minimisingdisruptions Nothing is perfect. Things will break down. We’re perfecting our response time to deal with any eventuality. TNB Corporate Report 2002 58 President / Chief Executive Officer’s Report It is my pleasure as your CEO to present the 2002 Annual Report. It could not have been a more memorable year. We belong in the category of those high profile strategic industries that bear the brunt of any external shocks. TNB, one can fairly say, is inured to emergencies, and has developed to a high degree the operational capability for dealing with the unexpected; to prevent any disruption in energy supply. But nothing could have prepared us for 911. Like the rest of the country, we are still assessing the impact both in economic terms, and in our concern for security, always a priority are now calling for increased vigilance. I came to my present task in October 2001 in time to number of complex challenges. This validated the inherit this unique external situation. TNB meantime technical capability we have built up over long experience produced its share of operating issues that created a progressively enhanced by the most modern advances in fairly challenging scenario internally. As an omen of what power technology, and sustained new strategic thinking was in store for us, we had a major problem at Kapar on our part. caused by a transformer malfunction. We were not able to recommission the plant until July 2002. This was only The other basis for confidence lies in the progress we one of the many challenges we faced last year. We were made in the course of the year, towards positioning put squarely on our mettle. As the national power utility, ourselves for greater discipline and effectiveness, for we have to provide one of the most basic needs of both catalyzing new initiatives, and making ourselves more industry and households, with the obligation to keep the ready to power the future. The challenges that marked lights on. We recognise as our prime responsibility, the last year gave us an up to date problem analysis to task of ensuring the security and uninterrupted reliability ensure our future strategies were solutions driven. of energy supply. Shareholders may be assured our confidence in that future is well founded, and will find it well attested in the The main message of this year’s report is one of renewed Report that follows. and well proven confidence in both our present capacity and in the future outlook for the growth and enhanced We began with a proactive policy we adopted despite, in efficiency of TNB. fact in response to the problems that assailed the industry. This theme is borne out first by the exceptional level The top story of the year is well named. This is the T7 of operational difficulty we encountered during the course strategy we communicated organisation wide, an innovative of the year, and the resilience shown in the way the 5 year initiative where the “T7” stands for tiger by the year company was able to respond to and surmount any 2007. In choosing the tiger as our symbol, we identified TNB Corporate Report 2002 59 The main message of this year’s report is one of renewed and“ “well proven confidence in both our present capacity and in the future outlook for the growth and enhanced efficiency of TNB. Dato’ Pian Sukro President/Chief Executive Officer TNB Corporate Report 2002 60 President/Chief Executive Officer’s Report (Continued) fuels; such as fuel oil and distillate. We avoided going into load shedding. These measures afforded us a breathing space but were costly. The gas crunch had a rather severe impact on the third quarter results, which reported a net loss of RM352.7 million. This reflects the higher cost of alternative fuels. The situation in the end was happily turned around. A new supply stream coming in from West Natuna, recently acquired by Petronas, proved most timely. I am pleased now to be able to report that the shortfall had narrowed to 120 mscfd by July whilst by August it was less than 100 mscfd. “The T7 strategy we communicated organisation wide is an innovative 5 year initiative where the T7 stands for the tiger by the year 2007.” with the animal Asia most associates with strength, agility, speed – and most appropriate of all for TNB – sheer power. At the same time, it also serves to remind ourselves that we have to deal with a very harsh environment. Seven Structural Building Blocks were put in place to streamline the entire organisation. The new business planning and budgeting process set objectives and a clear common direction for what – we have called the “Tiger” scenario, to fulfill the company Vision. Performance is key. This rests on the seven components designated the “Building Blocks” across the entire organisation. Shared values provide the essential foundation. The other elements needed to build the organisation to its peak are corporate culture, performance management, business process re- engineering, organisational structure, all contributing and building up to the final thrust in terms of strategy and direction. With the template in place, a more rigorous tracking system can now be used against key performance indicators. Meanwhile there were pressures building on the operational front demanding immediate attention. The major challenge of the year was a threatened shortage of gas. In the first half of the year we were facing a worrying shortfall of 199 million standard cubic feet per day. TNB's immediate response to the problem was to resort to alternate TNB Corporate Report 2002 61 TNB itself responded quickly by speeding up the commissioning of In the course of the year environment impact studies were carried out the projected new coal fired plant at Janamanjung (first unit of and emissions were continuously treated to protect the atmosphere. 700MW) originally scheduled for April 2003 but now brought forward Our policy has always been to aim for clean as well as efficient fuels to the end of the present year. and we have a division dedicated to environmental quality and protection in the power sector. We have reason to be proud of the resilience and foresight that was shown, evident in the manner in which the gas supply problems were The second major challenge in the year under review was the problem handled with such dexterity that our customers were saved from of plants under performing, as witnessed by the number of outages electricity supply disruptions. We are now once again comfortable and the set back at Kapar. Some of this was down to teething troubles. with our fuel supply position, having adequate stocks of standby fuel The Kapar Phase III has two units of 500MW, which were designed and having gained experience in dealing with the problems of fuel oil to generate efficient base load energy requirements, and our priority and distillate delivery logistics. was to see that there were no disruptions in supply. We are now back to normal and our new organisation performance strategy should The gas supply shortfall incident had forcibly reminded us of our over ensure an unremitting monitoring and a more efficient delivery system. dependence on gas which currently supplies over 70% of the country's fuel for electricity generation. We are already well embarked In the transmission sector, we have upgraded the network by putting on a new strategy of rebalancing the industry’s generating fuel mix, in a 500kV system. We commissioned a high voltage direct current moving decisively from gas to coal and hydro electricity. The grid between Malaysia and Thailand which, it is hoped, will contribute projected new Janamanjung Plant with 2100MW is part of the directly to regional aspirations for an Asian wide system. TNB favours aggressive effort to increase the use of coal. It will boost the coal a policy of increasing connectivity with its neighbours, and is component in the fuel mix from the current 12% up to 21% by 2005. positioning to take the lead in this area. To this can be added the future input from YTL Power’s 1,400MW Jimah power plant and SKS Ventures’ 2,100MW plant at Tanjong Bin Most of all, our focus remained on the TNB culture of customer service both based on coal. We anticipate the present 72% share of gas will excellence mandated by the national responsibility we hold to provide be slashed to 49% by 2010. an essential service and a quality service to our people. Customer service excellence has become the hallmark of our operations. There is a strong rationale for the shift to coal. There is an abundant supply of coal from multiple sources around the world. In addition the cost of coal today makes it cheaper than gas on a RM per GJ basis. Moreover, modern desulphurisation technology makes coal burning clean. TNB Corporate Report 2002 62 President/Chief Executive Officer’s Report (Continued) Whilst probably the most important initiative was the study we undertook into the question of power quality – resulting in a Paper submitted to Government on the subject. The third anxiety for a time last year was the concern for the possible impact of the deteriorating international situation, post 911, upon our Liberty power plant in Pakistan. This was TNB’s maiden investment overseas to the tune of more than RM1 billion. It had already had a chequered history. First pursued in 1995 it was actually completed in 1998 but changes in the Pakistan Government delayed the commercial start up. However, patience and perseverance paid off. Liberty Power is now a success story and has proven a good investment.