PETGAS-AnnualReport2012.pdf

Over the years, PETRONAS Gas Berhad has experienced tremendous growth, propelled by the tenacity and determination of our people, who are our most valuable asset.

Our personnel throughout Malaysia work day and night - each bringing their own unique capability, insights and talents to the table to ensure our continuity and progress as a business.

Like the many leaves of a tree, we see each of them contributing directly to the growth and resilience of this Company - each embracing the spirit of progress in their own individual ways.

As we weather the challenges that come our way, our roots remain fi rmly planted in the foundations of our business, even as our branches continue to reach out far and wide towards infi nite opportunities. Together, we embrace our journey of progress to a better tomorrow with open arms.

2012 ANNUAL REPORT

embracingprogress

PETRONAS Gas Berhad’s liquefi ed natural gas (LNG) Regasifi cation Terminal is the fi rst of its kind in Malaysia, paving the way for the importation of gas to supplement the

energy consumption needs of the country.

Our Vision, Mission and Shared Values 2

Embracing Change 4

Five-Year Group Financial Highlights 6

Corporate Information 8

Our Operations 10

Our Presence 12

Organisational and Corporate Structure 14

Corporate and Management Directory 15

Board of Directors 16

Directors’ Profi les 18

Management Committee 24

Management Committee’s Profi les 26

Business Review 34

Chairman’s Statement 36

CEO’s Business Review 40

Performance Review 52

Financial Review 54

Statement of Value Added 60

Performance of Shares 61

Financial Calendar 61

Supporting Progress 62

Powering Progress 64

Progressive Mindset 66

PGB in the News 68

Awards and Achievements 69

Corporate Responsibility 70

CR in the Marketplace 72

CR in the Workplace 78

CR in the Environment 82

CR in the Community 84

Calendar of Events 86

Corporate Governance 90

Corporate Governance Statement 92

Nomination and Remuneration Committee Report 99

Nomination and Remuneration Committee’s

Terms of Reference 102

Statement on Risk Management and Internal Control 104

Board Audit Committee Report 110

Board Audit Committee’s Terms of Reference 113

Statement of Directors’ Responsibility 116

Financial Statements 117

Other Information 195

Summary of Landed Property, Plant and Equipment 196

Training Programmes Attended by Directors 203

Analysis of Shareholdings 205

Corporate Directory 209

Notice of Annual General Meeting 210

Administrative Details 212

Proxy Form

Contents

PETRONAS GAS BERHAD (101671-H) 1

2 PETRONAS GAS BERHAD (101671-H)

Our VisionA World Class Gas and Utilities CompanyOur Mission

• We are a business entity

• Gas is our core business

• Our primary responsibility is to add value to this natural resource

Our Shared Values

• Loyalty • Professionalism • Integrity • Cohesiveness


PETRONAS Gas Berhad (PGB) has been in business for 29 years and counting. Since its incorporation on 23 May 1983 until today, PGB continues to contribute to the nation’s economic growth and progress.

Gas processing and gas transmission remain the core business of PGB. The process begins at its six gas processing plants located in Kertih and Paka, operated by the Company’s Plant Operations Division (POD). Natural gas from the offshore fi elds of Terengganu is processed there before being piped into PGB’s Peninsular Gas Utilisation (PGU) pipeline which is operated by the Transmission Operations Division (TOD). TOD is responsible for the transmission and delivery of sales gas to customers in the power, industrial and commercial sectors throughout Peninsular and East Malaysia.

In 1998, PGB expanded its business into manufacturing, supplying and marketing of industrial utility products to customers in the Kertih Integrated Petrochemical Complex and Gebeng Industrial Area through its Centralised Utility Facilities Division (CUF).

PGB’s vast experience in industrial utility products is the key to unlock the door to the world of power producing. In 2009, PGB’s

business landscape evolved further to include the generation of electricity with the formation of Kimanis Power Sdn Bhd, a joint venture company with Yayasan Sabah. The entity was set up to develop a 300MW gas fi red power plant in Kimanis to meet the growing demand for electricity in the state of Sabah.

With a renowned technical capability and a strong track record in gas transmission operations and project management, PGB entered into an agreement with PETRONAS Carigali Sdn Bhd for the provision of project management and execution services for the Sabah-Sarawak Gas Pipeline Project (SSGP).

Our latest venture is the foray into the liquefi ed natural gas (LNG) regasifi cation business. PGB is developing Malaysia’s fi rst LNG Regasifi cation Terminal (RGT) which is located in Sungai Udang, Melaka, which will allow the importation of LNG to cater for increases in gas demand.

Progress is a journey of growth. With our dedicated and reliable personnel contributing their energies towards PGB’s success, we are confi dent of reaching many more important milestones in years to come.

EmbracingChangePGB Today



12 months ended 9 monthsended

12 monthsended

RM Million 31.3.2009 31.3.2010 31.3.2011 31.12.2011 31.12.2012

Revenue 3,415.1 3,221.8 3,525.0 2,765.1 3,576.8

Profi t Before Tax 1,231.4 1,243.8 1,900.3 1,433.0 1,844.5

Profi t After Tax 928.0 940.7 1,439.1 1,080.8 1,397.1

Total Assets 9,867.1 9,834.7 10,509.9 10,746.5 13,462.2

Total Equity 8,038.3 8,017.0 8,515.2 8,643.9 9,282.7

Long Term Liabilities 1,610.9 1,583.3 1,542.5 1,508.4 2,673.8

Profi t as % of Revenue

- Before Tax 36.1 38.6 53.9 51.8 51.6

- After Tax 27.2 29.2 40.8 39.1 39.1

Earnings Per Share (sen) - Basic 46.9 47.6 72.7 54.6 71.0

Net Assets Per Share (sen) 406.3 405.1 430.3 436.8 469.1

Group Financial Highlights

Five-Year


Net Assets per Share

sen

20122011*201120102009

406.

3

405.

1

430.

3

436.

8

469.1

Earnings per Share Sen

20122011*201120102009

71.0

46.9

47.6

72.7

54.6

Profit as % of Revenue

20122011*201120102009

After Tax Before Tax

27.2

29.2

40.8

39.1

39.1

36.1 38

.6

53.9

51.6

51.8

Total EquityRM million

20122011*201120102009

8,03

8.3

8,01

7.0

8,51

5.2

8,64

3.9

9,2

82.7

Long Term LiabilitiesRM million

20122011*201120102009

1,61

0.9

1,58

3.3

1,54

2.5

1,50

8.4

2,6

73.8

Note:Financial year 2009, 2010 and 2011 comprise reporting period from 1 April to 31 March.

* For the nine months period ended 31 December 2011.

Revenue RM million

20122011*201120102009

3,41

5.1

3,22

1.8

3,52

5.0

2,76

5.1 3,5

76.8

ProfitRM million

20122011*201120102009

Profit After Tax (PAT) Profit Before Tax (PBT)

928.

0

940.

7 1,43

9.1

1,08

0.8

1,3

97.1

1,8

44.5

1,23

1.4

1,24

3.8

1,90

0.3

1,43

3.0

Total AssetsRM million

20122011*201120102009

9,86

7.1

9,83

4.7

10,5

09.9

10,7

46.5 13,4

62.2


EmbracingCapability

PGB’s growth over the years has been shaped by the dedicated men and women who devoted their energies, time and ideas towards taking the Company forward. Their ability to learn, unlearn and re-learn has placed us at the leading edge of capability building in the country’s gas industry, transforming them into some of the most sought after talents not just locally, but around the world. Our focus on capabilty building will continue to colour our road to progress in years to come.

2,550 km Gas pipeline network throughout Malaysia

29 yearsExperience in gas processing and transmission

2,060 mmscfdGas processing capacity


Our Operations 10

Our Presence 12

Organisational and Corporate Structure 14

Corporate and Management Directory 15

Board of Directors 16

Directors’ Profi les 18

Management Committee 24

Management Committee’s Profi les 26

Corporate Information


Transmission Operations Division (TOD)TOD operates the PGU pipeline network by managing the supply of gas to PETRONAS’ customers while ensuring the reliability, safety and effi ciency of operations. The Segamat Operations Centre which houses the PETRONAS Gas Control Centre acts as a mission control for the entire PGU network.

Plant Operations Division (POD)POD operates the six gas processing plants in the state of Terengganu. The plants are divided into two complexes – Gas Processing Plant A in Kertih and Gas Processing Plant B in Paka. With total combined sales gas processing capacity of over 2,000 million standard cubic feet per day, these gas processing plants process natural gas into sales gas and other by-products such as ethane, propane and butane to be transmitted to PETRONAS’ customers in power and non-power sectors via PGB’s PGU pipeline network.

Gas Processing Gas Transmission

Our Operations


PETRONAS Gas Berhad (PGB) business portfolio is divided into fi ve major divisions – Plant Operations, Transmission Operations, Centralised Utility Facilities, Technical & Facilities Development and LNG Regasifi cation.

The fi rst two are directly related, with the former responsible for processing the gas piped from PETRONAS’ offshore fi elds while the latter is responsible for transporting the processed gas via the Peninsular Gas Utilisation (PGU) pipeline network to PETRONAS’ customers. The third division, supports the gas value chain by supplying industrial utilities to the various petrochemical plants operating in Kertih, Terengganu and Gebeng, Pahang. The fourth division is a technical services outfi t for PGB, which also extends its expertise in engineering and project management to other entities within the PETRONAS Group. The fi fth division is dedicated to oversee and drive PGB’s foray into the liquefi ed natural gas (LNG) regasifi cation business to augment Malaysia’s gas supply.

With current expansion and growth involving new business ventures, PGB is branching out to other new and exciting areas of growth. With projects such as the Sabah-Sarawak Gas Pipeline, Kimanis Power Plant and LNG Regasifi cation Terminal expected to be commissioned in 2013, we are gearing up and getting ready to usher in a new period of growth.

Centralised Utility Facilities (CUF)CUF supplies a range of industrial utilities to the petrochemical businesses in Kertih Integrated Petrochemical Complex in Terengganu and Gebeng Industrial Area in Pahang. The industrial utilities include electricity, steam, industrial gases and other by-products such as liquid oxygen, liquid nitrogen, demineralised water, raw water, cooling water and boiler feed water.

Technical and Facilities Development Division (TFDD)TFDD is the engineering and project management arm of PGB. With vast technical experience, TFDD also provides project management services to other companies within the PETRONAS Group such as PETRONAS Carigali Sdn Bhd for the Sabah-Sarawak Gas Pipeline project.

LNG Regasifi cation Division (RGTD)RGTD is responsible for overseeing the engineering, construction and commissioning of LNG regasifi cation facilities throughout Malaysia.

Industrial Utilities Engineering and Project Management Services LNG Regasification


GPP B

CUF Kertih

CUF Gebeng

GPP A

STRAITSOF MELAKA

SOUTH CHINA SEA

20

PERLIS

PULAUPINANG

PERAK

SELANGOR

PAHANG

KEDAH

KELANTANTERENGGANU

NEGERISEMBILAN

MELAKA

JOHOR

SINGAPORE

19

18

17

16

15

14

12

13

11

10

98

7

65

3

4

2

1

CUSTOMERS

Gas Processing Plant (GPP)

Centralised Utility Facilities (CUF)

Compressor Station

Tenaga Nasional Berhad Power Station

Independent Power Producer Power Station

LNG Regasifi cation Terminal

PGU I 32 km

Kertih - Teluk Kalong 1984

PGU II 685 km

Sector I : 233 kmTeluk Kalong - Segamat 1991

Sector II : 241 kmSegamat - Kapar 1991

Sector III : 211 kmSegamat - Singapore 1991

PGU III 450 km

Sector I : 184 kmMeru - Lumut 1996

Sector II : 176 kmLumut - Gurun 1998

Sector III : 90 kmGurun - Pauh 1998

Loop 1 265 km

Kertih - Segamat 1999

Loop 2 226 km

Segamat - Meru 2001

Main Pipeline Gas - in

Capacitymmscfd

GPP A

GPP B

GPPComplex

1 310

2 250

3 250

4 250

5 500

6 500

Total 2,060

1. TNB Paka

2. YTL Paka

3. TNB Pasir Gudang

4. YTL Pasir Gudang

5. Senoko Energy

6. Keppel Gas

7. Pahlawan Power,

Tg. Kling

8. Panglima Power,

Teluk Gong

9. Powertek,

Teluk Gong

Major Customers

10. TNB Tuanku Jaafar

11. Port Dickson Power

12. Genting Sanyen Power

13. TNB Serdang

14. TNB Connaught Bridge

15. TNB Kapar

16. GB3 Lumut

17. Segari Energy Ventures

18. Prai Power

19. TNB Gelugor

20. Technology Tenaga

Perlis Consortium

Our PresencePGB Total Pipeline Length(in operation)

Main 1,658 km

Lateral 374 km

C2, C3 and C4 357 km

GPP Interconnect 116 km

Sarawak 45 km

Total 2,550 km


NLUTONG

MIRI TOWN

PIASAU

PUJUT

SABAH

SARAWAK

SOUTH CHINA SEA

SOUTH CHINA SEA

Miri Pipeline System Network

LUAK

Teacher Training CollegeTaman Tunku

Miri

Bintulu

1

3

6

4

2

SOUTH CHINA SEA

TG. KIDURONG

Bintulu Pipeline System Network

5

Kimanis

FACILITIES

Pipeline

Power Station

Industry

Kimanis Power Plant

CUSTOMERS

SESCO Miri Power Station

Sarawak Gas Distribution System

Bintulu Edible Oils Sdn. Bhd.

Syarikat Sebangun Sdn. Bhd.

Sime Darby Austral Sdn. Bhd.

Biport Bulkers Sdn. Bhd.

1

2

3

4

5

6


CENTRALISED UTILITY FACILITIES

Organisational Structure

50%

100%

100%

99%

60%

60%

14.8

%

Jointly Controlled EntitySubsidiaries

Associate Company

Corporate Structure

BOARD OF DIRECTORS

MANAGING DIRECTOR/CHIEF EXECUTIVE OFFICER

PETRONAS GAS BERHAD

LNG REGASIFICATION

TRANSMISSION OPERATIONS

BUSINESS PLANNING

HEALTH, SAFETY AND ENVIRONMENT

RISK MANAGEMENT

Industrial Gases Solutions Sdn Bhd

Gas Malaysia Berhad

PLANT OPERATIONS

Regas Terminal (Sg. Udang) Sdn Bhd

Regas Terminal (Pengerang) Sdn Bhd

Regas Terminal (Lahad Datu) Sd Bhd

Kimanis Power Sdn Bhd

Kimanis O&M Sdn Bhd

LEGAL AND CORPORATE SECRETARIAT

PROJECT SUPPLY CHAIN MANAGEMENT

HUMAN RESOURCE MANAGEMENT

TECHNICAL AND FACILITIES DEVELOPMENT

CORPORATE AND COMMERCIAL SERVICES

FINANCE

NOMINATION AND REMUNERATION COMMITTEEBOARD AUDIT COMMITTEE

MANAGEMENT COMMITTEE


Corporate andManagement Directory

DIRECTORS

Datuk Anuar bin Ahmad

Samsudin bin Miskon

Dato’ N. Sadasivan N.N. Pillay

Dato Mohammad Medan bin Abdullah

Datuk Rosli bin Boni

Ir. Pramod Kumar Karunakaran

Dato’ Ab. Halim bin Mohyiddin

Lim Beng Choon

BOARD AUDIT COMMITTEE




NOMINATION AND REMUNERATION COMMITTEE

Lim Beng Choon



SECRETARIES

Intan Shafi nas (Tuty) binti Hussain(LS 0009165)

Yeap Kok Leong (MAICSA 0862549)

REGISTRAR

Symphony Share Registrars Sdn Bhd (378993-D)

Level 6, Symphony House,

Pusat Dagangan Dana 1,

Jalan PJU 1A/46,

47301 Petaling Jaya,

Selangor Darul Ehsan

Tel: (+603) 7841 8000

Fax: (+603) 7841 8151

REGISTERED OFFICE AND BUSINESS ADDRESS

Tower 1, PETRONAS Twin Towers,

Kuala Lumpur City Centre,

50088 Kuala Lumpur

Tel: (+603) 2051 5000

Fax: (+603) 2051 6555

AUDITORS

KPMG Desa Megat & Co.

PRINCIPAL BANKER

CIMB Bank Berhad

STOCK EXCHANGE LISTING

Main Market of Bursa Malaysia Securities Berhad

WEBSITE

www.petronasgas.com


Board ofDirectors


From left:

Muri bin Muhammad



Datuk Anuar bin Ahmad (Chairman)

Ir. Pramod Kumar Karunakaran

Lim Beng Choon

Samsudin bin Miskon (Managing Director/Chief Executive Offi cer)



Ramlan bin Abdul Malek


Directors’Profi les

Datuk Anuar bin Ahmad ChairmanMalaysian (age 59)

Appointed as Director and Chairman of PETRONAS Gas Berhad on 17 August 2010.

Skills and Experience: Datuk Anuar holds a Bachelor of Science Degree (Econs) from the London School of Economics & Political Science, University of London, United Kingdom and had attended Harvard Business School’s Advanced Management Programme, United States of America.

He joined PETRONAS in 1977 and is currently the Executive Vice President (EVP) of Gas and Power Business, PETRONAS.

Prior to his appointment as EVP of Gas and Power Business, he held various senior managerial positions in the International Marketing Division and Corporate Planning Unit of PETRONAS Trading Corporation Sdn Bhd and PETRONAS Dagangan Berhad respectively. Datuk Anuar has also held the positions of Vice President of Oil Business, PETRONAS, as well as Vice President of Human Resource Management, PETRONAS.

Datuk Anuar is a member of the PETRONAS Executive Committee and PETRONAS Management Committee. He also sits on the Board of several other companies within the PETRONAS Group.


Samsudin bin Miskon Managing Director/Chief Executive Offi cer Malaysian (age 52)

Appointed to the Board of PETRONAS Gas Berhad as Managing Director/Chief Executive Offi cer on 1 March 2007.

Skills and Experience: Samsudin holds a B.Sc (Hons) in Chemical Engineering from Aston University, United Kingdom in 1983. He obtained a Masters of Science in Project Management from Reading University, United Kingdom in 1994. In 2005, Samsudin attended the Advanced Management Program at Harvard Business School, United States of America.

Samsudin began his career with PETRONAS in 1983 as a process engineer and was involved in the operations, design and project implementation of gas processing facilities in PETRONAS Gas Berhad until 1992.

He had held several positions in the PETRONAS Group including serving as General Manager in the Plant Division of OGP Technical Services Sdn Bhd accountable for the project management of gas processing and petrochemical plants until 2000. He then served as the General Manager of Malaysia LNG Dua Sdn Bhd and subsequently as the Senior General Manager of Malaysia LNG Sdn Bhd until 2005, managing the operations of the PETRONAS LNG Complex in Bintulu, Sarawak.

Prior to his current appointment, Samsudin was the Senior General Manager of Leadership and Capability Development Department of Human Resource Management Division in PETRONAS.

Samsudin is currently the Chairman of Kimanis Power Sdn Bhd, Regas Terminal (Sg. Udang) Sdn Bhd, Regas Terminal (Pengerang) Sdn Bhd and Regas Terminal (Lahad Datu) Sdn Bhd. He also sits on the Board of several companies in the PETRONAS Group.

External Appointment:• Director, Gas Malaysia Berhad

Dato’ N. Sadasivan N.N. Pillay Senior Independent Non-Executive DirectorMalaysian (age 73)

Appointed to the Board of PETRONAS Gas Berhad on 29 August 1995.

Skills and Experience: He graduated in Economics from the University of Malaya in 1963.

Dato’ N. Sadasivan began his career with the Economic Development Board Singapore upon graduation until 1967. In 1968, Dato’ N. Sadasivan joined the Malaysian Industrial Development Authority (MIDA) and was appointed as the Director-General of MIDA in 1984. He served in that capacity until his retirement in 1995.

External Appointments: • Executive Chairman, SKA Management Consultants Sdn Bhd• Director, APM Automotive Holdings Berhad• Director, Bank Negara Malaysia• Director of seven private companies (Sdn Bhd)

Committee Membership:• Chairman, Board Audit • Nomination and Remuneration


Datuk Rosli bin BoniNon-Independent Non-Executive DirectorMalaysian (age 56)

Appointed to the Board of PETRONAS Gas Berhad on 1 November 2010.

Skills and Experience: Datuk Rosli holds a Bachelor of Science in Petroleum Engineering from the University of Wyoming, United States of America in 1979.

Datuk Rosli has 32 years of experience in the petroleum industry. He began his career with PETRONAS in 1980 in the area of sub-surface engineering, wireline operations, well drilling and well-testing operations. He served as a Field Asset Manager for fi ve years from 1996 to 2000.

From July 2000 to March 2004, Datuk Rosli was involved in several overseas assignments at top management level, namely with Premier Oil plc in the United Kingdom, an oil development project in Chad and exploration in Bahrain.

From April 2004 to February 2010, he served as the General Manager (GM) in the Petroleum Management Unit in Exploration & Production Division, Senior GM of the Operations Division in charge of all production operations both in Malaysia and overseas and as the Senior GM of the Corporate Human Resource Shared Services. He is active in the Society of Petroleum Engineer (SPE) and has served in the committee of various SPE forums and workshops.

External Appointment: • Chief Executive Offi cer with Malaysia-Thailand Joint Authority (MTJA)

Committee Membership:• Board Audit

Dato Mohammad Medan bin Abdullah Non-Independent Non-Executive Director Malaysian (age 54)


Skills and Experience: Dato Medan graduated with a Bachelor of Laws from the University of Malaya and had attended the Advanced Management Program at the Wharton School, University of Pennsylvania, Philadelphia, United States of America.

Dato Medan began his career in 1982 at PETRONAS as a Legal Offi cer at the Legal Services Department and had since held various positions before his current appointment as the Senior General Manager (SGM) of Group Corporate Affairs Division of PETRONAS in May 2010.

He has helmed various senior positions within the PETRONAS Group, including that of Managing Director/Chief Executive Offi cer (CEO) of Malaysia LNG Group of Companies, SGM of Group Tenders and Contracts Division, Executive Assistant to the President/CEO of PETRONAS, SGM of Corporate Services Division in PETRONAS Carigali Sdn Bhd and General Counsel for Exploration & Production Business, PETRONAS.

Dato Medan possesses a proven track record in achieving various signifi cant successes across the oil and gas value chain, to contribute towards PETRONAS’ overall profi tability and growth.

Dato Medan is currently a member of PETRONAS’ Management Committee and sits on the Board of several companies in the PETRONAS Group.

External Appointments: • Director, PETRONAS Dagangan Berhad• Director, Bintulu Port Holdings Berhad

Committee Membership:• Nomination and Remuneration

Directors’ Profi les


Ir. Pramod Kumar Karunakaran Non-Independent Non-Executive DirectorMalaysian (age 53)

Appointed to the Board of PETRONAS Gas Berhad on 25 July 2011.

Skills and Experience: Ir. Pramod holds a Bachelor of Science, Communication (Electronics) Engineering from Leeds Polytechnic, United Kingdom.

Ir. Pramod joined PETRONAS in 1984 and is currently the Vice President of Infrastructure, Utilities, Gas and Power Business. Prior to assuming this position, he has held various senior positions in PETRONAS including as the Managing Director/Chief Executive Offi cer of Ethylene (M) Sdn Bhd, Senior General Manager and Head of Group Plant Performance Management, Group Technology Solution and General Manager (Plant) of ASEAN Bintulu Fertilizer Sdn Bhd.

Ir. Pramod also sits on the Boards of other companies within the PETRONAS Group.

External Appointment: • Director, PETRONAS Dagangan Berhad

Dato’ Ab. Halim bin Mohyiddin Independent Non-Executive DirectorMalaysian (age 67)


Skills and Experience: Dato’ Ab. Halim graduated with a Bachelor of Economics (Accounting) from the University of Malaya in 1971 and thereafter joined Universiti Kebangsaan Malaysia as a Faculty member of the Faculty of Economics. He obtained his Masters of Business Administration from the University of Alberta, Edmonton, Alberta, Canada in 1973 and subsequently a Diploma in Accountancy from University Malaya in 1975.

He joined KPMG/KPMG Desa Megat & Co. in 1977 and had his early accounting training in both Malaysia and the United States of America. He was made Partner of KPMG in 1985. During his tenure as Partner for 17 years, he held various designations in KPMG and acted as receiver and manager and liquidator for several companies. At the time of his retirement on 1 October 2001, he was the Partner in Charge of the Assurance and Financial Advisory Services Divisions and was also looking after the Secured e-Commerce Practice of the Firm.

He is a past member of the Education Committee of the International Federation of Accountants (IFAC), representing Malaysia in the Committee from 2001-2005.

External Appointments: • Council Member of The Malaysian Institute of Certifi ed Public

Accountants (MICPA)• Chairman of the Education Training Committee of the Institute• Member of the Malaysian Institute of Accountants (MIA)• Director, HeiTech Padu Berhad• Director, Utusan Melayu (Malaysia) Berhad• Director, Kumpulan Perangsang Selangor Berhad• Director, Amway (Malaysia) Holdings Berhad• Director, KNM Group Berhad• Director, ECM Libra Financial Group Berhad• Director, Amcorp Properties Berhad• Director, RCE Capital Berhad• Director, DiGi Telecommunications Sdn Bhd



Lim Beng Choon Independent Non-Executive Director Malaysian (age 53)


Skills and Experience: Beng Choon holds a Bachelor of Science (First Class Honours) in Mathematics and Computer Science from the Australian National University, Canberra, Australian Capital Territory, Australia and has attended numerous Accenture Management Training Programs in the United States of America and the IMD Leadership Program in Switzerland.

Beng Choon was the Country Managing Director in Accenture, the global consulting, technology and outsourcing company, before he retired in 2009. He held various positions during his 28 years tenure in Accenture, including that of Managing Partner for Accenture’s Resources Industry Group (Oil & Gas, Chemicals, Utilities, Natural Resources) in South Asia. He also had oversight of the Management Consulting practice across industries in ASEAN.

Beng Choon has extensive experience in management consulting which spans strategy formulation, operational consulting and merger integrations and has led complex projects to deliver transformational change for multinationals as well as top Malaysian companies. Prior to moving into management consulting, he was in technology consulting covering IT Strategies and System Integration work.

External Appointments: • Trustee in the ECM Libra Foundation• Director, PETRONAS Dagangan Berhad• Director, Hong Leong Bank Berhad• Director, MISC Berhad

Committee Membership:• Chairman, Nomination and Remuneration

Directors’ Profi les

Muri bin Muhammad Independent Non-Executive Director Malaysian (age 70)


Skills and Experience: He holds a Master of Science in Biological Oceanography from Dalhousie University, Halifax, Canada.

Muri started his career with PETRONAS in 1975 and had served for 27 years in various capacities, including as the Managing Director/Chief Executive Offi cer of ASEAN Bintulu Fertilizer Sdn Bhd and Managing Director/Chief Executive Offi cer of Malaysia LNG Sdn Bhd. Muri retired as the Vice President of Gas Business, PETRONAS in 2002. Upon his retirement, he was appointed as an Advisor to Gas Business, PETRONAS, until the end of March 2005.

On 1 September 2005, he was appointed by the Government as a member of the Energy Commission of Malaysia and served for the full term of four years until August 2009. He has also served as a Director of various international gas pipeline companies namely APA Group, a public listed Australian gas transmission and energy company, Transportadora de Gas delNorte (TGN) and Transportadora de Gas del Mercosur (TGM), both gas transmission companies of Argentina.

Muri was also on the Board of several PETRONAS subsidiaries and has held the position of the Chairman of the Board of the Gas District Cooling Group of Companies, PETRONAS NGV Sdn Bhd, Bekalan Air KIPC Sdn Bhd and OGP Technical Services Sdn Bhd.

External Appointment: • Board Member, Petromin PNG Holdings Limited


Muri has since vacated offi ce on 31 December 2012 pursuant to Paragraph 15.05 (3) (c) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad.


None of the Directors has:

Any family relationship with any other Director and/or major shareholder

Any confl ict of interest with PETRONAS Gas Berhad

Any conviction for offences within the past 10 years other than traffi c offences

Ramlan bin Abdul Malek Non-Independent Non-Executive Director Malaysian (age 58)


Skills and Experience: Ramlan holds a degree in Chemical Engineering from the University of Bath, United Kingdom.

Ramlan joined PETRONAS in 1979 and possesses 33 years of working experience mainly in the area of Exploration & Production (E&P). He is currently the Vice President of Petroleum Management, E&P Business of PETRONAS. As the Head of Petroleum Management Unit (PMU), his present responsibilities covers promotion and regulation of the upstream activities in Malaysia. PMU also acts as the petroleum resource owner and production sharing contracts manager in Malaysia.

Prior to assuming his current position in June 2010, he was the Vice President of E&P Business and has held several technical and general management positions in PETRONAS, PETRONAS Carigali Sdn Bhd and PETRONAS Research Sdn Bhd. Ramlan also sits on the PETRONAS Management Committee.

External Appointments: • Chairman, Society of Petroleum Engineers (SPE) Asia-Pacifi c Sdn Bhd• Board Member, Malaysia Petroleum Resource Corporation• Board Member, Malaysia-Thailand Joint Authority

Ramlan has since vacated offi ce on 31 December 2012 pursuant to Paragraph 15.05 (3) (c) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad.


ManagementCommittee

From left:

Muhamed Ali bin Hashim Muhamed

Azlimi bin Mohd Lazim

Mohd Sukri bin Ibrahim

Intan Shafi nas (Tuty) binti Hussain

Ahmad Nawawi bin Mohd Yatim

Wan Mohd Muzani bin Wan Muda

Aida Aziza binti Mohd Jamaludin

Samsudin bin Miskon

Ir. Hudal Firdaus bin Dimyati

Helmi bin Zaidan

Zilfalilah binti Abdul Aziz

Abdul Rashid bin Mukri

Norarnizar bin Ali Amran



Samsudin bin Miskon Managing Director/Chief Executive Offi cer Malaysian (age 52)

Appointed to the Board of PETRONAS Gas Berhad as Managing Director/Chief Executive Offi cer in March 2007.

Skills and Experience: Samsudin holds a B.Sc (Hons) in Chemical Engineering from Aston University, United Kingdom in 1983. He obtained a Masters of Science in Project Management from Reading University, United Kingdom in 1994. In 2005, Samsudin attended the Advanced Management Program at Harvard Business School, United States of America.

Samsudin began his career with PETRONAS in 1983 as a process engineer and was involved in the operations, design and project implementation of gas processing facilities in PETRONAS Gas Berhad until 1992.

He had held several positions in the PETRONAS Group including serving as General Manager in the Plant Division of OGP Technical Services Sdn Bhd accountable for the project management of gas processing and petrochemical plants until 2000. He then served as the General Manager of Malaysia LNG Dua Sdn Bhd and subsequently as the Senior General Manager of Malaysia LNG Sdn Bhd until 2005, managing the operations of the PETRONAS LNG Complex in Bintulu, Sarawak.

Prior to his current appointment, Samsudin was the Senior General Manager of Leadership and Capability Development Department of Human Resource Management Division in PETRONAS.

Samsudin is currently the Chairman of Kimanis Power Sdn Bhd, Regas Terminal (Sg. Udang) Sdn Bhd, Regas Terminal (Pengerang) Sdn Bhd and Regas Terminal (Lahad Datu) Sdn Bhd. He also sits on the Board of several companies in the PETRONAS Group.

External Appointment:• Director, Gas Malaysia Berhad

Management Committee’s Profi les


Azlimi bin Mohd LazimSenior General Manager, Plant Operations Division (POD)Malaysian (age 47)

Appointed as Senior General Manager of POD in April 2012.

Skills and Experience: Azlimi holds a degree in Chemical Engineering from Lamar University, Texas, United States of America (USA). He also attended the Advance Management Program at the Wharton School, University of Pennsylvania, Philadelphia, USA in 2007.

Azlimi began his career as a Trainee Engineer in 1990 at Sabah Gas Industries in the Methanol Plant Division and later joined PETRONAS in March 1991 as Shift Operations Supervisor at MTBE Malaysia Sdn Bhd (MTBE).

Azlimi’s six years experience in the Dehydro Section provided the platform for him to emerge as Section Head at the Export Terminal Section in 1996. In 1998, he was appointed as Senior Process Engineer and subsequently returned to the Dehydro Section as Operations Manager within the same year. Azlimi was later promoted to MTBE Plant Asset Senior Manager in April 2003 in the same operating unit.

After 13 years at MTBE, Azlimi was appointed in December 2004 as General Manager of Gas Processing Plant A, PETRONAS Gas Berhad and thereafter at Gas Processing Plant B, Kg Tok Arun Paka until March 2011.

Subsequently, he was appointed as President/Chief Executive Offi cer of Trans Thai-Malaysia (Thailand) Ltd in Songkhla, Thailand from April 2011 until March 2012.

Azlimi is currently the Chairman of Kimanis O&M Sdn Bhd.

Aida Aziza binti Mohd JamaludinGeneral Manager, Finance Division Malaysian (age 39)

Appointed as General Manager of Finance Division in September 2012.

Skills and Experience: Aida Aziza holds a Bachelor of Accounting and Finance from the University of Lancaster, United Kingdom.

Aida Aziza began her career with PETRONAS in October 1996 as an executive in the Budget Department of the PETRONAS and in the ensuing years, has held various positions in the PETRONAS Group, including serving as General Manager for the Finance and Accounts Services Department.

Aida Aziza has acquired more than 16 years of experience in accounting and fi nance related assignments. She has led several Financial Reporting Standard and Malaysian Financial Reporting Standard implementations for PETRONAS Group of Companies as well as the implementation of the SAP ECC6.0 for PETRONAS.

Aida Aziza is a Director of Kimanis O&M Sdn Bhd.

External Appointments:• Fellow, Association of Chartered Certifi ed Accountant

of United Kingdom• Alternate Director, Gas Malaysia Berhad



Norarnizar bin Ali AmranGeneral Manager, Transmission Operations Division (TOD)Malaysian (age 51)

Appointed as General Manager, TOD in November 2011.

Skills and Experience: Norarnizar holds a Bachelor Degree in Chemical Engineering from University Technology Malaysia and Diploma in Mechanical Engineering from Mara Institute of Technology.

Norarnizar has been in the gas industry for more than 29 years since he began his career as a Project Engineer in Gas Processing Plant Project in 1984. He was involved in the design and project implementation of gas processing facilities.

Norarnizar has acquired vast experience in the gas transmission operation from his assignment in PETRONAS Gas Berhad, assuming the positions of Pipeline Executive, Regional Manager and fi nally as Senior Manager, Operation in 2005. Prior to his appointment to the current position, he was the Senior Manager of Operation Engineering Department, TOD.

Mohd Sukri bin IbrahimGeneral Manager, Centralised Utility Facilities Division (CUF)Malaysian (age 50)

Appointed as General Manager, CUF in August 2009.

Skills and Experience: Mohd Sukri holds a Bachelor Degree of Science in Petroleum Engineering from the West Virginia University, United States of America.

Upon graduation, he started his career as a Service Engineer with a drilling company serving Esso Production Malaysia Inc and Sarawak Shell Berhad. His career in PETRONAS started in 1991 as a Shift Supervisor in PETRONAS Gas Berhad where he was involved in the project implementation of several gas plants. In 1997, he was assigned to the project engineering, construction, commissioning and operations at CUF. Prior to his current position, he was assigned to Gas Processing Plant B as Senior Manager of Plant Operations.

Mohd Sukri also serves as a Director for Kimanis Power Sdn Bhd and Industrial Gases Solutions Sdn Bhd.


Ahmad Nawawi bin Mohd YatimGeneral Manager, Technical and Facilities Development Division (TFDD), Malaysian (age 49)

Appointed as General Manager, TFDD in January 2011.

Skills and Experience: Ahmad Nawawi holds a Degree in Mechanical Engineering from University of New Brunswick, Canada.

Ahmad Nawawi joined PETRONAS Gas Berhad in October 1987 as a Trainee Engineer and was then appointed as a Mechanical Engineer for the Gas Processing Plant (GPP) 2 and 3 Project in the following year. In 1993, he was reassigned by PETRONAS to OGP Technical Services Sdn Bhd for the GPP 5 and 6 Project, the Propane Dehydrogenation Project and the District Cooling Plant Projects.

A decade later, he joined Gas Business Unit, PETRONAS, where he was responsible for business development for the Indonesian market. Ahmad Nawawi was appointed as Head of Project Engineering for the Sabah-Sarawak Integrated Oil & Gas Project in 2006 prior to his appointment in PETRONAS Gas Berhad in January 2011.

Ir. Hudal Firdaus bin DimyatiHead, LNG Regasifi cation Division Malaysian (age 49)

Appointed as Head of LNG Regasifi cation Division in January 2011.

Skills and Experience: Ir. Hudal Firdaus holds a Degree in Civil Engineering from the University of Toledo, Ohio, United States of America.

Ir. Hudal Firdaus joined PETRONAS in September 1993 as Deputy Project Services Manager of OGP Technical Services Sdn Bhd after working in a multinational oil and gas company for six years.

Ir. Hudal Firdaus was involved in the implementation of various cross border pipeline projects in Malaysia, Thailand and Sudan. In 1999, he served as an Audit Manager in the Group Internal Audit Division, PETRONAS and later as a Senior Manager where he was responsible for the audits on gas and petrochemical companies within PETRONAS Group. In 2003, he was appointed as Head of Business Development under the Gas Business Unit, PETRONAS, and was responsible for pursuing gas business opportunities in Myanmar and Thailand.

Ir. Hudal Firdaus joined PETRONAS Gas Berhad in April 2005 as Senior Manager, Engineering Management Department, Technical and Facilities Development Division (TFDD) and was later promoted to General Manager of TFDD in January 2006.

He is a Director of Regas Terminal (Sg. Udang) Sdn Bhd, Regas Terminal (Pengerang) Sdn Bhd and Regas Terminal (Lahad Datu) Sdn Bhd.

External Appointments:• Member, Board of Engineers, Malaysia• Member, Institution of Engineers, Malaysia



Muhamed Ali bin Hashim MuhamedManaging Director, Kimanis Power Sdn Bhd Malaysian (age 55)

Appointed as Managing Director, Kimanis Power Sdn Bhd in January 2009.

Skills and Experience: Muhamed Ali holds a Bachelor of Science (Hons) in Civil Engineering from Middlesex Polytechnic, United Kingdom.

Muhamed Ali began his career in PETRONAS as a Project Engineer after graduating in 1983 and his experiences include the management of pipeline system integrity and plant constructions. He also has vast experience in managing projects including the Gas Processing Plant 1, Export Terminal, Peninsular Gas Utilisation 2 and Malaysia LNG Tiga Project.

Prior to his current position, Muhamed Ali headed the Business Development of LNG in the Gas Business Unit, PETRONAS in which he was responsible for managing the entry for PETRONAS global LNG ventures through partnerships or acquisitions. Among the ventures he developed are Egyptian LNG and Gladstone LNG. His LNG business development scope covered India, Iran, Myanmar, China and Taiwan.

Wan Mohd Muzani bin Wan MudaGeneral Manager, Corporate and Commercial Services Division (CCSD), Malaysian (age 47)

Appointed as General Manager, CCSD in July 2012.

Skills and Experience: Wan Mohd Muzani holds a Bachelor of Science in Chemical Engineering from California State University, Long Beach, United States of America.

He started his career with PETRONAS in October 1988 as a Process Engineer at the Plant Operations Division, PETRONAS Gas Berhad (PGB). He spent most of his time in the plant, holding various positions in areas of Plant Technical Services, Project Management and Production Planning where he acquired in-depth experience in plant design and the operations of a gas plant.

Wan Mohd Muzani was also involved in the start-up and commissioning of Gas Processing Plant (GPP) 2, 3 and 4 and Plant Rejuvenation Project for GPP 1. Prior to his current position, he was the Senior Manager, Business Planning Department overseeing the business plan and budget and business portfolio management for PGB.

Wan Mohd Muzani has since assumed the position of General Manager, Technical Services, Malaysia LNG Sdn Bhd effective February 2013.


Intan Shafi nas (Tuty) binti HussainSenior Legal Counsel and Company SecretaryMalaysian (age 40)

Appointed as Company Secretary in May 2012.

Skills and Experience: Intan Shafi nas holds an LLB (Hons) from the University of Leicester, United Kingdom and Certifi cate in Legal Practice (Legal Profession Qualifying Board, Malaysia).

Prior to joining PETRONAS, Intan Shafi nas had garnered fi ve years of banking experience having worked at several fi nancial institutions in Malaysia.

Her career in PETRONAS started in 2001 as a Legal Executive with the Petrochemical Business, PETRONAS. In 2007, she was attached to the Corporate Services and Technology Department, Legal Division, PETRONAS, providing legal advisory services in the area of intellectual property and commercialisation of technologies. In January 2011, she was appointed as Senior Legal Counsel of Corporate Services, PETRONAS.

Intan Shafi nas then joined PETRONAS Chemicals Group Berhad in August 2011 and was subsequently appointed as Senior Legal Counsel of Legal and Corporate Secretariat Department, PETRONAS Gas Berhad, in March 2012.

She currently holds several positions as Company Secretary for Regas Terminal (Sg. Udang) Sdn Bhd, Regas Terminal (Pengerang) Sdn Bhd, Regas Terminal (Lahad Datu) Sdn Bhd, Gas District Cooling (UTP) Sdn Bhd, Industrial Gases Solutions Sdn Bhd, Kimanis Power Sdn Bhd and Kimanis O&M Sdn Bhd.

External Appointment:• Member and Honorary Secretary, Board of Visitors, Prince Court

Medical Centre

Zilfalilah binti Abdul AzizGeneral Manager, Human Resources Management (HRM) Division Malaysian (age 45)

Appointed as General Manager, HRM Division in January 2009.

Skills and Experience: Zilfalilah holds a Degree in Computer Science and Mathematics from the New Mexico Institute of Mining and Technology, New Mexico, United States of America.

Zilfalilah began her career in PETRONAS in 1990 as a Management Executive, where she was assigned to develop the Human Resource Information System.

Since then, Zilfalilah has served in various capacities in the fi eld of human resource management, amongst others, the development of the PETRONAS Leadership Dimensions, Leadership and Performance Management System and employees’ reward programmes. She had also served in Vinyl Chloride (Malaysia) Sdn Bhd, a subsidiary of PETRONAS Chemicals Group Berhad.

Zilfalilah has since assumed the position of General Manager, Human Resource Division, PETRONAS Chemicals Group Berhad, effective March 2013.



Abdul Rashid bin MukriSenior Manager, Business Planning Department (BPD) Malaysian (age 46)

Appointed as Senior Manager, BPD in July 2012.

Skills and Experience: Abdul Rashid holds a Bachelor of Engineering (Civil) from the University of Western Australia, Australia.

Abdul Rashid started his career in 1991 with PETRONAS Gas Berhad as a Developmental Executive in Construction Management. He acquired nine years of Project Management experience working in various areas from Front End Engineering Design to Planning and Control. Subsequently, he spent two years with Australian Pipeline Trust in pipeline capacity marketing for Moomba to Sydney Pipeline and Central West Pipeline in New South Wales, Australia.

Abdul Rashid then spent the next ten years of his career in Gas Business Unit, PETRONAS, holding various positions where he acquired experience in Joint Venture Management, Gas Monetisation, Unconventional Gas and Business Development.

Helmi bin ZaidanSenior Manager, Health, Safety and Environment Department (HSE), Malaysian (age 39)

Appointed as Senior Manager, HSE in February 2012.

Skills and Experience: Helmi holds a Bachelor of Science in Petroleum Engineering from the University of Wyoming, United States of America and Master of Science in Process Safety and Loss Prevention from University of Sheffi eld, United Kingdom.

Helmi began his career with PETRONAS in 1996 as a Developmental Executive. He was then involved in the Gas Processing Plant 5 and 6 startup as a Shift Supervisor. The next 15 years of his career in Plant Operations Division (POD) saw him holding various positions where he acquired experience in plant operations, process design, turnaround planning and process safety. Prior to his current position, he was the HSE Manager for POD.


Karima binti Mohd NoorGeneral Manager, Finance Division, up to August 2012 Malaysian (age 37)

Skills and Experience: Karima holds a Degree in Economics, majoring in Accounting and Finance from the London School of Economics and Political Science, University of London, United Kingdom. She is also a member of the Malaysian Institute of Certifi ed Public Accountants and Malaysian Institute of Accountants.

Prior to joining PETRONAS, she pursued her articleship with Hanafi ah Raslan & Mohamad. She began her career in PETRONAS in February 2002 as a Finance Executive in PETRONAS Carigali Sdn Bhd and in the ensuing years, she served as an analyst in the Offi ce of the President.

She joined PETRONAS Gas Berhad in December 2008 and held various positions in the Financial and Management Accounting Department within the Finance Division.

Karima was appointed as the General Manager of Finance Division from February 2011 up to August 2012. She has since assumed the position of Head of Group Planning and Performance, Finance and Accounts Services Department of PETRONAS effective September 2012.


Chairman’s Statement 36

CEO’s Business Review 40

Business Review

Embracing Challenges


The road to growth is studded with challenging milestones. At PGB we have taken on challenging new projects to expand our business portfolio, knowing full well that our mental strength, capability and endurance will be tested by entering uncharted territory. While we have experienced both triumphs and tribulations, we are determined to stay the course.

99.99% PGU Pipeline Reliability

99.9%POD Sales Gas Reliability

99.5% CUF Electricity Reliability

In this challenging year, our people have exhibited resilience and resolve to overcome tremendous challenges in project execution, while ensuring that day-to-day operations continue to run effi ciently.


The fi nancial year ending 31 December 2012 was challenging for the

Company. In the operations, we did well generating a profi t before tax

of RM1,844.5 million and profi t after tax of RM1,397.1 million on revenue

of RM3,576.8 million. The results were enhanced by gains made from

partial sale of PETRONAS Gas Berhad’s equity in an associate company,

Gas Malaysia Berhad.

The Company unfortunately experienced delays in the construction

of the Melaka Regasifi cation Terminal and the rejuvenation and revamp

of Gas Processing Plant (GPP)3 and GPP2 (collectively known as

Plant Rejuvenation and Revamp 2 Project or PRR2).

The Board is recommending a fi nal dividend of 35 sen per share. In addition

to the interim dividend of 15 sen per share paid in December 2012,

the total gross dividend for the year is 50 sen per share. This represents

a dividend payout ratio of 70.4%.

Chairman’s Statement


Operations – Gas Processing and Transmission

As always, the Company strived to maintain operational excellence at world class standards. Unfortunately, a fi re incident resulting in a fatality and several injuries caused delay in the completion of the rejuvenation and revamping of GPP3 and GPP2. Fortunately though, the delay has not caused interruption of gas supply to the nation.

Our gas pipeline network reliability once again, exceeded world class standard at 99.99%.

Operations – Utilities

The Company’s Centralised Utility Facilities (CUF) in Kertih and Gebeng continued to register revenue growth on the back of stronger selling prices and higher sales volume of electricity and steam to customers.

Plant Rejuvenation and Revamp

I have communicated in the previous report that the Company is undertaking works to ensure that the plants’ integrity and reliability can be sustained for another 20 years of operations.

Chairman’s Statement

The replacement, refurbishment, upgrading and modifi cation of the Company’s GPP under the contract awarded in 2010 is on-going and will be completed this year, albeit there is a slight delay.

I am also pleased to inform members that during the year, we have awarded Engineering, Procurement, Construction and Commissioning (EPCC) contract for our Plant Rejuvenation and Revamp 4 (PRR 4) project. It involves the rejuvenation and revamp activities of GPP4, Kertih Compressor Station B and Dew Point Control Unit 2. The project is planned to be completed in 2015.

Regasifi cation Terminals

The Melaka LNG Regasifi cation Terminal was planned to be operational by September 2012. Unfortunately due to construction issues, the project is now delayed and is expected to be commissioned only by the second quarter of 2013.

The expected positive impact from this business will only be now refl ected in the Company’s earnings beginning second half of 2013.

The progress of the other two LNG Regasifi cation Terminals at Pengerang, Johor and Lahad Datu, Sabah have been slow, in line with the progress of Refi nery and Petrochemical Integrated Development project and Lahad Datu Power Station.

People – Our Most Valuable Resource

PETRONAS Gas Berhad (PGB) success would not have been possible without the support of its dedicated and committed pool of talents.

In this challenging year, our people have exhibited resilience and resolve to overcome tremendous challenges in project execution, while ensuring that day-to-day operations continue to run effi ciently.

With a view of PGB’s future growth and expansion, the Company will continue to place an emphasis on capability development of its existing workforce through training and coaching. The Company will supplement these efforts by recruiting capable and experienced external talents. The success of these efforts will ensure that PGB has the right talent pool to propel its business further in years to come.


Corporate Social Responsibility (CSR)

The Company recognises the importance of engaging with the local community wherever we operate. Our key CSR initiatives have always focused on the participative involvement of our staff, reaching out to the communities around our operations, especially through programmes focusing on educational improvement and community welfare.

In the year under review, CSR activities such as the acclaimed Program Bakti Pendidikan PETRONAS (PBPP) allowed employees to volunteer their energy and knowledge towards encouraging better academic achievement and self-confi dence amongst primary school students in selected schools surrounding our operations.

I am pleased to note that during FY2012, we have experienced notable improvements in the academic performance of primary school students adopted under our PBPP programme. It is our sincere hope that the mentoring and encouragement provided by our staff through the programme will place these young students on the path to a brighter future.

Additionally, we continued to carry out a number of community welfare activities under the umbrella of our CSR programme, which focuses on assisting less fortunate members of society, such as those in the lower income groups as well as orphans.

Health, Safety and Environment (HSE)

We take HSE seriously. We have devoted a lot of time and resources towards embedding a safety-driven culture amongst our people. Notwithstanding these efforts, we regrettably experienced one fatality involving a contractor’s worker. We recognise that a safety-oriented mindset must be embraced by all. As part of this effort, we have introduced programmes which are preventive and corrective in nature, as well as initiated efforts to enhance HSE leadership and ownership amongst our people and contractors.

We certainly wish to improve our HSE performance to ensure that the regrettable incidents such as those experienced during the year can be prevented in the future.

Recognition

As usual, I would like to take this opportunity to express my sincere thanks to all our stakeholders for their continuous support and confi dence in PGB. My deepest appreciation goes to the Board of Directors for their guidance and counsel, as well as to the Management and employees of PGB for their loyalty, dedication and strong sense of ownership which has helped us overcome the odds, time and again. My gratitude also goes to the various authorities for their support, cooperation and assistance provided.

Datuk Anuar Ahmad

Chairman

We take HSE seriously. We recognise that a safety-oriented mindset must be embraced by all.


CEO’s Business Review

INTRODUCTION

Embracing ProgressFinancial Year 2012 was a watershed year for PETRONAS Gas Berhad (PGB) as we continue to chart the Company’s course along the strategic path for growth initiated a number of years ago.

As a Company that has established a fi rm foundation in the gas processing and transmission business, we are aware of the fact that the Company must look beyond its conventional business model in order to generate new sources of revenues for the future.

Based on this insight, PGB has diversifi ed its business model to venture into liquefi ed natural gas (LNG) regasifi cation, power generation and Third Party Access (TPA) as a possible means of injecting new vigour into the Company.

Admittedly, the path to progress is not without its challenges. In the year that was, we continue to be united in our resolution to steer PGB through various project challenges and issues. While there were moments when the complexity of the challenge can be confounding, even to the most experienced hands, our determination to do our best and see things through have helped us arrive to where we are today.

The tough lessons and pain we faced during the year of growth have made us much wiser and more determined to reach our promised destination.

We remain committed to the pursuit of growth and embracing progress that will not only sustain PGB’s business but will also ensure the advancement of its business model to weather the challenges of an ever-changing gas industry, whatever tomorrow brings.

The progress of our journey so far is detailed out in the following pages.


We continue to be united in our resolution to steer PGB through various project challenges and issues.

Our determination to do our best and see things through has helped us arrive at where we are today.


FINANCIAL PERFORMANCE

Delivering Value to Our StakeholdersDuring the year under review the Company continues to deliver its commitments as outlined under the 4th Term Gas Processing and Transmission Agreement (GPTA) with PETRONAS. The GPTA provides for PETRONAS to remunerate PGB with a Throughput Fee (TF) for processing and transmitting gas to PETRONAS’ customer.

While the agreement guarantees a stable and reliable income stream for PGB, the Company has always pride itself in its ability to add further value and generate spinoffs that will increase revenues and enhance its profi tability.

Challenges in the upstream continue to limit the volume of feed gas supply processed and transmitted through PGB’s system, impacting the scale of revenue earned from the GPTA arrangement. Furthermore, project challenges experienced during the year under review also delayed the introduction of new income streams to PGB’s revenue.

Against this background, PGB persevered and delivered a commendable fi nancial performance for FY2012. The Group recorded a revenue of RM3,576.8 million, a decrease of RM79.5 million (2.2%) as compared to the previous year mainly due to lower revenue contribution from gas processing, though partly negated by higher sales of utilities and gas transmission revenues.

FINANCIAL HIGHLIGHTS

• Group Profi t after tax improved by 3.7% despite decrease in revenue, augmented by income from partial disposal of stake in an associate.

• Earnings per share attributable to shareholders increased by 4.3% to 71.0 sen from 68.1 sen.

• Successfully secured Islamic Financing Facilities with a nominal value of RM1.16 billion for the construction of the Kimanis Power Plant.

OPERATIONAL HIGHLIGHTS

• Consistently performing at world class standard for gas pipeline reliability.

• Kimanis Power Plant is on track to be commissioned by end of 2013.

• Awarded Engineering, Procurement, Construction and Commissioning package for PRR4 to Toyo Engineering Corporation of Japan.


Against the background of a challenging year, PGB persevered and delivered commendable results for FY2012

During the year, the cost of revenue decreased by 5.2% to RM1,806.8 million from RM1,906.5 million previously. As a result, the Group recorded a profi t before tax of RM1,844.5 million for the fi nancial year ended 31 December 2012, which is an increase of RM60.7 million (3.4%).

The Group’s profi t before tax was also augmented by the income generated from the partial disposal of its stake in Gas Malaysia Berhad, an associate company, which generated a gain of RM100 million.

Profi t after tax for the fi nancial year under review increased to RM1,397.1 million, which is RM49.7 million and 3.7% higher than the performance recorded last year. Earnings per share attributable to the shareholders of the Company increased to 71.0 sen from 68.1 sen in the previous year.

The Board of Directors is recommending a fi nal dividend of 35 sen per share under the single tier system. Together with the interim dividend of 15 sen per share under the single tier system paid out on 20 September 2012, total gross and net dividend for the fi nancial year ended 31 December 2012 will amount to 50 sen per share, which represents a dividend payout ratio of 70.4%.


BUSINESS SEGMENTS

Gas Processing and Transportation Business

Sustaining Reliability against a Challenging Background

The Company’s Gas Processing Plants (GPP) operated by our Plant Operations Division (POD) in Kertih and Paka in Terengganu experienced continued challenges due to prolonged upstream constraints which resulted in decreased feed gas supply. During the year under review, our GPPs processed an average of 1971 million standard cubic feet per day (mmscfd) of gas.

Our Peninsular Gas Utilisation (PGU) pipeline network also received 409 mmscfd of gas from the Malaysia-Thailand Joint Development Area (MTJDA). Total sales gas delivered to customers was 2,132 mmscfd.

Sustaining our businessPGB’s effort to rejuvenate and revamp its plant will extend the life of the Company’s capital assets for many years to come, ensuring continued reliability and operability.


Despite facing a number of challenges during the year, the Company continued to sustain its plant operations at commendable standards. GPP’s sales gas reliability was at 99.9% while its reliability for ethane was at 90.1%. The reliability for propane and butane was recorded at 91.7%

The Company also managed to sustain its pipeline reliability above world class average, chalking 99.99% for the year.

Utilities Business

Generating Higher Value

Our Centralised Utility Facilities (CUF) plants in Kertih, Terengganu and Gebeng, Pahang continued to deliver relatively good performance, despite experiencing some plant-related issues during the year. Notwithstanding this, CUF registered a commendable 10% revenue growth on the back of higher volumes of electricity and steam sales, and higher realised product prices.

CUF charted 94.9% reliability for steam, 95.9% reliability for industrial gases as well as 99.5% reliability for electricity during the year under review.

On the path to future growth

PGB’s foray into new businesses such as LNG regasifi cation (above) and power generation (below) is expected to bring on new revenue streams for the Group.



PLANT REJUVENATION AND REVAMP

Sustaining Operability and Asset IntegrityDuring the year under review, the Company experienced delays in completing its Plant Rejuvenation and Revamp project (PRR2) which comprises the rejuvenation and revamp of facilities in our GPP2, GPP3 and the Kertih Compressor Station located in our GPP Complex A in Kertih and the Export Terminal (ET) Units 3 and 4 in Kemaman, Terengganu.

Despite the above, we are working hard to achieve our collective completion date in late 2013 as planned. The completion of the PRR is expected to sustain PGB’s plant reliability and integrity for an additional 20 years while generating major savings in capital investment.

As announced last year, PGB has also embarked on the PRR4 project, which will involve GPP4, Kertih Compressor Station B (KCS B) and Dew Point Control Unit 2 (DPCU2) within GPP Complex A, in Kertih, Terengganu. The Engineering, Procurement, Construction and Commissioning (EPCC) package has been awarded to a consortium led by Toyo Engineering Corporation of Japan. The project is expected to be completed by 2015.

LNG REGASIFICATION TERMINAL PROJECT

Adding a New Node for GrowthPGB is in the fi nal stages of completing the development of Malaysia’s very fi rst offshore LNG Regasifi cation Terminal (RGT) in Sungai Udang, Melaka, although we have been experiencing delays that

was contributed by construction issues. The completion of the project will ensure the security of gas supply to Peninsular Malaysia, as well as meet the increasing demand from consumers in the power generation and manufacturing sectors.

As announced during the fi nancial year, the project is expected to be commissioned by second quarter of FY2013.

There was no material effect on PGB’s earnings and net assets for the year under review resulting from the later commencement of operations at the RGT. Resulting from this, the expected positive impact from the RGT business will only be refl ected in PGB’s earnings in the next fi nancial year ending 31 December 2013.

OTHER PROJECT UPDATES

Weathering ChallengesDuring the year under review, PGB continued to provide project management services for the construction of the Sabah-Sarawak Gas Pipeline carried out by contractors for PETRONAS Carigali Sdn Bhd, which is expected to undergo commissioning in 2013.

This effort showcases our capability in undertaking the development and construction management of a key gas infrastructure project along some of the most challenging terrains and operating environments in Malaysia, leveraging on our previous experience in developing the Peninsular Gas Utilisation system.

I am pleased to inform that our joint-venture effort with Yayasan Sabah, Kimanis Power Sdn Bhd, has reported commendable progress with the construction of its 300MW gas-fi red power plant located in Kimanis, Sabah.

The plant is expected to begin supplying its fi rst 100MW of electricity by the end of 2013 providing much needed additional electricity supply to support the state’s economic growth and social well-being.

Last year, Kimanis Power also successfully secured Islamic Financing Facilities of a nominal value of RM1.16 billion. The fi rst series of the Sukuk programme has been issued on 8 August 2012 with an aggregate nominal value of RM860.0 million.

HEALTH, SAFETY AND ENVIRONMENT (HSE)

Strengthening Our Commitment to SafetyFor the year under review despite our aspiration to raise our focus on HSE, we regret to inform that our projects experienced some incidents that impacted our HSE performance. We recorded Lost Time Injury Frequency (LTIF), Total Reportable Case Frequency (TRCF) and Fatal Accident Rate (FAR) rating of 0.19, 1.3 and 4.67 respectively. We regrettably experienced one fatality by one of our contractors during activity carried out in our GPP, during a fi re incident. Since then, we have doubled our efforts to strengthen our internal safety culture as well as ensuring that the zero tolerance mindset to safety is also emulated by the contractors working on our projects.

Regardless of all the challenges faced by PGB, we continue to work hard to ensure that HSE standards and practices at all our areas of operations are fully complied with. We are also working with all safety regulatory bodies to ensure that necessary steps are taken to provide a better safety measure to prevent any incidents from recurring in the future.



CORPORATE RESPONSIBILITY IN THE ENVIRONMENT

Sustaining the BalanceAs a responsible corporate citizen that gives due focus to the economic, social and environmental aspects of our operations, PGB continues to support programmes which promote environmental awareness and sustainability.

Our Environmental 4G (Green Care, Green Mind, Green Ownership and Green Growth) Program is still going strong. For the year under review, we turned our focus to waste minimisation, aimed at reducing the total amount of scheduled wastes generated in 2012.

Our waste minimisation efforts not only ensured that less waste is being disposed, it also translates to fi nancial savings for the Company, as costly waste disposal fees can be reduced.

The positive impact of our efforts has not gone unnoticed as PGB was also invited to share our 4G experience and success stories during the PETRONAS Group’s Environmental Community of Practice (COP), which is a testament to the strength of the program.

Further to this, PGB staff also contributed their bit to the environment by organising two mangrove conservation campaigns which involved the replanting of mangrove seedlings at identifi ed areas. This is to ensure the continued preservation of mangrove areas as natural habitats for rare fl ora, fauna and aquatic life species, as well natural safeguards against coastal erosion. The campaigns were held at Kampung Mercang, in Marang, Terengganu on 14 July 2012 and later at Kuala Selangor National Park on 15 December 2012.

As part of our efforts to promote a healthy lifestyle amongst our staff, PGB carried out a Mass Health Screening Program for all PGB permanent staff from March to June 2012. The results were shared with all staff starting December 2012. The analysis of the results will be used to plan health-related programs for 2013.

PGB also embarked on the Fitness to Work (FTW) initiative with a special focus on our Emergency Response Team (ERT) members in 2012. This is to ensure that our ERT members,who are often the fi rst responders during emergencies, are fi t and able to carry out their responsibilities, especially under the stressful conditions of an emergency. Under this program, all ERT members are required to undergo and pass a fi tness assessment test.

CORPORATE RESPONSIBILITY IN THE WORK PLACE

In the Pursuit of High PerformanceIn PGB, we consider our people as our most valued and cherished asset. During the year, we continue to work towards enhancing the skills and capability of our existing talent pool, as well as attracting experienced and motivated professionals from the industry to become part of our family. The combination of these initiatives is expected to enhance PGB’s standing as a high-performing organisation.

In 2012, our efforts were focused on integrating succession planning and mobility to channel the energies of our best talents to the most critical business undertakings being carried out by the Company. At the same time, this will ensure the continuity of our operations, thanks to the pipeline of talents groomed to succeed personnel who have been appointed to other positions within PGB.

Also critical to the success of PGB during the year was our internally-developed leadership development efforts. Signature initiatives such as our Building Leadership Programme for our budding leaders have allowed PGB to nurture and grow our tree of leadership and capability. This sustained effort has borne fruit in the form of many capable and talented individuals much sought after within the PETRONAS


Group to fi ll critical positions and lead key projects. Based on the success seen so far, we will continue to nurture this tree not only for PGB’s business continuity but also for the benefi t of the rest of the PETRONAS Group,to produce a pipeline of talent who are able to lead the Corporation into its next phase of growth.

Additionally, we have organised a number of programmes aimed at enhancing the hard and soft business skills of our staff, as well as allow leaders to share their tacit knowledge with budding talents in the Group.

Pulling all of this together is our regular internal communication sessions with staff. We continue to hold extensive communication sessions every quarter to give our people an insight into PGB’s fi nancial and operational performance in the preceding quarter, as well as to rally them to improve business performance and delivery, moving forward.

People are at the heart of our successWe continue to work hard to inculcate a safety-oriented culture at the workplace in PGB. (above)Constant communications is the key towards ensuring that we reach our business goals. (bottom left)Our leaders invest time and effort to nurture and develop the capability of our young staff. (bottom right)


CORPORATE RESPONSIBILITY IN THE COMMUNITY

Sharing our SuccessWe have always believed that it is our responsibility to try and make a difference in the lives of communities surrounding our extensive operations. Thus, PGB’s Corporate Social Responsibility (CSR) programmes have acted as bridge between the Company and the larger community - allowing our employees to assist others through education-based, as well as community welfare initiatives, devoting their time, resources and knowledge towards the betterment of all.

Through our fl agship Program Bakti Pendidikan PETRONAS (PBPP), we reached out to standard, four, fi ve and six students from selected schools from around our operations to help them improve their academic performance in subjects such as Mathematics, English and Science, through tuition classes and Fun Learning activities.

Sharing our successWe place an emphasis on developing upgrading the technical capability of our staff. (above)Constant communication between the management and employees allows us to cascade key messages effectively. (bottom left)Our CSR programmes allow us to form closer bonds with the community. (bottom right)



Throughout 2012, PGB continued to support the programme in four schools namely Sekolah Kebangsaan Santong in Paka, Terengganu; Sekolah Kebangsaan Batu Anam in Segamat, Johor; Sekolah Kebangsaan Pinang Tunggal in Kepala Batas, Pulau Pinang; and Sekolah Kebangsaan Sungai Baging in Kuantan, Pahang.

Since the introduction of this programme in 2006 to date, more than 1,000 students have benefi ted from the tuition classes sponsored by PGB, as well as the Fun Learning sessions conducted by PGB’s volunteer-facilitators.

I am pleased to note that during the year, PGB saw the graduation of our fi fth batch of PBPP students. Of the total of 101 students under the programme who sat for the UPSR 2012 Examination, some 71.3% have passed the examination. Of this total, some 13 students scored 5As, 12 students scored 4As and a remaining 12 students received 3As. I am truly delighted with this achievement as its shows that our staff’s voluntary efforts to motivate and nurture these young students have paid off handsomely.

In addition to the PBPP, our people have also carried out numerous staff-driven and staff-led CSR activities, aimed at assisting the less fortunate members of our community. In line with our slogan ‘Bakti Dihulur, Kasih Disemai’ which means ‘Kindness Extended, Affection Nurtured’ we have reached out to the communities around our operation centres by carrying out CSR activities almost on a weekly basis involving the elderly, the physically challenged, single mothers and orphans throughout the country. Over and above the funds earmarked by the Company towards realising these programmes, our personnel contributed approximately RM150,000 of their own personal donations to sustain this effort.

RECOGNITIONS

Credit for a Job Well DoneDuring the year, PGB clinched a number of awards, attesting to the recognition given by the authorities and regulatory bodies towards various efforts taken to raise safety standards and practices, as well as enhance our operations excellence as a premier gas and utility company.

On the HSE front, PGB won eight awards conferred by the Malaysian Society for Occupational Safety and Health (MSOSH) at the MSOSH Awards for the year 2011:

• 1 Grand Award won by Plant Operations Division

• 1 Gold Merit and 3 Gold Class 1 Award won by Transmission Operations Division

• 1 Gold Merit Award and 1 Gold Class 1 Award won by Centralised Utility Facilities

• 1 Gold Class 1 Award won by Technical and Facilities Development Division

PGB’s Transmission Operations Division also won the 2011 National Occupational, Safety and Health (OSH) Excellence Awards for the Gas Utilities Category.

PGB also sustained its dominance by clinching the ‘Best Annual Report’ in the Industrial Products and Technology category of the National Annual Corporate Report Award (NACRA) for the third consecutive year, attesting to the high level of disclosure and quality of reporting exhibited in its annual report.

APPRECIATION

A Note of AppreciationOn behalf of the management, I would like to take this opportunity to put on record my sincere appreciation to all our employees who have toiled day and night, at our plants, facilities and project sites throughout Malaysia for their relentless efforts and strong commitment to PGB throughout the year. Their undaunted spirit, patience in the face of adversity and willingness to perform above and beyond the call of duty has allowed this Company to establish a fi rm foundation and progress tremendously over the past three decades.

I would also like to thank our Chairman Yang Berbahagia Datuk Anuar bin Ahmad for his guidance, stewardship and support to PGB’s management in dealing with one of the most challenging periods in our Company’s history. His guidance and understanding has given us the confi dence to stay the course and ensure that the Company emerges stronger and more robust as we move forward.



The year under review also saw some changes in the composition of our Management Committee, as old faces move on to other growth opportunities, and new faces arrive, bringing fresh insights and ideas that will continue to invigorate our internal pool of creativity as we move forward.

In this vein I would like to thank En Rashid bin Muhamad, Pn Noryati binti Mohd Noor, and Cik Karima binti Mohd Noor, who have taken up other challenges elsewhere within the PETRONAS Group, as well as En Md Nasser bin Abdullah who retired in mid-2012 for their excellent service and contributions towards PGB’s growth. I also welcome their successors En Azlimi bin Mohd Lazim, Pn Intan Shafi nas (Tuty) binti Hussain, Pn Aida Aziza binti Mohd Jamaludin and En Wan Mohd Muzani bin Wan Muda respectively.

Further to this, I would like to also express my sincere thanks to our customers, business partners, valued contractors, Federal and State authorities, regulatory bodies and agencies, as well as our parent Company PETRONAS for the immense trust, support and cooperation given through the years. We hope to continue to nurture a mutually benefi cial relationship that will stand the test of time.

My special note of thanks goes to our shareholders who continue to place their trust and confi dence on our counter. We pledge to work harder to return more value to your investment in our Company.

Last but not least, the Company would like to express its immense appreciation to our esteemed Board of Directors whose wisdom and penetrating insights have allowed the management to steer through challenging waters towards our desired destination. We hope to continue to benefi t from their sound counsel as we embrace progress in every aspect of our efforts.

In our relentless pursuit of growth in 2012, we faced challenges and growing pains aplenty. While the year has been truly challenging, I am proud to note that the Company and its people have emerged stronger, wiser and more determined to meet future odds. We recognise that the path to progress is long, winding and hard, and this journey is only at its very beginning. But we are determined to complete what we have initiated and fulfi ll the amanah entrusted upon us with the best of our abilities In Sha Allah.

SAMSUDIN BIN MISKON

Managing Director/Chief Executive Offi cer


Strengthening our foundation and moving forwardOur plant’s integrity is critical to our business continuity. (above)The development of our RGT in Melaka will allow us to tap into new opportunities for growth. (below left)Our growth into power business extends our presence into a new area of the energy value chain. (below right)


Financial Review 54

Statement of Value Added 60

Performance of Shares 61

Financial Calendar 61

Supporting Progress 62

Powering Progress 64

Progressive Mindset 66

PGB in the News 68

Awards and Achievements 69

Performance Review

Embracing Opportunities


Great opportunities lie ahead for those who are willing to embrace it. At PGB we are ever willing to capitalise on new growth opportunities that will generate greater value for our stakeholders. Our willingness to do things differently to secure this value is the hallmark of our commercial success.

RM3,576.8 million Revenue

RM1,397.1 millionProfi t After Tax

70.4%Dividend Payout Ratio


Overview

PETRONAS Gas Berhad (PGB) Group have changed its fi nancial year end from 31 March to 31 December effective from the previous reporting period in accordance with PETRONAS Groupwide practice to align its fi nancial year to calendar year. To allow comparable review of performance in terms of operations and business activities, PGB Group’s fi nancial performance for the year ended 31 December 2012 is compared against the performance of the last 12 months from 1 January 2011 to 31 December 2011 (FY2011) which combines PE2011 and Quarter 4, FY2010/11.

The Group delivered a solid fi nancial performance for the year ended 31 December 2012 (FY2012) on the back of sustainable revenue streams from gas processing and transportation businesses, amidst management focus on growth initiatives.

We recorded profi t after tax of RM1,397.1 million, representing an increase of RM49.7 million or 3.7% from RM1,347.4 million in FY2011.

Revenue

In the year under review the Group recorded revenue of RM3,576.8 million, a reduction by RM79.5 million (2.2%) from RM3,656.3 million recorded in FY2011 primarily due to lower gas

processing revenue (GPR) by RM206.7 million (12.0%) negated by higher sales of utilities by RM86.1 million (10.0%) and gas transportation revenue (GTR) by RM41.1 million (3.8%).

The decrease in GPR by RM206.7 million (12.0%) was mainly contributed by lower performance based structure (PBS) income as a result of lower volume exported for both propane and butane in line with the decrease in production of these liquid by-products by 13.4% and 14.2% respectively. The declined production of these liquid by-products was contributed by composition in the feedgas received from domestic gas fi elds. The impact of lower volume was however cushioned by improved realised prices of propane and butane.

The GPR decrease was offset by an increase in utilities revenue by RM86.1 million (10.0%) from RM860.1 million to RM946.2 million mainly attributable to higher revenue from electricity, steam and industrial gases, driven by higher consumption by customers and full year effect of the upward revision in the utilities prices in line with the increase in fuel gas price effective 1 June 2011. Under the sales and purchase agreements between PGB and its customers, any increase in fuel gas cost will be passed through to the customer via price adjustment.

FINANCIAL RESULTS HIGHLIGHTS FOR FY2012

RM3,576.8

million in RevenueRevenue of RM3,576.8 million for the year is sustained by contribution from Gas Processing and Gas Transportation Segments.

RM1,397.1million in Profi t After TaxProfi t After Tax increased by 3.7% or RM49.7 million after accounting for gains from partial disposal of shareholdings in an associate through IPO.

70.4%

Dividend Payout Ratio The Board is recommending a fi nal dividend of 35 sen per share. Including interim dividend of 15 sen per share paid in December 2012, the gross dividend per share for the year is 50 sen.

RM13,462.2million in Total Assets Total Assets of the Groupincreased by RM2,715.7 millionin line with investments inmajor growth projects andrejuvenation and revamp of the existing plants.

Financial Review


During the year, PETRONAS made a higher capacity reservation for the Peninsular Gas Utilisation (PGU) pipeline by 24 mmscfd (1.2%) from 2,048 mmscfd in FY2011 to 2,072 mmscfd in FY2012. This resulted in the increase of GTR by RM41.1 million (3.8%) from RM1,078.3 million recorded in the previous year.

Cost of Revenue

Cost of revenue for the Group decreased by RM99.7 million (5.2%) from RM1,906.5 million in FY2011 to RM1,806.8 million in FY2012. The decrease was mainly due to impairment of certain plant and equipment made in FY2011 amounting to RM90.7 million, lower staff cost by RM50.4 million and lower inventory written off by RM27.2 million. However, this was negated by higher fuel gas cost by RM59.6 million due to the full year effect of the increase in fuel gas price.

Gross Profi t

Gross profi t for the Group in the year under review was higher by RM20.2 million (1.2%) from RM1,749.8 million to RM1,770.0 million.

Gross profi t for gas transportation and utilities segments increased by RM165.2 million (24.5%) and RM16.5 million (11.3%) respectively whilst gas processing segment decreased by RM161.5 million (17.4%).

Other Income and Administrative Expenses

Other income and administrative expenses for the Group was higher by RM63.1 million. This was primarily contributed by gains of RM100.0 million arising from partial disposal of investment in an associate, Gas Malaysia Bhd (GMB) through initial public offering (IPO) during the year under review offset by higher other expenses by RM38.4 million compared to FY2011.

Profi t

The Group recorded higher profi t before tax by RM60.7 million (3.4%) from RM1,783.8 million to RM1,844.5 million.

The Group’s associate, GMB contributed share of profi t after tax of RM22.1 million whilst the jointly controlled entity, Industrial Gases Solutions Sdn Bhd (IGS) contributed share of profi t after tax of

RM1.8 million. The total share of profi t after tax of equity accounted associate and jointly controlled entity amounted to RM23.9 million, a decrease by RM23.2 million (49.3%) compared to FY2011 mainly resulting from partial divestment of 5.2% of our interest in GMB through IPO during the year.

The Group’s subsidiaries, Kimanis Power Sdn Bhd (KPSB), Regas Terminal (Sg. Udang) Sdn Bhd (RGTSU) and Regas Terminal (Lahad Datu) Sdn Bhd registered losses of RM25.0 million, RM21.2 million and RM17.6 million respectively in relation to general and administrative and other expenses during the year. The other subsidiaries namely Kimanis O&M Sdn Bhd and Regas Terminal (Pengerang) Sdn Bhd did not incur any signifi cant profi t or loss during the year.

Tax expense at RM447.4 million was higher by RM11.0 million (2.5%) compared to RM436.4 million in FY2011. Effective tax rate was at 24.6% compared to 25.1% for the previous year. The effective tax rate for the year under review is slightly lower than the statutory corporate tax rate of 25% mainly due to capital gain on partial divestment of investment in GMB of RM100.0 million which is not subjected to income tax.

UtilitiesGas processing Gas transportation

Revenue by Segment RM million

FY2012 FY2011

946.2 860.1

1,119.4 1,078.3

1,717.91,511.2


As a result, the Group recorded profi t after tax of RM1,397.1 million, an increase by RM49.7 million (3.7%) from RM1,347.4 million recorded in the corresponding year. Earnings per share (EPS) for the Group increased by 2.9 sen (4.3%) from 68.1 sen to 71.0 sen, with 1.2 sen attributed from our 14.8% interest in GMB.

Dividends

During the year, the Company paid interim dividend of 15 sen per share under the single tier tax system amounting to RM296.8 million. The Board of Directors is recommending a fi nal dividend of 35 sen per share under the single tier tax system amounting to RM692.6 million in respect of the fi nancial year ended 31 December 2012. This, together with the interim dividend, will result in total gross and net dividend of 50 sen per share, representing a dividend payout ratio of 70.4% on the profi t after tax attributable to the shareholders of the Company for the fi nancial year ended 31 December 2012.

Segment Financial Performance

Gas Processing

The Gas Processing segment contributed 43.4% or RM768.7 million of the Group’s gross profi t. Segment results dropped by

Financial Review

RM161.5 million or 17.4% compared to FY2011 due to lower revenue by RM206.7 million or 12.0% as previously mentioned.

Gas Transportation

The Gas Transportation segment continued to be the key contributor to the Group, accounting for 47.4% or RM839.3 million of the Group’s gross profi t. Segment revenue for the year at RM1,119.4 million, represents an increase of RM41.1 million or 3.8% on the back of higher transportation capacity booked by customer. Segment results improved by RM165.2 million or 24.5% mainly due to one off impairment loss on asset amounting to RM90.7 million last year coupled with the aforesaid increase in revenue.

Utilities

The Utilities segment contributed 9.2% or RM162.0 million of the Group’s gross profi t on the back of RM946.2 million revenue. Segment revenue was higher by RM86.1 million or 10.0% compared to FY2011 contributed by higher consumption by customers and upward revision in the utilities prices in line with the increase in fuel gas price effective 1 September 2011. The Utilities segment results improved by RM16.5 million or

11.3% in line with higher revenue, partly offset by higher cost of utilities and depreciation charges. Assets

The Group’s total assets increased by RM2,715.7 million (25.3%) from RM10,746.5 million as at 31 December 2011 to RM13,462.2 million as at 31 December 2012.

Property, plant and equipment increased by RM3,043.6 million (40.8%) from RM7,458.3 million as at 31 December 2011 to RM10,501.9 million as at 31 December 2012 mainly as a result of further investments in major growth projects and improvements to maintain the integrity of the Group’s assets totaling RM3,735.8 million negated by depreciation of RM663.1 million.

Investment in associate decreased by RM51.8 million (28.8%) to RM127.8 million as at 31 December 2012 compared to RM179.6 million as at 31 December 2011, mainly due to partial divestment of investment in GMB through IPO of RM44.5 million and after taking into consideration dividend received of RM29.4 million and share of profi t in GMB of RM22.1 million. Investment in jointly controlled entity increased by RM1.8 million (33.3%) to RM7.2 million

Assets RM million

FY2012 FY2011

10,501.9 7,458.3185.0

2,614.4

488.8

2,365.5

135.0 459.8

UtilitiesGas processing Gas transportation

Results by Segment RM million

FY2012 FY2011

768.7162.0

839.3 674.1

145.5

930.2

Investment in associate and jointly controlled entity

OthersProperty, plantand equipment

Cash and fund investments


Equities RM million

FY2012 FY2011

115.8 86.5

7,188.2 6,578.7

1,978.71,978.7

as at 31 December 2012 as compared to RM5.4 million as at 31 December 2011 as result of share of profi t in IGS of RM1.8 million.

Fund and other investments of RM160.4 million comprise investments in Malaysian Government Securities and other unquoted securities held as at 31 December 2012.

The Group generated RM2.1 billion in cash from operation. This was suffi cient to sustain the current year dividend payment to the shareholders of RM791.5 million and signifi cant portion of the Group’s capital investments. During the year, a subsidiary of the Group, KPSB made a drawdown of RM1.0 billion Islamic fi nancing facilities to fi nance its power plant project in Kimanis, Sabah. Consequently, the Group’s cash and cash equivalents decreased by RM163.8 million (6.9%) from RM2,368.8 million as at 31 December 2011. Liabilities

Total liabilities for the Group increased by RM2,077.0 million (98.8%) from RM2,102.5 million as at 31 December 2011 to RM4,179.5 million

as at 31 December 2012. The increase was mainly due to higher borrowings by RM1,657.7 million (372.7%) and trade and other payables by RM472.6 million (105.6%).

The increase in borrowings was attributable to issuance of Sukuk Series 1 based on the principles of Istisna’ and Ijarah term fi nancing of RM860.0 million by KPSB and fi nance lease liabilities of RM798.7 million assumed by RGTSU in relation to the charter hire of two fl oating storage units at LNG Regasifi cation Terminal in Sg. Udang, Melaka.

The increase in trade and other payables by RM472.6 million (105.6%) was in line with increase in capital expenditure to support the Group’s growth projects. Equity

Total equity for the Group attributable to the shareholders of the Company as at 31 December 2012 increased by RM609.5 million (7.1%) from RM8,557.4 million as at 31 December 2011 to RM9,166.9 million. The increase was mainly contributed by profi t attributable to the shareholders of the Company of RM1,405.2 million, negated by dividend payment of RM791.5 million.

The non-controlling interests contributed further to the increase in equity by RM29.3 million (33.9%) from RM86.5 million as at 31 December 2011 to RM115.8 million as at 31 December 2012. The non-controlling interests mainly consists of the minority shareholder’s proportion of the share capital and reserves of KPSB. Signifi cant EventOn 10 September 2012, the Company entered into a Shareholder Agreement with Sabah Energy Corporation Sdn Bhd for the purpose of undertaking the construction and development of the LNG Regasifi cation Facilities in Lahad Datu, Sabah (Facilities). RGTLD will be responsible for the overall coordination and strategic management of the project from the development stage and will also own, operate and maintain the Facilities with an expected capacity of 0.76 million tonnes per annum.

Liabilities RM million

FY2012 FY2011

444.7

1,004.0

122.3

950.8

2,102.4

458.3

146.5

1,053.0

Payables TaxationBorrowings Deferred tax Non-controlling interestsShare capital Reserves


Financial Review

12 months ended31.12.2012(mmscfd)

12 months ended31.12.2011(mmscfd)

Increase/(Decrease)Gas Processed (mmscfd) %

Feedgas processed at the gas processing plants

1,971 1,915 56 2.9

Sales gas delivery from JDA 409 355 54 15.3

Total gas injected into the system 2,380 2,270 110 4.9

Total sales gas delivery to customers

2,132 1,976 156 7.9

12 months ended31.12.2012

(MT)


(MT)Increase/(Decrease)

Liquid by-products (MT) %

Ethane production 1,185,222 1,282,652 (97,430) (7.6)

Propane production 1,124,454 1,342,329 (217,875) (16.2)

Butane production 745,281 890,482 (145,201) (16.3)

Utilities12 months ended

31.12.201212 months ended

31.12.2011Increase/(Decrease)

Volume %

Electricity (kwh) 1,965,491,245 1,880,053,728 85,437,516 4.5

Steam (MT) 4,414,512 4,411,926 2,586 0.1

Industrial Gases (Nm3) 639,260,832 615,212,510 24,048,323 3.9

Group Financial Performance RM million

Revenue Cost of Revenue Profit Before Tax Profit After Tax

12 months ended 31.12.2012 12 months ended 31.12.2011

3,576.8 3,656.3

1,806.8 1,906.5 1,844.5 1,783.81,397.1 1,347.4

OPERATIONAL HIGHLIGHTS

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER


* To be approved at the Company’s Thirtieth Annual General Meeting on 16 May 2013.

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER

Group12 months ended

31.12.2012 RM million

12 months ended 31.12.2011

RM million RM million %

Gas processing revenue 1,511.2 1,717.9 (206.7) (12.0)

- Throughput services 1,242.0 1,242.0 – –

- Performance based structure income 269.2 475.9 (206.7) (43.4)

Gas transportation revenue 1,119.4 1,078.3 41.1 3.8

Sale of industrial utilities 946.2 860.1 86.1 10.0

Revenue 3,576.8 3,656.3 (79.5) (2.2)

Cost of gas processing (742.5) (787.7) 45.2 5.7

Cost of gas transportation (280.1) (404.2) 124.1 30.7

Cost of industrial utilities (784.2) (714.6) (69.6) (9.7)

Cost of revenue (1,806.8) (1,906.5) 99.7 5.2

Gross profi t 1,770.0 1,749.8 20.2 1.2

Other income and administrative expenses

70.9 7.8 63.1 809.0

Operating Profi t 1,840.9 1,757.6 83.3 4.7

Financing costs (20.3) (20.9) 0.6 2.9

Share of profi t after tax of accounted associate and jointly controlled entity

23.9 47.1 (23.2) (49.3)

Profi t before tax 1,844.5 1,783.8 60.7 3.4

Tax expense (447.4) (436.4) (11.0) (2.5)

Profi t after tax 1,397.1 1,347.4 49.7 3.7

Basic earnings per ordinary share (sen) 71.0 68.1 2.9 4.3

Profi t before tax/ Revenue margin 51.6% 48.8%

Profi t after tax/ Revenue margin 39.1% 36.9%

Net Dividends Per Share sen



31.3.201131.3.201031.3.2009

15.015.015.011.3

35.0*25.0

15.0

35.035.0

Interim Dividend Final Dividend

12 months ended

33.7

Variance


Statement of Value Added

Group

12 months ended

31.12.2012RM mil

12 months ended

31.12.2011RM mil

Revenue 3,576.8 3,656.3

Purchase of goods and services (872.0) (788.1)

Value added 2,704.8 2,868.2

Other Income and Expenses 223.0 150.1

Financing costs (20.3) (20.8)

Share of profi t after tax of equity accounted associate and jointly controlled entity

23.9 47.1

Value added available for distribution 2,931.4 3,044.6

DISTRIBUTION

To employees – Employment costs 393.4 398.1

To government – Taxation 447.4 436.4

To shareholders – Dividends 791.5 989.4

– Non-controlling Interest (8.1) (0.3)

Retained for reinvestment and future growth

Depreciation and amortisation 693.5 862.7

Retained profi t 613.7 358.3

2,931.4 3,044.6

To employees To governmentTo shareholders Retained for reinvestmentand future growth

31.12.201131.12.2012

Group40%

33%13%

14%

45%

27%

13%

15%


Performance of Shares

Financial Calendar

For the Year Ended 31 Dec

For the Year Ended 31 Dec Jan - Feb

2011 2012 2013

Highest price 15.64 20.50 19.90

Lowest price 11.10 14.70 17.28

Composite Index Closing Price Volume

RESULTS

First Quarter ended 31 March 2012 Announced On 9 May 2012

Second Quarter ended 30 June 2012 Announced On 15 August 2012

Third Quarter ended 30 September 2012 Announced On 23 November 2012

Fourth Quarter ended 31 December 2012 Announced On 21 February 2013

DIVIDENDS

Interim Entitlement Date 4 September 2012

Paid On 20 September 2012

Final Entitlement Date 29 May 2013

Payable On 19 June 2013

NOTICE OF ANNUAL GENERAL MEETING 15 April 2013

THIRTIETH ANNUAL GENERAL MEETING 16 May 2013

FINANCIAL YEAR FROM 1 JANUARY 2012 TO 31 DECEMBER 2012

05,000

10,00015,00020,00025,00030,00035,00040,00045,00050,00055,00060,00065,00070,00075,00080,00085,000

Shares Closing Price (sen)/Composite Index

Volume

100

300

500

700

900

1,100

1,300

1,500

1,700

1,900

2,100

FebJan2013

DecNovOctSepAugJulJunMayAprMarFebJan2012



PETRONAS Gas Berhad’s tremendous growth trajectory in the last few years would not have been possible without the support of our dedicated and resilient staff. Our people are deeply involved in every aspect of our business value chain and are instrumental in pushing the boundaries of our performance.

In order to support our leading edge in talent management, we continue to place an emphasis in developing the leadership ability, mindset and capability of our people through various programmes which enhances their soft skills, encouraging them to tap their inner source of strength to deliver stronger performance.

At the same time, we have put in place specifi c initiatives that will allow our people to develop multi-faceted capability in both business and technical-based skill areas. Through this effort, we hope to develop a pipeline of future leaders who are equally competent and at ease in the realm of plant-based technical work, as well as the commercial aspect of managing a business.

Supporting Progress

PGB Staff Population3,366 and counting, spread over operations in Peninsular Malaysia, Sabah and Sarawak


PETRONAS Gas Berhad’s decision to embrace new business ventures naturally led us to staking a foothold in the power business, a natural extension of our proven capability in the industrial utilities business.

The development of the Kimanis Power Plant (KPP) symbolises our commitment to test the limits of our ability in project development, as well as to grow our presence beyond our traditional geographical stronghold in Peninsular Malaysia.

Situated in Kimanis Bay, Papar, Sabah, the KPP is being developed by Kimanis Power Sdn Bhd, a joint venture company between PETRONAS Gas Berhad (PGB) and NRG Consortium (Sabah) Sdn Bhd, the energy arm of Yayasan Sabah.

The 300MW gas-fi red power plant is part of the larger Economic Transformation Programme initiatives introduced to spur economic growth throughout Malaysia.

The power plant will receive natural gas produced from offshore Sabah via Sabah Oil and Gas Terminal. On track for completion in late 2013, the electricity generated will be transmitted into the existing Sabah State Grid under a 21-year Power Purchase Agreement signed on February 2012 with Sabah Electric Sdn Bhd.

While progressing forward, PGB will continue to add value to Malaysia’s gas resources, ushering a new era of growth for the people Sabah.

Powering Progress

Kimanis Power PlantFirst 100MW to be produced by 2013




As a business entity, PETRONAS Gas Berhad (PGB) is always thinking differently on how to achieve real, sustainable and long-term growth whilst introducing innovative ideas to unlock endless possibilities for our business growth. With our reliable operations and competent workforce, PGB has progressively raised its profi le as one of Malaysia’s premier infrastructure and utilities companies.

In its three decades of growth, PGB has experienced numerous challenges that could have impacted our business trajectory. However, at each juncture, our progressive mindset and determination to succeed has always allowed us to emerge wiser and stronger and determined to take on even bigger challenges as we move ahead.

Our ability to create value has been widely recognised, ensuring that we continue to attract the attention of those who scour the market for stable returns and reliable performance over time.

ProgressiveMindset

TOP 10 PGB’s progressive growth over the years has elevated it into one of 10 biggest companies listed on Bursa Malaysia in terms of market capitalisation.


PGB in the NewsSabah Energy to take stake in PetGas regasifi cation projectThe Star Online, 10 September 2012

Regasifi cation facility fi rst of its kind in MalaysiaNew Straits Times, 5 June 2012

Terminal Regasifi kasi terapung catat sejarah baru industri minyakBerita Harian, 4 June 2012

PetGas LNGregasifi cation terminal draws interestStarBiz, The Star, 1 June 2012

Fired up on power plants’ potentialNew Straits Times, 4 June 2012

PETRONAS Gas to spend RM1 billion on SabahThe Sun, 16 May 2012

Re-gasifi cation terminal marks state as an oil and gas hubThe Star Online,7 June 2012

Loji LNG Sungai Udang lonjak pendapatanBerita Harian, 16 May 2012

PetGas sasar peningkatan perolehanUtusan Malaysia, 16 May 2012

TERMINAL LNG DAPAT SAMBUTANEkonomi, Berita Harian, 1 June 2012


Awards and AchievementsMSOSHThe annual Malaysian Society for Occupational Safety and Health (MSOSH) awards recognises companies in Malaysia that demonstrated outstanding occupational safety and health performance.

Grand Award

• MSOSH Grand Award Winner 2011 for Plant Operations Division (POD)

Gold Merit

• MSOSH OSH Gold Merit Award Winner 2011 for Segamat Operation Center (SOC), Transmission Operations Division (TOD)

• MSOSH OSH Gold Merit Award Winner 2011 for Centralised Utility Facilities, Kertih (CUFK)

Gold Class 1

• MSOSH OSH Gold Class 1 Award Winner 2011 for Kuantan Regional Offi ce, Shah Alam Regional Offi ce and Seremban Regional Offi ce, TOD

• MSOSH OSH Gold Class 1 Award Winner 2011 for Centralised Utility Facilities, Gebeng (CUFG)

• MSOSH OSH Gold Class 1 Award Winner 2011 for Technical and Facilities Development Division (TFDD)

OSHThe award is an initiative of the National Council for Occupational Safety and Health (NCOSH) under the Ministry of Human Resources to give recognition to employers and employees in various sectors in the industry that achieved excellence in managing safety and health systems in their organisations.

• OSH National Award Winner for Gurun Regional Offi ce

NACRAThe National Annual Corporate Reports Award (NACRA) is jointly organised by Bursa Malaysia Berhad, Malaysia Institute of Accountants (MIA), and the Malaysia Institute of Certifi ed Public Accountants (MICPA) to promote excellence in corporate reporting, greater transparency and accountability by respective parties in their fi nancial reporting and to acknowledge and recognise high quality corporate reporting.

• Industry Excellence Awards Winner under the Industrial Products and Technology category in National Annual Corporate Reward Awards (NACRA 2012) for Annual Report Ending 31 December 2011

ICCThe innovative and Creative Circle (ICC) Convention is organised by the Malaysia Producitivity Corporation (MPC) to promote ICC activities as well as a culture of excellence at the work place and also provide an opportunity to share ICC best practices as well as to benchmark among the best ICC projects.

• Gold Medal Three Stars for CUF Team (Fusion Ready Eco-Energy) at the NationaI ICC Convention

IKM Excellence AwardThe Institut Kimia Malaysia Laboratory Excellence Awards was introduced by the Institute to ensure the laboratory’s commitment to achieve excellence in providing quality and competent testing services pertaining to local legislation, especially in the fi elds of health, safety and the enviroment.

• IKM Laboratory Excellence Award for POD

CERTIFICATIONSCertifi cations allow PGB to benchmark its systems, operations and procedures against internationally recognised benchmarks and ensure that the key elements are kept up to date to guarantee optimal standards of operations.

• SIRIM Recertifi cation of OHSAS 18001:2007, MS1722: Part 1:2005 Occupational Health and Safety Management System and MS ISO 14001:2004 Environmental Management System for TOD, POD and CUF

• Recertifi cation of MS ISO 9001:2008 Quality Management System for PGB

• Surveillance Audit on MS ISO 14001:2004 Environmental Management System for POD and TFDD

• Certifi cation of Quality Improvement Practices (5S) from the Malaysia Productivity Corporation (MPC) for Export Terminal (ET), POD


Embracing Possibilities


Total 45 Visits to PGB Plants and Operations entertained in FY2012

32% savings Recovery effort from schedule waste management

> 1,000 studentsAdopted under Program Bakti Pendidikan PETRONAS since 2006

CR in the Marketplace 72

CR in the Workplace 78

CR in the Environment 82

CR in the Community 84

Calender of Events 86

Corporate Responsibility

An oft-beaten path may branch out leading to the road not taken. Who knows what new possibilities can be found in the end. At PGB, we constantly think of ways to enhance our Corporate Responsibility initiatives to maximise the possibilities of success, as well as leave a lasting positive impact on our multifaceted stakeholders.


GOING BEYOND BUSINESS AS USUAL

At PETRONAS Gas Berhad (PGB), we continue to do our business responsibly while charting our growth progress. We are committed in continuing to add value to the nation, the gas and utilities industry and the communities in which we operate as well as to our shareholders and stakeholders.

We subscribe to the belief of upholding high standards of accountability, transparency, fairness and integrity in the way we conduct ourselves to ensure a sustainable and profi table business model. Being a responsible corporate citizen and maintaining strong ethical values are entrenched in our corporate culture.

CorporateResponsibilitySharing the Fruits of Progress

At PETRONAS Gas Berhad (PGB), we view our Corporate Responsibility (CR) initiatives as part and parcel of the way we do business. At every step of the way, we invest in people development and capacity building efforts that will leave a lasting impact on our stakeholders. We recognise the fact that our determination to embrace progress will be meaningless if the benefi ts are not shared equitably with our stakeholders.

As a responsible corporate citizen who pursues sustainable growth, we are continuously fi nding ways to sustain our momentum in everything that we do,

including the development and rollout of our CR initiatives. Our involvement in CR includes activities and interactions with communities, authorities, regulators, non-governmental organisations, shareholders and our workforce.

People and socio-economic developments remain the core of our CR framework, with education being our main focus in most activities conducted under the Company’s CR banner.

Our CR initiatives are designed to enrich our stakeholders with new skills and build capability, allowing them to set clear and

direct goals that will enrich their lives and encourage them to become better individuals.

The crown jewel of our CR effort is Program Bakti Pendidikan PETRONAS (PBPP), which embodies our long-term engagement through education. Through the programme, our employees progressively and proactively contributed to a structured motivation and tuition programme involving primary school students, thus imbuing them with skills which are benefi cial for their future. PBPP will continue to be the fl ag-bearer of PGB’s CR portfolio for years to come.

CR in the Marketplace


Another stream of our CR effort involves positioning and providing capable talents in supporting business growth, while enriching these individuals with continuous learning, upskilling and training. Our workforce is constantly being redefi ned, reimagined and reshaped with the necessary knowledge and proper competency tools that will allow us to face any challenges at hand.

Aligning this with PGB’s aspiration of embracing progress through business growth, staff-driven innovation is widely encouraged at PGB, in addition to sustaining our high level of operational excellence.

Another critical area which is covered by our CR initiatives is the Health, Safety and Environment (HSE) elements which are critical towards sustaining our operability and the overall wellbeing of our workforce. As a common Key Performance Indicator (KPI) throughout PGB, our inculcation of a strong safety-based culture is part and parcel of the way we approach all aspects of our operations.

Last but not least, to our shareholders, we are committed to creating value for your investment by putting in place sound and practical business strategies, under the guidance from the Board of Directors,

and execution by PGB’s management, supported by rigorous corporate governance practices at all levels.

At PGB, we continue to reach out to our stakeholders so that we are able to share the hard won fruits of progress together.

(left)The strength of our business is built upon the progressive mindset of our people.

(right)Our willingness to innovate has allowed us to learn, unlearn and relearn, in order to improve the quality of our delivery.


CR in the Marketplace

COMMITTED TO BEING A GOOD CORPORATE CITIZEN

In the marketplace, good corporate governance and superior offering of products and services are vital in being a responsible corporate citizen.

Corporate Governance

PGB, under the auspices of PETRONAS, continues its journey in embracing the fi nancial control framework across the Group, following its formal establishment in the FY2010/11. The objective is to provide reasonable assurance on the accuracy and reliability of the Company’s fi nancial statements. PGB embarked on this initiative in its quest to uphold good governance across the Company.

Our corporate governance in the area of corporate reporting had been accredited with the Industry Excellence Awards for exemplary performance in the Industrial Products & Technology industry by the National Annual Corporate Report Awards 2011 for the third time in a row.

Services and Products

Our Vision, Mission and Shared Values are refl ected in the quality of our products and services. Our processing, transmission and utility facilities are operating reliably while some are operating at par with world class standards.

During the year, reliability for sales gas, ethane, propane and butane for our gas processing plants are at 99.9%, 90.1%, 91.7% and 91.7% respectively. Our Peninsular Malaysia gas transmission pipelines continues to maintain world class systems reliability at 99.99% whilst reliability for our electricity, steam and industrial gases are at 99.5%, 94.9% and 95.5% respectively.

DEDICATED IN HELPING THE NATION

Gas is a depleting natural resource. Nevertheless, gas contributes to approximately half of the Malaysian power generation mix, indicating the nation’s high dependency on gas supply. It is important to the nation that PGB maintains high

operational performance standards for its plants and pipeline network to ensure seamless processing and delivery of gas and utilities to customers. The ongoing Plant Rejuvenation and Revamp (PRR) project to extend the useful life of our Gas Processing Plant (GPP) 2, 3 and 4 by another 20 years, is a testament to our long term commitment to provide a sustainable gas supply to the nation.

On top of striving to ensure uninterrupted gas supply to the nation, PGB has unceasingly made every effort to meet rising gas demand as it is committed to Malaysia’s long-term economic development. Even in the face of necessary but painful challenges, PGB continues to persevere in ensuring the development of liquefi ed natural gas (LNG) Regasifi cation Terminal (RGT) in Melaka and the implementation of Third Party Access (TPA). These will enable Malaysia to import additional gas supplies from abroad to fulfi ll future growth demand and ensure security of gas supply for the nation.

Our people work day and night to ensure the reliability of our plants.


CONTINUOUSLY ENHANCING KNOWLEDGE OF THE GAS INDUSTRY AND OUR COMMUNITY

PGB embraces the advancement in technology for the betterment of the gas industry. In relation to that, we continue to encourage the advancement of knowledge in the area of gas technology, with the objective of promoting safe practices, stimulating development of the gas industry in Malaysia and enhancing the understanding of general public on the role of gas as a clean and effi cient energy resource of choice for the nation.

Imparting knowledge and engaging with our peers, government agencies, academia and the public are essential to enhance our stakeholders’ awareness of our business. Our commitment to this cause is evidenced as follows:

1. Participation in international and domestic conferences, forums or seminars:• 25th World Gas Conference;

4 - 8 June 2012

• Paper presentation at National Energy Security Conference, Suruhanjaya Tenaga;28 February 2012

• 4th National Energy Forum, Malaysia Gas Association;27 September 2012

2. Engagements with international and domestic corporations through delegation visits to our GPPs, Centralised Utility Facilities (CUF) and Segamat Operation Centre (SOC):• Porsche Team;

25 March 2012• Tenaga Nasional Berhad;

19 April 2012• GEVO Ltd.;

24 May 2012• Kuraray Co. Ltd.;

30 May 2012• P.T Transportasi Gas Indonesia;

18 June 2012 and 19 September 2012

• Brunei LNG Sdn Bhd;28 June 2012

• Virdia;3 July 2012

• Genomatica Inc;24 July 2012

• Mitsubishi;24 July 2012

• Iraq Plant;24 September 2012

• Talisman Malaysia Ltd.;4 October 2012

• Konebada Petroleum Park Authority, Papua New Guinea;17 - 18 October 2012

• Minister of Municipalities and Public Works of Iraq;5 November 2012

• Trans Thai-Malaysia Sdn Bhd;27 November 2012

The development of new projects allows us to gain new experiences, knowledge and insights.


3. Engagements with Government agencies, local authorities and communities through delegation visits to our GPPs, CUF, Transmission Operation Divisions (TOD) Regional Offi ces and RGT:• Department of Occupational Safety

and Health;17 January 2012

• Jabatan Kerja Raya Negeri Perak;19 January 2012

• Jabatan Kastam Diraja Malaysia Negeri Kedah;12 February 2012

• KDYMM Sultan & Sultanah Terengganu, YAB Menteri Besar Terengganu and Ahli-ahli Majlis Tertinggi Terengganu;15 March 2012

• Persatuan Ibu Bapa dan Guru (PIBG) Sekolah Rendah Kebangsaan Tengah Kuala Kemaman;20 March 2012

• Malaysian Industrial Development Finance Berhad;21 March 2012

• Palm Oil Industrial Cluster (POIC), Sabah;28 March 2012

• Terengganu State Executive Council;9 April 2012

• Department of Environment;29 April 2012

• Minister of Human Resource;15 May 2012

• Malaysian Investment Development Authority;30 May 2012

• East Coast Economic Region;30 May 2012

• Chief Minister of Melaka;4 June 2012

• Institut Penyelidikan Piawaian dan Perindustrian Malaysia (SIRIM);6 June 2012

• TIM Naziran (Majlis Keselamatan Negara);17 July 2012

• Tentera Udara DiRaja Malaysia;23 October 2012

• Majlis Perbandaran Dungun, Terengganu;17 December 2012

4. Engagements with universities through visits by students to our GPPs, CUF and SOC :• Queen’s University Belfast, Northern

Ireland;13 February 2012

• Universiti Tun Hussein Onn Malaysia;13 February 2012

• Universiti Institut Teknologi MARA;28 February 2012 and 13 May 2012

Our multifaceted CR initiatives not only allow

us to forge a much closer relationship with

our stakeholders, but also plant the

seeds of future growth and sustainability.


• Universiti Malaya;2 April 2012

• Pahang Skills Development Centre;5 September 2012

• Politeknik Sultan Mizan;5 November 2012

• Institut Kemahiran MARA;6 November 2012

• Universiti Institut Teknologi MARA;12 November 2012

• Politeknik Ungku Omar;20 November 2012

5. Engagements with fi nancial institutions and audit fi rms through familiarisation visits to our GPPs and CUF:• Delfort Group;

2 March 2012 and 31 July 2012• KPMG Desa Megat & Co.;

3 December 2012

6. Engagement with media and press through familiarisation visit to our RGT:• Bernama, New Straits Times, Berita

Harian, The Star, Utusan Malaysia and Jabatan Penyiaran Melaka; 20 May 2012

HAVING OUR SHAREHOLDERS’ INTEREST AT HEART

The Company has been renowned for its strong and consistent returns. Over the year under review, our share price appreciated by 28% and ended the year on high note of RM19.52 per share. Likewise, the KLCI Composite Index increased by 10.3% over the same year. Our ability to set a new record high and correspond to the KLCI Composite Index is a testimony of continuous investor confi dence in our fi nancial strength, operational performance and growth progress.

At the Company’s 29th Annual General Meeting held on 15 May 2012, there was a healthy and constructive engagement session between the Chairman and the shareholders of the Company in which many shareholders’ queries, concerns and suggestions were brought up and addressed by the Board of Directors in an open and transparent manner.

PGB strongly believes in providing our shareholders with a strong understanding of how we conduct our business. By giving them opportunities to get direct access to our operations, the shareholders are able to understand the operations and how we approach our business. In 2012, the Company arranged two shareholders visitation programmes on 4 July 2012 and 25 September 2012 to the Company’s GPP in Terengganu and CUF Gebeng in Pahang.

Our Annual General Meetings provide a platform for our shareholders to interact with the key movers of our business in an open and conducive atmosphere.

s in an


PROVIDING A PIPELINE OF TALENTS TO SUPPORT GROWTH

Human Resource (HR) has become more complex with today’s increasing global and multi-generation workforce. With a dynamic and challenging business landscape for the year under review, the need for HR to proactively plan to ensure the availability of the required and capable talent has become a vital step in initiating a business planning cycle.

PGB realises that we need to understand our talent requirements that are necessary to execute our business strategies. High performance can be achieved and sustained by building the right set of competencies in the workforce and by aligning and deploying the most effective methods to particular job functions.

The Technical Criticality Assessment and Skill Criticality Assessment were conducted as a synergised effort between HR and the subject matter experts as well as Head of Divisions to review and determine the required number of Technical Professionals (TPs) and Technical Trade Specialists (TTS). Following this assessment, the Company has fi lled up 84% of the required TPs and TTS.

CR in the Workplace

ALIGNING THE ORGANISATION’S STRUCTURE WITH BUSINESS’ STRATEGIES

As a dynamic corporation, PGB continues to fi nd ways to optimise its structure and functionality in order to meet increasingly complex business challenges head on. For the year under review, PGB focused on restructuring and realigning certain divisions such as our Finance and Human Resource to ensure that the Company houses only the optimum and effective organisational functions. This restructuring and realignments in the Company resulted from the refocusing of certain functions and to ensure better integration in various business processes. Through this effort, PGB can further deliver outstanding services, improve performance as well as support new growth initiatives.

ACHIEVING A HIGHLY SKILLED AND DYNAMIC WORKFORCE THROUGH INTEGRATED SUCCESSION PLANNING AND MOBILITY

In the quest of addressing the recruitment and retention of talents, PGB has made concerted efforts to strengthen succession planning, internal progression and mobility as well as talent sourcing.

The Succession Planning is aimed to develop wholesome successors, in both leadership skills and functional capabilities. In 2012, PGB had successfully planned the succession of all technical managerial positions and the succession is expected to take place eventually within two to fi ve years.

At PGB, we believe that internal progression and mobility will help us build a highly-skilled and dynamic workforce. In 2012, we accomplished a mobility rate of 30% through the movement of staff within PGB and across PETRONAS Group.

We place great emphasis on the

career development of our technical

staff throughout our operations.


The business leaders of tomorrow are given ample opportunities to develop their skills in PGB.

This, together with Succession Planning, become a powerful tool for PGB to move forward in business by having a steady and ready pool of multi-talented human capital.

RAPID AND EFFECTIVE RECRUITMENT IN FACING THE GLOBAL TALENT WAR

PGB realises that the process of recruiting talents requires us to understand and source talent more strategically, based on clear defi nitions of skill gaps and needs for the future. As the battle for talent intensifi es in the oil and gas industry, PGB has taken the necessary steps to acquire only the best of talents. With the rollout of a new recruitment system for PETRONAS recruiters, the e-Recruitment, the traditional talent sourcing process has become more rapid and aggressive.

The Company had also reached out and participated in four national-level career exhibitions. These were important platforms for the Company to promote its numerous job opportunities and at the same time gain access to a diverse pool of eligible and bright talents.

DEVELOPING LEADERS FOR TOMORROW

In today’s uncertain business climate and fast changing economy, it is more important than ever to fi nd the competitive edge that will allow our organisation to get ahead of the competition. Thus, we are continuously looking into exclusive training programmes and development strategies to ensure we adopt the best practices for the Company in meeting the essential phase of people development. A number of leadership programmes have been developed and enhanced to support this effort:

• Building Leaders Programme

We have established Building Leaders Programme (BLP) as a structured leadership programme with the intention to groom and mold high performing staff in preparing them to become future PGB and PETRONAS leaders. Since its inception in 2005, 197 staff have been enrolled into the programme and 93 or 47% of the participants have been promoted to higher positions within the Group.

• Competency Development Programme for NENT and Secretaries

The programme was developed for Non Executives and Secretaries to help them close their competency gaps and enhance their supervisory skill. Common gaps were identifi ed and development plans were proposed.

• Special Al-Falah (Back to Basic)

This new programme which was introduced during the year focused on reemphasising core values such as being responsible and accountable to perform as a leader based on Islamic values and subsequently practice the values in coaching subordinates at senior management level.

• Facilitation Skills for E4 and above - Fast Forward 31:13

This experiential learning programme was introduced to help leaders improve their presentation skills by empowering three key elements of presentations excellence-clarity, credibility and confi dence.

The business leaders of tomorrow are given ample opportunities to develop their skills in PGB.


CR in the Workplace

• Leadership Programme for 1st Successor for CUF – Peer Assist Leadership (PAL@CUF)

The programme was created with the intention to leverage on peer to peer relationship. The benefi ts include collaboration among peers, building a shared knowledge base, developing peers to give and receive ideas which will accelerate leadership development.

BENCHMARKING – THE CRITICAL MEASUREMENT OF SUCCESS

In an effort to continuously improve our practice and ensure we are at par with the top players in the industry, a benchmarking exercise was carried out together with ExxonMobil, Malayan Banking Berhad, Bank Negara Malaysia and Schlumberger. Representatives from PGB Management together with the HRM heads from these leading companies compared notes on the Leadership Development and Talent Management Strategy and Philosophy. One of the key takeaways identifi ed from

this benchmarking exercise is for PGB to upskill line managers’ knowledge and skills towards increasing line ownership in managing our talents.

ENHANCING HUMAN TALENT AND SKILL IS CRUCIAL

Human talent is the combination of the right capability and will of people to achieve the organisation’s and nation’s goals. With Accelerated Capability Development Assessment for Technical Executives (ACD) introduced since 2009, various intervention and capability efforts have been enforced to ensure that our staff acquired the highest level of Technology Know-How (TKH).

The establishment of the Annual TKH Target last year enabled the Company to plan and implement various measures to ensure that the TKH’s target is met. This year, the Company had made tremendous achievement by having minimal gaps left to achieve the TKH target. TKH is

measured based on individual staff’s ACD results and TKH performance, cascaded up to the Company’s TKH performance.

PACD DRIVES TECHNICAL CAPABILITY ENHANCEMENT AND DEVELOPMENT

PGB Accelerated Capability Development Committee (PACD) was established in FY2011 to identify, formulate and initiate the master plan and strategies for technical staff capability development to support business needs and growth. With quarterly PACD sittings, the committee which comprises of the Company’s Skill Group Resource Persons (SKG RPs) and selected Head of Divisions, convene to discuss capability development strategies and planning of capability intervention plans. This year, a number of major capability strengthening initiatives had been identifi ed and conducted.

A number of capability development initiatives were rolled out during

the year to accelerate the development of our staff.


One of the initiatives that was conducted was PGB’s Career Path for Technical Executives. The Career Path had been established as a main tool to chart the Technical Executives’ career path, either laterally or through progression. The establishment of the Technical Skill Group career path was the result of in depth discussions and challenge sessions amongst the Company’s SKG RPs and subject matter experts. The career path was deliberately used as a key tool in our Succession Planning for the managerial positions.

EMPLOYEE ENGAGEMENT – A KEY FOR SUCCESS

Employee engagement continues to be an important element to the success of this organisation, whereby it provides an emotional connection between employees and their organisation. This leads to improved performance, productivity, employee retention, customer service and loyalty.

PGB understands that employees need to receive relevant, timely and personalised communication from the organisation on their vision and goals. Any changes, such as new people, systems and processes were communicated clearly and two-way communication between employee and management is encouraged. Quarterly Communication Session on the Company’s performance were conducted across the divisions and communicated by the Company’s Management Committee. At the various divisions, other communication sessions were also conducted such as “Mimbar Mahabbah” in CUF, “Jom Sembang” in TOD and POD Leaders Engagement Session in POD. Monthly tazkirah sessions were also conducted for employees to refl ect on their actions, thoughts and to share values and lesson learnt.

In addition, PGB HR community also organised Customer Appreciation Day across the four divisions in PGB to provide a platform for HR to engage and

connect with the employees. Service providers such as Employees Provident Fund, Lembaga Hasil Dalam Negeri, ING Insurance Berhad and Ambank Group were present at the one stop centre to address any concerns or issues from the employees. For non-executives, quarterly engagement sessions were conducted with Kesatuan Kakitangan Petroliam Nasional Berhad (KAPENAS) to discuss on their welfare and development.

Our extensive employee engagement activities allow us forge a closer bond between our management and staff.


CR in the Environment

SUSTAINING EXCELLENCE IN A CHALLENGING OPERATING ENVIRONMENT

Health, Safety and Environment (HSE) is a no-compromise element which dictates the working manner in PGB’s business and operations. During the year under review, as a growing Company, we were faced with many challenges which were part and parcel of our efforts in expanding the footprint of our operations.

2012 HSE PERFORMANCE

For the year under review despite our aspiration to raise our focus on safety, we regret to inform that our projects experienced some incidents that impacted our HSE performance. We recorded Lost Time Injury Frequency (LTIF), Total Reportable Case Frequency (TRCF) and Fatal Accident Rate (FAR) rating of 0.19, 1.3 and 4.67 respectively. Regardless of all the challenges faced by PGB, we are working hard to ensure that HSE standards and practices everywhere we do business is fully complied.

PGB is also working closely with all safety regulatory bodies to ensure that necessary steps is taken to provide a better safety measure to prevent any incidents from recurring in the future.

HSE MANAGEMENT SYSTEM INITIATIVES

In 2012, PETRONAS Group HSE Division rolled out the HSE Mandatory Control Framework (MCF). This framework was designed based on the experience acquired during PETRONAS’ involvement in the design, construction, operation and maintenance of processing units and facilities as well as national and international standards and codes of practice. Upon adoption of this framework, PGB has carried out review and assessment of our existing HSE Management System (HSEMS) and currently on track in closing all identifi ed gaps.

During the year, PGB initiated Incident Analysis which evaluated three years of incident data with an aim to identify the common causes of incidents and appropriate action plans. One of the

key deliverables of this initiative is the enhancement of incident management procedure which leads to a more streamlined approach to incident reporting and investigation, with the roles and responsibilities of each party clearly stated.

The initiative is further supported by other programmes such as:

1) Tripod Beta Training - Tripod Beta is an investigation analysis tool to help investigators analyse the root cause of an incident. The training was aimed towards increasing the user’s understanding of this tool resulting in better output from the investigation and addressing the correct root causes.

2) PETRONAS iHSE System - iHSE is an online platform to manage and share HSE information across PETRONAS, managed by Group HSE Division. For PGB, during the year, the system was used for Performance Reporting as well as to track the status of incident investigations and action items.

We have enhanced our incident management procedures to ensure

better management of incident reporting and

investigation.


3) Electronic Permit to Work (ePTW) The ePTW was rolled out to CUF Gebeng as an initiative to move from the normal paper-based to an online system. The main aim is to increase effi ciency and compliance, as well as improve record keeping. The implementation to other operating divisions will be rolled out progressively.

4G – ENVIRONMENT INITIATIVES

PGB’s 4G Programme (Green Care, Green Mind, Green Ownership and Green Growth) is still going strong. For the year under review, the focus was on waste minimisation. In 2012, PGB managed to reduce its scheduled waste handling cost by 32% as compared to the previous year, which translates into a saving of RM2.8 million. Our waste minimisation efforts not only meant that less waste is being disposed, it also translates to fi nancial savings for our Company, as costly waste disposal fees can be avoided.

During the year, PGB was also invited to share our 4G experience and success stories during the PETRONAS’ Environmental Community of Practice which was a testament to the strength of the programme.

PGB staff also contributed to the preservation of the environment by organising two mangrove conservation campaigns where mangrove seedlings were planted at the identifi ed areas. The campaigns were held at Kg. Mercang, Marang on 14 July 2012 and also at Kuala Selangor National Park on 15 December 2012.

HEALTH INITIATIVES

At PGB, maintaining the personal health and wellbeing of our staff is critical to ensure optimum manning and effi cient operation as our business operates around the clock. In 2012, PGB enhanced the coverage of Mass Health Screening Programme for all PGB permanent staff. The analysis of the results will be used to craft health-related programmes for 2013. PGB also embarked on the Fitness to Work (FTW) initiative with the given focus in 2012 being on our Emergency Response Team (ERT) members. We acknowledge the importance for ERT members, who are often the fi rst responders during emergencies, to be physically fi t and able to carry out their duties. Under this programme, all ERT members were required to undergo and pass a fi tness assessment test.

CERTIFICATIONS AND AWARDS - COMMITMENT SAYS IT ALL

During the year under review, PGB Head Offi ce (HO), Centralised Utility Facilities (CUF) and Transmission Operations Division (TOD) successfully underwent the recertifi cation process for Environmental Management System (MS ISO 14001:2004), Occupational Health and Safety Management System (OHSAS 18001:2007) and MS 1722:2005 in ensuring that our management system is up to date and is continually improving.

As for awards, PGB continued to show strong performance in HSE with a total of eight Malaysian Society for Occupational Safety and Health (MSOSH) Awards won for the year 2011:

• POD won Grand Award • TOD won one Gold Merit and three

Gold Class 1 Award• CUF won Gold Merit Award and Gold

Class 1 Award• Technical and Facilities Development

Division (TFDD) won Gold Class 1 Award

PGB’s TOD also won the Occupational Safety and Health (OSH) National Award from the National Council for Occupational Safety and Health (NCOSH).

We introduced waste minimisation efforts which produced savings for the Company.


CR in the Community

SHARING PROGRESS WITH FUTURE GENERATIONS

The Company continues to innovate and implement a broad range of CSR programmes and initiatives in localities where it operates. Among these initiatives are the fl agship Program Bakti Pendidikan PETRONAS (PBPP), interaction and engagement activities with local authorities, public awareness programmes as well as other social responsibility programmes aimed at enriching and empowering the livelihood of its stakeholders, in tandem with the PETRONAS Group of Companies’ CSR aspiration.

PROGRAM BAKTI PENDIDIKAN PETRONAS (PBPP): CULTIVATING EXCELLENCE IN SOCIETY

PGB continued maintaining four schools under the PBPP during the year under review, namely Sekolah Kebangsaan Santong in Paka, Terengganu; Sekolah Kebangsaan Batu Anam in Segamat, Johor; Sekolah Kebangsaan Pinang Tunggal in Kepala Batas, Pulau Pinang; and Sekolah Kebangsaan Sungai Baging in Kuantan, Pahang. The programme was initiated in 2002 by PETRONAS. With support and involvement by the Company since 2006, more than 1,000 students have benefi ted from this programme.

PBPP is a structured and integrated long-term education programme focusing on marginally performing school children or better known as HaLus or Harapan Lulus (Potential to Pass) according to the Ministry of Education. The programme is designed to enhance teaching methods and approach in order to improve academic achievements specifi cally in Mathematics, English and Sciences for standard four, fi ve and six pupils.

PBPP emphasises on soft skills development through specially crafted and scheduled Fun Learning sessions conducted by PGB staff who volunteered their time and energy on a monthly basis with these future leaders. Students under the PBPP selected schools will undergo two key elements:

• Academic sessions conducted by their school teachers twice weekly in the form of extra tuition fi nanced by PGB; and

• Fun Learning session conducted by PGB staff volunteers, known as staff facilitators, held once or twice a month.

Students are able to build their confi dence and character through various activities conducted by the facilitators which are designed to bring out their hidden potential. Each session covers a wide range of personal values and skills such as creative thinking, public speaking, networking, presentation skills and team spirit. PBPP has managed to bring out the best in these students when coupled with the academic sessions.

Apart from these two elements, our PBPP students were also taken on annual educational fi eld trips to PETRONAS’ experiential learning facilities – PETROSAINS, where they experienced the science of the petroleum business in a fun and interactive manner as well as to the Dewan Filharmonik PETRONAS and Galeri PETRONAS where they were exposed to classical music and fi ne arts. In addition to the places mentioned above, these students were also taken to the Company’s corporate headquarters at the PETRONAS Twin Towers where they were able to experience the breathtaking view of Kuala Lumpur from the Towers’ Skybridge.

Our fun learning sessions are much awaited by the children taking part in our

PBPP initiative.


During the year under review, students who sat for the Standard Six Examination known as Ujian Penilaian Sekolah Rendah (UPSR), participated in an annual motivational camp and solat hajat organised by our staff volunteers. In recognising the students’ overall achievements and acknowledging their efforts in achieving outstanding results and demonstrating improvements at school, an annual prize giving ceremony was organised by PGB.

In 2012, PGB saw the graduation of our fi fth batch of PBPP students. A total of 101 students sat for the UPSR 2012 Examination. Out of this total, 71.3% passed the examination of which 13 students scored 5As, 12 students scored 4As and 12 students scored 3As. This remarkable achievement of students under PBPP is a success to be proud of.

WORKING FOR THE COMMUNITY: GOING BEYOND EXPECTATIONSAs a responsible company, PGB continues to implement a series of holistic and staff-driven Corporate Social Responsibility (CSR) programmes. From assisting senior citizens, the physically challenged and

single mothers to giving motivational and moral support to orphans; our staff’s commitment in working together and giving back to society has always been carried out beyond the call of duty.

Adhering closely with the Company’s tagline which sums up that every act of kindness instills the spirit of caring for each other or “Bakti Dihulur, Kasih Disemai”, our CSR effort saw an increased number of activities, a sign that we at PGB are serious in assisting the members of the community in places we operate.

During the year under review, a total of approximately RM150,000 was donated by senior management and staff for these CSR activities. Through these personal contributions, the Company was able to conduct an average of one CSR activity per week across all divisions nationwide.

REACHING OUT PROACTIVELY TO THE COMMUNITYThe Company has conducted a series of public awareness programmes to engage with the local communities within the vicinity of its plants, facilities and vast network of gas pipelines. Through these

engagements, we were able to create awareness on preventive and safety control measures which need to be carried out, for example, along our Peninsular Gas Utilisation (PGU) pipeline routes and Right of Way (ROW). The public were also made aware of how to activate emergency procedures should the unexpected occur. These awareness programmes were jointly organised by the Company and relevant authorities and agencies such as the Fire and Rescue Services Department, the Royal Malaysian Police, the Malaysian Armed Forces, the Municipal Councils and the Department of Environment. In 2012, PGB conducted more than 30 awareness programmes throughout Malaysia.

The Company also recognises the importance and necessity of fostering good relations with relevant local authorities and media to promote better understanding of its business. Through this good relationship, the Company was also able to understand and keep abreast with the regulatory requirements of the different agencies. Activities to foster relationship and enhance rapport include plant visits, sporting activities and regular engagement sessions.

PGB’s staff facilitators take part in monthly interaction and motivation sessions with primary school children participating in PBPP.


Calendar of EventsCalendar of Events

13 FEBRUARYA delegation of 35 students from Queen’s University Belfast, Northern Ireland and PETRONAS Technology Ventures Sdn Bhd visited the Company’s Gas Processing Plant Complex A (GPP A) in Kertih, Terengganu.

16 FEBRUARY Power Purchase Agreement document exchange between Sabah Electricity Sdn Bhd (SESB) and PGB’s joint venture company, Kimanis Power Sdn Bhd (KPSB) witnessed by Honorary Prime Minister at Magellan Sutera, Kota Kinabalu, Sabah.

2 MARCH Delfort Group visited PGB’s Centralised Utility Facilities (CUF) in Gebeng, Pahang.

4 MARCH PGB organised its Annual Golf Tournament involving members of the Board of Directors and key stakeholders at Glenmarie Golf and Country Club, Selangor.

15 MARCHKDYMM Sultan of Terengganu, Sultan Mizan Zainal Abidin and KDYMM Sultanah, Tuanku Nur Zahirah accompanied by YAB Menteri Besar of Terengganu Datuk Seri Ahmad Said, together with members of the State Legislative Council made an offi cial visit to PGB’s GPP A in Kertih, Terengganu.

11 APRILRegas Terminal (Sg. Udang) Sdn Bhd carried out Corporate Social Responsibility (CSR) by distributing basic necessities to the less fortunate families in Pantai Puteri, Melaka.

8 MAYYB Dato’ Sri Peter Chin Fah Kui of Ministry of Energy, Green Technology and Water visited Kimanis Power Plant Site.

13 MAYPGB’s Board of Directors visited RGT facilities at Sungai Udang, Melaka.

15 MAY PGB held its 29th Annual General Meeting at Intercontinental Hotel Kuala Lumpur, Jalan Ampang, Kuala Lumpur.

4 JUNEThe World Gas Conference was offi cially launched by Prime Minister of Malaysia, YAB Dato’ Sri Mohd Najib Tun Abdul Razak at Kuala Lumpur Convention Centre.

YAB Chief Minister of Melaka, Datuk Seri Mohd Ali Mohd Rustam launched the liquefi ed natural gas (LNG) Regasifi cation Terminal (RGT) in Sungai Udang, Melaka, in conjunction with the World Gas Conference hosted by Malaysia in Kuala Lumpur.

15 JUNEThe MD/CEO’s offi ce conducted CSR activity at Kampung Batu 16 in Hulu Langat, Selangor, involving the construction of a home for a less-fortunate family.

18 JUNEA group of 35 staff from Transportasi Gas Indonesia (TGI) visited PGB’s Gas Processing Plant Complex B (GPP B) in Paka, Terengganu.

28 JUNE A delegation from Brunei Liquefi ed Natural Gas (BLNG) visited PGB’s Centralised Utility Facilities (CUF) in Kertih, Terengganu.

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3 JULYA delegation from Virdia visited PGB’s CUF in Kertih, Terengganu.

14 JULY PGB carried out CSR at Rumah Anak Yatim Kesayangan in Petaling Jaya, Selangor with a programme titled Inspirational Team Building Activity.

19 JULY Signing ceremony of Financing Agreement between Kimanis Power Sdn Bhd and CIMB Investment Bank, HSBC Amanah & Malaysian Trustees Bhd at Malaysian Petroleum Club, PETRONAS Twin Towers.

24 JULY A delegation from Genomatica Inc. and Mitsubishi visited PGB’s CUF in Kertih, Terengganu.

8 AUGUSTPGB via KPSB obtained Islamic Financing Facilities or Sukuk Programme with a nominal value of up to RM1.16 billion, consisting of two series, to fi nance the construction of the Kimanis Power Plant.

10 SEPTEMBER PGB entered into a Shareholder Agreement with Sabah Energy Corporation Sdn Bhd to construct and develop LNG regasifi cation facilities in Lahad Datu, Sabah.

14 SEPTEMBERPGB organised its Majlis Ramah Mesra Aidilfi tri 2012 at the Mandarin Oriental Hotel, Kuala Lumpur to forge a closer relationship with its key stakeholders.

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19 SEPTEMBER A group of 10 personnel from TGI visited TOD in Segamat, Johor.

24 SEPTEMBERA delegation of 20 Iraqi Government offi cials went on plant familiarisation programme held at GPP B in Paka, Terengganu.

8 OCTOBERPETRONAS’ Chairman, YBhg Tan Sri Mohd Sidek Hassan visited the RGT facility in Sungai Udang, Melaka.

16 – 18 OCTOBER PETRONAS Gas Bhd joined the Innovative and Creative Circle (ICC) organised by Malaysia Productivity Corporation (MPC).

17 – 18 OCTOBERA group of 5 personnel from Konebada Petroleum Park Authority of Papua New Guinea visited GPP A & B, and CUF in Terengganu.

5 NOVEMBERA delegation of 5 personnel from the Ministry of Municipalities and Public Works of the Republic of Iraq visited PETRONAS’ water processing plant in Dungun, Terengganu which is managed by PGB.

9 NOVEMBERPGB signed a contract with the consortium of Toyo Engineering Corporation and Toyo Engineering & Construction Sdn Bhd for the provision of Engineering, Procurement, Construction and Commissioning (EPCC) for the Plant Rejuvenation and Revamp (PRR4) project.

Calendar of Events

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18 NOVEMBER PGB organised the PGB’s Contractors Forum at Zenith Hotel, Kuantan, Pahang to forge a greater understanding between the Company and its contractors, especially in matters involving services and materials procurement.

25 NOVEMBERTOD hosted the PGB-Senoko Interaction Games with Senoko Energy Pte Ltd at the Le Grandeur Palm Resort, Senai, Johor.

28 - 29 NOVEMBERPGB hosted the Regional Process Technology Forum at Swiss-Garden Resort and Spa, Kuantan, Pahang, which was also participated by the representatives of Trans-Thai Malaysia (Thailand) Ltd, Brunei LNG and Malaysia LNG Sdn Bhd.

3 DECEMBER A delegation of 8 personnel from Messrs KPMG Desa Megat & Co, PGB external auditors visited PGB’s CUF and GPP B in Kertih, Terengganu.

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The strong foundations we lay today will ensure our continued sustainability as a business tomorrow. At PGB, we believe that robust governance practices will help us create value for our stakeholders and promote their best interest. By embracing high governance standards we hope to ensure that the Group will continue to chart positive growth and contribute extensively towards the economic, social and environmental spheres.

RM38,625 millionMarket Capitalisation

RM19.52Closing share price at end of FY2012

RM13,462 millionTotal Assets

Embracing Sustainability


Corporate Governance Statement 92

Nomination and Remuneration Committee Report 99

Nomination and Remuneration Committee’s Terms of Reference 102

Statement on Risk Management and Internal Control 104

Board Audit Committee Report 110

Board Audit Committee’s Terms of Reference 113

Statement of Directors’ Responsibility 116

Corporate Governance


Corporate Governance Statement

The Board is entrusted with the responsibility to exercise reasonable and proper care of the Company’s resources for the best interests of shareholders.

The Board of Directors (Board) of PETRONAS Gas Berhad recognises that its primary responsibility is to safeguard and promote the interests of the shareholders and to enhance the long-term value of the Company. The Board continuously strives and is fully committed to maintaining high standards of corporate governance throughout the organisation and to safeguard the interests of the shareholders.

The Board in this Corporate Governance Statement complies with paragraph 15.25 of the Main Market Listing Requirements (MMLR) of Bursa Malaysia Securities Berhad and the Amendments to MMLR in relation to Corporate Governance and has substantially applied and conformed to the Principles of Corporate Governance and the Best Practices in Corporate Governance as set out in the Malaysian Code on Corporate Governance 2012 (MCCG 2012).

THE BOARD AND BOARD COMMITTEES

1. Principal Responsibilities of the Board

The Board is generally entrusted with the overall governance of the Company and its Group (“Group” wherever it appears in this Corporate Governance Statement shall mean the Company and its subsidiaries), the responsibility to exercise reasonable and proper care of the Company’s resources for the best interests of its shareholders as well as to safeguard the Company’s assets.

The Board is mindful of the importance of the establishment of clear roles and responsibilities in discharging its fi duciary and leadership function as recommended by MCCG 2012 and in this regard the Board has assumed the following responsibilities:

i) Review and approve the annual corporate plan, which includes overall corporate strategy, operational plan, marketing plan, human resources plan, fi nancial plan and budget, risk management plan and information technology plan.

ii) Oversee the conduct of business, and to evaluate whether the business is being properly managed.

iii) Identify principal risks and ensure the implementation of appropriate systems to control, monitor and manage these risks.

iv) Oversee the succession planning and appointment of senior management, including ensuring senior management personnel are of suffi cient calibre.

v) Review the adequacy and integrity of internal control systems and management information systems, ensuring the establishment of sound framework of reporting on internal controls, including regulatory compliance.

vi) Review and approve fi nancial statements.

The roles and responsibilities of the Directors are documented in the Board Charter which sets out the strategic intent, key values, principles and guidelines that are to be applied by the Chairman, Managing Director and Chief Executive Offi cer (MD/CEO), Board and the Board Committees, as well as identifying their functions in the Company and Group. This Board Charter shall be periodically reviewed, as and when necessary. A copy of the Board Charter is available on the Company’s corporate website.


The Board further acknowledges its role in establishing a corporate culture comprising ethical conduct within the Group. In line with this principle, the Board has adopted the PETRONAS Code of Conduct and Business Ethics (CoBE) which sets out the standards of behaviour and ethical conduct for the Board and Group and for external parties liaising with the Group. This CoBE shall be periodically reviewed, as and when necessary. In addition, the Board has also adopted the PETRONAS Whistleblowing Policy. A copy of the CoBE is available on the Company’s corporate website.

2. An Effective Board Composition

A. Composition The Board comprises eight Directors including the

Independent Non-Executive Directors who have been selected based on their character, calibre, extensive experience and expertise in a wide range of industries, as well as their ability to add strength to the stewardship of the Company.

The Board consists of members who have the mix of skills, knowledge, experience and strength in qualities which are relevant to enable the Board to carry out its responsibilities in an effective and competent manner as well as providing balance and independence of the Board. The current composition of the Board is in compliance with Paragraph 15.02 of the MMLR as one third of its members are Independent Directors.

As at the date of this report, the Board comprises the following:

Executive Director (also the MD/CEO)

1/8 (12.5%)

Independent Non-Executive Directors 3/8 (37.5%)

Non-Independent Non-Executive Directors(including the Chairman)

4/8 (50%)

The profi le of each Director is presented in the Board of

Directors’ Profi le on pages 18 to 23 of the annual report.

Given that the Company’s synergetic business and operational integration with the PETRONAS Group of Companies, the Chairman of the Company would have to be and is a Non-Independent Non-Executive Director.

There is a clear demarcation of responsibilities within the Company to ensure a balance of power and authority. The positions of Chairman and Managing Director are

separately held. The Chairman is primarily responsible for running the Board and ensuring that all Directors have full and timely access to all relevant information, which is necessary for informed decision-making. The Managing Director who is also the Chief Executive Offi cer oversees the implementation of Board policies, the day-to day running of the business and operational decision-making. The MD/CEO also manages the respective responsibilities of the divisions and departments in the Company and he is assisted in the management of the business by the Management Committee (MC). The MC serves in an advisory capacity to the MD/CEO in accomplishing the vision, mission, strategies and objectives set for the Company. The distinct and separate roles of the Chairman and the MD/CEO ensure a balance of power and authority, such that no one individual has unfettered powers of decision making.

All Non-Executive Directors have the necessary expertise and skill to ensure that the strategies proposed by the Management are fully evaluated, taking into account the long-term interests of the shareholders. They review and engage with the Management and provide input to the strategy development and the planning process of the Company. In doing so, the Non-Executive Directors consider and rationalise the initiatives and priorities towards developing value proposition for the Company to enhance its competitiveness in achieving the Company’s target.

In addition, they contribute to policy formulation and are actively involved in decision-making. They provide guidance and promote professionalism and competence among Management and employees.

The Directors who are nominated as the representatives of Petroliam Nasional Berhad (PETRONAS), when making any decisions, always act in the best interest of the Company in line with Section 132(1E) of the Companies Act, 1965, Malaysia.

During deliberation of the board papers at the Board meetings, any Director who is faced with any confl ict of duties or confl ict of interests declares his interests and refrains himself from participating in the discussions of such board papers.

During the fi nancial year under review, Encik Muri bin Muhammad and Encik Ramlan bin Abdul Malek vacated offi ce pursuant to Paragraph 15.05(3)(c) of the MMLR, effective from 31 December 2012.


B. Independence The presence of the Independent Non-Executive Directors

is essential in providing unbiased and independent views, advice and judgement, as well as safeguarding the interests of other parties such as minority shareholders of the Company. The concept of independence adopted by the Board is in accordance with the defi nition of an Independent Director in Paragraph 1.01 of the MMLR.

Dato’ N. Sadasivan N.N. Pillay has been appointed as the Senior Independent Non-Executive Director to whom any concerns pertaining to the Company may be conveyed. Dato’ N. Sadasivan N.N. Pillay has served as Senior Independent Director for 17 years.

Recommendation 3.2 of the MCCG 2012 states that the tenure of an Independent Director should not exceed a cumulative term of nine years. However, following an assessment by the Nomination and Remuneration (NomRem) Committee and the Board, the Board recommends that Dato’ N. Sadasivan N.N. Pillay continues to serve as an Independent Director subject to shareholders approval at the forthcoming Annual General Meeting (AGM) of the Company on the basis of the following justifi cations:-

a) His appointment is made in accordance with the requirements of the MMLR;

b) He provided effective check and balance in the proceedings of the Board and the Board Committees;

c) He provided objectivity in decision making through unbiased and independent views as well as advice and judgement, to the Board;

d) He exhibited high commitment and devoted suffi cient time and attention to his responsibilities as an Independent Non-Executive Director of the Company; and

e) He exercised due care in the interest of the Company and shareholders during his tenure as an Independent Non-Executive Director of the Company.

In consideration of the above, the Board has concluded to seek shareholders’ approval to retain Dato’ N. Sadasivan N.N. Pillay as an Independent Non-Executive Director of the Company at the forthcoming AGM.

The remaining two Independent Non-Executive Directors, Dato’ Ab. Halim bin Mohyiddin and Encik Lim Beng Choon, are professionals in their own right with wide ranging experiences, skills and expertise in various fi elds.

Pursuant to the recommendation of MCCG 2012, the performance assessment of both Non-Independent and Independent Directors was undertaken and reported to the Board. Specifi c assessment of the “independence” of the Independent Directors is included in the annual performance assessment for the fi nancial year ended 31 December 2012. The NomRem Committee and the Board have conducted an assessment on the independence of the Independent Directors and undertake to perform such assessment annually.

C. Gender Diversity The Board does not have a specifi c policy on Gender

Diversity. However the Board is continuously looking into inviting to the Board people of talent based on merits including skills, knowledge and experience bearing in mind the need for diversity, including gender diversity.

3. Board Structures and Procedures

A. Board and Board Committee Meetings Board meetings are scheduled in advance before the

beginning of the new fi nancial year to enable the Directors to plan ahead their schedules to fi t the series of meeting in the year. Board meetings are held at minimum of quarterly intervals with additional meetings, including special meetings, held whenever necessary. There were fi ve meetings held during the fi nancial year under review. Most of the Directors attended all of the Board meetings. The details of the attendance of the Directors for the fi nancial year under review are as follows:

Table 1 : Attendance Record

Name of Directors Attendance

Datuk Anuar bin Ahmad 5/5

Samsudin bin Miskon 5/5

Dato’ N. Sadasivan N.N. Pillay 5/5

Dato Mohammad Medan bin Abdullah 4/5

Datuk Rosli bin Boni 5/5



Table 1 : Attendance Record

Name of Directors Attendance

Ir. Pramod Kumar Karunakaran 5/5

Dato’ Ab. Halim bin Mohyiddin 5/5

Lim Beng Choon 5/5

Muri bin Muhammad* 2/5

Ramlan bin Abdul Malek* 2/5

* Vacated offi ce on 31 December 2012 pursuant to

Para 15.05(3)(c) of the MMLR.

B. Supply of and Access to Information In discharging their duties with reasonable care, skill and

diligence, the Directors will be accorded with suffi cient information on any subject matter so as to enable the Directors to make the business judgment in the best interest of the Company and shareholders.

Prior to the Board meetings, every Director is given an agenda and a set of Board papers covering the agenda items to facilitate informed decision-making. The agenda and the Board papers which contain quantitative information and other related performance factors are circulated prior to the Board meetings and this will enable the Directors to have a good assessment of the subject in hand prior to arriving at any decision.

The MD/CEO leads the presentation of the Board papers and provides comprehensive explanation on pertinent issues. All proceedings of Board meetings are minuted and signed by the Chairman of the meeting in accordance with the provisions of Companies Act, 1965, Malaysia. Minutes of the Board meetings which include a record of the decision and resolution of the Board meetings are properly maintained by the Company Secretary.

The Board is kept updated on the Company’s activities and operations on a regular basis. All Directors have full access to information, including monthly reports on Company activities, both fi nancial and operational.

In addition, whenever independent professional advice is required by the Directors, outside experts may, and have been engaged at the Company’s expense.

The Directors have access to the advice and services of the Company Secretaries, whose appointments and resignations are subject to the Board’s approval. The Chairman is always accorded with strong and positive support of the Company Secretaries in ensuring the effective functioning of the Board.

The Company Secretaries attend all Board meetings and ensure that accurate and adequate records of the proceeding of the Board meetings and decision made are properly kept. The Company Secretaries also ensure that the Board members receive briefi ngs on changes in regulation or law, as circumstances require.

The Board is fully aware of, and acts on any matters for decision to ensure proper direction and control of the Company. Such matters, outlined in the Company’s Limits of Authority, clearly establish the authority of the Board and the Management.

The Board may, whenever required, as provided by the Articles of Association, set up Board Committees delegated with specifi c powers and responsibilities.

C. Training of Directors In compliance with the MMLR, the Directors are mindful

that they shall receive appropriate training which may be required from time to time to keep them abreast with the current developments of the industry as well as the new statutory and regulatory requirements.

During the fi nancial year under review, the members of the Board have attended the relevant development and training programmes, either attended by the Directors according to their individual needs or as arranged by the Company Secretary, to enhance their ability in discharging their duties and responsibilities more effectively. The details of which are set out on pages 203 to 204 of the annual report.

Any new Director is given a comprehensive understanding of the operations of the Company through regular briefi ngs on Company history and fi nancial control systems. In addition, plant visits are arranged to ensure fi rst-hand understanding of the Company’s operation.


D. Re-election of Directors Pursuant to Article 93 of the Company’s Articles of

Association an election of Directors shall take place each year at the AGM of the Company where one-third of the Directors who are longest in offi ce shall retire and, if eligible, may offer themselves for re-election. In accordance with the Company’s Articles of Association, at the 29th AGM held on 15 May 2012, two Directors retired by rotation and were re-elected to the Board by the shareholders.

Pursuant to Article 96 of the Company’s Articles of Association, any Director so appointed shall hold offi ce only until the next following AGM of the Company and shall then be eligible for re-election but shall not be taken into account in determining the Directors who are to retire by rotation at that meeting. At the 29th AGM held on 15 May 2012, three Directors were re-elected in accordance with this provision.

Pursuant to Section 129 of the Companies Act, 1965, Malaysia, a Director who is over 70 years of age must retire at the AGM of the Company, and may be re-appointed by shareholders with not less than a three-fourth majority. At the 29th AGM held on 15 May 2012, one Director was re-appointed pursuant to this provision.

The Director who attained the age of 70 years was re-appointed pursuant to Section 129 of the Companies Act, 1965, Malaysia as he is a highly regarded personality in the business community. He has demonstrated to the Board that he exercises independent judgment and has acted in the best interest of the Company and ensured that the varied competing interests of all stakeholders are respected without compromising fi nancial performance and accountability of the Company.

NOMINATION AND REMUNERATION COMMITTEE

The Nomination and Remuneration (NomRem) Committee of the Company was established on 14 November 2011 and is made up of entirely Non-Executive Directors which comprises two Independent Non-Executive Directors and one Non-Independent Non-Executive Director. In line with the MCCG 2012, all NomRem Committee members including the Chairman shall be Non-Executive Directors; the majority including the Chairman

shall be Independent Directors. The members of the NomRem Committee shall be appointed by the Board from amongst their number and shall consist of not less than three members.

A report on the membership of the NomRem Committee, its Terms of Reference and its duties, responsibilities as well as its activities are detailed out in pages 99 to 101 and 102 to 103 respectively in the annual report.

BOARD AUDIT COMMITTEE

The Board Audit Committee (BAC) comprising mainly the Independent Non-Executive Directors has specifi c terms of reference including the review of the interim and full year fi nancial statements and preliminary announcements, internal fi nancial controls and the reports of the Group Internal Audit Division of PETRONAS. It ensures the adequacy and integrity of the Company’s internal control system and management information system and that they are in compliance with the Company’s policies and procedures, applicable laws and regulations and MMLR. The BAC monitors the effective implementation of programmes to ensure compliance to the Company’s Risk Management Policy. It will continue to ensure that the principal risks facing the Company are identifi ed and monitored and appropriate measures are undertaken to manage these risks. The BAC Terms of Reference and the BAC Report are detailed out in pages 110 to 112 and 113 to 115 respectively in the annual report.

RELATIONSHIPS WITH SHAREHOLDERS

1. Engagements with Shareholders

The Company recognises the importance of timely, fair and equal dissemination of information to shareholders and public generally. In this regard, it adheres strictly to the disclosure requirements of Bursa Malaysia. Besides the announcement via Bursa LINK, the Company communicates regularly with the shareholders through the annual report and the quarterly fi nancial reports.

Institutional investors and analysts are also given the opportunity to meet with the Management on performance, corporate governance and other matters affecting the shareholders’ interests.



In providing shareholders with the opportunity to gain fi rst-hand exposure on the Company’s operations, several visits to Gas Processing Plants located in Kertih and Paka, Terengganu, as well as its Centralised Utility Facilities located in Gebeng, Pahang, were organised during the year. Shareholders were given a presentation on the Company’s operations and were provided the opportunity to ask for more information in respect of the plant operations. The Management believes that shareholders, by having a better understanding of the Company’s activities, will have a greater sense of belonging to the Company. Such two-way communication increases corporate transparency and helps shareholders take a longer term view of their investment based on a better understanding of the Company’s corporate strategy and operations.

2. Disclosures

The Board recognises the need to fully disclose to shareholders all major developments in relation to the Group on a timely basis. In addition to the mandatory disclosures requirement by Bursa Malaysia as well as other corporate disclosures, the Company has long established its corporate website (www.petronasgas.com) to allow the public particularly the shareholders, investors and analysts to have access to information such as corporate profi le, policies and guidelines, contact details of designated persons and announcements made to Bursa Malaysia.

The Company has recently established an internal Corporate Disclosure Policy to facilitate disclosure of information. This guide is based on the requirements as set out in the MMLR. A copy of the Corporate Disclosure Policy is available on the Company’s corporate website.

In all circumstances, the Company preserves confi dentiality with regard to undisclosed material information about the Company and continuously stresses the importance of timely, fair and equal dissemination of information to the shareholders and the public generally.

3. AGM

The AGM is a crucial mechanism in shareholders communication. Shareholders are notifi ed of the meeting and provided with a copy of the Company’s Annual Report 21 days before the meeting. At each AGM, the Board provides shareholders with an opportunity to ask questions on the progress and performance of the Company, without limiting the time and types of questions asked, prior to seeking approval by show of hands from members and proxies on the audited fi nancial statements. The Chairman informs on the availability of poll voting by shareholders on matters raised during the AGM.

During the meeting, the Chairman and Board members respond to all queries and undertake to provide suffi cient clarifi cation on issues and concerns raised by the shareholders. The external auditors are also present to provide their professional and independent clarifi cation on issues and concerns raised by the shareholders. The status of all resolutions proposed at the AGM is submitted to the Bursa Malaysia at the end of the meeting day. A summary of the discussions at the AGM is kept by the Management for future reference.

The Board has ensured that where there is special business included in the notice of the Annual or Extraordinary General Meeting, each item of the special business is accompanied by a full explanation of the effects of the proposed resolution.

ACCOUNTABILITY AND AUDIT

1. Financial Reporting

The Board aims to present a balanced and understandable assessment of the Company’s position and prospects. This also applies to other price-sensitive public reports and reports to regulators. The Directors’ responsibility statement is enclosed in page 116 of the annual report.

2. Risk Management and Internal Control

The Board continues to maintain a sound system of risk management and internal control to safeguard shareholders’ investment and the Company’s assets. The principle is further elaborated under the Statement on Risk Management and Internal Control by the Directors in pages 104 to 109 of the annual report.



3. Relationship with the Auditors The external auditors, Messrs KPMG Desa Megat & Co.,

have continued to report to members of the Company on their opinions which are included as part of the Company’s fi nancial reports with respect to their audit on each year’s statutory fi nancial statements. In so doing, the Company has established a transparent arrangement with the auditors to meet the auditors’ professional requirements. From time to time, the auditors highlight to the BAC and the Board matters that require the Board’s attention. The Report by the BAC on the review of audit reports is enclosed in pages 110 to 112 of the annual report.

The Company continuously reviews and monitors the suitability and independence of external auditors. The BAC obtains assurance from the external auditors on their independence in discharging their duties.

This statement is made in accordance with the resolution of the Board of Directors dated 11 March 2013.

Datuk Anuar AhmadChairman

Samsudin MiskonMD/CEO

ADDITIONAL COMPLIANCE INFORMATION1. Non-Audit fees The amount of non-audit fees paid and payable to the

external auditors by the Company for the fi nancial year ended 31 December 2012 was RM343,000.

2. Sanctions During the year under review, there were no sanctions and/or

penalties imposed on the Company, Directors or Management by the relevant regulatory bodies.

3. Material Contracts There were no material contracts entered into by the

Company during the fi nancial year, other than the Gas Processing and Transmission Agreement (GPTA) entered since 1 April 1994 between the Company and its substantial shareholder, PETRONAS, for the provision of separating natural gas into its components and storing, transporting and distributing such components thereof for a fee.

The GPTA provides for revision of the terms and conditions every fi ve years. The last revision of the GPTA was made on 31 March 2010 which revised the throughput fee structure for the period from 1 April 2010 to 31 March 2014 and also entailed clearer demarcation of terms and remuneration structure between processing and transportation of gas.


Nomination and Remuneration Committee Report

In compliance with Paragraph 15.08A of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (MMLR), the Nomination and Remuneration (NomRem) Committee of the Company was established on 14 November 2011. The NomRem Committee is pleased to present the Nomination and Remuneration Committee Report for the fi nancial year ended 31 December 2012.

COMPOSITION

The NomRem Committee currently comprises three members. In line with the Malaysian Code of Corporate Governance 2012 (MCCG 2012), all NomRem Committee members including the Chairman shall be Non-Executive Directors. The majority including the Chairman are Independent Directors.

The NomRem Committee is chaired by an Independent Director, Encik Lim Beng Choon. Whilst the MCCG 2012 has recommended that the NomRem Committee be chaired by the Senior Independent Director, the Senior Independent Director, Dato’ N. Sadasivan N.N. Pillay is currently the Chairman of the Board Audit Committee. The Board has instead elected Encik Lim Beng Choon as the Chairman of the NomRem Committee so as to have different Directors chairing the committees to leverage on different perspectives and dynamics as well as to ensure that each Independent Director has equitable roles and responsibilities.

The members of the NomRem Committee currently are:

No. Name of Members

1. Lim Beng ChoonChairman(Independent Non-Executive Director)

2. Dato’ N. Sadasivan N.N. Pillay(Senior Independent Non-Executive Director)

3. Dato Mohammad Medan bin Abdullah(Non-Independent Non-Executive Director)

By invitation, the Managing Director/Chief Executive Offi cer (MD/CEO), Company Secretaries and the General Manager of Human Resources Management Division are present for deliberations which require their input or advice.

RESIGNATION OF NOMREM MEMBERS

Any NomRem Committee member may resign effective upon the date of the member giving oral or written notice to the Chairman of the Board, the Company Secretary or the Board (unless the notice specifi es a later time for the effectiveness of such resignation). The Board will elect a successor to take offi ce when the resignation becomes effective.

The appointment of a NomRem Committee member shall automatically be terminated if the member ceases to be a Director for any reason whatsoever or as determined by the Board.

Lim Beng Choon • Dato’ N. Sadasivan N.N. Pillay • Dato Mohammad Medan bin Abdullah


ROLES AND RESPONSIBILITIES

The following shall be the common recurring duties and responsibilities of the NomRem Committee in carrying out its purposes. These duties and responsibilities are set forth as a guide to the NomRem Committee with the understanding that the NomRem Committee may amend or supplement them as appropriate under the circumstances to the extent permitted by applicable laws:

a) Assess the effectiveness of the Board as a whole, the Committees of the Board and the contribution of each individual Director.

b) Review regularly the selection criteria for Board membership, the Board structure, size and composition and make recommendations for any adjustments thereto.

c) Develop membership qualifi cations for the Board, including defi ning specifi c criteria for Director independence and Committee membership.

d) Review annually the Board’s mix of skills, education and experience and other qualities including core competencies which Directors should bring to the Board, taking into account the current and future needs of the Company.

e) Establish and recommend the remuneration structure and policy for Directors and Senior Management and review changes to the policy, as necessary.

f) Implement/maintain a reward system for Directors and Senior Management based on their performance against the Company’s results.

The Terms of Reference governing the NomRem Committee is stipulated on pages 102 to 103 of the annual report.

MEETINGS AND ACTIVITIES

The NomRem Committee will deliberate on the above matters during meetings which shall be held at least twice a year or at such other times as the Chairman of the NomRem Committee deems necessary. In addition to the schedule of regular meetings established by the NomRem Committee, the Chairman of the NomRem Committee may call a special meeting at any time. In order to form a quorum, two of the members of the NomRem Committee must be present, one of whom must be an Independent Director.

During the fi nancial year under review, the NomRem Committee met twice and the attendance of the members are as follows:

Name of Members Attendance

Lim Beng Choon (Chairman) 2/2

Dato’ N. Sadasivan N. N. Pillay 2/2

Dato Mohammad Medan Abdullah 2/2

The NomRem Committee had carried out an assessment on the effectiveness of the Board as a whole, the Committees of the Board as well as the contribution of each individual Director through a Board Effectiveness and Directors Evaluation exercise, the report of which has been tabled to the Board.

The NomRem Committee is also implementing a skills mapping exercise for the Directors to review the mix of skills, education and business experience and other qualities including core competencies of the Directors. This exercise will enable the NomRem Committee to access and review the selection criteria for future Board membership and make recommendations for adjustments.

At the start of the year, the NomRem Committee reviewed the Key Performance Indicators, the Performance Management System and the Remuneration Structures set up for the Senior Management level. Upon completion of the year, the NomRem Committee has duly reviewed the performance reviews and rewards of the Senior Management. In addition, all changes made at the Management Committee level have been presented to the NomRem Committee for input.

DIRECTORS’ FEES

With the exception of the MD/CEO, all Non-Executive Directors are paid Directors’ fees as approved by the shareholders at the Annual General Meeting, based on the recommendation of the Board. For the fi nancial year under review, the breakdown is as follows:

Nomination and Remuneration Committee Report


Directors’ Name

Directors’ Fees(RM)

Board Meeting

Attendance Fees(RM)

Board AuditCommittee

Meeting Attendance

Fees(RM)

NomRem Meeting

Attendance Fees (RM)

Total(RM)

Datuk Anuar bin Ahmad Nil Nil Nil Nil Nil

Dato’ N. Sadasivan N.N. Pillay 68,000.00 15,000.00 13,000.00 3,000.00 99,000.00

Dato Mohammad Medan bin Abdullah 69,000.00 12,000.00 Nil 3,000.00 84,000.00

Datuk Rosli bin Boni 61,000.00 15,000.00 9,000.00 Nil 85,000.00

Ir. Pramod Kumar Karunakaran Nil Nil Nil Nil Nil

Dato’ Ab. Halim bin Mohyiddin 68,000.00 15,000.00 9,000.00 Nil 92,000.00

Lim Beng Choon 70,000.00 15,000.00 Nil 6,000.00 91,000.00

Muri bin Muhammad* 68,000.00 6,000.00 7,000.00 Nil 81,000.00

Ramlan bin Abdul Malek* Nil Nil Nil Nil Nil

Total 404,000.00 78,000.00 38,000.00 12,000.00 532,000.00

*Vacated offi ce on 31 December 2012 pursuant to Paragraph 15.05(3)(C) of the MMLR.

Fees for certain Directors appointed by PETRONAS are paid directly to PETRONAS as Board of Directors representation fees. During the year, the Company paid RM272,000 as Board of Directors representation fees for PETRONAS. A formal written policy and procedures for Directors’ remuneration is currently being developed.

The MD/CEO, an employee of PETRONAS, is seconded to the Company as an Executive Director. The MD/CEO, as well as the other Directors representing PETRONAS, possesses a mix of skills, knowledge, expertise and experience, each contributing towards safeguarding the interests of the Company. At the same time, their presence gives the Board a deeper insight into PETRONAS’ operations with greater accountability for the Company’s performance, both fi nancial and operational. In consideration of the service of the MD/CEO, the Company is required to pay a management fee to cover all payroll-related costs and benefi ts ordinarily incurred by him in the course of his employment. During the year, the Company paid RM737,000 as management fee. The Company also reimburses all reasonable expenses incurred by the Directors, where relevant, in the course of carrying out their duties as Directors.

In addition to the MD/CEO, other Management staff have been seconded from PETRONAS. Their training and succession planning are aligned to the PETRONAS’ Human Resources Management Division. The Board ensures that only appropriate personnel with the relevant skills and experience are appointed to Management positions of the Company. The Board further ensures that the members of the Management Committee of the Company are rewarded based on performance.

REPORTING PROCEDURES

The Chairman of the NomRem Committee reports on key issues deliberated at the NomRem Committee to the Board and Minutes of the Meetings of the NomRem Committee are circulated to all members of the Board.

Lim Beng ChoonChairmanNomination and Remuneration Committee11 March 2013


Nomination and Remuneration Committee’s Terms of Reference

CONSTITUTION

The Nomination and Remuneration (NomRem) Committee was formed by the Board pursuant to its meeting on 14 November 2011.

MEMBERSHIP

The members of the NomRem Committee shall be appointed by the Board from amongst their number and shall consist of not less than three members. In line with the Malaysian Code of Corporate Governance 2012 (MCCG 2012), all NomRem Committee members including the Chairman shall be Non-Executive Directors. The majority of the NomRem Committee members including the Chairman shall be Independent Directors.

The members of the NomRem Committee shall elect a Chairman from amongst their number who shall be an Independent Director.

The actual number of members shall be determined from time to time by resolution of the Board.

The terms of offi ce and performance of the NomRem Committee and each of its members shall be reviewed by the Board periodically as to whether the NomRem Committee and/or its members have carried out its duties in accordance with its Terms of Reference.

RESIGNATION OF MEMBERS

Any NomRem Committee member may resign effective upon the date of the member giving oral or written notice to the Chairman of the Board, the Company Secretary or the Board (unless the notice specifi es a later time for the effectiveness of such resignation). The Board will elect a successor to take offi ce when the resignation becomes effective.

The appointment of a NomRem Committee member shall automatically be terminated if the member ceases to be a director for any reason whatsoever or as determined by the Board.

MEETING

To form a quorum, two of the members of the NomRem Committee must be present, one of whom must be Independent Director.

The Chairman of the NomRem Committee will be designated by the Board based upon recommendation by the members. In the absence of the Chairman, the remaining members present

shall elect one of their members from the independent directors as Chairman of the meeting. Other Directors, key executives and employees may attend any particular meeting only at the NomRem Committee’s invitation.

The Company Secretary or in his/her absence, his/her deputy shall be the Secretary of the NomRem Committee. Minutes of the meetings shall be duly entered in the books provided therefor.

Meetings shall be held at least twice a year or at such other times as the Chairman of the NomRem Committee deems necessary. In addition to the schedule of regular meetings established by the Committee, the Chairman of the NomRem Committee may call a special meeting at any time.

Meetings of the NomRem Committee shall be arranged by the Secretary at the request of the Chairman or any other member of the NomRem Committee. Unless otherwise agreed, notice of each meeting confi rming the venue, time and date shall be issued to each NomRem Committee member and to other attendees (as appropriate) in advance of each scheduled meeting date together with an agenda and supporting papers.

The NomRem Committee shall regulate its own detailed procedure, in particular:

i) the calling of meetings;

ii) the notice to be given for meetings;

iii) the voting and proceedings of meetings;

iv) the keeping of minutes; and

v) the custody, production and inspection of minutes.

AUTHORITY

The NomRem Committee is authorised by the Board to investigate any activity within its Terms of Reference. It is authorised to seek any information it requires from any employees, Company offi cers and external parties.

The NomRem Committee is authorised to engage external consultants and other advisers, or otherwise obtain such independent legal or other professional services it requires.

The NomRem Committee will have or be provided with suffi cient resources undertaking its duties, including access to the Company secretariat.


DUTIES AND FUNCTIONS

The following shall be the common recurring duties and responsibilities of the NomRem Committee in carrying out its purpose. These duties and responsibilities are set forth as a guide to the NomRem Committee with the understanding that the NomRem Committee may amend or supplement them as appropriate under the circumstances to the extent permitted by applicable laws:

a) To assess Directors on an on-going basis, the effectiveness of the Board as a whole, the Committees of the Board and the contribution of each individual Director.

b) To review regularly the selection criteria for Board membership, the Board structure, size and composition and make recommendations to the Board with regard to any adjustments which are deemed necessary.

c) To develop membership qualifi cations for the Board and all Board Committees, including defi ning specifi c criteria for Director independence and Committee membership.

d) To look into suggestions for candidates for membership on the Board, recommend prospective Directors, with a view, to provide an appropriate balance of knowledge, experience and capability on the Board, including shareholder’s nominations to the Board and assess the suitability of potential candidates against the set criteria.

e) To review annually the Board’s mix of skills, education and experience and other qualities including core competencies which Directors should bring to the Board, taking into account the current and future needs of the Company.

f) To review and recommend to the Board appropriate corporate governance policies and procedures of the Company.

g) To monitor compliance with corporate governance standards.

h) To annually convene a meeting with the Chairman of any committee appointed by the Board for purpose of reviewing their roles and responsibilities and facilitating appropriate coordination.

i) To implement a formal appraisal process for the evaluation of the effectiveness of the Board as a whole, the committees and the individual contribution of each Board member.

j) To carry out other actions and do such other things as may be referred to it from time to time by the Board.

The NomRem Committee shall, amongst others, undertake the following functions in relation to remuneration:

i) to establish and recommend the remuneration structure and policy for Directors and Senior Management and review changes to the policy, as necessary;

ii) to implement/maintain a reward system for Directors and Senior Management based on their performance against the Company’s results; and

iii) to review and recommend the entire individual remuneration packages for each of the Directors and Senior Management.

REPORTING PROCEDURESDraft minutes of each meeting shall be distributed to all members of the NomRem Committee. The minutes of the NomRem Committee meeting shall be confi rmed at the next meeting of the NomRem Committee and shall be available on request from the Company Secretary to all Non-Executive Directors. The confi rmed minutes of the meeting will be tabled to the Board for notation succeeding the NomRem Committee meeting.

Any decision shall be decided by a majority of votes. In the case of an equality of votes, the Chairman of the meeting shall have a second or casting vote.


Statement on Risk Management and Internal Control

The Group adopts PETRONAS’ shared values of loyalty, integrity, professionalism and cohesiveness which set the tone for a sound system of risk management and internal control. The Board is committed to maintain and continuously improve the Group’s system of risk management as well as internal control and is pleased to provide the following statement which outlines the nature and scope of risk management and internal control of the Group during the year under review.

BOARD’S ACCOUNTABILITY

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

In view of the limitations that are inherent in any system of internal control, this system is designed to manage, rather than eliminate, the risk of failure of achieving the corporate objectives. Accordingly, it can only provide reasonable but not absolute assurance against material misstatement or losses.

The Group has in place an ongoing process for identifying, evaluating, monitoring and managing all signifi cant risks faced by the Group, that has been in place for the year and up to the date of approval of the annual report and fi nancial statements. This process is regularly reviewed by the Board in accordance with the Statement on Risk Management and Internal Control: Guidelines for Directors of Listed Issuers.

RISK MANAGEMENT

Risk management is regarded by the Board to be an integral part of the Group’s organisational processes, with the objective of maintaining a sound system and ensuring its continuing adequacy and integrity. Risk Management is fi rmly embedded in the Group’s management system. The Group’s Risk Management Policy is to adopt an effective and progressive enterprise risk management system to identify, analyse, appraise and monitor the risks facing the Group and to take specifi c measures to mitigate these risks.

The Risk Management Department (RMD) is entrusted with responsibility of ensuring effective risk governance and implementation within the Group. The risk profi le of the Group has been established based on the enterprise risk management concept with principal risks identifi ed and regular reviews of key risk indicators and risk treatments.

RMD provides regular updates to both PGB Management Committee (MC) and Board Audit Committee (BAC) in the form of quarterly Enterprise Risk Report (ERR). The report covers the risk profi le and status of risk mitigation implementation, i.e. event mitigation, risk management framework implementation and risk initiatives. The detailed risk events, risk rating as well as the status updates of the mitigation actions are also updated in the PETRONAS INTERISK system.

Event Mitigation

Detailed risk events arising from PGB’s business, together with existing controls and risk levels are discussed and approved by the BAC together with the appropriate risk mitigations to address the risks. The risk mitigations identifi ed are monitored for completion and the resultant residual risks are determined and reduced to an acceptable risk level as approved by the BAC.

In addition, risk assessments are also conducted for new business ventures. The risk assessments report which covers risk profi le and mitigations are included in the business development proposal reported to the Business Development Steering Committee chaired by PGB Managing Director/Chief Executive Offi cer (MD/CEO).

Risk Management Framework Implementation

Project Risk

The Group continues to implement Project Risk Management processes in line with the PETRONAS Project Management System (PPMS) requirements. The Group carries out Project Risk Assessments, Independent Reviews and Lessons Learnt for all its major and critical projects. The Project Risk Assessment reports are captured in the Project Risk Management (PRisMa) system to enable effi cient monitoring and reporting.

Project risk is monitored and reported to the Management via monthly Project Risk Report. The report which also includes project risk areas of concern is incorporated into the ERR submitted to BAC on a quarterly basis.


Enterprise Risk Profi ling

PGB Enterprise Risk Management System

PGB Strategic Thrusts

Risk Mitigation Implementation

Enterprise Risk Reporting

Pursue Profi table Revenue GrowthDeliver World Class Operational

PerformanceAchieve People Excellence

Risk Management Framework

ImplementationEvent Mitigation Risk Initiatives

• Mitigation follow-up and

determination of residual risk

• New business venture risk

event mitigation

• Project Risk

• Contractor Risk

• Credit Risk

• Business Continuity Management

• HSE Risk

• Finance Risk

• Risk Management Forum

• Risk Management

Effectiveness Assessment

• BCP drill

Contractor Risk

Contractor risk is managed through technical and commercial tendering evaluation exercises facilitated by PGB’s Project Supply Chain Management (PSCM) Department and PETRONAS Group Shared Material and Services Organisation (SMSO) prior to the award of contracts in compliance with the PETRONAS Group tendering and contract policy and procedures. The Contractor Risk Assessment (CoRA) process is an integral part of the contractor selection process which is being applied prior to awarding the contract to the contractor.

Credit Risk

To reduce its credit risk exposure, the Group continues to apply the Credit Risk Management processes whereby the customers are assessed using the PETRONAS Credit Risk Rating System (PCRRS) to ensure alignment with the credit assessment process adopted by the PETRONAS Group. The system evaluates the creditworthiness and assigns credit risk ratings to all the Group’s

external customers. In addition, annual reviews are conducted on the assigned credit risk ratings of these customers while the trend of the customers’ fi nancials are also analysed to detect early signs of fi nancial distress and provide early warning to Management. The Group has established its Credit Risk Tolerance Limit for utilities customers to minimise potential loss from credit exposure.

The credit risk is monitored and reported to the business and Management via monthly Credit Risk Report. The report also includes Credit Value at Risk which measures potential loss from customers’ overdue balances against Credit Risk Tolerance Limit. On a quarterly basis, the report is incorporated into the ERR submitted to BAC.

During the year under review, the Group adopted the revised PETRONAS Credit Risk Rating methodology and applied the upgraded PCRRS to ascertain the creditworthiness of the customers for an effective credit exposure management.


Business Continuity Management

The Plant and Facilities Risk Management (PFRM) and Business Continuity Plan (BCP) are governed under the Business Continuity Management (BCM) capability as part of the Integrated Plant Operations Capability System (iPOCS) driven by PETRONAS Group Technology Solutions (GTS). The iPOCS supports the PETRONAS Operational Excellence (OE) Framework implementation in PETRONAS.

PFRM is established at the operating divisions to embed risk assessment, risk mitigation, monitoring and reporting of risk that are relevant to plant and facilities environment.

The Company has in place BCP that defi nes the structure and processes for managing emergencies at the operational and Company level. Scheduled drills and exercises are carried out at various facilities/asset levels to ensure the readiness in the event of an emergency or crisis. During the year under review, one BCP drill was conducted at Transmission Operations Division (TOD) in Segamat and one table top drill was carried out to test the adequacy and reliability of the BCP for Peninsular Malaysia Gas Supply. BCP was activated at Centralised Utility Facilities (CUF) in Kertih to ensure continuity of supply of industrial gases to customers.

Health, Safety and Environment (HSE) Risk

The Group leverages on the PETRONAS HSE Management System (HSEMS) to manage HSE risk and ensure that operations are in tandem with the HSE regulatory requirements. The HSEMS process ensures that HSE risk within the business is managed effectively. In ensuring effective implementation of HSEMS, a Mandatory Control Framework was deployed to strengthen the HSE governance within the Group.

The Group reviews its risk register on regular basis in addressing the changes that triggered from incidents, plant modifi cations activities and amendment of the PETRONAS Technical Standard (PTS). HSE assurance is carried out to provide independent assurance on the effectiveness of HSE controls. The assurance reports are presented to the Management.

During the year under review, external audit was conducted for SIRIM recertifi cation for MS ISO 14001:2004 Environmental Management System, OHSAS 18001:2007 Occupational Health and Safety Management System and MS1722:2005 Occupational Health and Safety Management System at Head Offi ce, CUF and TOD in line with the Group’s initiative to integrate its various management systems under the PGB’s Integrated Management System.

Finance Risk

The Company has adopted PETRONAS Corporate Financial Policy (CFP) which sets forth the policy for fi nancial management activities embedding the principles of fi nancial risk management. The CFP governs fi nancial risk management practices across the Company. The Company has established CFP supporting guidelines to manage its fi nance risk exposures that includes counterparty risk, liquidity risk, foreign exchange risk and interest rate risk.

Risk Initiatives

The Group continues to enhance risk management awareness and capability building across the Group through various risk communication sessions such as sharing, forum and engagement sessions.

The Group benefi ts from being part of the PETRONAS Group, which has an established Board Governance and Risk Committee that primarily provides guidance and recommends strategies and policies, as well as groupwide risk management awareness and capability building program.

Moving Forward

The Group will continue its focus in implementing key risk management strategies and initiatives towards institutionalisation of risk management as a business culture throughout the Group.

INTERNAL AUDIT FUNCTION

The Board recognises that the internal audit function is an integral part of the governance process. PETRONAS Group Internal Audit Division (GIAD) undertakes the internal audit function of the Group and provides independent assurance on the adequacy and effectiveness of the internal control systems implemented by the Group, and reports its fi ndings directly to the BAC.



The internal audit function includes undertaking reviews of the Group’s system of internal controls, its operations and selected key activities based on risk assessment and in accordance with the annual internal audit plan which is presented and approved by the BAC.

BAC receives and reviews all GIAD audit reports and directs the Management for the necessary corrective actions. The Management is responsible for ensuring that agreed corrective actions are taken on the reported areas within the required time frame. Accordingly, the status of the audit issues is reported to the BAC on a quarterly basis.

GIAD adopts the standards and principles outlined in the International Professional Practices Framework of the Institute of Internal Auditor.

The key activities of the internal audit function are set out in the BAC Report on page 110 to 112.

OTHER SIGNIFICANT ELEMENTS OF INTERNAL CONTROL SYSTEM

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

Board

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

• The Board reviews any signifi cant issues arising from changes in the business environment, which may result in signifi cant risks to the Group. The General Manager of Finance Division provides the Board with quarterly performance report.

• Where areas for improvement in the system are identifi ed, the Board considers the views and recommendations made by the BAC and Management.

Organisation Structure

• An organisational structure which defi nes the formal lines of responsibility and delegation of authority is in place to assist in implementing the Group’s strategies and day-to-day business activities. A process of hierarchical reporting has been established which provides a documented and auditable trail of accountability. The Company’s organisational structure is set out on page 14 of the annual report.

• The Company has a Management Committee which serves in an advisory capacity to the MD/CEO in accomplishing the vision, mission, strategies and objectives set for the Group.

• Various functional committees have also been established across the Group to ensure the Group’s activities and operations are properly aligned towards achieving the organisation goals and objectives.

Budget Approval

• Budgets are an important control mechanism used by the Group to ensure an agreed allocation of Group resources and that the operational managers are suffi ciently guided in making business decisions. The Group undertakes a comprehensive annual planning and budgeting exercise which include the development of business strategies for a fi ve-year period and establishment of performance indicators against which operating units and subsidiaries are evaluated.

• Variances against budget are analysed and reported to the MC and BAC/Board on a monthly and quarterly basis respectively. Management monitors major variances and undertakes actions, where necessary.

Limits of Authority

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


System and Control

• Systems and Control Unit of Finance Division conducts scheduled governance and compliance audits in addition to the internal audits conducted by GIAD. The audits are meant to provide assurance to the Management on the Group’s internal control effectiveness and compliance to PGB Enterprise Resource Planning (ERP) system’s established roles and segregation of duties, LOA, policies and work procedures. At the end of each audit, a report is presented to the PGB MC highlighting fi ndings and the agreed corrective actions. The status of the audit issues are monitored and reported to PGB MC on a quarterly basis.

Tender Committee

• Tender Committee structure with defi ned level of responsibilities has been established to review all major contracts. Subsequent to the review by the relevant Tender Committees, the contracts will be subjected to approval by the relevant approving authority who is independent from the Tender Committees. Tenders are called for and are awarded based on factors such as capability, quality, track record, speed of delivery and cost.

Operating Procedures and Guidelines

• Internal control procedures are documented in standard operating procedure manuals with established guidelines on business planning, capital expenditure, fi nancial operations, performance reporting, plant and transmission operations, supply chain management, human resource, information technology and HSE.

Financial Control Framework

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

• On a semi-annual basis, each key process owner at various management levels is required to complete and submit a Letter of Assurance which provides confi rmation of compliance to key controls for the areas of the business for which they are accountable.

Contingency Planning

• The Group has contingency planning in place that defi nes the structure and processes for managing emergencies at operational locations. There is a three-tier response system in place which provides a clear demarcation of roles and responsibilities between emergency site management, operating division management and MC.

• The above integrated contingency planning together with business continuity strategies shall enhance the Group preparedness to respond and reduce the impact of crisis as well as recover and restore the Group’s critical functions within a reasonable period of time toward sustaining the Group’s operational survival thus protecting business and customers during crisis or disaster.

MANAGEMENT ROLE

Management is accountable to the Board for the implementation of the processes in identifying, evaluating, monitoring and reporting of risks and internal control as prescribed above. The MD/CEO and General Manager of Finance Division provided assurance to the Board that the Group’s risk management and internal control system are operating adequately and effectively.

WEAKNESSES IN INTERNAL CONTROL THAT RESULT IN MATERIAL LOSSES

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



REVIEW OF THIS STATEMENT

The external auditors have reviewed this Statement on Risk Management and Internal Control pursuant to the scope set out in Recommended Practice Guide (RPG) 5 issued by the Malaysian Institute of Accountants (MIA) for inclusion in the annual report of the Group for the year ended 31 December 2012, and reported to the Board that nothing has come to their attention that cause them to believe that the statement is inconsistent with their understanding of the process the Board has adopted in the review of the adequacy and effectiveness of risk management and internal controls within the Group.

RPG 5 does not require the external auditors to consider whether the Directors’ Statement on Risk Management and Internal Control covers all risks and controls, or to form an opinion on the adequacy and effectiveness of the Group’s risk management and internal control system including the assessment and opinion by the Directors and Management thereon.

This Statement on Risk Management and Internal Control is made in accordance with the resolution of the Board dated 11 March 2013.

Datuk Anuar bin AhmadChairman

Samsudin bin MiskonManaging Director/ Chief Executive Offi cer


Board Audit Committee Report

The Board Audit Committee (BAC) of PETRONAS Gas Berhad is pleased to present the Audit Committee Report for the fi nancial year ended 31 December 2012 in compliance with Paragraph 15.15 of Main Market Listing Requirements of Bursa Malaysia Securities Berhad (MMLR).

COMPOSITION

The BAC was formed by the Board pursuant to its meeting on 14 August 1995. Currently the BAC comprises of three Directors, in compliance with Paragraph 15.09(1)(a) of the MMLR. The members are as follows:

No. Name of Members

1. Dato’ N. Sadasivan N.N. PillayChairman(Senior Independent Non-Executive Director)

2. Dato’ Ab. Halim bin Mohyiddin(Independent Non-Executive Director)

3. Datuk Rosli bin Boni (Non-Independent Non-Executive Director)

4. Encik Muri bin Muhammad*(Independent Non-Executive Director)

* Vacated offi ce on 31 December 2012 pursuant to Paragraph 15.05(3)(c)

of the MMLR.

In line with the Malaysian Code on Corporate Governance 2012 (MCCG 2012) and Paragraph 15.09(1)(b) of the MMLR, all three BAC members are Non-Executive Directors, two of whom are Independent Directors. Both Independent Directors satisfy the test of independence under Paragraph 1.01 of the MMLR.

Dato’ Ab. Halim bin Mohyiddin is currently presiding as a Council Member of The Malaysian Institute of Certifi ed Public Accountants (MICPA) and also serves as the Chairman of the Education Training Committee of the Institute. He is also a member of the Malaysian Institute of Accountants (MIA). In this regard, the Company is in compliance with Paragraph 15.09(1)(c)(i) of the MMLR.

TERMS OF REFERENCE

The BAC is governed by the Terms of Reference as stipulated on pages 113 to 115 of the Annual Report. All the requirements under the Terms of Reference were fully complied with.

MEETINGS

During the year, the BAC held four meetings. The Meeting attendance record of the members are as follows:

Name of BAC Members Attendance

Dato’ N. Sadasivan N.N. Pillay 4/4

Dato’ Ab. Halim bin Mohyiddin 4/4

Datuk Rosli bin Boni 4/4

Encik Muri bin Muhammad* 3/4

* Vacated offi ce on 31 December 2012 pursuant to Paragraph 15.05(3)(c)

of the MMLR.


By invitation, the Managing Director/Chief Executive Offi cer (MD/CEO), Company Secretaries, General Manager of Finance Division, Head of Risk Management Department, external and internal auditors were also present during deliberations which required their inputs and advice.

The Head of Group Internal Audit Division of PETRONAS (GIAD) was present at the BAC meetings to present the internal audit reports to the BAC. Relevant members of the Management were at times invited to brief the BAC on specifi c issues arising from the audit fi ndings. The partner of the external auditors also attended the BAC meeting to present the external audit plan for the year as well as the outcome of the statutory audit conducted on the Company. In addition, during the year, the BAC met with the external auditors twice without the presence of the Management.

Deliberations during the BAC meetings included performance review of the Company, the proposed annual and interim fi nancial reporting to Bursa Malaysia Securities Berhad, the status of open audit fi ndings together with the agreed corrective actions and risk management activities.

It is common practice that the draft BAC minutes are circulated to the Board members prior to the Board meeting subsequent to the BAC meeting. This assists the BAC Chairman to effectively convey to the Board on matters deliberated at the BAC meeting. Minutes of the BAC meeting are tabled for confi rmation during the next BAC meeting, after which it is distributed to the Board for notation. In addition to communicating to the Board on matters deliberated during the BAC meeting, the BAC Chairman also recommends to the Board the approval of annual and interim fi nancial statements.

SUMMARY OF ACTIVITIES OF THE BAC

The following activities were carried out by the BAC during the fi nancial year ended 31 December 2012:

1. Reviewed the annual internal audit plan for the year including its scope, basis of assessments and risk ratings of the proposed areas of audit.

2. Reviewed and deliberated on reports of audits conducted by the GIAD.

3. Monitored all corrective actions on audit fi ndings identifi ed by the GIAD until all issues are resolved.

4. Reviewed the quarterly fi nancial results including quarterly fi nancial announcements to Bursa Malaysia Securities Berhad before recommending the same for approval by the Board upon being satisfi ed that, it complies with applicable approved Malaysian Financial Reporting Standards (MFRS) issued by the Malaysian Accounting Standards Board, MMLR and other relevant regulatory requirements.

5. Reviewed potential impact of implementation of new MFRS’s to the Company’s fi nancial statements.

6. Reviewed the Company’s annual and quarterly management accounts.

7. Reviewed the appointment of external auditors and their remuneration thereof.

8. Reviewed with the external auditors audit strategy and scope for the statutory audit of the Company’s fi nancial statements for the fi nancial year ended 31 December 2012.

Dato’ N. Sadasivan N.N. Pillay • Dato’ Ab. Halim bin Mohyiddin • Datuk Rosli bin Boni • Encik Muri bin Muhammad


Board Audit Committee Report

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

10. Reviewed the audited fi nancial statements of the Company prior to submission to the Board for their consideration and approval, upon being satisfi ed that, inter alia, they were drawn up in accordance with the provisions of the Companies Act, 1965, Malaysia and the applicable approved MFRS issued by the Malaysian Accounting Standards Board. The review also included relevant statements in relation to the fi nancial statements, being the Corporate Governance Statement, Statement on Risk Management and Internal Control, Statement of Directors Responsibilities and BAC Report.

11. Reviewed the Company’s Enterprise Risk Report, Status of Risk Monitoring and deliberated on the risk exposures and the required mitigation plans.

INTERNAL AUDIT

The internal audit function of the Company was carried out by the GIAD. They maintained at all times their impartiality, profi ciency and due professional care by having their plans and reports directly under the purview of the BAC.

The internal audits were undertaken to provide independent assessments on the adequacy, effi ciency and effectiveness of the Company’s internal control systems in anticipating potential risks exposures over key business processes within the Company. The BAC has full access to internal auditors and received reports on all audits performed.

During the fi nancial year under review, the internal auditors had carried out audits according to the internal audit plan which had been approved by the BAC. Internal audits were carried out to provide assurance that internal controls are established and operating as intended to achieve effective and effi cient operations and adherence to applicable policies, guidelines and procedures. The audits conducted during the year were:

• Audit on PGB Transmission Operations Division Open Access Readiness.

• Audit on PGB Finance Activities.

• Shareholders Audit on Industrial Gases Solutions Sdn Bhd.

• Audit on Kimanis Power Plant Project Management and Governance Activities.

The resulting reports from the audits were reviewed by the BAC and subsequently forwarded to the Management for the necessary corrective actions. The Management is responsible for ensuring that corrective actions are taken within the required time frame.

REPORTING TO THE EXCHANGE

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

Dato’ N. Sadasivan N.N. PillayChairmanBoard Audit Committee11 March 2013


Board Audit Committee’s Terms of Reference

CONSTITUTION

The Board Audit Committee (BAC) was formed by the Board pursuant to its meeting on 14 August 1995.

MEMBERSHIP

The members of the BAC shall be appointed by the Board from amongst their number and shall consist of not less than three members. In line with Paragraph 15.09(1)(b) and 15.10 of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (MMLR), all BAC members including the Chairman shall be Non-Executive Directors. The majority of the BAC members including the Chairman shall be Independent Directors. An Independent Director shall be a Director who fulfi lls the requirements as provided in the MMLR.

All BAC members must be fi nancially literate with at least one member of the BAC:

a) shall be a member of the Malaysian Institute of Accountants; or

b) if he/she is not a member of the Malaysian Institute of Accountants, he/she must have at least three years’ working experience; and

i) passed the examinations specifi ed in Part I of the First Schedule of the Accountants Act, 1967, Malaysia; or

ii) is a member of one of the associations of accountants specifi ed in Part II of the First Schedule of the Accountants Act, 1967, Malaysia; and

c) fulfi lls such other requirements as prescribed or approved by Bursa Malaysia Securities Berhad.

The members of the BAC shall elect a Chairman from amongst their number who shall be an Independent Director.

If a member of the BAC resigns, dies or for any other reason ceases to be a member with the result that the number of members is reduced to below three, the Board shall within three months of that event, appoint such number of new members as may be required to make up the minimum number of three members.

No alternate Director can be appointed as a member of the BAC.

The terms of offi ce and performance of the BAC and each of its members shall be reviewed by the Board periodically to whether the BAC and/or its members have carried out its duties in accordance with its Terms of Reference.

MEETING

To form a quorum, the majority of the members present must be Independent Directors and one of whom shall be the Chairman of the BAC. The BAC shall be able to convene meetings with the external auditors, internal auditors or both without the presence of any other Directors or employees whenever it deems necessary. The external auditors and internal auditors have the right to appear and be heard at any meeting of the BAC and shall appear before the BAC when required to do so by the BAC.

The Company Secretary or in his/her absence, his/her deputy shall be the Secretary of the BAC. Minutes of the meetings shall be duly entered in the books provided therefor.

Meetings shall be held not less than four times a year. The external auditors may request a meeting if they consider it necessary. The Chairman of the BAC shall convene a meeting of the Committee to consider any matters the external auditor believes should be brought to the attention of the Board or shareholders.

AUTHORITY

The BAC is authorised by the Board to investigate any activity within its Terms of Reference. It is authorised to seek any information it requires from any employee and all employees are directed to cooperate with any request made by the BAC.

The BAC is authorised by the Board to obtain outside legal or other independent professional advice and to secure the attendance of outsiders with relevant experience and expertise if it considers this necessary.

The BAC is authorised by the Board to communicate directly with internal and external auditors, as well as the members of Management such as the Chairman of the Company and

Managing Director/Chief Executive Offi cer on a continuous basis in order to be informed and updated with matters related to the Company.


DUTIES AND FUNCTIONS

The duties and functions of the BAC shall be:

1) External Audit

a) To consider the appointment of the external auditors, the audit fees, and any question in relation to resignation or dismissal of the external auditors before making recommendation to the Board; and

b) To review and discuss with the external auditors, before the audit commences, the nature and scope of the audit, and ensure coordination where more than one audit fi rm is involved.

2) Internal Audit

a) To review the internal audit plan, consider the major fi ndings of internal audits and Management’s responses, and ensure coordination between the internal and external auditors;

b) To review the adequacy of the scope, functions, competency and resources of the internal audit functions and that it has the necessary authority to carry out its work;

c) To review the audit reports;

d) To direct and where appropriate supervise any special project or investigation considered necessary;

e) To prepare periodic reports to the Board summarising the work performed in fulfi lling the BAC’s primary responsibilities; and

f) To determine the remit of internal audit function which reports directly to the BAC. The internal audit function should be independent of the activities they audit and should be performed with impartiality, profi ciency and due professional care.

3) Financial Reporting Review

To review with the Management and the external auditors the quarterly results and year-end fi nancial statements prior to the approval by the Board, focusing particularly on:

i) any change in accounting policies and practices;

ii) signifi cant and unusual events;

iii) major judgmental areas;

iv) signifi cant adjustments resulting from the audit;

v) the going concern assumption;

vi) compliance with accounting standards; and

vii) compliance with other legal requirements and MMLR.

4) Related Party Transactions

To review any related party transaction and confl ict of interest situation that may arise in the Company including any transaction, procedure or course of conduct that raises the questions of management integrity.

5) Internal Control

To keep under review the effectiveness of internal control systems and the internal and/or external auditors’ evaluation of these systems and in particular review the external auditors’ Management Letter and Management’s responses.

Board Audit Committee’s Terms of Reference


6) Other Matters

a) To arrange for periodic reports from Management, the external auditors and the internal auditors to assess the impact of signifi cant regulatory changes, and accounting or reporting developments proposed by accounting and other bodies, or any signifi cant matter that may have a bearing on the annual examination;

b) To discuss problems and reservations arising from the internal audits, interim and fi nal audits, and matters the internal and external auditors may wish to discuss (in the absence of Management where necessary);

c) Where the BAC is of the view that a matter reported by it to the Board has not been satisfactorily resolved resulting in a breach of the MMLR, the BAC must promptly report such matter to the Securities Commission; and

d) Carrying out any other functions that may be mutually agreed upon by BAC and the Board.

REPORTING PROCEDURES

The Secretary shall circulate the minutes of meetings of the BAC to all members of the Board.


Statement of Directors’ Responsibility

The fi nancial statements of the Group and of the Company as set out on pages 118 to 191, are properly drawn up so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2012 and of the results of its operations and cash fl ows for the year ended on that date.

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

• appropriate accounting policies have been used and consistently applied;

• reasonable and prudent judgments and estimates were made;

• all Malaysian Financial Reporting Standards and the Companies Act, 1965, Malaysia have been followed; and

• are prepared on a going concern basis.

The Directors are responsible for ensuring that the accounting and other records and registers required by the Companies Act, 1965, Malaysia to be retained by the Company and its subsidiaries have been properly kept in accordance with the provisions of the said Act.

The Directors also have general responsibilities for taking such steps that are reasonably available to them to safeguard the assets of the Group and the Company, and to prevent and detect fraud and other irregularities.

IN RELATION TO THE FINANCIAL STATEMENTS


Financial Statements

Directors’ Report 118

Statement by Directors 123

Statutory Declaration 123

Consolidated Statement of Financial Position 124

Consolidated Statement of Profi t or Loss and Other Comprehensive Income 125

Consolidated Statement of Changes in Equity 126

Consolidated Statement of Cash Flows 127

Statement of Financial Position 128

Statement of Profi t or Loss and Other Comprehensive Income 129

Statement of Changes in Equity 130

Statement of Cash Flows 131

Notes to the Financial Statements 132

Independent Auditors’ Report 192

Directors’ Report FOR THE YEAR ENDED 31 DECEMBER 2012

The Directors have pleasure in submitting their report and the audited fi nancial statements of the Group and of the Company for the year ended 31 December 2012.

Principal Activities

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

The principal activities of subsidiaries, associate and jointly controlled entity are as stated in note 4, note 5 and note 6 to the fi nancial statements respectively.

Results Group Company RM’000 RM’000

Profi t for the year 1,397,101 1,478,722

Attributable to:Shareholders of the Company 1,405,205 1,478,722 Non-controlling interests (8,104) –

Dividends

During the fi nancial year, the Company paid:

i) a fi nal dividend of 25% per ordinary share under single tier system in respect of the fi nancial period ended 31 December 2011 amounting to RM494,683,000 on 13 June 2012; and

ii) an interim dividend of 15% per ordinary share under single tier system in respect of the fi nancial year ended 31 December 2012 amounting to RM296,810,000 on 20 September 2012.

The Directors propose a fi nal dividend of 35% per ordinary share under single tier system amounting to RM692,556,000 in respect of the fi nancial year ended 31 December 2012 for shareholders’ approval at the forthcoming Annual General Meeting.

The fi nancial statements for the current fi nancial year do not refl ect this proposed dividend. Such dividend, if approved by the shareholders, will be accounted for in equity as an appropriation of retained profi ts in the fi nancial year ending 31 December 2013.

Reserves and Provisions

There were no material movements to or from reserves and provisions during the year under review other than as disclosed in the fi nancial statements.


Directors’ Report

FOR THE YEAR ENDED 31 DECEMBER 2012

Directors of the Company

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

Datuk Anuar bin Ahmad Dato’ N. Sadasivan N.N. PillaySamsudin bin MiskonDato Mohammad Medan bin AbdullahDatuk Rosli bin BoniPramod Kumar KarunakaranDato’ Ab. Halim bin MohyiddinLim Beng ChoonMuri bin Muhammad (offi ce vacated on 31 December 2012)Ramlan bin Abdul Malek (offi ce vacated on 31 December 2012)

The offi ces of Muri bin Muhammad and Ramlan bin Abdul Malek were vacated on 31 December 2012 pursuant to paragraph 15.05(3)(c) of the Main Market Listing Requirements.

In accordance with Article 93 of the Company’s Articles of Association, Datuk Anuar bin Ahmad and Datuk Rosli bin Boni will retire by rotation from the Board at the forthcoming Annual General Meeting and, being eligible, offer themselves for re-election.

In accordance with Article 96 of the Company’s Articles of Association, no Directors were appointed to fi ll a casual vacancy in the Board, thus, no Director will retire at the forthcoming Annual General Meeting and offer themselves for re-election.

In accordance with Section 129(6) of the Companies Act, 1965, Dato’ N. Sadasivan N.N. Pillay is retiring at the forthcoming Annual General Meeting. Dato’ N. Sadasivan N.N. Pillay offers himself for re-appointment and is eligible to be re-appointed.

Directors’ Interests

The Directors in offi ce at the end of the year who have interests in the shares of the Company and of its related corporations other than wholly owned subsidiaries as recorded in the Register of Directors’ Shareholdings are as follows:

Number of ordinary shares of RM1.00 each in the Company Name Balance at Balance at 1.1.2012 Bought Sold 31.12.2012

Muri bin Muhammad 7,000 – (7,000) –Dato’ Ab. Halim bin Mohyiddin 5,000 – – 5,000

Number of ordinary shares of RM1.00 each in PETRONAS Dagangan BerhadName Balance at Balance at 1.1.2012 Bought Sold 31.12.2012

Datuk Anuar bin Ahmad 2,000 – – 2,000 Muri bin Muhammad 10,000 – (10,000) –


Directors’ Interests (continued) Number of ordinary shares of RM1.00 each in KLCC Property Holdings BerhadName Balance at Balance at 1.1.2012 Bought Sold 31.12.2012

Lim Beng Choon 34,200 – (13,000) 21,200

Number of ordinary shares of RM0.10 each in PETRONAS Chemicals Group BerhadName Balance at Balance at 1.1.2012 Bought Sold 31.12.2012

Datuk Anuar bin Ahmad 20,000 – – 20,000 Muri bin Muhammad 10,000 – (10,000) –Ramlan bin Abdul Malek 10,000 – – 10,000 Dato Mohammad Medan bin Abdullah 6,000 – – 6,000 Pramod Kumar Karunakaran 6,000 – – 6,000 Samsudin bin Miskon 6,000 – – 6,000 Datuk Rosli bin Boni 6,000 – – 6,000 Dato’ Ab. Halim bin Mohyiddin– own 5,000 – – 5,000 – others 5,000 – – 5,000

The other Directors holding offi ce at 31 December 2012 had no interest in the ordinary shares of the Company and of its related corporations during the fi nancial year.

Directors’ Benefi ts

Since the end of the previous fi nancial period, no Director of the Company has received nor become entitled to receive any benefi t (other than the benefi t included in the aggregate amount of emoluments received or due and receivable by Directors as shown in the fi nancial statements or the fi xed salary of a full time employee of the Company or of related corporations), by reason of a contract made by the Company or a related corporation with the Director or with a fi rm of which the Director is a member, or with a company in which the Director has a substantial fi nancial interest.

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

Issue of Shares

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

Options Granted Over Unissued Shares

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

Directors’ Report



Other Statutory Information

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

i) there are no bad debts to be written off and no provision need to be made for doubtful debts, and

ii) any current assets which were unlikely to be realised in the ordinary course of business have been written down to an amount which they might be expected so to realise.

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

i) that would render it necessary to write off any bad debts or provide for any doubtful debts, or

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

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

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

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

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

ii) any contingent liability in respect of the Group or of the Company that has arisen since the end of the fi nancial year.

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

In the opinion of the Directors, the fi nancial performance of the Group and of the Company for the fi nancial year ended 31 December 2012 have not been substantially affected by any item, transaction or event of a material and unusual nature nor has any such item, transaction or event occurred in the interval between the end of that fi nancial year and the date of this report.

Signifi cant Event During the Financial Year

Shareholders Agreement for Regas Terminal (Lahad Datu) Sdn. Bhd. (“RGTLD”)

On 10 September 2012, the Company entered into a Shareholder Agreement with Sabah Energy Corporation Sdn. Bhd. for the purpose of undertaking the construction and development of the LNG Regasifi cation Facilities in Lahad Datu, Sabah (“Facilities”). RGTLD will be responsible to the overall coordination and strategic management of the project from the development stage and will also own, operate and maintain the Facilities with an expected capacity of 0.76 million tonnes per annum.

Directors’ Report



Subsequent Events

There were no material events subsequent to the end of the year.

Auditors

The auditors, Messrs KPMG Desa Megat & Co., have indicated their willingness to accept re-appointment.

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


Samsudin bin Miskon

Kuala Lumpur, 21 February 2013

Directors’ Report



In the opinion of the Directors, the fi nancial statements set out on pages 124 to 190, are drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the Companies Act, 1965 in Malaysia so as to give a true and fair view of the fi nancial position of the Group and of the Company at 31 December 2012 and of their fi nancial performance and cash fl ows for the year ended on that date.

In the opinion of the Directors, the information set out in note 34 on page 191 to the fi nancial statements has been compiled in accordance with the Guidance on Special Matter No.1, Determination of Realised and Unrealised Profi ts or Losses in the Context of Disclosures Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, issued by the Malaysian Institute of Accountants, and presented based on the format prescribed by Bursa Malaysia Securities Berhad.

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


Samsudin bin Miskon

Kuala Lumpur, 21 February 2013

Statement by Directors

I, Aida Aziza binti Mohd Jamaludin, the offi cer primarily responsible for the fi nancial management of PETRONAS GAS BERHAD, do solemnly and sincerely declare that the fi nancial statements set out on pages 124 to 191 are, to the best of my knowledge and belief, correct and I make this solemn declaration conscientiously believing the same to be true, and by virtue of the provisions of the Statutory Declarations Act, 1960.

Subscribed and solemnly declared by the above named Aida Aziza binti Mohd Jamaludin at Kuala Lumpur in Wilayah Persekutuan on 21 February 2013

BEFORE ME:

Statutory Declaration


Note 31.12.2012 31.12.2011 1.4.2011 RM’000 RM’000 RM’000

ASSETS Property, plant and equipment 3 10,501,881 7,458,272 6,830,609 Investment in associate 5 127,796 179,567 175,087 Investment in jointly controlled entity 6 7,205 5,414 2,606

TOTAL NON-CURRENT ASSETS 10,636,882 7,643,253 7,008,302

Trade and other inventories 7 103,044 102,449 100,399 Trade and other receivables 8 356,786 386,371 369,997 Fund and other investments 9 160,422 245,562 275,082 Cash and cash equivalents 10 2,205,070 2,368,834 2,756,079

TOTAL CURRENT ASSETS 2,825,322 3,103,216 3,501,557

TOTAL ASSETS 13,462,204 10,746,469 10,509,859

EQUITY Share capital 11 1,978,732 1,978,732 1,978,732 Reserves 12 7,188,199 6,578,673 6,487,024

Total equity attributable to the shareholders of the Company 9,166,931 8,557,405 8,465,756 Non-controlling interests 13 115,815 86,516 49,415

TOTAL EQUITY 9,282,746 8,643,921 8,515,171

LIABILITIES Borrowings 14 1,639,284 444,735 423,580 Deferred tax 16 1,004,045 1,053,000 1,107,000 Other long term liabilities 17 30,517 10,692 11,937

TOTAL NON-CURRENT LIABILITIES 2,673,846 1,508,427 1,542,517 Borrowings 14 463,146 – – Trade and other payables 19 920,258 447,632 340,030 Taxation 122,208 146,489 112,141

TOTAL CURRENT LIABILITIES 1,505,612 594,121 452,171

TOTAL LIABILITIES 4,179,458 2,102,548 1,994,688

TOTAL EQUITY AND LIABILITIES 13,462,204 10,746,469 10,509,859

The notes set out on pages 132 to 191 are an integral part of these fi nancial statements.

Consolidated Statement of Financial PositionAT 31 DECEMBER 2012


1.1.2012 1.4.2011 to to Note 31.12.2012 31.12.2011 RM’000 RM’000

Revenue 20 3,576,771 2,765,124 Cost of revenue 20 (1,806,762) (1,347,251)

Gross profi t 20 1,770,009 1,417,873 Administration expenses (152,038) (113,038) Other expenses (70,178) (37,572) Other income 293,177 153,391

Operating profi t 21 1,840,970 1,420,654Financing costs 22 (20,342) (16,263)Share of profi t after tax of equity-accounted associate and jointly controlled entity 23,921 28,600

Profi t before taxation 1,844,549 1,432,991Tax expense 23 (447,448) (352,198)

Profi t for the year/ period 1,397,101 1,080,793

Other comprehensive expenseItem that may be reclassifi ed subsequently to profi t or loss

Change in fair value of cash fl ow hedge (6,976) –

Total other comprehensive expense for the year/ period (6,976) –

TOTAL COMPREHENSIVE INCOME FOR THE YEAR/ PERIOD 1,390,125 1,080,793

Profi t attributable to: Shareholders of the Company 1,405,205 1,081,014 Non-controlling interests 13 (8,104) (221)

PROFIT FOR THE YEAR/ PERIOD 1,397,101 1,080,793

Total comprehensive income attributable to: Shareholders of the Company 1,401,019 1,081,014 Non-controlling interests (10,894) (221)

TOTAL COMPREHENSIVE INCOME FOR THE YEAR/ PERIOD 1,390,125 1,080,793

Basic and diluted earnings per ordinary share 25 71.0 sen 54.6 sen


Consolidated Statement of Profi t or Loss and Other Comprehensive Income FOR THE YEAR ENDED 31 DECEMBER 2012


Attributable to shareholders of the Company

Non-distributable Distributable

Share Share Hedging Retained Non-controlling Total Note Capital Premium Reserve Profi ts Total Interests Equity RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Balance at 1 April 2011 1,978,732 1,186,472 – 5,300,552 8,465,756 49,415 8,515,171

Profi t for the period – – – 1,081,014 1,081,014 (221) 1,080,793

Total comprehensive income for the period – – – 1,081,014 1,081,014 (221) 1,080,793

Issuance of ordinary share capital to non-controlling interests – – – – – 37,322 37,322Dividends – 31.03.2011 fi nal 24 – – – (692,556) (692,556) – (692,556)Dividends – 31.12.2011 interim 24 – – – (296,809) (296,809) – (296,809)

Total (distribution to)/ contribution from shareholders – – – (989,365) (989,365) 37,322 (952,043)

Balance at 31 December 2011 1,978,732 1,186,472 – 5,392,201 8,557,405 86,516 8,643,921

Balance at 1 January 2012 1,978,732 1,186,472 – 5,392,201 8,557,405 86,516 8,643,921

Cash fl ow hedge – – (4,186) – (4,186) (2,790) (6,976)Profi t for the year – – – 1,405,205 1,405,205 (8,104) 1,397,101

Total comprehensive income for the year – – (4,186) 1,405,205 1,401,019 (10,894) 1,390,125

Issuance of ordinary share capital to non-controlling interests – – – – – 40,193 40,193Dividends – 31.12.2011 fi nal 24 – – – (494,683) (494,683) – (494,683)Dividends – 31.12.2012 interim 24 – – – (296,810) (296,810) – (296,810)

Total (distribution to)/ contribution from shareholders – – – (791,493) (791,493) 40,193 (751,300)

Balance at 31 December 2012 1,978,732 1,186,472 (4,186) 6,005,913 9,166,931 115,815 9,282,746



Consolidated Statement of Changes in Equity


1.1.2012 1.4.2011 to to Note 31.12.2012 31.12.2011 RM’000 RM’000

CASH FLOWS FROM OPERATING ACTIVITIES Cash receipts from customers 3,700,035 2,806,156 Cash paid to suppliers and employees (1,210,753) (1,004,189)

2,489,282 1,801,967 Interest income from fund and other investments 92,039 72,624 Taxation paid (520,684) (371,850)

Net cash generated from operating activities 2,060,637 1,502,741

CASH FLOWS FROM INVESTING ACTIVITIES Purchase of fund and other investments – (20,000) Dividends received 29,433 21,312 Purchase of property, plant and equipment (2,554,475) (1,016,191) Proceeds from disposal of investment in associate 144,447 – Maturity of other investments 85,000 50,000 Proceeds from disposal of property, plant and equipment 478 22,059

Net cash used in investing activities (2,295,117) (942,820)

CASH FLOWS FROM FINANCING ACTIVITIES Financing costs paid (21,544) (10,213) Drawdown of Islamic fi nancing facilities 1,016,000 – Dividends paid (791,493) (989,365) Advances from non-controlling interests 332 16,772 Repayment of term loan (156,000) – Issuance of ordinary share capital to non-controlling interests 23,421 35,640

Net cash generated from/ (used in) fi nancing activities 70,716 (947,166)

NET DECREASE IN CASH AND CASH EQUIVALENTS (163,764) (387,245)

CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR/ PERIOD 2,368,834 2,756,079

CASH AND CASH EQUIVALENTS AT END OF THE YEAR/ PERIOD 10 2,205,070 2,368,834


Consolidated Statement of Cash FlowsFOR THE YEAR ENDED 31 DECEMBER 2012


Note 31.12.2012 31.12.2011 1.4.2011 RM’000 RM’000 RM’000

ASSETS Property, plant and equipment 3 6,712,376 6,449,104 6,702,248 Investment in subsidiaries 4 2,192,101 881,716 75,729 Investment in associate 5 76,466 103,336 103,336 Investment in jointly controlled entity 6 250 250 250

TOTAL NON-CURRENT ASSETS 8,981,193 7,434,406 6,881,563

Trade and other inventories 7 103,044 102,449 100,399 Trade and other receivables 8 549,385 428,441 374,513 Fund and other investments 9 160,422 245,562 275,082 Cash and cash equivalents 10 1,706,219 2,322,896 2,743,731

TOTAL CURRENT ASSETS 2,519,070 3,099,348 3,493,725

TOTAL ASSETS 11,500,263 10,533,754 10,375,288

EQUITY Share capital 11 1,978,732 1,978,732 1,978,732 Reserves 12 7,192,152 6,504,923 6,415,176

TOTAL EQUITY 9,170,884 8,483,655 8,393,908

LIABILITIES Borrowings 14 – 444,735 423,580 Deferred tax 16 1,004,000 1,053,000 1,107,000 Other long term liabilities 17 9,688 10,692 11,937

TOTAL NON-CURRENT LIABILITIES 1,013,688 1,508,427 1,542,517

Borrowings 14 448,019 – – Trade and other payables 19 745,789 395,198 326,728 Taxation 121,883 146,474 112,135

TOTAL CURRENT LIABILITIES 1,315,691 541,672 438,863

TOTAL LIABILITIES 2,329,379 2,050,099 1,981,380

TOTAL EQUITY AND LIABILITIES 11,500,263 10,533,754 10,375,288


Statement of Financial Position AT 31 DECEMBER 2012


Statement of Profi t or Loss and Other Comprehensive Income FOR THE YEAR ENDED 31 DECEMBER 2012

1.1.2012 1.4.2011 to to Note 31.12.2012 31.12.2011 RM’000 RM’000

Revenue 20 3,576,771 2,765,124 Cost of revenue 20 (1,806,762) (1,347,251)

Gross profi t 20 1,770,009 1,417,873

Administration expenses (147,483) (107,363)Other expenses (12,573) (37,572)Other income 335,520 174,616

Operating profi t 21 1,945,473 1,447,554

Financing costs 22 (20,342) (16,263)

Profi t before taxation 1,925,131 1,431,291

Tax expense 23 (446,409) (352,179)

PROFIT FOR THE YEAR/ PERIOD REPRESENTING TOTAL COMPREHENSIVE INCOME FOR THE YEAR/ PERIOD 1,478,722 1,079,112



Attributable to shareholders of the Company

Non-distributable Distributable

Share Share Retained Note Capital Premium Profi ts Total RM’000 RM’000 RM’000 RM’000

Balance at 1 April 2011 1,978,732 1,186,472 5,228,704 8,393,908

Profi t for the period – – 1,079,112 1,079,112

Total comprehensive income for the period – – 1,079,112 1,079,112

Dividends – 31.03.2011 fi nal 24 – – (692,556) (692,556)Dividends – 31.12.2011 interim 24 – – (296,809) (296,809)

Total distribution to shareholders of the Company – – (989,365) (989,365)

Balance at 31 December 2011 1,978,732 1,186,472 5,318,451 8,483,655

Balance at 1 January 2012 1,978,732 1,186,472 5,318,451 8,483,655

Profi t for the year – – 1,478,722 1,478,722

Total comprehensive income for the year – – 1,478,722 1,478,722

Dividends – 31.12.2011 fi nal 24 – – (494,683) (494,683)Dividends – 31.12.2012 interim 24 – – (296,810) (296,810)

Total distribution to shareholders of the Company – – (791,493) (791,493)

Balance at 31 December 2012 1,978,732 1,186,472 6,005,680 9,170,884


Statement of Changes in Equity FOR THE YEAR ENDED 31 DECEMBER 2012


1.1.2012 1.4.2011 to to Note 31.12.2012 31.12.2011 RM’000 RM’000

CASH FLOWS FROM OPERATING ACTIVITIES Cash receipts from customers 3,712,700 2,806,156 Cash paid to suppliers and employees (1,229,001) (998,034)

2,483,699 1,808,122 Interest income from fund and other investments 86,775 72,537 Taxation paid (520,000) (371,840)

Net cash generated from operating activities 2,050,474 1,508,819

CASH FLOWS FROM INVESTING ACTIVITIES Advances to subsidiary (194,084) (36,724) Subscription of shares in subsidiaries 4 (1,271,139) (805,987) Purchase of fund and other investments – (20,000) Dividends received 29,433 21,312 Purchase of property, plant and equipment (648,249) (252,640) Proceeds from disposal of investment in associate 144,447 – Maturity of other investments 85,000 50,000 Proceeds from disposal of property, plant and equipment 478 113,963

Net cash used in investing activities (1,854,114) (930,076)

CASH FLOWS FROM FINANCING ACTIVITIES Financing costs paid (21,544) (10,213) Dividends paid (791,493) (989,365)

Net cash used in fi nancing activities (813,037) (999,578)

NET DECREASE IN CASH AND CASH EQUIVALENTS (616,677) (420,835)

CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR/ PERIOD 2,322,896 2,743,731

CASH AND CASH EQUIVALENTS AT END OF THE YEAR/ PERIOD 10 1,706,219 2,322,896


Statement of Cash Flows FOR THE YEAR ENDED 31 DECEMBER 2012


PETRONAS GAS BERHAD is a public limited liability company, incorporated and domiciled in Malaysia and is listed on the Main Board of the Bursa Malaysia Securities Berhad. The address of its registered offi ce and principal place of business is:

Tower 1, PETRONAS Twin TowersKuala Lumpur City Centre50088 Kuala Lumpur

The Company is principally engaged in separating natural gas into its components and storing, transporting and distributing such components thereof for a fee and the sale of industrial utilities. The principal activities of its subsidiaries, associate and jointly controlled entity are as stated in note 4, note 5 and note 6 to the fi nancial statements respectively.

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

The consolidated fi nancial statements as at and for the fi nancial year ended 31 December 2012 comprise the Company and its subsidiaries, and the Group’s interest in an associate and a jointly controlled entity.

1. Basis of Preparation

1.1 Statement of compliance

The fi nancial statements of the Group and of the Company have been prepared in accordance with Malaysian Financial Reporting Standards (“MFRSs”), International Financial Reporting Standards (“IFRSs”) and the Companies Act, 1965 in Malaysia. These are the Group’s and the Company’s fi rst fi nancial statements prepared in accordance with MFRSs and MFRS 1, First-time Adoption of

Malaysian Financial Reporting Standards has been applied.

These fi nancial statements also comply with the applicable disclosure provisions of the Listing Requirements of Bursa Malaysia Securities Berhad.

In the previous years, the fi nancial statements of the Group and of the Company were prepared in accordance with Financial Reporting Standards (“FRSs”) in Malaysia.

The transition to MFRSs does not have fi nancial impact to the fi nancial statements of the Group and of the Company.

The Group and the Company have early adopted the amendments to MFRS 101, Presentation of Financial Statements which are effective for annual periods beginning on or after 1 July 2012. The early adoption of the amendments to MFRS 101 has no impact on the fi nancial statements other than the presentation format of the statement of profi t or loss and other comprehensive income.

The Malaysian Accounting Standards Board (“MASB”) has issued other new and revised MFRSs, amendments and IC interpretations (collectively referred to as “pronouncements”) which are not yet effective and therefore, have not been implemented by the Group and the Company in these fi nancial statements as set out in note 32. New pronouncements that are not relevant to the operation of the Group and of the Company are set out in note 33.

These fi nancial statements were authorised for issue by the Board of Directors on 21 February 2013.

Notes to the Financial Statements 31 DECEMBER 2012


1. Basis of Preparation (continued)

1.2 Comparative fi gures

The Group and the Company have changed its fi nancial year end from 31 March to 31 December effective from the previous reporting period. Consequently, the current fi nancial statements are for a period of 12 months from 1 January 2012 to 31 December 2012. The comparatives fi gures are for the previous 9 months period from 1 April 2011 to 31 December 2011.

1.3 Basis of measurement

The fi nancial statements of the Group and of the Company have been prepared on the historical cost basis, other than as disclosed in the accounting policies below whereby certain items are measured at fair value.

1.4 Functional and presentation currency

The individual fi nancial statements of each entity in the Group are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The Group’s and the Company’s fi nancial statements are presented in Ringgit Malaysia (RM), which is also the Company’s functional currency.

All fi nancial information presented in RM has been rounded to the nearest thousand, unless otherwise stated.

1.5 Use of estimates and judgments

The preparation of fi nancial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

In particular, information about signifi cant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most signifi cant effect on the amount recognised in the fi nancial statements are described in the following notes:

i) Note 3 : Property, Plant and Equipment;ii) Note 16 : Deferred Tax; andiii) Note 30 : Financial Instruments.

2. Signifi cant Accounting Policies

The accounting policies set out below have been applied consistently to all periods presented in these fi nancial statements and in preparing the opening MFRS statements of fi nancial position of the Group and of the Company at 1 April 2011 (the transition date to MFRS framework) and comparatives for the fi nancial period ended 31 December 2011, unless otherwise stated.

2.1 Basis of consolidation

Subsidiaries are entities controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the fi nancial and operating policies of an entity so as to obtain benefi ts from its activities.

The fi nancial statements of subsidiaries are included in the consolidated fi nancial statements from the date that control commences until the date that control ceases.

Notes to the Financial Statements

31 DECEMBER 2012


2. Signifi cant Accounting Policies (continued)

2.1 Basis of consolidation (continued)

All inter-company transactions are eliminated on consolidation and revenue and profi ts relate to external transactions only. Unrealised losses resulting from inter-company transactions are also eliminated unless cost cannot be recovered.

Business combinations

Business combinations are accounted for using the acquisition method from the acquisition date, which is the date on which control is transferred to the Group.

The Group measures goodwill as the excess of the aggregate of consideration transferred, amount recognised for any non-controlling interests in the acquiree and the fair value of any previously held equity interest in the acquiree over the fair value of the identifi able assets acquired and liabilities assumed. When the excess is negative, the difference is recognised immediately in the profi t or loss.

For each business combination, the Group elects whether it measures the non-controlling interests in the acquiree either at fair value or at the proportionate share of the acquiree’s identifi able net assets at the acquisition date.

Costs related to the acquisition, other than those associated with the issuance of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred. Non-controlling interests

Non-controlling interests at the reporting date, being the portion of the net assets of subsidiaries attributable to equity interests that are not owned by the Company, whether directly or indirectly through subsidiaries, are presented in the consolidated statement of fi nancial position and statement of changes in equity within equity, separately from equity attributable to the equity shareholders of the Company. Non-controlling interests in the results of the Group are presented in the consolidated statement of profi t or loss and other comprehensive income as an allocation of the profi t or loss and the comprehensive income for the year between the non-controlling interests and the equity shareholders of the Company.

Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a defi cit balance.

The Group treats all changes in its ownership interest in a subsidiary that do not result in a loss of control as equity transactions between the Group and its non-controlling interest holders. Any difference between the Group’s share of net assets before and after the change, and any consideration received or paid, is adjusted to or against Group reserves.

Loss of control

When control of a subsidiary is lost, the Group derecognises the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or defi cit arising on the loss of control is recognised in profi t or loss. If the Group retains any interest in the former subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently it is accounted for as an equity-accounted investee or as an available-for-sale fi nancial asset depending on the level of infl uence retained.


31 DECEMBER 2012



2.2 Associate

An associate is an entity in which the Group has signifi cant infl uence including representation on the Board of Directors, but not control or joint control, over the fi nancial and operating policies of the investee company.

An associate is accounted for in the consolidated fi nancial statements using the equity method. The consolidated fi nancial statements include the Group’s share of post-acquisition profi ts or losses of the equity-accounted associate, after adjustments to align the accounting policies with those of the Group, from the date that signifi cant infl uence commences until the date that signifi cant infl uence ceases.

The Group’s share of post-acquisition reserves and retained profi ts less losses is added to the carrying amount of the investment in the consolidated statement of fi nancial position. These amounts were taken from the latest audited fi nancial statements or management fi nancial statements of the associate.

When the Group’s share of post-acquisition losses exceeds its interest in an equity-accounted associate, the carrying amount of that interest (including any long-term investments) is reduced to nil and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee.

Unrealised profi ts arising from transactions between the Group and its associate are eliminated to the extent of the Group’s interests in the associate. Unrealised losses on such transactions are also eliminated partially, unless cost cannot be recovered.

When the Group ceases to have signifi cant infl uence over an associate, it is accounted for as a disposal of the entire interest in that associate, with a resulting gain or loss being recognised in profi t or loss. Any retained interest in the former associate at the date when signifi cant infl uence is lost is re-measured at fair value and this amount is regarded as the initial carrying amount of a fi nancial asset.

When the Group’s interest in an associate decreases but does not result in a loss of signifi cant infl uence, any retained interest is not re-measured. Any gain or loss arising from the decrease in interest is recognised in profi t or loss. Any gains or losses previously recognised in other comprehensive income are also reclassifi ed proportionately to the profi t or loss.

Investment in associate is measured in the Company’s statement of fi nancial position at cost less any impairment losses, unless the investment is classifi ed as held for sale or distribution. The cost of investment includes transactions costs.

2.3 Jointly controlled entity

The Group has an interest in a joint venture which is a jointly controlled entity. A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity that is subject to joint control, established by contractual agreement and requiring unanimous consent for strategic fi nancial and operating decisions. A jointly controlled entity is a joint venture that involves the establishment of a separate entity in which each venturer has an interest.

Investment in the jointly controlled entity is accounted for in the consolidated fi nancial statements using the equity method of accounting as described in note 2.2.

2.4 Property, plant and equipment and depreciation

Freehold land and project-in-progress are stated at cost less accumulated impairment losses, if any, and are not depreciated. Other property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any.


31 DECEMBER 2012



2.4 Property, plant and equipment and depreciation (continued)

Cost includes expenditures that are directly attributable to the acquisition of the asset and any other costs directly attributable to bringing the assets to working condition for their intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. The cost of self-constructed assets also includes the cost of materials and direct labour. For qualifying assets, borrowing costs are capitalised in accordance with the accounting policy on borrowing costs as described in note 2.16. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.

When signifi cant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefi ts embodied within the part will fl ow to the Group and the Company, and its cost can be measured reliably. The carrying amount of the replaced item of property, plant and equipment is derecognised with any corresponding gain or loss recognised in the profi t or loss accordingly. The costs of the day-to-day servicing of property, plant and equipment are recognised in the profi t or loss as incurred.

Buildings are depreciated over 50 years or over the remaining land lease period, whichever is shorter.

Depreciation for property, plant and equipment other than freehold land and project-in-progress, is recognised in the profi t or loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. Property, plant and equipment are not depreciated until the assets are ready for their intended use.

Leased properties are depreciated over the lease term or the estimated useful lives, whichever is shorter. Leasehold land is depreciated over the lease term.

The estimated useful lives of the property, plant and equipment are as follows:

Plant and pipelines 5 - 55 yearsExpendable capital improvements 3 yearsOffi ce equipment, furniture and fi ttings 6 - 7 yearsOther plant and equipment 5 - 7 yearsComputer hardware and software 5 yearsMotor vehicles 4 yearsPlant turnaround/ major inspection 3 - 7 years

Estimates in respect of certain items of plant and equipment were revised during the year (refer to note 3).

Property, plant and equipment individually costing less than RM5,000 are expensed off in the year of purchase.

The depreciable amount is determined after deducting residual value. The residual value, useful life and depreciation method are reviewed at each fi nancial year end to ensure that the amount, period and method of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefi ts embodied in the items of property, plant and equipment.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefi ts are expected from its use or disposal. The difference between the net disposal proceeds, if any, and the net carrying amount is recognised in the profi t or loss.


31 DECEMBER 2012



2.5 Leased assets

Finance lease

A lease is recognised as a fi nance lease if it transfers substantially to the Group and the Company all the risks and rewards incidental to ownership. Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments at the inception of the lease. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. The corresponding liability is included in the statement of fi nancial position as borrowings.

Minimum lease payments made under fi nance leases are apportioned between the fi nance costs and the reduction of the outstanding liability. Finance costs, which represent the difference between the total leasing commitments and the fair value of the assets acquired, are amortised over the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability for each accounting period. The fi nance costs for leased assets which is not yet ready for its intended use, are accounted for in accordance with the policy set out in note 2.16.

Contingent lease payments, if any, are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confi rmed.

Leasehold land which in substance is a fi nance lease is classifi ed as property, plant and equipment.

2.6 Investments

Long term investments in subsidiaries, associate and jointly controlled entity are stated at cost less impairment loss, if any, in the Company’s fi nancial statements. The cost of investment includes transaction costs.

The carrying amount of these investments includes fair value adjustments on shareholder’s loans and advances, if any.

2.7 Intangible asset – goodwill

Goodwill arising from business combinations is initially measured at cost. Following the initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is not amortised but instead, it is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

In respect of equity-accounted investee, the carrying amount of goodwill is included in the carrying amount of the investment. The entire carrying amount of the investment is reviewed for impairment when there is objective evidence of impairment.

2.8 Financial instruments

A fi nancial instrument is recognised in the statement of fi nancial position when, and only when, the Group or the Company becomes a party to the contractual provisions of the instrument.

i) Financial assets

Initial recognition

Financial assets are classifi ed as fi nancial assets at fair value through profi t or loss, loans and receivables, held-to-maturity investments or available-for-sale fi nancial assets, as appropriate. The Group and the Company determine the classifi cation of fi nancial assets at initial recognition.


31 DECEMBER 2012



2.8 Financial instruments (continued)

i) Financial assets (continued)

Initial recognition (continued)

Financial assets are recognised initially at fair value, normally being the transaction price plus, in the case of fi nancial assets not at fair value through profi t or loss, any directly attributable transaction costs.

Purchases or sales that require delivery of fi nancial assets within a timeframe established by regulation or convention in the marketplace (regular way purchases) are recognised on the trade date, i.e. the date that the Group and the Company commit to purchase or sell the fi nancial asset.

Subsequent measurement

The subsequent measurement of fi nancial assets depends on their classifi cation as follows:

Financial assets at fair value through profi t or loss

Financial assets at fair value through profi t or loss includes fi nancial assets held for trading and fi nancial assets designated upon initial recognition as at fair value through profi t or loss. This category includes derivative fi nancial instruments entered into by the Group and the Company that do not meet the hedge accounting criteria.

Financial assets at fair value through profi t or loss are carried in the statement of fi nancial position at fair value with gains or losses recognised in the profi t or loss. The methods used to measure fair value are as stated in note 2.8(vi).

Loans and receivables

Loans and receivables are non-derivative fi nancial assets with fi xed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, such fi nancial assets are carried at amortised cost, using the effective interest rate method (note 2.8(vii)), less impairment losses.

Gains and losses are recognised in the profi t or loss when the loans and receivables are derecognised or impaired, as well as through the amortisation process.

ii) Financial liabilities

Initial recognition

Financial liabilities are classifi ed as fi nancial liabilities at fair value through profi t or loss, or loans and borrowings as appropriate. The Group and the Company determine the classifi cation of fi nancial liabilities at initial recognition.

Financial liabilities are recognised initially at fair value less, in the case of loans and borrowings, any directly attributable transaction costs.

Subsequent measurement

The subsequent measurement of fi nancial liabilities depends on their classifi cation as follows:

Financial liabilities at fair value through profi t or loss

Financial liabilities at fair value through profi t or loss include fi nancial liabilities held for trading and fi nancial liabilities designated upon initial recognition as at fair value through profi t or loss. This category includes derivative fi nancial instruments entered into by the Group and the Company that do not meet the hedge accounting criteria.


31 DECEMBER 2012




ii) Financial liabilities (continued)

Subsequent measurement (continued)

Financial liabilities at fair value through profi t or loss (continued)

Financial liabilities at fair value through profi t or loss are carried on the statement of fi nancial position at fair value with gains or losses recognised in the profi t or loss. The methods used to measure fair value are as stated in note 2.8(vi).

Loans and borrowings

Subsequent to initial recognition, loans and borrowings are measured at amortised cost using the effective interest rate method as stated in note 2.8(vii).

Gains and losses are recognised in the profi t or loss when the liabilities are derecognised, as well as through the amortisation process.

iii) Hedge accounting

Cash fl ow hedge

A cash fl ow hedge is a hedge of the exposure to variability in cash fl ows that is attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction and could affect the profi t or loss. In a cash fl ow hedge, the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised in other comprehensive income and the ineffective portion is recognised in profi t or loss.

Subsequently, the cumulative gain or loss recognised in other comprehensive income is reclassifi ed from equity into profi t or loss in the same period or periods during which the hedged forecast cash fl ows affect profi t or loss. If the hedge item is a non-fi nancial asset or liability, the associated gain or loss recognised in other comprehensive income is removed from equity and included in the initial amount of the asset or liability. However, loss recognised in other comprehensive income that will not be recovered in one or more future periods is reclassifi ed from equity into profi t or loss.

Cash fl ow hedge accounting is discontinued prospectively when the hedging instrument expires or is sold, terminated or exercised, the hedge is no longer highly effective, the forecast transaction is no longer expected to occur or the hedge designation is revoked. If the hedge is for a forecast transaction, the cumulative gain or loss on the hedging instrument remains in equity until the forecast transaction occurs. When the forecast transaction is no longer expected to occur, any related cumulative gain or loss recognised in other comprehensive income on the hedging instrument is reclassifi ed from equity into profi t or loss.

iv) Derivative fi nancial instruments

The Group and the Company uses derivative fi nancial instruments such as forward currency contracts to manage certain exposures to fl uctuations in foreign currency exchange rates.

Such derivative fi nancial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. Derivatives are carried as fi nancial assets when the fair value is positive and as fi nancial liabilities when the fair value is negative.

Any gains and losses arising from changes in fair value on derivatives during the year, other than those accounted for under hedge accounting as described in note 2.8(iii), are recognised directly to the profi t or loss.


31 DECEMBER 2012




iv) Derivative fi nancial instruments (continued)

An embedded derivative is recognised separately from the host contract and accounted for as a derivative if, and only if, it is not closely related to the economic characteristics and risks of the host contract and the host contract is not categorised as at fair value through profi t or loss. The host contract, in the event an embedded derivative is recognised separately, is accounted for in accordance with policy applicable to the nature of the host contract.

In general, contracts to sell or purchase non-fi nancial items to meet expected own use requirements are not accounted for as fi nancial instruments. However, contracts to sell or purchase commodities that can be net settled or which contain written options are required to be measured at fair value, with gains and losses recognised in the profi t or loss.

v) Offsetting of fi nancial instruments

Financial assets and fi nancial liabilities are offset and the net amount is reported in the statement of fi nancial position if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.

vi) Fair value of fi nancial instruments

The fair value of fi nancial instruments that are actively traded in organised fi nancial markets is determined by reference to quoted market prices at the close of business at the end of reporting date.

For fi nancial instruments where there is no active market, the fair value is determined using valuation techniques. Such techniques may include using recent arm’s length market transactions; reference to the current fair value of another instrument that is substantially the same; discounted cash fl ow analysis or other valuation models. Where fair value cannot be reliably estimated, assets are carried at cost less impairment losses.

vii) Amortised cost of fi nancial instruments

Amortised cost is computed using the effective interest rate method. This method uses effective interest rate that exactly discounts estimated future cash receipts or payments through the expected life of the fi nancial instrument to the net carrying amount of the fi nancial instrument. Amortised cost takes into account any transaction costs and any discount or premium on settlement.

viii) Derecognition of fi nancial instruments

Financial assets

A fi nancial asset is derecognised when the rights to receive cash fl ows from the asset have expired or, the Group and the Company have transferred their rights to receive cash fl ows from the asset or have assumed an obligation to pay the received cash fl ows in full without material delay to a third party under a “pass-through” arrangement without retaining control of the asset or substantially all the risks and rewards of the asset. On derecognition of a fi nancial asset, the difference between the carrying amount and the sum of the consideration received (including any new asset obtained less any new liability assumed) and any cumulative gain or loss that had been recognised in equity is recognised in the profi t or loss.

Financial liabilities

A fi nancial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. On derecognition of a fi nancial liability, the difference between the carrying amount of the fi nancial liabilities extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in the profi t or loss.


31 DECEMBER 2012



2.9 Impairment

i) Financial assets

A fi nancial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A fi nancial asset is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred loss event) and that loss event has an impact on the estimated future cash fl ows of the fi nancial asset that can be reliably estimated.

For loans and receivables carried at amortised cost, individually signifi cant fi nancial assets are tested for impairment on an individual basis. The remaining fi nancial assets are assessed collectively in groups that share similar credit risk characteristics.

An impairment loss is measured as the difference between an asset’s carrying amount and the present value of estimated future cash fl ows discounted at the asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the profi t or loss.

If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or reduced by adjusting the allowance account.

ii) Other assets

The carrying amounts of other assets, other than inventories, are reviewed at each reporting date to determine whether there is any indication of impairment. For certain classes of assets, the carrying amounts are reviewed more frequently if events or changes in circumstances indicate that the carrying value may be impaired, as described in the respective assets’ accounting policies.

If any such indication exists, the asset’s recoverable amount is estimated. An impairment loss is recognised if the carrying amount of an asset or the cash-generating unit to which it belongs exceeds its recoverable amount. Impairment losses are recognised in the profi t or loss.

A cash-generating unit is the smallest identifi able asset group that generates cash fl ows that are largely independent from other assets and groups. Impairment losses recognised in respect of a cash-generating unit are allocated fi rst to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit on a pro-rata basis.

The recoverable amount is the greater of the asset’s fair value less cost to sell and its value in use. In assessing value in use, estimated future cash fl ows are discounted to their present value using a pre-tax discount rate that refl ects current market assessments of the time value of money and the risks specifi c to the asset. For an asset that does not generate largely independent cash infl ows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

An impairment loss in respect of goodwill is not reversed in a subsequent period. In respect of other assets, impairment losses are reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

Reversals of impairment losses are credited to the profi t or loss in the year in which the reversals are recognised.


31 DECEMBER 2012



2.10 Cash and cash equivalents

Cash and cash equivalents consist of cash on hand and bank balances, deposits with licensed fi nancial institutions and highly liquid investments which have an insignifi cant risk of changes in value.

2.11 Inventories

Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

Cost of maintenance material and spares consists of the invoiced value from suppliers and import duty charges and is determined on a weighted average basis.

Cost of liquefi ed gases and water is determined on a weighted average basis.

2.12 Provisions

A provision is recognised if, as a result of a past event, the Group or the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outfl ow of economic benefi ts will be required to settle the obligation. Provisions are determined by discounting the expected future net cash fl ows at a pre-tax rate that refl ects current market assessments of the time value of money and the risks specifi c to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as fi nance cost.

The amount recognised as a provision is the best estimate of the expenditure required to settle the present obligation at the reporting date. Provisions are reviewed at each reporting date and adjusted to refl ect the current best estimate.

Where it is not probable that an outfl ow of economic benefi ts will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outfl ow of economic benefi ts is remote. Possible obligations whose existence will only be confi rmed by the occurrence or non-occurrence of one or more future events, not wholly within the control of the Group, are not recognised in the fi nancial statements but are disclosed as contingent liabilities unless the possibility of an outfl ow of economic resources is considered remote.

2.13 Employee benefi ts

Short term benefi ts

Wages and salaries, bonuses and social security contributions are recognised as an expense in the year in which the associated services are rendered by employees of the Group and of the Company.

Defi ned contribution plans

As required by law, companies in Malaysia make contributions to the state pension scheme, the Employees Provident Fund (EPF). Such contributions are recognised as an expense in the profi t or loss as incurred.

2.14 Taxation

Tax on the profi t and loss for the year comprises current and deferred tax. Income tax is recognised in the profi t or loss except to the extent it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax

Current tax expense is the expected tax payable on the taxable income for the year, using the statutory tax rates at the reporting date, and any adjustment to tax payable in respect of previous years.


31 DECEMBER 2012



2.14 Taxation (continued)

Deferred tax

Deferred tax is provided for, using the liability method, on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts in the fi nancial statements. In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised for all deductible temporary differences, unabsorbed capital allowances, unused tax losses and unused tax credits to the extent that it is probable that future taxable profi t will be available against which the deductible temporary differences, unabsorbed capital allowances, unused tax losses and unused tax credits can be utilised.

Deferred tax is not recognised if the temporary difference arises on initial recognition of goodwill or negative goodwill, and the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction, affects neither accounting nor taxable profi t.

Deferred tax is measured at the tax rates that are expected to apply in the period when the asset is realised or the liability is settled, based on tax rates enacted or substantially enacted at the end of reporting period.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefi t will be realised.

2.15 Foreign currency transactions

In preparing fi nancial statements of individual entities in the Group, transactions in currencies other than the entity’s functional currency are translated to the functional currency at rates of exchange ruling on the transaction dates.

Monetary assets and liabilities denominated in foreign currencies at the reporting date have been retranslated to the functional currency at the foreign exchange rates ruling on the reporting date. Non-monetary assets and liabilities denominated in foreign currencies, which are measured at fair value, are retranslated to the functional currency at the foreign exchange rates ruling at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in foreign currency are not retranslated.

Gains and losses on exchange arising from retranslation are recognised in the profi t or loss.

2.16 Borrowing costs

Borrowing costs which are directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to be prepared for their intended use or sale, are capitalised as part of the cost of those assets.

The capitalisation of borrowing costs as part of the cost of a qualifying asset commences when expenditures for the asset are being incurred, borrowing costs are being incurred and activities that are necessary to prepare the asset for its intended use or sale are in progress. Capitalisation of borrowing costs ceases when all activities necessary to prepare the qualifying asset for its intended use or sale are completed.


31 DECEMBER 2012



2.16 Borrowing costs (continued)

The capitalisation rate used to determine the amount of borrowing costs eligible for capitalisation is the weighted average of the borrowing costs applicable to borrowings that are outstanding during the period, other than borrowings made specifi cally for the purpose of fi nancing a specifi c qualifying asset, in which case the actual borrowing cost incurred on that borrowing less any investment income on the temporary investment of that borrowing, will be capitalised.

2.17 Revenue

Revenue from gas processing services is recognised in the profi t or loss based on actual and estimates of work done in respect of services rendered for separating natural gas into its components.

Revenue from gas transportation services is recognised in the profi t or loss based on services rendered for transporting and distributing the processed gas.

Revenue from sale of industrial utilities is recognised in the profi t or loss based on utilities distributed to the buyer at pre-determined rates.

2.18 Financing costs

Finance costs comprise interest payable on borrowings and profi t share margin on Islamic fi nancing facilities.

All interest and other costs incurred in connection with borrowings are expensed as incurred, other than capitalised in accordance with the accounting standard stated in note 2.16. The interest component of fi nance lease payments is accounted for in accordance with the policy set out in note 2.5.

2.19 Deferred income

Deferred income is recognised in the profi t or loss on a time proportion basis over the agreed contract period or applicable period.

2.20 Earnings per share

The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares.

Basic EPS is calculated by dividing the profi t and loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period.

Diluted EPS is determined by adjusting the profi t and loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilute potential ordinary shares, which comprise convertible notes and share options granted to employees.

2.21 Operating segments

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. An operating segment’s operating whose operating results are reviewed regularly by entity’s chief operating decision maker, which in this case is the Board to make decisions about resources to be allocated to the segment and to assess its performance, and for which discrete fi nancial information is available.


31 DECEMBER 2012


3. Property, Plant and Equipment At Disposals/ Transfers/ At 1.1.2012 Additions Write offs Reclassifi cation 31.12.2012 Group RM’000 RM’000 RM’000 RM’000 RM’000

At cost Freehold land 3,137 932 – – 4,069 Leasehold land – long lease 371,110 1,168 – 7,000 379,278 – short lease 161,726 – – – 161,726 Buildings 194,248 – – 45,262 239,510 Plant and pipelines 13,707,159 677 (17,981) 61,976 13,751,831 Offi ce equipment, furniture and fi ttings 61,491 591 (166) (35,116) 26,800 Other plant and equipment 107,284 4,497 (500) (1,934) 109,347 Computer hardware and software 58,845 853 (592) 22,486 81,592 Motor vehicles 26,675 1,286 (2,544) – 25,417 Plant turnaround/ major inspection 406,347 – (62,592) 69,766 413,521 Projects-in-progress 1,590,367 3,725,804 (24,679) (169,440) 5,122,052

16,688,389 3,735,808 (109,054) – 20,315,143

At Charge for Disposals/ Transfers/ At 1.1.2012 the year Write offs Reclassifi cation 31.12.2012 Group RM’000 RM’000 RM’000 RM’000 RM’000

Accumulated depreciation Freehold land – – – – – Leasehold land – long lease 59,537 6,587 – – 66,124 – short lease 36,680 147 – – 36,827 Buildings 55,711 4,917 – 21,619 82,247 Plant and pipelines 8,693,700 547,002 (17,672) (2,904) 9,220,126 Offi ce equipment, furniture and fi ttings 57,454 1,458 (151) (35,916) 22,845 Other plant and equipment 72,268 7,063 (472) (476) 78,383 Computer hardware and software 39,182 5,661 (592) 17,677 61,928 Motor vehicles 19,965 3,133 (2,515) – 20,583 Plant turnaround/ major inspection 195,620 87,153 (58,574) – 224,199 Projects-in-progress – – – – –

9,230,117 663,121 (79,976) – 9,813,262


31 DECEMBER 2012


3. Property, Plant and Equipment (continued) At Disposals/ Transfers/ At 1.4.2011 Additions Write offs Adjustments 31.12.2011 Group RM’000 RM’000 RM’000 RM’000 RM’000

At cost Freehold land 3,096 41 – – 3,137 Leasehold land – long lease 370,737 – – 373 371,110 – short lease 161,726 – – – 161,726 Buildings 193,069 209 – 970 194,248 Plant and pipelines 13,655,296 325 (47,973) 99,511 13,707,159 Offi ce equipment, furniture and fi ttings 61,046 167 (83) 361 61,491 Other plant and equipment 107,092 521 (885) 556 107,284 Computer hardware and software 46,642 53 (60) 12,210 58,845 Motor vehicles 26,114 1,209 (1,467) 819 26,675 Plant turnaround/ major inspection 319,480 – (4) 86,871 406,347 Projects-in-progress 613,221 1,131,562 – (154,416) 1,590,367

15,557,519 1,134,087 (50,472) 47,255 16,688,389

At Charge for Disposals/ Transfers/ At 1.4.2011 the period Write offs Adjustments 31.12.2011 Group RM’000 RM’000 RM’000 RM’000 RM’000

Accumulated depreciation Freehold land – – – – – Leasehold land – long lease 54,622 4,915 – – 59,537 – short lease 36,570 110 – – 36,680 Buildings 52,510 3,201 – – 55,711 Plant and pipelines 8,268,257 407,844 (29,656) 47,255 8,693,700 Offi ce equipment, furniture and fi ttings 56,502 1,022 (70) – 57,454 Other plant and equipment 67,959 4,704 (395) – 72,268 Computer hardware and software 36,357 2,885 (60) – 39,182 Motor vehicles 19,157 2,275 (1,467) – 19,965 Plant turnaround/ major inspection 134,976 60,648 (4) – 195,620 Projects-in-progress – – – – –

8,726,910 487,604 (31,652) 47,255 9,230,117

31 DECEMBER 2012



3. Property, Plant and Equipment (continued) At Disposals/ Transfers/ At 1.1.2012 Additions Write offs Reclassifi cation 31.12.2012 Company RM’000 RM’000 RM’000 RM’000 RM’000

At cost Freehold land 3,137 932 – – 4,069 Leasehold land – long lease 371,110 1,168 – 7,000 379,278 – short lease 161,726 – – – 161,726 Buildings 194,044 – – 45,262 239,306 Plant and pipelines 13,707,159 678 (17,981) 61,976 13,751,832 Offi ce equipment, furniture and fi ttings 61,367 532 (166) (35,116) 26,617 Other plant and equipment 107,284 4,497 (500) (1,934) 109,347 Computer hardware and software 58,457 689 (592) 22,486 81,040 Motor vehicles 26,324 1,286 (2,544) – 25,066 Plant turnaround/ major inspection 406,347 – (62,592) 69,766 413,521 Projects-in-progress 581,830 929,173 (8,398) (169,440) 1,333,165

15,678,785 938,955 (92,773) – 16,524,967

At Charge for Disposals/ Transfers/ At 1.1.2012 the period Write offs Reclassifi cation 31.12.2012 Company RM’000 RM’000 RM’000 RM’000 RM’000

Accumulated depreciation Freehold land – – – – – Leasehold land – long lease 59,537 6,587 – – 66,124 – short lease 36,680 147 – – 36,827 Buildings 55,619 4,877 – 21,619 82,115 Plant and pipelines 8,693,700 547,003 (17,672) (2,904) 9,220,127 Offi ce equipment, furniture and fi ttings 57,414 1,437 (151) (35,916) 22,784 Other plant and equipment 72,268 7,063 (472) (476) 78,383 Computer hardware and software 39,031 5,574 (592) 17,677 61,690 Motor vehicles 19,812 3,045 (2,515) – 20,342 Plant turnaround/ major inspection 195,620 87,153 (58,574) – 224,199 Projects-in-progress – – – – –

9,229,681 662,886 (79,976) – 9,812,591

31 DECEMBER 2012



3. Property, Plant and Equipment (continued) At Disposals/ Transfers/ At 1.4.2011 Additions Write offs Adjustments 31.12.2011 Company RM’000 RM’000 RM’000 RM’000 RM’000

At cost Freehold land 3,096 41 – – 3,137 Leasehold land – long lease 370,737 – – 373 371,110 – short lease 161,726 – – – 161,726 Buildings 192,865 209 – 970 194,044 Plant and pipelines 13,655,296 325 (47,973) 99,511 13,707,159 Offi ce equipment, furniture and fi ttings 60,928 161 (83) 361 61,367 Other plant and equipment 107,092 521 (885) 556 107,284 Computer hardware and software 46,254 53 (60) 12,210 58,457 Motor vehicles 25,763 1,209 (1,467) 819 26,324 Plant turnaround/ major inspection 319,480 – (4) 86,871 406,347 Projects-in-progress 485,656 342,494 (91,904) (154,416) 581,830

15,428,893 345,013 (142,376) 47,255 15,678,785

At Charge for Disposals/ Transfers/ At 1.4.2011 the period Write offs Adjustments 31.12.2011 Company RM’000 RM’000 RM’000 RM’000 RM’000

Accumulated depreciation Freehold land – – – – – Leasehold land – long lease 54,622 4,915 – – 59,537 – short lease 36,570 110 – – 36,680 Buildings 52,449 3,170 – – 55,619 Plant and pipelines 8,268,257 407,844 (29,656) 47,255 8,693,700 Offi ce equipment, furniture and fi ttings 56,475 1,009 (70) – 57,414 Other plant and equipment 67,959 4,704 (395) – 72,268 Computer hardware and software 36,264 2,827 (60) – 39,031 Motor vehicles 19,073 2,206 (1,467) – 19,812 Plant turnaround/ major inspection 134,976 60,648 (4) – 195,620 Projects-in-progress – – – – –

8,726,645 487,433 (31,652) 47,255 9,229,681

31 DECEMBER 2012



3. Property, Plant and Equipment (continued) Group Company Carrying Amount Carrying Amount 31.12.2012 31.12.2011 1.4.2011 31.12.2012 31.12.2011 1.4.2011 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Freehold land 4,069 3,137 3,096 4,069 3,137 3,096 Leasehold land – long lease 313,154 311,573 316,115 313,154 311,573 316,115 – short lease 124,899 125,046 125,156 124,899 125,046 125,156 Buildings 157,263 138,537 140,559 157,191 138,425 140,416 Plant and pipelines 4,531,705 5,013,459 5,387,039 4,531,705 5,013,459 5,387,039 Offi ce equipment, furniture and fi ttings 3,955 4,037 4,544 3,833 3,953 4,453 Other plant and equipment 30,964 35,016 39,133 30,963 35,016 39,133 Computer hardware and software 19,664 19,663 10,285 19,350 19,426 9,990 Motor vehicles 4,834 6,710 6,957 4,725 6,512 6,690 Plant turnaround/ major inspection 189,322 210,727 184,504 189,322 210,727 184,504 Projects-in-progress 5,122,052 1,590,367 613,221 1,333,165 581,830 485,656

10,501,881 7,458,272 6,830,609 6,712,376 6,449,104 6,702,248

Restrictions of land title

The titles of certain freehold and leasehold lands are in the process of being registered in the Company’s name.

Projects-in-progress

Included in additions to the projects-in-progress of the Group is borrowing costs (net of fund investment income of RM4,184,000 (31.12.2011: RM Nil; 1.4.2011: RM Nil) arising from the Islamic fi nancing facilities and fi nance lease liabilities capitalised during the year of RM38,904,000 (31.12.2011: RM Nil; 1.4.2011: RM Nil). The additions also includes leased assets amounting to RM841,009,000 (31.12.2011: RM Nil; 1.4.2011: RM Nil) which are accounted for as assets of the Group.

The borrowing rate on borrowings capitalised range from 4.25% to 9.20% (31.12.2011: Nil) per annum.

Projects-in-progress of RM784,990,000 of a subsidiary secures the Islamic fi nancing facilities, obtained to fi nance the construction of a power plant by the subsidiary (see note 14).

Change in estimates

During the year, the Company reviewed the major components and useful lives of its property, plant and equipment. Accordingly, this resulted in reclassifi cations of signifi cant components of certain items of plant and equipment and revisions to the estimated useful lives of certain plant and equipment. The revision was accounted for prospectively as a change in accounting estimates, and its effect to the current and future periods are as follows:

i) increase in depreciation charges for the year by RM59,300,000 due to one-off impact from assets which useful lives have expired; and

ii) decrease in yearly depreciation charges by RM35,700,000 as a result of increase in the assets useful lives.

31 DECEMBER 2012



4. Investment in Subsidiaries Company Note 31.12.2012 31.12.2011 RM’000 RM’000

Investment at cost: – unquoted shares At beginning of the year/ period 881,716 75,729 Conversion of advances made: – during the year/ period 1,271,139 803,465 – in prior year/ period 8.5 39,246 2,522

Total conversion of advances made 1,310,385 805,987

At end of the year/ period 2,192,101 881,716

Details of the subsidiaries are as follows:

Name of Principal Country of Effective percentage company activities incorporation holding 31.12.2012 31.12.2011 1.4.2011 % % %

Kimanis Power Generation and sale Malaysia 60 60 60 Sdn. Bhd. (KPSB) of electricity

Kimanis O&M Sdn. Bhd. Provision of operation and Malaysia 60 60 – maintenance services to KPSB

Regas Terminal (Sg. Udang) Manage and operate Malaysia 100 100 – Sdn. Bhd. LNG regasifi cation terminal

Regas Terminal (Pengerang) Manage and operate Malaysia 100 100 – Sdn. Bhd. LNG regasifi cation terminal

Regas Terminal (Lahad Datu) Manage and operate Malaysia 99 100 – Sdn. Bhd. LNG regasifi cation terminal

5. Investment in Associate Group Company 31.12.2012 31.12.2011 1.4.2011 31.12.2012 31.12.2011 1.4.2011 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Investment at cost: – quoted shares – in Malaysia 76,466 – – 76,466 – – – unquoted shares – 103,336 103,336 – 103,336 103,336

Share of post-acquisition profi ts and reserves 51,330 76,231 71,751 – – –

127,796 179,567 175,087 76,466 103,336 103,336

Market value of quoted shares 488,382 – – 488,382 – –

31 DECEMBER 2012



5. Investment in Associate (continued)

Summary of fi nancial information on associate: 31.12.2012 31.12.2011 1.4.2011 RM’000 RM’000 RM’000

Total assets (100%) 1,513,480 1,474,426 1,616,026 Total liabilities (100%) 505,068 464,972 448,476 Revenue (100%) 2,125,294 2,000,170 1,807,475 Profi t (100%) 162,828 229,154 298,278

During the year, the associate of the Group was listed on the Main Market of Bursa Malaysia Securities Berhad. Following the initial public offering exercise, the Group reduced its equity holding in the associate from 20% to 14.8% and recorded gain of RM99,978,000 in the consolidated fi nancial statements of the Group and RM117,577,000 in the separate fi nancial statements of the Company upon completion of the exercise.

The Group continues to equity-account the associate as it has retained its signifi cant infl uence over the fi nancial and operating policy of the associate through representation on the associate’s board of directors.

Details of the associate are as follows:


Gas Malaysia Berhad Selling, marketing, distribution Malaysia 14.8 20.0 20.0 and promotion of natural gas

6. Investment in Jointly Controlled Entity Group Company 31.12.2012 31.12.2011 1.4.2011 31.12.2012 31.12.2011 1.4.2011 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Investment at cost: – unquoted shares 250 250 250 250 250 250 Share of post-acquisition profi ts and reserves 6,955 5,164 2,356 – – –

7,205 5,414 2,606 250 250 250

Summary of fi nancial information on jointly controlled entity:

31.12.2012 31.12.2011 1.4.2011 RM’000 RM’000 RM’000

Total assets (100%) 24,275 17,953 8,408 Total liabilities (100%) 10,408 8,884 4,106 Revenue (100%) 21,569 25,665 17,254 Profi t (100%) 2,815 4,858 2,454

31 DECEMBER 2012



6. Investment in Jointly Controlled Entity (continued)

Details of the jointly controlled entity are as follows:


Industrial Gases Solutions Selling, marketing, distribution and Malaysia 50 50 50 Sdn. Bhd. promotion of industrial gas

7. Trade and Other Inventories 31.12.2012 31.12.2011 1.4.2011 Group/Company RM’000 RM’000 RM’000

Liquefi ed gases and water 989 764 663 Maintenance materials and spares 102,055 101,685 99,736

103,044 102,449 100,399

Maintenance materials and spares amounting to RM1,326,000 were written off during the fi nancial year (31.12.2011: RM Nil; 1.4.2011: RM28,504,000).

8. Trade and Other Receivables Group Company Note 31.12.2012 31.12.2011 1.4.2011 31.12.2012 31.12.2011 1.4.2011 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Trade receivables 14,943 15,035 14,678 14,943 15,035 14,678 Other receivables 8.1 16,124 26,256 28,274 13,725 26,154 28,222 Deposits 1,020 1,020 1,021 1,020 1,020 1,021 Prepayments 6,729 12,263 16,035 2,185 12,263 16,020 Amounts due from: Holding company 8.2 147,881 129,116 169,327 147,881 129,116 169,327 Related companies 8.3 151,885 189,383 121,481 151,885 189,383 121,481 Subsidiaries – – – 5,458 2,926 2,061 Jointly controlled entity – Trade 1,299 1,845 3,354 1,299 1,845 3,354 Related parties – Trade 8.4 16,905 11,453 15,827 16,905 11,453 15,827 Advances to subsidiaries 8.5 – – – 194,084 39,246 2,522

356,786 386,371 369,997 549,385 428,441 374,513

8.1 Included in other receivables of the Group and of the Company is interest receivable of RM7,443,000 (31.12.2011: RM22,747,000; 1.4.2011: RM24,202,000).

31 DECEMBER 2012



8. Trade and Other Receivables (continued)

8.2 The amount due from holding company relates to: 31.12.2012 31.12.2011 1.4.2011 Group/Company RM’000 RM’000 RM’000

Trade 191,449 164,623 202,557 Non-trade (43,568) (35,507) (33,230)

147,881 129,116 169,327

8.3 The amounts due from related companies relate to: 31.12.2012 31.12.2011 1.4.2011 Group/Company RM’000 RM’000 RM’000

Trade 116,896 118,954 70,778 Non-trade 34,989 70,429 50,703

151,885 189,383 121,481

8.4 The amounts due from related parties are in relation to associates and jointly controlled entities of the holding company.

8.5 Advances made in prior year amounting to RM39,246,000 was converted to ordinary shares in a subsidiary during the year. The balance of advances to subsidiaries amounting to RM194,084,000 will be converted to ordinary shares in subsidiaries, upon obtaining necessary approvals from the respective shareholders.

9. Fund and Other Investments 31.12.2012 31.12.2011 1.4.2011 Group/Company RM’000 RM’000 RM’000

Fair value through profi t or loss Designated upon initial recognition Malaysian Government Securities 20,016 59,971 89,891 Corporate private debt securities 140,406 185,591 185,191

160,422 245,562 275,082

10. Cash and Cash Equivalents Group Company 31.12.2012 31.12.2011 1.4.2011 31.12.2012 31.12.2011 1.4.2011 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Cash and bank balances 101,281 700 326 573 694 321 Deposits placed: Licensed banks 2,061,789 1,998,360 2,307,835 1,663,646 1,952,428 2,295,492 Other corporations 42,000 369,774 447,918 42,000 369,774 447,918

2,205,070 2,368,834 2,756,079 1,706,219 2,322,896 2,743,731

Included in deposits placed with licensed banks of the Group is an amount of RM18,000,000 (31.12.2011: RM Nil; 1.4.2011: RM Nil) being deposits held under designated account as a security for the payment of the Islamic fi nancing facilities obtained by a subsidiary (see note 14).

31 DECEMBER 2012



11. Share Capital Company 31.12.2012 31.12.2011 1.4.2011 RM’000 RM’000 RM’000

Authorised: 2,000,000 ordinary shares of RM1 each 2,000,000 2,000,000 2,000,000

Issued and fully paid: 1,978,732 ordinary shares of RM1 each 1,978,732 1,978,732 1,978,732

12. Reserves

Retained Profi ts

As introduced by the Finance Act 2007, the Company has adopted the single tier company income tax system with effect from year of assessment 2008 and the Company pays dividend under the single tier system.

Hedging Reserve

This reserve records the portion of the gain or loss on hedging instruments in a cash fl ow hedge that is determined to be an effective hedge in accordance with accounting policy stated in note 2.8(iii).

13. Non-Controlling Interests

This consists of the non-controlling interests proportion of share capital and reserves of partly-owned subsidiaries.

14. Borrowings Group Company 31.12.2012 31.12.2011 1.4.2011 31.12.2012 31.12.2011 1.4.2011 Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Current Term loan 566,426 – – 566,426 – – Derivative asset-CEA (118,407) – – (118,407) – – Finance lease liabilities 15 15,127 – – – – –

Total current borrowings 463,146 – – 448,019 – – Non-Current Term loan – 652,921 587,314 – 652,921 587,314 Derivative asset-CEA – (208,186) (163,734) – (208,186) (163,734) Islamic fi nancing facilities 855,746 – – – – – Finance lease liabilities 15 783,538 – – – – –

Total non-current borrowings 1,639,284 444,735 423,580 – 444,735 423,580

Total borrowings 2,102,430 444,735 423,580 448,019 444,735 423,580

31 DECEMBER 2012



14. Borrowings (continued)

Terms and debt repayment schedule Under 1 1 - 2 2 - 5 Over 5 Total year years years years Group RM’000 RM’000 RM’000 RM’000 RM’000

Term loan (net of CEA) 448,019 448,019 – – – Islamic fi nancing facilities 855,746 – – 99,531 756,215 Finance lease liabilities 798,665 15,127 16,505 59,764 707,269

2,102,430 463,146 16,505 159,295 1,463,484

Under 1 1 - 2 2 - 5 Over 5 Total year years years years Company RM’000 RM’000 RM’000 RM’000 RM’000

Term loan (net of CEA) 448,019 448,019 – – –

Term loan

The unsecured term loan comprising the 6th series 3.4% Samurai Bond was on lent from PETRONAS to the Company on 21 April 1997. The term loan represents an amount equivalent to Yen 16 billion. Under the Currency Exchange Agreement (“CEA”) with PETRONAS, the repayment of the principal amount is at a fi xed exchange rate of 100 Yen – RM2.838. The loan is due for payment in 2013 at a contracted amount of RM454.1 million.

The CEA being an embedded derivative attached to the Yen 16 billion term loan is valued and accounted separately at each reporting date due to the risks and characteristics not being closely related to the host contract. The term loan is translated at the spot rate at the reporting date whereas the CEA is measured at fair value. The fair value of the CEA is based on the discounted net cash fl ow of the difference between forward exchange rate and contracted rate. Any increase or decrease in the translation or valuation is recorded accordingly in the profi t or loss.

The market risk on the fair value or future cash fl ows of the term loan and CEA will fl uctuate depending on the exchange rate and interest rate movement.

For the purpose of presentation of the fi nancial statements, both the term loan and the CEA are netted off since the conditions of legally enforceable right and the intention to settle on net basis are met.

The net unrealised loss arising from retranslation of term loan and revaluation of CEA during the year was RM3,285,000 (31.12.2011: net unrealised loss of RM21,155,000).

Islamic fi nancing facilities

The Islamic fi nancing facilities obtained by a subsidiary of the Group with a nominal value up to RM1.16 billion, comprise Shariah principles of Istisna’ and Ijarah term fi nancing (“Sukuk Programme”) bearing a yield payable at a range between 4.25% to 5.50% per annum. The Sukuk Programme consists of two series, namely Sukuk Programme Series 1 and Series 2. Sukuk Programme Series 1 have been issued on 8 August 2012 with an aggregate nominal value of RM860.0 million which is repayable up to 16 years from the date of fi rst issue. The Sukuk Programme Series 2 which has an aggregate nominal value up to RM300.0 million and tenures up to 10.5 years is yet to be issued.

The Islamic fi nancing facilities have been obtained to fi nance the construction of the power plant by the subsidiary and are secured by the project-in-progress of RM784,990,000 (see note 3).

31 DECEMBER 2012



14. Borrowings (continued)

Islamic fi nancing facilities (continued)

In connection with the Sukuk Programme above, the subsidiary of the Group has agreed on the following signifi cant covenants:

i) will not incur or permit to exist any indebtedness for borrowed monies or enter into any derivative transactions or give any guarantee in respect of any indebtedness of any person other than pursuant to this Sukuk Programme or permitted indebtedness;

ii) shall not create or permit to exist any security interest over its assets other than those contemplated under this Sukuk Programme, but excluding liens arising in the ordinary course of business;

iii) shall not dispose of the whole or any substantial part of its assets, save for obsolescence and/or deterioration;

iv) shall not have any subsidiaries;

v) commencing from the fi nancial year following the fi nancial year when the full commercial operation date is achieved, maintain a minimum Finance Service Cover Ratio (“FSCR”) of at least 1.25x.

15. Finance Lease Liabilities

Finance lease liabilities are payable as follows:

31.12.2012 31.12.2011 Minimum Minimum lease lease payments Interest Principal payments Interest Principal RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Group Less than one year 88,041 72,914 15,127 – – – Between 1 - 2 years 87,967 71,462 16,505 – – – 2 - 5 years 264,139 204,375 59,764 – – – More than 5 years 1,289,566 582,297 707,269 – – –

1,729,713 931,048 798,665 – – –

1.4.2011 Minimum lease payments Interest Principal RM’000 RM’000 RM’000

Group Less than one year – – – Between 1 - 2 years – – – 2 - 5 years – – – More than 5 years – – –

– – –

31 DECEMBER 2012



16. Deferred Tax

The components and movements of deferred tax liabilities and assets during the year prior to and after offsetting are as follows:

Charged/ (Credited) to At 1.1.2012 Profi t or Loss At 31.12.2012 RM’000 RM’000 RM’000

Group Deferred tax liabilities Property, plant and equipment 1,053,456 (46,649) 1,006,807 Financial instrument valuation 52,337 (22,445) 29,892

1,105,793 (69,094) 1,036,699

Deferred tax assets Deferred income (3,088) (1,485) (4,573) Foreign currency translation (49,705) 21,624 (28,081)

(52,793) 20,139 (32,654)

Total 1,053,000 (48,955) 1,004,045


Group Deferred tax liabilities Property, plant and equipment 1,102,478 (49,022) 1,053,456 Financial instrument valuation 41,224 11,113 52,337

1,143,702 (37,909) 1,105,793

Deferred tax assets Deferred income (3,399) 311 (3,088) Foreign currency translation (33,303) (16,402) (49,705)

(36,702) (16,091) (52,793)

Total 1,107,000 (54,000) 1,053,000

31 DECEMBER 2012



16. Deferred Tax (continued)


Company Deferred tax liabilities Property, plant and equipment 1,053,456 (46,694) 1,006,762 Financial instrument valuation 52,337 (22,445) 29,892

1,105,793 (69,139) 1,036,654

Deferred tax assets Deferred income (3,088) (1,485) (4,573) Foreign currency translation (49,705) 21,624 (28,081)

(52,793) 20,139 (32,654)

Total 1,053,000 (49,000) 1,004,000


Company Deferred tax liabilities Property, plant and equipment 1,102,478 (49,022) 1,053,456 Financial instrument valuation 41,224 11,113 52,337

1,143,702 (37,909) 1,105,793

Deferred tax assets Deferred income (3,399) 311 (3,088) Foreign currency translation (33,303) (16,402) (49,705)

(36,702) (16,091) (52,793)

Total 1,107,000 (54,000) 1,053,000

The above deferred tax liabilities and assets are offset as there is a legally enforceable right to set off current tax assets against current tax liabilities and the deferred taxes relate to the same tax authority.

31 DECEMBER 2012



17. Other Long Term Liabilities

Group Company 31.12.2012 31.12.2011 1.4.2011 31.12.2012 31.12.2011 1.4.2011 Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Derivative liabilities 18 20,829 – – – – – Deferred income 9,688 10,692 11,937 9,688 10,692 11,937

30,517 10,692 11,937 9,688 10,692 11,937

Note 31.12.2012 31.12.2011 Group/Company RM’000 RM’000

Deferred income At beginning of the year/ period 12,351 14,406 Addition – – Less: Recognised in the profi t or loss (1,658) (2,055)

At end of the year/ period 10,693 12,351

31.12.2012 31.12.2011 1.4.2011 RM’000 RM’000 RM’000

Analysis of deferred income: Current 19 1,005 1,659 2,469 Non-current 9,688 10,692 11,937

10,693 12,351 14,406

Deferred income mainly relates to the payment received in advance from third party, related companies and related parties for the rights given to these parties to use the Company’s property, plant and equipment over a period of time. The deferred income is subsequently recognised in the profi t or loss on a time apportionment basis over the specifi ed period.

31 DECEMBER 2012



18. Derivative Liabilities 31.12.2012 31.12.2011 1.4.2011 Note RM’000 RM’000 RM’000

Group Non-current Forward foreign exchange contracts 20,829 – – Current Forward foreign exchange contracts 7,099 – –

27,928 – –

Included within: Trade and other payables 19 7,099 – – Other long-term liabilities 17 20,829 – –

27,928 – –

A subsidiary of the Group has entered into forward foreign exchange contracts to manage its exposures in relation to foreign currency exchange rates as required by the principal terms of the Islamic fi nancing facilities (see note 14).

The fair value of forward foreign exchange contracts is based on the fair value difference between the contracted rates and forward rates of similar forward foreign currency contracts at reporting date.

The subsidiary has adopted cash fl ow hedge accounting whereby only the foreign currency risk of the forecast transactions has been designated as the hedged item. The effective portion of the gain or loss on the hedging instruments (i.e. the forward foreign exchange contract) is recognised in other comprehensive income and subsequently recorded in equity until the hedged transaction occurs, while the ineffective portion is recognised in the profi t or loss. As at 31 December 2012, the balance recognised under hedging reserve in equity amounts to RM4,186,000 (31.12.2011: RM Nil; 1.4.2011: RM Nil). There has been no ineffective portion recognised in the profi t or loss during the year (31.12.2011: RM Nil; 1.4.2011: RM Nil).

The cash fl ows associated with the effective portion of the cash fl ow hedge are expected to occur and affect the profi t or loss between 2013 and 2032 to match the hedge item.

31 DECEMBER 2012



19. Trade and Other Payables Group Company Note 31.12.2012 31.12.2011 1.4.2011 31.12.2012 31.12.2011 1.4.2011 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Trade payables – – 184 – – 184 Other payables and accruals 899,384 428,234 321,254 738,370 392,572 309,634 Derivative liabilities 18 7,099 – – – – – Amounts due to: Holding company 6,019 – – – – – Related companies 6,414 967 14,441 6,414 967 14,441 Advances from non-controlling interests 337 16,772 1,682 – – – Deferred income 17 1,005 1,659 2,469 1,005 1,659 2,469

920,258 447,632 340,030 745,789 395,198 326,728

Included in other payables and accruals are amounts owing to suppliers and contractors for purchase of property, plant and equipment of approximately RM708,991,000 (31.12.2011: RM368,667,000; 1.4.2011: RM250,771,000) for the Group and RM620,083,000 (31.12.2011: RM329,377,000; 1.4.2011: RM237,004,000) for the Company. Also included in other payables is interest payable of RM51,772,000 (31.12.2011: RM9,886,000; 1.4.2011: RM3,835,000) and RM8,684,000 (31.12.2011: RM9,886,000; 1.4.2011: RM3,835,000) for the Group and the Company respectively.

The amounts due to holding company and related companies are non-trade in nature. These payables arose from the normal course of business.

20. Revenue and Gross Profi t 1.1.2012 1.4.2011 to to 31.12.2012 31.12.2011 Group/Company RM’000 RM’000

Revenue – gas processing fees 1,511,169 1,299,873 – gas transportation fees 1,119,392 803,461 – sale of industrial utilities 946,210 661,790

Total 3,576,771 2,765,124

Cost of revenue – cost of gas processing 742,481 579,024 – cost of gas transportation 280,049 231,246 – cost of industrial utilities 784,232 536,981

Total 1,806,762 1,347,251

Gross profi t 1,770,009 1,417,873

31 DECEMBER 2012



21. Operating Profi t Group Company 1.1.2012 1.4.2011 1.1.2012 1.4.2011 to to to to 31.12.2012 31.12.2011 31.12.2012 31.12.2011 RM’000 RM’000 RM’000 RM’000

Operating profi t is arrived at after charging: Audit fees 312 219 222 209 Underprovision of audit fees in prior years – 5 – – Depreciation of property, plant and equipment 663,121 487,604 662,886 487,433 Inventory written off 1,326 – 1,326 – Property, plant and equipment expensed off 361 577 361 577 Property, plant and equipment written off 29,078 1,149 12,797 1,149 Rental of equipment and motor vehicles 7,599 4,649 7,560 4,649 Rental of land and buildings 7,277 5,318 6,927 5,206 Loss on disposal of other investments – 224 – 224 Loss on realised foreign exchange 1,459 161 – 136 Loss on unrealised foreign exchange 12,800 21,155 3,285 21,155 Unrealised loss on changes in values of Malaysia Government Securities and other unquoted securities 188 – 188 – Staff costs – wages, salaries and others 345,105 330,626 336,749 327,465 – contributions to Employees Provident Fund 48,317 41,238 46,974 41,238

and crediting: Dividend income from associate – quoted in Malaysia (2011: unquoted) – – 29,433 21,312 Gain on realised foreign exchange – – 1,062 – Gain on disposal of other investments 48 – 48 – Gain on disposal of property, plant and equipment 478 4,388 478 4,388 Gain on partial disposal through initial public offering of an associate 99,978 – 117,577 – Interest income from fund and other investments 72,551 71,169 71,471 71,082 Rental income on land and buildings 202 218 202 218 Unrealised gain on changes in values of Malaysia Government Securities and other unquoted securities – 704 – 704

31 DECEMBER 2012



22. Financing Costs Group Company 1.1.2012 1.4.2011 1.1.2012 1.4.2011 to to to to 31.12.2012 31.12.2011 31.12.2012 31.12.2011 RM’000 RM’000 RM’000 RM’000

Interest expense: – Term loan 20,342 16,263 20,342 16,263 – Islamic fi nancing facilities 17,198 – – – – Finance lease liabilities 25,890 – – –

63,430 16,263 20,342 16,263

Recognised in profi t or loss: – Term loan 20,342 16,263 20,342 16,263 Capitalised into projects-in-progress: – Islamic fi nancing facilities 17,198 – – – – Finance lease liabilities 25,890 – – –

63,430 16,263 20,342 16,263

23. Tax Expense Group Company 1.1.2012 1.4.2011 1.1.2012 1.4.2011 to to to to 31.12.2012 31.12.2011 31.12.2012 31.12.2011 RM’000 RM’000 RM’000 RM’000

Current tax expense – current year/ period 496,403 409,244 495,409 409,240 – over provision in prior year/ period – (3,046) – (3,061)

496,403 406,198 495,409 406,179

Deferred tax expense – reversal of temporary differences (43,363) (54,000) (43,711) (54,000) – over provision in prior year/ period (5,592) – (5,289) –

(48,955) (54,000) (49,000) (54,000)

Tax expense 447,448 352,198 446,409 352,179

Tax expense 447,448 352,198 446,409 352,179 Tax expense on share of profi t of associate 6,941 9,172 – – Tax expense on share of profi t of jointly controlled entity 765 669 – –

Total tax expense 455,154 362,039 446,409 352,179

31 DECEMBER 2012



23. Tax Expense (continued)

A reconciliation of income tax expense applicable to profi t before taxation at the statutory income tax rate to total tax expense at the effective income tax rate of the Group and of the Company is as follows:

Group Company 1.1.2012 1.4.2011 1.1.2012 1.4.2011 to to to to 31.12.2012 31.12.2011 31.12.2012 31.12.2011 RM’000 RM’000 RM’000 RM’000

Profi t before taxation 1,844,549 1,432,991 1,925,131 1,431,291

Taxation at Malaysian statutory tax rate of 25% (31.12.2011 - 25%) 461,137 358,248 481,283 357,823 Non-deductible expenses 24,609 8,359 7,167 2,745 Income not subject to tax (25,000) (937) (36,752) (5,328) Utilisation of unabsorbed capital allowance – (70) – – Recognition of previously unutilised tax losses – (515) – –

460,746 365,085 451,698 355,240 Over provision in prior year (5,592) (3,046) (5,289) (3,061)

Total tax expense 455,154 362,039 446,409 352,179

24. Dividends Company 1.1.2012 1.4.2011 to to 31.12.2012 31.12.2011 RM’000 RM’000

Ordinary Final paid: 31.12.2011 - 25% per ordinary share under single tier system 494,683 (31.03.2011 - 35% per ordinary share under single tier system) 692,556

Interim paid: 31.12.2012 - 15% per ordinary share under single tier system 296,810 (31.12.2011 - 15% per ordinary share under single tier system) 296,809

791,493 989,365

Proposed: Final: 31.12.2012 - 35% per ordinary share under single tier system 692,556 –

The proposed fi nal dividend of 35% per share under single tier system amounting to RM692,556,000 in respect of the fi nancial year ended 31 December 2012 has not been accounted for in the fi nancial statements.

31 DECEMBER 2012



24. Dividends (continued)

The net dividend per ordinary share for the fi nancial year ended 31 December 2012 takes into account the total interim and proposed fi nal dividends for the fi nancial year as follows:

Company 1.1.2012 1.4.2011 to to 31.12.2012 31.12.2011 Sen Sen

Interim dividend per ordinary share paid - net 15.0 15.0 Final dividend per ordinary share proposed - net 35.0 25.0

50.0 40.0

25. Earnings Per Share

Basic earnings per shareThe calculation of basic earnings per ordinary share (“EPS”) at 31 December 2012 was based on the Group’s net profi t attributable to shareholders of the Company of RM1,405,205,000 (31.12.2011: RM1,081,014,000), over the number of ordinary shares outstanding during the year of 1,978,732,000 (31.12.2011: 1,978,732,000).

Diluted earnings per shareThe Company has not issued any dilutive potential ordinary shares, hence, the diluted EPS is the same as the basic EPS.

26. Capital Commitments

Outstanding commitments in respect of capital expenditures not provided for in the fi nancial statements are:

Group Company 31.12.2012 31.12.2011 1.4.2011 31.12.2012 31.12.2011 1.4.2011 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Property, plant and equipment Approved and contracted for Less than one year 733,914 927,883 1,168,795 378,331 65,084 1,031,065 Between one and fi ve years 723,129 1,222,603 2,092,600 597,894 704,373 1,150,044

1,457,043 2,150,486 3,261,395 976,225 769,457 2,181,109

Approved but not contracted for Less than one year 1,008,196 1,068,657 147,519 513,902 406,066 132,426 Between one and fi ve years 5,639,630 3,484,437 481,060 517,083 2,610,977 169,282

6,647,826 4,553,094 628,579 1,030,985 3,017,043 301,708

8,104,869 6,703,580 3,889,974 2,007,210 3,786,500 2,482,817

31 DECEMBER 2012



27. Related Party Disclosures

Related parties

For the purposes of these fi nancial statements, parties are considered to be related to the Group or the Company if the Group or the Company has the ability, directly or indirectly, to control the party or exercise signifi cant infl uence over the party in making fi nancial and operating decisions, or vice versa. Related parties may be individuals or other entities.

The Group’s related parties include subsidiaries, associate, jointly controlled entity as well as the holding and ultimate holding company, Petroliam Nasional Berhad (“PETRONAS”) and its related entities. The Group’s related parties also include:

i) Government of Malaysia and its related entities as the Company’s holding company, PETRONAS is wholly-owned by the Government of Malaysia; and

ii) Key management personnel defi ned as those persons having authority and responsibility for planning, directing and controlling the activities of the Group either directly or indirectly. Key management personnel include all Directors of the Group.

Key management personnel compensation Group Company 1.1.2012 1.4.2011 1.1.2012 1.4.2011 to to to to 31.12.2012 31.12.2011 31.12.2012 31.12.2011 RM’000 RM’000 RM’000 RM’000

Directors

Fees 540 439 532 417

Other short term employee benefi ts

(including estimated monetary value of benefi ts-in-kind) 41 63 41 63

581 502 573 480

The Company paid management fee to the holding company in relation to services of key management personnel of the Company as disclosed in page 167.

31 DECEMBER 2012



27. Related Party Disclosures (continued)

In addition to the transactions detailed elsewhere in the fi nancial statements, the Group and the Company had the following transactions with related parties during the fi nancial year/ period:

Group Company 1.1.2012 1.4.2011 1.1.2012 1.4.2011 to to to to 31.12.2012 31.12.2011 31.12.2012 31.12.2011 RM’000 RM’000 RM’000 RM’000

Government of Malaysia’s related entities CIMB Bank Berhad Advisory fee (5,002) – – – Interest payable (17,027) – – – Tenaga Nasional Berhad Purchase of electricity (80,480) (81,318) (80,480) (81,318) Sales of industrial utilities 78,409 55,180 78,409 55,180 Yayasan Sabah Land rental (650) – – – Johor Bahru Valuation and Property Services Department Land premium (50,793) – (50,793) – POIC Sabah Sdn. Bhd. Land reclamation and study (33,955) – – – TNB Repair and Maintenance Sdn. Bhd. Provision of repair and maintenance services (39,218) (31,893) (39,218) (31,022) Holding company: Gas processing fee income 1,511,169 1,299,873 1,511,169 1,299,873 Gas transportation fee income 1,119,392 803,461 1,119,392 803,461 Purchase of fuel gas (451,455) (308,624) (451,455) (308,624) Insurance expense (5,007) (21,912) (5,007) (21,912) Information, communication and technology charges (19,351) (11,097) (19,351) (11,097) Interest expense (20,342) (16,263) (20,342) (16,263) Corporate security charges (6,691) (5,005) (6,237) (5,005) Rental of offi ce premises (6,855) (5,032) (6,795) (5,032) Supply chain and management services (12,996) (3,896) (12,890) (3,896) Technical consultancy fees – (22,493) – (22,493) Management fees (737) (553) (737) (553) Internal audit services (528) (470) (369) (470) Fees for representation in the Board of Directors (272) (217) (272) (217) Others – (791) – (791)

31 DECEMBER 2012



27. Related Party Disclosures (continued) Group Company 1.1.2012 1.4.2011 1.1.2012 1.4.2011 to to to to 31.12.2012 31.12.2011 31.12.2012 31.12.2011 RM’000 RM’000 RM’000 RM’000

Related companies: PETRONAS Chemicals Aromatics Sdn. Bhd. Sale of industrial utilities 42,105 29,249 42,105 29,249 Vinyl Chloride (Malaysia) Sdn. Bhd. Sale of industrial utilities 60,303 32,350 60,303 32,350 PETRONAS Chemicals Ammonia Sdn. Bhd. Sale of industrial utilities 108,787 81,287 108,787 81,287 MTBE Malaysia Sdn. Bhd. Sale of industrial utilities 110,512 72,057 110,512 72,057 Petlin (Malaysia) Sdn. Bhd. Sale of industrial utilities 72,915 48,679 72,915 48,679 Bekalan Air KIPC Sdn. Bhd. Purchase of treated water (13,529) (9,902) (13,529) (9,902) Management fee income 500 375 500 375 PETRONAS Carigali Sdn. Bhd. Project management fee 52,786 41,268 52,786 41,268 CEFS Response Contribution for emergency response services (8,458) (7,260) (8,458) (7,260) Optimal Group of Companies Sale of industrial utilities 290,747 218,492 290,747 218,492 Ethylene Malaysia Sdn. Bhd. Sale of industrial utilities 2,582 2,311 2,582 2,311 PETRONAS Management Training Sdn. Bhd. Training and development related costs (3,209) (4,059) (3,204) (4,059) PETRONAS Technical Training Sdn. Bhd. Training and development related costs (4,643) – (3,386) – PETRONAS Technical Services Sdn. Bhd. Technical consultancy fees (13,016) – (13,016) – PETRONAS Penapisan Melaka Sdn. Bhd. Lease of land for pipeline route (127) – – – Rental of offi ce premises (124) – – – Purchase of offi ce building (1,100) – – – Gas Asia Terminal (L) Pte. Ltd. Time charter services (50,448) – – –

31 DECEMBER 2012



27. Related Party Disclosures (continued) Group Company 1.1.2012 1.4.2011 1.1.2012 1.4.2011 to to to to 31.12.2012 31.12.2011 31.12.2012 31.12.2011 RM’000 RM’000 RM’000 RM’000

Subsidiaries: Regas Terminal (Sg. Udang) Sdn. Bhd. Management fee 4,656 – 4,656 – Rental of warehouse 43 – – – Regas Terminal (Pengerang) Sdn. Bhd. Management fee 365 – 365 – Regas Terminal (Lahad Datu) Sdn. Bhd. Management fee 876 – 876 – Jointly controlled entity: Industrial Gases Solutions Sdn. Bhd. Sale of industrial utilities 4,628 5,215 4,628 5,215

Associates and jointly controlled entities of the holding company: Kertih Terminal Sdn. Bhd. Sale of industrial utilities 6,258 4,669 6,258 4,669 BASF PETRONAS Chemicals Sdn. Bhd. Sale of industrial utilities 97,039 64,160 97,039 64,160 BP PETRONAS Acetyls Sdn. Bhd. Sale of industrial utilities 39,812 27,234 39,812 27,234 Trans Thai-Malaysia (Malaysia) Sdn. Bhd. Access right of way fee 2,025 810 2,025 810 Annual operations and maintenance fee 2,209 709 2,209 709

The Directors of the Company are of the opinion that the above transactions have been entered into in the normal course of business and have been established on a commercial basis. The above has been stated at transacted amount.

Included in the management fees paid to the holding company is payment for services of certain key management personnel of the Company.

Included in the fees for representation in the Board of Directors are fees paid directly to holding company in respect of certain directors who are appointees of the holding company.

Information regarding outstanding balances at reporting date arising from related party transactions are disclosed in note 8, note 17 and note 19.

31 DECEMBER 2012



28. Operating Segments

The Group has four reporting segments, as described below, which offer different products and services and are managed separately because they require different technology and marketing strategies. The following summary describes the operations in each of the Group’s reporting segments:

• Gas processing – activities include processing of natural gas from gas fi elds offshore the East Coast of Peninsular Malaysia into sales gas and other by-products such as ethane, propane and butane.

• Gas transportation – activities include transportation of the processed gas to PETRONAS end users throughout Malaysia and export to Singapore.

• Utilities – activities include manufacturing, marketing and supplying of industrial utilities to the petrochemical complexes in the Kerteh and Gebeng Industrial Complexes.

• Regasifi cation – the intended activities include regasifi cation of liquefi ed natural gas for PETRONAS and third parties to be used throughout Malaysia. The regasifi cation facility is presently under construction and targeted to be completed in year 2013.

For each of the reportable segment, the Group chief operating decision maker, which in this case is the Board of Directors of the Group, reviews performance reports at least on a quarterly basis.

Performance is measured based on segment operating profi t, as included in the performance reports to the Board of Directors. Segment operating profi t is used to measure performance as management believes that such information is the most relevant in evaluating the results of the segments.

31 DECEMBER 2012



28. Operating Segments (continued) Gas Gas Business segments Processing Transportation Utilities Regasifi cation Total 31.12.2012 RM’000 RM’000 RM’000 RM’000 RM’000

Revenue 1,511,169 1,119,392 946,210 – 3,576,771

Segment results 768,688 839,343 161,978 – 1,770,009

Unallocated income 70,961

Operating profi t 1,840,970 Financing costs (20,342) Share of profi t after tax of equity-accounted associate and jointly controlled entity 23,921

Profi t before taxation 1,844,549 Tax expense (447,448)

Profi t for the year 1,397,101

Included in the measure of segment results are: Depreciation and amortisation 361,160 99,998 201,458 – 662,616 Unallocated depreciation and amortisation – – – – 505

Gas Gas Business segments Processing Transportation Utilities Regasifi cation Total 31.12.2011 RM’000 RM’000 RM’000 RM’000 RM’000

Revenue 1,299,873 803,461 661,790 – 2,765,124

Segment results 720,849 572,215 124,809 – 1,417,873

Unallocated income 2,781

Operating profi t 1,420,654 Financing costs (16,263) Share of profi t after tax of equity-accounted associate and jointly controlled entity 28,600

Profi t before taxation 1,432,991 Tax expense (352,198)

Profi t for the period 1,080,793

Included in the measure of segment results are: Depreciation and amortisation 253,129 107,367 126,979 – 487,475 Unallocated depreciation and amortisation – – – – 129

31 DECEMBER 2012



28. Operating Segments (continued) Gas Gas Business segments Processing Transportation Utilities Regasifi cation Total 31.12.2012 RM’000 RM’000 RM’000 RM’000 RM’000

Segment assets 3,464,172 2,268,449 1,429,291 3,001,157 10,163,069

Investment in associate 127,796 Investment in jointly controlled entity 7,205 Unallocated assets 3,164,134

Total assets 13,462,204

Included in the measure of segment assets are: Capital expenditure 830,964 47,031 61,686 2,233,245* 3,172,926 Unallocated capital expenditure – – – – 562,882

* Capital expenditure for Regasifi cation segment includes leased assets amounting to RM841,009,000 which are accounted for as assets of the Group (refer note 3).

Gas Gas Business segments Processing Transportation Utilities Regasifi cation Total 31.12.2011 RM’000 RM’000 RM’000 RM’000 RM’000

Segment assets 3,005,791 2,309,303 1,554,056 – 6,869,150

Investment in associate 179,567 Investment in jointly controlled entity 5,414 Unallocated assets 3,692,338

Total assets 10,746,469

Included in the measure of segment assets are: Capital expenditure 264,809 43,795 36,386 – 344,990 Unallocated capital expenditure – – – – 789,097

31 DECEMBER 2012



28. Operating Segments (continued)

Segment results

The total segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items mainly comprise fair value gain or loss on fi nancial asset, fi nance income, income taxes and other corporate expenses.

Segment assets

The total of segment assets are measured based on all assets of a segment, excluding interest bearing assets and corporate assets as these are managed on a group basis.

The segmental information in respect of the associate and jointly controlled entity is not presented as the contribution of the associate and jointly controlled entity and the carrying amount of investment in the associate and jointly controlled entity are not material and have been refl ected in the statement of comprehensive income and statement of fi nancial position of the Group. Details of the associate and jointly controlled entity are disclosed in note 5 and note 6 to the fi nancial statements respectively.

Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more than one period.

Products and services segments 1.1.2012 1.4.2011 to to 31.12.2012 31.12.2011 RM’000 RM’000

Gas processing fees 1,511,169 1,299,873 Gas transportation fees 1,119,392 803,461 Utilities – Electricity 434,041 299,151 – Steam 288,186 196,293 – Industrial gases 164,357 123,343 – Others 59,626 43,003

3,576,771 2,765,124

Geographical information for revenue and non-current assets is not disclosed as the Group is pre-dominantly operated in Malaysia.

29. Holding Company

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

31 DECEMBER 2012



30. Financial Instruments

Categories of fi nancial instruments

The table below provides an analysis of fi nancial instruments categorised as follows:

i. Loans and receivables (“L&R”);ii. Fair value through profi t or loss (“FVTPL”); – Designated upon initial recognition (“DUIR”);iii. Loans and borrowings (“L&B”).

Derivatives L&R/ FVTPL used for Carrying (L&B) -DUIR hedging amount Group Note RM’000 RM’000 RM’000 RM’000

31.12.2012 Financial assets Trade and other receivables (excluding prepayments) 8 350,057 – – 350,057 Fund and other investments 9 – 160,422 – 160,422 Cash and cash equivalents 10 2,205,070 – – 2,205,070

2,555,127 160,422 – 2,715,549

Financial liabilities Borrowings 14 (2,220,837) 118,407 – (2,102,430) Other long term liabilities (excluding deferred income) 17 – – (20,829) (20,829) Trade and other payables (excluding deferred income) 19 (912,154) – (7,099) (919,253)

(3,132,991) 118,407 (27,928) (3,042,512)

L&R/ Carrying (L&B) FVTPL amount Group Note RM’000 RM’000 RM’000

31.12.2011 Financial assets Trade and other receivables (excluding prepayments) 8 374,108 – 374,108 Fund and other investments 9 – 245,562 245,562 Cash and cash equivalents 10 2,368,834 – 2,368,834

2,742,942 245,562 2,988,504

Financial liabilities Borrowings 14 (652,921) 208,186 (444,735) Trade and other payables (excluding deferred income) 19 (445,973) – (445,973)

(1,098,894) 208,186 (890,708)

31 DECEMBER 2012



30. Financial Instruments (continued)

Categories of fi nancial instruments (continued) L&R/ Carrying (L&B) FVTPL amount Group Note RM’000 RM’000 RM’000

1.4.2011 Financial assets Trade and other receivables (excluding prepayments) 353,962 – 353,962 Fund and other investments – 275,082 275,082 Cash and cash equivalents 2,756,079 – 2,756,079

3,110,041 275,082 3,385,123

Financial liabilities Borrowings (587,314) 163,734 (423,580) Trade and other payables (excluding deferred income) (337,561) – (337,561)

(924,875) 163,734 (761,141)

L&R/ Carrying (L&B) FVTPL amount Company Note RM’000 RM’000 RM’000


2,253,419 160,422 2,413,841


(1,311,210) 118,407 (1,192,803)

31 DECEMBER 2012




Categories of fi nancial instruments (continued) L&R/ Carrying (L&B) FVTPL amount Company Note RM’000 RM’000 RM’000


2,739,074 245,562 2,984,636


(1,046,460) 208,186 (838,274)

L&R/ Carrying (L&B) FVTPL amount Company Note RM’000 RM’000 RM’000

1.4.2011 Financial assets Trade and other receivables (excluding prepayments) 358,493 – 358,493 Fund and other investments – 275,082 275,082 Cash and cash equivalents 2,743,731 – 2,743,731

3,102,224 275,082 3,377,306

Financial liabilities Borrowings (587,314) 163,734 (423,580) Trade and other payables (excluding deferred income) (324,259) – (324,259)

(911,573) 163,734 (747,839)

Certain fund and other investments have been designated upon initial recognition as at fair value through profi t or loss as management internally monitors these investments on fair value basis.

The fair value of borrowings is shown on page 187. For all other fi nancial instruments, the carrying amount is either the fair value, or are not materially different from the fair value.

The fair value movements for fi nancial assets categorised as at fair value through profi t or loss are mainly attributable to changes in market prices.

31 DECEMBER 2012




Financial risk management

The Group and the Company are exposed to various risks that are particular to its core business which consists of separating natural gas into its components and storing, transporting and distributing such components thereof for a fee and the sale of industrial utilities. These risks, which arise in the normal course of the Group’s and the Company’s business, comprise credit risk, liquidity risk and market risk relating to interest rates and foreign currency exchange rates.

The Group has policies and guidelines in place that sets the foundation for a consistent approach towards establishing an effective risk management across the Group.

The Group’s and the Company’s goal in risk management is to ensure that the management understands, measures and monitors the various risks that arise in connection with their operations. Policies and guidelines have been developed to identify, analyse, appraise and monitor the dynamic risks facing the Group and the Company. Based on this assessment, the Group and the Company adopt appropriate measures to mitigate these risks in accordance with their view of the balance between risk and reward.

Credit risk

Credit risk is the potential exposure of the Group and of the Company to losses in the event of non-performance by counterparties. The Group’s and the Company’s exposure to credit risk arise from its operating activities, primarily from trade receivables and from its investing activities, primarily from fund and other investments. The credit risk arising from the Group’s and the Company’s normal operations are controlled by individual operating units in line with PETRONAS’ policies and guidelines.

Receivables

The Group and the Company minimise credit risk by entering into contracts with highly credit rated counterparties. Potential counterparties are subject to credit assessment and approval prior to any transaction being concluded and existing counterparties are subject to regular reviews, including re-appraisal and approval of granted limits. The creditworthiness of counterparties is assessed based on an analysis of all available quantitative and qualitative data regarding business risks and fi nancial standing, together with the review of any relevant third party and market information. Reports are prepared and presented to the management that cover the Group’s overall credit exposure against limits and securities.

Depending on the types of transactions and counterparty creditworthiness, the Group and the Company further mitigate and limit risks related to credit by requiring other credit enhancements such as cash deposits and bank guarantees. No collateral or other credit enhancement is required for amounts due from related parties.

31 DECEMBER 2012




Credit risk (continued)

Receivables (continued)

As at the reporting date, the maximum exposure to credit risk arising from receivables is represented by the carrying amounts in the statement of fi nancial position. The ageing of trade receivables as at the reporting date is analysed below:

31.12.2012 31.12.2011 1.4.2011 Group/Company RM’000 RM’000 RM’000

Current 326,290 299,343 300,854 Past due 1 to 30 days 1,236 517 499 Past due 31 to 60 days 1,478 76 801 Past due 61 to 90 days 862 119 689 Past due more than 90 days 11,626 11,855 4,351

341,492 311,910 307,194

Representing: Trade receivables (note 8) 14,943 15,035 14,678 Amounts due from holding company (note 8.2) 191,449 164,623 202,557 Amounts due from related company (note 8.3) 116,896 118,954 70,778 Amounts due from jointly controlled entity (note 8) 1,299 1,845 3,354 Amounts due from related parties (note 8) 16,905 11,453 15,827

341,492 311,910 307,194

Fund and other investments

The Group and the Company are also exposed to counterparty credit risk from fi nancial institutions through fund investment activities comprising primarily money market placement and investments in bonds. These exposures are managed in accordance with existing policies and guidelines that defi ne the parameters within which the investment activities shall be undertaken in order to achieve the Group’s investment objective of preserving capital and generating optimal returns above appropriate benchmarks within allowable risk parameters.

Investments are only made with approved counterparties who met the appropriate rating and other relevant criteria, and within approved credit limits, as stipulated in the policies and guidelines. The treasury function undertakes a credit risk management activities similar to the credit management and monitoring procedures for receivables.

As at the reporting date, the maximum exposure to credit risk arising from fund and other investments is represented by the carrying amounts in the statement of fi nancial position.

The fund and other investments are unsecured, however, in view of the sound credit rating of counterparties, management does not expect any counterparty to fail to meet its obligation.

Liquidity risk

Liquidity risk is the risk that suitable sources of funding for the Group’s and the Company’s business activities may not be available. In managing its liquidity risk, the Group and the Company maintain suffi cient cash and liquid marketable assets.

31 DECEMBER 2012




Maturity analysis

The table below summarises the maturity profi le of the Group’s and of the Company’s fi nancial liabilities as at the reporting date based on undiscounted contractual payments:

Contractual interest/ More Carrying profi t rates Contractual Within 1 1 - 2 2 - 5 than amount per annum cash fl ow* year years years 5 years Group RM’000 % RM’000 RM’000 RM’000 RM’000 RM’000

31.12.2012 Financial liabilities

Unsecured term loan from holding company Term loan (net of CEA) 448,019 3.4 473,359 473,359 – – –

Islamic fi nancing facilities 855,746 4.3 - 5.5 1,324,303 59,647 42,860 224,763 997,033

Finance lease liabilities 798,665 9.2 1,729,713 88,041 87,967 264,139 1,289,566

Trade and other payables (excluding deferred income and derivative liabilities) 912,154 – 912,154 912,154 – – –

Derivative liabilities Forward foreign exchange contracts - Infl ows – – (592,221) (229,633) (61,333) (2,570) (298,685) - Outfl ows 27,928 633,986 237,015 60,315 2,791 333,865

3,042,512 4,481,294 1,540,583 129,809 489,123 2,321,779

* The contractual cash fl ow is inclusive of the principal and interest payments.

31 DECEMBER 2012




Maturity analysis (continued)



Unsecured term loan from holding company Term loan (net of CEA) 444,735 3.4 498,498 22,199 476,299 – –

Trade and other payables (excluding deferred income) 445,973 – 445,973 445,973 – – –

890,708 944,471 468,172 476,299 – –




Unsecured term loan from holding company Term loan (net of CEA) 423,580 3.4 504,023 19,969 19,969 464,085 –


761,141 841,584 357,530 19,969 464,085 –


31 DECEMBER 2012





Contractual interest/ More Carrying profi t rates Contractual Within 1 1 - 2 2 - 5 than amount per annum cash fl ow* year years years 5 years Company RM’000 % RM’000 RM’000 RM’000 RM’000 RM’000


Unsecured term loan from holding company Term loan (net of CEA) 448,019 3.4 473,359 473,359 – – –


1,192,803 1,218,143 1,218,143 – – –




Unsecured term loan from holding company Term loan (net of CEA) 444,735 3.4 498,498 22,199 476,299 – –


838,274 892,037 415,738 476,299 – –


31 DECEMBER 2012







Unsecured term loan from holding company Fixed rate loan 423,580 3.4 504,023 19,969 19,969 464,085 –


747,839 828,282 344,228 19,969 464,085 –


Market risk

Market risk is the risk or uncertainty arising from changes in market prices and their impact on the performance of the business. The market price changes that the Group and the Company are exposed include interest rates, foreign currency exchange rates and other indices that could adversely affect the value of the Group’s and of the Company’s fi nancial assets, liabilities or expected future cash fl ows.

Interest rate risk

The Group’s and the Company’s investments in fi xed-rate debt instruments are exposed to a risk of change in their fair value while investments in fl oating-rate debt instruments are exposed to a risk of change in their future cash fl ows, due to changes in interest rates.

All interest rate risks are monitored and managed proactively in line with PETRONAS policies and guidelines.

31 DECEMBER 2012




Interest rate risk (continued)

The interest rate profi le of the Group’s and of the Company’s interest-bearing fi nancial instruments based on carrying amounts as at reporting date is as follows:


Fixed rate instruments Financial assets 2,229,210 2,578,693 2,995,834 1,831,067 2,532,761 2,983,491 Financial liabilities (2,102,430) (444,735) (423,580) (448,019) (444,735) (423,580)

126,780 2,133,958 2,572,254 1,383,048 2,088,026 2,559,911

Floating rate instruments Financial assets 35,001 35,003 35,001 35,001 35,003 35,001

As at 31 December 2012, 99% of the fi nancial instruments of the Group and the Company are fi xed rate instruments (31.12.2011: 99%).

Since most of the Group’s and the Company’s fi nancial assets and liabilities are fi xed rate instruments measured at amortised cost, a change in interest rate is not expected to have material impact on the Group’s and the Company’s profi t or loss.

Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash fl ows of a fi nancial instrument will fl uctuate because of changes in foreign currency exchange rates.

The Group and the Company are exposed to varying levels of foreign currency risk when they enter into transactions that are not denominated in the respective companies’ functional currencies or when foreign currency monetary assets and liabilities are translated at the reporting date.

The Group and the Company operate predominantly in Malaysia and transact mainly in Malaysian Ringgit. As such, it is not exposed to any signifi cant foreign currency risk.

The Group’s and the Company’s foreign exchange management policy is to minimise economic and signifi cant transactional exposure arising from currency movements. For major capital projects, the Group and Company perform assessment of potential foreign exchange risk exposure at the investment decision phase to determine the appropriate foreign exchange risk management strategy. When deemed necessary and appropriate, the Group and the Company will enter into forward exchange contracts to hedge and minimise their exposure to the foreign currency risk.

31 DECEMBER 2012




Foreign currency risk (continued)

The Group’s and the Company’s exposure to foreign currency risk, based on carrying amounts as at the reporting date are as follows:

31.12.2012 Denominated in USD GBP EUR JPY Group RM’000 RM’000 RM’000 RM’000

Financial liabilities Borrowings 798,709 – – 2,013 Trade and other payables 161,293 4,013 23,466 8 Forward foreign exchange contracts 523,320 – 110,940 –

1,483,322 4,013 134,406 2,021 Estimated forecast purchases (490,835) – (115,497) –

Net foreign currency exposure 992,487 4,013 18,909 2,021


Financial liabilities Borrowings – – – 14,311 Trade and other payables 29,885 17 8,181 157

29,885 17 8,181 14,468


Financial liabilities Borrowings – – – 5,969 Trade and other payables 45,659 – 2,089 –

45,659 – 2,089 5,969

31 DECEMBER 2012




Foreign currency risk (continued) 31.12.2012 Denominated in USD GBP EUR JPY Company RM’000 RM’000 RM’000 RM’000

Financial liabilities Borrowings – – – 2,013 Trade and other payables 83,068 4,013 622 8

83,068 4,013 622 2,021

31.12.2011 Denominated in USD GBP EUR JPY Company RM’000 RM’000 RM’000 RM’000

Financial liabilities Borrowings – – – 14,311 Trade and other payables 21,477 17 1,390 157

21,477 17 1,390 14,468

1.4.2011 Denominated in USD GBP EUR JPY Company RM’000 RM’000 RM’000 RM’000

Financial liabilities Borrowings – – – 5,969 Trade and other payables 45,659 – 2,089 –

45,659 – 2,089 5,969

Currency risk sensitivity analysis

Sensitivity analysis for a given market variable provided in this note, discloses the effect on profi t or loss and equity as at 31 December 2012 assuming that a reasonably possible change in the relevant market variable had occurred at 31 December 2012 and had been applied to the risk exposures in existence at that date to show the effects of reasonably possible changes in price on profi t or loss and equity to the next annual reporting date. Reasonably possible changes in market variables used in the sensitivity analysis are based on implied volatilities, where available, or historical data for equity and commodity prices and foreign exchange rates where relevant. Reasonably possible changes in interest rates are based on management judgment and historical experience.

The sensitivity analysis is hypothetical and should not be considered to be predictive of future performance because the Group’s actual exposure to market prices is constantly changing with changes in the Group’s portfolio of among others, commodity, debt and foreign currency contracts where relevant. Changes in fair values or cash fl ows based on a variation in a market variable cannot be extrapolated because the relationship between the change in market variable and the change in fair value or cash fl ows may not be linear. In addition, the effect of a change in a given market variable is calculated independently of any change in another assumption and mitigating actions that would be taken by the Group. In reality, changes in one factor may contribute to changes in another, which may magnify or counteract the sensitivities.

31 DECEMBER 2012




Currency risk sensitivity analysis (continued)

The following table demonstrates the indicative pre-tax effects on the profi t or loss of applying reasonably foreseeable market movements in the following foreign currency exchange rates:

+/- Group Company Change in Effect on Effect on Effect on currency profi t or equity profi t or rate loss loss

% RM’000 RM’000 RM’000

31.12.2012 USD 5 55,189 10,753 4,153 GBP 10 401 – 401 EUR 10 13,680 – 62 JPY 5 101 – 101

+/- Group Company Change in Effect on Effect on Effect on currency profi t or equity profi t or rate loss loss

% RM’000 RM’000 RM’000

31.12.2011 USD 5 1,494 – 1,074 GBP 10 2 – 2 EUR 10 479 – 139 JPY 5 724 – 724

This analysis assumes that all other variables, in particular interest rates, remain constant.

A depreciation in the above foreign currency rates would have had equal but opposite effect, on the basis that all other variables remain constant.

31 DECEMBER 2012




Fair value

The fair values of fi nancial liabilities measured at amortised cost, together with the carrying amounts shown in the statement of fi nancial position are as follows:

31.12.2012 31.12.2011 1.4.2011 Carrying Fair Carrying Fair Carrying Fair amount value amount value amount value Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Loans and borrowings:

Term loan (net of CEA) 448,019 450,659 444,735 452,165 423,580 437,763 Islamic fi nancing facilities 855,746 855,746 – – – – Finance lease liabilities 798,665 798,665 – – – –

2,102,430 2,105,070 444,735 452,165 423,580 437,763

31.12.2012 31.12.2011 1.4.2011 Carrying Fair Carrying Fair Carrying Fair amount value amount value amount value Company RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Loans and borrowings:

Term loan (net of CEA) 448,019 450,659 444,735 452,165 423,580 437,763

As at 31 December 2012, the term loan and the CEA are fair valued separately. The fair value of the term loan is derived from the price sourced from third party and translated at the spot rate at the reporting date. The fair value of the CEA (note 14) is netted off against the carrying value of the term loan.

Fair value hierarchy

The table below shows the fair value hierarchy of fi nancial instruments carried at fair value. The different levels have been defi ned as follows:

• Level 1 Quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2 Input other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

• Level 3 Inputs for the asset or liability that are not based on observable market data (unobservable input).

The Group’s and the Company’s fi nancial assets and fi nancial liabilities carried at fair value are classifi ed under Level 2 as follows:


Financial assets Malaysia Government Securities 20,016 59,971 89,891 20,016 59,971 89,891 Corporate private debt securities 140,406 185,591 185,191 140,406 185,591 185,191

160,422 245,562 275,082 160,422 245,562 275,082

Financial liabilities Forward foreign exchange contracts 27,928 – – – – –

31 DECEMBER 2012




Income/ (expense), net gains and losses arising from fi nancial instruments

Interest Interest income expense Others Total RM’000 RM’000 RM’000 RM’000

Group 1.1.2012 to 31.12.2012 Financial instruments at fair value through profi t or loss - Designated upon initial recognition 7,755 – (89,919) (82,164) Loans and receivables 64,796 – – 64,796 Financial liabilities at amortised cost – (20,342) 96,472 76,130 Derivatives used for hedging - recognised in profi t or loss – – (20,952) (20,952) - recognised in equity – – (6,976) (6,976)

Total 72,551 (20,342) (21,375) 30,834

Group 1.4.2011 to 31.12.2011 Financial instruments at fair value through profi t or loss - Designated upon initial recognition 7,209 – 44,932 52,141 Loans and receivables 63,960 – – 63,960 Financial liabilities at amortised cost – (16,263) (65,768) (82,031)

Total 71,169 (16,263) (20,836) 34,070

Interest Interest income expense Others Total RM’000 RM’000 RM’000 RM’000

Company 1.1.2012 to 31.12.2012 Financial instruments at fair value through profi t or loss - Designated upon initial recognition 7,755 – (89,919) (82,164) Loans and receivables 63,716 – – 63,716 Financial liabilities at amortised cost – (20,342) 87,556 67,214

Total 71,471 (20,342) (2,363) 48,766

Company 1.4.2011 to 31.12.2011 Financial instruments at fair value through profi t or loss - Designated upon initial recognition 7,209 – 44,932 52,141 Loans and receivables 63,873 – – 63,873 Financial liabilities at amortised cost – (16,263) (65,743) (82,006)

Total 71,082 (16,263) (20,811) 34,008

31 DECEMBER 2012



31. Capital Management

The Group and the Company defi ne capital as its total equity and debt. The objective of the Group and the Company’s capital management is to maintain an optimal capital structure and ensure availability of funds in order to meet fi nancial obligations, support business growth and maximises shareholder’s value. As a subsidiary of PETRONAS, the Group and the Company’s approach in managing capital is set out in the PETRONAS Group Corporate Financial Policy.

The Group and the Company monitor and maintain a prudent level of total debt to total asset ratio and ensures compliance with all covenants under debt and shareholders’ agreements and regulatory requirements, if any.

There were no changes in the Group and the Company’s approach to capital management during the year.

Under the requirement of Bursa Malaysia Practice Note No.17/2005, the Company is required to maintain consolidated shareholders’ equity equal to or not less than 25% of the issued and paid-up capital (excluding treasury shares) and such shareholders’ equity is not less than RM40 million. The Company has complied with this requirement.

32. New and Revised Pronouncements Yet in Effect

The following new and revised MFRSs, amendments and IC interpretations (collectively referred to as “pronouncements”) that have been issued by the Malaysian Accounting Standards Board will become effective in future fi nancial reporting periods and have not been adopted by the Group and/or the Company:

Effective for annual periods beginning on or after 1 January 2013

MFRS 10, Consolidated Financial Statements

MFRS 11, Joint Arrangements

MFRS 12, Disclosure of Interests in Other Entities

MFRS 13, Fair Value Measurement

MFRS 119, Employee Benefi ts (revised)

MFRS 127, Separate Financial Statements

MFRS 128, Investments in Associates and Joint Ventures

Amendments to MFRS 7, Financial Instruments: Disclosures – Offsetting Financial Assets and Financial Liabilities

Amendments to MFRS 10, Consolidated Financial Statements: Transition Guidance

Amendments to MFRS 11, Joint Arrangements: Transition Guidance

Amendments to MFRS 12, Disclosure of Interests in Other Entities: Transition Guidance

Amendments to MFRS 101, Presentation of Financial Statements (Annual Improvements 2009-2011 Cycle)

Amendments to MFRS 116, Property, Plant and Equipment (Annual Improvements 2009-2011 Cycle)

Amendments to MFRS 132, Financial Instruments: Presentation (Annual Improvements 2009-2011 Cycle)

Amendments to MFRS 134, Interim Financial Reporting (Annual Improvements 2009-2011 Cycle)


Amendments to MFRS 132, Financial Instruments: Presentation – Offsetting Financial Assets and Financial Liabilities

31 DECEMBER 2012



32. New and Revised Pronouncements Yet in Effect (continued)


MFRS 9, Financial Instruments (2009)

MFRS 9, Financial Instruments (2010)

Amendments to MFRS 7, Financial Instruments: Disclosures – Mandatory Effective Date of MFRS 9 and Transition Disclosures

The adoption of the above pronouncements except for MFRS 10 and MFRS 11, are not expected to have material impact on the fi nancial statements of the Group and of the Company in the period of initial application.

MFRS 10 introduces a new single control model to determining which investees should be consolidated. MFRS 10 supersedes MFRS 127, Consolidated and Separate Financial Statements and IC Interpretation 112, Consolidation – Special Purpose Entities. There are three elements to the defi nition of control in MFRS 10: (i) power by investor over an investee, (ii) exposure, or rights, to variable returns from investor’s involvement with the investee, and (iii) investor’s ability to affect those returns through its power over the investee.

The Group has re-evaluated its involvement with investees under the new control model. Based on its reassessment, the Group concluded that it has not had control over certain subsidiaries of which the Group owns 60% of the voting rights considering that strategic and fi nancial decision of the relevant activities of the investees require unanimous consent by the Group and other parties. Upon adoption of MFRS 10, the Group will de-consolidate these subsidiaries retrospectively. These investees will be equity-accounted for using MFRS 11, Joint

Arrangements.

The change of the accounting policy is not expected to have material impact on the Group’s reported income or net assets.

33. New Pronouncements Not Applicable to the Group and the Company

The MASB has issued amendments and IC interpretation which are not yet effective, but for which are not relevant to the operations of the Group and of the Company and hence, no further disclosure is warranted.


Amendments to MFRS 1, First–time Adoption of Malaysian Financial Reporting Standards (Annual Improvements 2009-2011 Cycle)

Amendments to MFRS 1, First–time Adoption of Malaysian Financial Reporting Standards - Government Loans

IC 20, Stripping Costs in the Production Phase of a Surface Mine

31 DECEMBER 2012



34. Disclosure of Realised and Unrealised Profi t

The retained profi ts as at the end of reporting period consists of:

Group Company 31.12.2012 31.12.2011 31.12.2012 31.12.2011 RM’000 RM’000 RM’000 RM’000

Total retained profi ts/ (accumulated losses) of the Company and its subsidiaries: - realised 6,967,958 6,352,810 7,002,795 6,361,095 - unrealised (1,029,230) (1,042,644) (997,115) (1,042,644)

5,938,728 5,310,166 6,005,680 5,318,451

Total share of retained profi ts/ (accumulated losses) from associated company: - realised 61,129 89,319 – – - unrealised (9,799) (13,088) – –

Total share of retained profi ts/ (accumulated losses) from jointly controlled entity: - realised 6,935 5,164 – – - unrealised 20 1 – –

5,997,013 5,391,562 6,005,680 5,318,451 Consolidation adjustments 8,900 639 – –

Total retained profi ts 6,005,913 5,392,201 6,005,680 5,318,451

The realised and unrealised profi ts are complied based on the Guidance on Special Matter No.1, Determination of Realised and Unrealised Profi ts or Losses in the Context of Disclosures Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, issued by the Malaysian Institute of Accountants, and presented based on the format prescribed by Bursa Malaysia Securities Berhad.

31 DECEMBER 2012



Report on the Financial Statements

We have audited the fi nancial statements of PETRONAS GAS BERHAD, which comprise the Statements of Financial Position as at 31 December 2012 of the Group and of the Company, and the Statements of Profi t or Loss and Other Comprehensive Income, Changes in Equity and Cash Flows of the Group and of the Company for the year then ended, and a summary of signifi cant accounting policies and other explanatory information, as set out on pages 124 to 190.

Directors’ Responsibility for the Financial Statements

The Directors of the Company are responsible for the preparation of fi nancial statements so as to give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. The Directors are also responsible for such internal control as the Directors determine is necessary to enable the preparation of fi nancial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on our judgement, including the assessment of risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation of fi nancial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the fi nancial statements.

We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the fi nancial statements give a true and fair view of the fi nancial position of the Group and of the Company as of 31 December 2012 and of their fi nancial performance and cash fl ows for the year then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia.

Report on Other Legal and Regulatory Requirements

In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following:

(a) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries have been properly kept in accordance with the provisions of the Act.

(b) We are satisfi ed that the accounts of the subsidiaries that have been consolidated with the Company’s fi nancial statements are in form and content appropriate and proper for the purposes of the preparation of the fi nancial statements of the Group and we have received satisfactory information and explanations required by us for those purposes.

(c) Our audit reports on the accounts of the subsidiaries did not contain any qualifi cation or any adverse comment made under Section 174(3) of the Act.

Independent Auditors’ Report TO THE MEMBERS OF PETRONAS GAS BERHAD


Other Reporting Responsibilities

Our audit was made for the purpose of forming an opinion on the fi nancial statements taken as a whole. The information set out in note 34 on page 191 to the fi nancial statements has been compiled by the Company as required by the Bursa Malaysia Securities Berhad Listing Requirements and is not required by the Malaysian Financial Reporting Standards or International Financial Reporting Standards. We have extended our audit procedures to report on the process of compilation of such information. In our opinion, the information has been properly compiled, in all material respects, in accordance with the Guidance on Special Matter No.1, Determination of Realised and Unrealised Profi ts or Losses in the Context of Disclosures Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, issued by the Malaysian Institute of Accountants and presented based on the format prescribed by Bursa Malaysia Securities Berhad.

Other Matters

This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.

KPMG DESA MEGAT & CO. ADRIAN LEE LYE WANGFirm Number: AF 0759 Approval Number: 2679/11/13(J)Chartered Accountants Chartered Accountant

Petaling Jaya,21 February 2013

Independent Auditors’ Report

TO THE MEMBERS OF PETRONAS GAS BERHAD



OtherInformation

Summary of Landed Property, Plant and Equipment 196

Training Programmes Attended by Directors 203

Analysis of Shareholdings 205

Corporate Directory 209

Notice of Annual General Meeting 210

Administrative Details 212

Proxy Form


Summary of Landed Property, Plant and Equipment

A summary of landed property, plant and equipment of PETRONAS Gas Berhad and its subsidiaries as at 31 December 2012

LocationAcquisition

Date TenureDescriptionand usage

Land Area (hectare)

Age of Plant and Building

(years)

Build-up Area

(sq. m)

Net Book Value as at

31 December 2012 (RM’000)

TERENGGANU

Gas Processing Plants, KertihKm 105, Jalan Kuantan-Kuala Terengganu24300 Kertih, Kemaman, Terengganu Darul Iman

Lot No. 1903

Lot No. 3541

Lot No. 1902

30.09.1991

30.09.1991

30.09.1991

LeaseholdExpiry :

28.02.2043(Sub-Lease60 years)

03.04.2050 (60 years)

26.02.2082(99 years)

Leasehold land

PlantGPP 1GPP 2GPP 3

GPP 4 / DPCU 2Compressor station

Offi ceAdministration building 1Administration building 2Fire station

87.9

34.6

2.7

28.320.420.1

18.5

21.1

27.4

22.724.8

95,998123,310123,310

266,400

65,010

1,282

6,8923,248

640,927

Gas Processing Plants, Paka, Km 8, Kg. Tok Arun, Off Jalan Santong 23100 Paka, Dungun, Terengganu Darul Iman

Lot No. 7346

Lot No. 7220

03.08.1997

03.08.1997

LeaseholdExpiry :

13.07.2058 (60 years)

20.06.2058(60 years)

Leasehold land

PlantGPP 5GPP 6DPCU 3

Offi ceAdministration building

(Vacant)

189.6

27.0

13.913.014.3

15.2

200,000220,00060,000

12,220

1,041,333


A summary of landed property, plant and equipment of PETRONAS Gas Berhad and its subsidiaries as at 31 December 2012 (continued)

LocationAcquisition


Land Area (hectare)


(years)

Build-up Area

(sq. m)



Export Terminal OperationTanjung Sulong,24000 Kemaman,Terengganu Darul Iman

Lot No. 1314

Lot No. 1333

24.07.1993

24.07.1993

LeaseholdExpiry :

19.03.2025 (40 years)

11.03.2027 (40 years)

Leasehold land

PlantUnit 1,2,3,4


Marine facilityBreakwaterjetty

9.7

2.8

28.1

28.1

1,146

130,084

Centralised Utility Facilities (CUF) Operations, Kertih Kertih Integrated Petrochemical Complex, Km 105, Jalan Kuantan - Kuala Terengganu, 24300 Kertih, Kemaman, Terengganu Darul Iman

Lot No. 8065 21.12.1999

LeaseholdExpiry :

19.08.2060 (60 years)

Leasehold land

PlantCGN BCGN CCGN D, E, FWater plant CGN GASU Lab & workshop

Control room


37.1

13.113.112.612.612.711.811.8

11.6

11.9

667667

2,0002,000

66715,451

729

1,820

514

818,885

PAHANG

Kuantan Regional Operations Offi ce Lot 1, Sector 1,Bandar Indera Mahkota,25200 Kuantan, Pahang Darul Makmur

Lot No. PT16756 04.01.1989

LeaseholdExpiry :

04.01.2088 (99 years)

Leasehold land

Offi ceRegional offi ce 11.2 21.2 2,428

8,385




LocationAcquisition


Land Area (hectare)


(years)

Build-up Area

(sq. m)



Kuantan Compressor Station, Kampung Mahkota, Km 19, Jalan Gambang, 26070 Kuantan, Pahang Darul Makmur

Lot No. PT6039804.01.1989

LeaseholdExpiry :

26.08.2101 (99 years)

Leasehold land

PlantCompressor stationCompressor station

20.1

19.1

3.2

1,142

4,378

152,888

Centralised Utility Facilities (CUF) Operations, GebengLot 139A,Gebeng Industrial Area, Phase III26080 Kuantan, Pahang Darul Makmur

Lot No. PT15127

17.11.1999 LeaseholdExpiry : 08.01.2100(99 years)

Leasehold land

PlantCGN ACGN BCGN CN2GENWater plant

Offi ceMaintenance buildingWarehouse

18.8

13.113.113.113.112.6

11.611.6

667667667360

2,000

1,0151,004

385,734

JOHOR

Segamat Operation Centre, Gas Transmission System,Km 10, Lebuhraya Segamat-Kuantan85000 Segamat, Johor Darul Takzim

Lot No. PTD564 22.09.1991

LeaseholdExpiry :

18.02.2102 (99 years)

Leasehold land

PlantCompressor station

Offi ceOperation centre

61.3

15.0

20.4

2,792

8,080

63,248



LocationAcquisition


Land Area (hectare)


(years)

Build-up Area

(sq. m)



Pasir Gudang Regional Operations Offi ce, PLO 332, Jalan Perak 4, Pasir Gudang Industrial Area, 81700 Pasir Gudang, Johor Darul Takzim

Lot No. PTD84942 23.04.1989

LeaseholdExpiry :

22.04.2088 (99 years)

Leasehold land


7,906

NEGERI SEMBILAN

Seremban Regional Operations Offi ce, Km 11, Jalan Seremban - Tampin, 71450 Sg. Gadut,Seremban, Negeri Sembilan Darul Khusus

Lot No. 21958 16.02.1994 Freehold

Freehold land


7,011

SELANGOR

Shah Alam Regional Operations Offi ce, Lot 1, Jalan Jemuju Lima 16/13E,Shah Alam Industrial Area, Section 16,40200 Shah Alam, Selangor Darul Ehsan

Lot No. PT606 12.10.1990

Leasehold Expiry :

11.10.2089 (99 years)

Leasehold land


7,666

Meru Compressor Station,Lot 1586 (G3907), Mukim of Jeram, District of Kuala Selangor, Selangor Darul Ehsan

Lot No. PT6875 04.08.1998

LeaseholdExpiry :

10.08.2107 (99 years)

Leasehold land(Vacant)

5.4 N/A N/A 1,099



LocationAcquisition


Land Area (hectare)


(years)

Build-up Area

(sq. m)



PERAK

Sitiawan Regional Operations Offi ce, Lot 33263, Jalan Dato’ Ahmad Yunus,32000 Sitiawan, Perak Darul Ridzuan

Lot No. PT4535 04.11.1997

Leasehold Expiry :

27.06.2101 (99 years)

Leasehold land


4,758

KEDAH

Gurun Regional Operations Offi ce,PO Box 31, Km 1, Jalan Jeniang,08300 Gurun, Kedah Darul Aman

Lot No. 8173 18.12.1997

Leasehold Expiry :

22.04.2102 (99 years)

Leasehold land


5,235

8.0 km TTM Pipeline land at District of Kubang Pasu, Kedah Darul Aman

1.11.2006 Leasehold Expiry :31.10.2105(99 years)

Leasehold land

PipelinePipeline across 8.0 km 24.7

7.8 N/A

1,110

SARAWAK

Miri Operations Offi ce,Lot 2075, Block 4, Jalan Cattleya 2B, Piasau Industrial Area, PO Box 1504, 98008 Miri, Sarawak

N/A PipelineMeter stationpipeline across 42.2 km

N/A – located

along road reserve area 22.8

2,066

14,094

Bintulu Gas Meter Station,Kidurong Industrial Area, Part of Lot 155,Block 20,Kemena Land District,97007 Bintulu, Sarawak

Lot No. 1646 21.10.2004 16.07.2067(60 years)

PipelineMeter station pipeline across 4.2 km 0.1 16.2 630

92




LocationAcquisition


Land Area (hectare)


(years)

Build-up Area

(sq. m)



Sabah

Kg Kuala Benoni,Kimanis, Papar,Sabah

Lot No. PT20-09020166Subleased to KPSB

03.04.2009

Leasehold Expiry :

31.12.2038 (30 years)

Leasehold land

PlantPower station

17.4 N/A N/A 72

PIPELINES

PGU I – total gas pipeline comprises 6 km from Kertih to Paka, Terengganu and 32 km from Kertih to Teluk Kalong, Terengganu and two 40 km of lateral lines from the GPPs to the Export Terminal in Tanjung Sulong, Terengganu Darul Iman

20.03.1985 Leasehold Expiry :(40, 60 and 99 years)

PipelinesPipelines in leasehold land

Terengganu:43 lots

Terengganu: 237.32

28.3 N/A

38,214

PGU II – total gas pipeline comprisesSector 1 – 233 km from Teluk Kalong, Terengganu to Segamat, Johor,Sector 2 – 241 km from Segamat, Johor to Kapar, Selangor, &Sector 3 - 211 km from Segamat, Johor to Singapore

01.01.1992 Leasehold Expiry :(99 years)


Terengganu :19 lots

Pahang:333 lots

Johor:645 lots (Inclusive Loop 1 & Loop 2)

Melaka:139 lots

NegeriSembilan: 263 lots

Selangor:137 lots

Terengganu:79.83

Pahang:531.67

Johor:

966.86

Melaka:191.03

Negeri Sembilan:

463

Selangor:278.9

21.1 N/A

544,507



LocationAcquisition


Land Area (hectare)


(years)

Build-up Area

(sq. m)



PGU III – total gas pipeline comprisesSector 1 - 184 km from Meru, Selangor to Lumut, Perak, Sector 2 - 176 km from Lumut, Perak to Gurun, Kedah, Sector 3 - 90 km of NPS 36” mainline from Gurun to Pauh, Perlis

06.01.1996 Leasehold Expiry :(99 years)


Selangor:92 lots

WP Kuala Lumpur:14 lots

Perak:362 lots

Penang:95 lots

Kedah:256 lots

Perlis:77 lots

Selangor:178.6

WP Kuala

Lumpur:17.9

Perak:543.8

Penang:118.84

Kedah:472.29

Perlis:87.3

Sector 1:

17.1

Sector 2&3 15.2

N/A

N/A

535,186

PGU Loop 1 – total gas pipeline of 265 km from Kertih, Terengganu to Segamat, Johor

04.10.1999 PipelinesPipelines in leasehold land

Terengganu:77 lots

Pahang:358 lots

Terengganu: 142.25

Pahang:128.08

13.4 N/A

329,825

PGU Loop 2 – total gas pipeline of 226 km from Segamat, Johor to Meru, Selangor

01.11.2000 PipelinesPipelines in leasehold land (Part of PGU’sdocument of title)

Melaka:4 lots

Negeri Sembilan:6 lots

Melaka:1.31

Negeri Sembilan:

1.25

12.4 N/A

392,831

TOTAL 5,131,090


Abbreviations:

CGN : Cogenerator Plant

DPCU : Dew Point Control Unit Plant

GPP : Gas Processing Plant

N2GEN : Nitrogen Generator

ASU : Air Separation Unit


Training Programmes Attended by Directors

1. Datuk Anuar bin Ahmad

• 25th World Gas Conference, Kuala Lumpur

• Site Visit to Regasifi cation Terminal, Sg. Udang

4 June 2012

2. Samsudin bin Miskon

• GSCM Forum 2012 - “Integrity-Insider Threat”

• National Energy Security Conference


• 4th National Energy Forum

• E&P Capability Exchange 2012

• Mandatory Accreditation Programme


11 January 2012

28 February 2012

4 June 2012

27 September 2012

24 October 2012

5 December 2012

3. Dato’ N. Sadasivan N.N. Pillay

• Audit Committee Institute-Breakfast Roundtable titled The Audit Committee’s Oversight Role on Financial Reporting

• Corporate Governance Updates MFRS 10 - Consolidation : A new single control modelMFRS 11 - Reassesing Joint Ventures Accounting


5 December 2012

15 December 2012

4. Dato Mohammad Medan bin Abdullah



4 June 2012

5. Datuk Rosli bin Boni

• PETRONAS BAC Forum

• Offshore Decommissioning Asia Conference


2 March 2012

19 June 2012

6. Ir. Pramod Kumar Karunakaran



4 June 2012


7. Dato’ Ab. Halim bin Mohyiddin

• PETRONAS BAC Forum


2 March 2012

8. Lim Beng Choon

• Bursa Malaysia Governance Program - Role of Audit Committee in Assuring Audit Quality

• Hong Leong Bank Group Directors Training - Optimising IFRS Convergence by KPMG

• MISC Group Directors Training - Malaysian Code on Corporate Governance 2012: Implications & Challenges to the Board of Directors by Busatra

• Management Succession & Related Talent Management Issues: Insights for the Board of Directors by AON Hewitt


22 May 2012

25 May 2012

5 December 2012

5 December 2012

9. Muri bin Muhammad


10. Ramlan bin Abdul Malek

• International Petroleum Technology Conference

• Offshore Technology Conference



• Site Visit to Kimanis Power Plant, Kimanis

6 February 2012

30 April 2012

4 June 2012

Training Programmes Attended by Directors


Analysis of ShareholdingsAS AT 29 MARCH 2013

CategoryNo. of

Shareholders% of Total

Shareholders No. of Shares% of Total

Shareholdings

Less than 100 131 1.27 1,788 0.00

100 - 1,000 7,322 70.91 6,933,037 0.35

1,001 - 10,000 2,099 20.33 7,075,597 0.36

10,001 - 100,000 484 4.69 17,842,234 0.90

100,001 to less than 5% of issued shares 286 2.77 388,807,359 19.65

5% and above of issued shares 3 0.03 1,558,071,900 78.74

Total 10,325 100.00 1,978,731,915 100.00

* Insignif icant % shareholding

Classification of Shareholders

No. of Shareholders No. of Shares Shares PercentageMalaysian Foreigner Malaysian Foreigner Malaysian Foreigner

INDIVIDUAL 8,725 90 13,716,307 343,843 0.69 0.02

BODY CORPORATE

Banks/fi nance companies 73 – 295,120,600 – 14.92 –

Investments trusts/ foundation/ charities

6 – 144,000 – 0.00 –

Other types of companies 192 7 3,878,702 144,000 0.20 0.01

GOVERNMENT AGENCIES/INSTITUTIONS 10 – 1,571,000 – 0.08 –

NOMINEES 772 450 1,538,736,136 125,077,327 77.76 6.32

OTHERS – – – – – –

Total 9,778 547 1,853,166,745 125,565,170 93.65 6.35


*

*


Analysis of Shareholdings

AS AT 29 MARCH 2013

List of Directors’ Shareholdings

No. Name No. of Shares% of Total

Shareholdings1 Datuk Anuar bin Ahmad – –

2 Encik Samsudin bin Miskon – –

3 Dato’ N. Sadasivan N.N. Pillay – –

4 Dato Mohammad Medan bin Abdullah – –

5 Datuk Rosli bin Boni – –

6 Ir. Pramod Kumar Karunakaran – –

7 Dato' Ab. Halim bin Mohyiddin 5,000 0.00

8 Lim Beng Choon – –

9 Muri bin Muhammad – –

10 Ramlan bin Abdul Malek – –

List of Directors’ Shareholdings in PETRONAS Dagangan Berhad


Shareholdings1 Datuk Anuar bin Ahmad 2,000 0.00






7 Dato' Ab. Halim bin Mohyiddin – –




List of Directors’ Shareholdings in KLCC Property Holdings Berhad


Shareholdings1 Datuk Anuar bin Ahmad – –






7 Dato' Ab. Halim bin Mohyiddin – –

8 Lim Beng Choon 11, 000 0.00




*

*

*



AS AT 29 MARCH 2013

List of Directors’ Shareholdings in PETRONAS Chemicals Group Berhad


Shareholdings1 Datuk Anuar bin Ahmad 20,000 0.00

2 Encik Samsudin bin Miskon 6,000 0.00


4 Dato Mohammad Medan bin Abdullah 6,000 0.00

5 Datuk Rosli bin Boni 6,000 0.00

6 Ir. Pramod Kumar Karunakaran 6,000 0.00

7 Dato' Ab. Halim bin Mohyiddin** 10,000 0.00



10 Ramlan bin Abdul Malek 10,000 0.00

* Insignifi cant % shareholding

** Inclusive of deemed interest by virtue of his spouse’s shareholdings of 5,000 units pursuant to Section 134(12)(c) of the Companies Act, 1965, Malaysia

List of Top 30 Shareholders

No. Names No. of Shares %

1 Cartaban Nominees (Tempatan) Sdn Bhd (Petroliam Nasional Berhad (Strategic Inv))

1,199,768,000 60.63

2 Citigroup Nominees (Tempatan) Sdn Bhd (Employees Provident Fund Board)

255,316,700 12.90

3 Kumpulan Wang Persaraan (Diperbadankan) 102,987,200 5.21

4 Amanahraya Trustees Berhad (Skim Amanah Saham Bumiputera)

83,631,300 4.23

5 Amanahraya Trustees Berhad (Amanah Saham Wawasan 2020) 22,896,200 1.16

6 Amanahraya Trustees Berhad (Amanah Saham Malaysia) 20,000,000 1.01

7 Cartaban Nominees (Asing) Sdn Bhd (Exempt AN for State Street Bank & Trust Company (West CLT OD67)

18,044,360 0.91

8 Malaysia Nominees (Tempatan) Sendirian Berhad (Great Eastern Life Assurance (Malaysia) Berhad (PAR 1))

17,900,900 0.90

9 HSBC Nominees (Asing) Sdn Bhd (BBH and Co. Boston for Vanguard Emerging Markets Stock Index Fund)

16,226,496 0.82

10 Amanahraya Trustees Berhad AS 1 Malaysia 16,111,800 0.81

11 Amanahraya Trustees Berhad (Amanah Saham Didik) 9,038,000 0.46

12 AMSEC Nominees (Tempatan) Sdn Bhd Amtrustee Berhad for CIMB Islamic Dali Equity Growth Fund (UT-CIMB-DALI)

7,351,900 0.37

13 Cartaban Nominees (Tempatan) Sdn Bhd (Exempt AN for Eastspring Investments Berhad)

6,437,000 0.33

14 HSBC Nominees (Asing) Sdn Bhd(Exempt AN for JPMorgan Chase Bank, National Association (U.A.E))

6,184,565 0.31

15 Amanahraya Trustees Berhad (Public Islamic Dividend Fund) 5,230,200 0.26

16 Permodalan Nasional Berhad 4,500,000 0.23

*

*

*

*

*

*

*



No. Names No. of Shares %

17 Citigroup Nominees (Tempatan) Sdn Bhd Employees Provident Fund Board (Nomura)

4,314,100 0.22

18 Pertubuhan Keselamatan Sosial 4,280,000 0.22

19 HSBC Nominees (Asing) Sdn Bhd (Exempt AN for The Bank of New York Mellon (Mellon ACCT))

4,276,205 0.22

20 HSBC Nominees (Asing) Sdn Bhd (Exempt AN for JPMorgan Chase Bank, National Association (U.S.A))

3,848,228 0.19

21 HSBC Nominees (Asing) Sdn Bhd (Exempt AN For JPMorgan Chase Bank, National Association (Norges BK Lend))

3,804,100 0.19

22 Amanahraya Trustees Berhad Public Islamic Select Enterprises Fund 3,700,500 0.19

23 Citigroup Nominees (Asing) Sdn Bhd Legal & General Assurance(Pensions Management) Limited (A/C 1125250001)

3,626,383 0.18

24 Citigroup Nominees (Tempatan) Sdn Bhd Exempt AN for American International Assurance Berhad

3,584,100 0.18

25 HSBC Nominees (Asing) Sdn Bhd (Exempt AN for JPMorgan Chase Bank, National Association (BVI))

3,426,200 0.17

26 Citigroup Nominees (Tempatan) Sdn Bhd Employees Provident Fund Board (CIMB PRIN)

3,323,000 0.17

27 HSBC Nominees (Asing) Sdn Bhd (Exempt AN for JP Morgan Bank, (Ireland) Public Limited Company)

2,798,100 0.14

28 HSBC Nominees (Asing) Sdn Bhd BNY Brussels for City of New York Group Trust 2,625,500 0.13

29 Valuecap Sdn Bhd 2,500,000 0.13

30 Amanahraya Trustees Berhad Public Islamic Optimal Growth Fund 2,498,700 0.13

TOTAL 1,840,229,737 93.00

List of Substantial Shareholders

No. Names No. of Shares % of Total Shareholdings

1 Cartaban Nominees (Tempatan) Sdn Bhd (Petroliam Nasional Berhad (Strategic Inv) & Petroleum Research Fund)

1,200,304,400 60.66

2 Employees Provident Fund Board 268,702,000 13.58

3 Kumpulan Wang Persaraan (Diperbadankan) 106,324,000 5.37

List of Top 30 Shareholders

AS AT 29 MARCH 2013


Corporate Directory

PETRONAS Gas BerhadLevel 49-51, Tower 1PETRONAS Twin TowersKuala Lumpur City Centre50088 Kuala LumpurTelephone : + 6 03 2051 5000Fax : + 6 03 2051 6555 (Corporate Secretary), + 6 03 2051 6992 (General)

Operations / Regional Offi ces:Gas Processing Plants, KertihKm 105, Jalan Kuantan-Kuala Terengganu24300 Kertih, KemamanTerengganu Darul ImanTelephone : + 6 09 831 2345Fax : + 6 09 827 1710

Gas Processing Plants, PakaKm 8, Kg. Tok Arun, Off Jalan Santong23100 Paka, DungunTerengganu Darul ImanTelephone : + 6 09 831 5656Fax : + 6 09 827 4578

Export Terminal OperationTanjung Sulong24000 KemamanTerengganu Darul ImanTelephone : + 6 09 862 4321Fax : + 6 09 863 1146

Centralised Utility Facilities (CUF)Operations, KertihKertih Integrated Petrochemical ComplexKm 105, Jalan Kuantan-Kuala Terengganu24300 Kertih, KemamanTerengganu Darul ImanTelephone : + 6 09 830 5500Fax : + 6 09 830 5514

Centralised Utility Facilities (CUF)Operations, GebengLot 139A, Gebeng Industrial AreaFasa III, 26080 KuantanPahang Darul MakmurTelephone : + 6 09 586 3300Fax : + 6 09 586 3311

Segamat Operation Centre,Gas Transmission SystemKm 10, Lebuhraya Segamat-Kuantan85000 SegamatJohor Darul TakzimTelephone : + 6 07 935 3000Fax : + 6 07 931 6521

Pasir Gudang Regional Operations Offi cePLO 332, Jalan Perak 4Pasir Gudang Industrial Area81700 Pasir GudangJohor Darul TakzimTelephone : + 6 07 251 0333Fax : + 6 07 251 0400

Seremban Regional Operations Offi ceKm 11, Jalan Seremban-Tampin71450 Sg. Gadut, SerembanNegeri Sembilan Darul KhususTelephone : + 6 06 677 6777Fax : + 6 06 677 7799

Shah Alam Regional Operations Offi ceLot 1, Jalan Jemuju Lima 16/13EShah Alam Industrial Area, Section 1640200 Shah AlamSelangor Darul EhsanTelephone : + 6 03 5510 6222Fax : + 6 03 5510 1528

Sitiawan Regional Operations Offi ceLot 33263, Jalan Dato’ Ahmad Yunus32000 SitiawanPerak Darul RidzuanTelephone : + 6 05 692 5611/12/13/14Fax : + 6 05 692 5615

Gurun Regional Operations Offi ceKm 1, Jalan Jeniang, P.O. Box 3108300 GurunKedah Darul AmanTelephone : + 6 04 468 5518Fax : + 6 04 468 5519

Kuantan Regional Operations Offi ceLot 1, Sector 1, Bandar Indera Mahkota25200 KuantanPahang Darul MakmurTelephone : + 6 09 573 2802Fax : + 6 09 573 2813

Kertih Regional Operations Offi ceLevel 1, PETRONAS East Coast RegionalOffi ce, 24300 Kertih, KemamanTerengganu Darul ImanTelephone : + 6 09 867 3500Fax : + 6 09 864 0375

Miri Operations Offi ceLot 2075, Block 4, Jalan Cattleya 2BPiasau Industrial Area, P.O. Box 150498008 MiriSarawakTelephone : + 6 085 661 144Fax : + 6 085 656 362

Bintulu Operations Offi ceLot 1622 & 1623, Ground FloorJalan Sommerville, P.O. Box 219097011 BintuluSarawakTelephone : + 6 086 316 517Fax : + 6 086 311 960

Kimanis Power Sdn BhdSuite B-12-3a, Block B,Level 3a, KK Times Square,Off Coastal Highway,88100 Kota Kinabalu,SabahTelephone : +6 088 324 200Fax : +6 088 324 223


Notice of Annual General Meeting

NOTICE IS HEREBY GIVEN THAT the Thirtieth Annual General Meeting of the Company will be held at Emerald Room, Mandarin Oriental Hotel, Kuala Lumpur City Centre, 50088 Kuala Lumpur on Thursday, 16 May 2013 at 10.00 a.m. to consider the following matters:

Agenda

As Ordinary Business1. To receive the Audited Financial Statements for the fi nancial

year ended 31 December 2012 together with the Reports of the Directors and Auditors thereon. (Resolution 1)

2. To approve the payment of fi nal dividend of 35 sen per ordinary share under the single tier system in respect of the fi nancial year ended 31 December 2012. (Resolution 2)

3. To re-elect the following Directors pursuant to Article 93 of the Company’s Articles of Association:(a) Datuk Anuar bin Ahmad (Resolution 3) (b) Datuk Rosli bin Boni (Resolution 4)

4. To approve the Directors’ fees of up to RM986,000 in respect of the fi nancial year ending 31 December 2013. (Resolution 5)

5. To re-appoint Messrs KPMG Desa Megat & Co. as Auditors of the Company and to authorise the Directors to fi x their remuneration. (Resolution 6)

As Special Business6. To consider and, if thought fi t, to pass the following Resolution

with or without modifi cations: “THAT Dato’ N. Sadasivan s/o N.N. Pillay, retiring in

accordance with Section 129 of the Companies Act, 1965, Malaysia and who has served as an Independent Director of the Company for more than nine years be and is hereby re-appointed as an Independent Director of the Company to hold offi ce until the conclusion of next Annual General Meeting of the Company.” (Resolution 7)

7. To transact any other business for which due notice has been given.

NOTICE OF DIVIDEND ENTITLEMENT AND PAYMENT

NOTICE IS ALSO HEREBY GIVEN THAT subject to the approval of members at the Thirtieth Annual General Meeting to be held on 16 May 2013, a fi nal dividend of 35 sen per ordinary share under the single tier system will be paid on 19 June 2013 to shareholders whose names appear in the Register of Depositors on 23 May 2013.

A Depositor shall qualify for entitlement only in respect of:

(a) Shares transferred into the Depositor’s Securities Account before 4.00 p.m. on 23 May 2013 in respect of ordinary transfers.

(b) Shares bought on Bursa Malaysia Securities Berhad on a cum entitlement basis according to the Rules of Bursa Malaysia Securities Berhad.

By Order of the Board

Intan Shafi nas (Tuty) Hussain (LS 0009165)Yeap Kok Leong (MAICSA 0862549)Company Secretaries

Kuala Lumpur23 April 2013


Notice of Annual General Meeting

Notes:

1. For the purposes of determining a member who shall be entitled

to attend and vote at the forthcoming Thirtieth Annual General

Meeting of the Company, the Company shall be requesting the

Record of Depositories as at 9 May 2013. Only a depositor whose

name appears on the Record of Depositors as at 9 May 2013 shall

be regarded as a member entitled to attend, speak and vote at the

meeting as well as for appointment of proxy(ies) to attend and vote on

his/her stead.

2. A member may appoint not more than two proxies to attend the same

meeting. A proxy may but need not be a Member of the Company

and a Member may appoint any person to be his proxy without

limitation and the provision of Section 149(1)(b) of the Companies

Act, 1965, Malaysia shall not apply to the Company. There shall be no

restriction as to the qualifi cation of the proxy.

3. Where a member of the Company is an authorised nominee as

defi ned under the Securities Industry (Central Depositories) Act, 1991

(SICDA), it may appoint at least one proxy but not more than two

proxies in respect of each securities account it holds with ordinary

shares of the Company standing to the credit of the said securities

account.

4. Where a member of the Company is an exempt authorised nominee

which holds ordinary shares in the Company for the omnibus account,

there is no limit to the number of proxies which the exempt authorised

nominee may appoint in respect of each omnibus account it holds.

An exempt authorised nominee refers to an authorised nominee

defi ned under the SICDA which is exempted from compliance with

the provisions of subsection 25A(1) of SICDA.

5. Where a member or the authorised nominee appoints two proxies,

or where an exempt authorised nominee appoints two or more

proxies, the proportion of shareholdings to be represented by each

proxy must be specifi ed in the instrument appointing the proxies.

6. The instrument appointing a proxy shall be in writing (in the common

or usual form) under the hand of the appointer or if the Member is

a corporation, either under seal or under the hand of an offi cer or

attorney duly authorised and shall be deposited at the offi ce of the

Company’s Share Registar, Symphony Share Registars Sdn Bhd,

Level 6, Symphony House, Pusat Dagangan Dana 1, Jalan PJU

1A/46, 47301 Petaling Jaya, Selangor Darul Ehsan, at least 48 hours

before the meeting or if the meeting is adjourned at least 48 hours

before the time fi xed for the the adjourned meeting.

7. If this Proxy Form is signed under the hand of an offi cer duly

authorised, it should be accompanied by a statement reading “signed

as authorised offi cer under Authorisation Document which is still in

force, no notice of revocation having been received”. If this Proxy

Form is signed by an attorney duly appointed under a power of

attorney, it should be accompanied by a statement reading “signed

under Power of Attorney which is still in force, no notice of revocation

having been received”. A copy of the Authorisation Document or the

Power of Attorney, which should be valid in accordance with the laws

of the jurisdiction in which it was created and is exercised, should be

enclosed with this Proxy Form.

8. Explanatory Notes:

(i) Resolution 5 - Directors’ fees for fi nancial year ending

31 December 2013

The Directors’ fees approved for the fi nancial year ended

31 December 2012 was RM853,000.00. The actual Directors’

fees for the Non-Executive Directors paid during the fi nancial year

ended 31 December 2012 was RM804,000. .

The Directors’ fees proposed for the fi nancial year ending

31 December 2013 (FY 2013) are calculated based on the

number of scheduled Board and Board Committees’ meetings

and assumption that all the Non-Executive Directors will remain

offi ce until the end of the FY 2013. This resolution is to facilitate

payment of Directors’ fees in FY 2013. The Board will seek

shareholders’ approval at the next Annual General Meeting in the

event the Directors’ fees proposed is insuffi cient due to increase

in number of Board and Board Committees’ meetings and/or

increase in Board size.

(ii) Resolution 7 - Section 129 of the Companies Act, 1965,

Malaysia

Pursuant to Section 129 of the Companies Act, 1965, Malaysia

the proposed Resolution 7 is to seek shareholders’ approval on

the re-appointment of Dato’ N. Sadasivan s/o N.N. Pillay as a

Director who is over the age of seventy and has served as an

independent director for more than nine years. Please refer to

Item 2B as stated in the Corporate Governance Statement of the

Annual Report for detailed information.


Registration

1) Registration will start at 8.00 a.m. on 16 May 2013 in front of the Emerald Room, Mandarin Oriental Hotel, Kuala Lumpur.

2) Please produce your original Identity Card (IC) to the registration staff for verifi cation. Please make sure you collect your IC thereafter.

3) Upon verifi cation, you are required to write your name and sign on the Attendance List placed on the registration table.

4) You will also be given an identifi cation tag. No person will be allowed to enter the meeting room without the identifi cation tag. There will be no replacement in the event that you lose or misplace the identifi cation tag.

5) No person will be allowed to register on behalf of another person even with the original IC of that other person.

6) The registration counter will handle only verifi cation of identity and registration.

Help Desk

7) Please proceed to the Help Desk for any clarifi cation or enquiry.

8) The Help Desk will also handle revocation of proxy’s appointment.

Parking

9) Please take note that PETRONAS Gas Berhad (PGB) will not be providing cash reimbursements for parking. Instead, you are advised to park at P1 / P2 / P3 / P4 of Mandarin Oriental Hotel, Kuala Lumpur. Please bring along your parking ticket for validation at the counter near the Emerald Room.

10) By validating the parking ticket, you will not be charged for parking when you leave. Please be advised that the ticket will expire by 4 p.m. on 16 May 2013. Any additional costs incurred for parking after 4 p.m. will not be borne by PGB.

11) Please be advised that PGB will not reimburse any parking costs incurred at any other location. As such, please observe the parking areas mentioned in Item 9 above.

Annual Report

12) PETRONAS Gas Berhad’s Annual Report for Financial Year 2012 is available on:

http://www.bursamalaysia.com http://www.petronasgas.com

Administrative DetailsPETRONAS Gas Berhad Thirthieth Annual General Meeting


I/We (Full Name In Capital Letters)

of (Full Address)

being a *Member/Members of PETRONAS GAS BERHAD, do hereby appoint (Full Name In Capital Letters)

of (Full Address)

or failing him (Full Name In Capital Letters)

of (Full Address)

or failing him, the CHAIRMAN OF MEETING, as *my/our proxy to vote for *me/us and on *my/our behalf at the Thirtieth Annual General Meeting to be held at Emerald Room, Mandarin Oriental Hotel, Kuala Lumpur City Centre, 50088 Kuala Lumpur on Thursday, 16 May 2013 at 10.00 a.m and at any adjournment thereof.

Please indicate with an “X” in the space provided below how you wish your votes to be casted. If no specifi c direction as to voting is given, the Proxy will vote or abstain from voting at his discretion.

No. Resolutions For Against

ORDINARY BUSINESS1. To receive the Audited Financial Statements for the fi nancial year ended 31

December 2012 together with the Reports of the Directors and Auditors thereon.

2. To approve the payment of fi nal dividend of 35 sen per ordinary share under the single tier system in respect of the fi nancial year ended 31 December 2012.

3. To re-elect Datuk Anuar bin Ahmad as Director pursuant to Article 93 of the Company’s Articles of Association.

4. To re-elect Datuk Rosli bin Boni as Director pursuant to Article 93 of the Company’s Articles of Association.

5. To approve the Directors’ fees of up to RM986,000 in respect of the fi nancial year ending 31 December 2013.

6. To re-appoint Messrs KPMG Desa Megat & Co. as Auditors of the Company and to authorise the Directors to fi x their remuneration.

SPECIAL BUSINESS7. To re-appoint Dato’ N. Sadasivan s/o N.N. Pillay, who has served as an

Independent Director of the Company for more than nine years as an Independent Director of the Company to hold offi ce until the conclusion of the next Annual General Meeting of the Company in accordance with Section 129 of the Companies Act, 1965, Malaysia.

8. To transact any other business for which due notice has been given.

* Strike out whichever not applicable.

As witness my/our hand this day of 2013. Signature of Member/Common Seal

Proxy Form No. of Shares Held

PETRONAS GAS BERHAD (101671-H)

fold here

fold here

Symphony Share Registrars Sdn BhdLevel 6, Symphony House, Pusat Dagangan Dana 1, Jalan PJU 1A/46, 47301 Petaling Jaya, Selangor Darul Ehsan, Malaysia

Affi xStamp

Notes:

1. For the purposes of determining a member who shall be entitled to attend and vote at the forthcoming Thirtieth Annual General Meeting of the Company, the Company shall be requesting the Record of Depositories as at 9 May 2013. Only a depositor whose name appears on the Record of Depositors as at 9 May 2013 shall be regarded as a member entitled to attend, speak and vote at the meeting as well as for appointment of proxy(ies) to attend and vote on his/her stead.

2. A member may appoint not more than two proxies to attend the same meeting. A proxy may but need not be a Member of the Company and a Member may appoint any person to be his proxy without limitation and the provision of Section 149(1)(b) of the Companies Act, 1965, Malaysia shall not apply to the Company. There shall be no restriction as to the qualifi cation of the proxy.

3. Where a member of the Company is an authorised nominee as defi ned under the Securities Industry (Central Depositories) Act, 1991 (SICDA), it may appoint at least one proxy but not more than two proxies in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account.

4. Where a member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for the omnibus account, there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds. An exempt authorised nominee refers to an authorised nominee defi ned under the SICDA which is exempted from compliance with the provisions of subsection 25A(1) of SICDA.

5. Where a member or the authorised nominee appoints two proxies, or where an exempt authorised nominee appoints two or more proxies, the proportion of shareholdings to be represented by each proxy must be specifi ed in the instrument appointing the proxies.

6. The instrument appointing a proxy shall be in writing (in the common or usual form) under the hand of the appointer or if the Member is a corporation, either under seal or under the hand of an offi cer or attorney duly authorised and shall be deposited at the offi ce of the Company’s Share Registar, Symphony Share Registars Sdn Bhd, Level 6, Symphony House, Pusat Dagangan Dana 1, Jalan PJU 1A/46, 47301 Petaling Jaya, Selangor Darul Ehsan, at least 48 hours before the meeting or if the meeting is adjourned at least 48 hours before the time fi xed for the the adjourned meeting.

7. If this Proxy Form is signed under the hand of an offi cer duly authorised, it should be accompanied by a statement reading “signed as authorised offi cer under Authorisation Document which is still in force, no notice of revocation having been received”. If this Proxy Form is signed by an attorney duly appointed under a power of attorney, it should be accompanied by a statement reading “signed under Power of Attorney which is still in force, no notice of revocation having been received”. A copy of the Authorisation Document or the Power of Attorney, which should be valid in accordance with the laws of the jurisdiction in which it was created and is exercised, should be enclosed with this Proxy Form.

PETRONAS Gas Berhad (101671-H)

Tower 1, PETRONAS Twin Towers,

Kuala Lumpur City Centre,

50088 Kuala Lumpur.

Tel : (+603) 2051 5000

Fax : (+603) 2051 6555

www.petronasgas.com

Documents

PETGAS-AnnualReport2012.pdf