GOVERNANCE AND FINANCIAL REPORT 2020

GOVERNANCE AND FINANCIAL REPORT 2020

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ABOUT THIS REPORTINTEGRATED REPORTING APPROACH

ADNAN ZAINOL ABIDINChairman

ABDUL AZIZ OTHMANManaging Director/Chief Executive Officer

Scan this QR code with your smart device to access our Integrated Report suite.

INTEGRATED REPORT

Our Integrated Report is the primary report to our stakeholders, showcasing

our value creation proposition and delivery.

GOVERNANCE & FINANCIAL REPORT

Our Governance and Financial Report provides our comprehensive approach towards

protection of value in our activities, together with our financial performance for the year.

SUSTAINABILITY REPORT

Our Sustainability Report details our efforts and commitment towards creating

a sustainable business, positioned for long-term success.

APPROVAL BY THE BOARD

PGB Board of Directors (Board) acknowledges its responsibility in ensuring the integrity of this Integrated Report, which in the Board’s opinion address all the issues that are material to the Group’s ability to create value and fairly presents the integrated performance of PGB Group. This report has been prepared in accordance with the IIRC <IR> Framework.

OUR REPORTING SUITE

At PETRONAS Gas Berhad (PGB), we advocate transparency to stakeholders and we are honoured to present this report as the primary source of information on our Group’s financial and non-financial performance for 2020. It forms part of our reporting suite which comprises:

RATIONALE

PGB has remained strong and robust since the liberalisation of the gas market in 2016. We have embraced the challenges presented by the new business landscape by adapting our strategies and operations accordingly. We are now well-prepared in shaping the path ahead of us.

Our steadfastness and resilience are driven by our ongoing strategy – R2 Game Plan: 301Q99 Pushing Forward. We are focused on being the preferred solutions partner to our stakeholders. We became a leaner and more streamlined organisation. We also increased our efforts in digitalisation, while also reinforcing our systems and processes to drive growth and create long-term value for our stakeholders.

Befitting our role as a Leading Gas Infrastructure and Centralised Utilities Company, we will continue Pushing Forward towards Shaping our New Norm as we progress responsibly to meet the nation’s needs.

REGULATIONS COMPLIED SCOPE AND BOUNDARY OF REPORTING

• Bursa Malaysia Main Market Listing Requirements• Companies Act 2016• Malaysian Code on Corporate Governance 2017• Corporate Governance (3rd Edition) issued

by Bursa Malaysia• Malaysian Financial Reporting Standards• International Financial Reporting Standards

This report covers the primary activities of the Group, our business segments and our subsidiaries as well as joint venture operations, with the aim to address the

information requirement of long-term investors. We also present information relevant to the way we create value for other key stakeholders, including our employees,

customers, government agencies and authorities, suppliers and communities.

This report covers the period from 1 January to 31 December 2020, unless otherwise stated.

2 Board at a Glance4 Profile of the Board of Directors16 Profile of Leadership Team15 Organisation Structure16 Chairman’s Statement on Corporate Governance18 Corporate Governance Overview Statement

40 Board Audit Committee Report48 Independent Financial Advisor’s Opinion52 Nomination and Remuneration Committee Report56 Statement on Risk Management and Internal Controls

71 List of Internal Policies

73 Statement of Directors’ Responsibilities in relation to the Financial Statements

74 Directors’ Report79 Statement by Directors79 Statutory Declaration80 Consolidated Statement of Financial Position81 Consolidated Statement of Profit or Loss and Other

Comprehensive Income82 Consolidated Statement of Changes in Equity86 Consolidated Statement of Cash Flows87 Statement of Financial Position88 Statement of Profit or Loss and Other Comprehensive Income89 Statement of Changes in Equity90 Statement of Cash Flows91 Notes to the Financial Statements174 Independent Auditors’ Report177 Analysis of Shareholdings180 Summary of Landed Property, Plant and Equipment188 Top 10 Landed Property, Plant and Equipment

RESPONSIBLE GOVERNANCE

FINANCIAL STATEMENTS

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WHAT’S INSIDEABOUT OUR REPORT

COMPOSITION

GENDER

AGE GROUP

TENURE

33

1 1

4 4

2 2

2 2

4

1

1

2

Senior Independent Director 1 Independent Non-Executive Director* 3 Non-Independent Non-Executive Director

(including the Chairman) 3 Executive Director 1

* Excluding the Senior Independent Director

Male 4 Female 4

Age 70-79 2 Age 60-69 2 Age 50-59 2 Age 40-49 2

7-9 years 1 4-7 years 1 2-4 years 2 0-2 years 4

P E T R O N A S G A S B E R H A D G O V E R N A N C E & F I N A N C I A L R E P O R T 2 0 2 0

2

BOARD AT A GLANCE

Skills Matrix Industry Experience

Fin

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/Au

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Eco

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En

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/T

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ng

Op

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Pla

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Hu

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Res

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ICT

Oil

and

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Ban

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Fin

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Ship

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Reg

ion

al/

Inte

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ion

al

Adnan Zainol Abidin

Farina Farikhullah Khan

Abdul Aziz Othman

Dato’ Abdul Razak Abdul Majid

Datuk Yeow Kian Chai

Marina Md Taib

Habibah Abdul

Emeliana Dallan Rice-Oxley

BOARD SKILLS AND EXPERIENCE MATRIX

Finance/Audit Legal/Regulatory Economics Engineering/Technical Commercial/Marketing Operations Corporate Planning and Development Human Resource ICT Oil and Gas Banking and Finance Shipping/Logistics Regional/International

3

P U S H I N G F O R W A R D S H A P I N G T H E N E W N O R M

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Nationality Date of Appointment

59 Years/Male Malaysian 2 July 2020

Length of Service

• 7 months

Number of Board Meetings Attended

• 4/4

Academic/Professional Qualifications

• Bachelor of Science in Chemical Engineering, University of Leeds, United Kingdom

Present Directorships

Listed issuer:• PETRONAS Gas Berhad

Other public company:• NIL

Present Appointments

• Executive Vice President and Chief Executive Officer of PETRONAS Gas and New Energy Business

• Member of PETRONAS Executive Leadership Team• Board Member of various companies in PETRONAS

Past Experience

• Senior Vice President of PETRONAS Project Delivery and Technology

• Vice President of PETRONAS LNG Assets• Vice President of PETRONAS Global LNG Projects• President and Chief Executive Officer of Pacific Northwest

LNG (Canada)• Chief Executive Officer of Egyptian LNG (Egypt)• Chief Executive Officer of PETRONAS Chemicals

Ammonia Sdn. Bhd.• 35 years of extensive experience in oil and gas industry

Declaration

• No family relationship with any Director/Major Shareholder• No conflict of interest with PETRONAS Gas Berhad• No conviction of offences within the past five years other

than traffic offences, if any• Does not hold more than five directorships in listed issuers

ADNAN ZAINOL ABIDINChairman Non-Independent Non-Executive Director

Finance/Audit Legal/Regulatory Economics Engineering/Technical Commercial/Marketing Operations Corporate Planning and Development Human Resource ICT Oil and Gas Regional/International

Age/Gender


4

PROFILE OF THE BOARD OF DIRECTORS as at 10 February 2021

Age/Gender Nationality Date of Appointment

55 Years/Male Malaysian 1 January 2021

ABDUL AZIZ OTHMANManaging Director/Chief Executive Director Non-Independent Executive Director

Length of Service

• 1 month


• NIL


• Senior Executive Programme, London Business School• INSEAD Programme, INSEAD Business School• Bachelor Science Mechanical Engineering, University George

Washington, United States of America





• Vice President Gas and Power, Gas and New Energy Business• Member, Gas and New Energy Executive Leadership Team

of PETRONAS• Board Member of various companies in PETRONAS

Past Experience

• Vice President, Strategy and New Ventures of PETRONAS Energy Canada Limited

• Head, Strategic Planning and Ventures of PETRONAS Chemicals Group Berhad

• Chief Executive Officer of Vinyl Chloride Malaysia Sdn. Bhd.• General Manager, Centralised Utilities Facilities of PETRONAS

Gas Berhad• Engineer, Peninsular Gas Utilisation Project of PETRONAS

Gas Berhad

Declaration



Economics Engineering/Technical Commercial/Marketing Operations Corporate Planning and Development Oil and Gas Regional/International 5


01

02

PROFILE OF THE BOARD OF DIRECTORS as at 10 February 2021


65 Years/Female Malaysian 13 September 2013

Length of Service

• 7 years and 5 months


• 7/7


• Fellow of Institute of Chartered Accountants in England and Wales

• Member of Malaysian Institute of Certified Public Accountants• Member of Malaysian Institute of Accountants• Bachelor of Economics (Accounting), University Malaya


Listed issuers:• PETRONAS Gas Berhad• KLCC Property Holdings Berhad



• Chairman, Nomination and Remuneration Committee of KLCC Property Holdings Berhad

• Member, Board Audit Committee of PETRONAS Gas Berhad• Member, Nomination and Remuneration Committee of

PETRONAS Gas Berhad• Member, Board Audit Committee of KLCC Property

Holdings Berhad• Board Member of KLCC REIT Management Sdn. Bhd.

Past Experience

• Member of Securities Commission• Experienced in providing audit and business advisory services

to several large public listed, multinationals and local corporations

• Partner of Arthur Andersen• Partner of Ernst & Young

Declaration



Finance/Audit Legal/Regulatory Economics Corporate Planning and Development Human Resource Oil and Gas Banking and Finance Shipping/Logistics Regional/International

Age/Gender

HABIBAH ABDULSenior Independent Director


6

Profile of the Board of Directors as at 10 February 2021



Length of Service• 2 years and 5 months

Number of Board Meetings Attended• 7/7

Academic/Professional Qualifications• Advanced Management Program, Harvard Business School,

United States of America• Fellow member of the Institute of Chartered Accountants,

Australia • Bachelor of Commerce (Accounting), University of New South

Wales, Australia

Present DirectorshipsListed issuers:• PETRONAS Gas Berhad• KLCC Property Holdings Bhd • AMMB Holdings Berhad• Icon Offshore Berhad

Other public company:• Ambank Islamic Berhad

Foreign listed company:• EnQuest PLC

Present Appointments• Chairman, Board Audit Committee of PETRONAS Gas Berhad• Chairman, Board Audit Committee of KLCC Property

Holdings Berhad• Chairman, Group Nomination and Remuneration Committee of

AMBB Holdings Berhad• Chairman, Risk Management Committee of Ambank Islamic Berhad• Member, Nomination and Remuneration Committee of PETRONAS

Gas Berhad• Member, Nomination and Remuneration Committee of KLCC

Property Holdings Berhad• Member, Audit Examination Committee of AMMB Holdings Berhad• Member, Audit Examination Committee of Ambank Islamic Berhad• Member, Audit Committee of Icon Offshore Berhad• Board Member of KLCC REIT Management Sdn. Bhd.• Member, Safety, Climate and Risk Committee of EnQuest Plc• Member, Remuneration and Social Responsibility Committee

of EnQuest Plc • Member, Audit Committee of EnQuest Plc

Past Experience• Board Member of Progress Energy Canada Ltd• Chief Financial Officer of PETRONAS Chemicals Group Berhad• Chief Financial Officer of PETRONAS Exploration & Production

Business• Chief Financial Officer of PETRONAS Carigali Group of Companies• Senior Manager, Corporate Planning & Development Division of

PETRONAS• Senior Associate, Business Services of Coopers & Lybrand, Australia

Declaration• No family relationship with any Director/Major Shareholder• No conflict of interest with PETRONAS Gas Berhad• No conviction of offences within the past five years other

than traffic offences, if any• Does not hold more than 5 directorships in listed issuers

Finance/Audit Economics Corporate Planning and Development Human Resource Oil and Gas Banking and Finance Regional/International

FARINA FARIKHULLAH KHANIndependent Non-Executive Director

Age/Gender

7


01

02


70 Years/Male Malaysian 1 September 2018

DATO’ ABDUL RAZAK ABDUL MAJIDIndependent Non-Executive Director

Length of Service



• 7/7


• Masters Degree in Business Administration, Ohio University, United States of America

• Bachelor of Electrical Engineering, Brighton University, United Kingdom





• Chairman of Energy Council of Malaysia• Chairman, Nomination and Remuneration Committee of

PETRONAS Gas Berhad• Member, Board Audit Committee of PETRONAS Gas Berhad

Past Experience

• Chief Executive Officer of MyPower Corporation MESI 2.0 (Government of Malaysia Undertaking)

• Chairman of Energy Commission Malaysia• Chief Executive Officer of MyPower Corporation MESI 1.0

(Incorporated by Ministry of Energy)• Senior Vice President, (Corporate Affairs Division) of Tenaga

Nasional Berhad• Vice President (Generation) of Tenaga Nasional Berhad• Secondment, Economic Planning Unit of Prime Minister’s

Department

Declaration



Legal/Regulatory Economics Engineering/Technical Corporate Planning and Development Human Resource Oil and Gas Banking and Finance Regional/International

Age/Gender




70 Years/Male Malaysian 30 July 2020

Length of Service

• 6 months


• 4/4


• Masters of Marine Technology, University of Strathclyde• Degree in Mechanical Engineering, University College London





• Chairman of PETRONAS Abandonment Cess Fund Board of Trustee

• Independent Non-Executive Board Member of PETRONAS Carigali Sdn. Bhd.

• Independent Non-Executive Board Member of PETRONAS International Corporation Limited

• Member of Nomination and Remuneration Committee of PETRONAS Gas Berhad

Past Experience

• Advisor of PETRONAS Carigali Sdn Bhd• Vice President of PETRONAS Chemicals Business• Director of Project Interface Directorate• Co-Champion PETRONAS OPI Initiative• Chief Executive Officer of PETRONAS Chemicals Fertiliser

Kedah Sdn. Bhd.• Chief Executive Officer of PETRONAS Carigali (Turkemenistan)

Sdn. Bhd.• Head of Exploration and Production Technology Centre• 35 years of extensive experience in oil and gas industry

experience

Declaration



Economics Engineering/Technical Commercial/Marketing Operations Corporate Planning and Development Oil and Gas Regional/International

DATUK YEOW KIAN CHAIIndependent Non-Executive Director

Age/Gender

9


01

02



Length of Service



• 7/7


• Advanced Management Programme, Harvard Business School, United States of America

• Degree in Geology, University of South Carolina, United States of America





• Vice President, Exploration of PETRONAS Upstream• Member, Upstream Leadership Team of PETRONAS• Member, Upstream People Development Council of PETRONAS• Champion, PETRONAS Leading Women Network• Board Member of various companies in PETRONAS

Past Experience

• Vice President of Exploration Malaysia of PETRONAS• Led PETRONAS strategy to accelerate monetisation of the

gas-rich resources in East Malaysia as well as international exploration growth

• Served numerous technical and managerial roles in Malaysia, Central North Sea, Brazil, Onshore United States of America and Latin America for Shell

• Exploration Portfolio and Planning Manager for Asia Pacific region for Shell

Declaration



Economics Engineering/Technical Commercial/Marketing Operations Corporate Planning and Development Human Resource Oil and Gas Regional/International

EMELIANA DALLAN RICE-OXLEYNon-Independent Non-Executive Director

Age/Gender


10




MARINA MD TAIBNon-Independent Non-Executive Director

Length of Service

1 year and 5 months


• 7/7


• Advanced Management Programme, Harvard Business School• Masters of Petroleum Business Management, University of

Adelaide, Australia• Fellow, Institute of Chartered Accountants in England and

Wales (ICAEW) • Bachelor of Social Studies Accountancy, University of Exeter,

United Kingdom





• Member, Board Audit Committee of PETRONAS Gas Berhad• Head, Corporate Strategic Planning of PETRONAS• Board Member of various companies in PETRONAS

Past Experience

• Head, Brunei Operations of PETRONAS Carigali Sdn Bhd• Head, Strategic Planning, Petroleum Management Unit of

PETRONAS• Senior Manager, Corporate Planning and Development Division

of PETRONAS

Declaration



Finance/Audit Economics Operations Corporate Planning and Development Oil and Gas Regional/International

Age/Gender

11


01

02

Nationality/EthnicityAge/GenderDate of AppointmentLength of Service

Malaysian/Malay53/MaleMarch 202011 months


Malaysian/Malay55/MaleJanuary 20211 month


Malaysian/Malay54/MaleJanuary 20174 years 1 month

1 ABDUL AZIZ BIN OTHMAN Managing Director/ Chief Executive Director

2 ZABIDI AHMAD Head of Gas Processing and Utilities

3 BURHAN ABDULLAH Head of Gas Transmission and Regasification

1 2 3 4 5

Responsibilities

• Overall management and operations of Gas Processing and Utilities facilities by ensuring safe, optimum and efficient plant operations

• Ensure delivery of contracted utilities which satisfies customers’ requirements as well as achieving optimum gas value chain for PETRONAS and PGB

• Ensure compliance with regulations and statutory requirements


• Bachelor of Science in Mechanical Engineering, George Washington University, United States of America


• Board Member of various companies in PETRONAS

• Executive Committee of Kelab Golf & Rekreasi PETRONAS (KGRP)

Past Experience

• Managing Director/CEO, PETRONAS Penapisan Sdn Bhd PP(T)SB

• Head (Plant), PETRONAS Penapisan Sdn Bhd PP(T)SB

• Manager (Maintenance), PETRONAS Penapisan Sdn Bhd PP(T)SB

• Manager (Maintenance Rotating Engineering- GPP B) PETRONAS Gas Berhad

• Manager (Maintenance Process), PETRONAS Gas Berhad

Responsibilities

• Overall management and operations of Gas Transmission and Regasification facilities by ensuring safe, optimum and efficient pipeline network and regasification operations

• Ensure delivery of gas which satisfies PETRONAS customers’ requirements as well as achieving optimum gas value chain for PETRONAS

• Ensure compliance with regulations and statutory requirements


• Bachelor of Chemical Engineering from University of Texas A&I, United States of America

• First Grade Steam Engineer from Malaysian Department of Occupational Safety & Health


• Chief Executive Officer, Regas Terminal (Sg. Udang) Sdn Bhd

Past Experience

• Vice President Operations, Trans-Thai Malaysia (Thailand) Ltd

• Senior Operation Manager, PETRONAS Gas Berhad

• Shift Supervisor, Ethylene (Malaysia) Sdn Bhd• Operation Engineer, PETRONAS Penapisan

(Terengganu) Sdn Bhd

Responsibilities

• Overall management and operations of the business, organisational effectiveness and the implementation of the Group’s strategies and policies

• Manage the respective responsibilities of the divisions and departments in Company


• Senior Executive Programme, London Business School

• INSEAD Programme, INSEAD Business School• Bachelor of Science in Mechanical

Engineering, George Washington University, United States of America


• Vice President, Gas and Power, Gas and New Energy Business

• Member, Gas and New Energy Executive Leadership Team, PETRONAS

• Board Member of various companies in PETRONAS

Past Experience

• Vice President, Strategy and New Ventures, PETRONAS Energy Canada Limited

• Head, Strategic Planning and Ventures, PETRONAS Chemicals Group Berhad

• Chief Executive Officer, Vinyl Chloride Malaysia Sdn Bhd

• General Manager, Centralised Utilities Facilities (CUF), PETRONAS Gas Berhad

• Engineer, Peninsular Gas Utilisation Project (PGU)


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PROFILE OF LEADERSHIP TEAM as at 10 February 2021


Malaysian/Malay47/FemaleSeptember 20173 years 5 months


Malaysian/Malay55/MaleFebruary 20138 years 0 month

4 SHARIZA SHARIS MOHD YUSOF Chief Financial Officer

5 ABDUL RAZAK SAIM Head of Business Development and Commercial


Malaysian/Malay56/FemaleMarch 20137 years 11 months

6 BARISHAH MD HANIPAH Head of Human Resources Management

Declaration

• No family relationship with any director and/or major shareholder of PGB

• No conflict of interest with PGB• No conviction of offences within

the past five years other than traffic offences, if any

6 7 8 9

Responsibilities

• Overall Group’s financial and fiscal management as well as investor relations

• Provide strategic partnering and finance advisory to the business particularly on business ventures and commercial arrangements


• Member, Malaysian Institute of Accountants• Fellow, Institute of Chartered Accountants

in England and Wales (ICAEW)• Bachelor of Science in Economics and

Accounting, University of Bristol, United Kingdom


• Director, Kimanis Power Sdn Bhd• Director, Kimanis O&M Sdn Bhd• Director, Pengerang Gas Solutions Sdn Bhd• Alternate Director, Pengerang LNG (Two)

Sdn Bhd• Alternate Director, Gas Malaysia Berhad• Board Member of various companies in

PETRONAS

Past Experience

• Financial Controller, PETRONAS Chemicals Group Berhad

• Senior Manager, Strategic Planning, PETRONAS• Head, Finance and Administration, Dragon

LNG, United Kingdom• Manager, Financial Accounting, PETRONAS

Dagangan Berhad• Analyst, President/CEO’s Office, PETRONAS• Executive, Corporate Finance, PETRONAS• Auditor, Wenham Major Chartered Accountants,

United Kingdom

Responsibilities

• Provide overall medium to long-term business strategy for the Company

• Maximise Group’s profitability through effective business development for growth, commercial negotiations and resolutions, business ventures management, land acquisition and management

• Provide strategic direction for effective and profitable business operations under the Third Party Access (TPA)


• Bachelor of Mechanical Engineering (Hons), University of Wollongong, New South Wales, Australia


• Director/CEO, Pengerang LNG (Two) Sdn Bhd• Director, Industrial Gases Solutions Sdn Bhd• Director, PETRONAS Energy (India) Ptd Ltd• Director, Gas District Cooling (GDC) Sdn Bhd• Director, Regas Terminal (Lahad Datu) Sdn Bhd• Director, Regas Terminal (Pengerang) Sdn Bhd

Past Experience

• Director, Transasia Pipeline Pvt Ltd• Commissioner, PT Transportasi Gas Indonesia• Chief Operating Officer, BAKIPC Sdn Bhd• General Manager, Gas Business Development,

Gas Business Unit, PETRONAS• Head, Malaysia Gas Management, Gas Business

Unit, PETRONAS• Manager, Gas Supply Planning, PETRONAS• Manager, Business Planning, PETRONAS

Australia Pty Ltd• Senior Executive, Marketing, East Australia

Pipeline Marketing Pty Ltd• Various technical positions in PGB on gas

compression and facilities management• Procurement Executive, Gas Transmission

Operation, PGB

Responsibilities

• Formulate talent strategies and initiatives in developing competent and capable leaders and workforce across PGB Group including securing, developing and retaining talents

• Provide Human Resources advisory to adapt and adopt the right HR solutions at the strategic, tactical and operational level

• Create posit ive experience through empowered, agile and enabled talent eco-system


• Bachelor of Business Administration (Cum Laude), University of Toledo, Ohio, United States of America


• Joint Secretary, Nomination and Remuneration Committee

Past Experience

• Senior Manager, Sponsorship and Talent Sourcing, PETRONAS

• Manager, Human Resource Management, PETRONAS Chemicals Fertiliser (Kedah) Sdn Bhd

• Manager, HR Planning and Development, PGB

• Manager, Remuneration Administration, PETRONAS

• Executive within HRM Division of PETRONAS in the areas of People Development, Capability Development and HR Information System

• Executive, Education Sponsorship, PETRONAS

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02

Declaration

• No family relationship with any director and/or major shareholder of PGB• No conflict of interest with PGB• No conviction of offences within the past five years other than traffic offences, if any


Malaysian/Malay49/Female1 March 20201 year


Malaysian/Malay41/MaleJune 20191 year 8 months


Malaysian/Malay45/MaleAugust 20182 years 6 months

7 TENGKU MAZURA TENGKU ISMIT Head of Legal & Corporate Secretariat

8 MUHAMMAD NAZOMI OMAR Head of Business Excellence

9 NIK IRWAN IZANEE NIK ABDULLAH Head of Corporate Affairs

Responsibilities

• Manage overall PGB strategies and plans implementation, as well as risk management to ensure PGB business continuity while safeguarding and sustaining the long-term interests of the shareholders, employees and customers in line with the Company’s direction, policy, procedures and statutory requirements

• Manage deliverable of key business reporting to relevant stakeholders and analyse gaps for business opportunities and portfolio performance

• Ensure the development and effectiveness of PGB management system and business process to improve performance and create value for stakeholders


• Bachelor in Electrical and Electronic Engineering, University Sains Malaysia


• NIL

Past Experience

• Manager, Commercial Plant and Utilities, PETRONAS Gas Berhad

• Head, Project Management Office GPU, PGB• Head, Operations GP3/4 and KCS A/B and

COGEN, GPU, PGB• Head, Operations COGEN, PGB• Executive, Shift Supervisor, PGB

Responsibilities

• Lead and drive the corporate affairs functions which include external stakeholders’ engagement, media management, corporate and crisis management communications, sustainable development, staff & public relations and administration to meet the short, medium and long-term objectives of PGB

• Formulate strategies and programmes and the required approach to define the desired reputation and brand positioning to continuously secure shareholders’ satisfaction and confidence towards PGB

• Ensure positive positioning of PGB’s reputation as a socially responsible organisation and the community’s business partner of choice through various Corporate Social Responsibilities (CSR) initiatives


• Bachelor of Business Administration, Western Michigan University, United States of America


• NIL

Past Experience

• Head, Corporate Affairs & Administration, PETRONAS Carigali Iraq Holding B.V.

• Manager, Stakeholder Relations (International), PETRONAS

• Manager, Corporate Brand & Policy, PETRONAS• Executive, Public Relations, Advertising and

Promotions, Events Management, PETRONAS

Responsibilities

• Overall management of legal affairs and company secretarial services of PGB Group


• LLB (Honours), Universiti Kebangsaan Malaysia• Admitted as Advocate & Solicitor of the High

Court of Malaya in 1997• Licensed Company Secretary


• Head (Legal Gas), Legal G&NE, Group Legal

Past Experience

• Head Legal Finance and Tax, PETRONAS• Head Corporate Governance & International

Compliance, PETRONAS• Senior Legal Counsel, PETRONAS Chemical

Group Berhad• Senior Legal Counsel, Corporate Services,

PETRONAS• Legal Counsel, Legal Finance• Management Trainee and Industrial Relations

Executive, Nestle Products Sdn Bhd


14

Profile of Leadership Team as at 10 February 2021

BOARD OF DIRECTORS

COMPANYSECRETARY*

MANAGING DIRECTOR/CHIEF EXECUTIVE OFFICER

BOARD AUDITCOMMITTEE

NOMINATION AND

REMUNERATION COMMITTEE

LEADERSHIP TEAM

CorporateAffairs

BusinessExcellence

Legal AndCorporateSecretariat*

Human Resources

Management

Business Development

and Commercial

Finance

Gas Transmission

and Regasification

Gas Processing

and Utilities

* Corporate Secretariat functions are undertaken by PETRONAS Group Legal

1,765as at 31 December 2020

NUMBER OF EMPLOYEES

GENDER DIVERSITY

Male

87%Female

13%

13%

87%

Technical 1,536 Non-Technical 229

AGE DIVERSITY*

TECHNICAL KNOWLEDGE DIVERSITY

* Manpower generation data 2020 is based on the new definition i.e Baby Boomers (1965 and before), Gen X (1966-1979), Millenials (1980-1994) and Post Millenials (1995 and after).

ORGANISATION STRUCTURE

PGB Internal Audit

1.2%

0.9%

61.8%

36.1%

Gen X 637 Baby Boomers 17 Millenials 1,090 Post Millenials 21

01

02

15


Dear Valued Shareholders,

The Board of Directors (the Board) of PETRONAS Gas Berhad (PGB or the

Company) recognises the critical role of good corporate governance to the success

of PGB and its subsidiaries (the Group). It strives to ensure that a high standard of

corporate governance is practiced throughout the Group in ensuring

sustainable growth for the interests of all its shareholders and stakeholders. In this

respect, the Board, the management team, and employees of the Group remain steadfast in delivering their roles and

commitment towards systematic management with transparency and

efficiency, towards enhancing the Group’s competitive edge and achieving the

Group’s long-term goals.

In 2020, the COVID-19 pandemic has had a profound effect on the lives of millions of people across the globe. The crisis has brought unprecedented challenges not only to our daily lives but has also affected the way corporations conduct their businesses. Navigating the COVID–19 pandemic and its aftermath was one of the biggest business challenges that corporations faced last year, and the Group was no exception.

I am pleased to report that against this backdrop of a very challenging business environment, the Group has remained resilient and our business performance continued to perform steadily, primarily through adoption of strategies focusing on safeguarding the safety and well-being of our employees and the implementation of an agile, customer-centric and innovative business continuity plan that minimised operational disruptions.

Hence, while the crisis exposed vulnerabilities, it also presented valuable opportunities for transformation. For example, PGB, for the first time, successfully conducted all of its Board, Board Committee meetings from March 2020 onwards and the 37th Annual General Meeting (AGM) virtually.

The year ahead will likely continue to be dynamic and volatile. Staying resilient and agile in difficult situations is the only way we can respond efficaciously and adapt to changing times swiftly, without sacrificing our foundational strengths and capabilities.

Hence, the Board’s oversight role will continue to focus on building a more robust organisation, strengthening its fundamentals while also laying the foundations for our future success. We firmly believe good governance depends on strong, effective leadership and healthy corporate culture, supported by robust systems and processes.

The Board leverages on the diversity of its members who provide the necessary range of perspectives to achieve effective stewardship. During this challenging year, as Chairman, I was well supported by seven Board members drawn from diverse backgrounds who collectively represent a formidable leadership, independent viewpoints and valuable insights in aiding the Board’s decision-making process.

With 50% of the Board composition comprising Independent Non-Executive Directors (INED), the Board is assured of diversity in experience, expertise and objectivity. Of the eight Directors, four are women, representing 50% of the Board’s total composition, meeting the requirements of Practice 4.5 of the Malaysian Code on Corporate Governance 2017 (MCCG 2017).


16

CHAIRMAN’S STATEMENT ON CORPORATE GOVERNANCE

During the year in review, the Board also saw some changes to its composition. I was appointed as Chairman of the Company effective 2 July 2020, in place of Encik Adif Zulkifli. On 30 July 2020, Datuk Yeow Kian Chai was appointed to the Board as an INED and Dato’ Ab. Halim Mohyiddin resigned on 3 August 2020 following the expiry of his nine–year tenure as INED. Additionally, due to staff mobility within PETRONAS, Encik Abdul Aziz Othman was appointed as the Managing Director/Chief Executive Officer of PGB in place of Encik Kamalbahrin Ahmad, who was assigned to another role in the PETRONAS Group effective 1 January 2021.

The Board wishes to extend its gratitude to Encik Adif Zulkifli, Dato’ Ab. Halim Mohyiddin and Encik Kamalbahrin Ahmad for their significant contributions and services during their tenure.

On behalf of the Board, I wish to congratulate and welcome Datuk Yeow Kian Chai as our new Board member and Encik Abdul Aziz Othman as our new PGB Managing Director/Chief Executive Officer.

During the year under review, the Board also strengthened our commitment towards doing business responsibly by enhancing our internal governance processes.

Pursuant to the amendment to the Main Market Listing Requirements (MMLR) of Bursa Malaysia Securities Berhad (Bursa Malaysia) on the enhancement of the definition of Independent Directors, PGB updated the Board Selection Criteria to reflect the new requirements under the MMLR. Additionally, the Nomination and Remuneration Committee Terms of Reference was reviewed for improvement based on the latest corporate governance requirements and industry best practices.

Whilst the Board has laid down a solid foundation on corporate governance for the Group, we remain fully committed towards continuously improving the Group’s governance practices and processes.

Today, as economies rebuild and the world transitions to the new normal, I am confident that we are more ready to meet the demands of a significantly changed world and forge ahead towards a sustainable tomorrow.

I am pleased to inform that PGB has applied and complied with the relevant provisions of the MMLR of Bursa Malaysia, the Companies Act 2016, the Corporate Governance Guide – 3rd Edition issued by Bursa Malaysia Berhad, and our practices are benchmarked against the ASEAN Corporate Governance Scorecard. Additionally, the Company has also applied and complied with almost all Practices enumerated in the MCCG 2017 in which the status of the Company’s application is reported in our Corporate Governance Report which is accessible to the public on the Company’s corporate website at www.petronasgas.com.

Adnan Zainol AbidinChairman

17


01

02

The Board of Directors (the Board) of PETRONAS Gas Berhad (PGB or the Company) is pleased to present this Corporate Governance Overview Statement (CG Statement) and report on the manner the Group has adopted and applied the following principles and best practices set out in the:

1. Main Market Listing Requirements (MMLR) of Bursa Malaysia Securities Berhad (Bursa Malaysia); 2. Companies Act 2016 (CA 2016); 3. Malaysian Code on Corporate Governance 2017 (MCCG 2017); and4. Corporate Governance (3rd Edition) issued by Bursa Malaysia Berhad;

in addition to being benchmarked against the ASEAN Corporate Governance Scorecard and other applicable laws and regulations throughout the year ended 31 December 2020.

This CG Statement shall be read together with the Corporate Governance Report 2020 (CG Report 2020) which is accessible to the public at PGB’s corporate website at www.petronasgas.com.

This CG Statement demonstrates how PGB measures are aligned with the principles of good governance in accordance with the MCCG 2017 and references are made to the three key CG principles in the MCCG 2017:

PRINCIPLE A

PRINCIPLE B

PRINCIPLE C

Board Leadershipand Effectiveness

Effective Audit and Risk Management

Integrity inCorporate Reporting

and Meaningful Relationship with

Stakeholders


18

CORPORATE GOVERNANCE OVERVIEW STATEMENT

• Financial Reporting• Internal Reporting• Risk Management*

Board Audit Committee (BAC)3 INEDs1 NINED

OUR GOVERNANCE STRUCTURE

The Board is committed to ensure that there is a strong and effective system of corporate governance in place to support the successful execution of the Group strategy. The table below describes Group’s governance structure, an overview of the key Committees of the Board and other Management committees.

GOVERNANCE STRUCTURE

Board of Directors (Board)

ChairmanResponsible for

the orderlyconduct and

function of theBoard

IndependentNon-Executive

Directors (INEDs)Provide independent

judgement andviews

Senior Independent Director (SID)

Acts as the point ofcontact between

Non-Executive Directors (NEDs) and Chairman as

well as shareholders

Non-IndependentNon-Executive

Directors (NINEDs)Provide in-depth

knowledge and insightfrom PETRONAS’

perspective

Stra

teg

ic K

PIs

, p

rog

ress

an

d i

mp

lem

en

tati

on

Managing Director/Chief Executive Officer (MD/CEO)

Responsible for the overall operations of the business, organisational effectiveness and implementation of the Group’s strategies and policies

Quarterly Financial Reporting,Quarterly Enterprise Risk

Report

Decisionmaking process

Result Delivery (R2)Steering Committee

Leadership Team(LT)

Risk and ComplianceCommittee

Monthly reporting, performance & strategic KPIs

Division reporting/progress updates

Working GroupDivisional Plant Leadership Teams, Divisional HOD Meeting, HSE Committee, Sustainable Development Working Committee, Project Steering Committees, Credit Risk Management Committee, RTPA Steering

Committee and Investment Steering Committee

• Board Performance, Succession Plan & Remuneration

Nomination and RemunerationCommittee (NRC)

4 INEDs

Senior Management’s Performance

& Remuneration

PRINCIPLE A: BOARD LEADERSHIP AND EFFECTIVENESS

Quarterly Audit Status Report

Internal Audit Department

* There is no immediate business requirement by PGB to establish a separate Board Risk Committee. Hence, the risk oversight function remains with BAC.

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02

HOW THE BOARD OPERATES

The Board Charter

In discharging its duties and responsibilities effectively, the Board is guided by the Board Charter, a document which sets out the principles and guidelines that are to be applied by the Board. The delegation of authority as set out in the Board Charter is clear and ensures that the line of authority is in line with the legal and regulatory requirements.

The Board Charter is reviewed and updated from time to time to reflect relevant changes to the policies, procedures and processes as well as amendments to rules and regulations to ensure the document remains relevant and consistent with the applicable rules and regulations and recommended best practices.

The Board Charter is available on the Company’s corporate website, www.petronasgas.com together with the Terms of References (TOR) of all Board Committees.

The Board’s Responsibilities and Duties

The Board is entrusted with the responsibility to promote the success of the Group by directing and supervising the Group’s affairs in a responsible and effective manner. Each Director has a duty to act in good faith and in the best interest of the Company. The Directors are aware of their collective and individual responsibilities to all shareholders for the manner in which the affairs of the Company are managed, controlled and operated. The Board is satisfied that it has fulfilled these duties and obligations during the year under review.

In discharging its fiduciary and leadership functions, the roles and responsibilities of the Board are, inter alia, as follows:

The above roles and responsibilities are clearly set out in the Board Charter.

THE BOARD’S MAINFUNCTIONS

POLICY MAKING

PR

OV

IDIN

G

AC

CO

UN

TA

BILIT

Y

STR

AT

EG

Y

FOR

MU

LAT

ION

RISK MANAGEMENT AND INTERNAL CONTROL

• To review, approve and monitor the annual corporate plans which includes overall corporate strategy, business plan and targets, human resources plan, financial plan and budget, risk management plan and information technology plan.

• To review and approve financial statements. • To review and manage principal risks and adequacy of PGB’s internal control system including systems for compliance with applicable laws, regulations, rules and guidelines.• To ensure that there is an appropriate succession plan for members of the Board and Senior Management.

• To ensure that appropriate policies are in place, adopted e�ectively and are regularly reviewed in light of the changing circumstances.

• To be accountable to its shareholders, and to some extent, accountability towards a wider range of stakeholders a�ected by PGB’s decision such as employees, suppliers, customers, the local community and the state/ country where PGB is operating.


20

Corporate Governance Overview Statement

Board Balance and Composition

As at the date of this Governance and Financial Report, the Board comprises eight members, one of whom is an Executive Director and seven are Non-Executive Directors (NEDs). None of the Board Members are former PGB’s MD/CEO.

During the financial year under review, there was a change in the composition of the Board. Adnan Zainol Abidin was appointed as Chairman of the Company effective 2 July 2020 in place of Adif Zulkifli whilst on 30 July 2020, Datuk Yeow Kian Chai was appointed to the Board as Independent Non-Executive Director (INED) of PGB. Dato’ Ab. Halim Mohyiddin who has completed his nine-year tenure as INED, resigned on 3 August 2020. In addition, as part of staff mobility within PETRONAS, Abdul Aziz Othman was appointed as the MD/CEO of PGB in place of Kamalbahrin Ahmad who was assigned to another role effective 1 January 2021.

The Board wishes to record its appreciation and gratitude to Adif Zulkifli, Dato’ Ab. Halim Mohyiddin and Kamalbahrin Ahmad during their tenure as Chairman and Members of the Board.

As at the date of this report, the Board composition is as follows:

Designation Number of Directors

Independent Non-Executive Directors 4 out of 8

Non-Independent Non-Executive Directors (including Chairman)

3 out of 8

Executive Director (MD/CEO) 1 out of 8

The composition of the Board exceeds the requirements of Paragraph 15.02 of the MMLR as more than one-third of its members are Independent Non-Executive Directors. This composition enables an effective and objective check and balance on the Board’s deliberation and decision making. The roles of the Independent Non-Executive Directors are crucial particularly in the area of related party transactions where their presence is imperative to protect the interest of minority shareholders.

The Directors are selected based on their individual merits and experience. The current Board composition comprises individuals of diverse backgrounds with expertise and skills in the oil and gas industry, energy sector, legal and regulatory, economics, engineering/technical, finance, operations and corporate planning. The current overall Board composition is adequate in terms of size and diversity of age and gender. This is to ensure inclusiveness of views as well as to facilitate effective decision-making and constructive deliberation during its meetings.

The NEDs possess the necessary expertise and experience to ensure that the formulation of policies and strategies proposed by the Management are fully deliberated and examined. They contribute the formulation of policy and decision-making through their expertise and experience.

In line with the MMLR of Bursa Malaysia, none of the members of the Board holds more than five directorships in listed companies. Prior to acceptance of any other appointment for directorship in other listed companies, the Directors are required to notify the Chairman of PGB to ensure that such appointments would not unduly affect their time commitment and responsibilities to the Board. None of the Directors have appointed any alternates.

The profile of each Director is presented on pages 4 to 11 of this Governance and Financial Report.

50.0%

37.5%

12.5%

21


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02

• Leading the Board in setting the values and ethical standards of PGB.

• Chairing the Board meetings and stimulating debates on issues and encouraging positive contributions from each Director.

• Consulting with the Company Secretary in setting the agenda for Board meetings and ensuring that all relevant issues are on the meetings’ agendas.

• Maintaining a relationship of trust with and between the MD/CEO and Non-Executive Directors.

• Ensuring the provision of accurate, timely and clear information to Directors.

• Ensuring effective communication with shareholders and relevant stakeholders.

• Conducting performance assessment of the Board, its Committees and individual Directors, including assessment of the independence of Independent Non-Executive Directors.

• Facilitating effective contribution of Non-Executive Directors and ensuring constructive discussions at Board meetings.

• Ensuring that all Directors are properly apprised on issues arising at Board meetings and there is sufficient time allowed for discussion on complex or contentious issues and where appropriate, arranging for informal meetings beforehand to enable thorough preparations.

• Allowing every Board resolution to be voted on and ensuring the will of the majority prevails.

• Casting votes in accordance with the prescribed Articles in the Constitution of PGB.

• Ensuring that all Board members, upon taking up their office, are fully briefed on the terms of their appointment, time commitment, duties and responsibilities, and the business of PGB.

• Acting as liaison between the Board and Management, and between the Board and the MD/CEO.

Separate roles of Chairman and MD/CEO

The positions of Chairman and MD/CEO are held separately to ensure a clear distinction of responsibilities between Chairman and the MD/CEO.

The Chairman is primarily responsible for the stewardship and smooth functioning of the Board, whilst the MD/CEO is responsible for the overall operations of the business, organisational effectiveness and the implementation of the Group’s strategies and policies. Given the Company’s business integration and synergy with PETRONAS, the Chairmanship of the Company remains with a Non-Independent Non-Executive Director (NINED). The separation of roles is imperative as both roles have different expectations and serve distinct primary audiences.

The MD/CEO manages the respective responsibilities of the divisions and departments in the Company. He is assisted by the Leadership Team (LT) who ensures effective systems, controls and resources are in place to execute business strategies and decisions.

Roles of Chairman

ADNAN ZAINOL ABIDINChairman

The profile of the Chairman is presented on page 4 of this Governance and Financial Report.


22


Responsibilities to the Board and PGB

• To develop and recommend to the Board the long-term strategy and vision for PGB and/or Group that leads to the creation of long-term prosperity and stakeholder value.

• To develop and recommend to the Board the operational plan and budget that support PGB’s and/or Group’s long-term strategy.

• To foster a corporate culture that promotes ethical practices, encourages individual integrity and the fulfillment of PGB’s corporate social responsibilities.

• To maintain a positive and ethical working environment that is conducive to attracting, retaining and motivating a diverse work force at all levels.

Responsibilities to the Management and business operation

• To recommend suitable management structure and operating authority levels which include delegations of responsibilities to the Management.

• To ensure an effective LT below the level of the MD/CEO and to develop an appropriate succession plan.

• To formulate and oversee implementation of major corporate policies.

• To be accountable to the Board for the financial management and reporting, including forecasts and budgets of PGB.

• To report to the Board periodically on the Company’s financial positions and results, key performance indicators, market conditions and business development.

• To ensure continuous improvement in quality and value of PGB’s products and services.

• To serve as spokesperson for PGB.

• To refer to the Board Committee on matters as requested from time to time.

The profile of the MD/CEO is presented on page 5 of this Governance and

Financial Report.

The Senior Independent Director (SID) acts as the main liaison between the Independent Non-Executive Directors and the Chairman on matters that may be deemed sensitive and is available to confidential discussions with other NEDs who may have concerns which they believe have not been considered by the Board as a whole. She also provides an alternative communication channel for shareholders and stakeholders to convey their concern and raise issues so that these can be channeled to the relevant parties.

Habibah Abdul fulfills the criteria under the definition of Independent Director pursuant to MMLR as the SID. The appointment is in line with the best practice recommended by the ASEAN Corporate Governance Scorecard, which is used as a benchmark by the Company in its effort to maintain the highest standards of good governance. Based on her experience with the Board and seniority amongst the INEDs, Habibah Abdul satisfies the prescribed criteria, and is the most appropriate candidate for the role of SID. Her familiarity with the operations throughout the years and on the workings of the Board as well as her involvement with NRC and BAC have also provided her with in-depth experience on the respective member’s individual roles and forte. Habibah Abdul also has significant influence within the Board and was able to deliver her role as a SID of PGB.

The profile of the SID is presented on page 6 of this Governance and

Financial Report.

ABDUL AZIZ OTHMANManaging Director/ Chief Executive Officer

The respective roles and responsibilities of the Chairman and MD/CEO can be viewed under the Board Charter in the Company’s corporate website, www.petronasgas.com.

Roles of Managing Director/Chief Executive Officer Roles of Senior Independent Director

HABIBAH ABDULSenior Independent Director

23


01

02

Separation of Powers between the Board and Management

The MD/CEO is assisted by the LT, R2 Steering Committee, Risk and Compliance Committee and Investment Steering Committee in managing the business on a day-to-day basis, with whom he consults regularly.

The LT ensures that effective systems, controls and resources are in place to execute business strategies and decisions taken by the Board and/or the MD/CEO. The other committees report the performance and strategic KPIs on monthly basis to the MD/CEO, whilst progress and updates are reported regularly by the working group within the business units.

Board Diversity

The Board recognises that diversity is a key driver to enhance its effectiveness by allowing for a broader scope for debate within itself. PGB Diversity Policy is in place to ensure a mix of member profiles in terms of age and gender, and provides the necessary range of perspective, experience and expertise required to achieve effective stewardship, hence, creating value. Diversity is also important to ensure the Company remains relevant and sustainable in the rapidly transforming and evolving business environment. The Board also supports the country's aspirational target of 30% representation of women directors. To-date, there are four women directors on the Board of the PGB, constituting 50% of composition and hence meeting the requirements of Practice 4.5 of the MCCG 2017. In tandem with the emphasis on gender diversity, the Board is committed in developing a corporate culture that also embraces the aspect of gender diversity.

In this regard, the NRC is empowered to review and evaluate the composition and performance of the Board annually, as well as assessing qualified candidates to occupy Board positions.

The Board continues to focus on diversity when assessing new candidates for Board memberships. In its effort to create and maintain a diverse Board, the Board would:

(a) Review succession plans to ensure an appropriate focus on diversity;

(b) Identify specific factors for consideration in the recruitment and selection process;

(c) Adhere to the recruitment and sourcing process that seeks to include diverse candidates, including women in any director search; and

(d) Assess the appropriate mix of diversity including gender, age, skills, experience and expertise required on the Board and address gaps, if any.

The Board Diversity Policy is accessible to the public for reference on PGB’s corporate website at www.petronasgas.com.

Independence

The Board recognises the important contributions that INEDs make to good corporate governance. All Directors, regardless of their independent status, are required to act in the best interests of the Company and to exercise unfettered and independent judgement. To date, all four INEDs satisfy the following criteria:

(a) Independent from Management and free from any business or other relationship which could interfere with independent judgement or the ability to act in the best interests of the Company.

(b) Not involved in the day-to-day operations of the Company other than when collective Board approval is required. This mitigates the risk of undue influence from third parties and allows INEDs to exercise fair judgement.

(c) Declared their interest or any possible conflict of interest in any matter tabled prior to the commencement of Board meetings. Directors are able to ascertain their involvement in any proposal as the papers are disseminated to them at least five business days before each meeting. In a situation where there is conflict of interest, Directors are required to recuse themselves and abstain from deliberation to allow unbiased and free discussion and decision making. This also holds true for and applies to NINEDs.

In line with the exemplary practice as recommended by the MCCG 2017, the Company has adopted a tenure policy whereby an INED's total tenure on the Board is capped at nine years. As at the date of this report, none of the INEDs has served the Board more than nine years.

The Board had, as recommended by the NRC, revised its Board Succession Planning Framework which include amendments to Board Selection Criteria and revision of cooling-off period for the appointment of Independent Director.

Following the recent amendment to the MMLR of Bursa Malaysia on 13 August 2020, Bursa Malaysia has enhanced the definition of independent directors by extending the cooling-off period for specific person (such as an existing or former officer, adviser or transacting party of the listed issuer or its related corporation), to three years (from the current two-year period); and require a non-independent non-executive director to also observe the above revised cooling-off period. In view of these changes, the Board had revised its Board Succession Planning Framework which include amendment to Board Selection Criteria and revision of cooling-off period for the appointment of Independent Director.


24


Board Appointment Process

The Board appointment process is summarised in the chart below:

PGB practices a formal and transparent procedure for the appointment of new directors. The Nomination of NINEDs to the Board is made by PETRONAS, being the majority shareholder of PGB. The nomination of INEDs to the Board may be made via recommendations from the Board members and/or through the engagement of a professional recruitment firm to find the most suitable candidates to fill any vacant positions.

In its selection of suitable candidates, the NRC adheres to the guidelines stipulated in the Board Succession Planning and Board Selection Criteria. Once a potential candidate has been shortlisted for recommendation, the Company Secretary will conduct comprehensive background checks, including checks on financial and character integrity.

All nominees to the Board are first considered by the NRC, taking into consideration mix of skills, competencies, experience, integrity, personal attributes and time commitment required to effectively discharge his or her role as a director. Diversity in terms of age and gender are also considered during the selection process.

PROCESS FLOW FOR APPOINTMENT OF A DIRECTOR

Search for candidates

To perform background check

The NRC shall develop and deliberate selection criteria combining competencies and attributes required

Circumstances giving rise to the appointment of Directors

Assess and shortlist the potential candidates in consultation with the NRC

PGB Board Approval

Orientation/Induction

Interview shortlisted candidates/consultation with Chairman of the Board

Deliberation by the NRC on the suitability of the candidate

Continuous Training & Annual Performance Assessment

25


01

02

Directors’ Re-Election and Re-Appointment

In accordance with the MMLR and Article 107 of the Company’s Constitution, one-third of the Directors of the Company for the time being shall retire by rotation at an AGM of the Company provided always that all Directors, shall retire from office at least once in every three years but shall be eligible for re-election at the AGM. A Director retiring at the AGM shall retain office until the close of the meeting whether adjourned or not. Whilst according to Article 100 of the Company’s Constitution and the CA 2016, Directors appointed to fill a casual vacancy or as an addition to the Board of Directors shall hold office only until the conclusion of the next AGM and shall be eligible for re-election. Taking into consideration the relevant requirements, the Directors’ rotation list was presented to the NRC for endorsement prior to recommendation to the Board and the affected Directors are required to give their consent on their re-election prior to PGB’s Board meeting.

In assessing the candidates’ eligibility for re-election, the NRC considers their competencies, commitment, contribution, performance based on the Board Effectiveness Evaluation (BEE) and their ability to act in the best interest of PGB.

The Board at its meeting held on 22 February 2021 endorsed the recommendation of the NRC for the following Directors to be considered for re-election pursuant to Article 107 and 100 of the Company’s Constitution at the forthcoming 38th AGM and they have given their consent for re-election at the AGM:

Article 107

• Dato’ Abdul Razak Abdul Majid• Farina Farikhullah Khan

Article 100

• Adnan Zainol Abidin• Datuk Yeow Kian Chai• Abdul Aziz Othman

Board Meetings and Attendance

The Board meets at least quarterly with additional meetings convened as and when necessary. The Board, Board Committees and General meeting for the year under review were scheduled as early as November 2019 to facilitate the Directors in planning ahead and incorporating the said meetings into their respective schedules. Aside from the Board meetings, urgent maters are also decided via written circular resolutions.

The Board has a formal schedule of matters reserved at Board meetings which includes corporate plans, annual budgets, operational and financial performance reviews, major investments and financial decisions, risk management, Management performance assessment, changes to the Management and control structure within the Group, including key policies and procedures and delegated authority limits. Relevant members of the LT attend Board meetings by invitation and report to the Board on matters pertinent to their respective areas of responsibility, to present new proposals or to brief on actions implemented pursuant to recommendations made by the Board. All proceedings of Board meetings are duly minuted and signed. Minutes of each Board meeting are properly kept by the Company Secretary.

The Board was apprised on how COVID-19 pandemic impacted the Group. The COVID-19 crisis in 2020 has also changed the manner on how the Board and Management carry out daily affairs where more activities are being conducted online, including matters relating to strategic conversation, high level decision making, financial and governance. As such, six out of total of seven Board meetings were held virtually via tele-conference during the year. Aside from Board meetings, urgent matters will also be decided via written circular resolution. In discharging their responsibilities during each Board and Committee meeting, the Directors were inquisitive in the quest for better understanding of items being discussed, vocal during discussions and judicious in the decision-making process. They were impartial in their views with the Company’s and stakeholders’ best interest at the forefront of every major decision.

The Director’s commitment in carrying out their duties and responsibilities is reflected by their attendance at the Board meetings held during the year. All Directors complied with the minimum attendance requirement of at least 50% of Board meetings pursuant to the MMLR of Bursa Malaysia. The Directors’ commitment in discharging their duties and responsibilities is reflected by their attendance at the Board meetings. The overall percentage of all Board meetings attended by the Directors during the year under review was almost 100%. The Board is satisfied with the level of commitment given by the Directors toward fulfilling their roles and responsibilities.


26


Board of Directors (BOD) Board Audit Committee (BAC)

Nomination and Remuneration Committee (NRC) Annual General Meeting (AGM)

Adnan Zainol Abidin* Appointed 02.07.2020Datuk Yeow Kian Chai** Appointed 30.07.2020Adif Zulkifli^ Resigned 02.07.2020Dato’ Ab. Halim Mohyiddin^^ Resigned 03.08.2020

2020 saw the Board and Board Committees spent a total of approximately 88 hours in discharging its key fiduciary duties and oversight function and responsibilities.

HOURS MINUTES HOURS MINUTES HOURS MINUTES HOURS MINUTES

BOARD BAC NRC BSC*

The details of attendance of each Director on the Board, Board Committees and 37th Annual General Meeting who had served PGB during the year under review are as follows:

BOD BAC NRC AGM

4/4

4/4

7/7 1/1

1/1

1/1

1/1

1/1

1/1

7/7 7/7 3/3

3/3

1/1

1/1

1/1

2/2

7/7

7/7

6/7

4/4

7/7

7/7

7/7

7/7

3/3

3/3

Adnan Zainol Abidin*

Kamalbahrin Ahmad

Habibah Abdul

Farina Farikhullah Khan

Datuk Yeow Kian Chai**

Marina Md Taib

Dato’ Ab Halim Mohyiddin^^

Dato’ Abdul Razak Abdul Majid

Emeliana Dallan Rice-Oxley

Adif Zulkifli^

* Board Strategic Conversation

27


01

02

Board Committees

As part of its efforts to ensure the effective discharge of its duties, the Board has delegated certain functions to certain Committees with their own Terms of Reference.

The Chairman of all Committees will report to the Board on the decision or outcome of the Committee meetings. The reports of the BAC and NRC are set out on pages 40 to 55 of this Governance and Financial Report.

Board Strategic Conversation

In addition to the above meetings, the PGB Board Strategic Conversation was held on 17 and 21 December 2020 which was also attended by the LT to provide updates and discuss on the external environment and market outlook, and deliberate on the Group’s strategic and growth plans.

Supply and Access to Information

Prior to each Board meeting, the agenda and Board papers encompassing comprehensive qualitative and quantitative information relevant to the business of the meeting are circulated to all Directors within five business days of the meeting dates. This enables the Directors to have sufficient time to peruse the Board papers and seek clarifications or further details from the Management or the Company Secretary before each meeting to ensure preparedness for the meeting. Any Director may request matters to be included in the agenda. Urgent papers may be presented and tabled at meetings under the item “Any Other Business”, subject to the approval of both the MD/CEO and Chairman. The content of the Board papers prepared are comprehensive and include objectives, background, critical issues, implications, risks, strategic fit, recommendations and other pertinent information to enable informed decision-making by the Board.

Presentations and briefings by the Management and relevant external consultants, where applicable, are also held at Board meetings to furnish clarification to assist the Board in making a decision.

Access to Board papers is carried out online through a collaborative software which allows the Directors to securely access, to read and review Board documents and collaborate with other Directors and the Company Secretary electronically. The online accessibility facilitates the Directors to read and review the documents or communicate with other Board members at anytime.

The Directors have direct access to the Management and have unrestricted access to any information relating to the Group to enable them to discharge their duties. The Directors also have direct access to the advice and services of the Company Secretary and are regularly updated on new statutory and regulatory requirements relating to the duties and responsibilities of the Directors. The Directors, whether collectively as a Board or in their individual capacity, may seek independent professional advice at PGB’s expense in furtherance of their duties.

The Board’s 2020 Key Focus Areas and Priorities

The diagramme illustrated below shows the key areas of focus for the Board which appear as items on the Board’s agenda at the respective meetings throughout the year. Concentrated discussion of these items assists the Board in making the right decisions taking into account the long-term implications to the business and its stakeholders.

The Board deliberated on long-term strategic options and provided feedback and steer.

The Board deliberated and approved PGB’s business plan. PGB strategic targets, operational plan and financial forecasts were presented to the Board for their deliberation. The Board deliberated the risks as well as potential challenges, both external and internal, towards achieving the business plan. The Board considered and approved the budget necessary to carry out the business plan.

Group Strategic Initiatives and Plans

Group’s Business Plan and Budget

STRATEGY


28


Related Party Transactions and Recurrent Related Party Transaction to ensure all transactions are at arm’s length and were carried out on normal commercial terms and not to the detriment of the minority shareholders.

As part of the role of the Board of PGB, the Board ensures that there is an appropriate succession plan for members of the Board.

During the year, the Board has approved the revision to Board Succession Planning framework in order to:

(a) incorporate the existing Process Flow on the Appointment of Director and Board Selection Criteria under the Framework as one consolidated single document on Board succession plan;

(b) include the requirement to undertake background check on the candidates for Directors;

(c) revise cooling-off period for the appointment of Independent Director and specific person including an existing or former officer, adviser or transacting party of the listed issuer or its related corporation,

Related Party Transactions and Recurrent Related Party Transactions

Implementation and monitoring of succession planning

CORPORATE GOVERNANCE

AND COMPLIANCE

The business performance report is mandatory to be reported at quarterly board meeting. Performance is measured and tracked against approved KPIs. On quarterly basis, the Board was updated on the performance against the Business Performance targets.

The Board considered and approved the proposal on declaration of Interim and Special Dividends.

The Board deliberated and endorsed the proposed RM3.0 billion Islamic Medium Term Notes Programme (IMTN Programme) based on the Shariah principle of Murabahah by its subsidiary, PETRONAS LNG (Two) Sdn Bhd and the subsequent issuance of RM1.7 billion Sukuk Murabahah and repayment of its outstanding USD shareholders’ loans.

Group’s Performance on Quarterly basis

Interim and Special Dividends

Corporate ProposalFINANCIAL

The Board deliberated and approved PGB critical risks that may significantly impact PGB business goals and targets. The Board constantly monitors the agreed mitigations to manage or reduce the likelihood and impact of these critical risks. Key risk indicators which provide early warnings of risk manifestation were also reported to the Board.

To ensure risks undertaken in pursuit of business objectives are within Board acceptable level, the Board approved PGB risk appetite which sets its key operational boundaries. Any breach of risk appetite may jeopardise PGB business sustainability, hence, will be escalated to the Board for deliberation.

In achieving comprehensive risk-based decision making, the Board also deliberated on the risks related to high impact business matters such as projects’ Final Investment Decisions in order to assess the feasibility and commerciality of these projects and investments.

Management of principal risks

RISK AND INTERNAL

CONTROLS

29


01

02

Overview of Various Agenda Items on the Board and Board Committees Meetings 2020

Nomination and Remuneration Committee (NRC) Board Audit Committee (BAC) Board of Directors (BOD)

JANUARY

FEBRUARY

MARCH

MAY

JUNE

AUGUST

SEPTEMBER

NOVEMBER

DECEMBER

F Financial S Strategy R Risk and Internal Control C Corporate Governance and Compliance

Senior Management Performance for FY2019 C

Update on Directors’ Training Programmes for theFinancial Year 2019/2020

C

Board Effectiveness Evaluation FY2019 C

Integrated Report 2019: NRC Report C

Q4 2019 Financial Results and Performance review andAudited Financial Statements

F

RRPT Status Update R

Review on Related Party Transactions by Independent Advisor R

2019 Integrated Report Statements C

Enterprise Risk Profile Updates R

Enhancement of Risk Appetite R

Q4 2019 Financial Results and Performance review andAudited Financial Statements

F

Board Effectiveness Evaluation FY2019 C

Litigation and Arbitration Report C

2019 Integrated Report and Corporate Governance Report C

Dividend Policy F

Interim Dividend and Special Dividend for FY2019 F

Enhancement of Risk Appetite R

Corporate Liability S17A MACC Act C

Q1 2020 Financial Results and Performance review F


Revision on Limits of Authority R

Quarterly Audit Status Report R

Enterprise Risk Profile Updates R



Interim Dividend FY2020 F

Revision on Limits of Authority R

Change of Company Secretary C

Review on Related Party Transactions C



Internal Audit Strategy, Balance Score Card and Road Map R

Internal Audit Charter R

Updates Board and Management Succession Planning C

Board Evaluation Effectiveness: Questionnaires C

Update on Directors’ Training Programmes for the financialyear 2020

C

Review NRC Terms of Reference C

Change of MD/CEO C



KPMG Audit Plan for PGB Group of Companies for 2020 F

Update on Projects S

Progress update on PGB Internal Audit DepartmentDeliverables and Performance in 2020

R


Progress Updates on Annual Audit Planningfor 2021

R


Key Observation & Takeaways on the Effectiveness ofInternal Audit Function of Listed Issuers

C

PGB 2021 Enterprise Risk Profile R



Strategic Business discussion S

Interim Dividend FY2020 F

Change of MD/CEO C

Business Plans 2021-2025 & Budget 2021 F

PGB 2021 Enterprise Risk Profile R

Updates Board Succession Planning C

Review on NRC Terms of Reference C


Strategic Business Discussion S




Internal Audit Department Progress Update R

Progress Updates on Annual Audit Planning for 2021 R


Enterprise Risk Report R



Strategic Business discussion S

Interim Dividend and Special Dividend FY2020 F


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Directors’ Indemnity

PGB continues to provide and maintain indemnification for its Directors throughout the financial year as allowed under the CA 2016 to the extent it is insurable under the Directors’ and Officers’ Liability Insurance (D&O) procured by the Company. Directors and Officers are indemnified against any liability incurred by them in discharging their duties while holding office as Directors and Officers of the Company.

All Directors may opt to obtain D&O insurance to provide insurance protection (to the extent it is insurable) against unindemnified liabilities by the Company or uninsured circumstances. The premium to be paid by all Directors is determined by the insurance company.

Succession Plan

The Board Succession Plan Framework has been adopted by the Board to assist the Company in ensuring the orderly identification and selection of new Non-Executive Directors in the event of an opening on the Board, whether such opening exists by reason of an anticipated retirement, the expansion of the size of the Board, or otherwise. Such structured Succession Plan addresses the composition and effectiveness of the Board.

The Board through the NRC has the responsibility in ensuring appropriate succession planning of Directors and reviewing the Board’s required mix of skills and experience as well as reviewing the tenure of INEDs on the Board.

In addition to the Succession Planning for the Directors, the NRC also reviewed the succession plan for the MD/CEO and LT of the Company.

During the year under review, NRC continued to focus on conducting all relevant reviews and assessments of the LT positions. The NRC is satisfied that there is a sufficient talent pool of potential successors for PGB LT and that for critical positions, external talents will be recruited if there are no suitable internal talents available.

Onboarding and Continuing Development Programme for Directors

All new Directors appointed to the Board receive a comprehensive onboarding programme, conducted by members of the LT covering key areas of the business, an overview of the Group’s financial risk management processes, the internal audit function, innovation and technology, and the corporate governance framework within the Group. Directors were also updated on ongoing and potential projects undertaken by the Group. This programme helps the new Directors to familiarise themselves with the Group’s businesses.

During the year under review, PGB conducted the onboarding programme for its three newly appointed Directors, Adnan Zainol Abidin, Datuk Yeow Kian Chai and Abdul Aziz Othman. They have also attended the Mandatory Accreditation Programme (MAP) as required under the MMLR of Bursa Malaysia, except for Abdul Aziz Othman, who has registered to attend the MAP in March 2021.

In line with Paragraph 15.08 of the MMLR, the Directors acknowledged the importance and value of attending conferences, training programmes and seminars in order to keep themselves abreast with the development and changes in the industry in which the Group operates, as well as to update themselves on new statutory and regulatory requirements. During the year under review, the Directors attended and participated in programmes, conferences and forums that covered the areas of corporate governance, financial, relevant industry updates and global business developments which they considered as useful in contributing to the effective discharge of their duties as Directors. All members of the BAC have also fulfilled the requirement of practice 8.5 MCCG 2017 by attending the relevant trainings on accounting and auditing standards.

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During the year under review, the Directors also participated in seminars and training programmes in various capacities, as delegates and/or speakers, the details of which are set out below:

No Director Programmes Attended Date

1. Adnan Zainol Abidin(Appointed 2 July 2020)

• Mandatory Accreditation Programme 19 – 21 October 2020

2. Kamalbahrin Ahmad(Resigned on 1 January 2021)

• CGS-CIMB 12th Annual Malaysia Corporate Day 6 January 2020

• Presentation Day of Purpose Awareness Leadership (PAL) Program 28 February 2020

• Dialogue with Finance Minister of Malaysia: Fiscal Priorities and Policy Response under a COVID-19 Economic Landscape

9 June 2020

• Top Leaders Dialogue 2020 2 July 2020

• Invest Malaysia 2020 Virtual Series 2 20 July 2020

• Gas & Power: eLearning Modules on 5 Critical Legal Areas for PETRONAS Employees

28 July 2020

• Top Leaders Dialogue (TLD) Session 2 – Liquidity Plus 21 September 2020

• ASB-MGA Panelist 17 October 2020

• PETRONAS Board Excellence Advance 1: Best Practices for Board Excellence

19 – 20 October 2020

• TLD Cascading Clinic: Moving Forward Together 50.30.0 & PETRONAS Cultural Beliefs

6 November 2020

3. Habibah Abdul • Corporate Liability Program: PETRONAS’ Preparedness for Corporate Liability under S17A MACC Act 2009 (Amendment 2018)

10 February 2020

• Reinventing Cybersecurity with Artificial Intelligence 20 February 2020

• KLCC group of companies – External Environment Assessment Forum 2020

9 July 2020

• HR in the 2020s: Culture Sculptor, Risk Manager and More 11 August 2020

• Staying Ahead with Data Analytics 18 August 2020


19 – 20 October 2020

• PETRONAS Board Excellence Series: MFRS Updates by KPMG 30 November 2020

4. Farina Farikhullah Khan • Corporate Liability Program: PETRONAS’ Preparedness for Corporate Liability under S17A MACC Act 2009 (Amendment 2018)

10 February 2020

• Staying Ahead with Data Analytics 18 August 2020

• Anti-Money Laundering 21 September 2020


19 – 20 October 2020

• Cyber Security Awareness 13 November 2020

• Effective Non-Executive Director 19 – 20 November 2020


• Goldman Sachs – Oil and Gas Outlook 9 December 2020

• Shariah Governance Policy Documents 10 December 2020


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No Director Programmes Attended Date

5. Dato’ Abdul Razak Abdul Majid • Corporate Liability Program: PETRONAS’ Preparedness for Corporate Liability under S17A MACC Act 2009 (Amendment 2018)

10 February 2020

• Reinventing Cybersecurity with Artificial Intelligence 20 February 2020

• KPMG's Captains’ Forum – Transformation Towards Recovery 9 October 2020


6. Emeliana Dallan Rice-Oxley • American Association of Petroleum Geologists (AAPG) Superbasin (Speaker)

11 – 13 February 2020

• Leaders Develop Leaders #1 – Managerial Excellence (ME) (Speaker) 14 May 2020

• PETRONAS Leaders Women Network (PLWN) Link Up Session – Exploration (Speaker)

19 May 2020 and 7 August 2020

• Women Inspiring Women with PLI Brazil (Speaker) 3 June 2020

• Leaders Develop Leaders #2 – PETRONAS Induction Programme for Executive (PIPE) (Cohort 202) (Speaker)

18 June 2020

• Leaders Develop Leaders #3 – PIPE (Cohort 207) (Speaker) 13 July 2020

• Leaders Develop Leaders #4 – Professional Excellence (PE) (Video Speech)

21 July 2020

• Leadership Session with McDermott Global Women Leadership Network (Guest Speaker)

28 September 2020

• Leadership Session with Sabah Asset 15 on 10 (Guest Speaker) 7 October 2020

• Operational Excellence Forum & Award (Panelist) 12 October 2020

• PETRONAS Technology Forum (Speaker) 21 October 2020

• Woman Global Leadership Conference (Speaker) 3, 5 and 6 November 2020

• Offshore Technology Conference (OTC) 2020 – Talent and Capability Development: Closing the Gap (Panel Speaker)

5 November 2020

7. Marina Md Taib • Corporate Liability Program: PETRONAS’ Preparedness for Corporate Liability under S17A MACC Act 2009 (Amendment 2018)

10 February 2020


19 – 20 October 2020

• MIA Webinar Series – COVID-19 Impact on Revenue, Inventory and Related Costs in Respect of Dealings with Customers

23 December 2020

8. Datuk Yeow Kian Chai (Appointed on 30 July 2020)

• Onboarding Programme for New Director 13 August 2020

• Mandatory Accreditation Programme 28 – 30 September 2020


19 – 20 October 2020

• Offshore Technology Conference Asia 2020 2 – 6 November 2020

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Qualified and Competent Company Secretaries

The Company Secretaries of PGB are qualified to act as company secretary under Section 235 of the CA 2016. One of them has a legal qualification and the other is Fellow of the Malaysian Institute of Chartered Secretaries and Administrators. Both act as advisors to the Board, particularly with regard to the PGB’s Constitution, policies and procedures and its compliance with regulatory requirements, codes, guidelines and legislations.

During the year under review, Syuhaida Ab Rashid vacated her position as Company Secretary effective 21 May 2020 and was replaced by Tengku Mazura Tengku Ismit who also has a legal qualification.

The Company Secretaries ensure that the discussions and deliberations at Board and Board Committee meetings are well documented, and subsequently communicated to the relevant Management for appropriate actions. The Company Secretaries update the Board on the follow up of its decisions and recommendations by the Management.

The Company Secretaries constantly keep themselves abreast of the evolving regulatory changes and developments in corporate governance through continuous training.

The Board is satisfied with the performance and support rendered by the Company Secretaries to the Board in discharging their functions.

During the year under review, the Company Secretaries have attended the following trainings programmes:

Name Development Programme Date

Tengku Mazura Tengku Ismit • Group Legal e-Learning Modules on 5 Critical Laws (5 online training modules)

• Corruption Risk Assessment• Common Pitfalls in Transactions and RPT Rules • PDM Company Law and Secretarial Practices • PDM Intro to Malaysian Tax• PETRONAS Board Excellence Series : MFRS Updates by KPMG

June 2020

22 June 20201 – 2 July 20206 – 8 July 202021 October 202030 November 2020

Yeap Kok Leong • Guideline for Reporting Framework for Beneficial Ownership of Legal Person

• 15th ADP Partner Executive Convention

6 August 2020

1 – 3 December 2020

Board Effectiveness Evaluation

The Board Effectiveness Evaluation (BEE) is to evaluate the performance of Board/Board Committees/Members of the Board as well as identifying any gaps or areas of improvement, where required. Every year, under the purview of the NRC, a formal evaluation is undertaken to assess the effectiveness of the following:

(a) The Board as a whole and the Board Committees(b) Contribution of each individual Director(c) Independence of Independent Directors

The BEE was conducted internally through a digital platform, focusing on maximising the effectiveness and performance of the Board and its Committees in the best interests of the Company. The Board will be engaging the services of an external consultant to perform the BEE exercise every five years. The Board takes cognisance that the external evaluation is intended to provide more objectivity that could at times be lacking when carrying out the process internally.


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Board and Board Committees Effectiveness Evaluation 2020

During the year under review, the Board was satisfied that the Board members discharged their functions, duties and responsibilities in accordance with its Board Charter. The results of the Board Effectiveness Evaluation 2020 were presented to the Board in February 2020 where the Board noted the findings and areas that necessitated further improvements.

Directors’ Remuneration

Directors’ fee, which is aligned to PGB’s strategic objectives, allows the Board to attract, motivate and retain high calibre talents. The design of the fees architecture complies with regulatory requirements, embraces market practices and trends, and provides attractive and balanced rewards.

The Board has established a formal and transparent Directors’ Remuneration Framework which comprises retainer fees, meeting allowances and benefits in-kind. In compliance with Section 230(1) of the CA 2016, the resolution on the payment of the following Directors’ fees from the 37th AGM until the forthcoming AGM was tabled for shareholders’ approval:

Meeting Allowance per attendance

Monthly fees Board

Board Audit

Committee

Nomination and Remuneration

Committee

Chairman RM24,000 RM3,500 RM3,500 RM3,500

Member RM12,000 RM3,500 RM3,500 RM3,500

Note : INEDs are entitled to fuel allowance of RM6,000 per annum

The fees and allowances for NEDs will remain until further review by the Board and are subject to the approval of the shareholders of PGB.

The Director’s fees and meeting allowances for NINEDs who are also employees of PETRONAS are paid directly to PETRONAS.

The Company also reimburses all expenses incurred by the Directors, where relevant, in the course of carrying out their duties as Directors.

The breakdown of the detailed Directors’ remuneration is disclosed in the Corporate Governance Report 2020, which is accessible to the public at PGB’s corporate website, www.petronasgas.com

The remuneration package for the Executive Director of the Company is balanced between fixed and performance linked elements. A portion of the Executive Director’s compensation package is variable in nature and is Key Performance Indicator (KPI) based, which includes the Group’s performance.

Kamalbahrin Ahmad, the MD/CEO and Executive Director of the Company is not entitled to receive directors’ fee or meeting allowances. During the year, he was remunerated an amount of RM1,499,424 as MD/CEO of PGB.

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Senior Management’s Remuneration

The remuneration philosophy reflects the Group’s commitment to be aligned with best practices in the areas of remuneration, retention and reward to ensure that the Group attracts and retains exceptional talent. The remuneration packages and incentives are regularly evaluated against market-related surveys.

PETRONAS Remuneration Philosophy and Guiding PrinciplesCompetitive and differentiated remuneration to attract and retain talents to drive business needs

• Pay for job and performance • Competitive within the relevant industry• Internal equity • Conformance to statutory requirements• Affordability of the Company

The Senior Management are employees of PETRONAS and seconded to the Company. Their remuneration has been benchmarked with the industry and is aligned with the market.

PRINCIPLE B: EFFECTIVE AUDIT AND RISK MANAGEMENT

ACCOUNTABILITY AND AUDIT

Financial Reporting

The Board is committed to provide a fair and objective assessment of the financial position and prospects of the Group in the quarterly financial results, annual financial statements, Integrated Report and all other reports or statements to shareholders, investors and relevant regulatory authorities.

The Statement of Responsibility by Directors in respect of preparation of the annual Audited Financial Statements is set out on page 73 of this Governance and Financial Report.

Risk Management and Internal Control

The Board continues to maintain and review its risk management processes and internal control procedures to ensure a sound system of risk management and internal control to safeguard shareholders’ investments and the assets of the Company and the Group.

The Statement on Risk Management and Internal Control provides an overview of the risk management and internal controls within the Group and further details can be found on pages 56 to 70 of this Governance and Financial Report.

PRINCIPLE C: INTEGRITY IN CORPORATE REPORTING AND MEANINGFUL RELATIONSHIP WITH STAKEHOLDERS

COMMUNICATING EFFECTIVELY WITH STAKEHOLDERS AND INVESTORSThe Board recognises the importance of effective communications with the Company’s shareholders and other stakeholders including the general public. Information on the Group’s business activities and financial performance is disseminated timely through announcements to Bursa Malaysia, postings on the Company’s website, press releases, issuance of the Annual Report and where required, press conferences.

The MD/CEO together with the Chief Financial Officer and the Company’s Head of Investor Relations conduct regular dialogues with the Company’s institutional shareholders and analysts, and hold quarterly analyst briefings to further explain the Group’s quarterly financial results to promote better understanding of the Group’s financial performance and operations. The Company also distributed a press statement to the media and published the same on the Company’s website instead of holding a live press conference immediately after the conclusion of the AGM.

In addition, visits to the Group’s facilities are also organised periodically to facilitate better appreciation and insight into the Group’s business and operations. Earlier in January 2020, the Company organised a site visit to our Segamat Operations Centre in Johor, Malaysia. The event received positive feedback from the attendees who appreciated the role PGB plays in ensuring gas supply delivery and reliability for the nation. There was no other site visit organised for the remaining part of the year in adherence to Movement Control Order (MCO) guidelines.

The Company actively updates its website www.petronasgas.com with the latest information on the corporate and business aspects of the Group. Press releases, announcements to Bursa Malaysia, analyst briefings and quarterly results of the Group are also made available on the website and this helps to promote accessibility of information to the Company’s shareholders and all other market participants. Communication and feedback from investors can also be directed to the email address [email protected] or alternatively, it can be addressed to:

Izan Hajar IshakHead of Investor RelationsLevel 49 & 50, Tower 1PETRONAS Twin Towers50088 Kuala LumpurMalaysia


36


In addition, matters of concern to the Group from shareholders or other stakeholders can be addressed to the Senior Independent Director directly to the following address:

Habibah AbdulSenior Independent Director PETRONAS Gas BerhadLevel 49-50, Tower 1, PETRONAS Twin TowersKuala Lumpur City Centre 50088 Kuala Lumpur

Email address: [email protected]

The details of the IR Activities during the year under review is presented on pages 77 to 78 of the Integrated Report 2020.

Annual General Meeting (AGM)

The AGM is the principal forum of open dialogue with shareholders. The notice and agenda of our AGM together with proxy form were given to shareholders not less than 28 days before the AGM, which gives shareholders sufficient time to prepare themselves to attend the AGM or to appoint proxies to attend and vote on their behalf. Each item of ordinary business included in the notice of the AGM will be accompanied by an explanatory statement on the effects of the proposed resolution.

In view of COVID-19 pandemic conditions, the 37th AGM was convened on 25 June 2020 fully virtually which is in line with the Securities Commission Guidance Note on the Conduct of General Meetings for Listed Issuers issued on 18 April 2020 to ensure companies can continue to fulfil their obligation under the law and to shareholders during this pandemic.

The Company had notified the shareholders on the change of the conduct of the 37th AGM to a fully virtual meeting via the Remote Participation Voting (RPV) application, together with the instructions in the Administrative Details on 22 May 2020. The same was also published through the announcement to Bursa Malaysia and the Company’s corporate website respectively.

During the Virtual AGM, the MD/CEO presented a comprehensive review of the Group’s performance initiatives and value created for shareholders. This review was supported by a visual and graphical presentation of the key points and financial figures. Prior to 37th AGM, shareholders were encouraged and given sufficient opportunity as well as time by the Board to submit questions pertaining to the Integrated Report, resolutions being proposed and the business of the Company or the Group in general prior to seeking approval from members and proxies on the resolutions. The Board, LT and external auditors were also present virtually at the 37th AGM to provide answers and clarification to shareholders.

The Company received 54 live questions and 23 pre-submitted questions from shareholders. The responses for the remaining questions were published on 30 June 2020 in the Company’s website after the meeting.

Pursuant to Paragraph 8.29A of the MMLR, each resolution to be tabled at an AGM is to be voted by poll. At the 37th AGM, PGB has engaged Tricor Investor & Issuing House Services Sdn Bhd as the Poll Administrator and Boardroom Corporate Services Sdn Bhd as Independent Scrutineer for conduct of poll via e-Vote application. The Board also encouraged active participation by the shareholders and investors during the AGM. At the beginning of the meeting, total number of shareholders and proxies logged in through RPV was 281, which represented a total of 641,378,098 shares.

The minutes of the AGM are accessible to the public on PGB’s corporate website at www.petronasgas.com

INTEGRITY AND ETHICS

The Board is committed to a corporate culture that encompasses and embraces ethical conduct within the Group by adopting numerous policies which serve to achieve this commitment.

Code of Conduct and Business Ethics

The Group adopts and practises the PETRONAS Code of Conduct and Business Ethics (CoBE) which emphasises and advances the principles of discipline, good conduct, professionalism, loyalty, integrity and cohesiveness that are critical to the success and well-being of the Group. The CoBE contains detailed policy statements on the standards of behaviour and ethical conduct expected of each individual of the Group. The Group also requires that contractors, sub-contractors, consultants, agents and representatives, and others performing work or services for or on behalf of the Group to comply with the relevant parts of the CoBE when performing such work or services. The CoBE expressly prohibits improper solicitation, bribery and other corrupt activities not only by employees and directors but also by third parties performing work or services for or on behalf of companies in the Group. The CoBE is accessible to the public on the Company’s corporate website at www.petronagas.com.

Anti-Bribery and Corruption Policy

With the adoption of the Anti-Bribery and Corruption Policy (ABC) policy from PETRONAS, PGB also practices a zero tolerance policy against all forms of bribery and corruption. The ABC policy elaborates upon those principles and provides guidance to employees on how to deal with improper solicitation, bribery and other corrupt activities and issues that may arise in the course of conducting business. The ABC policy is also applicable to all employees, directors, contractors, sub-contractors, consultants, agents, representatives and others performing work or services for or on behalf of PGB.

For more information on the ABC policy, please refer to the Company’s corporate website at www.petronasgas.com.

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Corporate Liability

Taking cognisance of the introduction of corporate liability in the recent amendment to the Malaysian Anti-Corruption Commission Act 2009 (MACC Act 2009), which came into force on 1 June 2020, the Company has taken proactive actions to ensure that it has adequate procedures in place designed to prevent associated persons from undertaking conduct that would trigger the liability under the newly introduced Section 17A of the MACC Act 2009. The corporate liability provision criminalises a Company based on illegal actions taken by the employee, for the benefit of the company unless the Company can demonstrate presence of adequate procedures by the Company to prevent such illegal actions.

The Company has conducted a workshop on 10 February 2020 to brief on the adequate procedures that have been put in place by the Company, and to equip the Directors with the relevant understanding on the liability and penalty imposed for the offences, under Section 17A of the MACC Act 2009.

The Company has also provided mandatory e-learning modules to train its employees on the five critical areas of laws namely Data Privacy, Third-Party Risk Management (TPRM), Sanctions, Anti-Bribery and Corruption (ABC) manual and Competition.

Whistleblowing Policy

The Company has adopted the PETRONAS Whistleblowing Policy which provides an avenue for the Group’s employees and members of the public to disclose any improper conduct in accordance with the procedures as provided under the policy. The policy and procedures are accessible to the public on the Company’s corporate website at www.petronasgas.com. To lodge a report for any improper conduct, please email [email protected]. Trading on Insider Information

On a quarterly basis, the Company Secretary issued a Notice of Closed Period to Directors and LT, highlighting the requirements with regard to dealing in the Company’s shares during “Closed Period”/”Outside Closed Period” as they are in possession of price sensitive information relating to PGB.

There were no trading activities undertaken by the Board nor the Principal Officers of the Company during the year under review.

Selection of Vendors

The Group has adopted the PETRONAS tendering process and governing principles that are embedded in the PETRONAS Tenders & Contracts Administrative Manual for vendors’ selection. Generally, the main selection criteria is based on technically acceptable and commercially attractive bid.

Tender Committees have been established to carry out independent review on evaluation of bidders’ proposals and to ensure tendering activities are carried out in accordance with the established guidelines and procedures. Only with the endorsement of the Tender Committee will the award recommendation be forwarded to the approving authority for consideration and approval.

The tendering processes are as follows:

(i) Tender Plan approval;(ii) Technical Evaluation; (iii) Commercial Evaluation; and(iv) Award Recommendation.

Related Party Transactions and Conflict of Interest Situations

All RPTs including RRPTs entered into by the Company or its subsidiaries are reviewed by the BAC. The Company has established its Guideline and Procedures on RPT and Conflict of Interest Situations (Guideline) to strengthen its internal control. Further refinement on process flows and procedures through RPT Assessment checklist have been incorporated for each steps of approval, monitoring and reporting of RPTs/RRPTs prior to endorsement by the BAC as per the revised Guideline undertaken by the Company. The Statement on Risk Management and Internal Control provides a comprehensive overview of the Group’s guideline and procedures on RPTs and RRPTs. Further details can be found on page 68 of this report.

RELATIONSHIP WITH AUDITORS

External Auditors

Through the BAC, the Company maintains a professional and transparent relationship with its external auditors, KPMG PLT. The BAC met the external auditors twice during the financial year to review the scope and adequacy of the Group’s audit process, financial results, annual financial statements and audit findings. The BAC also met the external auditors twice during the year under review without the presence of the Management. At the meeting, the external auditors highlighted to both the BAC and the Board on matters that warranted their attention.

The role of the BAC in relation to the external auditors is described in the Board Audit Committee Report on pages 42 to 43 of this Governance and Financial Report.


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Internal Auditors

Prior to 2020, internal audit function was undertaken by PETRONAS Group Internal Audit Division (GIAD). In November 2019, the BAC had approved the formation of in-house internal audit function within PGB itself. The in-house internal audit function has been operationalised effective 1 January 2020.

In maintaining independency and objectivity, PGB’s Internal Audit function reports directly to the BAC and has unrestricted access to the BAC, as well as unrestricted access to the function or/and asset under the purview of the BAC. The Internal Audit function is independent of the activity or operation of other operating units. The Internal Audit conducts regular audits on the adequacy and effectiveness of internal control including compliance to regulatory requirements. Findings and agreed recommendations from approved audit engagements are tabled to the BAC.

The role of the BAC in relation to the internal auditors is described in the Board Audit Committee Report on page 42 of this Governance and Financial Report.

Directors’ Responsibility Statement

The Directors have provided assurance that the financial statements prepared for the financial year ended 31 December 2020 is a true and fair view of the state of affairs of the Company and the Group as required by the CA 2016. The Statement of Responsibility by Directors for the audited financial statements of the Company and Group is as outlined on page 73. Details of the Company and the Group’s financial statements for the financial year ended 31 December 2020 are set out on pages 73 to 176.

Statement by the Board on Compliance

The Board has deliberated, reviewed and approved this Statement and is satisfied that the Group has fulfilled its obligations under the relevant paragraphs of the MMLR of Bursa Malaysia, CA 2016, MCCG 2017 and Corporate Governance Guide – 3rd Edition issued by Bursa Malaysia Berhad in addition to being benchmarked against the ASEAN Corporate Governance Scorecard and other applicable laws and regulations throughout the year ended 31 December 2020.

Additional Compliance Information – Material Contracts

In accordance with Appendix 9C of the MMLR of Bursa Malaysia:

1) Status of Utilisation of Proceeds Raised from any Corporate Proposal

In 2020, Pengerang LNG (Two) Sdn Bhd (PLNG2), a sixty five percent (65%) owned subsidiary of the Company issued Islamic Medium Term Notes (IMTN) as part of its IMTN programme. A summary of the transactions and utilisation of the proceeds is tabled below:

Issuance date TypeNominal value (RM million) Maturity Date Proceeds Utilisation

21 October 2020 IMTN 1,700 Serial annual tenures from 21 October 2021 to 19 October 2040

For full repayment of outstanding USD shareholders’ loans

2) Material Contracts

There were no material contracts or loans entered into by the Company or its subsidiaries involving Directors’ or major shareholders’ interests, either still subsisting at the end of the year ended 31 December 2020 or entered into since the end of the previous period, except as disclosed in the Audited Financial Statements.

Adnan Zainol AbidinChairman

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COMPOSITION

The current BAC composition is in compliance with Paragraph 15.09(1)(b) of the MMLR of Bursa Malaysia and the MCCG 2017 where all four BAC members are Non-Executive Directors including three Independent Directors who fulfil the criteria of independence as defined in the MMLR. None of the Independent Directors has appointed alternate directors.

During the year under review, there was a change in the composition of the BAC whereby Dato’ Ab. Halim Mohyiddin who has completed his nine-year tenure, ceased as member of the BAC effective 3 August 2020.

The BAC wishes to record its appreciation and gratitude to Dato’ Ab. Halim Mohyiddin for his contribution and guidance during his tenure as BAC member.

The Board Audit Committee (BAC) of PETRONAS Gas Berhad (PGB or the Company) is pleased to present the BAC Report for the financial year ended 31 December 2020 in compliance with Paragraph 15.15 of the Main Market Listing Requirements (MMLR) of Bursa Malaysia Securities Berhad (Bursa Malaysia).

FARINA FARIKHULLAH KHANChairman, Board Audit Committee

TERMS OF REFERENCE

The Terms of Reference of the BAC set out the authority, duties and responsibilities of the BAC which are consistent with the requirements of the MMLR and the Malaysian Code on Corporate Governance 2017 (MCCG 2017). The BAC TOR was reviewed for improvement based on the latest corporate governance requirements.

The Terms of Reference of the BAC are accessible to the public on PGB’s corporate website at www.petronasgas.com

Farina Farikhullah Khan Chairman Independent Non-Executive Director

Date of Appointment as

BAC Member: 21 November 2018

Tenure on the BAC:

2 years 3 months

Dato’ Abdul Razak Abdul Majid MemberIndependent Non-Executive Director


BAC Member: 21 November 2018

Tenure on the BAC:

2 years 3 months

Habibah Abdul Member Senior Independent Director


BAC Member: 24 February 2016

Tenure on the BAC:

4 years 11 months

Marina Md Taib Member Non-Independent Non-Executive Director


BAC Member: 1 January 2020

Tenure on the BAC:

1 year 1 month

As at the date of this report, the composition of the BAC is as follows:


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Corporate Governance Overview StatementBOARD AUDIT COMMITTEE REPORT

Farina Farikhullah Khan, Habibah Abdul and Marina Md Taib are qualified accountants. Farina Farikhullah Khan, the Chairman, is currently a Fellow of the Institute of Chartered Accountants in Australia and New Zealand. Habibah Abdul is a Fellow of the Institute of Chartered Accountants in England and Wales, a Member of Malaysian Institute of Certified Public Accountants and a Member of Malaysian Institute of Accountants whilst Marina Md Taib is a Fellow of the Institute of Chartered Accountants in England and Wales. In this regard, the Company is in compliance with Paragraph 15.09(c)(i) of the MMLR which requires at least one member of the BAC to be a qualified accountant.

MEETINGS AND ATTENDANCE

The BAC meetings for the year under review were scheduled in November 2019, to facilitate the Members in planning ahead and incorporating the BAC meetings into their respective schedules.

The BAC meets at least quarterly with additional meetings convened as and when necessary. The manner on how the BAC conducts its meeting has also changed due to COVID-19 pandemic, whereby most of the meetings were held via digital platform. During the year under review, the BAC met seven times to discharge its duties and functions as a committee to the Board. The record of attendance of the BAC members can be found on page 27 of this Governance and Financial Report.

To facilitate deliberation of audit issues or other areas impacting the financial results of the Company, the MD/CEO, Chief Financial Officer, Head of Internal Audit Department (IAD), Head of Risk Management, External Auditors, Senior Management and other persons deemed necessary by the BAC were invited to attend the BAC meetings to provide advice and furnish the BAC with necessary information. The Company Secretary acts as Secretary to the BAC.

The Head of IAD presented the internal audit plan to the BAC. The External Auditors also attended the BAC meetings to present the external audit plan for the year and the outcome of the statutory audits conducted on the Company and its subsidiaries.

Both internal and external audit plans were approved by the BAC in accordance to the BAC TOR. In addition, the BAC had two private sessions on 11 February 2020 and 18 November 2020 with the External Auditors without the presence of the Management.

The agenda and meeting papers relevant to the business of the meetings were distributed to the BAC members via a secured collaborative software, not less than five business days from the date of each meeting.

Matters deliberated at the BAC meetings included the review of the Group’s financial statements, quarterly results for the announcements to Bursa Malaysia, related party transactions and recurrent related party transactions, external and internal audit reports, status of open audit findings together with the agreed corrective actions, internal control and risk management activities including Enterprise Risk Report and Status of Risk Monitoring. In addition to communicating to the Board on matters deliberated during its meeting, the BAC also recommends to the Board, the approval of Group Financial Statements and quarterly results.

All proceedings of the BAC meetings were duly recorded in the minutes of each meeting and the signed minutes of each BAC meeting were properly kept by the Secretary. Minutes of the BAC meeting were tabled for confirmation at the following BAC meeting, after which they were presented to the Board for notation.

CONTINUOUS TRAINING

The BAC members acknowledged the need for continuous education trainings. During the year under review, all members of the BAC attended training on the developments in accounting and auditing standards, practices and rules, in line with Practice 8.5 of the MCCG 2017.

ACTIVITIES OF THE BAC DURING THE FINANCIAL YEAR 2020

As the Board is ultimately responsible for the oversight of the Company, it is consistently kept informed by the BAC of its activities. As such, the BAC meeting is almost always held before the Board meeting to ensure that all critical issues, significant findings and irregularities are communicated to the Board on a timely basis.

During the year under review, the BAC carried out the following activities in discharging its function and duties:

Financial Reporting

• Reviewed the quarterly results announcements to Bursa Malaysia before recommending the same for approval by the Board upon being satisfied that, it had complied with applicable approved Malaysian Financial Reporting Standards (MFRS) issued by the Malaysian Accounting Standards Board (MASB), Main Market Listing Requirements (MMLR) and other relevant regulatory requirements.

• Reviewed the Company’s and Group’s annual and quarterly management accounts.

• Reviewed the audited financial statements of the Company and Group prior to submission to the Board for the Board’s consideration and approval, upon the BAC being satisfied that, inter alia, the audited financial statements were drawn up in accordance with the provisions of the Companies Act 2016 and the applicable approved MFRSs issued by the MASB.

The above reviews were conducted together with MD/CEO and CFO.

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Internal Control

• Reviewed the effectiveness of the system of internal controls, taking into account the findings from internal and external audit reports.

Corporate Governance

• Reviewed the Corporate Governance Overview (CG Overview) and BAC Report.

• Reviewed the Statement on Risk Management and Internal Control (SORMIC) for the financial year ended 31 December 2019 which was supported by an independent review by KPMG PLT for inclusion in the Integrated Report 2019.

Risk Monitoring

• Reviewed the Company’s Enterprise Risk Report and Status of Risk Monitoring on quarterly basis. The BAC also deliberated on the risk exposures and the mitigation plans required.

• Reviewed and endorsed the enhanced risk appetite.

Internal Audit

• Prior to 2020, the internal audit function was undertaken by PETRONAS Group Internal Audit Division (GIAD) in providing independent objective assurance and consulting activities on Governance, Risk and Control (GRC) of PGB. This practice is in line with the requirement of Bursa Malaysia, MCCG 2017 and the International Professional Practices Framework (IPPF).

• In November 2019, the BAC had approved and formed a dedicated internal audit function within PGB itself. PGB Internal Audit function (PGB IA) has been officially operationalised on 1 January 2020. In managing the transition and in ensuring the newly formed internal audit function is able to demonstrate professional due care and in conformance with the above mentioned requirements, during the first half of 2020, approved audit engagements were still being executed by GIAD, whilst in the second half of 2020, approved audit engagements were executed by PGB IA.

• In light of the above, the BAC had undertaken the following activities, to be in line with the requirements of IPPF, Institute of Internal Auditors (IIA), Bursa Malaysia and MCCG 2017:

(i) Reviewed and approved the PGB Internal Audit Charter which is the Term of Reference which document the purpose, authority, responsibility and limitation of the newly formed in-house internal audit function;

(ii) Reviewed and approved PGB IA strategy, three-year road and scorecard which encompass structure, people and process;

(iii) Undertake periodic review on the status of PGB IA organisation structure and capability for demonstration of sufficiency and professional due care;

(iv) Monitored the progress of PGB IA deliverables as reported quarterly; and

(v) Assessed the performance of PGB IA with regard to their ability to provide independent and objective assurance on the effectiveness of governance, risk and control to be in conformance with recognised international standards.

• Reviewed and deliberated audit report, recommendations, and action plans to strengthen PGB’s governance, risk and control. The BAC also put forward some suggestions for improvement to reinforce the oversight role and to ensure that Management holds individuals accountable on their internal control, risk and governance responsibilities.

• Monitored the closure of agreed corrective actions as reported quarterly until duly resolved. The BAC also deliberated the justification provided by Management for extension of timeline and approved such request where the justification were acceptable.

• Reviewed and approved the risk-based FY2021 Annual Audit Plan and budget to ensure comprehensiveness of audit coverage, resources and competencies for effective execution in 2021.

Related Party Transactions and Conflict of Interest Situations

• Appointed Independent Financial Advisor to conduct a review of PGB’s methods or procedures in determining and reviewing transaction process and terms of the RRPTs. The objective of the review is to opine whether the methods and procedures in determining the transaction prices and terms of the RRPTs are sufficient to ensure that the transactions are carried out on normal commercial terms and will not be to the detriment of minority shareholders.

• Reviewed RPTs and RRPTs in accordance with PGB Guideline and Procedures on RPT and Conflict of Interest Situations to ensure the transactions are at all times carried out on arm’s length basis and not to the detriment of the minority shareholders. The BAC also reviewed the status update of the RPTs and RRPTs on quarterly basis.

External Audit

• Reviewed audit strategies and scope for the statutory audit of the Company’s and Group’s financial statements for the financial year ended 31 December 2020 as presented by the external auditors.

• Reviewed with the external auditors the results of the statutory audit and the audit report.

• Reviewed and endorsed the proposed fees for the statutory audits.


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• In accordance to the PETRONAS Framework on External Auditors adopted in 2019, the BAC had carried out the annual assessment on the performance, sustainability and independence of the external auditors for the year under review, based on the following four key areas:

(a) Quality of engagement team and services;(b) Adequacy of resources;(c) Quality of communication and interaction; and(d) Independence, objectivity and professional skepticism.

Overall, the BAC was satisfied with the performance and independence of the external auditors. Positive feedbacks and area of improvement arising from the assessment, have been communicated to the auditors accordingly.

• Reviewed the non-audit services provided by the external auditors while ensuring there was no impairment of independency or objectivity. This included monitoring the fee of the total non-audit work carried out by the external auditors so as not to jeorpardise their independence status. In relation to this, the BAC was provided assurance by the external auditors confirming their independence throughout the financial year under review. During the year under review, PGB also engaged the external auditors for non-audit services. Total fees paid to the external auditors were as follows:

2020 2019

ParticularsGroup

RM ‘000CompanyRM ‘000

GroupRM ‘000

CompanyRM ‘000

Total Statutory Audit fees 506 303 547 298

Total Non-audit Fees – Independent Review of SORMIC – Reporting Accountant in relation to RM1.7 billion Sukuk

Murabahah issuance for a subsidiary company*

11

270

11

–

11

–

11

–

Percentage of Non-audit Fees over Statutory Audit Fees 55.5% 3.6% 2.0% 3.7%

* The fees are non-recurrent relating to assurance work to meet Securities Commission requirements on the debt issuance exercise

• Reviewed the Audit Focus Areas identified by the external auditors for the financial year ended 31 December 2020:

FY2020 Audit Focus Area

No. Audit Focus Area Matters Considered BAC Comments

1. Capitalisation and componentisation of completed projects

The audit reviewed the componentisation exercise performed by the management and noted that the assets classification are appropriate and consistent with the Group policy.

Concurred with the findings that Management had capitalised and componentised of the completed project accordingly.

2. Revenue from utilities segment

The audit evaluated the design, implementation and operating effectiveness of controls related to revenue recognition and perform substantive testing on revenue recognised.

Concurred with the findings that revenue from utilities segment have been recognised appropriately.

3. Debt restructuring by a subsidiary of the Group (including issuance of Sukuk)

The audit reviewed the accounting treatment adopted by management and ensure compliance with financial covenants at reporting date and noted that the accounting treatment is in accordance to applicable accounting standards and covenants have been complied with.

Concurred with the findings that accounting treatment is appropriate and all financial covenants have been complied with.

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EXTERNAL AUDIT

In ensuring that the external auditors’ independence is not impaired, the Audit Engagement Partner in charge of the Company is allowed to serve in the same role for a maximum of seven years before being rotated, and is required to observe a minimum cooling-off period of five years before being re-appointed. Internally, the external auditors conduct an Independent Partner Review in order to preserve their independence. The external auditors had also provided their written assurance to the BAC that in accordance with the terms of all relevant professional and regulatory requirements, they had been independent throughout the audit engagement.

Annual Reporting

The BAC reviewed its report, CG Overview and the SORMIC for the financial year ended 31 December 2020 to ensure that they were prepared in compliance with the relevant regulatory requirements and guidelines.

INTERNAL AUDIT FUNCTION

The mission of internal audit function is to enhance and protect organizational value by providing risk-based and objective assurance, advice and insight.

Internal audit assists the organisation to accomplish its goal by bringing a systematic and disciplined approach to evaluate and improve the effectiveness of risk management, control and governance process within the Group.

During the year under review, GIAD undertook the execution of audit engagements for the first six months, whilst PGB IA undertook audit engagements for the subsequent six months. This arrangement was consciously planned to ensure PGB internal audit function is equipped with the required internal control addressing all three elements namely Structure, People and Process, thus able to demonstrate professional due care in line with the requirement of Bursa Malaysia, MCCG 2017 and IPPF.

In line with the function independency status, the Head of Internal Audit reports functionally to the BAC and administratively to the MD/CEO of PGB. At least annually, the Head of Internal Audit shall confirm the independency status of PGB in-house internal audit function.

In 2020, the internal audit function was headed by Shamliyah Mohamed @ Arif who holds a Bachelor of Science in Business Administration (majoring in Finance) from the University of Tulsa, Oklahoma, USA. Incumbent is also a certified Internal Control Integrated Framework issued by the Committee of Sponsoring Organisations of the Treadway Commission (COSO) and has practiced COSO for more than ten years.

Her previous stint at two PETRONAS Public Listed Companies namely PETRONAS Dagangan Berhad and PETRONAS Chemicals Group Berhad coupled with more than 20 years of experience in various functions within PETRONAS Business, Holding Company, Internal Audit and Assurance is an added advantage in steering the newly formed in-house internal audit function.

The Internal Audit function is guided by:

• PGB Internal Audit Charter (the Charter) as approved by the BAC. The Charter defines PGB IA Purpose, Authority, Responsibility, and Limitation within the Group

• International Professional Practices Framework (IPPF)

• COSO (Control Environment, Risk Assessment, Control Activities, Information & Communication and Monitoring Activities)

• Procedures and Processes (L3 documents)

• Relevant policies and procedures as adopted by the Group.

In maintaining independency and objectivity, internal auditors will not be assigned with audit scope that would lead to conflict of interest. PGB IA continues to adopt a risk-based approach to ensure the audit plan is prioritised based on the Group’s key risks in deriving the audit plan. In deriving the audit plans, PGB IA gathers input from various sources including the Group’s risk profile, business plan and strategy, emerging risks, materiality/criticality of business operations, previous audit history and insights & feedback from the BAC and the Management.

In the year under review, the BAC was supported by GIAD to execute the approved audit engagement during the first half of the year. The arrangement had enabled greater focus by PGB IA in preparing the department for the inaugural and subsequent audit engagements by the in-house function from July 2020 onward. The results of the following audit engagement were presented to the BAC:

• Audit on Third Party Access GIAD

• Audit on PGB Growth Project GIAD

• Audit on PGB Digital Project GIAD

• Shareholders Audit on Pengerang Gas Solutions Sdn. Bhd. (PGSSB)

PGB IA

• Unplanned Review on the Management of PGSSB by Venture Management Department

PGB IA

• Audit on Related Party Transactions/Recurrent Related Party Transactions

PGB IA

• Audit on the Overall Management of PGB Venture Management

PGB IA


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The results of the abovementioned audit engagement were deliberated with the respective Management prior to subsequent deliberation at the BAC platform. Respective Management is responsible to close all Agreed Corrective Actions within the agreed time frame and status will be reported to the BAC on quarterly basis. If extension of time for closure of corrective action is required, respective Management is to provide reasonable justification to the BAC prior to approval for extension.

The in-house internal audit is also subjected to continuous improvement effort. For that PGB IA undertake self-assurance process, sought for GIAD Knowledge Management team’s feedback to review the establish internal control was developed by PGB IA during the year under review. The Quality Assurance and Improvement Program (QAIP) and External Quality Assessment Review (EQAR) are also adopted by PGB IA as propagated by Institute of Internal Auditors (IIA) and the result will be shared to the PGB BAC upon completion of EQAR. For demonstration of competency and professional due care, PGB IA is staffed by eight individuals from diverse work experiences, competencies and qualification amongst others are Accounting & Finance, Operations & Maintenance, Sales & Marketing, Information Technology & Digital, Supply & Logistics, Strategic Planning, Project Management, and other related enablers functions. To date, five of PGB IA internal audit personnel are equipped with relevant certification either from accounting professional bodies, Institute of Internal Audit, COSO and Malaysia Department of Safety & Health.

The Group continues its commitment to equip the internal auditors with adequate knowledge to discharge their duties and responsibilities via continuous training platforms either through the Institute of Internal Audit or Functional Skill Group 04 (FS04) on Internal Audit. FS04 training programs are established based on Internal Audit Competency Framework issued by The Institute of Internal Auditors. The new internal audit from business is also provided with on the job attachment platform within PETRONAS Internal Audit fraternity. In addition, to elevate team’s skill on the application of COSO, two internal auditors were sent for COSO certification program.

In elevating the understanding on GRC, PGB IA also provided an attachment platform to PGB personnel either via long-term attachment (two + one year) or attachment in the specific audit assignment. In 2020, two PGB personnel had been attached for specific assignment and one personnel is attached via long-term attachment.

Annually, the auditors are assessed via individual Superior Managed Assessment (SMA) to identify their areas of strength and development area. Personal Development Plan will be prepared based on the SMA result of individual auditors.

The total cost incurred by the internal audit function of the Company and the Group for the financial year was RM1,922.858.17 of which RM120,513.75 was back charged by GIA to PGB IA and another RM1,802,344.42 was incurred by PGB IA.

RELATED PARTY TRANSACTIONS AND CONFLICT OF INTEREST SITUATIONS

During the year under review, the BAC reviewed all Related Party Transactions (RPTs/RRPTs) and Conflict of Interest (COI) situations based on the Guideline and Procedures of RPT and COI (the Guideline). This Guideline lays out the principles and procedures which govern the activities on RPTs/RRPTs and COI situations across the PGB Group in complying with the applicable MMLR and other laws and regulations. The BAC is satisfied that the Guideline has put in place adequate procedures and processes to identify, monitor and track all RPTs/RRPTs in a timely and orderly manner to ensure that the RPTs/RRPTs are at all times, carried out in the best interests of the Group, are fair, reasonable and on normal commercial terms and are not to the detriment of the minority shareholders. The BAC has, from time to time reviewed any RPTs that have risen within the Group in accordance with the Guideline. The procedures and processes will also be reviewed from time to time based on the recommendations from the Management.

PGB forms part of the integrated oil and gas value chain of the PETRONAS Group. Due to the integrated nature of PGB’s business operations with the PETRONAS Group, the Company has been granted exemption and waivers from complying with the requirement of Paragraphs 10.08 and 10.09 of the MMLR including having to seek shareholders’ approval in relation to the supply, sale, purchase, provision and usage of certain goods, services and facilities. The exemption and waivers are of particular significance to ensure PGB does not experience any disruption to its operations.

During the year under review, PGB has been granted a waiver on 23 October 2020 in having to comply with Paragraph 10.09 of the MMLR in respect of the purchase of natural gas by PGB and its subsidiaries from PETRONAS Energy Gas & Trading Sdn Bhd. The waiver is conditional upon disclosing in annual report an independent financial adviser’s opinion that the method or procedures in determining the transaction prices and terms of the RRPTs are sufficient to ensure that these transactions will be carried out on normal commercial terms and will not be to the detriment of the Company’s minority shareholders.

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RRPTs that were waived by Bursa Malaysia from complying with the requirement of Paragraph 10.09 of the MMLR are as follows:

Date of Bursa Malaysia Waiver Approval Transacting Parties Relationship Nature of Transactions

Value of Transactions in2020 (RM’000)

26 March 2014 • PGB and PETRONAS • PETRONAS is a major shareholder of PGB holding 51%

• Gas Processing Agreement (GPA)

• Gas Transportation Sabah Agreement (GTSA)

• Shipper Agent Services Agreement (ASA)

• Gas processing services: RM1,704,134

• Gas transportation services (Sabah): RM7,581

• Agent services: RM30

23 May 2014 • Regas Terminal (Sg. Udang) Sdn. Bhd. (RGTSU) and Gas Asia Terminal (L) Pte. Ltd. (GATL)

• RGTSU is a wholly owned subsidiary of PGB

• GATL is a wholly owned subsidiary of MISC Berhad (MISC) and PETRONAS is a major shareholder of MISC holding 51%

• Ancillary Agreement for Regasification service (ACRS) for Time Charter Services for Floating Storage Unit

• Time Charter Services for Floating Storage Unit:RM241,976

• RGTSU and Sg. Udang Port Sdn. Bhd. (SUP)


• SUP is a wholly owned subsidiary of MISC Maritime Services Sdn Bhd, a wholly owned subsidiary of MISC and PETRONAS is a major shareholder of MISC holding 51%

• ACRS Marine Services Agreement

• Marine services:RM6,475

• RGTSU and PETRONAS Penapisan Melaka Sdn. Bhd. (PPM)


• PPM is a whol ly owned subsidiary of PETRONAS

• A C R S L a n d L e a s e Agreement

• Land lease for pipeline route and office building:RM87

27 October 2015 • Pengerang LNG (Two) S d n . B h d . ( P L N G 2 ) , PETRONAS and PETRONAS’ subsidiaries and joint ventures

• PLNG2 is a subsidiary of PGB holding 65%.

• P E T R O N A S i s a m a j o r shareholder of PGB holding 51%

• Ancillary Agreements for RGT Pengerang Project

• Purchase of electricity:RM77,438

23 October 2020 • PGB, RGTSU and PLNG2 with PEGT

• PGB is owned by PETRONAS of 51%


• PLNG2 is a subsidiary of PGB holding 65%.

• PEGT is a wholly owned subsidiary of PETRONAS

• Master Sale and Purchase Agreement (MSPA) for purchase of internal gas consumption

• Purchase of gas for internal consumption by PGB, RGTSU and PLNG2 from PEGT: RM92,661

• PGB with PEGT • PGB is owned by PETRONAS of 51%

• PEGT is a wholly owned subsidiary of PETRONAS

• Gas Supply Agreement (GSA) for purchase of fuel gas

• Purchase of fuel gas: RM109,364


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During the year, the Independent Financial Advisor has reviewed the methods and procedures in determining and reviewing transaction prices and terms of RRPT. A copy of Independent Financial Advisor’s Opinion is disclosed on pages 48 to 51 of this Governance and Financial Report.

The BAC is satisfied that during the year under review, all the RPTs/RRPTs were fairly concluded on prevailing market rate/prices, had been carried out at arm’s length basis and normal commercial terms/conditions, applicable industry norms and not detrimental to the interests of PGB and its minority shareholders. The RPTs/RRPTs were reported to the BAC on a quarterly basis.

RISK MANAGEMENT

The Board has established an organisation structure with clearly defined lines of responsibility and accountability pursuant to its business and operational requirements while ensuring appropriate risk management processes are in place to protect shareholders and stakeholders value.

PGB Risk Management Unit (RMU) has been tasked to conduct assessment of risks for the PGB Group of Companies. RMU reports to the BAC on a quarterly basis or as and when necessary.

Risk Management is enforced through an Enterprise Risk Report (ERR) reporting tool as per Practice 9.1 of the MCCG 2017. Further details on risk management are provided under the SORMIC on pages 56 to 59 of this Governance and Financial Report.

BAC plays a vital role in reviewing the adequacy and effectiveness of risk management processes within the PGB Group. In this regard, BAC reviews and challenges the ERR which entails amongst others, the risk profile and status of risk mitigation implementation.

BAC EFFECTIVENESS REVIEW AND PERFORMANCE

During the financial year under review, the Board assessed the performance of the BAC through an annual Board Effectiveness Evaluation. The Board agreed that BAC continued to support the Board in reviewing financial and audit matters, contributing to the overall effectiveness of the decision-making process by the Board for the Company and the Group. The PGB Board is satisfied that the BAC has discharged its functions, duties and responsibilities in accordance with the BAC TOR.

REPORTING TO THE EXCHANGE

For the year under review, the BAC is of the view that the Company is in compliance with the MMLR and as such, the reporting to Bursa Malaysia under Paragraph 15.16 of the MMLR is not required.

Farina Farikhullah KhanChairmanBoard Audit Committee

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PricewaterhouseCoopers Capital Sdn Bhd (676054-V) Level 10, 1 Sentral, Jalan Rakyat, Kuala Lumpur Sentral, P.O. Box 10192, 50706 Kuala Lumpur, Malaysia T: +60 (3) 2173 1188, F: +60 (3) 2173 1288, www.pwc.com/my

Board Audit Committee PETRONAS Gas Berhad Level 51, Tower 1 PETRONAS Twin Towers 50088 Kuala Lumpur 22 February 2021 Dear Sirs, REVIEW ON METHODS OR PROCEDURES IN DETERMINING AND REVIEWING THE TERMS OF RECURRENT RELATED PARTY TRANSACTIONS (‘RRPT’) 1 INTRODUCTION

PETRONAS Gas Berhad (‘PGB’ or ‘the Company’), a subsidiary of Petroliam Nasional Berhad (‘PETRONAS’), is listed on the Main Market of Bursa Malaysia Securities Berhad (‘Bursa Malaysia’) since 1995. PGB’s business portfolio is divided into four core operations which are Gas Processing, Gas Transmission, Utilities and Regasification. This letter has been prepared for the purpose of inclusion in the Annual Report for the financial year ended 31 December 2020 (‘PGB 2020 Annual Report’) pursuant to the waiver for compliance with Paragraph 10.09 of Main Market Listing Requirements (‘MMLR’) of Bursa Malaysia granted by Bursa Malaysia based on its letter to PGB dated 23 October 2020 (‘the Waiver’). As part of the Waiver which was granted for the following agreements; i. Gas Sales Agreement (‘GSA’) between PETRONAS Energy & Gas Trading (‘PEGT’) and PGB;

ii. Master Sale and Purchase Agreement (‘MSPA’) between PEGT and PGB for the Internal Gas

Consumption (‘IGC’) of the Peninsular Gas Utilisation Pipeline (‘PGU’);

iii. MSPA between PEGT and Regas Terminal (Sg. Udang) Sdn Bhd (‘RGTSUSB’) for the IGC of the Regasification Terminal Sungai Udang (‘RGTSU’); and

iv. MSPA between PEGT and Pengerang LNG (Two) Sdn Bhd (‘PLNG2SB’) for the IGC of the

Regasification Terminal Pengerang (‘RGTP’). (items (ii) to (iv) above are collectively referred to as the ‘MSPAs’)

PGB is required to disclose in its Annual Report after the date of Bursa Malaysia’s letter dated 23 October 2020, an independent financial adviser’s opinion that the methods or procedures in determining the transaction prices and terms of the agreements stated above are sufficient to ensure that the transactions will be carried out on normal commercial terms and will not be to the detriment of its minority shareholders (the ‘Minority Shareholders’).


48

Corporate Governance Overview StatementINDEPENDENT FINANCIAL ADVISOR’S OPINION


Board Audit Committee Petronas Gas Berhad 22 February 2021

2 TERMS OF REFERENCE

To comply with the condition attached to the Waiver as described above, PricewaterhouseCoopers Capital Sdn. Bhd. (‘PwC Capital’) has been appointed as the independent party to provide an opinion on whether the methods or procedures in determining and reviewing the transaction prices and terms of the agreements stated above are sufficient to ensure that the transactions will be carried out on normal commercial terms and will not be to the detriment of the Minority Shareholders. PwC Capital’s views as set forth in this letter are based on the prevailing market and economic conditions, and our analysis of the information provided to us by PGB up to the date of this letter. Accordingly, this opinion shall not take into account any event or condition which occurs after that date. PwC Capital’s work is solely in respect of the review of methods or procedures in determining the transaction prices and terms of the RRPTs under review. PwC Capital is not involved in the formulation of the procedures adopted by the Company. In the course of our evaluation of the methods and procedures, we have performed the following review procedures: • Performed desktop reviews of standard operating procedures and relevant Board and

Management reports that are used to determine and review the transaction prices and terms of the RRPTs under review;

• Performed a walkthrough on the RRPTs under review, to assess procedures undertaken to

determine and review the transaction prices and the terms of the RRPTs; • Held discussions with selected members of Senior Management on the methods and

procedures employed by PGB to determine and review the transaction prices and terms of the RRPTs under review;

• Interviewed the Audit Committee Chairman to understand the role of the Board of Directors

(‘BOD’) in reviewing the RRPTs under review; • Developed report highlighting the results of work performed and recommendations for

consideration; and • Developed our opinion on whether the methods and procedures in determining the

transaction prices and terms of the RRPTs under review are sufficient to ensure that the transactions will be carried out on normal commercial terms and will not be to the detriment of the minority shareholders.

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Board Audit Committee Petronas Gas Berhad 22 February 2021 2 TERMS OF REFERENCE (continued)

Other than the review on the methods and procedures of the RRPTs as stipulated in this letter, we have not conducted any other procedures on information included in the PGB 2020 Annual Report.

3 REVIEW PROCEDURES IN DETERMINING AND REVIEWING THE TERMS Details of such review procedures and threshold limits are set out in PGB’s Guideline and Procedures On Related Party Transactions And Conflict of Interest Situations document as approved by the BOD on 6 December 2019. These procedures are summarised in the Statement on Risk Management and Internal Control (‘SORMIC’) of PGB 2020 Annual Report, and Shareholders are advised to read the information carefully.

Bursa Malaysia had on 23 October 2020 granted PGB a waiver from complying with Chapter 10.09 of the MMLR of Bursa Malaysia, of having to seek shareholders’ approval in relation to the services pertaining to the agreements stated above (i-iv).

In our review of the above, we have considered the following:

a) The Directors’ rationale and the benefits accruing to PGB arising as a result of entering into the RRPT agreements; and

b) The review procedures for each of the agreements stated above (i-iv).

During the period of review, PGB undertook adequate process which involved: a) Determining suitable tariffs and prices for the agreements above (i-iv); b) Negotiating with the relevant parties on pricing and terms and conditions in respect of the

transactions; and c) Obtaining the required approvals from the Board Audit Committee (‘BAC’) and the BOD, which

were aligned to the approved policies and procedures. Based on the result of our review, there were no exceptions relating to the procedures in determining and reviewing transaction prices and terms of the agreements stated above (i-iv).


50

Corporate Governance Overview StatementINDEPENDENT FINANCIAL ADVISOR’S OPINION


Board Audit Committee Petronas Gas Berhad 22 February 2021 4 OPINION

Based on the work performed as indicated in paragraph 3, our review did not identify any material exception as it relates to the methods and procedures undertaken by PGB to determine that the transaction prices and terms of the RRPT are carried out on normal commercial terms and will not be to the detriment of the Minority Shareholders. We have prepared this letter for the use of PGB in connection with the conditions of the Waiver imposed by Bursa Malaysia. A copy of the letter may be reproduced in the PGB 2020 Annual Report.

Yours faithfully, PricewaterhouseCoopers Capital Sdn Bhd

Nurul A’in Binti Abdul Latif Partner

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COMPOSITION

The NRC was established on 14 November 2011 and comprises exclusively of Independent Non-Executive Directors (INEDs). The composition of the NRC is in compliance with the requirement of Paragraph 15.08A(1) of the MMLR of Bursa Malaysia, which provides that the NRC must comprise exclusively of non-executive directors, majority of whom are independent directors. The NRC is chaired by an Independent Director which is in line with Practice 4.7 of MCCG 2017.

During the year under review, there were changes in the composition of the NRC whereby Datuk Yeow Kian Chai was appointed as the NRC member effective 3 August 2020 whereas Dato’ Ab. Halim Mohyiddin who has completed his nine-year tenure ceased as the NRC member on 3 August 2020. Dato’ Abdul Razak Abdul Majid was appointed as the NRC Chairman effective 3 August 2020, in place of Dato’ Ab. Halim Mohyiddin. Farina Farikhullah Khan was also appointed as the NRC member effective 19 November 2020.

The Nomination and Remuneration Committee (NRC) of PETRONAS Gas Berhad (PGB or the Company) is pleased to present the NRC report for the financial year ended 31 December 2020 in compliance with Paragraph 15.08A(3) of the Main Market Listing Requirements (MMLR) of Bursa Malaysia Securities Berhad (Bursa Malaysia).

DATO’ ABDUL RAZAK ABDUL MAJIDChairman, Nomination and Remuneration Committee

The NRC wishes to record its appreciation and gratitude to Dato’ Ab. Halim Mohyiddin for his contribution and guidance during his tenure as NRC Chairman and member.

As at the date of this report, the composition of the NRC is as follows:

Dato’ Abdul Razak Abdul Majid Chairman Independent Non-Executive Director


NRC Member: 21 November 2018

Tenure on the NRC:

2 years 3 months

Datuk Yeow Kian Chai Member Independent Non-Executive Director


NRC Member: 3 August 2020

Tenure on the NRC:

6 months

Habibah Abdul Member Senior Independent Director



Tenure on the NRC:

7 years 3 months

Farina Farikhullah Khan Member Independent Non-Executive Director



Tenure on the NRC:

3 months

TERMS OF REFERENCE

The NRC is governed by its Terms of Reference (TOR) which are consistent with the requirements of MMLR and Malaysian Code on Corporate Governance 2017 (MCCG 2017). During the year under review, the NRC TOR was reviewed for improvement based on the latest corporate governance requirements, including annual review of the corporate key performance indicators for the Managing Director/Chief Executive Officer (MD/CEO) and Senior Management of the Company.

The TOR of the NRC is accessible to the public on the Company’s corporate website at www.petronasgas.com


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Corporate Governance Overview StatementNOMINATION AND REMUNERATION COMMITTEE REPORT

ROLE AND PHILOSOPHY

The NRC was established to enhance among others the efficiency and transparency of the Company’s governance process and responsible for regularly reviewing and making recommendations to the Board on the structure, size and composition of the Board and to ensure that an appropriate balance exists between Executive, Non-Executive and Independent Directors. It assists with the identification and nomination of new directors and appointment by the Board and/or shareholders and oversees the training of Directors.

MEETINGS AND ATTENDANCE

The NRC meetings for the year under review were scheduled in November 2019, to facilitate the Members in planning ahead and incorporating the NRC meetings into their respective schedules.

During the year under review, the NRC met three times to discharge its duties and functions as a committee to the Board. The record of attendance of the NRC members can be found on page 27 of this Governance and Financial Report.

The manner on how the NRC conducts its meeting has also changed due to COVID-19 pandemic, whereby most of the meetings were held via digital platform.

The MD/CEO, Head of Human Resources Management Division and any other persons deemed necessary by the NRC are invited to attend the NRC meetings to provide their input and furnish the NRC with relevant information. The Company Secretary acts as Secretary to the NRC.

During the year under review, the agenda and meeting papers relevant to the business of the meeting were distributed to the NRC members via a secured collaborative software, no less than five business days from the meeting date.

All proceedings of the NRC meetings were duly recorded in the minutes of each meeting and the signed minutes of each NRC meeting were properly kept by the Secretary. Minutes of the NRC meeting were tabled for confirmation at the following NRC meeting, after which they were presented to the Board for notation.

FUNCTIONS OF THE NRC AND RELATED ACTIVITIES IN 2020

Board Succession Plan

The Board has established a Succession Planning Framework to ensure the orderly identification and selection of new INEDs in the event of an opening on the Board, whether such opening exists by reason of an anticipated retirement, the expansion of the size of the Board, or otherwise.

The NRC has the responsibility in ensuring appropriate succession planning of Directors and reviewing the Board’s required mix of skills and experience as well as reviewing the tenure of INEDs on the Board.

Management had also collated relevant information in assisting NRC to assess and nominate potential candidates to replace retiring/vacant positions of independent directors. A vigorous screening exercise was undertaken to ensure the candidate possessed the relevant qualification, skills and experience.

During the year under review, the NRC has also reviewed the composition of the Board by deliberating and recommending the appointment of the following Directors for Board’s approval:

(i) The appointment of Adnan Zainol Abidin as Chairman and Director of PGB, in place of Adif Zulkifli effective 2 July 2020 due to PETRONAS’ internal restructuring exercise;

(ii) The appointment of Datuk Yeow Kian Chai effective 30 July 2020;(iii) The resignation of Dato’ Ab. Halim Mohyiddin due to the

expiration of nine-year tenure on 3 August 2020; and(iv) The appointment of Abdul Aziz Othman as MD/CEO of PGB in

place of Kamalbahrin Ahmad effective 1 January 2021 due to staff mobility within PETRONAS.

During the year, NRC also saw the revision of the Board Succession Planning Framework to include amendments to Board Selection Criteria and process flow for appointment of a Director. In addition the cooling-off period from two years has been revised to three years for the appointment of INED and specific persons (such as an existing or former officer, adviser or transacting party of the listed issuer or its related corporation). The Company is also required to observe a three-year cooling off period for the re-designation of NINED before being appointed as INED. This is in line with the new requirement of the MMLR of Bursa Malaysia in enhancing the definition of independent director.

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Senior Management Succession Plan

In addition to the Succession Planning for the Directors, the NRC is tasked to oversee the development of a succession plan for the MD/CEO and Senior Management. During the year under review, NRC continued to focus on conducting all relevant reviews and assessments of the Senior Management positions. The NRC is deliberated to establish that there is a sufficient pool of potential successors for PGB Senior Management and that for critical positions, external talents will be recruited if there are no suitable internal talents available. The NRC also highlighted to the Board on the importance of development of internal talent pool, effective human capital planning and management which are vital in delivering the Company the best available talent for its future success.

Directors’ Re-Election and Re-Appointment

Taking into consideration the relevant requirements, the Directors’ rotation list was presented to the NRC for endorsement prior to recommendation to the Board and the affected Directors are required to give their consent on their re-election prior to recommendation to the Board and thereafter, to the shareholders for approval.

In line with the Article 107 of the Constitution, Dato’ Abdul Razak Abdul Majid and Farina Farikhullah Khan are the Directors representing one-third and have been longest in office since their last election. They shall both retire at the forthcoming 38th AGM of the Company.

There were three new appointments since the last AGM namely Adnan Zainol Abidin, Datuk Yeow Kian Chai and Abdul Aziz Othman, whom shall retire and shall be considered for re-election pursuant to Article 100 of the Company’s Constitution.

These Directors have given their consent for the re-election at the 38th AGM.

MD/CEO and Senior Management Performance Appraisal

During the year under review, the NRC deliberated on the MD/CEO and Senior Management’s 2020 scorecard and their performance against the set targets.

Board Effectiveness Evaluation

During the year under review, the BEE was internally conducted and the process covered the Board, Board Committees, Peer and Self Evaluations of the Board members. The BEE 2020 focused on assessing the effectiveness and performance of the Board and its Committees in the best interest of PGB. The BEE results were compiled/analysed internally.

For the current year, the questionnaires of the BEE were circulated through a digital platform in November 2020. The questionnaires on the BEE incorporated applicable best practices. The indicators for the performance of the Board included among others, the Board composition, planning process, conduct of meetings, communication with the Management and stakeholders as well as strategy and planning for the Group were used for the Board to provide their ratings.

The following areas were assessed:

GROUP DYNAMICS AND EFFECTIVENESS

• Overall Board Effectiveness• Organisation of the Board• Composition of the Board• Looking Forward (Succession Planning and

Development)• Communications with Shareholders

KNOWLEDGE AND UNDERSTANDING ON

• Role that a Board plays in governance and as Company Director

• Vision and Mission • Strategic needs and development • Market • Critical success factors • Business risk • Performance measures • International businesses • Financial discussions • Legal and compliance duties • Risk management • Board effectiveness • Differentiate strategy/policy issues and operational matters

BOARD/BOARD COMMITTEE EFFECTIVENESS

• Board Chairman Evaluation• MD/CEO Evaluation • Board Audit Committee • Nomination and Remuneration Committee

AREAS OF BOARD EVALUATION

DIRECTOR SELF/PEER EVALUATION


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Corporate Governance Overview StatementNOMINATION AND REMUNERATION COMMITTEE REPORT

Board Effectiveness Evaluation 2020 Review

The result of the BEE 2020 were presented to the NRC in February 2020, whereby the NRC noted the findings and areas that necessitated further improvements. The NRC reviewed the performance of the Board and the Board Committees. The NRC noted that the Board is committed to the highest standards of good governance and continues to be highly effective Board with strong support from the Management. The BEE 2020 report also revealed that the current composition of the Board is well-balanced and equipped with the relevant skills and areas of expertise to steer PGB especially in its growth strategy.

NRC's Effectiveness Review and Performance

Based on the 2020 BEE findings, the Board is satisfied with the performance and effectiveness of the NRC in providing sound advice and recommendations to the Board during the year, particularly on succession planning for Directors and the Senior Management.

SKILLS AND EXPERIENCE

• Analytical skills • Relevant functional insights • Relevant industry insights

PREPARATION FOR BOARD MEETINGS

• Time commitment• Contribution • Pre-reading of all board papers

INDEPENDENCE

• Ability to speak openly and honestly

BUILDING RELATIONSHIP

• Board colleagues • Board and Management • Display confidence in other Directors’ abilities • Listen attentively to ideas

PROFESSIONAL DEVELOPMENT

• On-going training and education

SUMMARY OF ACTIVITIES OF THE NRC DURING THE FINANCIAL YEAR 2020

During the year under review, the NRC in its meetings held in 2020 carried out the following activities in discharging its functions and duties:

• Conducted search, reviewed and nominated INED for Board appointments;

• Reviewed the change of Board/Board Committee composition;

• Reviewed and endorsed the appointment of professional recruitment firms for search of Independent Directors.

• Recommended the Directors standing for re-election at the 2020 AGM;

• Reviewed the Directors’ Training Plan 2020;

• Reviewed and evaluated the Senior Management’s performance including MD/CEO for financial year 2019;

• Reviewed the change of Head, Gas Processing & Utilities;

• Reviewed the PGB Senior Management and MD/CEO’s Succession Planning;

• Reviewed the manpower cost for MD/CEO;

• Assessed the BEE findings for financial year 2019 and reviewed the follow-up actions on 2019 BEE recommendations;

• Reviewed and approved BEE questionnaires for financial year 2020.

• Reviewed the Board Succession Planning Framework and revised cooling-off period for the appointment of Independent Director and specific person including an existing or former officer, adviser or transacting party of the listed issuer or its related corporation;

• Reviewed the Board’s Skills and Experience Matrix;

• Reviewed the NRC TOR; and

• Reviewed the NRC Report for inclusion in the 2019 Integrated Report.

Dato’ Abdul Razak Abdul Majid ChairmanNomination and Remuneration Committee

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The Board is committed to maintain and continuously improve the system of risk management and internal controls for PETRONAS Gas Berhad and its subsidiaries, and is pleased to provide the following statement which outlines the nature and scope of risk management and internal controls of the Group during the year under review.

As internal control is an integral part of the Group’s risk and control continuum to achieve the Group’s objectives, the Group adopts PETRONAS’ shared values of loyalty, integrity, professionalism and cohesiveness which set the tone for a sound system of risk management and internal controls.

BOARD’S ACCOUNTABILITY

The Board acknowledges the importance of a sound risk management system and internal control practices for good corporate governance with the objective of safeguarding shareholders’ investments and the Group’s assets. The Board affirms its overall responsibility for the Group’s system of risk management and internal controls and has undertaken a review of the adequacy and effectiveness of those systems and compliance with relevant laws and regulations.

In view of the limitations that are inherent in any system of internal controls, this system is designed to manage the risk to as low as reasonably practicable in achieving the corporate objectives. Accordingly, it can only provide reasonable but not absolute assurance against material misstatement or losses or the occurrence of unforeseeable circumstances.

The Group has in place an ongoing process for identifying, evaluating, monitoring and managing all significant risks faced by the Group and its achievement of objectives and strategies for the year under review. This process is regularly reviewed by the Board in accordance with the Statement on Risk Management and Internal Control pursuant to Paragraph 15.26 (b) of the Main Market Listing Requirements (MMLR) of Bursa Malaysia Securities Berhad (Bursa Malaysia).

This statement is made pursuant to Paragraph 15.26 (b) of the Main Market Listing Requirements (MMLR) of Bursa Malaysia Securities Berhad (Bursa Malaysia) where the Board of Directors of public listed companies are required to publish a statement about the state of the internal controls of the listed issuer as a group.

RISK MANAGEMENT PRACTICES

Risk Management is regarded by the Board to be an integral part of the Group’s organisational processes, with the objective of maintaining sound system and ensuring its continuing adequacy and integrity. Risk Management is firmly embedded in the Group’s management system. The Group’s Risk Management Policy is to adopt an effective and progressive Enterprise Risk Management (ERM) system to identify, evaluate and monitor the risks faced by the Group and to take specific measures to mitigate these risks.

Risk Oversight Structure

The Group risk oversight structure allows risk information flow for effective oversight on risk management implementation at all levels. Risks are reviewed at various levels, namely at Divisional Plant Leadership Teams (PLTs), Project Steering Committees (PSCs) and Credit Risk Management Committee (CRMC) within the Group, before it is deliberated at the PETRONAS Gas Berhad (PGB) Group Risk and Compliance Committee (RCC) and Board Audit Committee (BAC).

Reporting flow Information flow

HIGH LEVEL GROUP RISK OVERSIGHT STRUCTURE

Noted: Risks are also reviewed at various levels, namely at Divisional PLTs, PSCs as well as CRMC.

Risk Management Unit (RMU) is entrusted with

the responsibility of ensuring effective risk

governance and implementation in the

Group.

Board

Head, Business

Excellence

Managing Director/ Chief Executive

Officer

Risk Management

UnitThe RCC, which is chaired by the Managing Director/Chief Executive Officer (MD/CEO), is obliged to ensure that an appropriate and effective risk management framework is in place and implemented throughout the Group.

The BAC is authorised by Board to review the adequacy and effectiveness of risk management practices and procedures of the Group, on quarterly basis.

Board Audit Committee

Risk & ComplianceCommittee


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STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROLS

RISK MANAGEMENT FRAMEWORK

Our Risk Management Framework adheres to the PETRONAS Resiliency Model (PRM), which focuses on the three areas namely Enterprise Risk Management (ERM), Crisis Management (CM) and Business Continuity Management (BCM) in strengthening the current practices and placing greater emphasis on risk management implementation and business continuity practices.

Enterprise Risk Management

(a) Enterprise Risk

The Group’s Enterprise Risk Management (ERM) adheres to the PETRONAS ERM Framework which adopts ISO 31000:2009 Risk Management requirements. The ERM Framework provides a standard and consistent approach in implementing ERM in the Group. There are six key requirements of ERM under the Framework:

ERM FRAMEWORK

Context Setting

• External Context• Internal Context• Risk Appetite• Risk Criteria

Risk Assessment

• Risk Identification• Risk Analysis• Risk Evaluation

Risk Treatment

• Risk Treatment Strategy• Risk Treatment Plan

Risk Monitoring

• Risk Reporting & Monitoring• Risk Information System

Continual Improvement

• System Monitoring & Review• Risk Assurance• ERM Capability• COP’s Discussion

Governance

• Risk Policy• Organisation Structure• Roles & Responsibilities

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In addition, the Group’s risk appetite is determined to further enhance clarity on the risks that the Group is willing to pursue and or retain. The risk appetite takes into account relevant parameters as well as business strategies and performance expectations and is reviewed annually. During the year under review, the Group reviewed and enhanced the risk appetite by establishing improved statements, risk tolerances and thresholds on five main areas.

PGB IS COMMITTED TO BECOME A RISK RESILIENT ORGANISATION

MANAGING RISK IS EVERYONE’S RESPONSIBILITY

PGB SHALL CONTINUOUSLY STRIVE TO IMPLEMENT:• Risk management best

practices to protect and create value within the set boundaries.

• Risk based decision making by providing a balanced and holistic view of exposures to achieve business objectives.

The Group’s Risk Policy communicates the Board’s and Management’s expectations on risk management implementation and business continuity practices.

PGB RISK APPETITE

STRATEGIC• Capital investment returns• Portfolio distribution

OPERATIONAL• Health, Safety and Environment • Project excellence• Operational excellence

FINANCIAL• Key performance on capital, profitability and liquidity• Counterparties credit risk

REPUTATIONAL• Sentiments in mainstream media

LEGAL AND REGULATORY COMPLIANCE• Zero tolerance on breach of laws and regulations• Zero tolerance on bribery and corruption


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Statement on Risk Management and Internal Controls

Enterprise Risk Profiling and Assessment follows a process which ensures a consistent approach in assessing and analysing risks faced by the Group, guided by its approved strategies and plan. Risks are reviewed annually with involvement from Management and Subject Matter Experts (SMEs) from divisions and departments across the Group with discussions focused on risks which could potentially impede the Group from meeting its objectives.

The following structured process within the ERM Framework was adopted:

CONTEXT SETTING

RISK MATRIX

RISK ASSESSMENT

RISK TREATMENT RISK MONITORING AND REVIEW

RISK IDENTIFICATION RISK ANALYSIS RISK EVALUATION

• Define the scope of the risk assessment (i.e. Business Decision/Risk Profile/Project).• Understand external environment and consider the strategic, organisational/business objectives, KPI, stakeholders’ expectations, preliminary risks.• Determine the Risk Appetite (The amount of risk that an organisation is willing to pursue)

Identify Risk Treatment Strategy

Determine the new risk

impact

Identify new mitigations

for each identified

risk

Establish Target Risk Rating by

using the Risk Matrix

• Develop risk descriptions and risk statements

• Assign risk ownership• Identify causes and consequences

• Identify and assess existing mitigations• Determine the current risk impact• Establish current risk rating by using the

Risk Matrix

• Evaluate the level of the identified risk – High, Medium, Low.

• Evaluate which risks need treatment.• Prioritise risk which requires treatment

implementation

• Identify Key Risk Indicators (i.e. leading and lagging) as triggering mechanism.

• Monitor risk updates through Integrated Enterprise Risk Information System (INTERISK) and ensure Corporate Digital Assurance sign off.

• Quarterly report risk status to RCC, BAC and Board.

Our Risk Matrix

As part of ERM, each risk is mapped based on a risk matrix which specifies the likelihood and impact of the risk. The likelihood and impact of these risks are assessed and evaluated against PGB’s risk appetite and tolerance level. Likelihood rating states the probability of the risk to happen, while impact rating specifies the extent of its impact if the risk occurs. Both measurements can be expressed qualitatively or quantitatively.

Key risk indicators and mitigation actions have also been identified and implemented accordingly. Key risk indicators are identified to facilitate monitoring of the risks and to provide an early warning signal on recognised risks. The key risks and mitigation actions are monitored and reported to RCC, BAC and Board for deliberation and guidance on a quarterly basis.

LIK

ELI

HO

OD

IMPACT

Remote

Insignificant Minor Moderate Major Severe

Very High High Medium Low

Unlikely

Possible

Likely

Almost Certain

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Prior to risk profiling and assessment activities, various inputs are analysed in setting the context of the assessment, which include both internal and external factors that may impact the Group’s businesses and operations. Internal context, key considerations include recent Health, Safety, Security and Environment (HSSE) performance or audit findings, operational performance as well as project related matters. From external context, recent changes in regulatory or statutory requirements as well as shifts in industry outlook and landscape are also considered and analysed as they may have direct or indirect impact to the Group operations.

Each risk is mapped based on a matrix which specifies its likelihood (how likely is the risk to happen) and its impact (the extent of its impact if it did happen), analysing from both qualitative and quantitative perspectives. The matrix is adopted from PETRONAS ERM Framework and adapted based on the Group’s risk appetite and tolerance level. Depending on risk treatment strategies adopted, mitigation plans are outlined to mitigate the risks to an acceptable level.

Key Risk Indicators (KRIs) are identified to facilitate monitoring of the risks which provide an early warning signal on potential emerging risks. Risk Owners, Risk Mitigation Owners and Risk Focal persons are assigned for each risk to ensure the risk mitigations developed are appropriately implemented, monitored and regularly reported.

RMU provides updates on the Group’s ERM implementation to both the Group’s RCC and BAC in the form of quarterly Enterprise Risk Report (ERR). The report covers the risk profile and status of risk mitigation implementation, KRIs as well as risk management framework implementation and risk initiatives.

During the year, – a review of the Enterprise Risk Profile was conducted throughout the Group (including at subsidiaries and JV companies) where key issues and risks were deliberated at length based on the latest context considering internal and external factors, focusing on the key risks i.e. High and Medium risks. The rationale of the likelihood and impact rating assigned to the key risks were also discussed against the Company’s risk tolerance and appetite. Further mitigations were identified for each of the key risks which were mainly in the strategy and commercial areas, and aligned with the Group’s focus in driving its business plans and strategies to achieve its aspirations as set out on page[x].

Both Regasification Terminal Sungai Udang Sdn Bhd and Pengerang LNG (Two) Sdn Bhd, which are operating subsidiaries within the Group also prescribes to the PRM framework and practices. Guidance was provided to Kimanis Power Sdn Bhd and Pengerang Gas Solutions Sdn Bhd, both joint venture companies, on the adoption of PGB Risk Policy and assistance given on the implementation of PRM.

Risk assessments were also conducted on new business ventures and strategies, as it is a key component to facilitate informed decision making at BAC and Board where more than 60 Risk Assessments were facilitated by RMU across the Group.

(b) Plant and Facilities Risk

The respective Plant Leadership Teams (LT) are responsible in ensuring adequate and effective Plant and Facilities Risk Management (PFRM) at the Divisions. The Group manages its operational risks via PFRM. Under PFRM, risks relevant to operations at the divisions were assessed, monitored and reported to the respective Business Divisions’ PLT. As per the Enterprise Risk, the risks were rated based on its probability and impact to the divisions’ operations. Appropriate mitigation plans are put in place for every key risk.

During the year under review, the plant and facilities risk review was conducted for both Gas Processing and Utilities (GPU) Division, and Gas Transmission and Regasification (GTR) Division. The respective divisions’ risk profiles were deliberated, updated and approved at Division’s PLT. Subsequently, the risks were monitored with mitigation actions tracked and periodically reported to the respective PLTs.

(c) Project Risk

Project functions are undertaken by PETRONAS Project Delivery & Technology (PD&T) which allows for improved efficiency and accountability from integration and centralisation of project management activities throughout the wider PETRONAS Group. Dedicated project steering committees are in place in PGB to closely monitor and ensure effective project execution and services as per Plant Change Execution Agreement (PCEA), Technical Service Agreement (TSA), and Service Agreement (SA).

Status updates on project risk mitigations are included as part of the monthly project progress report to the relevant committees such as respective Divisions’ PLT and the relevant PSCs for proper monitoring. With current and potential new projects from growth initiatives, close monitoring is key to meet the project delivery targets.

PGB Investment Steering Committee (ISC) was established on 29 January 2021, to be a sounding board to the Leadership Team in managing capital investments related to growth and strategy. The PGB ISC is a platform to discuss and provide strategic direction for potential busines opportunities, project and initiatives for strategic, growth purpose and annual portfolio review.

(d) Contractor Risk

Procurement functions are undertaken by Group Procurement (GP) under PETRONAS PD&T to benefit from cost and process efficiencies, improved line of sight as well as clarity in accountability whilst having direct access to a larger pool of expertise and resources in PD&T. Correspondingly, tendering exercises are facilitated by GP in accordance with PETRONAS Group tendering and contract procedures and guidelines.

The Contractor Risk Assessment (CoRA) process is an integral part of the contractor selection process which is being applied prior to awarding the contract to the contractor. Upon award of contract, the results of CoRA together with its mitigation plans are implemented, monitored and resolved by the relevant teams involved in the project.


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(e) Finance Risk

PGB and its subsidiaries have adopted the PETRONAS Corporate Financial Policy (CFP) which sets forth the governing policy in effecting the practice of Financial Risk Management. In November 2020, this was superseded by the adoption of PETRONAS Financial Policy. The revised policy sets the overarching philosophy on commitment towards becoming financially resilient, and to ensure efficient capital and liquidity management amidst challenging and volatile business landscape, in addition to providing a consistent framework in which financial risk exposures are identified and strategies developed to mitigate such risks. The Group is establishing supporting framework and guidelines to manage its finance risk exposures that includes counterparty risk, liquidity risk, foreign exchange risk and interest rate risk. These guidelines align the Group’s practices with PETRONAS’ policies and guidelines.

The Group’s foreign currency management policy is to minimise economic and significant transactional exposure arising from currency movements. For major capital projects, the Group and the Company perform assessment of potential foreign currency risk exposure at the investment decision phase to determine the appropriate foreign currency risk management strategy. Residual net positions are actively managed and monitored against prescribed policies and control procedures. When deemed necessary and appropriate, the Group will enter into derivative financial instruments to hedge and minimise their exposure to the foreign currency movements.

(f) Credit Risk

The Company continues to apply the Credit Risk Management processes based on PETRONAS Credit Risk Rating methodology whereby the customers are assessed using the PETRONAS Credit Risk Rating System (PCRRS) to ensure alignment with the credit assessment process adopted by the PETRONAS Group. The system evaluates the credit worthiness and assigns credit risk ratings to all of the Company’s customers. Credit assessment facilitates the decision to assign applicable credit limit on customers as exposure control.

Trade and non-trade receivables ageing are also deliberated monthly at the PGB LT, where overdue balances, if any, are highlighted and actions to be taken agreed.

To further strengthen the management of credit risk and also address Third Party Access (TPA) implementation, PGB Credit Risk Management Committee provides oversight on credit risk management practices in compliance with PETRONAS Corporate Financial Policy. PGB Credit Guidelines were also revised and enhanced to reflect credit management requirements and processes for trade counterparties.

(g) Health, Safety, Security and Environment (HSSE) Risk

The Group leverages on the PETRONAS Health, Safety and Environment Management System (HSEMS) to manage HSSE risks and ensure that operations are in compliance with the HSSE regulatory requirements. The HSEMS ensures that HSSE risks within the business are managed effectively. In addition, the Group subscribes to PETRONAS HSSE Mandatory Control Framework to strengthen HSSE governance within the Group through clear HSSE requirements.

Major risks in HSSE are identified with its mitigation actions monitored through Hazards and Effects Management Process (HEMP), Plant Facilities Risk Management and Enterprise Risk Management (ERM). Amongst the focus areas for the year under review is HSSE compliance improvement via digitalisation, efficient functional assurance, upskilling HSSE capability and effective communication program. Let’s Comply & Intervene program (Jom Patuh & Tegur) is also progressing as part of the continuation effort towards inculcating a pervasive behavioural safety culture.

The Group has established multiple platforms to conduct periodic management review on HSSE related risks and events in addressing changes that are triggered from past incidents and plant modifications activities. HSSE performance and reporting has been a fix agenda in monthly PGB Leadership Team Meeting. Similar HSSE Leadership Team (HSELT) Committee meetings are held at the division level, facilities and projects which are chaired by respective Management personnel.

The Group has also put in place a series of assurance programmes to review and verify the effectiveness of the HSEMS and HSSE risk mitigations on its facilities. The HSSE assurance programme adheres to the requirement of PETRONAS HSEMS, Mandatory Control Framework, PETRONAS Technical Standards, as well as international standards such as ISO 14001 for Environmental Management System, OHSAS 18001 and MS 1722 for Occupational Health and Safety Management System. The Group is committed to continue with its rigorous HSSE assurance programmes in ensuring the effectiveness of its HSEMS implementation.

(h) Corruption Risk

The Malaysia Anti-Corruption Commission (MACC) Act 2009 Amendment (May 2018) includes new Corporate Liability Provision which comes effective on 1 June 2020 whereby the organisation (Company and Top Management) is equally liable for any corruption committed by person associated to the organisation, unless the organisation can show that they have adequate procedures in place to prevent corruption.

Corruption Risk Assessment was conducted during the year under review to identify structural weaknesses that may facilitate corruption. The assessment helps to identify risk factor and treatment, and embeds corruption prevention for the key functions and business activities.

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Secretary:Head HSSE

Team Member:Head

Occupational Health

Team Member:Head Risk

Management

Team Member:Head

Emergency Response

Team Member:Group

Security

Team Member:Head

Human Resource

CRISIS MANAGEMENT

The Group crisis management framework and practices are in adherence to the PETRONAS Crisis Management framework which provides the foundation for consistent and effective crisis response. The Group has in place contingency planning that defines the structure and processes for managing emergencies and crisis at operational and company level. There is a three-tier response system in place as outlined based on severity of the crisis which provides clear demarcation of response control and required capability of emergency or crisis team members in order to protect and save people, environment, asset and reputation. In the event of business disruptions during crisis events, Business Continuity Plan (BCP) will be activated to ensure business continuity. During the year under review, the Group has progressed in expanding the crisis response areas beyond HSSE.

During the year, the outbreak of the COVID-19 pandemic necessitated quick, effective and co-ordinated responses across the Group. PGB Pandemic Preparedness Response Guideline was established to:

• provide guidance to strategise preparedness and response to minimise the risk imposed by COVID-19 outbreak,

• align the action plans as stipulated by PETRONAS Pandemic Preparedness and Response Team

• reduce the impact on the Company’s business activities whereby safeguarding its people, environment, assets and reputation.

Additionally, daily monitoring were conducted with Management and critical personnel present where preventive and recovery management were implemented through PGB barrier management, to ensure zero (0) operation interruption and business disruption.

PPRT STRUCTURE

Chaiman:Head GPU/GTR/HO


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Crisis Assessment• Risk Assessment (Risk Identification,

Risk Analysis and Risk Evaluation)• Credible Scenarios Identification• Thresholds Identification

Crisis Response Strategy• Strategies & Actions Development• Resources Identification• Emergency/Crisis Management Plan Establishment• Emergency/Crisis Management Plan

Communication

Testing & Exercising (T&E)• T&E Planning

• T&E Execution• T&E Review

Continual Improvement• Assurance

• System Review & Monitoring• Capability Building

Tier 3 – CrisisA situation where there is a potential for

multiple fatalities/injuries and severe damage to property, environment and

business which involves neighbouring sites and surrounding communities.

Tier 3 – CrisisIncident is affecting PGB business/operations. Require PGB management involvement on strategic decision making.

Tier 2 – Major EmergencyEmergency response is within the

control and capability of the EMT with external assistance from response

agencies and authorities.

Tier 2 – DisasterDisruption is beyond operational. Require division’s management support on strategic decision making.

Tier 1 – Minor EmergencyEmergency response is within the control and

capability of assets/area/regional office/site

emergency response.

Tier 1 – IncidentDisruption is manageable at operational level. No management intervention is required.

CRISIS MANAGEMENT PLANActivated when there is an emergency situation

BUSINESS CONTINUITY PLANActivated when there is a business disruption

Crisis ManagementTeam

Business Continuity

Management Team

Business Recovery

Management Team

Business Continuity Response

Team

Emergency ManagementTeam

Emergency ResponseTeam

CRISIS

MANAGEMENT

FRAMEWORK

(CMF)

Governance• PETRONAS Risk Oversight Structure

• PETRONAS Crisis Management Structure• PETRONAS Three-Tiered Response Protocol and Activation

• Roles and Responsibilities in Crisis Management

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PGB CRISIS MANAGEMENT TEAM (CMT) ORGANISATION CHART

PGB BUSINESS CONTINUITY MANAGEMENT TEAM (BCMT) ORGANISATION CHART

CMT Secretary

BCMT Secretary

Historian

Historian

Head, Risk Management

Head, Business Excellence

Executive Risk Management

Executive Risk Management

Health Safety EnvironmentAdvisor

Business Continuity Advisor

Finance Advisor

Finance Advisor

LegalAdvisor

Information & Liaison Advisor

Information & Liaison Advisor

Legal Advisor

Business Continuity Advisor

Human ResourceAdvisor

Head, Business Excellence Chief Financial Officer

Chief Financial Officer

Head, Corporate Affairs

Head, Corporate Affairs

Head, Legal & Corporate Secretariat Department

Head, Business Development & Commercial

Head, Legal & Corporate Secretariat Department

Head, Business Development & Commercial

Head, Human Resource Management

CMT CHAIRMAN

BCMT CHAIRMAN

PGB MD/CEO

PGB MD/CEO


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BUSINESS CONTINUITY MANAGEMENT

The Group practices structured Business Continuity Management (BCM) which involves various elements to ensure continuity of the Group’s operations and services in the event of disruptions or crises. The Risk Management Unit (RMU) is entrusted with the responsibility of ensuring effective BCM governance and implementation in the Group. At operating divisions, there are focal persons assigned to drive implementation of the framework and processes rolled out by RMU and ensure effective execution of BCM at the respective divisions.

Business Impact Analysis (BIA) prioritises the Group’s key business functions and spells out the timeframe to resume each function in the event of disruptions. It was periodically reviewed and updated with objective to identify criticality of business functions and determine resource requirements to be allocated for recovery and resumption.

The Group has in place of Gas and Utilities supply Business Continuity Plan (BCP) which adopts a three-tiered approach in escalating response which will assist the Group in effectively responding and managing gas and utilities supply disruption. The Group has also formulated BCP in responding to the inaccessibility of PETRONAS Twin Towers where its Head Office operates, to resume its Head Office’s critical functions be it virtually or at established alternate worksite.

RMU provides guidance and reference to ensure compliance to the Group’s BCM requirements including capability building whereby assurance and continuous awareness programmes are in place, as part of the overall BCM continual improvement.

Risk Profiling and Control

Business Impact Analysis

Strategy Selection

Business Continuity Plan

Test and Exercise

Continual Improvement

Standards

Infrastructure

People

PGB BUSINESS CONTINUITY MANAGEMENT FRAMEWORK

Process

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INTERNAL AUDIT FUNCTION

The Board recognises that the internal audit function is an integral part of PGB corporate governance.

Prior to 2020, the internal audit function was undertaken by PETRONAS Group Internal Audit Division (GIAD) in providing independent objective assurance and consulting activities on Governance, Risk and Control (GRC) of PGB. This practice is in line with the requirement of Bursa Malaysia, Malaysia Code on Corporate Governance 2017 (MCCG 2017) and the International Professional Practices Framework (IPPF).

In November 2019, the BAC had approved and formed a dedicated internal audit function with PGB itself. PGB Internal Audit (PGB IA) has been operationalised on 1 January 2020.

In demonstrating independency and objectivity of PGB IA:

• Functionally internal audit function reports to the BAC with administrative reporting to the Managing Director/Chief Executive Officer of the Group;

• The internal audit processes and activities are guided by the approved Internal Audit Charter which outlined the purpose, authority, responsibilities and limitations of in-house internal audit function. Reference is also made to the COSO Internal Control Framework in evaluating the state of PGB internal control.

The above line of reporting and Internal Audit Charter, as established are in line with the Bursa Malaysia, MCCG 2017 and IPPF requirements.

During the year under review, GIAD undertook the execution of audit engagements in the first six months, whilst PGB IA undertook audit engagements in the subsequent six months. This arrangement was consciously planned to ensure PGB IA function is equipped with the required internal control addressing all three elements, namely Structure, People and Process. Hence, able to demonstrate professional due care as per the abovementioned industry and external requirements.

In line with the formation objective, PGB IA reviews the governance, risk management and internal controls of PGB key activities based on risk-based annual internal audit plan which were presented and approved by the BAC. The BAC reviews PGB IA audit reports which include opinion on the adequacy and effectiveness of PGB’s governance, risk management and internal controls, root cause and recommended corrective actions to be undertaken by the Management. The progress of PGB IA activities including status of corrective action closure based on internal audit findings were reported to the BAC on a quarterly basis.

The key activities of the internal audit function are set out in the BAC Report on pages 44 to 45 of this Annual Report.

Audit Competencies

In 2020, PGB internal audit is staffed by eight individuals from diverse work experiences, competencies and qualification, amongst are Accounting & Finance, Operations & Maintenance, Sales & Marketing, Information Technology & Digital, Supply & Logistics, Strategic Planning, Project Management, and other related enablers functions. relevant experiences and qualifications. To date, five of our internal audit personnel are equipped with relevant certification such as from accounting professional bodies, Institute of Internal Audit, COSO and Malaysia Department of Safety & Health.

Currently, PGB internal audit is headed by Shamliyah Mohamed @ Arif, a PETRONAS sponsored student graduated with Bachelor of Science Business Administration (majoring in Finance) from the University of Tulsa Oklahoma, USA. In August 1998, she started her career in PETRONAS Dagangan Berhad as Finance Executive.

Joined PGB on 2 January 2020, bringing with her 20 years of experiences and knowledge from various roles in the areas of Finance, Retailing, Marketing & Trading, Supply & Logistic, Real Estate & Land Management, Project Management, Strategic & Business Planning, Internal & External Stakeholders Management, Strategic Communication, Branding, Internal Audit, Business Assurance and Manufacturing. Her experiences in operating units, business, corporate, second line assurance and internal audit will be an added advantage in steering PGB internal audit.

OTHER SIGNIFICANT ELEMENTS OF INTERNAL CONTROL SYSTEM

The other significant elements of the Group’s internal control system are tabulated below.

(a) Board

The Board meets at least once a quarter, in order to maintain its full and effective supervision on the overall governance of the Group. The MD/CEO leads the presentation of Board Papers and provides comprehensive explanation on pertinent issues. In arriving at any decisions, based on recommendations by the Management, thorough deliberation and discussion by the Board is a prerequisite. In addition, the Board is kept updated on the Group’s activities and its operations on a regular basis.

The Board reviews all significant issues arising from changes in the business environment, which may result in significant risks to the Group. The Chief Financial Officer (CFO) and Head of Business Excellence provides the Board with the Group quarterly performance report.

Where areas for improvement in the system are identified, the Board will consider the views and recommendations made by the BAC and Management.


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(b) Organisation Structure

An organisational structure which defines the formal lines of responsibility and delegation of authority is in place to assist in implementing the Group’s strategies and day-to-day business activities. A process of hierarchical reporting has been established which provides a documented and auditable trail of accountability. The Company’s organisational structure is set out on page 113 of this Annual Report.

The Company’s Leadership Team (LT) serves as an advisory to PGB MD/CEO in accomplishing the vision, mission, strategies and objectives set for the Group. Additionally, the Gas Processing & Utilities and Gas Transmission & Regasification Division Plant Leadership Teams (PLTs) provide operational directions and manage operational matters at the respective divisions. Various functional committees have also been established across the Group to ensure the Group’s activities, major projects and operations are properly aligned towards achieving the organisation’s objectives and targets.

(c) Limits of Authority

A documented Limits of Authority (LOA) with clear lines of accountability and responsibility serves as a tool of reference to identify the appropriate approving authority at various levels of management including matters that require the Board’s approval.

A full review of LOA is undertaken every five years and realignment of LOA is performed to cater for a change in the organisational structure to ensure effective decision making. During the year under review, the Company made minor realignment to the LOA so as to reflect changes in processes and structure which was approved and subsequently implemented effective 1 July 2020. The LOAs for Regasification Terminal Sungai Udang Sdn Bhd and Pengerang LNG (Two) Sdn Bhd were also reviewed, updated and enhanced during the year under review.

(d) Management System

The Group has adopted Operational Excellence Management System (OEMS) which serves as a one-stop-center for all systems and requirements, with a built-in self-assurance process. It incorporates best practices, continual improvement cycles and embed mandatory requirements into day-to-day work practices which translated into four levels of structured document (Policy, Requirements, Procedures and Records). The company leverages on internal governance processes that ensures disciplined execution at all levels by complying to PETRONAS Assurance Standard. In addition to the documents and self-assurance, the Group is also in the process of adopting PETRONAS Downstream Operate Facility Work Process (OFWP) and Maintain Facility Work Process (MFWP) to enhance business process efficiency and clarity on roles, responsibilities and competencies. The company evaluates the effectiveness of overall OEMS key areas through its annual Management System Review (MSR). A comprehensive MSR has been conducted for the year where areas of improvement and appropriate action items were identified.

(e) Tendering and Procurement

All tendering exercises were deliberated at the respective Tender Committees of PETRONAS Group. Leveraging on the said Tender Committees, the level of responsibilities are in place to govern the tendering activities. Subsequent to the review by the relevant Tender Committees, the contracts will be subject to approval by the relevant approving authority who is independent from the Tender Committee. Tenders are called for and are awarded based on factors such as technical and financial capability, quality, HSSE, performance track record, schedule and cost.

(f) Budget Approval

Budgets are an important control mechanism used by the Group to ensure an optimum allocation of Group resources and the operational managers are sufficiently guided in making business decisions. The Group undertakes a comprehensive planning and budgeting exercise which include the development of business plans for a five-year period and establishment of performance indicators against which operating units and subsidiaries are evaluated. The plans and budget are deliberated and approved by the Board.

Variances against the approved budget are monitored, analysed and reported to the PGB LT and BAC/Board on a monthly and quarterly basis respectively and corrective actions are taken where necessary.

Any additional budget requirements are managed through budget transfer or supplementary budget, to be approved by the relevant approving authority in accordance to the Limits of Authority.

(g) Financial Control Framework

The Group has adopted PETRONAS Financial Control Framework (FCF) with the principal objective of enhancing the quality and integrity of the Group’s financial reports through a structured process of ensuring the adequacy and effectiveness of key internal controls operating at various levels within the Group at all times. FCF requires among others, documentation of key controls, remediation of control gaps as well as regular testing of control operating effectiveness.

The Group has embarked on a Governance, Risk and Compliance system focusing on Process Control which is a single solution for end-to-end control management including documentation, testing, monitoring and certification. The system functions as central depository of internal control documentation for FCF for PETRONAS Group and Operating Units (OPUs).

On a semi-annual basis, each key process owner at various Management levels is required to complete and submit a Letter of Assurance which provides confirmation of compliance to key controls for the areas of the business for which they are accountable. Subsequently, the MD/CEO and CFO provide overall assurance to the Board on the adequacy and effectiveness of key internal controls of the Group.

During the year under review, the Group also performed FCF for Kimanis Power Sdn Bhd, a joint venture company as well as for Regasification Terminal Pengerang Sdn Bhd (RGTP) and Regasification Terminal Lahad Datu (RGTLD), two dormant subsidiaries.

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(h) Information and Communication Technology

The Group leverages on Information and Communication Technology (ICT) as key enabler to efficiently collect key business information to facilitate timely decision making and enhance productivity. Being part of PETRONAS Group, the Group adheres to PETRONAS Group Digital Policy and adopts PETRONAS Group Digital Strategy and roadmap. Internal ICT audit and system reviews are conducted periodically to ensure compliance against PETRONAS Group policies and procedures. As PGB transforms itself into a data driven organisation, cybersecurity threats may be amplified; hence it has been identified as one of the Group principal risks under Enterprise Cyber Security Governance Program (ECSGP) and is being monitored accordingly.

(i) Related Party Transactions

The Group has reviewed the Guidelines and procedures on Related Party Transactions (RPTs) and Conflict of Interest (COI) (collective, the Guideline) Situations to promote continuous awareness and provide consistent approach to all RPTs and Recurrent Related Party Transactions (RRPTs) or COI situations.

The Guideline requires the use of various processes to ensure that RPTs/RRPTs are conducted on arm’s length basis, which is consistent with the Group’s normal business practices and policies, and will not be to the detriment of the Group’s minority shareholders. It aims to provide guidelines under which certain transactions and situations must be reviewed and endorsed by the various governing parties of the Group and/or disclosed to the regulators and governing bodies.

It also prescribes the processes required to identify, evaluate, approve, monitor and report RPTs/RRPTs as well as manage COI. Such processes include identification and screening of transactions, negotiation of transaction and approval/mandate mechanism, monitoring and reporting principles, and renewal or changes in the terms or termination of such dealings. In principle, the Guideline sets forth the following:

• Directors and Officers of the Company and its Group shall not enter into transactions with related parties unless these transactions are carried out on normal commercial terms and are not to the detriment of the Group’s minority shareholders.

• All Directors are required to make annual written declaration involving their interest, either directly or indirectly, to the Company Secretary. They can also notify the Company Secretary at Board meetings of any interest in RPTs or COI situation when it becomes known to them.

• As per the RPTs/RRPTs Policies and Procedures, RPTs/RRPTs will be reviewed by the BAC for the BAC’s endorsement of the transaction. Such transactions are then approved by the relevant approving authority as prescribed in the Company’s LOA. Furthermore, the Directors are required to abstain from deliberation and voting on relevant resolutions in which they have conflict of interest at the Board or any general meeting convened.

• Where possible, benchmarking is conducted on the prices of similar services/product available in the market.

• The Board has the overall responsibility to ensure compliance to the established guidelines and procedures to approve and monitor RPTs/RRPTs and COI situations. The Board and/or BAC may also appoint individuals and committees to examine the RPTs/RRPTs, as deemed appropriate.

The Company has been granted exemption and various waivers by Bursa Malaysia from complying with the requirements of Paragraph 10.08 and 10.09 of the MMLR of Bursa Malaysia from having to seek shareholders’ mandate for RRPTs entered into with parties that are related to PETRONAS Group of Companies vide letters dated 28 January 2002, 13 October 2003, 2 March 2011, 26 March 2014, 23 May 2014, 27 October 2015, 12 March 2019 and 23 October 2020. The said exemptions and waivers were subject to conditions which essentially state that the exempted and waived RRPTs must be transacted on an arm’s length basis.

(j) Human Resource Policies and Procedures

The Group’s Human Resource (HR) policies are aligned to the PETRONAS policies and procedures on all areas of human resources. This is to ensure that the Group practices best in class HR policies and procedures especially with regards to Human Capital Development. Other HR areas which are established in the Group include Organisation Design & Job Management, People Planning, Talent Sourcing, Capability Management, Succession Planning, Leadership Development, People Development, Remuneration, Employee Relations and Industrial Relations.

(k) Employee Performance Management

In order to maintain the Group as a high performing organisation, the Group continues to strengthen and enhance its Employee Performance Management. The Group has established a systematic assessment of staff’s performance against the set performance indicators which is reviewed on periodical basis.

(l) Capability Development

The Group invests in building the staff capability towards highly competent and capable workforce to deliver superior results for the Group. The Group aligns its capability development efforts through the PETRONAS Superior Managed Assessment Framework (SMA) for Executive and PETRONAS Competency Based Assessment System (PECAS) for Technical Non-Executive, where staff capabilities are continuously developed and assessed.

The Group has also established a platform through the Company Capability Development Working Committee (CDWC) to deliberate on staff capability and intervention plans. The Working Committee will drive capability gap closure for each Technical and Non-Technical Skill Group, which is to be done jointly between the staff, Supervisors and/or dedicated Discipline Resource Person (DRP).


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(m) Succession Planning

The Group has adopted the PETRONAS Top Talent Management Value Chain for Succession Planning process to enable the matching of the right talents to the right positions for breakthrough performance. The process starts with identification of critical positions at business and corporate level. The Group is committed in developing Succession Planning for focused group of staff, namely Technical and Non-Technical Managers, Technical Professional Positions as well as for HSE Critical Positions. This exercise is crucial in managing talents within the Group and from other Operating Units or Business Units. The Succession Planning information will then facilitate the Management in deliberating and charting staff’s career progression including mobility internally within the Group or across businesses within PETRONAS Group for wider exposure as well as capability gap closure through an identified development plan.

(n) Leadership Development

The Group recognises the importance of Leadership Development in ensuring the organisation has sufficient competent leaders currently and for the future. Leadership development in PGB aims to identify and develop leaders at every level of employee career guided by the PETRONAS Leadership Framework with the objective to have a bigger pool of leaders that can drive and steer the company’s business strategy. The PETRONAS Leadership Competencies and PETRONAS Cultural Beliefs guide staff to better understand the PETRONAS Leadership Philosophy, emphasising on competencies and behaviours to promote better internalisation of the values.

(o) Code of Conduct and Business Ethics

The Group adopts and practices PETRONAS Code of Conduct and Business Ethics (CoBE). The CoBE, which is accessible to the public for reference on the Company’s corporate website at www.petronasgas.com, places significant importance in upholding the principle of discipline, good conduct, professionalism, loyalty, integrity and cohesiveness that are critical to the success and wellbeing of the Group. The CoBE detailed policy statements on the standards of behaviour and ethical conduct expected of each individual to whom the CoBE applies. The Group also expects that contractors, sub-contractors, consultants, agents and representatives and others performing work or services for or on behalf of the Group to always act consistently with the relevant parts of the CoBE when performing such work or services. The CoBE expressly prohibits improper solicitation, bribery and other corrupt activity not only by employees and directors but also by third parties performing work or services for or on behalf of companies in the PETRONAS Group.

In compliance with the CoBE, the Company adopts the PETRONAS Anti-Bribery and Corruption (ABC) Manual which governs the prevention of corruption and unethical practices within the Group. The ABC Manual sets forth the policy statement and guidelines on how to deal with improper solicitation, bribery and other corrupt activities and issues that may arise in the course of business.

(p) Whistleblowing Policy

The Group has adopted the PETRONAS Whistleblowing Policy (WBP) which provides an avenue for employees and members of the public to disclose any improper conduct committed or about to be committed in accordance with the procedures as provided under the policy. The WBP is accessible to the public for reference on the Company’s corporate website at www.petronasgas.com

Under the policy, a whistleblower will be accorded with protection of confidentiality of identity, to the extent reasonably practicable. An employee who whistle blows internally will also be protected against any adverse and detrimental action for disclosing any improper conduct within the Group, to the extent reasonably practicable, provided that the disclosure is made in good faith. Such protection is accorded even if the investigation later reveals that the whistle blower is mistaken as to the facts and the rules and procedures involved.

(q) PETRONAS Raid Protocol

The Company’s policies are aligned to the PETRONAS Raid Protocol in ensuring appropriate manner in handling interaction with, and submission of information and data to the authorities in the event that raids are carried out within the premises of Company’s offices worldwide. It is an internal procedure in response to the scope and powers of the authorities under relevant laws and various jurisdictions.

(r) Human Rights Commitment

The Group is committed to uphold internationally recognised human rights in areas of its operations, complying with its Code of Conduct and Business Ethics, and all relevant legal requirements.

The Group subscribes to PETRONAS Social Performance Framework. The introduction of this framework covers the supply chain, community well-being, labour and working conditions for contractors, and third party security which will strengthen the commitment of social responsibility. The Group is working closely with Group HSE (GHSE) to increase the human rights awareness across the organisation.

Meanwhile, the Group is vigilant to ensure all projects will comply not only with the safety and environment, but also on the social dimensions. Prior to any development of projects, social impact assessment will be conducted as part of the Environmental Impact Assessment process under the jurisdiction of the Department of Environment. Aspects and matters arising from community health (dust, noise pollution), safety (construction debris, traffic flow prone to accidents), community sensitivities (cultural heritage, relocation of local’s important socio elements – pre-historical buildings etc) are aptly addressed. Stakeholder engagements were carried out with the local communities to reach to a mutual level of understanding that benefit both sides without any prejudicial implication to the latter.

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(s) Corporate Disclosure Guide

The Group is committed to uphold internationally recognised human rights in areas of its operations, complying with its Code of Conduct and Business Ethics, and all relevant legal requirements. The Company has established an Internal Corporate Disclosure Guide to facilitate the disclosure and conduct on the dissemination of information. This Guide is based on the requirements as set out in the MMLR, the Corporate Disclosure Guidelines (2nd Edition) by Bursa Malaysia and promotes transparency and accountability. In the communication and dissemination of material information amongst the Company organisation and public. A detailed guide is available at www.petronasgas.com

(t) Corporate Privacy Policy

PGB is committed to comply with applicable privacy and personal data protection laws. In this regard, the Company has put in place a Corporate Policy to adequately safeguard the privacy and personal data of its employees as well as third parties.

(u) Insurance

The Group has in place and maintains at all times such relevant insurance/Takaful policies/contracts and have coverage which are industry standard as are customarily taken out and maintained by other companies in the same industry. Insurances are subscribed to with advice by PETRONAS Group Insurance, ensuring appropriate covers are in place and leveraging on common policies across PETRONAS Group, where applicable.

MANAGEMENT ROLE

Management is accountable to the Board for the implementation of the processes in identifying, evaluating, monitoring and reporting of risks and internal control as prescribed above. The MD/CEO and the CFO have provided the Board with assurance that the Group risk management and internal control system is operating adequately and effectively, in all material aspects, to ensure achievement of corporate objectives. In providing the above assurance by MD/CEO and CFO, similar letters of assurance have also been obtained from PGB LT members confirming the adequacy and effectiveness of risk management practice and internal control system within their respective areas.

WEAKNESSES IN RISK MANAGEMENT AND INTERNAL CONTROL THAT RESULT IN MATERIAL LOSSES

There were no material losses incurred during the year as a result of weaknesses in risk management and internal control. The Management continues to take measures to strengthen the control environment and monitor the risk management and internal control framework. Accordingly, the Board is satisfied that the Group’s risk management and internal control system is adequate and effective.

IMPLEMENTATION OF RISK MANAGEMENT AND INTERNAL CONTROL IN SUBSIDIARIES AND MATERIAL JOINT VENTURE (JV) COMPANIES AND SUBSIDIARIES

The implementation of the relevant risk management and internal control systems at the Group’s subsidiaries and material JV companies is in place.

REVIEW OF THIS STATEMENT

The external auditors have reviewed this Statement on Risk Management and Internal Control pursuant to the scope set out in Audit and Assurance Practice Guide (“AAPG 3”), Guidance for Auditors on Engagements to Report on the Statement on Risk Management and Internal Control included in the Annual Report issued by the Malaysian Institute of Accountants (MIA) for inclusion in the Annual Report of the Group for the year ended 31 December 2020, and reported to the Board that nothing has come to their attention that causes them to believe that the statement intended to be included in the Annual Report of the Group, in all material aspects:

(a) has not been prepared in accordance with the disclosures required by paragraphs 41 and 42 of the Statement on Risk Management and Internal Control: Guidelines for Directors of Listed Issuers, or

(b) is factually inaccurate

AAPG 3 does not require the external auditors to consider whether the Directors’ Statement on Risk Management and Internal Control covers all risks and controls, or to form an opinion on the adequacy and effectiveness of the Group’s risk management and internal control system including the assessment and opinion by the Board of Directors and Management thereon. The auditors are also not required to consider whether the processes described to deal with material internal control aspects of any significant problems disclosed in the Annual Report will, in fact, remedy the problems.

This Statement on Risk Management and Internal Control is made in accordance with the resolution of the Board dated 22 February 2021.

Farina Farikhullah KhanChairmanBoard Audit Committee


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Good governance enables PGB to function efficiently and effectively by providing clarity on acceptable as well as expected standards of behaviour. In carrying out our business activities responsibly, safely and reliably, we are guided by PETRONAS’ Shared Values of Loyalty, Professionalism, Integrity and Cohesiveness. These are supported by our strict conformance to respective laws, rules and regulations.

PETRONAS Corporate Privacy Policy

PETRONAS Framework on Climate Change

PETRONAS Corporate Sustainability Framework

PETRONAS Corporate Social Investment (CSI) Strategic Framework

PETRONAS Framework on External Auditors

PETRONAS Cultural Beliefs (PCB)

PETRONAS Position Statement on Climate Change

PETRONAS Human Rights Commitment

PGB Investment Criteria

PETRONAS Financial Policy

PETRONAS Code of Conduct and Business Ethics (CoBE)

PETRONAS Carbon Commitments

PETRONAS Competition Law Guidelines

PETRONAS Anti-Bribery and Corruption Manual

PETRONAS Whistleblowing Policy and Procedures

PETRONAS Social Performance Framework

PETRONAS Zero Tolerance (ZeTo) Rules

PETRONAS Technical Standards

PETRONAS Risk Policy

PETRONAS Raid Protocol PGB HSSE Policy

PGB Dividend Policy

PGB Limits of Authority

PGB Guideline and Procedures on Related Party Transactions and Conflict of Interest Situations

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LIST OF INTERNAL POLICIES

73 Statement of Directors’ Responsibilities in relation to the Financial Statements

74 Directors’ Report79 Statement by Directors79 Statutory Declaration80 Consolidated Statement of Financial Position81 Consolidated Statement of Profit or Loss and Other

Comprehensive Income82 Consolidated Statement of Changes in Equity86 Consolidated Statement of Cash Flows87 Statement of Financial Position88 Statement of Profit or Loss and

Other Comprehensive Income89 Statement of Changes in Equity90 Statement of Cash Flows91 Notes to the Financial Statements174 Independent Auditors’ Report

FinancialStatements

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The financial statements of the Group and of the Company as set out on pages 80 to 173, are properly drawn up so as to give a true and fair view of the financial position of the Group and of the Company as at 31 December 2020, and of their financial performance and their cash flows for the year then ended.

The Directors consider that in preparing the financial statements of the Group and of the Company:

• appropriate accounting policies have been used and consistently applied;• reasonable and prudent judgements and estimates were made;• all Financial Reporting Standards and the Malaysian Companies Act 2016 have been followed; and• are prepared on a going concern basis.

The Directors are responsible for ensuring that the accounting and other records and registers required by the Malaysian Companies Act 2016 to be retained by the Company and its subsidiaries have been properly kept in accordance with the provisions of the said Act.

The Directors also have general responsibilities for taking such steps that are reasonably available to them to safeguard the assets of the Group and the Company, and to enable the preparation of financial statements of the Group and of the Company that are free from material misstatement, whether due to fraud or error.

STATEMENT OF DIRECTORS’ RESPONSIBILITIESIN RELATION TO THE FINANCIAL STATEMENTS

The Directors have pleasure in submitting their report and the audited financial statements of the Group and of the Company for the year ended 31 December 2020.

PRINCIPAL ACTIVITIES

The principal activities of the Company in the course of the financial year remained unchanged and consist of separating natural gas into its components and storing, transporting and distributing such components thereof for a fee and the sale of industrial utilities.

The principal activities of subsidiaries, joint ventures and associate are stated in Note 4, Note 5 and Note 6 to the financial statements respectively.

ULTIMATE HOLDING COMPANY

The holding and ultimate holding company is Petroliam Nasional Berhad (“PETRONAS”), a company incorporated in Malaysia.

SUBSIDIARIES

The details of the Company’s subsidiaries are disclosed in Note 4 to the financial statements.

RESULTS

Group Company

RM’000 RM’000

Profit for the year 2,082,281 1,734,441

Attributable to:

Shareholders of the Company 2,009,585 1,734,441

Non-controlling interests 72,696 –

DIVIDENDS

During the financial year, the amount of dividends paid by the Company were as follows:

(i) In respect of the financial year ended 31 December 2019 as reported in the Directors’ Report of that year, a fourth interim dividend of 22 sen per ordinary share amounting to RM435,321,000 and a special interim dividend of 10 sen per ordinary share amounting to RM197,873,000 declared on 18 February 2020 and paid on 26 March 2020; and

(ii) In respect of the financial year ended 31 December 2020:

• a first interim dividend of 16 sen per ordinary share amounting to RM316,597,000 declared on 20 May 2020 and paid on 30 June 2020;

• a second interim dividend of 16 sen per ordinary share amounting to RM316,597,000 declared on 19 August 2020 and paid on 1 October 2020;

• a special interim dividend of 50 sen per ordinary share amounting to RM989,366,000 declared on 19 August 2020 and paid on 1 October 2020; and

• a third interim dividend of 18 sen per ordinary share amounting to RM356,172,000 declared on 19 November 2020 and paid on 22 December 2020.

The Directors had on 22 February 2021 declared a fourth interim dividend of 22 sen per ordinary share amounting to RM435.3 million and a special interim dividend of 5 sen per ordinary share amounting to RM98.9 million, in respect of the financial year ended 31 December 2020.

The financial statements for the current financial year do not reflect the declared interim dividends. The dividends will be accounted for in equity as an appropriation of retained profits in the financial statements for the financial year ending 31 December 2021.

Further details on dividends are disclosed in Note 23 to the financial statements.

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DIRECTORS’ REPORTfor the year ended 31 December 2020

RESERVES AND PROVISIONS

There were no material movements to and from reserves and provisions during the year, other than as disclosed in the financial statements.

DIRECTORS

Directors who served during the financial year until the date of this report are:

Adnan bin Zainol Abidin (appointed on 2 July 2020)Abdul Aziz bin Othman (appointed on 1 January 2021) Habibah binti AbdulFarina binti Farikhullah KhanDato’ Abdul Razak bin Abdul MajidDatuk Yeow Kian Chai (appointed on 30 July 2020) Emeliana Dallan Rice-OxleyMarina binti Md TaibAdif bin Zulkifli (resigned on 2 July 2020) Kamalbahrin bin Ahmad (resigned on 1 January 2021)Dato’ Ab. Halim bin Mohyiddin (resigned on 3 August 2020)

Subsidiaries

Regas Terminal (Sg. Udang) Sdn. Bhd.

Abdul Aziz bin Othman (appointed on 5 February 2021) Zainal Abidin bin ZainudinAfendy bin Mohamed AliKamalbahrin bin Ahmad (resigned on 5 February 2021)

Regas Terminal (Pengerang) Sdn. Bhd.

Abdul Razak bin Saim Burhan bin Abdullah

Regas Terminal (Lahad Datu) Sdn. Bhd.

Abdul Razak bin Saim Burhan bin Abdullah

Pengerang LNG (Two) Sdn. Bhd.

Directors Alternates

Abdul Aziz bin Othman (appointed on 5 February 2021) Shariza Sharis binti Mohd Yusof (alternate to PGB’s nominees)

Abdul Razak bin Saim* Teo Seow Ling (alternate to Chan Yew Kai)

Zainal Abidin bin Zainudin* Ngau Wu Wei (alternate to Zainab binti Mohd Salleh)

Abdul Razak Faiz bin Sulaiman* (appointed on 10 March 2020)Chan Yew KaiZainab binti Mohd SallehLukman bin Abu Bakar (appointed on 28 February 2020)Kamalbahrin bin Ahmad* (resigned on 5 February 2021)Azrul bin Osman Rani* (resigned on 10 March 2020)

Dzulkifly bin Hassan (alternate to Lukman bin Abu Bakar) (appointed on 28 February 2020)

* These directors are nominees from PETRONAS Gas Berhad (“PGB”)

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DIRECTORS (CONTINUED)

In accordance with Article 107 of the Company’s Constitution, Farina Farikhullah Khan and Dato’ Abdul Razak Abdul Majid will retire by rotation from the Board at the forthcoming Annual General Meeting, and being eligible, offer themselves for re-election.

In accordance with Article 100 of the Company’s Constitution, Adnan Zainol Abidin, Datuk Yeow Kian Chai and Abdul Aziz Othman who have been appointed to fill casual vacancies on the Board, will retire at the forthcoming Annual General Meeting, and being eligible, offer themselves for re-election.

DIRECTORS’ INTERESTS

The Directors in office at the end of the year who have interests and deemed interests in the shares of the Company and of its related corporations other than wholly-owned subsidiaries (including the interests of the spouses and/or children of the Directors who themselves are not Directors of the Company) as recorded in the Register of Directors’ Shareholdings are as follows:

Number of ordinary shares in the Company

Date of Balance at

Name appointment Bought Sold 31.12.2020

Datuk Yeow Kian Chai 3,000 – – 3,000

Number of ordinary shares in PETRONAS Chemicals Group Berhad

Balance at1.1.2020/

Date ofappointment

Balance at31.12.2020

Name Bought Sold

Adnan bin Zainol Abidin – own 10,000 – – 10,000

– spouse 6,000 – – 6,000

Marina binti Md Taib 1,000 – – 1,000

Kamalbahrin bin Ahmad 5,000 – – 5,000

Number of ordinary shares in PETRONAS Dagangan Berhad

Date of Balance at

Name appointment Bought Sold 31.12.2020

Datuk Yeow Kian Chai 6,000 – (3,000) 3,000

None of the other Directors holding office at 31 December 2020 had any interest in the ordinary shares of the Company and of its related corporations during the financial year.

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Directors’ Report for the year ended 31 December 2020

DIRECTORS’ BENEFITS

Since the end of the previous financial year, no Director of the Company has received nor become entitled to receive any benefit (other than the benefit included in the aggregate amount of remuneration received or due and receivable by Directors as shown in Note 27 to the financial statements or the fixed salary of a full time employee of the Company or of related corporations), by reason of a contract made by the Company or a related corporation with the Director or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest.

There were no arrangements during and at the end of the financial year which had the object of enabling Directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.

ISSUE OF SHARES

There were no changes in the issued and paid up capital of the Company during the financial year.

OPTIONS GRANTED OVER UNISSUED SHARES

No options were granted to any person to take up unissued shares of the Company during the financial year.

INDEMNITY AND INSURANCE COSTS

During the financial year, Petroliam Nasional Berhad (“PETRONAS”) and its subsidiaries (hereinafter referred to as “PETRONAS Group”), including the Company, maintained a Directors’ and Officers’ Liability Insurance in accordance with Section 289 of the Companies Act, 2016. The total insured limit for the Directors and Officers Liability Insurance effected for the Directors and Officers of PETRONAS Group was RM1,290 million (2019: RM1,290 million) per occurrence and in the aggregate. The insurance premium for the Group and the Company is RM19,851 (2019: RM19,851) and RM17,851 (2019: RM17,851) respectively.

OTHER STATUTORY INFORMATION

Before the financial statements of the Group and of the Company were made out, the Directors took reasonable steps to ascertain:

(i) necessary actions had been taken in relation to the writing off of bad debts and the provisioning of doubtful debt and satisfied themselves that all known bad debts have been written off and adequate provision made for doubtful debts, and

(ii) any current assets which were unlikely to be realised in the ordinary course of business, their values as shown in the accounting records of the Group and of the Company, had been written down to an amount which they might be expected so to realise.

At the date of this report, the Directors are not aware of any circumstances:

(i) that would render the amount written off for bad debts, or the amount of the provision for doubtful debts, in the Group and in the Company inadequate to any substantial extent, or

(ii) that would render the value attributed to the current assets in the financial statements of the Group and of the Company misleading, or

(iii) which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate, or

(iv) not otherwise dealt with in this report or the financial statements, that would render any amount stated in the financial statements of the Group and of the Company misleading.

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01

02

OTHER STATUTORY INFORMATION (CONTINUED)

At the date of this report, there does not exist:

(i) any charge on the assets of the Group or of the Company that has arisen since the end of the financial year and which secures the liabilities of any other person, or

(ii) any material contingent liability in respect of the Group or of the Company that has arisen since the end of the financial year.

No material contingent liability or other liability of any company in the Group has become enforceable, or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the Directors, will or may substantially affect the ability of the Group and of the Company to meet their obligations as and when they fall due.

In the opinion of the Directors, the financial performance of the Group and of the Company for the financial year ended 31 December 2020 have not been substantially affected by any item, transaction or event of a material and unusual nature nor has any such item, transaction or event occurred in the interval between the end of that financial year and the date of this report.

In respect of the directors or past directors of the Company, the amount of:

(i) fees and other benefits paid to or receivable by them from the Company or its subsidiary companies as remuneration for their services to the Company or its subsidiary companies; and

(ii) the estimated money value of any other benefits received or receivable by them otherwise than in cash from the Company or from any of its subsidiary companies; and

(iii) the total of the amount paid to or receivable by any third party in respect of the services provided to the Company or any of its subsidiary companies by any director or past director of the Company;

are disclosed in Note 27 to the financial statements.

AUDITORS

The auditors, KPMG PLT, have indicated their willingness to accept re-appointment.

The auditors’ remuneration is disclosed in Note 20 to the financial statements.

Signed on behalf of the Board of Directorsin accordance with a resolution of the Directors:

Adnan bin Zainol Abidin Abdul Aziz bin Othman Chairman Director

Kuala Lumpur, Date: 22 February 2021

78


Directors’ Report for the year ended 31 December 2020

In the opinion of the Directors, the financial statements set out on pages 80 to 173, are drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as of 31 December 2020 and of their financial performance and cash flows for the financial year then ended on that date.

Signed on behalf of the Board of Directors in accordance with a resolution of the Directors:

Adnan bin Zainol Abidin Abdul Aziz bin Othman Chairman Director

Kuala Lumpur, Date: 22 February 2021

I, Shariza Sharis binti Mohd Yusof, the officer primarily responsible for the financial management of PETRONAS GAS BERHAD, do solemnly and sincerely declare that the financial statements set out on pages 80 to 173 are, to the best of my knowledge and belief, correct and I make this solemn declaration conscientiously believing the same to be true, and by virtue of provisions of the Statutory Declarations Act, 1960.

Subscribed and solemnly declared by the abovenamed Shariza Sharis binti Mohd Yusof, MIA Membership Number: 37533at Kuala Lumpur in Wilayah Persekutuan on 22 February 2021.

79


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02

STATEMENT BY DIRECTORS

STATUTORY DECLARATION

2020 2019

Note RM’000 RM’000

ASSETS

Property, plant and equipment 3 13,216,195 13,246,513

Investment in joint ventures 5 631,248 547,361

Investment in associate 6 142,482 137,771

Long term receivables 7 208,453 263,569

Deferred tax assets 9 217,915 273,814

TOTAL NON-CURRENT ASSETS 14,416,293 14,469,028

Trade and other inventories 10 44,940 78,153

Trade and other receivables 11 744,484 954,875

Tax recoverable – 59,769

Cash and cash equivalents 12 3,138,898 4,021,696

TOTAL CURRENT ASSETS 3,928,322 5,114,493

TOTAL ASSETS 18,344,615 19,583,521

EQUITY

Share capital 13 3,165,204 3,165,204

Reserves 14 9,469,553 10,080,158

Total equity attributable to the shareholders of the Company 12,634,757 13,245,362

Non-controlling interests 15 333,777 319,813

TOTAL EQUITY 12,968,534 13,565,175

LIABILITIES

Borrowings 16 3,134,260 3,792,264

Deferred tax liabilities 9 1,240,578 1,233,482

Deferred income 17 2,127 3,072

TOTAL NON-CURRENT LIABILITIES 4,376,965 5,028,818

Trade and other payables 18 839,135 882,876

Borrowings 16 145,161 106,652

Taxation 14,820 –

TOTAL CURRENT LIABILITIES 999,116 989,528

TOTAL LIABILITIES 5,376,081 6,018,346

TOTAL EQUITY AND LIABILITIES 18,344,615 19,583,521

The notes set out on pages 91 to 173 are an integral part of these financial statements.

80


CONSOLIDATED STATEMENT OF FINANCIAL POSITIONas at 31 December 2020

2020 2019


Revenue 19 5,592,117 5,458,250

Cost of revenue (2,935,689) (3,071,201)

Gross profit 2,656,428 2,387,049

Administration expenses (125,361) (94,825)

Other expenses (22,281) –

Other income 161,408 263,621

Operating profit 20 2,670,194 2,555,845

Financing costs 21 (219,781) (229,684)

Share of profit after tax of equity-accounted joint ventures and associate 159,788 136,724

Profit before taxation 2,610,201 2,462,885

Tax expense 22 (527,920) (478,833)

PROFIT FOR THE YEAR 2,082,281 1,984,052

Other comprehensive expenses

Items that may be reclassified subsequently to profit or loss

Net movement from exchange differences (5,184) (16,082)

Cash flow hedge (1,981) (63,570)

Share of cash flow hedge of an equity-accounted joint venture (1,099) (447)

TOTAL COMPREHENSIVE INCOME FOR THE YEAR 2,074,017 1,903,953

Profit attributable to:


Non-controlling interests 15 72,696 48,794


Total comprehensive income attributable to:


Non-controlling interests 72,696 43,542


Basic and diluted earnings per ordinary share (sen) 24 101.6 97.8


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02

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME for the year ended 31 December 2020

Attributable to shareholders of the Company

Non-distributable

Share Capital

Capital Reserve

Foreign Currency

TranslationReserve

Hedging Reserve

Note RM’000 RM’000 RM’000 RM’000

Balance at 1 January 2019 3,165,204 57,090 25,962 101,803

Net movement from exchange differences – – (10,830) –

Cash flow hedge – – – (63,570)

Share of cash flow hedge of an equity-accounted joint venture – – – (447)

Profit for the year – – – –

Total comprehensive (expenses)/income for the year – – (10,830) (64,017)

Redemption of redeemable preference share in subsidiaries – 354,111 – –

Dividends – 31.12.2018 interim 23 – – – –


Total transactions with shareholders of the Company – 354,111 – –

Balance at 31 December 2019 3,165,204 411,201 15,132 37,786

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82


CONSOLIDATED STATEMENT OF CHANGES IN EQUITYfor the year ended 31 December 2020

Attributable to shareholdersof the Company

Non- controlling

InterestsTotal

Equity

Distributable

Retainedprofits Total

Note RM’000 RM’000 RM’000 RM’000

Balance at 1 January 2019 9,459,579 12,809,638 369,281 13,178,919

Net movement from exchange differences – (10,830) (5,252) (16,082)

Cash flow hedge – (63,570) – (63,570)

Share of cash flow hedge of an equity-accounted joint venture – (447) – (447)

Profit for the year 1,935,258 1,935,258 48,794 1,984,052

Total comprehensive (expenses)/income for the year 1,935,258 1,860,411 43,542 1,903,953

Redemption of redeemable preference share in subsidiaries (354,111) – (73,320) (73,320)

Dividends – 31.12.2018 interim 23 (435,321) (435,321) – (435,321)

Dividends – 31.12.2019 interim 23 (989,366) (989,366) (19,690) (1,009,056)

Total transactions with shareholders of the Company (1,778,798) (1,424,687) (93,010) (1,517,697)

Balance at 31 December 2019 9,616,039 13,245,362 319,813 13,565,175

continued from previous page


83


01

02

Attributable to shareholders of the Company

Non-distributable

Share Capital

Capital Reserve

Foreign Currency

TranslationReserve

Hedging Reserve

Note RM’000 RM’000 RM’000 RM’000

Balance at 1 January 2020 3,165,204 411,201 15,132 37,786

Net movement from exchange differences – – (5,184) –

Cash flow hedge – – – (1,981)

Share of cash flow hedge of an equity-accounted joint venture – – – (1,099)

Profit for the year – – – –

Total comprehensive (expenses)/income for the year – – (5,184) (3,080)

Redemption of redeemable preference share in subsidiaries – 109,600 – –



Total transactions with shareholders of the Company – 109,600 – –

Balance at 31 December 2020 3,165,204 520,801 9,948 34,706



84


Consolidated Statement of Changes in Equityfor the year ended 31 December 2020

Attributable to shareholdersof the Company

Non- controlling

InterestsTotal

Equity

Distributable

Retainedprofits Total

Note RM’000 RM’000 RM’000 RM’000

At 1 January 2020 9,616,039 13,245,362 319,813 13,565,175

Net movement from exchange differences – (5,184) – (5,184)

Cash flow hedge – (1,981) – (1,981)

Share of cash flow hedge of an equity-accounted joint venture – (1,099) – (1,099)

Profit for the year 2,009,585 2,009,585 72,696 2,082,281

Total comprehensive (expenses)/income for the year 2,009,585 2,001,321 72,696 2,074,017

Redemption of redeemable preference share in subsidiaries (109,600) – – –

Dividends – 31.12.2019 interim 23 (633,194) (633,194) – (633,194)

Dividends – 31.12.2020 interim 23 (1,978,732) (1,978,732) (58,732) (2,037,464)

Total transactions with shareholders of the Company (2,721,526) (2,611,926) (58,732) (2,670,658)




85


01

02

2020 2019


CASH FLOWS FROM OPERATING ACTIVITIESProfit before taxation 2,610,201 2,462,885Adjustments for:

Depreciation and amortisation 3 1,016,887 1,137,578 Share of profit after tax of equity-accounted joint ventures and associate (159,788) (136,724)Unrealised gain on foreign exchange 20 (23,838) (49,080)Interest income 20 (120,919) (154,244)Financing costs 21 219,781 229,684Other non-cash items 15,371 (737)

Operating profit before changes in working capital 3,557,695 3,489,362 Change in trade and other receivables 262,773 14,580 Change in trade and other inventories 19,185 (12,860)Change in trade and other payables (78,300) 141,754

Cash generated from operations 3,761,353 3,632,836 Interest income 120,919 154,244 Taxation paid (390,376) (429,788)

Net cash generated from operating activities 3,491,896 3,357,292

CASH FLOWS FROM INVESTING ACTIVITIESDividend received from joint ventures and associate 64,906 28,471 Increase in investment in a joint venture – (31,031)Term loan to a joint venture – (7,226)Proceeds from disposal of property, plant and equipment 8,619 6,509Purchase of property, plant and equipment (964,269) (1,094,383)

Net cash used in investing activities (890,744) (1,097,660)

CASH FLOWS FROM FINANCING ACTIVITIESDividends paid to shareholders of Company 23 (2,611,926) (1,424,687)Dividend paid to a non-controlling interest (58,732) (19,690)Drawdown of:– Term loan 16 – 7,226– Islamic financing facility 16 1,700,000 – Payment of lease liabilities 16 (57,487) (56,579)Repayment of:– Term loan 16 (1,800,333) –– Loan from corporate shareholder of a subsidiary 16 (439,795) (52,938)Payment to non-controlling interests on redemption of shares – (73,320)Interest expense paid 16 (215,677) (229,535)

Net cash used in financing activities (3,483,950) (1,849,523)

NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (882,798) 410,109 NET FOREIGN EXCHANGE DIFFERENCES – (4,441)CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR 4,021,696 3,616,028

CASH AND CASH EQUIVALENTS AT END OF THE YEAR 12 3,138,898 4,021,696

Total cash outflows for leases during the year comprise repayment of lease liabilities and related interests totalling RM197,720,000 (2019: RM202,991,000).

Included in the Group’s cash and cash equivalents is RM24,351,000 (2019: RM Nil) in a finance service reserve account being designated as security against a subsidiary’s Islamic financing facility.


86


CONSOLIDATED STATEMENT OF CASH FLOWSfor the year ended 31 December 2020

2020 2019


ASSETS

Property, plant and equipment 3 7,903,410 7,633,146

Investment in subsidiaries 4 1,608,853 2,129,753

Investment in joint ventures 5 283,059 283,059

Investment in associate 6 76,466 76,466

Long term receivables 7 208,453 1,317,471

TOTAL NON-CURRENT ASSETS 10,080,241 11,439,895

Trade and other inventories 10 40,840 56,895

Trade and other receivables 11 602,665 954,332

Tax recoverable – 59,825

Cash and cash equivalents 12 2,626,718 3,532,758

TOTAL CURRENT ASSETS 3,270,223 4,603,810

TOTAL ASSETS 13,350,464 16,043,705

EQUITY

Share capital 13 3,165,204 3,165,204

Reserves 14 8,227,286 9,106,752

TOTAL EQUITY 11,392,490 12,271,956

LIABILITIES

Borrowings 16 6,774 1,781,242

Deferred tax liabilities 9 1,240,462 1,232,984

Deferred income 17 2,127 3,072

TOTAL NON-CURRENT LIABILITIES 1,249,363 3,017,298

Trade and other payables 18 693,019 754,451

Borrowings 16 82 –

Taxation 15,510 –

TOTAL CURRENT LIABILITIES 708,611 754,451

TOTAL LIABILITIES 1,957,974 3,771,749

TOTAL EQUITY AND LIABILITIES 13,350,464 16,043,705


87


01

02

STATEMENT OF FINANCIAL POSITIONas at 31 December 2020

2020 2019


Revenue 19 4,193,578 4,222,693

Cost of revenue (2,248,799) (2,444,300)

Gross profit 1,944,779 1,778,393

Administration expenses (122,736) (92,894)

Other expenses (7,119) (3,790)

Other income 430,735 373,653

Operating profit 20 2,245,659 2,055,362

Financing costs 21 (44,180) (50,083)


Tax expense 22 (467,038) (431,781)


Other comprehensive expense

Item that may be reclassified subsequently to profit or loss

Cash flow hedge (1,981) (27,112)



88


STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOMEfor the year ended 31 December 2020

Attributable To Shareholders Of The Company

TotalRM’000

Non-distributable Distributable

ShareCapital

HedgingReserve

RetainedProfits

Note RM’000 RM’000 RM’000

Balance at 1 January 2019 3,165,204 29,092 8,955,961 12,150,257

Cash flow hedge – (27,112) – (27,112)

Profit for the year – – 1,573,498 1,573,498

Total comprehensive (expense)/income for the year – (27,112) 1,573,498 1,546,386

Dividends – 31.12.2018 interim 23 – – (435,321) (435,321)


Total distribution to shareholders of the Company – – (1,424,687) (1,424,687)

Balance at 31 December 2019 3,165,204 1,980 9,104,772 12,271,956

Balance at 1 January 2020 3,165,204 1,980 9,104,772 12,271,956

Cash flow hedge – (1,981) – (1,981)

Profit for the year – – 1,734,441 1,734,441

Total comprehensive (expense)/income for the year – (1,981) 1,734,441 1,732,460


Dividends – 31.12.2020 interim 23 – – (1,978,732) (1,978,732)

Total distribution to shareholders of the Company – – (2,611,926) (2,611,926)

Balance at 31 December 2020 3,165,204 (1) 8,227,287 11,392,490


89


01

02

STATEMENT OF CHANGES IN EQUITYfor the year ended 31 December 2020

2020 2019


CASH FLOWS FROM OPERATING ACTIVITIES


Adjustments for:

Depreciation and amortisation 3 646,522 760,752

Unrealised loss on foreign exchange 20 1,605 2,847

Interest income 20 (175,939) (227,762)

Financing costs 21 44,180 50,083

Other non-cash items 14,780 392

Operating profit before changes in working capital 2,732,627 2,591,591

Change in trade and other receivables 289,975 (142,902)

Change in trade and other inventories 1,720 (34)

Change in trade and other payables (130,628) 112,181

Cash generated from operations 2,893,694 2,560,836

Dividends received from subsidiary, joint ventures and associate (217,074) (79,244)

Interest income 175,939 227,762

Taxation paid (384,225) (424,742)

Net cash generated from operating activities 2,468,334 2,284,612

CASH FLOWS FROM INVESTING ACTIVITIES

Dividend received from subsidiary, joint ventures and associate 217,074 79,244

Increase in investment in a joint venture – (31,031)

Term loan to joint venture – (7,226)

Purchase of property, plant and equipment (878,730) (969,703)

Proceeds from disposal of property, plant and equipment 8,619 6,509

Redemption of preference share in subsidiaries 4 520,900 354,111

Repayment of term loan due from a subsidiary 1,214,529 136,250

Net cash generated from/(used in) investing activities 1,082,392 (431,846)

CASH FLOWS FROM FINANCING ACTIVITIES

Dividends paid 23 (2,611,926) (1,424,687)

Drawdown of term loan 16 – 7,226

Payment of lease liabilities 16 (94) –

Repayment of term loan 16 (1,800,333) –

Interest expense paid 16 (44,413) (50,083)

Net cash used in financing activities (4,456,766) (1,467,544)

NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (906,040) 385,222

CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR 3,532,758 3,147,536

CASH AND CASH EQUIVALENTS AT END OF THE YEAR 12 2,626,718 3,532,758

Total cash outflows for leases during the year comprise payment of lease liabilities and related interests totalling RM800,000 (2019: RM Nil).


90


STATEMENT OF CASH FLOWSfor the year ended 31 December 2020

PETRONAS GAS BERHAD is a public limited liability company, incorporated and domiciled in Malaysia and is listed on the Main Market of Bursa Malaysia Securities Berhad. The address of the principal place of business and registered office of the Company is as follows:

Tower 1, PETRONAS Twin Towers, Kuala Lumpur City Centre, 50088 Kuala Lumpur

The Company is principally engaged in separating natural gas into its components and storing, transporting and distributing such components thereof for a fee and the sale of industrial utilities. The principal activities of its subsidiaries, joint ventures and associate are as stated in Note 4, Note 5 and Note 6 to the financial statements respectively.

The holding company as well as the ultimate holding company is Petroliam Nasional Berhad (“PETRONAS”), a company incorporated in Malaysia.

The consolidated financial statements of the Company as at and for the financial year ended 31 December 2020 comprises the Company and its subsidiaries (collectively referred to as the “Group”) and the Group’s interest in joint ventures and an associate.

1. BASIS OF PREPARATION

1.1 Statement of compliance

The financial statements of the Group and of the Company have been prepared in accordance with Malaysian Financial Reporting Standards (“MFRS”), International Financial Reporting Standards and the requirements of the Companies Act, 2016 in Malaysia.

These financial statements also comply with the applicable disclosure provisions of the Listing Requirements of Bursa Malaysia Securities Berhad.

As of 1 January 2020, the Group and the Company have adopted amendments to MFRSs (“pronouncements”) that have been issued by the Malaysian Accounting Standards Board (“MASB”) as described fully in Note 31 to the financial statements.

MASB has also issued revised pronouncements which are not yet effective for the Group and the Company and therefore, have not been adopted in these financial statements. These pronouncements including their impact on the financial statements in the period of initial application are set out in Note 32 to the financial statements. The new and revised pronouncements which are not yet effective that are not relevant to the operation of the Group and of the Company are set out in Note 33.

These financial statements were approved and authorised for issue by the Board of Directors on 22 February 2021.

1.2 Basis of measurement

The financial statements of the Group and of the Company have been prepared on historical cost basis except for certain items are measured at fair value, as disclosed in the accounting policies below.

1.3 Functional and presentation currency

The individual financial statements of each entity in the Group are prepared using the currency of the primary economic environment in which the entity operates (“the functional currency”). The Group’s and the Company’s financial statements are presented in Ringgit Malaysia (“RM”), which is the Company’s functional currency.

1.4 Use of estimates and judgments

The preparation of financial statements in conformity with MFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

91


01

02

NOTES TO THE FINANCIAL STATEMENTSas at 31 December 2020

1. BASIS OF PREPARATION (CONTINUED)

1.4 Use of estimates and judgments (continued)

In particular, information about significant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements are described in the following Notes:

(i) Note 3 : Property, Plant and Equipment;(ii) Note 9 : Deferred Tax;(iii) Note 22 : Tax Expense; and(iv) Note 29 : Financial Instruments.

2. SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out below have been applied consistently to all periods presented in these financial statements and have been applied consistently by the Group and the Company, unless otherwise stated.

2.1 Basis of consolidation

Subsidiaries

Subsidiaries are entities, including structured entities, controlled by the Company. The Company controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Potential voting rights are considered when assessing control only when such rights are substantive. The Company considers it has de facto power over an investee when, despite not having the majority of voting rights, it has the current ability to direct the activities of the investee that significantly affect the investee’s return.

Investments in subsidiaries are measured in the Company’s statement of financial position at cost less any impairment losses, unless the investment is classified as held for sale or distribution. The cost of investment includes transaction costs.

The financial statements of subsidiaries are included in the consolidated financial statements of the Group from the date that

control commences until the date that control ceases.

All inter-company transactions are eliminated on consolidation and revenue and profits relate to external transactions only. Unrealised losses resulting from inter-company transactions are also eliminated unless cost cannot be recovered.

Business combinations

A business combination is a transaction or other event in which an acquirer obtains control of one or more businesses. Business combinations are accounted for using the acquisition method from the acquisition date, which is the date on which control is transferred to the Group. The identifiable assets acquired and liabilities assumed are measured at their fair values at the acquisition date. The cost of an acquisition is measured as the aggregate of the fair value of the consideration transferred and the amount of any non-controlling interests in the acquiree. Non-controlling interests are stated either at fair value or at the proportionate share of the acquiree’s identifiable net assets at the acquisition date.

When a business combination is achieved in stages, the Group remeasures its previously held non-controlling equity interest in the acquiree at fair value at the acquisition date, with any resulting gain or loss recognised in the profit or loss. Increase in the Group’s ownership interest in an existing subsidiary is accounted for as equity transactions with differences between the fair value of consideration paid and the Group’s proportionate share of net assets acquired, recognised directly in equity.

The Group measures goodwill as the excess of the cost of an acquisition and the fair values of any previously held interest in the acquiree over the fair value of the identifiable assets acquired and liabilities assumed at the acquisition date. When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.

Transaction costs, other than those associated with the issuance of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

92


Notes to the Financial Statementsas at 31 December 2020

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.1 Basis of consolidation (continued)

Business combinations (continued)

Business combinations arising from transfers of interests in entities that are under the control of the shareholder that controls the Group are accounted for as if the acquisition had occurred at the beginning of the earliest comparative period presented, or, if later, at the date that common control was established; for this purpose, comparatives are restated. The assets and liabilities acquired are recognised at the carrying amounts recognised previously in the Group controlling shareholder’s consolidated financial statements. The components of equity of the acquired entities are added to the same components within Group equity and any resulting gain or loss is recognised directly in equity.

Non-controlling interests

Non-controlling interests at the end of the reporting period, being the portion of the net assets of subsidiaries attributable to equity interests that are not owned by the Company, whether directly or indirectly through subsidiaries, are presented in the consolidated statement of financial position and statement of changes in equity within equity, separately from equity attributable to the shareholders of the Company. Non-controlling interests in the results of the Group are presented in the consolidated statement of profit or loss and other comprehensive income as an allocation of the profit or loss and total comprehensive income for the year between the non-controlling interests and shareholders of the Company.

Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance.

The Group treats all changes in its ownership interest in a subsidiary that do not result in a loss of control as equity transactions between the Group and its non-controlling interest holders. Any difference between the Group’s share of net assets before and after the change, and any consideration received or paid, is adjusted to or against Group reserves.

Loss of control

Upon the loss of control of a subsidiary, the Group derecognises the assets and liabilities of the former subsidiary, any non-controlling interests and the other components of equity related to the former subsidiary from the consolidated statement of financial position. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the former subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently, it is accounted for as an equity-accounted investee or as a fair value through other comprehensive income financial asset depending on the level of influence retained.

2.2 Associate

An associate is an entity in which the Group has significant influence including representation on the Board of Directors, but not control or joint control, over the financial and operating policies of the investee company.

Associates are accounted for in the consolidated financial statements using the equity method less any impairment losses, unless it is classified as held for sale or distribution. The consolidated financial statements include the Group’s share of post-acquisition profits or losses and other comprehensive income of the equity-accounted associates, after adjustments to align the accounting policies with those of the Group, from the date that significant influence commences until the date that significant influence ceases.

The Group’s share of post-acquisition reserves and retained profits less losses is added to the carrying value of the investment in the consolidated statement of financial position. These amounts are taken from the latest audited financial statements or management financial statements of the associate.

When the Group’s share of post-acquisition losses exceeds its interest in an equity accounted associate, the carrying amount of that interest (including any long-term investments such as loans and advances) is reduced to nil and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the associate.

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2.2 Associate (continued)

When the Group ceases to have significant influence over an associate, it is accounted for as a disposal of the entire interest in that associate, with the resulting gain or loss being recognised in the profit or loss. Any retained interest in the former associate at the date when significant influence is lost is measured at fair value and this amount is regarded as the initial carrying amount of a financial asset.

When the Group’s interest in an associate decreases but does not result in loss of significant influence, any retained interest is not re-measured. Any gain or loss arising from the decrease in interest is recognised in profit or loss. Any gains or losses previously recognised in other comprehensive income are also reclassified proportionately to the profit or loss if that gain or loss would be required to be reclassified to profit or loss on the disposal of the related assets and liabilities.

Unrealised profits arising from transactions between the Group and its associate are eliminated to the extent of the Group’s interests in the associate. Unrealised losses on such transactions are also eliminated partially, unless cost cannot be recovered.

2.3 Joint arrangements

Joint arrangements are arrangements of which the Group has joint control, established by contracts requiring unanimous consent for decisions about the activities that significantly affect the arrangements’ returns.

Joint arrangements are classified as either joint operation or joint venture. A joint arrangement is classified as joint operation when the Group or the Company has rights to the assets and obligations for the liabilities relating to an arrangement. The Group and the Company account for each of its share of the assets, liabilities and transactions, including its share of those held or incurred jointly with the other investors, in relation to the joint operation. A joint arrangement is classified as joint venture when the Group has rights only to the net assets of the arrangements. The Group accounts for its interest in the joint venture using the equity method as described in Note 2.2.

2.4 Property, plant and equipment and depreciation

Recognition and measurement

Freehold land and projects-in-progress are stated at cost less accumulated impairment losses and are not depreciated. Other property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses.

Cost includes expenditures that are directly attributable to the acquisition of the assets and any other costs directly attributable to bringing the assets to working condition for their intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. The cost of self-constructed assets also includes the cost of material and direct labour. For qualifying assets, borrowing costs are capitalised in accordance with the accounting policy on borrowing costs. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.

When significant components of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

Subsequent costs

The cost of replacing a component of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the component will flow to the Group or the Company and its cost can be measured reliably. The carrying amount of the replaced item of property, plant and equipment is derecognised with any corresponding gain or loss recognised in the profit or loss accordingly. The costs of the day-to-day servicing of property, plant and equipment are recognised in the profit or loss as incurred.

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2.4 Property, plant and equipment and depreciation (continued)

Depreciation

Depreciation for property, plant and equipment other than freehold land and projects-in-progress, is recognised in profit or loss on a straight-line basis over the estimated useful lives of each component of an item of property, plant and equipment. Property, plant and equipment are not depreciated until the assets are ready for their intended use.

Buildings are depreciated over 50 years or over the remaining land lease period, whichever is shorter.

The estimated useful lives of the other property, plant and equipment and right-of-use assets are as follows:

Plant and pipelines 5 – 55 years

Storage units 20 – 25 years

Plant turnaround/major inspection 3 – 6 years

Office equipment, furniture and fittings 6 – 7 years

Other plant and equipment 3 – 20 years

Computer software and hardware 5 years

Motor vehicles 4 years

The depreciable amount is determined after deducting residual value. The residual value, useful life and depreciation method are reviewed at each financial year end to ensure that the amount, period and method of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the items of property, plant and equipment.

Right-of-use assets are subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use assets or the end of the lease term.

Derecognition

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. The difference between the net disposal proceeds, if any, and the net carrying amount is recognised in the profit or loss.

2.5 Leases

(i) Definition of a lease

A contract is, or contains, a lease if the contract conveys a right to control the use of an identified asset for a period of time in exchange for a consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group and the Company assess whether:

– the contract involves the use of an identified asset – this may be specified explicitly or implicitly and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified;

– the customer has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and

– the customer has the right to direct the use of the asset when it has the decision-making rights that are most relevant to changing how and for what purpose the asset is used. The customer has the right to direct the use of the asset if either the customer has the right to operate the asset; or the customer designed the asset in a way that predetermines how and for what purpose it will be used throughout the period of use.

At inception or on reassessment of a contract that contains a lease component, the Group and the Company allocate the consideration in the contract to each lease and non-lease component on the basis of their relative stand-alone prices.

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2.5 Leases (continued)

(ii) Recognition and initial measurement

(a) As a lessee

The Group and the Company recognise a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the respective Group entities’ incremental borrowing rate is used. Generally, the Group entities use their incremental borrowing rate as the discount rate.

Lease payments included in the measurement of the lease liability comprise the following:

– fixed payments, including in-substance fixed payments;– variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the

commencement date;– amounts expected to be payable under a residual value guarantee;– the exercise price under a purchase option that the Group and the Company are reasonably certain to exercise;

and– penalties for early termination of a lease unless the Group and the Company are reasonably certain not to early

terminate the contract.

The Group and the Company exclude variable lease payments that are linked to future performance or usage of the underlying asset from the lease liability. Instead, these payments are recognised in profit or loss in the period in which the performance or use occurs.

The Group and the Company assess at lease commencement whether it is reasonably certain to exercise the extension options in determining the lease term.

The Group and the Company have elected not to recognise right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less and leases of low-value assets. The Group and the Company recognise the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

The Group and the Company present right-of-use assets that do not meet the definition of investment property in ‘property, plant and equipment’ and lease liabilities in ‘borrowings’ in the statement of financial position.

(b) As a lessor

When the Group and the Company act as a lessor, it determines at lease inception whether each lease is a finance lease or an operating lease.

To classify each lease, the Group and the Company make an overall assessment of whether the lease transfers substantially all of the risks and rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease.

If an arrangement contains lease and non-lease components, the Group and the Company apply MFRS 15 Revenue from Contracts with Customers to allocate the consideration in the contract based on the stand-alone selling price.

Where applicable, for finance lease, the Group and the Company recognise assets held under a finance lease in its statement of financial position and presents them as a receivable at an amount equal to the net investment in the lease. The Group and the Company use the interest rate implicit in the lease to measure the net investment in the lease.

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2.5 Leases (continued)

(iii) Subsequent measurement

(a) As a lessee

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of property, plant and equipment. Depreciation of certain right-of-use assets are subsequently capitalised into carrying amount of other assets whenever they meet the criteria for capitalisation. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is measured at amortised cost using the effective interest method (see Note 2.7(vi)). It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a revision of in-substance fixed lease payments, or if there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee, or if the Group changes its assessment of whether it will exercise a purchase, extension or termination option. The Group will reassess whether it is reasonably certain to exercise the extension option if there is a significant change in circumstances within its control.

When the lease liability is remeasured as described in the above paragraph, a corresponding adjustment is made to the carrying amount of the right-of-use asset or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

When there is lease modification due to increase in the scope of lease by adding the right-to-use one or more underlying assets, the Group and the Company assess whether the lease modification shall be accounted for as a separate lease or similar to reassessment of lease liability. The Group and the Company account for lease modification as a separate lease when the consideration for the lease increases by an amount commensurate with the stand-alone price for the increase in scope and any appropriate adjustments.

When there is lease modification due to decrease in scope, the Group and the Company decrease the carrying amount of the right-of-use asset and remeasure the lease liability to reflect the partial or full termination of the lease. The corresponding gain or loss shall be recognised in profit or loss. Lease liabilities are remeasured for all other lease modifications with corresponding adjustments to the right-of-use asset.

(b) As a lessor

The Group and the Company recognise lease payments received under operating leases as income on a straight-line basis over the lease term as part of “revenue”.

The Group and the Company recognise finance income over the lease term, based on a pattern reflecting a constant periodic rate of return on the Group’s and the Company’s net investment in the lease. The Group and the Company aim to allocate finance income over the lease term on a systematic and rational basis. The Group and the Company apply the lease payments relating to the period against the gross investment in the lease to reduce both the principal and the unearned finance income. The net investment in the lease is subject to impairment requirements in MFRS 9 Financial Instruments (see Note 2.8).

2.6 Investments

Long-term investments in subsidiaries, associates and joint ventures are stated at cost less impairment loss, if any, in the Company’s financial statements unless the investment is classified as held for sale or distribution. The cost of investments includes transaction costs.

The carrying amount of these investments includes fair value adjustments on shareholder’s loans and advances, if any (see Note 2.7(i)).

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2.7 Financial instruments

Recognition and initial measurement

A financial instrument is recognised in the statement of financial position when, and only when, the Group or the Company becomes a party to the contractual provisions of the instrument.

Regular way purchases or sales are recognised on the trade date i.e. the date that the Group and the Company commit to purchase or sell the financial asset.

A financial asset (unless it is a receivable without a significant financing component) and a financial liability is measured at fair value plus or minus, in the case of a financial instrument not at fair value through profit or loss, any directly attributable transaction cost incurred at the acquisition or issuance of the financial instrument. A trade receivable that does not contain a significant financing component is initially measured at the transaction price.

Fair value adjustments on shareholder’s loans and advances at initial recognition, if any, are added to the carrying value of investments in the Company’s financial statements.

Classification and subsequent measurement

(i) Financial assets

Financial assets are classified as measured at amortised cost, fair value through other comprehensive income (“FVOCI”) or fair value through profit or loss (“FVTPL”), as appropriate.

The Group and the Company determine the classification of financial assets at initial recognition. The financial assets are not subsequently reclassified unless the Group and the Company changes their business model for managing financial assets in which case all affected financial assets are reclassified on the first day of the first reporting period following the change of the business model.

(a) Amortised cost

Amortised cost category comprises financial assets that are held within a business model whose objective is to hold assets to collect contractual cash flows and its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The financial assets are not designated as fair value through profit or loss.

Subsequent measurement

Subsequent to initial recognition, these financial assets are measured at amortised cost using the effective interest method (see Note 2.7(vi)). Interest income and foreign exchange gains and losses are recognised in profit or loss.

(b) Fair value through profit or loss

All financial assets not classified as measured at amortised cost or fair value through other comprehensive income as described above are measured at fair value through profit or loss. This includes derivative financial assets (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument as per Note 2.7(iii)). On initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at fair value through other comprehensive income as at fair value through profit or loss if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

Subsequent measurement

Financial assets categorised as fair value through profit or loss are subsequently measured at their fair value with gains or losses recognised in the profit or loss. The methods used to measure fair value are stated in Note 2.24.

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2.7 Financial instruments (continued)

Classification and subsequent measurement (continued)

(ii) Financial liabilities

The categories of financial liabilities at initial recognition are as follows:

(a) Amortised cost

Subsequent to initial recognition, other financial liabilities are subsequently measured at amortised cost using the effective interest method (see Note 2.7 (vi)).

Gains and losses are recognised in the profit or loss when the liabilities are derecognised as well as through the amortisation process.

(b) Fair value through profit or loss

Fair value through profit or loss category comprises financial liabilities that are derivatives (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument), contingent consideration in a business combination and financial liabilities that are specifically designated into this category upon initial recognition.

On initial recognition, the Group or the Company may irrevocably designate a financial liability that otherwise meets the requirements to be measured at amortised cost as at fair value through profit or loss:

– if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise;– a group of financial liabilities or financial assets and financial liabilities is managed and its performance is evaluated

on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the Group is provided internally on that basis to the Group’s key management personnel; or

– if a contract contains one or more embedded derivatives and the host is not a financial asset in the scope of MFRS 9, where the embedded derivative significantly modifies the cash flows and separation is not prohibited.

Financial liabilities categorised as fair value through profit or loss are subsequently measured at their fair value with gains or losses, including any interest expenses are recognised in the profit or loss.

For financial liabilities where it is designated as fair value through profit or loss upon initial recognition, the Group and the Company recognise the amount of change in fair value of the financial liability that is attributable to change in credit risk in the other comprehensive income and remaining amount of the change in fair value in the profit or loss, unless the treatment of the effects of changes in the liability’s credit risk would create or enlarge an accounting mismatch.

(iii) Hedge Accounting

Cash Flow hedge

A cash flow hedge is a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction and could affect the profit or loss. In a cash flow hedge, the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised in other comprehensive income and the ineffective portion is recognised in profit or loss.

Subsequently, the cumulative gain or loss recognised in other comprehensive income is reclassified from equity into profit or loss in the same period or periods during which the hedged forecast cash flows affect profit or loss. If the hedge item is a non-financial asset or liability, the associated gain or loss recognised in other comprehensive income is removed from equity and included in the initial amount of the asset or liability. However, loss recognised in other comprehensive income that will not be recovered in one or more future periods is reclassified from equity into profit or loss.

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(iii) Hedge Accounting (continued)

Cash Flow hedge (continued)

Cash flow hedge accounting is discontinued prospectively when the hedging instrument expires or is sold, terminated or exercised, the hedge is no longer highly effective, the forecast transaction is no longer expected to occur or the hedge designation is revoked. If the hedge is for a forecast transaction, the cumulative gain or loss on the hedging instrument remains in equity until the forecast transaction occurs. When the forecast transaction is no longer expected to occur, any related cumulative gain or loss recognised in other comprehensive income on the hedging instrument is reclassified from equity into profit or loss.

(iv) Derivative financial instruments

The Group and the Company use derivative financial instruments such as interest rate swaps and forward currency contracts to manage certain exposures to fluctuations in interest rates and foreign currency exchange rates.

Derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.

Any gains and losses arising from changes in fair value on derivatives during the year, other than those accounted for under hedge accounting as described in Note 2.7(iii), are recognised in profit or loss.

In general, contracts to sell or purchase non-financial items to meet expected own use requirements are not accounted for as financial instruments. However, contracts to sell or purchase commodities that can be net settled or which contain written options are required to be recognised at fair value, with gains and losses recognised in the profit or loss.

An embedded derivative is recognised separately from the host contract where the host contract is not a financial asset, and accounted for separately if, and only if, the derivative is not closely related to the economic characteristics and risks of the host contract and the host contract is not measured at fair value through profit or loss. The host contract, in the event an embedded derivative is recognised separately, is accounted for in accordance with policy applicable to the nature of the host contract.

(v) Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is reported in the statement of financial position if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis or to realise the assets and settle the liabilities simultaneously.

(vi) Effective interest method

Amortised cost is computed using the effective interest method. This method uses effective interest rate that exactly discounts estimated future cash receipts or payments through the expected life of the financial instrument to the net carrying amount of the financial instrument. Amortised cost takes into account any transaction costs and any discount or premium on settlement.

(vii) Amortised cost of financial instruments

Interest income is recognised by applying effective interest rate to the gross carrying amount except for credit impaired financial assets (see Note 2.8(i)) where effective interest rate is applied to the amortised cost.

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(viii) Derecognition of financial instruments

A financial asset is derecognised when the rights to receive cash flows from the asset have expired or, the Group and the Company have transferred their rights to receive cash flows from the asset or have assumed an obligation to pay the received cash flows in full without material delay to a third party under a “pass-through” arrangement without retaining control of the asset or substantially all the risks and rewards of the asset. On derecognition of a financial asset, the difference between the carrying amount and the sum of the consideration received (including any new asset obtained less any new liability assumed) and any cumulative gain or loss that had been recognised in equity is recognised in the profit or loss, except for equity investments at fair value through other comprehensive income where the gain or loss are recognised in other comprehensive income.

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expired. On derecognition of a financial liability, the difference between the carrying amount of the financial liability extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in the profit or loss. In the case of waiver of debt from owners, the gain is recognised in equity as capital reserve.

2.8 Impairment

(i) Financial assets and contract assets

The Group and the Company recognise loss allowances for expected credit losses on financial assets measured at amortised cost and contract assets.

The Group and the Company measure loss allowances on cash and cash equivalents at an amount equal to lifetime expected credit loss.

Loss allowances for trade receivables and contract assets are always measured at an amount equal to lifetime expected credit loss.

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating expected credit loss, the Group and the Company consider reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group’s and the Company’s historical experience and informed credit assessment and including forward-looking information, where available.

The Group and the Company assume that the credit risk on a financial asset has increased significantly if it is past due.

The Group and the Company consider a financial asset to be in default when the borrower is unlikely to pay its credit obligations to the Group and the Company in full, without recourse by the Group and the Company to actions such as realising security.

Lifetime expected credit losses are the expected credit losses that result from all possible default events over the expected life of a financial instrument, while 12-month expected credit losses are the portion of expected credit losses that result from default events that are possible within the 12 months after the reporting date.

The maximum period considered when estimating expected credit losses is the maximum contractual period over which the Group is exposed to credit risk.

An impairment loss in respect of financial assets measured at amortised cost is recognised in profit or loss and the carrying amount of the asset is reduced through the use of an allowance account.

All financial assets, except for those measured at fair value through profit or loss and equity investments measured at fair value through other comprehensive income, are subject to impairment (see Note 2.7(i)).

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2.8 Impairment (continued)

(ii) Other assets

The carrying amounts of other assets, other than inventories, deferred tax assets and non-current assets are reviewed at each reporting date to determine whether there is any indication of impairment.

If any such indication exists, the asset’s recoverable amount is estimated. An impairment loss is recognised if the carrying amount of an asset or the cash-generating unit to which it belongs exceeds its recoverable amount. Impairment losses are recognised in the profit or loss.

A cash-generating unit is the smallest identifiable asset group that generates cash flows from continuing use that are largely independent from other assets and groups. An impairment loss recognised in respect of a cash-generating unit is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to reduce the carrying amount of the other assets in the unit on a pro-rata basis.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs of disposal. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or cash-generating unit. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

Impairment losses recognised in prior periods are assessed at the end of each reporting period for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Reversals of impairment losses are credited to profit or loss in the year in which reversals are recognised.

2.9 Cash and cash equivalents

Cash and cash equivalents consist of cash on hand and bank balances, deposits with licensed financial institutions and highly liquid investments which have an insignificant risk of changes in fair value and are used by the Group and the Company in the management of their short-term commitments. For the purpose of the statements of cash flows, cash and cash equivalents are presented net of bank overdrafts and deposits restricted, if any.

2.10 Contract Cost

(i) Incremental cost of obtaining a contract

The Group and the Company recognise incremental costs of obtaining contracts when the Group and the Company expect to recover these costs.

(ii) Cost to fulfil a contract

The Group and the Company recognise a contract cost that relate directly to a contract or to an anticipated contract as an asset when the cost generates or enhances resources of the Group and the Company, will be used in satisfying performance obligations in the future and it is expected to be recovered.

These contract costs are initially measured at cost and amortised on a systematic basis that is consistent with the pattern of revenue recognition to which the asset relates. An impairment loss is recognised in the profit and loss when the carrying amount of the contract cost exceeds the expected revenue less expected cost that will be incurred. Where the impairment condition no longer exists or has improved, the impairment loss is reversed to the extent that the carrying amount of the contract cost does not exceed the amount that would have been recognised had there been no impairment loss recognised previously.

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2.11 Inventories

Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.

Cost of material stores and spares consists of the invoiced value from suppliers and import duty charges and is determined on a weighted average basis.

Cost of liquefied gases and water is determined on a weighted average basis.

2.12 Provisions

A provision is recognised if, as a result of a past event, the Group and the Company have a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future net cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Where discounting is used, the accretion in the provision due to the passage of time is recognised as finance cost.

The amount recognised as a provision is the best estimate of the expenditure required to settle the present obligation at the reporting date. Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate.

Possible obligations whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events not wholly within the control of the Group, are not recognised in the financial statements but are disclosed as contingent liabilities unless the possibility of an outflow of economic resources is considered remote.

2.13 Employee benefits

Short term benefits

Wages and salaries, bonuses and social security contributions are recognised as an expense in the year in which the associated services are rendered by employees of the Group and the Company.

Defined contribution plans

As required by law, companies in Malaysia make contributions to the state pension scheme, the Employees Provident Fund (“EPF”). Such contributions are recognised as an expense in the profit or loss as incurred.

2.14 Taxation

Tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the profit or loss except to the extent it relates to a business combination or items recognised directly in equity, in which case it is recognised in equity or other comprehensive income.

Current tax

Current tax expense is the expected tax payable on the taxable income for the year, using the statutory tax rates at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax

Deferred tax is provided for, using the liability method, on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts in the financial statements. In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised for all deductible temporary differences, unabsorbed capital allowances, unused reinvestment allowances, unused investment tax allowances, unused tax losses and other unused tax credits to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences, unabsorbed capital allowances, unused reinvestment allowances, unused investment tax allowances, unused tax losses and other unused tax credits can be utilised.

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2.14 Taxation (continued)

Deferred tax (continued)

Deferred tax is measured at the tax rates that are expected to apply in the period when the asset is realised or the liability is settled, based on the laws that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities where they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

Deferred tax asset is reviewed at each reporting date and is reduced to the extent that it is no longer probable that the future taxable profit will be available against which the related tax benefit can be realised.

Unused reinvestment allowance and unused investment tax allowance, being tax incentives that is not a tax base of an asset, is recognised as a deferred tax asset to the extent that it is probable that the future taxable profits will be available against which the unused tax incentive can be utilised.

2.15 Foreign currency transactions

In preparing the financial statements of individual entities in the Group, transactions in currencies other than the entity’s functional currency (foreign currencies) are translated to the functional currencies at rates of exchange ruling on the transaction dates.

Monetary assets and liabilities denominated in foreign currencies at the reporting date have been retranslated to the functional currency at rates ruling on the reporting date.

Non-monetary assets and liabilities denominated in foreign currencies are not retranslated at reporting date, except for those that are measured at fair value, are retranslated to the functional currency at the exchange rate at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in foreign currency are not retranslated.

Gains and losses on exchange arising from retranslation are recognised in the profit or loss, except for differences arising on the retranslation of equity instruments at FVOCI, which are recognised in equity and are never reclassified to profit or loss.

On consolidation, the assets and liabilities of subsidiaries with functional currencies other than Ringgit Malaysia, are translated into Ringgit Malaysia at the exchange rates ruling at reporting date.

The income and expenses are translated at the exchange rates at the dates of the transactions or an average rate that approximates those rates.

Foreign currency differences are recognised in other comprehensive income and accumulated in the foreign currency translation reserve within equity.

2.16 Borrowing costs and foreign currency exchange differences relating to projects-in-progress

Borrowing costs which are directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to be prepared for their intended use or sale, are capitalised as part of the cost of those assets.

The capitalisation of borrowing costs as part of the cost of a qualifying asset commences when expenditure for the assets is being incurred, borrowing costs are being incurred and activities that are necessary to prepare the asset for its intended use or sale are in progress. Capitalisation of borrowing costs ceases when all activities necessary to prepare the qualifying asset for its intended use or sale are completed.

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2.16 Borrowing costs and foreign currency exchange differences relating to project-in-progress (continued)

Exchange differences arising from foreign currency borrowings, although regarded as an adjustment to borrowing costs, are not capitalised but instead recognised in the profit or loss in the period in which they arise.

The capitalisation rate used to determine the amount of borrowing costs eligible for capitalisation is the weighted average of borrowings that are outstanding during the year, other than borrowings made specifically for the purpose of financing a specific qualifying asset, in which the actual borrowing cost incurred on that borrowing less any investment income on the temporary investment of that borrowings will be capitalised. Borrowing costs incurred subsequently to the completion of a specific qualifying asset are included in the determination of the capitalisation rate.

2.17 Revenue

Revenue from contracts with customers is measured based on the consideration specified in a contract with a customer and exclude amounts collected on behalf of third parties. The Group and the Company recognise revenue when or as it transfers control over a product or service to customer. An asset is transferred when the customer obtains control of the asset.

An entity transfers control of a good or service over time and, therefore, satisfies a performance obligation and recognises revenue over time, if one of the following criteria is met:

(a) the customer simultaneously receives and consumes the benefits provided by the entity’s performance as the entity performs; or(b) the entity’s performance creates or enhances an asset (for example, work-in-progress) that the customer controls as the

asset is created or enhanced; or(c) the entity’s performance does not create an asset with an alternative use to the entity and the entity has an enforceable

right to payment for performance completed to date.

If a performance obligation is not satisfied over time in accordance with the above criteria, then the Group or the Company satisfies the performance obligation and recognises revenue at a point in time.

2.18 Financing costs

Financing costs comprise of interest component of finance lease payments, interest payable on borrowings and profit share margin on Islamic Financing Facilities, as well as accretion in provision due to the passage of time.

All interest and other costs incurred in connection with borrowings are expensed as incurred, other than that capitalised in accordance with the accounting policy stated in Note 2.16. The interest component of finance lease payments is accounted for in accordance with the policy set out in Note 2.5.

2.19 Deferred income

Deferred income is recognised in profit or loss on a time proportion basis over the agreed contract period or applicable period.

2.20 Earnings per share

The Group presents basic and diluted earnings per share (“EPS”) data for its ordinary shares.

Basic EPS is calculated by dividing the profit and loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period.

Diluted EPS is determined by adjusting profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding during the period, for the effects of all dilutive potential ordinary shares, if any.

2.21 Operating segments

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components, and for which discrete financial information is available. All operating segment results are reviewed regularly by the chief operating decision maker to make decisions about resources to be allocated to the segment and to assess its performance.

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2.22 Contingencies

(i) Contingent liabilities

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is not recognised in the statements of financial position and is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events, are also as disclosed as contingent liabilities unless the probability of outflow of economic benefit is remote.

(ii) Contingent assets

When an inflow of economic benefit of an asset is probable where it arises from past events and where existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity, the asset is not recognised in the statement of financial position but is disclosed as a contingent asset. When the inflow of economic benefit is virtually certain, then the related asset is recognised.

2.23 Government grants

Government grants related to assets, including non-monetary grants at fair value, are deducted against the construction cost of the assets. Subsequently, the grants are recognised in profit or loss on a systematic basis over the life of the asset as a reduced depreciation expense.

2.24 Fair value measurement

Fair value of an asset or a liability, except for lease transactions, is determined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The measurement assumes that the transaction to sell the asset or transfer the liability takes place either in the principal market or, in the absence of a principal market, in the most advantageous market.

(i) Financial instruments

The fair value of financial instruments that are actively traded in organised financial markets are determined by reference to quoted market bid prices at the close of business at the end of reporting date. For financial instruments where there is no active market, fair value is determined using valuation techniques. Such techniques may include using recent arm’s length market transactions; reference to the current fair value of another instrument that is substantially the same; discounted cash flow analysis or other valuation models.

(ii) Non-financial assets

For non-financial assets, the fair value measurement takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

When measuring the fair value of an asset or a liability, the Group and the Company use observable market data as far as possible. Fair value is categorised into different levels in a fair value hierarchy based on the input used in the valuation technique as follows:

• Level 1 – Quoted prices (unadjusted) in active markets for identifiable assets or liabilities.• Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly

(i.e. as prices) or indirectly (i.e. derived from prices).• Level 3 – Inputs for the asset or liability that are not based on observable market data (unobservable input).

The fair value of an asset to be transferred between levels is determined as of the date of the event or change in circumstances that caused the transfer.

The Group and the Company recognise transfers between levels of the fair value hierarchy as of the date of the event or change in circumstances that caused the transfers.

106



3. PROPERTY, PLANT AND EQUIPMENT

GroupAt

1.1.2020 AdditionsDisposals/write-offs

Transfers/adjustments

At31.12.2020

2020 RM’000 RM’000 RM’000 RM’000 RM’000

At cost

Freehold land 4,504 – – – 4,504

Land improvement 109,006 – – – 109,006

Buildings 453,697 – (536) 2,735 455,896

Plant and pipelines 21,597,416 580 (40,909) 145,157 21,702,244

Storage units 817,416 – – – 817,416

Plant turnaround/major inspection 1,338,690 – (5,902) 219,138 1,551,926

Office equipment, furniture and fittings 56,030 220 (289) 5,004 60,965

Other plant and equipment 415,969 3,311 (1,471) 93,952 511,761

Computer software and hardware 136,565 – (4,306) 17,070 149,329

Motor vehicles 26,340 1,233 (817) – 26,756

Projects-in-progress 891,236 966,675 – (497,707) 1,360,204

25,846,869 972,019 (54,230) (14,651) 26,750,007

Right-of-use

Leasehold land 653,946 7,462 (110) (312) 660,986

Plant and pipelines 698,187 – – 31,695 729,882

Storage units 989,549 – – – 989,549

2,341,682 7,462 (110) 31,383 2,380,417

28,188,551 979,481 (54,340) 16,732* 29,130,424


* Relates to inventories transferred to property, plant and equipment of RM18,186,000 offset by consumable assets expensed-off of RM1,454,000.

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3. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

GroupAt

1.1.2020Charge for

the yearDisposals/write-offs

Transfers/adjustments

At31.12.2020

2020 RM’000 RM’000 RM’000 RM’000 RM’000

Accumulated depreciation and impairment losses:

Freehold land – – – – –

Land improvement 3,634 1,677 – – 5,311

Buildings 162,765 12,063 (260) – 174,568

Plant and pipelines 13,211,903 632,134 (31,727) (19) 13,812,291

Storage units 68,617 34,844 – (5) 103,456

Plant turnaround/major inspection 650,457 207,878 (5,902) – 852,433

Office equipment, furniture and fittings 40,492 3,653 (281) 45 43,909

Other plant and equipment 162,337 24,525 (1,433) – 185,429

Computer software and hardware 95,520 11,613 (4,306) – 102,827

Motor vehicles 20,574 2,449 (776) – 22,247

Projects-in-progress – – – – –

14,416,299 930,836 (44,685) 21 15,302,471

Right-of-use

Leasehold land 156,050 8,554 (32) – 164,572

Plant and pipelines 59,017 26,897 – – 85,914

Storage units 310,672 50,600 – – 361,272

525,739 86,051 (32) – 611,758

14,942,038 1,016,887 (44,717) 21* 15,914,229


* Relates to depreciation adjustment of property, plant and equipment transferred to inventories.

108




GroupAt


2019 RM’000 RM’000 RM’000

At cost

Freehold land 4,504 — —

Land improvement 110,203 — —

Buildings 442,305 — (88)

Plant and pipelines 21,072,220 18,188 (50,940)

Storage units 827,292 — —

Plant turnaround/major inspection 1,176,440 — (180,001)

Office equipment, furniture and fittings 49,550 418 (313)

Other plant and equipment 375,897 1,444 (6,952)

Computer software and hardware 110,242 1,354 (1,748)

Motor vehicles 33,281 3,413 (10,354)

Projects-in-progress 688,358 1,220,237 —

24,890,292 1,245,054 (250,396)

Right-of-use

Leasehold land 647,870 6,205 —

Plant and pipelines 705,851 — —

Storage units 975,913 13,636 —

2,329,634 19,841 —

27,219,926 1,264,895 (250,396)


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GroupTransfers/

adjustment

Translationexchange

differenceAt

31.12.2019

2019 RM’000 RM’000 RM’000

At cost

Freehold land – – 4,504

Land improvement – (1,197) 109,006

Buildings 12,300 (820) 453,697

Plant and pipelines 575,118 (17,170) 21,597,416

Storage units (293) (9,583) 817,416

Plant turnaround/major inspection 342,251 – 1,338,690

Office equipment, furniture and fittings 6,471 (96) 56,030

Other plant and equipment 46,143 (563) 415,969

Computer software and hardware 26,717 – 136,565

Motor vehicles – – 26,340

Projects-in-progress (1,017,047) (312) 891,236

(8,340) (29,741) 25,846,869

Right-of-use

Leasehold land – (129) 653,946

Plant and pipelines – (7,664) 698,187

Storage units – – 989,549

– (7,793) 2,341,682

(8,340)* (37,534) 28,188,551


* Relates to property, plant and equipment transferred to inventories of RM8,076,000 and consumable assets expensed-off of RM264,000.

110




GroupAt


2019 RM’000 RM’000 RM’000


Freehold land – – –

Land improvement 1,979 1,694 –

Buildings 151,075 11,809 (45)

Plant and pipelines 12,542,146 723,162 (50,528)

Storage units 34,169 35,195 –

Plant turnaround/major inspection 591,911 238,308 (180,001)

Office equipment, furniture and fittings 36,134 4,683 (292)

Other plant and equipment 143,076 23,909 (5,630)

Computer software and hardware 86,235 10,371 (1,089)

Motor vehicles 26,031 2,908 (8,365)

Projects-in-progress – – –

13,612,756 1,052,039 (245,950)

Right-of-use

Leasehold land 147,841 8,213 –

Plant and pipelines 32,940 26,726 –

Storage units 260,072 50,600 –

440,853 85,539 –

14,053,609 1,137,578 (245,950)


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GroupTransfers/

adjustment

Translationexchange

differenceAt

31.12.2019

2019 RM’000 RM’000 RM’000


Freehold land – – –

Land improvement – (39) 3,634

Buildings – (74) 162,765

Plant and pipelines (889) (1,988) 13,211,903

Storage units – (747) 68,617

Plant turnaround/major inspection 239 – 650,457

Office equipment, furniture and fittings (3) (30) 40,492

Other plant and equipment 1,156 (174) 162,337

Computer software and hardware 3 – 95,520

Motor vehicles – – 20,574

Projects-in-progress – – –

506 (3,052) 14,416,299

Right-of-use

Leasehold land – (4) 156,050

Plant and pipelines – (649) 59,017

Storage units – – 310,672

– (653) 525,739

506* (3,705) 14,942,038


* Relates to depreciation adjustment of property, plant and equipment transferred to inventories.

112




CompanyAt

1.1.2020 AdditionsDisposals/ write-offs

Transfers/ adjustment

At 31.12.2020

2020 RM’000 RM’000 RM’000 RM’000 RM’000

At cost

Freehold land 4,504 – – – 4,504

Buildings 351,852 – (536) 2,539 353,855





Computer hardware and software 125,854 – (4,306) 18,780 140,328

Motor vehicles 25,594 1,233 (817) – 26,010

Projects-in-progress 805,066 914,784 – (376,869) 1,342,981

20,313,176 920,012 (53,979) (787) 21,178,422

Leased to others as operating lease

Buildings 717 – – – 717

Right-of-use

Leasehold land 641,825 7,320 (110) (312) 648,723

20,955,718 927,332 (54,089) (1,099)* 21,827,862


* Relates to consumable assets expensed-off of RM1,499,000 offset by inventories transferred to property, plant and equipment of RM400,000.

113


01

02


CompanyAt

1.1.2020Charge for

the yearDisposals/ write-offs


At 31.12.2020

2020 RM’000 RM’000 RM’000 RM’000 RM’000



Buildings 152,095 7,677 (260) – 159,512

Plant and pipelines 12,138,040 406,555 (31,652) – 12,512,943

Plant turnaround/major inspection 617,050 196,322 (5,902) – 807,470

Office equipment, furniture and fittings 28,752 2,136 (281) – 30,607

Other plant and equipment 119,489 12,504 (1,433) – 130,560

Computer hardware and software 92,745 10,745 (4,306) – 99,184

Motor vehicles 20,156 2,285 (776) – 21,665


13,168,327 638,224 (44,610) – 13,761,941


Buildings 591 80 – – 671

Right-of-use

Leasehold land 153,654 8,218 (32) – 161,840

13,322,572 646,522 (44,642) – 13,924,452


114




CompanyAt

1.1.2019 AdditionsDisposals/ write-offs


At 31.12.2019

2019 RM’000 RM’000 RM’000 RM’000 RM’000

At cost

Freehold land 4,504 – – – 4,504

Buildings 340,523 – (88) 11,417 351,852





Computer hardware and software 99,775 1,339 (1,748) 26,488 125,854

Motor vehicles 32,534 3,413 (10,353) – 25,594

Projects-in-progress 682,540 1,099,175 – (976,649) 805,066

19,438,336 1,105,982 (232,908) 1,766 20,313,176


Buildings 717 – – – 717

Right-of-use

Leasehold land 639,961 1,864 – – 641,825

20,079,014 1,107,846 (232,908) 1,766* 20,955,718


* Relates to transfer of inventories to property, plant and equipment of RM1,913,000 offset by consumable assets expensed off of RM147,000.

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02


CompanyAt

1.1.2019Charge for

the yearDisposals/ write-offs


At 31.12.2019

2019 RM’000 RM’000 RM’000 RM’000 RM’000



Buildings 144,696 7,443 (44) – 152,095

Plant and pipelines 11,692,910 496,547 (50,528) (889) 12,138,040

Plant turnaround/major inspection 555,611 223,714 (162,514) 239 617,050

Office equipment, furniture and fittings 27,067 1,980 (292) (3) 28,752


Computer hardware and software 84,456 9,375 (1,089) 3 92,745

Motor vehicles 25,777 2,744 (8,365) – 20,156


12,643,504 752,779 (228,462) 506 13,168,327


Buildings 511 80 – – 591

Right-of-use

Leasehold land 145,761 7,893 – – 153,654

12,789,776 760,752 (228,462) 506* 13,322,572


* Relates to depreciation adjustment of property, plant and equipment transferred to inventories.116




Group Company

2020 2019 2020 2019

Carrying amount RM’000 RM’000 RM’000 RM’000

Freehold land 4,504 4,504 4,504 4,504

Land improvement 103,695 105,372 – –

Buildings 281,328 290,932 194,343 199,757

Plant and pipelines 7,889,953 8,385,513 4,956,790 5,250,131

Storage units 713,960 748,799 – –

Plant turnaround/major inspection 699,493 688,233 681,678 672,164

Office equipment, furniture and fittings 17,056 15,538 12,226 9,226

Other plant and equipment 326,332 253,632 178,470 165,454

Computer hardware and software 46,502 41,045 41,144 33,109

Motor vehicles 4,509 5,766 4,345 5,438

Projects-in-progress 1,360,204 891,236 1,342,981 805,066

11,447,536 11,430,570 7,416,481 7,144,849


Buildings – – 46 126

Right-of-use

Leasehold land 496,414 497,896 486,883 488,171

Plant and pipelines 643,968 639,170 – –

Storage units 628,277 678,877 – –

1,768,659 1,815,943 486,883 488,171

13,216,195 13,246,513 7,903,410 7,633,146

3.1 As a lessee

Right-of-use assets

Group

Right-of-use assets are mainly in relation to lease of land from state governments and a related company, rental of seabed from state government, usage of jetty facilities from a related company and charter hire of floating storage units from a related company.

Company

Right-of-use assets are in relation to lease of lands from state government and a related company.

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3.1 As a lessee (continued)

Depreciation of right-of-use assets

The following is the depreciation of right-of-use assets recognised in profit or loss:

Group Company

2020 2019 2020 2019

RM’000 RM’000 RM’000 RM’000

Total depreciation 86,051 85,539 8,218 7,893

Extension options

Certain lease contracts contain extension option exercisable before the end of the non-cancellable contract period. The discounted potential future lease payments arising from exercisable extension option was not included in the lease liabilities due to uncertainty at the reporting date as to whether the Group will exercise the extension terms.

Significant judgements and assumptions in relation to leases

The Group also applied judgment and assumptions in determining the incremental borrowing rate of the respective leases. Group entities first determine the closest available borrowing rates before using significant judgment to determine the adjustments required to reflect the term, security, value or economic environment of the respective leases.

3.2 As a lessor

Property, plant and equipment leased to others as operating lease

The Company leases out a warehouse to a subsidiary under 10-year operating lease arrangement ending 2021. The lease income recognised in profit or loss during the year amounts to RM103,000 (2019: RM103,000).

The operating lease payments to be received until end of the lease tenure amounts to RM61,000 (2019: RM164,000).

3.3 Restrictions of land title

The titles of certain land are in the process of being registered in the Company’s name.

3.4 Project-in-progress

Included in additions to project-in-progress of the Group and of the Company are borrowing costs capitalised during the year of RM6,003,000 and RM233,000 respectively. The interest rate on borrowings capitalised for Group and Company was 7.0% and 2.3% per annum respectively.

No borrowing cost was capitalised as part of additions to the project-in-progress in 2019.

3.5 Impairment

No impairment on assets were recognised as at 31 December 2020 and as at 31 December 2019.

3.6 Land lease contract for seabed land at a subsidiary

A subsidiary of the Group has entered into an agreement with the state government (“the lessor”) to lease a seabed land situated off the coast of Sg. Udang in Melaka for 25 years from 2011 to 2036 on which the subsidiary’s LNG regasification terminal and offshore pipeline resides. Upon termination or expiry of the agreement, the land is to be re-delivered to the lessor in a manner to be mutually agreed between both parties.

Under the agreement, the lessor may require the land to be delivered together with all of the subsidiary’s equipment, erections, fixtures, structures and sub-structures (“the assets”) constructed on the land at a consideration to be mutually agreed between the parties. Should there be no mutual agreement on the consideration, the lessor may then require the subsidiary to remove the assets, or they may appoint a third party to carry out the removal works and recharge the subsidiary for the costs incurred.

118



4. INVESTMENT IN SUBSIDIARIES

Company

2020 2019

RM’000 RM’000

Investment at cost:

– unquoted shares

At beginning of the year 2,129,753 2,483,864

Redemption of redeemable preference shares in subsidiaries (520,900) (354,111)

At end of the year 1,608,853 2,129,753

Redemption of redeemable preference shares relates to redemption by Regas Terminal (Sg. Udang) Sdn. Bhd. and Pengerang LNG (Two) Sdn. Bhd..

Details of the subsidiaries are as follows:

Name of entity Principal activitiesCountry of incorporation

Effective ownership and voting interest

2020 2019

% %

Regas Terminal (Sg. Udang) Sdn. Bhd. Own and operate LNG regasification terminal

Malaysia 100 100

Regas Terminal (Pengerang) Sdn. Bhd. Dormant Malaysia 100 100

Regas Terminal (Lahad Datu) Sdn. Bhd. Dormant Malaysia 100 100

Pengerang LNG (Two) Sdn. Bhd. Own and operate LNG regasification terminal

Malaysia 65 65

Summarised financial information of non-controlling interest has not been disclosed as the non-controlling interest of the subsidiary is not individually material to the Group.

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5. INVESTMENTS IN JOINT VENTURES

Group Company

2020 2019 2020 2019

RM’000 RM’000 RM’000 RM’000

Investment at cost:

– unquoted shares 283,059 283,059 283,059 283,059

Share of post-acquisition profits and reserves 348,189 264,302 – –

631,248 547,361 283,059 283,059

Share of joint ventures’ contingent liabilities:

Counter claim by a third party – 137,296 – –

The Group’s involvements in joint arrangements are structured through separate vehicles which provide the Group rights to the net assets of these entities. Accordingly, the Group has classified these investments as joint ventures.

Details of counter claim by a third party against Kimanis Power Sdn. Bhd. are described in Note 26 to the financial statements.

Group’s summarised financial information of joint ventures

2020 2019

RM’000 RM’000

As at 31 December

Non-current assets 2,157,360 2,828,019

Current assets 936,490 647,668

Non-current liabilities (1,623,704) (2,255,696)

Current liabilities (348,949) (262,049)

Net assets 1,121,197 957,942

Included in the net assets are:

Cash and cash equivalents 471,747 212,061

Non-current financial liabilities (excluding other payables and provisions) (1,434,984) (2,096,640)

Current financial liabilities (excluding trade and other payables and provisions) (11,717) (3,078)

Group’s share of net assets 631,248 547,361

120



5. INVESTMENTS IN JOINT VENTURES (CONTINUED)

Group’s summarised financial information of joint ventures (continued)

2020 2019

RM’000 RM’000

As at 31 December Profit for the year 241,862 197,605Other comprehensive expense (11,996) (3,012)

Total comprehensive income for the year 229,866 194,593

Included in the total comprehensive income are:Revenue 680,342 609,198 Depreciation and amortisation (39,683) (53,454)Interest income 77,673 77,109 Interest expense (91,310) (105,809)Tax expense (35,367) (21,402)

2020 2019

RM’000 RM’000

Group’s share of resultsShare of profit from continuing operations 129,329 109,461 Share of other comprehensive expense (6,283) (1,554)

Share of total comprehensive income 123,046 107,907

Other informationDividends received 39,160 2,250

Group’s share of the net assets and results are significantly contributed by Kimanis Power Sdn. Bhd. and Pengerang Gas Solutions Sdn. Bhd.

Details of the joint ventures are as follows:



2020 2019

% %

Kimanis Power Sdn. Bhd.* Generation and sale of electricity Malaysia 60 60

Kimanis O&M Sdn. Bhd.* Dormant Malaysia 60 60

Pengerang Gas Solutions Sdn. Bhd.* Own and operate air separation unit plant

Malaysia 51 51

Industrial Gases Solutions Sdn. Bhd. Selling, marketing, distribution and promotion of industrial gas

Malaysia 50 50

* Although the Group has more than 50% of the ownership in the equity interest of these entities, the Group has determined that it does not have

sole control over these entities considering that strategic and financial decisions of the relevant activities of these entities require unanimous consent

by all shareholders.

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6. INVESTMENTS IN ASSOCIATE

Group Company

2020 2019 2020 2019

RM’000 RM’000 RM’000 RM’000

Investment at cost:

– quoted shares 76,466 76,466 76,466 76,466

Share of post-acquisition profits and reserves 66,016 61,305 — –

142,482 137,771 76,466 76,466

Market value of quoted shares 516,827 522,528 516,827 522,528

Details of the associate are as follows:



2020 2019

% %

Gas Malaysia Berhad Selling, marketing, distribution and promotion of natural gas

Malaysia 14.8 14.8

Although the Group has less than 20% of the ownership in the equity interest of Gas Malaysia Berhad, the Group has determined that it has significant influence over the financial and operating policies of the associate through representation on the Board of Directors.

2020 2019

RM’000 RM’000

Group’s share of results

Share of total comprehensive income for the year 30,458 27,263

Other information

Dividends received 25,746 26,221

122



7. LONG-TERM RECEIVABLES

Group Company

2020 2019 2020 2019

Note RM’000 RM’000 RM’000 RM’000

USD term loans:

Due from a subsidiary 7.1, 16.3 – – – 1,055,729

Due from a joint venture 7.2, 16.3 208,856 248,694 208,856 248,694

208,856 248,694 208,856 1,304,423

Derivative assets 8 – 1,980 – 1,980

Amount due from a related company 7.3 – 13,325 – 13,325

208,856 263,999 208,856 1,319,728

Less: expected credit losses (403) (430) (403) (2,257)

208,453 263,569 208,453 1,317,471

7.1 Term loan due from a subsidiary is unsecured, bears interest at a rate of 6.5% (2019: 6.5%) per annum and repayable in tranches at various due dates from 2020 to 2028. On 21 October 2020, the term loan was prepaid in full.

7.2 Term loan due from a joint venture is unsecured, bears interest at a rate of 5.5% (2019: 5.5%) per annum and repayable in tranches at various due dates from 2021 to 2025.

7.3 Amount due from a related company relates to settlement agreement for early termination of utilities and electricity by the related company repayable in tranches with final settlement due date in 2021.

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8. DERIVATIVES

Nominalvalue

Carrying amount

Nominalvalue

Carrying amount

2020 2020 2019 2019

Note RM’000 RM’000 RM’000 RM’000

Group

Derivative assets used for hedging

Interest rate swaps 7 — — 1,320,051 1,980

Derivative assets at fair value through profit or loss

Forward foreign exchange contracts 11 5,215 15 64,769 952

Derivative liabilities at fair value through profit or loss

Forward foreign exchange contracts 18 49,492 161 55,331 1,329

Included within:

Long term receivables 7 – 1,980

Trade and other receivables 11 15 952

Trade and other payables 18 161 1,329

Company

Derivative assets used for hedging

Interest rate swaps 7 – – 1,320,051 1,980

Derivative assets at fair value through profit or loss

Forward foreign exchange contracts 11 260 2 55,331 873

Derivative liabilities held at fair value through profit or loss

Forward foreign exchange contracts 18 260 2 55,331 1,324

Included within:

Long term receivables 7 – 1,980

Trade and other receivables 11 2 873

Trade and other payables 18 2 1,324

In the normal course of business, the Group and the Company enter into derivative financial instruments to manage their normal business exposures in relation to interest rates and foreign currency exchange rates consistent with their risk management policies and objectives.

Interest rate swaps are used to achieve an appropriate mix of fixed and floating interest rate exposure within the Group’s policy. In 2019, the Company had interest rate swaps arrangements with a nominal value of USD322,003,000 to hedge the interest rate risk in relation to the floating interest rate of a USD term loan as disclosed in Note 29 to the financial statements. On 21 October 2020, the Company prepaid its floating interest rate USD term loan in full. Accordingly, the interest rate swap arrangements with a nominal value of USD322,003,000 has since been discontinued.

The Group adopts hedge accounting whereby hedges meeting the criteria for hedge accounting are classified as cash flow hedges. The effective portion of the gain or loss on the hedging instruments is recognised directly in equity until the hedged transaction occurs, while the ineffective portion is recognised in the profit or loss. As these amounts are not material to the Group, full disclosure of hedge accounting is not required to be presented in the Group’s financial statements.

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9. DEFERRED TAX

Recognised deferred tax assets/(liabilities)

Deferred tax assets and liabilities are attributable to the following:

Assets Liabilities Net

2020 2019 2020 2019 2020 2019

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Group

Property, plant and equipment – – (1,608,606) (1,623,826) (1,608,606) (1,623,826)

Deferred income 737 964 – – 737 964

Expected credit loss 628 118 – – 628 118

Unabsorbed capital allowances 2,198 59,626 – – 2,198 59,626

Unused investment tax allowances 582,380 603,450 – – 582,380 603,450

Tax assets/(liabilities) 585,943 664,158 (1,608,606) (1,623,826) (1,022,663) (959,668)

Set off tax (368,028) (390,344) 368,028 390,344 – –

Net tax assets/(liabilities) 217,915 273,814 (1,240,578) (1,233,482) (1,022,663) (959,668)

Company

Property, plant and equipment – – (1,241,835) (1,234,582) (1,241,835) (1,234,582)

Deferred income 737 964 – – 737 964

Expected credit loss 636 634 – – 636 634

Tax assets/(liabilities) 1,373 1,598 (1,241,835) (1,234,582) (1,240,462) (1,232,984)

Set off tax (1,373) (1,598) 1,373 1,598 – –

Net tax assets/(liabilities) – – (1,240,462) (1,232,984) (1,240,462) (1,232,984)

Unrecognised deferred tax assets

Deferred tax assests have not been recognised in respect of the following items (stated at gross):

Group Company

2020 2019 2020 2019

RM’000 RM’000 RM’000 RM’000

Unused tax losses 38,882 38,882 – –

The unused tax losses relates to a subsidiary of the Group. In accordance with Paragraph 5 of Income Tax (Exemption) (No.7) Order 2013 (Income based exemption for statutory income of a qualifying person derived from RAPID Complex), the subsidiary’s unused tax losses does not expire. Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profits will be available against which the Group can utilise the benefits in the foreseeable future.

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9. DEFERRED TAX (CONTINUED)

The components and movements of deferred tax liabilities and assets during the year prior to offsetting are as follows:

GroupAt

1.1.2020

Charged/(credited) to profit

or lossAt

31.12.2020

2020 RM’000 RM’000 RM’000

Deferred tax liabilities

Property, plant and equipment 1,623,826 (15,220) 1,608,606

Deferred tax assets

Deferred income (964) 227 (737)

Expected credit loss (118) (510) (628)

Unabsorbed capital allowances (59,626) 57,428 (2,198)

Unused investment tax allowance (603,450) 21,070 (582,380)

(664,158) 78,215 (585,943)

Net deferred tax 959,668 62,995 1,022,663

GroupAt

1.1.2019


or lossAt

31.12.2019

2019 RM’000 RM’000 RM’000


Property, plant and equipment 1,606,646 17,180 1,623,826

Deferred tax assets

Deferred income (1,191) 227 (964)

Expected credit loss (127) 9 (118)

Unabsorbed capital allowances (137,558) 77,932 (59,626)

Unused investment tax allowance (603,450) – (603,450)

(742,326) 78,168 (664,158)

Net deferred tax 864,320 95,348 959,668

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9. DEFERRED TAX (CONTINUED)

CompanyAt

1.1.2020


or lossAt

31.12.2020

2020 RM’000 RM’000 RM’000



Deferred tax assets

Deferred income (964) 227 (737)

Expected credit loss (634) (2) (636)

(1,598) 225 (1,373)

Net deferred tax 1,232,984 7,478 1,240,462

CompanyAt

1.1.2019


or lossAt

31.12.2019

2019 RM’000 RM’000 RM’000



Deferred tax assets

Deferred income (1,191) 227 (964)

Expected credit loss – (634) (634)

(1,191) (407) (1,598)

Net deferred tax 1,180,181 52,803 1,232,984

10. TRADE AND OTHER INVENTORIES

Group Company

2020 2019 2020 2019

RM’000 RM’000 RM’000 RM’000

Liquefied gases and water 2,385 1,346 2,385 1,346

Maintenance materials and spares 42,555 76,807 38,455 55,549

44,940 78,153 40,840 56,895

Recognised in profit or loss as:

Cost of revenue 27,498 40,545 27,107 39,193

Inventories written-off 12,721 1,364 12,721 1,364

Impairment losses on inventories 1,214 – 1,214 –

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11. TRADE AND OTHER RECEIVABLES

Group Company

2020 2019 2020 2019

Note RM’000 RM’000 RM’000 RM’000

Trade receivables 11,257 27,828 11,257 27,828

Other receivables 11.1 7,092 42,922 6,060 12,325

Deposit 932 1,067 931 1,066

Prepayments 26,737 29,532 9,255 11,479

Amount due from:

– holding company 11.2 148,324 148,530 148,121 148,272

– subsidiaries 11.3 — — 2,812 19,937

– joint ventures and associate 11.4 7,007 12,704 7,007 12,704

– related companies 11.5 492,810 657,510 366,921 544,231

– related parties 11.6 15,444 33,915 15,444 33,915

Term loans due from:

– subsidiary 7.1, 16.3 – – – 142,089

– joint venture 34,927 — 34,927 —

Derivative assets 8 15 952 2 873

744,545 954,960 602,737 954,719

Less: Expected credit loss (61) (85) (72) (387)

744,484 954,875 602,665 954,332

11.1 Included in other receivables are goods and service tax (“GST”) receivables amounting to RM Nil (2019: RM30,597,000) relating to a subsidiary of the Group.

11.2 Amount due from holding company arose in the normal course of business and relates to:

Group Company

2020 2019 2020 2019

RM’000 RM’000 RM’000 RM’000

Trade 145,385 144,346 145,381 144,346

Non-trade 2,939 4,184 2,740 3,926

148,324 148,530 148,121 148,272

Included in amount due from holding company at year end are GST receivables amounting to RM2,906,000 (2019: RM2,954,000) for the Group and RM2,696,000 (2019: RM2,696,000) for the Company.

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11. TRADE AND OTHER RECEIVABLES (CONTINUED)

11.3 Amount due from subsidiaries arose in the normal course of business and relates to:

2020 2019

Company RM’000 RM’000

Trade 366 928

Non-trade 2,446 19,009

2,812 19,937

11.4 Amount due from joint ventures and associate arose in the normal course of business and relates to:

2020 2019

Group and Company RM’000 RM’000

Trade 914 354

Non-trade 6,093 12,350

7,007 12,704

11.5 Amount due from related companies arose in the normal course of business and relates to:

Group Company

2020 2019 2020 2019

RM’000 RM’000 RM’000 RM’000

Trade 465,997 480,307 345,129 367,028

Non-trade 26,813 177,203 21,792 177,203

492,810 657,510 366,921 544,231

11.6 Amount due from related parties arose in the normal course of business and relates to:

2020 2019

Group and Company RM’000 RM’000

Trade 15,428 33,915

Non-trade 16 —

15,444 33,915

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12. CASH AND CASH EQUIVALENTS

Group Company

2020 2019 2020 2019

RM’000 RM’000 RM’000 RM’000

Cash with PETRONAS Integrated Financial Shared Services Centre 2,455,188 3,542,455 2,623,186 3,053,517

Cash and bank balances 683,710 479,241 3,532 479,241

3,138,898 4,021,696 2,626,718 3,532,758

The Group’s and the Company’s cash and bank balances are held in the In-House Account (“IHA”) managed by PETRONAS Integrated Financial Shared Service Centre (“IFSSC”) to enable more efficient cash management for the Group and the Company.

Included in the Group’s cash and cash equivalents is RM24,351,000 (2019: RM Nil) in a finance service reserve account being designated as security against a subsidiary’s Islamic financing facility.

All of the Group’s and the Company’s cash and cash equivalents in the current year and in the previous year are interest-bearing balances.

13. SHARE CAPITAL

2020 2019

No of shares Amount No of shares Amount

’000 RM’000 ’000 RM’000

Issued and fully paid shares with no par value classified as equity instruments:

Ordinary shares 1,978,732 3,165,204 1,978,732 3,165,204

The holders of ordinary shares are entitled to receive dividends as declared from time to time, and are entitled to one vote per share at meetings of the Company.

Included in share capital is share premium amounting to RM1,186,472,000 that was not utilised where the period for utilisation had expired on 30 January 2019.

14. RESERVES

Retained Profits

The Company has sufficient retained earnings to distribute single tier dividends paid out of income derived from operations which are tax exempted in the hands of shareholders pursuant to Paragraph 12B, Schedule 6 of the Income Tax Act, 1967.

Capital Reserve

Capital reserve represents available reserve in a subsidiary that has been capitalised arising from redemption of preference shares.

Foreign Currency Translation Reserve

Foreign currency translation reserve comprises all foreign currency differences arising from the translation of the financial statements of a subsidiary whose functional currency is different from that of the Group’s presentation currency.

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14. RESERVES (CONTINUED)

Hedging Reserve

Hedging reserve records the portion of the gain or loss on hedging instruments in a cash flow hedge that is determined to be an effective hedge in accordance with accounting policy stated in Note 2.7(iii). When the hedged transaction occurs, the gain or loss on the hedging instrument is transferred out to equity to either profit or loss or the carrying value of assets, as appropriate. If the forecast transaction is no longer expected to occur, the gain or loss recognised in equity is transferred to profit or loss.

15. NON-CONTROLLING INTERESTS

This consists of the non-controlling interests’ proportion of share capital and reserves of a partly-owned subsidiary.

16. BORROWINGS

Group Company

2020 2019 2020 2019

Note RM’000 RM’000 RM’000 RM’000

Non-current

Secured

Islamic financing facility 16.1 1,610,000 – – –

Lease liabilities 16.2 1,524,260 1,604,727 6,774 –

3,134,260 1,604,727 6,774 –

Unsecured

Term loan 16.3 – 1,781,242 – 1,781,242

Loan from corporate shareholder of a subsidiary 16.4 – 406,295 – –

Total non-current unsecured borrowings – 2,187,537 – 1,781,242

Total non-current borrowings 3,134,260 3,792,264 6,774 1,781,242

Current

Secured

Islamic financing facility 16.1 90,000 – – –

Lease liabilities 16.2 55,161 51,965 82 –

145,161 51,965 82 –

Unsecured

Loan from corporate shareholder of a subsidiary 16.4 – 54,687 – –

Total current borrowings 145,161 106,652 82 –

Total borrowings 3,279,421 3,898,916 6,856 1,781,242

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16. BORROWINGS (CONTINUED)

Terms and debt repayment schedule:

Under 1 1-2 2-5 Over 5

year years years years

Total RM’000 RM’000 RM’000 RM’000

Group

Secured

Islamic financing facility 1,700,000 90,000 110,000 335,000 1,165,000

Lease liabilities 1,579,421 55,161 64,772 232,098 1,227,390

Total borrowings 3,279,421 145,161 174,772 567,098 2,392,390

Company

Secured

Lease liabilities 6,856 82 89 317 6,368

16.1 The secured Islamic financing facility obtained by a subsidiary of the Group comprise:

2020 2019

RM’000 RM’000

RM-Denominated Islamic Murabahah Medium Term Notes 1,700,000 –

On 21 October 2020, Pengerang LNG (Two) Sdn. Bhd. (“PLNG2”), a subsidiary of the Group issued an RM-denominated 20-year multi tranche (“Sukuk Murabahah”) totalling RM1.7 billion under its Islamic Medium Term Note Programme (“Programme”).

The Sukuk Murabahah bears profit rates ranging from 2.03% to 3.74% per annum and are fully repayable at their various 20 tranche due dates from 2021 to 2040.

It is secured by way of first ranking assignment and charge over a finance service reserve account as disclosed in Note 12 which is to be funded to a minimum balance equivalent to the next 6 months’ principal and next 6 months’ periodic profit payment due.

In connection with the Programme, the subsidiary (“Issuer”) has agreed to the following significant covenants:

(i) Issuer shall maintain a maximum debt to equity ratio of 80:20; and

(ii) Issuer shall maintain a Finance Service Cover Ratio of not less than 1.25 times.

132




16.2 The Group’s lease liabilities represent committed future payments for rights-of-use assets in relation to charter hire of floating storage units, usage of jetty facilities, lease of land and rental of seabed by subsidiaries of the Group from related companies and state government.

The lease liabilities bear interest at rates ranging from 7.2% to 9.1% per annum.

16.3 The unsecured term loan obtained by the Group and the Company comprise:

2020 2019

RM’000 RM’000

USD term loan – 1,781,242

The unsecured term loan bears interest at rates ranging from 2.6% to 2.7% (2019: 2.1% to 2.8%) per annum and was prepaid in full on 21 October 2020.

The unsecured term loan obtained by the Company has been on-lent to a subsidiary and a joint venture. At the reporting date, the outstanding amounts on-lent to a subsidiary and a joint venture are as follows:

Company

2020 2019


Subsidiary – repayable within twelve months 7.1 – 142,089

– repayable after twelve months 7.1 – 1,055,729

– 1,197,818

Joint venture – repayable after twelve months 7.2 208,856 248,694

On 21 October 2020, the subsidiary prepaid its outstanding shareholders’ term loans in full upon receipt of proceeds from the Sukuk Murabahah issuance.

16.4 Loan from corporate shareholder of a subsidiary bears interest at a rate of 6.5% (2019: 6.5%) per annum and was prepaid in full on 21 October 2020.

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Reconciliation of movement of liabilities to cash flows arising from financing activities

Islamicfinancing

facilityLease

liabilities Term loan

Loan from corporate

shareholder of a subsidiary Total

Group RM’000 RM’000 RM’000 RM’000 RM’000

Balance at 1 January 2020 – 1,656,692 1,781,242 460,982 3,898,916

Changes from financing cash flows

– payment of lease liabilities – (57,487) – – (57,487)

– drawdown of Islamic financing facility 1,700,000 – – – 1,700,000

– repayment of term loan – – (1,800,333) – (1,800,333)

– repayment of loan from corporate shareholder of a subsidiary – – – (439,795) (439,795)

Total changes from financing cash flows 1,700,000 (57,487) (1,800,333) (439,795) (597,615)

Effect of changes in foreign exchange rates – (26,639) 19,091 (21,187) (28,735)

Other liability-related changes

– prepayment made – (597) – – (597)

– acquisition of new lease – 6,950 – – 6,950

– accrued interest expense (9,605) – – – (9,605)

– interest capitalised 1,557 2,642 1,497 307 6,003

– interest expense 10,018 138,093 42,210 29,460 219,781

– interest paid (1,970) (140,233) (43,707) (29,767) (215,677)

Total other liability-related changes – 6,855 – – 6,855

Balance at 31 December 2020 1,700,000 1,579,421 – – 3,279,421

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Reconciliation of movement of liabilities to cash flows arising from financing activities (continued)

Lease liabilities Term loan

Loan from corporate

shareholder of a subsidiary Total

Group RM’000 RM’000 RM’000 RM’000

Balance at 1 January 2019 1,709,935 1,793,643 519,007 4,022,585


– payment of lease liabilities (56,579) – – (56,579)

– drawdown of term loan – 7,226 – 7,226

– repayment of loan from corporate shareholder of a subsidiary – – (52,938) (52,938)

Total changes from financing cash flows (56,579) 7,226 (52,938) (102,291)

Effect of changes in foreign exchange rates (18,181) (19,627) (5,087) (42,895)


– prepayment made (149) – – (149)

– acquisition of new lease 4,354 – – 4,354

– re-measurement of lease liabilities 17,163 – – 17,163

– interest expense 146,561 50,083 33,040 229,684

– interest paid (146,412) (50,083) (33,040) (229,535)

Total other liability-related changes 21,517 – – 21,517


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Reconciliation of movement of liabilities to cash flows arising from financing activities (continued)

Lease liabilities Term loan Total

Company RM’000 RM’000 RM’000

Balance at 1 January 2020 – 1,781,242 1,781,242


– payment of lease liabilities (94) – (94)

– repayment of term loan – (1,800,333) (1,800,333)

Total changes from financing cash flows (94) (1,800,333) (1,800,427)

Effect of changes in foreign exchange rates – 19,091 19,091


– acquisition of new lease 6,950 – 6,950

– interest capitalised – 233 233

– interest expense 706 43,474 44,180

– interest paid (706) (43,707) (44,413)

Total other liability-related changes 6,950 – 6,950

Balance at 31 December 2020 6,856 – 6,856

Term loan Total


Balance at 1 January 2019 1,793,643 1,793,643


– drawdown of term loan 7,226 7,226

Total changes from financing cash flows 7,226 7,226

Effect of changes in foreign exchange rates (19,627) (19,627)


– interest expense 50,083 50,083

– interest paid (50,083) (50,083)

Total other liability-related changes – –

Balance at 31 December 2019 1,781,242 1,781,242

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17. DEFERRED INCOME

2020 2019

Group and Company Note RM’000 RM’000

At beginning of the year 4,017 4,962

Addition 1,735 1,669

Less: recognised in the profit or loss (2,680) (2,614)

At end of the year 3,072 4,017

Analysis of deferred income:

Current 18 945 945

Non-current 2,127 3,072

3,072 4,017

Deferred income mainly relates to the payments received in advance from a related party amounting to RM3,072,000 (2019: RM4,017,000) for the utilisation of Company’s properties over a period of time by the related party. The deferred income is subsequently recognised in the profit or loss on a time apportionment basis over the specified period.

18. TRADE AND OTHER PAYABLES

Group Company

2020 2019 2020 2019

Note RM’000 RM’000 RM’000 RM’000

Other payables and accruals 18.1 572,251 620,356 524,977 546,668

Amount due to:

– Holding company 18.2 63,853 77,460 56,161 66,492

– Related companies 18.2 201,925 182,786 110,759 139,022

– subsidiaries 18.2 – – 175 –

Derivative liabilities 8 161 1,329 2 1,324

Deferred income 17 945 945 945 945

839,135 882,876 693,019 754,451

18.1 Included in other payables and accruals are amounts owing to suppliers and contractors for purchase of property, plant and equipment for the Group of RM316,644,000 (2019: RM301,432,000) and for the Company of RM297,473,000 (2019: RM248,184,000).

18.2 Amounts due to holding company, related companies and subsidiaries arose in the normal course of business and are non-trade in nature.

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19. REVENUE

Revenue from contracts with customers

The Group’s total revenue which also represents revenue from contracts with customers are disaggregated by primary geographical market and major products and services as follows:

Group Company

2020 2019 2020 2019

RM’000 RM’000 RM’000 RM’000

Geographical locations

Peninsular Malaysia 5,581,068 5,410,244 4,182,529 4,174,687

Sabah and Sarawak 11,049 48,006 11,049 48,006

Total revenue from contracts with customers 5,592,117 5,458,250 4,193,578 4,222,693

Products and services

Gas processing services 1,710,677 1,702,318 1,710,677 1,702,318

Gas transportation services 1,165,728 1,118,271 1,165,728 1,118,271

Regasification services 1,396,570 1,236,525 — —

Utilities

– Electricity 547,498 652,391 547,498 652,391

– Steam 433,006 413,321 433,006 413,321

– Industrial gases 265,462 233,982 265,462 233,982

– Others* 61,334 64,239 61,334 64,239

Operations and maintenance services 8,410 35,833 9,873 38,171

LNG ancillary services 3,432 1,370 — —

Total revenue from contracts with customers 5,592,117 5,458,250 4,193,578 4,222,693

* Others relates to water treatment services and sale of other utilities products.

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19. REVENUE (CONTINUED)

Revenue from contracts with customers (continued)

The Group’s disaggregated revenue for each reportable segments are as follows:

Group2020

Gas Processing

RM’000

Gas Transportation

RM’000Regasification

RM’000UtilitiesRM’000

TotalRM’000

Gas processing services 1,710,677 – – – 1,710,677

Gas transportation services – 1,165,728 – – 1,165,728

Regasification services – – 1,396,570 – 1,396,570

Utilities – – – 1,307,300 1,307,300

Operations and maintenance services – 7,160 – 1,250 8,410

LNG ancillary services – – 3,432 – 3,432

1,710,677 1,172,888 1,400,002 1,308,550 5,592,117

Group2019

Gas Processing

RM’000

Gas Transportation

RM’000Regasification

RM’000UtilitiesRM’000

TotalRM’000

Gas processing services 1,702,318 – – – 1,702,318

Gas transportation services – 1,118,271 – – 1,118,271

Regasification services – – 1,237,895 – 1,237,895

Utilities – – – 1,363,933 1,363,933

Operations and maintenance services – 34,210 – 1,623 35,833

LNG ancillary services – – 1,370 – 1,370

1,702,318 1,152,481 1,237,895 1,365,556 5,458,250

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Nature of goods and services

The following describes information about the nature and timing of the satisfaction of performance obligations in contracts with customers, including significant payment terms and the related revenue recognition policies.

Nature of products and servicesTiming of recognition or method used to recognise revenue and significant payment terms Variable elements in consideration

Gas processing services

Processing of natural gas into sales gas and by-products

Upon services being rendered, invoices are issued at pre-determined tariff on a monthly basis, at month-end and payable within 30 days.

There is a performance based income upon achieving certain plant and equipment efficiency to extract liquid by-products from natural gas of which contributes less than 10% of total consideration.

Gas transportation services

Transportation of processed gas to end customers


No variable considerations.

Regasification services

Regasification of liquefied natural gas into Peninsular Gas Utilisation (“PGU”) pipeline network and Pengerang Integrated Complex (“PIC”)



Utilities

Sale of industrial utilities to petrochemical complexes and national electricity grid

Upon industrial utilities distribution to customers, invoices are issued at pre-determined rates on a monthly basis, at month-end and payable within 30 days.


Operations & maintenance services

Provision of manpower to operate and maintain customer facilities



LNG ancillary services

Gassing up cooling down services Upon services being rendered, invoices are issued at pre-determined tariff per service basis and payable within 7 days.


LNG reloading services Upon services being rendered, invoices are issued at pre-determined tariff on a monthly basis, at month-end and payable within 30 days.


LNG truck loading services Upon services being rendered, invoices are issued at pre-determined tariff on a monthly basis, at month-end and payable within 30 days.


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Transaction price allocated to the remaining performance obligations

The following table shows revenue expected to be recognised in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the reporting date. The disclosure only provides information for contracts that have a duration of more than one year.

Gas Processing Services

Within 1year

RM’000

1 – 5year

RM’000

Over 5year

RM’000Total

RM’000

Group and CompanyGas Processing services

– Reservation charges 1,612,200 3,224,400 — 4,836,600

The Group has a 20-year agreement from 2014 to 2033 with the holding company to provide gas processing services called the Gas Processing Agreement (“GPA”). Pursuant to the recently entered 2nd term of the GPA effective 1 January 2019 till 31 December 2023, there is remaining an unsatisfied performance obligation to the customer for the next 4 years. There is no unsatisfied performance obligation beyond 5 years as tariffs and quantity nomination have yet to be agreed.

As allowed by the accounting standards, the Group and the Company applied the practical expedient for exemption on disclosure of information on remaining performance obligation that are unsatisfied (or partially unsatisfied) for contracts with customers as the performance obligation has an original expected duration of one year or less as follows:

(i) Gas Transportation Services

The Group has a long term agreement with a related company to provide gas transportation services that is subject to annual capacity reservation by the customer.

(ii) Regasification Services

The Group has two LNG regasification facilities in Melaka and Johor that provide LNG regasification services.

Regas Terminal (Sg. Udang) Sdn. Bhd. (“RGTSU”), being a subsidiary company, has a long term agreement with a related company to provide LNG regasification services that is subject to annual capacity nomination by the customer.

Pengerang LNG (Two) Sdn. Bhd. (“PLNG2”), being a subsidiary company, has a long term agreement with a related company to provide LNG regasification services that is subject to annual capacity nomination by the customer.

(iii) Utilities

The Group has long term agreements to supply industrial utilities to various customers in the Kertih Integrated Petrochemical Complex and Gebeng Industrial Area that are subject to daily, monthly, quarterly and annual nominations by the customers as well as fixed minimum offtake charges.

(iv) LNG ancillary services

LNG reloading services

RGTSU, being a subsidiary company, has long term agreement with a related company to provide LNG reloading services that is subject to annual nomination schedule by the customer.

LNG truck loading services

PLNG2, being a subsidiary company, has a long term agreement with a related company to provide LNG truck loading services that is subject to annual operation schedule agreed by the customer.

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20. OPERATING PROFIT

Group Company

2020 2019 2020 2019

RM’000 RM’000 RM’000 RM’000

Included in operating profit are the following charges:Auditor’s remunerations:

– audit fees 507 547 303 298

– non-audit fees 281 10 11 10

Depreciation of property, plant and equipment 1,016,887 1,137,578 646,522 760,752

Loss on disposal of property, plant and equipment 810 – – –

Property, plant and equipment:

– written off 853 513 853 513

– expensed off 2,200 898 2,185 783

Rental of:

– land and buildings 6,745 7,518 5,750 6,626

– equipment and motor vehicles 12,157 11,482 5,395 5,691

Staff costs:

– wages, salaries and others 302,051 380,387 282,039 358,459

– contributions to Employees Provided Fund 44,745 46,443 42,079 43,827

Other receivables written off 549 – 549 –

Inventories written off 12,721 1,364 12,721 1,364

Impairment losses on inventories 1,214 – 1,214 –

Realised loss on foreign exchange 21,471 – 4,210 –

Unrealised loss on foreign exchange – – 1,605 2,847

and crediting:Dividend income (quoted)

– associate – – 25,746 26,221

Dividend income (unquoted)

– subsidiaries – – 152,168 50,773

– joint ventures – – 39,160 2,250

Gain on disposal of property, plant and equipment – 2,576 25 2,576

Realised gain on foreign exchange – 1,123 – 752

Unrealised gain on foreign exchange 23,838 49,080 – –

Interest income:

– fund investment 106,212 140,399 97,317 129,127

– term loan due from a subsidiary – – 63,915 84,790

– term loan due from a joint venture 14,707 13,845 14,707 13,845

Rental income on land and buildings 4,734 4,711 5,256 5,333

Net write-back of impairment losses on expected credit loss 51 38 2,169 198

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21. FINANCING COSTS

Group Company

2020 2019 2020 2019

RM’000 RM’000 RM’000 RM’000

Recognised in profit or loss:

– Lease liabilities 137,966 146,561 706 –

– Islamic financing facility 8,048 – – –

– Term loan 42,210 50,083 43,474 50,083

– Loan from corporate shareholder of a subsidiary 24,229 33,040 – –

– Other financing costs 7,328 – – –

219,781 229,684 44,180 50,083

Capitalised into qualifying assets:

– Lease liabilities 2,642 – – –

– Islamic financing facility 1,557 – – –

– Term loan 1,497 – 233 –

– Loan from corporate shareholder of a subsidiary 307 – – –

6,003 – 233 –

Total financing cost 225,784 229,684 44,413 50,083

Other financing costs relate to costs on prepayment of loan from corporate shareholder of a subsidiary and on issuance of Islamic financing facility by the same subsidiary.

22. TAX EXPENSE

Group Company

2020 2019 2020 2019

RM’000 RM’000 RM’000 RM’000

Current tax expenses

Current year 454,895 386,736 449,750 382,233

Under/(Over) provision in prior years 10,030 (3,251) 9,810 (3,255)

Total current tax expenses 464,925 383,485 459,560 378,978

Deferred tax expenses

Origination and reversal of temporary differences 66,378 98,793 11,066 56,258

Over provision in prior year (3,383) (3,445) (3,588) (3,455)

Total deferred tax expenses 62,995 95,348 7,478 52,803

Total tax expenses recognised in profit or loss 527,920 478,833 467,038 431,781

Tax expense on share of profit of joint ventures 20,303 12,650 – –

Tax expense on share of profit of associate 9,786 7,236 – –

Total tax expenses 558,009 498,719 467,038 431,781

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22. TAX EXPENSE (CONTINUED)

A reconciliation of income tax expense applicable to profit before taxation at the statutory income tax rate to income tax expense at the effective income tax rate of the Group and of the Company is as follows:

% 2020 % 2019

Group RM’000 RM’000


Taxation at Malaysian statutory tax rate 24.0 633,670 24.0 595,865

Non-deductible expenses 0.9 24,834 0.5 12,047

Tax exempt income (1.0) (25,486) (1.3) (31,502)

Effect of net deferred tax benefits not recognised (3.2) (84,693) (1.9) (48,105)

Effect of net deferred tax previously not recognised – – (0.9) (22,038)

Foreign exchange translation difference – – – (5)

Income not subject to tax – (177) – (847)

20.7 548,148 20.4 505,415

Under/(Over) provision in prior years 9,861 (6,696)

Tax expense 558,009 498,719

% 2020 % 2019



Taxation at Malaysian statutory tax rate 24.0 528,355 24.0 481,267

Non deductible expenses, net of non assessable income 0.4 7,911 0.3 5,039

Tax exempt income (3.4) (75,450) (2.4) (47,815)

21.0 460,816 21.9 438,491

Under/(Over) provision in prior years 6,222 (6,710)

Tax expense 467,038 431,781

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23. DIVIDENDS

Company

2020 2019

RM’000 RM’000

Ordinary

Interim paid:

2018 – Fourth interim dividend of 22 sen per ordinary share – 435,321

2019 – First interim dividend of 16 sen per ordinary share – 316,597

2019 – Second interim dividend of 16 sen per ordinary share – 316,597

2019 – Third interim dividend of 18 sen per ordinary share – 356,172

2019 – Fourth interim dividend of 22 sen per ordinary share 435,321 –

2019 – Special interim dividend of 10 sen per ordinary share 197,873 –

2020 – First interim dividend of 16 sen per ordinary share 316,597 –

2020 – Second interim dividend of 16 sen per ordinary share 316,597 –

2020 – Special interim dividend of 50 sen per ordinary share 989,366 –

2020 – Third interim dividend of 18 sen per ordinary share 356,172 –

2,611,926 1,424,687

The Directors had on 22 February 2021 declared a fourth interim dividend of 22 sen per ordinary share amounting to RM435.3 million and a special interim dividend of 5 sen per ordinary share amounting to RM98.9 million, in respect of the financial year ended 31 December 2020.

The financial statements for the current financial year do not reflect the declared interim dividends. The dividends will be accounted for in equity as an appropriation of retained profits in the financial statements for the financial year ending 31 December 2021.

The net dividend per ordinary share for the respective financial year ended 31 December takes into account the total interim dividends declared as follows:

Company

2020 2019

Sen Sen

Declared and paid – net

First interim dividend per ordinary share 16 16

Second interim dividend per ordinary share 16 16

Special interim dividend per ordinary share 50 —

Third interim dividend per ordinary share 18 18

100 50

Declared but not paid – net

Fourth interim dividend per ordinary share 22 22

Special interim dividend per ordinary share 5 10

127 82

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24. EARNINGS PER SHARE

Basic earnings per share

The calculation of basic earnings per ordinary share was based on the Group’s net profit attributable to shareholders of the Company of RM2,009,585,000 (2019: RM1,935,258,000), over the number of ordinary shares outstanding during the year of 1,978,732,000 (2019: 1,978,732,000).

Diluted earnings per share

The Company has not issued any dilutive potential ordinary shares, hence, the diluted EPS is the same as the basic EPS.

Company

2020 2019

Sen Sen

Basic and diluted earnings per ordinary share 101.6 97.8

25. CAPITAL COMMITMENTS

Outstanding commitments in respect of capital expenditure at the end of the financial year not provided for in the financial statements are:

Group Company

2020 2019 2020 2019

RM’000 RM’000 RM’000 RM’000

Property, plant and equipment

Approved and contracted forLess than one year 427,360 417,561 427,269 404,744

Between one and five years 26,326 10,988 26,326 10,988

453,686 428,549 453,595 415,732

Approved but not contracted forLess than one year 1,318,755 494,857 1,276,586 438,320

Between one and five years 2,660,957 2,646,443 2,578,823 2,616,883

3,979,712 3,141,300 3,855,409 3,055,203

4,433,398 3,569,849 4,309,004 3,470,935

Share of capital expenditure of joint venture

Approved and contracted forLess than one year 795 18,760 – –

Between one and five years – – – –

795 18,760 – –

Approved but not contracted forLess than one year 3,081 15,405 – –

Between one and five years 6,567 – – –

9,648 15,405 – –

10,443 34,165 – –

Total commitments 4,443,841 3,604,014 4,309,004 3,470,935

146



26. CONTINGENT LIABILITIES

Group

2020 2019

RM’000 RM’000

Unsecured

Counter claim by a third party against a joint venture – 137,296

Kimanis Power Sdn. Bhd. (“KPSB”), a 60% joint venture company of the Group, had issued a Notice of Arbitration on 24 March 2017 to Sabah Electricity Sdn. Bhd. (“SESB”) in connection to disputes on the Power Purchase Agreement entered into between the parties.

Subsequent to the issuance of the Notice of Arbitration, KPSB had on 12 September 2017 filed its Statement of Claim for an estimated sum of RM83,381,000 plus interest. SESB has since filed its Statement of Defence and Counterclaim on 2 November 2017 amounting to a sum of RM228,826,000 plus interest.

On 12 February 2020, both parties have agreed to amicably resolve all outstanding disputes by entering into a Global Settlement Agreement and mutually withdrawing from the Arbitration Proceedings.

27. RELATED PARTY DISCLOSURES

Significant transactions with related parties

For the purposes of these financial statements, parties are considered to be related to the Group or the Company if the Group or the Company has the ability, directly or indirectly, to control or jointly control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa or where the Group or the Company and the party are subject to common control. Related parties may be individuals or other entities.

The Group’s and the Company’s related parties include subsidiaries, joint ventures, associate, as well as the holding and ultimate holding company, Petroliam Nasional Berhad (“PETRONAS”) and its related entities. The Group’s related parties also include Government of Malaysia and its related entities as the Company’s holding company, PETRONAS is wholly-owned by the Government of Malaysia.

Related parties also include key management personnel defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Group either directly or indirectly and an entity that provides key management personnel services to the Group. The key management personnel include all the Directors of the Group.

Key management personnel compensation

Group Company

2020 2019 2020 2019

RM’000 RM’000 RM’000 RM’000

Directors

– Other short term employee benefits 24 24 24 24

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27. RELATED PARTY DISCLOSURES (CONTINUED)

In addition to directors’ compensation paid directly as above, the Company paid to the holding company fees for representation on the Board of Directors for services provided by directors and reimbursement of key management cost as disclosed below.

In addition to the transactions detailed elsewhere in the financial statements, the Group and the Company had the following transactions with related parties during the financial year:

Group Company

2020 2019 2020 2019

RM’000 RM’000 RM’000 RM’000

Government of Malaysia’s related entities:Tenaga Nasional Berhad– Sales of industrial utilities 5,960 120,997 5,960 120,997– Purchase of electricity (45,204) (53,929) (19,618) (32,282)TNB Repair and Maintenance Sdn. Bhd.– Provision of repair and maintenance services (40,640) (25,422) (40,640) (25,422)

Holding company:– Gas processing fee income 1,694,150 1,692,288 1,694,150 1,692,288– Interest income from fund investments 101,385 131,256 92,513 119,987– Internal gas consumption and performance incentive 9,984 9,485 9,984 9,485– Gas transportation fee income 7,581 16,501 7,581 16,501– Office rental income – 120 – –– Information, communication and technology charges (52,292) (41,487) (50,735) (39,596)– Insurance expense (23,664) (18,126) (18,176) (15,443)– Supply chain and management services (17,389) (13,175) (16,078) (12,759)– Financial services (12,221) (11,966) (12,097) (11,463)– Corporate security charges (9,313) (12,175) (9,352) (10,731)– Rental of office premises (5,774) (6,752) (5,774) (6,752)– Technical manpower services (2,984) (3,273) (2,780) (3,062)– Legal services (2,025) (1,016) (1,738) (855)– Clinic management fees (1,880) (1,838) (1,880) (1,838)– Fees for representation on the Board of Directors (1,518) (1,464) (1,518) (1,464)– Reimbursement of key management cost (1,499) (1,581) (1,499) (1,581)– Annual learning and development charges (922) (989) (881) (945)– Tax services (468) (1,432) (594) (838)– Internal audit services (110) (733) (110) (733)– Agent services fee expense (30) (523) (30) (523)– Technical studies – (38) – (38)

Related companies:CEFS Response– Contribution for emergency response services (13,165) (11,010) (13,158) (10,854)CEFS Pengerang Integrated Complex– Contribution for emergency response services (1,146) (3,730) – –Convex Malaysia Sdn. Bhd.– Rental of meeting room (37) (171) (37) (171)Fiberail Sdn. Bhd.– Leasing and cable storage fees 2,376 2,376 2,376 2,376– Telecommunication services (1,053) (1,405) (1,053) (1,405)Gas Asia Terminal (L) Pte. Ltd.– Time charter services (241,976) (239,913) – –– Purchase of plant and equipment for LNG reloading (26,385) – – –– Marine diesel oil (2,703) (201) – –– Lease and rental of building (942) (1,092) – –

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Group Company

2020 2019 2020 2019

RM’000 RM’000 RM’000 RM’000

Related companies (continued):Gas Asia Terminal (L) Pte. Ltd. (continued)– Fresh water services (73) – – –– Insurance premium (46) – – –– Installation of water supply system – (300) – –– Inspection services – (38) – –Indah Putrajaya Sdn. Bhd.– Rental of hall/meeting room (69) (23) (69) (23)Institute of Technology PETRONAS Sdn. Bhd.– Professional course services (17) (78) (17) (78)Kertih Port Sdn. Bhd.– Land lease (98) (98) (98) (98)– Facilities usage (15) (15) (15) (15)Malaysia LNG Sdn. Bhd.– Gassing Up Cooling Down income 415 1,243 – –Malaysian Maritime Academy– Training fee (86) (17) – –– Vessel screening fees (72) – – –Mandarin Oriental KL– Rental of hall/meeting room (2) (722) (2) (722)Pengerang Power Sdn. Bhd.– Purchase of electricity (77,438) (25,048) – –PETCO Trading Labuan Co. Ltd.– LPG import and export service fees 6,543 545 6,543 545– Marine facilities income 2,897 375 2,897 375PETRONAS Carigali Sdn. Bhd.– Land management income 209 296 209 296– Operations and maintenance services income 22 31,505 22 31,505– Operations and maintenance services charges (4,013) – (4,013) –PETRONAS Chemicals Ammonia Sdn. Bhd.– Sale of industrial utilities 183,254 159,889 183,254 159,889– Office space refund 1,417 – 1,417 –– Compressed air maintenance fees 399 359 399 359– Fire water services 25 32 25 32– Maintenance fees for lab and workshop (2,080) (1,094) (2,080) (1,094)PETRONAS Chemicals Aromatics Sdn. Bhd.– Sale of industrial utilities 55,050 53,829 55,050 53,829PETRONAS Chemicals Derivatives Sdn. Bhd.– Sale of industrial utilities 503,361 463,649 503,361 463,649PETRONAS Chemicals Ethylene Sdn. Bhd.– Sale of industrial utilities 5,807 5,520 5,807 5,520– Utilities consumption (80) (80) (80) (80)PETRONAS Chemicals LDPE Sdn. Bhd.– Sale of industrial utilities 98,255 92,239 98,255 92,239PETRONAS Chemicals Marketing Labuan Sdn. Bhd.– Purchase of hydrogen (1,927) – (1,927) –PETRONAS Chemicals MTBE Sdn. Bhd.– Sale of industrial utilities 173,185 166,936 173,185 166,936– Fire water services income 114 24 114 24– Emergency response services (1,592) (1,854) (1,592) (1,854)– Rental of piperack (175) (175) (175) (175)

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Group Company

2020 2019 2020 2019

RM’000 RM’000 RM’000 RM’000

Related companies (continued):PETRONAS Dagangan Berhad– Staff gift cards (3,277) (3,142) (3,273) (3,142)– Fuel card services (454) (779) (454) (779)– Purchase of petroleum products (83) (178) (83) (178)PETRONAS Energy and Gas Trading Sdn. Bhd.– Regasification fee income 1,394,950 1,156,333 – –– Gas transportation fee income 1,158,146 1,097,027 1,158,146 1,097,027– Reloading Income 2,982 3,189 – –– Agent services fee income 1,297 2,900 1,297 2,900– LNG truck loading income 416 – – –– Purchase of fuel gas (830,388) (848,707) (830,388) (848,707)– Purchase of gas for internal gas consumption (92,661) – (78,624) –PETRONAS Global Technical Services Sdn. Bhd.– Project management consultancy (6,140) (8,223) – –PETRONAS Hartabina Sdn. Bhd.– Land lease (1,220) (2,978) (800) (2,561)PETRONAS Digital Sdn. Bhd.– Information, communication and technology services (10,092) (5,889) (9,891) (5,225)– License fees (24) – (11) –PETRONAS LNG Ltd.– Gassing Up Cooling Down income 1,242 1,243 – –PETRONAS Lubricants Marketing Sdn. Bhd.– Purchase of petroleum products (3,696) (3,334) (3,569) (3,224)PETRONAS Management Training Sdn. Bhd.– Training and development related costs (949) (1,897) (920) (1,836)PETRONAS Penapisan (Melaka) Sdn. Bhd.– Lease of land for pipeline route (76) (76) – –– Lease of land for office building (11) (11) – –PETRONAS Penapisan (Terengganu) Sdn. Bhd.– Marine facilities income 54 1,426 54 1,426PETRONAS Technical Services Sdn. Bhd.– Technical consultancy fees (126,621) (143,425) (127,136) (142,032)– Rental of office space (60) – – –PETRONAS Technical Training Sdn. Bhd.– On the job training income 229 422 229 422– Training and development related costs (1,876) (6,879) (1,667) (6,499)PETRONAS Technology Ventures Sdn. Bhd.– Purchase of software (220) (200) (220) (200)Sungai Udang Port Sdn. Bhd.– Marine services (6,475) (6,475) – –– Freshwater transfer services (37) (50) – –– Purchase of marine gas oil/marine diesel oil (3) – – –Vinyl Chloride (Malaysia) Sdn. Bhd.– Sale of industrial utilities 102 1,528 102 1,528Voltage Renewables Sdn. Bhd.– Operations and maintenance services income 1,250 1,623 1,250 1,623– Sale of industrial utilities 268 324 268 324– Management fee income 191 185 191 185

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Group Company

2020 2019 2020 2019

RM’000 RM’000 RM’000 RM’000

Subsidiaries:Regas Terminal (Sg. Udang) Sdn. Bhd.– Management fee income – – 3,294 2,659– Pipeline maintenance fee income – – 1,463 2,338– Annual access right fee income – – 418 519– Rental Income of warehouse – – 103 103– Transfer of assets – – (175) –Pengerang LNG (Two) Sdn. Bhd.– Interest income – – 63,915 84,790– Breakage costs – – 13,930 –– Management fee income – – 2,868 2,868– Transfer of pipeline – – – 17,800

Joint ventures:Industrial Gases Solutions Sdn. Bhd.– Sale of industrial utilities 6,342 5,442 6,342 5,442– Purchase of nitrogen (1,252) (1,162) – –Kimanis Power Sdn. Bhd.– Secondment fee income 1,463 1,512 1,463 1,512Pengerang Gas Solutions Sdn. Bhd.– Interest Income 14,707 13,845 14,707 13,845– Secondment fee income 589 1,506 589 1,506

Associates and joint ventures of the holding company:BASF PETRONAS Chemicals Sdn. Bhd.– Sale of industrial utilities 143,891 166,807 143,891 166,807BP PETRONAS Acetyls Sdn. Bhd.– Sale of industrial utilities 37,799 36,561 37,799 36,561– Fire water services 21 31 21 31Kertih Terminals Sdn. Bhd.– Sale of industrial utilities 8,575 8,796 8,575 8,796– Warehouse charges (1,914) (1,521) (1,914) (1,521)Trans Thai-Malaysia (Malaysia) Sdn. Bhd.– Annual operations and maintenance fee income 3,693 2,706 3,693 2,706– Access right of way fee income 2,264 2,264 2,264 2,264– Office space rental income – (17) – (17)

Included in the fees for representation on the Board of Directors are fees paid directly to holding company in respect of certain directors who are appointees of the holding company.

Information regarding outstanding balances at reporting date arising from related party transactions are disclosed in Note 7, Note 11, Note 16, Note 17 and Note 18.

The Directors of the Company are of the opinion that the above transactions have been entered into in the normal course of business and have been established on a negotiated basis.

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28. OPERATING SEGMENTS

The Group has four reportable segments, as described below, which are the Group’s strategic business units. The strategic business units offer different products and services, and are managed separately because they require different technology and marketing strategies. For each of the strategic business units, the Group’s Chief Operating Decision Maker which is the Board of Directors, reviews internal management reports at least on a quarterly basis. The following summary describes the operations in each of the Group’s reportable segments:

• Gas processing – activities include processing of natural gas from gas fields offshore the East Coast of Peninsular Malaysia into salesgas and other by-products such as ethane, propane and butane.

• Gas transportation – activities include transportation of sales gas to shippers’ end customers throughout Malaysia and export to Singapore as well as provision of operations and maintenance services.

• Regasification – activities include regasification of liquefied natural gas (“LNG”) into the Peninsular Gas Utilisation pipeline network and provision of LNG reloading, truck loading and gassing up and cooling down services.

• Utilities – activities include manufacturing, marketing and supplying of industrial utilities to the petrochemical complexes in the Kertih and Gebeng Industrial Area and provision of operations and maintenance services.

Performance is measured based on segment gross profit as included in the internal management reports. Segment gross profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of the segments.

Segment results refer to segment gross profit. The total segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated expenses mainly comprise forex gain or loss, other corporate income and expenses.

The total of segment assets are measured based on all assets of a segment, excluding interest bearing assets and corporate assets as these are managed on a group basis.

The segmental information in respect of the joint ventures and associate is not presented as the contribution of the associate and joint ventures and the carrying amounts of investment in the associate and joint ventures have been reflected in the statement of profit or loss and other comprehensive income and statement of financial position of the Group. Details of the joint ventures and associate are disclosed in Note 5 and Note 6 to the financial statements respectively.

Segment capital expenditure is the total cost incurred during the period to acquire non-current assets that are expected to be used for more than one period, other than financial instruments and deferred tax assets.

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28. OPERATING SEGMENTS (CONTINUED)

GroupBusiness segments

Gas Processing

Gas Transportation Regasification Utilities Total

2020 RM’000 RM’000 RM’000 RM’000 RM’000

Revenue 1,710,677 1,172,888 1,400,002 1,308,550 5,592,117

Segment results 944,616 794,852 713,113 203,847 2,656,428

Unallocated income 13,766

Operating profit 2,670,194

Financing costs (219,781)

Share of profit after tax of equity-accounted joint ventures and associate 159,788

Profit before taxation 2,610,201

Tax expense (527,920)

Profit for the year 2,082,281

Included in the measure of segment profit are:

Depreciation and amortisation (399,962) (103,291) (370,576) (142,395) (1,016,224)

Unallocated depreciation and amortisation – – – – (663)


Gas Processing


2019 RM’000 RM’000 RM’000 RM’000 RM’000

Revenue 1,702,318 1,152,481 1,237,895 1,365,556 5,458,250

Segment results 816,513 799,462 610,993 160,081 2,387,049

Unallocated income 168,796

Operating profit 2,555,845

Financing costs (229,684)

Share of profit after tax of equity-accounted joint ventures and associate 136,724

Profit before taxation 2,462,885

Tax expense (478,833)

Profit for the year 1,984,052

Included in the measure of segment profit are:

Depreciation and amortisation (462,353) (97,606) (376,826) (200,172) (1,136,957)

Unallocated depreciation and amortisation – – – – (621)

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Gas Processing


2020 RM’000 RM’000 RM’000 RM’000 RM’000

Segment assets 4,271,901 2,888,892 6,197,986 1,335,597 14,694,376

Investment in joint ventures 631,248

Investment in associate 142,482

Unallocated assets 2,876,509

Total assets 18,344,615

Included in the measure of segment assets are:

Capital expenditure 480,138 181,113 46,388 263,211 970,850

Unallocated capital expenditure – – – – 8,631


Gas Processing


2019 RM’000 RM’000 RM’000 RM’000 RM’000

Segment assets 4,295,726 2,865,335 6,622,482 1,323,906 15,107,449

Investment in joint ventures 547,361

Investment in associate 137,771

Unallocated assets 3,790,940

Total assets 19,583,521

Included in the measure of segment assets are:

Capital expenditure 687,738 135,083 157,048 275,486 1,255,355

Unallocated capital expenditure – – – – 9,540

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Major customers

The following are major customers with revenue that contribute to equal or more than 10 percent of the Group revenue:

2020 2019

Group Segment RM’000 RM’000

– PETRONAS Energy and Gas Trading Sdn. Bhd.

Gas Transportation and Regasification 2,556,494 2,253,360

– Petroliam Nasional Berhad (PETRONAS) Gas Processing, Gas Transportation and Regasification 1,711,715 1,718,274

– PETRONAS Chemicals Group Berhad Utilities 1,019,073 943,589

Pursuant to Gas Supply Act (Amendment) 2016, the Third Party Access code was introduced by Suruhanjaya Tenaga for the owner of gas facilities to purchase their own internal gas consumption. Hence, PETRONAS Gas Berhad and its subsidiaries had on 30 November 2020 entered into the following agreements with PETRONAS Energy & Gas Trading Sdn. Bhd.:

Name of company Agreements Tenure

PETRONAS Gas Berhad Master Sale and Purchase Agreement (“MSPA”) to purchase gas for internal consumption at Peninsular Gas Utilisation pipeline network.

2020 to 2022

Regas Terminal (Sg. Udang) Sdn. Bhd. MSPA to purchase gas for internal consumption at LNG regasification terminal in Sg. Udang, Melaka.

2020 to 2022

Pengerang LNG (Two) Sdn. Bhd. MSPA to purchase gas for internal consumption at LNG regasification terminal in Pengerang, Johor.

2020 to 2022

Upon expiry of the current 20-year sale and purchase agreement for the purchase of fuel gas for Utilities business, PETRONAS Gas Berhad had on 30 October 2020 entered into the following new agreement with PETRONAS Energy & Gas Trading Sdn. Bhd.:

Name of company Agreement Tenure

PETRONAS Gas Berhad Gas Sales Agreement to purchase fuel gas for Utilities business. 2020 to 2039

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29. FINANCIAL INSTRUMENTS

Categories of financial instruments

The table below provides an analysis of financial instruments categorised as follows:

(i) Amortised cost (“AC”)(ii) Fair value through profit or loss (“FVTPL”) – Mandatorily required by MFRS 9; – Designated upon initial recognition (“DUIR”)

Group AC FVTPL

Total carrying amount

2020 Note RM’000 RM’000 RM’000

Financial assets

Long term receivables (excluding Expected Credit Loss (“ECL”)) 7 208,856 – 208,856

Trade and other receivables (excluding prepayments, GST receivables and ECL) 11 714,887 15 714,902

Cash and cash equivalents 12 3,138,898 – 3,138,898

4,062,641 15 4,062,656

Financial liabilities

Borrowings (excluding lease liabilities) 16 (1,700,000) – (1,700,000)

Trade and other payables (excluding deferred income) 18 (838,029) (161) (838,190)

(2,538,029) (161) (2,538,190)

Group AC FVTPL


2019 Note RM’000 RM’000 RM’000

Financial assets

Long term receivables (excluding ECL) 7 262,019 1,980 263,999



5,174,640 2,932 5,177,572


Borrowings (excluding lease liabilities) 16 (2,242,224) – (2,242,224)

Trade and other payables (excluding deferred income) 18 (880,602) (1,329) (881,931)

(3,122,826) (1,329) (3,124,155)

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29. FINANCIAL INSTRUMENTS (CONTINUED)

Categories of financial instruments (continued)

Company AC FVTPL


2020 Note RM’000 RM’000 RM’000

Financial assets

Long term receivables (excluding ECL) 7 208,856 — 208,856


Cash and cash equivalents 12 2,626,718 — 2,626,718

3,426,358 2 3,426,360


Trade and other payables (excluding deferred income) 18 (692,072) (2) (692,074)

(692,072) (2) (692,074)

Company AC FVTPL


2019 Note RM’000 RM’000 RM’000

Financial assets

Long term receivables (excluding ECL) 7 1,317,748 1,980 1,319,728



5,790,177 2,853 5,793,030


Borrowings 16 (1,781,242) – (1,781,242)

Trade and other payables (excluding deferred income) 18 (752,182) (1,324) (753,506)

(2,533,424) (1,324) (2,534,748)

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Financial risk management

The Group and the Company are exposed to various risks that are particular to its core business which consists of separating natural gas into its components and storing, transporting and distributing such components thereof for a fee, the sale of industrial utilities and the regasification of liquefied natural gas for a fee. These risks, which arise in the normal course of the Group’s and the Company’s business, comprise credit risk, liquidity risk and market risk relating to interest rates and foreign currency exchange rates.

The Group and the Company have policies and guidelines in place that sets the foundation for a consistent approach towards establishing an effective financial risk management across the PETRONAS Group.

Risk taking activities are undertaken within acceptable level of risk or risk appetite, whereby the risk appetite level reflects business considerations and capacity to assume such risks. The risk appetite is established at Board level, where relevant, based on defined methodology and translated into operational thresholds.

The Group’s and the Company’s goal in risk management is to ensure that the management understands, measures and monitors the various risks that arise in connection with their operations. Policies and guidelines have been developed to identify, analyse, appraise and monitor the dynamic risks facing the Group and the Company. Based on this assessment, the Group and the Company adopt appropriate measures to mitigate these risks in accordance with their view of the balance between risk and reward.

Credit risk

Credit risk is the potential exposure of the Group and of the Company to losses in the event of non-performance by counterparties. The Group’s and the Company’s exposure to credit risk arise from their operating activities, primarily from their receivables from customers and fund investments. The credit risk arising from the Group’s and the Company’s normal operations are controlled by individual operating units in line with PETRONAS’ policies and guidelines.

(i) Receivables

Risk management objectives, policies and processes for managing the risk

The Group and the Company minimise its credit risk by entering into contracts with highly rated counterparties. Potential counterparties are subject to credit assessment and approval prior to any transaction being concluded and existing counterparties are subject to regular reviews, including re-appraisal and approval of granted limits. The creditworthiness of counterparties is assessed based on an analysis of all available quantitative and qualitative data regarding business risks and financial standing, together with the review of any relevant third party and market information. Reports are prepared and presented to the management that cover the Group’s overall credit exposure against limits and securities.

Depending on the types of transactions and counterparty’s creditworthiness, the Group and the Company further mitigate and limit risks related to credit by requiring other credit enhancements such as cash deposits and bank guarantees. No collateral or other credit enhancement is required from related parties.

At each reporting date, the Group and the Company assess whether any of the trade receivables are credit impaired.

The gross carrying amounts of credit impaired trade receivables are written off (either partially or in full) when there is no realistic prospect of recovery. This is generally the case when the Group or the Company determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. Nevertheless, trade receivables that are written off could still be subject to enforcement activities.

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Credit risk (continued)

(i) Receivables (continued)

Exposure to credit risk, credit quality and collateral

As at the end of the reporting period, the maximum exposure to credit risk arising from trade receivables are represented by the carrying amounts in the statement of financial position.

At each reporting date, the Group assesses whether financial assets carried at amortised cost are credit-impaired. A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

Evidence that a financial asset is credit-impaired includes the following observable data:

– significant financial difficulty of the customer;– a breach of contract such as a default; or– it is probable that the customer will enter bankruptcy or other financial reorganisation.

Concentration of credit risk

As at the reporting date, significant receivables relate to amounts due from holding company and amounts due from related companies.

Recognition and measurement of impairment loss

In managing credit risk of trade receivables, the Group manages its debtors and takes appropriate actions (including but not limited to legal actions) to recover long overdue balances.

The Group and the Company perform credit rating assessment of all its counterparties in order to measure Expected Credit Loss (“ECL”) of trade receivables for all segments using the PETRONAS Credit Risk Rating system. This credit rating assessment considers quantitative assessment using the counterparties’ financial statements or a qualitative assessment of the counterparties which includes but is not limited to their reputation, competitive position, industry and geopolitical outlook.

In determining the ECL, the probability of default assigned to each counterparty is based on their individual credit rating. This probability of default is derived by benchmarking against available third party and market information, which also incorporates forward looking information.

Loss given default is the assumption of the proportion of financial asset that cannot be recovered by conversion of collateral to cash or by legal process, and is assessed based on the Company’s historical experience.

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Recognition and measurement of impairment loss (continued)

The following table provides information about the exposure to credit risk and ECLs for trade receivables and contract assets as at 31 December 2020 which are grouped together as they are expected to have similar risk nature.

Group2020 Note

Gross carryingamountRM’000

Loss allowance

RM’000

Net balanceRM’000

Credit risk rating

Low risk rating 160,609 (1) 160,608

Medium risk rating 479,150 (1) 479,149

High risk rating – – —

Amounts not subject to loss allowances* (778) – (778)

638,981 (2) 638,979

Representing:

Trade receivables 11 638,981 (2) 638,979

Company2020 Note

Gross carryingamountRM’000

Loss allowance

RM’000

Net balanceRM’000

Credit risk rating

Low risk rating 160,605 (1) 160,604

Medium risk rating 358,648 (1) 358,647

High risk rating – – –

Amounts not subject to loss allowances* (778) – (778)

518,475 (2) 518,473

Representing:

Trade receivables 11 518,475 (2) 518,473

* Amounts not subject to loss allowances relates to credit notes issued to customers.

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The ageing of trade receivables as at the reporting date is analysed below.

Group Company

2020 2019 2020 2019

Note RM’000 RM’000 RM’000 RM’000

Current 638,981 693,203 518,475 580,852

Past due 1 to 30 days – (140) – (140)

Past due 31 to 60 days – 373 – 373

Past due 61 to 90 days – (8,623) – (8,623)

Past due more than 90 days – 1,937 – 1,937

638,981 686,750 518,475 574,399

Representing:

Trade receivables 11 27,828 27,828 11,257 27,828

Amounts due from holding company 11.2 145,385 144,346 145,381 144,346

Amounts due from subsidiary 11.3 – – 366 928

Amounts due from joint ventures 11.4 914 354 914 367,028

Amounts due from related companies 11.5 465,997 480,307 345,129 354

Amounts due from related parties 11.6 15,428 33,915 15,428 33,915

638,981 686,750 518,475 574,399

Other receivables

Credit risks on other receivables are mainly arising from term loan due from a joint venture company and amount due from related companies arising from the normal course of business. The term loan due from a joint venture company has fixed terms of repayment as disclosed in Note 7 to the financial statements and amount due from related companies are short term in nature.

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Other receivables (continued)

As at the end of the reporting period, the maximum exposure to credit risks is represented by their carrying amounts in the statement of financial position. The Group and the Company have provided allowances for expected credit losses on these amounts. The movements in the allowance for expected credit losses during the year are as follows:

2020

Trade receivables

RM’000

Other receivables

RM’000Total

RM’000

Group

Opening balance (70) (445) (515)

Impairment reversal/(loss) recognised 68 (17) 51

Closing balance (2) (462) (464)

Company

Opening balance (70) (2,574) (2,644)

Impairment reversal recognised 68 2,101 2,169

Closing balance (2) (473) (475)

(ii) Fund investments

The Group and the Company are also exposed to counterparty credit risk from financial institutions through fund investments activities which is managed by PETRONAS IFSSC on behalf of the Group comprising primarily money market placement. These exposures are managed in accordance with existing policies and guidelines that define the parameters within which the investment activities shall be undertaken in order to achieve the Group’s investment objective of preserving capital and generating optimal returns above appropriate benchmarks within allowable risk parameters.

Investments are only made with approved counterparties who met the appropriate rating and other relevant criteria, and within approved credit limits, as stipulated in the policies and guidelines. The treasury function is governed by a counterparty credit risk management framework.

As at the reporting date, the maximum exposure to credit risk arising from fund investments is represented by the carrying amounts in the statement of financial position.

The credit risk on a financial instrument is considered low, if the financial instrument has a low risk of default, the borrower has a strong capacity to meet its contractual cash flow obligations in the near term and adverse changes in economic and business conditions in the longer term may, but will not necessarily, reduce the ability of the borrower to fulfil its contractual cash flow obligations. The Group and the Company assume that there is a significant increase in credit risk when it is past due.

While the fund investments are unsecured, the Group and the Company do not expect any of the counterparties to fail to meet its obligation in view of their sound credit ratings.

Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s exposure to liquidity risk arise principally from its trade and other payables and borrowings. In managing its liquidity risk, the Group and the Company maintain sufficient cash and liquid marketable assets.

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Liquidity risk (continued)

The Group’s and the Company’s borrowing power is not limited by the Company’s and respective Group entities’ constitutions. However, certain borrowing covenants impose limited restrictions on some of the debt level of the Group and Company.

Maturity analysis

The table below summarises the maturity profile of the Group’s and of the Company’s financial liabilities as at the reporting date based on undiscounted contractual payments:

GroupCarrying amount

Contractualinterest per

annum/discount rate

Contractual cash flows*

Within 1year

2020 RM’000 % RM’000 RM’000

RM Islamic financing facility 1,700,000 2.0 to 3.7 2,194,248 138,836

Lease liabilities 1,579,421 7.2 to 9.1 2,811,581 177,692

Trade and other payables (excluding deferred income) 838,190 – 838,190 838,190

4,117,611 5,844,019 1,154,718

Group1-2

years2-5

years More than 5

years

2020 RM’000 RM’000 RM’000

RM Islamic financing facility 157,009 461,872 1,436,531

Lease liabilities 188,900 567,052 1,877,937

Trade and other payables (excluding deferred income) – – –

345,909 1,028,924 3,314,468

CompanyCarrying amount


annum/discount rate

Contractual cash flow*

Within 1year

2020 RM’000 % RM’000 RM’000

Lease liabilities 6,856 8.2 16,396 640


698,930 708,470 692,714

Company1-2

years2-5

years More than 5

years

2020 RM’000 RM’000 RM’000

Lease liabilities 640 1,921 13,195


640 1,921 13,195

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Liquidity risk (continued)

Maturity analysis (continued)

GroupCarrying amount


annum/discount rate


Within 1year

2019 RM’000 % RM’000 RM’000

Term loan 1,781,242 2.1 to 2.8 1,840,200 50,990

Loan from corporate shareholder of a subsidiary 460,982 6.5 587,327 84,063

Lease liabilities 1,656,692 7.2 to 9.1 3,036,115 180,518


4,780,847 6,345,573 1,197,502

Group1-2

years2-5

years More than 5

years

2019 RM’000 RM’000 RM’000

Term loan 1,789,210 – –

Loan from corporate shareholder of a subsidiary 82,733 235,380 185,151

Lease liabilities 191,566 575,055 2,088,976


2,063,509 810,435 2,274,127

CompanyCarrying amount


annum/discount rate


Within 1year

2019 RM’000 % RM’000 RM’000

Term loan 1,781,242 2.1 to 2.8 1,840,200 50,990


2,534,748 2,593,706 804,496

Company1-2

years2-5

years More than 5

years

2019 RM’000 RM’000 RM’000

Term loan 1,789,210 – –


1,789,210 – –

* The contractual cash flow is inclusive of the principal and interest payments.

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Market risk

Market risk is the risk or uncertainty arising from changes in market prices and their impact on the performance of the business. The market price changes that the Group and the Company are exposed to includes interest rates, foreign currency exchange rates and other indices that could adversely affect the value of the Group’s and of the Company’s financial assets, liabilities or expected future cash flows.

Interest rate risk

The Group’s and the Company’s investments in fixed rate debt instruments are exposed to a risk of change in their fair value due to changes in interest rates. The Group’s and Company’s variable rate borrowings are exposed to a risk of change in cash flows due to changes in interest rates. Short term receivables and payables are not significantly exposed to interest rate risk.

All interest rate exposures are monitored and managed proactively in line with PETRONAS policies and guidelines. The Group enters into hedging transactions to minimise exposure to the interest rate movement in accordance with policies and guidelines.

The interest rate profile of the Group’s and the Company’s interest-bearing financial instruments based on carrying amount as at reporting date is as follows:

Group Company

2020 2019 2020 2019

RM’000 RM’000 RM’000 RM’000

Fixed rate instruments

Financial assets 257,107 276,807 257,107 1,474,625

Financial liabilities (3,279,421) (2,117,674) (6,856) –

(3,022,314) (1,840,867) 250,251 1,474,625

Floating rate instruments

Financial assets 3,138,898 4,021,696 2,626,718 3,532,758

Financial liabilities – (1,781,242) – (1,781,242)

3,138,898 2,240,454 2,626,718 1,751,516

All interest rate exposures are monitored and managed proactively in line with PETRONAS’ policies and guidelines.

Cash flow sensitivity analysis for variable rate instrument

A change of basis points (b.p.s) in interest rates for financial asset and financial liabilities respectively at the end of the reporting period would have increased pre-tax profit or loss by the amounts shown below. The analysis assumes that all other variables, in particular foreign currency rates, remain constant.

Group Company

2020 2019 2020 2019

RM’000 RM’000 RM’000 RM’000

Changes in interest b.p.s (+/-)

Financial assets 20 b.p.s 20 b.p.s 20 b.p.s 20 b.p.s

Financial liabilities 10 b.p.s 70 b.p.s 10 b.p.s 70 b.p.s

Gain/(Loss) 6,278 (4,425) 5,253 (5,403)

For the Group’s and the Company’s interest-bearing financial assets and liabilities that are fixed rate instruments measured at amortised cost, a change in interest rate is not expected to have material impact on the Group’s and the Company’s profit or loss.

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Market risk (continued)

Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign currency exchange rates. The Group and the Company are exposed to varying levels of foreign currency risk when they enter into transactions that are not denominated in the respective companies’ functional currencies or when foreign currency monetary assets and liabilities are translated at the reporting date.

The Group and the Company operate predominantly in Malaysia and transact mainly in Ringgit Malaysia.

The Group’s and the Company’s foreign exchange management policy are to minimise economic and significant transactional exposures arising from currency movements. For major capital projects, the Group and the Company perform assessment of potential foreign exchange risk exposure at the investment decision phase to determine the appropriate foreign exchange risk management strategy. Residual net positions are actively managed and monitored against prescribed policies and control procedures. When deemed necessary and appropriate, the Group and the Company will enter into derivative financial instruments to hedge and minimise its exposures to the foreign currency movements.

The Group’s and the Company’s exposure to foreign currency risk (a currency which is other than the functional currency of the Group entities), based on carrying amounts as at the reporting date are as follows:

2020 2019

Group RM’000 RM'000

Denominated in USD

Financial assets

Long term receivables* 208,856 1,304,423

Trade and other receivables* 53,200 159,913

Derivative asset – 1,980

262,056 1,466,316


Borrowing* – (1,781,242)

Lease liabilities (1,566,455) (975,079)

Trade and other payables (33,283) (49,901)

(1,599,738) (2,806,222)

Net exposure (1,337,682) (1,339,906)

Denominated in RM

Financial assets

Trade and other receivables* – 1,081


Lease liabilities – (4,435)

Trade and other payables – (61,466)

– (65,901)

Net exposure – (64,820)

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Foreign currency risk (continued)

2020 2019

Company RM’000 RM'000

Denominated in USD

Financial assets

Long term receivables* 208,856 1,304,423

Trade and other receivables* 35,690 143,341

Derivative asset – 1,980

244,546 1,449,744


Borrowing* – (1,781,242)

Trade and other payables (27,958) (10,279)

(27,958) (1,791,521)

Net exposure 216,588 (341,777)

* In 2019, borrowing primarily relates to the Company’s USD term loan which has been subsequently on-lent to a subsidiary and a joint venture. At

the Group level, the USD currency risk exposure arising from the Company’s USD term loan is off-set by the USD amount on-lent to the subsidiary

as presented within long term receivables and trade and other receivables.

Currency risk sensitivity analysis

Sensitivity analysis for a given market variable provided in this note, discloses the effect on profit or loss as at 31 December 2020 assuming that a reasonably possible change in the relevant market variable had occurred at 31 December 2020 and been applied to the risk exposures in existence at that date to show the effects of reasonably possible changes in price on profit or loss and equity to the next annual reporting date. Reasonably possible changes in market variables used in the sensitivity analysis are based on implied volatilities, where available, or historical data for equity and commodity prices and foreign exchange rates. Reasonably possible changes in interest rates are based on management judgment and historical experience.

The sensitivity analysis is hypothetical and should not be considered to be predictive of future performance because the Group’s actual exposure to market prices is constantly changing with changes in the Group’s portfolio of among others, debt and foreign currency contracts where relevant. Changes in fair values or cash flows based on a variation in a market variable cannot be extrapolated because the relationship between the change in market variable and the change in fair value or cash flows may not be linear. In addition, the effect of a change in a given market variable is calculated independently of any change in another assumption and mitigating actions that would be taken by the Group. In reality, changes in one factor may contribute to changes in another, which may magnify or counteract the sensitivities.

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Currency risk sensitivity analysis (continued)

The following table demonstrates the indicative pre-tax effects on the profit or loss of applying reasonably foreseeable market movements in the following currency exchange rates:

Appreciation in foreign

currency rate%

Group Company

Effect on reserves

Effect on profit/(loss)

Effect on reserves

Effect on profit/(loss)

RM’000 RM’000 RM’000 RM’000

2020

USD 10 – (133,768) – 21,659

2019

USD 10 198 (134,189) 198 (34,376)

MYR 10 – (6,482) – –

A depreciation in foreign currency rate above would have had equal but opposite effect, on the basis that all other variables remain constant.

Interest rate swaps

The Company had entered into an interest rate swaps to hedge the cash flow risk in relation to the floating interest rate of the USD term loan of USD322,003,000. The interest rate swaps had the same nominal value of USD322,003,000 (2019: USD322,003,000) and was settled every quarter, consistent with the interest repayment schedule of the bond.

In 2019, a loss of RM27,112,000 was recognised in equity and no ineffective portion was recognised in the profit or loss that arises from cash flow hedge amounts.

On 21 October 2020, the interest rate swaps was unwound as the Company had fully settled the USD term loan.

The following table indicates the periods in which the cash flows are expected to occur.

Carrying Expected Under Between Over 5

amount cash flow 1 year 1 and 5 years years

Group RM’000 RM’000 RM’000 RM’000 RM’000

2019

Interest rate swaps 1,980 1,999 2,130 (131) –

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Fair value information

The carrying amounts of cash and cash equivalents, short term receivables and payables and short term borrowings, reasonably approximate their fair values due to the relatively short term nature of these financial instruments.

The following table analyses financial instruments carried at fair value and those not carried at fair value for which fair value is disclosed, together with their fair values and carrying amounts shown in the statement of financial position.

Fair value of financial

instruments carried

at fair value

Fair value offinancial

instruments not carried

at fair value Total fairvalue

CarryingamountsLevel 2 Level 3

Group RM’000 RM’000 RM’000 RM’000

2020

Financial assets

Long term receivables – 208,856 208,856 208,856

Derivative assets 15 – 15 15

15 208,856 208,871 208,871


Islamic financing facility – (1,700,000) (1,700,000) (1,700,000)

Derivative liabilities (161) – (161) (161)

(161) (1,700,000) (1,700,161) (1,700,161)

2019

Financial assets


Derivative assets 2,932 – 2,932 2,932

2,932 262,019 264,951 264,951


Term loan – (1,781,242) (1,781,242) (1,781,242)

Loan from corporate shareholder of a subsidiary – (460,982) (460,982) (460,982)

Derivative liabilities (1,329) – (1,329) (1,329)

(1,329) (2,242,224) (2,243,553) (2,243,553)

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Fair value information (continued)

Fair value of financial

instruments carried

at fair value

Fair value offinancial

instruments not carried

at fair value Total fairvalue

CarryingamountsLevel 2 Level 3

Company RM’000 RM’000 RM’000 RM’000

2020

Financial assets


Derivative assets 2 – 2 2

2 208,856 208,858 208,858


Derivative liabilities (2) – (2) (2)

2019

Financial assets

Long term receivables – 1,317,748 1,317,748 1,317,748

Derivative assets 2,853 – 2,853 2,853

2,853 1,317,748 1,320,601 1,320,601

Financial liabilitiesTerm loan – (1,781,242) (1,781,242) (1,781,242)

Derivative liabilities (1,324) – (1,324) (1,324)

(1,324) (1,781,242) (1,782,566) (1,782,566)

The calculation of fair value for derivatives assets and derivatives liabilities within financial instruments depends on the type of instruments as follows:

– Fair value of non-derivative financial instruments, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the end of the reporting period.

– Fair value of forward exchange contracts are estimated by discounting the difference between the contractual forward price and the current forward price for the residual maturity of the contract using a risk-free interest rate (based on government bonds).

– The fair value of interest rate swap agreements are estimated by discounting expected future cash flows using current market interest rate and yield curve over the remaining term of the instruments.

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Income/(expense), net gains and losses arising from financial instruments

Interest income

Interest expense Others Total

Group RM’000 RM’000 RM’000 RM’000

2020

Financial asset at amortised cost 120,919 – 11,871 132,790

Financial asset at fair value through profit or loss – – 308 308

Financial liabilities at amortised cost – (219,781) (401) (220,182)

Financial liabilities at fair value through profit or loss – – (8,358) (8,358)

Total 120,919 (219,781) 3,420 (95,442)

2019


Financial asset at fair value through profit or loss – – (27,112) (27,112)

Financial liabilities at amortised cost – (83,123) 15,845 (67,278)

Financial liabilities at fair value through profit or loss – – (98) (98)

Total 154,244 (83,123) 17,825 88,946

Interest income

Interest expense Others Total

Company RM’000 RM’000 RM’000 RM’000

2020


Financial asset at fair value through profit or loss – – 450 450

Financial liabilities at amortised cost – (44,180) (15,921) (60,101)


Total 175,939 (44,180) (4,762) 126,997

2019

Financial asset at amortised cost 227,762 – (19,495) 208,267

Financial asset at fair value through profit or loss – – (27,112) (27,112)

Financial liabilities at amortised cost – (50,083) 19,047 (31,036)


Total 227,762 (50,083) (27,658) 150,021

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30. CAPITAL MANAGEMENT

The Group and the Company define capital as their total equity and debt. The objective of the Group’s and the Company’s capital management is to maintain an optimal capital structure and ensuring availability of funds in order to meet financial obligations, support business growth and maximise shareholder’s value. As a subsidiary of Petroliam Nasional Berhad (“PETRONAS”), the Group’s and the Company’s approach in managing capital is outlined in the PETRONAS Financial Policy (formerly known as Group Corporate Financial Policy).

The Group and the Company monitor and maintain a prudent level of total debt to total asset ratio to optimise shareholder value and to ensure compliance with covenants under debt and shareholders’ agreements and regulatory requirements, if any.

There were no changes in the Group’s and the Company’s approach to capital management during the year.

31. ADOPTION OF NEW AND REVISED PRONOUNCEMENTS

As of 1 January 2020, the Group and the Company adopted the following pronouncements that have been issued by the MASB and are applicable as listed below:

Effective for annual periods beginning on or after 1 January 2020

Amendments to MFRS 3 Business Combinations (Definition of a Business)

Amendments to MFRS 9 Financial Instruments, MFRS 139 Financial Instruments: Recognition and Measurement and MFRS 7 Financial

Instruments: Disclosures – Interest Rate Benchmark Reform

Amendment to MFRS 16 Leases (COVID-19 Related Rent Concessions)

Amendments to MFRS 101 Presentation of Financial Statements (Definition of Material)

Amendments to MFRS 108 Accounting Policies, Changes in Accounting Estimates and Errors (Definition of Material

The Group and the Company have early adopted the Amendment to MFRS 16 Leases (COVID-19 Related Rent Concessions) issued by MASB in June 2020, in response to the COVID-19 pandemic. The amendment is effective for annual periods beginning on or after 1 June 2020.

The initial application of the above-mentioned pronouncements did not have any material impact to the financial statements of the

Group and the Company.

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32. PRONOUNCEMENTS YET IN EFFECT

The following pronouncements that have been issued by the Malaysian Accounting Standards Board will become effective in future financial reporting periods and have not been adopted by the Group and the Company in these financial statements:


Amendments to MFRS 9 Financial Instruments, MFRS 139 Financial Instruments: Recognition and Measurement, MFRS 7 Financial Instruments: Disclosures, MFRS 4 Insurance Contracts and MFRS 16 Leases (Interest Rate Benchmark Reform – Phase 2)


Amendments to MFRS 3 Business Combinations (Reference to the Conceptual Framework)Amendments to MFRS 9 Financial Instruments (Annual Improvements to MFRS Standards 2018 – 2020)Amendments to Illustrative Examples accompanying MFRS 16 Leases (Annual Improvements to MFRS Standards 2018 − 2020)Amendments to MFRS 116 Property, Plant and Equipment (Property, Plant and Equipment − Proceeds before Intended Use)Amendments to MFRS 137 Provisions, Contingent Liabilities and Contingent Assets (Onerous Contracts − Cost of Fulfilling a Contract)


Amendments to MFRS 101 Presentation of Financial Statements (Classification of Liabilities as Current or Non-current)

Effective for a date yet to be confirmed

Amendments to MFRS 10 Consolidated Financial Statements: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

Amendments to MFRS 128 Investments in Associates and Joint Ventures: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

The Group and the Company are expected to apply the abovementioned pronouncements beginning from the respective dates the pronouncements become effective. The initial application of the abovementioned pronouncements are not expected to have any material impact to the financial statements of the Group and the Company.

33. NEW PRONOUNCEMENTS NOT APPLICABLE TO THE GROUP AND THE COMPANY

The MASB has issued pronouncements which is not relevant to the Group and Companies and hence, no further disclosure is warranted.


Amendments to MFRS 1 First-time Adoption of Malaysian Financial Reporting Standards (Annual Improvements to MFRS Standards 2018−2020)

Amendments to MFRS 141 Agriculture (Annual Improvements to MFRS Standards 2018−2020)


MFRS 17 Insurance ContractsAmendments to MFRS 17 Insurance Contracts

34. HOLDING AND ULTIMATE HOLDING COMPANY

The holding company as well as the ultimate holding company is Petroliam Nasional Berhad (“PETRONAS”), a company incorporated in Malaysia.

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REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS

Opinion

We have audited the financial statements of PETRONAS Gas Berhad, which comprise the statements of financial position as at 31 December 2020 of the Group and of the Company, and the statements of profit or loss and other comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, as set out on pages 80 to 173.

In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Group and of the Company as at 31 December 2020, and of their financial performance and their cash flows for the year then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia.

Basis for Opinion

We conducted our audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our auditors’ report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence and Other Ethical Responsibilities

We are independent of the Group and of the Company in accordance with the By-Laws (on Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants (“By-Laws”) and the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards) (“IESBA Code”), and we have fulfilled our other ethical responsibilities in accordance with the By-Laws and the IESBA Code.

Key Audit Matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the Group and of the Company for the current year. These matters were addressed in the context of our audit of the financial statements of the Group and of the Company as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Capitalisation and componentisation of completed projects

Refer to Note 2.4 – Significant accounting policy: Property, plant and equipment and depreciation and Note 3 – Property, plant and equipment.

The Group and the Company have significant property, plant and equipment including projects-in-progress recognised as at the end of the reporting period. During the year, the Group and the Company completed significant capital projects and capitalised costs amounting to RM498 million and RM377 million respectively. Due to the size, complexity and volume of transactions involved in the capitalisation and componentisation process, there is a risk that the costs capitalised are not in accordance of MFRS 116, Property, Plant and Equipment. It is a significant area that our audit focuses on because it requires us to exercise judgement in evaluating management’s process over the capitalisation and componentisation of the completed projects.

We performed the following audit procedures, among others:

• checked the completion date of project-in-progress to determine that completed projects were capitalised timely;• evaluated the capitalisation process and determined that costs capitalised met the requirements of MFRS 116.• evaluated the componentisation process to determine that significant components with different useful lives are depreciated separately;

and• assessed that any borrowing costs capitalised met the requirement of MFRS 123 Borrowing Costs.

174


INDEPENDENT AUDITORS’ REPORTto the members of PETRONAS Gas Berhad (Company No. 198301006447 (101671-H)) (Incorporated in Malaysia)

Information Other than the Financial Statements and Auditors’ Report Thereon

The Directors of the Company are responsible for the other information. The other information comprises the information included in the Directors’ Report, and Statement on Risk Management and Internal Control (but does not include the financial statements of the Group and of the Company and our auditors’ report thereon), which we obtained prior to the date of this auditors’ report, and the remaining parts of the annual report, which are expected to be made available to us after that date.

Our opinion on the financial statements of the Group and of the Company does not cover the other information and we do not and will not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements of the Group and of the Company, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements of the Group and of the Company or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other information that we obtained prior to the date of this auditors’ report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

When we read the remaining parts of the annual report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to the Directors of the Company and take appropriate actions in accordance with approved standards on auditing in Malaysia and International Standards on Auditing.

Responsibilities of the Directors for the Financial Statements

The Directors of the Company are responsible for the preparation of financial statements of the Group and of the Company that give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia. The Directors are also responsible for such internal control as the Directors determine is necessary to enable the preparation of financial statements of the Group and of the Company that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements of the Group and of the Company, the Directors are responsible for assessing the ability of the Group and of the Company to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so.

Auditors’ Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements of the Group and of the Company as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with approved standards on auditing in Malaysia and International Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements of the Group and of the Company, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control of the Group and of the Company.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Directors.

175


01

02

• Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the ability of the Group or of the Company to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements of the Group and of the Company or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Group or the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements of the Group and of the Company, including the disclosures, and whether the financial statements of the Group and of the Company represent the underlying transactions and events in a manner that gives a true and fair view.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial statements of the Group. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.

From the matters communicated with the Directors, we determine those matters that were of most significance in the audit of the financial statements of the Group and of the Company for the current year and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our auditors’ report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Other Matter

This report is made solely to the members of the Company, as a body, accordance with Section 266 of the Companies Act 2016 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.

KPMG PLT CHONG CHEN KIAN(LLP0010081-LCA & AF 0758) Approval Number: 03232/02/2020 JChartered Accountants Chartered Accountant Petaling Jaya,22 February 2021

176


Independent Auditors’ Reportto the members of PETRONAS Gas Berhad (Company No. 198301006447 (101671-H)) (Incorporated in Malaysia)

177


01

02

SHARE CAPITAL

Share Capital : RM1,978,731,915 comprising 1,978,731,915 ordinary shares Class of Shares : Ordinary Shares Voting Rights : One Vote Per Ordinary Share (on a poll)

DISTRIBUTION OF SHAREHOLDINGS

Size of HoldingsNo. of

Shareholders% of Total

ShareholdersNo. of Shares

% of Total Shares

Less than 100 1,228 10.21 6,471 0.00

100 – 1,000 7,737 64.33 6,355,180 0.32

1,001 – 10,000 2,122 17.64 7,042,887 0.36

10,001 – 100,000 545 4.53 20,434,704 1.03

100,001 to less than 5% of issued shares 393 3.27 491,663,673 24.85

5% and above of issued shares 3 0.02 1,453,229,000 73.44

Total `12,028 100.00 1,978,731,915 100.00

CLASSIFICATION OF SHAREHOLDERS

Category

No. of Shareholders No. of Shares % of Total Shareholdings

Malaysian Foreign Malaysian Foreign Malaysian Foreign

• Individuals 9,794 111 12,580,152 237,672 0.64 0.01

• Body Corporate a. Banks/Finance Companies 34 0 429,153,700 0 21.69 0.00

b. Investment Trusts/ Foundation/Charities 5 0 173,500 0 0.00 0.00

c. Other types of companies 195 7 2,788,804 243,800 0.14 0.01

• Government Agencies/ Institutions 7 0 3,133,900 0 0.16 0.00

• Nominees 1,054 821 1,342,203,795 188,216,592 67.83 9.52

• Others 0 0 0 0 0.00 0.00

Total 11,089 939 1,790,033,851 188,698,064 90.46 9.54

LIST OF SUBSTANTIAL SHAREHOLDERS

Direct Indirect

No. NameNo. of Shares

% of TotalShares

No. of Shares

% of TotalShares

1. CIMB Group Nominees (Tempatan) Sdn Bhd– Exempt AN for Petroliam Nasional Berhad– Exempt AN for Petroliam Nasional Berhad (PRF)

1,008,616,900536,400

50.970.03

NilNil

NilNil

TOTAL 1,009,153,300 51.00 Nil Nil

2. Citigroup Nominees (Tempatan) Sdn Bhd– Employees Provident Fund Board (including Portfolio Managers)

256,949,700 12.99 Nil Nil

3. Kumpulan Wang Persaraan (Diperbadankan) 209,372,200 10.58 Nil Nil

ANALYSIS OF SHAREHOLDINGS as at 10 February 2021


178

Analysis of Shareholdings as at 10 February 2021

LIST OF DIRECTORS’ SHAREHOLDINGS

Direct Indirect


% of TotalShareholding

No. of Shares

% of TotalShareholding

1. Adnan Zainol Abidin Nil Nil Nil Nil

2. Abdul Aziz Othman Nil Nil Nil Nil

3. Habibah Abdul Nil Nil Nil Nil

4. Farina Farikhullah Khan Nil Nil Nil Nil

5. Dato’ Abdul Razak Abdul Majid Nil Nil Nil Nil

6. Datuk Yeow Kian Chai 3,000 0.00 Nil Nil

7. Emeliana Dallan Rice-Oxley Nil Nil Nil Nil

8. Marina Md Taib Nil Nil Nil Nil

LIST OF SENIOR MANAGEMENT’S SHAREHOLDINGS

None of the Senior Management members hold any direct or indirect shares in PGB.

LIST OF 30 LARGEST SHAREHOLDERS


% of Total Shareholdings

1. CIMB GROUP NOMINEES (TEMPATAN) SDN BHD EXEMPT AN FOR PETROLIAM NASIONAL BERHAD

1,008,616,900 50.97

2. CITIGROUP NOMINEES (TEMPATAN) SDN BHDEMPLOYEES PROVIDENT FUND BOARD

239,699,100 12.11

3. KUMPULAN WANG PERSARAAN (DIPERBADANKAN) 204,913,000 10.36

4. AMANAHRAYA TRUSTEES BERHADAMANAH SAHAM BUMIPUTERA

71,925,100 3.63

5. AMANAHRAYA TRUSTEES BERHADAMANAH SAHAM MALAYSIA 3

32,074,900 1.62

6. AMANAHRAYA TRUSTEES BERHAD AMANAH SAHAM MALAYSIA

26,497,700 1.34

7. AMANAHRAYA TRUSTEES BERHAD AMANAH SAHAM MALAYSIA 2 – WAWASAN

26,000,000 1.31

8. AMANAHRAYA TRUSTEES BERHADAMANAH SAHAM BUMIPUTERA 2

16,597,300 0.84

9. CARTABAN NOMINEES (ASING) SDN BHDEXEMPT AN FOR STATE STREET BANK & TRUST COMPANY (WEST CLT OD67)

14,126,200 0.71

10. CITIGROUP NOMINEES (TEMPATAN) SDN BHDGREAT EASTERN LIFE ASSURANCE (MALAYSIA) BERHAD (PAR 1)

12,667,200 0.64

11. LEMBAGA TABUNG HAJI 11,898,200 0.60

12. CARTABAN NOMINEES (TEMPATAN) SDN BHD PAMB FOR PRULINK EQUITY FUND

10,024,000 0.51

179


01

02


% of Total Shareholdings

13. HSBC NOMINEES (ASING) SDN BHDJPMCB NA FOR VANGUARD TOTAL INTERNATIONAL STOCK INDEX FUND

8,091,012 0.41

14. HSBC NOMINEES (ASING) SDN BHDJPMCB NA FOR VANGUARD EMERGING MARKETS STOCK INDEX FUND

7,833,163 0.40

15. PERMODALAN NASIONAL BERHAD 6,947,900 0.35

16. AMANAHRAYA TRUSTEES BERHAD PUBLIC ISLAMIC DIVIDEND FUND

6,465,800 0.33

17. CITIGROUP NOMINEES (TEMPATAN) SDN BHDEMPLOYEES PROVIDENT FUND BOARD (NOMURA)

5,500,000 0.28

18. AMANAHRAYA TRUSTEES BERHADAMANAH SAHAM BUMIPUTERA 3 - DIDIK

5,210,600 0.26

19. DB (MALAYSIA) NOMINEE (ASING) SDN BHDBNYM SA/NV FOR PEOPLE’S BANK OF CHINA (SICL ASIA EM)

5,201,800 0.26

20. PERTUBUHAN KESELAMATAN SOSIAL 4,900,300 0.25

21. HSBC NOMINEES (ASING) SDN BHDJ.P. MORGAN SECURITIES PLC

4,795,500 0.24

22. MAYBANK NOMINEES (TEMPATAN) SDN BHDMAYBANK TRUSTEES BERHAD FOR PUBLIC ITTIKAL FUND (N14011970240)

4,500,000 0.23

23. CITIGROUP NOMINEES (TEMPATAN) SDN BHDGREAT EASTERN LIFE ASSURANCE (MALAYSIA) BERHAD (PAR 3)

4,202,100 0.21

24. MAYBANK NOMINEES (TEMPATAN) SDN BHDMAYBANK TRUSTEES BERHAD FOR PUBLIC REGULAR SAVINGS FUND (N14011940100)

3,871,900 0.20

25. CARTABAN NOMINEES (ASING) SDN BHDGIC PRIVATE LIMITED FOR GOVERNMENT OF SINGAPORE (C)

3,853,337 0.19

26. CITIGROUP NOMINEES (ASING) SDN BHDUBS AG

3,732,117 0.19

27. HSBC NOMINEES (ASING) SDN BHDJPMCB NA FOR BLACKROCK INSTITUTIONAL TRUST COMPANY, N.A. INVESTMENT FUNDS FOR EMPLOYEE BENEFIT TRUSTS

3,726,400 0.19

28. CITIGROUP NOMINEES (TEMPATAN) SDN BHDEMPLOYEES PROVIDENT FUND BOARD (CIMB PRIN)

3,577,900 0.18

29. HSBC NOMINEES (ASING) SDN BHDJPMCB NA FOR MSCI EQUITY INDEX FUND B-MALAYSIA

3,092,760 0.16

30. AMANAHRAYA TRUSTEES BERHADPUBLIC ISLAMIC EQUITY FUND

3,058,100 0.15

LIST OF 30 LARGEST SHAREHOLDERS (CONTINUED)

A summary and usage of the landed property, plant and equipment of PETRONAS Gas Berhad and its subsidiaries as at 31 December 2020:

LocationAcquisitionDate Tenure

Descriptionand Usage

Land Area

(hectare)

Age of Plant and

Building (years)

Build-up Area

(sq. m)

Net Book Value

as at 31 December

2020 (RM’000)

TERENGGANU

Gas Processing Plants, Kertih KM 105, Jalan Kuantan-Kuala Terengganu,24300 Kertih, Kemaman, Terengganu Darul Iman

Lot No. 1903

Lot No. 3541

Lot No. 1902

30.9.1991

30.9.1991

30.9.1991

LeaseholdExpiry:

28.2.2043(Sub-Lease 60 years)

3.4.2050(60 years)

26.2.2082(99 years)

Leasehold land

PlantGPP1GPP2GPP3

GPP4/DPCU2Compressor station

OfficeAdministrationbuilding 1Administrationbuilding 2Fire station

87.9

34.6

2.7

36.328.428.1

26.529.1

35.4

30.7

32.8

95,998123,310123,310

266,40065,010

1,282

6,892

3,248

1,824,051

Gas Processing Plants, Paka KM 8, Kg. Tok Arun, Off Jalan Santong, 23100 Paka, Dungun, Terengganu Darul Iman

Lot No. 7346

Lot No. 7220

3.8.1997

3.8.1997

LeaseholdExpiry:

13.7.2058 (60 years)

20.6.2058(60 years)

Leasehold land

PlantGPP5GPP6DPCU3

OfficeAdministrationbuilding

(Vacant)

189.5

26.9

21.921.022.3

23.2

200,000220,00060,000

12,220

744,264


180

SUMMARY OF LANDED PROPERTY, PLANT AND EQUIPMENT



Land Area

(hectare)

Age of Plant and

Building (years)

Build-up Area

(sq. m)

Net Book Value

as at 31 December

2020 (RM’000)

Export Terminal Operation,Tanjung Sulong,24000 Kemaman,Terengganu Darul Iman

Lot No. 1314

Lot No. 1333

24.7.1993

24.7.1993

LeaseholdExpiry:

19.3.2025 (40 years)

11.3.2027(40 years)

Leasehold land

PlantUnit 1, 2, 3, 4


Marine facilityBreakwaterJetty

9.7

2.7

36.1

36.1

1,146

235,738

Utilities Plant, Kertih Kertih Integrated Petrochemical Complex, KM 105, Jalan Kuantan- Kuala Terengganu, 24300 Kertih, Kemaman, Terengganu Darul Iman

Lot No. 8065 21.12.1999

LeaseholdExpiry:

19.8.2060(60 years)

Leasehold land

PlantCGN BCGN CCGN D, E, FWater plant CGN GASU Control room,lab & workshop


37.1

21.120.620.620.719.819.819.6

19.9

6672,0002,000

66715,451

7291,820

514

203,184

PAHANG

Kuantan Regional Operations Office Lot 1, Sector 1,Bandar Indera Mahkota,25200 Kuantan, Pahang Darul Makmur

Lot No. PT16756 4.1.1989

LeaseholdExpiry:

4.1.2088 (99 years)

Leasehold land

OfficeRegional office

11.2

29.2 2,428

6,909

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01

02

SUMMARY OF LANDED PROPERTY, PLANT AND EQUIPMENT



Land Area

(hectare)

Age of Plant and

Building (years)

Build-up Area

(sq. m)

Net Book Value

as at 31 December

2020 (RM’000)

Kuantan Compressor Station, Kampung Mahkota, KM 19, Jalan Gambang, 26070 Kuantan, Pahang Darul Makmur

Lot No. 104462 4.1.1989

LeaseholdExpiry:

26.8.2101 (99 years)

Leasehold land

PlantCompressor stationCompressor station

20.3

27.1

11.2

1,142

4,378

87,963

Utilities Plant, Gebeng, Lot 139A, Gebeng Industrial Area, Phase III,26080 Kuantan, Pahang Darul Makmur

Lot No. PT15127

17.11.1999 LeaseholdExpiry: 8.1.2100(99 years)

Leasehold land

PlantCGN ACGN BCGN CN2GENWater plantCGN E

OfficeMaintenance building

Warehouse

18.8

21.121.121.121.1

20.61.8

19.6

19.6

667667667360

2,000780

1,015

1,004

357,489

JOHOR

Segamat Operation Centre, Gas Transmission System,KM 10, Lebuhraya Segamat-Kuantan,85000 Segamat, Johor Darul Takzim

Lot No. PTD564 22.9.1991

LeaseholdExpiry:

18.2.2102 (99 years)

Leasehold land

PlantCompressor station

OfficeOperation centre

61.3

23.0

28.4

2,792

8,080

161,916


182

Summary of Landed Property, Plant and Equipment



Land Area

(hectare)

Age of Plant and

Building (years)

Build-up Area

(sq. m)

Net Book Value

as at 31 December

2020 (RM’000)

Pasir Gudang Regional Operations Office, PLO 332, Jalan Perak 4,Pasir Gudang Industrial Area, 81700 Pasir Gudang, Johor Darul Takzim

Lot No. PTD84942 23.4.1989

LeaseholdExpiry:

22.4.2088 (99 years)

Leasehold land


Sublease from third partyLand

4.1

28.5 2,428

8,392

6,627

LNG Regasification TerminalPengerang Terminals (Two) Sdn. Bhd. Building, Lot PTD 4836, Jalan Damai 2, Kg Sungai Kapal, Pengerang, Johor

Lot No. 11081 1.11.2017

Leasehold Expiry:

9.8.2080(65 years)

Leasehold land

PlantTank 1Tank 2

OfficeAdministration building

Sublease from third partyLand

Jetty

19.3

3.22.8

2,152,714

7,925

612,694

NEGERI SEMBILAN

Seremban Regional Operations Office, KM 11, Jalan Seremban – Tampin, 71450 Sg. Gadut, Seremban, Negeri Sembilan Darul Khusus

Lot No. 21958 16.2.1994 Freehold

Freehold land


14.0

29.4 2,428

5,703

183


01

02



Land Area

(hectare)

Age of Plant and

Building (years)

Build-up Area

(sq. m)

Net Book Value

as at 31 December

2020 (RM’000)

SELANGOR

Shah Alam Regional Operations Office, Lot 1, Jalan Jemuju Lima 16/13E,Shah Alam Industrial Area, Section 16,40200 Shah Alam, Selangor Darul Ehsan

Lot No. PT606 12.10.1990

Leasehold Expiry:

11.10.2089 (99 years)

Leasehold land

OfficeRegional office 2.9 29.1 2,428

6,171

Meru Compressor Station,Lot 1586 (G3907), Mukim of Jeram, District of Kuala Selangor, Selangor Darul Ehsan

Lot No. 12441 4.8.1998

LeaseholdExpiry:

10.8.2107 (99 years)

Leasehold land(Vacant)

5.4 N/A N/A 906

PERAK

Sitiawan Regional Operations Office, Lot 33263, Jalan Dato’ Ahmad Yunus,32000 Sitiawan, Perak Darul Ridzuan

Lot No. PT4535 4.11.1997

Leasehold Expiry:

27.6.2101 (99 years)

Leasehold land


3.2

23.2 1,604

3,653

KEDAH

Gurun Regional Operations Office,PO Box 31, KM 1, Jalan Jeniang08300 Gurun, Kedah Darul Aman

Lot No. 8173 18.12.1997

Leasehold Expiry:

22.4.2102 (99 years)

Leasehold land


2.9

22.3 1,604

3,949

8.4 km TTM Pipeline land at District of Kubang Pasu, Kuala Muda, Pendang, and Pokok Sena, Kedah Darul Aman to District of Seberang Perai Tengah, Penang

1.11.2006 Leasehold Expiry:31.10.2105(99 years) & Freehold

Leasehold land

PipelinePipeline across 8.4 km

25.2

15.8 N/A

396


184




Land Area

(hectare)

Age of Plant and

Building (years)

Build-up Area

(sq. m)

Net Book Value

as at 31 December

2020 (RM’000)

SABAH

Kimanis OperationsOfficeKimanis Power Plant,Administration Building,KM 48, Kg. Batu Pungit,89607 Papar, Sabah.

1.1.2013 PipelineMeter StationPipeline across8.2 km

Sublease from third party Land

N/A 8.0 73 4,785

1,858

MELAKA

LNG Regasification Terminal,Sungai Udang PSR-1/MG3 Retrofit Site Office Revamp PETRONAS Penapisan Sungai Udang, Melaka

1.10.2012

1.7.2011

Leasehold Expiry:

30.4.2036(24 years)

30.6.2038(25 years)

Facilities Jetty

OfficeAdministration building

Facilities Jetty

Sublease from third partyRegasification Floating Storage

LNG bunkering

Land

N/A

N/A

5.5

7.6

3,000

N/A

1,685,152

628,277

31,275

1,495

PIPELINES

PGU I – total gas pipeline comprises 6 km from Kertih to Paka, Terengganu, 32 km from Kertih to Teluk Kalong, Terengganu and two 40 km of lateral lines from the GPPs to the Export Terminal in Tanjung Sulong, Terengganu Darul Iman

20.3.1985 Leasehold Expiry:(40, 60 and 99 years)

PipelinesPipelines in leasehold land

Terengganu:51 lots

Terengganu:272.5

36.3 N/A 62,186

185


01

02



Land Area

(hectare)

Age of Plant and

Building (years)

Build-up Area

(sq. m)

Net Book Value

as at 31 December

2020 (RM’000)

PGU II – total gas pipeline comprisesSector 1 – 233 km from Teluk Kalong, Terengganu to Segamat, JohorSector 2 – 241 km from Segamat, Johor to Kapar, Selangor Sector 3 – 211 km from Segamat, Johor to Singapore

1.1.1992 Leasehold Expiry:(99 years)


Terengganu:20 lots

Pahang:347 lots

Johor:643 lots (Inclusive Loop 1 & Loop 2)

Melaka:138 lots

Negeri Sembilan:261 lots

Selangor:140 lots

Terengganu:76.6

Pahang:526.9

Johor:894.5

Melaka:190.5

Negeri Sembilan:

460.2

Selangor:297.9

29.1 N/A 956,264

PGU III – total gas pipeline comprisesSector 1 – 184 km from Meru, Selangor to Lumut, Perak,Sector 2 – 176 km from Lumut, Perak to Gurun, Kedah, Sector 3 – 90 km of NPS 36" mainline from Gurun to Pauh, Perlis



Selangor:94 lots

WP Kuala Lumpur:14 lots

Perak:360 lots

Penang:96 lots

Kedah:262 lots

Perlis:80 lots

Selangor:178.3

WP Kuala Lumpur:

17.9

Perak:539.9

Penang:118.1

Kedah:473.9

Perlis:87.1

Sector 1:25.1

Sector 2 & 3:

23.2

N/A

N/A

407,234


186




Land Area

(hectare)

Age of Plant and

Building (years)

Build-up Area

(sq. m)

Net Book Value

as at 31 December

2020 (RM’000)

PGU Loop 1 – total gas pipeline of 265 km from Kertih, Terengganu to Segamat, Johor



Terengganu:77 lots

Pahang:315 lots

Terengganu:141.5

Pahang:103.8

21.4 N/A 273,292

PGU Loop 2 – total gas pipeline of 226 km from Segamat, Johor to Meru, Selangor



Melaka:4 lots

Negeri Sembilan:4 lots

Melaka:1.3

Negeri Sembilan:

1.1

20.4 N/A 279,637

TOTAL 10,762,099

187


01

02

Name of facilities and location DescriptionNet Book Value

(RM'000)

LNG Regasification Terminal, Pengerang, Johor Leasehold land, tank, jetty and pipelines 2,773,333

LNG Regasification Terminal, Sungai Udang, Melaka Floating storage units, regasification jetty and pipelines 2,346,199

Gas Processing Plants, Kertih, Terengganu Leasehold land, plant and office buildings 1,824,051

Peninsular Gas Utilisation pipeline network (PGU) II Leasehold land and pipelines 956,264

Gas Processing Plants, Santong, Terengganu Leasehold land, plant and office buildings 744,264

PGU III Leasehold land and pipelines 407,234

Utilities Plants, Gebeng, Pahang Leasehold land, plant and office buildings 357,489

PGU Loop 2 Leasehold land and pipelines 279,637

PGU Loop 1 Leasehold land and pipelines 273,292

Export Terminal Operation, Tanjung Sulong, Terengganu Leasehold land, plant and office buildings 235,738

TOP 10 LANDED PROPERTY, PLANT AND EQUIPMENT


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GOVERNANCE AND FINANCIAL REPORT 2020

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