ENERGY TO TRANSFORM LIVES INTEGRATED ANNUAL REPORT 2018 Energy is powerful. Not only does it spark one’s desire for innovation and growth, it also spurs one’s passion for excellence and success. Having proudly kept the nation progressing for the past seven decades, we shall continue to do so for the next seven decades and beyond. Happy 70th Anniversary INSIDE THIS REPORT About TNB Sustainability Statement 2 Our Domestic Businesses 66 About This Statement 3 Our International Footprint 67 Managing Sustainability 4 Our Vision, Our Mission and About Us 68 Sustainability Governance 5 Notice of the 29th Annual General Meeting 68 Supporting The United Nations Sustainable Development Goals (UN SDGs) 8 Statement Accompanying Notice of the 29th Annual General Meeting 70 Engaging Stakeholders 9 Administrative Notes of the 29th Annual General Meeting 71 What Matters to Us 72 Spirit of Sustainability • Our Governing Principles Our Business 74 Delivering With Purpose • The Future of Energy 12 Our Reporting Journey • Customer Centricity 13 Key Highlights 81 Environmental Stewardship 14 Key Financial Highlights • Minimising Environmental Impact 15 Six-Year/Period Group Financial Summary • Climate Change 16 Six-Year/Period Group Growth Summary 84 Embracing Relationship • Unlocking People Value FROM OUR LEADERS • Generative Safety Culture 17 Chairman’s Letter to Shareholders • Brightening Surrounding Communities 21 2018 Year in Review • Transforming Lives Through Education • Group Business Model • Our Strategy - Future Generation Sources - Grid of the Future The Strength of Our Governance - Winning the Customer 98 Chairman’s Introduction - Future Proof Regulations 100 A Committed Board • Our Capitals - Financial Capital 111 An Effective Leadership - Manufactured Capital 118 Leadership & Effectiveness - Natural Capital • Nomination and Remuneration Committee Report - Intellectual Capital 132 Accountability - Human Capital • Audit Committee Report - Social and Relationship Capital • Risk Committee Report 44 Our Scorecard • Internal Audit Function 45 Financial Calendar 141 Relations with Shareholders 46 Investor Relations 144 Statement of Risk Management and Internal Control 49 Net Book Value of Land & Buildings Financial Statements Business Context 148 Directors’ Report 52 Corporate Information 153 Consolidated Statement of Profit or Loss 53 Organisational Structure 154 Consolidated Statement of Comprehensive Income 54 Group Corporate Structure 155 Consolidated Statement of Financial Position 56 Direct Value Added to Malaysia 157 Consolidated Statement of Changes in Equity 57 Awards & Recognition 160 Consolidated Statement of Cash Flows 163 Notes to the Financial Statements 308 Statement by Directors Performance Review 308 Statutory Declaration 62 Simplified Group Statement of Financial Position 309 Independent Auditors’ Report 64 Core Revenue Financial Year Ended 31 December 2018 Additional Information 316 Statistics of Shareholdings Proxy Form About TNB Performance Review Financial Statements Our Business Sustainability Statement Additional Information Business Context Governance p.2 OUR DOMESTIC BUSINESSES DISTRIBUTION GENERATION GRID NETWORK As the key component of our electricity The Grid Division links the power produced The Distribution Network Division is production, the Generation Division is by our Company and IPPs throughout responsible for the asset lifecycle of the entrusted to operate and maintain TNB’s Peninsular Malaysia with the Distribution Nation’s distribution electricity supply portfolio of power generating assets, Division’s network. Electricity is also system to the end-users, ensuring comprising of thermal generation facilities transmitted directly to large industrial an uninterruptible supply of power to and major hydro-generation schemes customers via the National Grid. businesses and homes. in Peninsular Malaysia. In addition, the Division also supports the operations and MW LENGTH OF DOMESTIC maintenance of six (6) Independent Power 18,338 DISTRIBUTION NETWORK Producers (IPPs). Maximum Demand on 15 August 2018 660,038 KM CAPACITY Circuit Kilometres of wholly-owned distribution network in Peninsular Malaysia Total Domestic Generating Capacity 23,082 KM 10,917.53 MW Length of Domestic Transmission Network SAIDI For wholly-owned power plants in Peninsular Malaysia 48.22 min/cust/yr 2017: 50.24 min/cust/yr AVAILABILITY 443 Domestic Transmission Substations Equivalent Availability Factor (EAF) % RETAIL 88.93 SYSTEM MINUTES For wholly-owned power plants in Peninsular Malaysia The Retail Division strives to win our 0.35 MINUTES customers by building long-term and which has been consistently below the meaningful relationship through continuous RELIABILITY 2-minute mark since FY2009 ongoing customer centric approaches. Equivalent Unplanned Outage Factor (EUOF) 3.84% SYSTEM RESILIENCE AVAILABILITY For wholly-owned power plants in ZERO LOAD LOSS 9.65 million Peninsular Malaysia for the 500kV system since FY2008 Customers in Peninsular Malaysia, Sabah and Labuan SYSTEM AVAILABILITY % 118,814.46 GWh 99.79 Units Sold in 2018 (Sales in Peninsular Malaysia, Sabah and Labuan) About TNB Performance Review Financial Statements Tenaga Nasional Berhad Our Business Sustainability Statement Additional Information Integrated Annual Report 2018 Business Context Governance p.3 OUR INTERNATIONAL FOOTPRINT UNITED KINGDOM KUWAIT SAUDI ARABIA INDIA - 50% equity ownership in a - REMACO O&M for the 225MW - 6% equity ownership in the - 30% equity ownership in GMR UK Solar Portfolio via Vortex Sabiya Power Generation & Shuaibah Independent Water Energy Ltd with 2,299MW Solar Investments S.à.r.l with Water Distillation Plant & Power Project (IWPP) with installed capacity of coal, gas 365MWp total installed capacity - REMACO O&M for the Shuaiba 900MW installed capacity and solar assets - 80% equity ownership in a UK North Co-Gen 780MW Power; of conventional plant and - 50% equity ownership in JV Wind Portfolio via Tenaga Wind 204,000 m3/day water 1,030,000m3/day water company between REMACO Ventures UK Ltd with 26.1MW - REMACO O&M for the 210MW desalination assets and GMR Energy Ltd for plant total installed capacity O&M services Doha West Power Generation & - REMACO O&M Services for Water Distillation Plant Shuaibah IWPP - Maintenance Service Agreement (MSA) for Instrumentation and Control TURKEY PAKISTAN INDONESIA for the Doha West Plant and - 30% equity ownership in GAMA Shuwaikh Plant - Liberty Power Ltd 235MW - Development of the Enerji A.Ș. with 1,102MW - MSA for Mechanical Works - REMACO O&M Services - Sumatra - Peninsular Malaysia installed capacity of gas, wind, for the Doha West Plant and Balloki Power Plant High Voltage Direct Current hydro and 274,000m3/day water Shuaiba Plant Interconnection conveyance assets in Jordan About TNB Performance Review Financial Statements Our Business Sustainability Statement Additional Information Business Context Governance p.4 ABOUT OUR US VISION As the largest utility in Malaysia, Tenaga Nasional Berhad not only provides electricity to the To be among the leading country’s homes, businesses and industries, but corporations in energy is also a key contributor to Nation-building. and related businesses We are present throughout the entire electricity production and supply value chain. We have also embraced the sustainability agenda by entering into the Renewable globally Energy space and at the same time undertaking other green and social initiatives to ensure we deliver value to all our stakeholders. These efforts are underpinned by our goal of ensuring the longevity of our business and the long-term well-being of our community. In all of our endeavours, we are driven by our firm belief that we have a responsibility to improve the lives of the people of Malaysia. We therefore look OUR forward to continuing to ensure a better and brighter tomorrow for us all. MISSION WHO WE We are committed to SERVE excellence in our products and services We have served our industrial, commercial and residential customers in Malaysia for over 69 years. INDUSTRIAL Our industrial customers engage in the manufacture of goods and services. Although they make up the smallest segment of our customers, they also account for the majority of our electricity sales. COMMERCIAL Our commercial customers are our second-largest source of electricity sales, carrying out the business and commercial activities which drive our economy. RESIDENTIAL Our residential customers represent the majority of Malaysia’s 32.6 million population. As our largest market, they drive us to deliver excellence in our products and services. About TNB Performance Review Financial Statements Tenaga Nasional Berhad Our Business Sustainability Statement Additional Information Integrated Annual Report 2018 Business Context Governance p.5 NOTICE OF NOTICE IS HEREBY GIVEN THAT the TH Twenty-Ninth Annual General Meeting THE 29 (29th AGM) of Tenaga Nasional Berhad (“TNB” or “the Company”) will be held on Tuesday, ANNUAL 14 May 2019 at 10.00 a.m. at mySpace1@ Ballroom, Level 3, The Malaysia International Trade GENERAL & Exhibition Centre (MITEC), Kompleks MITEC, No. 8, Jalan Dutamas 2, 50480 Kuala Lumpur, MEETING Malaysia to transact the following businesses: Tuesday, 14 May 2019 at 10.00 a.m. mySpace1@Ballroom, Level 3, The Malaysia International Trade & Exhibition Centre (MITEC), Kompleks MITEC, No. 8, Jalan Dutamas 2, 50480 Kuala Lumpur, Malaysia AGENDA 4. To approve the payment of Non-Executive Directors’ fees of RM2,057,419.35 for the Financial Year ended 31 December