YTL POWER INTERNATIONAL BERHAD BERHAD INTERNATIONAL POWER YTL Our work stands the test of time by turning the right opportunity into the right thing and the right thing into lasting value. YTL is about building value that is not simply lasting, but is worthy of lasting. 406684-H ANNUAL REPORT 2019 Annual Report BUILDING THE RIGHT THING 2019 The Journey Continues... YTL POWER INTERNATIONAL BERHAD BERHAD INTERNATIONAL POWER YTL Our work stands the test of time by turning the right opportunity into the right thing and the right thing into lasting value. YTL is about building value that is not simply lasting, but is worthy of lasting. 406684-H ANNUAL REPORT 2019 Annual Report BUILDING THE RIGHT THING 2019 The Journey Continues... YTL POWER INTERNATIONAL BERHAD (406684-H) CONTENTS CORPORATE REVIEW FINANCIAL STATEMENTS 2 Chairman’s Statement 72 Directors’ Report 5 Corporate Events 83 Statement by Directors 6 Management Discussion & Analysis 83 Statutory Declaration 27 Managing Sustainability 84 Independent Auditors’ Report 31 Notice of Annual General Meeting 95 Income Statements 35 Statement Accompanying Notice of Annual General 96 Statements of Comprehensive Income Meeting 97 Statements of Financial Position 36 Corporate Information 100 Statements of Changes in Equity 37 Profile of the Board of Directors 103 Statements of Cash Flows 42 Profile of Key Senior Management 106 Notes to the Financial Statements 43 Statement of Directors’ Responsibilities 44 Audit Committee Report • Form of Proxy 47 Nominating Committee Statement 52 Corporate Governance Overview Statement 60 Statement on Risk Management & Internal Control 64 Analysis of Shareholdings 66 Statement of Directors’ Interests 69 List of Properties YTL POWER INTERNATIONAL BERHAD Chairman’s Statement YTL Power International Berhad (“YTL Power”) and its subsidiaries (“Group”) continued to perform stably for the financial year under review, with the power generation, merchant multi utilities and mobile broadband network divisions contributing to a 10.6% increase in revenue to RM11.7 billion. Profit before tax stood at RM753.4 million this financial year compared to RM940.6 million last year, impacted mainly by a loss recorded in the merchant multi utilities segment and lower profit in the water and sewerage business, partially offset by better performance in the Group’s investment holding and mobile broadband network segments. YTL Power declared an interim cash dividend of 5 sen per ordinary share for the financial year ended 30 June 2019, representing a yield of approximately 5.2% based on the average share price for the financial year of RM0.96 per share. YTL Power has a consistent dividend track record and has declared dividends to shareholders for 22 consecutive years since listing on the Kuala Lumpur stock exchange in 1997. TAN SRI DATO’ (DR) FRANCIS YEOH SOCK PING, KBE, CBE, FICE Executive Chairman 2 ANNUAL REPORT 2019 Chairman’s Statement In the UK, Wessex Water Limited (“Wessex Water”), which carries out our water and sewerage business, maintained its position amongst the top water and sewerage companies under its regulator’s service incentive mechanism. Wessex Water is regulated by Ofwat, the independent economic regulator for the UK water and sewerage industry, and has consistently performed well, ranking near or at the top of the industry’s performance rankings over the years. Wessex Water outperformance stems from its drive to provide ever-improving standards of service and high quality water and environmental services that protect health and improve the environment, all at excellent value to customers. Performance of the Group’s contracted power generation division in Malaysia remained stable due to supply from Paka Power Station under the current power purchase agreement, which commenced in September 2017 and will continue until June 2021. We have an established track record in this area dating back to 1994 as Malaysia’s first independent power producer, and this has ensured The Malaysian economy recorded lower gross domestic product that the plant continues to operate at optimal efficiency. (GDP) growth of 4.7% for the 2018 calendar year compared to 5.9% in 2017, impacted by external and domestic challenges This year, our mobile broadband network division undertook a during the year. The economy registered GDP growth of 4.5% in first-in-Asia trial of Terragraph, a gigabit wireless network built the first quarter and 4.9% in the second quarter of 2019, supported together with Facebook. The network is a technological by robust expansion in domestic demand. Meanwhile, in other breakthrough that utilises existing infrastructure to enable rapid major economies in which the Group operates, the United Kingdom deployment of fibre level connectivity. This saves the time and (UK) registered growth of approximately 1.4% during 2018, with cost of laying new fibre and represents the future of high speed the first and second quarters of the 2019 calendar year registering mobile network development. The Terragraph pilot successfully an estimated growth of 0.5% and negative 0.2%, respectively. powers free public WiFi in 50 popular landmarks in George Town, Singapore’s economy showed growth of 3.2% in 2018, with Penang, enabling users to experience a world-class public WiFi growth of approximately 1.1% and 0.1% respectively in the first service with an average downlink speed of 160 Mbps. and second quarters of the 2019 calendar year, (sources: Ministry of Finance Malaysia, Bank Negara Malaysia, Singapore Ministry of Trade & Industry, UK Office for National Statistics updates & reports). YTL PowerSeraya Pte Limited (“YTL PowerSeraya”), which carries out our merchant multi utilities business in Singapore, has a long track record of being one of the most efficient and best-performing companies in the sector and continued every effort to increase operational efficiency, in addition to pursuing the diversification of its utilities businesses in supplying steam, natural gas and water, oil storage tank leasing, and oil trading and bunkering. Whilst the Singapore electricity market continues to face an excess in generation capacity, recent developments and restructuring activities undertaken by other players in the sector indicate that consolidation within the industry, which would bring stability to prices, is on the horizon. 3 YTL POWER INTERNATIONAL BERHAD Chairman’s Statement Our Group has led the roll out of 4G/LTE in the country and The global outlook remains subdued in the face of uncertainties continues to drive market innovation through the development over trade and fiscal policies in the largest economies and we and deployment of new technologies, and the division is well expect tough operating conditions to continue in some of our key positioned to continue to expand with the prospective allocation markets. Whilst the Group has extensive international operations, of the low band 700MHz spectrum by the Malaysian Communications our businesses provide vital utilities to local populations, such as and Multimedia Commission. water and sewerage in the southeast of England and electricity in Singapore, and, therefore, encounter the effects of domestic In Jordan, good progress has been made on construction of the economic policies. 554 megawatt oil shale-fired power generation project being undertaken by our 45%-joint venture, Attarat Power Company Our focus consistently remains on the Group’s long-term PSC (“APCO”), and is on schedule for commercial operations to development and prospects, such as our investment in the new commence in 2020. APCO has a 30-year power purchase agreement power station in Jordan, which has a horizon of at least 30 years. for the plant’s entire generation capacity with National Electric This strategy has enabled our Group to build up a depth of Power Company (NEPCO), Jordan’s state-owned power utility, with expertise across water, electricity, telecommunications and other an option for the utility to extend the operating period to 40 key utilities in Malaysia, the UK, Singapore, Australia, Indonesia years. and Jordan. The long-term nature of YTL Power’s commitments ensures continuity and stability that drive the performance and The Group also continued to work towards financial close of its success of our assets and enable our businesses to better weather 80%-owned Tanjung Jati A project, a 1,320 megawatt coal-fired cycles of difficult operating conditions. power project in Java, Indonesia, which has a 30-year power purchase agreement with PT PLN (Persero), the Indonesian state- owned electricity utility. Meanwhile, our existing investments, comprising a 33.5% stake TAN SRI DATO’ (DR) FRANCIS YEOH SOCK PING in ElectraNet Pty Ltd, which owns and operates the electricity PSM, KBE, CBE, FICE, SIMP, DPMS, DPMP, JMN, JP transmission grid in South Australia, and an effective interest of 20% in PT Jawa Power, the owner of a 1,220 megawatt coal-fired power station in Indonesia, continued to perform well. 4 ANNUAL REPORT 2019 Corporate Events 18 FEBRUARY 2019 Launch of the First Large-Scale Terragraph Pilot in Asia YTL Communications Sdn Bhd, a subsidiary of YTL Power International Berhad, launched Terragraph, a gigabit wireless network built together with Facebook, in Georgetown, Penang, to deliver reliable, affordable and high-speed broadband services to the heritage city. From left to right:- Mr Jacob Yeoh Keong Yeow, Deputy Chief Executive Officer, YTL Communications Sdn Bhd; Dato’ Yeoh Seok Hong, Managing Director YB Tuan Shakib Ahmad Shakir, Deputy Secretary