Malakoff Annual Report 2007

Reaching for the highest pinnacle, capturing the wind at its strongest,

the paper fan spins at its fastest, a moment exuding triumphant sheer exhilaration.

In the child lies the fundamental spirit of curiosity in a world that she continues

to explore and discover, and in the fan, an iconic reference to the values of

integrity, teamwork, innovation, excellence and respect for

the individual to which we adhere to, in making it possible.

With a strategy of harnessing available resources, and focused with precision

on growth, the Group ventures in global partnerships to expand its business

internationally.

This is our testament to the future that we have conceived, in the pursuit of

new frontiers that transcend boundaries.

Transcending Boundaries

team

wo

rk

e x c e l l en

ce

inn

ov

a

t ion

i nt e

gr

i tiy

re

sp

ec

t

f or

i nd i v i d u a l

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2 Annual Report 2007

MalakoffcorporationBerhad (731568-V)

our Mission

In striving to enhance stakeholders’ value and achieve our vision, we seek to:

• Develop and utilise local expertise;

• Share knowledge and spur the growth of the power and water sectors; and

• Promote innovation in all aspects of our business.

corporate Values

• Integrity

• Teamwork

• Innovation

• Excellence

• Respect for Individual

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To be a LeaDINGPoWeR & WaTeR PRoVIDeR

our Vision

Annual Report 2007


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contents

2 Our Mission & Vision5 2007 Group Financial & Performance Highlights for Malakoff Corporation Berhad 6 Malakoff Berhad Historical Five-Year Group Financial & Performance Highlights8 Corporate Profile12 Corporate Information13 Malakoff Shareholders’14 Corporate Structure

directors’ profiles

16 Board of Directors18 Profile of Board of Directors

Management team

27 Organisational Structure28 Individual Profiles of Key Members of Management Team

audit committee

36 Audit Committee

corporate performance

40 Statement by Chairman48 Performance Review by MD/CEO - Asset Performance (Local and International) - Operations & Maintenance (“O&M”) - Electricity Distribution and Chilled Water Supply - Ventures - Project Management

corporate responsibility

72 Corporate Responsibility - Corporate Governance - Health, Safety and Environment (“HSE”) - Human Resources Development - Enterprise Risk Management (“ERM”) - Community Investment

corporate event highlights

76 Corporate Event Highlights

financial statements

79 Financial Statements

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* 2007 rM’000

revenue 2,701,998

Profit before taxation 323,769

profit after tax & minority interest 217,297

as at 31 augustPaid-up capital 351,344

shareholders’ funds 4,172,439

total assets employed 23,457,579

per share (sen)earnings 61.8

Dividend (gross) 9.1

net assets per share (sen) 1188

2007Group financial & performancehiGhliGhtsfoR maLakoff coRPoRaTIoN beRhaD * On 30 April 2007, Malakoff

Corporation Berhad (formerly known as Nucleus Avenue (M) Berhad) completed its acquisition of the securities of all the subsidiaries and the associate companies of Malakoff Berhad together with all the assets (other than cash balance) & liabilities of Malakoff Berhad.

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maLakoff beRhaD hIsToRIcaLfIVe-yeaR GRouP fINaNcIaL & PeRfoRmaNce hIGhLIGhTs

2006 2005 2004 2003 2002 rM’000 rM’000 rM’000 rM’000 rM’000

revenue 1,923,235 2,122,003 2,059,078 1,825,013 1,717,462

Profit before taxation 709,953 876,301 742,472 687,494 588,228

profit after tax & minority interest 442,445 510,642 460,298 441,754 353,591

as at 31 august

Paid-up capital 899,285 893,914 885,961 871,288 858,664

shareholders’ funds 3,719,053 3,445,801 3,080,100 2,811,285 2,467,135

total assets employed 15,512,506 14,804,662 12,490,328 7,358,996 6,990,589

per share (sen)

earnings 49.3 57.3 52.4 51.1 41.6

Dividend (gross) 30.0 30.0 28.0 25.0 22.0

net assets per share (sen) 413.6 385.5 347.6 322.6 287.3

1,8251,717

2,059

2,122

1,923

2003

2002

2004

2005

2006

441

460

510

442

2003

3532002

2004

2005

2006

2,811

3,080

3,445

3,719

2003

2,4672002

2004

2005

2006

ReVeNueRM1,923MILLIOn

PRofIT afTeR Tax & mINoRITy INTeResTRM442MILLIOn

shaRehoLDeRs’ fuNDsRM3,719MILLIOn

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7

7,358

12,490

14,804

15,512

2003

6,9902002

2004

2005

2006

51.1

52.4

57.3

49.3

2003

41.62002

2004

2005

2006

322.6

347.6

385.5

413.6

2003

287.32002

2004

2005

2006

ToTaL asseTs emPLoyeDRM15,512MILLIOn

eaRNINGs PeR shaRe49.3SEn

NeT asseTsPeR shaRe413.6SEn

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corPoraTe Profile

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Malakoff Corporation Berhad (“Malakoff”) is one of the leading independent power and water produCers Based in asia with an exCellent reputation. our Core Business inCludes power generation, water desalination and operations & MaintenanCe serviCes. in Malaysia, we own a gross generating CapaCity of 5,020 Mw CoMprising of 6 power stations that run on gas, oil and Coal.

Malakoff’s power generation assets are held through a number of subsidiaries and associate companies:

• Lumut Power Plant through a 93.75% equity interest in Segari Energy Ventures Sdn Bhd (“SEV”)

• GB3 Power Plant through a 75.0% equity interest in GB3 Sdn Bhd (“GB3”)

• Prai Power Plant through its wholly-owned subsidiary Prai Power Sdn Bhd (“PPSB”)

• Tanjung Bin Power Plant through a 90.0% equity interest in Tanjung Bin Power Sdn Bhd (“TBPSB”)

• Port Dickson Power Plant through a 25.0% equity interest in Port Dickson Power Berhad, via its wholly-owned subsidiary Hypergantic Sdn Bhd

• Kapar Power Station through a 40.0% equity interest in Kapar Energy Ventures Sdn Bhd (“KEV”)

Furthermore, Malakoff provides services through its subsidiary companies:

• Operations and maintenance (“O&M”) services through wholly-owned subsidiary Teknik Janakuasa Sdn Bhd (“TJSB”), one of the leading O&M service providers in Malaysia

• Electricity distribution activities through Wirazone Sdn Bhd (“WIRAZOnE”), a wholly owned subsidiary that currently supplies centralised chilled water and distributes electricity to the landmark Kuala Lumpur Sentral development (“KL Sentral”), which is set to become the transportation and communication hub of Malaysia

• Project management services for in-house and external projects through Malakoff Engineering Sdn Bhd (”MESB”), a wholly owned subsidiary by Malakoff

On the international front, we own a net capacity of 360 MW of power and 213,000 m3/day of water desalination. These projects are located in Saudi Arabia, Jordan, Oman and Algeria.

At Malakof f, we aim to work together with all stakeholders for productive partnerships. We believe that long-term partnerships re-enforce our success. As an asset-centered organisation, we maximise the value of assets we manage for our shareholders and partners. We do this by fully understanding the elements of cost, risk and performance unique to the environment in which we operate.

Good leadership commands the underlying ability to possess a commitment to

integrity and to be a role model for others to follow.

integrity

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corPoraTe inforMaTion

directorsTAn SRI ABDUL HALIM ALIChairman

AHMAD JAUHARI YAHYAManaging Director/Chief Executive Officer

HASnI HARUnnon-Independent non-Executive Director

YOOnG nIM CHEEnon-Independent non-Executive Director

MABEL LEE KHUAn EOInon-Independent non-Executive Director

CInDY TAn LER CHInnon-Independent non-Executive Director

AZIAn MOHD nOHnon-Independent non-Executive Director

AnDREW ROWAn IAn YEEnon-Independent non-Executive Director

VIJAY VIJEnDRA SETHUAlternate Director to Andrew Rowan Ian Yee

coMpany secretaries

SAMAnTHA YEOH SOO MEI(MAICSA 7032259)

SHARIFAH LAILA FARInA SYED MOHD(LS 0008736)

audit coMMittee MeMBers

HASnI HARUn (Chairman)

YOOnG nIM CHEE

AHMAD JAUHARI YAHYA

reMuneration coMMittee MeMBers

TAn SRI ABDUL HALIM ALI (Chairman)

HASnI HARUn

CInDY TAn LER CHIn

registered office

Level 8, Kompleks Antarabangsa,Jalan Sultan Ismail,50250 Kuala LumpurTel: +603-2142 4777Fax: +603-2148 9887Website: www.malakoff.com.my

auditors

KPMG

principal Banker

Malayan Banking Berhad

correspondence address

Level 12, Block 3B, Plaza Sentral,Jalan Stesen Sentral 5,50470 Kuala LumpurTel: +603-2263 3388Fax: +603-2263 3333Website: www.malakoff.com.my

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30%employeesprovident

Fund

2.5%seasaF power

sdn Bhd(formerly known as

Premier Unity Sdn Bhd)

malakoFF corporation

Berhad 6.5%standard

charteredprivate equity

limited

10%kumpulan wang

persaraan(Diperbadankan)

51%mmc

corporation Berhad

Malakoff shareholders’

OperatiOn

s a

nd

Mainten

an

ce

services

pOw

er

Ge

ne

rat

iO

n

ele

ct

ric

ity

distributiOn

100%Teknik Janakuasa Sdn Bhd

100% Natural Analysis Sdn Bhd

100% TJSB International Limited

100% TJSB International (Shoaiba) Limited

20% Saudi-Malaysia Operation &

Maintenance Services Company Limited

20% Al-Imtiyaz Operation & Maintenance Company Limited

100% TJSB Middle East Limited

100% TJSB Global Sdn Bhd

93.75%Segari Energy Ventures Sdn Bhd

75% GB3 Sdn Bhd

100% Prai Power Sdn Bhd

90%Tanjung Bin Power Sdn Bhd

40% Kapar Energy Ventures Sdn Bhd

100% Hypergantic Sdn Bhd

25% Port Dickson Power Berhad

100%Wirazone Sdn Bhd

Corporate StruCture as at 31 December 2007

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ele

ct

ric

ity

distributiOn

prOject Ma

na

Ge

Me

nt

Others

OffshOre 100%Tuah Utama Sdn Bhd

20% Lekir Bulk Terminal Sdn Bhd

54% Desa Kilat Sdn Bhd

100% Transpool Sdn Bhd I

100%Malakoff Engineering Sdn Bhd

I Dormant

II Malakoff’s effective equity interest of 20% and 12% in SAMAWEC and SWEC, respectively, is held via Malakoff Gulf Limited which holds 40% equity interest in MSCSB which in turn holds 50% equity interest in SAMAWEC. SAMAWEC holds 60% equity interest in SWEC.

lll Malakoff’s effective equity interest of 11.7% in SEPCL is held via Malakoff Gulf Limited which holds 40% equity interest in MSCSB which in turn holds 50% equity interest in SAMAWEC. SAMAWEC holds 60% in SEHCL which in turn holds 97.5% equity interest in SEPCL.

IV Malakoff’s effective equity interest of 20% in DPC is held via Malakoff Technical (Dhofar) Limited which holds a direct 43.4% equity interest in OTPL which in turn holds 100% equity interest in SPHL. SPHL holds 46% equity interest in DPC, a publicly traded company listed on the Muscat Securities Market of the Sultanate of Oman.

V Malakoff’s effective equity interest of 35.7% in AAS is held via MADSB which holds 70% equity interest in TDIC which in turn holds 51% equity interest in AAS.

VI Malakoff’s effective equity interest of 12.75% in CEGCO is held via MJGL which holds 25% equity interest in EnARA which in turn holds 51% equity interest in CEGCO.

100%Malakoff International Limited

100% Malakoff Gulf Limited

40% Malaysian Shoaiba Consortium

Sdn Bhd (“MSCSB”)

20% Saudi-Malaysia Water & Electricity

Company Limited (“SAMAWEC”) II

12% Shuaibah Water & Electricity

Company Limited (“SWEC”) II

12% Shuaibah Expansion Holding Company Limited (“SEHCL”) lll

11.7% Shuaibah Expansion Project lll Company Limited (“SEPCL”)

100%Malakoff Technical (Dhofar) Limited

43.4% Oman Technical Partners Limited (“OTPL”) lV

43.4% Salalah Power Holdings Limited (“SPHL”) lV

20% Dhofar Power Company SAOG (“DPC”) lV

100%Malakoff AlDjazair Desal Sdn Bhd (“MADSB”)

70% Tlemcen Desalination Investment Company SAS (“TDIC”)

35.7% Almiyah Attilemcania SPA (“AAS”) V

100%Spring Assets Limited I

100%Malakoff Capital (L) Ltd

100%Malakoff Jordan Generation Limited (“MJGL”)

25% Enara Energy Investment Company (“EnARA”)

12.75% Central Electricity Generating Company Limited (“CEGCO”) VI

100%KuwMal Investments Limited

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1. TAn SRI ABDUL HALIM ALI Chairman

2. AHMAD JAUHARI YAHYA Managing Director/Chief Executive Officer

3. HASnI HARUn

4. MABEL LEE KHUAn EOI

5. VIJAY VIJEnDRA SETHU

6. AZIAn MOHD nOH

7. CInDY TAn LER CHIn

8. YOOnG nIM CHEE

9. AnDREW ROWAn IAn YEE (picture not available)

boaRD of DIRecToRs

12

34

5

7

6

8

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TaN sRI abDuL haLIm aLIChairMan

YBhg. Tan Sri Abdul Halim Ali, aged 65, a Malaysian, was appointed to the Board on 24 May 2007 and appointed as a Chairman of Malakoff Corporation Berhad (“Malakoff”) on 26 October 2007. He is also Chairman of the Remuneration Committee of the Board.

He holds a Bachelor of Arts (Honours) degree from the University of Malaya, Malaysia.

Tan Sri Abdul Halim joined the Malaysian Foreign Service soon after graduating in 1965. During the next 30 years, his postings included the Malaysian High Commission in new Delhi, Republic of India, the Malaysian Consulate in Medan, Sumatra, Republic of Indonesia and the Malaysian Embassy in Tokyo, Japan. In 1976, he was appointed Principal Assistant Secretary, Ministry of Foreign Affairs and 3 years later, was posted to the United nations in new York, as Malaysia’s Deputy Permanent Representative. In 1982, he assumed his first ambassadorial role as the Malaysian Ambassador to the Socialist Republic of Vietnam, coming back to Kuala Lumpur when he was appointed Deputy Secretary-General (III), Ministry of Foreign Affairs. In 1988, he was appointed Ambassador of Malaysia to Austria, where he also held the position of President Representative to UnIDO, IAEA, United nations Office in Vienna, Austria. In 1991, he was named Deputy of Secretary-General (1), Ministry of Foreign Affairs, before his appointment as Secretary-General 5 years later. In September 1996, he was appointed Chief Secretary to the Government, a post he held until his retirement in January 2001, when he was named Chairman of EPF. From September 2001 until 4 July 2007 he was the Chairman of Malakoff Berhad.

Currently, he is the Chairman of Malaysian Building Society Berhad, a subsidiary of Employees’ Provident Fund (“EPF”) and University of Technology, Malaysia. He also sits on the boards of ESSO Malaysia Berhad, IJM Corporation Berhad and LCL Corporation Berhad.

In recognition of his achievements and contribution to the country and corporate sector, Tan Sri Abdul Halim was conferred a Fellowship by the Governing Council of the Malaysian Institute of Directors.

PRofILe of boaRD of DIRecToRs

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ahmaD JauhaRI yahyaManaging direCtor/Chief exeCutive offiCer

Encik Ahmad Jauhari Yahya, aged 54, a Malaysian, is currently the Managing Director/Chief Executive Officer of Malakoff Corporation Berhad (“Malakoff”). He was appointed to the Board on 30 April 2007 and is a member of the Audit Committee of the Board. He also sits on the Board of Port Dickson Power Berhad, MMC Corporation Berhad, Aliran Ihsan Resources Berhad, Kapar Energy Ventures Sdn Bhd and Malakoff AlDjazair Desal Sdn Bhd.

He holds a Bachelor of Science (Honours) degree in Electrical and Electronic Engineering from University of nottingham, UK.

During his career, Encik Ahmad Jauhari has managed many large technical projects and held senior management positions in The new Straits Times Press (M) Berhad (Director and Senior Group General Manager), Time Engineering Berhad (Managing Director) and Malaysian Resources Corporation Berhad (Managing Director, Executive Vice President and Director).

On the international front, he is also a Director and Chairman of Executive Committee of Central Electricity Generating Company Limited (Jordan) and Director of Shuaibah Water & Electricity Company Limited and Shuaibah Expansion Project Company Limited (Saudi Arabia).

At present, Encik Ahmad Jauhari is the Honorary Vice-President of Penjanabebas (Association of Independent Power Producers in Malaysia).

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hasNI haRuNnon-independent non-exeCutive direCtor

Encik Hasni Harun, aged 51, was appointed to the Board on 24 May 2007 and is the Chairman of the Audit Committee and a member of the Remuneration Committee of the Board.

He graduated with a Bachelor of Accounting (Honours) degree from the University of Malaya in 1980, and holds a Master’s degree in Business Administration from United States International University, San Diego, California, USA. He is also a member of the Malaysian Institute of Accountants.

He is presently the Chief Executive Officer, Malaysia of MMC Corporation Berhad (“MMC”) having been its Group Chief Operating Officer from January 2007 to February 2008. Prior to joining MMC, he was the Group Chief Financial Officer of DRB-Hicom Berhad (2006), Managing Director of RHB Asset Management Sdn Bhd (2001-2006), and Senior General Manager of the Investment Department at the Employees Provident Fund Board (1994-2001). He had held several senior positions in the Accountant General’s Office (1980-1994).

His directorship in other companies include MMC, Zelan Berhad, Johor Port Berhad, IJM Corporation Berhad, MMC Engineering Group Berhad and Aliran Ihsan Resources Berhad.

PRofILe of boaRD of DIRecToRs (con’t)

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yooNG NIm cheenon-independent non-exeCutive direCtor

Mr. Yoong nim Chee, aged 49, a Malaysian, was appointed to the Board on 16 May 2006 and is a member of the Audit Committee of the Board.

He holds a Bachelor of Economics in Business Administration degree from University Malaya. Mr. Yoong has extensive experience in corporate finance and has worked in senior positions for several merchant banks. He was the Executive Director of MMC Engineering Group Berhad from 2001-2003 and currently holds the position of Director, Corporate Affairs of MMC Corporation Berhad.

He is also a board member of Zelan Berhad, Kramat Tin Dredging Berhad and Integrated Rubber Corporation Berhad.

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mabeL Lee khuaN eoInon-independent non-exeCutive direCtor

Dr. Mabel Lee, 53, a Malaysian, was appointed to the Board on 11 April 2008. She is currently the Senior General Manager of Corporate Planning at MMC Corporation Berhad (“MMC”). Prior to joining MMC, she had worked with JP Morgan Chase’s Kuala Lumpur office as Vice President of its Investment Banking Division.

Mabel is a Chartered Financial Analyst Charterholder and holds a Bachelor of Accounting (First Class Honours) degree from Universiti Malaya, MBA (with Distinction) from University of Hull, United Kingdom and Doctor of Business Administration degree from University of newcastle, Australia. She is a member of the Malaysian Institute of Accountants, an Associate Member with Institut Bank-Bank Malaysia and a member of the Institute of Chartered Accountants in England and Wales (“ICAEW”), Corporate Finance Faculty.


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cINDy TaN LeR chINnon-independent non-exeCutive direCtor

Puan Cindy Tan Ler Chin, aged 48, a Malaysian, was appointed to the Board on 9 August 2007 and is a member of the Remuneration Committee of the Board.

She holds an Honours Degree in Economics, majoring in statistic, from Universiti Kebangsaan Malaysia. In 1991, she obtained a Certified Diploma in Accounting and Finance, accorded by the Chartered Association of Certified Accountants.

She is currently the General Manager of the Corporate Financing Department, Investment Division of the Employees’ Provident Fund (“EPF”). She is also a Director of Malaysia Building Society Berhad, a subsidiary of EPF.

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aZIaN mohD Nohnon-independent non-exeCutive direCtor

Puan Azian Mohd noh, aged 55, a Malaysian, was appointed to the Board on 9 August 2007.

She holds a Master in Business Administration from University Kebangsaan Malaysia and a Bachelor of Economics (Accounting) from University of Malaya.

Puan Azian began her career in 1980 as a Treasury Accountant in the Investment and Loan Division of the Accountant General’s Department before being appointed as an Accountant in the Ministry of Public Enterprise in 1981. She joined Kraftangan Malaysia as Senior Accountant in 1982 until 1985, where she served as Deputy Finance Director of SIRIM. In 1991, she was appointed as Deputy Director in the Kumpulan Wang Amanah Pencen (“KWAP”) in the Accountant General’s Department, a position she held for seven years before becoming a Director of KWAP in 1997 until 2006. She is currently the Chief Executive Officer of Kumpulan Wang Persaraan (Diperbadankan).

She also a board member of RHB Berhad and Time DotCom Berhad.


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aNDReW RoWaN IaN yeenon-independent non-exeCutive direCtor

Mr. Andrew Rowan Ian Yee, aged 43, an Australian citizen, was appointed to the Board on 9 August 2007.

He holds a Bachelor of Commerce degree, majoring in Accounting and a Bachelor of Law degree from the University of new South Wales, Sydney, Australia. He is also qualified to practice law in Australia.

Mr. Andrew Yee is the joint Chief Executive Officer of Standard Chartered IL&FS Asia Infrastructure Growth Fund (SCI Asia), based in Singapore. He joined Standard Chartered’s Principal Finance team in 2007 as a Managing Director and Head of Infrastructure. He has 19 years of infrastructure experience gained from positions in investment banking, industry and private equity.

Prior to joining Standard Chartered and launching SCI Asia, he founded Renewable Energy Asia Pacific, a renewable energy fund. He was also Head of Mergers and Acquisitions at InterGen Asia where he participated in the US$3.3 billion sale of InterGen to a partnership between AIG and the Ontario Teachers’ Pension Plan during 2004 and 2005. Prior to InterGen, Andrew was Head of Goldman Sachs Asia’s Energy & Power advisory team, based in Hong Kong. He was also a Director at Barclays de Zoete Wedd Australia, an investment banking firm that was acquired by ABn AMRO in 1997, prior to which he worked in the Corporate Finance team of Barclays de Zoete Wedd in London.

His deal experience includes the Initial Public Offering of British Sky Broadcasting, secondary offerings of national Power and PowerGen, acquisitions of British Coal and Powercor Australia, and the sale of Australian airports in Melbourne, Brisbane and Perth.

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VIJay VIJeNDRa seThualternate direCtor to andrew rowan ian yee

Mr. Vijay Vijendra Sethu, aged 44, an Australian citizen, is the Alternate Director to Mr. Andrew Rowan Ian Yee and was appointed to the Board on 9 August 2007.

He has a Master of Business Administration from Auckland University and is a Fellow of the Association of Chartered Certified Accountants in United Kingdom, an Associate of the new Zealand Society of Chartered Accountants and a graduate member of Chartered Institute of Management Accountants in United Kingdom.

He is currently the Chief Executive Officer (“CEO”) of CIMB Standard Strategic Asset Advisors Sdn Bhd (“SEASAF”). Prior to becoming the CEO of the SEASAF, Vijay spent four years with Australia new Zealand (“AnZ”) Investment Bank in Singapore where he was the Head of Power and later the Executive Director, Head of Project and Structured Finance for Asia. Prior to joining AnZ Investment Bank in Singapore, Vijay was the Vice President and Head of Mergers and Acquisitions for Asia Pacific, Africa and China at Enron International, Singapore. During his time, he was involved in numerous oil, gas and power asset reviews. Earlier, Vijay spent 8 years with AnZ Investment Bank in Melbourne, London and new York. His last position was Head of Global Structured Finance for the Americas, where the bank focused particularly on Latin America and successfully completed several resources, oil, gas and power transactions. Vijay spent the earlier part of his career with KPMG Peat Marwick in new Zealand and Exxon in Malaysia.


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oRGaNIsaTIoNaL sTRucTuRe

Malakoff corPoraTion Berhad

MD/CEO’sOffice & Corporate

Affairs Department

IT & Enterprise ApplicationsDepartment

OrganisationalDevelopmentDepartment

Ventures I

Division

Ventures II

Division

GroupFinance & AccountsDivision

LegalServices

Department

dceO

MOHD RADZUAN YAHYA

AssetManagement

Division

Operations& Maintenance

Division

MalakoffEngineering

Sdn Bhd(“MESB”)

HumanResources& Admin

Department

Md/ceO

AHMADJAUHARi YAHYA

cOMpany

secretarial

departMent

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INDIVIDuaL PRofILes of key membeRs of maNaGemeNT Team

1. ahMad Jauhari yahya

2. Mohd radzuan yahya

1.

2.

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29

ahmaD JauhaRI yahyaManaging Director/Chief Executive Officer

Encik Ahmad Jauhari Yahya, aged 54, a Malaysian, is currently the Managing Director/Chief Executive Officer of Malakoff Corporation Berhad (“Malakoff”). He was appointed to the Board on 30 April 2007 and is a member of the Audit Committee of the Board. He also sits on the Board of Port Dickson Power Berhad, MMC Corporation Berhad, Aliran Ihsan Resources Berhad, Kapar Energy Ventures Sdn Bhd and Malakoff AlDjazair Desal Sdn Bhd.

He holds a Bachelor of Science (Honours) degree in Electrical and Electronic Engineering from University of nottingham, UK.

During his career, Encik Ahmad Jauhari has managed many large technical projects and held senior management positions in The new Straits Times Press (M) Berhad (Director and Senior Group General Manager), Time Engineering Berhad (Managing Director) and Malaysian Resources Corporation Berhad (Managing Director, Executive Vice President and Director).

On the international front, he is also a Director and Chairman of Executive Committee of Central Electricity Generating Company Limited (Jordan) and Director of Shuaibah Water & Electricity Company Limited and Shuaibah Expansion Project Company Limited (Saudi Arabia).

At present, Encik Ahmad Jauhari is the Honorary Vice-President of Penjanabebas (Association of Independent Power Producers in Malaysia).

mohD RaDZuaN yahyaDeputy Chief Executive Officer

Encik Mohd Radzuan Yahya, aged 55, is currently the Deputy Chief Executive Officer (“DCEO”) of Malakoff Corporation Berhad (“Malakoff”). He obtained a Bachelor of Science degree in Mechanical Engineering from Liverpool University, UK in 1977. He started his career with national Electricity Board (“nEB”) in 1977 as an Assistant Operation Engineer at the Prai Power Plant. He was appointed to the position of Boiler Maintenance Engineer at the Pasir Gudang Power Station between 1981-1984. He was then transferred to Paka Combined Cycle Power Station as Efficiency and Test Engineer until 1987. Between 1987 to 1993, he assumed the positions of Senior Shift Charge Engineer, Senior Mechanical Engineer and Assistant Station Manager at the Port Dickson Power Station. He joined Teknik Janakuasa Sdn Bhd (“TJSB”) as Plant Manager for Lumut Power Plant in 1995. In 1998, he was appointed as Chief Operating Officer (“COO”) of TJSB. In 2000, he was transferred to Segari Energy Ventures Sdn Bhd (“SEV”) to assume the position of COO of SEV. In 2002, he was transferred to Malakoff Berhad and promoted to COO and subsequently re-designated to his current position as the DCEO of Malakoff in April 2006.

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RusWaTI oThmaNChief Financial Officer/Senior Vice PresidentGroup Finance & Accounts Division

Puan Ruswati Othman, aged 48, obtained her Bachelor of Science degree in Chemistry and Master of Business Administration degree (majoring in Accounting and Finance) from University of Bradford, England, UK and University of Massachusetts, Boston, USA in 1984 and 1988 respectively. She started her career as executive in the Chemical Division of Behn Meyer & Co. in 1984. She joined Southern Bank Berhad as an officer in 1989. She was appointed as Assistant Manager, Corporate Planning and Investments at Melewar Corporation Berhad/MAA Berhad in 1990. Amongst others, she was involved in the setting up of an international food chain and a highway project for the Group. In 1994, she joined Malakoff Berhad as Manager, Corporate Planning. In 1997, she was promoted to Senior Manager and as Head, Research and Risk Management Department. She was promoted to Assistant General Manager, Corporate Finance and Risk Management in 1999 and as General Manager and Head, Corporate Finance and Risk Management Department in 2000. In 2004, she was promoted to the position of Chief Financial Officer/Senior Vice President, Group Finance & Accounts Division. Her present responsibility includes managing the Group Accounts and Treasury Department and the Corporate and Project Finance Department. She overseas the overall accounting and reporting functions in Malakoff Corporation Berhad (“Malakoff”) and heads the Malakoff team for corporate finance exercises such as equity & debt financing as well as mergers & acquisition and project finance exercises for companies within the Malakoff Group.

NoR shakImaN muhammaDSenior Vice PresidentOperations & Maintenance Division

Ir. nor Shakiman Muhammad, aged 47, obtained his Bachelor of Science in Mechanical Engineering from University of Sussex, UK. He started his career in 1984 with national Electricity Board (“nEB”), subsequently Tenaga nasional Berhad (“TnB”) as an Assistant Shift Charge Engineer at 900 MW Sultan Ismail Power Station Paka Terengganu (“SIPS”). In 1987, he was appointed as an Assistant Operation Engineer and later appointed as Test and Efficiency Engineer. In August 1988, he was appointed as Safety and Training Engineer, which was his last appointment in SIPS. In September 1988, he was employed as Gas Turbine Maintenance Engineer at 910 MW Connaught Bridge Power Station (“CBPS”) in Klang. He later joined Teknik Janakuasa Sdn Bhd (“TJSB”) in 1994 as Mechanical Maintenance Manager and was involved in the project/design review of the Lumut Power Plant (“LPP”) together with the Owner’s project team. He was promoted to Senior Mechanical Maintenance Manager in 1996 and subsequently as Assistant General Manager in 1997. Later, he was promoted to Station Manager in LPP in 1998 and then promoted to Chief Operating Officer of TJSB in July 2002, before assuming his current position as Senior Vice President of O&M Division in Malakoff Corporation Berhad (“Malakoff”).

habIb husINSenior Vice PresidentAsset Management Division

Encik Habib Husin, aged 48, obtained his Bachelor in Engineering (Electrical & Electronics) from University of Wales. He started his career in 1983 as an Assistant Instrument Maintenance Engineer in Port Dickson Power Station for Lembaga Letrik negara (now Tenaga nasional Berhad). In 1985, he was transferred to Kapar Power Station (Phase I and II) and was later promoted to Instrument Maintenance Engineer in 1987. He then joined Sarawak Shell Berhad as Instrument Engineer in 1990 before moving to ICI Paints (Mal) Sdn Bhd as Works Engineer in 1992. He joined Malakoff Berhad as Senior Manager of Technical Audit Department in July 1998. His role is to provide consultancy service on all engineering and management matters pertaining to the operations of the Lumut Combined Cycle Power Plant and to constantly conduct technical and safety due diligence from time to time for new projects and proposed acquisitions. He has been redesignated and promoted to Assistant General Manager, Business Organisation & Technical Services on 1st January 2000. His scope of work in addition to the previous role is to oversee on the business reorganisation and strengthening the technical services group to strategise Malakoff Berhad as an international power player. In September 2001, he was promoted and transferred to General Manager-Projects in Segari Energy Ventures Sdn Bhd (“SEV”). In July 2004, he was promoted to Chief Operating Officer (“COO”) in SEV. He was re-designated to Senior Vice President of Business Operations Division in April 2006. In 2007, he was re-designated to his current position as Senior Vice President of Asset Management Division of Malakoff Corporation Berhad (“Malakoff”).

INDIVIDuaL PRofILes of key membeRs of maNaGemeNT Team (cont’d)

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31

3. ruswati othMan

4. nor shakiMan MuhaMMad

5. haBiB husin

4.

5.

3.

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6. azizan leBai Manat

7. azhari sulaiMan

8. ernest naVaratnaM

6. 7.

8.

INDIVIDuaL PRofILes of key membeRs of maNaGemeNT Team (cont’d)

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33

aZIZaN LebaI maNaTSenior Vice PresidentMalakoff Engineering Sdn Bhd

Encik Azizan Lebai Manat, aged 50, a Malaysian, obtained a Bachelor of Science degree in Electrical and Electronics Engineering from University College of Cardiff, Wales, UK and a Master of Business Administration in Project Management (with Distinction) from University of Dundee, Scotland, UK in 1982 and 1992, respectively. He is a registered Professional Engineer with the Board of Engineers, Malaysia and a member of the Institution of Engineers, Malaysia. He started his career as a Project Engineer with the national Electricity Board (“nEB”) in 1982. From 1983 to 1985, he was the Site Resident Engineer responsible for the control and instrumentation scope of the power station in Connaught Bridge, Klang, Selangor Darul Ehsan (“Connaught Bridge Power Station”). Between 1985 to 1988, he worked at the Kapar Power Station (Phases I and II) project, as a member of the Tenaga nasional Berhad (“TnB”) project owner’s site team. Upon completion of the above project in 1988, he joined the station maintenance team as a Computer Maintenance Engineer at the Kapar Power Station. In 1991, he was awarded a scholarship by the nEB to pursue a Masters of Business Administration degree in Project Management. From 1992 to 1994, he was a Training Manager at the Human Resource Department of TnB and was responsible for planning and co-ordinating management training for the TnB group’s executives. In 1994, he joined TnB Engineering and Consultancy Sdn Bhd, a wholly-owned subsidiary of TnB. Thereafter in 1996, he joined Teknik Janakuasa Sdn Bhd (“TJSB”) as Senior Manager, Projects and was promoted to the position of Assistant General Manager of head Wirazone Sdn Bhd (“Wirazone”) in 1997. In 2000, he was promoted to General Manager of WSB and assumed the position of Head of Wirazone Sdn Bhd. He was transferred to Malakoff Berhad and re-designated as Head of Corporate Services Division in April 2006. He is currently the Senior Vice President of Malakoff Engineering Sdn Bhd of Malakoff Corporation Berhad (“Malakoff”).

aZhaRI suLaImaNSenior Vice PresidentVentures I Division

Encik Azhari Sulaiman, aged 48, a Malaysian, holds a Bachelor of Science in Electrical & Electronic Engineering from University of Technology Loughborough, England and Masters in Business Administration from Universiti Malaya. He first joined Lembaga Letrik negara in September 1983 as a Computer Maintenance Engineer in the Computer Maintenance Department. In 1986, he was then promoted to Senior Engineer, Telecontrol, in which, he was involved mainly in the development of control centrs, repair and maintenance of the national Load Despatch Centre SCADA/EMS computer system and RTUs. Later in January 1994, he was transferred to the Business Management unit of the Transmission Division as the Senior Manager, Commercial. In January 1999, he was designated as the Head of Energy Procurement Unit before joining Tanjung Bin Power Sdn Bhd as Chief Operating Officer in August 2004. He is currently the Senior Vice President of Ventures I Division, Malakoff Corporation Berhad (“Malakoff”).

eRNesT NaVaRaTNamSenior Vice PresidentVentures II Division

Mr. Ernest navaratnam, aged 44, a Malaysian, holds a Bachelor of Science in Electrical Engineering from Queen’s University, Canada. He started his career in 1988 with Tenaga Ewbank Preece Sdn Bhd as Electrical Engineer/Software Development Engineer. He then joined SMEC Malaysia in 1992 as Electrical Engineer. SMEC Malaysia is the Malaysian office for Snowy Mountains Engineering Corporation, Australia. In early 1995, he joined Malakoff Berhad as Senior Project Engineer in April 1995. He was promoted to Project Manager in January 1996 where he was responsible for coordinating and reviewing the feasibility of projects assigned for possible augmentation to Malakoff Berhad’s corporate portfolio. In June 1999, he joined International Power PLC (“IPR”) in the Kuala Lumpur regional office as their Business Development Manager for South East Asia. He was subsequently seconded to IPR’s headquarters in London, England for a period of over 2 years. He then rejoined Malakoff Berhad in August 2003 as General Manager for International Business Development. In April 2006, he was re-designated as Vice President, Region II. He is currently the Senior Vice President of Ventures II, Malakoff Corporation Berhad (“Malakoff”).

teamwork demonstrates that trust is an integral part of our pursuit towards achieving

a common goal.

teamwork

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auDIT commITTee

purpose

The Audit Committee (“Committee”) was established by Board on 19 november 2007. The primary objectives of the Audit Committee are as follows:

1. To assist the Board in fulfilling its statutory and fiduciary responsibilities in examining and monitoring the Company and its subsidiaries’ (“the Group”) management of business, financial risk processes, accounting and financial reporting practices;

2. To determine the adequacy and effectiveness of the administrative, operational and internal accounting controls of the Group and to ensure that the Group is operating in accordance with the prescribed procedures, codes of conduct and applicable legal and regulatory requirements;

3. Serve as an independent and objective party from management in the review of the financial information of the Company and Group presented by management for the distribution to shareholders and the general public;

4. Provide direction and oversight over the internal and external auditors of the Company to ensure their independence from management;

5. To evaluate the quality of audits conducted by the internal and external auditors on the Company and Group. MeMBers

The members of the Committee comprised the following members:

status of directorship

Hasni Harun (Chairman) - non-Executive DirectorYoong nim Chee - non-Executive DirectorAhmad Jauhari Yahya - Managing Director/Chief Executive Officer

The Chairman of the Committee is a member of the Malaysian Institute of Accountants.

Meetings and Minutes

Meetings shall be held at least four (4) times a year or more frequently as circumstances dictate. The Chairman shall call a meeting of the Committee, if requested to do so by any Audit Committee member, the management or the internal or external auditors. A representative of the external and internal auditors shall normally be invited to attend the meetings of the Audit Committee. The management shall be represented at the meetings by the Managing Director/Chief Executive Officer (“CEO”) or in his absence, the Deputy CEO, the Chief Financial Officer and the Financial Controller of the Company. Other board members may attend Audit Committee meetings upon the invitation of the Audit Committee.

The Chairman of the Audit Committee should engage on a continuous basis with senior management, such as the Chairman, the Managing Director/CEO, or in his absence, the Deputy CEO, the Chief Financial Officer, the Financial Controller of the Company, the internal auditors and the external auditors in order to kept informed of matters affecting the Company.

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37

The Audit Committee shall meet at least twice a year with the internal and external auditors without the attendance of the executive members of the Committee and the management of the Company. The quorum for a meeting of the Committee shall be two (2) members present or in their absence, their alternate directors, both of whom must be non-executive directors.

Minutes of each meeting shall be kept and distributed to each member of the Committee and of the Board. The Chairman of the Committee shall report on each meeting to the Board. The Company Secretary shall be the Secretary of the Committee.

authority

The Audit Committee is authorised by the Board:

(a) to investigate any matter within its terms of reference;

(b) to have the resources in order to perform its duties and responsibilities as set out in its terms of reference;

(c) to have full and unrestricted access to information pertaining to the Company and the Group including to call on any officers of the Company and/or the Group in carrying out their duties;

(d) to have direct communication channels to the internal and external auditors;

(e) to obtain, at the expense of the Company, external legal or other independent professional advice if it considers necessary; and

(f) to be able to convene meetings with the external auditors and internal auditors, or both, without the attendance of the executive members of the Group, other directors and employees of the Company, whenever deemed necessary.

duties and responsiBilities

The duties and responsibilities of the Committee are as follows:-

(a) To consider the appointment of the external auditor, the audit fee and any questions of resignation or dismissal;

(b) To discuss with the external auditor before the audit commences, the nature and scope of the audit;

(c) To review the quarterly and year-end financial statements for recommendation to the Board;

(d) To discuss problems and reservations arising from the interim and final audits, and any matter the auditor may wish to discuss (in the absence of management where necessary);

(e) To review the external auditor’s management letter and management’s response;

(f) To do the following with respect to the internal audit function:-

• Review the adequacy of the scope, functions, competency and resources of the internal audit function, and that it has the necessary authority to carry out its work;

• Review the internal audit programme and results of the internal audit process and where necessary, ensure that appropriate action is taken on recommendations of the internal audit function;

• Review and appraise or assess the performance of members of the internal audit function/firm carrying out the internal audit function;

(g) To consider any related party transactions that may arise within the Group;

(h) To consider the major findings of internal investigations and management’s response;

(i) To report to the Board at least once a year, the activities of the Audit Committee and the summary of the activities of the internal audit function or activity, including the number of meetings held and the details of attendance of each audit member in respect of the meetings; and

(j) To consider other topics as defined by the Board.

An open mind continues to think out of the box, never content with the tried and tested,

but challenged to provide fresh solutions, and winning innovation.

inn0vation

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sTaTemeNT by chaIRmaN

dear stakeholders,2007 hAS BEEn AnOthEr GOOD yEAr FOr MAlAkOFF COrPOrAtIOn BErhAD (“MAlAkOFF”) BOth In MAlAySIA AnD ABrOAD AS wE COntInuE tO DEMOnStrAtE COnSIStEnt AnD EFFECtIVE ExECutIOn OF Our StrAtEGy. thE yEAr hAS BEEn PArtICulArly SIGnIFICAnt AS It MArkED thE COMPlEtIOn OF A DIVEStMEnt ExErCISE.

on 30 april 2007, nuCleus avenue (M) Bhd, CoMpleted its aCquisition of Malakoff’s entire Business for a Cash Consideration of rM9.3 Billion, giving MMC Corporation Berhad a 51% Controlling stake.

the proCess of the privatisation also saw nuCleus avenue (M) Bhd Changed its naMe to Malakoff Corporation Berhad.

having CoMpleted My first 8 Months as ChairMan under the “new” Malakoff, i aM delighted to Be aBle to report another “year” of strong progress for the group.

For the 8 months ended 31 December 2007, the underlying profit

was RM217 million and revenue was RM2,702 million. The increase

in revenue and profit was mainly attributable to Tanjung Bin power

plant, which has a capacity of 2,100 MW.

With the completion of Tanjung Bin Power Plant third 700 MW unit on

31 August 2007, our effective generation capacity in Peninsular

Malaysia increased to 5,020 MW. This further cement’s our position

as the leading Independent Power Producer (“IPP”) in Malaysia.

The performance of our local assets, which is the major contributor

to the Group’s revenue, remains robust due to the operational

efficiency that far exceeds our contractual obligations. During the

year under review, significant changes were introduced to our local

operations to ensure that sustained improvement and operational

excellence are achieved through the balance of performance

enhancement, risk management and cost optimisation.

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41

TaN sRI abDuL haLIm aLIChairMan

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the long-terM nature of Malakoff’s investMents in the international Market should enaBle the group to generate growth and iMproving returns over Many years.

As a leading electricity and water producer, we

will continue to provide quality and affordable

power and water that meet or exceed our

customers’ expectations. Over the years to

come, our local assets and operations will

remain as our core business.

Significant milestones were also achieved in

2007 with regard to our ventures overseas.

On 15 July 2007, Malakoff’s consortium partners

entered into a series of agreements with Saudi

Arabia’s Water and Electricity Co. (“WEC”)

for the expansion of Shuaibah Independent

Water and Power Plant (“IWPP”) project to

deliver an extra 150,000 m3/day of water. This

US$232 million expansion project which will

utilise Reverse Osmosis desalination technology

is expected to deliver water in February 2009.

Meanwhile, the construction of the 900 MW

and 1,030,000 m3/day Shuaibah IWPP in Saudi

Arabia, which is our first overseas project, is

proceeding well with commercial operations

targeted for July 2009. Malakoff has 12%

indirect stake in Shuaibah IWPP.

On 17 October 2007, Malakoff’s consortium

also completed the acquisition of a 51%

interest in Jordan’s Central E lectr ici t y

Generating Company Limited (“CEGCO”),

which is Jordan’s largest electricity provider

with a generation capacity of 1,665 MW.

The privatisation of CEGCO, where we have a

12.75% indirect stake, is one of the largest

privatisation exercises in Jordan’s history.

Our participation at Dhofar Power Company

SAOG (“DPC”) in Oman, where we have an

indirect stake of 20% through an acquisition in

2006, has not only provided us with a growth

opportunity in Oman but also an excellent

platform to gain knowledge and experience

in running a transmission and distribution

business. Meanwhile, the development of the

200,000 m3/day desalination plant located in

Tlemcen, Algeria, where we have a 37.5%

interest, had achieved Financial Closure in

January 2008.

sTaTemeNT by chaIRmaN (con’t)

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43

Strategically, Malakoff is doing the right things,

building on its established business in Malaysia

whilst looking for investment opportunities,

principally in the Middle East and South East

Asia. The long-term nature of Malakoff’s

investments in the international market should

enable the Group to generate growth and

improving returns over many years.

We give particular attention to the environment

by investing in technologies which minimise the

environmental impact of our operations. Our

coal-fired Tanjung Bin power plant, for example,

incorporates state-of-the-ar t clean coal

technology such as Electrostatic Precipitators

(“ESP”) and Flue Gas Desulphurisation (“FGD”).

Work is also underway to certify Tanjung Bin

as ISO 14001 compliant by 2009.

We are committed to a high standard of safety and

health at the workplace to minimise or eliminate

lost time incidents and other occupational

health risks. In 2007, efforts were introduced

to enhance and standardise our Health, Safety

and Environment (“HSE”) practices across the

board as well as to work towards achieving the

OHSAS 18001 certification in 2009 for all the

plants that we control, i.e., Tanjung Bin, Lumut

and Prai power plants.

In terms of Community Investment, we

continue to promote sporting events at national

and ‘grassroots’ levels under various themes

of charity, voluntarism, sports tourism and

environmental conservatism. In the year under

review, Malakoff organised and supported a

total of at least eight major sporting events

that attracted more than 4,000 athletes and

volunteers from Malaysia and abroad. In terms

of our contributions to charitable causes, be it

social, religious and educational, we continue

to provide financial assistance to the less

privileged, physically challenged, school-going

children and orphans in the communities where

we operate.

A new Board has evolved as a result of the

privatisation exercise and I thank all the new

Board members, with their wealth of experience

and expertise, for sharing their time and insight.

I am confident that this new team will

bring renewed vigour and commitment to

the successful development of Malakof f.

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I should also pay tribute to my fellow directors of Malakoff Berhad for the considerable

contribution they had made in support of the Group over the years.

I would also like to thank the Management and all our employees who worked

particularly hard throughout 2007 in responding to the unusually demanding environment.

Their commitment and loyalty had been outstanding.

Looking back at the events that culminated in the privatisation of Malakoff, I have been

impressed and reassured by the caring and responsible way in which the Board, the

Management and the staff have executed the change. On a personal note, I find this an

exciting time to work for Malakoff. The Company is doing well and with its pool of talented

people, its international ambitions is on track to do even better.

Looking forward, we will continue to lay the foundations for long-term success, growth

and value creation in a demanding and changing international business environment.

Our investment strategy will be driven by value and a cost structure that is subjected to rigid

appraisal. Critical thinking and innovation will be the key to our success to break new frontiers

and transcend boundaries. I believe that we have the opportunity to build a truly world class

company if we can keep our focus on what we believe we can achieve.

tan sri aBdul haliM ali

Chairman

sTaTemeNT by chaIRmaN (con’t)

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45

Being focused pushes us to excel in everything we do, and in being passionate about

our capabilities, we are determined to pursue excellence and exceed expectations.

excellence

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PeRfoRmaNce ReVIeW by mD/ceo

ahmaD JauhaRI yahyaManaging direCtor/Chief exeCutive offiCer

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49

we are helping to power the Country towards the vision of a fully industrialised and developed nation status.

our theMe for this year’s annual report, transCending Boundaries, defines the hard earned suCCess we have aChieved in iMproving operational effiCienCy in the power plants, and the Breakthroughs we have Made into the international arena, whiCh drive our growth. these aChieveMents attest to the exCellenCe of our people and refleCt the rigorous exeCution of our Mission stateMent.

power generation

Malakoff Corporation Berhad (“Malakoff”) generates and sells power as an Independent Power Producer (“IPP”) to Tenaga nasional Berhad (“TnB”) for uploading onto the national Grid, Malaysia. Our plants increased their substantial contribution to the nation’s total installed capacity with the commissioning of the second and third 700 MW units of Tanjung Bin Power Plant on 28 February 2007 and 31 August 2007, respectively. Our total effective generation capacity has now increased to 5,020 MW. We are therefore providing approximately 27% of the total installed capacity in Peninsular Malaysia. Already Malaysia’s leading IPP, our new overseas investments, presently under construction, are set to enhance our business and financial performance.

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asseT PeRfoRmaNce

PeRfoRmaNce ReVIeW by mD/ceo (con’t)

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51

local assetsluMut power plant

in operation for More than eleven years, the luMut power plant (“lpp”), with a dependaBle CapaCity of 1,303 Mw, reMains the largest CoMBined CyCle power plant in Malaysia. the plant is held through our suBsidiary, segari energy ventures sdn Bhd (“sev”), in whiCh we hold 93.75 per Cent.

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Malakoff owns a gross generating CapaCity of5,020 Mw CoMprising of 6 power stations that run on oil, gas and Coal.

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53

During the financial year under review, LPP maintained its high performance in terms of availability, reliability and efficiency. The plant delivered approximately 6,423 GWh of electricity to the national Grid, with an average capacity factor of approximately 51.88%. With an availability of 94.29%, the plant exceeded the 86.0% guaranteed under the Power Purchase Agreement (“PPA”) with Tenaga nasional Berhad (“TnB”). Having met all the required performance standards set out in the PPA, SEV therefore received full capacity payments for the period.

gB3 power plant

The GB3 Power Plant, also a combined cycle power plant with a dependable capacity of 640 MW, is held through our 75% owned subsidiary, GB3 Sdn Bhd. The power plant is in its sixth year of operation and is located adjacent to the LPP owned by SEV.

The plant delivered a total of 4,245 GWh of electricity to the national Grid, with an average capacity factor of approximately 76.71%, during the financial year under review. The plant’s availability was 93.21%, exceeding the requirement of the PPA of 91.5%.

shareholding X plant’s capacity effective capacity

90.00%@2,100 MW tBp 1,890 MW

40.00%@2,420 MW keV 968 MW

25.00%@440 MW pdp 110 MW

100.00%@350 MW ppsB 350 MW

75.00%@640 MW gB3 480 MW

93.75%@1,303 MW seV 1,222 MW

7,253 Mw 5,020 Mw

Malakoff has an effective generation capacity of 5,020 MW, which accounts for ∼27% of Peninsular

Malaysia’s total installed capacity.

local generation capacity

Malakoff5,020 Mw

27%

tnB & other ipps73%

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prai power plant

The Prai Power Plant is a single-shaft combined cycle power plant with a dependable capacity of 350 MW. In its fifth year of operation, a total of 2,426 GWh of electricity was delivered to the national Grid. During the financial year under review, the plant recorded an average Capacity Factor of 70.49%. The plant’s availability was 93.7%, exceeding PPA requirement of 93%. Being one of the most efficient plants in Malaysia, Prai Power Plant recorded net efficiency (Lower Heating Value) of 53.25% during the financial year under review.

tanjung Bin power plant

Tanjung Bin Power Plant is the first private coal-fired power plant in Malaysia and one of the largest independent coal-fired power plants in South East Asia. It incorporates the latest clean coal technologies, such as Electrostatic Precipitators (“ESP”) and Flue Gas Desulphurisation (“FGD”). Tanjung Bin Power Plant has a generating capacity of 3 x 700 MW for a total of 2,100 MW. The plant is held through our subsidiary, Tanjung Bin Power Sdn Bhd, in which we hold 90%.

Unit 1 started operations on 28 September 2006, and Unit 2 and Unit 3 have successfully achieved their targeted Scheduled Commercial Operation Dates on 28 February 2007 and 31 August 2007, respectively.

In 2007, the plant delivered a total of 7,737 GWh of electricity to the national Grid, with an average capacity factor of 59.35%. With an availability of 92.55% at the end of 2007, the plant exceeded the 91% of the PPA requirements.

international assets

shuaibah

Our first overseas project is the Shuaibah Phase 3 Independent Water and Power Project in the Kingdom of Saudi Arabia. We are part of a consortium tasked with designing, constructing, commissioning and testing a 900 MW and 194 MIGD (Million Imperial Gallons per Day) crude oil-fired power and desalination plant. The project is on a build, own and operate basis under a 20-year Power and Water Purchase Agreement with the Water and Electricity Company of Saudi Arabia.

The Project’s construction activities are in full swing with procurement and manufacturing on schedule. The first evaporator arrived at Shuaibah in October 2006 while first steam turbine for Unit 10 was erected in December 2007. First firing is expected in September 2008 and the project’s Commercial Operation Date is scheduled in July 2009.

oman

We have entered the power generation business in Oman through Oman Technical Partners Limited (“OTPL”). The consortium members of OTPL are Malakoff Technical (Dhofar) Limited (“MTL”) (43.4%), a wholly-owned subsidiary of Malakoff International Limited (“MIL”), GCC Energy Fund of Dubai through its subsidiary, Oman Power Limited (28.3%) and Darbat Power LLC of Oman (28.3%).

OTPL in turn, is a direct shareholder of Dhofar Power Company S.A.O.G (“DPC”) with MTL having an indirect 20.0% equity interest in DPC after the successful acquisition of the entire issued and paid-up share capital, comprising 12,000 issued ordinary shares of USD1.00 each of Salalah Power Holdings Limited (“SPHL”) from PSEG Global L.L.C of the United States of America. MTL also became the Technical Partner of DPC. DPC is a power integrated company with 239 MW generating asset as well as the transmission and distribution assets in the Salalah region of the Government of Oman.

With electricity demand in the Dhofar region growing at a cumulative annual growth of about 7% over the past years, this investment provides much potential for Malakoff’s growth in the future.

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Jordan

Malakoff has footprint in Jordan with recent stakes acquisit ion in Central Electr icit y Generating Company Limited ( “CEGCO” ) . Malakoff has a 25% interest in Enara Energy Investment Company (“EnARA”), a consortium with Jordan Dubai Capital of Jordan (65%), Consolidated Contractors Ltd of Greece (10%) in the 51% stake in the Jordanian generation assets held by (“CEGCO”).

CEGCO has 4 major multi-fuel power plants under 4 separate Power Purchase Agreements (“PPA”) with a fifth PPA governing the balance generation capacity from 4 other small power plants. Total net generation capacity under CEGCO is 1,665 MW.

The Government of Jordan signed the CEGCO Share Sale Agreement with EnARA in May 2007. In September 2007 CEGCO Transaction Documents was signed. Further, in October 2007, the sale completion was finally achieved.

Moving forward, EnARA plans to develop other potential opportunities in Jordan and neighboring countr ies ut il izing CEGCO’s expertise and manpower.

algeria

Another overseas project is the seawater desalination plant which is located at Souk Tleta, Wilaya of Tlemcen, Algeria with a consortium comprising our wholly-owned subsidiary, Malakoff International Limited (“MIL”) and Spring Utility Limited (“SUL”), a wholly-owned

subsidiary of Hyflux Limited of Singapore. The consortium received a letter of award in October 2006 from the government-owned Algerian Energy Company (“AEC”) to develop, construct and operate the seawater desalination plant. The plant will be supplying 200,000 m3/day of desalinated water to Algerienne des Eaux under a 25-year concession.

The consortium held 51% in the company undertaking the project, with the balance held by AEC, MIL and SUL, in turn, held 70% and 30% interest respectively in the consortium. The Algeria project is scheduled to achieve Financial Close in January 2008. The project’s total construction period is scheduled 24 months from the Financial Close.

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oPeRaTIoNs & maINTeNaNce (“o&m”)


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57

teknik janakuasa sdn Bhd (“tjsB”), a wholly-owned suBsidiary of Malakoff Corporation Berhad (“Malakoff”), was estaBlished in 1995. sinCe then tjsB’s experienCe with luMut, gB3, prai and tanjung Bin power plants has proven its CapaBility in operating and Maintaining gas-fired and Coal-fired power plants.

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o&M serVices

lumut power plant (seV and gB3)

The Lumut Power Plant continued to provide highly reliable supply to the national Grid during the financial year under review. The Availability Factor (“AF”) based on the 365-day average of SEV Plant was always above 92.0% and the 365-day Unplanned Outage Rate (“UOR”) of GB3 Plant to date remains as below 2.0%. Both plants fulfilled all operational requirements specified in their respective PPAs. Both plants performed well and met world industry standards. Both completed their A/B/C gas turbine inspections as scheduled, utilising in-house expertise led by the Repair and Maintenance Services (“RMS”) team. This is an indication that the transfer of technology from the Original Equipment Manufacturer (“OEM”) has been progressing well. These efforts towards technology transfer will continue.

Caring for Health, Safety and Environment is always our top priority. We have maintained zero Lost Time Incident (“LTI”) over the last 3 years. We continue to enhance our pro-active safety program and since early last year we have embarked on Process Safety Risk Management (“PSRM”) leading towards achieving OHSAS 18000 Certification.

Competency Based Assessment ( “CBA” ) remains our platform to develop our human capital, including intensive training based on in-house simulators as well as on-the-job training (“OJT”). Lumut Power Plant currently has two fully operational simulators on site for that purpose.

prai power plant

Prai Power Plant continued to provide highly reliable supply to the national Grid during the financial year under review with the VOR well below the industry standard of 2%, and Availability Factor (“AF” ) of 92.91%. This was mainly due to the reduction in

the number and duration of forced outages as compared to 2006. Plant initiative on startup reliability study has also improved the overall plant reliability. Prai Power Plant also maintained a high Capacity Factor (“CF”) of 79.06% due to high dispatch throughout 2007, with an average net efficiency of 53.25%.

Prai Power Plant has embarked on the development of a Plant Performance Monitoring off-line model through collaboration through a third party via a Technical Services Agreement (“TSA”). This initiative will be integral to TJSB’s service portfolio in providing value-added O&M services to its internal and external clients.

Prai Power Plant also managed to keep its excellent safety record by maintaining zero LTI after four maintenance outages in 2007.

tanjung Bin power plant

Unit no. 2 met the target scheduled Commercial Operation Date (“COD”) of 28 February 2007, followed by Unit no. 3 on 31 August 2007. After achieving COD, plant operations have been seamlessly taken over by TJSB, being the O&M subcontractor.


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The smooth transition and proven competencies of TJSB staff are attributable to the extensive training programmes, supported by the availability of Tanjung Bin Plant-Specific Simulator, from an early stage of project development.

A working group on PSRM was formed to consolidate and standardise health, safety and environmental system practices among the plants owned by Malakoff. The group will also prepare the plant for certification to OHSAS 18001 and ISO 14001 by 2009.

The Operational Environmental Monitoring Plan required for the commercial operation of the plant has been prepared and implemented, reports are submitted regularly to the state DOE office, and environmental standards are being met.

The 2007 Contract Year ended with all 3 units of 700 MW generators in commercial operation with a facility Capacity Factor of 59% and Availability Factor of 94%. A slightly higher than average Forced Outage Rate of 4.17% at the end of the year was mainly due to design and erection related equipment reliability issues that are normally encountered in a new plant. All these issues are being progressively resolved.

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operations and technical

TJSB through its Technical Support Group (“TSG”) team provides support and expertise to ensure that TJSB’s operated plants are managed and maintained efficiently and cost-effectively through the implementation of the latest O&M tools and methodologies.

Working in conjunction with Asset Management Division, TJSB has revamped the cost centre structures for all of Malakoff’s power plants in order to enhance further the budgeting process and there by provide better monitoring on cost accounting. This initiative to manage and optimise plant life-cycle cost has been implemented under the SAP application system.

To further manage associated variable costs at all plants under its O&M portfolio, TJSB has formed a RMS team that specialises in major overhaul on boilers, gas and steam turbines as well as ‘Balance of Plant’ equipment. The same team has also been providing technical support to Malakoff’s international business development projects and will be offered to other customers as part of TJSB’s long-term business plan.

The Life Cycle Asset Information Management System ( “LCA IM” ) ini t iat ive which was started in 2006 for the Tanjung Bin project, has captured all technical details, drawings, project documents and the entire O&M manual

into an integrated system named EALIS. The application will be used by O&M personnel in the Tanjung Bin Power Plant which will now be a reference site for LCAIM. EALIS will be added to the in-house-developed O&M tools which TJSB intends to market worldwide.

TSG continues to provide Technical and Management Support Services for the Salalah Power Plant in Oman as part of its 6-monthly technical audit service. Two audits have successfully been completed, including a review of a blackout incident in the region.

o&M international

TJSB is committed to expanding its business and seek ing oppor tun i t ies to prov ide O&M services to third parties locally and internationally. Outside of Malaysia, the Middle East and ASEAn regions have been identified as potential markets for the Company’s services. To introduce these services and establish contacts with potential clients, in 2007, TJSB participated in Power Gen Middle East, the region’s premier conference and exhibition for the power and water industries held in Bahrain, the Power Gen Conference and Exhibition Asia in Bangkok, and the Malaysia Services Exhibition organised by Matrade in Sharjah, United Arab Emirates.

On the international front, TJSB will be co-operator via a sub-contract to a local company for the Shuaibah Phase 3 Independent Water and Power Project (“IWPP”) in the Kingdom of Saudi Arabia. In addition, TJSB together with Hyflux Limited of Singapore will be the O&M contractor for a 200,000 m³/day Sea Water Desalination Plant in Algeria. TJSB has also been awarded a Manpower Supply contract for 12 months for major overhauls of Alstom gas turbine models 13DM and 13E2 for Aluminium Bahrain (“ALBA”) in Bahrain.

For O&M related services, TJSB has provided technical advice, simulator training and on-the-job training services not only to Malaysian companies but also to various international companies, including Marmara in Turkey and GECOL in Libya.

Throughout 2007, TJSB was actively involved in the preparation and submission of documents for the following project tenders:

• 850 MW and 212,000m³ /day IWPP Shuqaiq, Saudi Arabia

• 760 MW CCGT Zanjan II Power Plant, Iran

• 500 MW OCGT Erbil Power Plant, Iraq

• Acquisition of Globeleq assets in Egypt and Asia

• 800 MW Az Zour Emergency Power Plant, Kuwait


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o&M Business and eXperienceo&M portfolio (through wholly-owned teknik Janakuasa sdn Bhd)

plant name configuration generating generating cod o&M capacity type term

segari energy Ventures 6x143.3 (GT) 1,303 CCGT (Once-through) 1996 15

Lumut Power Plant (LPP) 2x221.5 (ST) OCGT 2001

gB3 3x143.3 (GT) 651 CCGT (Cooling Tower) 2002 21

(LPP Block 3) 1x221.5 (ST)

Prai Power Plant 1x230 (GT) 350 CCGT (Single-shat) 2003 21

1x120 (ST)

Tanjung Bin Power 3x700 (Coal) 2,100 Coal Fired 2006 25

total o&M portfolio 4,404

o&M Via partnership

souk tleta, swro plant, algeria 200,000 m3/day water output IWP 2009 25

o&M Via suB-contracting

shuaibah iii water & 1,190.7 MW & 888,000 m3/day IWP 2009 20 electricity company water output

coMpleted o&M contract

Petronas Centralised Utility Facilities gebeng 3x36 (GT) 108 COGEn 1999 5 kerteh 6x36 (GT) 216 COGEn 1999 5

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eLecTRIcITy DIsTRIbuTIoN aND chILLeD WaTeR suPPLy


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Malakoff’s wholly-owned suBsidiary, wirazone sdn Bhd (“wirazone”) is the liCensed eleCtriCity distriButor within the kuala luMpur sentral (“kl sentral”) developMent area. it has held a liCense froM the energy CoMMission to distriBute eleCtriCity up to 100 Mw within the franChised area sinCe july 2000. wirazone also supplies Chilled water to the plaza sentral offiCe CoMplex for air Conditioning froM a Centralised Chilled water systeM with a Cooling CapaCity of 7,000 refrigerant tonnes.

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During the year under review, Wirazone’s customer base increased to 956 accounts from 801 in the previous year. The peak maximum power demand recorded was 20.4 MW. The rebound experienced during the year in the property market improved the take-up of tenancies at Kuala Lumpur Sentral and boosted the demand for electricity.

Wirazone’s mission is to provide an excellent standard and distinctive quality of service to its customers. Wirazone’s commitment is manifested through its Customer Charter and its Quality Policy under the MS ISO9001:2000 Quality Management System. The company’s high standard of technical performance is reflected by its achievement of a System Average Interruption Duration Index of 2.382 minutes per customer and System Average Interruption Frequency Index of 0.002 interruptions per customer recorded during the year under review.

Electricity sales and total revenue garnered by Wirazone are expected to be further improved as more customers move into the KL Sentral area and register to be served. The next sub-parcel developments nearing completion are Lot n (office tower), Lot J (offices towers and leisure centre) and Lot L (condominium). All are slated to be occupied by the end of 2008.


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VeNTuRes


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Malakoff is an aCtive Market player in developing power and water related projeCts in the Middle east, north afriCa, south asia and south east asia.

the CoMpany’s ventures division has Been Making gains into the international Market winning projeCts during the period under review.

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This expansion project is to be undertaken on a fast track basis and commercial operation date is expected in December 2008. The engineering, procurement and commissioning (“EPC”) contractor is Doosan of Korea, the same EPC contractor for the main Shuaibah III (desalination portion).

Following the success in Shuaibah, the company submitted a solicited proposal to the Ministry of Energy and Mines of Algeria for the development of a 200,000m3/day seawater desalination using reverse osmosis technology. The proposal was accepted by the government. The partner in the investor consortium is Hyflux Ltd of Singapore while the Algerian Energy Company, a government owned investment company, takes up 49% in the special purpose company developing the project.

The project achieved financial close in January 2008 and construction started immediately af ter. The commercial operation date is expected in January 2010 supplying potable water to Algerienne des Eaux, the national water distribution company.

Meanwhile, in Jordan the company continued its success as part of the winning consortium called Enara bidding for 51% equity stake in CEGCO, the power generation company that

once was owned by the government. The company owns several power plants totaling 1,665 MW in the country. The partners in the bidding consortium are Jordan Dubai Capital of Jordan and Consolidated Contractors Ltd of Greece.

The strength and experience of Malakoff in operating various types of power plants in Malaysia was the major factor in clinching the deal with CEGCO. The government of Jordan recognized that Enara can tap Malakoff’s technical and operational experience to move CEGCO forward successfully.

Jordanian Minister of Finance, as the representative of the Government of Jordan, signed the CEGCO Share Sale Agreement with Enara on 19th May 2007. The completion of the takeover was achieved in October 2007.

In South East Asia, Malakoff is focusing on development opportunities in countries like Singapore, Indonesia, Philippines, and Vietnam. The countries in South East Asia are rich in resources; some having huge potential for hydro, whilst others have abundance of coal and gas. Going forward, the demand for electricity is expected to remain high given the potential rate of growth and development in these developing countries.

South East Asia provides the opportunities for development of the power industry. Challenges such as regulations, legal framework, off-taker credit risk, political influence, investors competition and other factors would need to be addressed and mitigated. Malakoff is keen to participate with suitable partners to develop opportunities within the region for the medium to long term.

In conclusion, Malakoff is an active market player in developing power and water related projects in the regions of focus that has been identified. It is keen to work with partners whether they are technical or f inancial corporations to develop the industry that will always be growing given the demand for power and water is always on the rise. We develop these infrastructures with a long term goal of benefiting the stakeholders of the project. We intend to become a major player in the industry and look forward to many successful projects in the future with our partners.


the shuaiBah iii projeCt was the first power and desalination projeCt whiCh the CoMpany partiCipated in a ConsortiuM Made up of tenaga nasional Berhad (Malaysia’s Biggest power utility), khazanah (Malaysian governMent treasury investMent arM) and aCwa power ltd of saudi araBia. following the suCCessful Bid and start of ConstruCtion of the shuaiBah iii projeCt, the ConsortiuM was awarded the shuaiBah iii expansion where it was to finanCe, design, ConstruCt and operate an adjaCent 150,000M3/day seawater desalination plant using the reverse osMosis teChnology. this Brings the total desalination CapaCity of the shuaiBah iii projeCt to 1,030,000M3/day.

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the group’s in-house projeCts are undertaken By its projeCt ManageMent suBsidiary CoMpany, Malakoff engineering sdn Bhd (“MesB”). MesB provides projeCt ManageMent serviCes inCluding negotiation and exeCution of engineering, proCureMent and ConstruCtion ContraCts, as well as liaising with suB-ContraCtors, Bankers’ engineers and relevant authorities in ensuring that projeCts are CoMpleted on tiMe, within Budget and Meet the quality standards as spelt out By the speCifiCations.

Amongst the projects successfully managed by MESB were the 1,303 MW Lumut Power Plant, the 640 MW GB3 Power Plant in Lumut, MnI Co-generation Plant in Mentakab, Juru-Bayan Lepas 275 kV Substations and Submarine Cables in Penang, 500 kV Transmission Tower Helicopter Erection, District Cooling System & Electrical Distribution System for KL Sentral and 2,100 MW Tanjung Bin Power Plant in Johor.

Currently MESB provides project management services to the Asset Management Division of Malakoff Corporation Berhad (“Malakoff”).

PRoJecTmaNaGemeNT

respect for individuals means treating others with respect in all aspects of working relationship,

and appreciating the unique contributions they make to our business.

respectindividual

for

Annual Report 2007


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corPoraTe resPonsiBiliTy

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corporate goVernance

The tenets of corporate governance remain embedded in the Company even after the privatization exercise of Malakoff Berhad. This is a demonstration of the Company’s commitment to meet the highest standards of governance and transparency in the conduct of our business.

The Board of Directors (“Board”) of Malakoff Corporation Berhad (“Malakoff” ) remains committed in its efforts to implement the principles and best practices set out in the Malaysian Code on Corporate Governance (the “Code”). The adoption of good corporate governance is a fundamental part of the Board’s responsibility to protect and enhance shareholders’ value and the performance of the Group.

health, safety and enVironMent (“hse”)

During the year under review, Lumut Power Plant, GB3 Power Plant and Prai Power Plant achieved zero Lost Time Incident (LTI ). This accomplishment has been consistent over the years and signifies our commitment to continuously promote a strong safety culture.

The year 2007 also marked significant achievement in HSE-related activities. Under the Asset & Risk Management (“ARM”) initiative which was launched in the same year, a HSE Central Committee was formed to re-look at the HSE management systems across the spread of

generation assets where we have significant control. The objectives of the Committee include the following:

• To inculcate a safety a culture within the organisation;• To ensure effective and consistent HSE practices and implementation

across all sites; • To achieve OHSAS 18000 certification for all sites by 2009; and• To achieve ISO 14001 for Tanjung Bin Power Plant in 2009.

The base reference points of the Committee’s scope of work are the OHSAS 18001 standards’ as well as Dupont’s PSRM system for “best practice” as deemed appropriate.

Significant achievements of the HSE Central Committee include not only meeting most of the key OHSAS 18001 and ISO 14001 requirements but also further enhancing the level of HSE awareness and commitment for both our employees and our contractors through awareness road-shows, specialised trainings and other HSE-related activities.

For the year under review, the findings of the quarterly environmental monitoring for all plants that we operate show that we consistently achieve our environmental performance standards in terms of ambient air quality, gaseous stack emission, wastewater quality, marine water quality and noise levels. Our environmental performance remains constantly well within the minimum levels prescribed by the relevant authorities.

Annual Report 2007


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74coRPoRaTe ResPoNsIbILITy (cont’d)

huMan resources deVelopMent

The strength of any organisation lies in a competent and well trained workforce, working cohesively to achieve the organisation’s objectives. Our business and operational targets have been achieved through the dedication and skills of our people. nonetheless, their knowledge and capabilities need to be constantly enhanced so that we can maintain our competitive edge and remain at the forefront of our industry. This is undertaken through a comprehensive staff training schedule that covers functional and soft skills as well as on-the-job training, based on proper needs identification.

Following the rapid growth of Malakoff, the Human Resources Department has devoted its efforts to achieving such aspirations. As the demands and requirements for skilful and knowledgeable manpower increases, more specialised training initiatives have been developed. To date, we have a plant-specific training simulator at each power plant, providing a platform to simulate realistic power plant scenarios for effective training and competency assessment of our plant operators.

Malakoff’s human resources development efforts extend beyond our own staff. In September 2007, we launched the Executive Development programme targeted towards fresh graduates to develop their competencies through training and on the job experience. The practical understanding and exposure gained in the programme will assist them in ensuring that they understand the business processes and strategies in the Group.

We also provide Segari Energy Ventures (“SEV”) scholarships to deserving undergraduates at Universiti Tenaga nasional, which aim to encourage and assist young people in pursuing relevant courses. Five scholarships were awarded for the academic year 2006/2007, bringing the total number awarded to 42 since these scholarships were introduced in 1997.

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enterprise risk ManageMent (“erM”)

Since 2002, Enterprise Risk Management (“ERM”) has been treated as a coordinated approach in assessing and responding to all identified risks within the Group. ERM was reflected in the broad policies and procedures which are carried out by the Group on a periodic basis in order to facilitate a more integrated risk management approach aligning strategy, processes, people, technology and knowledge with the purpose to manage the risks that the Group faces.

The Board approved the new ERM approach on november 2007.

The new approach complies with the Australian/new Zealand Standard on Risk Management (AS/nZS 4360:2004). The new ERM Approach also introduced Primary and Secondary Risk Management Units in order to promote ownership and accountability. For proactive risk identification, ERM will take into account the internal and external risk assessment process as part of the risk inputs.

The new approach also has a clear segregation between financial, engineering, operational, strategic and project risks. These risks are in turn treated as controllable or inherent.

The new ERM Approach will be implemented in January 2008.

coMMunity inVestMent

The advancement of educational opportunities has always been a major focus for the group, as we consider education to be one of the key avenues for individual success.

Our pledge of RM600,000 towards the three year Education Development Programme for Primary and Secondary Schools, which commenced in May 2003 receive an extension of another term until the year 2009 cementing our continued commitment to Education excellence. Students from selected schools in Mukim Pengkalan Bharu, Daerah Manjung, Perak, Prai and Pontian, Johor will benefit in terms of subsidised costs for tuition, examination preparatory classes, motivational courses, study aids, computer facilities and monitory rewards to outstanding students.

An ongoing educational programme being supported is the Adopted School Programme, which provides opportunities for students from adopted schools within Mukim Pengkalan Bharu, Perak, Prai and Pontian Johor to visit places of interest in the country for educational purposes. Also ongoing is the award of scholarships to deserving students studying at Universiti Tenaga nasional.

Besides education, the Group also fulfills its social obligations through financial contributions and sponsorships to worthwhile causes.

We are also involved in sports tourism as the title sponsor of Powerman Malaysia. We were involved in this international sport since its introduction in Malaysia in 2002. This sport subsequently received the support of the Olympic Council of Malaysia in March 2004 and was included in the SEA Games 2007.

powering forward

We continue to grow our generation capacity and deliver consistent and reliable services to our customers. With Tanjung Bin Power Plant now on stream, our Operations & Maintenance expertise extends from gas-fired to include coal-fired plants.

The opportunities overseas are immense and in many cases in the arid Middle East and north Africa, the installation of new power generation is linked with the construction of a desalination plant to meet the growing demand for potable water there.

Malakoff is rising to these challenges and leveraging on its reputation for technical engineering excellence and delivering power projects on schedule, to build a profitable future.

ahMad Jauhari yahyaManaging Director/Chief Executive Officer

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corPoraTeevenT highlighTs

7 JAnUARY 2007contriBution to fire VictiMsOn January 7, 2007, five (5) houses were totally burn down at Kampung Kayan, Perak leaving these families homeless. Malakoff have visited the area and contributed RM2,000 to the respective victims.

18 JAnUARY 2007annual general MeetingMalakoff Berhad held its 14th Annual General Meeting at Mutiara Crowne Plaza, Kuala Lumpur.

2 FEBRUARY 2007Malakoff orphanage VisitMalakoff visited “Rumah Limpahan Kasih” in Puchong on February 2, 2007. Malakoff made a cash contribution of RM15,000 to upgrade the facilities at the orphanage.

28 APRIL 2007Malakoff faMily day 2007Malakoff staf f and family members were treated at Genting Highlands Resort for a grand Annual Dinner.

8 MARCH 2007Bond holders MeetingMalakoff Berhad held its Bond Holders Meeting at Mutiara Crowne Plaza, Kuala Lumpur.

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1-3 JUnE 2007Malakoff charity rideThe 3 day Charity ride from Putrajaya to Kuantan succeeded in raising RM46,000 which was donated to PDK Anggerik, PDK Selendang, Jawatankuasa Pengurusan nurhidayah, Rumah Tunas Harapan Payung Seri Sejahtera Seri Menanti, Bengkel Seri Perkasa and CADS Centre.

8 SEPTEMBER 2007handing oVer cereMonyHanding over ceremony of Tanjung Bin Power Plant, Unit III.

30 APRIL 2007signing cereMony Malakoff corporation Berhad’s take oVer of Malakoff BerhadA signing ceremony was held for the completion of the take over of Malakoff Berhad by Malakoff Corporation Berhad formerly known as nucleus Avenue (M) Bhd.

9 SEPTEMBER 2007inaugural “eco run”The 10km and 21km “Eco Run” was held at Tanjung Piai, Johor. The run is part of the Company’s initiative to promote a healthy lifestyle.

11 nOVEMBER 2007powerMan Malaysia 2007“Powerman” is an International series of events held in Europe and America. “Powerman Malaysia 2007” was held at Manjung, Perak. Over 600 participants took part in this International event.

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Financial StatementS

80 Directors’ Report84 Statement by Directors84 Statutory Declaration85 Report of the Auditors86 Balance Sheets88 Income Statements89 Statements of Changes in Equity90 Cash Flow Statements92 Notes to the Financial Statements

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MalakoffcorporationBerhad (731568 V)

Directors’ report for the year ended 31 December 2007

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 2007.

principal activity

The Company is principally engaged in investment holding company and provision of management services to it subsidiaries. The principal activities of the subsidiaries are shown in Note 6 to the financial statements. There has been no significant change in the nature of these activities during the financial year.

change of naMe

On 25 April 2007, the Company had changed its name from Nucleus Avenue (M) Berhad to Malakoff Corporation Berhad.

results group company

rM’000 rM’000

Profit attributable to:

Shareholders of the Company 217,297 155,884 Minority interest 51,205 -

268,502 155,884

reserves and provisions

There were no material transfers to or from reserves and provisions during the year under review.

dividend

Since the end of the previous financial year, the Company paid:

(i) an interim ordinary dividend of approximately 9.1 sen per share less 27% tax totalling RM23,360,000 in respect of the year ended 31 December 2007 which was paid on 7 December 2007; and

(ii) an interim preference dividend of RM1 per share less 27% tax totalling RM36,640,000 in respect of the year ended 31 December 2007 which was paid on 7 December 2007.

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Directors’ report for the year ended 31 December 2007 (cont’d)

directors of the coMpany

The Directors who served since the date of the last report are:

director alternate director

Tan Sri Abdul Halim bin Ali (Chairman) (appointed as Director on 24 May 2007) (appointed as Chairman on 26 October 2007)

Ahmad Jauhari bin Yahya (Managing Director/Chief Executive Officer) (appointed as Director on 30 April 2007)

Feizal Ali Azlan bin Shahrim (appointed on 6 November 2007) Hasni bin Harun (resigned on 24 May 2007)

Yoong Nim CheeHasni bin Harun (appointed on 24 May 2007)Tan Ler Chin (appointed on 9 August 2007)Azian binti Mohd Noh (appointed on 9 August 2007)Andrew Ian Rowan Yee (appointed on 9 August 2007) Vijay Vijendra Sethu (appointed on 9 August 2007)Dato’ Wira Syed Abdul Jabbar bin Syed Hassan (resigned on 24 May 2007)

directors’ interests

None of the Directors holding office at 31 December 2007 had any interest in the ordinary shares of the holding company and of its related corporations during the financial year.

directors’ Benefits

Since the end of the previous period, no Director of the Company has received nor become entitled to receive any benefit (other than a benefit included the aggregate amount of emoluments received or due and receivable by Directors as shown in the financial statements) by reason of a contract made by the Company or a related company 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.

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issue of shares

During the financial year, the Company issued:

(i) 351,344,028 new ordinary shares of RM1 each at an issue price of RM10 per share for cash for investment purposes.

(ii) 50,192,004 new redeemable convertible preference shares of RM0.10 each at an issue price of RM10 per share for cash for investment purposes.

There were no other 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.

other statutory inforMation

Before the balance sheets and income statements of the Group and of the Company were made out, the Directors took reasonable steps to ascertain that:

(i) all known bad debts have been written off and adequate provision made for doubtful debts, and

(ii) all current assets have been stated at the lower of cost and net realisable value.

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 Group and in the Company financial statements 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 in the financial statements, that would render any amount stated in the financial statements of the Group and of the Company misleading.

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

(i) any charge on the assets of the Group and 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 contingent liability in respect of the Group and of the Company that has arisen since the end of the financial year.

No contingent liability or other liability of the Group and of the Company 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 Company to meet its obligations as and when they fall due.


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other statutory inforMation (cont’d)

In the opinion of the Directors, other than as disclosed in the financial statements, the results of the operations of the Group and of the Company for the financial year ended 31 December 2007 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.

significant events

On 30 April 2007, the Company completed its acquisition of the securities of all the subsidiaries and the associate companies of Malakoff Berhad (Malakoff) together with all the assets of Malakoff (other than cash balance in Malakoff and the above securities) and the transfer, assignment or novation of all liabilities of Malakoff for a cash consideration of RM9,307,599,771 less any available cash in Malakoff (“Acquisition”).

On the same date, the Company also completed its fund raising exercise through the issue of new ordinary shares of RM1.00 each together with new redeemable convertible preference shares of RM0.10 each, cumulative non-convertible Islamic Junior Sukuk and Islamic Commercial papers and Medium Term Notes Issuance Programme (“Senior Sukuk”) to finance the Acquisition.

auditors

The auditors, Messrs KPMG, have indicated their willingness to accept re-appointment.

Signed on behalf of the Board of Directors in accordance with a resolution of the Directors:

………………………………………………… Chairmantan sri abdul halim bin ali

………………………………………………… Managing Director/Chief Executive Officerahmad Jauhari bin yahya

Kuala Lumpur,

Date: 21 February 2008


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statement by Directors pursuant to Section 169(15) of the Companies Act, 1965

In the opinion of the Directors, the financial statements set out on pages 86 to 136 are drawn up in accordance with the provisions of the Companies Act, 1965 and applicable approved Financial Reporting Standards issued by the Malaysian Accounting Standards Board so as to give a true and fair view of the state of affairs of the Group and of the Company at 31 December 2007 and of the results of their operations and cash flows for the year ended on that date.

Signed in accordance with a resolution of the Directors:

………………………………………………… ChairmanTan Sri Abdul Halim bin Ali

………………………………………………… Managing Director/Chief Executive OfficerAhmad Jauhari bin Yahya

Kuala Lumpur,


I, ho chee sheong, the officer primarily responsible for the financial management of Malakoff Corporation Berhad, do solemnly and sincerely declare that the financial statements set out on pages 86 to 136 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 the provisions of the Statutory Declarations Act, 1960.

Subscribed and solemnly declared by the above named in Kuala Lumpur on 21 February 2008.

…………………………………………Ho Chee Sheong

Before me:

statutory Declaration pursuant to Section 169(16) of the Companies Act, 1965

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report of the auDitors to the members of Malakoff Corporation Berhad

We have audited the financial statements set out on pages 86 to 136. The preparation of the financial statements is the responsibility of the Company’s Directors.

It is our responsibility to form an independent opinion, based on our audit, on the financial statements and to report our opinion to you, as a body, in accordance with Section 174 of the Companies Act, 1965 and for no other purpose. We do not assume responsibility to any other person for the content of this report.

We conducted our audit in accordance with approved Standards on Auditing in Malaysia. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Directors, as well as evaluating the overall financial statements presentation. We believe our audit provides a reasonable basis for our opinion.

In our opinion:

(a) the financial statements are properly drawn up in accordance with the provisions of the Companies Act, 1965 and applicable approved Financial Reporting Standards issued by the Malaysian Accounting Standards Board so as to give a true and fair view of:

(i) the state of affairs of the Group and of the Company at 31 December 2007 and the results of their operations and cash flows for the year ended on that date; and

(ii) the matters required by Section 169 of the Companies Act, 1965 to be dealt with in the financial statements of the Group and the Company; and

(b) the accounting and other records and the registers required by the Companies Act, 1965 to be kept by the Company and the subsidiaries have been properly kept in accordance with the provisions of the said Act.

We are satisfied that the financial statements of the subsidiaries that have been consolidated with the Company's financial statements are in form and content appropriate and proper for the purposes of the preparation of the consolidated financial statements and we have received satisfactory information and explanations required by us for those purposes.

The audit reports on the financial statements of the subsidiaries were not subject to any qualification and did not include any comment made under subsection (3) of Section 174 of the Act.

kpMg foong Mun kong Firm Number: AF 0758 PartnerChartered Accountants Approval Number: 2613/12/08(J)

Kuala Lumpur,


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balance sheets at 31 December 2007

group company

note 2007 2007 2006 rM’000 rM’000 rM’000

assets

Property, plant and equipment 3 10,631,005 38,419 - Intangible assets 4 6,904,958 - - Prepaid lease payments 5 112,288 5,516 - Investment in subsidiaries 6 - 8,128,970 - Investment in associates 7 1,536,031 1,022,000 - Other investments 8 - 1,715,897 - Deferred tax assets 9 10,609 - -

total non-current assets 19,194,891 10,910,802 -

Receivables, deposits and prepayments 10 1,147,669 602,737 4,640 Inventories 11 488,173 - - Current tax assets 52,892 51,550 - Cash and cash equivalents 12 2,573,954 460,493 -

total current assets 4,262,688 1,114,780 4,640

total assets 23,457,579 12,025,582 4,640

equity

Share capital 356,363 356,363 - Reserves 3,658,997 3,658,997 - Retained earnings 157,079 95,666 (218)

total equity attributable to shareholders of the company 4,172,439 4,111,026 (218)

Minority interest 220,410 - -

total equity 13 4,392,849 4,111,026 (218)

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balance sheets at 31 December 2007 (cont’d)

group company

note 2007 2007 2006 rM’000 rM’000 rM’000

liabilities

Loans and borrowings 14 14,348,464 6,855,028 - Employee benefits 15 27,280 8,950 - Deferred tax liabilities 9 2,809,559 - -

total non-current liabilities 17,185,303 6,863,978 -

Payables and accruals 16 588,340 457,998 4,858 Provision for tax 23,913 - - Loans and borrowings 14 1,267,174 592,580 -

total current liabilities 1,879,427 1,050,578 4,858

total liabilities 19,064,730 7,914,556 4,858

total equity and liabilities 23,457,579 12,025,582 4,640

The notes on pages 92 to 136 are an integral part of these financial statements.

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income statements for the year ended 31 December 2007

group company

note 30.4.2007 to 31.12.2007 2007 2006 rM’000 rM’000 rM’000

Revenue 17 2,701,998 421,219 -Cost of sales (1,536,229) - -

gross profit 1,165,769 421,219 -Other income 4,219 104 -Administrative expenses (96,124) (37,500) (218)Other expenses (106,304) - -

Results from operating activities 967,560 383,823 (218)Interest income 123,038 214,330 - Finance costs (762,955) (382,415) -

operating profit/(loss) 18 327,643 215,738 (218)Share of loss after tax and minority interest of equity accounted associates (3,874) - -

profit/(loss) before tax 323,769 215,738 (218) Tax expense 20 (55,267) (59,854) -

profit/(loss) for the year 268,502 155,884 (218)

attributable to:

Shareholders of the Company 217,297 155,884 (218) Minority interest 51,205 - -

profit/(loss) for the year 268,502 155,884 (218)


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statements of changes in equity for the year ended 31 December 2007

____________ attributable to shareholders of the company ____________ _________________ non-distributable ________________ distributable

(accumulated ordinary preference ordinary preference losses) / share share share share retained Minority group note capital capital premium premium earnings total interest total rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000

at 1 January 2007 - * - - - (218) (218) - (218) Profit for the year - - - - 217,297 217,297 51,205 268,502Shares issued 13 351,344 5,019 3,162,096 496,901 - 4,015,360 - 4,015,360 Acquisition through business combination 27 - - - - - - 189,285 189,285Dividends to shareholders 21 - - - - (60,000) (60,000) (20,080) (80,080)

at 31 december 2007 351,344 5,019 3,162,096 496,901 157,079 4,172,439 220,410 4,392,849

* RM2 ____________ attributable to shareholders of the company _____________ __________________ non-distributable ___________________ distributable

(accumulated ordinary preference ordinary preference losses) / share share share share retainedcompany note capital capital premium premium earnings total rM’000 rM’000 rM’000 rM’000 rM’000 rM’000

At incorporation date -* - - - - - Loss for the year - - - - (218) (218)

at 31 december 2006/1 January 2007 - - - - (218) (218)

Profit for the year - - - - 155,884 155,884Shares issued 13 351,344 5,019 3,162,096 496,901 - 4,015,360Dividends to shareholders 21 - - - - (60,000) (60,000)

at 31 december 2007 351,344 5,019 3,162,096 496,901 95,666 4,111,026

* RM2

The notes on pages 92 to 136 are an integral part of these financial statements

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group company

note 30.4.2007 to 31.12.2007 2007 2006 rM’000 rM’000 rM’000

cash flows from operating activities

Profit/(Loss) before tax 323,769 215,738 (218) Adjustments for: Amortisation of intangible assets 230,795 - - Depreciation of property, plant and equipment 375,815 1,329 - Amortisation of prepaid lease payments 2,986 42 - Finance costs 762,955 382,415 - Interest income (123,038) (214,330) - Share of loss of equity accounted associates 3,874 - - Allowance for doubtful debts 75,491 - - Provision for retirement benefits 4,167 696 -

Operating profit/(loss) before changes in working capital 1,656,814 385,890 (218) Inventories (46,037) - - Trade and other receivables 40,964 (118,647) (4,640) Trade and other payables (185,766) (136,554)

Cash generated from operations 1,465,975 130,689 (4,858) Tax paid (126,869) - -

net cash from/(used in) operating activities 1,339,106 130,689 (4,858)

cash flows from investing activities

Dividend received from associated companies 33,475 - - Investment in associated companies (55,773) - - Redemption of unsecured loan stocks (525) - - Interest received 93,243 181,125 - Purchase of property, plant and equipment (253,331) (2,716) - Acquisition of business, net of cash acquired 27 (7,211,089) (9,239,344) -

net cash used in investing activities (7,394,000) (9,060,935) -

cash flow statements for the year ended 31 December 2007

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91

cash flow statements for the year ended 31 December 2007 (cont’d)

group company

note 30.4.2007 to 31.12.2007 2007 2006 rM’000 rM’000 rM’000

cash flows from financing activities

Dividends paid (20,080) (60,000) - Interest paid (819,741) (98,630) - Issue of shares 4,015,360 4,015,360 - Repayment of borrowings (1,963,380) (1,878,380) - Proceeds from borrowings 7,416,689 7,412,389 - Advance from holding company - - 4,858

net cash generated from financing activities 8,628,848 9,390,739 4,858

net increase in cash and cash equivalents 2,573,954 460,493 -

cash and cash equivalents at beginning of year - - -

cash and cash equivalents at end of year 2,573,954 460,493 -

(i) cash and cash equivalents

Cash and cash equivalents included in the cash flow statements comprise the following balance sheet amounts:

group company

2007 2007 2006 rM’000 rM’000 rM’000

Cash and bank balances 299,782 31,644 - Deposits with licensed banks 2,274,172 428,849 -

2,573,954 460,493 -


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notes to the financial statements

Malakoff Corporation Berhad is a public limited liability company, incorporated and domiciled in Malaysia. The addresses of its registered office and principal place of business are as follows:

registered officeLevel 8, Kompleks AntarabangsaJalan Sultan Ismail50250 Kuala Lumpur

principal place of businessLevel 12, Block 3BPlaza SentralJalan Stesen Sentral 550470 Kuala Lumpur

The Company is principally engaged in investment holding company and provision of management services to it subsidiaries. The principal activities of the subsidiaries are shown in Note 6 to the financial statements.

The consolidated financial statements of the Company as at and for the year ended 31 December 2007 comprise the Company and its subsidiaries and the Group’s interest in associates.

The holding company is MMC Corporation Berhad., a company incorporated in Malaysia and listed on the Main Board of Bursa Malaysia Securities Berhad. The ultimate holding company is Indra Citra Sdn. Bhd, a company incorporated in Malaysia.

The financial statements were approved by the Board of Directors on 21 February 2008.

1. Basis of preparation

(a) statement of compliance

The financial statements of the Group and the Company have been prepared in accordance with applicable approved Financial Reporting Standards (FRS) issued by the Malaysian Accounting Standards Board (MASB), accounting principles generally accepted in Malaysia and the provisions of the Companies Act, 1965.

The MASB has also issued the following FRSs and Interpretations that are effective for annual years beginning after 1 January 2007, and that have not been applied in preparing these financial statements:

frss/interpretations effective date

FRS 107, Cash Flow Statements 1 July 2007 FRS 111, Construction Contracts 1 July 2007 FRS 112, Income Taxes 1 July 2007 FRS 118, Revenue 1 July 2007 FRS 120, Accounting for Government Grants and Disclosure of Government Assistance 1 July 2007

notes to the financial statements (cont’d)

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1. Basis of preparation (cont’d)

(a) statement of compliance (cont’d)

frss/interpretations (cont’d) effective date

Amendment to FRS 121, The Effects of Changes in Foreign Exchange Rates - Net Investment in a Foreign Operation 1 July 2007 FRS 134, Interim Financial Reporting 1 July 2007 FRS 137, Provisions, Contingent Liabilities and Contingent Assets 1 July 2007 FRS 139, Financial Instruments: Recognition and Measurement To be announced IC Interpretation 1, Changes in Existing Decommissioning, Restoration and Similar Liabilities 1 July 2007 IC Interpretation 2, Members’ Shares in Co-operative Entities and Similar Instruments 1 July 2007 IC Interpretation 5, Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds 1 July 2007 IC Interpretation 6, Liabilities arising from Participating in a Specific Market - Waste Electrical and Electronic Equipment 1 July 2007 IC Interpretation 7, Applying the Restatement Approach under FRS 129, Financial Reporting in Hyperinflationary Economies 1 July 2007 IC Interpretation 8, Scope of FRS 2 1 July 2007

The Group and the Company plan to adopt FRS 111, FRS 112, FRS 118 and FRS 137 for the annual period beginning 1 January 2008. The initial application of these FRSs is not expected to have any material impact on the financial statements of the Group and the Company.

The Group and the Company will adopt FRS 139 once the effective date has been announced. The impact of applying FRS 139 on the financial statements upon first adoption as required by paragraph 30(b) of FRS 108, Accounting Policies, Changes in Accounting Estimates and Errors is not disclosed by virtue of the exemption given in FRS 139.103AB.

Other FRSs and Interpretations are not applicable to the Group and Company. Hence no further disclosure is warranted.

There are no material effects upon adoption of the new/revised FRSs in 2007.

(b) Basis of measurement

The financial statements have been prepared on the historical cost basis except for the following assets as explained in their respective accounting policy notes:

- Property, plant and equipment - Intangible assets

(c) functional and presentation currency

These financial statements are presented in Ringgit Malaysia (RM), which is the Company’s functional currency. All financial information presented in RM has been rounded to the nearest thousand, unless otherwise stated.

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1. Basis of preparation (cont’d)

(d) use of estimates and judgements

The preparation of financial statements requires management to make judgements, 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 year in which the

estimate is revised and in any future years affected.

There are no significant areas of estimation uncertainty and critical judgements in applying accounting policies that have significant effect on the amounts recognised in the financial statements other than those disclosed in the following notes:

• Note2(c)(iii)-residualvalueofpowerplant • Note4-intangibleassets

2. significant accounting policies

The accounting policies set out below have been applied consistently to the periods presented in these financial statements, and have been applied consistently by Group entities, unless otherwise stated.

(a) Basis of consolidation

(i) subsidiaries

Subsidiaries are entities, including unincorporated entities, controlled by the Group. Control exists when the Group has the ability to exercise its power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account. Subsidiaries are consolidated using the purchase method of accounting.

Under the purchase method of accounting, the financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

Investments in subsidiaries are stated in the Company’s balance sheet at cost less any impairment losses, unless the investment is classified as held for sale (or included in a disposal group that is classified as held for sale).

(ii) associates

Associates are entities, including unincorporated entities, in which the Group has significant influence, but not control, over the financial and operating policies.

Associates are accounted for in the consolidated financial statements using the equity method unless it is classified as held for sale (or included in a disposal group that is classified as held for sale). The consolidated financial statements include the Group’s share of the profit or loss of the equity accounted associates, after adjustments, if any, to align the accounting policies with those of the Group, from the date that significant influence commences until the date that significant influence ceases.


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2. significant accounting policies (cont’d)

(a) Basis of consolidation (cont’d)

(ii) associates (cont’d)

When the Group’s share of losses exceeds its interest in an equity accounted associate, the carrying amount of that interest (including any long-term investments) 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 investee.

Investments in associates are stated in the Company’s balance sheet at cost less any impairment losses, unless the investment is classified as held for sale (or included in a disposal group that is classified as held for sale).

(iii) Minority interest

Minority interest at the balance sheet date, being the portion of the net identifiable 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 balance sheet and statement of changes in equity within equity, separately from equity attributable to the equity shareholders of the Company. Minority interest in the results of the Group are presented on the face of the consolidated income statement as an allocation of the total profit or loss for the year between minority interest and the equity shareholders of the Company.

Where losses applicable to the minority exceed the minority’s interest in the equity of a subsidiary, the excess, and any further losses applicable to the minority, are charged against the Group’s interest except to the extent that the minority has a binding obligation to, and is able to, make additional investment to cover the losses. If the subsidiary subsequently reports profits, the Group’s interest is allocated with all such profits until the minority’s share of losses previously absorbed by the Group has been recovered.

(iv) transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements.

(b) foreign currency

(i) foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of the Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are retranslated to the functional currency at the exchange rate at that date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Foreign currency differences arising on retranslation are recognised in the income statements.

(ii) operations denominated in functional currencies other than ringgit Malaysia

The assets and liabilities of operations in functional currencies other than RM, including goodwill and fair value adjustments arising on acquisition, are translated to RM at exchange rates at the balance sheet date. The income and expenses of foreign operations are translated to RM at exchange rates at the dates of the transactions.

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(b) foreign currency (cont’d)

(ii) operations denominated in functional currencies other than ringgit Malaysia (cont’d)

Foreign currency differences are recognised in translation reserve. On disposal, accumulated translation differences are recognised in the consolidated income statement as part of the gain or loss on sale.

(iii) net investment in foreign operations

Exchange differences arising from monetary items that in substance form part of the Company’s net investment in foreign operations are recognised in the Company’s income statement. Such exchange differences are reclassified to equity in the consolidated financial statements. Deferred exchange differences are recognised in the consolidated income statement upon disposal of the investment.

(c) property, plant and equipment

(i) recognition and measurement

Items of property, plant and equipment are stated at cost less any accumulated depreciation and any accumulated impairment losses.

Cost includes expenditures that are directly attributable to the acquisition of the asset and any other costs directly attributable to bringing the asset to working condition for its 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 materials and direct labour and, for qualifying assets, borrowing costs are capitalised in accordance with the Group’s accounting policy.

The cost of property, plant and equipment recognised as a result of a business combination is based on fair value at acquisition date. The fair value of property is the estimated amount for which a property could be exchanged between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. The fair value of other items of plant and equipment is based on the quoted market prices for similar items.

When significant parts 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.

Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognised net within “other income” or “other operating expenses” respectively in the income statements. When revalued assets are sold, the amounts included in the revaluation surplus reserve are transferred to retained earnings.

(ii) subsequent costs

The cost of replacing part 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 part will flow to the Group and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in the income statements as incurred.


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(c) property, plant and equipment (cont’d)

(iii) residual value

The management has assessed the residual value of its power plant based on management’s best estimate of the amount that the Group would obtain from the disposal or continuing use of the power plant at the end of the respective power purchase agreements (“PPA”).

(iv) depreciation

Depreciation is recognised in the income statements on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives. Freehold land is not depreciated. Property, plant and equipment under construction are not depreciated until the assets are ready for their intended use.

The estimated useful lives for the current and comparative periods are as follows:

Buildings 5 years Power plant 35 years Plant and machinery 5-25 years C-inspection costs 3 years Office equipment and furniture 5 years Motor vehicles 5 years Computers 3 years

The depreciable amount is determined after deducting the residual value.

Depreciation methods, useful lives and residual values are reassessed at the balance sheet date. (d) leased assets

(i) finance lease

Leases in terms of which the Group and the Company assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.

Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed.

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(d) leased assets (cont’d)

(ii) operating lease

Other leases are operating leases and the leased assets are not recognised on the Group and the Company’s balance sheet.

Leasehold land that normally has an indefinite economic life and title is not expected to pass to the lessee by the end of the lease term is treated as an operating lease. The payment made on entering into or acquiring a leasehold land is accounted for as prepaid lease payments.

Payments made under operating leases are recognised in the income statement on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease.

(e) intangible assets

(i) goodwill

Goodwill arises on business combinations and is measured at cost less any accumulated impairment losses.

Goodwill represents the excess of the cost of the acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree.

Any excess of the Group’s interest in the net fair value of acquiree’s identifiable assets, liabilities and contingent liabilities over the cost of

acquisition is recognised immediately in income statements.

Goodwill is allocated to cash-generating units and is tested annually for impairment or more frequently if events or changes in circumstances indicate that it might be impaired.

(ii) other intangible assets

Intangible assets, other than goodwill, that are acquired by the Group are stated at cost less any accumulated amortisation and any accumulated impairment losses.

(iii) amortisation

Other intangible assets are amortised from the date that they are available for use. Amortisation of intangible assets is charged to the income statements based on the estimated net electrical output and fixed operation and maintenance income over the finite useful lives of the intangible assets.


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(f) investments

Long term investments other than in subsidiaries and associates companies are stated at cost. Impairment is made when the Directors are of the view that there is impairment which is other than temporary.

Long term investments in subsidiaries and associates are stated at cost in the Company, less impairment loss where applicable.

Investment in redeemable preference shares are stated at cost. The premium receivable upon redemption of the redeemable preference shares is accrued over the tenor of the preference shares.

(g) inventories

Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the weighted average cost and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. 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.

(h) receivables

Receivables are initially recognised at their cost when the contractual right to receive cash or another financial asset from another entity is established.

Subsequent to initial recognition, receivables are stated at cost less allowance for doubtful debts.

Receivables are not held for the purpose of trading.

(i) cash and cash equivalents

Cash and cash equivalents consist of cash on hand, balances and deposits with banks and highly liquid investments which have an insignificant risk of changes in value. For the purpose of the cash flow statements, cash and cash equivalents are presented net of pledged deposits.

(j) impairment

The carrying amounts of assets except for financial assets, inventories and deferred tax assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. 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. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”).

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the income statements. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (groups of units) on a pro rata basis.

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(j) impairment (cont’d)

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date 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 the income statements in the year in which the reversals are recognized.

(k) share capital

preference share capital

Preference share capital is classified as equity if it is non-redeemable, or is redeemable but only at the Company’s option, and any dividends are discretionary. Dividends thereon are recognised as distributions within equity. Preference share capital is classified as a liability if it is redeemable on a specific date or at the option of the shareholders, or if dividend payments are not discretionary. Dividends thereon are recognised as interest expense in the income statements.

(l) loans and borrowings

Loans and borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the income statements over the period of the loans and borrowings using the effective interest method.

(m) employee benefits

(i) short term employee benefits

Short-term employee benefit obligations in respect of salaries, annual bonuses, paid annual leave and sick leave are measured on an undiscounted basis and are expensed as the related service is provided.

A provision is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

The Group’s contribution to statutory pension fund is charged to the income statements in the year to which they relate. Once the contributions have been paid, the Group has no further payment obligations.

(ii) defined benefit plans

The Group’s net obligation in respect of a defined benefit plan is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods and that benefit is discounted to determine the present value. The discount rate is the market yield at the balance sheet date on high quality corporate bonds or government bonds. The calculation is performed by an actuary using the projected unit credit method.

When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees is recognised as an expense in the income statement on a straight-line basis over the average period until the benefits become vested. To the extent that the benefits vest immediately, the expense is recognised immediately in the income statement.


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(m) employee benefits (cont’d)

(ii) defined benefit plans (con’d)

In calculating the Group’s obligation in respect of a plan, to the extent that any cumulative unrecognised actuarial gain or loss exceeds ten percent (10%) of the greater of the present value of the defined benefit obligation, that portion is recognised in the income statement over the expected average remaining working lives of the employees participating in the plan. Otherwise, the actuarial gain or loss is not recognised.

Where the calculation results in a benefit to the Company, the recognised asset is limited to the net total of any unrecognised actuarial losses and past service costs and the present value of any future refunds from the plan or reductions in future contributions to the plan.

An actuarial valuation is conducted by an independent actuary at regular intervals. The last valuation performed was on 31 August 2006.

(n) provisions

A provision is recognised if, as a result of a past event, the Group has 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 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.

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 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 disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

(o) payables

Payables are measured initially and subsequently at cost. Payables are recognised when there is a contractual obligation to deliver cash or another financial asset to another entity.

(p) income recognition

(i) capacity and energy payments, operation and maintenance charges and project management fees

Revenue is measured at the fair value of the consideration receivable and is recognised in the income statement as it accrues.

(ii) income from construction contract

As soon as the outcome of a construction contract can be estimated reliably, contract revenue and expenses are recognised in the income statements in proportion to the stage of completion of the contact. Contract revenue includes the initial amount agreed in the contract plus any variations in contract work, claims and incentive payments to the extent that it is probable that they will result in revenue and can be measured reliably.

The stage of completion is assessed by reference to completion of a physical proportion of the contract work. When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised only to the extent of contract costs incurred that are likely to be recoverable. An expected loss on a contract is recognised immediately in the income statements.

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(p) income recognition

(iii) dividend income

Dividend income is recognised when the right to receive payment is established.

(q) interest income and borrowing costs

Interest income is recognised as it accrues, using the effective interest method.

All borrowing costs are recognised in the income statements using the effective interest method, in the period in which they are incurred except to the extent that they are capitalised as being directly attributable to the acquisition, construction or production of an asset which necessarily takes a substantial period of time to be prepared for its intended use.

The capitalisation of borrowing costs as part of the cost of a qualifying asset commences when expenditure for the asset 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 is suspended or ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are interrupted or completed.

(r) tax expense

Tax expense comprises current and deferred tax. Tax expense is recognised in the income statements except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit (tax loss). Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the balance sheet date.

Deferred tax liability is recognised for all taxable temporary differences.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

(s) segment reporting

A segment is a distinguishable component of the Group that is engaged in providing products or services (business segment), which is subject to risks and rewards that are different from those of other segments.


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3. property, plant and equipMent

c - office freehold Work in power inspection plant and equipment Motor land Buildings progress plant costs machinery and furniture vehicles computers total group rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000

cost

At 1 January 2006/

31 December 2006/

1 January 2007 - - - - - - - - - -

Acquisition through

business combination 21,516 27,789 6,525 11,852,161 630,855 39,233 30,465 4,924 25,463 12,638,931

Additions - - 14,377 134,066 91,755 3,847 7,553 430 1,303 253,331

Disposal - - - - - - - (8) - (8)

Reclassification - - (1,574) 1,574 - - - - - -

At 31 December 2007 21,516 27,789 19,328 11,987,801 722,610 43,080 38,018 5,346 26,766 12,892,254

depreciation

As at 1 January 2006/

31 December 2006/

1 January 2007 - - - - - - - - - -

Acquisition through

business combination - 5,905 - 1,305,019 523,574 8,756 18,967 3,559 19,662 1,885,442

Charge for the year - 893 - 276,360 91,711 870 3,531 266 2,184 375,815

Disposal - - - - - - - (8) - (8)

At 31 December 2007 - 6,798 - 1,581,379 615,285 9,626 22,498 3,817 21,846 2,261,249

carrying amount

As at 1 January 2006 - - - - - - - - - -

At 31 December 2006/

1 January 2007 - - - - - - - - - -

At 31 December 2007 21,516 20,991 19,328 10,406,422 107,325 33,454 15,520 1,529 4,920 10,631,005

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3. property, plant and equipMent (cont’d)

office freehold Work in plant and equipment Motor land Buildings progress machinery and furniture vehicles computers total company rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000

cost

As at 1 January 2006/ 31 December 2006/

1 January 2007 - - - - - - - -

Acquisition through business combination 21,516 17,055 - 154 2,987 1,080 6,622 49,414

Additions - - 1,888 - 314 152 362 2,716

At 31 December 2007 21,516 17,055 1,888 154 3,301 1,232 6,984 52,130

depreciation

As at 1 January 2006/31 December 2006/

1 January 2007 - - - - - - - -

Acquisition through business combination - 3,451 - 154 2,541 1,068 5,168 12,382

Charge for the year - 536 - - 225 12 556 1,329

At 31 December 2007 - 3,987 - 154 2,766 1,080 5,724 13,711

carrying amount

As at 1 January 2006 - - - - - - - -

At 31 December 2006/1 January 2007 - - - - - - - -

At 31 December 2007 21,516 13,068 1,888 - 535 152 1,260 38,419

security

At 31 December 2007, properties with a carrying amount of RM10,545,304,000 (2006 - Nil) was charged as security for debt securities issued by the subsidiaries (see note

14 - loans and borrowings).

Borrowing costs

Included in property, plant and equipment of the Group is interest capitalised at a rate of 6% to 8.9% per annum (2006 - Nil% per annum) for the year of RM222,222,000

(2006 - Nil).


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4. intangiBle assets

interest over power purchase and operation and goodwill Maintenance agreements

subsidiaries associate total group rM’000 rM’000 rM’000 rM’000

cost

At 1 January 2006 - - - -

At 31 December 2006/At 1 January 2007 - - - - Acquisitions through business combination 8,232 7,103,796 857,970 7,969,998

At 31 December 2007 8,232 7,103,796 857,970 7,969,998

amortisation

At 1 January 2006 - - - -

At 31 December 2006/At 1 January 2007 - - - -

Amortisation for the year - 207,070 23,725 230,795

At 31 December 2007 - 207,070 23,725 230,795

carrying value

At 1 January 2006 - - - -

At 31 December 2006/At 1 January 2007 - - - -

At 31 December 2007 8,232 6,896,726 834,245 7,739,203

(Note 7)

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4. intangiBle assets (cont’d)

carrying amount

interest over power purchase and operation and goodwill Maintenance agreements

subsidiaries total group rM’000 rM’000 rM’000

At 1 January 2007 - - -

At 31 December 2007 8,232 6,896,726 6,904,958

intangible assets arising from interest over power purchase and operation and Maintenance agreements

The Group’s revenue is substantially derived from the generation and sale of electricity energy and generating capacity in Malaysia, which is governed by the Power Purchase Agreements (“PPA”) (together with the Independent Power Producer (“IPP”) Licence issued by the Ministry of Energy, Water and Communications) held by the respective power generating subsidiaries and associates. In addition, part of the Group’s revenue is also generated from the operations and maintenance of the power plants, which is governed by the Operation and Maintenance Agreement (“OMA”) held by the operations and maintenance subsidiaries.

The Group has identified the cashflows to be generated from the PPA (together with the IPP Licences) and the OMA as Intangible Assets.

The PPAS and the IPP Licences are recognised as a single asset in accordance with FRS138, in view that both are required for the generation and sale of electricity energy and generating capacity in Malaysia.

There are six (6) PPAs (together with the respective IPP Licences) held respectively by the Group’s power generating subsidiaries of Segari Energy Ventures Sdn Bhd (“SEV”), GB3 Sdn Bhd (“GB3”), Prai Power Sdn Bhd (“PPSB”) and Tanjung Bin Power Sdn Bhd (“TBP”) and associates Kapar Energy Ventures Sdn Bhd (“KEV”) and Port Dickson Power Sdn Bhd (“PDP”); and there are four (4) OMAs held by the Group’s operations and maintenance subsidiaries of Teknik Janakuasa Sdn Bhd (“TJSB”) and Natural Analysis Sdn Bhd (“NASB”).

These PPAS and OMA are the key documents that govern the underlying strength of the Group’s cash flow, which provide for, inter alia, the electricity tariff, supply, operations and maintenance and all other terms to be met by the Group. Each PPA is tied to one power plant, where its fair value can be separately accounted for, while the OMAs are held by TJSB and its wholly-owned subsidiary, NASB, of which their fair values can also be accounted for.

Measurement

The fair value of the Intangible Assets arising from the PPAs and OMAs are measured using the Multi-Period Excess Earnings Method (“MEEM”) under the income method. The underlying rationale in the MEEM is that the fair value of an Intangible Asset represents the present value of the net income after taxes attributable to the Intangible Asset. The net income attributable to the Intangible Asset is the excess income after charging a fair return on and of all the assets that are necessary (contributory assets) to realise the net income. The contributory asset charges (“CAC”) are based on the fair value of each contributory asset and represent the return on and return of the assets. The assumption in calculating the CAC is that the owner of the Intangible Asset “rents” or “leases” the contributory assets from a hypothetical third party in an arm’s length transaction in order to be able to derive income from the Intangible Asset. The present value of the expected income attributable to the Intangible Assets less CAC and taxes represents the value of the Intangible Asset.


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4. intangiBle assets (cont’d)

The management had applied the following key assumptions in deriving the present value of the net income after taxes attributable to the Intangible Assets:

• RemainingusefullifeofPPAs/OMAs 12-24years(inaccordancewiththerespectivePPAs)

• Dependablecapacity(DC) 350MW-2,420MW

• Capacityfactor 45%-75%ofDC

• Netelectricaloutput(millionkW/hour) 2,300-11,197

• CapacityRate(RM/kW/month) 11.61-50.00

• FixedOperatingRateunderRevenue(RM/kW/month) 4.00-10.50

• VariableOperatingRateunderRevenue(RM/kW/month) 0.013-0.025

• Fuelprice(RM/mBtu) 4.60-6.50

• CAC 17.77%-28.00%ofEBITDA

In applying the MEEM valuation methodology, the expected cash flows are discounted to their present value equivalent using a rate of return that reflects the relative risk of the cashflows, as well as the time value of money. This is calculated by weighing the required returns on debt and equity in proportion to their assumed percentages. The applied discount rate was 9.09% per annum.

amortisation

The Intangible Assets with finite useful lives are amortised based on the Net Electrical Output generated from the PPA companies and Fixed Operation and Maintenance income generated from the OMA companies as management represented that these basis best represents the pattern in which the Intangible Assets’ future economic benefits are expected to be consumed by the Group. The amortisation is charged to cost of sales in the income statement.

impairment testing for cash generating units (“cgus”) containing goodwill

For the purpose of impairment testing, the goodwill amounting to RM8.2 million is allocated to the following CGUs:

rM’000

PPA companies 6,532 OMA companies 1,700

The impairment test of the above CGUs was based on the same cashflows used to fair value the Intangible Assets but without any effect on tax payments and receipts and a pre tax discount rate was used. The estimated recoverable amount of the CGUs exceeds the carrying amount, including goodwill allocated. Therefore, there is no impairment on the goodwill.

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5. prepaid lease payMents

leasehold land unexpired unexpired period period less than more than group 50 years 50 years total rM’000 rM’000 rM’000

cost

At 1 January 2006 - - -

At 31 December 2006/1 January 2007 - - - Acquisition through business combination 93,137 29,371 122,508

At 31 December 2007 93,137 29,371 122,508

amortisation

At 1 January 2006 - - -

At 31 December 2006/1 January 2007 - - - Acquisition through business combination 2,388 4,846 7,234 Amortisation for the year 2,388 598 2,986

At 31 December 2007 4,776 5,444 10,220

carrying amounts

At 1 January 2006 - - -

At 31 December 2006/1 January 2007 - - -

At 31 December 2007 88,361 23,927 112,288

security

The leasehold land of the Group amounting to RM6,221,000 (2006:Nil) have been charged as security for debt securities issued by certain subsidiaries.


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5. prepaid lease payMents (cont’d)

leasehold land unexpired period more than company 50 years total rM’000 rM’000

cost

At 1 January 2006 - - At 31 December 2006/1 January 2007 - - Acquisition through business combination 6,159 6,159

At 31 December 2007 6,159 6,159

amortisation

At 1 January 2006 - -

At 31 December 2006/1 January 2007 - - Acquisition through business combination 601 601 Amortisation for the year 42 42

At 31 December 2007 643 643

carrying amounts

At 1 January 2006 - -

At 31 December 2006/1 January 2007 - -

At 31 December 2007 5,516 5,516

security

The Company entered into a sale and purchase agreement with a subsidiary for the disposal of certain portions of a leasehold land. The subdivision of the land was completed in 2006 and the Company is in the process of transferring the land to the subsidiary. The lease was charged as security for certain debt instruments issued by the subsidiary.

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6. investMents in suBsidiaries

company

2007 2006 rM’000 rM’000

At cost: Unquoted shares 8,128,970 -

8,128,970 -

Details of the subsidiaries are as follows:

country of effective name incorporation ownership interest principal activities 2007 2006 % %

Segari Energy Ventures Sdn. Bhd. Malaysia 93.75 - Design, construction, operation and maintenance of a combined cycle power plant, generation and sale of electrical energy and generating capacity of power plant

Teknik Janakuasa Sdn. Bhd. Malaysia 100 - Operation and maintenance of power plants

GB3 Sdn. Bhd. Malaysia 75 - Design, construction, operation and maintenance of a combined cycle power plant, generation and sale of electrical energy and generating capacity of the power plant

Prai Power Sdn. Bhd. Malaysia 100 - Design, construction, operation and maintenance of a combined cycle power plant, generation and sale of electrical energy and generating capacity of the power plant

Tanjung Bin Power Sdn. Bhd. Malaysia 90 - Design, engineering, procurement, construction, installation and commissioning, testing, operation and maintenance of 2,100 MW coal fired electricity generating facilities and sale of electrical energy and generating capacity of the power plant

Malakoff Engineering Sdn. Bhd. Malaysia 100 - Provision of engineering and project management services


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111

6. investMents in suBsidiaries (cont’d)

Details of the subsidiaries are as follows: (cont’d)


Wirazone Sdn. Bhd. Malaysia 100 - Build, own and operate an electricity distribution system and a centralised chilled water plant system

Hypergantic Sdn. Bhd. Malaysia 100 - Investment holding

Desa Kilat Sdn. Bhd. Malaysia 54 - Land reclamation, development and/or sale of reclaimed land

Tuah Utama Sdn. Bhd. Malaysia 100 - Investment holding

Transpool Sdn. Bhd. Malaysia 100 - Dormant

Spring Assets Limited British Virgin Islands 100 - Dormant

Malakoff Capital (L) Ltd Malaysia 100 - Dormant

Malakoff International Limited Cayman Islands 100 - Offshore - Investment holding

subsidiary of Malakoff international limited

Malakoff Gulf Limited British Virgin Islands 100 - Offshore - Investment holding

Malakoff Technical (Dhofar) Limited British Virgin Islands 100 - Offshore - Investment holding Malakoff AlDjazair Desal Sdn Bhd Malaysia 100 - Investment holding Malakoff Jordan Generation Limited British Virgin Islands 100 - Offshore - Investment holding KuwMal Investments Limited British Virgin Islands 100 - Dormant subsidiary of Malakoff aldjazair desal sdn Bhd

Tlemcen Desalination Investment France 70 - Offshore - Investment holding Company SAS subsidiaries of teknik Janakuasa sdn Bhd

Natural Analysis Sdn. Bhd. Malaysia 100 - Operation and maintenance of power plant

TJSB International Limited Cayman Islands 100 - Offshore - Investment holding

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6. investMents in suBsidiaries (cont’d)

Details of the subsidiaries are as follows: (cont’d)


subsidiaries of tJsB international limited

TJSB Middle East Limited British Virgin Islands 100 - Offshore - Investment holding TJSB International (Shoaiba) Limited British Virgin Islands 100 - Offshore - Investment holding TJSB Global Sdn Bhd Malaysia 100 - Investment holding

7. investMents in associates

group company

2007 2007 2006 rM’000 rM’000 rM’000

At cost: Unquoted shares 97,948 641,770 - Quoted shares outside Malaysia 55,512 - - Unquoted preference shares 4,000 - - Unquoted loan stocks 417,655 380,230 - Pre-acquisition reserves 130,545 - - Share of post-acquisition losses (3,874) - -

701,786 1,022,000 - Add: Intangible assets acquired through business combination (see Note 4) 857,970 - - Less: Amortisation of intangible assets (23,725) - - (see Note 4)

1,536,031 1,022,000 -

Market value: Quoted shares outside Malaysia 71,995 - -


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113

7. investMents in associates (cont’d)

summary financial information on associates:

profit / total total revenues (loss) assets liabilities (100%) (100%) (100%) (100%) rM’000 rM’000 rM’000 rM’000

2007 1,226,680 31,486 5,771,094 5,173,425

details of associates:


Port Dickson Power Berhad Malaysia 25 - Generation and sale of electricity

Kapar Energy Ventures Sdn. Bhd. Malaysia 40 - Generation and sale of electricity Lekir Bulk Terminal Sdn. Bhd. Malaysia 20 - Bulk terminal jetty and coal handling services Malaysian Shoaiba Consortium Sdn. Bhd. Malaysia 40 - Investment holding Saudi-MalaysiaWater & Saudi Arabia 20 - Offshore - Investment holding Electricity Company Limited

Shuaibah Water & Saudi Arabia 12 - Design, construction, commissioning, testing, Electricity Company Limited ownership, operation and maintenance of oil fired power generation and water desalination plant

Shuaibah Expansion Holding Saudi Arabia 12 - Drinking water production Company Limited

Shuaibah Expansion Saudi Arabia 11.7 - Development, construction, possession operation Project Company Limited and maintenance of Shuaibah expansion project 3 for water product at Shuaibah region, water transport and sale and all relevant works and activities

Oman Technical Partners Limited British Virgin Islands 43.4 - Offshore - Investment holding Salalah Power Holdings Limited Bermuda 43.4 - Offshore - Investment holding

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7. investMents in associates (cont’d)

details of associates: (cont’d)


Dhofar Power Company SAOG Oman 20 - Electricity generation, transmission, distribution in the region of Salalah, Oman

Almiyah Attilemcania SPA Algeria 35.7 - Construction, operation and management of a sea water desalination plant and marketing the desalinated water produced

Enara Energy Investment Company Jordan 25 - Offshore - Investment holding Central Electricity Generating Jordan 12.75 - Generate electrical energy in different Company Limited regions of Jordan Al-Imtiaz Operation and Saudi Arabia 20 - Implementation of operation and maintenance Maintenance Company Limited contracts for stations of electrical power generation and water desalination

Saudi Malaysia Operation and Saudi Arabia 20 - Operation and maintenance of power Maintenance Services and water desalination plant Company Limited

8. other investMents

company

2007 2006 rM’000 rM’000 non-current

At cost:

Unquoted unsecured loan stocks in subsidiaries 1,715,897 -

The loan stocks are unsecured, bear interest ranging from 6.0% to 15.0% per annum and are repayable over a period of 28 years.


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115

9. deferred tax assets and liaBilities

recognised deferred tax assets and liabilities

Deferred tax assets and liabilities are attributable to the following:

assets liabilities net 2007 2007 2007 rM’000 rM’000 rM’000

group

Property, plant and equipment 244 1,599,909 1,600,153 Provisions (10,853) (30,520) (41,373) Intangibles - 1,949,052 1,949,052 Unutilised capital allowances - (721,912) (721,912)

Others - 13,030 13,030

Tax (assets)/liabilities (10,609) 2,809,559 2,798,950

unrecognised deferred tax assets

Deferred tax assets have not been recognised in respect of the following items:

group company

2007 2007 2006 rM’000 rM’000 rM’000

Deductible temporary differences 6 - - Tax loss carry-forwards 62,657 - -

62,663 - -

Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit will be available against which the Group can utilise the benefits there from.

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9. deferred tax assets and liaBilities (cont’d)

Movement in temporary differences during the year

recognised recognised acquired in income in income in business at statement at statement combinations at 1.1.2006 (note 20) 31.12.2006 (note 20) (note 27) 31.12.2007 group rM’000 rM’000 rM’000 rM’000 rM’000 rM’000

deferred tax assets

Property, plant and equipment - - - 244 - 244 Provisions - - - (8,909) (1,944) (10,853)

- - - (8,665) (1,944) (10,609)

deferred tax liabilities

Property, plant and equipment - - - 384,420 1,215,489 1,599,909 Provisions - - - (10,061) (20,459) (30,520) Intangibles - - - (58,148) 2,007,200 1,949,052 Unutilised capital allowances - - - (357,783) (364,129) (721,912) Others - - - (3,263) 16,293 13,030

- - - (44,835) 2,854,394 2,809,559

10. receivaBles, deposits and prepayMents

group company

2007 2007 2006 note rM’000 rM’000 rM’000

current

trade

Trade receivables 732,520 - - Less: Allowance for doubtful debts (75,491) - -

657,029 - -


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117

10. receivaBles, deposits and prepayMents (cont’d)

group company

2007 2007 2006 note rM’000 rM’000 rM’000

non-trade

Amount due from subsidiaries i - 354,434 - Amount due from associate ii 160,348 160,348 - Other receivables 75,007 7,253 - Deposits 17,310 - - Prepayments 237,975 80,702 4,640

490,640 602,737 4,640

1,147,669 602,737 4,640

i - amount due from subsidiaries

The non-trade receivables due from subsidiaries are unsecured, interest free and repayable on demand.

ii - amount due from associate

The non-trade receivables from associates are interest receivable and subject to the existing terms of the unsecured loan stocks.

11. inventories

group company

2007 2007 2006 rM’000 rM’000 rM’000

Spares and consumables 322,080 - - Coal 111,011 - - Diesel fuel 55,082 - -

488,173 - -

All inventories are carried at cost.

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12. cash and cash equivalents

group company

2007 2007 2006 rM’000 rM’000 rM’000

Deposits with licensed banks 2,274,172 428,849 - Cash and bank balances 299,782 31,644 -

2,573,954 460,493 -

deposits placed with licensed banks pledged for a bank facility

Included in the deposits placed with licensed banks is RM16,780,000 (2006 - Nil) of the Group and the Company pledged for a bank facility granted to the Group and the Company.

13. share capital and reserves

Share capital

group and company

number number amount of shares amount of shares 2007 2007 2006 2006 rM’000 ’000 rM’000 ’000

Authorised: Ordinary shares of RM1 each 490,000 490,000 490,000 490,000

Redeemable convertible non cumulative preference shares of RM0.10 each 10,000 100,000 10,000 100,000

Issued and fully paid: Ordinary shares of RM1 each Issued for cash 351,344 351,344 -* -*

On issue at 31 December 351,344 351,344 -* -*

Redeemable convertible non cumulative preference shares of RM0.10 each Issued for cash 5,019 50,192 - -

On issue at 31 December 5,019 50,192 - -

* 2 shares of RM1 each


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119

13. share capital and reserves (cont’d)

ordinary shares

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.

redeemable convertible non cumulative preference shares

Holders of redeemable convertible (at the option of the Company in the event the Company is listed on Bursa Malaysia) non-cumulative preference shares receive a non-cumulative gross dividend of RM1 per share at the Company’s discretion or whenever dividends to ordinary shareholders are declared. They do not have the right to participate in any additional dividends declared for ordinary shareholders. Preference shares do not carry the right to vote except for variation of holders’ rights to the class of shares, proposal to wind up and during the winding up of the Company, proposal to reduce the share capital of the Company and on the proposal for the disposal of the whole Company’s property, business or undertaking. The preference shares shall rank equally among themselves in all respects and shall rank in senior to the ordinary shares but junior to the Junior Sukuk.

section 108 tax credit

Subject to agreement by the Inland Revenue Board, the Company has Section 108 tax credit to frank all of its distributable reserves at 31 December 2007 if paid out as dividends.

The Malaysian Budget 2008 introduced a single tier company income tax system with effect from year of assessment 2008. As such, the Section 108 tax credit as at 31 December 2007 will be available to the Company until such time the credit is fully utilised or upon expiry of the six-year transitional period on 31 December 2013, whichever is earlier.

14. loans and BorroWings

group company

2007 2007 2006 rM’000 rM’000 rM’000

non-current

Sukuk Ijarah bonds - secured 760,366 - - Al-Bai Bithamin Ajil (ABBA) bonds - secured 730,000 - - Al-Istisna bonds - secured 517,353 - - Istisna medium term notes - secured 5,290,000 - - Sukuk medium term notes - secured 5,155,028 5,155,028 - Junior Sukuk - secured 1,700,000 1,700,000 - Subordinated loan notes - unsecured 195,717 - -

14,348,464 6,855,028 -

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14. loans and BorroWings (cont’d)

group company

2007 2007 2006 rM’000 rM’000 rM’000

current

Commercial papers - secured 697,684 592,580 - Sukuk Ijarah bonds - secured 99,689 - - ABBA bonds - secured 120,000 - - Al-Istisna bonds - secured 67,983 - - Istisna medium term notes - secured 280,000 - - Subordinated loan notes - unsecured 1,818 - -

1,267,174 592,580 -

security

The bonds, medium term notes, Junior Sukuk and commercial papers are secured over property, plant and equipment with a carrying amount of RM10,545,304,000 (2006 - Nil) (see note 3) and prepaid lease payments with a carrying amount of RM6,221,000 (2006 - Nil) (see note 5).

significant covenants

The borrowings are subject to the fulfilment of the following significant covenants:

1. sukuk ijarah bonds issued by a subsidiary

Maintain a Debt/Equity Ratio of not more than 4:1 and a Finance Service Cover Ratio of at least 1.15 times.

2. aBBa bonds and commercial papers issued by a subsidiary

Maintain the Debt/Equity Ratio to be no greater than 9:1 during post-completion (of power plant) period and ensure that the Debt Service Cover ratio is not less than 1.25:1 commencing from commercial operation date.

3. al-istisna bonds issued by a subsidiary

Maintain a Debt/Equity Ratio of not higher than 4:1 at all times and maintain an Annual Finance Service ratio of not less than 1.4:1 commencing from the third year of the first issue of the bonds.

4. istisna medium term notes issued by a subsidiary

Maintain a minimum Debt Service cover ratio of 1.25 times commencing from the second semi-annual profit payments date and the Debt/Equity Ratio of no more than 4:1.

5. sukuk medium term notes, Junior sukuk and commercial papers issued by the company

Maintain a Debt/Equity Ratio of no greater than 1.25:1 and Group Debt/Equity ratio to be no greater than 7:1 at all times.


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121

14. loans and BorroWings (cont’d)

terms and debt repayment schedule

year of carrying under 1 1 - 2 2 - 5 over 5 maturity amount year years years years group rM’000 rM’000 rM’000 rM’000 rM’000

2007

Commercial papers - secured 2008 697,684 697,684 - - - Sukuk Ijarah bonds - secured 2008-2012 860,055 99,689 98,787 661,579 - ABBA bonds - secured 2008-2014 850,000 120,000 120,000 360,000 250,000 Al-Istisna bonds - secured 2008-2016 585,336 67,983 65,888 193,403 258,062 Istisna medium term notes - secured 2008-2018 5,570,000 280,000 490,000 1,660,000 3,140,000 Sukuk medium term notes - secured 2015-2025 5,155,028 - - - 5,155,028 Junior Sukuk - secured 2025 1,700,000 - - - 1,700,000 Subordinated loan notes - unsecured 2008-2031 197,535 1,818 1,818 4,999 188,900

15,615,638 1,267,174 776,493 2,879,981 10,691,990

year of carrying under 1 1 - 2 2 - 5 over 5 maturity amount year years years years company rM’000 rM’000 rM’000 rM’000 rM’000

2007

Commercial papers - secured 2008 592,580 592,580 - - - Sukuk medium term notes - secured 2015-2025 5,155,028 - - - 5,155,028 Junior Sukuk - secured 2025 1,700,000 - - - 1,700,000

7,447,608 592,580 - - 6,855,028

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15. eMployee Benefits

retirement benefits

group company

2007 2007 2006 rM’000 rM’000 rM’000

Present value of unfunded obligations 27,280 8,950 -

Total employee benefits 27,280 8,950 -

Movement in the present value of the defined benefit obligations

group company

2007 2007 2006 rM’000 rM’000 rM’000

Defined benefit obligations at 1 January - - - Acquired through business combination 23,519 8,328 - Benefits paid by the plan (406) (74) - Current service costs and interest (see below) 4,167 696 -

Defined benefit obligations at 31 December 27,280 8,950 -

expense recognised in the income statements

group company

2007 2007 2006 rM’000 rM’000 rM’000

Current service costs 1,883 278 - Interest on obligation 967 166 - Transitional liability 1,317 252 -

4,167 696 -

The expense is recognised as administrative expenses in the income statements.


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123

15. eMployee Benefits (cont’d)

actuarial assumptions

Principal actuarial assumptions at the balance sheet date: group company

2007 2007 2006

Discount rate at 31 December 6.7% 6.7% - Salary inflation 6.7% 6.7% - Price inflation 3.5% 3.5% -

Assumed salary inflation rates have a significant effect on the amounts recognised in the income statements. A single percentage point change in assumed salary inflation trend rates would have the following effects:

group company

one one one one percentage percentage percentage percentage point point point point increase decrease increase decrease rM’000 rM’000 rM’000 rM’000

Effect on the aggregate service and interest cost 447 (374) 114 (97) Effect on defined benefit obligations 1,954 (1,683) 535 (467)

historical information

2007 2006 2005 2004 2003 group rM’000 rM’000 rM’000 rM’000 rM’000

Present value of the defined benefit obligations 27,280 - - - -

company

Present value of the defined benefit obligations 8,950 - - - -

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16. payaBles and accruals

group company

2007 2007 2006 note rM’000 rM’000 rM’000

trade

Trade payables 211,079 - -

non-trade

Other payables 32,774 84,016 - Accrued expenses i 344,487 2,773 - Amount due to holding company ii - - 4,858 Amount due to subsidiaries iii - 371,209 -

377,261 457,998 4,858

588,340 457,998 4,858

i - accrued expenses

Included in accrued expenses of the Group are interest expense payable of RM189,940,000 and provision for CESS fund of RM32,486,000.

ii - amount due to holding company

The non-trade payables due to holding company are unsecured, interest free and have no fixed terms of repayment.

iii - amount due to subsidiaries

The non-trade payables due to subsidiaries are unsecured, interest free and have no fixed terms of repayment.

17. revenue

30.4.2007 to 31.12.2007 2006 group rM’000 rM’000

Electricity generation and distribution 2,655,813 - Interest income on loan stocks from associate 3,002 - Project management fee 198 - Rental income from estate 3,496 - Operation and maintenance fees 39,489 -

2,701,998 -


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17. revenue (cont’d)

2007 2006 company rM’000 rM’000

Dividends from subsidiaries 412,603 - Rental income from estate 3,496 - Management fee from subsidiaries 5,120 -

421,219 -

18. operating profit/(loss)

group company

30.4.2007 to 31.12.2007 2007 2006 rM’000 rM’000 rM’000

operating profit/(loss) is arrived at after charging:

Allowance for doubtful debts 75,491 - - Amortisation of prepaid lease payments 2,986 42 - Amortisation of intangible assets 230,795 - - Auditors’ remuneration: - Statutory audit - KPMG 220 35 - - Others - - 10 Other services - KPMG 421 377 - - Affiliates of KPMG 2,340 1,363 - Depreciation on property, plant and equipment 375,815 1,329 - Personnel expenses (including key management personnel): - Contributions to Employees Provident Fund 6,547 1,927 - - Expenses related to defined benefit plan 4,167 696 - - Wages, salaries and others 21,233 6,999 -

and after crediting:

Dividend income from: - subsidiaries (unquoted) - 412,603 - Inter - company management fees - 5,120 -

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19. key ManageMent personnel coMpensation

The key management personnel compensations are as follows:

group company 30.4.2007 to 31.12.2007 2007 2006 rM’000 rM’000 rM’000 Directors

- Fees 149 149 - - Meeting allowance 24 24 - - Remuneration 576 576 - Other short term employee benefits (including estimated monetary value of benefits-in-kind) 58 58 - Total short-term employee benefits 807 807 -

Other key management personnel:

- Short-term employee benefits 2,341 2,341 -

3,148 3,148 -

Other key management personnel comprise persons other than the Directors of Group entities, having authority and responsibility for planning, directing and controlling the activities of the entity either directly or indirectly.

20. tax expense

recognised in the income statements

group company

30.4.2007 to 31.12.2007 2007 2006 rM’000 rM’000 rM’000

Total tax expense 55,267 59,854 -

Major components of tax expense include:

current tax expense

Malaysian - current year 108,767 59,854 -


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20. tax expense (cont’d)

group company

30.4.2007 to 31.12.2007 2007 2006 rM’000 rM’000 rM’000

current tax expense (cont’d)

Total current tax 108,767 59,854 -

deferred tax expense

Origination and reversal of temporary differences 5,339 - - Effect of change in tax rate (58,839) - -

(53,500) - -

Total tax expense 55,267 59,854 -

Profit for the year 268,502 155,884 - Total tax expense 55,267 59,854 -

Profit excluding tax 323,769 215,738 -

Tax at Malaysian tax rate of 27% 87,418 58,249 - (2006 - 28%) Effect of change in tax rate* (58,839) - - Effect of share of results of associates 1,046 - - Effect of deferred tax benefits not recognized 16,919 - - Non-deductible expenses 8,723 1,605 -

55,267 59,854 -

* With effect from year of assessment 2007, corporate tax rate is at 27%. The Malaysian Budget 2008 also announced the reduction of corporate tax rate to 26% with effect from year of assessment 2008 and to 25% with effect from year of assessment 2009 respectively. Consequently deferred tax assets and liabilities are measured using these tax rates.

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21. dividends

Dividends recognised in the current year by the Company are as follows:

sen total per share amount date of 2007 (net of tax) rM’000 payment

Interim 2007 - ordinary shares 6.65 23,360 7.12.2007 Interim 2007 - preference shares 73 36,640 7.12.2007

Total amount 60,000

2006

Total amount Nil

After the balance sheet date, the following dividends were proposed by the Directors. These dividends will be recognised in subsequent financial reports upon approval by the shareholders.

sen total per share amount (net of tax) rM’000

Final ordinary 11.38 40,000

Total amount 40,000

22. segMent reporting

Segment information is presented in respect of the Group’s business segments. The primary format, business segments, is based on the Group’s management and internal reporting structure.

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

Segment capital expenditure is the total cost incurred during the year to acquire property, plant and equipment.

Inter-segment pricing is determined on an arm’s length basis.

Business segments

The Group comprises the following main business segments:

• AssetManagement • Operationsandmaintenance(O&M)


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22. segMent reporting (cont’d)

asset Management o&M eliminations consolidated 30.4.2007 to 30.4.2007 to 30.4.2007 to 30.4.2007 to 31.12.2007 31.12.2007 31.12.2007 31.12.2007 rM’000 rM’000 rM’000 rM’000

Business segments

Total external revenue 2,662,509 39,489 - 2,701,998 Inter-segment revenue - 326,850 (326,850) -

total segment revenue 2,622,509 366,339 (326,850) 2,701,998

Segment results 745,969 221,591 - 967,560

Results from operating activities 967,560 Interest income 123,038 Finance costs (762,955) Share of loss of equity accounted associates (3,874) Tax expense (55,267)

profit for the year 268,502

asset Management o&M consolidated 2007 2007 2007 rM’000 rM’000 rM’000

segment assets 21,135,824 785,724 21,921,548

Investment in associates 1,536,031 - 1,536,031

total assets 23,457,579

segment liabilities 18,809,943 254,787 19,064,730

total liabilities 19,064,730

Capital expenditure 240,221 13,110 253,331

Depreciation 313,325 62,490 375,815

Amortisation of intangible assets 195,415 35,380 230,795

Non-cash expenses other than depreciation and amortization 79,338 3,306 82,644

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23. financial instruMents

Exposure to credit, interest rate and currency risks arises in the normal course of the Group’s business. Derivative financial instruments are not used to hedge exposure to fluctuations in foreign exchange rates and interest rates.

credit risk

Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed on all customers requiring credit over a certain amount. The Group and the Company do not require collateral in respect of financial assets.

Investments are allowed only in liquid securities and only with counterparties that have a credit rating equal to or better than the Group and the Company. Given their high credit ratings management does not expect any counterparty to fail to meet their obligations.

At balance sheet date, the Group has a concentration of credit risk in the form of trade debts due from Tenaga Nasional Berhad (TNB), representing approximately 54% of the total receivables of the Group. The maximum exposures to credit risk for the Group and the Company are represented by the carrying amount of each financial asset.

interest rate risk

Interest rate exposure arises from the Group’s and the Company’s borrowings and is managed through the use of fixed and floating rate debts.

The Group and the Company have no material interest rate risk arising from long term interest bearing assets.

The investments in financial assets are mainly short term in nature and they are not held for speculative purposes but mostly placed in fixed deposits. The placements are short term and therefore their exposure to the effects of future changes in the prevailing level of interest rate is limited.

effective interest rates and repricing analysis

In respect of interest-earning financial assets and interest-bearing financial liabilities, the following table indicates their average effective interest rates at the balance sheet date and the periods in which they mature, or if earlier, reprice (the effective interest rates and fair values of Islamic financial instruments are not shown in the table below).

group average effective less More interest than 1 - 2 2 - 3 3 -4 4 -5 than 2007 rate total 1 year years years years years 5 years % rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000

fixed rate instruments

Financial assets Unsecured subordinated loan notes 6% to 16% 197,535 1,818 1,818 1,818 1,818 1,363 188,900

Cash and cash equivalents 3.53% 2,573,954 2,573,954 - - - - -


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23. financial instruMents (cont’d)

effective interest rates and repricing analysis (cont’d)

company average effective less More interest than 1 - 2 2 - 3 3 -4 4 -5 than 2007 rate total 1 year years years years years 5 years % rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000

fixed rate instruments

Financial assets Cash and cash equivalents 3.53% 460,493 460,493 - - - - -

foreign currency risk

The Group incurs foreign currency risk on purchases that are denominated in a currency other than Ringgit Malaysia. The currency giving rise to this risk is primarily the Swiss Franc.

The Group uses forward exchange contracts to hedge its foreign currency risk when necessary. Forward exchange contracts are rolled over at maturity at market rates where necessary.

In respect of other monetary assets and liabilities held in currencies other than Ringgit Malaysia, the Group ensures that the net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates where necessary to address short term imbalances.

liquidity risk

The Group monitors and maintains a level of cash and cash equivalents deemed adequate by management to finance the Group’s operations and to mitigate the effects of fluctuations in cash flows.

fair values

The carrying amounts of cash and cash equivalents, receivables, other payables and short term borrowings, approximate fair values due to the relatively short term nature of these financial instruments.

It is impracticable to estimate the fair value of the unsecured subordinated loan notes the instruments are issued to the shareholders at negotiated interest rates. Similarly, it is also impracticable to estimate the fair value of the Company’s investment in unquoted unsecured subordinated loan stocks in its subsidiaries.

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24. capital and other coMMitMents

group company

2007 2007 2006 rM’000 rM’000 rM’000

plant and equipment

Authorised but not contracted for 39,420 1,579 -

25. contingencies

The Directors are of the opinion that provisions are not required in respect of these matters, as it is not probable that a future sacrifice of economic benefits will be required or the amount is not capable of reliable measurement.

contingent liability

litigation

Segari Energy Ventures Sdn Bhd’s (“SEV”) Power Purchase Agreement with Tenaga Nasional Berhad (“TNB”) contains procedures for determining inaccuracies of the metering devices used for billing purposes. These devices are owned, operated, maintained and controlled solely by TNB. There have been certain inaccuracies with the metering devices, which SEV brought to the attention of TNB, as SEV alleged that the inaccuracies caused underpayments. TNB had carried out tests and claim that the inaccuracies have resulted in alleged overpayments of RM87.5 million.

On 13 December 2007, TNB issued a notice of arbitration to resolve the dispute with SEV.

contingent asset

litigation

On 28 March 2007, Prai Power Sdn Bhd (“PPSB”) commenced arbitration proceedings against TNB claiming a sum of approximately RM11,863,000 which PPSB alleged TNB had wrongfully deducted from available capacity payments due and payable to PPSB for the month of November 2006. TNB had responded stating that that its deductions were in accordance with the Power Purchase Agreement between PPSB and TNB and had filed a counterclaim against PPSB. TNB had then applied to the arbitral tribunal for leave to amend its Defence and Counterclaim and to file a Rejoinder in the proceedings to introduce events and matters since June 2003.

During the preliminary meeting for the arbitration held on 16 January 2008, the arbitral tribunal allowed an application by both PPSB and TNB to amend and re-file the Statement of Claim, Defence and Counterclaim, Reply and Defence to the Counterclaim to include these events and matters from June 2003 into the proceedings.

PPSB has since issued to TNB, via its solicitors, an amended Statement of Claim revising PPSB’s claim approximately from RM11,863,000 to RM113,713,000. The additional sum of RM101,850,000 being claimed is the amount due and payable by TNB to PPSB in respect of capacity payments from June 2003 to October 2006.


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25. contingencies (cont’d)

guarantees (secured)

group company

2007 2006 2007 2006 rM’000 rM’000 rM’000 rM’000

Guarantees - secured 405,122 - 306,035 -

These guarantees mainly consist of guarantees for loans, bid bonds, performance bonds and security deposits for projects.

26. 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 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 or common significant influence. Related parties may be individuals or other entities.

The significant related party transactions of the Group and the Company, other than key management personnel compensation, are as follows:

group transactions gross balance net balance amount for outstanding outstanding the year ended at at 31 december 31 december 31 december 2007 rM’000 rM’000 rM’000

holding company

Acquisition of equity interest in Malakoff Berhad from MMC Corporation Berhad 2,047,834 - -

associated companies

Interest income on unsecured subordinated loan notes 77,631 161,845 161,845

company subject to common significant influence

Operation and maintenance fee expense 62,540 26,438 26,438 Operation and maintenance subcontract fee income 32,426 28,750 28,750

The terms and conditions for the above transactions are based on negotiated terms. All the amounts outstanding are unsecured and expected to be settled in cash.

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26. related parties (cont’d)

company transactions gross balance net balance amount for outstanding outstanding the year ended at at 31 december 31 december 31 december 2007 rM’000 rM’000 rM’000

holding company

Acqusition of equity interest in Malakoff Berhad from MMC Corporation Berhad 2,047,834 - -

subsidiaries

Interest income on unsecured subordinated loan notes 130,060 146,346 146,346 Management fee 5,120 - - Dividends 412,603 - -

associated companies

Interest income on unsecured subordinated loan notes 74,639 160,348 160,348

The terms and conditions for the above transactions are based on negotiated terms. All the amounts outstanding are unsecured and expected to be settled with cash.

27. acquisition of Business

Business combination

On 30 April 2007, the Group acquired all the assets and undertakings (other than cash held by Malakoff Berhad) and assume all the disclosed liabilities of Malakoff Berhad for a total cash consideration of RM9.3 billion satisfied in cash. In the eight months to 31 December 2007, the subsidiaries and associates contributed profit after tax of RM268 million. If the acquisition had occurred on 1 January 2007, management estimates that consolidated revenue would have been RM3,824 million and consolidated profit after tax for the year would have been RM296 million.

The acquisition had the following effect on the Group’s assets and liabilities on acquisition date:

pre- acquisition fair recognised carrying value values on amounts adjustments acquisition

Property, plant and equipment 10,753,489 - 10,753,489 Intangible assets - 7,103,796 7,103,796 Prepaid lease rentals 115,274 - 115,274 Investment in associated companies 683,362 857,970 1,541,332 Deferred tax assets 1,944 - 1,944


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27. acquisition of Business (cont’d)

Business combination (cont’d)

The acquisition had the following effect on the Group’s assets and liabilities on acquisition date:

pre- acquisition fair recognised carrying value values on amounts adjustments acquisition

Inventories 442,135 - 442,135 Receivables, deposits and prepayments 1,217,763 - 1,217,763 Tax recoverable 13,067 - 13,067 Cash and cash equivalents 2,028,255 - 2,028,255 Loans and borrowings (9,811,433) - (9,811,433) Deferred tax liabilities (847,194) (2,007,200) (2,854,394) Payables and accruals (1,107,312) - (1,107,312) Retirement benefits (23,519) - (23,519) Minority interests (189,285) - (189,285)

Net identifiable assets and liabilities 3,276,546 5,954,566 9,231,112

Goodwill on acquisition 8,232

Consideration paid, (including cost of business combination), satisfied in cash 9,239,344 Cash acquired (2,028,255)

Net cash outflow 7,211,089

Pre-acquisition carrying amounts were determined based on applicable FRSs immediately before the acquisition. The values of assets, liabilities and contingent liabilities recognised on acquisition are their estimated fair values.

28. suBsequent event

development, construction, operations of a seawater desalination plant of 200,000m3/day at souk tleta, Wilaya of tlemcen, algeria (“the project”)

The Project, which will be developed by Almiyah Attilemcania SPA, had on 15 January 2008 achieved financial close following its successful financing from Banque Nationale d’ Algerie. AAS is a 51% subsidiary of Tlemcen Desalination Investment Company SAS(“TDIC”) which in turn is a 70% subsidiary of Malakoff AlDjazair Desal Sdn Bhd, a wholly - owned subsidiary of Malakoff Corporation Berhad (“Malakoff”). The balance of 49% interest in AAS is held by Algerian Energy Company SPA. MenaSpring Utility (S) Pte Limited, a wholly-owned subsidiary of Hyflux Limited (“Hyflux”), Singapore holds the balance 30% interest in TDIC. The effective equity interest for Malakoff in AAS will be 35.7% and is estimated to be up to a maximum of USD20 Million (approximately RM68 Million).

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28. suBsequent event (cont’d)

development, construction, operations of a seawater desalination plant of 200,000m3/day at souk tleta, Wilaya of tlemcen, algeria (“the project”) (cont’d)

The Desalination Plant will be operated and maintained by Hyflux-TJSB Algeria SPA(“OMCO”), in which Malakoff and Hyflux, through their respective wholly-owned subsidiaries, holds a 49% and 51% equity interest. Malakoff’s interest in OMCO is via TJSB Global Sdn. Bhd. (“TJSB Global”), a wholly-owned subsidiary of TJSB International Limited, which in turn is a wholly owned subsidiary of Malakoff. TJSB Global has an authorised share capital of RM100,000 comprising 100,000 ordinary shares of RM1.00 each and an issued and paid up share capital of RM2.00 comprising two ordinary shares of RM1.00 each.

The Project is estimated to contribute positively to the results of the Group once it is completed.

29. significant event

On 30 April 2007, the Company completed its acquisition of the securities of all the subsidiaries and the associate companies of Malakoff Berhad (Malakoff) together with all the assets of Malakoff (other than cash balance in Malakoff and the above securities) and the transfer, assignment or novation of all liabilities of Malakoff for a cash consideration RM9,307,599,771 less any available cash in Malakoff (“Acquisition”).

On the same date, the Company also completed its fund raising exercise through the issue of new ordinary shares of RM1.00 each together with new redeemable convertible preference shares of RM0.10 each, cumulative non-convertible Islamic Junior Sukuk and Islamic Commercial papers and Medium Term Notes Issuance Programme (“Senior Sukuk”) to finance the Acquisition.