laporan tahunan tnb 2007

�Tenaga Nasional Berhad Annual Report 2007

2Tenaga Nasional Berhad Annual Report 2007

Nerve and Drive

The electricity business had its humble beginnings as Central

Electricity Board in 1949 with an initial generation capacity of

40 MW and 2,466 employees serving 45,000 customers. Over

the last five decades, this has grown to a formidable proportion

with Tenaga Nasional Berhad (TNB) established and having

today, over 11,200 MW in installed generation capacity, more

than RM67 billion in assets, over 28,000 employees, and a

customer base of more than seven million. Our infrastructure

is a complete generation, transmission and distribution system

that forms the driving nucleus powering the nation’s progress,

lighting up commerce and the lives of Malaysians.

Today the electrical pulse rendered by TNB is indeed felt

here, there and everywhere. As the nerve and drive of

human mankind’s development, TNB through its workforce,

places its commitment to all touchpoints with full fervour

and dedication. From the break of dawn as reflected on the

front cover of our annual report, TNB remains constant in

its delivery of electricity, serving 24/7 throughout Peninsular

Malaysia and Sabah. And as the country rises to the challenges

of tomorrow, you can be assured that we are always there to

help communities thrive.


Corporate Profile

Tenaga Nasional Berhad (TNB) is the largest electricity utility in Malaysia with more than RM67.0 billion in assets. The Company is listed on the main board of Bursa Malaysia and employs approximately 28,000 people to serve a customer base of over seven million in Peninsular Malaysia and Sabah. TNB plays an integral role in the national, economic and social prosperity of the country by providing reliable and efficient services.

The Company has earned a reputation for outstanding performance, regionally and globally. TNB is the only Asian energy company short-listed as one of five finalists for the “Power Company of the Year” in the 2007 Platts Global Energy Awards.

TNB’s core businesses are in the generation, transmission and distribution of electricity. It has a total installed generation capacity of about 11,200 MW (including SESB and Kapar Energy Ventures). In Peninsular Malaysia, TNB contributes to 55 per cent of the total industry capacity through six thermal stations and three major hydroelectric schemes. TNB also manages and operates a comprehensive transmission network, the National Grid. Spanning the peninsula, the grid links TNB power stations and IPPs to the distribution network. The grid is also interconnected to Thailand’s transmission system in the North and Singapore’s transmission system in the South. TNB’s distribution network is managed through a comprehensive distribution system, customer service centres and call management centres.

Today, TNB is also involved in diversified activities linked to the power industry. Through subsidiaries, the Company is in the manufacture of transformers, high voltage switchgears and cables; the provision of professional consultancy services; architectural, civil and electrical engineering works and services, repair and maintenance; as well as in research and development; property development; and project management services.

In advancing human capital, Universiti Tenaga Nasional (UNITEN) has been established to produce well-rounded competent individuals in various fields. A major part of the Company’s corporate social responsibility in education, sponsorships and contributions, is channeled through our trust foundation - Yayasan Tenaga Nasional.

To ensure the Company’s continued service excellence and to support its strategic vision of global leadership, employee competencies are continuously enhanced through structured programmes. As a responsible corporate citizen, TNB also places great emphasis on its engagement with the community to ensure society gains and benefits from our efforts.


Key FinancialHighlights

RM FY06 FY07

Revenue 20,384.2 23,320.4

Operating Expenses (16,916.9) (18,371.4)

Other Operating Income 489.3 593.7

Operating Surplus 3,956.6 5,542.7

Finance Cost (1,539.3) (1,305.0)

Transaction Gain/(Loss) (166.4) 33.5

Profit Before Tax & Translation Gain/(Loss) 2,265.5 4,313.6

Net Profit Before Translation Gain 1,635.6 3,608.8

Translation Gain 491.3 452.3

Profit for the period 2,161.7 4,067.6

Profit Attributable to:

Equity Holders 2,126.9 4,061.1

Minority Interests 34.8 6.5

2,161.7 4,067.6


Key Corporate Highlights

Unit Demand Growth + 5.3% - Group + 5.5% - TNB

Revenue Growth + 14.4%

Operating Expenses + 8.6% i) 22.5% increase in IPP cost principally from the additional capacity payments to Tg. Bin upon commissioning of Units 1 & 2 (Sep’06 and Feb’07 respectively)

ii) Increase in provisions made under

FRS119 for staff benefits

Core Profits + 29.8% Excluding new tariff, forex, deferred tax writeback and one-off provisions

EBITDA Margin 37.6% 35.7% last year

ROA 6.3% Based on adjusted net profit

Total Debt RM 24.0 bn Reduction from RM27.1 bn as at 31st Agt 2006

Capex RM 5.2 bn i) Completion of carried forward projects from FY2006

ii) Finalisation of project accounts iii) Acceleration of projects (especially the

Central Area Reinforcement project) Iv) System improvement as pledged under

the tariff increase


Five-Year PerformanceHighlights

2007 2006 2005 2004 2003

Group

Finance (RM’ million)Total Revenue 23,320.4 20,384.2 18,977.5 17,712.1 16,457.8 Profit Before Taxation and Zakat# 4,765.9 2,756.8 1,818.9 1,482.7 1,648.5 Property, Plant and Equipment 57,382.9 55,201.3 54,721.0 53,443.7 51,768.4

Generation

Group Installed Capacity (MW) 11,514.5* 11,464.8 11,497.8 11,137.5 10,854.5

Sales Of ElectricityTotal Units Sold (GWh) 86,545.0 82,214.8 78,933.4 72,921.4 68,254.3

Sales Revenue (RM’ million) 22,384.0 19,707.4 18,326.4 17,219.4 15,973.9

CustomersTotal Number of Customers 7,068,329 6,814,523 6,582,374 6,323,719 6,069,561

Employees (Group)Total Number of Employees 28,822 28,067 27,727 26,989 27,238

ShareholdersTotal Number of Bumiputera Shareholders 5,865 5,943 5,971 6,526 6,778 Total Number of Non-Bumiputera Shareholders 17,516 17,318 14,935 15,726 16,471 Total Number of Institutional Shareholders 539 586 577 497 612 Total Number of Foreign Shareholders 1,242 1,067 1,379 715 702 Total Number of Government Agency Shareholders 26 28 35 42 43 Total Number of Nominee Company Shareholders 3,656 3,814 6,080 4,717 2,499

Dividends (Gross) 36.3 sen 14.8 sen 16.2 sen 18.2 sen 12.0 sen

Financial RatiosDebt-Equity (Net of Cash) Ratio 0.78 1.19 1.69 1.94 2.11 Earnings Per Share - Basic (sen) 94.92 52.52 32.01 26.1 34.1 Net Assets Per Share (sen) 554 470 499 460 449

# The financials for 2003 to 2005 have not been adjusted for the adoption of FRS 101-Presentation of Financial Statements*(Figure includes TNB, Sabah Electricity Sdn Bhd and Liberty Power Limited)


Corporate Award Highlights

During FY2007, Tenaga Nasional Berhad was recognised with numerous accolades, awards and honours conferred by both national and international organisations as well as by leading publications. Here is our Top 20 -

10. Gold Award for Best Emerging Contact Center (Category GLC) for CMC 15454 presented by the Contact Centre Association of Malaysia on 8 September 2007

11. National Labour Day Celebrations 2007 - • Anugerah Harapan Majikan Berdaya Saing

kategori Industri Besar • Anugerah Tokoh Pekerja Lelaki (Bukan

Eksekutif) • Anugerah Harapan Tokoh Pekerja Lelaki

(Eksekutif) • Anugerah Harapan Tokoh Pekerja Lelaki

(Bukan Eksekutif)

12. Silver and Bronze Awards at Pecipta ’07 for UNITEN on 12 August 2007

13. Best Theme Booth Award at the 50th Merdeka Expo on 30 August – 2 September 2007 at Putra World Trade Centre, Kuala Lumpur

14. League Champion in the TNB-Malaysia Hockey League 2007

15. MECD Award - Ministry of Entrepreneur and Co-operative Development on 26 August 2007

16. Ministry of Human Resource 2007 Award for Institut Latihan TNB-ILSAS for Best Training Provider category

17. Champion in the National ICC Convention 2006 from 19-21 September 2006

18. 5S certification awarded to Yayasan Tenaga Nasional (YTN) by National Productivity Council (NPC)

19. National 5S Practice Award 2006 under Open Category (Service) awarded to SJ Tuanku Ja’afar, Port Dickson on 29 November 2006

20. 5S certification from NPC to SJ Connaught Bridge (SJJC), Klang on 18 September 2006

1. TNB, the only Asian energy company short-listed as one of five finalists for the “Power Company of the Year” in the 2007 Platts Global Energy Awards

2. Asiamoney Awards - • TNB - Best Investor Relations, Malaysia • TNB - Second Best For Corporate Governance • TNB - Third Best Asian Investor Relations

Company (excluding Japan)

3. Silver Award presented to Ir Haji Sazali P Abdul Karim at the International Product and New Technique Exhibition in Geneva, Switzerland on 22 April 2007

4. IABC Malaysia Silver Quill Awards 2007 by the International Association of Business Communicators Malaysia Chapter for TNB’s Annual Report 2006 awarded in April 2007 -

• Silver Quill for Publication • Excellence Award for Communication Skills • Merit Award for Publication Design

5. FinanceAsia’s Best Managed Companies Poll 2007 - TNB among Malaysia’s Top Ten

6. Best Brand Award under Energy and Utility Corporate Branding at The Brand Laureate on 8 January 2007

7. Occupational Safety and Health Gold Award 2005 to Connaught Bridge Power Station on 8 September 2006

8. Dato’ Izzaddin Idris declared Second Best CFO in Malaysia by FinanceAsia on 3 September 2007

9. National Annual Corporate Report Awards (NACRA) Silver Award for Best Design for TNB Annual Report 2005 awarded on 30 November 2006



3Corporate ProfileTNB’s core businesses are in the generation, transmission and distribution of electricity

4Key Financial HighlightsProfit Before Tax and Translation Gain/(loss) reported in RM4,313.6 million for FY2007 compared with RM2,265.5 million in FY2006

5Key Corporate HighlightsTotal Debt reduced to RM24.0 billion from RM27.1 billion as at 31 August 2006

6Five-Year Performance HighlightsClear analysis from 2003-2007 covering Finance, Generation, Sales of Electricity, Customers, Employees (Group), Shareholders, Dividends and Financial Ratios

16Statement Accompanying Notice of AGMFour Directors are seeking re-election at the 17

th

Annual General Meeting

17Operational Statistics Statistics provided for Sales of Electricity, Number of Customers by Classification Group, TNB Generation Mix, TNB Installed Capacity, and more

18Corporate Performance ChartsCharts displaying Profit Before Tax and Net Profit for both Group and Company; Property, Plant and Equipment for the Group

22Chairman’s Letter To ShareholdersAchievements are testament of our commitment to the GLC Transformation efforts advocated by the Government

78Group Corporate StructureA quick display of Associated/Investment Companies, Trust Foundation and Subsidiaries as at October 2007

80Organisational Structure TNB’s Corporate Social Responsibility (CSR) policy is founded on philanthropy in key areas such as education, sports, the environment and helping the underprivileged

82Corporate Information Details of Board of Directors, Board Audit Committee, Board Nomination and Remuneration Committee, Company Secretaries, Share Registrar, Principal Bankers, etc

84Board of Directors Pictorial Portfolio of the Board of Directors of TNB

Corporate Report Contents

Part IIFinancial StatementsAnalysis of ShareholdingsAnalysis of Convertible Redeemable Income Securities 2004-2009 (“CRIS”) HoldingsShare Price TrackingProperties ListProxy Form

104Group ExecutiveCouncil CommitteeThe Group Executive Council Committee (GECC) plays a key role in reviewing the Group’s policies, strategies and procedures, overall performance of the Group

105Energy SupplyCommittee This Committee endorses and approves all power system development plans and proposals for TNB in Peninsular Malaysia, and for SESB in Sabah, prior to submission to TNB Board

106Group ExecutiveManagement CommitteeThe Group Executive Management Committee (GEMC) facilitates better coordination and effective interaction between the Company and its group of companies.

110Operations ReviewFY2007 was a great year that saw our 28,000 employees living the brand through our T7 and SE 10/10 strategies

214Corporate CalendarA summary of the corporate activities at TNB during FY2007

222Financial CalendarFinancial activities during the year under review


7Corporate Award HighlightsTNB was recognised with numerous accolades, awards and honours conferred by both national and international organisations

10Vision and MissionTo be among the leading corporations in energy and related businesses globally

11FY2007 Core RevenueRevenue at RM23,320.4 million for FY2007 compared with RM20,384.2 million for FY2006

12Notice of 17th Annual General MeetingThursday, 13 December 2007, at 10.00 am at Dewan Serbaguna, Kompleks Sukan TNB, Jalan Pantai Baru, 59200 Kuala Lumpur

38President/CEO Review Our meaningful progress in operations and financials for FY2007, has us well positioned to continue to perform in this culture and to accelerate our efforts

62Statement of Corporate GovernanceDuring the year, the Board had announced a dividend policy for the Company for the purpose of providing a stable and sustainable dividends to shareholders

76Recurrent Related Party TransactionsAt the 16

th AGM of TNB held on

14-12-2006, the shareholders had approved and ratified all recurrent related party transactions (RRPT) of a revenue or trading nature

86Profile of Board of DirectorsDetailed essays of the profile of TNB’s Board of Directors

91Board Audit Committee Report The BAC Chairman submits a report on matters deliberated to the Board of Directors after each BAC meeting

Corporate Report Contents

94Terms of Reference of the Board Audit Committee The function and authority of the BAC extends to TNB and all its subsidiaries, joint-ventures and associates where management responsibility is vested

100Statement of Internal ControlThe Board has established an appropriate framework and on-going processes for identifying, evaluating and managing the significant risks faced by the Group

54Corporate Social Responsibility Our meaningful progress in operations and financials for FY2007, has us well positioned to continue to perform in this culture and to accelerate our efforts

190Other ServicesTNB executes a major part of its corporate social responsibility through a trust body, Yayasan Tenaga Nasional (YTN), mainly ineducation sponsorships and welfare contributions

198Statement of Occupational Safety and HealthTNB has put in place a comprehensive OSH management system base which resulted in certain stations being recognised and awarded prestigious OSH awards

204Statement of EnvironmentTNB is committed to achieving excellence in environmental management.

208Enterprise-Wide Risk ManagementTNB recognises that effective risk management is the key element in the Company’s overall strategy with a focus on the on-going implementation of an Enterprise-Wide-Risk Management (EWERM) framework

�0Tenaga Nasional Berhad Annual Report 2007�0Annual Report 2007 Tenaga Nasional Berhad

To be among the leading corporations in energy and related businesses globally

VisionTo be among the leading corporations in energy and related businesses globally

Vision

MissionWe are committed to excellence in our products and servicesWe are committed to excellence in our products and services

Mission

��Tenaga Nasional Berhad Annual Report 2007

FY2007Core Revenue

Peninsular Malaysia 88.7%

SESB 3.5%

Goods & Services 2.6%

Deferred Income 1.4%

EGAT 1.8%

LPL 2.0%

FY2007 Total RM2�,�20.� millionFY200� Total RM20,��.2 million

} 3.8%

�2Tenaga Nasional Berhad Annual Report 2007

Notice Of �7th Annual General Meeting

NOTICE IS HEREBY GIVEN THAT the Seventeenth Annual General Meeting of Tenaga Nasional Berhad will be held on Thursday, 13 December 2007, at 10.00 a.m. at Dewan Serbaguna, Kompleks Sukan TNB, Jalan Pantai Baru, 59200 Kuala Lumpur to transact the following businesses:

AS ORDINARY BUSINESS:-1. To lay before the meeting the Audited Financial

Statements together with the reports of the Directors and Auditors thereon for the Financial Year ended 31 August 2007. Ordinary Resolution 1

2. To approve the declaration of final gross dividend of 16.3 sen per ordinary share less tax for the Financial Year ended 31 August 2007. Ordinary Resolution 2

3. To approve the payment of Directors’ fees for the Financial Year ended 31 August 2007.

Ordinary Resolution 3

4. To re-elect the following Directors who retire in accordance with Article 135 of the Company’s Articles of Association:-

(i) Dato’ Sri Che Khalib bin Mohamad Noh; Ordinary Resolution 4

(ii) Tan Sri Dato’ Lau Yin Pin @ Lau Yen Beng. Ordinary Resolution 5

5. To re-elect the following Directors who retire in accordance with Article 133 of the Company’s Articles of Association:-

(i) Dato’ Fuad bin Jaafar; Ordinary Resolution 6

(ii) Mohammad Zainal bin Shaari. Ordinary Resolution 7

6. To re-appoint Messrs PricewaterhouseCoopers, having consented to act, as Auditors of the Company, to hold office until the conclusion of the next Annual General Meeting (“AGM”) and to authorise the Directors to fix their remuneration. Ordinary Resolution 8

AS SPECIAL BUSINESS:-

To consider and if thought fit, to pass the following Ordinary Resolutions:-

7. PROPOSED RENEWAL OF SHAREHOLDERS’ MANDATE FOR RECURRENT RELATED PARTY TRANSACTIONS (“RRPT”) OF A REVENUE OR TRADING NATURE ENTERED WITH PERSONS CONNECTED TO A MAJOR SHAREHOLDER OF TNB, DETAILS OF WHICH ARE SET OUT IN APPENDIX II OF THE CIRCULAR TO SHAREHOLDERS.

“THAT the mandate granted by the shareholders of the Company at the AGM of the Company held on 14 December 2006 pursuant to paragraph 10.09 of the Listing Requirements of Bursa Securities (“Listing Requirements”) be and is hereby renewed to authorise the Company and its subsidiaries (“the Group”) to enter into the specified RRPT as set out in Section 1 of Appendix II of the Circular to Shareholders with persons connected to a Major Shareholder of TNB as mentioned therein which are necessary for the Group’s day-to-day operations subject to the following:



(i) the transactions are in the ordinary course of business and are on terms not more favourable to the related parties than those generally available to the public and are not to the detriment of the minority shareholders; and

(ii) disclosure of the aggregate value of transactions relating to the proposed renewal of shareholders’ mandate for RRPT of a revenue or trading nature entered with persons connected to a Major Shareholder of TNB conducted during a Financial Year will be made in the annual report for the said Financial Year.

AND THAT such authority conferred by the renewed mandate shall continue to be in force until:

(i) the conclusion of the Eighteenth AGM of the Company following the forthcoming AGM at which the proposed renewal of shareholders’ mandate for RRPT of a revenue or trading nature entered with persons connected to a Major Shareholder of TNB is approved, at which time it will lapse, unless the mandate is renewed by a resolution passed at the Eighteenth AGM;

(ii) the expiration of the period within which the Eighteenth AGM after that date is required to be held pursuant to Section 143(1) of the Companies Act, 1965 (“Act”) [but shall not extend to such extension as may be allowed pursuant to Section 143(2) of the Act]; or

(iii) revoked or varied by a resolution passed by the shareholders in a general meeting, whichever is the earlier.

AND THAT the Board be and is hereby authorised to complete and do all such acts and things as they may consider expedient or necessary to give effect to the proposed renewal of shareholders’ mandate for RRPT of a revenue or trading nature entered with persons connected to a Major Shareholder of TNB.”


8. PROPOSED SHAREHOLDERS’ MANDATE FOR RRPT OF A REVENUE OR TRADING NATURE ENTERED WITH PERSONS CONNECTED TO A DIRECTOR AND A MAJOR SHAREHOLDER OF TNB, DETAILS OF WHICH ARE SET OUT IN APPENDIX II OF THE CIRCULAR TO SHAREHOLDERS.

“THAT the Group be and is hereby authorised to enter into the specified RRPT as set out in Section 2 of Appendix II of the Circular to Shareholders with the persons connected to a Director and a Major Shareholder of TNB as mentioned therein which are necessary for the Group’s day-to-day operations subject to the following:

(i) the transactions are in the ordinary course of business and are on terms not more favourable to the related parties than those generally available to the public and are not to the detriment of the minority shareholders; and

(ii) disclosure of the aggregate value of transactions relating to the proposed shareholders’ mandate for RRPT of a revenue or trading nature entered with persons connected to a Director and a Major Shareholder of TNB conducted during a Financial Year will be made in the annual report for the said Financial Year.

AND THAT such authority conferred by the above mandate shall continue to be in force until:

(i) the conclusion of the Eighteenth AGM of the Company following the forthcoming AGM at which the proposed shareholders’ mandate for RRPT of a revenue or trading nature entered with persons connected to a Director and a Major Shareholder of TNB is approved, at which time it will lapse, unless the mandate is renewed by a resolution passed at the Eighteenth AGM;

(ii) the expiration of the period within which the Eighteenth AGM after that date is required to be held pursuant to Section 143(1) of the Act [but shall not extend to such extension as may be allowed pursuant to Section 143(2) of the Act]; or

(iii) revoked or varied by resolution passed by the

shareholders in a general meeting whichever is the earlier.

AND THAT the Board be and is hereby authorised to complete and do all such acts and things as they may consider expedient or necessary to give effect to the proposed shareholders’ mandate for RRPT of a revenue or trading nature entered with persons connected to a Director and a Major Shareholder of TNB.”




9. Specific authority for the Directors to issue shares pursuant to the Employees’ Share Option Scheme II

“THAT pursuant to the TNB Employees’ Share Option Scheme II (“ESOS II”) as approved at the Extraordinary General Meeting (“EGM”) of the Company held on 29 May 2003, approval be and is hereby given to the Directors to issue shares in the Company at any time and in accordance with the terms and conditions of the said scheme.”


10. General authority for the Directors to issue shares pursuant to Section 132D, Companies Act, 1965

“THAT pursuant to Section 132D of the Act, full authority is hereby given to the Directors to issue shares in the capital of the Company at any time until the conclusion of the next AGM and upon such terms and conditions and for such purposes as the Directors may, in their absolute discretion, deem fit provided that the aggregate number of shares to be issued pursuant to this Resolution does not exceed ten per cent (10%) of the issued share capital of the Company for the time being, subject to the provision of the Act, Articles of Association of the Company and approval from the Bursa Malaysia Securities Berhad and all the relevant regulatory bodies where such approval is necessary.”


To consider and if thought fit, to pass the following Special Resolution:-

11. PROPOSED AMMENDMENTS TO THE COMPANY’S ARTICLES OF ASSOCIATION:-

“THAT the Company’s Articles of Association be altered, modified, added and deleted:-

(a) in the form and manner as set out in the Appendix I of the Circular to Shareholders dated 21 November 2007;

(b) by the re-arrangement of the definitions set out in Article 1(2) of the Articles of Association (as altered, modified, added and deleted), in alphabetical order; and

(c) by the substitution throughout the Articles of Association, of the defined term “Bursa Securities”, with the defined term “the Exchange” as appropriate (“Proposed Amendments”);

AND THAT the Board be and is hereby authorised to do all such acts, deeds and things as are necessary and/or expedient in order to give full effect to the Proposed Amendments with full powers to assent to any conditions, modifications and/or amendments as may be required by any relevant authorities or third parties.”

Special Resolution 1

12. To transact any other business of which due notice shall have been given in accordance with the Act.

BY ORDER OF THE BOARD

NOR ZAKIAH BINTI ABDUL GHANI (LS 0008795)WAN MARZIMIN BIN WAN MUHAMMAD (LS 0009013)Company Secretaries

Kuala Lumpur21 November 2007



EXPLANATORY NOTES ON SPECIAL BUSINESS(i) Ordinary Resolution 9 and 10 : Details on the Proposed Renewal of Shareholders’ Mandate and Proposed

Shareholders’ Mandate for RRPT of a revenue or trading nature which are in the ordinary course of business as mentioned above are set out in the Circular to Shareholders dated 21 November 2007.

(ii) Ordinary Resolution 11 : Power for the Directors to issue shares pursuant to the ESOS II.

The proposed Ordinary Resolution, if passed, is to empower the Directors to issue shares in the Company pursuant to the terms and conditions of the ESOS II, which was approved at the EGM of the Company held on 29 May 2003.

(iii) Ordinary Resolution 12 : Power to issue shares pursuant to Section 132D, of the Act.

The proposed Ordinary Resolution, if passed, is to give the Directors of the Company flexibility to issue and allot shares for such purposes as the Directors in their absolute discretion consider to be in the interest of the Company, without having to convene a general meeting. This authority will expire at the next AGM of the Company.

(iv) Special Resolution 1: Details on the Proposed Amendments to the Articles of Association as mentioned above are set out in the Circular to Shareholders dated 21 November 2007.

Notes:-

Registration of Members/ProxiesRegistration of Members/Proxies attending the Meeting will be from 7.00 a.m. on the day of the Meeting. Members/Proxies are required to produce identification documents for registration.

Proxy(i) Any member entitled to attend and vote at this Meeting of the Company is entitled to appoint a proxy to

attend and vote in his stead. A proxy need not be a member of the Company.

(ii) The instrument appointing a proxy shall be in writing under the hand of the appointer or of his attorney duly appointed under a power of attorney. Where the instrument appointing a proxy/proxies is executed by a corporation, it shall be executed either under its common seal or under the hand of any officer or attorney duly appointed under a power of attorney.

(iii) Pursuant to Article 105(4) of the Company’s Articles of Association, a member is entitled to appoint not more than two proxies, and where a member appoints two proxies, the appointment shall be invalid unless the percentage of the holding to be represented by each proxy is specified.

(iv) A corporation which is a member, may by resolution of its Directors or other governing body authorise such person as it thinks fit to act as its representative at the Meeting, in accordance with Article 107(6) of the Company’s Articles of Association.

(v) The instrument appointing a proxy/proxies must be deposited at Symphony Share Registrars Sdn. Bhd., Level 26, Menara Multi-Purpose, Capital Square, No. 8, Jalan Munshi Abdullah, 50100 Kuala Lumpur not less than forty-eight (48) hours before the time set for the Meeting.

Additional Information on Ordinary Resolutions 4 to 6Additional Information on the Particulars of the retiring Directors, as required under Appendix 8A of the Listing Requirements are detailed out in the Annual Report.


Pursuant To Paragraph 8.28 (2) Of The Listing Requirements Of Bursa Malaysia Securities Berhad

The Directors Who Are Standing For Re-election At The 17th

Annual General Meeting

Statement Accompanying Notice Of Annual General Meeting

(a) Directors retiring pursuant to Article 135 of the Company’s Articles of Association:-

• Dato’ Sri Che Khalib bin Mohamad Noh; • Tan Sri Dato Lau Yin Pin @ Lau Yen Beng.

(b) Directors retiring pursuant to Article 133 of the Company’s Articles of Association:-

• Dato’ Fuad bin Jaafar; • Encik Mohammad Zainal bin Shaari.

The details of the four (4) Directors seeking re-election are set out in their respective profiles which appear in the Directors’ profiles on pages 86 to 90 of this Annual Report.

The details of any interest in the securities of the Company or its subsidiaries (if any) held by the said Directors are stated on page 4 of the Audited Financial Statements of the Annual Report.


Operational Statistics

Sales Of Electricity (RM’ Million) GroupSales Of Electricity (GWh) GroupNumber Of Customers By

Classification Group

TNB Installed Capacity (National Grid)TNB Generation Mix

(National Grid)TNB Installed Capacity including IPPs

(National Grid)

Industrial 45.40% (39,289.1 GWh)

Commercial 30.42% (26,323.3 GWh)

Domestic 18.55% (16,051.8 GWh)

Agriculture 0.19% (165.6 GWh)

Mining 0.04% (34.4 GWh)

Public Lighting 1.07% (926.9 GWh)

Export 2.82% (2,443.7 GWh)

Others (TNB LPL) 1.51% (1,310.2 GWh)

Industrial 41.44% (RM9,275.3 million)

Commercial 36.08% (RM8,075.5 million)

Domestic 17.58% (RM3,935.0 million)

Agriculture 0.22% (RM49.7 million)

Mining 0.02% (RM5.6 million)

Public Lighting 0.73% (RM162.4 million)

Export 1.84% (RM412.4 million)

Others (TNB LPL) 2.09% (RM468.1 million)

Industrial 0.3906% (27,613 )

Commercial 15.7637% (1,114,230 )

Domestic 83.1915% (5,880,250 )

Agriculture 0.0111% (782 )

Mining 0.0002% (14 )

Public Lighting 0.6429% (45,440 )

Hydro 9.7% (1,910.5 MW)

Conventional Thermal (Coal) 18.6% (3,670 MW)

Conventional Thermal (Oil and Gas) 4.2% (840 MW)

Combined Cycle 14.0% (2,762 MW)

Gas Turbine 8.4% (1,653 MW )

IPPs 45.1% (8,887.4 MW )

Hydro 17.6% (1,910.5 MW)

Conventional Thermal (Coal) 33.9% (3,670 MW)

Conventional Thermal (Oil and Gas) 7.7% (840 MW)

Combined Cycle 25.5% (2,762 MW)

Gas Turbine 15.3% (1,653 MW )

Hydro 10.9% (4,945.9 GWh)

Conventional Thermal (Oil & Gas) 7.4% (3,361.3 GWh)

Conventional Thermal (Coal) 36.9% (16,816.3 GWh)

Combined Cycle 41.0% (18,650.4 GWh)

Gas Turbine 3.8% (1,740.0 GWh)


Corporate Performance Charts

Profit Before Tax# And Net Profit (Group)

Profit Before Tax And Net Profit (Company) Property, Plant and Equipment (Group)

# The financials for 2003 to 2005 have not been adjusted for the adoption of FRS 101-Presentation of Financial Statements


Corporate Performance Charts

Productivity (Group)

Maximum Demand Trend

12,000

15,000

2�Tenaga Nasional Berhad Annual Report 2007

Generating National, Economic and Social ProgressGenerating National, Economic and Social Progress


TAN SRI LEO MOGGIEChairman

We are strenghtening our initiatives and constantly looking at ways to improve our customer services


Chairman’s Letter To Shareholders

On behalf of the Board of Directors of Tenaga Nasional Berhad

(TNB), I take great pride in reporting that Financial Year 2007

was a year of notable achievements for the Group. Despite

the many challenges faced by the local energy industry for the

year under review, TNB rose to the occasion. The Group posted a

record net profit of RM3,608.8 million before foreign exchange

translation gains. We also exceeded most of our targeted Headline

Key Performance Indicators (KPIs) and company-wide initiatives.

These achievements are testament of our commitment to the

GLC Transformation efforts advocated by the Government.

The year under review saw TNB recording our best ever Unplanned Outage Rate at 2.2 per cent, which surpassed the global industry’s benchmark of 4.0 per cent. Gearing was reduced to 49.9 per cent, while Transmission and Distribution losses narrowed to 10.0 per cent. Our Distribution SAIDI

reduced to a double-digit of 83 minutes, an achievement which deservedly positions TNB amongst the best utility companies in the world.

Our accomplishments in FY2007 will help us maintain our operational and financial performance next year as expected by our stakeholders. We shall remain focused on strengthening our financial fundamentals, improving our operational performance and providing high quality and reliable services to all our customers.



“Lighting up retail malls”



Financials

The Group recorded a 14.4 per cent growth in revenue to RM23,320.4 million in FY2007 from RM20,384.2 million in FY2006. This was driven by various factors such as the implementation of the new tariff structure which took effect in the middle of last year, foreign exchange translation gains and a 5.3 per cent increase in electricity demand. EBITDA increased to 37.6 per cent compared to 35.7 per cent last year while net profit increased by 90.9 per cent from RM2,126.9 million to RM4,061.1 million.

During the year, the Board announced a dividend policy for the purpose of providing stable and sustainable dividends to shareholders while maintaining an efficient capital structure and ensuring sufficient funding for future growth. Under this policy, TNB will distribute 40-60 per cent of the Company’s annual free cash flow as dividends. As such, the Board of Directors is recommending a final gross dividend of 16.3 sen per ordinary share less income tax of 26 per cent to shareholders of the Company. Together with the interim dividend of RM632 million, the total dividend declared for this Financial Year amounts to an estimated RM1,154.5 million.

Customer Focus

Customers being our priority, TNB is proud of our role in providing an integral service to the more than seven million households and business customers across the country. We are strengthening our initiatives and constantly looking at ways to improve our services.

One of the efforts being taken to improve customer service is by enhancing the image and quality of our service outlets, currently known as “Kedai Tenaga”.

Meanwhile, on-going initiatives are undertaken to train our front line employees to be more professional, efficient, courteous and friendly. These include our “Service with a Smile” campaign and the introduction of new corporate uniforms for our counter staffs. An FAQ booklet was also produced to assist and guide our counter staffs on prompt and proper response to customers’ enquiries. Access to our Call Management Centre (CMC) has also been further expanded with the introduction of TNB’s SMS CareLine 15454 which provides another quick and easy channel to submit reports on electricity breakdowns to our call center.



Industry Development

In view of the rising cost of fuels and the challenges facing the power industry, TNB will continue to work closely and strategically with the Government and relevant regulatory bodies on the gradual unwinding of the cross-subsidy embedded in the tariff structure. This includes the setting up of a mechanism to pass through uncontrollable costs, in order to ensure that the impact to the general consumers will be gradual and minimal.

The Financial Year saw a new Independent Power Producer (IPP) Tanjung Bin joining the energy industry with a capacity of 2,100 MW. As the sole purchaser and grid operator in Peninsular Malaysia, TNB will maintain a strategic relationship with all IPPs to ensure reliability of supply to customers.

An equity stake has been offered to TNB to participate in the company involved in the transmission of electricity generated from Bakun in Sarawak. Any consideration of TNB’s involvement will be made based on the additional capacity requirement in Peninsular Malaysia and also subject to further feasibility studies.

The Company will continue to support the Government’s target of achieving 500 MW capacity from renewable energy sources and to conform with the Kyoto Protocol’s Clean Development Mechanism to promote efficient renewable energy development. TNB has agreed to pay a higher price for the renewable energy it purchases. Nevertheless, renewable energy purchase agreements will be structured in such a way to ensure fairness and commercial viability to all parties.

“Lighting up the city”



Energy Efficiency

Increasing energy efficiency is one of the efforts undertaken by TNB to reduce wastage and help meet the demand for electricity in the country. A continuous and reliable supply of electricity is essential for Malaysia to achieve its economic goals under the 9th Malaysian Plan. Although currently TNB has an excess reserve margin, in time this margin will quickly diminish to a figure more reflective of our prudent utility practice. Hence, even though encouraging customers to be efficient in their energy usage conflicts with the Company’s earning goals, TNB will continue to engage and educate our customers on the importance of using electricity wisely and efficiently.

Within this context, Demand Side Management (DSM) has become an increasingly important component of the resource mix that TNB can apply to meet growing system requirements. Constant dialogues are also conducted with our industrial customers on the intelligent use of energy through the adoption of smart energy systems such as energy efficient lightings and programmable thermostats. Strategic conservation will help reduce power fluctuations and increase stability of the system.


Corporate Governance

TNB remains committed to improving our corporate governance practices and to ensuring that the highest standards of governance culture are practiced throughout the Group. Risk management initiatives within TNB will be strengthened continuously to ensure TNB is able to respond effectively to the constantly changing business environment and thus able to protect and enhance our stakeholders’ value.

The Code of Ethics, which was launched in July 2007, further enhanced the existing framework for effective corporate governance. It encompasses best practices, which set the manner in which the Company is governed, expressly with high ethical standards and uncompromising integrity.

The Limits of Authority (LOA) Manual was also established. The LOA Manual, which is a fundamental and integral component of TNB’s Group Financial Control and Risk Management Framework, contains both the monetary and non-monetary limits of authority. The manual will promote greater managerial discipline, accountability and transparency in the performance of identified operational and management decision-making activities.

A whistle blowing procedure has also been established to act as a mechanism for internal and external parties to channel their complaints or to provide information on fraud, wrongdoings or non-compliance to any rules or procedures by an employee of TNB. This procedure also functions as an internal control mechanism, allowing for effective action to be taken and providing preventive measures to ensure that the integrity of the Company is maintained.




“As we grow, we are staying true to our roots as a company embedded in the communities we serve”



Prospects and Challenges

Of late, the price of fuels has increased significantly, increasing the cost for TNB to maintain surplus plant capacity, including those operated by IPPs. This scenario poses a challenge for us to maintain a high level of service quality demanded by our customers, and at the same ensure a fair return to shareholders. TNB will strive to balance this dual expectation for the benefit of our customers, our shareholders and the country.

Our energy reserve margin currently stands at about 44 per cent. This margin will comfortably cater to the growth in demand for at least the next three years, without needing additional capacity to be connected to the system. This provides an opportunity for TNB to focus its initiative on capital expenditure to improve or upgrade our transmission and distribution networks. It will also allow for planned outages to be carried out for aging generation plants such as Paka and Pasir Gudang.

In today’s globalised environment, it is no longer sufficient to operate in a single market. TNB has diversified its earnings base abroad to help spread business risks and create new sources of income. However such ventures will be carefully studied with considerations given on its feasibility and the country risk involved.



Our strategy will also be on adding value to TNB’s core compentencies rather than as an equity investor.

TNB intends to leverage our repair and maintenance skills under TNB Repair and Maintenance Sdn Bhd (REMACO) by penetrating promising markets abroad, especially in the emerging markets of the Middle East and Asia.

In Saudi Arabia, TNB’s investment through the consortium Saudi-Malaysia Water and Electricity Company Limited (SAMAWEC) in the Shuaibah III Independent Water and Power Project (IWPP) is progressing well, as scheduled. It is expected to commence commercial operations in July 2009. SAMAWEC is also set to undertake a special project to expand the Shuaibah III IWPP’s desalination plant.

Our wholly-owned subsidiary in Pakistan - TNB Liberty Power Limited - continues to be profitable and has already repatriated sponsored loans to TNB. In the Philippines, TNB is a making a bid with our partner to operate the Philippines’ power grid. A successful bid would allow TNB to have a foothold in the country for more lucrative power generation projects in the future.

TNB’s 20-Year Strategic Plan initiatives to position the Company at the pinnacle of global service excellence is backed by our human resource master plan to maximise the Company’s human capital potential. One of the key features of the plan is our talent pool programme which serves to support succession management. Meanwhile, the ‘SE 10/10’ acts as a guideline and benchmark to measure our growth.



Corporate Social Responsibility

As a leading corporate entity, TNB takes our Corporate Social Responsibility (CSR) very seriously. As we grow, we are staying true to our roots as a company embedded in the communities we serve. Our CSR policy is founded on supporting initiatives in key areas such as education, arts and culture, sports, the environment and helping the underprivileged. For Financial Year 2007, TNB invested RM1.4 billion to uphold our CSR commitments. What I will share with you here are just a few of the CSR initiatives that we have undertaken. A comprehensive presentation can be found on pages 54 to 61 of this Annual Report.

TNB continues to support the Government’s plans to enhance the quality of life in rural areas. Under the Rural Street Lighting Programme, TNB has embarked on Phase III of the programme which involves the installation of 26,408 units of 150W streetlights throughout Peninsular Malaysia. This programme helps improve public safety and assists in the prevention of social ills and accidents.

Our solar and wind hybrid power plant projects in remote islands have also made a positive impact on the quality of life of the respective communities. In places like Pulau Sibu, off Mersing, Johor, the electricity supply provided allows for internet connection, enabling this once remote village to be now connected to the rest of the world. These efforts which promote the use of renewable energy to produce electricity, are recognised worldwide.

Our commitment to the environment has prompted TNB to undertake a long-term project on the funding, rehabilitation and preservation of the firefly colony in Kuala Selangor, Selangor Darul Ehsan. TNB’s participation in this project through the infrastructures we have built will also help develop the area into a tourist haven, which in turn will assist in improving the economic well-being of the local community.

In sports, the Company is recognised not just for our social role but more importantly for our contribution as a catalyst in the development of past and future champions. We are the main supporter for hockey, which is one of the few sports where the Malaysian team is highly ranked, internationally. We also take pride in the fact that there are six TNB players in the national team.

In celebrating Malaysia’s 50th Independence Anniversary, TNB, in the true style of a patriot, was the sponsor of a national patriotic song and an accompanying video clip entitled - “Malaysiaku Gemilang, Kibarkan Jalur Gemilang”- specially created to commemorate the historic occasion. The song is our way of helping to instil national patriotism and of saying Thank You to the nation.

In TNB, we encourage our employees to be actively involved in voluntary and welfare activities such as gotong-royong and special visits to orphanages and welfare homes, besides making charitable donations. This concept of doing things together and helping each other in the spirit of goodwill is our culture of giving back to the communities in which we operate.

“TNB continues to support the Government’s plans to enhance the quality of life in rural areas”


Recognition and Awards

TNB takes pride in the various national and international excellence awards that we have received. Asiamoney, in its Corporate Governance Poll 2006, recognised TNB as the overall Second Best Company in Malaysia for Corporate Governance, the Best Company in Malaysia for Investor Relations and Third Best in Asia (excluding Japan). In addition, our Chief Financial Officer (CFO) was named the Second Best CFO in Malaysia. In FinanceAsia’s Best Managed Companies Poll 2007, TNB was among the Top Ten in the Best Managed Companies in Malaysia.

TNB’s Call Management Centre (TNB CareLine 15454) was the recipient of the Gold Award from the Ministry of Science, Technology and Innovation, Malaysia in the Best Emerging Contact Centre for the GLC Category, while our Institut Latihan TNB–ILSAS was awarded the Human Resource Ministry Award 2007 in the Training Provider Category.

It was also a momentous occasion for TNB when five of our generation stations received awards in the Utilities Sector Category at the Malaysian Society of Occupational Safety and Health Award 2006. The stations awarded the Gold Award (Class II) were Stesen Janaelektrik Putrajaya, Stesen Janaelektrik Sultan Iskandar, Stesen Janaelektrik Tuanku Jaafar and Stesen Janaelektrik Jambatan Connaught, while Stesen Janaelektrik Gelugor received the Silver Award.

Adding further to the list of accolades received during the year was the National Award for OSH Excellence 2006 which saw four stations, namely Stesen Janaelektrik Chenderoh and Stesen Janaelektrik Sultan Ismail Petra receiving the Gold Award, and Stesen Janaelektrik Tuanku Jaafar and Tenaga National Distribution Division (Johore) receiving the Silver Award.

The Malaysia Chapter of the International Association of Business Communicators also awarded TNB three honours in the IABC Silver Quill Awards 2007 for best annual reporting and publication.

At the time of publishing this report, TNB received another accolade in being shortlisted as one of five finalists for the “Power Company of the Year” in the 2007 Platts Global Energy Awards.

Appreciations

I would like to thank our shareholders, affiliates, partners and our esteemed customers for their continued support and confidence in TNB. My appreciation also goes to the Government of Malaysia and the various regulatory bodies, particularly the Ministry of Energy, Water and Communications, and the Energy Commission, for their support and assistance.

My sincere gratitude also goes to the Management led by Dato’ Sri Che Khalib Mohamad Noh and all employees of TNB for their striving efforts, dedication and contributions, which have enabled the Company to fulfill its obligations to all stakeholders by delivering a record performance for this Financial Year.




“TNB takes pride in the various national and international excellence awards that we have received”



Ready To Serve 24/7


DATO’ SRI CHE KHALIB BIN MOHAMAD NOHPresident/Chief Executive Officer

What is also delightful news is that the Group has for the past three years, reduced its loan from RM�2.� billion to RM2�.� billion, reflecting a RM�.� billion or 2�.2 per cent reduction


President / CEO’sReview

For Tenaga Nasional Berhad (TNB), “Powering the Nation” is not just a

clarion call but an expectation that society and stakeholders expect of us to

deliver. Our meaningful progress in operations and financials for Financial

Year 2007 (FY2007), have us well positioned to continue to perform

in this culture and to accelerate our efforts. TNB will remain focused

on strengthening our financial fundamentals, improving operational

performance and efficiency, and providing a high quality and reliable

service to our customers.

For the Financial Year under review, the Company has exceeded the targets for most of its Key Performance Indicators. For the first time, our Distribution’s System Average Interruption Duration Index (SAIDI) has been reduced to a double-digit of 83 minutes, from 104 minutes the previous year. This remarkable achievement has ranked the Company as one of the best utility companies in the world. TNB also achieved Generation Unplanned Outage Rate (UOR) figure of 2.2 per cent, which places us at par with or better than some power producers internationally.

Despite the many challenges confronting the local energy sector, the Company’s financial performance improved considerably for FY2007. Our outcomes were boosted by profits due to the tariff review, unrealised forex gains and improved collections.

As a result, the Group’s revenue increased to RM23,320.4 million in FY2007 compared to RM20,384.2 million recorded in FY2006, reflecting an increase of 14.4 per

cent. With the increase, the Group also chalked in a profit after tax of RM4,061.1 million, almost double from the previous year’s figure of RM2,126.9 million.

Apart from registering its highest profit ever, what is also delightful news is that the Group has for the past three years, reduced its loan from RM32.4 billion to RM23.9 billion, reflecting a RM8.5 billion or 26.2 per cent reduction. During the same period, we have also managed to collect RM553 million from our major delinquent debtors. Due to the various cost management initiatives undertaken by the Management, the Company has realised around RM2.4 billion in terms of value creation since 2004. TNB also saw increasing foreign investors’ interest in its shares, when foreign shareholding reached 28.4 per cent in May 2007, its highest since the Company’s privatisation.

Given the continued strong financial outcomes, the Company is poised to undertake appropriate growth opportunities within its core business areas.


President / CEO’s Review

Financial Performance

Financial Ratios

Revenue Operating Expenses

EBITDA Net Profit ex Forex Trans.

Gearing ROA Interest Coverage

Basic EPS

32. 1

33. 7

31.2

35.7

37. 6

80.8%



Strategising Towards Service Excellence

There is a big picture to the future of TNB. We have a well-focused 20-year strategic action plan to realise our goals and aspirations. When the T7 Strategy was first implemented in 2002, it was designed for the purpose of transforming and inculcating an effective goal-oriented culture. T7 laid the foundations for TNB to be amongst the best performing companies in Malaysia. That phase was successfully completed by the close of our Financial Year ended 31 August 2007. Now the excitement and momentum of our next phase continues with the ‘Service Excellence 10/10 (SE 10/10)’ programme roll-out. In this stage, the SE 10/10 aims to position TNB not only as the nation’s best, but the region’s as well, by 2010. Our long-term goal by 2025 is to command global leadership in the relevant business areas, and to establish a reputation as a strong business partner and shareholder value creator. Ultimately, TNB desires to be acknowledged as amongst the most admired companies in the world.

Three strategic themes underpin the SE 10/10. The first is by building customer and stakeholder loyalty, the second by building a strong foundation for service excellence and operations effectiveness, and the third by building a strong platform for business expansion, locally and globally.

TNB’s drive to reach its goals is not a sprint to a destination. Ours is a strategic plan that requires perseverance and a focused and unwavering commitment to continuously improve, to become even stronger and to deliver on results that our stakeholders expect of us.



Focusing on Customer Satisfaction

Delighting customers is a key priority in TNB. Companies with satisfied customers consistently perform better. They also attain a more positive image in the eyes of society. It is with this in mind and following the 2006 tariff review that TNB is intensifying efforts in the upgrading and maintenance of its existing infrastructure for the purpose of ensuring supply reliability to customers. Networks will be improved by replacing old cables, switchgears and transformers; building new substations, upgrading transmission systems; building new regional control centres and installing the Geographical Information System (GIS) to assist in asset maintenance and security.

The implementation of the RM399 million Supervisory Control and Data Acquisition and Distribution Automation (SCADA/DA) Project is expected to improve and reduce SAIDI to a lower double-digit. This is achievable through the system’s ability to identify fault location, isolate the fault and mobilise technical staff or carry out remote switching to restore supply to our customers.

TNB is constantly evolving with new technologies to automate the various processes within the Company. These include the Enhanced Customer Information Billing System (e-CIBS) which enhances our customer management and billing systems, and an e-Application System which allows our customers to make online applications for the new supply of electricity. Other customer-related applications currently in use are the Customer Feedback System or Sistem Maklumbalas Pelanggan (SMP), Enterprise Wide Resource Management System (EWRM), e-Payment Service and the TNB Outage Management System (TOMS).

The Customer Feedback System (SMP) has also been upgraded to provide an automated tool in handling customer complaints. In addition, our Call Management Centre (CMC), Electric Eyes and the Prime Customer Management Programmes are interfacing with SMP to form a structured web-based customer complaints handling system. The PQMS (Power Quality Monitoring System), meanwhile, identifies real time power quality incidents on the system and the information is accessible nationwide to allow for remedial action as and when required.

Seminars and dialogues with leaders and representatives of industries, businesses and Government Agencies, also form part of the whole process of handling customer complaints. By managing the three different channels of customer complaints through the PAP, we are able to monitor, report and evaluate the feedback. Integrating customer information on a single platform is a step towards achieving better Customer Relationship Management (CRM).

TNB is working closely with the Ministry of Energy, Water and Communications and the relevant regulatory agencies to establish a Customer Charter. This is aimed at improving the quality of services rendered by TNB and further strengthening our commitment in fulfilling customer needs, expectations and satisfaction.


Ensuring Supply Reliability

In order to ensure adequate system capacity and supply reliability, TNB continues to make huge investments in electricity supply systems. At the same time we will continue to ensure that additional generation capacity is integrated into the system in a timely and efficient manner. In 2007, there were two major on-going Generation projects- the PD2 Combined Cycle Gas Turbine Project and the Cameron Highlands Rehabilitation Project. The PD 2 project at Tuanku Jaafar Power Station, which will see the installation of a 750 MW gas-fired combined cycle plant, is scheduled for completion by December 2008. Currently, 85 per cent of the project has been completed. The Cameron Highlands Rehabilitation Project is meant to rehabilitate a 40-year hydro scheme. Works being done involve the de-silting of the Ringlet Lake to recover live storage volume and the project is scheduled for completion in December 2008.

Currently, TNB is also implementing system improvements to strengthen its network and improve supply security in Kuala Lumpur and Selangor Darul Ehsan. The ongoing RM400 million Central Area Reinforcement Project (CAR) is aimed at upgrading transmission and distribution systems within the Klang Valley. The Chubadak 275 kV substation near Gombak, which is part of the Central Area Reinforcement


(CAR) Project, was completed and commissioned in May 2007. The CAR Project, which will strengthen the electricity transmission systems around Kuala Lumpur and the Klang Valley, continues in progress and is targeted for completion in December 2007. The 500 kV transmission line, which connects the Jimah IPP Coal Fired Power Station to Lenggeng Substation and to Olak Lempit Substation is well under construction and is targeted for completion by December 2007.

In addition, other system improvement projects that are underway include the replacement and upgrading of the Perak 22 kV distribution system, and the replacement of old distribution switchgears and transformers across Peninsular Malaysia. These projects are expected to be ready within the next few years.

With fossil fuel cost increasing significantly over the last few years, TNB needs to continuously identify and harness all possible hydro power potential in Peninsular Malaysia and Sarawak.

In preparation for the near future, TNB has also embarked on the engineering design for two new hydro power plants in Ulu Jelai (372 MW) and Hulu Terengganu (212 MW). These two hydro power plants are projected for completion in year 2013/2014.



Benchmarking Performance

In an effort to enhance performance measurement, Divisional Accounting was introduced within TNB in FY2007 by creating separate financial statements for TNB’s core businesses (Generation, Transmission and Distribution). The Divisional Accounting framework ensures that costs are allocated in a consistent and equitable basis to the respective units and also helps to identify enhancements, where applicable. In addition, this framework makes it possible for TNB to benchmark with other utilities, in terms of cost allocation amongst our power plants. The cost and revenue elements used for the benchmarking have to be comparable in common units of measurement.

TNB has always recognised that proactive supervision of power plant performance is essential towards the success of TNB’s business objectives. As a pivotal player in the power industry, it has been in the Company’s commercial interest to monitor the performance of all our power plants and to ensure that electricity supply is delivered with optimum efficiency and economy without compromising on service quality. TNB has established benchmarks for our power plants and is systematically keeping track of outage rates and monitoring the availability of each generating unit. Detailed procedures to encourage professionalism and efficient operations that will support our business discipline are therefore imperative.

Towards this end, TNB’s Transmission and Generation Divisions have resorted to Service Level Agreements (SLAs) for the purchase of power. SLAs would be utilised as benchmarks for all power plants owned by TNB with each of our thermal power stations committing to clear performance targets. These SLAs – with concepts and conditions typical of Malaysian Power Purchase Agreements – reinforce TNB’s commitment to high performance standards and transparency. Today, all thermal power plants in the TNB Generation network are measured not only by their technical achievements, but by their financial performance as well.

As is typical in Power Purchase Agreements with IPPs, the performance of each power plant will be closely monitored. The technical and financial performance of the power plants will be assessed, thus providing valuable input for decision making and resource allocation.




Capacity Building

Capability development is crucial for TNB. As we explore new frontiers globally, the Company will require an abundant pool of able leaders to carry the torch for its long-term strategic plans and to keep TNB on par with the competition. The talents assessed under the succession management initiative in 2006, were reviewed in 2007. Currently, a total of 188 talents from a group of 227 assessed have been formally included in the talent pool. An additional 103 executives were evaluated for entry into the pool. Altogether, there are now 330 executive candidates in the talent pool for consideration into key leadership positions.

In our effort to further build the Company’s human capital and retain technical expertise, a Technical Expert was promoted to Specialist, whilst 16 new Technical Experts were appointed under the Specialist Career Path (SCP) programme in FY2007. This brings the total number of expertise in our SCP pool to date, to two Specialists and 20 Technical Experts. A similar scheme, known as the Specialised Technician Career Path, was introduced for the non-executives, resulting in the creation of 38 Specialised Technician positions.

In increasing TNB’s competency levels, 123 Development Programmes and 1,227 Mandatory Training Programmes were organised for both Executives and Non-Executives. During the year under review, the Company spent more than RM72 million for staff training and developmental programmes, including sponsorship for further studies locally and abroad.


Prioritising Safety and Health

Safety is a priority at TNB. As such, the Company has established a comprehensive Occupational Safety and Health (OSH) Management System, aptly known as the Safety Excellence Management System (SEMS). We have increased the number of qualified Safety and Health Officers to ensure TNB’s readiness for any crisis or emergency situation. Second level Safety Inspectors and third level Safety Representatives were also appointed to ensure OSH performance at the far end of the job chain is monitored and reported to the management.

Alertness and readiness for any crisis and emergency situation is a key factor in the effort to preserve life and assets. Priority has therefore been given to planning for eventualities. New risks were identified and efforts were taken to ensure that an immediate response is readily available should any disaster arises.

All staff are required to be exposed to OSH and to attend training while practitioners are required to impart OSH knowledge. Continuous training programmes, seminars, conferences, symposiums and workshops were identified for all levels. This is to ensure that participants gain exposure on new developments in OSH. Contractors working in TNB are also educated on the importance of OSH. An NIOSH-TNB Safety Passport was developed in a joint effort with the National Institute of Occupational Safety and Health (NIOSH) to ensure contractors are aware of the basic requirements of occupational safety.

Equally important was electrical safety education for members of the public. Assistance was provided to schools, non-governmental organisations, industries and various associations following their requests for safety information on the proper use of electricity. Safety campaigns were also carried out in our effort to optimise information dissemination.


“Ensuring safety at work”


Enhancing Research and

Development

TNB continued to enhance on our intellectual capacity and core businesses through TNB Research (TNBR), an approved Research and Development (R&D) company and the research arm of TNB. The key role of TNBR is to enhance TNB’s core businesses through R&D, consultancy services, laboratory testing and quality assurance. Its research and development findings are widely applied to improve efficiency, availability and reliability of TNB’s electricity supply network.

During the year under review, 26 research and development projects worth RM30.5 million were completed for TNB’s core businesses and support divisions, including SESB. The projects addressed different areas of impact such as reliability, efficiency, environment, technological evaluation, quality assurance and cost savings. As the Quality Assurance agent for the Company, TNBR was also responsible for ensuring that all equipments supplied to TNB met with the necessary technical and functional standards.

TNBR is registered with the Department of Environment, Malaysia, as an approved body to conduct Environment Impact Assessment studies. TNBR is also engaged as a consultant in energy-related works, especially on Renewable Energy, by the Ministry of Energy, Water and Communications, the Malaysia Energy Centre and universities. Scientific services are a revenue earner and the biggest contribution comes from laboratory testing and research works. TNBR has successfully taken over some of the technical works previously undertaken by foreign consultants. In areas such as Material Engineering, High Voltage Diagnostics, Lightning and Hydro Plant Optimisation, TNBR has developed its own intellectual capital to meet the technology and engineering challenges faced by the core divisions in TNB.



Towards Geographical Expansion

TNB will continue to explore opportunities abroad. Our wholly-owned subsidiary, TNB REMACO Sdn Bhd has entered into a synergistic alliance with Turbocare SpA of Italy to collaborate technically and commercially in order to serve local and regional market demands for services related to our products. Through this alliance, we are working together to offer better service at a competitive price to the target market. This alliance will also enhance TNB REMACO Repair Centre’s capabilities and hence reduce production costs through localisation of advance technology repair procedures. This collaboration is an important achievement for TNB in our quest to expand our business within Malaysia and in the region.

TNB is continuously exploring other opportunities that could potentially lead to partnerships and cooperation with international counterparts in utility services around the region. In building relationships with other utility companies, TNB plans to sign an MOU with the Korea Electric Power Corporation. This MOU will encompass technical cooperation activities in identified areas, including the exchange of information and personnel on subject areas mutually agreed by both parties.

During the year under review, TNB, through its Sultan Ahmad Shah Training Institute (ILSAS), successfully completed its training services and cooperation activities with power utility companies in Vietnam, Yemen and Mongolia. This is an added plus to ILSAS’ track record of providing training services to various utilities in this region, including Laos, Indonesia, Thailand, Vietnam, Nepal, Egypt and Pakistan.

In Saudi Arabia, TNB’s investment through the consortium undertaken by Saudi-Malaysia Water and Electricity Company Limited (SAMAWEC) in Shuaibah III Independent Water and Power Project (IWPP), is progressing well as scheduled. As of August 2007, 68.9 per cent of the overall construction of Shuaibah III has been completed. The USD2.5 billion project is scheduled to commence commercial operation in July 2009.

Following the success of Shuaibah III, the Government of Saudi Arabia has requested SAMAWEC to undertake a special project to expand the Shuaibah III IWPP’s desalination plant by 150,000 m3/day over the planned capacity of 880,000 m3/day. The USD232 million expansion project, which utilises the reverse osmosis desalination technology, is located at a site adjacent to the main project and is expected to commence commercial operation in February 2009.



Looking Ahead

The journey ahead will be rough but we are up for the challenge. Profitability for the coming year will be affected by additional IPP capacity payments from new plants coming on-stream and increasing fuel, metal and equipment prices. In this respect, TNB will continue to adapt to changing market demands and challenges, and to find solutions to counter balance possible erosion on its revenue.

Managing fuel costs in the future will be the biggest challenge for TNB. For instance, coal prices in the international market have rocketed for the past few years and is expected to continue to increase. It is unrealistic to expect local gas prices to remain as cost of production has been rising while local sources are depleting. At the same time, there is a continuing need to invest in the system’s improvement to ensure reliability and security of supply.

For the year under review, our coal consumption amounted to 8.7 million metric tons. This figure is estimated to be higher in the coming year at 14.1 million metric tons. Nevertheless, we have managed to hedge 49 per cent of the requirements for 2008. TNB will continue to discuss and negotiate with the relevant parties/authorities on any issues relating to any potential increment in the price of gas and to develop solutions to gradually unwind the cross-subsidy embedded in the tariff structure. We see this possibility through a proposed new tariff framework that will allow the passing of any increase in fuel costs to consumers. We will also actively pursue the use of alternative energy sources, new technology and practices to keep costs down, while remaining alert for new opportunities, locally and globally.

Several value-creation initiatives are already in place to enhance the Company’s profitability in 2008. We see our strategy continuing to produce long-term growth to create significant value to our shareholders. We have set the target to be amongst the most admired companies globally by 2025. It is a tall order, but we are up to the challenge and we are making good progress.

Acknowledgements

Our appreciation goes to the Government of Malaysia, Ministry of Energy, Water and Communications, Ministry of Finance, Ministry of International Trade and Industry, Energy Commission, Malaysian Industrial Development Authority (MIDA) and other agencies for all assistance rendered. Our thanks must also go to our valued shareholders and customers for their loyalty and trust, which we very much appreciate.

Our record performance this year would not have been achieved without the dedication of our employees and the pride they have in their work. Hence, I would like to record my deepest appreciation and gratitude to the Board of Directors and staff of TNB for their dedication and constant hard work that has kept us in the forefront of Corporate Malaysia. We’ve Got the Power – to serve, to deliver, to excel.




Corporate SocialResponsibility




Tenaga Nasional Berhad (TNB) has powered the length and breadth of the nation for decades through the generation, transmission and distribution of electricity but its social responsibility has been equally far reaching to the public.

TNB’s Corporate Social Responsibility (CSR) policy is founded on philanthropy in key areas such as education, sports, the environment and helping the underprivileged. As a leader in the country’s power industry, we realise this position requires TNB to be the catalyst for change when it comes to CSR. Because of this, TNB has always demonstrated a diligent response to offer its commitment to philanthropic causes and corporate sponsorships. For the Financial Year, TNB spent RM1.4 billion to uphold its CSR policy, which made it one of the largest contributors in the country.

The far reaching impact of TNB’s CSR policy was acknowledged by the Government who has singled out our policy as the basis for the pilot study on CSR initiatives for the Silver Book on GLCs, launched in September last year.

It is important to note that our CSR efforts lie deep beyond philanthropic or sponsorship activities. The major CSR contribution is in fact not easily visible to the eyes of the public. TNB’s integral role to deliver electricity to the public efficiently and at the lowest rate possible is by far a single most important CSR activity undertaken by the Company. Providing a reliable and competitive electricity supply, which require tremendous effort and resources by the Company, benefit all Malaysians regardless of where they live or whatever level of their income.

TNB also recognises the need and the relevance of the Government’s policy for the country’s ongoing development, and the various initiatives we have undertaken to deliver safe, reliable and secure electricity to customers for their private and economic needs, are testament to our commitment to ensure society will gain and benefit from these developments. With this in mind, TNB strongly supports government driven policies such as the 9th Malaysian Plan and its aims to continue powering the country’s vision of becoming a fully developed nation by the year 2020.

The need to support the Government has been translated into the Company’s battle cry of “Powering the Nation”, which sets the tone for our CSR activities.


Powering Business Excellence

As a major player in the energy sector and a responsible corporate citizen, TNB is committed to play an important role in nation building. TNB’s most integral CSR policy is in its core businesses and operations where it ensures delivery of adequate, safe, reliable and continuous power supply that is critical to the nation. To deliver this commitment, TNB must have reliable transmission and distribution systems that can fulfill the demand of electricity at the highest level of consumption or peak demand.

This is done through having a reasonable reserve margin, which could sustain demand for electricity for industries, commercial operations as well as residences. Reserve margin is important to ensure that factories, shopping complexes continue to have its electricity supply despite the country experiencing the hottest month or any factors that may increase the demand for electricity.

To ensure this delivery, TNB has also on the average invested some RM4 billion annually for new infrastructures such as the building of new transmission lines, power plants or substations.



Powering Communities

Despite TNB’s efforts to deliver electricity to every nook and hidden corner of the country, there are some areas which remain unreachable to the common electricity grids which traverse the nation. In these remote places, the only means to reach them is through an independent solar hybrid power plant that runs on diesel in addition to sun rays tapped from solar panels.

TNB is responsible for the maintenance and operations of these stations in remote areas as well as offshore islands at a subsidised rate. Besides providing electricity to the rural areas, our efforts are recognised world wide for promoting the use of renewable energy to produce electricity.

More recently, TNB added a wind turbine technology to the hybrid plant, the first project being the Wind/Solar Hybrid plant installed in Pulau Perhentian Kecil in Terengganu. The plant harnesses the strong wind presence on the island to power its two 100 kW wind turbines. The technology not only makes the plant more efficient, it also consumes less diesel, thus reducing possible pollution sources from fossil fuel.

These efforts have made a positive impact on the quality of life for those in the community it serves. In places like Pulau Sibu off Mersing, round the clock electricity supply allows for internet connections that connects the once remote village to the rest of the world. In some of the islands including Pulau Perhentian, the availability of 24-hour electricity has allowed tourism activities to thrive. Electricity enables tourism operators to upgrade their chalets into full-scale resorts, thus allowing more high-end tourist arrivals and bringing more income to the local community.

Other CSR activities for the communities are also prevalent in all TNB divisions and subsidiaries. These activities include raising funds for flood victims, providing tuition for underprivileged children, and visiting homes for the disabled and orphanages. In addition, each of the respective departments and units in TNB implement CSR initiatives through direct contacts with the public. These initiatives are either structured, or built in into their daily activities, or taken by the group on an ad-hoc basis to help needy causes.



Powering Education

TNB believes that education can turn dreams into realities. TNB has a very strong tradition in producing world-class scholars and researchers through its education and scholarship programmes. Many of the current business leaders in the country are TNB scholars and have enjoyed the education provided by the Company under its scholarship programmes.

Over the years, TNB has strengthened this role and is now actively involved in not only providing scholarships, but also in providing education through Universiti Tenaga Nasional (UNITEN) and Institut Latihan Sultan Ahmad Shah (ILSAS).

As an institute of higher learning, UNITEN has an immense and important responsibility in helping the Government produce well rounded individuals. The University also gives primary focus on research and development activities which encourage and develop the culture of innovation and competition among the academic staff as well as its students. Strategic cooperation between UNITEN and the industrial sector provides access and opportunities for students and academic staff to master knowledge as well as scientific and technical expertise that are relevant with industrial and market place needs.

Yayasan Tenaga Nasional (YTN) as a trust body for TNB, provides sponsorships through scholarships and study loans to deserving students. For FY2007, YTN provided loans amounting to RM47 million for top students to pursue their tertiary education at local and world-renowned universities overseas as an effort to build a pool of good scholars for TNB and the country.

YTN was also involved in community welfare development projects, such as the Track to Excellence Programme (Program Jejak Kegemilangan) and the Smart Youth Camps Programme (Program Kem Remaja Bistari). In the Track to Excellence Programme, 140 good students from rural areas and underprivileged families from across Malaysia got an unprecedented chance to visit UNITEN, exposing them to campus life and inspiring them to seek great achievements. The Smart Youth Camps are essentially education camps for the children of TNB employees as well as orphans.

TNB also embarked on various initiatives to improve language proficiency among the students in rural areas throughout the country by supplying, for example, mainstream newspapers to the schools. All these activities were undertaken to increase the performance of students in an effort towards making Malaysia a Knowledge Nation.



Powering Champions

TNB regards sports in not just its social role but more importantly as a catalyst to develop future champions. TNB’s involvement in sports through the years is in line with the Government’s aspiration to produce top athletes and for Malaysia to be a top-notch sporting nation.

TNB is the main supporter for hockey, which is one of the few sports which the Malaysian team is highly ranked in the world. For FY2007, TNB contributed RM1.1 million to the Malaysian Olympic Council which was channeled to the Malaysian Hockey Federations (MHF), the body tasked to develop hockey in the country.

TNB is the main sponsor for the Sultan Azlan Shah Cup hockey tournament, which feature top hockey teams from around the world. TNB is also the title sponsor for the TNB-MHL Hockey League, which is organised by the MHF. The TNB team which competed in the Division 1 of the League emerged as Overall Champion and won the inaugural TNB Cup in 2007. Six TNB players have also been selected to play for the national team.

To strengthen its involvement in hockey, TNB is working with several state hockey bodies to develop the sports further. It has set up a Special Sports Unit, to conduct specialised hockey skills to rising hockey stars. The project is expected to teach at least 2,000 talents and is aimed at exposing specific hockey skills that are important for the development of the game.

Besides hockey, TNB will also be the major sponsor for the 2008 Malaysian Game (SUKMA) which will be held in Terengganu. TNB is also the main sponsor for cricket in the country.



Powering a Green Nation

As a power producer and distributor, TNB’s nature of operations requires the Company to take great interest in its environment. As a principle, TNB embraces the notion that any project or development undertaken by TNB must blend and not be in conflict with the environment it operates in.

TNB takes pride of its corporate responsibility in ensuring that its projects comply with the strictest world environment standard. A recent example was the construction of the coal powered Stesen Janakuasa Sultan Azlan Shah, which has adopted a clean coal technology. This technology ensures that the plant does not emit harmful discharge to the environment, thus helping to conserve nature in the surrounding areas. The grounds of TNB’s associate independent power producers, Kapar Energy Ventures, has also now become one of the main stops for migratory birds which are attracted to the warm water and abundance of food in the plant’s ash pond.

In the protection and conservation of environment, TNB’s major contribution can be seen in the Company’s efforts in the preservation of the firefly colony in Kampung Kuantan in Kuala Selangor. This species of firefly flickers in unison creating a natural lightshow after dark along the Kuala Selangor riverbank. Over the years, TNB has contributed around RM1.5 million to help in the protection of the fireflies.

TNB’s contribution to the conservation of the area goes beyond monetary value. Visitors who come provide a sustainable livelihood to the boatmen, and if the boatmen could live comfortably on the income derived from tourism activities, there is a strong chance that TNB’s conservation efforts would be sustained.

In the firefly conservation project, TNB’s subsidiary, TNB Research has been involved in conducting studies on the lampyridae firefly. The research will cover the study of the entire ecology of the insects and when completed, is expected to provide a scientific basis for future conservation efforts of the species and its environment.



Building a strong governance foundation and undertaking continuous efforts in it’s improvement, remain the focus of the Board of Directors (the Board) of Tenaga Nasional Berhad (TNB or the Company) to safeguard and promote the interest of all stakeholders. This improvement begins with the board structure itself, as for the year under review an additional member with a technical engineering background was brought onto the Board. His knowledge and experience would serve the Board well in assessing and evaluating technical issues before decisions are made.

The existing framework for effective corporate governance is further enhanced with the introduction of the Code of Ethics which was launched on 23 July 2007. It encompasses best practices which set the manner in which the Company is governed, expressly with high ethical standards and uncompromising integrity. The Code of Ethics also served to complement the Company’s current policies and procedures. In order to ensure its effective application, the Code is incorporated in the Integrity and Ethics Training Module conducted in house by the Company’s training centre, ILSAS.

A Whistle Blowing Procedure was established to provide a platform and to act as a mechanism for internal and external parties to channel their complaints or to provide information on fraud, wrongdoings or non-compliance to any rules/procedures by the employee or management of the Company. An appropriately managed whistle blowing system functions as an internal control mechanism allowing for effective action to be taken and to provide preventive measures in order to ensure that the integrity of the Company is maintained.

A compilation of the existing Limits of Authority (LOA) for ease of reference and compliance was made. The LOA which is updated from time to time contains both the monetary and non-monetary limits of authority for recommending and approving the Company’s operational and management decision making activities prior to execution. The LOA is the fundamental and integral component of the Company’s Group Financial Control and Risk Management Framework. As a pivotal internal control mechanism, the LOA will promote greater managerial discipline, accountability and transparency in the performance of the identified operational and management decision-making activities.

Initiatives that were identified under the Government Linked Companies Transformation Programme continues to progress throughout the year under review. For example, procurement guidelines and best practices as well as the TNB Procurement Code of Conduct were put in place as recommended by the “Red Book”. The improved procurement method will have the potential to realise value with significant savings and to also provide quality products, hence the ability to deliver better quality services.

Statement Of Corporate Governance



During the year, the Board had announced a dividend policy for the Company for the purpose of providing stable and sustainable dividends to shareholders while maintaining an efficient capital structure and ensuring sufficient of funding for future growth. This commitment can be realised by the Company through efficient financial management coupled with quality and reliable services. The Company has earned recognition from Asiamoney in its Corporate Governance Poll 2006 as the overall second best company in Malaysia for Corporate Governance, the best company in Malaysia for Investor Relations and third best in Asia. In addition, the Chief Financial Officer (CFO) has also been proclaimed as the second best CFO in Malaysia.

To add to the list of accolades that TNB has received, a recent FinanceAsia Best Managed Companies Poll 2007 has voted TNB as among the top ten (10) best managed companies in Malaysia.

Essentially, the good governance culture in TNB begins with an effective Board and Management team which are transparent in their action and accountable throughout the Company. Both teams are firmly grounded in sound business ethics particularly in implementing the strategic business initiatives. Sufficient checks and balances in the management structures, particularly in finance and operations, provide an effective system of internal controls while risk management systems and actions help to mitigate potential risks.

The Board of Directors of TNB remains committed to improving corporate governance practices to ensure that the highest standards of corporate culture are practiced throughout the Group in the interest of shareholders. The Board is pleased to report to the shareholders on the manner TNB has strengthened its application of the principles of corporate governance and on the adoption of corporate governance best practices laid down in the Malaysian Code on Corporate Governance (the Code).



(A) THE BOARD OF DIRECTORS

The Board remains resolute and upholds its responsibility in governing, guiding and monitoring the direction of the Company with the eventual objective of enhancing long term sustainable value creation aligned with the interests of shareholders, while taking into account the interests of other stakeholders. The Board is committed to ensuring good corporate governance practices are well applied inline with the six (6) principal responsibilities outlined in the Code that operate within a set of governance as set out below:-

Composition of the Board

The Board of Directors of TNB consists of ten (10) members comprising of one (1) Non-Executive Chairman, one (1) Executive Director, seven (7) Non-Executive Directors and one (1) Alternate Director. The diverse background of members in various fields such as financial, legal, engineering, management and public administration provide considerable depth and wisdom of knowledge, expertise and experience to the Board of TNB. A brief profile of each Director is set out on pages 86 to 90 of this Annual Report.

Process of Appointment to the Board

Appointment to the Board of TNB is made either by the Special Shareholder pursuant to Article 5(2) of the Company’s Articles of Association or by the Board of Directors pursuant to Article 133 of the Company’s Articles of Association.

The Board Nomination & Remuneration Committee (BNRC) scrutinises the sourcing and nomination of suitable candidates for appointment as Director in TNB and its subsidiary companies. This Committee will ensure the selection of Board members with the right skill set, expertise and industry knowledge thus strengthen the composition of the Board and contribute significantly to the effectiveness of the Board.

Roles and Responsibilities

The Board puts in place long term strategic plans and reviews the short and medium term performance on an annual basis. This is to align the long term strategic plans and directions with current demand of the customers and change in the economic outlook. Monitoring by the Board on the achievement of the business targets is made quarterly with monthly management reporting on financial and technical performance updates.

The roles and responsibilities of the Chairman of the Board and the President/Chief Executive Officer are distinct and separated. The Chairman is responsible for the conduct of the Board and ensures that the Board’s discussions are conducted in a manner that all views are taken into account before a decision is made. The President/Chief Executive Officer has the general responsibility for running the business on a day-to-day basis thus ensuring a balance of power and authority so as to provide a safeguard against the exercise of unfettered powers in decision-making.

Accountability is part and parcel of governance in TNB. The Board is accountable to the shareholders, and the Management is accountable to the Board. The Board ensures that the Management acts in the best interests of the Company and its shareholders by working to enhance the Company’s performance.

There is a clear division of responsibilities between the Board and the Management. The President/Chief Executive Officer supported by his team of Management through Committees namely the Group Executive Council Committee, Group Executive Management Committee, Group Management Tender Committee, Energy Supply Committee and Group Risk Management Committee. These Committees are responsible for the implementation of Board resolutions, overall responsibilities over the day-to-day operations of the Group’s business and operational efficiency.



Operation of the Board

The Board has established five (5) Board Committees. The Board has entrusted certain responsibilities to the Board Committees, which operate within clearly defined written terms of references on which the Committees deliberate the issues on a broad and in depth basis before putting up any recommendation to the Board. A diagram outlining the main Committees involved in the decision making process is set out below :-

Board of Directors

Board Committees Management Committees

Board Audit

Committee

Board Tender

Committee

Board DisciplinaryCommittee

Board Nomination

and Remuneration

Committee

Board Finance

and InvestmentCommittee

Group Executive

Council Committee

Group Executive Management Committee

Group Management

Tender Committee

Energy SupplyCommittee

The Board Meetings

The Board meetings are scheduled in advance and during the Financial Year ended 31 August 2007, 17 Board Meetings were convened to deliberate and consider a variety of significant matters. These include reviews on business plans, budgets, quarterly financial results, risk assessments, key performance indicators of the Senior Management, debt restructuring and other corporate proposals such as foreign investment exercise, overall performance of the Company and the subsidiary companies as well as other related business matters that require the Board’s deliberation and due approval.

Minutes of proceedings and resolutions passed at each Board and Board Committees Meetings are kept in the statutory register at the registered office of the Company. In the event of a potential conflict of interest, the Director in such a position will make a declaration to that effect as soon as practicable. The Director concerned will then abstain from any decision-making process in which he/she has an interest in.

Group Risk

ManagementCommittee


Supply of Information to the Board

The Board and its Committees have full and unrestricted access to all information within TNB pertaining to the Group’s business and affairs.

The Board Meetings are held regularly, on a monthly basis and special meetings will be convened as warranted by specific circumstances. The Board is provided in advance with the agenda for every Board meeting, together with comprehensive management reports which includes proposal analysis, risk evaluation and supporting documents for the Board’s perusal. Before decisions are made, consideration is given to the adequacy of information available to the Board and, if necessary, decisions are deferred if further information is required.

All Directors have the right and duty to make further enquiries when necessary. In most instances, the Senior Management of the Company as well as external advisors are invited to be in attendance at Board Meetings to provide insights and to furnish clarification on issues that may be raised by the Board. Whether as a full board or in their individual capacities, Directors are also at liberty to take independent professional advice on any matter connected with the discharge of their responsibilities as they may deem necessary and appropriate.

The Board is also notified of any disclosures/announcements made to Bursa Malaysia.

Tan Sri Leo Moggie (Chairman)

Dato’ Sri Che Khalib bin Mohamad Noh

Dato’ Puteh Rukiah binti Abd Majid (Appointed w.e.f. 13 September 2006)

Datuk Zalekha binti Hassan

(Alternate Director to Dato’ Puteh Rukiah binti Abd Majid)

(Appointed w.e.f. 13 September 2006)

Encik Mohammad Zainal bin Shaari (Appointed w.e.f. 31 March 2007)

Tan Sri Dato’ Lau Yin Pin @ Lau Yen Beng

Tan Sri Dato’ Hari Narayanan a/l Govindasamy

Dato’ Zainal Abidin bin Putih

Datuk Mohd Zaid bin Ibrahim

Dato’ Fuad bin Jaafar (Appointed w.e.f. 15 March 2007)

(Note:- Attendance record of Alternate Director must be read in concurrence with attendance record of the Principal Director)

Attendance Details of Board Members

Directors Meeting Attendance

17/17

17/17

15/17

2/2

5/7

16/17

16/17

13/17

14/17

8/8


Board Effectiveness

The present composition, size, modus operandi, strength of relationship with the Management and functional Board Committees, contribute to an effective Board. Apart from the convening of Board Meetings on a frequent basis, deliberation and discussion at a Board Meeting are conducted in a comprehensive and in depth manner before arriving at any decision, as recommended by the Management.

A Board and Management interactive session or internally known as Board and Management Break Out Session, held twice a year, provides the Board with an additional formal platform outside the Boardroom to scrutinise the performance, business plan and budget of the Company in greater detail, thus enabling the Board to chart the strategic direction for the Company and to provide effective control linking the business plan to the key performance indicators.

Board Balance and Independence

The requirement of the Code for a board balance is fulfilled with Independent Directors forming more than one third of the Board. The classification for independence is in accordance with paragraph 1.01 (Definition and Interpretations) of the Listing Requirements of Bursa Malaysia Securities Berhad.

The present Board consists of four (4) Independent Non-Executive Directors namely Y. Bhg. Tan Sri Dato’ Lau Yin Pin, Y. Bhg. Tan Sri Dato’ Hari Narayanan a/l Govindasamy ,Y. Bhg. Dato’ Zainal Abidin bin Putih and Y.Bhg. Dato’ Fuad bin Jaafar who are independent of Management and free from any business relationship that could materially interfere with the exercise of their independent judgement. The presence of Independent Directors assures an additional element of balance to the Board as they provide unbiased and independent views, advice and judgement to all Board deliberations. Y. Bhg. Tan Sri Dato’ Lau Yin Pin is the Senior Independent Non-Executive Director. He is the Company’s longest-serving Director and as such has significant knowledge of the Company and its business. Any concerns on or related to the Company may be conveyed to him by shareholders and the public through e-mail.

Re-election

Pursuant to Article 133 of the Company’s Articles of Association, newly appointed Directors are subject to re-election by shareholders at the first opportunity after their appointment and the retiring Directors may offer themselves for re-election by the shareholders. In accordance with Article 135 of the Company’s Articles of Association all Directors are required to retire from office at least once in every three (3) years.

The BNRC reviews the appointment of new Director to the Company and its subsidiaries taking into consideration the required mix of skills and experience before making recommendations to the Board for approval.

Further information concerning the Directors standing for re-election at the Annual General Meeting is included in the Statement Accompanying Notice of Annual General Meeting. The detailed profiles of Directors standing for re-election are provided in order to enable shareholders to make an informed decision in re-electing them.



Continuing Board Development

Recognising the ever increasing demands of their role as Directors of a leading Public Listed Company, the Directors of TNB continue to equip themselves with the relevant professional advancement programmes particularly in

corporate regulatory development and current development in the industry.

All Directors have attended and successfully completed the Mandatory Accreditation Programme in compliance with the Listing Requirements of Bursa Malaysia Securities Berhad. The Directors have also been advised and encouraged to attend various professional programmes organised by various professional bodies. During the Financial Year under review, a Director has been nominated to attend the Malaysian Directors Academy (MINDA) – Programme for Building High Performance Director organized by Khazanah Nasional Berhad in collaboration with IMD. The programme is deployed through three (3) modules, namely what makes a Board perform, the strategic dimensions of work and external dimensions. The Chairman of TNB has also been invited and attended the Chairman’s Forum organized by MINDA.

Apart from attending various conferences and seminars organised by the external organisers, the Board also benefited from an in-house Board Development Programme. The topic on transformation of an organisation was presented at the in-house Board Development Programme 2007. The training for the Directors also included site visits to power stations where presentations were conducted by power plant managers to explain the operational aspects of power plants.

Directors’ Remuneration Procedure

The BNRC will recommend to the Board on the framework and the remuneration package for the Executive Director and Senior Management. In determining the framework, the Committee has engaged professional advice from internal as well as external sources.

The Level and Make-Up of Remuneration (a) The remuneration package of the Executive Director comprises of a fixed and variable pay which is linked to

the key performance indicator as follows:-

(i) Basic Salary

The basic salary (which include the statutory contributions to the Employee Provident Fund Board) for Executive Director is recommended by the BNRC, taking into account the individual performance and information obtained from independent sources on the rates of salary for similar positions in a selected group of comparable companies in the market.

(ii) Reward Scheme

The Group operates a bonus scheme for all employees, including the Executive Director. The criteria set in determining the quantum of bonus is the level of profit achieved by the Company through the Group’s business activities as compared against the targets. It is also coupled with an assessment of each individual’s performance and competencies. Meanwhile, the Executive Director is provided with a Contractual bonus based on performance.

(b) The remuneration package of Non-Executive Directors comprises of the following elements:-

(i) Fees

The Directors are paid fixed monthly fees and Meeting allowances for each Board and Board Committee meeting attended during the year. Such fees are tabled to the shareholders of the Company for approval.

(ii) Benefits-in-kind

Other benefits in the form of coverage on electricity bills and reimbursements are made available as appropriate.



Disclosure on Directors’ Remuneration The details on the aggregate remuneration received by the Directors for the Financial Year ended 31 August 2007 are as follows:-

Dato’ Sri Che Khalib

bin Mohamad Noh

302,000.00

Basic Salary (RM)

Bonus(RM)

Flexible Benefits

(RM)

Tan Sri Leo Moggie

Dato’ Puteh Rukiah binti

Abd Majid

Mohammad Zainal bin

Shaari

Tan Sri Dato’ Lau Yin Pin

@ Lau Yen Beng

Tan Sri Dato’ Hari

Narayanan a/l

Govindasamy

Dato’ Zainal Abidin bin

Putih

Datuk Mohd Zaid bin

Ibrahim

Dato’ Fuad bin Jaafar

Datuk Zalekha bin Hassan

Dato’ Azman bin Mokhtar

(resigned w.e.f. 31 March

2007)

127,500.00 (TNB)

98,000.00

(Subsidiaries)

59,950.00 (TNB)

*38,825.00 (TNB)

66,850.00 (TNB)

58,475.00 (TNB)

12,500.00

(Subsidiaries)

55,700.00 (TNB)

49,000.00 (TNB)

16,500.00

(Subsidiaries)

27,746.00 (TNB)

16,500.00

(Subsidiaries)

3,200.00 (TNB)

*23,500.00 (TNB)

11,747.96

6,790.00

18,591.23

6,481.98

26,328.84

12,165.25

34,448.18

3,748.64

5,338.00

11,415.89

237,247.96

66,740.00

57,416.23

73,331.98

97,303.84

67,865.25

99,948.18

47,994.64

8,538.00

34,915.89

Non-Executive Fees & Allowances (RM)

Benefits in kind (RM)

Total (RM)

600,000.00 113,280.00 42,000.00 50,000.00

Executive Contribution to EPF (RM)

Car Allowance

(RM)

Total(RM)

1,107,280.00

*Paid to Khazanah Nasional Berhad in respect of Directors Fees and Meeting Allowance provided for Dato’ Azman bin Mokhtar and Mohammad Zainal bin Shaari for the Financial Year ended 31 August.



(B) SHAREHOLDERS

TNB is committed to maintaining a constructive relationship with its shareholders, pursuing its on-going commitment to sustain the highest standards of corporate governance practices throughout the Group with full appreciation of its impact on long-term corporate performance and optimal shareholder value.

Relations Between the Company and Investors

The Board and Management of TNB recognise the importance of transparency and accountability to its shareholders and investors, thereby its pursuit of the highest standards of corporate governance practices throughout the Group.

Whilst various channels of communication are optimised to provide shareholders and investors with a balanced and comprehensive view of the Group’s performance and the issues faced by the Group in light of the challenging environment, the role of investor relations is entrenched as the communications platform between the Group and the investor at large. In this regard, the Investor Relations & Management Reporting Unit (IRMU), a dedicated unit under the Finance Division has been entrusted with the responsibility of coordinating and responding to all queries and information raised by shareholders, research analysts and investors. An equal level of importance is placed on the need for investor relations to channel the views of the investment community back to the Management and the Board of Directors.

Under the annual investor relations programme, TNB participated in 11 utility conferences arranged by leading investment banks both in Malaysia and overseas. This provided the platform to meet with fund managers and investors, both existing and potential, to update them on the Company’s performance and to address any issues and concerns that they may

have regarding the Company. During the year TNB attended 4 investor conferences held in Kuala Lumpur and 4 international conferences held in Singapore, Hong Kong, Japan and the United States. In July 2007, the TNB Management met with its local shareholders under a domestic roadshow programme arranged by the Company, whilst in November 2006, TNB accepted the invitation to go on a non-deal roadshow covering parts of Europe and the United Kingdom to meet with

investors and fund managers.

In FY2007, TNB met with a total of 200 fund managers and investors during the conferences and roadshows attended.

The attendance of the financial community and news media to TNB’s quarterly financial result presentations, have been good. The presentations were attended by research analysts covering TNB, credit-rating agencies, and media news reporters. Fund managers on the other hand, were invited to teleconferences for the sessions. On the average, a total of 85 research analysts, several news media reporters and fund managers attended or were teleconferenced in for these quarterly presentations.

In FY2007, TNB had approximately 68 meetings with equity research analysts, fund managers and investors who had requested to meet with company officials (excluding investors that were seen at conferences, roadshows and quarterly financial result presentations).

TNB is a participant in the CMDF-Bursa Research Scheme (CBRS) which was initiated by Bursa Malaysia Securities Berhad in 2005. CBRS is aimed at ensuring a wider research coverage of Bursa Listed companies and to provide a platform for research to be made available to retail investors as the research coverage under CBRS is posted on Bursa’s website.

The company’s website at www.tnb.com.my also provides easy and quick access to financial, corporate and other pertinent information on the Group’s various activities.



Constructive Use of the Annual General Meeting

The Annual General Meeting (AGM) is the principal avenue for shareholders to communicate and engage in dialogue with the Board and Management of TNB. The highlights of the Company’s technical and financial performance which is made via visual presentation is made by the Chairman and President/Chief Executive Officer at the AGM. The turnout of shareholders at AGMs of TNB has always been high. A total of 2,942 shareholders and proxies attended the Sixteenth AGM held in 2006.

Constructive dialogue between the Board and the shareholders are encouraged whereby at the AGM, shareholders are given the opportunity to raise questions on issues pertaining to the Company’s financial and operational performance. At the AGM, the shareholders can exercise their voting rights and the meeting is convened in strict compliance with the laws and procedures of general meeting. Separate resolutions are proposed for separate motions and the Chairman will declare the outcome of each resolution after a proposal and a secondment are done by the shareholders. Each item of ordinary and special business in the notice of the AGM would be accompanied by a full explanation of the effects of the proposed resolution. Shareholders are also given the opportunity to put forward their questions on the proposed resolutions and on the Company’s operations. The Chairman will provide sufficient time for shareholder questions on matters pertaining to the Company’s performance and would seek to explain to the shareholders with regard to their concerns.

Immediately after the AGM, the Chairman and the President/Chief Executive Officer will address all issues raised by the media and analysts through a news conference and analyst briefing in the course of providing all stakeholders with the latest update on the Company.

Continuing Disclosure of Material Information

TNB firmly observed the continuing disclosure obligation imposed upon a listed issuer by Bursa Malaysia. The Company has in place Corporate Disclosure Policy and Procedures since 1994, which provides for adoption of Best Practices in Corporate Disclosure laid down by Bursa Malaysia in July 2004. As required under the said Best Practice, the Company Secretary is identified as “Corporate Disclosure Manager” within the context of the aforementioned Best Practice.

Timely and accurate disclosure is made on all material information and throughout the Financial Year under review, material information and material development thereof on acquisition, disposal, divestment, issuance of notes, proposed financing facility, conversion of bonds, related party transaction, employees’ share option scheme, notice of book closure, change in boardroom are among the material information released to Bursa Malaysia via Bursa Link.

Confidentiality of Information

In the conduct of briefings or presentations, the Company takes 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 shareholder group.



(C) ACCOUNTABILITY AND AUDIT

Financial Reporting

The Directors are responsible for ensuring that financial statements are drawn up in accordance with the requirements of the Companies Act, 1965 and in line with approved accounting standards in Malaysia so as to present an objective and understandable assessment of the Group’s financial position and prospects. TNB publishes quarterly financial reports so that its shareholders can monitor the Company’s financial position regularly. In this Annual Report, an assessment is provided in the Directors’ Report of the Audited Financial Statements.

On behalf of the Board, the Board Audit Committee (BAC) scrutinises the quarterly financials, statutory compliance aspects of the Audited Financial Statements, and the Company’s policies and procedures prior to full deliberation at the Board level. The Board ensures the integrity of the Company’s financial reporting and fully recognises that accountability in financial disclosure forms an integral part of good corporate governance practices.

Relationship with the Auditors

The Board has, through the BAC, established a formal, transparent and appropriate relationship with the Group’s Auditors, both external and internal. A report by the BAC is provided on page 91 and its Terms of Reference is provided from pages 94 to 99.

The BAC meets regularly with the external and internal auditors to discuss and review the audit plan, quarterly financial results, annual financial statements and the audit findings and makes recommendations for the Board’s approval.

Internal Control

The Board acknowledges that they are responsible for maintaining a sound system of internal control to safeguard shareholders’ investment and the Company’s assets as required by the Code. TNB adheres to Bursa Malaysia guidelines on the Statement on Internal Control: Guidance for Directors of Public Listed Companies, as guidance for compliance with these requirements.

On 16 July 2007, the Board Audit Committee met with the External Auditors without the presence of the Executive Director and the Management.

Information on the Group’s internal control is presented in the Statement on Internal Control, pursuant to paragraph

15.27(b) of the Bursa Malaysia Listing Requirements as set out from pages 100 to 103.



RESPONSIBILITY STATEMENT IN RESPECT OF THE FINANCIAL YEAR UNDER REVIEW(Pursuant to paragraph 15.27(a) of the Bursa Malaysia Listing Requirements)

The Board is fully accountable to ensure that the financial statements are prepared in accordance with the provisions of 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 view, balanced and understandable assessment of the Group’s financial position and prospects. In this Annual Report, an assessment is provided in the Directors’ Report of the Audited Financial Statement.

The BAC reviews the statutory compliance and scrutinises the financial aspects of the Audited Financial Statement prior to full deliberation at the Board level.

ADDITIONAL COMPLIANCE STATEMENT

Apart from providing the shareholders and the stakeholders with an overview of the state of corporate governance in the Company, TNB is also pleased to disclose the following information:

(1) Utilisation of Proceeds Raised from any Corporate Proposal

During the Financial Year 2007, the proceeds from the disposal of TNB shares in Malaysian Technology Development Corporation Sdn. Bhd. and the exercise of the Employees’ Share Option Scheme were utilised to finance the Company’s working capital and capital expenditure.

(2) Share Buy-Back for the Financial Year

There was no share buy-back exercise carried out by the Company for the Financial Year ended 31 August 2007.

(3) Options, Warrants or Convertible Securities Exercised

The status on Options, Warrants or Convertible Securities exercised by the Company are as follows:-

(a) The Company launched the second Employees’ Share Option Scheme (ESOS II) in July 2003 and as at August 2007, eight (8) offers have been made to eligible employees where:-

(i) under the First Offer, options representing 199,994,000 shares were offered at an option price of RM8.39 (being the 5 day weighted average price from 30 June 2003 to 4 July 2003 net of 10% discount) to 22,815 eligible employees. Options representing a total of 199,347,000 shares were taken up by the grantees and the options exercised until August 2007 represented 176,718,764 shares. Under the First Offer an additional 6,000 shares options were also offered and taken up by 1 eligible employee and until August 2007, 6,000 shares were exercised;

(ii) under the Second Offer, options representing 16,872,000 shares were offered at an option price of RM8.74 (being the 5 day weighted average price from 17 February 2004 to 24 February 2004 net of 10% discount) to 2,927 eligible employees. Options representing a total of 16,838,000 shares were taken up and until August 2007, 13,674,112 shares were exercised;

(iii) under the Third Offer, options

representing 14,128,000 shares were offered at an option price of RM9.28 (being the 5 day weighted average price from 21 February 2005 to 25 February 2005 net of 10% discount) to 2,209 eligible employees. Options representing a total of 13,192,000 shares were taken up and until August 2007, 8,520,045 shares were exercised;



(iv) under the additional Offer, 450,000 shares options were offered at an option price of RM9.69 (being the 5 day weighted average price from 18 January 2005 to 25 January 2005 net of 10% discount) and RM9.75 (being the 5 day weighted average price from 10 June 2005 to 16 June 2005 net of 10% discount) to 2 eligible employees. The total shares of 450,000 were taken up and until August 2007, 70,000 shares were exercised;

(v) under the fourth, fifth, sixth and seventh Offers, options representing 17,267,000 shares were offered at an option price of RM9.17 (being the 5 day weighted average price from 18 January 2006 to 24 January 2006 net of 10% discount) to 4,055 eligible employees. Options representing a total of 16,843,000 shares were taken up and until August 2007, 9,887,115 shares were exercised;

(vi) under the Performance Stock Options for Senior Management employees, options representing 1,336,000 shares were offered at an option price of RM9.189 (being the 5 day weighted average price from 18 August 2006 and 21 August 2006 to 24 August 2006) to 16 eligible employees. Options representing a total of 1,336,000 shares were taken up and until August 2007, 30,000 shares were exercised;

(vii) under the eighth Offer, options representing 15,751,000 shares were offered at an option price of RM11.07 (being the 5 day weighted average price from 15 February 2007 to 16 February 2007 and 21 February 2007 to 23 February 2007 net of 10% discount) to 2,853 eligible employees. Options representing a total of 14,806,000 shares were taken up and until August 2007, 18,000 shares were exercised.

(4) American Depository Receipts (“ADR”)

In January 1994, TNB launched its Level 1 American Depository Receipts (ADR) in New York, the United States of America. Each ADR carries an equivalent of four underlying TNB shares. The only custodian bank for TNB’s ADR programme is Malayan Banking Berhad. The Bank of New York in the USA is the Depository Bank and the ADRs are traded over the counter. As at 31 August 2007, the total number of ordinary shares held through these ADRs was 2,008,825 which represented less than five per cent of the issued and paid-up capital of the 4,331,709,068 shares of TNB.

(5) Sanctions/Penalties

There were no sanctions and/or penalties imposed on the Company and its subsidiaries, Directors or Management by the relevant regulatory bodies during the Financial Year ended 31 August 2007.

(6) Non Audit Fees

Apart from the annual audit fees, the Group had paid non audit fees to the external auditors. The amounts paid for the Financial Year ended 31 August 2007 are as follows:-

External Auditor Total Paid

PricewaterhouseCoopers RM1,305,000.00

PT Prima Wahana Caraka,

PricewaterhouseCoopers, JakartaUSD78,648.90



(7) Variation in Results

The Company did not issue any profit forecast for the Financial Year ended 31 August 2007. As such, no commentary is made on variation in results.

(8) Profit Guarantee

The Company did not issue any profit guarantee for the Financial Year ended 31 August 2007.

(9) Material Contracts

Save as disclosed below, there is no other contracts which may be material that have been entered into by TNB or its subsidiaries in the Financial Year under review, apart from material contracts concerning borrowings as follows:-

(i) On 9 February 2006, TNB executed 4 sets of Term Loan Agreements for a total combined term loan facility of RM1.0 billion with Malayan Banking Berhad. The term loans were structured into 4 tranches of RM250 million, each with varying tenors ranging from 7 to 10 years from the date of drawndown.

(ii) On 24 August 2006, TNB had entered into a Novation and Amendment Agreement with TNB Janamanjung Sdn. Bhd., TNB Capital (L) Ltd. and HSBC Bank PLC to effect the novation of the outstanding ECA Loan equivalent to US$503,003,321 from TNB Janamanjung Sdn. Bhd. to TNB Capital (L) Ltd. The novation forms part of the restructuring of the ECA Loan which entails a re-pricing of the interest rate and unification of the currencies into a single currency namely from USD, € and £ into USD.

(10) Revaluation Policy

The revaluation policy of the Company in relation to its landed properties is set out in Note 2(f) of the Notes to the Financial Statements set out on page 17 of this Annual Report.

(11) Recurrent Related Party Transactions of a Revenue or Trading Nature

At the Extraordinary General Meeting of the Company held on 14 December 2006, the shareholders of TNB had approved and ratified all recurrent transactions of a revenue or trading nature, which are necessary for the day-to-day operations of the Group, entered into by the Company and/or its subsidiaries with certain classes of related parties from 14 December

2006 until the forthcoming AGM. Such approval will expire at the conclusion of the forthcoming Seventeenth AGM thus compelling the Board to propose to seek the shareholders’ mandate for the renewal of the same, together with a new mandate on recurrent transactions of a revenue or trading nature with the new related parties.

Pursuant to paragraph 4.1.5 of Practice Note 12/2001 of the Listing Requirements, a breakdown of the aggregate value of the Recurrent Transactions together with the type of the Recurrent Transactions, the related parties involved and the nature of their relationship with TNB in each type of the Recurrent Transaction made during the Financial Year are set out on page 76 of this Annual Report.

STATEMENT ON COMPLIANCE WITH THE REQUIREMENTS OF BURSA MALAYSIA IN RELATION TO APPLICATION OF PRINCIPLES AND ADOPTION OF BEST PRACTICES LAID DOWN IN THE MALAYSIAN CODE OF CORPORATE GOVERNANCE(Pursuant to paragraph 15.26 of the Bursa Malaysia Listing Requirements)

The Board is pleased to report to shareholders that the Company has applied the principles of corporate governance and is in compliance with Part 1 of the Code. Further to that, the Board remains committed to attain the highest possible standard of corporate governance through continuous adoption of best practices as recommended in Part 2 of the Code.

Signed on behalf of the Board of Directors in accordance with their resolution dated 25 October 2007.

TAN SRI DATO’ LAU YIN PIN @ LAU YEN BENGSENIOR INDEPENDENT NON-EXECUTIVE DIRECTOR



Recurrent Related PartyTransactions

At the Sixteenth Annual General Meeting of TNB which was held on 14 December 2006, the shareholders had approved and ratified all recurrent related party transactions (RRPT) of a revenue or trading nature, which are necessary for the day-to-day operations of the Group, entered into by the Company and/or its subsidiaries with certain classes of related parties from 15 December 2006 until the forthcoming AGM. In accordance with paragraph 4.1.5 of Practice Note 12/2001 of the Listing Requirements, a breakdown of the aggregate value of the recurrent transactions together with the type of the recurrent transactions, the related parties involved and the nature of their relationship with TNB in each type of the recurrent transaction made during the Financial Year are tabulated below:-

(1) RENEWAL OF SHAREHOLDERS’ MANDATE FOR RRPT OF A REVENUE OR TRADING NATURE

Transacting Company in TNB Group

Persons Connected to Major Shareholder (Related Parties Involved)

Interested Major Shareholder

Nature of RelationshipNature of Recurrent Transactions

Aggregate Value (RM) of the Transaction during the validity of the Mandate

TNB Edaran Otomobil Nasional Berhad

Khazanah Nasional Berhad

Khazanah Nasional Berhad being a major shareholder of TNB has 6.27% interest in EON, making the latter person connected to the Major Shareholder.

i) Purchase of Vehicle

ii) Repair of vehicle

346,312.60

14,498.41

TNB Putrajaya Holdings Sdn. Bhd.


Khazanah Nasional Berhad being a major shareholder of TNB has 15.59% interest in Putrajaya Holdings Sdn. Bhd., making the latter person connected to the Major Shareholder.

Payment on office rental

1,209,423.85


(2) SHAREHOLDERS’ MANDATE FOR RRPT OF REVENUE OR TRADING NATURE

Transacting Companies

in TNB Group

Persons Connected to Major

Shareholder (Related Parties

Involved)

Interested Major Shareholder

Nature of Relationship

Nature of Recurrent

Transactions

Aggregate Value (RM) of the Transactions during the validity of the Mandate

Bangsar Energy Systems Sdn. Bhd.

Telekom Malaysia Berhad


Khazanah Nasional Berhad being a major shareholder of TNB has 40.13% interest in Telekom Malaysia Berhad, making the latter a person connected to the Major Shareholder.

Supply of chilled water

7,474,644.36

TNB UDA Holdings Berhad


Khazanah Nasional Berhad being a major shareholder of TNB has 50.01% interest in UDA Holdings Berhad, making the latter a person connected to the Major Shareholder.

Payment on office rental

44,640.00

AGGREGATE VALUE OF THE TRANSACTIONS 9,089,519.22

Recurrent Related Party Transactions


Associate/InvestmentCompanies

Trust Foundation

YAYASAN TENAGA NASIONAL

RETIREMENT BENEFIT TRUST FUND

Subsidiaries

TNB ENGINEERING CORP. SDN. BHD. (100%)

TNB ENGINEERS SDN. BHD. (100%)

TNB ENERGY SERVICES SDN. BHD. (100%)

TNB FUEL SERVICES SDN. BHD. (100%)

TNB JANAMANJUNG SDN. BHD. (100%)

TNB POWER DAHARKI LTD. (100%)

TNB PROPERTIES SDN. BHD. (100%)

TNB REPAIR AND MAINTENANCE SDN. BHD. (100%)

TNB RESEARCH SDN. BHD. (100%)

UNIVERSITI TENAGA NASIONAL SDN. BHD. (100%)

TNB CAPITAL (L) LTD. (100%)

TNB VENTURES SDN. BHD. (100%)

POWER AND ENERGY INTERNATIONAL (MAURITIUS) LTD. (100%)

TNB KULIM DISTRIBUTION SDN. BHD. (100%)

TNB KULIM GENERATION SDN. BHD. (100%)

TNB COAL INTERNATIONAL LIMITED. (92.5%)

SABAH ELECTRICITY SDN. BHD. (80%)

MALAYSIA TRANSFORMER MANUFACTURING SDN. BHD. (100%)

SEPANG POWER SDN. BHD. (70%)

TENAGA SWITCHGEAR SDN. BHD. (60%)

KAPAR ENERGY VENTURES SDN. BHD. (60%)

Dormant Subsidiaries:

TNB DISTRIBUTION SDN. BHD. (100%)

SUMBER HIDRO MANAGEMENT SDN. BHD. (100%)

TNB GENERATION SDN. BHD. (100%)

- TNBG POWER SERVICES SDN. BHD. (100%)

TNB HIDRO SDN. BHD. (100%)

TNB-IT SDN. BHD. (100%)

TNB KAPAR SDN. BHD. (100%)

TNB KEKAL SDN. BHD. (100%)

TNB LOGISTICS SDN. BHD. (100%)

TNB PAKA SDN. BHD. (100%)

TNB METERING SERVICES SDN. BHD. (100%)

TNB RISK MANAGEMENT SDN. BHD. (100%)

TNB PRAI SDN. BHD. (100%)

TNB WORKSHOP SERVICES SDN. BHD. (100%)

TNB TRANSMISSION NETWORK SDN. BHD. (100%)

Group Corporate Structure

FIBRECOMM NETWORK (M) SDN. BHD. (49%)

TEKNOLOGI TENAGA PERLIS CONSORTIUM SDN. BHD. (20%)

PERUSAHAAN OTOMOBIL ELEKTRIK (MALAYSIA) SDN. BHD. (20%)

GB3 SDN. BHD. (20%)

LABUAN REINSURANCE (L) LTD. (10%)

FEDERAL POWER SDN. BHD. (8.91%)

BAKUN HYDRO-ELECTRIC CORPORATION SDN. BHD.

(6.67%)

ELECTROSTORM INC. (1.58%)

(As at October 2007)


TNEC CONSTRUCTION SDN. BHD. (100%)

TNEC OPERATIONS AND MAINTENANCE SDN. BHD. (100%)

BANGSAR ENERGY SYSTEMS SDN. BHD. (100%)

TNB LIBERTY POWER LIMITED (100%)

TNP CONSTRUCTION SDN. BHD. (100%)

HICOM-TNB PROPERTIES SDN. BHD. (40%)

INDERA-TNB PROPERTIES SDN. BHD. (40%)

KM METRO-TNB PROPERTIES SDN. BHD. (40%)

TNB PROPERTIES-JB CITYTOWERS SDN. BHD. (40%)

ZEUS-TNB PROPERTIES SDN. BHD. (40%)

TNB OPERATIONS & MAINTENANCE INTERNATIONAL LTD (100%)

TRICHY POWER LIMITED (100%)

TRICHY ENERGY LIMITED (100%)

TENAGA MICROWAVE TECHNOLOGIES SDN. BHD. (In the process of liquidation)

TENAGA CABLE INDUSTRIES SDN. BHD. (76%)

NORTHERN UTILITY RESOURCES SDN. BHD. (20%)

INDEPENDENT POWER INTERNATIONAL LTD. (100%)

DYNAMIC ACRES SDN. BHD. (100%)

TOMEST ENERGY MANAGEMENT SDN. BHD. (51%)

SELESA ENERGY SYSTEMS SDN. BHD. (100%)

MALAYSIAN SHOAIBA CONSORTIUM SDN. BHD. (20%)

P.T. DASA EKA JASATAMA (99%)

OASIS PARADE SDN. BHD. (100%)

JANA LANDFILL SDN. BHD. (70%)

LEGEND

SUBSIDIARY

SUB-SUBSIDIARY

SUBSIDIARY OF SUB-SUBSIDIARY

ASSOCIATE COMPANY OF SUBSIDIARY

ASSOCIATE COMPANY

INVESTMENT COMPANY

ASSOCIATE COMPANY OF SUB-SUBSIDIARY

TRUST FOUNDATION

Group Corporate Structure

Note :

* In the process of disposal.

*


OrganisationalStructure

Chief Internal Auditor

Board Of

Directors

Board Committees

President/Chief Executive Officer

VicePresident

GenerationDivision

VicePresident

TransmissionDivision

VicePresident

DistributionDivision

ChiefFinancial OfficerFinanceDivision

VicePresidentCorporateServicesDivision

VicePresidentHuman

ResourceDivision

ChiefInformation Officer

Information andCommunication

Technology Division

VicePresident

InvestmentManagement

Division

Core Business Management Services Non-core Business

Senior Vice President(Operations & Technical)

Functional Reporting Direct Reporting

CompanySecretary


Board Of Directors

Tan Sri Leo Moggie(Non-Independent Non-Executive Chairman)

Dato’ Sri Che Khalib bin Mohamad Noh(President/Chief Executive Officer)(Non-Independent Executive Director)

Dato’ Puteh Rukiah binti Abd Majid(Non-Independent Non-Executive Director)

Mohammad Zainal bin Shaari(Non-Independent Non-Executive Director)(Appointed w.e.f. 31.3.2007)(Resigned as Alternate Director to Dato’ Azmanbin Mokhtar on 31.3.2007)

Tan Sri Dato’ Lau Yin Pin @ Lau Yen Beng(Senior Independent Non-Executive Director)

Tan Sri Dato’ Hari Narayanan a/l Govindasamy(Independent Non-Executive Director)

Dato’ Zainal Abidin bin Putih(Independent Non-Executive Director)

Datuk Mohd Zaid bin Ibrahim(Non-Independent Non-Executive Director)

Dato’ Fuad bin Jaafar(Independent Non-Executive Director)(Appointed w.e.f. 15.3.2007)

Datuk Zalekha binti Hassan(Alternate Director to Dato’ Puteh Rukiah binti Abd Majid)(Non-Independent Non-Executive Director)

Dato’ Azman bin Mokhtar(Non-Independent Non-Executive Director)(Resigned on 31.3.2007)

Board Audit Committee

Tan Sri Dato’ Lau Yin Pin @ Lau Yen Beng(Chairman of the Committee)

Mohammad Zainal bin Shaari

Dato’ Zainal Abidin bin Putih


Board Nomination And Remuneration Committee

Tan Sri Leo Moggie(Chairman of the Committee)

Mohammad Zainal bin Shaari


Dato’ Fuad bin Jaafar

Company Secretaries

Nor Zakiah binti Abdul Ghani(LS 0008795)

Wan Marzimin bin Wan Muhammad(LS 0009013)

Share Registrar

Symphony Share Registrars Sdn. Bhd.Level 26, Menara Multi-PurposeCapital Square No. 8, Jalan Munshi Abdullah50100 Kuala Lumpur, Malaysia

Corporate Information


Principal Bankers

Malayan Banking BerhadLevel 1, Tower A, Dataran MaybankNo.1, Jalan Maarof59000 Kuala Lumpur, Malaysia

CIMB Bank BerhadNo. 21 & 23, Lorong Ara Kiri 1Lucky Garden, Bangsar59100 Kuala Lumpur, Malaysia

Bank Islam Malaysia BerhadCawangan KL SentralTingkat Bawah, No. CS/3B/GBlock 3B, Plaza Sentral, KL Sentral50748 Kuala Lumpur, Malaysia

External Auditor

Messrs PricewaterhouseCoopers (No. AF: 1146)Level 10, 1 Sentral Jalan TraversKuala Lumpur SentralP.O Box 1019250706 Kuala Lumpur, Malaysia

Registered Office And Head Office

Tenaga Nasional BerhadNo. 129, Jalan Bangsar59200 Kuala Lumpur, Malaysia

Telephone : 603- 2296 5566

Facsimile : 603-2296 3686

Website : www.tnb.com.my

E-mail : [email protected] [email protected] (Tan Sri Dato’ Lau Yin Pin @ Lau Yen

Beng) (Senior Independent Non-Executive

Director)

Stock Exchange Listing

Main BoardBursa Malaysia Securities BerhadMalaysia

Ratings

Baa1 (Moody’s)BBB (Standard & Poor’s)AA1 (Rating Agency Malaysia)AA+ (Malaysian Rating Agency

Corporation Berhad)

American Depository Receipts Programme (ADR)

ADR Level 1

Corporate Information


Board OfDirectors’

1. Tan Sri Leo Moggie (Non-Independent Non-Executive Chairman)

2. Dato’ Sri Che Khalib bin Mohamad Noh (President/Chief Executive Officer) (Non-Independent Executive Director)

3. Dato’ Puteh Rukiah binti Abd Majid (Non-Independent Non-Executive Director)

4. Mohammad Zainal bin Shaari (Non-Independent Non-Executive Director) (Appointed w.e.f. 31.3.2007) 5. Tan Sri Dato’ Lau Yin Pin @ Lau Yen Beng (Senior Independent Non-Executive Director)

6. Tan Sri Dato’ Hari Narayanan a/l Govindasamy (Independent Non-Executive Director)

3

481011 12


Board Of Directors’

7. Dato’ Zainal Abidin bin Putih (Independent Non-Executive Director)

8. Datuk Mohd Zaid bin Ibrahim (Non-Independent Non-Executive Director)

9. Dato’ Fuad bin Jaafar (Independent Non-Executive Director) (Appointed w.e.f. 15.3.2007)

10. Datuk Zalekha binti Hassan (Alternate Director to Dato’ Puteh Rukiah binti Abd

Majid) (Non-Independent Non-Executive Director)

11. Nor Zakiah binti Abdul Ghani Company Secretary

12. Wan Marzimin bin Wan Muhammad Company Secretary

1

25 67 9


Profile Of Board Of Directors


Non-Independent Non-Executive Director

Tan Sri Leo Moggie, 66 years of age and a Malaysian was appointed as Non-Independent Non-Executive Chairman of Tenaga Nasional Berhad on 12 April 2004. He is the Chairman of the Board Nomination & Remuneration Committee and Board Finance & Investment Committee. Tan Sri Leo Moggie also sits on the Board of Digi.Com Berhad.

Tan Sri Leo Moggie holds a Master of Arts in History from University of Otago, New Zealand and a Masters in Business Administration from Pennsylvania State University, USA.

He held several senior ministerial posts both at the federal and state levels prior to his appointment as Chairman of Tenaga Nasional Berhad. Tan Sri Leo Moggie was the former Minister of Energy, Communications and Multimedia (1998–2004), Minister of Works (1989–1995), Minister of Energy, Telecommunications and Posts (1978–1989 and 1995-1998) in the Federal Cabinet and Minister of Local Government (1977–1978) and Minister of Welfare Services (1976–1977) in the State Government of Sarawak.

He began his career as a Civil Servant and held various positions in the Sarawak State Civil Service from 1966 to 1974. He was also a member of Council Negeri Sarawak (1974–1978) and a member of Parliament (1974–2004).

Tan Sri Leo Moggie attended all the 17 Board Meetings held in the Financial Year.


Non-Independent Executive Director

Dato’ Sri Che Khalib bin Mohamad Noh, 42 years of age and a Malaysian, was appointed as a Non-Independent Executive Director of Tenaga Nasional Berhad on 1 July 2004. He sits on the Board Disciplinary Committee.

He is a Fellow of the Association of Chartered Certified Accountants (United Kingdom) and also a member of the Malaysian Institute of Accountants.

Dato’ Sri Che Khalib has held several key positions in the private sector. He started his career with Messrs Ernst & Young and later joined Bumiputra Merchant Bankers Berhad. Between 1992 and 1999, he served in several companies within Renong Group, including Projek Lebuhraya Utara-Selatan, HBN Management Services Sdn. Bhd., Renong Overseas Corporation Sdn. Bhd. and Marak Unggul Sdn. Bhd., the consortium company responsible for the management of Keretapi Tanah Melayu Berhad. In June 1999, he joined Ranhill Utilities Berhad as the Chief Executive Officer. He was the Managing Director and Chief Executive Officer of KUB Malaysia Berhad prior to his appointment as President/Chief Executive Officer of Tenaga Nasional Berhad.

Prior to joining Tenaga Nasional Berhad, Dato’ Sri Che Khalib served as a member of the Board and Executive Committee of Khazanah Nasional Berhad from 2000 till 2004. He also served as Board member on several of the United Engineers Malaysia Berhad Group of Companies and Bank Industri & Teknologi Malaysia Berhad.

He attended all the 17 Board Meetings held in the Financial Year.



DATO’ PUTEH RUKIAH BINTI ABD MAJIDNon-Independent Non-Executive Director

Dato’ Puteh Rukiah binti Abd Majid, 54 years of age and a Malaysian, was appointed as Non-Independent Non-Executive Director of Tenaga Nasional Berhad on 13 September 2006. She is the Chairman of Board Tender Committee and a member of the Board Disciplinary Committee.

She is a holder of a Bachelor of Economics (Hons) from University Malaya, Malaysia and Masters (Economy) from Western Michigan University, USA.

She has held various posts in the Government such as the Deputy Under Secretary, Minister of Finance (Incorporated), Privatisation and Public Enterprise Division (2000 – 2004) and later as Under Secretary, Investment, Minister of Finance (Incorporated) and Privatisation Division (2004 – August 2006). At present, she is the Deputy Secretary General (Systems and Controls), Ministry of Finance.

She sits on the Boards of Perbadanan Usahawan Nasional Berhad, Pengurusan Aset Air Berhad, Malaysia Airlines System Berhad (as an Alternate Director), Penerbangan Malaysia Berhad and Pelaburan Hartanah Bumiputera Berhad.

She attended 15 out of the 17 Board Meetings held in the Financial Year.

MOHAMMAD ZAINAL BIN SHAARINon-Independent Non-Executive Director

Mohammad Zainal bin Shaari, 44 years of age and a Malaysian. He was appointed as Non-Independent Non-Executive Director of Tenaga Nasional Berhad on 31 March 2007. He sits on the Board Tender Committee, Board Audit Committee, Board Finance & Investment Committee and Board Nomination & Remuneration Committee.

Mohammad Zainal is a Fellow of the Institute of Chartered Accountants in England & Wales and the Association of Chartered Certified Accountants (ACCA) of the United Kingdom. He is also a member of the Malaysian Institute of Accountants and the Malaysian Institute of Certified Public Accountants.

He has extensive experience in the field of accounting and has held various positions in a Public Accounting Firm in the United Kingdom (1984-1990), PricewaterhouseCoopers (1990-2002) and BinaFikir Sdn. Bhd. (January 2003-October 2004). Currently, he is an Executive Director/Chief Operating Officer of Khazanah Nasional Berhad.

He is also a Director of Proton Holdings Berhad and serves as a member of its Board Audit Committee. On 1 September 2006, he was appointed to be a member of the Financial Reporting Foundation.

Mohammad Zainal has attended 5 out of the 7 Board Meetings held in the Financial Year since his appointment on 31 March 2007.



TAN SRI DATO’ LAU YIN PIN @ LAU YEN BENGSenior Independent Non- Executive Director

Tan Sri Dato’ Lau Yin Pin @ Lau Yen Beng, 58 years of age and a Malaysian, is the Senior Independent Non- Executive Director of Tenaga Nasional Berhad. He chairs the Board Audit Committee and sits on the Board Tender Committee.

He is a Chartered Accountant of the Malaysian Institute of Accountants (MIA) since 1979, a Fellow Member of the Chartered Association of Certified Accountants (ACCA), United Kingdom since 1981 and also a graduate of the Institute of Chartered Secretaries and Administrators (ICSA), United Kingdom. He obtained his Diploma in Commerce (with Distinction), from Kolej Tunku Abdul Rahman.

He is the Chairman of Star Publications (Malaysia) Berhad and a Director of YTL Power International Berhad and Nanyang Press Holdings Bhd.

He attended 16 out of the 17 Board Meetings held in the Financial Year.

TAN SRI DATO’ HARI NARAYANAN A/L GOVINDASAMY

Independent Non- Executive Director

Tan Sri Dato’ Hari Narayanan, 57 years of age and a Malaysian, is an Independent Non-Executive Director of Tenaga Nasional Berhad. He was appointed to the Board of Tenaga Nasional Berhad on 1 March 1995. He is a member of the Board Audit Committee and Board Nomination & Remuneration Committee.

Tan Sri Dato’ Hari Narayanan’s directorships in other public companies are S P Setia Berhad and Puncak Niaga Holdings Berhad. He also sits on the board of Lembaga Lebuhraya Malaysia (The Malaysian Highway Authority).

He holds a Bachelor degree in Electrical and Electronics Engineering from the University of Northumbria, England.

He has vast experience in the field of electrical and electronics engineering and has held key positions at Inchcape Berhad and Tamco Cutler-Hammer Sdn. Bhd. He is currently the Chairman of Noblemax Resources Sdn. Bhd., Chairman of IEV Group Sdn. Bhd., Deputy Chairman of Emrail Sdn. Bhd., Deputy Chairman of Leighton Contractors (M) Sdn. Bhd. and Director of several other private companies.

He has attended 16 out of the 17 Board Meetings held in the Financial Year.


DATO’ ZAINAL ABIDIN BIN PUTIHIndependent Non- Executive Director

Dato’ Zainal Abidin bin Putih, 61 years of age and a Malaysian. He was appointed as Independent Non- Executive Director of Tenaga Nasional Berhad on 1 May 2003. He serves as a member of the Board Audit Committee as well as the Board Finance & Investment Committee.

He is presently the Chairman of the Malaysian Accounting Standards Board (MASB), Mobile Money International Sdn. Bhd. and a Trustee of IJN Foundation.

He is a qualified Chartered Accountant from the England and Wales Institute. He has extensive experience in Public Accounting Practice and has held various positions such as Partner, Executive Director, Country Managing Partner and Chairman in the firm of Hanafiah Raslan & Mohamed , which merged with Ernst & Young in 2002.

He was also the past Chairman of Mentakab Rubber Company Berhad, Pengurusan Danaharta Nasional Berhad, a past President of Malaysian Institute of Certified Public Accountant (MICPA), a past member of Multimedia & Communication Commission of Malaysia and a past Advisor to Ernst & Young Malaysia.

He also sits on the Board of Bumiputra-Commerce Holdings Berhad, ESSO Malaysia Berhad, CIMB Investment Bank Berhad and CIMB Bank Berhad.

Dato’ Zainal Abidin bin Putih attended 13 out of the 17 Board Meetings held in the Financial Year.

DATUK MOHD ZAID BIN IBRAHIMNon-Independent Non-Executive Director

Datuk Mohd Zaid bin Ibrahim, 56 years of age and a Malaysian, was appointed as a Non-Independent Non-Executive Director of Tenaga Nasional Berhad on 15 June 2004. He chairs the Board Disciplinary Committee and a member of Board Finance & Investment Committee.

He has wide and extensive experience in legal matters which covers corporate, administrative, constitutional, construction, financing and commercial law. He has served as an advocate and solicitor of the High Court of Malaya and as a Notary Public. Datuk Mohd Zaid is also the Chairman of Messrs. Zaid Ibrahim & Co.

He is a qualified Barrister-at-Law from the Inner Temple, United Kingdom and a holder of Bachelor of Laws (Hons) from University of London, United Kingdom.

Datuk Mohd Zaid attended 14 out of the 17 Board Meetings held in the Financial Year.



DATO’ FUAD BIN JAAFARIndependent Non-Executive Director

Dato’ Fuad bin Jaafar, 64 years of age and a Malaysian, was appointed as Independent Non-Executive Director of Tenaga Nasional Berhad on 15 March 2007. He sits on the Board Tender Committee, Board Disciplinary Committee and Board Nomination & Remuneration Committee.

He is a holder of a Diploma in Technology from Brighton University, United Kingdom.

He has served in various capacities during his tenure with Tenaga Nasional Berhad holding positions such as Assistant Distribution Engineer, Senior District Manager, Construction Engineer, Assistant Senior Construction Engineer, Senior Construction Engineer, Deputy Chief Engineer/Assistant General Manager and Deputy General Manager. In January 1994, Dato’ Fuad bin Jaafar became the General Manager for Transmission Division and later became the Senior General Manager for Energy Supply. On 4 September 1997, he was appointed as TNB’s Chief Operating Officer and Executive Director and subsequently on 16 October 2000 he was appointed as the President/Chief Executive Officer of Tenaga Nasional Berhad.

He attended all the 8 Board Meetings held in the Financial Year since his appointment on 15 March 2007.

DATUK ZALEKHA BINTI HASSANNon-Independent Non-Executive Director(Alternate Director to Dato’ Puteh Rukiah

binti Abd Majid)

Datuk Zalekha binti Hassan, 54 years of age and a Malaysian. She was appointed as the Alternate Director to Dato’ Puteh Rukiah binti Abd Majid on 13 September 2006.

She is a holder of Bachelor of Arts (Hons) from University of Malaya, Malaysia.

She has held various key positions in the civil service among others, as Deputy Under Secretary in the Government Procurement Management of the Ministry of Finance, Senior Assistant Director with the Budget Division of the Ministry of Finance, Principal Assistant Secretary with the Ministry of National Unity and Community Development, Principal Assistant Secretary with the Ministry of Welfare, Principal Assistant Secretary with the Public Services Department, Assistant Secretary with the Ministry of Health and Assistant Director with the Public Services Department. She is currently the Under Secretary for the Government Procurement Management Division, Ministry of Finance.

She also sits on the Board of Konsortium Baja Nasional Berhad.

Datuk Zalekha attended 2 out of 2 Board Meetings held in the Financial Year on behalf of Dato’ Puteh Rukiah binti Abd Majid.



The Board Audit Committee (BAC) was established on 9 December 1990 by the Board of Directors, to assist them to carry out their responsibilities. The BAC is guided by their Terms of Reference which is set out in pages 94 to 103 of the Annual Report.

Membership And Meetings The details of the BAC members and the number of meetings which they attended during the financial year were as follows:

No. NameStatus of

DirectorshipIndependent

No. of Meetings Attended

1.Tan Sri Dato’ Lau Yin Pin @Lau Yen Beng (Chairman)

Non-Executive Director

Yes 17/17

2.Tan Sri Dato’ Hari Narayanan a/l Govindasamy


Yes 16/17

3. Dato’ Zainal Abidin bin PutihNon-Executive Director

Yes 17/17

4.Encik Mohammad Zainal bin Shaari


No 13/17

On 1 April 2007, Encik Mohammad Zainal bin Shaari who was previously an alternate director, was appointed as a member of the BAC to replace Dato’ Azman bin Mokhtar who retired on 31 March 2007.

According to the BAC’s Terms of Reference, the Committee shall convene meetings as and when required, and at least six (6) times during the financial year. The Committee met seventeen (17) times, and five (5) of the meetings were held at station offices. The meetings at the station offices enabled the BAC members and operating management to interact and facilitated feedback to improve systems and performance.

The Chief Internal Auditor, and Company Secretary who is also the secretary to the BAC, were in attendance during the meetings. The President/Chief Executive Officer was present during the meetings at the invitation of the BAC to provide feedback on strategic and operational matters, and also expedite the implementation and monitoring of corrective actions by operating management. Officers of the Company were also invited to attend the meetings on the matters requiring their attention, feedback and corrective actions.

The BAC Chairman submits a report on matters deliberated to the Board of Directors after each BAC meeting.

Board Audit CommitteeReport


SUMMARY OF ACTIVITIES OF THE BOARD AUDIT COMMITTEE

A summary of the activities performed by the BAC during the financial year is set out below.

Risk Management

• Reviewed the adequacy of the Group’s risk management system for identifying and managing the Group’s risks.

• Reviewed the Group’s Bi-annual Strategic and Operating Risk Profiles, and the activities undertaken by the Enterprise Wide Risk Management Department to promote and improve risk management awareness and processes.

• Reviewed revisions made to the Enterprise Wide Risk Management Policy to extend the scope of risk management activities and enhance accountability over risk management processes.

Internal Audit

• Reviewed and approved Group Internal Audit (GIA)’s Budget and Annual Audit Plan to ensure adequacy of resources and coverage on auditable entities with significant and high risks.

• Reviewed internal audit reports issued by GIA and external parties on the effectiveness and adequacy of risk management, operational, compliance and governance processes.

• Reviewed the adequacy and effectiveness of corrective actions taken by management on all significant matters raised.

• Reviewed the results of ad-hoc investigations performed and confirmed that appropriate actions are taken to correct the weaknesses.

• Reviewed and approved the revised GIA Charter which was updated to incorporate professional practices and standards.

• Reviewed the performance of the GIA Department.

External Audit

• Reviewed and approved the External Audit Plan and the scope for the annual audit.

• Deliberated and reported the results of the annual audit to the Board of Directors.

• Recommended to the Board of Directors the appointment and remuneration of the Group External Auditor.

• Met with the Group External Auditor without the presence of management to discuss any matters that they may wish to present.

Financial Results

• Reviewed the Quarterly and Annual Financial statements of the Company and Group including announcements, and recommended them to the Board for their approval.

Related Party Transactions

• Reviewed the system for identifying, monitoring and disclosing related party transactions for TNB and its subsidiaries.

Annual Reporting

• Reviewed and recommended the Statement on Corporate Governance, Statement on Internal Control, Board Audit Committee Report and Circular to Shareholders on Related Party Transactions to the Board for approval.

GROUP INTERNAL AUDIT

The internal audit function of the Group is carried out by the GIA Department. GIA is independent and reports directly to the BAC.

GIA provides independent, objective assurance on areas of operations reviewed, and advice on best practices that will improve and add value to the Group.

Board Audit Committee Report


Board Audit Committee Report

A systematic and disciplined approach is adopted to evaluate the adequacy and effectiveness of the risk management, financial, operational, compliance and governance processes. Internal audit activities are aligned to the strategic plan/objectives of the company. A risk-based methodology is adopted to ensure that the relevant controls addressing risks are reviewed regularly.

During the Financial Year, a total of 45 reports covering 109 assignments were issued. The areas of coverage includes generation, transmission, distribution, procurement, projects, finance, human resource, logistics, information and communication technology, investments in subsidiaries and risk management.

The reports issued provide independent and objective assessment of the following:

• Existence, effectiveness and adequacy of the internal control systems to manage operations and safeguard the Group’s assets.

• Adequacy and effectiveness of the risk management operations, governance and compliance functions to manage and anticipate potential risks over key business processes.

The internal audit reports arising from the assignments were issued to management for their response and corrective actions. Deadlines to complete the relevant preventive and corrective actions were also provided. The reports were subsequently tabled to the BAC for their deliberation. Management staff was present during the deliberation of the reports to ensure that they undertake the responsibility of carrying out preventive and corrective actions on the weaknesses reported.

Tan Sri Dato’ Lau Yin Pin @ Lau Yen BengChairmanBoard Audit CommitteeTenaga Nasional Berhad(Senior Independent Non-Executive Director)


Terms Of Reference Of The Board Audit Committee

1. CONSTITUTION 1.1 The Board of Directors of Tenaga Nasional Berhad (TNB), in accordance with Article 146 of the

Memorandum and Articles of Association of TNB, has established a Committee of the Board, known as the Board Audit Committee (BAC), vide Minute No. 39/90 on 9 October 1990.

1.2 The function and authority of the BAC extends to TNB and all its subsidiaries, joint ventures and associates where management responsibility is vested in TNB or subsidiaries of TNB (collectively referred to as the Group).

2. COMPOSITION OF THE COMMITTEE 2.1 The members of the BAC shall be appointed by the Board of Directors of TNB and shall consist of

not less than three (3) members, the majority of whom shall be independent in accordance with the definition in Bursa Malaysia Listing Requirements.

2.2 Where the members for any reason are reduced to less than three (3), that 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.

2.3 At least one (1) member of the Committee must meet the criteria set by the Bursa Malaysia Listing Requirements, i.e.:-

i) must be a member of the Malaysian Institute of Accountants; or

ii) if he/she is not a member of the Malaysian Institute of Accountants; he must have at least three (3) years working experience, and:

a) he/she must have passed the examinations specified in Part 1 of the 1st Schedule of the Accountants Act 1967; or

b) he/she must be a member of one of the associations of accountants specified in Part II of the 1st Schedule of the Accountants Act 1967.

2.4 The Board shall elect a Chairman from the Committee who shall be an independent director as set out in the Bursa Malaysia Listing Requirements.

2.5 All members shall hold office only for as long as they serve as directors of TNB.

2.6 No alternate Directors shall be appointed to the BAC.


Terms Of Reference Of The Board Audit Committee

3. CHAIRMAN OF THE COMMITTEE 3.1 The following are the main duties and responsibilities of the Chairman of the Committee:

3.1.1 to steer the Committee to achieve its objectives;

3.1.2 to provide leadership to the Committee and ensure proper flow of information to the Committee, review adequacy and timing of documentation;

3.1.3 to provide a reasonable time for discussion at the Committee meetings. Organise and present the agenda for Committee meetings based on input from Members and ensure that all relevant issues are on the agenda. In addition, the Chairman should encourage a healthy level of skepticism and independence;

3.1.4 to ensure that consensus is reached on every Committee resolution and where considered necessary, call for a vote and the decision will be made by simple majority. Dissenting opinions should be captured;

3.1.5 to manage the process and working of the Committee and ensure that the Committee discharges its responsibilities;

3.1.6 to ensure that all members participate in the discussion to enable effective decisions to be made; and

3.1.7 the Chairman of the BAC shall be available to answer questions about the Committee’s work at the Annual General Meeting of the Company.

4. COMMITTEE MEMBERS 4.1 Each Committee Member is expected to:

4.1.1 provide independent opinions to the factfinding, analysis and decision making process of the Committee, based on their experience and knowledge;

4.1.2 consider viewpoints of the other committee members; and make decisions and recommendations for the best interest of the Group;

4.1.3 keep abreast of the latest corporate governance guidelines in relation to the Committee and the Board as a whole; and

4.1.4 continuously seek out best practices in terms of the processes utilised by the Committee, following which these should be discussed with the rest of the Committee for possible adoption.

5. OBJECTIVES OF THE COMMITTEE

The objectives of the Committee are:

5.1 to ensure transparency, integrity and accountability in the Group’s activities so as to safeguard the rights and interests of the shareholders;

5.2 to provide assistance to the Board in fulfilling its fiduciary responsibilities relating to corporate accounting and reporting practices;

5.3 to improve the Group’s business efficiency, the quality of the accounting and audit function and to strengthen public confidence in the Group’s reported financial results;


5.4 to maintain, through regularly scheduled meetings, a direct line of communication between the Board and the External and Internal Auditors;

5.5 to ensure the independence of the external and internal audit functions; and

5.6 to create a climate of discipline and control which will reduce the opportunity for fraud.

6. AUTHORITY OF THE COMMITTEE The Committee is authorised by the Board to:

6.1 investigate any activity within its Terms of Reference; or as directed by the Board of Directors;

6.2 determine and obtain the resources required to perform its duties, including approving the budget for the external and internal audit functions;

6.3 have full and unrestricted access to all employees, the Group’s properties and works, to all books, accounts, records and other information of the Group in whatever form;

6.4 have direct communication channels with external auditors and person(s) carrying out the internal audit function or activity for the Group;

6.5 direct the Internal Audit Function in the Group;

6.6 approve the appointment of the Head of Internal Audit;

6.7 engage independent advisers and to secure the attendance of outsiders with relevant experience and expertise if it considers this necessary; and

6.8 to review the adequacy of the structure and Terms of Reference of the Board Committees, including the BAC.

7. FUNCTIONS OF THE COMMITTEE

The functions and responsibilities are as follows:

7.1 Corporate Financial Reporting

7.1.1 To review and recommend acceptance or otherwise of accounting policies, principles and practices.

7.1.2 To review the quarterly results and annual financial statements of the Company and Group before submission to the Board. The review should focus primarily on:

i. any changes in existing or implementation of new accounting policies;

ii. major judgement areas, significant and unusual events;

iii. significant adjustments resulting from audit;

iv. the going concern assumptions;

v. compliance with accounting standards; and

vi. compliance with Bursa Malaysia Listing Requirements and other legal and statutory requirements.

7.1.3 To review with management and the external auditors, the results of the audit including any difficulties encountered.

Terms Of Reference Board Audit Comittee Report


7.2 Enterprise-Wide Risk Management

7.2.1 To review the adequacy of and to provide independent assurance to the Board of the effectiveness of risk management functions in the TNB Group.

7.2.2 To ensure that the principles and requirements of managing risk are consistently adopted throughout the TNB Group.

7.2.3 To deliberate on the key risk issues highlighted by Group Risk Management Committee in their reports to BAC.

7.3 Internal Control

7.3.1 To assess the quality and effectiveness of the systems of internal control and the efficiency of the Group’s operations.

7.3.2 To review the findings on internal control in the Group by internal and external auditors.

7.3.3 To review and approve the Statement on Internal Control for the Annual Report as required under Bursa Malaysia Listing Requirements.

7.4 Internal Audit

7.4.1 To approve the Corporate Audit Charters of internal audit functions in the Group.

7.4.2 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 organisational structure, resources, budgets and qualifications of the internal audit personnel.

7.4.3 To review internal audit reports and management’s response and actions taken in respect of these. Where actions are not taken within an adequate time frame by management, the BAC will report the matter to the Board.

7.4.4 To review the adequacy of internal audit plans and the scope of audits, and ensure that the internal audit functions are carried out without any hindrance.

7.4.5 To appraise the performance of Head of Internal Audit.

7.4.6 To be informed of resignations and transfers of senior internal audit staff and provide resigning/transferred staff an opportunity to express their views.

7.4.7 To direct any special investigation to be carried out by Internal Audit.

7.5 External Audit

7.5.1 To nominate the External Auditors together with such other functions as may be agreed to by the Board and recommend for approval of the Board the external audit fee, and consider any questions of resignation or termination.

7.5.2 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.

7.5.3 To review external audit plans and scope of work.

7.5.4 To meet the external auditors at least twice a year to discuss problems and reservations arising out of external audits and any matters the auditors may wish to discuss, in the absence of management, Executive Directors or non-independent Directors where necessary.



7.6 Corporate Governance

7.6.1 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 noncompliance.

7.6.2 To review the findings of any examinations by regulatory authorities.

7.6.3 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.

7.6.4 To review and approve the Statement of Corporate Governance for the Annual Report as required under Bursa Malaysia Listing Requirements.

7.6.5 To review the investor relations programme and shareholder communications policy for the company.

7.6.6 To examine instances and matters that may have compromised the principles of corporate governance and report back to the Board.

7.6.7 To develop and regularly review TNB’s Code of Corporate Governance and Business Ethics.

7.6.8 Where the BAC is of the view that a matter reported by it to the Board has not been satisfactorily resolved, resulting in a breach of Bursa Malaysia Listing Requirements, the BAC must promptly report such matters to Bursa Malaysia.

8. COMMITTEE MEETINGS 8.1 The Committee shall convene meetings as and when required, and at least six (6) times during the

financial year of TNB.

8.2 The number of Committee 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.

8.3 The Chairman of the Committee, 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 Committee by giving reasonable notice. It shall not be necessary to give notice of a Committee meeting to any member for the time being absent from Malaysia.

8.4 No business shall be transacted at any meeting of the Committee unless a quorum is present. The quorum for each meeting shall be three (3) members.

8.5 The Chairman of the Committee shall chair the Committee meetings and in his absence, the members present shall elect one amongst themselves to be the Chairman of the meeting.

8.6 In appropriate circumstances, the Committee may deal with matters by way of circular reports and resolution in lieu of convening a formal meeting.

8.7 Officers of the Group or others as necessary may be invited to attend meetings where the Committee considers their presence necessary.

8.8 All recommendations of the Committee shall be submitted to the Board for approval.



8.9 A Committee member shall excuse himself/herself from the meeting during discussions or deliberations of any matter which 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 Committee has the right to appoint another Director(s), which meets the membership criteria.

8.10 The Committee, through its Chairman, shall report to the Board after each meeting.

8.11 Subject to the provisions of this Terms of Reference and Memorandum and Articles of Association of TNB, the Committee shall establish its own procedures for meetings.

9. SECRETARY OF THE COMMITTEE

9.1 The Secretary of the Committee shall be the Company Secretary.

9.2 The Secretary shall draw up an agenda for each meeting, in consultation with the Chairman of the Committee. The Agenda shall be sent to all members of the Committee and the Head of Internal Audit at least three (3) working days before each meeting together with the relevant papers.

9.3 The Secretary shall promptly prepare the written minutes of the meeting and distribute it to each member. The minutes of the Committee meeting shall be confirmed and signed by the Chairman of the meeting at the next succeeding meeting.

9.4 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.

10. DISCLOSURE

10.1 The Committee shall assist the Board in making disclosures concerning the activities of the Committee, in the Report of the Board Audit Committee, to be issued in the Annual Report.

10.2 The Board requires all Directors to submit a Disclosure of Interest to avoid any conflict between their personal interests and the interests of the Company. In the event of a conflict, either perceived or actual, this Disclosure of Interest shall be submitted to the Chairman of the Committee with a copy to the Company Secretary.

11. REVISION OF THE TERMS OF REFERENCE

11.1 Any revision or amendment to the Terms of Reference, as proposed by the Committee or any third party, shall be presented to the Board for its approval.

11.2 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.



BOARD RESPONSIBILITY

The Board of Directors (Board) is responsible for Tenaga Nasional Berhad’s Group (“the Group”) system of internal control. The system is designed to meet the Group’s business objectives and safeguard shareholders’ investments, the interest of customers, regulators and employees, and the Group’s assets. The internal control system covers the areas of risk management, finance, operations, management information systems and compliance with the relevant laws, regulations, rules, directives and guidelines. The system provides a reasonable but not an absolute assurance, against material misstatement, loss or fraud.

The Board has established an appropriate framework and on-going processes for identifying, evaluating and managing the significant risks faced by the Group. The process is regularly reviewed by the Board and is in accordance with the Statement on Internal Control: Guidance for Directors of Public Listed Companies.

RISK MANAGEMENT

The Board has put in place an Enterprise Wide Risk Management (EWRM) System to identify, assess, treat, report and monitor strategic and operational risks in the Group. This process is one of the Group’s key support processes and forms a part of TNB’s Corporate Office Quality Management System. The Board Audit Committee (BAC) reviews the effectiveness of this system bi-annually and is assisted by management in the review, treatment and monitoring of the Group’s strategic and operating risks. These reviews are presented to the Board for approval. Apart from these, the following activities/initiatives were reviewed by the BAC/Board during the year:

• Revision of the EWRM Policy to extend the applicability of the Policy to include major projects and new business ventures; establish Divisional Risk Management Committees; incorporate the roles and responsibilities of the Group Risk Management Working Committee and risk officers; and identify the approval authority of risk management matters at the management level.

• Development and implementation of the Code of Ethics, Procurement Code of Conduct, Fraud Policy and Whistle Blowing Procedures to promote higher integrity and transparency as well as provide a feedback mechanism to further improve accountability and responsibility.

• Development of an EWRM Training Module by Institut Latihan Sultan Ahmad Shah for the Group’s executive staff to promote risk awareness and improve employees’ risk management skills.

Statement OnInternal Control

�0�Tenaga Nasional Berhad Annual Report 2007

CONTROL STRUCTURES

The Board is committed to maintaining an effective control structure and environment for the proper conduct of the Group’s business operations. The following key internal control structures were implemented to ensure an effective control environment:

Board and Management Committees

To promote corporate governance and transparency, Board and Management Committees (the Committees) were established by the Board. The roles of the Committees are to assist the Board to ensure the effectiveness of the Group’s operations and that the Group’s actions and operations are in accordance with approved strategies, objectives, business plans, and policies. The responsibilities and authority of the Committees are governed by specific terms of reference. These Committees report to the Board and make recommendations for the Board’s approval. The Committees are:

Board Committees• Audit Committee• Tender Committee• Disciplinary Committee• Nomination & Remuneration Committee• Finance & Investment Committee

Management Committees• Group Executive Council Committee• Group Executive Management Committee• Energy Supply Committee• Tender Committees• Group Risk Management Committee

Organisation Structure

The Board has approved a divisional structure for the Group. The divisional structure enables the division heads to focus on their assigned core areas of the Group’s operations or support functions. Additionally, with each division and operating entity, clear lines of accountability and responsibilities have been established. Limits of authority are also established to govern the management of financial and non financial approval limits.

The Board also reviews and refines the effectiveness of the Group and control structures to ensure that the Group’s strategic and operational requirements are met.

Management Information Systems

The Board recognises the importance of the use of information and communication technology to provide efficient and effective control over business operations, and timely and accurate reporting to stakeholders. During the year, the systems and projects undertaken/ embarked on were as follows: • Supervisory Control and Data Acquisition (SCADA)

– Distribution Division. The system enables control and monitoring of the remote supply of electricity for the Distribution Division network from a centralised location. The project covers the whole of Peninsular Malaysia. Presently, the Metro Region SCADA covering Wilayah Persekutuan, Selangor and Petaling Jaya, has been completed.

• Remote Meter Reading System (RMR). This system allows the reading of Large Power Customers’ (LPC) meters at remote locations. The High Voltage LPCs have already been installed with remote meters. The current project is aimed at installing RMR Systems for identified Low Voltage LPCs at the Northern, Central, Eastern and Southern Regions.

• Distribution Network Information Management. This system provides a central engineering database and a suite of applications which can improve the areas of distribution planning, development and design; construction; operations and maintenance; asset management; customer service and workforce efficiency.

• Electronic Banking Facilities. The e-banking platforms, Bizchannel and Maybank2e were implemented to increase the efficiency of the payment processing system with enhanced security features.

• Electronic Document Management System. This system promotes a paperless mode of transmitting, storing and retrieving documents, and is being implemented in phases.

Statement On Internal Control


Group Policies and Procedures

The Board has approved policies and procedures to govern the financial and operational functions of the Group. The objectives of the policies and procedures are to ensure that internal control principles/mechanisms are embedded in operations. This enables the organisation to respond quickly to evolving risks and immediately report on any significant control failure. Amongst others, the policies and procedures implemented are:

• Internal Control Guidelines• Group Financial Policies & Procedures• Safety & Health Policy• Environmental Policy• Investment Policy• Procurement Policy• Fraud Policy• Disciplinary Policy & Procedures• Information & Communication Technology Security

Policy & Codes of Practice• Enterprise Wide Risk Management Policy &

Guidelines• Limits of Authority• Code of Ethics• Procurement Code of Conduct• Whistle Blowing Procedures

Revenue Maximisation Unit (RMU)

During the financial year, the RMU was formed to reinforce the initiative to curb non-technical losses by the Special Engagement Against Losses (SEAL) Teams. RMU’s focus is to improve billing and collection processes especially for theft of electricity cases.

MONITORING & REVIEW

Board Interactions With Management via Board Break Out Sessions

The Board plays an active role in breakout sessions held with management to discuss and review the plans, strategies, performance and risks faced by the Group. During the year, two breakout sessions were conducted. Strategic concerns were deliberated. Strategies and action plans were then reviewed and mandates were given to management by the Board to carry out the agreed strategies and action plans.

Business Planning & Budgeting Review

Business plans, budgets and Key Performance Indicators (KPI)s are aligned to the Group’s 20 Year Strategic Plan, which guide the organisation in achieving its vision of becoming among the leading corporations in energy and related businesses globally.

Based on strategies identified in the Strategic Plan, 5 Year Business Plans and Annual Operation Plans together with KPIs are drawn up and approved by the Board. This is to ensure accountability and achievement of the Group’s objectives and strategies. Strategies are also revised based on the changes in business and operating environments. Inputs from the Board Breakout Sessions are used to develop the Five-Year and Annual Operating Plans. The Five-Year Business Plan and Annual Operating Plan also contain the budget of the Company, to enable the Company to direct its resources toward the achievement of its financial objectives. Effective utilisation of the budget is attained through regular monitoring by management.

Financial and Operational Review

Quarterly financial statements and the Group’s performance are reviewed by the BAC, who subsequently presents them to the Board for their review, consideration and approval. Monthly management accounts containing key financial results, operational performance indicators and budget comparisons are also issued to the Board and senior management to enable them to have regular and updated information of the Group’s performance.



Group Internal Audit (GIA)

The Board established the GIA Department to provide independent assurance on the adequacy of risk management, internal control and governance systems. GIA reports to the BAC. Regular reviews are carried out on the business processes to monitor compliance with the Group’s procedures, assess the effectiveness of internal controls and highlight significant risks impacting the Group. The BAC holds regular meetings to review internal audit reports, management actions and monitor the implementation of preventive and corrective actions for areas with significant and high risks. The scope of coverage by GIA includes the areas of generation, transmission, distribution, procurement and projects, finance, human resource, information and communication technology, investment in subsidiaries, and risk management and compliance.

Annual Audit Plans are presented to the BAC for their review and approval. The review is to ensure adequacy of resources and sufficient coverage on significant and high risk areas. The audits in the Annual Audit Plans are mostly done internally, with some being outsourced or co-sourced. Outsourcing and co-sourcing of internal audits are done to enable adequate coverage and the transfer of knowledge from external consultants through co-sourcing.

CONCLUSION

For the financial year under review, some weaknesses in internal control were identified. However, after due and careful inquiry and based on the information and assurance provided, the Board is satisfied that there were no material losses as a result of weaknesses in the system of internal control, that would require separate disclosure in Tenaga Nasional Berhad’s Annual Report. Nevertheless, for areas requiring attention, measures have been and are being taken to ensure ongoing adequacy and effectiveness of internal controls and to safeguard shareholders’ investments and the Group’s assets.

This statement is made in accordance with the resolution of the Board of Directors dated 25 October 2007.



Group ExecutiveCouncil Committee

The Group Executive Council Committee (GECC) is the highest executive forum of the organisation and plays a key role in reviewing the Group’s policies, strategies and procedures, overall performance of the Group as well as the promotions of executives.

GECC responsibilities range from coordinating business planning strategies and Group wide policies to the monitoring and overseeing of the effective implementation of activities and performance of other Group Management Committees which cover the appointments of members of the respective committees.

During the Financial Year review, the Committee held nine meetings.

1. Dato’ Sri Che Khalib bin Mohamad Noh President / Chief Executive Officer

2. Datuk Wira Md. Sidek bin Ahmad Senior Vice President, Operations & Technical

3. Dato’ Izzaddin Idris Chief Financial Officer

2 1 3


Energy SupplyCommittee

This Committee is the highest management forum having the authority to endorse and approve all power system development plans and proposals for TNB in Peninsular Malaysia, and for SESB in Sabah, prior to submission to the TNB Board. The Committee also makes decisions related to major TNB’s core business operational issues as well as issues related to the expedition of on-going generation, transmission and primary distribution development projects in Peninsular Malaysia.

During the Financial Year under review, the Committee held four meetings.



3. Dato’ Abdul Razak bin Abdul Majid Vice President, Generation

4. Ir. Ab’llah bin Haji Mohd Salleh Vice President, Transmission

5. Dato’ Ir. Aishah binti Dato’ Haji Abdul Rauf Vice President, Distribution

6. Ir. Baharin bin Din Managing Director, Sabah Electricity Sdn. Bhd.

1 2 3 4 5 6


Group ExecutiveManagement Committee

The Group Executive Management Committee (GEMC) provides an avenue for the Senior Management to facilitate better coordination and effective interaction between the Company and its group of companies.

The GEMC is primarily responsible for formulating policies, procedures, strategies and undertaking operational decisions pertaining to operational matters, corporate issues, finance, human resource, corporate affairs and entrepreneur development.

During the Financial Year review, the Committee held 14 meetings.



3. Dato’ Izzaddin Idris Chief Financial Officer

4. Dato’ Abdul Razak bin Abdul Majid Vice President, Generation

5. Dato’ Ir. Aishah binti Dato’ Haji Abdul Rauf Vice President, Distribution

12 3 4 5


Group Executive Management Committee

6. Ir. Ab’llah bin Haji Mohd Salleh Vice President, Transmission

7. Dato’ Nik Ibrahim bin Nik Mohamed Vice President, Investment Management

8. Dato’ Kamaruzzaman bin Jusoh Vice President, Human Resource

9. Dato’ Che Zurina binti Zainul Abidin Vice President, Corporate Services

10. Razali bin Awang Chief Information Officer

678 910


Switchgears Safeguarding Your Assets

��0Tenaga Nasional Berhad Annual Report 2007

Operations Review


Datuk Wira Md Sidek bin AhmadSenior Vice President

(Operations & Technical)

FY2007 was a great year that saw our

28,000 employees living the brand

through our T7 and SE 10/10 strategies.

As a result, our operational and technical

competence elevated and TNB was able to

deliver on our credible KPIs.

“

“


Dato’ Abdul Razak bin MajidVice President

Towards World Class Generation Performance -As our operational performance improves year after year, our confidence grows. We are aligning our resources to expand our services to be among the top players globally. We strive on quality and excellence in every aspect of our operations. We seek to satisfy our customers and all stakeholders using technology through a committed and trained workforce.

“

“

Generation

Operations Review


Generation

Highlights of Achievements:• Best Equivalent Unplanned Outage Factor (EUOF) ever achieved

of 2.15 per cent. Better than the global industry benchmark of four per cent

• Further improvement of the power plant Equivalent Availability Factor (EAF) exceeding 90 per cent and comparable to international benchmarks

• Further improvement in thermal efficiency achieved

• Our engineers are playing a key role in the planning and construction of Shuaibah Independent Water and Power Project in partnership with a group of Malaysian and Saudi Arabian companies

• Four out of six finalists in TNB President’s Quality Award (AKP) this year are from Generation Division power stations

• All power stations and Generation Division headquarters are MS ISO 9001:2000 certified. All power stations are MS ISO 14001 certified and some stations have won many other national awards e.g. Malaysian Society for Occupational Safety and Health (MSOSH), 5S, Innovative and Creative Circle Convention (ICC Convention), etc


Generation

The Generation Division not only operates and maintains TNB’s portfolio of power plant assets, but it is also involved in procuring and developing new power plant projects and giving utility-related technical services to customers at home and abroad. The Division is one of the three core divisions in TNB being headed by a Vice President (Generation).

Generation Division’s main activity is operating and maintaining six thermal power stations and three major hydroelectric schemes in Peninsular Malaysia. The Division also gives support to the operation and maintenance of two IPPs (a wholly-owned and a majority-owned namely, Sultan Azlan Shah Power Station and Sultan Salahuddin Abdul Aziz Shah Power Station respectively). REMACO Sdn. Bhd., a business

unit under this Division, provides maintenance and workshop services to fulfil the requirements of our generating fleet comprising of conventional thermal, open cycle and combined cycle gas turbines steam turbines and hydroelectric power plants. Currently REMACO is under contract to operate and maintain the power plant owned by TNB Liberty Power Limited of Pakistan, which currently is the only IPP fully owned by TNB overseas. The thermal power stations above use natural gas, coal, or oil as fuel. The Generation Division also provides technical expertise in other power plant ventures undertaken locally and overseas.

For FY2007, the Division’s overall performance can be summarised by the Key Performance Indicators as shown in the chart below: -

EE - Exceeds Expectations

ME - Meets Expectations

NI - Needs Improvement

NI ME EE

NI ME EE

FY07101.6%

FY06104%

FY06

FY07

Sales(%GWh)

98%

98%

90%

90%

NI ME EE

NI ME EE

FY0690.22%

FY0691.15%

FY06

FY07

Availability(%)

86.5%

88%

84%

86%

NI ME EE

NI ME EE

FY063.07%

FY072.14%

FY06

FY07

UnplannedOutage(%)

4.0%

4.0%

6.0%

4.5%

Generation Division Key Performance Indicators FY2007


Generation

Operational Summary

TNB’s total installed capacity remains at 8,416 MW (excluding KEV). It comprises of 6,505 MW thermal and 1,911 MW hydroelectric power plants. With an additional capacity of 2,400 MW from KEV, TNB contributes 56.96 per cent of the total installed capacity in Peninsular Malaysia.

KEV12.72%

IPPs43.04%

TNB44.24%

PAKA5.97%

CBPS4.37%

PGPS3.83%

GLGR2.09%

PJPS3.29%

TJPS3.76%

HYDRO10.05%

MNJG5.97%

The maximum power demand in Peninsular Malaysia for the period under review was 13,620 MW, recorded on 8 August 2007. The year-on-year capacity demand growth rate of 4.85 per cent indicates a rise from last year’s 3.98 per cent. The Division’s total energy sales is 35,973 GWh of the system total sales of 92,144 GWh. With the additional sales of 9,482 GWh from KEV, TNB’s market share is 49.33 per cent.

TNB Fuel Mix (%)

GAS55.84%

COAL30.62%

MEDIUM FUEL OIL(MFO)0.04%

HYDRO30.62%

DISTILLATE0.10%


Generation

Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug

3,133 3,308 3,056 2,760 3,088 2,633 2,958 2,736 2,995 3,820 2,872 3,033

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500TNB

Target

TNB USO - GWh

Overall Generation Market Share by Energy FY07

TNB39.04%

KEV10.29%

IPPs50.67%

MNJG11.94%

PAKA8.04%

CBPS2.32%

PGPS2.34%

GLGR2.13%

PJPS1.02%

TJPS5.98%

HYDRO5.27%

GW

h


Generation

Continued efforts to improve plant thermal efficiency and cost management resulted in further reduction of our generation operating cost. The above cost reduction was achieved in spite of the volatility and surge in the world delivered coal and oil price. The price of natural gas from Petronas, however, remained fixed. Generation from natural gas as fuel contributed to 55.8 per cent of the total energy sent out by Generation Division, followed by coal at 30.6 per cent and hydro at 15.4 per cent. TNB plants’ generation fuel mix for the period under review has not changed compared to the last Financial Year.

After surging past the 90 per cent mark last year, TNB Generation’s Equivalent Availability Factor (EAF) this year improved further from 90.2 per cent last year to 91.2 per cent. All the stations in the Division exceeded 90 per cent EAF except one. Benchmarked against North America Realiability Council (NERC), 10 units operated and maintained by the Division performed better than the median of NERC peer group of 92.06 per cent. The equivalent unplanned outage rates (EUOR) of the same 10 units are also better than the top quartile in comparison with NERC peer group.

Trending of Equivalent Availability Factor

80.0

85.0

90.0

95.0

97 98 99 00 01 02 03 04 05 06 07

100.0

75.0

Financial Year

85.7

83.2

87.6 87.2

83.3

80.4

85.0

81.7

85.6

90.291.2

Perc

enta

ge


TNB’s overall net thermal efficiency rose to 37.58 per cent from the previous year’s 36.15 per cent and against a target of 36.2 per cent. Targets set for the power stations were exceeded by most, thanks to the high output factor of the plants.

Generation

Trends of Equivalent Unplanned Outage Factor

2

4

6

12

FY01

16

0

Financial Year

9.8

FY02 FY03 FY04 FY05 FY06 FY07

8

10

1414.2

9.09.5

6.1

3.1

2.1

THERMAL EFFICIENCY (FY03 - FY07)Thermal Efficiency (%)

32

33

34

36

FY03

38

31

Financial Year

EUO

F (%

)

35

37

FY04 FY05 FY06 FY07

35.4

36.9

36.22

37.58

33.7

Higher plant efficiency is due to higher sales from combined cycle plant and less from OCGT, and availability

EUO

F (%

)


Improvement Initiatives

FY2007 saw the end of TNB’s T7 Programme. In 2007, Generation Division had four key initiatives to deliver, namely:

1. Reduce Equivalent Unplanned Outage Rate2. Optimise Maintenance and Management of Planned Outage3. Project on Time and Within Budget4. Improve Technical Competency of Staff

In summary, Generation Division concluded its T7 Programme with success and contributed to the overall technical performance.

Reduce Equivalent Unplanned Outage Rate (EUOR)

For the Reduce Unplanned Equivalent Outage Rate (EUOR) Initiative, Generation Division achieved EUOR figures of 2.05 per cent for Combined Cycle plants and 1.90 per cent for Coal plants, against the target of four per cent and three per cent for Combined Cycle plants and Coal plants respectively. Generation Division is very proud that all power stations managed to achieve their EUOR target for this Financial Year.

Optimise Maintenance and Management of Planned Outage

For FY2007, Generation Division successfully implemented Reliability Centred Maintenance (RCM) modules in all its power stations with the Risk-Based Inspection (RBI) implementation ongoing. These programmes have already started showing results with planned outage overrun contained at 0.27 per cent and (EAF) improved to 91.2 per cent, both showing improvements over the previous year. The performance is a result of better understanding of the power plants through systematic and detailed discussions amongst experienced engineers and technicians in producing policies on plant failures prevention by the implemention through correct maintenance at the right time on each sub-system and component of the power plant. RCM and RBI not only improve the plant reliability, but have also reduced the maintenance cost considerably.

To enhance RBI and RCM the Division has embarked on another improvement programme by procuring the Generation Plant Management System (GPMS) to be installed in all the power plants and those linked to the Division headquarters. The pilot project was commissioned in Sultan Azlan Shah Power Station, Manjung in January 2007. Phase 2 of the project is currently undertaken to link real time data from all the other power stations to Generation headquarters.

Generation


Generation

Project on Time and Within Budget

Two major projects were ongoing in 2007 – the Cameron Highlands Rehabilitation Project and the PD 2 Combined Cycle Gas Turbine Project. The PD 2 project at Tuanku Jaafar Power Station is to install a 750 MW gas-fired combined cycle plant. It is expected to be completed by December 2008 and currently 85 per cent of the project has been completed. In Cameron Highlands the project is to rehabilitate a 40 year scheme including de-silting of the Ringlet Lake to recover live storage volume. Work is scheduled for completion in December 2008.

Besides the above, new projects are currently being initiated or acquired in this Financial Year. Preliminary engineering work, including detailed Environmental Impact Assessment (EIA) studies are being undertaken at Ulu Jelai 372 MW and Ulu Terengganu 212 MW Hydroelectric Projects. The studies are prerequisite for the final plant configuration and design. The projects are due for completion in the year 2013-2014. Generation Division, through REMACO, successfully won the bid for a 300 MW coal-fired conventional power plant in Sabah, against stiff competition from well established organisations. It is the first power plant project in Malaysia offered through a public tender exercise.

The Division also provides the technical lead in the development of Shuaibah Independent Water and Power Project in Saudi Arabia. The project is a joint venture between a few Malaysian companies with local Saudi Arabian partners.

Improve Technical Competency of Staff

For FY2007, Generation Division had achieved an average of 10.3 training man-days per staff per year. The competency measurement done for non-executives showed a competency level of 89.18 per cent against the target of 87 per cent. This capacity and technical competency building initiatives are to ensure that staff meets the competency requirement of theirs job. Plant operation and maintenance staff clocked a minimum of seven training man-days in the year, while all categories of staff clocked a minimum of three. In the effort to improve plant reliability, RM450,000.00 was spent to train 300 power station personnel on RCM. Staff members were also sent to courses organised by SIRIM, NIOSH and NPC for other skills. Emphasis is given on mandatory job skills, training and high-impact training for specialist groups.

Generation Division is very proud of its T7 success, indicating that continuous efforts at improvement are bearing results, and is confident that new initiatives to be undertaken in the SE 10/10 Programme will lead to a world class performance.


Generation

Quality Initiatives - Awards and Achievements

Generation Division has been the trend setter in the AKP initiative since it was introduced in 2001. This year, again four out of the six finalists selected for FY2007 AKP Award were from Generation Division. Led by Putrajaya Power Station with 810 points, on average, Generation Division received 755.31 points for AKP 2007. Eleven out of 12 business units exceeded the 700 points mark to qualify as “sportsmen” or as “professional sportsmen” status (above 800 points).

Generation Division endeavours to create employees who are multi-skilled. Therefore, activities such as 5S and Work Improvement Teams are seriously implemented. Tuanku Jaafar Power Station won National 5S Competition (Open Category) in November 2006. Sultan Iskandar Power Station received their 5S Certification from the National Productivity Corporation in Mac 2007. In our quest to achieve ‘World Class Generation Performance’, Generation Division has implemented various Total Quality Management (TQM) initiatives such as MS ISO 9001:2000, MS ISO 14001 (Environment) and OHSAS 18001 (Safety). All power stations have obtained MS ISO 9001:2000 and MS ISO 14001. Besides this, two power stations have received OHSAS 18001 led by Putrajaya Power Station in year 2000 followed by Sultan Mahmud Power Station, Kenyir in 2001. The Generation Division headquarters got its MS ISO 9001:2000 certification last year.

Other awards won by various power stations and units within the Divisions are as follows:

2006 National Safety and Health Excellence Award• Tuanku Jaafar Power Station• Chenderoh Power Station• Ismail Petra Power Station

2006 National Innovative and Creative Circle (ICC) Convention• P-Power, Sultan Iskandar Power Station: Emas 3 Bintang• EG, Sultan Iskandar Power Station: Emas 3 Bintang• Elegen, Gelugor Power Station: Emas 3 Bintang

Malaysian Society of Occupational Safety and Health Award - 2006• Connaught Bridge Power Station, Tuanku Jaafar Power Station, Putrajaya Power

Station, Sultan Iskandar Power Station: Gold Award Class 2• Gelugor Power Station: Silver Award


Generation

Challenges and Prospects

The electricity demand forecast for Peninsula Malaysia shows a healthy growth of more than five per cent per annum. Generation Division will endeavour to maintain a high level of performance whilst maintaining the least generation cost. Availability of a continuous supply of the normal fossil fuel currently in use by the power plants, as well as their fluctuating prices, will remain a major concern. In the meantime, the Division is fully engaged in the effort to use an optimum energy mix including alternative fuels, especially from renewable sources.

The Division will also focus on expanding the services provided by REMACO i.e. in the field and repair shop services. Appropriate resources will be allocated to facilitate the expansion within the country and regional market. A state of the art workshop is being implemented to provide high quality services.


Ir. Ab’llah bin Haji Mohd SallehVice President

Transmission

Operations Review

Transmission Division aims to be the

region’s leading transmission entity and

the centre of ASEAN Power Grid. All our

strategies are geared towards these

goals and our commitment in providing

a safe, secure and reliable supply of

electricity to the nation

“

“


Transmission

• Maintains single digit System Minutes for two consecutive years.

• Completed major refurbishment works of the KL Region’s assets (switchgears).

• Completed upgrading of the Kinta Valley 66 kV network with 132 kV network.

• Added 2,130 MVA transformer capacity into the system upon completion of 13 substation projects.

• Reduced transmission system losses from 3.02 per cent to 2.32 per cent.

Highlights of Achievements.


Transmission system equipment database is as below:-

Types of Lines Length/Capacity/No.

500 kV Overhead Lines 890 (circuit-km)

275 kV Overhead Lines 6,666 (circuit-km)

132 kV Overhead Lines 10,280 (circuit-km)

Total Overhead Lines Length 17,836 (circuit-km)

275 kV Underground Cable 61 (circuit-km)

132 kV Underground Cable 680 (circuit-km)

Total Underground Cable Length 741 (circuit-km)

Transfomer of 500 kV 6,750 MVA

Transformer of 275 kV 27,273 MVA

Transformer of 132 kV 41,805 MVA

Total Transformer Capacity 75,828 MVA

Substations of 500 kV 5



Total Number of Substation 385

- As of August 2007

Divisional Goals

The Division manages and operates the 132 kV, 275 kV and 500 kV transmission grid of Peninsular Malaysia, known as the National Grid. The National Grid consists of approximately 17,836 circuit-km of overhead transmission lines, 741 circuit-km of underground transmission cables and 385 substations with transformation capacity of 75,828 MVA. During the year under review, 31 power stations, made up of TNB power stations and IPPs, are connected to the grid and maximum electricity demand of the system was recorded at 13,620 MW on 8 August 2007.

The National Grid is interconnected to Thailand’s transmission system operated by Electricity Generating Authority of Thailand (EGAT) in the North via a HVDC interconnection with a transmission capacity of 300 MW and a 132 kV HVAC overhead line with maximum transmission capacity of 90 MW. In the South, the National Grid is connected to Singapore Power’s transmission system at Senoko via two 230 kV submarine cables with a firm transmission capacity of 200 MW.

The National Grid allows electricity generated at various power stations to be transmitted to main intake substations located at load centers. The objective of Transmission is towards “safe, reliable and economic” operation of the Electricity Supply. It plays an important role in ensuring reliable and sustainable electricity supply which is priced competitively as compared with utilities in the Region.

In going forward, the Transmission Division is committed to be the region’s leading transmission entity and the center of ASEAN Power Grid, and therefore all our future efforts are geared towards these goals.

Transmission


Operation Summary

Transmission Division closely aligns its core activities to support the goals and objectives of TNB. High priority was placed on the development of a safe, reliable and economical grid system in line with Transmission’s goal to be a major player in the ASEAN Grid network.

The strategies are as follows:

• Addressing Existing Vulnerabilities To cater for future demand growth and plant-up of new power station, new projects

are being developed. TNB also developed new projects to reinforce transmission lines and substations to enhance supply reliability. In the efforts to ensure the system security, System Operations focuses on system voltage within limits, transmission equipment within limits and security criteria with the used of state-of-the-art on-line real time reliability assessment tools. On the Maintenance side, the Division focuses on condition monitoring technology, vigilant rentice management and replacement of aging equipment.

• Gearing up For Excellence In line with the T7 strategy of Defend our Core, Transmission Division’s immediate

focus would be gearing up for excellence in technical competency, infrastructure, work processes and capabilities. One of the key initiatives towards excellence is the development of an Intelligent Grid Network.

• Exploring Beyond Our Borders Transmission Division intends to explore beyond our borders and participate in regional

markets of ASEAN to improve revenue and to be a leading player in the ASEAN region. Malaysia is well placed to benefit from the ASEAN power grid via participation in the regional power markets. By participating in other regional markets TNB can expand its customer base to include other ASEAN countries.

In the journey to support TNB towards Service Excellence in 2010 (SE 10/10), the Division is implementing two additional initiatives:

• Zero tripping with load loss• Project excellence

The focus in human resource management excellence and managing stakeholder relationships will enhance and complement the efforts in raising the effectiveness of the Division.

Transmission


System Improvements

The Division takes initiatives to ensure that transmission projects are completed on time and within budget. These initiatives include improvement of the procurement approach and practice; improve project specifications and BQ; and ensuring accurate project scoping together with enhanced QA/QC process.

The Chubadak 275 kV substation near Gombak which is part of the Central Area Reinforcement (CAR) Project was completed and commissioned in May 2007. With the CAR Project being close to its completion date of December 2007, it would further strengthen the security of supply around Kuala Lumpur and the Klang Valley.

The 500 kV transmission line that connects the Jimah IPP Coal Fired Power Station to Lenggeng Substation and to Olak Lempit Substation is progressing to be completed by December 2007. A total of 30 projects were fully completed and commissioned during the year in review. Out of these projects, 13 were substation projects that contribute to additional 2,130 MVA transformer capacity in the system.

Improvement are not restricted to the Central region alone. In the North, the Division has upgraded the Kinta Valley 66 kV with the 132 kV system. This is a milestone in the achievement of supply reliability in Perak, yet marking another milestone in Transmission history whereby the whole of 66 kV system is now de-commissioned in the National Grid, with the exception of only one dedicated feeder connected for a particular customer.

Major rehabilitation of the Skudai substation was completed to strengthen the electricity supply in the Southern region which also caters for the development of Wilayah Pembangunan Iskandar.

In the Eastern region, the re-configuration of the Tanah Merah-Kenyir 275 kV transmission line into Kandis would strengthen the electricity supply to Kelantan.

The upgrading of the National Load Despatch Center (NLDC) project has progressed satisfactorily and is scheduled for completion by 2008. Through this project TNB will acquire a state-of-the-art SCADA system and Energy Management System (EMS) to meet the future needs of TNB, providing the technological support for secure operation and the development of an intelligent grid system.

Transmission


Key Performance Indicators

The Transmission Division applied the Balanced Scorecard approach in developing the Key Performance Indicators (KPIs). The Division is pleased to report that all major indicators are healthy.

Technical performance was captured under the Customer and Internal Process perspectives. In addressing the Customer perspective, the Division achieved positive lower indices as against a set of stretched targets. The System Average Interruption Frequency Index (SAIFI) scored 0.16 (namely, number per delivery point) against a target 0.25 – 0.29 whilst the System Average Interruption Index (SAIDI) stood at 14.93 minutes against a target of 20 – 25 minutes.

From the Internal Process perspective, the achievements were the System Average Restoration Index (SARI) at 71 minutes per interruption against 75 – 90 minutes; the Monthly Delay Index (MDI) reduced to 5.99 months from 6.87 months in the last Financial Year; and the System Minutes remained a single digit at 9.34 minutes against the target of 7 – 10 minutes.

However, for System Minutes, it should be noted that for equitable comparison and international benchmark, tripping of 132 kV transformers (which are considered Distribution transformers) and under-frequency tripping due to tripping of large generators usually are not included in the calculation of system minutes. With the exclusion of these two elements, the System Minutes for the 132 kV and above 275 kV transmission systems would be 3.2 minutes and 0.5 minutes respectively.

Other than that, the other two major contributors towards the System Minutes were the total shutdown of one main intake due to fire and failure of the Paper Insulated (PILC) transformer cable tails. The PILC cables are being replaced in phases with XLPE cables.

Min

ute

s

00 01 02 03 04 05 06 07

1920

14

18

79

0.00

5.00

10.00

15.00

20.00

25.00

System Minutes

Financial Year

17

14

Transmission


Achievement of Project T7 The Division’s T7 initiatives, that include enhancement of procurement process, specifications and project scooping, are targeted to improve project delivery. Despite the challenging 254 projects executed during the reporting period, the Division has managed to reduce the project’s Monthly Delay Index (MDI) from 12.74 months in FY2003 to the current 5.99 months.

The implementation of the initiatives which started in Financial Year 2003 and ended in Financial Year 2007, contributed to accumulated cost savings of approximately RM934 million. The savings were RM224 million from management of project specifications, RM129 million from improving asset utilisation and avoided cost of RM581 million in variation orders. Additional cost savings of RM70 million was also achieved in FY2007 from the reduction of transmission system losses.

Transmission

03

Mo

nth

s

0

2

4

6

8

10

12

14

12.74

04 05 06 07

10.35

8.85

6.875.99

Monthly Delay Index

Financial Year

00 01 02 03 04 05 06 07

Min

ute

s

0

10

DP SAIDI (Delivery Point System Average Interruption

Duration Index)

Financial Year

70

42 4538

15

20

30

40

50

60

70

80

27

16

42

00 01 02 03 04 05 06 07

Ilos

0

0.1

DP SAIFI (Delivery Point System Average Interruption

Frequency Index)

Financial Year

0.2

0.3

0.4

0.5

0.6

0.7

0.62

0.160.22

0.290.34

0.39

0.53

0.50


Transmission

Implementation of Process Standardisation Improvement (PSI) The Transmission Division is continuously committed to ensure that excellence in the services provided are sustained through continual improvement efforts, in particular, via the Process Standardisation Improvement (PSI) initiative and MS ISO certification process. The Division maintained its MS ISO 9001:2000 certification for the second year.

Shared Values

The Division is proud to embrace “Gung Ho!” as a culture towards organisational excellence. It emphasises on the importance of shared goals and values; achievement of stretched targets and goals and the power of positive reinforcement. Gung Ho! has become a way of life in Transmission. This is communicated to all levels of the workforce symbolised as ways of the squirrel, beaver and goose. The “Spirit of the Squirrel” ensures the staff know their work is worthwhile, the “Way of the Beaver” ensures the staff are in control of achieving the goal whilst the “Gift of the Goose” ensures the staff are cheering each other on.


Challenges and Prospects

The year under review proved challenging to the Division. During the second quarter of the Financial Year the flood in the southern states affected high voltage installations and the division vigilantly managed the system to supply electricity to parts of the states that were not affected by the flood. Tilted transmission towers were replaced with the Emergency Restoration System’s towers. Flooded high voltage substations were closely monitored for rising water levels that would endanger the operation of the high voltage switchgear.

The Transmission Division has proven that it was able to manage the security of operations and keeping the system healthy whilst catering the major rehabilitation of key substations such as Paka 275 kV and KL East 275 kV. The longest ever gas curtailment period of 50 days starting from August 2007 was successfully managed without any interruption of supply and without resorting to the use of expensive distillate fuel.

Project implementation was not without any problems. Public protests on the transmission line corridor and EMF was among the factors that prevented smooth implementation of project execution, especially for parts of the transmission line route under the CAR project.

In the midst of exploring beyond the Malaysian border and gaining experience in the energy consultancy field, the Transmission Division is actively involved in the Group’s business ventures. The team from the Division plays a leading role in assessing the technical due diligence for the Bidding of the Philippines’ Transco. Utilising its experience in managing PPAs, the Transmission Division was engaged by the Group to finalise the Liberty Power Station upgrading proposal to the Pakistani authority. The improvements incorporated by the Transmission Division in finalising the SESB’s Tuaran PPA has benefited SESB in terms of reduced project cost and tax and fuel savings. Transmission Division was also engaged actively in the technical system studies for the Bakun interconnection.

With the linking of the ASEAN countries’ electricity grids, the Transmission Division is placed in the center of the ASEAN Grid. The High Voltage Direct Current (HVDC) interconnection between Malaysia and Thailand has been fully utilised for the consecutive three years. The same scenario of interconnection and maximising power transactions with other neighbouring countries such as Indonesia would pave the prospect of TNB playing a role as a major player in the region.

Transmission


Human Resource Management

To achieve the main objective of a safe, reliable and economic electricity supply, the Division requires a competent, committed and business-oriented workforce. This was achieved by developing competency-based training plans and implementation. From the TNA/TNI process, training plans were implemented to ensure all level of employees have identified and received appropriate training. Each staff was allocated with five man-days training, and staff were encouraged to work in cross-functional teams either at the Divisional or Group level. Innovation and creativity were channeled via the formation of Work Improvement Teams (WIT).

The Division exercised empowerment in line with the “Way of The Beaver” Gung Ho! principle. Appropriate Authorisation and Competency enable the staff to make decisions in their area of expertise. As an example, the control engineer at the National Load Despatch Center is fully responsible to manage the security of the National Grid. In term of Specialist development, the Division has expanded the post of experts in switchgear, transformer and power system analysis.


Customer Focus

The Division pleased a heavy emphasis on being customer-focused. In fact, it is the major driving force that create the incentives or pressures for change in the Division. At the macro level, the Division’s customers are the electricity supply customers, electricity supply industry players, Generators (IPPs and TNB Generation Division), TNB Distribution Division and the various Stakeholders.

In line with TNB’s effort to meet its customers’ expectations, the Division is committed to ensuring a high standard of supply reliability which can be achieved through improvement of equipment availability and a quick response to transmission equipment tripping. Efforts have been put in place to enhance a healthier maintenance culture via RCM which has changed the maintenance philosophy from time-based to condition-based. Vegetation management has been a key focus for the Division to ensure that tripping caused by vegetation are eliminated thus reducing outages and lowering System Minutes. These efforts have paid off, for two consecutive Financial Years, TNB maintained a single digit transmission System Minutes.

Economic transfer of power from the efficient power plants to load the centers was facilitated with the completion of high capacity transmission lines, namely the Tanjung Bin Power Station-Bukit Batu 500 kV transmission line and the Tuanku Jaafar Power Station-Olak Lempit 1000 MVA 275 kV transmission line. The completion of these two lines, which remove the constraint of bulk power transfer, together with the improvement of system via completion of other projects further improve the system’s load-flow. The transmission system losses have improved to 2.32 per cent as compare to 3.02 per cent in Financial Year 2006. This improvement translates to value creation of approximately RM70 million.

The Malaysian industry requires a very high standard of power quality supply. High-tech industries such as electronics, chemical and cement manufacturing are not condoned to voltage dip, even if it is only for a fraction of a second. The Division has analysed the root cause and found ways to control the frequency of occurrence. Thereupon voltage dips have reduced from thirty numbers in Financial Year 2002 to thirteen in Financial Year 2007, mainly as a result of the 25 initiatives embodied in the SE 10/10.

Customer requirements, expectations and needs are usually obtained during meetings, such as the Project Implementation Committee (PIC) meeting and post-tripping meeting. In addition, customer communications are established through contacts at regular meetings and coordination platforms, such as EGAT(Thailand)/TNB/PLN(Indonesia) Joint Maintenance Cooperation Committee (JMCC), Joint Operation Committee (JOC) and ASEAN Transmission’s Sub-Working Group No.2 – Operation & Maintenance (HAPUA SWG2 – O&M).

Regular pre-arranged dialogues with local authorities, vendors and contractors are also conducted by the Division to acquire customers’ needs and expectations.

The Operations Coordination Committee (OCC) meeting is one of the platforms in obtaining Distribution Division requirements. Transmission participates and supports the TNB Group’s programmes in Exhibitions, Campaigns and Dialogues such as Community Leadership Outreach Programme (CLOP) to disseminate information and to obtain feedback from customers.

The Division utilised the online “Pengurusan Aduan Pelanggan (PAP)” in the TNB Webpage to capture and process customer complaints. The feedback received via customer complaints were translated into actions for improvement by the Division.

Transmission


Transmission


Transmission

Quality Management and Initiatives

The Division supports QCS-WIT (Work Improvement Teams) with 58 teams which involves more than 500 staff that have embarked on 64 projects. During the reporting period the Division held a Quality Convention for the WIT groups to showcase their quality initiatives. Team “Pro Tech” from the Division represented TNB at the National Productivity Centre (NPC) convention, and had received the gold award. For the AKP Award, all 16 business units were assessed. 10 business units had achieved scoring above the 700 marks, putting them in the “sportsman” category whilst six other units remained “ordinary man” with scoring in the range of 600s. The Divisional average improved to 702.07 from 658.47 in the Financial Year 2006. Transmission also implements 5S division-wide and planned for certification in Financial Year 2008.

Awards

Some of the more significant achievements by the Transmission Division staff both at national and international forums are as follows:

• Ir. Sazali P Abdul Karim, a Senior Technical Expert, won a Silver Medal for his design of an analytical software at the 35th International Exhibition Inventions, New Techniques and Products on April 2007 at Geneva, Switzerland. The software identifies the root cause of transmission tripping and analyse protection failure using fault disturbance recorder. His innovation has been trademarked as IPSAZTM and TNB is holding the patent, trademark and copyrights for this innovation.

• En. Shariffudin K Abdullah, Senior Technician Live Line Unit, received 'Anugerah Harapan Tokoh Pekerja Lelaki' for Non-Executive Group of National Level during the Labour Day Celebration (National) at Stadium Putra Bukit Jalil on 5 May 2007.


To SDAO

PULAULANGKAWI

PINANGPULAU

KEDAH

PERAKKELANTAN

TERENGGANU

PAHANG

JOHORE

N. SEMBILAN

MELAKA

SELANGOR

Khlong Ngae(HVDC link)Khlong Ngae(HVDC link)Khlong Ngae(HVDC link)

SNKO

300kV DC line 100km

RSIDBBTG

JJNG

300kV DC line 100km300kV DC line 100km

SJAYSKSP

INTL

DSRU

TRMN

BBDG

MCOP

JTGH

BSPT

PONT

TPCH

YGPG

SGAD

PRJA

PSRI

RNGT

HLNN

KAWA

JTUT

KTRI

GTNG

KULESRYA

KULN

BTAI

BTRKBSTA

KPNG

PCTY

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TMOHSYPS

KLIM

NTBL

BMJM

BTBN

JURU

PRAI

BBRU

GLGR

PFTZ

JENG

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PWGRSPID

GRUN

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BSBU

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KBRU

LMAL

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GBDK

TPAUUMKA

TEWA

KCMT

KGAR

BKTR

KPLSPLPS

CIMA

PAUH

CPNG

KSTR

ASTRMGON

BRKT

GCPD

TJPS

MTNH

PTEKTKMG

PDPS

TJGS

PCOR

SIHY

BGJH

KBRG

KVRT

GTWN

PRGS

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SPNG

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KKTL

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DGUN

PGPP

PAKA

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STNG

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KTIHCUFK

KMAN

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SHELL

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CBPS

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SGRI

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KMTG

BMRH GRIKCEND

UPIALPIA

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BSIA

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KKPG

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TUNI

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GRSK

NASIONALTENAGA

2007 NATIONAL GRID

System Planning, Transmission Division

132 kV Cable

500 kV Overhead Line275 kV Overhead Line

132 kV Overhead Line

HYDROTHERMAL Power Station

INTERNATIONALSEPANG AIRPORT

SELANGOR

PERLIS

PJST

CBJN

SGBT

KSASSRDR(T)

DWGI

KLJT

JMJG

SBSR

KPAR

PKLG

BKPR

BBDG

BBTG

KSGR

RSID

BTRK

BTAI

BSTA

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SLTI

NLAI

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NUNI

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SHAN

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BJTG

KULN

KRWG

KSBG

SDAM

NRWG

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KAWA

BGJH

HMLG

BFLD

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BRGS

MSWK

MOXY

ASMB

PMRN

OLPT

TJGS

BARG RWSS

CBDK


Dato’ Ir. Aishah Binti Dato’ Haji Abdul Rauf Vice President

We strive to improve the technical efficiency

of the system network operations and in

resolving Power Quality concerns with the

aim of providing high quality power supply

to relevant consumers.

“

“

Distribution

Operations Review


Distribution

Highlights of Achievements• TNB’s Call Management Centre (TNB CareLine 15454) - recipient

of the 2007 Gold Award for the Best Emerging Contact Centre (Category GLC) from Customer Relationship Management and Contact Centre Association of Malaysia (CCAM) in partnership with Multimedia Development Corporation (MDEC)

• Collection of backbillings amounting to RM54.07 million for the period from September 2006 until August 2007

• Significant reduction of electricity theft from four per cent in FY2005 to 1.2 per cent currently

• Improvement in System Average Interruption Duration Index (SAIDI) to 83 minutes and Average Collection Period (ACP) to 23 days

• Improved customer service through enhancement of Kedai Tenaga, Call Management Centre and introduction of new payment modes namely Mobile Money

• Introduction of integrated application programme for power breakdown management known as TNB Outage Management System (TOMS)

• Setting up of Iskandar Development Region’s office in Nusa Jaya, Johor

To ensure a secure and reliable supply, TNB is currently undergoing system improvements to strengthen the system and improve supply security in Kuala Lumpur and Selangor. The ongoing RM400 million Central Area Reinforcement Project (CAR) is aimed at upgrading transmission and distribution systems within the Klang Valley.

In addition to that, other system improvement projects which are well underway include the replacement and upgrading of the Perak 22 kV distribution system and the replacement of old distribution switchgears and transformers across the Peninsular. These projects are expected to be completed within the next several years.

The implementation of the RM399 million Supervisory Control and Data Acquisition and Distribution Automation (SCADA/DA) project is expected to improve and reduce SAIDI to that of other world class utilities over the next few years. This is achievable through the system’s ability to identify fault location, isolate the fault and mobilise technical staffs or perform remote switching to restore supply to the customers.


The Network Operations component of the Division plans, designs, constructs, operates and maintains the system that delivers supply of electricity to the customers.

Distribution Division connects all the 6.8 million customers from the National Grid through a distribution system web at voltage levels of

33 kV, 22 kV, 11 kV, 6.6 kV and 415/240 V.

Electricity Distribution NetworkFrom Main Intake (PMU/PPU) to customer points

(From 33 kV down to 240 V)

“To provide timely and continuous supply of electricity and related products and services that meet customers’ expectations, and effectively act as a key agent for national developments, whilst meeting our shareholders’ expectations”

Distribution


Operational Improvements

For Supply Reliability and Quality initiative, we have put in efforts to improve our System Average Interruption Duration Index (SAIDI) by reducing our response time and security of our Distribution system. We have also implemented the Power Quality (PQ) Management system to monitor and improve power quality.

For the initiative to improve “Connect Supply on Time”, TNB Distribution has developed a new project monitoring system called Distribution Project Monitoring System (DPMS) to assist our project personnel to improve their projects implementation and management.

TNB Distribution is constantly striving to improve our material availability and quality. We have constant review with our customers, vendors and project personnel so as to establish close coordination between supply and demand of our materials. Suppliers’ delivery dates are tracked and total number of projects served by TNB Distribution warehouses have been measured to ensure we deliver the best service to the customers.

We have set up a Special Engagement Against Losses (SEAL) team to curb cases of Non-Technical Losses. We are also continuously improving our Distribution system so as to reduce system technical losses.

The achievement of T7 key initiatives are measured by their KPIs and milestones. As at 31 August 2007, Distribution Division has achieved an overall result of 87.5 per cent as against the set target.

Faces behind Customer CareLine 15454


Summary of Operations

Distribution has successfully retained its MS ISO 9001:2000 certification after undergoing the Surveillance Audit by SIRIM QAS International in April 2007. Using its “Continual Improvement Plan” (CIP), Distribution continues its effort to internalise the ISO 9001:2000 framework into its work culture and this framework shall be one of the foundations to help the division achieve Service Excellence by 2010.

Delighting customers is a key priority in TNB. Ordinary Power Customers (OPCs) constitutes the majority of our almost 6.8 million customers which are mainly Malaysian households. Large Power Customers (LPCs), while small in number, account for almost 80 per cent of the total sales of electricity in the country. LPC is also further categorised into the commercial and industrial categories, with the industrial customers being further classified into different industries.

The direct undertaking for the customers’ needs and expectations fall within the jurisdiction of Distribution Division. Hence it is imperative for TNB to identify these needs and expectations through a structured and focused data and information gathering exercise. Feedbacks from customers are channeled through a combination of a structured Customer Satisfaction Index (CSI) survey, feedback forms available at TNB retail outlets – the Kedai Tenaga and surveys done through the Call Management Centre (CMC).

At intervals, the Distribution management meets up with industry leaders and representatives from both Government Agencies like MITI and MIDA and private sectors such as FOMCA, FMM and REHDA. These dialogues and meetings are high-level discussions that also include the participation of the Company’s Top Management members.

Another method of information gathering is through the Power Quality (PQ) survey conducted on all LPCs. This enables TNB to assess the LPC knowledge on PQ, sensitive loads within the premises and requirements for PQ solutions. This is in line with the increasing thrust by the government agencies through MIDA/MITI to woo more high-tech industries to Malaysia where PQ is a critical issue to some of the manufacturing processes.

For the convenience of customers, they are offered a myriad of payment channel options which include payment via Direct Debit, phone banking, Auto-Pay (payment via credit card), payment at various local banking institutions, Mobile Money and many more.

TNB Distribution strives to improve the technical efficiency of the system network operations and in resolving Power Quality concerns with the aim of providing high quality power supply to relevant consumers. A major effort made this year was the SCADA/DA project which reduces restoration time after the occurrence of a fault in the medium voltage (MV) distribution network. The Control Centre is alerted immediately when tripping occurs and especially in remotely monitored substations – it expedites fault detection. Furthermore, remote switching can be performed which will reduce travelling time.

Distribution


Materials availability and quality is of high importance to TNB’s infrastructure development. This has been identified as a key initiative to boost TNB’s service delivery. TNB Distribution is committed to this effort in order to ensure on-time completion of supply projects and longer lifespan of street lighting through better quality products.

The highest TNB management council Executive Management Committee spearheaded by the President/CEO meets regularly to ensure participation and commitment from all Divisions and support services to our customers. Furthermore, at Distribution Division, department heads and executives organise regular meetings, cross functional initiatives, continuous and close monitoring of projects, implement service level agreements between departments to obtain regular feedback on pertinent issues (e.g. poor quality of materials).

A comprehensive Customer Feedback Programme (Sistem Maklumbalas Pelanggan – SMP) has been introduced and upgraded to provide an automated tool in handling customer complaints. In addition, CMC, Electric Eyes and the PRIME Management Programmes are interfacing with SMP to form a structured web-based customer complaint handling system.

PQMS (PQ Monitoring System) meanwhile identify real time power quality incidents on the system and the information is accessible by Distribution nationwide to allow for remedial action as and when it is required. Seminars and dialogues with leaders and representatives of industries, businesses and Government Agencies, also form part of the whole process in handling customer complaints. By managing the three different channels of customer complaints via an in-house developed software called SMP, we are able to track, escalate, monitor, report and evaluate the feedback. Integrating customer information on a single platform is a step towards achieving a Customer Relationship Management (CRM) programme.


To ensure complaints and comments are captured; TNB has developed a customer repository of all its 6.8 million customers and is able to view its customer feedback on a single platform. The customer repository is developed to enhance customers’ experience as they deal with TNB.

The PRIME Management Programme generates a quarterly report that gives management insight into areas of concern that might prevail or explore new initiatives that can be introduced to improve TNB’s products and services.

Meanwhile, conducted on a daily basis through CMC, weekly through media and monthly through SMP, the analysis focuses on complaints received from the general public through various customer touch points.

Distribution Division continuously improves its products and services as well as some of the programmes and activities undertaken over recent months. They include enhanced awareness programme on Power Quality, street lighting, renewable energy and energy efficiency. Apart from the new integrated software developed to make processes between the calls, service and control centre seamless, CMC services have also been experiencing another wave of enhancement as Short Message Service (SMS) is now added onto Distribution’s 15454 TNB CareLine. The SMS service now allows subscribers of Celcom, Maxis and Digi to send information on electricity breakdown and streetlights breakdown report via SMS to 15454. The centralised CMC is also equipped with Interactive Voice Recorder (IVR) and IP Telephony and CTI (integration of computer and the telephone).

As a whole, compilation of performance data is captured through SMP, CMC and PRIME Management Programmes supplemented by information derived from dialogues and regional managers handling of media reports. Information available on the systems where these are recorded and managed accordingly is accessible to all levels of management.

Kedai Tenaga being the customers’ service centre for TNB is currently undergoing service and image enhancement. Ongoing initiatives to boost TNB service levels include the “Service with a Smile” campaign whereby front liners are encouraged to smile when rendering their service. On top of that, counter staff are given new corporate uniforms that will project a professional image. A FAQ booklet has also been developed to assist counter staff in responding to customer enquiries in a proper and consistent manner.

TNB is always striving to provide the highest quality service to its customers. As such, Kedai Tenaga centres are equipped with a new queue system to facilitate better tracking and monitoring of response and waiting time of the counter service.

Distribution


Relationship with Stakeholders

TNB is working closely with the regulatory and the Ministry groups to introduce a Customer Charter that reflects the growing demands of the customers. The Division’s Customer Charter will further strengthen Distribution’s compliance to the terms and conditions of the TNB License (Syarat 15) in fulfilling customer needs, satisfaction and expectation. This is also in line with TNB’s strategic mission to become the preferred power provider by 2010.

TNB has established a Strategic Supplier Relation Management framework in January 2007 with the objective to develop a stable and competitive supplier base that has direct impact on quality products and services procured. This will improve reliability of supply, quality products and services whilst developing competent and capable local suppliers in achieving the national objective. There are three main groups of suppliers:

the Strategic Supplier Programme refers to vendors that supply products and services which are critical to core operations and significant annual spending

the Supplier Management Programme focuses on vendors that have been awarded contracts which contributed to 80 per cent of the total procurement spending

the Bumiputera Vendor Development Programme refers to a special programme to develop Bumiputera companies in medium and high technology industries and knowledge based on the field of manufacturing, works and services.

TNB is also committed to support the national objective of “developing Bumiputera companies”. Tremendous emphasis was given to enhance the development of Bumiputera companies in ensuring quality products and services based on TNB’s requirements. Additionally, as part of the initiative to enhance quality and as a feedback mechanism for vendors, several dialogues and training programmes were conducted throughout the country to educate vendors on recent development and enhancement in TNB’s procurement and quality assurance practice.

Distribution


Distribution

Several initiatives have been undertaken to maintain and enhance existing ties with the media. Among the programmes conducted include goodwill games such as golf and bowling as well as media luncheon.

TNB continues to support the Government through various means. Under the Rural Street Lighting programme administered by the Rural and Federal Ministry, TNB has embarked on Phase III of the programme which sees a total of 26,408 approved units of 150W streetlights to be installed throughout the Peninsular Malaysia. The Phase III project is scheduled for completion in December 2007.

To enhance the quality of life through the provision of electricity supply to remote and rural areas, TNB together with the Rural and Federal Ministry also worked hand-in-hand in implementing the Rural Area Electricity Supply project that is funded by the AAIBE (Akaun Amanah Industri Bekalan Elektrik).

Two Solar Hybrid electrification projects, each in Pulau Kapas and Pulau Perhentian, Terengganu were also completed and launched in June 2007 and September 2007 respectively. These efforts are in line with the Government’s initiative in identification and utilisation of renewable energy sources.


Dato’ Izzaddin Idris Chief Financial Officer

Finance division sees its role as a

business partner to the core business

divisions and to align business strategies

to enhance shareholders’ value

““

Finance

Operations Review


Finance Division

In recent years the Finance Division’s responsibilities has extended beyond the conventional boundaries of financial and management reporting, corporate finance as well as treasury operations, to include investor relations, strategic and financial planning, business development and risk management. The role of the Finance Division has moved away from just being responsible for the traditional accounting aspects of an organisation to a role that has been increasingly linked with the strategic and operational aspects of the business as well as value creation through:-

• Strengthening internal reporting systems and aligning them with the Company’s strategy

• Exploring new business and growth opportunities

• Being stewards of value preservation

• Aligning the Group’s business strategies to enhance shareholder value and improve return on assets

• Promoting discipline in cost management

• Proactively managing investor relations

Highlights of Achievements:• Formulation of a progressive

dividend policy comparable with international peers

• Implementation of Divisional Accounting (DA) within TNB

• Implementation of an Investment Evaluation Framework for Budget Planning

• Establishment of TNB Economic

Council (TNB-ECouncil)

• Excercised the Call Option of the Guaranteed Exchangeable Bonds

thereby improving the gearing position

• Initiation of the process to remove foreign shareholding restrictions

• Signing of the Memorandum of Understanding for the ASEAN Power Grid in August 2007

• Implementation of a comprehensive Policy Manual for the Limits of Authority to enhance the effectiveness of existing internal control systems


The key activities of the Finance Division during the year under review are summarised below:-

Progressive Development of the Malaysian Electricity Supply Industry

During the year under review, the Division submitted a report titled “Recommendations for a Malaysian Power Exchange-Issues and Options” to the Ministry of Energy, Water and Communications. This has been viewed as a proactive effort by TNB to contribute to the progressive development of the electricity supply industry. A paper titled “The National Energy and Electricity Sector: Towards 2020: Energy Policies and Strategies” was presented by TNB’s President and Chief Executive Officer at the 4th National Energy Summit in Kuala Lumpur on 29 August 2007. The paper highlighted several major considerations which need to be addressed for a smooth transition of the industry, if that was the direction. Discussions with Ministry officials and the Energy Commission are still ongoing.

Service Excellence 2010 (SE10/10) - First milestone in TNB’s 20-Year Strategic Plan

Formulated in 2005, the TNB 20-Year Strategic Plan seeks to guide the organisation in achieving its vision of becoming amongst the leading corporations in the energy and related businesses globally. The first destination in this 20-year journey, encapsulated under ‘Service Excellence 2010 (SE 10/10),’ is essentially to build a solid foundation for the future growth and business expansion of the organisation. The primary focus of this SE 10/10 programme is not only to be amongst the best-run corporations in Malaysia, but also in the region. As a testimony to this, TNB aims to achieve the Prime Minister’s Industrial Excellence Award by 2010.

Formulation of Corporate Strategies

With the increasing utilisation of coal as a fuel source for power generation in Peninsular Malaysia, the Division has commissioned and completed a study on the ‘Coal Supply Security Issues and Mitigation Strategies’ during the year under review. The study highlighted the key problems and issues related to coal supply and recommended several additional mitigating actions to address these issues. The recommendations, include amongst others, lobbying for fuel cost pass-through mechanism, identify opportunities to establish long term supplier relationships with credible mine operators or coal suppliers and building internal expertise to manage the coal supply chain.

Finance Division


Prudent Debt Liability Management to Achieve Optimal Capital Leverage and Debt Mix

During the year under review, the Group did not embark on any significant funding exercise as its cash flow from operations and healthy cash position was more than adequate to meet its capital expenditure and debt repayments.

To ensure efficient utilisation of the Group’s capital, TNB has initiated a capital management programme, in line with Government Linked Companies (GLCs) Purple Book Transformation Programme Guidelines. TNB’s capital management program involves establishing an optimum capital structure and capital efficiency (encompassing capital expenditure, working capital and disposal programme for non-core assets).

On 12 September 2006, TNB exercised its call option to exchange the balance outstanding on its 2.625 per cent Guaranteed Exchangeable Bonds with new TNB shares. With the expiry of the right to exchange the bonds, a total of USD398,960,000 nominal value in bonds were exchanged at the close of business on 6 October 2006. As a result of the exchange, the paid-up ordinary share capital of TNB increased by a total of 187,155,756 new TNB shares.

In April 2007, the Board approved and announced a progressive dividend policy for TNB effective from FY2007. Under the newly formulated policy, TNB intends to distribute 40-60 per cent of TNB’s annual free cash flow (defined as operating cash flow less normalised capital expenditure and interest servicing) as dividends. This will enable TNB to provide stable and sustainable dividends to shareholders, while maintaining an efficient capital structure and ensuring sufficient funding for future growth. The new payout structure is comparable with other international peers and meets overall market expectations.

As part of Central Treasury Management’s efforts to manage and reduce TNB’s exposure to foreign exchange risk, TNB entered into a Cross Currency and Interest Rate Swap in October 2006 for a notional amount of JPY 7.7 billion. The swap transaction had the effect of partially reducing TNB’s exposure to losses that may arise from adverse fluctuations on exchange rates and interest rates in relation to the underlying Yen loan.


Financial Ratios Financial Year

2003 2004 2005 2006 2007

Self-Financing Ratio 40:60 25:75 51:49 68:32 118:-18

Effective Weighted Average Cost of Funds* 4.9% 5.3% 5.4% 5.9% 5.9%

Currency Mix (RM:Foreign) 49:51 51:49 50:50 52:48 55:45

Debt Service Cover Ratio 2.0x 1.6x 1.4x 1.8x 2.5x

Debt-Equity (Net of Cash) Ratio 2.11# 1.94# 1.69# 1.19# 0.78#

* reflective of RM equivalent of currency exposure# after FRS 112-Income Taxes and FRS 119-Employee Benefits

1. ROA is computed after adjusting for foreign exchange gain/loss and provision for staff benefits2. SAIDI refers to System Average Interruption Duration Index

KPIs Financial Year

Actual Actual Actual Target Actual

2004 2005 2006 2007 2007

Return on Assets (ROA)1 2.6% 2.2% 3.3% 6.5% 6.3%

Gearing 68.6% 64.9% 58.1% 50.0-55.0% 49.9%

Unplanned Outage Rate (UOR) 9.4% 6.1% 4.7% 4.4% 2.2%

T&D Losses 10.8% 10.5% 11.0% 10.5% 10.0%

Transmission System Minutes (mins) 18.0 14.0 7.3 <7.0 9.3

Distribution SAIDI Minutes (mins) 2 152.0 148.0 101.6 95.0 83.0

For the Financial Year under review, TNB had arguably achieved the targeted Headline KPIs which were stretched, showing a strong commitment to the GLC Transformation efforts of the Government. TNB’s Headline KPIs performance over the past few years are set out below:-

Financial Ratios and Headline KPIs

With the new tariff accorded to TNB effective from June 2006 and together with the various initiatives undertaken for cost management and value creation, there has been a significant improvement in TNB’s financial ratios and Headline Key Performance Indicators (KPIs) as shown below:-

Finance Division


Processes and Procedures to Improve Cash Flow and Effective Cost Management

The year under review saw an overall reduction in the cost of insurance premium payments and brokerage fees, resulting from lower loss ratios for most of the policies, improved perception of TNB’s operational risk by the insurance market and improved risk management through creating awareness and sharing of information/knowledge on risk management.

In line with the objectives of ensuring timely payment, the Division embarked on an internet based payment method via Maybank2e.net (Malayan Banking) and BizChannel (CIMB Bank) initially to cover payroll (and related payments), with plans to include third party payments in the immediate future. For the current Financial Year under review, the application has been extended to staff claims and vendors/suppliers with Maybank accounts.

The focus of Group Tax Unit is to manage all taxation matters, both direct and indirect taxes, relating to the TNB Group. In this regard, the Unit has to ensure that the Group plans its operations and investments in a tax - efficient manner whilst complying with all relevant tax legislation. The Group Tax unit focuses on achieving tax efficiencies through maximising tax relief and incentives wherever possible in structuring new investments locally and abroad and assisting subsidiaries in tax audits, to minimise tax exposure and liabilities. In FY2007, tax savings amounting to RM70 million was achieved in the form of custom duty and sales tax exemption.

Removal of foreign shareholding restrictions

On 5 February 2007, the level of foreign shareholding in TNB exceeded 25 per cent reaching a peak of 28.4 per cent on 30 May 2007. On 16 February 2007, the Division initiated an application to the Authorities for the removal of foreign shareholding restrictions and received approval of the Ministry of Finance on 19 April 2007. TNB has convened an Extraordinary General Meeting in December 2007 to seek shareholders approval for the amendments to the Articles of Association to remove the limit. The removal will provide an opportunity for more foreign shareholders to invest in TNB and lead to further diversification of the profile of the shareholders of TNB.

Finance Division


Diversifying Earnings Base and Establishing International Partnerships and Cooperation

The progress of TNB’s investment through the consortium undertaken by Saudi-Malaysia Water And Electricity Company Limited (SAMAWEC) in Shuaibah III Independent Water and Power Project (IWPP) in Saudi Arabia is progressing as scheduled. As of August 2007 the overall construction progress of Shuaibah III has reached 68.9 per cent. The USD2.5 billion project is scheduled to commence Commercial Operations in July 2009.

Following the success of Shuaibah III, the Government of Saudi Arabia has requested SAMAWEC to undertake a special project to expand the Shuaibah III IWPP’s desalination plant by 150,000 m3/day over the planned capacity of 880,000 m3/day. The USD232 million Expansion Project, utilising Reverse Osmosis desalination technology is located at a site adjacent to the main project. The Project is expected to commence Commercial Operation on 28 February 2009.

Other opportunities are continuously being explored by the Business Development team which could potentially lead to partnerships and cooperation with international counterparts in the utility services around the region. In building relationship with other utilities, TNB plans to sign an MOU with the Korea Electric Power Corporation, KEPCO. This MOU will encompass technical cooperation activities in identified areas, including the exchanging of information and personnel on the subject matters mutually agreed by both Parties. The year saw the completion of cooperation activities with Vietnam, Yemen and Mongolia whilst there is an on-going technical services arrangement with Yemen. The inter-connection project across the Straits of Malacca reached another milestone with the completion of the joint commercial feasibility study by TNB and its Indonesian counterpart in January 2007, covering legal, financial and tax perspectives. The final report was presented to the Joint Steering Committee (JSC) comprising representatives from both utilities as an input to the realisation of the ASEAN Power Grid.

The Division continues its role as TNB’s secretariat for ASEAN and HAPUA activities. The year’s activities include the participation of TNB in the HAPUA Working Committee meeting in Feb 2007 and Council Meeting in June 2007 in Yangon Myanmar. The meetings deliberated on the next course of action by HAPUA upon the signing of the MOU on the ASEAN Power Grid by the respective ASEAN Governments and the activities of the eight HAPUA working groups. The key milestone of HAPUA/ASEAN activity this year was the signing of the Memorandum of Understanding (MOU) for the ASEAN Power Grid MOU in August 2007.

Formation of TNB Economic Council

The first inaugural meeting of the TNB Economic Council (TNB-ECouncil) was initiated in January 2007, followed by the second meeting held in July 2007. The main objective of the council is to assess and formulate a view on Malaysia’s economic growth and to assist in preparing the electricity demand forecasts. The meetings have generated constructive deliberations on matters relating to the economic direction/growth of the industry as well as structural changes to facilitate internal planning activities within TNB especially on the electricity demand forecast and capacity planning. Following the formation of the TNB-ECouncil, the Division has been entrusted with the responsibility to maintain a Long-Term Economic Model for input to TNB’s internal planning requirements. A short-term Quarterly Sectoral Model is also currently being developed together with Rating Agency of Malaysia Consultancy Services to further assist TNB in its short-term planning activities.

Finance Division


Implementation of Divisional Accounting

In an effort to enhance performance measurement, TNB has implemented Divisional Accounting by creating separate financial statements for the core businesses namely (Generation (G), Transmission (T) and Distribution Business (D) as well as for each power station and Distribution state levels. Their Divisional Accounts serves as a platform for an objective and transparent performance measurement of each Division. The framework will ensure that all financial statement items are allocated in a consistent and equitable basis to the respective divisions, power stations and state levels and also to identify enhancements where applicable. The Divisional Accounting framework will enable TNB to benchmark with Independent Power Producers in terms of cost of production amongst its power plants.

Investment Evaluation Framework for Capital Budgeting

In the continuous efforts to improve the alignment between the Group’s business and policy objectives, the Finance Division has developed an investment evaluation framework for capital budgeting. This is expected to facilitate the creation of a more structured and disciplined process for approving and managing TNB’s annual capital expenditure with the aim of improving the return on capital investments. The framework would further enhance TNB’s capital efficiency programme in line with the objectives of the GLC Purple Book.

The evaluation framework which will be implemented in 2008, will ensure that consistent cost benefit analyses are carried out in assessing the viability of electricity supply projects. This is also to meet TNB’s investment objectives as follows;

• Minimising the risk of stranded assets and poor return on investment;

• Ensuring that investment proposals or projects have gone through a rigorous process of assessment and evaluation;

• Ensuring a consistent financial approach or indicators are used by planners in planning for capital expenditure projects; and

• Ensuring a fair return on investment for capital expenditure projects where appropriate.

Finance Division


Improved Financial Governance

The Policy Manual for the Limits of Authority (LOA) was officially rolled out on 1 January 2007 as part of management’s effort to enhance the effectiveness of the Company’s existing internal control system. The implementation and enforcement of the LOA ensures an improved management accountability structure through the assignment of a clear, practicable and uniform set of both monetary and non-monetary limits in support of the management role and decision making function. Since then, the LOA has also been introduced to the respective subsidiaries within the Group. Designed to be a user friendly internal control instrument, the continuous updating of the LOA will ensure its relevancy and effectiveness in line with the dynamic requirements of the business.

Investor Relations

Being one of the largest companies (in terms of market capitalisation) listed on Bursa Malaysia, TNB views the role of investor relations as a strategic management responsibility that combines the disciplines of finance, communication and marketing to manage the content and flow of information to financial markets, investors, brokerage firms and other constituencies so as to provide an accurate portrayal of the Group’s performance and prospects. An equal level of importance is placed on the need for investor relations to channel the views of the investment community back to Management and the Board of Directors.

During the year under review, TNB participated in several utility conferences arranged by leading investment banks, as this provides the platform to meet with fund managers and investors, both existing and potential, to provide them with an update on the Company’s performance and to address any issues and concerns they may have regarding the Company. In November 2006, TNB participated in a non-deal roadshow covering parts of Europe and the United Kingdom to meet investors and fund managers, whilst on the domestic front, Management went on a domestic roadshow to meet key local shareholders. During the Financial Year under review TNB met a total of 200 fund managers and investors during the conferences and roadshows.

The response from the financial community and media to attend TNB’s quarterly financial results announcement has always been encouraging. These are attended by the research analysts covering TNB, the credit rating agencies and media reporters, whilst fund managers are invited to be teleconferenced in for the sessions. On average, a total of 85 research analysts, fund managers and media attend or conference in for these quarterly presentations.

In FY2007, TNB had 68 meetings with equity research analysts, fund managers and investors who had requested for meeting officials apart from those investors at conferences, roadshows and quarterly financial results presentations.

On 21 June 2007, Bursa Malaysia launched the establishment of the Malaysian Investor Relations Association (“MIRA”), with the key objective to spearhead the development and raise the standard and level of IR in practice in Malaysia and assist listed companies in initiating and implementing their IR programs. Following the launch, TNB accepted the invitation by Bursa Malaysia to be an inaugural member as well as to nominate a representative on the Board of Directors of MIRA.

Finance Division


Improving Human Capital Development

During the year under review, TNB has been accredited as a training organisation by several professional accounting bodies. In November 2006, TNB received authorisation from the Institute of Chartered Accountants of England and Wales (ICAEW) to be the Authorised Training Provider. TNB is also recently certified under the Association of Certified Chartered Accountants (ACCA) Approved Training Scheme. In June 2007, TNB held a Professional Bodies (accountancy) Open Day for TNB accountants which involved all the accounting professional bodies present in Malaysia.

Moving Forward

The Finance Division has achieved much in the last few years, particularly in terms of its primary responsibility to improve cashflow management and effective debt liability and capital management. Underpinning these achievements is the desire for continuous improvement and a commitment towards achieving “Service Excellence”.

For Financial Year ending 31 August 2008, we will continue to exploit synergies within the Group and strive to create greater shareholder value through financial and operational efficiencies. The value creation drive is entrenched within the Division and more efforts have been devoted to improving staff communications and nurturing a culture of continuous improvement. Key initiatives for FY2008 include the followings:-

• Strengthening the Business Development Unit of the Division and aggressively identifying, exploring and supporting new business opportunities.

• Achieving Balance Sheet efficiency through effective working capital management and the improvement of the payment process and procedures.

• Developing in-house capability in the management of coal supply, in light of the significant increase in the utilisation of coal as fuel for power generation. The study will, amongst others look into the coal supply and demand dynamics, issues with respect to coal logistics and, factors affecting coal and coal freight prices.

• TNB is also striving towards transforming itself into a Gulf Cooperation Council (GCC) Syariah compliant company, to support the Malaysian Government’s aspiration to be an Islamic financing hub outside the Middle East. One of the initiatives to achieve such objective is to source new funds using Middle East Syariah compliant structures.

• Implementation of the Investment Evaluation Framework for Budget Planning to ensure an efficient and effective review that supports the budgeting process and ensures the regular monitoring and management of the Group’s investments.

• Providing a supporting role in the various issues and challenges related to the current review of the electricity tariff-setting mechanism and pricing studies.

• The continuous review of the Group’s Financial Policies and Procedures, with particular regard to improving workflow and processes and moving towards a “paperless” environment.

Finance Division


Dato’ Nik Ibrahim binNik Mohamed Vice President

These initiatives taken have shown positive overall financial performance. For FY2007, ROI was higher at 79.2 per cent against more than 60 per cent targeted; EVA was higher at RM420.33 million against more than RM250 million targeted; stranded cost lower at RM23.7 milion against less than RM40 million targeted.

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Operations Review

InvestmentManagement


Investment Management Division

Operational Summary

The main focus of the Investment Management Division (IMD) is to ensure that all investments bring positive value to TNB. All TNB investments whether in the form of subsidiaries, associates or other long-term investments, are closely monitored. The investment equity value under its purview is worth RM577.17 million for 17 active operating companies. The Division also monitors other subsidiaries which are dormant, inactive and facing litigation proceedings.

IMD’s main responsibilities include monitoring and supervision of Malaysia Transformer Manufacturing Sdn Bhd, Tenaga Cable Industries Sdn Bhd and Tenaga Switchgear Sdn Bhd that operate in the manufacturing sector; Liberty Power Limited in Pakistan which is involved in the electricity generation business; Fibrecomm Network (M) Sdn Bhd in the communication and IT related business; University Tenaga Nasional (UNITEN) in education and knowledge development; TNB Engineering Corporation Sdn. Bhd. in district cooling, engineering advisory and consultancy services and related functions; and TNB Fuel Services Sdn Bhd in the supply of fuel and coal for the power generation sector.

Highlights of Achievements:• Price-benchmarking report prepared to ensure all

investments are providing products and services with good value-for-money to TNB

• Positive overall financial performance, such as Return on Investment (ROI) and Economic Value Added (EVA)

• Costing and price benchmarking exercise for products/services


In monitoring the business performance of the investments which include the financial and operating performance, the Division has taken up various initiatives to reduce subsidiaries’ issues, giving emphasis on the financial health. Tools and systems have also been developed for evaluation and monitoring of all investments. Strategic plans for identified investments have been developed and implemented.

These initiatives taken have shown positive overall financial performance. For FY2007, ROI was higher at 79.2 per cent against more than 60 per cent targeted; EVA was higher at RM420.33 million against more than RM250 million targeted; stranded cost lower at RM23.7 milion against less than RM40 million targeted.

The Division consistently monitors subsidiaries, contract compliance to ensure subsidiaries comply with their contract agreements. These impacted many areas within the organisation and can significantly influence inventory, operations, customer satisfaction, reduced costs and wastage, project management and corporate image.

In its effort to improve the performance of the investments, IMD has also prepared a price-benchmarking report to ensure that the investments are providing good value-for-money products and services to TNB.

IMD participated in the AKP and implemented the PSI, 5S, IMD Best Employee Award, and Work Improvement Team (WIT) framework as approaches to bring efficiency improvement to the Division.

For continuous improvement in process standardisation and to promote transparency, IMD adopted MS ISO 9001:2000 and acquired certification under Corporate TNB in January 2006. Subsidiaries under the purview of IMD also have gone through the same exercise for their own individual certification, namely TNB Engineering Corporation Sdn Bhd, Bangsar Energy System Sdn Bhd, TNB Properties Sdn Bhd, UNITEN, Tenaga Switchgear Sdn Bhd and TNB Fuel Sdn Bhd.

Key initiatives implemented by IMD towards becoming customer oriented and to resolve feedbacks promptly and effectively, are done through Customer Satisfaction Index (CSI) surveys used to provide a consistent framework and platform for ongoing improvement and measurement; Suggestion Box for customers to give their feedback to help improve IMD services further; Subsidiaries Performance Review, conducted with subsidiaries and with the President/Chief Executive to promote direct communication.

From the CSI survey carried out, about 68 per cent of the respondents are satisfied with the services provided, an improvement of 1.1 per cent from previous surveys.

Investment Management Division


Razali bin Awang Chief Information Officer

Operations Review

ICT DivisionICT Division continues to subscribe to three main objectives towards supporting TNB’s overall Vision and Mission, i.e. effectively govern and consolidate the use of ICT in TNB, E-enabling critical TNB processes to drive corporate efficiencies higher and providing the digital infrastructure to enable intelligent power delivery system.

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ICT Division

In this Financial Year, ICT Division has completed a number of major ICT projects to help spearhead TNB towards excellence in the areas of customer services and internal operations and administration.

During the year under review, ICT Division was selected as recipient of “Anugerah Khas Jabatan yang Menggunakan Sistem SEMS” during the Kecemerlangan Keselamatan dan Kesihatan Pekerjaan TNB 2006 held in May 2007. In July 2007, the Division received another recognition of two SEMS stars in its first year of SEMS implementation.

Highlights of Achievements:• Implementation of Mobile Field Force Automation (MFFA)

Phase One to improve communication and breakdown response time between TNB’s Call Management Centre and its field crew

• E-Application for housing developers to apply for new electric supply via online

• Enhancement of the PRIME system to better manage TNB’s major customers

• Implementation of Electronic Document Management System (EDMS) and Properties Information System to improve internal processes

• Enhancement of TNB telecommunication network to increase network availability for TNB operations and administration


Operational Summary

ICT Division has been entrusted to effectively govern and consolidate the use of ICT in TNB. To date, this has been realised through the enforcement of ICT policies, codes of practice and guidelines endorsed by TNB Management.

The Division’s core operational focus is to ensure TNB’s telecommunication network and IT system’s are always available. This is a prerequisite to indirectly assist TNB’s core operations in providing a secure, reliable and continous electricity supply to the customers.

Besides this, the Division has also been entrusted to put in place security features to assure TNB stakeholders and customers that data integrity is not compromised. It is with this in mind that ICT has prepared a security framework and implemented security upgrades at critical areas. The Division is in the midst of upgrading and expanding its data centre to host critical TNB ICT services.

Our network infrastructure serves both corporate and operational needs of TNB’s businesses. ICT Division provides peripheral support service that covers both ends of the spectrum, from the simplest user personal computers to the most state-of-the-art, high-end servers. The Division also offers consultation and project management services to TNB divisions and subsidiaries.

ICT Division has implemented the Mobile Field Force Automation Project in Selangor and Kuala Lumpur that provides an integrated communication platform between TNB’s Call Management Centre, Supply Recovery Centre , the Distribution Network Information Management (DNIM) System and field workers which comprise of Maintenance and Repair Teams and Fault Finder Teams. This communication platform utilises mobile devices to enable supervisors to effectively determine crew location and enable efficient dispatching of teams. This has directly improved TNB’s response time to breakdown calls, thereby reducing interruption time.

The Division is also expanding the scope of this project to include other Distribution teams located in Peninsular Malaysia such as Johor and Pulau Pinang. ICT Division also intends to roll out this project to the Transmission Division in the near future.

ICT Division also provided its expertise in the successful roll out of the Distribution Network Information Management (DNIM) System in Shah Alam, which involves mapping of all TNB’s Distribution Infrastructure on a single platform. This project is expected to improve Distribution’s capability in network planning and outage restoration.

The Division has also upgraded its telecommunication network and commissioned TNB’s telecommunication Customer Premises Equipment at critical sites to provide the much needed bandwidth to transmit data for DNIM, video and desktop conferencing and operational transactions.

ICT recently embarked on a realignment of business operations to provide efficient and effective end-to-end ICT products and services. This is in line with TNB’s Service Excellence initiative.

ICT Division


ICT Division

Internal Process Standardisation and Improvement

ICT Division heavily utilises the Process Standardisation and Improvement (PSI) platform to improve its internal services. At the same time, this platform has enabled the Division to study and propose improvement systems in line with its main objective of E-enabling critical TNB processes to drive corporate efficiencies higher.

In this Financial Year itself, ICT Division consolidated and simplified a number of processes to enhance its internal effectiveness. This initiative has seen the Division’s number of processes reduced from 38 to 23 process control documents. This was successfully conducted through work improvement and Cross Functional Teams throughout the Division. Besides using Online PSI System, ICT Division also administers the PSI.

Quality Management and Initiatives

ICT Division has also embarked on several other quality initiatives such as:

• Developed improvements in the Enterprise Resource Planning System;

• Established Work Improvement Teams (WIT);

• Implemented 5S programme;

• Conducted the Safety and Environment Management System (SEMS) baseline audit.

In FY2006, ICT Division has introduced the WIT and 5S practice among the staff. The objectives are to inculcate teamwork, continual improvement and safety culture at workplace.

Four WITs have been set up. A total of 49 ICT Division staff took part in proposing ways to improve their day-to-day work. Several proposals were approved and have been implemented in the Division.

In line with TNB’s call for increasing safety awareness amongst staff, ICT Division has undertaken the SEMS baseline audit initiative to determine the safety level of all operational units in the four regions of Peninsular Malaysia. Overall, ICT Division received two SEMS stars in July 2007.


The Way Forward

ICT Division faces a challenging year ahead to meet the ever increasing business demands of TNB. The Division will be implementing a total of 29 plans and initiatives; 19 of which to cater for system expansion and 10 productivity improvement systems for TNB Group.

The 19 upgrading plans include security improvement initiatives, storage virtualisation, enhancement of TNB’s digital transmission and protection network, provision of network connectivity for TNB’s Integrated Security Management System and upgrading its Data Centre.

The 10 productivity improvement systems include the implementation of the Mobile Field Force Automation for other locations in Peninsular Malaysia, Radio Frequency Identification for warehouse and implementation of an Integrated Fleet Management System.

ICT Division has adopted ITIL, the globally accepted best practice framework in IT Service Management towards improving its service delivery. Phase One of Customer Management System (CMS) is implemented in line with ITIL. ICT Division is also in the midst of a collaboration with UNITEN in drafting a comprehensive best practices adoption roadmap for ICT Division.

With the objective of enhancing staff competency and engagement, ICT has conducted knowledge sharing sessions to impart knowledge to all levels of staff, developed a comprehensive TNI/TNA report to develop executives according to job requirements and established succession plan for critical posts in ICT.

ICT Division

ICT Division has adopted ITIL, the globally accepted best practice framework in IT Service Management towards improving its service delivery


Dato’ Kamaruzzaman bin Jusoh Vice President

Operations Review

Group Human

The Code of Ethics & Whistle Blowing

procedure were launched to uphold

and further strengthen the Company’s

integrity and reputation.

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Resource


Group Human Resource

• Succession Management - Current Talent Pool size stands at 188. An additional 103 executives were evaluated for consideration to be included into the Talent Pool.

• Specialist Career Path - One technical expert was promoted to the rank of Specialist whilst 16 new Technical Experts were appointed. Currently in total there are two Specialists and 21 Technical Experts.

• The Policy for managing Low Performers which was launched in May 2007 provides the guidelines and comprehensive programmes for staff deemed as ‘low performers’ to increase their productivity towards achieving their target set.

• Institut Latihan TNB - ILSAS was awarded the Human Resource Ministry Award 2007 (Training Provider Category)

Highlights of Achievements:

Operational Summary

An external consultant was engaged to conduct a study on Employee Engagement. The level of engagement attained was 83 per cent fairly close to the 87 per cent for The Best Employer in Asia.

The succession management initiative in 2007 reviewed the talents assessed in 2006. One hundred and eighty-eight talents from 227 have now been formally included in the talent pool. The management team had also outlined the career plan for top talents during the management break out session. In talent development effort, five Progem (Programme for General Managers) involving 166 talents had been conducted in this Financial Year. Cross functional team projects has been assigned to all Progem participants. Concurrently, new talents, totalling 103 executives, have been identified and assessed in August 2007. The new group of talents has a higher percentage of executives in the lower/middle management group. To date, almost 10 per cent of the executive population had been assessed for their potential. The Succession Management activities will prepare talents for Key Leadership Positions (KLP).


In building the human resource capacity and retaining technical expertise, one Technical Expert was promoted as Specialist and 16 were appointed as Technical Experts in the Specialist Career Path (SCP) scheme for the Financial Year, bringing to date two Specialists and 21 Technical Experts to be in the SCP.

A similar scheme, known as the Specialised Technician Career Path, was introduced for the non-executives with creation of thirty-eight Specialised Technician positions.

A new policy on managing low performers had been established to provide a platform for line management to manage the low-performers. At the same time non-performers were provided an opportunity for self-improvement through a programme called Performance Improvement Programme with a maximum period of six months for executives and nine months for non-executives.

This past year has seen the Counseling Services Unit actively giving talks to educate and create awareness towards improving the mental and emotional well-being of TNB employees. The unit is also currently embarking on recruiting and training more “Pembimbing Rakan Sekerja TNB” throughout Peninsular Malaysia with expectations to provide employee with a more positive and harmonious working environment for a greater work-life balance.

The Company continues its efforts to contain medical cost throughout the year 2007. Preventive programmes were initiated by implementing Wellness Programmes in all divisions. The programmes give high emphasis on early detection of common diseases. Health awareness talks were also given. More audits were conducted on panel clinics throughout the year.


System Improvement

In Phase 3 of the Competency Based Performance Management System (CbPMS), further enhancement to the Employee Performance Appraisal process was made in an effort to improve efficiency and reduce time as well as to create a more transparent process. The Appeal and Employee Development Plan module (EDF) can be done online starting this financial year. The online Appeal would enable employees to register their appeal, in which the management is able to identify the number of appeals made during the appeal period and understand which element of the ratings or results is being appealed by employees. While EDF online would allow the training unit to plan and carry out training programmes, particularly in new skills as identified by employees, this enables the staffing department to plan future emplacement of executives.

Customer Service

The HR Division engaged UNITEN to conduct a Customer Satisfaction Survey (CSS) to garner information pertaining to the services being provided. With this information, corrective action is taken to further improve services given. The level of satisfaction attained this year was 68.6 per cent compared to 67.9 per cent in 2006 and 66.8 in 2005.

The Customer Complaint Procedure for the Human Resource Division was certified MS ISO 9001:2000. The certification would enable appropriate action to be taken based on feedbacks from HR customers/clients.



Training and Development

The TNB Training Institute - ILSAS has close partnerships with leading local and international training providers such as Turbo Welding Institute (TWI), Institut Kemahiran Belia Negara (IKBN), Energy Commission, Institute of Engineers Malaysia (IEM) and Universiti Kebangsaan Malaysia.

In an effort to increase competency levels, a total of 102 Development and 1227 Mandatory Training Programmes were organised for Executives and Non-Executives respectively. Institut Latihan TNB-ILSAS have hosted several state-of-the-art training workshops and technical lab sessions to allow the trainees to get practical experience so that they may apply what they have learnt in class, at work.

300MW Simulator

Overhead Lines Workshop

Heavy Mechanical Workshop

Basic Mechanical WorkshopProtection Workshop

Electrical Wiring Workshops


Dato’ Hajah Che Zurina binti Zainul AbidinVice President

The Corporate Services Division provides

support services to TNB Group in areas it

specialises in i.e. procurement, property,

legal, logistics, research, security and

intelligence services.

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Operations Review

CorporateServices


Corporate Services

Procurement

The Procurement Department is responsible for formulating the Company’s procurement policy, providing advisory services, enforcing compliance and driving procurement-related activities in line with corporate strategic directions. The Department is also responsible for promoting and implementing the National Procurement Policy, in particular the Entrepreneur Development Programme that supports the National Economic Policy.

FY2007 is the first year of implementation of the procurement transformation programme. Hence the focus of the department is to continue all initiatives that drive and add value to the Company. Five key focus areas are the promotion of the use of local content and ensuring Bumiputera equity shares, realising value creation, enhancing procurement process transparency, integrity and effectiveness, enhancing supplier management and strengthening our procurement organisation by transforming it into a more strategic function.

Highlights of Achievements:• Completion of Integrity and Ethics Awareness Programme for

Generation and Support services

• Successful implementation of first year Procurement Transformation Plan

• Implementation of various Customer Relationship Management activities, resulting in improved CSI rating in PSD

• Implementation of Integrated Fleet Management by Logistics Department

A trade mission to the Middle East, “The Asian Showcase and Exhibition” in Doha, Qatar was organised in order to build the Company’s brand at international level and to support entrepreneur development under the Entrepreneur Development Programme. The trade was held from January 12 – 19, 2007 at the Sheraton Doha Convention Centre.

During the year under review, the Department had aggressively conducted various procurement dissemination sessions throughout the Company. The department had also introduced “Info Perolehan” in the TNB webpage as a channel for customer information and developed a customer complaint management platform and began to produce bulletins.

In response to the Company’s strategic plan to achieve “Service Excellence” by 2010, the Department will continue to drive the Company’s procurement initiatives through its Transformation Plan which includes short and long-term initiatives.


Legal Services

The Legal Services Department (LSD) aims to be the central provider of quality legal services within TNB and amongst its subsidiaries with the goal of supporting TNB’s core business, non-core business and management services. The Department is divided into three units, namely Corporate Advisory, Regulatory and Legal Documentation and Litigation.

During the year under review, the first and second phase of the Litigation and Corporate Advisory Modules were successfully implemented. Under the litigation module, the system allows for tracking and managing reports of litigation matters effectively. Judgement and legal opinions prepared by the Legal Department and panel lawyers are constantly uploaded for future references. Similarly, the Corporate Advisory, Regulatory and Legal Documentation module also provides an avenue for executives to track and better manage opinions and agreements.

For FY2007, several roadshows were carried out as a continuance of the awareness programme. They were held in several states by the Regulatory and Legal Documentation Unit to executives and non executives of the Distribution Division regarding the legal issues on land matters, trespassing and acquisition of land for TNB installations, rechargeable job order, housing loan for TNB’s staff and supply matters.

During the year under review, a legal forum was held on commercial contracts, legal perpectives organised by the Corporate Advisory Unit. A total of 80 participants attended the forum from the various divisions within TNB. The Department had also participated in the PSI Programmes supporting TNB for MS ISO 9001:2000 certification in 2006. Focus on human resource development saw comprehensive training programmes for all legal executives. Legal Services also contributes articles for the Company’s inhouse bulletin i.e. “Tenagawan” and also produces its own Legal Services Department Bulletin.

Corporate Services


Property Services

The Property Services Department (PSD) provides property support services to the core business of TNB, in the form of property planning and development, land procurement, project management, property management and property maintenance.

Some of the major achievements recorded during the year are:-

• Customer Satisfaction Index rating further improved from 69 per cent in FY2006 to 76 per cent in 2007 due to continuous effort to improve services.

• Continuation of Service Level Agreement (SLA) with other divisions for better customer services and better understanding of work scope and roles and responsibilities. This leads to better work efficiency.

Other initiatives implemented were:

1. Full implementation of 5S initiatives throughout the department and coming out first in the division during audit.

2. Successful roll out of Phase 1 and Phase 2 of the Property Information System.

3. Various quick win initiatives implemented for better efficiency and services such as confirmation of ownership of land through official search for registered lease and land vesting application. These quick win initiatives are for completion in 30, 60 and 90 days.

4. Electronic Document Management System (EDMS) which is currently still under discussion with ICT Division.

5. Use of data for better management and efficiency such as quit rent and assessment, TNB office buildings throughout the country, rented office space in Klang Valley, property projects and holiday bungalows throughout the country.

Corporate Services


Logistics Services

The Logistics Services Department (LSD) consists of three operational units, namely Freight Management, Fleet Management and Generator Set Services. LSD aims to become the most cost-effective one-stop logistics centre and the most improved service provider targeting 800 AKP points by 2010. The department aims to provide cost-effective logistics services to customers and providing new value added services by the Group. LSD’s objective is to manage total logistics requirements in order to meet customer expectation.

LSD provided cost-efficient and effective logistics services with high customer satisfaction comprising freight, fleet and generator set services to support TNB’s core business. Major jobs handled during the year under review include vehicle repair and maintenance, vehicles sent for PUSPAKOM inspection, supply of generator sets, freight shipments and customs clearance, transportation of general cargo and heavy lift.

Among the highlights and achievement for FY2007 are:

1. Integrated Fleet Management (IFM) e.g. appointment of panel workshops, establishment of schedule rate, savings from implementation of IFM, centralised vehicle resale and disposal.

2. Taking over all generator sets from Distribution Division.

3. New generator sets operating bases set up in Chain Ferry, Penang.

4. More than 50 per cent engine driver certified.

5. Expansion of feeder pillar repair – increase of requests by Distribution Division.

6. Expansion of hydraulic repair to southern area.

Security and Intelligence Services

Security and Intelligence Services (SSID) is one of the important support services provided for the Company. The Department’s functions cover Operations, Planning and Crisis Management, including Investigation and Intelligence. Services provided are to safeguard TNB’s key installations from damage, vandalism and theft. Security forces are stationed at various critical locations such as power stations, substations and regional warehouses and offices throughout Peninsular Malaysia. As an auxilliary police force, close links are being maintained with the nation’s police force, which enables the latter to respond swiftly during emergencies.

Some of the major achievements during FY2007 were:

• TNB Fraud Policy Statement was approved for implementation.

• A joint council meeting between TNB/GLCs and Second-hand Dealer Association Malaysia was held to discuss issues relating to thefts at TNB installation and to procure cooperation from the above association in overcoming the problem.

• Formation of task force for GLCs where SSID is the chairman. The purpose behind the formation of this task force is mainly to get cooperation and understanding between the various GLC companies on security issues.

• Arrest of 117 persons from September 06 to August 07 through cooperation with various Government Agencies in cases involving trespassing, thefts and other crimes related to TNB.

Corporate Services


TNB Research

As an approved Research and Development (R&D) company and the research arm of TNB, TNBR’s main role is to enhance the core businesses of TNB through its Research and Development, Consultancy Services, Laboratory Testing and Quality Assurance units. TNBR aims to be the point of reference for new technological developments in the electricity industry by leveraging on its technical consultancy and advisory strengths.

Research and development findings are widely applied to improve efficiency, availability and reliability of our electricity supply network. Through its pilot projects, TNBR is able to demonstrate the best approach in applying new technologies and processes and to guide its customers, both internally and externally, to make critical decisions on technical specifications and standard operating procedures.

A total of 26 research and development projects worth RM30.5 million were completed for TNB’s core business and support divisions including SESB. The projects addressed different areas of impact such as reliability, efficiency, environment, technological evaluation, quality assurance and cost savings. As the Quality Assurance (QA) agent for TNB, TNBR is responsible for ensuring that all equipment supplied to TNB meets necessary technical and functional standards through measures like product inspection, product certification and second-party quality systems audit.

TNBR also provides consultancy services in the areas of environmental assessment and energy. The department is registered with the Department of Environment, Malaysia as an approved body to conduct Environment Impact Assessment (EIA) studies. TNBR is also engaged as a consultant in energy-related works, especially renewable energy, by the Ministry of Energy, Water and Communications, Malaysia Energy Centre and universities. Scientific services are a revenue centre and the biggest contribution comes from laboratory testing and scientific services. TNBR clients are mainly from TNB core divisions, vendors as well as industries. TNBR has secured several SLAs due to its remarkable service performance. TNBR has successfully displaced some of the technical work previously done by foreign consultants. In areas such as Material Engineering, High Voltage Diagnostics, Lightning and Hydro Plant Optimisation, TNBR has developed its intellectual capital to meet the technology and engineering challenges faced by TNB core divisions. Specialists and technical experts are placed on a separate career path to ensure they can retain their technical expertise as they climb up the corporate ladder.

Corporate Services


Group InternalAudit

A total of 109 planned and ad-hoc

assignments were completed and 45

reports were issued during the year

““


The Group Internal Audit (GIA) function was established by the Board and reports functionally to the Board Audit Committee (BAC) and administratively to the President/Chief Executive Officer.

GIA’s mission is to provide objective and independent assurance on the system of internal controls in the Group. The main functions carried out by GIA to fulfill the mission are:

• Preparing a strategic risk-based audit plan and performing planned audits to ensure adequate coverage of all auditable entities.

• Reviewing the adequacy and effectiveness of risk management, compliance and governance processes established by the Group to manage its risks and operations.

• Establishing the existence, effectiveness and adequacy of internal control processes designed to manage operations and safeguard the assets of the Group.

The GIA function is structured into units that focus on generation, transmission, distribution, procurement, projects, group corporate services, core business support services, information and communication technology, investment management and risk management functions.

As at 31 August 2007, GIA had 78 staff. A total of 109 planned and ad-hoc assignments were completed and 45 reports were issued during the year by both GIA and external consultants. The processes reviewed include the following:

• Generation plant performance, maintenance processes, fuel and resource management

• Transmission asset maintenance including wayleave, engineering practices and warehouse management

• Distribution revenue assurance, customer services and network services

• Project procurement and implementation

• Group Corporate Services covering the areas of finance, human resource, procurement, asset management, vehicle management and training school

• Management Information System covering project implementation review, security and access, data integrity, SAP R/3 applications, business process controls

• Operational systems of subsidiaries owned by the Group

• Risk management systems and activities undertaken to manage risks

During the year, the following activities were undertaken by GIA to continuously improve its performance:

• Implementation of Customer Satisfaction Surveys to obtain feedback for enhancing internal audit services.

• Implementation of Board Audit Committee Satisfaction Survey to seek feedback to achieve a higher level of performance.

• Introduction of a Key Performance Indicator to measure customer satisfaction.

• Revision of the GIA Charter to improve and align internal audit practices and processes to best practices.

• Provision of in-house training courses to enhance staff competencies.

Group Internal Audit


Operations Review

Sabah ElectricitySdn. Bhd.

“ “Eight T7 programmes implemented

aggressively


Sabah Electricity Sdn. Bhd.

Highlights of Achievements• Turnaround of Sabah Electricity Sdn Bhd sees sales rise to

RM807 million in FY2007 compared to RM703.5 million in FY2006

• Distribution SAIDI was reduced to 1,850 minutes from 2,581 minutes

• System losses were improved to 11.74 per cent from 13.79 per cent

Sales of electricity at Sabah Electricity Sdn Bhd (SESB) registered RM807 million in FY2007 compared to RM703.5 million recorded in FY2006.

During the year under review, SESB implemented the T7 programmes aggressively. There were eight T7 key initiatives that included -

1. Reducing generation cost2. Ensuring State Grid Interconnection projects were completed on time and within budget (Transmission)3. Improving transmission supply reliability - West Coast Grid (WCG)4. Improving transmission Supply Reliability - East Coast Grid (ECG)5. Reducing distribution system loss6. Improving distribution supply reliability & quality7. Improving revenue collection (ACP)8. Developing staff competency


During the year, Generation capacity was at 791 MW with maximum demand from throughout Sabah at 605MW. Generation fuel mix at SESB as at 31 August 2007 is depicted here –


The total cost per unit, ie CPU, for all SESB and IPP plants in FY2007 was 17.1 cent/kWh (at corrected diesel price of RM0.495/litre and MFO price of RM0.420/litre). The overall units generated and expenses incurred were 3,908 GWh and RM670 million respectively. From these total figures, minor and rural stations contributed 1.6 per cent of the total units generated and 2.3 per cent from the total expenses incurred. In order to reduce the overall generation cost, the key initiative for the Generation Division is to focus on SESB major stations, all the IPP plants as well as the SESB mini hydro plants. The key steps to reducing generation cost have been to focus on the following:-

(a) Optimising power generation from hydro and gas plants.(b) Completion of IPP projects on time (SPBC and Powertron)

The IPP project Sepanggar Bay Power Corporation Phase 1 (66MW) was completed in November 2006 while the East-West Interconnection was completed in July 2007. This allows energy from the West Coast to be exported to the East Coast, thus reducing units generated from the expensive gas turbine operations (running on diesel) at Tawau and Sandakan. The Kundasang power station was decommissioned in June 2007. On 28 July 2007, the East-West grid project was completed with the commissioning of the 275 kV lines from Kolopis substation to Segaluid substation. With the commissioning of the 246 km double circuit 275 kV lines, the state-wide Sabah Grid was formed linking the West Coast Grid (WCG) and the East Coast Grid (ECG). With this completion of the Sabah Grid, the system reliability will be improved and the production cost per unit lowered. This project is financed under the Eight Malaysian Plan.

Diesel IPP (Sutra)3.00% Biomass IPP (THS)

1.50%

SESB Hydro13.90%

Gas (SESB) 15.10%

Diesel (SESB) 12.80%

Gas IPP9.80%


SESB is also undertaking new projects, one of which is the Kota Kinabalu outer-ring connecting Northern Town to Kepayan Substation that is expected to complete by the end of 2007. Another new project is the extension of the transmission lines from Inanam substation to the Minintod substation expected to be commission by the middle of 2008.

During FY2007, SESB’s Transmission Division achieved the following -


0.347 0.1760.642

Targets and Objectives TargetKey Performance

Indicators / Measures

Achievement

Delivery Point Unreliability Index (DPUI)

System minutes 46

System Average Interruption Frequency Index (SAIFI)

Interruption /Delivery Point

0.37

21.02 18.9968.56

WCG 01/9/06 to

27/7/07

Sabah Grid 28/7/07 to

31/8/07

ECG 01/9/06 to

27/7/07

SESB also completed the timely upgrading of transformer capacity from 2 x 7.5 MVA to 2 x 30/45 MVA at the Papar Substation on 4 February 2007.

During the year, a state control centre in Penampang Substation – State Load Despatch Centre (SCADA/EMS Systems) was completed in February 2007 has improved supply reliability. Under the key initiative to reduce system loss, Strike Force operations have been carried out in all twenty areas to check metering installations for Ordinary Power Consumers (OPC), mainly commercial, industrial and residential. Of the 12,646 covered by the operations in FY2007, 1,780 installations were found tampered. Random checking of Large Power Consumer (LPC) installations was also undertaken. With the combined measures, losses were reduced from 13.79 per cent to 11.74 per cent.



The key initiative to improve supply reliability saw several major 33 kV projects implemented to strengthen the distribution networks. The new 33/11 kV substations have provided new injection points to strengthen 11 kV distribution network. The major projects commissioned were -

The 11 kV projects such as the installation of auto-reclosers and the changing from bare to aerial cables, have also been implemented to improve supply reliability. A major maintenance exercise was carried out for all the PPUs. Distribution SAIDI was reduced from 2,581 to 1,850 minutes in spite of having more scheduled shut-downs during the year for more maintenance and system upgrades.

Today with a resource of 2,326 employees, SESB continues to develop its staff competency in order to enhance the productivity of the company. During FY 2007, the company conducted several workshops and training such as 5S, Management Tools, SWOT, AKP Assessor Course and many more for both the executives and non-executives. SESB also facilitated the opportunity for employees to be involved in quality improvement activities such as 5S, CFT and WIT. The company also conducted the Acid Test in June 2007 to evaluate the effectiveness of employee involvement. The AKP Score for SESB in this Financial Year is 700. The achievement in AKP will be the prime mover for SESB to move forward to achieve service excellence in the year 2012.

33/11 kV ABC System for Kalumpang – Balung – Wakuba, Tawau

Projects Completion Date

PPU Sim Sim, Sandakan

Supply Erection Testing and commissioning of new 33 kV ABC from PMU Segaliud

Erection Testing and Commissioning double circuit 33 kV U/G Cable & Optical Cable from SSU Sibuga to PPU Permai, Sandakan

19 May 2007

26 July 2007

12 April 2007

28 July 2007


Other Services


Other Services

Yayasan Tenaga NasionalTNB executes a major part of its corporate social responsibility through a trust body, Yayasan Tenaga Nasional (YTN), mainly in education sponsorship and welfare contributions.

For FY2007, YTN provided scholarships and study loans amounting to RM47.3 million to top and deserving students to pursue their tertiary education at local and world-renowned universities abroad. This is a direct contribution towards the development of professional manpower for TNB and the country. Since its inception, YTN has provided education sponsorship to more than 6,300 students.

YTN had also contributed RM1.36 million in FY2007 to community programmes such as the annual “Program Jejak Kegemilangan” and “Program Kem Remaja Bestari”.

During “Program Jejak Kegemilangan” held this Financial Year, 142 students with good academic results from rural areas and underprivileged families from all over Malaysia were selected for a study visit to Kuala Lumpur, including University Tenaga Nasional (UNITEN). The objective is to give exposure and inspire them to continuously achieve academic excellence.

“Program Kem Remaja Bestari” is essentially an educational camp programme for children of TNB employees as well as orphans. It is intended to guide and inspire participating students to perform well in public examinations such as the UPSR, PMR and SPM. About 1,550 students attended these annual camps, which were held simultaneously in four regional zones - North, South, East and Central, with the assistance of local TNB management. This programme implemented since 2001 has a yearly budget of RM500,000.

To further its cause, other contributions made during the year included RM250,000 to the Ministry of Education for the setting up of Pusat Pendidikan Khas, Putrajaya for handicapped children RM250,000 to Institut Jantung Negara (IJN) Foundation to sponsor infant/young heart patients requiring surgery, RM200,000 to National Cancer Council (MAKNA) the Mobile Cancer Screening Programme (MCSP) and RM100,000 for the supply of selected electrical appliances to various orphanages with the purpose of improving their living conditions.


Other Services

Corporate

Communications

Corporate Communications as the custodian of TNBs image, branding and relationship management plays an important support services role to the Company. The Department drives various initiative to enhance TNB as an ethical, caring and highly respected energy provider in Malaysia. It also implements various initiatives to foster a positive image among our stakeholders, in particular the Government, the media and the general public.

The Department is restructured into two units, Internal and External, streamlined with the goal of delivering effective communications in the most relevant manner. Internal Communication is responsible for communications with regards to TNB’s internal publics, events and sports management services, publications and website management. External Communications deals with media relations, branding as well as Government and Community Relations.

In support of the strategic initiatives undertaken by the Company such as T7 and SE 10/10, about 30 internal communication roadshows were held with the objective of creating awareness and of instilling commitment to all citizens of TNB to ensure the success and achievement of these strategic plans. These efforts were undertaken as all employees plays an important role as flagbearers of the Company, hence contributing towards strengthening the corporate image of the Company in the various roles that they play.

A total of 13 major corporate events such as opening ceremonies of TNB plants and premises were held during the year with the purpose of improving corporate image besides fostering relationships with the various stakeholders. The Department also organised various exhibitions which acted as a platform to improve networking and to support the business expansion strategy. Some of the exhibitions that we participated have won the Company a number of awards such as:-

• Best Show Award for Best New Services at ACM Expo and Exhibition 2006 held in September 2006

• Best Themed Booth for The 50th Merdeka held from 30 August to 2 September 2007 in Putra World Trade Centre, Kuala Lumpur

The Corporate Communications Department also made TNB proud with some achievements that included:

• NACRA Silver Award for TNB Annual Report 2005 (adjucated in 2006)

• Three IABC Malaysia Silver Quill Awards 2007 for the TNB Annual Report 2007

The Corporate Communications also oversees and implements the various processes deemed mandatory for the MS ISO 2001:9000 certification received by TNB in 2006. Beyond that it acts the corporate complaints management centre, handling issues at the corporate level.

In essence, Corporate Communications continues to play an active role in supporting TNB’s strategic initiatives, adding intangibles values in terms of improved corporate image and relationship with important stakeholders.


Other Services

Productivity And Quality Management The Productivity and Quality Management Department (PQM) is responsible for improving TNB’s overall productivity and quality.

After five years of effort in bringing about change through it’s 32 key initiatives under the T7 strategy which ends on 31st August, 2007 this unit is currently developing a strategy called Service Excellence 10/10 .

Throughout the year there are ongoing efforts to review and improve existing processes. In addition to that PMU has embarked on steps to assist SESB in their efforts to obtain MS ISO 9000:2000 certification.

The AKP initiative continues to be carried out this year. Satisfactory results where the average achievement rose from 687 points to 728 points as compared to the previous year were recorded. Apart from using the AKP initiative to improve the business units, these results were also used as a benchmark in preparation for TNBs’ participation in the upcoming Prime Minister Industry Excellence Award.

So far TNB still continues it’s tradition towards excellence especially through WIT activities. The following are records of some WIT’s achievement throughout FY2007:

1. The “Anugerah Panca Satya” award – for the continued participation in the Indonesian Quality Convention since 2002.

2. “Anugerah Prisma Kategori 1” award– Gold Medal was conferred to the WIT named P-Power of SJ Pasir Gudang, Johor at the Indonesian Quality Convention 2006 in Bali Indonesia.

3. The “Johan Sektor Perkhidmatan” was conferred to a WIT named K-Power from TNBD Kuala Lipis Pahang at the National ICC Convention 2006 held at Genting Highlands from 19-21 September, 2006.

4. “Johan Sektor Perkhidmatan” and “Johan Keseluruhan” was awarded to a WIT named Circle Point, a WIT from TNBD Kuantan, Pahang at the National ICC Convention 2007.

5. Silver Award was awarded to K-Power, a WIT from TNBD Kuala Lipis Pahang at the International Convention of Quality Control Circles (ICQCC) 2007 in Beijing on 23-26 October, 2007.

Beginning this year, TNB also implemented 5S initiative which was launched throughout the organisation in June 2007.


Other Services

Internal Affairs

Internal Affairs at TNB has the key objective of reducing misconduct in the Company through managing, conducting and monitoring of disciplinary actions taken against employees. Reporting direct to the Board of Directors’ Disciplinary Committee, Internal Affairs is tasked with investigating, deciding prima facie, prosecution, conciliation, defending cases in industrial courts, research and development as well as educating and training TNB employees on matters of discipline.

During the year under review, the Whistle Blowing Procedure was introduced. The process for “caught red-handed cases” was also introduced. As a result of the various initiatives and efforts in FY2007, disciplinary cases at prosecution level were reduced to 109 from 158, reflecting a drop by 31 per cent.


Other Services


Occupational Safety& Health Report


Occupational Safety Review & Health Report

Introduction

The ever-changing environment of the workplace and the diversity of tasks to be undertaken especially during breakdowns and emergency situations, pose a great challenge to the Company and its personnels to ensure immediate restoration of electrical supply while making sure that safety issues are at the same time prioritised. Hence, as a saying goes, “No job so important, no task so urgent, that time cannot be taken to do the job safely“, means striking a balance which have to be met without compromise. In trying to meet all these challenges, the management of Occupational Safety and Health (OSH) has, within the operational processes, been able to effectively reduce losses due to unnecessary accident. TNB has put in place a comprehensive OSH management system base which resulted in certain stations being recognised and awarded prestigious OSH awards by governmental and non-governmental institutions.

Service Quality Enhancement

Management of OSH with the new structure within the divisions of TNB (that has been approved by the management since reported in the previous Financial Year) has brought tremendous improvement in OSH across the board. The numbers of qualified Safety and Health Officers (SHO) has been increased to ensure TNB’s readiness to accept and adopt any changes in the requirements of the government enforcement agencies. Second level Safety Inspectors (SI) and third level Safety Representatives (SR), were appointed to ensure OSH performance at the far end of the job chain, are monitored and reported to the management.

MS ISO 9001:2000 documents are being scrutinised further to ensure OSH requirements in processes and procedures are being incorporated in the OSH framework to ensure transparency of the management on these issues.


OSH Management System

The OSH Management System, aptly known as, the “Safety Excellence Management System, (SEMS)”, has gone a long way in managing OSH in TNB. Challenges from certification bodies to ensure best OSH performance, saw SEMS being further enhanced to meet these requirements. The system has been fine-tuned to meet the requirements of the OHSAS 18001:2000 and the MS 1722, and various programmes are in place to adapt to new challenges.

Trainings are conducted continuously for all personnel requiring competency in managing, implementing and auditing as required by the system. ICT Division and TNB Engineering Corporation Sdn Bhd, has started their paces to achieve excellence, Tenaga Switchgear Sdn Bhd, has been handed their Baseline Report after a Baseline Audit conducted by the Occupational Safety, Health and Environment Department (OSHED), under the Group Human Resource Division.

OSH Excellence Award

In recognition of the diligent OSH management by TNB, the prestigious “Anugerah Kecemerlangan Keselamatan Pekerjaan”, was awarded to the best three ranking stations in the respective core divisions, the best in terms of over-all performance in distribution state and several best performance awarded to sub-division station. The standard of OSH management performance has continuously been reviewed to ensure new requirements of the law are always being incorporated into the system.

The National Award for OSH Excellence 2006 saw four stations being awarded comprising of three generation and one distribution stations. The stations are Stesen Janaelektrik Chenderoh and Stesen Janaelektrik Sultan Ismail Petra, received Gold Award while Stesen Janaelektrik Tuanku Jaafar and TNB Distribution (Johore), Silver Award.

The Malaysian Society of Occupational Safety and Health Award 2006, saw, five generation stations being awarded in the utilities sector. Gold (Class II) Award was received by; Serdang Power Station (now known as Putrajaya Power Station), Stesen Janaelektrik Sultan Iskandar, Stesen Janaelektrik Tuanku Jaafar and Stesen Janaelektrik Jambatan Connaught and Silver Award was received by Stesen Janaelektrik Gelugor.



Emergency Response

In the effort to preserve life and assets, alertness and readiness for any crisis and emergency is the key factor. Planning for eventualities takes center stage with new threats coming from unexpected angles. New risks were identified and efforts were taken to ensure immediate response can be exercised should any threat arises. Emergency Response Plan were reviewed and the latest techniques were sought from the market to ensure immediate response.

Emergency Response Personnel were trained by the best available training facility in the country and other personnel were trained to act safely during crisis.

OSH Awareness and Training

Top level management at the helm of TNB were given continuous exposure on OSH management knowledge by CEO’s and experts of leading OSH organisation. The commitment to drive TNB to world OSH excellence requires maximum effort on resources available. Thus, charting TNB’s course towards world’s best will be fully supported with the knowledge and experience gained.

All staffs are required to attend at least one day of training and exposure each on OSH while OSH practitioners were required to impart OSH knowledge. Continuous trainings, seminars, conferences, symposiums and workshops are identified for all levels, for participants to gain exposure on new developments in OSH. Trainers were also identified to assist the National Institute of Occupational Safety and Health (NIOSH) in their programmes that are related to the electrical utility industry.

Contractors working in TNB are made aware on the importance of OSH. NIOSH-TNB Safety Passport was developed in a joint effort with NIOSH to ensure contractors are aware of the basic requirements of OSH. This programme will later be made compulsory to all contractors working in TNB. This programme is also conducted for field supervisors, to ensure cognisance and coordination of TNB’s efforts to eradicate ignorance of contractors on OSH matters.

The public was not forgotten in the quest to impart electrical safety knowledge. Schools, non-government organisation, industries and various associations were assisted on their request, to ensure safety in the use of electricity. Safety Campaigns were also carried out by divisions to involve all staffs as well as the public in the effort to discharge TNB’s corporate social responsibility.



Statement ofEnvironment

TNB is committed to achieving excellence

in environmental management. This is thus

part of our Corporate Social Responsibility in

preserving the environment for the benefit of

future generations

“

“


TNB’s Environmental Policy

• Protect, conserve and improve the environment in all of its operations and decision-making

• Comply with all applicable laws and regulations, and establish standards that will lead to continuous improvement of its environmental performance

• Implement an Environmental Management System (EMS) that will ensure that all impacts on the environment from its operations are eliminated or minimised

• Carry out environmental audits at required intervals to ensure compliance with its Corporate Environmental commitments, and implement environmental training programmes for our employees to develop a high level of competency

• Promote environmental awareness amongst contractors, the public and other stakeholders and to make available the environmental policy to them

Some of the initiatives implemented during the year:-

A. Recycling Programme

The waste recycling and reduction programme is included in the EMS initiatives within respective divisions. Currently, most of the power stations are implementing an Environmental Management programme to minimise wastage and reduce consumption of resources. Some of the stations have also assigned Recycling Centres at strategic places in the station. Continuous staff awareness programmes were undertaken via staff monthly gatherings.

(i) Condition Monitoring Programme (CMP) : Transmission Division is continuously implementing CMP.

(ii) Recycling old power cables : Recycling old power cables is implemented via the Scrap Committee at each region. The recycling process of old power cables can be conducted upon approval from this committee. Usually, the committee will appoint a recycling company to handle the scrap materials for further processing.

Statement of Environment


Statement of Environment

B. Scheduled Waste Disposal

TNB Scheduled Waste Management programme has been implemented to comply with the Environmental Quality (Scheduled Wastes) Regulation 2005. Scheduled wastes include all waste generated periodically that requires disposal by DoE-registered contractors.

All scheduled wastes generated are notified to DoE and temporarily stored at Scheduled Waste Store prior to disposal. EMR is responsible to record, monitor, and manage wastes generated at their respective units.

C. Environmental Management Plan

i) Environment Monitoring Programme

The Environmental Management Plan was conducted as per requirements for licences under the Environmental Quality Act, 1974 or in accordance with the specific DoE’s Detailed EIA or EIA approval conditions for the respective power stations. In general, the monitoring programme focused on monitoring the air quality, water quality and boundary noise level.

TNB is continuously installing efficient and environmentally friendly equipment as well as the Continuous Emission Monitoring System (CEMS) in the new power stations.

ii) Coal Dust Study

TNB Research Sdn. Bhd. has designed and developed a Laboratory Scale Gasifier and is currently performing tests on coal gasification using various types of coal in the gasifier. The results of gasification can help researchers increase their understanding and knowledge of the gasification process in general.

D. Halon Replacement

The halon replacement programme is among the key focus areas of the Network Maintenance (NM) Department of Transmission Division. Gradual halon gas replacement with new approved gas in the existing fire fighting system is implemented under the NM department’s 2004 - 2008 Business Plan.


E. Environmental Audits And MS ISO Certification

All the power stations have a complete set of MS ISO 14001 documentation and are currently implementing EMS based on the standards. Recently, Manjung PS also received MS ISO 14001 certification from SIRIM QAS. It was the 11th power station to achieve MS ISO 14001 certification.

Annual Environmental Management Audits or EMS based on MS ISO 14001 are conducted at all power stations by TNB Generation Division auditors (GRMU). The EMS reassessment audit is conducted once per year by SIRIM QAS International.

F. Crisis Management

The Disaster Team is represented by the Emergency Response Team which is the main component of the TNB Safety Excellence Management System (SEMS) which is implemented at all divisions.

SEMS will identify every possible emergency that can happen in the division business activities and consequently an Emergency Response Plan is developed as mitigation measures.

All divisions also conduct an annual ERP exercise that involves all staff and relevant authorities and agencies.


TNB recognises that effective risk management is the key element in the Company’s overall strategy with a focus on the on-going implementation of an Enterprise-Wide Risk Management (EWRM) framework to ensure that the major areas of risks are managed and controlled effectively.

The EWRM framework ensures a uniform application of risk management across the Group through standardised risk management processes and Group-wide exchange of risk information.

Enterprise-Wide Risk Management Framework

The TNB EWRM framework sets the foundation for a structured risk management framework that consists of a complete cycle involving risk assessment, reporting, treatment, monitoring and review of the business risks within the Group.

Enterprise Wide Risk Management


Enterprise-Wide Risk Management

Risk Management Policy

The TNB EWRM Policy has been reviewed and amended accordingly to further enhance the effectiveness of the framework. This policy that has been approved by the BAC aims at achieving the following:

• simplifying the Content Structure and the EWRM Policy Summary;• incorporating the Group Risk Management Working Committee (GRMWC) Roles and

Responsibilities, Risk Manager and Risk Coordinator Roles and Responsibilities;• extending the applicability of the Policy to major projects and all new business ventures other

than operations;• establishing of the Divisional Risk Management Committee or utilisation of existing Divisional

Management Committee to discuss risk management issues at the Operating Divisional level; • Approving authority on amendments of the EWRM policy and procedures at the Group Risk

Management Committee (GRMC) and the Group Risk Management Working Committee (GRMWC);

• revising the regularity of reporting for GRMWC.

Risk Management Structure

The EWRM framework requires that a risk management structure be adopted to ensure that roles, responsibilities and accountabilities for managing risk are clearly defined and communicated. The risk management structure comprises various levels of authority in the Group i.e. the Board of Directors, Board Audit Committee, Group Risk Management Committee (GRMC), Group Risk Management Working Committee (GRMWC), Enterprise-Wide Risk Management (EWRM) Department and TNB Operating Divisions.

BOARD OF DIRECTORS

BOARD AUDIT COMMITTEE

Group Risk Management Committee (GRMC)

Group Risk Management Working Committee (GRMWC)

EWRM Department Group Internal Audit

ManagementServices

CoreBusiness

Non-CoreBusiness


Risk Assessment Process

In supporting the framework, the Group Wide Risk Assessment Process was also established to standardise the risk management methodology used throughout the Group which focuses on risk assessment, risk treatment, risk reporting as well as risk monitoring and review. In order to ensure the comprehensiveness of the risk assessment process and that the principal risks that may materially affect the business are considered, several broad risks areas which comprise of Governance, Operational, Financial, Technology, Integrity, Compliance, Preparedness, Environment, Reputation, Human Resources and Management Information are evaluated.

Risk Profile Review and Verification

Risk profile review and verification sessions for the TNB’s operating divisions have been carried out to validate the changes made to the operating risks as well as to ensure that all risk profiles remain aligned with the present TNB’s business strategies and objectives in the Financial Year. More than 30 sessions analysing more than 75 risk profiles were carried out by the EWRM Department together with the relevant Risk Managers and Risk Coordinators as well as Risk Owners.

In addition, risk profile development activities are carried out continuously to be consistent with the objectives of EWRM framework to ensure that comprehensive risk identification and assessment efforts are carried out across the Group.

Risk Communication Risk communication, being one of the important elements in the EWRM framework as it focuses on the dissemination of risk information at all levels, forms an integral part of the risk management activities in TNB.




Risk Coordinators Forum

Two Risk Coordinator Forums were organised and used as a platform to communicate decisions made by GRMWC, GRMC and BAC to the risk managers and risk coordinators, brainstorm the way forward on risk related issues and highlight as well as resolve issues faced in the process of implementing the EWRM framework. The forums held in this Financial Year were attended by risk managers and risk coordinators as well as senior management across the Group. External speakers from other GLCs were invited to share their experiences on the implementation of enterprise risk management.

EWRM Website

The EWRM website has now been integrated into the revamped Group Finance website and currently being finalised to be published.

Risk Analysis

A risk analysis was carried out on risk of accidents in TNB focusing on areas causing fatality and bodily injury to TNB personnel. The recommendations had been presented and approved by GRMWC, GRMC and BAC and are being implemented at various levels. The risk analysis paper had also been presented at two safety conferences in TNB.

As for the risk analysis that has been previously carried out i.e. legal and fraud risks in TNB, the implementation of the recommendations are at a mature stage and some of the recommendations have been completed i.e. TNB Code of Ethics and Whistle Blowing procedures are currently being communicated down to all levels in TNB while the legal risks taskforce has identified the top three contributing factors to TNB’s legal risks exposures.

TNB Risk Information System

TNB Risk Information System Phase 2 involving enhancement to the system has been successfully rolled out to all divisions and relevant trainings was provided to all.


Streamlining of Risk Management Activities with Key Activities/ Processes The approved process of streamlining the risk management activities with business planning and budgeting has been implemented to ensure that controls and mitigation plans for risk management are built into the business plans, budgets and key performance indicators of the Group.

Development of Curriculum for Risk Management

To further enhance and inculcate the risk management culture in TNB, EWRM has developed the first EWRM Awareness Module with guidance and cooperation from our trainning centre, ILSAS. In view of this, a few Divisional Risk Managers/Coordinators and EWRM personnel had been trained as Certified Trainers. The module will officially be made a part of the training module in ILSAS and is targeted to be implemented in FY2008.




The TNB Chief Financial Officer/ Chief Risk Officer delivering the welcoming address at the TNB Risk Coordinators’ Forum.

Corporate Emergency Response Plan (CERP)

Preparedness

The TNB CERP Steering Committee deliberated on several matters including the compilation, printing and distribution of the TNB CERP Document – System Related which has been printed and distributed to critical personnel within TNB. An awareness training programme was also carried out for the relevant personnel throughout TNB and SESB. The training programme would be extended to all wholly-owned subsidiaries in Peninsular Malaysia by the next Financial Year.

Collaboration with External Parties / Government Agencies

As an essential service and crucial towards TNB ensuring a potent state of National Security, continues to collaborate with external parties and various Government Agencies in particular the National Security Department and the National Security Council in the Prime Minister’s Department and the Ministry of Health.

TNB participated in the “Pameran Sempena Seminar Sasaran Penting” organised by the Chief Government Security Officer with the Ministry of Internal Security Malaysia, aimed at creating awareness and furnishing information on all government and private agencies that are listed as Critical Installations.

Most of the generation power stations have carried out scheduled mock drills and as the secretariat of TNB CERP, EWRM has participated in these exercises.

Generation Division had activated their annual ‘OPSTRANG’ exercise aimed to:-

• ensure that all black start diesel generators are able to run and synchronised to bars

• assess the Power Stations readiness in responding to emergency or crisis situations

• test the communication system for all power stations, and

• test the activation of the operations rooms at all power stations.

TNB also participated in the Chemical, Biological, Radiation and Nuclear Awareness Programme which was organised by the Crisis and Disaster Management Division, National Security Council, Prime Minister’s Department following which a mock drill was carried out at the KLCC LRT Station.

Transmission Division, with Generation and Distribution Division had successful conducted two Blackstart test Communication drills at KLPP in January 2007 and at Putrajaya in July 2007. The purpose was to ensure good coordination with all parties especially power stations,Transmission Division and Distribution Division.


CorporateCalendar

1. 4 September

TNB held the TNB Staff Gathering

in conjunction with its 57th

Anniversary at TNB Headquarters.

2. 6 September

TNB honoured the top

management retirees at a

special function “Majlis Jasamu

Dikenang” at KL Hilton Hotel,

Kuala Lumpur.

September 2006September 2006

1. 3 October

TNB organised “Majlis Berbuka

Puasa 2006” at the Balai Islam,

TNB Headquarters.

2. 19 October

Launching of TNB Hari Raya

Television Commercial 2006

- “Majlis Semanis-manis Dodol

Manis Lagi Dibuat Bersama” at TNB

Headquarters.

October 2006October 2006

1

2

1

2


Corporate Calendar

1. 4 November

TNB held the 2006 Deepavali

Celebration at the TNB Sports

Complex, Kuala Lumpur.

2. 16 November

TNB held the 2006 Hari Raya

Aidilfitri Celebration at the TNB

Sports Complex, Kuala Lumpur.

3. 21 - 23 November

TNB participated in the Asia

Pacific Regional Conference &

Exhibition at Sunway Convention

Centre, Petaling Jaya, Selangor.

November 2006November 2006

1. 12 December

4th T7 Review Session held at

Hotel Armada, Petaling Jaya,

Selangor.

2. 14 December

TNB held its 2006 Annual General

Meeting at the TNB Sports

Complex, Kuala Lumpur.

December 2006December 2006

1

2

3

1

2


Corporate Calendar

1. 17 January

TNB’s Connaught Bridge Power

Station celebrates its achievement

of 200,000 Equivalent Operating

Hours (EOH) on two SIEMENS

branded V94.2 gas turbines at

Connaught Bridge Power Station.

2. 19 January

TNB held the 2007 New Year Staff

Gathering at TNB Sports Complex,

Kuala Lumpur.

3. 24 - 25 January

SIRIM conducted MS ISO 9001:

2000 Surveillance Audit for

TNB Corporate Level, at TNB

Headquarters.

January 2007January 2007

1. 5 February

TNB held Occupational, Health

and Safety Seminar for TNB Top

Management at Holiday Villa,

Subang Jaya, Selangor.

2. 23 February

“Soft Launching and Awareness

Session” of Prime Minister’s

Industry Excellence Award at Bilik

Kenyir, TNB Headquarters.

3. 26 February

TNB held the 2007 Chinese New

Year Celebration at the TNB

Sports Complex, Kuala Lumpur.

February 2007February 2007

1

2

3

1

2

3


Corporate Calendar

1. 9 - 11 March

TNB-Singapore Power Friendly

Games held in Kuala Lumpur.

2. 20 - 21 March

TNB participated in the Vendor

Network Programme organised

by the Ministry of Entrepreneur

and Cooperative Development

(MECD) at Kuala Lumpur

Convention Centre.

March 2007March 2007

1. 5 April

TNB Switchgear Factory was officiated

by Y.Bhg. Dato’ Seri Rafidah Aziz,

Minister of International Trade and

Industry.

2. 30 April

Official Opening Ceremony of Sultan

Azlan Power Station, Manjung by

DYMM Sultan Perak.

April 2007April 2007

1

2

1

2


Corporate Calendar

1. 5 May

TNB won four awards - the

“Anugerah Harapan Majikan

Berdaya Saing kategori Industri

Besar”, “Anugerah Tokoh Pekerja

Lelaki (Bukan Eksekutif)”, “Anugerah

Tokoh Pekerja Lelaki (Eksekutif)”

and “Anugerah Harapan Tokoh

Pekerja Lelaki (Bukan Eksekutif)”

at the National Labour Day 2007

celebration held in Putra Stadium,

Bukit Jalil, Kuala Lumpur

2. 15 May

TNB recognised 471 long serving

staff at the Long Service Award

Ceremony for Eastern Region at

Hotel Grand Riverview, Kota Bharu,

Kelantan.

May 2007May 2007

1. 1 - 3 June

TNB participated in the 4th

International Trade Exhibition

& Conference ‘Enterprise Asia

2007’ at Putra World Trade Centre

(PWTC), Kuala Lumpur.

2. 5 - 8 June

TNB participated in SMIDEX

2007 Exhibition at Kuala Lumpur

Convention Centre.

June 2007June 2007


Corporate Calendar

1. 14 July

TNB announced its Third Quarter

Financial Results for FY 2007

at the Analyst Briefing at TNB

Headquarters.

2. 14 July

TNB organised Corporate TNB Family

Day 2007 at TNB Sports Complex,

Kuala Lumpur.

3. 23 July

Launching of TNB Code of Ethics and

Whistle Blowing Initiative at TNB

Headquarters.

July 2007July 2007

1. 4 August

TNB participated in the “Majlis

Bersama TNB/GLC dan Persatuan

Pekedai Barang-Barang Lusuh

Malaysia” at TNB Sports Complex,

Kuala Lumpur.

2. 23 - 25 August

“Majlis Tilawah Al-Quran TNB

Peringkat Kebangsaan” held at

Intekma Hotel @ UITM Shah Alam,

Selangor.

3. 30 August - 2 September

TNB participated in the 50th Merdeka

Expo at Putra World Trade Centre

(PWTC), Kuala Lumpur.

August 2007August 2007


Financial Calendar

Quarterly Results Announcement Date

First Quarter ended 30 November 2006

25 January 2007

Second Quarter ended 28 February 2007

16 April 2007

Third Quarter ended 31 May 2007

13 July 2007

Fourth Quarter ended 31 August 2007

25 October 2007

Distribution of Annual Report 21 November 2007

Seventeenth Annual General Meeting 13 December 2007


Directors’ Report 2 - 5 Income Statements 6 Balance Sheets 7 - 8 Statements of Changes in Equity 9 - �0Cash Flow Statements �� - �2 Notes to the Financial Statements �3 - 89 Statement by Directors 90Statutory Declaration 9� Auditors’ Report to the Members of Tenaga Nasional Berhad 92 - 93 Analysis of Shareholdings 94 - 96 Analysis of Convertible Redeemable Income Securities 2004-2009 (“CRIS”) Holdings 97 - 99 Share Price Tracking �00 Property List �0� - �04 Proxy Form

PART II

Financial ReportTNB revenue, profit hit record highs New Straits Times

TNB profit soars 88%The Star

Tenaga post record net profit of RM4b in FY07Malaysian Reserve

Tenaga FY07 net profit soars 91 % to RM4.1bThe Edge FinancialDaily


Directors’ Report

Tenaga Nasional Berhad (Incorporated in Malaysia)

DIRECTORS’ REPORT

The Directors have pleasure in submitting their Report with the audited financial statements of the Group and the Company for the financial year ended 31 August 2007.

PRINCIPAL ACTIVITIES

The Group and the Company are primarily involved in the business of the generation, transmission, distribution and sale of electricity and those tabulated in Note 16 to the financial statements.

There have been no significant changes in these activities during the financial year under review.

FINANCIAL RESULTS

Group Company RM’million RM’million

Profit for the year attributable to - Equity holders of the Company 4,061.1 3,514.5- Minority interests 6.5 0 Profit for the year 4,067.6 3,514.5

DIVIDENDS

The dividends paid or declared since 31 August 2006 were as follows: RM’million

In respect of the financial year ended 31 August 2006 as shown in the Directors’ Report for that financial year:

Final dividend of 12.0 sen gross per ordinary share, less income tax at 27% and 2.0 sen per ordinary share, tax exempt, paid on 4 January 2007 459.7 In respect of the financial year ended 31 August 2007: First interim dividend of 10.0 sen gross per ordinary share, less income tax at 27%, paid on 7 June 2007 315.8

Second interim dividend of 10.0 sen gross per ordinary share, less income tax at 27%, paid on 30 August 2007 316.2

For the financial year ended 31 August 2007, the Directors had on 25 October 2007 recommended the payment of a final dividend of 16.3 sen gross per ordinary share, less income tax at 26%, subject to the approval of the shareholders at the forthcoming Annual General Meeting of the Company. The Books Closure and Payment dates will be announced in due course.

RESERVES AND PROVISIONS

All material transfers to or from reserves and provisions during the financial year are shown in the financial statements.


Directors’ Report (Continued)

ISSUE OF SHARES

During the financial year, 196,538,731 new ordinary shares of RM1.00 each were issued by the Company comprising:-

(a) 66,736,312 ordinary shares of RM1.00 each in TNB pursuant to the Employees’ Share Option Scheme II (‘ESOS II’) at exercise prices of RM6.71, RM6.99, RM7.42, RM7.33, RM7.75, RM7.80, RM9.189 or RM11.07 per share,

(b) 114,699,925 ordinary shares of RM1.00 each in TNB pursuant to the exchange of Guaranteed Exchangeable Bonds at the exercise price of RM8.10 per share, and

(c) 15,102,494 ordinary shares of RM1.00 each in TNB pursuant to the conversion of Unsecured Convertible Redeemable Income Securities at the price of RM9.18 per share.

The new ordinary shares issued during the financial year ranked pari passu in all respects with the existing ordinary shares of the Company.

EMPLOYEES’ SHARE OPTION SCHEME (‘ESOS’)

Options under the ESOS were granted to eligible Directors, employees and retirees of the Group to subscribe for ordinary shares of RM1.00 each in TNB. The first ESOS expired on 11 May 2002.

The Company implemented a new Employees’ Share Option Scheme II (‘ESOS II’) on 8 July 2003 for a period of 10 years. The ESOS II is governed by the bye-laws, which were approved by the shareholders at the Extraordinary General Meeting (‘EGM’) held on 29 May 2003 and amended at the EGM held on 15 December 2005.

The main features and movement during the financial year in the number of options over the shares of the Company is set out in Note 35 to the financial statements.

The Company has been granted an exemption by the Companies Commission of Malaysia via a letter dated 26 September 2007 from having to disclose in this Report the name of the persons to whom options have been granted during the year and details of their holdings pursuant to Section 169 (11) of the Companies Act, 1965 except for information on employees who were granted options representing 450,000 ordinary shares and above.

The list of employees of the Company who were granted options representing 450,000 ordinary shares and above under ESOS II are as follows:- No. of No. of ordinary ordinary shares shares granted exercised and acquired under the Name Designation under the options options Datuk Wira Md Sidek Senior Vice President, bin Ahmad Operations and Technical 515,000 470,000

Dato’ Abdul Razak Vice President, bin Abdul Majid Generation 575,000 100,000

Dato’ Mohd Izzaddin bin Idris Chief Financial Officer 490,000 0

Dato’ Ir Aishah Vice President, binti Dato’ Haji Abdul Rauf Distribution 555,000 152,500

Dato’ Hjh. Che Zurina binti Zainul Abidin Vice President, Corporate Services 530,000 230,000

Dato’ Haji Nik Ibrahim Vice President, bin Nik Mohamed Investment Management 537,500 310,000

Dato’ Kamaruzzaman bin Jusoh Vice President, Human Resource 554,000 186,500

None of the subsidiaries’ employees were granted options representing 450,000 ordinary shares and above under ESOS II.



DIRECTORS

The Directors who have held office during the period since the date of the last Report are:

Tan Sri Leo Moggie

Dato’ Sri Che Khalib bin Mohamad Noh Dato’ Puteh Rukiah binti Abd Majid

Mohammad Zainal bin Shaari (Resigned as alternate director to Dato’ Azman bin Mokhtar on 31 March 2007. Reappointed as Director on 31 March 2007) Tan Sri Dato’ Lau Yin Pin @ Lau Yen Beng Tan Sri Dato’ Hari Narayanan a/l Govindasamy Dato’ Zainal Abidin bin Putih Datuk Mohd Zaid bin Ibrahim Dato’ Fuad bin Jaafar (Appointed on 15 March 2007) Datuk Zalekha binti Hassan (Alternate Director to Dato’ Puteh Rukiah binti Abd Majid)

Dato’ Azman bin Mokhtar (Resigned on 31 March 2007)

DIRECTORS’ BENEFITS

During and at the end of the financial year, no arrangements subsisted to which the Company is a party, being arrangements with the object or objects of enabling Directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate, except for the options granted to the President/Chief Executive Officer pursuant to the ESOS II.

Since the end of the previous financial year, no Director has received or become entitled to receive a benefit (other than benefits disclosed as Directors’ remuneration and benefits in Note 5 to the financial statements) by reason of a contract made by the Company or a related corporation with the Director or with a firm of which the Director is a partner, or with a company in which the Director has a substantial financial interest.

DIRECTORS’ INTERESTS IN SHARES AND DEBENTURES

According to the Register of Directors’ shareholdings, particulars of the interests of Directors who held office as at the end of the financial year in shares in the Company are as follows:

Number of ordinary shares of RM1.00 each As at As at 1.9.2006 Acquired Disposed 31.8.2007

Tan Sri Leo Moggie 0 40,000 0 40,000 Dato’ Zainal Abidin bin Putih 1,250 0 0 1,250 Dato’ Fuad bin Jaafar 62,500 0 0 62,500

Options over ordinary shares of RM1.00 each As at As at 1.9.2006 Granted Exercised 31.8.2007

Dato’ Sri Che Khalib bin Mohamad Noh 375,000 360,000 0 735,000

According to the Register of Directors, none of the other Directors held any options over shares in the Company.

No other Directors in office at the end of the financial year held any other interest in shares and debentures of the Company and its related corporations.



STATUTORY INFORMATION ON THE FINANCIAL STATEMENTS

Before the income statements and balance sheets of the Group and of the Company were made out, the Directors took reasonable steps:

(a) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate allowance had been made for doubtful debts; and

(b) to ensure that any current assets, other than debts, which were unlikely to be realised in the ordinary course of business their values as shown in the accounting records of the Group and of the Company had been written down to an amount which they might be expected to be realised.

At the date of this Report, the Directors are not aware of any circumstances:

(a) which would render the amounts written off for bad debts or the amount of the allowance for doubtful debts in the financial statements of the Group and of the Company inadequate to any substantial extent; or

(b) which would render the values attributed to current assets in the financial statements of the Group and of the Company misleading; or

(c) which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate.

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, in the opinion of the Directors, will or may affect the ability of the Group or of the Company to meet their obligations when they fall due.

At the date of this Report, there does not exist:

(a) 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 liability of any other person; or

(b) any contingent liability of the Group and of the Company which has arisen since the end of the financial year.

OTHER STATUTORY INFORMATION

At the date of this Report, the Directors are not aware of any circumstances not otherwise dealt with in this Report or the financial statements which would render any amount stated in the financial statements misleading.

In the opinion of the Directors, there has not arisen in the interval between the end of the financial year and the date of this Report any item, transaction or event of a material and unusual nature likely to affect substantially the results of the operations of the Group or of the Company for the financial year in which this Report is made.

AUDITORS

The auditors, PricewaterhouseCoopers, have expressed their willingness to continue in office.

Signed on behalf of the Board of Directors, in accordance with their resolution dated 31 October 2007.

TAN SRI LEO MOGGIE DATO’ SRI CHE KHALIB BIN MOHAMAD NOH CHAIRMAN PRESIDENT/CHIEFEXECUTIVEOFFICER


Income Statementsfor the financial year ended 3� August 2007

Group Company Note 2007 2006 2007 2006 RM’million RM’million RM’million RM’million

Revenue 4 23,320.4 20,384.2 21,400.6 18,815.1

Operating expenses 5 (18,371.4) (16,916.9) (17,441.8) (16,601.6) Other operating income 7 593.7 489.3 793.9 691.0 Operating profit 5,542.7 3,956.6 4,752.7 2,904.5 Foreign exchange gain 8 485.8 324.9 341.2 197.3 Share of results of associates 42.4 14.6 0 0 Profit before finance cost 6,070.9 4,296.1 5,093.9 3,101.8 Finance cost 9 (1,305.0) (1,539.3) (969.5) (1,101.2)

Profit before taxation and zakat 4,765.9 2,756.8 4,124.4 2,000.6

Taxation and Zakat 10 (698.3) (595.1) (609.9) (464.7)

Profit for the year 4,067.6 2,161.7 3,514.5 1,535.9

Attributable to:

Equity holders of the Company 4,061.1 2,126.9 3,514.5 1,535.9 Minority interests 6.5 34.8 0 0 Profit for the year 4,067.6 2,161.7 3,514.5 1,535.9

Sen Sen Earnings per share - basic 11(a) 94.92 52.52 - diluted 11(b) 93.00 50.44

Dividends per share: Sen Sen

Interim dividends (gross) 12 20.0 0 Final dividend (gross) 12 0 12.0 Final dividend (tax exempt) 12 0 2.0 Proposed final dividend (gross) 12 16.3 0

The notes set out on pages 13 to 89 form an integral part of these financial statements


Balance Sheets

as at 3� August 2007


NON-CURRENT ASSETS

Property, plant and equipment 13 56,405.3 54,344.5 46,332.8 44,136.2 Prepaid operating leases 14 852.6 856.8 693.4 690.2 Coal mining rights 15 0 279.9 0 0 Subsidiaries 16 0 0 4,581.1 743.1 Associates 17 233.0 200.6 125.8 135.8 Investments 18 38.0 38.0 97.4 56.8 Long term receivables 19 0 0 703.1 841.8

57,528.9 55,719.8 52,533.6 46,603.9 CURRENT ASSETS Non-current assets held for sale 20 125.0 0 55.8 0 Inventories 21 1,769.5 1,931.8 1,115.4 1,113.4 Receivables, deposits and prepayments 22 2,921.8 3,415.4 2,204.6 2,501.4 Current tax assets 11.6 10.0 0 0 Amount due from subsidiaries 23 0 0 1,250.1 5,445.9 Amount due from associates 45.3 43.6 34.6 30.7 Short term investments 24 12.6 12.6 12.6 12.6 Marketable securities 25 10.6 9.2 10.6 9.2 Deposits, bank and cash balances 26 5,299.3 3,949.7 4,524.3 3,124.7 10,195.7 9,372.3 9,208.0 12,237.9 CURRENT LIABILITIES Payables 27 4,301.6 3,733.5 3,132.7 2,394.9 Amount due to subsidiaries 23 0 0 1,403.4 1,781.2 Amount due to associates 226.1 212.4 224.5 212.4 Current taxation 226.1 184.6 221.3 175.1 Short term borrowings 28 2,015.5 2,534.7 1,452.7 1,964.5

6,769.3 6,665.2 6,434.6 6,528.1

NET CURRENT ASSETS 3,426.4 2,707.1 2,773.4 5,709.8

TOTAL ASSETS LESS CURRENT LIABILITIES 60,955.3 58,426.9 55,307.0 52,313.7



Balance Sheetsas at 3� August 2007 (Continued)


NON-CURRENT LIABILITIES

Borrowings 29 (21,963.9) (24,580.9) (14,898.8) (16,101.0) Amount due to subsidiaries 23 0 0 (3,621.1) (3,829.3) Consumer deposits 30 (2,319.6) (2,147.7) (2,186.0) (2,029.6) Employee benefits 31 (2,730.6) (2,314.1) (2,627.4) (2,221.3) Other liabilities (145.9) (72.3) (63.7) (72.2) Deferred taxation 32 (6,274.4) (6,424.6) (5,524.8) (5,758.4) Deferred income 33 (2,803.5) (2,675.8) (2,504.7) (2,400.6) Government development grants 34 (620.5) (665.0) 0 0

(36,858.4) (38,880.4) (31,426.5) (32,412.4)

TOTAL NET ASSETS 24,096.9 19,546.5 23,880.5 19,901.3

CAPITAL AND RESERVES ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY

Share capital 35 4,331.7 4,135.2 4,331.7 4,135.2 Share premium 36 5,242.0 3,912.9 5,242.0 3,912.9 Revaluation and other reserves 37 894.9 843.6 1,021.3 1,017.6 Retained profits 38 13,530.0 10,533.5 13,285.5 10,835.6

23,998.6 19,425.2 23,880.5 19,901.3

MINORITY INTERESTS 98.3 121.3 0 0

TOTAL EQUITY 24,096.9 19,546.5 23,880.5 19,901.3

Sen Sen

NET ASSETS PER SHARE* 554.0 470.0

* The net assets per share attributable to ordinary equity holders of the Company.



for the financial year ended 3� August 2007

Statement of Changes in Equity

Attributable to equity holders of the Company

Employees’ Ordinary Share shares of Option Revaluation

RM1.00 Share Scheme and other Retained Minority Total Note each premium reserve reserves profits interests equity RM’million RM’million RM’million RM’million RM’million RM’million RM’million

Group At 1 September 2006 4,135.2 3,912.9 0 843.6 10,533.5 121.3 19,546.5

Currency translation differences 0 0 0 42.7 0 0 42.7 Realisation of revaluation reserve 37 0 0 0 (27.1) 27.1 0 0

Income and expense recognised directly in equity 0 0 0 15.6 27.1 0 42.7 Profit for the year 0 0 0 0 4,061.1 6.5 4,067.6 Total recognised income and expense for the year 0 0 0 15.6 4,088.2 6.5 4,110.3 Transaction with minority interests in subsidiaries 0 0 0 0 0 (29.5) (29.5) Dividends paid for the year ended - 31.08.2006 12 0 0 0 0 (459.7) 0 (459.7) - 31.08.2007 12 0 0 0 0 (632.0) 0 (632.0) Employees’ Share Option Scheme - options granted 0 0 35.7 0 0 0 35.7 Issuance of share capital - share options, GEB and CRIS 35, 36 196.5 1,329.1 0 0 0 0 1,525.6

At 31 August 2007 4,331.7 5,242.0 35.7 859.2 13,530.0 98.3 24,096.9

At 1 September 2005 3,220.7 3,989.6 0 844.7 8,030.5 115.3 16,200.8

Currency translation differences 0 0 0 5.8 0 0 5.8 Disposal of subsidiary 0 0 0 0 0 (30.4) (30.4) Realisation of revaluation reserve 37 0 0 0 (6.9) 6.9 0 0

Income and expense recognised directly in equity 0 0 0 (1.1) 6.9 (30.4) (24.6) Profit for the year 0 0 0 0 2,126.9 34.8 2,161.7

Total recognised income and expense for the year 0 0 0 (1.1) 2,133.8 4.4 2,137.1 Transaction with minority interests in subsidiaries 0 0 0 0 0 1.6 1.6 Dividends paid for the year ended - 31.08.2005 12 0 0 0 0 (279.4) 0 (279.4) Goodwill written back 0 0 0 0 5.7 0 5.7 Issuance of share capital - share options, GEB and CRIS 35, 36 105.8 732.0 0 0 0 0 837.8 - bonus shares 35, 36 808.7 (808.7) 0 0 0 0 0 Waiver of term loan by Government of Malaysia 0 0 0 0 642.9 0 642.9

At 31 August 2006 4,135.2 3,912.9 0 843.6 10,533.5 121.3 19,546.5



Statement of Changes in Equityfor the financial year ended 3� August 2007 (Continued)

Non-distributable Distributable

Employees’ Ordinary Share shares of Option Revaluation

RM1.00 Share Scheme and other Retained Total Note each premium reserve reserves profits equity

RM’million RM’million RM’million RM’million RM’million RM’million

Company

At 1 September 2006 4,135.2 3,912.9 0 1,017.6 10,835.6 19,901.3

Realisation of revaluation reserve 37 0 0 0 (27.1) 27.1 0 Income and expense recognised directly in equity 0 0 0 (27.1) 27.1 0 Profit for the year 0 0 0 0 3,514.5 3,514.5 Total recognised income and expense for the year 0 0 0 (27.1) 3,541.6 3,514.5 Dividends paid for the year ended - 31.08.2006 12 0 0 0 0 (459.7) (459.7) - 31.08.2007 12 0 0 0 0 (632.0) (632.0) Employees’ Share Option Scheme - options granted 0 0 30.8 0 0 30.8 Issuance of share capital - share options, GEB and CRIS 35, 36 196.5 1,329.1 0 0 0 1,525.6

At 31 August 2007 4,331.7 5,242.0 30.8 990.5 13,285.5 23,880.5

At 1 September 2005 3,220.7 3,989.6 0 1,028.7 9,568.0 17,807.0

Realisation of revaluation reserve 37 0 0 0 (11.1) 11.1 0 Income and expense recognised directly in equity 0 0 0 (11.1) 11.1 0 Profit for the year 0 0 0 0 1,535.9 1,535.9 Total recognised income and expense for the year 0 0 0 (11.1) 1,547.0 1,535.9 Dividends paid for the year ended - 31.08.2006 12 0 0 0 0 (279.4) (279.4) Issuance of share capital - share options, GEB and CRIS 35, 36 105.8 732.0 0 0 0 837.8 - bonus shares 35, 36 808.7 (808.7) 0 0 0 0 At 31 August 2006 4,135.2 3,912.9 0 1,017.6 10,835.6 19,901.3




Group Company 2007 2006 2007 2006 Note RM’million RM’million RM’million RM’million

CASH FLOWS FROM OPERATING ACTIVITIES

Profit for the year 4,067.6 2,161.7 3,514.5 1,535.9 Adjustments for: Taxation and Zakat 698.3 595.1 609.9 464.7 Depreciation 3,199.9 3,298.7 2,595.2 2,648.4 Amortisation of prepaid operating leases 22.1 21.8 14.7 14.4 Amortisation of coal mining rights 10.7 10.8 0 0 Provision for employee benefits 649.2 295.1 638.0 285.8 Provision for share options 35.7 0 30.8 0 Translation gain (452.3) (491.3) (288.2) (324.1) Release of deferred income (326.9) (340.4) (291.8) (277.1) Gain on disposal of property, plant and equipment (29.1) (13.2) (29.0) (12.7) Gain on disposal of prepaid operating leases (4.0) 0 (4.0) 0 Loss on disposal of subsidiaries 0 1.2 0 1.2 Share of results of associates (42.4) (14.6) 0 0 Dividend income (4.4) (2.5) (4.8) (2.9) Interest income (201.6) (134.5) (463.0) (385.6) Interest on borrowings 1,196.0 1,443.6 866.7 1,005.5 Property, plant and equipment written off 5.3 170.3 0 94.8 Release of Government development grants (44.5) (47.3) 0 0 Allowance for diminution in value of coal mining rights 200.0 0 0 0 Allowance for diminution in value of subsidiaries 0 0 0 71.9 (Write-back)/allowance for diminution in value of marketable securities (1.4) 0.2 (1.4) 0.2 Allowance for/(write-back) diminution in value of investments 0.1 1.7 (40.6) 42.3 Allowance for/(write-back) inventory obsolescence 5.9 (34.5) 5.9 (34.5) Inventories written off 34.3 47.8 33.9 47.8 Goodwill written off (3.4) 0 0 0 9,015.1 6,969.7 7,186.8 5,176.0 Inventories 128.0 (101.4) (41.8) (124.5) Receivables 561.4 244.7 326.7 622.8 Payables 553.7 267.8 822.2 (64.4) Amount due from/to subsidiaries 0 0 (73.6) 81.2 Amount due from/to associates 12.0 (27.4) 8.2 (16.4) Cash generated from operations 10,270.2 7,353.4 8,228.5 5,674.7 Employee benefits paid (232.7) (229.2) (231.9) (227.4) Consumer contributions received 454.6 510.3 395.9 406.7 Consumer deposits received 171.8 195.4 156.4 184.3 Taxation and Zakat paid (798.7) (198.9) (797.2) (196.9) Taxation refund received 0 1.9 0 0 Net cash flow from operating activities 9,865.2 7,632.9 7,751.7 5,841.4


Cash Flow Statements


Group Company 2007 2006 2007 2006 Note RM’million RM’million RM’million RM’million

CASH FLOWS FROM INVESTING ACTIVITIES

Additional investment in subsidiaries (26.1) 0 (42.2) 0 Proceeds from disposal of associates 0 0.1 0 7.4 Proceeds from redemption of unsecured loan notes in a subsidiary 4.2 0 4.2 0 Proceeds from redemption of unsecured loan notes in an associate 10.0 0 10.0 0 Proceeds from redemption of redeemable preference shares in an associate 0 16.0 0 16.0 Dividend income received 3.9 0.4 3.9 1.6 Interest income received 253.7 241.8 232.2 218.7 Purchase of property, plant and equipment (5,063.6) (3,982.2) (4,574.0) (3,612.2) Payments for prepaid operating leases (16.6) (7.3) (16.6) (7.3) Proceeds from disposal of property, plant and equipment 47.6 21.8 47.6 21.8 Proceeds from disposal of prepaid operating leases 8.5 0 8.5 0 Net cash flow from investing activities (4,778.4) (3,709.4) (4,326.4) (3,354.0)

CASH FLOWS FROM FINANCING ACTIVITIES

Government development grants received 0 26.3 0 0 Proceeds from issuance of shares 1,525.6 837.8 1,525.6 837.8 Proceeds from long term borrowings 782.1 3,600.8 622.0 1,495.1 Repayments of long term borrowings (3,446.0) (5,087.2) (2,072.8) (2,050.5) Interest paid (1,483.7) (1,658.5) (1,008.8) (1,108.7) Dividends paid to shareholders (1,091.7) (279.4) (1,091.7) (279.4) Proceeds from short term borrowings 32.4 164.0 0 0 Repayments of short term borrowings (48.9) (424.1) 0 (244.3) Issue of shares to minority interests 0 1.6 0 0

Net cash flow from financing activities (3,730.2) (2,818.7) (2,025.7) (1,350.0)

NET INCREASE IN CASH AND CASH EQUIVALENTS 1,356.6 1,104.8 1,399.6 1,137.4

EFFECT OF CHANGES IN FOREIGN CURRENCY (7.0) (4.5) 0 0

CASH AND CASH EQUIVALENTS AT BEGINNING OF THE FINANCIAL YEAR 3,949.7 2,849.4 3,124.7 1,987.3

CASH AND CASH EQUIVALENTS AT END OF THE FINANCIAL YEAR 26 5,299.3 3,949.7 4,524.3 3,124.7

Deposits, held in trust* 0 (0.6) 0 0 Cash at bank, held in trust* (65.6) (12.4) 0 0

CASH AVAILABLE 5,233.7 3,936.7 4,524.3 3,124.7

* Deposits and cash at bank held in trust are in respect of a grant given to a subsidiary by the Government for a designated capital project.


for the financial year ended 3� August 2007 (Continued)

Cash Flow Statements


1 GENERAL INFORMATION

The Group and the Company are primarily involved in the business of the generation, transmission, distribution and sale of electricity and those tabulated in Note 16 to these financial statements.

There have been no significant changes in these activities during the financial year.

The Company is a public limited liability company, incorporated and domiciled in Malaysia and listed on the Main Board of Bursa Malaysia Securities Berhad.

The address of the registered office of the Company is 129, Jalan Bangsar, 59200 Kuala Lumpur, Malaysia.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Unless otherwise stated, the following accounting policies have been applied consistently in dealing with items that are considered material in relation to the financial statements. These policies have been consistently applied to all the years presented, unless otherwise stated.

(a) Basis of preparation

The financial statements of the Group and the Company have been prepared in accordance with the provisions of the Companies Act 1965 and Financial Reporting Standards (‘FRS’), the MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities.

The financial statements have been prepared under the historical cost convention except as disclosed in this summary of significant accounting policies.

The preparation of financial statements in conformity with FRS requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported period. It also requires Directors to exercise their judgement in the process of applying the Group’s accounting policies. Although these estimates and judgement are based on the Directors’ best knowledge of current events and actions, actual results may differ.

The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in Note 3 to these financial statements.

(i) Standards, amendments to published standards and interpretations that are effective

The new accounting standards, amendments to published standards and interpretations to existing standards effective and applicable for the Group’s and the Company’s financial periods beginning on or after 1 September 2006 are as follows:

FRS 2 Share-based Payment FRS 3 Business Combinations FRS 5 Non-current Assets Held for Sale and Presentation of Discontinued Operations FRS 101 Presentation of Financial Statements FRS 102 Inventories FRS 108 Accounting Policies, Changes in Accounting Estimates and Errors FRS 110 Events After the Balance Sheet Date FRS 116 Property, Plant and Equipment FRS 121 The Effect of Changes in Foreign Exchange Rates FRS 127 Consolidated and Separate Financial Statements FRS 128 Investments in Associates FRS 132 Financial Instruments: Disclosure and Presentation FRS 133 Earnings Per Share FRS 136 Impairment of Assets FRS 138 Intangible Assets FRS 140 Investment Property

Amendment to FRS 1192004 Employee Benefits – Actuarial Gains and Losses, Group Plans and Disclosures – in relation to the “asset ceiling” test.


Notes to the Financial Statements


Notes to the Financial Statementsfor the financial year ended 3� August 2007 (Continued)

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(a) Basis of preparation (Continued)

(i) Standards, amendments to published standards and interpretations that are effective (Continued)

All changes in accounting policies have been made in accordance with the transition provisions in the respective standards and amendments to published standards. All standards, amendments and interpretations adopted by the Group and the Company require retrospective application other than:

FRS 2 – retrospective application for all equity instruments granted after 31 December 2004 and not vested at 1 September 2006;

FRS 3 – prospectively for business combinations for which the agreement date is on or after 1 September 2006;

FRS 5 – prospectively to non-current assets (or disposal groups) that meet the criteria to be classified as non-current assets held for sale and to operations that meet the criteria to be classified as discontinued on or after 1 September 2006;

FRS 116 – the exchange of property, plant and equipment is accounted at fair value prospectively;

FRS 121 – prospective accounting for goodwill and fair value adjustments as part of foreign operations;

FRS 136 – applies to goodwill and intangible assets acquired in business combinations & 138 for which the agreement date is on or after 1 September 2006 and all other

assets prospectively from 1 September 2006.

A summary of the impact of the new accounting standards, amendments to published standards and interpretations to existing standards on the financial statements of the Group and the Company is set out in Note 44 to these financial statements.

(ii) Standards, amendments to published standards and interpretations to existing standards that are not yet effective and have been early adopted

FRS 117 – retrospective application for leasehold land reclassified as prepaid operating leases.

(iii) Standards, amendments to published standards and interpretations to existing standards that are not yet effective and have not been early adopted

The new standards, amendments to published standards and interpretations that are mandatory for the Group’s and the Company’s financial periods beginning on or after 1 September 2007 or later periods, but which the Group and the Company have not early adopted are as follows:

FRS 124 – Related Party Disclosures (effective for accounting periods beginning on or after 1 October 2006). This standard will affect the identification of related parties and certain other related party disclosures. The Group will apply this standard from financial periods beginning 1 September 2007.

FRS 139 - Financial Instruments: Recognition and Measurement (effective date yet to be determined by Malaysian Accounting Standards Board). This new standard establishes principles for recognising and measuring financial assets, financial liabilities and certain contracts to buy and sell non-financial items. Hedge accounting is permitted only under strict circumstances. The Group and the Company will apply this standard when it becomes effective.


Notes to the Financial Statements (Continued)


(a) Basis of preparation (Continued)

(iii) Standards, amendments to published standards and interpretations to existing standards that are not yet effective and have not been early adopted (Continued)

Amendment to FRS 1192004 Employee Benefits – Actuarial Gains and Losses, Group Plans and Disclosures (effective for accounting periods beginning on or after 1 January 2007). This amendment introduces the option of an alternative recognition approach for actuarial gains and losses. It may impose additional recognition requirements for multi-employer plans where insufficient information is available to apply defined benefit accounting. It may add new disclosure requirements.

MASB also issued the following revised standards, amendments to published standards and interpretations which are only effective for annual periods on or after 1 July 2007. The Group and the Company will apply these standards and interpretations from financial periods beginning 1 September 2007.

FRS 107 - Cash Flow Statements

FRS 111 - Construction Contracts

FRS 112 - Income Taxes FRS 118 - Revenue

FRS 120 - Accounting for Government Grants and Disclosure of Government Assistance

FRS 134 - Interim Financial Reporting

FRS 137 - Provisions, Contingent Liabilities and Contingent Assets

Amendments to FRS 121 The Effects of Changes in Foreign Rates – Net Investment in Foreign Operations

IC Interpretation 8 – Scope of FRS 2

With the exception of FRS 139, the above standards, amendments to published standards and interpretations to existing standards are not anticipated to have any significant impact to the financial position of both the Group and the Company.

(iv) Standards, amendments to published standards and interpretations to existing

standards that are not yet effective and will not be relevant or material for the Group’s operations

FRS 6 - Exploration for and Evaluation of Mineral Resources (effective for accounting periods beginning on or after 1 January 2007).

IC Interpretation 1 - Changes in Existing Decommissioning, Restoration and Similar Liabilities (effective for accounting periods beginning on or after 1 July 2007).

IC Interpretation 2 - Members’ Shares in Co-operative Entities and Similar Instruments (effective for accounting periods beginning on or after 1 July 2007).

IC Interpretation 5 - Rights to Interests arising from Decommissioning, Restoration and Environment Rehabilitation Funds (effective for accounting periods beginning on or after 1 July 2007).

IC Interpretation 6 - Liabilities arising from Participating in a Specific Market – Waste Electrical and Electronic Equipment (effective for accounting periods beginning on or after 1 July 2007).

IC Interpretation 7 - Applying the Restatement Approach under FRS 1292004 Financial Reporting in Hyperinflationary Economies (effective for accounting periods beginning on or after 1 July 2007).




(b) Subsidiaries

Subsidiaries are those corporations or other entities (including special purpose entities) in which the Group has power to exercise control over the financial and operating policies so as to obtain benefits from their activities, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.

Subsidiaries are consolidated using the purchase method of accounting.

Under the purchase method of accounting, subsidiaries are fully consolidated from the date on which control is transferred to the Group and are de-consolidated from the date that control ceases. The cost of an acquisition is measured as fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interests. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired at the date of acquisition is reflected as goodwill (see Note 2(e)). If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement.

Minority interests represent that portion of the profit or loss and net assets of a subsidiary attributable to equity interests that are not owned, directly or indirectly through subsidiaries, by the parent. It is measured at the minorities’ share of the fair value of the subsidiaries’ identifiable assets and liabilities at the acquisition date and the minorities’ share of changes in the subsidiaries’ equity since that date.

Where more than one exchange transaction is involved, any adjustment to the fair values of the subsidiary’s identifiable assets, liabilities and contingent liabilities relating to previously held interests of the Group is accounted for as a revaluation.

Intragroup transactions, balances and unrealised gains or losses on transactions between Group companies are eliminated. Unrealised losses are also eliminated but considered an impairment indicator of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

The gain or loss on disposal of a subsidiary is the difference between net disposal proceeds and the Group’s share of the subsidiaries net assets as of the date of disposal including the cumulative amount of any exchange differences that relate to the subsidiary is recognised in the Consolidated Income Statement.

(c) Transactions with minority interests

The Group applies a policy of treating transactions with minority interests as transactions with equity owners of the Group. For purchases from minority interests, the difference between any consideration paid and the relevant share of the carrying value of net assets of the subsidiary acquired is deducted from equity. Gains or losses on disposals to minority interests are also recorded in equity. For disposals to minority interests, differences between any proceeds received and the relevant share of minority interests are also recorded in equity.

(d) Associates

Associates are enterprises in which the Group exercises significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the associates but not control over those policies.

Investments in associates are accounted for in the Consolidated Financial Statements using the equity method of accounting and are initially recognised at cost. The Group’s investment in associates includes goodwill identified on acquisition, net of any accumulated impairment loss (see Note 2(e)).





(d) Associates (Continued)

The Group’s share of its associates’ post-acquisition profits or losses is recognised in the Consolidated Income Statement, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group’s interest is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate.

Unrealised profits on transactions between the Group and the associates are eliminated partially to the extent of the Group’s interest in the associates; unrealised losses are also eliminated unless the transaction provides evidence on impairment of the asset transferred. Where necessary, in applying the equity method, adjustments are made to the financial statements of associates to ensure consistency of accounting policies with those of the Group.

Dilution of gains and losses in associates are recognised in the Consolidated Income Statement.

For incremental interest in an associate, the date of acquisition is date at which significant influence is obtained. Goodwill is calculated at each purchase date based on the fair value of assets and liabilities identified. The previously acquired stake is stepped up to fair value and the share of profits and equity movements for the previously acquired stake are not recognised since they are embedded in the step up.

(e) Goodwill

Goodwill represents the excess of the cost of the acquisition over the Group share of the fair value of the identifiable net assets including contingent liabilities of subsidiaries, associates and joint ventures at the date of the acquisition.

Capitalised goodwill is tested for impairment at least annually, or if events or circumstances occur indicating that impairment may exist.

Goodwill and fair value adjustment arising from the acquisition from a foreign entity are treated as assets and liabilities of the acquiring entity and are recorded at the exchange rate at the date of acquisition.

(f) Property, plant and equipment

Property, plant and equipment are stated at cost or valuation less accumulated depreciation and impairment losses. Cost includes expenditure that is directly attributable to the construction or acquisition of the items and bringing them to the location and condition so as to render them operational in the manner intended by the Group. The Group allocates the cost of an item of property, plant and equipment to its significant system and component parts.

The Directors have applied the transitional provisions of International Accounting Standard No. 16 (Revised) “Property, Plant and Equipment” as adopted by the Malaysian Accounting Standards Board which allow the freehold land, buildings and civil works to be stated at their previous years’ valuations less depreciation.

Surpluses arising on revaluation are credited to the revaluation reserve account. Any deficit arising from revaluation is charged against the revaluation reserve to the extent of a previous surplus held in the revaluation reserve for the same asset. In all other cases, a decrease in the carrying amount is charged to the income statement.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when 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. The carrying amount of the replaced part is derecognised.

The cost of major overhaul/inspection is recognised in the asset’s carrying amount as a replacement and

the remaining carrying amount of the previous major overhaul/inspection is derecognised.




(f) Property, plant and equipment (Continued)

Major spare parts and standby equipment are recognised as assets when the Group expects to use them during more than one period. Similarly, if the spare parts and servicing equipment can be used only in connection with an item of property, plant and equipment, they are accounted for as property, plant and equipment.

Gains and losses on disposal of property, plant and equipment are determined by reference to their carrying amount and are taken into account in determining profit/(loss) before taxation. On disposal of revalued assets, the amount in revaluation reserve relating to those property, plant and equipment are transferred to retained profits.

Freehold land and capital project-in-progress are not depreciated.

Depreciation is provided on all other categories of property, plant and equipment on a straight line basis which reflects the estimated useful lives of the assets.

The estimated useful lives of property, plant and equipment are as follows:

Buildings and civil works 10 to 60 years Plant and machinery 10 to 40 years Lines and distribution mains 25 to 35 years Distribution services 20 years Meters 15 years Public lighting 15 to 25 years Furniture, fittings and office equipment 3 to 10 years Motor vehicles 5 to 10 years

Where an indication of impairment exists, the carrying amount of the asset is assessed and written down immediately to its recoverable amount (see Note 2(n)).

(g) Prepaid operating leases

The Directors have applied the transitional provisions of FRS No. 117 “Leases”, treating the leasehold land as prepaid operating leases which was previously classified within property, plant and equipment and allow the Group to retain the unamortised revalued amount of the previously revalued leasehold land as the surrogate carrying amount of prepaid operating leases and such prepaid operating leases shall be amortised on a straight line basis over the lease term.

Leasehold land is amortised over the remaining period of the respective leases ranging from 5 to 99 years on a straight line basis.

(h) Non-current assets held for sale

The Group shall classify a non-current asset as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use.

The assets classified as non-current assets held for sale will be measured at the lower of its carrying amount and fair value less costs to sell.

No depreciation or amortisation is provided against the assets while it is classified as non-current assets held for sale.

The assets shall be derecognised on disposal and the difference between the net disposal proceeds and the carrying amount is recognised as profit or loss in the period of disposal.

An asset that ceases to be classified as non-current assets held for sale shall be measured at the lower of its carrying amount before the asset was classified as non-current assets held for sale, adjusted for any depreciation, amortisation or revaluations that would be recognised had the asset not be classified as non-current assets held for sale, and its recoverable amount at the date of the subsequent decision not to sell.





(i) Intangible assets

Expenditure on acquired rights, patents, trademarks and licenses is capitalised and amortised using the straight line method over their estimated useful lives. Intangible assets are not revalued.

(j) Research and development

Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised in the income statement as an expense as incurred.

Expenditure on development activities, whereby research findings are applied to a plan or design for the production of new or substantially improved products and processes, is capitalised if the product or process is technically and commercially feasible and the Group has sufficient resources to complete the development.

Capitalised development costs are recognised as intangible assets and amortised from the point at which the asset is ready for use on a straight-line basis over its useful life.

(k) Capitalisation of interest

Interest incurred on external borrowings related to long term projects-in-progress is capitalised until the assets are ready for their intended use.

(l) Investments

Investments in subsidiaries and associates held for long term are stated at cost, less allowance for any diminution in their value. Diminution in the value of an investment is recognised as an expense in the financial year in which the diminution is identified.

Investments in other non-current investments are shown at cost and an allowance for diminution in value is made where, in the opinion of the Directors, there is a decline other than temporary in the value of such investments. Where there has been a decline other than temporary in the value of an investment, such a decline is recognised as an expense in the financial year.

On disposal of an investment, the difference between net disposal proceeds and the carrying amount is charged or credited to the income statement, as the case may be.

(m) Marketable securities and short term investments

Marketable securities and short term investments are stated at the lower of cost and market value on an aggregate portfolio basis. Cost is derived at on the weighted average basis. Market value is calculated by reference to the relevant stock exchange quoted selling prices at the close of business at the balance sheet date. Any write downs to the market value of investments or subsequent write backs to cost are dealt with through the income statement.

(n) Impairment of assets

Property, plant and equipment and other non-current assets, including intangible assets, are reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Impairment loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount. The recoverable amount is the higher of fair value less cost to sell. For the purposes of assessing impairment, assets are grouped at the lowest level for which there are separately identifiable cash flows.

Impairment loss is charged to the income statement unless it reverses a previous revaluation in which case it is charged to the revaluation surplus. Any subsequent increase in recoverable amount is recognised in the income statement unless it reverses an impairment loss on a revalued asset in which case it is taken to revaluation surplus.

(o) Deferred income

Contributions received from customers to defray the cost of capital projects are credited to the deferred income account. The amount in this account is released to the income statement on a straight line basis over 15 years, being the average useful life of such projects.



(p) Operating leases

Assets leased out as operating leases are included within property, plant and equipment in the balance sheet and they are depreciated over their expected useful lives on a basis consistent with similar assets.

(q) Inventories

Inventories are stated at the lower of cost and net realisable value.

Cost of work-in-progress and finished goods comprise raw materials, direct labour and a proportion of the production overheads. Cost is determined on the weighted average and first-in-first-out basis.

Net realisable value is the estimated selling price in the ordinary course of business, less the costs of completion and selling expenses.

(r) Trade receivables

Trade receivables are carried at anticipated realisable value. Bad debts are written off in the period in which they are identified. An allowance is made for doubtful receivables based on review of all outstanding amounts at the financial year end.

(s) Trade payables

Trade payables are stated at cost, which is the fair value of the consideration to be paid in the future for the goods and services received.

(t) Cash and cash equivalents

For the purpose of the cash flow statement, cash and cash equivalents comprise cash in hand, deposits held at call with banks, bank overdrafts and short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

(u) Share capital

(i) Classification

Ordinary shares and non-redeemable preference shares with discretionary dividends are classified as equity. Other shares are classified as equity and/or liability according to the economic substance of the particular instrument.

The portion of a convertible bond representing the value of the conversion option at the time of issue is included in equity (see Note 2(v) on borrowings). The value of the conversion option is not changed in subsequent periods. Upon conversion of the bond to equity shares, the amount credited to share capital and share premium is the aggregate of the amounts classified within liability and equity at the time of conversion. No gain or loss is recognised. If the bond is redeemed, the conversion option is transferred to retained earnings.

Distributions to holders of a financial instrument classified as an equity instrument are charged directly to equity.

(ii) Share issue costs

Incremental external costs directly attributable to the issuance of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

(iii) Dividends to shareholders of the Company

Dividends on redeemable preference shares are recognised as a liability and expressed on an accrual basis. Other dividends are recognised as a liability in the period in which they are declared.





(v) Borrowings

Borrowings are initially recognised based on the proceeds received. The costs of issuing debt instruments are expensed as and when incurred.

Interest and dividends on financial instruments deemed as borrowings are reported within finance cost in the income statement.

(w) Income tax

Current tax expense is determined according to Malaysia’s tax laws.

Deferred tax is recognised in full, using the liability method, on temporary differences arising between the amounts attributed to assets and liabilities for tax purposes and their carrying amounts in the financial statements.

Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, unused tax losses and unutilised tax credits can be utilised.

Deferred tax is recognised on temporary differences arising on investments in subsidiaries, associates and joint ventures except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.

Tax rates enacted or substantively enacted by the balance sheet date are used to determine deferred tax.

(x) Employee benefits

(i) Short term employee benefits

Wages, salaries, paid annual leave, bonuses, and non-monetary benefits are accrued in the financial year in which the services are rendered by employees of the Group.

(ii) Post-employment benefits

The Group has various post-employment benefit schemes which are either defined contribution or defined benefit plans.

Defined contribution plans

The Group’s contributions to defined contribution plans are charged to the income statement in the financial year to which they relate. Once the contributions have been paid, the Group has no further payment obligations.

Defined benefit plans

The Group makes contributions to the Company’s Retirement Benefit Plan, a defined benefit plan and approved fund independent of the Company’s finances. A book provision is also provided by the Company as the contribution rate required to fund the benefits under the said plan is in excess of the Inland Revenue maximum limit. The Group and the Company also provide for a post retirement medical plan for certain employees.

The liability in respect of a defined benefit plan is the present value of the defined

benefit obligation at the balance sheet date minus the fair value of plan assets, together with adjustments for actuarial gains/losses and past service cost. The Group determines the present value of the defined benefit obligation and the fair value of any plan assets with sufficient regularity such that the amounts recognised in the financial statements do not differ materially from the amounts that would be determined at the balance sheet date.

The defined benefit obligation, calculated using the Projected Unit Credit Method, is determined by an independent actuarial firm, considering the estimated future cash outflows using market yields at balance sheet date of Government securities which have currency and terms to maturity approximating the terms of the related liability. The last revaluation was done in February 2007.




(x) Employee benefits (Continued)

(ii) Post-employment benefits (Continued)

Defined benefit plans (Continued)

The amount of net actuarial gains and losses are credited or charged to the income statement, as the case may be, over the expected average remaining service lives of the participating employees.

(iii) Share-based compensation

The Group has applied the provision of FRS 2 to all equity instruments granted after 31 December 2004 but not yet vested as at 1 September 2006, the effective date the Group adopted this FRS.

The Group operates an equity-settled, share-based compensation plan for the employees of the Group. Employee services received in exchange for the grant of the share options is recognised as an expense in the income statement over the vesting periods of the grant with a corresponding increase in equity.

The total amount to be expensed over the vesting period is determined by reference to the fair value of the share options granted, excluding the impact of any non-market vesting conditions (for example, profitability and sales growth targets). Non-market vesting conditions are included in assumptions about the number of options that are expected to be vested. At each balance sheet date, the Group revises its estimates of the number of share options that are expected to be vested. It recognises the impact of the revision of original estimates, if any, in the income statement, with a corresponding adjustment to equity.

The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised.

(y) Government development grants

Government development grants relating to the construction of property, plant and equipment are included in long term liabilities and are credited to the income statement on a straight line basis over 15 years.

(z) Contingent liabilities

The Group does not recognise a contingent liability but discloses its existence in the financial statements. A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by uncertain future events beyond the control of the Group or a present obligation that is not recognised because it is not probable that an outflow of resources will be required to settle the obligation.

(aa) Revenue recognition

Sales are recognised upon invoiced value of services delivered net of billing adjustments.

Other operating income earned by the Group and the Company comprises interest and leasing income as well as dividend income. Leasing income is accrued, unless collectibility is in doubt. Dividend income is recognised when the shareholders’ rights to receive payment is established.

Interest income is recognised on a time proportion basis that takes into account the effective yield on the asset.

(ab) Foreign currencies

(i) Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the ’functional currency’). The financial statements are presented in Ringgit Malaysia, which is the Company’s functional and presentation currency.






(ab) Foreign currencies (Continued)

(ii) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities in foreign currencies are translated at exchange rates ruling at the balance sheet date. All exchange differences are dealt with through the income statement.

(iii) Group companies

The results and financial position of all the group entities (none of which has the currency of a hyperinflationary economy) that have functional currencies different from the presentation currency are translated into the presentation currency as follows:

• assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

• income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and

• all resulting exchange differences are recognised as a separate component of equity.

On consolidation, exchange differences arising from the translation of the net investment in foreign operations are taken to shareholders’ equity. When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity are recognised in the income statement as part of the gain or loss on sale.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

The principal closing rates used in translation of foreign currency amounts were as follows:

Foreign currency 2007 2006 RM RM

1 US Dollar 3.5090 3.6795

100 Japanese Yen 3.0370 3.1448

1 Sterling Pound 7.0582 6.9938

100 Pakistani Rupee 5.7749 6.0909

1 EURO 4.7843 4.7221

(ac) Financial instruments

(i) Description

Financial instruments carried on the balance sheet include cash and bank balances, investments, receivables, payables, leases and borrowings. The particular recognition methods adopted are disclosed in the individual policy statements associated with each item.

The Group and the Company are also parties to financial instruments that manage exposure to fluctuations in foreign currency exchange and interest rate. These financial instruments, which mainly comprise foreign currency forward contracts, cross currency swap contracts and interest rate swap contracts, are not recognised in the financial statements. Derivative financial instruments are used in the Group and the Company’s risk management of foreign currency and interest rate risk exposure of its financial liabilities.




(ac) Financial instruments (Continued)

(ii) Financial instruments not recognised on the balance sheet

Foreign currency forward contracts

The Group enters into foreign currency forward contracts to protect the Group from movements in exchange rates by establishing the rate at which a foreign currency asset or liability will be settled.

Exchange gains and losses on contracts are recognised in the income statement at time of settlement.

Cross currency swap contracts

Cross currency swaps are entered into to manage exposure to movements in exchange rates by establishing the currency at which a foreign currency liability will be settled.

The notional principal of these contracts are off balance sheet. Any differential in terms of exchange gains or losses are recognised in the income statement in the same period as the exchange differences on the underlying hedged items.

Currency Options

Currency options are designed to manage the Group’s exposure to protect the Group from movements in foreign currency. The notional principal of the contract is off balance sheet. The premium paid is expensed to the income statement when it is incurred. Gains or losses on early termination of currency options or on repayment of the borrowing are taken to the income statement.

Interest rate swap contracts

Interest rate swaps, collars and caps agreements are designed to manage the Group’s exposure to protect the Group from movements in interest rates. The notional principal of these contracts are off balance sheet. Any differential to be paid or received on an interest rate swap contract is recognised as a component of interest income or expense over the period of the contract. Gains and losses on early termination of interest rate swaps or on repayment of the borrowing are taken to the income statement.

(iii) Fair value estimation for disclosure purposes

In assessing the fair value of financial instruments, the Group and the Company make certain assumptions and apply the discounted cash flow method to discount future cash flows to determine the fair value of financial instruments. The fair values of financial liabilities are estimated by discounting future cash flows at current market interest rate available to the Group and the Company.

Fair value of publicly traded derivatives and securities is based on quoted market prices at balance sheet date whereas the fair value of foreign currency forward contracts is calculated using spot rates, as published by Reuters, at balance sheet date.

The fair value of cross currency swaps and currency options are calculated as the present value of the estimated future cash flows and/or valuation from the banks.

The carrying amount for financial assets and liabilities with a maturity of less than one year are assumed to approximate their fair values.





(ad) Rural electrification and projects under the Malaysia Plan

(i) Rural electrification projects are capitalised as property, plant and equipment.

(ii) The costs of the projects under the Malaysia Plan in the State of Sabah are only capitalised and accounted for as property, plant and equipment upon receipt of formal handover documentation. The corresponding amounts are recorded as Government development grants and such grants are credited to the income statement on a straight line basis over the same period as the expected economic life of the projects.

3 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Estimates and judgements are continually evaluated by the Directors and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

(a) Critical judgement in applying the Group’s accounting policies

In determining and applying accounting policies, judgement is often required in respect of items where the choice of specific policy could materially affect the reported results and financial position of the Group. The accounting policy to classify between investment properties and property, plant and equipment requires subjective judgements, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

Investment property is a property held to earn rentals or for capital appreciation or both.

Several properties comprise a portion that is held to earn rentals or for capital appreciation and another portion that is held for use in the production or supply of goods or services or for administrative purposes. If these portions could be sold (or leased out under a finance lease) separately, then these portions would be accounted separately by the Group.

If the portions could not be sold separately, the property is an investment property only if an insignificant portion is held for use in the production or supply of goods or services or for administrative purposes. Judgement is made on an individual property basis to determine whether ancillary services are so significant that a property does not qualify as an investment property.

During the year, the Group has leased out several land and office space but these do not meet the definition of an investment property either due to immateriality or classification. Accordingly, these properties continue to be classified as property, plant and equipment.

(b) Critical accounting estimates and assumptions

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equate to the related actual results. To enhance the information content of the estimates, certain key variables that are anticipated to have a material impact on the Group’s results and financial position are tested for sensitivity to changes in the underlying parameters. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below.

(i) Impairment of Property, Plant and Equipment

The Group assesses impairment of assets whenever the events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable i.e. the carrying amount of the asset is more than the recoverable amount.


3 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS (Continued)

(b) Critical accounting estimates and assumptions (Continued)

(i) Impairment of Property, Plant and Equipment (Continued)

Recoverable amount is measured at the higher of the fair value less cost to sell for that asset and its value-in-use. The value-in-use is the net present value of the projected future cash flow derived from that asset discounted at an appropriate discount rate. Projected future cash flows are based on Group’s estimates calculated based on historical, sector and industry trends, general market and economic conditions, changes in technology and other available information. The assumptions used, results and conclusion of the impairment assessment are stated in the Note 13 to these financial statements.

(ii) Estimated Useful Lives of Property, Plant and Equipment

The Group regularly reviews the estimated useful lives of property, plant and equipment based on factors such as business plan and strategies, expected level of usage and future technological developments. Future results of operations could be materially affected by changes in these estimates brought about by changes in the factors mentioned above. A reduction in the estimated useful lives of property, plant and equipment would increase the recorded depreciation and decrease the value of property, plant and equipment.

(iii) Share-based Payment

Equity settled share-based payment (share options) is measured at fair values at the date they are granted. The assumptions used in the valuation to determine these fair values are explained in Note 35 to these financial statements.

(iv) Contingent Liabilities

Determination of the treatment of contingent liabilities is based on management’s view of the expected outcome of the contingencies after consulting legal counsel for litigation cases and internal and external experts to the Group for matters in the ordinary course of business.

(v) Allowance for Receivables

The allowance is established when there is objective evidence that the Group will not be able to collect all amount dues according to the original term of receivables. This is determined based on the ageing profile and collection patterns.

4 REVENUE Group Company 2007 2006 2007 2006 RM’million RM’million RM’million RM’million

Sale - electricity 22,384.0 19,707.4 21,108.8 18,538.0 - goods and services 609.5 336.4 0 0 Release of deferred income (Note 33) 326.9 340.4 291.8 277.1

23,320.4 20,384.2 21,400.6 18,815.1





5 OPERATING EXPENSES

Group Company 2007 2006 2007 2006 RM’million RM’million RM’million RM’million

Energy cost 12,198.6 11,153.3 12,705.5 11,794.3 Transmission cost 980.9 922.0 979.6 921.1 Distribution cost 2,712.4 2,935.1 2,708.2 2,924.5 Administrative expenses 1,340.2 901.1 854.4 479.1 Other operating expenses 1,139.3 1,005.4 194.1 482.6

18,371.4 16,916.9 17,441.8 16,601.6

Operating expenses include the following items:

Directors’ remuneration - fees 0.6 0.6 0.4 0.5 - other emoluments 0.2 0.9 0.2 0.9 Auditors remuneration – PricewaterhouseCoopers - statutory audit fees - Malaysia 1.2 1.1 0.6 0.5 - Malaysia’s affiliates** 0 0 0 0 - audit related fees - Malaysia 0.2 0.2 0.2 0.2

- non-audit fees - Malaysia 1.3 1.1 1.3 1.1

- Malaysia’s affiliates 0.3 0 0.3 0 Allowance for doubtful debts 66.6 321.7 52.0 318.7

Amortisation of coal mining rights 10.7 10.8 0 0 Depreciation 3,199.9 3,298.7 2,595.2 2,648.4 Amortisation of prepaid operating leases 22.1 21.8 14.7 14.4 Rental of land and buildings 51.5 50.9 39.0 36.5 Rental of plant and machinery 22.2 15.9 21.9 15.9 Research and development expenses 17.0 63.0 16.7 63.0 Property, plant and equipment written off 5.3 170.3 0 94.8 Inventories written off 34.3 47.8 33.9 47.8 (Write-back)/ allowance for diminution in value of marketable securities (1.4) 0.2 (1.4) 0.2 Allowance for diminution in value of coal mining rights 200.0 0 0 0 Allowance for diminution in value of amount due from a subsidiary 0 0 35.6 59.4 (Write-back)/allowance for diminution in value of investment (0.1) 1.7 (40.6) 42.3 (Write-back) of allowance for doubtful debts (213.4) (178.6) (207.7) (178.1) Allowance /(write-back) for inventory obsolescence 5.9 (34.5) 5.9 (34.5) Receipt of Government subsidies* (435.7) (599.2) 0 0 Staff cost (Note 6) 2,392.1 1,952.0 2,104.4 1,690.9

* This represents the subsidies that Sabah Electricity Sdn. Bhd. (‘SESB’) received for diesel and medium fuel oil

from the Government of Malaysia. The total amount credited in the current year was RM435.7 million (2006: RM599.2 million) and it has been offset against energy cost.

** This represents the audit fees for Liberty Power Ltd amounting to RM42,956 (2006 : RM41,808).

The estimated monetary value of benefits-in-kind received by the Directors was RM180,806 (2006: RM174,223) for the Group and the Company.

The estimated monetary value of amounts paid and payable to a firm, of which a Director is a partner, for professional services rendered to the Group and the Company was RM673,864 (2006: RM228,404).



6 STAFF COSTS


Wages, salaries and bonuses 1,429.1 1,393.0 1,207.1 1,190.8 Defined contribution retirement plan 152.0 144.4 124.6 120.8 Retirement benefit plan 249.0 199.8 246.2 198.8 Retirement medical plan 400.2 95.3 391.8 87.0 Employees’ Share Option Scheme II 35.7 0 30.8 0 Other employee benefits 126.1 119.5 103.9 93.5

2,392.1 1,952.0 2,104.4 1,690.9

Details of the retirement benefit and retirement medical plans of the Group and the Company are set out in Note 31 to these financial statements.

7 OTHER OPERATING INCOME


Dividend income from investments in: - quoted shares 0.7 0 0.7 0 - unquoted shares 3.7 2.5 4.1 2.9 Leasing income 1.1 1.1 1.1 4.6 Interest income 201.6 134.5 463.0 385.6 Rental income 8.8 12.1 20.2 20.6 Release of Government development grants (Note 34) 44.5 47.3 0 0 Gain on disposal of property, plant and equipment 29.1 13.2 29.0 12.7 Gain on disposal of prepaid operating leases 4.0 0 4.0 0 Interest on late payments 72.4 184.9 72.4 184.9 Minimum make up charges 36.0 32.6 36.0 32.6

Other income 191.8 61.1 163.4 47.1 593.7 489.3 793.9 691.0

8 FOREIGN EXCHANGE GAIN


Foreign exchange gain comprises:

Translation gain – foreign currency denominated term loans 427.4 481.4 263.2 358.0 Translation gain/(loss) – others 24.9 9.9 25.0 (33.9) Transaction gain/(loss) 33.5 (166.4) 53.0 (126.8) 485.8 324.9 341.2 197.3




9 FINANCE COST


Interest on borrowings 1,505.5 1,705.9 1,176.2 1,267.8 Less: Amount capitalised into property, plant and equipment (309.5) (262.3) (309.5) (262.3) 1,196.0 1,443.6 866.7 1,005.5

Interest on consumer deposits 109.0 95.7 102.8 95.7 1,305.0 1,539.3 969.5 1,101.2

10 TAXATION AND ZAKAT


Current tax: - Malaysian corporate income tax 815.1 160.3 810.1 154.8 Deferred tax (Note 32) (150.2) 426.8 (233.6) 301.9 Real Property Gains Tax 1.3 0 1.3 0

Tax expense 666.2 587.1 577.8 456.7 Zakat 32.1 8.0 32.1 8.0 698.3 595.1 609.9 464.7

The analysis of the tax expense is as follows:

Current tax: Current year 806.2 258.4 799.5 252.9 Under/(over) accrual in prior years 8.9 (98.1) 10.6 (98.1) 815.1 160.3 810.1 154.8

Deferred tax: (Reversal)/origination of temporary differences (150.2) 426.8 (233.6) 301.9

Real Property Gains Tax 1.3 0 1.3 0 666.2 587.1 577.8 456.7


10 TAXATION AND ZAKAT (Continued)

The explanation of the relationship between tax expense and profit before taxation is as follows:

Group Company 2007 2006 2007 2006 RM’million RM’million RM’million RM’million Profit before taxation 4,765.9 2,756.8 4,124.4 2,000.6 Tax calculated at the Malaysian corporate income tax rate of 27% (2006: 28%) 1,286.8 771.9 1,113.6 560.2

Tax effects of: - change in corporate income tax rate (456.3) 0 (450.3) 0 - share of results of associates 4.9 0.9 0 0 - income not subject to tax (286.8) (234.0) (186.3) (148.7) - expenses not deductible for tax purpose 116.3 161.2 94.6 158.8 - current year’s tax loss not recognised 4.3 4.0 0 0 - expenses qualifying for double deduction (6.0) (15.5) (5.7) (15.5) Under/(over) provision of current tax in prior years 8.9 (98.1) 10.6 (98.1) Benefits from previously unrecognised tax losses 0 (3.3) 0 0 Current year unrecognised temporary differences (7.2) 0 0 0 Real Property Gains Tax 1.3 0 1.3 0

Zakat 32.1 8.0 32.1 8.0 Tax and zakat charge 698.3 595.1 609.9 464.7 Average effective tax rate (%) 14.7 21.6 14.8 23.2

The Malaysian corporate income tax rate for the year of assessment 2008 will be 26%. For year of assessment 2009 the Malaysian corporate income tax rate will be 25% as announced by the Government in the Budget Speech on 7 September 2007 and the effect of the reduction, estimated at about RM200.0 million will be effected in the first quarter results for the financial year ending 31 August 2008.

11 EARNINGS PER SHARE

(a) Basic earnings per share

Basic earnings per share is calculated by dividing the profit attributable to ordinary equity holders of the Company for the financial year by the weighted average number of ordinary shares in issue during the financial year.

Group

2007 2006

Profit attributable to ordinary equity holders of the Company (RM’million) 4,061.1 2,126.9 Weighted average number of ordinary shares in issue (’000) 4,278,527 4,049,544

Basic earnings per share (sen) 94.92 52.52





11 EARNINGS PER SHARE (Continued)

(b) Diluted earnings per share

Group 2007 2006 RM’million RM’million

Profit attributable to ordinary equity holders of the Company 4,061.1 2,126.9 Elimination of interest expense on: Guaranteed Exchangeable Bonds, net of tax effect (6.8) 34.3 Unsecured Convertible Redeemable Income Securities 4.5 6.0 Profit used to determine diluted earnings per share 4,058.8 2,167.2

’000 ’000

Weighted average number of ordinary shares in issue 4,278,527 4,049,544 Adjustment for share options 53,272 45,934 Adjustment for Guaranteed Exchangeable Bonds 17,988 179,374 Adjustment for Unsecured Convertible Redeemable Income Securities 14,359 21,786 Weighted average number of ordinary shares for diluted earnings per share 4,364,146 4,296,638

Diluted earnings per share (sen) 93.00 50.44

As at 31 August 2007, the Guaranteed Exchangeable Bonds had been fully exchanged for new ordinary shares of the Company wherein the terms of conversion are set out in Note 29(b)(i).

12 DIVIDENDS

Company 2007 2006 RM’million RM’million

First interim dividend of 10.0 sen gross per ordinary share, 315.8 0 less income tax at 27% Second interim dividend of 10.0 sen gross per ordinary share, less income tax at 27% 316.2 0

Proposed: Proposed final dividend of 16.3 sen gross per ordinary share, less income tax at 26% (2006: final dividend of 12.0 sen gross per ordinary share, less income tax at 27%, and 2.0 sen per ordinary share, tax exempt) 522.5 459.7 Dividends recognised as distribution to ordinary equity holders of the Company 1,154.5 459.7

Interim dividends are paid and accounted for in shareholders’ equity as an appropriation of retained profits in the financial year.

At the forthcoming Annual General Meeting, a final dividend in respect of the financial year ended 31 August 2007 of 16.3 sen gross per ordinary share less income tax at 26%, will be proposed for shareholders’ approval. This final dividend will be accrued as a liability in the financial year ending 31 August 2008 when approved by the shareholders.

In respect of the financial year ended 31 August 2006, a final dividend of 12.0 sen gross per ordinary share, less income tax at 27% and 2.0 sen per ordinary share, tax exempt was declared and approved by the shareholders in the Annual General Meeting held on 14 December 2006.



13 PROPERTY, PLANT AND EQUIPMENT

Exchange Transfers/ As at rate reclassi- As at 1.9.2006 adjustment Additions Disposals fication 31.8.2007 RM’million RM’million RM’million RM’million RM’million RM’million

Group

2007

Cost/valuation

At 1984 and earlier valuations:

Buildings and civil works 5.6 0 0 0 0 5.6 5.6 0 0 0 0 5.6

At 1994 valuation:

Freehold land 680.4 0 0 (16.4) (55.4) 608.6 Buildings and civil works 439.5 0 0 (2.5) 9.0 446.0 1,125.5 0 0 (18.9) (46.4) 1,060.2

At cost:

Freehold land 305.0 (0.2) 88.9 (0.1) (34.7) 358.9 Buildings and civil works 11,200.8 (0.2) 336.2 (0.2) (1.6) 11,535.0

12,631.3 (0.4) 425.1 (19.2) (82.7) 12,954.1

Plant and machinery 33,938.7 (52.3) 2,397.6 0 107.9 36,391.9 Lines and distribution mains 21,523.8 0 1,284.8 0 80.6 22,889.2 Distribution services 2,221.6 0 124.2 0 4.7 2,350.5 Meters 1,118.3 0 148.7 0 0 1,267.0 Public lighting 265.5 0 10.6 0 0 276.1 Furniture, fittings and office equipment 1,015.5 (0.3) 89.2 (3.6) (0.1) 1,100.7 Motor vehicles 233.1 (0.3) 37.3 (13.2) (1.1) 255.8

72,947.8 (53.3) 4,517.5 (36.0) 109.3 77,485.3 Capital project-in-progress 6,610.9 (0.1) 5,395.0 0 (4,699.5) 7,306.3

79,558.7 (53.4) 9,912.5 (36.0) (4,590.2) 84,791.6




13 PROPERTY, PLANT AND EQUIPMENT (Continued)

Charged Released on As at for the disposals/ As at 1.9.2006 financial year transfers 31.8.2007 RM’million RM’million RM’million RM’million Group

2007 Accumulated depreciation


Buildings and civil works 3.4 0 0 3.4

At 1994 valuation: Freehold land 0 0 0 0 Buildings and civil works 172.1 14.0 3.9 190.0 175.5 14.0 3.9 193.4 At cost:

Freehold land 0 0 0 0 Buildings and civil works 2,510.2 306.1 6.8 2,823.1 2,685.7 320.1 10.7 3,016.5

Plant and machinery 11,525.5 1,638.3 (15.9) 13,147.9 Lines and distribution mains 7,909.3 930.0 (6.9) 8,832.4 Distribution services 1,085.2 100.9 0 1,186.1 Meters 545.4 71.0 0.2 616.6 Public lighting 135.0 13.3 0.3 148.6 Furniture, fittings and office equipment 707.2 106.5 0.3 814.0 Motor vehicles 180.7 19.8 (16.5) 184.0 24,774.0 3,199.9 (27.8) 27,946.1 Accumulated impairment losses

Plant and machinery 440.2 0 0 440.2




Exchange Transfers/ As at rate reclassi- As at 1.9.2005 adjustment Additions Disposals fication 31.8.2006 RM’million RM’million RM’million RM’million RM’million RM’million

Group

2006

Cost/valuation


Buildings and civil works 5.6 0 0 0 0 5.6 At 1994 valuation:

Freehold land 687.1 0 0 (6.7) 0 680.4 Buildings and civil works 440.1 0 0 (1.7) 1.1 439.5 1,132.8 0 0 (8.4) 1.1 1,125.5

At cost:

Freehold land 274.4 (0.1) 2.7 (1.2) 29.2 305.0 Buildings and civil works 10,812.3 (0.2) 479.1 (42.0) (48.4) 11,200.8

12,219.5 (0.3) 481.8 (51.6) (18.1) 12,631.3

Plant and machinery 32,782.2 (37.7) 964.2 (420.7) 650.7 33,938.7 Lines and distribution mains 20,384.8 0 1,106.2 0 32.8 21,523.8 Distribution services 2,086.0 0 131.7 0 3.9 2,221.6 Meters 975.4 0 142.4 0 0.5 1,118.3 Public lighting 257.8 0 7.7 0 0 265.5 Furniture, fittings and office equipment 895.2 (0.1) 129.0 (10.9) 2.3 1,015.5 Motor vehicles 220.6 0 17.7 (5.2) 0 233.1 69,821.5 (38.1) 2,980.7 (488.4) 672.1 72,947.8 Capital project-in- progress 6,226.6 0.3 4,178.4 (215.4) (3,579.0) 6,610.9 76,048.1 (37.8) 7,159.1 (703.8) (2,906.9) 79,558.7





Charged Released on As at for the disposals/ As at 1.9.2005 financial year transfers 31.8.2006 RM’million RM’million RM’million RM’million Group

2006

Accumulated depreciation


Buildings and civil works 3.3 0.1 0 3.4

At 1994 valuation:

Buildings and civil works 157.1 16.0 (1.0) 172.1

160.4 16.1 (1.0) 175.5 At cost:

Buildings and civil works 2,264.9 300.1 (54.8) 2,510.2 2,425.3 316.2 (55.8) 2,685.7

Plant and machinery 9,898.3 1,817.9 (190.7) 11,525.5 Lines and distribution mains 7,034.9 874.4 0 7,909.3 Distribution services 988.9 96.3 0 1,085.2 Meters 482.7 62.7 0 545.4 Public lighting 122.2 12.8 0 135.0 Furniture, fittings and office equipment 614.8 100.9 (8.5) 707.2 Motor vehicles 169.1 17.5 (5.9) 180.7 21,736.2 3,298.7 (260.9) 24,774.0

Accumulated impairment losses

Plant and machinery 462.2 0 (22.0) 440.2




Transfers/ As at reclassi- As at 1.9.2006 Additions Disposals fication 31.8.2007 RM’million RM’million RM’million RM’million RM’million

Company

2007

Cost/valuation At 1994 valuation:

Freehold land 680.4 0 (16.4) (55.4) 608.6 Buildings and civil works 439.4 0 (2.5) 9.0 445.9 1,119.8 0 (18.9) (46.4) 1,054.5

At cost:

Freehold land 254.2 89.0 (0.1) (36.8) 306.3 Buildings and civil works 9,753.6 321.5 0 (11.8) 10,063.3 11,127.6 410.5 (19.0) (95.0) 11,424.1 Plant and machinery 24,007.6 2,160.5 0 (28.7) 26,139.4 Lines and distribution mains 20,876.3 1,270.9 0 34.9 22,182.1 Distribution services 2,115.7 124.0 0 0 2,239.7 Meters 1,097.0 145.8 0 0 1,242.8 Public lighting 265.6 10.5 0 0 276.1 Furniture, fittings and office equipment 913.6 75.0 (0.2) (2.6) 985.8 Motor vehicles 188.7 35.1 (12.0) (0.2) 211.6 60,592.1 4,232.3 (31.2) (91.6) 64,701.6

Capital project-in-progress 5,888.1 4,906.7 0 (4,248.9) 6,545.9

66,480.2 9,139.0 (31.2) (4,340.5) 71,247.5





Charged Released on As at for the disposals/ As at 1.9.2006 financial year transfers 31.8.2007 RM’million RM’million RM’million RM’million Company

2007

Accumulated depreciation At 1994 valuation: Buildings and civil works 172.1 14.0 3.8 189.9 172.1 14.0 3.8 189.9

At cost:

Freehold land 0 0 0 0 Buildings and civil works 2,306.4 245.9 7.2 2,559.5 2,478.5 259.9 11.0 2,749.4

Plant and machinery 9,711.7 1,152.5 (22.7) 10,841.5 Lines and distribution mains 7,692.0 893.3 0 8,585.3 Distribution services 1,013.8 96.6 0 1,110.4 Meters 536.5 69.2 0 605.7 Public lighting 135.0 13.3 0 148.3 Furniture, fittings and office equipment 627.0 95.6 1.6 724.2 Motor vehicles 149.5 14.8 (14.4) 149.9 22,344.0 2,595.2 (24.5) 24,914.7




Transfers/ As at reclassi- As at 1.9.2005 Additions Disposals fication 31.8.2006 RM’million RM’million RM’million RM’million RM’million

Company

2006

Cost/valuation

At 1994 valuation:

Freehold land 687.1 0 (6.7) 0 680.4 Buildings and civil works 440.1 0 (1.7) 1.0 439.4 1,127.2 0 (8.4) 1.0 1,119.8

At cost:

Freehold land 252.6 2.7 (1.1) 0 254.2 Buildings and civil works 9,387.8 464.2 (42.0) (56.4) 9,753.6 10,767.6 466.9 (51.5) (55.4) 11,127.6

Plant and machinery 23,274.8 907.2 (233.7) 59.3 24,007.6 Lines and distribution mains 19,781.0 1,094.3 0 1.0 20,876.3 Distribution services 1,984.6 131.1 0 0 2,115.7 Meters 957.6 139.4 0 0 1,097.0 Public lighting 257.8 7.8 0 0 265.6 Furniture, fittings and office equipment 792.7 120.0 (0.4) 1.3 913.6 Motor vehicles 178.9 13.0 (4.3) 1.1 188.7 57,995.0 2,879.7 (289.9) 7.3 60,592.1

Capital project-in-progress 5,021.0 3,881.7 (24.8) (2,989.8) 5,888.1 63,016.0 6,761.4 (314.7) (2,982.5) 66,480.2





Charged Released on As at for the disposals/ As at 1.9.2005 financial year transfers 31.8.2006 RM’million RM’million RM’million RM’million Company

2006

Accumulated depreciation

At 1994 valuation:

Buildings and civil works 157.1 16.0 (1.0) 172.1

At cost:

Buildings and civil works 2,118.2 242.9 (54.7) 2,306.4 2,275.3 258.9 (55.7) 2,478.5

Plant and machinery 8,573.6 1,283.9 (145.8) 9,711.7 Lines and distribution mains 6,854.0 838.0 0 7,692.0 Distribution services 923.0 90.8 0 1,013.8 Meters 475.5 61.0 0 536.5 Public lighting 122.2 12.8 0 135.0 Furniture, fittings and office equipment 536.3 89.9 0.8 627.0 Motor vehicles 140.1 13.1 (3.7) 149.5 19,900.0 2,648.4 (204.4) 22,344.0 Group Company 2007 2006 2007 2006 RM’million RM’million RM’million RM’million Net book value


Buildings and civil works 2.2 2.2 0 0

At 1994 valuation:

Freehold land 608.6 680.4 608.6 680.4 Buildings and civil works 256.0 267.4 256.0 267.3 866.8 950.0 864.6 947.7

At cost:

Freehold land 358.9 305.0 306.3 254.2 Buildings and civil works 8,711.9 8,690.6 7,503.8 7,447.2 Total land and buildings 9,937.6 9,945.6 8,674.7 8,649.1

Plant and machinery 22,803.8 21,973.0 15,297.9 14,295.9 Lines and distribution mains 14,056.8 13,614.5 13,596.8 13,184.3 Distribution services 1,164.4 1,136.4 1,129.3 1,101.9 Meters 650.4 572.9 637.1 560.5 Public lighting 127.5 130.5 127.8 130.6 Furniture, fittings and office equipment 286.7 308.3 261.6 286.6 Motor vehicles 71.8 52.4 61.7 39.2 49,099.0 47,733.6 39,786.9 38,248.1 Capital project-in-progress 7,306.3 6,610.9 6,545.9 5,888.1 56,405.3 54,344.5 46,332.8 44,136.2




Had the revalued property, plant and equipment been included in the financial statements at cost less depreciation, the net book value of the revalued property, plant and equipment would have been as follows:


Freehold land 50.7 51.7 43.8 44.8 Buildings and civil works 110.5 118.7 110.5 118.7 161.2 170.4 154.3 163.5

The valuations of freehold land, buildings and civil works of the Company was based on an independent valuation by a professional firm of valuers on the open market value basis in 1994. The net surplus on revaluation was incorporated into the financial statements at 31 August 1996 and transferred to revaluation reserve.

The valuations of buildings of a subsidiary were carried out in 1982 and 1984 respectively based on independent valuations by professional firms of valuers on the open market value basis. The net surplus on revaluation was transferred to revaluation reserve.

The title deeds of certain land are in the process of being registered in the name of the Company and certain subsidiaries.

Included in transfers/reclassification in 2007 for the Group and the Company was RM54.3 million being the carrying amount of land and building reclassified as non-current assets held for sale (see Note 20).

Interest capitalised during the financial year in capital project-in-progress amounted to RM309.5 million (2006: RM262.3 million) for the Group and the Company.

The capitalisation rate used to determine the amount of borrowing cost eligible for capitalisation is 5.63%

(2006: 5.84%) for the Group and the Company.

Impairment test for property, plant and equipment

During the year, a subsidiary company, TNB Liberty Power Limited, undertook an assessment of the provision for impairment totalling RM440.2 million recognised in prior years. The assessment showed that no further impairment loss is required for the carrying amount of property, plant and equipment assessed, including where realistic variations are applied to key assumptions. The carrying value of the property, plant and equipment of the subsidiary company at balance sheet date is RM725.2 million (2006: RM777.2 million).




14 PREPAID OPERATING LEASES Group Company 2007 2006 2007 2006 RM’million RM’million RM’million RM’million Cost/Valuation

As at the beginning of the financial year 1,029.6 1,022.3 825.5 818.2 Additions 16.6 7.3 16.6 7.3 Disposals (5.4) 0 (5.4) 0 Reclassified to non-current assets held for sale (Note 20) (2.7) 0 (2.7) 0 Reclassification 5.7 0 5.6 0 As at the end of the financial year 1,043.8 1,029.6 839.6 825.5

Accumulated amortisation

As at the beginning of the financial year 172.8 151.0 135.3 120.9 Charged for the financial year 22.1 21.8 14.7 14.4 Released on disposals (0.9) 0 (0.9) 0 Released on reclassification to non-current assets held for sale(Note 20) (1.2) 0 (1.2) 0 Released on reclassification (1.6) 0 (1.7) 0 As at the end of the financial year 191.2 172.8 146.2 135.3

Net book value as at the end of the financial year 852.6 856.8 693.4 690.2

Prepaid operating leases were previously classified as leasehold land within property, plant and equipment.

The prepaid operating leases comprise long leasehold land and short leasehold land. The last revaluation of the leasehold land was in 1994.

15 COAL MINING RIGHTS


Cost

As at the beginning and the end of the financial year 323.0 323.0

Accumulated amortisation

As at the beginning of the financial year 43.1 32.3 Charged during the financial year 10.7 10.8 As at the end of the financial year 53.8 43.1 269.2 279.9

Less : allowance for diminution in value (200.0) 0 Reclassified to non-current assets held for sale (Note 20) (69.2) 0 Net book value as at the end of the financial year 0 279.9



15 COAL MINING RIGHTS (Continued)

On 30 April 2007, TNB announced that Dynamic Acres Sdn. Bhd. (‘DASB’) has entered into a Share Sale Agreement with PT Pamapersada Nusantara in relation to the divestment of DASB’s entire 99% shareholding in PT Dasa Eka Jasatama. Consequently, the coal mining rights that was recorded in the books of DASB has been reclassified as non-current assets held for sale.

16 SUBSIDIARIES


Unquoted ordinary shares, at cost 296.7 254.5 Redeemable unsecured loan stocks, at cost 570.3 574.5 Redeemable preference shares, at cost 4,300.2 500.2

5,167.2 1,329.2 Less: allowance for diminution in value (586.1) (586.1) 4,581.1 743.1

During the financial year, TNB Janamanjung Sdn Bhd issued Redeemable Preference Shares (‘RPS’) amounting to RM3,800.0 million to the Company. The issuance of this RPS does not involve any cash transaction. The main features of the RPS are as follows:

• No fixed dividends attached to RPS;

• There shall not be any cumulative rights to dividends or any other preference in respect of profits or dividend; and

• TNB Janamanjung Sdn. Bhd. at its absolute discretion may at any time and from time to time redeem at a premium of minimum Ringgit Malaysia thirteen only (RM13.00) of the issued price per share, the whole or any portion or portions of the RPS issues upon giving to the holders fourteen (14) days notice of such redemption.

Group’s interest Country of Name of subsidiary 2007 2006 Principal activities incorporation TNB Janamanjung Sdn Bhd 100% 100% Operation of power plant Malaysia and generation of electricity

TNB Power Daharki Ltd* 100% 100% Investment holding Mauritius

TNB Fuel Services Sdn Bhd 100% 100% Purchase and supply of Malaysia fuel and coal for power generation

TNB Energy Services Sdn Bhd 100% 100% Generation and supply of various Malaysia energy sources and provision of related technical services

TNB Research Sdn Bhd 100% 100% Research and development, Malaysia consultancy and other services

TNB Ventures Sdn Bhd 100% 100% Investment holding for domestic Malaysia and international ventures

TNB Properties Sdn Bhd 100% 100% Property management services Malaysia



16 SUBSIDIARIES (Continued)

Group’s interest Country of Name of subsidiary 2007 2006 Principal activities incorporation

TNB Engineering Corporation 100% 100% Project management and Malaysia Sdn Bhd consultancy, engineering works and energy project development services

TNB Repair and 100% 100% Repair, maintenance Malaysia Maintenance Sdn Bhd and testing of power plants

TNB Engineers Sdn Bhd 100% 100% Providing engineering, procurement Malaysia and construction services for power related projects

TNB Capital (L) Ltd 100% 100% Investment holding Malaysia

Universiti Tenaga Nasional Sdn Bhd 100% 100% Providing higher education Malaysia

TNB Generation Sdn Bhd 100% 100% Dormant Malaysia

TNB Transmission Network 100% 100% Dormant Malaysia Sdn Bhd

TNB Distribution Sdn Bhd 100% 100% Dormant Malaysia

TNB Risk Management Sdn Bhd 100% 100% Dormant Malaysia

TNB Logistics Sdn Bhd 100% 100% Dormant Malaysia

TNB - IT Sdn Bhd 100% 100% Dormant Malaysia TNB Workshop Services 100% 100% Dormant Malaysia Sdn Bhd

TNB Kekal Sdn Bhd** 100% 100% Dormant Malaysia TNB Metering Services 100% 100% Dormant Malaysia Sdn Bhd

TNB Hidro Sdn Bhd 100% 100% Dormant Malaysia

Sumber Hidro Management 100% 100% Dormant Malaysia Sdn Bhd**

TNB Kapar Sdn Bhd** 100% 100% Dormant Malaysia

TNB Prai Sdn Bhd 100% 100% Dormant Malaysia

TNB Paka Sdn Bhd** 100% 100% Dormant Malaysia

Sabah Electricity Sdn Bhd 80% 80% Generation, transmission, distribution Malaysia and sale of electricity in Sabah

Malaysia Transformer 100% 73% Manufacturing, selling Malaysia Manufacturing Sdn Bhd and repairing of transformers

TNB Coal International Ltd* 92.5% 92.5% Investment holding Mauritius





Tenaga Switchgear Sdn Bhd 60% 60% Assemble and manufacture Malaysia high voltage switchgears Kapar Energy Ventures 60% 60% Generate and deliver electricity Malaysia Sdn Bhd energy and generating capacity to TNB

Power and Energy 100% 100% Investment holding Mauritius International (Mauritius) Ltd*

Sepang Power Sdn Bhd 70% 70% Dormant Malaysia

TNB Kulim Generation Sdn Bhd 100% 100% Dormant Malaysia TNB Kulim Distribution Sdn Bhd 100% 100% Dormant Malaysia

Subsidiaries of TNB Engineering Corporation Sdn Bhd

Bangsar Energy Systems 100% 100% Operating an integrated Malaysia Sdn Bhd district cooling system for air conditioning systems of office buildings

TNEC Construction Sdn Bhd 100% 100% Construction contractors Malaysia

TNEC Operations and 100% 100% Operations and maintenance Malaysia Maintenance Sdn Bhd of cooling and power plants

Subsidiary of Power and Energy International (Mauritius) Ltd

Independent Power 100% 100% Investment holding Mauritius International Ltd*

Subsidiary of Bangsar Energy Systems Sdn Bhd

Selesa Energy Systems Sdn Bhd 100% 100% Dormant Malaysia

Subsidiary of TNEC Operations and Maintenance Sdn Bhd

Tomest Energy Management 51% 51% Dormant Malaysia Sdn Bhd

Subsidiary of TNB Generation Sdn Bhd

TNBG Power Services Sdn Bhd** 100% 100% Dormant Malaysia Subsidiary of TNB Power Daharki Ltd

TNB Liberty Power Limited# 100% 100% Operation of power plant Pakistan and generation of electricity

Subsidiary of TNB Properties Sdn Bhd

TNP Construction Sdn Bhd 100% 100% Construction contractors Malaysia

Subsidiary of TNB Research Sdn Bhd

Tenaga Microwave 70% 70% Supplier and manufacturer Malaysia Technologies Sdn Bhd*^ of electrical components





Subsidiary of TNB Energy Services Sdn Bhd

Jana Landfill Sdn Bhd 70% 70% Generation and distribution of heat Malaysia and electricity using landfill gas and/or other renewable energy resources in Peninsular Malaysia and/or elsewhere

Subsidiaries of TNB Repair and Maintenance Sdn Bhd

Trichy Power Limited* 100% 100% Dormant India

Trichy Energy Limited* 100% 100% Dormant India

TNB Operations & Maintenance 100% 100% Investment holding Mauritius International Ltd (TOMIL)

Subsidiary of TNB Operations & Maintenance International Ltd (TOMIL)

Oasis Parade Sdn Bhd 100% 100% Investment holding Malaysia

Subsidiary of TNB Ventures Sdn Bhd

Tenaga Cable Industries 76% 76% Manufacturing and distribution Malaysia Sdn Bhd of power and general cables, aluminium rods and related activities

Subsidiary of TNB Coal International Limited

Dynamic Acres Sdn Bhd* 100% 100% Coal trading Malaysia

Subsidiary of Dynamic Acres Sdn Bhd

P.T. Dasa Eka Jasatama*(i) 99% 99% Coal mining and trading Indonesia

* Not audited by PricewaterhouseCoopers (i) In respect of P.T. Dasa Eka Jasatama, Dynamic Acres Sdn. Bhd. (‘DASB’) has entered into a Share Sale

Agreement with PT Pamapersada Nusantara in relation to the divestment of DASB’s entire 99% shareholding in PT Dasa Eka Jasatama as disclosed in Note 15.

# Audited by a member firm of PricewaterhouseCoopers International Limited which is a separate and independent legal entity from PricewaterhouseCoopers Malaysia.

^ On 23 August 2002, the High Court has granted the liquidation petition of Tenaga Microwave Technologies Sdn Bhd brought by the Company and TNB Research Sdn Bhd. The liquidation process is still in progress as at 31 August 2007.

** These companies are in the process of being wound up.



17 ASSOCIATES


Share of net assets of associates 233.0 200.6


Unquoted shares, at cost 59.2 59.2 Less: allowance for diminution in value (9.6) (9.6) 49.6 49.6 Redeemable preference shares, at cost 34.0 34.0 Unsecured loan notes 42.2 52.2 125.8 135.8

The Group’s share of revenue, profit, assets and liabilities of associates are as follows:

2007 2006 RM’million RM’million

Revenue 224.3 211.1 Profit after taxation 42.4 14.6

Non-current assets 606.8 600.8 Current assets 270.8 273.1 Current liabilities (137.9) (178.9) Non-current liabilities (506.7) (494.4) Net assets 233.0 200.6

Details of the associates are as follows:

Group’s interest Country of Name of associate 2007 2006 Principal activities incorporation

Teknologi Tenaga Perlis 20% 20% Ownership, operation, maintenance Malaysia Consortium Sdn Bhd of electricity generating plant

Perusahaan Otomobil Elektrik 20% 20% Dormant Malaysia (Malaysia) Sdn Bhd

GB3 Sdn Bhd 20% 20% Design, develop, construction, Malaysia operation and maintenance of electricity generating facility

Fibrecomm Network (M) Sdn Bhd 49% 49% Provision of fibre optic Malaysia transmission network Associate of TNB Energy Services Sdn Bhd

Pendinginan Megajana Sdn Bhd 0% 49% District cooling system Malaysia



17 ASSOCIATES (Continued)

Group’s interest Country of Name of associate 2007 2006 Principal activities incorporation

Associates of TNB Properties Sdn Bhd

HICOM-TNB Properties Sdn Bhd 40% 40% Construction contractors Malaysia

INDERA-TNB 40% 40% Property development Malaysia Properties Sdn Bhd and construction

KM Metro-TNB 40% 40% Property development Malaysia Properties Sdn Bhd and construction

TNB Properties-JB 40% 40% Property development Malaysia Citytowers Sdn Bhd and construction

ZEUS-TNB Properties Sdn Bhd 40% 40% Property development and construction Malaysia

Associate of TNB Ventures Sdn Bhd

Northern Utility Resources Sdn Bhd 20% 20% Operation of power plant, Malaysia (Receivers and Managers appointed) generation and supply of electricity

Associate of Independent Power International Ltd

Malaysian Shoaiba 20% 20% Investment holding Malaysia Consortium Sdn Bhd

18 INVESTMENTS


Unquoted shares, at cost 75.7 75.7 75.7 79.5 Unquoted unsecured loan stocks, at cost 0 3.8 59.4 59.4 75.7 79.5 135.1 138.9 Allowance for diminution in value: - unquoted shares (37.7) (37.7) (37.7) (41.5) - unquoted unsecured loan stocks 0 (3.8) 0 (40.6) 38.0 38.0 97.4 56.8

19 LONG TERM RECEIVABLES


Amounts due from subsidiaries 703.1 841.8

The amounts due from subsidiaries comprise advances and other receivables from TNB Liberty Power Limited (‘TLPL’) and TNB Power Daharki Ltd (‘TPD’) amounting to RM54.6 million (2006: RM57.2 million) and RM648.5 million (2006: RM784.6 million) respectively.

These amounts are unsecured and the Company has given an undertaking to the subsidiaries not to recall the amount within 12 months from the balance sheet date. The amount due from LPL is interest free. The amount due from TPD is subject to interest at rates ranging from 6.7% to 8.4% (2006: 4.9% to 8.2%) per annum.



20 NON-CURRENT ASSETS HELD FOR SALE

Group Company Carrying Carrying amount Carrying amount Carrying prior amount prior amount to as at to as at reclassification 31.8.2007 reclassification 31.8.2007 RM’million RM’million RM’million RM’million

Amount transferred from property, plant & equipment (Note 13) 54.3 54.3 54.3 54.3 Amount transferred from prepaid operating leases (Note 14) 1.5 1.5 1.5 1.5 Amount transferred from coal mining rights (Note 15) 69.2 69.2 0 0 125.0 125.0 55.8 55.8

During the year, the Company entered into several sale and purchase agreements with various parties, for which the disposals are still in progress.

21 INVENTORIES


Raw materials, fuel and consumables 1,692.3 1,782.5 1,115.4 1,113.4 Work-in-progress 51.2 9.8 0 0 Finished goods 26.0 139.5 0 0 1,769.5 1,931.8 1,115.4 1,113.4

22 RECEIVABLES, DEPOSITS AND PREPAYMENTS

Group Company 2007 2006 2007 2006 RM’million RM’million RM’million RM’million Trade receivables 2,045.1 2,519.8 1,639.1 2,095.6 Less: allowance for doubtful debts (504.0) (667.7) (415.6) (597.7) 1,541.1 1,852.1 1,223.5 1,497.9

Rechargeable debtors 92.3 86.2 91.0 92.5 Less: allowance for doubtful debts (83.8) (71.8) (73.3) (67.1) 8.5 14.4 17.7 25.4

Staff advances/loans 620.6 664.2 616.5 660.8 Advance to contractors 114.5 133.2 98.1 117.2 Deposits and prepayments 109.3 113.2 21.5 21.4 Other receivables 527.8 638.3 227.3 178.7 1,372.2 1,548.9 963.4 978.1 2,921.8 3,415.4 2,204.6 2,501.4



22 RECEIVABLES, DEPOSITS AND PREPAYMENTS (Continued)

The Group’s and the Company’s credit policy provides trade receivables with a 30 day (2006: 30 day) credit period. The Group and the Company have no significant exposures to any individual customer, geographical location or industry category. All credit and recovery risks associated with receivables have been provided for in the financial statements.

Included in staff advances/loans are staff housing and car loans amounting to RM536.5 million (2006: RM575.6 million) which are not recoverable within 12 months.

23 AMOUNTS DUE FROM/TO SUBSIDIARIES

Amount due from TLPL is interest free. Amounts due from TPD and TNB Janamanjung Sdn Bhd (‘TNBJ’) are subject to interest at rates ranging from 6.7% to 8.4% (2006: 4.9% to 8.2%) per annum and 4.0% (2006: 4.0%) per annum respectively. Amount due from SESB is subject to an interest rate of 6.0% (2006: 6.0%) per annum, is unsecured and has no fixed terms of repayment.

Amounts due from/to all other subsidiaries are unsecured, interest free and have no fixed terms of repayment.

24 SHORT TERM INVESTMENTS


Quoted warrants, at cost 12.6 12.6 12.6 12.6

Market value - quoted warrants 23.7 14.8 23.7 14.8

25 MARKETABLE SECURITIES


Quoted in Malaysia, at cost: Shares 27.1 27.1 27.1 27.1 Less: allowance for diminution in value (16.5) (17.9) (16.5) (17.9) 10.6 9.2 10.6 9.2 Market value 10.6 9.2 10.6 9.2



26 DEPOSITS, BANK AND CASH BALANCES


Cash in hand and at bank 988.1 537.2 295.4 223.3 Deposits with licensed banks 4,310.6 3,411.9 4,228.9 2,901.4 Deposits with licensed finance companies 0.6 0.6 0 0 5,299.3 3,949.7 4,524.3 3,124.7

The interest rate per annum of deposits, bank and cash balances that were effective as at balance sheet date were as follows:

Group Company 2007 2006 2007 2006 % % % %

Deposits with licensed banks and finance companies 3.50 – 5.25 2.66 – 5.23 3.50 – 5.25 3.54 – 5.23 Bank balances 1.80 – 2.00 1.80 – 3.60 1.80 – 2.00 1.80 – 3.60

Deposits with licensed banks are held in the short term money market. Deposits have maturity periods ranging from 5 to 448 days (2006: 2 to 92 days) for the Group and the Company.

Deposits of the Group and the Company at the end of the financial year have an average maturity period of 60 days (2006: 63 days) and 60 days (2006: 69 days).


Cash and cash equivalents at end of the financial year comprise:

Cash in hand and at bank 988.1 537.2 295.4 223.3 Deposits with licensed banks 4,310.6 3,411.9 4,228.9 2,901.4 Deposits with finance companies 0.6 0.6 0 0 Deposits held in trust* 0 (0.6) 0 0 Cash at bank held in trust* (65.6) (12.4) 0 0 5,233.7 3,936.7 4,524.3 3,124.7

* Deposits and cash at bank held in trust are in respect of a grant given to a subsidiary by the Government of Malaysia for a designated capital project.



27 PAYABLES


Trade payables 3,233.7 2,488.8 2,607.7 1,715.8 Accrued interest on borrowings 470.8 462.4 240.9 275.9 Payroll liabilities 163.7 172.1 152.8 165.2 Deposits 15.4 18.6 9.8 9.7 Other payables and accruals 418.0 591.6 121.5 228.3 4,301.6 3,733.5 3,132.7 2,394.9

Credit terms of trade payables of the Group and the Company vary from 30 to 60 days (2006: 30 to 60 days) depending on the terms of the contracts.

28 SHORT TERM BORROWINGS


Portion of borrowings due within one financial year (Note 29) - unsecured 1,727.4 2,402.2 1,422.7 1,934.5 - secured 215.8 43.6 0 0 1,943.2 2,445.8 1,422.7 1,934.5

Short term loans - unsecured 40.0 45.0 30.0 30.0 Bankers’ acceptances 32.3 43.9 0 0 2,015.5 2,534.7 1,452.7 1,964.5

The short term borrowings carry interest at rates ranging from 2.50% to 8.30% (2006: 0.73% to 9.25%) per annum for the Group and the Company. Included in short term borrowings of the Group are loan stocks held by the Company in a subsidiary company which carries a coupon of 15.00% per annum.



29 BORROWINGS

Group Company 2007 2006 2007 2006 Note RM’million RM’million RM’million RM’million Unsecured - Term loans (a) 10,198.2 10,564.7 7,557.5 7,733.3 - Bonds (b) 8,173.8 10,511.8 6,954.6 8,331.1 - Income Securities (c) 1,561.4 1,700.0 1,561.4 1,700.0 - Amount due to Cagamas Berhad 248.0 271.1 248.0 271.1 - Redeemable Unsecured Loan Stocks 380.2 383.0 0 0 20,561.6 23,430.6 16,321.5 18,035.5 Secured - Term loans (a) 437.5 484.2 0 0 - Bonds (b) 2,908.0 3,111.9 0 0 23,907.1 27,026.7 16,321.5 18,035.5


Payable within one year included under short term borrowings (Note 28) 1,943.2 2,445.8 1,422.7 1,934.5

Repayable after one year:

After one and up to two years 904.1 2,857.7 363.2 1,428.7 After two and up to five years 5,957.0 5,895.2 4,308.4 4,154.6 After five and up to ten years 7,851.4 8,548.8 4,212.1 4,666.9 After ten and up to twenty years 5,740.3 5,664.8 4,907.9 4,647.3 After twenty and up to thirty years 874.2 912.1 484.0 501.2 After thirty years 636.9 702.3 623.2 702.3 21,963.9 24,580.9 14,898.8 16,101.0 23,907.1 27,026.7 16,321.5 18,035.5


Net book values of property, plant and equipment pledged as security for term loans:

(i) Machinery and equipment 2,812.5 2,948.7 (ii) Building 818.0 877.8 3,630.5 3,826.5

Unsecured term loans include RM16.1 million (2006: RM17.3 million) due to the Government of Malaysia and RM3,290.4 million (2006: RM2,842.2 million) guaranteed by the Government of Malaysia.



29 BORROWINGS (Continued)

(a) Term loans

Details of term loans with designated derivative financial instruments are as follows:

(i) 10-YEAR JPY37.0 BILLION TERM LOAN

In 1997, the Company entered into a 10-year JPY37.0 billion unsecured loan, paying interest at floating rates, matured on 30 June 2007. This loan is an amortising loan, whose principal amount is payable in equal semi-annual instalments over the life of the loan. The repayments commenced since 1997. The notional principals of the hedging contracts illustrated below amortise in the same manner as this loan.

Interest rate swap (‘IRS’)

On one tranche of the loan, the Company entered into an IRS agreement on 31 December 1997 that entitles it to receive floating interest rates, and obliges it to pay interest at a fixed rate of 1.927%, matured on 30 June 2007. The notional principal of the swap is JPY8.6 billion. The effect of this transaction is to fix the interest rate payable on that tranche of the loan.

For the period from 1 July 2002 to 30 June 2007, the Company entered into IRS agreements that entitles it to receive interest at floating rates on notional principals totalling JPY14.0 billion and oblige it to pay interest at fixed rates ranging from 2.74% to 2.94%. The IRS has matured on 30 June 2007.

(ii) TNB JANAMANJUNG SDN BHD (‘TNBJ’) 12-YEAR AMORTISING LOAN

TNBJ, a wholly owned subsidiary of the Company, had in 1999 entered into a 12-year amortising loan facility with floating interest rates to part finance the construction of a power plant. On 30 August 2006 the loan was novated to TNB Capital (L) Ltd (‘TNBCL’) a wholly owned subsidiary of TNB. The loan is guaranteed by the Company and is denominated in US Dollar. The translated outstanding balance as at 31 August 2007 is RM1,557.4 million (2006: RM1,850.8 million).

Forward interest rate swap

TNBJ has entered into IRS agreements that entitles it to receive interest at floating rates and obliges it to pay interest at fixed rates in the range of 6.59% to 6.92% (depending on counterparty) on an aggregate notional amount of GBP250.0 million. The effect of this transaction is to fix the interest rate on the tranche. The IRS was however unwound in full on 3 January 2007.

(iii) 30-YEAR JPY26.0 BILLION TERM LOAN

On 30 March 2004, TNBCL entered into a 30-year JPY26.0 billion unsecured loan, paying interests at USD fixed rates. The loan will mature on 13 April 2034. The loan is an amortising loan whose principal is payable in 20 equal annual instalments. The first repayment shall be due on 13 April 2015. The interest is paid semi-annually on 13 April and 13 October each year commencing 13 October 2005. The balance as at 31 August 2007 is RM789.7 million (2006: RM817.6 million).

USD-JPY Option on the principal repayment

In April 2004, TNBCL entered into Currency Option Agreements with a notional amount of JPY26.0 billion as a hedge on its Term Loan. This transaction enables TNBCL to reduce its exposure to losses that may arise from adverse fluctuation on foreign currency exchange rates in relation to the above Term Loan.

(iv) 5- YEAR JPY11.0 BILLION TERM LOAN

On 13 December 2004, the Company entered into a 5-year JPY11.0 billion unsecured loan, paying floating interest rates. The loan will mature on 4 January 2010. The loan is an amortising loan whose principal amount is payable in 10 equal semi-annual instalments. The first repayment of the loan commenced on 4 July 2005. The translated Ringgit Malaysia of the loan as at 31 August 2007 in accordance with Company’s accounting policy is equivalent to RM167.0 million (2006: RM242.1 million).




(a) Term loans (Continued)

(iv) 5- YEAR JPY11.0 BILLION TERM LOAN (Continued)

JPY-MYR cross-currency swap (‘CCS’)

In October 2006, TNB entered into a CCS agreement that entitles TNB to receive a floating interest rate in JPY and to pay a fixed rate of 4.23% in Ringgit Malaysia. The notional principle of the swap is JPY7.7 billion. The effect of this transaction is to fix the interest rate payable on that loan and reduce TNB’s exposure to losses that may arise from adverse fluctuation on foreign currency exchange rates and interest rates in relation to the loan.

(b) Bonds

Details of bonds with designated derivative financial instruments are as follows:

(i) 5-YEAR USD400.0 MILLION GUARANTEED EXCHANGEABLE BONDS (‘GEB’)

On 20 November 2002, TNBCL a wholly owned subsidiary of TNB, issued USD400.0 million 2.625% GEB. The GEB’s maturity date is on 20 November 2007.

The holders of the GEB are entitled to exchange, at par, the GEB for TNB’s share based on an exchange price which had commenced on 20 December 2002 and ended on 21 October 2007. The holders of the GEB also had the option to put the bonds to TNBCL for redemption on 20 November 2005. The put option notice period had since expired on 21 October 2005. On the expiry date, no bonds were put and the issuer, TNBCL was not required to repurchase all of its bonds or any portion of the principal amount thereof.

The GEB are redeemable at the option of the issuer, in whole or in part, upon notice to the holders on or any time after 20 November 2005.

On 28 February 2006, the exchange price of the GEB was adjusted from RM10.15 per share to RM8.10 per share as a result of TNB’s bonus issue.

The right of exchange of the Bonds had expired on 6 October 2006. Upon expiry of that right, a total of USD398.9 million were exchanged. As a result of the exchange, the paid-up ordinary share capital of the Company had increased by the total of 187,155,756 new TNB shares. On 13 October 2006, the balance of USD1.1 million, had since been fully redeemed.

(ii) 5-YEAR RM200.0 MILLION CONVERTIBLE INCOME SECURITIES (‘CRIS’)

On 11 May 2004, the Company issued RM200.0 million 3.05% CRIS. The CRIS will mature on 8 May 2009.

The holders of the CRIS have the right at any time during the conversion period to convert all or any part of the CRIS into fully paid up ordinary shares of the Company at the conversion price.

On 28 February 2006, the exchange price of the CRIS was adjusted from RM11.47 per share to RM9.18 per share as a result of the bonus issue.

(iii) ISLAMIC DEBT SECURITIES - BAI BITHAMIN AJIL (‘BaIDS’)

On 28 June 2004, Kapar Energy Ventures Sdn Bhd (‘KEV’), a subsidiary of TNB obtained RM3,402.0 million BaIDS to finance the acquisition of Stesen Janaelektrik Sultan Salahuddin Abdul Aziz. The tenure of the BaIDS Facility ranges from 1 to 15 years with a profit rate of between 3.65% and 8.70% per annum.




(b) Bonds (Continued)

(iii) ISLAMIC DEBT SECURITIES - BAI BITHAMIN AJIL (‘BaIDS’) (Continued)

The BaIDS are secured by the following:

(i) Charge over KEV’s leased land. The charge of the leased land was not effected as at 31 August 2007.

(ii) Debenture over KEV’s assets and properties and assignment of all rights, title interest and benefits under the project documents, the assigned insurances, and the designated accounts to secure the payment and repayment of the total secured amounts.

(iii) The Priority and Security Sharing Agreement.

The terms of BaIDS require deposits to be placed in the debt reserve account with a licensed bank to meet the debt servicing requirements. The terms of BaIDS also require KEV to maintain certain financial covenants.

(c) Income Securities

Fixed Income Securities (‘FIS’)

The FIS consists of both redeemable bonds and Redeemable Preference Shares (‘RPS’), details of which are as follows:

(i) 1,500 interest bearing 10-year redeemable unsecured bonds (“Bonds”) of an aggregated nominal value of RM999.0 million issued at 100% of nominal value (in denominations of RM999,000.00 each), with detachable coupons representing interest on the Bonds. The Bonds are to be redeemed at par in two tranches with redemption amounts of RM999.0 million and RM499.5 million on 16 August 2011 and 19 September 2011 respectively, and;

(ii) 1,000 Class A RPS of RM1.00 each, issued at a premium of RM999.00 per share and 500 Class B RPS of RM1.00 each, issued at a premium of RM999.00 per share. Both classes of RPS are redeemable at RM1,000 each at the Company’s option at any time on or after 16 August 2010 and 19 September 2010, for Class A and B RPS respectively. If the Class A and B RPS are not redeemed by 16 August 2011 and 19 September 2011 respectively, an additional sum of RM1.0 million on the first tranche and RM0.5 million on the second tranche shall become due and payable under the final Bond Coupon payment for each of the tranches.

If the Company elects to declare and pay dividends on the RPS, payment of such dividends amounting to RM71.9 million per annum (net of income tax) shall be on a six monthly basis non-cumulative. In addition, interest under the Bond Coupons amounting to RM0.2 million per annum shall be payable. In the event that dividends on the RPS are not declared or paid, interest payable under the Bond Coupon is RM94.5 million per annum payable semi-annually.

The FIS are classified as debt instruments and hence are reported as liabilities. Accordingly, the annual net dividend payment of the RPS amounting to RM71.9 million is classified as an interest expense in the income statement.

Under the terms of the FIS, if the holder of the RPS is unable to receive the related tax credits associated with the transaction, the Company has to indemnify the holder of the RPS, in respect of the benefits denied and any penalties arising which the RPS holder may incur.



30 CONSUMER DEPOSITS

Consumers (with the exception of employees and government departments/agencies) are required to deposit a sum sufficient to cover charges for two months supply of energy as allowed under the regulation of the Licensee Supply (Amendment) Regulations 2002. In default of payment of the deposit within the time specified, the supply to the consumer’s installation may be disconnected, subject to certain conditions laid out in the Regulations.

TNB shall pay a sum equivalent to 5% per annum on the amount of cash deposit as a rebate, on a pro-rated basis, in January every year.

31 EMPLOYEE BENEFITS The movements during the financial year in the amounts recognised in the consolidated balance sheet are as

follows: Retirement Retirement benefit plan medical plan Total RM’million RM’million RM’million Group

At 1 September 2005 941.0 1,307.2 2,248.2 Charged to income statement 199.8 95.3 295.1 Contribution and benefits paid (129.8) (99.4) (229.2) At 31 August 2006 1,011.0 1,303.1 2,314.1

Charged to income statement 249.0 400.2 649.2 Contribution and benefits paid (123.8) (108.9) (232.7) At 31 August 2007 1,136.2 1,594.4 2.730.6

The amounts recognised in the consolidated balance sheet are analysed as follows:

Retirement Retirement benefit plan medical plan Total RM’million RM’million RM’million

Group

At 31 August 2006 Present value of obligations 1,595.3 1,340.4 2,935.7 Fair value of plan assets (451.7) 0 (451.7) Present value of unfunded obligations 1,143.6 1,340.4 2,484.0 Unrecognised actuarial losses (92.9) 0 (92.9) Unrecognised past service cost (41.9) (37.3) (79.2) Others 2.2 0 2.2 Liability in the balance sheet 1,011.0 1,303.1 2,314.1

At 31 August 2007 Present value of obligations 2,049.6 3,053.5 5,103.1 Fair value of plan assets (648.2) 0 (648.2) Present value of unfunded obligations 1,401.4 3,053.5 4,454.9 Unrecognised actuarial losses (193.8) (1,459.1) (1,652.9) Unrecognised past service cost (77.3) 0 (77.3) Others 5.9 0 5.9 Liability in the balance sheet 1,136.2 1,594.4 2,730.6



31 EMPLOYEE BENEFITS (Continued)

The expense recognised in the consolidated income statement is analysed as follows:


Group

2006 Current service cost 110.9 8.3 119.2 Interest cost 98.8 87.0 185.8 Expected return on plan assets (25.7) 0 (25.7) Past service cost 15.5 0 15.5 Others 0.3 0 0.3 Total, included in staff costs 199.8 95.3 295.1 Actual return on plan assets (18.8) 0 (18.8)


2007

Current service cost 133.2 8.4 141.6 Interest cost 119.2 199.4 318.6 Expected return on plan assets (28.6) 0 (28.6) Actuarial losses recognised 9.7 192.4 202.1 Past service cost 15.5 0 15.5 Amortisation of transitional liability 0 0 0 Total, included in staff costs 249.0 400.2 649.2 Actual return on plan assets (144.0) 0 (144.0)

The charge to income statement was included in the administrative expenses.




The principal actuarial assumptions used in respect of the Group’s defined benefit plans were as follows:

Retirement Retirement benefit plan medical plan % %

Group

At 31 August 2006

Discount rates 7.0 7.0 Expected return on plan assets 8.0 N/A Expected rate of salary increases 5.0 N/A Medical cost inflation - inpatient N/A 6.0 - outpatient N/A 6.0

At 31 August 2007

Discount rates 6.5 7.1 Expected return on plan assets 6.0 N/A Expected rate of salary increases 6.0 N/A Medical cost inflation - inpatient N/A 7.9 - outpatient N/A 5.1

The movements during the financial year in the amounts recognised in the Company’s balance sheet are as follows:


Company

At 1 September 2005 929.6 1,233.3 2,162.9

Charged to income statement 198.8 87.0 285.8 Contributions and benefits paid (128.0) (99.4) (227.4) At 31 August 2006 1,000.4 1,220.9 2,221.3 Charged to income statement 246.2 391.8 638.0 Contributions and benefits paid (123.0) (108.9) (231.9) At 31 August 2007 1,123.6 1,503.8 2,627.4




The amounts recognised in the Company’s balance sheet are analysed as follows:


Company

At 31 August 2006

Present value of obligations 1,586.0 1,258.2 2,844.2 Fair value of plan assets (451.1) 0 (451.1) Present value of unfunded obligations 1,134.9 1,258.2 2,393.1

Unrecognised actuarial losses (41.7) (37.3) (79.0) Unrecognised past service cost (92.8) 0 (92.8) Liability in the balance sheet 1,000.4 1,220.9 2,221.3

At 31 August 2007 Present value of obligations 2,042.9 2,962.9 5,005.8 Fair value of plan assets (648.2) 0 (648.2) Present value of unfunded obligations 1,394.7 2,962.9 4,357.6 Unrecognised actuarial losses (193.8) (1,459.1) (1,652.9) Unrecognised past service cost (77.3) 0 (77.3) Liability in the balance sheet 1,123.6 1,503.8 2,627.4

The expense recognised in the Company’s income statement is analysed as follows:


Company

2006

Current service cost 110.3 0 110.3 Interest cost 98.7 87.0 185.7 Expected return on plan assets (25.7) 0 (25.7) Past service cost 15.5 0 15.5 Total, included in staff costs 198.8 87.0 285.8 Actual return on plan assets (18.8) 0 (18.8)




Retirement Retirement benefit plan medical plan Total RM’million RM’million RM’million Company

2007 Current service cost 130.4 0 130.4 Interest cost 119.2 199.4 318.6 Expected return on plan assets (28.6) 0 (28.6) Actuarial losses recognised 9.7 192.4 202.1 Past service cost 15.5 0 15.5 Total, included in staff costs 246.2 391.8 638.0 Actual return on plan assets (144.0) 0 (144.0)

The charge to income statement was included in the administrative expenses.

The principal actuarial assumptions used in respect of the Company’s defined benefit plans were as follows:

Retirement Retirement benefit plan medical plan % % Company

At 31 August 2006

Discount rates 7.0 7.0 Expected return on plan assets 8.0 N/A Expected rate of salary increases 5.0 N/A Medical cost inflation - inpatient N/A 6.0 - outpatient N/A 6.0 At 31 August 2007

Discount rates 6.5 7.1 Expected return on plan assets 6.0 N/A Expected rate of salary increases 6.0 N/A

Medical cost inflation - inpatient N/A 8.0 - outpatient N/A 5.0



32 DEFERRED TAXATION

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred taxes relate to the same tax authority. The following amounts, determined after appropriate offsetting, are shown in the balance sheet:


Deferred tax liabilities: - subject to corporate income tax (6,274.4) (6,390.2) (5,524.8) (5,724.0) - subject to real property gains tax 0 (34.4) 0 (34.4) (6,274.4) (6,424.6) (5,524.8) (5,758.4)

The movements during the financial year relating to deferred tax are as follows:


As at the beginning of the financial year (6,424.6) (5,997.8) (5,758.4) (5,456.5) (Charged)/credited to income statement: - property, plant and equipment 149.1 (399.7) 232.5 (274.8) - provision and allowances 1.1 (27.1) 1.1 (27.1) 150.2 (426.8) 233.6 (301.9) As at the end of the financial year (6,274.4) (6,424.6) (5,524.8) (5,758.4) Subject to income tax

Deferred tax assets (before offsetting) Provision and allowances 798.6 797.5 798.6 797.5 Property, plant and equipment 1.6 1.6 0 0 Offsetting (800.2) (799.1) (798.6) (797.5) Deferred tax assets (after offsetting) 0 0 0 0 Deferred tax liabilities (before offsetting) Property, plant and equipment (7,074.6) (7,189.3) (6,323.4) (6,521.5) Offsetting 800.2 799.1 798.6 797.5 Deferred tax liabilities (after offsetting) (6,274.4) (6,390.2) (5,524.8) (5,724.0)


Subject to capital gains tax

Deferred tax liabilities Property, plant and equipment 0 (34.4) 0 (34.4)



32 DEFERRED TAXATION (Continued)

The amount of deductible temporary differences and unused tax losses (both of which have no expiry date) for which no deferred tax assets is recognised in the balance sheet are as follows:


Deductible temporary differences 1,688.4 1,180.3 0 0 Tax losses 1,222.7 1,135.2 0 0

As at 31 August 2007, the temporary differences associated with unremitted earnings of subsidiaries for which deferred tax liabilities have not been recognised amounted to RM740.2 million (2006: RM498.0 million).

33 DEFERRED INCOME


As at the beginning of the financial year 2,675.8 2,505.9 2,400.6 2,271.0 Received during the financial year 454.6 510.3 395.9 406.7 Released to income statement (Note 4) (326.9) (340.4) (291.8) (277.1) As at the end of the financial year 2,803.5 2,675.8 2,504.7 2,400.6

34 GOVERNMENT DEVELOPMENT GRANTS

Group 2007 2006 RM’million RM’million As at the beginning of the financial year 665.0 686.0 Received during the financial year 0 26.3 Released to income statement (Note 7) (44.5) (47.3) As at the end of the financial year 620.5 665.0

The Government development grants are in respect of capital grants received by an 80% subsidiary company Sabah Electricity Sdn. Bhd. for capital projects in the State of Sabah.


35 SHARE CAPITAL

Group and Company 2007 2006 RM RM

Authorised:

Ordinary shares of RM1.00 each 5,000,000,000 5,000,000,000

Special Rights Redeemable Preference Share of RM1.00 each 1 1

Class A Redeemable Preference Shares of RM1.00 each

As at the beginning/end of the financial year 1,000 1,000

Class B Redeemable Preference Shares of RM1.00 each

As at the beginning/end of the financial year 500 500

Issued and fully paid:

Ordinary shares of RM1.00 each 4,331,709,068 4,135,170,337

Special Rights Redeemable Preference Share of RM1.00 each 1 1 Total share capital issued and fully paid as at the end of the financial year 4,331,709,069 4,135,170,338

Movements on issued ordinary shares of RM1.00 each

As at the beginning of the financial year 4,135,170,337 3,220,719,030 Issuance of ordinary shares of RM1.00 each under the ESOS II 66,736,312 33,335,924 Issuance of ordinary shares of RM1.00 under the exchange of Guaranteed Exchangeable Bonds 114,699,925 72,413,901 Issuance of ordinary shares of RM1.00 under the Unsecured Convertible Redeemable Income Securities 15,102,494 0 Issuance of bonus shares as fully paid up, on the basis of one (1) bonus share for every four (4) existing TNB shares held by shareholders via the capitalisation of the share premium account 0 808,701,482

As at the end of the financial year 4,331,709,068 4,135,170,337

Employees’ Share Option Scheme (‘ESOS’)

The Company implemented a new Employees’ Share Option Scheme II (‘ESOS II’) on 8 July 2003 for a period of 10 years. The ESOS II is governed by the bye-laws, which were approved by the shareholders at an Extraordinary General Meeting (‘EGM’) on 29 May 2003 and amended at the EGM held on 15 December 2005.

The main features of ESOS II are as follows:

(a) The total number of ordinary shares to be issued by the Company under the ESOS II shall not exceed 10% of total issued and paid-up ordinary shares of the Company, such that not more than 50% of the shares available under the ESOS II are allocated, in aggregate, to Directors and senior management.

(b) Not more than 10% of the shares available under the ESOS II is allocated to any individual Director or employee who, either singly or collectively through his/her associates, holds 20% or more in the issued and paid-up capital of the Company.




35 SHARE CAPITAL (Continued)

Employees’ Share Option Scheme (‘ESOS’) (Continued)

(c) Any employee, including any Executive Director and those categorised as Fixed Term Senior Management, but excluding a Skim A employee (the scheme governing employees who, upon the corporatisation and privatisation of the Lembaga Letrik Negara in 1990, remain employed under the Government’s terms and conditions) are eligible to participate in the ESOS II. Employees under the Fixed Term Senior Management are also entitled to the Performance Options based on them meeting prescribed performance targets.

(d) The option price under the ESOS II is the higher of the weighted average market price of the shares as shown in the daily official list issued by the Bursa Malaysia Securities Berhad for the five trading days preceding the date of offer with a 10% discount on the nominal value of the shares, subject always that the discount shall not be applicable to any shares under the Performance Option.

(e) In the event of any alteration to the capital structure of the Company during the option period which expires on 7 July 2013, such corresponding alterations shall be made in:

(i) the number of new shares in relation to the ESOS II so far as unexercised;

(ii) the option price; and/or

(iii) the method of the exercise of the option.

(f) Options granted under the ESOS II carry no dividends or voting rights. Upon exercise of the options, shares issued rank pari passu in all respects with the then existing ordinary shares of the Company.

(g) The persons to whom the options have been granted under the ESOS II have no right to participate in any share issue of any other company within the Group.

.

Movements in the number of shares represented by options outstanding and their related weighted average exercise prices are as follows:

2007 2006 Average Number Average Number exercise of exercise of price shares price shares RM/share ‘000 RM/share ‘000

Beginning of year 6.89 133,821 6.81 120,013 Granted 10.92 17,087 7.33 17,267 Bonus Issue 0 0 6.89 30,679 Exercised 6.86 (66,736) 6.82 (33,336) Expired 11.68 (141) 7.16 (802) At end of year 7.73 84,031 6.89 133,821

Out of the options outstanding, those representing 84,030,814 shares (31.8.2006: 133,821,051 shares) were exercisable. Options exercised during the period resulted in 66,736,312 shares (31.8.2006: 33,335,924 units) being issued at RM6.71, RM6.99, RM7.42, RM7.33, RM7.75, RM7.80, RM9.189 or RM11.07 each (31.8.2006: RM8.39, RM8.74, RM9.28, RM6.71, RM6.99, RM7.42 or RM7.33 each). The related weighted average share price at the time of exercise was RM7.73 (31.8.2006: RM6.89) per share.




Details relating to the options exercised during the financial year are as follows:

Number of Fair value of shares shares at share Exercise issued as at Exercise date issue date price 31.8.2007 RM/share RM/share

September 2006 9.15-10.10 6.71/6.99/7.42/7.33 5,665,650 October 2006 9.55-10.10 6.71/6.99/7.42/7.33 8,760,475 November 2006 9.95-10.90 6.71/6.99/7.42/7.33 6,233,325 December 2006 10.80-11.60 6.71/6.99/7.42/7.33 12,435,132 January 2007 11.00-12.40 6.71/6.99/7.42/7.33 8,694,675 February 2007 12.00-12.40 6.71/6.99/7.42/7.33/7.75/7.80 10,226,530 March 2007 11.10-12.00 6.71/6.99/7.42/7.33 2,497,075 April 2007 11.50-12.20 6.71/6.99/7.42/7.33 3,129,975 May 2007 11.10-12.00 6.71/6.99/7.42/7.33/7.75/11.07 3,938,600 June 2007 11.20-11.70 6.71/6.99/7.42/7.33/11.07 1,919,825 July 2007 10.90-11.60 6.71/6.99/7.42/7.33/9.189 2,214,775 August 2007 9.95-10.90 6.71/6.99/7.42/7.33 1,020,275 Sub-total 66,736,312 Exchange of Guaranteed Exchangeable Bonds (‘GEB’) 8.10 114,699,925 Conversion of Convertible Redeemable Income Securities (‘CRIS’) 9.18 15,102,494

Total 196,538,731

Share options outstanding at the end of the year have the following expiry dates and exercise price.

Number of shares

Expiry date Exercise price 2007 2006 RM/share ‘000 ‘000 07.07.2013 6.71 42,877 92,022 07.07.2013 6.99 5,149 9,070 07.07.2013 7.75 7,469 250 07.07.2013 7.42 205 13,034 07.07.2013 8.39 0 0 07.07.2013 7.80 288 313 07.07.2013 7.33 8,042 14,022 07.07.2013 7.33 3,110 5,110 07.07.2013 9.189 1,306 0 07.07.2013 11.07 15,585 0 84,031 133,821





The weighted average fair value of options granted during the year was determined using the Trinomial valuation model. The significant inputs into the model were as follows:

5 year average Share price Exercise Option Expected Risk free share price Grant Date at grant date price life dividend yield interest rate movement RM RM Years % % %

25.02.2005 8.24 7.75 8 1.14 3.64 21.57 31.03.2005 8.00 7.42 8 1.14 3.33/3.72 22.13 17.07.2005 8.56 7.80 7 1.14 3.40 19.41 24.02.2006 8.70 7.33 7 1.14 3.43/3.63/3.77 24.01 16.04.2006 8.65 7.33 7 1.14 3.55/3.96 18.07 25.09.2006 9.91 9.189 6 1.14 3.86/3.95 18.52 28.03.2007 11.50 11.07 6 1.14 3.48/3.50 17.59

The charges to income statement arising from share-based payments during the financial year amounted to RM35.7 million (2006:nil) for the Group and RM30.8 million (2006:nil) for the Company as set out in Note 6 to these financial statements.

31.8.2007 RM’000

Ordinary share capital, at par 66,736 Share premium 391,233 Proceeds received on exercise of share options 457,969 Fair value at exercise date of shares issued 743,961

Special Rights Redeemable Preference Share (‘Special Share’)

(a) The Special Share would enable the Government of Malaysia through the Minister of Finance Incorporated to ensure that certain major decisions affecting the operations of the Company are consistent with the Government’s policies. The Special Shareholder, which may only be the Government or any representative or person acting on its behalf, is entitled to receive notices of meetings but not to vote at such meetings of the Company. However, the Special Shareholder is entitled to attend and speak at such meetings.

The Special Shareholder has the right to appoint any person, but not more than six at any time, to be the Board of Directors of the Company.

(b) Certain matters, in particular the alteration of the Articles of Association of the Company relating to the rights of the Special Shareholder, creation and issue of additional shares which carry different voting rights, the dissolution of the Company, substantial disposal of assets, amalgamations, merger and takeover, require the prior consent of the Special Shareholder.

(c) The Special Shareholder does not have any right to participate in the capital or profits of the Company.

(d) The Special Shareholder has the right to require the Company to redeem the Special Share, at par, at any time.




Class A and Class B Redeemable Preference Shares (‘RPS’)

The main features of the Company’s Class A and Class B RPS are as follows:

(a) The RPS do not carry any right to participate in the assets and surplus profit of the Company.

(b) The RPS holders have no voting rights except on resolution to amend the RPS holders’ rights.

(c) These RPS are not convertible into ordinary shares

(d) The Company has the right to redeem all Class A and Class B RPS on or after 16 August 2010 and 19 September 2010 respectively at RM1,000 each.

As described in Note 29(c) to these financial statements, these RPS form part of the Company’s Fixed Income Securities.

36 SHARE PREMIUM

Group and Company 2007 2006 RM’million RM’million

As at the beginning of the financial year 3,912.9 3,989.6 Arising in respect of ordinary shares issued during the financial year 1,329.1 732.0 Issuance of bonus shares as fully paid up on the basis of one (1) bonus share for every four (4) existing TNB shares held by shareholders via the capitalisation of the share premium account 0 (808.7)

As at the end of the financial year 5,242.0 3,912.9

37 REVALUATION AND OTHER RESERVES


Non-distributable

Revaluation reserve 1,000.6 1,027.7 990.5 1,017.6 Foreign currency translation reserve 5.2 (37.5) 0 0 Reserve on consolidation (146.6) (146.6) 0 0 Employees’ Share Option Scheme reserve 35.7 0 30.8 0 894.9 843.6 1,021.3 1,017.6




37 REVALUATION AND OTHER RESERVES (Continued)

The movements in each category of reserves were as follows:


Revaluation reserve

As at the beginning of the financial year 1,027.7 1,034.6 1,017.6 1,028.7 Realisation of revaluation reserve (27.1) (6.9) (27.1) (11.1) As at the end of the financial year 1,000.6 1,027.7 990.5 1,017.6

Foreign currency translation reserve

As at the beginning of the financial year (37.5) (43.3) 0 0 Arising in the financial year 42.7 5.8 0 0 As at the end of the financial year 5.2 (37.5) 0 0

Reserve on consolidation

As at the beginning of the financial year (146.6) (146.6) 0 0 Arising in the financial year 0 0 0 0 As at the end of the financial year (146.6) (146.6) 0 0

Employees’ Share Option Scheme reserve

As at the beginning of the financial year 0 0 0 0 Arising in the financial year 35.7 0 30.8 0 As at the end of the financial year 35.7 0 30.8 0

Total revaluation and other reserves

As at the beginning of the financial year 843.6 844.7 1,017.6 1,028.7 Arising in the financial year 78.4 5.8 30.8 0 Realisation of revaluation reserve (27.1) (6.9) (27.1) (11.1) As at the end of the financial year 894.9 843.6 1,021.3 1,017.6

38 RETAINED PROFITS

Subject to agreement by the Inland Revenue Board, the Company has sufficient tax credits under Section 108 of the Income Tax Act, 1967 available to frank approximately RM1,858.3 million (2006: RM1,058.2 million) of its retained profits as at 31 August 2007, if paid out as dividends. There is insufficient tax credit to cover the remaining profits of RM11,427.2 million (2006: RM9,777.4 million), if paid out as dividends.

In addition, the Company has tax exempt income as at 31 August 2007 arising from the Income Tax (Amendment) Act, 1999, relating to tax on income earned in 1999 being waived and exempt dividend income amounting to approximately RM47.3 million (2006: RM129.1 million) available for distribution as tax exempt dividends to shareholders. This tax exempt income is subject to agreement by the Inland Revenue Board.



39 COMMITMENTS

(a) Capital and other commitments for 5 years


Authorised capital expenditure not provided in the financial statements Contracted 1,141.2 2,048.4 912.9 1,867.7 Not contracted 11,580.6 12,781.5 11,283.5 12,180.3 12,721.8 14,829.9 12,196.4 14,048.0

(b) Non-cancellable operating lease commitments

Group and Company 2007 2006 RM’million RM’million Future minimum lease payments

Not later than one year 13.3 13.3 Later than one year and not later than five years 24.3 37.5

37.6 50.8

The above lease payments relate to the non-cancellable operating leases of the Group and the Company.

40 CONTINGENT LIABILITIES (UNSECURED)


Claims by third parties 943.0 974.5 917.9 905.4 Trade guarantees and performance bonds 5.4 5.4 0 0 Corporate guarantees given to financial institutions in respect of facilities granted to subsidiaries 170.8 0 3,894.4 5,366.4 Stamp duties on transfer of assets to a subsidiary (1) 108.0 108.0 0 0 Other contingent liabilities 29.7 67.2 0 0 1,256.9 1,155.1 4,812.3 6,271.8

Claims by third parties include claims by contractors, consultants, consumers and former employees. These claims are being resolved and the Directors are of the opinion that their outcome will not have a material adverse effect on the financial position of both the Group and the Company.

(1) In respect of stamp duties on transfer of assets from Lembaga Letrik Sabah, SESB is in the process of

obtaining a vesting order to exempt itself from any potential liability.


41 SIGNIFICANT RELATED PARTY DISCLOSURES

In addition to related party balances mentioned elsewhere in the financial statements, set out below are other significant related party transactions which were carried out on terms and conditions negotiated amongst the related parties:


(a) Sales of electricity to associates 0.3 0.1 0.3 0.1

(b) Purchases of electricity from associates 1,194.9 1,156.2 1,194.9 1,156.2

(c) Interest income received from an associate - GB3 Sdn Bhd 5.9 6.3 5.9 6.3

Sales and purchases of electricity to and from associates are aggregated because the transactions are similar in nature and no single transaction is significant enough to warrant separate disclosure.

As stated under paragraph 5 of FRS Standard No. 124 “Related Party Disclosures”, disclosure of significant related party transactions between a state-controlled enterprise with other state-controlled enterprises is not required to be disclosed in the financial statements.

Accordingly, significant related party transactions between the Company and other Government controlled entities are not presented as the principal shareholders of the Company are the Government of Malaysia and related entities owned by the Government.

42 SEGMENTAL REPORTING

As the principal activities of the Group and the Company are the generation, transmission, distribution and sale of electricity, segmental reporting is deemed not necessary.

43 FINANCIAL RISK MANAGEMENT

(a) Financial risk management objectives and policies

The main risks arising from the Group’s financial assets and liabilities are foreign currency exchange, interest rate, credit, liquidity and cash flow risks.

The Group’s overall risk management seeks to minimise potential adverse effects of these risks on the financial performance of the Group.

The Group has established risk management policies, guidelines and control procedures to manage its exposure to financial risks. Hedging transactions are determined in the light of commercial commitments; derivative financial instruments are used only to hedge underlying commercial exposures and are not held or sold for speculative purposes.

• Currency risk

The foreign currency exchange risk of the Group arises from borrowings denominated in foreign currencies. The main currency exposures are primarily in United States Dollar and Japanese Yen. The Group also has subsidiaries operating in foreign countries, which generate revenue and incur costs denominated in foreign currencies. The main currency exposure is primarily in United States Dollar.



43 FINANCIAL RISK MANAGEMENT (Continued)

(a) Financial risk management objectives and policies (Continued)

• Interest rate risk

The Group has cash and bank balances and deposits placed with creditworthy licensed banks and financial institutions. The Group manages its interest rate risks by placing such balances on varying maturities and interest rate terms.

The Group’s debt includes bank overdrafts, bank borrowings, bonds and notes. The Group’s interest rate risk management objective is to manage the interest expense consistent with maintaining an acceptable level of exposure to interest rate fluctuations. In order to achieve this objective, the Group targets a mix of fixed and floating debt based on assessment of its existing exposure and desired interest rate profile. To obtain this mix, the Group combines cross-currency interest rate swaps, interest rate swaps and options to convert certain long term foreign currency borrowings from variable to fixed rate and vice versa.

• Credit risk

Financial assets that potentially subject the Group to concentrations of credit risk consist primarily of receivables, cash and cash equivalents, marketable securities and financial instruments used in hedging activities.

Due to the nature of the Group’s business, customers are mainly segregated into business and residential. The Group has no other major significant concentration of credit risk other than business and residential trade receivables due to its diverse customer base. Credit risk is managed through the application of credit limits and monitoring procedures. Where appropriate, the Group obtained deposits or bank guarantees from the customers.

The Group places its cash and cash equivalents and marketable securities with a number of creditworthy financial institutions. The Group’s policy limits the concentration of financial exposure to any single financial institution.

All hedging instruments are executed with creditworthy financial institutions with a view to limit the credit risk exposure of the Group. The Group, however is exposed to credit-related losses in the event of non-performance by counterparties to financial derivative instruments, but does not expect any counterparties to fail to meet their obligations.

• Liquidity and cash flow risks

In the management of liquidity and cash flow risk, the Group monitors and maintains a level of cash and cash equivalent deemed adequate by the management to finance the Group’s operations and mitigate the effects of fluctuations in cash flows. Due to the dynamic nature of the underlying business, the Group aims at maintaining flexibility in funding by keeping both committed and uncommitted credit lines available.

(b) Interest rate risk

Fair value interest rate risk

The Group’s exposure to risk that the value of a financial instrument will fluctuate due to changes in market interest rates as mentioned in Note 29.

Cash flow interest rate risk

The Group’s income and operating cash flows are substantially independent of changes in market interest rates. Interest rate exposure arises from the Group’s borrowings and deposits, and is managed through the use of fixed and floating rate debt and derivative financial instruments. Derivative financial instruments are used, where appropriate, to generate the desired interest rate profile.




(b) Interest rate risk (Continued)

Cash flow interest rate risk (Continued)

The Company has entered into interest rate swap contracts that entitle it to receive interest at floating rates on notional principal amounts and obliges it to pay interest at fixed rates on the same amounts. Under the interest rate swaps, the Company agrees with other parties to exchange, at quarterly intervals, the differences between fixed rate and floating rate interest amounts calculated by reference to the agreed notional principal amounts.

The weighted average interest rate of the Company’s fixed rate borrowings at balance sheet date was 5.79% (31.8.2006: 5.82%) per annum. After the interest rate swap, the Company’s weighted average interest rate at balance sheet date was 5.85% (31.8.2006: 5.86%) per annum.

The remaining terms and notional principal amounts of the outstanding interest rate swap contracts of the Company at the balance sheet date, which are denominated in US Dollars, were as follows:

2007 2006 RM’million RM’million

In one year or less 0 116.4

The tables below summarise the Group and the Company’s exposure to interest rate risk. Included in the tables are the Group and the Company’s financial assets and liabilities at carrying amounts, categorised by the earlier of repricing or contractual maturity dates. The off-balance sheet gap represents the net notional amounts of all interest rate sensitive derivative instruments. Sensitivity to interest rates arises from mismatches in the repricing dates, cash flows and other characteristics of assets and their corresponding liability funding.

Effective interest F ixed rate instruments Total at balance Floating maturing or repriced in interest sheet date rate < 1 year 1- 2 years 2- 3 years 3- 4 years 4- 5 years > 5 years sensitive % RM RM RM RM RM RM RM RM per annum ’million ’million ’million ’million ’million ’million ’million ’million

Group

2007

Financial assets

Trade and other receivables 0 22.2 202.2 0 0 0 0 0 224.4 Amount due from associates 0 0 34.6 0 0 0 0 0 34.6 Deposits and bank balances 0 87.1 4,741.7 0 0 0 0 0 4,828.8 109.3 4,978.5 0 0 0 0 0 5,087.8 2006

Financial assets

Trade and other receivables 0 23.4 444.3 0 0 0 0 0 467.7 Amount due from associates 0 0 30.7 0 0 0 0 0 30.7 Deposits and bank balances 0 134.2 2,847.5 0 0 0 0 0 2,981.7

157.6 3,322.5 0 0 0 0 0 3,480.1




(b) Interest rate risk (Continued)

Balances Total Non under interest interest Islamic sensitive sensitive principles Total RM’million RM’million RM’million RM’million Group

2007

Financial assets

Investments 0 50.6 0 50.6 Trade and other receivables 224.4 2,332.2 365.2 2,921.8 Amount due from associates 34.6 10.7 0 45.3 Marketable securities 0 10.6 0 10.6 Deposits and bank balances 4,828.8 9.7 460.8 5,299.3 Other assets (amount receivable from swap counterparties) 0 0.3 0 0.3 5,087.8 2,414.1 826.0 8,327.9

2006

Financial assets

Investments 0 50.6 0 50.6 Trade and other receivables 467.7 2,237.9 368.2 3,073.8 Amount due from associates 30.7 12.9 0 43.6 Marketable securities 0 9.2 0 9.2 Deposits and bank balances 2,981.7 88.3 879.7 3,949.7 Other assets (amount receivable from swap counterparties) 0 0.1 0 0.1 3,480.1 2,399.0 1,247.9 7,127.0




(b) Interest rate risk (continued)


Company

2007

Financial assets Amount due from subsidiaries 8.94 648.5 946.7 54.6 0 0 0 0 1,649.8 Amount due from associates 0 0 34.6 0 0 0 0 0 34.6 Deposits and bank balances 0 0 3,768.1 0 0 0 0 0 3,768.1

648.5 4,749.4 54.6 0 0 0 0 5,452.5 2006

Financial assets

Amount due from subsidiaries 7.11 784.6 4,306.3 0 57.2 0 0 0 5,148.1 Amount due from associates 0 0 30.7 0 0 0 0 0 30.7 Deposits and bank balances 0 0 2,425.4 0 0 0 0 0 2,425.4 784.6 6,762.4 0 57.2 0 0 0 7,604.2





Balances Total Non under interest interest Islamic sensitive sensitive principles Total RM’million RM’million RM’million RM’million Company

2007 Financial assets

Investments 0 110.0 0 110.0 Trade and other receivables 0 1,789.9 365.2 2,155.1 Amount due from subsidiaries 1,649.8 303.4 0 1,953.2 Amount due from associates 34.6 0 0 34.6 Marketable securities 0 10.6 0 10.6 Deposits and bank balances 3,768.1 249.4 506.8 4,524.3 Other assets (amount receivable from swap counterparties) 0 0.3 0 0.3 5,452.5 2,463.6 872.0 8,788.1

2006

Financial assets

Investments 0 69.4 0 69.4 Trade and other receivables 0 2,093.9 368.2 2,462.1 Amount due from subsidiaries 5,148.1 1,139.6 0 6,287.7 Amount due from associates 30.7 0 0 30.7 Marketable securities 0 9.2 0 9.2 Deposits and bank balances 2,425.4 258.7 440.6 3,124.7 Other assets (amount receivable from swap counterparties) 0 0.1 0 0.1 7,604.2 3,570.9 808.8 11,983.9






Group

2007

Financial liabilities

Trade and other payables 0 0 491.9 0 0 0 0 0 491.9 Amount due to associates 0 0 224.5 0 0 0 0 0 224.5 Borrowings 5.77 1,941.8 4.7 63.8 307.2 3,008.0 639.1 11,814.1 17,778.7 1,941.8 721.1 63.8 307.2 3,008.0 639.1 11,814.1 18,495.1

On-balance sheet interest sensitivity gap 0 (1,832.5) 4,257.4 (63.8) (307.2) (3,008.0) (639.1) (11,814.1) (13,407.3) Off-balance sheet interest sensitivity gap 0 167.0 0 0 (170.5) 0 0 0 (3.5) Total interest sensitivity gap (1,665.5) 4,257.4 (63.8) (477.7) (3,008.0) (639.1) (11,814.1) (13,410.8)

2006

Financial liabilities Trade and other payables 0 0 605.8 0 0 0 0 0 605.8 Amount due to associates 0 0 212.4 0 0 0 0 0 212.4 Borrowings 5.81 2,596.2 250.0 2,719.2 0 0 0 15,781.6 21,347.0 2,596.2 1,068.2 2,719.2 0 0 0 15,781.6 22,165.2 On-balance sheet interest sensitivity gap 0 (2,438.6) 2,254.3 (2,719.2) 0 0 0 (15,781.6) (18,685.1) Off-balance sheet interest sensitivity gap 0 1,354.8 0 (1,354.8) 0 0 0 0 0 Total interest sensitivity gap (1,083.8) 2,254.3 (4,074.0) 0 0 0 (15,781.6) (18,685.1)





Balances Total Non under interest interest Islamic sensitive sensitive principles Total RM’million RM’million RM’million RM’million

Group

2007


Trade and other payables 491.9 3,809.7 0 4,301.6 Amount due to associate 224.5 1.6 0 226.1 Borrowings 17,778.7 221.2 6,435.2 24,435.1 Other liabilities (amount payable to swap counterparties) 0 1.2 0 1.2 18,495.1 4,033.7 6,435.2 28,964.0 On-balance sheet interest sensitivity gap (13,407.3) (1,619.6) (5,609.2) (20,636.1) Off-balance sheet interest sensitivity gap (3.5) 0 0 (3.5) Total interest sensitivity gap (13,410.8) (1,619.6) (5,609.2) (20,639.6)

2006


Trade and other payables 605.8 2,160.8 0 2,766.6 Amount due to associate 212.4 0 0 212.4 Borrowings 21,347.0 254.7 6,600.5 28,202.2 Other liabilities (amount payable to swap counterparties) 0 0.5 0 0.5 22,165.2 2,416.0 6,600.5 31,181.7 On-balance sheet interest sensitivity gap (18,685.1) (17.0) (5,352.6) (24,054.7)

Total interest sensitivity gap (18,685.1) (17.0) (5,352.6) (24,054.7)






Company

2007


Amount due to associates 0 0 224.5 0 0 0 0 0 224.5 Amount due to subsidiaries 5.32 0 1,403.4 219.2 219.2 219.2 219.2 2,744.3 5,024.5 Borrowings 5.57 197.0 4.7 63.8 307.2 3,008.0 639.1 8,838.9 13,058.7 197.0 1,632.6 283.0 526.4 3,227.2 858.3 11,583.2 18,307.7 On-balance sheet interest sensitivity gap 0 451.5 3,116.8 (228.4) (526.4) (3,227.2) (858.3) (11,583.2) (12,855.2) Off-balance sheet interest sensitivity gap 0 167.0 0 (170.5) 0 0 0 0 (3.5) Total interest sensitivity gap 618.5 3,116.8 (398.9) (526.4) (3,227.2) (858.3) (11,583.2) (12,858.7)

2006


Amount due to associates 0 0 212.4 0 0 0 0 0 212.4 Amount due to subsidiaries 4.92 0 1,700.3 217.7 217.7 217.7 217.7 2,958.3 5,529.4 Borrowings 5.80 470.9 1,445.3 8.5 203.0 408.9 3,106.4 9,122.8 14,765.8 470.9 3,358.0 226.2 420.7 626.6 3,324.1 12,081.1 20,507.6 On-balance sheet interest sensitivity gap 0 313.7 3,404.4 (226.2) (363.5) (626.6) (3,324.1) (12,081.1) (12,903.4) Off-balance sheet interest sensitivity gap 0 116.4 (116.4) 0 0 0 0 0 0 Total interest sensitivity gap 430.1 3,288.0 (226.2) (363.5) (626.6) (3,324.1) (12,081.1) (12.903.4)





Balances Total Non under interest interest Islamic sensitive sensitive principles Total RM’million RM’million RM’million RM’million

Company

2007

Financial liabilities Trade and other payables 0 2,804.0 0 2,804.0 Borrowings 13,058.7 170.6 3,362.7 16,592.0 Amount due to subsidiaries 5,024.5 0 0 5,024.5 Amount due to associates 224.5 0 0 224.5 Other liabilities (amount payable to swap counterparties) 0 1.2 0 1.2 18,307.7 2,975.8 3,362.7 24,646.2

On-balance sheet interest sensitivity gap (12,855.2) (512.2) (2,490.7) (15,858.1) Off-balance sheet interest sensitivity gap (3.5) 0 0 (3.5) Total interest sensitivity gap (12,858.7) (512.2) (2,490.7) (15,861.6)

2006


Trade and other payables 0 2,050.5 0 2,050.5 Borrowings 14,765.8 206.2 3,369.4 18,341.4 Amount due to subsidiaries 5,529.4 81.1 0 5,610.5 Amount due to associates 212.4 0 0 212.4 Other liabilities (amount payable to swap counterparties) 0 0.5 0 0.5 20,507.6 2,338.3 3,369.4 26,215.3 On-balance sheet interest sensitivity gap (12,903.4) 1,232.6 (2,560.6) (14,231.4)

Total interest sensitivity gap (12,903.4) 1,232.6 (2,560.6) (14,231.4)





The table below summarises the effective weighted average interest rate as at 31 August 2007 and 31 August 2006 by major currencies for each class of financial asset and financial liability.

USD JPY EURO RM Others % % % % %

Group

2007

Financial assets

Deposits and bank balances 4.52 0 0 3.53 0 Financial liabilities

Borrowings 6.61 1.95 3.06 6.60 2.25 2006

Financial assets

Receivables 0 0 0 4.00 8.37 Deposits and bank balances 3.27 0 0 3.70 0 Financial liabilities

Borrowings 6.22 2.07 3.16 6.59 2.20

Company

2007

Financial assets

Amount due from subsidiaries 7.04 0 0 7.90 0 Trade and other receivables 0 0 0 4.00 0 Deposits and bank balances 5.25 0 0 5.53 0 Financial liabilities

Amount due to subsidiaries 5.37 4.05 0 0 0 Borrowings 7.57 1.43 3.06 6.30 2.25 2006

Financial assets

Amount due from subsidiaries 6.95 0 0 4.51 0 Trade and other receivables 0 0 0 4.00 0 Deposits and bank balances 3.80 0 0 3.70 0 Financial liabilities

Amount due to subsidiaries 4.85 4.05 0 0 0 Borrowings 7.53 1.52 3.16 6.34 2.20




(c) Credit risk

(i) On balance sheet, commitment and contingencies

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The following tables analyse the Group’s and the Company’s financial assets by industry concentration as at the balance sheet date.

Interest receivable Deposits Trade from Total and bank Investment receivables swap on- Commitment balances in unquoted and other Inter- counter- balance and (excl. cash) instruments# assets company parties sheet contingencies RM’million RM’million RM’million RM’million RM’million RM’million RM’million

Group

2007

Government 0 0 114.2 0 0 114.2 0 Financial Institutions 4,339.8 38.0 15.3 0 0.3 4,393.4 0 Business 0 0 1,105.2 0 0 1,105.2 0 Individuals 0 0 1,041.8 0 0 1,041.8 0 Associates 0 0 0 34.6 0 34.6 0 Others 0 0 190.3 0 0 190.3 3,566.3 4,339.8 38.0 2,466.8 34.6 0.3 6,879.5 3,566.3

2006

Government 0 0 110.5 0 0 110.5 0 Financial Institutions 3,006.6 38.0 0 0 0.1 3,044.7 0 Business 0 0 1,455.7 0 0 1,455.7 0 Individuals 0 0 1,096.2 0 0 1,096.2 0 Others 0 0 162.1 0 0 162.1 0 3,006.6 38.0 2,824.5 0 0.1 5,869.2 0

# This amount excludes equity instruments amounting to RM23.2 million (2006: RM21.8 million), net of allowance.




(c) Credit risk (continued)

(i) On balance sheet, commitment and contingencies (Continued) Interest receivable Deposits Trade from Total and bank Investment receivables swap on- Commitment balances in unquoted and other Inter- counter- balance and (excl. cash) instruments# assets company parties sheet contingencies RM’million RM’million RM’million RM’million RM’million RM’million RM’million

Company

2007

Government 0 0 76.9 0 0 76.9 0 Financial Institutions 4,228.9 38.0 15.3 0 0.3 4,282.5 0 Business 0 0 967.6 0 0 967.6 0 Individuals 0 0 905.0 0 0 905.0 0 Associates 0 0 0 34.6 0 34.6 0 Subsidiaries 0 0 0 1,953.2 0 1,953.2 3,894.4

Others 0 0 190.3 0 0 190.3 0

4,228.9 38.0 2,155.1 1,987.8 0.3 8,410.1 3,894.4 2006

Government 0 0 28.8 0 0 28.8 0 Financial Institutions 2,901.4 38.0 7.1 0 0 2,946.5 0 Business 0 0 1,306.6 0 0 1,306.6 0 Individuals 0 0 957.5 0 0 957.5 0 Associates 0 0 0 30.7 0 30.7 0 Subsidiaries 0 0 0 6,287.7 0 6,287.7 5,366.4 Others 0 0 162.1 0 0 162.1 0 2,901.4 38.0 2,462.1 6,318.4 0 11,719.9 5,366.4

# This amount excludes equity instruments amounting to RM23.2 million (2006: RM21.8 million), net of allowance.

* This amount represents the financial guarantees issued by the Company on the borrowing facilities given to subsidiaries.




(c) Credit risk (continued)

(ii) Off balance sheet

The Group and the Company are exposed to credit risk where the fair value of the contract is favourable, where the counterparty is required to pay the Group or the Company in the event of contract termination. The following table summarises the favourable fair values of the contracts, indicating the credit risk exposure.

Group Company Contract or Contract or notional Favourable notional Favourable principal net fair principal net fair amount value amount value RM’million RM’million RM’million RM’million

2007

Cross currency interest rate swap 167.0 0 167.0 0 167.0 0 167.0 0

2006

Interest rate swap 1,266.8 10.5 28.3 0 Forward start interest rate swap 88.1 0 88.1 0 1,354.9 10.5 116.4 0

(d) Foreign exchange risk

The currency exposure of financial assets and financial liabilities of the Group and the Company that are not denominated in the functional currency of the respective companies is set out below.

USD JPY EURO Others RM’million RM’million RM’million RM’million

Group


Receivables, deposits and prepayments 0.6 0 0 0 Deposits and bank balances 18.6 0 0 0 Other assets 0 0.3 0 0 19.2 0.3 0 0


Payables - external 1.8 0 0.1 0 Borrowings 6,666.3 4,254.9 6.1 8.1 6,668.1 4,254.9 6.2 8.1




(d) Foreign exchange risk (Continued)

USD JPY EURO Others RM’million RM’million RM’million RM’million

Group

2006

Financial assets Deposits and bank balances 22.6 0 0 0.1 Other assets 0 0.1 0 0.1 22.6 0.1 0 0.2 Financial liabilities

Payables 2.7 0 0.1 0 Borrowings 8,947.4 4,023.7 10.3 10.0 Other liabilities 0 0.5 0 0 8,950.1 4,024.2 10.4 10.0

Company

2007

Financial assets

Amount due from subsidiaries 1,322.2 0 0 0.2 Deposits and bank balances 14.4 0 0 0 Other assets (interest receivable from swap counterparties) 0 0.3 0 0 1,336.6 0.3 0 0.2 Financial liabilities

Amount due to subsidiaries 3,108.1 885.6 0 0 Borrowings 3,754.6 3,427.2 6.1 8.1 6,862.7 4,312.8 6.1 8.1 2006

Financial assets

Amount due from subsidiaries 1,354.4 0 0 0 Deposits and bank balances 50.5 20.1 0 0.1 Other assets (interest receivable from swap counterparties) 0 0.1 0 0.1 1,404.9 20.2 0 0.2 Financial liabilities

Amount due to subsidiaries 4,132.4 885.6 0 0 Borrowings 4,713.6 3,163.2 10.3 10.0 Other liabilities (interest payable to swap counterparties) 0 0.5 0 0 8,846.0 4,049.3 10.3 10.0




(e) Fair value

The fair value of a financial instrument is assumed to be the amount at which the instrument could be exchanged or settled between knowledgeable and willing parties in an arm’s length transaction, other than in forced or liquidation sale. Quoted market prices, when available, are used as the measure of fair values. However, for a significant portion of the Group’s and the Company’s financial instruments, quoted market prices do not exist. For such financial instruments, fair values presented are estimates derived using the net present value or other valuation techniques. The above techniques involve uncertainties and are significantly affected by the assumptions used and judgements made regarding risk characteristics of various financial instruments, discount rates, estimates of future cash flows, future expected loss experience and other factors. Changes in assumptions could significantly affect these estimates and the resulting fair values.

The face values for financial assets and liabilities with a maturity of less than one year are assumed to approximate their fair values.

(i) On balance sheet

The carrying amounts of financial assets and liabilities of the Group and the Company at the balance sheet date approximated their fair values except as set out below.

Group Company Carrying Fair Carrying Fair amount value amount value RM’million RM’million RM’million RM’million


Investments 0.1 0 0 0 Long term receivables 0 0 703.1 700.9 Receivables, deposits and prepayments 38.8 17.4 0 0


Payables 32.9 0 0 0 Borrowings 24,435.0 25,127.1 15,589.3 16,156.2 Amount due to subsidiaries (non-current) 0 0 3,621.1 3,616.2 Other liabilities 712.4 0 0 0

2006

Financial assets

Long term receivables 0 0 841.8 841.7


Borrowings (exclude Islamic Instrument and include Short term portion of Borrowings) 21,601.6 22,364.2 13,717.6 14,207.5 Amount due to subsidiaries (non-current) 0 0 3,829.3 3,921.6




(e) Fair value (Continued)

(i) On balance sheet (Continued)

Financial assets

The fair value of long term receivables is lower than carrying amount at balance sheet date as the Company gives its subsidiaries advances at below current market rate. The Directors consider the carrying amount fully recoverable as they do not intend to realise the financial assets via exchange with another counterparty.


The fair value of quoted bonds has been estimated using the respective quoted offer price. For unquoted borrowings with fixed interest rate, the fair values have been estimated by discounting the estimated future cash flows using the prevailing market rates for similar credit risks and remaining period to maturity. For unquoted borrowings with floating interest rate, the carrying values are generally reasonable estimates of their fair values.

The method by which fair value information was determined and any significant assumptions made in its application are as follows:

• quoted shares and marketable securities - quoted market prices at balance sheet date

• loans to subsidiaries, amounts due from subsidiaries and staff loans - future contractual cash flows discounted using dealer quotes of interest rates for similar loans

• bank overdrafts, cash and cash equivalents, receivables and payables with a maturity period of less than one year (all of which were subject to normal credit terms) - carrying value at balance sheet date

• borrowings other than bank overdraft - future contractual cash flows discounted at current market interest rates available for similar financial instruments

• vacant property provision - cash flows discounted using a discount rate that reflects current market assessments of the time value of money and the risks specific to the liability

• financial guarantees given to third parties - quotation from bankers in respect of the amount required to settle the contingent obligations at the balance sheet date

• forward foreign exchange contracts - difference between the spot exchange rates and the contracted forward exchange rates at balance sheet date, applied to the contracted sum

• interest rate swaps - present value of estimated future cash flows calculated using forward rates

(ii) Off balance sheet

The financial derivative instruments are used to hedge foreign exchange and interest rate risks associated with certain long term foreign currency borrowings. The contract notional principal amounts of the derivative and the corresponding fair value adjustments are analysed as below.

Fair values of financial derivative instruments are the present values of their future cash flows and are arrived at based on valuations carried out by the Company’s bankers. Favourable fair value indicates amount receivable by the Company if the contracts are terminated as at 31 August 2007 or vice versa.




(e) Fair value (Continued)

(ii) Off balance sheet (Continued)

Contract or notional principal Favourable Unfavourable amount net fair value net fair value RM’million RM’million RM’million

Group

2007

Cross currency interest rate swap 167.0 0 (5.1) Currency option 789.7 0 (11.2) Corporate guarantee given to financial institutions in respect of facilities granted to subsidiaries 170.8 0 0 1,127.5 0 (16.3) 2006

Interest rate swap 1,266.8 10.5 (17.2) Forward start interest rate swap 88.1 0 (1.4) Currency option 817.6 0 (4.0) 2,172.5 10.5 (22.6)

Company

2007 Corporate guarantee given to financial institutions in respect of facilities granted to subsidiaries 3,894.4 0 (105.6) Cross currency interest rate swap 167.0 0 (5.1) 4,061.4 0 (110.7)

2006

Corporate guarantee given to financial institutions in respect of facilities granted to subsidiaries 5,366.4 0 (254.5) Interest rate swap 28.3 0 (0.3) Forward start interest rate swap 88.1 0 (1.4) 5,482.8 0 (256.2)




44 CHANGES IN ACCOUNTING POLICIES

The following describes the impact of the new financial reporting standards, amendments and interpretations on the financial statements of the Group and the Company.

(a) Irrelevant or immaterial effect on financial statements

FRS 1 is not relevant to the Group’s and Company’s operations. The adoption of FRS 102, 108, 110, 116, 121, 127, 128, 131, 132, 133, 140 and the ‘asset ceiling’ amendment to FRS 1192004 and Interpretations did not have material impact on the financial statements and policies of the Group and the Company.

(b) Reclassification of prior year comparatives

Set out below are changes in accounting policies that resulted in reclassification of prior year comparatives but did not affect the recognition and measurement of the Group’s and Company’s net assets:

FRS 101 - has affected the presentation of minority interests. In the consolidated balance sheet, minority interests are now presented within equity, separately from parent shareholders’ equity. Profit or loss in the consolidated income statement as well as total income and expenses for the year recognised directly in equity are now allocated between minority interests and equity holders of the parent. The Group’s share of results of jointly controlled entity and of associates are now shown net of tax in the consolidated income statement.

FRS 117 - requires leasehold land to be treated as an operating lease. The Group has applied FRS 117 retrospectively on or after 1 September 2006. Consequently from the adoption of FRS 117, the Group and the Company has reclassified the leasehold land as prepaid operating leases instead of property, plant and equipment. The prepaid lease rentals are amortised on a straight-line basis over the remaining lease period.

(c) FRS 2 – Share-based Payment

The adoption of FRS 2 has resulted in a change in the accounting policy for share-based payments. In previous years, the provision of share options to employees did not result in a charge to the income statement. Upon adoption of FRS 2, the Group and the Company recognise the fair value of such share options as an expense in the income statement over the vesting period of the grant with a corresponding increase in equity (Note 2(x)(iii)).

Under the transitional provisions of FRS 2, this standard must be applied to share options that were granted after 31 December 2004 and had yet to be vested on 1 September 2006. The financial impact to the Group and the Company arising from the retrospective application of FRS 2 is not material and hence, no restatement of retained profits is performed.

(d) FRS 5 – Non-current Assets Held for Sale and Discontinued Operations

The adoption of FRS 5 requires a non-current asset or disposal group to be classified as non-current assets held for sale if;

i ) its carrying amount will be recovered principally through a sale transaction rather than through continuing use

ii ) the asset or disposal group is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets or disposal group and the sale is highly probable.

The Group has applied FRS 5 prospectively on or after 1 September 2006. Consequently from the adoption of FRS 5, the Group and the Company has reclassified non-current assets identified for sale from property, plant and equipment to non-current assets held for sale.


44 CHANGES IN ACCOUNTING POLICIES (Continued)

(e) FRS 3 - Business Combinations FRS 136 - Impairment of Assets FRS 138 - Intangible Assets

The adoption of FRS 3, FRS 136 and FRS 138 has resulted in changes in accounting policy for goodwill. Goodwill arising on consolidation has to be capitalised and subject to annual impairment test. Impairment of goodwill is charged to the income statement as and when it arises and reversal is not allowed.

(f) Restatement of the financial statements for the financial year ended 31 August 2006

The following table sets out the material adjustments that have been made in accordance with the transitional and new provisions of the respective FRSs to each of the line items in the Group’s and the Company’s balance sheet for the financial year ended 31 August 2006.

Effect of change in accounting policies As previously FRS117 As reported Note 44(b) restated RM’million RM’million RM’million Group

Balance Sheet as at 31 August 2006

Property, plant and equipment 55,201.3 (856.8) 54,344.5 Prepaid operating leases 0 856.8 856.8

Company

Balance Sheet as at 31 August 2006

Property, plant and equipment 44,826.4 (690.2) 44,136.2 Prepaid operating leases 0 690.2 690.2

45 SUBSEQUENT EVENTS

On 9 October 2007, TNB announced that TNB Transmission Network Sdn. Bhd. (‘TNBT’), which is now a dormant company, received the Award of the Arbitration, whereby the Arbitrator dismissed TNBT’s claims with cost and allowed the counter claims by Irham Niaga Sdn. Bhd. and Irham Niaga Logistics Sdn. Bhd. for the sums of RM106,888,499.34 and RM6,102,922.50 respectively, together with simple interest to be calculated at 8% from 19 April 2004 until the date of Award, and between the Award and the payment for the wrongful repudiation of the Tenancy Agreeements.

TNBT has been advised by its solicitors that there are strong grounds to set aside the Award and accordingly instructed its solicitors to file the necessary application to the High Court to set aside the Award.

46 COMPARATIVE FIGURES

The amount due to subsidiaries amounting to RM3,829.3 million has been reclassified to non-current, to conform with the current year’s accounts presentation.

47 APPROVAL OF FINANCIAL STATEMENTS

The financial statements have been approved for issue in accordance with a resolution of the Board of Directors on 31 October 2007.



We, Tan Sri Leo Moggie and Dato’ Sri Che Khalib bin Mohamad Noh, two of the Directors of Tenaga Nasional Berhad, do hereby state that, in the opinion of the Directors, the financial statements set out on pages 6 to 89 are drawn up so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 August 2007 and of the results and the cash flows of the Group and of the Company for the financial year ended on that date in accordance with the MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities and the provisions of the Companies Act, 1965.

Signed on behalf of the Board of Directors, in accordance with their resolution dated 31 October 2007.

TAN SRI LEO MOGGIE DATO’ SRI CHE KHALIB BIN MOHAMAD NOH CHAIRMAN PRESIDENT/CHIEF EXECUTIVE OFFICER

Statement by Directors Pursuant to Section �69 (�5) of the Companies Act, �965


I, Dato’ Mohd Izzaddin Idris, the person primarily responsible for the financial management of Tenaga Nasional Berhad, do solemnly and sincerely declare that the financial statements set out on pages 6 to 89 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.

DATO’ MOHD IZZADDIN IDRIS

Subscribed and solemnly declared by the above named Dato’ Mohd Izzaddin Idris at Kuala Lumpur, Malaysia on 31 October 2007, before me.

MOHD RADZI BIN YASIN COMMISSIONER FOR OATHS

Statutory Declaration Pursuant to Section �69 (�6) of the Companies Act, �965


We have audited the financial statements set out on pages 6 to 89. These financial statements are the responsibility of the Company’s Directors. It is our responsibility to form an independent opinion, based on our audit, on these financial statements and to report our opinion to you, as a body, in accordance with Section 174 of the Companies Act, 1965 and for no other purpose. We do not assume responsibility to any other person for the content of this report.

We conducted our audit in accordance with approved auditing standards in Malaysia. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Directors, as well as evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion:

(a) the financial statements have been prepared in accordance with the provisions of the Companies Act, 1965 and Financial Reporting Standards, the MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities so as to give a true and fair view of:

(i) the matters required by Section 169 of the Companies Act, 1965 to be dealt with in the financial statements; and

(ii) the state of affairs of the Group and the Company as at 31 August 2007 and of the results and cash flows of the Group and the Company for the financial year ended on that date;

and

(b) the accounting and other records and the registers required by the Act to be kept by the Company and by the subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act.

PricewaterhouseCoopers (AF 1146)Chartered AccountantsLevel 10, 1 SentralJalan Travers, Kuala Lumpur SentralP O Box 1019250706 Kuala Lumpur, MalaysiaTelephone +60 3 2173 1188Facsimile +60 3 2173 1288www.pwc.com

Auditors’ Report to the Members of Tenaga Nasional Berhad (Company no. 200866-W) (Incorporated in Malaysia)


The names of the subsidiaries of which we have not acted as auditors are indicated in Note 16 to the financial statements. We have considered the financial statements of these subsidiaries and the auditors’ reports thereon.

We are satisfied that the financial statements of the subsidiaries that have been consolidated with the Company’s financial statements 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.

The auditors’ reports on the financial statements of the subsidiaries were not subject to any qualification and did not include any comment made under subsection (3) of Section 174 of the Act.

PRICEWATERHOUSECOOPERS THAYAPARAN A/L S. SANGARAPILLAI (No. AF: 1146) (No. 2085/09/08(J)) Chartered Accountants Partner of the firm

Kuala Lumpur 31 October 2007

Auditors’ Report to the Members of Tenaga Nasional Berhad (Company no. 200866-W) (Incorporated in Malaysia) (Continued)


Analysis of Shareholdingsas at �0 October 2007

SHARE CAPITAL

Authorised Share Capital 5,000,000,000 ordinary shares of RM1.00 per share, 1 (One) Special Rights Redeemable Preference Share of RM1.00 per share,

1,000 Class A Redeemable Preference Share of RM1.00 per share, 500 Class B Redeemable Preference Share of RM1.00 per share.

Issued and Fully Paid-Up 4,332,064,193 ordinary shares of RM1.00 per share, Share Capital 1 (One) Special Rights Redeemable Preference Share of RM1.00 per share, 1,000 Class A Redeemable Preference Share of RM1.00 per share, 500 Class B Redeemable Preference Share of RM1.00 per share.

Voting Right One voting right for one ordinary share

ANALYSIS OF SHAREHOLDINGS

No. of % of Size of No. of % of Ordinary Issued Shareholdings Shareholders Shareholders Shares Held Share Capital

Less Than 100 777 2.55 22,637 0.00 100 - 1,000 5,602 18.39 4,018,134 0.09 1,001 - 10,000 21,412 70.28 55,601,926 1.28 10,001 - 100,000 1,882 6.18 55,326,791 1.28 100,001 To Less Than 5% of Issued Shares 790 2.59 1,817,716,030 41.96 5% and above of Issued Shares 3 0.01 2,399,378,675 55.39

TOTAL 30,466 100.00 4,332,064,193 100.00

DIRECTORS’ SHAREHOLDINGS

No. Name of Directors No. of shares Direct/Indirect % Interest

1 Tan Sri Leo Moggie 40,000 0.00

- 40,000 shares held through Cimsec Nominees (Tempatan) Sdn Bhd

2 Dato’ Sri Che Khalib Bin Mohamad Noh - -

3 Dato’ Puteh Rukiah Binti Abd Majid - -

4 Tan Sri Dato’ Lau Yin Pin @ Lau Yen Beng - -

5 Tan Sri Dato’ Hari Narayanan a/l Govindasamy - -

6 Dato’ Zainal Abidin Bin Putih 1,250 0.00

7 Datuk Mohd Zaid Bin Ibrahim - -

8 Datuk Zalekha Binti Hassan - -

9 Mohammad Zainal Bin Shaari - -

10 Dato’ Fuad Bin Jaafar 62,500 0.00


Analysis of Shareholdings (Continued)

SUBSTANTIAL SHAREHOLDERS

No. Name of Substantial Shareholders No. of Shares %

1 KHAZANAH NASIONAL BERHAD 1,631,574,464 37.66 2 EMPLOYEES PROVIDENT FUND BOARD 478,522,861 11.05 - 428,939,911 shares held its own name - 13,434,400 shares held through SBB Nominees (Tempatan) Sdn Bhd - 10,400,000 shares held through Alliancegroup Nominees (Tempatan) Sdn Bhd - 5,888,750 shares held through HSBC Nominees (Tempatan) Sdn Bhd - 5,225,000 shares held through Cartaban Nominees (Tempatan) Sdn Bhd - 4,018,700 shares held through Am Nominees (Tempatan) Sdn Bhd - 1,650,000 shares held through Citigroup Nominees (Tempatan) Sdn Bhd - 436,100 shares held through Mayban Nominees (Tempatan) Sdn Bhd - 4,660,000 shares held through RHB Nominees (Tempatan) Sdn Bhd - 3,400,000 shares held through Mayban Nominees (Tempatan) Sdn Bhd - 470,000 shares held through Mayban Nominees (Tempatan) Sdn Bhd

3 SKIM AMANAH SAHAM BUMIPUTERA 338,864,300 7.82 - 338,864,300 shares held through Amanah Raya Nominees (Tempatan) Sdn Bhd

30 LARGEST SHAREHOLDERS

No. Name of Shareholders No. of Shares % 1 KHAZANAH NASIONAL BERHAD 1,631,574,464 37.66

2 EMPLOYEES PROVIDENT FUND BOARD 428,939,911 9.90

3 AMANAH RAYA NOMINEES (TEMPATAN) SDN BHD 338,864,300 7.82 SKIM AMANAH SAHAM BUMIPUTERA 4 KUMPULAN WANG PERSARAAN (DIPERBADANKAN) 140,437,300 3.24 5 LEMBAGA TABUNG HAJI 94,996,375 2.19

6 CARTABAN NOMINEES (ASING) SDN BHD 87,808,700 2.03 SSBT FUND NB37 FOR JANUS CONTRARIAN FUND

7 AMANAH RAYA NOMINEES (TEMPATAN) SDN BHD 59,468,300 1.37 AMANAH SAHAM WAWASAN 2020

8 AMANAH RAYA NOMINEES (TEMPATAN) SDN BHD 43,038,400 0.99 AMANAH SAHAM MALAYSIA

9 VALUECAP SDN BHD 35,813,600 0.83

10 HSBC NOMINEES (ASING) SDN BHD 35,805,300 0.83 TNTC FOR SAUDI ARABIAN MONETARY AGENCY

11 CARTABAN NOMINEES (ASING) SDN BHD 34,042,700 0.79 SSBT FUND RNZX FOR STICHTING PENSIOENFONDS ABP

12 CITIGROUP NOMINEES (ASING) SDN BHD 32,310,530 0.75 EXEMPT AN FOR MELLON BANK (MELLON)

13 CITIGROUP NOMINEES (ASING) SDN BHD 30,264,600 0.70 ROYAL BANK OF SCOTLAND AS DEPOSITORY FOR FIRST STATE ASIA PACIFIC LEADER FUND (CB LDN)


Analysis of Shareholdings

30 LARGEST SHAREHOLDERS (Continued)

No. Name of Shareholders No. of Shares %

14 HSBC NOMINEES (ASING) SDN BHD 27,000,000 0.62 BNY BRUSSELS FOR MAGELLAN

15 CITIGROUP NOMINEES (ASING) SDN BHD 25,945,500 0.60 UBS AG FOR PRISM OFFSHORE FUND LTD

16 CIMSEC NOMINEES (TEMPATAN) SDN BHD 23,451,775 0.54 SECURITY TRUSTEE (KCW ISSUE 1)

17 HSBC NOMINEES (ASING) SDN BHD 23,305,600 0.54 EXEMPT AN FOR J.P. MORGAN BANK LUXEMBOURG S.A.

18 CITIGROUP NOMINEES (TEMPATAN) SDN BHD 22,955,175 0.53 EXEMPT AN FOR PRUDENTIAL ASSURANCE MALAYSIA BERHAD

19 PERMODALAN NASIONAL BERHAD 22,873,775 0.53

20 MALAYSIA NOMINEES (TEMPATAN) SENDIRIAN BERHAD 20,100,000 0.46 GREAT EASTERN LIFE ASSURANCE (MALAYSIA) BERHAD (PAR 1)

21 CITIGROUP NOMINEES (ASING) SDN BHD 19,018,334 0.44 GSI FOR PERRY PARTNERS INTER INC

22 HSBC NOMINEES (ASING) SDN BHD 18,819,556 0.43 MORGAN STANLEY & CO. INTERNATIONAL PLC (FIRM A/C)

23 AMANAH RAYA NOMINEES (TEMPATAN) SDN BHD 18,518,350 0.43 AMANAH SAHAM DIDIK

24 HSBC NOMINEES (ASING) SDN BHD 17,606,850 0.41 EXEMPT AN FOR JPMORGAN CHASE BANK, NATIONAL ASSOCIATION (U.K.) 25 CARTABAN NOMINEES (TEMPATAN) SDN BHD 17,390,900 0.40 PETROLIAM NASIONAL BERHAD (STRATEGIC INV)

26 CITIGROUP NOMINEES (ASING) SDN BHD 16,232,250 0.37 EXEMPT AN FOR AMERICAN INTERNATIONAL ASSURANCE COMPANY LIMITED

27 HSBC NOMINEES (ASING) SDN BHD 16,138,975 0.37 EXEMPT AN FOR MORGAN STANLEY & CO. INTERNATIONAL PLC

28 CITIGROUP NOMINEES (ASING) SDN BHD 15,714,200 0.36 GSCO FOR INDUS ASIA PACIFIC MASTER FUND LTD

29 HSBC NOMINEES (ASING) SDN BHD 15,025,000 0.35 BNY BRUSSELS FOR CG NOUVELLE ASIE

30 CARTABAN NOMINEES (ASING) SDN BHD 13,737,650 0.32 INVESTORS BANK AND TRUST COMPANY FOR ISHARES, INC. Total 3,327,198,370 76.80

as at �0 October 2007


Analysis Of Convertible Redeemable Income Securities 2004-2009 (“CRIS”) Holdings as at �0 October 2007

Type of Security : 3.05% 5 year Unsecured Convertible Redeemable Income Securities 2004-2009 (CRIS) with nominal value of RM1.00 each

Voting Right : None until upon conversion into Ordinary Shares of RM1.00 each

STATISTICS ON CONVERTIBLE REDEEMABLE INCOME SECURITIES 2004-2009 (“CRIS”) AS AT 10 OCTOBER 2007 ANALYSIS OF CONVERTIBLE REDEEMABLE INCOME SECURITIES 2004-2009 (“CRIS”)

Category No.of % of Nominal Value % of CRIS Holders CRIS Holders of CRIS (RM) CRIS Issued LESS THAN 100 3 3.23 72 0.00 100 - 1,000 7 7.52 3,970 0.01 1,001 - 10,000 23 24.73 124,588 0.21 10,001 - 100,000 24 25.81 1,441,540 2.39 100,001 TO LESS THAN 5% OF ISSUED SHARES 31 33.33 23,633,100 39.16 5% AND ABOVE OF ISSUED SHARES 5 5.38 35,137,300 58.23 Total 93 100.00 60,340,570 100.00

DIRECTORS’ CRIS HOLDINGS No. Name of Directors Nominal Value Of CRIS (RM) Direct/Indirect % Interest

1 TAN SRI LEO MOGGIE - -

2 DATO’ SRI CHE KHALIB BIN MOHAMAD NOH - -

3 DATO’ PUTEH RUKIAH BINTI ABD MAJID - -

4 TAN SRI DATO’ LAU YIN PIN @ LAU YEN BENG - -

5 TAN SRI DATO’ HARI NARAYANAN A/L GOVINDASAMY - -

6 DATO’ ZAINAL ABIDIN BIN PUTIH - -

7 DATUK MOHD ZAID BIN IBRAHIM - -

8 DATUK ZALEKHA BINTI HASSAN - -

9 MOHAMMAD ZAINAL BIN SHAARI - -

10 DATO’ FUAD BIN JAAFAR - -

SUBSTANTIAL CRIS HOLDERS No. Name of CRIS Holders Nominal Value of CRIS (RM) %

1 MAYBAN NOMINEES (TEMPATAN) SDN BHD 10,000,000 16.57 MALAYSIA NATIONAL INSURANCE BERHAD (LIFE PAR FUND) 2 CITIGROUP NOMINEES (TEMPATAN) SDN BHD 7,743,100 12.83 ING INSURANCE BERHAD (INV-IL PAR) 3 MALAYSIA NOMINEES (TEMPATAN) SENDIRIAN BERHAD 6,800,000 11.27 GREAT EASTERN LIFE ASSURANCE (MALAYSIA) BERHAD (PAR 1) 4 AMANAH RAYA NOMINEES (TEMPATAN) SDN BHD 5,500,000 9.11 PUBLIC FAR-EAST BALANCED FUND 5 AMANAH RAYA NOMINEES (TEMPATAN) SDN BHD 5,094,200 8.44 PUBLIC ENHANCED BOND FUND


Analysis Of Convertible Redeemable Income Securities 2004-2009 (“CRIS”) Holdings as at �0 October 2007 (Continued)

30 LARGEST CRIS HOLDERS

No. Name of CRIS Holders Nominal Value of CRIS (RM) % 1 MAYBAN NOMINEES (TEMPATAN) SDN BHD 10,000,000 16.57 MALAYSIA NATIONAL INSURANCE BERHAD (LIFE PAR FUND) 2 CITIGROUP NOMINEES (TEMPATAN) SDN BHD 7,743,100 12.83 ING INSURANCE BERHAD (INV-IL PAR) 3 MALAYSIA NOMINEES (TEMPATAN) SENDIRIAN BERHAD 6,800,000 11.27 GREAT EASTERN LIFE ASSURANCE (MALAYSIA) BERHAD (PAR 1) 4 AMANAH RAYA NOMINEES (TEMPATAN) SDN BHD 5,500,000 9.11 PUBLIC FAR-EAST BALANCED FUND

5 AMANAH RAYA NOMINEES (TEMPATAN) SDN BHD 5,094,200 8.44 PUBLIC ENHANCED BOND FUND

6 AMANAH RAYA NOMINEES (TEMPATAN) SDN BHD 3,000,000 4.97 KUMPULAN WANG BERSAMA

7 AMANAH RAYA NOMINEES (TEMPATAN) SDN BHD 2,500,000 4.14 PUBLIC GLOBAL BALANCED FUND

8 AMANAH RAYA NOMINEES (TEMPATAN) SDN BHD 2,000,000 3.31 PUBLIC DIVIDEND SELECT FUND

9 HSBC NOMINEES (TEMPATAN) SDN BHD 1,544,000 2.56 HSBC (M) TRUSTEE BHD FOR OSK-UOB KIDSAVE TRUST (3621)

10 MAYBAN TRUSTEES BERHAD 1,510,000 2.50 STRATEGIC BOND FUND

11 HSBC NOMINEES (TEMPATAN) SDN BHD 1,218,000 2.02 HSBC (M) TRUSTEE BHD FOR OSK-UOB INCOME FUND (4314)

12 AMSEC NOMINEES (TEMPATAN) SDN BHD 1,000,000 1.66 PLEDGED SECURITIES ACCOUNT FOR TAN KIM KUAN @ TAN KIM CHIN

13 MAYBAN NOMINEES (TEMPATAN) SDN BHD 980,000 1.62 MAYBAN TRUSTEES BERHAD FOR INCOME PLUS FUND (N14011980070)

14 KE-ZAN NOMINEES (ASING) SDN. BHD. 976,000 1.62 KIM ENG SECURITIES PTE. LTD. FOR CYL INVESTMENTS LIMITED

15 DB (MALAYSIA) NOMINEE (TEMPATAN) SENDIRIAN BERHAD 963,300 1.60 CIMB-PRINCIPAL ASSET MGMT BHD FOR GLOBALE RUCKVERSICHERUNGS-AKTIENGESELLSCHAFT

16 UNIVERSAL TRUSTEE (MALAYSIA) BERHAD 850,000 1.41 HLG BOND FUND (L1)

17 DAYA MAHSURI SDN BHD 800,000 1.33

18 CIMSEC NOMINEES (TEMPATAN) SDN BHD 800,000 1.33 CIMB FOR HASRAT JAGUH SDN BHD (PB)

19 CITIGROUP NOMINEES (TEMPATAN) SDN BHD 687,700 1.14 ING INSURANCE BERHAD (INV-IL NON-PAR)

20 CIMSEC NOMINEES (TEMPATAN) SDN BHD 600,000 0.99 CIMB FOR SIEH KOK SWEE (PB)


30 LARGEST CRIS HOLDERS (Continued)

No. Name of CRIS Holders Nominal Value of CRIS (RM) %

21 HLG NOMINEE (TEMPATAN) SDN BHD 505,000 0.84 HLG ASSET MANAGEMENT SDN BHD FOR YAYASAN USAHAWAN BUMIPUTRA (1084)

22 CIMSEC NOMINEES (TEMPATAN) SDN BHD 500,000 0.83 CIMB FOR FAIRLY YAP SWEE ENG (PB)

23 CIMSEC NOMINEES (TEMPATAN) SDN BHD 482,000 0.80 CIMB FOR CHEONG KEE LAI (PB)

24 MALAYSIA NOMINEES (TEMPATAN) SENDIRIAN BERHAD 450,000 0.75 OVERSEAS ASSURANCE CORPORATION (MALAYSIA) BERHAD (MGF)

25 HSBC NOMINEES (TEMPATAN) SDN BHD 347,000 0.58 HSBC (M) TRUSTEE BHD FOR RHB BALANCED FUND (3936)

26 HLG NOMINEE (TEMPATAN) SDN BHD 338,000 0.56 HLG ASSET MANAGEMENT SDN BHD FOR PERBADANAN BEKALAN AIR PULAU PINANG SDN BHD (2052)

27 CIMSEC NOMINEES (TEMPATAN) SDN BHD 200,000 0.33 CIMB FOR TAN KOK HENG (PB)

28 CIMSEC NOMINEES (TEMPATAN) SDN BHD 200,000 0.33 CIMB FOR ROSLINA BINTI ABDUL RAHMAN (PB-IU)

29 MAYBAN NOMINEES (TEMPATAN) SDN BHD 200,000 0.33 AMANAHRAYA-JMF ASSET MANAGEMENT SDN. BHD. FOR AZIAN BINTI AIYUB GHAZALI (C193-240084)

30 NADIAH PAUT ABDULLAH @ REBECCA PAUT 187,300 0.31 Total 57,975,600 96.08

Analysis Of Convertible Redeemable Income Securities 2004-2009 (“CRIS”) Holdings as at �0 October 2007 (Continued)


Share Price Tracking

9

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53

404

3

2,93

3,39

4

467

,353

6

10

148

,589

3

,417

,782

GEN

ERAT

ION

El

ectr

icit

y is

pro

duce

d th

roug

h a

proc

ess

of c

onve

rtin

g ot

her

form

s of

ene

rgy

into

ele

ctri

cal e

nerg

y. T

his

conv

ersi

on p

roce

ss is

kno

wn

as g

ener

atio

n an

d is

mai

nly

carr

ied

out

at

pow

er s

tati

ons.

In

add

itio

n, a

num

ber

of m

ini h

ydro

sta

tion

s an

d nu

mer

ous

dies

el g

ener

atin

g se

ts a

re o

pera

ted

by T

NB.

Not

e : N

BV -

Net

Boo

k Va

lue


Property ListTransmission

N

atur

e of

LAN

D

BUIL

DIN

GS

D

escr

ipti

onFu

ncti

onal

Leas

ehol

d

Fr

eeho

ld

To

tal

Tota

l To

tal

No.

Bu

ilt-U

p To

tal

Act

ivit

y

N

o.of

A

rea

NBV

Are

a N

BV

No.

of

Are

a N

BV

No.

of

Are

a N

BV

Lots

(s

q M

) (R

M’0

00)

(s

q M

) (R

M’0

00)

Tran

smis

sion

Lo

ts

(sq

M)

(RM

’000

) Lo

ts

(sq

M)

(RM

’000

)

(1

) (2

) (3

) (4

) (5

) (6

) (1

+4)

(2

+5)

(3+6

) (1

0)

(11)

(1

2)

(13)

Lo

cati

on

Pe

rlis

4

1

10,0

24

1,0

52

2

15,

860

4

74

6

125

,884

1

,526

1

6

3,1

45

66,

056

M

ain

Inta

keK

edah

1

2

445

,892

3

,500

1

80

71,

451

2

,550

1

92

517

,343

6

,050

7

0

7,6

94

187

,314

Su

bsta

tion

sPu

lau

Pina

ng

15

1

,311

,447

8

,296

3

6

114

,908

4

,739

5

1

1,4

26,3

55

13,

035

4

1

3,6

53

158

,064

Pe

rak

10

1

57,1

93

1,5

29

68

2

6,43

8

12,

396

7

8

183

,631

1

3,92

5

53

8

,146

2

50,1

99

Se

lang

or

20

2

57,5

23

25,

006

4

5

92,

713

1

09,3

21

65

3

50,2

36

134

,327

1

21

13,

673

6

33,2

44

W

.Per

seku

tuan

1

0

176

,794

1

1,22

1

203

7

9,80

0

13,

543

2

13

256

,594

2

4,76

4

45

7

,740

3

24,3

86

Putr

ajay

a/Cy

berj

aya

-

-

-

-

-

-

-

-

-

N

.Sem

bila

n 1

3

688

,904

6

,843

1

2

87,

029

4

,633

2

5

775

,933

1

1,47

6

57

3

,836

1

20,9

63

Mel

aka

6

59,

717

4

,984

2

1

20,

627

1

0,80

4

27

8

0,34

4

15,

788

4

9

7,1

67

81,

508

Jo

hor

30

5

54,5

52

22,

617

4

4

64,

522

1

5,13

6

74

6

19,0

74

37,

753

1

33

9,0

27

715

,557

Pa

hang

8

8

6,48

7

1,2

61

18

1

55,8

35

3,8

56

26

2

42,3

22

5,1

17

76

2

,934

1

83,5

39

Tere

ngga

nu

5

170

,622

3

,433

9

-

5

4

14

1

70,6

22

3,4

87

41

3

,544

7

1,96

1

Kel

anta

n 3

9

5,62

8

1,8

76

169

1

76,0

29

5,1

99

172

2

71,6

57

7,0

75

33

5

,551

5

9,00

7

Saba

h 3

3

0,90

4

1,5

55

1

14,

165

1

34

4

45,

069

1

,689

1

5

3,6

00

31,

520

Tota

l 1

39

4,1

45,6

87

93,

173

8

08

919

,377

1

82,8

39

947

5

,065

,064

2

76,0

12

750

7

9,71

0

2,8

83,3

18

TRA

NSM

ISSI

ON

Tr

ansm

issi

on a

ctiv

ity

rela

tes

to t

he p

roce

ss o

f tr

ansm

itti

ng e

lect

rici

ty g

ener

ated

at

pow

er s

tati

ons

to t

he lo

ad c

entr

es w

here

it is

req

uire

d, e

g. t

owns

hips

, ind

ustr

ial g

row

th c

entr

es

and

maj

or c

usto

mer

s.

A n

etw

ork

of t

rans

mis

sion

line

s, f

orm

ing

the

Nat

iona

l G

rid

is r

equi

red

for

this

pur

pose

. At

appr

opri

ate

site

s, t

rans

mis

sion

sub

stat

ion

are

cons

truc

ted

to c

hann

el e

lect

rici

ty f

rom

the

N

atio

nal G

rid

to t

he n

umer

ous

load

cen

tres

. The

tra

nsm

issi

on s

yste

m o

pera

tes

at v

olta

ge le

vels

of

500

kV, 2

75 k

V, 1

32 k

V a

nd 6

6 kV

.

Not

e : N

BV -

Net

Boo

k Va

lue


Distribution

Property ListN

atur

e of

LAN

D

BUIL

DIN

GS

D

escr

ipti

onFu

ncti

onal

Leas

ehol

d

Fr

eeho

ld

To

tal

Tota

l To

tal

No.

Bu

ilt-U

p To

tal

Act

ivit

y

N

o.of

A

rea

NBV

Are

a N

BV

No.

of

Are

a N

BV

No.

of

Are

a N

BV

Lots

(s

q M

) (R

M’0

00)

(s

q M

) (R

M’0

00)

Dis

trib

utio

n Lo

ts

(sq

M)

(RM

’000

) Lo

ts

(sq

M)

(RM

’000

)

(1

) (2

) (3

) (4

) (5

) (6

) (1

+4)

(2

+5)

(3+6

) (1

0)

(11)

(1

2)

(13)

Lo

cati

on

Pe

rlis

3

7

16,

378

7

95

42

7

1,96

4

880

7

9

88,

342

1

,675

5

2

1,2

00

4,9

19

Dis

trib

utio

nK

edah

1

59

296

,580

5

,491

3

07

510

,601

3

2,58

6

466

8

07,1

81

38,

077

2

14

46,

250

4

0,17

1

Subs

tati

ons

Pula

u Pi

nang

1

06

71,

696

4

,777

3

64

131

,413

2

4,27

1

470

2

03,1

09

29,

048

1

75

12,

880

2

5,07

5

Pera

k 5

38

563

,012

1

0,16

2

227

5

28,8

43

9,7

55

765

1

,091

,855

1

9,91

7

356

1

2,61

7

48,

206

Sela

ngor

3

98

201

,800

3

9,19

3

544

4

81,1

28

83,

376

9

42

682

,928

1

22,5

69

790

1

21,0

96

142

,658

W.P

erse

kutu

an

176

1

22,8

82

45,

030

1

57

122

,976

2

1,12

7

333

2

45,8

58

66,

157

2

91

16,

603

3

28,2

96

Pu

traj

aya/

Cybe

rjay

a -

-

7

1

2

-

676

2

-

7

47

14

-

2

8,53

6

N.S

embi

lan

246

1

08,3

19

2,9

09

136

4

0,68

9

2,3

69

382

1

49,0

08

5,2

78

123

6

,872

6

,371

Mel

aka

197

8

0,63

9

4,6

06

210

6

7,64

6

24,

825

4

07

148

,285

2

9,43

1

156

6

,136

6

,217

Jo

hor

588

4

64,1

88

19,

161

6

25

388

,894

4

4,98

2

1,2

13

853

,082

6

4,14

3

465

1

9,77

4

41,

554

Paha

ng

204

1

57,4

72

7,5

91

175

9

4,83

0

173

3

79

252

,302

7

,764

1

52

9,8

01

29,

419

Te

reng

ganu

1

88

638

,856

3

,373

5

5

41,

337

1

,571

2

43

680

,193

4

,944

1

19

4,5

08

18,

278

K

elan

tan

175

4

93,6

17

3,6

89

176

2

36,2

71

6,6

01

351

7

29,8

88

10,

290

1

39

67,

062

1

0,30

5

Saba

h 5

1

637

,841

3

,572

3

7

173

,243

1

,881

8

8

811

,084

5

,453

3

18

84,

500

2

8,18

8

Tota

l 3

,063

3

,853

,280

1

50,4

20

3,0

57

2,8

89,8

35

255

,073

6

,120

6

,743

,115

4

05,4

93

3,3

64

409

,299

7

58,1

93

D

ISTR

IBU

TIO

N

The

dist

ribu

tion

pro

cess

beg

ins

at t

he t

erm

inat

ion

of

the

tran

smis

sion

lin

e w

here

dis

trib

utio

n su

bsta

tion

s st

ep d

own

volt

age

to e

nabl

e el

ectr

icit

y to

be

dist

ribu

ted

to T

NB’

s cu

stom

ers.

Th

e di

stri

buti

on s

yste

m c

onsi

sts

of d

istr

ibut

ion

subs

tati

ons,

ove

rhea

d lin

es a

nd u

nder

grou

nd c

able

s op

erat

ing

at v

olta

ge le

vels

of

33 k

V a

nd b

elow

.

Not

e : N

BV -

Net

Boo

k Va

lue


Residential & Others

Property ListN

atur

e of

LAN

D

BUIL

DIN

GS

D

escr

ipti

onFu

ncti

onal

Leas

ehol

d

Fr

eeho

ld

Tota

l To

tal

No.

Bu

ilt-U

p To

tal

Act

ivit

y

To

tal

Are

a N

BV

A

rea

NBV

N

o.of

A

rea

NBV

N

o.of

A

rea

NBV

N

o.of

(s

q M

) (R

M’0

00)

(s

q M

) (R

M’0

00)

Resi

dent

ial a

nd

Lots

(s

q M

) (R

M’0

00)

Lots

(s

q M

) (R

M’0

00)

Lots

othe

rs

(1)

(2)

(3)

(4)

(5)

(6)

(1 +

4)

(2+5

) (3

+6)

(10)

(1

1)

(12)

(1

3)

Loca

tion

Perl

is

1

1,0

37

329

6

5

0,81

6

1,9

87

7

51,

853

2

,316

1

3

6,1

51

6,2

95

Resi

dent

ial

Ked

ah

5

43,

983

2

,543

2

9

259

,202

2

2,71

1

34

3

03,1

85

25,

254

4

2

39,

168

2

5,30

9

Hou

ses,

Pula

u Pi

nang

8

2

6,82

9

5,4

05

23

2

56,9

68

28,

168

3

1

283

,797

3

3,57

3

54

1

3,62

8

139

,133

A

part

men

ts,

Pera

k 3

7

78,

110

3

,124

5

3

1,0

74,7

10

28,

544

9

0

1,1

52,8

20

31,

668

1

15

134

,749

6

5,41

9

Hol

iday

Sela

ngor

3

6

33,

009,

908

1

61,8

87

49

1

,764

,430

1

37,8

97

85

3

4,77

4,33

8

299

,784

3

31

80,

974

1

,044

,809

Bu

ngol

ows,

W.P

erse

kutu

an

3

18,

757

7

,189

1

1

79,

918

7

4,10

1

14

9

8,67

5

81,

290

1

23

136

,326

1

48,0

31

Offi

ce B

uild

ings

, Pu

traj

aya/

Cybe

rjay

a -

-

-

-

-

-

-

-

-

Mai

n St

ore

and

N

.Sem

bila

n 1

0

113

,329

2

,055

2

8

359

,906

2

9,59

7

38

4

73,2

35

31,

652

7

1

132

,894

6

0,94

8

War

ehou

se

Mel

aka

4

99,

097

8

,549

2

0

142

,288

9

,582

2

4

241

,385

1

8,13

1

31

2

8,63

5

19,

437

Jo

hor

23

3

84,4

39

36,

860

4

9

773

,793

2

2,95

3

72

1

,158

,232

5

9,81

3

119

7

6,37

3

67,

709

Pa

hang

2

3

760

,444

1

5,93

8

24

6

7,59

8

7,3

32

47

8

28,0

42

23,

270

1

83

76,

822

1

58,8

34

Tere

ngga

nu

25

3

,306

,420

3

0,02

6

4

1,9

22

2,3

62

29

3

,308

,342

3

2,38

8

53

4

7,43

4

92,

567

K

elan

tan

11

2

29,8

63

7,4

63

22

8

7,84

5

5,8

22

33

3

17,7

08

13,

285

5

4

322

,636

6

0,19

7

Saba

h 5

1

22,3

69

3,1

77

2

59,

490

1

0,04

3

7

181

,859

1

3,22

0

12

3

3,50

0

19,

435

Pa

kist

an

-

-

-

1

856

,207

2

,940

1

8

56,2

07

2,9

40

3

12,

713

1

,999

K

alim

anta

n*

-

-

-

1

578

,317

2

,782

1

5

78,3

17

2,7

82

-

-

565

Tota

l 1

91

38,

194,

585

2

84,5

45

322

6

,413

,410

3

86,8

21

513

4

4,60

7,99

5

671

,366

1

,204

1

,142

,003

1

,910

,687

RES

IDEN

TIA

L A

ND

OTH

ERS

‘Res

iden

tial

Pro

pert

y’ in

clud

es s

taff

qua

rter

s, h

olid

ay b

unga

low

s an

d ap

artm

ents

. “O

ther

s” in

clud

e of

fice

bui

ldin

gs, m

ain

stor

e an

d w

areh

ouse

.

*Lan

d A

cqui

red

for

hold

ing

over

burd

en s

oil d

urin

g co

al m

inin

g.

N

ote

: NBV

- N

et B

ook

Valu

e


Glossary

5S : 5S Initiatives

AAIBE : Akaun Amanah Industri Bekalan Elektrik

ACP : Average Collection Period

AKP : Anugerah Kualiti Presiden TNB

BTU : British Thermal Units

CAR : Central Area Reinforced Project

CMC : Call Management Centre

CRM : Customer Relationship Management

CSR : Corporate Social Responsibility

DPMS : Distribution Project Monitoring System

DSM : Demand Side Management

EDMS : Electronic Document Management System

EMF : Electronic Magnetic Field

EVA : Economic Value Added

FY : Financial Year

GIS : Gas Insulated Switchgear

GLC : Government Linked Companies

GWh : 1,000,000 kWh

ICT : Information, Communication and Technology

IFM : Integrated Fleet Management

ILSAS : Institut Sultan Ahmad Shah

IPPs : Independent Power Producers

IWPP : Independent Water and Power Project

kV : Kilovolt

kVA : Kilovolt Ampere

kW : Kilowatt (measure of capacity)

kWh : Kilowatt Hour (unit of electricity)

LOA : Limit of Authority

MW : Megawatts

MVA : Mega Volt Ampere

OCGT : Open Cycle Gas Turbine

PPA : Power Purchase Agreement

PQ : Power Quality

PRIME : Special programme for TNB 1000 customers

PSI : Process Standardisation and Improvement

R & D : Research and Development

RCM : Reliability Centred Maintenance

SAIDI : System Average Interruption Index

SAIFI : System Average Interruption Frequency Index

SAR : System Average Restoration Index

SCADA : Supervisory Control and Data Acquisition

SE 10/10 : Service Excellence Year 2010

SEMS : Safety Excellence Management System

SLA : Service Level Agreement

T7 : Strategy T7

TNB : Tenaga Nasional Berhad

UOR : Unplanned Outage Rate

WIT : Work Improvement Team

This page has been intentionally left blank.

Number of Ordinary Share(s) heldCDS Account No.:

Proxy Form

(Please indicate “X” in the appropriate box against each Resolution as to how you wish your proxy/proxies to vote. If no voting instruction is given, this form will be taken to authorise the proxy/proxies to vote at his/her discretion).

Dated: ______________ December 2007 ____________________________________ Signature of Shareholder(s) or Common Seal

NOTES:-1. Any member entitled to attend and vote at this Meeting of the Company is entitled to appoint a proxy to attend and vote in his stead. A proxy need

not be a member of the Company.2. The instrument appointing a proxy shall be in writing under the hand of the appointer or of his attorney duly appointed under a power of attorney.

Where the instrument appointing a proxy/proxies is executed by a corporation, it shall be executed either under its common seal or under the hand of any officer or attorney duly appointed under a power of attorney.

3. Pursuant to Article 105(4) of the Company’s Articles of Association, a member is entitled to appoint not more than two proxies, and where a member appoints two proxies, the appointment shall be invalid unless the percentage of the holding to be represented by each proxy is specified.

4. A corporation which is a member, may by resolution of its Directors or other governing body authorise such person as it thinks fit to act as its representative at the Meeting, in accordance with Article 107(6) of the Company’s Articles of Association.

5. The instrument appointing a proxy/proxies must be deposited at Symphony Share Registrars Sdn. Bhd., Level 26, Menara Multi-Purpose, Capital Square, No. 8, Jalan Munshi Abdullah, 50100 Kuala Lumpur not less than forty-eight (48) hours before the time set for the Meeting.

I/We, ___________________________________________________________ NRIC No./Passport No./Co.No.__________________________________ (FULL NAME IN CAPITAL)

of ________________________________________________________________________being a Member/Members of Tenaga Nasional Berhad, (ADDRESS)

hereby appoint__________________________________________________ NRIC No./Passport No./Co.No.__________________________________ (FULL NAME IN CAPITAL)

of ___________________________________________________________________________________________________________________________ (ADDRESS)

and/or failing him/her ___________________________________________ NRIC No./Passport No./Co.No__________________________________ (FULL NAME IN CAPITAL)

of____________________________________________________________________________________________________________________________ (ADDRESS)

Or failing him/her, the Chairman of the Meeting, as my/our proxy, to vote for me/us, and on my/our behalf at THE SEVENTEENTH ANNUAL GENERAL MEETING of TENAGA NASIONAL BERHAD to be held at Dewan Serbaguna, Kompleks Sukan TNB, Jalan Pantai Baru, 59200 Kuala Lumpur on Thursday, 13 December 2007, at 10.00 am and/or at any adjournment thereof.

My/Our proxy is to vote as indicate below:

1. RESOLUTION 1 To receive the Directors’ Report and Audited Financial Statements for the Financial Year

ended 31 August 2007

2. RESOLUTION 2 Declaration of Dividend

3. RESOLUTION 3 Payment of Directors’ Fees

4. RESOLUTION 4 Re-election of Dato’ Sri Che Khalib bin Mohamad Noh

5. RESOLUTION 5 Re-election of Tan Sri Dato’ Lau Yin Pin @ Lau Yen Beng

6. RESOLUTION 6 Re-election of Dato’ Fuad bin Jaafar

7. RESOLUTION 7 Re-election of Mohammad Zainal bin Shaari

8. RESOLUTION 8 Re-appointment of Messrs PricewaterhouseCoopers as the Company’s Auditors

SPECIAL BUSINESS

9. RESOLUTION 9 Proposed Renewal of Shareholders’ Mandate for Recurrent Related Party Transaction

(RRPT) of a Revenue or Trading Nature Entered With Persons Connected to a Major

Shareholder

10 RESOLUTION 10 Proposed Shareholders’ Mandate for RRPT of a Revenue or Trading Nature Entered With

Persons Connected to a Director and a Major Shareholder

11. RESOLUTION 11 Issuance of Shares Pursuant to Employees’ Share Option Scheme II (ESOS II)

12. RESOLUTION 12 Issuance of New Shares Pursuant to Section 132D, Companies Act, 1965

13. SPECIAL RESOLUTION 1 Proposed Amendments to the Company’s Articles of Association

FOR AGAINST

Symphony Share Registrars Sdn. Bhd.Level 26, Menara Multi-PurposeCapital SquareNo.8, Jalan Munshi Abdullah50100 Kuala Lumpur

Stamp

laporan tahunan tnb 2007

Documents

jalan pantai baru

datuk wira md

yayasan tenaga nasional

khazanah nasional berhad

tenaga nasional berhad

tenaga nasional berhad

jalan munshi abdullah

malayan banking berhad