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Business Review
P o w e r G e n e rati o n

During the year, the Group consolidated its position as a major regional power player and put in place measures to fuel future growth. All the Group’s power plants across Malaysia, Egypt, Bangladesh, Pakistan, Sri Lanka and the United Arab Emirates continued to deliver strong operational performance while it undertook cost mitigation and productivity improvement measures. With some 13 power plants to date in its portfolio and a net generating capacity of 3,951 MW and a water desalination capacity of 16 million imperial gallons per day, the Group’s Power Generation segment continues to deliver significant benefits in the way of sustainable earnings and cashflow growth. In the current year, Power Generation revenue increased by 3% from RM2,718 million to RM2,812 million mainly due to improved contributions from the Malaysian and Egyptian power plants. The segment’s operating profit increased by RM202 million or 25% to RM1,006 million as a result of higher revenue, lower plant maintenance expenses, lower corporate and business development costs totalling RM114 million, and the non-recurring windfall profit levy of RM85 million which was charged in previous year. Finance costs for Power Generation reduced from RM507.1 million to RM366.8 million due to the absence of one-time refinancing costs of RM141 million which was incurred in the previous year and the resulting interest savings brought about by the refinancing exercise. With the global economy slowly strengthening, many power 20 TANJONG PUBLIC LIMITED COMPANY annual report & financial statements 2010

projects, which had been held back amidst the preceding year’s financial turbulence are now gradually being opened for bidding. In line with this, the Group has set its sights on doubling its net generating capacity in the next five years through a balance of greenfield developments and M&A activities. Greenfield initiatives will most likely be centred in the Middle East and North Africa, South Asia and Southeast Asia regions where power market fundamentals are favourable and postfinancial crisis opportunities have re-emerged. While the competition is expected to intensify in these markets, the Group is competitively positioned to leverage on its operational knowledge and proven capabilities in these regions to secure consortium agreements and related operations and maintenance contracts. The Group will concurrently pursue an M&A growth strategy which will enable it to increase its presence in its current focus regions, and provide the avenue to diversification into more developed markets. In this regard, Tanjong’s successful record in integrating new plant acquisitions will be a critical success factor. Going forward, the Power Generation segment is expected to be a key driver for the Group’s future growth. The performance of the segment is however very much dependent on the impact

The Business Review section forms part of the Directors’ Report pursuant to Section 417 of the UK Companies Act 2006.

Sidi Krir Power Plant, Egypt

of external market forces on the Group’s M&A and greenfield-driven strategies. In Malaysia, the future success of the Group’s power generation business will depend on the outcome of the Malaysian Government’s efforts to reform the domestic electricity supply industry.

Company Powertek Berhad (“PB”)

Location Malaysia

Power Plant Powertek Pahlawan Panglima Port Said Suez Gulf Sidi Krir Meghnaghat Haripur NEPC Fauji Kabirwala Ace Horana & Ace Matara Taweelah B

PPA Expiry 2016 2020 2023 2023 2023 2022 2024 2023 2014 2029 2012 2028

Net/Effective Capacity 440 MW 330 MW 720 MW 683 MW 683 MW 375 MW 248 MW 198 MW 30 MW 36 MW 8 MW 200 MW

Kuasa Nusajaya (L) Ltd (“KNL”) Pendekar Energy (L) Ltd (“PEL”)

Egypt Egypt Bangladesh Bangladesh Bangladesh Pakistan Sri Lanka Abu Dhabi

Pendekar Power (Labuan) Ltd (“PPL”)

TANJONG PUBLIC LIMITED COMPANY annual report & financial statements 2010

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