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ANNUAL REPORT 2014 PETRONAS GAS BERHAD (101671-H) DRIVING TRANSFORMATION

Driving Transformation

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Page 1: Driving Transformation

www.petronasgas.com

PETRONAS GAS BERHAD (101671-H)

Tower 1, PETRONAS Twin TowersKuala Lumpur City Centre50088 Kuala Lumpur

T +603 2051 5000F +603 2051 6555

ANNUAL REPORT 2014PETRONAS GAS BERHAD (101671-H)

DRIVINGTRANSFORMATION

AN

NU

AL R

EP

OR

T 2

014

PE

TR

ON

AS

GA

S B

ER

HA

D (10

1671-H

)

Driving transformation in an organisation requires vision andaspirations as well as the ability to generate energy and new ideas. As a corporation that is constantly challenging itself to forge ahead, PETRONAS Gas Berhad (PGB) is transforming itself into a high performance organisation through various actions considering elements like cultivating high performance culture, managing a sustainable growth, conveying trust and stewardship, delivering sustainable profit and of course defining our culture via performance in collaboration to implement its next phase of growth amidst a changing industry environment.

A new restructuring exercise has been revitalised PGB into a more streamlined organisation with an intention to achieve superior performing assets, improved Health, Safety and Environment (HSE) performance and breakthrough operational results. This new structure also reflects PGB’s desire to return to its fundamentals which is to focus on its core business of gas processing, gas transportation, utilities and regasification.

In line with this, PGB looks forward to driving the future and meeting the challenges of an ever changing business, social and economic landscape.

DRIVING TRANSFORMATION

Page 2: Driving Transformation

www.petronasgas.com

PETRONAS GAS BERHAD (101671-H)

Tower 1, PETRONAS Twin TowersKuala Lumpur City Centre50088 Kuala Lumpur

T +603 2051 5000F +603 2051 6555

ANNUAL REPORT 2014PETRONAS GAS BERHAD (101671-H)

DRIVINGTRANSFORMATION

AN

NU

AL R

EP

OR

T 2

014

PE

TR

ON

AS

GA

S B

ER

HA

D (10

1671-H

)

Driving transformation in an organisation requires vision andaspirations as well as the ability to generate energy and new ideas. As a corporation that is constantly challenging itself to forge ahead, PETRONAS Gas Berhad (PGB) is transforming itself into a high performance organisation through various actions considering elements like cultivating high performance culture, managing a sustainable growth, conveying trust and stewardship, delivering sustainable profit and of course defining our culture via performance in collaboration to implement its next phase of growth amidst a changing industry environment.

A new restructuring exercise has been revitalised PGB into a more streamlined organisation with an intention to achieve superior performing assets, improved Health, Safety and Environment (HSE) performance and breakthrough operational results. This new structure also reflects PGB’s desire to return to its fundamentals which is to focus on its core business of gas processing, gas transportation, utilities and regasification.

In line with this, PGB looks forward to driving the future and meeting the challenges of an ever changing business, social and economic landscape.

DRIVING TRANSFORMATION

Page 3: Driving Transformation

VISION

MISSION

SHARED VALUES

• We are business entity• Gas is our core business• Our primary responsibility is to add value

to this natural resource

• Loyalty• Integrity• Professionalism• Cohesiveness

TO BE A LEADINGGAS INFRASTRUCTUREAND UTILITIESCOMPANY

32ANNUAL GENERAL MEETINGOF THE COMPANY

Emerald RoomMandarin Oriental HotelKuala Lumpur City Centre50088 Kuala LumpurThursday, 30 April 2015 at 10.00 a.m.

nd

Page 4: Driving Transformation

32ANNUAL GENERAL MEETING OF THE COMPANY

Emerald RoomMandarin Oriental HotelKuala Lumpur City Centre50088 Kuala LumpurThursday, 30 April 2015 at 10.00 a.m.

nd

Page 5: Driving Transformation

SECTION 1: AT A GLANCE

2 Facts at a Glance4 Highlights of FY2014 4 Key Highlights 6 Five-Year Financial Summary

SECTION 2: MESSAGE TO SHAREHOLDERS

10 Chairman’s Statement14 CEO’s Business Review

SECTION 3: ABOUT US

24 Our Profile26 Our Presence28 Our Operations and Services 30 Group Corporate Structure30 Group Organisational Structure31 Corporate Management Directory32 Board of Directors34 Profile of Board of Directors42 Management Committee43 Profile of Management Committee

SECTION 4: STRATEGY AND ACHIEVEMENTS

50 Business Strategy54 PGB Transformation56 Key Performance58 Investor Relations60 Performance of Shares61 Financial Calendar62 Corporate Milestones: Our Journey 1983-201464 2014 Media Milestones66 2014 Calendar of Events72 2014 Awards and Achievements74 Past Awards76 Simplified Group Statement of Financial Position

and Segmental Analysis80 Group Quarterly Financial Performance81 Statement of Value Added82 Distribution of Value Added83 Group Financial Review

SECTION 5: CORPORATE GOVERNANCE

94 Corporate Governance Statement104 Training Programmes Attended by Directors106 Code of Conduct and Business Ethics107 Nomination and Remuneration Committee Report111 Nomination and Remuneration Committee’s

Terms of Reference113 Statement on Risk Management and Internal Control123 Business Continuity Management Report124 Board Audit Committee Report128 Independent Financial Advisor’s Report130 Board Audit Committee’s Terms of Reference132 Additional Compliance Information

SECTION 6: BUSINESS REVIEW

136 Business Review 136 Gas Processing 140 Gas Transportation 144 Utilities 148 Regasification

SECTION 7: SUSTAINABILITY

154 Health, Safety and Environment156 Innovation158 Human Capital Development160 Corporate Responsibility 162 Marketplace 168 Workplace 174 Environment 178 Community

SECTION 8: FINANCIAL STATEMENTS

184 Financial Statements

SECTION 9: OTHER INFORMATION

262 Analysis of Shareholdings263 Authorised and Issued Share Capital264 List of Top 30 Shareholders266 Summary of Landed Property,

Plant and Equipment274 Top 10 Landed Property, Plant and Equipment 275 Corporate Directory276 Notice of Annual General Meeting278 Administrative Details for the

32nd Annual General Meeting

• Proxy Form

What’s Inside...

Page 6: Driving Transformation

MALAYSIA’S LEADING GAS INFRASTRUCTURE AND UTILITIES COMPANY

pg 2PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

FACTS AT A GLANCE

Page 7: Driving Transformation

OFFERS MORE THAN

2,000 mmscfd processing capacity through six gas processing plants

OPERATING MORE THAN

2,500 km of gas transmission pipeline across Peninsular Malaysia, Sabah and Sarawak

MALAYSIA’S FIRST LNG REGASIFICATION TERMINAL with

530 mmscfd capacity

ESTABLISHED

300 MW Kimanis Power Plant which is the Company’s first power business venture

pg 3

Page 8: Driving Transformation

KIMANIS POWER PLANT ACHIEVED COMMERCIAL OPERATIONS

ON ALL THREE BLOCKS

FULL YEAR CONTRIBUTION FROMLiquefied Natural Gas (LNG) Regasification Terminal in Sungai Udang, Melaka

SIGNING OF HEADS OF AGREEMENT

for Air Separation Unit Project, Pengerang

RENEWAL OF 20 CONTRACT YEARS of Gas Processing and Gas Transportation Agreements with PETRONAS

FINAL INVESTMENT DECISIONfor Malaysia’s Second LNG Regasification Terminal Project in Pengerang, Johor

pg 4PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

HIGHLIGHTS OF FY2014

KEY HIGHLIGHTS

Page 9: Driving Transformation

DIVIDENDS

55 sen PER ORDINARY SHARE

REVENUE

RM4,391.7 million 13%

HIGHEST SINCE THE ESTABLISHMENT OF THE COMPANY IN 1983.

EBITDA

RM3,217.6 million HIGHEST EVER

IN HISTORY

SOLID TOTAL ASSETS

RM13,260.5 million

20%

pg 5

Page 10: Driving Transformation

Year FY2011 PE20111 FY2012 FY2013 FY2014

Revenue (RM million) 3,525.0 2,765.1 3,576.8 3,892.1 4,391.7

Profit After Tax (RM million) 1,439.1 1,080.8 1,404.9 2,078.9 1,842.1

Dividends Per Share (sen) 50 40 50 55 55

Earnings Per Share (EPS) (sen) 72.7 54.6 71.0 105.1 93.1

Total Assets (RM million) 10,509.9 10,746.5 12,438.3 13,222.4 13,260.5

Total Equity (RM million) 8,515.2 8,643.9 9,167.3 10,265.5 10,569.0

Market Capitalisation (RM billion) 22.6 30.1 38.6 48.0 43.8

Share Price (RM) 11.44 15.20 19.52 24.28 22.16

Note:Financial year 2011 comprises reporting period from 1 April to 31 March.1 For the nine months period ended 31 December 2011.2 Excluding recognition of deferred tax assets (DTA) arising from investment tax allowance (ITA) granted for the Group.

(FY2014: RM154.5 million vs. FY2013: RM626.4 million).

2014‘13‘12‘111‘11

4,3

91.

7

3,8

92

.1

3,5

76

.8

2,7

65

.1

3,5

25

.0

Revenue (RM million)

‘12‘111‘111,

84

2.1

1,6

87

.62

2,0

78

.9

1,4

52

.52

1,4

04

.9

1,0

80

.8

1,4

39

.1

‘13 2014

Profit After Tax (RM million)

Total Assets (RM million)

2014‘13‘12‘111‘11

13,2

60

.5

13,2

22

.4

12,4

38

.3

10,7

46

.5

10,5

09

.9

Total Equity (RM million)

10,5

69

.0

10,2

65

.5

9,1

67

.3

8,6

43

.9

8,5

15.2

2014‘13‘12‘111‘11

pg 6PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

HIGHLIGHTS OF FY2014

FIVE-YEAR FINANCIAL SUMMARY

Page 11: Driving Transformation

Year FY2011 PE20111 FY2012 FY2013 FY2014

Revenue (RM million) 3,525.0 2,765.1 3,576.8 3,892.1 4,391.7

Profit After Tax (RM million) 1,439.1 1,080.8 1,404.9 2,078.9 1,842.1

Dividends Per Share (sen) 50 40 50 55 55

Earnings Per Share (EPS) (sen) 72.7 54.6 71.0 105.1 93.1

Total Assets (RM million) 10,509.9 10,746.5 12,438.3 13,222.4 13,260.5

Total Equity (RM million) 8,515.2 8,643.9 9,167.3 10,265.5 10,569.0

Market Capitalisation (RM billion) 22.6 30.1 38.6 48.0 43.8

Share Price (RM) 11.44 15.20 19.52 24.28 22.16

Note:Financial year 2011 comprises reporting period from 1 April to 31 March.1 For the nine months period ended 31 December 2011.2 Excluding recognition of deferred tax assets (DTA) arising from investment tax allowance (ITA) granted for the Group.

(FY2014: RM154.5 million vs. FY2013: RM626.4 million).3 Price as at financial year end.

2014‘13‘12‘111‘11

55

55

50

40

50

Dividends Per Share (sen)

93

.1

105

.1

71.

0

54

.6

72

.7

85

.32

‘13 2014

73

.42

‘12‘111‘11

Earnings Per Share (EPS) (sen)

Market Capitalisation (RM billion)

43

.8

48

.0

38

.6

30

.1

22

.6

2014‘13‘12‘111‘11

Share Price (RM)3

2014‘13‘12‘111‘11

22

.16

24

.28

19.5

2

15.2

0

11.4

4

pg 7

Page 12: Driving Transformation
Page 13: Driving Transformation

HIGH PERFORMANCE CULTUREIn efforts to develop our talent pool, we place strong emphasis on talent management and competency building amongst our staff. Empowering our people with the right knowledge, skills and capabilities allows them to grow in their career paths and sustain the Company’s long-term growth by embedding a high performance culture.

Page 14: Driving Transformation

2014 was a strong year for the Group, with record revenue of RM4.4 billion and profit before tax of RM2.4 billion. Market capitalisation closed at RM44 billion at year end, making PGB one of the largest corporations on the Bursa Malaysia.

DATUK MANHARLAL RATILALCHAIRMAN

CHAIRMAN’SSTATEMENT

MARKET CAPITALISATION

RM44 BILLION

EPS*

PER ORDINARY SHARE85.3 SEN

DIVIDENDS

PER ORDINARY SHARE55 SEN

* Excluding recognition of deferred tax assets (DTA) arising from investment tax allowance (ITA) granted for the Group

pg 10PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

Page 15: Driving Transformation

The financial year 2014 (FY2014) was tough for the Malaysian economy. Following a considerable period of high petroleum prices, towards the second half of the year, benchmark crude prices began to fall. Tracking the slide in oil prices, the Ringgit also weakened against the US Dollar. Although impacted by these headwinds, Malaysia’s gross domestic product (GDP) maintained a steady 5.9% growth bolstered by robust domestic demand.

Despite these challenges, PETRONAS Gas Berhad (PGB) registered steady growth on the back of landmark gas infrastructure agreements that safeguard our sustainability as well greater operational efficiencies, the commitment of our people and support of our stakeholders. These have led to a further s t rengthen ing o f our bus iness fundamentals, enabling us to continue to deliver value to our stakeholders.

Overall, it has been a very encouraging year for the Company and, as the newly appointed Chairman of PGB, it gives me great pleasure to present our financial and operational results to you.

HIGHLIGHTS OF THE YEAR

A definite highlight was implementation of the new Gas Processing Agreement ( G P A ) a n d G a s T r a n s p o r t a t i o n Agreements (GTA) with PETRONAS which effectively serve to strengthen our revenue base through higher reservation charge and capacity booking. Both contracts are valid for 20 years as of 1 April 2014 and will ensure steady income for the Company.

We also benefitted from the first full-year of operations of our new liquefied natural gas (LNG) Regasification Terminal in Sungai Udang, Melaka ( R G T S U ) . T h e f a c i l i t i e s w e r e commissioned in May 2013 and were ful ly operational throughout the financial year under review. Not only does the facilities add considerably to our annual revenue, it also further enhances the security and reliability of gas supply to the nation.

Further contributing to power supply, and in line with Malaysia’s Economic Transformation Programme (ETP), PGB and our joint venture partner Yayasan Sabah were proud to see all three blocks of our Kimanis Power Plant (KPP) begin full commercial operations in the fourth quarter of 2014.

DELIVERING BUSINESSEXCELLENCE

PROFIT BEFORE TAX

RM2.4 BILLION

PROFIT AFTER TAX

RM1.7 BILLION*

* Normalised profit after tax is after excluding recognition of DTA arising from ITA granted for the Group

pg 11

Page 16: Driving Transformation

Finally, in November, PGB signed a series of agreements towards developing Malaysia’s Second LNG Regasification Terminal in Pengerang, Johor (RGTP), which will supply the gas requirements of the Refinery and Petrochemical Integrated Development (RAPID) in the Pengerang Integrated Complex (PIC). We also signed a heads of agreement with an international technology partner to develop an Air Separation Unit (ASU) plant to produce industrial gases for operations within PIC. Both projects are expected to be completed in time to support the commissioning of RAPID in 2019.

PERFORMANCE

PGB experienced another record year in te rms of per formance , generating RM4,391.7 million in revenue, an increase of RM499.6 million or 13% from FY2013. This was attributed to the full-year’s revenue from RGTSU as well as higher revenue from Utilities and Gas Transportation segments, due to additional capacity bookings and more positive terms under the GTA.

Profit stood at RM1,842.1 million, a decrease by 11% due to recognition of deferred tax assets (DTA) amounting to RM626.4 million in relation to the RGTSU in the previous year. Excluding the impact of RGTSU‘s DTA and DTA recognised during the year from the investment tax allowance (ITA) granted for the KPP, our profit would have increased by RM235.1 million or 16%.

We were unfortunately beset by certain incidents which marred our safety performance. Notwithstanding existing safety measures and initiatives, there were three fatalities from two separate incidents during the year. In response, the Board has requested for more s t r ingent sa fe ty measures and procedures. We have also recommended that safety be elevated as a key focus area in PGB’s ongoing transformation.

On a more positive note, our team and contractors made good progress in the Plant Rejuvenation and Revamp 4 project (PRR4) at the Gas Processing Plant 4 in Kertih, which is currently in its final phase of commissioning.

RETURN TO SHAREHOLDERS

Thanks to the Group’s performance and our shareholders’ support, the Company achieved market capitalisation of RM44 billion last year, strengthening our position as one of the largest corporations on the Malaysian stock market. As due reward, the Board has approved dividends of 55 sen per ordinary share for the year. This represents a normalised dividend payout ratio of 64% which is at par with, if not better than, the industry average.

OUTLOOK

We are confident of the future, given a number of factors. Our GPA and GTA assure us with a steady revenue base, augmented by improved margins through greater efficiencies throughout our operations. Income from utilities will be driven by demand from petrochemical customers, while our regasification revenue is also expected to contribute positively to the Group on the back of capacity reservation from PETRONAS.

For as long as gas forms an essential component in power generation and industrial feedstock, PGB will continue to play an essential role in safeguarding PETRONAS’ position as Malaysia’s primary gas supplier. Our continued growth is further underlined by a pipeline of projects that support PETRONAS’ expansion of its refining and pe t rochemica l bus inesses , especially at PIC. We will continue to

seek further growth opportunities from the development of RAPID and PIC, focusing on projects that have a strategic fit with our core competencies in gas processing, gas transportation, industrial utilities, regasification and power generation.

I am confident that with the current drive by the Management to effect a complete t ransformat ion of the Company’s work culture and strategies, supported by robust performance targets presented to the Board, PGB is well positioned to realise our expansion goals and set new performance benchmarks in years to come.

APPRECIATION

I would like to take this opportunity to express my appreciat ion of my predecessor and colleague, Datuk Anuar bin Ahmad, whose many years’ contribution to PGB and PETRONAS will be recorded in the pages of this Company’s history. I would also like to acknowledge our Management for their leadership in steering PGB through another challenging year. As to my fellow Board members, thank you for guiding this Company with your experience and wisdom. Finally, on behalf of the Board, I would like to acknowledge the various Federal and State Government agencies, authorities and regulators for their support; and our valued shareholders for their continued trust in PGB.

Thank You

Datuk Manharlal RatilalChairman

pg 12PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

CHAIRMAN’SSTATEMENT

Page 17: Driving Transformation

pg 13

Page 18: Driving Transformation

CHIEFEXECUTIVEOFFICER‘SBUSINESS REVIEWPETRONAS Gas Berhad (PGB) delivered another year of strong achievements in financial year 2014 (FY2014) and continues to thrive as Malaysia’s leading gas infrastructure and utilities company as well as PETRONAS’ flagship in this specialised business sector.

During the year, the Company secured a number of growth projects that will pave the way for our business expansion in the immediate future in areas related to our core businesses.

In addition, FY2014 was marked by a number of successes in terms conferment of awards and market recognition on the high standards of our reporting, investor relations and corporate governance.

The Company also continues to focus on upgrading the systems and processes, as well as ensuring the integrity of our plants and facilities to ensure the sustainability of our operations.

Notwithstanding this, FY2014 came with its set of unique challenges that have tested the skills and ability of the Management Team.

On that note, I am pleased to update our shareholders on our financial and operational performance for FY2014. To put it briefly, FY2014 exceeded our expectations, despite the many external and internal challenges that came our way.

pg 14PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

Page 19: Driving Transformation

YUSA‘ BIN HASSANMANAGING DIRECTOR/CHIEF EXECUTIVE OFFICER

OPERATIONAL PERFORMANCE

During the year, our Gas Processing Plants (GPP) processed an average of 2,011 million standard cubic feet per day (mmscfd) of feed gas. Our Peninsular Gas Utilisation (PGU) pipeline network also received 315 mmscfd of gas from the Malaysia-Thailand Joint Development Area, as well as an additional volume of around 232 mmscfd from our liquefied natural gas (LNG) Regasification Terminal in Sungai Udang, Melaka (RGTSU) making a total of some 2,322 mmscfd of sales gas transported to PETRONAS’ customers.

In our Gas Processing segment, our GPPs continued to exhibit reliability performance, with very marginal performance fluctuation. Our sales gas reliability recorded at 99.4% while our liquid reliability were at 95.1%, 95.6% and 95.6% for ethane, propane and b u t a n e r e s p e c t i v e l y . O u r G a s Transportation segment also recorded a high reliability of 99.92% during the year, already a world-class standard.

Similarly, our Utilities segment maintained its reliability for electricity, steam and industrial gases at 97.8%, 97.9% and 99.0% respectively, thanks to the continuing efforts to sustain plant operational performance during the year.

Our Regasification segment continues to sustain posit ive performance, delivering gas consistently meeting demand requirement.

While we have succeeded in improving our performance in a number of key operat ional parameters, our Occupational Safety and Health (OSH) performance were marred with three fatalities in two separate incidents involving a contractor at our plant, while two of our staff were involved in a road accident.

Despite our stringent procedure, we truly regret these two untoward fatal accidents. Focus on Health, Safety and Environment (HSE) has always been our priority and we shall strive to achieve zero incidents moving forward.

FINANCIAL PERFORMANCE

During FY2014, PGB continued to deliver our services consistently meeting the requirement of the Gas Processing Agreement (GPA) and Gas Transportation Agreements (GTA) with PETRONAS s igned in 2014. Under the new arrangement, PGB is rewarded a sustainable income for delivering our baseline gas processing performance, plus opportunity to secure Performance Based Structure (PBS) income if exceeding the baseline performance and making available the capacity for gas transportation.

Thanks to our unrelenting efforts, PGB delivered a commendable revenue of RM4,391.7 million, a 13% increase from RM3,892.1 million recorded last year, contributed largely by the first full-year operation of the RGTSU, as well as higher revenues from our Utilities and Gas Transportation segments on the back of higher offtake by utilities customers and revision of electricity tariff and higher capacity reservation under the new GTA respectively.

pg 15

Page 20: Driving Transformation

Resulting from this, PGB achieved a profit before tax of RM2,354.4 million, which is an increase of RM458.0 million from 2013.

Normalised profit after tax for the year under review increased by 16% to RM1,687.6 million* from the RM1,452.5 million achieved in FY2013. As a result, earnings per share increased to 85.3 sen from 73.4 sen previously.

Measured from an operational point of view, our Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) of RM3,217.6 million, is the highest since the Company’s inception, an increase of 20% as compared to last year

* Excluding recognition of deferred tax assets (DTA) arising from investment tax allowance (ITA) granted for the Group.

PROJECT PROGRESS UPDATE

During the year, we achieved a major milestone for our business in Sabah when our Kimanis Power Plant (KPP), a joint-venture with Yayasan Sabah achieved ful l commercial operations in November 2014.

With the 300MW plant, which receives gas from the PETRONAS-owned Sabah Oil and Gas Terminal (SOGT), will be part of a new wave of infrastructure that will improve the reliability of electricity supply in Sabah, bolstering the state’s socio-economic development and industrialisation process.

The KPP stands as a notable example of the strong partnership that exists between PGB, the Sabah State G o v e r n m e n t a n d t h e F e d e r a l Government towards realising what is considered a key initiative under Malaysia’s Economic Transformation Programme.

Our Plant Rejuvenation and Revamp 4 project (PRR4) being carried out at Gas Processing Plant 4, Dew Point Control Unit 2 and Kertih Compressor Station B, all located in our Gas Processing Kertih (GPK) complex is progressing well and is current ly a t the f ina l s tage of commissioning. The completion of this extremely important project will ensure the continued reliability of our gas processing installations which are the very lifeline of gas supply for Malaysia.

I am also pleased to update our members that we have been entrusted by the PETRONAS Group to undertake the development of two key ancillary facilities to support the Pengerang Integrated Complex (PIC) in southern Johor, namely the development of Malaysia’s Second LNG Regasification Terminal (RGTP) and the Air Separation Unit (ASU) in Pengerang, Johor.

The RGTP project will consist of an LNG regasification unit and two units of 200,000 m3 LNG storage tanks with a send out capacity of 3.5 MTPA (490 mmscfd) of natural gas. It also has a reloading export facility.

pg 16PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

CEO’SBUSINESS REVIEW

Page 21: Driving Transformation

The RGTP project is expected to provide primary gas supply to Refinery a n d P e t r o c h e m i c a l I n t e g r a t e d Development (RAPID), the Pengerang Co-generation Plant as well as the Peninsular Gas Utilisation (PGU) grid to mitigate the tight gas supply situation.

Meanwhile, the ASU will play an integral role of supplying industrial gases to Operating Units in PIC with a target of meeting the PIC’s Refinery First Start-Up by the fourth quarter of 2018.

The shareholders’ agreement, as well as related documents for the development of RGTP and the heads of agreement (HOA) for the development of the ASU were signed between PGB and our partners in November 2014.

CORPORATE RESPONSIBILITY

As a business, we are constantly aware of the fact that our whole operations and value chain does not exist in a vacuum. Our success is very much a resul t of our constant interaction with our stakeholders and constituents who have supported our business in both direct and indirect ways. As part of this virtuous cycle, we are also committed to sharing the fruits of our success with these stakeholders through our numerous corporate responsibility initiatives that span the key areas of Marketplace, Workplace, Environment and Community.

pg 17

Page 22: Driving Transformation

CORPORATE RESPONSIBILITY IN THE MARKETPLACE

As responsible corporate citizen, PGB pursued a deliberate agenda in FY2014 to strengthen our relationship with key stakeholders in the Marketplace to build upon the already strong levels of interaction, understanding and cooperation.

During the year, PGB organised a series of targeted engagements to enhance this relationship and bring it to the next level.

As always, our Annual General Meeting in May served as an effective platform for our Board and Management to interact with our shareholders, giving them an opportunity to learn more about our bus iness model , our performance and business plans moving forward. This was followed by two familiarisation visits for shareholders to our operations in Kertih and Segamat to allow them to have a close look at the key business activities which contribute to the profitability and growth of the Company.

In keeping with the times, we have also enhanced of our key communications channel which is our corporate website to improve the way we engage and disseminate information to the public. Among others, we have introduced a comprehensive investor relations page which carries a database of reports and market disclosures aimed at analysts and investors.

PGB also took an important step forward to strengthen investor relations practices in the company by organising regular quarterly briefings via webcast as well as continued interactions and meetings with market analyst covering our centre. This new initiative has allowed our Management to present a c l e a r p i c t u r e o f o u r b u s i n e s s performance during each quarter, as well as to update the analysts on key developments and information that will help them assess the Company’s true valuation.

pg 18PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

CEO’SBUSINESS REVIEW

Page 23: Driving Transformation

CORPORATE RESPONSIBILITY IN THE WORKPLACE

In the workplace, we continued to put a lot of emphasis on leadership development, capability building and gap closure at all levels of staff. We hope our special focus on this area will strengthen their abilities to facilitate the transformation of PGB into an entity that is truly a leading corporation in Malaysia and the region.

During the year, we have invested a lot of time and effort to work on enhancing some of the hard and soft skill sets expected of our leadership coalition.

As a listed entity, we are aware of the need to ensure that our leaders are up to date on the corporate governance and regulatory framework that must be adhered to by listed companies in Malays ia . For th is purpose, our Management Committee members attended a Directors Workshop to expose them on the Malaysia’s current listing requirements, as well as the improvements to the disclosure and reporting framework aimed at elevating the corporate governance standards in this country.

In addition to this, as a Company handling what can be considered as M a l a y s i a ’ s c r i t i c a l a s s e t s a n d hydrocarbons, we must always be p r e p a r e d w i t h k n o w l e d g e a n d competencies in order to deal with crises that might arise from incidents at our operations. Taking a page from the experience of other companies in dealing with the media and larger public during a crisis, we are keenly aware that half the battle will be won if we are able to effectively communicate and manage perception in order to

safeguard our brand and reputation. In order to equip our leaders and middle management with the foundational media handling skills, we collaborated with Malaysia’s national news agency BERNAMA to conduct a series of media management workshops for our key personnel. The workshops provided both theoretical guidance and practical exposure to our leaders and was conducted by seasoned journalists with experience covering some of the major events in Malaysia’s recent history.

We also spent a lot of time engaging our s ta f f to communica te the Company’s targets and aspirations. We also provided the feedback loop for staff to communicate their needs and concerns directly to Management for further action and improvement. For this purpose, PGB organised two sessions of its annual PGB Leaders Forum, assembling almost all of its top and middle Management in a two-day workshop to strengthen their bonding, discussing the current realities and operational challenges faced by the organisation, and proposing solutions that would help us to deliver the performance to higher levels as we move forward.

I admit that the engagements have been an eye-opener for me and my leadership team, and we are committed to improve the manner and method of our communication with our staff to support them in their endeavours to deliver breakthrough performance.

CORPORATE RESPONSIBILITY IN THE ENVIRONMENT

We continue to strengthen our focus on conserving the environment by enhancing our reporting framework, especially in key reporting areas of special concern to the oil and gas industry.

During the year, we continued to track our operational performance in terms of greenhouse gas (GHG) emissions, energy and water use, aligning ourselves with the measurement and reporting best-practices adhered to by PETRONAS and other major oil and gas corporations.

For GHG, we experienced a slight increase in our emissions release due to certain operational issues experienced by our plant in the area of energy used. We were successful in reducing our energy consumption, thanks to the aggressive efforts undertaken at our operations to improve the efficiency of our turbines and installations. For water use, our operations registered an increase in water consumption last year, due to increased demand for steam required by our customers to support their shutdown activities.

PGB has also put in place a waste minimisation roadmap which focuses on creating efficiencies at every point along the waste chain. The Company adopts a holistic approach to waste management that sees it conducting the Environmental Impact Assessments (EIA) prior to embarking on any project. As a result, the Company is able to minimise waste generation, while also hav ing mechan isms to recover hazardous wastes.

We continued to monitor the growth of mangrove seedling planted in 2013 at our adopted mangrove areas in Kuala Selangor National Park and Kampung Merchang, Marang. We are confident that in a few years time, these seedling will achieve their full growth potential and provide the necessary buffer zone and habitat for fish and wildlife species inhabiting Malaysia’s fragile riverine estuary systems.

pg 19

Page 24: Driving Transformation

CORPORATE RESPONSIBILITY IN COMMUNITY

As a responsible corporate citizen, PGB is always ready to provide a helping hand in the areas of educational empowerment and community uplift.

During the year, we continued to strengthen the implementation of our school adoption programme, Program Sentuhan Ilmu PETRONAS (PSIP) at our adopted schools, Sekolah Kebangsaan Cherana Puteh in Melaka, Sekolah Kebangsaan Simpang Ampat in Johor, Sekolah Kebangsaan Sungai Baging in Pahang and Sekolah Kebangsaan Santong in Terengganu.

Collectively, our staff volunteers conducted more than 24 fun learning sessions with the adopted school students to cultivate their interest in Science & Technology, English and Mathematics subjects (STEM) in a fun manner. The students were also treated to a motivational camp under the banner of the ‘School of Champions’ programme, as well as day trips to Petrosains and Aquaria KLCC in Kuala Lumpur to open up their horizons and stir their interest in learning.

A series of community outreach efforts were also organised throughout the year to help the less fortunate living around our operations in Terengganu. We distributed essential Raya and food items to the poor villagers around Kertih and Paka to help ease their burdens for Hari Raya celebration.

In Kuala Lumpur, PGB focused its aid efforts on the urban lower income groups, work ing c losely wi th a non-governmental organisation (NGO) to distribute food items, school bags, uniforms and stationery to families requir ing assistance to start the schooling years.

These activities were funded primarily through voluntary staff contributions topped up with matching grants from PGB. Over the years, these programmes have managed to instil a sense of generosity and selflessness among our people, which has made them more empathic and sensitive to the needs and requirements of the communities within which we operate.

pg 20PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

CEO’SBUSINESS REVIEW

Page 25: Driving Transformation

RECOGNITION

A s a Corporation that strives to be a best-in-class entity , PGB’s transformation and continuous pursuit for excellence did not go unnoticed.

During the year, we clinched a number of awards and recognitions which attested to the levels of excellence attained by the Company in the corporate sphere.

During the year, PGB was recognised by The Edge Billion Ringgit Club as the Best Performing Industrial Stock in 2014, picked from amongst the listed companies in Bursa Malaysia. For the record, since the establishment of The Edge Billion Ringgit Club, PGB has always been selected as a finalist, thanks to its robust market capitalisation which stood above RM10 bil l ion threshold.

PGB also clinched the coveted National Annual Corporate Reports Awards (NACRA) in the industry excellence category, attesting to the excellence in the concept, thematic and visual presentation, as well as the level of transparency and disclosure reflected in its annual report.

PGB was also the winner in the Oil & Gas Category for the MSWG ASEAN Corporate Governance Index award, which is a testament to the high-standards of corporate governance conduct and disclosures practices by the Company over the years.

These awards have spurred us to strive for greater achievements in the future, e l e v a t i n g P G B ’ s c o n t i n u o u s transformation into a corporate player of choice.

PREPARING FOR THE NEXT WAVE OF TRANSFORMATION

As I have explained to our members in our previous annual reports, PGB has e m b a r k e d o n a n a m b i t i o u s transformation effort under the Strategic PGB Organisat ional Rev iew and Alignment (SPORA) initiative, which focuses on reorganising the Company’s structure and systems to deliver stronger operational excellence and safety performance, I am pleased to in form that bu i ld ing upon th is foundation, PGB’s Management has embarked on a long-term transformation efforts aimed at elevating PGB’s performance to the next level and preparing the whole organisation for the next wave of growth. Through this transformation, we are determined to reach a zero non-compliance, zero HSE incidents and zero interruptions to assets as well as achieve 100% product delivery reliability for all our assets. These targets are encapsulated in the 3ZERO100 tagline introduced during a

number of key townhall sessions organised at our headquarters and operating assets throughout Malaysia.

In the long run, we are determined to see a transformation of our people, systems and work processes towards attaining sustainable world-class standards expected of a leading gas infrastructure and utilities company.

This is timely, given that PGB has been further entrusted by PETRONAS to undertake two key projects to support the development of the large-scale (RAPID) located in Southern Johor.

By undertaking this transformation today, we are laying the groundwork for PGB’s future growth and success. We hope our members will remain supportive of our transformational efforts as this will in turn ensure our future profitability and our returns to your shareholding in this Company.

pg 21

Page 26: Driving Transformation

pg 22PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

CEO’S BUSINESS REVIEW

Page 27: Driving Transformation

CONCLUSION

A ll of our achievements this year would not have been made possible without the contribution of many individuals who have left an indelible mark on this Company, entrusting us with a legacy that we will continue to honour as we move forward.

On that note, I would like to convey our thanks, primarily to Yang Berbahagia Datuk Anuar bin Ahmad, our former chairman who helmed the PGB Board of Directors from 2010 until his retirement in 2014.

Having devoted his whole career to the PETRONAS Group, we salute Datuk Anuar for his honesty, forthrightness and tenacity in ensuring PGB remains a strong business entity and ensuring that the Company remains on the right path as it moves into the future. We wish him every success in his future endeavour.

On the same token, I would like to take this opportunity to welcome our new cha i rman and non- independent director, Datuk Manharlal Ratilal, who was appointed to the Board in June 2014.

Datuk Manharlal brings with him a wealth of experience, as a seasoned former banker and is PETRONAS’ Executive Vice President of Finance. I am confident that Datuk Manharlal has a wealth of knowledge and experience that would strengthen the governance aspects of PGB as we move forward.

I would also like to thank our former Head of Planning and Risk Management, Encik Abdul Rashid bin Mukri, who has since been appointed to a new position at PETRONAS’ operations in Indonesia and welcome En Fairos Bin Roslan, his replacement and Encik Irwan bin A Latiff, the Head of Health, Safety and Environment and Operational Excellence to the Management Committee. I am confident that the new members in the Management Committee line up will be able to contribute their vast operational experience towards strengthening PGB.

My sincere thanks also goes to our majority shareholder the PETRONAS Group, for its continuous support of PGB, the various Federal and State Government authorities and agencies, our partners, clients and customers, as well as our staff and shareholders who have each contributed to PGB’s success in their own unique way.

Established on a foundation of trust and excellence, PGB continues to remain a dynamic organisation that is able to deliver the best results on the corporate and operational fronts. While the road ahead is long and still full of challenges, we hope our members will continue to be with us as fellow travellers on this transformative journey.

We thank you for your support.

Yusa’ bin Hassan

pg 23

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PETRONAS Gas Berhad (PGB) was incorporated in 1983 as a wholly-owned subsidiary of Malaysia’s national oil corporation PETRONAS and listed on the main market of the Bursa Malaysia Securities Berhad on 4 September 1995.

Currently, PGB is 60.63% owned by PETRONAS while the remaining shares are held by financial institutions and retail shareholders. Today, it is one of the largest companies on the local bourse in terms of market capitalisation.

PGB is now Malaysia’s leading gas infrastructure and utilities company with core businesses in Gas Processing and Utilities (GPU) and Gas Transmission and Regasification (GTR). The Company processes PETRONAS’ natural gas piped from offshore fields; transports the processed gas via the Peninsular Gas Utilisation (PGU) pipeline network to PETRONAS’ customers in Malaysia and Singapore as well as supplies steam and industrial gases to customers in the Kert ih Integrated Petrochemical Complex in Terengganu and Gebeng Industrial Area in Pahang.

The Company employs a to ta l work force o f 2 ,077 employees nationwide with the majority of the staff based at its plant operation in Kertih and Santong, in Terengganu as well as Gebeng in Kuantan, Pahang.

Headquartered at the PETRONAS Twin Towers in Kuala Lumpur, PGB also operates eight regional offices in Peninsular Malaysia and three in East Malaysia.

Over the years, the Company has broadened its business portfolio with the commissioning of the liquefied natural gas (LNG) Regasif icat ion Terminal, Malaysia’s First Regasification Facility, in Sungai Udang, Melaka in 2013.

In 2011, PGB further expanded its business by venturing into power generation in Sabah through its 60% joint venture company Kimanis Power Sdn Bhd. The power plant, commenced its full commercial production of electricity by end of 2014.

pg 24PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

OUR PROFILE

Page 29: Driving Transformation

pg 25

Page 30: Driving Transformation

PGB TOTAL PIPELINE LENGTH(In Operation)

Main 1,658 kmLateral 374 kmC2, C3 and C4 357 kmGPP Interconnect 116 kmSarawak 45 kmRGTSU 33 km

Total 2,583 km

MAIN PIPELINE GAS - IN

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 km Segamat - Singapore 1991

SALES GAS CUSTOMERS(East Malaysia)

1. SESCO Miri Power Station

2. Sarawak Gas Distribution System

3. Bintulu Edible Oils Sdn Bhd

4. Syarikat Sebangun Sdn Bhd

5. Sime Darby Austral Sdn Bhd

6. Biport Bulkers Sdn Bhd

MAIN PIPELINE GAS - IN

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

3

6

4

5

SARAWAK

Miri

Bintulu

SABAH

SOUTH CHINA SEA

Kimanis

MIRI TOWN

LUAK

Teacher Training CollegeTaman Tunku

1

2

Pipeline

Power Station

Industry

Kimanis Power Plant

Gas Processing Plant (GPP)

Utilities Plant

Compressor Station

Tenaga Nasional Berhad Power Station

Independent Power Producer Power Station

LNG Regasification Terminal

RGT Pipeline

N

PULAUPINANG

20

19

18

17

16

15

GPS

Utilities Kertih

Utilities Gebeng

GPK

STRAITS

OF MELAKA

SOUTH

CHINA

SEA

PERAK

SELANGOR

PAHANG

KEDAH

KELANTANTERENGGANU

MELAKA

JOHOR

SINGAPORE

14

12

11

109

8

7

6 5 3

4

2

1

NEGERISEMBILAN

PERLIS

13

LUTONG

PIASAUPUJUT

SALES GAS CUSTOMERS(Peninsular Malaysia)

1. TNB Paka2. YTL Paka3. TNB Pasir Gudang4. YTL Pasir Gudang5. Senoko Energy6. Keppel Energy7. Pahlawan Power, Tg. Kling8. Panglima Power, Teluk Gong9. Powertek, Teluk Gong10. TNB Tuanku Jaafar

11. Port Dickson Power12. Genting Sanyen Power13. TNB Serdang14. TNB Connaught Bridge15. TNB Kapar16. GB3 Lumut17. Segari Energy Ventures18. Prai Power19. TNB Gelugor20. Technology Tenaga Perlis Consortium

CAPACITYMMSCFD

GPK

GPS

GPPCOMPLEX

1 310

2 250

3 250

4 250

5 500 6 500

Total 2,060

pg 26PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

OUR PRESENCE

Page 31: Driving Transformation

PGB TOTAL PIPELINE LENGTH(In Operation)

Main 1,658 kmLateral 374 kmC2, C3 and C4 357 kmGPP Interconnect 116 kmSarawak 45 kmRGTSU 33 km

Total 2,583 km

MAIN PIPELINE GAS - IN

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 km Segamat - Singapore 1991

SALES GAS CUSTOMERS(East Malaysia)

1. SESCO Miri Power Station

2. Sarawak Gas Distribution System

3. Bintulu Edible Oils Sdn Bhd

4. Syarikat Sebangun Sdn Bhd

5. Sime Darby Austral Sdn Bhd

6. Biport Bulkers Sdn Bhd

MAIN PIPELINE GAS - IN

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

3

6

4

5

SARAWAK

Miri

Bintulu

SABAH

SOUTH CHINA SEA

Kimanis

MIRI TOWN

LUAK

Teacher Training CollegeTaman Tunku

1

2

Pipeline

Power Station

Industry

Kimanis Power Plant

Gas Processing Plant (GPP)

Utilities Plant

Compressor Station

Tenaga Nasional Berhad Power Station

Independent Power Producer Power Station

LNG Regasification Terminal

RGT Pipeline

N

PULAUPINANG

20

19

18

17

16

15

GPS

Utilities Kertih

Utilities Gebeng

GPK

STRAITS

OF MELAKA

SOUTH

CHINA

SEA

PERAK

SELANGOR

PAHANG

KEDAH

KELANTANTERENGGANU

MELAKA

JOHOR

SINGAPORE

14

12

11

109

8

7

6 5 3

4

2

1

NEGERISEMBILAN

PERLIS

13

LUTONG

PIASAUPUJUT

SALES GAS CUSTOMERS(Peninsular Malaysia)

1. TNB Paka2. YTL Paka3. TNB Pasir Gudang4. YTL Pasir Gudang5. Senoko Energy6. Keppel Energy7. Pahlawan Power, Tg. Kling8. Panglima Power, Teluk Gong9. Powertek, Teluk Gong10. TNB Tuanku Jaafar

11. Port Dickson Power12. Genting Sanyen Power13. TNB Serdang14. TNB Connaught Bridge15. TNB Kapar16. GB3 Lumut17. Segari Energy Ventures18. Prai Power19. TNB Gelugor20. Technology Tenaga Perlis Consortium

CAPACITYMMSCFD

GPK

GPS

GPPCOMPLEX

1 310

2 250

3 250

4 250

5 500 6 500

Total 2,060

pg 27

Page 32: Driving Transformation

PETRONAS Gas Berhad (PGB) portfolio is divided into four business segments: Gas Processing, Gas Transportation, Regasification and Utilities.

GAS PROCESSINGPGB owns six gas processing plants in Kertih and Santong, both in Terengganu which process over 2000 mil l ion standard cubic feet per day (mmscfd) of raw gas on behalf of PETRONAS. In return for the gas processing services, PGB receives gas processing fees comprising mainly fixed reservation charges under a 20-year long term agreement with PETRONAS. Beside raw gas, these plants also produce ethane, propane and butane for petrochemical feedstock.

GAS TRANSPORTATIONThe Company transports sales gas to PETRONAS’ customers v ia more than 2 ,500km Peninsular Gas Utilisation (PGU) pipeline network which is operated by a Control Centre in Segamat, Johor. PGB receives gas transportation fees based on capacity booking via a 20-year Gas Transporta t ion Agreements with PETRONAS.

pg 28PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

OUR OPERATIONS & SERVICES

Page 33: Driving Transformation

REGASIFICATIONThe Company’s liquefied natural gas (LNG) Regasification Terminal in Sungai Udang, Melaka (RGTSU) receives LNG cargo from global suppliers via vessels and regasifies the LNG before being injected into the PGU pipeline network.

UTILITIESIts uti l ity plants supply power, steam and industrial g a s e s t o v a r i o u s p e t r o c h e m i c a l p l a n t s operating in the Kertih Integrated Petrochemical Complex in Terengganu and Gebeng Industrial Area in Pahang.

pg 29

Page 34: Driving Transformation

BOARD OF DIRECTORS

MANAGING DIRECTOR/CHIEF EXECUTIVE OFFICER

INTERNAL AUDIT*

BOARD AUDIT COMMITTEE

NOMINATION AND

REMUNERATION COMMITTEE

SUBSIDIARIES

ASSOCIATE

JOINT VENTURES

PETRONAS GAS

BERHAD

REGAS TERMINAL (SG. UDANG) SDN BHD

100% PGB

PENGERANG LNG (TWO) SDN BHD

72% PGB*28% DIALOG

INDUSTRIAL GASES SOLUTIONS SDN BHD

50% PGB50% LINDE MALAYSIA

SDN BHD

GAS MALAYSIA BERHAD

37% MMC-SHAPADU HOLDINGS29% PUBLIC SHAREHOLDERS19% TOKYO GAS-MITSUI HOLDINGS15% PGB

REGAS TERMINAL (PENGERANG) SDN BHD

100% PGB

KIMANIS POWER SDN BHD

60% PGB40% NRG CONSORTIUM

(SABAH) SDN BHD

KIMANIS O&M SDN BHD

60% PGB40% NRG CONSORTIUM

(SABAH) SDN BHD

REGAS TERMINAL (LAHAD DATU) SDN BHD

99% PGB 1% SABAH ENERGY CO

* The intended equity shareholding in Pengerang LNG (Two) Sdn Bhd of 65% will be achieved upon further subscription of ordinary shares by the Company and other non-controlling parties in 2015.

* Internal Audit and Legal and Corporate Secretariat functions are undertaken by Group Internal Audit, PETRONAS and Group Legal, PETRONAS respectively.

GAS TRANSMISSION AND

REGASIFICATION

FINANCE

COMMERCIAL AND CORPORATE

SERVICES

PLANNING AND RISK

MANAGEMENTGAS PROCESSING

AND UTILITIES

HSE AND OPERATIONAL EXCELLENCE

HUMAN RESOURCE MANAGEMENT

LEGAL AND CORPORATE

SECRETARIAT*

MANAGEMENT COMMITTEE

pg 30PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

GROUP CORPORATE STRUCTURE

GROUP ORGANISATIONAL STRUCTURE

Page 35: Driving Transformation

DIRECTORSDATUK MANHARLAL RATILAL

YUSA’ BIN HASSANDATO’ N. SADASIVAN N.N. PILLAY

DATUK ROSLI BIN BONIIR. PRAMOD KUMAR KARUNAKARAN

DATO’ AB. HALIM BIN MOHYIDDINLIM BENG CHOON

HABIBAH BINTI ABDUL

BOARD AUDIT COMMITTEEDATO’ N. SADASIVAN N.N. PILLAY

DATO’ AB. HALIM BIN MOHYIDDINDATUK ROSLI BIN BONI

NOMINATION AND REMUNERATIONCOMMITTEE

LIM BENG CHOONDATO’ N. SADASIVAN N.N. PILLAY

HABIBAH BINTI ABDUL

COMPANY SECRETARIESINTAN SHAFINAS (TUTY) BINTI HUSSAIN

(LS 0009774)YEAP KOK LEONG(MAICSA 0862549)

REGISTRARSYMPHONY SHARE REGISTRARS SDN BHD

(378993-D)LEVEL 6, SYMPHONY HOUSE

PUSAT DAGANGAN DANA 1JALAN PJU 1A/46

47301 PETALING JAYASELANGOR DARUL EHSAN

TEL: (+603) 7841 8000FAX: (+603) 7841 8151

AUDITORSMESSRS KPMG

STOCK EXCHANGE LISTINGMAIN MARKET OF BURSA MALAYSIA

SECURITIES BERHAD

CORPORATEMANAGEMENT DIRECTORY

REGISTERED OFFICE AND BUSINESSADDRESSTOWER 1PETRONAS TWIN TOWERSKUALA LUMPUR CITY CENTRE50088 KUALA LUMPURTEL: (+603) 2051 5000FAX: (+603) 2051 6555

PRINCIPAL BANKERCIMB BANK BERHAD

WEBSITEwww.petronasgas.com

pg 31

Page 36: Driving Transformation

BOARDDIRECTORS

OF

1. Datuk Manharlal RatilalChairman

Non-Independent Non-Executive Director

2. Yusa’ bin HassanManaging Director/Chief Executive Officer

Non-Independent Executive Director

3. Dato’ N. Sadasivan N.N. PillaySenior Independent Non-Executive Director

4. Datuk Rosli bin BoniNon-Independent Non-Executive Director

5. Ir. Pramod Kumar KarunakaranNon-Independent Non-Executive Director

6. Dato’ Ab. Halim bin MohyiddinIndependent Non-Executive Director

7. Lim Beng ChoonIndependent Non-Executive Director

8. Habibah binti AbdulIndependent Non-Executive Director

9. Intan Shafinas (Tuty) binti HussainCompany Secretary

10. Yeap Kok LeongCompany Secretary

1

87

pg 32PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

Page 37: Driving Transformation

2 3

4

6 9 105

pg 33

Page 38: Driving Transformation

Chairman, Malaysian (age 55)Appointed as Chairman and Non-Independent Non-Executive Director of PETRONAS Gas Berhad (PGB) on 15 May 2014.

Qualification, Skills and Experience: Datuk Manharlal Ratilal holds a Bachelor of Arts (Honours) in Accountancy from the City of Birmingham Polytechnic, United Kingdom and a Masters in Business Administration from the University of Aston in Birmingham, United Kingdom.

He joined PETRONAS in 2003 and is currently the Corporation’s Executive Vice President & Group Chief Financial Officer, and a member of its Executive Committee and Management Committee.

Prior to joining PETRONAS in 2003, he was attached to a local investment bank for 18 years, concentrating on corporate finance including advisory work in mergers and acquisitions, equity and debt capital markets. From 1997 to 2002, he served as the Managing Director of the investment bank.

External Appointments:• Director, MISC Berhad• Director, KLCC Property Holdings Berhad• Director, Cagamas Holdings Berhad

He also sits on the Boards of other subsidiaries of PETRONAS Group.

Datuk Manharlal Ratilal has no family relationship with any director and/or major shareholder of PGB. He has no conflict of interest with PGB and has never been charged for an offence.

DATUK MANHARLAL RATILAL

pg 34PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

PROFILE OF BOARD OF DIRECTORS

Page 39: Driving Transformation

Managing Director/Chief Executive Officer, Malaysian (age 52)Appointed to the Board of PETRONAS Gas Berhad (PGB) as Managing Director/Chief Executive Officer on 1 July 2013.

Qualification, Skills and Experience: Yusa’ graduated with a Bachelor of Science in Mechanical Engineering from West Virginia University, United States of America in 1984.

His career spans over 29 years in PETRONAS’ Refining and Petrochemical Businesses, covering plant technical and operations areas. He joined the pioneering team of PETRONAS Chemicals Group Berhad (PCG)’s maiden plant, ASEAN Bintulu Fertilizer Sdn Bhd, in 1985 as an Engineer in the Technical Department. From 1998 to 2011, he has held various plant senior and top management positions in PETRONAS Ammonia Sdn Bhd (now known as PETRONAS Chemicals Ammonia Sdn Bhd), PETRONAS Penapisan (Terengganu) Sdn Bhd, MTBE Malaysia Sdn Bhd (now known as PETRONAS Chemicals MTBE Sdn Bhd) and Polypropylene Malaysia Sdn Bhd.

Yusa’ joined PCG in July 2010 as Head of Fertiliser and Methanol Business Division, and in June 2011 he assumed the position of Head of Olefins and Derivatives Business Division of PCG.

Yusa’ is the Chairman of Kimanis Power Sdn Bhd, Regas Terminal (Sg. Udang) Sdn Bhd, Regas Terminal (Pengerang) Sdn Bhd, Regas Terminal (Lahad Datu) Sdn Bhd and Pengerang LNG (Two) Sdn Bhd. He also sits on the Boards of several companies within the PETRONAS Group.

External Appointment:• Director, Gas Malaysia Berhad

Yusa’ has no family relationship with any director and/or major shareholder of PGB. He has no conflict of interest with PGB and has never been charged for an offence.

YUSA’ BIN HASSAN

pg 35

Page 40: Driving Transformation

Senior Independent Non-Executive Director, Malaysian (age 75)Appointed to the Board of PETRONAS Gas Berhad on 29 August 1995.

Qualification, Skills and Experience: Dato’ Sadasivan graduated in Economics from the University of Malaya in 1963.

Upon graduation, he began his career at the Economic Development Board Singapore where he stayed until 1967. In 1968, he joined the Malaysian Industrial Development Authority (MIDA) and was appointed as its Director-General in 1984, a position that he served until his retirement in 1995.

External Appointments: • Director, APM Automotive Holdings Berhad• Director, Bank Negara Malaysia• Director of seven private companies

Committee Memberships:• Chairman, Board Audit Committee• Member, Nomination and Remuneration Committee

Dato’ Sadasivan has no family relationship with any director and/or major shareholder of PGB. He has no conflict of interest with PGB and has never been charged for an offence.

DATO’ N. SADASIVAN N.N. PILLAY

pg 36PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

PROFILE OF BOARD OF DIRECTORS

Page 41: Driving Transformation

DATUK ROSLI BIN BONI

Non-Independent Non-Executive Director, Malaysian (age 58)Appointed to the Board of PETRONAS Gas Berhad on 1 November 2010.

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

He has 34 years of experience in the petroleum industry, and began career with PETRONAS in 1980 as a Petroleum Engineer. He served as a field asset manager for five years from 1996 to 2000. From July 2000 to March 2004, he was involved in several overseas assignments at managerial level with Premier Oil in the United Kingdom, an oil development project in Chad, and exploration project in Bahrain.

From April 2004 to February 2010, he served as General Manager of the Petroleum Management Unit in the Exploration and Production Division; Senior General Manager of Operations Division in charge of all production operations in Malaysia and overseas; and Senior General Manager of the Corporate Human Resource Shared Services.

External Appointment: • Chief Executive Officer, Malaysia-Thailand Joint Authority (MTJA)

Committee Membership:• Member, Board Audit Committee

Datuk Rosli has no family relationship with any director and/or major shareholder of PGB. He has no conflict of interest with PGB and has never been charged for an offence.

pg 37

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Non-Independent Non-Executive Director, Malaysian (age 55)Appointed to the Board of PETRONAS Gas Berhad on 25 July 2011.

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

He joined PETRONAS in 1984 and is currently the Vice President of Infrastructure and Utilities, Downstream Business. Prior to assuming this position, he has held various senior positions including as the Managing Director/Chief Executive Officer of PETRONAS Chemicals Ethylene 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 sits on the Boards of several companies within the PETRONAS Group.

Ir. Pramod has no family relationship with any director and/or major shareholder of PGB. He has no conflict of interest with PGB and has never been charged for an offence.

IR. PRAMOD KUMAR KARUNAKARAN

PROFILE OF BOARD OF DIRECTORS

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Independent Non-Executive Director, Malaysian (age 69)Appointed to the Board of PETRONAS Gas Berhad on 4 August 2011.

Qualification, Skills and Experience: Dato’ Ab. Halim graduated with a Bachelor of Economics in Accounting from the University of Malaya in 1971, following which he joined the Faculty of Economics of Universiti Kebangsaan Malaysia. He obtained his Master of Business Administration from the University of Alberta, Edmonton, Alberta, Canada in 1973 and subsequently a Diploma in Accountancy from the University of Malaya in 1975.

He is a Council member of the Malaysian Institute of Certified Public Accountants (MICPA) and a member of the Malaysian Institute of Accountants (MIA). Dato’ Ab. Halim also sits as the Chairman of the Education and Training Committee of the Institute of MICPA. He is a past member of the Education Committee of the International Federation of Accountants (IFAC) and represented Malaysia in the Committee from 2001-2005.

He joined KPMG/KPMG Desa Megat & Co in 1977 and had his early accounting training in both Malaysia and United States of America. He was made a Partner of KPMG in 1985. During his 17-year tenure as a partner, he has held various designations in KPMG and acted as a 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 firm’s Secured e-Commerce Practice.

External Appointments: • Chairman/Director, MISC Berhad• Director, Amway (Malaysia) Holdings Berhad• Director, KNM Group Berhad• Director, DiGi.Com Berhad

Committee Membership:• Member, Board Audit Committee

Dato’ Ab. Halim has no family relationship with any director and/or major shareholder of PGB. He has no conflict of interest with PGB and has never been charged for an offence.

DATO’ AB. HALIM BIN MOHYIDDIN

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Independent Non-Executive Director, Malaysian (age 55)Appointed to the Board of PETRONAS Gas Berhad on 4 August 2011.

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

He was the Country Managing Director of Accenture, the global consulting, technology and outsourcing giant before he retired in 2009. He has held various positions during his 28-year 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.

He has extensive experience in management consulting which spans strategy formulation, operational consulting and mergers, 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, ECM Libra Foundation• Director, PETRONAS Dagangan Berhad• Director, MISC Berhad

Committee Membership:• Chairman, Nomination and Remuneration Committee

Lim has no family relationship with any director and/or major shareholder of PGB. He has no conflict of interest with PGB and has never been charged for an offence.

LIM BENG CHOON

PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com pg 40

PROFILE OF BOARD OF DIRECTORS

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Independent Non-Executive Director, Malaysia (age 59)Appointed to the Board of PETRONAS Gas Berhad on 13 September 2013.

Qualification, Skills and Experience: Habibah graduated with a Bachelor of Economics (Accounting) from the University of Malaya. She is a member of the Institute of Chartered Accountants in England and Wales, the Malaysian Association of Certified Public Accountants and Malaysian Institute of Accountants.

She has 35 years of experience in providing audit and business advisory services to several large public listed, multinational and local corporations. Habibah was a formerly the Group Partner of The Audit & Business Advisory Division in Ernst & Young, and a member of the Securities Commission from 1999 to 2002.

External Appointments: • Director, CIMB Islamic Bank Berhad• Director, CIMB Investment Bank Berhad• Director, KLCC Property Holdings Berhad

Committee Membership:• Member, Nomination and Remuneration Committee

Habibah has no family relationship with any director and/or major shareholder of PGB. She has no conflict of interest with PGB and has never been charged for an offence.

HABIBAH BINTI ABDUL

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3

4

5

2

1

9

8

67

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MANAGEMENT COMMITTEE

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1. Yusa’ bin Hassan Managing Director/Chief Executive Officer

2. Azlimi bin Mohd Lazim Head of Gas Processing and Utilities Division

3. Norarnizar bin Ali Amran Head of Gas Transmission and Regasification Division

4. Barishah binti Md Hanipah Head of Human Resource Management Division

5. Irwan bin Abdul Latif Head of Health, Safety and Environment & Operational Excellence Division

6. Aida Aziza binti Mohd Jamaludin Head of Finance Division

7. Abdul Razak bin Saim Head of Commercial and Corporate Services Division

8. Mohd Fairos bin Roslan Head of Planning and Risk Management Division

9. Intan Shafinas (Tuty) binti Hussain Head of Legal and Corporate Secretariat Division

Yusa’ bin HassanManaging Director/Chief Executive Officer, Malaysian (age 52)

Yusa’ assumed his current position on Board of PETRONAS Gas Berhad as Managing Director/Chief Executive Officer on 1 July 2013.

Qualification, Skills and Experience: Yusa’ graduated with a Bachelor of Science in Mechanical Engineering from West Virginia University, United States of America in 1984.

His career spans over 29 years in PETRONAS Refining and Petrochemical Businesses, covering plant technical and operations areas. He joined the pioneering team of PETRONAS Chemicals Group Berhad’s (PCG) maiden plant, ASEAN Bintulu Fertilizer Sdn Bhd, in 1985 as an Engineer in the Technical Department. From 1998 to 2011, he has held various plant senior and top management positions in PETRONAS Ammonia Sdn Bhd (now known as PETRONAS Chemicals Ammonia Sdn Bhd), PETRONAS Penapisan (Terengganu) Sdn Bhd, MTBE Malaysia Sdn Bhd (now known as PETRONAS Chemicals MTBE Malaysia Sdn Bhd) and Polypropylene Malaysia Sdn Bhd.

Yusa’ joined PCG in July 2010 as the Head of Fertilizer and Methanol Business Division. In June 2011, he assumed the position of Head of Olefins and Derivatives Business Division for PCG.

Yusa’ is the Chairman of Kimanis Power Sdn Bhd, Regas Terminal (Sg. Udang) Sdn Bhd, Regas Terminal (Pengerang) Sdn Bhd, Regas Terminal (Lahad Datu) Sdn Bhd and Pengerang LNG (Two) Sdn Bhd. He also sits on the Board of several companies within the PETRONAS Group.

External Appointment:• Director, Gas Malaysia Berhad

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PROFILE OF MANAGEMENT COMMITTEE

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Aida Aziza binti Mohd JamaludinHead of Finance Division, Malaysian (age 41)

Aida Aziza assumed her current position in September 2012.

Qualification, Skills and Experience:Aida Aziza holds a Bachelor of Accounting and Finance from the University of Lancaster, United Kingdom. She is a Fellow of the Association of Chartered Certified Accountant of United Kingdom.

Aida Aziza began her career with PETRONAS in October 1996 as an Executive in the Budget Department of 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, PETRONAS.

Aida Aziza has more than 18 years of experience in accounting and finance-related assignments. She has led several Financial Reporting Standard (FRS) and Malaysian Financial Reporting Standard (MFRS) for PETRONAS Group of Companies as well as the implementation of the SAP ECC6.0 for PETRONAS.

She is responsible for the management of all financial and fiscal aspects of the Group, as well as investor relations and procurement. In addition, Aida Aziza is also a Director of Kimanis Power Sdn Bhd, Kimanis O&M Sdn Bhd, Gas District Cooling (UTP) Sdn Bhd and Pengerang LNG (Two) Sdn Bhd.

External Appointment:• Alternate Director, Gas Malaysia Berhad

Azlimi bin Mohd LazimHead of Gas Processing and Utilities Division, Malaysian (age 49)

Azlimi assumed his current position in April 2012.

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

He 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, Dehydro Section at MTBE Malaysia Sdn Bhd (now known as PETRONAS Chemicals MTBE Malaysia Sdn Bhd). His experience of six years in the Dehydro Section provided platform for him to emerge as Section Head at the Export Terminal section in 1996. In 1998, he was appointed as a Senior Process Engineer and subsequently returned to the Dehydro Section, as Operations Manager within the same year. Azlimi was later promoted to Asset Senior Manager in April 2003 in the same operating unit. After 13 years at PETRONAS Chemicals MTBE Malaysia Sdn Bhd, Azlimi was appointed in December 2004 as General Manager of Gas Processing Kertih, PETRONAS Gas Berhad and thereafter at Gas Processing Santong until March 2011. Subsequently, he was appointed as President/CEO of Trans Thai-Malaysia (Thailand) Ltd in Songkhla, Thailand from April 2011 until March 2012.

He is currently responsible for the gas processing and utilities operations of the Company. Azlimi is also a Director of Industrial Gases Solutions Sdn Bhd.

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PROFILE OF MANAGEMENT COMMITTEE

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Norarnizar bin Ali AmranHead of Gas Transmission and Regasification Division,Malaysian (age 53)

Norarnizar assumed his current position in November 2011.

Qualification, 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.

He has been in the gas industry for more than 29 years since he began his career as a Project Engineer in Gas Processing Plant (GPP) 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 taking position as Pipeline Executive, Regional Manager and finally as Senior Manager Operation in 2005. Prior to his appointment to the current position, he was Senior Manager of the Operation Engineering Department.

He is currently responsible for the gas transmission and regasification operations of the Company. He is also assumes the position of Chief Executive Office of Regas Terminal (Sg. Udang) Sdn Bhd and Alternate Director on the Board of Pengerang LNG (Two) Sdn Bhd.

External Appointment:• Director, Transasia Pipeline Company Pty Ltd

Abdul Razak bin SaimHead of Commercial and Corporate Services Division,Malaysian (age 49)

Abdul Razak assumed his current position in February 2013.

Qualification, Skills and Experience: Abdul Razak holds a Degree in Mechanical Engineering (Hons) from the University of Wollongong, New South Wales, Australia.

Abdul Razak has been in the gas industry for the past 23 years. He began his career as a Procurement Executive in PGB’s Transmission Operation Division (currently known as Gas Transmission and Regasification) in 1992. He later held various technical positions within PGB.

In 2002, Abdul Razak was seconded to East Australia Pipeline Marketing Pty Ltd. based in Sydney, where he managed the capacity marketing for the 3,000 km Moomba-Sydney gas pipeline. He was also involved in the development of the Papua New Guinea – Queensland pipeline project.

In 2006, Abdul Razak was appointed as Manager, Gas Supply Planning at Gas Business Unit, PETRONAS. He later headed this department from 2008 until 2011. Prior to his current position, Abdul Razak led the Gas Business Development Department.

He is currently responsible for all commercial and corporate services for PGB. Abdul Razak is the Chairman of Industrial Gases Solutions Sdn Bhd as well as a Director of Regas Terminal (Pengerang) Sdn Bhd, Regas Terminal (Lahad Datu) Sdn Bhd and Alternate Director on the Board of Pengerang LNG (Two) Sdn Bhd. He was appointed as the Chief Operating Officer and Board member of BAKIPC Sdn Bhd, a subsidiary of PETRONAS.

External Appointment:• Director, Transasia Pipeline Company Pty Ltd

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Intan Shafinas (Tuty) binti HussainHead of Legal and Corporate Secretariat Division,Malaysian (age 42)

Intan Shafinas assumed her current position in March 2012.

Qualification, Skills and Experience: Intan Shafinas holds an LLB (Hons) from the University of Leicester, United Kingdom and Certificate in Legal Practice (Legal Profession Qualifying Board, Malaysia). She is also a licensed Company Secretary.

Prior to joining PETRONAS, Intan Shafinas had garnered five years having worked at several banks. Her career in PETRONAS started in 2001 as Legal Executive with the Petrochemical Business. In 2007, she was attached to the Corporate Services and Technology Department, Legal Division, providing legal advisory services in the area of intellectual property and commercialisation of technologies. In 2010, she was appointed as Senior Legal Counsel of Corporate Services, PETRONAS.

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

She is currently the Company Secretary, as well as Senior Legal Counsel, Infrastructure & Utilities, Legal Downstream PETRONAS, responsible for all legal affairs and company secretarial services of the Group. In addition, she is the Company Secretary for Regas Terminal (Sg. Udang) Sdn Bhd, Regas Terminal (Pengerang) Sdn Bhd and Regas Terminal (Lahad Datu) Sdn Bhd, Gas District Cooling (UTP) Sdn Bhd, Industrial Gas Solutions Sdn Bhd, Kimanis Power Sdn Bhd, Kimanis O&M Sdn Bhd and Pengerang LNG (Two) Sdn Bhd.

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

Court Medical Centre

Barishah binti Md HanipahHead of Human Resource Management (HRM) Division, Malaysian (age 51)

Barishah assumed her current position in March 2013.

Qualification, Skills and Experience: Barishah graduated in 1986 with a Bachelor in Business Administration (Cum Laude) from the University of Toledo, Ohio, United States of America.

She began her career with PETRONAS in February 1988 as an Executive at the Education sponsorship. She then held various positions within HRM Holding company, PETRONAS from 1991 to 2004 in the areas of remunerations, people development and capability development.

In January 2005, she was assigned as Manager (HR Planning) in PETRONAS Gas Berhad (PGB). Subsequently, in 2006 she took on the role of Manager, HRM in PETRONAS Chemicals Fertiliser Kedah Sdn Bhd.

In December 2011, she was appointed as the Head of Sponsorship and Talent Sourcing at Talent Sourcing & Employee Relations Department, HRM Division, PETRONAS.

Amongst her major accomplishments during her 27 years of service includes the implementation of HRIS/SAP System and the outsourcing of medical administration for PETRONAS, the decentralisation of talent sourcing initiative, recruitment and brand enhancement initiatives as well as the Employee Referral Program.

She is currently responsible for HRM of PGB. Barishah is also the joint secretary of the Nomination and Remuneration Committee of PGB.

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PROFILE OF MANAGEMENT COMMITTEE

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Mohd Fairos bin RoslanHead of Planning and Risk Management Division, Malaysian (age 42)

Mohd Fairos assumed his current position in June 2014.

Qualification, Skills and Experience:Mohd Fairos holds a Bachelor of Science in Mechanical Engineering from the University of Tulsa, Oklahoma, United States of America.

He started his career with PETRONAS in 1996 as a Shift Supervisor at PETRONAS Gas Berhad’s (PGB) Gas Processing Plants. He spent the majority of his time in the plant holding various positions in the areas of Plant Operations and Production Planning. He was then assigned to lead the Operating Performance Improvement (OPI) department at Centralised Utility Facilities (CUF) responsible for the performance of its plants.

Mohd Fairos gained experience in business management while serving as Business Development Manager in PGB’s Head Office. Subsequently, in 2011, he was seconded to the Kimanis Power Plant (KPP) project where he served as the Head of Commercial, responsible for project financing, commercial agreements and project procurement.

Mohd Fairos is currently responsible for Company’s business development, planning, risk management and overseeing PGB Joint Venture companies.

Irwan bin Abdul LatifHead of Health, Safety and Environment & Operational Excellence Division, Malaysian (age 42)

Irwan assumed his current position on 1 January 2015.

Qualification, Skills and Experience: Irwan graduated with a Bachelor in Petroleum Engineering from Universiti Teknologi Malaysia, Johor in 1997.

His career in PETRONAS Gas Berhad spans over 17 years in Gas Processing and Utility Businesses, covering plant technical and operations areas. He started his career in 1997 as the first batch of Process Supervisor in Operation Department of Gas Processing Santong, Paka, Terengganu. From 1997 to 2010, he progressed to hold managerial position in Operation Department.

He was then holding positions as Asset Manager in Utilities Kerteh, Terengganu before being appointed as the Head of Central Engineering Department in 2013.

In 2014, Irwan assumed the position of PGB Head of Health, Safety and Environment (HSE) and Operational Excellence (OE) where he is responsible for developing and implementing strategies to ensure sustainable plant operational performance. He is also responsible for effective implementation of HSE Policy and assurance framework in PGB Group.

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SUSTAINABLEGROWTHAmidst a challenging oil and gas industry landscape, we are constantly gathering impetus to move forward. Following a restructuring exercise and the integration of our Gas Processing and Utilities businesses as well as our Gas Transmission and Regasification businesses into new Divisions, we are now a more streamlined organisation set for the next phase of our growth.

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VISIONTo be A Leading GasInfrastructure and Utilities Company

MISSION• We are a business entity• Gas is our core business• Our primary responsibility is to

add value to this natural resource

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BUSINESS STRATEGY

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THE STRATEGIES ARE BUILT UPON• Empowered leaders with clear ownership

and accountability

• Business savvy with excellent competencies

to deliver value

• Performance-driven culture and customer-

oriented mindset.

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

1. HEALTH, SAFETY & ENVIRONMENT (HSE)

• Robust HSE governance and assurance – PGB is committed towards exhibiting leadership in the area of safety, and ensuring the adherence and compliance of the various HSE governance and assurance framework and the PETRONAS Mandatory Control Framework at all times to safeguard lives, assets and our overall business continuity.

• Institutionalisation of Process and Behavioural Safety – PGB is determined to increase efforts towards instilling safety-at-heart to all members of our workforce, towards the safe operationalisation of the Company’s assets.

3. VALUE OPTIMISATION & GROWTH

• Optimum cost control and asset uti l isation – PGB is dedicated towards minimising value leakages and improving overall asset utilisation, which translates into higher returns to its shareholders.

• Improved energy efficiency – PGB is committed towards u t i l i s ing energy e f f ic ient technologies to reduce energy per unit cost of production, which translates into lower production cost, as well as to reduce our overall energy intensity and carbon footprint.

• S t r a t e g i c g r o w t h i n g a s infrastructure and utilities – PGB is determined to pursue, explore and execute new business ventures within the core area of the Company’s expertise towards establishing new revenue streams for its shareholders.

• Excellence in project delivery – PGB is focused on implementing a seamless project execution strategy across all of its projects which translates into on-time a n d o n - b u d g e t p r o j e c t completion and delivery.

These strategies are supported by the two phases of our organisational transformation, which was initiated in Financial Year 2013. The two phases of this initiative to date are as follows:

PETRONAS Gas Berhad (PGB) remains committed towards realising our vision of becoming A Leading Gas Infrastructure and Utilities Company.

OUR GROUP STRATEGY FOCUSES ON DRIVING PGB’S LONG-TERM

TRANSFORMATION THAT WILL ELEVATE THE COMPANY’S PERFORMANCE TO

THE NEXT LEVEL, WHILE PREPARING THE WHOLE ORGANISATION FOR THE

NEXT WAVE OF GROWTH.

2. OPERATIONAL EXCELLENCE

• Superior product delivery and reliability – PGB is striving towards elevating its Overall Equipment Effectiveness (OEE) for equipment reliability, which translates into higher product delivery to our customers.

• Sustainable improvement of key operational indicators – PGB is committed towards improving and sustaining our plant operational performance in optimising the value delivered to our stakeholders.

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BUSINESS STRATEGY

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Phase 1: Strategic PGB Organisational Review and Alignment (SPORA)

The SPORA project was undertaken in mid-2013 to review PGB’s overall structure, systems and process towards delivering better HSE performance, improved operational excellence and superior performing assets.

The effort also worked on streamlining the Company’s overall structure to better focus on PGB’s talents and resources towards the most productive goals, resulting in shaping PGB towards Production Centered Organisation, which is to support the cash generating assets at the operating divisions.

SPORA resulted in the merger of our Gas Processing and Utilities businesses into Gas Processing and Utilities (GPU) and Gas Transmission and Regasification

businesses into Gas Transmission and Regasification (GTR). It also resulted in a more streamlined Management Committee with clear roles and oversight over the totality of PGB’s business.

Phase 2: 3ZERO100

As a follow up to the SPORA project, 3ZERO100 was initiated in late 2014 to further cascade the message of the organisation’s transformation to the line, allowing our staff to own, drive and co-create the results of the change journey.

Through this transformation, PGB is determined to reach an immediate target of zero non-compliance, zero HSE incidents and zero interruption to assets, as well as achieve 100% product delivery reliability for all our assets.

3ZERO100 will propel PGB in three specific strategic thrusts, which are; Asset, System & Process and People & Culture. Efforts are being focused to maximise human productivity and assets reliability. PGB believes that an engaged superior workforce will produce the target encapsulated in 3ZERO100.

In the long run, PGB is determined to see a transformation of the Company’s people, systems and processes towards attaining the world-class standards expected of a leading gas infrastructure and utilities company.

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PETRONAS Gas Berhad (PGB) embarked on a transformation journey in December 2013 following a Strategic PGB Organisational Review and Alignment (SPORA) to strengthen its foundations and stimulate further growth within its core competencies. AIMED AT REVITALISING AND STREAMLINING THE ORGANISATION, THE

TRANSFORMATION HAS STARTED TO DELIVER POSITIVE RESULTS.

I n 2 0 1 4 , o v e r a l l e q u i p m e n t effectiveness (OEE) and reliability of ethane production increased to 87.6% and 95.1% from 80.0% and 89.1% respectively in 2013. Even more encouragingly, it delivered 100% OEE in sa les gas (C1 ) p roduct ion and maintained world-class reliability and ava i lab i l i ty s tandards in i ts gas transportation system. PGB rejuvenated the Dew Point Control Unit 2 (DPCU2) ahead of schedule with zero lost time injury while the Plant Rejuvenation and Revamp 4 project (PRR4) at Gas Processing plant 4, Kertih was well on track.

DELIVERING TRANSFORMATION

Further strengthening the reliability of PGB’s operations and to safeguard the supply of gas and util it ies to its customers, the Company on December 2014 embarked on the second phase of its transformation journey to move towards a high performance organisation. Development of this second phase entailed a rigorous process to unearth every potential and opportunity to deliver greater value to PGB customers and stakeholders.

Called 3ZERO100, its transformation sequel aims to achieve zero Health, Safety and Environment (HSE) incident zero interruption, zero non-compliance and 100% product delivery reliability by end of 2016. Various strategic initiatives outlined under this phase seek to drive the organisation towards HSE and Operat ional Excel lence through enhanced Assets, System & Process and People & Culture.

3ZERO100

ORGANISATIONPERFORMANCEHIGH

KEY ASSETS SYSTEM & PEOPLE& Elimination of all

Bad Actors & proactive prevention to ensure high asset reliability

Maximising Human Reliability through e�ective management system

Achieving sustainability through competency development

and cultural re-engineering

PROCESS CULTURE

0 HSE Incident 0 Non-compliance

0 Interruption 100% ProductDelivery Reliability

E�cient & Sustainable System & Work Process

Highly Engaged & Capable Workforce

STRATEGICTHRUSTS

PGB TRANSFORMATION

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PGB TRANSFORMATION

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2015 FOCUS

To deliver its transformation targets, PGB es tab l i shed a P rogramme Management Office in December 2014, tasked with expediting the delivery of results. High-potential employees have been chosen to head various strategic initiatives, with guidance from the top Management. This not only supports its transformation programme but is also integral to the Company’s leadership development initiatives to a greater heights.

A series of upgrading activities will be undertaken on critical equipment in the Company‘s facilities to eliminate breakdowns or malfunctions and achieve 100% product delivery reliability. Other than corrective actions, PGB has adopted a proactive approach to implement industrial best practices in order to strengthen its inspection, testing and maintenance programme to ensure all assets are safe and reliable. The Company also streamlined its work processes to reduce duplication, redundancy and waste. At the same time, it empowered its employees to respond faster to changes in the supply cha in and encouraged g rea te r collaboration towards optimising its customer delivery. The design and development of this initiative started in September 2014 and the new work processes are expected to be rolled out in 2015.

PGB has always placed top priority to its people. To nurture a cadre of quality employees, PGB established a Gas Academy and Gas Transmiss ion Academy in 2014 . A se r ies o f development programmes aimed at up-skilling technical competencies has been identified in keeping employees abreast of the latest technology developments and industrial best practices to improve their performance. The technical competency enhancement

will prepare the organisation to take on future growth opportunities while maintaining the highest performance delivery of current assets.

To accelerate the progress, PGB plans to run a cultural development programme focusing on operational and HSE excellence to support its transformation journey. Leadership performance coaching will be provided

a t a l l leve ls , wh i le PETRONAS’ Downstream Cultural Beliefs will be rolled out to strengthen personal accountability within the organisation in delivering results.

The Downstream Cultural Beliefs programme and continuous leadership performance coaching will help the organisation to face challenges ahead and sustain a high level of performance at all times.

DOWNSTREAMCULTURAL BELIEFS

Deliver Value I deliver breakthrough performance for PETRONAS

Focus Execution I own the goal, prioritise and execute in a timely manner

Step-up I take calculated risks and own my actions

Nurture TrustI deliver my promise and stand by you

Tell MeI seek, I listen, I appreciate continuous feedback and act on it

Shared SuccessI drive group performance through common objectives and shares values

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THE FINANCIAL INDICATORS ASSESS THE GROUP’S CURRENT YEAR PERFORMANCE AS COMPARED TO THE PRECEDING YEAR.

GROUP PERFORMANCE RATIOS

Attributed to lower amounts owing to suppliers and contractors for purchase of property, plant and equipment for the Group during the year.

Current ratio is defined as the Company’s ability to meet its short-term obligations.

NET PROFIT MARGIN

2014

2013

42%

53%37%

38% 2014

2013

14%

16%11%

13%

RETURN ON ASSETS (ROA)

2014

2013

1.63

1.47

CURRENT RATIO

2014

2013

16%

14% 20%

17%

RETURN ON EQUITY (ROE)

Including recognition of DTA arising from ITA granted for the Group. (FY2014: RM154.5 million vs. FY2013: RM626.4 million).

Attributed to contribution from Regasification and Gas Transportation segments and profit contribution from Kimanis Power Sdn Bhd (KPSB).

Net profit margin is defined as a ratio of net profit after tax to revenue.

In tandem with higher normalised net profit for the year.

ROE is defined as profit attributable to shareholders divided by the average shareholders’ equity for the financial year.

In line with higher normalised net profit for the year.

ROA is an indicator that measures the Company’s efficiency in using the total assets to generate profit.

All analysis below is after excluding impact of the one-off deferred tax assets (DTA) arising from investment tax allowance (ITA) granted for the Group in FY2013 and FY2014.

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KEY PERFORMANCE

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INVESTORS RATIOS

Sustainable dividend payout in respect of FY2014 in tandem with strong performance of the Group.

DPS is interim and final dividends declared for the shareholders divided by the number of ordinary shares issued.

EARNINGS PER SHARE (EPS)

2014

2013

93 sen

105 sen73 sen

85 sen 2014

2013 75%

64%

DIVIDEND PAYOUT RATIO (DPR)

2014

2013 82% 27%

-6%

TOTAL SHAREHOLDERS RETURN (TSR)

2014

2013

55 sen

55 sen

DIVIDENDS PER SHARE (DPS)

Including recognition of DTA arising from ITA granted for the Group. (FY2014: RM154.5 million vs. FY2013: RM626.4 million).

Within the industry average of DPR.

DPR is defined as the percentage of earnings paid to shareholders in dividend.

In line with higher normalised net profit for the year.

EPS represents the portion of the Company’s distributable income allocated to each equity share.

Fundamentally in tandem with FTSE Bursa Malaysia (FBM) Kuala Lumpur Composite Index (KLCI).

TSR is the measure of share pr ice performance and dividend paid during the year, divided by the opening share prices.

All analysis below is after excluding impact of the one-off deferred tax assets (DTA) arising from investment tax allowance (ITA) granted for the Group in FY2013 and FY2014.

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Financial Results Announcements

In line with guidelines under the Malaysian Code on Corporate Governance 2012 and Main Market Listing Requirements of Bursa Malaysia Securities Berhad (Bursa Malaysia), PGB issues comprehensive and timely announcements to Bursa Malaysia on its quarterly and annual financial results. These announcements are subsequently posted on PGB’s corporate website under the Investor Relations portal.

Date Event Share Price Results Briefing

6 May 2014 Q1 2014 Announcement RM23.36 On 7 May 2014 – via Conference Call

8 August 2014 Q2 2014 Announcement RM21.08 On 11 August 2014 – via Webcast & Conference Call

4 November 2014 Q3 2014 Announcement RM21.08 On 5 November 2014 – via Webcast & Conference Call

17 February 2015 Q4 2014 Announcement RM22.38 On 18 February 2015 – via Webcast & Conference Call

ENGAGEMENT WITH INVESTORS

T hrough its Investor Relat ions platform, PGB maintains an open channel of communication with analysts and investors in order to provide in-depth information on the Company’s current and projected performance, its business strategies and direction. As a result of conscientious efforts to engage with analysts, PGB is covered by 12 leading research houses.

During the year, the Company organised two corporate development briefings; the new Gas Processing and Gas Transportation Agreements and the liquefied natural gas (LNG) Regasification Terminal and Air Separation Unit Projects in Pengerang, Johor. The Gas Processing and Gas Transportation Agreements briefing was held in the Twin Towers, KLCC where 28 analysts and investors attended while the LNG

Regas i f icat ion Terminal and A i r Separation Unit Projects briefing was conducted via webcast and conference call with 27 analysts and investors. Additionally, the Company attended to a total of 21 analyst meetings including face-to-face sessions and conference calls. At these interactive dialogues, feedbacks from the analysts were encouraged for better understanding of their interests and concerns.

As a public listed company, PETRONAS Gas Berhad (PGB) is committed to creating value for its shareholders. THIS IS EMPHASISED THROUGH THE ESTABLISHMENT OF PGB INVESTOR RELATIONS POLICY IN 2014 TO SET OUT THE MANNER

IN WHICH THE INVESTOR RELATIONS PROGRAMME IS TO BE EXECUTED AND THE INTERNAL PROCEDURES RELATED TO ITS

ACTIVITIES. THE INVESTOR RELATIONS UNIT BELIEVES IT IS IMPORTANT TO ENGAGE WITH PGB SHAREHOLDERS AND THE

BROADER INVESTMENT COMMUNITY TO CREATE GREATER TRANSPARENCY OF THE COMPANY’S BUSINESS AND PERFORMANCE.

INVESTOR RELATIONS’ FUNCTION PLAYS A KEY ROLE IN ALL INITIATIVES TARGETING THIS STAKEHOLDER GROUP.

pg 58PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

INVESTOR RELATIONS

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1. MalaysiaNo. of Analyst/Research House : 11

2. SingaporeNo. of Analyst/Research House : 1

RESEARCH HOUSE1 2 3 4 5 6 7 8 9 10 11 12

CONFERENCES

To further extend its investors reach, the Investor Relations Unit participated in regional conferences organised by research houses. In 2014, it attended Pulse of Asia 2014 and dbAccess Asia Conference 2014, both in Singapore; and the RHB Asian Corporate Day Conference 2014 held in Kuala Lumpur.

INVESTORS’ PLANT VISITS

T h e I n v e s t o r R e l a t i o n s U n i t acknowledges the need for PGB’s investors to understand and appreciate the nature of the business. As such, the Company hosted two visits to its facilities in Segamat Operation Centre in Johor and Gas Processing Santong and Utilities Kertih in Terengganu. The visits received positive feedbacks from a total of 60 investors who attended as they were able to see the operations first-hand, therefore increasing their appreciation of PGB.

INVESTOR RELATIONS PORTAL

The Unit maintains a user-friendly Investor Relations portal on the Company’s website, www.petronasgas.com, that can be accessed not only by analysts and shareholders but anyone interested in discovering more about PGB. The portal contains vital financial and operational information including its annual reports, quarterly results, corporate updates, replies to the Minority Shareholder W a t c h d o g G r o u p ( M W S G ) , announcements to Bursa Malaysia, minutes of Annual General Meetings (AGMs) and corporate development briefings.

An email address, [email protected], is provided whereby investors, analysts, shareholders, the media and members of the public can give encouraging feedback, post comments or seek further information or clarification on matters related to PGB.

MARKET FEEDBACKIn add i t ion , the Company was acknowledged for its investor relations efforts via a number of awards as follows:

• Best Performing Industrial Stock by the Edge Billion Ringgit Club

• 4th Most Transparent Big Stock in Malaysia by Focus Malaysia

• 3rd Best Managed Company in Malaysia by Finance Asia

• Best Annual Report in the Products & Technology category by the National Annual Corporate Report Awards (NACRA) 2014

• Excellent Corporate Governance in the Oil and Gas sector by the MSWG-ASEAN Corporate Governance Index 2014

In addition, PGB also met globally recognised standards on environment, social and governance practices  for inclusion in the FTSE4Good Bursa Malaysia Index.

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PETRONAS Gas Berhad (PGB) was listed on the Main Board of Bursa Malaysia Securities Berhad (Bursa Malaysia) in 1995. Since then, the Company has grown steadily to become an active player in the capital market, especially with the realisation of various projects in recent years.

PGB’s market capital isation as at 31 December 2014 stood at RM44 billion, ranking it as one of the largest corporations listed on the Main Market of Bursa Malaysia. PGB was recognised by the Edge Billion Ringgit Club as the Best Performing Stock under the Industrial Category with a market capitalisation of more than RM10 billion. PGB was also named the fourth most transparent big stock in Malaysia by Focus Malaysia.

The Company’s substantial shareholders are Petrol iam Nasional Berhad (PETRONAS), the Employees Provident Fund (EPF) Board, Permodalan Nasional Berhad (PNB) and Kumpulan Wang Persaraan (Diperbadankan), which together account for 84% of its shareholdings. On top of this, foreign shareholdings as at 31 December 2014 stood at 7%.

PGB’s share price experienced a decline of 8% in FY2014. It started the year at RM24.28, rose to peak at RM24.50 on 30 May 2014 and gradually headed down towards the end of the year to RM22.16. The highest share price during the year was RM24.881, the highest price ever recorded by PGB since the Company’s listing on Bursa Malaysia while the lowest share price was RM20.902, fundamentally in tandem with FTSE Bursa Malaysia (FBM) Kuala Lumpur Composite Index (KLCI) and supported by the Company’s growth act iv i t ies part icular ly in regasification and power business. The Company’s shares were actively traded throughout the year with the highest volume being 5,935,100 units3.

DIVIDENDS PER SHARE

FY2014: 55 sen

FY2013: 55 sen

SHARE PRICE

-RM2.12

FY2014: RM22.16

FY2013: RM24.28

EARNINGS PER SHARE*

+12 sen

FY2014: 85 sen

FY2013: 73 sen

TOTAL SHAREHOLDERS’ RETURN

-33%

FY2014: -6%

FY2013: 27%

MARKET CAPITALISATION

-RM4 billion

FY2014: RM44 billion

FY2013: RM48 billion

For the Year Ended 31 December 2012

For the Year Ended 31 December 2013

For the Year Ended 31 December 2014

Share price (RM)

Volume (’00)

Share price (RM)

Volume (’00)

Share price (RM)

Volume (’00)

Highest 20.50 81,719 24.52 35,674 24.88 59,351

Lowest 14.70 1 18.20 207 20.90 887

Note:* Excluding recognition of deferred tax assets (DTA) arising from investment tax allowance (ITA) granted for the Group.

(FY2014: RM154.5 million vs. FY2013: RM626.4 million).

pg 60PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

PERFORMANCE OF SHARES

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Jan

2014

Feb Mar

Closing Price (sen)/Composite Index

Shares

Closing PriceComposite IndexVolume

45,000

Volume

60,000

55,000

50,000

40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0

Apr May Jun Jul Aug Sept Oct Nov Dec

2015

Jan Feb

100

300

500

700

900

1,300

1,500

1,700

1,900

2,100

2,300

2,500

1,100

2. Lowest share price

1. Highest share price 3. Highest volume

RESULTS AGMDIVIDENDSFirst Quarter ended 31 March 2014Announced On : 6 May 2014

Second Quarter ended 30 June 2014Announced On : 8 August 2014

Third Quarter ended 30 September 2014Announced On : 4 November 2014

Fourth Quarter ended 31 December 2014Announced On : 17 February 2015

First InterimEntitlement Date : 26 August 2014Paid On : 26 September 2014

Second InterimEntitlement Date : 20 November 2014Paid On : 8 December 2014

Third InterimEntitlement Date : 9 March 2015Payable On : 25 March 2015

Notice of Annual General Meeting7 April 2015

32nd Annual General Meeting30 April 2015

pg 61

FINANCIAL CALENDARFinancial year from 1 January 2014 to 31 December 2014

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1983 PETRONAS Gas Sdn Bhd (PGSB) was incorporated a s a w h o l l y - o w n e d subsidiary of PETRONAS on 23  May 1983.

1984 C o m m i s s i o n i n g o f Peninsular Gas Utilisation (PGU) 1, Commissioning of Gas Processing Plant (GPP) 1 with first gas in and first sales gas delivery to power and industrial customers.

1987 Appointment of PGSB as throughput and servicing agent to PETRONAS in relation to the PGU project in Peninsular Malaysia (Throughput Agreement) on 2 November 1987.

1991 Commissioning of PGU 2 and the official opening of t h e S e g a m a t G a s Transmission Operation Centre by Prime Minister o f Ma lays i a , Tun Dr . Mahathir bin Mohamed.

1992 First sales gas delivery to Senoko Power Station in Singapore via submarine p i p e l i n e a n d t h e commissioning of GPP2 and GPP3.

1994 Commissioning of GPP4.

1995 S ign ing of a 20-year agreement between PGSB and PETRONAS for the provision of services relating to Gas Processing and Gas Transmission Agreement (GPTA) in Malaysia on 31 March 1995 with effective date 1  April 1994.

Conversion of PGSB from private limited to a public listed company (PETRONAS Gas Berhad) and was listed on the main board of K u a l a L u m p u r S t o c k Exchange (now Bursa Malaysia Securities Berhad (Bursa Malaysia)).

1998 Complet ion of PGU 3 project and the signing of first Sale and Purchase Agreement with Centralised Utility Facilities (CUF).

1999 Commissioning of GPP5 and GPP6, first delivery of electricity from CUF Kertih a n d C U F G e b e n g t o customers.

2000 PGB secures RM1.4 billion worth of Islamic Financing from the domestic private debt securities to partly finance its CUF project.

2001 PGB’s CUF and PGU III projects were completed allowing additional revenue for PGB besides being one of the first to become the supplier of steam, e l e c t r i c i t y , o x y g e n , nitrogen, compressed air, demineralised water and waste treatment.

FROM 1983 TO 2001

CORPORATE MILESTONES:OUR JOURNEY 1983-2014

CORPORATE MILESTONES:OUR JOURNEY 1983-2014

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2002 P G B e m b a r k e d o n a framework discussion on Environment Reporting to incorporate sustainable d e v e l o p m e n t o f t h e country’s resources based o n t h e B r u n d t l a n d Commission Sustainable Development Guide.

2003 Creat ion of Customer Relat ions Management (CRM) to ensure effective customer re la t ionsh ip management for a more robust customer focused and market driven entity.

2004 The es tab l i shment of Service Level Arrangements (SLA) to enhance overall c u s t o m e r f o c u s a n d efficiency to facilitate the n e w o r g a n i s a t i o n a l structure which became effective in 1 January 2004.

2005 First gas-in from Malaysia-Thailand Joint Development Area; Signing of Operation and Maintenance Services Agreement with Trans Thai-Malaysia (M) Sdn Bhd.

2007 S i g n i n g o f P r o j e c t E x e c u t i o n S e r v i c e s Agreement with PETRONAS Car iga l i Sdn Bhd for S a b a h - S a r a w a k G a s Pipeline (SSGP) Project.

2008 Signing of Shareholders Agreement (SHA) with NRG Consortium (Sabah) Sdn Bhd, a subsidiary of Yayasan Sabah on 24 November 2008 for the establishment of Kimanis Power Sdn Bhd, a 60:40 joint venture company tasked with the development of a 300 megawatt power plant in Kimanis, Sabah.

2009 Ground breaking ceremony of Kimanis Power Plant project on 26 November 2009 by Chief Minister of Sabah, Datuk Seri Panglima Musa bin Haji Aman.

2010 Prime Minister of Malaysia, Dato’ Sri Mohd Najib bin Tun Haji Abdul Razak announced on 10 June 2010 the development of Malaysia’s first liquefied natural gas ( L N G ) R e g a s i f i c a t i o n Terminal in Sungai Udang, M e l a k a ( R G T S U ) b y PETRONAS under the 10th Malaysia Plan. PETRONAS assigned PGB to undertake the RGTSU project on 29 June 2010.

2011 Signing of Engineering, Procurement, Construction, I n s t a l l a t i o n a n d Commissioning All iance agreement between PGB and a consortium of contractors for LNG Regasif icat ion F a c i l i t i e s P r o j e c t o n 25 February 2011. PGB unveiled the PGB Network Code on the 23  December 2011 to the public via official announcement to Bursa Malaysia.

2012 S i g n i n g o f a P o w e r Purchase Agreement (PPA) between PGB and Sabah Electricity Sdn Bhd (SESB), witnessed by Prime Minister of Malaysia, Dato’ Sri Mohd Najib bin Tun Haji Abdul Razak and Chief Minister of Sabah, Datuk Seri Panglima Musa bin Haji Aman on 16 February 2012.

O f f i c i a l l a u n c h f o r mechanical completion of the RGTSU by the Prime Minister of Malaysia, Dato’ Sri Mohd Najib bin Tun Haji Abdul Razak and the Chief Minister of Melaka, Datuk Seri Haji Mohd Ali bin Mohd Rustam on 4 June 2012 in conjunction with World Gas Conference 2012.

2013 C o m m i s s i o n i n g o f RGTSU on 23 May 2013; Commissioning and testing of Kimanis Power Plant.

2014 In November 2014, PGB achieved another milestone as its power venture arm K imanis Power P lant , became fully operationalise, allowing additional power for the people of Sabah.

PGB signed a series of a g r e e m e n t s t o w a r d s developing Malaysia’s Second LNG Regasification Terminal in Pengerang and a heads of agreement with Linde to develop an Air Separation Unit Plant to produce industrial gases for Pengerang Integrated Complex.

FROM 2002 TO 2014

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MEDIA MILESTONES2014

PGB renews 20-year contract with PETRONAS

1 April 2014

Top 10

Biggest Malaysian Companies

25 August 2014

10 November 2014

KPP

begins full operations

MOST TRANSPARENT BIG STOCKS

28 June – 4 July 2014

10 November 2014

PETRONAS

Yayasan Sabah’s joint venture power plant begins full operations

pg 64PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

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Kimanis Power Plant begins full commercial operations

10 November 2014

11 November 2014

PETRONAS Kimanis Power Plant commences operations

Top awards for

Annual Corporate Reports

6 December 2014

17 November 2014Dialog,

PETRONAS

Gas sign shareholders’ pact for project

11 November 2014

Sabah gets electricity boost as

Kimanis plant becomes operational

pg 65

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29 JANUARY CORPORATE SOCIAL RESPONSIBILITY (CSR) PROGRAMME WITH SEKOLAH KEBANGSAAN DAIGIN • Kimanis Power Sdn Bhd (KPSB) and Kimanis O&M Sdn Bhd (KOMSB) jointly organised a CSR programme and contributed

school necessities to Sekolah Kebangsaan Daigin Kimanis, Papar in Sabah, such as students’ tables, chairs, cabinets and reading materials for the betterment of the school.

16 MARCH BRIEFING AND ENGAGEMENT SESSION• Briefing on Industrial Efficient Regulations (IER2009) by Department of Environment (DOE) Kuala Terengganu at

Kelab Golf Rantau PETRONAS and followed by a bowling tournament between DOE and GPU Management at Mesra Mall, Kertih.

26 FEBRUARY LAUNCHING OF GAS ACADEMY• PGB MD/CEO, Yusa’ bin Hassan, conducted his sharing

session on PGB’s FY2013 performance and then launched Gas Academy at Gas Processing Kertih in Terengganu.

20 MARCH DOSH OFFICIAL VISIT TO KIMANIS POWER PLANT• A courtesy visit by the Department of Safety and Health

(DOSH) Putrajaya and Sabah, led by Director of Industrial Safety Division, Ir. Abdul Aziz bin Yahya, to Kimanis Power Plant. Among the matters being discussed were on DOSH’s assistance on the process of obtaining safe structures that were in compliance with the regulatory act. In addition, DOSH also gave an insight on the government’s roles and responsibilities in assisting the economic growth of mega projects in Sabah.

pg 66PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

2014 CALENDAROF EVENTS

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30 APRIL PRR4 ACHIEVED 500,000 MAN-HOURS WITHOUT LTI• A collaboration between PGB and a consortium led by

Toyo Engineering Corporation of Japan commemorated 500,000 man hours without Lost Time Injury (LTI) for Plant Rejuvenation and Revamp 4 Project (PRR4). A wall breaking ceremony as a symbolic sign for the commencement of the renovation of Central Control Room 1, 2, 3 (CCR123) was initiated by GPU Head, Azlimi bin Mohd Lazim.

5 MAY PETRONAS GAS BERHAD 31ST ANNUAL GENERAL MEETING• PGB organised its 31st Annual General Meeting (AGM) at

Mandarin Oriental Hotel in Kuala Lumpur.

8 APRIL ENGAGEMENT SESSION WITH MAJLIS BANDARAYA SHAH ALAM• An engagement session between Majlis Bandaraya Shah Alam (MBSA) and PGB’s Shah Alam regional office (RO) at Shah Alam

Convention Centre in Selangor. The session was to provide a common understanding with regards to PGB’s Gas Transmission and Regasification (GTR) facilities, which emphasised on public safety and pipeline management, as well as a sharing session on emergency response plan.

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24 MAY GTR FUN RIDE WITH DOSH• PGB GTR organised GTR Fun Ride at Bukit Bandaraya which involved 40 cyclists. The programme served as a platform

to further strengthen relationship with DOSH. The event was attended by DOSH offices from Putrajaya, Kuala Lumpur and Selangor while PGB was represented by its Regional Offices (RO) from Pasir Gudang, Setiawan and Segamat Operations Centre.

1 JUNE GTR ENGAGEMENT SESSION WITH DOSH SABAH• PGB GTR organised an engagement session with DOSH Sabah at Sutera Harbour Resort, Kota Kinabalu. This event serves

as a platform to enhance the relationship between PGB and DOSH.

22 MAY CSR PROGRAMME WITH OLD FOLKS AND ORPHANS• Secretaries from GPU Kertih and Kimanis O&M Sdn Bhd

(KOMSB) jointly brought joy to the elderly of the Rumah Wargatua Sri Pritchard Kinarut in Papar and orphans of the Rumah Kanak-kanak Kota Kinabalu in Beringgis, both in Sabah.

23 – 25 MAY PROGRAM SENTUHAN ILMU PETRONAS (PSIP) MELAKA • PGB Head Office (HO) organised a PSIP programme at

Sekolah Kebangsaan Cherana Putih in Melaka. During this PSIP, students were exposed to the method of leading and living a healthy lifestyle. Various activities were carried out such as ‘Senamrobik’.

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2014 CALENDAROF EVENTS

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5 – 6 SEPTEMBER PGB – SENOKO INTERACTIVE GAMES 2014 DI PGRO• PGB and SENOKO jointly organised an interaction game as part of its stakeholders engagement to strengthen partnership

while building up good support between operation teams.

12 AUGUST CSR HARI RAYA WITH SEKOLAH KEBANGSAAN SERI NILAM• A CSR Hari Raya was organised by PGB Head Office for the students of Sekolah Kebangsaan Seri Nilam, Taman Koperasi

Polis, Gombak. The pupils received goodies in conjunction with Hari Raya celebration.

31 AUGUST NATIONAL DAY CELEBRATION• PGB’s Segamat RO bagged the champion award for banner competition at the Segamat District’s annual Merdeka parade.

28 AUGUST SHAREHOLDERS OFFICIAL VISIT• PGB held an educational engagement programme with its

shareholders at GPU Kertih to enlighten them on PGB’s businesses.

3 – 4 SEPTEMBER “EX TANJUNG” (TIER-3 EMERGENCY EXERCISE) WITH MAJLIS KESELAMATAN NEGARA AT TSET• A Tier-3 emergency exercise with code name “Ex-Tanjung”

was jointly collaborated between PGB and Majlis Keselamatan Negara (MKN) which was held at Tanjung Sulong Export Terminal (TSET). About 300 participants were involved in the exercise including PGB staff, MKN, Unit Tindakan Khas (UTK) and local authorities such as Royal Malaysian Police, The Fire & Rescue Department and The Health Department.

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24 SEPTEMBER VISIT BY BANK NEGARA MALAYSIA, SABAH ECONOMIC DEVELOPMENT AND INVESTMENT AUTHORITY TO KIMANIS POWER PLANT• Bank Negara Malaysia (BNM), Sabah Economic Development and Investment Authority (SEDIA) organised regular

discussions with industry players to better understand the developments and issues. This will also help BNM to propose policies to facilitate growth in the economy.

• The BNM delegate was led by Deputy Director of Economics Department, Dr. Mohamad Hasni bin Sha’ari with six other officers.

9 NOVEMBER PGB HO CSR 2014: PROGRAM SENTUHAN IHSAN PGB AT MASJID AMINAH AL-MUHAIRI, SS2 PETALING JAYA• It is part of PGB‘s initiatives to create awareness for the

communities in need and provide opportunities to strengthen the nurturing culture amongst participants.

10 – 11 OCTOBER PGB CONTRACTORS FORUM 2014• The event was conducted to impart best practices between

PGB and Contractors towards successful project delivery;• A platform for continuous engagement between PGB and

Contractors to overcome challenges and develop strategies for improvement on any gaps; and

• Serves to share information and new regulations on matters related to HSE, Contractual Performance, Integrity, Ownership and Accountability.

pg 70PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

2014 CALENDAROF EVENTS

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11 DECEMBER CSR PROGRAMME AT SEK KEB MOOK, KINARUT, PAPAR• Kimanis Power Sdn Bhd (KPSB) and KOMSB jointly organised a CSR at Sekolah Kebangsaan Mook, Kinarut, Papar, Sabah.• School facilities such as students desk, chairs and educational books were contributed to 200 primary students.

15 DECEMBER PGB AND DOSH ENGAGEMENT SESSION AT IOI MARRIOTT PUTRAJAYA• A collaboration event between DOSH and PGB. The activities include golf interactive tournament between head of

PETRONAS and DOSH followed by meeting sessions. One of the objectives was to introduce the new DOSH Director General to all PGB Heads and to conduct discussion in addition to embracing way forward on several issues.

17 NOVEMBER PROGRAM SENTUHAN ILMU PETRONAS (PSIP) SEGAMAT• PGB GTR organised a back to school programme for the

students’ of Sekolah Kebangsaan Batu Anam which was held at Vip Hotel at Segamat. The students were given basic school necessities such as shoes and clothes.

7 DECEMBER PGB GOLF ANNUAL INVITATION 2014 AT AMVERTON COVE GOLF & RESORT, PULAU CAREY• PGB Annual Golf tournament with stakeholders.

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WE ARE THRILLED TO HAVE BEEN BESTOWED WITH NUMEROUS AWARDS AND CERTIFICATIONS IN THE YEAR UNDER REVIEW IN RECOGNITION OF OUR STELLAR ACCOMPLISHMENTS

AWARDS& ACHIEVEMENTS

2 0 1 4

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THE EDGE BILLION RINGGIT CLUBPETRONAS Gas Berhad was honoured for having the Best Performing Industrial Stock with a market capitalisation of more than RM10 billion in the Industrial Sector.

Certifications

The following certifications validate the high standards to which PETRONAS Gas Berhad adheres in its processes and systems.

• Jabatan Alam Sekitar Award for compliance with all stipulated conditions related to the management of scheduled wastes.

• IQNet and SIRIM International Quality Management System ISO 9001:2008.

NACRA 2014PETRONAS Gas Berhad won the Best Annual Report in the Industrial Products & Technology Category at the National Annual Corporate Report Awards (NACRA) 2014 for annual report produced for the year ended December 2013.

MSWG-ASEAN CORPORATE GOVERNANCE INDEX 2014PETRONAS Gas Berhad was recognised for having the best corporate governance pract ices including t ransparency and performance in the Oil and Gas Sector.

FINANCE ASIA AWARDPETRONAS Gas Berhad was named the third Best Managed Company in Malaysia by a Finance Asia poll which tallied the votes of 265 investors and analysts across the region.

FOCUS MALAYSIA AWARDPETRONAS Gas Berhad was named the fourth Most Transparent Big Stock in Malaysia in a poll conducted by Focus Malaysia, a leading English business weekly.

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AWARDS AND ACHIEVEMENTS 2013DURING THE YEAR UNDER REVIEW, PETRONAS GAS BERHAD WAS ACCREDITED WITH SEVERAL AWARDS AND CERTIFICATIONS AS A RESULT OF THE HIGH STANDARDS IN ITS OPERATIONS.

Awards:

1. The Edge Billion Ringgit Club – PETRONAS Gas Berhad (PGB) was recognised as one of Malaysia’s top three

Companies in the Industrial Products Sector in terms of Return on Equity.

2. Alpha Annual Southeast Asia Institutional Investor Corporate Awards– PGB won the Best Senior Management Investor Relations (IR) Support

Category in Malaysia.

3. MSOSH (Malaysian Society for Occupational Safety and Health) – Gold Merit

• MSOSH Gold Merit Award Winner 2012 for Segamat Operation Centre (SOC), Segamat Regional Office, Transmission Operations Division, (TOD)

• MSOSH Gold Merit Award Winner 2012 for Pasir Gudang Regional Office, TOD

• MSOSH Gold Merit Award Winner 2012 for Gas Processing Plant Paka (GPPB), Plant Operations Division (POD)

• MSOSH Gold Merit Award Winner 2012 for Export Terminal (ET), POD

– Gold Class 1• MSOSH Gold Class 1 Award Winner 2012 for Gurun Regional Office,

TOD

4. NCOSH (National Council for Occupational Safety and Health)– OSH National Award Winner for Gurun Regional Office, TOD

5. NACRA (National Annual Corporate Reports Award)– Industry Excellence Awards Merit Winner under the Industrial Products

and Technology category in National Annual Corporate Reward Awards (NACRA 2013) for Annual Report Ending 31 December 2012

6. ICC (Innovative and Creative Circle)– Team BUBBLE from PGB was awarded

• Best Young ICC Award at the Central Mini Regional Convention on Team Excellence

• Gold Medal at the Central Regional Convention on Team Excellence• 3 Stars Gold Medal and Most Potential Group Award at the National

Convention Team Excellence ICC

7. IKM (Institut Kimia Malaysia)– IKM Laboratory Excellence Award

Certifications:

1. SIRIM Certification of Occupational Health and Safety Assessment Series (OHSAS) 18001:2007, MS1722:2011 for Occupational Health and Safety Management System

2. SIRIM Certification of MS ISO 9001:2008 for Quality Management System

3. SIRIM Certification of MS ISO 14001 for Environmental Management System

4. Certification of Quality Improvement Practices (5S) from the Malaysia Productivity Corporation (MPC) for Tanjung Sulong Export Terminal (TSET)

20

13

pg 74PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

PAST AWARDS

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Awards:

1. MSOSH 2011 Grand Award for GPPB, POD

2. MSOSH 2011 Gold Merit Award for Segamat Operation Centre (SOC), TOD

3. MSOSH 2011 Gold Merit Award for Centralised Utilities Facilities, Kertih (CUFK)

4. MSOSH 2011 Gold Class 1 Award for Kuantan Regional Office, Shah Alam Regional Office and Seremban Regional Office, TOD

5. MSOSH 2011 Gold Class 1 Award for Centralised Utility Facilities, Gebeng (CUFG)

6. MSOSH 2011 Gold Class 1 Award for Technical and Facilities Development Division (TFDD)

7. OSH 2011 National Award Winner for Gurun Regional Office, TOD

8. 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

9 Gold Medal Three Stars for CUF Team (Fusion Ready–Energy) at the National ICC Convention

10. IKM Laboratory Excellence Award for POD

Certifications:

1. PGB Head Office received certifications for:

a. OHSAS 18001:2007, MS1722: Part 1:2005b. Certification of Quality Improvement Practices (5S) from the Malaysia

Productivity Corporation (MPC) for ET, POD

AWARDS AND ACHIEVEMENTS 2012DURING THE YEAR UNDER REVIEW, PETRONAS GAS BERHAD WAS ACCREDITED WITH SEVERAL AWARDS AND CERTIFICATIONS AS A RESULT OF THE HIGH STANDARDS IN ITS OPERATIONS.

20

12

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Property, plant and equipment 82% Cash and cash equivalents 5% Trade and other receivables 5% Deferred tax assets 4% Investment in joint ventures 3% Investment in associate 1% Trade and other inventories 0% Fund and other investments 0%

TOTAL ASSETS

2014RM13,260.5 million

TOTAL ASSETS2013RM13,222.4 million

Property, plant and equipment 80% Cash and cash equivalents 7% Trade and other receivables 5% Deferred tax assets 5% Investment in joint ventures 2% Investment in associate 1% Trade and other inventories 0% Fund and other investments 0%

pg 76PETRONAS GAS BERHAD (101671-H)

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SIMPLIFIED GROUP STATEMENT OF FINANCIAL POSITION & SEGMENTAL ANALYSIS

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Reserves 63% Share Capital 15% Deferred tax liabilities 7% Non-current borrowings 6% Trade and other payables 8% Taxation 1% Non-controlling interests 0% Current borrowings 0% Deferred income 0%

Reserves 65% Share Capital 15% Deferred tax liabilities 8% Non-current borrowings 6% Trade and other payables 5% Taxation 1% Non-controlling interests 0% Current borrowings 0% Deferred income 0%

TOTAL LIABILITIES &SHAREHOLDERS’ EQUITY

2014RM13,260.5 million

TOTAL LIABILITIES &SHAREHOLDERS’ EQUITY2013RM13,222.4 million

pg 77

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SEGMENT OPERATING REVENUEfor the financial year ended 31 DecemberRM million

2014

2013 1,497.4

1,480.2

2014

2013 751.3

701.7

2014

2013 3,847.7

4,292.3

2014

2013 1,189.3

1,286.7

2014

2013 902.4

1,006.7

2014

2013 2,255.3

2,437.8

SEGMENT RESULTfor the financial year ended 31 DecemberRM million

SEGMENT ASSETSfor the financial year ended 31 DecemberRM million

2013RM3,892.1million

2013RM1,944.9million

2013RM11,868.8million

Gas Processing

Gas Processing

Gas Processing

Gas Transportation

Gas Transportation

Gas Transportation

pg 78PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

SIMPLIFIED GROUP STATEMENT OF FINANCIAL POSITION & SEGMENTAL ANALYSIS

Page 83: Driving Transformation

2014

2013 867.2

1,008.6

2014

2013 127.7

195.9

2014

2013 1,420.9

1,265.1

2014

2013 338.2

616.2

2014

2013 163.5

308.0

2014

2013 4,344.9

4,046.3

2014RM4,391.7million

2014RM2,212.3million

2014RM12,041.5million

Utilities

Utilities

Utilities

Regasification

Regasification

Regasification

pg 79

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First Second Third Fourth YearRM million Quarter Quarter Quarter Quarter 2014

Operating revenue 1,054.2 1,102.4 1,123.5 1,111.6 4,391.7

Operating profit before finance cost 545.5 583.5 552.6 460.5 2,142.1

Profit before taxation 543.1 578.9 549.2 683.2 2,354.4

Profit attributable to equity holders of the Company 418.0 435.3 418.6 571.3 1,843.2

Earnings per share (sen) 21.1 22.0 21.1 28.9 93.1

Proposed/declared dividends per share (sen) – 20.0 20.0 15.0 55.0

First Second Third Fourth YearRM million Quarter Quarter Quarter Quarter 2013

Operating revenue 910.4 930.8 1,022.9 1,028.1 3,892.1

Operating profit before finance cost 479.1 475.5 477.3 471.9 1,903.7

Profit before taxation 485.9 468.1 471.1 471.4 1,896.4

Profit attributable to equity holders of the Company 360.4 944.9 379.8 393.7 2,078.9

Earnings per share (sen) 18.2 47.8 19.2 19.9 105.1

Proposed/declared dividends per share (sen) – 15.0 – 40.0 55.0

2014

2013

pg 80PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

GROUP QUARTERLY FINANCIAL PERFORMANCE

Page 85: Driving Transformation

2014RM million

2013RM million

Revenue 4,391.7 3,892.1

Purchase of goods and services (1,055.1) (965.9)

Value added by the companies 3,336.6 2,926.2

Other income and expenses 4.7 78.9

Financing costs (76.3) (50.1)

Share of profit after tax of equity-accounted associate and joint ventures 288.7 42.8

Value added available for distribution 3,553.7 2,997.8

DISTRIBUTION OF VALUE ADDED

To employees – Employment costs 368.1 374.5

To government – Taxation 368.4 443.6

To shareholders – Dividends 1,583.0 989.4

– Non-controlling interest (1.1) –

Retained for reinvestment and future growth

Depreciation and amortisation 831.1 726.9

Deferred tax expense/(income) 144.0 (626.1)

Retained profit 260.2 1,089.5

3,553.7 2,997.8

pg 81

STATEMENT OF VALUE ADDED

Page 86: Driving Transformation

GROUP

2014 To employees 10% To government 10% Retained for reinvestment 35%

and future growth To shareholders 45%

GROUP2013

To employees 12% To government 15% Retained for reinvestment 33%

and future growth To shareholders 40%

pg 82PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

DISTRIBUTION OF VALUE ADDED

Page 87: Driving Transformation

Note:* Excluding recognition of deferred tax assets (DTA) arising from investment tax allowance (ITA) granted for the Group. (FY2014: RM154.5 million vs. FY2013: RM626.4 million)

Gas Processing, Gas Transportation and Utilities RM3,775.5 million

Regasification RM616.2 million

TOTAL REVENUE

RM4,391.7 million REVENUE GROWTH BY RM499.6 MILLION (13%) FROM

RM3,892.1 MILLION IN FY2013.

FULL YEAR OPERATIONS OF LIQUEFIED NATURAL GAS (LNG) REGASIFICATION TERMINAL IN SUNGAI UDANG, MELAKA (RGTSU) CONTRIBUTED RM278.0 MILLION (7%) OF THE GROWTH IN REVENUE.

pg 83

GROUP FINANCIAL REVIEW

DIVIDENDS PER SHARE

55 SEN SUSTAINABLE DIVIDEND PAYOUT IN

RESPECT OF FY2014, TRANSLATING TO 64%* PAYOUT RATIO.

EBITDA

RM3,217.6 million(+20%)

HIGHEST EVER EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTISATION (EBITDA) IN HISTORY OF PGB

STRONGER PAT*

RM1,687.6 million(+16%)

CONTRIBUTION FROM KIMANIS POWER PLANT (KPP) AS WELL AS REGASIFICATION AND GAS TRANSPORTATION SEGMENTS, RESULTING IN PAT SURGED BY RM235.1 MILLION FOR FY2014.

TOTAL ASSETS

RM13,260.5 million

REMAINED STRONG BACKED BY SOLID GROUP‘S PROPERTY, PLANT AND EQUIPMENT

Page 88: Driving Transformation

Note:Financial year 2011 comprises reporting period from 1 April to 31 March.1 For the nine months period ended 31 December 2011.2 Excluding recognition of DTA arising from ITA granted for the Group.

(FY2014: RM154.5 million vs. FY2013: RM626.4 million).

2014‘13‘12‘111‘11

4,3

91.

7

3,8

92

.1

3,5

76

.8

2,7

65

.1

3,5

25

.0

CAGR: 4.5%

Revenue (RM million)

‘13‘12‘111‘11

1,8

42

.1

1,6

87

.62

2,0

78

.9

2014

1,4

52

.52

1,4

04

.9

1,0

80

.8

1,4

39

.1

CAGR: 3.2%2

Profit After Tax (RM million)

FY2014 has seen a solid financial performance for PGB, where it continues to deliver sustainable returns on the back of its Gas Processing Agreement (GPA) and Gas Transportation Agreements (GTA).

THE COMPANY RECORDED GROWTH THROUGH THE FULL YEAR OPERATIONS OF LIQUEFIED NATURAL GAS (LNG) REGASIFICATION TERMINAL IN SUNGAI UDANG, MELAKA (RGTSU) AND EARNINGS BOOST FROM KIMANIS POWER PLANT (KPP) IN KIMANIS, SABAH.

OVERVIEW

PETRONAS Gas Berhad (PGB) Group have delivered a solid financial performance for the year ended 31 December 2014 (FY2014) on the back of sustainable revenue streams from Gas Processing, Gas Transportation, Utilities and Regasification segments. The revenue has a compounded annual growth rate (CAGR) of 4.5% per annum throughout the five years.

For FY2014, PGB has recorded profit after tax of RM1,842.1 million, representing a decrease of RM236.8 million (11%) from RM2,078.9 million in FY2013. Excluding the one-off deferred tax assets of RGTSU and KPP, profit after tax increased by RM235.1 million (16%) from RM1,452.5 million in FY2013 to RM1,687.6 million in FY2014. Similarly, the CAGR for profit after tax shows an upward trend of 3.2%2 per annum.

pg 84PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

GROUP FINANCIAL REVIEW

Page 89: Driving Transformation

GROUP FINANCIAL PERFORMANCE

Revenue by Segment (RM million)

FY2014

1,480.2

1,286.7

616.2

1,008.6

338.2

867.2 1,497.4

1,189.3

Gas Processing Regasification Gas Transportation Utilities

Revenue

In the year under review, the Group recorded revenue of RM4,391.7 million, representing an upsurge of RM499.6 million (13%) from RM3,892.1 million recorded in FY2013. This was driven primarily by full year operations of RGTSU of RM278.0 million, higher sales of utilities of RM141.4 million (16%) and higher gas transportation revenue (GTR) by RM97.4 million (8%). The higher revenue, however, was marginally offset by lower gas processing revenue (GPR) by RM17.2 million (1%).

The utilities revenue grew by RM141.4 million (16%) as a result of higher revenue from electricity, industrial gases and steam, in line with higher products offtake by its customers and an upward revision of electricity tariff.

During the year, PETRONAS made 8% higher capacity reservation for the Peninsular Gas Utilisation (PGU) pipeline under the new GTA, in line with additional gas supply through RGTSU. This has resulted in an RM97.4 million (8%) increase in GTR from RM1,189.3 million recorded in the previous year.

The increase in revenue across the different segments was marginally offset by decrease in GPR by RM17.2 million (1%). This was mainly due to a lower performance based structure (PBS) income as a result of lower Overall Equipment Effectiveness (OEE) plant liquid extraction performance as compared to the base OEE target, which typically already at a high level of efficiency, under the new Gas Processing Agreement (GPA). The impact of lower PBS income, however, was cushioned by strengthening of reservation charge under the new structure.

PGB HAS RECORDED ITS HIGHEST REVENUE IN FY2014 SINCE IT WAS ESTABLISHED IN 1983 RESULTING FROM FULL YEAR OPERATIONS OF RGTSU COUPLED WITH HIGHER UTILITIES AND CAPACITY RESERVATION FOR GAS TRANSPORTATION SEGMENT UNDER THE NEW GTA.

FY2013

pg 85

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Cost of Revenue

Cost of revenue for the Group rose by RM232.2 million (12%) from RM1,947.2 million in FY2013 to RM2,179.4 million in FY2014, in line with full year RGTSU operations during the year coupled with higher utilities cost of sales due to revision of fuel gas tariff effective 1 January 2014 by RM133.5 million and RM73.2 million respectively.

Gross ProfitGross profit for the year soared by RM267.4 million (14%) from RM1,944.9 million in the corresponding year to RM2,212.3 million. This is attributable to contributions from Regasification segment of RM144.5 million, Gas Transportation segment by RM104.3 million and Utilities segment by RM68.2 million. The contribution from Gas Processing segment decreased by RM49.6 million.

Other Income and Administrative Expenses

Other income and administrative expenses for the Group were lower by RM29.0 million. This was primarily contributed by recovery from early termination of electricity and utilities agreement of RM78.3 million in FY2013 and partially offset by lower administrative expenses by RM45.2 million.

Cost of Revenue by Segment (RM million)

FY2014

308.2

812.7

778.5

280.0

746.1

174.7

739.5

286.9

Gas Processing Regasification Gas Transportation Utilities

PGB HAS ACHIEVED ITS HIGHEST GROSS PROFIT TO DATE, ATTRIBUTABLE TO THE STRONGER REVENUE FROM REGASIFICATION AND GAS TRANSPORTATION SEGMENTS

FY2013

pg 86PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

GROUP FINANCIAL REVIEW

Page 91: Driving Transformation

701.7

1,006.7

308.0

195.9

127.7

163.5

751.3

902.4

FY2013

Share of PAT of Associates and Joint Ventures

The Group’s associate, Gas Malaysia Berhad (GMB) contributed share of profit after tax of RM26.8 million whilst the joint ventures, Kimanis Power Sdn Bhd (KPSB), Kimanis O&M Sdn Bhd, and Industrial Gases Solutions Sdn Bhd, contributed share of profit after tax of RM254.8 million, RM4.0 million and RM3.1 million respectively. The total share of profit after tax of equity-accounted associate and joint ventures amounted to RM288.7 million, a surge of RM245.9 million (575%) as compared to FY2013. This was mainly resulting from higher PGB’s share of profit after tax from KPSB due to recognition of deferred tax assets (DTA) arising from investment tax allowance (ITA) granted by Ministry of Finance (MOF), following commercial operations of all three blocks in FY2014.

Tax Expenses

Tax expenses were higher by RM694.8 million (381%) as compared to RM182.5 million in FY2013 predominantly due to recognition of deferred tax assets arising from RGTSU’s ITA granted by Malaysian Investment Development Authority (MIDA) amounting to RM626.4 million in FY2013.

Profit

As a result, the Group recorded profit after tax for the year amounted to RM1,842.1 million, a drop of RM236.8 million (11%) from RM2,078.9 million recorded in the previous year. Excluding impact of the DTA, profit for the year increased by RM235.1 million primarily attributable to profit contribution from KPSB and higher profit contribution from Regasification and Gas Transportation segments. Gas Processing Regasification

Gas Transportation Utilities

Result by Segment (RM million)

FY2014

PGB HAS REACHED ANOTHER MILESTONE IN FY2014 WHERE IT RECORDED HIGHEST PROFIT BEFORE TAX OF RM2,354.4 MILLION IN THE HISTORY OF THE GROUP

pg 87

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SEGMENT FINANCIAL PERFORMANCE

Gas Processing

The Gas Processing segment contributed RM701.7 million (32%) of the Group’s gross profit. Segment results dropped by RM49.6 million (7%) as compared to FY2013 mainly due to higher cost of revenue by RM32.4 million (4%) as a result of higher repair and maintenance.

Gas Transportation

The Gas Transportation segment contributed RM1,006.7 million (46%) of the Group’s gross profit. Segment revenue for the year at RM1,286.7 million, represents an increase of RM97.4 million (8%) on the back of higher transportation capacity booked by PETRONAS under the new GTA. Accordingly, segment results improved by RM104.3 million (12%) in tandem with the higher revenue.

Utilities

The Utilities segment contributed RM195.9 million (8%) of the Group’s gross profit on the back of RM1,008.6 million revenue. Segment revenue was higher by RM141.4 million (16%) as compared to FY2013 due to higher products offtake by customers and upward revision of electricity tariff. The Utilities segment results increased by RM68.2 million (53%) in tandem with higher revenue, partially offset by higher utilities cost of sales in line with fuel gas price revision effective 1 January 2014.

Regasification

The Regasification segment contributed RM308.0 million (14%) of the Group’s gross profit. Revenue was RM616.2 million as a result of full year RGTSU operations in FY2014. Accordingly, the segment results increased by RM144.5 million for the year.

Revenue

Gross Profit

COR

1,008.6

867.2

812.7

739.5

195.9

127.7

2014 2013

Revenue

Gross Profit

COR

616.2

338.2

308.2

174.7

308.0

163.5

2014 2013

Revenue

Gross Profit

COR

1,286.7

1,189.3

280.0

286.9

1,006.7

902.4

2014 2013

Revenue

Gross Profit

COR

1,480.2

1,497.4

778.5

746.1

701.7

751.3

2014 2013

RM million

RM million

RM million

RM million

pg 88PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

GROUP FINANCIAL REVIEW

Page 93: Driving Transformation

GROUP FINANCIAL POSITION

608.7

10,858.5

1,155.6

637.7

972.7

927.1

711.5

10,611.1

Assets

The Group’s total assets remained strong at RM13,260.5 million as at 31 December 2014, marking a marginal increase of RM38.1 million from RM13,222.4 million last year.

Property, Plant and Equipment (PPE)

Property, plant and equipment increased by RM247.4 million (2%) from RM10,611.1 million as at 31 December 2013 to RM10,858.5 million as at 31 December 2014 mainly resulting from further investments in major growth projects and improvements to maintain the integrity of the Group’s assets.

Cash and Fund Investments

The Group generated RM2.6 billion in cash from operations. This was sufficient to sustain the current year dividend payment to the shareholders of RM1,583.0 million and significant portion of the Group’s capital investments. Consequently, the Group’s cash and fund investments decreased by RM289.4 million (31%) from RM927.1 million as at 31 December 2013.

Trade and Other Receivables

Trade and other receivables decreased by RM102.8 million (14%) from RM711.5 million as at 31 December 2013 mainly resulted from repayment from related companies during the year.

Other assets

Others assets increased by RM182.9 million (19%) from RM972.7 million as at 31 December 2013 to RM1,155.6 million as at 31 December 2014 in line with increase in investment in joint ventures.

Property, plant and equipment Others assets Trade and other receivable Cash and fund investment

Assets (RM million)

FY2014

FY2013

pg 89

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811.0

8,555.1

882.3

1,033.3

1,978.7

Reserves Finance lease liabilities Deferred tax liabilities Others Share capital

1,133.9

8,287.0

841.8

981.0

1,978.7

Equity

Total equity of the Group as at 31 December 2014 of RM10,569.0 million rose by RM303.5 million (3%) from RM10,265.5 million as at 31 December 2013 primarily contributed by profit attributable to the shareholders of the Company, offset by dividend payment.

Liabilities

Total liabilities for the Group reduced by RM265.4 million (9%) from RM2,956.9 million as at 31 December 2013 to RM2,691.5 million as at 31 December 2014. The decrease was mainly due to lower trade and other payables by RM346.2 million (34%).

However, the decrease in liabilities was partially offset by higher of deferred tax liability of RM52.3 million (5%) and finance lease liabilities of RM40.5 million (5%).

Equity and Liabilities (RM million)

FY2014

FY2013

pg 90PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

GROUP FINANCIAL REVIEW

Page 95: Driving Transformation

Dividends

During the year, the Company made two interim dividend payments of 20 sen per ordinary share each under the single tier tax system in relation to financial year ended 31 December 2014 amounting to RM791.4 million. The Board of Directors had declared an interim dividend of 15 sen per ordinary share under the single tier tax system amounting to RM296.8 million in respect of the financial year ended 31 December 2014 in February 2015. This, together with the two interim dividends, resulted in net dividend of 55 sen per ordinary share, representing a dividend payout ratio of 64%* on the profit after tax attributable to the shareholders of the Company for the financial year ended 31 December 2014.

Earnings Per Share (EPS) and Return on Equity (ROE)

EPS for the Group decreased by 12.0 sen (11%) from 105.1 sen to 93.1 sen in line with lower profit after tax. Excluding impact of DTA, EPS grew by 12.0 sen (16%).

The Group’s normalised ROE improved from 14% in FY2013 to 16% in FY2014 in tandem with higher normalised net income generated for the year.

Third Interim Dividend Second Interim Dividend First Interim Dividend Final Dividend Interim Dividend

Net Dividends Per Share (sen)

20142013

15.0

20.0

20.0

40.0

15.0

15.0

20.0

20.0

Note:* Excluding recognition of DTA arising from ITA granted for the Group. (FY2014: RM154.5 million vs. FY2013: RM626.4 million)

pg 91

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pg 92PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

Page 97: Driving Transformation

pg 93

TRUST & STEWARDSHIPWe recognise the importance of corporate governance as it underpins the Management’s actions and the Company’s business operations. In enhancing the long-term value of the company for the benefit of our shareholders and stakeholders, we ensure that we comply with the highest standards of trust, accountability and stewardship.

Page 98: Driving Transformation

The Directors of PETRONAS Gas Berhad (PGB or the Company) promote and ensure good corporate governance within the Company so as to protect the interests of its shareholders.

The Company was also awarded Best Corporate Governance Practices for Oil and Gas by the MSWG-ASEAN Corporate Governance Transparency Index, Findings and Recognition 2014, the Malaysian Chapter. The Company was also ranked amongst the top ten public listed companies for transparency in disclosures benchmarked against the ASEAN CG Scorecard published by the Minority Shareholders Watchdog Group in which strong emphasis is placed in advocating good corporate governance in companies.

The Company, for the financial year under review was also awarded the following accolades:

• Best Performing Stock with a Market Capitalisation of more than RM10 Billion

By The Edge Billion Ringgit Club (Industrial Category)

• 4th Most Transparent Big Stocks in Malaysia

By Focus Malaysia

• 3rd Best Managed Company in Malaysia

By Finance Asia

• FTSE4Good Bursa Malaysia Index By Bursa Malaysia

The Company’s compliance to the principles and recommendations of the MCCG 2012 are provided for throughout the various sections of this Corporate Governance Statement as well as in other parts of this Annual Report for the financial year ended 31 December 2014.

THE BOARD OF DIRECTORS

1. P r i n c i p a l R o l e s a n d Responsibilities of the Board

The Board is generally entrusted with the overall governance of the Company, the responsibility to exercise reasonable and proper care of the Company’s resources for the best interests of i ts 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 d i scharg ing i t s f iduc ia ry and leadersh ip funct ion as recommended by MCCG 2012. In this regard, the Board has assumed the following responsibilities:

a) Review and approval of the annual corporate plan, which includes overall corporate strategy, operational plan, m a r k e t i n g p l a n , h u m a n resources plan, financial plan and budget, risk management p l a n a n d i n f o r m a t i o n technology plan;

b) Overseeing the conduct of business, and evaluation of whether the business is being properly managed;

c) Identification of principal r i s k s a n d e n s u r i n g t h e implementation of appropriate systems to control, monitor and manage these risks;

T he Board has model led the Company’s governance structure to observe the following principles of compliance:

• Malaysian Code on Corporate Governance (MCCG 2012).

• Main Market Listing Requirements of Bursa Malaysia Securities Berhad (MMLR).

• Corporate D isc losure Gu ide : Towards Boardroom Excellence (CG Guide) by Bursa Malaysia Securities Berhad (Bursa Malaysia) (2nd Edition)

• Corporate Disclosure Guide by Bursa Malaysia.

• Minority Shareholders Watchdog Group (MSWG) Malaysia-ASEAN Corporate Governance Scorecard.

The Company’s stance in safeguarding the transparent disclosure of its corporate governance is evident in the numerous accolades received in financial year 2014. PGB received the 2014 National Annual Corporate Governance Award (NACRA) for Industrial Products and Technology under the Industry Excellence category for Companies Listed on the Main Market.

pg 94PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

CORPORATE GOVERNANCE STATEMENT

Page 99: Driving Transformation

d) Overseeing the succession planning and appointment of senior management, including ensuring senior management personnel are of sufficient calibre;

e) 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; and

f) Rev iew and approval of quarterly results and year end financial statements.

2. Board Charter

In discharging its duties and roles effectively, the Board is guided by its Board Charter, a document which sets out the principles and guidelines that are to be applied by the Board and the Board Committees. The Board Charter was developed based on the principles and recommendations as set out in the MCCG 2012.

The PGB Board Charter was adopted by the Board in March 2013 and serves as a guideline for the Board and its Committees in the execution of their responsibilities for the Company. The Board Charter shall be periodical ly reviewed and updated from time to time to reflect relevant changes to policies, procedures and processes as well as amendments to rules and regulations.

The Board Charter is accessible to the public for reference on the Company’s official website at www.petronasgas.com.

AN EFFECTIVE BOARD

A. Composition

The Board currently comprises of eight Directors of which four are Independent Non-Execut i ve Directors who have been selected based on their character, integrity, experience and expertise in a wide range of industries, as well as their ability to add strength to the stewardship of the Company.

The current composition of the Board are as follows:

50%

12.5%

37.5%

Non-Independent Executive Directors (also the MD/CEO)

Independent Non-Executive Directors

Non-Independent Non-Executive Directors

The composition of the Board is in compliance with Paragraph 15.02 of the MMLR as more than one t h i r d o f i t s m e m b e r s a r e Independent Directors. A balanced composit ion of Independent Directors enables an effective and objective check and balance on the Board’s deliberation and decision making. The presence of the Independent Directors are also crucial in the mitigation of any possible conflicts of interests in relation to related party transactions.

The Board consists of members who have the mix of ski l ls , knowledge , exper ience and capabilities which are relevant to enable the Board to carry out its responsibilities in an effective and competent manner.

The profile of each Director is presented in the Board of Directors’ Profile on pages 34 to 41 of the Annual Report.

Separation of Powers between Chairman and Managing Director/Chief Executive Officer

There is a clear demarcation of responsibilities within the Company to ensure a balance of power and author i ty . The pos i t ions o f Chairman and Managing Director/Chief Executive Officer (MD/CEO)are separately held. The Chairman is primarily responsible for smooth functioning of the Board and ensuring that all Directors have full and timely access to all relevant information, which is necessary for informed decision making. The MD/CEO ove r sees the implementation of Board policies, the day to day running of the business and operational decision making and ensures the Group strengthened its sustainability governance of its businesses and p r o m o t e s a w a r e n e s s o n environmental and social aspects.

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 distinct and separate roles of the Chairman and the MD/CEO ensures a balance of power and authority , such that no one individual has unfettered powers of decision making.

pg 95

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During the financial year under review, Datuk Anuar bin Ahmad, vacated his position as Chairman and Board member o f the Company effective 15 May 2014. Datuk Anuar is succeeded by Datuk Manharlal Ratilal, whose profile is available on page 34 of the Annual Report.

Non-Executive Directors

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- te rm in te res t s o f 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 rat ional ise the initiatives and priorities towards developing value proposition 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 a m o n g M a n a g e m e n t a n d 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 in any conflict of duties or conflict of interests declares his interests and refrains himself from participating in the discussions of such Board papers.

B. Independence

The presence of the Independent Non-Execut i ve D i rec to rs i s essential in providing unbiased and independent views, advice and judgment, as well as in safeguarding the interests of other stakeholders including minority shareholders of the Company. All Independent Directors have met the criteria of independence as set out in in Paragraph 1.01 of the MMLR which amongst o thers , s ta te tha t Independent Directors must be independent from Management and free from any business relationship which could interfere with the exercise of his/her independent judgment.

All Independent Directors are required to submit a Statement of Independence on an annual basis as a conf i rmat ion o f the i r independence. In addition, the assessment of independence is also included as part of the annual Board evaluation.

Senior Independent Non-Executive Director

Dato’ N. Sadasivan N.N. Pillay continues to play an active role a s a S e n i o r I n d e p e n d e n t Non-Executive Director to whom any concerns pertaining to the Company may be conveyed.

Dato’ N. Sadasivan has served as Senior Independent Director of the Company for 19 years. At the 31st Annual General Meeting (AGM) of PGB held on 5 May 2014, the shareholders have approved the re-appointment of Dato ’ N. Sadasivan.

The Board believes that there are notable benefits to be acquired from long serving Directors who possess insightful knowledge of the Company’s businesses and proceedings.

Following an assessment by the Nomination and Remuneration (NomRem) Committee and further concurred by the Board in February 2015, the Board has agreed for Dato’ N. Sadasivan to continue to serve as an Independent Director based on the following justifications:

a) The appointment meets the requirements under Paragraph 1.01 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 judgment, to the Board.

d) He exhibited high commitment and devoted sufficient time a n d a t t e n t i o n t o h i s responsibilities as Independent Non-Executive Directors of the Company.

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

f) He has also met with the attendance requirements for Board meetings pursuant to the MMLR. During the financial year under review, Dato’ N. Sadasivan attended eight out of nine Board meetings. This testifies his dedication in discharging the responsibilities expected of an Independent Director.

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C. Diversity

The current Board composition comprises of individuals of diverse backgrounds with expertise and skills in oil and gas industry, engineering, finance, business and accounting. The current overall Board compos i t ion has the adequate size and diversity of age, gender and ethnicity. These are important to ensure diversity of view, facilitate effective decision making and constructive board deliberation during its meeting.

D. Time Commitment

In compliance to Paragraph 15.06 of the MMLR, each member of the Board does not hold more than five directorships in public listed companies.

The Directors are required to notify the Chairman before accepting any new directorships to ensure that such appointments would not affect their time commitments and responsibilities to the Board.

E. 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 office shall retire and, if eligible, may offer themselves for re-election. In accordance with the Company’s Articles of Association, at the 31st AGM held on 5 May 2014, 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 office only until the next following AGM of the Company and shall then be eligible for re-election. At the 31st AGM held

on 5 May 2014, two Directors retired and 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 forthcoming AGM to be held on 30 April 2015, the Company intends to seek its shareholders’ approval on re-appointment of a Director exceeding 70 years of age.

The Director 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 financial performance and accountability of the Company.

BOARD STRUCTURES AND PROCEDURES

A. Board Meetings

Board meetings are scheduled in advance before the beginning of the new financial year to enable the Directors to plan ahead their schedules to fit the series of meeting during the year. Board meetings are held at minimum of quarterly intervals with additional meet ings , inc lud ing spec ia l meetings, held whenever necessary. There were nine meetings during the financial year under review, consisting of scheduled and special meetings. Al l Directors have complied with the minimum attendance requirement of at least 50% of Board Meetings pursuant to the MMLR. The details of the attendance of the Directors for the financial year under review are as follows:

Table 1: Attendance Record

Name of Directors Attendance Percentage

Datuk Manharlal Ratilal* 5/5 100%

Yusa’ bin Hassan 9/9 100%

Dato’ N. Sadasivan N.N. Pillay 8/9 89%

Datuk Rosli bin Boni 9/9 100%

Dato’ Ab. Halim bin Mohyiddin 9/9 100%

Ir. Pramod Kumar Karunakaran 9/9 100%

Lim Beng Choon 8/9 89%

Habibah binti Abdul 9/9 100%

Datuk Anuar bin Ahmad** 4/4 100%

* Appointed on 15 May 2014**Vacated office on 15 May 2014

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B. Supply of and Access to Information

In discharging their duties with reasonable care, skill and diligence, the Directors will be accorded with sufficient 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 D i r e c t o r s t o h a v e a g o o d assessment of the subject in hand prior to arriving at any decision.

The MD/CEO leads the presentation of 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 in Malaysia. Minutes of the Board meetings which record decisions and resolutions are properly maintained by the Company Secretary.

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

The Board, as well as the individual Directors, are entitled to seek independent professional advice from technical, financial and legal a d v i s e r s to a s s i s t t h em in discharging their responsibilities as Directors on matters relating to the Company.

The Directors have access to the adv ice and serv ices of the Company Secretar ies, whose appointments and resignations are subject to Board’s approval. The Chairman is always accorded strong and positive support of the Company Secretaries in ensuring the effective functioning of the Board.

The Company Secretaries attended all Board Meetings and have ensured that accurate and adequate records of the proceedings of the Board meetings and decision made are properly kept. The Company Secretaries also ensure that the Board members receive briefings 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 direct ion and control of the Company. Such matters, outlined in the Company’s L imi t s o f Author i ty , c lear ly established the authority of the Board and the Management.

C. Board Committees

Based on the provision under the Articles of Association of the Company, the Board has set up spec i f i c Board Commi t tees delegated with specific powers, functions and responsibilities.

The Board has established two committees to ass ist in the execution of its responsibilities as detailed below:

BOARD OF DIRECTORS

BOARD AUDIT COMMITTEE

NOMINATION AND

REMUNERATION COMMITTEE

Each of the committee is governed under specific Terms of Reference detailing its delegated authority from the Board.

Board Audit Committee (BAC)

The BAC comprising mainly the Independent Non-Execut i ve Directors has specific Terms of Reference including the review of quarterly results, f inancial s t a t e m e n t s , c o r p o r a t e announcements, internal control system and the reports of the Group Internal Audit Division of PETRONAS. It also ensures the adequacy, integrity and effectiveness of the Company’s internal control s y s t e m a n d m a n a g e m e n t information system and that they are in compl iance with the Company’s policies and procedures, applicable laws and regulations and MMLR. The BAC monitors the ef fect ive implementat ion 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 ident i f ied and mon i to red and appropr i a te measures are undertaken to

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manage these risks. The BAC Terms of Reference and the BAC Report are detailed out in pages 130 to 131 and 124 to 127 respectively in the Annual Report. Nomination and Remuneration Committee (NomRem)

The NomRem Committee of the Company was established on 14 November 2011 and comprises three Independent Non-Executive Directors. In line with the MCCG 2012, all NomRem Committee members including the Chairman are Non-Executive Directors. The m e m b e r s o f t h e N o m R e m Committee are appointed by the Board from amongst themselves.

A report on the membership of the NomRem Committee, i ts Terms of Reference and its duties, responsibil it ies as well as its activit ies are detai led out in pages 107 to 110 and 111 to 112 respectively in the Annual Report.

Management Committee (MC)

The MC is chaired by the MD/CEO, who is responsible for the day to day operations of PGB and is also accountable to the Board. The membership of the MC comprises of the Heads of Divisions within the Company.

The MD/CEO is further assisted in the implementation of projects and the operations of the Company with the establishment of various other committees such as the People Development Committee, Risk Compliance Committee, Commercial Steering Committee and Project Steering Committee.

BOARD DEVELOPMENT AND PROGRESSION

A. Training of Directors

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.

All Directors have attended the necessary training as required by the MMLR, as detailed out on pages 104 to 105 of the Annual Report.

Any new Director is given a comprehensive understanding of the operations of the Company through an introductory briefing on the Company history and f inancial control systems. In addition to this, plant visits are arranged to ensure first-hand understanding of the Group’s operation.

INTEGRITY AND ETHICS

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, the Whistleblowing Policy and the Anti-Bribery and Corruption Manual. The adoption of such policies are so as to ensure that the conduct of business and the Company’s employees are consistently carried out ethically and with integrity.

1. Code of Conduct and Business Ethics

The Code of Conduct and Business Ethics (CoBE) emphasises and advances the p r inc ip les o f discipline, good conduct, loyalty, integrity, professionalism and cohes iveness . The CoBE i s accompanied by the CoBE Guide which sets out the Frequently Asked Questions to assist in the application of the CoBE.

A copy of the CoBE is available on the Company’s corporate website for viewing by the public and any third parties dealing with the Company.

2. Whistleblowing Policy

I n l i n e w i t h i t s o n - g o i n g commitment to transparency and integrity, the Company has also adopted PETRONAS’ Whistleblowing Policy to provide an avenue for all employees of the Company to d i s c l o s e a n y i m p r o p e r o r unprofessional conduct at the workplace.

T h e p o l i c i e s u n d e r t h e Whistleblowing Policy maintain the confidentiality of the whistleblower, to the extent which is reasonably p r a c t i c a b l e , t o e n s u r e t h e protection of the whistleblower from any adverse reactions in his course of disclosing any improper conduct committed or about to be committed within the Company. Any report submitted under the Whistleblowing Policy shall be s u b j e c t e d t o a t h o r o u g h invest igation to determine a reasonable course of action.

A copy of the Whistleblowing P o l i c y i s a v a i l a b l e o n t h e Company’s corporate website for viewing by the public and any third parties dealing with the Company.

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3. Anti Bribery and Corruption Manual

In compliance with the CoBE, the Company has adopted the PETRONAS Ant i Br ibery and Corruption Manual which governs the prevention of corruption and unethical practices within the Group.

The Company has also adopted and implemented the ‘No Gift Policy’ as a means to avoid any conflict of interest situations for either party or potential business dealings between the Company and third parties.

4. Corporate Disclosure Guide

The Company has established an internal Corporate Disclosure Guide to facilitate the disclosure and conduct on the dissemination of information. This Guide is based on the requirements as set out in the MMLR, the Corporate Disclosure Guidelines [2nd Edition] by Bursa Malaysia and promotes transparency a n d a c c o u n t a b i l i t y i n t h e dissemination of material information amongst the Company organisation and public. A detailed guide is available at www.petronasgas.com

ENGAGEMENT WITH SHAREHOLDERS AND STAKEHOLDERS

T he Company recognises the importance of timely, fair and equal d isseminat ion of information to shareholders and public generally. In this regard, it adheres strictly to the disclosure requirements of Bursa Malaysia. Besides the announcement v i a B u r s a L I N K , t h e C o m p a n y communicates regularly with the shareholders through the annual report and the quarterly financial reports.

I n p r o v i d i n g s t a k e h o l d e r s t h e opportunity to gain first-hand exposure on the Company’s operations, several visits to Gas Processing Plants and Centralised Utility Facilities located in Kertih and Santong, Terengganu, Pahang, as well as the Segamat Operat ions Centre, Johor, were organised during the year under review.

The s takeholders were g iven a presentat ion on the Company’s operations and were provided the opportunity to ask for more information in respect of the plant operations. The Management be l i eves tha t the stakeholders by having a better understanding of the Company’s a c t i v i t i e s , w i l l h a v e a g r e a t e r understanding about the Company. S u c h t w o - w a y c o m m u n i c a t i o n increases corporate transparency and helps the stakeholders take a longer term view of their investment based on a better understanding of the Company’s corporate strategy and operations.

1. Disclosures

The Board recognises the need to fully disclose to shareholders all major developments in relation to the Group on a timely basis. In add i t ion 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 pub l i c pa r t i cu la r l y the shareholders, investors and analysts to have access to information such as corporate profile, policies and guidelines contact details o f des ignated persons and announcements made to Bursa Malaysia.

In all circumstances, the Company preserves confidentiality 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.

2. Annual General Meeting (AGM)

The AGM is a crucial mechanism in shareholders communication. This is the platform for dialogue during which shareholders and investors are informed of the financial performance and current developments of the Group.

Shareholders are notified of the meeting and provided with a copy of the Company’s Annual Report 21 days before the meeting. Shareholders are encouraged to attend the AGM and participate in the proceedings.

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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 resolutions. 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 as well as the Senior Management and Project Management team are available to respond to a l l quer ies and undertake to provide sufficient clarification on issues and concerns raised by the shareholders. The external auditors are also present to provide their professional and independent clarification on issues and concerns ra ised by the shareholders. The status of all resolutions proposed at the AGM is submitted to the Bursa Malaysia at the end of the market day on the AGM day.

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 i s a c c o m p a n i e d b y a f u l l 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 Statement of Directors’ Responsibility is enclosed in page 185 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 113 to 122 of the Annual Report.

3. Related Party Transactions (RPTs), Recurrent Related Party Transact ions (RRPTs) and Conflict of Interests (COI)

a) Compliance Monitoring

The Company’s corporate structure and integrated business operations amongst c o m p a n i e s w i t h i n t h e PETRONAS Group makes it susceptible to certain RPT/RRPT situations. The Company is responsible to ensure that all transactions entered into that involve related parties comply with al l relevant r e g u l a t i o n s a n d a r e appropriately evaluated based on fairness, reasonableness and consistency.

b) Policies

The Board has adopted the RPT Policies & Procedures (P&P) to ensure that a l l transactions that involve RPT or COI are determined on a fair, reasonable and consistent basis.

The RPT P&P was developed t o e n s u r e c o m p l i a n c e throughout the Group with any re levant regulat ions pertaining to RPTs and to ensure that all RPTs entered into by the Group are subject to adequate and effective monitoring and documentation processes.

The Company monitors the report ing thresholds and percentage ratios of all RPT/RRPTs of the Group. For transactions that exceed the reporting threshold, or when an announcement is required u n d e r t h e M M L R , t h e Company makes prompt and complete announcements to Bursa Ma lays i a . The Company adheres to relevant requirements as prescribed under the MMLR in the reporting of its transactions.

c) Bursa Malaysia Securit ies

Berhad Waiver

The Company may apply to Bursa Malaysia for specific waivers on certain RPTs/RRPTs that may be entered into by the Group with the related parties from complying with certain paragraphs of the MMLR. The waiver is normally very specific in nature and the Group must strictly comply with the terms and conditions stated in the approval letter of Bursa Malaysia if such waiver was granted by Bursa Malaysia.

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d) Disclosure of Interests

The Directors complete the annual declaration forms, for the purposes of identifying potential relationships and/or COI situations. The interested Directors must also declare in writing on an annual basis, if there are any RPT or COI s ituat ions involving their interest, either directly or indirectly.

The interested Director must abstain from participating in all Board deliberation and voting involving the RPTs/RRPTs at all relevant Board meetings. The in te res ted D i rector and interested major shareholder must ensure that persons connected with them with any interest, direct or indirect, shall abstain from participating in all de l ibera t ion and vot ing involving the RPT/RRPT at the relevant general meetings.

e) Board Aud i t Commit tee Review and Endorsement

The BAC reviews all RPTs/R R P T s t o e n s u r e t h a t Management has established a comprehensive framework for the purposes of identifying, m o n i t o r i n g , e v a l u a t i n g , reporting and approving RPTs/RRPTs. In reviewing the RPTs/RRPTs, the BAC shall consider factors it deems appropriate, including but not limited to the following:

i) The benef i t s o f the t r a n s a c t i o n s t o t h e Group;

ii) The arm’s length basis m a i n t a i n e d d u r i n g n e g o t i a t i o n s a n d t h e c o m m e r c i a l reasonableness of the terms of the transactions;

iii) The materiality of the R P T s / R R P T s t o t h e Group;

iv) Justification as to why the transaction must be undertaken with the related party, for example that the goods/services sourced from the related party cannot be obtained elsewhere;

v) The extent of the related party’s interest in the RPT/RRPT;

vi) T h e i m p a c t o f t h e t r a n s a c t i o n o n a n employee’s or director’s independence;

vii) The actual or apparent COI of the related party’s participating in the RPT/RRPT; and

viii) Any other matters the BAC deems appropriate.

f) Process Flow

The process flow in the P&P is a guide to assist in the identification of RPTs/RRPTs and the administration of such transactions. The process flow is broken down into three sections:

i) Verification Stage

The in i t i a l s tage to ident i fy whether the transaction is RPT/RRPT;

ii) Review/Approval Stage

The administration stage where the transaction is reviewed/endorsed by its various stakeholders/relevant departments prior to approval/execution f r o m t h e r e l e v a n t personnel/authority based on the Group’s Limits of Authority; and

iii) Monitoring Stage

The post-execution stage where the transaction is to be moni tored to ensure compliance with the MMLR and filed with its relevant custodian.

4. Relationship with the Auditors

a) External Auditors

The external auditors, Messrs KPMG, have continued to report to members of the Company on their opinions which are included as part of the Company’s f inancia l reports with respect to their audit on each year’s statutory financial statements. In so doing, the Company has established a transparent arrangement with the auditors t o m e e t t h e a u d i t o r s ’ professional requirements. From t ime to t ime, the auditors highlight to the BAC and the Board, matters that require the Board’s attention. The external auditor has had separate sessions with BAC without the presence of the Management to highlight any c o n c e r n s w i t h i n t h e Company’s system of internal control and compliance.

The Report by the BAC on the review of audit reports is enclosed in pages 124 and 127 of the Annual Report.

The Board cont inuous ly reviews and monitors the suitability and independence of its external auditors. The BAC also obtains assurance from the external auditors on t h e i r i n d e p e n d e n c e i n discharging their duties.

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b) Internal Auditors

The Company ’s In terna l Auditors, of which the function is undertaken by the Group Internal Audit Deportment (GIAD) of PETRONAS reports directly to the BAC and has unrestricted access to the BAC.

T h e G I A D f u n c t i o n i s independent of the activities o r o p e r a t i o n s o f o t h e r operating units. The GIAD conducts regular audits on the effectiveness of internal controls, compliance with i n t e r n a l a n d r e g u l a t o r y requi rements . The audi t report which highlights any f indings, a long with the recommendations are tabled to the BAC.

This statement is made in accordance with the resolution of the Board of Directors dated 17 February 2015.

Datuk Manharlal RatilalChairman

Yusa’ bin HassanManaging Director/Chief Executive Officer

ADDITIONAL COMPLIANCE INFORMATION

1. Non-Audit fees

The amount of non-audit fees paid and payable to the external auditors by the Company for the financial year ended 31 December 2014 was RM15,000.

2. Sanctions

During the period, there were no sanctions and/or penalties imposed o n t h e C o m p a n y a n d i t s s u b s i d i a r i e s , D i r e c t o r s o r Management by the relevant regulatory bodies.

3. Material Contracts

During the financial year, the following material contracts were entered into by the Company or its subsidiaries involving Major Shareholders’ interest:

(a) Gas Processing Agreement, Gas Transportation Agreements and Agent Services Agreement

The Gas Processing Agreement, Gas Transportation Agreements and Agent Services Agreement were entered into on 31 March 2014 between the Company and its substantial shareholder, Petroliam Nasional Berhad (PETRONAS), for the provision of services for the processing, transportation and distribution of gas via the Peninsular Gas Utilisation pipeline system for p r o c e s s i n g a n d g a s transportation fee that covers reasonable capital costs and operating expenses, for a period of 20 years.

(b) P r o j e c t M a n a g e m e n t C o n s u l t a n c y S e r v i c e s Agreement for the Engineering, Procurement, Construction & C o m m i s s i o n i n g o f t h e R e g a s i f i c a t i o n T e r m i n a l P ro jec t Loca ted a t the P e n g e r a n g D e e p W a t e r Terminal, Johor

The Project Management C o n s u l t a n c y S e r v i c e s Agreement for the Engineering, Procurement, Construction & C o m m i s s i o n i n g o f t h e R e g a s i f i c a t i o n T e r m i n a l P r o j e c t l o c a t e d a t t h e P e n g e r a n g D e e p W a t e r Terminal, Johor (RGTP) was entered into on 14 November 2014 between the Company and a subs id ia ry o f i t s subs tant i a l sha reho lder , PETRONAS Technical Services Sdn Bhd, for the provision of consultancy services for the RGTP during the project phase based on reimbursable basis at non-escalating fixed unit rate for the RGTP project.

Other than the above, the R e g a s i f i c a t i o n S e r v i c e s Agreement is a mater ia l contract which was entered into since 2013 between the Company and its substantial shareholder, PETRONAS, for the provision of regasification services at the l iquef ied natural gas Regasification Terminal in Sungai Udang, Melaka, for a period of 20 years.

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LIST OF TRAINING PROGRAMMES ATTENDED BY DIRECTORS OF PGB IN 2014

No. Director Training Attended

1. Datuk Manharlal Ratilal • MISC Directors’ Training (October 2014)

• Customised Advocacy Session for Directors (27 November 2014)

2. Yusa’ bin Hassan • Pulse of Asia Conference, organised by DBS Vickers, Singapore (8 January 2014).

• 5th Annual dbAccess Asia Conference, Singapore (19 – 23 May 2014)

• Malaysian Code for Institutional Investors (27 June 2014)

• Innovating Malaysia Conference 2014 (28 – 29 August 2014)

• Customised Advocacy Session for Directors (27 November 2014)

3. Dato’ N. Sadasivan N.N. Pillay • 2014 Audit Committee Conference ‘Stepping Up for Better Governance’ (20 March 2014)

• Directors’ Training on Board Dynamics and Governance (25 August 2014)

• Directors’ Breakfast Series: ‘Great Companies Deserve Great Boards’ (10 October 2014)

• Audit Committee Institute – Breakfast Roundtable Titled: ‘The Impact of Cyber Security at Board Levels’ (12 November 2014)

• Customised Advocacy Session for Directors (27 November 2014)

4. Dato’ Ab. Halim bin Mohyiddin • MFRS/FRS Update 2013/2014 Seminar (18 March 2014)

• Workshop on Network, Spectrum and Branding (15 May 2014)

• Risk Management and Internal Control (5 June 2014)

• The Role of Chairman Programme (23 June 2014)

• Project Orient Workshop (15 August 2014)

• Directors’ Training on Board Dynamics and Governance (25 August 2014)

• Budget 2015 Review and Transfer Pricing (30 October 2014)

• Customised Advocacy Session for Directors (27 November 2014)

5. Datuk Rosli bin Boni • Directors’ Training on Board Dynamics and Governance (25 August 2014)

• Customised Advocacy Session for Directors (27 November 2014)

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No. Director Training Attended

6. Lim Beng Choon • MIA Audit Committee Conference Stepping Up for Better Guidance (20 March 2014)

• GST – Goods & Service Tax (30 May 2014)

• Valuing Intellectual Property (23 September 2014)

• Great Companies Deserve Great Boards (10 October 2014)

• MISC Annual Directors Training (15 October 2014)

• Directors’ Training on Board Dynamics and Governance (25 August 2014)

• Customised Advocacy Session for Directors (27 November 2014)

7. Ir. Pramod Kumar Karunakaran • Bursa Malaysia Securities Berhad: Advocacy Sessions on Corporate Disclosure for Directors of Listed Issuers (2 July 2014)

• PETRONAS Directors’ Training for Calendar Year 2014 – In House Continuing Directors’ Training Programme (25 August 2014)

8. Habibah binti Abdul • Directors’ Training on Board Dynamics and Governance (25 August 2014)

• Customised Advocacy Session for Directors (27 November 2014)

• GST briefing by KPMG (27 February 2014)

• Briefing Session on Corporate Governance Guide by Bursa Malaysia Securities Berhad (25 March 2014)

• TalentCorp/ICAEW Women in Leadership Workshop (17 April 2014)

• Risk Posture Workshop for CIMB Directors (24 July 2014)

• Board Dynamics and Governance organised by PETRONAS (25 August 2014)

• Global Islamic Finance Forum by Bank Negara Malaysia (2 September 2014)

• GST Awareness training for CIMB Directors by Ernst & Young (8 September 2014)

• 12th Women’s Summit (15 September 2014)

• Customised Advocacy session for PETRONAS Directors by Bursa Malaysia Securities Berhad (14 October 2014)

• Tax Seminar 2015 Tax Budget organised by Ernst & Young (17 October 2014)

• AMLA training for CIMB Directors (12 December 2014)

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The implementation of the CoBE is part of the Group’s corporate enhancement programme and reflects the importance of an effective corporate governance and compliance culture within the Group.

The CoBE is accompanied by a CoBE Guide that sets out frequently asked questions and the ‘Dos’ & ‘Don’ts’ in relation to certain specific situations. The CoBE Guide is printed in booklets and distributed to all employees.

As part of the extension of CoBE, PGB is in the midst of implementing Corporate Integrity System (CIS) for its employees and contractors. This is part of the PGB commitment to uphold the Anti-Corruption Principles. Amongst the objective of the CIS are as follows:

i) To promote integrity, accountability and proper management of anti-corruption programs, for adoption by PGB; and

ii) To reinforce corporate governance, in tegr i t y , t r ansparency and accountability in the daily operational processes and procedures of PGB.

PETRONAS Gas Berhad (PGB or the Company) and its subsidiaries (Group) are committed to a high level of accountability, transparency and maintaining an ethical, law-abiding culture that provides enormous benefit to the Group.

The Board of Directors of PGB had on 30 April 2012 adopted PETRONAS Code of Conduct and Business Ethics (CoBE). The CoBE serves as a guide to be applied by every employee and director of each PETRONAS companies worldwide. PETRONAS encourages joint ventures and associate of the Group to also adopt these or similar principles and standards.

The CoBE places significant importance in upholding loyalty and cohesiveness, all of which form the foundation for the success of the Company. The CoBE contains a detailed policy on the standards of conduct expected from each employee as well as the Directors of the Company. The Company also enforces the CoBE on all its contractors, sub-contractors, agents, consultants, representatives and any other persons performing works or services for and on behalf of the Company. In short, the CoBE expressly prohibits improper solicitation, bribery and other corrupt activity not only by employees and Directors but also by third parties performing work or services for or on behal f of companies in the PETRONAS Group.

Approximately 100 PGB contractors representing 39 companies have undertaken a verbal Corporate Integrity Pledge (CIP) during the PGB Contractors Forum in October 2014. The awareness session on the CIS to the PGB contractors was initiated in 2012 during sharing session of Integrity Framework.

A copy of the CoBE is available on the Company’s corporate website, for viewing by the public and any third parties dealing with the PGB.

pg 106PETRONAS GAS BERHAD (101671-H)

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CODE OF CONDUCT AND BUSINESS ETHICS

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COMPOSITION

As at 31 December 2014, the NomRem Committee comprises three Independent Non-Executive Directors. In line with the Malaysian Code on Corporate Governance 2012 (MCCG 2012), all NomRem Committee members including the Chairman are Non-Executive Directors.

The NomRem Committee is chaired by an Independent Director, Mr Lim Beng Choon. Whilst the MMLR 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 Mr 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 as at 31 December 2014 are:-

No. Name of Members Directorate

1. Lim Beng Choon(Chairman)

IndependentNon-Executive Director

2. Dato’ N. Sadasivan N.N. Pillay Senior IndependentNon-Executive Director

3. Habibah binti Abdul IndependentNon-Executive Director

In compliance with Paragraph 15.08A of the Main Market Listing Requirement of Bursa Malaysia Securities Berhad (MMLR), the Nomination and Remuneration (NomRem) Committee of PETRONAS Gas Berhad (PGB or the Company) was established on 14 November 2011. The NomRem Committee is pleased to present the NomRem Committee Report for the financial year ended 31 December 2014.

Lim Beng Choon Dato’ N. Sadasivan N.N. Pillay Habibah binti Abdul

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The Managing Director/Chief Executive Officer (MD/CEO), Company Secretaries, Head of Human Resources and any other persons deemed necessary by the NomRem Committee are invited to attend and are present for deliberations which require their input or advice. The Company Secretaries and the Head of Human Resources act as jo in t secretaries to the NomRem Committee.

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 specifies a later time for the effectiveness of such resignation). The Board will elect a successor to take off ice once the resignation becomes effective.

The 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.

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 appropr iate 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 c o m p o s i t i o n a n d m a k e r e c o m m e n d a t i o n s f o r a n y adjustments thereto.

(c) Develop membership qualifications for the Board, including defining specif ic cr i ter ia for Director independence and committee membership.

d) Review annually the Board’s mix of ski l ls , education, experience, diversity in terms of gender, ethnicity and age and other q u a l i t i e s i n c l u d i n g c o r e competencies which Directors should bring to the Board, taking into account the current and future needs of the Company.

e) Review and recommend any change to the remuneration structure and policy for Directors and Senior Management, as necessary.

TERMS OF REFERENCE

T he NomRem Commit tee i s governed by the Terms of Reference as stipulated on pages 111 to 112 of the Annual Report.

MEETINGS AND ACTIVITIES

T he NomRem Committee wil l deliberate on the above matters during meetings which shall be held at least twice a year or at such other times as the Cha i rman of the NomRem Committee deems necessary. In addition to the schedule of regular meetings established by the NomRem Committee, the Cha i rman 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 financial year under review, the NomRem Committee met twice and the attendance of the members are as follows:-

Name of Members No. of meetings attended

Lim Beng Choon (Chairman) 2/2

Dato’ N. Sadasivan N.N. Pillay 2/2

Habibah binti Abdul 2/2

On the appointment process of Board Members, all nominees to the Board are considered by the NomRem Committee. The NomRem Committee’s role in the appointment process is to undertake an assessment of the potential nominees’ and to initiate the selection process for the Board.

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NOMINATION AND REMUNERATION COMMITTEE REPORT

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SUMMARY OF ACTIVITIES OF THE NOMREM COMMITTEE

The following activities were carried out by the NomRem Committee during the financial year ended 31 December 2014:-

(a) Assessment on the effectiveness of the Board as a whole , the Committees of the Board as well as the contr ibut ion of each individual Director through a Board Ef fect iveness and Directors ’ Evaluation exercise.

(b) Review of the succession planning o f the sen io r management positions of PGB as well as the E m p l o y e e P e r f o r m a n c e Management System and the evaluation of the performance of PGB’s Senior Management.

(c) Review of Directors’ Training Requirements.

(d) Review of the status of PGB’s compliance and gaps with respect to the recommendations as set out in the MCCG 2012.

(e) R e v i e w o f t h e P G B B o a r d Evaluation Questionnaires.

BOARD EVALUATION

Every year, under the purview of the NomRem Commit tee , a fo rma l evaluation is undertaken to assess the effectiveness of the following:-

(a) The Board as a whole and the various Board Committees.

(b) Contribution of each Individual Director.

(c) Independence of Independent Directors.

This is conducted through a Board Evaluation process which consists of a Board and Peer Annual Assessment (Board Evaluation). The Board Evaluation focuses on maximising the effectiveness and performance of the Board in the best interest of the Company.

DIRECTORS’ FEES

W ith 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 financial year under review, the Directors’ Fees paid are as follows:

Table: Details of Directors’ Fees

Directors’ NameDirectors’ Fees

(RM)

Board Meeting Attendance

Fees(RM)

Board Audit Committee

Meeting Attendance

Fees(RM)

NomRem Meeting

Attendance Fees(RM)

Total(RM)

Datuk Manharlal Ratilal(Chairman)(Appointed on 15 May 2014) Nil Nil Nil Nil Nil

Yusa’ bin Hassan Nil Nil Nil Nil Nil

Dato’ N. Sadasivan N.N. Pillay 72,000 24,000 24,000 4,000 124,000

Datuk Rosli bin Boni 72,000 27,000 16,000 Nil 115,000

Ir. Pramod Kumar Karunakaran Nil Nil Nil Nil Nil

Dato’ Ab. Halim bin Mohyiddin 72,000 27,000 16,000 Nil 115,000

Lim Beng Choon 72,000 24,000 Nil 6,000 102,000

Habibah binti Abdul 72,000 27,000 Nil 4,000 103,000

Datuk Anuar bin Ahmad (Chairman)(Resigned on 15 May 2014) 4,500 4,000 Nil Nil 8,500

Total 364,500 133,000 56,000 14,000 567,500

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Fees for certain Directors appointed by PETRONAS are pa id d i rect ly to PETRONAS as Board of Directors representation fees. During the year, the Company paid RM249,500 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 o f PETRONAS, i s seconded to the Company as an Executive Director. The MD/CEO, as well as the other Directors representing PETRONAS, possess a mix of skills, knowledge, expertise and experience, each contributing towards managing the various assets of the Company’s d iverse bus iness . 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 benefits ordinarily incurred by him in the course of his employment. During the year, the C o m p a n y p a i d R M 7 3 6 , 8 0 0 a s 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 Senior Management staff are also seconded from PETRONAS. Their training and succession planning are aligned to the PETRONAS’ Human Resources Division. The Board ensures that only appropriate personnel with the relevant skills and experience are appointed to Senior 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

T he 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 for the Board’s notation.

Lim Beng ChoonChairmanNomination and Remuneration Committee13 February 2015

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The Nomination and Remuneration Committee is to assist the Board in exercising its authority in relation to the matters set out in the Terms of Reference.

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

MEETING

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

The Chai rman 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 confirming 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 terms of office and performance of the NomRem Committee and each of its members shall be reviewed by the Board periodically to whether the NomRem Committee and/or i ts 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 specifies a later time for the effectiveness of such resignation). The Board will elect a successor to take office 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.

MEMBERSHIP

T he 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 o f 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.

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NOMINATION AND REMUNERATION COMMITTEE’S TERMS OF REFERENCE

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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; andv) the custody; production and

inspection of minutes.

AUTHORITY

T h e N o m R e m C o m m i t t e e i s authorised by the Board to investigate any act iv i ty within i ts Terms of Reference. It is authorised to seek any information it requires from any employees, company officers 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 sufficient 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 appropr iate under the circumstances to the extent permitted by applicable laws:

a) To assess D i rec tors 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 B o a r d s t r u c t u r e , s i z e a n d c o m p o s i t i o n a n d m a k e recommendations to the Board with regard to any adjustments which are deemed necessary;

c) T o d e v e l o p m e m b e r s h i p qualifications for the Board and all Board Committees, including defining specific 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 a n a p p r o p r i a t e b a l a n c e o f knowledge , exper ience 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 g o v e r n a n c e p o l i c i e s a n d procedures of the Company;

g) To monitor compliance with corporate governance standard;

h) To annually convene a meeting w i t h t h e C h a i r m a n o f a n y 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; and

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 also, amongs t o thers , e s tab l i sh and recommend the remuneration structure and policy for directors and review changes to the policy, as necessary.

REPORTING PROCEDURES

Draft minutes of each meeting shall be distributed to all members of the NomRem Committee. The minutes of the NomRem Committee Meeting shall be confirmed at the next meeting of the NomRem Committee and shall be available on request from the Company Secretary to all non-executive Directors. The confirmed 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.

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NOMINATION AND REMUNERATION COMMITTEE’S TERMS OF REFERENCE

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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

T he Board acknowledges the importance of a sound risk management system and internal control practices for good corporate governance with t h e o b j e c t i v e o f s a f e g u a r d i n g shareholders’ investments and the Group’s assets. The Board affirms its overall responsibility for the Group’s system of risk management and internal controls and has undertaken a review of the adequacy and effectiveness of those systems 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 or the occurrence of unforeseeable circumstances.

The Group has in place an ongoing process for identifying, evaluating, monitoring and managing all significant risks faced by the Group and its achievement of objectives and strategies for the year under review and up to the date of approval of this Statement on Risk Management and Internal Control for inclusion in the Annual Report. 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 firmly 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, evaluate and monitor the risks faced by the Group and to take specific measures to mitigate these risks.

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STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL

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Risk Management Framework Implementation

Enterprise Risk

The Group’s Enterprise Risk Management (ERM) adheres to PETRONAS Risk Governance Framework which adopts ISO 31000:2009 Risk Management requirements. Under the framework, there are four key requirements of ERM:

• Approval and communication of Risk Policy and Strategy,

• Establishment of Risk Organisation Structure,

• Utilisation of an appropriate Risk Measurement techniques, and

• Establishment of Risk Operation and System for managing, monitoring and reporting of Group’s Enterprise Risk Profile

Enterprise Risk Profiling and Assessment follows a structured process which ensures a comprehensive and consistent approach in assessing and analysing risks faced by the Group. Risks are reviewed annually with involvement from Management and Subject Matter Experts (SMEs) from divisions and departments across the Group. Prior to risk profiling and assessment activities, various inputs are analysed in setting the context of the assessment which include both internal and external factors that may impact the Group’s business and operations.

The Group’s annual risk profiling and assessment process is guided by its approved s t ra teg ies and p lans . Discussions are focused on risks which could potentially impede the Group from meeting its objectives. On a regular basis existing risk profiles namely project risks, plant & facilities risks and new business venture risks are reviewed to identify significant risks to be escalated to the Enterprise Risk

Profile. Other key discussions include recent Health, Safety, and Environment (HSE) or audit findings, operational issues as well as project issues.

From external context, any recent changes in regulatory/statutory requirements as well as shifts in industry outlook and landscape are also analysed as they may have direct or indirect impact to the Group’s operations.

Company Strategies & Plans

Current operational issue, recent HSE incidents, project issues

Operating Divisions

Plant and Facilities Risk

PGB 2015 Enterprise Risk Profile

Projects

Project Risk Business Ventures Risk

Growth/New businesstransactions

Management Review

Existing Enterprise Risk Profile

New Regulatory/Legal

RequirementsAudit

Findings

Context of PGB 2015 Enterprise Risk Profile is based on various inputs to reflect the latest environment and expectations.

Each risk is mapped based on a matrix which specifies its likelihood (how likely is the risk to happen) and its impact (how bad would it be if it did happen), analysing from both qualitative and quantitative perspectives. The matrix is a d o p t e d f r o m P E T R O N A S R i s k Governance Framework and adapted based on the Group’s risk appetite and tolerance level. Depending on risk treatment strategies adopted, mitigation plans are outlined to mitigate the risks to an acceptable level.

Key Risk Indicators (KRIs) are identified to facilitate monitoring of the risks which provide an early warning signal on potential emerging risks. Risk Owners, Risk Mitigation Owners and Risk Focal persons are assigned for each risk to ensure the risk mitigations d e v e l o p e d a r e a p p r o p r i a t e l y implemented, monitored and regularly reported.

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STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL

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The Planning and Risk Management Department (PRMD) is entrusted with responsibility of ensuring effective risk governance and implementation in the Group. PRMD provides regular updates on the Group’s ERM implementation to both the Group ’ s Management Committee (MC) and Board Audit Committee (BAC) in the form of quarterly Enterprise Risk Report (ERR). The report covers the risk profile and status of risk mitigation implementation, KRIs as well as risk management framework implementation and risk initiatives.

During the year under review, the Group’s Enterprise Risk Assessment has been aligned with its annual business planning cycle, with endorsement on the Group Enterprise Risk Profile (ERP) by the BAC coincided with the approval of the Group’s Plans and Budget. This ensures alignment between the Group’s risk mitigations and its approved initiatives under its strategies. In the last review, key issues and risks were deliberated at length focusing on the High and Medium risks in the Group. The rationale of the likelihood and impact rating assigned to the key risks

PGB Enterprise Risk Profiling adheres to a structured process which complies with PETRONAS Governance Framework.

Identify Risk Mitigations& Key Risk Indicators

Determine Risk Ownersand Mitigations Owners

Obtain Approval ofRisk Profile from

Management & BAC

Periodically Monitor &Report Mitigation ActionStatus to Management &

BAC

Identify Likelihood & Impact

Identify Risks &Existing Controls

Establish Internal &External Context

were also discussed against Management’s risk tolerance and appetite. Further mitigations were identified for the key risks, mainly in the areas of operational and HSE areas. These mitigations are in line with the Group’s focus in driving its business plans and strategies to achieve its aspirations as set out in pages 54 and 55.

The Company had also provided guidance to Kimanis Power Sdn Bhd (KPSB), one of its joint venture (JV) companies , on adopt ion of the C o m p a n y ’ s R i s k M a n a g e m e n t Framework and practices, where relevant. During the year under review, the Company facilitated an Enterprise Risk Assessment workshop for KPSB.

Risk assessments are also conducted on new business ventures. The Business Venture Risk Assessment Reports are i n c l u d e d a s p a r t o f b u s i n e s s development proposal presented to the Commercial Steering Committee (CSC) or relevant Project Steering Committees (PSC). The reports are also included in the Final Investment Decision (FID) proposals for Board’s approval.

During the year under review, the establishment of Risk and Compliance Committee (RCC) chaired by Managing Director/Chief Executive Office (MD/CEO) was endorsed by BAC. The main objective of the establishment of RCC was to enhance oversight on risk management and compliance in the Group. The Committee sits quarterly beginning January 2015. The function of Risk Management Unit under PRMD which undertakes the role of the Secretariat to the RCC, has also been expanded to oversee overall compliance in the Group.

Plant and Facilities Risk

The Group managed its operational risks via Plant and Facilit ies Risk Management (PFRM). Under PFRM, risks relevant to operations at the Divisions were assessed, monitored and reported to the respective Divisions Plant Leadership Team (PLT).

As per Enterprise Risk, the risks were rated based on its probability and impact to the Divisions’ operations. Appropriate mitigation plans are put in place for every critical risk.

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During the year under review, the Plant and Facilities risk review was conducted for both Gas Processing & Utilities (GPU), and Gas Transmission and Regasification (GTR). Subsequently, the risks were monitored with mitigation act ions tracked and periodical ly reported to the respective PLT at the Divisions.

The PLT is responsible in ensuring adequate and effective PFRM at the Divisions.

Project Risk

The Group continues to implement Project Risk Management processes in l ine with the PETRONAS Project M a n a g e m e n t S y s t e m ( P P M S ) requirements. The Group carries out Project Risk Assessments, Independent Reviews and Lessons Learnt for all its major and critical projects.

Project risk report which includes project status and areas of concerns are incorporated into the ERR and submitted to the MC and BAC on a quarterly basis.

The PSC chaired by MD/CEO meets on regular basis to deliberate on project progress, risk areas and their mitigations. Updates on project progress are also incorporated as an agenda deliberated in the monthly MC meetings and quarterly Board meetings.

Contractor Risk

Contractor risk is managed through tendering evaluation exercises facilitated by the Company’s Project Supply Chain Management (PSCM) Department, PETRONAS Group Technology & Engineer ing Div is ion (GTS) 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. Upon award of contract, the results of CoRA together with its mitigation plans are implemented and monitored by the relevant teams involved in the project.

Finance Risk

The Group has adopted PETRONAS Corporate Financial Policy (CFP) which sets forth the governing policy in effecting the practice of Financial Risk Management across the Group. The policy stipulates a consistent framework in which financial risk exposures are identified and strategies developed to mitigate such risks. The Group has established CFP supporting guidelines to manage its finance risk exposures that includes counterparty risk, liquidity risk, foreign exchange risk and interest rate risk.

During the year under review, the Group has adopted an enhanced version of CFP incorporating PETRONAS Integrated Financial Shared Service Centre ( IFSSC) guidelines. These guidelines align the Group’s practices with PETRONAS IFSSC to enable more efficient cash management.

Credit Risk

To reduce its credit risk exposure, the Group continues to apply the Credit Risk Management processes based on P E T R O N A S C r e d i t R i s k R a t i n g methodology 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 credit worthiness and assigns credit risk ratings to all of 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’ financials are also analysed to detect early signs of financial distress and to provide early warning to the Management. The Group used Credit Risk Tolerance Limit to minimise potential loss from credit exposure for utilities customers.

The credit risk report 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 and submitted to the Management and BAC.

The trade and non-trade receivables ageing are also deliberated by the Management Committee as well as Commercial Steering Committee on monthly and quarterly basis respectively.

THE GROUP HAS ADOPTED PETRONAS CORPORATE FINANCIAL POLICY (CFP) WHICH SETS FORTH THE GOVERNING POLICY IN EFFECTING THE PRACTICE OF FINANCIAL RISK MANAGEMENT ACROSS THE GROUP.

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STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL

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Contingency Planning & Business Continuity Management

The Group has in place Contingency Planning that defines the structure and processes for managing emergencies at operational and company level. 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. Business Continuity Plan (BCP) is also in place to ensure business continuity in the event of crises, or business disruptions. The BCP implementation is part of the Group’s Business Continuity Management set out in page 123.

The above Contingency and Business Continuity Plans should enhance the Group’s readiness in dealing with disruptive incidents, reduce its impact and ensure continuity of Group’s critical functions within a reasonable period of time. A sound business continuity plan is crucial towards sustaining the operational survival thus protecting business, stakeholders and customers during crisis or disaster.

During the year under review, two emergency exercises were successfully conducted to test the Company’s readiness in managing crisis. A Tier-3 emergency exercise was carried out at Tanjung Sulong Export Terminal (TSET) involving local authorities which simulated fire and explosion incident at TSET. The Company has also conducted a simulated exercise at its Head Office (HO) to test the continuity of its critical functions at its alternate worksite.

THE GROUP HAS ESTABLISHED A GOVERNANCE STRUCTURE IN MANAGING THE HSE RISK.

Health, Safety and Environment (HSE) Risk

The Group leverages on the PETRONAS HSE Management System (HSEMS) to manage HSE risks and ensure that operations are in compliance with the HSE regulatory requirements. The HSEMS process ensures that HSE risks within the business are managed effectively. In addition, the Group adopts PETRONAS HSE Mandatory Control Framework to strengthen the HSE governance within the Group through clear HSE requirements, effective and consistent implementation of HSEMS, and effective implementation of process safety and HSE assurance.

The Group has established a governance structure in managing the HSE risks, in tandem with the PETRONAS HSEMS and HSE Mandatory Control Framework. The governance structure includes the identification of HSE risks, HSE annual targets and plans, roles and responsibilities and appointment of HSE Management Representative to monitor and review HSEMS implementation.

The Group has established multiple p la t fo rms to conduct per iod ic management review on HSE related risks and events in addressing changes and development that are triggered f rom pas t inc idents and p lant modifications activities. The MD/CEO chairs the HSE Steering Committee which comprises members from the Management to discuss HSE matters concerning the Group on monthly basis. Similar HSE management committee meetings are held at the facilities, projects as well as at Division level which are chaired by respective management personnel at site. In addition, the Group’s HSE risks are registered under the Group’s Enterprise Risk Profile where closure of mitigation actions are reported as part of quarterly Enterprise Risk Reporting to the Management and BAC.

The Group has also put in place a series of assurance programmes to review and verify the effectiveness of the HSEMS and HSE risk mitigations. The HSE assurance programs adheres to the requirement of PETRONAS HSEMS, Mandatory Control Framework, PETRONAS Technical Standards, and international standards such as ISO 14001, OHSAS 18001 and MS 1722.

During the year under review, external audits which involved SIRIM surveillance audits for ISO 14001:2004, OHSAS 18001:2007 and MS 1722:2011, were conducted at Head Office, GTR, Utilities Kerteh (UK) and Utilities Gebeng (UG). SIRIM survei l lance audit for ISO 14001:2004 was also conducted at Gas Processing Kerteh (GPK), Gas Processing Santong (GPS) and TSET. Apart from external audits , the Group also per fo rmed va r ious HSE-re la ted assurance programmes and audits on its facilities, which include Pre-Activity Safety Review and Project Independent Review. The Group is committed to cont inue with i ts r igorous HSE assurance programmes in ensuring the e f f e c t i v e n e s s o f i t s H S E M S implementation.

Risk Initiatives

The Group continues to enhance risk management awareness and capability building across the Group through various sharing of information and application of best practices.

The Group benefits from being part of the PETRONAS Group, which has an established Board Governance and Risk Committee that primarily provides guidance and reviews strategies and p o l i c i e s , o n R i s k M a n a g e m e n t implementation.

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Moving Forward

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

INTERNAL AUDIT FUNCTION

T he 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 findings directly to the BAC.

The internal audit function includes undertaking reviews of the Group’s system of internal controls , i ts 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 including the agreed corrective actions to be undertaken by the auditees. GIAD monitors status of the agreed corrective actions through Quarterly Audit Report submitted by auditees which will be assessed and verified by GIAD. The consolidated status of the audit issues is submitted and presented to the BAC for deliberations 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 126.

OTHER SIGNIFICANT ELEMENTS OF INTERNAL CONTROL SYSTEM

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

Board

The Board meets at least once a quarter, in order to maintain its 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 all significant issues arising from changes in the business environment, which may result in significant 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 identified, the Board will consider the views and recommendations made by the BAC and Management.

Organisation Structure

An organisational structure which defines 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 30 of the Annual Report.

The Company has a Management Committee which serves as an advisory c a p a c i t y t o t h e M D / C E O i n accomplishing the vision, mission, strategies and objectives set for the Group. Additionally, PLT at GPU and GTR provide operational direction and manage operational issues at the respective Divisions.

Various functional committees have also been established across the Group to ensure the Group’s activities, major projects and operations are properly a l i gned towards ach iev ing the organisation’s 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 sufficiently guided in making business decisions. The Group undertakes a comprehensive annual planning and budgeting exercise which include the development of business strategies for a five-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. The Management is responsible to monitor major variances and take corrective actions, where necessary.

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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.

Full review of LOA is undertaken every five years and realignment of LOA is performed every time there is a change in the organisation structure.

System and Control

System and Control Unit of Finance D i v i s i o n c o n d u c t s s c h e d u l e d 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 the Company 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 MC highlighting findings and the agreed corrective actions. The status of the audit issues are monitored and reported to the MC on a quarterly basis.

During the year under review, two audits on management of Company’s vehicle and project accounting were undertaken, with an overall assessment of fair.

Tendering & Procurement

The Group has c lear ly def ined authorisation procedures and authority limits set for awarding tenders and all procurement transactions covering both capital and revenue expenditure items.

Tender Committee structure with defined level of responsibilities is in place to govern the tendering activities. Subsequent to the review by the relevant Tender Committees, the contracts will be subject to approval by the relevant approving authority who is i n d e p e n d e n t f r o m t h e T e n d e r Committee. Tenders are called for and are awarded based on factors such as capability, quality, HSE, performance track record, schedule and cost.

O p e r a t i n g P r o c e d u r e s a n d Guidelines

Internal control procedures are documented in standard operating procedure manuals with established guidelines on business planning, capital expenditure, f inancial operations, performance reporting, plant and transmission operations, supply chain management , human resource , information technology and health, safety and environment. The Operating Procedures and Guidelines are being reviewed on regular basis to ensure compliance to regulatory requirements and best practices.

Financial Control Framework

The Group has adopted PETRONAS Financial Control Framework (FCF) with the principal objective of enhancing the quality and integrity of the Group’s financial reports through a structured process of ensuring the adequacy and effectiveness of key internal controls operating at various levels within the Group 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.

During the year, the Group embarked on Governance, Risk and Compliance system focusing on Process Control which is a single solution for end-to-end control management including documentation, testing, monitoring and certification. The system function as central depository of internal control documentation for FCF for PETRONAS Group and Operating Units (OPUs).

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 confirmation of compliance to key controls for the areas of the business for which they are accountable. Subsequently, the MD/CEO and General Manager of Finance Division provides overall assurance to the Board on the adequacy and effectiveness of key internal controls of the Group.

THE GROUP HAS CLEARLY DEFINED AUTHORISATION PROCEDURES AND AUTHORITY LIMITS SET FOR AWARDING TENDERS AND ALL PROCUREMENT TRANSACTIONS.

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Information and Communication Technology

The Group leverages on Information and Communication Technology (ICT) as key enabler to enhance productivity and decision making process. Being part of PETRONAS Group, the Group adheres to PETRONAS Group ICT Policy and adopts PETRONAS Group ICT Strategy and roadmap. Internal ICT audit and system reviews are conducted periodically to ensure compliance against PETRONAS Group policies and procedures.

Related Party Transaction

The Group has a policy and procedure in place with regards to all related party transactions and conflict of interest situations, including recurrent related party transactions, to ensure that such commercial transactions entered into are conducted in a fair manner and are not detrimental to the Company’s minority shareholders.

The Corporate Governance Statement includes an overview of the Group’s policy and procedures on related party transactions as set out on pages 101 to 102 of this Annual Report.

Beginning FY2014, GIAD conducted quarterly review of the Group Related Par ty Transact ion and prov ides assurance to the BAC on the Group’s compliance to the Related Party Transaction Guidelines.

Employee Performance Management

In order to maintain the Group as a high performing organisation, the Group continues to strengthen and enhance its Employee Performance Management. The Group has established a systematic and wholesome assessment of staff’s performance against the set performance indicators which is reviewed on a half yearly basis. 

Accelerated Capability Development

The Group invests a lot of efforts in accelerating the capability of its staff.  The Group a l igns i ts capabi l i ty development efforts to the PETRONAS Accelerated Capability Development Framework for its technical staff, where their capabilities are continuously developed and periodically assessed.  Non-technical staff are appraised t h r o u g h a n a n n u a l F u n c t i o n a l Assessment.

During the year under review, the Group has established a new platform to deliberate staff capability matters through the Company Capabil ity Development Working Committee (CDWC). This platform is crucial to d iscuss on s ta f f capabi l i ty and intervention plans to close capability gaps for each Skill Group together with dedicated Discipline Resource Person (DRP).

Code of Conduct and Business Ethics

The Group subscribes to PETRONAS Code of Conduct and Business Ethics (CoBe) which sets the policy and standards of behaviour and ethical conduct expected of each individual not only by employees and Directors, but also by third parties performing work or services for or on behalf of companies in the PETRONAS Group. Benchmarked to internal standards, the CoBe together with PETRONAS’ shared values serve as the guide concerning how all staff are expected to conduct themselves in maintaining an ethical, law abiding culture in the Group.

Whistleblowing Policy

The Company recognises employees and members of the public’s right under Whistleblower Protection Act 2010 (the Act). Whistleblowing policy is a platform for employees and members of the public to report any improper conduct within PETRONAS (committed or about to be committed). It is the duty of every staff in the Company to report any misconduct, and the Company will protect employee who reports the misconduct.

Anti – Bribery and Corruption Policy

The Group has a zero tolerance policy against al l forms of bribery and corruption. The Group adopts the PETRONAS Ant i – Br ibery and Corruption Policy and Guidelines which provides guidance to employees concerning how to deal with improper solicitation, bribery and other corrupt activities and issues that may arise in the course of business.

PETRONAS Raid Protocol

The Company’s policies are aligned to the PETRONAS Raid Protocol in ensur ing appropr iate manner in hand l ing in te rac t ion w i th , and submission of information and data to the authorities in the event that raids are carried out in PETRONAS’s offices worldwide. It is an internal procedure in response to the powers of the authorities under relevant laws and various jurisdictions.

THE GROUP HAS A ZERO TOLERANCE POLICY AGAINST ALL FORMS OF BRIBERY AND CORRUPTION.

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Succession Planning

The Succession Planning process is aimed to enable the matching of the right talents to the right positions for breakthrough performance. The process starts with identification of Critical Position at Business and Corporate level. The Company invests heavi ly in developing the Succession Planning for the focused group of staff i.e. Technical and Non-Technical Managers as well as for Technical Professional Positions. This exercise is crucial in managing talents within PGB and from other Operating Units or Business Units. The Succession Planning information will then facilitate the Management in deliberating and charting staff’s career progression including mobility internally within the Company or across businesses within PETRONAS Group for wider exposure as well as capability gap closure through an identified development plan. During the year under review, the Company has established Succession Planning for the Company’s key critical positions at a ratio of 1.9:1.

PETRONAS Leadership Development

The Management recognises the importance of Leadership Development in ensuring the organisation has sufficient leaders in the future. The PETRONAS Leadership Diamond guides as an engagement driver for staff to better understand the Leadership Philosophy and Enhanced Interventions in Leadership Development. Communication is undertaken to update employees on the enhanced PETRONAS Leadership Philosophy, emphasising on Leadership Competencies and i ts identi f ied b e h a v i o u r s t o p r o m o t e b e t t e r internalisation.

Human Resource Policies and Procedures

The Group’s Human Resource (HR) policies are aligned to the PETRONAS policy and procedures on all areas of human resources. This is to ensure that the Group practices best in class HR policies and procedures especially with regards to Human Capital Development. Other HR areas which are wel l established in the Group include Job Management, Succession Planning and Leadership Development.

MANAGEMENT ROLE

The 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. On annual basis all Head of Divisions provide assurance on their respective Division’s risk management and internal control system. Accordingly, the MD/CEO and General Manager of Finance Division have provided assurance to the Board that the Group’s risk management and internal control system is operating adequately and effectively.

WEAKNESSES IN RISK MANAGEMENT AND INTERNAL CONTROL THAT RESULT IN MATERIAL LOSSES

T here were no material losses incurred during the year as a result of weaknesses in risk management and internal control. The Management cont inues to take measures to strengthen the control environment and monitor the risk management and internal control framework. Accordingly, the Board is satisfied that the Group’s risk management and internal control system is adequate and effective.

IMPLEMENTATION OF RISK MANAGEMENT AND INTERNAL CONTROL IN MATERIAL JOINT VENTURE (JV) COMPANIES

One of the Group’s material JV has just commenced operations in FY2014, hence implementation of the relevant risk management and internal control systems will be in place progressively.

REVIEW OF THIS STATEMENT

The external auditors have reviewed this Statement on Risk Management & Internal Control pursuant to the scope set out in Recommended Practice Guide (RPG) 5 (Revised), Guidance for Auditors on Engagements to Report on the Statement on Risk Management and Internal Control included in the Annual Report issued by the Malaysian Institute of Accountants (MIA) for inclusion in the Annual Report of the Group for the year ended 31 December 2014, and reported to the Board that nothing has come to their attention that causes them to believe that the statement intended to be included in the Annual Report of the Group, in all material aspects:

a) h a s n o t b e e n p r e p a r e d i n accordance with the disclosures required by paragraphs 41 and 42 o f t h e S t a t e m e n t o n R i s k Management and Internal Control: Guidelines for Directors of Listed Issuers, or

b) is factually inaccurate.

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RPG 5 (Revised) 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 Board of Directors and management thereon. The auditors are also not required to consider whether the processes described to deal with material internal control aspects of any significant problems disclosed in the Annual Report will, in fact, remedy the problems.

This Statement on Risk Management and Internal Control is made in accordance with the resolution of the Board dated 17 February 2015.

Datuk Manharlal RatilalChairman

Yusa’ bin HassanManaging Director/ Chief Executive Officer

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PGB BUSINESS CONTINUITYMANAGEMENT FRAMEWORK

RiskProfiling

& Control

BusinessImpact Analysis

BusinessContinuity

Plan

ContinualImprove-

ment

Test &Exercise

StrategySelection

Standards

People

Process

Infrastructure

The Group practices a structured Business Continuity Management (BCM) to ensure continuity of Group’s operations and services in the event of disruptions or crises. The Group’s BCM provides a systematic approach from managing its operational risks to building capability towards effective response during disruptions or crises.

The Group has also formulated BCP in responding to the unavailability of PETRONAS Twin Towers where its Head Office operates. An alternate worksite has been established to resume its critical Head Office’s functions in the event the PETRONAS Twin Towers is inaccessible.

The Group acknowledges the importance of capability building in managing crisis. Continuous awareness and capability building programmes are carried out for various level of staff of the Group.

During the year under review, a few training sessions were conducted on emergency and crisis management, namely Crisis Management Training, Media Crisis Management Training and Emergency Response Training, targeting the Management and relevant staff involved in the Emergency Response Team (ERT) and Crisis Management Team (CMT). The training was intended to provide the fundamentals and principles in managing crisis, including the process, roles and responsibilities.

The Group has also successfully conducted a Tier-3 Emergency Response Exercise in collaboration with National Security Council which simulated a fire and explosion incident at Tanjung Sulong Export Terminal (TSET). During the exercise, the Group’s cr is is and emergency response processes were tested as well as its Emergency Response Team (ERT) and Crisis Management Team’s (CMT) capability in responding to emergency and crisis. The exercise also further strengthened teamwork between the Group’s Operating Divisions and the local authorities in managing crisis. Several gaps were identified with further improvement plans put in place to address the gaps.

The Group has programmes in place to drive continuous enhancements in the Group’s BCM as well as to keep Management and staff up-to-date on the requirements and processes. These are periodically tested to ensure business continuity and effective response to crises and business disruptions.

BCM GOVERNANCE

The Planning and Risk Management Department (PRMD) is entrusted with responsibility of ensuring effective BCM governance and implementation in the Group. At Operating Divisions, there are focal persons assigned from the Plant Operational Excellence (POE) Department to drive implementation of the framework and processes rolled out by PRMD and ensure effective execution of BCM at the respective Divisions. On regular basis, PRMD conduct assessments to ensure Divisions’ compliance to the Group’s BCM requirements.

BCM PROCESS

The Group’s BCM process involves various elements towards enhancing readiness in responding to business disruptions and crises.

BCM scope encompasses various elements to ensure readiness in responding to business disruptions.

As set out in page 114 of this Annual Report, risks are periodically assessed and monitored to ensure the Group’s critical risks are managed and mitigated.

Business Impact Analysis prioritises the Group’s key business functions and spells out the timeframe to resume each function in the event of disruptions. Post organisational realignment activities in 2013, the Group undertook a second review of its Head Office’s Business Impact Analysis to ensure alignment with its revised structure.

Business Continuity Plans (BCP) are in place to address business disruptions. The Group is currently part of the integrated PETRONAS Gas Supply Peninsular Malaysia (GSPM) of which, a BCP will be activated in the event of sales gas supply disruption to PETRONAS customers.

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The Board Audit Committee (BAC) of PETRONAS Gas Berhad (PGB or the Company) is pleased to present the Board Audit Committee Report for the financial year ended 31 December 2014 in compliance with paragraph 15.15 of Main Market Listing Requirement of Bursa Malaysia Securities Berhad (MMLR).

COMPOSITION

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

No. Name of Members Directorate

1. Dato’ N. Sadasivan N.N. Pillay(Chairman)

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

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

Dato’ Ab. Halim bin Mohyiddin is currently a Council Member of the Malaysian Institute of Certified Public Accountants 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. In this regard, the Company is in compliance with paragraph 15.09(c)(i) under the MMLR which requires at least one member of the BAC to be a qualified accountant.

Dato’ N. Sadasivan N.N. Pillay Dato’ Ab. Halim bin Mohyiddin Datuk Rosli bin Boni

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TERMS OF REFERENCE

The BAC is governed by the Terms of Reference as stipulated on pages 130 to 131 of the Annual Report.

MEETINGS

During the financial year under review, the BAC held eight meetings. The meeting attendance record of the members are as follows:

Name of Members No. of meetings attended

Dato’ N. Sadasivan N. N. Pillay (Chairman)

8/8

Dato’ Ab. Halim bin Mohyiddin 8/8

Datuk Rosli bin Boni 8/8

SUMMARY OF ACTIVITIES OF THE BAC DURING THE FINANCIAL YEAR 2014

During the financial year ended 31 December 2014, the following activities were carried out by the BAC:

Internal Control

a) Reviewed the effectiveness of the system of internal controls, taking account of the findings from internal and external audit reports.

b) Reviewed the Statement on Risk Management and Internal Controls (SORMIC), which is supported by an independent review by Messrs KPMG.

Financial Reporting

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

b) Reviewed the Company’s annual a n d q u a r t e r l y m a n a g e m e n t accounts.

c) Reviewed and endorsed the fees of the external auditors for financial year end 31 December 2014 to 31 December 2016.

By invitation, the Managing Director/Chief Executive Officer, 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) presents the internal audit reports to the BAC. Relevant members of the Management are invited to brief the BAC on specific issues arising from the audit findings. The external auditors also attend 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 and its subsidiaries. In addition, the BAC met with the external auditors twice during the financial year without the presence of the Management.

Deliberations during the BAC meetings included performance review of the Company, the proposed annual and interim financial reporting to Bursa Malaysia Securities Berhad (Bursa Malaysia), the status of open audit findings together with the agreed corrective actions, risk management act iv i t ies and proposed inter im dividends.

The above assists the BAC Chairman to effectively convey to the Board the matters del iberated at the BAC meetings. Minutes of the BAC meeting are tabled for confirmation 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 financial statements and quarterly results.

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d) Reviewed the audited financial statements of the Company prior to submission to the Board for their consideration and approval, upon being satisfied that, inter alia, they were drawn up in accordance w i th the prov i s ions o f the Companies Act 1965 and the applicable approved MFRS issued by the Malaysian Accounting Standards Board.

Annual Reporting

T h e s t a t e m e n t s f o r C o r p o r a t e Governance, Board Audit Committee Report, Board Audit Committee Terms of Reference and Risk Management and Internal Controls for financial year ended 2014 for inclusion in the Company Annual Report 2014 were presented and endorsed by the BAC on 11 February 2015. Related Party Transaction and Conflict of Interest

The BAC reviews all related party transaction (RPT) and recurrent related party transaction (RRPT) in accordance with the PGB RPT Policies & Procedures (P&P) to monitor, track and identify RPTs and RRPTs so as to ensure the transactions are at all times carried out on arms-length basis and are not to the detriment of minority shareholders. During the financial year under review, the BAC reviewed on quarterly basis, the status update on RPTs and RRPTs. The BAC also ensures that any conflicts of interests in the deliberation of a transaction is appropriately declared in advance.

Internal Audit

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

b) Monitored all corrective actions on audit findings identified by the GIAD until all issues are resolved.

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

External Audit

a) Rev iewed wi th the externa l auditor’s audit strategies and scope for the statutory audit of the Company’s financial statements for the f inancial year ended 31 December 2014.

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

Risk Monitoring

Reviewed on quarterly basis the Company’s Enterprise Risk Report and Status of Risk Monitoring. The BAC also deliberated on the risk exposures and the mitigation plans required.

INTERNAL AUDIT

The internal audit function of the Company was carried out by the GIAD. GIAD maintained at all times their impartial ity, proficiency and due professional care by reporting directly to the BAC.

The internal audits were undertaken to provide independent assessments on the adequacy, efficiency 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 year, 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 efficient operations and adherence to applicable policies, guidelines and procedures. The audits conducted during the year were:

No. Audit Titles

1 Audit on Project Management of Plant Rejuvenation and Revamp 4 Project (PRR 4)

2 Audit on Production, Maintenance and Technical Services of utility plants

3 Audit on Operations and Maintenance Activities of Liquefied Natural Gas (LNG) Regasification Terminal in Sungai Udang, Melaka

4 Shareholders Audit on Overall Governance and Operation Readiness of Kimanis Powerplant Project

5 Audit on Project Management of LNG Regasification Terminal in Pengerang, Johor

Note:

Items 3, 4 and 5 of the above were audits conducted in FY2014 but presented to the BAC in Q1 FY2015.

The resulting reports from the audits were reviewed by the BAC and subsequent ly 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 and all outstanding/open items are reported to the BAC on a quarterly basis.

The total fees payable to GIAD for the internal audit function of the Company and the Group for the financial year was RM643,929.

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RISK MANAGEMENT

T he Board has establ ished an organisation structure with clearly defined lines of responsibility and accountability pursuant to its business and operational requirements while ensuring appropriate risk management processes are in place to protect shareholders and stakeholders value.

The Planning and Risk Management Department (PRMD) of PGB has been tasked to conduct assessment of risks for PGB Group of Companies (PGB Group). PRMD reports directly to the BAC on quarterly basis or as and when is necessary.

Pursuant to Recommendation 6.1 of the MCCG 2012, Risk Management is enforced through an Enterprise Risk Report (ERR) reporting tool. Further details on the Risk Management is provided under the SORMIC on pages 113 to 118 of this Annual Report.

BAC plays a vital role in reviewing the adequacy and effectiveness of Risk Management processes within PGB Group. In this regard, BAC reviews and challenges the ERR which entails amongst others the risk profile and status of risk mitigation implementation.

INDEPENDENT REVIEW BY MESSRS PRICEWATERHOUSECOOPERS

P G B h a s e n g a g e d M e s s r s Pr icewaterhouseCoopers Capi ta l Sdn Bhd (Independent Advisor or PwCC) to carry out the review on the methods and procedures in determining the transaction price and terms of the RRPT are sufficient to ensure that the transaction will be carried out on normal commercial terms and will not be to the detriment of its minority shareholders (Minority Shareholders).

The Independent Advisor’s opinion report was presented to the BAC on 11 February 2015 where PwCC was of the opinion that the review procedures for determining the transactions prices of the RRPTs as set out in the Statement of Corporate Governance of this Annual Report are sufficient to ensure that the RRPTs will be carried out on normal commercial terms and will not be detrimental to the interests of PGB and its Minority Shareholders.

The full report of the Independent Advisor is set out under pages 128 to 129 of the Annual Report.

REVIEW PROCEDURES IN DETERMINING AND REVIEWING THE TRANSACTIONS PRICE AND TERMS OF THE RRPT

Details of such review procedures and threshold limits are set out in PGB’s P&P. In the review of procedures for determining the transaction prices of the RRPT , the fo l low ing were considered:

a) The Directors’ rationale for, and the benefits accruing to PGB arising from the RRPT.

b) The review procedures for the RRPT.

Bursa Malaysia had on 26 March 2014 granted PGB a waiver from complying with Paragraph 10.09 of the MMLR, of having to seek shareholders’ approval in relation to the new Gas Processing and Transportation Agreements as well as the Sh ipper Agent Serv ices Agreement. Subsequent ly , Bursa Malaysia had, on 23 May 2014, granted PGB a waiver of the same in relation to four of the ancillary agreements for the regasification services provided by PGB to PETRONAS in Sungai Udang.

As part of Bursa Malaysia’s condition for waiver, an independent financial adv i so r ’ s rev iew o f the above agreements have been undertaken on the methods or p rocedures in determining the transaction prices and terms of the ancillary agreements are suf f ic ient to ensure that these transactions are carried out on normal commercial terms and will not be detrimental to minority shareholders.

During the year under review, PGB undertook a process which primarily involved determining suitable tariffs, negotiations and obtaining proper approvals from the BAC and Board, which were aligned for the subsequently approved policies and procedures. Based on the result of the test, there were no exceptions as it relates to the price determination process for RRPT.

Based on the work per formed, improvement areas have been discussed and agreed with the BAC and has been incorporated in the Related Party Transactions Policies and Procedures document.

REPORTING TO THE EXCHANGE

For the 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 under paragraph 15.16 of the MMLR was not required.

Dato’ N. Sadasivan N.N. PillayChairmanBoard Audit Committee11 February 2015

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Board Audit Committee PETRONAS Gas Berhad Level 51, Tower 1PETRONAS Twin Towers50088 Kuala Lumpur

26 February 2015

Dear Sirs,

REVIEW ON METHODS OR PROCEDURES IN DETERMINING AND REVIEWING TRANSACTION PRICES AND TERMS OF RECURRENT RELATED PARTY TRANSACTIONS

1 INTRODUCTION

PETRONAS Gas Berhad (‘PGB’), a subsidiary of Petroliam Nasional Berhad (‘PETRONAS’), is listed on the Main Market of Bursa Malaysia since 1995. PGB’s business portfolio is divided into four core operations which are Gas Processing, Gas Transmission, Utilities and Regasification.

This letter has been prepared for the purpose of inclusion in the Annual Report for the financial year ended 31 December 2014 pursuant to the waiver for compliance with Paragraph 10.09 of Bursa Malaysia Main Market Listing Requirements granted by Bursa Malaysia based on its letters to PGB dated 26 March 2014 and 23 May 2014 (‘the Waiver’).

As part of the Waiver which was granted for the following agreements:

(i) Time Charter Party for Floating Storage Unit Tenaga Satu(ii) Time Charter Party for Floating Storage Unit Tenaga Empat(iii) Marine Services Agreement(iv) Land Lease Agreement (3km pipeline)(v) Shipper Agent Services Agreement

PGB is required to disclose in its Annual Report after the listing date, an independent financial adviser’s opinion that the methods or procedures in determining the transaction price and terms of Recurring Related Party Transactions (‘RRPT’) are sufficient to ensure that the transactions will be carried out on normal commercial terms and will not be to the detriment of its Minority Shareholders.

2 TERMS OF REFERENCE

To comply with the condition attached to the waiver as described above, PricewaterhouseCoopers Capital Sdn Bhd (‘PwCC’) has been appointed as the independent financial adviser to provide an opinion on whether the methods or procedures in determining the transaction price and terms of the agreement stated in (i)-(v) above are sufficient to ensure that the transactions will be carried out on normal commercial terms and will not be to the detriment of Minority Shareholders.

PwCC’s views as set forth in this letter are based on the prevailing market and economic conditions, and our analysis of the information provided to us by PGB up to the date of this letter. Accordingly, this opinion shall not take into account any event or condition which occurs after that date.

PwCC’s work is solely in respect of the review of methods or procedures in determining the transaction prices of the RRPT and we were not involved in the formulation of these procedures adopted by PGB.

In the course of our evaluation of the procedures, we have performed the following:

• Desktop reviews of standard operating procedures and relevant Board and Management reports that are used to determine and review the transaction prices and terms of the RRPTs under review

• Performed a walkthrough on the RRPTs under review, to assess procedures undertaken to determine transaction prices and terms of the RRPTs

pg 128PETRONAS GAS BERHAD (101671-H)

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INDEPENDENT FINANCIAL ADVISOR’SREPORT

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2 TERMS OF REFERENCE (continued)

• Held discussions with selected members of Senior Management on the methods and procedures employed by PGB to determine and review the transaction prices and terms of the RRPTs under review

• Interviewed the Audit Committee to understand the Board’s role in reviewing the RRPTs

We have not conducted any procedures on information included in PGB 2014 Annual Report.

3 REVIEW PROCEDURES IN DETERMINING AND REVIEWING TRANSACTION PRICES AND TERMS

Details of such review procedures and threshold limits are set out in PGB’s Related Party Transactions Policies and Procedures document as approved by the Board Audit Committee (‘BAC’) on 10 February 2014. These procedures are summarised in the Statement of Corporate Governance of this Annual Report, and Shareholders are advised to read the information carefully.

In our review of procedures for determining the transaction prices and terms of the agreements in (i)-(v) above, we have considered the following:

(a) The Directors’ rationale and the benefits accruing to PGB arising from the above agreements; and (b) The review procedures for the above agreements.

Bursa Malaysia had in May 2014 granted PGB a waiver from complying with Chapter 10.09 of the Main Market Listing Requirements of Bursa Malaysia, of having to seek Shareholders’ approval in relation to the services pertaining to the agreements stated in (i)-(v) above.

During the period of review, PGB undertook the following procedures which involved:

(a) Determining suitable tariffs for the agreements in (i)-(v) above;(b) Negotiating with the relevant parties on pricing and terms and conditions; and(c) Obtaining the required approvals from the BAC and Board, which were aligned to the approved policies and

procedures.

Based on the results of our review, there were no material exceptions relating to the price determination process for the agreements stated in (i)-(v) above.

Based on work performed, improvement areas have been discussed and agreed with the BAC and will be incorporated in the Related Party Transactions Policies and Procedures document.

4 OPINION

Based on the analysis undertaken and subject to the qualifications and assumptions made herein, PwCC is of the opinion that the review procedures for determining the transactions prices of the RRPTs, as set out in the Statement of Corporate Governance of this Annual Report are sufficient to ensure that the RRPTs will be carried out on normal commercial terms and will not be detrimental to the interests of PGB and its Minority Shareholders.

We have prepared this letter for the use of PGB in connection with the conditions of the Waiver imposed by Bursa Malaysia. A copy of the letter may be reproduced in the Annual Report.

Yours faithfully,

PricewaterhouseCoopers Capital Sdn Bhd

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The Board Audit Committee is responsible to oversight the financial reporting process, selection of external auditor, receipt of audit results both internal and external, internal control system, risk management system and internal and external audit functions.

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 the Malaysian Code of Corporate Governance, 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 fulfills the requirements as provided in the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (MMLR).

All BAC members must be financially 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 examinat ions specified in Part 1 of the 1st Schedule of the Accountants Act 1967; or

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 i t 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 Committee 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 shal l 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 o b t a i n o u t s i d e l e g a l o r o t h e r independent professional advice and to secure the attendance of outsiders with relevant experience and expertise if it considers this necessary.

ii) is a member of one of the associations of accountants specified in Part II of the 1st Schedule of the Accountants Act 1967; or

(c) fulfills 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 office 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.

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BOARD AUDIT COMMITTEE’STERMS OF REFERENCE

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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 Chai rman of the Company and Managing Director/Chief Executive Officer 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 firm is involved.

2) Internal Audit

a) To review the internal audit plan, consider the major findings 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) T o d i r e c t a n d w h e r e appropriate supervise any special project or investigation considered necessary;

e) To prepare periodic reports to the Board summarising the work performed in fulfilling t h e B A C ’ s p r i m a r y 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, p r o f i c i e n c y a n d d u e professional care.

3) Financial Reporting Review

To review with the Management and the external auditors the quarterly results and year-end financial statements prior to the approval by the Board, focusing particularly on:

a) any change in accounting policies and practices;

b) significant and unusual events;c) major judgmental areas;d) s i g n i f i c a n t a d j u s t m e n t s

resulting from the audit;e) the going concern assumption;f) compliance with accounting

standards; andg) compliance with other legal

requirements and MMLR.

4) Related Party Transactions

To review any related party transaction and conflict of interest situation that may arise in the Company including any transaction, procedure or course of conduct that raises the quest ions of management integrity.

5) Risk Management

To review the adequacy and effectiveness of risk management practices and procedures as well as conducting risk profiling reviews on the Company, on a quarterly basis.

6) Internal Control

To keep under rev iew the effectiveness of internal control systems and the internal and/or external auditors’ evaluation of these systems and in particular review the external auditors’ M a n a g e m e n t L e t t e r a n d Management’s responses.

7) Other Matters

a) To arrange for periodic reports f r o m M a n a g e m e n t , t h e external auditors and the internal auditors to assess the impact of significant regulatory changes, and accounting or repor t ing deve lopments proposed by accounting and other bodies, or any significant matter that may have a b e a r i n g o n t h e a n n u a l examination;

b) To discuss problems and reservations arising from the internal audits, interim and final 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) Car ry ing out any other f u n c t i o n s t h a t m a y b e 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.

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The Company continues to uphold its strong commitment in ensuring compliance to statutory and regulatory requirements as well as internal policies and procedures.

The Company has therefore put in place internal controls and various compliance exercise, guided by these statutory and regulatory requirements, guidelines and best practices both from within PETRONAS Group as well as external.

KEY COMPLIANCE REQUIREMENTS AND ASSESSMENTS

T he Company observes various compliance requirements as part of its overall governance efforts, covering the areas of F inance, Health Safety Env i ronment (HSE) , Operat ional Excellence, Project Management and Human Resource, to cite a few.

Internally, the Company’s compliance assessments or audits are based on a three-tier hierarchy in line with the PETRONAS Technical Standards, with frequency of assessments determined based on the standards and approved by Management.

At Tier-1, self-audits are undertaken by the respective process owners to assess any gaps on compliance. There are also selected Departments or Units within the Company which undertake audits on other Departments or Units to assess compliance on specific areas e.g. HSE Management System, SIRIM requirements a s we l l a s i n te rna l p rocedure requirements. Tier-1 audits are the most frequently conducted compliance assessments in the Company, some are even as frequent as on monthly basis.

COMPLIANCE MONITORING AND REPORTING

Audit findings are deliberated and tracked until closure. At the Divisions, the Plant Leadership Team (PLT) reviews audit plans and findings related to the respective Divisions. Some key audit findings mainly from Tier-2, 3 and external audits are reported to the Company’s Management Committee (MC) meetings. All findings and progress of actions items derived from Tier-3 audits conducted by PETRONAS Group Internal Audit are reported to the Board Audit Committee (BAC).

In strengthening governance and c o m p l i a n c e , b e g i n n i n g 2 0 1 5 , Management has mandated the Risk Management Section under Planning and Risk Management Department (PRMD) to oversee compliance activities throughout the Company. A Risk and Compliance Committee (RCC) was also established to enhance oversight on risk management framework implementation as well as compliance in the Company. The Risk and Compliance Committee (RCC) is chaired by Managing Director/Chief Executive Officer and sits on quarterly basis. Amongst the scope of RCC is to ensure appropriate oversight, deliberation, monitoring and review of internal controls and risk management implementation in the Company.

Additional Compliance Information in accordance with Appendix 9C of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (MMLR) is as follows:

1. Utilisation of Proceeds from Corporate Proposals

There was no Corporate Proposals undertaken for the year under review.

[Disclosed in accordance with Appendix 9C,

Part A, Item 13 of the MMLR]

At T ier-2 , representat ives f rom PETRONAS Downstream undertakes audits on the Company based on selected areas of compliance which are carried out at a less frequent interval compared to Tier-1, which is annually or once every two years.

At Tier-3, the Company may be subject to audits conducted by selected Divisions within PETRONAS Holding Company for example Group HSE, Group Technical Solutions and Group Internal Audit. The exercise may be conducted periodically or on need basis based on request by Management.

The Company is also subject to periodical audits by external bodies or authorities as part of compliance assessments against statutory and regulatory requirements. During the year under review, amongst the authorities or external bodies which conducted audits on the Company were KPMG, Inland Revenue Board, SIRIM, Fire and Rescue department, Department of Standards Malaysia (DSM), National Security Council and Malaysian Institute of Chemistry.

pg 132PETRONAS GAS BERHAD (101671-H)

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ADDITIONAL COMPLIANCE INFORMATION

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2. Share Buy-Back

The Company did not propose any share buy-back during the financial year.

[Disclosed in accordance with Appendix 9C, Part A, Item 14 and Appendix 12D of paragraph 12.23 of the MMLR]

3. Op t i ons o r C on ve r t i b l e Securities

The Company did not issue any options or convertible securities during the financial year.

[Disclosed in accordance with Appendix 9C, Part A, Item 15 of the MMLR]

4. Depository Receipt Programme

The Company did not sponsor any depository receipt programme during the financial year.

[Disclosed in accordance with Appendix 9C, Part A, Item 16 of the MMLR]

5. Imposit ion of Sanctions/Penalties

There were no sanctions and/or pena l t ies imposed on the Company or its subsidiaries, Directors or Management by the relevant regulatory bodies during the financial year.

[Disclosed in accordance with Appendix 9C, Part A, Item 17 of the MMLR]

6. Non-Audit Fees

The amount of non-audit fees incurred for services rendered to the Group by the external auditors, Messrs KPMG or its affiliated companies during the financial year is RM15,000.

[Disclosed in accordance with Appendix 9C, Part A, Item 18 of the MMLR]

7. Variation in Results

There were no profit estimates, forecasts or projections made or released by the Company during the financial year.

[Disclosed in accordance with Appendix 9C, Part A, Item 19 of the MMLR]

8. Profit Guarantee

The Company did not give any profit guarantee during the financial year.

[Disclosed in accordance with Appendix 9C, Part A, Item 20 of the MMLR]

9. Material Contracts Involving Interests of Directors and Major Shareholders

The list of Material Contracts is disclosed on page 103 of this Annual Report.

[Disclosed in accordance with Appendix 9C, Part A, Item 21 of the MMLR]

10. Analysis of Shareholdings

The analysis of shareholdings is disclosed on pages 262 to 265 of this Annual Report.

[Disclosed in accordance with Appendix 9C, Part A, Item 23 of the MMLR]

11. Listing of Properties

The summary of Landed Property, Plant and Equipment for the financial year ended 31 December 2014 is disclosed on pages 266 to 274 of this Annual Report.

[Disclosed in accordance with Appendix 9C, Part A, Item 25 of the MMLR]

12. Share Issuance Scheme

The Company did not have Share Issuance Scheme as required under paragraph 8.17 of the MMLR.

[Disclosed in accordance with Appendix 9C,

Part A, Item 26 of the MMLR]

13. Share Option Scheme for Employees

The Company did not have Share Option Scheme for its Employees.

[Disclosed in accordance with Appendix 9C, Part A, Item 27 of the MMLR]

14. Training Attended by Directors

The list of trainings attended by Directors is disclosed on pages 104 to 105 of this Annual Report.

[Disclosed in accordance with Appendix 9C, Part A, Item 28 of the MMLR]

15. Corporate Social Responsibility Activities

The corporate social responsibility activities undertaken by the Company is disclosed on pages 160 to 183 of this Annual Report.

[Disclosed in accordance with Appendix 9C, Part A, Item 29 of the MMLR]

16. Recurrent Re lated Par ty Transactions of a Revenue or Trading in Nature (RRPT)

Details of the RRPT entered into during the financial year ended 31 December 2014 pursuant to the said RRPT Mandate is disclosed on pages 238 to 241 of this Annual Report.

[Pursuant to Paragraph 10.09(2)(b) and Paragraph 3.1.5 of Practice Note 12 of the MMLR]

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DELIVERING SUSTAINABLEPROFITSDelivering sustainable financial results to our shareholders and stakeholders remains our key priority. By constantly challenging ourselves to stay ahead of the curve and remain focused on achieving our targets, we strengthen our resolve to fulfil our commitment to deliver value to our shareholders and stakeholders.

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GASPROCESSING

HIGHLIGHTS• Rewarded with 20 contract years of Gas Processing Agreement

(GPA)

• Achieved 99.4% sales gas reliability

• Recorded 10.3 million safe manhours

• Marginal drop in revenue by RM17.2 million

Gas Processing is one of PGB’s primary business segments, operated by its Gas Processing and Utilities (GPU) Division. Operating six Gas Processing Plants (GPP) in Terengganu, it processes PETRONAS’ raw gas delivered from offshore Peninsular Malaysia into methane (C1), which is also known as sales gas, as well as other by-products such as ethane (C2), propane (C3) and butane (C4). Sales gas is supplied to Power and Non-Power sectors as fuel and feedstock while C2, C3 and C4 are supplied to Petrochemical Plants as feedstock. In addition, sales gas, C3 and C4 are also available for export market.

Gas Processing contributions to PGB Group

34%

Revenue

32%

Gross Profit

Gas Processing Other Segments

pg 136PETRONAS GAS BERHAD (101671-H)

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BUSINESS REVIEW

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OPERATIONAL HIGHLIGHTS

During the year, GPP achieved a sales gas reliability of 99.4% while the reliability for ethane was 95.1%, and that for propane and butane stood at 95.6%. In terms of production volumes, it achieved 1,024,920 metric tonnes (Mt) for ethane, 939,072 Mt for propane and 642,108 Mt for butane.

In line with PGB’s Transformation journey to move towards a higher performance base, our GPP performed better in Overall Equipment Effectiveness (OEE) and reliability for its liquid products while sales gas maintained at world-class standards.

In terms of safety performance, GPU achieved 10.3 million safe manhours for FY2014. It also successfully conducted Ex-Tanjung, a Tier-3 Emergency Response Exercise at Export Terminal, Tanjung Sulong, Kemaman, where PGB was the first operating unit within the PETRONAS Group to be tested by Majlis Keselamatan Negara (MKN).

Gas Processing recorded a marginal drop in revenue by RM17.2 million as compared to 2013, mainly due to lower Performance Based Structure (PBS) income for ethane, propane and butane. However, the impact of the lower PBS was cushioned by the strengthening of reservation charge under the new Gas Processing Agreement (GPA) which came into effect on 1 April 2014. The Division’s contribution to PGB’s gross profit decreased slightly by RM49.6 million as a result of higher cost of revenue due to operations and maintenance cost in line with plant initiatives and efforts to intensify plant reliability and production.

Gas Processing Reliability (%)

C1 C2 C3 C4

91.

3

99

.6

99

.7

99

.9

99

.9

99

.4

98

.8

98

.3

90

.1

89

.1

95

.1

98

.7

98

.7

99

.3

91.

7

95

.6

91.

3

99

.3

91.

7

95

.6

91.

3

2014‘13‘12‘11*‘11 2014‘13‘12‘11*‘11 ‘13‘12‘11*‘11 ‘13‘12‘11*‘112014 2014

Note:Financial year 2011 comprises reporting period from 1 April to 31 March.* For the nine month period ended 31 December 2011.

pg 137

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OTHER HIGHLIGHTS (PRR4)

Plant Rejuvenation and Revamp 4 project (PRR4) achieved commendable milestones in FY2014. The Dew Point Control Unit 2 (DPCU2) achieved Initial Acceptance (IA) on 24 April 2014, eight days ahead of schedule. The Kertih Compressor Station B (KCS-B) completed its upgrading in 12 days, compared to planned 31 days. In addition, the aspiration to centralise Control Room for Gas Processing Kertih (GPK) has been materialised in November 2014. Currently, construction & commissioning of the biggest package in PRR4 which is at GPK-4, is progressing as per plan and currently at final phase of commissioning despite various challenges such as monsoon season (November to December), multinational workforce and project complexity. It is expected that an additional 20 years of lifespan will be added to PGB’s GPK plant after completion of this PRR4 project. This will provide long term sustainable revenue for PGB through GPA.

OTHER INITIATIVES

GPU has also continuously undertaken efforts and initiatives to improve its plant safety towards providing safe working conditions to all staff and contractors working within PGB premise.

One of the initiatives undertaken is a project to remove existing clamps at 42” Resak pipeline inside GPK, which had shown signs of withering. The pipeline supplies feed gas to both GPK and Gas Processing Santong (GPS). The shutdown of the pipeline is very complex due to the difficulty of getting the line free from hydrocarbons, thus posing a major challenge for the repair works. Two clamps at the flanges of 42” Resak pipeline near GPK Gate C road crossing were removed and a new 90 metres spool was successfully installed during the shutdown timeframe.

By utilising new technology such as 3D Laser Scanning (for Flange Orientation Control & Spool Dimensional Control) and Flange Rescue Gasket (FRG), only seven shutdown days was taken to complete the repair works which was nine days earlier from the schedule. Completion of the repair works enabled GPU to close HSEMS Tier-3 Audit finding, Enterprise Risk Report Action Items and Non Standard Repair (NSR) Outstanding for Repair.

Another significant initiative undertaken during the year under review was a project to improve the process of ethane recovery at GPS 6. This initiative increased ethane recovery rate by 8% which contributed positively to PETRONAS’ revenue.

Gas Production Volume (Mt)

C4

66

5,7

60

64

2,1

08

C2

98

7,2

52

1,0

24

,92

0

C3

99

7,7

64

93

9,0

72

4%

6%

3%

2013 2014

pg 138PETRONAS GAS BERHAD (101671-H)

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BUSINESS REVIEW

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MOVING FORWARD

In 2015, it is GPU aspiration to incorporate best practices and further improve from past performance which focuses on reducing interruptions to assets in order to regain its sole position in delivering world-class performance and reliability.

In line with the PGB Transformation journey, Gas Processing business is expected to continue to enhance Assets, System & Process and People & Culture to deliver steady returns in 2015 and beyond.

GPU also expects to continue delivering sustainable and steady returns backed by the GPA effective 1 April 2014 whilst performance based structure will be dependent on PGB’s liquid extraction performance.

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The Gas Transportation business is operated by its Gas Transmission and Regasification (GTR) Division. Through this business, GTR manages the gas transmission pipelines covering much of West Malaysia known as the Peninsular Gas Utilisation (PGU) grid as well as smaller distribution systems in Miri and Bintulu in East Malaysia, which transport gas to PETRONAS’ customers. The year also saw GTR started its services to manage the pipeline in Kimanis, Sabah.

The business unit also acts as the operations and maintenance (O&M) operators to PETRONAS’ exploration and production subsidiary, PETRONAS Carigali Sdn Bhd (PCSB), for the Sabah-Sarawak Gas Pipeline (SSGP) and Trans Thai-Malaysia (M) Sdn Bhd’s pipeline from Malaysia border to Seberang Prai.

GASTRANSPORTATION

HIGHLIGHTS• Renewal of 20 contract years of Gas Transportation Agreements

(GTA)

• Achieved 99.92% system reliability

• Launched Gas Transmission Academy

• Revenue increased by 8% on the back of higher capacity reservation

for the Peninsular Gas Utilisation (PGU)

Gas Transportation contributions to PGB Group

29%

46%Revenue Gross Profit

Gas Transportation Other Segments

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BUSINESS REVIEW

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Gas Transportation Reliability and Availability (%)

Reliability

99

.97

99

.98

99

.99

99

.98

99

.92

99

.89

99

.92

99

.99

99

.95

99

.85

Availability

2014‘13‘12‘11*‘112014‘13‘12‘11*‘11

Note:Financial year 2011 comprises reporting period from 1 April to 31 March.* For the nine month period ended 31 December 2011.

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OPERATIONAL HIGHLIGHTS

A key highlight of the year was the signing of a new Gas Transportation Agreements (GTA) with PETRONAS, which increased the Company’s booking capacity on the back of availability of additional injection following commissioning of liquefied natural gas (LNG) Regasification Terminal in Sungai Udang, Melaka. Through effective supply demand balancing, the business unit ensured uninterrupted gas delivery to PETRONAS’ customers, managing the transport and supply of a total of 2,322 mmscfd of sales gas during the year.

Continued focus on pipeline integrity which entails regular inspection and rehabilitation of the 2,583 kilometre (km) grid led to a consistently high system reliability and availability of 99.92% and 99.85% respectively.

The year also saw GTR was tested with a challenge in operations through pipeline burst piping incident in Kerteh, Terengganu. In addition, PGB also involved in assisting PETRONAS Carigali Sdn Bhd in managing the pipeline explosion incident for Sabah-Sarawak Gas Pipeline (SSGP) in Lawas, Sarawak. GTR managed to resolve these crisis timely and has demonstrated high capability in responding to the challenges. The learning from these challenges has elevated GTR level of maintenance practices and enhanced its risk management.

Gas Transportation recorded an 8% increase in revenue to RM1,286.7 million in 2014, mainly attributable to the revised capacity reservation under the new GTA. The business division also derived additional income from operation readiness services for SSGP and operations and maintenance of pipeline for the supply of gas to two new PETRONAS’ customers in Sabah. This followed the successful management of gas-in and commencement of commercial operations at the plants. On the back of increased revenue, Gas Transportation notched 11% growth in gross profit to RM1,006.7 million.

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BUSINESS REVIEW

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OTHER HIGHLIGHTS

GTR Engineering consultancy team continued to explore opportunities within their proven technical expertise domestically and internationally. GTR are involved in various technical governance reviews and assessment for Prince Rupert Gas Transmission Pipeline Project in Canada; Garraf gas, oil and water pipelines in Iraq, and a Ready for Start-Up (RFSU) review for GLNG Gas Transmission Pipeline in Australia. In addition, GTR has received several requests from PETRONAS to conduct feasibility studies for new pipelines in Peninsular Malaysia, Sabah and Sarawak to supply gas to a growing list of new customers in the power and industrial sectors.

Efforts to build the knowledge and skills of personnel were further intensified during the year. GTR new recruit staff will receive training at the Gas Transmission Academy which was launched in November 2014. On top of that, GTR also extend the Gas Transmission Academy learning program to PETRONAS Carigali staff via Technical Competency Development Agreement (TCDA) of which the first intake will be trained in June 2015.

MOVING FORWARD

Following the Strategic PGB Organisational Review and Alignment (SPORA) in December 2013, Gas Transportation embarked on a Production Centered Organisations (PCO) concept which would serve to strengthen area-based ownership and management. The PCO drives the efforts to maintain the highest level of infrastructure integrity and operational excellence through enhanced Assets, System & Process and People & Culture which supports the overall PGB Transformation journey.

GTR also expects to continue delivering sustainable and steady returns, augmented by higher capacity reservation made in advance by PETRONAS under the Gas Transportation Agreements which came into effect on 1 April 2014.

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UTILITIESHIGHLIGHTS• High reliability for all products ranging from 97.8% – 99.0%

• Received Gold Medal Award from International Convention Quality Creative Circle (ICQCC)

• Revenue surged by 16% attributable to higher offtake by customers coupled with

an upward revision in prices

Gas utility plants in Kertih, Terengganu; and Gebeng, Pahang; is on merchant mode. It supplies a range of industrial utilities to the petrochemical businesses located in the Ker t ih In tegrated Petrochemical Complex and Gebeng Industrial Area. These includes electricity, steam, industrial gases and other products such as liquid oxygen, liquid nitrogen, demineralised water, raw water, cooling water and boiler feed water.

Utilities contributions to PGB Group

23%

9%

Revenue Gross Profit

Utilities Other Segments

Utilities Reliability (%)

91.

3

99

.5

99

.8

99

.5

99

.0

97

.8

99

.5

99

.7

94

.9

99

.1

97

.9

99

.6

99

.9

95

.5

99

.0

98

.6

Electricity Steam Industrial Gases

2014‘13‘12‘11*‘11 2014‘13‘12‘11*‘11 ‘13‘12‘11*‘11 2014Note:Financial year 2011 comprises reporting period from 1 April to 31 March.* For the nine month period ended

31 December 2011.

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OPERATIONAL HIGHLIGHTS

Despite some plant-related issues and project-related challenges, the plants continued to deliver relatively good performance at 97.8% reliability for electricity, 97.9% reliability for steam and 99.0% reliability for industrial gases. Over the year, electricity production stood at 1,864 gigawatt hour (GWh); steam at 4,246 kilometric tonnes (KMt); and industrial gases at 626 mega normal cubic metres (MNm3).

Concerted efforts to maintain a high level of safety led to a consistently positive health, safety and environment (HSE) performance throughout the year. In FY2014, the Utilities business recorded an RM141.4 million increase in revenue as compared to 2013 and this is primarily due to higher offtake by customers of electricity, steam and industrial gases coupled with an upward revision in prices due to upward revision of electricity tariff effective 1 January 2014. On the back of its revenue, the Division’s contribution to PGB’s gross profit grew by RM68.2 million as compared to 2013.

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OTHER HIGHLIGHTS

The Division also embarked on an upgrade of our electrical and instrument control system for both our utility plants. This project was executed as part of the plant obsolescence management to sustain plant’s product delivery reliability (PDR) to our customers. The upgrading project has been completed at both Utilities Kerteh (UK) and Utilities Gebeng (UG) plant.

During the year, PGB Utilities business bagged the Gold Medal Award for our Innovative and Creative Circle Team at the International Convention Quality Creative Circle (ICQCC) in Colombo, Sri Lanka.

Utilities Volume

Steam (MMt) Electricity (GWh) Industrial Gases (MNm3)

3,9

87

4,2

46

1,7

70

1,8

64

57

8

62

6

6%5%

8%

2013 2014

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MOVING FORWARD

Revenue and results for the Utilities segment will cont inue to be heavi ly inf luenced by the petrochemicals customer’s demand.

The Utility Gebeng plant upgrading activities for FY2015 is to position the Company for projected growth in Gebeng Industrial Area. Plant utilisation in Gebeng is expected to reach its maximum sustainable capacity by FY2016. We have also dedicated our hearts and minds to accelerate our progress to achieve our target in the path of transforming PGB into a leading gas infrastructure and utilities company.

Under the newly embarked PGB Transformation journey, the utility plants are poised to elevate the plant performance and deliver greater value to the stakeholders.

For FY2015, utility plants will continue to incorporate best practices and further improvements from past experiences to achieve its vision of zero interruptions to customers and delivering world-class performance.

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The Regasification business operates and maintains its offshore LNG Regasification Terminal in Sungai Udang, Melaka (RGTSU), which began its commercial operations on second quarter of 2013. The facility receives vessels carrying LNG imported from around the world, stores it in two floating storage units and converts the LNG to gas before injecting it into the Peninsular Gas Utilisation (PGU) grid for distribution to PETRONAS’ customers.

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REGASIFICATIONHIGHLIGHTS• Achieved Overall Equipment Effectiveness (OEE) of 94.1%

• Received 27 liquefied natural gas (LNG) cargoes in 2014

• Revenue rose by 82% due to full year operations in 2014

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Regasification contribution to PGB Group

14% 14%

Revenue Gross Profit

Regasification Other Segments

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OPERATIONAL HIGHLIGHTS

In its first full year of operations, RGTSU achieved 79.2% reliability and 73.0% availability for regasification due to unplanned downtime from trains cleaning and boroscoping, and seawater overboard piping repair. Meanwhile, its Overall Equipment Effectiveness (OEE) improved from 92.2% in 2013 to 94.1%. Despite facing several equipment issues last year, RGTSU still managed to meet nomination given by Malaysian Gas Management, PETRONAS.

During the year, RGTSU underwent its first Department of Occupational Safety and Health (DOSH) turnaround which was executed within its planned downtime of 21 days. It also successfully received 27 cargoes, which added up to a total of 50 cargoes since it commenced operations in May 2013.

The business unit recorded an 82% growth in revenue to RM616.2 million, derived primarily from a full year operations in 2014, comprising regasification and storage fees.

RGT’s gross profit stood at RM308.0 million, marking an increase of RM144.5 million, or 88%, from 2013. It recorded a 289% increase in profit before tax to RM180.6 million and a net profit after tax of RM112.5 million.

MOVING FORWARD

As the first regasification business established in the country, there is much potential for RGTSU to expand through the provision of operations and technical services to future regasification terminals in the country and elsewhere in the region. Meanwhile, to build its internal strengths and capabilities, Regasification business has developed its own Regasification Plant Operations capability training programme for personnel which will be launched in 2015. This will focus on developing new talents to support PETRONAS Downstream business growth in view of the upcoming Refinery and Petrochemical Integrated Development (RAPID) project to complement existing development programmes, as well as to accelerate the readiness of our new talents to undertake responsibilities in existing plants.

The Regasification business is expected to contribute positively, on the back of capacity reservation by PETRONAS for regasification and storage fees under the Regasification Services Agreement.

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PERFORMANCEDEFINESOUR FUTUREAs a leading gas infrastructure and utilities company, we are gearing towards achieving performance excellence at all levels – from our infrastructure to our people, from our philosophy to our business presence, and from our role in supporting the national agenda to position ourselves as a leading gas infrastructure and utilities company.

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PETRONAS Gas Berhad (PGB) is committed to upholding the highest standards of safety in its operations. It manages all Health, Safety and Environment (HSE) risks across the business through strict adherence to regulatory requirements, PETRONAS’ HSE Mandatory Control Framework (MCF), PETRONAS’ Technical Standards, and the HSE Management System (HSEMS).

To drive HSE high performance, PGB has embarked on a three year HSE Roadmap that is gearing the organisation towards a Generative Culture, namely one in which safe behaviour is fully integrated into every aspect of the Company’s systems and processes. As part of the roadmap, PGB has enhanced its behavioural safety programme and extended its coverage to include contractors working in its facilities. In addition, a Felt Leadership programe was introduced to the senior management in September 2014 to strengthen their HSE awareness and knowledge. More HSE programmes will be implemented in 2015 in line with PGB’s Transformation to achieve its 3ZERO100 targets, specifically in delivering the targets of zero HSE incident, and zero non-compliance.

In 2014, PGB undertook a process safety review of all its processes and equipment following which a list of Safety Critical Element (SCE) equipment was identified. SCE equipment form layers of barriers to protect against major hazards in the facilities. All SCE equipment will be given more attentive care and prioritised inspection and testing under a preventive maintenance programme to ensure their functionality and integrity.

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HEALTH, SAFETY &ENVIRONMENT

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Following the fatal incident in one of the pipeline scrapper launcher stations in Kertih involving a contractor, PGB has instructed Pipeline and Facility Units to review their piping integrity at site. The Company has also conducted a major review of its as-built engineering documentation and pipeline integrity programme, covering the areas of design, construction, operations, inspection, testing and maintenance.

PGB is regret to lose two of its staff in a road accident in December 2014 when the East Coast States of Peninsular Malaysia experienced one of the worst floods in recent years. The Company has taken serious steps to review its standard operating procedure on road transport safety and inspected all Company vehicles. PGB is working closely with PETRONAS Group to improve the road transport safety practice in the Company, including tightening the routine inspection and maintenance check list, and providing defensive driving training to the staff.

Despite the incidents in 2014, the Company has always prioritised HSE performance as encompassed by its emissions management, improved energy efficiency, reduced flaring and the prevention of spills. As part of ongoing efforts to improve its HSE scorecard, in June 2014 PGB managed to recover valuable hydrocarbons from flare gas at the Gas Processing Kertih (GPK) and Gas Processing Santong (GPS) plants through a Flare Gas Recovery Unit Project. The newly installed system has managed to cut down plant emissions and achieved an estimated RM4.4 million of gas saving.

Apart from the yearly exercises on HSEMS assurance and emergency response, PGB in 2014 carried out a Tier-3 Emergency Response Exercise in September, involving its Tanjung Sulong Export Terminal, local regulatory bodies as well as security and emergency response units. The objective of the exercise was to enhance the state of

preparedness of the parties involved and their effectiveness in handling emergencies. The exercise also fulfilled PGB’s safety obligations in line with regulatory requirements.

PGB is committed to continuously improving its HSE programme, and uphold ing a h igh leve l of HSE performance in delivering value to its stakeholders. With the Transformation Programmes in place, PGB will strive towards its 3ZERO100 targets and to elevate the organisation to the next level of the Generative Culture.

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Among PGB’s more recent and significant innovations were the removal of mercury and other impurities from gas streams released from its gas processing plants. PGB is ahead of the curve in mercury management through HycaptureTM Hg, a proprietary ionic liquid mercury removal technology developed by PETRONAS’ Technology & Engineering Division (T&E). PGB volunteered to have a pilot unit built in its Gas Processing Santong (GPS) 6 in 2010. This unit has since delivered an impressive performance, leading to the installation of the system in Gas Processing Kertih (GPK) in June 2014.

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INNOVATION

As a gas infrastructure and utilities company, PGB has always explored new technologies and invested in the latest solutions to improve its operations. Innovative technology provides an opportunity to extract more value from the entire value chain and helps the businesses to perform better.

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In June 2014, PGB has commissioned the new Flare Gas Recovery System in GPK and GPS. The new system has provided an opportunity to recover remaining hydrocarbon from the flare gas system and return it as fuel gas source to the plant. The innovative effort by the Company in reducing emission and hydrocarbon release has resulted in estimated savings of RM4.4 million in the year under review.

With its capable workforce and the adoption of relevant technologies, PGB will always maintain an edge by innovating on the way it operates and maintains its facilities to provide more value to its shareholders and stakeholders.

PGB has also improved its gas turbine maintenance programme by introducing a system that allows gas turbine washing to take place without shutting down the unit. Online gas turbine washing units have been installed at Gas Processing Kertih (GPK), Gas Processing Santong (GPS) and Utilities Kertih (UK). While enabling the gas turbines to run for extended periods without shutting down for maintenance work, the units have also contributed to a saving of estimated RM3.0 million from the improved gas turbine rate efficiency.

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PETRONAS Gas Berhad (PGB)’s Group Human Capital (GHC) methodologies and practices are in line with the world’s best. They are designed to elevate people’s capability to meet the Company’s needs and aspirations.

TO INSTITUTIONALISE THE CAPABILITY DEVELOPMENT IN THE ORGANISATION AND TO ACHIEVE HIGH TECHNICAL CAPABILITY OF ITS WORKFORCE, PGB HAD ESTABLISHED A GAS ACADEMY AND GAS TRANSMISSION ACADEMY IN FEBRUARY 2014.

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HUMAN CAPITAL DEVELOPMENT

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CAPABILITY DEVELOPMENT – MAJOR ACHIEVEMENT FOR 2014

In 2014, PGB established a Capability Development Working Committee (CDWC) to drive and strategise the enhancement and development of staff capability to support business needs and growth. Continuous review by CDWC ensures department heads take accountability and follow through on their staff capability development progress.

DEVELOPMENT OF PGB CAPABILITY FRAMEWORK AND FIVE YEARS ROADMAP

The new techn ica l capab i l i t y f ramework and roadmap ref lect aspirations towards high technically competence and capable workforce. They were developed to provide the way forward for PGB to track its capability development efforts. The mission of the framework and roadmap is to bui ld dist inct ive Technical Capability in Gas Processing and Ut i l i t ies , Gas Transmiss ion and Regasification to support business requirement and expansion. The PGB Technical Capability Framework was developed and approved by PGB Management on 15 April 2014.

PGB “LEADER IN ME” PROGRAM FOR NON-EXECUTIVES

The objective of this programme is to refresh and strengthen the non-executives’ understanding on PETRONAS Behavioural Competencies in order for them to apply the knowledge in their day to day functions and tasks through fun learning activities. The program includes a talk given by a well-known motivational speaker on the expected behaviour and the desired competencies from the non-executive towards achieving high performing workforce under PGB Transformation journey.

GAS ACADEMY AND GAS TRANSMISSION ACADEMY

To institutionalise the capability development in the organisation and to achieve high technical capability of workforce, PGB had established Gas Academy and Gas Transmiss ion Academy in February 2014. The main objective of the academies is to give a proper foundation to new joiners in term of theory and practical, gauge their readiness to take up accountability and responsibility and to have structured learning development programme for Technical Executives in PGB.

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Shareholder ValueSustaining the Company’s profitability

through value creation, efficient extraction and manufacturing processes

Natural Resource UsePromoting efficient use of hydrocarbons

and water and supporting the use of renewable energy

Societal NeedsSafeguarding human rights within our sphere of influence, contributing to

community needs, investing in training and education, promoting arts and

sports and conducting business in a transparent manner

BiodiversityEnsuring projects and operations do not

have significant effect on the diversity of plants and animals

Health, Safety and EnvironmentPreventing and eliminating injuries, health hazard

and damage to properties and communities, including conserving the environment

Climate ChangeLimiting emissions of greenhouse gases

into atmosphere

Product StewardshipEnsuring that products conform to

quality and HSE standards throughout the product lifecycle and

meet the needs of society

PGB initiatives are in line with the PETRONAS’ Group-wide Corporate Responsibility (CR) initiatives that are built upon a heritage of ensuring that the fruits of its efforts are shared with society at large and investing in the future by bringing improvements to the lives of the people today.

The initiatives are guided by the PETRONAS Corporate Sustainability Framework which focuses on seven key result areas:

CORPORATERESPONSIBILITY

CORPORATE SUSTAINABILITY

FRAMEWORK

PETRONAS Gas Berhad (PGB) remains committed to

safeguard the health and safety of the people especially

those living in the areas where it operates, particularly in education, environmental

and community wellbeing and development.

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Towards this end, some of PGB’s signature programmes have grown from strength-to-strength, a testament to the Company’s unrelenting efforts to improve the delivery and impact of these initiatives on its stakeholders in the Marketplace, Workplace, Environment and Community.

Above all, the Company is committed to making a difference in the lives of others in its distinctive way.

At the Marketplace, the Company works hard to build bridges and opportunities for interaction with its shareholders and other important stakeholders, while maintaining the highest standards for its operations and services.

At the Workplace, the Company makes every effort to empower the people with the right knowledge, skills and capabilities. This enables them to grow in their respective career paths and deliver breakthrough performance to the Company, while emphasising on their safety and wellbeing at work, wherever they maybe. In the Environment, the Company ensures that every operation causes minimal adverse impact on the planet. It also champions efforts to drive greater awareness amongst its staff and other stakeholders on preserving the environment for future generations. In the Community, the Company devotes its time, resources and ideas to improve the lives of others by cultivating the younger generations to aspire for greater heights in their academic achievements, as well as to assist the needy and less-fortunate members of the community.

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MARKETPLACE

AT PGB, WE STRIVE TO CONDUCT OUR BUSINESS

RESPONSIBLY TO ADD VALUE TO THE GAS AND

UTILITIES INDUSTRY. WE ARE COMMITTED TO

UPHOLDING HIGH STANDARDS OF GOVERNANCE

AND CORPORATE ETHICS WHICH ENCOMPASS

BEING ACCOUNTABLE, TRANSPARENT AND FAIR IN

DEALINGS WITH ALL OUR STAKEHOLDERS. AT THE

SAME TIME, WE SEEK CONTINUOUSLY TO EXPAND

OUR BUSINESS PORTFOLIO TO SUPPORT THE

NATIONAL AGENDA AS WELL AS OUR OWN BUSINESS

GOALS; ENHANCE OUR STAKEHOLDERS’ KNOWLEDGE

AND UNDERSTANDING OF THE GAS INDUSTRY; AND

ADHERE TO TRANSPARENT PROCUREMENT POLICIES.

BEST PRACTICES IN CORPORATE GOVERNANCE

In adhering to best practices in Corporate Governance, we are guided by the Malaysian Code on Corporate Governance 2012 (MCCG 2012) which clearly outlines the responsibilities of the Board in setting a tone of transparency, integrity and professionalism across the Company. As a measure of our commitment to fulfilling MCCG 2012’s guidelines, we have given due consideration to its recommendation on gender diversity and in 2013 welcomed our first female Board member.

With regard to transparency, we provide comprehensive information about the Company and our performance through our quarterly and annual reports, guaranteeing the accuracy and viability of our financial statements by adhering to the Financial Control Framework. We also provide the opportunity for investors, analysts, shareholders, regulators and other stakeholders to visit our plants and other operational units to gain first-hand exposure to our business. As a member of the PETRONAS Group, we have fully adopted the PETRONAS Code of Conduct and Business Ethics which is applicable to everyone in the organisation, from our Directors to employees on the floor. Supported by a Whistleblowing Policy, this ensures a high level of integrity and professionalism.

CORPORATERESPONSIBILITY

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SUPPORTING THE NATIONAL AGENDA

Malaysia’s power supply is dependent on gas, which makes up about 60% of the generation mix. Supply security is therefore of national interest, and PGB plays a major role in this regard. We are committed to maintaining high operational performance standards at our plants and ensuring seamless delivery of gas and utilities to customers. All our operations are reliable while some have attained world-class standards.

To safeguard the supply of high-quality gas, we have embarked on a Plant Rejuvenation and Revamp Project (PRR) to extend the useful life of our Gas Processing Plants (GPPs) 2, 3 and 4 by another 20 years. As a result of ongoing upgrades, we increased the reliability of our ethane, propane and butane to 95.1%, 95.6% and 95.6% respectively from 89.1%, 91.3% and 91.3% in 2013. Reliability of our sales gas marginally dropped to 99.4% from 99.9% in 2013.

Meanwhile, we continue to maintain an exceptionally high level of system reliability at 99.92% and availability of 99.85% in our gas transmission pipelines.

Our liquefied natural gas (LNG) Regasification Terminal in Sungai Udang, Melaka recorded 79.2% reliability and 73.0% availability as well as Overall Equipment Effectiveness (OEE) of 94.1%, which are encouraging figures for a first full year of operations.

Our Utilities business, which supplies electricity to Kerteh Integrated Petrochemical Complex (KIPC), Gebeng Industrial Area as well as Tenaga Nasional Berhad, achieved reliability of 97.8% for electricity. The supplies of steam and industrial gases achieved reliability of 97.9% and 99.0% respectively.

In addition to supporting energy security via the supply of gas, PGB is now contributing directly to power generation via Kimanis Power Sdn Bhd (KPSB), our joint venture company with Yayasan Sabah. KPSB manages three power plants, which started commercial operations on 16 May, 22 July and 7 November 2014. This 300MW Kimanis Power Plant is expected to meet Sabah’s increasing electricity demand as a full-fledged independent power producer (IPP).

ENHANCING INDUSTRY KNOWLEDGE

PGB believes it is essential to engage with and educate the stakeholders which include government agencies, academia and the public to promote transparency, encourage safe practises in the area of gas technology, stimulate the development of gas industry in Malaysia and create greater understanding of our business and the role of gas as a clean and efficient choice of energy for the nation.

Such efforts also serve to enhance PGB’s positive reputation, the store of goodwill and relationship with our stakeholders.

In 2014, we entertained more than 30 visits to our facilities from various stakeholders.

Our commitment to this cause is evidenced as follows:

1. Engagements with international and domestic corporations through delegation visits to our Gas Processing Plants (GPPs), Utilities plants and Kimanis Power Plant (KPP):• 15 January Republic of South Sudan; oil and gas trainees

• 8 July General Electric, Malaysia• 8 July Load Despatch Centre (LDC), Sabah, Sabah

Electricity Sdn Bhd (SESB) and Energy Commission (EC)

• 9 July China Technical Consultants Inc.

• 5 September Sabah Oil and Gas Terminal (SOGT)• 19 September South Oil Company, Iraq

• 31 October SOGT and other Independent Power

Producers (IPPs)

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CORPORATERESPONSIBILITY

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2. Engagements with local authorities through delegation visits to our GPPs and KPP:• 7 March Department of Environment (DOE)• 16 March DOE• 20 March Department of Safety and Health (DOSH),

Putrajaya

• 24 May DOSH, Putrajaya

• 1 June DOSH• 23 June EC• 26 June DOSH

• 10 July DOSH

• 4 September EC• 23 September EC• 25 September DOSH, Sabah

• 7 October Malaysia Fire and Rescue Department, Papar• 10 October DOE• 10 October Sabah Electricity Sdn Bhd (SESB)• 11 October SESB• 30 October Malaysia Fire and Rescue Department, Kuantan• 31 October EC and SESB

• 6 November Government Agencies from the district of

Papar, Sabah• 15 November SESB and other IPPs• 30 November DOSH, Sabah

3. Engagements with financial institutions through delegation visits to our KPP:• 24 September Bank Negara Malaysia• 24 September Sabah Economic Development And

Investment Authority

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CORPORATERESPONSIBILITY

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TRANSPARENT PROCUREMENT POLICIES

Our Supply Chain Management (SCM) covers the whole cycle of activities from the conception of needs to the disposal of materials and discontinuation of services. It encompasses the process of planning, implementing and controlling supply chain operations with the purpose of satisfying customer requirements as efficiently as possible. Currently, SCM focuses heavily on the procurement of services and materials that ensure the success of our projects, and hence create value for PGB’s growth.

All SCM activities in PGB comply with PETRONAS’ directives and circulars from the Government.

MAXIMISING SHAREHOLDERS’ VALUE

PGB strongly believes in providing our shareholders with a strong communication avenue in order to maximise our shareholders’ value. In FY2014, we have elevated our Investor Relations function to ensure that there is strong engagement between the Company and shareholders. Through this medium, shareholders are in contact regularly with the Company and given regular updates on our business and strategic direction.

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WORKPLACE

RETAINING & DEVELOPING SUCCESSORS FOR PGB: PGB SUCCESSION PLANNING FOR TECHNICAL & NON-TECHNICAL PROFESSIONALS

In 2014, PGB Human Resource Management (HRM) paid special attention on succession planning for critical positions particularly Technical positions. On that note, PGB had successfully conducted Succession Planning workshop for Technical and Non-Technical managers’ positions at Resort World Awana, Kijal on 22 May 2014. A total of 133 Technical and Non-Technical positions including Technical Professional positions were assessed.

The session which was facilitated by our HRM practitioners and chaired by selected Senior Management reviewed Technical and Non-Technical positions, managed potential successors and charted successors development plan prior to their mobility to higher positions.

PGB IS COMMITTED TOWARDS PROVIDING

CHALLENGING, YET FULF ILL ING CAREER

OPPORTUNITIES FOR ITS STAFF, ALLOWING THEM

TO ATTAIN PERSONAL GROWTH AND DEVELOPMENT,

WHICH WOULD SPUR THEM TO CONTRIBUTE TO

THE BREAKTHROUGH PERFORMANCE OF THE

ORGANISATION. DURING THE YEAR, WE HAD ROLLED

OUT A NUMBER OF INITIATIVES TO IMPROVE THE

WAY WE MANAGED THE CAREER DEVELOPMENT

AND GROWTH OF OUR PEOPLE, AS WELL AS WAYS

THROUGH WHICH WE COULD ENHANCE THEIR

CAPABILITIES, SKILLS AND COMPETENCIES.

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CORPORATERESPONSIBILITY

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pg 169

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A total of

interns enrolled in PGB Internship Programme.

In order to strengthen human competencies, PGB initiated

aggressive recruitment

Employee Performance Management (EPM) inculcates a coaching culture

that will propel PGB towards achieving its aspiration as a High Performance Culture organisation

243

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CORPORATERESPONSIBILITY

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PGB Internship Programme

PGB has in place a structured internship programme where it opens to undergraduates from local and overseas universities. These undergraduates will typically spend between three to eight months or one semester at various departments within PGB. The relevant department will propose key activities for the intern prior to their enrolment into this Programme.

During the period of internship, the intern will have the opportunity to understand PGB business in particular as well as Downstream business.

In 2014, a total of 243 interns enrolled in the Programme at three different locations i.e. Head Office (HO), Gas Processing & Utilities (GPU) and Gas Transmission & Regasification (GTR) Divisions with majority of them attached to technical-based departments.

PGB was also recognised by local universities as a good platform for their student to gain and apply their academic knowledge particularly in Technical areas during the Programme.

PGB Talent Management

In order to strengthen human competencies in the organisation PGB had initiated aggressive recruitment together with Downstream Business Unit beginning with Overseas Recruitment in Mumbai from 23 to 28 August 2014 and Middle East Recruitment Drive in Doha and Dubai from 21 to 27 November 2014. As for domestic, PGB had advertised the vacancies in various local newspapers such as The Star, Berita Harian, Daily Express Sabah and Borneo on 18 and 19 October 2014.

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Employee Performance Management (EPM)

Enhanced Performance Management System (PMS), now known as Employee Performance Management (EPM) was approved by the PETRONAS ExCo People Development Committee (PDC). EPM is aimed to drive employees’ individual performance through Coaching, Review & Feedback which would positively impact the overall business objectives.

EPM will boost employees’ performance and delivery. It inculcates a coaching culture that will propel PGB towards achieving its aspiration as a High Performance Culture organisation. PGB employees will be able to drive and enhance their own performance which will ultimately benefit the organisation.

GOAL SETTING & ALIGN

MEN

T

HIG

H P

ERFO

RM

AN

CE

CU

LTU

RE REWARD & CON

SEQU

EN

CE

WHOLESALE AP

PR

AISAL

COACHING & REVIEWFEEDBCK

COACHING, REVIEW & FEEDBACKCoaching, Review and Feedback are illustrated as the continuous engagement driver that accelerates the journey towards the aspiration in becoming High Performing Organisation.

WHOLESALE APPRAISALBoth superior and subordinate will collect data and evidence to conduct the periodic and Year End Performance review, which consist of Performance Objectives, Leadership Behaviour, Shared Values and People Management Contribution.

GOAL SETTING & ALIGNMENTEPM activities begin with Goal Setting & Alignment where Business Units set, discuss and cascade the strategic priorities and performance objectives.

These performance objectives will be cascaded down to employees at all level to drive the one-on-one expectation setting discussion with Superior and must be aligned with business target.

REWARD & CONSEQUENCEPerformance result based on differentiated performance standard, are linked to meaningful reward and right consequence to motivate and sustain High Performance Culture in ensuring continuous performance achievement.

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CORPORATERESPONSIBILITY

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From the top, Managing Director/Chief Executive Officer (MD/CEO), General Managers (GMs) and other Senior Management staff will pioneer the transformation through coaching interventions and they are expected to cascade best practices within their respective units. At the same time, their subordinates will be equipped with basic awareness and understanding of coaching methods as well as seek continuous feedback. This two-pronged strategy will further instill a coaching culture in PGB.

PGB’s HR policies are aligned to the PETRONAS policy & procedures on the areas of Human Resources. This is to ensure that the Company practices best in class HR policies and procedures especially with regards to Human Capital Development

Code of Conduct and Business Ethics (CoBe)

The objective of CoBe which is to provide an ethical and law abiding culture in the Company has provided enormous benefit to the organisation. All PGB staff are expected to uphold the highest standards in taking actions that reflect well on the Company and public interest.

As such, PGB has subscribed to the PETRONAS’ Code of Conduct and Business Ethics that was benchmarked to international standards, with PETRONAS shared values serve as the guide concerning how all staff are expected to conduct themselves at work.

Anti – Bribery and Corruption (ABC) Policy

PGB has a zero tolerance policy against all forms of bribery and corruption. PGB has adopted the PETRONAS Anti – Bribery and Corruption Policy and Guidelines which provides guidance to employees concerning how to deal with improper solicitation, bribery and other corrupt activities and issues that may arise in the course of business.

Whistleblowing Policy

Whistleblowing Policy is part of the Anti-Bribery & Corruption Policy. It is a platform for employees and members of the public to report any improper conduct, committed or about to be committed by PETRONAS staff. Under this policy, the identity of the person who reports the misconduct is protected.

PETRONAS Raid Protocol

PGB’s policies are aligned to the PETRONAS Raid Protocol in ensuring appropriate manner in handling interaction with, and submission of information and data to the authorities in the event that raids are carried out in PETRONAS’s offices worldwide. It is an internal procedure in response to the powers of the authorities under relevant laws and various jurisdictions.

pg 173

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ENVIRONMENT

PROTECTING THE ENVIRONMENT

BY SUPPLYING GAS TO MEET THE COUNTRY’S

ENERGY GENERATION MIX, PGB IS CONTRIBUTING

IN A POSITIVE WAY TO A LOWERED CARBON

FOOTPRINT AS GAS IS A CLEANER FUEL THAN OIL,

COAL AND OTHER PETROLEUM DERIVATIVES.

HOWEVER, AS A GAS INFRASTRUCTURE AND UTILITIES

COMPANY, IT ACKNOWLEDGES THE ADDITIONAL

RESPONSIBILITY TO ENSURE ITS PROCESSES AND

SYSTEMS ARE AS EFFICIENT AS POSSIBLE TO MINIMISE

IMPACT TO THE ENVIRONMENT.

COMMITMENT TO GREENHOUSE GAS EMISSIONS REDUCTION

PGB has installed Flare Gas Recovery Unit at both Gas Processing Santong and Gas Processing Kertih in 2014 to reduce the flaring emission, by recovering hydrocarbon in flare system into plant fuel gas. PGB will continue to monitor its emissions and report it using the IPIECA [International Petroleum Industry Environmental Conservation Association] GHG Accounting and Reporting Guidelines via SANGEA® software.

pg 174PETRONAS GAS BERHAD (101671-H)

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CORPORATERESPONSIBILITY

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COMMITMENT TO OPTIMISING ENERGY CONSUMPTION

A comprehensive list of new initiatives undertaken in 2014 to reduce energy consumption are as follows:

• installation of high pressure online washing at Gas Turbines inlet in 2014 at the Utilities Kerteh (UK) and Gas Processing Kertih (GPK), both in Terengganu; and Gas Processing Santong (GPS) resulted in improvement in heat rate.

• installation of Flare Gas Recovery Unit which has resulted in recovery of hydrocarbon in flare system into fuel gas.

COMMITMENT TO MANAGING WATER CONSUMPTION AND WITHDRAWAL

For social and economic reasons, PGB constantly monitors our water usage, and identifies water conservation and recycling opportunities to avoid depletion of our freshwater reserves. In the year under review, a total of 7.9 million cubic metres (m3) of freshwater was withdrawn as compared to 5.5 million m3 in 2013, marking an increase of 48%. The increment was due to shutdown of Brine Reverse Osmosis (BRO) recovery systems, and plant shutdown attributed to Plant Revamp and Rejuvenation 2 Project (PRR2) in 2013.

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CORPORATERESPONSIBILITY

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COMMITMENT TO WASTE MINIMISATION

PGB has put in place a waste minimisation roadmap which focuses on creating efficiencies at every point along the waste chain. The Company adopts a holistic approach to waste management that sees it conducting the Environmental Impact Assessments (EIA) prior to embarking on any project. As a result, the Company is able to minimise of waste generation, while also having mechanisms to recover hazardous wastes and to convert special waste.

During the year, a total of 901 metric tonnes (Mt) of waste was generated as compared to 909 Mt in 2013, marking a 1% reduction. Apart from continuous recovery of waste efforts that we have embarked since 2012, our waste management has not only enhanced our environmental profile but also contributed to RM400K in operational savings in 2014.

COMMITMENT TO BIODIVERSITY CONSERVATION

PGB recognises the importance of conserving the environment, particularly areas with high biodiversity value. As a rule, the company analyses the potential impact of its operations on the ecosystem via EIAs and carefully plan activities to preserve the country’s natural assets.

Proactive management actions are focused on preserving the mangrove area neighbouring the Pengerang Gas Pipeline project in Johor and stretches of rainforest that is traversed by the Sabah-Sarawak Gas Pipeline (SSGP).

To protect the mangrove ecosystem, PGB has strategised a range of mitigation activities to be put in place at the construction as well as operational stages. These include plans to minimise disturbance of the downstream portion of the mangrove area of Sungai Lebam as a result of PGB’s soon to be implemented pipeline laying and burial works based on Environmental Management Plan (EMP) recommendations.

In Sabah and Sarawak, PGB also acknowledges some species within the pipeline corridor are either endemic to Borneo, totally protected species or belong to highly endangered categories. Consequently, stringent measures have been put in place to minimise the project’s impact on the natural environment during construction stage. These include the prevention of poaching and hunting of protected species, protection of slopes, reclaiming of degraded areas via re-turfing and constant environmental awareness sessions for our contractors.

While the Company focuses on its transformation journey, PGB continues its commitment towards improving the fragile ecosystems. Towards this end, PGB has done a desktop analysis to monitor the growth of the mangrove plantlets in Kuala Selangor Nature Park which the Company planted in 2013. This is to ensure the growth is sustained after a year. At the same time, this initiative is expected to enhance the good relationship with an non-governmental organisation (NGO) such as Malaysian Nature Society (MNS) who is actively in conservation effort.

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COMMUNITY

PGB REBRANDED ITS FLAGSHIP CORPORATE SOCIAL

INVESTMENT (CSI) INITIATIVE KNOWN AS PROGRAM

BAKTI PENDIDIKAN PETRONAS (PBPP) INTO PROGRAM

SENTUHAN ILMU PETRONAS (PSIP), TO REALIGN

WITH THE PETRONAS’ GROUP-WIDE CSI EFFORT.

This programme underlines PETRONAS’ unparalleled commitment and unified efforts towards contributing to the growth and transformation of the nation in addition to grasping the concept of empowering people’s lives through education. Under this programme, PGB has adopted the following schools:

• Sekolah Kebangsaan Santong in Paka, Terengganu (2005)

• Sekolah Kebangsaan Batu Anam in Segamat, Johor (2008)

• Sekolah Kebangsaan Sungai Baging in Kuantan, Pahang (2012)

• Sekolah Kebangsaan Cherana Puteh in Simpang Ampat, Melaka (2013)

Some criteria for the PSIP targeted audience include:

• Borderline students

• Low income families

• Students of families who have yet to receive assistance from the government

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CORPORATERESPONSIBILITY

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During the year under review, PGB adopted Sekolah Cherana Puteh in Melaka. Under the PSIP banner, the school is the first adopted institute by PGB which has the most number of orang Asli pupils. This sums up the total number of schools to four adopted schools.

COMMUNITY OUTREACH

PGB Corporate Social Responsibility Programme

PGB Corporate Social Responsibility Programmes (CSR) are tailored to add value to every community relations activity in helping the less fortunate while indoctrinating amongst our staff the spirit of helping the underprivileged. These programmes remain as PGB’s main agenda to instil a sense of gratitude and responsibility to the community, our staff and their family members.

During the year under review, PGB continued to implement its comprehensive and staff driven CSR programmes from assisting senior citizens, single mothers and physically challenged in addition to giving motivational and moral support to orphans.

Its CSR programmes are formulated with the guiding principles of adhering closely to the Company’s tagline which was “Bakti Dihulur, Kasih Disemai” or instilling the spirit of caring for each other.

The general CSR criteria for its target audience or group are:

• Welfare homes which include old folks home

• Orphanage and shelter organisations

• Cases of extreme poverty

• Hospital or Health Care Centers

• Education Centers

• Victims in any natural disaster hit areas

PGB Community Engagement

PGB emphasises great importance in reaching out to the communities wherever it operates. This is realised through specially crafted and organised communication sessions that allow closer interaction with the community. These engagements are used to leverage and share greater details the nature of its business as well as to foster an understanding on the safety measures that the residents of surrounding areas need to be aware of, in the unlikely event of an emergency.

pg 180PETRONAS GAS BERHAD (101671-H)

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CORPORATERESPONSIBILITY

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Quick facts at a glance on CSR conducted in 2014:

• Total donation from Staff

RM67,065

• Total number of Staff participated

1,369

• Total number of hours spent per staff (average)

• Total hours of Community Service (average)

12 hours

15,552 hours

• Total donation from Company

RM166,000

• Number of CSR programmes conducted

• Total collective man-hours spent (average)

• Average number of CSR conducted monthly

36

432 hours

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HIGHLIGHTS OF KEY ENGAGEMENTS WITH THE COMMUNITY IN 2014:

Transformational CSR programmes

PGB’s CSR programmes are tailored with the end in mind at focusing on enhancing the lives of the poor whilst enriching them with the knowledge of our business and fulfilling their basic needs. During the year under review, several high impact programmes were conducted that aimed around these missions.

One of the programmes, dubbed the “Food Basket” event, was a part of a two-day event to provide the less fortunate families in Subang Jaya by providing them with basic food necessities such as rice, malted drinks, cooking oils and other groceries. Whilst the second day portion of the event was followed by the mission to help the underprivileged school students’ provisional items such as school uniforms, shoes, school bag and stationaries at Masjid Aminah SS2, Petaling Jaya. The successful CSR session was graced by our MD/CEO together with the Management Committee whom also shared their aspiration with the students.

This session also gave the Company a first-hand understanding on the business we are engaged in, as well as allowing open and direct communications between PGB representatives and the communities.

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CORPORATERESPONSIBILITY

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Metamorphosing the people of Sabah

PGB’s new business venture, Kimanis Power Plant (KPP), which was fully operational in November 2014, is our commitment in delivering more to the society while increasing our business portfolio and presence beyond Peninsular Malaysia.

KPP project which is situated in Kimanis in Papar, Sabah is a project developed by Kimanis Power Sdn Bhd, a joint venture company between PGB and NRG Consortium (Sabah) Sdn Bhd, the energy counterpart of Yayasan Sabah. PGB in 2012, signed a 21-year Power Purchase Agreement with Sabah Electricity Sdn Bhd.

From the inception of this project, PGB and its partner have made it a target to provide employment to local Sabahans, as part of PETRONAS’ larger human capital building efforts. In 2014, the total number of locally employed staff in KPP and Kimanis O&M Sdn Bhd (KOMSB) was 24 against a total staff strength of 38. This means that the percentage of local (Sabahans) employed in KPP and KOMSB reached some 63% of its manpower.

It is predicted that more local businesses around the area in Kimanis will benefit from business opportunities due to the domino effect of growth since KPP started its full-scale operations in November 2014; hence transforming the lives of local Sabahans into a robust growing community.

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FINANCIALSTATEMENTS

185 Statement of Directors’ Responsibility in Relation to the Financial Statements

186 Directors’ Report191 Statement by Directors191 Statutory Declaration192 Consolidated Statement of Financial Position193 Consolidated Statement of Profit or Loss and

Other Comprehensive Income194 Consolidated Statement of Changes in Equity196 Consolidated Statement of Cash Flows197 Statement of Financial Position198 Statement of Profit or Loss and Other

Comprehensive Income199 Statement of Changes in Equity200 Statement of Cash Flows201 Notes to the Financial Statements260 Independent Auditors’ Report

to the members of PETRONAS Gas Berhad

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The financial statements of the Group and of the Company as set out on pages 192 to 259, 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 2014 and of the results of its operations and cash flows for the year ended on that date.

The Directors consider that in preparing the financial 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 Financial Reporting Standards and the Malaysian Companies Act, 1965 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 Malaysian Companies Act, 1965 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.

pg 185

STATEMENT OF DIRECTORS’ RESPONSIBILITYIN RELATION TO THE FINANCIAL STATEMENTS

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The Directors have pleasure in submitting their report and the audited financial statements of the Group and of the Company for the financial year ended 31 December 2014.

PRINCIPAL ACTIVITIES

The principal activities of the Company in the course of the financial year remain 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 the subsidiaries, associate and joint ventures are as stated in note 4, note 5 and note 6 to the financial statements respectively.

RESULTS

Group RM’000

Company RM’000

Profit for the year 1,842,080 1,694,369

Attributable to:

Shareholders of the Company 1,843,186 –

Non-controlling interests (1,106) –

DIVIDENDS

During the financial year, the Company paid:

i) a final dividend of 40 sen per ordinary share under single tier system amounting to RM791,494,000 in respect of the financial year ended 31 December 2013 on 10 June 2014;

ii) a first interim dividend of 20 sen per ordinary share under single tier system amounting to RM395,747,000 in respect of the financial year ended 31 December 2014 on 11 September 2014; and

iii) a second interim dividend of 20 sen per ordinary share under single tier system amounting to RM395,747,000 in respect of the financial year ended 31 December 2014 on 8 December 2014.

The Directors had on 17 February 2015 declared a third interim dividend of 15 sen per ordinary share under single tier system amounting to RM296,810,000 in respect of the financial year ended 31 December 2014.

The financial statements for the current financial year do not reflect the declared interim dividend. The dividend, will be accounted for in equity as an appropriation of retained profits in the financial statements for the financial year ending 31 December 2015.

RESERVES AND PROVISIONS

There were no material movements to and from reserves and provisions during the year other than as disclosed in the financial statements.

pg 186PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

DIRECTORS’ REPORTfor the year ended 31 December 2014

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DIRECTORS OF THE COMPANY

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

Datuk Manharlal Ratilal (appointed on 15 May 2014)Dato’ N. Sadasivan N.N. PillayDatuk Rosli bin Boni Ir. Pramod Kumar KarunakaranDato’ Ab. Halim bin MohyiddinLim Beng ChoonYusa’ bin HassanHabibah binti AbdulDatuk Anuar bin Ahmad (resigned on 15 May 2014)

In accordance with Article 93 of the Company’s Articles of Association, Datuk Rosli bin Boni and Dato’ Ab. Halim bin Mohyiddin 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, Datuk Manharlal Ratilal who was appointed to fill a casual vacancy on the Board, will retire at the forthcoming Annual General Meeting, and being eligible, offer himself 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 office 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 (including the interests of the spouses and/or children of the Director who themselves are not Director of the Company) as recorded in the Register of Directors’ Shareholdings are as follows:

Number of ordinary shares of RM1.00 each in the Company

NameBalance at

1.1.2014 Bought SoldBalance at31.12.2014

Dato’ Ab. Halim bin Mohyiddin 5,000 – – 5,000

Number of ordinary shares of RM1.00 each in KLCC Property Holdings Berhad

Name

At appointment

date Bought SoldBalance at31.12.2014

Datuk Manharlal Ratilal 5,000 – – 5,000

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DIRECTORS’ INTERESTS (continued)

Number of ordinary shares of RM0.50 each in Malaysia Marine and Heavy Engineering Holdings Berhad

NameBalance at

1.1.2014 Bought SoldBalance at31.12.2014

Dato’ Ab. Halim bin Mohyiddin 5,000 – – 5,000

Number of ordinary shares of RM0.10 each in PETRONAS Chemicals Group Berhad

Name

Balance at1.1.2014/

appointmentdate Bought Sold

Balance at31.12.2014

Datuk Manharlal Ratilal 20,000 – – 20,000

Datuk Rosli bin Boni 6,000 6,000 – 12,000

Ir. Pramod Kumar Karunakaran 6,000 – – 6,000

Dato’ Ab. Halim bin Mohyiddin

– own 5,000 – – 5,000

– others 5,000 – – 5,000

Yusa’ bin Hassan 14,000 – – 14,000

None of the other Directors holding office at 31 December 2014 had any interest in the ordinary shares of the Company and of its related corporations during the financial year.

DIRECTORS’ BENEFITS

Since the end of the previous financial year, no Director of the Company has received nor become entitled to receive any benefit (other than the benefit included in the aggregate amount of emoluments received or due and receivable by Directors as shown in the financial statements or the fixed 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 firm of which the Director is a member, or with a company in which the Director has a substantial financial interest.

There were no arrangements during and at the end of the financial year which had the object of enabling Directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.

ISSUE OF SHARES

There were no changes in the issued and paid up capital of the Company during the financial year.

OPTIONS GRANTED OVER UNISSUED SHARES

No options were granted to any person to take up unissued shares of the Company during the financial year.

pg 188PETRONAS GAS BERHAD (101671-H)

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DIRECTORS’ REPORTfor the year ended 31 December 2014

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OTHER STATUTORY INFORMATION

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

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

i) any charge on the assets of the Group or of the Company that has arisen since the end of the financial year and which secures the liabilities of any other person; or

ii) any contingent liability in respect of the Group or of the Company that has arisen since the end of the financial 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 financial 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 financial performance of the Group and of the Company for the financial year ended 31 December 2014 have not been substantially affected by any item, transaction or event of a material and unusual nature nor has any such item, transaction or event occurred in the interval between the end of that financial year and the date of this report.

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SIGNIFICANT EVENT DURING THE FINANCIAL YEAR

Shareholders Agreement for the development of Liquefied Natural Gas (LNG) Regasification Terminal in Pengerang Deep Water Terminal, Johor.

On 14 November 2014, the Company entered into a Shareholders Agreement with Dialog LNG Sdn. Bhd. (Dialog) and Pengerang LNG (Two) Sdn. Bhd. (PLNG2) for the establishment of a company to undertake the development of an LNG Regasification Terminal located at the Pengerang Deep Water Terminal, Johor. PLNG2 is the special purpose vehicle for the said company. The information on the acquisition of PLNG2 as a subsidiary of the Group is set out in note 24 on page 236 to the financial statements.

SUBSEQUENT EVENTS

There were no material events subsequent to the end of the financial year.

AUDITORS

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

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

Datuk Manharlal Ratilal

Yusa’ bin Hassan

Kuala Lumpur,17 February 2015

pg 190PETRONAS GAS BERHAD (101671-H)

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DIRECTORS’ REPORTfor the year ended 31 December 2014

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In the opinion of the Directors, the financial statements set out on pages 192 to 259, 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 financial position of the Group and of the Company at 31 December 2014 and of their financial performance and cash flows for the year ended on that date.

In the opinion of the Directors, the information set out in note 34 on page 259 to the financial statements has been compiled in accordance with the Guidance on Special Matter No.1, Determination of Realised and Unrealised Profits 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 Directorsin accordance with a resolution of the Directors:

Datuk Manharlal Ratilal

Yusa’ bin Hassan

Kuala Lumpur, 17 February 2015

I, Aida Aziza binti Mohd Jamaludin, the officer primarily responsible for the financial management of PETRONAS GAS BERHAD, do solemnly and sincerely declare that the financial statements set out on pages 192 to 259 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 17 February 2015.

BEFORE ME:

pg 191

STATEMENT BY DIRECTORS

STATUTORY DECLARATION

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Note31.12.2014

RM’00031.12.2013

RM’000

ASSETS

Property, plant and equipment 3 10,858,461 10,611,108

Investment in associate 5 132,335 129,047

Investment in joint ventures 6 468,399 201,996

Deferred tax assets 7 511,434 603,049

TOTAL NON-CURRENT ASSETS 11,970,629 11,545,200

Trade and other inventories 8 43,384 38,615

Trade and other receivables 9 608,718 711,471

Fund and other investments 10 – 15,010

Cash and cash equivalents 11 637,746 912,123

TOTAL CURRENT ASSETS 1,289,848 1,677,219

TOTAL ASSETS 13,260,477 13,222,419

EQUITY

Share capital 12 1,978,732 1,978,732

Reserves 13 8,555,146 8,286,998

Total equity attributable to the shareholders of the Company 10,533,878 10,265,730

Non-controlling interests 14 35,125 (183)

TOTAL EQUITY 10,569,003 10,265,547

LIABILITIES

Finance lease liabilities 15 861,223 824,061

Deferred tax liabilities 7 1,033,321 981,000

Deferred income 16 7,798 12,336

TOTAL NON-CURRENT LIABILITIES 1,902,342 1,817,397

Trade and other payables 17 668,185 1,014,437

Finance lease liabilities 15 21,027 17,731

Taxation 99,920 107,307

TOTAL CURRENT LIABILITIES 789,132 1,139,475

TOTAL LIABILITIES 2,691,474 2,956,872

TOTAL EQUITY AND LIABILITIES 13,260,477 13,222,419

The notes set out on pages 201 to 259 are an integral part of these financial statements.

pg 192PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

CONSOLIDATED STATEMENT OF FINANCIAL POSITIONat 31 December 2014

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Note2014

RM’0002013

RM’000

Revenue 18 4,391,716 3,892,139

Cost of revenue 18 (2,179,498) (1,947,274)

Gross profit 18 2,212,218 1,944,865

Administration expenses (74,843) (120,014)

Other expenses (96,215) (92,001)

Other income 100,899 170,893

Operating profit 19 2,142,059 1,903,743

Financing costs 20 (76,328) (50,117)

Share of profit after tax of equity-accounted associate and joint ventures 288,728 42,793

Profit before taxation 2,354,459 1,896,419

Tax (expense)/income 21 (512,379) 182,457

Profit for the year 1,842,080 2,078,876

Other comprehensive income

Item that may be reclassified subsequently to profit or loss

Share of cash flow hedge of an equity-accounted joint venture 7,950 8,782

TOTAL COMPREHENSIVE INCOME FOR THE YEAR 1,850,030 2,087,658

Profit/(loss) attributable to:

Shareholders of the Company 1,843,186 2,078,888

Non-controlling interests 14 (1,106) (12)

PROFIT FOR THE YEAR 1,842,080 2,078,876

Total comprehensive income/(expense) attributable to:

Shareholders of the Company 1,851,136 2,087,670

Non-controlling interests (1,106) (12)

TOTAL COMPREHENSIVE INCOME FOR THE YEAR 1,850,030 2,087,658

Basic and diluted earnings per ordinary share (sen) 23 93.1 105.1

The notes set out on pages 201 to 259 are an integral part of these financial statements.

pg 193

CONSOLIDATED STATEMENT OF PROFIT OR LOSS ANDOTHER COMPREHENSIVE INCOMEfor the year ended 31 December 2014

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Attributable to shareholders of the Company

Non-distributable Distributable

NoteShare

capitalRM’000

Share premium

RM’000

Hedging reserveRM’000

Retained profits

RM’000Total

RM’000

Balance at 1 January 2013 1,978,732 1,186,472 (4,186) 6,006,408 9,167,426

Share of cash flow hedge of an equity-accounted joint venture – – 8,782 – 8,782

Profit for the year – – – 2,078,888 2,078,888

Total comprehensive income for the year – – 8,782 2,078,888 2,087,670

Dividends – 31.12.2012 final 22 – – – (692,556) (692,556)

Dividends – 31.12.2013 interim 22 – – – (296,810) (296,810)

Total distribution to shareholders of the Company – – – (989,366) (989,366)

Balance at 31 December 2013 1,978,732 1,186,472 4,596 7,095,930 10,265,730

Balance at 1 January 2014 1,978,732 1,186,472 4,596 7,095,930 10,265,730

Share of cash flow hedge of an equity-accounted joint venture – – 7,950 – 7,950

Profit for the year – – – 1,843,186 1,843,186

Total comprehensive income for the year – – 7,950 1,843,186 1,851,136

Issuance of shares to non-controlling interest – – – – –

Dividends – 31.12.2013 final 22 – – – (791,494) (791,494)

Dividends – 31.12.2014 interim 22 – – – (791,494) (791,494)

Total transactions with shareholders of the Company – – – (1,582,988) (1,582,988)

Balance at 31 December 2014 1,978,732 1,186,472 12,546 7,356,128 10,533,878

Continue to next page.

The notes set out on pages 201 to 259 are an integral part of these financial statements.

pg 194PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

CONSOLIDATED STATEMENT OF CHANGES IN EQUITYfor the year ended 31 December 2014

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Note

Non- controlling

interestsRM’000

Total equityRM’000

Balance at 1 January 2013 (171) 9,167,255

Share of cash flow hedge of an equity-accounted joint venture – 8,782

Profit for the year (12) 2,078,876

Total comprehensive income for the year (12) 2,087,658

Dividends – 31.12.2012 final 22 – (692,556)

Dividends – 31.12.2013 interim 22 – (296,810)

Total distribution to shareholders of the Company – (989,366)

Balance at 31 December 2013 (183) 10,265,547

Balance at 1 January 2014 (183) 10,265,547

Share of cash flow hedge of an equity-accounted joint venture – 7,950

Profit for the year (1,106) 1,842,080

Total comprehensive income for the year (1,106) 1,850,030

Issuance of shares to non-controlling interest 36,414 36,414

Dividends – 31.12.2013 final 22 – (791,494)

Dividends – 31.12.2014 interim 22 – (791,494)

Total transactions with shareholders of the Company 36,414 (1,546,574)

Balance at 31 December 2014 35,125 10,569,003

Continue from previous page.

The notes set out on pages 201 to 259 are an integral part of these financial statements.

pg 195

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Note2014

RM’0002013

RM’000

CASH FLOWS FROM OPERATING ACTIVITIES

Cash receipts from customers 4,547,268 3,665,257

Cash paid to suppliers and employees (1,631,831) (1,022,526)

2,915,437 2,642,731

Interest income from fund and other investments 37,056 49,071

Taxation paid (375,830) (458,168)

Net cash generated from operating activities 2,576,663 2,233,634

CASH FLOWS FROM INVESTING ACTIVITIES

Dividends received from associate and joint venture 26,987 29,512

Acquisition of subsidiary, net of cash acquired 24 2,101 –

Purchase of property, plant and equipment (1,254,029) (1,631,094)

Maturity of other investments 15,000 145,000

Proceeds from disposal of property, plant and equipment 268 499

Net cash used in investing activities (1,209,673) (1,456,083)

CASH FLOWS FROM FINANCING ACTIVITIES

Dividends paid (1,582,988) (989,366)

Financing costs paid (76,247) (112,671)

Proceeds from shares issued to non-controlling interest 36,414 –

Repayment of finance lease liabilities (18,546) (15,510)

Repayment of term loan to holding company – (454,100)

Net cash used in financing activities (1,641,367) (1,571,647)

NET DECREASE IN CASH AND CASH EQUIVALENTS (274,377) (794,096)

CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR 912,123 1,706,219

CASH AND CASH EQUIVALENTS AT END OF THE YEAR 11 637,746 912,123

The notes set out on pages 201 to 259 are an integral part of these financial statements.

pg 196PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

CONSOLIDATED STATEMENT OF CASH FLOWS for the year ended 31 December 2014

Page 201: Driving Transformation

Note31.12.2014

RM’00031.12.2013

RM’000

ASSETS

Property, plant and equipment 3 7,537,445 7,158,798

Investment in subsidiaries 4 2,514,767 2,420,101

Investment in associate 5 76,466 76,466

Investment in joint ventures 6 192,250 192,250

TOTAL NON-CURRENT ASSETS 10,320,928 9,847,615

Trade and other inventories 8 42,904 38,528

Trade and other receivables 9 613,330 1,083,184

Fund and other investments 10 – 15,010

Cash and cash equivalents 11 492,474 705,846

TOTAL CURRENT ASSETS 1,148,708 1,842,568

TOTAL ASSETS 11,469,636 11,690,183

EQUITY

Share capital 12 1,978,732 1,978,732

Reserves 13 7,732,476 7,621,095

TOTAL EQUITY 9,711,208 9,599,827

LIABILITIES

Deferred tax liabilities 7 1,033,321 981,000

Deferred income 16 7,798 12,336

TOTAL NON-CURRENT LIABILITIES 1,041,119 993,336

Trade and other payables 17 617,390 989,714

Taxation 99,919 107,306

TOTAL CURRENT LIABILITIES 717,309 1,097,020

TOTAL LIABILITIES 1,758,428 2,090,356

TOTAL EQUITY AND LIABILITIES 11,469,636 11,690,183

The notes set out on pages 201 to 259 are an integral part of these financial statements.

pg 197

STATEMENT OF FINANCIAL POSITIONat 31 December 2014

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Note31.12.2014

RM’00031.12.2013

RM’000

Revenue 18 3,775,496 3,553,948

Cost of revenue 18 (1,871,257) (1,772,560)

Gross profit 18 1,904,239 1,781,388

Administration expenses (73,339) (117,117)

Other expenses (43,389) (8,564)

Other income 327,622 192,513

Operating profit 19 2,115,133 1,848,220

Financing costs 20 – (9,319)

Profit before taxation 2,115,133 1,838,901

Tax expense 21 (420,764) (420,592)

PROFIT FOR THE YEAR REPRESENTING TOTAL COMPREHENSIVE INCOME FOR THE YEAR 1,694,369 1,418,309

The notes set out on pages 201 to 259 are an integral part of these financial statements.

pg 198PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

STATEMENT OF PROFIT OR LOSS ANDOTHER COMPREHENSIVE INCOMEfor the year ended 31 December 2014

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Attributable to shareholders of the Company

Non-distributable Distributable

Note

Share capital

RM’000

Share premium

RM’000

Retained profitsRM’000

TotalRM’000

Balance at 1 January 2013 1,978,732 1,186,472 6,005,680 9,170,884

Profit for the year – – 1,418,309 1,418,309

Total comprehensive income for the year – – 1,418,309 1,418,309

Dividends – 31.12.2012 final 22 – – (692,556) (692,556)

Dividends – 31.12.2013 interim 22 – – (296,810) (296,810)

Total distribution to shareholders of the Company – – (989,366) (989,366)

Balance at 31 December 2013 1,978,732 1,186,472 6,434,623 9,599,827

Balance at 1 January 2014 1,978,732 1,186,472 6,434,623 9,599,827

Profit for the year – – 1,694,369 1,694,369

Total comprehensive income for the year – – 1,694,369 1,694,369

Dividends – 31.12.2013 final 22 – – (791,494) (791,494)

Dividends – 31.12.2014 interim 22 – – (791,494) (791,494)

Total distribution to shareholders of the Company – – (1,582,988) (1,582,988)

Balance at 31 December 2014 1,978,732 1,186,472 6,546,004 9,711,208

The notes set out on pages 201 to 259 are an integral part of these financial statements.

pg 199

STATEMENT OF CHANGES IN EQUITYfor the year ended 31 December 2014

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Note2014

RM’0002013

RM’000

CASH FLOWS FROM OPERATING ACTIVITIES

Cash receipts from customers 3,916,009 3,487,100

Cash paid to suppliers and employees (1,427,079) (1,004,181)

2,488,930 2,482,919

Interest income from fund and other investments 28,484 47,773

Taxation paid (375,830) (458,169)

Net cash generated from operating activities 2,141,584 2,072,523

CASH FLOWS FROM INVESTING ACTIVITIES

Repayment from/(advances to) subsidiaries 289,190 (454,903)

Acquisition of subsidiary 24 (94,666) –

Subscription of new shares in existing subsidiaries – (225,916)

Dividends received 226,987 29,512

Purchase of property, plant and equipment (1,208,747) (1,105,619)

Maturity of other investments 15,000 145,000

Proceeds from disposal of property, plant and equipment 268 499

Net cash used in investing activities (771,968) (1,611,427)

CASH FLOWS FROM FINANCING ACTIVITIES

Dividends paid (1,582,988) (989,366)

Financing costs paid – (18,003)

Repayment of term loan to holding company – (454,100)

Net cash used in financing activities (1,582,988) (1,461,469)

NET DECREASE IN CASH AND CASH EQUIVALENTS (213,372) (1,000,373)

CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR 705,846 1,706,219

CASH AND CASH EQUIVALENTS AT END OF THE YEAR 11 492,474 705,846

The notes set out on pages 201 to 259 are an integral part of these financial statements.

pg 200PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

STATEMENT OF CASH FLOWSfor the year ended 31 December 2014

Page 205: Driving Transformation

PETRONAS GAS BERHAD is a public limited liability company, incorporated and domiciled in Malaysia and is listed on the Main Market of Bursa Malaysia Securities Berhad. The address of the principal place of business and registered office of the Company is as follows:

Tower 1, PETRONAS Twin Towers Kuala 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 joint ventures are as stated in note 4, note 5 and note 6 to the financial statements respectively.

The holding company as well as the ultimate holding company is Petroliam Nasional Berhad (PETRONAS), a company incorporated in Malaysia.

The consolidated financial statements of the Company as at and for the financial year ended 31 December 2014 comprises the Company and its subsidiaries (together referred to as the “Group”) and the Group’s interest in an associate and joint ventures.

1. BASIS OF PREPARATION

1.1 Statement of compliance

The financial statements of the Group and of the Company have been prepared in accordance with Malaysian Financial Reporting Standards (MFRS), International Financial Reporting Standards and the Companies Act, 1965 in Malaysia.

These financial statements also comply with the applicable disclosure provisions of the Listing Requirements of Bursa Malaysia Securities Berhad.

As of 1 January 2014, the Group and the Company have adopted amendments to MFRS, and IC Interpretations (collectively referred to as “pronouncements”) that have been issued by the Malaysian Accounting Standards Board (MASB) as described fully in note 31.

MASB has also issued new pronouncements which are not yet effective for the Group and the Company and therefore, have not been adopted for in these financial statements. These new pronouncements including their impact on the financial statements in the period of initial application are set out in note 32. New pronouncements and revised pronouncements that are not relevant to the operation of the Group and of the Company are set out in note 33.

These financial statements were approved and authorised for issue by the Board of Directors on 17 February 2015.

1.2 Basis of measurement

The financial statements of the Group and the Company have been prepared on historical cost basis except that, as disclosed in the accounting policies below, certain items are measured at fair value.

1.3 Functional and presentation currency

The individual financial 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 financial statements are presented in Ringgit Malaysia (RM), which is the Company’s functional currency.

All financial information is presented in RM and has been rounded to the nearest thousand, unless otherwise stated.

pg 201

NOTES TO THE FINANCIAL STATEMENTS– 31 December 2014

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1. BASIS OF PREPARATION (continued)

1.4 Use of estimates and judgments

The preparation of the financial statements in conformity with MFRS 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 estimates are revised and in any future periods affected.

In particular, information about significant areas of estimation, uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements are described in the following notes:

i) Note 3 : Property, plant and equipment;ii) Note 5 : Investment in associate;iii) Note 6 : Investment in joint ventures;iv) Note 7 : Deferred tax; andv) Note 29 : Financial instruments.

2. SIGNIFICANT ACCOUNTING POLICIES

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

2.1 Basis of consolidation

Subsidiaries

Subsidiaries are entities controlled by the Company. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Potential voting rights are considered when assessing control only when such rights are substantive. The Group considers it has de facto power over an investee when, despite not having the majority of voting rights, it has the current ability to direct the activities of the investee that significantly affect the investee’s return.

The financial statements of subsidiaries are included in the consolidated financial statements of the Group from the date that control commences until the date that control ceases.

All inter-company transactions are eliminated on consolidation and revenue and profits are related to external transactions only. Unrealised losses resulting from inter-company transactions are also eliminated unless cost cannot be recovered.

pg 202PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

NOTES TO THE FINANCIAL STATEMENTS– 31 December 2014

Page 207: Driving Transformation

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

2.1 Basis of consolidation (continued)

Business combinations

A business combination is a transaction or other event in which an acquirer obtains control of one or more businesses. Business combinations are accounted for using the acquisition method. The identifiable assets acquired and liabilities assumed are measured at their fair values at the acquisition date. The cost of an acquisition is measured as the aggregate of the fair value of the consideration transferred and the amount of any non-controlling interests in the acquiree. Non-controlling interests are stated either at fair value or at the proportionate share of the acquiree’s identifiable net assets at the acquisition date.

When a business combination is achieved in stages, the Group remeasures its previously held non-controlling equity interest in the acquiree at fair value at the acquisition date, with any resulting gain or loss recognised in the profit or loss. Increase in the Group’s ownership interest in an existing subsidiary is accounted for as equity transactions with differences between the fair value of consideration paid and the Group’s proportionate share of net assets acquired, recognised directly in equity.

The Group measures goodwill as the excess of the cost of an acquisition as defined above and the fair values of any previously held interest in the acquiree over the fair value of the identifiable assets acquired and liabilities assumed at the acquisition date. When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.

Transaction costs, 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 period, 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 financial 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 profit or loss and other comprehensive income as an allocation of the profit or loss and other comprehensive income for the year between non- controlling interests and 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 deficit 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

Upon the loss of control of a subsidiary, the Group derecognises the assets and liabilities of the former subsidiary, any non-controlling interests and the other components of equity related to the former subsidiary from the consolidated statement of financial position. Any surplus or deficit arising on the loss of control is recognised in profit 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 financial asset depending on the level of influence retained.

pg 203

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2. SIGNIFICANT ACCOUNTING POLICIES (continued)

2.2 Associate

An associate is an entity in which the Group has significant influence including representation on the Board of Directors, but not control or joint control, over the financial and operating policies of the investee company.

Associate is accounted for in the consolidated financial statements using the equity method. The consolidated financial statements include the Group’s share of post-acquisition profits or losses and other comprehensive income of the equity accounted associate, after adjustments to align the accounting policies with those of the Group, from the date that significant influence commences until the date that significant influence ceases.

The Group’s share of post-acquisition reserves and retained profits less losses is added to the carrying value of the investment in the consolidated statement of financial position. These amounts are taken from the latest audited financial statements or management financial 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 associate.

When the Group ceases to have significant influence over an associate, it is accounted for as a disposal of the entire interest in that associate, with the resulting gain or loss being recognised in profit or loss. Any retained interest in the former associate at the date when significant influence is lost is re-measured at fair value and this amount is regarded as the initial carrying amount of a financial asset.

When the Group’s interest in an associate decreases but does not result in a loss of significant influence, any retained interest is not re-measured. Any gain or loss arising from the decrease in interest is recognised in profit or loss. Any gains or losses previously recognised in other comprehensive income are also reclassified proportionately to the profit or loss if that gain or loss would be required to be reclassified to profit or loss on the disposal of the related assets and liabilities.

Unrealised profits 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.

2.3 Joint arrangements

Joint arrangements are arrangements of which the Group has joint control, established by contracts requiring unanimous consent for decisions about the activities that significantly affect the arrangements’ returns.

Joint arrangements are classified as either joint operation or joint venture. A joint arrangement is classified as joint operation when the Group or the Company has rights to the assets and obligations for the liabilities relating to an arrangement. The Group and the Company account for each of its share of the assets, liabilities and transactions, including its share of those held or incurred jointly with the other investors, in relation to the joint operation. A joint arrangement is classified as joint venture when the Group has rights only to the net assets of the arrangements. The Group accounts for its interest in the joint venture using the equity method as described in note 2.2.

pg 204PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

NOTES TO THE FINANCIAL STATEMENTS– 31 December 2014

Page 209: Driving Transformation

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

2.4 Property, plant and equipment and depreciation

Freehold land and projects-in-progress are measured at cost less any accumulated impairment losses and are not depreciated. Other property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses.

Cost includes expenditure that are directly attributable to the acquisition of the assets 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. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.

When significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

The cost of replacing a component of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the component will flow to the Group or the Company, and its cost can be measured reliably. The carrying amount of the replaced component is derecognised in the profit or loss. The costs of the day-to-day servicing of property, plant and equipment are recognised in the profit 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 projects-in-progress is recognised in the profit or loss on a straight-line basis over the estimated useful lives of each component of an item of property, plant and equipment. Property, plant and equipment are not depreciated until the assets are ready for their intended use.

Lease 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 other property, plant and equipment are as follows:

Plant and pipelines 5 – 55 yearsOffice equipment, furniture and fittings 6 – 7 yearsOther plant and equipment 3 – 7 yearsComputer hardware and software 5 yearsMotor vehicles 4 yearsPlant turnaround/major inspection 3 – 7 years

The depreciable amount is determined after deducting residual value. The residual value, useful life and depreciation method are reviewed at each financial 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 benefits 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 benefits 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 profit or loss.

pg 205

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2. SIGNIFICANT ACCOUNTING POLICIES (continued)

2.5 Leased assets

When the fulfilment of an arrangement is dependent on the use of a specific asset and the arrangement conveys a right to use the asset, it is accounted for as a lease although the arrangement does not take the legal form of a lease. A lease arrangement is accounted for as finance or operating lease in accordance with the accounting policy stated below.

Finance lease

A lease is recognised as a finance 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. 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 financial position as financial lease liabilities.

Minimum lease payments made under finance leases are apportioned between the finance costs and the reduction of the outstanding liability. The finance costs, which represent the difference between the total leasing commitments and the fair value of the assets acquired, are recognised in the profit or loss and allocated 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.

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 confirmed.

Leasehold land which in substance is a finance lease is classified as property, plant and equipment.

Operating lease

All leases that do not transfer substantially to the Group and the Company all the risks and rewards incidental to ownership are classified as operating leases and, the leased assets are not recognised on the Group’s and the Company’s statement of financial position.

Payments made under operating leases are recognised as an expense in the profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised as a reduction of rental expense over the lease term on a straight-line basis. Contingent rentals are charged to profit or loss in the reporting period in which they are incurred.

Leasehold land which in substance is an operating lease is classified as prepaid lease payments.

2.6 Investments

Long term investments in subsidiaries, associate and joint ventures are stated at cost less impairment loss, if any, in the Company’s financial statements, unless the investment is classified as held for sale. 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.

pg 206PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

NOTES TO THE FINANCIAL STATEMENTS– 31 December 2014

Page 211: Driving Transformation

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

2.7 Intangible asset – goodwill

Goodwill arising from business combinations is initially measured at cost as described in note 2.1. Following the initial recognition, goodwill is measured at cost less any accumulated impairment loss. 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 associate, 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 financial instrument is recognised in the statement of financial 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 classified as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments or available-for-sale financial assets, as appropriate. The Group and the Company determine the classification of financial assets at initial recognition.

Financial assets are recognised initially at fair value, normally being the transaction price plus, in the case of financial assets not at fair value through profit or loss, any directly attributable transaction costs.

Purchases or sales that require delivery of financial assets within a timeframe established by regulation or convention in the marketplace concerned (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 financial asset.

Fair value adjustments on shareholder’s loans and advances at initial recognition, if any, are added to the carrying value of investments in the Company’s financial statements.

Subsequent measurement

The subsequent measurement of financial assets depends on their classification as follows:

Financial assets at fair value through profit or loss

Fair value through profit or loss category comprises financial assets that are held for trading, including derivatives (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument) and financial assets that are specifically designated into this category upon initial recognition.

Financial assets categorised as fair value through profit or loss are subsequently measured at their fair value with gains or losses recognised in the profit or loss. The methods used to measure fair value are stated in note 2.21.

Loans and receivables

Loans and receivables category comprises debt instruments that are not quoted in an active market. Subsequent to initial recognition, financial assets categorised as loans and receivables are measured at amortised cost using the effective interest rate method as described in note 2.8(vi).

Held-to-maturity investments

The Group and the Company did not have any held-to-maturity investments during the year ended 31 December 2014 and the year ended 31 December 2013.

pg 207

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2. SIGNIFICANT ACCOUNTING POLICIES (continued)

2.8 Financial instruments (continued)

i) Financial assets (continued)

Available-for-sale financial assets

Available-for-sale category comprises investment in equity and debt securities instruments that are not held for trading.

Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are measured at cost. Other financial assets categorised as available-for-sale are subsequently measured at fair value with unrealised gains and losses recognised directly in other comprehensive income and accumulated under available-for-sale reserve in equity until the investment is derecognised or determined to be impaired, at which time the cumulative gain or loss previously recorded in equity is recognised in the profit or loss.

All financial assets, except for those measured at fair value through profit or loss, are subject to review for impairment (see note 2.9(i)).

ii) Financial liabilities

Initial recognition

Financial liabilities are classified as financial liabilities at fair value through profit or loss, or financial liabilities measured at amortised cost as appropriate. The Group and the Company determine the classification of financial liabilities at initial recognition.

Financial liabilities are recognised initially at fair value less, in the case of financial liabilities measured at amortised cost, any directly attributable transaction costs.

Subsequent measurement

The subsequent measurement of financial liabilities depends on their classification as follows:

Financial liabilities at fair value through profit or loss

Fair value through profit or loss category comprises financial liabilities that are derivatives (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument) or financial liabilities that are specifically designated into this category upon initial recognition.

Financial liabilities categorised as fair value through profit or loss are subsequently measured at their fair values with the gain or loss recognised in profit or loss.

Financial liabilities measured at amortised cost

Subsequent to initial recognition, financial liabilities measured at amortised cost are measured at amortised cost using the effective interest rate method as described in note 2.8(vi).

Gains and losses are recognised in the profit or loss when the liabilities are derecognised, as well as through the amortisation process.

pg 208PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

NOTES TO THE FINANCIAL STATEMENTS– 31 December 2014

Page 213: Driving Transformation

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

2.8 Financial instruments (continued)

iii) Hedge accounting

Cash flow hedge

A cash flow hedge is a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction and could affect the profit or loss. In a cash flow 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 profit or loss.

Subsequently, the cumulative gain or loss recognised in other comprehensive income is reclassified from equity into profit or loss in the same period or periods during which the hedged forecast cash flows affect profit or loss. If the hedge item is a non-financial 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 reclassified from equity into profit or loss.

Cash flow 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 reclassified from equity into profit or loss.

iv) Derivative financial instruments

The Group and the Company uses derivative financial instruments such as forward currency contracts to manage certain exposures to fluctuations in foreign currency exchange rates.

Such derivative financial 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 financial assets when the fair value is positive and as financial 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 profit or loss.

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 profit 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-financial items to meet expected own use requirements are not accounted for as financial 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 profit or loss.

pg 209

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2. SIGNIFICANT ACCOUNTING POLICIES (continued)

2.8 Financial instruments (continued)

v) Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is reported in the statement of financial 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) Amortised cost of financial 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 financial instrument to the net carrying amount of the financial instrument. Amortised cost takes into account any transaction costs and any discount or premium on settlement.

vii) Derecognition of financial instruments

Financial assets

A financial asset is derecognised when the rights to receive cash flows from the asset have expired, or the Group and the Company have transferred their rights to receive cash flows from the asset or have assumed an obligation to pay the received cash flows 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 financial 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 profit or loss.

Financial liabilities

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expired. On derecognition of a financial liability, the difference between the carrying amount of the financial liability extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in the profit or loss.

2.9 Impairment

i) Financial assets

All financial assets (except for financial assets categorised as fair value through profit or loss, investment in subsidiaries, investment in associate and investment in joint ventures) are assessed at each reporting date to determine whether there is any objective evidence of impairment as a result of one or more events having an impact on the estimated future cash flows of the asset. Losses expected as a result of future events, no matter how likely, are not recognised. For an investment in an equity instrument, a significant or prolonged decline in the fair value below its cost is an objective evidence of impairment. If any such objective evidence exists, then the impairment loss of the financial asset is estimated.

An impairment loss in respect of loans and receivables is recognised in profit or loss and is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account.

pg 210PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

NOTES TO THE FINANCIAL STATEMENTS– 31 December 2014

Page 215: Driving Transformation

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

2.9 Impairment (continued)

i) Financial assets (continued)

An impairment loss in respect of available-for-sale financial assets is recognised in profit or loss and is measured as the difference between the asset’s acquisition cost (net of any principal repayment and amortisation) and the asset’s current fair value, less any impairment loss previously recognised. Where a decline in the fair value of an available-for-sale financial asset has been recognised in other comprehensive income, the cumulative loss in other comprehensive income is reclassified from equity to profit or loss.

An impairment loss in respect of unquoted equity instrument that is carried at cost is recognised in profit or loss and is measured as the difference between the financial asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset.

Impairment losses recognised in profit or loss for an investment in an equity instrument classified as available for sale is not reversed through profit or loss.

If, in a subsequent period, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed, to the extent that the asset’s carrying amount does not exceed what the carrying amount would have been had the impairment not been recognised at the date the impairment is reversed. The amount of the reversal is recognised in profit or loss.

ii) Other assets

The carrying amounts of other assets, other than inventories, deferred tax assets and financial assets, are reviewed at each reporting date to determine whether there is any indication of impairment.

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 profit or loss.

A cash-generating-unit is the smallest identifiable asset group that generates cash flows from continuing use that are largely independent from other assets and groups. An impairment loss recognised in respect of a cash-generating-unit is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to reduce the carrying amounts of the other assets in the unit on a pro-rata basis.

The recoverable amount of an asset or cash-generating-unit is the greater of its value in use and its fair value less costs of disposal. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or cash-generating-unit. For an asset that does not generate largely independent cash inflows, 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 the subsequent period. In respect of other assets, impairment losses recognised in prior periods are assessed at the end of each reporting period for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Reversals of impairment losses are credited to the profit or loss in the year in which reversals are recognised.

pg 211

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2. SIGNIFICANT ACCOUNTING POLICIES (continued)

2.10 Cash and cash equivalents

Cash and cash equivalents consist of cash on hand and bank balances, and deposits with licensed financial institutions and highly liquid investments which have an insignificant risk of changes in value. For the purpose of statement of cash flows, cash and cash equivalents are presented net of bank overdrafts and deposits restricted, if any.

2.11 Inventories

Inventories are measured 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 liquefied 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 and the Company have a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future net cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Where discounting is used, the accretion in the provision due to the passage of time is recognised as finance 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 reflect the current best estimate.

Possible obligations whose existence will only be confirmed 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 financial statements but are disclosed as contingent liabilities unless the possibility of an outflow of economic resources is considered remote.

2.13 Employee benefits

Short term benefits

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.

Defined contribution plans

As required by law, companies in Malaysia make contributions to the state pension scheme, the Employees Provident Fund (EPF).

pg 212PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

NOTES TO THE FINANCIAL STATEMENTS– 31 December 2014

Page 217: Driving Transformation

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

2.14 Taxation

Tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the profit 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 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.

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 financial 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, unutilised reinvestment allowances, unutilised investment tax allowances, unutilised tax losses and unutilised tax credits to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences, unabsorbed capital allowances, unutilised reinvestment allowances, unutilised investment tax allowances, unutilised tax losses and unutilised tax credits can be utilised.

Deferred tax is measured at the tax rates that are expected to apply in the period when the assets is realised or the liability is settled, based on the laws that have been enacted or substantively enacted by the end of the 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, where 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 asset is reviewed at each reporting date and is reduced to the extent that it is no longer probable that the future taxable profits will be available against which related tax benefit will be realised.

Unutilised reinvestment allowance and unutilised investment tax allowance, being tax incentives that is not a tax base of an asset, is recognised as a deferred tax asset to the extent that it is probable that the future taxable profits will be available against which the unutilised tax incentive can be utilised.

2.15 Foreign currency transactions

In preparing the financial statements of individual entities in the Group, transactions in currencies other than the entity’s functional currency (foreign currencies) are translated to the functional currencies at rates of exchange ruling on the transaction dates.

Monetary assets and liabilities denominated in foreign currencies at reporting date are retranslated to the functional currency at the exchange rate at that date.

Non-monetary assets and liabilities denominated in foreign currencies are not retranslated at reporting date, except for those that are measured at fair value, are retranslated to the functional currency at the exchange rate 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 profit or loss.

pg 213

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2. SIGNIFICANT ACCOUNTING POLICIES (continued)

2.16 Revenue

Revenue from gas processing services is recognised in the profit 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 profit or loss based on services rendered for transporting and distributing the processed gas.

Revenue from sale of industrial utilities is recognised in the profit or loss based on utilities distributed to the buyer at pre-determined rates.

Revenue from regasification of liquefied natural gas is recognised in the profit or loss based on actual and estimates of work done in respect of services rendered for conversion of natural gas from liquid to gas.

2.17 Financing costs

Finance costs comprise interest payable on borrowings.

All interest and other costs incurred in connection with borrowings are expensed as incurred. The interest component of finance lease payments is accounted for in accordance with the policy set out in note 2.5.

2.18 Deferred income

Deferred income is recognised in the profit or loss on a time proportion basis over the agreed contract period or applicable period.

2.19 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 profit 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 profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding during the period, for the effects of potential ordinary shares, if any.

2.20 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, and for which discrete financial information is available. All operating segment’s operating results are reviewed regularly by entity’s chief operating decision maker to make decisions about resources to be allocated to the segment and to assess its performance.

pg 214PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

NOTES TO THE FINANCIAL STATEMENTS– 31 December 2014

Page 219: Driving Transformation

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

2.21 Fair value measurements

Fair value of an asset or a liability, except for lease transactions, is determined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The measurement assumes that the transaction to sell the asset or transfer the liability takes place either in the principal market or in the absence of a principal market, in the most advantageous market.

Financial instruments

The fair value of financial instruments that are actively traded in organised financial markets is determined by reference to quoted market bid prices at the close of business at reporting date. For financial instruments where there is no active market, 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 flow analysis or other valuation models.

Non-financial assets

For non-financial asset, the fair value measurement takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

When measuring the fair value of an asset or a liability, the Group/Company uses observable market data as far as possible. Fair value are categorised into different levels in a fair value hierarchy based on the input used in the valuation technique as follows:

• Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities.• Level 2 – Inputs 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 l iabi l i ty that are not based on observable market data

(unobservable input).

The fair value of an asset to be transferred between levels is determined as of the date of the event or change in circumstances that caused the transfer.

pg 215

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3. PROPERTY, PLANT AND EQUIPMENT

Group31.12.2014

At 1.1.2014RM’000

AdditionsRM’000

Acquisitionof a

subsidiaryRM’000

Disposals/ write-offs

RM’000

Transfers/ adjustment

RM’000

At 31.12.2014

RM’000

At costFreehold land 4,544 – – – (40) 4,504

Leasehold land 541,287 4,589 – – (7,000) 538,876

Buildings 241,532 130 – – 22,899 264,561

Plant and pipelines 17,671,585 8,062 – (131,338) 905,277 18,453,586

Office equipment, furniture and fittings 39,629 69 – (3,942) 562 36,318

Other plant and equipment 187,734 14,679 – (967) 42,115 243,561

Computer hardware and software 84,564 41 – (405) 8,708 92,908

Motor vehicles 29,014 909 – (1,008) – 28,915

Plant turnaround/major inspection 457,952 – – (72,946) 147,154 532,160

Projects-in-progress 1,697,329 1,058,423 94,294 – (1,222,190) 1,627,856

20,955,170 1,086,902 94,294 (210,606) (102,515)* 21,823,245

*Relates to adjustments upon finalisation of cost previously accrued amounting to RM102,515,000.

Group31.12.2014

At 1.1.2014RM’000

Charge forthe yearRM’000

ImpairmentRM’000

Disposals/ write-offs

RM’000

Transfers/ adjustment

RM’000

At 31.12.2014

RM’000

Accumulated depreciation & impairment losses:

Freehold land – – – – – –

Leasehold land 109,827 6,856 – – – 116,683

Buildings 87,533 6,102 – – – 93,635

Plant and pipelines 9,645,397 671,628 30,850 (124,851) – 10,223,024

Office equipment, furniture and fittings 25,236 2,971 – (830) – 27,377

Other plant and equipment 83,736 10,865 – (742) – 93,859

Computer hardware and software 67,771 7,061 – (405) – 74,427

Motor vehicles 20,938 3,080 – (840) – 23,178

Plant turnaround/major inspection 303,624 78,372 – (69,395) – 312,601

Projects-in-progress – – – – – –

10,344,062 786,935 30,850 (197,063) – 10,964,784

pg 216PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

NOTES TO THE FINANCIAL STATEMENTS– 31 December 2014

Page 221: Driving Transformation

3. PROPERTY, PLANT AND EQUIPMENT (continued)

Group31.12.2013

At 1.1.2013RM’000

AdditionsRM’000

Disposals/ write-offs

RM’000

Transfers/ reclass

RM’000

At 31.12.2013

RM’000

At costFreehold land 4,069 475 – – 4,544

Leasehold land 541,004 – – 283 541,287

Buildings 239,306 – – 2,226 241,532

Plant and pipelines 13,751,831 910 (177,539) 4,096,383 17,671,585

Office equipment, furniture and fittings 26,617 369 (44) 12,687 39,629

Other plant and equipment 173,752 5,900 (463) 8,545 187,734

Computer hardware and software 81,040 375 (646) 3,795 84,564

Motor vehicles 25,066 5,782 (2,108) 274 29,014

Plant turnaround/major inspection 413,521 – (13,474) 57,905 457,952

Projects-in-progress 4,334,323 1,546,206 (1,102) (4,182,098) 1,697,329

19,590,529 1,560,017 (195,376) – 20,955,170

Group31.12.2013

At 1.1.2013RM’000

Charge forthe yearRM’000

ImpairmentRM’000

Disposals/ write-offs

RM’000

Transfers/ reclass

RM’000

At 31.12.2013

RM’000

Accumulated depreciation & impairment losses:

Freehold land – – – – – –

Leasehold land 102,951 6,876 – – – 109,827

Buildings 82,115 5,418 – – – 87,533

Plant and pipelines 9,220,126 601,382 – (176,174) 63 9,645,397

Office equipment, furniture and fittings 22,784 2,494 – (42) – 25,236

Other plant and equipment 78,383 5,861 – (445) (63) 83,736

Computer hardware and software 61,690 6,233 – (152) – 67,771

Motor vehicles 20,342 2,703 – (2,107) – 20,938

Plant turnaround/major inspection 224,199 92,899 – (13,474) – 303,624

Projects-in-progress – – – – – –

9,812,590 723,866 – (192,394) – 10,344,062

pg 217

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3. PROPERTY, PLANT AND EQUIPMENT (continued)

Company31.12.2014

At 1.1.2014RM’000

AdditionsRM’000

Disposals/ write-offs

RM’000

Transfers/ adjustment

RM’000

At 31.12.2014

RM’000

At costFreehold land 4,544 – – (40) 4,504

Leasehold land 541,287 4,589 – (7,000) 538,876

Buildings 241,532 130 – 22,899 264,561

Plant and pipelines 14,189,248 701 (131,338) 998,807 15,057,418

Office equipment, furniture and fittings 30,901 69 (3,942) 562 27,590

Other plant and equipment 187,738 14,679 (967) 43,686 245,136

Computer hardware and software 84,564 9 (405) 8,708 92,876

Motor vehicles 29,012 819 (1,008) – 28,823

Plant turnaround/major inspection 457,952 – (72,946) 129,659 514,665

Projects-in-progress 1,627,601 1,014,251 – (1,204,649) 1,437,203

17,394,379 1,035,247 (210,606) (7,368)* 18,211,652

*Relates to adjustments upon finalisation of cost previously accrued amounting to RM7,368,000.

Company31.12.2014

At 1.1.2014RM’000

Charge forthe yearRM’000

ImpairmentRM’000

Disposals/ write-offs

RM’000

Transfers/ adjustment

RM’000

At 31.12.2014

RM’000

Accumulated depreciation & impairment losses:

Freehold land – – – – – –

Leasehold land 109,827 6,856 – – – 116,683

Buildings 87,533 6,102 – – – 93,635

Plant and pipelines 9,537,681 496,762 30,850 (124,851) – 9,940,442

Office equipment, furniture and fittings 24,471 1,662 – (830) – 25,303

Other plant and equipment 83,736 8,447 – (742) – 91,441

Computer hardware and software 67,771 7,059 – (405) – 74,425

Motor vehicles 20,938 3,078 – (840) – 23,176

Plant turnaround/major inspection 303,624 74,873 – (69,395) – 309,102

Projects-in-progress – – – – – –

10,235,581 604,839 30,850 (197,063) – 10,674,207

pg 218PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

NOTES TO THE FINANCIAL STATEMENTS– 31 December 2014

Page 223: Driving Transformation

3. PROPERTY, PLANT AND EQUIPMENT (continued)

Company31.12.2013

At 1.1.2013RM’000

AdditionsRM’000

Disposals/ write-offs

RM’000

Transfers/ reclass

RM’000

At 31.12.2013

RM’000

At costFreehold land 4,069 475 – – 4,544

Leasehold land 541,004 – – 283 541,287

Buildings 239,306 – – 2,226 241,532

Plant and pipelines 13,751,832 910 (177,540) 614,046 14,189,248

Office equipment, furniture and fittings 26,617 369 (44) 3,959 30,901

Other plant and equipment 173,753 5,903 (463) 8,545 187,738

Computer hardware and software 81,040 375 (646) 3,795 84,564

Motor vehicles 25,066 5,780 (2,108) 274 29,012

Plant turnaround/major inspection 413,521 – (13,474) 57,905 457,952

Projects-in-progress 1,333,165 986,154 (685) (691,033) 1,627,601

16,589,373 999,966 (194,960) – 17,394,379

Company31.12.2013

At 1.1.2013RM’000

Charge forthe yearRM’000

ImpairmentRM’000

Disposals/ write-offs

RM’000

Transfers/ reclass

RM’000

At 31.12.2013

RM’000

Accumulated depreciation & impairment losses:

Freehold land – – – – – –

Leasehold land 102,951 6,876 – – – 109,827

Buildings 82,115 5,418 – – – 87,533

Plant and pipelines 9,220,127 493,665 – (176,174) 63 9,537,681

Office equipment, furniture and fittings 22,784 1,729 – (42) – 24,471

Other plant and equipment 78,383 5,861 – (445) (63) 83,736

Computer hardware and software 61,690 6,233 – (152) – 67,771

Motor vehicles 20,342 2,703 – (2,107) – 20,938

Plant turnaround/major inspection 224,199 92,899 – (13,474) – 303,624

Projects-in-progress – – – – – –

9,812,591 615,384 – (192,394) – 10,235,581

pg 219

Page 224: Driving Transformation

3. PROPERTY, PLANT AND EQUIPMENT (continued)

GroupCarrying amount

CompanyCarrying amount

2014RM’000

2013RM’000

2014RM’000

2013RM’000

Freehold land 4,504 4,544 4,504 4,544

Leasehold land 422,193 431,460 422,193 431,460

Buildings 170,926 153,999 170,926 153,999

Plant and pipelines 8,230,562 8,026,188 5,116,976 4,651,567

Office equipment, furniture and fittings 8,941 14,393 2,287 6,430

Other plant and equipment 149,702 103,998 153,695 104,002

Computer hardware and software 18,481 16,793 18,451 16,793

Motor vehicles 5,737 8,076 5,647 8,074

Plant turnaround/major inspection 219,559 154,328 205,563 154,328

Projects-in-progress 1,627,856 1,697,329 1,437,203 1,627,601

10,858,461 10,611,108 7,537,445 7,158,798

Restrictions of land title

The titles of certain lands are in the process of being registered in the Company’s name.

Projects-in-progress

Included in the previous year’s additions to the projects-in-progress of the Group is financing costs arising from finance lease liabilities capitalised amounting to RM34,576,000.

The financing rate on finance lease liabilities capitalised is 8.9% per annum.

Leased floating storage unit

The Group leases certain plant and pipelines under a finance lease agreement with a net book value of RM812,804,000 (2013: RM850,048,000).

Leasehold land

Included in the carrying amounts of leasehold land are:

Group Company

2014RM’000

2013RM’000

2014RM’000

2013RM’000

Leasehold land with unexpired lease period of more than 50 years 292,063 306,694 292,063 306,694

Leasehold land with unexpired lease period of less than 50 years 130,130 124,766 130,130 124,766

422,193 431,460 422,193 431,460

pg 220PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

NOTES TO THE FINANCIAL STATEMENTS– 31 December 2014

Page 225: Driving Transformation

4. INVESTMENT IN SUBSIDIARIES

Note

Company

2014RM’000

2013RM’000

Investment at cost:

– unquoted shares

At beginning of the year 2,420,101 2,000,101

Conversion of advances made:

– during the year – 225,916

– in prior year – 194,084

Total conversion of advances made – 420,000

Acquisition during the year 24 94,666 –

At end of the year 2,514,767 2,420,101

Details of the subsidiaries are as follows:

Name of entity Principal activities Country of incorporationEffective ownership and voting interest

2014%

2013%

Regas Terminal (Sg. Udang) Sdn. Bhd.

Manage and operate LNG regasification terminal

Malaysia 100 100

Regas Terminal (Pengerang) Sdn. Bhd.

Intended to manage and operate LNG regasification terminal

Malaysia 100 100

Regas Terminal (Lahad Datu) Sdn. Bhd.

Intended to manage and operate LNG regasification terminal

Malaysia 99 99

Pengerang LNG (Two) Sdn. Bhd. (PLNG2)

Intended to manage and operate LNG regasification terminal

Malaysia 72* –

* The Company’s intended equity shareholding in PLNG2 is 65%. This shall be achieved upon further subscription of ordinary shares by the Company and other non-controlling parties, which is expected in 2015.

pg 221

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5. INVESTMENT IN ASSOCIATE

Group Company

2014RM’000

2013RM’000

2014RM’000

2013RM’000

Investment at cost:

– quoted shares in Malaysia 76,466 76,466 76,466 76,466

Share of post-acquisition profits and reserves 55,869 52,581 – –

132,335 129,047 76,466 76,466

Market value of quoted shares 611,832 735,339 611,832 735,339

Details of the associate are as follows:

Name of entity Principal activities Country of incorporationEffective ownership and voting interest

2014%

2013%

Gas Malaysia Berhad Selling, marketing, distribution and promotion of natural gas

Malaysia 14.8 14.8

Although the Group has less than 20% of the ownership in the equity interest of Gas Malaysia Berhad, the Group has determined that it has significant influence over the financial and operating policy of the associate through representation on the associate’s board of directors.

2014RM’000

2013RM’000

Group’s share of results

Share of total comprehensive income for the year 26,773 27,263

Other information

Dividends received 23,485 26,012

6. INVESTMENT IN JOINT VENTURES

Group Company

2014RM’000

2013RM’000

2014RM’000

2013RM’000

Investment at cost:

– unquoted shares 192,250 192,250 192,250 192,250

Share of post-acquisition profits and reserves 276,149 9,746 – –

468,399 201,996 192,250 192,250

The Group’s involvement in joint arrangements are structured through separate vehicles which provide the Group rights to the net assets of these entities. Accordingly, the Group has classified these investments as joint ventures.

pg 222PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

NOTES TO THE FINANCIAL STATEMENTS– 31 December 2014

Page 227: Driving Transformation

6. INVESTMENT IN JOINT VENTURES (continued)

Group’s share of the net assets and results is significantly contributed by Kimanis Power Sdn. Bhd.

2014RM’000

2013RM’000

Group’s summarised financial information

As at 31 December

Non-current assets 1,855,127 1,054,404

Current assets 295,143 537,417

Non-current liabilities (1,118,883) (1,152,476)

Current liabilities (248,461) (100,316)

Net assets 782,926 339,029

Included in the net assets are:

Cash and cash equivalents 200,901 489,240

Non-current liabilities (excluding trade and other payables and provisions) (1,118,883) (1,152,332)

Current liabilities (excluding trade and other payables and provisions) (34,788) –

Year ended 31 December

Profit for the year 436,932 26,054

Other comprehensive income for the year 13,250 14,636

Total comprehensive income 450,182 40,690

Included in the total comprehensive income are:

Revenue 1,744,096 82,303

Depreciation and amortisation (368) (230)

Interest income 40,091 484

Interest expense (4,987) –

Tax (income)/expenses 291,179 (3,045)

Group’s share of net assets 468,399 201,996

Group’s share of results

Share of profit for the year 261,955 15,530

Share of other comprehensive income for the year 7,950 8,782

Share of total comprehensive income 269,905 24,312

Other information

Dividends received 3,502 3,500

pg 223

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6. INVESTMENT IN JOINT VENTURES (continued)

Details of the joint ventures are as follows:

Name of entity Principal activities Country of incorporationEffective ownership and voting interest

2014%

2013%

Kimanis Power Sdn. Bhd. (KPSB)

Generation and sale of electricity Malaysia 60 60

Kimanis O&M Sdn. Bhd. Provision of operation and maintenance services to KPSB

Malaysia 60 60

Industrial Gases Solutions Sdn. Bhd.

Selling, marketing, distribution and promotion of industrial gas

Malaysia 50 50

Although the Group has more than 50% of the ownership in the equity interest of Kimanis Power Sdn. Bhd. and Kimanis O&M Sdn. Bhd., the Group has determined that it does not have sole control over these investees considering that strategic and financial decisions of the relevant activities of these investees require unanimous consent by all shareholders.

Contingent liabilities

Group

2014RM’000

2013RM’000

Group’s share of claim against a joint venture – 5,040

pg 224PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

NOTES TO THE FINANCIAL STATEMENTS– 31 December 2014

Page 229: Driving Transformation

7. DEFERRED TAX

The components and movements of deferred tax liabilities and assets during the year prior to and after offsetting are as follows:

Group

At 1.1.2014RM’000

Charged/ (credited) to

profit or lossRM’000

At 31.12.2014

RM’000

31.12.2014

Deferred tax liabilities

Property, plant and equipment 1,020,751 89,450 1,110,201

Financial instrument valuation – – –

1,020,751 89,450 1,110,201

Deferred tax assets

Deferred income (2,325) 19,009 16,684

Foreign currency translation (14,080) 14,080 –

Unutilised investment tax allowance (626,395) 21,397 (604,998)

(642,800) 54,486 (588,314)

Net deferred tax 377,951 143,936 521,887

31.12.2013

Deferred tax liabilities

Property, plant and equipment 1,006,762 13,989 1,020,751

Financial instrument valuation 29,892 (29,892) –

1,036,654 (15,903) 1,020,751

Deferred tax assets

Deferred income (4,573) 2,248 (2,325)

Foreign currency translation (28,081) 14,001 (14,080)

Unutilised investment tax allowance – (626,395) (626,395)

(32,654) (610,146) (642,800)

Net deferred tax 1,004,000 (626,049) 377,951

pg 225

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7. DEFERRED TAX (continued)

Company

At 1.1.2014RM’000

Charged/ (credited) to

profit or lossRM’000

At 31.12.2014

RM’000

31.12.2014

Deferred tax liabilities

Property, plant and equipment 983,325 33,312 1,016,637

Financial instrument valuation – – –

983,325 33,312 1,016,637

Deferred tax assets

Deferred income (2,325) 19,009 16,684

Foreign currency translation – – –

(2,325) 19,009 16,684

Net deferred tax 981,000 52,321 1,033,321

31.12.2013

Deferred tax liabilities

Property, plant and equipment 1,006,762 (23,437) 983,325

Financial instrument valuation 29,892 (29,892) –

1,036,654 (53,329) 983,325

Deferred tax assets

Deferred income (4,573) 2,248 (2,325)

Foreign currency translation (28,081) 28,081 –

(32,654) 30,329 (2,325)

Net deferred tax 1,004,000 (23,000) 981,000

pg 226PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

NOTES TO THE FINANCIAL STATEMENTS– 31 December 2014

Page 231: Driving Transformation

7. DEFERRED TAX (continued)

Deferred tax liabilities and assets are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred taxes relate to the same tax authority. The amounts determined after appropriate offsetting are as follows:

Group Company

2014RM’000

2013RM’000

2014RM’000

2013RM’000

Deferred tax assets

Deferred tax liabilities 93,564 37,425 – –

Deferred tax assets (604,998) (640,474) – –

(511,434) (603,049) – –

Deferred tax liabilities

Deferred tax liabilities 1,035,419 983,325 1,035,419 983,325

Deferred tax assets (2,098) (2,325) (2,098) (2,325)

1,033,321 981,000 1,033,321 981,000

Net deferred tax 521,887 377,951 1,033,321 981,000

8. TRADE AND OTHER INVENTORIES

Group Company

2014RM’000

2013RM’000

2014RM’000

2013RM’000

Liquefied gases and water 1,931 1,694 1,931 1,694

Maintenance materials and spares 41,453 36,921 40,973 36,834

43,384 38,615 42,904 38,528

pg 227

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9. TRADE AND OTHER RECEIVABLES

Group Company

Note2014

RM’0002013

RM’0002014

RM’0002013

RM’000

Trade receivables 22,580 19,909 22,580 19,909

Other receivables 9.1 46,063 40,725 45,405 36,034

Deposits 1,030 1,022 1,030 1,022

Prepayments 15,964 25,706 360 253

Amount due from:

Holding company 9.2 287,551 306,394 235,668 253,348

Subsidiaries 9.3 – – 72,760 454,903

Related companies 9.4 200,793 288,346 200,790 288,346

Joint ventures 9.5 16,323 11,212 16,323 11,212

Related parties 9.6 18,414 18,157 18,414 18,157

608,718 711,471 613,330 1,083,184

9.1 Included in other receivables of the Group and of the Company is interest receivable of RM Nil (2013: RM161,000).

9.2 The amount due from holding company relates to:

Group Company

2014RM’000

2013RM’000

2014RM’000

2013RM’000

Trade 287,036 305,965 235,156 252,919

Non-trade 515 429 512 429

287,551 306,394 235,668 253,348

9.3 The amount due from subsidiaries are non-trade in nature. Included in these receivables are accrual of payment to be made on behalf of subsidiaries amounting to RM2,194,000 (2013: RM Nil).

pg 228PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

NOTES TO THE FINANCIAL STATEMENTS– 31 December 2014

Page 233: Driving Transformation

9. TRADE AND OTHER RECEIVABLES (continued)

9.4 The amount due from related companies relates to:

Group Company

2014RM’000

2013RM’000

2014RM’000

2013RM’000

Trade 110,104 142,218 110,104 142,218

Non-trade 90,689 146,128 90,686 146,128

200,793 288,346 200,790 288,346

9.5 The amount due from joint ventures relates to:

Group/Company2014

RM’0002013

RM’000

Trade 3,452 893

Non-trade 12,871 10,319

16,323 11,212

9.6 The amount due from related parties are trade in nature and is in relation to associates and joint ventures of the holding company.

10. FUND AND OTHER INVESTMENTS

Group/Company2014

RM’0002013

RM’000

Fair value through profit or loss Designated upon initial recognition Corporate private debt securities – 15,010

pg 229

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11. CASH AND CASH EQUIVALENTS

Group Company

2014RM’000

2013RM’000

2014RM’000

2013RM’000

Cash with PETRONAS Integrated Financial Shared Services Centre 550,010 856,993 407,648 650,716

Cash and bank balances 87,736 55,130 84,826 55,130

637,746 912,123 492,474 705,846

The Group’s and the Company’s cash and bank balances are held in the In-House Account (IHA) managed by PETRONAS Integrated Financial Shared Service Centre (IFSSC) to enable more efficient cash management for the Group and the Company.

Included in cash with IFSSC and cash and bank balances are interest-bearing balances amounting to RM637,594,000 (2013: RM911,989,000) for the Group and RM492,322,000 (2013: RM705,712,000) for the Company.

12. SHARE CAPITAL

Company

2014RM’000

2013RM’000

Authorised:

2,000,000,000 ordinary shares of RM1 each 2,000,000 2,000,000

Issued and fully paid:

1,978,732,000 ordinary shares of RM1 each 1,978,732 1,978,732

13. RESERVES

Share Premium

Share premium comprises the premium paid on subscription of shares in the Company over and above the par value of the shares.

Hedging Reserve

This reserve records the portion of the gain or loss on hedging instruments in a cash flow hedge that is determined to be an effective hedge in accordance with accounting policy stated in note 2.8(iii).

pg 230PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

NOTES TO THE FINANCIAL STATEMENTS– 31 December 2014

Page 235: Driving Transformation

14. NON-CONTROLLING INTERESTS

This consists of the non-controlling interests’ proportion of share capital and reserves of partly-owned subsidiaries.

15. FINANCE LEASE LIABILITIES

Finance lease liabilities are payable as follows:

2014 2013

Group

Minimumlease

paymentsRM’000

InterestRM’000

PrincipalRM’000

Minimumlease

paymentsRM’000

InterestRM’000

PrincipalRM’000

Less than one year 100,744 79,717 21,027 94,501 76,770 17,731

Between 1 – 2 years 101,020 77,693 23,327 94,501 75,059 19,442

Between 2 – 5 years 302,232 219,036 83,196 283,762 213,361 70,401

More than 5 years 1,275,446 520,746 754,700 1,290,908 556,690 734,218

1,779,442 897,192 882,250 1,763,672 921,880 841,792

The finance lease liabilities are in relation to charter hire of floating storage units from a related company. Included in minimum lease payments is a reduction amounting to RM7,035,000 upon finalisation of capital expenditure cost.

16. DEFERRED INCOME

Group/Company Note2014

RM’0002013

RM’000

At beginning of the year 27,656 10,693

Addition 540 17,968

Less: recognised in the profit or loss (15,319) (1,005)

At end of the year 12,877 27,656

Analysis of deferred income:

Current 17 5,079 15,320

Non-current 7,798 12,336

12,877 27,656

Deferred income mainly relates to the payments received in advance or the right to receive payments from third party amounting to RM540,000 (2013: RM Nil), a related company amounting to RM3,594,000 (2013: RM17,968,000) and a related party amounting to RM8,743,000 (2013: RM9,688,000) for the rights given to these parties to use the Company’s properties over a period of time or early termination of supply contract with the Company. The deferred income is subsequently recognised in the profit or loss on a time apportionment basis over the specified period.

pg 231

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17. TRADE AND OTHER PAYABLES

Group Company

Note2014

RM’0002013

RM’0002014

RM’0002013

RM’000

Other payables and accruals 17.1 523,034 795,974 504,503 772,266

Amount due to:

Holding company 17.2 119,859 115,326 102,204 114,874

Related companies 17.2 20,213 87,817 5,604 87,254

Deferred income 16 5,079 15,320 5,079 15,320

668,185 1,014,437 617,390 989,714

17.1 Included in other payables and accruals are amounts owing to suppliers and contractors for purchase of property, plant and equipment for the Group of RM244,788,000 (2013: RM514,430,000) and for the Company of RM238,415,000 (2013: RM419,283,000). Also included in other payables is interest payable of RM6,677,000 (2013: RM6,596,000) for the Group.

17.2 The amount due to holding company and related companies are non-trade in nature. These payables arose from the normal course of business.

18. REVENUE AND GROSS PROFIT

Group Company

2014RM’000

2013RM’000

2014RM’000

2013RM’000

Revenue

– gas processing fees 1,480,247 1,497,435 1,480,247 1,497,435

– gas transportation fees 1,286,690 1,189,269 1,286,690 1,189,269

– sale of industrial utilities 1,008,559 867,244 1,008,559 867,244

– regasification fees 616,220 338,191 – –

Total 4,391,716 3,892,139 3,775,496 3,553,948

Cost of revenue

– cost of gas processing (778,579) (746,126) (778,579) (746,126)

– cost of gas transportation (280,024) (286,916) (280,024) (286,916)

– cost of industrial utilities (812,654) (739,518) (812,654) (739,518)

– cost of regasification (308,241) (174,714) – –

Total (2,179,498) (1,947,274) (1,871,257) (1,772,560)

Gross profit 2,212,218 1,944,865 1,904,239 1,781,388

pg 232PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

NOTES TO THE FINANCIAL STATEMENTS– 31 December 2014

Page 237: Driving Transformation

19. OPERATING PROFIT

Group Company

2014RM’000

2013RM’000

2014RM’000

2013RM’000

Included in operating profit are the following charges:

Audit fees 376 310 249 235

Depreciation of property, plant and equipment 786,935 723,866 604,839 615,384

Impairment losses on property, plant and equipment 30,850 – 30,850 –

Loss on changes in fair value of other investments 10 412 10 412

Loss on realised foreign exchange 1,264 7,341 572 5,631

Loss on unrealised foreign exchange 51,969 58,595 2 3

Property, plant and equipment

– expensed off 592 1,656 592 673

– written off 13,362 2,982 13,362 2,566

Rental of

– equipment and motor vehicles 7,131 9,104 6,482 9,104

– land and buildings 9,199 7,463 8,032 6,597

Staff costs

– wages, salaries and others 318,315 323,030 309,986 315,970

– contributions to Employees Provident Fund 49,696 51,497 48,662 50,459

and crediting:

Dividend income in Malaysia from

– subsidiary (unquoted) – – 200,000 –

– associate (quoted) – – 23,485 26,012

– joint venture (unquoted) – – 3,502 3,500

Gain on disposal of property, plant and equipment 87 493 87 493

Interest income from fund and other investments 36,895 41,789 28,323 40,491

Recovery from early termination of electricity and utilities agreements – 78,261 – 78,261

Rental income on land and buildings 3,484 3,664 3,945 3,957

pg 233

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20. FINANCING COSTS

Group Company

2014RM’000

2013RM’000

2014RM’000

2013RM’000

Interest expense:

– Term loan – 9,319 – 9,319

– Finance lease liabilities 76,328 75,374 – –

76,328 84,693 – 9,319

Recognised in profit or loss:

– Term loan – 9,319 – 9,319

– Finance lease liabilities 76,328 40,798 – –

76,328 50,117 – 9,319

Capitalised into projects-in-progress:

– Finance lease liabilities – 34,576 – –

76,328 84,693 – 9,319

21. TAX EXPENSE/(INCOME)

Group Company

2014RM’000

2013RM’000

2014RM’000

2013RM’000

Current tax expense

– current year 365,441 443,592 365,441 443,592

– prior year 3,002 – 3,002 –

Total current tax expense 368,443 443,592 368,443 443,592

Deferred tax expenses/(income)

– origination and reversal of temporary differences 121,101 (628,421) 52,321 (25,372)

– under provision in prior year 22,835 2,372 – 2,372

Total deferred tax expenses/(income) 143,936 (626,049) 52,321 (23,000)

Total tax expense/(income) recognised in profit or loss 512,379 (182,457) 420,764 420,592

Tax expense on share of profit of associate 7,333 7,401 – –

Tax (income)/expense on share of profit of joint ventures (174,765) 2,024 – –

Total tax expense/(income) 344,947 (173,032) 420,764 420,592

pg 234PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

NOTES TO THE FINANCIAL STATEMENTS– 31 December 2014

Page 239: Driving Transformation

21. TAX EXPENSE/(INCOME) (continued)

A reconciliation of income tax expense applicable to profit 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

2014RM’000

2013RM’000

2014RM’000

2013RM’000

Profit for the year 1,842,080 2,078,876 1,694,369 1,418,309

Total tax expense/(income) 344,947 (173,032) 420,764 420,592

Profit excluding tax 2,187,027 1,905,844 2,115,133 1,838,901

Taxation at Malaysian statutory tax rate of 25% (2013: 25%) 546,757 476,461 528,783 459,725

Non-deductible expenses 36,502 29,535 9,934 14,910

Effect of unabsorbed capital allowance and unutilised tax losses recognised (77,817) – – –

Income not subject to tax (1,772) (2,356) – –

Tax exempt income (8,799) (8,410) (63,402) (13,149)

Tax incentives (175,761) (627,368) (57,553) –

Effect of changes in tax rates – (40,894) – (40,894)

319,110 (173,032) 417,762 420,592

Under provision in prior year 25,837 – 3,002 –

Total tax expense/(income) 344,947 (173,032) 420,764 420,592

22. DIVIDENDS

Company

2014RM’000

2013RM’000

Ordinary

Final paid:

2013 – Final dividend of 40 sen per ordinary share under single tier system. 791,494 –

2012 – Final dividend of 35 sen per ordinary share under single tier system. – 692,556

Interim paid:

2014 – First interim dividend of 20 sen per ordinary share under single tier system. 395,747 –

2014 – Second interim dividend of 20 sen per ordinary share under single tier system. 395,747 –

2013 – First interim dividend of 15 sen per ordinary share under single tier system. – 296,810

1,582,988 989,366

The Directors had on 17 February 2015 declared a third interim dividend of 15 sen per ordinary share under single tier system amounting to RM296,810,000 in respect of the financial year ended 31 December 2014.

pg 235

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22. DIVIDENDS (continued)

The financial statements for the current financial year do not reflect the declared interim dividend. The dividend, will be accounted for in equity as an appropriation of retained profits in the financial statements for the financial year ending 31 December 2015.

The net dividend per ordinary share for the financial year ended 31 December 2014 takes into account the total interim dividends paid and declared for the financial year as follows:

Company

2014Sen

2013Sen

Final dividend per ordinary share paid – net 40 35

First interim dividend per ordinary share paid – net 20 15

Second interim dividend per ordinary share paid – net 20 –

80 50

23. EARNINGS PER SHARE

Basic earnings per share

The calculation of basic earnings per ordinary share (EPS) at 31 December 2014 was based on the Group’s net profit attributable to shareholders of the Company of RM1,843,186,000 (2013: RM2,078,888,000), over the number of ordinary shares outstanding during the year of 1,978,732,000 (2013: 1,978,732,000).

Diluted earnings per share

The Company has not issued any dilutive potential ordinary shares, hence, the diluted EPS is the same as the basic EPS.

24. ACQUISITION OF SUBSIDIARY

On 14 November 2014, the Company entered into a Shareholders Agreement with Dialog LNG Sdn. Bhd. (Dialog) and Pengerang LNG (Two) Sdn. Bhd. (PLNG2) for the establishment of a company to undertake the development of an LNG Regasification Terminal. PLNG2 is the special purpose vehicle for the said company.

Pursuant to the terms of the Shareholders Agreement, the Company had on 12 December 2014 subscribed 780,000 ordinary shares of RM1 each representing 72% of the issued and paid-up capital of PLNG2 and 93,886 redeemable preference shares of RM1 each with premium of RM999 each for a total consideration of RM94,666,000. Upon subscription of the ordinary shares, PLNG2 becomes a subsidiary of the Group. PLNG2 is incorporated in Malaysia under the Companies Act, 1965.

The Company’s intended equity shareholding of 65% in PLNG2 shall be achieved upon further subscription of ordinary shares by the Company and Dialog and full subscription by State Secretary Johor Incorporated of its 10% shareholding, which is expected in 2015.

During the post-acquisition period, the subsidiary contributed revenue of RM Nil and a net loss of RM3,969,000 to the Group’s results for the year.

pg 236PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

NOTES TO THE FINANCIAL STATEMENTS– 31 December 2014

Page 241: Driving Transformation

24. ACQUISITION OF SUBSIDIARY (continued)

The effect of acquisitions on the cash flows and fair value of assets and liabilities acquired are as follows:

At initial recognition/

fair value RM’000

Property, plant and equipment 94,294

Current assets 96,767

Current liabilities (96,395)

Net identifiable assets and liabilities/purchase consideration 94,666

Less: Cash and cash equivalents of PLNG2 acquired (96,767)

Cash flow on acquisition, net of cash acquired (2,101)

25. CAPITAL COMMITMENTS

Outstanding commitments in respect of capital expenditure at the end of the financial year not provided for in the financial statements are:

Group Company

2014RM’000

2013RM’000

2014RM’000

2013RM’000

Property, plant and equipmentApproved and contracted for

Less than one year 557,028 158,073 171,371 153,081

Between one and five years 2,070,742 498,453 44,013 481,259

2,627,770 656,526 215,384 634,340

Approved but not contracted forLess than one year 798,122 555,013 703,689 537,448

Between one and five years 1,268,096 5,080,177 919,332 869,981

2,066,218 5,635,190 1,623,021 1,407,429

4,693,988 6,291,716 1,838,405 2,041,769

Share of capital expenditure of joint venturesApproved and contracted for

Less than one year 30,432 137,167 – –

Between one and five years – 84,485 – –

30,432 221,652 – –

Approved but not contracted forLess than one year 960 108,123 – –

Between one and five years 518 159 – –

1,478 108,282 – –

31,910 329,934 – –

Total commitments 4,725,898 6,621,650 1,838,405 2,041,769

pg 237

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26. RELATED PARTY DISCLOSURES

Related parties

For the purposes of these financial statements, parties are considered to be related to the Group or the Company if the Group or the Company has the ability, directly or indirectly, to control or jointly control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa or where the Group or the Company and the party are subject to common control. Related parties may be individuals or other entities.

The Group’s and the Company’s related parties include subsidiaries, associate, joint ventures as well as the holding and the 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 defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Group either directly or indirectly. Key management personnel includes all Directors of the Group.

Key management personnel compensation

Group Company

2014RM’000

2013RM’000

2014RM’000

2013RM’000

Directors

Fees 568 543 568 543

Other short term employee benefits (including estimated monetary value of benefits-in-kind) 27 25 27 25

595 568 595 568

The Company paid management fee to the holding company in relation to services of key management personnel of the Company as disclosed below.

pg 238PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

NOTES TO THE FINANCIAL STATEMENTS– 31 December 2014

Page 243: Driving Transformation

26. RELATED PARTY DISCLOSURES (continued)

In addition to the transactions detailed elsewhere in the financial statements, the Group and the Company had the following transactions with related parties during the financial year:

Group Company

2014RM’000

2013RM’000

2014RM’000

2013RM’000

Government of Malaysia’s related entities:

Tenaga Nasional Berhad Purchase of electricity (78,484) (88,940) (59,209) (88,940)

Sales of industrial utilities 78,269 76,204 78,269 76,204

Johor Bahru Valuation and Property Services Department Land premium – (75,063) – (75,063)

POIC Sabah Sdn. Bhd. Land reclamation and study – (2,320) – –

Bendahari Negeri Melaka Land lease rental, ex gratia & fisherman fund (1,185) – – –

TNB Repair and Maintenance Sdn. Bhd. Provision of repair and maintenance services (49,391) (21,541) (49,391) (21,541)

Holding company:

Gas processing fee income 1,480,247 1,497,435 1,480,247 1,497,435

Gas transportation fee income 1,286,690 1,189,269 1,286,690 1,189,269

Regasification fee income 616,220 338,191 – –

Interest income 35,196 24,383 26,624 23,085

Purchase of fuel gas (487,563) (402,423) (487,563) (402,423)

Insurance expense (15,387) (28,479) (12,502) (12,695)

Information, communication and technology charges (32,848) (18,601) (32,517) (18,601)

Interest expense – (9,319) – (9,319)

Corporate security charges (14,045) (15,028) (13,833) (14,978)

Rental of office premises (8,032) (6,597) (8,032) (6,597)

Supply chain and management services (14,813) (7,063) (14,005) (6,468)

Management fees (737) (737) (737) (737)

Internal audit services (766) (710) (607) (710)

Fees for representation on the Board of Directors (250) (240) (250) (240)

pg 239

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26. RELATED PARTY DISCLOSURES (continued)

Group Company

2014RM’000

2013RM’000

2014RM’000

2013RM’000

Related companies:PETRONAS Chemicals Aromatics Sdn. Bhd.

Sale of industrial utilities 47,103 43,142 47,103 43,142Vinyl Chloride (Malaysia) Sdn. Bhd.

Sale of industrial utilities 16,969 28,038 16,969 28,038Recovery from early termination of electricity and utilities agreements – 78,261 – 78,261

PETRONAS Chemicals Ammonia Sdn. Bhd. Sale of industrial utilities 118,851 112,419 118,851 112,419

PETRONAS Chemicals MTBE Sdn. Bhd. Sale of industrial utilities 117,367 100,632 117,367 100,632

PETRONAS Chemicals LDPE Sdn. Bhd. Sale of industrial utilities 83,484 62,002 83,484 62,002

Bekalan Air KIPC Sdn. Bhd. Purchase of treated water (15,933) (14,531) (15,933) (14,531)Management fee income 930 500 930 500

PETRONAS Carigali Sdn. Bhd. Project management fee income 2,104 22,854 2,104 22,854Overbilling of project management fees (5,095) (51,270) (5,095) (51,270)Operations and maintenance services income 24,887 17,367 24,887 17,367

CEFS Response Contribution for emergency response services (7,898) (9,620) (7,898) (9,620)

PETRONAS Chemicals Derivatives Sdn. Bhd. Sale of industrial utilities 319,310 259,641 319,310 259,641

PETRONAS Chemicals Ethylene Sdn. Bhd. Sale of industrial utilities 4,447 5,189 4,447 5,189

PETRONAS Management Training Sdn. Bhd. Training and development related costs (2,656) (3,041) (2,656) (3,041)

PETRONAS Technical Training Sdn. Bhd. Training and development related costs (5,773) (3,087) (5,609) (3,087)

PETRONAS Technical Services Sdn. Bhd. Technical consultancy fees (22,466) (47,999) (22,025) (34,622)

PETRONAS Penapisan (Melaka) Sdn. Bhd. Lease of land for pipeline route (76) (76) – –Rental of office premises (75) (82) – –Lease of land for office building (11) (11) – –Facilities usage charges (169) – – –

Gas Asia Terminal (L) Pte. Ltd. Time charter services (154,147) (148,730) – –Lease and rental of building (789) (590) – –Repair and maintenance (78) – – –

PrimeSourcing International Sdn. Bhd. Supply of parts and materials (108,551) (10,104) (108,551) (10,104)

PETRONAS Penapisan (Terengganu) Sdn. Bhd. Marine facilities income 1,505 1,459 1,505 1,459

Sungai Udang Port Sdn. Bhd. Fresh Water Transfer Services (221) – – –Marine services (6,706) (3,005) – –

pg 240PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

NOTES TO THE FINANCIAL STATEMENTS– 31 December 2014

Page 245: Driving Transformation

26. RELATED PARTY DISCLOSURES (continued)

Group Company

2014RM’000

2013RM’000

2014RM’000

2013RM’000

Subsidiaries:

Regas Terminal (Sg. Udang) Sdn. Bhd. Management fee income – – 5,627 5,726

Rental income of warehouse – – 104 103

Pipeline maintenance fee income – – 1,161 612

Lab sampling fee income – – 31 19

Annual access right fee income – – 357 190

Regas Terminal (Pengerang) Sdn. Bhd. Management fee income – – 2,261 1,027

Regas Terminal (Lahad Datu) Sdn. Bhd. Management fee income – – 128 307

Pengerang LNG (Two) Sdn. Bhd. Management fee income – – 205 –

Joint venture:

Industrial Gases Solutions Sdn. Bhd. Sale of industrial utilities 6,074 3,730 6,074 3,730

Associates and joint ventures of the holding company:

Kertih Terminals Sdn. Bhd. Sale of industrial utilities 7,069 6,204 7,069 6,204

BASF PETRONAS Chemicals Sdn. Bhd. Sale of industrial utilities 111,285 94,309 111,285 94,309

BP PETRONAS Acetyls Sdn. Bhd. Sale of industrial utilities 40,070 37,754 40,070 37,754

Trans Thai-Malaysia (Malaysia) Sdn. Bhd. Access right of way fee income 2,095 2,025 2,095 2,025

Annual operations and maintenance fee income 5,856 3,722 5,856 3,722

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 on 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 9, note 15, note 16 and note 17.

pg 241

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27. OPERATING SEGMENTS

The Group has four reporting segments, as described below, which are the Group’s strategic business units. The strategic business units offer different products and services, and are managed separately because they require different technology and marketing strategies. For each of the strategic business units, the Group’s Chief Operating Decision Maker which is the Board of Directors, reviews internal management reports at least on a quarterly basis. The following summary describes the operations in each of the Group’s reportable segments:

• Gas processing – activities include processing of natural gas from gas fields 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 customers 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 Area.

• Regasification – activities include regasification of liquefied natural gas (LNG) for PETRONAS.

Performance is measured based on segment operating profit. Segment operating profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of the segments.

GroupBusiness segments

Gas Processing

RM’000

Gas Transportation

RM’000UtilitiesRM’000

RegasificationRM’000

TotalRM’000

31.12.2014

Revenue 1,480,247 1,286,690 1,008,559 616,220 4,391,716

Segment results 701,668 1,006,666 195,905 307,979 2,212,218

Unallocated expenses (70,159)

Operating profit 2,142,059

Financing costs (76,328)

Share of profit after tax of equity-accounted associate and joint ventures 288,728

Profit before taxation 2,354,459

Tax expense (512,379)

Profit for the year 1,842,080

Included in the measure of segment profit are:

Depreciation and amortisation (341,833) (82,296) (180,368) (182,096) (786,593)

Unallocated depreciation and amortisation – – – – (342)

pg 242PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

NOTES TO THE FINANCIAL STATEMENTS– 31 December 2014

Page 247: Driving Transformation

27. OPERATING SEGMENTS (continued)

GroupBusiness segments

Gas Processing

RM’000

GasTransportation

RM’000UtilitiesRM’000

RegasificationRM’000

TotalRM’000

31.12.2013

Revenue 1,497,435 1,189,269 867,244 338,191 3,892,139

Segment results 751,309 902,353 127,726 163,477 1,944,865

Unallocated expenses (41,122)

Operating profit 1,903,743

Financing costs (50,117)

Share of profit after tax of equity-accounted associate and joint ventures 42,793

Profit before taxation 1,896,419

Tax income 182,457

Profit for the year 2,078,876

Included in the measure of segment profit are:

Depreciation and amortisation (332,348) (98,195) (184,554) (108,481) (723,578)

Unallocated depreciation and amortisation – – – – (288)

GroupBusiness segments

Gas Processing

RM’000

GasTransportation

RM’000UtilitiesRM’000

RegasificationRM’000

TotalRM’000

31.12.2014

Segment assets 4,292,276 2,437,755 1,265,132 4,046,346 12,041,509

Investment in associate 132,335

Investment in joint ventures 468,399

Unallocated assets 618,234

Total assets 13,260,477

Included in the measure of segment assets are:

Capital expenditure 803,863 134,809 77,301 51,066 1,067,039

Unallocated capital expenditure – – – – 19,863

pg 243

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27. OPERATING SEGMENTS (continued)

GroupBusiness segments

Gas Processing

RM’000

GasTransportation

RM’000UtilitiesRM’000

RegasificationRM’000

TotalRM’000

31.12.2013

Segment assets 3,847,724 2,255,332 1,420,851 4,344,914 11,868,821

Investment in associate 129,047

Investment in joint ventures 201,996

Unallocated assets 1,022,555

Total assets 13,222,419

Included in the measure of segment assets are:

Capital expenditure 747,806 198,710 43,378 560,051* 1,549,945

Unallocated capital expenditure – – – – 10,072

* Capital expenditure for Regasification segment includes leased assets amounting to RM Nil (2013: RM34,576,000) which are accounted for as assets of the Group.

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 income/(expenses) mainly comprises finance income, other corporate income and 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 joint ventures is not presented as the contribution of the associate and joint ventures and the carrying amounts of investment in the associate and joint ventures have been reflected in the statement of profit or loss and other comprehensive income and statement of financial position of the Group. Details of the associate and joint ventures are disclosed in note 5 and note 6 to the financial 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.

pg 244PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

NOTES TO THE FINANCIAL STATEMENTS– 31 December 2014

Page 249: Driving Transformation

27. OPERATING SEGMENTS (continued)

Products and services segments

Group2014

RM’0002013

RM’000

Gas processing fee 1,480,247 1,497,435

Gas transportation fee 1,286,690 1,189,269

Utilities

– Electricity 484,387 392,260

– Steam 292,160 260,007

– Industrial gases 173,880 148,750

– Others 58,132 66,227

Regasification fee 616,220 338,191

4,391,716 3,892,139

Geographical information for revenue and non-current assets is not presented as the Group is pre-dominantly operating in Malaysia.

28. HOLDING AND ULTIMATE HOLDING COMPANY

The holding company as well as the ultimate holding company is Petroliam Nasional Berhad (PETRONAS), a company incorporated in Malaysia.

pg 245

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29. FINANCIAL INSTRUMENTS

Categories of financial instruments

The table below provides an analysis of financial instruments categorised as follows:

i. Loans and receivables (L&R);ii Fair value through profit or loss (FVTPL); - Designated upon initial recognition (DUIR); andiii Financial liabilities measured at amortised cost (FL).

Group Note

L&R/(FL)

RM’000

FVTPL-DUIR

RM’000

Total carrying amountRM’000

2014

Financial assets

Trade and other receivables (excluding prepayments) 9 592,754 – 592,754

Cash and cash equivalents 11 637,746 – 637,746

1,230,500 – 1,230,500

Financial liabilities

Finance lease liabilities 15 (882,250) – (882,250)

Trade and other payables (excluding deferred income) 17 (663,106) – (663,106)

(1,545,356) – (1,545,356)

2013

Financial assets

Trade and other receivables (excluding prepayments) 9 685,765 – 685,765

Fund and other investments 10 – 15,010 15,010

Cash and cash equivalents 11 912,123 – 912,123

1,597,888 15,010 1,612,898

Financial liabilities

Finance lease liabilities 15 (841,792) – (841,792)

Trade and other payables (excluding deferred income) 17 (999,117) – (999,117)

(1,840,909) – (1,840,909)

pg 246PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

NOTES TO THE FINANCIAL STATEMENTS– 31 December 2014

Page 251: Driving Transformation

29. FINANCIAL INSTRUMENTS (continued)

Categories of financial instruments (continued)

Company Note

L&R/(FL)

RM’000

FVTPL-DUIR

RM’000

Total carrying amountRM’000

2014

Financial assets

Trade and other receivables (excluding prepayments) 9 612,970 – 612,970

Cash and cash equivalents 11 492,474 – 492,474

1,105,444 – 1,105,444

Financial liabilities

Trade and other payables (excluding deferred income) 17 (612,311) – (612,311)

(612,311) – (612,311)

2013

Financial assets

Trade and other receivables (excluding prepayments) 9 1,082,931 – 1,082,931

Fund and other investments 10 – 15,010 15,010

Cash and cash equivalents 11 705,846 – 705,846

1,788,777 15,010 1,803,787

Financial liabilities

Trade and other payables (excluding deferred income) 17 (974,394) – (974,394)

(974,394) – (974,394)

In 2013, certain fund and other investments have been designated upon initial recognition as fair value through profit or loss as management internally monitors these investments on fair value basis.

The fair value movements for financial assets categorised as fair value through profit or loss are mainly attributable to changes in market prices.

pg 247

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29. FINANCIAL INSTRUMENTS (continued)

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, the sale of industrial utilities and the regasification of liquefied natural gas for a fee. 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 financial 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 financial 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’s 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.

As at the reporting date, the maximum exposure to credit risk arising from receivables is represented by the carrying amounts in the statement of financial position. The ageing of trade receivables as at the reporting date is analysed on page 249.

pg 248PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

NOTES TO THE FINANCIAL STATEMENTS– 31 December 2014

Page 253: Driving Transformation

29. FINANCIAL INSTRUMENTS (continued)

Credit risk (continued)

Receivables (continued)

Group Company

Note2014

RM’0002013

RM’0002014

RM’0002013

RM’000

Current 380,392 475,278 328,512 422,232

Past due 1 to 30 days 55,581 7,392 55,581 7,392

Past due 31 to 60 days 678 1,739 678 1,739

Past due 61 to 90 days 590 1,319 590 1,319

Past due more than 90 days 4,345 1,414 4,345 1,414

441,586 487,142 389,706 434,096

Representing:

Trade receivables 9 22,580 19,909 22,580 19,909

Amounts due from holding company 9.2 287,036 305,965 235,156 252,919

Amounts due from related companies 9.4 110,104 142,218 110,104 142,218

Amounts due from joint ventures 9.5 3,452 893 3,452 893

Amounts due from related parties 9.6 18,414 18,157 18,414 18,157

441,586 487,142 389,706 434,096

As at the reporting date, significant receivables relate to amounts due from holding company and amounts due from related companies.

Fund and other investments

The Group and the Company are also exposed to counterparty credit risk from financial institutions through fund investment activities comprising primarily money market placement. These exposures are managed in accordance with existing policies and guidelines that define 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 is governed by a counterparty credit risk management framework.

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 financial 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.

pg 249

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29. FINANCIAL INSTRUMENTS (continued)

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 sufficient cash and liquid marketable assets.

Maturity analysis

The table below summarises the maturity profile of the Group’s and of the Company’s financial liabilities as at the reporting date based on undiscounted contractual payments:

Group

Carrying amountRM’000

Contractualinterest/

profit rates per annum

%

Contractual cash flow*

RM’000

Within1

yearRM’000

1 – 2years

RM’000

2 – 5years

RM’000

More than

5 yearsRM’000

2014

Finance lease liabilities 882,250 9.1 1,779,442 100,744 101,020 302,232 1,275,446

Trade and other payables (excluding deferred income) 663,106 – 663,106 663,106 – – –

1,545,356 2,442,548 763,850 101,020 302,232 1,275,446

2013

Finance lease liabilities 841,792 8.9 1,763,672 94,501 94,501 283,762 1,290,908

Trade and other payables (excluding deferred income) 999,117 – 999,117 999,117 – – –

1,840,909 2,762,789 1,093,618 94,501 283,762 1,290,908

*The contractual cash flow is inclusive of the principal and interest payments.

pg 250PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

NOTES TO THE FINANCIAL STATEMENTS– 31 December 2014

Page 255: Driving Transformation

29. FINANCIAL INSTRUMENTS (continued)

Liquidity risk (continued)

Maturity analysis (continued)

Company

Carrying amountRM’000

Contractualinterest/

profit rates per annum

%

Contractual cash flow*

RM’000

Within1

yearRM’000

1 – 2years

RM’000

2 – 5years

RM’000

More than

5 yearsRM’000

2014

Trade and other payables (excluding deferred income) 612,311 – 612,311 612,311 – – –

612,311 612,311 612,311 – – –

2013

Trade and other payables (excluding deferred income) 974,394 – 974,394 974,394 – – –

974,394 974,394 974,394 – – –

*The contractual cash flow is inclusive of the principal and interest payments.

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 to 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 financial assets, liabilities or expected future cash flows.

Interest rate risk

The Group’s and the Company’s investments in fixed rate debt instruments are exposed to a risk of change in their fair value due to changes in interest rates. Short term receivables and payables are not significantly exposed to interest rate risk.

All interest rate exposures are monitored and managed proactively in line with PETRONAS’ policies and guidelines.

pg 251

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29. FINANCIAL INSTRUMENTS (continued)

Market risk (continued)

Interest rate risk (continued)

The interest rate profile of the Group’s and of the Company’s interest-bearing financial instruments based on carrying amounts as at reporting date is as follows:

Group Company

2014RM’000

2013RM’000

2014RM’000

2013RM’000

Fixed rate instruments

Financial assets 637,594 926,999 492,322 720,722

Financial liabilities (882,250) (841,792) – –

(244,656) 85,207 492,322 720,722

Since most of the Group’s and the Company’s interest-bearing financial assets and liabilities are fixed 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 profit or loss.

Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate 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 Ringgit Malaysia. As such, it is not exposed to any significant foreign currency exposures.

The Group’s and the Company’s foreign currency management policy is to minimise economic and significant transactional exposure arising from currency movements. For major capital projects, the Group and the Company perform assessment of potential foreign currency risk exposure at the investment decision phase to determine the appropriate foreign currency risk management strategy. When deemed necessary and appropriate, the Group and the Company will enter into derivative financial instruments to hedge and minimise their exposure to the foreign currency movements.

pg 252PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

NOTES TO THE FINANCIAL STATEMENTS– 31 December 2014

Page 257: Driving Transformation

29. FINANCIAL INSTRUMENTS (continued)

Market risk (continued)

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:

GroupDenominated in

CompanyDenominated in

USDRM’000

GBPRM’000

USDRM’000

GBPRM’000

2014

Financial assets

Trade and other receivables 16,566 – – –

Financial liabilities

Finance lease liabilities (882,250) – – –

Trade and other payables (93,585) (109) (72,493) (109)

(975,835) (109) (72,493) (109)

Net exposure (959,269) (109) (72,493) (109)

2013

Financial assets

Trade and other receivables 15,975 – – –

Financial liabilities

Finance lease liabilities (841,792) – – –

Trade and other payables (141,310) (6,068) (127,513) (6,068)

(983,102) (6,068) (127,513) (6,068)

Net exposure (967,127) (6,068) (127,513) (6,068)

pg 253

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29. FINANCIAL INSTRUMENTS (continued)

Market risk (continued)

Currency risk sensitivity analysis

Sensitivity analysis for a given market variable provided in this note, discloses the effect on profit or loss as at 31 December 2014 assuming that a reasonably possible change in the relevant market variable had occurred at 31 December 2014 and had been applied to the risk exposures in existence at that date to show the effects of reasonably possible changes in price on profit 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, debt and foreign currency contracts where relevant. Changes in fair values or cash flows 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 flows 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.

The following table demonstrates the indicative pre-tax effects on the profit or loss of applying reasonably foreseeable market movements in the following currency exchange rates:

Appreciation in foreign

currency rate%

Group

Effect on profit/(loss)

RM’000

Company

Effect on profit/(loss)

RM’000

2014

USD 5 (47,963) (3,625)

GBP 5 (5) (5)

2013

USD 5 (48,356) (6,376)

GBP 7 (425) (425)

A depreciation in the above foreign currency rates would have had equal but opposite effect, on the basis that all other variables remain constant.

pg 254PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

NOTES TO THE FINANCIAL STATEMENTS– 31 December 2014

Page 259: Driving Transformation

29. FINANCIAL INSTRUMENTS (continued)

Market risk (continued)

Fair value information

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

The following table analyses financial instruments carried at fair value and those not carried at fair value for which fair value is disclosed, together with their fair values and carrying amounts shown in the statement of financial position.

Fair value offinancial

instruments carried at fair

valueLevel 2RM’000

Fair value offinancial

instruments not carried at

fair valueLevel 3

RM’000

Total fairvalue

RM’000

Carrying amounts

RM’000

Group

2014

Financial liabilities

Finance lease liabilities – 882,250 882,250 882,250

– 882,250 882,250 882,250

2013

Financial assets

Corporate private debt securities 15,010 – 15,010 15,010

15,010 – 15,010 15,010

Financial liabilities

Finance lease liabilities – 841,792 841,792 841,792

– 841,792 841,792 841,792

Company

2013

Financial assets

Corporate private debt securities 15,010 – 15,010 15,010

15,010 – 15,010 15,010

The fair value of finance lease liabilities has been estimated using the discounted cash flows method.

pg 255

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29. FINANCIAL INSTRUMENTS (continued)

Income/(expense), net gains and losses arising from financial instruments

Interest incomeRM’000

Interest expenseRM’000

OthersRM’000

TotalRM’000

Group

2014

Financial instruments at fair value through profit or loss

– Designated upon initial recognition – – (10) (10)

Loans and receivables 36,895 – 2,265 39,160

Financial liabilities at amortised cost – (76,328) (55,498) (131,826)

Total 36,895 (76,328) (53,243) (92,676)

2013

Financial instruments at fair value through profit or loss

– Designated upon initial recognition 3,702 – (118,819) (115,117)

Loans and receivables 38,087 – 110 38,197

Financial liabilities at amortised cost – (50,117) 52,361 2,244

Total 41,789 (50,117) (66,348) (74,676)

Company

2014

Financial instruments at fair value through profit or loss

– Designated upon initial recognition – – (10) (10)

Loans and receivables 28,323 – – 28,323

Financial liabilities at amortised cost – – (574) (574)

Total 28,323 – (584) 27,739

2013

Financial instruments at fair value through profit or loss

– Designated upon initial recognition 3,702 – (118,819) (115,117)

Loans and receivables 36,789 – – 36,789

Financial liabilities at amortised cost – (9,319) 112,773 103,454

Total 40,491 (9,319) (6,046) 25,126

pg 256PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

NOTES TO THE FINANCIAL STATEMENTS– 31 December 2014

Page 261: Driving Transformation

30. CAPITAL MANAGEMENT

The Group and the Company define capital as its total equity and debt. The objective of the Group’s and the Company’s capital management is to maintain an optimal capital structure and ensure availability of funds in order to meet financial obligations, support business growth and maximise shareholder’s value. As a subsidiary of PETRONAS, the Group’s 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 ensure compliance with all covenants under debt and shareholders’ agreements and regulatory requirements, if any.

There were no changes in the Group’s and the Company’s approach to capital management during the year.

31. ADOPTION OF NEW AND REVISED PRONOUNCEMENTS

As of 1 January 2014, the Group and the Company have adopted the following pronouncements that have been issued by the MASB as listed below.

Effective for annual periods beginning on or after 1 January 2014

Amendments to MFRS 10 Consolidated Financial Statements: Investment Entities Amendments to MFRS 12 Disclosure of Interests in Other Entities: Investment Entities Amendments to MFRS 127 Consolidated Separate Financial Statements: Investment Entities Amendments to MFRS 136 Impairment of Assets – Recoverable Amount Disclosures for Non-Financial AssetsAmendments to MFRS 139 Financial Instruments: Recognition and Measurement – Novation of Derivatives and Continuation of Hedge AccountingIC Interpretation 21 Levies

The adoption of the above amendments to MFRSs and IC Interpretation did not have material impact to the financial statements of the Group and the Company.

32. PRONOUNCEMENTS YET IN EFFECT

The following pronouncements that have been issued by the MASB will become effective in future financial reporting periods and have not been adopted by the Group and the Company in these financial statements.

Effective for annual periods beginning on or after 1 July 2014

Amendments to MFRS 3 Business Combinations (Annual Improvements 2010-2012 Cycle and 2011-2013 Cycle)Amendments to MFRS 8 Operating Segments (Annual Improvements 2010-2012 Cycle) Amendments to MFRS 13 Fair Value Measurement (Annual Improvements 2011-2013 Cycle) Amendments to MFRS 116 Property, Plant and Equipment (Annual Improvements 2010-2012 Cycle)Amendments to MFRS 119 Employee Benefits - Defined Benefit Plans: Employee ContributionsAmendments to MFRS 124 Related Party Disclosures (Annual Improvements 2010-2012 Cycle)

pg 257

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32. PRONOUNCEMENTS YET IN EFFECT (continued)

Effective for annual periods beginning on or after 1 January 2016

Amendments to MFRS 5 Non-current Assets Held for Sa le and Discont inued Operat ions (Annual Improvements 2012-2014 Cycle)Amendments to MFRS 7 Financial Instruments: Disclosures (Annual Improvements 2012-2014 Cycle)Amendments to MFRS 10 Consolidated Financial Statements: Sale or Contribution of Assets between an Investor and its Associate or Joint VentureAmendments to MFRS 10 Consolidated Financial Statements: Investment Entities: Applying the Consolidation ExceptionAmendments to MFRS 11 Joint Arrangement: Accounting for Acquisitions of Interests in Joint OperationsAmendments to MFRS 12 Disclosure of Interest in Other Entities: Investment Entities: Applying the Consolidation ExceptionAmendments to MFRS 101 Presentation of Financial Statements: Disclosure InitiativeAmendments to MFRS 116 Property, Plant and Equipment: Clarification of Acceptable Methods of Depreciation and AmortisationAmendments to MFRS 119 Employee Benefits (Annual Improvements 2012-2014 Cycle)Amendments to MFRS 127 Separate Financial Statements: Equity Method in Separate Financial StatementsAmendments to MFRS 128 Investments in Associates and Joint Ventures: Sale or Contribution of Assets between an Investor and its Associate or Joint VentureAmendments to MFRS 128 Investments in Associates and Joint Ventures: Investment Entities: Applying the Consolidation ExceptionAmendments to MFRS 134 Interim Financial Reporting (Annual Improvements 2012-2014 Cycle)

Effective for annual periods beginning on or after 1 January 2017

MFRS 15 Revenue from Contracts with Customers

Effective for annual periods beginning on or after 1 January 2018

MFRS 9 Financial Instruments (2014)

The Group and the Company are expected to apply the abovementioned pronouncements beginning from the respective dates the pronouncements become effective. The initial application of the abovementioned pronouncements are not expected to have any material impacts to the financial statements of the Group and the Company except as mentioned below:

i. MFRS 15 Revenue from Contracts with Customers

MFRS 15 replaces the guidance in MFRS 111 Construction Contracts, MFRS 118 Revenue, IC Interpretation 13 Customer Loyalty Programmes, IC Interpretation 15 Agreements for Construction of Real Estate, IC Interpretation 18 Transfers of Assets from Customers and IC Interpretation 131 Revenue – Barter Transactions Involving Advertising Services. The Group is currently assessing the financial impact that may arise from the adoption of MFRS 15.

ii. MFRS 9 Financial Instruments

MFRS 9 replaces the guidance in MFRS 139 Financial Instruments: Recognition and Measurement on the classification and measurement of financial assets and financial liabilities, and on hedge accounting. The Group is currently assessing the financial impact that may arise from the adoption of MFRS 9.

pg 258PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

NOTES TO THE FINANCIAL STATEMENTS– 31 December 2014

Page 263: Driving Transformation

33. NEW PRONOUNCEMENTS NOT APPLICABLE TO THE GROUP AND THE COMPANY

The MASB has issued amendments 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.

Effective for annual periods beginning on or after 1 July 2014

Amendments to MFRS 1 First-time Adoption of Malaysian Financial Reporting Standards (Annual Improvements 2011-2013 Cycle)Amendments to MFRS 2 Share-based Payment (Annual Improvements 2010-2012 Cycle)Amendments to MFRS 138 Intangible Assets (Annual Improvements to MFRSs 2010-2012 Cycle)Amendments to MFRS 140 Investment Property (Annual Improvements to MFRSs 2011-2013 Cycle)

Effective for annual periods beginning on or after 1 January 2016

MFRS 14 Regulatory Deferral AccountsAmendments to MFRS 116 Property, Plant and Equipment Agriculture: Bearer PlantsAmendments to MFRS 138 Intangible Assets: Clarification of Acceptable Methods of Depreciation and AmortisationAmendments to MFRS 141 Agriculture – Agriculture: Bearer Plants

34. DISCLOSURE OF REALISED AND UNREALISED PROFITS

The retained profits as at the end of reporting period consist of:

Group Company

2014RM’000

2013RM’000

2014RM’000

2013RM’000

Total retained profits/(accumulated losses) of the Company and its subsidiaries:

– realised 7,609,990 7,471,893 7,578,575 7,412,879

– unrealised (574,622) (433,875) (1,032,571) (978,256)

7,035,368 7,038,018 6,546,004 6,434,623

Total share of retained profits/(accumulated losses) from associated company:

– realised 80,340 77,794 – –

– unrealised (24,471) (25,214) – –

55,869 52,580 – –

Total share of retained profits/(accumulated losses) from joint ventures:

– realised 84,820 (7,686) – –

– unrealised 178,782 12,835 – –

263,602 5,149 – –

Consolidation adjustments 1,289 183 – –

Total retained profits 7,356,128 7,095,930 6,546,004 6,434,623

The realised and unrealised profits are compiled based on the Guidance on Special Matter No.1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosures Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, issued by the Malaysian Institute of Accountants on 20 December 2010.

pg 259

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Report on the Financial Statements

We have audited the financial statements of PETRONAS GAS BERHAD, which comprises the Statements of Financial Position as at 31 December 2014 of the Group and of the Company, and the Statements of Profit 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 significant accounting policies and other explanatory information, as set out on pages 192 to 259.

Directors’ Responsibility for the Financial Statements

The Directors of the Company are responsible for the preparation of financial statements that 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 financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial 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 financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation of financial 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 financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements give a true and fair view of the financial position of the Group and of the Company as of 31 December 2014 and of their financial performance and cash flows 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.

pg 260PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

INDEPENDENT AUDITORS’ REPORTTO THE MEMBERS OF PETRONAS GAS BERHAD(Company No. 101671-H) (Incorporated in Malaysia)

Page 265: Driving Transformation

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 satisfied that the accounts of the subsidiaries that have been consolidated with the Company’s financial statements are in form and content appropriate and proper for the purposes of the preparation of the financial 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 qualification or any adverse comment made under Section 174(3) of the Act.

Other Reporting Responsibilities

Our audit was made for the purpose of forming an opinion on the financial statements taken as a whole. The information set out in note 34 on page 259 to the financial 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 Profits 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 ADRIAN LEE LYE WANGFirm Number: AF 0758 Approval Number: 2679/11/15(J)Chartered Accountants Chartered Accountant

Petaling Jaya,Date: 17 February 2015

pg 261

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CategoryNo. of

Shareholders% of Total

Shareholders No. of Shares% of Total

Shareholdings

Less than 100 263 2.67 2,140 0.00*

100 – 1,000 6,931 70.44 6,440,207 0.33

1,001 – 10,000 1,934 19.66 6,468,821 0.33

10,001 – 100,000 426 4.33 15,719,951 0.79

100,001 to less than 5% of issued shares 282 2.87 412,927,696 20.87

5% and above of issued shares 3 0.03 1,537,173,100 77.68

Total 9,839 100.00 1,978,731,915 100.00

*Insignificant % shareholding

CLASSIFICATION OF SHAREHOLDERS

No. of Shareholders No. of Shares Shares Percentage

Category Malaysian Foreigner Malaysian Foreigner Malaysian Foreigner

INDIVIDUAL 8,321 86 12,429,047 299,745 0.63 0.02

BODY CORPORATE

Banks/finance companies 75 2 305,474,600 11,600 15.44 0.00

Investments trusts/ foundation/charities 6 – 139,000 – 0.00 0.00

Other types of companies 190 5 2,516,202 107,000 0.13 0.01

GOVERNMENT AGENCIES/ INSTITUTIONS 6 – 1,435,000 – 0.07 0.00

NOMINEES 644 504 1,510,151,161 146,168,560 76.32 7.39

OTHERS – – – – 0.00 0.00

Total 9,242 597 1,832,145,010 146,586,905 92.59 7.41

LIST OF DIRECTORS' SHAREHOLDINGS

No. Name No. of Shares% of Total

Shareholdings

1. Datuk Manharlal Ratilal – –

2. Yusa’ bin Hassan – –

3. Dato’ N. Sadasivan N.N. Pillay – –

4. Datuk Rosli bin Boni – –

5. Ir. Pramod Kumar Karunakaran – –

6. Dato’ Ab. Halim bin Mohyiddin 5,000 0.00*

7. Lim Beng Choon – –

8. Habibah binti Abdul – –

*Insignificant % shareholding

pg 262PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

ANALYSIS OF SHAREHOLDINGSas at 27 February 2015

Page 267: Driving Transformation

LIST OF SUBSTANTIAL SHAREHOLDERS

No. Name No. of Shares% of Total

Shareholdings

1. CIMB Group Nominees (Tempatan) Sdn Bhd(Exempt AN for Petroliam Nasional Berhad)

1,200,304,400 60.66

2. Employees Provident Fund Board 238,169,000 12.04

3. Kumpulan Wang Persaraan (Diperbadankan) 110,663,400 5.59

Company

2014 2013

Authorised:

2,000,000,000 ordinary shares of RM1.00 each 2,000,000,000 2,000,000,000

Issued and fully paid:

1,978,731,915 ordinary shares of RM1.00 each 1,978,731,915 1,978,731,915

pg 263

AUTHORISED & ISSUED SHARE CAPITAL

Page 268: Driving Transformation

LIST OF TOP 30 SHAREHOLDERS

No. Name No. of Shares% of Total

Shareholdings

1 CIMB GROUP NOMINEES (TEMPATAN) SDN BHD(EXEMPT AN FOR PETROLIAM NASIONAL BERHAD)

1,199,768,000 60.63

2 CITIGROUP NOMINEES (TEMPATAN) SDN BHD(EMPLOYEES PROVIDENT FUND BOARD)

228,627,200 11.55

3 KUMPULAN WANG PERSARAAN (DIPERBADANKAN) 108,777,900 5.50

4 AMANAHRAYA TRUSTEES BERHAD (SKIM AMANAH SAHAM BUMIPUTERA)

78,270,700 3.96

5 AMANAHRAYA TRUSTEES BERHAD(AMANAH SAHAM WAWASAN 2020)

21,542,200 1.09

6. AMANAHRAYA TRUSTEES BERHAD(AS 1MALAYSIA)

19,113,500 0.97

7. CARTABAN NOMINEES (ASING) SDN BHD (EXEMPT AN FOR STATE STREET BANK & TRUST COMPANY (WEST CLT OD67))

19,013,460 0.96

8. AMANAHRAYA TRUSTEES BERHAD (AMANAH SAHAM MALAYSIA)

15,000,000 0.76

9. HSBC NOMINEES (ASING) SDN BHD (BBH AND CO BOSTON FOR VANGUARD EMERGING MARKETS STOCK INDEX FUND)

14,781,096 0.75

10. CARTABAN NOMINEES (TEMPATAN) SDN BHD (EXEMPT AN FOR EASTSPRING INVESTMENTS BERHAD)

14,767,900 0.75

11. MALAYSIA NOMINEES (TEMPATAN) SENDIRIAN BERHAD (GREAT EASTERN LIFE ASSURANCE (MALAYSIA) BERHAD (PAR 1)

13,665,000 0.69

12. AMSEC NOMINEES (TEMPATAN) SDN BHD (AMTRUSTEE BERHAD FOR CIMB ISLAMIC DALI EQUITY GROWTH FUND (UT-CIMB-DALI))

8,850,400 0.45

13. AMANAHRAYA TRUSTEES BERHAD (AMANAH SAHAM DIDIK)

7,224,800 0.37

14. AMANAHRAYA TRUSTEES BERHAD (PUBLIC ISLAMIC DIVIDEND FUND)

7,041,200 0.36

15. CITIGROUP NOMINEES (TEMPATAN) SDN BHD (EMPLOYEES PROVIDENT FUND BOARD (NOMURA))

6,451,500 0.33

16. HSBC NOMINEES (ASING) SDN BHD (EXEMPT AN FOR JPMORGAN CHASE BANK, NATIONAL ASSOCIATION (U.S.A.))

6,363,914 0.32

17. AMANAHRAYA TRUSTEES BERHAD (PUBLIC ISLAMIC SELECT ENTERPRISES FUND)

5,629,400 0.28

18. PERMODALAN NASIONAL BERHAD 5,086,000 0.26

19. MAYBANK NOMINEES (TEMPATAN) SDN BHD (MAYBANK TRUSTEES BERHAD FOR PUBLIC REGULAR SAVINGS FUND (N14011940100))

4,897,500 0.25

pg 264PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

LIST OF TOP 30 SHAREHOLDERS

Page 269: Driving Transformation

No. Name No. of Shares% of Total

Shareholdings

20. HSBC NOMINEES (ASING) SDN BHD (EXEMPT AN FOR THE BANK OF NEW YORK MELLON (MELLON ACCT))

4,254,321 0.22

21. AMANAHRAYA TRUSTEES BERHAD (PUBLIC ISLAMIC SECTOR SELECT FUND)

4,204,900 0.21

22. HSBC NOMINEES (ASING) SDN BHD (HSBC BK PLC FOR ABU DHABI INVESTMENT AUTHORITY (AGUS))

4,136,015 0.21

23. MAYBANK NOMINEES (TEMPATAN) SDN BHD (MAYBANK TRUSTEES BERHAD FOR PUBLIC ITTIKAL FUND (N14011970240))

3,950,000 0.20

24. HSBC NOMINEES (ASING) SDN BHD (EXEMPT AN FOR JPMORGAN CHASE BANK, NATIONAL ASSOCIATION (BVI))

3,891,100 0.20

25. CARTABAN NOMINEES (ASING) SDN BHD (GIC PRIVATE LIMITED FOR GOVERNMENT OF SINGAPORE (C))

3,371,000 0.17

26. AMANAHRAYA TRUSTEES BERHAD (PUBLIC ISLAMIC EQUITY FUND)

3,362,400 0.17

27. CITIGROUP NOMINEES (ASING) SDN BHD (LEGAL & GENERAL ASSURANCE (PENSIONS MANAGEMENT) LIMITED (A/C 1125250001))

3,248,263 0.16

28. HSBC NOMINEES (ASING) SDN BHD (HSBC BK PLC FOR ABU DHABI INVESTMENT AUTHORITY (TRANG))

3,185,565 0.16

29. AMANAHRAYA TRUSTEES BERHAD (PUBLIC ISLAMIC OPTIMAL GROWTH FUND)

2,972,300 0. 15

30. HSBC NOMINEES (ASING) SDN BHD (EXEMPT AN FOR J.P. MORGAN BANK (IRELAND) PUBLIC LIMITED COMPANY)

2,946,800 0.15

TOTAL 1,824,394,334 92.23

pg 265

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A summary of the landed property, plant and equipment of PETRONAS Gas Berhad and its subsidiaries as at 31 December 2014

LocationAcquisitionDate Tenure

Descriptionand Usage

Land Area(hectare)

Age ofPlant

and Building

(years)

Build-up

Area(sq. m)

Net Book Value as at

31 December2014

(RM’000)

TERENGGANU

Gas Processing Plants, KertihKm 105Jalan Kuantan-Kuala Terengganu24300 Kertih, KemamanTerengganu Darul Iman

LeaseholdExpiry:

Leasehold land

1,747,023

Lot No. 1903 30.09.1991 28.02.2043(Sub-Lease 60 years)

PlantGPP 1GPP 2GPP 3

87.930.322.422.1

95,998123,310123,310

Lot No. 3541 30.09.1991 03.04.2050(60 years)

GPP 4/ DPCU 2Compressor station

34.6 20.523.1

266,40065,010

Lot No. 1902 30.09.1991 26.02.2082(99 years)

OfficeAdministration building 1Administration building 2Fire station

2.729.4

24.7

26.8

1,282

6,892

3,248

Gas Processing Plants, SantongKm 8, Kg. Tok ArunOff Jalan Santong23100 Paka, DungunTerengganu Darul Iman

LeaseholdExpiry:

Leasehold land

926,105

Lot No. 7346 03.08.1997 13.07.2058(60 years)

PlantGPP 5GPP 6DPCU 3

OfficeAdministration building

189.615.915.016.3

17.2

200,000220,00060,000

12,220

Lot No. 7220 03.08.1997 20.06.2058(60 years)

(Vacant) 26.9

pg 266PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

SUMMARY OF LANDED PROPERTY,PLANT AND EQUIPMENTas at 31 December 2014

Page 271: Driving Transformation

LocationAcquisitionDate Tenure

Descriptionand Usage

Land Area(hectare)

Age ofPlant

and Building

(years)

Build-up

Area(sq. m)

Net Book Value as at

31 December2014

(RM’000)

Export Terminal OperationTanjung Sulong24000 KemamanTerengganu Darul Iman

LeaseholdExpiry:

Leasehold land

180,258

Lot No. 1314 24.07.1993 19.03.2025(40 years)

PlantUnit 1, 2, 3, 4

OfficeAdministration building

9.730.1 1,146

Lot No. 1333 24.07.1993 11.03.2027(40 years)

Marine facilityBreakwater jetty

2.8 30.1

Centralised Utility Facilities (CUF) Operations, Kertih Integrated Petrochemical Complex Km 105, Jalan Kuantan Kuala Terengganu 24300 Kertih, KemamanTerengganu Darul Iman

LeaseholdExpiry:

Leasehold land

PlantCGN BCGN CCGN D, E, FWater plantCGN GASULab & workshop

15.115.114.614.614.713.813.8

667667

2,0002,000

66715,451

729

588,065

Lot No. 8065 21.12.1999 19.08.2060(60 years)

Control room

OfficeAdministration building

37.1 13.6

13.9

1,820

514

A summary of the landed property, plant and equipment of PETRONAS Gas Berhad and its subsidiaries as at 31 December 2014 (continued)

pg 267

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LocationAcquisitionDate Tenure

Descriptionand Usage

Land Area(hectare)

Age ofPlant

and Building

(years)

Build-up

Area(sq. m)

Net Book Value as at

31 December2014

(RM’000)

PAHANG

Kuantan Regional Operations Office Lot 1, Sector 1Bandar Indera Mahkota25200 KuantanPahang Darul Makmur

LeaseholdExpiry:

Leasehold land

7,958

Lot No. PT16756 04.01.1989 04.01.2088(99 years)

OfficeRegional office

11.223.2 2,428

Kuantan Compressor StationKampung Mahkota Km 19 Jalan Gambang 26070 KuantanPahang Darul Makmur

LeaseholdExpiry:

Leasehold land

141,991

Lot No. 104462 04.01.1989 26.08.2101(99 years)

PlantCompressor stationCompressor station

20.121.1

5.2

1,142

4,378

Centralised Utility Facilities (CUF) Operations, GebengLot 139AGebeng Industrial Area Phase III26080 Kuantan Pahang Darul Makmur

17.11.1999 LeaseholdExpiry:08.01.2100(99 years)

Leasehold land

PlantCGN ACGN BCGN CN2GENWater plant

18.815.115.115.115.114.6

667667667360

2,000

286,540

Lot No. PT15127 OfficeMaintenance buildingWarehouse

13.6

13.6

1,015

1,004

A summary of the landed property, plant and equipment of PETRONAS Gas Berhad and its subsidiaries as at 31 December 2014 (continued)

pg 268PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

SUMMARY OF LANDED PROPERTY,PLANT AND EQUIPMENTas at 31 December 2014

Page 273: Driving Transformation

A summary of the landed property, plant and equipment of PETRONAS Gas Berhad and its subsidiaries as at 31 December 2014 (continued)

LocationAcquisitionDate Tenure

Descriptionand Usage

Land Area(hectare)

Age ofPlant

and Building

(years)

Build-up

Area(sq. m)

Net Book Value as at

31 December2014

(RM’000)

JOHOR

Segamat Operation CentreGas Transmission SystemKm 10, Lebuhraya Segamat-Kuantan85000 Segamat Johor Darul Takzim

LeaseholdExpiry:

Leasehold land

61,632

Lot No. PTD564 22.09.1991 18.02.2102(99 years)

PlantCompressor station

OfficeOperation centre

61.317.0

22.4

2,792

8,080

Pasir Gudang Regional Operations Office PLO 332, Jalan Perak 4 Pasir Gudang Industrial Area, 81700 Pasir Gudang Johor Darul Takzim

LeaseholdExpiry:

Leasehold land

7,535

Lot No. PTD84942 23.04.1989 22.04.2088(99 years)

OfficeRegional office

4.122.5 2,428

NEGERI SEMBILAN

Seremban Regional Operations Office, Km 11 Jalan Seremban – Tampin 71450 Sungai Gadut, Seremban Negeri Sembilan Darul Khusus

Freehold land 6,652

Lot No. 21958 16.02.1994 Freehold OfficeRegional office

14.023.4 2,428

pg 269

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A summary of the landed property, plant and equipment of PETRONAS Gas Berhad and its subsidiaries as at 31 December 2014 (continued)

LocationAcquisitionDate Tenure

Descriptionand Usage

Land Area(hectare)

Age ofPlant

and Building

(years)

Build-up

Area(sq. m)

Net Book Value as at

31 December2014

(RM’000)

SELANGOR

Shah Alam Regional Operations Office Lot 1, Jalan Jemuju Lima 16/13E, Shah Alam Industrial Area, Section 1640200 Shah Alam Selangor Darul Ehsan

LeaseholdExpiry:

Leasehold land

7,348

Lot No. PT606 12.10.1990 11.10.2089(99 years)

OfficeRegional office

2.923.1 2,428

Meru Compressor StationLot 1586 (G3907)Mukim of Jeram45000 District of Kuala SelangorSelangor Darul Ehsan

LeaseholdExpiry:

Leasehold land(Vacant)

5.4 N/A N/A 1,051

Lot No. PT6875 04.08.1998 10.08.2107(99 years)

PERAK

Sitiawan Regional Operations Office Lot 33263 Jalan Dato’ Ahmad Yunus32000 Sitiawan Perak Darul Ridzuan

Leasehold Expiry:

Leasehold land

4,903

Lot No. PT4535 04.11.1997 27.06.2101 (99 years)

OfficeRegional office

3.217.2 1,604

KEDAH

Gurun Regional Operations OfficePO Box 31 Km 1, Jalan Jeniang08300 Gurun Kedah Darul Aman

Leasehold Expiry:

Leasehold land

5,538

Lot No. 8173 18..12.1997 22.04.2102 (99 years)

OfficeRegional office

2.916.3 1,604

pg 270PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

SUMMARY OF LANDED PROPERTY,PLANT AND EQUIPMENTas at 31 December 2014

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A summary of the landed property, plant and equipment of PETRONAS Gas Berhad and its subsidiaries as at 31 December 2014 (continued)

LocationAcquisitionDate Tenure

Descriptionand Usage

Land Area(hectare)

Age ofPlant

and Building

(years)

Build-up

Area(sq. m)

Net Book Value as at

31 December2014

(RM’000)

TTM Pipeline land at District of Kubang Pasu Kuala Muda, Pendang, and Pokok Sena Kedah Darul Aman

1.11.2006 Leasehold Expiry:31.10.2105(99 years)

Leasehold land

PipelinePipeline across 8.0 km

24.79.8 N/A

932

SARAWAK

Miri Operations OfficeLot 2075, Block 4 Jalan Cattleya 2B Piasau Industrial Area 98008 Miri, Sarawak

N/A PipelineMeter StationPipeline across 42.2 km

N/A – located

along road

reserve area

24.8 2,06615,465

Bintulu Gas Meter StationKidurong Industrial Area Part of Lot 155Block 20Kemena Land District97007 Bintulu, Sarawak

PipelineMeter StationPipeline across 4.2 km

0.1 18.2 630

88

Lot No. 1646 21.10.2004 16.07.2067(60 years)

MELAKA

LNG Regasification TerminalSungai Udang PSR-1/MG3 Retrofit Site Office Revamp PETRONAS Penapisan Sungai Udang, Melaka

N/A N/A Regasification Floating Storage Units

Facilities Jetty

N/A N/A N/A 3,076,356

PIPELINES

PGU I – total gas pipeline comprises 6 km from Kertih to Paka, Terengganu & 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

20.03.1985 Leasehold Expiry:(40, 60 and 99 years)

PipelinesPipelines in leasehold land

Terengganu:43 lots

Terengganu: 237.3

30.3 N/A33,454

pg 271

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LocationAcquisitionDate Tenure

Descriptionand Usage

Land Area(hectare)

Age ofPlant

and Building

(years)

Build-up

Area(sq. m)

Net Book Value as at

31 December2014

(RM’000)

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)

PipelinesPipelines in leasehold land

Terengganu:19 lots

Pahang:338 lots

Johor:644 lots (Inclusive Loop 1 & Loop 2)

Melaka:139 lots

Negeri Sembilan:263 lots

Selangor:138 lots

Terengganu:79.8

Pahang:559.7

Johor:902.9

Melaka:191.0

Negeri Sembilan:

463.9

Selangor:295.7

23.1 N/A528,785

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 Indera Kayangan

06.01.1996 Leasehold Expiry:(99 years)

PipelinesPipelines in leasehold land

Selangor:93 lots

WP Kuala Lumpur:14 lots

Perak:362 lots

Penang:100 lots

Kedah:261 lots

Perlis:77 lots

Selangor:184.6

WP Kuala Lumpur:

17.9

Perak:543.9

Penang:119.5

Kedah:468.8

Perlis:87.3

Sector 1:19.1

Sector 2 & 3:

17.2

N/A

N/A

508,356

A summary of the landed property, plant and equipment of PETRONAS Gas Berhad and its subsidiaries as at 31 December 2014 (continued)

pg 272PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

SUMMARY OF LANDED PROPERTY,PLANT AND EQUIPMENTas at 31 December 2014

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A summary of the landed property, plant and equipment of PETRONAS Gas Berhad and its subsidiaries as at 31 December 2014 (continued)

LocationAcquisitionDate Tenure

Descriptionand Usage

Land Area(hectare)

Age ofPlant

and Building

(years)

Build-up

Area(sq. m)

Net Book Value as at

31 December2014

(RM’000)

PGU Loop 1 – total gas pipeline of 265 km from Kertih, Terengganu to Segamat, Johor Darul Takzim

04.10.1999 PipelinesPipelines in leasehold land

Terengganu:77 lots

Pahang:315 lots

Terengganu:158.9

Pahang:104.6

15.4 N/A317,168

PGU Loop 2 – total gas pipeline of 226 km from Segamat, Johor to Meru, Selangor Darul Ehsan

01.11.2000 PipelinesPipelines in leasehold land(Part of PGU’sdocument of title)

Melaka:4 lots

Negeri Sembilan:4 lots

Melaka:1.3

Negeri Sembilan:

1.1

14.4 N/A337,678

TOTAL 8,790,881

Abbreviations:CGN : Cogeneration PlantDPCU : Dew Point Control Unit PlantGPP : Gas Processing PlantN2GEN : Nitrogen GeneratorASU : Air Separation UnitPGU : Peninsular Gas Utilisation

pg 273

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Name of Facilities and Location DescriptionNet Book Value

(RM'000)

LNG Regasification Terminal, Sungai Udang Floating Storage Units, Regasification Jetty and Pipelines

3,076,356

Gas Processing Plants, Kertih Leasehold land, Plant and Office Buildings 1,747,023

Gas Processing Plants, Santong Leasehold land, Plant and Office Buildings 926,105

Utilities Plants, Kertih Leasehold land, Plant and Office Buildings 588,065

PGU II Leasehold land and Pipelines 528,785

PGU III Leasehold land and Pipelines 508,356

PGU Loop 2 Leasehold land and Pipelines 337,678

PGU Loop 1 Leasehold land and Pipelines 317,168

Utilities Plants, Gebeng Leasehold land, Plant and Office Buildings 286,540

Export Terminal Leasehold land, Plant and Marine Facility 180,258

pg 274PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

TOP 10 LANDED PROPERTY, PLANT AND EQUIPMENT

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PETRONAS GAS BERHAD

Level 49 – 51, Tower 1PETRONAS Twin TowersKuala Lumpur City Centre50088 Kuala LumpurTelephone : + 6 03 2051 5000Fax : + 6 03 2051 6992 (General) : + 6 03 2051 6555 (Company Secretary)

GAS PROCESSING AND UTILITIES DIVISION

Gas Processing Plants, KertihKm 105, Jalan Kuantan-Kuala Terengganu 24300 Kertih, KemamanTerengganu Darul ImanTelephone : + 6 09 831 2345Fax : + 6 09 827 1710 Gas Processing Plants, SantongKm 8, Kg. Tok Arun, Off Jalan Santong23100 Paka, DungunTerengganu Darul ImanTelephone : + 6 09 831 2345Fax : + 6 09 827 4578 Utilities Plants, KertihKertih Integrated Petrochemical ComplexKm 105, Jalan Kuantan/Kuala Terengganu24300 Kertih, KemamanTerengganu Darul ImanTelephone : + 6 09 830 5500Fax : + 6 09 830 5514

Utilities Plants, GebengLot 139A, Gebeng Industrial Area Fasa III26080 KuantanPahang Darul MakmurTelephone : + 6 09 586 3300Fax : + 6 09 586 3311

Tanjung Sulong Export TerminalTanjung Sulong 24000 KemamanTerengganu Darul ImanTelephone : + 6 09 831 2345Fax : + 6 09 827 1710

GAS TRANSMISSION & REGASIFICATION DIVISION

PETRONAS Gas Berhad SegamatKm 10, Lebuhraya Segamat-Kuantan85000 SegamatJohor Darul TakzimTelephone : + 6 07 935 3000Fax : + 6 07 931 6521

Gurun Regional OfficeKm 1, Jalan Jeniang 08300 GurunKedah Darul AmanTelephone : + 6 04 468 5518Fax : + 6 04 468 5519

Bintulu Operations CentreS/L No. 169, Lot 7748, Block 31Jalan Sultan Iskandar Assyakirin Commerce Square97000 Bintulu, SarawakTelephone : + 6 086 31 6517Fax : + 6 086 31 1960

Miri Operation CentreLot 1590 & 1591Eastwood Valley Industrial AreaJalan Miri By Pass 98008 Miri, SarawakTelephone : + 6 085 42 2811Fax : + 6 085 41 6410

Sitiawan Regional OfficeLot 33263 Jalan Dato’ Ahmad Yunus32000 SitiawanPerak Darul RidzuanTelephone : + 6 05 692 5611/12/13/14Fax : + 6 05 692 5615

Shah Alam Regional OfficeLot 1, Jalan Jemuju Lima 16/13EKawasan Perindustrian Seksyen 1640200 Shah AlamSelangor Darul EhsanTelephone : + 6 03 5510 6222Fax : + 6 03 5510 1528

Seremban Regional OfficeKm 11, Jalan Seremban, Tampin71450 Sungai GadutNegeri Sembilan Darul KhususTelephone : + 6 06 677 6777Fax : + 6 06 677 7799

Pasir Gudang Regional OfficePLO 332, Jalan Perak 4Kawasan Perindustrian Pasir Gudang81700 Pasir GudangJohor Darul TakzimTelephone : + 6 07 251 0333Fax : + 6 07 251 0400

Kuantan Regional OfficeLot 1, Sektor 1, Bandar Indera Mahkota25200 Kuantan, Pahang Darul MakmurTelephone : + 6 09 573 2811Fax : + 6 09 573 2813

Kertih Regional OfficeAras 1, Kompleks Pejabat PETRONAS Wilayah Pantai Timur (PWPT)24300 Kertih, KemamanTerengganu Darul ImanTelephone : + 6 09 867 3500Fax : + 6 09 864 0375

Kimanis Operation CentreLot 2, Block A, Ground FloorMembakut Jaya89728 Membakut SabahTelephone : + 6 087 88 6217/224Fax : + 6 087 88 6219

pg 275

CORPORATE DIRECTORY

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NOTICE IS HEREBY GIVEN THAT the Thirty Second (32nd) Annual General Meeting of the Company will be held at Emerald Room, Mandarin Oriental Hotel, Kuala Lumpur City Centre, 50088 Kuala Lumpur on Thursday, 30 April 2015 at 10.00 a.m. to consider the following matters:

AGENDA

As Ordinary Business

1. To receive the Audited Financial Statements for the financial year ended 31 December 2014 together with the Reports of the Directors and Auditors thereon. (Resolution 1)

2. To re-elect the following Directors pursuant to Article 93 of the Company’s Articles of Association:

(a) Datuk Rosli bin Boni(b) Dato’ Ab. Halim bin Mohyiddin

(Resolution 2) (Resolution 3)

3. To re-elect the following Director pursuant to Article 96 of the Company’s Articles of Association:

(a) Datuk Manharlal Ratilal (Resolution 4)

4. To approve the Directors’ fees of up to RM986,000 in respect of the financial year ending 31 December 2015. (Resolution 5)

5. To re-appoint Messrs KPMG as Auditors of the Company until the conclusion of the next Annual General Meeting and to authorise the Directors to fix their remuneration. (Resolution 6)

As Special Business6. To consider and, if thought fit, to pass the following Ordinary Resolution with or

without modifications:

“THAT Dato’ N. Sadasivan N.N. Pillay, retiring in accordance with Section 129(6) of the Companies Act, 1965, Malaysia, is hereby re-appointed as a Director of the Company to hold office 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.

By Order of the Board

Intan Shafinas (Tuty) Hussain (LS0009774)Yeap Kok Leong (MAICSA 0862549) Company Secretaries

Kuala Lumpur7 April 2015

pg 276PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

NOTICE OFANNUAL GENERAL MEETING

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Notes:1. For the purposes of determining a member who shall be entitled to attend and vote at the forthcoming Thirty Second (32nd) Annual General Meeting of

the Company, the Company shall be requesting the Record of Depositories as at 23 April 2015. Only a depositor whose name appears on the Record of Depositors as at 23 April 2015 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 qualification of the proxy.

3. Where a member of the Company is an authorised nominee as defined 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 defined 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 specified 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 officer or attorney duly authorised and shall be deposited at the office of the Company’s Share Registrar, Symphony Share Registrars 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 fixed for the adjourned meeting.

7. If this Proxy Form is signed under the hand of an officer duly authorised, it should be accompanied by a statement reading “signed as authorised officer 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 3 – Re-election of Independent Director (Note on re-election of Independent Director pursuant to Recommendation 3.1 of Malaysian Code on Corporate Governance 2012)

The Board has conducted assessment on the independence of Dato’ Ab. Halim bin Mohyiddin as Independent Director who is seeking for re-election at the forthcoming Thirty Second (32nd) Annual General Meeting of the Company and is satisfied that the incumbent has complied with the independence criteria as set out in the Paragraph 1.01 of the Main Market Listing Requirements.

ii) Resolution 5 – Directors’ Fees for financial year ending 31 December 2015 The Directors’ fees approved for the financial year ended 31 December 2014 was RM986,000 The actual Directors’ fees for the Non-Executive

Directors paid during the financial year ended 31 December 2014 was RM817,000.

The Directors’ fees proposed for the financial year ending 31 December 2015 (FYE 2015) are calculated based on the number of scheduled Board’s and Board Committees’ meetings and assumption that all the Non-Executive Directors will remain office until the end of the FYE 2015. This resolution is to facilitate payment of Directors’ fees in FYE 2015. The Board will seek shareholders’ approval at the next annual general meeting in the event the Directors’ fees proposed is insufficient due to increase in number of Board’s and Board Committees’ meetings and/or increase in Board size.

iii) Resolution 7 – Section 129(6) of the Companies Act, 1965 (Note on re-appointment of Independent Director pursuant to Recommendation 3.1 of Malaysian Code on Corporate Governance 2012)

Pursuant to Section 129(6) of the Companies Act, 1965, Malaysia, the proposed Resolution 7 is to seek shareholders’ approval on the re-appointment of Dato’ N. Sadasivan N.N. Pillay as a Director who is over the age of 70 and has served as an Independent Director for more than nine years.

The Board has conducted assessment on the independence of Dato’ N. Sadasivan N.N. Pillay as an Independent Director who is seeking for re-election at the forthcoming Thirty Second (32nd) Annual General Meeting of the Company. Apart from meeting independence criteria as set out in the Paragraph 1.01 of the Main Market Listing Requirements, the Board is satisfied with the active participation in the Board and Board Audit Committee deliberations particularly on the quarterly financial report and audited financial statements notwithstanding his tenure has reached 19 years.

pg 277

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Jalan Pinang, Kuala Lumpur City Centre, 50088 Kuala Lumpur, Wilayah Persekutuan Kuala Lumpur

REGISTRATION

1) Registration will start at 8.00 a.m. on 30 April 2015 in front of the Emerald Room, Mandarin Oriental Kuala Lumpur.

2) Please produce your original Identification Card (IC) to the staff at the registration counter for verification. Please make sure you collect your IC thereafter.

3) Upon verification, you are required to write your name and sign on the Attendance List placed on the registration counter.

4) You will also be given an identification tag. No person will be allowed to register on behalf of another person even with the original IC of that person.

5) The registration counter will handle only verification of identity and registration.

HELP DESK

1) Please proceed to the Help Desk for any clarification or enquiry.

2) The help desk will also handle revocation of proxy’s appointment.

PARKING

1) Please take note that PETRONAS Gas Berhad (PGB) will not be providing cash reimbursement for parking. Instead, you are advised to park at P2 or P4 of Mandarin Oriental Hotel, Kuala Lumpur or Suria KLCC. Please bring your parking ticket for validation at the counter near the Emerald Room.

2) By validating the parking ticket, you will not be charged for parking when you leave. Please be advised, that the parking ticket will expire by 4.00 p.m. on 30 April 2015. Any additional cost incurred for parking after 4.00 p.m. will not be borne by PGB.

3) Please be advised that PGB will not reimburse any parking costs incurred at any other location. As such, please observe the abovementioned parking area.

SITE VISIT

1) Please take note that there will be a registration booth available for the Shareholders’ Visitation Programme, which will take place at a later date, to be informed by PGB.

pg 278PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

ADMINISTRATIVE DETAILS FOR THE 32ND ANNUAL GENERAL MEETING

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No. of Shares Held

CDS Account No.

PROXY FORMPETRONAS GAS BERHAD (101671-H)

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 Thirty Second (32nd) Annual General Meeting to be held at Emerald Room, Mandarin Oriental Hotel, Kuala Lumpur City Centre, 50088 Kuala Lumpur on Thursday, 30 April 2015 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 specific direction as to voting is given, the Proxy will vote or abstain from voting at his discretion.

No. Resolutions For Against

ORDINARY BUSINESS

1. To receive the Audited Financial Statements for the financial year ended 31 December 2014 together with the Reports of the Directors and Auditors thereon.

2. To re-elect Datuk Rosli bin Boni as a Director pursuant to Article 93 of the Company's Articles of Association.

3. To re-elect Dato’ Ab. Halim bin Mohyiddin as a Director pursuant to Article 93 of the Company's Articles of Association.

4. To re-elect Datuk Manharlal Ratilal as a Director pursuant to Article 96 of the Company's Articles of Association.

5. To approve the Directors’ fees of up to RM986,000 in respect of the financial year ending 31 December 2015.

6. To re-appoint Messrs KPMG as Auditors of the Company until the conclusion of the next Annual General Meeting and to authorise the Directors to fix their remuneration.

SPECIAL BUSINESS

7. To re-appoint Dato’ N. Sadasivan N.N. Pillay as a Director of the Company to hold office until the conclusion of next Annual General Meeting of the Company in accordance with Section 129(6) of the Companies Act, 1965.

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 2015. Signature of Member/Common Seal

Page 284: Driving Transformation

Symphony Share Registrars Sdn BhdLevel 6, Symphony House,Pusat Dagangan Dana 1,Jalan PJU 1A/46, 47301 Petaling Jaya,Selangor Darul Ehsan, Malaysia

fold here

fold here

AffixStamp

Notes:1. For the purposes of determining a member who shall be entitled to attend and vote at the forthcoming Thirty Second (32nd) Annual General Meeting of the Company,

the Company shall be requesting the Record of Depositories as at 23 April 2015. Only a depositor whose name appears on the Record of Depositors as at 23 April 2015 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 qualification of the proxy.

3. Where a member of the Company is an authorised nominee as defined 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 defined 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 specified 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 officer or attorney duly authorised and shall be deposited at the office of the Company’s Share Registrar, Symphony Share Registrars 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 fixed for the adjourned meeting.

7. If this Proxy Form is signed under the hand of an officer duly authorised, it should be accompanied by a statement reading “signed as authorised officer 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.

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www.petronasgas.com

PETRONAS GAS BERHAD (101671-H)

Tower 1, PETRONAS Twin TowersKuala Lumpur City Centre50088 Kuala Lumpur

T +603 2051 5000F +603 2051 6555

ANNUAL REPORT 2014PETRONAS GAS BERHAD (101671-H)

DRIVINGTRANSFORMATION

AN

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014

PE

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Driving transformation in an organisation requires vision andaspirations as well as the ability to generate energy and new ideas. As a corporation that is constantly challenging itself to forge ahead, PETRONAS Gas Berhad (PGB) is transforming itself into a high performance organisation through various actions considering elements like cultivating high performance culture, managing a sustainable growth, conveying trust and stewardship, delivering sustainable profit and of course defining our culture via performance in collaboration to implement its next phase of growth amidst a changing industry environment.

A new restructuring exercise has been revitalised PGB into a more streamlined organisation with an intention to achieve superior performing assets, improved Health, Safety and Environment (HSE) performance and breakthrough operational results. This new structure also reflects PGB’s desire to return to its fundamentals which is to focus on its core business of gas processing, gas transportation, utilities and regasification.

In line with this, PGB looks forward to driving the future and meeting the challenges of an ever changing business, social and economic landscape.

DRIVING TRANSFORMATION