Download - Tenaga Nasional Berhad

Tenaga Nasional Berhad 84 Annual Report 2009OPERATIONS REVIEWGROUP Finance (Cont’d.)• Bakun project – The Government ofMalaysia has identified Tenaga NasionalBerhad and Sarawak Energy Berhad toundertake the operation of the 2,400 MWBakun Hydroelectric Dam from SarawakHidro Sdn Bhd through a leasing agreementand to develop the associated transmissionfacilities from Sarawak to PeninsularMalaysia, including the 700 km underseatransmission cable. This project is animportant alternative source of energy supplyto meet the growing demand for affordableelectricity in Peninsular Malaysia whilst italso in line with Government’s aspiration inpromoting clean energy for the nation.• Renewable energy power programme(SREP) – As a commitment to the smallrenewable energy power programme (SREP)launched by the Government to promote theuse of renewable energy in power generation,TNB together with Felda and J-Power haveformed an incorporated joint venturecompany to be the developer of a 10 MWebiomass power project in Jengka, Pahangthat uses empty fruit bunch to generateelectricity.Despite the global impact of economic slowdown,our mission to be a global player remains oncourse. We are selective in our choice ofoverseas ventures and guided by Board approvedlevel of country risk against a predeterminedlevel of expected returns. Selection of investmentopportunities are also driven by activeparticipation in our core areas of generation andoperation and maintenance. Going forward, wewill continue to explore potential businessopportunities which falls within the guidelines ofour investment policy to ensure maximum returnsand manageable risks.Monitoring and ImprovingPerformance of Our InvestmentsWhilst the Business Development arm exploresopportunities for investments, the InvestmentManagement Department’s key role is to managethe Group’s extensive portfolio of investmentswith the objective of creating long-term positivevalue from related non-core business and whichwould support the Group’s overall financialperformance.The Department’s operations are guided by its4 main priorities of:-• formulating long-term and short-termstrategies for the Group’s equity investments,in alignment with the 2nd phase of the 20-Year Strategic Plan;• setting the strategic direction;• streamlining the operations of thesubsidiaries; and• overseeing and monitoring the performanceof the investments.Todate, Investment Management monitors 15 keyinvestments under the Group’s subsidiaries,associates and investee companies, with a totalmarket value of approximately RM5.0 billion.During the year, the Group’s related non-coresubsidiaries aggressively explored marketopportunities to expand their business operationsboth locally and overseas, in an effort to increaserevenue from non-Group related sales/businessoperations. This was apparent from the increasein the Group’s revenue during the year from noncorebusinesses.Implementation of the InvestmentEvaluation Framework for CapitalBudgetingThe implementation of the Investment EvaluationFramework in January 2008 was an extensionand enhancement to the earlier Guidelines andApproval Procedures for Capital Investment. Thenew guidelines for capital investment evaluationhas further reinforced the need to focus onproject returns and thus facilitated TNB in itsannual capital expenditure programme withemphasis given on project optimisation andfinancial feasibility.The objectives of the evaluation framework are;• minimising the risk of stranded assets andpoor return on investment;• ensuring that investment proposals orprojects have gone through a rigorousprocess of assessment and evaluation;• ensuring a consistent financial approach byplanners in planning for capital expenditureprojects; and• ensuring a fair return on investment forcapital expenditure projects.The roll-out of the framework has reinforced theexisting capital budgeting initiative while theestablished evaluation models have facilitatedTNB personnel to carry out financial analysis ofcapital projects. This further enhances TNB’scapex efficiency programme which is in line withthe objectives of the Purple Book.