Annual Report - Sarawak Energy

Transcription

Annual
Report
Our Vision, Mission & Values
2-3
Group Five-Year Financial Statistics, 2006-2010
33
About Us
4-9
Group Financial Highlights
34
2010 Highlights
10
Our Operations
36 - 43
Corporate Information
11
Our People
44 - 49
Board of Directors
12 - 17
SEB in the Community
50 - 51
Executive Management Committee
18 - 19
Corporate Social Responsibility
52 - 53
Chairman’s Report
20 - 23
Statement of Internal Control
54 - 56
CEO’s Message
24 - 27
Statement on Corporate Governance
57 - 66
SEB’s Role in Sarawak’s Future
28 - 31
Board Audit Committee Report
67 - 74
Financial Performance
32
Directors’ Report and Audited
Financial Statements 31 December 2010
75 - 154
SARAWAK ENERGY BERHAD (Company No. 007199-D)
Laporan Tahunan 2010 Annual Report
CONTENTS
11
Our vision
Sustainable growth and prosperity for Sarawak by meeting the region’s
need for reliable, renewable energy
Our mission
To realise our vision, we will:
• PursueopportunitiesforgrowthbyfullydevelopingtheSarawak
Government’s SCORE agenda
• Ensure our own safety and the safety of others, with a
commitment to ‘no harm to anyone at any time’
• Provideareliablesupplyofclean,competitivelypricedenergy
to support the economic and social development of Sarawak
and our partners in the region
• Operate as a business based on principles that reward our
owners and employees, and delight our customers
• HonourthetrustplacedinusbythepeopleofSarawak,byacknowledging
and respecting them and contributing to their well-being
• Setandachievehighethicalandcorporatestandardsthatareasource
of pride for our employees, customers and owners
• Develop our people, leadership and teamwork to build an agile, open,
corporate and customer-focused culture that responds to challenges and
the need for change with innovation and cooperation
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• Harnessandutilisenaturalresourcesinasustainableandresponsibleway
• Achieve operational excellence through a commitment to continual
improvement and best practice
Our values
Integrity
we do what is right in every aspect of our business, and in every contact
with our people, customers, contractors and the community
Unity
we are one business, working together and sharing information and
expertise to achieve our common vision for the future
Respect
we value our diversity, listen well and involve others to use our best judgment in all situations and
actively care for our relationships
Accountability
we work hard, take responsibility for our performance and deliver on our commitments
Courage
we respect and support each other to do what is right, and in the best interests of our company and
the community, even when it is not easy to do so
33
ABOUT US
Batang Ai Hydroelectric Power Station
Sarawak Energy Berhad (SEB) is an investment holding company with subsidiaries that are involved in the
generation, transmission, distribution and sale of electricity. The Company has six key operational areas:
4
• ThermalGeneration
• Distribution
• HydroGeneration
• Retail
• Transmission
• ProjectExecution
The six operational areas are supported by three
business support departments:
• Finance
• Planning&Strategy
• CorporateServices
5
Mukah Coal-Fired Power Plant
The key roles of the operational divisions are described below.
Thermal Generation
SEB conducts thermal power generation through its wholly owned subsidiaries, Syarikat SESCO Berhad (SESCO),
Sarawak Power Generation Sdn Bhd (SPG), Sejingkat Power Corporation Sdn Bhd (SPC), PPLS Power Generation
(PPLS) and Mukah Power Generation Sdn Bhd (MPG).
AsatDecember2010,thetotalinstalledcapacitywithintheThermalDepartmentexceeded1,200MW,withfive
major power stations connected to the Sarawak State Grid (the network of extra-high-voltage trans mission lines
and substations that connect generating power plants to the distribution networks that serve the towns and
cities of Sarawak) and 19 isolated rural diesel and mini-hydro power stations.
6
Duringthefirstquarterof2010theBintulucombinedcycleproject,withacombinedcapacityof317MW,was
successfully commissioned. The Bintulu plant was registered with the United Nations under the Clean Development
Management (CDM) scheme on 18 September 2010.
The CDM scheme is part of the Kyoto Protocol environmental agreement and aims to encourage sustainable
developmentandreducegreenhousegasemissions.TheBintulufacilityisthefirstCDMplantinMalaysia.
Hydro Generation
The Hydro Generation Department owns and operates the hydro assets. The Department takes the lead in
the planning, initiation and concept phases of all big hydro projects before passing them over to the Project
Execution Division to execute all the phases until commissioning and finally handing over the assets. The
Department also identifies small hydropower potential that could be developed in particular to support the
ruralelectrificationinnearbyareas.
During 2010 the Department undertook feasibility studies on 13 sites. Much progress was made during the year
in ensuring that feasibility studies were conducted in a consistent manner and have a broad scope. Whereas
studies previously focused primarily on the technical aspects of projects, they were broadened to include
factors such as power evacuation and transmission, land-use compensation, access roads, and political and
social implications.
At the moment only Batang Ai which was commissioned in 1984 is in operation while Murum was still at its early
stage of construction. Batang Ai recorded an average availability of 96.8 per cent and total energy generation
of 524.68GWh in 2010.
Sejingkat Coal-Fired Power Plant
77
Transmission
The Transmission Department owns and operates the Sarawak State
Grid. The network also carries bulk electricity to large power users.
As the appointed Grid System Operator (GSO), the Transmission
Department operates and controls the Sarawak power system,
including power generation scheduling and dispatch. It is also the asset
owner and Transmission Network Service Provider (TNSP), responsible
forthemaintenanceandsafeandefficientoperationofthenetwork
to ensure reliable electricity supply.
The department is also responsible for the planning and development
oftheStateGridtomeettheState’sfuturepowerrequirements.
Distribution
The Distribution Department consists of two main
units: Distribution Network and Distribution Asset
Management. Together they are responsible
for ensuring that power is distributed efficiently
throughout the State.
Distribution Network has four divisions: Western
Region, Central Region, Northern Region and
Distribution Planning. Each region is responsible for
operating and maintaining its own distribution assets
to ensure optimum output. One of the main tasks of
the regions is to connect new customers, including
large industrial customers, in a timely manner.
Distribution Planning works closely with Transmission
Planning and Non-Grid Generation Planning to
ensure a holistic planning process for networks up to
and including 33kV.
8
Distribution Asset Management maintains and
ensures the efficient operation of the distribution
network’s database systems, and other assets and
processes. This includes overseeing data collection
by regional Global Information Systems (GIS),
providing policy and technical specifications,
undertaking maintenance and installation planning,
and managing the inventory of all electrical
equipmentstocks.
Miri Regional Office (Northern Region)
Retail
The Retail Division was established to manage the sale of electricity
to SEB’s customers, manage customers’ expectations and collect the
bills from electricity sales. The division comprises three distinct areas:
Customer Management, Meters, and Revenue Management. The
projected unit electricity sale for 2010 is 6,486,301,766kWh with an
estimated revenue of approximately RM1.6 billion. There are currently
511,019 customer accounts with SESCO, 84 per cent of which are
domestic customers.
Meter Reading in progress
Project Execution
During2010adedicatedProjectExecutionDepartmentwasestablishedtoensurethatSEBfulfilsitsexpansion
program. In addition to creating a customer-focused project delivery division, we appointed a Head of Project
Execution with extensive experience in project portfolio management.
The creation of a new dedicated Project Execution team will ensure that SEB can successfully accomplish its
investment projects in line with its business goals and strategies. The division will establish a common methodology,
terminologyanddocumentationframeworkforSEB’sprojectworkacrossalldivisions.Thiswillcreateanefficient
and effective process, from evaluation of business opportunities through to project development, execution,
and handover to operations.
In 2011, Project Execution will focus on delivering critical projects already in execution, and preparing for new
major hydro and thermal generation projects planned for commencement in 2012. We will also further grow the
team and establish best practice for all projects.
Within the new division are the support functions of Project Controls, Contracts and Procurement, and Project
Management.
9
2010 HIGHLIGHTS
SEB begins transformation into regional power supplier
New Vision, Mission and Values
332 new people recruited, bringing total number of employees to 2,959
Strong demand from new industrial and export customers
Total Revenue grows by RM178.5
million, to RM
1,553.7million
21,203 new customers connected, bringing total customers to 504,774
Gross power generation grows to 7,346
Total Sales (gwh)
GWH (gigawatt hours)
grows by 21.7% to 5,728 GWH
Profit After Tax: RM
336.2 Million
Bintulu Combined Cycle project
10
starts commercial operation
Power Purchase Agreement (PPA) for
Bakun Hydro Electric Plant proposed
CORPORATE INFORMATION
Directors
ChiefExecutiveOfficer
Datuk Abdul Hamed Bin Sepawi
Chairman/IndependentNon-ExecutiveDirector
Mr. Torstein Dale Sjøtveit
Datuk Amar Haji Mohamad Morshidi bin
Company Secretary
Haji Abdul Ghani
Non Independent Non-Executive Director
Aisah Eden
(LS 03629)
Vivian Voon
(MAISCA 7021367)
(Up to 3rd March 2011)
(Appointed 3rd March 2011)
Senator Dato’ Haji Idris Bin Haji Buang
Senior Independent Non-Executive Director
Tan Sri Dato Sri Mohd Hassan bin Marican
Independent Non-Executive Director
(Appointed with effective 9th June 2010)
RegisteredOffice/
HeadOffice
th
Audit Committee
4 Floor, Wisma SESCO
Petra Jaya 93673
Kuching, SARAWAK
Tel: 6082-441 188
Fax: 6082-313 588
E-mail: [email protected]
Chairman
Auditors
Datuk Fong Joo Chung
Non-Independent Non-Executive Director
Datuk Amar Haji Mohamad Morshidi bin
Haji Abdul Ghani
Ernst & Young
Principal Financial Institutions
RHB Bank Berhad
EON Bank Berhad
AmInvestment Bank Berhad
Nomination & Remuneration
Committee
Chairman
11
BOARD OF DIRECTORS
Datuk Amar Haji Mohamad Morshidi
bin Haji Abdul Ghani
Tan Sri Dato Sri Mohd Hassan
bin Marican
12
BOARD
OF
DIRECTORS
Datuk Haji Abdul Hamed bin Sepawi
Datuk Haji Abdul Hamed joined the Board of SEB and was
appointed Chairman of the Company on 27 June 2005. Datuk
Haji Abdul Hamed holds a Bachelor of Science degree from
University of Malaya (1971), studied Forestry at the Australian
National University from 1974 to 1975, and has a Master’s degree
in Forest Products Utilization from Oregon State University, USA.
He was awarded the titles of Panglima Gemilang Bintang
Kenyalang on 11 September 1999 and Sarawak Entrepreneur of
theYear2004,andwasafinalistfortheEntrepreneuroftheYear
Malaysia Award 2005. Datuk Haji Abdul Hamed is also Chairman
of the Nomination and Remuneration Committee, SESCO,
Naim Holdings Berhad, Executive Chairman of Ta Ann Holdings
Berhad, and Director of Sarawak Plantation Berhad, and sits on
the boards of several other private limited companies.
13
BOARD
OF
DIRECTORS
Datuk Amar Haji Mohamad Morshidi
bin Haji Abdul Ghani
Datuk Amar Haji Mohamad Morshidi bin Haji Abdul Ghani was
appointed to the Board on 26 May 2010. He holds a Bachelor
of Economics degree from Universiti Kebangsaan Malaysia and
a Master of Science in Human Resource Administration from
University of Scranton, Pennsylvania, USA. He was a Management
Executive with PETRONAS from 1980 to 1988, and Director of
Kuching North City Hall from 1988 to 1998. He then held a number
of senior positions in the Chief Minister’s Department before
being appointed a Permanent Secretary in the Ministry of Social
Development and Urbanisation in 2001. He was Director of the
State Planning Unit in the Chief Minister’s Department before
being appointed Deputy State Secretary of Sarawak in 2006
and then State Secretary of Sarawak on 2 August 2009. He sits
on the boards of a large number of organisations, including the
Sarawak Economic Development Corporation (SEDC), Universiti
Malaysia Sarawak, Swinburne University of Technology Sarawak,
Sarawak Forestry Corporation and SESCO.
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BOARD
OF
DIRECTORS
Dato’ Haji Idris bin Haji Buang joined the Board of SEB on 24
June 2000. He is currently a member of the Nomination and
Remuneration Committee and the Audit Committee. He holds
a Bachelor of Laws degree with Honours from University of
Buckingham, UK, and a degree of utter Barrister from the Lincoln’s
Inn, London. He is the proprietor of Idris-Buang & Associates and
was formerly the Chief Political Secretary to YAB Chief Minister of
Sarawak, a position he held from August 2000 to August 2006. He
was appointed Senator of the Dewan Negara on 28 November
2005, and was reappointed for another term of three years on 29
November 2008. Senator Dato’ Haji Idris also sits on the board of
Hock Seng Lee Berhad, Amanah Saham Sarawak Berhad and
several other private limited companies, including some state
government-linked companies.
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BOARD
OF
DIRECTORS
Tan Sri Dato Sri Mohd Hassan
bin Marican
Tan Sri Dato Sri Mohd Hassan bin Marican joined the Board of
SEB on 9 June 2010. He is a Fellow of the Institute of Chartered
Accountants in England and Wales, and a member of the
Malaysian Institute of Accountants and Malaysian Institute of
CertifiedPublicAccountants.Hebeganhisprofessionalcareer
in1972atToucheRoss&Co.,Londonandsubsequentlybecame
a Partner at Hanafiah Raslan & Mohamad/Touche Ross & Co.
in 1981. He was appointed PETRONAS’s Senior Vice President of
FinanceinFebruary1989,itsPresidentandChiefExecutiveOfficer
from February 1995 to February 2010, and its Acting Chairman
from July 2004 to February 2010. He currently sits on the boards of
Regional Corridor Development Authority (RECODA), Sarawak,
Lambert Energy Advisory Limited, Sembcorp Industries Limited
and Singapore Power Limited.
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BOARD
OF
DIRECTORS
Datuk Fong Joo Chung joined the Board of SEB on 31 January
1996. He obtained his Bachelor degree in Law (LLB) (Hons)
from the University of Bristol, UK and practised as an advocate
until retiring in July 1992 when he was appointed as the State
Attorney-General, Sarawak. He served as State AttorneyGeneral, Sarawak until 31 December 2007, but he has been
retained in an advisory capacity. Datuk Fong was awarded the
Panglima Jasa Negara by the Yang di-Pertuan Agong, Malaysia
in 1999 and Panglima Gemilang Bintang Kenyalang by the Yang
di-Pertua Negeri, Sarawak in 1994. He sits on the boards of several
other subsidiaries of the SEB Group besides holding directorships
in Encorp Berhad, Bintulu Port Holdings Berhad, Sarawak Cable
Berhad, Borneo Development Corporation (Sarawak) Sdn Bhd,
Harwood Timber Sdn Bhd and Permodalan Assar Sdn Bhd.
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Haji Wan Mahmud bin
Wan Abdullah
Zuraimy bin Kushaili
Head of CEO Office / Corporate Services
Head of Internal Audit
Chief Executive Officer, EMC Chairman
EXECUTIVE
MANAGEMENT
COMMITTEE (EMC)
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Haji Sulaiman bin
Abdul Hamid
Head of Finance
Miles Smith
Einar Kilde
James Ung
Head of Planning & Strategy
Head of Project Execution
Senior Vice President, Thermal
Victor Wong
Lu Yew Hung
Aisah binti Eden
Senior Vice President, Transmission
Senior Vice President, Distribution
Senior Vice President, Retail
Nick James Arnett Wright
Dr. Chen Shiun
Alvin Lim
Vice President, External Relations &
Strategic Communications
Head of Research & Development
Head, Key Account
(SCORE Customers)
Polycarp Wong
Siti Aisah Adenan
Marconi Madai
Julia Shim
General Manager,
Shared Services
General Manager,
People & Leadership Development
General Manager,
Corporate Risk & HSE
Chief Information Officer, Secretary
Stell Sindau
Senior Vice President, Hydro
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CHAIRMAN’S REPORT
I am delighted to present the Annual Report and Audited Financial
StatementsoftheCompanyforthefinancialyearended2010onbehalf
of the Board of Directors of SEB.
2010: A Journey from Vision to Reality
Following many years of steady growth and careful preparation, 2010
has been a year of rapid progress in SEB’s implementation of the Sarawak
Government’s SCORE (Sarawak Corridor of Renewable Energy) agenda.
Likewise, the transformation of the company from a stable and effective,
but local and traditional, utility into a modern, international corporation
is now well under way.
The Board shares the sense of optimism and energy that now surrounds
SEB, and we look forward to the next few years with real excitement.
The SCORE Agenda
SEB is now well on the way to transforming the Sarawak Government’s
SCORE vision into reality.
Bakun Hydro Electric Project (HEP)
Bakun is the commercial and technical foundation of the SCORE agenda
andunderpinsnotonlythefuturefinancialperformanceofSEB,butalsothe
social and economic development of Sarawak. With strong support from
the State Government, SEB’s negotiations with the Federal Government
for either an outright purchase or a power purchase agreement (PPA)
with the asset owner, Sarawak Hidro Sdn Bhd, have been our number one
priority.
These negotiations were successfully concluded on 1 June 2011, when
SEB signed a 30-year PPA with Sarawak Hidro.
Murum Hydroelectric Project
With a capacity of 944MW, the Murum HEP is SEB’s largest construction
project to date and marks the start of an ambitious program expansion
of hydroelectric generation to support the SCORE agenda. The
diversion tunnel was completed in late April, allowing the river to be
diverted on 30 April 2010.
Our team has been on a steep learning curve to develop a
deeper understanding of the proper role and accountabilities of
the proponents of a hydropower project. By the end of 2010,
we had secured significant improvements in our relationship
with our Engineering, Procurement and Construction (EPC)
contractor, China Three Gorges Corporation, in particular
with regard to the safety practices on site and the various
contractual arrangements.
20
New Hydropower and Coal Projects
We also made significant progress this year in better understanding the details of future HEP opportunities.
Historically, SEB’s approach to feasibility assessment had focused on technical and commercial issues. Our
hydropowerdevelopmentteamnowtakesamorecomprehensiveapproachthatrequiresinvestigationofthefull
range of related issues, such as road access, contract strategy, community engagement and communications,
landacquisitionandcompensation,resettlement,andenvironmentalimpactassessmentandmitigation.
The same processes are now deployed in our assessment of new opportunities for thermal generation.
Work will proceed in 2011 to prepare business cases for the following projects: Lawas, Limbang 1, Limbang 2,
Trusan 2, Baram 1, Baram 3, Baram 4, Belepeh, Linau 1, Belaga, Pelagus and Baleh.
SCORE Customer Negotiations
Having started the year with a relatively small number of potential SCORE customers, we are proud to report
thatthereisnowverystrongdemandforSCOREenergy.SEBexpectstoreachfirmagreementswithagroupof
advanced customers from the aluminium, manganese and silicon industries early in 2011.
Export Customer Negotiations
The potential for Sarawak to become the driving force of a regional energy hub has been the subject of
discussion and analysis at ASEAN and BIMP-EAGA meetings for many years. In 2010, we progressed to a much
morematureanddetailedphaseofnegotiationswithourneighbours,andweexpecttoconcludefirmplans
with Indonesia (in West Kalimantan) and Brunei Darussalam in early 2011.
Aerial view of the Bakun Hydropower Electric Station
21
Transforming the Organisation
The details of the main organisational changes undertaken in 2010 are recorded in detail in the CEO’s message
and elsewhere in this report. My main observation is that, in 2010, we are now on track to reach the level of
professionalismrequiredtodelivertheresponsibilitiesentrustedtousbytheStateGovernment.
In undertaking multiple mega-projects and signing power purchase agreements worth many billions of Ringgit
with international customers, SEB has now outgrown its traditional role as Sarawak’s local utility. We have entered
the ‘big league’ and the stakes are high.
In this new environment, it has been essential to ensure that we have the right expertise to protect our
shareholders’ interests. To support our growth strategy, we have recruited 97 new local employees, taking our
total head count to just under 3,000. We expect to recruit several hundred more local personnel in early 2011.
In 2010, we also engaged 13 expatriate employees, of whom nine have been seconded from Hydro Tasmania
pursuant to a broader partnership agreement. The recruitment of expatriates acknowledges the reality that
there are skills that are both essential to SEB’s achievement of the SCORE agenda and not yet available in SEB
or Sarawak.
I am delighted to observe both the strong commitment of our new arrivals to the achievement of Sarawak’s
objectives and the warm welcome that has been extended to our new friends by our local staff. Notwithstanding
the accelerating rate of change, I am conscious that our progress in 2010 represents early steps in a much
longer journey of transformation. Change of this nature is not easy and will inevitably cause disruption, confusion
anddisappointmentforsome.However,IamnowevenmoreconfidentthatSEBisheadingintherightdirection.
22
275kv transmission lines
Board Matters
Farewell to a Dear Friend
The SEB family was deeply saddened upon the passing of our respected Board member Dato’ Nordin bin
Baharuddin in June 2010. Dato’ Baharuddin was appointed a Director of Sarawak Energy Berhad in September
2005. A prominent member of the accounting fraternity, he was a familiar figure in the Sarawak corporate
scene. He served many years in Sarawak, with his last appointment prior to his retirement as Chairman of Ernst
& Young.
Meticulous in his approach and with a sharp eye for numbers, Dato’ Nordin was an active member of the Board
and served as Chairman of the Group Audit Committee for the tenure of his directorship in SEB. He contributed
activelytodiscussionsduringboardmeetings,andhisexpertiseandnetworksinfinanceandcorporatematters
were extremely valuable. Likewise, Dato’ Nordin’s corporate experience pertaining to the listing and compliance
requirementsoftheBursawereoftensoughtbytheBoard.
Retirements
Two of our long-serving Directors completed their service in 2010:
• TanSriDatukAmar(Dr)HajiAbdulAzizBinDatoHajiHusainjoinedtheBoardofSarawakEnergyBerhadon27
June 2005 and resigned as a Director in March 2010.
• DatukAmarWilsonBayaDandot,59,joinedtheBoardofSarawakEnergyBerhadon31January1996,also
sitting on the Audit Committee. Datuk Amar Wilson resigned with effect from 30 June 2010.
Our sincere thanks are extended to Tan Sri Aziz and Datuk Amar Wilson for their loyal and conscientious service.
Their efforts have been vital to building the very solid foundations from which our recent progress has been
launched.
New Arrivals
Two new members joined the Board in 2010:
• DatukAmarHajiMohamadMorshidibinHajiAbdulGhaniwasappointedasaBoardMemberofSEBinMay
2010; and
• TanSriDatoSriMohdHassanbinMaricanjoinedtheBoardofSEBon9June2010.
FullprofilesforournewDirectorsareprovidedelsewhereintheReport.
The new Board is energised by the scale and urgency of the SCORE agenda, and I am profoundly grateful to
the other Directors for their wisdom and support.
In closing, I wish to thank our shareholders for the trust they have placed in SEB, our staff for their unrelenting
efforts to achieve our goals, and our customers, professional advisors and stakeholders for their ongoing support.
Chairman
Sarawak Energy Berhad
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CEO’S MESSAGE
At the end of 2010, I feel privileged to have been given the opportunity
to lead Sarawak Energy Berhad through such an important and exciting
period of Sarawak’s development.
Mindful of how much our people have achieved, I have asked our
communications team to reframe this year’s Annual Report to provide
a more comprehensive record of our journey, reflecting my sense that
history will regard 2010 as a turning point for SEB.
Maintaining Our Core Utility Business
Over the past year, there has been strong growth in demand for power
from regulated tariff customers (both domestic and commercial)
and major industries established through the SCORE initiative. Growth
in demand from regulated customers for the year was 6.5 per cent.
Inclusion of major industrial customers brings the total growth to 21.7 per
cent. The combination of this rapid growth in demand and the delay
in the commissioning of the Bakun HEP means that the ‘reserve margin’
between peak demand and supply is now critically low.
Until access to energy from Bakun is secured, SEB’s system cannot
withstand an outage at any of our major power stations. In the meantime,
we are taking every possible preparation and precaution to prevent any
disruption to the security of Sarawak’s electricity supply.
Strong Financial Performance
SEB has recorded a final profit after tax for 2010 of RM336.2 million,
compared to the 2009 result of RM217.2 million. Of this amount, RM55.3
million was due to the recognition by the Ministry of Finance (MoF), in
mid-December 2010, of a deferred tax asset arising from the grant of an
‘investment allowance’ for the Bintulu combined cycle plant.
Thisisaverystrongresultthatreflectswellontheteam’sperformancein
2010,drivenbyrevenuegrowthandincreasingprofitabilityfromthepower
segment. Looking ahead, access to Bakun energy will help us drive down
the average cost of generation. However, the scale of our investment
programwillleadtoasignificantincreaseinourdebtservicingcosts.
Getting to Know SEB
I spent much of my time in early 2010 getting to know SEB’s people
and facilities around the four corners of Sarawak. Wherever I
went, I was consistently touched by the warmth and sincerity
of our employees, and by their enthusiasm for the challenges
ahead. These visits taught me that SEB and SESCO have a
proud heritage, and that we are generally well regarded by
the communities whom we are here to serve.
24
Notwithstanding the scale and pace of change and
progress to be expected in the years ahead, we should
never forget that any future achievements have been
made possible by the efforts of those that have
come before. I am therefore particularly grateful
to the retiring members of the Board of Directors,
including my predecessor Tan Sri Aziz, for leaving
SEBinsuchfineshape.
Understanding the SCORE Challenge
The Corporate Planning and Finance teams, in particular, have provided me with strong support in gaining a
firm grasp of what is required to deliver the SCORE agenda. Throughout 2010, we developed accurate and
comprehensive models that allow us to assess the impact of changes in our external environment, our investment
plans, or the commercial agreements that we conclude with our customers.
Pending the outcome of feasibility studies which address technical, commercial, social and environmental issues,
SEBnowexpectsthattherewillbeatleastfivemorehydropowerplantsandoneortwocoalprojectsdeveloped
by 2020. In total, up to 6,200MW of new capacity could be available by the end of this decade (including
Bakun and Murum). It is anticipated that around 70 per cent of this new generation will be hydropower, with the
remainder coming from coal resources.
To meet these growth targets, it now seems likely that SEB will need to invest more than RM20 billion in newgeneration and transmission infrastructure. The timing and sequence of new-generation projects will be
determined by customer demand.
Executing SEB’s Big Projects
Inearly2010,emergingchallengesintheMurumhydroandBintulucombinedcycleprojectsconfirmedthat
SEB required a much greater capacity in project execution. To this end, we have established a new Project
Execution (PE) Department, which incorporates the (previously separate) Sarawak Engineering Services business.
The establishment of PE has been among the highlights of 2010, and I have been impressed by the enthusiasm
with which the existing team has embraced the new systems and discipline introduced.
Sejingkat Coal Fired Power Plant
25
New Vision, Mission and Values
The Executive Management Committee has provided me with strong support throughout the year. One of the
group’s main achievements has been to support the development of new organisational mission, vision and
valuesforSEB.Theprocesswasundertakenoverseveralmonthsandrequiredseriouspersonalreflectiononwhat
we consider to be most important in terms of our capacity to work together to serve the people of Sarawak.
The new framework of vision, mission and values is both accurate and heartfelt. Our challenge for 2011 is to
engage the broader SEB team in what we mean by these new ‘words’ and make them meaningful to our work
from day to day.
RaisingtheFinanceRequiredforSCORE
Throughout 2010, the Finance team has explored options with various investment banks to secure the debt
financerequiredtosupporttheSCOREagenda.Atthetimeofwriting,theFinanceteamisconfidentthatwewill
soonconfirmtheofferofafacilitytoSEB:
(i)
(ii)
(iii)
26
ofatleastRM10billion,whichcanbeprovidedinadditiontothefinalpurchasecostsofBakun;
with a targeted rating of at least AA1; and
without resort to a parent (State Government) guarantee.
Murum HEP under construction
Aerial view of Bintulu Gas Fired Combined Cycle Power Plant
Looking Ahead
The kind of transformation that is under way at SEB is not affected by the end of one year or the beginning of
another.Manyoftheongoingprocesseswillcrystalliseinearly2011.Specifically,wearewelladvancedinour
preparation for:
•
•
•
•
•
•
thefinalisationoftheBakunandSCOREcustomernegotiations;
theadoptionofamorecontemporaryandfocusedorganisationalstructure;
therolloutofaformaltransformationprogramtoengageallSEB’speopleinthenewvision,missionand
values;
thecompletionoftheSukukbondprogram;
buildingsufficientinternalcapacitytoaddressthecomplexsocialandenvironmentalissuesarisingfrom
the development of the various SCORE projects; and
theupdateandrenewalofarangeofadministrativeandmanagerialprocessesandprocedures.
Conclusion
Few people in the business world are offered the chance to contribute to the transformation of an entire
economy or society. I therefore remain profoundly grateful to the Sarawak Government and the Board for the
opportunity given to me to lead SEB through this exciting transformation. I likewise thank all the staff at SEB and
our customers for their support, and I look forward to providing reports of further exciting progress through 2011
and beyond.
TORSTEIN DALE SJØTVEIT
Chief Executive Officer
27
S
A R A WA K
CORE
CORRIDOR OF RENEWABLE ENERGY
SEB and the SCORE Strategy
The new SEB HQ Building
SEB’S ROLE IN
SARAWAK’S FUTURE
The year 2010 was one of great change for SEB,
as we began our transformation from a local
utility company into a major regional supplier
of competitively priced renewable energy. To
achieve this transformation, we must rapidly grow
both our energy capacity and our workforce, and
in2010wemadesignificantprogressinboththese
areas.
Our expansion plans support the Sarawak State
Government’s development strategy, the Sarawak
Corridor of Renewable Energy. The foundation of
SCORE is Sarawak’s abundant hydropower and
coal resources. Development of these resources
will allow Sarawak to offer competitively priced
energy to our region and to attract energyintensive industries such as aluminium smelting
and solar panel manufacturing.
Sarawak’s geographic location and its stable political and economic environment place it in an ideal position
to attract energy-intensive industries. The new industries attracted by the SCORE strategy will deliver Sarawakians
new jobs, infrastructure and essential public services on a huge scale.
PhaseoneofproductionforthefirstgroupofsixSCOREcustomersaloneisexpectedtocreate25,000to30,000
direct and indirect jobs. Higher employment and income will lead to improvements in education, health and
community capacity.
In addition to direct employment, investment by SCORE customers will lead to the generation of new tax income
and water royalties that improve the capacity of both the Federal and State governments to provide essential
public services such as schools, healthcare and roads.
SEBhasanimportantroletoplayinSCORE.Weareinauniquepositiontobecomeamajorenergysupplierin
the region at a time when carbon pricing and the rising cost of fossil fuels will increase the global demand for
clean, renewable energy.
There is no doubt that a demand exists for competitively priced energy. Over the past year, there has been strong
growth in the demand for power from both domestic and commercial customers, including major industries
established through the SCORE initiative. Total 2010 growth in regulated customer demand was 21.7 per cent.
28
SEB has a long and proud history of providing energy to the people of Sarawak, and this next phase of our
growth will underpin Sarawak’s future prosperity.
Our plans for growth are ambitious, with a targeted nine-fold increase in energy output between 2010 and 2020,
from 5,921GWh to 54,947GWh. In terms of capacity, we will grow from 1,300MW in 2010 to between 7,000MW
and 8,500MW in 2020.
In 2010 we made great progress in moving towards our goals, employing almost 300 new people, moving
forwardwithourhydropowerandthermaldevelopmentprojects,andfinalisingnegotiationswithnewSCORE
and export customers.
SCORE and Export Negotiations
During 2010, SEB conducted discussions under the SCORE strategy with new industrial customers from a range
of industries as well as export customers. These discussions indicate very strong demand for competitively priced
energy in our region.
As at 31 December 2010, SEB was in negotiation with 21 potential customers from various industries ranging from
aluminium to antibacterials. Of these, SEB was in an advanced stage of negotiation with six customers.
Four of these advanced customers are proposed projects in Samalaju, Bintulu, consisting of the aluminium,
manganese,ferrosiliconandpolysiliconindustries.Thetotalpowerrequirementforthesefourcustomersisnearly
1,300MW.
The other two advanced customers are proposed projects in Tanjung Manis, Sarikei (metallic silicon) and
Samajaya,Kuching(solarwafer),withpowerrequirementsof12MWand70MW,respectively.
Weanticipatewewillreachfirmagreementswiththeseadvancedcustomersinearly2011.
Collectively,newindustrialcustomersareexpectedtorequire70–80percentofthecapacityfromtheBakun
hydropower project, the largest dam in Southeast Asia. They will invest billions of Ringgit, thus creating thousands
of job opportunities in Sarawak.
In addition to supplying power to industrial customers under SCORE, SEB needs to meet the growing demand
from domestic and regional customers. In 2010 we made significant progress with export negotiations, and
we are currently discussing power purchase and sale agreements (PPSAs) with West Kalimantan and Brunei
Darussalam. Opportunities also exist to export power to Sabah.
While there are no immediate plans for an interconnection between Sarawak and Peninsular Malaysia, the
supply of power to West Malaysia remains an option for the future.
29
Aerial view of the Bakun Hydropower Electric Station
SEB’s International Engagement on Sustainable Practice
In line with our rapid expansion plans and our commitment to sustainable hydropower development and
operation, SEB significantly increased engagement and collaboration with fellow utility companies and
international research and advocacy institutions during 2010.
SEB took up membership of the International Hydropower Association (IHA) in early 2010 to engage with the
latest progress within the hydropower sector internationally. The IHA pursues a range of initiatives on hydropower
sustainability, and is also addressing the possible role and contribution of hydropower to climate change
mitigation and adaptation.
ThepartnershipbeganwithSEBparticipatingintheUNESCO/IHAGHG(GreenhouseGas)EmissionMonitoring
project,andthiswaslaterextendedtojoiningtheIHASustainabilityPartnerprogram.TheaimoftheUNESCO/IHA
project is to undertake research that leads to a better understanding of the emission of methane from tropical
reservoirs. A key objective is to evaluate the carbon footprint resulting from the construction of a freshwater
reservoir within a river basin and to develop potential mitigation measures.
As part of the project, the IHA assisted SEB in setting up GHG emission monitoring campaigns for hydropower
reservoirs in Sarawak. Measurements were conducted at Bakun before impoundment began in October and at
Batang Ai, a mature reservoir.
30
In November 2010 the IHA adopted the Hydropower Sustainability Assessment Protocol, which was developed
by the Hydropower Sustainability Assessment Forum, a multi-stakeholder body with representatives from social
and environmental non-government organisations (NGOs), governments, commercial and development banks,
and the hydropower sector, represented by IHA.
The Protocol is an enhanced sustainability assessment tool which is being used to measure and guide performance
in the hydropower sector. It assesses the four main stages of hydropower development: Early Stage, Preparation,
ImplementationandOperation.Assessmentsrelyonobjectiveevidencetocreateasustainabilityprofileagainst
some 20 topics, depending on the relevant stage and covering all aspects of sustainability.
AsasustainabilitypartnerofIHA,wewillbenefitfromadditionaltrainingintheapplicationoftheSustainability
Assessment Protocol, which will ensure we apply the highest international sustainability standards to all of our
hydropower projects. Training is expected to be held in 2011, closely followed by an assessment of the Murum
hydropower project.
SEB also collaborated with the Scandinavian research organisation SINTEF during the year. A visit to SINTEF at
TrondheiminNorwayinJune2010ledtotwocollaborativeefforts.Inthefirstinitiative,SINTEFexpertstrainedSEB
staff in the measurement of GHG emissions for hydropower schemes, carried out at Batang Ai in September.
ThiswasfollowedbyseveralmoremeasurementsatthesamereservoirusingSINTEFequipment.InNovember,a
second project was carried out to employ SINTEF modelling and analysis tools for the optimisation of hydropower
resources in Sarawak. This involved creating new models for Sarawak power systems, incorporating hydrological
information to establish the optimal operating strategy for available water resources.
In August 2010, a Memorandum of Understanding (MOU) was signed between SEB and Transpower New Zealand
Limited. The MOU paved the way for both organisations to share knowledge, experience and opportunities to
be exposed to new developments in power transmission. Staff attachments and exchanges occurred during the
year,inadditiontothesharingofequipmentandinformation.
Closer to home, SEB signed a letter of cooperation with the School of Engineering and Science of the Curtin
University of Technology, Sarawak Campus, in early 2010. The collaboration started with several student projects
on the utilisation of palm oil biomass for power generation. Another project, on the modelling of fuel cell energy
conversion processes, is ongoing and regular discussions are held to review progress and to explore new projects.
Towards the end of the year the three main operating departments of Thermal Power Generation, Power
Transmission and Power Distribution jointly agreed to join the EPRI (Electric Power Research Institute) membership
program. EPRI is a not-for-profit and utility-funded research institute based in the United States and has a
multi-faceted research spectrum spanning environment sustainability, nuclear engineering, thermal power
generation, and power delivery and utilisation.
SEB shall continue to seek out opportunities to form strategic partnerships that enable us to achieve our goals and
that ensure the social and environmental performance of all our projects will be measured against international
standards. We shall continue to create opportunities for employees to improve themselves through further
education, greater exposure to international best practices and more in-depth participation with international
organisations.
Batu Tugun
31
FINANCIAL PERFORMANCE
SEBbeganitstransformationintoaregionalpowersupplierwithalongrecordoffinancialstrengthandprudent
capitalmanagement.Ourfinancialperformanceduring2010furtherstrengthenedthisposition.
Revenue
During 2010, SEB reported a total revenue of RM1,553.7 million, an increase of RM178.5 million compared to 2009,
primarily due to a RM161.5 million rise in electricity sales. The increase in electricity sales resulted from a growth
of 6.3 per cent and 5.6 per cent, respectively, in regulated tariff customers and a single bulk purchaser, Press
Metal Berhad, which commenced operations in November 2009. The higher growth registered by regulated
tariff customers was mainly contributed by commercial and domestic sectors.
Gross Profit
SEB’sgrossprofitincreasedbyRM106millioncomparedtothepreviousyear,mainlyduetohigherrevenueand
animprovedgrossprofitmarginfromthepowersegment.Grossmarginimprovedto26.1percent,compared
to 21.8 per cent in 2009. This was mainly the result of a more efficient power generation mix following the
commencement of the Bintulu combined cycle plant in June 2010 and full commercial run of the Mukah coal
power plant in May 2009.
In addition, the favourable gas price adjustment of RM16 million in 2010 and the lower feasibility studies expenses
ofRM15millionin2010,comparedtoRM32.9millionin2009,furtherimprovedSEB’sgrossprofitduringtheyear.
Profit before Taxation
Thehigherprofitbeforetaxin2010ofRM386.9million,comparedtoRM277.3millionin2009,wasduemainlyto
the net impact of the following:
• higherelectricitysales;
• highergrossmargin,asdiscussedabove;
• increasedotherincomecontributedbythehigherdeferredincomeamortisationandrecognitionofincome
from carbon credits from the Bintulu combined cycle project;
• impairmentofinvestmentinSeatracSdnBhd,amountingtoRM19.1million,duetodefermentoftheundersea
cable project with Tenaga National Bhd; and
• higherfinancingcostsincurredduring2009forthedevelopmentoftheMukahcoalpowerplant,theBintulu
combined cycle project, and the expansion for transmission lines.
Profit after Taxation
SEB recorded a lower effective tax rate of 13.1 per cent during the year compared to 21.6 per cent in 2009.
This was due mainly to the recognition of a deferred tax asset of RM55.3 million because of the investment
allowance for the Bintulu combined cycle gas turbine, which was granted during the year.
Asaresult,ahigherprofitaftertaxationofRM336.2millionwasachieved,anincreaseofRM119millioncompared
to 2009.
32
Raising Funds for Future Expansion
Ourstrongpositionplacesusinaverygoodpositiontoraisefinancetofundourexpansion.Wehaveestablished
aSukukMusharakahProgrammeofuptoRM15billioninMay2011tofinanceSEBGroup’scapitalexpenditure.
GROUP FIVE-YEAR FINANCIAL STATISTICS, 2006-2010
PERFORMANCE
Revenue
Profitbeforetaxation
Taxation
Profitfortheyear
Minority interest
Profitattributabletoequity
holders of the Company
Net dividends
2010
RM’000
2009
RM’000
2008
RM’000
2007
RM’000
2006
RM’000
1,553,734
1,375,195
1,339,266
1,319,208
1,177,813
386,939
277,274
293,731
400,727
264,466
(50,721)
(60,032)
(16,974)
(63,316)
(6,679)
336,218
217,242
276,757
337,411
257,787
5,091
(1,097)
(1,110)
(1,949)
(2,022)
341,309
63,009
216,145
63,009
275,647
63,006
335,462
56,201
255,785
45,462
ASSETS EMPLOYED
Property,plantandequipment
Investments and goodwill
Non-current receivable
Deferred tax assets
Bank and cash balances
Othernetcurrentassets/(Liabilities)
Associated companies
7,593,227 6,443,215
78,730
29,569
465,298
642,577
(711,276) (527,570)
42,241
43,047
5,001,301
34,337
766,392
(134,483)
45,314
4,471,783 3,896,564
2,686
909,515
668,700
41,627
119,416
35,279
55,098
Total
7,468,220
6,630,838
5,712,861
5,458,204
4,742,464
Equityattributabletoequity
holders of the Company
Minority interests
Non-current liabilities
Deferred taxation
3,491,025
13,263
3,567,710
396,222
3,214,631
18,354
3,022,276
375,577
2,865,428
17,257
2,459,774
370,402
2,595,994
16,147
2,470,359
375,704
2,305,090
14,406
2,045,225
377,743
Total
7,468,220
6,630,838
5,712,861
5,458,204
4,742,464
2.17
21.20
5.5
2.00
14.10
5.5
1.88
18.10
5.5
1.71
22.09
5.0
1.52
16.84
4.1
FINANCED BY
Net tangible assets per share (RM)
Net earnings per share (Sen)
Gross dividend per share (Sen)
SELECTED RATIOS
33
GROUP FINANCIAL HIGHLIGHTS
MAKLUMAT PENTING KEWANGAN KUMPULAN
Revenue
Profit for the year
RM (Million)
0
300
600
900
RM (Million)
1200
1500
1800
1,177.8
2006
0
100
200
1,319.2
2007
2008
1,339.3
2008
2009
1,375.2
2009
1,553.7
2010
276.8
217.2
336.2
2010
Net earnings per share
RM
0.5
1.0
1.5
2006
34
Sen
2.0
2.5
1.52
3.0
0
2006
2007
1.71
2007
2008
1.88
2008
2009
2010
500
337.4
Net tangible assets per share
0
400
257.8
2006
2007
300
2.00
2.17
2009
2010
5
10
15
20
25
16.84
22.09
18.10
14.10
21.20
35
35
OUR OPERATIONS
Changing Our Generation Mix
SEB is one of the major power companies in East Malaysia, producing power through its wholly owned subsidiaries,
Syankat SESCO Berhad (SESCO), Sarawak Power Generation Sdn Bhd (SPG), Sejingkat Power Corporation Sdn
Bhd (SPC), PPLS Power Generation (PPLS) and Mukah Power Generation Sdn Bhd (MPG). Transmission, distribution
and sale of electricity are undertaken via SESCO.
Currently, we draw less than 10 per cent of our power generation from hydropower projects. As we increase
ourhydropowercapacityundertheSCOREagenda,thisproportionwillchangesignificantly,withhydropower
expected to account for around 70 per cent of our generation by 2020. Our hydropower development plans
reflectthisshift,andduring2010werestructuredourdevelopmentdivisionandfeasibilityassessmentprocessto
streamline project execution.
AsatDecember2010,thetotalinstalledcapacitywithintheThermalDepartmentexceeded1,200MW,withfive
major power stations connected to the Sarawak State Grid and 19 isolated rural diesel and mini-hydro power
stations.
The details of all SEB’s power plants as at 31 December 2010 are as follows:
36
Operating
Subsidiaries
Location
SPG
Tanjung Kidurong, Bintulu
SPC
PPLS
MPG
SESCO
SESCO
SESCO
SESCO
SESCO
KampungGoebilt,Kuching
KampungGoebilt,Kuching
Matadeng,Mukah
Batang Ai
Bintulu
Miri
Sg. Biawak
Lundu, Penindin, Sebako
Sg. Pasir
Subtotal grid system
SESCO
TOTAL
Non-grid
A technician on duty at the Sejingkat Power Station
Type of Plant
Capacity (MW)
Total
Generating
Gas-turbine
Combined turbine
Coal-fired
Coal-fired
Coal-fired
Hydro
Gas-turbine
Gas-turbine
Diesoline
Hydro
317
Diesoline/Hydro
Sejingkat Power Station
100
110
270
94
192
79
114
2
1,278
50
1,328
POWER
GENERATION
PLAN
Tutong
LAWAS
Lumut
K.Belait
Tudan
To
Sabah
Tunku
LIMBANG
Sg.Tujuh
To
Brunei
LIMBANG 1
LIMBANG 2
MIRI
Limbang
river basin
Bunut
tr i
es
Samalaju
Baram
river basin
us
E n e r g y In
Tg.Kidurong
ten
si v
e
d
In
Baram 1
Similajau
Baram 3
(Power Station)
Murum Junction
Mukah
it y
du
rt
io n / S m a
Mukah East
cat
C
SCORE
northern
gateway
Kemena
Matadeng
Oya E
Balingian
Belepeh
Balingian
coal-field
Selangau
Dalat
Bakun
Murum
Daro
G.Maling
Pelagus
i eB a s
s ed
Tg.Manis
Oya Road
SCORE
southern
gateway
e
rc r
R e s o ud u st
In
Sarikei
Song
Kemantan
Upper Rejang
river basin
Kapit
Baleh
Tondong
S A R A W A K
Matang Biawak Sejingkat
To
N
KUCHING
Ka
lim
an
ta
n
Mambong
Entinggan
Engkilili
Btg.Ai
To meet our increased energy generation plans, SEB intends to develop large hydropower projects to deliver
bulk energy reliably at a relatively low cost. In addition to securing power from the Bakun Dam and completing
construction of the Murum Dam, SEB is currently undertaking feasibility studies of other potential projects.
Pending the outcome of feasibility studies that address technical, commercial, social and environmental issues,
weexpecttodevelopatleastfivemorehydropowerplantsandoneortwocoalprojectsby2020.Intotal,up
to 6,200MW of new capacity could be available by the end of this decade, including the Bakun and Murum
hydropower facilities.
Future hydropower projects may include Baram 1 (1,200MW), Baram 3 (300MW), Linau (297MW), Belepeh
(114MW), Pelagus (411MW) and Baleh (1,300MW). The Limbang 1 and 2 (245MW) and Lawas (87MW0)
hydropower projects may also be developed as a regional system in the north, in conjunction with the supply of
power to Brunei and Sabah.
A main 500kV transmission system will be developed in stages, in coordination with the hydropower projects
development. The current 275kV network will be expanded to tap the 500kV backbone and to connect the
hydroelectric dams into the state grid system.
In addition to supporting the rapid growth in local domestic and commercial demand, this new output can
be sold to new major customers from energy-intensive industries, which will bring investment, employment and
other opportunities to Sarawak. Negotiations are also well advanced to sell power to West Kalimantan, and SEB
is exploring the potential to sell power to Brunei and Sabah.
We anticipate that the new-generation developments in the SEB Group will result in a balanced generation mix
of 69 per cent hydro, 19 per cent coal, 10 per cent gas and 2 per cent diesel by 2020.
During 2010 we undertook feasibility studies on several of these projects, as outlined in the following section on
our hydropower development process.
37
Hydropower Development Process
Streamlined
The Hydropower Development Division has undergone significant
growth during 2010 and adopted a new project development model
tostreamlineourdevelopmentprocessandensureefficientexecution
of projects.
In early 2010 the division was divided into two sections and renamed
the Hydropower Development (Feasibility Studies) Division, with its
main focus being to undertake feasibility studies for existing and new
hydropower projects.
With the appointment of Graeme Maher as Senior Manager heading
the division in July 2010, the division reverted to its previous title and
continued its role of undertaking feasibility studies.
Duringthefinalquarterof2010theSEBProjectModelwasintroduced,
signalling a change of approach to the implementation of hydropower
projects in particular and other major projects in general.
Under the SEB Project Model, the Hydropower Development Division
will handle the early phases of hydropower project implementation:
Phase 1 (Initiation Phase) and Phase 2 (Concept Phase), while the
ProjectExecutionDivisionwillberesponsibleforthefinalphases:Phase
3 (Pre-Engineering) and Phase 4 (Execution), as well as the handingover to the eventual owners under Phase 5 (Operation).
An impressive view of the Bakun Hydro Electric Dam
38
A technician maintaining the power lines
The new model will address important development issues:
• allstudiestobealignedsothattheyarecomparableacrossprojects;
• morecomprehensivecoverageofissuessothatgapsareeliminatedfromplanning–thatis,roads,property
acquisition,budget;
• betterunderstandingandreductionofhydrologyrisk(ourgreatestdevelopmentrisk);and
• clearerprojectbenefits,ratherthanjustafocusonprojectcosts.
Staff numbers in the Hydro Development Division were also substantially boosted during 2010 to enable SEB to
realise our ambitious expansion plans. In addition to secondees from Hydro Tasmania, SEB engaged experienced
international consultants and increased the number of local employees to ensure we meet our short-term
project needs as well as build capacity and capability for the long term.
Feasibility studies for the Baram, Baleh and Lawas HEP projects were substantially completed by the end of
2010. Other feasibility studies on Limbang 1 and Limbang 2 HEPs, Belaga HEP, and Pelagus HEP were previously
completed in 2009.
39
BAKUN Hydroelelectric Dam
Bakun HEP Negotiations
The Bakun Dam is the largest hydropower project in Malaysia, with an installed capacity of 2,400MW. The facility
willbethebackboneoftheenergyresourcesofSarawakforthenext50–100years.Thedamiscurrentlyowned
by Sarawak Hidro SDN Bhd (‘Sarawak Hidro’), a company 100 per cent owned by the Malaysian MoF, and SEB is
activelyengagedinnegotiationstoleaseoracquiretheBakunpowerfacilities.
Bakun was originally intended to supply power to Peninsular Malaysia, but during 2010 the Government
of Malaysia and the State of Sarawak agreed that Bakun’s output would be used to support the industrial
development of Sarawak.
SEB is taking a two-phase approach to securing power from the 2,400MW Bakun Dam. The first phase is the
negotiation of a power purchase agreement between Sarawak Hidro and SESCO. The second phase is the
ongoing negotiations between the State Government of Sarawak and the Government of Malaysia for the
StatetowhollyorpartiallyacquiretheBakunDamviaapurchaseofSarawakHidro.
In late August 2010, SEB made an offer to the Government of Malaysia to purchase Bakun, and in September
2010 we undertook a due diligence of the project. Following this assessment, we submitted a revised offer.
Negotiations are still under way.*
40
The Bakun PPA is the cornerstone of SEB’s pricing strategy for SCORE customers. By blending the relatively lowcost Bakun power with the output of other higher-cost developments, SEB can construct the full program of
SCORE developments at a globally competitive average cost of supply and maximise the number of energyintensive industries we can attract to Sarawak.
In this way, Bakun unlocks the full social and economic value of Sarawak’s energy resources, contributing to
thedevelopmentofSarawakintoahigh-incomeeconomyby2020.Thiswillbringsignificantbenefitstoboth
Sarawak and Malaysia for many decades to come through higher tax and royalty revenues, improving the State
and Federal governments’ capacity to fund vital public infrastructure.
We expect the Similajau substation and the transmission line connecting Bakun to Similajau to be energised in
thefirsthalfof2011.
*APPAforthefulloutputofBakunwassubsequentlysignedwithSarawakHidroinJune2011.
Murum Hydroelectric Project
The Murum Hydroelectric Project is SEB’s largest construction project and marks the start of our ambitious
expansion of hydroelectric generation to support the SCORE agenda. The Murum project has a capacity of
944MW and consists of a 141-metre-high concrete dam, 2.7km twin tunnels and a powerhouse. There is also a
transmission line, township and major access road under construction to service the project.
Reservoirfillingwilldisplacesome1,400Penanpeople,andtheGovernmentisaddressingtheresettlementof
these affected people.
The project is being constructed by Three Gorges Development Company under a design and construct
contract, and there are some 1,800 workers on site. A separate contract was previously let with Longsheng to
construct the river diversion works to enable an early start.
Progress on the project has been hampered by a two-year delay of the permanent access road being
constructed by JKR. The existing 70km logging road is to be used for most of the construction period, presenting
considerable challenges.
During 2010 the diversion tunnel was completed and the construction of the main dam began. The SEB Board
approved a revised budget, up from RM3.71 billion to RM4.28 billion, to take account of the known and forecast
projectriskssuchasroadaccessdifficultiesandadversegeologicalconditions.Expenditureontheprojectwas
RM1.1 billion at year-end.
A major contractual claim with Longsheng relating to the collapse of the diversion tunnel in 2009 was resolved
during the year.
SEB has a staff of 40 persons managing the project, headed up by Project Director Mr Andrew Pattle who started
workinMayfollowingtheretirementofMrLeeSingSiew.Therehasbeensignificantstrengtheningofproject
management rigour during 2010.
AkeypriorityforSEBistoimprovesafetyonthesite,astherehavebeensignificantissueswiththecontractor’s
safety performance on the project. Measures introduced by SEB to improve safety on site have led to a marked
improvement at year-end.
The diversion tunnel was completed in late April 2010, allowing the river to be diverted on 30 April, which
wasasignificantmilestonefortheproject.Thediversiongavethecontractoraccesstotheriverbedfordam
construction. Excavation of the dam foundation progressed steadily throughout 2010. Concrete pouring for the
dam commenced, with some 4 per cent of concrete being placed. The powerhouse, intake and tunnels also
progressed well, and the powerhouse is 35 per cent complete.
MURUM Hydroelelectric Project
Theconstructionperiodfortheprojectspansfiveyears,withfirstpowerforecastinearly2014.
41
41
Mukah Coal-Fired Power Plant
The Mukah coal-fired power plant, owned by the SEB subsidiary Mukah Power Generation Sdn Bhd (MPG),
receiveditsfinalacceptancecertificateforcommercialoperationin2010.
The plant sits on an 865-acre site about 30km east of Mukah town along the Mukah–Balingian coastal road.
It comprises two units of 135MW boiler-turbine-generator units, which are primarily fuelled by local coal, with
distillate fuel oil as a standby energy source.
The plant uses conventional pulverised-fuel technology in the boilers to generate steam that drives the turbo
generators. The power generators then step up to 132kV by generator transformers, and export to the SESCO
grid via a 132kV switchyard built by SESCO.
42
The project also includes ancillary infrastructure. This includes a coal yard with a related coal-handling system,
an ash pond with a corresponding ash-handling system, a chimney, electrostatic precipitators with a related
flue-gassystem,acoolingpondwithanassociatedcoolingwatersystem,aswellasadistillatefuel-oilsystem
and storage tanks. The operation and maintenance of the plant is carried out by MPG personnel.
Construction of the plant began in May 2006. Unit 1 commenced commercial operation on 16 January 2009 and
unit 2 on 3 May 2009. Upon completion of the 14 months’ contractual warranty period, the Final Acceptance
Certificate(FAC)wasissuedon20July2010forunit1andon9September2010forunit2.
The Bintulu Combined Cycle Project
The Bintulu combined cycle project is a gas-turbine combined cycle plant with a total capacity of 317MW. The
plant uses the waste heat from the exhaust of the existing open cycle generators to generate more electricity
through a heat recovery steam generator.
With this combined cycle technology, the new facility is able to generate around 30 per cent more electricity
from its fuel (natural gas) than it would with a conventional open-cycle power system. As it generates electricity
through the recovery of waste heat without burning additional fossil fuels, the plant produces fewer air pollutants.
The facility underwent successful start-up and commissioning during the first quarter of 2010. After a 30-day
periodoftestingitwasdeclaredfitandenteredcommercialoperationon30June2010.
The plant was registered with the United Nations under the Clean Development Management (CDM) scheme
on 18 September 2010. The CDM is part of the Kyoto Protocol environmental agreement and aims to encourage
sustainable development and reduce greenhouse gas emissions. The Bintulu facility is the first CDM plant in
Malaysia.
43
OUR PEOPLE
SEB’s ambitious plans for growth mean we must
rapidly employ new people with the skills to help
us fulfil these plans. During 2010 our employee
numbers grew significantly, with more than 300 new
appointments. This expanded our workforce to a total
of 2,959 employees, 2,938 of whom are locals or from
the region and 21 expatriates.
44
Our employee numbers will continue to grow as we
expand our operations to fulfil the SCORE agenda.
We look forward to offering new employment
opportunities to the people of Sarawak during this
exciting expansion phase of our business, and to
building our skills and expertise through our global
network of experts.
New vision, mission and values
One of SEB’s main achievements during 2010 was
to develop new organisational vision, mission and
values. This process was undertaken over several
monthsandrequireddeepreflectionconcerningthe
type of organisation SEB needs to be, both to achieve
our goals and in the way we work together.
The new framework will allow SEB to achieve its
ambitious goals for the future. Our challenge for the
year ahead is to engage the broader SEB team in
what these new vision, mission and values mean, and
to put them into action.
SEB Leadership Conference in progress
Developing a Strong Leadership
Culture
The SCORE initiative entrusts SEB with a significant
responsibility. The new electricity infrastructure that
we are working to achieve will bring vast business
opportunities and prosperity to Sarawak for decades
to come. However, to achieve our goals we need a
different style of leadership at SEB and a culture that
inspires optimism, enthusiasm, hard work and open
communication.
During 2010, we conducted a number of leadership
conferences to support our leadership staff and to
cultivate the culture we need in order to move forward.
We also began the planning of a cultural change
program that will be initiated from January 2011.
EMC members at the SEB Leadership Conference
ThisnewSEBcultureisonethatwillsupportthefutureplansofSEB.ThefutureofSEBwillbebuiltonfivepillarsof
operational strategy:
signingnewcustomers;
maintainingstrongfinancialperformance;
deliveringexcellentprojectexecution;
maintainingcredibilitythroughexcellenceinoperationalperformance;and
deliveringonourculturalchangeprogram.
Ourfirstleadershipconferencewasheldon1–3July2010.Morethan100SEBseniormanagementstafffromall
overSarawakconvenedatDamaiPuriResort&SpatoattendtheCEOLeadershipConference,Series1/2010.
The conference covered all the major issues that have an impact on SEB’s challenging mandate for renewable
energy development established by the State.
The three-day conference was delivered by SEB’s CEO, Mr Torstein Dale Sjøtveit. Its main objective was to
enhance communication between the middle and top management to achieve the vision and mission of the
Company. The program aimed to promote and align SEB’s leadership and management principles across the
Group and to provide an avenue for the management team to discuss their experiences and ideas.
TheconferencealsoprovidedanopportunityforthedelegatestodiscusswiththeCEOtheirviewsandquestions
regarding the challenges posed by SEB’s expansion plans.
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45
Technicians installing the power lines
During the three days, Mr Sjøtveit emphasised that it was the responsibility of all SEB employees to contribute
towards SEB’s success. Key attributes of SEB leaders are a positive attitude, determination to get the job done,
and a willingness to communicate with honesty and transparency, and to be receptive to direct feedback
even when the message is uncomfortable.
Leaders at SEB are also expected to have the courage to say ‘no’, challenge the facts, develop new leaders,
and learn from failures, but also to acknowledge achievements.
Decisive action to address key priorities for change will be initiated during 2010 and 2011, including:
•
•
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takingsafetymoreseriously;
tighteningupmanagementofmajorprojects;
addressingpowertheft;and
recognisingandaddressingoursocialresponsibilities.
Improving Skills through Training
SEB is committed to continual improvement of the skills and expertise of all our employees. With this in mind,
throughout the year we conducted numerous training courses for staff. The courses were coordinated by the
Competency Development Division (CDD) and were conducted either by staff of SEB or external trainers.
During 2010, CDD conducted 98 runs of Safety and Competency courses for the purpose of the CAC competency
certificationwith1,553participants.Wealsoregistered384employeestoattend133externalcoursescovering
technical,management,supervisory,qualityandmotivationfields.
46
In-house programs covering technical, management, supervisory, quality and motivation fields were also
organisedduringtheyear,aswellaseightrefreshercoursesessionsforPaperProficiency.
Partnership with Hydro Tasmania
SEB’splansforgrowthmeanwemustrapidlyfindtherightpeoplewiththenecessaryskills.Aspartofthisprocess,
weconductedasearchtofill12criticalmanagementpositions,initiallylocallyandwithintheregion,andthen
globally. To support our immediate needs we are negotiating a partnership with Hydro Tasmania, Australia’s
largest producer of renewable energy. We expect to formalise this partnership agreement in 2011.
When finalised, the partnership will be a formal
agreement for knowledge transfer, which includes
secondment of staff from Hydro Tasmania, consulting
services and a number of co-development agreements
forspecifichydropowerprojects.
A key objective of the secondment program is
succession planning and knowledge transfer, so that
local employees will be trained to take over the roles of
secondeeswithinaspecifictimeframe.
During 2010, seven managers out of a total of 120 have
been appointed under the secondment program.
There will be 20–30 additional support staff appointed
under the program over time.
Customer Service Counter
The partnership program with Hydro Tasmania will
enableustofillourcompetencygapssothatwecan
expand at the speed necessary to meet our growth
targets. It will also raise the skill level of all SEB employees
through higher levels of training and knowledge transfer.
NewHeadquarters
As part of our expansion program we are building new SEB headquarters to accommodate our growing
workforce.Situatedon4.4acresatthesoutheastcorneroftheisthmus,thebuildingwillbethefirstinSarawakto
achieve Green Building Index status.
Afterreviewingsubmissionsfromarchitecturalfirms,theBoardapprovedtheproposalfromJurubinaUnireka.
DesignedtoachieveLowEnergyIndexstatus,thenine-storeybuildinghasanEnergyIndexof120kWpersquare
metre.
Thedesignisexpectedtohalveenergyexpenditurethroughenergy-efficientfeatures,including:
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•
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east–westorientationtominimisedirectsunlightexposure;
internalatriumformaximuminternallight;
double-glazingofwindowstoensurelowheattransferbuthighlightpenetration;
sunshadesandscreenstoreducedirectsunlightbutallowdiffusedlight;
energy-efficientchillersandmotorsontheairconditioningandliftsystems;
daylightphotocellsensorstocontrolartificiallighting;
photovoltaicpanelstoharnesssolarenergy;
efficientwaterfittings;and
recyclingfacilities.
Thebuildingisanoblongshapewithanetfloorareaofapproximately28,100squaremetres.Thesub-basement
car park can accommodate up to 380 cars, with a further 215 parking lots at ground level.
InJuly2010,SEBdecidedtoupgradethebuildingtobecertifiedasagreenbuildingundertheGreenBuilding
Index (GBI) certification. The upgrade from a low-energy building to ‘green building certified’ level required
minimaladjustment,astheenergyefficiencyaspectcontributesthemostpointstotheGBIrating.
As at 31 December 2010, the building is 57 per cent complete. All the foundation and superstructure work has
been completed, but architectural work is 36 per cent complete while mechanical and engineering work is 55
per cent complete.
WeareexpectingthenewheadquarterstobecompletedbyDecember2011.
To reduce the carbon footprint of the building, solar panels will be used to generate renewable energy for
certain appliances. These will be installed on the rooftop and in some parking areas. Rain harvesting tanks
installed on the rooftop to cater for the watering of plants will minimise the use of expensive treated water.
47
Safety
SEB has made the improvement of safety
standards a top priority during 2010. During the
year, three external contractors died in two
separate safety incidents at the Murum and
Mukah projects.
While SEB is not legally responsible for these
incidents, such occurrences at SEB-owned sites
are unacceptable on every level.
We have endeavoured during the year to lift
the awareness of safety among our employees
and to implement rigorous systems and
procedures to protect the safety of everyone
working on our projects.
SEB’s Safety Division has been instructed to
instigate strict safety procedures at all project
sites, including those controlled by external
contractors.
State Dispatch Centre, Wisma SESCO
In addition, we have initiated a public electrical safety awareness program. As part of the program, SEB staff
visited 69 schools to deliver presentations on electrical safety and conducted 37 public talks.
Addressing Power Theft
Theft of SEB’s electricity has come under intense scrutiny during the year, and during 2010 we engaged outside
support to deal decisively with this issue.
More than 7 per cent of the electricity we produce is currently being stolen. In 2010, power theft cost SEB RM105
million, rising from around RM50 million in 2005. The most significant loss is in the commercial sector (16.2 per
cent),followedbydomestic(12.84percent)andCTmeters/industrialcustomers(4.75percent).
In November 2010, the total distribution losses peaked at 18.58 per cent, with technical losses estimated to
account for 11 per cent of the total distribution losses and theft accounting for 7.58 per cent, worth RM105
million.
The theft of power is a crime, and there are strong indications that a small group of SEB employees is involved.
SEB employees found to have been involved in electricity theft have been dismissed and we are continuing our
investigations.
The following graph shows electricity losses by month. Following the implementation of our investigations, losses
fell slightly between November and December 2010.
In addition to our investigations of power theft, we have implemented an awareness campaign to emphasise
to the public and to SEB employees that stealing electricity is illegal as well as unethical. This effort involved a
seriesofpresscampaignstocreatepublicawarenessofenergyefficiency,sustainabilityandthetheftofpower,
as well as discussions with our staff as to the reasons they may not be properly checking meters.
We have also put in place an education program to educate the public on the safety aspect of power theft, as
tampering with electrical installations can make the installation unsafe and may endanger lives.
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On a technical level, we have set up a process to improve our tracking of meter irregularities and to analyse
abnormality reports. This includes the introduction of a GSM remote metering system, SAP and GIS systems to
trigger abnormality reports. Meter installation construction practices and sealing methods have also been
improved, and we have adopted new and advanced metering technology.
During the year we have established close links with police and other relevant authorities to deal with security
and to closely monitor high-risk customers.
Eliminating power theft will continue to be a top priority during the coming year.
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49
SEB IN THE COMMUNITY
Community Program
SEB is proud to be able to support the prosperity of the
people of Sarawak and we take seriously our responsibility
towards the community in which we operate. As part of
this commitment to our community, we recently became
a sustainability partner of the International Hydropower
Association. This partnership means that the social and
environmental performance of all our projects will be
measured against international standards.
During 2010 we initiated a more structured approach
to our Community Program. This included implementing
sustainable social investment programs in partnership with
local communities and other stakeholders to benefit the
communities in which we operate.
As a top priority, we focus on community development in
the communities directly affected by our projects. We do
this by investing in skills development, and educational and
medical facilities, and by aiding in the preservation of the
cultural heritage of indigenous communities. In addition,
we support lifestyle improvement and capacity-building
initiatives in other under-served rural communities.
Christmas in Long Wat, Murum 21.12.2010
During 2010 we undertook the following projects in communities where we started new SEB power generation
projects:
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constructedakindergartenforthechildrenofLongWatinMurum;
providedschoolbagsandstationerysetstokindergartenstudents;
donatedricetothecommunityinMurumaffectedbypoorharvest;
supported the cultural heritage of indigenous communities by hosting and supporting numerous festival
celebrations and ritual ceremonies, such as the Pelah Daleh at the Penan’s sacred rock in Murum; and
• helddialogueswithlocalcommunitiesandorganisedritualceremonies.
Wider community engagement initiatives during 2010 included:
• capitalcontributionforelectricitysupplytoneworrenovatedwelfarehomes,housesofprayerandakidney
dialysis centre;
• donationforrebuildingofaschoolrazedbyfire;
• donationofcomputerstoschools;
• donationofcashandin-kindcontributionstosocialwelfareorganisations;
• hosting festivals and religious celebrations – such as Hari Raya, Gawai and Christmas festivals – for local
communities; and
• organisingablooddonationdriveandparticipationinsportsandgamestopromotesocialintegrationin
support of the 1Malaysia concept.
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RuralElectrificationProgram
During 2010, SEB set up a Rural Electrification Division to oversee the delivery of power to Sarawak’s rural
population. Ensuring that rural communities have access to electricity is a key priority for SEB, and we are working
closely with the Sarawak State Government to achieve this.
Ruralelectrification(RE)isaboutproviding24-hourelectricitytocommunitiesinremoteareasthathavebeen
relying on expensive and noisy diesel power generators. Our focus is to extend our grid to reachable areas, while
hybrid systems employing renewable solar energy will be established for regions deemed too remote for grid
connection.
Under the National Key Result Area (NKRA) initiatives launched by the Government, expanding rural infrastructure,
including electricity provision, is a key target. Close to RM2 billion has been earmarked for Sarawak to raise
electricity coverage from the existing 66 per cent to 95 per cent by 2013. Over 2,000 villages are expected to be
connected to the grid, while hundreds more will be provided with off-grid systems.
SEB has committed to take over the ownership, operation and maintenance of the RE systems implemented
throughtheseprograms.During2010weputtogetheramasterplantoguidetheruralelectrificationprocess
and instigated a new training program for our staff.
The project is challenging. Sarawak covers an area the size of Peninsular Malaysia with a widely scattered
population,andtheinterioraccessibleonlyvialoggingroads,riverorbyair.Transportationcanalsobedifficult
or impossible for extended periods due to adverse weather conditions, low river levels, landslides and damage
to bridges.
Despite these challenges, SEB is fully committed to ensuring these programs are successfully implemented. We
haveintroducedanumberofnewinitiativestosupportruralelectrification.Theyinclude:
• In mid-2010 we formed a dedicated Rural Electrification Team to ensure that projects are implemented
effectively and in a timely manner.
• InDecember2010welaunchedourRuralElectrificationManagementSystem(REMS)tohelpustrackour
internal processes.
• WeinitiatedaRuralElectrificationMasterPlantostreamlinetheplanningprocess.
• WecreatedaRuralElectrificationGISsystemandareworkingcloselywithseveralministriesandagenciesat
the federal and state level to gather the relevant information.
• We initiated a process to enable us to work closely with contractors to ensure that they understand our
processes, procedures and engineering standards.
We made good progress on the RE program in 2010. During the year 12,313 homes were connected throughout
Sarawak, with a target of 21,792 homes to be connected during 2011.
We are also making good progress with stand-alone alternative hybrid systems planned for very remote locations.
In some of these rural areas the design will be developed for expansion into a micro-grid system. As these hybrid
projects are to be handed over to SEB, we have a responsibility to provide continuous supply into the future
through the development of new operation and maintenance procedures.
The government is allocating funds for the off-grid program. Nine off-grid solar hybrids have been planned for
completion in 2011, and RM20 million has been made available for micro hydro pilot projects. SEB is actively
identifying potential micro hydro sites to utilise this funding.
SEB’s commitment to Rural Electrification is clear, and we look forward to bringing electricity to all rural
communities as part of our commitment to the people of Sarawak.
In June 2010 the Second Minister of Planning and Resource Management, Datuk Amar Haji Awang Tengah Ali
Hasan,launchedtheRuralElectrificationschemefortheBakong–TinjarstretchintheruralMarudiconstituency,
costingoverRM50million.Theschemewillbenefitthousandsoflonghousedwellers.
51
CORPORATE SOCIAL RESPONSIBILITY
WHAT DO WE STAND FOR?
Corporate Social Responsibility refers to an organization’s response on environmental, ethical, social and
economic issues in relation to key stakeholders. In this regard, Sarawak Energy Berhad has a long standing
traditionofcontributingtosocietyanditsemployeesaswebelieveinstrikingabalancebetweenprofitability
and giving back to both the external communities as well as our own employees.
We are driven by the belief in good corporate governance and responsibility because CSR and Corporate
Governancemergeprincipallyintheareasofbusinessprinciples/valuesandriskmanagement.
Sarawak Energy Berhad and its group of companies will continue to make its presence felt in the state of Sarawak
not only through vigorous development projects but also with the heart and mind to get involved in corporate
social responsibility programs.
SEB CORE CSR THRUSTS
On the platform of education, sports development and community & nation-building, the Group carries out
activities that create a value proposition for all parties concerned.
For Employees
For its employees, Annual Dinner and Family Day are organized on a yearly basis to bring close rapport among
theemployeesandinstillintothemthespiritofcamaraderieandesprit-de-corp.Alsoheldonaquarterlybasis
was the voluntary blood donation campaign to ease the burden of the hospital’s Blood Bank especially during
critical times. Employees donate blood through an organized Blood Donation Program that has been practiced
over the last 15 years or so. Lucky employees who bled for a noble cause were rewarded with winning hampers
and tokens. All in all, we used to get generous response from our staff.
Sports and Recreations
Since 2008, Sarawak Energy Berhad has organized the Sarawak Energy Berhad Golf Tournament at Sarawak
Club Golf Resort which was participated by all Heads of Departments, business-associates and clients of SEB in
order to foster and enhance greater working relationship with our associates. We have also organized the SEB
Badminton Tournament to cater for different group of youths and veterans to unearth emerging talents within
the badminton-playing fraternity that can represent the state and country in national and international games.
Notwithstanding the above, SEB do participate in state-organized games and recreational activities such as in
MAKSAK and our own Inter-Regional Meets to bring employees from all regions and districts together in the true
spirit of sporting brotherhood. The Inter-Regional Games were specially tailored to include our subsidiaries as
well in order for staff to familiarize with each other. These subsidiaries include the SPC, MPG, SESCo Engineering
Services Sdn Bhd and SARWAJA.
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SEB also participated in TNB Technical Games at ILSAS Kuala Lumpur. This participation gave the employees to
build a close rapport and exchanging ideas with TNB and SESB staff. We are now looking at organizing InterUtilities Meet that will include Tenaga Nasional, Sabah Electricity Sdn Bhd, the Department of Electricity (Negara
Brunei Darussalam) and PT PLN (Persero) of Indonesia.
Community Development, Education & Nation-Building
The Rural Electrification Scheme (RES) Projects
For Sarawak Energy Berhad, giving back to the society is a normal practice that it will always continue to sustain.
Throughout the years, Sarawak Energy Berhad and its group of companies have embarked on a number of
social projects that were meant to bring more benefits to the people.
Through assisting the government directly in the implementation of the RES projects, SEB need to generate more
power to enable the rural areas to be lighted up and connected to the grid. Whilst this ensures a more stable
supply of power to households in the interior of Sarawak, it may not translate into direct earnings for SEB in the
short-term.
Donations and philanthropic deeds to other organizations
Different institutions have different needs. We have given refurbished computers to various school and communal
societies to assist rural students to have access to computers. Among the beneficiaries were JKK Kampung
Sungai Nada and SMK Matang Jaya. We have and will continue to give books to fill up the libraries of secondary
schools around Kuching so that students can have access to updated reports of happenings around the world,
especially pertaining to our projects.
We contributed to other various racial and cultural rites by contributing in no little ways to festivals such as the
Pesta Berumuh for the Bidayuhs and Pelah Daleh in Murum for the Penans. We also organized the Fast-Breaking
ceremony for the Muslims during their fasting month and also the Hari Raya gatherings in all regions. During
the Muslim fasting month of Ramadan, SEB organized several Majlis Berbuka Puasa functions where Senior
Management officers would visit various Homes for the Aged and the needy to hand over donations both in
cash and in kind. However, it is important to note that during these occasions, all employees irrespective of race,
culture and ethnic backgrounds were invited, making the function a truly unifying experience for all.
To assimilate with the society at large, our employees has, and will continue to, participate in the Hari
Kemerdekaan Celebration, Maulidur Rasul and Ma’al Hijrah congregations and the celebration of the Yang DiPertua Negeri’s Birthday functions. SEB will provide the attire to participating employees and in more than one
occasion, they have won prizes for being the best contingent in their respective categories. That inadvertently
brought fame and name to SEB as a caring organization.
Conclusion
SEB is the highly visible corporate entity in the State and is always committed towards sustaining a meaningful
symbiotic co-existence with the surrounding community, in order to achieve this, SEB will continue its effort in its
CSR initiatives that will strengthen the relationship and to place SEB in the hearts and minds of the society. SEB
will continue to strive to go beyond whenever possible to give back to its community.
There are other community plans in the pipeline that SEB hoped to realise one day such as helping the various
ethnic communities in the remote parts of the state to bring them into the mainstream of development. These
plans are being drawn up and will be carried out once the nod has been given.
53
STATEMENT OF INTERNAL CONTROL
BOARD RESPONSIBILITY
The Board recognizes the importance of maintaining a sound system of internal control and the proper
management of risks affecting the Group’s operations in order to safeguard the interests of stakeholders. The
Board affirms its overall responsibility for the Group’s systems of internal control and risk management, and for
reviewing the adequacy and integrity of those systems. The system of internal control covers financial, operational,
management information systems, risk management, and compliance with relevant laws, regulations, rules,
directives and guidelines. It should be noted, however, that such systems are designed to manage, rather than
eliminate, the risk of failure to achieve business objectives. Therefore, these systems can only provide reasonable,
but not absolute, assurance against material misstatement or loss.
The group’s system of internal control does not apply to associated companies, as the Board does not have
control over their financial and operating policies.
ENTERPRISE RISK MANAGEMENT
The Board confirms that it has identified, evaluated, monitored and managed the significant risks affecting the
Group’s business activities and established a Group Risk Profile, which includes, inter alia:
(a)
(b)
(c)
the principal risks faced by the Group under appropriate risk categories, levels and sub-levels;
the likelihood of risks crystallizing and the resulting impact; and
the internal controls put in place to address those risks.
For the financial year under review, the Board through the Board Audit Committee (BAC) has reviewed and
endorsed the following major activities carried out by the Risk Management Division (RMD) through the quarterly
consolidated reports presented at the committee’s meetings: •
Review of the risk rating and action plan implementation status for the Top 12 Strategic Risks and the next
10 High Risks of the Group;
•
Project Risk Assessment and Action Planning for the following projects in line with SEB’s focus on project
implementation and management to meet the State’s power needs;
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•
•
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Murum Hydro Electric Plant
Bakun Similajau 275kV Transmission Line
Kemantan Kapit 132kV Transmission Line
Similajau (500kV)/275kV/33kV Substation
Samalaju 275kV/132kV/33kV Substation
Murum Junction 275kV/33kV Substation
Engkilili/Entinggan/Muara Tabuan 275kV/132kV Substation
Bintulu Combined Cycle
•
Review of the risk profile of Kidurong Power Station, Bintulu, with the completion of the combined cycle
project and its incorporation as STG Unit No. 9 in the power station;
•
Enhancement of Enterprise Management System (EMS) functionalities and reporting capabilities;
•
Conducting EMS end-user training for project management staff; and
•
Facilitating divisional/departmental risk discussions and conducting risk awareness sessions, continuous
education and knowledge sharing among staff.
CONTROL STRUCTURE
Apart from risk management activities, the Board has also set up the key elements of the Group control structure
to maintain an effective control environment. One of the key elements of the control environment is the shared
values of integrity, unity, respect, accountability and courage, which have been established by the Board
and cascaded to all staff in the Group through leadership conferences and SEB Way workshops organized
throughout the Group.
The other elements of the Group’s control structure include the following:
Board and Management Committees
The Company has established Board and Management Committees to promote corporate governance and
transparency. Specific terms of reference and authority are assigned to the Committees within their scope.
Board Committees
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Board Audit Committee (BAC)
Board Tender Committee (BTC)
Group Establishment and Disciplinary Committee (GEDC)
Nomination & Remuneration Committee (NRC)
Management Committees
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Executive Management Committee (EMC)
Operation Management Team (OMT)
Management Tender Committee (MTC)
Regional Tender Committee (RTC)
Board Meetings
The Board maintains full and effective supervision over key issues affecting the Group. This is done through
regular scheduled meetings, where the agenda is set and agreed by the Chairman and Senior Management.
Board papers are circulated to members ahead of the meetings. All important matters are dealt with and
decided on after the required information is presented and deliberated.
Management Meetings
The Group’s Management, through the Executive Management Committee (EMC), conducts weekly senior
management meetings comprised of the Chief Executive Officer, and Heads of Departments and Business Units.
The purpose of these meetings is to deliberate and decide on policy and operational matters affecting the
Group.
Organization Structure
The Board has implemented a new and clearly defined structure that is aligned to the Group’s strategic and
operational requirements. The Group structure is departmentalized to enable better focus on both operational
and support functions to ensure that SEB has the capacity to meet its goals. The new structure emphasizes that
the operational departments are where most of the value is created – specifically, Hydro Generation, Thermal
Generation, Distribution, Transmission, Retail and Project Execution.
Management Information Systems
The Board recognizes the importance of leveraging on management information systems to enable faster
information for decision making and assisting operations to be run effectively and efficiently.
Group Policies and Procedures
The Group has put in place approved policies and procedures to govern its financial and operational functions.
The objectives of these are to ensure that internal controls are embedded in operations, and that there are
clearly defined lines of authority and responsibility.
The new organization chart also makes it clear that the role of the business support functions – such as Human
Resources, Legal, Communication, and so on – is to support the operational functions that achieve SEB’s goals.
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Non-Technical Losses of Electricity
The Board has created a new Retail Department to provide appropriate focus and leadership in the area of
revenue collections. The department will also lead the fight against power theft in an effort to reduce the overall
system losses.
MONITORING AND REVIEW
Business Planning and Budgeting Review
The Board’s long-term plan is to ensure that the Group realizes its mission and objectives. For this purpose, the
Chief Executive Officer has drawn up a Strategic Plan for Long-Term Power System Development in Sarawak to
guide the organization in achieving its vision of sustainable growth and prosperity for Sarawak by meeting the
region’s need for reliable renewable energy.
Based on the strategies identified in the Strategic Plan, an Annual Business Plan and Budget and Key Performance
Indicators (KPIs) are drawn up and approved by the Board to ensure accountability and achievement of the
Group’s objectives and strategies. The Business Plan includes the budget, new project proposals and capital
budget. KPIs are monitored through the CEO’s Monthly Report, which incorporates key project progress, financial
and operational KPIs, and departmental initiatives. These reports are tabled to the Board by the CEO at every
board meeting.
Financial and Operational Review
Interim financial results are reviewed by the BAC and approved by the Board upon recommendation of the
BAC. The full-year financial results and analyses of the SEB Group’s state of affairs are disclosed to shareholders
after being reviewed and audited by the external auditors.
The Group Management Report, containing key financial results, operational performance indicators and
improvement initiatives implemented by the various business units, is also issued to the Board and senior
management to update them on the Group’s performance.
Internal Audit
The internal audit function of the Group is carried out by the Group Internal Audit Department. The internal audit
function provides the Board with the assurance it requires regarding the adequacy and integrity of the system
of internal control.
The internal audit function reviews the internal controls in the key activities of the Group’s business based on an
annual internal audit plan, which is presented to the BAC for approval. Regular reviews are carried out on the
business processes to monitor their compliance with the Group’s procedures, assess the effectiveness of internal
controls and highlight significant risks impacting the Group.
The internal audit reports are reviewed by the BAC. Management is responsible for ensuring that corrective
actions on reported weaknesses are implemented within the required timeframe.
The BAC has access to both internal and external auditors and receives reports on all audits performed.
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CONCLUSION
There were no major internal control weaknesses noted which have resulted in material losses, contingencies or
uncertainties that would require disclosure in the Group’s Annual Report. The Management continues to take
measures to strengthen the control environment.
STATEMENT ON CORPORATE GOVERNANCE
The Board of Directors of Sarawak Energy Berhad (“SEB”) is committed to ensure that the highest standard of
Corporate Governance is practiced throughout the Group with the objective of strengthening the Group’s
growth, corporate accountability and safeguarding the interests of the shareholders.
The Board of Directors is pleased to report a satement to the shareholders on how the Group has applied
the principles of good governance and compliance of the best practices set out in the Malaysian Code of
Corporate Governance.
The Board of Directors
The Board’s principal responsibilities for corporate governance are by setting out the strategic direction of the
Group, establishing the objectives and achievement of the objectives and goals.
The current Board comprises of five (5) members, where all Directors are non-executive directors. Three (3) of the
non-executive directors are independent directors, and two (2) are non-independent non-executive directors.
The Directors collectively have wide range of experience and expertise drawn from the area of business,
accounting, legal and economics as well as public administration. Their expertise, experience and background
are vital for the strategic direction of the Group. The profiles of the Directors are set out on pages 12 to 17.
The Chairman’s responsibility is to ensure the effectiveness of the Board and conduct. The independent nonexecutive directors play an important role to ensure the views provided are professional and independent and
that the advice and judgment made on issues and decisions are to the best interest of the stakeholders and
the Group.
Dato’ Haji Idris Bin Haji Buang is the Senior Independent Non-Executive Director to whom concerns regarding
the Company maybe conveyed.
Meetings
Attended
% of
Attendance
Independent
Non-Executive Chairman
5/5
100
Group Managing
Director
1/1
100
Datuk Amar Wilson Baya Dandot
(resigned as a Director of the company
on 30.06.2010)
Non-Independent
Non-Executive Director
2/2
100
Datuk Amar Mohamad Morshidi bin
Abdul Ghani (appointed as a Director of
the company on 26.05.2010)
Non-Independent
3/3
100
Dato’ Haji Idris bin Haji Buang
Independent
5/5
100
Tan Sri Dato Sri Mohd Hassan bin
Marican (appointed as a Director of the
company on 09.06.2010)
Independent
2/3
67
Non-Independent
Independent
4/5
80
0/2
100
Directors
Datuk Abdul Hamed bin Sepawi
Tan Sri Datuk Amar (Dr) Haji Abdul Aziz
bin Dato Haji Husain (resigned as
a Director of the company on 11.03.2010)
Dato’ Nordin bin Baharuddin
(deceased on 05.06.2010)
The Board meets at least four (4) times a year, with additional meetings are held as and when required. There
were five (5) Board meetings held during the financial year ended 31 December 2010. A summary of the
attendance of each Director of the Company at the Board meetings held during the financial year ended 31
December 2010 are as follows:
57
57
Supply of Information
The Board and its Committees have full and unrestricted access to all information within SEB pertaining to the
Group’s business and affairs.
All the Directors are notified of the Board meetings within stipulated time prior to the meetings date. Directors are
provided with an agenda and a set of Board papers prior to each Board Meeting. These are issued in sufficient
time to enable them to obtain further information and explanation, where and when necessary, in order to be
properly briefed before the meeting.
In most instances, the Senior Management of the Group as well as external advisors may be invited to attend
Board Meetings, to provide insights and to furnish clarification on issues that may be raised by the Board.
Board members have access to the Company Secretary for any further information required. Directors may
also seek independent professional advice on any matter connected with the discharge of their responsibilities
deems necessary and appropriate, whether as a full board or in their individual capacities, at the Company’s
expense.
Board Committees
The following Committees have been established to assist the Board in the execution of its responsibilities. These
Committees have written terms of reference which have been approved by the Board and set out their authority
and duties.
1.
Audit Committee
The Audit Committee continued to play an important role in reviewing the Group’s financial management
and reporting, and to assess the integrity of the Group’s accounting procedures and financial control.
The Committee is responsible for the review of accounting policy and presentation of external financial
reporting including the Group’s interim results and its disclosures, monitoring the work of the internal audit
function and ensuring an objective and professional relationship is maintained with the external auditors,
and that conflicts of interest, if any, are avoided. The Committee has full access to both internal and
external auditors, who in turn, have access at all times, to the Chairman of the Audit Committee.
The Audit Committee strives to ensure that it keeps abreast of all material developments in regulations and
best practices in its area of responsibility.
The report of the Audit Committee, including their attendance at the Committee Meetings is set out on
pages 67 to 74 of this Annual Report.
2.
Nomination & Remuneration Committee
The Committee consists of two (2) non-executive directors and the Chief Executive Officer. The members of
the Committee as at the date of this Annual Report are as follows:
58
i.
Datuk Abdul Hamed bin Sepawi
(Non-Executive Director) – Chairman
ii.
(Non-Executive Director)
iii.
Chief Executive Officer
The duties and responsibilities of the Committee are to:a)
b)
c)
d)
e)
f)
identify and recommend to the Board candidates for directorships to the Board;
make recommendations to the Board on all new or re-appointments of members of the Board;
evaluate the effectiveness of the Board as a whole and the Committees of the Board;
make recommendations to the Board on the Company’s framework of remuneration and its cost and
to determine on behalf of the Board specific remuneration packages and terms and conditions of
employment for the Group’s employees;
provide remuneration input on any contract of employment with executive directors and determine
the terms of any compensation in the event of early termination of the employment contracts thereon;
and
make recommendations to the Board on the remuneration of non-executive directors which shall be
a decision of the Board as a whole.
The Committee held two (2) meetings during the financial year ended 31 December 2010 to:
a)
b)
c)
d)
e)
f)
g)
h)
Review and approve the Corporate Organisation Structure for the Company in 2010;
approve recruitment of Key Management Personnel for the Company;
approve the engagement of a proposed Project Director for the Bakun Transmission and SEATRAC
Project team;
establishing a Reputation Management Unit to manage issues, reputation and matters relating to
corporate social responsibilities following to the implementations of hydroelectric power projects in
Sarawak;
introducing a 6-month fast-track Training Programme for technicians as a capacity building for the
Company;
approve extension of service/contract for Staff of the Murum Hydro power Project;
approve the proposed bonus distribution and annual salary increment for the Group in Year 2010; and
extend the service of Contract Employee for either the Company and/or Group as a whole.
Management/Establishment Committees
The following Committees have been established to assist the Board in the execution of its responsibilities. These
Committees have written terms of reference which have been approved by the Board and set out their authority
and duties.
Executive Management Committee
The Executive Management Committee (EMC) previously known as The Group Managing Director
Committee was established on September 2007. The role of the EMC is to ensure that adoption of
corporate-level policies is well developed before adoption, and to award tenders within the approving
limits as prescribed by the prevailing terms of reference provided in the General Instructions on Purchasing
and Contrasts (GIPC) of the company.
1.
59
The updated Terms of Reference (ToR) and guidelines of the Committee following the change of name
from GMDC to EMC are as follows:a)
b)
c)
d)
e)
f)
g)
h)
i)
to interpret define and/or implement Corporate/Group policies and decisions.
to formulate and/or approve the general management operating policies procedures and guidelines.
to decide and/or approve operational or matters requiring management decisions or approval by
EMC. In the event of uncertainties the CEO shall have the mandate to decide on the subject matters
or issued to be referred to EMC.
to review and/or decide on proposals, plans, projects, budgets and policies prior to submission to the
Board.
to implement management leadership change and continuous improvements programs and initiatives
for the Group.
to endorse and/or review decisions of the disciplinary committees appointed to conduct disciplinary
inquiry into disciplinary cases involving support group.
to discuss and/or review progress reports on projects and decide on any issues requiring management
input or decisions.
to appoint consultants subject to the limits of EMC defined in the GIPC.
such other matters not mentioned above provided approval of the CEO has been obtained to
refer the matter to EMC and such matters is within the scope or general authority of EMC to decide/
approve.
As of reporting date, the EMC members comprise of all the General Managers of each department and
business unit within the Group and the direct reports to the Chief Executive Officer (CEO), and/or any
inclusions and exclusions as directed by the CEO from time to time. The CEO shall act as the Chairman of
the Committee.
The EMC members, as of reporting date are as follows:-
60
i.
(Chief Executive Officer) - Chairman
ii.
Haji Wan Mahmud bin Wan Abdullah
(Head of Internal Audit)
iii.
Zuraimy bin Kushaili
(Head of CEO Office)
iv.
Haji Sulaiman bin Abdul Hamid
(Head of Finance)
v.
Miles Smith
(Head of Planning & Strategy)
vi.
Einar Kilde
(Head of Project Execution)
vii.
James Ung
(Senior Vice President, Thermal)
viii. Stell Sindau
(Senior Vice President, Hydro)
ix.
Victor Wong
(Senior Vice President, Transmission)
x.
Lu Yew Hung
(Senior Vice President, Distribution)
xi.
Aisah binti Eden
(Senior Vice President, Retail)
xii.
Nick James Arnett Wright
(Vice President, External Relations & Strategic Communications)
xiii. Dr. Chen Shiun
(Head of Research & Development)
xiv. Alvin Lim
(Head of Key Account (SCORE Customers)
xv.
Polycarp Wong
(General Manager, Shared Services)
xvi. Siti Aisah Adenan
(General Manager, People & Leadership Development)
xvii. Marconi Madai
(General Manager, Corporate Risk & HSE)
xviii. Julia Shim
(Chief Information Office) - Secretary
There were two (2) GMDC meetings and 23 EMC meetings held during the financial year ended 31
December 2010, which totals up to 25 meetings altogether in the Year 2010.
Group Establishment and Disciplinary Committee
The Group Establishment and Disciplinary Committee (“GEDC”) was established on 19 June 2008 in view
of the SEB Group re-structuring and the movement of the common functions such as Human Resource
Department, Corporate Affairs Department and Finance Department to the Group Level. The GEDC
members, as at 31 December 2010, comprise of the following:i.
(Chief Executive Officer) – Chairman
ii.
(Non-Executive Director)
iii.
Nelson Balang ak Rining
(Director, Syarikat SESCO Berhad)
iv.
Gerald Rentap Jabu
(Director, Syarikat SESCO Berhad)
2.
61
The Terms of Reference (ToR) and guidelines of the Committee are as follows:a)
b)
c)
d)
62
to formulate policy, procedure and guidelines on the following matters:i.
Personnel – creation of posts, recruitment, confirmation, promotion, salary structure, increment
and bonus, staff transfer and staff movement, staff review and revision of employees’ benefits,
performance appraisal, career development, termination, study leave, scholarship, overseas
training, examination, induction and any other item which the committee may deem necessary.
ii.
Disciplinary – offences and disputes, punishments, hearings, appeals, sub-committees.
to decide on the following matters:i.
using the budget allocation, the Corporation’s strategic plan and operational and management
needs as guidance on the total staff strength for the coming year, the distribution of staff in the
various categories and the organisation structure.
ii.
approval of the manpower planning.
iii. recruitment of higher management group.
iv. promotion of employees in the top three (3) levels below the Chief Executive Officer subject to
endorsement by the Board.
v.
the direction which the Corporation should take on its Human Resource Management based on
the strategic planning process.
vi. termination of staff.
vii. study leave.
viii. overseas training.
ix. endorsement on permanent transfer of Regional Managers.
x.
the dismissal of any employee except for the top three (3) levels which would be subjected to
Board’s approval.
xi. settlement of disputes between employee(s) and Management.
xii. appeals from a decision of any Disciplinary Committee at Management level.
xiii. appeals of any kind over decisions made by Management on any of the matters stated in a) and
b) hereof.
xiv. negotiation on collective Agreement between Management and Senior Officers Association to
be conducted by the Committee and endorsed by the Board.
to assist the Board of Directors in making the correct decision on all matters regarding the subject
stated in a) and b) above.
procedure - the GEDC shall meet to discuss and decide on any of the matters stated in a) and b)
above. All meetings shall be arranged by the Secretary upon receipt from the Chairman/Managing
Director of a request to hold one. The relevant Division in the Human Resource Department shall
collate all data and relevant information necessary, submit papers to the GEDC and arrange for all
Resource personnel to attend any GEDC meetings. Once a decision is made by the GEDC, immediate
action shall be taken upon receipt of the minutes, unless such matter has been decided by the GEDC
to be referred to the Board of Directors for endorsement or for some other specific reason. All matters
discussed must as far as possible be presented in the following format:i.
purpose/issue in question.
ii.
background to the issue.
iii. relevant data/alternative actions with examination of foreseeable consequences.
iv. recommendation.
The GEDC held two (2) meetings during the financial year ended 31 December 2010 to:
a) approve the confirmation/termination in promotion and/or in service of staff of the Group.
b) oversee the career development programme for the staff within the Group.
c) oversee the disciplinary case(s) being convicted within the Group.
Group Board Tenders Committee
The Group Board Tenders Committee (“GBTC”) was previously established by the Syarikat SESCO Berhad’s
Board to assist the Board of Directors on the award of tenders with the value of RM5 million to RM20 million.
It has been brought up to the SEB Group Level on 19 June 2009 in view of the rationalization of the Group.
As at 31 December 2010, the GBTC members comprise of the following:i.
YBhg. Dato Sri Ahmad Tarmizi bin Haji Sulaiman
(Director of Syarikat SESCO Berhad) - Chairman
ii.
YBhg. Tuan Haji Ubaidillah bin Haji Abdul Latip
(Director of Syarikat SESCO Berhad) – Alternate Chairman / Member
iii.
YBhg. Tan Sri Datuk Amar (Dr) Haji Abdul Aziz bin Dato Haji Husain
(Director of SEB/SESCO – resigned on 11.03.2010) - Member
iv.
YB Encik Joseph Mauh ak. Ikeh
(Director of Syarikat SESCO Berhad) - Member
v.
YBhg. Dato’ Ir. Wahab bin Suhaili
(Director of Syarikat SESCO Berhad) - Member
vi.
YB Senator Dato’ Haji Idris bin Haji Buang
(Director of SEB - Member)
The GBTC has not held any meeting during the financial year ended 31 December 2010.
Re-Election of Directors
In accordance with the Company’s Articles of Association, all Directors appointed by the Board are subject
to election by shareholders at the first Annual General Meeting after their appointment. One-third of the
remaining Directors are required to submit them selves for re-election by rotation at each annual general
meeting. All Directors must submit themselves for re-election at least once in every three years. Directors
over seventy years of age are required to submit themselves for reappointment annually in accordance
with Section 129(6) of the Companies Act 1965.
Directors’ Training
Various accredited programs have been attended by the directors of the Company. Among them are
programs related to the Continuing Education Program (“CEP”) conducted by various course leaders. The
Company will continuously arrange for further training of the directors as part of the directors obligation to
update and enhance their skills and knowledge which are important for their carrying out an effective role
as directors.
3.
63
Number of Directorships in Other Companies
None of the directors of the Company hold more than ten (10) directorships in public listed companies or
more than fifteen (15) in non-public listed companies.
Directors’ Remuneration
1.
2.
The details on the aggregate remuneration of directors for the financial year ended 31 December
2010 are as follows:
(RM)
Executive
Director
Non-Executive
Director
Total
Amount
Fees
-
495,882
495,882
Attendance/
Meeting Allowance
-
16,500
16,500
Salary & Bonus
-
88,212
88,212
TOTAL
-
600,594
600,594
The number of Directors whose total remuneration falls within the following bands during the financial
year ended 31 December 2010 are as follows:
(RM)
Executive
Director
Non-Executive
Director
Total
RM20,001 to RM50,000
-
3
3
RM50,001 to RM100,000
-
3
3
RM100,001 to RM150,000
-
2
2
TOTAL
-
8
8
Investor Relations and Shareholders Communications
The Company seeks to develop and maintain regular informative communications with its shareholders,
institutional and potential investors through various public announcements made during the year. In addition,
the timely release of the financial results on quarterly basis provides its shareholders with an overview of the
Group’s financial and operational performance.
64
The Annual General Meeting of the Company remains the principal forum for dialogue with shareholders.
Shareholders who are unable to attend are allowed to appoint proxies to attend and vote on their behalf.
Members of the Board, as well as the external auditors of the Company are present to answer questions raised
at the Meeting.
The Board has also adopted best practice to enhance the efficiency and value of general meetings such as
ensuring that the Chairman provides reasonable time at the meeting for discussion and for a question and
answer session.
Confidentiality of Information
In conducting briefings or presentations, the Company takes due care to ensure that any information regarded
as undisclosed material information about the Company and its operations will not be given to any single
shareholder or group of shareholders.
Accountability and Audit
Financial Reporting
The Directors are responsible in ensuring that the annual financial statements of the Company and the Group are
drawn up in accordance with the applicable approved accounting standards in Malaysia and the provisions
of the Companies Act, 1965.
The Board aims to provide and present a balanced and meaningful assessment of the Group’s financial
performance and prospects, primarily through the annual financial statements and quarterly financial results
as well as the Chairman’s statement and review of operations in the Annual report. The Board is assisted by the
Audit Committee to oversee the Group’s financial reporting processes and the quality of its financial reporting.
Relationship with Auditors
The Board has, through the Audit Committee, established a formal, transparent and appropriate relationship
with the Group’s Auditors, both external and internal. The Audit Committee meets regularly with external and
internal auditors to discuss and review the audit plan, quarterly financial results, annual financial statements,
internal audit reports etc and at every Board meeting, the Chairman of the Committee briefed the Board on
significant matters discussed and deliberated at each Committee’s meeting and makes recommendations for
the Board’s approval and endorsement as the case may be.
Internal Controls
Information on the Group’s internal controls system is presented in the Statement on Internal Control as set out
on pages 54 to 56 of this Annual Report.
Directors’ Responsibility Statement
The Board is fully accountable to ensure that the financial statements are prepared in accordance with the
Companies Act, 1965 and the applicable approved accounting standards set by the Malaysian Accounting
Standards Board so as to present a true and fair, balanced and understandable assessment of the Group’s
financial position and results. In this Annual Report, an assessment is provided in the Directors’ Report of the
Audited Accounts.
The Audit Committee reviews the statutory compliance and scrutinizes the financial aspects of the Audited
Accounts prior to deliberation at the Board level.
•
MaterialContracts
Neither the Company nor its Subsidiaries had entered into any material contracts not in the ordinary course
of business during the Financial Year ended 31 December 2010.
•
Sanctions/Penalties
There were no sanctions and/or penalties imposed on the Company and its subsidiaries, Directors or
Management by any relevant regulatory authorities during the Financial Year ended 31 December 2010.
Additional Compliance information
65
•
Non-AuditFees
Non-audit fees of RM661,000 were paid to the External Auditors for the financial year ended 31 December
2010.
•
RevaluationPolicyonLandedProperties
The Group does not adopt any revaluation policy on landed properties during the financial year ended 31
December 2010.
•
RecurrentRelatedPartyTransactions
Following the de-listing of the Company on 5th January 2010, no further mandate is required from the
shareholder on the recurrent related party transaction.
66
BOARD AUDIT COMMITTEE REPORT
The Board Audit Committee (BAC) of Sarawak Energy Berhad (SEB) is pleased to present the Board Audit
Committee Report for the year ended 31 December 2010.
The BAC was established on 30 July 1994 by the Board of Directors and is guided by their Terms of Reference.
MEMBERSHIP
The BAC comprises the following directors:
1.
Dato’ Nordin Bin Baharuddin – Chairman
(Independent Non-Executive Director)
2.
(Senior Independent Non-Executive Director)
3.
(Non-Independent Non-Executive Director)
4.
(Independent Non-Executive Director)
5.
Datuk Amar Haji Mohamad Morshidi bin Haji Abdul Ghani
(Non-Independent Non-Executive Director)
Dato’ Nordin Bin Baharuddin, passed away on 5 June 2010, and Datuk Amar Wilson Baya Dandot, resigned from
the Board of SEB on 30 June 2010. Tan Sri Dato Sri Mohd Hassan bin Marican and Datuk Amar Haji Mohamad
Morshidi bin Haji Abdul Ghani were appointed on 9 June 2010 and 26 May 2010 respectively. Tan Sri Dato Sri
Mohd Hassan bin Marican was appointed Chairman of the BAC.
MEETINGS
During the year, the BAC met four times. The attendance of each member is as follows:
Attendance
2/2
4/4
1/2
2/2
1/2
The Head of Internal Audit and the Group Company Secretary were in attendance during the meetings. The
Chief Executive Officer, Senior Management, External Auditors and whenever required, external parties were
invited to attend the meetings on matters requiring their attention, feedback, input and clarification.
Following each meeting, the BAC Chairman briefed the Board of Directors on any significant matters discussed
and deliberated on by the BAC members.
Name
Dato’ Nordin Bin Baharuddin
Datuk Amar Haji Mohamad Morshidi bin Haji Abdul Ghani
67
SUMMARY OF ACTIVITIES OF THE BAC
During the financial year, the BAC carried out the following activities:
•
Reviewed the quarterly unaudited and year-end audited financial statements of the Company and
Group with management and the external auditors, and ensured that the financial statements were
drawn up in accordance with the provisions of the Companies Act 1965 and applicable approved
accounting standards and other statutory and regulatory requirements prior to recommending them to
the Board for approval.
•
Reviewed the adequacy of disclosure of related party transactions entered into by the Company and
the Group, and the adequacy of policies, procedures and guidelines for identifying, monitoring and
disclosing related party transactions for SEB and its subsidiaries.
Reviewed and endorsed the quarterly report from the Risk Management Division (RMD) on the status and
progress of implementation of EWRM activities and key initiatives carried out during the year.
•
•
Reviewed the External Audit Planning Memorandum and scope for their annual plan.
•
Reviewed and recommended to the Board the reappointment of external auditors and their remuneration.
•
Discussed with external auditors, without the presence of management, any problems and issues
encountered in the course of their audit and any other matters they wished to address.
•
Reviewed and approved the Internal Audit Annual Plan to ensure the adequacy of resources and
coverage for auditable areas with significant and high risks.
•
Reviewed and discussed internal audit reports, special review reports, and follow-up reviews issued and
presented by internal audit, as well as management’s responses thereto, and ensured the adequacy and
effectiveness of corrective actions taken by management on all significant matters raised.
•
Reviewed, and recommended to the Board for approval, the Statement of Internal Control, the Audit
Committee Report and the Corporate Governance Statement for inclusion in the SEB Annual Report.
GROUP INTERNAL AUDIT
The internal audit function of the Group is carried out by the Group Internal Audit Department (GIA), which is
independent and reports directly to the BAC.
GIA was established by the Board to provide independent assurance on the adequacy of SEB’s risk management,
internal control and governance systems. Regular reviews are carried out to monitor compliance of the business
processes with the Group’s procedures, to assess the effectiveness of internal controls, and to highlight any
significant risks impacting the Group. The BAC holds regular meetings to deliberate on internal audit reports prior
to presenting them to the Board.
68
68
Certain audits in the Internal Audit Plans are performed internally, while others are outsourced or co-sourced.
Audits are outsourced to ensure they provide adequate coverage, and that the assignments involve specific
areas of expertise and skill. Co-sourced audits enable transfer of knowledge from external consultants. During the
year, the GIA also successfully coordinated and participated in a Contract Audit by Hydro Tasmania Consulting
and an internal controls review by Ernst & Young on Bintulu Combined Cycle Project and Murum Hydro Power
Project.
All reports arising from the assignments were issued to management for their response, for suggestions for
corrective actions, and for provision of deadlines to complete the relevant preventive and corrective actions.
The reports were subsequently tabled to the BAC for their deliberation. Follow-up reviews were carried out by
internal auditors, and the status of such action plans was reported to the BAC.
The BAC has full access to both internal and external auditors and receives reports on all audits performed.
TERMS OF REFERENCE
1.0 CONSTITUTION
•
The Board of Directors of Sarawak Energy Berhad (SEB) has established a Committee of the Board,
known as the Board Audit Committee (BAC), vides a resolution of the Board on 30 July 1994.
•
The function and authority of the BAC extends to SEB and all its subsidiaries (collectively referred to
as the “Group”).
2.0 COMPOSITION OF THE COMMITTEE
•
The members of the BAC shall be appointed by the Board of Directors of SEB and shall consist of not
less than three (3) members, the majority of whom shall be independent directors of SEB.
•
Where the members for any reason are reduced to less than three (3), the Board shall, within one
(1) month of the event, appoint such number of new members as may be required to make up the
minimum number of three (3) members.
•
The Board shall elect a Chairman from among the members of the BAC who shall be an independent
director.
•
All members shall hold office only for as long as they serve as directors of SEB.
•
No alternate directors shall be appointed to the BAC.
3.0 CHAIRMAN OF THE COMMITTEE
•
to steer the BAC to achieve its objectives;
•
to provide leadership and ensure the proper flow of information to the BAC, while reviewing the
adequacy and timing of documentation;
•
to provide a reasonable amount of time for discussion at the BAC meetings, organize and present
the agenda for BAC meetings based on input from members, ensure that all relevant issues are on
the agenda, and encourage a healthy level of skepticism and independence;
•
to manage the process and workings of the BAC, and ensure that the BAC discharges its
responsibilities; and
•
to ensure that all members participate in the discussion to enable effective decisions to be made.
4.0 COMMITTEE MEMBERS
Each BAC member is expected to:
•
provide independent opinions to the fact-finding, analysis and decision-making process of the
BAC, based on their experience and knowledge;
•
consider the viewpoints of the other members, and make decisions and recommendations that
are in the best interests of the Group;
The following are the main duties and responsibilities of the Chairman of the BAC:
69
69
•
keep abreast of the latest corporate governance guidelines in relation to the BAC and the Board
as a whole; and
•
continuously seek out best practices in terms of the processes utilised by the BAC, following which
these should be discussed with the rest of the members for possible adoption.
5.0 OBJECTIVES OF THE COMMITTEE
The objectives of the BAC are as follows:
•
to ensure transparency, integrity and accountability in the Group’s activities so as to safeguard the
rights and interests of the shareholders;
•
to provide assistance to the Board in fulfilling its fiduciary responsibilities relating to corporate
accounting and reporting practices;
•
to improve the Group’s business efficiency, and the quality of the accounting and audit function,
and to strengthen public confidence in the Group’s reported financial results;
•
to maintain, through regular scheduled meetings, a direct line of communication between the
Board and the external and internal auditors;
•
to ensure the independence of the external and internal audit functions; and
•
to create a climate of discipline and control within the Group so as to reduce the opportunities for
fraud.
6.0 AUTHORITY OF THE COMMITTEE
The BAC is authorized by the Board to:
•
investigate any activity within its terms of reference or as directed by the Board of Directors;
•
have full and unrestricted access to all employees, the Group’s properties and works, and all books,
accounts, records and other information of the Group in whatever form;
•
have direct communication channels with external auditors and person(s) carrying out the internal
audit function or activity for the Group;
•
direct the internal audit function in the Group;
•
engage independent advisors, and secure the attendance of outsiders with relevant experience
and expertise if deemed necessary; and
•
review the adequacy of the structure and terms of reference of other Board committees, including
the BAC.
7.0 FUNCTIONS OF THE COMMITTEE
70
70
The functions and responsibilities are as follows:
Corporate Financial Reporting
•
To review and recommend acceptance or otherwise of accounting policies, principles and
practices.
•
To review the quarterly results and annual financial statements of the Company and Group before
their submission to the Board.
The review should focus primarily on:
i.
ii.
iii.
iv.
v.
vi.
•
any changes in existing accounting policies or implementation of new ones;
major judgment areas, significant and unusual events;
significant adjustments resulting from audit;
the going concern assumptions;
compliance with accounting standards; and
compliance with other legal and statutory requirements.
To review with management and the external auditors the results of the audit, including any
difficulties encountered.
Enterprise Risk Management
•
To review the adequacy of risk management functions in the SEB Group, and to provide independent
assurances to the Board as to their effectiveness.
•
To ensure that the principles and requirements of managing risk are adopted consistently throughout
the SEB Group.
•
To deliberate on the key risk issues highlighted by the Group Risk Management Committee in their
reports to BAC.
Internal Control
•
To assess the quality and effectiveness of the internal control systems and the efficiency of the
Group’s operations.
•
To review the findings on internal control in the Group by internal and external auditors.
•
To review, and recommend for Board approval, the Statement on Internal Control and Board Audit
Committee Report for inclusion in the Company’s Annual Report.
•
To approve the Audit Charters of internal audit functions in the Group.
•
To ensure that the internal audit functions have appropriate standing in the Group and have the
necessary authority and resources to carry out their work. This includes a review of the organizational
structure, resources, budgets and qualifications of the internal audit personnel.
•
To review internal audit reports and management’s response and actions taken in respect of these.
Where actions are not taken within an adequate timeframe by management, the BAC will report
the matter to the Board.
•
To review the adequacy of internal audit plans and the scope of audits, and to ensure that the
internal audit functions are carried out without any hindrance.
To appraise the performance of the Head of Internal Audit.
•
•
To review any appraisal or assessment of the performance of members of the internal audit
function.
•
To be informed of resignations of internal audit members, and to provide the resigning staff member
an opportunity to submit his/her reasons for resigning.
•
To direct any special investigation to be carried out by the internal audit function.
Internal Audit
71
71
External Audit
•
To nominate the external auditors, together with such other functions as may be agreed to by the
Board, recommend for approval of the Board the external audit fee, and consider any questions
of resignation or termination.
•
To review external audit reports and management’s response and actions taken in respect of
these. Where actions are not taken within an adequate timeframe by management, the BAC will
report the matter to the Board.
•
To review external audit plans and the scope of work.
•
The BAC shall meet the external auditors at least twice a year to discuss problems and reservations
arising out of external audits and any other matters the auditors may wish to discuss, in the absence
of management, Executive Directors and Non-Independent Directors where necessary.
Corporate Governance
•
To review the effectiveness of the system for monitoring compliance with laws and regulations
and the results of management’s investigation and follow-up (including disciplinary action) of any
instances of non-compliance.
•
To review the findings of any examinations by regulatory authorities.
•
To review any related party transaction and conflict-of-interest situation that may arise within the
Group, including any transaction, procedure or course of conduct that raises questions of integrity.
•
To review and recommend the Corporate Governance Statement for Board approval for inclusion
in the Company’s Annual Report.
•
To review the investor relations program and shareholder communications policy for the company.
•
To examine instances and matters that may have compromised the principles of corporate
governance and report back to the Board.
8.0 COMMITTEE MEETINGS
72
72
•
The BAC shall convene meetings as and when required, and at least four (4) times during the
financial year of SEB.
•
The number of BAC meetings held a year, and the details of attendance of each individual member
in respect of meetings held, should be disclosed in the Annual Report.
•
The Chairman of the BAC, or the Secretary on the requisition of any member, the Head of Internal
Audit or the external auditors, shall at any time summon a meeting of the BAC by giving reasonable
notice.
•
No business shall be transacted at any meeting of the BAC unless a quorum is present. The quorum
for each meeting shall be two (2) members comprising all independent directors.
•
The Chairman of the BAC shall chair the committee meetings; in his absence, the members present
shall elect one from among themselves to be the Chairman of the meeting.
•
In appropriate circumstances, the BAC may deal with matters by way of circular reports and
resolutions in lieu of convening a formal meeting.
•
Officers of the Group, or others as required, may be invited to attend meetings where the BAC
considers their presence necessary.
•
A committee member shall excuse himself/herself from the meeting during discussions or
deliberations of any matter that gives rise to an actual or perceived conflict-of-interest situation for
the member. Where this causes insufficient directors to make up a quorum, the BAC has the right
to appoint another director(s) to meet the membership criteria.
•
The BAC, through its Chairman, shall report to the Board after each meeting.
•
Subject to the provisions of this Terms of Reference and Memorandum and Articles of Association
of SEB, the BAC shall establish its own procedures for meetings.
9.0 SECRETARY OF THE COMMITTEE
•
The Secretary of the BAC shall be the Company Secretary.
•
The Secretary shall draw up an agenda for each meeting, in consultation with the Chairman of the
BAC. The agenda shall be sent to all members of the BAC and the Head of Internal Audit at least
three (3) working days before each meeting, together with any relevant papers.
•
The Secretary shall promptly prepare the written minutes of the meeting and distribute it to each
member. The minutes of the BAC meeting shall be confirmed and signed by the Chairman of the
meeting at the next succeeding meeting.
•
The minutes of each meeting shall be entered into the minutes book kept at the registered office
of the Company under the custody of the Company Secretary. The minutes shall be available for
inspection by the members of the Board, external auditors, internal auditors, and other persons
deemed appropriate by the Company Secretary.
•
The BAC shall assist the Board in making disclosures concerning the activities of the BAC, in the
Report of the Audit Committee, to be issued in the Annual Report.
•
The Board requires all directors to submit a Disclosure of Interest statement to avoid any conflict
between their personal interests and those of the Company. In the event of a conflict, either
perceived or actual, this Disclosure of Interest statement shall be submitted to the Chairman of the
BAC with a copy to the Company Secretary.
10.0 DISCLOSURE
73
73
11.0 REVISION OF THE TERMS OF REFERENCE
Any revision or amendment to the Terms of Reference, as proposed by the BAC or any third party,
shall be presented to the Board for its approval.
•
Upon the Board’s approval, the said revision or amendment shall form part of this Terms of Reference
and this Terms of Reference shall be considered duly revised or amended.
•
74
74
DIRECTOR’S REPORT AND AUDITED FINANCIAL
STATEMENTS 31 DECEMBER 2010
CONTENTS
Directors’ Report
Statement by Directors and Statutory Declaration
Independent Auditors’ Report
Statements of Comprehensive Income
76 - 79
80
81 - 82
83
Statements of Financial Position
84 - 85
Statements of Changes in Equity
86 - 89
Statements of Cash Flows
90 - 91
92 - 154
Notes to the Financial Statements
75
DIRECTORS’ REPORT
The directors have pleasure in presenting their report together with the audited financial statements of the
Group and of the Company for the financial year ended 31 December 2010.
Principal activities
The principal activity of the Company is investment holding.
The principal activities of the subsidiaries and associates are disclosed in Note 15 and Note 16 to the financial
statements.
There have been no significant changes in the nature of these activities during the financial year.
Results
Profit net of tax
Profit attributable to:
Owners of the parent
Minority interests
Group
RM’000
Company
RM’000
336,218
======
67,120
=====
341,309
(5,091)
67,120
-
336,218
======
67,120
=====
There were no material transfers to or from reserves or provisions during the financial year other than as disclosed
in the financial statements.
In the opinion of the directors, the results of the operations of the Group and of the Company during the financial
year were not substantially affected by any item, transaction or event of a material and unusual nature other
than the effects arising from changes in accounting policies as disclosed in Note 2.2 to the financial statements.
Dividends
The amount of dividends paid by the Company since 31 December 2009 was as follows:
In respect of the financial year ended 31 December 2009 as reported in the directors’ report of that year:
RM’000
76
Final dividend of 5.5 sen less 25% taxation on 1,610,568,979
ordinary shares of RM1.00 each declared on 2 July 2010
and paid on 30 July 2010
66,436
======
At the forthcoming Annual General Meeting, a final dividend in respect of the financial year ended 31
December 2010, of 5.5 sen less 25% taxation on 1,610,568,979 ordinary shares, amounting to a dividend payable
of RM66,435,970 will be proposed for shareholders’ approval. The financial statements for the current financial
year do not reflect this proposed dividend. Such dividend, if approved by the shareholders, will be accounted
for in equity as an appropriation of retained earnings in the financial year ending 31 December 2011.
DIRECTORS’ REPORT
Employee Share Options Scheme
The Company’s Employee Share Options Scheme (“ESOS”) was governed by the by-laws approved by the
shareholders at an Extraordinary General Meeting held on 19 December 2007. The ESOS was implemented on
21 December 2007 and was initially in force for a period of 10 years from the date of implementation.
The ESOS was dissolved on 22 March 2010 following the de-listing of the entire issue and paid-up share capital
of the Company in January 2010.
The salient features, terms and other details of the ESOS are disclosed in Note 27(b) to the financial statements.
Directors
The names of the directors of the Company in office since the date of the last report and at the date of this
report are:
Datuk Abdul Hamed Bin Sepawi - Chairman
Dato’ Haji Idris Bin Haji Buang
Datuk Amar Haji Mohamad Morshidi Bin Haji Abdul Ghani (appointed on 26 May 2010)
Tan Sri Dato Sri Mohd Hassan Bin Marican (appointed on 9 June 2010)
Datuk Amar Wilson Baya Dandot (resigned on 30 June 2010)
Dato’ Nordin Baharuddin (deceased on 05 June 2010)
In accordance with Article 82 of the Company’s Articles of Association, Datuk Abdul Hamed Bin Sepawi and
Dato’ Haji Idris Bin Haji Buang retire by rotation at the forthcoming Annual General Meeting and, being eligible,
offer themselves for re-election.
Directors’ benefits
Neither at the end of the financial year, nor at any time during that year, did there subsist any arrangement to
which the Company was a party, whereby the directors might 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 benefits included in the aggregate amount of emoluments received or due and receivable by
the directors as shown in the financial statements or the fixed salary of a full-time employee of the Company
as shown in Note 10 to the financial statements) by reason of a contract made by the Company or a related
corporation with any director or with a firm of which he is a member, or with a company in which he has a
substantial financial interest, except as disclosed in Note 32 to the financial statements.
Directors’ interests
The Company
Direct interest:
Number of Ordinary Shares of RM1 Each
1.1.2010
Sold
31.12.2010
70,000
(70,000)
-
None of the other directors in office at the end of financial year had any interest in shares in the Company or its
related corporations during the financial year.
According to the register of directors’ shareholdings, the interests of directors in office at the end of the financial
year in shares and options in the Company and its related corporations during the financial year were as follows:
77
DIRECTORS’ REPORT
Issue of shares
During the financial year, the Company increased its issued and paid-up ordinary share capital from
RM1,610,267,079 to RM1,610,568,979 by way of the issuance of 301,900 ordinary shares of RM1 each for cash,
pursuant to the Company’s Employees’ Share Options Scheme at an exercise price of RM2.15 per ordinary
share.
The new ordinary shares issued during the financial year ranked pari passu in all respects with the existing ordinary
shares of the Company.
Other statutory information
(a)
(b)
78
Before the statements of comprehensive income and statements of financial position of the Group and
of the Company were made out, the directors took reasonable steps:
(i)
to ascertain that proper action had been taken in relation to the writing off of bad debts and the
making of provision for doubtful debts and satisfied themselves that all known bad debts had been
written off and that adequate provision had been made for doubtful debts; and
(ii)
to ensure that current assets which were unlikely to realise their value as shown in the accounting
records in the ordinary course of business 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 which would render:
(i)
the amount written off for bad debts or the amount of the provision for doubtful debts in the
financial statements of the Group and of the Company inadequate to any substantial extent; and
(ii)
the values attributed to the current assets in the financial statements of the Group and of the
Company misleading.
(c)
At the date of this report, the directors are not aware of any circumstances which have arisen which
would render adherence to the existing method of valuation of assets or liabilities of the Group and of the
Company misleading or inappropriate.
(d)
At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this
report or financial statements of the Group and of the Company which would render any amount stated
in the financial statements misleading.
(e)
As at the date of this report, there does not exist:
(f)
(i)
any charge on the assets of the Group and of the Company which has arisen since the end of the
financial year which secures the liabilities of any other person; or
(ii)
any contingent liability of the Group and of the Company which has arisen since the end of the
financial year.
In the opinion of the directors:
(i)
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 will or may affect the ability
of the Group and of the Company to meet their obligations when they fall due; and
DIRECTORS’ REPORT
Other statutory information (cont’d.)
(ii)
no item, transaction or event of a material and unusual nature has arisen in the interval between
the end of the financial year and the date of this report which is likely to affect substantially the
results of the operations of the Group and of the Company for the financial year in which this report
is made.
Significant events
Details of significant events are disclosed in Note 39 to the financial statements.
Subsequent events
Details of subsequent events are disclosed in Note 40 to the financial statements.
Controlling shareholder
The Directors regard State Financial Secretary, Sarawak, a statutory corporation established under the State
Financial Secretary (Incorporation) Ordinance of Sarawak, as the controlling shareholder of the Company.
Auditors
The auditors, Ernst & Young, have expressed their willingness to continue in office.
Signed on behalf of the Board in accordance with a resolution of the directors dated 19 May 2011
79
STATEMENT BY DIRECTORS
pursuant to Section 169(15) of the Companies Act, 1965
We, Datuk Abdul Hamed Bin Sepawi and Dato’ Haji Idris Bin Haji Buang, being two of the directors of Sarawak
Energy Berhad, do hereby state that, in the opinion of the directors, the accompanying financial statements set
out on pages 83 to 154 are drawn up in accordance with Financial Reporting Standards and the Companies
Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company
as at 31 December 2010 and of their financial performance and cash flows for the year then ended.
Signed on behalf of the Board in accordance with a resolution of the directors dated 19 May 2011
STATUTORY DECLARATION
pursuant to Section 169(16) of the Companies Act, 1965
I, Haji Sulaiman Bin Haji Abdul Hamid, being the person primarily responsible for the financial management of
Sarawak Energy Berhad, do solemnly and sincerely declare that the accompanying financial statements set out
on pages 83 to 154 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.
Subscribed and solemnly declared by the
abovenamed Haji Sulaiman Bin Haji Abdul Hamid
at Kuching in the State of Sarawak
on 19 May 2011
80
Before me,
Haji Sulaiman Bin Haji Abdul Hamid
INDEPENDENT AUDITORS’ REPORT
to the members of Sarawak Energy Berhad (Incorporated in Malaysia)
Report on the financial statements
We have audited the financial statements of Sarawak Energy Berhad, which comprise the statements of financial
position as at 31 December 2010 of the Group and of the Company, and the statements of comprehensive
income, statements of changes in equity and statements of cash flows 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 83 to 154.
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 Financial Reporting Standards and the Companies Act 1965 in Malaysia. 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 judgement, 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 the 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 Financial Reporting
Standards and the Companies Act 1965 in Malaysia so as to give a true and fair view of the financial position of
the Group and of the Company as at 31 December 2010 and of their financial performance and cash flows of
the Group and of the Company for the year then ended.
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 have been properly kept in accordance with the provisions of the Act.
(b)
We are satisfied that the accounts of the subsidiaries that have been consolidated with the financial
statements of the Company are in form and content appropriate and proper for the purposes of the
preparation of the consolidated financial statements and we have received satisfactory information and
explanations required by us for those purposes.
Report on other legal and regulatory requirements
81
INDEPENDENT AUDITORS’ REPORT
to the members of Sarawak Energy Berhad (Incorporated in Malaysia)
Report on other legal and regulatory requirements (cont’d.)
(c)
The auditors’ reports on the accounts of the subsidiaries were not subject to any qualification and did not
include any comment required to be 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.
ERNST & YOUNG
AF: 0039
Chartered Accountants
Kuching, Malaysia
Date: 19 May 2011
82
YONG VOON KAR
1769/04/12 (J/PH)
Chartered Accountant
STATEMENTS OF COMPREHENSIVE INCOME
for the year ended 31 December 2010
Revenue
2010
RM’000
4
1,553,734
1,375,195
(1,147,738)
(1,075,185)
Cost of sales
Gross profit
Other items of income
Interest income
Other income
Other items of expense
Administrative and other expenses
Selling and distribution expenses
Finance costs
Share of results of associates
Profit before tax
Income tax expense
Group
Note
2009
RM’000
Company
2010
2009
RM’000
RM’000
125,009
107,476
-
-
405,996
300,010
125,009
107,476
8,552
150,919
11,056
118,300
2
5,031
349
3,416
(96,046)
(293)
(82,662)
473
(79,743)
(712)
(70,465)
(1,172)
(34,611)
(1,899)
-
(19,404 )
-
8
386,939
277,274
93,532
91,837
11
(50,721)
(60,032)
(26,412)
(23,279 )
5
6
7
Profit for the year, net of tax,
representing total
comprehensive income
for the year
336,218
========
217,242
========
67,120
=======
68,558
======
216,145
1,097
67,120
-
68,558
-
336,218
========
217,242
========
67,120
=======
68,558
======
Profit and total comprehensive income
attributable to:
Owners of the parent
Minority interests
341,309
(5,091)
Basic
12
21.2
========
14.1
========
Diluted
12
21.2
========
14.1
========
The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
Earnings per share attributable
to owners of the parent (sen)
83
STATEMENTS OF FINANCIAL POSITION
AS AT 31 DECEMBER 2010
Group
2009
(restated )
RM’000
1.1.2009
(restated)
RM’000
7,593,227
42,241
78,730
6,443,215
43,047
29,569
5,001,301
45,314
34,337
7,714,198
6,515,831
18
19
100,679
298,626
20
21
22
23
Note
Company
2009
(restated)
RM’000
1.1.2009
(restated)
RM’000
17,799
1,617,610
35,693
206
85,937
1,643,910
34,858
170
17,218
1,626,998
32,405
137
5,080,952
1,671,308
1,764,875
1,676,758
100,679
327,101
100,679
272,678
-
-
-
185,531
11,724
183,563
15,515
208,549
6,959
1,915,863
2,039
1,085,622
1,733
226,157
4,142
7,802
465,298
36,082
642,577
94,799
766,392
41,234
156,325
47,288
1,069,660
1,305,517
1,450,056
1,959,136
1,243,680
277,587
8,783,858
========
7,821,348
========
6,531,008
========
3,630,444
========
3,008,555
========
1,954,345
========
36,589
614,769
650,000
14,280
4,896
776,056
401,153
8,405
2,604
654,637
155,749
5,157
16,719
530,000
-
9,137
309,153
-
13,002
50,000
-
1,315,638
1,190,510
818,147
546,719
318,290
63,002
115,007
631,909
1,412,417
925,390
214,585
2010
RM’000
ASSETS
2010
RM’000
Non-current assets
Property,
plant and equipment
Land use rights
Investment in subsidiaries
Investment in associates
Deferred tax assets
13
14
15
16
17
Current assets
Property development costs
Inventories
Trade and
other receivables
Other current assets
Amount due from customers
on contract works
Cash and bank balances
TOTAL ASSETS
EQUITY AND LIABILITIES
Current liabilities
Amount due to customers
on contract works
22
Trade and other payables 24
Loans and borrowings
25
Income tax payable
84
Net current (liabilities)/assets
(245,978)
STATEMENTS OF FINANCIAL POSITION
AS AT 31 DECEMBER 2010
Note
2010
RM’000
Group
2009
(restated)
RM’000
1.1.2009
(restated)
RM’000
2010
(restated)
RM’000
Company
2009
(restated)
RM’000
1.1.2009
RM’000
Deferred tax liabilities
Deferred income
Retirement benefit
obligations
17
25
26
396,222
1,859,159
1,589,197
375,577
1,537,174
1,383,433
370,402
1,030,000
1,347,355
989,159
-
597,174
-
-
27
119,354
101,669
82,419
820
678
546
3,963,932
3,397,853
2,830,176
989,979
597,852
546
Total liabilities
5,279,570
4,588,363
3,648,323
1,536,698
916,142
63,548
Net assets
3,504,288
3,232,985
2,882,685
2,093,746
2,092,413
1,890,797
1,610,569
149,644
1,730,812
1,610,267
149,146
1,455,218
1,527,426
14,159
1,323,843
1,610,569
149,644
333,533
1,610,267
149,146
333,000
1,527,426
14,159
349,212
Minority interests
3,491,025
13,263
3,214,631
18,354
2,865,428
17,257
2,093,746
-
2,092,413
-
1,890,797
-
Total equity
3,504,288
3,232,985
2,882,685
2,093,746
2,092,413
1,890,797
8,783,858
========
7,821,348
========
6,531,008
========
3,630,444
========
3,008,555
========
1,954,345
========
Equity attributable to owners
of the parent
Share capital
Share premium
Reserves
28
28
29
TOTAL EQUITY AND LIABILITIES
85
86
Closing balance at
31 December 2010
Total transactions
with owners
Transactions with owners
Issue of ordinary shares
pursuant to ESOS
Dividends on ordinary shares
Share options granted
under ESOS
Share options forfeited
under ESOS
-
85,355
=====
149,644
1,610,569
-
-
-
-
-
85,355
85,355
-
======
73,128
-
-
-
-
-
73,128
73,128
-
=====
-
(311)
(160)
-
(151)
-
-
311
311
-
Total
RM’000
(66,276)
160
-
(66,436)
341,309
(65,787)
-
-
649
(66,436)
341,309
====== ======= =======
94,147 1,478,182 3,491,025
-
-
-
-
-
94,147 1,203,149 3,215,503
94,147 1,202,277 3,214,631
872
872
Equity attributable to owners of the parent
Non-Distributable
Distributable
Capital
Share
Capital redemption
option General Retained
reserves reserves reserves reserves earnings
RM’000
RM’000
RM’000
RM’000
RM’000
======= =======
498
-
-
9
302
-
302
-
498
-
-
149,146
1,610,267
-
149,146
-
1,610,267
-
Share
Share
capital premium
RM’000
RM’000
33
Note
Total comprehensive income
Opening balance at
1 January 2010
Effect of adopting FRS 139
2010
Group
RM’000
Total
equity
(65,787)
-
-
649
(66,436)
336,218
===== =======
13,263 3,504,288
-
-
-
-
(5,091 )
18,354 3,233,857
18,354 3,232,985
872
RM’000
Minority
interests
STATEMENTS OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2010
-
1,610,267
========
149,146
=======
134,987
-
-
9
82,841
-
82,841
-
134,987
-
-
14,159
85,355
======
-
-
-
-
-
85,355
73,128
======
-
-
-
-
-
73,128
311
=======
(22,058)
(297)
17,960
(39,721)
-
-
22,369
Total
RM’000
(62,712)
297
-
(63,009)
216,145
133,058
-
17,960
178,107
(63,009)
216,145
94,147 1,202,277 3,214,631
====== ======== ========
-
-
-
-
-
94,147 1,048,844 2,865,428
Closing balance at
31 December 2009
Total transactions
with owners
Transaction with owners
Issue of ordinary shares
pursuant to ESOS
Dividend on ordinary shares
Share options granted
under ESOS
Share options forfeited
under ESOS
-
1,527,426
Share
Share
capital premium
RM’000
RM’000
33
Note
Opening balance at
1 January 2009
2009
Group
Attributable to equity holders of the Company
Non-Distributable
Distributable
Capital
Share
Capital redemption
option General Retained
reserves reserves reserves reserves earnings
RM’000
RM’000
RM’000
RM’000
RM’000
RM’000
Total
equity
133,058
-
17,960
178,107
(63,009)
217,242
18,354 3,232,985
====== ========
-
-
-
-
1,097
17,257 2,882,685
RM’000
Minority
interests
87
88
Closing balance at
31 December 2010
Total transactions with owners
Issue of ordinary shares pursuant to ESOS
Share options granted under ESOS:
Recognised in profit or loss
Included in investments in subsidiaries
Share options forfeited under ESOS
Opening balance at
1 January 2010
2010
Company
9
33
Note
498
-
498
-
1,610,569
149,644
========= =======
302
-
302
-
-
149,146
1,610,267
-
149,146
-
1,610,267
-
73,128
======
-
-
-
-
73,128
73,128
-
======
(311)
(160)
(151)
-
-
311
311
-
Non-Distributable
Capital
Share
Share
Share redemption
option
capital premium reserves reserves
RM’000
RM’000
RM’000
RM’000
5,000
======
-
-
-
-
5,000
5,000
-
Total
RM’000
(65,787)
-
649
(66,436 )
67,120
255,405 2,093,746
====== ========
(66,276 )
160
(66,436 )
67,120
254,561 2,092,413
254,561 2,092,413
-
General Retained
reserves earnings
RM’000
RM’000
Distributable
9
33
Note
1,610,267
========
82,841
-
82,841
-
-
1,527,426
149,146
======
134,987
-
134,987
-
-
14,159
73,128
======
-
-
-
-
73,128
311
======
(22,058)
1,048
16,912
(297)
(39,721)
-
-
22,369
Closing balance at
31 December 2009
Total transactions with owners
Issue of ordinary shares pursuant to ESOS
Share options granted under ESOS:
Recognised in profit or loss
Included in investments in subsidiaries
Share options forfeited under ESOS
Opening balance at
1 January 2009
2009
Company
Non-Distributable
Capital
Share
Share
Share redemption
option
capital premium reserves reserves
RM’000
RM’000
RM’000
RM’000
5,000
======
-
-
-
-
5,000
Total
RM’000
133,058
1,048
16,912
-
178,107
(63,009)
68,558
254,561 2,092,413
======= ========
(62,712 )
297
(63,009 )
68,558
248,715 1,890,797
General Retained
reserves earnings
RM’000
RM’000
Distributable
89
STATEMENTS OF CASH FLOWS
Group
Note
2010
Company
2010
2009
(restated)
RM’000
RM’000
RM’000
2009
(restated)
RM’000
386,939
277,274
93,533
91,837
453
290,338
(28)
7,591
7,716
(11,006)
188
359
259,128
172
(12,928)
246
887
(116,144)
(3,618)
7,878
1,899
(8,867 )
-
1,007
(105,604)
(2,221)
-
(1,330)
11,458
(108)
-
Operating activities
Profit before tax
Adjustments for:
Bad debts written off
8
Depreciation of property, plant and equipment
8
Dividend income from related companies
4
Gain on disposal of investment in a subsidiary
6
Impairment in value of investment in an associate
8
Interest expenses on loans and borrowings
7
Interest income from loans and receivables
4&5
Inventories written off
8
Loss/(gain) on partial disposal of shares
in an associate
6
Net impairment loss on receivables
8
Net (gain)/loss on disposal of property,
plant and equipment
6&8
Profit payments on islamic debt securities
7
Property, plant and equipment written off
8
Release of deferred income
6
Retirement benefit obligations
9
Reversal of write-down of inventories
8
Share options granted under ESOS
9
Unrealised loss on foreign exchange
8
2,796
260
2,816
74,895
9
(109,463)
21,244
(473)
-
4,676
70,215
81
(91,543)
21,947
(1)
1,172
17,960
1,534
683,813
553,348
(14,198)
(13,908)
Changes in working capital:
Inventories
Receivables
Payables
12,298
(72,068)
59,006
(104,158)
(54,668 )
124,038
(50,161)
122,090
(676,953)
(306 )
6,033
(867,404)
2,409
6,621
Total changes in working capital
(104,922)
141,299
(671,226 )
(858,374)
Cash flows from/ (used in) operations
578,891
694,647
(685,424)
(872,282)
Interest paid
Taxes paid, net of refund
Retirement benefit paid
(7,716)
(70,894)
(3,560)
(172 )
(46,016)
(2,697 )
(1,899)
(1,753)
(2)
4,101
(1)
Net cash flows from/(used in)
operating activities
496,721
645,762
Operating cash flows before changes
in working capital
90
426
12,168
(38 )
144
-
(689,078)
133
1,048
-
(868,182 )
STATEMENTS OF CASH FLOWS
Group
Note
2010
RM’000
2009
(restated)
RM’000
Company
2010
2009
(restated)
RM’000
RM’000
Investing activities
Acquisition of an associate
Grants and capital contribution received
Purchase of property, plant and equipment
Proceeds from disposal of property, plant
and equipment
Proceeds from partial disposal of investment in
an associate
Proceeds from disposal of subsidiaries (net)
Interest received
Dividends received
315,227
(1,465,271)
15
Net cash flows (used in)/ from
investing activities
(7,878)
127,621
(1,697,715)
(100,737 )
(7,878)
(69,726 )
1,205
2,642
173
-
4,655
24,960
11,006
644
5,533
12,928
644
4,655
17,880
8,867
96,104
5,533
2,221
75,644
(1,107,574)
(1,556,225 )
26,942
5,794
649
-
178,107
-
Proceeds from issuance of ordinary shares
Repayment of islamic debt securities
Net drawdown and repayment of loans and
borrowings
Dividend paid
649
(74,934)
(90,000)
178,107
(81,028 )
(100,000 )
664,295
(66,436)
852,578
(63,009 )
612,832
(66,436 )
856,327
(63,009 )
Net cash flows from financing activities
433,574
786,648
547,045
971,425
(177,279)
(123,815 )
(115,091 )
109,037
642,577
766,392
156,325
47,288
465,298
========
642,577
========
41,234
=======
156,325
========
Net (decrease)/increase in cash and cash
equivalents
Cash and cash equivalents at 1 January
Cash and cash equivalents at 31 December
23
Financing activities
91
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2010
1.
Corporate information
The Company is a public limited liability company, incorporated and domiciled in Malaysia. The
controlling shareholder of the Company is the State Financial Secretary, Sarawak, a statutory corporation
established under the State Financial Secretary (Incorporation) Ordinance of Sarawak. The registered
office of the Company is located at 4th Floor, Wisma SESCO, Petra Jaya, 93673 Kuching, Sarawak.
The principal activity of the Company is investment holding. The principal activities of the subsidiaries
of the Company are described in Note 15 to the financial statements. There have been no significant
changes in the nature of these principal activities during the financial year.
2.
Summary of significant accounting policies
2.1
Basis of preparation
The financial statements of the Group and of the Company have been prepared in accordance
with the Companies Act, 1965 and Financial Reporting Standards in Malaysia. At the beginning of
the current financial year, the Group and the Company adopted new and revised FRS which are
mandatory for financial periods beginning on or after 1 January 2010 as described fully in Note 2.2.
The financial statements have been prepared on the historical cost basis except as disclosed in the
accounting policies below.
The financial statements are presented in Ringgit Malaysia (RM) and all values are rounded to the
nearest thousand (RM’000) except when otherwise indicated.
2.2
Changes in accounting policies
The accounting policies adopted are consistent with those of the previous financial year except as
follows:
On 1 January 2010, the Group and the Company adopted the following new and amended FRS
and IC Interpretations mandatory for annual financial periods beginning on or after 1 January 2010.
•
•
•
•
•
•
•
92
•
•
•
•
•
•
•
•
FRS 7 Financial Instruments: Disclosures
FRS 8 Operating Segments
FRS 101 Presentation of Financial Statements (Revised)
FRS 123 Borrowing Costs
FRS 139 Financial Instruments: Recognition and Measurement
Amendments to FRS 1 First-time Adoption of Financial Reporting
Standards and FRS 127 Consolidated and Separate Financial
Statements: Cost of an Investment in a Subsidiary, Jointly Controlled
Entity or Associate
Amendments to FRS 2 Share-based Payment – Vesting Conditions and
Cancellations
Amendments to FRS 132 Financial Instruments: Presentation
Amendments to FRS 139 Financial Instruments: Recognition and
Measurement, FRS 7 Financial Instruments: Disclosures and IC
Interpretation 9 Reassessment of Embedded Derivatives
Improvements to FRS issued in 2009
IC Interpretation 9 Reassessment of Embedded Derivatives
IC Interpretation 10 Interim Financial Reporting and Impairment
IC Interpretation 11 FRS 2 - Group and Treasury Share Transactions
IC Interpretation 13 Customer Loyalty Programmes
IC Interpretation 14 FRS119 - The Limit on a Defined Benefit Asset,
Minimum Funding Requirements and their Interaction
31 DECEMBER 2010
Summary of significant accounting policies (cont’d.)
2.2
Changes in accounting policies (cont’d.)
FRS 4 Insurance Contracts and TR i-3 Presentation of Financial Statements of Islamic Financial
Institutions will also be effective for annual periods beginning on or after 1 January 2010. These FRS
are, however, not applicable to the Group or the Company.
Adoption of the above standards and interpretations did not have any effect on the financial
performance or position of the Group and the Company except for those discussed below:
FRS 7 Financial Instruments: Disclosures
Prior to 1 January 2010, information about financial instruments was disclosed in accordance with
the requirements of FRS 132 Financial Instruments: Disclosure and Presentation. FRS 7 introduces
new disclosures to improve the information about financial instruments. It requires new disclosures
to improve information about financial instruments. It requires the disclosure of qualitative and
quantitative information about exposure to risks arising from financial instruments, including
specified minimum disclosures about credit risk and liquidity risk.
The Group and the Company have applied FRS 7 prospectively in accordance with the transitional
provisions. Hence, the new disclosures have not been applied to the comparatives. The new
disclosures are included throughout the Group’s and the Company’s financial statements for the
year ended 31 December 2010.
FRS 101 Presentation of Financial Statements (Revised)
The revised FRS 101 introduces changes in the presentation and disclosures of financial statements.
The revised Standard separates owner and non-owner changes in equity. The statement of changes
in equity includes only details of transactions with owners, with all non-owner changes in equity
presented as a single line. The Standard also introduces the statement of comprehensive income,
with all items of income and expense recognised in profit or loss, together with all other items of
recognised income and expense recognised directly in equity, either in one single statement, or
in two linked statements. The Group and the Company have elected to present this statement as
one single statement.
In addition, a statement of financial position is required at the beginning of the earliest comparative
period following a change in accounting policy, the correction of an error or the classification of
items in the financial statements.
The revised FRS 101 also requires the Group to make new disclosures to enable users of the financial
statements to evaluate the Group’s objectives, policies and processes for managing capital (see
Note 38).
The revised FRS 101 was adopted retrospectively by the Group and the Company.
FRS 139 Financial Instruments: Recognition and Measurement
FRS 139 establishes principles for recognising and measuring financial assets, financial liabilities and
some contracts to buy and sell non-financial items. The Group and the Company have adopted
FRS 139 prospectively on 1 January 2010 in accordance with the transitional provisions. The effects
arising from the adoption of this Standard has been accounted for by adjusting the opening
balance of retained earnings as at 1 January 2010. Comparatives are not restated. The details
of the changes in accounting policies and the effects arising from the adoption of FRS 139 are
discussed below:
2.
93
31 DECEMBER 2010
2.
2.2
Changes in accounting policies (cont’d)
FRS 139 Financial Instruments: Recognition and Measurement (cont’d)
•
Impairment of trade receivables
Prior to 1 January 2010, provision for doubtful debts was recognised when it was considered
uncollectible. Upon the adoption of FRS 139, an impairment loss is recognised when there
is objective evidence that an impairment loss has been incurred. The amount of the loss is
measured as the difference between the receivable’s carrying amount and the present
value of the estimated future cash flows discounted at the receivable’s original effective
interest rate. As at 1 January 2010, the Group has remeasured the allowance for impairment
losses as at that date in accordance with FRS 139 and the difference is recognised as
adjustments to the opening balance of retained earnings as at that date.
•
Financial guarantee contracts
During the current year, the Company provided a financial guarantee to a bank in
connection with banking facilities granted to one of its subsidiaries. Prior to 1 January
2010, such guarantees need not be provided for unless it was more likely than not that the
guarantees would be called upon. The guarantees were disclosed as contingent liabilities.
Upon the adoption of FRS 139, financial guarantees issued by the Company are recognised
as financial liabilities and are measured at their initial fair value less accumulated amortisation
as at 1 January 2010 when the likelihood of default is more than probable.
The following are effects arising from the above changes in accounting policies:
Statements of financial position
Trade receivables
Retained earnings
Increase/(decrease)
Increase/(decrease)
Group
As at
As at
31 December
1 January
2010
2010
RM’000
RM’000
(873)
(873)
======
873
873
======
Group
2010
RM’000
Statements of comprehensive income
94
Other expenses
Profit before tax
Income tax expense
Profit net of tax
Earnings per share:
Basic
873
(873)
(873)
======
Sen per share
(0.05)
======
31 DECEMBER 2010
2.2
Amendments to FRS 117 Leases
Prior to 1 January 2010, for all leases of land and buildings, if title is not expected to pass to the
lessee by the end of the lease term, the lessee normally does not receive substantially all of the risks
and rewards incidental to ownership. Hence, all leasehold land held for own use was classified by
the Group as operating lease and where necessary, the minimum lease payments or the up-front
payments made were allocated between the land and the building elements in proportion to the
relative fair values for leasehold interests in the land element and building element of the lease at
the inception of the lease. The up-front payment represented prepaid land lease payments and
were amortised on a straight-line basis over the lease term.
The amendments to FRS 117 Leases clarify that leases of land and buildings are classified as
operating or finance leases in the same way as leases of other assets. They also clarify that the
present value of the residual value of the property in a lease with a term of several decades would
be negligible and accounting for the land element as a finance lease in such circumstances would
be consistent with the economic position of the lessee. Hence, the adoption of the amendments
to FRS 117 has resulted in the Group’s and the Company’s unexpired land leases to be reclassified
as finance leases. The Group and the Company have applied this change in accounting policy
retrospectively and certain comparatives have been restated. The following are effects to
the statements of financial position as at 31 December 2010 arising from the above change in
accounting policy:
Group
2010
RM’000
Increase/(decrease) in:
Property, plant and equipment
Land use rights
117,013
(117,013)
=======
Company
2010
RM’000
13,354
(13,354)
=======
The following comparatives have been restated:
As
previously
stated Adjustments
RM’000
RM’000
As
restated
RM’000
Group
At 31 December 2009
Land use rights
6,319,598
123,617
========
123,617
(123,617)
=======
6,443,215
========
4,875,994
125,307
========
125,307
(125,307)
=======
5,001,301
========
At 1 January 2009
Land use rights
2.
95
31 DECEMBER 2010
2.
2.2
Amendments of FRS 117 Leases (cont’d.)
The following comparatives have been restated: (cont’d.)
As
previously
stated Adjustments
RM’000
RM’000
As
restated
RM’000
Statements of Financial Position (cont’d.)
Company
At 31 December 2009
Land use rights
72,322
13,615
=======
13,615
(13,615)
=======
85,937
=======
3,343
13,875
=======
13,875
(13,875)
=======
17,218
=======
257,233
1,895
=======
1,895
(1,895)
======
259,128
=======
747
260
=======
260
(260)
======
1,007
=======
At 1 January 2009
Land use rights
Statements of Cash Flows
Group
For the year ended 31 December 2009
Depreciation of property, plant
and equipment
Amortisation of land use rights
Company
For the year ended 31 December 2009
96
Depreciation of property, plant
and equipment
Amortisation of land use rights
31 DECEMBER 2010
2.3
Standards and interpretations issued but not yet effective
The Group has not adopted the following standards and interpretations that have been issued but
not yet effective:
Effective for financial periods beginning on or after 1 March 2010
• Amendments to FRS 132: Classification of Rights Issues
Effective for financial periods beginning on or after 1 July 2010
•
•
•
•
•
•
•
•
•
•
FRS 1: First-time Adoption of Financial Reporting Standards
FRS 3: Business Combinations (revised)
Amendments to FRS 127: Consolidated and Separate Financial Statements
Amendments to FRS 2: Share-based Payment
Amendments to FRS 5: Non-current Assets Held for Sale and Discontinued Operations
Amendments to FRS 138: Intangible Assets
Amendments to IC Interpretation 9: Reassessment of Embedded Derivatives
IC Interpretation 12: Service Concession Arrangements
IC Interpretation 16: Hedges of a Net Investment in a Foreign Operation
IC Interpretation 17: Distributions of Non-cash Assets to Owners
Effective for financial periods beginning on or after 30 August 2010
• Amendment to IC Interpretation 15: Agreements for the Construction of Real Estate
Effective for financial periods beginning on or after 1 January 2011
•
•
•
•
•
•
•
•
Amendments to FRS 1: Limited Exemption from Comparative FRS 7 Disclosures for First-time Adopters
Amendments to FRS 1: Additional Exemptions for First-time Adopters
Amendments to FRS 2: Group Cash-settled Share-based Payment Transactions
Amendments to FRS 7: Improving Disclosures about Financial Instruments
Amendments to FRSs ‘Improvements to FRSs (2010)’
IC Interpretation 4: Determining Whether an Arrangement contains a Lease
IC Interpretation 18: Transfers of Assets from Customers
Technical Release i-4: Shariah Compliant Sale Contracts
Effective for financial periods beginning on or after 1 July 2011
• Amendments to IC interpretation 14: Prepayments of a Minimum Funding Requirement
• IC Interpretation 19: Extinguishing Financial Liabilities with Equity Instruments
Effective for financial periods beginning on or after 1 January 2012
• FRS 124: Related Party Disclosures
• IC Interpretation 15: Agreements for the Construction of Real Estate
Except for the changes in accounting policies arising from the adoption of the revised FRS 3, the
amendments to FRS 127, as well as the new disclosures required under the Amendments to FRS 7,
the directors expect that the adoption of the other standards and interpretations above will have
no material impact on the financial statements in the period of initial application. The nature of the
impending changes in accounting policy on adoption of the revised FRS 3 and the amendments
to FRS 127 are described below.
2.
97
31 DECEMBER 2010
2.
2.3
Standards and interpretations issued but not yet effective (cont’d.)
Revised FRS 3 Business Combinations and Amendments to FRS 127 Consolidated and Separate
Financial Statements
The revised standards are effective for annual periods beginning on or after 1 July 2010. The revised
FRS 3 introduces a number of changes in the accounting for business combinations occurring after
1 July 2010. These changes will impact the amount of goodwill recognised, the reported results
in the period that an acquisition occurs, and future reported results. The Amendments to FRS 127
require that a change in the ownership interest of a subsidiary (without loss of control) is accounted
for as an equity transaction. Therefore, such transactions will no longer give rise to goodwill, nor will
they give rise to a gain or loss. Furthermore, the amended standard changes the accounting for
losses incurred by the subsidiary as well as the loss of control of a subsidiary. Other consequential
amendments have been made to FRS 107 Statement of Cash Flows, FRS 112 Income Taxes, FRS 121
The Effects of Changes in Foreign Exchange Rates, FRS 128 Investments in Associates and FRS 131
Interests in Joint Ventures. The changes from revised FRS 3 and Amendments to FRS 127 will affect
future acquisitions or loss of control and transactions with minority interests. The standards may be
early adopted. However, the Group does not intend to early adopt.
2.4
Basis of consolidation
The consolidated financial statements comprise the financial statements of the Company and
its subsidiaries as at the reporting date. The financial statements of the subsidiaries used in the
preparation of the consolidated financial statements are prepared for the same reporting date as
the Company. Consistent accounting policies are applied to like transactions and events in similar
circumstances.
All intra-group balances, income and expenses and unrealised gains and losses resulting from intragroup transactions are eliminated in full.
Acquisitions of subsidiaries are accounted for by applying the purchase method. Identifiable assets
acquired and liabilities and contingent liabilities assumed in a business combination are measured
initially at their fair values at the acquisition date. Adjustments to those fair values relating to
previously held interests are treated as a revaluation and recognised in other comprehensive
income. The cost of a business combination is measured as the aggregate of the fair values, at the
date of exchange, of the assets given, liabilities incurred or assumed, and equity instruments issued,
plus any costs directly attributable to the business combination. Any excess of the cost of business
combination over the Group’s share in the net fair value of the acquired subsidiary’s identifiable
assets, liabilities and contingent liabilities is recorded as goodwill on the statement of financial
position. The accounting policy for goodwill is set out in Note 2.8. Any excess of the Group’s share in
the net fair value of the acquired subsidiary’s identifiable assets, liabilities and contingent liabilities
over the cost of business combination is recognised as income in profit or loss on the date of
acquisition. When the Group acquires a business, embedded derivatives separated from the host
contract by the acquiree are reassessed on acquisition unless the business combination results in a
change in the terms of the contract that significantly modifies the cash flows that would otherwise
be required under the contract.
Subsidiaries are consolidated from the date of acquisition, being the date on which the Group
obtains control, and continue to be consolidated until the date that such control ceases.
98
2.5
Transactions with minority interests
Minority interests represent the portion of profit or loss and net assets in subsidiaries not held by
the Group and are presented separately in profit or loss of the Group and within equity in the
consolidated statements of financial position, separately from parent shareholders’ equity.
Transactions with minority interests are accounted for using the entity concept method, whereby,
transactions with minority interests are accounted for as transactions with owners. On acquisition
of minority interests, the difference between the consideration and book value of the share of the
net assets acquired is recognised directly in equity. Gain or loss on disposal to minority interests is
recognised directly in equity.
31 DECEMBER 2010
2.6
Foreign currency
(a)
Functional and presentation currency
The individual financial statements of each entity in the Group are measured using the
currency of the primary economic environment in which the entity operates (“the functional
currency”). The consolidated financial statements are presented in Ringgit Malaysia (RM),
which is also the Company’s functional currency.
(b)
Foreign currency transactions
Transactions in foreign currencies are measured in the respective functional currencies of
the Company and its subsidiaries and are recorded on initial recognition in the functional
currencies at exchange rates approximating those ruling at the transaction dates. Monetary
assets and liabilities denominated in foreign currencies are translated at the rate of exchange
ruling at the reporting date. Non-monetary items denominated in foreign currencies that
are measured at historical cost are translated using the exchange rates as at the dates of
the initial transactions. Non-monetary items denominated in foreign currencies measured
at fair value are translated using the exchange rates at the date when the fair value was
determined.
Exchange differences arising on the settlement of monetary items or on translating monetary
items at the reporting date are recognised in profit or loss except for exchange differences
arising on monetary items that form part of the Group’s net investment in foreign operations,
which are recognised initially in other comprehensive income and accumulated under
foreign currency translation reserve in equity. The foreign currency translation reserve is
reclassified from equity to profit or loss of the Group on disposal of the foreign operation.
Exchange differences arising on the translation of non-monetary items carried at fair value
are included in profit or loss for the period except for the differences arising on the translation
of non-monetary items in respect of which gains and losses are recognised directly in equity.
Exchange differences arising from such non-monetary items are also recognised directly in
equity.
2.7
All items of property, plant and equipment are initially recorded at cost. The cost of an item of
property, plant and equipment is recognised as an asset if, and only if, 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.
Subsequent to recognition, property, plant and equipment except for freehold land are stated at
cost less accumulated depreciation and any accumulated impairment losses. When significant
parts of property, plant and equipment are required to be replaced in intervals, the Group
recognises such parts as individual assets with specific useful lives and depreciation, respectively.
Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the
plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and
maintenance costs are recognised in profit or loss as incurred.
2.
99
31 DECEMBER 2010
2.
2.7
Property, plant and equipment (cont’d.)
Certain items of property, plant and equipment of the Group have not been revalued since 1993.
The Directors have not adopted a policy of regular revaluations of such assets and no later valuation
has been recorded. As permitted under the transitional provisions of IAS 16 (Revised): Property,
Plant and Equipment, these assets continue to be stated at their valuation less accumulated
depreciation. The above transitional provisions are available only on the first application of the
MASB Approved Accounting Standard IAS 16 (Revised): Property, Plant and Equipment which is
effective for periods ending on or after 1 September 1998. By virtue of this transitional provision,
an entity that had recorded its property, plant and equipment at revalued amounts but had not
adopted a policy of revaluation has been allowed to continue carrying those assets on the basis
of their previous revaluations subject to continuity in its depreciation policy and the requirement
to write down the assets to their recoverable amounts for impairment adjustments. The transitional
provisions will remain in force until and unless the entity chooses to adopt a revaluation policy
in place of a cost policy. When that happens, FRS 116 (which supersedes IAS 16) would require
revaluations to be carried out at regular intervals.
Any revaluation surplus is recognised in other comprehensive income and accumulated in equity
under the asset revaluation reserve, except to the extent that it reverses a revaluation decrease
of the same asset previously recognised in profit or loss, in which case the increase is recognised in
profit or loss. A revaluation deficit is recognised in profit or loss, except to the extent that it offsets an
existing surplus on the same asset carried in the asset revaluation reserve.
Any accumulated depreciation as at the revaluation date is eliminated against the gross carrying
amount of the asset and the net amount is restated to the revalued amount of the asset. The
revaluation surplus included in the asset revaluation reserve in respect of an asset is transferred
directly to retained earnings on retirement or disposal of the asset.
Freehold land has unlimited useful life and therefore is not depreciated. Depreciation is computed
on a straight-line basis over the estimated useful lives of the assets as follows:
Leasehold land
Buildings
Structures and improvements
Plant and machinery
Lines and distribution mains
Distribution services
Meters
Public Lighting
Furniture, fittings, equipment and others
Motor vehicles
- over period of the lease
2% to 5%
1% to 10%
- 2.86% to 20%
- 3.33% to 4%
4%
6.67%
4%
- 6.67% to 50%
- 10% to 20%
Capital work-in-progress are not depreciated as these assets are not available for use.
100
The carrying values of property, plant and equipment are reviewed for impairment when events or
changes in circumstances indicate that the carrying value may not be recoverable.
The residual value, useful life and depreciation method are reviewed at each financial year-end,
and adjusted prospectively, if appropriate.
An item of property, plant and equipment is derecognised upon disposal or when no future
economic benefits are expected from its use or disposal. Any gain or loss on derecognition of the
asset is included in the profit or loss in the year the asset is derecognised.
31 DECEMBER 2010
2.8
Intangible assets
(a)
Goodwill
Goodwill is initially measured at cost. Following initial recognition, goodwill is measured at
cost less accumulated impairment losses.
For the purpose of impairment testing, goodwill acquired is allocated, from the acquisition
date, to each of the Group’s cash-generating units that are expected to benefit from the
synergies of the combination.
The cash-generating unit to which goodwill has been allocated is tested for impairment
annually and whenever there is an indication that the cash-generating unit may be impaired,
by comparing the carrying amount of the cash-generating unit, including the allocated
goodwill, with the recoverable amount of the cash-generating unit. Where the recoverable
amount of the cash-generating unit is less than the carrying amount, an impairment loss is
recognised in the profit or loss. Impairment losses recognised for goodwill are not reversed in
subsequent periods.
Where goodwill forms part of a cash-generating unit and part of the operation within that
cash-generating unit is disposed of, the goodwill associated with the operation disposed of
is included in the carrying amount of the operation when determining the gain or loss on
disposal of the operation. Goodwill disposed of in this circumstance is measured based on
the relative fair values of the operations disposed of and the portion of the cash-generating
unit retained.
(b)
Research and development costs
All research costs are recognised in the profit or loss as incurred. Preliminary engineering,
investigation and survey costs incurred on projects before authorisation for their construction
are charged to operating expenditure. The cost of research and development related
to alternative energy sources or those not related to a specific project, is also charged to
operations.
2.9
Land use rights
Land use rights were initially measured at cost. Following initial recognition, land use rights were
measured at cost less accumulated amortisation and accumulated impairment losses. The land
use rights were amortised over their lease terms.
2.10
Impairment of non-financial assets
The Group assesses at each reporting date whether there is an indication that an asset may be
impaired. If any such indication exists, or when an annual impairment assessment for an asset is
required, the Group makes an estimate of the asset’s recoverable amount.
An asset’s recoverable amount is the higher of an asset’s fair value less costs to sell and its value
in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which
there are separately identifiable cash flows (cash-generating units (“CGU”)).
In assessing value in use, the estimated future cash flows expected to be generated by the asset
are discounted to their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset. Where the carrying
amount of an asset exceeds its recoverable amount, the asset is written down to its recoverable
amount. Impairment losses recognised in respect of a CGU or groups of CGUs are allocated first to
reduce the carrying amount of any goodwill allocated to those units or groups of units and then, to
reduce the carrying amount of the other assets in the unit or groups of units on a pro-rata basis.
2.
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31 DECEMBER 2010
2.
2.10
Impairment of non-financial assets (cont’d.)
Impairment losses are recognised in profit or loss except for assets that are previously revalued
where the revaluation was taken to other comprehensive income. In this case the impairment is
also recognised in other comprehensive income up to the amount of any previous revaluation.
An assessment is made at each reporting date as to whether there is any indication that previously
recognised impairment losses may no longer exist or may have decreased. A previously recognised
impairment loss is reversed only if there has been a change in the estimates used to determine the
asset’s recoverable amount since the last impairment loss was recognised. If that is the case, the
carrying amount of the asset is increased to its recoverable amount. That increase cannot exceed
the carrying amount that would have been determined, net of depreciation, had no impairment
loss been recognised previously. Such reversal is recognised in profit or loss unless the asset is
measured at revalued amount, in which case the reversal is treated as a revaluation increase.
Impairment loss on goodwill is not reversed in a subsequent period.
2.11
Subsidiaries
A subsidiary is an entity over which the Group has the power to govern the financial and operating
policies so as to obtain benefits from its activities.
In the Company’s separate financial statements, investments in subsidiaries are accounted for at
cost less impairment losses.
2.12
Associates
An associate is an entity, not being a subsidiary or a joint venture, in which the Group has significant
influence. An associate is equity accounted for from the date the Group obtains significant
influence until the date the Group ceases to have significant influence over the associate.
The Group’s investments in associates are accounted for using the equity method. Under the equity
method, the investment in associates is measured in the statement of financial position at cost plus
post-acquisition changes in the Group’s share of net assets of the associates. Goodwill relating to
associates is included in the carrying amount of the investment. Any excess of the Group’s share
of the net fair value of the associate’s identifiable assets, liabilities and contingent liabilities over
the cost of the investment is excluded from the carrying amount of the investment and is instead
included as income in the determination of the Group’s share of the associate’s profit or loss for the
period in which the investment is acquired.
When the Group’s share of losses in an associate equals or exceeds its interest in the associate, the
Group does not recognise further losses, unless it has incurred obligations or made payments on
behalf of the associate.
102
After application of the equity method, the Group determines whether it is necessary to recognise
an additional impairment loss on the Group’s investment in its associates. The Group determines at
each reporting date whether there is any objective evidence that the investment in the associate
is impaired. If this is the case, the Group calculates the amount of impairment as the difference
between the recoverable amount of the associate and its carrying value and recognises the
amount in profit or loss.
The financial statements of the associates are prepared as of the same reporting date as the
Company. Where necessary, adjustments are made to bring the accounting policies in line with
those of the Group.
In the Company’s separate financial statements, investments in associates are stated at cost less
impairment losses. On disposal of such investments, the difference between net disposal proceeds
and their carrying amounts is included in profit or loss.
31 DECEMBER 2010
2.13
Financial assets
Financial assets are recognised in the statements of financial position when, and only when, the
Group and the Company become a party to the contractual provisions of the financial instrument.
When financial assets are recognised initially, they are measured at fair value, plus, in the case of
financial assets not at fair value through profit or loss, directly attributable transaction costs.
The Group and the Company determine the classification of their financial assets at initial
recognition, and the categories include financial assets at fair value through profit or loss, loans
and receivables, held-to-maturity investments and available-for-sale financial assets.
(a)
Financial assets at fair value through profit or loss
Financial assets are classified as financial assets at fair value through profit or loss if they are
held for trading or are designated as such upon initial recognition. Financial assets held
for trading are derivatives (including separated embedded derivatives) or financial assets
acquired principally for the purpose of selling in the near term.
Subsequent to initial recognition, financial assets at fair value through profit or loss are
measured at fair value. Any gains or losses arising from changes in fair value are recognised
in profit or loss. Net gains or net losses on financial assets at fair value through profit or loss
do not include exchange differences, interest and dividend income. Exchange differences,
interest and dividend income on financial assets at fair value through profit or loss are
recognised separately in profit or loss as part of other losses or other income.
Financial assets at fair value through profit or loss could be presented as current or noncurrent. Financial assets that is held primarily for trading purposes are presented as current
whereas financial assets that is not held primarily for trading purposes are presented as
current or non-current based on the settlement date.
(b)
Loans and receivables
Financial assets with fixed or determinable payments that are not quoted in an active
market are classified as loans and receivables.
Subsequent to initial recognition, loans and receivables are measured at amortised cost
using the effective interest method. Gains and losses are recognised in profit or loss when the
loans and receivables are derecognised or impaired, and through the amortisation process.
Loans and receivables are classified as current assets, except for those having maturity
dates later than 12 months after the reporting date which are classified as non-current.
(c)
Held-to-maturity investments
Financial assets with fixed or determinable payments and fixed maturity are classified as
held-to-maturity when the Economic Entity has the positive intention and ability to hold the
investment to maturity.
Subsequent to initial recognition, held-to-maturity investments are measured at amortised
cost using the effective interest method. Gains and losses are recognised in profit or loss
when the held-to-maturity investments are derecognised or impaired, and through the
amortisation process.
Held-to-maturity investments are classified as non-current assets, except for those having
maturity within 12 months after the reporting date which are classified as current.
2.
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31 DECEMBER 2010
2.
2.13
Financial assets (cont’d.)
(d)
Available-for-sale financial assets
Available-for-sale financial assets are financial assets that are designated as available for
sale or are not classified in any of the three preceding categories.
After initial recognition, available-for-sale financial assets are measured at fair value. Any
gains or losses from changes in fair value of the financial assets are recognised in other
comprehensive income, except that impairment losses, foreign exchange gains and
losses on monetary instruments and interest calculated using the effective interest method
are recognised in profit or loss. The cumulative gain or loss previously recognised in other
comprehensive income is reclassified from equity to profit or loss as a reclassification
adjustment when the financial asset is derecognised. Interest income calculated using the
effective interest method is recognised in profit or loss. Dividends on an available-for-sale
equity instrument are recognised in profit or loss when the Economic Entity’s right to receive
payment is established.
Investments in equity instruments whose fair value cannot be reliably measured are measured
at cost less impairment loss.
Available-for-sale financial assets are classified as non-current assets unless they are
expected to be realised within 12 months after the reporting date.
A financial asset is derecognised where the contractual right to receive cash flows from the asset
has expired. On derecognition of a financial asset in its entirety, the difference between the
carrying amount and the sum of the consideration received and any cumulative gain or loss that
had been recognised in other comprehensive income is recognised in profit or loss.
Regular way purchases or sales are purchases or sales of financial assets that require delivery of
assets within the period generally established by regulation or convention in the marketplace
concerned. All regular way purchases and sales of financial assets are recognised or derecognised
on the trade date i.e., the date that the Group and the Company commit to purchase or sell the
asset.
2.14
Impairment of financial assets
The Group and the Company assess at each reporting date whether there is any objective
evidence that a financial asset is impaired.
Trade and other receivables and other financial assets carried at amortised cost
104
To determine whether there is objective evidence that an impairment loss on financial assets has
been incurred, the Group and the Company consider factors such as the probability of insolvency
or significant financial difficulties of the debtor and default or significant delay in payments. For
certain categories of financial assets, such as trade receivables, assets that are assessed not to
be impaired individually are subsequently assessed for impairment on a collective basis based on
similar risk characteristics. Objective evidence of impairment for a portfolio of receivables could
include the Group’s and the Company’s past experience of collecting payments, an increase in
the number of delayed payments in the portfolio past the average credit period and observable
changes in national or local economic conditions that correlate with default on receivables.
If any such evidence exists, the amount of impairment loss is measured as the difference between
the asset’s carrying amount and the present value of estimated future cash flows discounted at the
financial asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
31 DECEMBER 2010
2.14
Impairment of financial assets (cont’d)
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial
assets with the exception of trade receivables, where the carrying amount is reduced through the
use of an allowance account. When a trade receivable becomes uncollectible, it is written off
against the allowance account.
If in a subsequent period, the amount of the impairment loss decreases and the decrease can
be related objectively to an event occurring after the impairment was recognised, the previously
recognised impairment loss is reversed to the extent that the carrying amount of the asset does not
exceed its amortised cost at the reversal date. The amount of reversal is recognised in profit or loss.
2.15
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and on hand, demand deposits, and shortterm, highly liquid investments that are readily convertible to known amount of cash and which are
subject to an insignificant risk of changes in value.
2.16
Construction contracts
Where the outcome of a construction contract can be reliably estimated, contract revenue
and contract costs are recognised as revenue and expenses respectively by using the stage
of completion method. The stage of completion is measured by reference to the proportion of
contract costs incurred for work performed to date to the estimated total contract costs.
Where the outcome of a construction contract cannot be estimated reliably, contract revenue
is recognised to the extent of contract costs incurred that are likely to be recoverable. Contract
costs are recognised as expense in the period in which they are incurred.
When it is probable that total contract costs will exceed total contract revenue, the expected loss
is recognised as an expense immediately.
Contract revenue comprises the initial amount of revenue agreed in the contract and variations in
contract work, claims and incentive payments to the extent that it is probable that they will result
in revenue and they are capable of being reliably measured.
When the total of costs incurred on construction contracts plus recognised profits (less recognised
losses) exceeds progress billings, the balance is classified as amount due from customers for contract
work. When progress billings exceed costs incurred plus, recognised profits (less recognised losses),
the balance is classified as amount due to customers for contract work.
2.17
Property development costs
Property development costs comprise all costs that are directly attributable to development
activities or that can be allocated on a reasonable basis to such activities.
When the financial outcome of a development activity can be reliably estimated, property
development revenue and expenses are recognised in the income statement by using the stage
of completion method. The stage of completion is determined by the proportion that property
development costs incurred for work performed to date bear to the estimated total property
development costs.
Where the financial outcome of a development activity cannot be reliably estimated, property
development revenue is recognised only to the extent of property development costs incurred
that is probable will be recoverable, and property development costs on properties sold are
recognised as expense in the period in which they are incurred.
2.
105
31 DECEMBER 2010
2.
2.17
Property development costs (cont’d.)
Any expected loss on a development project, including costs to be incurred over the defects
liability period, is recognised as an expense immediately.
Property development costs not recognised as an expense are recognised as an asset, which is
measured at the lower of cost and net realisable value.
The excess of revenue recognised in the income statement over billings to purchasers is classified
as accrued billings within trade receivables and the excess of billings to purchasers over revenue
recognised in the income statement is classified as progress billings within trade payables.
2.18
Inventories
Inventories are stated at the lower of cost and net realisable value. Costs incurred in bringing the
inventories to their present location and condition are accounted for as follows:
- Raw materials: purchase costs on a weighted average cost basis.
- Finished goods and work-in-progress: costs of direct materials and labour and a proportion of
manufacturing overheads based on normal operating capacity. These costs are assigned on a
weighted average cost basis.
Net realisable value is the estimated selling price in the ordinary course of business less estimated
costs of completion and the estimated costs necessary to make the sale.
2.19
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a
result of a past event, it is probable that an outflow of economic resources will be required to settle
the obligation and the amount of the obligation can be estimated reliably.
Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate.
If it is no longer probable that an outflow of economic resources will be required to settle the
obligation, the provision is reversed. If the effect of the time value of money is material, provisions
are discounted using a current pre tax rate that reflects, where appropriate, the risks specific to
the liability. When discounting is used, the increase in the provision due to the passage of time is
recognised as a finance cost.
2.20
106
Deferred income
Certain consumers are required to contribute towards the cost of revenue earning capital projects.
These contributions together with government grants in respect of capital expenditure are credited
to the deferred income account and released to the income statement on a straight line basis
over the estimated useful lives of the related property, plant and equipment except for those
relating to projects not yet completed.
2.21
Financial liabilities
Financial liabilities are classified according to the substance of the contractual arrangements
entered into and the definitions of a financial liability.
Financial liabilities, within the scope of FRS 139, are recognised in the statement of financial position
when, and only when, the Group and the Company become a party to the contractual provisions
of the financial instrument. Financial liabilities are classified as either financial liabilities at fair value
through profit or loss or other financial liabilities.
31 DECEMBER 2010
2.21
Financial liabilities (cont’d.)
(a)
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading
and financial liabilities designated upon initial recognition as at fair value through profit or
loss.
Financial liabilities held for trading include derivatives entered into by the Group and the
Company that do not meet the hedge accounting criteria. Derivative liabilities are initially
measured at fair value and subsequently stated at fair value, with any resultant gains or losses
recognised in profit or loss. Net gains or losses on derivatives include exchange differences.
The Group and the Company have not designated any financial liabilities as at fair value
through profit or loss.
(b)
Other financial liabilities
The Group’s and the Company’s other financial liabilities include trade payables, other
payables, amount due to related companies and loans and borrowings.
Trade and other payables are recognised initially at fair value plus directly attributable
transaction costs and subsequently measured at amortised cost using the effective interest
method.
Loans and borrowings are recognised initially at fair value, net of transaction costs incurred,
and subsequently measured at amortised cost using the effective interest method. Borrowings
are classified as current liabilities unless the Group and the Company has an unconditional
right to defer settlement of the liability for at least 12 months after the reporting date.
For other financial liabilities, gains and losses are recognised in profit or loss when the liabilities
are derecognised, and through the amortisation process.
A financial liability is derecognised when the obligation under the liability is extinguished. When an
existing financial liability is replaced by another from the same lender on substantially different terms,
or the terms of an existing liability are substantially modified, such an exchange or modification is
treated as a derecognition of the original liability and the recognition of a new liability, and the
difference in the respective carrying amounts is recognised in profit or loss.
2.22
Financial guarantee contracts
A financial guarantee contract is a contract that requires the issuer to make specified payments
to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when
due.
Financial guarantee contracts are recognised initially as a liability at fair value, net of transaction
costs when the likelihood of default by the debtors is more than probable. Subsequent to initial
recognition, financial guarantee contracts are recognised as income in profit or loss over the period
of the guarantee. If the debtor fails to make payment relating to financial guarantee contract
when it is due and the Group, as the issuer, is required to reimburse the holder for the associated
loss, the liability is measured at the higher of the best estimate of the expenditure required to settle
the present obligation at the reporting date and the amount initially recognised less cumulative
amortisation.
2.
107
31 DECEMBER 2010
2.
2.23
Borrowing costs
Borrowing costs are capitalised as part of the cost of a qualifying asset if they are directly attributable
to the acquisition, construction or production of that asset. Capitalisation of borrowing costs
commences when the activities to prepare the asset for its intended use or sale are in progress and
the expenditures and borrowing costs are incurred. Borrowing costs are capitalised until the assets
are substantially completed for their intended use or sale.
All other borrowing costs are recognised in profit or loss in the period they are incurred. Borrowing
costs consist of interest and other costs that the Group and the Company incurred in connection
with the borrowing of funds.
2.24
Employee benefits
(a)
Short-term benefits
Wages, salaries, bonuses and social security contributions are recognised as an expense in
the year in which the associated services are rendered by employees of the Group and the
Company. Short-term accumulating compensated absences such as paid annual leave
are recognised when services are rendered by employees that increase their entitlement to
future compensated absences, and short-term non-accumulating compensated absences
such as sick leave are recognised when the absences occur.
(b)
Defined contribution plans
The Group participates in the national pension schemes as defined by the laws of the countries
in which it has operations. The Malaysian companies in the Group make contributions to the
Employee Provident Fund in Malaysia, a defined contribution pension scheme. Contributions
to defined contribution pension schemes are recognised as an expense in the period in
which the related service is performed.
(c)
108
Defined benefit plans
The Group operates an unfunded, post-retirement medical benefit plan (“the Plan”) for its
eligible employees and their eligible family members. The Group’s obligation under the
Plan, calculated using the Projected Unit Credit Method, is determined based on actuarial
computations by independent actuaries, through which the amount of benefit that
employees have earned in return for their service in the current and prior years is estimated.
That benefit is discounted in order to determine its present value. Actuarial gains and losses
are recognised as income or expense over the expected average remaining working lives of
the participating employees when the cumulative unrecognised actuarial gains or losses for
the Scheme exceed 10% of the higher of the present value of the defined benefit obligation
and the fair value of plan assets. Past service costs are recognised immediately to the extent
that the benefits are already vested, and otherwise are amortised on a straight-line basis
over the average period until the amended benefits become vested.
The amount recognised in the balance sheet represents the present value of the defined
benefit obligations adjusted for unrecognised actuarial gains and losses and unrecognised
past service costs.
31 DECEMBER 2010
2.24
Employee benefits (cont’d.)
(d)
Employee share option plans
The Company’s Employee Share Options Scheme (“ESOS”), an equity-settled, share-based
compensation plan, allows the Company and its subsidiaries to acquire ordinary shares of
the Company. The total fair value of share options granted to employees is recognised as
an employee cost with a corresponding increase in the share option reserve within equity
over the vesting period and taking into account the probability that the options will vest. The
fair value of share options is measured at grant date, taking into account, if any, the market
vesting conditions upon which the options were granted but excluding the impact of any
non-market vesting conditions. Non-market vesting conditions are included in assumptions
about the number of options that are expected to become exercisable on vesting date.
At each balance sheet date, the Group revises its estimates of the number of options that are
expected to become exercisable on vesting date. It recognises the impact of the revision of
original estimates, if any, in the profit or loss, and a corresponding adjustment to equity over
the remaining vesting period. The equity amount is recognised in the share option reserve
until the option is exercised, upon which it will be transferred to share premium, or until the
option expires, upon which it will be transferred directly to retained earnings.
The proceeds received net of any directly attributable transaction costs are credited to
equity when the options are exercised.
2.25
Leases
(a)
As lessee
Finance leases, which transfer to the Group substantially all the risks and rewards incidental to
ownership of the leased item, are capitalised at the inception of the lease at the fair value of
the leased asset or, if lower, at the present value of the minimum lease payments. Any initial
direct costs are also added to the amount capitalised. Lease payments are apportioned
between the finance charges and reduction of the lease liability so as to achieve a constant
rate of interest on the remaining balance of the liability. Finance charges are charged to
profit or loss. Contingent rents, if any, are charged as expenses in the periods in which they
are incurred.
Leased assets are depreciated over the estimated useful life of the asset. However, if there is
no reasonable certainty that the Group will obtain ownership by the end of the lease term,
the asset is depreciated over the shorter of the estimated useful life and the lease term.
Operating lease payments are recognised as an expense in profit or loss on a straight-line
basis over the lease term. The aggregate benefit of incentives provided by the lessor is
recognised as a reduction of rental expense over the lease term on a straight-line basis.
(b)
As lessor
Leases where the Group retains substantially all the risks and rewards of ownership of the asset
are classified as operating leases. Initial direct costs incurred in negotiating an operating
lease are added to the carrying amount of the leased asset and recognised over the lease
term on the same bases as rental income.
2.
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31 DECEMBER 2010
2.
2.26
Revenue
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the
Group and the revenue can be reliably measured. Revenue is measured at the fair value of the
consideration received or receivable.
(a)
Sale of electricity
Sale of electricity is recognised upon invoiced value of services rendered.
(b)
Sale of goods
Revenue is recognised net of sales taxes and upon transfer of significant risks and rewards of
ownership to the buyer. Revenue is not recognised to the extent where there are significant
uncertainties regarding recovery of the consideration due, associated costs or the possible
return of goods.
(c)
Interest income
Interest income is recognised on an accrual basis using the effective interest method.
(d)
Dividend income
Dividend income is recognised when the Group’s right to receive payment is established.
(e)
Revenue from construction contracts is accounted for by the stage of completion method
as described in Note 2.16.
(f)
Revenue from parking and maintenance fees and rental income
Revenue from maintenance charges and rental income is recognised on an accrual basis.
(g)
Development properties
Revenue from sale of development properties is accounted for by the stage of completion
method as described in Note 2.17.
2.27
Income taxes
(a)
110
Current tax
Current tax assets and liabilities are measured at the amount expected to be recovered
from or paid to the taxation authorities. The tax rates and tax laws used to compute the
amount are those that are enacted or substantively enacted by the reporting date.
Current taxes are recognised in profit or loss except to the extent that the tax relates to items
recognised outside profit or loss, either in other comprehensive income or directly in equity.
(b)
Deferred tax
Deferred tax is provided using the liability method on temporary differences at the reporting
date between the tax bases of assets and liabilities and their carrying amounts for financial
reporting purposes.
31 DECEMBER 2010
2.27
Income taxes (cont’d.)
(b)
Deferred tax (cont’d.)
Deferred tax liabilities are recognised for all temporary differences, except:
-
where the deferred tax liability arises from the initial recognition of goodwill or of an asset or
liability in a transaction that is not a business combination and, at the time of the transaction,
affects neither the accounting profit nor taxable profit or loss; and
-
in respect of taxable temporary differences associated with investments in subsidiaries,
associates and interests in joint ventures, where the timing of the reversal of the temporary
differences can be controlled and it is probable that the temporary differences will not
reverse in the foreseeable future.
Deferred tax assets are recognised for all deductible temporary differences, carry forward of
unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be
available against which the deductible temporary differences, and the carry forward of unused
tax credits and unused tax losses can be utilised except:
-
where the deferred tax asset relating to the deductible temporary difference arises from the
initial recognition of an asset or liability in a transaction that is not a business combination
and, at the time of the transaction, affects neither the accounting profit nor taxable profit or
loss; and
-
in respect of deductible temporary differences associated with investments in subsidiaries,
associates and interests in joint ventures, deferred tax assets are recognised only to the
extent that it is probable that the temporary differences will reverse in the foreseeable future
and taxable profit will be available against which the temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the
extent that it is no longer probable that sufficient taxable profit will be available to allow all or part
of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each
reporting date and are recognised to the extent that it has become probable that future taxable
profit will allow the deferred tax assets to be utilised.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the
year when the asset is realised or the liability is settled, based on tax rates and tax laws that have
been enacted or substantively enacted at the reporting date.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss.
Deferred tax items are recognised in correlation to the underlying transaction either in other
comprehensive income or directly in equity and deferred tax arising from a business combination
is adjusted against goodwill on acquisition.
Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set
off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable
entity and the same taxation authority.
2.28
Share capital and share issuance expenses
An equity instrument is any contract that evidences a residual interest in the assets of the Group
and the Company after deducting all of its liabilities. Ordinary shares are equity instruments.
Ordinary shares are recorded at the proceeds received, net of directly attributable incremental
transaction costs. Ordinary shares are classified as equity. Dividends on ordinary shares are
recognised in equity in the period in which they are declared.
2.
111
31 DECEMBER 2010
2.
2.29
Contingencies
A contingent liability or asset is a possible obligation or asset that arises from past events and whose
existence will be confirmed only by the occurrence or non-occurrence of uncertain future event(s)
not wholly within the control of the Group.
Contingent liabilities and assets are not recognised in the statements of financial position of the
Group.
3.
Significant accounting estimates and judgements
The preparation of the Group’s financial statements requires management to make judgements, estimates
and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the
disclosure of contingent liabilities at the reporting date. However, uncertainty about these assumptions
and estimates could result in outcomes that could require a material adjustment to the carrying amount
of the asset or liability affected in the future.
Key sources of estimation uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at the balance
sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets
and liabilities within the next financial year are discussed below.
(a)
Depreciation of property, plant and equipment and release of deferred income
Property, plant and equipment are depreciated on a straight-line basis over their estimated useful
lives and deferred income (ie. capital contributions and grants received from consumers and
government) was transferred to the income statement based on the estimated useful lives of the
related property, plant and equipment. Management estimates the useful lives of the property,
plant and equipment to be within 2 to 100 years. Changes in the expected level of usage and
technological developments could impact the economic useful lives and the residual values of
these assets, therefore future depreciation charges and release of deferred income could be
revised.
(b)
The Group recognises contract revenue based on percentage of completion method. The stage
of completion is measured by reference to either the costs incurred to-date to the estimated total
cost or the completion of a physical proportion of work to-date. Significant judgement is required
in determining the stage of completion, the extent of the costs incurred and the estimated total
revenue (for contracts other than fixed contracts) and costs. Total contract revenue also includes
an estimation of the variation works that are recoverable from the customers. In making the
judgement, the Group relies on past experience and work of specialists.
(c)
112
Deferred tax assets
Deferred tax assets are recognised for all unutilised tax losses, unabsorbed capital allowances,
unutilised investment allowances and provisions to the extent that is probable that taxable
profit will be available against which the tax losses, capital allowances, investment allowances
and provisions can be utilised. Significant management judgement is required to determine the
amount of deferred tax assets that can be recognised, based upon the likely timing and level
of future taxable profits together with future tax planning strategies. The total carrying value of
recognised tax losses, capital allowances, investment allowances and provisions of the Group was
RM608,516,000 (2009: RM418,332,000) and the unrecognised investment allowances of the Group
was RM430,001,000 (2009: RM 430,001,000).
31 DECEMBER 2010
3.
Significant accounting estimates and judgements (cont’d.)
(d)
Impairment of loans and receivables
The Group assesses at each reporting date whether there is any objective evidence that a
financial asset is impaired. To determine whether there is objective evidence of impairment, the
Group considers factors such as the probability of insolvency or significant financial difficulties of
the debtor and default or significant delay in payments.
Where there is objective evidence of impairment, the amount and timing of future cash flows are
estimated based on historical loss experience for assets with similar credit risk characteristics.
(e)
Defined benefit plan
The cost of post-retirement medical benefit plan (“the Plan”) as well as the present value of the
obligation under the Plan is determined using actuarial valuations. The actuarial valuation involves
making assumptions about discount rates, medical cost inflation rate and mortality rates. All
assumptions are reviewed at each reporting date. The net employee liability as at 31 December
2010 is RM119,354,000 (2009: RM101,669,000). Further details are given in Note 27(a).
In determining the appropriate discount rate management has derived the applicable interest
rates from long term corporate bonds in the country. The bonds have been selected based on the
expected duration of the defined benefit obligation and taking into consideration the yield curve
respectively.
Medical cost inflation rate is based on the country market practice of 11% in year 2008 and reduced
by 2% annually from year 2008 until year 2011 while the mortality rate is based on publicly available
mortality tables for the country.
Further details about the assumptions used are given in Note 27(a).
Revenue
2010
RM’000
Dividend income from related companies
Interest income from loans and receivables
- short term deposits
- subsidiary
Sales of electricity
Sales of good and services
Manufacturing, fabrication, galvanising
and sale of steel structures
Others
Group
2009
RM’000
Company
2010
2009
RM’000
RM’000
-
-
116,144
105,604
2,454
1,514,450
-
1,872
1,352,978
4,741
2,454
6,411
-
1,872
-
9,230
21,001
6,599
2,859
6,577
6,168
-
-
1,553,734
========
1,375,195
========
125,009
=======
107,476
=======
4.
113
31 DECEMBER 2010
5.
Interest income
2010
RM’000
Interest income from loans
and receivables:
- Short-term deposits
- Others
6.
Company
2010
2009
RM’000
RM’000
8,251
301
10,388
668
2
349
8,552
======
11,056
======
2
=======
349
======
109,463
91,543
-
-
-
-
1,330
108
56
-
38
-
28
34,564
2,435
4,373
22,750
15
3,992
3,618
17
-
3,305
3
-
-
-
28
-
150,919
======
118,300
======
5,031
=======
3,416
======
9
74,895
36,535
13,502
411
51
3
80,941
8,522
7,025
78
36,535
13,489
-
8,522
6,856
-
125,403
96,569
50,024
15,378
-
(48,125)
(15,378)
(10,726)
(6,856)
-
-
(8,522)
-
-
-
1,899
=======
======
Finance costs
Interest expenses/profit payments on:
- Bankers acceptance and trust receipts
- Islamic debt securities
- Syndicated borrowings
- Revolving credits
- Term loan
Bank charges and commission
114
2009
RM’000
Other income
Amortisation of grant and capital
contribution
Gain on disposal of investment
in an associate
Gain on disposal of property, plant
and equipment
Gain on partial disposal of investment
in a subsidiary
Miscellaneous
Net realised foreign exchange gain
Rental income from land and building
Reversal of allowance for impairment
loss on loans and receivables – related
company
7.
Group
Amount recharged to subsidiaries (Note 25)
Amount capitalised in capital work-in-progress (Note 13)
- Profit payments on islamic debt securities
- Interest expenses on revolving credit
(5,795)
- Interest expenses/profit payments on
syndicated borrowings
(36,535)
- Term loan
(411)
82,662
======
70,465
======
31 DECEMBER 2010
Profit before tax
2010
RM’000
Group
2009
RM’000
Company
2010
2009
RM’000
RM’000
The following amounts have been included
in arriving at profit before tax:
Auditors’ remuneration
- statutory audits
current year
underprovision in prior years
- other services
Bad debts written off
Depreciation of property, plant and
equipment(Note 13)
Directors’ remuneration (Note 10)
Employee benefits expense (Note 9)
Finance costs (Note 7)
Impairment in value of investment in
an associate
Inventories written off
Net impairment loss on loans and receivables
- trade receivables
- related companies
Loss on partial disposal of investment
in an associate
Loss on disposal of property, plant
and equipment
Loss on foreign exchange
- realised
- unrealized
Operating lease
Property, plant and equipment written off
301
42
661
453
261
8
87
359
70
10
661
-
60
10
45
-
290,338
1,306
204,783
82,662
259,128
4,506
214,160
70,465
887
383
5,727
1,899
1,007
2,539
10,002
-
7,591
188
246
7,878
-
-
692
11,476
260
-
11,486
-
426
2,795
-
-
2,872
4,676
-
-
17
5,419
9
======
1,535
4,361
81
======
=====
=====
8.
115
31 DECEMBER 2010
9.
Employee benefits expense
2010
RM’000
Salaries, wages, overtime and bonus
Social security contributions
Contributions to defined contribution plan
Other benefits
Retirement benefit obligations (Note 27(a))
(Note 27(b))
Less: Amount capitalised in capital
work-in-progress (Note 13)
Less: Amount charged to subsidiaries
Group
2009
RM’000
Company
2010
2009
RM’000
RM’000
146,754
1,348
18,785
16,699
21,244
142,923
1,301
18,627
12,024
21,947
11,917
36
799
910
144
7,385
28
885
524
133
-
17,960
-
1,047
204,830
214,782
13,806
10,002
(47)
204,783
======
(622)
214,160
======
(8,079)
5,727
======
10,002
=====
Included in employee benefits expense of the Group and of the Company are executive directors’
remuneration amounting to RMNil (2009: RM2,815,644) and RMNil (2009: RM1,907,604) respectively.
10. Directors’ remuneration
Directors of the Company
Emoluments
Fees
Other directors
Emoluments
Fees
116
Total Directors’ remuneration (Note 32)
2010
RM’000
Group
2009
RM’000
Company
2010
2009
RM’000
RM’000
105
496
-
1,760
579
513
102
281
-
1,754
272
513
601
2,852
383
2,539
432
273
-
837
303
28
486
-
-
705
1,654
-
-
1,306
======
4,506
======
383
======
2,539
=====
31 DECEMBER 2010
10. Directors’ remuneration (cont’d.)
The number of directors of the Company whose total remuneration (excluding share options granted
under ESOS) falls within the following bands is analysed below:
Number of Directors
2010
2009
Executive Directors
RM1,900,000 - RM1,950,000
-
1
3
3
2
5
-
Non-executive Directors
RM20,001 - RM50,000
RM50,001 - RM100,000
RM100,001 - RM150,000
11. Income tax expense
Major components of income tax expense
The major components of income tax expense for the years ended 31 December 2010 and 2009 are:
2010
RM’000
Group
2009
RM’000
Company
2010
2009
RM’000
RM’000
Statements of comprehensive income:
Deferred tax (Note 17):
- Origination and reversal of
temporary differences
- Overprovision in respect of
previous years
- Deferred tax assets recognised on
investment allowance
Income tax expense recognised in profit
or loss
65,826
49,858
11,378
231
77,204
50,089
29,480
10,882
(341)
(939)
(55,622)
-
(26,483)
9,943
50,721
======
60,032
======
26,753
(305)
26,448
(36)
23,300
12
23,312
(33)
-
-
-
-
(36)
26,412
======
(33)
23,279
=====
Current income tax:
- Malaysian income tax
- Under/(over)provision in respect of
previous years
117
31 DECEMBER 2010
11. Income tax expense (cont’d.)
Reconciliation between tax expense and accounting profit
The reconciliation between tax expense and the product of accounting profit multiplied by the applicable
corporate tax rate for the years ended 31 December 2010 and 2009 are as follows:
2010
RM’000
Accounting profit before tax
Tax at Malaysian statutory tax rate of 25% (2009: 25%)
Adjustments:
Non-deductible expenses
Income not subject to tax
Benefits from previously unrecognised deferred tax assets
Deferred tax assets recognised
Underprovision of income tax expense in respect of previous years
Overprovision of deferred tax in respect of previous years
Income tax expense recognised in profit or loss
Group
2009
RM’000
386,939
======
277,274
======
96,735
69,318
35,513
(30,012)
(6,812)
(55,621)
(119)
11,378
(341)
23,503
(23,832)
(8,542)
293
231
(939 )
50,721
======
60,032
======
Company
2010
2009
RM’000
RM’000
Accounting profit before tax
Tax at Malaysian statutory tax rate of 25% (2009: 25%)
Adjustments:
Non-deductible expenses
Income not subject to tax
(Over)/under provision of tax expense in respect of previous years
Income tax expense recognised in profit or loss
118
93,532
======
91,837
======
23,383
22,959
8,614
(5,280)
(305)
2,561
(2,253)
12
26,412
======
23,279
======
Current income tax is calculated at the Malaysian statutory tax rate of 25% (2009: 25%) of the estimated
assessable profit for the year.
31 DECEMBER 2010
12. Earnings per share
Basic earnings per share amounts are calculated by dividing profit for the year, net of tax, attributable
to owners of the parent by the weighted average number of ordinary shares outstanding during the
financial year.
Diluted earnings per share amounts are calculated by dividing profit for the year, net of tax, attributable to
owners of the parent by the weighted average number of ordinary shares outstanding during the financial
year plus the weighted average number of ordinary shares that would be issued on the conversion of all
the dilutive potential ordinary shares into ordinary shares.
The following table reflects the profit and share data used in the computation of basic and diluted
earnings per share for the years ended 31 December:
2010
RM’000
Profit net of tax attributable to owners of the parent used
in the computation of basic/diluted earnings per shares
341,309
========
2010
’000
Weighted average number of ordinary shares for diluted
earnings per share computation
Basic earnings per share (sen)
Diluted earnings per share (sen)
2009
RM’000
216,145
========
Group
2009
’000
1,610,552
1,535,687
-
19
1,610,552
========
21.2
========
21.2
========
1,535,706
========
14.1
========
14.1
========
Weighted average number of ordinary shares for basic earnings
per share computation
Effects of dilution
- share options
Group
119
120
169,877
205
164,607
=======
At 31 December
2009 (as restated) 1,180
=====
(17,818)
75,467
(4,020)
359
160,946
=======
At 31 December
2010
1,180
======
597,286
========
545,611
775
(6,749 )
-
164,607
164,607
-
545,611
-
- As restated
1,180
Additions
Disposals/written off Disposals of
subsidiary
Reclassification/
transfer
-
At 1 January 2010
- As previously
stated
1,180
- Effects of
adopting the
amendments to
FRS 117
(Note 14)
-
-
545,611
=======
375,390
344
-
164,402
164,402
-
375,390
438,913
=======
-
-
438,913
-
-
438,913
438,913
=======
1,549
-
437,364
-
-
437,364
Structures
and
Buildings improvements
RM’000
RM’000
-
Leasehold
land
RM’000
- As restated
1,180
Additions
Disposals/
written off
Reclassification/
transfer
-
At 1 January 2009
- As previously
stated
1,180
- Effects of
adopting the
amendments to
FRS 117
(Note 14)
Cost/ surrogated cost
Group
Freehold
land
RM’000
13. Property, plant and equipment
4,331,891
========
505,740
(21,370)
3,840,317
14,547
(7,343)
-
3,840,317
3,840,317
========
843,055
(14,786)
2,998,361
13,687
-
2,998,361
Plant and
machinery
RM’000
1,626,539
========
165,918
-
1,463,941
(3,320)
-
1,463,941
1,463,941
========
69,651
(7,600)
1,401,890
-
-
1,401,890
Lines and
distribution
mains
RM’000
653,936
=======
97,378
-
561,049
(4,491)
-
561,049
561,049
=======
45,719
(691 )
516,021
-
-
516,021
Distribution
services
RM’000
75,823
======
2,427
-
73,770
(374)
-
73,770
73,770
======
4,034
(982)
70,718
-
-
70,718
Meters
RM’000
107,044
======
10,712
-
96,553
(221)
-
96,553
96,553
=======
2,506
(119)
94,166
-
-
94,166
295,075
======
24,010
(2,463)
288,520
1,566
(16,558)
-
288,520
288,520
=======
21,946
(6,767)
272,402
939
-
272,402
Motor vehicle
furniture
fittings,
Public equipment
lighting and others
RM’000
RM’000
2,758,350
========
(882,011)
(539)
2,192,517
1,448,383
-
-
2,192,517
2,192,517
========
(1,158,542 )
-
1,657,588
1,693,471
-
1,657,588
Capital
work-inprogress
RM’000
11,046,983
=========
-
(46,210)
9,666,978
1,465,271
(39,056)
164,607
9,502,371
9,666,978
========
-
(30,945)
7,989,482
1,708,441
164,402
7,825,080
Total
RM’000
31 DECEMBER 2010
Leasehold
land
RM’000
3,046
(103)
-
-
1,180
=====
At 31 December
2009
1,180
=====
At 31 December
2010
1,180
=====
At 1 January
2009
211,046
=======
365,605
=======
414,466
=======
123,617
======
117,013
======
182,820
=======
(4,727 )
-
(5,729 )
13,270
180,006
125,307
======
43,933
======
40,990
-
40,990
-
At 31 December
2010
=====
Net carrying amount
- As restated
Depreciation
charge for
the year (Note 8)
Disposals/
written off
Disposals of
subsidiary
Reclassification
180,006
22
-
-
-
15,640
180,006
=======
1,895
-
164,344
-
164,344
280,061
=======
284,924
=======
285,297
=======
158,852
=======
-
-
4,863
153,989
-
153,989
153,989
=======
-
1,922
152,067
-
152,067
Structures
and
Buildings improvements
RM’000
RM’000
40,990
======
39,095
39,095
-
-
-
-
At 31 December
2009 (as restated)
=====
At 1 January 2010
- As previously
stated
- Effects of adopting
the amendments to
FRS 117 (Note 14)
-
- As restated
Depreciation
charge for
the year (Note 8)
Disposals/
written off
Reclassification
At 1 January 2009
- As previously
stated
- Effects of
adopting the
amendments to
FRS 117
(Note 14)
Group (cont’d.)
Accumulated depreciation
Freehold
land
RM’000
2,601,187
========
2,257,266
========
1,551,835
========
1,730,704
========
(18,084 )
(10 )
(5,173)
170,920
1,583,051
-
1,583,051
1,583,051
========
(10,346)
(34)
146,905
1,446,526
-
1,446,526
Plant and
machinery
RM’000
13. Property, plant and equipment (cont’d.)
881,390
========
770,234
========
752,746
========
745,149
========
-
(2,978 )
54,420
693,707
-
693,707
693,707
========
(4,794)
-
49,357
649,144
-
649,144
Lines and
distribution
mains
RM’000
374,703
======
297,870
======
271,118
======
279,233
======
-
(4,220)
20,274
263,179
-
263,179
263,179
======
(631 )
-
18,907
244,903
-
244,903
Distribution
services
RM’000
27,324
======
28,766
======
30,360
======
48,499
======
-
(374)
3,869
45,004
-
45,004
45,004
======
(964)
-
5,610
40,358
-
40,358
Meters
RM’000
61,159
======
54,321
======
55,588
======
45,885
======
-
(221 )
3,874
42,232
-
42,232
42,232
======
(119 )
-
3,773
38,578
-
38,578
76,394
=======
66,915
=======
59,236
=======
218,681
=======
(2,405 )
10
(16,331 )
15,802
221,605
-
221,605
221,605
=======
(6,692 )
12
15,119
213,166
-
213,166
Motor vehicle
furniture
fittings,
Public equipment
lighting and others
RM’000
RM’000
2,758,350
========
2,192,517
========
1,657,588
========
========
-
-
-
-
-
-
========
-
-
-
-
-
Capital
work-inprogress
RM’000
7,593,227
=========
6,443,215
=========
5,001,301
=========
3,453,756
=========
(25,319)
-
(35,026 )
290,338
3,223,763
40,990
3,182,773
3,223,763
=========
(23,546 )
-
259,128
2,988,181
39,095
2,949,086
Total
RM’000
31 DECEMBER 2010
121
31 DECEMBER 2010
Company
Motor vehicle,
furniture,
fittings,
Leasehold equipment
Land and others
RM’000
RM’000
Capital
Work-inprogress
RM’000
Total
RM’000
Cost
At 1 January 2009
- As previously stated
- Effects of adopting the
amendments to FRS 117 (Note 14)
-
5,592
-
5,592
14,657
-
-
14,657
- As restated
Additions
14,657
-
5,592
130
69,596
20,249
69,726
14,657
======
5,722
=====
69,596
======
89,975
======
At 31 December 2009 (as restated)
At 1 January 2010
-
5,722
69,596
75,318
14,657
-
-
14,657
- As restated
Additions
Disposals
Transfer to subsidiary
14,657
-
5,722
481
(300)
-
At 31 December 2010
14,657
======
69,596
100,256
(167,853)
89,975
100,737
(300)
(167,853)
5,903
=====
1,999
======
22,559
======
Accumulated depreciation
122
At 1 January 2009
-
2,249
-
2,249
782
-
-
782
- As restated
Depreciation charge for the year (Note 8)
782
260
2,249
747
-
3,031
1,007
1,042
======
2,996
=====
======
4,038
======
At 31 December 2009 (as restated)
31 DECEMBER 2010
Company (cont’d.)
Motor vehicle,
furniture,
fittings,
Leasehold equipment
Land and others
RM’000
RM’000
Capital
work-inprogress
RM’000
Total
RM’000
Accumulated depreciation (cont’d.)
At 1 January 2010
-
2,996
-
2,996
1,042
-
-
1,042
- As restated
Depreciation charge for the year (Note 8)
Disposals
1,042
261
-
2,996
626
(165)
-
4,038
887
(165)
1,303
======
3,457
======
======
4,760
======
At 1 January 2009
13,875
======
3,343
======
======
17,218
======
At 31 December 2009
13,615
======
2,726
======
69,596
======
85,937
======
At 31 December 2010
13,354
======
2,446
======
1,999
======
17,799
======
At 31 December 2010
Net carrying amount
Assets under construction
The following expenses incurred during the year have been included in capital work-in-progress:
Group
2010
2009
RM’000
RM’000
Interest expenses/profit payments on syndicated
borrowings
36,535
8,522
Interest expenses on revolving credit
5,795
6,856
10,726
Term loan
411
Employee benefits expense
47
622
Operating lease
48
89
======
======
Included in capital work-in-progress of the Company was the design, construction, completion and
commissioning of the Proposed Headquarters Building for the Company amounting to RM68,625,352 as
at last year end. During the current year, the capital work-in-progress was transferred to a subsidiary.
Included in the capital work-in-progress of the Group are projects completed as at 31 December 2010 but
not capitalised amounted to RM16,410,453 (2009: RM12,593,905). The Group is taking concerted action
to identify the total cost of these completed projects and take them to the respective assets accounts.
123
31 DECEMBER 2010
Revaluation of land and buildings
Land and buildings of the Group have not been revalued since 1993. The Directors have not adopted
a policy of regular revaluations of such assets and no later valuation has been recorded. As permitted
under the transitional provisions of IAS 16 (Revised): Property, Plant and Equipment, these assets continue
to be stated at their valuation less accumulated depreciation.
The above transitional provisions are available only on the first application of the MASB Approved
Accounting Standard IAS 16 (Revised): Property, Plant and Equipment which is effective for periods
ending on or after 1 September 1998. By virtue of this transitional provision, an entity that had recorded
its property, plant and equipment at revalued amounts but had not adopted a policy of revaluation
has been allowed to continue carrying those assets on the basis of their previous revaluations subject to
continuity in its depreciation policy and the requirement to write down the assets to their recoverable
amounts for impairment adjustments. The transitional provisions will remain in force until and unless the
entity chooses to adopt a revaluation policy in place of a cost policy. When that happens, FRS 116
(which supersedes IAS 16) would require revaluations to be carried out at regular intervals.
The title deeds of certain lands of certain subsidiaries are in the process of being registered in the name
of the subsidiaries.
14. Land use rights
At cost/surrogated cost
At 1 January
2010
RM’000
Group
2009
RM’000
Company
2010
2009
RM’000
RM’000
164,607
164,402
14,657
14,657
(164,607)
(164,402)
(14,657)
(14,657)
-
-
-
-
=======
=======
=======
=======
40,990
39,095
1,042
782
(40,990)
(39,095)
(1,042)
(782)
-
-
-
-
At 31 December
=======
=======
=======
=======
Net carrying amount
=======
=======
=======
=======
- As restated
Addition
At 31 December
Accumulated amortisation
At 1 January
124
- As restated
Amortisation for the year (Note 8)
31 DECEMBER 2010
15. Investment in subsidiaries
Company
2010
2009
RM’000
RM’000
Unquoted shares, at costs
Less: Accumulated impairment losses
ESOS granted to employees of subsidiaries
1,666,383
(94,773)
46,000
1,617,610
========
1,690,841
(94,773)
47,842
1,643,910
========
Details of the subsidiaries, all of which are incorporated in Malaysia and audited by Ernst & Young,
Malaysia, are shown below:
Name
Proportion (%) of
ownership interest
2010
2009
Held by the Company:
Syarikat SESCO Berhad
Generation, transmission,
distribution and sale of
electricity
100.00
100.00
Sarawak Power
Sdn. Bhd.
Power generation
100.00
100.00
Sejingkat Power Corporation
Sdn. Bhd. *
Power generation
100.00
100.00
Mukah Power Generation Sdn. Bhd.
Power generation
100.00
100.00
Sarawak Hydro Power Generation
Sdn. Bhd. #
Power generation
100.00
100.00
Sarwaja Timur Sdn. Bhd. *
Manufacture, fabrication,
galvanising and sale of
steel structures
-
100.00
Investment holding
100.00
100.00
Dunlop Agro-Management
Sdn. Bhd.
Investment holding
100.00
100.00
Dunlop Estates Holdings Sdn. Bhd.
Investment holding
100.00
100.00
Dasar Untung Sdn. Bhd.
125
31 DECEMBER 2010
15. Investment in subsidiaries (cont’d.)
Name
Held by the Company: (cont’d.)
Proportion (%) of
ownership interest
2010
2009
Dunlop Properties Sdn. Bhd.
Investment holding
100.00
100.00
Naungan Pertiwi Sdn. Bhd.
Dormant
100.00
100.00
51.00
51.00
100.00
100.00
70.00
70.00
100.00
100.00
60.00
60.00
-
100.00
100.00
100.00
Held through Syarikat SESCO Berhad:
SESCO-EFACEC Sdn. Bhd.
Sarawak Energy Services Sdn. Bhd.
Manufacturing of
transformers and switch
gears and contracting
electrical works
Provision of management
services, operation and
maintenance of power
stations and contracting
Sarawak Energy Engineering
Sdn. Bhd.
Mechanical, electrical and
electronic engineering
and contracting
PPLS Power Generation Sdn. Bhd.
Power generation
Held through Sejingkat Power Corporation Sdn. Bhd.:
SE Lite Crete Sdn. Bhd.
Dormant
Held through Sarwaja Timur Sdn. Bhd.:
Sarwaja Engineering &
Construction Sdn. Bhd.
Undertake engineering
and construction projects
Held through Sarawak Hydro Power
Generation Sdn. Bhd.:
Murum Hydro Consortium
Sdn. Bhd.#
Power generation
* Through the equity interest held by the Company and its subsidiary, Syarikat SESCO Berhad.
# These subsidiaries have yet to commence operations during the financial year.
126
31 DECEMBER 2010
15. Investment in subsidiaries (cont’d.)
Disposal of subsidiaries
The Group disposed of its 100% equity interest in Sarawaja Timur Sdn. Bhd. and its wholly owned subsidiary,
Sarwaja Engineering & Construction Sdn. Bhd. to Sarawak Cable Berhad and a third party on 30 December
2010 for a total consideration of RM38,500,000 in exchange for cash and shares in Sarawak Cable Berhad.
The disposal had the following effects on the financial position of the Group as at the end of the financial
year:
2010
RM’000
Inventories
Trade and other receivables
Amount due from a fellow subsidiary
Amount due from customers on contract
Cash and bank balances
Trade and other payables
Amount due to related companies
Borrowings
Current tax payable
Net assets disposed
Disposal proceeds received by the Company
Disposal proceeds received by the subsidiary
20,891
15,989
25,886
17,719
5,577
1,502
(42,808)
(563)
(3,463)
(225)
(2,033)
38,472
(29,918)
(8,582)
(38,500)
Gain on disposal to the Group
Disposal proceeds settled by:
Cash
Allotment of 10,000,000 ordinary shares by Sarawak Cable Berhad (Note 16)
(28)
=======
26,462
12,038
38,500
=======
Net cash inflow on disposal
26,462
(1,502)
24,960
=======
Cash inflow arising on disposal:
Cash consideration
Cash and cash equivalents of subsidiaries disposed
127
31 DECEMBER 2010
16. Investment in associates
2010
RM’000
Quoted shares in Malaysia, at cost
Share of post-acquisition reserves
Group
2009
RM’000
Company
2010
2009
RM’000
RM’000
12,952
14,325
-
21,593
-
-
27,277
-
21,593
-
Unquoted shares in Malaysia, at cost
Share of post-acquisition reserves
37,470
(8,138)
38,701
11,123
30,413
-
43,293
-
Less: Accumulated impairment losses
29,332
(14,368)
49,824
(6,777)
30,413
(16,313)
43,293
(8,435)
14,964
43,047
14,100
34,858
42,241
=======
43,047
======
35,693
=======
34,858
======
35,223
=======
======
35,223
=======
======
Market value of quoted shares
Details of the associates, all of which are incorporated in Malaysia, are shown below:
Name
Proportion (%) of
ownership interest
2010
2009
Held by the Company:
Dectra Sdn. Bhd.#
128
Provision, integration and
maintenance of control
instrumentation and
SCADA systems
26.24
26.24
Sarawak Coal Resources
Sdn. Bhd. #
Extraction and sales of coal
30.00
30.00
Sarawak Cable Berhad *
Investment holding
21.56
24.07
Seatrac Sdn. Bhd. #
Development of the undersea
High Votage Direct Current
(“HVDC”) transmission cable.
50.00
50.00
20.00
20.00
Held through Sejingkat Power
Corporation Sdn. Bhd.:
Gobel Industry Sdn. Bhd. #
Coal mining, sales of coal, and
provision of transportation,
manpower supply and
machinery services
31 DECEMBER 2010
16. Investment in associates (cont’d.)
Name
Proportion (%) of
ownership interest
2010
2009
Held through Dunlop Properties
Sdn. Bhd.:
Integrated Circuit Design
Services Sdn. Bhd. #
Provision of integrated circuit
design services, intellectual
property licensing and
operation support
30.00
30.00
Sejingkat Power Corporation
Sdn. Bhd.
Power generation
49.18
49.18
Sarawak Gas Distribution
Sdn. Bhd.
Distribution of gas
30.00
30.00
Sarwaja Timur Sdn. Bhd.
Manufacture, fabrication,
galvanising and sale
of steel structure
-
22.29
Held through Syarikat
SESCO Berhad:
*On 2 June 2010, the Company has partially disposed its equity interest in Sarawak Cable Berhad (“SCB”)
for a total cash consideration of RM4,655,000 as part of the listing exercise of SCB on the Main Board of
Bursa Securities Malaysia Berhad. Consequently, the Company’s equity interest in SCB was decreased
from 24.07% to 15.92%. The Company’s equity interest in SCB subsequently increased from 15.92% to
21.56% on 30 December 2010 as a result of the event mentioned in Note 15.
All the companies are audited by Ernst & Young, Malaysia except for those marked # which are audited
by other firm.
The summarised financial information of the associates, not adjusted for the proportion of ownership
interest held by the Group is as follows:
Current assets
Non-current assets
Total assets
Current liabilities
Total liabilities
Group
2009
RM’000
243,332
191,682
115,758
164,298
435,014
========
280,056
=======
(219,282)
(20,765)
(105,408)
(16,138)
(240,047)
========
(121,546)
=======
Assets and liabilities
2010
RM’000
129
31 DECEMBER 2010
16. Investment in associates (cont’d.)
The summarised financial information of the associates, not adjusted for the proportion of ownership
interest held by the Group is as follows: (cont’d.)
2010
RM’000
Group
2009
RM’000
Results
Revenue
Profit/(Loss) for the year
299,235
4,965
=======
219,134
(2,984)
=======
The details of goodwill included within the Group’s carrying amount of investment in associates are as
follows:
2010
RM’000
Cost/net carrying amount
At 1 January
Partial disposal of equity interest
Additional equity interest acquired
Group
1,627
(551)
6,023
At 31 December
2009
RM’000
2,236
(609)
-
7,099
=======
1,627
=======
As at 31 Recognised Disposal of
December
in profit or subsidiaries
2009
loss
RM’000
RM’000
RM’000
As at 31
December
2010
RM’000
17. Deferred tax
Deferred income tax as at 31 December relates to the following:
Group
130
As at 1 Recognised
January
in profit or
2009
loss
RM’000
RM’000
Deferred tax liabilities:
Revaluation of land
and building
(15,341)
Accelerated capital
allowances
(398,732)
Retirement benefit
obligations
20,157
Unutilised investment
allowance and tax losses
23,514
(370,402)
=======
593
(14,748)
564
-
(14,184)
(401,653)
(23,795)
2,033
(423,415)
4,594
24,751
4,193
-
28,944
(7,441)
16,073
(3,640)
-
12,433
(5,175)
=======
(375,577)
=======
(22,678)
=======
2,033
=======
(2,921)
(396,222)
=======
31 DECEMBER 2010
17. Deferred tax (cont’d.)
Deferred tax assets:
Accelerated
capital
allowances
Retirement
benefit
obligations
Unutilised
investment
allowance
As at 1 Recognised
January
in profit or
2009
loss
RM’000
RM’000
(35,520)
432
1,330
208
As at 31 Recognised Disposal of
December
in profit or subsidiaries
2009
loss
RM’000
RM’000
RM’000
(34,190 )
As at 31
December
2010
RM’000
2,168
-
(32,022)
640
219
-
859
69,425
(6,306)
63,119
46,774
-
109,893
34,337
(4,768)
29,569
49,161
-
78,730
26,483
======
2,033
=======
(336,065)
=======
Company
Deferred tax assets:
(9,943)
======
(346,008 )
=======
As at 1 Recognised
January
in profit or
2009
loss
RM’000
RM’000
137
======
Presented after appropriate offsetting as follows:
Deferred tax assets
33
======
2010
RM’000
(78,730)
396,222
317,492
=======
Deferred tax assets have not been recognised in
respect of the following items:
Unutilised investment allowance
As at 31 Recognised
December in profit or
2009
loss
RM’000
RM’000
170
======
Group
2009
RM’000
(29,569 )
375,577
346,008
======
36
======
(317,492)
========
As at 31
December
2010
RM’000
206
======
Company
2010
2009
RM’000
RM’000
(206)
-
(170)
-
(206)
======
(170)
======
2010
RM’000
430,001
======
Group
2009
RM’000
430,001
======
At the reporting date, the deferred tax assets of a subsidiary are not recognised due to uncertainty of its
recoverability. The availability of the unutilised investment allowance for offsetting against future taxable
profits of the subsidiary is subject to no substantial changes in shareholdings of the subsidiary under the
Income Tax Act, 1967 and guidelines issued by the tax authority.
Group
131
31 DECEMBER 2010
18. Property development costs
2010
RM’000
Freehold land
Development cost
Group
2009
RM’000
5,600
95,079
5,372
95,307
100,679
=======
100,679
=======
19. Inventories
2010
RM’000
Group
2009
RM’000
Cost
Raw materials and consumables
Work-in-progress
Finished goods
292,653
4,439
1,534
319,658
3,323
4,120
298,626
=======
327,101
=======
20. Trade and other receivables
Current
2010
RM’000
Group
2009
RM’000
Company
2010
2009
RM’000
RM’000
Trade receivables
Third parties
Less: Allowance for impairment
133,189
(2,711)
139,143
(2,940)
-
-
Trade receivables, net
130,478
136,203
-
-
29,420
394
69,734
5,772
314
74,285
2,003,364
29,363
192
1,351
1,172,397
5,720
83
4,960
9,411
99,548
80,371
2,034,270
1,192,571
(33,011)
(11,484)
(33,011)
-
55,053
47,360
1,915,863
1,085,622
185,531
=======
183,563
======
1,915,863
========
1,085,622
========
Other receivables
132
Amounts due from related companies
- subsidiaries
- associates
Deposits
Dividend receivable
Sundry receivables
Less: Allowance for impairment
- third parties
- related companies
Total trade and other receivables
(118,407)
(106,949)
31 DECEMBER 2010
20. Trade and other receivables (cont’d.)
Trade receivables
Trade receivables are non interest bearing.
The Group’s normal trade credit term ranges from 14 to 60 days (2009: 14 to 60 days). Other credit
terms are assessed and approved on a case-by-case basis. They are recognised at their original
invoice amounts which represent their fair values on initial recognition.
The Group has no significant concentration of credit risk that may arise from exposures to a single
debtor or to groups of debtors.
Ageing analysis of trade receivables
The ageing analysis of the Group’s trade receivables is as follows:
2010
RM’000
Current
1 to 30 days past due
More than 90 days past due
Group
2009
RM’000
70,415
11,937
7,100
6,779
36,958
80,457
12,773
6,283
5,842
33,788
133,189
=======
139,143
=======
Receivables that are past due but not impaired
The Group has trade receivables amounting to RM39.8 million (2009: RM31.2 million) that are past
due at the reporting date but not impaired.
Receivables that are subject to impairment
The Group’s trade receivables that are subject to impairment at the reporting date and the
movement of the allowance accounts used to record the impairment are as follows:
Collectively
2010
2009
RM’000
RM’000
Trade receivables
- nominal amounts
Less: Allowance
for impairment
21,934
(1,729)
20,205
22,265
(1,729)
20,536
Subject to impairment
Individually
2010
2009
RM’000
RM’000
996
5,225
(982)
(1,211)
14
4,014
2010
RM’000
22,930
(2,711)
20,219
Total
2009
RM’000
27,490
(2,940)
24,550
(a)
133
31 DECEMBER 2010
20. Trade and other receivables (cont’d.)
(a)
Trade receivables (cont’d.)
2010
RM’000
Receivables that are subject to impairment (cont’d.)
Group
2009
RM’000
Movement in allowance accounts:
At 1 January
Disposal of a subsidiary
Charge for the year (Note 8)
2,940
(873)
(48)
692
2,680
260
At 31 December
2,711
2,940
The Group’s trade receivables amounting to RM60.1 million (2009: RM55.7 million) represent trade
receivables that are past due and no allowance for impairment is necessary as the amount of
collateral deposits from the trade receivables held by the Group stands at RM256.3 million (2009:
RM238.0 million).
(b)
Sundry receivables
Included in sundry receivables of the Group are advances to the contractors for the construction
of Proposed Headquarters Building and power plants undertaken by the Group amounting to
RM4.6 million (2009: RM11.1 million).
(c)
Amounts due from related companies
Amounts due from related companies are non-interest bearing except for amounts of RM1,548.4
million (2009: RM1,028.9 million) which bear interest at rates from 3.50% to 4.95% (2009: 2.25% to
4.50%) per annum. These amounts are unsecured and are repayable on demand.
21. Other current assets
2010
RM’000
Prepaid operating expenses
Tax recoverable
Group
2009
RM’000
Company
2010
2009
RM’000
RM’000
7,469
4,255
11,049
4,466
34
2,005
33
1,700
11,724
======
15,515
======
2,039
======
1,733
======
22. Due from/(to) customers on contract works
2010
RM’000
134
Construction contract costs incurred to date
Attributable profits
Less: Progress billings
Group
2009
RM’000
554,810
11,282
531,958
31,764
566,092
(594,879)
563,722
(532,536)
(28,787)
=======
31,186
=======
31 DECEMBER 2010
22. Due from/(to) customers on contract works (cont’d.)
2010
RM’000
Presented as:
Amount due from customers on contract works
Amount due to customers on contract works
Group
7,802
(36,589)
Retention sums on contract construction,
included in trade receivables
2009
RM’000
36,082
(4,896)
(28,787)
=======
31,186
=======
3,366
=======
12,920
=======
23. Cash and bank balances
For the purpose of the consolidated statement of cash flows, cash and cash equivalents comprise the
following at the reporting date:
2010
RM’000
Short-term deposits with
licensed banks
Cash at banks and on hand
Cash and cash equivalents
Group
2009
RM’000
Company
2010
2009
RM’000
RM’000
391,764
73,534
535,235
107,342
17,280
23,954
139,435
16,890
465,298
=======
642,577
=======
41,234
=======
156,325
=======
Cash at banks earns interest at floating rates based on daily bank deposit rates. Short-term deposits
are made for varying periods of between one day and 365 days depending on the immediate cash
requirements of the Group and the Company, and earn interest at the respective short-term deposits
rates. The interest rates of deposits at statement of financial position date range from 1.00% to 3.1% (2009:
1.7% to 3.8%) per annum.
Short-term deposits with licensed banks of the Group and of the Companies amounting to RM121,002,041
and RM17,280,000 (2009: RM71,979,645 and RMNIL) respectively, are pledged as securities for the Group’s
and the Company’s borrowings.
24. Trade and other payables
Group
2009
RM’000
Company
2010
2009
RM’000
RM’000
Trade payables
Third parties
Amount due to related company
- associates
191,219
218,465
-
-
10,763
14,273
-
-
201,982
232,738
-
-
Current
2010
RM’000
135
31 DECEMBER 2010
24. Trade and other payables (cont’d.)
Current (cont’d.)
2010
RM’000
Group
2009
RM’000
Company
2010
2009
RM’000
RM’000
Other payables
Other payables
Accruals
Amounts due to related companies
Collateral deposits
Total trade and other payables
Add: Loans and borrowings
(Note 25)
Total financial liabilities carried
at amortised cost
(a)
124,788
31,679
256,320
170,196
135,158
237,964
4
13,748
2,967
-
227
7,492
1,418
-
412,787
543,318
16,719
9,137
614,769
776,056
16,719
9,137
2,509,159
1,938,327
1,519,159
906,327
3,123,928
=========
2,714,383
========
1,535,878
========
915,464
========
Trade payables
Trade payables are non-interest bearing. The normal trade credit term granted to the Group
ranges from 14 to 90 days (2009: 14 to 90 days).
(b)
Other payables
These amounts are non-interest bearing. Other payables are normally settled on credit term ranges
from 14 to 90 days (2009: 14 to 90 days).
(c)
Amounts due to related companies
The amounts due to related companies are unsecured, non-interest bearing and are repayable
on demand.
136
31 DECEMBER 2010
25. Loans and borrowings
Current
Unsecured:
Islamic debt securities
Revolving credits
Secured:
Revolving credits
2009
RM’000
Company
2010
2009
RM’000
RM’000
55,000
530,000
55,000
309,153
530,000
309,153
585,000
364,153
530,000
309,153
65,000
2,000
35,000
-
-
65,000
37,000
-
-
650,000
401,153
530,000
309,153
55,000
989,159
110,000
597,174
989,159
597,174
1,044,159
707,174
989,159
597,174
765,000
50,000
830,000
-
-
-
815,000
830,000
-
-
1,859,159
1,537,174
989,159
597,174
2,509,159
========
1,938,327
========
1,519,159
========
906,327
========
2010
RM’000
Group
Non-current
Unsecured:
Syndicated borrowings
Secured:
Term loan
Total loans and borrowings
During the year, the Company had obtained a new revolving credit facility of RM1,200 million to bridge
the Group capital expenditure and working capital requirements pending the completion of the fund
raising exercise via Proposed Issuance of Sukuk Musyarakah Programme of up to RM15 billion as disclosed
in Note 40(a). As at 31 December 2010, a total of RM140 million has been drawdown by the Company.
The unsecured revolving credits of the Group and the Company bear interest rates of 3.50% to 4.82%
(2009: 2.8% to 4.4%) per annum.
The Group’s secured revolving credits were secured by way of a first fixed charge over the land and
buildings and by way of a debenture covering a first fixed and floating charge over the entire assets of a
subsidiary. The secured revolving credits bore interest at rates of 4.55% to 5.75% per annum.
Revolving credits
137
31 DECEMBER 2010
25. Loans and borrowings (cont’d.)
The details of the islamic debt securities of the Group are as follows:
(i)
11-year RM605 million Al-Bai Bithaman Ajil Islamic Debt Securities (“BaIDS”)
The unsecured islamic debt securities were issued by a subsidiary at interest rates of 3.70% to 6.55%
per annum and redeemable by eleven tranches over a period of eleven years commencing 2002
till 2012.
The BaIDS are redeemable as follows:
(ii)
2010
RM’000
Group
2009
RM’000
Redeemable within 1 year
55,000
55,000
Between 1 and 2 years
Between 2 and 5 years
55,000
-
55,000
55,000
Redeemable after 1 year
55,000
110,000
110,000
=======
165,000
=======
15-year RM215 million Sukuk Musharakah
This represents the Serial Sukuk Musharakah of up to an aggregate nominal amount of RM215.0
million (“the Sukuk Musharakah”) issued under the Islamic principle of Musharakah by a subsidiary
to partly finance the development and construction of a coal-fired power plant in Mukah which is
undertaken by another subsidiary of the Group.
This borrowing shall be issued in three tranches over a period of eighteen (18) months to a licensed
bank, the primary subscriber. The total nominal amount of Sukuk Musharakah amounting to
RM215.0 million had been issued in prior years.
The Sukuk Musharakah is secured by a security trust deed, the assignment of certain lease of the
subsidiary, a first legal charge over designated accounts of the subsidiary and assignment of rights,
titles and interests of the monies standing to the credit of these accounts, assignment of rights over
specified licence, agreements and insurances, and a deed of debenture creating a fixed and
floating charge over present and future assets of the subsidiary.
The subsidiary undertakes and has complied in maintaining a Service Cover Ratio of not less than
1.25:1 since the tenure of the facilities commenced.
138
31 DECEMBER 2010
(ii)
15-year RM215 million Sukuk Musharakah (cont’d.)
The summary of the profit payment rates and redemption dates of the Sukuk Musharakah as at 31
December 2010 is tabulated below:
Tranche
1
2
3
Nominal
amount
RM’ million
Issuance
dates
Year
Profit
payment rates
%
Redemption
dates
Year
105.0
55.0
55.0
2006
2007
2007
7.05 - 8.10
6.55 - 7.05
5.80 - 6.85
2016 - 2021
2012 - 2016
2009 - 2012
215.0
=====
The Sukuk Musharakah is redeemable as follows:
2010
RM’000
2009
RM’000
15,000
170,000
15,000
185,000
185,000
=======
200,000
=======
15-year RM665 million Sukuk Mudharabah
This represents the Serial Sukuk Mudharabah of up to an aggregate nominal amount of RM665.0
million (“the Sukuk Mudharabah”) issued under the Islamic principle of Mudharabah by a subsidiary
to partly finance its development and construction of a coal-fired power plant in Mukah.
This borrowing shall be issued in five tranches over a period of two years to a licensed bank, the
primary subscriber. The total nominal amount of Sukuk Mudharabah amounting to RM665.0 million
had been issued in prior years.
The Sukuk Mudharabah is secured by the following:
(i)
Assignment of all rights, benefits and titles of the subsidiary under its project documents;
(ii)
Memorandum of charge to be signed in escrow over the subsidiary’s land upon the issuance
of the land title to the subsidiary;
(iii)
Letter of undertaking to procure the issuance of the individual land title for Mukah Power
Plant and assignment of its rights to the alienation of the `issuance of lease(s) or provisional
lease(s) or separate document of title of the subsidiary’s land;
(iv)
Memorandum of first legal charge over designated accounts of the subsidiary and
assignment of rights, benefits and titles to the credit balances in these accounts; and
(v)
First ranking debenture creating fixed and floating charge over present and future assets of
the subsidiary.
(iii)
Group
139
31 DECEMBER 2010
Islamic debt securities (cont’d.)
(iii)
15-year RM665 million Sukuk Mudharabah (cont’d)
The subsidiary undertakes and has complied in maintaining a Service Cover Ratio of not less than
1.25:1 since the tenure of the facilities commenced.
The summary of the profit payment rates and redemption dates of the Sukuk Mudharabah as at 31
December 2010 is tabulated below:
Tranche
Nominal
amount
RM’ million
Issuance
dates
Year
Profit
payment
rates
%
Redemption
dates
Year
195.0
325.0
30.0
45.0
70.0
2006
2007
2007
2008
2008
8.10 - 8.60
7.15 - 8.25
7.40 - 7.50
6.70 - 6.90
6.45 - 6.75
2019 - 2021
2013 - 2019
2013
2012 - 2013
2010 - 2011
1
2
3
4
5
665.0
=====
The Sukuk Mudharabah is redeemable as follows:
2010
RM’000
Syndicated borrowings
Group
2009
RM’000
50,000
595,000
20,000
645,000
645,000
=======
665,000
=======
On 16 July 2009, the Company had executed an agreement to raise a total of RM1,900 million syndicated
borrowings via Syndicated Murabahah Tawarruq Facility of RM1,600 million and Syndicated Term Loan
Facility of RM300 million to partly finance the development and construction of a hydroelectric power
plant in Murum which is undertaken by a subsidiary. The syndicated borrowings are jointly financed by a
group of licensed Islamic Financiers and a licensed bank.
As at 31 December 2010, a total amount of RM989.2 million has been drawndown by the Company. The
details are as follows:
140
Group/Company
2010
2009
RM’000
RM’000
Syndicated Murabahah Tawarruq
Syndicated term loan
832,976
156,183
501,247
95,927
989,159
=======
597,174
=======
31 DECEMBER 2010
Syndicated borrowings (cont’d.)
The facilities have been structured for a tenure of the earlier of:
(i)
Twenty four months from the date of the first disbursement under the Syndicated Facilities; or
(ii)
Upon first disbursement of the long term funding exercise undertaken in respect of the Project
addressing the funding requirements of the Project over its entire construction development period,
which, for the avoidance of doubt, shall include the commissioning of the Project.
The syndicated borrowings are expected to be refinanced by the Proposed Issuance of Sukuk Musyarakah
Programme of up to RM15 billion as disclosed in Note 40(a).
The facilities are secured by charge over the Finance Service Reserve Accounts (“FSRA”) each held under
the Syndicated Facilities and both operated solely by the respective Security Agent. The Company shall
ensure that funds are deposited into the FSRAs until balance held in the FSRA is at least equivalent to the
Minimum Required Balance which represents one profit/interest payment under the Syndicated Facilities.
The syndicated borrowings bear profit payments/interest rates of 3.85% to 4.95% (2009: 3.85% to 4.50%) per
annum.
Term Loan- secured
2010
RM’000
Musharakah Mutanaqisah Term Financing - I
50,000
=======
Group
2009
RM’000
=======
This represents the Musharakah Mutanaqisah Term Financing – I of up to an aggregate nominal amount
of RM232.0 million (“the MMTF-i”) issued under the Shariah principle of Musharakah by a subsidiary to
partly finance the construction of the Proposed Headquarters Building. A nominal amount of RM50.0
million has been released during the year.
This borrowing is secured by Musharakah Mutanaqisah Co-ownership Agreement, specific negative
pledge over all assets related to Proposed Headquarters Building and a corporate guarantee of RM232.0
million from the Company.
This borrowing bears profit payment rate at 5.19% per annum and is for a period of 8 years plus 18 months
grace period from 29 July 2010. The borrowing is repayable in 96 monthly equal instalments, with first
instalment due on February 2012.
141
31 DECEMBER 2010
26. Deferred income
Deferred income represents government grants and capital contributions by consumers towards the cost
of capital projects and is analysed as follows:
Group
2010
2009
RM’000
RM’000
At 1 January
Received during the year
Released to the income statement
1,383,433
315,227
(109,463)
At 31 December
1,589,197
========
1,347,355
127,621
(91,543)
1,383,433
========
Capital contributions and grants received from consumers and government was transferred to the
income statement based on the estimated useful lives of the related property, plant and equipment.
27. Employee benefits
(a)
The Group operates an unfunded post-retirement medical benefit plan (“the Plan”) for its eligible
employees and their eligible family members upon attainment of the retirement age of 56 by the
eligible employees.
Movements in the net liability in the current year were as follows:
2010
RM’000
At 1 January
Recognised in income statement
Benefits paid
101,669
21,244
(3,559)
At 31 December
119,354
======
Group
2009
RM’000
82,419
21,947
(2,697)
101,669
======
Company
2010
2009
RM’000
RM’000
678
144
(2)
820
=====
546
133
(1)
678
=====
The amounts recognised in the balance sheet are determined as follows:
2010
RM’000
142
Present value of unfunded
defined benefit obligations
Unrecognised past service costs
Net liability
Group
2009
RM’000
144,767
(25,413)
131,475
(29,806)
119,354
======
101,669
======
Company
2010
2009
RM’000
RM’000
853
(33)
820
=====
714
(36)
678
=====
31 DECEMBER 2010
27. Employee benefits
(a)
Retirement benefit obligations (cont’d)
The amounts recognised in the income statement are as follows:
2010
RM’000
Current service cost
Interest cost
Past service costs
Total, included in employee
benefits expense (Note 9)
Company
2010
2009
RM’000
RM’000
2009
RM’000
8,912
7,939
4,393
10,073
7,481
4,393
97
44
3
93
37
3
21,244
======
21,947
======
144
=====
133
=====
Principal actuarial assumptions used:
2010
%
Discount rate
Medical cost inflation rate
Group
6.5
7.0
Group
Company
2010
2009
%
%
2009
%
6.5
9.0
6.5
7.0
6.5
9.0
The average life expectancy of an individual retiring at age 56 is 20 years.
Employee Share Options Scheme
The SEB Employee Share Options Scheme (“ESOS”) was governed by the by-laws approved by
the shareholders at an Extraordinary General Meeting held on 19 December 2007. The ESOS was
implemented on 21 December 2007 and was initially in force for a period of 10 years from the date
of implementation.
The salient features of the ESOS were as follows:
(i)
The Employee Share Options Scheme Committee (“Options Committee”) appointed by the
Board of Directors to administer the ESOS, might from time to time grant options to eligible
employees of the Group to subscribe for new ordinary shares of RM1 each in SEB.
(ii)
Subject to the discretion of the Options Committee, any employee whose employment had
been confirmed and in employment of the Group for a period of at least one (1) year of
continuous service prior to and up to the Offer Date and any executive directors holding
office in a full-time executive capacity of the Group, should be eligible to participate in the
ESOS.
(iii)
The total number of shares to be issued under the ESOS should not exceed in aggregate
10% of the total issued and paid-up share capital of SEB at any point of time during the
tenure of the ESOS and out of which not more than 50% of the shares should be allocated,
in aggregate, to directors and senior management of the Group. In addition, not more than
10% of the shares available under the ESOS should be allocated to any individual director or
employee who, either singly or collectively through his/her associates, held 20% or more in
the issued and paid-up capital of SEB.
(b)
143
31 DECEMBER 2010
27. Employee benefits (cont’d)
(b)
Employee Share Options Scheme (cont’d)
(iv)
The option price for each share should be the weighted average of the market price as
quoted in the Daily Official List issued by Bursa Malaysia Securities Berhad for the 5 market
days immediately preceding the date on which the option was granted, the Options
Committee should so determine at their discretion from time to time, a discount of not more
than 10% or the par value of the shares of SEB of RM1.
(v)
The employees’ entitlements to the options were vested as soon as they became exercisable.
The options upon acceptance would entitle the employee to subscribe for the total options
granted to him over a period commencing from the date of the offer letter to 21 December
2017 subject to the maximum percentage of option exercisable in a particular year. In the
first year, it would be 20% of the total options granted and subsequently, 10% from the second
year to the ninth year. Where the total options exercisable for a particular period was not
fully exercised, the unexercised options shall be carried forward to the next period subject to
the retention percentage imposed by the Options Committee. Any unexercisable options
that was allowed to roll over to the next period shall not subject to any restriction imposed
for the next period.
(vi)
All new ordinary shares issued upon exercise of the options granted under the ESOS would
rank pari passu in all respects with the existing ordinary shares of SEB other than as might
be specified in a resolution approving the distribution of dividends prior to their exercise
dates.
(vii)
The persons to whom the options have been granted have no right to participate by virtue
of the options, in any share issue of any other company.
During the last financial year, SEB had announced the receipt of notice of voluntary offer from
Delegateam Sdn. Bhd. (“Delegateam”), a wholly owned subsidiary of the State Financial Secretary
(“SFS”) to acquire all the remaining ordinary shares in SEB not already owned by Delegateam or SFS
and all the new SEB Shares that might be issued and allotted prior to the closing of the voluntary
offer arising from the exercise of outstanding options granted pursuant to the ESOS at an offer
consideration of RM2.65 per SEB Share to be satisfied in cash. The share options granted under
the ESOS was almost fully exercised by the eligible employees of the Group and a total employee
benefits expense of RM17,960,052 and RM1,047,283 for the Group and the Company respectively,
had been recognised in the last financial year.
The ESOS was dissolved on 22 March 2010 following the de-listing of the entire issue and paid-up
share capital of the Company in January 2010.
144
31 DECEMBER 2010
27. Employee benefits (cont’d)
Employee Share Options Scheme (cont’d)
Movement of share options during the financial year
The following table illustrates the number and weighted average exercise price (“WAEP”) of, and
movements in, share during the financial year:
2007 option (“WAEP” @ RM2.15)
Outstanding as at 1 January
- Exercised
- Forfeited
2010
’000
2009
’000
620
84,498
(302)
(318)
(82,841)
(1,037)
Outstanding as at 31 December
======
620
======
Exercisable as at 31 December
======
620
======
As disclosed in Note 28, options exercised during the financial year resulted in the issuance of
301,900 (2009: 82,840,480) ordinary shares at an exercise price of RM2.15. The related weighted
average share price at the date of exercise was RM2.65 (2009: RM2.63).
Fair value of share options granted
The fair value of share options granted in 2007 was determined using the Binomial model, taking
into account the terms and conditions upon which the options were granted. The fair value of
share options measured at grant date and the assumptions are as follows:
Fair value of share options at the grant date (RM)
Share price at grant date (RM)
Exercise price (RM)
Expected volatility (%)
Option life (years)
Risk free interest rate (%)
Expected dividend yield (%)
0.83
2.39
2.15
23.13
10.00
3.88
1.71
Consequential to the corporate exercise undertaken by SEB as mentioned above, the fair value
and the assumptions as stated above had been revised accordingly based on an intrinsic value
of RM0.50 per option.
(b)
145
31 DECEMBER 2010
28. Share capital and share premium
Amount
Total share
capital and
Share
share
premium
premium
RM’000
RM’000
Number of
ordinary shares
’000
Par
value
RM
Share
capital
RM’000
1,527,426
1.00
1,527,426
14,159
1,541,585
82,841
1.00
82,841
95,266
178,107
-
-
-
39,721
39,721
1,610,267
1.00
1,610,267
149,146
1,759,413
302
1.00
302
347
649
-
-
-
151
151
1,610,569
========
1.00
=======
1,610,569
========
149,644
=======
1,760,213
========
Group and Company
Issued and fully paid
At 1 January 2009
Exercise of employee share
options (Note 27(b))
Transferred from share
option reserve
At 31 December 2009
Exercise of employee share
options (Note 27(b))
Transferred from share
option reserve
At 31 December 2010
Number of ordinary
shares of RM1 each
2010
2009
’000
’000
Amount
2010
RM’000
2009
RM’000
Authorised share capital
At 1 January/31 December:
Ordinary shares of RM1 each
5-year 5% RCPS of RM0.10 each
146
2,900,000
1,000,000
2,900,000
1,000,000
2,900,000
100,000
2,900,000
100,000
3,900,000
=========
3,900,000
========
3,000,000
========
3,000,000
========
The holders of ordinary shares are entitled to receive dividends as and when declared by the Company.
All ordinary shares carry one vote per share without restrictions and rank equally with regard to the
Company’s residual assets.
During the financial year, the Company increased its issued and paid-up ordinary share capital from
RM1,610,267,079 to RM1,610,568,979 by way of the issuance of 301,900 ordinary shares of RM1 each for
cash, pursuant to the Company’s Employees’ Share Options Scheme at an exercise price of RM2.15 per
ordinary share.
The new ordinary shares issued during the financial year ranked pari passu in all respects with the existing
ordinary shares of the Company.
31 DECEMBER 2010
29. Reserves
Non-distributable:
Capital reserves (a)
Capital redemption reserve (b)
Share option reserve (c)
2010
RM’000
Group
2009
RM’000
Company
2010
2009
RM’000
RM’000
85,355
73,128
-
85,355
73,128
311
73,128
-
73,128
311
158,483
158,794
73,128
73,439
94,147
1,478,182
94,147
1,202,277
5,000
255,405
5,000
254,561
1,572,329
1,296,424
260,405
259,561
1,730,812
========
1,455,218
========
333,533
=======
333,000
=======
Distributable:
General reserves (a)
Retained earnings (d)
Movements in reserves are shown in the Statements of Changes in Equity.
The nature and purpose of each category of the reserves are as follows:
(a)
Capital reserves and general reserves
These reserves include reserves created in accordance with Section 21(2)(a) of the SESCo
Ordinance, 1962 which had since been repealed in year 2005.
The nature and purpose of each category of the reserves are as follows: (cont’d.)
(b)
Capital redemption reserve
This reserve represents cancellation of nominal value of ordinary shares arising from purchase of
own shares and cancellation of nominal value of Redeemable Convertible Preference Shares
(“RCPS”) redeemed in prior years.
(c)
Share option reserve
The share option reserve represents the equity-settled share options granted to eligible employees
of the Group. This reserve is made up of the cumulative value of services received from employees
recorded on grant of share options. The details of the share options are disclosed in Note 27(b).
Retained earnings
Prior to the year of assessment 2008, Malaysian companies adopted the full imputation system. In
accordance with the Finance Act 2007 which was gazetted on 28 December 2007, companies
shall not be entitled to deduct tax on dividend paid, credited or distributed to its shareholders, and
such dividends will be exempted from tax in the hands of the shareholders (“single tier system”).
However, there is a transitional period of six years, expiring on 31 December 2013, to allow companies
to pay franked dividends to their shareholders under limited circumstances. Companies also have
an irrevocable option to disregard the 108 balance and opt to pay dividends under the single tier
system. The change in the tax legislation also provides for the 108 balance to be locked-in as at 31
December 2007 in accordance with Section 39 of the Finance Act 2007.
(d)
147
31 DECEMBER 2010
29. Reserves (cont’d)
(d)
Retained earnings (cont’d)
The Company did not elect for the irrevocable option to disregard the 108 balance. Accordingly,
during the transitional period, the Company may utilise the credit in the 108 balance as at 31
December 2010 and 2009 to distribute cash dividend payments to ordinary shareholdings as
defined under the Finance Act 2007.
As at 31 December 2010, the Company has sufficient credit in the 108 balance to pay franked
dividends amounting to RM140 million out of its retained earnings (2009: RM207 million out of its
retained earnings). If the balance of the retained earnings of RM115 million (2009: RM48 million)
were to be distributed as dividends, the Company may distribute such dividends under the single tier
system. In addition, the Company has tax exempt profits available for distribution of approximately
at RM102 million (2009: RM102 million) which is available for distribution as tax exempt dividends,
subject to agreement by the Inland Revenue Board.
30. Capital commitments
2010
RM’000
Capital expenditure:
Approved and contracted for
Approved and not contracted for
3,967,621
1,896,681
Group
2009
RM’000
Company
2010
2009
RM’000
RM’000
4,350,595
1,367,095
-
184,196
9,179
5,864,302
5,717,690
======== =========
========
193,375
========
31. Contingencies
The Company has given a corporate guarantee of RM232.0 million to Maybank Islamic Berhad in favour
of its wholly-owned subsidiary, Naungan Pertiwi Sdn Bhd (“NPSB”) for the Musharakah Mutanaqisah Term
Financing– I facility of up to RM232.0 million granted by the bank to NPSB during the year as mentioned in
Note 25. The directors of the Company are of the view that the likelihood of default in payments by NPSB
is not probable and accordingly, no provision for liability has been made in these financial statements.
32. Related party disclosures
(a)
148
During the financial year, the Group and the Company entered into the following significant related
party transactions:
(i)
Transactions with subsidiaries:
Income
Interest charged to Syarikat SESCO Berhad
Company
2010
2009
RM’000
RM’000
6,411
-
31 DECEMBER 2010
32. Related party disclosures (cont’d)
(a)
During the financial year, the Group and the Company entered into the following significant related
party transactions: (cont’d)
Group
2010
2009
RM’000
RM’000
(ii)
Transactions with associates:
Income
Sales
Universal Cable (Sarawak) Sdn. Bhd.
Expenditure
Purchases
Sarawak Coal Resources Sdn. Bhd.
Gobel Industry Sdn. Bhd.
Universal Cable (Sarawak) Sdn. Bhd.
Rental paid to Gobel Industry Sdn. Bhd.
(iii)
-
161,208
1,579
21,623
26
124,614
2,307
6,631
40
90
90
3,982
20,822
231
219
Transactions with a company in which a subsidiary
has significant influence:
Income
Interest charged to Genesis Force Sdn. Bhd.
Expenditure
Purchases of coal from Genesis Force Sdn. Bhd.
(iv)
17
Transaction with a company in which a director has influence:
Expenditure
Rental of premises charged by
Custodev Dua Sdn. Bhd.
The directors are of the opinion that the above transactions were entered into in the normal course
of business and were transacted on normal commercial terms.
Compensation of key management personnel
The remuneration of directors and other members of key management during the year was as
follows:
Group
Company
2010
2009
2010
2009
RM’000
RM’000
RM’000
RM’000
Short-term employee benefits
Post-employment benefits
- defined contribution plan
- defined benefit plan
Other benefits
Included in the total key
management personnel are:
Directors’ remuneration (Note 10)
8,889
7,232
5,741
3,133
513
77
858
-
760
98
19
1,538
102
27
666
-
243
24
619
10,337
=======
9,647
======
6,536
======
4,019
======
1,306
=======
4,506
======
383
======
2,539
======
(b)
149
31 DECEMBER 2010
32. Related party disclosures (cont’d)
(b)
Compensation of key management personnel (cont’d)
The directors of the Group and other members of key management have been granted the
following number of options under the Employee Share Options Scheme (“ESOS”):
2010
’000
At 1 January
Exercised
280
(280)
Group
2009
’000
7,384
(7,104)
Company
2010
2009
’000
’000
-
2,888
(2,888)
At 31 December
280
======
=======
=======
=======
The share options were granted on the same terms and conditions as those offered to other
employees of the Group.
33. Dividends
Dividends in respect
of year
2010
2009
RM’000
RM’000
Dividends recognised
in year
2010
2009
RM’000
RM’000
Final dividend for 2008: 5.5 sen less 25%
taxation on 1,527,488,199 ordinary shares
-
-
-
63,009
-
66,436
66,436
-
66,436
-
-
-
66,436
======
66,436
======
66,436
======
63,009
======
Proposed for approval at forthcoming AGM
At the forthcoming Annual General Meeting, a final dividend in respect of the financial year ended 31
December 2010, of 5.5 sen less 25% taxation on 1,610,568,979 ordinary shares, amounting to a dividend
payable of RM66,435,970 will be proposed for shareholders’ approval. The financial statements for
the current financial year do not reflect this proposed dividend. Such dividend, if approved by the
shareholders, will be accounted for in equity as an appropriation of retained earnings in the financial
year ending 31 December 2011.
150
34. Controlling shareholder
The Directors regard State Financial Secretary, Sarawak, a statutory corporation established under the
State Financial Secretary (Incorporation) Ordinance of Sarawak, as the controlling shareholder of the
Company.
35. Segmental information
The Group principally involves in the generation, transmission, distribution and sale of electricity within the
same geographical region. Accordingly, no segmental information is presented.
31 DECEMBER 2010
36. Fair value of financial instruments
Determination of fair value
The following methods and assumptions are used to estimate the fair value of each class of financial
instruments for which it is practicable to estimate that value:
(a)
Cash and bank balances, other receivables and other payables
The carrying amounts of these balances approximate fair value due to their short term nature.
(b)
Trade receivables and trade payables
The carrying amounts of trade receivables and trade payables approximate fair value because
they are subject to normal trade credit terms.
(c)
Amounts due from/to related companies
The carrying values of amounts due from/to related companies in current assets and current
liabilities approximate fair value due to their short term nature. No disclosure of fair value is made
for non-current amounts due from/to related companies as it is not practicable to determine their
fair value with sufficient reliability since these balances have no fixed terms of repayment.
(d)
The carrying values of loans and borrowings approximate their fair values as they bear interest
rates which approximate the current incremental borrowing rates for similar types of lending and
borrowing arrangements.
37. Financial risk management objectives and policies
The Group and the Company are exposed to financial risks arising from their operations and the use of
financial instruments. The Group’s and the Company’s principal financial instruments comprise loans and
borrowings, cash and short-term deposits. The main purpose of these financial instruments is to manage
the Group’s funding and liquidity requirements. The Group and the Company have other financial assets
and liabilities such as trade receivables and trade payables, which arise directly from their operations.
Financial risk management policies are periodically reviewed and approved by the Board of Directors
and executed by risk management committees. The Group Risk Management Committee provides
independent oversight to the effectiveness of the risk management process.
It is, and has been throughout the current financial year, the Group and the Company do not apply
hedge accounting and do not hold or issue derivative financial instruments for trading purposes.
The following sections provide details regarding the Group’s and Company’s exposure to the abovementioned financial risks and the objective, policies and processes for the management of these risks.
(a)
Credit risk
Credit risks, or the risk of counterparties defaulting, is controlled by the application of credit
approvals, limit and monitoring procedures. Credit risks are minimised and monitored via strictly
limiting the Group’s associations to business partners with high creditworthiness. Trade receivables
are monitored on an ongoing basis via the Group’s management reporting procedures.
The key financial risks include credit risk, liquidity risk, interest rate risk and foreign currency risk.
151
31 DECEMBER 2010
37. Financial risk management objectives and policies (cont’d)
(a)
Credit risk (cont’d)
The Group does not have any significant exposure to any individual customer or counterparty nor
does it have any major concentration of credit risk related to any financial instruments.
(b)
Liquidity risk
The Group manages its debt maturity profile, operating cash flows and the availability of funding
so as to ensure that refinancing, repayment and funding needs are met. As part of its overall
prudent liquidity management, the Group maintains sufficient levels of cash or cash convertible
investments to meet its working capital requirements. In addition, the Group strives to maintain
available banking facilities at a reasonable level to its overall debt position. As far as possible, the
Group raises committed funding from both capital markets and financial institutions and balances
its portfolio with some short-term funding so as to achieve overall cost effectiveness.
(c)
Interest rate risk
The Group’s primary interest rate risk arises primarily from interest-bearing assets and debts. The
investment in financial assets are not held for speculative purposes but have been mostly placed
in fixed deposits or occasionally, in loan stocks which yield better returns than cash at bank.
The Group manages its interest rate exposure by maintaining a prudent mix of fixed and floating
rate borrowings. The Group actively reviews its debt portfolio, taking into account the investment
holding period and nature of its assets. This strategy allows it to capitalise on cheaper funding in a
low interest rate environment and achieve a certain level of protection against rate hikes.
The information on maturity dates and effective interest rates of financial assets and liabilities are
disclosed in their respective notes.
(d)
Foreign currency risk
The Group is exposed to transactional currency risk primarily through purchases that are denominated
in currency other than Malaysian Ringgit. Foreign exchange exposures in transactional currencies
other than the entity’s functional currency are kept to an acceptable level.
The Group does not use hedging activities to protect themselves against the volatility associated
with foreign currency transactions.
38. Capital management
The primary objective of the Group’s capital management is to ensure that it maintains a strong credit
rating and healthy capital ratios in order to support its business and maximise shareholder value.
152
The Group manages its capital structure and makes adjustments to it, in light of changes in economic
conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to
shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives,
policies or processes during the years ended 31 December 2010 and 31 December 2009.
The Group monitors capital using a gearing ratio, which is net debt divided by total equity. The Group
includes within net debt, loans and borrowings less cash and bank balances. Total equity comprises equity
attributable to the owners of the parent and minority interests.
31 DECEMBER 2010
38. Capital management (cont’d)
Less: Cash and bank
balances
Net debt
Total equity
Gearing ratio (times)
Note
2010
RM’000
25
2,509,159
23
(465,298)
2,043,861
=========
3,504,288
=========
0.58
=========
Group
2009
RM’000
1,938,327
Company
2010
2009
RM’000
RM’000
1,519,159
(642,577)
1,295,750
========
3,232,985
========
0.40
========
(41,234)
1,477,925
========
2,093,746
========
0.71
========
906,327
(156,325)
750,002
========
2,092,413
========
0.36
========
39. Significant events
(a)
De-listing of the entire issued and paid-up share capital of the Company and Dissolution of the
Company’s ESOS.
On 5 January 2010, the entire issued and paid-up share capital of the Company was de-listed from
the Official List of Bursa Securities.
On 22 March 2010, the Company’s ESOS was dissolved following the above mentioned de-listing
exercise.
(b)
Changes in Group Structure
On 30 December 2010, the Group has disposed off its entire equity interest in Sarwaja Timur Sdn
Bhd and its wholly owned subsidiary, Sarwaja Engineering & Construction Sdn Bhd to Sarawak
Cable Bhd (“SCB”) and a third party for a total consideration of RM38,500,000 in exchange for cash
and shares in SCB.
On 2 June 2010, the Company has partially disposed its equity interest in SCB for a total cash
consideration of RM4,655,000 as part of the listing exercise of SCB on the Main Board of Bursa
Malaysia Securities Berhad. Consequently, the Company’s equity interest in SCB decreased from
24.07% to 15.92%. On 30 December 2010, the Company’s equity interest in SCB subsequently
increased from 15.92% to 21.56% as a result of the events mentioned above.
Sarawak Hidro Sdn Bhd/Bakun Dam
During the year, the Company commenced negotiations with the Government of Malaysia
and Sarawak Hidro Sdn Bhd (“SHSB”) for the potential acquisition and/or purchase of power
arrangements relating to the 2,400 MW Bakun Dam, which is owned and being developed by
SHSB. As at the date of this report, negotiations are still on-going.
(d)
Proposed Issuance of Sukuk Musyarakah Programme of up to RM15 billion
On 19 October 2010, the Company has commenced the due diligence exercise on the proposed
issuance of the above mentioned programme with its Principal Adviser/Lead Arranger. The proceeds
from the proposed issuance will be mainly used to part finance the proposed acquisition of SHSB/
Bakun Dam mentioned in Note 39(c), to finance the Group’s capital expenditure requirements and
to refinance part of the Group’s existing borrowings.
(c)
153
31 DECEMBER 2010
40. Subsequent events
(a)
Proposed Issuance of Sukuk Musyarakah Programme of up to RM15 billion
On 11 April 2011, the Company has finalised the above mentioned programme and has submitted
the necessary submissions to Securities Commission via its Principal Adviser/Lead Arranger and the
proposed programme is currently pending approval from the Securities Commission. RAM Rating
Services Berhad has assigned a long term rating of AA1 to the above mentioned programme.
(b)
Signing of Power Purchase Agreement Term Sheet with Press Metal Berhad and three other foreign
companies
On 12 April 2011, the Company has signed separate Power Purchase Agreement Term Sheet with
Press Metal Berhad and three other foreign companies, namely OM Materials, Asia Mineral Ltd and
Tokuyama Corp. These four mentioned customers, being the first batch of investors of Sarawak
Corridor of Renewable Energy (“SCORE”), plan to invest approximately RM9.5 billion in energy
intensive industries at Samalaju Industrial Park of Bintulu, Sarawak and will require a long-term
supply of 1,300MW to power their plants. It is announced that the signing of the above power
purchase agreement term sheet signified the positive development towards the success of SCORE,
one of the five regional economic corridors in Malaysia.
41. Comparative figures
Certain comparative figures have been reclassified to conform with the current year’s presentation, as
follows:
As
previously
stated Adjustments
RM’000
RM’000
As
restated
RM’000
Group
Land use rights
Amount due from customers on contract
works
Company
Amount due from subsidiaries
154
6,319,598
123,617
123,617
(123,617)
6,443,215
-
235,160
========
36,082
(51,597)
15,515
========
36,082
183,563
15,515
========
1,065,448
21,907
========
(1,065,448)
1,063,715
1,733
========
1,085,622
1,733
========
42. Authorisation of financial statements for issue
The financial statements for the year ended 31 December 2010 were authorised for issued in accordance
with a resolution of the directors on 19 May 2011.
SARAWAK ENERGY BERHAD
(Company No. 007199-D)
4th Floor, Wisma SESCO, Petra Jaya, 93673 Kuching, Sarawak.
Tel: 6082-441 188 Fax: 6082-313 588 Website: www.sarawakenergy.com.my

Annual Report - Sarawak Energy

Transcription

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