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ANNUAL REPORT 2003
Business Review
POWER GENERATION BUSINESS
It was another year of sustained growth for our Power Generation business. The period
under review saw a 58% increase in turnover to RM933 million as compared to RM589
million previously. The improved performance is largely attributable to the successful
commissioning and commercial operations of the open cycle phase of the power plant
owned by Panglima Power Sdn Bhd (“Panglima”) which is wholly owned by our principal
subsidiary, Powertek Berhad (“Powertek”).
The Panglima power plant uses a Siemens V94.3A (Series F) model which is currently
one of the most efficient power plants in the industry. This has positioned Powertek
favourably and will enable it to pass the benefit of the increased efficiency to its customer.
Whilst addressing the construction challenges at Panglima, Powertek continued to
maintain its focus on the operation of its two existing plants, namely the 440 MW open
cycle power plant at Teluk Gong and the 330 MW combined cycle power plant in Tanjong
Kling, in line with its prudent utility practices. These have enabled a 48% increase in Power
Generation’s operating profit from RM229 million to RM339 million.
plant. The facility, which comprises RM830 million Redeemable Secured Serial Bonds,
RM306 million Commercial Papers/Medium Term Notes Programme and RM84 million
Standby Revolving Credit facility, was assigned an enhanced long-term rating of AA2 and a
short-term rating of P1 by the Rating Agency Malaysia Berhad. This has enabled Powertek
to not only secure project financing at a competitive cost, it has also given Powertek the
ability to optimise its capital structure to enable a more efficient management of the
Group’s cash resources.
On 31 March 2003, Panglima’s open cycle power plant was successfully converted
into a 720 MW combined cycle power plant when it achieved commercial operations.
This was accomplished within Panglima’s contracted schedule and project budget. The
TA N J O N G p u b l i c l i m i t e d c o m p a n y
During the year, Panglima secured a financing facility totalling RM1.22 billion to
finance the construction, development and operation of its 720 MW combined cycle power
successful completion of Panglima’s power plant marks another major milestone for the
Group, which now has a total nominal generating capacity of 1,490 MW, making it the
second largest Independent Power Producer in Malaysia.
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Business Review
(continued)
NUMBERS FORECAST TOTALISATOR BUSINESS (“NFO”)
Turnover for the NFO business has increased by 1.7% to RM1,422 million on the back of
five additional draws during the year. However, the underlying demand for NFO products
has remained soft due to increasing competition from unauthorised gaming operators
whose activities have continued to grow unabated.
During the year, several measures were taken as part of our plan to increase our market
share. One key initiative was to step up our branding activity through various sponsorships
and programmes on the electronic media. We also introduced the Telelink Mobile Service
enabling Telelink account holders to make their investments via mobile phones. In addition,
through strategic partnerships with financial institutions, we have enhanced our services
for our Telelink account holders who are now able to make investments and top-up their
Telelink accounts from their bank accounts. They can also top-up their Telelink accounts via
the PMP website which is linked to selected banking institutions. We expect our efforts to
promote Telelink to yield positive returns in the medium term.
For the year under review, NFO operating profit increased by RM9 million to RM201
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million on the back of improved operating margins mainly attributable to the revision of
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Betting and Sweepstake Duties in September 2001.
However, effective 1 January 2003, the Government standardised the pool betting
duty for the numbers forecast operators to 6%, and at the same time, the operators have
been required to raise the first prize payout for the 4-digit forecasts by RM500. Whilst the
increase in prize payouts is expected to generate higher turnover, the overall revision in
duties and prize payouts will have an adverse impact on our operating margins in the
coming financial year. Apart from the increase in prize payouts, other options are being
explored to enhance the competitiveness of the authorised gaming operators.
ANNUAL REPORT 2003
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ANNUAL REPORT 2003
Business Review
(continued)
RACING TOTALISATOR BUSINESS (“RTO”)
The higher dividend payout ratio following the revision in Betting and Sweepstake Duties
has enabled the RTO business to maintain its growth momentum and gross proceeds have
improved by 57% from RM498 million in the previous year to RM781 million. This was
achieved through 1,275 races which were conducted by the Malayan Racing Association
over 139 race days as compared to 1,120 races over 128 race days in the previous year. As a
result of the higher totalisator turnover, the operating loss for RTO has reduced
significantly from RM29.5 million to RM2.2 million this year.
The attendance at the turf clubs and off-course centres increased by 17.4% from 1.44
million punters to 1.69 million punters, while the spending per punter increased by 34%
from RM345 per race day to RM462 per race day this year.
The National Stud Farm (“NSF”) held its eleventh National Premier Sale where 52
two-year old horses, comprising 28 local breds and 24 imports, were successfully auctioned
for RM2.24 million. The Sale along with the NSF-sponsored incentive races are part of the
NSF’s efforts towards developing and promoting the thoroughbred breeding and equine
TA N J O N G p u b l i c l i m i t e d c o m p a n y
industry in Malaysia.
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Business Review
(continued)
PROPERTY INVESTMENT BUSINESS
Despite an oversupply of office space in the property market, we have managed to
improve our occupancy rate and maintained our rental structure due mainly to the
exceptional quality of our building and its related facilities.
As at 31 January 2003, tenancies for a total of 477,786 sq. ft. or 90.5% of the net
lettable area in Menara Maxis have been secured, representing an increase of 5.2% from
the previous year. Our anchor tenant, Maxis Communications Berhad took up an additional
floor while new tenants include Cahya Mata Sarawak Berhad and Binariang Satellite
Systems Sdn Bhd.
A new integrated security services management system was implemented in February
2002 to enhance the overall security of the building.
LIQUEFIED PETROLEUM GAS (“LPG”) BUSINESS
The adverse operating conditions for the LPG business have, as anticipated, persisted
TA N J O N G p u b l i c l i m i t e d c o m p a n y
without prospect of an immediate turnaround. Measures are being taken to ensure that
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the operating losses are contained within the existing business constraints.
We continue to explore avenues for exiting the LPG business and are addressing the
information requirements of parties who have expressed interest in acquiring the business.
ANNUAL REPORT 2003
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Business Review
(continued)
FILM EXHIBITION BUSINESS
A higher number of blockbusters and the better than expected performance of the Malay
titles during the year led to a 15% increase in admissions at Tanjong Golden Village (“TGV”),
from 5.3 million patrons to 6.1 million patrons. Gross box office receipts increased in
tandem by 22% from RM41 million to RM50 million. Overall occupancy for 2002 also
improved, averaging about 31% as compared to 28% previously.
There was a corresponding increase in our share of the pre-tax profit of TGV from
RM200,000 last year to RM3.7 million.
During the year, TGV added two new features to its ticket reservation facilities,
namely M-cinema and eTicketing, as part of its continuous customer service enhancement
programmes. M-cinema uses the STK/WAP platform to enable ticket reservations to be
made over the mobile telephone. With eTicketing, moviegoers are able to reserve cinema
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seats through the internet via TGV’s website at www.tgv.com.my.
ANNUAL REPORT 2003
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Corporate Social Responsibility
Corporate social responsibility is an integral part of our business as we believe that our actions
should not only benefit our shareholders, but also our employees, society and the environment.
Our Statement of General Business Principles guides our actions on the health and safety of our
employees, conservation of resources and environmental protection, as well as our
contributions to the communities within which we operate.
We are committed to safe and healthy working conditions for all employees. Our
Occupational Safety and Health committees implemented various programmes throughout the
year to entrench safety and health consciousness among employees. Fire fighting courses, first
aid and cardiopulmonary resuscitation training, fire drills and building evacuation exercises as
well as safety and health talks were among the activities carried out. At our power plants, we
constantly review plant procedures on safety and health to improve our standards. Our
vigilance has been rewarded with another accident-free year. At Menara Maxis, safety system
checks and drills are regularly conducted on all safety related equipment.
Environmental management, especially at our power plants, continues to be given close
attention. The Group ensures strict compliance with the environmental laws governing plant
operation and maintenance in areas relating to environmental standards, emission standards,
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noise level management and treatment of plant effluents and waste water. In addition, our
Teluk Gong power plant has successfully maintained for the third consecutive year, the ISO
14001 Certification for Environmental Management systems.
Our work for the betterment of the community remains the cornerstone of our corporate
social responsibility agenda. We offer educational scholarship awards to talented and deserving
students each year to pursue their tertiary education at public universities in Malaysia. There
are two scholarship award schemes offered by the Group, the Tanjong Scholarship Award and
the Powertek Berhad Scholarship Award. In addition, our Student Aid programme channels over
RM1 million each year to poor students at primary schools for their educational needs. We have
also organised and sponsored the annual Tanjong Heritage art competition for students from
tertiary level institutions to encourage the development of their artistic talent with a simultaneous
aim of inculcating appreciation for Malaysian heritage among our youth.
Our Staff-in-the-Community projects were implemented throughout the year providing
opportunities for our staff to perform volunteer work for persons with disabilities, the elderly
and orphans. In keeping with our tradition of "Caring & Sharing", we continue to celebrate the
major festivals in Malaysia with the needy in the community. As a part of the Festival Charity
Programme, we have contributed towards the development and upkeep of selected charities
and voluntary organisations nationwide. We also support the development of rural
communities through substantial contributions to the Electricity Supply Industry Trust Fund,
which was established to develop rural electrification and conduct research and development
for the benefit of the electricity supply industry.
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ANNUAL REPORT 2003