Consolidating Strengths Capitalising Opportunities Annual Report 2022
Ranhill Utilities Berhad (“Ranhill” or “the Group”) consists of three business or sectors. These are the Environment, Energy and Engineering Services sectors. Ranhill’s Environment sector accounts for 68.0% of revenue, with 15.3% coming from the Group’s Energy sector and 16.7% from the Engineering Services sector. Cover Rationale As a diversified group, Ranhill collaboration with its diverse businesses are imperative and affiliates in a way that fortifies business synergies and growth. In line with the theme, this concept highlights our diversity by showing the dynamism that it creates. Creative die-cut brings the reality of an organisation to life that thrives through synergy between a variety of different elements. In addition, the cover design depicts Ranhill has laid out a strategic foundation that will drive force to synergise our diverse range of products and services to enrich our core competencies and redefine progress so that to remain steadfast in achieving our business goals. All these pave the way for future opportunities and industry’s sustainability. Engineering Services Sector Environment Sector Energy Sector SUSTAINABILITY AND ENVIRONMENTAL, SOCIAL AND GOVERNANCE (“ESG”) Our ESG and sustainability agenda reflects our commitment to reduce the environmental impact of our business as a principal focus area. This is underpinned by excellence across our other ESG priorities. As part of our commitment to protect the environment, this annual report is printed on FSC® certified mix paper. Read more on Ranhill's global efforts on Sustainability by downloading our latest Sustainability Report here
BUSINESSES We are a responsible global business Ensuring a sustainable balance between environmental protection, social responsibility and profitability in all aspects of where we do business. Environment Sector Treated Water Supply Services Water, Wastewater Treatment & Reclaimed Water Treatment Engineering Services Sector Engineering, Procurement and Construction Management (“Epcm”), Engineering, Procurement, Construction and Commissioning (“Epcc”), Project Management Consultancy (“Pmc”), Operations and Maintenance (“O&M”) Energy Sector Energy and Renewable Energy (“RE”) Our Reports REPORTING SUITE ANNUAL REPORT 2022 (“AR2022”) The AR2022 provides a comprehensive account of Ranhill’s financial performance including audited financial accounts of the Group. It also provides information pertaining to the Group’s business and operational strategies, risks and opportunities, outlook and prospects, as well as information pertaining to the business model and industry value chain. SUSTAINABILITY REPORT 2022 (“SR2022”) The SR2022 provides a detailed account of the Group’s sustainability performance as per its identified material Economic, Environmental and Social (“EES”) topics. SR2022 is developed in accordance with the Global Reporting Initiative 2020 – Core Option (“GRI”), Bursa Malaysia FTSE4Good Index, Sustainability Accounting Standards Board (“SASB”) disclosures and (where relevant), the Task Force on ClimateRelated Financial Disclosures (“TCFD”). CORPORATE GOVERNANCE REPORT (“CG2022”) The CG2022 demonstrates how Ranhill has applied corporate governance practices of the Malaysian Code of Corporate Governance 2021 (“MCCG 2021”) including updates prescribed by the code in FY2022. Non-Revenue Water Management
Contents Business Overview Section 02 Corporate Philosophy 03 Ranhill Fact Sheet 04 Group Corporate Profile 08 Our Presence 10 Corporate Information 12 Our Approach to Value Creation 20 Our Value Creation Model 22 Our Strategic Snapshot Performance Review Section 26 Message From Chairman and Chief Executive 28 Group Financial Highlights 29 Management Discussion & Analysis Sustainability Section 59 Sustainability Statement Governance Section 88 Board of Directors 90 Board of Directors’ Profile 99 Key Senior Managements’ Profile 104 Corporate Governance Overview Statement 121 Additional Compliance Information 122 Audit Committee Report 125 Statement on Risk Management and Internal Control 129 Directors’ Responsibility Statement Financial Statements Section 131 Directors’ Report 139 Independent Auditors’ Report 144 Statements of Profit or Loss and other Comprehensive Income 145 Statements of Financial Position 147 Statements of Changes in Equity 150 Statements of Cash Flows 153 Notes to the Financial Statements 262 Statement by Directors 262 Statutory Declaration Other Information Section 263 Property Owned by Our Group 264 Disclosure of Recurrent Related Party Transactions 268 Analysis of Shareholdings 272 Notice of Annual General Meeting 280 Statement Accompanying the Notice of Annual General Meeting • Proxy Form 01 02 03 04 05 06 9th Annual General Meeting Date 17 May 2023, Wednesday Time 2.30 p.m. Venue Taming Sari 1 & 2, Ground Floor, Royale Chulan Kuala Lumpur, No. 5 Jalan Conlay, 50450 Kuala Lumpur. For more information: Scan the QR code to view our AR2022 https://www.ranhill.com.my/investor-relations/ reports-presentations/
Bus iness Overvi ew 01 Sect ion 2 Ranhi ll Ut i l i t i es Berhad Corporate Philosophy Our Mission TO BE A REGIONAL LEADER IN WATER, WASTEWATER AND ENERGY WITH EMPHASIS ON CIRCULAR ECONOMY Our Vision ENRICHING LIVES THROUGH SUSTAINABLE SOLUTIONS Our Values Respect for the environment, communities we serve and for our employees Focused on delivering growth and value to our stakeholders Determination in sourcing and adopting innovative solutions Resourceful Respect Result ENRICHING LIVES Ranhill aspires to lift the quality of life by being at the forefront of nation building through sustainable environment and energy solutions using innovative and clean technology SUSTAINABLE SOLUTIONS Ranhill aspires to meet the needs for an enhanced quality of life and a cleaner planet through innovation We subscribe to the triple-bottom-line approach, to the Environment (Planet) and Communities (People) whilst achieving our Financial Objective (Profit) We inspire our employees to be innovative in providing solutions beyond customers’ expectations Pontian Dam, Johor
Bus iness Overvi ew Sect ion 01 3 Annual Report 2022 Ranhill Fact Sheet You can find more details on our website on www.ranhill.com.my 46 Water Treatment Plants 99.8% Treated Water Supply Coverage (Rural) 100% Treated Water Supply Coverage (Urban) 714 Active Treated Water Reservoirs Provides Clean Water to 4 Million Consumers in Johor, Malaysia 24,002 km Total Pipelines 3,631 km Mains Distribution 20,371 km Reticulation Total Capacity 2,133 MLD Treated Water Treatment in Johor, Malaysia Provide Electricity 1.2 Million People in Sabah, Malaysia Total Potable Water, Wastewater & Reclaimed Water Treatment Capacity: Thailand: 117 MLD (100 MLD for WTP & WWTP) (17 MLD for WRTP) China : 227 MLD Total Potable Water, Wastewater and Reclaimed Water Capacity Local: 86.0% International: 14.0% Employees 4,018 Ranhill is a constituent of the FTSE4Good Bursa Malaysia Index since 2019 Participant of United Nation Global Compact (UNGC) since 2008 Recipient of The Edge Malaysia ESG Awards 2022 (Gold) Utilities sector Senai-Desaru Expressway Bridge, Johor Ranhill had engineered: Over 800 MLD Water Treatment Plants Over 601 km of Highways Over 200 km of Railway Over 70,000 Acres of Landbank Over 4 million sq.m of Building Space Owns and operates Combined Cycle Gas Turbine (CCGT) power plants Rugading: 190 Megawatt Teluk Salut: 190 Megawatt 2,392 GWh of electricity generated for Sabah NRW Level 26.3% 20.9 m3 / KM of Pipe / Day
Bus iness Overvi ew 01 Sect ion 4 Ranhi ll Ut i l i t i es Berhad GROUP CORPORATE PROFILE Ranhill Utilities Berhad (“Ranhill” or “the Group”) consists of three business sectors. These are the Environment, Energy and Engineering Services sectors. Ranhill’s Environment sector accounts for 68.0% of revenue, with 15.3% coming from the Group’s Energy sector and 16.7% from the Engineering Services sector. Information detailing the operations and capabilities of each business sector is provided below. Environment Sector Ranhill’s Environment sector provides a complete source to tap into solutions for the abstraction, treatment and and supply of raw potable water. This includes provision of technical services in the management and optimisation of water utility assets. Ranhill’s Environment sector accounts for a contribution of 68.0% of the Group's revenue. Information detailing the operations and capabilities of each business sector is provided below. Ranhill’s Environment sector's operations comprises the following operating companies: Ranhill SAJ Sdn Bhd (“Ranhill SAJ”), Ranhill Water (HongKong) Ltd. (“RWHK”), Ranhill Water Technologies (Thai) Ltd. (“RWTT”) and AnuRAKWater Treatment Facilities Co. Ltd. (“AnuRAK”). Together, they provide a complete source to find solutions for the abstraction, treatment and supply of potable water, contribute to non-revenue water (“NRW”) programmes, the treatment of wastewater and production of reclaimed water. Customers include the general public, governments, municipal authorities, industrial and commercial customers. 2022 2021 16.7% 9.9% 68.0% 75.7% 15.3% 14.4% Sector revenue Environment Energy Engineering Services
Bus iness Overvi ew Sect ion 01 5 Annual Report 2022 GROUP CORPORATE PROF I LE OUR BUSINESSES RANHILL SAJ SDN BHD (“Ranhill SAJ”) As Johor state’s sole water operators, Ranhill SAJ Sdn Bhd (“Ranhill SAJ”) undertakes raw water abstraction, treatment, distribution, sale and operates the entire water supply network in Johor. It operates 46 water treatment plants (“WTPs”) statewide with a total treatment capacity of 2,133 million litres daily (“MLD”). As at 31 December 2022, Ranhill SAJ’s network comprises 716 reservoirs and 24,002 KMof pipelines that supply treated water to 4 million people in Johor as well as industries across the state. With a low NRW rating of 20.9 m³ / KM of Pipe / Day, the NRW percentage for Johor state is 26.3% in FY2022. Working together with Ranhill Water Services Sdn Bhd (“RWS”), which specialises in NRW reduction and management, Ranhill SAJ has set a target of further reduction of Johor’s NRW levels to 20.9% by 2025. Ranhill Water (HongKong) LTD. (“RWHK”) On the international front, the Group owns a 40% share in Ranhill Water (Hong Kong) Ltd. (“RWHK”), which owns 12 industrial wastewater treatment plants with a total design capacity of 227 MLD. Assets are operated based on a Build-OperateTransfer (“BOT”) and Transfer-Operate-Transfer (“TOT”). Our 60% joint venture partner, SIIC Environment Holdings Ltd., a China state-owned entity has vast experience and good rapport with local authorities, which provides a good platform for negotiation and potential expansion. Treated Water Supply Services Multi Disciplinary EPCM, PMC, O&M Services and Consultancy Services Energy and Renewable Energy Non-Revenue Water Management Water and Wastewater Treatment & Reclaimed Water Treatment RANHILL WATER TECHNOLOGIES (THAI) LTD. (“RWTT”) AND ANURAK WATER TREATMENT FACILITIES CO. LTD. (“AnuRAK”) Ranhill Water Technologies (Thai) Ltd. (“RWTT”) and AnuRAK Water Treatment Facilities Co. Ltd. (“AnuRAK”) undertakes water, wastewater and reclaimed water treatment assets, as well as operations and project maintenance of related assets. Most assets are operated based on a BuildOperate-Transfer (“BOT”) and Rehabilitate-OwnTransfer (“ROT”) contracts. To date, the Group, has achieved 344 MLD or 86.0% of its targeted 400 MLD for international water and wastewater operations. Driven by the SDGs, Ranhill continues to focus on creating value for local communities. These include talent development and socioeconomic improvements through the provision of job opportunities, nurturing local supply chains, and infrastructure development. People Upholding operational excellence and prioritising quality and service responsibility, Ranhill continues to set new performance benchmarks for customer satisfaction and elevate standards to worldclass levels. Customer Experience Harbouring ambitions of greater growth, Ranhill aims to further expand its presence on the international stage, bringing its proven track record of expertise, worldclass capabilities, and longstanding experience to new markets across the world. Globalisation
Bus iness Overvi ew 01 Sect ion 6 Ranhi ll Ut i l i t i es Berhad Ranhill Water Services Sdn Bhd (“RWS”) is a leader in NRW management – having saved more than 751 MLD of treated water across various states in Malaysia and in Riyadh, Saudi Arabia. The following is RWS’ growing track record in reducing NRW: Engineering Services Sector RANHILL WATER SERVICES SDN BHD (“RWS”) Energy Sector Ranhill Powertron Sdn Bhd (“RPI”) and Ranhill Powertron II Sdn Bhd (“RPII”) Via subsidiaries, Ranhill Powertron Sdn Bhd (“RPI”) and Ranhill Powertron II Sdn Bhd (“RPII”), the Group owns, operates and maintains two CCGT power plants located at the Kota Kinabalu Industrial Park, Sabah. RPI owns and operates the 190 MW Teluk Salut Power Station while RPII owns and operates the 190 MW Rugading Power Station. The former comprises four 30 MW gas turbines, four vertical heat recovery steam generators and two 35 MW steam turbines. The latter consists of two 65 MW gas turbines, two horizontal heat recovery steam generators and a 60 MW steam turbine. Cumulatively, the Group’s power plants deliver up to 380 MW of energy, which is equivalent to approximately 40% of the total installed capacity among Independent Power Producers (“IPP”) in Sabah. This makes Ranhill the largest IPP player in Sabah. State/Region MLD Johor 475 Melaka 59 Kedah 54 Saudi Arabia 54 Terengganu 50 Kelantan 43 Pahang 16 GROUP CORPORATE PROF I LE Besides revenue loss, high NRW levels negatively impact the water supply system. High NRW levels equate to significant quantities of treated and potable water being lost. As a result, more water source needs to be abstracted from rivers to compensate (for the lost amounts) to meet consumption demand. This translates into increased workload on existing water assets, increased Operating Expenses (“OPEX”) and an increased environmental footprint (due to power consumption and emissions from WTPs for operations). By reducing NRW levels, the stress on WTPs and supporting assets can be reduced significantly, resulting in lower maintenance costs as well as lower consumption of power, water and other resources. Savings in water will increase the reserve margin and the surplus generated can be redistributed to high demand areas such as Johor Bahru city in Johor state. This also simultaneously contributes to increased revenue. In FY2022, RWS continues to expand its presence nationwide – successfully undertaking NRW projects under Approach One National NRW Reduction programme under the 12th Malaysia Plan. These include projects in Perlis and Pahang. Ranhill Water Technologies Sdn Bhd (“RWT”) Ranhill Water Technologies Sdn Bhd (“RWT”) undertakes varied water, wastewater and reclaimed water utility projects in Malaysia and China (through associate companies). In FY2022, RWT was successful in securing 10 contracts with a total cumulative value of RM41 million. The completion of several projects also contributed to higher revenue recognition in FY2022. In the previous years, RWT has successfully completed the design and build contract of the 50,000 population equivalent (“PE”) sewerage treatment plant (“STP”) known as STP4 Forest City in Gelang Patah, Johor, that consist of water reclamation facilities.
Bus iness Overvi ew Sect ion 01 7 Annual Report 2022 GROUP CORPORATE PROF I LE Ranhill Bersekutu Sdn BHD (“RBSB”) Ranhill Bersekutu Sdn Bhd (“RBSB”) is a multi-disciplinary engineering company services provider providing comprehensive engineering solutions. These include design services for geotechnical, civil infrastructure, structural, mechanical, electrical, water resources, linear transportation, project management and EPCC solutions. Since its inception five decades ago, RBSB has established a stellar track record of more than 2,300 successful projects for clients within Malaysia as well as overseas. RBSB continued to register steady progress in completing all projects in hand in FY2022. The completed projects are Ranhill’s Large Scale Solar 4 (“LSS4”) landmark project, various water supply related and flood mitigation infrastructure projects nationwide. Other accomplishments are landmark projects in Asia, the Middle- East and Africa comprising civil structure and township design, transportation related projects such as highways, roads, bridges, airports, ports, rail and transit systems; water distribution, catchment and wastewater treatment infrastructure; flood mitigation; power and industrial plants, as well as residential, commercial and public facilities. FY2022 has seen RBSB venture into the designing and building of solar facilities via its undertaking of the construction of the 50 MW LSS 4 solar farm, awarded to Ranhill. RBSB has also progressed into designing of hospitals, the KLIA baggage handling system, flood mitigation and various infrastructure development projects. RANHILL WORLEY SDN BHD (“RW”) Ranhill Worley Sdn Bhd (“RW”) is a well-regarded global brand name for professional project and asset services. RW is excellently positioned as a carbon storage, decarbonisation and technology leader with the recent award of Malaysia Kasawari Carbon Capture Storage (“CCS”), world’s largest offshore CCS, together with ESG solutions for the oil and gas industry. For over 25 years, RW, via partnership with Worley Ltd. global leader in Energy, Chemical and Resources (“ECR”) has provided engineering, design, management and consultancy services to the energy, chemicals and resource sectors. RW has developed a credible track record for brilliance by delivering high-quality, value-driven solutions for complex requirements. Recently in year 2022, RW secured projects worth RM252 million in Malaysia and overseas. RW has over the years, lent its expertise to the development of various successful projects in Malaysia and projects globally including the Middle East, North Sea UK, Myanmar, Vietnam, Africa, China, India, and Brazil. It continues to set the benchmark for project management, asset services and solutions within the region. RW has ventured into the niche but highly in demand sector of CCS solutions, particularly for the oil and gas sector. Among projects secured include the world’s largest Carbon Capture Storage (“CCS”) project: the Malaysia Kasawari CCS project and Brazil P-82 Floating Production Storage and Offloading (“FPSO”).
Bus iness Overvi ew 01 Sect ion 8 Ranhi ll Ut i l i t i es Berhad OUR PRESENCE CHINA THAILAND MALAYSIA
Bus iness Overvi ew Sect ion 01 9 Annual Report 2022 OUR PRESENCE CHINA • Concession agreement with local authorities or industrial park management councils • 12 Wastewater treatment plants ranging from 25-30 years • Total treatment capacity of 227 MLD THAILAND • 9 water, wastewater treatment plant and reclaimed water treatment plant • 100 MLD of total water and wastewater treatment capacity • 17 MLD of reclaimed water OTHER COUNTRIES (Multi Disciplinary of Engineering Services) • Engineering works for Santos WHP EPCI with Sapura Engineering, Western Australia • Pre-FEED for HI Development Project, Nigeria • Engineering Support to Sembcorp Marine under an EPCI contract awarded by North Oil Company (“NOC”) for Gallaf Batch 2 project, located field, off Qatar • Block 15-1/05 Lac Da Vang Oil Development, Vietnam • Neptune Deep Project, a FEED for gas de-hydration fixed platform (NNM CPP) in 120m of water in the Black Sea off the coast of Romania • Zawtika M-9 Development Project, Offshore, Myanmar • Marina Doha Residential Doha Office Tower, Qatar • Built a 113.5 MLD potable water treatment plant for Haldia Development in West Bengal • Bangladesh-Engineering for Public Sanitation Facility for 26 districts funded by Islamic Development Bank • First designed for float over project and detailed design, procurement support in Offshore Bombay, India for the B193 Development Project • Detailed engineering and project management services of 10,800 residential in Tajura, Libya • Provide project management services to Saudi Aramco, King Abdullah University of Science and Technology (“KAUST”) • Provide management and construction services of King Saud University for Girls (“KSUG”) in Riyadh • P-82 Floating Production Storage and Offloading (“FPSO”) contract, which will incorporate carbon capture and closed flare technology features in Brazil MALAYSIA Water Supply Services in Johor, Malaysia • Exclusive licence to provide source to tap water supply services throughout the State of Johor • 46 Water treatment plants • The second largest water operations in the country with total design capacity of 2,133 MLD Engineering and Infrastructure Solutions Specialist • ExxonMobil Exploration and Production Malaysia Inc (“EMEPMI”) - Provision of Engineering, Procurement and Construction Management (“EPCM”) Services • Develop the Kasawari Gas Development Project as part of the overall block SK316 development strategy off the coast of Sarawak • Shell Rosmari & Marjoram Project Offshore Gas Plant • Senai-Pasir Gudang-Desaru Expressway (with 500m main span cable-stayed bridge) • Kuala Lumpur International Airport and KLCC • The world’s largest Carbon Capture Storage (“CCS”) project - the Malaysia Kasawari CCS in Sarawak Power Business in Sabah, Malaysia • The largest IPP in Sabah, Malaysia • Owns and operates two (2) 190 MW CCGT power plants in Kota Kinabalu Industrial Park • 21-year PPA with SESB for the sale of up to 380 MW of electricity generating capacity. NRW Specialist: • Ranhill has achieved savings of 751 MLD • Developed 251 strategic and all mains models with over 1 million total number of connections • Designed and established over 1,200 District Metered Areas (“DMAs”) We aspire to lift the quality of life by being at the forefront of nation building through sustainable environment and power solutions using innovative and clean technology.
Bus iness Overvi ew 01 Sect ion 10 Ranhi ll Ut i l i t i es Berhad BOARD OF DIRECTORS Corporate Information TAN SRI HAMDAN MOHAMAD Chairman and Chief Executive Non-Independent Executive Director DATUK SERI LIM HAW KUANG Executive Director DATUK ABDULLAH KARIM Senior Independent Non-Executive Director MR LIM HUN SOON @ DAVID LIM Independent Non-Executive Director MS LEOW PEEN FONG Independent Non-Executive Director ENCIK ABU TALIB ABDUL RAHMAN Independent Non-Executive Director DR ARZU TOPAL Independent Non-Executive Director ENCIK AMRAN AWALUDDIN Executive Director and Chief Operating Officer CIK ZURINA ABDUL RAHIM Executive Director and Chief Commercial Officer AUDIT COMMITTEE (“AC”) MEMBERS MR LIM HUN SOON @ DAVID LIM Chairman Independent Non-Executive Director DATUK ABDULLAH KARIM Member Senior Independent Non-Executive Director ENCIK ABU TALIB ABDUL RAHMAN Member Independent Non-Executive Director GOVERNANCE AND RISK MANAGEMENT COMMITTEE (“GRMC”) MEMBERS MS LEOW PEEN FONG Chairman Independent Non-Executive Director TAN SRI HAMDAN MOHAMAD Member Chairman and Chief Executive Non-Independent Executive Director DATUK SERI LIM HAW KUANG Member Executive Director ENCIK ABU TALIB ABDUL RAHMAN Member Independent Non-Executive Director DR ARZU TOPAL Member Independent Non-Executive Director CIK ZURINA ABDUL RAHIM Member Executive Director and Chief Commercial Officer NOMINATING AND REMUNERATION COMMITTEE (“NRC”) MEMBERS DATUK ABDULLAH KARIM Chairman Senior Independent Non-Executive Director ENCIK ABU TALIB ABDUL RAHMAN Member Independent Non-Executive Director MS LEOW PEEN FONG Member Independent Non-Executive Director DR ARZU TOPAL Member Independent Non-Executive Director LONG TERM INCENTIVE PLAN COMMITTEE (“LTIP”) MEMBERS DATUK ABDULLAH KARIM Chairman Senior Independent Non-Executive Director ENCIK ABU TALIB ABDUL RAHMAN Member Independent Non-Executive Director MS LEOW PEEN FONG Member Independent Non-Executive Director DR ARZU TOPAL Member Independent Non-Executive Director
Bus iness Overvi ew Sect ion 01 11 Annual Report 2022 Corporate Informat ion COMPANY SECRETARIES MS LAU BEY LING Chartered Secretary MAICSA 7001523 Practising Certificate No. :201908004064 MS LEONG SHIAK WAN Chartered Secretary MAICSA 7012855 Practising Certificate No. :202008002757 REGISTERED OFFICE Bangunan Ranhill SAJ Jalan Garuda, Larkin 80350 Johor Bahru Johor Darul Takzim Malaysia Telephone No. : +(607) 225 5300 Facsimile No. : +(607) 225 5310 Website : www.ranhill.com.my SHARE REGISTRAR BOARDROOM SHARE REGISTRARS SDN. BHD. Registration Number: 199601006647 (378993-D) 11th Floor, Menara Symphony No. 5, Jalan Prof. Khoo Kay Kim Seksyen 13, 46200 Petaling Jaya Selangor Darul Ehsan, Malaysia Telephone No. : +(603) 7890 4700 Facsimile No. : +(603) 7890 4670 Website : www.boardroomlimited.com AUDITORS MESSRS DELOITTE PLT (LLP0010145-LCA) Chartered Accountants (AF0080) Level 16, Menara LGB 1, Jalan Wan Kadir Taman Tun Dr. Ismail 60000 Kuala Lumpur, Malaysia Telephone No. : +(603) 7610 8888 Facsimile No. : +(603) 7726 8986 Website : www.deloitte.com/my INVESTOR RELATIONS Telephone No. : +(603) 2716 5629 Facsimile No. : +(603) 2716 5662 Website : ir.info@ranhill.com.my PRINCIPAL BANKER Affin Bank Berhad Bank Islam Malaysia Berhad Malayan Banking Berhad MIDF Amanah Investment Bank Berhad STOCK EXCHANGE LISTING Main Market of Bursa Malaysia Securities Berhad (Listed on 16.12.2015 and traded on 16.03.2016) Stock Name : RANHILL Stock Code : 5272 FORM OF LEGAL ENTITY Incorporated on 28 April 2014 as a private limited liability company in Malaysia under the Companies Act 1965. On 24 October 2014, converted into a public company limited by shares under its name, Ranhill Holdings Berhad (“Ranhill”). Commenced its business on 16 December 2015 following the completion of the pre-offering reorganisation. On 16 December 2015, also assumed its listing status on the Main Market of Bursa Malaysia Securities Berhad following the completion of the reverse takeover of Symphony House Berhad. Ranhill assumed its present name of Ranhill Utilities Berhad effective from 13 May 2020. The present name is consistent with Ranhill’s Vision, Mission and circular economic model. The chosen brand name provides a unified identity for Ranhill’s Environment, Energy and Engineering Services sectors and highlights the Group’s proven expertise and experience as a leading player for environment, energy and engineering services.
Bus iness Overvi ew 01 Sect ion 12 Ranhi ll Ut i l i t i es Berhad OUR MATERIAL MATTERS Biodiversity Community Engagement Anti-Bribery and Anti-Corruption Climate Change and Greenhouse Gas Emissions Customer Experience and Satisfaction Corporate Governance and Regulatory Compliance Energy Usage and Energy Efficiency Employee Engagement Data and Cyber Security Material Management Human Rights, Diversity, Equity and Inclusion Economic Performance Waste (Solid) and Wastewater Management Safety, Health and Wellbeing (Employee and Public) Ethics and Integrity Water Security, Accessibility and Tariff Supply Chain Management and Responsible Sourcing Innovation Talent Acquisition, Retention and Development Operational Excellence Risk Management Technology and Digitalisation Environmental Social Governance E S G A sustainable future, a better tomorrow. In essence, this is the purpose Ranhill continues through its operations in the Environment, Energy and Engineering Services sectors to provide solutions that enable value creation, beyond the realisation of pure revenue and profits. While growth in financial performance remains a fundamental aspect of the Ranhill business model, the Group’s Vision and Mission are environmental and societal focused, that is addressing the challenges faced by society and the nation in relation to sufficient water supply and preserving the nation’s water resources, meeting the developmental needs of the country by providing sustainable energy generation solutions and contributing to socio-economic growth and prosperity by emphasising sustainable infrastructure development. OUR APPROACH TO VALUE CREATION
Bus iness Overvi ew Sect ion 01 13 Annual Report 2022 RANHILL SUSTAINABILITY STRATEGIES VALUE WE CREATE OUR IMPACT ON THE SDGS ENVIRONMENTAL AWARENESS & PRESERVATION CONTRIBUTION TOWARDS SOCIAL WELLBEING & CAPACITY BUILDING INSPIRATIONAL WORKPLACE & CULTURE ENHANCING GOVERNANCE ACROSS THE GROUP RANHILL SUSTAINABILITY FRAMEWORK Planet Responsible Living and Preservation Profit Business Sustenance People Social Responsibility Ranhill’s approach of preserving finite and dwindling water resources, delivering renewable and cleaner energy generation and adopting “green” infrastructure technologies directly address climate change, global warming, societal development and are consistent with the United Nations Sustainable Development Goals (“SDG”). OUR APPROACH TO VALUE CREAT ION
Bus iness Overvi ew 01 Sect ion 14 Ranhi ll Ut i l i t i es Berhad RETHINKING VALUE CREATION Ranhill’s focus on environmental and social performance are driven not just by the desire to serve as a force for good – creating positive impact for people and the natural landscape. The Group is of the view that people, planet and profit are intrinsically linked and a strategic focus that addresses the dynamic and integrated inter-relationships, between each element is a prerequisite for continued business success. A business that is dependent on water resources must focus on both increased supply to meet growing consumption demand whilst safeguarding the ecosystem that supplies the water. The capital dependency on natural resources is clear and while abstracting and selling more water equates to greater revenues, preserving the ability of the ecosystem to regenerate, eliminating wastages, promoting improved water consumption per capita per day go hand-in-hand and developing reclaimed water as a viable commercial alternative are equally, if not more vital than focusing on increased water supply and sales. OUR APPROACH TO VALUE CREAT ION Developing alternative water sources through circular approaches, enabling existing rivers to replenish sufficiently Eliminating wastages, promoting efficiency, increasing capacity Increased water supply and sales Tapping reclaimed water for non-potable, industrial and commercial applications, encouraging rainwater harvesting in more developments, focusing on desalination and other alternatives. Focusing on NRW loss reduction, promoting more efficient consumption practices by increasing tariffs, developing Off River Storage (“ORS”), undertaking raw water transfer projects. Abstracting more water from river sources, developing and upgrading WTPs and the overall water supply network towards supplying and selling more water to meet current consumption demand.
Bus iness Overvi ew Sect ion 01 15 Annual Report 2022 Likewise, with climate change, global warming and other physical effects, it is imperative that the world transitions to alternative sources for energy, beyond hydrocarbons. Through its Energy and Engineering Services sector, Ranhill is designing and building as well as promoting the use of solar, hydro, geothermal and other renewable energy (“RE”) options to reshape Malaysia and the region’s future energy mix. However, even as the world transitions to RE, certain hydrocarbons will remain integral to meeting global energy needs in the interim. Ranhill’s Combined Cycle Gas Turbine (“CCGT”) based power plants provide a viable solutions as a significantly cleaner form of carbon based energy generation. OUR APPROACH TO VALUE CREAT ION The Group’s Engineering Services sectors continues to provide solutions of new technologies such as Carbon Capture Storage (“CCS”) and Carbon Capture Usage Storage (“CCUS”), design and build of RE facilities as well as flood mitigation projects. Other projects include designing of hospitals towards meeting society’s increasing need for affordable, yet quality healthcare. These projects alone have generated the Group’s Engineering Services sector growing revenues and an expanding order book on the back of contracts secured in FY2022. In essence, Ranhill’s business model continues to integrate both financial and non-financial value creation perspectives that are akin to a virtuous cycle, mutually dependent and mutually supporting each other, which ultimately create positive outputs and outcomes over a multiple capitals perspective.
Bus iness Overvi ew 01 Sect ion 16 Ranhi ll Ut i l i t i es Berhad OUR APPROACH TO VALUE CREAT ION Creates the following values: under construction Indirectly spurs infrastructure development, commercial activities and attracts investments Generation of electricity required for socio-economic development Develops local supply chains and local employment Clean and reliable water supply; contribute to the health of communities and economic development OUR BUSINESSES Treated Water Supply Services Multi Disciplinary EPCM, PMC, O&M Services and Consultancy Services Energy and Renewable Energy Non-Revenue Water Management Water and Wastewater Treatment & Reclaimed Water Treatment Financial Values Non-financial Values Aspirations
Bus iness Overvi ew Sect ion 01 17 Annual Report 2022 OUR APPROACH TO VALUE CREAT ION APPLICATION OF THE CIRCULAR ECONOMY MODEL Ranhill’s business divisions apply the principles of the circular economy model. In essence, operations as well as solutions implemented to clients are premised on virgin resource and material optimisation (which promotes resource efficiency and reduced consumption of virgin materials), reduction of waste and recycling waste into useable by products or even upcycling waste to be converted into inputs for the production process. The circular economy model approach is reflected in the implementation of CCS and CCGT applications as well as use of reclaimed water. It addresses material matters toward preserving resources and creating financial and non-financial values for stakeholders. The values created involve revenues, reliable water supply, preservation of water resources, reduction in NRW, and contributing to water security. Energy and Material Input Production Distribution Use Disposal Waste and emission leakage Recycled Remanufactured Refurbished Reused Longer use, intensifying use, dematerialisation Business Processes and Value Chains Legend Raw, non-potable water Treated, potable water Wastewater Reclaimed water Treated effluent NRW MANAGEMENT NRW MANAGEMENT NRW MANAGEMENT DOMESTIC CONSUMER WASTEWATER & Reclaimed Water TREATMENT PLANT WATER TREATMENT PLANT & RESERVOIR NONDOMESTIC CONSUMER RAW WATER INTAKE Renewable Energy (Solar) Generation PV Panels String Inverter AC Container Box 132kv Malaysia Grid 33kv Switchgear 33/132kv Transformer pmu 132kv Bidor 0.8/33kv Transformer
Bus iness Overvi ew 01 Sect ion 18 Ranhi ll Ut i l i t i es Berhad OUR APPROACH TO VALUE CREAT ION CCGT Power Generation Air Inlet Heat Recovery Steam Generator Low Pressure Exhaust Steam High Pressure Steam Feed Water Exhaust Air Fuel - Natural Gas Air Out Air In Combustion Chamber Generator Gas Turbine Electrical Grid Pump Generator Exhaust Gas to Atmosphere via Stack Compressor Air Cooled Condenser Steam Turbine CAPITAL DEPENDENCIES WATER RESOURCES PRESERVATION The Group’s Environment sector comprises the abstraction, treatment and supply of potable water to the state of Johor, Malaysia. Operations also include addressing non-revenue water (“NRW”) with its effort, of which Johor state has the lowest NRW rate in Malaysia based on m3/KM of Pipe/ Day. The Environment sector also undertakes wastewater treatment and reclamation of wastewater in Thailand. Given that a large portion of Ranhill’s revenue is presently derived from environment sector revenues, it is evident that the Group’s business is dependent on sustainable water supply from the state’s rivers. However, amidst increasing water consumption due to population growth and rapidly expanding industrial and commercial activity as well as economic development, together with climate change and other environmental impacts, rivers across the state continue to come under increased pressure. Further details of the Group’s plans in addressing its capital dependency on water is provided in the Message of Chairman and Chief Executive as well as the Ranhill Sustainability Report 2022 (“SR2022”). CLIMATE CHANGE RESPONSE RISK OPPORTUNITIES Adverse weather effects such as droughts affects river water quantity and quality. This can necessitate water rationing activities which would impact revenues as well as customer satisfaction levels. Climate change and other environmental related impacts have led to greater awareness and urgency of action in addressing NRW and other issues faced by the water industry. These include expediting water infrastructure related projects such as ORS facilities, repairs, upgrading and construction of pipelines and WTPs and also enabled new opportunities for business expansion across Malaysia. A sudden deluge of torrential rain such as experienced in early FY2023, where Johor experienced a 32-year record high rainfall could lead to flash floods that could affect operations of the WTPs and the water supply network.
Bus iness Overvi ew Sect ion 01 19 Annual Report 2022 OUR APPROACH TO VALUE CREAT ION STAKEHOLDER MANAGEMENT RISK OPPORTUNITIES It is essential that Ranhill continues to feel the pulse of its many stakeholders – maintaining a clear understanding of the aspirations and objectives of stakeholders, notably regulators, the government and financiers. Being unaligned to stakeholders may lead to various issues such as regulatory non-compliance, loss of access to financing or even not being included in ESG indices that would impact brand reputation and visibility. By aligning closely to stakeholders, Ranhill continues to ensure that its business goals and objectives continues to remain relevant and that it retains the support of diverse stakeholder groups. Collaborating with stakeholders amplifies value creation – improving brand perceptions and enables opportunities to share the Group’s perspective on a wide range of material matters. TALENT DEVELOPMENT AND RETENTION RISK OPPORTUNITIES Talent scarcity continues to be an issue faced, especially skilled talent with specific technical proficiencies. In addition, recruiting and retaining talent with business acumen and leadership attributes also remains a challenge. Business development and growth are intrinsically linked with talent and the inability to secure and retain high-performing employees can impact the realisation of KPIs and targets over the medium to long-term. Talent scarcity necessitates new approaches include rethinking conventional talent recruitment and management approaches. The situation has propelled Ranhill to look internally towards meeting its requirements for technically proficient and skilled employees. This includes developing inhouse talents through company organised and sponsored training courses and programmes, and focusing on internal promotions. Other alternatives include recruiting directly from universities, technical institutions and also redesigning business processes to reduce reliance on manual labour. This promotes cost savings and supports operational efficiencies. TECHNOLOGY AND INNOVATION RISK OPPORTUNITIES The proliferation of technology enables new solutions and possibilities for value creation. However, technology acquisition may require significant CAPEX and there may be a period of adjustment before the full value creation impact of the implementation can be realised. During the transition, there may also be challenges such as user rejection, ineffective implementation, the costs associated with trial and error and potentially, the lack of concrete results achieved that may undermine user acceptance of the implementation process. Selection of unsuitable technologies may also negatively impact operations leading to financial and operational losses. Technologies such as carbon capture and storage provide new business opportunities for Ranhill. Emerging and existing technologies enable cost and operational efficiencies across the value chain, strengthen competitive edge and enable the development of new industry breakthroughs that strengthen the Group’s value proposition.
Bus iness Overvi ew 01 Sect ion 20 Ranhi ll Ut i l i t i es Berhad VISION Enriching Lives Through Sustainable Solutions CORE VALUES > Respect > Resourceful > Result MISSION To Be A Regional Leader In Water, Wastewater And Energy With Emphasis On Circular Economy. Securing Capital Enhancing Brand Value VISI Enriching Lives Through Sustainable Solutions C RE VALUES > Respect > Resourceful > Result MISSI To Be A Regional Leader In ater, aste ater And Energy ith E phasis n Circular Econo y OUR VALUE CREATION MODEL The Ranhill FY2022 Value Creation Model is a visual summation of the Group’s approach to value creation. It provides a concise, multi-capitals perspective of how the Group consumes a wide range of resources beyond financial capitals and how these are transformed via the business model to create multiple stakeholder outputs and outcomes. In essence, the value Natural Consumption of natural and other resources such as land, fossil fuels, water, gas, electricity to deploy and operate the business model. FINANCIAL Shareholders’ equity, debt and reinvested capital, internally generated funds and borrowings used to fund CAPEX and OPEX towards creating financial values and to deploy other forms of capital. HUMAN & INTELLECTUAL The cumulative skills, expertise and competencies of Senior management and staff as well as proprietary business processes, systems and relevant industry knowledge and experience. MANUFACTURED Physical assets required for business operations such as WTPs and power plants as well as machinery, vehicles fleet and more utilised for the execution of the business model. SOCIAL Harnessing existing relationships with various stakeholder groups to further the interest of Ranhill and its industries as well as stakeholders for mutual benefit. CAPITAL RESOURCES Proactive engagements with regulatory and other stakeholder groups. These include investors, the media, Jom Sembang customer engagements, and the community Key focus areas include water conservation and NRW Exploration of joint-ventures (“JV”), strategic partnerships to penetrate new markets and tap new business opportunities Water consumption: Ranhill SAJ: 686,891,245 m³ total raw water abstraction RWTT and AnuRAK: 9,169,864 m³ RPI and RPII: 133,707 m³ Energy consumption: Ranhill SAJ (direct energy): 1,059,220.29 GJ Ranhill SAJ (indirect energy): 374,292,054.90 GJ Ranhill SAJ (RE derived electricity generated): 134,631.00 kWh Gas consumption: RPI and RPII: 10,054,138.5 litres of diesel RPI and RPII: 21,025,790.1 MMBtu of gas RM66.2 million in CAPEX RM339.8 million in cash and bank balances RM680.8 million in total equity RM3,281.2 million in total assets RM1,044.3 million in loans and borrowings RM1,439.0 million in share capital 714 reservoirs 46 WTPs 24,002 KM pipeline network comprising mains distribution: 3,631 KM and reticulations: 20,371 KM 11.13 million m³ incoming wastewater for Thailand operations In Thailand: 100 MLD for water and wastewater treatment) and 2 reclaimed water plants with 17 MLD capacity Two CCGT fired power plants with total capacity of 380 MW Long-standing industry knowledge, experience and expertise High employee satisfaction and morale Empowered organisational culture Talent development and retention programmes Succession planning New technology and innovation 4,018 total workforce strength 361 internships provided Management trainee programme INPUTS
Bus iness Overvi ew Sect ion 01 21 Annual Report 2022 Integrity Policies & Procedures Capacity Building Climate Change Preserving Water Resources GHG & Other Emissions Circular Economy Employee Engagement Acculturation Diversity & Inclusivity Customer Engagement Access To Clean Water and Power Public Health & Safety NRW Reduction OUR VALUE CREAT ION MODEL creationmodel presents Ranhill fromamore comprehensive value creation perspective. It enables readers to view the Group’s business model beyond typical financial performance and disclosures and to ultimately develop insights into howManagement is embedding a triple bottomline approach into its strategic thinking. The Value Creation model illustrates how Ranhill is progressively focusing on creating value across multiple perspectives, beyond just revenues, earnings and shareholders returns and in doing so, continues to ensure the relevance of its business model over the short, medium and long-term perspectives. >> REALISING GROUP ASPIRATIONS AND CREATING VALUES THROUGH Environment Sector Energy Sector Engineering Services Sector >> Financial Growth Risk Mitigation Sustainable ESG Performance Future Ready Business Model OUTCOMES OUTPUTS Enhancing Governance Across The Group Contribution Towards Social Wellbeing Inspirational Workplace & Culture Environmental Awareness & Preservation Reducing Exposure To Sustainability Related Risks RM1,726.3 million in revenue RM203.4 million in profit before taxes RM389.0 million cash and bank balances RM3,261.7 million in total assets RM2,306.6 million in total liabilities RM1,439.0 in share capital RM1,099.2 million in borrowings 2,133 MLD total treatment capacity 17 MLD in reclaimed water 2,392 GWh of electricity generated for Sabah High customer satisfaction levels for water supply services in Johor NRW level of 26.3% 48,397 kWh of solar energy generated 64,822 kWh of mini-hydro energy generated 699 new hires, 525 male, 174 female, 363 aged 30 and below, 279 aged 31-50, 53 aged 51-65, 4 aged 65 and above, one employee with physical disabilities 4018 workforce strength, 2.8% increase 284 resignations, 7.1% attrition rate Development of leadership bench Incorporation of new technologies into business processes 7.7% increase in women employees 284 staff turnovers, 7.1% attrition rate Hiring of one physically disabled staff 4018 total workforce strength (2.8% growth) Development of leadership bench Incorporation of new technologies into business processes 121 YWP participants 23 interns absorbed 6 management trainees retained 63.8% of employees covered by collective bargaining agreements (Ranhill SAJ) Expansion into new sectors and geographic locations Contribution to industry conducive policymaking Improving relationships with the Government and industry regulators RM0.84 million in water rebates to 3,216 hardcore and poor households Implementation of new water tariffs 32.3 average training hours per employee (men: 32.2, women: 32.6) RM0.71 million spent on employee social and health activities 100.68% bill collection rate (Ranhill SAJ) 89.0% customer satisfaction score (Ranhill SAJ) 100% and 94% customer satisfaction scores for RPI and RPII respectively RM32.2 million in dividend payout Share price depreciation of 16.5% in FY2022 RM586.3 million market capitalisation as at end FY2022 RM95.3 million profit attributable to owners of the parent RM44.6 million paid in income taxes RM358.3 million paid in wages Additional 25 MLD saved in Johor Expansion of water system capacity and provision of reliable service Compliance to SPAN KPIs save for NRW loss Continued reduction of NRW levels in various states in Malaysia Ensuring grid stability and meeting the energy requirements of Sabah state Fulfilling key role as the largest IPP in Sabah 10% increase (to 54 MLD) for Thailand operations wastewater treatment capacity 2,392 GWh of power delivered to the Sabah grid (RPI and RPII) 95% DMA Connection coverage in Johor 124,379 customer water meters replaced Successful replenishment of order books for the Engineering Services Sector, including undertaking carbon capture and flood mitigation projects Continued cultivation of equality and gender and ethnic diversity 30.6% increase in female managerial staff High employee satisfaction scores ranging 70%-90% Development of local talents, provision of high-paying jobs that uplift socio-economic status Providing access to clean water, a basic human right and enabling the realisation of SDG 6: Clean Water and Sanitation Higher water tariffs support revenues and also sustainable water operations Progress on project Indonesia as well as Sabah related plant-ups 93,788,980 m³ total sludge (Ranhill SAJ) 5,645,833 m³ of effluent discharge (RWTT and AnuRAK) 11,559 m³ water discharge (RPI and RPII) 226,796.4165 total Co2e tonnes of carbon (Ranhill SAJ) 78,759.2 kgCO2eq avoided through RE usage
Bus iness Overvi ew 01 Sect ion 22 Ranhi ll Ut i l i t i es Berhad OUR STRATEGIC SNAPSHOT ENVIRONMENT SECTOR Business Strategies / Focus Areas Outputs, Performance Highlights & Achievements, Values Created Potential Risks, Issues & Challenges Opportunities Strategic Priorities • Continued implementation of COVID-19 SOPs across water operations. Strict adherence to SOP discipline is necessary to prevent operational disruptions and to protect staff and stakeholders from infection risks. • Maintaining a high level of operations to ensure continued achievement of the industry regulator’s KPIs. • Intensified focus on addressing NRW levels, which include pipe rehabilitation and replacement works, meter replacement and other measures. • Initiated a chemical substitution programme at several WTPs to reduce OPEX. • Implementation of new technologies, i.e. AquaSMART, to increase water yield, reduce costs and achieve increased efficiencies. • Expanding existing and constructing new WTPs. • Harnessing RE to power water operations. • Continued business development activities, targeted at the industrial water sector and potential non-revenue water (“NRW”) customers. • Leveraging technology and innovation for business growth. • Talent development and retention. • RM1,173.7 million in revenues. • RM261.6 million PBT. • Met or exceeded all of SPAN’s KPIs save for NRW loss, which marginally exceeded the KPI of 26% (FY2022: 26.3%). • 70,929 leaks detected and rectified through ALC activities. • Initiated solar farm proposal to fully power water operations in Johor. • Implementation of first pollutant removal system. • Creating seamless workflow and moving progressively towards greater implementation of paperless, webbased solutions, and significant cost savings. • 2,895 water theft cases successfully reported and 904 imposed with water charges. • Continued progress on construction and upgrade of several WTP projects. • Completed upgrading of the Amata Rayong WWTP, thus increasing wastewater treatment capacity by 10% to 54 MLD. • Continued rising costs especially energy costs. • Shortage of raw water quantity especially in locations with low water reserve margins. • Discontinuity of water operator licence from SPAN and Raw Water Abstraction Licence from BAKAJ. • Continued delays in reduction of rental for leased assets from PAAB. • Change in Government regulations. • Continued delays in upward tariff revision. • Extreme weather events caused by climate change and global warming. • Increasingly poor river water quality leads to increased treatment costs. • Challenging incoming water and wastewater quality. • Dwindling river water supply. • Delays in funding and progress for pipe rehabilitation and replacement works. • Acts of terrorism, security breach, vandalism, theft, etc. that cause disruption to WTP and WWTP operations. • Lack of skilled and specialised water industry talents. • Overspending or underspending on technology and to disburse technology budgets. • Exploration of water concessions in other states in Malaysia as well as Indonesia. • Growing demand for water supports stability of revenues and necessitates expansion of construction of new water assets. • Increased tariffs and CGPP support revenue and earnings growth. • Successful negotiation of lower lease rental rates and capping maximum rental rates from PAAB will also support margins • Government support to addressing NRW and using reclaimed water. • Provide and enable new prospect business models and income sources through robust technology. • Reinstatement of a downward trend for NRW by completing all five Rehab packages. • Completion of all WTP expansion, upgrade activities as well as construction of additional WTPs. • Lobbying regulators and government to impose harsher sentences on polluters. • Develop strategic partnerships with Original Equipment Manufacturer (“OEM”) product manufacturers. • Continued talent development especially for specialised and niche skillsets. • Developed engagement with technical resources identify applicable and potential technology ideas and adapt to business operations. Note: Please refer to the Management Discussion and Analysis section of this report for further details.
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