annual report - Tenaga Nasional Berhad

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