annual report - Tenaga Nasional Berhad

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