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At PETRONAS Gas Berhad (PGB), we advocate transparency to stakeholders and we are honoured to present this report as the primary source of information on our Group’s financial and non-financial performances for 2018 and on the outlook for 2019 across our operations in Malaysia.

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SCOPE AND BOUNDARY OF REPORTING

The report covers the primary activities of the Group, our business segments and our subsidiaries as well as joint venture operations. The report addresses the information requirement of long term investors. We also present information relevant to the way we create value for other key stakeholders, including our employees, customers, regulations, suppliers and communities.

This report covers period from 1 January to 31 December 2018, unless otherwise stated.

REGULATIONS COMPLIED

• Bursa Malaysia Main Market Listing Requirements• Companies Act 2016 • Malaysian Financial Reporting Standards• International Financial Reporting Standards

SUSTAINABILITY

Consistent with our commitment to sustainability, we also provide extensive report on how we respond to stakeholders in relation to economic, environmental, social and governance.

ABOUT OUR REPORT

36thANNUAL GENERAL MEETING FOR PETRONAS GAS BERHAD

Mandarin Oriental Kuala Lumpur

Tuesday, 30 April 2019

10.00 a.m.

Integrated Reporting cross-referencing

INTEGRATED REPORT

This year marks the fourth year in our integrated reporting journey, with greater emphasis on improving clarity and conciseness. We continue to provide balanced and accurate information on our strategy, performance and opportunities in relation to material financial, economic, social, environmental and governance matters. Given key developments affecting PGB this year, we have revalidated the material matters and risks which could substantially affect our ability to create value in the short, medium or long term, taking into account our stakeholders’ concerns. We discuss how we use our six input capitals to create value over time. We also offer our strategic blueprint and discussion on our strategic drivers which enrich our ability to remain commercially viable and socially relevant.

1 Strategic Drivers

2 Business Review

3 Key Stakeholders

4 Key Resource Capitals

5 Performance Review

6 Basis of Preparation

7 Sustainability

8 Corporate Governance

9 Our Key Risk Management

10 Operating Environment

11 Investor Relations

Read more on the basis of preparation on page 50.

Read more on sustainability on page 152 onwards.

6

7

In our quest to achieve sustainable world class standards befitting our role as a Leading Gas Infrastructure and Centralised Utilities Company, PETRONAS Gas Berhad (PGB) is PUSHING FORWARD its goals to deliver our operational excellence, commercial excellence as well as our growth aspirations.

With the liberalisation of the gas market, PGB has opened its doors to Third Party Access (TPA). In this environment, we have to be competitive and efficient to remain relevant. As such, we are ready to seize any opportunities and rise to any challenges that may arise.

We remain confident that our overall strategic direction will continue to strengthen our presence, and provide a sustainable and resilient future for PGB as well as delivering value to our stakeholders in meeting the nation’s needs in a responsible manner.

RATIONALE

OUR STAKEHOLDERS

• INVESTORS AND FUNDING INSTITUTIONS• CUSTOMERS• BUSINESS PARTNERS AND SUPPLIERS• EMPLOYEES AND UNIONS• COMMUNITIES• GOVERNMENT AGENCIES/AUTHORITIES

01

0203

0405

06

About Our Report

C O N T E N T S

WHAT’S INSIDETHIS REPORT

4 Overview of PETRONAS Gas Berhad4 Who We Are6 What We Do8 Where We Operate11 Why Invest in Us

14 Chairman’s Statement18 MD/CEO’s Statement 24 Group CFO’s Review28 2018 Key Highlights 28 Business Highlights 29 Financial Highlights30 Key Milestones32 Corporate Information33 Group Corporate Structure34 Group Business Activities and

Processes36 Our Value Creating Business Model40 Key Resource Capitals: Role and

Scoreboard

152 About This Report153 Sustainability Highlights154 Sustainability Framework156 Sustainability Statements 158 Economic Sustainability 160 Environmental Sustainability 166 Social Sustainability

88 Board of Directors90 Board at a Glance92 Profile of the Board of Directors100 Leadership Team102 Profile of Leadership Team106 Organisation Structure

A. Forward Strategies45 Our Operating Environment 46 Stakeholders Engagement48 Strategic Blueprint50 Material Matters52 Strategic Drivers53 Strategic Objectives54 Risks and Opportunities56 Key Performance Indicators57 Performance Scorecard

B. Forward Driven Performance62 5-year Group Financial Analysis64 5-year Financial Summary66 5-year Group Financial Information67 Group Quarterly Performance68 Simplified Group Statement of

Financial Position70 Key Interest Bearing Assets and

Liabilities70 Statement of Value Added71 Distribution of Value Added72 Financial Calendar73 Investor Relations

C. Forward Focused78 Business Review 78 Gas Processing 80 Gas Transportation 82 Regasification 84 Utilities

108 Corporate Governance Overview Statement

124 Board Audit Committee Report130 Nomination and Remuneration

Committee Report136 Statement on Risk Management

and Internal Controls

FUTURE FORWARD

FORWARD VISION

MANAGEMENT DISCUSSION & ANALYSIS FORWARD TOGETHER

MOVING FORWARD RESPONSIBLY

PROGRESSING OUR SUSTAINABLE JOURNEY FORWARD

FEEDBACKWe need your feedback to make sure we are covering the things that matter to you.

Email us at [email protected]

07 08288 Analysis of Shareholdings291 List of Internal Policies292 Summary of Landed Property, Plant

and Equipment300 Top 10 Landed Property, Plant and

Equipment301 Corporate Directory 302 Notice of Annual General Meeting 305 Administrative Details for the

36th AGM306 Glossary

• Proxy Form

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

179 Directors’ Report185 Statement by Directors185 Statutory Declaration186 Consolidated Statement of

Financial Position187 Consolidated Statement of Profit

or Loss and Other Comprehensive Income

188 Consolidated Statement of Changes in Equity

192 Consolidated Statement of Cash Flows

193 Statement of Financial Position194 Statement of Profit or Loss and

other Comprehensive Income195 Statement of Changes in Equity196 Statement of Cash Flows197 Notes to the Financial Statements285 Independent Auditors’ Report

OTHER INFORMATIONFINANCIAL STATEMENTS

CHAIRMAN’S

STATEMENT

STRATEGIC

DRIVERS

BUSINESS

REVIEW

14

52

78

PETRONAS GAS BERHADANNUAL REPORT 2018

MARKET CAPITALISATION TOTAL ASSETS

RM38.0 billion RM18.4 billion

SHARED VALUES

Loyalty

Professionalism

Integrity

Cohesiveness

A Leading Gas Infrastructure And Utilities Company

• We are a Business Entity

• Gas Infrastructure and Utilities is our Core Business

• We Operate Safely, Reliably and Competitively

• We Optimise the Gas Value Chain to Maximise Returns for our Stakeholders

WE ARE MALAYSIA’S LEADING GAS INFRASTRUCTURE AND CENTRALISED UTILITIES COMPANY AND ONE OF THE LARGEST COMPANIES ON THE LOCAL BOURSE IN TERMS OF MARKET CAPITALISATION, WITH CORE BUSINESSES IN GAS PROCESSING, GAS TRANSPORTATION, REGASIFICATION AND UTILITIES.

WHOWE ARE

VISION

MISSION

4

PETRONAS GAS BERHAD 01 FUTURE FORWARD 02 FORWARD VISION 03 MANAGEMENT DISCUSSION & ANALYSIS 04 FORWARD TOGETHER

OVERVIEW OF PETRONAS GAS BERHAD

GROUP REVENUE SHARE CAPITAL WORK FORCE

RM5.5 billion RM3.2 billion 1,959 employees

HOW WE CREATE SUSTAINABLE VALUE

PETRONASCULTURAL BELIEFS

HOW WE DIFFERENTIATE OURSELVES

Vision & Mission I stretch my limits to deliver superior results

Material Matters I own the results and don’t blame others

Strategic Objectives I plan, commit and deliver with discipline

Strategic Drivers I always keep my promise and build mutual trust

Key Risks andMitigations I seek, give and act

positively on feedback

I collaborate for greater good of PETRONAS

123456

Our operational excellence and reliable product

delivery

Our high-performing people

Our integrated gas infrastructure and

facilities

Our profitable and sustainable business

model

RESULTS MATTER

OWN IT!

FOCUSED EXECUTION

NURTURE TRUST

TELL ME

SHARED SUCCESS

To understand more on our strategy refer to page 46 onwards.

Read more on how we create value using the six capitals on pages 40 and 41.

Targets, Results and Prioritisations

1 4

5

05 MOVING FORWARD RESPONSIBLY 06


07 FINANCIAL STATEMENTS 08 OTHER INFORMATION ANNUAL REPORT 2018

WHATWE DO

Processes PETRONAS’ upstream natural gas from offshore Peninsular Malaysia into salesgas, ethane, propane and butane

GAS PROCESSING

GAS TRANSPORTATION

REVENUE

REVENUE

RM1.6 billion

RM1.4 billion

GROSS PROFIT

RM639.3 million

GROSS PROFIT

RM1,018.0 million

Transports processed gas to shippers’ end customers through Peninsular Gas Utilisation (PGU) pipeline network, Pengerang Gas Pipeline (PGP) and smaller distribution systems in Miri and Bintulu

BUSINESS UNITS & HIGHLIGHTS

01 FUTURE FORWARD 02 FORWARD VISION 03 MANAGEMENT DISCUSSION & ANALYSIS 04 FORWARD TOGETHERPETRONAS GAS BERHAD

6


UTILITIES

REGASIFICATION

REVENUE

REVENUE

RM1.3 billion

RM1.2 billion

GROSS PROFIT

RM180.6 million

GROSS PROFIT

RM698.0 million

Manufactures and supplies electricity, steam, industrial gases and others to petrochemical

complexes in Kertih and Gebeng

Receives capacity users’ imported Liquefied Natural Gas (LNG), stores it in LNG Regasification Terminal Sg. Udang’s (RGTSU)

floating storage units and LNG Regasification Terminal Pengerang’s (RGTP) storage tanks and converts the LNG to salesgas




7

MAIN PGU PIPELINE LENGTH GAS – IN

PGU I : Kertih – Teluk Kalong 32 km 1983

PGU II 714 km

Sector I : Teluk Kalong – Segamat 265 km 1991

Sector II : Segamat – Kapar 241 km 1991

Sector III : Segamat – Plentong 208 km 1991

PGU III 450 km

Sector I : Meru – Lumut 184 km 1996

Sector II : Lumut – Gurun 130 km 1996

Sector III : Gurun – Pauh 136 km 1996

Loop 1 : Kertih – Segamat 266 km 1999

Loop 2 : Segamat – Meru 228 km 2000

Total 1,690 km

OVERALL PIPELINE LENGTH (km)

Main PGU 1,690

Lateral 458

Liquid 373

Sungai Udang 30

Pengerang 72

Sarawak 37

Total 2,660

VRSB

PULAUPINANG

GPS

Utilities Kertih

Utilities Gebeng

GPK

TTM

in progress

STRAITSOF MELAKA

SOUTH CHINA SEA

PERAK

SELANGORPAHANG

KEDAH

KELANTAN

TERENGGANU

JOHOR

SINGAPORE

NEGERISEMBILAN

PERLIS

WHERE WEOPERATE

Industry

Compressor Station

Gas Processing Plant

Utilities Plant

Independent Power Producer Power Station

Tenaga Nasional Berhad Power Station

Kimanis Power Plant

Offshore LNG Regasification Terminal

Onshore LNG Regasification Terminal

Air Separation Unit

O&M Services

8



COMPLEX GPP CAPACITY (mmscfd)

Gas Processing Kertih (GPK)

1 310

2 250

3 250

4 250

Gas Processing Santong (GPS)5 500

6 500

Total 2,060

LNG REGASIFICATION TERMINAL CAPACITY (mmscfd)

Sungai Udang, Melaka 530

Pengerang, Johor 490

OPERATIONS & MAINTENANCE (O&M) SERVICES

1. Sabah-Sarawak Gas Pipeline (SSGP)2. Trans Thai-Malaysia (M) Sdn Bhd (TTM)3. Voltage Renewables Sdn Bhd (VRSB)

SARAWAK

Miri

SSGP

Bintulu

SABAHKimanis

SOUTH CHINA SEAN

9




• Headquartered at PETRONAS Twin Towers, Kuala Lumpur

• Eight operating sites across Malaysia

• Two gas processing plants in Kertih

• Two utilities facilities in Kertih and Gebeng

• 2,660km of pipeline mainly in Peninsular Malaysia

• Two LNG regasification terminals in Melaka and Johor

• Operation and Maintenance (O&M) service provider

OURPRESENCE

OURSTRATEGY

CommercialExcellence• Retain• Capture• Margin

Operational Excellence• HSSE• Reliable• Efficient

Growth DeliveryExcellence• Timely• Value Adding

To become the Leading Gas Infrastructure and Utilities Company

10



WHYINVEST IN US

HIGH RELIABILITY ACROSS ALL

ASSETS

STABILITYOF EARNINGSUNDERPINNED BY LONG TERM CONTRACTS

PROVIDING AGILITY TO CAPTURE OPPORTUNITIES

ROBUSTBALANCE SHEET

TOSHAREHOLDERS

LEADINGGAS INFRASTRUCTURE

OUR VALUE PROPOSITION

OWNER AND O&M PROVIDER

SUSTAINABLERETURNS

WORLD CLASSPERFORMANCE

11




GAS PROCESSING (GP)PUSHINGFORWARDTO ELEVATEPERFORMANCE

We are stepping up our efforts to sustain world class performance across our facilities, delivering our products and services in a safe, reliable and efficient manner. Safety remains our utmost priority as we continue to drive efficiency across our operations and improve utilisation of our assets.

G A S P R O C E S S I N G

CHAIRMAN’SSTATEMENT

DATUK MOHD ANUAR TAIB

What a fantastic year for PETRONAS Gas Berhad (PGB) this has been. Despite shrinking global and local economies due to the US-China trade war, tightening financing and geopolitical uncertainties, we recorded our best ever financial performance. We exceeded last year’s record revenue by 12% to hit RM5.5 billion and achieved profit for the year of RM1.9 billion, the highest ever in history1.

Most encouragingly, these results have been achieved in a year that marked the beginning of our Third Party Access (TPA) journey. We are fully supportive of the government’s aspiration for a competitive market, and will continue to provide safe, reliable and efficient gas transmission and LNG regasification services to the nation as we bridge the gas supply from the upstream to the demand areas.

Indeed, the year’s performance is indicative of our world-class operational standards. These, combined with additional revenue from our second regasification plant in Pengerang (RGTP) which completed its first full year of

operations since being commissioned in November 2017, contributed to our top and bottom line numbers. Moving forward, completion of the second tank at RGTP during the year further enhanced the plant’s storage capacity hence also its revenue potential.

We strive for excellent financial results not only for our own growth but also to be able to declare attractive dividends. It is, again, with pleasure to share that, this year, we are announcing our second consecutive record dividend of 72 sen per share, up from 66 sen per share in 2017.

For the year 2018, our earnings per share (EPS) stood at 91.5 sen as opposed to 90.6 sen in 2017. Both our return on equity and EPS demonstrate PGB’s ability to create optimum value from our assets. Though not correlated in a direct manner, our performance has also contributed to an increase in market capitalisation, which expanded from RM34.6 billion to RM38 billion year-on-year.

As one of the largest market cap companies on Bursa Malaysia, the Board realises it is even more imperative for us to maintain the highest level of governance. The Board has, accordingly, continued to devote our time to matters such as PGB’s transparency and integrity, constantly reviewing and updating our policies to ensure a robust governance framework. Our efforts were validated when we were listed among the Top 30 ASEAN Public Listed Companies for governance at the Minority Shareholders Watch Group (MSWG)’s ASEAN Corporate Governance Awards held on 26 November.

Further strengthening our governance, we enhanced our Board composition by welcoming two new Independent Non-Executive Directors – Dato’ Abdul Razak Abdul Majid and Puan Farina Farikhullah Khan – who bring added objectivity to our decision-making. With them on our Board, we now have four Independent Directors and four women directors out of a total of 8, very much in line with recommended practices of the Malaysian Code on Corporate Governance 2017.

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DEAR SHAREHOLDERS

“We strive for excellent financial results not only for our own growth but also to be able

to reward you, our valued shareholders, for the trust you

have bestowed in us by investing in the company”.

DATUK MOHD ANUAR TAIBChairmanPETRONAS Gas Berhad

15

IN 2018, WE CONTINUE TO IMPROVE ON HSSE AND STRIVE TO ACHIEVING ZERO NON-COMPLIANCE. AT THE SAME TIME, WE ACHIEVED ONE OF THE BEST OPERATIONAL PERFORMANCES, EARNING PERFORMANCE BASED STRUCTURE (PBS) INCOME FOR THE FOURTH CONSECUTIVE YEAR.

Good governance is integral to PGB’s sustainability, which is another key concern of the Board. We recognise that our sustainability depends on the value we bring to our stakeholders, not just our shareholders but also our business partners and suppliers, customers, employees and the nation at large. To determine what they expect of PGB, and what they see as being important, we conducted a materiality analysis/assessment and execute our sustainability programmes accordingly to better manage our material matters.

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CHAIRMAN’S STATEMENT

FINANCIAL PERFORMANCE

RECORD

EARNINGS PER SHARE

91.5sen2017: 90.6 sen

DIVIDEND DECLARED

RM1.4billion2017: RM1.3 billion

+8%

Safety is a key issue, and one that occupies top priority. We continually enhance our safety processes and procedures to ensure no one gets hurt at our work sites. This has resulted in a good safety record, with zero fatalities over the last two years, and a total recordable incident frequency (TRIF) that has been steadily decreasing.

Within our local communities, PGB undertakes various Corporate Social Responsibility (CSR) initiatives to help bridge the socio-economic gap through educational and entrepreneurial efforts targeting school children and women from the low-income group. Not forgetting the environment, in 2018, we entered into a new collaboration with the Malaysian Nature Society (MNS) for another conservation effort, “Sayangi Sungai Latoh” in Johor, aimed at restoring the riverine ecosystem and protecting the indigenous species of flora and fauna along our gas pipeline Right of Way.

As a player in the oil and gas industry, we are also cognisant of the added responsibility we shoulder to ensure minimal carbon footprint. Climate change has become an urgent global issue that r equ i res imm e d ia te a c t io n b y governments and major corporations. The Malaysian Government itself has committed to reducing the country’s carbon emissions intensity by 45% (as measured against GDP) by year 2030 from a 2005 baseline. For our part, PGB is undertaking various initiatives to reduce our carbon emissions while helping to preserve the environment through efficient waste and water management.

We believe that, as we continue to entrench our social citizenry and environmental stewardship, we will see PGB transform into a truly world-class organisation.

The Board plays a key role in guiding this transformation, and I would like to take this opportunity to thank my fellow colleagues for their time and dedicated effort towards this end. While welcoming our two new members, I would also like to acknowledge the contributions of Mr Heng Heyok Chiang @ Heng Hock Cheng, who served as an Independent Non-Executive Director for two years before retiring as of 31 December 2018. On behalf of the Board, I wish him the best in all future undertakings.

I would also like to thank our government and the Energy Commission, our shareholders, business partners, suppliers and shareholders for their continued support. We truly value your contributions to PGB and will strive continuously to deserve the trust you have placed in our company. Most of all, I would like to express my heartfelt appreciation to our competent management and all employees of PGB for their hard work and dedication towards achieving all our financial, social and environmental goals. With continued teamwork and focus on our fundamentals, we are set to build an organisation that will truly be a force to reckon with in the gas infrastructure and utilities space.

1 Based on normalised profit after tax of RM2.0 billion which excludes tax incentive impact. Refer to 5-Year Group Financial Analysis section of this Annual Report for details.

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KAMAL BAHRIN AHMAD

MD/CEO’SSTATEMENT

Improvement on HSSE

PBS INCOME12 Months

ACHIEVEMENTS

SUPERIOR PLANT PERFORMANCE

across company

Our legacy assets continued to run at the World Class performance level while our newly commissioned regasification plant and recently completed and commissioned our Air Separation Unit (ASU) in the Pengerang Integrated Complex (PIC), Johor have steadily injected new revenue streams since its commercial operation date. Our stellar performance has always been driven by our people, who share PGB’s passion for excellence in everything we do.

As both Transmission and Regasification businesses entering into a regulated regime, i.e. Third Party Access (TPA), PGB is embarking into our next stage of transformation called 301Q99 Pushing Forward in order to remain safe, reliable and efficient gas infrastructure company as per the spirit of TPA, as well as to remain competitive in pursue of our potential new income streams.

OPERATING ENVIRONMENT

The year 2018 witnessed a continued slowdown in the global economy, with trickle-down effects on Southeast Asia including Malaysia. The country’s real gross development product (GDP) was estimated by the World Bank at 4.7% as opposed to 5.9% in 2017, mainly from lower public investments which also dampened trade, particularly imports.

The global gas industry continued to grow, driven primarily by China which is focusing on gas as a primary fuel under its Blue Sky programme to reduce air pollution. The International Energy Agency (IEA) has predicted that gas demand will grow by an average of 1.6% annually to pass the 4 trillion cubic metres (tcm) mark by 2022. In contrast from the past, this growth will be stimulated more by the industrial sector as opposed to power generation, with emerging markets accounting for the bulk of the increase.

In Malaysia, the energy mix has been increasingly dynamic with the government’s push for 20% contribution from renewables by 2025. Our aspiration remains to support a sustainable energy mix across various consumption channels in the country. We expect increased demand from various sectors including heavy industries, manufacturing and transportation. At PIC, for example, operations of the refinery and petrochemical complexes in 2019 will contribute to steady demand for gas in the country.

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It gives me great pleasure to provide an overview of

PETRONAS Gas Berhad (PGB)’s performance in 2018.

The 3ZERO100 Transformation had set the

fundamentals to achieve our business targets, thus

contributing to the best performing year in 2018.

DEAR SHAREHOLDERS

KAMAL BAHRIN AHMADManaging Director/Chief Executive Officer

19

1 Our strategic drivers are further

elaborated on pages 52 to 53. 2 Read more on our business segment

performance on pages 78 to 85.

A key development during the year was the implementation of TPA in January, opening our gas transportation and regasification facilities to gas shippers. The idea is to provide a platform for gas market liberalisation thus encourage healthy competition at market-determined gas prices. TPA itself does not affect PGB, as our transportation and regasification capacities are fully booked by PETRONAS Energy & Gas Trading Sdn Bhd (PEGT), a new entity established by PETRONAS in compliance with the TPA requirements. However, tariffs decided by the Energy Commission could affect our revenue due to the newly introduced Incentive Based Regulation (IBR) mechanism used to determine the tariff. Nevertheless, there is still much potential to grow our Utilities Business and new opportunities within our four core businesses. Thanks to the Energy Commission on the understanding of the market, the agreed gradual migration of the Regulated Asset Base (RAB) determination from Depreciated Replacement Cost (DRC) to Net Book Value (NBV), will cushion the impact of TPA to the Gas Transportation tariff.

STRENGTHENING OUR FUNDAMENTALS

PGB has been undergoing a comprehensive transformation programme since 2015 to increase our operational efficiencies, commercial excellence and most importantly, enhance our safety performance in order to become a Leading Gas Infrastructure and Centralised Utilities Company. The programme, called 3ZERO100, focused in i t ia l ly on strengthening our basics of safety, compliance, services and project delivery.

In 2017, it was refined to enhance our competitiveness, productivity and efficiency driven by highly competent and empowered people. Renamed 3ZERO100 Beyond, our strategic plan also encompassed a Digital Transformation journey to capture and analyse data in order to enhance performance across the board.

Continuing to build on 3ZERO100 Beyond, during the year under review we incorporated Commercial Excellence and Growth Delivery Excellence to the programme. Through the former, we seek to retain and capture more customers while driving up our margin; while the latter is targeted at growing our customer base, especially for the Utilities business, towards full capacity.

BUSINESS REVIEW

Maintaining a high level of operational and commercial excellence, each of our four core businesses pulled in another set of impressive results, achieving world class standards in all key parameters.

Gas Processing

Gas Processing achieved its best performance in five years, with 100% product delivery reliability for sales gas, propane and butane. Operational reliability for sales gas averaged 99.98%, propane 99.1%, ethane 99.7% and butane 99.1%. On Overall Equipment Effectiveness (OEE) metrics, this segment also recorded a commendable records of 99.8% for sales gas, 99.3% for ethane, 98.7% for both propane and butane. Such high levels of efficiency led to revenue of RM1.6 billion, equivalent to 29% of the Group’s total, while profit stood at RM639.3 million.

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MD/CEO’S STATEMENT

5 Read more on our financial

performance on page 24 onwards.

Gas Transportation

Through effective management of the Peninsular Gas Utilisation (PGU) supply and delivery chain, Gas Transportation (GT) recorded zero supply curtailment, 100% sales gas delivery, and world class reliability as well as availability at 99.99% and 99.91% respectively. GT transported and supplied an average of 2,122 mmscfd of sales gas within Peninsular Malaysia. In Sabah and Sarawak, where we operate the Sabah-Sarawak Gas Pipeline (SSGP), despite the challenges on the geo-hazard, we transported an average of 268 mmscfd of salesgas. Revenue for the year stood at RM1.4 bil l ion, contributing to 25% of the Group’s total, while the division’s gross profit amounted to RM1,018.0 million.

Regasification

During the year under review, RGTSU maintained its 100% Overall Equipment Effectiveness (OEE) record, while at RGTP we successfully commissioned the second tank ahead of schedule, in April, increasing the regasification plant’s total storage capacity to 400,000 m3. RGTP also successfully completed a 90-day Available Test Run (ATR) which demonstrated its meeting the design intent of minimum 98.0% for Reliability and Availability. In addition, we tested the plant’s capability to reload LNG onto LNG vessels, marking another milestone in enhanced RGT capabilities. Thanks to a full year’s operation of the new RGTP, Regasification achieved a 61.0% increase in revenue to RM1.2 billion.

Utilities

Maintaining excellence in plant operations, our Utilities business also recorded its best performance for the last five years, achieving 99.6% reliability for both electricity and steam respectively, and 98.9% reliability for industrial gases. Performance on OEE came very high at 99.1% for electricity, 99.4% for steam and 99% for industrial gasses. This was complemented by 100% product delivery reliability for electricity, 99.98% for steam and 99.0% for industrial gases. The division achieved RM1.3 billion in revenue with gross profit amounting to RM180.6 million.

OUR DIGITAL JOURNEY

The entire PETRONAS Group is “Going Digital” as a means to become future-proof. Adoption of the latest technologies in data analysis will assist in translating information more accurately to develop effective solutions faster, while enhancing the decision-making process for better results.

The efficacy of digital technologies was proven at PGB. Early in the year, when we incorporated various solutions in our largest gas processing plant turnaround to date. Using RFID, we were able to track the movements of some 3,000 workers while enhanced safety features allowed for better surveillance and faster response to distress calls, leading to successful completion of the turnaround without any incidents. Productivity also increased through optimised delegation of resources for specific tasks.

Moving forward, another initiative – PETRONAS Integrated Vision for Operational Excellence and Technology (PIVOT), will be adopted to use data to improve plant safety, reliability and efficiency. PIVOT addresses operational pain points and will be able to track and anticipate potential issues through descriptive and advanced analytics dashboard. The digital platform is currently being implemented and is anticipated to be rolled out in 2019.

THROUGH THE CUSTOMERS’ LENS

As our customers are fundamental to our long-term success, we have always invested our efforts into fulfilling their needs. Today, as our business landscape becomes increasingly competitive and customers continue to reduce costs to maintain their own profitability, we continue to place greater resources into building stronger customer relationships to retain loyalty.

Various initiatives to develop techno-commercial leaders are being carried out under our Commercial Excellence platform. This year, we launched the “CX Academy” where such techno-commercial experts are trained to have both technical and commercial skills to serve our customers’ needs effectively and efficiently. Seventeen young executives from across the Group underwent an intensive nine-month programme designed specifically for this purpose and more participants are being selected for future enrolment.

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FINANCIAL PERFORMANCE

In 2018, we achieved an all-time high revenue of RM5.5 billion and a record gross profit of RM2.5 billion, the latter marking an 14% increase from RM2.2 billion in 2017.

Our performance was boosted by additional revenue from a full-year’s operat ion of RGTP, which was commissioned in November 2017, as well as income from the Performance Based Structure (PBS) that is applied to our Gas Processing efficiencies. We achieved RM73.4 million from the PBS from consistently high OEE of our Gas Processing plants.

Meanwhile, we grew our total assets by 5% to RM18.4 billion, maintaining a strong cash position.

SAFETY, ALWAYS A PRIORITY

While we take pride in our operational efficiency, safety has always been our top-most priority. Our ultimate goal is for every staff to get home to their families happy and, most importantly, safely. We constantly review and enhance our safety guidelines, procedures and culture, ensuring we adopt best practices as these emerge. The most recent safety campaign, “Jom Patuh dan Tegur” (Let’s Comply and Intervene), places strict emphasis on safe behaviours.

This has resulted in zero fatality, lost time injury (LTI), major fire incident, major loss of primary containment (LOPC) and with more than 50% reduction in HSSE incidents.

MANAGING OUR RISKS

All businesses are associated with risks, the gas business included. However, risk does not always mean adversity. While the TPA tariff may affect our revenue, at PGB we always find ways to turn potential threats into opportunities.

LOCAL AND REGIONAL RECOGNITION

While our results speak for themselves, it is always encouraging to receive affirmation of our performance from external parties. Throughout the years, PGB has accumulated an impressive string of accolades, and continued to do so in 2018.

During the year, we were listed among the Top 30 ASEAN Public Listed companies at the 2nd ASEAN Corporate Governance (CG) Awards organised by the Minority Shareholders Watch Group. We were also recognised as having the Highest Return on Equity Over Years among Utilities Company by The Edge Billion Ringgit Club 2018. Our technical capabilities were recognised by Institut

Kimia Malaysia via its Laboratory Excellence Award, while efforts to inculcate a culture of innovation were validated by our winning Malaysia Productivity Corporation’s Quality Environment (5S) Award at its Annual Productivity and Innovation Conference 2018. In the area of Health, Safety and Environment (HSSE), an Excellence Award in the Gas Utilities Category was received from the National Council for Occupational Health and Safety.

Openness and transparency are values we hold dearly, and are reflected in the breadth and depth of disclosure in our annual reports. It was therefore very satisfying to have won the Gold Award for the Most Outstanding Annual Report at the National Annual Corporate Report Awards (NACRA) 2018. At the same

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sks,risk hile

nue, urn

22


MD/CEO’S STATEMENT

7 Read more on our social sustainability

initiatives on page 167 onwards.

10 Read more on our operat ing

environment on page 45.

awards ceremony, we also took away the Industry Excellence Award for Industrial Products and Technology; Platinum Award for the Best Designed Annual Report; and Silver Award for the Best Integrated Reporting. In addition, we won a gold hat-trick at the Annual Report Competition (ARC) 2018, in the Oil and Gas Production Services category for: Non-Traditional Annual Report, Cover Photo/Design and Infographics.

PUSHING FORWARD

The year 2019 began with a reduction in the gas transportation tariff from RM1.248/GJ to RM1.072/GJ under the new IBR, based on guidelines by the EC. At the same time, PETRONAS agreed to an increase in fixed reservation charge to RM2,524/mmscf from RM2,330/mmscf for gas processing and is offering better PBS terms as we enter into the second Gas Processing Agreement (GPA) starting 1 January 2019.

Concurrent with the change in tariff rates, we expect to witness an increase in revenue from the higher reservation charge, increased utilisation of the RGTP, and new stream of income coming from

our newly-commissioned Air Separation Unit (ASU) in Pengerang Integrated Complex (PIC). We are also confident of our team of techno-commercial experts achieving results in terms of increased Utilities sales through keen focus on expanding our customer base by targeting other existing and emerging industrial hubs.

Meanwhile, we will continue to build on our operational and commercial efficiencies, as well as on further digitalisation of our systems and processes to maintain world-class standards across our core businesses and internal corporate functions. Our people are highly motivated by PGB’s recent successes and are driven to see this company continue to push forward in our agenda to become a Leading Gas Infrastructure and Utilities Company.

We anticipate exciting developments in the gas industry, and have every intention of being there for consumers – supplying their needs reliably and cost-efficiently. Realising this, through 301Q99 gameplan, we continue to become focussed and committed as a prudent asset operator to increase our assets utilisation, move

our energy and maintenance costs index towards a better Quartile 1 position as well setting a new benchmark for reliability in our industry of our assets. This initiative is expected to bring positive impact to our bottomline as we drive down our cost to serve to our customers for their benefits while setting us up strategically as a more competitive player in the new liberalised markets.

ACKNOWLEDGEMENTS

Operationally and financially, PGB has achieved many successes in 2018. For this, there are many parties to thank.

I would like to acknowledge my gratitude to the various government agencies and regulatory bodies, our shareholders, our customers and our business partners.

I would also like to thank my leadership team and staff of PGB for their hard work, passion and focus in executing operational excellence - and also their families for the sacrifice. I am deeply grateful for the astute counsel of our Board of Directors which has been very supportive in guiding PGB through this period of business landscape change.

We are at a very exciting juncture in our history, as liberalisation of the gas industry starts in earnest. With the support of all our stakeholders, we will be able not just to transition into this new era but play our part in shaping it. Throughout the years, we have enjoyed very strong and collaborative relationships with our stakeholders, and PGB is committed to maintain, indeed build these highly valued relationships.

To everyone, thank you.

23




GROUP CFO’SREVIEW

SHARIZA SHARIS MOHD YUSOF

REVENUE

RM5.5 RM1.9billion billion2017: RM4.9 billion 2017: RM1.8 billion

+12% +5%

PROFIT AFTER TAX

The year under review marked several milestones for PGB Group.

The Third Party Access (TPA) came into effect from January 2018 onwards, placing two of the Group’s business segments – Gas Transportation and Regasification – under regulatory purview of the Malaysian Energy Commission. Tariffs and hence revenue for both segments were maintained for 2018, prior to the prescribed one-year Pilot Period for TPA implementation in 2019.

With the first full year of contribution from the LNG Regasification Terminal in Pengerang, profit for the year under review was at RM1.9 billion, a 5% growth from 2017. This was after accounting for a once-off derecognition on deferred tax assets at one of our joint venture companies, attributable to time limitation imposed on certain tax allowances introduced under the new Finance Act 2018. Excluding the derecognition, profit for the year would have surpassed the RM2 billion mark. At the same time, Group total assets grew by RM796.5 million to RM18.4 billion.

SHARIZA SHARIS MOHD YUSOFChief Financial Officer

24


The record profits and robust balance sheet translated to total dividends of 72 sen per share declared for the year, equivalent to a dividend payout ratio of 79% of profit after tax and non-controlling interest.

In view of the changing business landscape, the primary focus areas for 2018 and indeed moving forward are:

ENHANCING CAPITAL MARKET ENGAGEMENT

During the year, there has been a conscious step-up on investor relations activities and engagements in terms of frequency as well as content. With the aim of providing timely and relevant information to our current and potential investors, capital market communications were also made more external, targeted and forward focused.

We organised a site visit for our institutional investors and also analysts to our newly operat iona l LNG Regasification Terminal in Pengerang so as to provide appreciation on one of the key drivers for our financial performance in 2018.

We also conducted a face-to-face engagement for our Q4 2018 results, with a special session on TPA. This contrasts with our usual quarterly conference calls. Besides providing access to our Management, we were able to share on how the TPA would work as well as on how it may impact our performance.

As PGB embarks on the journey of gas market liberalisation, we look forward to having even more strategic engagements with the capital market in future.

MAINTAINING EFFICIENCY OF FINANCIAL CAPITAL

The Group’s financial standing remains fundamentally strong. Gearing as at 31 December 2018 remains prudent at 20% (including arrangement accounted for as leases under MFRS), giving the Group ample capacity to raise funds should the need arise. Nevertheless, due consideration shall be given between equity and debt funding depending on the specific nature and requirements for funding.

The Group’s external borrowings relate to a USD500 million Term Facility with Mizuho Bank Limited, which was primarily used to finance our LNG Regasification Terminal and Air Separation Unit in Pengerang, Johor via on-lending to our subsidiary and joint venture companies respectively. Both companies have achieved commercial operations and are now generating revenue streams.

Capital and cash flow requirements of all the companies within the Group continue to be rigorously prepared and monitored both on short term and long term basis . This ensures t imely repatriation and compliance to minimum cash requirement levels while taking into account potential opportunities as well as changes to the business environment, including TPA.

STRENGTHENING FINANCIAL RISK MANAGEMENT

Whilst the Group is subject to several financial risks arising from the normal course of business, in particular credit risk, liquidity risk and market risk, these continue to be managed timely and proactively.

Credit Risk

Credit risk is minimised as we currently only enter into contracts with counterparties with high credit standing. We also implement other credit enhancement measures where applicable, such as cash deposits and bank guarantees.

While there is already a credit management process and procedures in place within the Group, these are currently being reviewed and strengthened in view of potential new shippers and capacity users under TPA.

Liquidity Risk

With sufficient cash and liquid marketable assets to ensure smooth running of our business, the Group’s liquidity position is fairly comfortable. Underpinned by long term contracts and with over 90% of our business based on fixed returns, our business model remains cash accretive. Investment funding is done via internal equity, external term loans and loans from corporate shareholders of our joint venture company.

Market Risk

The market risks to which we are exposed primarily relate to foreign currency exchange rates and interest rates.

Whi le most of our bus iness is predominantly Ringgit-based, we undertake foreign exchange hedging arrangements on foreign exchange transactions where applicable to manage exchange rate fluctuations.

We also have in place interest rate hedging arrangements with hedge counterparties to manage and mitigate the interest risk on our USD500 million Term Loan facility, which is floating rate instrument. The hedging arrangements enables PGB to effectively pay a fixed interest rate on the Term Loan regardless of interest rate fluctuations.

Scan this QR code with your smart device for our Quarterly Financial Result.

25




25




CULTIVATING GOVERNANCE AND FISCAL DISCIPLINE

We continued to cultivate the importance of stronger financial governance and fiscal discipline throughout the year. This is especially relevant considering two of our business segments are now under regulatory control and also in view of our target to achieve and sustain first quartile efficiency in operations.

During the year, we revised our Limits of Authority to address new business requirements, tighten controls as well as align our CAPEX and OPEX budgeting and spend with TPA guidelines for Gas Transportation and Regasification businesses, and with Gas Processing Agreement terms for Gas Processing business. Once effective in 2019, this should allow for efficient decision making while at the same time ensuring compliance as well as appropriate line of sight.

Costs continue to be monitored extensively throughout the organisation. With a good ba lance between empowerment and accountability, variances are deliberated comprehensively up to Board level. Notably, we have achieved a reduction of nearly 15% on our repair and maintenance costs from 2017. We will continue to seek for opportunities to further optimise costs and drive efficiencies.

As one of the top counters in Bursa Malaysia, our commitment remains first and foremost to ensure sustainable returns to our shareholders.

OUR RESULTS

Group Financial Performance Review

Variance%In RM’000 2018 2017

Revenue 5,498,074 4,896,689 +12.3

Cost of revenue (2,962,141) (2,666,822) +11.1

Gross profit 2,535,933 2,229,867 +13.7

Profit before taxation 2,351,896 2,252,713 +4.4

Profit for the year 1,908,181 1,816,933 +5.0

Group revenue at RM5.5 billion was the highest in history, an increase of 12% or RM601.4 million compared to last year , dr iven by successfu l fu l l year operations of the Group’s LNG Regasification Terminal in Pengerang, Johor (RGTP). This was further supported by higher revenue from Utilities segment.

Cost of revenue saw an increase by 11% or RM295.3 million mainly arising from higher depreciation expense and fuel gas costs in line with full year RGTP operations and upward fuel gas price revision respectively. Of note, various initiatives to improve asset integrity made in the past years continue to bear fruit with the Group’s repair and maintenance costs recording a decline by nearly 15%.

Other income registered an increase by RM7.2 million or 5.2% to RM146.1 million, largely due to higher fund investment income from deposits in line with higher cash and fund balances.

Other expenses was higher by 255% or RM15.3 million due to once-off impairment loss on assets totalling RM16.9 million. The impairment follows the change of business at one of our customers and the amount was recognised after all efforts to find alternative use for the facilities were exhausted.

Finance costs was RM169.4 million, an increase of 49% or RM55.9 million attributable to recognition of previously capitalised interest expenses following completion of RGTP.

Share of profits from joint ventures and associate was lower by 156% or RM137.1 million, at a loss of RM49.3 million for the year under review compared to a profit of RM87.8 million in 2017, largely attributed to share of losses from a joint venture company, Kimanis Power Sdn Bhd (KPSB). The losses arose due to de-recognition of deferred tax assets (DTA) amounting to RM124.3 million (being 60% share of the Group) in relation to certain tax benefits which now have a 7 year utilisation limit under the new Finance Act 2018.

Against profit before tax, tax expense at RM443.7 million carries an effective tax rate lower than the statutory tax rate of 24%, mainly due to tax incentives granted for the Utilities business and RGTP.

Profit for the year improved by 5.0% or RM91.3 million on the back of higher revenue offset by share of losses from KPSB following de-recognition DTA as well as higher finance costs. Excluding the impact of DTA from KPSB, profit for the year would be higher by 12% or RM215.6 million at RM2,032.5 million.

WITH OUR STRONG FINANCIAL TRACK RECORD AND ACHIEVEMENTS, PGB IS INDEED POISED TO PUSH FORWARD INTO THE COMING YEARS.

26


GROUP CFO’S REVIEW

Segmental Review Gas Processing

Segment gross profit of RM639.3 million was lower by 2% or RM11.6 million as higher PBS income and lower plant maintenance costs was offset by higher depreciation expense following the completion of statutory plant turnarounds.

Gas Transportation

Segment revenue decreased by 2% or RM21.8 million relating to operations and maintenance revenue from Sabah Sarawak Gas Pipeline.

Accordingly, segment gross profit was lower by 3% or RM33.1 million on the back of lower revenue and higher operating cost mainly attributed to gas transportation license fee and higher depreciation expenses following the completion of capital projects.

Regasification

Segment revenue grew by 61% or RM471.9 million to RM1,245.4 million primarily driven by the successful full year operations of RGTP. Correspondingly, segment gross profit surged from RM378.0 million to RM698.0 million.

Utilities

Utilities segment concluded the year with higher sales volumes of electricity and industrial gases on the back of higher demand from customers. Realised selling price was also higher in line with upward fuel gas price revision on 1 January and 1 July 2018.

The higher volumes and price translated to improved revenue by 13% or RM152.6 million at RM1,321.1 million. Correspondingly, segment results grew from RM149.9 million to RM180.6 million.

Financial Position

The Group’s total assets increased by 5% or RM796.5 million, mainly contributed

by higher cash and cash equivalents generated from the Group’s full year revenue stream from RGTP.

Total equity of RM13.0 billion was higher by 4% or RM456.8 million attributable to profit recorded during the period partially offset by dividend payments to shareholders.

Total liabilities was higher by 4% at RM210.5 million mainly due to additional term loan drawdown of RM275.0 million during the year to fund growth projects, offset by settlement of payables in line with completion of capital projects.

Details of the Group’s financial position as at 31 December 2018 can be found on pages 68 and 69 as well as under Consolidated Statement of Financial Position sections of this Annual Report.

Cash Flows

The Group’s cash and cash equivalents stands at RM3.6 billion as at 31 December 2018, an increase of RM1.1 billion or 45% from RM2.5 billion as at 31 December 2017.

Net cash generated from operating activities was higher by 13% or RM378.1 million in line with the Group’s full year revenue stream from RGTP.

Net cash used in investing activities was lower by 55% or RM1,048.1 million mainly due to lower spending on capital expenditure following the completion of RGTP. During the year, Pengerang LNG (Two) Sdn Bhd, a subsidiary of the Group, received a grant totaling RM150.0 million from the Government of Malaysia to develop RGTP.

Net cash used in financing activities was higher by 349% or RM1,046.7 million mainly due to lower drawdown to finance RGTP.

Details of the Group’s cash flows as at 31 December 2018 can be found under Consolidated Statement of Cash Flows section of this Annual Report.

Gas Processing (RM million)

2017 2018

CORRevenue Gross Profit

1,571

.01,5

72.3

650

.9

921

.49

31.7

639

.3

Gas Transportation (RM million)

1,36

0.6

1,38

2.4

1,051

.1

342.

633

1.3

1,018

.0

2017 2018


Regasification (RM million)

1,24

5.4

773.

5

378

.0

395.

554

7.4 69

8.0

2017 2018


Utilities (RM million)

1,321

.11,1

68

.5

149

.91,018

.61,1

40

.5

180

.6


2017 2018

Read more about our business segment performance on pages 78 to 85.2

27




DIGITAL TURNAROUND

Successful go live during Gas Processing Santong (GPS) Turnaround in July 2018

REGULATION UNDER THIRD PARTY ACCESS

Effective January 2018, the Group’s Gas Transporation and Regasification segments have to comply with Gas Supply (Amendment) Act 2016, which includes regulation by the Malaysian Energy Commission

SUSTAINED OPERATIONAL EXCELLENCE

Stellar plant and facility reliability performance across all segments at par with world class standards

CONTRIBUTION FROM GROWTH PROJECTS

Achieved first full year of commercial operation of LNG Regasification Terminal Pengerang and commercial operations for the first train of Air Separation Unit Pengerang

BUSINESS HIGHLIGHTS

Sustained world class performance across the

Group’s plants, pipelines and facilities

28


2018 KEY HIGHLIGHTS

Record profits on the back of full year

contribution of the Group’s second

LNG Regasification Terminal in Johor

DIVIDENDS

72 sen/share2017: 66 sen/share

+9%REVENUE

RM5.5 billion2017: RM4.9 billion

+12%TOTAL ASSETS


+5%PROFIT AFTER TAX


+5%MARKET CAPITALISATION


+10%

FINANCIAL HIGHLIGHTS

29

ANNUAL REPORT 201805 MOVING FORWARD RESPONSIBLY 06


07 FINANCIAL STATEMENTS 08 OTHER INFORMATION

• Execution of a 20-year Gas Processing and Gas Transmission Agreement (GPTA) between PGSB and PETRONAS.

• Listing of PETRONAS Gas Berhad (PGB) on the main board of the then Kuala Lumpur Stock Exchange (now known as Bursa Malaysia Securities Berhad).

• Completion of PGU3. • Execution of the first Sale

and Purchase Agreement with Centralised Utility Facilities (CUF).

1992 to 1994• First salesgas delivery to

Senoko Power Station in Singapore via submarine pipeline.

• Commencement of operations of GPP2 and GPP3.

• Commencement of operations of GPP4.

• Commencement of operations of GPP5 and GPP6.

• First delivery of electricity to customers from CUF Kertih and CUF Gebeng.

• Secured RM1.4 billion worth of Islamic Financing from the domestic private debt securities to partly finance CUF project.

• Incorporation of PETRONAS Gas Sdn Bhd (PGSB) as a wholly-owned subsidiary of Petroliam Nasional Berhad (PETRONAS) in 1983.

• Commencement of operations of Peninsular Gas Utilisation (PGU) 1 and commissioning of Gas Processing Plant (GPP) 1.

1987 to 1991• Appointment of PGSB as

a throughput and servicing agent to PETRONAS for PGU via Thoughput Agreement.

• Commencement of operations of PGU2.

• Officiation of the Segamat Gas Transmission Centre by the Prime Minister of Malaysia, Tun Dr. Mahathir Mohamad.

1999 to 2000

1995 to 1998

1983 to 1984

30


KEY MILESTONES OUR JOURNEY 1983 – 2018

• Execution of Operation and Maintenance Services Agreement with Trans Thai-Malaysia (M) Sdn Bhd.

• Ground breaking ceremony of Kimanis Power Plant project by Chief Minister of Sabah.

• Announcement of the development of Malaysia’s first liquefied natural gas (LNG) Regasification Terminal in Sungai Udang, Melaka (RGTSU) by Prime Minister of Malaysia.

• Announcement of PGB Network Code to Bursa Malaysia.

2013 to 2014• Commencement of

operations of RGTSU on 23 May 2013.

• Commencement of operations of Kimanis Power Plant.

• Execution of the new Gas Processing Agreement (GPA) and Gas Transportation Agreements (GTA) with PETRONAS for another 20 years.

• Completion of Plant Rejuvenation and Revamp Project for GPP2, 3 and 4.

• Secured USD500 million Term Loan Facility from Mizuho Bank to fund capital projects.

• Signing of Shareholders Agreement between PGB and Linde Malaysia Sdn Bhd for the development of the Air Separation Unit (ASU) project in Pengerang, Johor.

• Commencement of operations at LNG Regasification Terminal Pengerang (RGTP).

• Execution of 20-year Operation and Maintenance (O&M) Agreement with PETRONAS Carigali Sdn Bhd for operation and maintenance of the Sabah-Sarawak Gas Pipeline (SSGP).

• Regulation of the Group’s Gas Transportation and Regasification businesses by the Malaysian Goverment pursuant to the Gas Supply (Amendment) Act 2016

• Commercial operation of Train 1, Air Separation Unit (ASU), Pengerang

2005 to 2009

2010 to 2011

2017 to 2018

2015 to 2016

31




DIRECTORS

DATUK MOHD ANUAR TAIB (Chairman)

KAMAL BAHRIN AHMAD (MD/CEO)

www.petronasgas.comWEBSITE

as.com

HABIBAH ABDUL (Senior Independent Director)

FARINA FARIKHULLAH KHAN (Independent Non-Executive Director)

DATO’ AB. HALIM MOHYIDDIN (Independent Non-Executive Director)

DATO’ ABDUL RAZAK ABDUL MAJID (Independent Non-Executive Director)

EMELIANA DALLAN RICE-OXLEY (Non-Independent Non-Executive Director)

WAN SHAMILAH WAN MUHAMMAD SAIDI (Non-Independent Non-Executive Director)

BOARD AUDIT COMMITTEEFARINA FARIKHULLAH KHAN (Chairman)HABIBAH ABDULDATO’ AB. HALIM MOHYIDDINDATO’ ABDUL RAZAK ABDUL MAJIDEMELIANA DALLAN RICE-OXLEY

NOMINATION AND REMUNERATION COMMITTEEDATO’ AB. HALIM MOHYIDDIN (Chairman)HABIBAH ABDULDATO’ ABDUL RAZAK ABDUL MAJID

COMPANY SECRETARIESSYUHAIDA AB RASHID (MACS 01582)YEAP KOK LEONG(MAICSA 0862549)

REGISTRARBOARDROOM SHARE REGISTRARS SDN BHD(Formerly known as Symphony Share Registrars Sdn Bhd) (378993-D)Level 6, Symphony HousePusat Dagangan Dana 1Jalan PJU 1A/4647301 Petaling JayaSelangor Darul EhsanMalaysiaTel : (+603) 7849 0777Fax : (+603) 7841 8151/7841 8152Email address: [email protected]

REGISTERED OFFICE Tower 1, PETRONAS Twin TowersKuala Lumpur City Centre50088 Kuala LumpurMalaysiaTel : (+603) 2331 5000

BUSINESS ADDRESSTower 1, PETRONAS Twin TowersKuala Lumpur City Centre50088 Kuala LumpurMalaysiaTel : (+603) 2331 5000

STOCK EXCHANGE LISTING Listed on the Main Market of Bursa Malaysia Securities BerhadListing Date : 4 September 1995Stock Name : PETGASStock Code : 6033Stock Sector : Utilities

BANKING SERVICES PROVIDERPETRONAS Integrated Financial Shared Services Centre (IFSSC)*

AUDITORSKPMG PLT(LLP0010081-LCA & AF 0758)Chartered Accountants10th Floor, KPMG TowerBandar Utama47800 Petaling Jaya Selangor Darul EhsanMalaysiaTel : (+603) 7721 3388Fax : (+603) 7721 3399

INVESTOR RELATIONSIZAN HAJAR ISHAKHead of Investor RelationsLevel 51, Tower 1PETRONAS Twin TowersKuala Lumpur City Centre50088 Kuala Lumpur Email address:[email protected]

SENIOR INDEPENDENT DIRECTORHABIBAH ABDUL

Email address:[email protected]

* Banking requirements are managed centrally by IFSSC to enable more efficient banking management for PGB Group.

32


CORPORATE INFORMATION

SUBSIDIARY ASSOCIATEJOINT VENTURE

PETRONASGAS BERHAD

REGAS TERMINAL

(SG. UDANG) SDN BHD

100%PETRONAS GAS BERHAD

REGAS TERMINAL

(PENGERANG) SDN BHD


REGAS TERMINAL

(LAHAD DATU) SDN BHD


PENGERANG LNG (TWO)

SDN BHD


25%DIALOG LNG SDN BHD

10%PERMODALAN DARUL TA’ZIM SDN BHD(effective 1 March 2018)

GAS MALAYSIA BERHAD

35.77%PUBLIC SHAREHOLDERS

30.93%MMC CORPORATION BERHAD

18.5%TOKYO GAS-MITSUI CO HOLDINGS SDN BHD

14.8%PETRONAS GAS BERHAD

KIMANIS POWER

SDN BHD*

KIMANIS O&M SDN BHD*

PENGERANG GAS SOLUTIONS

SDN BHD*

INDUSTRIAL GASES SOLUTIONS

SDN BHD


40%NRG CONSORTIUM (SABAH) SDN BHD


40%NRG CONSORTIUM (SABAH) SDN BHD


49%LINDE MALAYSIA SDN BHD


50%LINDE MALAYSIA SDN BHD

* Although the Group has more than 50% ownership, the Group treats these companies as joint ventures in accordance with Malaysian Financial Reporting Standard 10.

33




GROUP CORPORATE STRUCTURE

ACTIVITIES AND PROCESSESSOURCES

UPSTREAM

WATER AIRFUELGAS

LNG CARGOES

MALAYSIA - THAILAND JOINT DEVELOPMENT AREA

RE

GA

SIFI

CA

TIO

N (

RG

T)G

AS

TRA

NSP

OR

TATI

ON

(GT)

UTI

LITI

ES

(U

T)G

AS

PR

OC

ESS

ING

(G

P)

GPS

RGTSU

RGTP

UK

UG

GPK

Feedgas

Salesgas Chemical

Raw Water Air

LNG

Butane

Propane

Ethane

Salesgas

Salesgas

Steam

Industrial gases

Others

Gas Transportation (GT)


Salesgas

3 km offshorepipeline

Electricity

27 km onshorepipeline

34


GROUP BUSINESS ACTIVITIES AND PROCESSES

PETRONAS AND PGB CUSTOMERS

Salesgas

Salesgas



ExportTerminal

Export

Petrochemical plants

Large industries

Power Substation

TNB

Domestic to Independent Power Producers (IPP)

Export to Senoko/Keppel

RAPID

GROWTH

ASU

Legend

Resources

Electricity Transmission Grid

Products

PGU pipeline

UT delivery to Customers

Air Separation Unit (ASU)

Pengerang Project

Pengerang Gas Pipeline

Small industries

Small commercial

Residential

SalesgasGas

Transportation (GT)

Pip

elin

e ne

two

rk m

ore

tha

n 2,

500

km

acr

oss

Pen

insu

lar

Mal

aysi

a

35




OUR VALUE CREATING BUSINESS MODEL

ACTIVITIES

Processes PETRONAS’ upstream natural gas delivered from offshore Peninsular Malaysia into salesgas, ethane, propane and butane to be transported to PETRONAS’ customers by our GT business

CUSTOMERSPETRONASPGB distributes the output to PETRONAS’ customers – power and non-power sector including the petrochemical sector

REVENUE STRUCTURE• Reservation charge (fixed)• Flowrate charge (variable)• Performance Based Structure income• Internal Gas Consumption incentive

COST STRUCTUREDepreciation and operational costs such as repair and maintenance, materials and supplies, as well as professional and purchased services

ACTIVITIES

Transports processed gas from our GPP, Joint Development Area (JDA) in Thailand and LNG Regasification Terminal in Sungai Udang, Melaka and Pengerang, Johor to shippers’ end customers in Peninsular Malaysia, Sabah, Sarawak and Singapore through Peninsular Gas Utilisation (PGU) pipeline network, and smaller distribution system in Miri and Bintulu

CUSTOMERSShippers PGB distributes the output to shippers’ customers – power and non-power sector including the petrochemical sector

REVENUE STRUCTURETransportation fee (fixed)


HUMAN CAPITAL HUMAN CAPITALASSETS• Gas Processing Kertih (GPP1,

2, 3 and 4)• Gas Processing Santong

(GPP5 and 6)• Tanjung Sulong Export

Terminal at Kemaman, Terengganu

ASSETS• 2,623 km Peninsular Gas

Utilisation (PGU) pipeline network

• Distribution system in Miri and Bintulu

PRODUCTS*• Salesgas• Ethane• Propane• Butane

SERVICES• Transported salesgas

RESOURCES*Natural gas from offshore platforms

RESOURCES*• Salesgas from

GPP and JDA• Ethane, butane

and propane from GPP

• Regasified LNG from RGT

GAS PROCESSING (GP) GAS TRANSPORTATION (GT)

Male

90%Female

10%

EMPLOYEES1,019

Male

88%Female

12%

EMPLOYEES449

* Resources and products belong to customer.

OUR CORE BUSINESSES AND ACTIVITIES

36

PETRONAS GAS BERHAD 01 FUTURE FORWARD 02 FORWARD VISION 03 MANAGEMENT DISCUSSION & ANALYSIS 04 FORWARD TOGETHERPETRONAS GAS BERHAD 01 FUTURE FORWARD 02 FORWARD VISION 03 MANAGEMENT DISCUSSION & ANALYSIS 04 FORWARD TOGETHER

36

Our business model is built across four strategic business units which actively interact and integrate with one another thus ensuring resources are utilised to the fullest. It allows for dynamic decision making as well as focused execution and growth, enabling us to deliver value to both PETRONAS Group and to our own stakeholders.

ACTIVITIES

Receives capacity users’ imported Liquefied Natural Gas (LNG), stores in Regasification Terminal Sg. Udang’s (RGTSU) floating storage units and Regasification Terminal Pengerang’s (RGTP) storage tanks, converts the LNG into salesgas and injects into PGU pipeline network to be delivered to shippers’ customers by our GT business

CUSTOMERSCapacity UsersPGB distributes the output to capacity users’ customers – power and non-power sector, including the petrochemical sector

REVENUE STRUCTURE• Regasification fee (fixed)• Storage fee (fixed)• Throughput fee (variable)

From 2019 onwards under TPA, there will be one fixed regasification fee


ACTIVITIES Manufactures, supplies and markets electricity, steam, industrial gases and others to various petrochemical businesses and third parties

CUSTOMERS Petrochemical and industrial customers in Kertih Integrated Petrochemical Complex, Terengganu and Gebeng Industrial Area, Pahang

REVENUE STRUCTURESales of utilities

COST STRUCTUREDepreciation and operational costs such as fuelgas, repair and maintenance, materials and supplies, as well as professional and purchased services

HUMAN CAPITAL HUMAN CAPITALASSETSFacilities located at both Sungai Udang and Pengerang: • Offshore and onshore LNG

regasification terminal• 27 km onshore and 3 km

offshore pipeline• 2 leased Floating Storage Unit

(FSU) and 2 LNG storage tanks• LNG Jetty

ASSETSFacilities located at both Kertih and Gebeng:• Cogeneration Plant (COGEN)• Air Separation Unit (ASU)• Demin and Cooling Water Unit• Nitrogen Generation Unit

(NGU)• Effluent Treatment Plant

SERVICESRegasification of LNG

PRODUCTS• Electricity & steam• Industrial gases such as

oxygen & nitrogen • Demineralised water, raw

water, cooling water and boiler feed water

RESOURCES*Liquefied Natural Gas (LNG)

RESOURCES• Salesgas from GPP• Chemicals• Raw water • Air

REGASIFICATION (RGT) UTILITIES (UT)

Male

95%Female

5%

EMPLOYEES116

Male

93%Female

7%

EMPLOYEES241

Read more about our business segment performance on pages 78 to 85.2

37



07 FINANCIAL STATEMENTS 08 OTHER INFORMATION ANNUAL REPORT 2018ANNUAL REPORT 2018

37

38


OUR VALUE CREATING BUSINESS MODEL

BUSINESS ACTIVITY AND PROCESS

STABILISED CONDENSATE

TERENGGANU CRUDE OIL TERMINAL

ETHANE

PGU PIPELINE

Liquid

Gas

Product

Contaminants

By-product

Carbon Dioxide

Petrochemical plants

Large industries

RESOURCES* GAS PROCESSING PLANT

FeedgasFeed Liquid

FEED PRE-TREATMENT UNIT

ACID GAS REMOVAL UNIT

DEHYDRATION & MERCURY REMOVAL UNIT

LOW TEMPERATURE SEPARATION UNIT:

De-Methaniser Column

PRODUCT RECOVERY UNIT:1) De-Ethaniser Column

2) De-Propaniser Column

3) De-Buthaniser Column

CONDENSATE STRIPPER

PROPANE

BUTANE

SALESGAS

Remove

PRODUCTS*

Moisture

Water & Chloride

Mercury

Hydrogen Sulphide

PIPELINE

POWER

COMPRESSOR STATION

Gas Processing Plants

Tenaga Nasional Berhad

Gas Malaysia Berhad

Petrochemical Plants

Large Industries

Independent Power Producers (IPP)

Senoko/Keppel

LNG Regasification Terminals

Malaysia - Thailand Joint Development Area

Salesgas Delivered to Customer

RESOURCES* TRANSPORTATION SYSTEM SERVICES

Salesgas from:

NON-POWER

METERING STATION

* Resources and products belong to customer.

39




Salesgas from GPP

Water

Natural Gas

Treated Water

Effluent WaterWaste Water

Ambient Air

DEMIN PLANT

COGENERATION PLANT

COOLING WATER PLANT

EFFLUENT TREATMENT PLANT

AIR SEPARATION/NITROGEN GENERATION UNIT

Electricity

Condensate

Electricity/LP Steam/ IP Steam/HP Steam/

HHP Steam

Demineralised WaterTreated Water

Fire Water

LP : Low PressureIP : Intermediate Pressure

HP : High PressureHHP : High High Pressure

NGU : Nitrogen Generation UnitN2 : NitrogenO2 : Oxygen

Product

By-product

AirFuelgas

RESOURCES UTILITIES PLANT PRODUCT

LP Nitrogen,HP Nitrogen,LP Oxygen

BASF PETRONAS Chemicals Sdn BhdBP PETRONAS Acetyls Sdn BhdIndustrial Gases Solutions Sdn BhdKaneka (Malaysia) Sdn BhdKertih Terminal Sdn BhdLinde Malaysia Sdn BhdPolyplastics Sdn Bhd

Air Liquide Malaysia Sdn BhdAlpha Gas Solution Sdn BhdSouthern Industrial Gas Sdn Bhd

Liquid Nitrogen,Liquid OxygenLiquid Argon

RESOURCES * REGASIFICATION PLANT SERVICES

LiquefiedNatural Gas

* Resources and products belong to customer

STORAGE UNIT

REGASIFICATIONUNIT

RGTSU(offshore)

RGTP(onshore)

PGU PIPELINE

SALESGAS

PENGERANG INTEGRATED

COMPLEX

6 INPUT CAPITALS

2017 Nature 20181,928 Natural gas (mmscfd) 1,999

6.3 Water consumption (million Sm3) 6.34,965 Land area (hectare) 4,961

2017 Asset 201811,233 Plants and pipelines value (RM million) 10,856

710 Project in progress value (RM million) 688

1,846 CAPEX (RM million) 1,047

Intellectual• System and process• Digitalisation• Skills, experience and technically qualified employees,

industry thought leaders and experts

Social and relationship• Business partners• Customers• Suppliers• Investors • Lenders

• Communities• Government agencies/

authorities• Unions

2017 Financial 201880% Equity funding 80%20% Debt funding 20%7.8% WACC* 8.1%

85 Interest earned from investment (RM million) 113158 Interest from financing (RM million) 17535 Market capitalisation (RM billion) 38

* as published by Bloomberg

2017 Human Capital 20181,956 Number of employees 1,959

HOW WE CREATE VALUE

Optimising financial capital• Sustainable returns via dividend distribution to shareholders in line

with industry dividend payout ratio• Optimum hedging strategy through continuous assessment on

various funding alternatives to cater for growth opportunities

Elevating asset performance• Investment on LNG Regasification Terminal and Air Separation Unit

(ASU) projects in Pengerang, Johor• Implementation of 3ZERO100 focusing on asset reliability and

efficiency

Nurturing people• Enhanced Leadership programme• World class working environment, culture and ethics in nurturing

leadership capability• Highly engaged, capable and diversified workforce

Engaging stakeholders• National energy security• Well established corporate reputation via effective engagements

with stakeholders and corporate social responsibility programmes• Develop vendor via Vendor Development Programme

Leveraging intellectual capital• Implementation of standardised Work Process (WP) and Operational

Excellence Management System (OEMS) Platform• Automation of processes to eliminate errors, enhance quality and

free resources for more value added tasks • Outsourcing of project management, procurement and transactional

finance functions to PETRONAS for efficiency and best practices

Managing natural resources• Investment in research and development as well as technologies to

improve energy efficiency and address negative impact on natural elements by minimising pollution and promoting water stewardship

• RM2 million allocated for effective waste disposal with 3% target on annual reduction in waste disposal

• ‘Sayangi Sungai Paka’ and ‘Sayangi Sungai Latoh’ programmes to preserve the biodiversity of rivers near our operating sites

Activities undertaken to promote sustainability are elaborated on page 152 onwards.

We believe in maintaining a good relationship with our stakeholders. Read more on our stakeholders engagement on pages 46 to 47. 73

40

PETRONAS GAS BERHAD 01 FUTURE FORWARD 02 FORWARD VISION 03 MANAGEMENT DISCUSSION & ANALYSIS 04 FORWARD TOGETHERPETRONAS GAS BERHAD 01 FUTURE FORWARD 02 FORWARD VISION 03 MANAGEMENT DISCUSSION & ANALYSIS 04 FORWARD TOGETHER

40

KEY RESOURCE CAPITALS: ROLE AND SCOREBOARD

KEY PROCESS OUTPUT/OUTCOME TRADE OFF

We invest in social & relationship capital for long term financial capital growth. However, in the short term, both financial and human capitals are required.

We affect natural resources through our business processes as well as emission. Addressing the impact requires utilisation of our financial and human capitals.

Investing in intellectual capital reduces our financial capital in the short term. Nevertheless, in the longer term, financial, natural resources, human and social & relationship capitals will be enhanced.

Optimisation for efficiency has required us to increase our investment on capability and leadership, depleting financial capital. However, in the long run, intellectual and financial capitals wil l be positively impacted, as we become more capable and cost efficient.

By applying our financial capital to create value, there will be positive impact on asset, human, intel lectual and social & relationship capitals. This, however, may result in depletion of natural resources.

Improving our asset performance requires financial capital in the short term but will positively contribute to financial, natural resources, human and social & relationship capitals in a longer term.

2017 20185.6 Greenhouse gas emission (million tonnes) 4.9

2,673 Waste generated (tonnes) 2,3591,411 Waste recycled (tonnes) 1,46653% Percentage of waste recycled 62%107 Energy Efficiency Index 103

2017 20185 Number of Work Processes 5

16 Number of coaches/mentors 19

2017 20184,897 Revenue (RM million) 5,498

46% Gross Profit margin 46%359 Tax paid to the government (RM million) 387

4 Graduates hired under Skim Latihan 1 Malaysia 226 Corporate Social Responsibility programmes 339th

MalaysiaTransparency rating Top 30

ASEAN

2017 20182,278 Operating profit (RM million) 2,5712,933 Cash from operating activities (RM million) 3,3113,184 EBITDA (RM million) 3,6121,306 Dividend paid to shareholders (RM million) 1,36590.6 EPS (sen) 91.5

2017 20182,060 Capacity of salesgas delivered (mmscfd) 2,060

530 Electricity (RM million) 596990 Depreciation (RM million) 1,137202 Industrial gases (RM million) 246

100% Product delivery 100%99% Reliability 99%99% OEE 99%

5 HSSE Total Recordable Cases (TRC) 1– Number of national power disruption –

2017 20186 Training mandays per employee 7

354 Total wages and salaries (RM million) 4033,633 Investment in training (RM/person) 7,103

– Number of work related fatalities –2 In-house programme introduced –

Involves various processes such as gas processing,

gas transportation, regasification and utilities

to convert natural resources utilising all other key inputs

into valuable products and output

Propane Butane Electricity

Sale

sgas

Etha

neSt

eam

Nitr o

gen

Oxy

gen

NATURAL GAS

WATER

AIR

Integration between capitals with external environment to create value over time from our key resources whilst meeting stakeholders needs in a responsible manner.

41



07 FINANCIAL STATEMENTS 08 OTHER INFORMATION ANNUAL REPORT 2018ANNUAL REPORT 2018

41

PUSHINGFORWARDTO DELIVERCUSTOMER-FOCUSEDSOLUTIONS

We embrace the changes in the industry landscape following the implementation of Third Party Access. We remain agile in anticipating and meeting our customer requirements as well as exploring opportunities in reaching out to new customer bases.

G A S T R A N S P O R T A T I O N

MANAGEMENTDISCUSSION &ANALYSISA. Forward Strategies45 Our Operating Environment 46 Stakeholders Engagement48 Strategic Blueprint50 Material Matters52 Strategic Drivers53 Strategic Objectives 54 Risks and Opportunities56 Key Performance Indicators57 Performance Scorecard

B. Forward Driven Performance62 5-year Group Financial Analysis64 5-year Financial Summary66 5-year Group Financial Information67 Group Quarterly Performance68 Simplified Group Statement of

Financial Position70 Key Interest Bearing Assets and

Liabilities70 Statement of Value Added71 Distribution of Value Added72 Financial Calendar73 Investor Relations

C. Forward Focused78 Business Review 78 Gas Processing 80 Gas Transportation 82 Regasification 84 Utilities

PGB IS WELL POSITIONED IN SUPPORTING THE PROSPECTIVE INCREASE IN GAS DEMAND BY PROVIDING THE ENERGY BRIDGE FOR GAS SUPPLIERS TO DELIVER THEIR VOLUME TO LAST MILE CUSTOMERS. WHICH CAN COME IN THE FORMS OF BOTH PHYSICAL AND VIRTUAL PIPELINE

With the gas market liberalisation affecting the gas transportation and regasification businesses effective January 2018, the domestic gas market is expected to see a shift in terms of competitiveness and activity. Under the amended Gas Supply (Amendment) Act 2016 (GSA), the industry shall adhere to a Third Party Access (TPA) regime whereby the gas transmission and distribution, as well as the LNG regasification sectors are liberalised to the open market. This development is intended to provide a more level-playing field, while attracting new players to enter the domestic gas market.

In governing this change, the Energy Commission (EC) is in charge of regulating tariffs and issuance of licenses for the transmission and distribution of gas, and the regasification of LNG. Under the GSA’s Incentive-Based Regulation (IBR), the new tariffs for these services shall be implemented for a one-year pilot regulatory period beginning January 2019, before going into its first regulatory period in January 2020. Thereafter, tariffs will be reviewed every three years.

In view of this development, PGB prioritises on the operational readiness of its infrastructures and facilities to continue to provide safe, reliable and efficient services to its existing and potential new customers. In terms of earnings, through a ‘revenue-capped concept, PGB’s earnings are kept whole regardless of entrance of any new shippers.

While this assurance of earnings is guaranteed for at least during the Pilot Regulatory Period, we acknowledge the need to transform along with the rapidly changing environment in which we operate. In this regard, PGB has embarked on a transformation programme focusing on operational and commercial excellence to engineer further opportunities for efficiency improvement and growth.

This transformation is supported by adoption of new technologies as well as effective digitalisation of the relevant work processes embedded within our business practice. A milestone was achieved in terms of digitalisation when, in mid-2018, we completed our biggest turnaround of a gas processing plant without any safety or productivity incident, utilising digitally enhanced safety and productivity mechanisms.

OUTLOOK

With the Malaysian economy expected to grow at a rate of 4.9% in 2019 attributed by sound domestic demand, we believe that the demand for gas in the country will correlate accordingly. This is in line with the prospective need for energy to be supplied in the heavy industries, manufacturing, and transportation sectors. Concurrently, the rapid urbanisation is also expected to happen within territories adjacent to industrial development zones across the nation.

Directionally, the Ministry of Energy, Science, Technology, Environment and Climate Change (MESTECC) aims to increase the portion of renewables within the national energy mix to 20% by year 2025. Within the frame of this aspiration, PGB remains optimistic in supporting a sustainable energy mix towards the long-term growth of the nation. Apart from being cost-effective, gas is also the cleanest hydrocarbon-based alternative in spurring further industrial and social development in the country.

In view of this outlook, PGB is well positioned in supporting the prospective increase in gas demand by providing the energy bridge for gas suppliers to deliver their volume to last mile customers. which can come in the forms of both physical and virtual pipeline. In realising this aspiration, we continue to work closely with stakeholders such as the MESTECC, Ministry of Economic Affairs (MEA), Ministry of International Trade and Industry (MITI), as well as state government agencies to shape the future of the national gas industry. We are also working closely with other players in the industry through the Malaysian Gas Association (MGA), to cont inue ident i fy co l laborat ion opportunities towards expanding the network of gas supply nationwide.

Our operating environment is affected by global and local economic trends, technological advances and particularly the impact of digitalisation on enhanced operational, safety and cost efficiencies. These megatrends are taken into consideration in shaping our strategies, guiding the way we operate at all levels.

45




OUR OPERATING ENVIRONMENT

Customers

Communities

Business Partners and Suppliers

Investors and Funding Institutions

Employees and Unions

Government Agencies/Authorities

We are cognisant of the need to engage our stakeholders and obtain their feedback on material sustainability areas in deriving and implementing our strategies. We will continue to engage our various stakeholder groups in ways that are meaningful to each and to ensure the achievement of best outcome.

• Audited Financial Statements • Analysts and Investor Briefings • Annual General Meeting • Roadshows and Conferences • PGB Website

• Economic performance • Asset integrity and reliability • Governance

• Periodic engagements• Secondment of staff

• Compliance to regulatory requirements

• Continuous engagements • Customer service level

• Board and management committee meetings with partners

• Financial and operational performance

• Governance

• Corporate Social Responsibility (CSR)• Education Programmes• Livelihood Programmes • Environment Programmes • Disaster Relief Assistance• Social/Strategic Engagements• Sponsorship/Donation

• Education state of the community• Livelihood sustenance• Environment protection and

biodiversity preservation

• Employee engagement • Periodic union engagement• Leadership engagement• Internal newsletter and intranet• Badan Rekreasi dan Kebajikan Sukan• Badan Kebajikan Islam PETRONAS

• Occupational health and safety• Talent management• Diversity and inclusion

KEY STAKEHOLDER GROUP

1 2 3

CHANNEL OF ENGAGEMENT MATERIAL SUSTAINABILITY AREAS

46

01 FUTURE FORWARD 02 FORWARD VISIONARIES 03 MANAGEMENT DISCUSSION & ANALYSIS 04 FORWARD TOGETHERPETRONAS GAS BERHAD

46

STAKEHOLDERS ENGAGEMENT

• Regulatory risks to business • Future growth strategy • Capital management

For more details, refer to investor relations report on pages 73 to 77

• Sustainable dividends • Good corporate governance

• Relevant guidance shared to facilitate informed decision-making

• Operational readiness of assets ahead of new policy implementation

• Regular updates to regulatory body • Operational support of policy change

• Operational requirements • Continuous operational

improvements• Positive customer experience

• Performance indicators • Commitment towards collaborative efforts in creating value

• Superior financial and operational performance

• Education opportunities/Access to education

• Economic opportunities o livelihood sustainabilityo skills development o facilities improvement

• Preservation of surrounding flora and fauna

• Financial assistance• Disaster relief assistance

• Ongoing support to the communities in the areas of our operations

For more details on sustainability, refer to page 152 onwards

• Improvement in, education, community well-being & development, environment, relationship with surrounding communities

• Business growth and direction• Gas supply and demand• Capability development

• Application of Right Talent, Right Environment, Right Leaders concept

For more details on talent management, refer to page 170 onwards

• Talent success

4 5 6

CONCERNS RAISED OUR RESPONSES VALUE CREATED/RESULTS

11

7

7

47




47

MATERIAL MATTERS

HEALTH & SAFETY

COMPLIANCE TO REGULATIONS

ENERGY EFFICIENCY

GAS SUPPLY AND DEMAND OUTLOOK

A Leading Gas Infrastructure And Utilities Company

• We are a Business Entity

• Gas Infrastructure and Utilities is our Core Business

• We Operate Safely, Reliably and Competitively

• We Optimise the Gas Value Chain to Maximise Returns for our Stakeholders

VISION

MISSION

HUMAN CAPITAL

BUSINESS GROWTH

GAS MARKET LIBERALISATION (TPA)

PLANT RELIABILITY

48


STRATEGIC BLUEPRINT

HSSE

RISK: Occurrence of major HSSE incidents due to non-compliance to HSSE requirements/policies affecting business and reputation.

MITIGATION: Strengthen HSSE processes and behaviours amongst staff and contractors via identified HSSE Key Risk Areas.

OPERATIONAL EXCELLENCE

• Robust HSSE governance and assurance

• Institutionalisation of process and behavioural safety

• Superior product delivery and reliability

• Sustainable improvement of key operational indicators

REGULATORY

RISK: Adverse impact from unfavourable tariff revision through Gas Supply (Amendment) Act 2016 (GSA) and Third Party Access (TPA) regulations.

MITIGATIONS:

• Strengthen engagements and n e g o t i a t i o n s w i t h E n e r g y Commission (EC) with regards to GSA and regulations and its impact to PGB.

• Effective execution of Growth Strategy.

STRATEGY

RISK: Inability to effectively execute PGB Growth Strategy.

MITIGATION: Ensure projects that have been identified are secured and managed effectively.

STRATEGIC OBJECTIVES STRATEGIC DRIVERS KEY RISKS & MITIGATIONS

COMMERCIAL EXCELLENCE

• Ability to retain and capture new customers

• Ability to secure reasonable margin and manage costs

• Ability to differentiate ourselves from competitors

OPERATIONS

RISK: Inability to sustain operational performance resulting in supply interruptions to customers.

MITIGATION: Close monitoring and reporting of progress and ensure timely completion of all elements under 3ZERO100 Beyond.

GROWTH

• Strategic growth in gas infrastructure & ut i l i t ies business.

• Ability to identify new growth areas to support sustainable business expansion.

• Excellence in growth projects delivery

DIGITALISATION

DOWNSTREAM OE R2


STRATEGIC GROWTH

PLANS

49




Our material matters are those that have the most impact on our ability to create a sustainability value in short, medium and long term as well as affect our ability to stay competitive.

Process to Determine and Manage Material Matters:

• Board meetings, Board Audit Committee meetings and senior management meetings

• Conferences, analyst meetings

• Risk assessment matrix/workshop

Report matters which create value to stakeholders:

• Material issues that have strong influence towards our stakeholders’ judgement and decision on the Company’s long-term sustainability and its commitment to their needs

• Factors that may affect financial stability and economic growth of our business

• Our vision and mission

• Our code and ethics

• Materiality

• Industry and global trends

• Sustainability

• Economic growth

• Financial stability

• Risk appetite

IDENTIFY

PRIORITISE

REPORT

• Materiality matrix

• Industry news and market trends

• Policies, code of conducts

• Sustainability Indices

• Customers feedback

Identify critical areas by reviewing:

Prioritise by assessing impact and value creation towards:

50


MATERIAL MATTERS

As a result of this process, the following table summarises the key matters as well as the evaluation of its impact and the level of imminence as illustrated in the materiality matrix.

Health and Safety Gas Supply and Demand Outlook

Compliance to Regulations Business Growth

Gas Market Liberalisation Energy Efficiency

Plant Reliability

IMP

AC

T

Immediate Medium Long

Human Capital

Safe and healthy working environment promoting work life balance

Strategic growth in gas infrastructure and utilities

Full compliance to statutory and regulatory requirements

Incremental return to shareholders

Regulated gas transportation and regasification businesses

Efficient running of operations and green technology

• Product Delivery Reliability• World Class Overall Equipment Effectiveness (OEE)

Productive, innovative, competent and competitive workforce

MATERIALITY MATRIX

MATERIALMATTERS

TIMEFRAME

High

Low

Strategic Driver

DigitalisationDownstream OE R2R2 Commercial Excellence Growth

51




DOWNSTREAM OE R2


STRATEGIC GROWTH PLANS

DIGITALISATION

HSSE and Operational Excellence focusing on safety, reliability and efficiency towards higher productivity and cost optimisation

Competitive price of products and services through lower cost-to-serve

Capturing new customers and diversifying business portfolio for sustainable return to shareholders

Data-driven business decisions based on digital insights and solutions

In 2018, our strategic drivers have been further developed to position PGB to become a world class organisation through our people, systems and processes, with a strong emphasis of looking from the customers’ lens.

52


STRATEGIC DRIVERS

The three pillars of our strategic focus areas are as follows:

We are committed to realise our vision of becoming a Leading Gas Infrastructure and Utilities Company anchored on the three pillars of our strategic objectives.

DOWNSTREAM OE R2


GROWTH

Robust HSSE governance and assurance

• We are committed to exhibit leadership in the area of HSSE and ensure compliance with all HSSE governance and assurance frameworks including PETRONAS Mandatory Control Framework at all times to safeguard lives, assets and ensure our overall business continuity.

Institutionalisation of Process and Behavioural Safety

• We are determined to increase our efforts to instil safety-at-heart in all members of our workforce to achieve safe operationalisation of the Company’s assets.

Superior product delivery and reliability

• We are striving to elevate our Overall Equipment Effectiveness (OEE), which would translate into higher product delivery reliability to our customers.

Sustainable improvement of key operational indicators

• We are committed to improve and sustain our plant operational performance towards optimising the value delivered to our stakeholders.

Optimum cost control and asset utilisation

• We endeavour to minimise value leakages and improve overall asset utilisation, which in turn would yield higher returns to our shareholders.

Improved energy efficiency

• We are committed to utilise energy-efficient technologies to reduce energy per-unit cost of production, which contributes to lower production cost and a reduction in overall energy intensity and carbon footprint.

• Ability to retain existing customers and capture new ones• Ability to secure reasonable margin and manage costs• Ability to differentiate ourselves from competitors

Strategic growth in gas infrastructure and utilities

• We are determined to pursue, explore and execute new business ventures within the core areas of the Company’s expertise to establish new revenue streams and value for our shareholders.

Excellence in project delivery

• We are focused on implementing a seamless project execution strategy for all projects which translates into on-time and on-budget project completion and delivery.

01

02

032

53




STRATEGIC OBJECTIVES

Read more about our business segment performance on pages 78 to 85.

The company has identified four key risks as described in detail below:

Key risks identified under the PGB Enterprise Risk Profile are regularly monitored to ensure timely completion of their mitigations.

REGULATORY

HSSE

STRATEGY

OPERATIONS

RISK DESCRIPTION IMPLICATIONS

Unfavourable tariff revision through Gas Supply (Amendment) Act 2016 (GSA) and Third Party Access (TPA) regulations.

Occurrence of major HSSE incidents affecting PGB business and reputation.

Ineffective execution of Growth Strategy in supporting PGB Business.

Unsustainable operational performance resulting in supply interruptions to customers

2 For details on key risks and mitigations relevant to each business segment, refer to pages 78 to 85.

9 For our risk management practices, refer to pages 136 onwards.

The risks may hinder PGB from achieving its targets

RISKS AND OPPORTUNITIES

54


CONTINUOUS IMPROVEMENTS

We continue to enhance risk management awareness and capability building across the Company and our subsidiaries through various sharing of information efforts and application of best practices.

In addition, we benefit from being part of the PETRONAS Group, which has an established Board Governance and Risk Committee that primarily provides guidance and reviews strategies and policies on Risk Management implementation. PGB is also part of various Community of Practice (CoP) discussions driven by PETRONAS Downstream Business, which provides platforms for PETRONAS Downstream Companies to share and learn best practices, discuss on issues and improvements relating to Risk Management and Business Continuity Management implementation.

Implementation on risk assurance exercises are in place within the Company to safeguard, control and mitigate risks, as part of its aspirations to achieve safe, reliable and efficient organisation.

We will also continue to focus on institutionalisation of risk management practice throughout the organisation.

OPPORTUNITIES MITIGATION ACTIONS RESULTS

Creating platform for healthy competition and providing room for growth of the Malaysian gas industry.

Undertake efforts in ensuring minimal impact to PGB under the new Tariff effective 2019 onwards and to effect ively implement growth strategies.

Ensured minimal impact to PGB PBT via gradual tariff reduction.

Commitment from all levels towards behavioural safety culture.

Strengthening HSSE practices via identified HSSE Key Risk Areas, implementation of digital solutions for effective HSSE monitoring and tracking, and interventions to address non-compliance.

Reduction in major HSSE incidents as compared to previous year.

Development of new business strategy for additional revenue and cushioning impact from TPA.

Ensure projects and initiatives that have been identified are effectively managed and executed.

Pursuant to exploring new business ventures, four growth projects were sanctioned in 2018.

Development of key operational strategies which resulted to additional revenue gained and achieved world class standard.

Close monitoring and reporting of progress and ensure timely completion of operational elements under 2018 3ZERO100 Beyond, and implementation of digital solutions for effective monitoring and tracking.

Sustainable improvement of key operational indicators which translated into higher product delivery reliability to customers.

55




PGB has introduced the new PGB R2 game plan 301Q99 – PUSHING FORWARD. It outlines the focus areas in maximising asset utilisation in a safe, reliable and efficient manner.

HSSE INCIDENT 1 HSSE Incident

OPERATIONAL EXCELLENCE

STRATEGIC INITIATIVES

PEOPLE DEVELOPMENT

(a) Average OEE (b) C2 Utilisation (c) Efficiency: Energy Index(d) Overall Salesgas PDR

99.3%83.6%102.6100%

(a) Key Growth Initiatives

(b) 2019 TPA Tariff Determination(c) Digital Implementation

(i) Completion of preparation work for PIVOT Descriptive Analytics

(ii) Digital Turnaround for GPP6

Completion of Detailed Feasibility Study of identified projects/opportunities

RM1.072/GJ

Progress as plan

100% completion

Ratio of Downstream Ready Talents (1st line) to Critical Positions(i) CCP : SGM, CEO(ii) BCP : GM

2.1 : 12.3 : 1

Improve 30% gap on asset utilisation• Retain existing customers through improvement on Plant Utilisation, asset & Product Reliability and HSSE.• Capture new customers

Achieve Quartile 1 (Q1) for energy and cost efficiency• Drive efficiency on Energy Index and cost on MC/CPRV and Unit Production Cost• Maximise Productivity through empowerment

Protect Enterprise Value with 99% SSGP Reliability target

2018 RESULT2018 KPI

2019 PRIORITIES

56


KEY PERFORMANCE INDICATORS

CategoryUnits of

measurement Description 2015 2016 2017 2018 YoY Trend

Fatality Accident Number of incidents Total number of reportable fatalities (staff, contractor and third party)

0 3 0 0

LTI Number of incidents An injury is assessed to be on LTI when the injured person cannot return for duty during next shift or next day

5 6 2 0

Major LOPC Number of incidents Total number of LOPC related to process safety incidents with the greatest consequences

3 0 0 0

Major Fire Incident Number of incidents Total number of fire or explosion resulting in the greatest consequences

1 0 0 0

Total Recordable Cases (TRCs)

Number of incidents The sum of fatalities and total injuries resulting in Permanent Total Disabilities (PTD), Permanent Partial Disabilities (PPD), Lost Work Day Cases (LWC), Restricted Work Cases (RWC) and Medical Treatment Cases (MTC)

7 10 5 1

7 PGB is committed to deliver sustainable value for all stakeholders by ensuring a safer environment, boosting economy and

improve social relationship. Read more on our Sustainability Report from pages 152 to 176.

HEALTH, SAFETY, SECURITY AND ENVIRONMENT (HSSE)

Zero Fatality, Lost Time Injury, Major Fire and Major LOPC with more than 50% reduction of number in HSSE incident.

In achieving our strategic objectives, we also assess the financial and non-financial performance within the organisation. Our performance scorecard provides an overview on how we have performed during the year.

57




PERFORMANCE SCORECARD

ObjectivesUnits of

measurement Description 2016 2017 2018 YoY Trend

Salesgas PDR %

Product delivered as per customers’ nomination

100.0 100.0 100.0

Electricity PDR % 100.0 100.0 100.0

Steam PDR % 100.0 99.8 99.98

Ethane Production (MT/hr)Annual average ethane production from the gas processing plants

142 134 142

Gas Processing OEE (%)

Regasification OEE (%)

Higher OEE achieved for GP, UT and RGT has translated into higher PDR to customers. Higher transmission reliability demonstrated our world class performance in transmission operations, ensuring security of gas supply to the nation.

OPERATIONS

2017 2018

RGTSU OEE RGTP OEE

98

100.0

100.0

100

• OEE – A measure of p lant performance against its limits and identified sources of loss within the plant and a measure of how well equipment is used when available.

• World class performance benchmark for OEE is 95%.

• Reliability – A measure to determine the impact of unscheduled downtime on the availability of the plant.

• World class performance benchmark for Reliability is 98%.

Utilities OEE (%)

2017 2018

Electricity OEE Steam OEEInd. Gases OEE

99.498.6

99.0

99.1

93.2

92.9

GT Reliability (%)

GT Reliability

2017 2018

100.0

99.98

SG OEE (without standby)C2 OEE C3 OEE C4 OEE

2017 2018

99.8

99.399.0

97.8

97.8

97.2

98.7

98.7

58



Baby Boomers

942017 : 1162016 : 210

Gen X

6852017 : 7012016 : 575

Millenials

1,1642017 : 1,1382016 : 1,331

Post Millenials

162017 : 12016 : 1

* Manpower generation data 2018 is based on the new definition i.e Baby Boomers (1965 and before), Gen X (1966-1979), Millenials (1980-1994), Post Millenials (1995 and after).

Objectives Units of measurement 2016 2017 2018

Total employees Number of staff 2,117 1,956 1,959

Other nationality Number of staff 14 9 8

Employee turnover % 0.7 0.5 0.6

Staff costs RM million 324.5 353.5 403.2

Mandays training per employee days 10.3 6.4 7.2

Training investment per employee RM’000 6.3 3.6 7.1

HUMAN CAPITAL

• PGB has adopted an empowered organisation and it is a continuous effort by the Company to further review the effectiveness of the organisation as we strive to achieve world class competitiveness.

• We provide continuous Leadership and Technical Capability Development programmes to enhance staff capability in order to build a highly engaged and capable workforce to realise PGB’s aspiration to become a world class organisation. Harvard Manage Mentor (HMM) is a digital learnig platform for staff to drive their own learning for capability development.

1,906 (97.3%)2017 : 1,897 (97%)2016 : 2,060 (97%)

33%2017 : 33%2016 : 38%

50% 2017 : 43%2016 : 43%

Women in Leadership

TeamPermanent

Women in Board

Composition

59




FIN

AN

CIA

L

Higher due to full year contribution from RGTP.

Current ratio is defined as the Company’s ability to

meet its short term obligations.

Net profit margin is defined as a ratio of net

profit after tax to revenue.

Return on Asset (ROA) is an indicator that measures the

Company’s efficiency in using the total assets to generate profit.

Higher due to higher cash balances.

Lower due to share of losses from JV

company (KPSB).

Comparable reflecting business model with fixed

returns.

Cost to Income (CTI) is a measure of cost of revenue divided by

revenue.

Lower due to positive full year contribution from RGTP.

45.5% 46.1%

2017 2018

4.8

7.0

2017 2018

54.5% 53.9%

2017 2018

37.1%34.7%

2017 2018

10.3% 10.4%

2017 2018

Gross profit margin is defined as a ratio of

gross profit to revenue.

60



Return on Equity (ROE) is defined as profit attributable

to shareholders divided by the average shareholders’

equity for the financial year.

Dividends Per Share (DPS) is dividends declared for the

shareholders divided by the number of ordinary shares

issued.

Earnings Per Share (EPS) represents the portion of the

Company’s distributable income allocated to each

equity share.

Total Shareholders’ Return (TSR) is measure of share

price performance and dividends paid during the

year, divided by the opening share prices.

Dividend Payout Ratio (DPR) is defined as the percentage of earnings paid to shareholders

in dividend.

Comparable returns from investments.

Higher in tandem with strong performance of the Group.

Higher in line with steady profit for the year.

Strong share price trend and higher dividends during

the year.Higher distribution

to shareholders.

14.3% 14.0%

2017 2018

66 sen72 sen

2017 2018

72.8%78.7%

2017 2018

90.6 sen 91.5 sen

2017 2018

-14.8%

201714.0%

2018

61




ANALYSIS

2014

• Signing of new Gas Processing A g r e e m e n t ( G P A ) a n d G a s Transportation Agreements (GTA). with PETRONAS for 20-year period.

• Kimanis Power Plant achieved full commercial operations in November 2014.

• Compared to 2013, excluding impact of DTA on ITA from RGTSU and Kimanis Power Sdn Bhd (KPSB), the Group’s profit increased attributable to profit contribution from KPSB, full year contribution from RGTSU and strengthening of GT revenue base under new GTA.

Item 2014 2015 2016 2017 2018

Profit after tax (RM million) 1,842.1 1,985.9 1,736.3 1,816.9 1,908.2Normalised profit after tax* (RM million) 1,741.1 1,742.7 1,736.3 1,816.9 2,032.5

* Excluding tax incentives and forex impact (FY2014: RM101.0 million, FY2015: RM243.2 million and FY2018: RM124.3 million)

2015

• Completion of the last series of plant revamp and rejuvenation project (PRR) for GP segment (PRR for Gas Processing Plant (GPP) 2 and 3 was completed in 2013 and PRR for GPP4 was completed in 2015).

• Compared to 2014, the Group’s profit increased as a result of recognition of tax incentives arising from ITA and reinvestment allowances granted by MIDA on PRR totalling RM443.1 million.

• This was partially offset by unrealised foreign exchange (forex) loss on USD finance lease liabilities totalling RM199.9 million due to weakening of the Ringgit.

• Excluding impact of tax incentives and forex, profit remained strong at RM1.7 billion.

1,842.1

1,985.9

1,736.3

2014 2015 2016 2017 2018

1,741.1 1,742.71,816.9

2,032.5

1,908.2

PROFIT AFTER TAX(RM million)

2016

• Compared to 2015, excluding impact of tax incentives and forex, profit remained steady at RM1.7 billion.

2017

• Achieved commercial operations of the Group’s second LNG regasification terminal in Pengerang, Johor on November 2017.

• Compared to 2016, profit was higher as a result of new revenue stream from RGT Pengerang.

2018

• Compared to 2017, profit was higher driven by full year contribution from the Group’s second LNG regasification terminal in Pengerang, Johor.

• Excluding impact of derecognition of tax incentives by a joint venture company (KPSB), profit would be at a record high at RM2.0 billion.

62


5-YEAR GROUP FINANCIAL ANALYSIS

Item 2014 2015 2016 2017 2018

Total Assets (RM million) 13,260.5 14,382.0 16,553.6 17,627.5 18,424.0

ANALYSIS

Item 2014 2015 2016 2017 2018

Property, plant and equipment 10,858.5 11,323.8 12,807.5 12,898.6 12,487.6 Fixed assets 9,230.6 9,737.9 9,660.8 12,188.5 11,799.2 Project-in-progress 1,627.9 1,585.9 3,146.7 710.1 688.4 Cash and cash equivalents 637.7 1,230.8 1,763.1 2,500.4 3,616.0

2014

• Compared to 2013, total assets remained steady at RM13.3 billion.

2015

• Compared to 2014, total assets of the Group increased mainly attributed to higher PPE arising from completion of PRR for GPP4 and higher cash balances.

2016

• Compared to 2015, total assets surged to RM16.6 billion as the Group embarked into Malaysia’s Second LNG Regasification Terminal and Air Separation Unit plant projects in Pengerang, Johor.

2017

• Compared to 2016, total assets increased due to higher cash balances contributed by cash generated from operations.

2014 2015 2016 2017 2018

13,260.5

14,382.0

16,553.6

17,627.5

18,424.0

TOTAL ASSETS(RM million)

2018

• Compared to 2017, higher total asssets were contributed by higher cash balances mainly contributed from cash generated from operations which include full year contribution from LNG regasification terminal in Pengerang, Johor.

63




Year 2014 2015 2016 2017 2018

Revenue (RM million) 4,391.7 4,455.9 4,561.3 4,896.7 5,498.1 Profit after tax (RM million) 1,842.1 1,985.9 1,736.3 1,816.9 1,908.2 EBITDA (RM million) 3,180.8 2,837.2 3,023.6 3,183.7 3,611.8 Dividends per share (sen) 55.0 60.0 62.0 66.0 72.0 Earnings per share (sen) 93.1 100.4 87.9 90.6 91.5 Total assets (RM million) 13,260.5 14,382.0 16,553.6 17,627.5 18,424.0 Total equity (RM million) 10,569.0 11,594.9 12,161.2 12,762.4 13,348.4 Market capitalisation (RM billion) 43.8 44.9 42.1 34.6 38.0 Share price (RM) 22.16 22.70 21.30 17.48 19.20

4,391.7 4,455.9 4,561.34,896.7

5,498.1

2014 2015 2016 2017 2018

1,842.11,985.9

1,736.31,816.9

1,908.2

2014 2015 2016 2017 2018

3,180.82,837.2 3,023.6

3,183.7

3,611.8

2014 2015 2016 2017 2018

REVENUE (RM million)

PROFIT AFTER TAX (RM million)

EBITDA (RM million)

64


5-YEAR FINANCIAL SUMMARY

55.060.0 62.0

66.072.0

2014 2015 2016 2017 2018

13,260.514,382.0

16,553.617,627.5

18,424.0

2014 2015 2016 2017 2018

43.8 44.942.1

34.638.0

2014 2015 2016 2017 2018

93.1100.4

87.9 90.6 91.5

2014 2015 2016 2017 2018

10,569.011,594.9

12,161.212,762.4

13,348.4

2014 2015 2016 2017 2018

22.16 22.7021.30

17.4819.20

2014 2015 2016 2017 2018

DIVIDENDS PER SHARE (sen)

TOTAL ASSETS (RM million)

MARKET CAPITALISATION (RM billion)

EARNINGS PER SHARE (sen)

TOTAL EQUITY (RM million)

SHARE PRICE (RM)

65




Year 2014 2015 2016 2017 2018

Key results (RM million)

Revenue 4,391.7 4,455.9 4,561.3 4,896.7 5,498.1 By segment:

Gas Processing 1,480.2 1,533.6 1,557.2 1,572.3 1,571.0 Gas Transportation 1,286.7 1,311.6 1,303.9 1,382.4 1,360.6 Regasification 616.2 637.1 631.1 773.5 1,245.4 Utilities 1,008.6 973.6 1,069.1 1,168.5 1,321.1

By geographical:Peninsular Malaysia 4,365.5 4,428.8 4,545.4 4,801.3 5,422.0 Sabah & Sarawak 26.2 27.1 15.9 95.4 76.1

Interest income 36.9 31.8 54.2 84.8 112.6 Cost of revenue 2,179.5 2,316.5 2,495.4 2,666.8 2,962.2

By segment:Gas Processing 778.5 836.7 908.8 921.4 931.7 Gas Transportation 280.0 302.4 328.5 331.3 342.6 Regasification 308.4 339.6 344.8 395.5 547.4 Utilities 812.6 837.8 913.2 1,018.6 1,140.5

Financing costs 76.3 90.1 93.9 113.5 169.4 Administration expenses 74.8 89.5 93.1 84.3 90.0 Operating profit 2,142.1 2,016.9 2,137.1 2,278.4 2,570.6 EBITDA* 2,923.0 2,762.0 2,960.5 3,183.7 3,611.8 Profit before taxation 2,354.5 2,002.1 2,106.8 2,252.7 2,351.9 Profit after taxation 1,842.1 1,985.9 1,736.3 1,816.9 1,908.2 Profit attributable to shareholders of the Company 1,843.2 1,987.5 1,739.1 1,792.7 1,810.3

Key statement of financial position (RM million)

Property, plant and equipment 10,858.5 11,323.8 12,807.5 12,898.6 12,487.6 Cash and cash equivalents 637.7 1,230.8 1,763.1 2,500.4 3,616.0 Total assets 13,260.5 14,382.0 16,553.6 17,627.5 18,424.0 Borrowings 882.3 1,058.3 2,249.5 3,084.3 3,327.0 Total liabilities 2,691.5 2,787.1 4,392.4 4,865.1 5,075.6 Share capital 1,978.7 1,978.7 1,978.7 3,165.2 3,165.2 Reserves 8,555.1 9,460.1 9,988.0 9,349.8 9,806.7 Total equity attributable to shareholders of the

Company 10,533.8 11,438.8 11,966.7 12,515.0 12,971.9 Non-controlling interests 35.0 156.1 194.5 247.4 376.5 Total equity 10,569.0 11,594.9 12,161.2 12,762.4 13,348.4

Share information

Earnings per share (sen) 93.1 100.4 87.9 90.6 91.5 Dividends per share (sen) 55.0 60.0 62.0 66.0 72.0 Net assets (RM) 5.32 5.78 6.05 6.32 6.56 Closing share price 22.16 22.70 21.30 17.48 19.20 Number of ordinary shares (‘000) 1,978,732 1,978,732 1,978,732 1,978,732 1,978,732 Market capitalisation (RM billion) 43.8 44.9 42.1 34.6 38.0

* EBITDA refer to earnings before interest, taxation, depreciation and amortisation, share of profit of joint ventures and associate and other significant non-cash items.

66


5-YEAR GROUP FINANCIAL INFORMATION

2017

2018

In RM millionFirst

QuarterSecond Quarter

Third Quarter

Fourth Quarter

Year 2017

Operating revenue 1,192.2 1,195.5 1,186.9 1,322.1 4,896.7 Operating profit 572.9 558.5 537.2 609.8 2,278.4 Profit before taxation 577.1 537.1 532.6 605.9 2,252.7 Profit after taxation 463.2 425.9 417.4 510.4 1,816.9 Profit attributable to shareholders of the

Company 463.3 425.3 417.4 486.7 1,792.7 Earnings per share (sen) 23.4 21.5 21.1 24.6 90.6 Dividends per share (sen) 15.0 16.0 16.0 19.0 66.0

In RM millionFirst

QuarterSecond Quarter

Third Quarter

Fourth Quarter

Year 2018

Operating revenue 1,350.8 1,358.3 1,401.8 1,387.2 5,498.1 Operating profit 659.0 658.2 655.0 598.4 2,570.6 Profit before taxation 637.0 632.8 634.8 447.3 2,351.9 Profit after taxation 505.3 537.1 523.4 342.4 1,908.2 Profit attributable to shareholders of the

Company 483.3 509.3 499.8 317.9 1,810.3 Earnings per share (sen) 24.4 25.7 25.3 16.1 91.5 Dividends per share (sen) 16.0 16.0 18.0 22.0 72.0

67




GROUP QUARTERLY PERFORMANCE

TOTAL ASSETS

RM18.4 billionRM17.6 billion

Property, Plant and Equipment 73% Cash and Cash Equivalents 14% Trade and Other Receivables 5% Investment in Joint Ventures 4% Deferred Tax Assets 2% Investment in Associate 1% Long Term Receivables 1% Trade and Other Inventories 0%* Tax Recoverable 0%*

Property, Plant and Equipment 68% Cash and Cash Equivalents 20% Trade and Other Receivables 5% Investment in Joint Ventures 3% Deferred Tax Assets 2% Long Term Receivables 2% Investment in Associate 1% Trade and Other Inventories 0%* Tax Recoverable 0%*

* Insignificant percentage (%)* Insignificant percentage (%)

1%2%2%3%

5%

20%

68%

1%1%2%4%

5%

14%

73%

20182017

68


SIMPLIFIED GROUP STATEMENT OF FINANCIAL POSITION

TOTAL EQUITY AND LIABILITIES

RM17.6 billion RM18.4 billion

Reserves 53% Share Capital 18% Non-Current Borrowings 17% Deferred Tax Liabilities 7% Trade and Other Payables 3% Non-Controlling Interest 1% Current Borrowings 1% Deferred Income 0%*

Reserves 53% Non-Current Borrowings 18% Share Capital 17% Deferred Tax Liabilities 6% Trade and Other Payables 3% Non-Controlling Interest 2% Current Borrowings 1% Deferred Income 0%*

* Insignificant percentage (%) * Insignificant percentage (%)

2%1%3%6%

17%

18%

53%

1%1%3%7%

17%

18%

53% 20182017

69




2017 2018

As at 31 December

RM million

EffectiveInterest Rate

%

InterestIncome/

(Expenses)RM million

As at 31 December

RM million

EffectiveInterest Rate

%

InterestIncome/

(Expenses)RM million

Interest earning assetsCash and cash equivalents 2,500.4 3.3 81.1 3,616.0 3.3 101.0 Loan to joint venture 143.8 5.5 3.8 244.2 5.5 11.6

Interest bearing liabilitiesFinance lease liabilities 1,023.6 9.1 (101.5) 1,014.3 9.1 (91.8)Term loan 1,529.1 2.6 (7.4)* 1,793.7 3.3 (45.1)*Loan from corporate

shareholder of a subsidiary 531.6 6.5 (4.6)* 519.0 6.5 (33.3)*

* Part of interest expenses are being capitalised as part of projects-in-progress.

2017RM million

2018RM million

Revenue 4,896.7 5,498.1 Purchase of goods and services (1,404.3) (1,488.8)

Value added by the Group of companies 3,492.4 4,009.3Other income and expenses 132.8 124.7 Financing costs (113.5) (169.4)Share of profit/(loss) after tax of joint ventures and associate 87.8 (49.3)

Value added available for distribution 3,599.5 3,915.3

70


KEY INTEREST BEARING ASSETS AND LIABILITIES

STATEMENT OF VALUE ADDED

43%

10%

10%

37%

43%

10%

10%

37%

2017RM million

2018RM million

To employees Employment costs 353.5 403.2

To government Taxation 358.2 380.1

To shareholdersDividends 1,306.0 1,365.3 Non-controlling interest 24.3 97.9

Retained for reinvestment and future growthDepreciation, amortisation and impairment 993.3 1,160.2 Deferred tax expense 77.5 63.6 Retained profit 486.7 445.0

3,599.5 3,915.3

To employees To Government To shareholders Retained for reinvestment and future growth

20182017

71




DISTRIBUTION OF VALUE ADDED

2018 2019 February February

March

April

March

September

November

December

April

May

June

August

26 February

Announcement of the unaudited consolidated results for the fourth quarter ended 31 December 2017

18 February

Announcement of the unaudited consolidated results for the fourth quarter ended 31 December 2018

15 March

Date of payment of the interim dividend for the fourth quarter ended 31 December 2018

30 April

36th Annual General Meeting

29 March

Date of Notice of the 36th Annual General Meeting and date of issuance of FY2018 Annual Report

23 March

Date of payment of the interim dividend for the fourth quarter ended 31 December 2017

14 September

Date of payment of the interim dividend for the second quarter ended 30 June 2018

30 November

Announcement of the unaudited consolidated results for the third quarter ended 30 September 2018

27 December

Date of payment of the interim dividend for the third quarter ended 30 September 2018

30 April

35th Annual General Meeting

17 May

Announcement of the unaudited consolidated results for the first quarter ended 31 March 2018

12 June

Date of payment of the interim dividend for the first quarter ended 31 March 2018

15 August

Announcement of the unaudited consolidated results for the second quarter ended 30 June 2018

30 March

Date of Notice of the 35th Annual General Meeting and date of issuance of FY2017 Annual Report

72


FINANCIAL CALENDAR

As one of the largest companies by market capitalisation on Bursa Malaysia Securities Berhad (Bursa Malaysia), the Group places utmost importance in establishing and maintaining a strong and transparent relationship with our shareholders and the broader investment community.

In 2018, we engaged with various investors and analysts via one-on-one meetings, group meetings, conference calls, analyst briefings, investor conference and site visits. Our activities were guided by our investor relations plan which is developed annually and tailored to address relevant topics at the time. All sessions were led by our designated spokespersons, namely our MD/CEO, CFO and Head of Investor Relations.

There were several significant events relating to the company, particularly on the structural changes impacting Transportation and Regasification businesses as well as the conclusion of the second term of the Gas Processing Agreement between the Group and PETRONAS.

SIGNIFICANT EVENTS

Date Event

15 January 2018Announcement of the Implementation of Third Party Access effective 16 January 2018

Bursa Announcement

31 December 2018

Announcement of the PETRONAS Gas Berhad’s Tariff for Peninsular Gas Utilisation, Regasification Terminal Sg. Udang, Melaka and Regasification Terminal Pengerang, Johor under the Third Party Access System

Bursa Announcement

31 December 2018

Announcement of the Acquisition of:i. Linepack for the Peninsular Gas

Utilisation Pipeline; andii. Heels for the Regasification

Terminal Sg. Udang, Melaka and R e g a s i f i c a t i o n T e r m i n a l Pengerang, Johor

by PETRONAS Gas Berhad and its subsidiaries from Petroliam Nasional Berhad

Bursa Announcement

31 December 2018

Announcement of the Execution of the 2nd Term of Gas Processing Agreement between PETRONAS Gas Berhad and Petroliam Nasional Berhad effective 1 January 2019

Bursa Announcement

Throughout these key developments, we were fully committed to engage and communicate to our stakeholders, particularly investors and analysts, the strategic direction of the company, our growth initiatives as well as the operational and financial performance of the Group. In addition we also shared the relevant industry updates so as to facilitate investors in making informed investment decisions.

Our 35th Annual General Meeting (AGM) was held on 30 April 2018 at the Mandarin Oriental Hotel, Kuala Lumpur. Key highlights of the Group’s performance for the year under review were presented and the 2,102 shareholders and proxies who attended the meeting were given the opportunity to actively participate

by raising queries and providing suggestions to the company. This was the second time we utilised digital voting for the meeting resolutions. All proposed resolutions were duly passed and minutes of the AGM is available on our website at www.petronasgas.com.

We consistently issue our quarterly financial results to Bursa Malaysia, in line with the Main Market Listing Requirements and the Malaysian Code of Corporate Governance 2017. Subsequently, we conduct quarterly analyst briefings via webcast and conference call to allow further clarification and interaction between the Group’s spokespersons and the capital market. The financial results announcements and recordings of webcast and conference calls are available on our website for reference.

RELEVANT INDUSTRY UPDATES ARE SHARED SO AS TO FACILITATE INVESTORS IN MAKING INFORMED INVESTMENT DECISIONS

73




INVESTOR RELATIONS

PGB 35th AGM

PGB Q4 FY2018 Results Announcement and Briefing on TPA

Shareholders visit to Pengerang Shareholders visit to Kertih

For the fourth quarter and full year results, we organised a special face-to-face briefing session to share news on the Group’s highest ever profit achieved and also to present on the Third Party Access (TPA). The interactive and well-received session allowed us to provide company updates as well as address the capital market queries directly.

We recognise the need for our stakeholders to appreciate the nature of our business. During the year under review, we received 30 of our retail shareholders at our Gas Processing Complex site at Kertih, Terengganu. In addition, we also hosted institutional investors and analysts at our newly completed LNG Regasification Terminal in Pengerang, Johor as the facilities successfully completed its first full year operations since November 2017.

Overall, 2018 proved to be a notable year for us as our efforts to communicate effectively had been acknowledged via a number of awards received during the year, including:

• 2nd ASEAN Corporate Governance (CG) 2018– Top 30 ASEAN Public Listed

Companies

• The National Annual Corporate Report Awards (NACRA) 2018– Gold Award for Most Outstanding

Annual Report– Industry Excellence Award for

Industrial Products and Technology– Platinum Award for Best Designed

Annual Report– Silver Award for Best Integrated

Reporting Awards

We continuously strive to maintain accessibility to our stakeholders. For more specific investor-related queries and feedback, we can be reached at [email protected].

74


INVESTOR RELATIONS

35th

Annual General Meeting (AGM)30 April 2018, Mandarin Oriental Hotel, Kuala Lumpur

Shareholders and proxies attended:

2,102

INVESTOR RELATIONS ACTIVITIES

Quarterly Results and Analyst Briefing

Results Announcement Date Briefing Date Type of Meeting

Q1 17 May 2018 18 May 2018 Webcast and conference call

Q2 15 August 2018 15 August 2018 Webcast and conference call

Q3 30 November 2018 3 December 2018 Webcast and conference call

Q4 18 February 2019 19 February 2019 Face-to-face

Investor Conference

Date Event Location

5 January 2018 CIMB 10th Annual Malaysia Corporate Day 2017 Kuala Lumpur

Site Visit

Date Event Site Location

28 August 2018 Retail Shareholders Visit Gas Processing Complex Kertih, Terengganu

24 October 2018Institutional Investors and

Analysts VisitLNG Regasification Terminal Pengerang, Johor

75




MARKET CAPITALISATION

RM38.0 billion – 2018RM34.6 billion – 2017

RM17.48 – OpeningRM19.20 – ClosingRM19.54 – Peak

817,625 – 20181,015,925 – 2017

91.5 sen – 201890.6 sen – 2017

16 sen12 June 2018

16 sen 14 September 2018

18 sen 27 December 2018

22 sen 15 March 2019

Q1 Q2 Q3 Q4

72 sen – 201866 sen – 2017

14.0% – 2018-14.8% – 2017

SHARE PRICE

AVERAGE DAILY TRADED VOLUME (ADTV)

EARNINGS PER SHARE

DIVIDEND PER SHARE

TOTAL SHAREHOLDERS’ RETURN

DIVIDEND PAYMENT DATE

SHARE PRICE PERFORMANCE

1,500

1,550

1,600

1,650

1,700

1,750

1,800

1,850

1,900

1,950

14.00

15.00

16.00

17.00

19.00

18.00

20.00 Share Price (RM) FBM KLCI

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb

Volume traded

Share price VolumeFBM KLCI

76


INVESTOR RELATIONS

SHAREHOLDINGS RESEARCH COVERAGE

9.80%

60.66%

29.54%

PETRONAS

Other Local

Foreign

60.66%

29.54%

9.80%

Malaysia

USA-Canada

Europe

Asia Pacific

Others

92.02%

4.74%

1.28%

0.36%

1.60%

BY INSTITUTIONS

BY GEOGRAPHY

92.66%

4.74%1.28%

0.36%

1.60%

Source: Symphony and Bloomberg as at 31 December 2018

PGB continues to attract a consistent following by both domestic and foreign investors. We remain a well-covered stock with 14 research houses maintaining core coverage as at end December 2018.

Key Discussion Topics:

1 Implementation of New Gas Supply (Amendment) Act 2016 – Third Party Access (TPA)

Impending operational and economic regulation (including tariffs) over PGB’s Transportation and Regasification segments by Energy Commission

2 Future Growth Strategy

Future growth plans post the completion of projects at Pengerang

3 OPEX and CAPEX Trend

Future trend of OPEX and CAPEX spending

Affin Hwang Capital Kenanga Investment Bank

AllianceDBS Research Macquarie Securities

AmInvestment Bank Maybank Investment Bank

BIMB Securities MIDF Amanah Investment Bank

CIMB Investment Bank Nomura Securities

CLSA Securities RHB Research

J.P. Morgan Securities TA Securities

Scan this QR code with your smart device for more Investor FAQ

77




MOHD KABIR NOORDINHead of Gas Processing and Utilities Division

Product Delivery Reliability for

salesgas, propane and butane100%

Achieved its best performance for the last

five years

Liquid Production Volume(MT million)

1.21.1

0.7

Ethane Propane Butane

Revenue:

RM1.6billion

Gross Profit:

RM639.3million

Segment Assets:

RM3,991.3million

FINANCIAL PERFORMANCE OPERATIONAL PERFORMANCE

RECOGNITION/AWARDS

Salesgas:

99.99%

Ethane:

99.7%

Propane:

99.1%

Butane:

99.1%

Innovation and Improvement

Gold Award during International Convention on Quality Control Circle (ICQCC) 2018 for the High Flaring Counter Due to Low Reliability of Heat Exchanger project.

9 Gold Awards in Regional Team Excellence Convention for East Coast Region 2018 inclusive of ICC and 5S projects. Obtained nine Gold Awards in 2018 Annual Productivity and Innovation Conference and Exposition (APIC)

GPK, GPS, and Tanjung Sulong Export Terminal (TSET) obtained Laboratory Excellence Award for five consecutive years from The Institut Kimia Malaysia (IKM)

Health, Safety, Security and Environment (HSSE)

Highest awards for The Royal Society for the Prevention of Accidents (RoSPA) International Health and Safety Awards (Gold Award) for 2017 by RoSPA

National Level OSH Award and Recognition (MSOSH 2017). Awarded the MSOSH OSH Gold Merit Award Winner 2017 (Excellent OSH Performance) for GPK and ET.

Awarded The Malaysian Society Occupational Safety and Health (MSOSH) Occupational Safety and Health (OSH) Gold Class 1 Award Winner 2017 (Very Good OSH Performance) for GPS.

HUMAN CAPITAL

Male918

Female101

EMPLOYEES1,019

Read more about our segment financial performance on pages 27.5

78


BUSINESS REVIEW – GAS PROCESSING

Challenges/Risks Mitigation Strategies Results

Operational• Non compliance• Gas Processing Plant (GPP) reliability

issues resulting in interruption of ethane supply to the petrochemical business

• Digitalisation initiative for effective plant and equipment monitoring and tracking, in addition to continuous efforts on operational improvement activities

• All the initiatives executed as per planned, as part of continuous improvement towards safe and reliable operations

HSSE• Sustaining HSSE mindset at all

levels and implementing behavioural programme as part of the HSSE

• Enhancement of Tier-1 assurance process and the rollout of digitalisation initiative for effective safety monitoring and tracking

• Achieving HSSE mindset and behavioural programme as part of the continuation effort towards Generative Safety culture

HIGHLIGHTS 2018

CHALLENGES/RISKS

OUTLOOK AND PROSPECTS

Strategic Objectives Initiatives in 2018 Targets in 2019

Operational Excellence

• Complies with various HSSE governance and assurance frameworks as well as the PETRONAS Mandatory Control Framework at all times.

• Drive plant interruption reduction improvement and enhance product delivery to customer.

• Digitalisation of Hydrocarbon allocation reporting for efficient flow and meeting governance requirement.

• To increase efforts in instilling safety-at-heart amongst workforce to achieve safe operationalisation of the workplace.

• Continue efforts in improving plant monitoring and achieving optimum operation target.

Commercial Excellence

• Plant improvements initiatives under Downstream OE R2 KRA activities which contributed to improved plant reliability and integrity resulting in enhanced cost efficiency.

• To improve cost to serve to improve plant margin.

Growth

• To minimise value leakages and to improve overall asset utilisation.

• To further enhance overall asset utilisation jointly with Business Development & Commercial Division under 301Q99 transformation gameplan.

Further improve our high performance by focussing on sustaining safety and reliable operations towards productive, efficient and competitive assets via continuous plant improvement, preventive maintenance and turnaround activities

In line with Downstream OE R2, continue to develop and empower its team by enhancing leadership competencies whilst optimising cost to ensure competitiveness against other organisations in global benchmarking.

Expected to extract higher ethane volume attributable to higher feedgas composition received from Terengganu and Gas Terminal (TGAST) facilities, once TGAST project completed by PETRONAS Carigali Sdn Bhd

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BUSINESS REVIEW – GAS TRANSPORTATION

BURHAN ABDULLAHHead of Gas Transmission and Regasification Division

National Council OSH Award 2018

Silver Award for Operation Excellence in Operational Excellence Forum and Awards (OEFA) 2018

Bronze Award for Improvement Team Data Mart in OEFA 2018

Reliability – A measure to determine the impact of unscheduled downt ime on the avai labi l i ty of the pipeline transmission.

World class performance benchmark for Reliability is 98%.

99.999.9

2017 2018

GT Reliability(%)

OPERATIONAL PERFORMANCEFINANCIAL PERFORMANCE

RECOGNITION/ AWARDS

Revenue:

RM1.4billion

Gross Profit:

RM1,018.0million

Segment Assets:

RM2,689.8million

HUMAN CAPITAL

Male395

Female54

EMPLOYEES449


80



Business Environment• Change of Gas Supply Act i.e.

introduction of Third Party Access (TPA) that has changed the fundamental economic model for GT business

• Constant engagement with Energy Commission (EC) to minimise the impact to operations.

• Successfully retained tariff at RM1.248/GJ for 2018.

HSSE Culture• HSSE Calculative Culture • Established KRA to improve HSSE

performance as well as moving towards Generative HSSE Culture.

• Implemented safety critical mindset and behavioural programme as part of the continuous effort towards Generative HSSE Culture.

Asset Utilisation and Integrity Culture• Low asset utilisation of PGU due to

low demand from power sector• Established PGB business growth

strategies.• Identified growth project was

executed timely in order to increase gas utilisation and balance the low power sector demand.

HIGHLIGHTS 2018

CHALLENGES/RISKS



Operational Excellence

• Compliance with various HSSE governance and assurance frameworks as well as the PETRONAS Mandatory Control Framework at all times.

• Accredited with national awards and certifications.

• Improved pipeline monitoring and surveillance using new technology and digital i.e. drone Regas Management System (RMS) Supervisory Control and Data Acquisition (SCADA) enhancement, Datamart and LDS (Leak Detection System).

• To improve incident emergency response effectiveness using Technology/Digital and instill safety-at-heart toward Generative HSSE Culture.

• To improve Sabah Sarawak Gas Pipeline (SSGP) reliability through comprehensive integrity programme.

• To expand coverage of surveillance using technology and digital for other areas.

Commercial Excellence

• Plant improvement initiatives under Downstream OE R2 KRA activities which contributed to improved plant reliability and integrity resulting in enhanced cost efficiency.

• To minimise value leakage and optimise overall asset utilisation through Cost-to-Serve and Energy Efficiency initiatives to be more competitive to retain and secure customers.

Growth• Several projects undertaken to connect

our PGU pipeline to new customers e.g. Edra Energy’s new power plant in Melaka.

• To further enhance overall asset utilisation through pipeline extension to new demand hubs.

Sustaining world class performance of gas pipeline with continuous improvement on assets integrity programme towards safe, reliable and efficient operations.

In line with Downstream OE R2, continue to develop an empowered team by enhancing leadership competencies whilst optimising cost to ensure competitiveness against other organisations in global benchmarking.

Readiness for TPA implementation where other parties would be able to subscribe to the services offered.

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BUSINESS REVIEW – REGASIFICATION

BURHAN ABDULLAHHead of Gas Transmission and Regasification Division

OEE – A measure of plant performance against its limits and identified sources of loss within the plant and a measure of how well equipment is used when available.

World class performance benchmark for OEE is 95%.

10010098

100

RGTP OEE RGTSU OEE

2017 2018

Regasification OEE(%)

Revenue:

RM1.2billion

Gross Profit:

RM698.0million

Segment Assets:

RM6,320.8million

HUMAN CAPITAL

Male110

Female6

EMPLOYEES116


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HIGHLIGHTS 2018

CHALLENGES/RISKS



OperationalExcellence

• Compliance with various HSSE governance and assurance frameworks as well as the PETRONAS Mandatory Control Framework at all times.

• Accredited with national and international awards and certifications.

• Plant improvements initiatives under Downstream OE R2 KRA activities which contributed to improved plant reliability and integrity.

• To improve incident emergency response effectiveness using Technology/Digital and instill safety-at-heart toward Generative HSSE Culture.

• To sustain RGTSU and RGTP OEE and reliability through comprehensive integrity programme and work process.

CommercialExcellence

• Implementation of RMS to manage mult ip le capacity users in TPA environment.

• To minimise value leakage and optimise overall asset utilisation th rough Cost - to -Serve and improvement of Maintenance Cost Over Cost Plant Replacement Value (CPRV) initiatives to improve margin and be more competitive.

Growth • Proven LNG reloading service at Terminal Pengerang RGTP.

• To further capture auxiliary services at our regas facilities.

Continue to contribute to the Group’s income and remain sustainable on the back of capacity reservation by capacity users under the Regasification Services Agreements (RSA).

The new RGTP terminal will support the business growth of PETRONAS’ Pengerang Integrated Complex (PIC) and further strengthen security of gas supply to the nation.

Readiness for TPA implementation where other parties would be able to subscribe to the services offered.


Business Environment• Change of Gas Supply Act i.e.

introduction of Third Party Access (TPA) that has changed the fundamental economic model for RGT

• Constant engagement with Energy Commission (EC) to minimise the impact to operations whilst increasing plant utilisation, particularly for RGTSU.

• Successfully retained tariff for 2018.

HSSE Culture• HSSE Calculative Culture • Established KRA to improve HSSE

performance as well as moving towards Generative HSSE Culture.

• Implemented safety critical mindset and behavioral program as part of the continuous effort towards Generative HSSE Culture.

Asset Utilisation and Integrity Culture• Managing uncertain and adhoc PGU

gas demand due to low demand from power sector

• Performed LNG tank optimisation to ensure sufficient ullage to accept additional cargo and maintain high reliability of standby trains.

• Met nomination at 100% reliability with zero interruption to customer.

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BUSINESS REVIEW – UTILITIES

RECOGNITION/ AWARDS

Innovation and Improvement

Attained Gold Award during 2018 Regional Team Excellence Convention for East Coast Region. Listed among the Top 20 in Manufacturing Sector during 2018 Annual Productivity and Innovation Conference and Exposition (APIC) for Elimination of Unsafe Act during Chemical Dosing at Gas Turbine Closed Loop Cooling Water project which has successfully contributed to a RM32,600 cost saving per year

UK and UG consistently obtained Laboratory Excellence Award for five consecutive years from The Institut Kimia

GPK, GPS, and TSET obtained Laboratory Excellence Award for five consecutive years from The Institut Kimia Malaysia (IKM)

Health, Safety, Security and Environment (HSSE)

Highest awards for RoSPA International Health and Safety Awards (Gold Award) for 2017 by The Royal Society for the Prevention of Accidents (RoSPA).

National Level OSH Award and Recognition (MSOSH 2017)

MOHD KABIR NOORDINHead of Gas Processing and Utilities Division

Product Delivery Reliability for

salesgas, propane and butane100%

Achieved its best performance for the last

five years

Production Volume

1,877

4,078

670

Electricity(GWh)

Steam(kMT)

Industrial Gases(Mil Nm3)

Electricity:

99.6%

Industrial Gasses:

98.9%

Steam:

99.6%


Revenue:

RM1.3billion

Gross Profit:

RM180.6million

Segment Assets:

RM1,308.7million

HUMAN CAPITAL

Male225

Female16

EMPLOYEES241


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Operational• Non compliance• GPP reliability issues resulting in

interruption of ethane supply to the petrochemical business

• Digitalisation initiative for effective plant and equipment monitoring and tracking, in addition to continuous efforts on operational improvement activities

• All the initiatives executed as per planned, as part of continuous improvement towards safe and reliable operations

HSSE• Sustaining HSSE mindset at all

levels and implementing behavioural programme as part of the HSSE

• Enhancement of Tier-1 assurance process and the rollout of digitalisation initiative for effective safety monitoring and tracking

• Achieving HSSE mindset and behavioural programme as part of the continuation effort towards Generative Safety culture

HIGHLIGHTS 2018

CHALLENGES/RISKS



OperationalExcellence

• Complies with various HSSE governance and assurance frameworks as well as the PETRONAS Mandatory Control Framework at all times.

• Drive plant interruption reduction improvement and enhance product delivery to customer.

• Digitalisation of Hydrocarbon allocation reporting for efficient flow and meeting governance requirement.

• To increase efforts in instilling safety-at-heart amongst workforce to achieve safe operationalisation of the workplace.

• Continue efforts in improving plant monitoring and achieving optimum operation target.

CommercialExcellence

• Plant improvements initiatives under Downstream OE R2 KRA activities which contributed to improved plant reliability and integrity resulting in enhanced cost efficiency.

• To improve cost to serve to enhance competitiveness.

• To retain and secure additional customers.

Growth• Progress in Cogen E project. • To replicate business model in other

areas.

Further improve its high performance by focusing on sustaining safety and reliable operations towards productive, efficient and competitive assets through continuous plant improvement such as UG cogeneration plant expansion, Generator and Turbine Control System Upgrade (GETS-UP), preventive maintenance and turnaround activities.

In line with Downstream OE R2, continue to develop and empower its team by enhancing leadership competencies whilst optimising cost to ensure competitiveness against other organisations in global benchmarking.

Committed in pursuing new business opportunities and reaching new customers beyond Kertih and Gebeng to maximise utilisation of its assets and creating value for its shareholders.

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