annual report - Tenaga Nasional Berhad

annual report2008

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MissionWe are committed to excellence in our products and servicesVisionTo be among the leading corporations in energy andrelated businesses globally

ContentsPowering up5 Mission5 Vision8 About Us9 Key Financial Highlights10 Corporate Award Highlights16 Notice Of Annual General Meeting19 Statement AccompanyingNotice Of Annual General MeetingENERGIZED PERFORMANCE20 Key Highlights21 Five-Year Performance Highlights22 Corporate Performance Charts24 FY2008 Core Revenue25 Financial Calendar 200826 Operational Statistics27 Share Price TrackingEMPowerING leadership28 Chairman’s Letter To Shareholders34 President/CEO’s Review45 Operations Review46 Generation56 Transmission62 Distribution70 Finance76 Corporate Affairs78 Group Human Resource82 Planning86 Investment Management90 ICT Division96 Procurement100 Corporate Services104 Sabah Electricity Sdn BhdTransmitting Transparency126 Statement Of CorporateGovernance138 Enterprise Wide Risk Management142 Statement Of Internal Control145 Board Audit Committee Report148 Terms Of ReferenceOf The Board Audit CommitteeGenerating excellence152 Board Of Directors154 Profile Of Directors160 Group Executive CouncilCommittee – GECC161 Energy Supply Committee – ESC162 Group Executive ManagementCommittee – GEMCChanneling our Energy164 Corporate Social Responsibility170 Other Services – Productivity AndQuality Management171 Occupational Safety And HealthReport172 Statement Of Environmentstrength in numberS174 Financial Statementskey indicators274 Analysis Of Shareholdings277 Analysis Of Unsecured ConvertibleRedeemable Income Securities2004-2009 (“CRIS”) Holdings280 Property List• Proxy FormCORPORATE DISCLOSURE114 Corporate Information116 Group Corporate Structure118 Organisational Structure119 Calendar Of Corporate Events124 Media HighlightsCover RationaleWe are the custodians of our environment and guardians of the future that is inherited by thoseafter us. This responsibility has guided our unwavering efforts in leading sustainability towards ourprecious resources. The solar panels illustrate Tenaga Nasional Berhad’s commitment to poweringa green nation and our continuous efforts in merging its development paradigms for our futureneeds. Moving further, higher and beyond is represented by the skies symbolising infinite heightsin contributing to the nation, community and environment.

About Us[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]Tenaga Nasional Berhad (TNB) is thelargest electricity utility in Malaysia withmore than RM69.8 billion in assets.The Company is listed on the mainboard of Bursa Malaysia and employsapproximately 29,210 people (Group)to serve a customer base of over sevenmillion in Peninsular Malaysia andSabah. TNB plays an integral role in thenational, economic and social prosperityof the country by providing reliable andefficient services.TNB’s core businesses are in thegeneration, transmission and distributionof electricity. In Peninsular Malaysia,TNB is a major contributor to the totalindustry capacity through six thermalstations and three major hydroelectricschemes. The Company also managesand operates a comprehensivetransmission network, the National Grid.Spanning the peninsular, the grid linksTNB power stations and IPPs to thedistribution network. The grid is alsointerconnected to Thailand’s transmissionsystem in the North and Singapore’stransmission system in the South.TNB’s distribution network is managedthrough a comprehensive distributionsystem, customer service centres andcall management centres.Today, TNB is also involved in diversifiedactivities linked to the power industry.Through subsidiaries, the Company isin the manufacture of transformers, highvoltage switchgears and cables; theprovision of professional consultancyservices; architectural, civil, and electricalengineering works and services,repair and maintenance; as well as inresearch and development; propertydevelopment; and management services.In advancing human capital, UniversitiTenaga Nasional (UNITEN) has beenestablished to produce well-roundedcompetent individuals in various fields.A major part of the Company’s corporatesocial responsibility in education,sponsorships and contributions, ischanneled through our trust foundation– Yayasan Tenaga Nasional.To ensure the Company’s continuedservice excellence and to support itsstrategic vision of global leadership,employee competencies are continuouslye n h a n c e d t h r o u g h s t r u c t u r e dprogrammes. As a responsible corporatecitizen, TNB also places great emphasison its engagement with the communityto ensure society gains and benefitsfrom our efforts.8

Key Financial HighlightsFinancial Year 2007 Financial Year 2008(RM’mil)(RM’mil)Revenue 23,320.4 25,750.6Operating Expenses (18,371.4) (22,503.4)Other Operating Income 593.7 794.8Operating Surplus 5,542.7 4,042.0Finance Cost (1,305.0) (1,095.8)Transaction Gain/(Loss) 33.5 (19.1)Profit Before Tax& Translation Gain/(Loss) 4,313.6 2,972.0Net Profit BeforeTranslation Gain 3,608.8 2,540.8Translation Gain 452.3 53.2Profit for the period 4,067.6 2,600.4Profit Attributable to:Equity Holders 4,061.1 2,594.0Minority Interests 6.5 6.44,067.6 2,600.4[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]9

Corporate Award Highlights[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]101. Prime Minister’s Industry ExcellenceAward (AKIPM) & Quality ManagementExcellence Award (QMEA)The FY2008 was most meaningful for TNB asthe company was announced the winner ofthe much coveted Prime Minister’s IndustryExcellence Award (AKIPM), triumphing over 217other participating companies; among whichwere multinational organisations. TNB was alsoawarded the Quality Management ExcellenceAward (QMEA), signifying the company’s progressand improvement in quality excellence.The AKIPM is the Government’s effort inrecognising local companies who havedisplayed excellence in organisation, innovationand corporate social responsibility. Participatingcompanies are evaluated based on eight keycriteria which comprise of Top ManagementLeadership and Management of Quality, Useof Quality Data and Information, HumanResource Management, Customer Focus,Quality Assurance of External Suppliers, ProcessManagement, Quality and Operational/BusinessResults and Corporate Social Responsibility.

232. TNB Finalist for Platts 2007 Global Energy Awards for Top PowerCompany of the Year, Ranked 32nd Among The Top EnergyCompanies In Asia and 42nd Among The Global Top 250TNB once again made it to the Platts ranking for top 56 energy companies inAsia in the 2007 survey of world’s top 250 Energy Companies conducted by theUnited States-based Platts. Results of the survey ranked TNB 32nd among thetop companies. Globally, Platts ranked TNB to be 42nd among the top ElectricityUtility Companies.The Platts Top 250 recognises outstanding financial performance for the previousyear. Each company listed in the Platts Top 250 has distinguished itself throughits remarkable performance and outstanding efforts and dedication of its team.Being awarded a ranking in the Platts Top 250 is an accomplishment of prestigeand honour for TNB in the energy industry. This recognition is significant to theCompany as it is placed in the same league with the world’s largest and mostsuccessful energy producers. It is indeed a continuous journey of excellence forTNB as it strives to achieve its vision to be among the leading corporations inenergy and related businesses globally.3. TNB wins NAfMA 2007 – BEST PRACTICE AWARD 2007(Public Listed Company)TNB was awarded Winner for Best Practice Award 2007 (Public Listed Company)for National Award for Management Accounting (NAfMA) 2007.4This award is for best practices, focusing on fully implemented managementaccounting systems that set new standards or introduce innovations in theworkplace. These systems have been benchmarked and tested, and outcomeshave been carefully measured, evaluated and documented. Best practices willgenerally have broad impact and applicability within a particular organisation.5Being a first time participant, it was pure satisfaction for the team that hadworked hard to ensure the Group made it to the Top Ten Final list after the firstround of assessments in mid October 2007.4. Gold Award for The Best Emerging Contact Centre (Category GLC)TNB CareLine 15454 was given recognition by the Contact Centre Association ofMalaysia and MSC Malaysia, when it won the Gold Award for The Best EmergingContact Centre (Category GLC).The award was held to recognise, promote and encourage Government agencies/GLCs to increase their customer service capability and efficiency to the communityat large through the Call Management Centre services.5. The BrandLaureate Awards 2008Tenaga Nasional Berhad was awarded The BrandLaureate Societe Awards 2008 forexcellence in corporate social responsibility.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]11

Corporate Award HighlightsThe BrandLaureate Awards is the most coveted branding Award in Malaysia and theAsia Pacific, recognising the best of brands from the Multinationals, Public Listedand Government Linked Companies. The winners are selected based on a 300point judging criteria formulated to assess the brand’s strength and performance.7Winning brands represent the best in their industries and are selected basedon various categories. The Societe Awards recognises excellence in the fields ofcorporate social responsibilities, promotion of green causes and philanthropy aswell as promoting the spirit of nobility and altruism amongst organisations andindividuals.6. Sultan Iskandar Power Station, Pasir Gudang E.G. WIT Team wonGold Award Runner Up at the Indonesia Quality ConventionE.G. WIT Team of Sultan Iskandar Power Station, Pasir Gudang led by EncikRoshidi Khamis won the GOLD AWARD RUNNER UP at the Indonesian QualityConvention held in West Java Indonesia.87. TNB Wins the Top Corporate Award – Malaysia 1000TNB was given recognition as the winner of Top Corporate Award while TNBJanamanjung Sdn. Bhd. won the Industry Excellence Award at the LaunchingCeremony of the Third Edition of the Malaysia 1000 magazine.It was organised by BASIS Publication House Sdn. Bhd., publisher of the Malaysia 1000magazine in collaboration with the National News Agency of Malaysia (BERNAMA).The award was in recognition of outstanding companies in Malaysia that havecontributed to industry excellence and economic development of the nation.9[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]128. TNB bagged Three Awards in conjunction with Workers Day 2008• Competitive Employer Award (Large Industry)• Associate Professor Dr. Izham Zainal Abidin, Deputy Dean Academic and QualityAssurance, Universiti Tenaga Nasional, received the Outstanding Male EmployeeAward, Executive Group.• Encik Adnan Saidin, Craftsman Senior Grade, Office of the Area Manager,Alor Setar, Kedah received the Outstanding Male Employee Award – NonExecutive Group.9. Minister of Human Resources Award 2007– ILSAS – (Training Provider Category)TNB Integrated Learning Solution Sdn. Bhd. (ILSAS) won the Minister of HumanResources Development Award in the ”Training Provider Category” in conjunctionwith the Human Resources Development Conference 2007.10

10. Malaysian Society ofOccupational Safety andHealth Awarda) MSOSH 2006 Safety AwardThe Annual Occupational Safetyand Health Award was held by theMalaysia Society for OccupationalSafety and Health (MSOSH) togive credit and recognition toorganisations that have achievedgood track record in occupationalsafety and health managementat their respective work place.The award conferred was basedon the points obtained throughthe audit of documents and thestations conducted by MSOSHauditors. Giving recognition toorganisations that have achievedexcellence in occupational safetyand health management is part ofthe Government’s effort to makework place in Malaysia safe andhealthy and to make safe andhealthy work practice a part ofculture among Malaysians.The following power stations hadwon awards in the respectivecategories:Gold Class I Award:1. Tuanku Ja’afar Power Station,Port Dickson2. Sultan Ismail Power Station,Paka3. Power Stations at CameronHighlandsGold Class II Award:1. Putrajaya Power Station2. Gelugor Power Station3. Sultan Mahmud Power Station,KenyirSilver Award:1. Sultan Iskandar Power Station,Pasir Gudang2. Connaught Bridge PowerStation, Klang3. Sultan Azlan Shah PowerStation, ManjungBronze Medal Award:1. Ismail Petra Power Station,Pergaub) MSOSH 2007 Safety AwardT h e M a l a y s i a n S o c i e t y o fOccupational Safety and Health(MSOSH) Award 2007 ceremonysaw the following power stationsgarner MSOSH awards in therespective categories:GOLD Class 1(Very good OSH performance)• Putrajaya Power Station• Cameron Highlands HydroPower Station• Sultan Ismail Power Station,Paka• Tuanku Ja’afar Power Station,Port Dickson• Chenderoh Power StationGOLD Class 2(Very good OSH performance)• Sg. Perak Hydro Power Station• Gelugor Power Station• Connaught Bridge PowerStation, Klang• Sultan Azlan Shah PowerStation, ManjungSILVER (Good OSH performance)• Sultan Iskandar Power Station,Pasir Gudang• Sultan Mahmud Power Station,KenyirBRONZE(Satisfactory OSH performance)• Sultan Ismail Petra PowerStation, Pergau11. Chenderoh Power Stationwon Gold Medal FirstPlace at Safety and HealthExcellence Award 2007Chenderoh Power Station won GoldAward First Place for ElectricityUtility Category at the NationalSafety and Health ExcellenceAward 2008.Chenderoh Power Station wasselected for the Electricity UtilityCategory by defeating other TNBand private power stations. EncikMustaphakamal Yaacob, Managerof Chenderoh Power Station andEncik Lee Kwan Yong, SafetyExecutive received the award.The Annual Occupational Safetyand Health Award was organisedby the National Council forOccupational Safety and Health,Ministry of Human Resource togive credit and recognition toorganisations that have achievedgood track record in occupationalsafety and health managementat their respective work place.The recognition accorded toorganisations that have achievedexcellence in occupational safetyand health management.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]13

Corporate Award Highlights12. Malaysia Productivity Corporation (MPC) Awarda) MPC Director General’s AwardTNB was given another accolade by winning the MPC Director General’sAward at the Official Opening of the National MPC ICC Convention 2008.12(a)The award was given to companies that have shown high level of work forcecommitment in work improvement (WIT), continuous participation and winningaccolades at MPC National and Regional ICC Conventions.b) Transmission Division’s ICC Group and Gelugor Power Station ReceivedMPC National ICC ConventionTwo ICC Groups of the Transmission Division created history when SinarGroup (Senggaraan Aset, Johor Bahru) and Northern Star (Senggaraan Aset,Alor Setar) succeeded in winning 3 Star Gold award at the National ICCConvention organised by the Malaysia Productivity Corporation (MPC) on21 August 2008. Sinar Group was also adjudged as among the 10 best ICCgroups at the convention.12(b)This is the best achievement by Transmission Division since they beganparticipation in the ICC Convention. Sinar Group presented a project onovercoming the problem of maintenance of field light switch and street lightswhile the Northern Star Group’s project was on overcoming the problem ofreplacing resistor at 132 & 275 kV transmission towers. Winning second place atthe convention was Impian Group from Gelugor Power Station.c) Northern Region ICC Competition Convention 2008 organised byMalaysia Productivity Corporation (MPC)Team ‘Missing 2’ from the office of the State General Manager Pulau Pinangwon the Gold Award.Wira Senggaraan team from the Bertam Branch Manager’s office won theSilver Award.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]14d) Universiti Tenaga Nasional (UNITEN) became the first university inMalaysia to secure the Quality Environment Practice Certification fromthe Malaysia Productivity Corporation (MPC)UNITEN was conferred the Quality Environment Certification (QE) on 15 and16 April 2008, after having met the 5S certification audit objectives. A fullscaleaudit assessment process was conducted by MPC senior consultantofficers cum assessors, Miss Norzirin Ariffin & Mr. Rosmi Abdullah at thePutrajaya Campus and Sultan Haji Ahmad Shah Campus respectively.e) SESB Sipitang Succeeded to obtain MPC Certification for 5SSabah Electricity Sdn. Bhd. (SESB) Sipitang was conferred 5S PracticeCertification by the Malaysia Productivity Corporation (MPC).f) Distribution Division Head Office, Wisma TNB Jalan Timur ConferredQuality Environment Practice Certification (5S)The Head Office of TNB Distribution Division was conferred Quality EnvironmentPractice Certification (5S Practice System) by the Malaysia Productivity Corporation(MPC).13

g) Transmission Division’sHuman Resource andAdministration Departmentconferred 5S PracticeCertificationThe Transmission Division’sH u m a n R e s o u r c e a n dAdministration Departmentsucceeded in obtaining the first5S certification in the Divisionfrom the Malaysia ProductivityCorporation (MPC).13. NACRA 2007 Certificate ofMerit for TNBTNB was presented with theCertificate of Merit for its 2006Annual Report at the NationalAnnual Corporate Report Awards(NACRA) 2007.NACRA is a manifestation ofthe joint commitment of thefour organising bodies – BursaMalaysia Berhad, Malaysia Instituteof Accountants (MIA), MalaysianInstitute of Management (MIM) andThe Malaysian Institute of CertifiedPublic Accountants (MICPA) topromote the highest standards incorporate reporting.14. ACCA Malaysia EnvironmentalAnd Social Reporting Awards(MESRA) 2007TNB won the Merit Awardfor Environmental Reportingcategory at the ACCA MalaysiaEnvironmental and Social ReportingAwards 2007.15. ACM 2007 Best New ServicesAwardTNB participated in the 10th ASEANCommunication & Multimedia(ACM) Expo & Forum 2007.During the three day exhibition,TNB was selected as the winnerfor Best New Services for severalinformation technology applicationsused by TNB in its daily businessoperations and consumer servicessuch as E-CIBS, Remote MeterReading (RMR), On-Line VendorRegistration (OVR) and MobileField Force Automation (MFFA).16. Team Circle Point Championof the Innovative & CreativeCircle (ICC) ConventionTeam Circle Point from TNB Kuantan,Pahang, emerged as the ServiceCategory and Overall Champion atthe National Innovative & CreativeCircle (ICC) Convention organisedby the National Productivity Centre(NPC).Team Circle Project entitled“Detecting Electricity Theft”succeeded in defeating 160 otherparticipating teams.17. Winner of the 2007Corporate Award – Tier 2,Category 1 by the Instituteof Internal Auditors Malaysia(IIA Malaysia)Tenaga Nasional Berhad (TNB)was awarded the Winner for the2007 Corporate Award – Tier 2,Category 1 by the Institute ofInternal Auditors Malaysia (IIAMalaysia). This prestigious award ispresented to TNB for demonstratingstrong commitment to ContinuousProfessional Development for theyear 2006.18. Best Theme Booth’ Award atthe 50th Merdeka Expo’TNB had participated in the‘50th Merdeka Expo’ held at thePutra World Trade Centre. TNB’sExhibition Booth was selectedas the Best Theme Booth at the4-day exhibition.19. UNITEN Overall Championat ITEX 2008 CompetitionUniversiti Tenaga Nasional (UNITEN)emerged as the Overall Championat the ITEX 2008 Competition.16 participating innovative productsby UNITEN researchers representingthe Engineering and InformationTechnology College won five goldmedals, six silver and five bronzemedals in the categories contest.20. TNB Youth Overall RunnerUp in Youth Hockey League2008TNB Youth Hockey Team emergedthe Overall Runner Up at theNational Youth Hockey League2008 after putting up a keen fightand lost 4-3 to Bukit Jalil SportSchool Selection Team in the finalmatch.21. Inaugural KajangInternational Six-a-SideCricket ChampionshipTNB’s Cricket Team emerged as theChampion at the Inaugural KajangInternational Six-a-Side CricketChampionship. The championshipwhich was jointly organised byKajang Cricket Association andMitraz Promotion also attractedinternational participation fromSouth Korea, Australia andSingapore.The TNB team trounced KlangMamangam team in the finalmatch by a display of excellentgame. In additon, TNB’s Batsman,Encik Thushara Kodikara wasadjudged the Best Batsman ofthe Championship by scoring 147points.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]15

Notice Of Annual General Meeting[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]16AS ORDINARY BUSINESS:-1. To receive the Audited FinancialStatements together with thereports of the Directors and Auditorsthereon for the Financial Year ended31 August 2008.Ordinary Resolution 12. To approve the declaration of finalgross dividend of 10.0 sen perordinary share less income tax of25% for the Financial Year ended31 August 2008.Ordinary Resolution 23. To approve the payment ofDirectors’ fees of RM628,838.00for the Financial Year ended31 August 2008.Ordinary Resolution 34. To re-elect the following Directorswho retire in accordance withArticle 135 of the Company’sArticles of Association:-(i)(ii)(iii)Tan Sri Leo Moggieordinary Resolution 4Tan Sri Dato’ Hari Narayanana/l Govindasamyordinary Resolution 5Dato’ Zainal Abidin bin Putihordinary Resolution 65. To re-elect Tan Sri Dato’ Seri SitiNorma binti Yaakob who retires inaccordance with Article 133 of theCompany’s Articles of Association.Ordinary Resolution 7To consider and if thought fit, to passthe following Ordinary Resolutions:-NOTICE IS HEREBY GIVEN THAT theEighteenth Annual General Meeting(18th AGM) of Tenaga Nasional Berhadwill be held on Thursday, 11 December2008, at 10.00 a.m. at Dewan Serbaguna,Kompleks Sukan TNB, Jalan Pantai Baru,59200 Kuala Lumpur to transact the followingbusinesses:-6. T o r e - a p p o i n t M e s s r sPricewaterhouseCoopers, havingconsented to act as Auditors ofthe Company, to hold office untilthe conclusion of the next AnnualGeneral Meeting (“AGM”) and toauthorise the Directors to fix theirremuneration.Ordinary Resolution 8AS SPECIAL BUSINESS:-7. Specific authority for the Directorsto issue shares pursuant tothe Employees’ Share OptionScheme II“THAT pursuant to the TNBEmployees’ Share Option SchemeII (“ESOS II”) as approved at theExtraordinary General Meeting(“EGM”) of the Company held on29 May 2003, approval be and ishereby given to the Directors toissue shares in the Company atany time and in accordance withthe terms and conditions of thesaid scheme.”Ordinary Resolution 98. General authority for the Directorsto issue shares pursuant to Section132D, Companies Act, 1965“THAT pursuant to Section 132D ofthe Companies Act, 1965 (“Act”),full authority is hereby given tothe Directors to issue shares inthe capital of the Company atany time until the conclusion ofthe next AGM and upon suchterms and conditions and for suchpurposes as the Directors may, intheir absolute discretion, deemfit provided that the aggregatenumber of shares to be issuedpursuant to this Resolution doesnot exceed ten percent (10%) ofthe issued share capital of theCompany for the time being,subject to the provision of theAct, Articles of Association of theCompany and approval from theBursa Malaysia Securities Berhad(“Bursa Securities”) and all therelevant regulatory bodies wheresuch approval is necessary.”Ordinary Resolution 10

9. Authority for proposed purchaseof its own shares by the Companyin accordance with Section 67A ofthe Act“THAT subject to compliancewith the Act, the Company’sM e m o r a n d u m a n d A r t i c l e so f A s s o c i a t i o n , t h e L i s t i n gRequirements of Bursa Securitiesand all other applicable laws,guidelines, rules and regulationsfor the time being in force or asmay be amended from time totime, and the approvals from allrelevant authorities, the Companybe and is hereby authorised topurchase such amount of ordinaryshares of RM1.00 each in theCompany’s issued and paid-upordinary share capital throughBursa Securities upon such termsand conditions as the Directors ofthe Company (“Board”) may deemfit and expedient in the interest ofthe Company provided that:-(a)(b)the aggregate number ofshares purchased pursuantto this resolution shall notexceed ten percent (10%) ofthe total issued and paid-upshare capital of the Company(“Proposed Share Buy-Back”);the maximum amount of fundsto be utilised for the purposeof the Proposed Share Buy-Back shall not exceed theCompany’s aggregate retainedprofits and/or share premiumaccount;(c)the authority conferred by thisresolution shall commenceimmediately upon the passingof this resolution and shallcontinue to be in force until:-(i)(ii)(iii)the conclusion of thenext AGM of theCompany at which timethe authority shall lapseunless by an ordinaryresolution passed bythe shareholders ofthe Company in ageneral meeting, theauthority is renewedeither unconditionally orsubject to conditions;the expiry of the periodwithin which the nextAGM of the Companyis required by law to beheld;the authority is revokedor varied by an ordinaryresolution passed bythe shareholders of theCompany at a generalmeeting,whichever is the earlier.””AND THAT authority be andis hereby given to the Board todecide in their discretion to retainthe ordinary shares in the Companyso purchased by the Company astreasury shares or to cancel themor a combination of both and/orto resell them on Bursa Securitiesand/or to distribute them as sharedividends.””AND THAT the Board be andis hereby authorised to take suchsteps to give full effect to theProposed Share Buy-Back with fullpower to assent to any conditions,modifications, variations and/oramendments as may be imposedby the relevant authorities and/or to do all such acts and thingsas the Board may deem fit andexpedient in the best interest ofthe Company.”Ordinary Resolution 1110. To transact any other business ofwhich due notice shall have beengiven in accordance with the Act.BY ORDER OF THE BOARDNor Zakiah binti Abdul Ghani(LS 0008795)Wan Marzimin bin Wan Muhammad(LS 0009013)Company SecretariesKuala Lumpur18 November 2008[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]17

Notice Of Annual General MeetingEXPLANATORY NOTES ON SPECIAL BUSINESS(i)(ii)Ordinary Resolution 9: Power for the Directors toissue shares pursuant to ESOS II.The proposed Ordinary Resolution, if passed, isto empower the Directors to issue shares in theCompany pursuant to the terms and conditions ofESOS II, which was approved at the EGM of theCompany held on 29 May 2003.Ordinary Resolution 10: Power to issue sharespursuant to Section 132D, of the Act.The proposed Ordinary Resolution, if passed, is togive the Directors of the Company flexibility to issueand allot shares for such purposes as the Directorsin their absolute discretion consider to be in theinterest of the Company, without having to convenea general meeting. This authority will expire at thenext AGM of the Company.Notes:-Registration of Members/ProxiesRegistration of Members/Proxies attending the Meetingwill be from 7.00 a.m. on the day of the Meeting.Members/Proxies are required to produce identificationdocuments for registration.Proxy(i) Any member entitled to attend and vote at thisMeeting of the Company is entitled to appoint aproxy to attend and vote in his stead. A proxy neednot be a Member of the Company.(ii)The instrument appointing a proxy shall be in writingunder the hand of the appointer or of his attorneyduly appointed under a power of attorney. Where theinstrument appointing a proxy/proxies is executed bya corporation, it shall be executed under its commonseal or under the hand of any officer or attorney dulyappointed under a power of attorney.(iii)Ordinary Resolution 11: Proposed Share Buy-Back.The proposed Ordinary Resolution, if passed, is toempower the Directors to purchase the Company’sshares of up to 10 percent of the issued and paidup capital of the Company by utilising the fundsallocated out of the retained profits and the sharepremium account of the Company. This authorityunless revoked or varied at a general meeting, willexpire at the next AGM of the Company.(iii)(iv)Pursuant to Article 105(4) of the Company’s Articlesof Association, a member is entitled to appoint notmore than two (2) proxies, and where a memberappoints two (2) proxies, the appointment shall beinvalid unless the percentage of the holding to berepresented by each proxy is specified.A corporation which is a member, may by resolutionof its Directors or other governing body authorisesuch person as it thinks fit to act as its representativeat the Meeting, in accordance with Article 107(6) ofthe Company’s Articles of Association.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]18(v)The instrument appointing a proxy/proxies must bedeposited at Symphony Share Registrars Sdn. Bhd.,Level 26, Menara Multi-Purpose, Capital Square,No. 8, Jalan Munshi Abdullah, 50100 Kuala Lumpur,Malaysia not less than forty-eight (48) hours beforethe time set for the Meeting.Additional Information on Ordinary Resolutions 4 to 7Additional Information on the Particulars of the retiringDirectors, as required under Appendix 8A of the BursaMalaysia Listing Requirements are detailed out in theAnnual Report.

Statement AccompanyingNotice Of Annual General MeetingPursuant To Paragraph 8.28 (2) of The Listing Requirements of Bursa MalaysiaSecurities BerhadThe Directors Who Are Standing For Re-election At The Eighteenth Annual GeneralMeeting(a)(b)Directors retiring pursuant to Article 135 of the Company’s Articles of Association:-• Tan Sri Leo Moggie• Tan Sri Dato’ Hari Narayanan a/l Govindasamy• Dato’ Zainal Abidin bin PutihDirector retiring pursuant to Article 133 of the Company’s Articles of Association:-• Tan Sri Dato’ Seri Siti Norma binti YaakobThe details of the four (4) Directors seeking re-election are set out in their respective profiles which appear in the Directors’profiles on pages 154 to 159 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 onpage 178 of the Audited Financial Statements of the Annual Report.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]19

Key HighlightsUnit Demand Growth +4.7% – Group+6.1% – TNBRevenue Growth +10.4% 27.4% increase in Generation costOperating Expenses +22.5% Increase in R&M and depreciationexpensesNet Profit attributable RM2,594.0 million 36.1% declineto Equity HoldersEBITDA Margin 29.5% 37.6% last year[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]20ROA 4.6% Based on adjusted net profitTotal Debt RM22.7 billion Reduction from RM24 billionas at 31 August 2007Capex RM4.9 billion RM5.2 billion last year

Five-Year Performance Highlights2008 2007 2006 2005 2004GroupFinance (RM’ million)Total Revenue 25,750.6 23,320.4 20,384.2 18,977.5 17,712.1Profit Before Taxation and Zakat# 3,025.2 4,765.9 2,756.8 1,818.9 1,482.7Property, Plant and Equipment 58,333.4 57,382.9 55,201.3 54,721.0 53,443.7GenerationGroup Installed Capacity (MW) 11,941.8* 11,514.5* 11,464.8 11,497.8 11,137.5Sales Of ElectricityTotal Units Sold (GWh) 90,650.2 86,545.0 82,214.8 78,933.4 72,921.4Sales Revenue (RM’ million) 24,190.1 22,384.0 19,707.4 18,326.4 17,219.4CustomersTotal Number of Customers 7,329,727 7,068,329 6,814,523 6,582,374 6,323,719Employees (Group)Total Number of Employees 29,210 28,822 28,067 27,727 26,989ShareholdersTotal Number of BumiputeraShareholders 6,177 5,865 5,943 5,971 6,526Total Number ofNon-Bumiputera Shareholders 22,467 17,516 17,318 14,935 15,726Total Number ofInstitutional Shareholders 600 539 586 577 497Total Number of Foreign Shareholders 1,116 1,242 1,067 1,379 715Total Number of Government AgencyShareholders 24 26 28 35 42Total Number of Nominee CompanyShareholders 4,153 3,656 3,814 6,080 4,717Dividends (Gross) 20.0 sen 36.3 sen 14.8 sen 16.2 sen 18.2 senFinancial RatiosDebt-Equity (Net of Cash) Ratio 0.68 0.78 1.19 1.69 1.94Earnings Per Share – Basic (sen) 59.87 94.92 52.52 32.01 26.1Net Assets Per Share (sen) 592 554 470 499 460# The financials for 2004 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)[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]21

Corporate Performance ChartsProfit Before Tax AndNet Profit (Company)Profit Before Tax4,5003,600RM’Million2,7001,800Profit Before Tax #And Net Profit (Group)90001,958.61,601.42,000.64,124.43,104.0FY’04 FY’05 FY’06 FY’07 FY’08Profit Before Tax5,000Net Profit4,0004,0003,200RM’Million3,000RM’Million2,4002,0001,6001,00001,482.71,818.92,756.84,765.93,025.2FY’04 FY’05 FY’06 FY’07 FY’0880001,759.81,163.61,535.93,514.52,663.6FY’04 FY’05 FY’06 FY’07 FY’08[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]22RM’MillionNet Profit5,0004,0003,0002,0001,0000813.71,280.02,126.94,061.12,594.0FY’04 FY’05 FY’06 FY’07 FY’08RM’MillionProperty, Plant AndEquipment (Group)60,00048,00036,00024,00012,000053,443.754,721.055,201.357,382.958,333.4FY’04 FY’05 FY’06 FY’07 FY’08# The financials for 2004 to 2005 have not been adjusted for the adoption of FRS 101-Presentation of Financial Statements

MWhProductivity (Group)Units Sold / Employee (In Units / MWh)3,5002,8002,1001,400Maximum Demand TrendMW14,20014,00013,80070002,701.92,846.82,929.23,002.73,103.4FY’04 FY’05 FY’06 FY’07 FY’0813,60013,400EmployeeNumber of Employees (No.)30,00024,00018,00012,0006,000026,98927,72728,06728,82229,210FY’04 FY’05 FY’06 FY’07 FY’0813,20013,00012,80012,60012,40013,412sep’0713,455oct’0713,341nov’0713,031dec’0713,517jan’0813,504feb’0813,579mar’0813,857apr’0814,007may’0813,925jun’0813,910jul’0813,821aug’08 year[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]23

FY2008 Core RevenueFY2008 Total RM25,750.6 millionFY2007 Total RM23,320.4 million[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]24Peninsular Malaysia87.6%SESB3.3%Goods & Services4.7%Deferred Income1.4%EGAT0.8%LPL2.2%}3.0%

Financial Calendar 2008Quarterly ResultsAnnouncementDateFirst Quarter ended 30 November 2007 15 January 2008Second Quarter ended 29 February 2008 14 April 2008Third Quarter ended 31 May 2008 24 July 2008Fourth Quarter ended 31 August 2008 16 October 2008Distribution of Annual Report 18 November 2008Eighteenth Annual General Meeting 11 December 2008[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]25

Operational StatisticsSales Of Electricity(RM’Million) (Group)Sales Of Electricity(GWh) (Group)Number Of CustomersBy Classification (Group)Industrial 41.61%(RM10,066.6)Mining 0.02%(RM5.6)Industrial 45.78%(41,503.1)Mining 0.04%(34.2)Industrial 0.3832%(28,089)Agriculture 0.0124%(906)Commercial 36.73%(RM8,884.1)Public Lighting 0.73%(RM177.5)Commercial 31.12%(28,214.8)Public Lighting 1.11%(1,002.6)Commercial 16.0144%(1,173,811)Mining 0.0002%(13)Domestic 17.40%(RM4,208.5)Export 0.85%(RM206.6)Domestic 18.62%(16,879.8)Export 1.27%(1,152.9)Domestic 82.9228%(6,078,016)Public Lighting 0.0670%(48,892)Agriculture 0.28%(RM66.6)Others (TNB LPL) 2.38%(RM574.6)Agriculture 0.24%(214.2)Others (TNB LPL) 1.82%(1,648.6)TNB Generation Mix(National Grid)TNB Installed Capacity(National Grid)TNB Installed CapacityIncluding IPPs (National Grid)[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]26Hydro 14.0%(6,670.4 GWh)ConventionalThermal (Coal) 35.0%(16,748.3 GWh)ConventionalThermal(Oil & Gas) 6.9%(3,282.6 GWh)CombinedCycle 41.4%(19,765.5 GWh)Gas Turbine 2.7%(1,312.0 GWh)Hydro 17.6%(1,910.5 MW)ConventionalThermal (Coal) 33.9%(3,670 MW)ConventionalThermal(Oil & Gas) 7.8%(840 MW)CombinedCycle 25.5%(2,762 MW)Gas Turbine 15.2%(1,653 MW)Hydro 9.7%(1,910.5 MW)ConventionalThermal (Coal) 18.6%(3,670 MW)ConventionalThermal(Oil & Gas) 4.2%(840 MW)CombinedCycle 14.0%(2,762 MW)Gas Turbine 8.4%(1,653 MW)IPPs 45.1%(8,887.4 MW)

Share Price Tracking11109876503 Sep 0717 Sep 0701 Oct 0715 Oct 0729 Oct 0712 Nov 0726 Nov 0710 Dec 0724 Dec 0707 Jan 0821 Jan 0804 Feb 0818 Feb 0803 Mar 0817 Mar 0831 Mar 0814 Apr 0828 Apr 0812 May 0826 May 0809 Jun 0823 Jun 0807 Jul 0821 Jul 0804 Aug 0818 Aug 08[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]27

[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]28Chairman’s LetterTo Shareholders

Dear Shareholders,TAN SRI LEO MOGGIEChairmanOn behalf of the Board of Directors, I ampleased to announce that Tenaga NasionalBerhad (TNB), despite the impact of higherfuel prices and rising operational costs,reported a profit for the financial year ended31 August 2008.While the Group’s profit declined as aresult of external cost factors beyondour control, we made good headway inincreasing efficiency of our systems andprocesses. As a result of these efforts,we generated higher revenue, exceededour Headline Key Performance Indicators(KPIs) on numerous fronts, made strongstrides forward on several company-wideinitiatives, and put in place the buildingblocks to secure future growth.Financial PerformanceDespite the good start in the first halfof the year, TNB was severely hamperedby the increase in fuel prices, especiallycoal, and higher capacity payments toIndependent Power Producers (IPPs).These external costs, plus foreignexchange translation losses, forced theGroup’s performance to deterioratesignificantly over FY2008.While Group revenue grew by 10.4% toRM25,750.6 million in FY2008 againstRM23,320.4 million previously, our netprofit declined by 36.1% to RM2,600.4million against net profit of RM4,067.6million the year before. This significantdecline in profitability was attributable toa 22.5% increase in operating expensesthat stemmed primarily from higherelectricity generation costs (namely IPPand fuel costs which accounted for60.5% of total operating expenses). Asa consequence, TNB’s EBITDA margindropped to 29.5% (FY2007: 37.6%)while our Return on Assets rate declinedto 4.6% (FY2007: 6.3%).Dividend PaymentsTNB’s dividend policy calls for theprovision of stable and sustainabler e t u r n s t o s h a r e h o l d e r s w h i l emaintaining an efficient capital structureand ensuring sufficient funding forfuture growth. For the financial yearended 31 August 2008, the Board ofDirectors is recommending a final grossdividend of 10 sen per ordinary share(FY2007: 16.3 sen) less income tax of25% subject to shareholders’ approvalat the forthcoming Annual GeneralMeeting. Together with the interimgross dividend of 10 sen amountingto RM320.7 million, the total dividendsdeclared for FY2008 will amount toan estimated RM645.8 million whichrepresents 60.6% of the Company’s freecash flow.Enhancing Service ExcellenceService to our customers is the core ofour business. Over the course of theyear, TNB undertook several initiativesto further enhance service excellenceand ensure a reliable and continuoussupply of electricity to our approximately7.0 million customers in Malaysia.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]29

Chairman’s Letter To ShareholdersIn the year under review, the Groupposted an Unplanned Outage Rateof 3.3%, once again surpassing theglobal industry benchmark of 4.0% andreduced our gearing to 46.9% (FY2007:49.9%). We brought Transmission& Distribution Losses down to 9.5%(FY2007: 10%) and trimmed down ourTransmission System Minutes time to 6.6minutes (FY2007: 9.3 minutes). We alsosuccessfully reduced our DistributionSystem Average Interruption DurationIndex (SAIDI) to 78.0 minutes against83.0 minutes previously.New technologies to automate, enhanceand simplify various customer-relatedprocesses, systems and applicationscontinued to be introduced in FY2008to ensure better service and forcustomer convenience. All divisions inTNB successfully renewed their relevantISO certifications and were focused onfollowing through with their respectivecontinual improvement plans. The Groupwill continue to work hard to improveon the high standards of operationalperformance and service excellencethat are already in place at TNB.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]Fulfilling our customers’ demand andexpectations for service excellenceand a secure and reliable supply ofelectricity remains our priority. TheBoard encourages efforts to furtherengage our customers and stakeholdersthrough various mediums and channelsof communications in order to creategoodwill and understanding towardsservice excellence.Industry Issues And ChallengesEnergy Supply SecurityEnergy supply security is a challenge forthe Malaysian Electricity Supply Industry(ESI). Currently, the power sector isfaced with limitations on natural gasavailability, which have increasedour reliance on imported coal. Thisconcern on the country’s fuel sourceand fuel mix, coupled with the presentimbalance in the ESI structure and theincreasing demand for fuel from Chinaand India, underlined the urgent needfor a comprehensive energy strategy soas not to compromise on our energysupply security.TNB is working aggressively to identifyrealistic alternative fuel sources and todiversify our generation mix. We areexploring several options to ensureMalaysia’s electricity supply security issustained in the long run. Hydroelectricpower will feature more prominently inthe country in the future. In PeninsularMalaysia, approximately 600 MW of thetotal 1,700 MW hydropower potential isbeing initiated for development, whilethe Sarawak Corridor of RenewableEnergy (SCORE) has the potential togenerate 28,000 MW of electricity forthe country. Other options includetapping renewable energy sources suchas solar and biomass. We are alsoseriously looking at nuclear energy asa source for power generation in thefuture.TNB is also committed to increasingenergy efficiency in order to reducewastage. We will continue to engageand educate our customers on theimportance of using electricity wiselyand efficiently. On the industrial front, weare constantly educating our customerson the intelligent use of energy throughthe adoption of smart energy systems.30

Sustainability of the Power SectorIn June 2008, the Governmentannounced an increase in the priceof gas to the Malaysian power sectorfrom RM6.40 per mmBTU to RM14.31per mmBTU and also approved acorresponding adjustment to theelectricity tariff. This adjustment allowedTNB to pass the additional cost ofgas on to consumers to recover infull the increase in the price of gas,while providing partial relief for the170% increase in coal price since 2006.However, the tariff adjustment does notreflect the full impact of the higherprices of coal.Additionally, the imbalance in theallocation of costs in the PPA termsbetween the IPPs and TNB continues toweigh heavily on the Company.While we can improve our operationalefficiencies through managing thecomponents within our control, theseexternal factors may well impact TNB’ssustainability and our ability to providea reliable and affordable supply ofelectricity to the people.We believe energy costs to consumersneed to be sensitive to the real cost ofsupply. In an environment of volatile fuelcosts, an automatic fuel cost adjustmentmechanism in the tariff structure wouldbetter ensure a sustainable electricitysupply industry. This, within the contextof a National Energy Policy, which isbased on long-term perspectives, anda regulatory framework that supports afair allocation of the cost of supplyingpower to consumers, would go a longway in meeting the challenges facingthe power sector in the years ahead.Corporate GovernanceTNB is committed to upholding thetenets of uncompromising integrity,transparency and accountability and toundertaking corporate governance bestpractices. In facing the challenges anddemands of our operating environment,we are continuously reviewing ande n h a n c i n g o u r i n t e r n a l c o n t ro lprocesses and structures. In FY2008,we established the Corporate Affairs,Planning and Procurement Division tostreamline our core business activitiesand ensure greater focus on strategicissues. The Board also endorsed thesetting up of the Fuel ProcurementExecutive Committee to ensure timelydecision-making on fuel procurement,particularly coal.Three strategic policy documentswere also set in place relating toInternational Business Ventures, InvestorRelations and a Treasury Policy, while inAugust 2008 a toll-free Whistle BlowingImplementation System was launchedto further enhance trust and integrityamong employees and to ensure thatthe integrity of the Company and ourservices is maintained.The Board was further strengthenedwith the appointment of an additionalindependent member with a legalbackground, and continued to equip itsmembers with relevant knowledge oncorporate regulatory and current industrydevelopments through professionaladvancement programmes.Corporate Social ResponsibilityTenaga Nasional Berhad is committedto undertaking Corporate SocialResponsibility best practices that impactpositively on all our stakeholders.Human resource development continuesto be our focus and priority in FY2008through the provision of educationalaid and financial contributions. Theseincluded educational programmes, suchas the PINTAR (Promoting Intelligence,Nurturing Talent and AdvocatingResponsibility) project for schools in theNorthern Corridor Economic Region,Eastern Corridor Economic Region andIskandar Development Region.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]31

Chairman’s Letter To ShareholdersMeanwhile, TNB’s Rural Electrificationand “Baiti Jannati” home improvementprogrammes for the hardcore poorcontinued to help elevate and improvethe standard of living and quality of lifeof rural communities annually.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]32Through our foundation, YayasanTenaga Nasional (YTN), the Group alsomakes an annual contribution of aboutRM53 million towards helping top anddeserving students further their studiesin institutions of higher learning locallyand abroad. Since its establishment in1993, YTN has provided educational aidin the form of scholarships and loans tomore than 8,000 students.In FY2008, TNB also invested RM1.32million in two motivational projects, i.e.“Program Kem Remaja Bestari” and“Program Jejak Kegemilangan” foroutstanding students in rural areas.The Group also contributed RM382,500towards the establishment of aneducation services centre for childrenwith special needs under the Ministryof Education. Through YTN, the Groupalso contributed RM200,000 to theNational Cancer Council for its mobilecancer screening facility and RM100,000to welfare homes under the auspices ofthe Ministry of Welfare.The Group’s commitment to protectingthe environment and environmentalconservation initiatives remained strongand continued to be a priority in ourpolicy decisions. Our conservationefforts to date include a bird sanctuaryat our power station in Kapar, while ourcontinued involvement with the fireflycolony in Kampung Kuantan, KualaSelangor has helped to conserve thecolony and increase the area’s tourismpotential, indirectly contributing towardsimproving the economic well-beingof the surrounding community. Also,our solar and wind hybrid power plantprojects at Pulau Perhentian and PulauSibu, among other locations, have hadpositive impact on communities.The Group has also been supportingthe development of local manufacturersand contractors through our VendorDevelopment Programme.Awards And AccoladesI am delighted to report that TNBgarnered an unprecedented haul ofawards and accolades over FY2008.The Company was the proud winner ofthe coveted Prime Minister’s IndustryExcellence Award and the QualityManagement Excellence Award inFY2008, two years ahead of our initialtarget. Globally, TNB was placed in thesame league as the world’s largest andmost successful energy producers bythe US-based Platts, a leading globalprovider of energy information, whichranked us 32nd among the top 56energy companies in Asia and 42ndamong the top 250 energy companiesin the world.

We also received the Gold Awardfrom the Contact Centre Associationof Malaysia and MSC Malaysia inrecognition of the TNB CareLine 15454as the Best Emerging Contact Centrefor the GLC Category. Meanwhile,our training institute, TNB IntegratedLearning Solution Sdn. Bhd. (ILSAS),was accorded the Minister of HumanResources Award 2007 in the TrainingProvider Category. TNB also receivedthe Malaysia Productivity Centre DirectorGeneral’s Award for our commitment toestablishing a dynamic workforce.In recognition of our outstandingoccupational safety and health practices,12 of our power generation stationsreceived awards from the MalaysianSociety of Occupational Safety andHealth in FY2007. We bettered FY2006’sperformance when the Putrajaya,Cameron Highlands, Sultan Ismail,Tuanku Ja’afar and Chenderoh powerstations were accorded Gold Class IAwards, while the Sg. Perak, Gelugor,Connaught Bridge and Sultan AzlanShah power stations were accordedGold Class II Awards. The SultanIskandar and Sultan Mahmud powerstations each received a Silver Award,while the Sultan Ismail Petra powerstation received a Bronze Award.TNB also received the BrandLaureateSociete Awards 2008 for excellencein corporate social responsibility;the National Award for ManagementAccounting (NAfMA) Best Practice Award2007 (Public listed Company); the 2007Corporate Award (Tier 2, Category 1)by the Institute of Internal AuditorsMalaysia; and the Top Corporate Award- Malaysia 1000 from the publisher of theMalaysia 1000 magazine in collaborationwith BERNAMA, the National NewsAgency. The year also saw TNB winningseveral other awards for achievementsin the areas of quality and technologicalinnovation – all apt testimonies of ourcommitment to operational excellence.Going ForwardTenaga Nasional Berhad expects to facea difficult business environment in thecoming year given the volatile globaleconomic climate and the challengesassailing the global energy industry. Intandem with slower economic growth,electricity demand is expected to belower than the 6.1% growth achieved inFY2008 in Peninsular Malaysia.The Board of Directors continues to beconcerned with these unprecedentedchallenges, especially the volatility ofglobal fuel costs and their impact on theGroup’s performance. Not withstandingthis, the Group is committed toimplementing measures that willincrease our operational efficiency andmitigate the impact of these externalfactors to some extent. We will intensifyinteraction with various stakeholders inorder to ensure better appreciation ofthe costs of providing electricity andof the importance of ensuring thatTNB has sufficient income to continueproviding reliable and secure supply ofelectricity to meet future demand forpower in the country.We will also continue to look for newsources of income, including expandingour inter national footprint anddiversifying our earnings base abroad,where appropriate. This, however, willonly be undertaken with due diligenceand professional assessment of the risksinvolved.AppreciationOn behalf of the Board of Directors ofTNB, I wish to convey my gratitude toour shareholders, affiliates, partners andesteemed customers for their steadfastsupport and confidence in the Group.My heartfelt thanks to the Governmentof Malaysia and the various regulatorybodies, in particular the Ministry ofEnergy, Water and Communications aswell as the Energy Commission, fortheir support and guidance.To the Management Team led by Dato’Sri Che Khalib Mohamad Noh and allTNB employees, please accept myheartfelt gratitude for your dedication,hard work and the spirit of excellenceyou have all exhibited. These attributeshave helped TNB to maintain itsprofitability amidst a challengingbusiness environment.Last but not least, my sincere thanksto my fellow Board Members for yourexpert guidance and insights. I lookforward to your support and continuedcommitment as we put in place theplans to secure the future growth ofthe Group. As we focus on steeringTNB steadily forward into turbulent yetopportunistic times, I trust that all ourstakeholders will continue to give ustheir steadfast support.Thank you.Tan Sri Leo MoggieChairman[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]33

President /CEO’s Review[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]34

In Financial Year 2008 (FY2008), strongdemand growth from the industrialand commercial sectors led to a6.1% increase in electricity demandfor Peninsular Malaysia. Againstthis backdrop, Tenaga NasionalBerhad (TNB or the Group) grew itsrevenues by 10.4% while making solidimprovements on the operational front.DATO’ SRI CHE KHALIBBIN MOHAMAD NOHPresident/Chief Executive OfficerHowever, the sudden rise in globalcoal prices, higher capacity paymentsand inflationary pressures, all led toa drop in the Group’s profits. Despitethese setbacks, we continued to setour sights on strengthening ourfinancial fundamentals as well asenhancing operational performanceto provide a reliable and highquality service to our customers.Exceeding ExpectationsF Y 2 0 0 8 s a w T N B ’s b u s i n e s sdivisions and business units chalkingup significant improvementsin operational efficiency, withmany surpassing their target KeyPerformance Indicators (KPIs). OurGeneration Division successfullyachieved an Unplanned Outage Rateof 3.3%, thus beating the industrybenchmark of 4% for the thirdconsecutive year. The TransmissionDivision recorded single-digitTransmission System Minutes timeof 6.6 minutes against the KPItarget of 7.0 minutes, also for thethird year in a row.The Distribution Division successfullyachieved meeting the KPI targetof 78 minutes on the DistributionSystem Average Interruption DurationIndex (SAIDI). On top of this, TNB’sTransmission & Distribution Losseswere successfully reduced to 9.5%against the target KPI of 10%.Even as we made excellent progresson the operational front in linewith our goal of achieving ServiceExcellence by the year 2010, ourefforts did not go unnoticed. Wewere ranked among the best energycompanies in the world on the Platts250 List for 2007 and attained theprestigious Prime Minister’s IndustryExcellence Award, two years aheadof our target 2010 date.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]35

President/CEO’s ReviewRising To The ChallengeAt the onset of FY2008, the Group hadplanned to leverage on the previousyear’s notable achievements (namelyrecord profits, strong operationalperformance, and value creationinitiatives) to optimise our financialand operational performance goingforward. With the benefits of these keydrivers in place, we had also madepreparations to face higher coal pricesand absorb the full impact of new IPPTanjung Bin joining the energy industrybandwagon.However, despite kicking off to a goodstart in the first half of the year, ourprogress in the second half of FY2008was severely hampered by the sheerweight of volatile global coal pricesthat surpassed all expectations. Highercapacity payments and inflationarypressures too, impeded the Group’sprogress. As a result of having to battlethese higher external costs plus foreignexchange translation losses due to theweakening of the Ringgit against theUS Dollar and Japanese Yen, TNB’sperformance deteriorated significantlyover FY2008.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]The effects of volatile fuel prices overthe year resulted in us having to giveup almost all gains from our efficiencyinitiatives. The 10.4% increase in revenueto RM25,750.6 million in FY2008 againstRM23,320.4 million previously, wasnot enough to absorb the drastic risein fuel costs and the resultant 22.5%increase in operating expenses. As aresult, TNB’s net profit declined by36.1% to RM2,600.4 million against netprofit of RM4,067.6 million the yearbefore. The Group’s EBITDA margintoo, dropped to 29.5% against 37.6%previously, while our rate of Return onAssets declined to 4.6% against 6.3%previously.The increase in operating expensesstemmed mainly from higher electricitygeneration costs, namely IPP and fuelcosts which made up some 60.5% oftotal operating expenses. IPP costsincreased 22.4% from RM7,726.0million in FY2007 to RM9,454.1 millionin FY2008; while net fuel costs rose40.4% from RM2,959.5 million inFY2007 to RM4,156.6 million in FY2008.TNB’s total capacity payments to IPPsincreased by 22.0% from RM3,452.5million in FY2007 to RM4,213.2 millionin FY2008.This is set to increase further to RM4.4billion in FY2009 once the Jimah coalfiredpower plant is commissioned.When the Jimah power plant comesonline, our installed capacity will increaseby an additional 1,400MW therebyraising the reserve margin to 47% from40.8% currently. Come FY2009, energypayments to IPPs will also increase by63.5%, from RM5.2 billion in FY2008 toan amount in excess of RM8.5 billion.In FY2008, the Group faced thechallenge of securing coal prices at thelowest level possible amidst a backdropof highly volatile global fuel prices. Thissituation is expected to continue intoFY2009 and will add further pressure onthe Group’s profitability going forward.The second half of FY2008 also sawthe Ringgit weakening against both theUS Dollar and Yen which gave rise to atranslation loss of RM469.6 million. Thisresulted in a net translation gain of onlyRM53.2 million for the full year FY2008.The weaker currency also saw the costof coal as well as the cost of parts,equipment, services and interest, allrising in the second half of the year.36

Over the last four years, our endeavoursto provide quality services to ourcustomers while providing value to ourshareholders had resulted in the creationof value/savings totalling RM2.6 billionor approximately RM652.8 million onaverage per annum. Unfortunately, thehigh volatility in coal prices for FY2008resulted in a RM1.3 billion increase inTNB’s total coal cost which completelynegated the gains for this year. Basedon the lower operating profit marginposted, TNB registered an economicloss of RM2.0 billion for the year underreview compared to an economic lossof RM741.4 million in FY2007.Towards Service ExcellenceIn the year under review, TNB continuedto see through its 20-year StrategicAction Plan (Plan). Developed in 2005,the Plan sets the strategic direction ofTNB for the period 2006-2025. Uponthe first phase, the T7 Strategy, cameto a close in FY2007, the next phase –Service Excellence 10/10 (SE 10/10), isnow running smoothly.Under the SE 10/10 phase which callsfor TNB to achieve Service Excellenceby the year 2010, TNB will endeavourto be the nation’s best run company by2010 and rank among the region’s topcompanies as well. Our long-term goalis to command global leadership inthe relevant business areas by the year2025, while establishing a reputation asa strong business partner and creator ofshareholder value. Ultimately, we aspireto be acknowledged as one of themost admired companies in the world.The SE 10/10 requires our commitmentto building customer and stakeholderloyalty, enhancing service excellenceand operational effectiveness as well asdriving business expansion, locally andglobally.Despite the pressure of external forcesupon the Group’s operations, wehave to date succeeded in achievingmany strategic objectives underthe SE 10/10. In fact, our efforts incontinuously enhancing TNB’s efficiencyand productivity, has resulted in uswinning – two years ahead of our target2010 date – the nation’s highest qualitymanagement award, the Prime Minister’sIndustry Excellence Award.To ensure that we align with therealities of our operating environmentand future business needs, we willreview the Plan and reassess thestrategies for implementation duringthe 2011-2015 phase which advocatesgeographical business expansion. Evenas we continue working the Plan, wewill focus our efforts on continuouslyimproving ourselves, to move into aposition of strength from where we cansecure the growth of TNB and createmore value for our stakeholders.Serving Customers BetterOne of the immediate priorities withinthe SE 10/10 Plan is to continue servingour customers better. The year underreview saw us focusing our efforts onrefining our delivery system throughcustomer-oriented initiatives thatelevated customer satisfaction levelsand helped build customer confidencein TNB.We took our diverse customerconvenience efforts up a couple ofnotches by introducing a diverse rangeof handy payment channels that includeddirect debit, phone banking, autopayment (via credit card) and mobilemoney options. The implementation ofthe new QMatic queue managementsystem at 40 Kedai Tenaga serviceoutlets helped optimise customer flowand create a more relaxed atmospherefor both customers and staff at thesecentres. The QMatic system allows TNBto keep better track of the customerwaiting time and transaction time foreach counter service. More systemswill be installed at other centres indue course. Our Kedai Tenaga frontlinerswere also put through customerorientation training and our “Servicewith a Smile” Campaign to enhancetheir customer service skills, all withthe aim of making the customer serviceexperience a delightful one.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]37

President/CEO’s Review[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]Enhancements to our TNB Careline 15454Call Management Centre (CMC) sawthe addition of a Short Message Service(SMS) option that allows subscribersof Celcom, Maxis and Digi to text inreports of electricity supply breakdownsand faulty streetlights. New state-ofthe-arttechnology including InteractiveVoice Recording, IP Telephony and CTIequipment were installed at the CMC tobetter manage customer enquiries. Ourefforts bore fruit when TNB CareLine15454 was voted the Best EmergingContact Centre in the GLC Categoryby the Contact Centre Association ofMalaysia and MSC Malaysia.Over FY2008, we also introduced newtechnologies to automate and enhancevarious processes. The ElectronicCustomer Information Billing System(e-CIBS) underwent enhancements,while the e-Application system waslaunched to simplify the applicationprocess and speed up electricity supplyto customers. The e-Application servicehas also helped reduce red tape and ourhousing developer customers now needonly make a single application for aproject instead of multiple applications.Some of the other innovative customerrelatedapplications that are beingtapped include the Customer FeedbackSystem or Sistem MaklumbalasPelanggan (SMP), the Enterprise WideResource Management System (EWRM)and the TNB Outage ManagementSystem (TOMS). The SMP enablescomplaints from different groups tobe channelled onto a single platform.To ensure complaints and commentsare captured, our customer repositorydatabase for all 6.9 million customersenables us to view customer feedbackon a single platform. This integrationof customer information and the abilityto monitor, report and evaluate thefeedback goes a long way in helping ustake Customer Relationship Management(CRM) service levels to new heights.The Mobile Field Force Automation(MFFA) pilot project launched in ShahAlam in January 2008 has now beenimplemented throughout all of Selangorand Wilayah Persekutuan. It allowsinstant feedback on what is happeningonsite and customers are updated asto when supply will be restored viathe TNB Careline. The MFFA project isexpected to be rolled out in Johor andPenang by the end of 2008.We recognise that the delivery of areliable power supply to our customersis essential to earning their loyalty. Assuch, we have gone all out to implementtwo-way communication to betterunderstand and meet our customers’expectations. A structured and focuseddata and information gathering exercisehas been in place these last 10 yearsto obtain customer feedback andcomplaints. It entails the use of a varietyof mediums that include a structuredCustomer Satisfaction Index (CSI) survey,feedback forms at Kedai Tenaga serviceoutlets, and a survey done via the TNBCareline 15454 CMC. The survey isbeing conducted by an internationalcompany that provides independentfeedback on TNB’s service levels andhighlights areas for improvement. TheFY2008 survey showed an improvementin TNB’s CSI from a scale of 6.8 to 7.1(based on a scale of 1 to 10), placingus among the top 30% of companiesin the world.From time to time, we engage indialogue and hold meetings withindustry leaders, businesses andrepresentatives from governmentagencies to gauge their feedback andunderstand their perspectives. Thesehigh-level discussions, which typicallyinvolve the Group Senior Management,offer us a platform to better understandcustomer needs and address complaintsin greater depth. Our top 1000 LargePower Customers (LPCs) are managedthrough a special programme calledthe PRIME Management Programmewhereby TNB executives personally visitthe LPCs to listen to their concernsand provide solutions. On 1 December2007, TNB embarked on CorporateAccount Relationship Enhancement orCARE Programme to forge a closertwo-way relationship between TNBand our corporate customers. In 2009,we will launch a new customer-centricprogramme which will result in amarked transformation of the way weare delighting customers.38

Ensuring Supply ReliabilityLike any other electric utility company inthe world, TNB has the task of ensuringa secure and uninterrupted powersupply to its customers. Our steadfastfocus on operational excellence in ourcore electricity generation, transmissionand distribution activities enables usto fulfil our obligation of “Keeping theLights On”.Over the course of the year, ourGeneration Division embarked onseveral initiatives to ensure adequategeneration capacity and to enhancethe availability and reliability of existinggeneration power plants. Theseincluded the repowering of Phase 2of the 750 MW combined-cycle gasturbine plant at the Tuanku Ja’afarPower Station in Port Dickson and thedevelopment of two hydro projectsin Peninsular Malaysia. The variousmeasures undertaken by the GenerationDivision resulted in TNB registering anEquivalent Unplanned Outage Factor(EUOF) of 3.3% thus beating the4% world class industrial benchmarkEUOF for the third consecutive year.This has resulted in several of TNB’spower plants being placed togetherwith their peers in the top quartile ofthe North American Electricity ReliabilityCorporation database.T N B ’s Tr a n s m i s s i o n D i v i s i o n i sresponsible for making improvementsto transmission network reliabilitywhich ensures high system reliability,security of supply as well as highsystem availability and improvements torestoration time. Transmission networkreliability is measured in terms ofSystem Minutes – which measures thesupply interruption to consumers dueto transmission network failure. OurTransmission Division achieved a SystemMinutes time of 6.6 minutes for FY2008– yet another single digit figure for thethird time in a row; plus it sustained itszero Major Disturbance record.The SAIDI is defined as the averageinterruption (in minutes) for eachcustomer per year and it is an importantmeasure of the performance of ourdistribution network. In FY2008, theDistribution Division recorded a SAIDIof 78 minutes compared to 83 minutespreviously.In March 2005, the Division establisheda dedicated team called the SpecialEngagement against Losses (SEAL)team to reduce non-technical lossesby eliminating losses of under-billingand preventing pilferage of electricity.The SEAL team originally concentratedtheir efforts on LPCs and later extendedthis to Ordinary Power Customers(OPCs). The team has identified asubstantial amount of back-billing andcollection activities are underway forthe outstanding amounts.Additionally, we have taken steps toenhance our monitoring and detectioncapabilities by implementing the RemoteMeter Reading (RMR) project and byupgrading our existing monitoring anddetection systems. The RMR projectprovides TNB and our customers abetter understanding of load profiles orusage patterns in order for customers tomanage their energy consumption moreefficiently. Initially implemented amongall high voltage and medium voltageLPCs, RMR implementation has nowbeen extended to low voltage LPCs.As part of our endeavours to ensureadequate system capacity and supplyreliability, we continue to makesignificant investments in electricitysupply systems. At the same time weare ensuring that additional generationcapacity is integrated into the system ina timely and efficient manner.Over the course of 2008, there wereseveral ongoing major generationprojects. The Tuanku Ja’afar PowerStation Rehabilitation Phase 2 (PD2)Project is on course for a combined cyclecommercial operation by end of 2008.Once fully commissioned, it will add anadditional installed capacity of 750 MWto the existing 750 MW PD1 plant.A major rehabilitation project in theCameron Highlands and Batang PadangHydroelectric Schemes is the PlantLife Extension and Automation Projectwhich is scheduled for completionin early 2009. The Ringlet Reservoirhas been substantially restored to itsoriginal holding capacity by desilting.The rehabilitation project is expected toextend the operating life of the CameronHighlands Hydroelectric Scheme byanother 30 years after having been inoperation for the last 45 years.With fossil fuel costs on the rise, thereis a need to continuously identifyand harness all possible hydro powerpotential in Peninsular Malaysiaand Sarawak. Currently two majorhydroelectric projects are in the stagesof procurement – the Hulu TerengganuHydroelectric Project (with plannedcapacity of 250 MW) and the Ulu JelaiHydroelectric Project (with plannedcapacity of 372 MW), are targetedfor completion by 2013 and 2014respectively.The 300 MW coal-fired IPP Project inSabah, which was awarded to a TNBsubsidiary in the last financial year, hashad to be relocated to a new site.Approval from the State Government isbeing sought to start the project.The year also saw us implementingsystem improvements to strengthen ournetwork and improve supply security. Atotal of thirty-eight transmission projectswere fully completed and commissionedduring the year in review. The 500 kVtransmission lines that connect theJimah IPP Coal Fired Power Stationto the Lenggeng Substation and theOlak Lempit Substation were completedin January 2008. The Lenggeng500/275 kV substation was commissionedin the same month. In the Eastern region,the Kandis 275/132 kV substation thatwas energised in December 2007 nowfunctions as the alternative supply pointfrom the National Grid to the state ofKelantan. It is also the prime substationfor the development of the EasternEconomic Corridor.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]39

President/CEO’s Review[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]To meet the nation’s future electricityneeds, TNB signed a Head OfAgreement on 7 May 2008 with SarawakEnergy Berhad (SEB) for the supplyof power to Peninsular Malaysia fromhydro-electric schemes via High VoltageDirect Current (HVDC) overhead linesand submarine cable, and coal powerplants in Sarawak. In this agreement,apart from Bakun, SEB also agrees tosupply 3,000 MW of electricity to TNBfrom 2017 to 2020 and a further 5,000MW from 2021 to 2030. To mitigatethe energy supply security issue, TNB isexploring the viability of nuclear poweras an alternative energy resource forthe future. We have been workingclosely with other stakeholders andagencies, in particular the MalaysianNuclear Agency (Nuclear Malaysia) andAtomic Energy Licensing Board (AELB)on this option. Last but not least, weare also investigating suitable means toincrease the penetration of RenewableEnergy (RE) and Energy Efficiency (EE)alternatives to supplement our effortsin the conventional fossil and hydroschemes towards ensuring our nationalenergy security for the near future.Driving Capacity BuildingTNB’s greatest asset is its workforceof almost 25,000 employees and weare committed to developing theircapabilities. Even as we explore newfrontiers globally, we are investing ina talent pool of able leaders that willcarry the torch for the Group’s longtermgrowth and ensure we maintainour competitive edge. In line with theGovernment’s call for capacity building,we have embarked on several initiativesto develop a highly competent workforceand leaders of high competency andunwavering integrity.TNB’s Succession ManagementProgramme aims to ensure there isa ready pool of good leaders andprofessionals with critical skills tosustain our businesses and move TNBforward. The programme incorporatesindividual development plans for highpotentialexecutives to prepare them foradvancement to higher positions withinTNB. To date, we have 288 talents inour talent pool, while there are 254key leadership positions. Potentialsuccessors have been nominated for85% of these positions.The Specialist Career Path programmeaims to address the imbalance betweentechnical and management skills byretaining and rewarding technicalexperts in their respective fields ofspecialisation while teaching themmanagerial skills. It is implemented as adual-career path strategy covering bothtechnical and management aspects. Thescheme has been in existence for fouryears and to date two specialists and24 technical experts have participatedin the programme. Two of them evenreceived international recognition fortheir flashover analysis tool and powerquality guidebook initiatives.In June 2008, the inaugural GLC TalentExchange initiative amongst GLCs waslaunched. Two of our top candidateswere assigned to Celcom Berhad andMalaysian Building Society Berhad(MBSB) for one year. In return, weaccepted two candidates, one eachfrom Malaysia Airports Holdings Berhadand MBSB.During the period under review, 114developmental and 1110 mandatorytechnical and non-technical trainingprogrammes were conducted fore x e c u t i v e s a n d n o n - e x e c u t i v e srespectively. The programmes have beendesigned to ensure that TNB employeesare equipped with competencies thatraise organisational efficiency andproductivity. On top of this, TNB’straining institute, the TNB IntegratedLearning Solution Sdn. Bhd. (ILSAS),conducted supplementary programmesto educate staff on the commercialaspects of running an organisation.40

In line with the SE 10/10 programmeto achieve geographical businessexpansion, overseas job assignmentsfor selected candidates have beenimplemented to enhance theirknowledge and broaden their exposurein relevant fields. Engineers have beenseconded to TNB Liberty Power Limited(TNB LPL) in Pakistan and Shuaibah IIIIndependent Water and Power Project(Shuaibah) in Saudi Arabia.To support the development of localmanufacturers and contractors, wecontinue to build upon our VendorDevelopment Programme. We areenabling Bumiputra vendors tomanufacture some of the equipment weuse by linking them to banks providingfinancing facilities plus offering them thenecessary support from our quality andresearch units. This win-win situationsees our suppliers getting our business,TNB getting our hands on good qualityequipment, and our consumers beingassured of continuous supply. Since1993, 65 types of import substitutionproducts have been developed andRM3.8 billion in contracts have beenawarded to companies under theprogramme. Our commitment to thevendor development programme showshow serious we are about nurturingBumiputera companies to becomeglobal players.It is mandatory for all TNB staff to beexposed to OSH and to attend trainingwhile practitioners are required to impartOSH knowledge. To this end, continuoustraining programmes, seminars,conferences, symposiums and workshopsare held for all levels. All TNB contractorstoo are educated on the importance ofOSH. The NIOSH-TNB Safety Passportdeveloped in collaboration with theNational Institute of Occupational Safetyand Health (NIOSH) ensures contractorsare aware of the basic requirements ofoccupational safety.Members of the public too aremade aware of electrical safetythrough educational programmesaimed at schools, non-governmentalorganisations, industries and variousassociations. We also carry out safetycampaigns in an effort to ensuremaximum information dissemination.FY2008 saw a total of 12 TNB powerstations winning Gold Medal Class 1& 2, Silver and Bronze medals at theMalaysian Society of Occupational Safetyand Health (MSOSH) Awards 2007.Expanding Our InternationalFootprintAs there are limited opportunities forbusiness growth in Malaysia, we willlook at expanding our internationalfootprint to expand our revenue base –be these assets or service opportunities.Diversifying our earnings base abroad,will also help us to spread our businessrisk and create new sources of income.We will continue to implement astrategy of adding value to TNB’s corecompetencies rather than act as anequity investor. Rest assured that wewill undertake due diligence even aswe study the feasibility of these marketsand the risks involved.Our wholly-owned subsidiary in Pakistan,TNB LPL, continues to make operationalprofit, although FY2008 saw TNB LPLexperiencing losses due to foreignexchange losses. Despite the politicalchallenges in Pakistan, the plant hassuccessfully improved its operationalefficiency and is now one of the mostreliable plants in that nation. In FY2008,the annual dependable capacity (ADC)of TNB LPL improved from 211.7 MWto 213.3 MW, exceeding the initialCommercial Operations Date ADC of212 MW.Prioritising Safety And HealthSafety continues to be a priority at TNBand our comprehensive OccupationalSafety and Health (OSH) ManagementSystem, aptly known as the SafetyExcellence Management System (SEMS),is a tangible reflection of our commitmentto keeping our employees safe.TNB’s qualified Safety and HealthOfficers ensure that the organisationis ready for any crisis or emergencysituation. They are backed up by secondlevel Safety Inspectors and third levelSafety Representatives who ensure thatOSH performance further down the jobchain is monitored and reported to themanagement.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]41

President/CEO’s ReviewOur investment in Saudi Arabia throughthe consortium Saudi-Malaysia Water andElectricity Company Limited (SAMAWEC)for Shuaibah is also progressing well.The plant’s commissioning will takeplace as scheduled in July 2009.We are also looking at opportunitiesin ASEAN in terms of power plants aswell as the provision of services andare also exploring more opportunitiesin the Middle East. We will leverageon the repair and maintenance skills ofTNB Repair and Maintenance Sdn Bhd(REMACO) to gain a foothold in thesemarkets. TNB has some 59 years ofexperience and staff with the relevantexpertise and skills to undertakeinternational projects and the exportof our expertise will help build ourreputation globally. This initiative is alsoconsistent with Khazanah’s aspirations ofhaving the GLCs become global playersin the long run.TNB has also been providing trainingservices to personnel from powerutility companies in Vietnam, Yemen,Mongolia, Laos, Indonesia, Thailand,Nepal, Egypt and Pakistan throughour training institute, ILSAS, and wewill be looking to explore new trainingopportunities via ILSAS.The Way ForwardThe world economy is expected to facecontinuing pressure from volatile fuelprices, the global financial meltdownand the resultant economic turmoilthat is affecting economies around theworld.While Budget 2009 in August 2008projected a GDP growth of 5.4%,the Malaysian Institute of EconomicResearch has more recently forecast alower GDP of 3.4% for 2009 due tothe poor global economic outlook. Thecurrent turmoil in the global financialmarkets, if prolonged, may impactglobal demand and indirectly slow downregional economic growth includingthe Malaysian economy. Consequently,due to a less than promising economicoutlook, the growth in electricitydemand is expected to be lower thanthe 6.1% growth achieved in FY2008.Going forward, concerns over the impactof global energy prices, especially thevolatility in coal prices, increase in IPPcapacity payments and inflationarypressure will continue to pose the mainchallenges for TNB. Our results thisyear are a clear manifestation of thisphenomenon.Moreover, TNB will face significantchallenges in FY2009 when the 1,400MW Jimah Power Plant is commissionedand capacity payments and the reservemargin are raised. Furthermore,weakening of the Ringgit will result in[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]42While we are optimistic about ouroverseas ventures based on ourcapabilities, the challenge will be theglobal economic slowdown and accessto funding as new plants require hugecapital investment.

higher fuel costs and procurement costsfor imported parts, equipment andservices; as well as increased interestcost on US Dollar and Yen-denominatedloans.The extent to which increases inelectricity generation cost can berecovered will determine the financialcondition of TNB and affect our abilityto make future investments in a timelymanner. While we are not able tochange or influence the market forcesthat are driving fuel costs higher, wewill continue improving the efficiency ofour operations to keep costs low andto strengthen our competitive position.We will also focus on strengtheningour financial fundamentals and willcontinue to provide high quality andreliable services to our customers. Atthe same time we will continue to bea catalyst for the nation’s progress andensure positive economic returns to ourshareholders.Given the volatile global economy, theanticipated lower electricity demandand higher operating costs, theGroup’s financial outlook for FY2009remains challenging. Notwithstandingthis, TNB is committed to providingall its customers with a reliable supplyof electricity and raising the level ofservice and operational excellence. Wewill pursue the SE 10/10 value-creationinitiatives to secure the Group’s growthgoing forward.AcknowledgementsI would like to accord our sincereappreciation to the Government ofMalaysia, the Ministry of Energy,Water and Communications, theMinistry of Finance, the Ministry ofInternational Trade and Industry, theEnergy Commission, the MalaysianIndustrial Development Authority andother government agencies for theirsteadfast support of TNB. Our utmostthanks go to our valued shareholdersand customers for their unwaveringconfidence and faith in the Group.I would like to extend my deepestappreciation to our dedicated employeesfor their perseverance and the excellentwork they have carried out despite aturbulent operating environment. Lastbut not least, my heartfelt gratitudeto the Board of Directors for theirwisdom and insight that has kept usgoing strongly. I look forward to the fullsupport of all our stakeholders as wemove forward to secure TNB’s growth.DATO’ SRI CHE KHALIBBIN MOHAMAD NOHPresident/Chief Executive Officer[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]43

GenerationTransmissionDistributionFinance[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]44Datuk Wira Md Sidek bin AhmadSenior Vice President(Operations & Technical)

InvestmentManagementICTCorporate AffairsGroupHumanResourcePlanningProcurementSabah ElectricitySdn BhdCorporateServicesoperations review[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]45

GenerationMoving forward, GenerationDivision is confident that itremains on track in its pursuitof achieving World ClassGeneration Performance. Ourcommitment to satisfying ourcustomers and stakeholdersremains one of our corefocuses. We will continue tooptimise our generation assetutilisation and increase ourtechnical competencies. Withour experience and track record,we will endeavour to expandour services locally and abroad.Highlights of Achievements:[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]46Equivalent Unplanned Outage Factor maintained better than the World Class industrial benchmarkof 4% for 3 consecutive years.Thermal Efficiency continues to improve and further improvement is expected to be attained whenPD2 comes on-line by end 2008.Our engineers are playing major roles in energy-related projects in support of TNB’s overseasventures.All power stations and Generation Division headquarters are MS ISO 9001:2000 certified. All powerstations are MS ISO 14001 certified. Some Power Stations have won national awards such as theMalaysian Society for Occupational Safety and Health (MSOSH) Awards and National Council forOccupational Safety and Health (NCOSH) Award.The Division was actively involved in contributing towards TNB’s achievement of the AKIPMaward.

Mohd Nazri bin ShahruddinVice PresidentGraph 1:Generation Capacity for FY2007/2008Divisional GoalsThe Generation Division, oneof the core business divisionsof TNB, is entrusted to operateand maintain six thermal powerstations and three major hydroelectric power generatingschemes in Peninsular Malaysia.The Generation Division alsosupports the operations andmaintenance of three IPPs,namely the wholly-owned SultanAzlan Shah Power Station andTNB Liberty Power Limitedof Pakistan, and the majorityownedSultan Salahuddin AbdulAziz Shah Power Station.The Division, through its businessunit TNB Repair & MaintenanceSdn Bhd (TNB REMACO), alsoprovides repair and maintenanceservices as well as operationsservices not only to TNB’s fleetof generating plants (includingthe 3 IPPs) but also to externalcustomers. TNB REMACO hasalso set up a parts and sparestrading unit (BuyCo) to expandits revenue base (to diversify itsbusiness).The Division also providestechnical expertise in energyrelatedprojects in support ofTNB’s overseas ventures.IPP45%MNJG10.4%HYD9.7%TNB42.7%PAKA5.8%PD3.7%PJ3.2%KEV12.3%CB4.2%GLGR 2.0%PG3.7%[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]47

Operations Review – Generation DivisionGraph 2:Overall Generation Market Shareby Energy Sales for FY2007/2008IPP50.41%MNJG11.08%HYD6.92%TNB39.62%PD5.82%PAKA7.79%KEV9.97%CB 2.54%PJ 0.94%PG 2.02%GLGR 2.51%Graph 3:Monthly Comparison of Generation Market Shareby Energy Output for FY2007/2008Operational SummaryThe total installed capacity for TNBGeneration Division is 8,416 MW, comprisingof 6,505 MW thermal and 1,911 MW hydroplants. The generating capacity will remainthe same until end of 2008 when TuankuJa’afar Power Station’s new 750 MWcombined cycle plant comes on stream inDecember 2008. The capacity market shareof TNB is 42.7%. (Please see Graph 1)Due to the full commercial operation ofTanjung Bin’s 3 x 700 MW coal-fired powerplant (an IPP) and marginal increase insystem energy demand, TNB’s market sharedecreased to 39.6%, a reduction of 0.1percentage point year-on-year. ManjungPower Station contributed the highestenergy sales of 27.96% to the system forTNB power plants.Graph 2 indicates the overall generationmarket share for FY2008 and Graph 3shows a comparison of monthly energymarket share for FY2007 and FY2008.Generation from gas fuel contributed54.46% of the total energy sales by TNBGeneration, followed by coal at 27.96% andhydro at 17.47%. TNB plants’ generationfuel mix for the period under review hasnot changed significantly compared to lastfinancial year. Graph 4 shows the generationfuel mix for TNB Generation for FY2008.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]48%464442403836343230Market Share FY2007Market Share FY200845.0244.6842.0240.7441.25 41.1541.2140.7840.2241.1340.1040.5739.4638.7238.7139.0537.4738.0337.6336.0036.5136.2334.7633.13Sep’07 Oct Nov Dec Jan’08 Feb Mar Apr May Jun Jul Aug

Technical Performance ReviewPlant Equivalent Availability Factor (EAF)TNB Generation’s EAF for FY2008 is 90.01%,a reduction of 2.14 percentage pointcompared to FY2007. As shown in Graph5, lowest EAF was recorded in November2007 at 83.19% due to some planned andunplanned outages during the month. (Thiswas largely due to major overhaul works atManjung Power Station and the unplannedoutages of steam turbines at Paka PowerStation). The overall station performancesfor FY2008 were excellent, with 80% of thestations having exceeded the EAF of morethan 90%. Graph 6 shows the EAF of allthe stations.Graph 4:Generation Fuel Mix for TNB for FY2008MFO0.00%DIST0.11%HYDRO17.47%COAL27.96%GAS54.46%[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]49

Operations Review – Generation Division[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]50Graph 5:Equivalent Availability Factor (EAF) by Plant TypeGraph 6:Equivalent Availability Factor (EAF) of all Stations%1101009080706050CB PAKA PD PG GLGR PJ MNJG SGPK KNYR CAM TNBGraph 7:Trending of Equivalent Availability Factor%110100908070605094929088868482Sep’0794.3695.57Oct’07CCP85.6391.3091.97Nov Dec’07 ’07ConvCoal91.0790.9390.7995.21Jan’08Feb’08ConvOil/Gas85.1795.76FY’0794.0695.7990.2 90.2Mar’08Apr’08May’08Jun’08Jul’08Aug’08OCGT Hydro TNBFY’04 FY’05 FY’06 FY’07 FY’0893.6082.01FY’0891.5493.5892.1587.2992.9698.8471.5090.0192.1290.01Graph 7 shows the EAF trendsince FY2004. For FY2008, theEAF achieved was 90.01%, whichis higher than the target valueof 88.6%. The main plannedoutages were Major Overhaulat Manjung Power Station’s U1,Turbine Inspection at TuankuJa’afar Power Station’s GT1A,Inspection at Connaught BridgePower Station’s GT5C and LifeExtension Project at CameronHighlands Power Station.Among the different plant types,conventional oil/gas thermalplants have achieved an EAFof 96.69% followed by opencyclegas turbines at 96.11%,combined-cycle plants at92.48%, hydro plants at 90.52%and conventional coal thermalplants at 82.01%.Plant Equivalent UnplannedOutage Factor (EUOF)TNB Generation’s EUOF wasbetter than the World Classindustrial benchmark of 4%for the last three consecutivefinancial years. The EUOFachieved for FY2008 was 3.34%.Graph 8 shows the EUOF trendsfrom FY2004 to FY2008.Overall, EUOF was excellentwith 80% of the stations havingachieved EUOF of less than 4%.Both Paka and Manjung PowerStations recorded high EUOFdue to the mechanical failuresof the steam turbines. Graph 9shows the EUOF achieved by allthe power stations for FY2008.Details by cause codes for theunplanned outages are as shownin Graph 10.

Graph 8:Trends of Equivalent Unplanned Outage Factor (EUOF)12109.50% %86420Graph 9:Equivalent Unplanned Outage Factor (EUCF) by Station14121086.103.107.182.1011.153.34FY’04 FY’05 FY’06 FY’07 FY’0864.524201.270.902.781.231.132.060.211.162.261.531.51CB PAKA PD PG GLGR PJ MNJG SGPK KNYR CAM TNB1.901.092.590.580.692.472.153.34FY’07FY’08Graph 10:Classification of Equivalent Unplanned Outage Factor (EUOF)HRSG BOILER, 0%HYDRO TURBINE/PUMP, 2%BALANCE OF PLANT,12%BOILER15%STEAMTURBINE12% GENERATOR20%GASTURBINE37%MISC, 2%POLLUTION CONTROLEQUIPMENT, 0%PERSONNEL ORPROCEDURE ERRORS, 0%[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]51

Operations Review – Generation DivisionEnergy Unit SalesThe total energy unit sales forFY2008 were 37,770 GWh,higher than the target value of32,860 GWh by 14.9%. ManjungPower Station contributed thehighest unit sales of 10,562GWh, followed by Paka PowerStation (7,426 GWh) and TuankuJa’afar Power Station (5,546GWh).Graph 11 shows the comparisonof energy sales by power stationsfor FY2007 and FY2008.Thermal EfficiencyGeneration Division’s overall netthermal efficiency was 37.9%, animprovement of 1.7% comparedto the target of 36.2%. Mostof the thermal plants exceededtheir targets. They were achievedmainly due to higher load factorof the plants. Graph 13 showsthe comparison between actualand targeted value of the thermalefficiency for FY2008. Over theyears the thermal efficiency hasimproved from as low as 34.1%in FY2004 to 37.9% in FY2008as indicated in Graph 14.GWh GWhGraph 11:Energy Unit Sales by Station, FY2007/200812,00010,008,0006,0004,0002,00002,1392,4177,4047,4265,5105,5462,1591,9241,9602,39794490011,00410,5622,4593,4201,5892,368805810CB PAKA PD PG GLGR PJ MNJG SGPK KNYR CAMFY’07FY’08Graph 12:Annual Trend of TNB Generation Sales FY2004-FY200842,00040,00038,00036,00034,00032,00039,29234,04638,17635,97337,770Major Projects30,000FY’04 FY’05 FY’06 FY’07 FY’08[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]52The Tuanku Ja’afar PowerStation Rehabilitation Phase 2(PD2) Project is on course fora combined cycle commercialoperation by end of 2008.The individual gas turbine hadsuccessfully reached their baseloads on 17 July and 22 July 2008respectively. The Steam TurbineGenerator Synchronisationmilestone was achieved on5 August 2008. As of August2008, the project is 98%completed. Once commissioned,it will add an additional installedcapacity of 750 MW to theexisting 750 MW PD1 plant.%Graph 13:Thermal Efficiency by Station555045403530252036.138.138.738.848.448.533.740.040.540.726.524.635.034.036.237.9CB PAKA PD PG GLGR PJ MNJG TNBFY’08 TargetFY’08 Actual

%Graph 14:Trending of TNB Thermal Efficiency FY2004-FY2007393837363534333234.1036.50A major rehabilitation projectin the Cameron Highland andBatang Padang HydroelectricSchemes is the Plant LifeExtension and AutomationProject which is scheduled forcompletion in early 2009. TheRinglet Reservoir has beensubstantially restored to itsoriginal holding capacity bydesilting. The rehabilitationproject is expected to extend theoperating life of the CameronHighlands Hydroelectric Schemeby another 30 years after havingbeen in operation for the last45 years.Two major hydroelectric projectsare now in the early stage ofprocurement. They are the HuluTerengganu Hydroelectric Project(planned capacity of 250 MW)and the Ulu Jelai HydroelectricProject (planned capacity of372 MW). These projects aretargeted for completion by 2013and 2014 respectively.The 300 MW coal-fired IPP Projectin Sabah, which was awarded toTNB in the last financial year,has to be relocated to a newsite. Approval from the StateGovernment is being sought tostart the project.36.2237.58TNB is seeking approval fromthe relevant authorities toredevelop the Prai PowerStation. If successful, a 220 MWOpen Cycle Gas Turbine (OCGT)power plant will be constructed.Quality ImprovementInitiatives37.89FY’04 FY’05 FY’06 FY’07 FY’08As a follow-up to the successof its implementation of the T7strategy, the Generation Divisionhas formulated the following fourinitiatives which embody its focusto the year 2010 in support ofTNB’s Service Excellence 10/10(SE10/10) programme:1. Optimisation of true lifecost2. Development of humancapital for global growth3. Positioning TNB REMACOfor overseas business4. Establish customer/stakeholdermanagement programme1. Optimisation of true life costThe Division intends to optimiseits power plants’ true life-cyclecost on a continual basis tominimise the long-term totalcost of ownership. Activitiesidentified include:a.b.c.Enhance Project Developmentand Control.Optimise Generation MarginalCost.• Install Generation PlantManagement System(GPMS) to analyse PlantPerformance in Real Timeand decide on the overalloperation regime.• Improve plants TestedAnnual Available Capacity(TAAC) and heat rate.• Reduce cost of spareparts.Improve plant reliability.• Implement Risk BasedInspection (RBI) andR e l i a b i l i t y C e n t r e dMaintenance (RCM).2. Development of humancapital for global growthThe Division has identified theavailability of highly competentworkforce and leaders as oneof its critical success factors. Inthis regard, several programmeshave been developed by theDivision’s HR:• Provide core leadership trainingto the relevant target groupsthrough identified coursesin Executive DevelopmentProgrammes, SuccessionManagement and advancedleadership courses.• Provide technical trainingas per staff job functionthrough mandatory courses,certification training andpublic courses.• Training for compliance withRegulators and EnvironmentalStandard.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]53

Operations Review – Generation Division[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]3. Positioning TNB REMACOTNB Repair and MaintenanceSdn. Bhd. (TNB REMACO), isa wholly owned subsidiary ofTNB. It provides repair andmaintenance services to TNBgroup core activities especiallyin power plants and distributiontransformer maintenance. It hasalso established a repair shopwith capability to refurbishvarious components of powerplants. It has strived vigorously tofulfil its functions efficiently andeffectively, building a nationalreputation of engineeringexcellence.TNB is positioning TNB REMACOto bring in extra revenue to TNBby actively marketing its servicesin power generation sector andenergy-related industries toexternal customers locally andabroad. To date, TNB REMACOhas succeeded in securing workswith several Independent PowerProducers including PetronasCUF in Kerteh and Gebeng forscheduled maintenance of gasturbine. TNB REMACO has alsoprovided repair and maintenanceservices to ASEAN countries.4. Establish customer/stakeholder managementprogrammeThe Division is fully committedto not only meeting butexceeding all customers andstakeholders expectations. In thisregard, it fully supports TNB’snewly established CorporateAffairs Division and its activitiesto enhance all stakeholderinteraction, especially with theregulators and customers.Implementation of ProcessStandardisation andImprovement (PSI)The Process Standardisationand Improvement (PSI) initiative,b a s e d o n I S O 9 0 0 1 : 2 0 0 0certification framework, hasb e e n i m p l e m e n t e d i n a l lpower stations, departmentsand subsidiaries under theGeneration Division since 2005.All the areas mentioned abovehave been certified by SIRIMUKAS to the ISO 9001:2000Quality Management System.The Division had also establishedCustomer Feedback ManagementSystem as part of its ISO 9001Quality Management Systemto manage customer feedbacksand complaints through surveysand other channels.Human Resource CapacityBuildingThe Generation Division hasdrawn up various trainingprogrammes to further enhancethe technical and businesscompetencies of its workforce soas to enable them to contributepositively towards achievingits business objectives whichamong others, also include thenew initiatives of expanding itsnon-tariff revenue and overseasbidding for new power plantprojects. It is also part of thestrategic initiative to achieveTNB’s SE10/10 target. Staffswere also being sent to qualitytraining programmes organisedby SIRIM, NIOSH and MPC tobe accredited as auditors andsystem implementers.T h e D i v i s i o n ’s i n - h o u s eexperts had been rigorouslyimplementing Reliability CentredM a i n t e n a n c e ( R C M ) a n dReliability Based Inspection (RBI)as part of the effort towards0% EUOR. In addition, TotalProductive Maintenance (TPM)is being introduced to enhancethe above effort.AwardsIn keeping with its track recordas an award-winning Division,the power stations under theGeneration Division listed belowhad won various accolades andawards during the period underreview.Malaysian Society ForOccupational SafetyAnd Health (MSOSH)Awards 2007GOLD CLASS 1• Cameron HighlandsHydroelectric Scheme• Sultan Ismail, Paka PowerStation• Chenderoh Power Station• Putrajaya Power Station• Tuanku Ja’afar, Port DicksonPower StationGOLD CLASS 2• Jambatan Connaught,Kelang Power Station• Sg. Perak HydroelectricScheme• Gelugor Power Station• Sultan Azlan Shah, ManjungPower StationSILVER• Sultan Mahmud, KenyirPower Station• Sultan Iskandar, PasirGudang Power StationBRONZE• Sultan Ismail Petra, PergauPower Station54

National Council forOccupational Safety andHealth Awards 2007GOLD• Chenderoh Power StationIn addition, the Division’s ICCteams from various stationshad garnered Gold Medalsand 3-star Gold Medals awardsat the Regional and NationalICC Convention organised bythe Malaysian ProductivityCorporation (MPC). Severalstations had also received 5Scertification over the sameperiod.Challenges and ProspectsMoving forward, the GenerationDivision is confident that itremains on track in its pursuit ofachieving World Class GenerationPerformance. It will leverage onits high technical experience toincrease technical competencieswhile at the same time activelyincreasing the reliability of meritorder plant. Plant reliabilitywill be improved to meet thegrowth in electricity demandin the country. In this regard,several key initiatives includingGeneration Plant ManagementSystem (GPMS) to analyse plantperformance in real time andTotal Productive Maintenance(TPM) are being implemented.TNB Generation will also ensurethat the Equivalent AvailabilityFactor (EAF) will maintain itsupward trend of consistentlyexceeding the target value.TNB REMACO, a wholly-ownedsubsidiary of TNB, which hasbeen providing repair andmaintenance services in powergeneration sector and energyrelatedservices in Malaysia andthe ASEAN region, will continueto widen its marketing initiativesto other foreign countries.I n t e r m s o f p r u d e n c e i nbudgetary management, theDivision has instituted poolingof high value spare parts andjust-in-time spare part purchaseto mitigate the high inventorylevel. Monthly monitoring andreview will continue to beconducted to ensure stringentbudget utilisation.The rising fuel cost driven byscarcity and price volatility willremain a major concern. TheDivision has been workingtowards reduction in fuelconsumption by improvingcurrent plant efficiency throughthe GPMS project. In themeantime, it is fully engaged inthe effort to optimise generationenergy mix of its power plantsby maximising hydro resourceswhile actively identifying newfuel types such as wind power,bio-fuel, LNG, geothermal, solarand others.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]55

Ir. Ab’llah bin Haji Mohd SallehVice PresidentTransmissionIn the present context, thebiggest challenge facing usin realtime operation of theNational Grid is one on safe,secure, reliable and optimaleconomic operations... moreso in meeting stakeholders’expectations.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]56Highlights of Achievements:Achieved 6.56 System Minutes thusmaintaining single digit System Minutes forthree (3) consecutive years.Reduced transmission system losses from2.32% to 2.17%.Maintains Zero Major Disturbance for three (3)consecutive years.Added 6,840 MVA transformer capacity and480 MVar capacitor banks into the systemthrough commissioning of 40 new projects.

Table 1:Transmission System Equipment Database as at31 August 2008Types of Lines500 kVOverhead Lines275 kVOverhead Lines132 kVOverhead LinesTotal OverheadLines Length275 kVUnderground Cable132 kVUnderground CableTotal UndergroundCable LengthLength/Capacity/No.638(circuit-km)7,565(circuit-km)10,609(circuit-km)18,812(circuit-km)51(circuit-km)689(circuit-km)740(circuit-km)500 kV Transformer 10,500 MVA275 kV Transformer 29,193 MVA132 kV Transformer 44,115 MVATotal Transformer Capacity83,808 MVA500 kV Substation 7275 kV Substation 69132 kV Substation 310Total Number ofTNB Substation386Divisional GoalsThe Transmission Division is entrusted to manage andoperate the 500 kV, 275 kV and 132 kV TransmissionGrid of Peninsular Malaysia, known as the National Grid.The National Grid consists of approximately 18,812circuit-km of overhead transmission lines, 740 circuit-kmof underground transmission cables and 386 substationswith transformation capacity of 83,808 MVA. Duringthe period under review, thirty-two (32) power stations,made up of TNB power stations and IndependentPower Producers (IPPs), are connected to the grid with19,723 MW installed capacity and a maximum electricitydemand of 14,007 MW recorded on 21 May 2008.(Please see Table 1)The National Grid is interconnected to Thailand’stransmission system operated by Electricity GeneratingAuthority of Thailand (EGAT) in the North via a HVDCinterconnection with a transmission capacity of ±300 MWand a 132 kV asynchronous HVAC overhead line withmaximum transmission capacity of 90 MW. In the South,the National Grid is connected to Singapore Power’stransmission system at Senoko via two 230 kV submarinecables with a transmission capacity of 450 MW.The National Grid allows electricity generated atvarious power stations to be transmitted to main intakesubstations located at load centers. The objective ofTransmission is towards “safe, reliable and economic”operation of the Electricity Supply. It plays an importantrole in ensuring reliable and sustainable electricity supplywhich is priced competitively as compared with otherutilities in the Region.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]57

Operations Review – Transmission DivisionMoving forward, the TransmissionDivision is committed to be theregion’s leading transmission entityand the center of ASEAN PowerGrid. All our efforts are gearedtowards achieving these goals.Operational Summary[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]The Transmission Division hadtaken initiatives to ensurethat transmission projectsare completed on time andwithin budget. These initiativesinclude improving procurementapproach and practices,project specifications and Billof Quantities (BQ) as well asensuring accurate project scopingtogether with a stringent QA/QC process.A total of forty (40) projectswere fully completed andcommissioned during the yearin review. Substation projectscontributed an additional 6,840MVA transformer capacity in thesystem. Out of these projects,eight (8) were capacitor bankinstallation that contributedto an additional 480 MVarcapacitive power into the 132 kVsystem leading to better voltageregulation and power quality.The 500 kV transmission linesthat connect the Jimah IPP CoalFired Power Station to Lenggengand Olak Lempit Substationswere completed in January2008. The Lenggeng 500/275 kVsubstation was commissioned inthe same month.In the Eastern region, theKandis 275/132 kV substationwas energised on 31 December2007. The project strengthensthe supply from the NationalGrid to the state of Kelantanand acts as a prime substationfor the development of theEastern Economic Corridor.The Division embarked on“Zero Tripping with Load Loss”initiative in early 2007 with anobjective to reduce the totalnumber of trippings with loadloss. A specific short termaction plan consisting of 25initiatives were implementedby all Regional maintenanceoffices. At the end of FinancialYear 2007/08, 10 initiatives werecompleted and helped contributein the reduction of the SystemMinutes with a 15% reduction oftransmission-initiated tripping ascompared to Financial Year 2007(Please see Graph 1).The upgrading of the NationalLoad Despatch Center (NLDC)project is in progress andscheduled for completion inearly 2009. The National Gridwill be equipped with a realtimestate-of-the-art SCADA/EMSsystem that helps facilitate inproviding a secure, safe andreliable operation.Operational ImprovementsKey Performance IndicatorsThe Transmission Divisionapplied the Balanced ScoreCardapproach in developing the KeyPerformance Indicators (KPIs).Technical performance wascaptured under the Customerand Internal Process perspectives.From the Customer perspective,the Division has achieved58

Graph 1:Transmission Tripping500464a positively lower index in its “Headline KPI”, theSystem Minutes. During the period under review, theSystem Minutes stand at 6.56 minutes compared with9.34 minutes last year. (Please see Graph 2) This isthe third consecutive year single-digit System Minuteswas recorded. Also for the third consecutive year theDivision has maintained Zero Major Disturbance.No450400350429392FY’06 FY’07 FY’08For the Internal Processes, System Availability ismaintained at 99.5% (Please see Graph 3).The division is committed to ensuring high standardsof supply reliability through improvement of equipmentavailability and fast response to transmission equipmenttripping. The response time is monitored through theSystem Average Response Index (SARI) which hasrecorded an improvement from 85 minutes last year to71 minutes during the period under review.Graph 2:System Minutesminutes252015105019FY’0017Graph 3:System Availabilitypercentage120100806040200201417.9313.677.329.34FY’01 FY’02 FY’03 FY’04 FY’05 FY’06 FY’07 FY’0899.1 98.7 99.4 99.5 99.5FY’04 FY’05 FY’06 FY’07 FY’086.56The 500 kV transmission lines in the Central Regionhave improved the system’s load-flow whilst installationof capacitor banks at specific substations has providedbetter voltage regulation. Overall transmission systemlosses have improved to 2.17% compared to 2.32%recorded last year.Implementation of Process StandardisationImprovement (PSI)The Transmission Division is fully committed inensuring Service Excellence through initiatives suchas Process Standardisation Improvement (PSI) and ISOcertification. In this regard, the Transmission Divisionhad maintained its MS ISO 9001:2000 certification forthe third consecutive year after having successfullycomplied with the surveillance audit by SIRIM QASInternational in April 2008.Quality Management and InitiativesDuring the period under review, 154 teams took part invarious WIT-ICC (Work Improvement Teams-Innovative& Creative Circle) projects at Departmental/Divisionallevel. Selected teams were then sent to participateat the Regional level Malaysian Productivity Center(MPC) Convention where 3 out of 3 teams won goldmedals. Two WIT-ICC teams, Sinar from Johor Bahruand Northern Star from Alor Star, won their placeto participate in the National Level MPC conventionand won 3-star Gold Medal. Sinar emerged to beamong the top 10 of the 155 participating teamsfrom the various companies in Malaysia. This is thehighest achievement for Transmission Division sincethe start of the WIT-ICC quality initiative. Some unitsin the Division are also awarded WIT-5S certification inAugust/September 2008.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]59

TEWAPERLISKGARBKTRCIMATo SDAOBKHMKhlong Ngae(HVDC link)300kV DC line 100kmKCMTUMKATPAUKPLSPLPSCPNGPULAULANGKAWIASTRKSTRPAUHMGONKSSMGCPDKEDAHPFTZJENGLMALRPJGKBRUPCORKDISPULAUPINANGINTNSPTNTKBUGRUNPWGRBDNGGNRESPIDAJYABSBUSJAY BWTNSKSPATJNBMJM BLINSPNG KLIMFLIMPRAIGLGR BTGH KKTLSSTLBBRU JURU PRIDINTLPRGSBLPSBTBN NTBLSKCLVDOR JJNGPBTRPERAKKNRGLPIABSIATMGRUPIATMRHPGAUKKRIKELANTANPPTHSJTHBRKTGBDKKTGUCHRGBSRISGRIBMRHGRIKCENDKMTG PKCBSSPTTPNGSBGSTPID PHCT KKSRAPMCGTWN KJWA NKANKLBGLMTMLMUTJMJG2008 National GridTransmission DivisionThermalHydroKVRTPAPNPKLNKMPR BGJHATWRHMLGSIKDKGJHTINTPower StationSBSR500 kVOver Head Line275 kVOver Head Line132 kVOver Head Line132 kV CableTMOHSMNKTASKGPRDSIHYSRVRSELANGORSYPSSKAIBTAIBDORBTRKKSKIPCTYBTNGKPNGBSTAKKPGRBDRRSIDBBTG GTNGGHLDKSGR BBDGATNIKULESRYACBDKPTAIKPARKULNAMPGBFLD GWAYBRGSPKLGKULW PULUBNTAKLIPGMSGJTUTBNTG KTRI MNIDJBRS MTKBKRAKTMIDSONGJBRS(T)BTRTN. SEMBILANPAHANGJNKAKRYGKAWAKNYRKBRGTERENGGANUMECCMRANMECCKCTLKTNNKULSBMSHCBPS HCOM SRDGKKWGSRDG(T)PMRNSPTGMGSTTPGRBCHG KBBRNLAIAMIDBTINPJAM PROISLTI HLNNNSCIKLPPMTINBAHAOLPT BKPYKPLHLGNGTJIDPBSRJMAHRTAU CMBGGMASPDPSSGMTBSPTLKUTTJPSSHELLKGDKTJGSTKMGMELAKAPTEKMTNH MFDR KLMKJSINTKIDMCOP(T)BKPG CAAHJMTHAKRH TKAKONST MCOPBKPGMPSSMCCA MMAUSBOK SMTIMUARYGPE KLGNTMASTAGS PGOH YPGNSABGPJML AHMJ PSLG YGPGTPCHPYSFSSLGBPHEBPHTTLBHSGADPSRIPRJAPNGTCUFGGBIDMTBEPCMTDGIDSTNGEMSBHTXDHTSSJOHORDGUNPGPPPAKAYPKAKTIHCUFKRPTSPWSMKMANECMLECSSGBNGAMCOTGLNJDSISMBUBIMKKTANPKANPONTTBINTKLGTJBUKLIDKLUGMKBLPNASRNGMBBTUSRGMJTGHMSNGKLAI KTGISLNGPUBBUTRMPSAKSELGGPTHTLTPPNWRSDAIPLTGMAJDTLSTPMJYDSRUTKPGCBRUPLNGPGGSPBJB PGPSSNKOTRMN[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]61

Dato’ Ir. Aishah bintiDato’ Haji Abdul RaufVice PresidentDistributionWe strive to improve thetechnical efficiency of thesystem network operationsand in resolving Power Qualityconcerns with the aim of providing high quality powersupply to relevant customers.Highlights of Achievements:Distribution Division’s main achievements throughout Financial Year 2007/2008 are:[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]62Completed 50% of the Remote Meter Reading (RMR) on schedule for 60,000 LV LPCs.Commissioned the first wind-solar hybrid Renewable Energy plant at Pulau Perhentian, Terengganuon 6 November 2007 in collaboration with TNB subsidiary, TNB Energy Services Sdn Bhd (TNB-ES).The project was jointly funded by TNB/Akaun Amanah Industri Bekalan Elektrik (AAIBE)/TerengganuState Government.Commissioned the Metro Southern Regional Control Centre (MSRCC) on 22 August 2008 andNorthern Eastern Regional Control Centre (NERCC) on 20 August 2007.Certification Of ISO 9001:2000 Surveillance Audit by SIRIM.Distribution Losses has been reduced from 9.29% to 8.69%.Certification of 5S Audit by MPC.Collection of back billing on theft of electricity (TOE) amounting to RM43.70 million for the periodfrom September 2007 until August 2008.Launching of E-Application for individual customer, contractors and developers on 28 August 2008by the Deputy Minister of Energy, Water and Communications.System Average Interruption Duration Index (SAIDI) has improved further to 78 minutes and AverageCollection Period (ACP) to 25 days.Customer Satisfaction Index (CSI) Score of 7.1, the first time TNB exceeds 7.0 the highest over thelast 10 years and a major improvement over the 6.8 figure achieved in the previous CSI survey.

To focus on its core businessactivities of distribution networkoperations and electricityretailing, Distribution, being thebiggest Division and face ofTNB to customers, fully supportsTNB mission and translates it asfollows:“To provide timelyand continuoussupply of electricityand related productsand services thatmeet customers’expectations, andeffectively act as keyagent for nationaldevelopments,whilst meetingour shareholders’expectations ”T h e D i s t r i b u t i o n N e t w o r kOperations component ofthe Division plans, designs,c o n s t r u c t s , o p e r a t e s a n dmaintains the system thatdelivers electricity supply to thecustomers. Distribution Divisionconnects all the 6.9 millioncustomers from the NationalGrid through a distributionsystem network at voltage levelsof 33 kV, 22 kV, 11 kV, 6.6 kVand 400/230 V. In FY2007/2008,Distribution Division completed3,515 number of supply andsystem improvement projectsat 11 kV with a capex ofapproximately RM2 billionand completed 49 projectsof 33/11 kV Distribution MainIntake Project with a capex ofapproximately RM526 million.To date, the DistributionDivision has 61,238 numberof substations supported by awide network of 191,714 km ofoverhead lines ranging from LowVoltage (

Operations Review – Distribution DivisionElectricity Distribution Network fromMain Intake (PMU/PPU) to customerpoints (From 33 kV down to 230 V)Electricity NetworkShared ValuesAs part of TNB’s organisation, our shared values are:• Customer First• Integrity• Business Excellence• Caring[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]64TransmissionNetworkDistributionSubstationPower GenerationTransmissionMain IntakeCustomerThe Network Operations component of theDivision plans, designs, constructs, operatesand maintains the system that delivers supplyof electricity to the customers. DistributionDivision connects all the 6.9 million customersfrom the National Grid through a distributionsystem web at voltage levels of 33 kV, 22 kV,11 kV, 6.6 kV and 400/230 V.Operational ImprovementsFor the initiative to improve Connect Supply onTime, TNB Distribution has developed a new projectmonitoring system called Distribution Project MonitoringSystem (DPMS) to assist our project personnel tomanage and improve their project implementation inmeeting customer needs.TNB has expanded the use of Remote Meter Reading(RMR) technology for Low Voltage Large PowerCustomers (LV-LPC). Up to 31 August 2008, thereare 37,000 LV-LPC out of 60,000 LV-LPC that hadbeen installed with RMR. (All High Voltage & MediumVoltage Large Power Customer (3,800) had beenequipped & monitored with RMR). RMR provides TNBand the customer better understanding of the loadprofile or usage pattern in order for the customer tomanage their energy consumption more efficiently.Metering Services Unit is implementing RMR for all ofTNB’s HV (high voltage), MV (medium voltage) and LV(low voltage) large power customers, the Unit will alsobe embarking on RF (radio frequency) meter readingpilot project for OPC (Ordinary Power Customer) inKlang Valley.TNB has also embarked on plans to improve thestrength and competency of the Special EngagementAgainst Losses (SEAL) team. This includes developingnew Theft of Electricity (TOE) software in automatingthe pre-raid analysis for higher hit-rate and productivityand developing TOE Module in identifying and curbingtheft. The enhanced module will be based on thelatest TOE techniques and effective approaches.Another means of information gathering/sharing withcustomers is through the Power Quality (PQ) surveyconducted for all LPCs. This enables TNB to assess theLPC’s knowledge on PQ, sensitive loads within theirpremises and requirements for PQ solutions. Apart fromthat, TNB has also implemented several new initiativessuch as the PQ Monitoring System which monitors PQof the supply system, outsourcing PQ services to TNBEnergy Services Sdn Bhd (TNB-ES) to assist PRIMEcustomers who encounter PQ problems and the PQ

D i s t r i b u t i o n D i v i s i o n h a sembarked on 5S programmeas part of its continuous qualityinitiatives and has achieved somemajor achievements throughoutthe states. The DistributionDivision HQ received its 5Scertification on 24 July 2008 andall states offices received their5S certification by August 2008.Summary Of OperationsCommercial Package whichassist LPCs looking for financingto mitigate PQ problems at theirfactory site.Besides that, PQ Seminars arebeing organised to continuouslyupdate our customers on thelatest development on PQ.We have also launched a PQGuidebook which is distributedto PRIME Customers for theirreference. PQ training forall LPCs, consultants andcontractors associations suchas FMM, ACEM & TEEAM isalso being planned. PQMS (PQMonitoring System) meanwhileidentify real time power qualityincidents on the system andthe information are accessibleby Distribution nationwide toallow for remedial action as andwhen it is required. All theseinitiatives to improve the qualityof supply are in line with thegovernment agencies throughMIDA/MITI to attract more hightech industries to Malaysia wherePQ is a critical issue to some ofthe manufacturing processes.Quality Management AndInitiativesAnugerah Kualiti Presiden (AKP)The AKP assessment is conductedonce every two years to inculcatea ”Business Excellence” culturethroughout the Division. The AKPassessment, is modeled after theMalcolm Baldridge framework toraise our quality standards andbusiness performance. The Divisionhas also initiated a ”DistributionLeague Table” Award to promoteinternal benchmarking amongst its13 state operations.In the effort to improve employees’performance, the Division has alsoencouraged Work ImprovementTeam – Innovative Creative Circle(WIT-ICC) – programmes duringthe 2007/2008 Financial Year. Thisincludes eight (8) sessions of WIT-ICC Management Presentationswhich were organised at statelevel in the Division; one (1) WIT-ICC session for ManagementPresentations was organised atDivisional level during which27 WIT-ICC with high potentialfor standardisation projects waspresented. By the end of thefinancial year, four (4) projectsfrom last year’s ManagementPresentations were approved forstandardisation throughout TNB.Ordinary Power Customers(OPCs) constitute the majority ofour almost 6.9 million customerswhich are mainly Malaysianhouseholds. Large PowerCustomers (LPCs), while small innumber, account for almost 80%of the total sales of electricity inthe country. LPCs are also furthercategorised into the commercialand industrial categories, withthe industrial customers beingfurther classified into differentindustries. The direct undertakingfor the customers’ needs andexpectations fall within thejurisdiction of DistributionDivision.Delighting customers is a keypriority in TNB. Hence it isimperative for TNB to identifythese needs and expectationsthrough a structured and focuseddata and information gatheringexercise. Feedbacks fromcustomers are obtained througha combination of a structuredCustomer Satisfaction Index(CSI) survey, feedback formsavailable at TNB retail outlets– the Kedai Tenaga and surveydone through TNB Careline15454 (Call ManagementCentre). CSI survey has beenconducted for the past ten yearsby an international independentcompany to provide feedbackon TNB’s service level and alsoareas for improvement.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]65

Operations Review – Distribution DivisionIn its preliminary stage ofimplementation, the programmehas identified the following 8segments of corporate accounts:• Banks/Financial Institutions• Business Complexes• Utilities• Fast Food Chains• Telecommunications• Hotels• Transports• Petroleum[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]At intervals, the Distributionmanagement meets up withindustry leaders and representativesfrom both Government agencieslike MITI and MIDA and privatesectors such as FOMCA, FMMand REHDA. These dialogues andmeetings are high-level discussionsthat also include the participationof the Company’s President/CEO in providing a platform tounderstand the customer needs ingreater depth.Seminars and dialogues withleaders and representativesof industries, businesses andGovernment Agencies, alsoform part of the whole processin managing customer queries.By managing the three differentchannels of customer queriesvia in-house developed softwarecalled Sistem MaklumbalasPelanggan (SMP), we are able totrack, escalate, monitor reportsand evaluate the feedbacks.Integrating customer informationand queries on a single platformis a step towards achieving acomprehensive CustomerRelationship Management (CRM)programme.To ensure complaints andcomments are captured, TNBhas developed a customerrepository database for all its 6.9million customers. It allows TNBto view its customer feedback ona single platform. The customerrepository is developed toenhance customers’ experiencewhen dealing with TNB.Additionally, PRIME customers,i.e. a list of TNB top 1,000LPCs are managed through aspecial programme called PRIMEManagement Programme.Through the Prime ManagementProgramme, TNB executivesroutinely touch base with theLPCs by personal visits to listento our valued customers’ opinionand providing solutions to theirconcerns.Care ProgrammeAs a customer oriented division,the Distribution Division alwaysstrives to ensure that TNBreflects an entity that has greatconcern on customer serviceand customers’ satisfaction.Thus, on 1 December 2007,TNB has embarked on a specialprogramme known as CAREProgramme or Corporate AccountRelationship EnhancementProgramme. The programmeaims at creating a closer twowayrelationship between TNBand corporate accounts. All thecorporate accounts have beenassigned a CARE Manager whoare responsible as the contactpersons in creating continuousinteraction to understand andsatisfy their needs.Distribution Division continuouslyimprove its products and servicesand some of the programmesand activities undertaken overrecent months include enhancedawareness programme on PowerQuality, street lighting, renewableenergy and energy efficiency.Apart from the new integratedsoftware developed to integratethe processes between the callcentres, field service and controlcentre into a seamless platform,TNB has also introduced the useof Mobile Field Force Automation(MFFA), piloted in Shah Alam inJanuary 2008 and now rolled outfor entire Selangor and WilayahPersekutuan Kuala Lumpur.It allows instant feedback onwhat is happening on site tobe informed to the customersvia TNB Careline Call Centrethus improving the efficiency inproviding updated informationon restoration of supply. Wewould be further embarking toinclude Johor and Penang byend 2008.CMC services have also beenexperiencing another wave ofenhancement as Short MessageService (SMS) are now addedinto Distribution’s TNB Careline15454. The SMS service nowallows subscribers of Celcom,Maxis and Digi to report onelectricity and streetlightsbreakdown via SMS to 15454.The centralised Call Centre isalso equipped with Interactive66

Voice Recorder (IVR) and IPTelephony and CTI (integrationof computer and the telephone)with the latest state-of-the-art technology in managingcustomer enquiry on electricitysupply.A FAQ booklet has also beendeveloped to assist frontlinersand counter staff in respondingto customer enquiries in a properand consistent manner. TNBhas also developed a customerinformation package for its newcustomers to brief them aboutTNB’s services and what to do ifthey require assistance.TNB is always striving toprovide the highest qualityservice to its customers. Assuch, Kedai Tenaga centres areequipped with a new QMaticqueue management system tofacilitate better tracking andmonitoring of counter services.40 Kedai Tenaga have beeninstalled with the QMatic systemwhich optimises customer flow,improves customer serviceand creates a more relaxedatmosphere for both customersand staff. The system alsoallows for better tracking ofperformance such as customerwaiting time and transactiontime for each counter service.For FY2008/2009, the QMaticsystem will be expanded toother services/outlets. Frontliners were also put throughcustomer orientation trainingand a Smile Campaign launchedfor Kedai Tenaga.Another initiative to enhance itsservices, TNB embarks on the 3Phase promotional scheme from1 June 2007 until 31 May 2008for all domestic and commercialcustomers. In the promotionalscheme, customers were given50% discount on connectioncharges. The objective of thepromotional scheme was toencourage single phase usersof electricity to upgrade theirsupply to a 3 Phase supply, tofacilitate the additional electricalload in the home as well as toensure better reliability of supply.Materials availability and qualityis given high importance to TNB’sinfrastructure development. Thishas been identified as a keyinitiative to boost TNB’s servicedelivery. TNB is committed inthis effort to ensure on-timecompletion of all supply projectsand longer lifespan of streetlighting through better qualityproducts.The highest TNB managementcouncil Executive ManagementCommittee spearheaded by thePresident/CEO meets regularlyto ensure participation andcommitment from all Divisionsand support services to ourcustomers. Furthermore, atDistribution Division, departmentheads and executives organiser e g u l a r m e e t i n g s , c r o s sfunctional initiatives, continuousa n d c l o s e m o n i t o r i n g o fprojects and implement servicelevel agreements betweendepartments to obtain regularfeedback on pertinent issues.Serious attention is being givento minimise product defectsand improve supply deliveryperformance through closemonitoring of manufacturers andsuppliers.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]67

Operations Review – Distribution DivisionIn support of GovernmentRenewable Energy (RE)ProgrammeThe Malaysian Governmentis striving to intensify thedevelopment of RenewableEnergy (RE) under the NinthMalaysia Plan. In supportingthe Government’s effort, TNBcontinues its commitment toachieve the Government’s targetof 350 MW electricity generationfrom RE by 2010. TNB is offeringa new purchase price of electricitygenerated from biomass-basedRE plant of up to 21 sen/kWh(previously 14 to 17 sen/kWh,then up to 19 sen/kWh). Apartfrom this support, TNB is alsoactively involved in formalising REsupport mechanism which includessimplifying Renewable EnergyPower Purchase Agreement(REPPA) for very small RE plantsand also facilitating entrepreneursin developing RE projects.The signing of the additionalthree (3) new REPPAs in theFY2007/2008 indicates TNB’scontinuous support for theGovernment SREP Programme(Small Renewable Energy PowerProgramme). This brings thetotal number of REPPAs signedby TNB in Peninsular Malaysiasince the launching of theSREP Programme to 11, with acombined capacity of 54.5 MW.Under this Financial Year, TNBhas carried out more than tenpreliminary technical studiesto encourage and ensure thatsmall renewable energy powerplant can be connected to TNBdistribution network.TNB has also signed aMemorandum of Understandingwith Felda Palm IndustriesSdn Bhd and Japan’s J-Powerto develop a 10 MW biomasspower plant in Jengka, Pahangwhich utilises palm oil waste asfuel for the power generation.TNB will continuously provideguidance and assistance to REdevelopers to ensure the successof renewable energy power plantconnection to TNB distributionnetwork.The solar hybrid projectsconstructed by TNB consist ofa technology that generatese l e c t r i c i t y t h r o u g h t h ecombination of solar energy,diesel engine and battery.Functioning as a stand-alone,the system is able to providecontinuous electricity supply 24hours a day. The system’s abilityto be remotely monitored makesit highly suitable for installation atremote areas and islands whichare far from the mainland.Funded by Akaun AmanahIndustri Bekalan Elektrik (AAIBE),these projects are monitored andcoordinated by the Ministry ofRural and Regional Development.To date, among the islandsin Malaysia that has benefitedfrom the implementation of suchtechnology include Pulau Sibu,Pulau Aur, Pulau Besar, PulauTinggi and Pulau Pemanggil offthe coastal of Mersing, Johor,Pulau Kapas and Pulau Perhentianin Terengganu. A commercial solarhybrid project to cater for chaletsin Pulau Kapas was done throughthe SEDC of Terengganu whilePulau Perhentian solar hybridproject was jointly funded bythe state of Terengganu besidesAAIBE & TNB.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]68Rural Electrification ProjectsIn the past TNB has activelyp a r t i c i p a t e d i n t h e R u r a lElectrification project promotedby the Government. To date TNBhas reached 99.9% electrificationin populated areas as comparedto about 30% in 1957.During FY2007/2008, TNBimplemented 55 AAIBE-fundedRural Electrification Projectscosting RM39.6 million, whichprovides electricity supply to1,619 households in rural areasthroughout the country. As partof TNB’s social obligation, TNB

continues to carry out operations and maintenance activities for the customers located in remote rural areas,including those accessible only via river or sea routes. TNB is also responsible for the maintenance andoperations of 12 and 24-hour diesel stations in rural areas as well as offshore islands. TNB has also carriedout, among others, the installation of 25,000 streetlights in rural areas under the “Lampu Jalan Kampung”project under the Ministry of Rural and Regional Development programme.The following is the list of solar hybrid projects that have been completed by TNB for the last financialyear (2007/2008).No. Projects Cost1 Pos Pulat, Gua Musang RM1,769,484.462 Kg. Orang Asli Pos Aring 5 RM1,580,384.463 Kg. Org Asli Pos Blau, Gua Musang RM2,003,819.794 Kg. Org Asli Ganuh, Rompin RM1,516,175.545 Kg. Orang Asli Sg Peroh, Kluang RM1,282,7266 Kg. Punan, Mersing RM2,691,3007 Kg. Peta, Mersing RM2,126,314.008 Kg. Orang Asli Tanah Abang, Mersing RM2,079,247.009 Kg. Orang Asli Tg Tuan, Mersing RM1,596,723.81Tariff Rebalancing – LookingBeyond ProfitsTNB tariff is designed tom i n i m i s e t h e i m p a c t o ncustomers, especially the lowerincome group. Therefore duringlast year’s tariff revision, ithas resulted in no increase inelectricity bills for consumerswhose monthly consumption isless than 200 kWh (or RM43.60).This group comprises threemillion households or 59 percentof total Domestic Customers.The Special Industry Tariff ismaintained for those industrialcustomers who qualify. The 10percent discount for governmentschools, government institutionsof higher learning, welfarehomes and places of worship isalso retained.Customers registered underthe categories of universities,government schools, welfarehomes and houses of worshipalso enjoy a 10 percent discounton their monthly bills. In line withthe Government’s developmentobjective, TNB introduced theAgriculture Tariff to promotethe agro-based sector. This tariffcovers key activities such aspoultry, animal rearing, vegetableand fruit farming, fish rearingand paddy farming.In the financial year 2007/2008,T N B s p e n t a p p ro x i m a t e l yRM348 million (as at July 2008)on Special Industrial Tariffs,RM188 million on life line tariffs,RM86 million for providingdiscounted street lighting andRM38 million on discounts tothe special groups (includingwelfare homes, place of worshipand government schools/higherinstitution of learning).[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]69

Dato’ Izzaddin IdrisChief Financial Officer/Senior Vice President (Group Finance)FinanceEmphasis on playingits role as a “businessstrategist” with thevision to achieve“financial excellence”by optimising financialprocesses, managingoperating costs,driving businessperformance andmitigating risk.The Group Finance Division as a business partner to thecore divisions and subsidiary companies of TNB extendsa comprehensive range of services to support and ensurethe smooth operations of the enterprise. These cover theprimary accounting and finance functions as well as riskmanagement and business development responsibilitiesall of which are to be aligned with the overall businessstrategies and enhancing shareholder value.During the year under review, the Division had also focusedon several key initiatives identified last year which includedthe following:-[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]70Reviewing and reformulation of key policies namelythe Investment Policy and Strategy, Investor RelationsPolicy and Treasury Policy as well as several othergeneral financial policies and proceduresEnhancing the resource capability of the BusinessDevelopment in terms of headcount and skillsInitiation of the process to implement the Share Buy-Back programmeCommencement of the conversion process of certaindebt obligations into Gulf Cooperation Council (GCC)Syariah compliant financing instrumentsInvestigating and evaluating the mechanics of coalhedging tools and activities to complement the coalsupply management activities of TNB Fuel ServicesSdn Bhd

SUMMARY OF OPERATIONSFinancial Performance – FY2008 vs FY2007By all standards, FY2007 was an exceptional year with several notable achievements with record profitsof RM4.1 billion, much improved technical performance, recoveries and value creation initiatives. Armedwith these successes as well as additional key drivers in place for a better performance, TNB prepareditself for the challenges it had anticipated in FY2008, the main element being the expected higher costof generation.FY2008 surpassed all expectations by any measure as the higher coal prices and IPP payments farexceeded operational cost savings and demand growth recorded of 6.1%. While total Group revenueincreased by 10.4%, operating expenses increased by 22.5% resulting in EBITDA margin being squeezeddown to 29.5% compared to 37.6% reported in FY2007. The Group’s performance for the financial yearunder review was also affected by the rapid weakening of the Ringgit against both the US Dollar andJapanese Yen in the second half of the financial year.The financial performance of the Group over the years is best illustrated by the following charts.Key Financial MetricsGearing80 807ROA ROA770 7068.668.664.964.9666.36.3%60 6050 50%58.158.149.949.946.946.9%54%544.64.640 403.33.330 30332.62.62.22.220 202210 1011%0 00 0FY’04 FY’04 FY’05 FY’05 FY’06 FY’06 FY’07 FY’07 FY’08 FY’08FY’04 FY’04 FY’05 FY’05 FY’06 FY’06 FY’07 FY’07 FY’08 FY’08Interest CoverageBasic Basic EPS EPS8 87 76 65 54%43 32 21 10 04.44.43.83.84.74.76.76.76.96.9sen100 10080 8060 60sen40 4020 200 0FY’04 FY’04 FY’05 FY’05 FY’06 FY’06 FY’07 FY’07 FY’08 FY’08 FY’04 FY’04 FY’05 FY’05 FY’06 FY’06 FY’07 FY’07 FY’08 FY’0826.126.130.230.252.552.594.994.959.959.9Notes:-1. Gearing is calculated astotal debt as a percentageof total capital2. ROA is determinedas Group net profit(before forex and FRS119 provisions) as apercentage of Group totalassets3. Interest coveragerepresents EBITDA overinterest expense4. Basic EPS is computedby taking total profitattributable to equityholders divided by theweighted average numberof ordinary shares issued[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]71

Operations Review – Group Finance DivisionKey Initiatives in FY2008With continuing regulatoryscrutiny, exceptionally difficultmarket conditions, and ongoingshareholders’ expectations,the Group Finance Divisionhas placed more emphasis onplaying its role as a “businessstrategist” with the vision toachieve “financial excellence” byoptimising financial processes,managing operational costs,driving business performanceand mitigating risk.Whilst several key drivers can beordinarily considered “businessas usual”, the measures andtargets that had been set wereaggressive so as to ensurecontinuous improvement.Driving Business PerformanceG r o u p F i n a n c e D i v i s i o ncontinued to hone its skills andapplied the tools developed andimplemented to monitor theperformance of the business.TNB’s 20-year cashflow-drivenDynamic Strategic PlanningModel developed in 2005 wasfurther enhanced with additionalfeatures allowing complex tariffsimulation, M&A analytics andcash requirement scenarioplanning. The full implementationand rollout of the DivisionalAccounts now enables the corebusiness units (including eachpower station (for the GenerationDivision) and State (for theDistribution Division)) to measureinternal efficiencies, monitorperformance as well as identifyareas for improvement. Traditionalbudget planning activities havealso been fine tuned withautomated budgetary controlmechanism to instill disciplinewhilst time-control features willbe introduced soon to monitorprogress. This is also coupledwith the Investment EvaluationFramework for Budget Planningmethodology.The ability for business unitsto benchmark against bestpractices and targets is a steptowards improving efficiencies &productivity in order to realise thevision of becoming one of theleading corporations in the energyand related businesses globally.Advances in IT, in particularinternet technology, has rapidlyenabled business operations tobe conducted over the internetand become new platform forentities to interact. At TNB,an earlier initiative to adoptMaybank2e.net has been nowextended to third parties withnon Maybank accounts. It isthe intention to also migrate allpayments and transactions onolder e-platforms to Maybank2e.net with the aim of maintainingonly one electronic paymentprocessing system.During the year under review, anasset valuation was conducted onthe Group’s key operating assetsto ensure proper and adequateinsurance coverage. Whilst theexercise resulted in an increasein asset valuation for assets tobe insured, by 87% for TNBand 79% for TNB JanamanjungSdn. Bhd., the total insurancepremium only increased by15% as the rates for premiumwere reduced. The reduction ininsurance rates was achievedas a result of prudent insurancerenewal processes, lower lossratio for most of the policiesand improved risk managementthrough creating awareness andsharing of information/knowledgeon risk management. Subsequentto this exercise, similar assetvaluations were carried out formajor subsidiaries.Debt Liability & CapitalManagementThe active management of thedebts and obligations continuedto provide the foundation ofTNB’s financial strength withthe year-end ratios at arguably,a much improved position astabulated below.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]72Financial RatiosFinancial Year2003 2004 2005 2006 2007 2008Self-Financing Ratio 40:60 25:75 51:49 68:32 118:-18 76:24Effective Weighted AverageCost of Funds*4.9% 5.3% 5.4% 5.9% 5.9% 5.5%Currency Mix (RM:Foreign) 49:51 51:49 50:50 52:48 # 55:45 # 53:47 #Debt Service Cover Ratio 2.0x 1.6x 1.4x 1.8x 2.5x 2.3xDebt-Equity (Net of Cash) Ratio 2.11 1.94 1.69 1.19 0.78 0.68* Reflective of RM equivalent of currency exposure# In accordance with FRS 132

The Division actively monitored the exchange rates, bond prices andfunding costs during the year and notwithstanding that there was nonew funds raised, TNB applied its cash balances to prepay severalforeign currency loans denominated in Swiss Francs and Euro in Juneand September 2008 respectively.As at 31 August 2008, the debt maturity profile of TNB is asdepicted below:-Debt Maturity Profile as at 31 August 20084,0003,5003,0002,500RMUSD Yen OthersClearly, the debts maturing inFY09 and FY10 will be met fromthe current cash balance as wellas from operations although thepossibility of refinancing thesewith new borrowings, subject toterms. The refinancing risk posedin FY11 with debts of RM3.7billion maturing will require TNBto consider alternative strategiessuch as prepayment and/or bondbuyback. This will also addressthe perennial feature of TNB’sloans where foreign currencydebt is in excess of 25% of thetotal debt portfolio, clearly amismatch of the predominantlyRinggit-denominated revenuebase.RM million2,0001,5001,0005000It is also TNB’s intention thatany new funding raised will bestructured to be in compliancewith GCC Syariah principles soas to allow TNB shares to berecognised as an Islamic stockhence diversifying the investorbase available.-500FY2009FY2010FY2011FY2012FY2013FY2014FY2015FY2016FY2017FY2018FY2019FY2020FY2021FY2022FY2023FY2024FY2025FY2026>2026Underlying Long Term Loans & DerivativesSubsequent to the year-end, on10 October 2008, TNB enteredinto an interest rate swap forUSD384.7 million of its floatingrate loans to a fixed rate at3.76%. With the completion ofthe transaction, TNB’s fixed rateloan position stands at 98.8%of the total debt portfolio whilstthe average cost of debt rosemarginally from 5.49% to 5.54%.The Board of Directors of TNBhad also approved for TNB toundertake a share buy-back of upto ten percent (10%) of the issuedand paid up share capital. Thisproposal will be subject to thestipulated Bursa Securities listingrequirements and provisions ofthe Companies Act as well asSecurities Commission Act. TNBplans to seek its shareholders’approval for the proposed sharebuy-back during the extraordinarygeneral meeting scheduledto coincide with the AGM inDecember 2008.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]73

Operations Review – Group Finance Division[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]Business StrategyDuring the year, 3 key policieswere reviewed and reformulatedto be aligned with TNB’s 20-YearStrategic Plan and for improvedinternal controls. The TreasuryPolicy was updated with recentdevelopments in electronicbanking functions, new policiesfor counterparties and enhancedwith better controls whilst theInvestor Relations Policy wasdeveloped to identify specificowners, a structured approach inthe communications strategy, aswell as documenting the need toensure a transparent, timely andfair dissemination of information/news to the investing community,research analysts, rating agenciesand the public at large.Of significance is the newInvestment Policy & Strategywhich sets out the broadprinciples under which BusinessDevelopment will identify, exploreand support new businessopportunities both locally andabroad. The foundation of thepolicy and strategy is the 20-Year Strategic Plan but alwaysdependent on the financialposition of TNB. In brief:-• TNB as a “technical investor”will pursue “Greenfield” and“Brownfield” generationprojects which meets theinvestment threshold of theweighted average cost ofcapital plus the appropriaterisk premium for risks suchas sovereign, exchange rateand development.• Investments shall be limitedto between 10%-25% ofthe equity share capitalwith flexibility if funding isstructured as non-recourseand/or credible counterpartiesas partners but alwayssubject to the cashflowposition.• TNB will focus on countrieswithin ASEAN, the MiddleE a s t , a n d t h e I n d i a nsubcontinent with limitationsdriven by country ratings.• Emphasis is also given to theoperations and maintenanceaspect of each investmentopportunity to grow thebusiness of TNB Repair &Maintenance Sdn Bhd.During the year, 2 M&Aopportunities were evaluatedand TNB was pre-qualified forseveral greenfield projects in theGulf Cooperation Council region.Whilst the M&A opportunitieswould have provided TNB withan immediate internationalfootprint with the capability tofurther expand existing capacityas well as a window into a“pooling” industry in a developedmarket, the valuations wouldhave posed a strain on TNB’sfuture cashflow. TNB has alsoagreed to partner with the SaudiBinladin Group to bid for the1700MW and 150,000 m3/dayindependent water and powerplant project in the industrialcity of Yanbu in the Kingdom ofSaudi Arabia. Notwithstandingthe current challenges in theEPC and financial markets, thebid is expected to close in mid-December 2008.On the existing Shuaibah IIIwater desalination and powerproject, the overall constructioni s p ro g re s s i n g w e l l w i t hcommercial operations targetedfor mid-2009.Proactive Investor RelationsInvestor Relations role in TNBis a strategic managementtool, providing a platform forregular communications betweenthe Group and the financialcommunity which includes itscurrent and potential investorsas well as research analysts. Themajor focus rests in the consistentcommunication and disseminationof accurate, reliable and timelyinformation to investors andanalysts which portrays the Group’sperformance and prospects. TheIR communication channel is alsoa means of acquiring feedbackfrom the investment communitywhich is then channeled backto Management and Board ofDirectors.74

As always, TNB invites thefinancial community and mediato attend the announcement ofits quarterly financial results. Onaverage a total of 87 partiesattended or “conferenced in” forthese quarterly presentations.As in previous years, TNBparticipated in several investorconferences and meetingsarranged by leading investmentbanks to provide an update onthe company’s performance, andaddress issues and concernsraised by fund managers andinvestors alike. Aside fromthe conferences and meetingsattended outside of TNBpremises, Management and IRfrequently have fund managersand analysts requesting formeetings at TNB offices.During the year under review,TNB had approximately 120meetings (excluding Quarterlyannouncement of financialresults) with analysts and fundmanagers at TNB.Outlook & The WayForward – FY2009TNB’s ChallengesThe Finance Division will continueon its journey “towards financialexcellence.” Given that theeconomic and financial climatein the near term is expected toremain volatile and that demandgrowth will be lower than theyear before, the ability to drivedown costs remains a criticalfactor for success.Under this scenario, the role ofGroup Finance for the ending 31August 2009 will bring renewedfocus to the important aspectsof drivers of revenue and costas well as drivers to creatingvalue. Key challenges for FY2009include the following:-• The need to further develops t r a t e g i c p a r t n e r s h i p swith EPC contractors, keyconsultants and businesspartners to enable TNBcompete better under thepresent environment tosucceed in developing newbusinesses internationally• Higher fuel prices will havea knock-on effect on cost ofservices and materials relatedto asset development,asset management andmaintenance• The ability to raise funds atcompetitive rates in view ofthe global financial turmoilaffecting credit availabilityand the expectation ofan economic slowdownworldwide• To implement a transparentand objective electricitypricing mechanism for endcustomersincorporatinga fuel cost pass throughmechanism and rectify theimbalance in the “inputoutput”value chain of thebusiness• Volatility in foreign exchangemarkets vis-à-vis the RMwill impact TNB’s foreigncurrency debt exposure andcoal purchases[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]75

Dato’ Abdul Razak bin Abdul MajidSenior Vice PresidentCorporateAffairsDivisional GoalsThe Corporate Affairs Division was established in January 2008, following a resolution on the need toreorganise the corporate functions of TNB. It consists of five (5) departments, namely:-1.2.3.4.5.Company Secretary;Yayasan Tenaga Nasional;Regulatory and Relations Management Department;Legal Services Department; andCorporate Communications DepartmentDuring the year under review, the Division has continuously assisted the TNB core businesses by providingcorporate secretarial and corporate advisory services; legal and litigation management, regulatory andrelations management, and valuable communications with internal and external stakeholders. In addition,the Division continues to provide educational and welfare aid through Yayasan Tenaga Nasional (YTN).The Division’s goal is to ensure attainment and compliance with best practices of corporate governancethrough fostering of an open and collegial approach on business and corporate affairs and towardsenhancing relationships with TNB stakeholders, government agencies, non-governmental organisationsand customers at large.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]76

Operational Summaryi.Regulatory and RelationsManagement DepartmentThe Department focuses ondeveloping and enhancingclose relationships andlinkages between TNB andthe Regulators, GovernmentAgencies, individuals,organisations and associationsthat may exercise influenceover matters relating to TNBin particular and the powerindustry in general.ii. Legal Services DepartmentThe Department providesCorporate legal & litigationadvisory on operationalmatters, as well as ensuringcompliance with Acts ofParliament, especially theElectricity Supply Act 1990,relevant rules, regulationsand by-laws, as well as theTerms and Conditions ofLicencing for TNB and itssubsidiaries.v. Yayasan Tenaga Nasional(YTN)Yayasan Tenaga Nasional(YTN), established as a trustbody for TNB, ensures thatthe company’s corporatesocial responsibility initiativesand efforts are continuouslymet through scholarships andloans to deserving students.to policy making and otherfiduciary duties to the TNBGroup within the ambit ofcompany laws, securitieslaw, Securities Commissionguidelines and Bursa Malaysialisting requirements. Its otherkey function is to assist theBoard of Directors in adoptingc o r p o r a t e g o v e r n a n c eprinciples and practicesas essential elements toCompany performance andintegrity. The Office is alsoresponsible for administrationmatters related to registrationof public, as well as eligibleemployee shareholders.• Revamping of “Livewire”,TNB’s intranet system, foreasier accessibility andinformation sharing in TNB.• Launching of a new TNB-wideinformation sharing channelcalled “TNB NewsTube” whichemulates features similar tocorporate-wide broadcast.Human ResourceManagementRecognising that the workforceis one of its most valuableassets in driving the success ofits operational objectives, theDivision placed great emphasisin building the capacity of itshuman resource through trainingprogrammes to suit the diverserequirements of the variousprofessional disciplines withinthe Division.Customer Focus andStakeholders Managementiii. Corporate CommunicationsDepartmentT h e D e p a r t m e n t i sresponsible for managingstakeholders’ perceptionsthrough effective internal andexternal communications inmedia relations, communitya f f a i r s a n d c o r p o r a t eresponsibility, corporatebranding, events and sportsmanagement, publications,w e b s i t e , a n d i n t e r n a lrelations. In addition, theDepartment is responsible forGaleri Tenaga, which housesthe much acclaimed andhighly valued TNB corporateart collection.iv. Company Secretary ServicesThe office of the CompanySecretary is responsible forcompliance with Statutoryand Regulatory requirementsand the effective functioningof the Board with respectOperational ImprovementsIn the year under review, theCorporate Affairs Division hasimplemented various initiativesto continuously enhance theefficiency and effectiveness ofits programmed activities. Theseinclude:• Development of a LegalManagement System forlitigation management andmonitoring.• Installation of an internalCorporate CommunicationsInformation System (CCIS) fordocumentation and sharingof information on calendar ofcorporate activities, media newsclippings, document library andassignment of tasks.• Operationalisation of a LoanMonitoring System to keeptrack of loan repayments bystudents.The Division is fully committedto the Company’s SE 10/10Service Excellence initiative.Various systems, activities andprogrammes were undertakento raise the proficiency levelsconsistent with the CorporateObjectives on service excellence.These include the setting up ofthe Pusat Aduan Korporat andCorporate CommunicationsInformation System (CCIS),analyses of the Customer SurveyIndex (CSI) and EmployeeSurvey Index (ESI) as yardsticksand feedback to improve oncustomer satisfaction, organisingCommunity Leader OutreachProgrammes (CLOP), CorporateBranding initiatives, creating TNBtalks – an internet-based sourceof reference on TNB issues for theMalaysian media, and facilitatingTNB Media Workshops, as wellas hosting regular sessions withstakeholders.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]77

Dato’ Kamaruzzaman bin JusohVice PresidentGroupHumanResourceNowadays, there is an increasing pressure for HR todemonstrate value to businesses and HR to contribute tothe overall performance of the organisation. Virtually, thisdictates HR taking the role of partnering the business/line management. Inevitably, this translate to giving focusto strategic people issues such as nurturing the leadershippipeline, building high performance workforce etc, asopposed to concentrating resources to the traditionaladministrative and transactional HR service provision.Highlights of Achievements:[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]78Succession/Talent ManagementCurrent Talent pool strength stands at 288. There are 254 Key Leadership Positions (KLPs) andpotential successors have been nominated for 85% of these positions.Talent Exchange ProgrammeThe inaugural GLC Talent Exchange initiative amongst GLCs was launched in June 2008. Two toptalents (selected from the talent pool) from TNB have been assigned to Celcom Berhad and MBSB(Malaysian Building Society Berhad) for one year. In return, TNB has accepted two talents, one eachfrom Malaysia Airports Holdings Berhad (MAHB) and MBSB.Leadership Development Audit (LDA)TNB’s company-wide adequacy in terms of framework, policy, processes and practices to meet itsleadership recruitment, development, readiness and retention requirements were audited by anexternal consultant in April 2008. The overall results were commendable. Out of the 7 elementsaudited, 5 were found to be of good practice while the other 2 were adequate.Blue Book ImplementationTNB was rated as being amongst the top two GLCs in Blue Book Implementation by an externalconsultant.Specialist Career PathThis scheme had been in existence for 4 years. To date two Specialists and 24 Technical Expertshad been appointed. Two of them had received international recognition for their respectiveachievement in Flashover Analysis Tool and Power Quality Guidebook.

Operational SummaryIn order to meet its current andfuture business needs, TNB hasto ensure that its leadershippipeline is able to supplycapable and competent leaders.Towards achieving this goal, theGroup’s talent pool size had beenincreased to 288 candidates asa result of continued focus ontalent identification and theirdevelopment. More importantlythe search for potential talenthas delved deeper into thelower level hierarchy of TNBexecutives. In the mean time,the Division continued to adoptformal development programmessuch as Progem (Programme forGeneral Managers) conductedby the National University ofSingapore.The short ter m and longterm development plans andplacement in the Talent ReviewProcess have been made aper manent agenda at theManagement Breakout, TNB’sbiannual management retreat.The Leadership DevelopmentAudit conducted by an externalconsultant had rated TNB ashaving a commendable standardof talent management.The Specialist Career PathScheme continues to createopportunities for aspiring anddeserving candidates. To datethe number of specialists andtechnical experts has increased totwo and twenty four respectively.This alternative career path forengineers has partly contributedto the retention of technicalexcellence in TNB.Ir. Sazali P. Abdul KarimFlashover Analysis Tool whichis his brain child has beenpatented and put in displayat World Intellectual PropertyOrganization (WIPO)Mohamed Fuad FaisalAuthor of Power QualityGuidebook“I was impressed with thePower Quality Guidebooksubtitled Voltage SagSolutions for industrialCustomers” Alex Mc Eachern– Power Standards Lab, USA.(No. 1 Power Quality Guru inthe world)[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]79

Operations Review – Group Human Resource[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]An external consultant wascommissioned by KhazanahNasional to conduct an audit onthe implementation of the BlueBook guidelines on IntensifyingPerformance Managementbased on the following 3 keyelements:• Organisational Performance,• Programs, policies and Systems• Benefits to Labour ForceThe audit had rated TNB as oneof the top practitioners amongthe GLCs.CAPACITY BUILDINGOne of the key attributes of aworld-class organisation is itsconcern for the standard ofprofessionalism in the workforce.Among the Division’s objectives,therefore, is to ensure that TNBhas a capable and professionalwork-force to meet, if not exceedcustomer expectations throughquality delivery. During the periodunder review, 114 developmentaland 1,110 mandatory technicaland non-technical trainingprogrammes were conducted forexecutives and non-executivesrespectively. The programmeswere designed to ensure thatTNB employees are equippedwith competencies that wouldmeet its business requirementsand raise organisational efficiencyand productivity.In addition, supplementaryprogrammes such as StrategicBusiness Leadership, FIDICGreen Book and FIDIC YellowBook were also conducted byTNB Training Institute, ILSAS toeducate and train staff in thecommercial aspect of running anorganisation.Moving forward and in linewith the Second Phase ofTNB’s 20 Year Strategic ActionPlan to achieve geographicalbusiness expansion, overseasjob assignments for selectedcandidates to enhance theirknowledge and broaden theirexposure in the relevant fieldshave been implemented. Fivemembers of TNB’s workforcewere seconded to TNB LibertyPower Limited in Pakistanand six others to Shuaibah IIIIndependent Water and PowerProject (Shuaibah), Saudi Arabiaunder this initiative.As part of long term capacitybuilding initiative, two engineerswere sent to the Korean AdvancedInstitute of Science & Technologyand University of Michigan inpreparation for nuclear poweroption eventualities.Process ImprovementTo enhance efficiency in servicedelivery to internal customers,86 procedures and 118 workinstructions relating to HumanResource Management hadbeen declared for MS ISO9000:2001 process comparedto only 65 procedures and 82work instructions in the previousfinancial year.The Whistle Blowing ProcedureToll Free line 1800 888 862 waslaunched in August 2008 toenable customers and staff toreport any violation or abuse ofprocedures, rules or regulations.The Human Resource ClientCharter was established in June2008 to support the HR SE10/10 initiative of ‘EnhancingHR Professionalism’. 27 HR coreprocesses were declared toensure services provided werecompliant to the standard ofquality promised.Internal AffairsHighlights of Achievements:Establishment of CaughtRed-Handed Procedure.Launching of the WhistleBlowing Information System(WBIS) and Toll Free Line.Introduced Customer Charterfor the IAD.Divisional GoalsThe IAD strives to be ad e p a r t m e n t o f h i g hprofessionalism and integrity indisciplinary management notonly in TNB but among theGovernment Linked Companies(GLCs). The department’s majorobjective is to reduce thenumber of cases of misconductin TNB through education andprevention programmes as wellas providing excellent services.Operational SummaryThe IAD is responsible inmanaging, conducting andmonitoring disciplinary actionsagainst the employees includingfor mulating a DisciplinaryPolicy for TNB. Functionally,the department reports to theBoard of Directors’ DisciplinaryCommittee while operationally itreports to Vice President (HumanResource). The main functionsof IAD include investigation,prosecution, conciliation,handling and managing casesat Industrial/Labour Court,research & development as wellas educating the employeesthrough training & awarenessprogrammes.80

Operational ImprovementsEfficiency ImprovementThe introduction of the WhistleBlowing Information System(WBIS) and Toll Free Line willhelped to enhance the levelof integrity among TNB staffwhich would heighten staffdiscipline, improve efficiency andproductivity. Improved integritywould also lead to cost savingsand proper budgetary utilisation.All these would create value addto TNB.Major Projects• Adopt a Station Programme(Program Stesen Angkat).• Audit Station Programme& Kursus Kemahiran for theDisciplinary Machinery.Key Performance Indicators• Reduction in disciplinarycases from 158 (FY2006) to102 (FY2007) and 66 (as atJune FY2008).• Investigation conductedwithin 1½ months.• A s a t J u l y 2 0 0 8 , t h eDepartment had chartedCustomer Satisfaction Index(CSI) of 85%.Challenges and ProspectsThe key challenge faced by theDepartment is to contribute inthe development of a TNB workforce with high performance andintegrity as well as upholdingthe Group’s Shared Values toachieving TNB. To develop humancapital with high performanceand integrity and upholding thecompany Shared Value towardsachieving its Vision.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]81

Highlights of Achievements:Zainab binti AbdullahVice PresidentPlanningReview of Division Business Plan and Top ManagementKey Performance Indicators (KPIs).Clean Development Mechanism (CDM) initiatives inTNB.Major Strategic Issue Coordination; Gas Pricing andTariff, Cogeneration and Malaysian Electricity SupplyIndustry (ESI) Structure.Sealing power supply agreement with SarawakElectricity Berhad (SEB).Involvement with Sarawak – Peninsular Malaysia(SARPEN) Interconnection.Study on the Development of Nuclear PowerGeneration.Execution of Service Level Agreement for TNB thermalpower stations under the custody of GenerationDivision.The Division’s key roles and functions includeformulating and reviewing TNB’s long term strategicplan that will position the organisation towards attainingits desired future state, planning of the long-termpower system development to ensure safe, reliable andeconomic power supply to meet the electricity demandand supply needs of the nation.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]DefendOurCorePositionForGrowth To be amongst thebest performingcompanies in Malaysiaby 2007Project 17GetOurHouseInOrderBusinessExpansionSERVICE EXCELLENCE2010 Improve CoreOperations under T7Strategy Place TNB as the bestperforming companyin Malaysia by 2007and as the Regionalbest by 2010ServiceExcellenceEnhanceCustomer/StakeholderLoyaltyGEOGRAPHICAL EXPANSION(SERVICES) 2015 Expand works andservices related to theenergy sector Creation of newrevenue streamleveraging on TNB’sknowledge andcompetencies in theenergy businessTNB 20-year Strategic PlanOVERSEAS INVESTMENT2020 Improve financialposition and humanresource readiness ofTNB Venture intopower/energy relatedinvestments in theinternational arenaGLOBAL LEADERSHIP2025 Excel in:– All business areas– Reputation as astrong businesspartner– Ability to continue tocreate shareholdervalue TNB acknowledged asamongst the mostadmired companiesglobally82

Divisional GoalsThe Planning Division whichwas operationalised in Januaryof 2008, comprises threedepartments namely StrategicPlanning Department, SystemPlanning and DevelopmentD e p a r t m e n t a n d E n e r g yProcurement Department. TheStrategic Planning Departmentwas previously under theGroup Finance Division, whileboth the System Planning andDevelopment, and EnergyProcurement Departments wereformerly operating under theTransmission Division.The Division’s key roles andfunctions include formulatingand reviewing TNB’s long termstrategic plan that will positionthe organisation towards attainingits desired future state, planningof the long-term power systemdevelopment to ensure safe,reliable and economic powersupply to meet the electricitydemand and supply needs of thenation. In addition, the Divisionis also responsible for managingall activities related to energyprocurement, operationalisationand settlement of energy andcapacity procured from powerproducers and cross bordertrading.Formulation andImplementation ofCorporate StrategiesThe Planning Division is activelyinvolved in the coordination andcommunication of the TNB 20-year Strategic Plan to facilitatean effective implementation ofstrategies and initiatives throughoutthe Group. This includes thecoordination of all Divisions’5-year Business Plans mid-termreview to ensure alignment withTNB long term strategic direction.Communication, coordinationand implementation activities ofthe 20-year Strategic Plan areimplemented in conjunction withother relevant divisions.T h e S t r a t e g i c P l a n n i n gD e p a r t m e n t a c t s a s t h esecretariat for the biannualmanagement retreat known asthe Management Breakout, whichis a forum for the top leadershipof TNB to deliberate and resolvestrategic issues. The Divisionalso conducted the StrategicPlanners Forum in 2008 with theobjective of creating a platformfor a strategic discourse onstrategies and implementationthus contributing towards thealignment of corporate anddivision strategies and objectives.In addition, the forum alsoserved as a useful platform forthe dissemination of strategiesand policy information.Management of StrategicIssues• Implementation of CleanDevelopment Mechanism(CDM) ProjectsTNB is fully supportive ofthe Government’s effortsi n p l a c i n g t h e C l e a nDevelopment Mechanism(CDM) as an importantcomplementary mechanism tofacilitate the implementationof sustainable energy projects(with emphasis on RenewableEnergy (RE) and EnergyEfficiency (EE) projects),thus resulting in overallimprovement and protectionof the environment.The Clean DevelopmentM e c h a n i s m ( C D M ) i s a narrangement under the KyotoProtocol allowing developedcountries with a Green HouseGas (GHG) reduction commitment(known as Annex 1 countries)to invest in projects that reduceCO 2 emissions in developingcountries (such as Malaysia) asan alternative to more expensiveemission reductions in their owncountries.The Division plays the role ofthe secretariat for CDM projectsin TNB. Currently two generationprojects are being pursued forthe deployment of CDM – i.e.the Ulu Terengganu and UluJelai hydroelectric projects. Inaddition, several potential CDMprojects were also identifiedin a study conducted withTNB Research. These includedrehabilitation of small hydros,Small Renewable Energy PowerProgramme (SREP), Bio-massRenewable Energy (RE) and therecycling of SF 6 gases in TNB’ssubstations.• Gas Pricing and TariffAdjustmentThe Division was activelyinvolved in the recent tariffadjustment due to thereview of the gas price forthe power sector. The tariffadjustment in July 2008is strictly to recover theadditional fuel cost incurredmainly due to the gas priceincrease. However, the tariffadjustment does not takeinto consideration the recenthigh increase in coal price.• CogenerationI n s u p p o r t o f t h eGovernment’s initiativestowards efficient utilisation ofenergy resources, the Divisionhas recently commissioned aCross-Divisional Task Groupto review the Cogenerationpolicy with the view towardsencouraging efficientutlisation of energy in thebusiness sector. The TaskGroup has proposed severalimmediate term measuresrelated to the scheme ofrates and conditions tofacilitate development ofCogeneration.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]83

Operations Review – Planning DivisionManagement of TNB Business PerformanceThe Planning Division had completed the development of top management Key Performance Indicators(KPIs) for Financial Year 2009. In addition, the Division is also responsible for monitoring the TNBHeadline KPIs (Please see Table 1) which are tracked by Khazanah Nasional under the Government LinkedCompanies (GLC) Transformation Programme.Table 1: TNB Headline Key Performance IndicatorsFinancial YearKey Performance IndicatorsActual2004Actual2005Actual2006Actual2007Target2008Actual2008Return on Assets (ROA) 2.6% 2.2% 3.3% 6.3% 5.5% 4.6%Gearing 68.6% 64.9% 58.1% 49.9% 55%-60% 46.9%Unplanned Outage Rate (UOR) 9.4% 6.1% 4.7% 2.2% < 3% 3.3%T&D Losses 10.8% 10.5% 11.0% 10.0% < 9.5% 9.5%Transmission System Minutes(minutes)Distribution SAIDI 1 Minutes(minutes)18.0 14.0 7.3 9.3

could pose environmentalissue as a result of emissionof greenhouse gas. For thesustainable development ofthe nation’s electricity andenergy sector and to mitigatethe energy supply securityissue, nuclear power plantshould be seriously consideredas a viable alternative for thefuture. TNB has been workingclosely with other stakeholdersand agencies in particular TheMalaysian Nuclear Agency(Nuclear Malaysia) on thenuclear option.Execution of Service LevelAgreements (SLA’s) withthermal power stationsoperated by GenerationDivisionIn our effort to ensure that allpower generators operate undersimilar business environment, thePlanning Division has developedand implemented SLAs on allthermal power plants operatedby the Generation Division. Alltechnical, commercial and legalterms of the Agreements areadapted from the most recentPower Purchase Agreement(PPA). To date, six individualSLAs had been duly signed.Challenges and ProspectsThe power supply industry willbe facing increasing challengesattributable to volatile fuelprices, energy supply securityissue, current global economicdownturn and deterioratingfinancial condition. In thisregard the Planning Divisionwill undertake various initiativesto mitigate the risks associatedwith these challenges:• Sustaining Long TermEnergy SecurityEnergy supply securitydue to depleting energyresources (gas), high andvolatile international energyprice (coal) and constraints inthe international coal supplychain (both the coal supplysources and infrastructure)are posing major challengesto Malaysia’s power sector.In order to ensure the sector’slong term sustainability inparticular mitigation of theenergy supply security risk,the Planning Division isentrusted to implement thefollowing initiatives:– Harness hydro power inPeninsular Malaysia andSarawak (Bakun etc)– P r o m o t e t h e u s eo f D e m a n d S i d eManagement, EnergyEfficiency, RenewableEnergy and other nonfossilpower sources.– Plan the development ofmore efficient generatingplants.– Assist in preparatorywork for possible useof nuclear energy. Theproject would demandmuch efforts in theformulation of policy,identification of sites,conduct of pre-feasibilityand feasibility studies,instituting the regulation,conduct manpowerplanning.– W o r k c l o s e l y w i t hstakeholders such asMinistry of Energy, Waterand Communications andthe Economic PlanningUnit (EPU), Prime MinisterDepartment on nationalenergy policy studiesfor sustainable energydevelopment.• Review of TNB 20 YearStrategic PlanThe Strategic Plan which wasdeveloped in 2005 sets thestrategic direction of TNB forthe period of 2006 -2025. Thefirst phase which commencedin 2006 sets to achieve ServiceExcellence by 2010. TNB hassucceeded to achieve manystrategic objectives under thisphase despite the impact ofmany external challenges andenvironmental pressures. Toalign TNB with the current andfuture business environment,the Plan will be reviewed andsuitable strategies reassessedfor implementation during itssecond phase (2011-2015)which focuses on geographicalbusiness expansion.• Addressing Major StrategicRisksIn this regard, the Divisionwill provide an active andsupporting role to addressmajor strategic risks inparticular the tariff review,fuel pass-through mechanismand pricing study, andMalaysian Electricity SupplyIndustry (ESI) structureanalysis to ensure thesuccessful implementation ofthe Identification of StrategicRisks and the AssociatedRisks Mitigation Plan.• TNB Strategic PlannersForum and TechnicalPlanners ForumThese biannual forums willinvolve discussion of strategicand technical issues impactingTNB in the medium and longterm by the Group’s strategicor technical planners andrelated executives. It alsoserves as the platform forstaff to be updated onmajor strategic and technicalissues/initiatives as well asTNB policies.• Hydro PPAs with TNBGThe Planning Divisionis currently conductingnegotiations and developmentof SLAs for TNB Hydro powerplants. These include Kenyir,Temenggor, Pergau andCameron Highlands hydroPower Stations.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]85

InvestmentManagementDato’ Nik Ibrahimbin Nik MohamedVice PresidentDivisional GoalsThe Investment Management Division manages an extensiveportfolio of equity investments of the Company and the Groupwith the objective of ensuring positive value addition to TNBGroup as a whole. The Division is currently monitoring equityinvestments in 68 subsidiaries and associate companies andother long-term investments in core and non-core businesseswith a market value of approximately RM4.949 billion.Operational SummaryThe Division assumes the role of setting strategic directionfor the subsidiaries and streamlining their operations withinthe Group. It also formulates long term and short terminvestment strategies for the equity investments within theGroup. The Division also plays the leading role in overseeingand monitoring the performances of the 68 companieswhile administratively overseeing 10 subsidiaries involvedin such sectors as manufacturing, services and consultancy,education, mining and utility. 83% of these companies arelocally registered.Management of Major Equity InvestmentAmong the subsidiaries in which TNB has equity participationand which are under the management of the Division arehighlighted below:[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]861. Malaysia Transformer Manufacturing Sdn. Bhd. (MTM)Malaysia Transformer Manufacturing Sdn. Bhd. (MTM)became a wholly-owned subsidiary of the Group followingthe successfully acquisition of 27 percent of its equity byTNB from ABB in 2007. MTM continues to maintain itsidentity to leverage on its long history in the region, whilestrengthening its corporate governance and improving itsbusiness orientation.MTM’s strategy is to maintain its leading role as a manufacturerof transformers such as Distribution System Transformers from300 kVA to 3000 kVA 11 kV to 33 kV, and Transmission SystemTransformers from 7.5 to 90 MVA 33 kV to 132 kV and to increaseits presence as a service provider in Remanufacturing andTransformer Life Management Services and Project, Installation,Testing and Commissioning in Malaysia and the region.The company’s turnover rose by 17.8% to RM227.0 millionand contributes a profit after tax of RM21.8 million, attributedmainly to the increase in demand for Distribution SystemTransformers from 300 kVA to 3000 kVA 11 kV to 33 kV.

As it moves forward to a newera, MTM is highly enthusiasticin fulfilling its vision “ToBecome A World Class LeaderIn Transformer Business Globallyby 2020”.2. Tenaga Cable IndustriesSdn. Bhd. (TCI)Tenaga Cable Industries Sdn. Bhd.(TCI) a 76%-owned subsidiaryof TNB had recorded a solidperformance in manufacturingand distribution of power cablessuch as XLPE Cables up to33 kV, Optical Ground Wires(OPGW), low voltage generalcables, aluminium conductors(ACSR), aluminium/aluminiumalloy rods and sales of OPGWaccessories. As a leader incable manufacturing TCI setsbenchmark for cables qualityand prices.During the period under review,TCI succeeded in reducing itsborrowing by 53.7% from RM54.5million to RM25.2 million. Asa result, its Net Tangible Asset(NTA) increased from RM0.72 toRM0.84, Current Ratio (CR) from115 percent to 146 percent, andGearing Ratio from 0.92 timesto 0.48 times.The key features of TCI businessmodel required close monitoringof prices on the London MetalExchange (LME). Its diligencehad paid off when it realisedsavings of RM0.65 million foraluminum and RM0.79 million forcopper after having successfullylocked in on LME contract priceor lower for the metals. TCI hadalso implemented AluminiumRecycle Management (ARM)project with a total recycledvalue of RM4.79 million witha cost saving amounting toRM1.61 million.Mindful of the challenges ahead,including those associated withthe industry, TCI is confident thatit can implement its businessstrategy in Malaysia and in theregion successfully in line with itsvision “To Be A Global LeaderIn Cabling Solutions And EnergyRelated Business By 2020”.3. Tenaga SwitchgearSdn. Bhd. (TSG)As a 60%-owned subsidiary,Tenaga Switchgear Sdn. Bhd.(TSG) had delivered a robustset of results as it continuedto build on its consistent andwell-executed strategy. Duringthe period under review, TSGcharted total sales of RM52.17million which generated profitbefore tax of RM4.4 million, andreturn on investment (ROI) of 13percent.TSG’s success in its core businessof assembling and manufacturinghigh voltage switchgears offerscustomers a wide range ofcompetitively priced productsand services. It had alsodifferentiated itself from thecompetitors through its serviceexcellence. During the sameperiod, TSG had successfullycompleted Turnkey 132 kV GISprojects such as PMU Shah AlamWest, TNB Central, PMU Melaka275 kV GIS, TNB Major Project,SSU 33 kV MAHA, and SSU33 kV MOX, TNBD Selangor andPMU 132 kV Kuantan, TNB East.It also completed the supply ofits products such as PMU TGLangsat, PMU Ulu Repah, PMUMasjid Tanah, PMU Kuala Pilah,PMU Putra Jaya and PMU KLPavilion. It is now setting itseyes to penetrate overseasmarket. The 170 kV GCB and DSproject which is 80% completedhas been developed to meett h e r e q u i r e m e n t s o f t h eIndonesian market.TSG is fully aware of the economicchanges affecting the regionand has identified appropriatestrategies to mitigate theimpact. The Division is confidentof TSG’s strengths and ability todeliver success in the true spiritof its vision “To Be the Leaderand Quality Symbol in the HighVoltage Switchgear Industry”.4. TNB EngineeringCorporation Sdn. Bhd.(TNEC)TNB Engineering CorporationSdn. Bhd. (TNEC) a whollyownedsubsidiary of TNB hadundergone a very active year.Since its inception in 1996, TNECwas the Project Manager andProject Developer, EngineeringProcurement Construction,Operations and Maintenance ofprojects and Equity Owner. Aquality review of its functionshas led to the restructuring ofits roles and responsibilities thatcould better serve the needs ofthe Group and its customers in itscapacity as the leading providerof District Cooling System inmajor buildings in Malaysia.The company had succeeded insecuring projects in EngineeringProcurement Construction withmain focus in 30,000RT DistrictCooling System in Abu Dhabi,UAE, District Cooling Systemproject at 1 Borneo Hypermall,Sabah, District Cooling Systemproject for IJN, Main InfrastructureWorks Project Phase 1, UITM,Achi Jaya Plantations Gas EngineProject, and District CoolingSystem project at UITM MedicalTraining Centre, Sg. Buloh.A m i d s t t h e i n c r e a s i n g l ycompetitive global landscape inparticular the competition fromwell-established local contractingfirms, TNEC had persevered inpursuing its passions to reachnew heights of excellence byopen and aggressive marketingfor district cooling systemprojects, for mulating newproject packaging strategy forcompetitiveness in tendering,expanding the district coolingsystem business internationallya n d e s t a b l i s h s t r a t e g i cpartnerships.Spurred on by the vision “Tobe amongst the Leading ServiceProvider in the Regional EnergyBusiness”, TNEC is movingforward to distinguish itself inthe global arena.5. TNB Energy ServicesSdn. Bhd. (TNBES)As a wholly-owned subsidiary,TNB Energy Services Sdn.Bhd. (TNBES) was granted fulloperational autonomy since1997. TNBES specialises inproviding quality and reliableenergy solutions and servicesto the customers. It offers acomplete package for energyrelatedservices includingengineering, procurementand consultancy and advisory[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]87

Operations Review – Investment Management Division[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]88services for the development,operations and maintenanceof Renewable Energy relatedprojects such as wind and solarhybrid, biomass and mini hydro,Power Quality Mitigation andMonitoring, Energy EfficiencyAudit and Implementation andAir conditioning and MechanicalVentilation Systems services andmaintenance.TNBES had initiated a broadstrategy review to ensure thatits strategic intent and policiesremain relevant, building onthe opportunities presented bythe changing environment andmeeting the rising expectationsof the various stakeholders.T N B E S i s p ro u d t o h a v eparticipated in Engineering,Procurement and Contractingof 2MW Landfill Gas PowerStation in Puchong, Selangor,Operations and Maintenanceand Rehabilitation of TNB MiniHydro Stations, RenewableEnergy (Wind/Solar Hybrid)power stations for supply of upto 300kW per station at variouslocations, Renewable Energyof mini hydro for LangkawiCable Car Middle Station forLADA, the islands off Mersing,Johore, Orang Asli Settlementsin Peninsular Malaysia, PulauPerhentian (wind/solar) offTerengganu and Remote Areasin Sabah for the Ministry ofRural and Regional Developmentand Pulau Kapas for TerengganuState-owned PERMINT.I t e n j o y e d a p re s t i g i o u srecognition from ASEAN asthe winner of The Landfill Gas(Biomass) Project in the ASEANRenewable Energy ProjectCompetition in 2005 under GridCategory as well as being theFirst Runner-up for Solar HybridProject off Mersing under Off-Grid Category in 2008.The year ahead will be anespecially challenging oneas TNBES prepares for theincreased competition in theenergy service sector. It will workwith the management of theDivision as well as leveragingon its expertise towards realisingits vision of being “A Leaderin Energy Service Company ofChoice in Malaysia by 2010 andthe Region by 2015”.6. TNB Fuel Services Sdn.Bhd. (TNBF)As a purchaser and supplier offuel, including coal for powergeneration in Malaysia since1998, TNB Fuel Services Sdn.Bhd. (TNBF), wholly-owned byTNB, continues to face new andgreater challenges in the faceof volatile fuel market. TNBFplays a key role in monitoringcoal and freight markets. TheFuel Procurement ExecutiveCommittee and Coal HedgingCommittee, established tostudy the fuel market havesince extended its activities tocover other critical commoditiessuch as copper and aluminiumrequired by other subsidiaries.TNBF is optimistic that its vision“To Be a Reputable InternationalFuel Trader and Fuel ServicesProvider” would be fulfilled givenits track record and experiencein the field.7. Universiti Tenaga Nasional(UNITEN)Since its inception in 1997, theuniversity has emerged as oneof the most sought after higherlearning institutions in the countryin just 10 years. Favourableremarks have been constantlyreceived about UNITEN’s strategiclocation, first-class infrastructureand highly marketable graduates;but what stands it in good steadis its corporate credo – visionand mission statements – andthe undivided support of its staffat every level. Our university hasfive main colleges which caterto the educational and researchactivities of 7100 students.Although relatively small, theuniversity’s ability to perform atpar or better in research andteaching compared to moreestablished higher learninginstitutions are seen by a numberof achievements in the nationaland international arena.UNITEN’s principal activities areto provide higher educationand training. Its main sources ofincome are derived from tuitionfees, accommodation, rentalof facilities, consultancy andtraining fees. Total revenue inthe last three financial years hasincreased, from RM77.4 millionin financial year 2004/2005(FY05) to RM82.6 million infinancial year 2006/2007 (FY07)to RM98.3 million in financialyear 2007/08 (FY08). The bulk ofthe revenue is generated fromtuition fees.Research is one of the keyagenda of UNITEN and thisis seen in the quality of itsresearchers as clearly worded inits mission statement. UNITEN’scommitment in promotingresearch activities is evidentfrom the number of researchundertaken that continues toincrease year after year. UNITENhas won 38 local awards and3 international awards and hasacquired Ministry of Science,Technology and Innovation( M O S T I ) r e s e a r c h g r a n t samounting to over RM10 million.UNITEN has been placed in the7th position, and is the highestamong the Private HigherEducation Institutions (HEIs) toreceive the MOSTI Fund.As a pioneer among privateuniversities in Malaysia andis wholly-owned by TNB,UNITEN focuses on three nicheareas; engineering, informationtechnology and business. Most ofthe programmes are accreditedby professional bodies such asInstitution of Mechanical Engineers(UK), Institution of Civil Engineers(UK), Engineering AccreditationCouncils (EAC), Malaysia Instituteof Accountants (MIA), MalaysiaInstitute of Certified PublicAccounts (MICPA), and Instituteof Chartered Accountants ofEngland and Wales (ICAEW). Theprogrammes are also recognisedby international countries suchas United Arab Emirates (UAE),Kingdom of Saudi Arabia,Republic of Iraq and Republicof Yemen.Evidence on the quality ofour students and graduatesis their success in obtainingrecognitions and winning variouscompetitions at national andinternational levels. UNITENgraduates are highly soughtafter by the industry and areemployed by reputable nationaland international companies.

In preparation for stiffercompetition and challengesin the globalisation era, andin becoming a benchmarkeduniversity by 2010, UNITEN hasestablished a comprehensivequality framework – UNITEN10 which is in line with TNB’sSE 10/10 for service excellence.We earned our first successwhen UNITEN became the firstuniversity in the country toreceive the award for QualityEnvironment Practices (5S)from Malaysia ProductivityCorporation (MPC). UNITEN wasalso awarded the ISO 9001:2000certification from SIRIM.Besides that, UNITEN hasinitiated an effort to share theknowledge of the world to themasses by the Tun MahathirLecture series programme. Thislecture series is held every yearat UNITEN and is open to publicon complimentary basis. Its mainobjective is to create a sharingplatfor m for distinguishedpersonalities who have madetheir mark in the world and toshare their achievements thatwill inspire people especially theyounger generation to be highachievers.Key Performance IndicatorsThe Division’s Key PerformanceIndicators (KPIs) is determinedby its success in sustainingstable performance, highestasset quality, strong structuralliquidity, positive performanceratios and minimum risk exposureof the subsidiaries under itsmanagement. These are achievedby constant assessment andmonitoring of the subsidiariesand by using the standardGroup KPIs that covered severalaspects such as:• Sustainable Profitability– Average Service Cost,Grows New Business –Earning Before Interest,Ta x , D e p re c i a t i o n a n dAmortisation (EBITDA) andReturn On Investment (ROI),• Improve Customer/Stakeholder Satisfaction –Internal Customer SatisfactionIndex (CSI),• A c h i e v e O p e r a t i o n a lExcellence – Audit ActionPlan completed based onaudit findings, completion ofStrategic Plan Development,and completion of subsidiariesproducts/services deliverybased on Agreement(Internal), completion processfor costing and pricing forservices/products suppliedTo TNB,• Improve Capital/AssetManagement – AverageProject Delay (Month),• Achieve Highly CompetentWorkforce – OrganisationCompetency Index andensure succession readinessand sustainability – EmployeeEngagement Score (EES).Process Standardisationand Improvement (PSI)Since the TNB as a Group wasconferred MS ISO 9001:2000certification in January 2006,the Division had strengthenedits control of the system fordocumented quality managementby continuously improvingthe quality of their businessprocesses.Developing HumanResource CapacityThe Investment ManagementDivision has about 4,220employees serving TNBC o r p o r a t e O ff i c e a n d a l lsubsidiaries. During the periodunder review, the Divisionhad increased its focus oncustomer service and financialperformance while proceedingwith operational restructuring andrationalisation. Among othersthis involved the centralisationof selected business functionsand back office support. Duringthe period under review, theDivision continued to invest indeveloping the capacity of itswork force with special focuson teamwork, competencyand skill enhancement andcustomer service. On averageeach employee had undergone5 training days.Annual review for employeesfocused on managing byobjectives which are linked tothe Division’s strategic goals.Mobility of managementstaff across the Division wasencouraged to promotetransfer of knowledge andexperience while fosteringthe inculcation of a uniformorganisational culture.Customer FocusThe Division had decentralisedits functions to the subsidiariesin order to build strongerrelationship as well as toprovide more efficient services.This service model had alsoenabled it to be activelyinvolved in the developmentof business strategies andplans for customers.In order to achieve ‘ImprovingCustomer Satisfaction’ underthe SE10/10 initiative, theDivision conducted andformulated comprehensivetraining and developmentprogrammes, held regularmeetings and establisheda tracking and monitoringmechanism on customerc o m p l a i n t s r e l a t i n g t othe Division’s jurisdiction.The Sistem MaklumbalasPelanggan (SMP) was adoptedas the tracking and monitoringmechanism to investigatecustomer complaints and toplan and implement correctiveaction within a specified timeframe. Customers will be dulyinformed of the proposedcorrective actions once theircomplaints were resolved.A customer satisfaction surveycovering the subsidiaries,divisions and units of theGroup as well as associatesand investment companieswhile showing a generalcustomer satisfaction hadalso revealed opportunitiesfor improving the quality andrange of services offered.The results show that allsegments are satisfied withthe customer service approachof the Division’s employees,especially the discretion,reliability and accuracy ofcustomer service delivered.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]89

ICT DivisionICT is continuouslyinnovating its ways toimplement ICT requirementsin TNB to support TNB’soverall vision and mission.Highlights of Achievements:Completed ‘Mobile Field Force AutomationProject’ to improve communication andbreakdown response time between TNB’sCall Management Centre and its field crew.Completed TNB’s 10-Year GIS MasterplanStudy aimed to formulate a long term GISroadmap and implementation strategy fora comprehensive Corporate GeographicalInformation System (CGIS) covering alldivisions within the Group.Developed TNB’s E-Application, a web-basedsystem that allows housing developers andindividual customers to apply for electricitysupply online.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]90Technical upgrading of TNB EnterpriseSystems which include ERMS, EHRMS andeCIBS to a higher platform version. With thecompletion of SAP upgrade, users can expectbetter functionalities and a more user-friendlysystem interface in future.Upgraded and expanded the Division’s datacenter to host critical TNB ICT servicesand applications. TNB Data Center 2was established early this year to providehot backup to TNB’s Data Center 1. Theadditional facility is critical as it enabled TNBto provide the necessary security assuranceto TNB stakeholders in terms of safeguardingimportant data.Undertook the revamping of TNB Intranet toprovide a user-friendly interface and encouragecollaboration and sharing of information on asingle platform.

Razali bin AwangChief Information OfficerDivisional GoalsThe ICT Division continues to subscribe to four mainobjectives towards supporting TNB’s overall vision andmission namely to effectively govern and consolidatethe use of ICT in TNB, e-enabling critical business andtechnical processes, providing reliable digital infrastructureand network connectivity as well as maximising returnsfrom ICT infrastructures and expertise.It is also committed to contribute effectively to thebusiness goals and growth of TNB through valuecreation, service and efficiency improvement, organisationexcellence and diversification.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]91

Operations Review – ICT Division[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]92Core FocusThe ICT Division had continuedto enforce ICT Policies, Codesof Practice and Guidelines in itseffort to govern and consolidatethe use of ICT in TNB.Its core operational focus isto meet TNB’s Service LevelAvailability for TNB’s ICT Systemsand Telecommunication Networkwhich will directly assist TNB’score operations in providinga secure, reliable and alwaysavailable electricity supply to thecustomers.In addition, the Division hasimplemented security upgrades incritical areas to ensure that dataintegrity within its ICT systemsis not compromised. ICT hasalso invested time and effort toenhance productivity within TNBthrough a range of internallydevelopedsystems to supportTNB’s Customer RelationshipManagement framework,Supply Chain Management andcommunication strategy.Operational ImprovementsMajor ProjectsDuring the period under review,the Integrated Fleet ManagementSystem (IFMS) was implementedin Selangor, Wilayah PersekutuanKuala Lumpur and Putrajayaf o r e ff i c i e n t m a i n t e n a n c emanagement of all TNB fleetvehicles as well as effectivemonitoring of performance andservice quality provided by TNBappointed workshops.

The Division had also contributedits expertise towards thedevelopment of the Online VendorRegistration (OVR) System. Theefforts had been well-rewardedwhen TNB was honored with the“Best New Services” Award for itsreputable IT applications such asOVR, eCIBS and MFFA duringthe 10th ASEAN Communication& Multimedia (ACM) Expo &Forum 2007 in Kuala Lumpur.ICT also contributed in thedevelopment of an online WhistleBlowing System together withInternal Affairs Department aspart of TNB’s effort to improveinternal or external complaintchannel related to employeemisconduct and power abuse.The Division had implemented aninternal Customer ManagementSystem (CMS) that enabled onlinerequest and tracking of ICTincidents and change requests.This system was implemented inaccordance with the principlesof IT Infrastructure Library (ITIL),the industry best practice for ITService Management.Several projects to improvein-house operations had beeninstituted during the periodunder review. Enhancement ofthe cbPMS had enabled TNBto monitor the Key PerformanceIndicators and competencies ofall staff, thus contributing tobetter performance management.Other projects implemented werethe enterprise-wide ElectronicDocument Management System(EDMS) to manage TNB’srecords and files and the TNBStorage Virtualisation projectwhich involved consolidationof various storage platforms toimprove ERP performance thatled to simplification of storagemanagement as well as reductionof total cost of ownership.The Division had also undertakencontinuous upgrading ofinfrastructure to enhance theresiliency, reliability and availabilityof the TNB telecommunicationnetwork as well as to provide forrobust and reliable channels forteleprotection, telecontrol andSCADA.The in-house development ofthese systems coupled withprudent project managementdiscipline had enabled TNB torealise cost savings in the longterm.Key Performance IndicatorsThe ICT Division’s Key PerformanceIndicators are evaluated based onthe four main thrusts formulatedto support TNB’s overall goals,namely prudent spending andmaximising value from ICTinvestments, improving customerefficiency through excellent andindustry standard ICT productsand services delivery, operationalexcellence through e-processesand leveraging on human capitalfor continuous growth.Overall, the Division had managedto reduce capital expenditurethrough innovative projectimplementation which succeededin meeting all deliverables whileoptimising cost.In line with industry practice,the Division’s services to thecore divisions were measured bythe Telecommunication NetworkAvailability and System Availabilityindicators. In this respect, theDivision had succeeded not onlyin meeting the targets but hadsurpassed the industry benchmark.Its internal Customer SatisfactionIndex score had also shownimprovement.At the same time, the ServerUtilisation Key Performance Indexhad indicated optimal utilisationof ICT Division’s infrastructure bythe Group.Implementation of ProcessStandardisation andImprovement (PSI)The ICT Division heavily utilisesthe PSI platform to improve itsinternal services. Through the PSI,the Division is able to study andpropose system improvement inline with its main objective ofE-enabling critical business andtechnical processes for higherefficiency.During the period under review,the Division had undertaken areview of its operational processto simplify and better manageits services. The new processeswould include the applicationof the entire Plan, Do, Checkand Act cycle in accordancewith the IT Infrastructure Library(ITIL) to ensure the effectivenessof services delivered. Apartfrom this, the Division has alsoimplemented parts of the ControlObjectives for Information andRelated Technology (COBIT) toeffectively govern ICT operationsin its processes.In the meantime, the Division hadreduced the number of processesfrom the initial 38 to 23 followingprocess consolidation in ProjectImplementation, Service DeskEscalation, Data Centre Monitoringand Customer Managementsystems. The reduction to thenumber of processes signifieslesser red tape and provides amore seamless and systematicprocess in delivery of ICT productsand services.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]93

Operations Review – ICT DivisionQuality Management andInitiativesThe ICT Division’s qualitymanagement was implementedthrough improvements inthe Enterprise ResourcePlanning System, establishingWork Improvement Teams(WIT), implementation of 5Sand conducting Safety andEnvironment Management System(SEMS) baseline audit.Four (4) Work ImprovementTeams (WIT) had implementedprojects to improve their dayto-daywork which included themanagement of Data CenterAccess and Inventory. SEMSbaseline audit was conductedto determine the safety level ofall operational units in the fourregions of Peninsular Malaysia.Capability BuildingThe ICT Division strongly believesthat building capability of its workforce is fundamental to enhancingperformance and the pursuitof the journey for excellence.Various initiatives were taken toimprove staff competencies andmotivation including knowledgesharing sessions with staff,job attachment, Face2Facecommunication programme todiscuss staff aspirations, identifygaps and development needs, KPIcascading sessions, and rewardand recognition programmessuch as ICT’s Quarterly/AnnualAnugerah Khidmat Cemerlang(AKC) Award and Monthly Top 5CMS Implementers.Relationship ManagementThrough its partnership withstakeholders, the Division wasable to implement the followingstrategic alliance programmesfor TNB:• Expansion of the strategicsourcing scheme introducedin 2004/2005 to includepurchases of other ITequipment such as scanners,projectors, printers and tonersas well as telecommunicationsequipmentThe Division had successfullyorganised the ICT OfficeProductivity Day to promote ICTproducts and services includingtools and tips to improvework productivity to TNB staff.Through the event, staff hadbenefited from affordable ITproducts offered by TNB thirdparty vendors. In response toencouraging staff feedback, ICTOffice Productivity Day will beorganised as an annual event.The ICT Division has alwaysbeen proactive in supportingand participating in welfareprogrammes. Contributions incash and in-kind have beenmade to the needy such as PCdonation to schools.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]94

Awards and AccoladesICT Chief Information Officer,Encik Razali Awang has beengiven recognition nationally as avisionary and charismatic leaderby MIMOS as reported in theBusiness Today magazine.Prospects and ChallengesThe ICT Division will continue toface a challenging year aheadto meet the ever increasingdemands for ICT services in theGroup. Our past performance hasearned the confidence of TNB’sthree core businesses divisionsof Generation, Transmissionand Distribution in enhancingoperational maintenance to ensureefficient supply of energy.Moving forward, the MFFA(Mobile Field Force Automation)project scope will be expandedto include Distribution Divisionteams located in other parts ofPeninsular Malaysia such as Johorand Penang. This project will beextended to the TransmissionDivision in the near future.The foundation project phaseof Corporate GIS is set tocommence in FY08/09 andwould span over the next fouryears. The ICT Division has beenentrusted by TNB Managementto drive and coordinate theGIS corporate-wide initiative.This includes managing internalTNB fibre optic network,property management, securitya n d l o g i s t i c s . A S e r v i c eOriented Architecture (SOA)solution will be included inthe implementation scope tooptimise the functionality ofthe Corporate GIS project andsharing of information betweenvarious TNB applications.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]95

[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]96Nor Azmi bin RamliChief Procurement OfficerProcurementProcurement is a strategicfunction that drives value creationin supply chain for the CompanyHighlights of Achievements:Significant Value Creation in the Financial Yearamounting to RM118 million.Continued and sturdy progress in the 2nd year ofProcurement Transformation Plan implementation.Launching of the nationwide On-line Vendor Registrationin October 2007.Hosting of the “Anugerah Usahawan/Vendor Cemerlang”event in February 2008.Launching of the TNB Product Quality Assurance Policyand Procedures in July 2008.The first revision of the BVDP Policy and Procedureswas approved in August 2008.Implementation of e-bidding for products and servicesresulting in savings of more than RM15 million.Divisional GoalsTNB has restructured and strengthenedits procurement organisation and hasgiven the Procurement Division themandate to play a greater strategic rolein driving value creation and enhancingprocurement process transparency,integrity and efficiency.The Division is an important drivero f b u s i n e s s p e r f o r m a n c e w i t hresponsibilities in formulating TNB’sprocurement policy, driving procurementstrategies in-line with corporate strategicdirections, providing advisory services,enforcing compliance and promotingnational development priorities,including the development of a morecompetitive and resilient Bumiputraenterprise community.Driven by its vision and mission, theProcurement Division aspires to bethe leader amongst regional utilities inSupply Chain Management. It is alsocommitted to create value throughinnovation and adoption of procurementbest practices.Operational SummaryDuring the period under review,various activities and initiatives weresuccessfully carried out to address thefive key focus areas in the ProcurementTransformation Plan, i.e. the promotionof use of local content and ensuringBumiputra equity shares; realising valuecreation; enhancing procurement processtransparency, integrity and effectiveness;enhancing supplier management andstrengthening procurement organisationby transforming it into a more strategicfunction. The value creation levers thatwere effectively employed in achievingthe significant total savings includespend consolidation, strategic sourcing,tax exemption, contract managementand e-Bidding.

Operational Improvements• e-BiddingEight e-Bidding sessions forproducts and services weresuccessfully conducted withmore than RM15 millionsavings being realised.• On-line Vendor Registration(OVR)OVR was implemented inOctober 2007 to replace themanual vendor registrationsystem. The objective isto shorten the vendorregistration process andimprove efficiency. Therehas been an increase in thenumber of renewals andnew registration of vendorsfollowing the implementationOVR. As the system is sharedwith other divisions throughthe intranet, it has enabledthe verification of vendorstatus by the divisions duringdivisional tender evaluations.The enhancement of thesystem is on-going tomeet current and futurerequirements.• Procurement AppraisalThe Division continues itsefforts in enhancing processintegrity and transparency byconducting 44 procurementappraisals on selectedstations throughout Malaysia.The objective is to ensurethe adequacy, compliancea n d e f f e c t i v e n e s s o fprocurement process, policyand procedures.Human Resource CapacityDevelopmentThe Division is structured around4 key departments namelySourcing Controller, StrategicSupplier Management, BestPractice and Policies and SharedPurchasing. Staffs with diversifieds k i l l s a n d d i s c i p l i n e s a recontinuously being developed tosupport the enhanced strategicfunction of procurement.Partnership withStakeholders• Heads of ASEAN PowerUtilities/Authorities (HAPUA)The HAPUA ProcurementCircle was established inFebruary 2007 to serve as aplatform for ASEAN membercountries to share bestpractices, provide alternativesources of information formarket intelligence and pricebenchmarks via the HAPUAProcurement Portal and createopportunities for collaborativep r o c u r e m e n t a c t i v i t i e sand benchmarking forperformance improvements.TNB had successfully hostedthe 2nd HAPUA ProcurementCircle meeting in March2008 which was attended byrepresentatives from eightASEAN countries. Amongstothers, the meeting resolvedthat the HAPUA ProcurementCircle must continue to existas a platform for HAPUAmembers to interact in thesharing of information andprocurement best practices.A benchmarking visit to PTPLN (Persero), Indonesiawas conducted to shareand compare procurementbest practices adoptedby TNB’s counterpart inJ a k a r t a . T h e v i s i t w a salso part of procurementregional networking initiativeto establish relationshipand to create a platformf o r b e n c h m a r k i n g a n dcomparative study activities.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]97

Operations Review – Procurement Division[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]• GLCs Procurement CircleOn the local scene, TNB ispart of the GLCs ProcurementCircle which is facilitated bythe Putrajaya committeeon GLC high performance.Several meetings held duringthe year had enabled TNB tocompare current procurementbest practices among themembers.• Info PerolehanAs one of the shared values,Procurement Division alwaysensures that our customers(both internal & external) areour top priority. In order toensure that information is welldisseminated, ProcurementDivision has set up a platformknown as “Info perolehan”for internal customers to postany queries on procurementmatters.• Government MinistriesP r o c u r e m e n t D i v i s i o nr e g u l a r l y m e e t s w i t hrelevant Ministries whichinclude among others theMinistry of Finance (MOF),Ministry of Entrepreneur andCooperative Development( M E C D ) , a n d M i n i s t r yo f E n e rg y, Wa t e r a n dCommunications (KTAK)to align TNB businessobjectives with Government’sexpectations.Quality Management andInitiativesProduct Quality AssurancePolicy & ProceduresTo ensure efficient, continuousand reliable electricity supplynetworks, the Product QualityAssurance Policy & Procedureswas launched in July 2008 toguide TNB in the procurementof high quality products througheffective and transparentprocesses. The Policy whichconsists of 24 procedures alsoacts as a catalyst in improvingand enhancing the quality of98

local products. An awarenessprogramme has been plannedto disseminate the Policy to allregions in FY2009.Excellence Award forEntrepreneurs/VendorsSince the introduction of theEntrepreneur DevelopmentProgramme in 1993, TNB throughthe Procurement Division hasbeen consistently nurturing anddeveloping its entrepreneursthus paving the way for themto emerge as global players.The Entrepreneurs/VendorsExcellence Award was introducedfor the first time in February2008 to serve as testimony toTNB’s success in implementingthe Entrepreneur DevelopmentProgramme. Salutary AvenueManufacturing Sdn. Bhd. wasthe winner of the Entrepreneurs/Vendors Excellence Award 2008for their consistent achievementsin the local, regional andinternational markets. The eventwas held at One World Hotel,Kuala Lumpur.Marketing & PromotionalProgrammesThe Strategic SupplierManagement Department of theDivision had jointly participated inlocal and international marketingand promotional programmeswith the vendors. Participationin these programmes helpsthe vendors leverage on TNBbrand name to penetrate thelocal and overseas markets. TheDivision had participated in,among others, the Ministry ofEntrepreneur and CooperativeDevelopment (MECD) EXPOheld in May 2008 at the PutraWorld Trade Centre (PWTC)and the international marketingmission to Cambodia & Vietnamin July 2008.Awards and AccoladesThe Procurement Division wasentrusted to contribute to the“Quality Assurance of ExternalSuppliers” criteria which is one ofthe criteria in the Prime Minister’sIndustry Excellence Award 2007(AKIPM). The assignment wasbased on the Division’s closerelationship with TNB Groupwidesuppliers. The Divisionensures the quality of TNBproducts and services throughits consistent quality assuranceefforts which encompassessupplier selection, suppliercertification and recognition.Division ChallengesThe escalating price of rawmaterials including the cost offuel has a direct impact on TNB’sprocurement operational costs.Value creation initiatives includingthe adoption of procurementbest practices particularly theTotal Cost of Ownership (TCO)is crucial in order to sustainTNB’s profitability.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]99

Md. Jailani bin AbasSenior General ManagerCorporateServicesThe Corporate Services Divisionprovides support services to TNBGroup in areas it specialises in i.e.logistics, properties, security andintelligence services.Highlights of Achievements:Among the highlights of achievement of Departments and Units under the Division are:[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]100Security Services & Intelligence Department (SSID)• Formation of National Taskforce on metal theft with relevant enforcement agencies to combatintrusion and theft at TNB installations with participation from GTD.• Formation of SSID National Control Room.• Effective 1 May 2008, SSID enforced rigid KPI and penalty in the contract with private securitycompanies. The Department also took the initiative to provide training to private securitypersonnel as stipulated in the same contract.• Conducted Cyber Crisis Drill in coordination with EWRM, Cyber Security & National SecurityCouncil.• Held dialogue session with Malaysian Indian Metal Traders & Recyclers Association (MIMTA).• Investigation & Intelligence Unit’s success include uncovering syndicated crime involving TNBpersonnel against TNB assets, syndicates involved in theft of transformers, electricity, TNB fuselink, cables and padlocks at installations. Four members of the syndicate involved in theft ofpadlocks at installations were arrested. Also uncovered was a syndicate involved in forgery ofcheques for payment of electricity bills.Property Services Department• Successfully implemented projects and maintenance job requested by the Division.• Realised annual savings of RM600,000 on TNB OPEX attributable to reduction in quit rentpayment to Majlis Perbandaran Port Dickson following reassessment on Tuanku Ja’afar PowerStation Port Dickson.Logistic Services Department• Migration of all Shell’s petrol card to Petronas.• Completed tagging of 4708 Group vehicles. This is an on-going exercise and tagging of newvehicles and current vehicle status would be carried out annually.• Increased savings on Customs duty and Sales Tax after gaining exemption for imported items.• Rolled out PERFEKTO system group-wide (peninsular Malaysia).

Divisional GoalsFollowing a major restructuringin early 2008, the CorporateServices Division’s functions andresponsibilities have been scaleddown to cover four main areasnamely logistics, properties,s e c u r i t y a n d i n t e l l i g e n c eas well as support servicesincluding human resource andadministration, finance andplanning and performance. TheDivision’s core operational focusis to be the leading divisionin supporting TNB’s vision andmission and provides excellentsupport services within TNB.Operational SummaryThe Security Services &Intelligence Department (SSID)is one of the important supportservices providing and deliveringeffective & efficient core securityservices to TNB to ensureuninterrupted power supply.It aims to achieve operationalexcellence by reducing breachof security to prevent losses toTNB. SSID aspires to be amongthe leading security servicesprovider in the region by 2010.The Department has threeo p e r a t i o n a l u n i t s n a m e l yOperation, Planning & CrisisManagement and Investigation& Intelligence Units. SSID’smain focus is to safeguardTNB’s key installations fromdamage, vandalism and theft.Its personnel are stationed atvarious critical locations such aspower stations, substations andregional warehouse and officesthroughout Peninsular Malaysia.T h e P r o p e r t y S e r v i c e sDepartment provides propertysupport services to the corebusinesses of TNB by enhancingthe Group’s assets values throughexcellent discipline in planningand development, projectmanagement, managementand land procurement. TheDepartment’s mission is achieveexcellence in the management ofproperty, products and services.The Logistic Services Departmentprovides cost-effective logisticservices to customers and to seeknew services that could add valueto the Group. The Department’sobjective is to manage totallogistics requirements to meetcustomer expectation.For the period under review, theDepartment had provided costefficientand effective logisticservices with high customersatisfaction. These includedfreight, fleet and generator setservices to support TNB’s corebusinesses. Major assignmentshandled during the periodincluded vehicle repair andmaintenance, vehicles inspectionby PUSPAKOM, supply ofgenerator sets, repair of feeder[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]101

Operations Review – Corporate Services Division[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]pillar, freight management(importation and exportation ofTNB cargoes), customs clearance,a p p l i c a t i o n f o r C u s t o m sduty & Sales Tax exemption,transportation of general cargo& heavy lift, office removal,management of fuel card andmobile phone billings.The Support Services Department,comprising the Planning andPerformance Department, HumanResource and AdministrationD e p a r t m e n t a n d F i n a n c eDepartment assists the SeniorGeneral Manager in planning,formulating and implementingthe Division’s objectives andstrategies towards achieving TNB’soverall corporate objectives. Thedepartment also serves as thecentral body serving the needs ofthe other departments/subsidiariesin the Division in business planning,human resource management,administration and finance.Major ProjectsThe SSID has been entrustedwith the implementation ofIntegrated Security ManagementSystem (ISMS) within five (5)years beginning FY2006/2007.T h i s s y s t e m c o n s o l i d a t e sdifferent Security Solutions intoone Control System. An annualbudget of RM10 million hasbeen allocated for this project.T h e P r o p e r t y S e r v i c e sDepartment is responsible forthe management of TNB megaprojects such as TNB Tower andother TNB buildings.During the period under review,major projects undertaken by theLogistics Services Departmentincluded the following:• Major refurbishment of six(6) units of 500 kW mobilegenerator sets.• Built skid tanks for Generatorset operating bases at GongBadak, Malim Nawar, MuadzamShah and Chain Ferry.• Built used oil storage at KelanaJaya and Malim Nawar.• Rolled out PERFEKTO systemgroup-wide especially theDistribution and TransmissionDivisions.• Vehicle tagging project.The Planning and PerformanceDepartment had initiated theIntegrated Security ManagementSystem for all critical assets ofTNB.Operational ImprovementsVarious programmes were initiatedand implemented in the Divisionto improve operational efficiency.These included conductingstaff training, developmentand certification programmes,motivation talks, knowledge andinformation sharing meetings,dialogues with customers andvendors to resolve operationalissues and the Vendor PerformanceEvaluation. In addition, theDivision had also implementedstaff award and recognitionprogrammes, monthly reportingby units for performance trackingand centralisation of customercomplaints for effective resolution.Key Performance Indicators(KPIs)The Division’s Key PerformanceIndicators are grouped underfour main categories as follows:Financial• Effective OPEX BudgetManagement (exclusiveuncontrollable projectrequirement & expenses).• Effective CAPEX BudgetManagement (exclusiveuncontrollable projectrequirement & expenses).Customers• Internal Customer ServiceScore.• Improve Project Delivery onProperty’s project.• Improve Project Delivery onSecurity’s project.Internal Processes• Value creation/savings fromIntegrated Fleet Managementand Gen Set operations.• Reduce Breach of security.• Value Creation from IdleAssets.Learning and Growth• Improve Competency Index.• Conduct PMS.Process Standardisationand ImprovementThere are currently four proceduresand eight Work Instructionsunder the Security Services &Intelligence Department (SSID).Several more procedures will bedeveloped and uploaded in thesystem after discussions with assetowners and approval by SeniorGeneral Manager of the Division.The Property Services Departmenthas developed 15 proceduresand 20 work instructions whichare subject to quarterly reviewat the department level.Ten procedures in the Divisionwere registered under the ISOsystem. These procedures wereaudited during Internal QualityAudit (IQA). No non-compliancewas discovered except for minorobservations for improvements(OFIs). Three procedures forfleet management would beregistered.The Division‘s Internal QualityAudit was conducted on 27 Juneto 8 July 2008. It plans to reviewits Action Plans on SIRIM NCRand OFI by mid September 2008.The ISO concepts, process andprocedure will be disseminatedto staff the Division in the nextFinancial Year.102

Human ResourceManagementApart from recruiting qualifiedand competent personnel,the Division has placed greatemphasis on continuous capacitybuilding of its human resource.As at end August 2008, theCorporate Services Division hasa staff strength of about 1500with many areas of specialisation.To enhance their skills andcompetencies, the number oftraining days attended by staff,in particular the executives,has been included as one oftheir KPIs. Suitable internal andexternal training programmesw o u l d c o n t i n u e d t o b eidentified and proposed to themanagement.Customer FocusThe Corporate Services Divisionidentifies its customer needs andexpectations through the AnnualCustomer Satisfaction Index(CSI). Each year all departmentsunder the Division are requiredto distribute questionnaires totheir customers. The final analysisof the results of the survey willbe reported by the Performance& Planning Department. Thescores and findings will serveas the basis for all departmentswill take appropriate correctivemeasures which include:• Identifing areas forimprovement.• Organising formal and informalmeetings with customers tounderstand their needs andexpectations and problemsencountered with the servicesoffered.• Meeting customer needs is setas one of the KPIs of staff.• Develop and implementC u s t o m e r R e l a t i o n s h i pManagement Plan.Quality Management andInitiativesThe Division had conductedvarious quality management andinitiatives which included:• Though there was AKPassessment during the periodunder review, activities underAKP were implemented asplanned.• 26 WIT teams were activelyinvolved in formulating waysto improve quality of productsand services to customers.Team members are drawn fromthe same units as projects aredesigned to improve processesof their respective units.• The 5S activities conductedhad considerably improvedthe office work environmentCurrently more than 90% ofthe staff Had taken part in 5Sprogrammes through weeklyobservations, monthly meetingsand quarterly audit.• Risks were monitored from TNBRisk Information System (TRIS)to maintain strong internalcontrol with the objective tominimise, if not eliminate, theimpact and likelihood of theDivision/Departments failingto achieve their objectivesand to reduce uncertainty ofundesirable events occurring.Stakeholder/RelationshipManagementThe Division had establishedgood rapport and networkingwith many stakeholders directlyrelated to its daily operations.Among these are the Ministryof Finance (MOF), the MalaysianIndustrial DevelopmentAuthority (MIDA), the RoyalCustoms Department, theMinistry of Domestic Trade &Consumer Affairs, the Ministry ofInternational Trade and Industry,the Road Transport Department,the Royal Malaysian Police andPUSPAKOM.The Division also managedvarious categories of vendorscomprising among others panelworkshops, panel transporters,panel Multimodal TransportOperators (MTOs), Petronas,CELCOM, private securityagencies, building contractors,general vendors for supply ofmaterials.Challenges and ProspectsAs TNB-owned assets aregazetted as National CriticalInfrastructure, Security Services& Intelligence Department(SSID) needs to be proactive inensuring the proper protectionfor the assets. Among initiativestaken included the formulationof strategies and mechanismsthat promote vigilance as well asbuilding networking with varioussecurity agencies.The fight against sabotagea n d t h re a t s o f t e r ro r i s mrequire comprehensive andmultifaceted strategies. Raisingawareness and educating TNBstaff of the threats, undertakingstrict compliance measures,adopting and implementingnecessary legislation and theeffective sharing of informationand intelligence at bilateral,multilateral levels multilateral andregional levels are among someof the pertinent initiatives.Among the main challengesfaced by the Property ServicesDepartment is the appropriateo u t s o u r c i n g o f i t s r o l e sand functions in propertymanagement in particularproperty maintenance servicesand project management.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]103

Sabah ElectricitySdn BhdHighlights of Achievements:The sales of electricity in the financial year amounted to RM854million compared to previous years sales of RM807 millionshowing a favourable increase of 5.8%. Total units sold for theyear amounted to kWh3,384.74 million compared to kWh3,221.34in FY2006, an increase of 5.07%.The total reported operating expenses for the financial year amountedto RM977.96 million compared to RM909.22 million reported inFY2007 (net of subsidy). The Company receives significant amountsof diesel and medium fuel oil subsidies from the Government ofMalaysia and is presented net of Energy Costs.Total operating expenditure exceeded total income (revenueplus other operating income) resulting in an operating loss ofRM16.44 million compared to an operating loss of RM3.24million in FY2007. Total finance costs and foreign exchangelosses for the financial year of RM65.03 million in FY2008(RM59.50 million in FY2007) resulted in a net loss after financecosts of RM81.47 million (RM62.75 million in FY2007).[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]104

Human Resources DivisionWith a manpower strength of2,289 staff, SESB continues todevelop the competency andcapability of its employees aspart of key strategy to enhancethe productivity and efficiency ofthe company.During the period under review,the Division had conductedvarious workshops and trainingsessions including GTD technicalcourses, Mini MBA, Kepner TregoeProblem Solving and Decision-Making, SEMS, 5S Practice,PSI (Process Standardisation &Improvement), Shared Values, andother soft-skills programmes.Some 75% of its executive and33% non-executives had availedthemselves to the training. SESBcontinued its collaboration withInstitut Latihan PerindustrianKota Kinabalu (ILPKK) in therecruitment of non-executivetechnical staff through the SkimLatihan Perantis Ketukangan.SESB adopted Kirk Patrick’sfour levels of training evaluation.Reward and Recognition initiativeswere introduced with 30 incentiveschemes. For FY2007/2008, theAKP score for HRM was 80%points. The achievement inAKP will be the prime moverfor SESB to move forward toachieve service excellence byyear 2012.Generation DivisionDuring the period under review,the total installed capacity for theGeneration Division was 871.3MW (SESB 435.8 MW and IPP435.5 MW) and the maximumdemand throughout the statewas 646.9 MW.Total cost per unit (CPU) generatedfor all SESB power stations (i.e.major, minor, rural and minihydro stations) and IPP plants forFY2007/2008 was 16.4sen/kWhwhile the CPU for SESB’s majorstations only and IPP plants was16.1sen/kWh. The overall unitgenerated and total expenditureincurred were 4,176 GWh andRM681 million respectively ofwhich minor and rural stationsaccounted for only 1.71% of thetotal unit generated and 0.53%of the total expenditure.As a strategy to reduce overallgeneration costs, the Divisionhad focused on the SESB majorstations, all IPPs and mini hydroplants. It had also optimisedpower generation from hydroand gas plants as a cost savingstrategy. Among initiatives tobe implemented to achieve thisobjective were Trash diverter IIproject at SJ Tenom Pangi andreplacement of Lateral ExhaustDucting and Damper Door atSJ Patau-Patau. Graph 1 showsthe generation fuel mix as atend August 2008. Generationfrom gas fuel accounted for 52%of the total energy, followed byMFO at 21% and hydro at 13%.During the period under review,the Sepanggar Bay PowerCorporation Phase 2 (34 MW) (anIPP project) and the PowertronPhase 2 (70 MW) project werecompleted in July and August2008 respectively. The East-West Interconnection projectwhich was completed in July2007 had enabled energy fromthe West Coast to be exportedto the East Coast and thusreducing unit generated fromthe expensive diesel-operatedGas Turbine operation at Tawauand Sandakan.Graph 1Generation Fuel Mixed as at 31 August 2008Biomass(THS) IPP2%PML IPP0.10%Gas IPP34%Hydro SESB13%MFO IPP21%Gas SESB18%DieselSESB8%Diesel(Sutra) IPP3%[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]105

Operations Review – Sabah Electricity Sdn Bhd[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]106Transmission DivisionThe key mandate for theTransmission Division is toensure supply reliability andquality. In its endeavour to fulfilthis responsibility, the Divisionhas formulated the followingobjectives:• To carry out planning,operation, maintenance andsystem improvement worksof the transmission systemt h ro u g h o u t S a b a h a n dFederal Territory of Labuan.• To operate the Sabah Grid inthe most efficient manner.• To t r a n s m i t a d e q u a t epower supply efficiently andeconomically with minimuminterruptions.T h e s u p p l y re l i a b i l i t y o ftransmission lines contributes tothe overall image of SESB astransmission lines and substationsare the linkages between supplysource and distribution system.SESB Transmission Divisionunderwent restructuring duringt h e p e r i o d u n d e r re v i e wresulting in the creation oftwo new departments - theEnergy Procurement Unit (EPU)and Operation Planning (OP).The EPU is responsible formonitoring the IndependentPower Producers (IPP), while OPwould dedicate itself to shortterm planning and forecastingfor operational purposes.Table 1Targets and Objectives1 Delivery Point Unreliability Index(DPUI)2 System Average InterruptionFrequency Index (SAIFI)Table 1 below showed the DeliveryPoint Unreliability Index (DPUI)and System Average InterruptionFrequency Index (SAIFI) achievedby the Transmission Divisionduring FY2007/2008.As indicated in Table 1, there wasa mark difference between “TotalAchievement” and “Achievementwithout Major Incident”. A majorincident is defined as a loadloss of 50 MW and above. Thesegregation between the twoscenarios is necessary for thepurpose of continuous monitoringon the effectiveness of the routineand preventive maintenanceperformances.Three major incidents thatled to the large disparity inachievement during the periodunder review were:• Total blackout on the EastCoast due to tripping of both275 kV Kolopis – Segaliudlines with a total load loss of124 MW on 30 September2007.• VT faulted at KaramunsingSub-Station with total load lossof 308 MW on 6 November2007.• Tower collapsed of 132 kValong Kayu Madang – UMSlines due to theft on towermembers with a total loadloss 459.3 MW on 21 April2008.KeyPerformanceIndicators/MeasuresTargetTotalAchievementW/O MajorIncidentSystem Minutes 42 154.38 11.89Interruption/Delivery PointThe Division had implementeda total of 21 projects form a i n t e n a n c e a n d s y s t e mimprovement. The followingseven projects were completedwhile 14 more are in variousstages of implementation.• Replacement of neutralearthing resistor (NER) atKaramunsing Sub-Stationand UMS 66 kV Sub-Stationcompleted on 1 December2007.• Installation of three-pole132 kV & 66 kV SF6 gascircuit breaker at the 66 kVSub-Stations in Tenom Town,Penampang, Kota Kinabalu,and Inanam completed on4 April 2008.• 132 kV transmission linerentice clearing for year 2008from Sandakan to SegaliudSub-Station 13 May 2008.• 132 kV transmission linerentice clearing for year2008 from Semporna toKalumpang Sub-Stationcompleted on 13 May 2008.• 132 kV transmission linerentice clearing for year 2008from Tawau to KalumpangSub-Station on 13 May 2008.• Procurement and trainingof 132/275 kV EmergencyRestoration System (ERS)Tower completed 13 June2008.0.29 1.125 0.108

• Installation of polymeric132 kV transmission linearresters (TLA) on the132 kV transmission linefrom Sandakan to SegaliudSub-Station completed on23 July 2008.Distribution DivisionUnder the SESB’s 20 YearStrategic Plan, the 3 principalKey Performance Indicators(KPIs) for which the DistributionDivision is directly responsibleare System Average InterruptionIndex (SAIDI), Losses andACP. Focus was given to theimplementation of preventivemaintenance schedule and HVsystem improvement projectsto improve supply reliability.Among the maintenance projectsimplemented were:• Vegetation Management for11 kV and 33 kV System• Preventive Maintenance forVCB switchgears at PMU andPPU• Preventive Maintenance for33 kV Transformers by MCMGraph 2System Average Interruption Index (SAIDI)for FY2005-20083,0002,5002,0001,5001,00050002,64520054,1092,583SAIDI Dx1,8501,1502006 2007 2008Graph 3Overall System Average Interruption Index (SAIDI)for FY2005-20085,0004,0003,849These initiatives would be furtherimproved in Financial Year 08/09while 52% of the budget for HVsystem improvement projects hadbeen utilised in FY2007/2008.Among projects to be givenpriority under these initiativesare the new feeders from PMUand creating feedback systemfrom existing feeders.As indicated in Graph 2the Distribution Division hadsucceeded in reducing SAIDI by700 mins while Overall SAIDI forSESB is shown in Graph 3.3,0002,0001,000020052,7171,9582006 2007 2008SAIDI GTD[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]107

Operations Review – Sabah Electricity Sdn Bhd[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]108The Metering Unit of the Divisionwhich is responsible for reducingsystem loss had outlined thefollowing critical initiatives thatwould have greatest impactsystem losses reduction especiallyNon-Technical Losses (NTL).• Scheduled Inspection on LPCMeters – 100% LPC Check• Installation of kVARH Meteron LPC Consumers• Installation of Check Meteron LPC Consumers• Replacement of Old OPC(Ordinary Power Consumers)MetersResults of these initiatives inFY2007/2008 are as indicatedin Table 2. Graph 4 showsthe System Loss recorded forFY2004-FY2008.Initiatives to reduce ACP is underthe purview of the ConsumerServices & Marketing Unit.Other than increasing the dailydisconnection activities carriedout at station level, several newinitiatives had been carried outin FY2007/2008 including:• M o n i t o r i n g t h e d a i l yperformance of MeterReaders• Daily monitoring of UnbilledAccounts• Appointing vendors to carryout disconnection – onlyexercised in Kota Kinabalu• Ongoing monitoring ofGovernment AccountsThe ACP performance forFY2007/2008 is indicated inGraph 5.Graph 4System Loss Recorded from FY2004-FY20082520151050Table 222.552004Nos. KPIs Target Achievements %1 Inspection of LPCMeters20.212 Installation of kVARHMeters3 Replacement of oldmeters OPC18.81Graph 5ACP (days) Trend FY2004-FY200892 9117.57 18.072005 2006 2007 2008Losses (%)Graph 5ACP (days) Trend FY2004-FY20081008060402002,431 1,704 70%80 80 100%62,179 22,251 36%832004 2005 2006 2007 2008ACP (days)6253

Major Projects DivisionUnder the 9 Malaysia Plan, the Federal Government had allocated RM600 million to implement 23 projectsto strengthen electricity supply mainly the transmission and distribution system in Sabah as follows:-No. Projects Status Remarks1 Extension from 132/66 kV InanamPMU to the proposed 132/33 kVMinintod PMUTransmission Line:89% completedSubstation:97% completedInanam PMU extension:12% completedOn-going2 Proposed new 132/33 kV UnggunPMU (formerly known as PMUNaval Base)Project start: June 2008Progress: 10%On-going3 Additional 132/11 kV; 1 x 20/30MVA Transformer at Lahad DatuPMUProject start: May 2008Progress: 8%The SCADA portion willbe tested once the datafreezing is lifted4 Additional 132/33 kV; 1 x 45MVA Transformer at Sandakanand Tawau PMUProject start: May 2008Progress: 8%On-going5 132 kV Kota Kinabalu Outer RingPhase 1 from Northern TownPMU to the new Kepayan PMUCommissioned on21 August 2008—6 132 kV Kota Kinabalu Outer RingPhase 2 from the new KepayanPMU to the new Lok Kawi PMUProject start: March 2008Progress: 10%On-going7 Proposed 132 kV Alam MesraPMU; 2 x 800mm 2 XLPE cu,132 kV from UMS PMUProject start: August 2007Progress: 90%On-going. First PMU to usethe Compact Air InsulatedSystem (CAIS)8 Sabah East West GridInterconnectionCommissioned on 28 July2007On average transfers70-90 MW of power fromthe West Coast to the EastCoast daily9 33 kV Overhead lines from Sookto new 33/11 kV Nabawan PPU10 33 kV Underground cable fromPMU Kepayan to PPU KKIA &MAB Kota Kinabalu11 33 kV Underground Cable fromPMU Kepayan & PMU Minintodto PPU Star City, Kota KinabaluCommissioned on11 December 2007Cable laying had beencompleted and initiallyenergised at 11 kVCable route had beenchanged due to therequirement of the authoritiesNabawan Rural PowerStation had beendecommissioned and allloads had been transferredto the new PPUCircuits will be transferredto the new 33 kV swithgearsat the Kepayan PMU instages. The PPU buildingprogress is 75%On-going. Cabling workprogress is 60%. The PPUbuilding had commenced inOctober 2008.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]109

Operations Review – Sabah Electricity Sdn BhdNo. Projects Status Remarks12 33 kV Underground Cable fromPMU Sepangar to TLDM Base,Teluk Sepanggar, Kota Kinabalu13 33 kV Underground cable fromSJ Patau-Patau to PPU W.P.Labuan14 2 x 185 mm2, 33 kV AerialBundle Cable (ABC) c/w AerialOptical Fibre cable from PMUSegaliud to PPU KinabatanganCable laying had beencompleted and initiallyenergised at 11 kV on20 May 2008Cable route had beenchanged due to therequirement of the authoritiesABC installation had beencompleted. Overall work (incl.Cable jointing) progress is80%Full completion dependenton the Unggun 132/33 kVPMU project. Tender for thePPU Building at the TLDMBase had been analysed foraward.On-going. Cabling workprogress is 20%On-goingBesides these projects undertaken by SESB, the Major Project Division is also monitoring and coordinatingthe implementation of several generation projects carried out by the Independent Power Producers andSmall Renewal Energy Programme (SREP) as follows:No. Projects Status Remarks1 Sepanggar Bay PowerCorporation (SBPC),100 MW Combined Cycle2 Ranhill Powertron (RPSB) 190 MWCombined Cycle Block 1 & 2CompletedOverall Progress is 99%Commercial Operation Date(COD) achieved on15 August 2008Steam Turbine Generator(STG)23 achieved InitialOperation Date (IOD)on 23 August 2008and performance testscommenced on 22September 20083 Ranhill Powertron II (RPSBII) Supplementary Agreementsigned. New COD (firstblock Open Cycle)8 November 2009[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]1104 SREP Projects:Sg. Kedamaian, Kota BeludSg. Pangapuyan, Kota MaruduSg. Kaingaran, Tambunan5 10 MW Kina Biopower Sdn. Bhd,Sandakan6 100 MW Seguntor BioenergySdn. Bhd. Sandakan7 5 MW Kalansa EnergyCorporation Sdn Bhd, BeluranContractual completion:6 July 2007Revised COD:23 October 2008Revised COD:30 October 2008Planned —Delays do not providepenalty clauses. Affected byM&E material deliveries andunresolved land mattersOn-goingOn-going

Organisation DevelopmentDivisionProcess Standardisation andImprovement (PSI)SESB launched the PSIprogramme on 27 November2007. SESB’s Quality Manual,9 General Procedures, 175 Level2 procedures and 216 workinstructions were developedthrough a joint effort of themanagement team and selectedkey personnel of the Company.34 staff members were trained asISO Lead Auditors and another64 staff members were trained asISO Auditors to facilitate InternalQuality Audit exercise and PSIimplementation programme inSESB. SESB’s Quality Manualand 9 General Procedures hadbeen submitted to SIRIM foradequacy audit in preparation forISO 9001:2000 compliance audittargeted for September 2008.S E S B M a n a g e m e n t Te a mapproved the Quality Frameworkas depicted in Figure M1 below on9 November 2007; thus enablinga structured implementationo f q u a l i t y i n i t i a t i v e s a n dstaff participation and hencepromoting team work. TheQuality Council headed by theManaging Director, oversees theplanning, execution, correctiveaction and review of all qualityinitiatives through regular QualityCouncil meetings. Each qualityinitiative is headed by a ProjectChampion who promotes, plans,coordinates and reviews progressof the quality initiative.Figure M1Quality FrameworkMCMSESBQuality CouncilQuality SecretariatISOSEMS AKP AUDIT GRR BMQualityWIT Secretariat CFT EWRM BMWAProject ChampionChange AgentSOPSug-ScnmSV5SetcHQWG1SC1WC7WC1WG2StationCoordinatorSC2WilayahCoordinatorWC6ProjectChampionWC2WG3WG4WG5WG = Working GroupSC3TxPSSC = Station CoordinationWc5WC4WC3WC = Wilayah Coordinator[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]111

Operations Review – Sabah Electricity Sdn Bhd[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]a.b.AKP InitiativesA work group leader wasappointed by the QualityCouncil to spearhead eachof the nine (9) AKP criteria.A w o r k i n g c o m m i t t e ewas also formed for eachwork group to developimplementation work plans forthe respective group, gatherand collate evidence foractivities conducted, preparepresentation materials andfinal report for submission toTNB. SESB scored 700 pointsfor AKP in FY2006/2007, andthe target for FY2007/2008is 750 points.WIT/CFTDuring FY2007/2008, 50‘Work-Improvement Teams,’(WIT) and 33 ‘Cross-Functional Teams,’ (CFT) wereformed from among the staffto address specific issuesaffecting performance ofthe company. Based on theQuality Framework structure,each of the WIT and CFTteam was headed by aProject Champion. Some ofthe CFT projects had begunto bear fruits such resultsas ‘rentice management,’‘reducing system losses,’and ‘data integrity in meterreadings’. A ‘7 Quality Tools’course was also organised for25 potential WIT facilitatorsto enable them to facilitateWIT projects.c.d.5S programmeThe 5S programme wasinitiated in SESB in November2007. A Project Championwas appointed to overseethe overall 5S programmescovering 34 stations. 90staff members were trainedas internal 5S auditors whoin turn conducted quarterlyinternal audits on all the 34stations. The internal auditsexercise has contributed toa reduction of stations with‘zero STAR’ rating from 19 to6, improved the number ofstations with ‘4 STAR’ ratingfrom 0 to 8, and 1 stationachieved a ‘5 STAR’ rating.Concerted efforts by the 5SProject Champion and 5SStation Facilitators coupledwith the continuous supportfrom the management led to11 stations being conferred5S certification by MalaysiaProductivity Centre (MPC) inJuly 2008.Safety and EnvironmentManagement System (SEMS)SEMS programme had beenin practice in SESB since2002. With the introductionof Quality Framework in2007, the SEMS programmesucceeded in making majorheadway, an indication ofstaff commitment towards‘safety and health’ at theirrespective work place. 118staff members were trainedas SEMS auditors. The jointconcerted efforts of theSEMS Project Championand Station Facilitators hadresulted in the reduction ofnumber of stations having‘zero STAR’ rating from 4 to0 , and increased the numberof stations having ‘2 STAR’rating from 9 to 20.e. Shared ValuesSESB initiated a ‘SharedValues’ quality initiativebased on the 5 Shared Valuesnamely: integrity, customerfocus, business and servicesexcellence, and caring.A Project Champion hasbeen appointed to drive theinculcation of Shared Valuesthroughout the Company.A ‘Shared Values’ programmewas conducted by ILSASon 13-14 May 2008 for40 change agents from variouszones and departments inSESB.Information System DivisionOne key focus of the IT initiativefor the year is the company-widedissemination of information toall staff in SESB through theIT Infrastructure. Kiosks wereplaced at 33 strategic sitesat SESB local offices whereinformation from SESB Website,Intranet and shared systemscould be accessed by thosenot provided with individualPC workstations such as fieldstaff, security personnel, driversand general workers. Commonemail addresses are assignedfor these staff at the Kiosksto facilitate better and fastercommunications. PC penetrationlevel in SESB has exceededits target of 90% following theinstallation of the kiosks.Another major improvement isthe replacement of 9.6kbps and128kbps data-communicationlines with streamyx 1.5Mbpsat eleven SESB branch offices.Beside improving the responsetime, the Company was ableto realised an annual saving ofRM185,000 from the reducedline rental charges.112

Vegetation and MaintenanceManagement System developedin-house was implementedin March 2008. This systemfacilitates better management ofthe clearing of vegetation alongdistribution power line networkas part of the effort to reduceSAIDI.Other InitiativesCorporate Social ResponsibilityAs one of the largest GLC in SabahSESB is mindful of the fact thatits success is not only measuredby the company’s performancebut also the extent to which ithas contributed to the well beingof the community, humanity,society and environment. Variousactivities, functions and eventshad been organised to promotegoodwill with the government andcommunity as well as to enhanceSESB’s corporate image.The Company fully subscribesto the concept of giving backto the society. Hence thetheme for SESB’s CorporateSocial Responsibility is ”CaringFor Future Development”which focus on education,health, environment and ruralelectrification.For FY2007/2008, SESB hasallocated RM50,000.00 for itscorporate social responsibilityprogrammes which coverscontributions to charitablecause and community welfares e r v i c e s i n c l u d i n g a m o n gothers, donations to ThalesemiaAssociation.ProspectsA comprehensive Power Planfor SESB covering the threecore businesses of Generation,Transmission and Distribution hasbeen drawn up to year 2025.The forecast demand growth ofelectricity is at 7.7% per annumup to year 2010. To support thegrowing demand as well as toimprove the reliability of supply,various generation, transmissionand distribution projects will beimplemented.SESB has set a target of 90%electrification by 2010 to enablemore people in the state havingaccess to electricity in an effortto contribute towards the socialand economic development ofSabah.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]113

Corporate InformationBoard Of DirectorsTan Sri Leo Moggie(Non-IndependentNon-Executive Chairman)Dato’ Sri Che Khalibbin Mohamad Noh(President/Chief Executive Officer)(Non-IndependentExecutive Director)Dato’ Puteh Rukiahbinti Abd Majid(Non-IndependentNon-Executive Director)Dato’ Mohammad Zainalbin Shaari(Non-IndependentNon-Executive Director)Tan Sri Dato’ Lau Yin Pin@ Lau Yen Beng(Senior IndependentNon-Executive Director)Tan Sri Dato’ Hari Narayanan a/lGovindasamy(IndependentNon-Executive Director)Dato’ Zainal Abidin bin Putih(IndependentNon-Executive Director)[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]114Board Audit CommitteeTan Sri Dato’ Lau Yin Pin @Lau Yen Beng(Chairman of the Committee)Dato’ Mohammad Zainalbin ShaariTan Sri Dato’ Hari Narayanana/l GovindasamyDato’ Zainal Abidin bin PutihRegistered Office And Head OfficeBoard Nomination AndRemuneration CommitteeTan Sri Leo Moggie(Chairman of the Committee)Dato’ Mohammad Zainalbin ShaariTan Sri Dato’ Hari Narayanana/l GovindasamyDato’ Fuad bin JaafarTan Sri Dato’ Seri Siti Normabinti YaakobTenaga Nasional BerhadNo. 129, Jalan Bangsar59200 Kuala Lumpur, MalaysiaTelephone : 603-2296 5566Facsimile : 603-2283 3686Website : www.tnb.com.myWhistle Blowing Information System : Toll Free 1-800-888-862http://wbis.hq.tnb.com.myCompany SecretariesNor Zakiah binti Abdul Ghani(LS 0008795)Wan Marzimin binWan Muhammad(LS 0009013)Share RegistrarSymphony Share RegistrarsSdn. Bhd.Level 26, Menara Multi-PurposeCapital SquareNo. 8, Jalan Munshi Abdullah50100 Kuala Lumpur, Malaysia

Dato’ Fuad bin Jaafar(IndependentNon-Executive Director)Tan Sri Dato’ Seri Siti Normabinti Yaakob(IndependentNon-Executive Director)(Appointed w.e.f.12 September 2008)Datuk Zalekha binti Hassan(Alternate Director to Dato’ PutehRukiah binti Abd Majid)(Non-IndependentNon-Executive Director)(Resigned w.e.f. 28 January 2008)Datuk Mohd Zaid bin Ibrahim(Non-IndependentNon-Executive Director)(Resigned w.e.f. 18 March 2008)Principal BankersMalayan Banking BerhadLevel 1, Tower ADataran MaybankNo. 1, Jalan Maarof59000 Kuala Lumpur, MalaysiaCIMB Bank BerhadNo. 21 & 23, Lorong Ara Kiri 1Lucky Garden, Bangsar59100 Kuala Lumpur, MalaysiaBank Islam Malaysia BerhadKL Sentral BranchGround FloorNo. CS/3B/G, Block 3BPlaza Sentral, KL Sentral50474 Kuala Lumpur, MalaysiaExternal AuditorMessrs PricewaterhouseCoopers(No. AF: 1146)Level 10, 1 SentralJalan TraversKuala Lumpur SentralP. O. Box 1019250700 Kuala Lumpur, MalaysiaStock Exchange ListingMain BoardBursa Malaysia Securities BerhadMalaysiaRatings(as at 9 October 2008)Baa1BBBAA1AA+(Moody’s)(Standard & Poor’s)(Rating Agency Malaysia)(Malaysian RatingCorporation Berhad)American DepositoryReceipts Programme (ADR)ADR Level 1[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]115

Group Corporate StructureAs at 9 October 2008TNB ENGINEERING CORPORATION SDN. BHD. (100%)TNB ENGINEERS SDN. BHD. (100%)TNB ENERGY SERVICES SDN. BHD. (100%)TNB FUEL SERVICES SDN. BHD. (100%)TNEC CONSTRUCTION SDN. BHD. (100%)TNEC OPERATIONS AND MAINTENANCESDN. BHD. (100%)BANGSAR ENERGY SYSTEMS SDN. BHD.(100%)TNB JANAMANJUNG SDN. BHD. (100%)JANA LANDFILL SDN. BHD. (70%)TNB POWER DAHARKI LTD. (100%)TNB REPAIR AND MAINTENANCE SDN. BHD. (100%)TNB LIBERTY POWER LIMITED (100%)[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]116TNB 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 INTEGRATED LEARNING SOLUTIONSDN. BHD. (100%)(Formerly known as TNB Kulim Distribution Sdn. Bhd.)TNB COAL INTERNATIONAL LIMITED. (100%)SABAH ELECTRICITY SDN. BHD. (75%)MALAYSIA TRANSFORMER MANUFACTURINGSDN. BHD. (100%)TENAGA SWITCHGEAR SDN. BHD. (60%)KAPAR ENERGY VENTURES SDN. BHD. (60%)ORION MISSION SDN. BHD. (100%)TNB OPERATIONS & MAINTENANCEINTERNATIONAL LTD (100%)TRICHY POWER LIMITED (100%)TRICHY ENERGY LIMITED (100%)TENAGA MICROWAVE TECHNOLOGIESSDN. 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%)LAHAD DATU HOLDINGS SDN. BHD. (100%)

Associate /Investment CompaniesJIMAH ENERGY VENTURES HOLDINGSDN. BHD. (20%)TOMEST ENERGY MANAGEMENTSDN. BHD. (51%)SELESA ENERGY SYSTEMSSDN. BHD. (70%)FIBRECOMM NETWORK (M) SDN. BHD.(49%)TEKNOLOGI TENAGA PERLISCONSORTIUM SDN. BHD. (20%)PERUSAHAAN OTOMOBIL ELEKTRIK(MALAYSIA) SDN. BHD. (20%)GB3 SDN. BHD. (20%)LABUAN REINSURANCE (L) LTD. (10%)OASIS PARADE SDN. BHD. (100%)SAUDI-MALAYSIA OPERATIONAND MAINTENANCE SERVICESCOMPANY LIMITED (30%)FEDERAL POWER SDN. BHD. (8.91%)BAKUN HYDRO-ELECTRIC CORPORATIONSDN. BHD. (6.67%)ELECTROSTORM INC. (1.58%)Trust FoundationYAYASAN TENAGA NASIONALRETIREMENT BENEFIT TRUST FUNDMALAYSIAN SHOAIBACONSORTIUM SDN. BHD. (20%)LAHAD DATU ENERGY SDN. BHD.(100%)SAUDI-MALAYSIA WATER &ELECTRICITY COMPANY LIMITED(50%)Note:The complete list ofcompanies under TenagaNasional Berhad is set outin Notes 15 to Notes 16 tothe Financial Statements onpage 218 to page 225 ofthis Annual Report.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]117

Calendar Of Corporate EventsSeptember 200710 September 200758th AnniversaryCelebrationTNB held an annualgathering to commemorateits 58th anniversary. Thecelebration which washeld at Kilat Club wasbroadcasted to all 25 TNBstations nationwide viavideo conferencing.October 20078 October 2007E-Vendor RegistrationTNB launched its On-Line Vendor Registrationthat helped to simplifyand speed up vendorregistration process.TNB – PERKEMCollaborationA ceremony was held tomark the exchange of theDocument of Collaborationbetween TNB and PERKEM(Association of MalayElectrical and MechanicalContractors). It was partof the initiatives under theTNB Bumiputera VendorDevelopment Programme.October 200725 October 2007FY2007 4th QuarterResults AnnouncementTNB announced its 4thquarter unaudited financialresults for FY2007.10 September 2007 8 October 200725 October 20078 October 2007[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]119

Calendar Of Corporate EventsNovember 20072 November 2007T7 Final Review SessionTNB conducted a FinalReview Session to markthe successful completionof its T7 Strategy by theclose of FY2007. T7 laid thefoundations for TNB to beamong the best companiesin Malaysia by inculcatinggoal-oriented culture.Signing Ceremony ofAgreement for TNBREMACO & TurboCare SpATNB Repair andMaintenance Sdn Bhd(TNB REMACO) forged analliance with multinationalTurboCare SpA Group whichprovided it with full accessto technology and skill viatechnology transfer. Anagreement to formalise thearrangement was signed on2 November 2007.December 200713 December 2007Annual General MeetingTNB held its AnnualGeneral Meeting for year2007 during which thirteenresolutions were passed.January 200810 January 2008Ma’al Hijrah CelebrationsTNB participated in theMa’al Hijrah 1429H nationallevel celebrations.21 January 20082nd Surveillance AuditSIRIM QAS InternationalSdn. Bhd. conductedthe “Second SurveillanceAudit” on TNB’s ProcessStandardisation andImprovement (PSI) toenhance customer serviceexcellence.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]2 November 20072 November 200713 December 200710 January 200821 January 2008120

15 April 2008February 200818 February 2008Majlis Malam Usahawan/Vendor TNB 2008TNB hosted a dinner forits registered entrepreneursand vendors as part of itssupport and commitmenttowards its BumiputeraDevelopment Programme.March 200818 March 2008MoU between Felda &JPowerTNB signed aMemorandum ofUnderstanding with FELDAPalm Industries Sdn Bhdand Japan’s J-Power todevelop a biomass powerplant at Jengka, Pahang.April 2008Visit by Yunan Power GridCorporation (YPGC)The Yunan Power GridCorporation (YPGC) visitedTNB Headquarters aspart of its study tour tofamiliarise itself with theregulatory regime governingthe energy sector.19 April 2008Long Service AwardTNB honoured 913 staff fortheir long service at a LoyalService Award Ceremony forthe Central Region.18 February 2008 18 March 200815 April 200819 April 2008[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]121

Calendar Of Corporate EventsMay 20083 May 2008National-Level WorkersDay Celebration108 staff from variousdivisions and representativesof the Staff Union attendedthe National Level WorkersDay celebration organisedby the Ministry of HumanResources at Stadium PutraBukit Jalil.27 May 2008AKIPM for TNBTNB emerged as the winnerof The Prime Minister’sIndustry Excellence Awardfor 2007. It also won TheQuality ManagementExcellence Award(Category 4). Both awardswere presented by YABDato’ Seri Mohd Najib TunRazak, the Deputy PrimeMinister of Malaysia.June 20083 June 2008REPPA with Bell Eco PowerTNB signed a RenewableEnergy Power PurchaseAgreement (REPPA) with BellEco Power to enable thelatter to develop a 2 MWpower plant at Batu Pahat,Johor.17 June 2008Electric Asia ’08Expo & ForumTNB showcased theregion’s premier electricaland power industry eventnamed Electric Asia ’08Expo & Forum at the KualaLumpur Convention Centre.The event comprised ofan International Expositionas well as Conference andTechnical Symposium. It waspreviously known as TenagaExpo and Forum.June 200830 June 2008The BrandLaureate SocieteAwards 2008TNB won The BrandLaureateSociete Award 2008 forexcellence in CorporateSocial Responsibility.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]3 May 200827 May 20083 June 200817 June 200830 June 2008122

July 200829 July 2008ICT Productivity DayTNB organised its first ICTProductivity Day to promoteaffordable ICT productsoffered by several ‘associatevendors’ of its ICT Division.August 200814 August 2008Whistle BlowingInformation System (WBIS)TNB introduced the WBISwhich enables membersof the public to reportmisconduct, misbehaviouror misuse of power by TNBstaff.28 August 2008E-ApplicationTNB introduced onlineapplication for electricitysupply by consumers. Usingweb-based technology,the system provides fast,convenient and easymonitoring of electricitysupply applications.August 200831 August 2008Merdeka Parade 2008TNB participated in thePrivate Sector Category ofthe Merdeka Parade ’08held at Dataran Merdekain conjuction with the51st National MerdekaCelebrations.29 July 2008 14 August 200831 August 200828 August 2008[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]123

Media Highlights[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]124

[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]125

Statement Of Corporate GovernanceTo equip and prepare Tenaga Nasional Berhad (TNB or the Company)with the resilience to meet the current challenging environment, therapid changes and demanding global economy, volatility of materialand operational costs, it is pertinent that internal control processes andstructures must be continuously reviewed and enhanced to enable theBoard and the Management to undertake its duty and responsibilitiesin ensuring that value to its stakeholders and shareholders are met.The following are highlights of the initiatives on good corporategovernance undertaken for the year under review.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]126A review of of the roles and functionsin the President/CEO’s office to ensuregreater focus on strategic issues andto streamline our business activitieswas approved by the Board inDecember 2007. Three new Divisionsnamely Corporate Affairs, Planning andProcurement were established followingthe review. The revised organisationstructure is indicated on page 118 ofthe Annual Report.Earlier in the Financial Year, the Boardhad also endorsed the establishmentof the Fuel Procurement ExecutiveCommittee to ensure timely decisionmakingin the procurement of fuel,particularly coal, to ensure security offuel supply to the power stations andhence preventing interruption to theday-to-day operations of the powergenerating system.The composition of the Board is furtherstrengthen with the appointment ofTan Sri Dato’ Seri Siti Norma Yaakobwho brought with her distinguishedcredentials as a former member ofthe Malaysian judiciary. She is knownas a person of high esteem and anacclaimed professional in her own right.Her knowledge and experience wouldserve the Board well in assessing andevaluating legal perspectives beforedecisions are made.The Board has set clear indication ofmatters that could be delegated fordecision as well as those reservedspecifically for the Board’s approval underthe Limits of Authority (LOA). The LOAis continuously reviewed and have beenadopted by the subsidiaries. It containsboth the monetary and non-monetarylimits of authority for recommending andapproving the Company’s operational andmanagement decision making activitiesprior to execution. The LOA is thefundamental and integral component ofthe Company’s Group Financial Control

and Risk Management Framework.Compliance with the LOA would promotegreater managerial discipline internallyas clear processes and procedures withproper check and control are put in placethat would in turn provide the confidencein decisions made.In line with the Company Long TermStrategic Plan to expand its businessventure internationally to sustain growth,a Policy and Strategy Document forInvestment was approved by the Board.The policy provides the guideline on thefocus area, country risks and the expectedyield on the investment made.The Board also approved a TreasuryPolicy designed to take into considerationthe best, updated prudent practicesand to a certain extent practicalnecessity to suit the current marketvolatility affecting treasury activities ofthe Company. The policy takes intoconsideration the requirements of thenew accounting standard applicable tothe financial instruments. The TreasuryPolicy is structured with the followingsub-policies namely:• Credit Risk Policy• Liquidating Risk Policy• Interest Rate Risk Policy• Foreign Exchange Risk Policy,• Investment Policy,• Permitted Instrument,• Monitoring Policy of TNB RetirementBenefit Trust Fund (RBTF) and• Settlement Policy.To inculcate good discipline among TNBemployees and its subsidiaries, an Anti-Fraud Policy Statement was also approvedby the Board. It provides guidelinesthat would encourage the enhancementof integrity and good values over andabove the the continuing observance ofthe existing code of ethics.An Investor Relations Policy was put inplace to ensure a transparent and timelydisclosure of the Company development,to the stakeholders. This policy isintended to provide guiding principles forTNB in its quest to ensure that investorrelations functions, activities and effortsare effective, timely and informative.It also aims to build continuous, longtermrelationships and credibility withshareholders and potential investorsbased on trust, transparency and agreater understanding of the Companyand its businesses.Compliance of these internal policiesand strategies will ensure due diligentand care are reinforced in the interestof the Company and its stakeholders.This culture would in turn bring aboutgood performance which is a strongindicator for current and better long termperformance and risk management bythe Company.To further strengthen the application ofthe existing Whistle Blowing activities inthe Company, a toll free 1-800-888-862Whistle Blowing Implementation Systemwas officially launched on 14 August 2008.Alternatively, feedback and complaintsfrom the public can also be channelledto http//wbis.hq.tnb.com.my.In the period under review, the Companyhas won recognition and accolades fromvarious organisations and professionalbodies as indicated in pages 10 to 15 ofthe Annual Report.The Board of Directors of TNB remainscommitted to improve corporategovernance practices to ensure that thehighest standards of corporate cultureare practised throughout the Group inthe interest of shareholders. The Boardis pleased to report to the shareholderson the manner TNB has strengthenedits application of the principles ofcorporate governance and adoption ofthe corporate governance best practiceslaid down in the Malaysian Code onCorporate Governance (the Code).(A) THE BOARD OF DIRECTORST h e B o a rd i s d e t e r m i n e d a n dcommitted with its responsibility ingoverning, guiding and monitoringthe direction of the Company with theeventual objective of enhancing longterm sustainable value creation alignedwith the interests of shareholders, whiletaking into account the interests of otherstakeholders. The Board is committedto ensure good corporate governancepractices are well applied inline withthe principal responsibilities outlined inthe Code and operates within a set ofgovernance as set out below:-Composition of the BoardThe Board of Directors of TNB consistsof nine (9) members comprising one(1) Non-Executive Chairman, one(1) Executive Director and seven (7)Non-Executive Directors. The diversebackground of members drawn fromsuch varied fields as finance, law,engineering, management and publicadministration provide considerabledepth and wisdom of knowledge,expertise and experience to the Boardof TNB. A brief profile of each Directoris set out on pages 154 to 159 of thisAnnual Report.Process of Appointment to the BoardAppointment to the Board of TNB ismade either by the Special Shareholderpursuant to Article 5(2) of the Company’sArticles of Association or by the Boardof Directors pursuant to Article 133 ofthe Company’s Articles of Association.The Board Nomination & RemunerationCommittee (BNRC) scrutinises thesourcing and nomination of suitablecandidates for appointment as a Directorin TNB and its subsidiary companies.This Committee will ensure the selectionof Board members with the right skillset, expertise and industry knowledgethus strengthening the composition ofthe Board and contribute significantly tothe effectiveness of the Board.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]127

Statement Of Corporate GovernanceRoles and ResponsibilitiesThe Board puts in place long termstrategic plans and reviews the shortand medium term performance on anannual basis. This is to align the longterm strategic plans and directionswith current demand of the customersand changes in the economic outlook.Monitoring the achievement of thebusiness targets is made quarterly bythe Board with monthly managementreporting on financial and technicalperformance updates.The roles and responsibilities of theChairman of the Board and the President/Chief Executive Officer are distinct andseparated. The Chairman is responsiblefor the conduct of the Board andensures that the Board’s discussions areconducted in such a way that all viewsare taken into account before a decisionis made. The President/Chief ExecutiveOfficer has the general responsibilityof running the business on a day-todaybasis thus ensures a balance ofpower and authority so as to providea safeguard against the exercise ofunfettered powers in decision-making.Accountability is part and parcel ofgovernance in TNB – whilst the Boardis accountable to the shareholders,the Management is accountable tothe Board. The Board ensures that theManagement act in the best interestsof the Company and its shareholdersby working to enhance the Company’sperformance.There is a clear division of responsibilitiesbetween the Board and the Management.The President/Chief Executive Officersupported by his team of Managementthrough Committees namely the GroupExecutive Council, Group ExecutiveManagement Committee, GroupManagement Tender Committee,Energy Supply Committee. GroupRisk Management Committee, FuelProcurement Executive Committee andthese Committees are responsible forthe implementation of Board resolutions,overall responsibilities over the day-todayoperations of the Group’s businessand operational efficiency.Operation of the BoardThe Board has established five (5) BoardCommittees. The Board has entrustedspecific responsibilities to the BoardCommittees, which operate within clearlydefined written terms of referencesbased on which the Committees wouldconduct broad and indepth deliberationof the issues before putting up anyrecommendation to the Board.A diagram outlining the main Committees involved in the decision making process is set out below:-BOARD OF DIRECTORSBOARD COMMITTEESMANAGEMENT COMMITTEESBoard AuditCommitteeBoard TenderCommitteeGroup Executive CouncilCommitteeGroup ExecutiveManagement Committee[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]Board Nomination &Remuneration CommitteeBoard DisciplinaryCommitteeBoard Finance &Investment CommitteeGroup ManagementTender CommitteeGroup Risk ManagementCommitteeEnergy SupplyCommitteeFuel ProcurementExecutive Committee128

The composition of the Board Committees and the attendance of Members at themeetings of the Board Committees are listed as follows:-Board Audit CommitteeDirectorsMeeting AttendanceTan Sri Dato’ Lau Yin Pin @ Lau Yen Beng 17/17Dato’ Mohammad Zainal bin Shaari 14/17Tan Sri Dato’ Hari Narayanan a/l Govindasamy 16/17Dato’ Haji Zainal Abidin bin Putih 15/17Board Tender CommitteeDirectorsMeeting AttendanceDato’ Puteh Rukiah binti Abd Majid 13/13Dato’ Mohammad Zainal bin Shaari 11/13Tan Sri Dato’ Lau Yin Pin @ Lau Yen Beng 13/13Dato’ Fuad bin Jaafar 13/13Board Nomination and Remuneration CommitteeDirectorsMeeting AttendanceTan Sri Leo Moggie 2/2Dato’ Mohammad Zainal bin Shaari 1/2Tan Sri Dato’ Hari Narayanan a/l Govindasamy 1/2Dato’ Fuad bin Jaafar 2/2Tan Sri Dato’ Seri Siti Norma binti YaakobBoard Finance and Investment CommitteeDirectorsnot applicableMeeting AttendanceTan Sri Leo Moggie 5/5Dato’ Mohammad Zainal bin Shaari 5/5Dato’ Haji Zainal Abidin bin Putih 5/5Tan Sri Dato’ Seri Siti Norma binti Yaakobnot applicableThe key terms of reference of the BoardCommittees are as follows:-Board Audit Committee• The terms of reference of the BoardAudit Committee are spelt out indetail under the Audit CommitteeReport.Board Tender Committee• To ensure the implementation ofand compliance with the TNBProcurement Policy and Proceduresand will make the necessaryrecommendations (if any) to theBoard. The Committee shall ensureTNB practices Best Value withintegrity and accountability;• To ensure TNB complies with theapplicable laws, regulations, rulesand guidelines to achieve BestBusiness Practices in its procurementof equipment, materials, works orservices;• The Board Tender Committee meetsat least once a month;Board Nomination and RemunerationCommittee• To identify and recommend newnominees to the Board and itssubsidiaries as well as the BoardCommittees;• To assist the Board in reviewing therequired mix of skills, experienceand other qualities, including corecompetencies which non-executivesdirectors should bring to the Board;• To implement the process formulatedby the Board designed to assessthe effectiveness of the Board;• To determine the level and make-upof remuneration for the ExecutiveDirector and Senior Managements;• T h e B o a rd N o m i n a t i o n a n dRemuneration Committee meetsas and when required and at leastonce a year.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]129

Statement Of Corporate Governance[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]130Board Finance and Investment Committee• To establish a framework of policies from which the Committee shall make itsrecommendation to the Board in relation to the management of the Company’sfinancial and investment activities.• The Board Finance and Investment Committee meets as and when required andat least twice a year.The Board MeetingsThe Board meetings are scheduled in advance and during the Financial Year ended 31August 2008, fifteen (15) Board Meetings were convened to deliberate and considera variety of significant matters including review on business plan, budget, quarterlyfinancial results, risk assessment, 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 otherrelated business matters that require their deliberation and due approval.Minutes of proceedings and resolutions passed at each Board and Board CommitteesMeetings are kept in the statutory register at the registered office of the Company.In the event of potential conflict of interest, the Director in such position will makedeclaration to that effect as soon as practicable. The Director concerned will thenabstain from any decision-making process in which he/she has interest in.Attendance Details of Board MembersDirectorsMeeting AttendanceTan Sri Leo Moggie (Chairman) 15/15Dato’ Sri Che Khalib bin Mohamad Noh 15/15Dato’ Puteh Rukiah binti Abd Majid 14/15Dato’ Mohammad Zainal bin Shaari 12/15Tan Sri Dato’ Lau Yin Pin @ Lau Yen Beng 15/15Tan Sri Dato’ Hari Narayanan a/l Govindasamy 15/15Dato’ Zainal Abidin bin Putih 15/15Datuk Mohd Zaid bin Ibrahim resigned w.e.f.18 March 2008Dato’ Fuad bin Jaafar 15/15Supply of Information to the BoardThe Board and its Committees have full and unrestricted access to all informationwithin TNB pertaining to the Group’s business and affairs.The Board Meetings are held regularly, on a monthly basis and special meetingswill be convened as warranted by specific circumstances. The Board is provided inadvance with the agenda for every Board meeting, together with comprehensivemanagement reports which includes proposal analysis, risk evaluation and supportingdocuments for the Board’s perusal. Before decisions are made, consideration isgiven to the adequacy of information available to the Board and, if necessary,decisions are deferred if further information is required.8/8All Directors have the right and duty tomake further enquiries when necessary.In most instances, Senior Managementof the Company as well as externaladvisors are invited to be in attendanceat Board Meetings to provide insightand to furnish clarification on issues thatmay be raised by the Board. Whetheras a full board or in their individualcapacities, Directors are also at libertyto take independent professional adviceon any matter connected with thedischarge of their responsibilities as theymay deem necessary and appropriate.The Board is also notified of anydisclosures/announcements made toBursa Malaysia.Board EffectivenessThe present composition, size, modusoperandi, strength of relationshipwith the Management and functionalBoard Committees contribute to aneffective Board. This is also in linewith the principle and best practicesof the Malaysian Code of CorporateGovernance (revised 2007). Apart fromthe convening of Board Meeting ona frequent basis, deliberation anddiscussion at a Board Meeting isconducted in a comprehensive and indepth manner before arriving at anydecision, as recommended by theManagement.The internal Board and Managementinteractive session held twice in thefinancial year since 2004 have provento be a useful and constructiveplatform/venue outside the Board forintensive deliberation and sharing ofviews and opinion between Board andManagement to formulate strategicplan and direction of the Company.During this session too, the Board isupdated on the performance of thevarious core business divisions. Amongthe highlights of the discussion in thesesessions are coal supply scenario, otheroperational planning, human resourcedevelopment initiatives, status report onmajor projects and other developmentinitiatives.

Board Balance and IndependenceThe requirement of the Code for a boardbalance is fulfilled with IndependentDirectors forming more than one thirdof the Board.The current Board consists of five (5)Independent Non-Executive Directorsnamely Tan Sri Dato’ Lau Yin Pin, Tan SriDato’ Hari Narayanan s/o Govindasamy,Dato’ Zainal Abidin bin Putih, Dato’Fuad bin Jaafar and Tan Sri Dato’Seri Siti Norma binti Yaakob who areindependent of Management and freefrom any business relationship that couldmaterially interfere with the exerciseof their independent judgement. Thepresence of Independent Directorsassures an additional element of balanceto the Board as they provide unbiasedand independent views, advice andjudgement to all Board deliberations.Tan Sri Dato’ Lau Yin Pin is the SeniorIndependent Non-Executive Director.He is the Company’s longest servingDirector and as such has significantknowledge of the Company and itsbusiness.Re-electionPursuant to Article 133 of the Company’sArticles of Association, newly appointedDirectors are subject to re-election byshareholders at the first opportunityafter their appointment and the retiringDirectors may offer themselves for reelectionby the shareholders. In accordancewith Article 135 of the Company’s Articlesof Association all Directors are requiredto retire from office at least once in everythree (3) years.The BNRC reviews the appointment ofnew Director to the Company and itssubsidiaries taking into consideration therequired mix of skills and experiencebefore making recommendations to theBoard for approval.Further information concerning theDirectors standing for re-election at theAnnual General Meeting is included inthe Statement Accompanying Notice ofAnnual General Meeting. The detailedprofiles of Directors standing for reelectionare provided in order to enableshareholders to make an informeddecision in re-electing them.Continuing Board DevelopmentRecognising the ever increasing demandsof their role as Directors of a leadingPublic Listed Company, the Directors ofTNB continue to equip themselves withthe relevant professional advancementprogrammes particularly in corporateregulatory development and currentdevelopment in the industry.The Board members have attended andsuccessfully completed the MandatoryAccreditation Programme whilst recentlyappointed director is scheduled toattend the same in compliance withthe Listing Requirements of BursaMalaysia Securities Berhad. Variousprofessional programmes organisedby various professional bodies arealso open for the directors to attendwhich also includes training programmeby the Malaysian Directors Academy(MINDA) – Programme for BuildingHigh Performance Director organisedby Khazanah Nasional Berhad incollaboration with IMD.In addition to attending variousconferences and seminars organisedby the external organisers, the Boardalso benefit from an in-house BoardDevelopment Programme. The topicon Electricity Markets in Singaporewas presented at the in-house BoardDevelopment Programme 2008 whichprovided an in sight on the SingaporeMarket Reform. The training for theDirectors also includes site visits toNational Load Despatch Centre (NLDC)and Bangsar Regional Control Center(BRCC). A presentation on the businessplan and operation at the premise ofUNITEN and Research Centre TNBResearch provides an awareness andbetter understanding on the operationof the subsidiaries.Directors’ RemunerationProcedureThe BNRC will recommend to the Boardon the framework and the remunerationpackage for the Executive Director andSenior Management. In determining theframework, the Committee may engageprofessional advice from internal as wellas external sources.The Level and Make-Up ofRemuneration(a)The remuneration package of theExecutive Director comprises ofa fixed and variable pay whichis linked to the key performanceindicator as follows:-(i) Basic SalaryThe basic salary (which includethe statutory contributions tothe Employee Provident FundBoard) for Executive Directoris recommended by theBNRC, taking into accountthe individual performanceand information obtainedfrom independent sources onthe rates of salary for similarposition in a selected groupof comparable companies inthe market.(ii)Reward SchemeThe Group operates a bonusscheme for all employees,including the ExecutiveDirector. The criteria set indetermining the quantum ofbonus is the level of profitachieved by the Companythrough the Group’s businessactivities as compared againstthe targets. It is also linkedwith the assessment of eachindividual’s performance andcompetencies. Meanwhile theExecutive Director is providedwith Contractual bonus basedon performance.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]131

Statement Of Corporate Governance(b)The remuneration package of Non-Executive Directors comprises of the following elements:-(i) FeesThe Directors are paid fixed monthly fees and meeting allowance for each Board and Board Committee meetingattended during the year. Such fees are tabled to the shareholders of the Company for approval.(ii) Benefits-in-kindOther benefits in the form of coverage on electricity bills and reimbursement are made available as appropriate.Disclosure on Directors’ RemunerationThe details on the aggregate remuneration of directors for the financial year ended 31 August 2008 are as follows:-Name of Directors(i) Salary &(ii) Contributionto EPF(RM)Director's Fee(RM)MeetingAllowance(RM)Bonus(RM)Benefitsin Kind(RM)Total(RM)Executive DirectorsDato’ Sri Che Khalib bin Mohamad Noh (i) 600,000.00 — — 354,000.00 *97,344.00 1,170,864.00(ii) 119,520.00[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]132719,520.00Non-Executive DirectorsTan Sri Leo Moggie — 132,000.00 34,000.00 — 22,097.40 188,097.40Dato’ Puteh Rukiah binti Abd Majid — 76,000.00 31,200.00 — 10,000.00 117,200.00Dato’ Mohammad Zainal bin Shaari — **73,000.00 **44,175.00 — 35,821.18 152,996.18Tan Sri Dato’ Lau Yin Pin— 76,000.00 51,050.00 — 4,212.80 131,262.80@ Lau Yen BengTan Sri Dato’ Hari Narayanan a/l— 76,000.00 36,700.00 — 14,775.78 127,475.78GovindasamyDato’ Zainal Abidin bin Putih — 76,000.00 38,750.00 — 13,879.20 128,629.20Dato’ Fuad bin Jaafar — 71,096.00 30,600.00 — 17,602.94 119,298.94Datuk Zalekha binti Hassan (Alternate— — 500.00 — 6,738.41 7,238.41Director, resigned w.e.f. 28 Jan 2008)Datuk Mohd Zaid bin Ibrahim(resigned w.e.f. 18 March 2008)— 48,742.00 13,850.00 — 34,048.33 96,640.33Total 719,520.00 628,838.00 280,825.00 354,000.00 256,520.04 2,239,703.04* This sum consists of RM42,000.00 for car allowance and RM55,344.00 for flexible benefits** Paid directly to Khazanah Nasional Berhad(B) SHAREHOLDERSTNB is committed to maintain a constructive relationship with its shareholders, pursuing its on-going commitment to sustainthe highest standards of corporate governance practices throughout the Group with full appreciation of its impact on long-termcorporate performance and optimal shareholder value.Relations Between the Company and InvestorsThe Board and Management of TNB recognise the importance of transparency and accountability to its shareholders andinvestors, thereby its pursuit of the highest standards of corporate governance practices throughout the Group.

W h i l s t v a r i o u s c h a n n e l s o fcommunication are optimised toprovide shareholders and investors witha balanced and comprehensive viewof the Group’s performance and theissues faced by the Group in light ofthe challenging environment, the roleof investor relations is entrenched asthe communications platform betweenthe Group and the investor at large.In this regard, the Investor Relations& Management Reporting Unit(“IRMU”), a dedicated unit under theFinance Division has been entrustedwith the responsibility of coordinatingand responding to all queries andinformation raised by shareholders,research analysts and investors. Anequal level of importance is placedon the need for investor relations tochannel the views of the investmentcommunity back to Management andthe Board of Directors.T h e A n n u a l I n v e s t o r R e l a t i o n sProgramme which serves to providethe Management opportunities andplatforms to interact with investors,analysts as well as the media. Theevents and activities scheduled in theProgramme include:-• Quarterly results announcement• Analyst briefing/conference call• Full year results announcement• Analyst briefing/conference call• Dividend payment• Preparation and release of AnnualReport• Annual General Meeting• Site visits• Investor Day/Domestic road-shows• International road-shows• Major international broker conferencesThe programme is reviewed and updatedperiodically as and when invitations forIR events are received.During the year under review, the unithad organised and participated invarious local and international eventswhich include:-• Conferences and forums organizedby research houses including CLSA,Credit Suisse First Boston, JP Morgan,Morgan Stanley and Deutsche Bank.In the Financial Year TNB attended 5of these conferences/forums.• Announcement of quarterly financialresults to the financial communityand the media. During theseevents, teleconferencing facility wasarranged to enable the investmentcommunities at major financialcenters worldwide to listen as wellas participate in the briefings. Onaverage, some 87 participants fromthe financial community and themedia attended or took part in theteleconferencing during the quarterlypresentations in the Financial Year.• The Invest Malaysia exhibitionorganised by Bursa Malaysia.• One-on-one and group meetings withequity and fixed income investorsand analysts. These meetings haveproven to be the most effectivemedium to enhance investors’understanding and perception ofthe Group. In the Financial Year,TNB attended a meeting to meetthe local fund managers organisedby CIMB.• Aside from the conferences andmeetings attended outside ofTNB premises, Management andIR frequently played host to localand international fund managersand investors who requested formeetings at TNB offices. Duringthe year under review, TNB heldapproximately 120 of such meetings(excluding Quarterly announcementof financial results).In the Financial Year, TNB hadapproximately 68 meetings with equityresearch analysts, fund managers andinvestors who had requested to meetup with company officials (excludinginvestors that were seen at conferences,road shows and quarterly financialresults presentations).Constructive Use of the AnnualGeneral MeetingThe Annual General Meeting (AGM) isthe principal avenue for shareholders tocommunicate and engage in dialoguewith the Board and Management ofTNB. The highlights of the Companytechnical and financial performancewhich is made via visual presentation ismade by the Chairman and President/Chief Executive Officer at the AGM.The turnout of shareholders at generalmeetings of TNB has always beenhigh. A total of 3835 shareholders andproxies attended the Seventeenth AGMheld in 2007.Constructive dialogue between the Boardand the shareholders are encouragedwhereby at the AGM, shareholders aregiven the opportunity to raise questionon issues pertaining to the Company’sFinancial and Operational performance.The shareholders can exercise their votingrights and the meeting is convened instrict compliance with the laws andprocedures of general meeting. Separateresolutions are proposed for separatemotions and the Chairman will declarethe outcome of each resolution afterproposal and secondment are done bythe shareholders. Each item of ordinaryand special business in the notice of thegeneral meeting would be accompaniedby a full explanation of the effects of theproposed resolution. Shareholders are alsogiven the opportunity to put forward theirquestions on the proposed resolutions andon the Group’s operations. The Chairmanwill provide sufficient time for shareholders’questions on matters pertaining to theCompany’s performance and would seekto explain to the shareholders with regardto their concern.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]133

Statement Of Corporate Governance[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]134Immediately after the AGM, theChairman and the President/ChiefExecutive Officer will address all issuesraised by the press and analysts througha press conference and an analystbriefing during which all stakeholdersare provided with the latest update onthe Company.Continuing Disclosure of MaterialInformationTNB firmly observed the continuingdisclosure obligation imposed upon alisted issuer by Bursa Malaysia. TheCompany has in place CorporateDisclosure Policy and Procedures since1994, which provides for adoption ofBest Practices in Corporate Disclosurelaid down by Bursa Malaysia in July2004. As required under the saidBest Practice, the Company Secretaryis identified as “Corporate DisclosureManager” within the context of theaforementioned Best Practice.Timely and accurate disclosure is madeon all the material information andthroughout the Financial Year underreview, the material information andthe material development thereofon acquisition, disposal, divestment,issuance of notes, proposed financingfacility, conversion of bonds, relatedparty transaction, employee shareoption scheme, notice of book closure,change in boardroom are among thematerial information released to BursaMalaysia via Bursa Malaysia Link.Confidentiality of InformationIn the conduct of briefings orpresentations, the Company takes care toensure that any information regarded asundisclosed material information aboutthe company and its operations will notbe given to any single shareholder orshareholder group.(C) ACCOUNTABILITY AND AUDITFinancial ReportingThe Directors are responsible for ensuringthat financial statements are drawn upin accordance with the requirements ofthe Companies Act 1965 and in linewith approved accounting standards inMalaysia so as to present an objectiveand understandable assessment of theGroup’s financial position and prospects.TNB publishes quarterly financial reportsso that its shareholders can monitor theCompany’s financial position regularly.In this Annual Report, an assessment isprovided in the Directors’ Report of theAudited Financial Statements.On behalf of the Board, the BoardAudit Committee (BAC) scrutinises thefinancial, statutory compliance aspectsof the Audited Financial Statementsand Companies policies and proceduresprior to full deliberation at the Boardlevel. The Board ensures the integrityof the Company’s financial reportingand fully recognise that accountabilityin financial disclosure form an integralpart of good corporate governancepractices.Relationship with the AuditorsThe Board has, through the BAC,established a formal, transparent andappropriate relationship with the Group’sAuditors, both external and internal. Areport by the Board Audit Committeeis provided in page 145 and its Termsof Reference is provided on pages 148to 151.The Board Audit Committee meetsregularly with the external and internalauditors to discuss and review the auditplan, quarterly financial results, annualfinancial statements, their audit findingsand made recommendations for theBoards approval.Internal ControlThe Board acknowledges that they areresponsible for maintaining a soundsystem of internal control to safeguardshareholders’ investment and thecompany’s assets as required by theCode. TNB adheres to Bursa Malaysiaguidelines on the Statement on InternalControl: Guidance for Directors of PublicListed Companies, as guidance forcompliance with these requirements.On 28 August and 16 October 2008,the Board Audit Committee met withthe External Auditors without thepresence of the Executive Directorand the Management to discuss onthe adequacy of the system of internalcontrol to ensure efficient and effectiveoperation and compliance with statutoryrequirements and the Companyguideline, policies and procedures.Information on the Group’s internalcontrol is presented in the Statement ofInternal Control, pursuant to paragraph15.27(b) of the Bursa Malaysia ListingRequirements is set out in pages 142to 144.RESPONSIBILITY STATEMENT INRESPECT OF THE FINANCIALYEAR UNDER REVIEW(Pursuant to paragraph 15.27(a) of theBursa Malaysia Listing Requirements)The Board is fully accountable to ensurethat the financial statements are preparedin accordance with the Companies Act1965 and the applicable approvedaccounting standards set by MalaysianAccounting Standards Board so as topresent a true and fair view, balancedand understandable assessment of theGroup’s financial position and prospects.In this Annual Report, an assessment isprovided in the Directors’ Report of theAudited Accounts.The Board Audit Committee reviewsthe statutory compliance and scrutinisesthe financial aspects of the AuditedAccounts prior to full deliberation at theBoard level.

ADDITIONAL COMPLIANCE STATEMENTApart from providing the shareholders and the stakeholders with an overview of the state of corporate governance in theCompany, TNB is also pleased to disclose the following information:(1) Utilisation of Proceeds Raised from Any Corporate ProposalThere were no proceeds raised from any Corporate Proposal in the Financial Year ended 31 August 2008.(2) Share Buy-Back for the Financial YearThere was no share buy-back exercise carried out by the Company for the Financial Year ended 31 August 2008.(3) Options, Warrants or Convertible Securities ExercisedDuring the financial year, 2,809,277 new ordinary shares of RM1.00 each were issued by the Company comprising:-a) 2,573,225 ordinary shares of RM1.00 each in TNB pursuant to the Employees’ Share Option Scheme II (‘ESOS II’) atexercise prices of RM6.71, RM6.99, RM7.42, RM7.33, RM11.07 and RM6.33 per share, andb) 236,052 ordinary shares of RM1.00 each in TNB pursuant to the conversion of Unsecured Convertible RedeemableIncome 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 sharesof the Company.The Company has been granted an exemption by the Companies Commission of Malaysia via a letter dated 18 September2008 from having to disclose in this Report the name of the persons to whom options have been granted during theyear and details of their holdings pursuant to section 169(11) of the Companies Act, 1965 except for information onemployees who were granted options representing 450,000 ordinary shares and above. Details are as set out in page177 of the Directors Report.(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 isMalayan Banking Berhad. The Bank of New York in the USA is the Depository Bank and the ADRs are traded over thecounter. As at 31 August 2008, the total number of ordinary shares held through these ADRs was 3,345,501 whichrepresented less than five per cent of the issued and paid-up capital of the 4,334,518,345 shares of TNB.(5) Sanctions/PenaltiesThere were no sanctions and/or penalties imposed on the Company and its subsidiaries, Directors or Management by therelevant regulatory bodies during the Financial Year ended 31 August 2008.(6) Non Audit FeesApart from the annual audit fees, the Group had paid non audit fees to the external auditors. The amounts paid for theFinancial Year ended 31 August 2008 are as follows:-No. Division/Subsidiary Nature of Non-Audit Fees to Auditors RM1. Group Finance-Treasury 487,212.502. Group Finance-Corporate Finance Pegasus Project 15,750.003. TNB Engineering Corporation (TNEC) Other Accounting Services 10,000.004. Liberty Power Limited (LPL) Tax Advisory Services 55,000.00*(PKR1.2 mil)* PKR 1 = RM0.04587TOTAL 567,962.50[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]135

Statement Of Corporate Governance(7) Variation in ResultsThe Company did not issue any profit forecast for the Financial Year ended 31 August 2008. As such, no commentaryis made on variation in results.(8) Profit GuaranteeThe Company did not issue any profit guarantee for the Financial Year ended 31 August 2008.(9) Material ContractsThere were no material contracts entered into by the Company and/or its subsidiaries involving directors and majorshareholders’ interest, either subsisting as at 31 August 2008 or entered into since the end of the previous Financial Yearended 31 August 2007.(10) Revaluation PolicyThe revaluation policy of the Company in relation to its landed properties is set out in Note 2(f) of the Notes to theFinancial Statements set out on pages 190 to 191 of this Annual Report.(11) Recurrent Related Party Transactions of Revenue or Trading NatureAt the Seventeenth Annual General Meeting of TNB which was held on 13 December 2007, the shareholders hadapproved and ratified all recurrent related party transaction (RRPT) of a revenue or trading nature, which are necessaryfor the day-to-day operations of the Group, entered into by the Group with certain classes of related parties from14 December 2007 until the forthcoming AGM. In accordance with paragraph 4.1.5 of Practice Note 12/2001 of theListing Requirements, a breakdown of the aggregate value of the recurrent transactions together with the type of therecurrent transactions, the related parties involved and the nature of their relationship with TNB in each type of therecurrent transaction made during the Financial Year are tabulated below:-RENEWAL OF SHAREHOLDERS’ MANDATE FOR RRPT OF A REVENUE OR TRADING NATURETransactingCompany inTNB GroupPersonsConnectedto MajorShareholder(Related PartiesInvolved)InterestedMajorShareholderNature of RelationshipNature ofRecurrentTransactionsAggregate Value(RM) of theTransaction duringthe validity of theMandate[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]TNBBangsar EnergySystem Sdn.Bhd.PutrajayaHoldingsSdn. Bhd.TelekomMalaysia BerhadKhazanahNasionalBerhadKhazanahNasionalBerhadKhazanah Nasional Berhadbeing a Major Shareholderof TNB has 15.59% interestin Putrajaya Holdings Sdn.Bhd., making the latterperson connected to theMajor Shareholder.Khazanah Nasional Berhadbeing a Major Shareholderof TNB has 41.78% interestin Telekom MalaysiaBerhad, making the latterperson connected to theMajor Shareholder.Payment ofoffice rentalCapacity andEnergy Services1,203,094.8010,848,501.00136

SHAREHOLDERS’ MANDATE FOR RRPT OF REVENUE OR TRADING NATURETransactingCompany inTNB GroupPersonsConnected to aDirector/MajorShareholder(Related PartiesInvolved)InterestedMajorShareholderNature of RelationshipNature ofRecurrentTransactionsAggregate Value(RM) of theTransaction duringthe validity of theMandateTNBOPUSInternationalKhazanahNasionalBerhadKhazanah Nasional Berhadbeing a Major Shareholderof TNB has 62.24% interestin OPUS International,making the latter personconnected to the MajorShareholder.Paymentfor projectmanagementand professionalfees433,092.75TNBMessrs. ZaidIbrahim & Co.Datuk MohdZaid binIbrahimDatuk Mohd Zaid binIbrahim being a Directorof TNB who is also theChairman and MajorityShareholder of Messrs. ZaidIbrahim & Co., making thelatter person connected toa Director.Provision ofLegal andConsultancyServices647,758.19TNBTelekomMalaysia BerhadKhazanahNasionalBerhadKhazanah Nasional Berhadbeing a Major Shareholderof TNB has 41.78% interestin Telekom MalaysiaBerhad, making the latterperson connected to theMajor Shareholder.Payment onoffice rental3,399,680.20AGGREGATE VALUE OF THE TRANSACTIONS 16,532,126.94Note: The abovementioned transactions does not equal or exceed the applicable prescribed threshold pursuant to Paragraph 2.1 of Practice Note 12/2001of the Listing Requirements.STATEMENT ON COMPLIANCE WITH THE REQUIREMENTS OF BURSA MALAYSIA IN RELATION TOAPPLICATION OF PRINCIPLES AND ADOPTION OF BEST PRACTICES LAID DOWN IN THE MALAYSIANCODE 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 isin compliance with Part 1 of the Code. Further to that, the Board remains committed to attain the highest possible standardof 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 16 October 2008.Tan Sri Dato’ Lau Yin Pin @ Lau Yen BengSENIOR INDEPENDENT NON-EXECUTIVE DIRECTOR[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]137

Enterprise Wide Risk ManagementTNB recognises that effective risk management is the key elementin the Company’s overall strategy with a focus on the on-goingimplementation of an Enterprise-Wide Risk Management (EWRM)framework to ensure that the major areas of risks are managed andcontrolled effectively.The EWRM framework ensures a uniform application of riskmanagement across the Group through standardised risk managementprocesses and Group-wide exchange of risk information.1.Overview[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]2.Tenaga Nasional Berhad (TNB) recognises that the management of principalrisks plays an important and integral part of the Group’s daily operationsand the effective identification and management of such risks will positivelyaffect the achievement of the Group’s business and strategic objectives. Theon-going implementation of an Enterprise-Wide Risk Management (EWRM)framework which was introduced since 2003 would ensure that the major areasof risks are identified, managed and controlled or mitigated effectively.The EWRM framework provides for a uniform application of risk managementacross the Group through standardised risk management processes andGroupwide exchange of risk information. As a result, the Management is ableto make conscious and informed decisions by formulating and implementingnecessary action plans and monitoring the results. As the EWRM frameworkis able to prioritise operational reviews throughout the Group, it also enablesthe development of an effective internal audit plan in the risk managementprocess. Consequently management and audit resources can also be directedto high-risk areas on an informed basis.Enterprise Wide Risk Management FrameworkThe TNB EWRM framework provides for a complete risk management cycleincorporating the assessment, reporting, treatment, monitoring and review ofthe business risks within the Group. Please see Figure 12.1 Risk Management PolicyThe TNB EWRM Policy formulatedin 2004 was reviewed during theyear to enhance the effectivenessof the framework. The secondedition was published in October2007. Further improvements weresubsequently made in the followingareas:– Streamlining of the roles andresponsibilities of the GroupRisk Management WorkingCommittee (GRMWC) to providefocus on the management ofoperational risks;– D e f i n i n g t h e r o l e s a n dresponsibilities of the RiskManager, Risk Coordinator andRisk Owner; and– Effecting changes to the EWRMreporting structure138

2.2 Risk Management StructureThe EWRM requires that a riskmanagement structure be embeddedin the framework to ensure that roles,responsibilities and accountabilitiesfor managing risk are clearlydefined and communicated. Therisk management structure (Figure 2)comprises various levels of authorityin the Group namely the Board ofDirectors, Board Audit Committee(BAC), Group Risk ManagementCommittee (GRMC) chaired by thePresident/Chief Executive Officer,Group Risk Management WorkingCommittee (GRMWC) chaired bythe Chief Financial Officer/SeniorVice President (Finance), Enterprise-Wide Risk Management (EWRM)Department, Group Internal Audit(GIA) and TNB Operating Divisions.Figure 1Enterprise Wide Risk Management (EWRM) FrameworkGroup Wide RiskAssessment ProcessBusiness reviewRisk IdentificationControlsRisk ratingRisk treatmentMonitoring and reviewRisk Policy andGuidelinesTNB RiskInformationSystem(TRIS)MitigationplansRisk TreatmentOptions– Terminate– Reduce– Accept– Pass onHalf-yearly risk assessment reportsfrom all divisions are submitted tothe EWRM Department for analysisand subsequently forwarded tothe relevant risk managementcommittees for deliberation.Risk monitoring& reportingResponse bymanagementMonitoring and review2.3 TNB ISO Quality ManualThe EWRM framework has beenidentified as one of the keysupport processes under the TNBISO Quality Manual and had beendocumented and certified by SIRIMunder the QMS MS ISO 9001:2000certification process.CoreBusinessFigure 2Risk Management StructureBOARD OF DIRECTORSBOARD AUDIT COMMITTEEGroup Risk ManagementCommittee (GRMC)Group Risk ManagementWorking Committee (GRMWC)EnterpriseManagementRisk StructureCorporateServicesEWRMDepartmentGroup InternalAudit[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]139

Enterprise Wide Risk Management3. Major Initiatives/Achievements3.1 Risk Assessment ProcessThe Group Wide Risk Assessment (GWRA) Process was reviewed and streamlined to standardise the risk managementmethodology in the Group. It focuses on identification, assessment, control and monitoring of risks. The EWRMDepartment was also involved in conducting due diligence for TNB major projects and overseas ventures incollaboration with external risk advisors.3.2 Risk Awareness & Review SessionThe EWRM Department had conducted more than 20 risk awareness and review sessions for TNB’s operatingdivisions together with the relevant Risk Managers, Risk Coordinators and Risk Owners. The exercise was to validatechanges made to the operating risks as well as to ensure that all risk profiles continue to align with TNB’s currentbusiness strategies and objectives.3.3 Risk Profile DevelopmentRisk profiles for newly established divisions and/or departments and those that underwent major restructuringwere developed to ensure that the relevant risks are clearly defined and adequately addressed. During the yearunder review, ten risk profiles were developed by the EWRM Department together with the relevant divisions andsubsidiaries.3.4 Risk Analysis on Common RisksIn the previous years several common risks across TNB were analysed and their collective impact on the Group wasassessed, in particular its exposure to legal and fraud risks as well as risk of accidents. Various recommendations tomitigate such risks were presented to and approved by the risk committees and BAC.Ongoing activities to mitigate legal risks involved assessment of TNB contract management and the standardisation ofmajor contracts as well as establishing a TNB Confidentiality Policy. In addition, audits on fraud policy and ethics wereincluded in the audit plan for the year under review and a fraud database is being compiled. In the case of risk ofaccidents, data collation and reconciliation of statistics and insurance details are ongoing and road shows are organisedto educate TNB staff with regards to this risk and the necessary mitigating action that need to be taken.3.5 Risk CommunicationRisk communication, focusing on the dissemination of risk information at all levels, forms an integral part of the riskmanagement activities in TNB.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]140Two Risk Management Forums were organised as a platform to communicate decisions made by the GRMWC, GRMCand BAC to the Risk Managers, Risk Coordinators and senior management. During the forums, risk managementissues identified in the course of risk-based audits conducted by the Group Internal Audit were highlighted. Alsodiscussed was the success of using the EWRM framework to turnaround the performance of a subsidiary.3.6 TNB Risk Information SystemThe EWRM framework requires the installation of a system that compiles and documents all risk information. For thispurpose, the EWRM Department has put in place and maintained the on-line TNB Risk Information System (TRIS),an inhouse system developed with the collaboration of the ICT Division. The department has also established a TRISHelpdesk managed by dedicated TRIS administrators to ensure the smooth running of the system.As part of continuous improvement to the system, further enhancements to TRIS had been identified and developed.In addition, regular training on TRIS were conducted throughout the year for newly appointed Risk Managers, RiskCoordinators and Risk Owners or as refresher courses for those already in service.

3.7 Project Risk Assessment ProcessThe preliminary methodology for a Project Risk Assessment Process was approved by GRMWC and GRMC. Theprocess serves as a risk assessment tool to identify, analyse and manage risks associated with a project throughoutits lifecycle. Further enhancement to the methodology and the development of a project risk assessment system isplanned for the next financial year.3.8 Implementation & Review of Curriculum for Risk ManagementThe EWRM Department has successfully developed and implemented the first “Introduction to Risk Management”curriculum with the guidance and cooperation of TNB’s training institute, ILSAS. During the period under review,at least two training courses had been conducted by certified trainers with registered participants from the variousdivisions. A review of the curriculum was carried out by the year-end to further improve the module.4. Corporate Emergency Response Plan (CERP)The TNB Corporate Emergency Response Plan (CERP) has been developed for the Group to provide a framework thatenables a prompt, coordinated and effective response to foreseen or unforeseen emergency situations. The CERP SteeringCommittee, headed by the Senior Vice President (Operations & Technical) who is also the Crisis Commander, providesguidance on the formulation of the CERP and the cascading of the plan to the divisions across TNB. The SteeringCommittee also ensures that structured testing and simulation exercises are carried out and that adequate training isprovided to key personnel including members of the Crisis Management Team.In addition, the CERP document for System-Related Emergencies was printed and distributed to the relevant personnelwithin TNB. Awareness training sessions were carried out across the Group in collaboration with the System OperationsDepartment of the Transmission Division to enhance the understanding of the various elements of the CERP, to ensurepreparedness for any emergency situation and to give emphasis on the necessary collaboration between the coredivisions.The CERP Steering Committee had reviewed the TNB CERP document for Non-System Related emergencies such asfloods and pandemics. The document is scheduled for approval and implementation in the next financial year.As a company that provides essential services crucial to national security, TNB continues to collaborate with externalparties and various government agencies in particular the National Security Council, the Chief Government SecurityOfficer, the Prime Minister’s Department and the Ministry of Health. TNB had also participated in the various drills onpandemic and cyber threats organised by the relevant government agencies.5. ConclusionCentral to the success of risk management is the ability to successfully embed risk management culture and processeswithin the Group. Risk management initiatives within TNB will continue to be strengthened to ensure that TNB is ableto respond effectively to the continuing changing business environment while achieving its objectives to protect andenhance stakeholders’ value.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]141

Statement Of Internal ControlBoard ResponsibilityThe Board of Directors (Board) is responsible for Tenaga NasionalBerhad’s Group (the Group) system of internal control. The systemis designed to meet the Group’s business objectives and safeguardshareholders’ investments, the interest of customers, regulators andemployees, and the Group’s assets. The internal control system coversthe areas of risk management, finance, operations, managementinformation systems and compliance with the relevant laws andregulations. The system provides a reasonable but not an absoluteassurance against material misstatement, loss or fraud.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]142The Board has established a frameworkfor identifying, evaluating andmanaging the significant risks facedby the Group. The framework and riskmanagement processes are reviewed atregular intervals by the Board and isin accordance with the Statement onInternal control: Guidance for Directorsof Public Listed Companies.Risk ManagementAn Enterprise Wide Risk Management(EWRM) System has been approvedby the Board and implemented by theGroup to identify, assess, treat, reportand monitor strategic and operationalrisks faced by the Group. The BoardAudit Committee (BAC) reviews theeffectiveness of the system and thereports arising from risk managementactivities undertaken during the year.The BAC is assisted by the GroupRisk Management Committee, ChiefRisk Officer, EWRM Department andoperations staff in the risk managementprocesses. Review of the EWRM systemsis undertaken by Group Internal Auditon the operating entities to provideassurance on the adequacy andeffectiveness of the system in mitigatingand controlling the risks faced by theGroup. The processes in place enablethe system to be refined and enhancedto meet the challenges and needsof the Group. During the year, thefollowing initiatives were undertaken toenhance risk management processes inthe Group:• Revision of the Procurement Policies& Procedures and EWRM Policies &Procedures to improve procurementand risk management processes,and enhance accountability andresponsibility.• Development and implementationof a risk management module aspart of a training programme toincrease employees’ risk awarenessand assist them to identify, assess,treat and monitor risks within theirscope of work.• Development and approval of theAnti Fraud Policy.• Launching of a Whistle Blowinghotline to complement the existingWhistle Blowing Procedures toprovide a more convenient feedbackmechanism, thus encouraging highertransparency and improvement inthe governance process.• Roadshows on the Group’s Codeof Ethics and the importance ofintegrity. The Anti CorruptionAgency (ACA) was invited to speakto employees on the importance ofcultivating, instilling and maintainingintegrity and good ethical practicesthroughout the organisation.• Development and implementation ofa training module on the effects offraud, the laws and enforcement onfraud, and fraud prevention in theorganisation for new managementtrainees.• Fraud and Ethics Review, comprisinga Fraud and Ethics Survey, FraudData Analysis and review of thesystem for managing fraud.• Implementation of Project RiskAssessment for projects worthRM100 million and above.

Control StructuresOrganisation Structureby the Group are:The Board has established controlstructures and is committed to evaluate,enhance and maintain them to ensureeffective strategic and operationalcontrol over the Group’s businessoperations. The following key internalcontrol structures are in place to assistthe Board to maintain a proper controlenvironment:Board and Management CommitteesIn its efforts to promote corporateg o v e r n a n c e , t r a n s p a r e n c y a n daccountability, the Board has set upBoard and Management Committeesto assist them to accomplish the vision,mission, strategies and objectives setfor the Group. The Committees overseethe areas assigned to them under theirTerms of Reference. The Committeesplay an important role to direct,monitor and ensure that the plans andoperations are in accordance with theGroup’s approved long term and shortterm business plans, and the policies ofthe Group. The Committees are:Board Committees• Audit Committee• Tender Committee• Disciplinary Committee• Nomination & RemunerationCommittee• Finance & Investment CommitteeManagement Committees• Group Executive CouncilCommittee• Group Executive ManagementCommittee• Energy Supply Committee• Tender Committees• Group Risk ManagementCommittee• Fuel Procurement ExecutiveCommitteeThe Board has implemented adivisional structure for the Group. Clearlines of authority, responsibility andaccountability have been establishedto enable the Group’s vision, mission,strategies and operational objectivesto be achieved. The divisional structureenhances the ability of each division tofocus on their assigned core or supportfunctions within the Group.The Board also reviews and refines theeffectiveness of the Group’s organisationand control structures to enhance theGroup’s ability to achieve their strategicand operational objectives and managechallenges in its operating environment.During the year, three new Divisionswere formed, being the CorporateAffairs, Planning and Group ProcurementDivisions. The regulatory relations, legal,corporate communications and companysecretarial functions were consolidatedinto the Corporate Affairs Division. Theplanning function for power systems,energy procurement and strategies weregrouped in the Planning Division. Theprocurement function was upgradedfrom a department to a division tooversee the strategic procurementmatters of the Group. The formationof the Divisions was to strengthen thefunctions as well as enhance strategicand operational performance.Management Information SystemsThe Board recognises the importanceof leveraging on information andcommunication technology to assistin providing effective and efficientbusiness operations, timely and accuratecommunication with stakeholders, andenhancing the Group’s performance inthe long term. The major systems used• Enterprise Resource ManagementSystem (ERMS)• e-Customer Information & BillingSystem (e-CIBS)• Enterprise Human ResourceManagement System (EHRMS)• Supervisory Control and DataAcquisition System (SCADA)• Remote Metering System (RMR)• Electronic Banking Facilities• Tenaga Risk Information System(TRIS)• Electronic Document ManagementSystem (EDMS)• Distribution Network InformationManagement (DNIM)Group Policies & ProceduresThe Board has approved policies andprocedures to govern the financial andoperational functions, and ethics of theGroup. The objectives of the policies andprocedures are to ensure that ethics, andinternal control principles and mechanismsare embedded in operations. This enablesthe Group to respond quickly to evolvingrisks and immediately report on anysignificant control failure. The policiesand procedures are also reviewed on aregular basis to ensure its relevance andeffectiveness. Amongst others, the policiesand procedures implemented are:• Internal Control Guidelines• Group Financial Policies & Procedures• Treasury Policy• Safety & Health Policy• Environmental Policy• Investment Policy• Procurement Policy & Procedures• Anti Fraud Policy• Disciplinary Policy & Procedures• Information & CommunicationPolicy & Codes of Practice• Enterprise Wide Risk ManagementPolicy & Guidelines• Limits of Authority• Code of Ethics• Procurement Code of Conduct• Whistle Blowing Procedures[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]143

Statement Of Internal Control[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]Special Engagement AgainstLosses Team & RevenueMaximisation UnitBoth the above entities assist the Groupin the detection and curbing of theft ofelectricity as well as improve billingand collection where theft has beenidentified.MONITORING & REVIEWBoard Interactions WithManagement via BreakoutSessionsThe Board interacts actively withmanagement during breakout sessionsto discuss and review the plans,strategies, performance and risks facedby the Group. During the year, twoBoard Breakout sessions were held.These sessions provide a monitoringand review mechanism to enhancethe Board’s effectiveness and enablesmanagement to seek mandates toaddress the risks faced in its internaland external environment. An inauguralBoard Audit Committee Breakoutsession with Senior Management wasalso held during the year to promoteawareness and importance of improvingand maintaining strong internal controlsin the Group.Business Planning & BudgetingT h e B o a r d h a s a p p r o v e d t h eimplementation of a 20 Year StrategicPlan. Business plans, budgets andKey Performance Indicators (KPI)s arealigned to the Strategic Plan. Theseserve as guides to the achievement ofthe Group’s vision of becoming amongthe leading corporations in energy andrelated businesses globally.Strategies identified in the StrategicPlan, 5 Year Business Plans, AnnualOperation Plans and KPIs are reviewed,approved and monitored by the Boardand management. Revisions are madebased on changes in business andoperating environments. Feedback fromthe Board during breakout sessions withthem is used to develop the Five Yearand Annual Operating Plans.The Five Year Business Plan and AnnualOperating Plan also contain the budgetof the Group, to enable the Groupto direct its resources towards theachievement of its financial objectives.The budget is monitored at regularintervals by management to ensureeffective budget utilisation.Financial and Operational ReviewThe Board Audit Committee (BAC)reviews the Group’s quarterly financialperformance together with management,and these are subsequently reported tothe Board. The quarterly reviews enablethe BAC to deliberate and assess theGroup’s financial results and operationalperformance. Monthly managementaccounts which serve as a monitoringtool, are also circulated to the Boardand key management staff to provideinformation on key financial results,operational performance indicators,budget comparisons to enable themto monitor and contribute towardsimproving performance.Group Internal Audit (GIA)The Group Internal Audit Department(GIA) was set up by the Board to provideindependent assurance on the adequacyof risk management, internal control andgovernance systems. GIA carries outregular reviews on the business processesto assess the adequacy and effectivenessof internal controls, compliance withregulations and the Group’s policies andprocedures, and highlight significant risksaffecting the Group. BAC meetings areheld regularly to deliberate audit findings,management response, corrective actions,and monitoring of actions taken bymanagement for areas with significant orhigh risks. GIA scope of coverage includesgeneration, transmission, distribution,projects, procurement, engineering,finance, human resources, corporateservices, information and communicationtechnology, investment in subsidiaries,risk management and compliance.GIA has an independent status inthe Group and reports functionally tothe Board through the Board AuditCommittee. GIA annual audit plans,budgets, competency and resources arereviewed and approved by the BoardAudit Committee. This is to enablereview on the adequacy of coverage,resources available and coverage ofsignificant and high risk areas. The reviewalso helps to confirm the audits that areto be co-sourced and outsourced tofacilitate transfer of knowledge fromconsultants and coverage by externalparty in areas where technical skills arenot available in GIA.ConclusionFor the financial year under review,some weaknesses in internal controlwere detected. However, after dueand careful inquiry and based on theinformation and assurance provided,the Board is satisfied that there wereno material losses as a result ofweaknesses in the system of internalcontrol, that would require separatedisclosure in Tenaga Nasional Berhad’sAnnual Report. Nevertheless, for areasrequiring attention, measures have beenand are being taken to ensure ongoingadequacy and effectiveness of internalcontrols and to safeguard shareholders’investments and the Group’s assets.This statement is made in accordancewith the resolution of the Board ofDirectors dated 16 October 2008.144

Board Audit Committee ReportThe BAC wasestablished on9 December 1990by the Board ofDirectors, to assistthem to carry outtheir responsibilities.The BAC is guidedby their Terms ofReference which isset out in pages 148to 151 of the AnnualReport.Membership And MeetingsThe Board Audit Committee (BAC) members and the number of meetings whichthey attended during the financial year were as follows:No.1.2.NameTan Sri Dato’ Lau Yin Pin @Lau Yen Beng (Chairman)Tan Sri Dato’ Hari Narayanana/l Govindasamy3. Dato’ Zainal Abidin bin Putih4.Dato’ Mohammad Zainalbin ShaariStatus ofDirectorshipNon-ExecutiveDirectorNon-ExecutiveDirectorNon-ExecutiveDirectorNon-ExecutiveDirectorIndependentNo. ofMeetingsAttendedYes 17/17Yes 16/17Yes 15/17No 14/17[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]145

Board Audit Committee Report[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]According to the BAC’s Terms ofReference, the Committee shall convenemeetings as and when required, and atleast six (6) times during the financialyear. The Committee met seventeen(17) times.The Chief Internal Auditor and CompanySecretary who is also the secretary tothe BAC were in attendance duringthe meetings. The President/ChiefExecutive Officer, and officers of thecompany were also invited to attendthe meetings on the matters requiringtheir attention and feedback.The BAC Chairman submits a reporton matters deliberated to the Board ofDirectors after each BAC meeting.Summary Of Activities Of TheBoard Audit CommitteeA summary of the activities performedby the BAC during the financial year isset out below.Risk Management• Reviewed the adequacy of theGroup’s risk management systemfor identifying and managing theGroup’s risks.• Reviewed the Group’s Bi-annualStrategic and Operating Risk Profiles,and the activities undertaken by theEnterprise Wide Risk ManagementDepartment to promote and improverisk management awareness andprocesses.• Reviewed revisions made to theEnterprise Wide Risk ManagementPolicy to extend the scope of riskmanagement activities and enhanceaccountability over risk managementprocesses.Internal Audit• Reviewed and approved GroupInternal Audit (GIA)’s Budgetand Annual Audit Plan to ensureadequacy of resources, competenciesand coverage on auditable entitieswith significant and high risks.• Reviewed internal audit reports issuedby GIA and external parties on theeffectiveness and adequacy of riskmanagement, operational, complianceand governance processes.• Reviewed the adequacy andeffectiveness of corrective actionstaken by management on allsignificant matters raised.• Deliberated the results of adhocinvestigations performed andconfirmed that appropriate actionsare taken to correct the weaknesses.• Assessed the performance of theGroup Internal Audit Department.• Conducted an inaugural BAC BreakoutSession with Senior Management toimprove internal control awareness,highlight the staff responsibilities oninternal controls and actions requiredto address common and recurringaudit findings.External Audit• Reviewed and approved the ExternalAudit Plan and the scope for theannual audit.• Deliberated and reported the resultsof the annual audit to the Board ofDirectors.• Recommended to the Board of Directorsthe appointment and remuneration ofthe Group External Auditor.• Met with the Group External Auditorwithout the presence of managementto discuss any matters that they maywish to present.Financial Results• Reviewed the Quarterly and AnnualFinancial statements of the Companyand Group including announcements,and recommended them to the Boardfor their approval.Related Party Transactions• Reviewed the system for identifying,monitoring and disclosing relatedparty transactions for TNB and itssubsidiaries.Annual Reporting• Reviewed and recommended theStatement on Corporate Governance,Statement on Internal Control, BoardAudit Committee Report, Circularto Shareholders on Related PartyTransactions and Corporate SocialResponsibility Report, to the Board forapproval.Others• Reviewed and verified that theallocation options granted underEmployee Share Option Scheme(ESOS) during the Financial Yearwere in accordance to the requiredprovisions set out under theCompany’s Scheme.• Visited Universiti Tenaga Nasional andTNB Research Sdn. Bhd. to enhanceawareness of operations and providedfeedback to management on areasrequiring improvement.146

Group Internal AuditThe internal audit function of the Groupis carried out by the GIA Department.GIA is independent and reports directlyto the BAC.GIA provides independent, objectiveassurance on areas of operationsreviewed, and advice on best practicesthat will improve and add value to theGroup.A systematic and disciplined approachis adopted to evaluate adequacy andeffectiveness of the risk management,financial, operational, compliance andgovernance processes. Internal auditactivities are aligned to the strategicplan/objectives of the company. Arisk-based methodology is adoptedto ensure that the relevant controlsaddressing risks are reviewed regularly.During the financial year, a total of 68reports covering 158 assignments wereissued. The areas of coverage includesgeneration, transmission, distribution,procurement, engineering, projects,finance, corporate governance, fraud& ethics, human resource, logistics,infor mation and communicationtechnology, investments in subsidiariesand risk management.The reports issued provide independentand objective assessment of thefollowing:• Existence, effectiveness andadequacy of the internal controlsystems to manage operations andsafeguard the Group’s assets.• Adequacy and effectiveness of the riskmanagement operations, governanceand compliance functions to manageand anticipate potential risks overkey business processes.The internal audit reports arising from theassignments were issued to managementfor their response, corrective actionsand provision of deadlines to completethe relevant preventive and correctiveactions. The reports were subsequentlytabled to the BAC for their deliberation.Management staff was present duringthe deliberation of the reports to ensurethat they undertake the responsibility ofcarrying out preventive and correctiveactions on the weaknesses reported.Tan Sri Dato’ Lau Yin Pin @Lau Yen BengChairmanBoard Audit CommitteeTenaga Nasional Berhad(Senior IndependentNon-Executive Director)[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]147

Terms Of Reference Of The Board Audit Committee[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]1481. Constitution1.1 The Board of Directors of Tenaga Nasional Berhad(TNB), in accordance with Article 146 of theMemorandum and Articles of Association of TNB,has established a Committee of the Board, knownas the Board Audit Committee (BAC), vide MinuteNo. 39/90 on 9 October 1990.1.2 The function and authority of the BAC extendsto TNB and all its subsidiaries, joint ventures andassociates where management responsibility isvested to TNB or subsidiaries of TNB (Collectivelyreferred to as the “Group”).2. Composition Of The Committee2.1 The members of the BAC shall be appointed by theBoard of Directors of TNB and shall consist of notless than three (3) members. All the audit committeemembers must be non-executive directors, withthe majority of whom shall be independent inaccordance with the definition in Bursa MalaysiaListing Requirements.2.2 Where the members for any reason are reducedto less than three (3), that Board shall within three(3) months of the event, appoint such number ofnew members as may be required to make up theminimum number of three (3) members.2.3 At least one (1) member of the Committee mustmeet the criteria set by the Bursa Malaysia ListingRequirements, i.e.:-i) must be a member of the Malaysian Instituteof Accountants orii) if he/she is not a member of the MalaysianInstitute of Accountants, he must have at least3 years’ working experience, and:-a) he/she must have passed the examinationsspecified in Part 1 of the 1st Schedule ofthe Accountants Act 1967; orb) he/she must be a member of one ofthe associations of accountants specifiedin Part II of the 1st Schedule of theAccountants Act 1967.2.4 The Board shall elect a Chairman from the Committeewho shall be an independent director as set out inthe Bursa Malaysia Listing Requirements.2.5 The term of office and performance of the Committeeshall be reviewed by the Board to determine whetherthe Committee has carried out its duties in accordancewith their terms of reference.2.6 No alternate Directors shall be appointed to theBAC.3. Chairman Of The Committee3.1 The following are the main duties and responsibilitiesof the Chairman of the Committee:3.1.1 to steer the Committee to achieve itsobjectives;3.1.2 to provide leadership to the Committee andensure proper flow of information to theCommittee, review adequacy and timing ofdocumentation;3.1.3 to provide a reasonable time for discussionat the Committee meetings. Organiseand present the agenda for Committeemeetings based on input from Membersand ensure that all relevant issues are on theagenda. In addition, the Chairman shouldencourage a healthy level of skepticism andindependence;3.1.4 to ensure that consensus is reached on everyCommittee resolution and where considerednecessary, call for a vote and the decisionwill be made by simple majority. Dissentingopinions should be captured;3.1.5 to manage the process and working of theCommittee and ensure that the Committeedischarges its responsibilities;3.1.6 to ensure that all members participate inthe discussion to enable effective decisionsto be made; and3.1.7 the Chairman of the BAC shall be availableto answer questions about the Committee’swork at the Annual General Meeting of theCompany.4. Committee Members4.1 Each Committee Member is expected to:-4.1.1 provide independent opinions to the factfinding,analysis and decision makingprocess of the Committee, based on theirexperience and knowledge;4.1.2 consider viewpoints of the other committeemembers; and make decisions andrecommendations for the best interest of theGroup;4.1.3 keep abreast of the latest corporategovernance guidelines in relation to theCommittee and the Board as a whole; and4.1.4 continuously seek out best practices in termsof the processes utilised by the Committee,following which these should be discussedwith the rest of the Committee for possibleadoption.

5. Objectives Of The CommitteeThe objectives of the Committee are:5.1 to ensure transparency, integrity and accountabilityin the Group’s activities so as to safeguard therights and interests of the shareholders;5.2 to provide assistance to the Board in fulfillingits fiduciary responsibilities relating to corporateaccounting and reporting practices;5.3 to improve the Group’s business efficiency, thequality of the accounting and audit function andstrengthening public confidence in the Group’sreported financial results;5.4 to maintain, through regularly scheduled meetings,a direct line of communication between the Boardand the External and Internal Auditors;5.5 to ensure the independence of the external andinternal audit functions; and5.6 to create a climate of discipline and control whichwill reduce the opportunity for fraud.6. Authority Of The CommitteeThe 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 toperform its duties, including approving the budgetfor 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 theGroup in whatever form;6.4 have direct communication channels with externalauditors and person(s) carrying out the internalaudit 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 InternalAudit;6.7 engage independent advisers and to secure theattendance of outsiders with relevant experienceand expertise if it considers this necessary; and6.8 to review the adequacy of the structure and Termsof Reference of the Board Committees, includingthe BAC.7. Functions Of The CommitteeThe functions and responsibilities are as follows:7.1 Corporate Financial Reporting7.1.1 To review and recommend acceptance orotherwise of accounting policies, principlesand practices.7.1.2 To review the quarterly results and annualfinancial statements of the Company andGroup before submission to the Board. Thereview should focus primarily on:i. any changes in existing or implementationof new accounting policies;ii. major judgment areas, significant andunusual events;iii. significant adjustments resulting fromaudit;iv. the going concern assumptions;v. compliance with accounting standards;andvi. compliance with Bursa Malaysia ListingRequirements and other legal andstatutory requirements.7.1.3 To review with management and the externalauditors the results of the audit, includingany difficulties encountered.7.1.4 To review and verify the allocation ofscheme options pursuant to the Company’sEmployees’ Share Option Scheme (ESOS) inaccordance to the Bursa Securities ListingRequirements as to provide a statement byaudit committee in the annual report.7.2 Enterprise-Wide Risk Management7.2.1 To review the adequacy of and to provideindependent assurance to the Board of theeffectiveness of risk management functionsin the TNB Group.7.2.2 To ensure that the principles and requirementsof managing risk are consistently adoptedthroughout the TNB Group.7.2.3 To deliberate on the key risk issueshighlighted by Group Risk ManagementCommittee in their reports to BAC.7.3 Internal Control7.3.1 To assess the quality and effectiveness ofthe systems of internal control and theefficiency of the Group’s operations.7.3.2 To review the findings on internal control inthe Group by internal and external auditors.7.3.3 To review and approve the Statement onInternal Control for the Annual Reportas required under Bursa Malaysia ListingRequirements.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]149

Terms Of Reference Of The Board Audit Committee[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]1507.4 Internal Audit7.4.1 To approve the Corporate Audit Charters ofinternal audit functions in the Group.7.4.2 To ensure that the internal audit functionshave appropriate standing in the Groupand have the necessary authority, resourcesand competency to carry out their work.This includes a review of the organisationalstructure, resources, budgets and qualificationsof the internal audit personnel.7.4.3 To review internal audit reports andmanagement’s response and actions takenin respect of these. Where actions arenot taken within an adequate timeframeby management, the BAC will report thematter to the Board.7.4.4 To review the adequacy of internal auditplans and the scope of audits, and ensurethat the internal audit functions are carriedout without any hindrance.7.4.5 To appraise the performance of Head ofInternal Audit.7.4.6 To be informed of resignations and transfersof senior internal audit staff and provideresigning/transferred staff an opportunity toexpress their views.7.4.7 To direct any special investigation to becarried out by Internal Audit.7.5 External Audit7.5.1 To nominate the External Auditors togetherwith such other functions as may be agreedto by the Board and recommend for approvalof the Board the external audit fee, andconsider any questions of resignation ortermination.7.5.2 To review external audit reports andmanagement’s response and actions takenin respect of these. Where actions arenot taken within an adequate timeframeby management, the BAC will report thematter to the Board.7.5.3 To review external audit plans and scope ofwork.7.5.4 The BAC shall meet the external andinternal auditors or both at least twice ayear to discuss problems and reservationsarising out of audits and any matters theauditors may wish to discuss, in the absenceof management, Executive Directors or nonindependentDirectors where necessary.7.6 Corporate Governance7.6.1 To review the effectiveness of the systemfor monitoring compliance with laws andregulations and the results of management’sinvestigation and follow up (includingdisciplinary action) of any instances of noncompliance.7.6.2 To review the findings of any examinationsby regulatory authorities.7.6.3 To review any related party transaction andconflict of interest situation that may arisewithin the Group including any transaction,procedure or course of conduct that raisesquestions of integrity.7.6.4 To review and approve the Statementof Corporate Governance for the AnnualReport as required under Bursa MalaysiaListing Requirements.7.6.5 To review the investor relations programmeand shareholder communications policy forthe company.7.6.6 To examine instances and matters thatmay have compromised the principles ofcorporate governance and report back tothe Board.7.6.7 To develop and regularly review TNB’s Codeof Corporate Governance and BusinessEthics.7.6.8 Where the BAC is of the view that a matterreported by it to the Board has not beensatisfactorily resolved, resulting in a breachof Bursa Malaysia Listing Requirements, theBAC must promptly report such matters toBursa Malaysia.8. Committee Meetings8.1 The Committee shall convene meetings as andwhen required, and at least six (6) times during thefinancial year of TNB.8.2 The number of Committee meetings held a yearand the details of attendance of each individualmember in respect of meetings held should bedisclosed in the annual report.8.3 The Chairman of the Committee, or the Secretaryon the requisition of any member, the Head ofInternal Audit or the External Auditors, shall atany time summon a meeting of the Committee bygiving reasonable notice. It shall not be necessaryto give notice of a Committee meeting to anymember for the time being absent from Malaysia.

8.4 No business shall be transacted at any meetingof 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 chairthe Committee meetings and in his absence,the members present shall elect one amongstthemselves to be the Chairman of the meeting.8.6 In appropriate circumstances, the Committee maydeal with matters by way of circular reports andresolution in lieu of convening a formal meeting.8.7 Officers of the Group or others as necessarymay be invited to attend meetings where theCommittee considers their presence necessary.8.8 All recommendations of the Committee shall besubmitted to the Board for approval.8.9 A Committee member shall excuse himself/herself from the meeting during discussions ordeliberations of any matter which gives rise to anactual or perceived conflict of interest situationfor the member. Where this causes insufficientDirectors to make up a quorum, the Committeehas the right to appoint another Director(s), whichmeets the membership criteria.8.10 The Committee, through its Chairman, shall reportto the Board after each meeting.8.11 Subject to the provisions of this Terms of Referenceand Memorandum and Articles of Associationof TNB, the Committee shall establish its ownprocedures for meetings.9.4 The minutes of each meeting shall be entered intothe minutes book kept at the registered office ofthe Company under the custody of the CompanySecretary. The minutes shall be available forinspection by the members of the Board, externalauditors, internal auditors, and other personsdeemed appropriate by the Company Secretary.10. Disclosure10.1 The Committee shall assist the Board in makingdisclosures concerning the activities of theCommittee, in the Report of the Board AuditCommittee, to be issued in the Annual Report.10.2 The Board requires all Directors to submit aDisclosure of Interest to avoid any conflictbetween their personal interests and the interestsof the Company. In the event of a conflict, eitherperceived or actual, this Disclosure of Interest shallbe submitted to the Chairman of the Committeewith a copy to the Company Secretary.11. Revision Of The Terms Of Reference11.1 Any revision or amendment to the Terms ofReference, as proposed by the Committee or anythird party, shall be presented to the Board for itsapproval.11.2 Upon the Board’s approval, the said revisionor amendment shall form part of this Terms ofReference and this Terms of Reference shall beconsidered duly revised or amended.9. Secretary Of The Committee9.1 The Secretary of the Committee shall be theCompany Secretary.9.2 The Secretary shall draw up an agenda for eachmeeting, in consultation with the Chairman ofthe Committee. The Agenda shall be sent toall members of the Committee and the Headof Internal Audit at least three (3) working daysbefore each meeting together with the relevantpapers.9.3 The Secretary shall promptly prepare the writtenminutes of the meeting and distribute it to eachmember. The minutes of the Committee meetingshall be confirmed and signed by the Chairman ofthe meeting at the next succeeding meeting.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]151

Board Of Directorsfrom left to right :• 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)• Dato’ Mohammad Zainal bin Shaari(Non-Independent Non-Executive Director)• 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)[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]152

from left to right :• Dato’ Zainal Abidin bin Putih(Independent Non-Executive Director)• Dato’ Fuad bin Jaafar(Independent Non-Executive Director)• Tan Sri Dato’ Seri Siti Norma binti Yaakob(Independent Non-Executive Director)• Nor Zakiah binti Abdul GhaniCompany Secretary• Wan Marzimin bin Wan MuhammadCompany Secretary[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]153

Profile Of DirectorsTan Sri Leo Moggie, 67 years of age and a Malaysian was appointedas Non-Independent Non-Executive Chairman of Tenaga NasionalBerhad on 12 April 2004. He is the Chairman of the Board Nominationand Remuneration Committee and Board Finance and InvestmentCommittee. Tan Sri Leo Moggie also sits on the Boards of Digi.ComBerhad and The New Straits Times Press (Malaysia) B erhad.Tan Sri Leo Moggie holds a Masters of Arts in History from Universityof Otago, New Zealand and a Masters in Business Administrationfrom Pennsylvania State University, USA.TAN SRI LEO MOGGIEHe held several senior ministerial positions both at the federal andstate levels prior to his appointment as Chairman of Tenaga NasionalBerhad. 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 Ministerof 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 inthe Sarawak State Civil Service from 1966 to 1974. He was also amember of Council Negeri Sarawak (1974-1978) and a Member ofParliament (1974-2004).Tan Sri Leo Moggie attended all the 15 Board Meetings held in theFinancial Year.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]154ChairmanNon-Independent Non-Executive Director

Dato’ Sri Che Khalib bin Mohamad Noh, 43 years of age and aMalaysian, was appointed as a Non-Independent Executive Directorof Tenaga Nasional Berhad on 1 July 2004. He sits on the BoardDisciplinary Committee.He is a Fellow of the Association of Chartered Certified Accounts(United Kingdom) and also a member of the Malaysian Institute ofAccountants.Dato’ Sri Che Khalib has held several key positions in the privatesector. He started his career with Messrs Ernst & Young and laterjoined Bumiputra Merchant Bankers Berhad. Between 1992 and1999, he served in several companies within Renong Group, includingProjek Lebuhraya Utara-Selatan, HBN Management Services Sdn.Bhd., Renong Overseas Corporation Sdn. Bhd. and Marak UnggulSdn. Bhd., the consortium company responsible for the managementof Keretapi Tanah Melayu Berhad. In June 1999, he joined RanhillUtilities Berhad as the Chief Executive Officer. He was the ManagingDirector and Chief Executive Officer of KUB Malaysia Berhad priorto his appointment as President/Chief Executive Officer of TenagaNasional Berhad.DATO’ SRI CHE KHALIBBIN MOHAMAD NOHPrior to joining Tenaga Nasional Berhad, Dato’ Sri Che Khalib servedas a member of the Board and Executive Committee of KhazanahNasional Berhad from 2000 till 2004. He also served as Boardmember on several of the United Engineers Malaysia Berhad Groupof Companies and Bank Industri & Teknologi Malaysia Berhad.Dato’ Sri Che Khalib attended all the 15 Board Meetings held in theFinancial Year.President/Chief Executive OfficerNon-Independent Executive Director[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]155

Profile Of DirectorsDato’ Puteh Rukiah binti Abd Majid, 55 years of age and a Malaysian,was appointed as Non-Independent Non-Executive Director ofTenaga Nasional Berhad on 13 September 2006. She is the Chairmanof Board Tender Committee and a member of the Board DisciplinaryCommittee.She is a holder of a Bachelor of Economics (Hons) from UniversitiMalaya, Malaysia and Masters (Economy) from Western MichiganUniversity, USA.DATO’ PUTEH RUKIAHBINTI ABD MAJIDShe has held various positions in the Government such as the DeputyUnder Secretary, Minister of Finance (Incorporated), Privatisation andPublic Enterprise Division (2000-2004) and later as Under Secretary,Investment, Minister of Finance (Incorporated) and PrivatisationDivision (2004-August 2006). She is currently the Deputy SecretaryGeneral (Systems and Controls), Ministry of Finance.She sits on the Boards of Perbadanan Usahawan Nasional Berhad,Pengurusan Aset Air Berhad, Pelaburan Hartanah Bumiputra Berhadand Penerbangan Malaysia Berhad.Dato’ Puteh Rukiah attended 14 out of the 15 Board Meetings heldin the Financial Year.Non-Independent Non-Executive DirectorDato’ Mohammad Zainal bin Shaari, 45 years of age and a Malaysianwas appointed as Non-Independent Non-Executive Director ofTenaga Nasional Berhad on 31 March 2007. He serves as a memberof the Board Audit Committee, Board Tender Committee, BoardFinance and Investment Committee and Board Nomination andRemuneration Committee.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]156He is presently the Executive Director/Chief Operating Officer ofKhazanah Nasional Berhad. He is also a member of the FinancialReporting Foundation.Dato’ Mohammad Zainal is a Fellow of the Institute of CharteredAccountants in England and Wales, and the Association of CharteredCertified Accountants (ACCA) of the United Kingdom. He is also aMember of the Malaysian Institute of Accountants and the MalaysianInstitute of Certified Public Accountants.He has served in various positions in the private sector including witha public accounting firm in the United Kingdom (1984-1990) andwith PricewaterhouseCoopers (1990-2002). He served a short stintwith Bina Fikir Sdn. Bhd. before being appointed to serve KhazanahNasional Berhad in October 2004.Dato’ Mohammad Zainal attended 12 out of the 15 Board Meetingsheld in the Financial Year.Non-Independent Non-Executive DirectorDATO’ MOHAMMADZAINAL BIN SHAARI

Tan Sri Dato’ Lau Yin Pin, 59 years of age and a Malaysian, is theSenior Independent Non-Executive Director of Tenaga NasionalBerhad. He was appointed to the Board of Tenaga Nasional Berhadon 25 September 1990. He chairs the Board Audit Committee andsits 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 ofCertified Accountants (ACCA), United Kingdom since 1981 and also agraduate of the Institute of Chartered Secretaries and Administration(ICSA), United Kingdom. He obtained his Diploma in Commerce(with Distinction), from Kolej Tunku Abdul Rahman. Tan Sri Dato’ LauYin Pin has served in various capacities in the private sector includingas a Public Accountant and a Business and Financial Consultant.He is the Chairman of STAR Publications (Malaysia) Berhad and sitson the Board of YTL Power International Berhad and Media ChineseInternational Limited.TAN SRI DATO’ LAUYIN PIN @ LAU YEN BENGTan Sri Dato’ Lau Yin Pin attended all the 15 Board Meetings heldin the Financial Year.Senior Independent Non-Executive DirectorTan Sri Dato’ Hari Narayanan, 58 years of age and a Malaysian, isan Independent Non-Executive Director of Tenaga Nasional Berhad.He was appointed to the Board of Tenaga Nasional Berhad on1 March 1995. He is a member of the Board Audit Committee andBoard Nomination and Remuneration Committee.TAN SRI DATO’ HARINARAYANAN A/LGOVINDASAMYTan Sri Dato’ Hari Narayanan’s directorships in other publiccompanies are S P Setia Berhad, Puncak Niaga Holdings Berhadand IEV Group Berhad.He holds a Bachelor degree in Electrical and Electronics Engineeringfrom the University of Northumbria, England.He has vast experience in the field of electrical and electronicsengineering and has held key positions at InchCape Berhad andTamco Cutler-Hammer Sdn. Bhd. He is currently the Chairman ofNoblemax Resources Sdn. Bhd. and Deputy Chairman of EmrailSdn. Bhd.Tan Sri Dato’ Hari Narayanan has attended all the 15 BoardMeetings held in the Financial Year.Independent Non-Executive Director[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]157

Profile Of DirectorsDato’ Zainal Abidin bin Putih, 62 years of age and a Malaysian wasappointed as Independent Non-Executive Director of Tenaga NasionalBerhad on 1 May 2003. He serves as a member of the Board AuditCommittee as well as the Board Finance and Investment Committee.He is presently the Chairman of the Malaysian Accounting StandardsBoard (MASB), Mobile Money International Sdn. Bhd. and a Trusteeof IJN Foundation.He is a qualified Chartered Accountant from the England and WalesInstitute. He has extensive experience in Public Accounting Practiceand has held various positions such as Partner, Executive Director,Country Managing Partner and Chairman in the firm of HanafiahRaslan & Mohammad, which merged with Ernst & Young in 2002.DATO’ ZAINAL ABIDINBIN PUTIHHe was also the past Chairman of Mentakab Rubber CompanyBerhad, Pengurusan Danaharta Nasional Berhad, a past Presidentof Malaysian Institute of Certified Public Accountant (MICPA), a pastmember of Malaysian Communication and Multimedia Commissionand a past Advisor to Ernst & Young Malaysia.He also sits on the Boards of Bumiputra-Commerce Holdings Berhad,ESSO Malaysia Berhad, CIMB Investment Bank Berhad and CIMBBank Berhad.Dato’ Zainal Abidin attended all the 15 Board Meetings held in theFinancial Year.Independent Non-Executive DirectorDato’ Fuad bin Jaafar, 65 years of age and a Malaysian, was appointedas Independent Non-Executive Director of Tenaga Nasional Berhadon 15 March 2007. He sits on the Board Tender Committee, BoardDisciplinary Committee and Board Nomination and RemunerationCommittee.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]158He is a holder of a Diploma in Technology from Brighton University,United Kingdom.He has served in various capacities during his tenure with TenagaNasional Berhad holding positions such as Assistant DistributionEngineer, Senior District Manager, Construction Engineer, AssistantSenior Construction Engineer, Senior Construction Engineer, DeputyChief Engineer/Assistant General Manager and Deputy GeneralManager. In January 1994, Dato’ Fuad became the GeneralManager for Transmission Division and later became the SeniorGeneral Manager for Energy Supply. On 4 September 1997, he wasappointed as TNB’s Chief Operating Officer and Executive Directorand subsequently on 16 October 2000 he was appointed as thePresident/Chief Executive Officer of Tenaga Nasional Berhad.Dato’ Fuad attended all the 15 Board Meetings held in the FinancialYear.Independent Non-Executive DirectorDATO’ FUAD BIN JAAFAR

Tan Sri Dato’ Seri Siti Norma binti Yaakob, 68 years of age and aMalaysian, was appointed as Independent Non-Executive Directorof Tenaga Nasional Berhad on 12 September 2008. She chairs theBoard Disciplinary Committee and serves as a member of BoardFinance and Investment Committee and the Board Nomination andRemuneration Committee.She graduated as a Barrister-at-Law from Gray’s Inn, London. Shealso holds a Certificate in Public International Law in Post-FinalsCourse, Council of Legal Education, London.She has held various senior positions in the Legal Service of Malaysiaholding such positions as Senior Assistant Registrar, President ofSessions Court, Senior Federal Counsel of Attorney General’sChambers, Deputy Public Trustee, Malaysia and Chief Registrar ofFederal Court, Malaysia. She was appointed a Judge of the HighCourt of Malaya (1983-1994), Judge, Court of Appeal, Malaysia(1994-2000). Effective 1 January 2001 she was made a Judge of theFederal Court of Malaysia and subsequently on 8 February 2005 shewas elevated as the Chief Judge of Malaya and held that positionuntil 5 January 2007.Tan Sri Dato’ Seri SitiNorma binti YaakobCurrently she sits on the Boards of KAF Investment Bank Berhad,RAM Holdings Berhad, RAM Rating Services Berhad and RAM Rating(Lanka) Limited.Independent Non-Executive Director[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]159

Group Executive Council Committee – GECC[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]160from left to right :• Dato’ Sri Che Khalib bin Mohamad Noh (President/Chief Executive Officer)• Datuk Wira Md. Sidek bin Ahmad (Senior Vice President, Operations & Technical)• Dato’ Abdul Razak bin Abdul Majid (Senior Vice President, Corporate Affairs)• Dato’ Izzaddin Idris (Chief Financial Officer/Senior Vice President, Group Finance)The Group Executive Council Committee (GECC) serves as the highest executive forum of the organisation and has a broadresponsibility of reviewing the Group’s policies, strategies and procedures in line with the Company’s mission and vision, overallperformance of the Group as well as promotions of executives.GECC is also duly responsible to co-ordinate business planning strategies and Group wide policies as well as to monitor andoversees the effective implementation of activities and performance of other Group Management Committees that covers theappointments of members of the respective committees.During the Financial Year under review, the Committee held 10 Meetings.

Energy Supply Committee – ESCfrom left to right :• Dato’ Sri Che Khalib bin Mohamad Noh (President/Chief Executive Officer)• Datuk Wira Md. Sidek bin Ahmad (Senior Vice President, Operations & Technical)• Dato’ Abdul Razak bin Abdul Majid (Senior Vice President, Corporate Affairs)• Ir. Ab’llah bin Haji Mohd Salleh (Vice President, Transmission)• Dato’ Ir. Aishah binti Dato’ Haji Abdul Rauf (Vice President, Distribution)• Mohd Nazri bin Shahruddin (Vice President, Generation)• Zainab binti Abdullah (Vice President, Planning)This Committee is the highest management forum having the authority to endorse and approve all power systemdevelopment plans and proposals for TNB in Peninsular Malaysia prior to submission to the TNB Board. The Committeealso makes decisions related to major TNB’s core business operational issues as well as issues related to the expedition ofon-going generation, transmission and primary distribution development projects in Peninsular Malaysia.During the Financial Year under review, the Committee held five Meetings.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]161

Group Executive Management Committee – GEMC[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]162standing from left to right :• Datuk Wira Md. Sidek bin Ahmad (Senior Vice President, Operations & Technical)• Dato’ Izzaddin Idris (Chief Financial Officer/Senior Vice President, Group Finance)• Dato’ Abdul Razak bin Abdul Majid (Senior Vice President, Corporate Affairs)• Ir. Ab’llah bin Haji Mohd Salleh (Vice President, Transmission)sitting from left to right :• Dato’ Sri Che Khalib bin Mohamad Noh (President/Chief Executive Officer)• Dato’ Ir. Aishah binti Dato’ Haji Abdul Rauf (Vice President, Distribution)The Group Executive Management Committee (GEMC) led by the President/Chief Executive Officer is responsible for theoverall management of the Company’s operational and financial administration. The Committee meets on a monthly basisand provides an avenue for the Senior Management to facilitate better coordination and effective interaction between theDivisions and TNB’s Group of Companies in deliberating and resolving pertinent issues by providing the best possiblesolutions to ensure implementation and execution of the necessary actions are done in accordance with the Company’swide initiatives and policies.

standing from left to right :• Mohd Nazri bin Shahruddin (Vice President, Generation)• Dato’ Nik Ibrahim bin Nik Mohamed (Vice President, Investment Management)• Dato’ Kamaruzzaman bin Jusoh (Vice President, Human Resource)• Razali bin Awang (Chief Information Officer)• Nor Azmi bin Ramli (Chief Procurement Officer)sitting from left to right :• Zainab binti Abdullah (Vice President, Planning)• Md. Jailani bin Abas (Senior General Manager, Corporate Services)Additionally it is also responsible for formulating policies, procedures, strategies and undertaking operational decisionspertaining to operational matters, corporate issues, finance, human resource, corporate affairs and entrepreneurdevelopment.During the Financial Year under review, the Committee held 15 Meetings.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]163

Corporate Social Responsibility[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]164Corporate social responsibility (CSR, currently also known as corporate responsibility) is a concept underwhich organisations consider the interests of society by taking responsibility for the impact of their activitieson customers, suppliers, employees, shareholders, communities and other stakeholders, as well as theenvironment. This obligation is seen to extend beyond the statutory obligation to comply with legislationand sees organisations voluntarily taking further steps to improve the quality of life for employees and theirfamilies as well as for the local community and society at large.As one of the nation’s leading GLCs, TNB is committed to undertaking Corporate Social Responsibility (CSR)best practices that impact positively to all our stakeholders, be they our employees, customers, partnersor the communities and the environment we operate in and above all the nation-building agenda. The farreaching impact of TNB’s CSR policy was acknowledged by the Government and was used as a benchmarkfor the pilot study on CSR for its Silver Book initiative.

As the leading power utility, TNB’sintegral role to deliver electricity tothe public efficiently and at the lowestrate possible is by far the single mostimportant CSR activity it has undertaken.The Company recognises the need andrelevance of the Government policyfor the country’s ongoing developmentand the various initiatives we haveundertaken to deliver safe, reliableand secure electricity to customers fortheir private and economic needs, aretestament to our commitment to ensuresociety will gain and benefit from thesedevelopments. With this in mind, TNBstrongly supports government drivenpolicies and initiatives such as thoseenshrined in the 9th Malaysia Plan and itaims to continue powering the country’svision of becoming a fully developednation by the year 2020.The need to support the Government hasbeen translated into the Company’s battlecry of “Powering the Nation”, which setsthe tone for our CSR activities.During the period under review, TNBcontinued to forge ahead with itsCSR initiatives in the various areas,touching the lives of many while at thesame time creating sustainable valuesin its relentless pursuit of businessexcellence.Powering CommunitiesThis is in consonance with TNB’sphilosophy of giving back to thecommunity by providing philanthropicassistance to the deserving and needyas well as implementing programmesthat create community wellness andbetter quality of life.Baiti JannatiTNB launched the Baiti Jannatiprogramme to repair dilapidatedhouses of the hardcore poor nationwidethus providing them with decent andcomfortable dwellings. Priority wasgiven to senior citizens, the disabledand single parents. To date, a total of18 houses have been repaired at anestimated cost of RM200,000.Community Leader OutreachProgramme (CLOP)TNB organised dialogue sessions withcommunity leaders and customers toget feedback on its services. CLOPserves as an alternative channelfor customers to file reports, submitrequests or forward suggestions thatwould help to improve TNB’s services.The Programme was introduced in 2005to provide a platform for TNB to buildgood relationships and networking withlocal authorities and the community atlarge.Electricity Safety and AwarenessCampaignTNB conducted an Electricity Safetyand Awareness Campaign to impartbetter knowledge on electricity safetyto the community. Among the groupsidentified for this programme are theprimary and secondary school teacherswho play an effective role in educatingand disseminating information on thesafe use of electricity to the students.The campaign was conducted throughhalf-day seminars comprising threemodules namely on Electrical Safety,Domestic Installation Safety andElectricity Safety at or near TNB’sInstallations. During the period underreview, 2,949 teachers from 10 statesbenefited from this programme.Rural Electrification ProgrammeThe programme has helped elevate thestandard of living and improved thequality of life of the rural communitieswhen some 99% of the populatedareas in the country are provided withelectricity supply compared to only 30%in 1957. The programme underscoresour commitment to nation-buildingas the costs of investment, operationand management of extended lines torural areas far superceded the revenuederived from these areas.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]165

Corporate Social Responsibility[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]Mobile Cancer Screening ProgrammeThis early detection of pre-symptomaticcancer programme was conducted bythe National Cancer Council (MAKNA)through mobile units dispatched tostrategic locations throughout thenation. Only breast, cervical, prostateand stomach cancer are targeted forearly detection. TNB has pledged anannual funding of RM200,000 to theprogramme for a period of five years.Powering EducationTNB believes that education can turndreams into reality. The Company hasa very strong tradition in producingworld-class scholars and researchersthrough its education and scholarshipp ro g r a m m e s . A m o n g t h e m a n ybeneficiaries are current businessleaders in the country who were TNBscholars who had enjoyed the educationprovided by the Company under itsscholarship programmes.Universiti Tenaga NasionalOver the years, TNB has strengthenedthis role and is now actively involvedin not only providing scholarships, butalso in providing education throughUniversiti Tenaga Nasional (UNITEN).As an institute of higher learning,UNITEN has an immense and importantresponsibility in helping the Governmentproduce well rounded individuals. TheUniversity also gives primary focus onresearch and development activitieswhich encourage and develop theculture of innovation and competitionamong the academic staff as well as itsstudents. Strategic provides access andopportunities for students and academicstaff to master knowledge as well asscientific and technical expertise thatare relevant with industrial and marketplace needs.PINTARPINTAR or Promoting Intelligence,Nurturing Talent and AdvocatingResponsibility is an education programmeconducted in collaboration withKhazanah Nasional Berhad (Khazanah),to inculcate education awareness amongthe poor families with special focus onthose located in the Northern CorridorEconomic Region (NCER), EasternCorridor Economic Region (ECER) andIskandar Development Region (IDR).The programme is supported by boththe Finance and Education Ministrieswith Khazanah taking the lead roleto collaborate with Government-Linked Companies (GLCs) to ensure itssuccess. 45 schools were adopted atthe inception of the programme.The implementation of PINTAR is inline with the Government’s call topromote public-private partnershipsfor sustainable education developmentunder the 9th Malaysia Plan and the2006 Budget. Two key thrusts of PINTAR’smission are to raise the children’smotivation to learn and to ensure aconducive learning environment.TNB has adopted 23 primary schoolsnationwide under this programme. Anannual allocation of RM520,000 has beenprovided to foster academic excellenceparticularly among rural school childrenwho will be sitting for the UPSRexamination. The contribution goestowards paying for tuition fees, the conductof engagement sessions with parents andschool teachers, motivation courses aswell as skills building workshops. To date,a total of 2,387 students had benefitedfrom this programme.PRS-UNITEN/PINTAR 2008ProgrammeThis motivation programme wasmanaged entirely by students ofTenaga Nasional’s own university,Universiti Tenaga Nasional (UNITEN)under the Persatuan Pembimbing RakanSebaya (PRS) or Association of PeerMentoring. In all 150 Standard 6 pupilsfrom Sekolah Kebangsaan Bayan Lepas,Bertam Indah and Sekolah KebangsaanSg. Ara in Pulau Pinang were selectedfor the 3-day programme which hadhelped to raise the spirit, determinationand the confidence of the pupils infacing the UPSR examination.Program Jejak KegemilanganUnder this programme, outstandings t u d e n t s f ro m r u r a l a re a s a n dunderprivileged families nationwide aretaken on a study visit to Kuala Lumpurincluding to Universiti Tenaga Nasional(UNITEN), exposing them to campuslife and inspiring them to seek greaterachievements.Program Kem Remaja BestariThis is basically an education campprogramme for children of TNBemployees as well as orphans designedto guide and inspire them to performwell in such public examinations asUPSR, PMR and SPM.Scholarships and Study LoansTNB disbursed scholarships and studyloans to outstanding and deservingstudents through its foundation, theYayasan Tenaga Nasional. The annualcontribution of RM53 million a year goesa long way in helping these students topursue their tertiary education both inlocal universities as well as at worldrenowneduniversities abroad as aneffort to build a pool of good scholarsand talents for TNB and the country.Special Needs Education ServicesTNB had made a five-year commitmentin support of the fund for educatingchildren with special needs under theSpecial Needs Education Services ofthe Ministry of Education.Education Motivation TalkTNB had conducted an educationmotivation talk for Standard 5 pupilsfrom Sekolah Kebangsaan Bebar, Pekan,Pahang dan Sekolah Kebangsaan Dato’Seri Kamaruddin, Manjung, Perak. Theprogramme was designed to guide thepupils on the systematic and effectivestudying technique besides motivatingthem to strive for excellence in theirstudies and co-curriculum activities.Most of those selected were outstandingpupils from poor families.166

Taking Motorsports to SchoolProgrammeSome 80 students and 8 accompanyingteachers from Sekolah KebangsaanBebar, Pekan, Pahang and SekolahKebangsaan Dato’ Sri Kamaruddin,Manjung, Perak were selected by TNBto watch the Petronas F1 Grand Prix atSepang, Selangor. To date, 336 studentshave enjoyed the privilege of watchingthis prestigious sporting event.TNB@SUKMA ProgrammeA total of 160 students from schoolsin Terengganu were brought by TNBto watch the final of the men andwomen hockey matches at the 12thSUKMA (Malaysian Games). This annualprogramme was organised in conjunctionwith SUKMA would provide the studentsfirst hand exposure to hockey as well asto nurture their interest in the sport.Powering Business ExcellenceTNB believes that aligning CSR initiativeswith its business strategies will bringlong term returns. On good initiativeis the support it renders to localmanufacturers and contractors throughthe Vendor Development Programme.In addition, consistently maintaininghigh standards of its businesses andoperations by ensuring adequate,safe, reliable and continuous deliveryof power supply, providing excellentcustomer service and inculcating a workculture of high integrity are among itsmany commitment in powering businessexcellence.Vendor Development ProgrammeA programme designed to develop astable and competitive supplier basefor TNB through strategic partnershipswith and support given to local vendorsin particular the Bumiputra vendors.A structured vendor managementprogramme, which involved strategicand innovative initiatives includingtraining, guidance, liaising withbanks for financing, implementationof Quality Management System anddevelopment incentives to the vendors,TNB succeeded in helping suppliersreduce costs and improve quality andlevel of service. The Company had alsopromoted vendor products overseas byleveraging on TNB banners. With theseadvantages, TNB is better positionedto face the challenges of a highlycompetitive environment in the industry.TNB is also able to help the nationachieves its development objective ofgrowth with equity.Renewable EnergyTNB has to date signed nine renewableenergy power purchase agreementswith Small Renewable Energy PowerDevelopers in Peninsular Malaysia witha total export capacity of 49.8 MW. Ithas also signed an MoU with FELDAPalm Industries Sdn Bhd and Japan’sJ-Power to develop a biomass powerplant at Jengka, Pahang.System Average Interruption DurationIndex (SAIDI)System Average Interruption DurationIndex or SAIDI is an industry standardwhich measures service reliability orservice level standard by a utility likeTNB to its customers. It is an indicationof the average duration of interruption ofservice in minutes term over a particularperiod of time. Since September 2008,TNB had used the new integrated TNBOutage Management System (TOMS)to more accurately measure SAIDI or itsservice level standards to customers.TNB Careline 15454 HelpdeskTNB Careline 15454 is a 24-hour onestopcall management centre thathandles enquiries on power supplymanagement nationwide. Using thelatest call centre telephony system, TNBCareline 15454 strives to achieve serviceexcellence by ensuring that more than90% of calls received are answeredwithin 20 seconds in order to meet aservice level of more than 75%.Toll Free WBIS SystemThis system enables members ofthe public to report misconduct,misbehavior or misuse of power orposition by TNB employees through thetoll-free line 1-800-888-862. An internalWBIS System has also been installed toenable employees to lodge report ofmisdemeanors by their peers.E-ApplicationTNB’s online application for electricitys u p p l y w h i c h c u r re n t l y t a rg e t sdevelopers of housing projects andindividual applicants. The system, whichuses web-based technology providesfast, convenient and easy monitoring ofelectricity supply applications.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]167

Corporate Social Responsibility[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]“Wayleave and Land Matters” SeminarA programme conducted jointly with therelevant Government Agencies and LocalAuthorities to share information on theexisting legislations governing land useand wayleave for the development ofhigh voltage electrical infrastructures.Powering A Green NationAs a power producer and distributor,TNB’s nature of operations requiresthe Company to take great interest inits environment. As a principle, TNBembraces the notion that any projector development undertaken by TNBmust blend and not in conflict with theenvironment its operates in.Environmental PolicyTNB has formulated an environmentalpolicy that complies with all applicablelaws and regulations and establishesstandards to protect, conserve andimprove the environment in all itsoperations and decision-making. AnEnvironmental Management System(EMS) has been implemented to ensurethat impact on the environment from itsoperations are eliminated, mitigated orminimised.Global Standards ISO 14000Audits on TNB’s corporate responsibilityinitiatives are planned and policiesand procedure are formulated toestablish compliance, achievementsand effectiveness of its environmentalinitiatives. Environmental audits areconducted at required intervals toensure compliance with TNB’s CorporateEnvironmental commitments. Inaddition, the Company also conductedtraining programmes for its employeesto develop a high level of competencyin environment protection.Firefly ConservationA project to conserve the unique fireflycolony at Kampung Kuantan was jointlyundertaken by TNB and the SelangorState Government. In addition toresearch activities, TNB had implementedfour projects to upgrade infrastructureat the Firefly Centre by building fourpavilions, a mini theatre and publicaddress system in the existing building,upgrading of the existing jetty and theaccess road as well as the square. Theprojects were part of the obligationsunder the agreement signed betweenthe two parties to the conservationproject. Earlier, the Company hadalso completed projects to refurbishthe gateway, erected TNB billboard atthe parking area as well as directionalsigns to the center at several strategiclocations from Kuala Lumpur to TanjungKarang, Selangor.Various initiatives to provide sustainablelivelihood for the boatmen operatingin the area have also been taken byTNB. These include the sponsoringof Basic Conversational Arabic andJapanese classes for the boatmen toimprove their conversational skills withArab and Japanese visitors. The classeswere conducted by trainers from TNB’sInstitut Latihan Sultan Ahmad Shah(ILSAS). Foreign language classes areuseful as the center has been receivingforeign visitors.The Company also launched ‘Lets GoTo School With TNB’ Programme aspart of financial support for children ofthe boatmen most of whom are withouta fixed source of income.Bird SanctuaryA bird sanctuary had been createdat the Sultan Salahuddin Abdul AzizPower Station at Kapar. Strict emissionregulations observed by the station hadmade its grounds the main convergingsite for birds like plovers, herons, godwit,sandpipers and egrets. This is part ofTNB’s effort to conserve our naturalheritage for the future generations.TNB Youth Motivation, Education andEnvironmental Awareness ProgrammeThe programme which was implementedsince 2003 was jointly organised byTNB and TNB Research Sdn Bhd. Itaimed to inculcate environmentalawareness among youths, particularlyschool children, by taking them throughthe following three phases:Phase 1: Environmental AwarenessCampPhase 2: Mini Projects – preservationof the environmentPhase 3: Inter-school mini projectscompetitionDuring the period under review, focuswas given to the preservation of fireflies at Kampung Kuantan (Please referto paragraph on Firefly Convervation).10 schools representing every districtin Selangor participated in the project.As at end August 2008, a total of 268student from 26 schools throughoutMalaysia had participated in thisprogramme.Powering Our Work ForceTNB believes that its employees are itsgreatest assets. Its CSR initiatives forthe employees over the year involvedsystematic training programmes andcareer development opportunities toenhance their professionalism as wellas to encourage their involvement involunteerism and extracurricular activitiesto achieve a good work-life balance.Health BenefitsTNB provides a wide range of healthand medical benefits for its staff, retireesand eligible dependents.168

Occupational Safety, Health andEnvironment (OSHE) (DistributionDivision perspective)TNB is committed to providing employeeswith a safe and healthy workplace.A programme to ensure accidents atthe workplace can be minimised, ifnot prevented, has been implementedthrough the following initiatives:• Formulation, development andenforcement of occupational safetyand health policies.• Establishment of a culture thatemphasises on occupational safetyand health.• Advice to the management of theDistribution Division on compliancewith relevant legislations andregulations.• Services of Division auditor andsecretariat for occupational safetyand health.Sports and Recreation ClubA wide range of physical and recreationalfacilities and social activities are providedthrough the Kilat Club to enhanceemployee well-being and morale. TNBhad spent some RM470,000 to financesports and social activities through theClub.The 5S Programme5S is a management tool that focuses onproviding a conducive and productivework environment. It owes its originto five Japanese words namely seiri,seiton, seisa, seiketsu and shitsuke. It isa foundation for all other productivityimprovement initiatives. Another benefitof activities under 5S is the enhancementof teamwork.Powering ChampionsSports has always been on TNB’scorporate agenda. The Company’s highregard for sports lies not only in itssocial role but more importantly in itsrole as a catalyst to develop futurechampions. TNB’s active involvement insports through the years is in line withthe Government’s aspiration to producetop athletes and for Malaysia to be atop-notch sporting nation and one ofthe responsibilities of private agenciesto promote sports in Malaysia.Sports Coaching ProgrammeTNB is the main supporter of hockey.One of the key initiatives is the jointproject it conducted through closecollaboration with the state hockeybodies of Johor, Negeri Sembilan,Selangor, Wilayah Persekutuan, Kedah,Pahang, Perak and Penang. The projectmobilises the “Thunderbolt CoachingTeam” comprising former nationalhockey players to conduct specialisedhockey skills coaching sessions to risinghockey stars. Some 3000 new talentshave been identified and are involvedin this project.TNB is the main sponsor for Sultan AzlanShah Cup, an international tournament,which features top hockey teams fromaround the world. TNB is also the keysponsor for several local leagues suchas the Razak Cup, Junior League andTNB-MHL Hockey League organised byMalaysia Hockey Federation.Besides hockey, TNB is also the mainsponsor for cricket in the country. It isactively involved in the developmentof cricket by officially competing inevery tournaments, both local andinternational, under the auspices of theMalaysian Cricket Association.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]169

Other Services – Productivity And Quality Management[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]170Productivity and Quality ManagementDepartment (PQM) is responsible forimproving TNB’s overall productivityand quality and facilitates corporatechange programs. It comprises of threeunits: Change Management Unit, PolicyManagement Unit and Quality andOrganisational Development Unit.Change Management UnitChange Management Unit (CMU)facilitates the Divisions in developingkey initiatives and achieving their setCorporate Programme targets. The unit’sobjective is also to increase the successrate by assisting the identification andremoval of potential blockers and toidentify interventions. This departmentalso monitors the implementationand achievement of each Division’sKey Initiatives under the CorporateTransformation program. TNB is currentlyundergoing a push towards serviceexcellence under its Service Excellence10/10 (SE10/10) corporate transformationprogramme scheduled to complete by2010. This unit also assists TNB Divisionsimprove through implementation ofshort term special change projects andthrough workshop facilitation and teamdevelopment activities.Policy Management UnitPolicy Management Unit has a majorresponsibility in the coordination of TNBQuality Management System (QMS)activities in accordance to the QualitySystem Certification Scheme by SIRIM.To carry out this responsibility, PolicyManagement Unit has established thefollowing as its objectives:• To ensure the achievementand sustainability of ProcessStandardisation & Improvement(PSI) in TNB by assisting ClientDivision/Department document theirprocesses, procedures and workinstructions based on ISO 9000Standards Requirements.• To ensure the availability andutilisation of the latest policies,procedures and circulars throughoutTNB.In order to support its objectives, it hasto undertake the following roles:A.B.PROCESS STANDARDISATION &IMPROVEMENT(MS ISO 9001:2000)• A d v i s o r y s e r v i c e s a n dguidance to Client Divisions/Departments with regardsto PSI implementation andsustainability• Develop and continuouslyupdate curricula and modulesof PSI training with ILSASPOLICY COLLATIONCoordinate collation of policies,procedures and circularsOrganisational DevelopmentAnd Quality UnitThe Organisational Development andQuality Unit is responsible for promotingquality in the organisation throughsuch initiatives as the President QualityAward (AKP), Work Improvement Team(WIT), 5S, Team Building and others.Effective from the period underreview, the AKP assessment would beheld biannually. The longer intervalprovided TNB with sufficient time toprepare itself for participation in theQuality Management Excellence Award(Category 4). The effort paid off whenTNB won the award and went on togarner the Prime Minister IndustryExcellence Award (AKIPM) for 2007.TNB had continued to keep the qualitytradition alive especially in WIT wherethere are now some 700 active WITteams in the Group and its subsidiaries.For FY2007/2008, the WIT teams hadwon the following awards:• Malaysia Productivity CentreDirector General Award – for TNB’sparticipation and success achieved inMPC National ICC Convention. Theaward was received by Datuk AbdulRazak Majid, Senior Vice PresidentCorporate Affairs on behalf of TNB.• Prism Award Category 1 – GoldMedal – awarded to EG WIT ofSultan Iskandar Power Station, PasirGudang, Johor at the IndonesianQuality Convention 2008 held atCisarua, Jakarta, Indonesia.• Runner Up Services Sector wonby Impian WIT of Glugor PowerStation, Penang at the ICC NationalConvention 2008 at One WorldHotel on 19-22 August 2008 afterhaving defeated 38 other teamsnationwide.• Silver Award to K-Power WIT ofTNBD Kuala Lipis, Pahang at theInternational Convention of QualityControl Circles (ICQCC) in Beijingon 23-26 October 2007.TNB continues to implement the 5Sconcept throughout the organisation toprovide a comfortable and conducivework environment. While not being theirprincipal objective, several businessunit had been conferred 5S certificationfrom the National Productivity Centre(NPC). Indeed the Tuanku Ja’afar PowerStation at Port Dickson was selectedas the winner of NPC National 5SPractitioner 2007.

Occupational Safety And Health ReportOSH Management SystemThe OSH Management System, aptly known as the Safety Excellence ManagementSystem (SEMS) has come a long way in managing OSH in TNB. The SEMS wasfurther enhanced to meet challenges from the certification bodies for the Groupto achieve the best OSH performance. The system has been fine tuned to meetthe standards of the OHSAS 18001:2000 and the MS 1722, and programmes arein place to adapt to the new challenge.Trainings are conducted on a regular basis to build up competency of all personnelin the management, implementation and audit of OSH as stipulated. It is also beenmade mandatory for subsidiaries of the Company to adopt the system. As a result,Baseline Audit was conducted on UNITEN, Putrajaya Complex. Project sites arebeing scrutinised for implementation of an appropriate OSH management system.OSH Awareness and TrainingFocus has been given to senior management on awareness and understanding ofthe OSH. Their commitment is paramount in ensuring that OSH excellence shouldbe placed at par with operational excellence.IntroductionThere is a great challenge for TNB toensure that occupational safety andhealth, OSH, is managed in tandemwith efficient operations. Critical businessoperations should be conducted inconsonance with ensuring a safe andhealthy work environment. A balanceneeds to be struck to ensure that thisis achieved. It requires a comprehensiveand complex synergy in the interfacingbetween systems and processes,management prerogatives, allocation ofresources and deployment of work force.This difficult amalgamation needs to berecognised in ensuring that TNB providesan efficient, effective and reliable service,while at the same time protecting livesand assets to enable the organisationto grow and stand tall in its mandate of“Powering the Nation Progress”.Service Quality EnhancementThe management of OSH has achievedfurther progress with a wide range ofrequirements being imposed to ensuregreater compliance. Improvements,however small, are reported. Qualityof services are being closely monitoredand the readiness to accept challengesin meeting targets are assessed andimplemented. Certification agenciesare invited to conduct audit to ensurecompliance to relevant OSH and qualityrequirements.TNB’s most valuable asset, the staff, are given continuous exposure to OSH throughinternal and external training courses, seminars, conferences, symposiums andworkshops. Suitable personnel were being identified for overseas seminars andconferences so that TNB could be kept current in the changes in technologies andconcepts of OSH.Even contractors on TNB projects were given exposure on OSH. NIOSH-TNB SafetyPassport was developed as a joint effort with National Institute of OccupationalSafety & Health (NIOSH) to ensure that contractors were fully aware of the basicrequirements of OSH. The programme would be made compulsory to all TNBcontractors in due course. Similar programme was conducted for field supervisorsas a concerted effort on the part of TNB to eradicate illiteracy on OSH matters.Even the public was not forgotten in the quest by the Group to impart electrical safetyknowledge. Seminars were organised for schools, non-government organisations,industries and associations as a way to ensure safety in the use of electricity. SafetyCampaigns were carried out by relevant Divisions involving the staff as well as thepublic as part of TNB’s corporate social responsibility.Emergency ResponseReadiness in responding to crisis and emergencies are critical in TNB’s business ofpower generation, transmission and distribution. In this regard, the Group has putin place elaborate emergency response plans which are closely monitored by therelevant divisions and departments. Emergency Response Management Team andEmergency Response Personnel are continuously exposed to a rigorous trainingregime and the status of alertness are being continuously tested and reviewed.Emergency drills are closely monitored and a rating system will be implementedfor better assessment.OSH Excellence AwardDuring the period under review, a total of 12 TNB power stations had won GoldMedal Class 1 & 2, Silver and Bronze medals at the The Malaysian Society ofOccupational Safety and Health (MSOSH) Award 2007.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]171

Statement Of Environment[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]172TNB ENVIRONMENTAL POLICYProtect, conserve and improve theenvironment in all of its operationsand decision making.Comply with all applicable laws andregulations, establish standards thatwill lead to continuous improvementof its environment performance.Implement an EnvironmentalManagement System (EMS) thatwill ensure all impacts on theenvironment from its operations areeliminated or minimised.Carry out environmental auditsare required intervals to ensurecompliance with its CorporateEnvironment commitments, andimplement environmental trainingprogrammes for our employees todevelop a high level of competency.Promote environmental awarenessamongst contractors, the publicand other stakeholders and tomake available the environmentalpolicy to them.A. Environmental Management PlanEnvironmental Monitoring ProgrammeThe Environmental Management Plan was conducted as per requirement forlicenses under the Environmental Quality Act, 1974 or in accordance withthe specific DoE’s Detailed EIA or EIA approval conditions for the respectivepower stations. In general, the monitoring programme focused on monitoringthe air quality, water quality and boundary noise level. Besides that, somestations also conducted ecological monitoring programme as part of theEnvironmental Monitoring programme.TNB is continuously installing efficient and environmentally friendly equipmentas well as the Continuous Emission Monitoring System (CEMS) in the newpower stations.B. Environmental Audits and MS ISO CertificationAll 12 TNB power stations have a complete set of MS ISO 14001 documentationsand are currently implementing EMS based on standards.Annual Environmental Management Audits or EMS based on MS ISO 14001are conducted at all power stations by TNB Generation Division auditors(Generation Risk Management Unit, GRMU). The EMS reassessment audit isconducted once a year by SIRIM QAS International.

C. Scheduled Waste DisposalThe scheduled Waste Managementp ro g r a m m e s o f T N B h a s b e e nimplemented to comply with theEnvironmental Quality (ScheduleWaste) Regulation 2005. Scheduledwaste includes all waste generatedperiodically that requires disposal byDoE – registered contractors.All scheduled waste generated arenotified to DoE and are temporarilystored at Scheduled Waste Store priorto disposal. Environmental ManagementRepresentative (EMR) is responsible torecord, monitor and manages wastesgenerated at their respective units.D. Recycling ProgrammeThe waste recycling and reductionprogramme was included in the EMSinitiatives within respective divisions.Currently, most of the power stationsare implementing and EnvironmentalManagement programmes to minimisewastage and reduce consumption ofresources. Some of the stations have alsoassigned Recycling Centres at strategicplaces in the station. Continuous staffawareness programmes were undertakenvia staff monthly gathering.i. Condition Monitoring Programmes(CMP): Transmission Division iscontinuously implementing CMPin the operation of the division.One of the initiatives of CMP is ontransformer oil reclamations whereby used transformer oil is filteredusing latest technology and reusedin operation.ii.Recycling old power cables:Recycling old power cableswas implemented via the ScrapCommittee at each region. Therecycling process of power cablescan be conducted upon approvalfrom this committee. Usually, thecommittee will appoint a recyclingcompany to handle the scrapmaterials for further processing.E. Crisis ManagementCrisis Management in TNB is headed bythe Disaster Team who is representedby Emergency Response Team (ERT)which the main component of the TNBSafety Excellence Management System(SEMS) implemented at all divisions.SEMS will identify every possibleemergency that can happen inthe division business activities andconsequently an Emergency ResponsePlan (ERP) is developed as mitigationmeasures.All divisions also conduct an annualERP exercise that involves all staff andrelevant authorities and agencies.F. Halon ReplacementGeneration and Distribution Divisionhave achieved halon free in all theiroperation while the halon replacementprogrammes is still on-going withinthe Transmission Division. The halonreplacement programmes is amongthe key focus area of the NetworkMaintenance Department (NMD) ofTransmission Division. Gradual halongas replacement with new approvedgas in the existing fire fightingsystem is implemented under NMDdepartment 2004-2008 Business Plan.This programme shall be completedwithin next financial year.G. Current Issuesi. Global Warming: The challengefor the electricity industry is notonly on limited fossil fuel but alsoon the escalating price of fossilfuel. The utilisation of fossil fuel togenerate electricity also contributesgreatly towards air pollution andgreenhouse gasses. Enforcementof international protocols and thenational environmental legislationrequire TNB to enhance ourmanagement initiatives and tomeet the stringent emissionstandards. TNB is also seekingii.iii.for latest technology to reducepollution such as carbon monoxide(CO), Carbon Dioxide (CO2),nitrogen oxides (NOx), and sulfurdioxide (SO2) and installed thetechnology in the operation of ourlatest power plant.Clean Development Mechanism(CDM): Clean developmentmechanism (CDM) is a globaleffort under the Kyoto Protocol(K.P), article 12, to reduce andstabilise the greenhouse gasesconcentration (GHG) injectedinto our atmosphere. Malaysiaas part of the global communityrecognises and supports theobjectives of the United NationFramework Convention on ClimateChange (UNFCCC) to preventanthropogenic gas concentrationin the atmosphere exceeding alevel that has adverse effects onlife on earth.Malaysia has signed the UNFCCCon 9 June 1993 and subsequentlyratified the convention on 13 July1994. On 12 March 1999, Malaysiasigned the KP and ratified the KPon 4 September 2002. The KyotoProtocol now has already comeinto force on 16 February 2005subsequently TNB also integrateCDM potential into our business.TNB has identified projects eligiblefor CDM and is currently pursuingthis initiative.Environmental Education andAwareness: Every year TNBreceived visitors from schoolchildren’s and universities studentto visit our operation especiallyto our power plants. Duringthe visit TNB demonstrate ourenvironmental managements y s t e m s a n d e n v i ro n m e n t a lactivities implemented by thecompany. TNB also conductedenvironmental awareness camp foryouth as our commitment towardsproducing Green Nation for futuregeneration.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]173

Financial Statements[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]174175 Directors’ Report180 Income Statements181 Balance Sheets183 Statement of Changes in Equity185 Cash Flow Statements187 Notes to the Financial Statements270 Statement by Directors271 Statutory Declaration272 Independent Auditors’ Report

Directors’ ReportThe Directors have pleasure in submitting their Report with the audited financial statements of the Group and the Companyfor the financial year ended 31 August 2008.PRINCIPAL ACTIVITIESThe Group and the Company are primarily involved in the business of the generation, transmission, distribution and sale ofelectricity and those tabulated in Note 15 to the financial statements.There have been no significant changes in these activities during the financial year under review.FINANCIAL RESULTSgrouprM’millionCompanyRM’millionProfit for the year attributable to– Equity holders of the Company 2,594.0 2,663.6– Minority interests 6.4 0Profit for the year 2,600.4 2,663.6DIVIDENDSThe dividends paid or declared since 31 August 2007 were as follows:rM’millionIn respect of the financial year ended 31 August 2007 as shown in the Directors’ Reportfor that financial year:Final dividend of 16.3 sen gross per ordinary share, less income tax at 26%, paid on 3 January 2008 522.6In respect of the financial year ended 31 August 2008:Interim dividend of 10.0 sen gross per ordinary share, less income tax at 26%, paid on 29 May 2008 320.7For the financial year ended 31 August 2008, the Directors had on 16 October 2008 recommended the payment of afinal dividend of 10.0 sen gross per ordinary share, less income tax at 25%, subject to the approval of the shareholdersat the forthcoming Annual General Meeting of the Company. The Books Closure and Payment dates will be announced indue course.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]175

Directors’ ReportRESERVES AND PROVISIONSAll material transfers to or from reserves and provisions during the financial year are shown in the financial statements.ISSUE OF SHARESDuring the financial year, 2,809,277 new ordinary shares of RM1.00 each were issued by the Company comprising:-(a)(b)2,573,225 ordinary shares of RM1.00 each in TNB pursuant to the Employees’ Share Option Scheme II (‘ESOS II’) atexercise prices of RM6.71, RM6.99, RM7.42, RM7.33, RM11.07 and RM6.33 per share, and236,052 ordinary shares of RM1.00 each in TNB pursuant to the conversion of Unsecured Convertible Redeemable IncomeSecurities 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 ofthe Company.EMPLOYEES’ SHARE OPTION SCHEME (‘ESOS’)Options under the ESOS were granted to eligible Directors, employees and retirees of the Group to subscribe for ordinaryshares 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 movements during the financial year in the number of options over the shares of the Company are setout in Note 34 to the financial statements.The Company has been granted an exemption by the Companies Commission of Malaysia via a letter dated18 September 2008 from having to disclose in this Report the name of the persons to whom options have been grantedduring the year and details of their holdings pursuant to Section 169 (11) of the Companies Act, 1965 except for informationon employees who were granted options representing 450,000 ordinary shares and above.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]176

EMPLOYEES’ SHARE OPTION SCHEME (‘ESOS’) (cont’D.)The list of employees of the Company who were granted options representing 450,000 ordinary shares and above under ESOSII are as follows:-no. of ordinaryshares granted No. of ordinaryand acquired shares exercisedName Designation under the options under the optionsDato’ Sri Che Khalib bin Mohamad NohDatuk Wira Md Sidek bin AhmadDato’ Abdul Razak bin Abdul MajidPresident / Chief ExecutiveOfficer 915,000 0Senior Vice President,Operations and Technical 590,000 470,000Senior Vice President,Corporate Affairs 655,000 100,000Dato’ Mohd Izzaddin bin Idris Chief Financial Officer /Senior Vice President(Group Finance) 580,000 0Dato’ Ir Aishah binti Dato’ Haji Abdul Rauf Vice President, Distribution 635,000 177,500Dato’ Haji Nik Ibrahim bin Nik MohamedDato’ Kamaruzzaman bin JusohVice President,Investment Management 597,500 352,500Vice President,Human Resource 614,000 186,500None of the subsidiaries’ employees were granted options representing 450,000 ordinary shares and above under ESOS II.DIRECTORSThe Directors who have held office during the period since the date of the last Report are:Tan Sri Leo MoggieDato’ Sri Che Khalib bin Mohamad NohDato’ Puteh Rukiah binti Abd MajidDato’ Mohammad Zainal bin ShaariTan Sri Dato’ Lau Yin Pin @ Lau Yen BengTan Sri Dato’ Hari Narayanan a/l GovindasamyDato’ Zainal Abidin bin PutihDato’ Fuad bin JaafarTan Sri Dato’ Seri Siti Norma binti Yaakob (Appointed on 12 September 2008)Datuk Zalekha binti Hassan(Resigned as alternate director to Dato’ Puteh Rukiah binti Abd Majid on28 January 2008)Datuk Mohd Zaid bin Ibrahim (Resigned on 18 March 2008)[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]177

Directors’ ReportDIRECTORS’ BENEFITSDuring and at the end of the financial year, no arrangements subsisted to which the Company is a party, being arrangementswith the object or objects of enabling Directors of the Company to acquire benefits by means of the acquisition of shares inor debentures of the Company or any other body corporate, except for the options granted to the President/Chief ExecutiveOfficer 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 thanbenefits disclosed as Directors’ remuneration and benefits in Note 5 to the financial statements) by reason of a contract madeby the Company or a related corporation with the Director or with a firm of which the Director is a partner, or with a companyin which the Director has a substantial financial interest.DIRECTORS’ INTERESTS IN SHARES AND DEBENTURESAccording to the Register of Directors’ shareholdings, particulars of the interests of Directors who held office as at the end ofthe financial year in shares in the Company are as follows:number of ordinary shares of RM1.00 eachAs atAs at1.9.2007 Acquired Disposed 31.8.2008Tan Sri Leo Moggie 40,000 0 40,000 0Dato’ Zainal Abidin bin Putih 1,250 0 0 1,250Dato’ Fuad bin Jaafar 62,500 0 0 62,500options over ordinary shares of RM1.00 eachAs atAs at1.9.2007 Granted Exercised 31.8.2008Dato’ Sri Che Khalib bin Mohamad Noh 735,000 180,000 0 915,000According to the Register of Directors, none of the other Directors held any options over shares in the Company.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]No other Directors in office at the end of the financial year held any other interest in shares and debentures of the Companyand its related corporations.STATUTORY INFORMATION ON THE FINANCIAL STATEMENTSBefore the income statements and balance sheets of the Group and of the Company were made out, the Directors tookreasonable steps:(a)(b)to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowancefor doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate allowancehad been made for doubtful debts; andto ensure that any current assets, other than debts, which were unlikely to be realised in the ordinary course of businesstheir values as shown in the accounting records of the Group and of the Company had been written down to an amountwhich they might be expected to be realised.178

STATUTORY INFORMATION ON THE FINANCIAL STATEMENTS (cont’D.)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 thefinancial 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 Companymisleading; or(c)which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group andof the Company misleading or inappropriate.No contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve monthsafter the end of the financial year which, in the opinion of the Directors, will or may affect the ability of the Group or of theCompany 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 whichsecures 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 INFORMATIONAt the date of this Report, the Directors are not aware of any circumstances not otherwise dealt with in this Report or thefinancial 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 thisReport any item, transaction or event of a material and unusual nature likely to affect substantially the results of the operationsof the Group or of the Company for the financial year in which this Report is made.AUDITORSThe auditors, PricewaterhouseCoopers, have expressed their willingness to continue in office.Signed on behalf of the Board of Directors, in accordance with their resolution dated 3 November 2008.Tan Sri Leo MoggieDato’ Sri Che Khalib Bin Mohamad NohChairmanPresident/Chief Executive Officer[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]179

Income Statementsfor the financial year ended 31 August 2008groupCompanynote 2008 2007 2008 2007RM’million RM’million RM’million RM’millionRevenue 4 25,750.6 23,320.4 23,069.2 21,400.6Operating expenses 5 (22,503.4) (18,371.4) (20,631.4) (17,441.8)Other operating income 7 794.8 593.7 1,488.4 793.9Operating profit 4,042.0 5,542.7 3,926.2 4,752.7Foreign exchange gain/(loss) 8 34.1 485.8 (11.1) 341.2Share of results of associates 44.9 42.4 0 0Profit before finance cost 4,121.0 6,070.9 3,915.1 5,093.9Finance cost 9 (1,095.8) (1,305.0) (811.1) (969.5)Profit before taxation and zakat 3,025.2 4,765.9 3,104.0 4,124.4Taxation and Zakat 10 (424.8) (698.3) (440.4) (609.9)Profit for the year 2,600.4 4,067.6 2,663.6 3,514.5Attributable to:Equity holders of the Company 2,594.0 4,061.1 2,663.6 3,514.5Minority interests 6.4 6.5 0 0Profit for the year 2,600.4 4,067.6 2,663.6 3,514.5[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]180SenSenEarnings per share– basic 11(a) 59.87 94.92– diluted 11(b) 59.84 93.00Dividends per share: Sen SenInterim dividends (gross) 12 10.0 20.0Final dividend (gross) 12 0 16.3Proposed final dividend (gross) 12 10.0 0The notes set out on pages 187 to 269 form an integral part of these financial statements.

Balance Sheetsas at 31 August 2008groupCompanynote 2008 2007 2008 2007RM’million RM’million RM’million RM’millionNON-CURRENT ASSETSProperty, plant and equipment 13 57,475.2 56,405.3 47,833.5 46,332.8Prepaid operating leases 14 844.1 852.6 692.1 693.4Subsidiaries 15 0 0 4,558.3 4,581.1Associates 16 322.5 233.0 171.0 125.8Investments 17 38.0 38.0 97.4 97.4Long term receivables 18 0 0 613.3 703.158,679.8 57,528.9 53,965.6 52,533.6CURRENT ASSETSNon-current assets held for sale 19 14.1 125.0 13.5 55.8Inventories 20 2,230.3 1,769.5 1,158.3 1,115.4Receivables, deposits and prepayments 21 3,452.2 2,921.8 2,292.1 2,204.6Current tax assets 14.4 11.6 0 0Amount due from subsidiaries 22 0 0 1,685.7 1,250.1Amount due from associates 46.1 45.3 37.8 34.6Short term investments 23 12.6 12.6 12.6 12.6Marketable securities 24 8.5 10.6 8.5 10.6Deposits, bank and cash balances 25 5,383.9 5,299.3 4,212.9 4,524.311,162.1 10,195.7 9,421.4 9,208.0CURRENT LIABILITIESPayables 26 5,187.4 4,301.6 3,734.3 3,132.7Amount due to subsidiaries 22 0 0 1,192.9 1,403.4Amount due to associates 346.8 226.1 345.2 224.5Current taxation 69.4 226.1 59.1 221.3Short term borrowings 27 1,058.3 2,015.5 400.9 1,452.76,661.9 6,769.3 5,732.4 6,434.6NET CURRENT ASSETS 4,500.2 3,426.4 3,689.0 2,773.4TOTAL ASSETS LESS CURRENT LIABILITIES 63,180.0 60,955.3 57,654.6 55,307.0The notes set out on pages 187 to 269 form an integral part of these financial statements.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]181

Balance Sheetsgroup Companynote 2008 2007 2008 2007RM’million RM’million RM’million RM’millionNON-CURRENT LIABILITIESBorrowings 28 (21,682.1) (21,963.9) (14,845.9) (14,898.8)Amount due to subsidiaries 22 0 0 (3,525.8) (3,621.1)Consumer deposits 29 (2,551.9) (2,319.6) (2,401.1) (2,186.0)Employee benefits 30 (3,124.8) (2,730.6) (2,999.1) (2,627.4)Other liabilities (258.9) (145.9) (56.8) (63.7)Deferred taxation 31 (6,337.4) (6,274.4) (5,499.3) (5,524.8)Deferred income 32 (2,899.4) (2,803.5) (2,580.8) (2,504.7)Government development grants 33 (563.6) (620.5) 0 0(37,418.1) (36,858.4) (31,908.8) (31,426.5)TOTAL NET ASSETS 25,761.9 24,096.9 25,745.8 23,880.5CAPITAL AND RESERVES ATTRIBUTABLETO EQUITY HOLDERS OF THE COMPANYShare capital 34 4,334.5 4,331.7 4,334.5 4,331.7Share premium 35 5,258.8 5,242.0 5,258.8 5,242.0Revaluation and other reserves 36 718.2 894.9 981.7 1,021.3Retained profits 37 15,345.7 13,530.0 15,170.8 13,285.525,657.2 23,998.6 25,745.8 23,880.5[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]MINORITY INTERESTS 104.7 98.3 0 0TOTAL EQUITY 25,761.9 24,096.9 25,745.8 23,880.5SenSenNET ASSETS PER SHARE* 591.9 554.0* The net assets per share attributable to ordinary equity holders of the Company.The notes set out on pages 187 to 269 form an integral part of these financial statements.182

Statement of Changes in Equityfor the financial year ended 31 August 2008Attributable to equity holders of the Companyemployees’ordinaryshareshares of option RevaluationrM1.00 Share Scheme and other Retained Minority Totalnote each premium reserve reserves profits interests equityrM’million RM’million RM’million RM’million RM’million RM’million RM’millionGroupAt 1 September 2007 4,331.7 5,242.0 35.7 859.2 13,530.0 98.3 24,096.9Currency translation differences 0 0 0 (138.8) 0 0 (138.8)Realisation of revaluation reserve 36 0 0 0 (65.0) 65.0 0 0Income and expense recognised directlyin equity 0 0 0 (203.8) 65.0 0 (138.8)Profit for the year 0 0 0 0 2,594.0 6.4 2,600.4Total recognised income and expensefor the year 0 0 0 (203.8) 2,659.0 6.4 2,461.6Dividends paid for the year ended– 31.08.2007 12 0 0 0 0 (522.6) 0 (522.6)– 31.08.2008 12 0 0 0 0 (320.7) 0 (320.7)Employees’ Share Option Scheme– options granted 0 0 27.1 0 0 0 27.1Issuance of share capital– share options and conversion ofConvertible Redeemable IncomeSecurities 34, 35 2.8 16.8 0 0 0 0 19.6At 31 August 2008 4,334.5 5,258.8 62.8 655.4 15,345.7 104.7 25,761.9At 1 September 2006 4,135.2 3,912.9 0 843.6 10,533.5 121.3 19,546.5Currency translation differences 0 0 0 42.7 0 0 42.7Realisation of revaluation reserve 36 0 0 0 (27.1) 27.1 0 0Income and expense recognised directlyin equity 0 0 0 15.6 27.1 0 42.7Profit for the year 0 0 0 0 4,061.1 6.5 4,067.6Total recognised income and expensefor the year 0 0 0 15.6 4,088.2 6.5 4,110.3Transaction with minority interests insubsidiaries 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 35.7Issuance of share capital– share options, GEB and CRIS 34, 35 196.5 1,329.1 0 0 0 0 1,525.6At 31 August 2007 4,331.7 5,242.0 35.7 859.2 13,530.0 98.3 24,096.9The notes set out on pages 187 to 269 form an integral part of these financial statements[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]183

Statement Of Changes In Equitynon-distributable Distributableemployees’ordinaryshareshares of option RevaluationrM1.00 Share Scheme and other Retained Totalnote each premium reserve reserves profits equityrM’million RM’million RM’million RM’million RM’million RM’millionCompanyAt 1 September 2007 4,331.7 5,242.0 30.8 990.5 13,285.5 23,880.5Realisation of revaluation reserve 36 0 0 0 (65.0) 65.0 0Income and expense recogniseddirectly in equity 0 0 0 (65.0) 65.0 0Profit for the year 0 0 0 0 2,663.6 2,663.6Total recognised income andexpense for the year 0 0 0 (65.0) 2,728.6 2,663.6Dividends paid for the year ended– 31.08.2007 12 0 0 0 0 (522.6) (522.6)– 31.08.2008 12 0 0 0 0 (320.7) (320.7)Employees’ Share Option Scheme– options granted 0 0 25.4 0 0 25.4Issuance of share capital– share options and conversion ofConvertible Redeemable IncomeSecurities 34, 35 2.8 16.8 0 0 0 19.6At 31 August 2008 4,334.5 5,258.8 56.2 925.5 15,170.8 25,745.8At 1 September 2006 4,135.2 3,912.9 0 1,017.6 10,835.6 19,901.3Realisation of revaluation reserve 36 0 0 0 (27.1) 27.1 0[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]184Income and expense recogniseddirectly in equity 0 0 0 (27.1) 27.1 0Profit for the year 0 0 0 0 3,514.5 3,514.5Total recognised income andexpense for the year 0 0 0 (27.1) 3,541.6 3,514.5Dividends 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 30.8Issuance of share capital– share options, GEB and CRIS 34, 35 196.5 1,329.1 0 0 0 1,525.6At 31 August 2007 4,331.7 5,242.0 30.8 990.5 13,285.5 23,880.5The notes set out on pages 187 to 269 form an integral part of these financial statements

Cash Flow Statementsfor the financial year ended 31 August 2008groupCompany2008 2007 2008 2007RM’million RM’million RM’million RM’millionCASH FLOWS FROM OPERATING ACTIVITIESProfit for the year 2,600.4 4,067.6 2,663.6 3,514.5Adjustments for:Taxation and zakat 424.8 698.3 440.4 609.9Depreciation 3,528.7 3,199.9 2,860.8 2,595.2Amortisation of prepaid operating leases 26.6 22.1 19.2 14.7Amortisation of coal mining rights 0 10.7 0 0Provision for employee benefits 682.8 649.2 646.0 638.0Provision for share options 27.1 35.7 25.4 30.8Translation (gain)/loss (53.2) (452.3) 4.8 (288.2)Release of deferred income (345.1) (326.9) (307.6) (291.8)Gain on disposal of property, plant and equipment (9.8) (29.1) (9.7) (29.0)Gain on disposal of non-current assets held for sale (238.6) 0 (238.6) 0Gain on disposal of prepaid operating leases (1.3) (4.0) (1.3) (4.0)Share of results of associates (44.9) (42.4) 0 0Dividend income (4.1) (4.4) (671.9) (4.8)Interest income (191.0) (201.6) (301.0) (463.0)Interest on borrowings 975.6 1,196.0 698.9 866.7Property, plant and equipment written off 45.3 5.3 29.9 0Release of Government development grants (56.9) (44.5) 0 0Allowance for diminution in value of coal mining rights 0 200.0 0 0Allowance for/(write-back of) diminutionin value of marketable securities 2.1 (1.4) 2.1 (1.4)Allowance for/(write-back of) diminutionin value of investments 0 0.1 0 (40.6)Allowance for/(write-back of) inventory obsolescence 0.2 5.9 (0.9) 5.9Inventories written off 23.5 34.3 23.2 33.9Goodwill written off 0 (3.4) 0 07,392.2 9,015.1 5,883.3 7,186.8Inventories (484.4) 128.0 (65.2) (41.8)Receivables (472.9) 561.4 (85.9) 326.7Payables 906.3 557.9 514.1 822.2Amount due from/to subsidiaries 0 0 (680.7) (73.6)Amount due from/to associates 119.9 12.0 117.5 8.2Cash generated from operations 7,461.1 10,274.4 5,683.1 8,228.5Employee benefits paid (275.4) (232.7) (274.3) (231.9)Consumer contributions received 441.0 454.6 383.7 395.9Consumer deposits received 232.4 171.8 215.1 156.4Taxation and zakat paid (519.0) (798.7) (499.5) (797.2)Taxation refund received 1.4 0 0 0Net cash flow from operating activities 7,341.5 9,869.4 5,508.1 7,751.7The notes set out on pages 187 to 269 form an integral part of these financial statements.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]185

Cash Flow Statementsgroup Company2008 2007 2008 2007RM’million RM’million RM’million RM’millionCASH FLOWS FROM INVESTING ACTIVITIESAdditional investment in subsidiaries 0 (26.1) 0 (42.2)Additional investment in associates (51.7) 0 (51.7) 0Proceeds from redemption ofunsecured loan notes in a subsidiary 0 0 22.8 4.2Proceeds from redemptionof unsecured loan notes in an associate 5.7 10.0 5.7 10.0Proceeds from redemption of redeemablepreference shares in an associate 0.8 0 0.8 0Dividend income received 3.6 3.9 542.9 3.9Interest income received 296.9 253.7 269.0 232.2Purchase of property, plant and equipment (4,607.4) (5,063.6) (4,137.6) (4,574.0)Payments for prepaid operating leases (0.1) (16.6) (0.1) (16.6)Proceeds from disposal of property, plant and equipment 11.5 47.6 10.4 47.6Proceeds from disposal of non-current assets held for sale 302.4 0 302.4 0Proceeds from disposal of prepaid operating leases 1.8 8.5 1.8 8.5Net cash flow from investing activities (4,036.5) (4,782.6) (3,033.6) (4,326.4)CASH FLOWS FROM FINANCING ACTIVITIESProceeds from issuance of shares 19.6 1,525.6 19.6 1,525.6Proceeds from long term borrowings 655.4 782.1 375.4 622.0Repayments of long term borrowings (1,899.9) (3,446.0) (1,431.0) (2,072.8)Interest paid (1,225.1) (1,483.7) (876.6) (1,008.8)Dividends paid to shareholders (843.3) (1,091.7) (843.3) (1,091.7)Proceeds from short term borrowings 160.4 32.4 0 0Repayments of short term borrowings (67.4) (48.9) (30.0) 0[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]186Net cash flow from financing activities (3,200.3) (3,730.2) (2,785.9) (2,025.7)NET INCREASE/(DECREASE) IN CASHAND CASH EQUIVALENTS 104.7 1,356.6 (311.4) 1,399.6EFFECT OF CHANGES IN FOREIGN CURRENCY (20.1) (7.0) 0 0CASH AND CASH EQUIVALENTSAT BEGINNING OF THE FINANCIAL YEAR 5,299.3 3,949.7 4,524.3 3,124.7CASH AND CASH EQUIVALENTSAT END OF THE FINANCIAL YEAR 25 5,383.9 5,299.3 4,212.9 4,524.3Cash at bank, held in trust* (205.9) (65.6) 0 0CASH AVAILABLE 5,178.0 5,233.7 4,212.9 4,524.3* 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.The notes set out on pages 187 to 269 form an integral part of these financial statements.

Notes to the Financial Statements31 August 20081 GENERAL INFORMATIONThe Group and the Company are primarily involved in the business of the generation, transmission, distribution and saleof electricity and those tabulated in Note 15 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 Boardof 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 POLICIESUnless otherwise stated, the following accounting policies have been applied consistently in dealing with items that areconsidered material in relation to the financial statements. These policies have been consistently applied to all the yearspresented, unless otherwise stated.(a)Basis of preparationThe financial statements of the Group and the Company have been prepared in accordance with the provisions ofthe Companies Act 1965 and Financial Reporting Standards (‘FRS’), the MASB Approved Accounting Standards inMalaysia for Entities Other than Private Entities.The financial statements have been prepared under the historical cost convention except as disclosed in thissummary of significant accounting policies.The preparation of financial statements in conformity with FRS, requires the use of certain critical accountingestimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingentassets and liabilities at the date of the financial statements, and the reported amounts of revenues and expensesduring the reported period. It also requires Directors to exercise their judgement in the process of applying theGroup’s accounting policies. Although these estimates and judgement are based on the Directors’ best knowledgeof current events and actions, actual results may differ.The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates aresignificant to the financial statements, are disclosed in Note 3 to these financial statements.(i)Standards, amendments to published standards and interpretations that are effective and applicable.The new accounting standards, amendments to published standards and interpretations to existing standardseffective and applicable for the Group’s and the Company’s financial periods beginning on or after 1 September2007 are as follows:FRS 107 – Cash Flow StatementsFRS 111 – Construction ContractsFRS 112 – Income TaxesFRS 118 – RevenueFRS 124 – Related Party DisclosuresFRS 137 – Provisions, Contingent Liabilities and Contingent Assets[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]187

Notes To The Financial Statements2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d.)(a)Basis of preparation (Cont’d.)(i)Standards, amendments to published standards and interpretations that are effective and applicable. (Cont’d.)IC Interpretation 8 – Scope of FRS 2Amendments to FRS 121 – The Effects of Changes in Foreign Rates – Net Investment in a ForeignOperationsAmendment to FRS 1192004 Employee Benefits – Actuarial Gains and Losses, Group Plans and DisclosuresAll changes in accounting policies have been made in accordance with the transitional provisions in therespective standards and amendments to published standards. All standards (which are applicable) adopted bythe Group and the Company require retrospective application.The above standards, amendments to published standards and interpretations do not have material impacton the financial statements and policies of the Group and the Company except for additional disclosurerequirements under FRS 124 as detailed in Note 40.(ii)(iii)Standards, amendments to published standards and interpretations to existing standards that are not yeteffective and have not been early adopted.FRS 139 – Financial Instruments: Recognition and Measurement (effective date yet to be determined byMalaysian Accounting Standards Board). This new standard establishes principles for recognisingand measuring financial assets, financial liabilities and certain contracts to buy and sell nonfinancialitems. Hedge accounting is permitted only under strict circumstances. The Group hasapplied the transitional provision in FRS 139 which exempts entities from disclosing the possibleimpact arising from the initial application of this standard on the financial statements of theCompany. The Group and the Company will apply this standard when it becomes effective.Standards, amendments to published standards and interpretations that are effective but not relevant.FRS 6– Exploration for and Evaluation of Mineral ResourcesFRS 120FRS 134– Accounting for Government Grants and Disclosure of Government Assistance– Interim Financial Reporting[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]188IC Interpretation 1 – Changes in Existing Decommissioning, Restoration and Similar LiabilitiesIC Interpretation 2 – Members’ Shares in Co-operative Entities and Similar InstrumentsIC Interpretation 5 – Rights to Interests arising from Decommissioning, Restoration and EnvironmentRehabilitation FundsIC Interpretation 6 – Liabilities arising from Participating in a Specific Market – Waste Electrical and ElectronicEquipmentIC Interpretation 7 – Applying the Restatement Approach under FRS 1292004 Financial Reporting inHyperinflationary Economies

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d.)(b)Subsidiaries and basis of consolidation(i)SubsidiariesSubsidiaries are those corporations or other entities (including special purpose entities) in which the Group haspower 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 ofpotential voting rights that are currently exercisable or convertible are considered when assessing whether theGroup controls another entity.In the Company’s separate financial statements, investments in subsidiaries are stated at cost less impairmentlosses. On disposal of such investments, the difference between net disposal proceeds and their carryingamounts is included in profit and loss.(ii)Basis of ConsolidationThe consolidated financial statements comprise the financial statements of the Company and its subsidiariesas at the balance sheet date. The financial statements of the subsidiaries are prepared for the same reportingdate as the Company.Subsidiaries are consolidated from the date on which the Group obtains control, and continue to be consolidateduntil the date that such control ceases. In preparing the consolidated financial statements, intragroup balances,transactions and unrealised gains or losses are eliminated in full. Uniform accounting policies are adopted inthe consolidated financial statements for like transactions and events in similar circumstances.Acquisitions of subsidiaries are accounted for using the purchase method. The purchase method of accountinginvolves allocating the cost of acquisition to the fair value of the assets acquired and liabilities and contingentliabilities assumed at the date of acquisition. The cost of an acquisition is measured as the aggregate of thefair values, at the date of exchange, of the assets given, liabilities incurred or assumed, and equity instrumentsissued, plus any costs directly attributable to the acquisition.Any access of the cost of acquisition over the Group’s interest in the net fair value of the identifiable assets,liabilities and contingent liabilities represents goodwill (see Note 2(e)). Any excess of the Group’s interest inthe net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition isrecognised immediately in profit and loss.(c)Minority interests represent that portion of the profit or loss and net assets of a subsidiary attributable to equityinterests that are not owned, directly or indirectly through subsidiaries, by the parent. It is measured at theminorities’ share of the fair value of the subsidiaries’ identifiable assets and liabilities at the acquisition dateand the minorities’ share of changes in the subsidiaries’ equity since that date.Transactions with minority interestsThe Group applies a policy of treating transactions with minority interests as transactions with equity owners of theGroup. For purchases from minority interests, the difference between any consideration paid and the relevant shareof the carrying value of net assets of the subsidiary acquired is deducted from equity. Gains or losses on disposalsto minority interests are also recorded in equity. For disposals to minority interests, differences between any proceedsreceived and the relevant share of minority interests are also recorded in equity.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]189

Notes To The Financial Statements2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d.)(d)AssociatesAssociates are enterprises in which the Group exercises significant influence. Significant influence is the power toparticipate 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 ofaccounting and are initially recognised at cost. The Group’s investment in associates includes goodwill identified onacquisition, net of any accumulated impairment loss (see Note 2(e)).The Group’s share of its associates’ post-acquisition profits or losses is recognised in the Consolidated IncomeStatement, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative postacquisitionmovements are adjusted against the carrying amount of the investment. When the Group’s share of lossesin an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group’sinterest is reduced to nil and recognition of further losses is discontinued except to the extent that the Group hasincurred 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 theGroup’s interest in the associates; unrealised losses are also eliminated unless the transaction provides evidence onimpairment of the asset transferred. Where necessary, in applying the equity method, adjustments are made to thefinancial 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 previouslyacquired stake is stepped up to fair value and the share of profits and equity movements for the previously acquiredstake are not recognised since they are embedded in the step up.(e)GoodwillGoodwill represents the excess of the cost of the acquisition over the Group share of the fair value of theidentifiable net assets including contingent liabilities of subsidiaries, associates and joint ventures at the date of theacquisition.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]190(f)Capitalised goodwill is tested for impairment at least annually, or if events or circumstances occur indicating thatimpairment may exist.Goodwill and fair value adjustment arising from the acquisition from a foreign entity are treated as assets andliabilities of the acquiring entity and are recorded at the exchange rate at the date of acquisition.Property, plant and equipment and depreciationProperty, 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 themto the location and condition so as to render them operational in the manner intended by the Group. The Groupallocates 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 freeholdland, buildings and civil works to be stated at their previous years’ valuations less depreciation.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d.)(f)Property, plant and equipment and depreciation (Cont’d.)Surpluses arising on revaluation are credited to the revaluation reserve account. Any deficit arising from revaluationis charged against the revaluation reserve to the extent of a previous surplus held in the revaluation reserve for thesame 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, onlywhen it is probable that future economic benefits associated with the item will flow to the Group and the cost ofthe 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 theremaining carrying amount of the previous major overhaul/inspection is derecognised.Major spare parts and standby equipment are recognised as assets when the Group expects to use them duringmore than one period. Similarly, if the spare parts and servicing equipment can be used only in connection with anitem 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 amountand are taken into account in determining profit/(loss) before taxation. On disposal of revalued assets, the amountin 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 whichreflects the estimated useful lives of the assets.The estimated useful lives of property, plant and equipment are as follows:(g)Buildings and civil worksPlant and machineryLines and distribution mainsDistribution servicesMetersPublic lightingFurniture, fittings and office equipmentMotor vehicles10 to 60 years10 to 40 years25 to 35 years20 years15 years15 to 25 years3 to 10 years5 to 10 yearsWhere an indication of impairment exists, the carrying amount of the asset is assessed and written down immediatelyto its recoverable amount (see Note 2(n)).Prepaid operating leasesThe Directors have applied the transitional provisions of FRS No. 117 “Leases”, treating the leasehold land asprepaid operating leases which was previously classified within property, plant and equipment and allow the Groupto retain the unamortised revalued amount of the previously revalued leasehold land as the surrogate carryingamount of prepaid operating leases and such prepaid operating leases shall be amortised on a straight line basisover the lease term.Leasehold land is amortised over the remaining period of the respective leases ranging from 5 to 99 years on astraight line basis.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]191

Notes To The Financial Statements2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d.)(h)Non-current assets held for saleThe Group shall classify a non-current asset as held for sale if its carrying amount will be recovered principallythrough 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 andfair 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 carryingamount 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 carryingamount before the asset was classified as non-current assets held for sale, adjusted for any depreciation, amortisationor revaluations that would be recognised had the asset not be classified as non-current assets held for sale, and itsrecoverable amount at the date of the subsequent decision not to sell.(i)(j)Intangible assetsExpenditure on acquired rights, patents, trademarks and licenses is capitalised and amortised using the straight linemethod over their estimated useful lives. Intangible assets are not revalued.Research and developmentExpenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledgeand 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 productionof new or substantially improved products and processes, is capitalised if the product or process is technically andcommercially 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 assetis ready for use on a straight-line basis over its useful life.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]192(k)(l)Capitalisation of interestInterest incurred on external borrowings related to long term projects-in-progress is capitalised until the assets areready for their intended use.InvestmentsInvestments in subsidiaries and associates held for long term are stated at cost, less allowance for any diminution intheir value. Diminution in the value of an investment is recognised as an expense in the financial year in which thediminution is identified.Investments in other non-current investments are shown at cost and an allowance for diminution in value is madewhere, 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 recognisedas an expense in the financial year.On disposal of an investment, the difference between net disposal proceeds and the carrying amount is charged orcredited to the income statement, as the case may be.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d.)(m) Marketable securities and short term investmentMarketable securities and short term investment are stated at the lower of cost and market value on an aggregateportfolio basis. Cost is derived at on the weighted average basis. Market value is calculated by reference to therelevant stock exchange quoted selling prices at the close of business at the balance sheet date. Any write downs tothe market value of investments or subsequent write backs to cost are dealt with through the income statement.(n)Impairment of assetsProperty, plant and equipment and other non-current assets, including intangible assets, are reviewed for impairmentlosses 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 recoverableamount. The recoverable amount is the higher of fair value less cost to sell and its value-in-use. For the purposes ofassessing 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 chargedto the revaluation surplus. Any subsequent increase in recoverable amount is recognised in the income statementunless it reverses an impairment loss on a revalued asset in which case it is taken to revaluation surplus.(o)(p)(q)Deferred incomeContributions received from customers to defray the cost of capital projects are credited to the deferred incomeaccount. 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.Operating leasesAssets leased out as operating leases are included within property, plant and equipment in the balance sheet andthey are depreciated over their expected useful lives on a basis consistent with similar assets.InventoriesInventories 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 productionoverheads. Cost is determined on the weighted average and first-in-first-out basis.(r)(s)(t)Net realisable value is the estimated selling price in the ordinary course of business, less the costs of completionand selling expenses.Trade receivablesTrade receivables are carried at anticipated realisable value. Bad debts are written off in the period in which theyare identified. An allowance is made for doubtful receivables based on review of all outstanding amounts at thefinancial year end.Trade payablesTrade payables are stated at cost, which is the fair value of the consideration to be paid in the future for the goodand services received.Cash and cash equivalentsFor the purpose of the cash flow statement, cash and cash equivalents comprise cash in hand, deposits held at callwith banks, bank overdrafts and short term, highly liquid investments that are readily convertible to known amountsof cash and which are subject to an insignificant risk of changes in value.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]193

Notes To The Financial Statements2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d.)(u)Share capital(i)ClassificationOrdinary shares and non-redeemable preference shares with discretionary dividends are classified as equity. Othershares 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 includedin equity (see Note 2(v) on borrowings). The value of the conversion option is not changed in subsequentperiods. Upon conversion of the bond to equity shares, the amount credited to share capital and share premiumis the aggregate of the amounts classified within liability and equity at the time of conversion. No gain or loss isrecognised. 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)(iii)Share issue costsIncremental external costs directly attributable to the issuance of new shares or options are shown in equity asa deduction, net of tax, from the proceeds.Dividends to shareholders of the CompanyDividends 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)BorrowingsBorrowings are initially recognised based on the proceeds received. The costs of issuing debt instruments areexpensed as and when incurred.Interest and dividends on financial instruments deemed as borrowings are reported within finance cost in theincome statement.(w) Income taxCurrent tax expense is determined according to Malaysia’s tax laws.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]194(x)Deferred tax is recognised in full, using the liability method, on temporary differences arising between the amountsattributed 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 whichthe 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 jointventures except where the timing of the reversal of the temporary difference can be controlled and it is probablethat 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.Employee benefits(i) Short term employee benefitsWages, salaries, paid annual leave, bonuses, and non-monetary benefits are accrued in the financial year inwhich the services are rendered by employees of the Group.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d.)(x)Employee benefits (Cont’d.)(ii)Post-employment benefitsThe Group has various post-employment benefit schemes which are either defined contribution or definedbenefit plans.Defined contribution plansThe Group’s contributions to defined contribution plans are charged to the income statement in the financialyear to which they relate. Once the contributions have been paid, the Group has no further paymentobligations.Defined benefit plansThe Group makes contributions to the Company’s Retirement Benefit Plan, a defined benefit plan and approvedfund independent of the Company’s finances. A book provision is also provided by the Company as thecontribution rate required to fund the benefits under the said plan is in excess of the Inland Revenue maximumlimit. 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 thebalance sheet date minus the fair value of plan assets, together with adjustments for actuarial gains/losses andpast service cost. The Group determines the present value of the defined benefit obligation and the fair valueof any plan assets with sufficient regularity such that the amounts recognised in the financial statements do notdiffer 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 anindependent actuarial firm, considering the estimated future cash outflows using market yields at balance sheetdate of Government securities which have currency and terms to maturity approximating the terms of therelated liability. The last revaluation was done in February 2007.The amount of net actuarial gains and losses are credited or charged to the income statement, as the casemay be, over the expected average remaining service lives of the participating employees.(iii)Share-based compensationThe Group has applied the provision of FRS 2 to all equity instruments granted after 31 December 2004 butnot 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 theincome 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 theshare options granted, excluding the impact of any non-market vesting conditions (for example, profitability andsales growth targets). Non-market vesting conditions are included in assumptions about the number of optionsthat are expected to be vested. At each balance sheet date, the Group revises its estimates of the number ofshare options that are expected to be vested. It recognises the impact of the revision of original estimates, ifany, 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 (nominalvalue) and share premium when the options are exercised.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]195

Notes To The Financial Statements2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d.)(y)Government development grantsGovernment development grants relating to the construction of property, plant and equipment are included in longterm liabilities and are credited to the income statement on a straight line basis over 15 years.(z)Contingent liabilitiesThe Group does not recognise a contingent liability but discloses its existence in the financial statements. Acontingent liability is a possible obligation that arises from past events whose existence will be confirmed byuncertain future events beyond the control of the Group or a present obligation that is not recognised because itis not probable that an outflow of resources will be required to settle the obligation.(aa) Revenue recognitionSales 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 asdividend income. Leasing income is accrued, unless collectibility is in doubt. Dividend income is recognised whenthe 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 currencyItems included in the financial statements of each of the Group’s entities are measured using the currency of theprimary economic environment in which the entity operates (the ’functional currency’). The financial statementsare presented in Ringgit Malaysia, which is the Company’s functional and presentation currency.(ii)Transactions and balancesForeign currency transactions are translated into the functional currency using the exchange rates prevailing atthe dates of the transactions. Monetary assets and liabilities in foreign currencies are translated at exchangerates ruling at the balance sheet date. All exchange differences are dealt with through the income statement.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]196(iii)Group companiesThe results and financial position of all the group entities (none of which has the currency of a hyperinflationaryeconomy) that have functional currencies different from the presentation currency are translated into thepresentation currency as follows:• assets and liabilities for each balance sheet presented are translated at the closing rate at the date of thatbalance sheet;• income and expenses for each income statement are translated at average exchange rates (unlessthis average is not a reasonable approximation of the cumulative effect of the rates prevailing on thetransaction dates, in which case income and expenses are translated at the rate on the dates of thetransactions); 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 operationsare taken to shareholders’ equity. When a foreign operation is partially disposed of or sold, exchange differencesthat 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 andliabilities of the foreign entity and translated at the closing rate.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d.)(ab) Foreign currencies (Cont’d.)(iii) Group companies (Cont’d.)The principal closing rates used in translation of foreign currency amounts were as follows:2008 2007Foreign currency RM RM1 US Dollar 3.3937 3.5090100 Japanese Yen 3.1250 3.03701 Sterling Pound 6.2067 7.0582100 Pakistani Rupee 4.4500 5.77491 EURO 5.0043 4.7843(ac) Financial instruments(i) DescriptionFinancial 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 individualpolicy statements associated with each item.The Group and the Company are also parties to financial instruments that manage exposure to fluctuations inforeign currency exchange and interest rate. These financial instruments, which mainly comprise foreign currencyforward contracts, cross currency swap contracts and interest rate swap contracts, are not recognised in thefinancial statements. Derivative financial instruments are used in the Group and the Company’s risk managementof foreign currency and interest rate risk exposure of its financial liabilities.(ii)Financial instruments not recognised on the balance sheetForeign currency forward contractsThe Group enters into foreign currency forward contracts to protect the Group from movements in exchangerates 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 contractsCross currency swaps are entered into to manage exposure to movements in exchange rates by establishingthe 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 gainsor losses are recognised in the income statement in the same period as the exchange differences on theunderlying hedged items.Currency optionsCurrency options are designed to manage the Group’s exposure to protect the Group from movements inforeign currency. The notional principal of the contract is off balance sheet. The premium paid is expensedto the income statement when it is incurred. Gains or losses on early termination of currency options or onrepayment of the borrowing are taken to the income statement.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]197

Notes To The Financial Statements2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d.)(ac) Financial instruments (Cont’d.)(ii) Financial instruments not recognised on the balance sheet (Cont’d.)Interest rate swap contractsInterest rate swaps, collars and caps agreements are designed to manage the Group’s exposure to protect theGroup from movements in interest rates. The notional principal of these contracts are off balance sheet. Anydifferential to be paid or received on an interest rate swap contract is recognised as a component of interestincome or expense over the period of the contract. Gains and losses on early termination of interest rate swapsor on repayment of the borrowing are taken to the income statement.(iii)Fair value estimation for disclosure purposesIn assessing the fair value of financial instruments, the Group and the Company make certain assumptions andapply the discounted cash flow method to discount future cash flows to determine the fair value of financialinstruments. The fair values of financial liabilities are estimated by discounting future cash flows at currentmarket 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 datewhereas the fair value of foreign currency forward contracts is calculated using spot rates, as published byReuters, at balance sheet date.The fair value of cross currency swaps and currency options are calculated as the present value of the estimatedfuture 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 toapproximate 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 foras property, plant and equipment upon receipt of formal handover documentation. The corresponding amountsare recorded as Government development grants and such grants are credited to the income statement on astraight line basis over the same period as the expected economic life of the projects.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]1983 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTSEstimates and judgements are continually evaluated by the Directors and are based on historical experience and otherfactors, including expectations of future events that are believed to be reasonable under the circumstances.(a)Critical judgement in applying the Group’s accounting policiesIn determining and applying accounting policies, judgement is often required in respect of items where the choiceof specific policy could materially affect the reported results and financial position of the Group. The accountingpolicy 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 isheld for use in the production or supply of goods or services or for administrative purposes. If these portions could besold (or leased out under a finance lease) separately, then these portions would be accounted separately by the Group.

3 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (Cont’d.)(a)Critical judgement in applying the Group’s accounting policies (Cont’d.)If the portions could not be sold separately, the property is an investment property only if an insignificant portionis held for use in the production or supply of goods or services or for administrative purposes. Judgement is madeon an individual property basis to determine whether ancillary services are so significant that a property does notqualify as an investment property.During the year, the Group has leased out several land and office space but these do not meet the definition ofan investment property either due to immateriality or classification. Accordingly, these properties continue to beclassified as property, plant and equipment.(b)Critical accounting estimates and assumptionsThe Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, bydefinition, rarely equate to the related actual results. To enhance the information content of the estimates, certainkey variables that are anticipated to have a material impact on the Group’s results and financial position are testedfor sensitivity to changes in the underlying parameters. The estimates and assumptions that have a significant riskof causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year areoutlined below.(i)Impairment of Property, Plant and EquipmentThe Group assesses impairment of assets whenever the events or changes in circumstances indicate that thecarrying amount of an asset may not be recoverable i.e. the carrying amount of the asset is more than therecoverable amount.Recoverable amount is measured at the higher of the fair value less cost to sell for that asset and its valuein-use.The value-in-use is the net present value of the projected future cash flow derived from that assetdiscounted at an appropriate discount rate. Projected future cash flows are based on Group’s estimatescalculated based on historical, sector and industry trends, general market and economic conditions, changesin technology and other available information. The assumptions used, results and conclusion of the impairmentassessment are stated in the Note 13 to these financial statements.(ii)(iii)(iv)Estimated Useful Lives of Property, Plant and EquipmentThe Group regularly reviews the estimated useful lives of property, plant and equipment based on factors suchas business plan and strategies, expected level of usage and future technological developments. Future resultsof operations could be materially affected by changes in these estimates brought about by changes in thefactors mentioned above. A reduction in the estimated useful lives of property, plant and equipment wouldincrease the recorded depreciation and decrease the value of property, plant and equipment.Share-based PaymentEquity 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 34 to thesefinancial statements.Contingent LiabilitiesDetermination of the treatment of contingent liabilities is based on management’s view of the expectedoutcome of the contingencies after consulting legal counsel for litigation cases and internal and external expertsto the Group for matters in the ordinary course of business.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]199

Notes To The Financial Statements3 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (Cont’d.)(b)Critical accounting estimates and assumptions (Cont’d.)(v) Allowance for ReceivablesThe allowance is established when there is objective evidence that the Group will not be able to collect allamount dues according to the original term of receivables. This is determined based on the ageing profile andcollection patterns.4 REVENUEgroupCompany2008 2007 2008 2007RM’million RM’million RM’million RM’millionSales – electricity 24,190.1 22,384.0 22,761.6 21,108.8– goods and services 1,215.4 609.5 0 0Release of deferred income (Note 32) 345.1 326.9 307.6 291.825,750.6 23,320.4 23,069.2 21,400.65 OPERATING EXPENSESgroupCompany2008 2007 2008 2007RM’million RM’million RM’million RM’million[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]200Energy cost 15,117.6 12,198.6 15,184.6 12,705.5Transmission cost 1,150.3 980.9 1,148.6 979.6Distribution cost 3,123.7 2,712.4 3,118.1 2,708.2Administrative expenses 1,533.3 1,340.2 872.4 854.4Other operating expenses 1,578.5 1,139.3 307.7 194.122,503.4 18,371.4 20,631.4 17,441.8Operating expenses include the following items:Directors’ remuneration– fees 1.1 0.7 0.9 0.5– other emoluments 1.2 1.1 1.2 1.1Auditors remuneration – PricewaterhouseCoopers– statutory audit fees– Malaysia 1.4 1.2 0.7 0.6– Malaysia’s affiliates** # 0 0 0 0– non-audit fees– Malaysia 0.5 1.3 0.5 1.3– Malaysia’s affiliates# 0 0.3 0 0.3

5 OPERATING EXPENSES (CONT’D.)groupCompany2008 2007 2008 2007RM’million RM’million RM’million RM’millionAllowance for doubtful debts 33.5 66.6 26.5 52.0Amortisation of coal mining rights 0 10.7 0 0Depreciation 3,528.7 3,199.9 2,860.8 2,595.2Amortisation of prepaid operating leases 26.6 22.1 19.2 14.7Rental of land and buildings 63.4 51.5 39.2 39.0Rental of plant and machinery 19.2 22.2 19.1 21.9Research and development expenses 47.1 17.0 46.1 16.7Property, plant and equipment written off 45.3 5.3 29.9 0Inventories written off 23.5 34.3 23.2 33.9Allowance for/(write-back of) diminutionin value of marketable securities 2.1 (1.4) 2.1 (1.4)Allowance for diminution in valueof coal mining rights 0 200.0 0 0Allowance for/(write-back of) diminution invalue of amount due from subsidiaries 0 0 68.2 (13.6)(Write-back) of diminution in value of investment 0 (0.1) 0 (40.6)(Write-back) of allowance for doubtful debts (32.5) (213.4) (26.2) (207.7)Allowance for/(write-back of) inventoryobsolescence 0.2 5.9 (0.9) 5.9Receipt of Government subsidies* (535.3) (435.7) 0 0Staff cost (Note 6) 2,582.8 2,392.1 2,236.5 2,104.4* This represents the subsidies that Sabah Electricity Sdn Bhd (‘SESB’) received for diesel and medium fuel oil fromthe Government of Malaysia. The total amount credited in the current year was RM535.3 million (2007: RM435.7million) and it has been offset against energy cost.** This represents the audit fees for Liberty Power Ltd amounting to RM37,881 (2007: RM42,956).# PricewaterhouseCoopers Malaysia and other member firms of PricewaterhouseCoopers International Limited areseparate and independent legal entities.The estimated monetary value of benefits-in-kind received by the Directors was RM256,520 (2007: RM180,806) for theGroup and the Company.The estimated monetary value of amounts paid and payable to a firm, of which a Director is a partner, for professionalservices rendered to the Group and the Company was RM458,243 (2007: RM673,864).[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]201

Notes To The Financial Statements6 STAFF COSTgroupCompany2008 2007 2008 2007RM’million RM’million RM’million RM’millionWages, salaries and bonuses 1,561.7 1,429.1 1,311.7 1,207.1Defined contribution retirement plan 160.0 152.0 129.5 124.6Retirement benefit plan 246.6 249.0 245.1 246.2Retirement medical plan 423.0 400.2 400.9 391.8Employees’ Share Option Scheme II 27.1 35.7 25.4 30.8Other employee benefits 164.4 126.1 123.9 103.92,582.8 2,392.1 2,236.5 2,104.4Details of the retirement benefit and retirement medical plans of the Group and the Company are set out in Note 30to these financial statements.7 OTHER OPERATING INCOMEgroupCompany2008 2007 2008 2007RM’million RM’million RM’million RM’million[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]202Dividend income from investments in:– quoted shares 0.5 0.7 0.5 0.7– unquoted shares 3.6 3.7 671.4 4.1Leasing income 4.5 1.1 4.5 1.1Interest income 191.0 201.6 301.0 463.0Rental income 8.4 8.8 31.6 20.2Release of Government developmentgrants (Note 33) 56.9 44.5 0 0Gain on disposal of property, plantand equipment 9.8 29.1 9.7 29.0Gain on disposal of prepaidoperating leases 1.3 4.0 1.3 4.0Gain on disposal of non-current assetsheld for sale 238.6 0 238.6 0Interest on late payments 63.1 72.4 63.1 72.4Minimum make up charges 34.2 36.0 34.2 36.0Other income 182.9 191.8 132.5 163.4794.8 593.7 1,488.4 793.9

8 FOREIGN EXCHANGE GAIN/(LOSS)groupCompany2008 2007 2008 2007RM’million RM’million RM’million RM’millionForeign exchange gain/(loss) comprises:Translation gain – foreign currencydenominated term loans 83.0 427.4 19.1 263.2Translation gain/(loss) – others (29.8) 24.9 (23.9) 25.0Transaction gain/(loss) (19.1) 33.5 (6.3) 53.034.1 485.8 (11.1) 341.29 FINANCE COSTgroupCompany2008 2007 2008 2007RM’million RM’million RM’million RM’millionInterest on borrowings 1,278.7 1,505.5 1,000.7 1,176.2Less: Amount capitalised into property,plant and equipment (301.8) (309.5) (301.8) (309.5)976.9 1,196.0 698.9 866.7Interest on consumer deposits 118.9 109.0 112.2 102.81,095.8 1,305.0 811.1 969.510 TAXATION AND ZAKATgroupCompany2008 2007 2008 2007RM’million RM’million RM’million RM’millionCurrent tax:Malaysian corporate income tax 349.8 815.1 453.9 810.1Deferred tax (Note 31) 63.0 (150.2) (25.5) (233.6)Real Property Gains Tax 4.0 1.3 4.0 1.3Tax expense 416.8 666.2 432.4 577.8Zakat 8.0 32.1 8.0 32.1424.8 698.3 440.4 609.9[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]203

Notes To The Financial Statements10 TAXATION AND ZAKAT (CONT’D.)groupCompany2008 2007 2008 2007RM’million RM’million RM’million RM’millionThe analysis of the tax expense is as follows:Current tax:Current year 393.7 806.2 506.1 799.5(Over)/under accrual in prior years (43.9) 8.9 (52.2) 10.6349.8 815.1 453.9 810.1Deferred tax:Origination/(reversal) of temporary differences 63.0 (150.2) (25.5) (233.6)Real Property Gains Tax 4.0 1.3 4.0 1.3416.8 666.2 432.4 577.8The explanation of the relationship between tax expense and profit before taxation is as follows:groupCompany2008 2007 2008 2007RM’million RM’million RM’million RM’millionProfit before taxation and zakat 3,025.2 4,765.9 3,104.0 4,124.4[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]204Tax calculated at the Malaysiancorporate income tax rateof 26% (2007: 27%) 786.6 1,286.8 807.1 1,113.6Tax effects of:– change in corporate income tax rate (232.8) (456.3) (217.1) (450.3)– share of results of associates 2.9 4.9 0 0– income not subject to tax (175.5) (286.8) (141.1) (186.3)– expenses not deductible for tax purpose 45.1 116.3 37.6 94.6– current year’s tax loss not recognised 10.4 4.3 0 0– expenses qualifying for double deduction (6.6) (6.0) (5.9) (5.7)(Over)/under provision of current tax in prior years (43.9) 8.9 (52.2) 10.6Benefits from previously unrecognised taxlosses (4.6) 0 0 0Current year unrecognised temporary differences 31.2 (7.2) 0 0Real Property Gains Tax 4.0 1.3 4.0 1.3Zakat 8.0 32.1 8.0 32.1Tax and zakat charge 424.8 698.3 440.4 609.9Average effective tax rate (%) 14.0 14.7 14.2 14.8The Malaysian corporate income tax rate for the Year of Assessment 2009 will be 25%.

11 EARNINGS PER SHARE(a)Basic earnings per shareBasic earnings per share is calculated by dividing the profit attributable to ordinary equity holders of the Companyfor the financial year by the weighted average number of ordinary shares in issue during the financial year.group2008 2007Profit attributable to ordinary equity holdersof the Company (RM’million) 2,594.0 4,061.1Weighted average number of ordinary shares in issue (’000) 4,333,012 4,278,527Basic earnings per share (sen) 59.87 94.92(b)Diluted earnings per sharegroup2008 2007RM’million RM’millionProfit attributable to ordinary equity holders of the Company 2,594.0 4,061.1Elimination of interest expense on:Guaranteed Exchangeable Bonds, net of tax effect 0 (6.8)Unsecured Convertible Redeemable Income Securities 0 4.5Profit used to determine diluted earnings per share 2,594.0 4,058.8’000 ’000Weighted average number of ordinary shares in issue 4,333,012 4,278,527Adjustment for share options 2,172 53,272Adjustment for Guaranteed Exchangeable Bonds 0 17,988Adjustment for Unsecured Convertible RedeemableIncome Securities 0 14,359Weighted average number of ordinary shares for dilutedearnings per share 4,335,184 4,364,146Diluted earnings per share (sen) 59.84 93.00[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]205

Notes To The Financial Statements12 DIVIDENDSgroup2008 2007RM’million RM’millionInterim dividend of 10.0 sen gross per ordinary share,less income tax at 26% (2007: interim dividend of 20.0 sengross per ordinary share, less income tax at 27%) 320.7 632.0Proposed:Proposed final dividend of 10.0 sen gross per ordinary share,less income tax at 25% (2007: final dividend of 16.3 sen grossper ordinary share, less income tax at 26%) 325.1 522.6Dividends recognised as distribution to ordinary equity holdersof the Company 645.8 1,154.6Interim dividends are paid and accounted for in shareholders’ equity as an appropriation of retained profits in thefinancial year.At the forthcoming Annual General Meeting, a final dividend in respect of the financial year ended 31 August 2008 of10.0 sen gross per ordinary share, less income tax at 25%, will be proposed for shareholders’ approval. This final dividendwill be accrued as a liability in the financial year ending 31 August 2009 when approved by the shareholders.In respect of the financial year ended 31 August 2007, a final dividend of 16.3 sen gross per ordinary share,less income tax at 26% was declared and approved by the shareholders in the Annual General Meeting held on13 December 2007.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]206

13 PROPERTY, PLANT AND EQUIPMENTexchangeTransfers/As at rate reclassi- As at1.9.2007 adjustment Additions Disposals fication 31.8.2008rM’million RM’million RM’million RM’million RM’million RM’millionGroup2008Cost/valuationAt 1984 and earliervaluations:Buildings and civil works 5.6 0 0 0 0 5.65.6 0 0 0 0 5.6At 1994 valuation:Freehold land 608.6 0 0 (0.6) (35.5) 572.5Buildings and civil works 446.0 0 0 (0.8) 0 445.21,060.2 0 0 (1.4) (35.5) 1,023.3At cost:Freehold land 358.9 (1.9) 15.9 (1.6) (2.5) 368.8Buildings and civil works 11,535.0 (1.1) 351.1 (0.9) 47.5 11,931.612,954.1 (3.0) 367.0 (3.9) 9.5 13,323.7Plant and machinery 36,391.9 (229.9) 2,225.5 (272.6) 220.4 38,335.3Lines and distributionmains 22,889.2 0 1,874.0 0 354.0 25,117.2Distribution services 2,350.5 0 154.4 0 5.4 2,510.3Meters 1,267.0 0 145.7 0 0.1 1,412.8Public lighting 276.1 0 18.4 0 (0.1) 294.4Furniture, fittings andoffice equipment 1,100.7 (1.4) 59.8 (7.6) (16.1) 1,135.4Motor vehicles 255.8 0.5 11.3 (5.9) 17.6 279.377,485.3 (233.8) 4,856.1 (290.0) 590.8 82,408.4Capital project-inprogress7,306.3 (0.1) 5,034.7 0 (5,672.5) 6,668.484,791.6 (233.9) 9,890.8 (290.0) (5,081.7) 89,076.8[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]207

Notes To The Financial Statements13 PROPERTY, PLANT AND EQUIPMENT (CONT’D.)Charged Release onAs at for the disposals/ As at1.9.2007 financial year transfers 31.8.2008rM’million RM’million RM’million RM’millionGroup2008Accumulated depreciationAt 1984 and earliervaluations:Buildings and civil works 3.4 0 0.5 3.9At 1994 valuation:Freehold land 0 0 0 0Buildings and civil works 190.0 13.9 (0.3) 203.6193.4 13.9 0.2 207.5At cost:Freehold land 0 0 0 0Buildings and civil works 2,823.1 322.9 (1.3) 3,144.73,016.5 336.8 (1.1) 3,352.2Plant and machinery 13,147.9 1,824.2 (300.5) 14,671.6Lines and distribution mains 8,832.4 1,037.5 0 9,869.9Distribution services 1,186.1 107.0 0 1,293.1Meters 616.6 79.6 0 696.2Public lighting 148.6 14.0 0 162.6Furniture, fittings and office equipment 814.0 101.4 (6.8) 908.6Motor vehicles 184.0 28.2 (5.0) 207.227,946.1 3,528.7 (313.4) 31,161.4Accumulated impairment lossesPlant and machinery 440.2 0 0 440.2[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]208

13 PROPERTY, PLANT AND EQUIPMENT (CONT’D.)exchangeTransfers/As at rate reclassi- As at1.9.2006 adjustment Additions Disposals fication 31.8.2007rM’million RM’million RM’million RM’million RM’million RM’millionGroup2007Cost/valuationAt 1984 and earliervaluations:Buildings and civil works 5.6 0 0 0 0 5.65.6 0 0 0 0 5.6At 1994 valuation:Freehold land 680.4 0 0 (16.4) (55.4) 608.6Buildings and civil works 439.5 0 0 (2.5) 9.0 446.01,125.5 0 0 (18.9) (46.4) 1,060.2At cost:Freehold land 305.0 (0.2) 88.9 (0.1) (34.7) 358.9Buildings and civil works 11,200.8 (0.2) 336.2 (0.2) (1.6) 11,535.012,631.3 (0.4) 425.1 (19.2) (82.7) 12,954.1Plant and machinery 33,938.7 (52.3) 2,397.6 0 107.9 36,391.9Lines and distributionmains 21,523.8 0 1,284.8 0 80.6 22,889.2Distribution services 2,221.6 0 124.2 0 4.7 2,350.5Meters 1,118.3 0 148.7 0 0 1,267.0Public lighting 265.5 0 10.6 0 0 276.1Furniture, fittings andoffice equipment 1,015.5 (0.3) 89.2 (3.6) (0.1) 1,100.7Motor vehicles 233.1 (0.3) 37.3 (13.2) (1.1) 255.872,947.8 (53.3) 4,517.5 (36.0) 109.3 77,485.3Capital project-inprogress6,610.9 (0.1) 5,395.0 0 (4,699.5) 7,306.379,558.7 (53.4) 9,912.5 (36.0) (4,590.2) 84,791.6[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]209

Notes To The Financial Statements13 PROPERTY, PLANT AND EQUIPMENT (CONT’D.)Charged Release onAs at for the disposals/ As at1.9.2006 financial year transfers 31.8.2007rM’million RM’million RM’million RM’millionGroup2007Accumulated depreciationAt 1984 and earliervaluations:Buildings and civil works 3.4 0 0 3.4At 1994 valuation:Freehold land 0 0 0 0Buildings and civil works 172.1 14.0 3.9 190.0175.5 14.0 3.9 193.4At cost:Freehold land 0 0 0 0Buildings and civil works 2,510.2 306.1 6.8 2,823.12,685.7 320.1 10.7 3,016.5Plant and machinery 11,525.5 1,638.3 (15.9) 13,147.9Lines and distribution mains 7,909.3 930.0 (6.9) 8,832.4Distribution services 1,085.2 100.9 0 1,186.1Meters 545.4 71.0 0.2 616.6Public lighting 135.0 13.3 0.3 148.6Furniture, fittings and office equipment 707.2 106.5 0.3 814.0Motor vehicles 180.7 19.8 (16.5) 184.024,774.0 3,199.9 (27.8) 27,946.1Accumulated impairment lossesPlant and machinery 440.2 0 0 440.2[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]210

13 PROPERTY, PLANT AND EQUIPMENT (CONT’D.)Transfers/As at reclassi- As at1.9.2007 Additions Disposals fication 31.8.2008rM’million RM’million RM’million RM’million RM’millionCompany2008Cost/valuationAt 1994 valuation:Freehold land 608.6 0 (0.6) (35.6) 572.4Buildings and civil works 445.9 0 (0.8) 0 445.11,054.5 0 (1.4) (35.6) 1,017.5At cost:Freehold land 306.3 8.8 0 (6.2) 308.9Buildings and civil works 10,063.3 295.6 (0.5) (2.3) 10,356.111,424.1 304.4 (1.9) (44.1) 11,682.5Plant and machinery 26,139.4 2,038.8 (181.7) (14.0) 27,982.5Lines and distributionmains 22,182.1 1,819.5 0 3.2 24,004.8Distribution services 2,239.7 154.1 0 0 2,393.8Meters 1,242.8 140.7 0 0 1,383.5Public lighting 276.1 18.4 0 0 294.5Furniture, fittings andoffice equipment 985.8 39.6 (2.0) (13.3) 1,010.1Motor vehicles 211.6 8.3 (3.4) 17.9 234.464,701.6 4,523.8 (189.0) (50.3) 68,986.1Capital project-inprogress6,545.9 4,439.6 0 (4,523.8) 6,461.771,247.5 8,963.4 (189.0) (4,574.1 75,447.8[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]211

Notes To The Financial Statements13 PROPERTY, PLANT AND EQUIPMENT (CONT’D.)Charged Release onAs at for the disposals/ As at1.9.2007 financial year transfers 31.8.2008rM’million RM’million RM’million RM’millionCompany2008Accumulated depreciationAt 1994 valuation:Buildings and civil works 189.9 14.0 (0.3) 203.6189.9 14.0 (0.3) 203.6At cost:Freehold land 0 0 0 0Buildings and civil works 2,559.5 262.6 (0.2) 2,821.92,749.4 276.6 (0.5) 3,025.5Plant and machinery 10,841.5 1,287.6 (159.2) 11,969.9Lines and distribution mains 8,585.3 988.2 0 9,573.5Distribution services 1,110.4 102.7 0 1,213.1Meters 605.7 77.3 0 683.0Public lighting 148.3 13.9 0 162.2Furniture, fittings and office equipment 724.2 90.1 1.7 816.0Motor vehicles 149.9 24.4 (3.2) 171.124,914.7 2,860.8 (161.2) 27,614.3[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]212

13 PROPERTY, PLANT AND EQUIPMENT (CONT’D.)Transfers/As at reclassi- As at1.9.2006 Additions Disposals fication 31.8.2007rM’million RM’million RM’million RM’million RM’millionCompany2007Cost/valuationAt 1994 valuation:Freehold land 680.4 0 (16.4) (55.4) 608.6Buildings and civil works 439.4 0 (2.5) 9.0 445.91,119.8 0 (18.9) (46.4) 1,054.5At cost:Freehold land 254.2 89.0 (0.1) (36.8) 306.3Buildings and civil works 9,753.6 321.5 0 (11.8) 10,063.311,127.6 410.5 (19.0) (95.0) 11,424.1Plant and machinery 24,007.6 2,160.5 0 (28.7) 26,139.4Lines and distributionmains 20,876.3 1,270.9 0 34.9 22,182.1Distribution services 2,115.7 124.0 0 0 2,239.7Meters 1,097.0 145.8 0 0 1,242.8Public lighting 265.6 10.5 0 0 276.1Furniture, fittings andoffice equipment 913.6 75.0 (0.2) (2.6) 985.8Motor vehicles 188.7 35.1 (12.0) (0.2) 211.660,592.1 4,232.3 (31.2) (91.6) 64,701.6Capital project-inprogress5,888.1 4,906.7 0 (4,248.9) 6,545.966,480.2 9,139.0 (31.2) (4,340.5) 71,247.5[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]213

Notes To The Financial Statements13 PROPERTY, PLANT AND EQUIPMENT (CONT’D.)Charged Release onAs at for the disposals/ As at1.9.2006 financial year transfers 31.8.2007rM’million RM’million RM’million RM’millionCompany2007Accumulated depreciationAt 1994 valuation:Buildings and civil works 172.1 14.0 3.8 189.9172.1 14.0 3.8 189.9At cost:Freehold land 0 0 0 0Buildings and civil works 2,306.4 245.9 7.2 2,559.52,478.5 259.9 11.0 2,749.4Plant and machinery 9,711.7 1,152.5 (22.7) 10,841.5Lines and distribution mains 7,692.0 893.3 0 8,585.3Distribution services 1,013.8 96.6 0 1,110.4Meters 536.5 69.2 0 605.7Public lighting 135.0 13.3 0 148.3Furniture, fittings and office equipment 627.0 95.6 1.6 724.2Motor vehicles 149.5 14.8 (14.4) 149.922,344.0 2,595.2 (24.5) 24,914.7[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]214

13 PROPERTY, PLANT AND EQUIPMENT (CONT’D.)groupCompany2008 2007 2008 2007RM’million RM’million RM’million RM’millionNet book valueAt 1984 and earlier valuations:Buildings and civil works 1.7 2.2 0 0At 1994 valuation:Freehold land 572.5 608.6 572.4 608.6Buildings and civil works 241.6 256.0 241.5 256.0815.8 866.8 813.9 864.6At cost:Freehold land 368.8 358.9 308.9 306.3Buildings and civil works 8,786.9 8,711.9 7,534.2 7,503.8Total land and buildings 9,971.5 9,937.6 8,657.0 8,674.7Plant and machinery 23,223.5 22,803.8 16,012.6 15,297.9Lines and distribution mains 15,247.3 14,056.8 14,431.3 13,596.8Distribution services 1,217.2 1,164.4 1,180.7 1,129.3Meters 716.6 650.4 700.5 637.1Public lighting 131.8 127.5 132.3 127.8Furniture, fittings and office equipment 226.8 286.7 194.1 261.6Motor vehicles 72.1 71.8 63.3 61.750,806.8 49,099.0 41,371.8 39,786.9Capital project-in-progress 6,668.4 7,306.3 6,461.7 6,545.957,475.2 56,405.3 47,833.5 46,332.8[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]215

Notes To The Financial Statements13 PROPERTY, PLANT AND EQUIPMENT (CONT’D.)Had the revalued property, plant and equipment been included in the financial statements at cost less depreciation, thenet book value of the revalued property, plant and equipment would have been as follows:groupCompany2008 2007 2008 2007RM’million RM’million RM’million RM’millionFreehold land 50.6 50.7 43.7 43.8Buildings and civil works 103.5 110.5 103.5 110.5154.1 161.2 147.2 154.3The valuations of freehold land, buildings and civil works of the Company was based on an independent valuation bya professional firm of valuers on the open market value basis in 1994. The net surplus on revaluation was incorporatedinto 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 independentvaluations by professional firms of valuers on the open market value basis. The net surplus on revaluation was transferredto revaluation reserve.The title deeds of certain land are in the process of being registered in the name of the Company and certainsubsidiaries.Included in transfers/reclassification in 2008 for the Group and the Company was RM20.4 million being the carryingamount of land and building reclassified as non-current assets held for sale (see Note 19).Interest capitalised during the financial year in capital project-in-progress amounted to RM301.8 million (2007: RM309.5million) for the Group and the Company.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]216The capitalisation rate used to determine the amount of borrowing cost eligible for capitalisation is 5.34% (2007: 5.63%)for the Group and the Company.Impairment test for property, plant and equipmentDuring the year, two subsidiary companies undertook annual impairment test for property, plant and equipment. Theresults of the test are as follows:-a) TNB Liberty Power Limited has recognised in prior years, a provision for impairment totalling RM440.2 million.The assessment showed that no further impairment loss is required for the carrying amount of property, plant andequipment assessed, including where realistic variations are applied to key assumptions. The carrying value of theproperty, plant and equipment at balance sheet date is RM520.1 million (2007: RM725.2 million).b) For Sabah Electricity Sdn Bhd (SESB), no impairment loss was required for the carrying amount of property, plant andequipment assessed based on certain assumptions applied for the test, which includes the company’s expectationof revenue growth, operating costs and cost of funds, drawing on from past experience and current assessment ofthe market and industry growth as well as the maximum capacity available. The carrying value of the property, plantand equipment at balance sheet date is RM2,269.8 millionn (2007: RM2,101.6 million).

14 PREPAID OPERATING LEASESgroupCompany2008 2007 2008 2007RM’million RM’million RM’million RM’millionCost/ValuationAs at the beginning of the financial year 1,043.8 1,029.6 839.6 825.5Additions 0.3 16.6 0.1 16.6Disposals (0.7) (5.4) (0.7) (5.4)Reclassified to non-current assetsheld for sale (Note 19) (3.0) (2.7) (3.0) (2.7)Reclassification 19.5 5.7 19.5 5.6As at the end of the financial year 1,059.9 1,043.8 855.5 839.6Accumulated amortisationAs at the beginning of the financial year 191.2 172.8 146.2 135.3Charged for the financial year 26.6 22.1 19.2 14.7Released on disposals (0.1) (0.9) (0.1) (0.9)Released on reclassification tonon-current assets held for sale (Note 19) (1.9) (1.2) (1.9) (1.2)Released on reclassification 0 (1.6) 0 (1.7)As at the end of the financial year 215.8 191.2 163.4 146.2Net book value as at the endof the financial year 844.1 852.6 692.1 693.4Prepaid operating leases were previously classified as leasehold land within property, plant and equipment and compriselong leasehold land and short leasehold land.Included in the transfers/reclassification for 2008 was RM1.1 million being the carrying amount of prepaid operating leasereclassified as assets held for sale (see Note 19).The last revaluation of the leasehold land was in 1994.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]217

Notes To The Financial Statements15 SUBSIDIARIESCompany2008 2007RM’million RM’millionUnquoted ordinary shares, at cost 296.7 296.7Redeemable unsecured loan stocks, at cost 547.5 570.3Redeemable preference shares, at cost 4,600.2 4,300.25,444.4 5,167.2Less: Allowance for diminution in value (886.1) (586.1)4,558.3 4,581.1G group’s interest Country ofName of subsidiary 2008 2007 Principal activities incorporationTNB Janamanjung Sdn Bhd 100% 100% Operation of power plant Malaysiaand generation of electricityTNB Power Daharki Ltd* 100% 100% Investment holding MauritiusTNB Fuel Services Sdn Bhd 100% 100% Purchase and supply of Malaysiafuel and coal for power generationTNB Energy Services Sdn Bhd 100% 100% Generation and supply of various Malaysiaenergy sources and provision ofrelated technical servicesTNB Research Sdn Bhd 100% 100% Research and development, Malaysiaconsultancy and other services[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]218TNB Ventures Sdn Bhd 100% 100% Investment holding for domestic Malaysiaand international venturesTNB Engineering Corporation 100% 100% Project management and MalaysiaSdn Bhdconsultancy, engineeringworks and energyproject developmentservices specialising indistrict cooling and cogenerationTNB Repair and 100% 100% Repair, maintenance MalaysiaMaintenance Sdn Bhdand testing of power plants

15 SUBSIDIARIES (CONT’D.)G group’s interest Country ofName of subsidiary 2008 2007 Principal activities incorporationTNB Engineers Sdn Bhd 100% 100% Providing engineering, procurement Malaysiaand construction servicesfor power related projectsTNB Capital (L) Ltd 100% 100% Investment holding MalaysiaUniversiti Tenaga Nasional 100% 100% Providing higher education MalaysiaSdn BhdMalaysia Transformer 100% 100% Manufacturing, selling MalaysiaManufacturing Sdn Bhdand repairing oftransformersTNB Coal International Ltd* 100% 92.5% Investment holding MauritiusPower and Energy 100% 100% Investment holding MauritiusInternational (Mauritius) Ltd*Orion Mission Sdn Bhd 100% 0% Investment holding MalaysiaSabah Electricity Sdn Bhd 80% 80% Generation, transmission, Malaysiadistribution and saleof electricity in SabahTenaga Switchgear Sdn Bhd 60% 60% Assemble and manufacture Malaysiahigh voltage switchgearsKapar Energy Ventures 60% 60% Generate and deliver MalaysiaSdn Bhdelectricity energy andgenerating capacity to TNBTNB Integrated Learning 100% 100% Providing training and MalaysiaSolution Sdn Bhdrelated services(formerly known as TNB(Formerly wasKulim Distribution Sdn Bhd)distribution of electricity)TNB Generation Sdn Bhd 100% 100% Dormant MalaysiaTNB Transmission Network 100% 100% Dormant MalaysiaSdn BhdTNB Distribution Sdn Bhd 100% 100% Dormant Malaysia[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]219

Notes To The Financial Statements15 SUBSIDIARIES (CONT’D.)G group’s interest Country ofName of subsidiary 2008 2007 Principal activities incorporationTNB Risk Management Sdn Bhd 100% 100% Dormant MalaysiaTNB Logistics Sdn Bhd 100% 100% Dormant MalaysiaTNB – IT Sdn Bhd 100% 100% Dormant MalaysiaTNB Workshop Services 100% 100% Dormant MalaysiaSdn BhdTNB Kekal Sdn Bhd** 100% 100% Dormant MalaysiaTNB Metering Services 100% 100% Dormant MalaysiaSdn BhdTNB Hidro Sdn Bhd 100% 100% Dormant MalaysiaSumber Hidro Management 100% 100% Dormant MalaysiaSdn Bhd**TNB Kapar Sdn Bhd** 100% 100% Dormant MalaysiaTNB Prai Sdn Bhd 100% 100% Dormant MalaysiaTNB Paka Sdn Bhd** 100% 100% Dormant MalaysiaTNB Properties Sdn Bhd 100% 100% Dormant MalaysiaTNB Kulim Generation 100% 100% Dormant MalaysiaSdn Bhd[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]220Sepang Power Sdn Bhd 70% 70% Dormant MalaysiaSubsidiaries of TNBEngineering CorporationSdn BhdBangsar Energy Systems 100% 100% Operating an integrated MalaysiaSdn Bhddistrict cooling system forair conditioning systemsof office buildingTNEC Construction Sdn Bhd 100% 100% Construction contractor MalaysiaTNEC Operations and 100% 100% Operations and maintenance MalaysiaMaintenance Sdn Bhdof cooling and power plant

15 SUBSIDIARIES (CONT’D.)G group’s interest Country ofName of subsidiary 2008 2007 Principal activities incorporationSubsidiary of Power andEnergy International(Mauritius) LtdIndependent Power 100% 100% Investment holding MauritiusInternational Ltd*Subsidiary of BangsarEnergy Systems Sdn BhdSelesa Energy Systems 70% 100% Operations and MalaysiaSdn Bhdmaintenance of coolingplantSubsidiary of TNECOperations and MaintenanceSdn BhdTomest Energy Management 51% 51% Dormant MalaysiaSdn BhdSubsidiary of TNBGeneration Sdn BhdTNBG Power Services Sdn Bhd** 100% 100% Dormant MalaysiaSubsidiary of TNB PowerDaharki LtdTNB Liberty Power Ltd# 100% 100% Operation of power Pakistanplant and generationof electricitySubsidiary of TNB PropertiesSdn BhdTNP Construction Sdn Bhd 100% 100% Dormant MalaysiaSubsidiary of TNB ResearchSdn BhdTenaga Microwave 70% 70% Supplier and manufacturer MalaysiaTechnologies Sdn Bhd*^of electrical componentsSubsidiary of TNB EnergyServices Sdn BhdJana Landfill Sdn Bhd 70% 70% Generation and distribution of heat Malaysiaand electricity using landfill gasand/or other renewable energyresources in Peninsular Malaysiaand/or elsewhere[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]221

Notes To The Financial Statements15 SUBSIDIARIES (CONT’D.)G group’s interest Country ofName of subsidiary 2008 2007 Principal activities incorporationSubsidiaries of TNB Repairand Maintenance Sdn BhdTrichy Power Ltd* 100% 100% Power Generation IndiaTrichy Energy Ltd* 100% 100% Power Generation IndiaTNB Operations & Maintenance 100% 100% Investment holding MauritiusInternational LtdSubsidiary of TNB Operations& MaintenanceInternational LtdOasis Parade Sdn Bhd 100% 100% Investment holding MalaysiaSubsidiary of TNBVentures Sdn BhdTenaga Cable Industries 76% 76% Manufacturing and distribution MalaysiaSdn Bhdof power and general cables,aluminium rods and related activitiesSubsidiary of TNB CoalInternational LtdDynamic Acres Sdn Bhd* 100% 100% Coal trading MalaysiaSubsidiary of OrionMission Sdn BhdLahad Datu Holdings 100% 0% Dormant MalaysiaSdn Bhd[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]222Subsidiary of Lahad DatuHoldings Sdn BhdLahad Datu Energy 100% 0% Dormant MalaysiaSdn Bhd* Not audited by PricewaterhouseCoopers# Audited by a member firm of PricewaterhouseCoopers International Limited which is a separate and independentlegal entity from PricewaterhouseCoopers Malaysia.^ On 23 August 2002, the High Court has granted the liquidation petition of Tenaga Microwave Technologies Sdn Bhdbrought by the Company and TNB Research Sdn Bhd. The liquidation process is still in progress as at 31 August2008.** These companies are in the process of being wound up.

16 ASSOCIATESgroup2008 2007RM’million RM’millionShare of net assets of associates 322.5 233.0Company2008 2007RM’million RM’millionUnquoted shares, at cost 60.2 59.2Less: Allowance for diminution in value (9.6) (9.6)50.6 49.6Redeemable preference shares, at cost 33.2 34.0Unsecured loan notes 87.2 42.2171.0 125.8The Group’s share of revenue, profit, assets and liabilities of associates are as follows:2008 2007RM’million RM’millionRevenue 284.2 224.3Profit after taxation 44.9 42.4Non-current assets 592.9 606.8Current assets 302.3 270.8Current liabilities (96.2) (137.9)Non-current liabilities (476.5) (506.7)Net assets 322.5 233.0[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]223

Notes To The Financial Statements16 ASSOCIATES (CONT’D.)Details of the associates are as follows:G group’s interest Country ofName of associate 2008 2007 Principal activities incorporationTeknologi Tenaga Perlis 20% 20% Ownership, operation, MalaysiaConsortium Sdn Bhdmaintenance of electricitygenerating plantPerusahaan Otomobil Elektrik 20% 20% Dormant Malaysia(Malaysia) Sdn BhdGB3 Sdn Bhd 20% 20% Design, develop, construction, Malaysiaoperation and maintenanceof electricity generating facilityFibrecomm Network 49% 49% Provision of fibre optic Malaysia(M) Sdn Bhdtransmission networkJimah Energy Ventures 20% 0% Generate electric power and MalaysiaHoldings Sdn Bhdinvestment holdingAssociates of TNBProperties Sdn BhdHICOM-TNB 40% 40% Construction contractors MalaysiaProperties Sdn BhdINDERA-TNB 40% 40% Property development MalaysiaProperties Sdn Bhdand constructionKM Metro-TNB 40% 40% Property development MalaysiaProperties Sdn Bhdand construction[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]224TNB Properties-JB 40% 40% Property development MalaysiaCitytowers Sdn Bhdand constructionZEUS-TNB 40% 40% Property development MalaysiaProperties Sdn Bhdand constructionAssociate of TNB VenturesSdn BhdNorthern Utility Resources 20% 20% Operation of power plant, MalaysiaSdn Bhdgeneration and supply(Receivers and Managersof electricityappointed)

16 ASSOCIATES (CONT’D.)G group’s interest Country ofName of associate 2008 2007 Principal activities incorporationAssociate of IndependentPower International LtdMalaysian Shoaiba 20% 20% Investment holding MalaysiaConsortium Sdn BhdAssociate of Oasis ParadeSdn BhdSaudi-Malaysia Operation 30% 30% Investment holding Saudi Arabiaand Maintenance ServicesCompany Limited17 INVESTMENTSgroupCompany2008 2007 2008 2007RM’million RM’million RM’million RM’millionUnquoted shares, at cost 75.7 75.7 75.7 75.7Unquoted unsecured loan stocks, at cost 0 0 59.4 59.475.7 75.7 135.1 135.1Allowance for diminution in value:– unquoted shares (37.7) (37.7) (37.7) (37.7)38.0 38.0 97.4 97.418 LONG TERM RECEIVABLESCompany2008 2007RM’million RM’millionAmounts due from subsidiaries 613.3 703.1The amounts due from subsidiaries comprise advances and other receivables from TNB Liberty Power Limited (‘TLPL’) andTNB Power Daharki Ltd (‘TPD’) amounting to RM52.8 million (2007: RM54.6 million) and RM560.5 million (2007: RM648.5million) respectively.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]225

Notes To The Financial Statements18 LONG TERM RECEIVABLES (CONT’D.)These amounts are unsecured and the Company has given an undertaking to the subsidiaries not to recall the amountwithin 12 months from the balance sheet date. The amount due from TLPL is interest free. The amount due from TPD issubject to interest at rates ranging from 4.2% to 8.4% (2007: 6.7% to 8.4%) per annum.19 NON-CURRENT ASSETS HELD FOR SALEgroupCompany2008 2007 2008 2007RM’million RM’million RM’million RM’millionCost/ValuationOpening 126.4 0 57.2 0Amount transferred fromproperty, plant & equipment (Note 13) 20.4 54.5 20.4 54.5Amount transferred fromprepaid operating leases (Note 14) 3.0 2.7 3.0 2.7Amount transferred fromcoal mining rights 0 69.2 0 0Amount transferred frominvestment in associates (Note 16) 0.6 0 0 0Disposals (135.7) 0 (66.5) 0Closing 14.7 126.4 14.1 57.2[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]226Depreciation/AmortisationOpening 1.4 0 1.4 0Amount transferred fromproperty, plant & equipment (Note 13) 0 0.2 0 0.2Amount transferred fromprepaid operating leases (Note 14) 1.9 1.2 1.9 1.2Disposals (2.7) 0 (2.7) 0Closing 0.6 1.4 0.6 1.4Net book amountAt 31 August 14.1 125.0 13.5 55.8During the year, the Company entered into several sale and purchase agreements with various parties, for which thedisposals are still in progress.

20 INVENTORIESG group Company2008 2007 2008 2007RM’million RM’million RM’million RM’millionRaw materials, fuel and consumables 2,133.4 1,692.3 1,158.3 1,115.4Work-in-progress 61.0 51.2 0 0Finished goods 35.9 26.0 0 02,230.3 1,769.5 1,158.3 1,115.421 RECEIVABLES, DEPOSITS AND PREPAYMENTSG group Company2008 2007 2008 2007RM’million RM’million RM’million RM’millionTrade receivables 2,501.1 2,045.1 1,702.4 1,639.1Less: Allowance for doubtful debts (418.4) (504.0) (342.8) (415.6)2,082.7 1,541.1 1,359.6 1,223.5Rechargeable debtors 67.6 92.3 58.7 91.0Less: Allowance for doubtful debts (64.8) (83.8) (54.3) (73.3)2.8 8.5 4.4 17.7Staff advances/loans 566.5 620.6 562.5 616.5Advance to contractors 193.6 114.5 133.8 98.1Deposits and prepayments 67.3 109.3 24.7 21.2Other receivables 539.3 527.8 207.1 227.61,366.7 1,372.2 928.1 963.43,452.2 2,921.8 2,292.1 2,204.6The Group’s and the Company’s credit policy provides trade receivables with a 30 days (2007: 30 days) credit period.The Group and the Company have no significant exposures to any individual customer, geographical location or industrycategory. 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 RM490.6 million (2007: RM536.5 million)which are not recoverable within 12 months.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]227

Notes To The Financial Statements22 AMOUNTS DUE FROM/TO SUBSIDIARIESAmount due from TLPL and TNB Janamanjung Sdn Bhd (‘TNBJ’) is interest free. Amounts due from TPD is subject tointerest at rates ranging from 4.2% to 8.4% (2007: 6.7% to 8.4%) per annum. Amount due from SESB is subject to aninterest rate of 6.0% (2007: 6.0%) per annum, is unsecured and has no fixed terms of repayment. Amount due from KaparEnergy Ventures Sdn Bhd (‘KEV’) and TNB Coal International Ltd are subject to interest rate of 15.0% (2007: 15.0%) and7.0% (2007: 7.0%) per annum respectively.Amounts due from/to all other subsidiaries are unsecured, interest free and have no fixed terms of repayment.23 SHORT TERM INVESTMENTSG group Company2008 2007 2008 2007RM’million RM’million RM’million RM’millionQuoted warrants, at cost 12.6 12.6 12.6 12.6Market value – quoted warrants 15.0 23.7 15.0 23.724 MARKETABLE SECURITIESG group Company2008 2007 2008 2007RM’million RM’million RM’million RM’millionQuoted in Malaysia, at cost:Shares 27.1 27.1 27.1 27.1Less: Allowance for diminution in value (18.6) (16.5) (18.6) (16.5)[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]2288.5 10.6 8.5 10.6Market value 8.5 10.6 8.5 10.6

25 DEPOSITS, BANK AND CASH BALANCESG group Company2008 2007 2008 2007RM’million RM’million RM’million RM’millionCash in hand and at bank 1,260.8 988.1 463.2 295.4Deposits with licensed banks 4,122.4 4,310.6 3,749.7 4,228.9Deposits with licensed finance companies 0.7 0.6 0 05,383.9 5,299.3 4,212.9 4,524.3The interest rate per annum of deposits, bank and cash balances that were effective as at balance sheet date were as follows:G group Company2008 2007 2008 2007% % % %Deposits with licensed banks andfinance companies 3.52 – 3.75 3.50 – 5.25 3.52 – 3.75 3.50 – 5.25Bank balances 0.13 – 1.50 0.13 – 4.75 0.13 – 0.50 0.13 – 1.00Deposits with licensed banks are held in the short term money market. Deposits have maturity periods ranging from 6to 448 days (2007: 5 to 448 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 31 days(2007: 60 days).G group CompanyCash and cash equivalents at endof the financial year comprise:2008 2007 2008 2007RM’million RM’million RM’million RM’millionCash in hand and at bank 1,260.8 988.1 463.2 295.4Deposits with licensed banks 4,122.4 4,310.6 3,749.7 4,228.9Deposits with finance companies 0.7 0.6 0 0Cash at bank held in trust* (205.9) (65.6) 0 05,178.0 5,233.7 4,212.9 4,524.3* Deposits and cash at bank held in trust are in respect of a grant given to a subsidiary by the Government of Malaysiafor a designated capital project.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]229

Notes To The Financial Statements26 PAYABLESG group Company2008 2007 2008 2007RM’million RM’million RM’million RM’millionTrade payables 3,999.7 3,233.7 3,059.6 2,607.7Accrued interest on borrowings 506.0 470.8 202.6 240.9Payroll liabilities 258.3 163.7 241.8 152.8Deposits 39.7 15.4 35.0 9.8Other payables and accruals 383.7 418.0 195.3 121.55,187.4 4,301.6 3,734.3 3,132.7Credit terms of trade payables of the Group and the Company vary from 30 to 60 days (2007: 30 to 60 days) dependingon the terms of the contracts.27 SHORT TERM BORROWINGSG group Company2008 2007 2008 2007RM’million RM’million RM’million RM’millionPortion of borrowings due withinone financial year (Note 28) – unsecured 653.1 1,727.4 400.9 1,422.7– secured 239.9 215.8 0 0[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]230893.0 1,943.2 400.9 1,422.7Short term loans – secured 140.0 0 0 0– unsecured 5.6 40.0 0 30.0Bankers’ acceptances 19.7 32.3 0 01,058.3 2,015.5 400.9 1,452.7The short term borrowings carry interest at rates ranging from 0.75% to 8.25% (2007: 2.50% to 8.30%) per annum for theGroup and from 0.75% to 6.40% (2007: 2.50% to 8.30%) for the Company. Included in short term borrowings of the Groupare loan stocks held by the Company in a subsidiary company which carries a coupon of 15.00% per annum.

28 BORROWINGSG group Company2008 2007 2008 2007N note RM’million RM’million RM’million RM’millionUnsecured– Term loans (a) 10,142.2 10,198.2 7,767.8 7,557.5– Bonds (b) 6,961.5 8,173.8 5,781.3 6,954.6– Income Securities (c) 1,559.2 1,561.4 1,559.2 1,561.4– Amount due to Cagamas Berhad 138.5 248.0 138.5 248.0– Redeemable Unsecured Loan Stocks 365.0 380.2 0 019,166.4 20,561.6 15,246.8 16,321.5Secured– Term loans (a) 714.7 437.5 0 0– Bonds (b) 2,694.0 2,908.0 0 022,575.1 23,907.1 15,246.8 16,321.5G group Company2008 2007 2008 2007RM’million RM’million RM’million RM’millionPayable within one year includedunder short term borrowings (Note 27) 893.0 1,943.2 400.9 1,422.7Repayable after one year:After one and up to two years 874.6 904.1 361.2 363.2After two and up to five years 6,103.0 5,957.0 4,549.4 4,308.4After five and up to ten years 5,356.4 7,851.4 1,689.5 4,212.1After ten and up to twenty years 7,722.0 5,740.3 7,058.0 4,907.9After twenty and up to thirty years 1,043.1 874.2 628.9 484.0After thirty years 583.0 636.9 558.9 623.221,682.1 21,963.9 14,845.9 14,898.822,575.1 23,907.1 15,246.8 16,321.5[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]231

Notes To The Financial Statements28 BORROWINGS (CONT’D.)group2008 2007RM’million RM’millionNet book values of property, plant and equipment pledgedas security for term loans:(i) Machinery and equipment 2,651.4 2,812.5(ii) Building 802.5 818.03,453.9 3,630.5Unsecured term loans include RM14.7 million (2007: RM16.1 million) due to the Government of Malaysia and RM3,571.4million (2007: RM3,290.4 million) guaranteed by the Government of Malaysia.(a)Term loansDetails of term loans with designated derivative financial instruments are as follows:(i)30-YEAR JPY26.0 BILLION TERM LOANOn 30 March 2004, TNB Capital (L) Ltd (‘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 loanwhose 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. Thebalance as at 31 August 2008 is RM812.5 million (2007: RM789.7 million).[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]232(ii)(iii)USD-JPY Option on the principal repaymentIn April 2004, TNBCL entered into Currency Option Agreements with a notional amount of JPY26.0 billion as ahedge on its Term Loan. This transaction enables TNBCL to reduce its exposure to losses that may arise fromadverse fluctuation on foreign currency exchange rates in relation to the above Term Loan.5-YEAR JPY11.0 BILLION TERM LOANOn 13 December 2004, the Company entered into a 5-year JPY11.0 billion unsecured loan, paying floatinginterest rates. The loan will mature on 4 January 2010. The loan is an amortising loan whose principal amountis 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 2008 in accordance with Company’s accountingpolicy is equivalent to RM103.1 million (2007: RM167.0 million).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 JPYand to pay a fixed rate of 4.23% in Ringgit Malaysia. The notional principle of the swap is JPY7.7 billion. Theeffect of this transaction is to fix the interest rate payable on that loan and reduce TNB’s exposure to losses thatmay arise from adverse fluctuation on foreign currency exchange rates and interest rates in relation to the loan.9-YEAR USD503.0 MILLION TERM LOAN (ECA LOAN)On 30 August 2006, the Company novated the Loan to TNB Capital (L) Ltd. (‘TNBCL’), a wholly-ownedsubsidiary of TNB. The loan is guaranteed by the Company and recognised as an inter-company loan betweenthe Company and TNBCL. The loan is an amortising loan in which the principal is payable in 17 equal semiannualinstalments and will mature on 28 February 2015. The first repayment of the loan is on 28 February2007. The balance as at 31 August 2008 is RM1,405.8 million (2007: RM1,557.4 million).

28 BORROWINGS (CONT’D.)(a)Term loans (Cont’d.)(iii) 9-YEAR USD503.0 MILLION TERM LOAN (ECA LOAN) (CONT’D.)Interest Rate Swap (‘IRS’)The Company entered into IRS agreements on 10 October 2008 with effective period from 15 October 2008to 28 February 2015 that entitles it to receive interest at floating rates, and obliges it to pay interest at fixedrate of 3.76% on aggregate notional principal of USD384.6 million.The effect of this transaction is to effectively fix the interest rate payable on the loan.(b)BondsDetails of bonds with designated derivative financial instrument are as follows:(i)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 ofthe 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 pershare as a result of the bonus issue.(ii)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 millionBaIDS to finance the acquisition of Stesen Janaelektrik Sultan Salahuddin Abdul Aziz. The tenure of the BaIDSFacility ranges from 1 to 15 years with a profit rate of between 3.65% and 8.70% per annum.(c)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 2008.(ii)(iii)Debenture over KEV’s assets and properties and assignment of all rights, title interest and benefits underthe project documents, the assigned insurances, and the designated accounts to secure the payment andrepayment of the total secured amounts.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 meetthe debt servicing requirements. The terms of BaIDS also require KEV to maintain certain financial covenants.Income SecuritiesFixed 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 ofRM999.0 million issued at 100% of nominal value (in denominations of RM999,000.00 each), with detachablecoupons representing interest on the Bonds. The Bonds are to be redeemed at par in two tranches withredemption amounts of RM999.0 million and RM499.5 million on 16 August 2011 and 19 September 2011respectively, and;[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]233

Notes To The Financial Statements28 BORROWINGS (CONT’D.)(c)Income Securities (Cont’d.)(ii)1,000 Class A RPS of RM1.00 each, issued at a premium of RM999.00 per share and 500 Class B RPS ofRM1.00 each, issued at a premium of RM999.00 per share. Both classes of RPS are redeemable at RM1,000each at the Company’s option at any time on or after 16 August 2010 and 19 September 2010, for Class A andB RPS respectively. If the Class A and B RPS are not redeemed by 16 August 2011 and 19 September 2011respectively, an additional sum of RM1.0 million on the first tranche and RM0.5 million on the second trancheshall become due and payable under the final Bond Coupon payment for each of the tranches.With the adoption of the Single Tier Tax System, the Company is now making coupon payments on the FIS insteadof dividend. The 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.29 CONSUMER DEPOSITSConsumers (with the exception of employees and government departments/agencies) are required to deposit a sumsufficient 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 theconsumer’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, inJanuary every year.30 EMPLOYEE BENEFITSThe movements during the financial year in the amounts recognised in the consolidated balance sheet are as follows:-R retirement Retirementbenefit medicalplan plan TotalR rM’million RM’million RM’million[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]234GroupAt 1 September 2006 1,011.0 1,303.1 2,314.1Charged to income statement 249.0 400.2 649.2Contribution and benefits paid (123.8) (108.9) (232.7)At 31 August 2007 1,136.2 1,594.4 2,730.6Charged to income statement 246.6 423.0 669.6Contribution and benefits paid (136.3) (139.1) (275.4)At 31 August 2008 1,246.5 1,878.3 3,124.8

30 EMPLOYEE BENEFITS (CONT’D.)The amounts recognised in the consolidated balance sheet are analysed as follows:R retirement Retirementbenefit plan medical plan TotalR rM’million RM’million RM’millionGroupAt 31 August 2007Present value of obligations 2,049.6 3,053.5 5,103.1Fair value of plan assets (648.2) 0 (648.2)Present value of unfunded obligations 1,401.4 3,053.5 4,454.9Unrecognised actuarial losses (193.8) (1,459.1) (1,652.9)Unrecognised past service cost (77.3) 0 (77.3)Others 5.9 0 5.9Liability in the balance sheet 1,136.2 1,594.4 2,730.6At 31 August 2008Present value of obligations 2,211.9 3,185.9 5,397.8Fair value of plan assets (615.1) 0 (615.1)Present value of unfunded obligations 1,596.8 3,185.9 4,782.7Unrecognised actuarial losses (62.0) 0 (62.0)Unrecognised past service cost (294.9) (1,307.6) (1,602.5)Others 6.6 0 6.6Liability in the balance sheet 1,246.5 1,878.3 3,124.8The expense recognised in the consolidated income statement is analysed as follows:R retirement Retirementbenefit plan medical plan TotalR rM’million RM’million RM’millionGroup2007Current service cost 133.2 8.4 141.6Interest cost 119.2 199.4 318.6Expected return on plan assets (28.6) 0 (28.6)Actuarial losses recognised 9.7 192.4 202.1Past service cost 15.5 0 15.5Total, included in staff costs 249.0 400.2 649.2Actual return on plan assets (144.0) 0 (144.0)[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]235

Notes To The Financial Statements30 EMPLOYEE BENEFITS (CONT’D.)R retirement Retirementbenefit plan medical plan TotalR rM’million RM’million RM’millionGroup2008Current service cost 133.9 22.1 156.0Interest cost 130.5 207.1 337.6Expected return on plan assets (33.5) 0 (33.5)Actuarial losses recognised 0 193.8 193.8Past service cost 15.5 0 15.5Others 0.2 0 0.2Total, included in staff costs 246.6 423.0 669.6Actual return on plan assets (86.1) 0 (86.1)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:R retirement Retirementbenefit plan medical plan% %[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]236GroupAt 31 August 2007Discount rates 6.5 7.1Expected return on plan assets 6.0 N/AExpected rate of salary increases 6.0 N/AMedical cost inflation– inpatient N/A 7.9– outpatient N/A 5.1At 31 August 2008Discount rates 6.5 7.1Expected return on plan assets 6.0 0Expected rate of salary increases 6.0 0Medical cost inflation– inpatient N/A 7.0– outpatient N/A 5.5

30 EMPLOYEE BENEFITS (CONT’D.)The movements during the financial year in the amounts recognised in the Company’s balance sheet are as follows:R retirement Retirementbenefit plan medical plan TotalR rM’million RM’million RM’millionCompanyAt 1 September 2006 1,000.4 1,220.9 2,221.3Charged to income statement 246.2 391.8 638.0Contributions and benefits paid (123.0) (108.9) (231.9)At 31 August 2007 1,123.6 1,503.8 2,627.4Charged to income statement 245.1 400.9 646.0Contributions and benefits paid (135.3) (139.0) (274.3)At 31 August 2008 1,233.4 1,765.7 2,999.1The amounts recognised in the Company’s balance sheet are analysed as follows:R retirement Retirementbenefit plan medical plan TotalR rM’million RM’million RM’millionAt 31 August 2007Present value of obligations 2,042.9 2,962.9 5,005.8Fair value of plan assets (648.2) 0 (648.2)Present value of unfunded obligations 1,394.7 2,962.9 4,357.6Unrecognised 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 2,627.4At 31 August 2008Present value of obligations 2,205.2 3,073.3 5,278.5Fair value of plan assets (615.1) 0 (615.1)Present value of unfunded obligations 1,590.1 3,073.3 4,663.4Unrecognised actuarial losses (294.8) (1,307.6) (1,602.4)Unrecognised past service cost (61.9) 0 (61.9)Liability in the balance sheet 1,233.4 1,765.7 2,999.1[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]237

Notes To The Financial Statements30 EMPLOYEE BENEFITS (CONT’D.)The expense recognised in the Company’s income statement is analysed as follows:R retirement Retirementbenefit plan medical plan TotalR rM’million RM’million RM’millionCompany2007Current service cost 130.4 0 130.4Interest cost 119.2 199.4 318.6Expected return on plan assets (28.6) 0 (28.6)Actuarial losses recognised 9.7 192.4 202.1Past service cost 15.5 0 15.5Total, included in staff costs 246.2 391.8 638.0Actual return on plan assets (144.0) 0 (144.0)R retirement Retirementbenefit plan medical plan TotalR rM’million RM’million RM’million2008Current service cost 132.6 0 132.6Interest cost 130.5 207.1 337.6Expected return on plan assets (33.5) 0 (33.5)Actuarial losses recognised 0 193.8 193.8Past service cost 15.5 0 15.5Total, included in staff costs 245.1 400.9 646.0[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]238Actual return on plan assets 86.1 0 86.1The charge to income statement was included in the administrative expenses.

30 EMPLOYEE BENEFITS (CONT’D.)The principal actuarial assumptions used in respect of the Company’s defined benefit plans were as follows:R retirement Retirementbenefit plan medical plan% %CompanyAt 31 August 2007Discount rates 6.5 7.1Expected return on plan assets 6.0 N/AExpected rate of salary increases 6.0 N/AMedical cost inflation– inpatient N/A 8.0– outpatient N/A 5.0At 31 August 2008Discount rates 6.5 7.1Expected return on plan assets 6.0 n/AExpected rate of salary increases 6.0 n/AMedical cost inflation– inpatient N/A 8.0– outpatient N/A 5.031 DEFERRED TAXATIONDeferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets againstcurrent tax liabilities and when the deferred taxes relate to the same tax authority. The following amounts, determinedafter appropriate offsetting, are shown in the balance sheet:G group Company2008 2007 2008 2007RM’million RM’million RM’million RM’millionDeferred tax liabilities:– subject to corporate income tax (6,337.4) (6,274.4) (5,499.3) (5,524.8)[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]239

Notes To The Financial Statements31 DEFERRED TAXATIONThe movements during the financial year relating to deferred tax are as follows:G group Company2008 2007 2008 2007RM’million RM’million RM’million RM’millionAs at the beginning of the financial year (6,274.4) (6,424.6) (5,524.8) (5,758.4)(Charged)/credited to income statement:– property, plant and equipment (99.5) 149.1 (13.7) 232.5– provision and allowances 36.5 1.1 39.2 1.1(63.0) 150.2 25.5 233.6As at the end of the financial year (6,337.4) (6,274.4) (5,499.3) (5,524.8)Subject to income taxDeferred tax assets (before offsetting)Provision and allowances 840.2 803.7 837.8 798.6Property, plant and equipment 488.1 558.5 0 0Offsetting (1,328.3) (1,362.2) (837.8) (798.6)Deferred tax assets (after offsetting) 0 0 0 0Deferred tax liabilities (before offsetting)Property, plant and equipment (7,665.7) (7,636.6) (6,337.1) (6,323.4)Offsetting 1,328.3 1,362.2 837.8 798.6Deferred tax liabilities (after offsetting) (6,337.4) (6,274.4) (5,499.3) (5,524.8)[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]240The amount of deductible temporary differences and unused tax losses (both of which have no expiry date) for which nodeferred tax assets is recognised in the balance sheet are as follows:G group Company2008 2007 2008 2007RM’million RM’million RM’million RM’millionDeductible temporary differences 1,338.8 1,688.4 0 0Tax losses 1,184.2 1,222.7 0 0As at 31 August 2008, the temporary differences associated with unremitted earnings of subsidiaries for which deferredtax liabilities have not been recognised amounted to RM1,021.8 million (2007: RM740.2 million).

32 DEFERRED INCOMEG group Company2008 2007 2008 2007R rM’million RM’million RM’million RM’millionAs at the beginning of the financial year 2,803.5 2,675.8 2,504.7 2,400.6Received during the financial year 441.0 454.6 383.7 395.9Released to income statement (Note 4) (345.1) (326.9) (307.6) (291.8)As at the end of the financial year 2,899.4 2,803.5 2,580.8 2,504.733 GOVERNMENT DEVELOPMENT GRANTSgroup2008 2007RM’million RM’millionAs at the beginning of the financial year 620.5 665.0Received during the financial year 0 0Released to income statement (Note 7) (56.9) (44.5)As at the end of the financial year 563.6 620.5The Government development grants are in respect of capital grants received by an 80% subsidiary company SabahElectricity Sdn Bhd for capital projects in the State of Sabah.34 SHARE CAPITALgroup and Company2008 2007RMRMAuthorised:Ordinary shares of RM1.00 each 5,000,000,000 5,000,000,000Special Rights Redeemable Preference Share of RM1.00 each 1 1Class A Redeemable Preference Shares of RM1.00 eachAs at the beginning/end of the financial year 1,000 1,000Class B Redeemable Preference Shares of RM1.00 eachAs at the beginning/end of the financial year 500 500[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]241

Notes To The Financial Statements34 SHARE CAPITAL (CONT’D.)group and Company2008 2007RMRMIssued and fully paid:Ordinary shares of RM1.00 each 4,334,518,345 4,331,709,068Special Rights Redeemable Preference Share of RM1.00 each 1 1Total share capital issued and fully paid as at the end of the financial year 4,334,518,346 4,331,709,069Movements on issued ordinary shares of RM1.00 eachAs at the beginning of the financial year 4,331,709,068 4,135,170,337Issuance of ordinary shares of RM1.00 each under the ESOS II 2,573,225 66,736,312Issuance of ordinary shares of RM1.00 under theexchange of Guaranteed Exchangeable Bonds 0 114,699,925Issuance of ordinary shares of RM1.00 under theUnsecured Convertible Redeemable Income Securities 236,052 15,102,494As at the end of the financial year 4,334,518,345 4,331,709,068Employees’ Share Option Scheme (‘ESOS’)The Company implemented a new Employees’ Share Option Scheme II (‘ESOS II’) on 8 July 2003 for a period of 10years. The ESOS II is governed by the bye-laws, which were approved by the shareholders at an Extraordinary GeneralMeeting (‘EGM’) on 29 May 2003 and amended at the EGM held on 15 December 2005.The main features of ESOS II are as follows:[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]242(a)(b)(c)(d)The total number of ordinary shares to be issued by the Company under the ESOS II shall not exceed 10% of totalissued and paid-up ordinary shares of the Company, such that not more than 50% of the shares available under theESOS II are allocated, in aggregate, to Directors and senior management.Not more than 10% of the shares available under the ESOS II is allocated to any individual Director or employeewho, either singly or collectively through his/her associates, holds 20% or more in the issued and paid-up capital ofthe Company.Any employee, including any Executive Director and those categorised as Fixed Term Senior Management, butexcluding a Skim A employee (the scheme governing employees who, upon the corporatisation and privatisation ofthe Lembaga Letrik Negara in 1990, remain employed under the Government’s terms and conditions) are eligible toparticipate in the ESOS II. Employees under the Fixed Term Senior Management are also entitled to the PerformanceOptions based on them meeting prescribed performance targets.The option price under the ESOS II is the higher of the weighted average market price of the shares as shown inthe daily official list issued by the Bursa Malaysia Securities Berhad for the five trading days preceding the date ofoffer with a 10% discount on the nominal value of the shares, subject always that the discount shall not be applicableto any shares under the Performance Option.

34 SHARE CAPITAL (CONT’D.)Employees’ Share Option Scheme (‘ESOS’) (Cont’d.)(e) In the event of any alteration to the capital structure of the Company during the option period which expires on7 July 2013, such corresponding alterations shall be made in:(i)(ii)(iii)the number of new shares in relation to the ESOS II so far as unexercised;the option price; and/orthe method of the exercise of the option.(f)(g)Options granted under the ESOS II carry no dividends or voting rights. Upon exercise of the options, shares issuedrank pari passu in all respects with the then existing ordinary shares of the Company.The persons to whom the options have been granted under the ESOS II have no right to participate in any shareissue of any other company within the Group.Movements in the number of shares represented by options outstanding and their related weighted average exerciseprices are as follows:2008 2007AverageAverageexercise Number exercise Numberprice of shares price of sharesR rM/share ‘000 RM/share ‘000Beginning of year 7.73 84,031 6.89 133,821Granted 6.56 21,351 10.92 17,087Exercised 6.80 (2,573) 6.86 (66,736)Expired 8.84 (743) 11.68 (141)At end of year 7.50 102,066 7.73 84,031[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]243

Notes To The Financial Statements34 SHARE CAPITAL (CONT’D.)Employees’ Share Option Scheme (‘ESOS’) (Cont’d.)Details relating to the options exercised during the financial year are as follows:N number ofFair value ofsharesshares at share exercise issued as atExercise date issue date price 31.8.2008R rM/share rM/shareSeptember 2007 9.45 – 10.30 6.71/6.99/7.42/7.33/11.07 353,125October 2007 9.15 – 9.95 6.71/6.99/7.42/7.33 225,375November 2007 8.80 – 9.40 6.71/6.99/7.42/7.33 154,125December 2007 9.25 – 10.00 6.71/6.99/7.42/7.33 140,675January 2008 8.95 – 9.95 6.71/7.42/7.33 237,875February 2008 9.05 – 9.45 6.71/6.99/7.42/7.33 413,300March 2008 6.80 – 8.95 6.71/6.99/7.33 56,250April 2008 6.60 – 7.50 6.71 9,000May 2008 6.60 – 7.10 6.71 8,750June 2008 7.00 – 9.00 6.71/7.42/7.33 125,375July 2008 7.70 – 8.40 6.71/6.99/7.33/6.33 155,025August 2008 7.75 – 8.50 6.71/6.99/7.42/7.33/6.33 694,350Sub-total 2,573,225Conversion of Convertible Redeemable Income Securities (‘CRIS’) 9.18 236,052TOTAL 2,809,277Share options outstanding at the end of the year have the following expiry dates and exercise price.Nnumber of sharesExpiry date exercise price 2008 2007R rM/share ‘000 ‘000[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]24407.07.2013 6.71 41,460 42,87707.07.2013 6.99 5,061 5,14907.07.2013 7.75 205 20507.07.2013 7.42 7,172 7,46907.07.2013 8.39 0 007.07.2013 7.80 288 28807.07.2013 7.33 7,649 8,04207.07.2013 7.33 3,011 3,11007.07.2013 9.189 1,306 1,30607.07.2013 11.07 15,252 15,58507.07.2013 11.558 13 007.07.2013 11.237 34 007.07.2013 9.189 90 007.07.2013 9.189 1,023 007.07.2013 10.716 41 007.07.2013 6.33 18,245 007.07.2013 7.33 1,216 0102,066 84,031

34 SHARE CAPITAL (CONT’D.)Employees’ Share Option Scheme (‘ESOS’) (Cont’d.)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:expected5 year averageshare price Exercise Option dividend Risk free share priceGrant date at grant date price life yield interest rate movementrM rM Years % % %25.02.2005 8.24 7.75 8 1.14 3.64 21.5730.03.2005 8.00 7.42 8 1.14 3.33/3.72 22.1317.07.2005 8.56 7.80 7 1.14 3.40 19.4124.02.2006 8.70 7.33 7 1.14 3.43/3.63/3.77 24.0116.04.2006 8.65 7.33 7 1.14 3.55/3.96 18.0725.09.2006 9.91 9.19 6 1.14 3.86/3.95 18.5228.03.2007 11.50 11.07 6 1.14 3.48/3.50 17.5926.07.2007 10.95 11.56 6 1.14 3.48 17.4524.08.2007 10.29 11.24 6 1.14 3.60 19.9227.10.2007 9.28 9.19 6 1.14 3.56 17.4027.12.2007 9.54 9.19/10.72 6 1.14 3.64/3.79 17.4725.04.2008 6.76 6.33 5 1.14 3.37/3.45 20.3230.07.2008 8.35 7.33 5 1.14 3.73/3.89 22.42The charges to income statement arising from share-based payments during the financial year amounted to RM27.1million (2007: RM35.7 million) for the Group and RM25.4 million (2007: RM30.8 milion) for the Company as set out inNote 6 to these financial statements.R31.8.2008rM’000Ordinary share capital, at par 2,573Share premium 14,920Proceeds received on exercise of share options 17,493Fair value at exercise date of shares issued 23,359Special Rights Redeemable Preference Share (‘Special Share’)(a) The Special Share would enable the Government of Malaysia through the Minister of Finance Incorporated to ensurethat 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 SpecialShareholder 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 Boardof Directors of the Company.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]245

Notes To The Financial Statements34 SHARE CAPITAL (CONT’D.)Special Rights Redeemable Preference Share (‘Special Share’) (Cont’d.)(b) Certain matters, in particular the alteration of the Articles of Association of the Company relating to the rights ofthe Special Shareholder, creation and issue of additional shares which carry different voting rights, the dissolution ofthe Company, substantial disposal of assets, amalgamations, merger and takeover, require the prior consent of theSpecial Shareholder.(c)(d)The Special Shareholder does not have any right to participate in the capital or profits of the Company.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)(b)(c)The RPS do not carry any right to participate in the assets and surplus profit of the Company.The RPS holders have no voting rights except on resolution to amend the RPS holders’ rights.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 2010respectively at RM1,000 each.As described in Note 28(c) to these financial statements, these RPS form part of the Company’s Fixed Income Securities.35 SHARE PREMIUMgroup and Company2008 2007RM’million RM’million[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]246As at the beginning of the financial year 5,242.0 3,912.9Arising in respect of ordinary shares issued during the financial year 16.8 1,329.1As at the end of the financial year 5,258.8 5,242.0

36 REVALUATION AND OTHER RESERVESG group Company2008 2007 2008 2007RM’million RM’million RM’million RM’millionNon-distributableRevaluation reserve 935.6 1,000.6 925.5 990.5Foreign currency translation reserve (133.6) 5.2 0 0Reserve on consolidation (146.6) (146.6) 0 0Employees’ Share Option Scheme reserve 62.8 35.7 56.2 30.8718.2 894.9 981.7 1,021.3The movements in each category of reserves were as follows:G group Company2008 2007 2008 2007RM’million RM’million RM’million RM’millionRevaluation reserveAs at the beginning of the financial year 1,000.6 1,027.7 990.5 1,017.6Realisation of revaluation reserve (65.0) (27.1) (65.0) (27.1)As at the end of the financial year 935.6 1,000.6 925.5 990.5Foreign currency translation reserveAs at the beginning of the financial year 5.2 (37.5) 0 0Arising in the financial year (138.8) 42.7 0 0As at the end of the financial year (133.6) 5.2 0 0Reserve on consolidationAs at the beginning/end of the financial year (146.6) (146.6) 0 0Employees’ Share Option Scheme reserveAs at the beginning of the financial year 35.7 0 30.8 0Arising in the financial year 27.1 35.7 25.4 30.8As at the end of the financial year 62.8 35.7 56.2 30.8Total revaluation and other reservesAs at the beginning of the financial year 894.9 843.6 1,021.3 1,017.6Arising in the financial year (111.7) 78.4 25.4 30.8Realisation of revaluation reserve (65.0) (27.1) (65.0) (27.1)As at the end of the financial year 718.2 894.9 981.7 1,021.3[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]247

Notes To The Financial Statements37 RETAINED PROFITSSubject to agreement by the Inland Revenue Board, the Company has sufficient tax credits under Section 108 of theIncome Tax Act, 1967 available to frank approximately RM1,739.0 million (2007: RM1,858.3 million) of its retained profitsas at 31 August 2008, if paid out as dividends. The remaining profits of RM13,431.8 million (2007: RM11,427.2 million)can be distributed as exempt dividends under the Single Tier Tax system.In addition, the Company has tax exempt income as at 31 August 2008 arising from the Income Tax (Amendment) Act,1999, relating to tax on income earned in 1999 being waived and exempt dividend income amounting to approximatelyRM247.3 million (2007: RM47.3 million) available for distribution as tax exempt dividends to shareholders. This tax exemptincome is subject to agreement by the Inland Revenue Board.38 COMMITMENTS(a) Capital and other commitments for 5 yearsG group Company2008 2007 2008 2007RM’million RM’million RM’million RM’millionAuthorised capital expenditurenot provided in the financial statementsContracted 548.0 1,141.2 284.6 912.9Not contracted 16,352.9 11,580.6 15,964.3 11,283.516,900.9 12,721.8 16,248.9 12,196.4(b)Non-cancellable operating lease commitmentsgroup and Company2008 2007RM’million RM’million[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]248Future minimum lease paymentsNot later than one year 13.3 13.3Later than one year and not later than five years 11.0 24.324.3 37.6The above lease payments relate to the non-cancellable operating leases of the Group and the Company.

39 CONTINGENT LIABILITIES (UNSECURED)G group Company2008 2007 2008 2007RM’million RM’million RM’million RM’millionClaims by third parties 1,077.5 943.0 947.1 917.9Trade guarantees and performance bonds 1.2 5.4 0 0Corporate guarantees given to financial institutionsin respect of facilities granted to subsidiaries 307.5 170.8 3,739.4 3,894.4Stamp duties on transfer of assets to a subsidiary (1) 108.0 108.0 0 0Other contingent liabilities 5.9 29.7 0 01,500.1 1,256.9 4,686.5 4,812.3Claims by third parties include claims by contractors, consultants, consumers and former employees. These claims arebeing resolved and the Directors are of the opinion that their outcome will not have a material adverse effect on thefinancial 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 avesting order to exempt itself from any potential liability.40 SIGNIFICANT RELATED PARTY DISCLOSURESThe related party transaction of the Company comprises mainly transactions between the Company and its subsidiariesand associates namely the followings:Subsidiaries• TNB Janamanjung Sdn Bhd• TNB Fuel Services Sdn Bhd• Kapar Energy Ventures Sdn Bhd• Tenaga Switchgear Sdn Bhd• Malaysia Transformers Manufacturing Sdn Bhd• Sabah Electricity Sdn Bhd• TNB Research Sdn Bhd• TNB Capital Ltd• TNB Repair & Maintenance Sdn Bhd• Tenaga Cable Industries Sdn BhdAssociates• Teknologi Tenaga Perlis Consortium Sdn Bhd• GB3 Sdn Bhd• Fibrecomm Network (M) Sdn BhdAll related party transactions were entered into in a normal course of business and at prices available to third parties orat negotiated terms.Khazanah Nasional Berhad (Khazanah) is a major shareholder with 37.81% equity interest and is a related party ofthe Company.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]249

Notes To The Financial Statements40 SIGNIFICANT RELATED PARTY DISCLOSURES (CONT’D.)In addition to related party balances mentioned elsewhere in the financial statements, set out below are other significantrelated party transactions which were carried out on terms and conditions negotiated amongst the related parties:G group Company2008 2007 2008 2007RM’million RM’million RM’million RM’million(a)(b)Transaction with subsidiariesIncome– Sales of electricity 0 0 24.2 22.6– Interest income 0 0 133.8 285.6– Dividend income 0 0 658.5 0.4– Rental income 0 0 25.1 12.9Expenditure– Purchases of electricity 0 0 3,443.2 3,574.4– Interest expense 0 0 161.8 201.8Amount due from subsidiaries 0 0 2,299.0 1,953.2Amount due to subsidiaries 0 0 4,718.7 5,024.5Transaction with associatesIncome– Sales of electricity 0.3 0.3 0.3 0.3– Interest income 4.8 5.9 4.8 5.9– Leasing income 0 0 4.5 1.1Expenditure– Purchases of electricity 1,306.5 1,194.9 1,306.5 1,194.9Amount due from associates 37.8 34.6 37.8 34.6Amount due to associates 345.2 224.5 345.2 224.5Sales and purchases of electricity to and from associates are aggregated because the transactions are similar in natureand no single transaction is significant enough to warrant separate disclosure.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]250As stated under paragraph 5 of FRS Standard No. 124 “Related Party Disclosures”, disclosure of significant related partytransactions between a state-controlled enterprise with other state-controlled enterprise is not required to be disclosed inthe financial statements.Accordingly, significant related party transactions between the Company and other Government controlled entities are notpresented as the principal shareholders of the Company are the Government of Malaysia and related entities owned bythe Government.

40 SIGNIFICANT RELATED PARTY DISCLOSURES (CONT’D.)G group Company2008 2007 2008 2007RM’million RM’million RM’million RM’million(c)Key management compensationShort term employee benefits– Salaries, allowances and bonus 9.0 7.4 6.1 4.9– Benefit in kind 0.2 0.2 0.2 0.2– Contribution to Employee ProvidentFund (EPF) 1.0 0.8 0.7 0.6– Other staff benefits 0.5 0.5 0.2 0.3Share-based payment– ESOS expense 2.5 3.3 2.2 3.0Key management personnel are the persons who have authority and responsibility for planning, directing and controllingthe activities of the Company or the Group either directly or indirectly but excludes the non-executive Directors ofthe Company.Whenever exist, related party transactions also includes transaction with entities that are controlled, jointly controlled orsignificantly influenced directly or indirectly by any key management personnel or their close family members.41 SEGMENTAL REPORTINGAs the principal activities of the Group and the Company are the generation, transmission, distribution and sale ofelectricity, segmental reporting is deemed not necessary.42 FINANCIAL RISK MANAGEMENT(a) Financial risk management objectives and policiesThe 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 financialperformance of the Group.The Group has established risk management policies, guidelines and control procedures to manage its exposure to financialrisks. Hedging transactions are determined in the light of commercial commitments; derivative financial instruments areused only to hedge underlying commercial exposures and are not held or sold for speculative purposes.• Currency riskThe foreign currency exchange risk of the Group arises from borrowings denominated in foreign currencies. Themain currency exposures are primarily in United States Dollar and Japanese Yen. The Group also has subsidiariesoperating in foreign countries, which generate revenue and incur costs denominated in foreign currencies. Themain currency exposure is primarily in United States Dollar.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]251

Notes To The Financial Statements42 FINANCIAL RISK MANAGEMENT (CONT’D.)(a)Financial risk management objectives and policies (Cont’d.)• Interest rate riskThe Group has cash and bank balances and deposits placed with creditworthy licensed banks and financialinstitutions. The Group manages its interest rate risks by placing such balances on varying maturities and interestrate terms.The Group’s debt includes bank overdrafts, bank borrowings, bonds and notes. The Group’s interest rate riskmanagement objective is to manage the interest expense consistent with maintaining an acceptable level ofexposure to interest rate fluctuations. In order to achieve this objective, the Group targets a mix of fixed andfloating 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 longterm foreign currency borrowings from variable to fixed rate and vice versa.• Credit riskFinancial 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 tradereceivables due to its diverse customer base. Credit risk is managed through the application of credit limitsand monitoring procedures. Where appropriate, the Group obtained deposits or bank guarantees from thecustomers.The Group places its cash and cash equivalents and marketable securities with a number of creditworthy financialinstitutions. 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 riskexposure of the Group. The Group, however is exposed to credit-related losses in the event of non-performanceby counterparties to financial derivative instruments, but does not expect any counterparties to fail to meettheir obligations.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]252(b)• Liquidity and cash flow risksIn the management of liquidity and cash flow risk, the Group monitors and maintains a level of cash and cashequivalent deemed adequate by the management to finance the Group’s operations and mitigate the effects offluctuations in cash flows. Due to the dynamic nature of the underlying business, the Group aims at maintainingflexibility in funding by keeping both committed and uncommitted credit lines available.Interest rate riskFair value interest rate riskThe Group’s exposure to risk that the value of a financial instrument will fluctuate due to changes in market interestrates as mentioned in Note 28.Cash flow interest rate riskThe 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 offixed and floating rate debt and derivative financial instruments. Derivative financial instruments are used, whereappropriate, to generate the desired interest rate profile.

42 FINANCIAL RISK MANAGEMENT (CONT’D.)(b)Interest rate risk (Cont’d.)Cash flow interest rate risk (Cont’d.)The weighted average interest rate of the Company’s fixed rate borrowings at balance sheet date was 5.44%(31.8.2007: 5.79%) per annum. After the interest rate swap, the Company’s weighted average interest rate at balancesheet date was 5.49% (31.8.2007: 5.85%) per annum.The tables below summarise the Group and the Company’s exposure to interest rate risk. Included in the tablesare the Group and the Company’s financial assets and liabilities at carrying amounts, categorised by the earlier ofrepricing or contractual maturity dates. The off-balance sheet gap represents the net notional amounts of all interestrate sensitive derivative instruments. Sensitivity to interest rates arises from mismatches in the repricing dates, cashflows and other characteristics of assets and their corresponding liability funding.Eeffectiveinterest Fixed rate instruments Totalat balance Floating maturing or repriced in interestsheet date rate < 1 year 1-2 years 2-3 years 3-4 years 4-5 years > 5 years sensitive% per annum RM’million RM’million RM’million RM’million RM’million RM’million RM’million RM’millionGroup2008Financial assetsTrade and other receivables 0 17.1 281.2 0 0 17.1 267.1 0 582.5Amount due from associates 0 0 37.8 0 0 0 1.1 0 38.9Deposits and bank balances 0 122.5 2,952.5 0 0 0 0 0 3,075.0139.6 3,271.5 0 0 17.1 268.2 0 3,696.42007Financial assetsTrade and other receivables 0 22.2 202.2 0 0 0 0 0 224.4Amount due from associates 0 0 34.6 0 0 0 0 0 34.6Deposits and bank balances 0 87.1 4,741.7 0 0 0 0 0 4,828.8109.3 4,978.5 0 0 0 0 0 5,087.8[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]253

Notes To The Financial Statements42 FINANCIAL RISK MANAGEMENT (CONT’D.)(b)Interest rate risk (Cont’d.)B balancesTotal non underinterest interest Islamicsensitive sensitive principles TotalR rM’million RM’million RM’million RM’millionGroup2008Financial assetsInvestments 0 50.6 0 50.6Trade and other Receivables 582.5 2,513.1 350.9 3,446.5Amount due from Associates 38.9 7.2 0 46.1Marketable securities 0 8.5 0 8.5Deposits and bank balances 3,075.0 802.5 1,506.4 5,383.9Other assets (amount receivablefrom swap counterparties) 0 0.2 0 0.23,696.4 3,382.1 1,857.3 8,935.82007Financial assetsInvestments 0 50.6 0 50.6Trade and other receivables 224.4 2,332.2 365.2 2,921.8Amount due from associates 34.6 10.7 0 45.3Marketable securities 0 10.6 0 10.6Deposits and bank balances 4,828.8 9.7 460.8 5,299.3Other assets (amount receivablefrom swap counterparties) 0 0.3 0 0.35,087.8 2,414.1 826.0 8,327.9[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]254

42 FINANCIAL RISK MANAGEMENT (CONT’D.)(b)Interest rate risk (Cont’d.)Eeffectiveinterest Fixed rate instruments Totalat balance Floating maturing or repriced in interestsheet date rate < 1 year 1-2 years 2-3 years 3-4 years 4-5 years > 5 years sensitive% per annum RM’million RM’million RM’million RM’million RM’million RM’million RM’million RM’millionCompany2008Financial assetsAmount due from subsidiaries 6.03 560.5 1,385.1 52.8 0 0 0 0 1,998.4Amount due from associates 0 0 37.8 0 0 0 0 0 37.8Deposits and bank balances 0 0 2,444.0 0 0 0 0 0 2,444.0560.5 3,866.9 52.8 0 0 0 0 4,480.22007Financial assetsAmount due from subsidiaries 8.94 648.5 946.7 54.6 0 0 0 0 1,649.8Amount due from associates 0 0 34.6 0 0 0 0 0 34.6Deposits and bank balances 0 0 3,768.1 0 0 0 0 0 3,768.1648.5 4,749.4 54.6 0 0 0 0 5,452.5B balancesTotal non underinterest interest Islamicsensitive sensitive principles TotalR rM’million RM’million RM’million RM’millionCompany2008Financial assetsInvestments 0 110.0 0 110.0Trade and other receivables 0 1,888.7 350.9 2,239.6Amount due from subsidiaries 1,998.4 300.6 0 2,299.0Amount due from associates 37.8 0 0 37.8Marketable securities 0 8.5 0 8.5Deposits and bank balances 2,444.0 419.6 1,349.3 4,212.9Other assets (amount receivablefrom swap counterparties) 0 0.2 0 0.24,480.2 2,727.6 1,700.2 8,908.0[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]255

Notes To The Financial Statements42 FINANCIAL RISK MANAGEMENT (CONT’D.)(b)Interest rate risk (Cont’d.)B balancesTotal non underinterest interest Islamicsensitive sensitive principles TotalR rM’million RM’million RM’million RM’millionCompany2007Financial assetsInvestments 0 110.0 0 110.0Trade and other receivables 0 1,789.9 365.2 2,155.1Amount due from subsidiaries 1,649.8 303.4 0 1,953.2Amount due from associates 34.6 0 0 34.6Marketable securities 0 10.6 0 10.6Deposits and bank balances 3,768.1 249.4 506.8 4,524.3Other assets (amount receivablefrom swap counterparties) 0 0.3 0 0.35,452.5 2,463.6 872.0 8,788.1Eeffectiveinterest Fixed rate instruments Totalat balance Floating maturing or repriced in interestsheet date rate < 1 year 1-2 years 2-3 years 3-4 years 4-5 years > 5 years sensitive% per annum RM’million RM’million RM’million RM’million RM’million RM’million RM’million RM’million[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]256Group2008Financial liabilitiesTrade and other payables 0 0 484.4 0 0 0 0 0 484.4Amount due to associates 0 0 349.1 0 0 0 0 601.9 951.0Borrowings 5.45 1,775.7 61.0 205.5 2,941.0 626.5 250.0 12,036.8 17,896.51,775.7 894.5 205.5 2,941.0 626.5 250.0 12,638.7 19,331.9On-balance sheetinterest sensitivity gap 0 (1,636.1) 2,377.0 (205.5) (2,941.0) (626.5) 18.3 (12,638.7) (15,652.5)Off-balance sheetinterest sensitivity gap 0 103.1 0 (102.3) 0 0 0 0 0.8Total interest sensitivity gap (1,533.0) 2,377.0 (307.8) (2,941.0) (626.5) 18.3 (12,638.7) (15,651.7)

42 FINANCIAL RISK MANAGEMENT (CONT’D.)(b)Interest rate risk (Cont’d.)Eeffectiveinterest Fixed rate instruments Totalat balance Floating maturing or repriced in interestsheet date rate < 1 year 1-2 years 2-3 years 3-4 years 4-5 years > 5 years sensitive% per annum RM’million RM’million RM’million RM’million RM’million RM’million RM’million RM’millionGroup2007Financial liabilitiesTrade and other payables 0 0 491.9 0 0 0 0 0 491.9Amount due to associates 0 0 224.5 0 0 0 0 0 224.5Borrowings 5.77 1,941.8 4.7 63.8 307.2 3,008.0 639.1 11,814.1 17,778.71,941.8 721.1 63.8 307.2 3,008.0 639.1 11,814.1 18,495.1On-balance sheetinterest 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 sheetinterest 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)B balancesTotal non underinterest interest Islamicsensitive sensitive principles TotalR rM’million RM’million RM’million RM’millionGroup2008Financial liabilitiesTrade and other payables 484.4 4,196.3 0 4,680.7Amount due to associate 951.0 (604.2) 0 346.8Borrowings 17,896.5 272.4 5,077.5 23,246.4Other liabilities (amount payable toswap counterparties) 0 0.7 0 0.719,331.9 3,865.2 5,077.5 28,274.6On-balance sheetinterest sensitivity gap (15,635.5) (483.1) (3,220.2) (19,338.8)Off-balance sheetinterest sensitivity gap 0.8 0 0 0.8Total interest sensitivity gap (15,634.7) (483.1) (3,220.2) (19,338.0)[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]257

Notes To The Financial Statements42 FINANCIAL RISK MANAGEMENT (CONT’D.)(b)Interest rate risk (Cont’d.)B balancesTotal non underinterest interest Islamicsensitive sensitive principles TotalR rM’million RM’million RM’million RM’millionGroup2007Financial liabilitiesTrade and other payables 491.9 3,809.7 0 4,301.6Amount due to associate 224.5 1.6 0 226.1Borrowings 17,778.7 221.2 6,435.2 24,435.1Other liabilities (amount payable toswap counterparties) 0 1.2 0 1.218,495.1 4,033.7 6,435.2 28,964.0On-balance sheetinterest sensitivity gap (13,407.3) (1,619.6) (5,609.2) (20,636.1)Off-balance sheetinterest sensitivity gap (3.5) 0 0 (3.5)Total interest sensitivity gap (13,410.8) (1,619.6) (5,609.2) (20,639.6)Eeffectiveinterest Fixed rate instruments Totalat balance Floating maturing or repriced in interestsheet date rate < 1 year 1-2 years 2-3 years 3-4 years 4-5 years > 5 years sensitive% per annum RM’million RM’million RM’million RM’million RM’million RM’million RM’million RM’million[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]258Company2008Financial liabilitiesAmount due to associates 0 0 345.2 0 0 0 0 0 345.2Amount due to subsidiaries 4.40 1,449.7 1,072.7 0 0 0 0 2,196.3 4,718.7Borrowings 5.32 196.5 61.0 205.5 2,941.0 626.5 250.0 8,816.3 13,096.81,646.2 1,478.9 205.5 2,941.0 626.5 250.0 11,012.6 18,160.7On-balance sheetinterest sensitivity gap 0 (1,085.7) 2,388.0 (152.7) (2,941.0) (626.5) (250.0) (11,012.6) (13,680.5)Off-balance sheetinterest sensitivity gap 0 103.1 0 0 (102.3) 0 0 0 0.8Total interest sensitivity gap (982.6) 2,388.0 (152.7) (3,043.3) (626.5) (250.0) (11,012.6) (13,679.7)

42 FINANCIAL RISK MANAGEMENT (CONT’D.)(b)Interest rate risk (Cont’d.)Eeffectiveinterest Fixed rate instruments Totalat balance Floating maturing or repriced in interestsheet date rate < 1 year 1-2 years 2-3 years 3-4 years 4-5 years > 5 years sensitive% per annum RM’million RM’million RM’million RM’million RM’million RM’million RM’million RM’millionCompany2007Financial liabilitiesAmount due to associates 0 0 224.5 0 0 0 0 0 224.5Amount due to subsidiaries 5.32 1,644.1 1,184.1 0 0 0 0 2,196.3 5,024.5Borrowings 5.57 197.0 4.7 63.8 307.2 3,008.0 639.1 8,838.9 13,058.71,841.1 1,413.3 63.8 307.2 3,008.0 639.1 11,035.2 18,307.7On-balance sheetinterest sensitivity gap 0 (1,192.6) 3,336.1 (9.2) (307.2) (3,008.0) (639.1) (11,035.2) (12,855.2)Off-balance sheetinterest sensitivity gap 0 167.0 0 (170.5) 0 0 0 0 (3.5)Total interest sensitivity gap (1,025.6) 3,336.1 (179.7) (307.2) (3,008.0) (639.1) (11,035.2) (12,858.7)B balancesTotal non underinterest interest Islamicsensitive sensitive principles TotalR rM’million RM’million RM’million RM’millionCompany2008Financial liabilitiesTrade and other payables 0 3,421.0 0 3,421.0Borrowings 13,096.8 166.0 2,186.3 15,449.1Amount due to subsidiaries 4,718.7 0 0 4,718.7Amount due to associates 345.2 0 0 345.2Other liabilities (amount payable toswap counterparties) 0 0.7 0 0.718,160.7 3,587.7 2,186.3 23,934.7On-balance sheetinterest sensitivity gap (13,680.5) (860.1) (486.1) (15,026.7)Off-balance sheetinterest sensitivity gap 0.8 0 0 0.8Total interest sensitivity gap (13,679.7) (860.1) (486.1) (15,025.9)[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]259

Notes To The Financial Statements42 FINANCIAL RISK MANAGEMENT (CONT’D.)(b)Interest rate risk (Cont’d.)B balancesTotal non underinterest interest Islamicsensitive sensitive principles TotalR rM’million RM’million RM’million RM’millionCompany2007Financial liabilitiesTrade and other payables 0 2,804.0 0 2,804.0Borrowings 13,058.7 170.6 3,362.7 16,592.0Amount due to subsidiaries 5,024.5 0 0 5,024.5Amount due to associates 224.5 0 0 224.5Other liabilities (amount payable toswap counterparties) 0 1.2 0 1.218,307.7 2,975.8 3,362.7 24,646.2On-balance sheetinterest sensitivity gap (12,855.2) (512.2) (2,490.7) (15,858.1)Off-balance sheetinterest sensitivity gap (3.5) 0 0 (3.5)Total interest sensitivity gap (12,858.7) (512.2) (2,490.7) (15,861.6)The table below summarises the effective weighted average interest rate as at 31 August 2008 and 31 August 2007by major currencies for each class of financial asset and financial liability.usD JPY EURO RM Others% % % % %[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]260Group2008Financial assetsDeposits and bank balances 4.52 0 0 3.53 0Financial liabilitiesBorrowings 6.61 1.95 3.06 6.60 2.252007Financial assetsDeposits and bank balances 4.52 0 0 3.53 0Financial liabilitiesBorrowings 6.61 1.95 3.06 6.60 2.25

42 FINANCIAL RISK MANAGEMENT (CONT’D.)(b)Interest rate risk (Cont’d.)usD JPY EURO RM Others% % % % %Company2008Financial assetsAmount due from subsidiaries 5.21 0 0 5.71 0Trade and other receivables 0 0 0 4.00 0Deposits and bank balances 5.25 0 0 3.58 0Financial liabilitiesAmount due to subsidiaries 4.08 4.05 0 0 0Borrowings 7.45 1.39 2.50 6.14 02007Financial assetsAmount due from subsidiaries 7.04 0 0 7.90 0Trade and other receivables 0 0 0 4.00 0Deposits and bank balances 5.25 0 0 5.53 0Financial liabilitiesAmount due to subsidiaries 5.37 4.05 0 0 0Borrowings 7.57 1.43 3.06 6.30 2.25[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]261

Notes To The Financial Statements42 FINANCIAL RISK MANAGEMENT (CONT’D.)(c)Credit risk(i) On balance sheet, commitment and contingenciesCredit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause theother party to incur a financial loss. The following tables analyse the Group’s and the Company’s financial assetsby industry concentration as at the balance sheet date.interestreceivableDeposits Trade from Totaland bank Investment receivables swap on- Commitmentbalances in unquoted and other Inter- counter- balance and(excl. cash) instruments# assets company parties sheet contingenciesrM’million RM’million RM’million RM’million RM’million RM’million RM’millionGroup2008Government 0 0 84.2 0 0 84.2 0Financial Institutions 4,414.7 38.0 6.3 0 0.2 4,459.2 0Business 0 0 1,264.9 0 0 1,264.9 0Individuals 0 0 923.3 0 0 923.3 0Associates 0 0 0 37.8 0 37.8 0Subsidiary Companies 0 0 0 0 0 0 3,739.4Others 0 0 196.0 0 0 196.0 04,414.7 38.0 2,474.7 37.8 0.2 6,965.4 3,739.4[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]2622007Government 0 0 114.2 0 0 114.2 0Financial Institutions 4,339.8 38.0 15.3 0 0.3 4,393.4 0Business 0 0 1,105.2 0 0 1,105.2 0Individuals 0 0 1,041.8 0 0 1,041.8 0Associates 0 0 0 34.6 0 34.6 0Others 0 0 190.3 0 0 190.3 3,566.34,339.8 38.0 2,466.8 34.6 0.3 6,879.5 3,566.3# This amount excludes equity instruments amounting to RM21.1 million (2007: RM23.2 million), net of allowance.

42 FINANCIAL RISK MANAGEMENT (CONT’D.)(c) Credit risk(i) On balance sheet, commitment and contingencies (Cont’d.)interestreceivableDeposits Trade from Totaland bank Investment receivables swap on- Commitmentbalances in unquoted and other Inter- counter- balance and(excl. cash) instruments# assets company parties sheet contingenciesrM’million RM’million RM’million RM’million RM’million RM’million RM’millionCompany2008Government 0 0 84.2 0 0 84.2 0Financial Institutions 3,750.1 38.0 6.3 0 0.2 3,794.6 0Business 0 0 1,049.8 0 0 1,049.8 0Individuals 0 0 903.3 0 0 903.3 0Associates 0 0 0 37.8 0 37.8 0Subsidiaries 0 0 0 2,299.0 0 2,299.0 3,739.4Others 0 0 196.0 0 0 196.0 03,750.1 38.0 2,239.6 2,336.8 0.2 8,364.7 3,739.42007Government 0 0 76.9 0 0 76.9 0Financial Institutions 4,228.9 38.0 15.3 0 0.3 4,282.5 0Business 0 0 967.6 0 0 967.6 0Individuals 0 0 905.0 0 0 905.0 0Associates 0 0 0 34.6 0 34.6 0Subsidiaries 0 0 0 1,953.2 0 1,953.2 3,894.4*Others 0 0 190.3 0 0 190.3 04,228.9 38.0 2,155.1 1,987.8 0.3 8,410.1 3,894.4# This amount excludes equity instruments amounting to RM21.1 million (2007: RM23.2 million), net of allowance.* This amount represents the financial guarantees issued by the Company on the borrowing facilities given to subsidiaries.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]263

Notes To The Financial Statements42 FINANCIAL RISK MANAGEMENT (CONT’D.)(c)Credit risk (Cont’d.)(ii) Off balance sheetThe 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. Thefollowing table summarises the favourable fair values of the contracts, indicating the credit risk exposure.G group CompanyContract orContract ornotional Favourable notional Favourableprincipal net fair principal net fairamount value amount valuerM’million RM’million RM’million RM’million2008Cross currency interest rate swap 103.1 0 103.1 0103.1 0 103.1 02007Cross currency interest rate swap 167.0 0 167.0 0167.0 0 167.0 0(d)Foreign exchange riskThe currency exposure of financial assets and financial liabilities of the Group and the Company that are notdenominated in the functional currency of the respective companies is set out below.usD JPY EURO OthersR rM’million RM’million RM’million RM’million[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]264Group2008Financial assetsReceivables, deposits and Prepayments 21.2 0 0.9 0Deposits and bank balances 124.4 63.2 0 57.1Other assets 0 0.2 0 0145.6 63.4 0.9 57.1Financial liabilitiesPayables– external 75.2 0 0.5 0Borrowings 6,310.7 4,506.1 1.8 06,385.9 4,506.1 2.3 0

42 FINANCIAL RISK MANAGEMENT (CONT’D.)(d)Foreign exchange risk (Cont’d.)usD JPY EURO OthersR rM’million RM’million RM’million RM’millionGroup2007Financial assetsReceivables, deposits and prepayments 0.6 0 0 0Deposits and bank balances 18.6 0 0 0Other assets 0 0.3 0 019.2 0.3 0 0Financial liabilitiesPayables– external 1.8 0 0.1 0Borrowings 6,666.3 4,254.9 6.1 8.16,668.1 4,254.9 6.2 8.1USD JPY EURO OthersR rM’million RM’million RM’million RM’millionCompany2008Financial assetsAmount due from subsidiaries 1,380.9 0 0 0.3Deposits and bank balances 0 63.2 0 0Other assets (interest receivablefrom swap counterparties) 0 0.2 0 01,380.9 63.4 0 0.3Financial liabilitiesAmount due to subsidiaries 2,901.1 885.6 0 0Borrowings 3,724.6 3,657.9 1.8 06,625.7 4,543.5 1.8 0[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]265

Notes To The Financial Statements42 FINANCIAL RISK MANAGEMENT (CONT’D.)(d)Foreign exchange risk (Cont’d.)usD JPY EURO OthersR rM’million RM’million RM’million RM’millionCompany2007Financial assetsAmount due from subsidiaries 1,322.2 0 0 0.2Deposits and bank balances 14.4 0 0 0Other assets (interest receivablefrom swap counterparties) 0 0.3 0 01,336.6 0.3 0 0.2Financial liabilitiesAmount due to subsidiaries 3,108.1 885.6 0 0Borrowings 3,754.6 3,427.2 6.1 8.16,862.7 4,312.8 6.1 8.1(e)Fair valueThe fair value of a financial instrument is assumed to be the amount at which the instrument could be exchanged orsettled between knowledgeable and willing parties in an arm’s length transaction, other than in forced or liquidationsale. Quoted market prices, when available, are used as the measure of fair values. However, for a significant portionof the Group’s and the Company’s financial instruments, quoted market prices do not exist. For such financialinstruments, 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 judgementsmade 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 estimatesand the resulting fair values.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]266The face values for financial assets and liabilities with a maturity of less than one year are assumed to approximatetheir fair values.

42 FINANCIAL RISK MANAGEMENT (CONT’D.)(e)Fair value (Cont’d.)(i) On balance sheetThe carrying amounts of financial assets and liabilities of the Group and the Company at the balance sheetdate approximated their fair values except as set out below.G group CompanyCarrying Fair Carrying Fairamount value amount valueR rM’million RM’million RM’million RM’million2008Financial assetsInvestments 0.1 0 0 0Long term receivables 0 0 613.3 611.3Receivables, deposits and prepayments 44.2 15.6 0 0Financial liabilitiesPayables 734.1 0 0 0Borrowings 23,231.0 23,808.7 15,449.1 15,514.8Amount due to subsidiaries(non-current) 0 0 3,525.8 3,499.0Other liabilities 0 0 0 02007Financial assetsInvestments 0.1 0 0 0Long term receivables 0 0 703.1 700.9Receivables, deposits and prepayments 38.8 17.4 0 0Financial liabilitiesPayables 32.9 0 0 0Borrowings 24,435.0 25,127.1 15,589.3 16,156.2Amount due to subsidiaries(non-current) 0 0 3,621.1 3,616.2Other liabilities 712.4 0 0 0Financial assetsThe fair value of long term receivables is lower than carrying amount at balance sheet date as the Companygives its subsidiaries advances at below current market rate. The Directors consider the carrying amount fullyrecoverable as they do not intend to realise the financial assets via exchange with another counterparty.Financial liabilitiesThe fair value of quoted bonds has been estimated using the respective quoted offer price. For unquotedborrowings with fixed interest rate, the fair values have been estimated by discounting the estimated future cashflows using the prevailing market rates for similar credit risks and remaining period to maturity. For unquotedborrowings with floating interest rate, the carrying values are generally reasonable estimates of their fair values.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]267

Notes To The Financial Statements42 FINANCIAL RISK MANAGEMENT (CONT’D.)(e)Fair value (Cont’d.)(i)On balance sheet (Cont’d.)Financial liabilities (Cont’d.)The method by which fair value information was determined and any significant assumptions made in itsapplication 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 flowsdiscounted 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 oneyear (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 interestrates available for similar financial instruments• vacant property provision – cash flows discounted using a discount rate that reflects current marketassessments 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 tosettle the contingent obligations at the balance sheet date• forward foreign exchange contracts – difference between the spot exchange rates and the contractedforward 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 sheetThe financial derivative instruments are used to hedge foreign exchange and interest rate risks associated withcertain long term foreign currency borrowings. The contract notional principal amounts of the derivative andthe 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 atbased on valuations carried out by the Company’s bankers. Favourable fair value indicates amount receivableby the Company if the contracts are terminated as at 31 August 2008 or vice versa.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]268

42 FINANCIAL RISK MANAGEMENT (CONT’D.)(e) Fair value (Cont’d.)(ii) Off balance sheet (Cont’d.)Contract ornotionalprincipal Favourable Unfavourableamount net fair value net fair valueR rM’million RM’million RM’millionGroup2008Cross currency interest rate swap 103.1 0 (0.4)Currency option 812.5 0 (0.9)Corporate guarantee given to financial institutionsin respect of facilities granted to subsidiaries 0 0 0915.6 0 (1.3)2007Cross currency interest rate swap 167.0 0 (5.1)Currency option 789.7 0 (11.2)Corporate guarantee given to financial institutionsin respect of facilities granted to subsidiaries 170.8 0 01,127.5 0 (16.3)Company2008Corporate guarantee given to financial institutionsin respect of facilities granted to subsidiaries 3,739.4 0 (124.7)Cross currency interest rate swap 103.1 0 (0.4)3,842.5 0 (125.1)2007Corporate guarantee given to financial institutionsin 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)43 APPROVAL OF FINANCIAL STATEMENTSThe financial statements have been approved for issue in accordance with a resolution of the Board of Directors on3 November 2008.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]269

Statement by Directorspursuant to Section 169(15) of the Companies Act, 1965We, Tan Sri Leo Moggie and Dato’ Sri Che Khalib bin Mohamad Noh, two of the Directors of Tenaga Nasional Berhad, dohereby state that, in the opinion of the Directors, the financial statements set out on pages 180 to 269 are drawn up so asto give a true and fair view of the state of affairs of the Group and of the Company as at 31 August 2008 and of the resultsand the cash flows of the Group and of the Company for the financial year ended on that date in accordance with the MASBApproved Accounting Standards in Malaysia for Entities Other than Private Entities and the provisions of the CompaniesAct, 1965.Signed on behalf of the Board of Directors, in accordance with their resolution dated 3 November 2008.TAN SRI LEO MOGGIEChairmanDATO’ SRI CHE KHALIB BIN MOHAMAD NOHPresident/Chief Executive Officer[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]270

Statutory Declarationpursuant to Section 169(16) of the Companies Act, 1965I, Dato’ Mohd Izzaddin Idris, the person primarily responsible for the financial management of Tenaga Nasional Berhad, dosolemnly and sincerely declare that the financial statements set out on pages 180 to 269 are, in my opinion, correct and Imake this solemn declaration conscientiously believing the same to be true, and by virtue of the provisions of the StatutoryDeclarations Act, 1960.DATO’ MOHD IZZADDIN IDRISSubscribed and solemnly declared by the above named Dato’ Mohd Izzaddin Idris at Kuala Lumpur, Malaysia on 3 November2008, before me.MOHD RADZI BIN YASINCOMMISSIONER FOR OATHS[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]271

Independent Auditors’ Reportto the Members of Tenaga Nasional Berhad (Company No. 200866-W) (Incorporated in Malaysia)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.comREPORT ON THE FINANCIAL STATEMENTSWe have audited the financial statements of Tenaga Nasional Berhad, which comprise the balance sheets as at 31 August 2008of the Group and of the Company, and the income statements, statements of changes in equity and cash flow statementsof the Group and of the Company for the year then ended, and a summary of significant accounting policies and otherexplanatory notes, as set out on pages 180 to 269.Directors’ Responsibility for the Financial StatementsThe directors of the Company are responsible for the preparation and fair presentation of these financial statements inaccordance with MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities and the CompaniesAct, 1965. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation andfair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting andapplying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.Auditors’ ResponsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordancewith approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan andperform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]272An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financialstatements. The procedures selected depend on our judgment, including the assessment of risks of material misstatement ofthe financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevantto the Company’s preparation and fair presentation of the financial statements in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’sinternal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness ofaccounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.OpinionIn our opinion, the financial statements have been properly drawn up in accordance with MASB Approved AccountingStandards in Malaysia for Entities Other than Private Entities and the Companies Act, 1965 so as to give a true and fair viewof the financial position of the Group and of the Company as of 31 August 2008 and of their financial performance and cashflows for the year then ended.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTSIn accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following:(a)In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and itssubsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act.(b)We have considered the accounts and the auditors’ reports of all the subsidiaries of which we have not acted as auditors,which are indicated in note 15 to the financial statements.(c)We are satisfied that the accounts of the subsidiaries that have been consolidated with the Company’s financial statementsare in form and content appropriate and proper for the purposes of the preparation of the financial statements of theGroup and we have received satisfactory information and explanations required by us for those purposes.(d)The audit reports on the accounts of the subsidiaries did not contain any material qualification or any adverse commentmade under Section 174(3) of the Act.OTHER MATTERSThis report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.PRICEWATERHOUSECOOPERS(No. AF: 1146)Chartered AccountantsTHAYAPARAN A/L S. SANGARAPILLAI(No. 2085/09/08(J))Chartered AccountantsKuala Lumpur3 November 2008[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]273

Analysis Of Shareholdingsas at 9 October 2008SHARE CAPITALAuthorised Share Capital5,000,000,000 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-UpShare Capital4,334,647,295 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.Voting RightOne voting right for one ordinary shareANALYSIS OF SHAREHOLDINGSno. of % of No. of % of IssuedSize of Shareholdings shareholders Shareholders Ordinary Shares Share CapitalLess Than 100 910 2.55 26,304 0.00100 – 1,000 8,429 23.60 6,521,548 0.151,001 –10,000 23,676 66.30 64,518,424 1.4910,001 – 100,000 2,021 5.66 55,887,345 1.29100,001 To Less Than 5% of Issued Shares 672 1.88 1,659,445,774 38.285% and above of Issued Shares 3 0.01 2,548,247,900 58.79TOTAL 35,711 100.00 4,334,647,295 100.00DIRECTORS’ SHAREHOLDINGS[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]Nno. of sharesDirect/IndirectNo. Name of Directors interest %1 Tan Sri Leo Moggie — —2 Dato’ Sri Che Khalib Bin Mohamad Noh — —3 Dato’ Puteh Rukiah Binti Abd Majid — —4 Dato’ Mohammad Zainal Bin Shaari — —5 Tan Sri Dato’ Lau Yin Pin @ Lau Yen Beng — —6 Tan Sri Dato’ Hari Narayanan a/l Govindasamy — —7 Dato’ Zainal Abidin Bin Putih 1,250 0.008 Dato’ Fuad Bin Jaafar 62,500 0.009 Tan Sri Dato’ Seri Siti Norma Binti Yaakob 1,250 0.00274

SUBSTANTIAL SHAREHOLDERSNo. Name of Substantial Shareholders no. of Shares %1 KHAZANAH NASIONAL BERHAD 1,638,474,689 37.802 EMPLOYEES PROVIDENT FUND BOARD 592,194,361 13.66– 516,686,511 shares held in its own name– 1,500,000 shares held in its own name– 11,112,300 shares held through SBB Nominees (Tempatan) Sdn Bhd– 15,180,000 shares held through Alliancegroup Nominees (Tempatan) Sdn Bhd– 2,400,000 shares held through Alliancegroup Nominees (Tempatan) Sdn Bhd– 7,418,700 shares held through Am Nominees (Tempatan) Sdn Bhd– 2,582,900 shares held through Cartaban Nominees (Tempatan) Sdn Bhd– 250,000 shares held through Citigroup Nominees (Tempatan) Sdn Bhd– 502,900 shares held through DB (Malaysia) Nominee (Tempatan) Sendirian Berhad– 23,988,750 shares held through HSBC Nominees (Tempatan) Sdn Bhd– 708,600 shares held through Mayban Nominees (Tempatan) Sdn Bhd– 693,700 shares held through Mayban Nominees (Tempatan) Sdn Bhd– 4,500,000 shares held through Mayban Nominees (Tempatan) Sdn Bhd– 280,000 shares held through Mayban Nominees (Tempatan) Sdn Bhd– 4,390,000 shares held through RHB Nominees (Tempatan) Sdn Bhd3 AMANAH RAYA NOMINEES (TEMPATAN) SDN BHD 393,086,700 9.07Skim Amanah Saham Bumiputera30 LARGEST SHAREHOLDERSNo. Name of Shareholders no. of Shares %1 KHAZANAH NASIONAL BERHAD 1,638,474,689 37.802 EMPLOYEES PROVIDENT FUND BOARD 516,686,511 11.923 AMANAH RAYA NOMINEES (TEMPATAN) SDN BHD 393,086,700 9.07SKIM AMANAH SAHAM BUMIPUTERA4 KUMPULAN WANG PERSARAAN (DIPERBADANKAN) 153,146,700 3.535 LEMBAGA TABUNG HAJI 120,861,175 2.796 CARTABAN NOMINEES (ASING) SDN BHD 84,983,900 1.96SSBT FUND NB37 FOR JANUS CONTRARIAN FUND7 AMANAH RAYA NOMINEES (TEMPATAN) SDN BHD 66,617,000 1.54AMANAH SAHAM WAWASAN 20208 AMANAH RAYA NOMINEES (TEMPATAN) SDN BHD 61,354,400 1.42AMANAH SAHAM MALAYSIA9 HSBC NOMINEES (ASING) SDN BHD 53,708,000 1.24TNTC FOR SAUDI ARABIAN MONETARY AGENCY10 CITIGROUP NOMINEES (ASING) SDN BHD 42,722,400 0.99ROYAL BANK OF SCOTLAND AS DEPOSITORY FOR FIRST STATE ASIA PACIFIC LEADERFUND (CB LDN)[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]275

Analysis Of Shareholdings30 LARGEST SHAREHOLDERS (continued)No. Name of Shareholders no. of Shares %11 VALUECAP SDN BHD 41,449,500 0.9612 PERMODALAN NASIONAL BERHAD 40,670,075 0.9413 MALAYSIA NOMINEES (TEMPATAN) SENDIRIAN BERHAD 39,400,000 0.91GREAT EASTERN LIFE ASSURANCE (MALAYSIA) BERHAD (PAR 1)14 AMANAH RAYA NOMINEES (TEMPATAN) SDN BHD 25,808,950 0.60AMANAH SAHAM DIDIK15 HSBC NOMINEES (TEMPATAN) SDN BHD 23,988,750 0.55NOMURA ASSET MGMT MALAYSIA FOR EMPLOYEES PROVIDENT FUND16 CITIGROUP NOMINEES (ASING) SDN BHD 23,747,336 0.54BEAR STEARNS SECURITIES CORP FOR PERRY PARTNERS INTERNATIONAL, INC.17 CITIGROUP NOMINEES (ASING) SDN BHD 21,879,490 0.50EXEMPT AN FOR MELLON BANK (MELLON)18 CITIGROUP NOMINEES (TEMPATAN) SDN BHD 20,642,075 0.48EXEMPT AN FOR PRUDENTIAL FUND MANAGEMENT BERHAD19 CARTABAN NOMINEES (TEMPATAN) SDN BHD 17,390,900 0.40PETROLIAM NASIONAL BERHAD (STRATEGIC INV)20 CARTABAN NOMINEES (ASING) SDN BHD 17,042,700 0.39SSBT FUND RNZX FOR STICHTING PENSIOENFONDS ABP21 CITIGROUP NOMINEES (ASING) SDN BHD 15,335,500 0.35CB LDN FOR FIRST STATE ASIA PACIFIC FUND22 ALLIANCEGROUP NOMINEES (TEMPATAN) SDN BHD 15,180,000 0.35PHEIM ASSET MANAGEMENT SDN BHD FOR EMPLOYEES PROVIDENT FUND23 CITIGROUP NOMINEES (ASING) SDN BHD 15,134,269 0.35GSI FOR PERRY PARTNERS INTER INC24 MAYBAN NOMINEES (TEMPATAN) SDN BHD 14,918,200 0.34MAYBAN TRUSTEES BERHAD FOR PUBLIC ITTIKAL FUND (N14011970240)25 PERTUBUHAN KESELAMATAN SOSIAL 14,711,350 0.34[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]27626 AMANAH RAYA NOMINEES (TEMPATAN) SDN BHD 13,861,900 0.32SEKIM AMANAH SAHAM NASIONAL27 HSBC NOMINEES (ASING) SDN BHD 13,000,000 0.30BNY BRUSSELS FOR MAGELLAN28 LEMBAGA TABUNG ANGKATAN TENTERA 12,558,000 0.2929 HSBC NOMINEES (ASING) SDN BHD 12,512,910 0.28BNY BRUSSELS FOR ING JANUS CONTRARIAN PORTFOLIO30 SBB NOMINEES (TEMPATAN) SDN BHD 11,112,300 0.26EMPLOYEES PROVIDENT FUND BOARDTotal 3,541,985,680 81.71

Analysis Of Unsecured Convertible Redeemable IncomeSecurities 2004-2009 (“CRIS”) Holdingsas at 9 October 2008Type of Security : 3.05% 5 year Unsecured Convertible Redeemable Income Securities 2004-2009 (CRIS) with nominal valueof RM1.00 eachVoting Right: None until upon conversion into Ordinary Shares of RM1.00 eachANALYSIS OF unsecured CONVERTIBLE REDEEMABLE INCOME SECURITIES 2004-2009 (“CRIS”)no. of % of Nominal Value % ofCategory CRIS Holders CRIS Holders of CRIS (RM) CRIS IssuedLESS THAN 100 4 4.44 94 0.00100 – 1,000 8 8.89 4,970 0.011,001 – 10,000 19 21.11 102,688 1.1710,001 – 100,000 25 27.78 1,455,000 2.46100,001 TO LESS THAN 5% OF ISSUED SHARES 28 31.11 19,429,100 32.825% AND ABOVE OF ISSUED SHARES 6 6.67 38,200,600 64.54Total 90 100.00 59,191,952 100.00DIRECTORS’ CRIS HOLDINGSNnominal Value Of CRIS (RM)Direct/IndirectNo. Name of Directors interest %1 TAN SRI LEO MOGGIE — —2 DATO’ SRI CHE KHALIB BIN MOHAMAD NOH — —3 DATO’ PUTEH RUKIAH BINTI ABD MAJID — —4 DATO’ MOHAMMAD ZAINAL BIN SHAARI — —5 TAN SRI DATO’ LAU YIN PIN @ LAU YEN BENG — —6 TAN SRI DATO’ HARI NARAYANAN A/L GOVINDASAMY — —7 DATO’ ZAINAL ABIDIN BIN PUTIH — —8 DATO’ FUAD BIN JAAFAR — —9 TAN SRI DATO’ SERI SITI NORMA BINTI YAAKOB — —[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]277

Analysis Of Unsecured Convertible Redeemable Income Securities 2004-2009 (“CRIS”) HoldingsSUBSTANTIAL CRIS HOLDERSNnominal ValueNo. Name of CRIS Holders of CRIS (RM) %1 MAYBAN NOMINEES (TEMPATAN) SDN BHD 10,000,000 16.89ETIQA INSURANCE BERHAD (LIFE PAR FUND)2 CITIGROUP NOMINEES (TEMPATAN) SDN BHD 7,636,100 12.90ING INSURANCE BERHAD (INV-IL PAR)3 MALAYSIA NOMINEES (TEMPATAN) SENDIRIAN BERHAD 6,800,000 11.49GREAT EASTERN LIFE ASSURANCE (MALAYSIA) BERHAD (PAR 1)4 AMANAH RAYA NOMINEES (TEMPATAN) SDN BHD 5,500,000 9.29PUBLIC FAR-EAST BALANCED FUND5 AMANAH RAYA NOMINEES (TEMPATAN) SDN BHD 5,264,500 8.89PUBLIC ENHANCED BOND FUND6 AMANAH RAYA NOMINEES (TEMPATAN) SDN BHD 3,000,000 5.07KUMPULAN WANG BERSAMA30 largest cris holdersNnominal ValueNo. Name of CRIS Holders of CRIS (RM) %1 MAYBAN NOMINEES (TEMPATAN) SDN BHD 10,000,000 16.89ETIQA INSURANCE BERHAD (LIFE PAR FUND)2 CITIGROUP NOMINEES (TEMPATAN) SDN BHD 7,636,100 12.90ING INSURANCE BERHAD (INV-IL PAR)3 MALAYSIA NOMINEES (TEMPATAN) SENDIRIAN BERHAD 6,800,000 11.49GREAT EASTERN LIFE ASSURANCE (MALAYSIA) BERHAD (PAR 1)4 AMANAH RAYA NOMINEES (TEMPATAN) SDN BHD 5,500,000 9.29PUBLIC FAR-EAST BALANCED FUND[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]2785 AMANAH RAYA NOMINEES (TEMPATAN) SDN BHD 5,264,500 8.89PUBLIC ENHANCED BOND FUND6 AMANAH RAYA NOMINEES (TEMPATAN) SDN BHD 3,000,000 5.07KUMPULAN WANG BERSAMA7 AMANAH RAYA NOMINEES (TEMPATAN) SDN BHD 2,500,000 4.22PUBLIC GLOBAL BALANCED FUND8 AMANAH RAYA NOMINEES (TEMPATAN) SDN BHD 2,000,000 3.38PUBLIC DIVIDEND SELECT FUND9 HSBC NOMINEES (TEMPATAN) SDN BHD 1,544,000 2.61HSBC (M) TRUSTEE BHD FOR OSK-UOB KIDSAVE TRUST (3621)10 MAYBAN TRUSTEES BERHAD 1,492,000 2.52CIMB-PRINCIPAL STRATEGIC BOND FUND11 HSBC NOMINEES (TEMPATAN) SDN BHD 1,207,500 2.04HSBC (M) TRUSTEE BHD FOR OSK-UOB INCOME FUND (4314)12 KE-ZAN NOMINEES (ASING) SDN BHD 976,000 1.65KIM ENG SECURITIES PTE. LTD. FOR CYL INVESTMENTS LIMITED

30 largest cris holders (Continued)Nnominal ValueNo. Name of CRIS Holders of CRIS (RM) %13 MAYBAN NOMINEES (TEMPATAN) SDN BHD 970,000 1.64MAYBAN TRUSTEES BERHAD FOR CIMB-PRINCIPAL INCOME PLUS BALANCED FUND14 DB (MALAYSIA) NOMINEE (TEMPATAN) SENDIRIAN BERHAD 963,300 1.63CIMB-PRINCIPAL ASSET MGMT BHD FOR GLOBALERUCKVERSICHERUNGS-AKTIENGESELLSCHAFT15 UNIVERSAL TRUSTEE (MALAYSIA) BERHAD 850,000 1.44HLG BOND FUND (L1)16 CIMSEC NOMINEES (TEMPATAN) SDN BHD 800,000 1.35CIMB FOR HASRAT JAGUH SDN BHD (PB)17 DAYA MAHSURI SDN BHD 800,000 1.3518 CITIGROUP NOMINEES (TEMPATAN) SDN BHD 717,700 1.21ING INSURANCE BERHAD (INV-IL NON-PAR)19 CIMSEC NOMINEES (TEMPATAN) SDN BHD 600,000 1.01CIMB FOR SIEH KOK SWEE (PB)20 HLG NOMINEE (TEMPATAN) SDN BHD 505,000 0.85HLG ASSET MANAGEMENT SDN BHD FOR YAYASAN USAHAWAN BUMIPUTRA21 CIMSEC NOMINEES (TEMPATAN) SDN BHD 500,000 0.84CIMB FOR FAIRLY YAP SWEE ENG (PB)22 CIMSEC NOMINEES (TEMPATAN) SDN BHD 482,000 0.81CIMB FOR CHEONG KEE LAI (PB)23 MALAYSIA NOMINEES (TEMPATAN) SENDIRIAN BERHAD 450,000 0.76OVERSEAS ASSURANCE CORPORATION (MALAYSIA) BERHAD (MGF)24 HSBC NOMINEES (TEMPATAN) SDN BHD 347,000 0.59HSBC (M) TRUSTEE BHD FOR RHB BALANCED FUND (3936)25 HLG NOMINEE (TEMPATAN) SDN BHD 338,000 0.57HLG ASSET MANAGEMENT SDN BHD FOR PERBADANAN BEKALAN AIR PULAU PINANGSDN BHD26 CIMSEC NOMINEES (TEMPATAN) SDN BHD 200,000 0.34CIMB FOR ROSLINA BINTI ABDUL RAHMAN (PB-IU)27 CIMSEC NOMINEES (TEMPATAN) SDN BHD 195,000 0.33CIMB FOR TAN KOK HENG (PB)28 NADIAH PAUT ABDULLAH @ REBECCA PAUT 187,300 0.3229 CIMSEC NOMINEES (TEMPATAN) SDN BHD 187,000 0.32CIMB FOR ZAKARIA BIN ARIFFIN (PB)30 CITIGROUP NOMINEES (TEMPATAN) SDN BHD 141,000 0.24ING INSURANCE BERHAD (ING-GP-EB)Total 57,153,400 96.55[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]279

Property List– generation[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]Nature of lAND builDINGS DESCRIPTIONFunctionalActivity leasehold FreeholdTotal Total Total built-Up Totalno. of Area NBV No. of Area NBV No. of Area NBV No. Area NBVGeneration Lots (sq M) (RM’000) Lots (sq M) (RM’000) Lots (sq M) (RM’000) (sq M) (RM’000)(1) (2) (3) (4) (5) (6) (1+4) (2+5) (3+6) (10) (11) (12) (13)LocationPerlis — — — 2 1,499 52 2 1,499 52 — — — Power Stations,Kedah 2 1,676 27 6 22,280 6,047 8 23,956 6,074 21 2,493 5,656 Rural PowerPulau Pinang 2 163,325 26,463 2 67,726 2,136 4 231,051 28,599 8 10,258 149,271 Stations,Perak 8 129,517 124,120 10 1,684,595 63,916 18 1,814,112 188,036 117 80,378 564,366 Mini Hydros,Selangor 5 16,892,869 122,045 4 514,707 25,451 9 17,407,576 147,496 40 11,688 895,102 Stores, OfficeW. Persekutuan — — — — — — — — — 11 150 7,184 Buildings,Putrajaya/ Jetties andCyberjaya — — — — — — — — — — — — DamsN. Sembilan 4 170,812 4,074 1 13,550 1,657 5 184,362 5,731 20 3,257 158,478Melaka — — — — — — — — — — — —Johor 3 89,012 12,969 2 167,515 13,923 5 256,527 26,892 26 9,850 68,031Pahang 47 230,588 238 58 98,742 8,616 105 329,330 8,854 137 2,755 37,933Terengganu 45 239,386 16,410 48 28,817 13,938 93 268,203 30,348 92 12,316 443,530Kelantan 75 76,498 543 39 56,539 1,348 114 133,037 1,891 94 4,444 832,538Sabah 23 5,462,413 6,463 18 4,017,445 5,769 41 9,479,858 12,232 48 1,100 176,547Total 214 23,456,096 313,352 190 6,673,415 142,853 404 30,129,511 456,205 614 138,689 3,338,600GENERATIONElectricity is produced through a process of converting other forms of energy into electrical energy. This conversion process is known as generation and is mainly carried out atpower stations.In addition, a number of mini hydro stations and numerous diesel generating sets are operated by TNB.Note: NBV – Net Book Value280

– transmissionNature of lAND builDINGS DESCRIPTIONFunctionalActivity leasehold FreeholdTotal Total Total built-Up Totalno. of Area NBV No. of Area NBV No. of Area NBV No. Area NBVTransmission Lots (sq M) (RM’000) Lots (sq M) (RM’000) Lots (sq M) (RM’000) (sq M) (RM’000)(1) (2) (3) (4) (5) (6) (1+4) (2+5) (3+6) (10) (11) (12) (13)LocationPerlis 4 110,024 1,030 2 15,860 474 6 125,884 1,504 16 3,145 63,803Kedah 11 440,017 3,409 180 71,451 2,441 191 511,468 5,850 70 7,694 180,927Pulau Pinang 15 1,311,447 8,126 36 114,908 4,739 51 1,426,355 12,865 44 3,653 167,373Perak 10 157,193 1,498 69 26,438 12,463 79 183,631 13,961 53 8,146 245,310Selangor 20 257,523 24,493 46 92,713 113,923 66 350,236 138,416 124 13,673 715,345W. Persekutuan 10 176,794 10,991 204 79,800 14,209 214 256,594 25,200 46 7,740 336,436Putrajaya/ Main IntakeCyberjaya — — — — — — — — — — — — SubstationsN. Sembilan 13 688,904 6,703 15 87,029 5,090 28 775,933 11,793 59 3,836 159,031Melaka 6 59,717 4,881 21 20,627 7,188 27 80,344 12,069 51 7,167 89,231Johor 30 554,552 22,153 44 64,522 15,132 74 619,074 37,285 133 9,027 697,994Pahang 8 86,487 1,235 19 155,835 4,722 27 242,322 5,957 76 2,934 177,820Terengganu 5 170,622 3,363 11 — 210 16 170,622 3,573 41 3,544 69,751Kelantan 3 95,628 1,838 170 176,029 6,130 173 271,657 7,968 35 5,551 67,201Sabah 3 30,904 1,454 1 14,165 134 4 45,069 1,588 19 5,040 82,402Total 138 4,139,812 91,174 818 919,377 186,855 956 5,059,189 278,029 767 81,150 3,052,624TRANSMISSIONTransmission activity relates to the process of transmitting electricity generated at power stations to the load centres where it is required, eg. townships, industrial growth centresand major customers.A network of transmission lines, forming the National Grid is required for this purpose. At appropriate sites, transmission substation are constructed to channel electricity from theNational Grid to the numerous load centres. The transmission system operates at voltage levels of 500 kV, 275 kV, 132 kV and 66 kV.Note: NBV – Net Book Value[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]281

Property List– distribution[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]Nature of lAND builDINGS DESCRIPTIONFunctionalActivity leasehold FreeholdTotal Total Total built-Up Totalno. of Area NBV No. of Area NBV No. of Area NBV No. Area NBVDistribution Lots (sq M) (RM’000) Lots (sq M) (RM’000) Lots (sq M) (RM’000) (sq M) (RM’000)(1) (2) (3) (4) (5) (6) (1+4) (2+5) (3+6) (10) (11) (12) (13)LocationPerlis 37 16,378 779 42 71,964 880 79 88,342 1,659 52 1,200 4,756 DistributionKedah 159 363,808 9,744 309 428,369 25,844 468 792,177 35,588 214 46,250 39,206 SubstationsPulau Pinang 106 155,457 5,760 366 47,423 22,915 472 202,880 28,675 175 12,880 24,225Perak 538 562,810 9,953 250 528,843 7,615 788 1,091,653 17,568 366 11,088 49,481Selangor 398 316,145 45,757 546 366,783 67,808 944 682,928 113,565 793 121,096 147,843W. Persekutuan 176 122,882 44,107 172 122,976 11,546 348 245,858 55,653 295 15,971 322,709Putrajaya/Cyberjaya — — 70 3 — 676 3 — 746 16 — 27,601N. Sembilan 246 108,319 2,849 145 40,689 2,383 391 149,008 5,232 123 6,872 6,156Melaka 197 61,468 4,000 211 67,646 24,279 408 129,114 28,279 155 4,007 6,006Johor 588 464,151 18,763 632 388,894 44,276 1,220 853,045 63,039 465 19,774 40,391Pahang 204 157,459 7,429 177 94,830 219 381 252,289 7,648 153 9,801 28,626Terengganu 188 639,980 2,709 58 40,214 1,084 246 680,194 3,793 119 4,508 17,943Kelantan 175 516,903 3,617 179 212,985 6,103 354 729,888 9,720 139 67,062 10,033Sabah 52 645,935 3,595 37 173,243 1,881 89 819,178 5,476 322 84,500 31,544Total 3,064 4,131,695 159,132 3,127 2,584,859 217,509 6,191 6,716,554 376,641 3,387 405,009 756,520DISTRIBUTIONThe distribution process begins at the termination of the transmission line where distribution substations step down voltage to enable electricity to be distributed to TNB’scustomers.The distribution system consists of distribution substations, overhead lines and underground cables operating at voltage levels of 33 kV and below.Note: NBV – Net Book Value282

– Residential & OthersNature of lAND builDINGS DESCRIPTIONFunctionalActivity leasehold FreeholdTotal Total Total built-Up TotalResidential No. of Area NBV No. of Area NBV No. of Area NBV No. Area NBVand others Lots (sq M) (RM’000) Lots (sq M) (RM’000) Lots (sq M) (RM’000) (sq M) (RM’000)(1) (2) (3) (4) (5) (6) (1+4) (2+5) (3+6) (10) (11) (12) (13)LocationPerlis 1 1,037 322 6 50,816 1,987 7 51,853 2,309 13 6,151 6,080 ResidentialKedah 5 43,983 2,491 29 259,202 22,711 34 303,185 25,202 42 39,168 24,446 Houses,Pulau Pinang 8 26,829 5,294 23 256,968 28,168 31 283,797 33,462 54 13,628 134,389 Apartments,Perak 37 78,110 3,060 53 1,074,710 28,544 90 1,152,820 31,604 116 134,749 63,214 HolidaySelangor 36 33,009,908 158,641 49 1,764,430 137,897 85 34,774,338 296,538 331 90,263 1,035,389 Bungolows,W. Persekutuan 3 18,757 7,112 11 79,918 74,101 14 98,675 81,213 125 136,326 148,447 OfficePutrajaya/ Buildings,Cyberjaya — — — — — — — — — — — — Main Store,N. Sembilan 10 113,329 2,013 28 359,906 29,597 38 473,235 31,610 71 132,894 58,870 WarehouseMelaka 6 535,762 10,019 20 142,288 9,582 26 678,050 19,601 31 28,635 14,718 and WorkshopJohor 23 384,439 36,104 49 773,793 22,953 72 1,158,232 59,057 119 76,373 65,400Pahang 23 760,444 15,611 24 67,598 7,332 47 828,042 22,943 183 76,822 163,509Terengganu 25 3,306,420 29,410 4 1,922 2,362 29 3,308,342 31,772 53 47,434 89,410Kelantan 11 229,863 7,310 22 87,845 5,822 33 317,708 13,132 54 322,636 58,184Sabah 5 122,369 3,079 5 140,207 20,681 10 262,576 23,760 12 33,500 18,858Pakistan — — — 1 856,207 2,436 1 856,207 2,436 3 12,713 1,300Total 193 38,631,250 280,466 324 5,915,810 394,173 517 44,547,060 674,639 1,207 1,151,292 1,882,214RESIDENTIAL AND OTHERS‘Residential Property’ includes staff quarters, holiday bungalows and apartments. “Others” include office buildings, main store and warehouse.Note: NBV – Net Book Value[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]283

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Proxy FormNumber of Ordinary Share(s) heldCDS Account No.:I/We,of(FULL NAME IN CAPITAL LETTERS)(ADDRESS)NRIC No./Passport No./Co. No.being a Member/Members of Tenaga Nasional Berhad,hereby appoint:-Name/NRIC No. No. of shares Percentage (%)Proxy 1Proxy 2or failing him/heror failing him/herTotalthe Chairman of the Meeting, as my/our proxy, to vote for me/us, and on my/our behalf at THE EIGHTEENTH ANNUAL GENERALMEETING of TENAGA NASIONAL BERHAD to be held at Dewan Serbaguna, Kompleks Sukan TNB, Jalan Pantai Baru, 59200Kuala Lumpur on Thursday, 11 December 2008, at 10.00 am and/or at any adjournment thereof.My/Our proxy is to vote as indicate below:ForAgaiNst1. RESOLUTION 1 To receive the Audited Financial Statements for the Financial Year ended31 August 20082. RESOLUTION 2 Declaration of Dividend3. RESOLUTION 3 Payment of Directors’ Fees4. RESOLUTION 4 Re-election of Tan Sri Leo Moggie pursuant to Article 1355. RESOLUTION 5 Re-election of Tan Sri Dato’ Hari Narayanan a/l Govindasamy pursuant toArticle 1356. RESOLUTION 6 Re-election of Dato’ Zainal Abidin bin Putih pursuant to Article 1357. RESOLUTION 7 Re-election of Tan Sri Dato’ Seri Siti Norma binti Yaakob pursuant to Article 1338. RESOLUTION 8 Re-appointment of Messrs PricewaterhouseCoopers as the Company’s AuditorsSPECIAL BUSINESS9. RESOLUTION 9 Issuance of Shares Pursuant to Employees’ Share Option Scheme II (ESOS II)10. RESOLUTION 10 Issuance of New Shares Pursuant to Section 132D, Companies Act, 196511. RESOLUTION 11 Proposed Share Buy-Back(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 betaken to authorise the proxy/proxies to vote at his/her discretion).Dated: December 2008.Signature of Shareholder(s) or Common SealNOTES: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 amember 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 theinstrument 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 attorneyduly appointed under a power of attorney.3. Where a member appoints two (2) 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 theMeeting, 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, JalanMunshi Abdullah, 50100 Kuala Lumpur not less than forty-eight (48) hours before the time set for the Meeting.

StampSymphony Share Registrars Sdn. Bhd.Level 26, Menara Multi-PurposeCapital SquareNo. 8, Jalan Munshi Abdullah50100 Kuala Lumpur