Industry Outlook 2020 Tenaga Nasional Berhad 1 The electricity sector globally is undergoing a major shift driven by energy transition, climate change, disruptive technologies and customer innovations, all of which are happening at unprecedented speed and scale The Future of Electricity Significant Challenges & Globally and in Malaysia Opportunities DEREGULATION to drive competition . Competitive bidding . Lower cost of alternative energy sources DECARBONISATION- Transition to clean . Greater transparency energy & low carbon generation . Higher cost efficiency DECENTRALIZATION- Distributed . Competition on service quality & price Energy resources . Customer centricity DIGITALIZATION- Integration of digital technologies along the value chain . Products & services beyond kWh TNB is aligning our aspirations and functions from traditional electricity service provider to a new energy solutions in supporting a greener, more sustainable and liberalized electricity industry. 2 Vendor Demographic PROCUREMENT SPEND FY2019 NON BUMI 30% BUMI 68% OTHERS 1% FOREIGN 1% 3 Vendor Demographic Vendor demographic for top spend categories in FY2019. Local vendors dominated majority of the categories. SUBSTATION SERVICES UNDERGROUND CABLE SERVICES CABLES & ACCESSORIES OVERHEAD LINE SERVICES OTHERS OTHERS OTHERS 0.0% 1% 0.1% NON BUMI FOREIGN FOREIGN 4.1% 0.1% NON BUMI 0.1% OTHERS 46.9% 0.4% NON BUMI NON BUMI 42.1% 53% BUMI BUMI BUMI BUMI 46% 52.9% 95.6% 57.8% TELECOMMUNICATION EQUIPMENT METERS & ASSOCIATED EQUIPMENTS IT SOFTWARE & SERVICES TRANSFORMERS NON BUMI OTHERS FOREIGN 9% 0.6% NON BUMI 0.3% 5% NON BUMI NON BUMI 19.5% 29.8% FOREIGN 6.6% FOREIGN 9% BUMI BUMI BUMI BUMI 86% 80.1% 91% 62.9% STREET LIGHTING SWITCHGEARS NON BUMI 19.5% OTHERS 0.01% NON BUMI 39% BUMI BUMI 61% 80.4% Others = GLC, GLC related company, Government Agency, University, Cooperative 4 Local Vendor Gap Analysis TNB’s Supports / Initiatives For Supports Required From Area Vendors’ Gaps Local Vendors To Reduce Gaps Government / Agencies Technical Competencies • Lack of local technical • Provide mandatory technical • Incentive for foreign companies 1 expertise especially training modules for contractors. to invest / collaborate with local for new / advanced • Facilitate & coordinate with vendors. technology. Government Technical Agencies for specific programs / trainings. • Measure gaps for improvement. R&D, Innovation & • Lack of R&D and • Share TNB technology roadmap • More research grants / innovation 2 Technology Adoption innovation. with vendors. funds / soft loans. • Unable to adopt new • Assist manufacturers in product • Incentive for local vendors to technologies and to development. collaborate with OEMS / align with industry • Provide opportunities to independence research centers. needs. collaborate with TNB subsidiaries. • Facilitate research grants from Government. Market Penetration • High dependency on • Facilitate business matching with • Rebate / incentive / tailored 3 TNB. other GLCs & other overseas trade missions (for utility utilities. industry) to assist local vendors to penetrate overseas market. Management & • Inefficient • Consistently monitor and evaluate • Mentoring scheme / effective 4 Leadership management and vendors’ performance. training / close monitoring. leadership skills. • Providing feedback for improvement • Facilitate engagement between vendors and financial institution. • Assist and engage vendors through regular meetings / online communication platform. 5 Issues & Challenges In Vendor Development Programme (VDP) Supports Required From Issues Challenges Government / Agencies Competitiveness • Low production costs of foreign products. • Government’s policy on local products versus 1 imported products. • Incentives for local manufacturers to ensure their products remain competitive. Capturing foreign market • Too dependent on TNB. • Rebate / incentive / tailored trade missions (for 2 • Different specification, costly setup with no utility industry) that will help local vendors to guarantee of business. penetrate overseas market. Limited Number of Local • High entry cost. • Grants / soft loans for local start up. 3 Manufacturers For Critical • Incentive for OEMS / independent research Products centers / foreign investment to collaborate with local manufacturers. 6 Current VDP Prioritization In TNB Value Impact High = Prioritization Category that gives high Zone : 8 5 • More local impact to TNB High 1 business manufacturers 14 3 are needed to (financial, 4 system 7 populate TNB ‘s criticality, Enough local manufacturers supplier pool operation, / market saturated / no • Competitive image, etc) technology enhancement 13 pricing expected • Reduce dependency for overseas products Value (support local Impact 6 12 11 10 2 economy) • Reduce risk due 15 9 16 to FOREX fluctuation 17 Low Supply Risk High = Category that has low Low Supply Risk High number of capable local manufacturers 1 – Cables 7 – Street Lighting LED 13 – RE products 2 – Cables Accessories 8 – Switchgear 14 – Compact Substation 3 – Smart Meter 9 – Overhead Line Equipment & Accessories 15 – Battery & Battery Charger 4 – Distribution Transformers 10 – Fuse 16 - Relay 5 – Power Transformers 11 – Feeder Pillar Online 17 - Capacitor Bank 6 – Street Lighting HPSV/ Smart LED 12 - Distribution Automation Equipment 7 TNB’s Initiatives To Achieve Target Outcome Policy In Supporting Local Vendors • Local tender preference • Price loading • Spend allocation Bumiputera 1 Spend >40% Technical training Collaboration with TNB subsidiaries Business opportunities with other GLCs Increase in % of 2 Vendors’ Facilitate vendor financing scheme with Performance financial institutions Performance monitoring 8 Thank You 9.