustment / (Restated) EPCM/PMC and distribution Water Others Eliminations Total 2007 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Other information Segment assets 1,695,187 710,836 8,490,769 1,165,667 (1,010,508) 11,051,951 Associates 485 0 0 48,481 0 48,966 Total assets classified as held for sale 0 0 0 23,906 0 23,906
Unallocated assets Deferred tax assets, tax and vat recoverable 92,150 Deposits with licensed banks 765,699 Total assets 11,982,672
Segment liabilities 1,440,756 112,738 4,883,757 567,441 (1,010,508) 5,994,184 Total liabilities associated with assets classified as held for sale 0 0 0 17,021 0 17,021
Unallocated liabilities: Deferred tax liabilities and current tax liabilities 253,215 Borrowings 4,004,221 Total liabilities 10,268,641
Capital expenditure 11,182 136,247 233,555 65,474 0 446,458 Non-cash expenses: Depreciation 5,377 22,561 120,936 3,345 0 152,219 Amortisation of intangible assets 0 0 183 0 0 183 Impairment losses 0 0 458 436 0 894 Others 11,209 242 2,407 2,897 0 16,755
Ranhill Berhad (430537-K) 81 NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
13 SEGMENT REPORTING (CONT’D) (a) Primary reporting format - business segments (Cont’d) Segment assets consist of property, plant and equipment, prepaid lease payment, investment property, goodwill, other investment, short and long term receivable, intangible assets, receivable from the State Government, inventories, trade and other receivable, amount due from customers on contract, prepayment, amount due from jointly controlled entities, amount due from associates and bank and cash balance.
Segment liabilities consist of operating liabilities exclude taxation, deferred taxation and borrowing.
Capital expenditure comprises addition to property, plant and equipment and addition to oil and gas properties.
(b) Secondary reporting format - geographical segment Revenue (external) Capital expenditure Total assets 2008 2007 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Countries Malaysia 1,386,535 1,283,388 289,118 365,359 10,252,624 10,212,694 Sudan 163,346 18,982 0 42 9,184 553,898 Australia 43,283 53,979 0 0 13,416 16,413 Vietnam 23,547 33,323 0 0 914 5,790 India 1,638 32,084 0 0 963 4,603 Libya 220,938 229 0 0 250,201 0 Arab Saudi 32,126 11,864 0 0 3,739 0 Others 38,524 36,563 73,720 81,057 78,121 258,553 1,909,937 1,470,412 362,838 446,458 10,609,162 11,051,951 Associates 3,271 48,966 Asset held for sale 34,427 23,906 Unallocated assets 784,165 857,849 Total assets 11,431,025 11,982,672
With the exception of the countries disclosed above, no other individual country contributed more than 10% of consolidated revenue or assets.
Although the Group’s business segments are managed on a worldwide basis, they operate mainly in geographical areas as follows:
Malaysia - mainly construction, engineering, power distribution system and manufacturing activities Sudan - mainly engineering, procurement, construction and commissioning activities Australia - mainly engineering services activities Vietnam - mainly engineering services activities India - mainly engineering services activities Others - mainly engineering services activities
82 Ranhill Berhad (430537-K) NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
14 DIVIDEND PER ORDINARY SHARE Dividend in respect of the financial year is as follows: Group and Company 2008 2007 Gross Amount of Gross Amount of dividend dividend, dividend dividend, per share net of tax per share net of tax Sen RM’000 Sen RM’000 Dividend paid in respect of the financial year ended 30 June 2006 0 0 1.5 6,450 Dividend paid in respect of the financial year ended 30 June 2007 1.5 6,540 0 0 Proposed first and final dividend 1.0 4,420 1.5 6,540
The Directors propose a first and final gross dividend of 1.0 sen (2007: 1.5 sen) per share, less income tax at 26% (2007: 27%) amounting to RM4,419,760 (2007: RM6,540,050) for the financial year ended 30 June 2008 subject to the approval of members at the forthcoming Annual General Meeting of the Company.
15 BASIC (LOSS)/EARNINGS PER ORDINARY SHARE The basic (loss)/earnings per ordinary share of the Group is calculated by dividing the net profit/(loss) for the financial year by the weighted average number of ordinary shares in issue during the financial year. Group 2008 2007 Net (loss)/profit attributable to ordinary equity holders of the Company for the financial year (RM’000) (715,425) 116,833 Weighted average number of ordinary shares in issue (‘000) 597,265 597,265
Basic (loss)/earnings per share (sen) attributable to equity holders of the Company - From continuing operations (119.78) 18.79 - From discontinued operations 0 0.77 (119.78) 19.56
Ranhill Berhad (430537-K) 83 NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
16 PROPERTY, PLANT AND EQUIPMENT Construction Office Bulk Project Construction equipment, equipment, Renovation, Group supply Concession development works plant and Power and furniture Motor Land Buildings station assets assets in progress machinery station computers and fittings vehicles Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 2008 Cost/valuation At cost 0 21,208 0 5,617,614 1,350,270 801,316 237,653 287,466 143,569 24,344 23,158 8,506,598 Arising from disposal of subsidiaries 0 0 0 0 0 0 0 0 (353) (332) 0 (685) Write offs 0 0 0 0 0 0 (3) 0 (182) (122) 0 (307) Additions 0 0 0 0 9,152 265,217 20,409 (101) 7,872 1,875 4,832 309,256 Disposals 0 0 0 0 0 (53) (4) 0 (18) (152) (1,618) (1,845) Reclassification 0 0 0 0 238,244 (508,765) 19,711 244,734 5,563 378 135 0 Reclassification as assets held for sale 0 0 0 0 0 (14,882) 0 0 (137) (218) (282) (15,519) Currency translation differences 0 0 0 0 0 (900) (1,938) 0 (56) (31) 3 (2,922) At 30 June 2008 0 21,208 0 5,617,614 1,597,666 541,933 275,828 532,099 156,258 25,742 26,228 8,794,576
Accumulated depreciation As cost 0 4,669 0 153,787 31,983 967 85,051 62,014 71,807 12,523 11,712 434,513 Charge for the financial year 0 706 0 65,300 18,708 0 28,163 11,755 21,380 4,209 3,514 153,735 Write offs 0 0 0 0 0 0 0 0 (155) (39) 0 (194) Disposals 0 0 0 0 0 0 (4) 0 (11) (117) (1,418) (1,550) Arising from disposal of subsidiaries 0 0 0 0 0 0 0 0 (288) (210) 0 (498) Reclassification as assets held for sale 0 0 0 0 0 0 0 0 (68) (84) (151) (303) Reclassification 0 0 0 0 0 (967) 0 967 0 0 0 0 Currency translation differences 0 0 0 0 0 0 (120) 0 (39) (18) 2 (175) At 30 June 2008 0 5,375 0 219,087 50,691 0 113,090 74,736 92,626 16,264 13,659 585,528
Impairment At 1 July 2007 0 715 0 0 0 0 0 0 0 0 458 1,173 At 30 June 2008 0 715 0 0 0 0 0 0 0 0 458 1,173
Net book value At 30 June 2008 0 15,118 0 5,398,527 1,546,975 541,933 162,738 457,363 63,632 9,478 12,111 8,207,875
84 Ranhill Berhad (430537-K) NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
16 PROPERTY, PLANT AND EQUIPMENT (CONT’D) Construction Office Bulk Project Construction equipment, equipment, Renovation, Group supply Concession development works plant and Power and furniture Motor Land Buildings station assets assets in progress machinery station computers and fittings vehicles Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 2007 Cost/valuation As restated 1,007 24,323 28,919 5,617,614 1,191,249 643,208 211,900 286,161 131,347 21,396 18,710 8,175,834 Arising from disposal of subsidiaries 0 0 0 0 0 0 (188) 0 (536) 0 0 (724) Write offs 0 0 0 0 0 0 0 0 (2,516) (1,087) 0 (3,603) Additions 0 38 6 0 159,021 157,499 35,990 2,946 16,761 4,572 5,147 381,980 Disposals 0 0 (28,925) 0 0 0 (3,669) (1,640) (882) (164) (508) (35,788) Reclassification as assets held for sale (1,007) (3,153) 0 0 0 0 (6,157) 0 (593) (338) (163) (11,411) Currency translation 0 0 0 0 0 609 (224) 0 (12) (35) (28) 310 At 30 June 2007 0 21,208 0 5,617,614 1,350,270 801,316 237,652 287,467 143,569 24,344 23,158 8,506,598
Accumulated depreciation As restated 0 4,051 5,159 92,688 17,240 0 64,807 43,569 54,655 9,953 9,436 301,558 Charge for the financial year 0 1,420 1,842 61,099 14,743 967 28,379 19,226 20,901 3,998 2,866 155,441 Write offs 0 0 0 0 0 0 0 0 (2,489) (1,027) 0 (3,516) Disposals 0 0 (7,001) 0 0 0 (3,443) (781) (553) (143) (390) (12,311) Arising from disposal of subsidiaries 0 0 0 0 0 0 (56) 0 (223) 0 0 (279) Reclassification as assets for sale 0 (802) 0 0 0 0 (4,668) 0 (525) (297) (147) (6,439) Currency translation differences 0 0 0 0 0 0 32 0 41 39 (53) 59 At 30 June 2007 0 4,669 0 153,787 31,983 967 85,051 62,014 71,807 12,523 11,712 434,513
Impairment At 1 July 2006 0 290 0 0 0 0 0 0 0 0 0 290 Addition 0 425 0 0 0 0 0 0 0 0 458 883 At 30 June 2007 0 715 0 0 0 0 0 0 0 0 458 1,173
Net book value At 30 June 2007 0 15,824 0 5,463,827 1,318,287 800,349 152,601 225,453 71,762 11,821 10,988 8,070,912
Ranhill Berhad (430537-K) 85 NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
16 PROPERTY, PLANT AND EQUIPMENT (CONT’D) Office Renovation, Plant equipment furniture Motor and and computers and fittings vehicles machinery Total Company RM’000 RM’000 RM’000 RM’000 RM’000 2008 Cost At 1 July 2007 4,754 1,038 2,865 0 8,657 Additions 260 22 0 52 334 At 30 June 2008 5,014 1,060 2,865 52 8,991
Accumulated depreciation At 1 July 2007 2,685 413 1,681 0 4,779 Charge for the financial year 1,179 202 573 3 1,957 At 30 June 2008 3,864 615 2,254 3 6,736
Net book value At 30 June 2008 1,150 445 611 49 2,255
2007 Cost At 1 July 2006 4,476 1,025 2,615 0 8,116 Additions 278 13 250 0 541 At 30 June 2007 4,754 1,038 2,865 0 8,657
Accumulated depreciation At 1 July 2006 1,851 213 1,137 0 3,201 Charge for the financial year 834 200 544 0 1,578 At 30 June 2007 2,685 413 1,681 0 4,779
Net book value At 30 June 2007 2,069 625 1,184 0 3,878
86 Ranhill Berhad (430537-K) NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
16 PROPERTY, PLANT AND EQUIPMENT (CONT’D) The net book values of property, plant and equipment of the Group and Company acquired under finance lease arrangements are as follows: Group Company 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 Construction equipment, plant and machinery and telecommunication 657 30 0 0 Renovation, furniture and fittings 1,216 365 0 0 Office equipment and computers 1,432 1,893 611 1,303 Motor vehicles 6,498 8,795 587 1,184
The net borrowing costs capitalised as part of the property, plant and equipment during the financial year (Note 8) is as follows: Group 2008 2007 RM’000 RM’000 Interest expense 48,840 57,103 Interest income (323) (1,059) 48,517 56,044
The net book value of project development in progress and plant and machinery of Ranhill Utilities Berhad pledged as security for a term loan granted to a subsidiary were RM16,192,000 (2007: RM6,589,000) and RM16,733,000 (2007: RM8,686,000) respectively at the balance sheet date.
The total impairment loss of RM715,171 was made in respect of the leasehold land and building located in Muadzam Syah. The recoverable amount is arrived at comparing the selling price based on independent professional valuation reports which was lower than the carrying amount.
17 PREPAID LEASE PAYMENT The Group’s prepaid lease payment comprised: Group 2008 2007 RM’000 RM’000 Cost At 1 July 2007/1 July 2006 6,669 6,682 Currency translation difference 20 (13) At 30 June 2008/30 June 2007 6,689 6,669
Accumulated depreciation At 1 July 2007/1 July 2006 527 370 Currency translation difference 3 (1) Charge for the financial year 159 158 At 30 June 2008/30 June 2007 689 527
Net book value At 30 June 2008/30 June 2007 6,000 6,142
Ranhill Berhad (430537-K) 87 NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
18 INVESTMENT PROPERTIES The Group’s investment properties comprise: Freehold land Buildings Total 2008 RM’000 RM’000 RM’000 Cost At 1 July 2007 4,469 11,407 15,876 Disposal 0 (85) (85) Reclassification as assets held for sale (4,469) (11,322) (15,791) At 30 June 2008 0 0 0
Accumulated depreciation At 1 July 2007 0 1,188 1,188 Charge for the financial year 0 227 227 Disposal 0 (56) (56) Reclassification as assets held for sale 0 (1,245) (1,245) At 30 June 2008 0 114 114
Impairment At 1 July 2007 0 0 0 Addition 1,919 4,212 6,131 Reclassification as assets held for sale (1,919) (4,326) (6,245) At 30 June 2008 0 (114) (114)
Net book value At 30 June 2008 0 0 0
The Group has entered into a Sale and Purchase Agreement (“SPA”) to dispose of its holding in its Setiawangsa property and although the SPA is only expected to be completed in the coming months, the Group has decided to write down the asset to its net recoverable value and has classified the asset under Asset Held for Sales as required under FRS 5.
The Group’s investment properties comprise: Freehold land Buildings Total 2007 RM’000 RM’000 RM’000 Cost At 1 July 2006 4,469 11,407 15,876
At 30 June 2007 4,469 11,407 15,876
Accumulated depreciation At 1 July 2006 0 960 960 Charge for the financial year 0 228 228
At 30 June 2007 0 1,188 1,188
Net book value At 30 June 2007 4,469 10,219 14,688
The fair value of the properties was estimated at RM16.8 million based on valuations by independent professionally qualified valuers. Valuations were based on current prices in an active market for the fair value was estimated by reference to open market value of properties in the vicinity.
88 Ranhill Berhad (430537-K)
NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
19 INTANGIBLE ASSETS Contractual rights Licences Total Group RM’000 RM’000 RM’000 2008 Cost Net book value At 1 July 2007 18,986 6,412 25,398 Amortisation charged (2,100) (618) (2,718) Currency translation differences 0 (195) (195) At 30 June 2008 16,886 5,599 22,485
At 30 June 2008 Cost 18,986 7,996 26,982 Accumulated amortisation (2,100) (2,372) (4,472) Currency translation differences 0 (25) (25) Net book value 16,886 5,599 22,485
2007 Net book value At 1 July 2006 0 6,368 6,368 Arising from acquisition of subsidiaries 18,986 0 18,986 Amortisation charged 0 (183) (183) Currency translation differences 0 227 227 At 30 June 2007 18,986 6,412 25,398
At 30 June 2007 Cost 18,986 7,996 26,982 Accumulated amortisation 0 (1,754) (1,754) Currency translation differences 0 170 170
Net book value 18,986 6,412 25,398
Ranhill Berhad (430537-K) 89 NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
20 GOODWILL Group 2008 2007 RM’000 RM’000 Net book value At 1 July 2007/1 July 2006 29,663 29,401 Arising from acquisition of subsidiaries 27 22 Reclassification to Assets Held for Sale (3,868) 240 Arising from acquisition of additional interest in a subsidiary 17,971 0 At 30 June 2008/30 June 2007 43,793 29,663
At 30 June 2008/30 June 2007 Cost 51,176 33,178 Accumulated amortisation and impairment (3,515) (3,515) Reclassification to Assets Held for Sale (3,868) 0 Net book value 43,793 29,663
Impairment tests for goodwill The carrying amounts of goodwill allocated to the Group’s cash-generating units (“CGUs”) are as follows: Group 2008 2007 RM’000 RM’000 Power generation, transmission and distribution 29,894 15,791 Water 13,732 13,732 Others (individually insignificant to the respective CGUs) 167 140 43,793 29,663
The recoverable amounts of both the power generation, transmission and distribution and water CGUs are determined based on value-in- use calculations, using pre-tax cash flow projections based on financial budgets approved by the Directors covering a five-year period.
The key assumptions used in the value-in-use calculations are as follows: Power generation, transmission and distribution Water % % Gross margin 29.0 31.4 Growth rate 3.2 3.5 Pre-tax discount rate 12.5 12.5
The Directors have determined the budgeted gross margin and the average growth rate based on past performance and their expectations of market development. The discount rate used is pre-tax and reflects specific risks relating to the segment.
90 Ranhill Berhad (430537-K) NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
21 INVESTMENTS IN SUBSIDIARIES Company 2008 2007 RM’000 RM’000 Cost Quoted shares in Malaysia 641,221 748,280 Unquoted shares 223,440 81,000 864,661 829,280
Market value of quoted shares in Malaysia 717,402 645,494
The quoted shares represent the Company’s investments in Ranhill Utilities Berhad (“Ranhill Utilities”). Ranhill Utilities was delisted from the Official List of Bursa Securities with effect from 28 August 2008.
The subsidiaries, all of which are incorporated in Malaysia, unless stated otherwise, are as follows as at 30 June 2008:
Effective Name of subsidiary equity interest Principal activities 2008 2007 % % Held by the Company: Ranhill Utilities Berhad @ 70 70 Investment holding and provision administrative and technical support of (“Ranhill Utilities”) services to its subsidiaries and consultancy services.
Ranhill Power Sdn Bhd @ 100 86 Investment holding. (“Ranhill Power”)
Ranhill Bersekutu Sdn Bhd @ * 100 100 Provision of engineering, procurement and construction management (“Ranhill Bersekutu”) services (EPCM) and project management services (PMC).
Ranhill Civil Sdn Bhd @ * 100 100 Provision of project management services (PMC) and engineering (“Ranhill Civil”) procurement and construction services (EPC).
Ranhill Engineering and @ * 100 100 Provision of engineering procurement and construction services (EPC). Constructors Sdn Bhd (“REC”)
Ranhill Sri Gading Sdn Bhd (“RSG”)* @ 100 100 Turnkey contracting for the Sri Gading Water Supply Project.
RB Ventures Sdn Bhd @* 100 100 Property investment. (“RB Ventures”)
Ranhill International Inc. (“RII”) @ 100 100 Provision of engineering and construction services overseas and investment (Incorporated in Labuan, Malaysia) holding.
Ranhill Berhad (430537-K) 91 NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
21 INVESTMENTS IN SUBSIDIARIES (CONT’D) Effective Name of subsidiary equity interest Principal activities 2008 2007 % % Held by the Company (Cont’d): Ranhill (India) Private Limited + 100 100 To carry out the business of EPCM, EPC, construction and Build Operate (Incorporated in India) and Transfer “BOT” in the utilities, infrastructure and the oil and gas sectors.
Ranhill Worley Engineering Sdn Bhd @ 60 60 Dormant (in the process of members voluntary liquidation).
Ranhill WorleyParsons Sdn Bhd @ 51 51 Provision of engineering, procurement and construction management (“RWPSB”) (EPCM), supervision and ancillary services.
MediGlobal Malaysia Sdn Bhd @ 60 60 Provision of procurement services management for the contracting and supply of medical and non-medical equipment to hospital owners/operators, developers, builders, turnkey contractors and international aid and donor organisations that fund healthcare infrastructure development programmes.
Ranhill Energy Sdn Bhd @ 100 100 To undertake energy and energy related works and services. (“Ranhill Energy”)
Ranhill Africa Sdn Bhd @ 100 100 Dormant.
Ranhill (L) Limited @ 100 100 To act as a special purpose vehicle for the issuance of any type of securities as permitted under the Offshore Companies Act, 1990.
Golden Active Sdn Bhd @ 100 100 Investment holding.
Amona Ranhill Consortium 60 60 Provision of engineering procurement and construction services (EPC). Sdn Bhd @
Ranhill Global System 100 0 Provision of information technology and related services. Sdn Bhd @
Held by Ranhill Utilities: SAJ Holdings Sdn Bhd @ 70 70 An integrated water supply services company principally involved in the (“SAJH”) sourcing of raw water, treatment and distribution of treated water to consumers in the State of Johor.
Ranhill Water Technologies Sdn Bhd + 49 49 A comprehensive water treatment plant company which builds, installs and provides technology driven solutions in waste water treatment and potable water supply.
Ranhill Water Services Sdn Bhd @ 70 70 To provide water supply and distribution business solutions, consultancy and water related services.
92 Ranhill Berhad (430537-K) NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
21 INVESTMENTS IN SUBSIDIARIES (CONT’D) Effective Name of subsidiary equity interest Principal activities 2008 2007 % % Held by Ranhill Utilities (Cont’d): Ranhill (Nanchang) Wastewater 70 70 To undertake waste water treatment services for Xiao Lan Industrial Park. Treatment Co Ltd (“RNanchang”) + (Incorporated in China)
Konsortium Ranhill Nada Cekal 70 70 Dormant. Sdn Bhd +
Ranhill (Hefei) Wastewater 70 0 To undertake waste water treatment services for Hefei Industrial Park. Treatment Co Ltd (“RHefei”) + (Incorporated in China)
Ranhill (Xin Xiang) Wastewater 70 0 To undertake waste water treatment services for Xin Xiang Industrial Park. Treatment Co Ltd (“RXin Xiang”) + (Incorporated in China)
Held by Ranhill Power: Ranhill Powertron Sdn Bhd @ ** 80 69 Independent power producer. (“Ranhill Powertron”)
Ranhill Power Projects Sdn Bhd @ 100 86 Ceased operations.
Ranhill Services Sdn Bhd @ 100 86 Ceased operations.
Ranhill Powerlink Sdn Bhd @ 100 86 Ceased operations.
Ranhill Power O&M Sdn Bhd @ 70 60 Operation and maintenance services for power plants.
Ranhill Power Manufacturing Sdn Bhd 100 86 Dormant. (“RPM”)
Ranhill Trans Bakti Sdn Bhd @ 100 86 Dormant.
Ranhill Power Agency Sdn Bhd @ 100 86 Dormant.
Ranhill Tuaran O&M Sdn Bhd @ 100 86 Dormant.
Ranhill Powertron II Sdn Bhd@ 100 86 Independent power producer.
Ranhill Berhad (430537-K) 93 NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
21 INVESTMENTS IN SUBSIDIARIES (CONT’D) Effective Name of subsidiary equity interest Principal activities 2008 2007 % % Held by Ranhill Power (Cont’d): Nobel Infrastructure Development + 100 86 Investment holding. Holdings Limited** (Incorporated in Port Louis Mauritius)
Ranhill Power Distribution Sdn Bhd @ 100 86 Ceased operations.
Held by Ranhill Civil: Ranhill Antara Koh Sdn Bhd (“RAK”) @ 51 51 To identify, secure and undertake land and marine piling works, marine structures related civil engineering works in Malaysia as well as globally except for Singapore where Malaysian entities and/or Malaysian investors are involved.
Held by REC:
Ranhill Middle East FZE @@ 100 100 Sourcing financing, managing funds, executing projects, marketing, business (Incorporated in United Arab Emirates) development and procurement.
Ranhill Pakistan (Private) Limited + 100 100 Engineering, procurement and construction services and investment (Incorporated in The Republic of Pakistan) holdings.
Held by Ranhill Energy: PT Ranhill Parahyangan Ranhill Energia Citarum + 60 60 Dormant (in the process of liquidation). (Incorporated in Indonesia)
West Java Energy Pte Ltd + 100 100 Investment holding and oil and gas exploration. (Incorporated in Singapore)
Ranhill Jambi Holdings Pte Ltd + 70 80 Investment holding and oil and gas exploration. (Incorporated in Singapore)
PT Ranhill Energy Indonesia + 100 100 Dormant. (Incorporated in Indonesia)
Ranhill Nusantara Energy Holding 70 0 Dormant. Pte Ltd + (Incorporated in Singapore)
94 Ranhill Berhad (430537-K) NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
21 INVESTMENTS IN SUBSIDIARIES (CONT’D) Effective Name of subsidiary equity interest Principal activities 2008 2007 % % Held by Golden Active Sdn Bhd: Moretta Finance B.V+ 100 100 Investment holding. (Incorporated in Netherlands)
Held by Ranhill Water Technologies Sdn Bhd: KWI (Guangzhou) Environmental 25 25 Ceased operations. Engineering Technology Co. Ltd. + (Incorporated in China)
AnuRAK Water Treatment Facilities 49 49 Engaged in supplying potable water, treated waste water and reclaimed Co. Ltd.+ water for domestic and industrial use. (Incorporated in Thailand)
Ranhill Water Technologies 49 49 Engaged in providing consultancy services on potable, waste water (Shanghai) Ltd + technologies and project management. (Incorporated in China)
Top Zone Solution Sdn Bhd + 49 49 Engaged in trading of construction materials and dealing in structural, civil and engineering, electrical and mechanical work for potable water and wastewater treatment plant.
Ranhill Water Technologies (Thai) Ltd 49 49 Engaged in providing consultancy, project engineering supply, construction Co. Ltd.+ and operation for potable and waste water treatment plant. (Incorporated in Thailand)
Held by West Java Energy Pte. Ltd.: Bumi Parahyangan Ranhill Energia + 0 60 To carry on business exploration and exploiting petroleum and natural gas Citarum Pte. Ltd. sector. (Incorporated in Singapore)
Bumi Parahyangan Energia + 73 0 To carry on business exploration and exploiting petroleum and natural gas Pte. Ltd. (“BPE”) sector. (Incorporated in Singapore)
Held by Ranhill Jambi Holdings Pte Ltd: Ranhill Jambi Inc. Pte Ltd + 0 80 Oil and gas exploration. (Incorporated in Singapore)
@ Audited by PricewaterhouseCoopers, Malaysia. @@ Audited by an member firm of PricewaterhouseCoopers International Limited which is a separate and independent legal entity from PricewaterhouseCoopers, Malaysia. + Audited by firm other than member firm of PricewaterhouseCoopers International Limited. * Subsidiaries consolidated under the merger method of accounting. ** Refer to Note 58
Ranhill Berhad (430537-K) 95 NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
22 INVESTMENTS IN ASSOCIATES Group 2008 2007 RM’000 RM’000 Unquoted shares, at cost 2,050 28,321 Redeemable Preference Shares 0 20,482 Share of post acquisition profits, less losses 1,221 163 3,271 48,966
Share of net assets 3,271 48,966
The Group’s share of revenue, profit, assets and liabilities of associates are as follows: Group 2008 2007 RM’000 RM’000 Revenue 7,860 7,959 Profit after tax 1,059 209
Non-current assets 3,892 2,257 Current assets 592 30,681 Current liabilities (206) (11,112) Non-current liabilities (14) (13) Per acquisition reserve (1,671) (20,206) Fair value adjustment 678 24,529 Currency translation difference 0 2,348
Net assets 3,271 28,484 Redeemable Preference Shares 0 20,482 3,271 48,966
The details of the associates are as follows: Effective Name of associate equity interest Principal activities 2008 2007 % % Held by the Company: Urusan Teknologi Wawasan Sdn Bhd + 25 25 Provision of facilities management and maintenance contractor. (“UTW”)
Held by Ranhill Bersekutu: PLT Asia (Airport Consultants) Sdn Bhd + 30 30 Project management consultancy and investment holding.
Held by Ranhill Energy: Ellipse Energy Jatirarangon Wahana + 0 49 Exploration, extraction, production, marketing and development of oil and Limited (“EEJW”) natural gas. (Incorporated in Bermuda)
+ Audited by firm other than member firm of PricewaterhouseCoopers International Limited.
The Group rationalized its investments in the Oil and Gas sector especially in the area of Exploration and Production (“E&P”) by disposing off its entire 49.0% interest in Ellipse Energy Jatirarangon Wahana Ltd (“EEJW”) in the financial year.
96 Ranhill Berhad (430537-K) NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
23 OTHER INVESTMENTS
Group Company 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 Quoted loan stocks 11,135 551 0 0 Less: Disposal of share (442) 0 0 0 Less: (Allowance)/write back of diminution in value 0 (412) 0 0 10,693 139 0 0 Unquoted loan stocks 184,900 139,488 184,900 135,880 195,593 139,627 184,900 135,880 Market value of quoted loan stocks 10,266 139 0 0
Included in unquoted loan stocks are as follows: (a) 184,900,000 units of RM1.00 each Irredeemable Convertible Unsecured Loan Stocks “(ICULS”) amounting to RM184.90 million subscribed in Senai-Desaru Expressway Berhad (“SDEB”) in accordance with the terms and conditions of the subscription agreement dated 22 June 2005 (as supplemented from time to time) (“Subscription Agreement”) with SDEB for the subscription of RM215,000,000 nominal value of ICULS in SDEB.
The salient terms of the ICULS as set out in the subscription agreement and the supplementary agreements are as follows: (i) the ICULS shall be issued in twelve (12) multiple tranches in accordance with the subscription schedule thereto; (ii) however, the drawdown period may be varied by SDEB provided that the drawdown period shall not exceed 30 January 2009; (iii) Payment shall be made to SDEB on the issue date failing which, SDEB shall be entitled to have recourse to all remedies including specific performance; (iv) the Company is entitled to convert the ICULS into new ordinary shares of SDEB upon the occurrence of certain events provided therein.
If any of the conversion events do not occur by the 3rd anniversary of the first issue date, Ranhill is entitled to convert all or any of the ICULS at any time thereafter until the maturity date in accordance with the terms and conditions of the Subscription Agreement.
Subscription schedule Date Tranche No. Amount (RM) 16 December 2005 1st Tranche 25,585,000 16 February 2006 2nd Tranche 12,900,000 16 May 2006 3rd Tranche 20,640,000 30 August 2006 4th Tranche 18,060,000 30 November 2006 5th Tranche 19,135,000 28 February 2007 6th Tranche 15,910,000 31 May 2007 7th Tranche 23,650,000 30 August 2007 8th Tranche 19,350,000 30 November 2007 9th Tranche 18,920,000 28 February 2008 10th Tranche 10,750,000 30 October 2008# 11th Tranche 15,910,000 30 January 2009# 12th Tranche 14,190,000 Total 215,000,000
# The stockholders have mutually agreed to extend the subscription dates to 30 December 2008 and 30 March 2009 respectively subject to approval from Securities Commission.
Ranhill Berhad (430537-K) 97 NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
24 LONG TERM RECEIVABLES Group 2008 2007 RM’000 RM’000 Receivable from SAJSB for Sri Gading Water Supply Project 27,618 38,948 Amount receivable within 12 months from SAJSB for Sri Gading Water Supply Project (included under trade receivables) (14,163) (11,330) Deferred value added tax recoverable on oil and gas production 0 4,443 Others 0 0 13,455 32,061
The balance of long term receivables of RM13.455 million is denominated in Ringgit Malaysia and is being repaid by SAJSB following the completion of the Sri Gading Water Supply Project. It is being paid in 40 unequal quarterly instalments and commencing from 26 June 2000. The carrying value at balance sheet date was not reduced to the estimated fair value of RM13,454,860 (2007: RM27,157,419) as the Directors are of the opinion that the amount will be repaid in full at the end of the repayment period.
The Group obtained Term Loan 2 (see Note 42) to finance this debt and the interest incurred is charged to SAJSB. Accordingly, the interest receivable is presented as a deduction from the term loan interest payable in the income statement.
Group 2008 2007 RM’000 RM’000 Interest expense 3,017 3,775 Interest income (3,017) (3,775) Net borrowing costs 0 0
The effective interest rate applicable to the long term receivables due from SAJSB as at the balance sheet date was 8.55% (2007: 8.58%) per annum.
98 Ranhill Berhad (430537-K) NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
25 INVESTMENT IN OIL AND GAS PROPERTIES The Group rationalised its investments in the Oil and Gas sector especially in the area of Exploration and Production (“E&P”) by disposing of 52% of its effective interest in Bumi Parahayangan Ranhill Energia Citarum Pte Ltd (“BPREC”), 73% of its effective interest in Ranhill Jambi Inc Pte Ltd (“RJI”) and 73% of its effective interest in Ranhill Nusantara Energy Pte Ltd (“RNE”) (the “Energy Asset Disposal”). As a result of the Energy asset disposals, the Group recorded a total of RM78 million arising from loss on disposal.
Tangible Intangible Total 2008 RM’000 RM’000 RM’000 Cost At 1 July 2007 14,332 64,254 78,586 Addition 25,457 28,125 53,582 Disposal (24,437) (86,994) (111,431) Currency translation difference (768) (3,489) (4,257) At 30 June 2008 14,584 1,896 16,480
Accumulated amortisation At 1 July 2007 0 807 807 Charge for the financial year 0 116 116 Disposal 0 (880) (880) Currency translation difference 0 (43) (43) At 30 June 2008 0 0 0
Net book value At 30 June 2008 14,584 1,896 16,480
2007 Cost At 1 July 2006 0 15,843 15,843 Addition 14,332 50,210 64,542 Currency translation difference 0 (990) (990) At 30 June 2007 14,332 65,063 79,395
Accumulated amortisation At 1 July 2006 0 258 258 Charge for the financial year 0 566 566 Currency translation difference 0 (16) (16) At 30 June 2007 0 808 808
Net book value At 30 June 2007 14,332 64,255 78,587
Ranhill Berhad (430537-K) 99 NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
26 RECEIVABLE FROM THE STATE GOVERNMENT The receivable from the State Government represents a capital consideration receivable from the State Government in consideration for SAJH in agreeing to undertake the design and construction of 159 Mld water treatment plant at Semangar, Johor together with the related distribution system (“Semangar assets”). The capital consideration that the State Government is obligated to pay SAJH is the sum total of the RM600 million borrowing from BPMB together with all related costs and principalised interest to-date so that SAJH is able to meet the amount due on each relevant repayment date or interest payment date of the borrowing from BPMB as set out in Note 42.
The State Government has assigned the raw water proceeds arising from the sale of raw water by the State Government to Singapore to ensure that SAJH is able to meet its obligations to BPMB.
27 DEFERRED TAXATION Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred taxes relate to the same tax authority. The following amounts, determined after appropriate offsetting is shown in the balance sheet.
Group Company 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 (Restated) At the beginning of the financial year Deferred tax assets 85,306 84,710 0 0 Deferred tax liabilities (246,767) (226,262) (9,406) 0 (161,461) (141,552) (9,406) 0 Credited/(charged) to income statement (Note 12) - property, plant and equipment (20,368) (4,985) 0 0 - tax losses (2,513) (5,590) 0 0 - foreign exchange differences 2,031 (5,050) 2,031 (5,050) - provisions 1,634 (6,141) 0 0 - other (23,829) 1,054 0 (4,356) (43,045) (20,712) 2,031 (9,406)
Acquisition of interest in subsidiaries 0 0 0 0 Disposal of subsidiaries (Note 52) 0 0 0 0 Other 0 803 0 0 (204,506) (161,461) (7,375) (9,406)
At the end of the financial year Deferred tax assets 83,973 85,306 0 0 Deferred tax liabilities (288,479) (246,767) (7,375) (9,406) (204,506) (161,461) (7,375) (9,406)
100 Ranhill Berhad (430537-K) NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
27 DEFERRED TAXATION (CONT’D)
Group Company 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 (Restated) Subject to income tax Deferred tax assets (before offsetting) - property, plant and equipment (29) 256 0 0 - tax losses 45,881 48,393 0 0 - investment tax allowance 204,723 204,723 0 0 - others 10,156 8,917 5,711 5,523 260,731 262,289 5,711 5,523 Offsetting (176,758) (176,983) (5,711) (5,523) Deferred tax assets (after offsetting) 83,973 85,306 0 0
Deferred tax liabilities (before offsetting) - property, plant and equipment 438,783 418,700 0 0 - foreign exchange differences 3,019 5,050 13,086 5,050 - others 23,436 0 0 9,879 465,238 423,750 13,086 14,929 Offsetting (176,759) (176,983) (5,711) (5,523) Deferred tax liabilities (after offsetting) 288,479 246,767 7,375 9,406
Deferred tax assets are recognised for tax losses carried forward to the extent that the realisation of the related tax benefit through the future taxable profits is probable. The Directors are of the opinion that the Group will be able to reduce tax payable in view of future profits and benefits accruing to the Group from projects which have been awarded and are to be awarded to the Group to which the deferred tax asset relates. The tax losses have no expiry date.
The amount of unabsorbed capital allowances and unused tax losses (both of which have no expiry date) for which no deferred tax asset is recognised are as follows: Group 2008 2007 RM’000 RM’000 Unabsorbed capital allowances 41,761 44,738 Tax losses 832,866 218,044 Allowance from petroleum income tax 0 26,240 Discontinued operations - unabsorbed capital allowances 0 0 - tax losses 0 3,256
Ranhill Berhad (430537-K) 101 NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
28 INVENTORIES Group 2008 2007 RM’000 RM’000 At cost Raw materials 200 82 Distillates 6,841 5,191 Consumables and spares 2,589 1,984 Oil and gas material 0 8,418 9,630 15,675
At net realisable value Water meters and water pipes 7,174 6,573 Consumables and spares 197 143 7,371 6,716 17,001 22,391
29 TRADE AND OTHER RECEIVABLES
Group Company 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 Trade receivables 355,279 213,529 0 0 Less: Allowance for doubtful debts (48,143) (42,676) 0 0 307,136 170,853 0 0
Amounts due from related parties (Note 56(d)) 199,532 199,766 0 332 Other receivables 52,690 39,907 11,516 8,313 Interest receivables 21,628 10,385 21,607 10,490 Deposits 8,993 12,519 904 664 282,843 262,577 34,027 19,799 589,979 433,430 34,027 19,799
Trade receivables and other receivables of the Group include retention sums receivable of RM40.866 million (2007: RM29.872 million).
The credit period granted for trade receivables ranges from 30 to 90 (2007: 15 to 90) days. The Group is exposed to concentration of significant amounts due from related parties and agencies/ministries of the Government of Malaysia and Libya.
102 Ranhill Berhad (430537-K) NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
29 TRADE AND OTHER RECEIVABLES (CONT’D)
The currency exposure profile of trade and other receivables is as follows: Group Company 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 Ringgit Malaysia 428,586 414,855 34,027 19,799 US Dollar 16,744 9,994 0 0 UAE Dirham 3,564 1,532 0 0 Thai Baht 1,693 2,712 0 0 Euro 0 0 0 0 Australian Dollar 0 78 0 0 Chinese Renminbi 770 268 0 0 Saudi Arabian Riyal 11,271 2,049 0 0 Pakistan Rupee 1,770 1,389 0 0 Libyan Dinar 124,829 0 0 0 Others 752 553 0 0 589,979 433,430 34,027 19,799
30 AMOUNT DUE FROM/(TO) CUSTOMERS ON CONTRACTS
Group Company 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 Contract costs incurred to date 4,908,397 4,322,996 97,297 81,846 Recognised profits less losses (23,235) 507,842 (26,362) (3,869) 4,885,162 4,830,838 70,935 77,977 Less: Progress billings to date (5,050,874) (4,367,835) (55,782) (51,335) (165,712) 463,003 15,153 26,642
Amount due from customers on contracts 405,147 783,925 15,153 26,642 Amount due to customers on contracts (570,859) (320,922) 0 0 (165,712) 463,003 15,153 26,642
Retention on contracts - included in trade receivables 40,866 29,872 0 0 - included in trade payables 88,415 92,320 0 0
Included in payables of the Group at balance sheet are advances received on contract of RM291,162,021 (2007: RM301,544,200).
Included in amount due from customers on contracts are capitalised borrowing costs of RM Nil (2007: RM17.113 million).
Amount due from customers principally comprises contract work in progress in respect of certain projects undertaken by the Group where costs have been incurred over and above the original contract sum. The Group has submitted claims and is in negotiation with their customers for costs incurred or expected to be incurred in respect of such projects. These claims include the cost of schedule delays leading to prolongation costs, claims for extra work, disruption costs, finance costs and other related miscellaneous claims. Management has concluded that there are no foreseeable losses other than those accounted for in the financial statements.
Ranhill Berhad (430537-K) 103 NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
30 AMOUNT DUE FROM/(TO) CUSTOMERS ON CONTRACTS (CONT’D) The currency exposure profile of amount due from customers on contracts is as follows: Group Company 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 Ringgit Malaysia 257,333 273,185 9,767 0 US Dollar 53,557 466,568 5,386 26,642 Chinese Renminbi 111 619 0 0 Thai Baht 0 57 0 0 Australian Dollar 0 0 0 0 Libyan Dinar 94,146 43,496 0 0 Others 0 0 0 0 405,147 783,925 15,153 26,642
The currency exposure profile of amount due to customers on contracts is as follows: Group Company 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 Ringgit Malaysia 272,642 319,716 0 0 US Dollar 1,055 1,206 0 0 Euro Dollar 0 0 0 0 Libyan Dinar 297,162 0 0 0 Others 0 0 0 0 570,859 320,922 0 0
31 AMOUNTS DUE FROM/(TO) SUBSIDIARIES (a) Amounts due from subsidiaries The amounts due from subsidiaries are denominated in Ringgit Malaysia and represent advances which are unsecured, interest free (with an exception of advances to Ranhill International Inc. in relation to the Melut Basin Project of which interest is charged at arms’ length basis up to 30 June 2007) and have no fixed terms of repayment except for the following amounts which represent bank facilities obtained by the Company for the utilisation of its subsidiaries: Effective interest rate Company 2008 2007 2008 2007 Denominated in: % % RM’000 RM’000 Ringgit Malaysia Principal sum outstanding 7.50 7.50 44,472 44,472 Interest accrued 0 0 0 0 Interest receivables 0 0 3,335 3,335
US Dollar Principal sum outstanding 12.50 12.50 236,071 265,121
Interest incurred on the bank facilities is charged to the relevant subsidiaries at cost.
104 Ranhill Berhad (430537-K) NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
31 AMOUNTS DUE FROM/(TO) SUBSIDIARIES (CONT’D) (b) Amounts due to subsidiaries The amounts due to subsidiaries are denominated in Ringgit Malaysia and represent advances which are unsecured, interest charged at arms’ length basis and have no fixed terms of repayment except for a loan from Ranhill Utilities Berhad (“RUB”) amounting to RM40 million at an interest rate of 3.1%.
32 AMOUNTS DUE FROM JOINTLY CONTROLLED ENTITIES Included in amounts due from jointly controlled entities is an amount due from joint venture partner of RM240.245 million (2007: RM230.303 million) for which a full provision has been made.
The details of the jointly controlled entities are as follows: Effective Name of jointly controlled entity equity interest Principal activities 2008 2007 % % Held by Ranhill Water Technologies Sdn Bhd: Pinang Water Ltd + (Incorporated in Labuan, Malaysia) 18 18 Investment holding, rendering, consultancy services, in water management and trading of water treatment equipment.
Held by RPM: Ranhill Wilson Transformer Sdn Bhd @ 0 60 Manufacture and sale of distribution transformers (ceased as jointly (“RWT”) controlled entity with effect from 10 August 2007).
Held by Ranhill Power: Laraib Energy Limited @@ 58 41 Dormant – Intended to be an independent power producer. (Incorporated in Pakistan)
Held by Ranhill Bersekutu Sdn Bhd: Ranhill Bersekutu Saudi Limited 50 0 Carrying out the contracts of management and operation of industrial and (“RBSL”) civil services.
Held by RII: Ranhill-Petroneeds Joint Venture + 55 55 To execute the project of Melut Basin Oil Development: (“Ranhill Petroneeds JV”) - Upstream Facilities Engineering, Procurement, Construction and (Unincorporated joint venture) Commissioning for the Al-Jabalyn Central Processing Facilities, Palouge field Production Facilities & Operational Base Camps.
@ Audited by PricewaterhouseCoopers, Malaysia. @@ Audited by an member firm of PricewaterhouseCoopers International Limited which is a separate and independent legal entity from PricewaterhouseCoopers, Malaysia. + Audited by firm other than member firm of PricewaterhouseCoopers International Limited.
Ranhill Berhad (430537-K) 105 NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
33 AMOUNTS DUE FROM/(TO) AN ASSOCIATE
The amounts due to the associate is denominated in Ringgit Malaysia and represents trade balances. The trade balances is unsecured, interest free and without fixed terms of repayment.
34 DEPOSITS, BANK AND CASH BALANCES
Group Company 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 Unrestricted: Bank and cash balances (Note 53) 211,258 374,933 (294) 11,539 Deposits with licensed banks (Note 53) 577,979 562,688 0 0
Restricted: Bank and cash balances 0 0 0 0 Deposits with licensed banks 114,396 203,011 39 0 903,633 1,140,632 (255) 11,539
The weighted average effective interest rate per annum of deposits that was effective as at balance sheet date were as follows: Group Company 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 % % % % Deposits with licensed banks 1.25-3.40 2.30-9.11 3.30 0
Deposits with licensed banks of the Group and Company that are pledged with banks are securities for bank facilities and for USD220 million bond Debt Service Reserve Account.
Included in the cash and cash equivalents balances of the Group are deposit of SAJH placed with licenced banks and bank balances amounting to RM15,952,000 (2007: RM91,000), the use of which is restricted for the purpose of financing the capital expenditure as stipulated in the Trust Deeds of BaIDS entered into by the subsidiary, SAJH on 11 October 2004. Also, the utilisation of the remaining cash and cash equivalents in SAJH of RM602,935,000 (2007: RM607,540,000) is subject to compliance with certain financial covenants which include Finance Service Cover Ratio and Debt Service Cover Ratio.
Deposits of the Group and Company have maturity periods that range between 6 to 365 (2007: 6 to 375) days. Bank balances are deposits held at call with banks.
Included in deposits of the Group are deposits made in Islamic financial instruments amounting to RM488.094 million (2007: RM474.256 million).
106 Ranhill Berhad (430537-K) NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
34 DEPOSITS, BANK AND CASH BALANCES (CONT’D)
The currency exposure profile of deposits, bank and cash balances are as follows: Group Company 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000
Ringgit Malaysia 823,770 861,777 (455) 11,445 US Dollar 63,280 101,139 141 13 Chinese Renminbi 7,515 7,161 0 81 Thai Baht 998 1,561 0 0 Libyan Dinar 5,968 168,424 0 0 Others 2,102 570 59 0 903,633 1,140,632 (255) 11,539
35 ASSET HELD FOR SALE AND DISCONTINUED OPERATIONS (a) On 9 January 2008, Ranhill Power Sdn Bhd (“Ranhill Power”), a subsidiary company, entered into a Settlement Agreement for the withdrawal of its entire investment in the New Bong Escape Hydropower Project in Pakistan. Accordingly, the Group’s investments in Nobel Infrastructure Development Holding Ltd (“Nobel”) and in Laraib Energy Ltd (“Laraib”), the holder of the New Bong Escape Hydropower Project, has been classified as “Assets Held For Sale”.
Asset held for sale for the financial year ended 30 June 2008 relates to the disposals of Laraib and Nobel for a total consideration of RM19,590,000 which is pending the completion of certain conditions precedent as set out in the Settlement Agreement.
For the financial year ended 30 June 2007 asset held for sale relates to the disposal of Ranhill Wilson Transformer Sdn Bhd.
(i) Balance sheet Group 2008 2007 RM’000 RM’000 ASSETS NON CURRENT ASSETS Property, plant and equipment 18,055 3,440 Goodwill 6,036 0 Other Investment 1,368 0 CURRENT ASSETS Inventories 0 11,137 Trade and other receivables 171 5,727 Tax recoverable 0 105 Deposits, cash and bank balances 260 3,497 Amount due from jointly controlled entity 237 0 26,127 23,906 Property classified as held for sale (Note 18) 8,300 0 Assets classified as held for sale 34,427 23,906
Ranhill Berhad (430537-K) 107 NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
35 ASSET HELD FOR SALE AND DISCONTINUED OPERATIONS (CONT’D)
(i) Balance sheet (Cont’d) Group 2008 2007 RM’000 RM’000 Equity relating to assets classified as held for sale 0 1,985
NON CURRENT LIABILITIES Finance lease creditors 82 12 Deferred tax liabilities 0 678 82 690
CURRENT LIABILITIES Trade and other payables 6,630 6,724 Borrowings 0 8,431 Tax liabilities 0 1,176 6,630 16,331 Liabilities associated with assets classified as held for sale 6,712 17,021
On 14 August 2008, Ranhill Power completed the disposal of its 57.88% effective equity interest in Laraib for a total consideration of USD6.0 million. With the completion of the withdrawal of investment, Nobel and Laraib ceased to be the subsidiary and jointly-controlled entity of Ranhill Power.
(b) Discontinued operations reflected in the income statement below relate to the disposals of Ranhill Switchgear Sdn Bhd for a total consideration of RM3,800,000 which was completed on 15 May 2007 and Ranhill Power Manufacturing Sdn Bhd’s 70% equity interest in Ranhill Wilson Transformer Sdn Bhd for a total consideration of RM7,350,000, which was completed on 10 August 2007.
(ii) Income statement Group 2008 2007 RM’000 RM’000 Revenue 0 100,102 Cost of sales 0 (89,927) Gross profit/(loss) 0 10,175 Other operating income 0 14,899 Administrative expenses 0 (6,037) Tendering and marketing expenses 0 (454) Provision for foreseeable loss 0 (9,044) Finance cost 0 (2,760) Profit/(loss) before tax 0 6,779 Tax expense 0 (1,467) Profit/(loss) after tax 0 5,312
108 Ranhill Berhad (430537-K) NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
36 TRADE AND OTHER PAYABLES Group Company 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 Trade payables 496,899 414,562 6,731 0 Amounts due to related parties (Note 56) 165,125 98,825 77,717 3 Finance lease liabilities (Note 41) 7,726 96,553 737 935 Other payables and accruals 179,520 368,328 39,168 22,414 Interest payable 73,463 113,738 19,252 15,813 Unpaid property, plant and equipment acquired (Note 51) 55 47 5 5 922,788 1,092,053 143,610 39,170
The currency exposure profile of trade and other payables is as follows: Group Company 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 Ringgit Malaysia 794,327 745,608 124,358 23,357 US Dollar 74,083 109,714 19,252 15,813 Japanese Yen 0 0 0 0 Sterling Pound 615 489 0 0 Australian Dollar 9,061 3,408 0 0 Singapore Dollar 99 667 0 0 UAE Dirham 4,004 541 0 0 Thai Baht 2,501 2,756 0 0 Chinese Renminbi 416 1,196 0 0 Pakistan Rupee 208 4,989 0 0 Euro Dollar 11,401 3,608 0 0 Libyan Dinar 16,544 213,845 0 0 Sudanese Dinar 8,402 4,591 0 0 Others 1,127 641 0 0 922,788 1,092,053 143,610 39,170
Credit period for trade payables varies from 30 to 365 (2007: 30 to 365) days.
37 CONSUMER DEPOSITS Group 2008 2007 RM’000 RM’000 Deposits received 136,210 129,920 Less: Long term receivables (84,674) (84,674) 51,536 45,246
This represents consumer deposits, net of deposits assumed from SAJSB, the former water operator pursuant to the CA.
The carrying value of the long term receivable included in consumer deposits at the balance sheet date was not reduced to the fair value of RM21,156,000 (2007: RM9,116,000) as the Directors are of the opinion that the amount will be settled in full at the end of the Concession Period.
Ranhill Berhad (430537-K) 109 NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
38 SHORT TERM BORROWINGS Group Company 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 Unsecured Bank overdrafts (Note 53) 41,335 47,206 10,019 10,056 Bankers acceptances/trust receipts 4,511 11,511 0 0 Term loan (Note 42) 149 159 0 0 Discounted bills 0 0 0 0 Revolving credit 12,000 22,114 0 0 57,995 80,990 10,019 10,056
Secured Bank overdrafts (Note 53) 23,023 852 0 0 Bankers acceptances/trust receipts 3,659 107,757 0 0 Revolving credit 18,000 18,000 0 0 Term loans (Note 42) 101,010 88,258 55,380 50,000 Trade loan 54,364 0 0 0 200,056 214,867 55,380 50,000 258,051 295,857 65,399 60,056
The trust receipts and bank overdrafts are secured over certain deposits with licensed banks as disclosed in Note 34.
Bank overdrafts, bankers acceptances, discounted bills, revolving credits, trust receipts and short term loans of the Group bear interest rates ranging from 3.79% to 8.55% (2007: 3.79% to 9.30%) per annum as at balance sheet date. Bank overdraft and term loan of the Company bears interest rate of 7.88% (2007: 7.88%) per annum, 6.67% (2007: 8.75%) per annum, respectively as at balance sheet date.
The currency exposure profile of short term borrowings is as follows: Group Company 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 Unsecured Ringgit Malaysia 57,846 80,774 10,019 10,056 US Dollar 149 159 0 0 Thai Baht 0 56 0 0
Secured Ringgit Malaysia 189,989 161,738 55,380 50,000 US Dollar 8,490 51,277 0 0 Thai Baht 1,577 1,853 0 0 258,051 295,857 65,399 60,056
110 Ranhill Berhad (430537-K) NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
39 PROVISION FOR RETIREMENT BENEFITS Group 2008 2007 RM’000 RM’000 At the beginning of the financial year 30,005 21,530 Charged to income statement (Note 9) - current service cost 3,061 2,977 - interest cost 2,444 2,240 - amortisation of transitional liability 1,582 3,165 - settlement loss 0 1,355 - actuarial loss recognised 470 545 7,557 10,282 Benefit paid (2,006) (1,807) Reclass to Other payable (291) 0 At the end of the financial year 35,265 30,005
The amount recognised in the balance sheet are determined as follows:-
Present value of unfunded obligations 43,101 39,882 Unrecognised transitional liability 0 (1,478) Unrecognised actuarial loss (7,836) (8,399) Liability recognised in the balance sheet 35,265 30,005
Representing: Current liabilities 987 2,078 Non current liabilities 34,278 27,927 35,265 30,005
The retirement benefits obligations are made for the non-funded benefits plan. The liability is accrued at the present value of the defined benefit obligations using the projected unit method. The principal assumptions used are as follows: Group 2008 2007 % % Discount rate 6.50 6.50 Salary increase rate 5.00 5.00
Ranhill Berhad (430537-K) 111 NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
40 CONCESSION LIABILITIES (a) Service concession arrangement The principal activities of SAJH, the subsidiary of Ranhill Utilities Berhad, are to process and treat raw water and supply treated water to consumers within a designated area for the period of thirty years (“Concession Period”) commencing from the year 2000 pursuant to the Concession Agreement (“CA”) dated 20 April 1999 signed by the State Government of Johor (“the State Government”), SAJSB, Lambang Optima Sdn. Bhd. and SAJH.
The following are certain terms of the concession granted to the Company under the CA dated 20 April 1999:
(i) Life of concession and water treatment assets The State Government has granted SAJH the sole and exclusive rights to use the water infrastructure assets and to carry out water supply services for 30 years commencing from 1 March 2000.
(ii) Concession obligations SAJH is obligated to pay concession liabilities to the State Government over the Concession Period.
In addition to the concession liabilities under the CA, SAJH is to pay a fixed monthly payment (“FMP”) for rights of use of water treatment plants of bulk water suppliers and a bulk supply rate (“BSR”) for treated water to be purchased by the State Government and SAJSB from these suppliers. As part of the tariff negotiations, SAJH agreed to accept a revised Schedule Tariff with effect from 1 January 2007 (lower than 2003 Schedule Tariff).
Pursuant to this, SAJH was discharged from its obligation to pay the FMP and BSR with effect from 1 January 2006. At even date, a Water Supply Agreement and a conditional lease agreement (“WSA”) were entered into on 30 December 2005.
Under the WSA, the State Government through State Secretary Inc, incorporated Johor Special Water Sdn Bhd (“JSW”) to supply treated water to SAJH for a period of three months from the date of the WSA (“initial supply period”) for a consideration of RM90 million payable on a deferred payment basis over 7 years. It was envisaged that the lease agreement shall take effect upon the expiry of the initial supply period and take over of the assets of the bulk water suppliers by JSW. However on 29 March 2006, the lease agreement did not take effect since JSW did not conclude the take over of the water treatment plants of the bulk water suppliers and the WSA was extended up to 29 May 2014.
Under the WSA, SAJH is obligated to pay a total consideration of not exceeding RM1,015 million for supply of treated water beyond the initial supply period. The manner and timing of these payments is subject to negotiations with the State Government.
(iii) Programme of Works (“POW”) SAJH is required to undertake capital expenditure works to meet the increase in water demand over the Concession Period. Under the CA, SAJH is obligated to increase its water treatment capacity in Johor by 1,337 Mld over the Concession Period. The POW includes new and expansion of current water treatment plants, distribution networks and an extensive asset replacement programme to reduce the Non-Revenue Water level to 20% by year 2010.
(iv) Transfer of assets upon expiry of concession period Upon expiry of the Concession Period, the Company shall immediately transfer its shares in SAJH to the State Government for a nominal consideration of RM1.00.
112 Ranhill Berhad (430537-K) NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
40 CONCESSION LIABILITIES (CONT’D) (a) Service concession arrangement (Cont’d) (v) Tariff According to the CA, the supply of treated water is charged in accordance to the Scheduled Tariff (water supply Tariff to be charged by SAJH for a particular purpose or class of consumers), provided that the SAJH’s Internal Rate of Return (“IRR”) is within the Agreed IRR Band of 14% to 18% over the Concession Period. The Scheduled Tariff is to be submitted to the State Government for approval. The Agreed Tariff (approved Scheduled Tariff) will be gazetted and shall take effect for the applicable operating period on the relevant Tariff Adjustment Dates. The Tariff Adjustment Dates agreed with the State Government are as follow: (i) First Tariff Adjustment Date - effected on 1 January 2001; (ii) Second Tariff Adjustment Date - effected on 1 July 2003; (iii) Third Tariff Adjustment Date - effected on 1 January 2007; and (iv) Subsequent Tariff Adjustment Dates - scheduled on 1 January 2009 and thereafter at 36 monthly intervals till 2029.
In the event the gazetted tariff is lower than that of the Agreed Tariff, or in any other event the Agreed Tariff was not adopted, the State Government shall compensate SAJH in accordance with a formula as specified in the CA.
(vi) Rights of the Holder of the Special Share SAJH has allotted one Special Share of RM1.00 each to the Menteri Besar of Johor pursuant to the CA dated 20 April 1999. This Special Share was not acquired by the Company. Under the CA, the Special Shareholder does not have the right to any dividend at any time and the rights to participate in the capital or profits of SAJH. Hence, the financial statements do not present the Special Share as a minority interest. Variation of rights of the holder of the Special Share will only be effected with his written consent.
(b) New regulation regime In line with the move to improve the quality, coverage and reliability of the nation’s water supply and safeguard the interests of consumers, the Water Services Industry Act (“WSIA”) has been introduced. The WSIA complements the restructuring of the water industry by ensuring a clear legal policy and framework aimed at efficiency, transparency and equitability for all parties concerned. Under the WSIA, players in the previously concession-driven water industry will now be obliged to apply for licences granted by the Ministry of Energy, Water and Communication via Suruhanjaya Perkhidmatan Air Negara (“SPAN”), in order to provide their respective services. Unlike the long term concession agreements, the licences are renewable upon application and approval of SPAN.
Based on Syarikat Air Johor Holdings Sdn Bhd’s (“SAJH”) submissions and latest negotiation and discussions with the Ministry of Energy, Water and Communication and SPAN, the key principles agreed are as follows: (i) All water assets belonging to SAJH and the State Government together with the relevant liabilities will be transferred to Pengurusan Aset Air Berhad (“PAAB”). PAAB, in return, will settle all the liabilities related to the assets transferred. Any surplus from the transfer will be paid by PAAB to SAJH. The assets taken over will then be leased back to SAJH; and
(ii) SAJH will be licensed to operate under the Operation and Maintenance (“O&M”) concept and will be supervised by SPAN based on prescribed terms under the licensing regime and set of key performance indicators (“KPI”).
The execution of the above terms are subject to the collective agreement by SAJH, the State Government and other related parties when it comes to detailing out each party’s scope, benefit and responsibility relating to the said transaction.
Ranhill Berhad (430537-K) 113 NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
40 CONCESSION LIABILITIES (CONT’D) Concession liabilities represents balance of amount payable to the State Government under the CA, which is interest free and the maturity profile of the liabilities are as follows: Group 2008 2007 RM’000 RM’000 Concession liabilities are payable in the following periods: - within one year 31,029 31,086 - between one and two years 31,000 31,029 - between two and five years 93,058 93,000 - after five years 3,483,025 3,514,112 3,638,112 3,669,227
Representing: Current liabilities 31,029 31,086 Non current liabilities 3,607,083 3,638,141 3,638,112 3,669,227
Concession liabilities payable for the financial year are as follows: Concession charges 31,115 30,942
41 FINANCE LEASE LIABILITIES Group Company 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 (Restated) Minimum finance lease payments payable: - within one year 23,280 105,882 805 1,048 - between one and two years 12,332 12,954 494 723 - between two and five years 52,056 43,426 340 746 - after five years 907,145 896,750 19 19 994,813 1,059,012 1,658 2,536 Less: Future finance charges (533,310) (586,701) (115) (215) Present value of finance lease liabilities 461,503 472,311 1,543 2,321
Representing finance lease liabilities payable: - within one year 7,726 96,553 737 935 - between one and two years 2,146 11,086 463 664 - between two and five years 1,957 16,608 324 703 - after five years 449,674 348,064 19 19 461,503 472,311 1,543 2,321 Included under trade and other payables (Note 36) (7,726) (96,553) (737) (935) Non current portion 453,777 375,758 806 1,386
Finance lease payables include an amount of RM454,328,000 (2007: RM462,909,000) representing fair value of SAJH’s obligation under the WSA. In assessing the fair value, future contractual cash flows discounted at current market interest rate available for similar risk profile of financial liabilities were applied (Note 57). The weighted average effective interest rates for the finance leases of the Group and Company as at balance sheet date were 5.22% (2007: 6.83%) per annum and 5.52% (2007: 5.68%) per annum, respectively.
114 Ranhill Berhad (430537-K) NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
42 LONG TERM LOANS Group Company 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 Current - repayable within 12 months (Note 38) Unsecured: Term loan 10 149 159 0 0 149 159 0 0
Secured: Term loan 1 1,700 1,700 0 0 Term loan 2 14,163 11,330 0 0 Term loan 3 0 947 0 0 Term loan 4 1,543 1,586 0 0 Term loan 5 15,000 10,000 0 0 Term loan 8 2,000 2,000 0 0 Term loan 9 20,000 50,000 55,380 50,000 Term loan 11 0 10,695 0 0 Term loan 16 35,381 0 0 0 Term loan 13 8,490 0 0 0 Term loan 14 2,733 0 0 0 101,010 88,258 55,380 50,000 Repayable within 12 months 101,159 88,417 55,380 50,000
Non current - repayable after 12 months Unsecured: Term loan 10 559 757 0 0 559 757 0 0
Secured: Term loan 1 746 2,408 0 0 Term loan 2 13,455 27,617 0 0 Term loan 4 11,846 14,466 0 0 Term loan 5 512,834 527,638 0 0 Term loan 6 1,196,390 1,183,770 0 0 Term loan 7 791,949 735,870 0 0 Term loan 8 2,167 4,167 0 0 Term loan 12 699,862 733,560 0 0 Term loan 13 17,418 0 0 0 Term loan 14 1,824 0 0 0 Term loan 15 12,133 0 0 0 3,260,624 3,229,496 0 0 Repayable after 12 months 3,261,183 3,230,253 0 0 3,362,342 3,318,670 55,380 50,000
Term loans are repayable over the following periods: - within one year 101,159 88,417 55,380 50,000 - between one and two years 56,331 36,642 0 0 - between two and five years 975,461 986,596 0 0 - after five years 2,229,391 2,207,015 0 0 3,362,342 3,318,670 55,380 50,000
Ranhill Berhad (430537-K) 115 NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
42 LONG TERM LOANS (CONT’D) The currency exposure profile of long term loans is as follows: Group Company 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 Unsecured: US Dollar 559 757 0 0 Ringgit Malaysia 0 0 0 0
Secured: Ringgit Malaysia 2,519,364 2,481,470 0 0 US Dollar 717,281 733,560 0 0 Thai Baht 11,846 14,466 0 0 Chinese Renminbi 12,133 0 0 0 3,261,183 3,230,253 0 0
Term loan 1 is secured over certain land and buildings (Note 16) of a subsidiary company. It is repayable in 60 equal monthly instalments of RM141,667 commencing from one month upon drawdown at an interest rate of 1.00% (2007: 1.75%) per annum above the base lending rate of the bank. The effective interest rate at the balance sheet date was 7.75% (2007: 8.17%) per annum. This facility contains covenants which require the subsidiary company to maintain minimum debt service coverage.
Term loan 2 is secured over the amount receivable from SAJSB pertaining to the Sri Gading Water Supply Project (see Note 24). It is repayable in 40 unequal quarterly instalments with effect from 26 June 2000. This term loan obtained by a subsidiary company to finance the project is on a non-recourse basis to the Group at an effective interest rate of 8.55% (2007: 8.58%) per annum above the base lending rate of the bank.
Term loan 3 is a borrowing by Ranhill Water Services to finance the Non Revenue Water project with SAJH. RWS entered into an Islamic financing facility, Bai Inah with a maturity period of 24 months with a profit contribution margin of 5.00% per annum. This is secured against a fixed deposit amounting to RM2,000,000. This facility is on non-recourse basis to the Group. This loan was fully repaid in the current financial year.
Term loan 4 is a borrowing by Ranhill Water Technologies Sdn Bhd to finance construction and equipment under 20 years water treatment concession (Amata Nakorn). This facility is on non-recourse basis to the Group. This term loan is secured by certain property, plant and equipment of a subsidiary. It is repayable in 108 instalments and bear interest at Minimum Lending Rate (“MLR”) of -1.0% per annum.
Term loan 5 is a RM540 million Islamic Medium Term Note (“MTN”) issued by Ranhill Powertron to refinance the bridging loan of RM260 million for the 120 MW Open Cycle and RM280 million to finance the construction of the Conversion Cycle Power Plant. The repayment tenure of the MTN ranges from three (3) to fourteen (14) years from the date of first issuance of the MTNs with profit contribution margins of 4.90% to 7.70% per annum.
The MTN is secured by the following: (a) A debenture to create a first ranking fixed and floating charges over all present and future assets of Ranhill Powertron;
(b) *An assignment of all the rights, title, interest and benefit of Ranhill Powertron in and to the Sale and Purchase Agreement dated 31 March 1997 entered into between KKIP Sdn Bhd (“KKIP”), as seller and Ranhill Powertron, as purchaser, in respect of the sale by KKIP and purchase by Ranhill Powertron of all those land forming the Site;
(c) A charge and assignment of all the rights, benefit and interest of Ranhill Powertron in and to the Designated Accounts;
116 Ranhill Berhad (430537-K) NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
42 LONG TERM LOANS (CONT’D) (d) Assignment (by way of security) of: (i) all rights, interest and benefit of Ranhill Powertron under the Project Agreements (including the right to all liquidated damages payable thereunder and the right to revenues of Ranhill Powertron); (ii) applicable licences and permits (to the extent that the licences and permits are assignable and no further consents are required to be obtained for such assignment); (iii) applicable insurance policies. (iv) performance bonds/guarantees.
* Upon issuance of the individual title(s) to the Site by the relevant authority.
This facility is on non-recourse basis to the Group.
Term loan 6 is the RM1,280 million nominal value of BaIDS obtained by SAJH to redeem SAJH’s existing RM680 million BaIDs, and to part finance the second phase of SAJH’s Programme of Works. The tenure of the BaIDS facility ranges from six (6) to fifteen (15) years with profit contribution margins of 5.90% to 8.45% per annum.
SAJH has to maintain a finance service cover ratio of 2.25:1 and debt equity ratio of 2.33:1 at all times as defined in the Trust Deed. In the event SAJH decided to declare and pay dividends the finance service cover ratio should be at 2.50 after the payments of dividend.
The BaIDS are secured by the following: (a) A first ranking debenture comprising fixed and floating charges over all present and future assets of SAJH. (b) Assignment (by way of security) of: (i) all rights under the Project Documents (as defined in the Trust Deed dated 11 October 2004 (“Trust Deed”)) including right to revenues of SAJH; (ii) applicable insurance; (iii) permits (to the extent that the permits are assignable and no further consents are required to be obtained for such assignment); (iv) performance bonds/guarantees; and (v) licences (to the extent that the licences are assignable and no further consents are required to be obtained for such assignment);
including all amounts from time to time and at any time payable to SAJH under any of the foregoing including all claims for damages which arise there under; and
(c) Assignment and charge (by way of security) over all Designated Accounts as defined in the Trust Deed.
The amounts of the BaIDS recognised in the balance sheet of the Group is analysed as follows: Group 2008 2007 RM’000 RM’000 Nominal value of the BaIDS 1,280,000 1,280,000 Less: Discount on BaIDS (125,874) (125,874) Net proceeds received 1,154,126 1,154,126 Add: Accumulated amortisation of discount on BaIDS 42,264 29,644 1,196,390 1,183,770
This facility is on non-recourse basis to the Group.
Ranhill Berhad (430537-K) 117 NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
42 LONG TERM LOANS (CONT’D) Term loan 7 comprises two tranches to finance part of the construction expenditure in connection with the design and construction of Semangar Water Supply Scheme including the provision of material and services relating thereto. The interest rate of the loan is fixed at 7.60% per annum with repayment terms as follows: (a) Capitalisation of interest for the first three (3) years and becomes payable annually in arrears commencing 48 months from the date of the first draw down; (b) Tranche 1 – to be repaid in 10 equal instalments commencing 132 months from the date of the first draw down; and (c) Tranche 2 – to be repaid in 15 equal instalments commencing 132 months from the date of the first draw down.
The term loan is to be repaid by SAJH from the raw water proceeds arising from the sale of raw water by the State Government to Singapore and payable in accordance with the Raw Water Letter of Undertaking dated 5 March 2002.
In the event that there is insufficient monies in the raw water revenue proceeds account to pay interest due on any interest payment date prior to the first repayment date such interest outstanding would be added to the principal sum then owing and shall be payable on the first repayment date.
Security: (a) Security interest in favour of the financier, ranking second in point of priority and security after the interest of the Holders of the BaIDS on SAJH’s rights, interest, and title in and to Designated Accounts, the Contract Documents, Performance Bonds, Insurance and Licenses; (b) Assignment over the rights, interest and title of SAJH in and to the raw water proceeds to be paid by the State Government of Johor to SAJH; (c) Assignment over the rights, interest and title of SAJH in and to the Semangar Water Supply Scheme; (d) Undertaking and guarantee by the State Government of Johor to repay the principal, interest and capitalised interest under the term loan agreement (see Note 44).
This facility is on non-recourse basis to the Group.
Term loan 8 is to part finance the acquisition of additional interest in a subsidiary company. It is secured over the additional shares and CULS acquired in the subsidiary company and is repayable in 60 equal monthly instalment of RM166,667 each commencing from the second month from the date of first drawdown at an interest rate of 1.25% per annum above the base lending rate of the bank. The effective interest rate was 7.75% (2007: 7.80%) per annum.
This facility is on non-recourse basis to the Group.
Term loan 9 is borrowing by Company to finance general working capital with perpetual repayment tenure. The effective interest rate applicable to this term loan at the balance sheet date was 8.75% per annum.
Term loan 10 is borrowing by Ranhill Water Technologies to finance the cost of machineries, equipment and M & E work. The repayment tenure is repayable in 32 equal quarterly instalments and bear interest at cost of fund plus 1.25% per annum.
Term loan 11 is borrowing by PT Ranhill Energy Indonesia. The purpose of the loan is for working capital and to fund the exploration of the first well at Citarum PSC. The loan is repayable in 12 months after commencement and carries an interest rate of 7.5% per annum (subject to review by the bank). This loan was fully repaid in June 2008.
Term loan 12 is borrowing by Ranhill (L) Ltd to assist the Group to repay its existing CP/MMTN, bridging loan, Trust Receipts, and to subscribe for ICULS in SDE. This loan has a maturity date of 5 years and bears a coupon rate of 12.50% payable semi annually. There is a mandatory Debt Service Reserve Account (DSRA) of USD27.5 million, representing 2 coupon payments (of which in certain circumstances may be reduced to one coupon payment) to be maintained for as long as any of the Notes remain outstanding. Among the main covenants for the USD Bond are that the Company has to satisfy a Fixed-Charge Cover Ratio, shares of material subsidiaries having been pledged and a limitation to the Company’s ability to incur, assume or permit to exist any Lien or to provide collateral on borrowings. In the financial year, the DSRA has been reduced to USD13.75 million, representing one coupon payment.
118 Ranhill Berhad (430537-K) NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
42 LONG TERM LOANS (CONT’D) Term loan 13 is a borrowing by RII to refinance the outstanding amount of RII’s existing syndicated trust receipts facility guaranteed by Ranhill Berhad.
Term loan 14 is a borrowing by Ranhill Power Sdn Bhd which arise from a conversion of trade lines of Ranhill Power to a term loan bearing an interest rate of 8.3% and is repayable from December 2007 until October 2010.
Term loan 15 is a borrowing by Ranhill (Nanchang) Wastewater Co.Ltd. from Shanghai Pudong Development Bank to finance the construction of BOT plant. The repayment tenure is 10 years on a half yearly basis which commence in the second year with step-up instalment repayments and bears a current floating interest rate of 7.83%.
Term loan 16 is a bridging loan facility of RM40 million (RM35,380,510 being utilised) granted by OSK Investment Berhad to finance the purchase of the remaining Ranhill Power shares. The tenure of the loan is 6 months but has been extended to 25 November 2008.
43 CONVERTIBLE UNSECURED LOAN STOCKS Group 2008 2007 RM’000 RM’000
12.5% Convertible Unsecured Loan Stocks 1998/2008 (“CULS”) 5,800 5,800
The CULS are issued by a subsidiary company and the salient features are as follows: (a) Maturity date is ten (10) years from issuance of the CULS. (b) Interest is accrued at the rate of 12.5% per annum and is payable in cash on each anniversary date of the CULS but is subject to lenders’ requirement and at the discretion of Ranhill Powertron. CULS converted before anniversary date will not be entitled to the annual interest. (c) Conversion in part or in whole is allowed before maturity date, subject to adherence to Ranhill Powertron’s existing shareholding proportions and the shareholding restrictions. All converted share capital will rank pari passu but will not be entitled to dividends declared for the financial year preceding the year of conversion. (d) On maturity date, the CULS, if not earlier converted, will be redeemed for its full principal amount together with all unpaid accrued interest. (e) Each CULS of RM1.00 is convertible, at the conversion rate of one CULS for one ordinary share of RM1.00 at the option of the holder before maturity date.
44 DEFERRED CAPITAL CONSIDERATION FROM THE STATE GOVERNMENT The capital consideration receivable from the State Government as disclosed in Note 26 is classified under non current liabilities as deferred capital consideration and is credited to the income statement in proportion to the depreciation charge and finance expense incurred for the assets and borrowings respectively which it is expected to compensate.
45 DEFERRED INCOME Group 2008 2007 RM’000 RM’000 At the beginning of the financial year 372,211 467,116 Addition 0 0 Changes in fair value 0 (74,665) Transfer to income statement (Note 11) (23,837) (20,240) At the end of the financial year 348,374 372,211
As disclosed in Note 40(a)(ii), pursuant to the WSA, the State Government restructured payments for treated water supply which resulted in a saving of approximately RM476,825,000. This saving is deemed as government grant and accordingly accounted for as deferred income.
Ranhill Berhad (430537-K) 119 NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
46 SHARE CAPITAL Group/Company 2008 2007 RM’000 RM’000 Authorised ordinary shares of RM1.00 each: At the beginning of the financial year/at the end of the financial year 2,000,000 2,000,000
Issued and fully paid-up ordinary shares of RM1.00 each: At the beginning of the financial year/at the end of the financial year 597,265 597,265
47 SHARE PREMIUM By virtue of the relief provided under Section 60(4) of the Companies Act, 1965, the share premium arising from the issue of 60,363,744 ordinary shares of RM1.00 each in financial year ended 30 June 2001 for the acquisition of Ranhill Bersekutu Sdn Bhd, Ranhill Civil Sdn Bhd, RB Ventures Sdn Bhd, Ranhill Engineers and Constructors Sdn Bhd and Ranhill Sri Gading Sdn Bhd has not been recorded in the share premium account.
48 OTHER RESERVES Group 2008 2007 RM’000 RM’000 Capital reserve arising on consolidation 0 0 Capital reserve arising from bonus issue by subsidiaries 3,255 3,255 Currency translation differences (175) (523) Revaluation reserve (881) 0 2,199 2,732
The movement in each category of reserves is as follows: Group 2008 2007 RM’000 RM’000 (a) Capital reserve arising on consolidation At the beginning of the financial year 0 3,097 Disposal of interest in a subsidiary 0 0 Reserve on consolidation charged out 0 (3,097) At the end of the financial year 0 0
(b) Capital reserve arising from bonus issue by subsidiaries At the beginning of the financial year 3,255 280 Capital reserve from bonus issue during the financial year 0 2,975 At the end of the financial year 3,255 3,255
(c) Currency translation differences At the beginning of the financial year (523) (351) Arising during the financial year 242 (172) Acquisition of share in subsidiary 106 0 At the end of the financial year (175) (523)
(d) Revaluation reserve At the beginning of the financial year 0 0 Arising during acquisition of share in subsidiary (881) 0 At the end of the financial year (881) 0
120 Ranhill Berhad (430537-K) NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
49 RETAINED PROFITS The Company has sufficient tax credits under Section 108(6) of the Malaysian Income Tax Act, 1967 to frank all of its retained profits if paid as dividends.
50 CHANGES IN ACCOUNTING POLICIES The list of new accounting standards, amendments to published standards and interpretations on existing standards that are effective for the Group and Company for the financial year ended 30 June 2008 is set out in Note 3 to the financial statements.
The adoption of new accounting standards, amendments to published standards and interpretation on existing standards that are effective for the Group and Company for the financial year ended 30 June 2008 as set out in Note 3 to the financial statements did not have any material impact on the financial statements of the Group and Company except FRS 112, the impact of which is described below: Amendment to FRS 112 Income Taxes removed the specific prohibition to recognised deferred tax assets on investment tax credits.
The adoption of the revised FRS 112 has resulted in a change in accounting policy, which the Group has accounted for retrospectively. Comparatives have been restated to conform with the current year’s presentation. The effects of the adoption of the revised FRS 112 are as follows:
Restatement of balance sheet and reserve As previously FRS 112 As reported effect restated As at 30 June 2007 RM’000 RM’000 RM’000 Retained profits 254,906 149,798 404,704 Minority interest 467,086 54,926 522,012 Deferred tax liabilities 386,577 (139,810) 246,767 Deferred tax asset 20,393 64,913 85,306
As at 30 June 2006 Retained profits 146,386 149,798 296,184 Minority interest 388,620 54,926 443,546 Deferred tax liabilities 366,072 (139,810) 226,262 Deferred tax asset 19,797 64,913 84,710
The changes in accounting policies as a result of the new accounting standards that are effective for the Group and Company do not have a material impact to the income statements for the financial years ended 30 June 2007 and 30 June 2008 respectively.
51 PURCHASE OF PROPERTY, PLANT AND EQUIPMENT Group Company 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 Property, plant and equipment and power station acquired 309,256 381,980 327 541 Reclassification from other receivables and construction work in progress (36,117) (963) 0 0 Financed by finance leases (1,258) (4,013) (219) (502) Deposit paid for acquisition of property, plant and equipment 0 (67) 0 0 Unpaid portion balance brought forward 47 305 0 0 Unpaid portion carried forward (Note 36) (55) (47) (5) (5) Finance cost capitalised in property, plant and equipment (48,518) (57,103) 0 0 Cash paid 223,355 320,092 103 34
Ranhill Berhad (430537-K) 121 NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
52 DISPOSAL OF SUBSIDIARIES (a) On 13 May 2008, the Company, via its wholly-owned subsidiary, Ranhill Energy Sdn Bhd (“RESB”), via its subsidiaries entered into an agreement with Pan Orient Energy Holdings Ltd to dispose of 90% of its equity interests in two companies in the RESB Group namely Ranhill Jambi Inc. Pte Ltd and Ranhill Nusantara Energy Pte Ltd resulting in those two companies ceasing to be subsidiaries in the RB Group.
(b) The Company also, through its wholly-own subsidiary, RESB, via its subsidiary, West Java Energy Pte Ltd, entered into an agreement with Pan Orient Energy Holding Ltd to dispose of its entire equity in Bumi Parahyangan Ranhill Energi Citarum Pte Ltd (BPREC) which resulted in BPREC ceasing to be a subsidiary of the RB Group. At the same time, West Java Energy Pte Ltd acquired a 73% equity shares in Bumi Parahyangan Energi Pte Ltd which resulted in BPE Ltd becoming a subsidiary in the RB Group.
The effects of disposal on Group’s results for the period were as follows: At date of disposal RM’000 Other operating income 222 Administrative expenses (1,245) Profit from operation (1,023) Finance cost 0 Profit before taxation (1,023) Taxation 0 Profit after taxation (1,023)
Attributable to: Equity holders of the parent (978) Minority interest (45) Net profit attributable to shareholders (1,023)
The effects of the disposal on Group’s financial position of the Group were as follows: RM’000 Non current assets 236,846 Current assets 13,593 Non current liabilities 0 Current liabilities (133,994) 116,445 Fair value in remaining investment oil and gas (14,584) Retained profit adjustment (2,298) Cash proceeds (44,218) Shares (9,891) Loss on disposal 45,454 Cash proceeds received 44,218 Cash and bank balances (2,824) Net cash and cash equivalent on disposal 41,394
122 Ranhill Berhad (430537-K) NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
53 CASH AND CASH EQUIVALENTS
Group Company 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 Bank and cash balances (Note 34) 211,258 374,933 (294) 11,539 Deposits with licensed banks, net of restricted deposits (Note 34) 577,979 562,688 0 0 789,237 937,621 (294) 11,539 Bank overdrafts - secured (Note 38) (23,023) (852) 0 0 - unsecured (Note 38) (41,335) (47,206) (10,019) (10,056) Cash and cash equivalents from discontinued operations 259 3,496 0 0 725,138 893,059 (10,313) 1,483
54 COMMITMENTS (a) Capital commitments for property, plant and equipment: - Approved and contracted for 786,828 710,822 8 28 - Approved and not contracted for 964,319 724,439 0 0 1,751,147 1,435,261 8 28
(b) Investment in oil and gas property - Approved and contracted for 0 60,454 0 0 - Approved and not contracted for 0 35,432 0 0 0 95,886 0 0
(c) Other investment - Approved and contracted for 66,535 145,655 30,100 79,120 - Approved and not contracted for 0 0 0 0 66,535 145,655 30,100 79,120
(d) Operating lease commitments The future minimum lease payments under operating leases are as follows: - Payable within one year 3,889 1,958 0 0 - Payable between one and five years 2,872 2,677 0 0 6,761 4,635 0 0 1,824,443 1,681,437 30,108 79,148
Ranhill Berhad (430537-K) 123 NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
55 CONTINGENT LIABILITIES All contingent liabilities are unsecured unless otherwise stated. (a) Corporate and bank guarantees Group Company 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 Subsidiaries’ leases and bank facilities guaranteed by the Company 0 0 778,395 0 Subsidiaries’ supplier and contract performance guaranteed by the Company 0 0 108,850 0
Bank guarantee facilities utilised by: - related parties (Note i) 39,456 1,467 0 0 - third party (Note i) 1,459 53,307 0 0 - subsidiaries 0 0 2,394 485 - Ranhill-Petroneeds JV (Note ii) 77,624 82,744 0 0 118,539 137,518 889,639 485
Note: (i) these are customers who awarded the contracts obtained by them to the Group, and the bank guarantees are utilised for the purpose of the said contracts. (ii) the bank guarantee facility is secured against the joint venture’s project proceeds. The bank guarantee has been reduced to RM39,096,880 (USD11,974,542) with effect from 22 October 2008.
The currency exposure profile of the corporate and bank guarantees is as follows: Group Company 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 Ringgit Malaysia 40,915 54,774 889,639 485 US Dollar 77,624 82,744 0 0 Pakistan Rupee 0 0 0 0 Others 0 0 0 0 118,539 137,518 889,639 485
124 Ranhill Berhad (430537-K) NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
56 SIGNIFICANT RELATED PARTY DISCLOSURES In addition to related party disclosures mentioned elsewhere in the financial statements, set out below are other significant related party transactions. The related party transactions described below were carried out on terms and conditions obtainable in transactions with unrelated parties.
The related parties and their relationship with the Group are as follows:
Related parties Relationship Ranhill Corporation Sdn Bhd (“RCorp”) Substantial shareholder of the Company and related by common directors/shareholders. Lambang Optima Sdn Bhd Substantial shareholder of the Company and related by common directors/shareholders. Ranhill Consulting Sdn Bhd (“RConsult”) Related by common directors/shareholders. Rancak Bistari Sdn Bhd (“Rancak Bistari”) Related by common directors/shareholders. Ranhill Bersekutu (Penang) Sdn Bhd Related by common directors/shareholders. WorleyParsons Ltd Substantial shareholder of a subsidiary, RWPSB. Perunding Ranhill Worley Sdn Bhd (“PRW”) Related by common directors/shareholders. AKM Sdn Bhd Related to a substantial shareholder of RAK, a subsidiary. Mitra Energia Ltd Substantial shareholder of a subsidiary, RESB. PT Bumi Parahyangan Energi Substantial shareholder of a subsidiary, RESB. Petroneeds Services International Substantial shareholder of jointly controlled entity, Ranhill Petroneed JV. Senai Desaru Expressway Berhad Related by common directors/shareholders. RBS Corporation Sdn Bhd Related by common directors/shareholders. Ranhill Energy Cebu Inc Related to a substantial shareholder of RESB. Ranhill Energy Sulu Sea Inc Related to a substantial shareholder of RESB. Ranhill Nusantara Energy Inc Related to a substantial shareholder of RESB. Ranhill Nusantara Energy Holdings Related to a substantial shareholder of RESB. Ranhill Energy Cebu Holdings Related to a substantial shareholder of RESB. Ranhill Energy Sulu Sea Holdings Related to a substantial shareholder of RESB. West Sumatra Energy Inc Related to a substantial shareholder of RESB.
Tan Sri Hamdan Mohamad is both a Director and a substantial shareholder of the following companies: - RCorp - RConsult - Rancak Bistari - Ranhill Bersekutu (Penang) Sdn Bhd - Lambang Optima Sdn Bhd - PRW
AKM Sdn Bhd is a wholly owned subsidiary of Antara Koh Pte Ltd (a company incorporated in Singapore), which is a substantial shareholder of a subsidiary, RAK.
Senai-Desaru Expressway Berhad (“SDEB”) is a joint venture company between Rancak Bistari (70%) and YPJ Holding Sdn Bhd (30%).
Amran Awaluddin is a Director and a shareholder of RCorp.
Ranhill Berhad (430537-K) 125 NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
56 SIGNIFICANT RELATED PARTY DISCLOSURES (CONT’D) The significant related party transactions of the Group during the financial year are as follows: Group 2008 2007 RM’000 RM’000 (a) Sales of goods and services: Sales of goods and services to: - RCorp (Note i) 71,714 128,052 - RConsult (Note ii) 12,379 28,353 - WorleyParsons Ltd’s subsidiaries and associates 64,665 60,272 - PRW (Note iii) 167,822 95,219 - SDEB 242,624 261,588
(b) Purchases of services: Purchases of services from: - RConsult (Note ii) 0 6,199 - PRW (Note iii) 7,854 6,338 - WorleyParsons Ltd’s subsidiaries and associates 77,161 24,053 - AKM Sdn Bhd 113,237 110,109 - RCorp 87,961 139,801
Note: (i) The sales of goods and services to RCorp are for the performance of projects which were secured by RCorp prior to the listing of Ranhill Berhad. These projects are currently being undertaken by REC and Ranhill Civil. Prior to the listing of Ranhill Berhad, REC and Ranhill Civil were subsidiaries of RCorp. RCorp sold REC and Ranhill Civil to Ranhill Berhad on 15 November 2000 as part of the listing exercise of Ranhill Berhad. (ii) The sales of goods and services to RConsult is in accordance with the Service Agreement dated 5 April 2000 entered between RConsult and Ranhill Bersekutu. In accordance with the Service Agreement, RConsult subcontracts all contracts secured by RConsult to Ranhill Bersekutu. RConsult is a consulting engineering firm which is licensed by the Board of Engineers Malaysia and the Ministry of Finance to undertake all aspects of engineering consultancy services. (iii) The sales of goods and services to PRW is in accordance with the Service Agreement dated 12 July 2002 entered between PRW and RWPSB. In accordance with this agreement, PRW subcontracts all contracts secured by PRW to RWPSB. PRW is a firm which is registered and licensed by the Board of Engineers Malaysia, Petronas and the Ministry of Finance to undertake design and engineering services.
(c) The significant related party transactions of the Company during the financial year are as follows: Company 2008 2007 RM’000 RM’000 (i) Management fees receivable from: - Ranhill Bersekutu 1,200 847 - Ranhill Civil 0 17,000 - REC 0 9,922 - RWPSB 7,839 4,236 - RB Ventures 120 120 - Ranhill Energy 20,000 15,000
126 Ranhill Berhad (430537-K) NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
56 SIGNIFICANT RELATED PARTY DISCLOSURES (CONT’D) (c) The significant related party transactions of the Company during the financial year are as follows (Cont’d): Company 2008 2007 RM’000 RM’000 (ii) Trade purchases from: - RWPSB 0 965
(iii) Office, fitting and furniture rental paid to: - RB Ventures 5,186 3,127
(d) Balances arising from related parties: (i) Amounts due from related parties: Group 2008 2007 Nature of transaction RM’000 RM’000 Trade - RCorp 90,831 100,185 - RConsult 27,166 40,718 - Rancak Bistari 5,342 5,042 - WorleyParsons Ltd’s subsidiaries and associates 28,528 11,876 - PRW 26,843 27,083 - Ranhill Energy Cebu Inc 0 109 - Ranhill Energy Sulu Sea Inc 0 138 - Ranhill Nusantara 0 11 - SDEB 38 0 178,748 185,162
Non trade - WorleyParsons Ltd’s subsidiaries and associates 113 1,202 - PRW 18,493 7,379 - SDEB 0 1 - RCorp (1,738) 1,980 - Rancak Bistari 0 6 - Mitra Energia Ltd 0 1 - PT Bumi Parahyangan Energi 1,038 190 - Ranhill Nusantara Energy Inc 0 2,623 - Ranhill Nusantara Energy Holdings 0 16 - Ranhill Energy Cebu Inc 308 309 - Ranhill Energy Cebu Holdings 2,236 14 - Ranhill Energy Sulu Sea 331 331 - Ranhill Energy Sulu Sea Holdings 3 3 - West Sumatra 0 548 - RBS Corporation Sdn Bhd 0 1 20,784 14,604 Amounts due from related parties (Note 29) 199,532 199,766
Ranhill Berhad (430537-K) 127 NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
56 SIGNIFICANT RELATED PARTY DISCLOSURES (CONT’D) (d) Balances arising from related parties (Cont’d): (ii) Amounts due to related parties: Group 2008 2007 Nature of transaction RM’000 RM’000 Trade - RCorp 8,595 3,967 - RConsult 4,148 6,694 - WorleyParsons Ltd’s subsidiaries and associates 22,002 8,612 - AKM Sdn Bhd 33,604 33,255 68,349 52,528
Non trade - RCorp 63,658 0 - Lambang Optima Sdn Bhd 6,759 3 - Ranhill Bersekutu (Penang) Sdn Bhd 255 255 - WorleyParsons Ltd’s subsidiaries and associates 9,035 14,398 - Sabah Energy Corporation Sdn Bhd 62 122 - Petroneeds Services International 9,514 10,564 - Senai Desaru Expressway Berhad 7,362 20,955 - RConsult 132 0 - RBS Corp Sdn Bhd (1) 0 96,776 46,297 Amounts due to related parties (Note 36) 165,125 98,825
(e) Key management compensation Group 2008 2007 RM’000 RM’000 Remuneration of key management personnel: - Fees 216 236 - Salaries and bonus 3,736 3,334 - Defined contribution plan 370 344 - Other emolument 504 379 - Benefit in kind 347 291
128 Ranhill Berhad (430537-K) NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
57 FINANCIAL INSTRUMENTS Fair values The carrying amounts of financial assets and liabilities of the Group and Company at the balance sheet date approximated their fair values except as disclosed in Notes 24 and Note 37 as set out below:
(i) On Balance sheet Group Company Carrying Carrying amounts amounts of assets/ Fair of assets/ Fair Note (liabilities) value (liabilities) value RM’000 RM’000 RM’000 RM’000 2008 ICULS 23 184,900 190,933 184,900 190,933 Receivable from the State Government 26 809,823 796,184 0 0 Concession liabilities 40 (3,607,083) (2,132,823) 0 0 Finance lease liabilities 41 (453,777) (461,625) (1,543) (1,566) Term loan 1 42 (746) (2,420) 0 0 Term loan 2 42 (13,455) (26,720) 0 0 Term loan 4 42 (11,846) (12,048) 0 0 Term loan 5 42 (512,834) (501,177) 0 0 Term loan 6 42 (1,196,390) (1,336,152) 0 0 Term loan 7 42 (791,949) (796,184) 0 0 Term loan 8 42 (2,167) (2,005) 0 0 Term loan 10 42 (559) (532) 0 0 Term loan 12 42 (699,862) (699,862) 0 0 Term loan 13 42 (17,418) (16,355) 0 0 Term loan 14 42 (1,824) (1,684) 0 0 Term loan 15 42 (12,133) (11,966) 0 0 CULS 43 (5,800) (5,800) 0 0
2007 ICULS 23 135,880 158,414 135,880 158,414 Receivable from the State Government 26 752,571 630,505 0 0 Concession liabilities 40 (3,638,141) (2,081,134) 0 0 Finance lease liabilities 41 (375,758) (375,917) (2,321) (2,343) Term loan 1 42 (2,408) (2,408) 0 0 Term loan 2 42 (27,617) (27,157) 0 0 Term loan 8 42 (14,466) (13,399) 0 0 Term loan 9 42 (527,638) (506,297) 0 0 Term loan 10 42 (1,183,770) (1,131,266) 0 0 Term loan 11 42 (735,870) (630,505) 0 0 Term loan 12 42 (4,167) (4,167) 0 0 Term loan 14 42 (757) (798) 0 0 Term loan 16 42 (733,560) (733,560) 0 0 CULS 43 (5,800) (5,800) 0 0
Ranhill Berhad (430537-K) 129 NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
57 FINANCIAL INSTRUMENTS (CONT’D) The carrying value for other assets and liabilities with a maturity of less than one (1) year is assumed to approximate their fair value.
(ii) Off balance sheet The contract notional principal amounts and their corresponding fair value adjustments as at 29 June 2008 (for month end 30 June 2008) are summarised below: Contract or notional Favourable Unfavourable principal net fair net fair 2008 amount value value RM’000 RM’000 RM’000 Interest rate swap 155,000 0 12,931 Interest rate swap 359,150 0 24,843
The method by which the fair value information was determined and significant assumptions made in its application are as follows: • ICULS – future coupon receivable and schedule payment discontinued at current market interest rate. • Receivable from the State Government – future contractual cash flows discounted at current market interest rate. • Concession liabilities - future contractual cash flows discounted at current market interest rates available for similar risk profile of financial liabilities. • Finance lease payables - future contractual cash flows discounted at current market interest rate available for similar risk profile of financial liabilities. • Term loans – future contractual cash flows discounted at current market interest rate. • CULS – discounted cash flow method using current market interest rates.
Interest Rate Swap In April 2007, the Company entered into four swap transactions, each in a notional amount of USD55.0 million, and amounting to an aggregate amount of USD220.0 million, with the objective of reducing the interest cost on its USD220 million USD notes program.
The swaps, which were each for five years terminating on October 2011, were structured with an upfront savings to the Company, and depending on the individual structure, losses are capped at between 1.75% and 3.50% per annum, in order that any exposure of the Company is limited. Two swaps were unwound with gains. The other two swaps were unwound and restructured on 24 October 2007 into a single swap transaction of USD110 million.
The restructured swap terminates on October 2011. On the swap, Ranhill is obliged to pay a fixed interest rate of 4.5% per annum in USD and is entitled to receive a floating interest rate per annum in USD, on a semi-annual basis, in April and October of each calendar year to termination.
In September 2007, the Company entered into another swap transaction with a notional amount of RM155 million with the objective of reducing the interest cost under the Islamic Medium Term Notes Programme of RM540 million in Nominal Value issued by Ranhill Powertron Sdn Bhd. The swap terminates on June 2012. On the swap, Ranhill is obliged to pay to fixed interest rate of 4.70% for the first year and a floating interest rate per annum for the remaining years, on a semi-annual basis, in June and December of each calendar year to termination.
130 Ranhill Berhad (430537-K) NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
58 SUBSEQUENT EVENTS (a) On 5 August 2008, Ranhill Power Sdn Bhd (“Ranhill Power”) completed the disposal of its 20.0% interest in the ordinary share capital of Ranhill Powertron Sdn Bhd (“RP”) as well as its 20.0% interest in the Convertible Unsecured Loan Stock of RP I for a total consideration of RM32.18 million to Sabah Energy Corporation Sdn Bhd.
(b) On 14 August 2008, Ranhill Power completed the disposal of its 57.88% effective equity interest in Laraib Energy Limited (“Laraib”) for a total consideration of USD6.0 million. Ranhill Power entered into a Settlement Agreement with Nobel Infrastructure Development Holdings Limited (“Nobel”), a wholly-owned subsidiary of Ranhill Power, the Sponsors Group (comprising all the other shareholders of Laraib and Laraib, whereby Ranhill Power withdraws its entire investment in the New Bong Escape Hydropower Project in Pakistan. With the completion of the withdrawal of investment, Nobel and Laraib ceased to be the subsidiary and jointly-controlled entity of Ranhill Power.
(c) On 6 June 2008, OSK Investment Bank Berhad on behalf of the Company and LOSB Cayman Ltd (collectively known as the “Joint Offerors”), served a Notice of Voluntary Take-over Offer on Ranhill Utilities Berhad (“RUB”) to acquire all the remaining ordinary shares of RM1.00 each in RUB which were not already held by the Joint Offerors and Persons Acting in Concert with them for a cash consideration of RM3.50 per share (“Offer”).
The Offer Document dated 27 June 2008 was issued by RUB in relation to the proposed VGO. On 14 July 2008, RUB received the approval from the Johor State Planning Unit (“UPEN”), as one of the conditions required for the implementation of the Offer and the delisting of RUB.
On 25 July 2008, the Company announced that, the Offer was declared unconditional by the Joint Offeror following the approval by the Company’s shareholders.
As at 8 August 2008, being the final closing date of the Offer, the Company announced that the Joint Offerors had received valid and complete acceptances exceeding 90% in the nominal value of the issued and paid-up capital of RUB (with acceptance of not less than nine-tenths in nominal value of the offer shares other than shares held by the Joint Offeror). Consequently, the Joint Offerors has achieved its intention to invoke Section 34 of the Securities Commissions Act, 1993 to compulsorily acquire any remaining offer shares for which acceptances have not been received under the Offer within two months from 8 August 2008.
Details of the above are set out in the announcements of RUB dated 7 August 2008, 30 July 2008, 25 July 2008, 18 July 2008, 17 July 2008, 16 July 2008,1 July 2008, 20 June 2008, 9 June 2008 and 6 June 2008.
With 98.39% of RUB’s issued and paid-up share capital held by the Joint Offerors, the Joint Offerors announced that they will not maintain the listing status of RUB. Consequently, the requirement to maintain public shareholding spread will not be applicable to the Company.
Subsequently, RUB was delisted from the Official List of Bursa Securities with effect from 28 August 2008.
Ranhill Berhad (430537-K) 131 NOTES TO THE FINANCIAL STATEMENTS
30 June 2008
58 SUBSEQUENT EVENTS (CONT’D) (d) Based on SAJ Holdings Sdn Bhd’s (“SAJH”) submissions and latest negotiation and discussions with the Ministry of Energy, Water and Communication and SPAN, the key principles agreed are as follows: (i) All water assets belonging to SAJH and the State Government together with the relevant liabilities will be transferred to Pengurusan Aset Air Berhad (“PAAB”). PAAB, in return, will settle all the liabilities related to the assets transferred. Any surplus from the transfer will be paid by PAAB to SAJH. The assets taken over will then be leased back to SAJH; and
(ii) SAJH will be licensed to operate under the Operation and Maintenance (“O&M”) concept and will be supervised by SPAN based on prescribed terms under the licensing regime and set of key performance indicators (“KPI”).
The execution of the above terms are subject to the collective agreement by SAJH, the State Government and other related parties when it comes to detailing out each party’s scope, benefit and responsibility relating to the said transaction.
59 COMPARATIVE FIGURES
Certain comparative figures were reclassified to conform with current year’s presentation.
60 APPROVAL OF FINANCIAL STATEMENTS
The financial statements have been approved for issue in accordance with a resolution of the Board of Directors on 31 October 2008.
132 Ranhill Berhad (430537-K) Analysis of Shareholdings
as at 31 October 2008
Authorised Share Capital : RM2,000,000,000.00 Issued and Paid-up Capital : RM597,264,816.00 Type of shares : Ordinary Shares of RM1.00 each Voting Rights : One vote per ordinary share
DIRECTORS’ SHAREHOLDINGS
Direct Interest Indirect Interest No. Name of Directors No. of Shares % No. of Shares % 1. Tan Sri Sallehuddin Mohamed 140,000 0.02 – – 2. Tan Sri Hamdan Mohamad 13,604,900 2.28 295,311,071* 49.44 3. Datuk Ramli Ibrahim 36,000 0.01 – – 4. Senator Datuk Chandrasekar Suppiah 2,863,200 0.48 – – 5. Datuk Razman Md Hashim Che Din Md Hashim 40,000 0.01 – – 6. Amran Awaluddin 1,053,000 0.18 – – 7. Nicholas John Lough @ Sharif Lough Abdullah 20,000 0.00 – – 8. Dato’ Seri Abdul Azim Mohd. Zabidi – – – – 9. Chew Seng Kok – – – – 10. Nadzru Azhari – – – –
* Deemed interest by virtue of his direct interest in Ranhill Corporation Sdn Bhd and Lambang Optima Sdn Bhd, and indirect shareholdings in Business Booster Inc. pursuant to Section 6A of the Companies Act, 1965.
DISTRIBUTION OF SHAREHOLDINGS
Shareholding No. of Shareholders % No. of Shares % Less than 100 139 1.06 4,724 0.00 100 to 1,000 2,587 19.74 2,400,268 0.40 1,001 to 10,000 8,033 61.28 37,041,374 6.20 10,001 to 100,000 2,109 16.09 59,894,157 10.03 100,001 to less than 5% of issued shares 236 1.80 286,094,303 47.90 5% and above of issued shares 4 0.03 211,829,990 35.47 Total 13,108 100.00 597,264,816 100.00
Ranhill Berhad (430537-K) 133 ANALYSIS OF SHAREHOLDINGS
as at 31 October 2008
SUBSTANTIAL SHAREHOLDERS
Direct Interest Indirect Interest Name No. of Shares % No. of Shares % Lambang Optima Sdn Bhd 181,598,646 30.40 – – Ranhill Corporation Sdn Bhd 87,739,425 14.69 25,973,000 * 4.35 Tan Sri Hamdan Mohamad 13,604,900 2.28 295,311,071** 49.44 YPJ Corporation Sdn Bhd 30,692,250 5.14 – – YPJ Holdings Sdn Bhd – – 30,692,250*** 5.14
* Deemed interest by virtue of its direct interest in Business Booster Inc. pursuant to Section 6A of the Campanies Act, 1965. ** Deemed interest by virtue of his direct interest in Ranhill Corporation Sdn Bhd and Lambang Optima Sdn Bhd, and indirect interest in Business Booster Inc. pursuant to Section 6A of the Companies Act, 1965. *** Deemed interest by virtue of its direct interest in YPJ Corporation Sdn Bhd pursuant to Section 6A of the Companies Act, 1965.
30 LARGEST SHAREHOLDERS
No. Name No. of Shares Percentage %
1. OSK Nominees (Tempatan) Sdn Berhad 71,629,990 11.99 Pledged Securities Account for Lambang Optima Sdn Bhd 2. Tasec Nominees (Tempatan) Sdn Bhd 60,000,000 10.05 TA First Credit Sdn Bhd for Ranhill Corporation Sdn Bhd 3. HDM Nominees (Tempatan) Sdn Bhd 40,200,000 6.73 Pledged Securities Account for Lambang Optima Sdn Bhd (MO1) 4. UOBM Nominees (Tempatan) Sdn Bhd 40,000,000 6.70 TAEL One Partners Ltd for Lambang Optima Sdn Bhd 5. Citigroup Nominees (Tempatan) Sdn Bhd 29,768,656 4.98 Pledged Securities Account for Lambang Optima Sdn Bhd 6. Lembaga Tabung Angkatan Tentera 29,000,000 4.86
7. Lembaga Tabung Haji 29,000,000 4.86
8. ABB Nominee (Tempatan) Sdn Bhd 22,700,000 3.80 Pledged Securities Account for YPJ Corporation Sdn Bhd (YPJ Oil) 9. SBB Nominees (Tempatan) Sdn Bhd 15,027,000 2.52 Pertubuhan Kebangsaan Melayu Bersatu atau UMNO (UMNO-E2) 10. Citigroup Nominees (Tempatan) Sdn Bhd 15,000,000 2.51 Pledged Securities Account for Tan Sri Hamdan Mohamad 11. Citigroup Nominees (Tempatan) Sdn Bhd 10,000,000 1.67 CPB for Hamdan Mohamad (Pledged Account) 12. UOBM Nominees (Asing) Sdn Bhd 10,000,000 1.67 TAEL One Partners Ltd for Business Booster Inc 13. Ranhill Corporation Sdn Bhd 8,049,415 1.35
14. YPJ Corporation Sdn Bhd 7,992,250 1.34
134 Ranhill Berhad (430537-K) ANALYSIS OF SHAREHOLDINGS
as at 31 October 2008
30 LARGEST SHAREHOLDERS
No. Name No. of Shares Percentage %
15. Amsec Nominees (Tempatan) Sdn Bhd 6,200,000 1.04 AmBank (M) Berhad for Hamdan Mohamad (Smart)
16. Cimsec Nominees (Tempatan) Sdn Bhd 5,103,900 0.85 CIMB Bank for Hamdan Mohamad (SFD) 17. Citigroup Nominees (Asing) Sdn Bhd 4,323,500 0.72 CBNY for DFA Emerging Markets Fund 18. Employees Provident Fund Board 3,754,200 0.63 19. OSK Nominees (Tempatan) Sdn Berhad 3,670,010 0.61 Pledged Securities Account for Ranhill Corporation Sdn Bhd 20. Mayban Nominees (Tempatan) Sdn Bhd 3,623,200 0.61 Pledged Securities Account for Tarique Azam 21. Amsec Nominees (Tempatan) Sdn Bhd 3,500,000 0.59 AmBank (M) Berhad for Ranhill Corporation Sdn Bhd (Smart) 22. Kong Lek Chai @ Kong Ah Lim 2,660,000 0.45 23. Citigroup Nominees (Asing) Sdn Bhd 2,521,900 0.42 Exempt An for Mellon Bank (Mellon) 24. Cimsec Nominees (Tempatan) Sdn Bhd 2,520,000 0.42 CIMB Bank for Ranhill Corporation Sdn Bhd (SFD) 25. Ng Hin Kwee & Sons Sdn Bhd 2,160,000 0.36 26. Maybank Nominees (Tempatan) Sdn Bhd 1,950,000 0.33 Pledged Securities Account for Hamdan Bin Mohamad (514011890076) 27. HSBC Nominees (Asing) Sdn Bhd 1,791,400 0.30 Exempt An for the Hongkong and Shanghai Banking Corporation Limited (HBFS-B CLT 500) 28. HSBC Nominees (Asing) Sdn Bhd 1,579,300 0.26 BNY Brussels for City of New York Group Trust 29. TA Nominees (Tempatan) Sdn Bhd 1,558,100 0.26 Pledged Securities Account for Chandrasekar a/l Suppiah 30. Tabung Amanah Warisan Negeri Johor 1,341,970 0.22
Total 436,624,791 73.10
Ranhill Berhad (430537-K) 135 Properties Held by the Group as at 30 June 2008
Last Approximate Revaluation/ Age of Net Book Acquisition Location Description Tenure Area Existing Use Building Value Date
Property owned by RB Ventures Building Freehold 190 sq.metre 1 unit of 15 years 12.02.2004 Sdn Bhd 4 storey 09.05.1997 Property held under Title No. 45495 shop offices/ (formerly HS (D) 99246) office use part of Lot No. 28172 Mukim Setapak Daerah Kuala Lumpur Wilayah Persekutuan 8,300
Property held under Title No. 45496 Building Freehold 1378 sq.metre 5 units of 15 years 12.02.2004 (formerly HS (D) 99248) 5 storey and 24.01.1992 Lot No. 28173 2 units of (6 units) (formerly PT 6754) 4 storey shop 09.05.1997 Mukim Setapak offices/ (1 unit) Daerah Kuala Lumpur offices use Wilayah Persekutuan
Property owned by Ranhill Power Building Leasehold Rented 13 years 475 20.01.1998 Berhad (66 years) Muadzam Land 22.6.1995 - HS(D) 1503 PT 3009 - 21.6.2061 Mukim Keratong 11,520 sq. ft
- H.S(D) 1504 PT 3010 Building Leasehold Mukim Keratong (66 years) 22.6.1995 - 21.6.2061
Held by Subsidiary Company - Land and Leasehold 18.1298 acres Development, 10.5 years 20,171.3 31.03.1997 Ranhill Powertron Sdn Bhd Building (99 years from Construction Kota Kinabalu Industrial Park Zone the date of and operation of KM 23, Jalan Sepangar issuance of a power plant 88450 Menggatal individual together with Kota Kinabalu, Sabah land title which related ancillary is still being facilities processed by the Lands and Surveys Department, Sabah)
136 Ranhill Berhad (430537-K) Ranhill Global Offi ces
MALAYSIA KUALA LUMPUR QATAR – EXCELLA BUSINESS PARK KUALA LUMPUR Doha – EMPIRE TOWER BUILDING Mediglobal Malaysia Sdn Bhd Al-Sraiya – Ranhill Bersekutu Sdn Bhd Tel : (60-3) 4270 3032 Tel : (974) 441 1800 Ranhill Berhad Fax : (60-3) 4270 3034 Fax : (974) 442 5909 Tel : (60-3) 2171 2020 Fax : (60-3) 2164 2235 PENANG ARAB SAUDI Ranhill Engineers and Constructors Ranhill Water Technologies Sdn Bhd Ranhill Bersekutu Saudi Limited Sdn Bhd Tel : (60-4) 227 3415 Tel : (966) 3895 5004 Tel : (60-3) 2171 2020 Fax : (60-4) 228 4559 Fax : (966) 3845 1818 Fax : (60-3) 2164 2072 JOHOR BAHRU REPUBLIC OF SUDAN Ranhill Bersekutu Sdn Bhd SAJ Holdings Sdn Bhd Khartoum Tel : (60-3) 2171 2020 Tel : (60-7) 224 4040 Ranhill Middle East FZE Fax : (60-3) 2775 2768 / 69 Fax : (60-7) 223 6155 Tel : (249-155) 119 445 Ranhill WorleyParsons Sdn Bhd Fax : (249-155) 119 445 Ranhill Water Services Sdn Bhd (formerly known as Ranhill Worley Sdn Bhd) Tel : (60-7) 276 2020 Tel : (60-3) 2163 0499 LIBYA Fax : (60-7) 276 3030 Fax : (60-3) 2163 0524 Tripoli Amona-Ranhill Consortium Sdn Bhd SABAH Ranhill Power Sdn Bhd Tel : (218-21) 715 5809/10/11 Tel : (60-3) 2170 6000 Ranhill Power O&M Sdn Bhd Fax : (218-21) 711 8897 Fax : (60-3) 2171 1660 Tel : (088) 496 330 Fax : (088) 496 327 INDIA Ranhill Powertron Sdn Bhd Tel : (60-3) 2170 6000 Ranhill Engineers and Constructors Chennai Fax : (60-3) 2171 1660 Sdn Bhd (Teluk Salut) Ranhill (India) Private Limited Tel : (088) 495 977 Tel : (91-44) 2434 2041 Ranhill Utilities Berhad Fax : (088) 495 484 Fax : (91-44) 2435 2041 Tel : (60-3) 2170 2020 Fax : (60-3) 2775 8775 THAILAND OVERSEAS Bangkok Ranhill Water Technologies Sdn Bhd UNITED ARAB EMIRATES Ranhill Water Technologies Thai Ltd Tel : (60-3) 2171 2020 Tel : (66-2) 321 7896 Fax : (60-3) 2170 1776 Dubai Ranhill Middle East (RME) FZE, Jebel Ali Fax : (66-2) 321 7897 Ranhill Energy Sdn Bhd Tel : (971-4) 337 1481 Tel : (60-3) 2171 2020 Fax : (971-4) 337 1482 CHINA Fax : (60-3) 2164 2235 Shanghai Abu Dhabi Ranhill Water Technologies (SHG) Co Ltd Senai-Desaru Expressway Berhad Ranhill Engineers and Constructors, Tel : (86) 21 5252 2714 Tel : (60-3) 2170 1780 Abu Dhabi Offi ce Fax : (86) 21 5252 2814 Fax : (60-3) 2171 1230 Tel : (971-2) 671 9717 Fax : (971-2) 671 6703 Yichun City Yichun Pinang Water Ltd Abu Dhabi, United Arab Emirates Tel : (86) 79 5319 5876 Tel : (971-2) 632 3301 Fax : (86) 79 5319 5877 Fax : (971-2) 632 1949
Ranhill Berhad (430537-K) 137 Notice of Annual General Meeting
NOTICE IS HEREBY GIVEN THAT the Twelfth Annual General Meeting of Ranhill Berhad will be held at the Concorde Ballroom, Lobby Level, Concorde Hotel Kuala Lumpur, No. 2, Jalan Sultan Ismail, 50250 Kuala Lumpur on 30 December 2008, Tuesday, at 2.30 p.m., for transacting the following businesses:
AGENDA 1. To receive the Audited Financial Statements for the fi nancial year ended 30 June 2008 and the Reports of the Directors and Auditors thereon. Resolution 1
2. To sanction the declaration and payment of a fi rst and fi nal gross dividend of 1.0 sen per share, less income tax at 26% for the fi nancial year ended 30 June 2008. Resolution 2
3. To re-appoint Tan Sri Sallehuddin Mohamed as a Director, who is retiring pursuant to Section 129(6) of the Companies Act, 1965. Resolution 3
4. To re-elect Dato’ Seri Abdul Azim Mohd. Zabidi as a Director, who is retiring pursuant to Article 100 of the Company’s Articles of Association. Resolution 4
5. To re-elect Mr Chew Seng Kok as a Director, who is retiring pursuant to Article 100 of the Company’s Articles of Association. Resolution 5
6. To re-elect Mr Nicholas John Lough @ Sharif Lough Abdullah as a Director, who is retiring pursuant to Article 100 of the Company’s Articles of Association. Resolution 6
7. To re-appoint Messrs PricewaterhouseCoopers as Auditors of the Company and to authorise the Board of Directors to fi x their remuneration. Resolution 7
8. To Authorise the Directors to Allot and Issue Shares Pursuant to Section 132D of the Companies Act, 1965 “THAT pursuant to Section 132D of the Companies Act, 1965 and subject always to the approval of the relevant regulatory authorities, where required, the Directors be and are hereby empowered to allot and issue shares in the Company from time to time and upon such terms and conditions and for such purposes as the Directors may deem fi t provided that the aggregate number of shares issued pursuant to this resolution does not exceed 10% of the total issued share capital of the Company for the time being AND THAT the Directors be also empowered to obtain the approval for the listing of and quotation for the additional shares so issued on Bursa Malaysia Securities Berhad and that such authority shall continue in force until the conclusion of the next Annual General Meeting of the Company;
AND THAT the Directors (whether solely or jointly), be and are hereby authorised to do all such acts and things (including executing any relevant documents) as he/they may consider expedient or necessary to complete and give effect to the aforesaid authority.” Resolution 8
9. To Authorise the Renewal of Share Buy-Back Mandate “THAT pursuant to Paragraph 12.03 of the Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”) and subject to Section 67A of the Companies Act, 1965 (“Act”), the Company’s Memorandum and Articles of Association and other applicable laws, rules and regulations and the approvals of all relevant regulatory authorities, the Company be and is hereby authorised to purchase and/or hold such number of ordinary shares of RM1.00 each in the Company as may be determined by the Directors from time to time through Bursa Securities upon such terms and conditions as the Directors may deem fi t and expedient in the interest of the Company, provided that the aggregate number of shares to be purchased and/or held pursuant to this resolution shall not exceed ten percent (10%) of the total issued and paid-up share capital of the Company as at the date of the share buy-back (“Proposed Share Buy-Back”) AND THAT an amount of the funds not exceeding the retained profi ts and share premium reserves of the Company based on its latest audited fi nancial statements available up to the date of a transaction pursuant to the Proposed Share Buy-Back, be utilised for the proposed purchase;
138 Ranhill Berhad (430537-K) NOTICE OF ANNUAL GENERAL MEETING
AND THAT such authority shall commence immediately upon the passing of this ordinary resolution and will continue to be in force until:
(a) the conclusion of the next Annual General Meeting (“AGM”) of the Company, at which time it will lapse, unless by an ordinary resolution passed by the shareholders in a general meeting, the authority is renewed, either unconditionally or subject to conditions;
(b) the expiration of the period within which the next AGM of the Company is required to be held pursuant to Section 143(1) of the Act (but shall not extend to such extension as may be allowed pursuant to Section 143(2) of the Act); or
(c) revoked or varied by ordinary resolution passed by the shareholders of the Company at a general meeting;
whichever is the earlier but not so as to prejudice the completion of purchase(s) by the Company before the aforesaid expiry date and, in any event, in accordance with the provisions of the Listing Requirements of Bursa Securities or any other relevant authorities;
AND THAT the Directors (whether solely or jointly) be and are hereby authorised to do all such acts and things (including executing any relevant documents) for and on behalf of the Company, as he/they may consider expedient or necessary to complete and give full effect to the Proposed Share Buy-Back AND FURTHER THAT the shares of the Company to be purchased may be cancelled, retained as treasury shares, distributed as dividends or resold on Bursa Securities, or a combination of the above, at the absolute discretion of the Directors.” Resolution 9
10. To Authorise the Renewal of Existing Shareholders’ Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature “THAT pursuant to Paragraph 10.09 of the Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”) approval be and is hereby given for the Company and/or its subsidiaries to enter into recurrent related party transactions of a revenue or trading nature with the related parties as set out in Section II, Part B(I), Section 2.3 of the Circular to Shareholders dated 6 December 2008 which are necessary for their day-to-day operations in their ordinary course of business and on normal commercial terms not more favourable to the related parties than those generally available to the public and are not detrimental to the minority shareholders; AND THAT such authority shall commence immediately upon the passing of this ordinary resolution and continue to be in force until:
(a) the conclusion of the next Annual General Meeting (“AGM”) of the Company, at which time it will lapse, unless by an ordinary resolution passed by the shareholders in a general meeting, the authority is renewed;
(b) the expiration of the period within which the next AGM of the Company is required to be held pursuant to Section 143(1) of the Companies Act, 1965 (“Act”) (but shall not extend to such extension as may be allowed pursuant to Section 143(2) of the Act); or
(c) revoked or varied by resolution passed by the shareholders of the Company in a general meeting;
whichever is earlier;
AND THAT the breakdown of the aggregate value of the recurrent related party transactions based on the type of recurrent transaction made and the names of the related parties involved in each type of the recurrent related party transaction made and their relationship with the Company and/or its subsidiaries, shall be disclosed in the Annual Report of the Company as may be required by the governing authority;
AND FURTHER THAT the Directors of the Company (whether solely or jointly) be authorised to complete and do all such acts and things (including executing such relevant documents) as he/they may consider necessary, expedient or in the interests of the Company to give effect to the aforesaid mandate.” Resolution 10
Ranhill Berhad (430537-K) 139 NOTICE OF ANNUAL GENERAL MEETING
11. To Obtain a new Shareholders’ Mandate for Additional Recurrent Related Party Transactions of a Revenue or Trading Nature “THAT pursuant to Paragraph 10.09 of the Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”), approval be and is hereby given for the Company and/or its subsidiaries to enter into recurrent related party transactions of a revenue or trading nature with the Related Parties as set out in Section II, Part B(II), Section 2.3 of the Circular to Shareholders dated 6 December 2008 which are necessary for their day-to-day operations in their ordinary course of business and on normal commercial terms not more favourable to the related parties than those generally available to the public and are not detrimental to the minority shareholders;
AND THAT such approval shall continue to be in force until:
(a) the conclusion of the next Annual General Meeting (“AGM”) of the Company, at which time it will lapse, unless by an ordinary resolution passed by the shareholders in a general meeting, the authority is renewed;
(b) the expiration of the period within which the next AGM of the Company is required to be held pursuant to Section 143(1) of the Companies Act, 1965 (“Act”) (but shall not extend to such extension as may be allowed pursuant to Section 143(2) of the Act); or
(c) revoked or varied by resolution passed by the shareholders of the Company in a general meeting;
whichever is earlier;
AND THAT the breakdown of the aggregate value of the recurrent related party transactions based on the type of recurrent transaction made and the names of the related parties involved in each type of the recurrent related party transaction made and their relationship with the Company and/or its subsidiaries, shall be disclosed in the Annual Report of the Company as may be required by the governing authority;
AND FURTHER THAT the Directors of the Company (whether solely or jointly) be authorised to complete and do all such acts and things (including executing such relevant documents) as he/they may consider necessary, expedient or in the interests of the Company to give effect to the aforesaid mandate.” Resolution 11
12. To transact any other business of which due notice has been given.
NOTICE OF DIVIDEND ENTITLEMENT AND PAYMENT
NOTICE IS ALSO HEREBY GIVEN THAT a fi rst and fi nal gross dividend of 1.0 sen per share, less income tax at 26% in respect of the fi nancial year ended 30 June 2008 if approved by the shareholders at the Twelfth Annual General Meeting, will be paid on 18 February 2009 to Depositors registered in the Record of Depositors at the close of business on 30 January 2009.
A Depositor shall qualify for entitlement only in respect of:
(a) shares transferred to the Depositor’s Securities Account before 4.00 p.m. on 30 January 2009 in respect of ordinary transfers; and
(b) shares bought on the Bursa Malaysia Securities Berhad (“Bursa Securities”) on a cum entitlement basis according to the Rules of the Bursa Securities.
By Order of the Board RANHILL BERHAD
WONG BEE SIAH (MAICSA 7006010) LAU BEY LING (MAICSA 7001523) Company Secretaries
Kuala Lumpur 6 December 2008
140 Ranhill Berhad (430537-K) NOTICE OF ANNUAL GENERAL MEETING
Notes: 1. A member of the Company entitled to attend and vote at the above Meeting is entitled to appoint a proxy to attend and vote on his behalf.
2. A proxy or attorney or corporate representative need not be a member of the Company.
3. A member of the Company is entitled to appoint not more than two (2) proxies to attend and vote at the same meeting provided that where a member of the Company is an authorised nominee as defi ned in accordance with the provisions of the Securities Industry (Central Depositories) Act, 1991, it may appoint at least one (1) proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account.
4. Where a member appoints two (2) proxies, the appointments shall be invalid unless the proportion of the holding to be represented by each proxy is specifi ed in the Form of Proxy.
5. The instrument appointing a proxy shall be in writing under the hand of the appointor or his attorney duly authorised in writing, or if the appointor is a corporation, either under its common seal or under the hand of an offi cer or attorney duly authorised.
6. The instrument of proxy, together with the power of attorney (if any) under which it is signed or a certifi ed copy thereof, shall be deposited with the Company’s Registrar, Symphony Share Registrars Sdn Bhd, Level 26, Menara Multi Purpose, Capital Square, No. 8, Jalan Munshi Abdullah, 50100 Kuala Lumpur, not less than forty eight (48) hours before the time appointed for holding the Meeting or at any adjournment thereof.
Explanatory Notes on Resolutions 8, 9, 10 and 11 1. Ordinary Resolution 8 – To Authorise the Directors to Allot and Issue Shares Pursuant to Section 132D of the Companies Act, 1965 The proposed Ordinary Resolution 8, if passed, will give the Directors of the Company, from the date of the general meeting, authority to allot and issue ordinary shares from the unissued share capital of the Company up to an aggregate amount not exceeding ten percent (10%) of the total issued share capital of the Company for the time being. This authority unless revoked or varied at a general meeting will expire at the next Annual General Meeting (“AGM”).
2. Ordinary Resolution 9 – To Authorise the Renewal of Share Buy-Back Mandate The proposed Ordinary Resolution 9, if passed, will empower the Company to purchase its own shares of up to ten percent (10%) of the total issued and paid- up share capital of the Company by utilising the funds allocated out of the retained profi ts and the share premium reserves of the Company.
Further information on this proposed Ordinary Resolution is set out in Section II, Part A of the Circular to Shareholders dated 6 December 2008.
3. Ordinary Resolution 10 – To Authorise the Renewal of Existing Shareholders’ Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature The proposed Ordinary Resolution 10, if passed, will empower the Company and/or its subsidiaries to enter into the recurrent related party transactions, which are necessary for the Company’s and/or its subsidiaries’ day-to-day operations, subject to the transactions being carried out in the ordinary course of business and on terms not detrimental to the minority shareholders of the Company.
Further information on this proposed Ordinary Resolution is set out in Section II, Part B(I) Section 2.3 of the Circular to Shareholders dated 6 December 2008.
4. Ordinary Resolution 11 – To Obtain a New Shareholders’ Mandate for Additional Recurrent Related Party Transactions of a Revenue or Trading Nature The proposed Ordinary Resolution 11, if passed, will empower the Company and/or its subsidiaries to enter into the additional recurrent related party transactions, which are necessary for the Company’s and/or its subsidiaries’ day-to-day operations, subject to the transactions being carried out in the ordinary course of business and on terms not detrimental to the minority shareholders of the Company.
Further information on this proposed Ordinary Resolution is set out in Section II, Part B(II) Section 2.3 of the Circular to Shareholders dated 6 December 2008.
Ranhill Berhad (430537-K) 141 Statement Accompanying the Notice of Annual General Meeting
Statement accompanying the Notice of the Twelfth Annual General Meeting of the Company pursuant to Paragraph 8.28(2) of Bursa Securities Listing Requirements.
DETAILS OF DIRECTORS WHO ARE STANDING FOR RE-APPOINTMENT OR RE-ELECTION Pursuant to Section 129 of the Companies Act, 1965
Tan Sri Sallehuddin Mohamed
Pursuant to Article 100 of the Company’s Articles of Association
(a) Dato’ Seri Abdul Azim Mohd. Zabidi (b) Mr Chew Seng Kok (c) Mr Nicholas John Lough @ Sharif Lough Abdullah
Details of Directors standing for re-appointment and re-election are set out in the Directors’ Profi le of this Annual Report.
142 Ranhill Berhad (430537-K) Form of Proxy
Number of shares held CDS Account No.
RANHILL BERHAD 430537-K (Incorporated in Malaysia)
A *I/*We NRIC No./Co. No. (FULL NAME IN BLOCK LETTERS) of (FULL ADDRESS) being a member of RANHILL BERHAD hereby appoint NRIC No. (FULL NAME IN BLOCK LETTERS) of (FULL ADDRESS) or failing him, NRIC No. (FULL NAME IN BLOCK LETTERS) of (FULL ADDRESS)
or failing him, THE CHAIRMAN OF THE MEETING as *my/*our proxy to vote for *me/*us and on *my/*our behalf at the Twelfth Annual General Meeting of the Company to be held at the Concorde Ballroom, Lobby Level, Concorde Hotel Kuala Lumpur, No. 2, Jalan Sultan Ismail, 50250 Kuala Lumpur on 30 December 2008, Tuesday, at 2.30 p.m. and at any adjournment thereof.
Where it is desired to appoint a second proxy, this section must also be completed. Otherwise, it is not applicable.
B *I/*We NRIC No./Co. No. (FULL NAME IN BLOCK LETTERS) of (FULL ADDRESS) being a member of RANHILL BERHAD hereby appoint NRIC No. (FULL NAME IN BLOCK LETTERS) of (FULL ADDRESS) or failing him, NRIC No. (FULL NAME IN BLOCK LETTERS) of (FULL ADDRESS)
or failing him, THE CHAIRMAN OF THE MEETING as *my/*our proxy to vote for *me/*us and on *my/*our behalf at the Twelfth Annual General Meeting of the Company to be held at the Concorde Ballroom, Lobby Level, Concorde Hotel Kuala Lumpur, No. 2, Jalan Sultan Ismail, 50250 Kuala Lumpur on 30 December 2008, Tuesday, at 2.30 p.m. and at any adjournment thereof.
The proportion of *my/*our holding to be represented by *my/*our *proxy/*proxies are as follows: 1st Proxy “A” : % 2nd Proxy “B”: % 100 % *My/* Our Proxy(ies) *is/*are to vote in the manner as indicated below: (Please indicate with a “ ✓ “ or “ X ” in the space provided below how you wish your vote to be cast. If no specific direction as to voting is given, the proxy will vote or abstain at his discretion). First Proxy “A” Second Proxy “B” Resolutions For Against For Against To receive the Audited Financial Statements and the Reports of the Directors and Auditors for the 1. financial year ended 30 June 2008. To approve the payment of a first and final gross dividend of 1.0 sen per share, less income tax at 26% 2. for the financial year ended 30 June 2008. 3. To re-appoint Tan Sri Sallehuddin Mohamed as a Director pursuant to Section 129(6) of the Companies Act, 1965. 4. To re-elect Dato’ Seri Abdul Azim Mohd. Zabidi as a Director. 5. To re-elect Mr Chew Seng Kok as a Director. 6. To re-elect Mr Nicholas John Lough @ Sharif Lough Abdullah as a Director. 7. To re-appoint Messrs PricewaterhouseCoopers as Auditors. 8. To authorise the Directors to allot and issue shares pursuant to Section 132D of the Companies Act, 1965. 9. To authorise the Renewal of Share Buy-Back Mandate. 10. To authorise the Renewal of Existing Shareholders’ Mandate for Recurrent Related Party Transactions (“RRPT”). 11. To obtain a New Shareholders’ Mandate for Additional RRPT.
Signed this day of 2008
* Please delete where not applicable Signature of Member/Common Seal Notes:
1. A member of the Company entitled to attend and vote at the above Meeting is entitled to appoint a proxy to attend and vote on his behalf.
2. A proxy or attorney or corporate representative need not be a member of the Company.
3. A member of the Company is entitled to appoint not more than two (2) proxies to attend and vote at the same meeting provided that where a member of the Company is an authorised nominee as defi ned in accordance with the provisions of the Securities Industry (Central Depositories) Act, 1991, it may appoint at least one (1) proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account.
4. Where a member appoints two (2) proxies, the appointments shall be invalid unless the proportion of the holding to be represented by each proxy is specifi ed in the Form of Proxy.
5. The instrument appointing a proxy shall be in writing under the hand of the appointor or his attorney duly authorised in writing, or if the appointor is a corporation, either under its common seal or under the hand of an offi cer or attorney duly authorised.
6. The instrument of proxy, together with the power of attorney (if any) under which it is signed or a certifi ed copy thereof, shall be deposited with the Company’s Registrar, Symphony Share Registrars Sdn Bhd, Level 26, Menara Multi Purpose, Capital Square, No. 8, Jalan Munshi Abdullah, 50100 Kuala Lumpur, not less than forty eight (48) hours before the time appointed for holding the Meeting or at any adjournment thereof.
1st fold here
AFFIX STAMP
SYMPHONY SHARE REGISTRARS SDN BHD (378993-D) Level 26, Menara Multi Purpose Capital Square No. 8, Jalan Munshi Abdullah 50100 Kuala Lumpur
2nd fold here
Ranhill Berhad (430537-K)
36th Floor, Empire Tower
No. 182, Jalan Tun Razak
50400 Kuala Lumpur
Tel : (603) 2171 2020
Fax : (603) 2164 2235
www.ranhill.com.my