Industry Overview

8. INDUSTRY OVERVIEW 8. INDUSTRY OVERVIEW
Frost & Sullivan Gle Malaysia Sdn Bhd (766648K) Suite (-11-02, Block C, Plaza Mont’ Kiara, -A.­2 Jalan Kiara, Mont’ Kiara,MSC _MALAYSIA_ 50480 Kuala Lumpur, Status Company Malaysia Tel :+603 6204 5800 Fax: +6036201 7402 www.frost.com Date:16 APR 2015 The Board of Directors Malakoff Corporation Berhad Level 12, Block 4, Plaza Sentral Jalan Stesen Sentral 5 50470 Kuala Lumpur Malaysia Dear Sirs, Executive Summary of the Independent Market Research Report on the Electricitv Supply Industry in Malaysia. selected South East Asia countries and Australia. and on the Electricity Supply and Water Production Industries in the Middle East and North Africa (“MENA”j Region for Malakoff Corporation Berhad (“Malakoff” or the “Company”) We, Frost & Sullivan GIC Malaysia Sdn Bhd (“Frost & Sullivan”), have prepared this Executive Summary of the Independent Market Research report on the electricity supply industries in Malaysia, selected South East Asia countries and Australia, and on the electricity supply and water production industries in the MENA region (“the Report”) for inclusion in Malakoffs Prospectus dated 17 Apr 2015 (“Prospectus”) in relation to the initial public offering and the listing of and quotation for the entire enlarged issued and paid-Up share capital of Malakoff on the Main Market of Bursa Malaysia Securities Berhad. We are aware that this Report will be included in the Prospectus and we further confirm that we are aware of our responsibilities under Section 215 of the Capital Markets and Services Act, 2007. This research is undertaken with the purpose of providing an analysis on the electricity supply industries in Malaysia and selected South East Asia countries and on the electricity supply and water production industries in the MENA region, as weli as an overview on the electricity supply industry in Australia. We aCknOWledge that if we are aware of any significant changes affecting the content of this Report between the date hereof and the issue date of the Prospectus, we have an on-going obligation to either cause this Report to be updated for the changes and, where applicable, cause Malakoff to issue a supplementary prospectus, or withdraw our consent to the inclusion of this Report in the Prospectus. Frost & Sullivan has prepared this Report in an independent and objective manner and has taken adequate care to ensure the accuracy and completeness of this Report. We believe that this Report presents a true and fair view of the industry within the limitations of, among others, secondary statistics and primary research, and does not purport to be exhaustive. Our research has been conducted with an “overall industry” perspective and may not necessarily refiect the performance of individual companies in the industry. Frost & Sullivan shall not be held responsible for the decisions andlor actions of the readers of this Report. This Report should also not be considered as a recommendation to buy or not to buy the shares of any company or companies as mentioned in this Report or otherwise. For and on behalf of Frost & Sullivan GIC Malaysia Sdn Bhd:
8. INDUSTRY OVERVIEW (Cont’d) TABLE OF CONTENTS
ANALYSIS OF THE ELECTRICITY SUPPLY INDUSTRY IN MALAYSIA 3 1.1 ECONOMIC OVERVIEW OF MALAySiA, 3 1.2 BACKGROUND OF THE ELECTRICITY SUPPLY INDUSTRY IN MALAYSIA …………………….. 3
1.3 ELECTRICITY CONSUMPTION TRENDS 4 1.4 ELECTRICITY SUPPLY TRENDS 7 1.5 COMPETITIVE LANDSCAPE AND STRUCTURE 18 1.6 RELEVANT LAws AND REGULATION 33 2 OvERVIEW OF THE ELECTRICITY SUPPLY INDUSTRY IN SOUTH EAST ASIA (SEA) 35 2.1 ECONOMIC OVERVIEW OF ASiA . . 35 2.2 BACKGROUND OF THE ELECTRICITY SUPPLY INDUSTRY IN SEA 35 2.3 ELECTRICITY CONSUMPTION TRENDS . . 36 2.4 INDUSTRY DRIVERS ………..••…………………., . . 37
2.5 MARKET SIZE OF POWER GENERATION INDUSTRY IN SEA . . 38 2.6 INDUSTRY CONSTRAINTS “””, . “”””””””‘,.,’, ,’, , ~ 3 BRIEF OVERVIEW OF THE ELECTRICITY SUPPLY INDUSTRY IN AUSTRALIA . ………………. 39 3,1 BACKGROUND OF ELECTRICITY SUPPLY INDUSTRY IN AUSTRALiA … 39 3.2 ELECTRICITY CONSUMPTION TRENDS, “”””,,’ . , 41 3.3 ELECTRICITY SUPPLY TRENDS . …………… 43
3.4 INDUSTRY OUTLOOK AND PROSPECTS …” “..48 4 ANALYSIS OF THE ELECTRICITY SUPPLY AND WATER PRODUCTION INDUSTRY IN THE MIDDLE EAST AND NORTH AFRICA (MENA) REGION ,’ ” “””””””,.. .., 48 4.1 ECONOMIC OVERVIEW OF MENA , . , “”” .48 4.2 BACKGROUND OF MENA’s ELECTRICITY SUPPLY INDUSTRY AND WATER PRODUCTION INDUSTRY …… 49 4.3 ANALYSIS OF THE ELECTRICITY INDUSTRY IN THE MENA REGION …. .. ,51 4.4 ANALYSIS OF THE WATER PRODUCTION INDUSTRY IN THE MENA REGION ,52 4.5 COUNTRY ANALYSIS .. “”””” 54 5 PROSPECTS AND OUTLOOK FOR MALAKOFF . ……………… “”” 74 Note: Any inconsistencies in the following Report relating to breakdown offigures and percentages are the results ofrounding off. Executive Summary Page 2 © Frost & Sullivan, 2015 196 8. INDUSTRY OVERVIEW (Cont’d) 1 ANALYSIS OF THE ELECTRICITY SUPPLY INDUSTRY IN MALAYSIA
1.1 ECONOMIC OVERVIEW OF MALAYSIA The Malaysian economy registered a higher growth of 5.8% in the fourth quarter of 2014 (30 2014: 5.6%), driven mainly by stronger private sector spending. On the supply side, growth was sustained by the major economic sectors, supported by trade and domestic activities. On a quarter to quarter seasonally-adjusted basis, growth momentum increased to 2.0% (30 2014: 0.9%). For the year of 2014, the Malaysian economy grew by 6.0%. The Maiaysian economy is expected to remain on a steady growth path. The graduai recovery in global growth will lend support to manufactured export performance, aithough overall export growth would likely remain modest amid lower commodity prices. Domestic demand is expected to remain favourable amidst the lower oil prices. Investment activity is projected to remain resilient, with broad-based capital spending by both the private and public sectors cushioning the lower oil and gas-related investment activity. While private consumption is expected to moderate, the steady rise in income and employment, and the additional disposable income from the lower oil prices would support household spending. Source: Extracted from the Economic and Financial Developments in Malaysia in the Fourth Quarter of 2014, BNM
1.2 BACKGROUND OF THE ELECTRICITY SUPPLY INDUSTRY IN MALAYSIA The electricity supply industry in Malaysia jointly refers to the power generation, transmission and distribution of electricity. The electricity supply industry in Malaysia is vital to the development of Malaysia and serves a combined consumer base from the residential, commercial, industrial and other sectors’. The Government of Malaysia monitors and closely regulates the electricity supply industry through various Government agencies, among others, such as the Economic Planning Unit (“EPU”) (Energy Unit), Ministry of Energy, Green Technology and Water (“KeTTHA”), Energy Information Bureau and Energy Commission (“EC”). The power generation utility companies comprise Tenaga Nasional Berhad (“TNB”) in Peninsular Malaysia, Sabah Electricity Sdn Bhd (“SESB”) in Sabah, Sarawak Energy Berhad (“SEB”), owned by the Sarawak State Government, Independent Power Producers (“IPPs”) and small power generation plants under the Small Renewable Energy Power (“SREP”) programme licenced by the Government of Malaysia. Utility companies, IPPs and participants under the SREP programme generate electricity from energy sources to be sold to consumers. The Government of Malaysia owns a golden share2 in TNB which gives it veto power for major decisions in TNB, which is also the controlling shareholder of SESB in Sabah. Meanwhile, TNB, SESB and SEB (via Syarikat SESCO Bhd (“SESCO”)) are responsible for the transmission and distribution of electricity to end consumers in Peninsular Malaysia, Sabah and Sarawak respectively. The electricity generated is transmitted throughout the country via the National Power Grid or the respective state grids. In Peninsular Malaysia, the National Power Grid is owned by TNB, while SESB and SESCO own the state grids in Sabah and Sarawak respectively. Private Participation in the Power Generation Industry In 1992, following a nationwide power blackout and a series of interruptions, the Government of Malaysia, through the award of Power Purchase Agreements (“PPAs”), opened the electricity generation sector to private participants or the IPPs. The first generation of gas­fired IPP power plants began commercial operations in 1993 and 1994. Two of the power plants, one owned by Malakoff Corporation Berhad (“Malakoff”) i.e. the plant under Segari Energy Ventures Sdn Bhd (“Segar; Energy Ventures”) in Lumut and another via Malakoffs 1 Source: Ee’s Performance & Statistical Information 2012 2 A golden share gives its shareholder veto power Over changes to a company’s charter.
8. INDUSTRY OVERVIEW (Cont’d) then associate company, Port Dickson Power Berhad (“Port Dickson Power”‘), are among the first generation IPPs. The second generation gas-fired IPP power plants began commercial operations between 1998 and 2001. Maiakoffs plants under Prai Power Sdn Bhd (“Prai Power”), GB3 Sdn Bhd (“GB3”) and associate Kapar Energy Ventures Sdn Bhd (“Kapar Energy Ventures”) are under this category. The third generation of mainly coal-fired power plants, namely those under Ranhill Powertron Sdn Bhd (“Ranhill Powertron I”), Ranhill Powertron \I Sdn Bhd (“Ranhill Powertron \I”), Jimah Energy Ventures Sdn Bhd (“Jimah Energy Ventures”) and Malakoff’s Tanjung Bin Power Sdn Bhd (“Tanjung Bin Power”), have each been in commercial operations for less than 10 years. 1.3 ELECTRICITY CONSUMPTION TRENDS 1.3.1 Historical Electricity Consumption Trends The electricity consumption in Malaysia is estimated to have increased at a compound annual growth rate (“CAGR”) of 5.5% from 92,814 Gigawatt hours (“GWh”) in 2008 to 121,271 GWh in 2013. Moving forward, the demand for electricity consumption will accelerate upwards at a heaithy pace as a result of future economic growth. Electricity consumption in Malaysia is anticipated to grow at a CAGR of 9.7%, from 126,565 GWh in 2014 to 183,310 GWh in 2018. Frost & Sullivan estimates that the demand for electricity consumption in Peninsular Malaysia is expected to grow at a CAGR of 3.5% from 110,193 GWh in 2014 to 126,571 GWh in 2018. The growth in electricity consumption in Peninsular Malaysia is expected to be driven by economic growth in the Iskandar Development Region in South Johor (“Iskandar Malaysia”). For example, the projected power supply demand in Iskandar Malaysia is expected to grow from 1,479 megawatt (“MW”) in 2010 to 2,254 MW in 20204 at a CAGR of 4.3% .. Table 1:1: Historical and Projected Electricity Consumption (GWh) in Malaysia and Peninsular Malaysia, 2008 -2018F I Malaysia Peninsular Malaysia East Malaysia Year Ii Electricity Growth Electricity Growth; Electriclty–Growth-­Consumption I Rate Consumption i Rate I Consumption RateI (GWh) ,(%) , (GWh) (%): (GWh) ,(%) 2008  92,814  nfa 84,924  nfa  7,890 nfa
2009  96,312  3.8  87,950  3.6  8,362 6.0  2010  104,523  8.5  94,666  7.6  9,857 17.9  2011  107,386  2.7  97,939  3.5  9,447 -4.2  2012  116,354  8.4  102;174  4.3  14,180 50.1  2013E 2014F  121,271 126,565  4.2 4.4  106,057 110,193  3.8 3.9  15,214 16,372 , 7.3 7.6  2015F  140,487  11.0  114,160  3.6  26,327 60.8  2016F 2017F  154,524 168,793  10.0 9.2  118,155 122,291  35 3.5  36,368 I 46,502 38.1 27.9  2018F  183,310  8.6  126,571  3.5  56.739 22.0  CAGR 2008 to 2013E  .  ,.’  . ‘ •.’ 4.5%  ”  14.0’1.  CAGR2014F to 2018F  9.7%  I ‘ ,’. . 3,5%  36,4%

Source: EC’s Performance & Statistical Information, National Energy Balance 2010-2012, Peninsular Malaysia Electricity Supply Induslry Outlook 2014, SEB and Frost &Sullivan Peninsular Malaysia remains the primary consumer of electricity in Malaysia, consuming about 90% of the electricity generated. This region consumed approximately 81,710 GWh of 3 Port Dickson Power is a wholly-owned subsidiary of Malakoff since April 2014. 4 Source: South Johor Economic Region Comprehensive Development Plan 2006 to 2025 (SJER CDP 2006 to
2025) 8. INDUSTRY OVERVIEW (CDnt’d) electricity in 2007 and its consumptiDn increased to 102,174 GWh in 2012 at a CAGR Df 4.6%. Meanwhile, Sabah and Sarawak have been growing at a faster pace Df 8.3% and 16.6% respectively over the same period, while still recording IDwer electricity cDnsumption compared to Peninsular Malaysia. In 2013, the consumer base Df electricity in Peninsular Malaysia exceeded 7.9 milliDn as compared tD Sarawak and Sabah, which had only apprDximately 510,000 and 574,000 consumers, respectively in the cDrresponding year. Frost & Sullivan estimates that the demand for electricity consumptiDn in East Malaysia is expected to grow at a CAGR of 36.4% from 16,372 GWh in 2014 to 56,739 GWh in 2018. Table 1:2: Electricit Consumption GWh) in Malaysia b Region, 2007 -2013
Note: Data for 2013 is not publicly available as at the publication of this Report. Source: EC’s Perfonnance & Sialislicalinfonnalion and Frosl & Sullivan Table 1:3: Number of Consumers (‘000 in Mala sia b Re ion, 2007 -2013
Note: Data for 2013 is not publicly available as at the publication of this Report. Source: EC’s Perfonnance & Sialislicalinfonnalion and Frosl & Sullivan Frost & Sullivan estimates the electricity consumption of the industrial segment tD grow at a CAGR of 9.6% between the period of 2014 and 2018, from 55,400 GWh to 79,972 GWh as a result of the implementation of key Entry Point Projects planned under the Economic Transformation Programme (“ETP”). In addition, the residential and commercial segment as well as the others segment are expected to grow at a CAGR of 9.4% and 27.8%, respectively over the same period. Electricity consumption in the residential and commercial segment is expected to increase frDm 70,071 GWh in 2014 to 100,417 GWh in 2018, growing at a CAGR of 9.4%.
Source: EC’s Perfonnance & Sialislicalinfonnalion and Frosl & Sullivan 8. INDUSTRY OVERVIEW (Cont’d)
1.3.2 Industry Drivers Government Initiatives to Drive Economic Growth The economic growth and pace of a country’s development strongly correlates with the amount of electricity utilised. As a country develops, more electricity is required for new residential and commercial property developments, increasing industrial activities, as well as other public amenities which include, among others, public lighting and public transport (such as light-rail transit and mass rapid transit). Hence, growth in Malaysia’s gross domestic product (“GOP”) per capita reflects the total electricity consumption per capita trend, which has increased from 1990 to 2012. In 2013, the Malaysian economy grew by 4.7%5 and its GOP stood at RM787.6 billion 6. GOP in Malaysia grew further by 6.0% in 2014 7 and according to the Ministry of Finance Malaysia, GOP growth is expected to range from 4.5% to 5.5% for 20158 Further growth in the economy is outlined in the 10lh Malaysia Plan (“10MP”), which strives to transform Malaysia into a high income nation by 2020 by focusing on 12 National Key Economic Areas (“NKEAs”). Among the identified NKEAs are wholesale and retail, financial services, tourism, electronics and electrical, education and greater Kuala Lumpur. The Government of Malaysia has also committed to the establishment of five economic growth corridors to promote free trade. These corridors are the Iskandar Malaysia Region, Northern Corridor Economic Region, East Coast Economic Region, Sabah Development Corridor and Sarawak Corridor of Renewable Energy. The electricity supply industry in Malaysia is expected to experience growth in the coming years, as a direct result of economic growth within Malaysia. Increasing Usage of Electrical and Electronic Consumer Products Electricity has become one of the basic necessities for modern living. It is used to power lights, drive industries and operate pUblic facilities such as the water supply system, communication system and public transportation system and most importantly, the national security systems. The increase in Malaysia’s GOP per capita is expected to bring about an increase in the disposable income amongst the population, which in turn will drive the sale of consumer electrical and electronic products.
1.3.3 Industry Constraints Effects ofthe Global Economic Recession The industrial and commercial sectors are the largest consumers of electricity. Electricity is reqUired in mining and construction activities as well as to operate factories, refineries, manufacturing facilities, commercial or business centres and retail outlets. As such, any economic slowdown may impact these sectors as consumer spending slowed, resulting in a decrease in demand for products and raw materials. This further leads to reduced construction, mining and industrial activities, signifying that energy reqUirement from these sectors will also decrease. BNM 6 GOP at 2005 prices, retrieved from DOS Malaysia BNM 9 Special Address by the Prime Minister titled “Current Economic Developments and Government’s Financial Position” dated 20 January 2015 8. INDUSTRY OVERVIEW (Gont’d) 1.4 ELECTRICITY SUPPLY TRENDS 1.4.1 Installed Capacity According to EG, as at 31 January 2015, the installed capacity in Peninsular Malaysia stood at 21,509.4 MW9 ,10 The three largest IPPs in Peninsular Malaysia based on effective capacity are Malakoff (with a market share of 24.9%), Edra Global Energy Bhd (“Edra”) (14.4%) and YTL (5.4%). In addition, TNB also holds a market share of 50.2% based on its effective capacity in IPPs and non-IPPs in Peninsular Malaysia. Out of the 21,509.4 MW, the installed capacity of coal-fired power plants totalled up to 7,170 MW Tanjung Bin Power, which has a capacity of 2,100 MW, is the largest coal-fired power plant in Peninsular Malaysia as at 31 January 2015, accounting for approximately 29.3% of the total installed capacity of coal-fired power plants in Peninsular Malaysia. Tanjung Bin Power is also the first privately owned coal-fired power plant in Malaysia and one of the largest privately owned coal-fired power plants in SEA, based on generation capacity, as at 20 March 2015. Due to unavailability of publicly available information of comparable installed capacity for East Malaysia and types of power plants, the following sections have been prepared based on information as of 2012. In 2012, the total installed capacity in Malaysia was recorded at 28,296 MW, of which 84.0% or 23,759 MW was located in Peninsular Malaysia. In Malaysia, IPPs held 60.5% or 17,127 MWofthe total installed capacity. IPPs in Peninsular Malaysia owned 15,289 MWofthe total 17,127 MW Meanwhiie, TNB owned 6,986 MW of the total installed capacity in non-IPP power plants in Peninsular Malaysia, where all of its power plants are situated. Thus, TNB held a market share of 24.7% in Malaysia. Elsewhere, SEB and SESB owned the remaining 6.3% or 1,769 MW of the total installed capacity in Malaysia. SEB held 4.8% or 1,352 MW of the total installed capacity in Maiaysia while SESB owned 1.5% or 417 MW Table 1:5: Installed Capacity (MW) by Type of Plant in Peninsular Malaysia, Sabah and Sarawak,2012 I I Natural I I’I Hydro I Gas I Coal Fuel Oil \ Diesel Total TNB  1,911  5,075  – – – 6,986  IPPs  20  8,069  7,200  – – 15,289  PM  Co-generation ~.  – 834  – –­ 35  7  876  Self-Generation  – 31  – – 577  608  ,  Subtotal  1,931  14,009  7,200  35  584  23,759  I  B r–­i I SA I  LSESB ~PS Co-generation ~c Self-Generation  69 105 494—–­-42_._-­– I  —- -144 — i  244 -60 526  , , I I  417 638 102 526  Subtotal SEB IPPs K Co-generation-Self-Generation I I Subtotal TAL . “, !L.__ : TO t  69 641 , -144 830 .­101 608 I 480 -163 1,200 —-I -289 —i —­–­—­—-i 13 .. 11,301 897 480 -, 176 3,301 .1M.47 7,680 ‘. 17~ __L_~.’590__ —­–_._… ..~ ———­ 1,683 _.-­1,352 —–­1,200 -i289 —–,–­13 2,854, I 28,296 –,~._——_.  ·PM  Penmsular Malaysia, SWK -Sarawak, SAB  Sabah  Notes:  (1)  Data for 2013 is not publicly available as at the publication of this Report  Peninsular Malaysia Electricity Supply Outlook 2013 and 2014
10 Source: Excluding Nur Generation Sdn Bhd, Musteq Hydro Sdn Bhd, co-generation and self-generation, as well as including the retirement of 240 MW generation set in Pasir Gudang Power Station as published by EC 8. INDUSTRY OVERVIEW (Cont’d) (2) Numbers may not add up to total amount due to rounding Source: National Energy Balance Report 2012, Frost & Sullivan

 

1.4.2 Key Sources of Electricity The total installed capacity in Malaysia in 2012, including the installed capacity from seif­generation and co-generation, was estimated at 28,296 MW, which represents a CAGR of 6.9% from 21,666 MW in 2008. Estimates for 2012 indicate that 54.91% of fuel used for power generation was sourced from natural gas, followed by coai (27.13%), hydroelectric power (11.72%), diesel (5.61 %) and fuel oil (0.63%). The installed capacity for coal-fired power plants recorded a CAGR of 5.7%, having increased from 6,145 MW in 2008 to 7,680 MW in 2012, which is higher than the CAGR of gas-fired power plants. Gas-fired power plants recorded a CAGR of 4.9% over the same period. During this period, the Government of Malaysia approved four major power plant projects in Peninsular Malaysia, one of which was Malakoff’s additional 1,000 MW capacity expansion of its Tanjung Bin coal-fired power plant in Pontian, Johor.
2008 12,821 6,14.5 2,106 339 255 21,666 2009 13,581 7,680 2,108 389 270 24,028 2010 13,767 7,680 2,108 346 260 24,161 2011 14,956 7,680 3,002 1,513_. __~8;;.o1~O:-_–t–‘2″‘7″”,9″‘6~1—-i 2012 15,547 7,680 3,301 1,590 _1..7-,,9_c+=,2,,”8″”,2c-9=-c6 ‘;jijlil~~;12 )’;i 1~~~,t~,;9o/d:i~t~~~ II:rr/S.7% ‘liltffi1r:12.0% “‘il Note: Data for 2013 is not pUblicly available as at the publication of this Report. Source: Nat/onal Energy Balance Malaysia Source: EC’s Performance & Statist/cal Information 2012, National Energy Balance Malaysia The electricity supply industry is a key consumer of both fossil and non-fossil fuels. Total fuel consumption in this industry increased from 24,164 kilo tonnes oi oil eqUivalent (“ktoe”) in 2008 to 29,181 ktoe in 2012. The increase of 20.8% in terms of total fuel consumption is inevitable as the industry continues to serve an increasing consumer base from both the residential and commercial sectors. Frost & Sullivan notes that fuel is a pass through item, whereby IPPs are able to pass on the purchase cost of fuel to TNB for reimbursement. Among different types of fuel, natural gas is an attractive choice of fuel as it receives price subsidy from the Government of Malaysia. Natural gas has generally formed the largest percentage of consumed fossil fuels in the electricity supply industry, forming more than half of the total fuel consumption in 2008 in Malaysia. It has since decreased to approximately 40% in 2012, as the Government of Malaysia has shifted towards coal and other sources which would lower the subsidy cost to the Government of Malaysia and also mitigate supply chain issues such as the December 201 0 fire at Bekok offshore platform and the April to June 2011 Petroliam Nasional Berhad (“PETRONAS”) gas maintenance shutdown. In 2011, increased fuel oil consumption was due to the additional use of coals, oils and distillate fuel to compensate for the gas supply chain issues.
8. INDUSTRY OVERVIEW (Cont’d) Table 1:8: Total Fuel Consumption (ktoe) in the Electricity Supply Industry in Malaysia, 2008 -2012 Year
2008 2009 2010 2011 2012 I Total Fuel Consumption (ktoe) –, –. -,’ ——–, ­, -~~ NaturalCoal , I Hydro ,I Diesel Fuel Oil Total 8,069 9,010 12,951 13,013 14,138 Gas'” 13,651 13,390 17,000 10,977 11,533 1,964 1,627 1,577 1,850 2,149 299  181  24,164  384  205  24,616  415  125  32,068  981  1,103  27,924  811  550  29,181
Note. Data for 2013 IS not publicly available as at the publication of thIs Report. Source: National Energy Balance 2012 and Frost & Sullivan 1.4.2.1 Non-Renewable Energy Natural Gas Malaysia has higher reserves of non-associated natural gas compared to associated gas. As at January 2012, Malaysia’s associated gas reserves stood at 16.3 trillion standard cubic feet (“tscf”) compared to 75.8 tset of non-associated gas reserves. Table 1:9: Reserves (tscf) of Natural Gas in Malaysia as at end 2013 and Production of Natural Gas (million standard cubic feet (“mmscf”) per day (“mmscf/d”» in Malaysia t1J  2012  trillion ..-. – Reserves, standard cubic fe~I~ Non-_..  et (tset) .­ Production million standard cubic feet per day,  Region  ‘Associated  associated  Total  (mmscf/d)’
9,325 25,649 34,974 2,119.62Peninsular Malavsia 3,765 9,454 13,218 436.16Sabah 3,330 46,798 50,123Sarawak ::~:,’ TQllW”;-‘ 16,420 81,901 :: ” 98,315:\jl1:\~d”
Note: “Data for production is as at 1 January 2012, being the latest publicly available infonnation.
Source: PETRONAS, National Energy Balance 2012, Malaysia Energy Statistics Handbook 2014, KeTTHA and EC Natural gas is considered a cleaner fuel resource compared to coal and diesel because it produces fewer pollutants. Specifically, natural gas produces iess carbon dioxide per unit of heat produced, which in turn results in natural gas-fired power plants having less maintenance for plants utilising it as a fuel. In 2012, approximately 56.5% of natural gas consumption was used for power generation”­
Residential. … 21 -+ ~.+ .. _2_1_. Commercial 8~5″,8~_-+-858 Indust =~—t~167:-,:,O:,?2″,3_–+ __—.:;5″‘,8~1″‘3;—+_-___;c;c_87;:7=_-__+-____;1″‘7~3,~7~13~__I Non-ener y I 72,440 68,097 59,545 200,082 Trans art I 11,129 , 11,129__ IPower Stations 442,400__+=_’~3″,1 ,,,,5~34c:.-_-+~ 26,664 500,598 Total 693,8I.L_. …L__…4”–_-‘–~ __8,..7″_,086~~.=_ 40,..1’_’__….J10=.5,!.”44…..8=.8..,6,…11 Data for 2013 is not publicly available as at the publication of this Report. 8. INDUSTRY OVERVIEW (Cont’d) Notes: (1) Data for 2013 is not publicly available as at the publication of this Report.
(2) Non-energy refers to the consumption of natural gas for use in the production of other petroleum products such as white spirit, paraffin waxes, lubricants, bitumen and other products.

Source: National Energy Balance 2012, Ke TTHA and EC The longevity of the natural gas industry is dependent on natural gas reserves. The 2012 proven gas reserves in Malaysia were estimated to be 92.122 tscl. At 2012 production rates, the estimated gas reserves in both Peninsular Malaysia and East Malaysia are expected to last for about four decades. Even though the estimated consumption of natural gas is expected to increase, the volume of natural gas from sources in Malaysia that is available for domestic use remains limited as natural gas continues to be used as an important foreign exchange revenue source. In order to meet the anticipated increase in demand for natural gas, the Government of Malaysia announced the construction of the first liquefied natural gas (“LNG”) regasification terminal in Sungai Udang off the coast of Melaka, under the 10MP. This plant, with a capacity to receive, store and vaporise up to 3.8 million metric tonnes per annum (“MTpa”) or 530 mmscf/d of LNG has been operational since May 2013. In November 2014 PETRONAS announced that it has entered into a joint venture with Dialog LNG Sdn Bhd’2 to develop a second LNG regasification terminal in Pengerang, Johor and the terminal is expected to be commissioned in 2017. The purpose of these two LNG regasification terminals is to counter the limited natural gas supply in Peninsular Malaysia, PETRONAS intends to import LNG into these LNG regasification terminal for regasification and distribution. Domestic gas production, including imports from the Joint Development Area with Thailand, is expected to decline at a rate of 12% per annum over the coming decade. Presently, there is insufficient gas supply in the region to support Malaysia’s anticipated demand for additional piped gas imports 13. The ETP also anticipates a decline in the production of natural gas in Peninsular Malaysia between 2010 and 2025. The production of natural gas is expected to decline from 6.1 billion standard cubic feet per day (“bscfd”) in 2010 to 1.6 bscld in 2025 at a rate of 73.8%. Nevertheless, the actual production of natural gas in 2012 was higher than expected at 6.5 mmscl/d as compared to the expected production of 5.8 mmscf/d. Chart 1:1: Anticipated Decline in the Production of Natural Gas (Peninsular Malaysia), 2010 -2025
Source: ETP: A Roadmap for Malaysia, October 201 0 The Government of Malaysia has been focusing on rationalising the subsidies on gas for the power and non-power sectors by 2015 as mentioned in the 10MP. The gas prices are revised twice a year to gradually reflect the market rates. For the period from January 2007 to June 2008, the Government of Malaysia had set the domestic price of natural gas at RM6.40 per million British thermal unit (“mmbtu”) and this was revised to RM14.41 per 12 Source: Announcement by PETRONAS Gas Bhd dated 14 November 2014. 13 Extracted from the Independent Market Research Report, 2012 prepared by Frost & Sullivan for Gas Malaysia Berhad. 8. INDUSTRY OVERVIEW (Cont’d) mmbtu in July 2008, RM10.70 per mmbtu in March 2009 and RM13.70 per mmbtu in June 2011. Effective January 2014, the price of subsidised gas used by the power sector was raised by 10.9% to RM15.20 per mmbtu. Nevertheless, in November 2014, EC announced that the current electricity rate will be maintained up to June 2015 in the interest of maintaining the weifare of Malaysian in view of the Government of Malaysia’s ongoing subsidy rationalisation programs. As a result of this, the price for natural gas for the power generation industry wili be maintained at RM15.20 per mmbtu until June 2015. According to the Energy Information Administration (“EIA”), shale gas is a globally abundant resource. As of 2014, there are 3 countries, namely the US, Canada and China with commercialiy viable ,production of shale gas 14, while other countries have conducted laboratory test welis1 The 3 countries with the largest recoverable shale gas resources, which are China, Argentina and Algeria, have expressed interest in exploring its shale gas industry. However, Frost & Suliivan notes that shale gas production outside of the US is still in an early development stage, where multiple chalienges, such as water scarcity (in China and Algeria), environmental concerns and lack of potential investments in Argentina are required to be addressed before large scale operation can be considered. Nonetheless, the lower production cost of shale gas and its abundant availability is expected to lead to a downward pressure on gas prices in the future. Coal Malaysia has abundant coal reserves in Sabah and Sarawak, with total reserves of 1,938.4 million MT as at 31 December 2012 ‘6 , but its coal-mining industry is underdeveloped. Development of these coal deposits would likely satisfy a large portion of the demand from the domestic power sector. However, these deposits are located in rural areas where the infrastructure is not fully developed. Furthermore, these deposits largely contain coal with low carbon value, which would lower the efficiency of power plants. Most of these coal deposits are only available through underground mining, which reqUires substantial capital investments. Due to these additional costs, the Government of Malaysia has opted to import coal from countries with larger coal reserves and more established coal industries, such as Indonesia, Australia, South Africa and Russia rather than developing the local coal mining industryH
Source: National Energy Balance 2012, KeTTHA and EC 14 EIA 15 Article titled “North America leads the world in production of shale gas” published by EIA, 16 National Energy Balance 2012, KeTTHA and EC 17 TNBF: A Power Source Perspective to Energy Supply Stability, Cost and Environment 8. INDUSTRY OVERVIEW (Cont’d) Chart 1:2: Malavsia Coal Import and Consumption (ktoe) by Sector, 1990 -.2…0..1…2__,
-+ -Power Stations _Industrial •••••• Import Note: Data for and 2013 is not pUblicly available as at the publication of this Report. Source: National Energy Balance 2012, Ke TTHA and EC In 2012, there were seven coal-fired power plants in Malaysia and the Government of Malaysia announced plans to commission another one in Sabah during the 10MP period. Coal is expected to remain a key source of alternative fuel in the coming years as the Government of Malaysia promotes research and development (“R&D”) to identify technologies in reducing carbon emissions”. In addition, the Government of Malaysia has also been promoting investment in the latest supercritical boiler technologies to ensure greater efficiency and sustainability. The power sector procures coal at global market rates and is not subsidised by the Government of Malaysia. The average cost of coal is expected to be lower than the average price of unsubsidised natural gas per unit of sold of electricity as Malaysia moves towards the rationalisation of subsidies for natural gas by 2015. Coal has the potential to emerge as a cheaper source of fuel due to its wider global availability. The Newcastle free on board (“FOB”) coal price, which is a key reference in the Asian thermal coal market, dropped by 17.1 % from USD84.6 in 2013 to USD70.13 per MT in 2014. Table 1:12: Production of Coal (million MT) Global and Malaysia, and Prices of Coal , Coal Production Volume Coal Price – ! —­Global (million I–Malaysia (million Newcastle FOB IMalaysia (c.l.f)I,Year , MT) MT) (USD/MT) 1 (USD/MT) 2 2007 6,593 1.1 65.73 45.30 2008
6,829 1.2 127.10 76.40 2009
6,906 2.1 71.84 90.20 2010 7,262 ! 2.4 98.97 r­2011 121.457:,708 2.8–I· … [2012._ 7,893 96.36 2013 7,896 I-~~_~-84.60 Notes. (1) Coal (Newcastle), freight on board price. 88.20 106.90 103.60 .. 83.60 (2) Average cost of coal in Malaysia, cost, insurance, and freight import price, as incurred by TNB during the FY2007 -FY2013 period
(3) Data for Malaysia coal production in 2013 is not publicly available as at the publication of this Report. Source: TNB Annual Report 2007 -2013. Department of Statistics (“DOS’) Malaysia Mining &

Quarrying Production Data 2007 -2012, BP Statislical Review 2014, KeTTHA, World Bank Commodity Price Data (Pink Sheet) published on 3 March 2015 1.4.2.2 Renewable Energy in 2012, the total installed capacity and electricity generation from renewable energy 19 by public Iicencees totalled 185 MW and 623.2 GWh, respectively”. During the same period, le National Energy Policy 19 Includes mini hydroelectric, solar PV and biomass renewable sources Company No.: 73156B-V 8. INDUSTRY OVERVIEW (Cont’d) the total installed capacity and electricity generation from renewable energy by private licencees in the same period were reported to be 715 MWand 1,295.5 GWh, respectively. Hydroelectric In 2012, Malaysia had a total installed capacity of 3,301 MW of major hydroelectric power stations. The total installed capacity for major hydroelectric power stations in Peninsular Malaysia was 1,931 MW in 2012, with the largest percentage of this installed capacity located in the state of Perak at 649 MW. East Malaysia has huge potential in producing hydroelectric power due to many rivers flowing through Sabah and Sarawak. In Sabah the registered installed capacity for 2012 stood at 69 MW. The registered installed capacity for Sarawak was oniy 94 MW in 2010 but it has reached 1,301 MW in 2012. The huge leap was due to the commencement of partial operation of Bakun Hydroelectric Plant in August 2011. As of December 2012, four of the eight turbines were already operating at an installed capacity of 1,200 MW out of the expected 2,400 MW upon completion of the power station. This makes it the largest hydroelectric power station by installed capacity In Malaysia. The Government of Malaysia has approved three hydroelectric power plant projects, namely the Ulu Jelai hydroelectric power plant (“Ulu Jelai Hydroelectric Plant”) (372 MW) in Pahang, the Hulu Terengganu hydroelectric power plant (“Hulu Terengganu Hydroelectric Plant”) (265 MW) in Terengganu and the Bakun Hydroelectric Piant (2,400 MW) in Sarawak. The construction of the Ulu Jelai Hydroelectric Plant and Hulu Terengganu Hydroelectric Plant are targeted to be completed between 2015 and 2016, while the construction of the remaining 1,200 MW capacity of the Bakun Hydroelectric Plant is targeted to be completed between 2015 and 2017. Biomass The Government of Maiaysia has specific biomass energy programmes for development, demonstration and commercialisation of technology, such as the SREP programme and Biomass-based Power Generation and Co-generation in Malaysian Palm Oil Industry (“BioGen”) programme”. Various incentives are offered to local players that are involved in the renewable energy projects involving biomass as fuel source. These include the Increase In electricity feed-in tariff (“FiT”) from the current 21 cents/kWh to 35 cents/kWh for biogas and biomasses as well as a tax exemption of 100% of statutory income for 10 years and investment tax allowance of 100% for five years to be offset against 100% of statutory income for millers, depending on whether electricity generated is sold or utilised by the plant. Malaysia aiso targets construction of 500 blogas plants by 2020 under the NKEA of the palm oil sector. The installed capacity of biomass for power generation capacity in Malaysia is around 2.7% of total instalied capacity in 2012. 1.4.3 Evolution of Fuel Mix In the 10MP, the Government of Malaysia had allocated RM7 billion for the construction of two coal-fired power plants, to ensure a reliability and stability of electricity supply in Peninsular Malaysia. The Government of Malaysia has also approved the increase in the capacity of TNB Janamanjung power plant by 1,000 MW, which is expected to be completed by 2015. In June 2011, the Government of Malaysia awarded another 1,000 MW coal-fired power plant construction project to Tanjung Bin Energy Sdn Bhd (formerly known as Transpool Sdn Bhd), a subsidiary of Malakoff. This plant will be built adjoining to the existing Tanjung Bin power piant in Johor and is expected to be operational in 2016. In addition, the 20 Data for 2013 is not publicly available as at the publication of this Report. 21 The BioGen programme is a collaboration effort between United Nations Development Program (“UNDP”) and Global Environment Facility with Government of Malaysia and other private organisations.
2,500  2,080  MW  ~  2,000  .i:’ ‘0.. c… o  500 1,000 1,500  Biomass, 110 iogas, 20  Solid waste 20  Biomass. BOO
8. INDUSTRY OVERVIEW (Cont’d) consortium of 1MOB and Mitsui & Co., Ltd was awarded the Track 38 project, a 2 x 1000 MW ultra-supercritical coal-fired thermal power plant in June 2014. The additional installed capacity in these projects is large and will therefore result in higher coal requirements for electricity generation in the medium term. The Government of Malaysia also intends to build a coal-fired power plant along the east coast of Sabah. This plant will utilise clean coal technology. In light of these developments, the fuel mix of coal is expected to increase from 36.9% in 2010 to 43.2% in 2015 and 48.0% in 2020. Chart 1:3: Targeted Fuel Generation Mix (%j in Malaysia, 2010 -2020 ,——.-0;,—–=——-­1.20 OiI1.1%
::i” 1.00
Diesel, 1.4() Ql 0.80
31.8% JlI'”0.80<:­d)~ 0-0.40 57.0%ll. ” ~ 0.20 a; 8.7%0.00u. ” 2015 _Hydro “‘Coal LI Diesel t:’Ii Oil
2020 ” Renewable 0: Nuclear ~——————————~ Notes: (1) Data on Renewable for 2010 is not available.
(2) Breakdown for diesel and oil not available from 2015 onwards.

Source: Ministry of Science, Technology and Innovation, Malaysia (“MOST!’): “MOST! -Fuel Mix till 2030″, 2010” In addressing Malaysia’s medium-term electricity requirements, the 10MP focuses on developing alternative energy sources, such as hydroelectric power and biomass. The Government of Malaysia intends to increase the contribution of renewable energy in electricity generation from 219 MW in 2011 to 985 MW in 2015, or 5.5% of the nation’s total electricity generation mix. In line with this, several measures have been identified to promote the adoption of renewable energy, which include the introduction of a FiT surcharge of 1.6% of the total electricity bill and the establishment of a Renewable Energy Fund, which is placed under the purview of Sustainable Energy Development Authority of Malaysia (“SEDA”) to support the development of renewable energy. Chart 1:4: Renewable Energy Capacity (MWj Targets in 10MP for Malaysia, 2011 to 2015 to 2020 r-·———_._——–­ini-h dro 6a ls:’O~I”‘jf~===~~/lli;;:h4~§Q2020 % of Total Generated Electricity I——_.__…_~——_Source: SEDA 22 ” Nuclear Power Programme Development in Malaysia -Prospects and Preparation~ by Ir Dr Mohamad Puad Haji Abu, Director, Nuclear Power Division, Malaysian Nuclear Agency, MOSTI, 2010 2011 2015 I 8. INDUSTRY OVERVIEW (Cont’d) Some of the first generation IPPs and TNB power plants with service level agreements (“SLAs”) that will expire between 2014 and 2017 still have considerable remaining life beyond the expiration of their PPAs/SLAs and can be extended without incurring much additional capital expenditure. In view of this, in April 2012, EC undertook a restricted tender among these power plants to bid for renewal of existing facilities on extension of either five or ten years. The objective of the restricted tender was to secure the required capacity at the lowest levelised system cost and to minimise completion risk. In October 2012, EC announced that the following parties were offered renewals to operate existing plants at the capacity, levelised tariff and extension period as indicated below: • Genling Sanyen Power Sdn Bhd (“Genting Sanyen”) (now known as Kuala Langat Power Plant (“KLPP”), 675 MW23 installed capacity plant and tariff of RMO.353/kWh for a term of ten years;
• Segari Energy Ventures, 1,303 MW installed capacity plant and tariff of RMO.363/kWh for a term of ten years; and
• TNB’s Sultan Iskandar (Pasir Gudang), 275 MW installed capacity plant and tariff of RMO.374/kWh for a term of five years.

EC targets approximately 10,924 MW to 11,324 MW of additional power generation capacity in Peninsular Malaysia between 2014 and 2020 (including the continuation of existing PPAs), with approximately 4,778 MW of new power supply agreements by 2016, under which the plants are targeted to be operational between 2015 and 2016. These plants are targeted to be operational between 2015 and 2016 primarily to replace first generation PPAs which commenced operations in early 1990s and are gradually expiring, as well as to cater for the increasing demand for electricity in Malaysia. Table 1:13: Selected Planned New Generation Capacity Projects in Peninsular Malaysia till year 2020 IExpected , I I IPP (YeslCommencement Name Location I
I No) CapacitY (MW) YearI II
pp
J 9 Perak 2015I ——-~ ~1~ , 2016 2016 1­2016 ..__…. _­II —­! 2016 i i L___..___ 2016 .. —-­-~”—“~”-­2017 I 2017 I 1——-­. 2017._L!_NB SlJitanlskalldar (Pas” ,~—­23 675 MW is the available capacity of the power plant during the process of restricted tender. The capacity of the Genting Sanyen Power Plant (now known as KLPP) has increased to 762 MW as of the second quarter 2014 as a result of expansion in its installed capacity 8. INDUSTRY OVERVIEW (Cont’d) IExpected I I IPP (Vesl ILocationCommencement • Name Year No) i Capacity (MW)I
• •II Gudang) combined-cycle power olant works extension _2017 Track 3A coal-fired Dower plant Perak Ves 1,000-Hydroelectric power plant works2018 • Perak No 12in Chenderoh Unit 5 I Negeri2018 Track 38. Unit 1 Ves 1,000Sembilan Combined-cycle gas turbine2018 Pahang No 1,000 -1ADOpower plant (Track 4A) I —-_. -­———“-Negeri2019 VesTrack 38, Unit 2
1,000 dI Sembilan –‘2020 NoTeka; hydroelectric power plant I Pahano 156 ,,:;8&;(“:; Total 1o,9a~1iit::~1~iig24I I Source: Peninsular Malaysia Electricity Supply Outlook 2014 To resolve Malaysia’s energy imbalance over the long-term. the Government of Malaysia plans to develop two nuclear power plants, of which the first plant is expected to be operational by 2021. The Government of Malaysia has engaged Malaysia Nuclear Power Corporation CMNPC”) to lead the planning and feasibility study for nuclear energy development. Frost & SUllivan notes that coal will be gaining advantage over natural gas as the preferred source for electricity generation in Malaysia over the short to medium-term because of the Government of Malaysia’s plan to reduce subsidies and diversify fuel mix. According to EC24 • there will be an additional 5,010 MW of coal-fired power plants targeted to be commissioned between 2014 and 2020. Renewable energy resources such as hydroelectric power and biomass will feature more prominently as a source of fuel in East Malaysia due to the higher availability of land and fuel supply sources. In the long-term, Frost & Sullivan expects that Malaysia will be seeking to lower its dependency on fossil fuels by developing nuclear energy, but anticipates that fossil fuels such as coal and natural gas will remain as key sources of fuel for electricity generation until 2030.
1.4.4 Reserve Margin EC targets a reserve margin of 25% for Malaysia2• Between 2008 and 2012. the reserve margin for Peninsular Malaysia was always above its recommended margin26 . Table 1:14: Generation Capacity, Peak Demand I Load (MW) and Reserve Margin {%j in Peninsular Mala sia, 2008 -2012
24  Peninsular Malaysia Electricity Supply Outlook 2014 published by EC  25  Issues of Concerns to the General Public Relating to Electricity Supply Sector (FAQs) pUblished by EC in 2013  26  Issues of Concerns to the Genera! Public Relating to Electricity Supply Sector (FAQs) published by EC in 2013
8. INDUSTRY OVERVIEW (Conrd) 2) combined-cycle gas turbine, both located in Port Dickson, by Jimah Energy Ventures and TNB’s Tuanku Jaafar II Power Station respectively.
Table 1:15: Reserve Margin (% for East Mala sia in 2010 to 2012 2010 49.4 23.7 2011 35.3 66.8 1—–=c=–·—-I—-~o_—_+—:;=_;o—-___12012 31.8 95.1 Notes: (1) Most diesel units in SESB are aged sets. Hence, they are derated due to thermal limitations. However, during each set’s operational state, some generating units are not available due to maintenance outages as weH as unexpected breakdowns; the actual operation capacity available to system operation for dispatch was very limited. Therefore, in the calculation of reserve margin, the actual operational capacity of aged diesel units of SESB used is less than the installed capacity.
(2) Reserve margin for Sabah and Sarawak calculated based on available capacity. Available capacity for Sabah was based on dependable capacity.

Source: National Energy Balance 2010 -2012, Frost & Sullivan The increase in reserve margin for Sarawak in 2012 was mainly due to the capacity addition of 300 MW at the Bakun Hydroelectric Plant in Sarawak, which increased the total installed capacity of the project to 1,200 MW. The outlook for reserve margin for Peninsular Malaysia is expected to be above 25% for the period 2013 to 2018. Frost & Sullivan expect the Government of Malaysia to continue to focus on investments in new generation capacity to ensure the reserve margin is above 25%.

1.4.5 Product Substitution Although there is no risk of substitution for power generation activities, the scheduled generation between industry players running on a particular fuel source face the risk of being substituted by other industry players as a result of disruption in fuel supply. For example, in light of the gas curtailment issues and fluctuation in oil price, changes in the Government of Malaysia’s policies may result in the displacement of certain current facilities to make way for the installation of power generation facilities that use alternative fuel sources such as coal or nuclear.
1.4.6 Reliance and Vulnerability to Import Malaysia depends primarily on imported coal as domestic coal reserves are located in remote areas, which makes exploitation of these coal resources challenging due to non­accessibility. Power plants consumed approximately 70% of the total supply of coal (import and domestic production) annually. Malaysia imports coal from Australia (19%), Indonesia (68%), South Africa (12%) and Russia (1%) in 2013″. Coal procurement is carried out by TNB Fuel Services Sdn Bhd (“TNBF”) which allocates coal supply to various generators based on their respective Coal Supply and Transportation Agreements. As coal is imported and not subsidised by the Government of Malaysia, it is exposed to price fluctuation risks. The LNG import and regasification facilities at Sungai Udang, Malacca is up and running since May 2013 with a capacity of 3.8 million MTpa, while the second facility at Pengerang, Johor, is estimated to be completed by 2017, which will enable Malaysia to import LNG on a larger scale’· PETRONAS is investing in Bintulu Floating LNG plant which is expected to become operational by end of 2015 and will be able to accommodate the LNG regasification facility in Sungai Udang, Malacca. Currently, the regasification facility is importing gas from 27 TNBF: A Power Source Perspective to Energy Supply Stability, Cost and Environment 25 PETRONAS, Petronas Reaches Final Investment Decision For Pengerang Integrated Complex 8. INDUSTRY OVERVIEW (Cont’d) Brunei, Qatar, Nigeria and Norway on short-term contracts. Once the Bintulu plant becomes operational, this would reduce the dependency of Malaysia on LNG imports significantly. 1.4.7 Future Outlook and Prospects New Energy Policy The 10MP highlights several efforts by the Government of Malaysia to create a sustainable industry despite volatile global energy pricing and limited gas resources, especially in Peninsular Malaysia. The New Energy Policy was introduced in the 1OMP and it aims to: 1. Increase and diversify generation capacity;
2. Strengthen transmission and distribution networks;
3. Improve customer service delivery; and
4. Restructure the electricity supply industry.

Budget 2015 As part of Malaysia’s plan to reduce the disparity between urban and rural areas, the Government of Malaysia is expected to continue to develop rural areas. In 2015, a sum of RM1.1 billion has been allocated to implement electricity connection for 15,000 houses nationwide, while an additional 10 lamp posts will be installed in 22,000 villages each at a total provision of RM56 million. In addition, electricity consumption for the first 300 units will not be sUbjected to the Goods and Services Tax expected to be implemented from April 2015. 1.5 COMPETITIVE LANDSCAPE AND STRUCTURE The electricity supply industry has experienced strong historical growth, stable prices and has been one of the main pillars of growth for the Malaysian economy. The level of competition for players with expiring PPAs is high as they have to compete for PPA extensions via a competitive bidding process where newer players participate in the tendering process. New power plant projects are also awarded via the competitive bidding process, thus increasing the level of competition between the IPPs, while providing opportunities for newer entrants in the market. Industry Players (lPPs) As of the end of 2013, there were 23 licenced IPPs in Malaysia, of which 16 were located in Peninsular Malaysia, 6 in Sabah and 1 in Sarawak. [The rest of this page is intentionally left blank] 8. INDUSTRY OVERVIEW (Cont’d) Fi ure 1:1: Location of IPPs in Mala sia, 2013
Note: (1) Details of the plants are provided in Chapter 1.5.1. Source: Frost & Sullivan [The rest of this page is intentionally left blank] I Company No.: 731568-V

 

 

8. INDUSTRY OVERVIEW (Cont’d) 1.5.1 Profile of Key IPPs as of 31 December 2012 i1 TTNB Janamanjung,F’er8k’!’-Manju-‘;’g Power ! 3 x 700 MW (coal) f—,,-i 1 Station ; I I I2 1Tanjung Bin Power, . i Tanjung Bin J3 x 700 MW (coal) r-2,100 l 15,266 14,572 26 September I ’11-~i:~:n:~~:~::~unr~s, I Pow;;i;~;_io_n_. ” 2 x 300 MW (thermal’ I 2,420 r—12,638 i. Kapar, Klang, Selangor” i Salahuddin Abdul i 2 x 300 MW, 2 x 500 ! ! Aziz Shah Power i MW (coal) ; : Station i 2 x 110 MW (gas I I Jimail.EiiergyVentLJreS,—–+I’-~b-=:~n-Oio~ocs.,.~W «(;0,,-1)–1—<406~ 4 JimailPower-,f-:~:;-u..10,967 Port Dickson, Negeri Station I I Sembilancd Ii 5 I YTL —-12x390MW 780 -! 7,540 a) Paka, Terengganu Paka Power i (combined-cycle) 390! II I’b) Pasir Gudang, Johor Station i 1 x 390 MW Pasir Gudang i (combined-cycle)
IIPower Station I 6 : Teknoloai Tenaaa Perlis TTPC Perils 1 x 650 MW 650 I 4,585 —‘-4’,5-‘-13 26 August 1998 1 July 1993 ~ … “! ………..
-~~ ~ 7 August 2001 , ~ugust 2001 –1;3031 3,127 3,078 15July 1993 2003 I 11,786 1 July 2004 July 2019 December10,367 22 March 2033 7,407 2005 September 2015 7 April 1993 ‘I March 2024 I , February 2026
February . 2023J ,December I 2022 1 June 2027 Independent Market Research Page 20 © Frost & Sullivan, 2015 214 I Company No,: 731568-01 8. INDUSTRY OVERVIEW (Cont’d) 11 Prai Power, S’eberang’Prai, ~’ Prai Power ‘j 1 x 350 MW -350 2,381 2,333 20 February June 2024 1 Penangb i Station I (combined-cycle) 2001 I i ‘ ~~”iJrJ~f~,r;:~~~~~~d’_ ~~~~~§t~::~~_I_!c~~~fn~:Ycle) .”i ..: 34 I 1,740 __ 26 May 1999 A~g2u3t_1,775 13 Ranhill Powertron I, Kota Teluk Salut r2 x 95 MW i 190 I 1,254 1,216 13 August October Kinabalu Industrial Park, Combined-Cycle I (combined-cycle) I, 2006 2029 Kota Kinabalu, Sabahf Power Station, ! i
14 Nur Generation Sdn Bhd, i Nur Generation I 2 x 220 MW r…. ·””·4’coo—+-1—c1’C,2″2″‘7c–+–~1 ,C02~07””–t-01”7-S”e”pC’te”m-CbC’e”r-+I—nlC’a—1 ! Kulim High-Tech Industrial i Plants 1(combined-cycle)I, 1998 Park, Kedah I Iii I 15SepangarBaY’Corporation 1 SepangarBay ‘1 x100MW i-100 ‘i,..—‘666-“-642 18May2006 I Mail2:D29′” i Sdn Bhd, Kota Kinabalu ,Power Station (combined-cycle) i i ! Industrial Park, Sabah ! ! ! i 16 I Ranhill Powertron II, Lot 35 Rugading 190 MW (combined-190″ …….. I”” 1,254 1,184 11 September September , (IZ4), Kota Kinabalu Combined-Cycle cycle) I 2009 2032 industrial Park, Kota Power Station i 1. .._. .. _”f5i,t:1~!?_~~~2-J3ab_a_h~_______ __ j_.. _ : 17 Stratavest Sdn Bhd, Stratavest Power’ 4 x 15 MW (diesel 60 ‘I 146 141 1 October I December Sandakan, Sabah ,Station engines) I 1996 I 2019I 118 Serudong Power Sdn Bhd, Tawau Power .. 3 x 12 MW (diesel 36 i 234 I 226 1 April 1995 I December I 19 :::~::..~~~O~SdnBh(rS9 j··Sg~~~~~ong-·–;-~~xg~~e~w (mini , ””20–I 103 I 18 November I NO~~~ber103″: I Kenerong, Kelantan I Small Hydro i hydro) I I 1994 I 2024] i I Power Station i ! ….-L-,,-“CC=—-+—~~–+-~~-==-_+-“”””‘-___1I 20 ARL Tenaga Sdn Bhd, I Melawa Power 14 x 12,5 MW (diesel! 50 ’59 56 14 June 1994 Octoberi Melawa, Sabah i Station , engines) 1 2016 ! 21 Port Dickson Power, i Port Dickson I4 x 110 MW (gas I 440 86 86 1 December JanuaryI I Tan]ung Gemuk, Port ‘PowerStation ‘I’turbines) i 1993 2016 i Dickson, Neaeri Sembilanb Ii ! 22 ! Powertek Berhad, Alor Telok Gong 4x 110 MW (gas 440 62 61 1 December January’I’ ~ajah, Malacca’ Power Station 1 turbines) i 1993 2016 123 I SarawakHidroSdnBhd, Bakun 2X1,200MW(hydro) I 1,200 2,745 2,712 June, 2011 nlaI’ i , Bakun Sarawak’ Hydroelectric i 1 I I Plant I ……J Independent Market Research Page 21 © Frost & Sullivan, 2015 215 !Company No.: 731568-V J 8. INDUSTRY OVERVIEW (Cont’d) Notes: (1) The typical contract duration for a PPA is 21 years for gas-based power plants and 25 years for coal-fired power plants.
(2) Data for 2013 is not publicly available as at the publication of this Report.

a) Wholly-owned subsidiary of TNB. b) The above power plants are wholly-owned by Malakoff, except for Kapar Energy Ventures and Port Dickson Power where Malakoff owns 40% and 25% in these respective companies. In April 2014, Malakoff acquired the remaining 75% stake in Port Dickson Power and increased its stake to 100%. Collectively, Malakoff has a gross licenced capacity of 7,249.4 MIN, including the capacity of its associate as of 30 June 2014. c) The above power plants are associates of TNB. TNB owns a 20% stake in each of these companies. d) These power plants were acquired by 1MDBz9• In 2012, Pahlawan Power’s installed capacity was recorded at 330 MW, compared to its licenced capacity of 334 Ml/IJ. e) In 2012, both Segari Energy Ventures and Genting Sanyen were granted a 10-year extension upon the expiry of their PPAs in 2017 and 2016, respectivello. f) Although Ranhill Powertron I had licenced capacity of 190 MW since the date of issuance of its licence, it only had an installed capacity of 120 MW. Full commencement of its 190 MW power plant only began in October 2008. Although RanhilJ Powertron II Sdn Bhd had licenced capacity of 190 MW since the date of issuance of its licence, it only had an installed capacity of 130 Ml/IJ. Full commencement of its 190 Ml/IJ power plant only began in April 2011. g) Bakun Hydroelectric Plant is owned and operated by an entity under the federal government (Sarawak Hidro Sdn Bhd). In 2012, the project operated at a total installed capacity of 1,200 MW out of the total licenced capacity of 2,400 Ml/IJ. h) As of the second quarter of 2014, the installed capacity of Genting Sanyen (currently known as KLPP) is recorded at 762 MW. Source: EC’s Performance & Statistical Information 2010, 2011 and 2012, Frost & Sullivan 29 1MDB 30 Media release by EC titled “Results of International Competitive Bidding for New Capacity in Prai and Restricted Tender for Renewal of Operating Licences of First Generation lPP and TNB Plants” dated 9 October 2012 Independent Market Research Page 22 © Frost & Sullivan, 2015 216 ~mpany No.: 731568~ 8. INDUSTRY OVERVIEW (Cont’d) Profile of Selected Companies with Interests in IPPs in Malaysia, 2012 The effective capacity of companies with interests in IPPs is shown in the table below based on publically available information for 2012.

L–.~ Se~~ri E~~;gyv~~i~re~.._..,Perak ” M” MW<~’;”~-‘””) ~ 1·-“‘-2165~:~:~:::r..~ Lu._ :.: -‘-_-=_”‘::”‘:’-:”‘:_~:~’=:Jlmut_L._ 3 GB3, Lumut, Perak _ _ ….. _. “l.x 640 rvwv (combined~c!”,’:l.._.L…… 75.00% _.. 640 L ~~__ 7 August 2001 Klang,il—~-ll,,””~,~:;OE:::g:~:~:unr::~~’~~”~~i:’i;i~t-,-“””-“~-:-i~:: ~:::i:l:dMCYCle) -_.-“”””~?:’~O:~o 2~:io-~~:::~ 20 ~~:~a2~o2:01 Selangor 2 x 300 MW 2 x 500 MW (coal)II ., I’ 12X110Mw(gasturbines) Ll I’ 6 Port Dickson Power, Tanjung Gemuk, Port Dickson, 4 x 110 MW (gas turbines) 25.00% 436.4 109.1 Ii 1 December’ 993ii’ II -‘-1_ I 7,249.4 1-5,018.7 I I 1 TNB Janamanjung, Perak 3 x 700 MW (coal) 100.00% 2,100.0 Pl May 199812 Kapar Energy Ventures, Kapar District, Klang, 2 x 300 MW (thennal) 60.00% 1,452.0 1 July 2004 i Selangor 2 x 300 MW, 2 x 500 MW (coal) I ! 2x 110 MW (gas turbines) I 3 Ji~~h-E~~rgy Ventures, Port Dickson, Negeri 12 x 700 MW (coal) 20.00% 1,400 280.0 i 22 March 2005 II i SembUa n I——-l–­I 4 I Te. knologiTenagaperiiSConsortiumSdn Bhd, I 1×650..M.W(combined-cycle) 20.00% 650 130.0 26 August 1998 II j!. Kuala Sungai Baru, Perils. . … …. .. . -+ ~~=’~~r3~~~:r~~i:ne;:nBhd, :,~~Hi9h.~:chlnd~stri~i1:-:::~::~:::~i~~~:~;~i:; I ~~.~~~ …–. ::~ –f~::_-18288: ··-·-1’ ::~:~~:~~~: Park, Kedah …1.. ‘ 1998 I Independent Market Research Page 23 © Frost & Sullivan, 2015 217 i Company No.: 731568-V 8. INDUSTRY OVERVIEW (Cont’d)
Powertek Berhad, Alar Gajah, Malacca !4 x 110 MW (gas turbines) 2 Panglim_~~<:~~~~dn Bhd, Alar Gajah, ~~~-~~-.—-L~” x 720 MW (combined-cycle) 3 Pahlawan Power Sdn Bhd, Ma)acca Power Station, 1 x 330 MW (combined-eycle) Tanjung Keling, M~lacca ..————+—–=—-=-:c:c–c—-c—c—-c-,—­4 KLPP, Kuala Langat, Selangor 1 x 720 MW (combined-cycle) I ed-cycle) I I Jati Cakerawala 3d” Bhd 100.00% 100.00%-_.__ .__._­100.00% 75.00% 100.00% -I Teknologi Tenaga Perlis Consortium Sdn Bhd, 1 x 650 MW (combined-cycle)I Kuala Sungai Baru, Perlis

Sime’Darby Berhad (Malakoff acquired the entJrest#~~,::Jry-_April 2014) I Port Dickson Power, Tanjung Gemuk, Port Dickson, I4 x 110 MW (gas turbines) 75,00%
60.00% ! r=
i 440 720 330 720 2,210 780 390 1,170 1,400 1,400 440.0 720.0 330.0 540.0 2,030.0 780.0i 390.0I 1,170.0 1,050.0I I I 1,050.0! I 650 520.0 650 520.0I
Independent Market Research Page 24 © Frost & Sullivan, 2015 218 i Company No.: 731568-V i 8. INDUSTRY OVERVIEW (Cont’d) 2  Ranhill.Powetron II, Lo.t 35 (IZ4), Kota Kinabalu Industnal Park, Kola Kmabalu, Sabah ——–­._  : 190 MW (combined-cycle) -_.__._._-_._..  -j .. -_ J  80.00%: 190I _……._-­—­.1 3_80  152.0 266.0  11 September f­-2~~9__..J  SESS  Serudong Power Sdn Bhd, Tawau, Sabah  3 X 12 MW (diesel)  I  31.03%  36  11.2  1 April 1995  I  2 i Ranhill Powertron I, Kota Kinabalu Industrial Park, 1 Kota Kinabalu, Sabah 3″””–“‘R~nhil1 Powetron [I. Lot 35 “(“124): Kota Klnabalu I Industrial Park, Kota Kinabalu, Sabah  i 2 x 95 MW (combined-cycle)i -1 190 MW (combined-cycle)I  40.00% 20.00% __-.J  190 190  76.0 38.0  13 August 2006 11 September 2009  I “Ii i  416  125.2  –j
Notes: a) In April 2014, Malakoff acquired the remaining 75% stake in Port Dickson Power and increased its stake to 100%. b) As of the second quarter of 2014, the installed capacity of Genting Sanyen (currently known as KLPP) is recorded at 762 MW. Source: EC’s Performance & Statistical Information 2012, TNB Annual Report 2012, Genting Bhd Annual Report 2012, YTL Corporation Berhad Annual Report 2012, Sime Darby Bhd Annual Report 2012 and Frost & Sullivan [The rest of this page is intentionally left blank] Independent Market Research Page 25 © Frost & Sullivan, 2015 219 8. INDUSTRY OVERVIEW (Cont’d) In 2012, given that TNB owned several IPPs31 in Malaysia, it held the largest market share of 39.5% of Malaysia’s total installed capacity, based on effective generation capacity. Frost & Sullivan also notes that Malakoff had a market share of 17.7% of the total installed capacity in Malaysia based on effective generation capacity in 2012, making it the second largest power generation player after TNB in Malaysia. In the same order, TNB also owned the largest market share of 47.0% based on effective generation capacity of the total installed capacity in Peninsular Malaysia in 2012. Following behind was Malakoff with a market share of 21.1 % in 2012. Chart 1:5: Market Share (%j of Companies with Interests in IPPs in Malaysia based on Effective Genera!ion Cap~<:ity,2012 mm _
____To_t_a_’_lns.talied Capacity 28,296 MVV Notes: (1) TNB’s market share includes TNB’s IPP and non-IPP power plants
(2) Excludes installed capacity for biomass and other renewable energy
(3) Others include installed capacity through co-generation and self-generation

Source: EC’s Performance & Statistical Information 2012, TNB Annual Report 2012, GenUng Bhd Annual Report 2012, YTL CorporaUon Berhad Annual Report 2012, Sime Darby Bhd Annual Report 2012, Malakoff Annual Report 2012 and Frost & Sullivan Chart 1:6: Market Share (‘!oj of Companies with Interests in IPPs in Peninsular Malaysia based on Effective Generation Capacity, 2012 Others 14.0% YTL 4.9%
___________J Notes: (1) TNB’s market share includes TNB’s IPP and non-IPP power plants
(2) Excludes installed capacity for biomass and other renewable energy
(3) Others include installed capacity through co-generation and self-generation

Source: EC’s Performance & Statistical Information 2012, INB Annual Report 2012, Genling Bhd Annual Report 2012, YTL Corporation Berhad Annual Report 2012, Sime Darby Bhd Annual Report 2012, Malakoff Annual Report 2012 and Frost & Sullivan

31 As of 2012, TNB Janamanjung was a wholly-owned subsidiary of TNB. TNB also held 60% interest in Kapar Energy Ventures, 20% interest in Jimah Energy Ventures, 20% interest in Teknologi Tenaga Perlis Consortium Sdn Bhd, 20% interest in GB3 Sdn Bhd and 20% interest in Nur Generation Sdn Bhd. 8. INDUSTRY OVERVIEW (Cont’d) TNB-owned Power Stations
i Sultan Iskandar, Pasir I 269 MW (combined-cycle) I_~_ jGud”Qg,.J(Jh”,~_… J2)(1.1.0M’IVJgas turbineL…, 489 , 2 I iultan Ismail, Paka, i 1,136 MW (combined-cycle) I 1,136 j.,. :_ ~~~gg~l]u_”. , ,. ~_._._ .. ._.~_L. __ …””…._ _,, __ .~_._+~I i Tuanku Jaafar I, Port Dickson, I 3 I Negeri SembiIan i 714 MW (combined-cycle) 1,422l_. I~uankuiaa~~ II, Port Dickson, i 708 MW (combined-cycle) L I 4″ j~’:~J~y~~~~’~~~~ITerritOry I3 x 135MW (combin,,(j:cyCle) 625I I .. I..•… 1..··_· . ..I2..x11 OMvv(c(Jrt1~ined:9Y91E!L i 5 i Connaugh! Bndge, Klang, i 308 MW (combined-cycle) i 828 l~ JSE!la.ngor_ ._. : 4 x 130M_VV_(g_a~_ turbine) _ I ~_._:
I ~ ~i~~~~frp~~~a~~eme~Gerik, ..~ ~~2:;~~c~~:~;~~d-CYciel …{ ~. ‘;~;:9′-~i I 8H~{~~MahmUd, K””yirLak”,’: 400 MW (hydro) 400′–1 !~.._.J_Ierenggan~_._ . .__. . ., :._~_~_.~. _._J ~§_f!lt?_~(J~Jj!.Rt!I.§l._~_q.l._e~_~~I1.g ,_ .. _..L~~~,,_MYYJ~Y9_rC?) _..t_~ ….__~_~62 .. __ ,,_.-…….i l~. . .._. __. ~ __.._.__.. .”._,’ ._____ _.._.__. __ __ ..__,~~~,.,.~.~.~ ~ : __”””‘ . ~6J800 . ~_,_~.JT~_~_~_I._. __ ._._. .. ” Awarded a 5-year extension upon expiry in 2017 and would be operating as an IPP thereafter. Source: TNB Annual Report 2012, Peninsular Maiays;a Electncily Supply Industry Outlook 2014 and Frost & Sullivan
a) The increase was due to the commissioning of 694 MW combined cycle block (second phase) at Tuanku Jaafar II Power Station in January 2009. b) The decrease was due to retirement of 68MW diesel-fired capacity from Peninsular Malaysia system and relocated to Sabah. (1) Data for 2013 is not pUblicly available as at the publication ofthis Report. Source: TNB Annual Reports 2006-2012, EC’s Performance & Statistical Infonnation 2012, Frost & Sullivan In 2012, TNB announced that it had committed RM9.7 billion to increase generation capacity over the next five years. A significant percentage from this RM9.7 billion will be spent on bUilding power plants between 2012 and 201732 . 1.5.2 Market Share and Ranking 1.5.2.1 Total Installed Capacity of Power Generation Companies in Malaysia The power generation segment of the electric supply industry in Malaysia comprises 23 licenced iPPs, 9 TNB-owned power stations, as well as SESB-owned and SEB-owned power plants in 2012. 32 http:..www.s1. gov.myfv4/index.php?option=com_contentSview=article&id =6142%3Atnb~a Ilocates-rm97~b illion-to­increase-generating-capacity&catid=794%3Aenergy-news&ltemid:::-:1201&lang=en, as at 10 December 2012 8. INDUSTRY OVERVIEW (Cont’d) Market share in this segment is determined by the installed capacity of all power generation companies’ power plants in Malaysia as reported by EC. As at the end of December 2012, Malakoff’s effective capacity based on equity stake was 5,018.7 MW, including its associate company, Kapar Energy Ventures and Malakoffs then associate company, Port Dickson Power. This constituted 17.7% of the total installed capacity in Malaysia. Meanwhile, among the total installed capacity of power generation companies in Peninsular Malaysia, Malakoff recorded a market share of 21.1 % in 2012. Chart 1:7: Malakoff’s Market Share (%j Chart 1:8: Malakoff’s Market Share (%j among Power Generation Companies among Power Generation Companies based on Effective Capacity in Malaysia (by based on Effective Capacity in Peninsular Installed Ca acit 2012 Mala sia b Installed Ca acit 2012
TNB, Others, 27.8%
Jimah Energy Ventures, 3.7% 39.4% YTL, 4.1% Edra, 7.2%
L-:.:7..:..—.J11.:..:7′–‘Yo LI
_ Jimah Energy Ventures, 4.4% TNB, 47.0% Notes: (1) TNB’s market share includes TNB’s IPP and non-IPP power plants
(2) EXcludes installed capacity for biomass and other renewable energy
(3) Others include installed capacity through co-generation and self-generation

Source: EG’s Perfonnance & Statistical Information 2012. MalakoffAnnual Report 2012 and Frost & Sullivan 1.5.2.2 Installed Capacity of IPPs in Malaysia As at the end of December 2012, Malaysia had a total installed capacity of 17,127 MW from IPPs. Malakoff’s effective capacity based on equity stake was 5,018.7 MW, including its associate company, Kapar Energy Ventures and Malakoff’s then associate company, Port Dickson Power. This constituted 29.3% of the total installed power generation capacity of IPPs in Malaysia. With a market share of 29.3% in 2012, Malakoff was a key player in the power generation industry in Malaysia. Malakoff was also the largest IPP in Peninsular Malaysia in 2012, where all of its power plants are situated. Malakoff’s installed power generation of 5,018.7 MW, inclUding its associate company, Kapar Energy Ventures and Malakoff’s then associate company, Port Dickson Power, constituted 32.8% of the total installed power generation capacity of IPPs in Peninsular Malaysia in 2012. [The rest of this page is intentionally left blank] 8. INDUSTRY OVERVIEW (Cont’d) Chart 1:10: Malakoff’s Market Share (‘!ojChart 1:9: Malakoff’s Market Share (‘!o) among IPPs based on Effective Capacity in among IPPs based on Effective Capacity in Peninsular Malaysia, 2012 Malaysia, 2012 YTL, 6.8% TNB,Edra,
24.4%11.9% 27.3%
Notes: (1) TNB’s market share excludes non-IPP power plants
(2) Excludes installed capacity for biomass and other renewable energy
(3) Others inclUde installed capacity through co-generation and self-generation

Source: EG’s Performance & Statistical Information 2012, MalakoffAnnual Report 2012 and Frost & Sullivan 1.5.2.3 Tofallnsfalled Capacity ofCoal-fired Power Planfs in Malaysia The coal-fired power plants segment of the electricity supply industry in Malaysia comprises 7 licenced power plants, of which 4 are IPP power plants located in Peninsular Malaysia, while the remain 3 coal-fired power plants are located in Sarawak. As at the end of December 2012, the total installed capacity of coal-fired power plants in Malaysia was 7,680 MW. Malakoff’s effective capacity based on its equity stake was 2,530.0 MW, including its associate company, Kapar Energy Ventures, and it contributed towards 32.9% of the total installed power generation capacity of coal-fired power plants in Malaysia. Meanwhile, among the coal-fired power plants in Peninsular Malaysia, Malakoff had a market share of 35.1% as at the end of December 2012. Malakoff’s Tanjung Bin power plant has an installed capacity of 2,100 MW, and accounted for approximately 29.2% of Peninsular Malaysia’s coal-fired installed capacity as at 31 December 2012. Chart 1:11: Malakoff’s Market Share (%) Chart 1:12: Malakoff’s Market Share (%) among Coal-fired Power Plants based on among Coal-fired Power Plants based on Effective Capacity in Malaysia, 2012 Effective Capacity in Peninsular Malaysia, 2012
Notes: (1)  TNB’s market share includes TNB’s IPP and non-IPP power plants  (2)  Others include installed capacity through co-generation and self-generation  Source: EG’s Performance & Statistical Information 2012, MalakoffAnnual Report 2012 and Frost &  SuI/ivan
B. INDUSTRY OVERVIEW (Cont’d) 1.5.2.4 Total Installed Capacity of Gas-fired Power Plants in Malaysia The gas-fired power generation segment of the electricity supply industry in Malaysia consists of non-coal fossil fuels fired power plants. This segment had a total installed capacity of 15,546 MW as at end December 2012. Malakoff’s effective capacity based on its equity stake in its associate company, Kapar Energy Ventures and Malakoffs then associate company, Port Dickson Power was 2,488.7 MW, accounting for 16.0% as at the end of December 2012. Meanwhile in 2012, Malakoff had a larger market share of 17.8% in Peninsular Malaysia with its effective capacity of 2,488.7 MW. In 2012, TNB was the largest power generation company with an effective capacity of 5,913.0 MW in this segment. Chart 1:13: Malakoff’s Market Share (%) Chart 1:14: Malakoff’s Market Share (%) among Gas-fired Power Plants based on among Gas-fired Power Plants based on Effective Capacity in Malaysia, 2012 Effective Capacity in Peninsular Malaysia, 2012 TNB, 38.0% YTL, 7.5% Edra, 13.1%

 

TNB, 8.4% YTL. 42.2% Edra, 14.5’% 17.8%
Notes: (1) TNB’s market share includes TNB’s IPP and non-I?? power plants
(2) Others include installed capacity through co-generation and self-generation

Source: EC’s Performance & Statistical Information 2012, Malakoff Annual Report 2012 and Frost & SuI/ivan 1.5.2.5 Actual Units Sold by IPPs in Malaysia As at end of December 2012, EC had reported a total of 89,744 GWh units of electricity sold by IPPs in Malaysia”. From this total, Malakoff, including its associate company, Kapar Energy Ventures and Malakoff’s then associate company, Port Dickson Power, sold approximately 25,574 GWh of electricity based on its equity stake. Based on this, Malakoff constituted 28.5% of total electricity sold in Malaysia in 2012. Meanwhile, in the same year, a total of 83,567 GWh of electricity was sold by IPPs in Peninsular Malaysia. As such, Malakoff’s unit of electricity sold accounted for 30.6% of the total electricity sold in Peninsular Malaysia. [The rest of this page is intentionally left blank] 33 Data for 2013 is not publicly available as at the publication of this Report. Independent Market Research Page 30 8. INDUSTRY OVERVIEW (Cont’d) Chart 1:15: Malakoff’s Market Share (%) in Chart 1:16: Malakoff’s Market Share (%) in Malaysia (by Actual Units Sold), 2012 Peninsular Malaysia (by Actual Units Sold), 2012
Source: EC’s Petfonnance & Slalislicallnfonnation 2012, Malakoff Annual Report 2012 and Frost & Sullivan 1.5.3 Operational Performance 1.5.3.1 Thermal efficiency Thermal efficiency is defined as the effectiveness of conversion from steam i heat to electricity. A thermal efficiency of 100% would mean that all energy put into the generator produces or is fully converted into the desired output. However, thermal efficiency is typically much less than 100% as not all heat energy is converted to electricity energy. There are various factors determining the conversion of energy. such as types of generators, power plant emission controls, age of power plant, leakages and friction, amongst others. Chart 1:17: Av_eE0i9~ThermalE!fi<:i~”-cy~pesof P0..”Ver Plants, 2012 _ 50.00% l 45% ~ Natural Gas -Coal -Steam Petroleum ­Petroleum ­Natural Gas -Petroleum­« Combined generator Combined Steam Gas Turbine Gas Turbine Cycle Cycle Generator
Source: EiA, Frost & Sullivan For example, in terms of design of power plant, a combined cycle power plant is able to use multiple processes to recover and utilise residual heat to further generate electricity during the power generation process, while an open cycle gas turbine is not able to utilise such residual heat. Therefore, the thermal efficiency of a combined cycle power plant is usually higher than that of an open cycle gas turbine. Besides, age and maintenance of power plants are also vital factors affecting leakages, friction and other heat losses and subsequently affecting the thermal efficiency of power plants. The thermal efficiency for Malakoff’s GB3, Segari Energy Ventures, Prai Power and Tanjung Bin Power have been consistently above IPP industry averages between 2008 and 2012, indicating high thermal efficiency performances for these plants. Among these four power plants, the highest thermal efficiency was recorded by Prai Power at 53.0% in 2008. 8. INDUSTRY OVERVIEW (Cont’d) Table 1:18: Average Thermal Efficiency of TNB, IPPs and Malakoff’s Generation Plant from 2008 to 2012 Type of Prime I I 2008 I 2009 2010: 2011 ! 2012Plant ~–~~ ~ Mover (%)
Combined Cycle _Average TNB nla nla nla _ _ n/a ~j~ Conventional AveragelPPs 33.8 34.7 33.1 35.1, 35.5 Tan”una Bin Power 34.7 35.4 35.5 i 36.2 l~6..:~_Coal Kapar EnerQV Ventures -Phase 2 NA 32.9 33.2 i 33.2 i 33.3 Kapar Energy Ventures -Phase 3 NA 33.5.__ ~§._~. .~.J._34.~_ Average TNB 25.6 17.4 22.6 I 22.3 ! 26.3 Open Cycle f–AveragelPPs . 26.1_+__.21.t–_~-.l7.3—–i~:-27.L~i-· 26.8 Kapar Energy Ventures -Phase 4-NA 26.8 27.0! 27.2 ! 26.7­
NA Not avaIlable Note: (1) Average TNB and Average IPPs data for 2013 is not publicly available as at the publication of this Report.
(2) Kapar Energy Ventures -Phase 1 is a conventional thermal power plant.

Source: EG’s Performance & Statistical Information 2012 and Malakoff 1.5.3.2 Equivalent Availability Factor (“EAF”) EAF is a measure of power plant availability derived based on the amount of time an electric power generating unit is available for service during a period. The availability of a power plant varies significantly, depending on the type of fuel, the design of the plant and how the plant is operated. All other variables being constant, plants that operate less frequently have higher availability factors because they require less maintenance. Similarly, newer plants tend to have significantly higher availability factors. Nonetheless, some power plants require temporary shutdown on their operations for preventive maintenance and / or improvements in design and technology, thus affecting their EAF. Malakoff’s Port Dickson Power plant has been consistently performing above IPP industry averages between 2008 and 2012, indicating high EAF performance for the plant. The highest EAF was recorded at 99.5% by Port Dickson Power in 2011. Table 1:19: Average EAF of TNB, IPPs and Malakoff’s Generation Plants from 2008 to 2012 TyPE’ of Prbne I 2008 I 2009 2010: 2011 2012Plant I ‘-L__ ~_ -~ ~~~—-­Mover I (%) i Average TNB 90.7 -I-93.2 90.5 84.9 94.1 Combined , Average IPPs 90.7 91.2 _~ll..6_~ _…….lJlI.,§_-l–__.95.~­, GB3 ~ __8.§~__ I .J~..L_~j 820 91.3, 91.9Cycle r-Segari EnergvVentures 93.9 “,,—97.3 I —94T-‘—95:’6~-: 92.0_~ Pra; Power 92.7 I 86.5 _! 88L _~a9.2~.. –!__ ~.7 ~~ o…-… _-.._.. -‘~’-“Ave-r-ageTFiB————————nia——,—“fa -‘TnJa “fa i nfa-Conventional __ Average IPPs . 78.5 78.0 ~~~~___ _u._~_Q_:~ 84.1 Coal ,Jarl1~n9Bin.fOIN~r__1 850 90.7 864 i 81.3 , 83.1 1Kapar EneiID’ Ventures -Phase 2 :–NA –1——–65.6 ….·.~.·.~_•.~._·..-_:_:-.•_-_II-.·.–…-,-.·.~.·, •.’.:~,’:,’::·_–1–__g~_:~. _.I—-….:_:_:~_________________L~~p~_~i!~~gy_V~!1J~£~~_=p_~~_~_~_ –r—-~~ ~J.8 ‘”_ , ‘” “””” Open Cycle it:~i~: i:p~~i:~fL;~:~ :~:: ..+:H_L ~H­-partDiCksonPOwer-! NA ! 99.4 ——gg.3—-r —‘99.5 99.3 .•.• _,_••.•_.~ __..•m… ·~J~_~par Energy Ventures -Phase 4 i NA._…~J. __.__ ,_~~:.~ ~~~~:.~ __,__ J___ 84.9 86.5 NA -Not available Notes: (1) Average TNB and Average IPPs data for 2013 is not pUblicly available as at the pUblication of this Report. (2) Kapar Energy Ventures -Phase 1 is a conventional thermal power plant. . Source: EG’s Performance & Statistical Information 2012 and Matakoff 8. INDUSTRY OVERVIEW (Cont’d) 1.6 RELEVANT LAWS AND REGULATION 1.6.1 Electricity Supply Regulations Malaysia’s power sector has evolved through a series of significant changes from a structural standpoint supported by strong enabling regulatory framework. Key pre-privatisation and post­privatisation policy reforms in the sector are illustrated below:
Tendering process for alliPPs on the  Competitive bidding process introduced  basis of ne otiation  Issues regarding the restructuring of  Incorporation of necessary condition to ensure the first generation IPPs  the first  eneration IPPs  achieve the efficienc  levels  Concerns on electricity and fuel  Adoption of Electricity Security Index by the Electricity Supply and Tariff  securit  Planning and Implementation Committee and being de 10 ed b  EC  Issues regarding gas subsidies and  Implementation of incentive based regulation, Fuel Cost Pass Through  no mechanism for tariff  ass throu h  (“FCPT”) and Stabilisation Mechanism  Traditional utility governance  Guidelines for ring fencing of the single buyer and system  structure  operator and accounting separation of various TNB  divisions are in the  rocess of im  lementation
Source: MyPOWER Corporation (“MyPOWER’) Major electricity sector related regulations are summarised below: Electricity Supply Act 1990 The Electricity Supply Act 1990 provides for the regulation of the electricity supply industry, the supply of electricity at reasonable prices, the licencing of any electrical installation, the control of any electrical installation, plant and equipment with respect to matters relating to the safety of persons and the efficient use of electricity. PPA Each private IPP player needs to sign a long-term PPA with the state utility companies to off­take the generated electricity and to supply it to the main grid. Environmental Policies and Legislation include: Kyoto Protocol34 In September 2002, Malaysia ratified the Kyoto Protocol and became a party to the United Nations (“UN”) Framework on Climate Change. The Kyoto Protocol outlines specific quantified and binding commitments for limiting or reducing green house gas (“GHG”) emissions caused by humans in advanced nations or nations in transition to a market economy for the commitment period of 2008 to 2012. These countries are classified as Annex I parties. In the case of developing countries, the targets are not legally binding and these countries are classified as non-Annex I parties. Malaysia is currently classified as a non-Annex I party due to its status as a developing country. Green Technology Policy” Launched by the Prime Minister of Malaysia in 2009, Malaysia’s Green Technology Policy was designed to implement better and more efficient technology without negatively impacting the environment. 34 Malaysia Green Technology Corporation (“GreenTech Malaysia”) 35 Source: KeTIHA, as at 20 March 2015 8. INDUSTRY OVERVIEW (Cont’d) 1.6.2 Regulating Authorities Malaysia’s electricity supply industry has various stakeholders overseeing different aspects across the value chain of the industry. EC is the main regulatory and planning body for the industry alongside KeTTHA and EPU (Energy Unit). The roles and responsibilities of these respective government agencies are: EC: EC is a statutory body created under the Energy Commission Act 2001 with the responsibility to regulate the energy sector in Malaysia, specifically the electricity supply industry and piped gas supply industry in Peninsular Malaysia, Sabah and Sarawak. The major functions of EC are economic regulation, tariff setting, technical regulation, consumer protection and safety regulation. KeTTHA: KeTTHA was established on 9 April 2009. The major functions of the ministry include implemention of development policies in the power industry, water and green technology, provision of a comprehensive and integrated infrastructure that meets the standards and quality as well as a conducive environment for industrial development and technology. EPU (Energy Unit): EPU is the principal government agency in Malaysia and was established in 1961. EPU formulates policies and strategies for sustainable development of the energy sector. Ministry of Rural and Regional Development: The Ministry of Rural and Regional Development is tasked to draft policies governing the supply of electricity to rural areas throughout Malaysia. Energy Information Bureau: Energy Information Bureau is responsible for energy policy and planning, reducing energy costs and environmental protection. Department of Environment (“DOE”): DOE monitors power plants during developmental and operational phase. DOE analyses the impact of power plants on the environment and surrounding communities. 1.6.3 Government Policies National Energy Policy Malaysia’s National Energy Policy was introduced in 1979 with three guiding principles governing the future development of the energy sector3S . To further complement the National Energy Policy, the Government of Malaysia introduced the four-fuel strategy in 1981 to establish the security and stability of fuel supply. This strategy was aimed at reducing the nation’s dependency on oil as a key source of energy, and promotes an energy supply mix of oil, gas, hydropower and coal. To address the issue of supply security, the strategy promotes the use of local fuel resources. As such, the electricity subsector witnessed great improvement in adopting this strategy, as evidenced in the comparison of generation fuel mix between 1990 and 2012 where the dependency on oil by the electricity supply industry reduced significantly and options in natural gas and coal fuel have been explored. In 2001, the Four Fuel Policy was being amended to become the Five Fuel Policy, with the inclusion of renewable energy such as biomass, solar PV and mini hydroelectric power as the fifth fuel resource in energy supply mix. 36 Source: KeTTHA, as at 20 March 2015 8. INDUSTRY OVERVIEW (Conl’d) Government Initiatives to Increase the National Power Generation Capacity The Government of Malaysia has further announced specific initiatives to increase electricity generation capacity in Peninsular Malaysia (Please refer to Table 1:14: Selected Planned New Geenration Capacity Projects in Peninsular Malaysia till year 2020 for more information). TNB has also carried out a feasibility study to evaluate the possibilities of linking the National Power Grid in Peninsular Malaysia to Sumatera, Indonesia. This grid linkage project is likely to be rolled out in 2015. The Government of Malaysia is committed to provide sufficient electricity to meet the anticipated increase in electricity consumption over the long term. The Government of Malaysia has also in the past intervened to revise electricity tariffs to ensure that all levels of the population have access to affordable electricity. This trend is expected to continue in the coming years. 2 OVERVIEW OF THE ELECTRICITY SUPPLY INDUSTRY IN SOUTH EAST ASIA (SEA) 2.1 ECONOMIC OVERVIEW OF ASIA Economic activity in Asia picked up speed in the second half of 2013, as exports to advanced economies accelerated. Domestic demand has been solid and retail sales across much of Asia have been brisk. Exports, particularly to the United States and the Euro area, have gained momentum. Countries with strong fundamentals and policies managed to navigate the pressures seen in mid-2013 and early 2014 from slowing capital flows, with many in emerging Asia unscathed and looking more positive. Despite increasing volatility, financial conditions remain accommodative, partly because weaker currencies are providing some offset. For Asia as a whole, growth is expected to accelerate modestly, from 5.2% in 2013 to about 55% in both 2014 and 2015. The improved outlook in advanced economies, alongside more competitive exchange rates in some cases, will help boost exports. Domestic demand will continue to be supported by strong labour markets and still-buoyant credit growth. Policies are expected to remain accommodative, although in a few cases (India, Indonesia) interest rate hikes on the one hand will attenuate vUlnerabilities, but on the other hand could weigh on growth. In Japan, fiscal consolidation will be a headwind. Inflation is expected to increase slightly, albeit remaining generally low across the region, as output gaps close. The main exceptions are India and Indonesia, whose high inflation rates should continue to moderate further. 2.2 BACKGROUND OF THE ELECTRICITY SUPPLY INDUSTRY IN SEA Robust economic development has accelerated the demand for power especially in developing economies in SEA, such as Indonesia, the Philippines and Vietnam. Access to continuous and reliable power has become indispensable for businesses. Power sector expansion continues in the region due to growing urbanisation, rising middle class population and progressive growth in electrification ratio. Significant reserves of coal (27.9 billion MT) and gas (7.5 trillion cubic meters) in SEA have increased the dominance of coal-fired and gas-fired power plants in the region’s electricity mix. The role of coal and gas-fired technologies in power generation is likely to remain significant, despite the growing importance of nuclear and renewable energy technologies. Utility companies and IPPs in SEA have both invested heavily in combined-cycle gas turbine power plants and coal-fired power plants in 2011 and 2012 and the trend is expected to continue during the period of 2014 to 2018. Countries like Singapore, Brunei and Thailand registered electrification ratios of 100.0%,99.7% and 99.3% respectively, while several other countries in SEA such as Myanmar, Cambodia, Vietnam, Indonesia, Philippines, Lao PDR and some parts of East Malaysia are yet to be completely covered by their respective national power grid due to topographical challenges. These countries face power blackouts and brownouts and have to rely on other power generation technologies, especially diesel generators to meet their electricity needs. 8. INDUSTRY OVERVIEW (Cont’d) Many SEA countries continue to rely significantly on fossil fuels and hydroelectric power plants above 25 MW capacity to generate electricity. However, to improve their respective electrification ratio as well as to address demand for power, the Governments of the SEA countries have emphasised on energy diversification in their energy policies. 2.3 ELECTRICITY CONSUMPTION TRENDS Electricity consumption of countries in SEA has grown from 519,165 GWh in 2008 to 742,758 GWh in 2013, representing a CAGR of 7.4%. Frost & Sullivan estimates that the region’s electricity consumption is expected to grow at a CAGR of 7.9% to 1,086,576 GWh in 2018. Frost & Sullivan expects Indonesia and Singapore to register a forecasted electricity consumption growth with a CAGR of 8.4% and 3.9%, respectively, from 2014 to 2018. According to International Monetary Fund (“IMF”), Singapore’s GDP is forecasted to grow at a CAGR of 5.5% from 2014 to 2020 as the country focuses on sustainable and inclusive growth driven by increasing productivity and innovations. Frost & Sullivan estimates electricity consumption in Singapore to grow from 46,676 GWh in 2014 to 54,472 GWh in 2018 at a CAGR of 3.9%. Due to unavailability of natural resources, Singapore will continue to import energy from neighbouring countries to meet the country’s energy needs. Frost & Sullivan estimates eiectricity consumption in Indonesia to grow from 203,345 MW from 2014 to 280,278 MW in 2018 at a CAGR of 8.4%. In order to meet this demand, the installed capacity would have to be increased. According to Rencana Usaha Penyediaan Tenaga L1strik 2013-2022, the development of additional generation capacity has been planned to meet the growing demand for electricity, The planned additional capacity of 59.5 GW, of which 25.5GW have been allocated for the private sector, will provide opportunities for the involvement of private companies37 . Total** 519,165 539,972 597,621 632,317 690,218 742,758 800,341 875,828 948,375 1,025,646 1,086,576 ./ “7\4%·/·.··· 7.9% ..
not add up due to rounding. Source: For Singapore: Historical numbers 2008 to 2013 taken from the Singapore Energy Statistics 2014 by the Energy Market Autholity (“EMA’J of Singapore. For Indonesia: Historical numbers 2008 to 2013 are taken from Ministry of Energy and Mineral Resources. For Thailand: Hislorical numbers 2008 to 2012 are taken from The Energy Policy and Ptanning Office, Ministry of Energy Thailand. For Philippines: Historical numbers 2008 to 2012 taken from Deparlment of Energy’s Power Statistics 2012. Historical numbers for a/l other countlies are taken from EIA publication. 37 17.1 GW of the total planned additional capacity has not been allocated as of the publication of RUPTL 2013-2022 in December 2013. Independent Market Research Page 36 © Frost & SuI/ivan, 2015 8. INDUSTRY OVERVIEW (Cont’d) 2.4 INDUSTRY DRIVERS 2.4.1 Increasing Rate of Urbanisation Table 2:2: Urbanisation Rate, countries in SEA, 2014 and 2050 Country I, 2014 i 2050 Brunei 77% 84%——-_.. .JY1alaysia 74% .~86!<> ..—..—–­Indonesia 53% 71 % —-·——–··-··-······-···——-~c;_—-_1I-·——~”‘”‘;——-­Thailand 49% 72%——-. …. ——–“””O~—–+———~~-.–_____1 .?hilip@1es 44% 56% Lao PDR ···_[“······_-·-··–38% ~6.1,”‘o”Yo’–j I ~~~i::a -~~===¥<=——i——–i–~–=–=::::::::::::~~~:~~~—————-….­, SEA 50% —-66″%–­________ __..J Source: UN’s World Urbanisation Prospects 2014 As the urbanisation rate” in the SEA region increases, there is a growing need to satisfy the urban population’s energy demand. Demand for additional power generation capacity is acutely evident in emerging economies such as Thailand, Vietnam, Indonesia and the Philippines. 2.4.2 Liberalisation of the Power Generation Market Power shortages, tight reserve margins and power utility companies’ lack of cash reserves are driving the liberalisation of power markets. As such, in encouraging private power producers to invest in the competitive power generation market, majority of the SEA countries are moving towards adopting a single off-taker model mainly to protect financiers of power generation projects from market risk and retail-level regulatory risk, enabling investments to be commercially profitable. The degree of competitiveness varies from country to country and Governments are now more open to regional power integration and private sector participation in projects. The increasing pace of power sector liberalisation presents a business expansion opportunity for power producers in the SEA region. 2.4.3 Abundant Availability of Fuel The abundant availability of coal and natural gas reserves in SEA has enabled power plant developers to obtain fuel resources domestically or within the region. Coal is one of the fossil fuels easily sourced in SEA, with Indonesia being the largest producer within the region”. According to Bundesanstalt fOr Geowissenschaften und Rohstoffe (” BGR”), Indonesia was ranked fourth (4th) largest coal producer in the world in 2013 with 430.0 million tonnes of coal production. Easy access to low-cost fuel spurs the high adoption rate of proven technologies such as coal-fired power plants in the SEA region, especially in Indonesia that predominantly uses gas-fired power plants with steam turbines and boilers. Indonesia has ample natural gas reserves that facilitate the installation of gas-fired power plants. Indonesia has the largest proven natural gas reserves in the Asia Pacific region, with approximately 1.5% of the world’s total estimated woven natural gas reserves in 2013. In addition, Malaysia and Indonesia are the world’s ninth (9′ ) and tenth (10 h) largest exporter of LNG respectively. JS Urbanisation is calculated using the World Bank’s population estimates and urban ratios from the UN World Urbanisation Prospects. Urbanisation refers to the increase in the proportion of people living in towns and cities when a country is still developing. Increase in urbanisation rates creates more demand for goods and services. 39 According to the EIA, top five coal producers in 2012 were China, the US, India, Australia and Indonesia. Indonesia is the only country located in the SEA region. 8. INDUSTRY OVERVIEW (Cont’d) 2.5 MARKET SIZE OF POWER GENERATION INDUSTRY IN SEA The market size by installed capacity in SEA is estimated to be 173,671 MW in 2013 and expected to grow at a CAGR of 4.5% to 216,604 MW in 2018. Frost & Sullivan’s research based on publicly available information shows that Malakoff is the largest IPP in terms of effective power generation capacity installed in SEA as at 20 March 2015. Table 2:3: Top 5 Largest Com anies with Interests in IPPs in SEA as at 20 March 2015 >Name OfIPP> i Country of Countries of Operation IEff~ctive 1I .Incorpo.ration ‘. Capacity (MW) ~l •.• ‘ I I Malaysia Malaysia, Saudi Arabia, ..-. •I ______~ …a”c:B”ah~rao=in:_e,,,,O~m1_-c-~c_–_+_~A’C_us'”t”rali…….a,,,n’____,~——-Ratchaburi Electricity 1Thailand Thailand, Lao PDR, Australia
5,612.55 Generating Holding i peL. I —.,,——–+c;-;—–c–~_;_;_~-____o~_o_-.—–.——-.———Edra Malaysia Malaysia, Egypt, Bangladesh, the UAE, 5,594.2 ~,~:~t~:”~c::~n-=-e~::::a;:ctin::::g-_~~–..T;::_ha;::_il::::an::::-d::::——-“-1::::::::, M_i~,”,-‘~~—,-4,917.86–‘­_Y_TL ~ Malaysia -Ma”aYsja.:Si;,-9:.aJlQr~::ful!.C?ii’e§ia,_Iiu.s!c~;ti=:=:_4..5.5.iQ:_ Source: Companies’ annLlal and quarterly reports, Frost &SLlllivan 2.6 INDUSTRY CONSTRAINTS Obstacles and Transparency of Project Agreements IPPs usually enter into PPAs with state-owned utility companies which have an effective monopoly over their respective countries’ electrical transmission and distribution services. In the SEA region, IPPs face difficulties in negotiating tariffs that are commercially acceptable for both new and extension of existing PPAs. Furthermore, terms of the PPAs are often not tailored to the IPPs’ specific operating circumstances and may contain ambiguous provisions. This challenge is more prominent in Indonesia, the Philippines and Vietnam. The lack of transparency and clarity in project agreements and the inability to agree on mutually favourable PPAs have led to project delays in the recent years. Access to Capital Power plant development is highly capital intensive and requires significant capital investment by project developers. Usually, power projects also involve extensive debt capital structure. Hence, the ability to execute a successful project on time largely depends on the ability of the utility companies or IPPs to obtain financing. In countries like Indonesia, the Philippines, Myanmar and Vietnam where PPAs are characterised by lengthy negotiations and bureaucratic processes, prolonged negotiations can result in a longer project completion cycle. IPPs need to have a strong relationship with their lenders in order to be able to negotiate for fleXibility in timing of loan disbursement until the conclusion of negotiations with all other parties involved. Fuel Costs and Supply Constraints Generally, the responsibility to arrange fuel for power plants is borne by the IPPs, where each of the IPPs enters into a fuel supply agreement with a fuel provider in the host country or one from neighbouring countries. In some markets and for certain types of projects, the IPPs may either enter into a long-term fuel supply agreement or opt to purchase fuel in the spot market. Securing a reliable fuel supply is highly critical for coal and gas-fired power plants as any shortages in fuel supply will disrupt the IPPs’ ability to generate continuous electricity, thus causing IPPs to employ more costly alternatives. 8. INDUSTRY OVERVIEW (Cont’d) 3 BRIEF OVERVIEW OF THE ELECTRICITY SUPPLY INDUSTRY IN AUSTRALIA 3.1 BACKGROUND OF ELECTRICITY SUPPLY INDUSTRY IN AUSTRALIA In Australia, the power generation industry was state-owned and centralised until the mid­1990s’. However, the market opened up to liberalisation which started in the 1990s’ in New South Wales (“NSW”), and subsequently expanded to Victoria, Queensland and South Australia. The National Electricity Market (“NEM”) was established in 1997. In 2004, Australian Energy Regulator (“AER”) was established to regulate the energy markets and networks, along with two other operating bodies under NEM. The Australian Energy Market Commission (“AEMC”) was established to manage transmission operation and planning process and Australian Energy Market Operator (“AEMO”) as the power system and market operator for NEM. Australia has two major wholesale electricity pools -the NEM and the Wholesale Electricity Market (“WEM”) operating in the South West Interconnected System (“SWIS”) in Western Australia with the latter facilitating the power flows across Southwest of Western Australia. The NEM facilitates market determined power flows across the Australian Capital Territory, NSW, Queensland, South Australia, Victoria and Tasmania. Western Australia and the Northern Territory are not connected to the NEM because of their geographical distance from the eastern region of Australia. Wholesale electricity pool is a systematic electricity trading model where power generators, customers and retailers within the participating jurisdictions trade electricity. In the NEM, the pool acts as a central dispatch system managed by AEMO. Trading of electricity in the NEM is conducted on spot basis, where supply and demand are instantaneously matched in real time through a centrally coordinated process. Price offers are submitted by power generators at 5-minute intervals, which will be determined by AEMO’s system on the selected power generator to meet the prevailing demand. On the contrary, apart from overseeing the operation of electricity trading, the WEM adopts the Reserve Capacity Mechanism that ensures adequate capacity is built to meet customer demand. Retailers are also able to enter into long-term bilateral contracts with the power generators and only the electricity volume that is not already covered in the bilateral contracts is traded on the WEM. Trading of electricity in the WEM is conducted on a day-ahead basis whereby market participants are able to adjust their existing net bilateral positions for the next trading day. Power generation outside of the territories of NEM and SWIS include power generation in the North West Interconnected System (“NWIS”), power generation in Nothern Territory, and other off-grid power generation. The NWIS is owned by the Western Australia State Government and operates in the northwest part of Western Australia where majority of industrial and resource­based activities are located. The NWIS now extends across an area measuring approximately 400 km east to west and 350 km north to south. It services the communities of Dampier, Wickham, Pannawonica, Paraburdoo and Tom Price through the Pilbara Iron (Rio Tinto) Network and Port Hedland, South Hedland, Karratha, Roebourne and Point Samson through the Horizon Power Network. Meanwhile, the power generation industry in Northern Territory is small reflecting the territory’s small population size. Regulatory Framework Within the NEM, AEMO regulates the connection, pricing and supply within the wholesale electricity pool. It is responsible for maintaining and developing the rules and market related procedures that govern the operation of NEM. AEMO has developed forecasts and planning for the NEM based on annual economic data, consumption trends, industrial activities, etc. AEMO operates under the National Electricity Law and National Electricity Rules (“NER”), which are reviewed, amended, and sanctioned by the AEMC. AEMC is also responsible for the development of regulation under the National Electricity Law, the National Gas Law and the National Energy Retail Law. The AER is responsible to monitor the market activities within NEM to ensure compliance with National Electricity Law and the NER. The AER, the AMEC and AEMO are regulatory arms reporting to the Council of Australian Governments (“COAG”) Energy Council (formerly known as Standing Council on Energy Resources). The COAG Energy Council is responsible policy decision related to the energy markets in Australia. 8. INDUSTRY OVERVIEW (Cont’d) Within the WEM, the equivalent authority governing the wholesale electricity market is the Independent Market Operator (“IMO”), who is also responsible for maintaining and developing the Wholesale Electricity Market Rules (“WEMR”) and related market procedures that govern the operation of WEM. Other key regulatory bodies that oversee the WEM operation include the Ministry of Energy, which establish the initial market rules, appoints the Board of the IMO, and approves proposed changes to Protected Provision in the Market Rules and the Economic Regulatory Authority (“ERA”), which performs regulatory and market surveillance roles and approves IMO budgets, as well as the Electricity Review Board (“ERB”), which acts as an adjudicator for appeals. In Australia, new power generation projects need to be lodged with the relevant authorities for project and environment appraisals in each state jurisdiction. Table 3:1: State Authorities Responsible for Power Generation Projects, Australia, 2014 Jurisdiction  Authority  Applicable Laws  Western Australia  Economic Regulatory Authority  Electricity Industry Act 2004  Northern Territorv  Utilities Commission  Electricitv Reform Act  New South Wales  Division of Resources and Energy (New South Wales Trade & Investment)  Environmental Planning and Assessment Amendment (Part 3A Repeal) Act 2011  Victoria  Essential Services Commission  Electricity Industry Act 2000  Tasmania  Tasmanian Energy Regulator  Electricity Supply Industry Act 1995, Energy Co-ordination and Planning Act 1995, Electricitv Reform Act 2012  South Australia  Essential Services Commission of South Australia  Essential Services Commission Act  Queensland  Department of Energy and Water Supply  Electricity Act 1994
Source: State Governments of Each Jurisdiction, Frost & Sullivan [The rest ofthis page is intentionally left blank] Independent Market Research Page 40 © Frost & Sullivan, 2015
8. INDUSTRY OVERVIEW (Cont’d) l y.!~e j CouncIl of Austl”illian Governments
End Users (residential, commercllJl, industrial and other users) Reg”J~tJon  M~rk~1 l’a,licipa”t rCl’S  ……………..;:.. ~1~ctriC’ily rlows  OH;tfer<l1 Conlract  spot !’ric”,  ””’lI  .. Reference to Law~ or Rules  Elenridty Whole,.. I” Pool

L.” no. ,.,,,,,..,,••,,.,, __ Noles: (1 ) ACT -Australia Capital Territory, NSW -New South Wales, QLD -Queensland, SA -South Australia, TAS -Tasmania, VIC -Victoria, WA -Western Australia (2) Depiction of 29 isolated regional power systems is excluded
(3) Includes Perth and extends from Albany in the south, to Kalgoorlie in the east and to Kalbarri in the north
(4) Includes the communities of Dampier, Wickham, Pannawonica, Paraburdoo and Tom Price through the Pilbara Iron (Rio Tinto) Network and Port Hedland, South Hedland, Karratha, Roebourne and Point Samson through the Horizon Power Network
(5) NWIS and Northern Territory do not operate in the wholesale electricity market model due to small scale of the electricity supply system

Source: Frost &Sullivari 3.2 ELECTRICITY CONSUMPTION TRENDS The electricity consumption in Australia between 2000-2001 and 2010-2011, increased from 224,641 GWh to 252,620 GWh at a CAGR of 1.2% However, in 2011-2012, electricity consumption declined by 1.1 % to 249,884 Gwh and this continued in the following year with a decline of 0.3% in 2012-2013. The recent decline in electricity consumption was mainly driven by the reduction in electricity generation using coal (black and brown coal) due to the introduction of the carbon pricing’o in July 2012 and the improvement on energy consumption efficiency. Moving forward, the Bureau of Resource and Energy Economics (” BREE”) has forecasted the electricity demand to grow with a CAGR of 20% from 2008-2009 to 2019­2020F, reaching a total electricity consumption of 310,000 GWh by 2019-2020F. 40 Part of Clean Energy Plan; where entities that emit over 25,000 MT of carbon per year and not participating in transport or agriculture industry are required to obtain permits. These permits can be purchased or can be obtain under industry assistance measures. 8. INDUSTRY OVERVIEW (Cont’d)
2008-2009  249,531  nla  2009-2010  252,133  1.0  2010-2011  252,620  0.2  2011-2012  249,884  -1.3  2012-2013  249,075  -0.3  2013-2014E  256,325  2.9  2014-2015F  263,997  3.0  2015-2016F  272,126  3.1  2016-2017F  280,749  3.2  2017-2018F  289,905  3.3  2018-2019F  299,639  3.4  2019-2020F  310,000  3.5  CAGR 2008-2009 -2012-2013: -0.05%  CAGR 2013-2014E -2019-2020F: 3.2%
Source: BREE, and Frost & Sullivan 3.2.1 Industry Drivers Population growth Australia’s population has grown at a CAGR of 1.6% from 21.7 million in 2008-2009 to 23.1 million in 2012-2013. According to Australian Bureau of Statistics, by 2020 the total population for Australia is expected to reach 26.3 million, representing a CAGR of 1.8% from 2013-2014 to 2019-2020F. Australia had a per capita consumption electricity of 10,712 kWh in 2011, behind few developed countries such as Iceland (52,373.8 kWh), Norway (23,173.6 kWh) and Canada (15,473.2 kWh). Economic Development As a developed nation, Australia’s economy is driven by technology and capital-intensive industries. Leaving aside the global economic challenges faced in 2008, Australia economy has posted a GOP CAGR of 8.1 % from 2008 to 2013 This growth was primarily driven by domestic demand and expansion in manufacturing and construction industry. Australia’s GOP increased from AU0311.3 billion in 1990 to AU01,560.1 billion in 2013 In 2014, Australia’s GOP is expected to grow 4.5% according to Reserve Bank of Australia, which is at a higher rate compared to its decade average of around 4.0%. Industrial Development In 2014-2015 more LNG projects are expected to be launched in Queensland, which is expected to drive electricity consumption in the region. Arrow LNG plant was one of the key LNG projects which were approved by the Australian Government in 2013. This includes construction of a gas pipeline, construction of a liquefaction facility where coal seam gas will be converted to LNG and stored for shipment in LNG carriers to growing LNG markets. The project is expected to produce up to 18 million MT of LNG per annum. The LNG project will boost level of electricity consumption due to the electricity demand increase to power up the LNG plants starting 2016-2017, upon completion of Phase 1, with the construction of Phase 2 starting in 2022-2023. Government Policy Australia is also looking to generate electricity using renewable sources such as wind, solar and hydro. By focusing on wind energy, the Australian Government plans to develop more efficient ways of generating electricity. In 2013 alone a total of 18 plants (705 MW) inclusive of wind, hydro, solar, biogas and geothermal power plants were commissioned. Going forward, the Australian government is expecting a strong growth (23.6% annually) in rooftop PV installations, particularly in Queensland and Victoria and also strong growth (10.0% annually) in total energy efficiency savings, with key contributions from air conditioning, refrigeration and electronics. 8. INDUSTRY OVERVIEW (Cont’d) 3.3 ELECTRICITY SUPPLY TRENDS 3.3.1 Evolution of Fuel Mix Black coal and brown coal-fired power generation 41 is likely to contribute to a substantial share of the total power generation in Australia despite a decline in last 5 years. Natural gas and wind power generation is expected to increase further in the next 5 to 7 years gradually replacing black and brown coal-fired power generation. The future mix of generation projects in Australia is impacted by federal energy policies, through incentives for withdrawing existing plant, or a reassessment of the timing and/or technology of proposed future projects. Along with high costs in transmission and distribution to growing demand and the cost of replacing old power poles (aged up to 50 to 60 year) and transmission wires, electricity price in NSW increased over 85% over 2011-2012 and 2012-201342 . In the backdrop of increasing electricity prices, consumers have taken measures to reduce power consumption by installing small  scale  renewable  energy  systems  (mostly  solar),  or  transitioning  to  natural  gas.  Consumers  have  been  given  the  option  to  pay  a  small  amount  of extra  cost  to  include  renewable energy generation in the power they consume.
Table 3:3: Power Generation Forecast, by Fuel Type, Australia, 2008-2009 to 2019-2020F , Power Generation (TWh) .. .. -.. . ~-­Year ‘-~.~——–.———! -.. -­I Black C Brown Coal : Natural Gas Others I Renewables ,I Total 2008-2009 127.3 57.0 37.7 9.0 18.6 249.6–1——..—-.. 56.12009-2010 123.7 44.6 6.1 21.8 252.3 2010-2011 117.0 55.3 49.0 5.8 26.2 253.3 2011-2012 \—–116.7· 55.1 48.6 3.8 25.8 250.0 ~,—-_.-.. ———–.2012-201347.6 51.0 6.4 32.6 249.1——J–111.5:.. -.—–t 48.3 52.7 6.2 35.82012-2014E J::—-11.3.3–1 .-I-..?~ 2014-2015F 115.2 .. 49.0 54.5 6.0 39.3 264.0 ,56:2 5.8 43.2 272.12015-201~ __r=-.f1[L_.! 49.8 50.6 58.1 5.6 47.5 280.8 60.0 5.4 52.2 290.0~~~ ~:~~~ ~~_+-~-Ht~:::::j-: 51.4 299.762.0 5.2 57.32018-2019F -123.0 ~ 52.2 —-,.~._-,­31002019-2020F 1250 53.0 64.0 5.0 63.0 CAGR 2008_2009–E–:;~-;-‘-‘1 -­.i:;”l, ·8.2% 15.1% -0.1%-4..4~.-2012-2013 . • : ….~ 1.5% -3.5% 9.9% I 3.2% j~1~_~~1~~~1~. _._1~6~_.L ————~-­Note. (1)  Other includes oil and multi-fuel fired power plants43  ,  (2)  Renewable includes wind, hydro, solar PV and bio ene rgy.  Source: BREE, 2014; Frost & Sultivan estimates
The total electricity generated in Australia during 2012-2013 was 249.1 TWh. Approximately 44.8% of the total generation was fuelled by black coal followed by natural gas and brown coal at 20.5% and 19.1 % respectively. The renewables fuel source accounted for 13.1 % of the total electricity generated in 2012-2013. However, this is expected to increase to 20.3% by 2019­2020F, due to the efforts of the Australian Government to improve the input of renewable energy segment for generating electricity. Usage of black coal in generating electricity is ~1 Black coal and brown coal are the two major types of mineral coal and named after their colours. Sub-bituminous coal, bituminous coal and anthracite are together known as black coaL Brown coal is also called lignite. Black coal has four times the heating value of brown coal. 42 Electricity Price from AEMO, http://www.aemo.com.au/Electricity/Oata/Price-and-Demand/Average-Price-Tables 43 Multi-fuel tired power plants refer to power plants that run on more than one type of fuels. There are mainly two types of multiwfuel fired plants: natural gas and liquids, and coal and natural gas. 8. INDUSTRY OVERVIEW (Cont’d) expected to reduce to 40.3%, in line with the Australian Government efforts to reduce emissions level of coal-fired plants and increase renewable energy fuel mix in the long term. 3.3.2 Renewable Energy The generation capacity continues to evolve in line with the Australian Government’s renewable energy policies. The Australian Government has implemented a number of measures to increase the uptake of renewable energy in Australia. Key amongst these are the Renewable Energy Target (“RET”), carbon pricing policies, as well as the establishments of the Australian Renewable Energy Agency (“ARENA”) and the Clean Energy Finance Corporation (“CEFC”). The RET targets 20% of the power generation capacity in Australia to be generated by renewable resources by 2020. Amongst all types of renewable energy generation, wind energy is the most widely adopted renewable energy in Australia, followed by hydro and solar. According to the Australian Energy Resource Assessment44 , the Southern and South-western coasts of Australia are amongst the best wind resources in the world for wind energy. Investment in large-scale solar power generation is also increasing rapidly. Australia has the highest average solar radiation per square metre45 of any continent and has capabilities in solar PV research and technology development according to a report on solar energy by Australian Energy Resource Assessment. As of October 2013, nuclear power generation has not been considered as an option in Australia despite Australia being among the top 3 largest producers of uranium in the world 4.. However there are continuous studies done on the importance of nuclear power for Australia in the future. The investments in renewable energy continues to grow, driven by mature technologies, government initiatives such as the RET policy that facilitate the gradual shift from coal-centred power generation to a portfolio of energy resources power generation with renewable energy playing a larger role in the energy mix. Wind With its high returns, wind power generation is a mature technology and is the largest renewable energy generation sector in Australia. Wind power generation is also expected to experience the highest growth during the forecast period between 2012-2013 and 2017-2018. Wind projects dominate the list of all current projects at advanced stages of completion. However, conditions for new development are increasingly challenging with public community objections to wind farms on the basis of noise disturbances and environmental threats to wildlife. In 2013, the installed capacity of wind generation in Australia is 3,240 MW from 68 farms in total, the largest being MaCarthur wind farm in Victoria topping the rest at 420 MW. The performance of wind farms are highly dependent on the location which determines the wind resources and power transmission infrastructure. 3.3.2.1 Renewable Energy in Victoria Victoria has abundant renewable energy sources, such as onshore wind, solar, hydroelectricity, bio-energy, geothermal, wave and tidal energy sources. However the utilisation of these resources faces economic, environmental, social, and regulatory constraints. In Victoria, the local council is the authority responsible for an application 44 Wind resources: a term used to describe the availability, strength, and consistency of wind, that are combined used to assess potential to generate wind power 45 Source: Geoscience Australia, http://arena.gov.au/files/2013/08/Chapter-1 O-Sola r~Energy.pdf 45 World Nuclear Association 2013, “World Uranium Mining Production’; July 2013. [Accessed on 4 November 2013] http://www.wo rid-n uclear. org/info/Nucle ar-F ueI-Cycle/Mining-of-U ra niumNVarld-U ra nium-Mini ng-Production/#. UndTJSflT3A 8. INDUSTRY OVERVIEW (Cont’d) for a permit for a wind energy facility, except where a project is designated as being of state significance under Part 9A of the Planning and Environment Act 1987, which falls under the purview of the Victoria State Government. Despite the statement from National Health and Medical Research Council (“NHMRC”) that dismissed the health concerns of wind farms in 2009, as a compromise to community oppositions towards wind farms, the Victoria government issued a restriction stating that if an existing dwelling is located within two kilometres of any wind turbine that forms part of a proposed wind energy facility, the permit application must be accompanied by evidence of the written consent of the owner of the dwelling. The application is prohibited by the planning scheme where evidence of written consent is not provided. In addition to the research conducted by NHMRC, Victorian Health Department has conducted a research (May 2013) which further dismissed the purported health concerns caused by wind farm operations. 3.3.3 Power Generation Capacity in Australia 3.3.3.1 NEM In 2013-2014, the installed capacity under NEM was 47,891 MW and comprised a range of fuel generation mix (55.6% coal, 21.2% natural gas, 5.5% wind, 16.0% hydroelectric power and 1.7% others). According to National Transmission Network Development Plan, installed capacity for NEM will total up to 53,967 MW by 2019-2020F, comprising a range of fuel generation mix (43.1 % coal, 18.8% natural gas, 19.5% wind, 14.2% hydro, 4.4% others). The increase in installed capacity relies heavily on renewable power projects mainly wind and solar power for NEM. The future mix of generation projects in NEM is impacted by federal energy policies, through changed incentives for withdrawing existing plant, or a reassessment of the timing and/or technology of proposed future projects. Chart 3:1: Installed Capacity Forecast by Technology (MW) within NEM, Australia (2013­2014to 2019-2020F) ….._._…
60,000 40,000 20,000

I o ,I 2013-2014E 2014-2015F 2015-2016F 2016-2017F 2017-2018F 2018·2019F 2019-20:J0F l’If Black Coal ~’;::Brown Coal ‘-.’CCGT 1I0CGT ‘:: Hydro … Wind . Solar PlIBiomass ~ Distillate iii Cogen Note: (1) Torrrens Island A and B generation is included as OCGT rather than Gas/steam sub-critical Source: National Transmission Network Development Plan 2013, AEMO 3.3.3.2 SW/S The iMO is responsible for demand, supply, and reserve capacity tracking 47 within SWIS network in Western Australia. In 2012-2013 the installed capacity in SWIS is estimated to be about 5,995.6 MW. The Reserve Capacity Mechanism was set up in 2005 to provide incentive to attract more participants In the wholesale electricity market in Southwest of Western Australia. This ensures sufficient capacity to meet system needs and to promote efficiencies in the market. 47 Reserve margin level Independent Market Research Page 45 © Frost & Sullivan, 2015 8. INDUSTRY OVERVIEW (Cont’d) Chart 3:2: Installed Capacity Forecast by Fuel Type within SWIS, Australia, 2008-2009 ­2015-2016F ,———_._—_. ~ 8,0001 .~ 6,000 I :3~ 4,000 1,11l-:;l!i;:..ill!:….;:…~_~~l\i~.~I!!-t:~:5_~/’~~i~:L~>>>~~£~~;[~~~,~i~;_~::::;:~::~;~~·~~~:~~~l:~::jt:~-~:~~~~?~:~-;~~~~::?~:_.~’~~~~~~:~~~·~~:..y~~~~~~t~?~·:;:~?~j~?~-~~~~-:::”::,/~~:~~~l~~:·~~
‘–·_,_Renewable II Gas -Coal <… Dual (Gas/Liquids) JlOual (Coal/Gas) il!:iLiquid IDSM J Notes: (1) DSM -Demand Side Management
(2) Forecast numbers provided by IMO is unti12015-2016F

Source: IMO, 2013 The future mix of generation projects in SWIS is impacted by federal energy policies, through changed incentives for withdrawing existing plant, or a reassessment of the timing and/or technology of proposed future projects. 3.3.4 Competitive Landscape 3.3.4.1 NEM Wholesale electricity in eastern and southern Australia is traded through the NEM, covering Australian Capital Territory, NSW, Queensland, South Australia, Victoria and Tasmania. As of 2013-2014, the total installed capacity under NEM was 47,891 MW. AGL Macquarie is the largest power company based on effective installed capacity with approximately 20.4% of market share for NEM, followed by Origin Energy with 12.5% market share. Chart 3:3: Market Share (%) of Selected Power Generation Companies based on Effective Capacity in NEM, as of 2013-2014
98.9% International Power Others 5.3’%Stanwell Corporatio n
8.7% Snowy Hydro Others 9.1% 41.1% Origin Energy 12.5% AGL and Macquarie 20.4%
Source: AER 2013; Frost & Sullivan Analysis Aside from principal generation businesses, there are a few power generators for consumers who are connected to the grids in NEM or SWIS and are able to sell surplus power back to the grids. These are typically industrial consumers such as Alummina and Alinta Gas, amongst others. There is no pUblicly stated restriction on foreign investment entering the power generation in Australia, aside from the existing project approval, registration and compliance requirements in each state jurisdiction and respective electricity wholesale network. 3.3.4.2 sw/s There are more than 12 power generating companies, which is made up of privately owned capacities (Alinta and NewGen Power) and state-owned capacities (Verve Energy) under SWIS. In 2012-2013 the installed capacity stood at 5,995.6 MW. In April 2013, the Government of Western Australia announced a merger of the State’s electricity retailer (Synergy) and generator
8. INDUSTRY OVERVIEW (Cont’d) (Verve Energy), effective January 2014, aimed at enhancing efficiencies in the energy market of West Australian regions. Chart 3:4: Market Share (‘I.) of Selected Power Generation Companies based on Effective Capacity in SWIS, as of 2012-2013 Verve Energy Bluewaters Power 51.7%7.5% NewGen Power 10.9% Alinta Energy
11.2% Source: IMO 2013; Frost & Sullivan Analysis 3.3.4.3 NWIS The participants for power generation in the NWIS are Rio Tinto Group, ATGa Australia, Alinta Energy, and Horizon Power. These stakeholders own and operate the NWIS. The total installed capacity for NWIS was 484 MW as of 2014. Alinta Energy owns the largest power generation capacity in the NWIS at approximately 210.0 MW (43.4%) of the total power generation capacity. This is followed by Rio Tinto with 108.0 MW (22.3%), ATCa with 86.0 MW (17.8%) and Horizon Power with approximately 80 MW (16.5%). Chart 3:5: Breakdown by <:..ll.pal:!!:l for Electricity Ne_lv><()..k~Jn NWIS,201_”­
Source: Public Utilities Office, Department of Finance, Government of Western Australia 3.3.4.4 Northern Territory The total installed capacity for the Northern Territory was 670 MW as of 2013. The territory is broken into three main network systems which are not interconnected, namely Darwin­Katherine, Alice Springs Electricity Network and Tennant Creek. Chart 3:6: Breakdown by Capacity for Electricity Networks in the Northern Territory, 2013 19.7% Tennant Creek 2.5%
>:/:j.:::::::::::::i!::/Y: Darwin-Katherine 77.8% Source: Utilities Commission Australia, 2013 8. INDUSTRY OVERVIEW (Cont’d) Power and Water Corporation, a state entity covers approximately 92.1 % of total installed capacity in the Northern Territory of Australia. Its total installed generation capacity is more than 617 MW as of 2013, split between Power and Water Corporation (559MW) and 58 MW contracted capacity under PPAs with IPPs (inciuding, NGT (NT) Pty Ltd, Central Energy Power Pty Ltd, Cosmo Power Pty Ltd, TKLN Solar Pty Ltd, amongst others). Power and Water Corporation is the largest electricity producer in the Northern Territory power generation market. 3.4 INDUSTRY OUTLOOK AND PROSPECTS Frost & Sullivan estimates that the electricity demand is expected to grow at a CAGR of 3.2% from 2012-2013 to 2019-2020F4′, and is subject to the variations with different economic and climatic outlook during the forecast period. Correspondingly, the power generation industry is expected to grow simultaneously. Nevertheless, the installed capacity of black coal and brown coal is expected to decrease and supplemented by renewable energy generation to meet the RET. Among all types of renewable power generation, wind energy is likely to gain the fastest grow1h in the next decade for its mature technology, feasible economics, and available wind resource. Frost & Sullivan expects wind power generation to grow at a CAGR of approximately 25.5% over 2012-2013 and 2019­2020F. Large scale wind energy generation is the most favourable form of renewable power source with about 2,220 MW installed capacity projects announced up to 2019 in Australia mostly in the region of South Australia. The Australian electricity sector is expected to develop organically with a mixture of domestic and international participants. According to the Statement of Opportunities in both NEM and SWIS, the Australian power generation sector offers an annual grow1h rate of about 1.0% to 1.5% and 2.5% respectively. The off-grid area (that is out of NEM and SWIS) also offers growth potential given the resource sector development in those areas. 4 ANALYSIS OF THE ELECTRICITY SUPPLY AND WATER PRDDUCTION INDUSTRY IN THE MIDDLE EAST AND NORTH AFRICA (MENA) REGION 4.1 ECONOMIC OVERVIEW OF MENA A large and possibly persistent decline in oil prices, and slower-than-projected grow1h in the euro area, China, Japan and Russia, have substantially altered the economic context for countries in the Middle East and Central Asia. The appropriate policy response will depend on whether a country is an oil exporter or importer. A common theme, however, is that these developments present both an opportunity and an impetus to reform energy subsidies and step up structural reform efforts to support jobs and growth. Lower oil prices have weakened the external and fiscal balaces of oil exporters, including members of the Gulf Cooperation Council (“GCC”)4′. Oil exporters in the Middle East, North Africa, Afghanistan and Pakistan (“MENAP”) regions are faced with substantial losses in government revenues and exports as a result of the iarge decline in oil prices. Many countries have significant buffers in the form of foreign assets that will allow them to avoild steep spending cuts and limit the drag on growth. Across the MENAP region, with buffers eroding at varying speeds, most countries will need to re-assess medium-term spending plans and, if lower oil prices persist for a prolonged period, will need to adjust gradually to the new realities in the giobal oil market. Some countries that do not have signinfcant buffers or borrowing capacity will need to adjust more quickly, with adverse consequences for economic growth. In all oil-exporting coutnries, deepening economic reforms 48 BREE and Frost & Sullivan 49 The high-income Gee countries comprised of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. 8. INDUSTRY OVERVIEW (Cont’d) aimed at diversifying economies away from oil, and encouraging growth and job creation, would help mitigate any adverse effects of fiscal consolidation growth. Oil importers in the MENAP region are benefiting from lower oil prices. Energy import bills are reduced, and, where lower oil prices are passed on to end-users, production costs decline and disposable income rises. Yet in most oil-importing countries gains from lower oil prices are offset by other adverse factors, such as slower-than-expected domestic demand grow1h and a weaker-than-expected outlook for growth in the key trading partner countries: the euro area and GCC for MENAP oil importers. In addition, some countries export non-oil commodities, the prices for which have been declining. As a result, impact on growth and on fiscal and current account deficits is mixed, with expected improvements in some countries but a worsening in others. Lower oil prices create favourable conditions for continuing subsidy reforms and for stepping up structural reform efforts to support medium-term grow1h and job creation. However, oil importers should not overestimate the positive impact of the decline in oil prices on their economies: demand grow1h is weak in trading partner countries and there is considerable uncertainty about the persistence of lower oil prices and the availability of external financing. Overall, the growth in the GCC is expected to be around 3.4% in 2015. In the non-GCC oil exporters, growth is expected to be 2.4%. Oil production and evolving conflicts in the region constitute important downside risks to the outlook. The oil producers from the Organisation of the Petroleum Exporting Countries are not expected to cut oil production under baseline projections, but appartent oversupply in the global oil market suggests that the risks for oil production are skewed to the downside. In addition, countries in conflict or difficult security situations (Iraq, Libya, Yemen) or facing a difficult external environment (Iran) could also suffer from declining oil production and/or face downside risks from conflict-induced disruptions in non-oil economic activitiy. 4.2 BACKGROUND OF MENA’s ELECTRICITY SUPPLY INDUSTRY AND WATER PRODUCTION INDUSTRY Economic growth in the MENA region has led to a marked growth in electricity consumption. Total electricity consumption in the regionSO has increased at a CAGR of 4.7% from 607,081 GWh in 2008 to 765,046 GWh in 2013. Frost & Sullivan anticipates that electricity demand in this region will further increase at a CAGR of 9.4% to reach 1,184,118 GWh by 2018. A notable trend in this region’s power generation sector is the integration of water production and power generation plant as a measure to meet the electricity demand, while in parallel, combating the water scarcity issue, one of the major concerns of the Governments in the region. These plants utilise natural gas or oil in a combined cycle generation process in which steam generated from the gas turbines are fed into steam turbines to generate electricity. At the same time, the steam produced from the gas turbines is supplied back to the desalination plant to distill sea water through water desalination methods. The Government of Algeria launched a programme to build 13 seawater desalination plants along its coastline with a design capacity of 32.3 million m per day. The Government of Saudi Arabia has announced similar expansion plans, Whereby it intends to increase the desalination capacity in the country by 577,000 m3 per day over the forecast period. Saudi Arabia maintains its leading global position in desalination industry as it produces over 18% of the world’s production. The Saline Water Conversion Corporalion (“SWCC”) plants together with other independent and private desalination plants produce over 6 million cubic meters of desalinated water per day. SWCC’s piants contribute 60% of this production to meet the demand for fresh water in the main regions of Saudi Arabia. 50 MENA region include Algeria, Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Saudi Arabia, Sudan, Tunisia, UAE and Yemen. Company No.: 731568-V 8. INDUSTRY OVERVIEW (Cont’d) 4.2.1 Background of the Electricity Supply Industry in the MENA Region The MENA region is blessed with vast reserves of natural gas and oil, which is why the power generation industry in this region is heavily dependent on these same fuel sources. For the past 6 years, the electricity supply industry in the MENA region grew from 607,081 GWh in 2008 to 765,046 GWh in 2013 at a CAGR of 4.7%51 driven by increased economic and population growth. Development of IPPs and Independent Water and Power Producers (“IWPPs”) in the MENA Region Before the mid-1990s, the power generation and/or water production plants in the MENA region were financed and built solely by each government. However, after the mid-1990s, the governments in the MENA region have increasingly turned to the IPP and IWPP models as alternative sources for electricity supply. IWPPs are private companies that build and operate power and desalination plants, and sell the electricity generated and the water produced by their respective plants. Under the IPP and IWPP operating model, the government identifies the need for a new power plant along with its specifications, and invites private sector developers to tender for the right to finance, build and operate the plant. Once the plant is completed, it is managed by the private sector. However, its output (electricity and water produced) is sold back to the government through a PPA or in the case of an IWPP, a Power and Water Purchase Agreement (“PWPA”).
4.2.2 Background on the Water Production Industry in the MENA Region Water Sourcing In the MENA region, sources of water include the renewable natural sources, non-renewable groundwater or wastewater. Renewable natural resources are categorised into groundwater resources, surface water resources and the overlap of both. Non-renewable groundwater is groundwater with negligible rate of recharge on the human time-scale whereas wastewater refers to urban or industrial wastewater which will be treated for reuse5′. Water Treatment Extracted renewable natural resources are either supplied directly to consumers without any form of treatment or channelled to water production plant to remove contaminants. Desalination is the water treatment method adopted by countries in the MENA region. It is used as a non­conventional water supply method mainly due to the depleting groundwater resources as a result of over-exploitation. Water Production Water production is the process of removing dissolved salts from water, thus producing freshwater from seawater or brackish water53 . There are two methods of desalination, namely thermal distillation and membrane desalination. Techniques of thermal distillation include multi­stage flash (“MSF”) and multi-effect distillation (“MED”), while membrane desalination techniques include reverse osmosis (“RO”), nanofiltration, electrodialysis and electrodeionisation. 51 Source: AUPTDE 52 Food and Agriculture Organisation of the UN Online: http://MWJ.fao.org/docrepf005N4473E/y4473e06.htm, as at 10 December 2012 53 International Desalination Association. “Desalination -a critical element afwater solutions for the 21 s1 century”, page 48 as at 10 December 2012 8. INDUSTRY OVERVIEW (Cont’d) Water Transmission Desalinated water is transmitted to end consumers through public main pipes. There are generally three main segments of water consumers in the region, namely agricultural, industrial and domestic. Water Industry Challenges in the MENA Region The main water issue faced by the MENA region is water scarcity. The availability of groundwater water resources is scarce in the MENA region as it is generally characterised by harsh climatic conditions whereby its average rainfall is decreasing. This leads to higher temperatures as well as higher evaporation and transpiration rates, all of which result in repeated drought and increased desertification. The increasing population in the region also leads to a more serious question of water scarcity. The reducing trend of renewable water resources results in insufficient supply to meet the increasing demand for water as a result of the rising population. In addition, water efficiency is another concern in the MENA region. Non-revenue water (“NRW”) percentages 54 are also impacting the efficiency of the water industry in the MENA region. Some MENA countries such as Algeria, Egypt and Saudi Arabia have percentages that close to or higher than the global average of 35%. NRW for Saudi Arabia in 2013 was close to 20%. Water scarcity impacts the region economically and socially. Industries, especially those that rely heavily on water, face difficulty in having continuous supplies of treated water for operations and people in these countries do not have sufficient water volumes to support daily activities. This has led to MENA countries cooperating with organisations such as the World Health Organisation, World Bank, African Development Bank, European Investment Bank and Isiamic Development Bank to resolve these water shortage issues. As a result, many foreign private water companies are entering the industry through public-private-partnership (“PPP”) or joint ventures and operating as Independent Water Producers (“IWPs”) or IWPPs. 4.3 ANALYSIS OF THE ELECTRICITY INDUSTRY IN THE MENA REGION 4.3.1 Electricity ConsumptionTrends As of 2013, the top 3 countries in the MENA region with the highest electricity consumption were Saudi Arabia at 256,688 GWh or 33.6%, Egypt at 140,257 GWh or 18.3% and the UAE at 101,454 GWh or 13.3% of the total electricity consumption. The Arab Union of Electricity tracks electricity consumption in four broad sectors: residential, industrial, commercial and others. In 2013 total electricity consumption in the MENA region was recorded at 765,046 GWh. Approximately 43.2% of total electricity consumption in the region was consumed by the residential segment. Meanwhile, the industrial seg ment consumed approximately 20.6% of electricity whereby the largest user in the industrial segment was the petroleum refining industry. This was followed by the commercial and others segments which accounted for approximately 16.3% and 19.9% respectively of total electricity consumption in the region. Total electricity consumption in the MENA region increased at a CAGR of 4.7% from 607,081 GWh in 2008 to 765,046 GWh in 2013 on the back of higher electricity consumption from the commercial (CAGR 9.9%), residentiai (CAGR 4.4%), industrial (CAGR 3.5%) and others (CAGR 3.2%) segments. Electricity consumption per capita has also been on an upward trend increasing from 2,016 kWh in 2008 to 2,331 kWh in 2013 at a CAGR of 3.5% supported by increasing population numbers which increased from 301.1 million in 2008 to 328.2 million in 2013. 504 NRW percentage is the percentage of water that has been produced and is “lost” before it reaches the customer. 8. INDUSTRY OVERVIEW (Gonl’d)
Source: EIA (International Energy Statistics); AUPTDE; Frost & Sullivan Analysis Frost & Sullivan estimates electricity consumption to increase from 826,340 GWh to 1,184,118 GWh at a CAGR of 9.4% between 2014 and 2018. The projected increase in population and urbanisation are also attributed as factors driving the consumption of electricity moving forward. 4.3.2 Demand Drivers Economic Growth The economic growth and pace of a country’s development correlates positively with the amount of electricity utilised. As a country develops, more electricity would be required for new residential and commercial property developments as well as increased industrial activities. The MENA region’s GOP increased from US02,001.2 billion in 2008 to US02,754.5 billion in 2013 at a CAGR of 6.6%. The electricity supply industry in the MENA region is expected to experience growth in the coming years as a direct result of economic growth within the region. The region’s GOP was estimated to have increased to US03,640.3 billion by 2018, at a year-on-year growth rate of 6.3%55 from 2014. Population Growth and Urbanisation The increased socio-economic growth in the region which is characterised by population growth and by a young, dynamic and increasingly urbanising population as seen from an urbanisation rate of between 34% to 99% in 2014 would lead to higher demand for electricity as the growing population requires more electricity to meet its basic needs i.e. electricity to power electronic gadgets as well as lighting and air conditioning in bUilding. Moreover, a growing population also signifies higher levels of water consumption in the MENA region, which translates to higher electricity needs for water production activities. 4.4 ANALYSIS OF THE WATER PRODUCTION INDUSTRY IN THE MENA REGION 4.4.1 Water Consumption Trends In 2013, total water consumption in the MENA region was estimated to reach 775.1 million m3 per day, a CAGR increase of 1.7% from 712.6 million m 3 per day in 2008. The agricultural sector consumed an estimated 79.8% of total water consumption in 2013 or 618.3 million m3 of water per day. This sector was the largest consuming segment of water in the region mainly for the production of food for local supplies. The second largest consumer of water was the 55 Frost & SUllivan estimates based on latest available data from the International Monetary Fund’s (“IMF”) World Economic Outlook 2014, excluding Palestine and Syria. 8. INDUSTRY OVERVIEW (Cont’d) municipal sector which consumed an estimated 10.5% of the total consumption in 2013 or 81.7 million m’ per day. Industrial sector consumed the least water in the region and only accounted for an estimated 9.7% of the total consumption with a volume of 75.1 million m3 per day.
Frost & Sullivan estimates the water consumption in the MENA region will increase at a CAGR of 2.1 % between 2014 and 2018. In 2018 the agricultural sector is expected to remain as the main consumer of water at a proportion of more than 671.7 million m’ per day or 78.1 % of the total forecast consumption. The water consumed by the municipal sector is expected to account for approximately 98.3 million m’ water per day or 11.4% of the total consumption in 2018, mainly due to the improved accessibility to clean water over the years. Industrial consumption will constitute approximately 90.5 million m’ per day or 10.5% of the total consumption.
Table 4:2: Water Consumption (million m’ per day) by Segments, Domestic Water Consumption per Capita per day (litres) and Population (million) Trends in the MENA Region,2008-2018F
II Water Consumption (millIon m3per day) MUnicipal.Water PopulationYear —Consumption per’ .I Municipal Agricultural Industrial I Total Capita per Day (litre) (million) I 2008 680 581 9 627 7126 2258 301 1 ·~—;·~~-+–=”‘-=—+~-=”‘~~f—‘:?~-+–·~~-+—7~?=~·—‘-~~—112009 70.5 586.0 65.0 721.5 228.7 308.3 2010 72.9 590.8 67.4 731.1 231.8 314.5—–.._-_._—-_._–­I-~ 2011 75.7 599.7 69.9 745.3 .. 241.5 313.4 f–.2012 78.6 608.9 72.5 760.0 244.8 321.1 I c——J013 81.7 618.3 75.1 775.1 249.0 328.2 1-__2..O’~’!f’._._._..~8_~ 628.0 77.9 790.7 __..l~2.c? __ 335.4 I 2015F 88.1 637.9 80.9 80S:!j’–257.0 342.8! 2016F’-‘ 91.4 648.9 83.9 824.2 ……~ __.n 260.9 “’35’6~31 1–‘-1~}~~-‘ ~:~ ~~~i i ~~.~ ~:~~ –‘—‘~%~i~”-‘” ~~~.~ I I CA~~1(;~Hi~I~+l:.3.7% 1.7% 2.0% 1.’7′ ~;&ti:’ii> LCA~~,(;g~~ 1.7’1./{lfii· 3.8% 2.1%,,>; 1.6% ” ~~K Source. GWI, FoodandAgncultureOrganisatIOn ofthe UNAQUASTATdatabase ( FAO AQUASTAT,)56 4.4.2 Demand Drivers Water Scarcity and Low Replenishment Rates The demand for desalinated water in the region is mainly driven by the fact that the region is facing severe water scarcity. The average renewable water resources per capita for the MENA region registered at 308.9 m’ in 2012, which represented a drop of 11.4% from 344.1 m3 in 20075J The water crisis here is partly caused by the change in rainfall patterns as a result of climate change, low replenishment of underground water and industriai and urban pollution. Countries such as Algeria and Morocco experienced drought in the past two decades which severely impacted water supply.
The depleting renewable and non-renewable water resources caused a shift to the utilisation of desalinated water in agricultural, the residential and industrial activities. Over the last six years (2007-2012) the agricultural sector was the largest water consumer in the region. Its water demand constituted more than 80% of total water consumption. The development of the agricultural sector is important in the MENA region in view of food security for the population. Governments of the MENA countries are working on increasing the local food supply and
56 FAOAQUASTATonline database accessed 20 March 2015 57 Frost & Sullivan estimates based on the World Bank’s Renewable Internal Freshwater Resources Per Capita Indicator. Online database accessed on 20 March 2015. 8. INDUSTRY OVERVIEW (Cont’d) reducing food imports. This sector is expected to continue generating the largest water demand going forward. Population Growth and Urbanisation The population in the MENA region has increased from 301.1 million in 2008 to 335.4 million in 2013 at a CAGR of 1.8%. The increasing population trend is mainly due to the urbanisation in the region. The urbanisation rate in the region increased from 57.4% in 2008 to 61.3% in 20135′ As a result of urbanisation, a greater movement of population to the urban areas is anticipated. This migration of expatriates to the MENA region as a result of employment opportunities is also expected to increase the population headcount in this region. The higher demand for water triggers the establishment of more water infrastructure such as water production plants and water transmission facilities in urban areas to produce sufficient volumes of desalinated water.Going forward, it is expected that the ~opulation in the MENA countries will grow at an annual rate of 1.4% between 2014 and 2018 9. This population increasing trend is expected to further drive demand for water from residential consumers. 4.5 COUNTRY ANALYSIS 4.5.1 Algeria 4.5.1.1 Industry Structure The state utility of Algeria, National Society for Electricity and Gas (“Sonelgaz”) controls all electricity generation, transmission and distribution in Algeria. Electricity is generated by Sonelgaz owned power plants, IPPs and IWPPs. All electricity generated by IPPs/lWPPs must be sold back to Sonelgaz and only Sonelgaz has the sole right to transmit and distribute electricity to consumers in the industrial, commercial, residential and other segments. Meanwhile, a large portion of electricity is needed in the water production process. Water sources such as ground or sea water are desalinated and supplied to consumers in the agriculture, residential, industrial and other segments. The National Water Holding Company and National Sanitation Company preside over all water production companies which are supervised under the authority of the Ministry of Water Resources in Algeria. 4.5.1.2 Electricity Consumption Trends Total electricity consumption in Algeria reached 45,050 GWh in 2013. The industrial segment was the largest electricity consumer in the country, accounting for approximately 39.0% of total electricity consumption which the residential segment trail closely with 38.1 %. The commercial and others segments made up the remaining electricity consumption with 19.5% and 3.4% respectively. Frost & Sullivan estimates that Algeria’s electricity consumption will grow at a CAGR of 7.5% between 2014 and 2018, as a result of urbanisation, population growth as well as growth in electricity consumption per capita. The industrial sector is expected to remain the biggest consumer sector comprising approximately 40.0% or 26,160 GWh of total electricity consumption in 2018. Residential consumption is expected to increase to 22,236 GWh in 2018 and account for approximately 34.0% of the total consumption whereas consumption by the commercial sector is foreseen to constitute approximately 13,734 GWh or 21.0% of total electricity consumption. 58  Frost & Sullivan estimates based on the World Bank’s Urban Population Indicator. Online database accessed on 20  March 2015.  59  IMF World Economic Outlook 2014
Independent Market Research Page 54 © Frost & SuI/ivan, 2015 8. INDUSTRY OVERVIEW (Cont’d)
Source: AUPTDE and Frost & Sullivan 4.5.1.3 Electricity Supply Trends The installed capacity in Algeria increased from 8,501 MW in 2008 to 15,098 MW in 2013 at a CAGR of 12.2% on the back of capacity additions from combined cycle which recorded a CAGR of 39.2% in the same period. Almost half (49.3%) of the 56,148 GWh of electricity generated in Algeria are from combined cycle power plant, followed by gas turbines (31.0%) and steam turbines (17.1%). The country is also connected to the Maghreb interconnection which ;s pan of the Mediterranean Electricity Ring energy corridor that connects the power grids of several countries in Europe, Nonh Africa and Middle East. Going forward, the capacity to generate electricity in Algeria is expected to expand funher in order to meet the increasing electricity demand. The Government of Algeria plans to allocate nearly USD30 billion for the production of 1,200 MW per year by 2020 to meet the growing demand for electricity, as announced in 2012. The Government of Algeria also introduced an emergency programme to add 8,400 MW in new capacity in 2015-2017 as a measure to replenish demand.
f.i,j==;J]~J—: ..-:;;!,”‘:i”-‘!~?~!_”-_~_-_~_2c.:.~”,%=-. _f—;”~”‘~~~=-i ‘_,.~_d~!­Source; AUPTDE and Frost & Suflivan
60 Frost & Sullivan Research PUblication 2012, “OveNiew of the Algerian Electricity Industry”, May 2012 8. INDUSTRY OVERVIEW (Cont’d) 4.5.1.4 Water Consumption Trends Total water consumption in Algeria grew from an estimated 16.2 million m3 per day in 2008 to 17.7 million m3 per day in 2013 at a CAGR of 1.8%. In 2013, the agriculture sector accounted for approximately 57.0% of total water consumption or 10.1 million m 3 of water per day. Meanwhile, residential water consumption made up approximately 35.0% of the total consumption or 6.2 million m3 of water per day. Industrial water demand took up only 7.0% of the total consumption or 1.2 million m3 of water per day. The water demand from the residential and the industrial segments grew at a CAGR of 3.6% and 1.8% respectively from 2008 and 2013, mainly as a result of higher population and industrial growth trends. The agriculture segment grew at only a CAGR of 0.8% during the same period. The estimated domestic water consumption per capita per day grew from 150.3 Iitres in 2008 to 163.6 litres at a CAGR of 1.7% in the same period. 3Table 4:6: Water Consumption (million m per day) in Algeria, 2008 -2018F Year I Wa.ter Consumption i G wth R t (%)(mollionm’perday) : ro ae • _~.~~2~0~0′:C8 +­ —-o-16~.’:C2———-+  ….-.-~—co_—_1  2009  16.5  ——0:1.~9—____l  2010  17.1  3.0  2011  17.1  0.6  ;~~;  g:i  ._—-..  ~:~  I
r——;2″‘0:’;-147.F=—-+——–;1c;:;-8’O;.3—–·–·-L__—cc3~.4—­f——‘:C;~::o:~;-;:~”‘~.-.—+———–o1~8.~9——-…—i …..-__-:J.L——–1 ;~~~~ ~~.~ t –tr———-J 1_~-~:———};~ti~=:li~~~~~~~~:~~~~~~:.~~ -_~ ~-~—. Source: National Office of Statistics Algeria, World Bank and Frost & Sullivan Frost & Sullivan expects water consumption in Algeria to increase at a CAGR of 3.4% between 2014 and 2018 supported by the growing population, urbanisation and industrialisation in the country. Consumption from the agricultural sector is expected to remain as the biggest consumer sector comprising approximately 10.8 million m3 water per day or 51.7% of total water consumption in 2018. Residential consumption is expected to increase slightly and account for approximately 7.3 million m 3 water per day or 34.9% of the total consumption whereas consumption by the industrial consumer is foreseen to constitute approximately 2.7 million m3 water per day or 12.9% of the consumption. 4.5.1.5 Water Supply Trends Total water production plant capacity in Algeria increased from 0.3 million m3 per day in 2008 to 1.6 million m3 per day in 2013 at a CAGR of 39.8%61. In 2005, the Government of Aigeria launched a seawater production programme to build 13 water production plants with a total design capacity of 2.3 million m3 per day along the country’s coastline. The objective of this initiative is to increase local water supply to various user segments especially the agricultural sector which its water demand is expected to be high under the agricultural irrigation expansion plan. According to GWI, 11 of these 13 water desalination plant project tenders were contracted out between 2005 and 2008, of which two were withdrawn in 2009, namely EI Taraf that was suspended due to high tender pricing and Oued Sebt due to failure to secure financing. As of 2013, 9 of the remaining plants were in operation or under 61 Source: Frost & Sullivan analysis Company No.: 731568-V 8. INDUSTRY OVERVIEW (Cont’d) construction. As a result of the suspended projects of EI Taraf and Oued Sebt, in 2013 the Algerian Energy Company (“AEC”) planned to build another four desalination plants each of 3100,000 m per day capacity In November 2014, the water production capacity in Algeria has been increased with the commencement of commercial operation of Magtaa Desalination Plant 3with a capacity of 500,000 m , which will supply water to Oran, Algeria’s second largest city. 4.5.1.6 Competitive Landscape 4.5.1.6.1 Profile of IWP Players Based on publicly available information, the effective capacity of companies with interests in IWPs was tabulated for the period of 2013. In 2013, Malakoffs effective capacity in Algeria based on water production plant design capacity was 71,400 m 3 per day. Table 4:7: Profile of Selected Companies with Interests in IPPs and IWPPs based on Water Production Plant Design Capacity (m’ per day) in Algeria, 2013 II 2013 i I…_~ –~ –, –~—–~ : ‘I I Effective capacity based on ! Equity, Plant Design Capacity I equity stake No Water Production Plants 1 Stake I (m3 per day) I (m3 per day) . 49.0 I 200,000 98,0001 Sauk Tleta Water Production Plant 98,000Beni SafWater Production Plant 49.0 200,0002 3 4 5 6 7 8 Hamma Water Production Plant Mostaaanem Water Production Plant Skikda Water Production Plant Fouka Water Production Plant Honaine Water Production Plant Cap Olinet Water Production Plant 300 49.0 49.0 49.0 49.0 49.0 … 200,000 200,000 100,000 120,000 200,000 100000 1,320,000 60,000 98,000 49,000 58,800 98,000 49,000 608,800
! Souk Tleta Water Production Plant I 15.1 I 200,000 I 30 200 I II ~_ I .~
1 I Beni SafWater Production Plant I 51.0 I 200,000 I 102,000 I I 200,000 140,000 Malakoff.'”,,’,,’. .i . 1 Souk Tleta Water Production Plant I 35.7 I 200,000 I 71,400
I ….. . •. I “”;-.L”,,_…….20″”0″”.0″”00′–…….._ J. _ …….,;,7.:'”1,4″‘0″”0–…….,–1
Forn~(ltQ’1(;1e Construc.cionesy contratas>SAJ!:”,C”C!–),—–“”””==—-,—~:2i”‘r:;nc””-~=.>··4 1 Mostaganem Water Production Plant 1-25.5 200,000 .__+–;:5~1–=,0700~–._ 2 CaD Oiinet Water Production Plant 25.5 100,000 25,500 300.000 76,500 G.S\Enaineerina.’,&\Construction Corporation (GS Engi’!eerinQ)’–;;==__._-.””–__
1 Mostaoanem Water Production Plant 25.5 200,000 51,000 2 Cap Diinet Water Production Plant 25·”‘.5:–I—……,1″’00″‘,”’00~0~·_–I’–_ ….··-~2~5,–=5700~——-1 300.000 76.500,,_ Abengoa$,lI,(A,:”bc.ce;:;n,~g::-oa;;i):::’::::”==”, …._ “II”-_”~~’~~~~2~0~0–=,”0,,,o=Co~”~~~_”_”­-I”l—t-iH”‘0’icn::;al:.:·ni’ie’iw:;;a::te’i;rc:p~roc:d:;uc2t,:io””n;i-;p:,::’a,”n,-t _T 25,.E. _l-r-===’~~~_”‘~53″4-:c-l;;’,700″00~00~==–~===–= 2 Skikda Water Production Plant I 34 0 I 100,000 I. . ..L.._…. I 300,000 . 85,000 ~ …§ac.l” Group (~acyt) . .. ~ 1 Honaine Water Production Plant 255 I 200’000 ~._)-_ .. _.-51,000_.__. ._ .. 2 Skikda Water Produclioii”Pla’n””t”–+ 170″1—·..·”100″‘:”’00″‘0;–….·.. ·…… -“—:10.;7″‘,0″‘0″0 1–:~.l-‘=”77~.._c-..—L –..J. 300,000 I 68,000 .._,,_ Acciona.SA (Acciona) 1 ! Fouka Water Production Plant T25.5 I 120,000 I 30,600 I ….-‘3”-0″‘.6-‘-00~ …….,
8. INDUSTRY OVERVIEW (Cont’d) Fouka Water Production Plant 25.5 120,000 30600 120,000 30,600 Source: Malakoff Annual Report 2013, Tecnicas de Desalinizaci6n de Aguas, S.A, Overseas Private Investment Corporation, World Bank and Frost & Sullivan 4.5.1.6.2 Market Share by Water Production Plant Design Capacity In 2013, Algeria had a total water desalination design capacity of 1.6 million m3 per day. The top 5 players with the largest market share based on effective capacity in 2013 were the AEC with a market share of 37.8%, GE with a market share of 8.7%, Geida with a market share of 6.3%, Abengoa with a market share of 5.3% as well as FCC and GS Engineering with a market share of 4.8% each. Amongst the other players in the water desalination industry in Algeria are Malakoff with a market share of 4.4%, Sacyr with a market share of 4.2% as well as Acciona and SNC Lavalin with a market share of 1.9% each as of 2013. Chart 4:1: Malakoff’s Market Share (‘!o) among Selected Companies with Interests in IWPs based on Effective Capacity in Algeria (by Water Production Plant Design Capacit ),2013 sN~~~:.alin Acciona 1.9% Sacyr
,–__GE4.2% Malakoff 8.7% 4.4% GS Engineering Geida 4.8% 6.3%
Source: Malakoff Annual Report 2013, Tecnicas de Desalinizaci6n de Aguas, SA Overseas Private Investment Corporation, World Bank and Frost & Sullivan 4.5.1.7 Industry Outlook and Prospects Demand for electricity in Algeria is expected to grow from 48,950 GWh in 2014 to 65,400 GWh in 2018. In order to cater for the increase in electricity demand, the Ministry of Energy and Mines, Algeria (“MEM”) announced in August 2012 plans to increase power production capacity by a further 8,000 MW over the next 5 years, therefore presenting opportunities for both public and private players to increase their power generation capacities in this country. Sonelgaz is planning to spend USD7.6 billion from 2014 to 2017 to increase generation capacity excluding renewable projects. An additional investments of USD13.9 billion is also envisaged on the transmission and distribution system. Algeria has significant indigenous energy resources and has been involved in desalination for many years for industrial use mainly for the development of oil and gas projects. Algeria is on the forefront of desalination compared to many other countries in the region as it considers desalination to be a long term solution and is working towards it. The demand for water in Algeria is expected to grow from an estimated 18.3 million m3 per day to 20.9 million m3 per day between 2014 and 2018 based on Frost & Sullivan’s forecast. Going forward, Algeria is expected to remain as a key market in the MENA region for investments in the water production sector especially in the areas of new infrastructure projects. Frost & Sullivan notes that economic nationalism has been growing since the Government of Algeria passed the Loi de Finances Complementaire (Supplementary Financing Act) in July 2009 which dictates that foreign companies can only hold a 49% interest in an Algerian company while the remaining 51 % must be held by an Algerian company or consortium. Additionally, the Code des Marches states that Algerian company will be given preference over foreign players when it comes to new projects procurement. However, there is still a need for 8. INDUSTRY OVERVIEW (Cont’d) foreign expertise in large scale projects which translates to opportunities for foreign players such as Malakoff. 4.5.2 Bahrain 4.5.2.1 Industry Structure The electricity supply industry in Bahrain is heavily dependent on fuel sources such as natural gas and oil. These fuel sources belong to the National Oil and Gas Authority which supplies the necessary fuel sources to the Ministry of Electricity and Water, Bahrain (“MEW”), IPPs and iWPPs for electricity generation. in Bahrain, the electricity generation, transmission and distribution processes are all controlled by the MEW. Electricity supplied to the country comes from MEW owned power plants, IPPs and IWPPs and all electricity generated by IPPsJIWPPs must be sold back to MEW. The MEW also oversees all water supply, transmission and distribution processes in the country. 4.5.2.2 Electricity Consumption Trends Total electricity consumption in Bahrain was recorded at 13,350 GWh in 2013. The residential segment was the largest electricity user in the country, accounting for nearly half of Bahrain’s total electricity consumption whereby approximately 48.0% of electricity was used on air conditioning particularly during the summer months of April to November each year due to the hot and humid weather in the region. Meanwhile, the commercial segment accounted for approximately 36.0% of total electricity consumption followed by the industrial and others segments which respectively made up the remaining 15.0% and 1.0%. Total electricity consumption in Bahrain increased at a CAGR of 6.6% from 9,719 GWh in 2008 to 13,350 GWh in 2013 on the back of higher electricity consumption from the commercial segment which recorded a CAGR of 8.9% during this period. Meanwhile electricity consumption per capita dropped from 12,149 kWh in 2008 to 11,125 kWh in 2013 at a CAGR of -1.7% due to more growth in population compared to the electricity consumption. Frost & Sullivan estimates that the electricity consumption in this country will increase at a CAGR of 4.1% between 2014 and 2018, driven by population growth and the country’s urbanisation. Consumption from the residential sector is expected to remain as the biggest consumer sector comprising approximately 49.0% or 7,938 GWh of total electricity consumption in 2018. Commercial consumption is expected to increase to 5,670 GWh in 2018 and account for approximately 35.0% of the total consumption whereas consumption by the industrial sector is foreseen to constitute approximately 2,511 GWh or 15.5% of total electricity consumption. Table 4:8: Electricity Consumption (GWh in Bahrain, 2008-2018F GroWth Rate (%) 2008 9,719_ nla
Source: AUPTDE and frost & Sullivan 8. INDUSTRY OVERVIEW (Cont’d) 4.5.2.3 Electricity Supply Trends The installed electricity generation capacity in Bahrain increased from 2,734 MW in 2008 to 3,934 MW in 2013. In 2013, gas supplied approximately 97.5% of the country’s electricity while the remaining 2.5% was generated from oil. Table 4:9: Installed Energy Generation Capacity (MW) by Sources in Bahrain, 2008 ­2013 Year Natural Gas Oil I TotalI ______2,63.£_____! 2008 100 2,734—_._-_. … -.-.—–I ..­
____ 2,634.______2009 ___.IQO I 2,734 -­I 2010 2,634 100 2,734–~ I 2011 2.634 100 2,734 2012 3,868 100 3,968 1002013 3,834 3,934 0;0%C.\\~I{Ii~i!’gg8-2013) .•.• .7.5%m”;’ 7.8% Source: AUPTDE and Frost & Sullivan The country is also connected to the GCC Power Grid whereby the electricity grids of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE are interconnected and allow electricity exchange among the 6 member countries. 4.5.2.4 Water Consumption Trends Water consumption in Bahrain increased from 031 million m3 per day in 2008 to 0.42 million m3 per day in 2013 at a CAGR of 6.3%. The consumption was mainly from the domestic or residential sector which constituted approximateiy 77.1 % of total water consumption in 2013. The commercial sector consumed approximately 19.8% of the total whereas the industrial sector accounted for a minority portion of about 3.1 % only. Water consumed in the country was mainly generated from desalinated water given that the country reduced the usage of brackish groundwater sources due to its depleting and deteriorating quality problems. The estimated water consumption per capita per day in Bahrain has reduced at a CAGR of 3.5% from 333 m 3 per day in 2008 to 278 m3 per day in 2013. Frost & Sullivan expects water consumption in Bahrain to grow at a slower CAGR of 3.2% between 2014 and 2018 as the government is expected to reduce its water subsidies further in response to the weakening state of public finances6′. Yet, about 80% of the water demand in 32018 or about 0.33 million m per day is expected to come from residential users, which is supported by urbanisation and growth in popUlation Table 4:10: Water Consum tion (million m’ per day) in Bahrain, 2008 -2018F
i2009 0.3L + ~3~.2~—-I ______ 201lJ. “.__________ _Q}9__ 21.9. _ 2011 I 0.41 5.1 ,—-2012—-:————-0A1–! -n-/a———1 ——2013–:——0.42 ———–! 2.4·——j —-_..2g1’lF =~]___ -… ‘0.44 ···—.-.-I—••-.-..’I.&…..——J 2015F’ 0.45 2.3”-‘——-~-“–_._._—–_…._–_……. ….. _.~ …~+-_.—-_.~–~-_ ..­20161″__ 0.47 __i-4.4 ______ 2017F _____ 0 48 1_2.1 _ ______20181″____ __J._.________Q,?() __ _______.l __ ‘1_.2 .. ~ __ CAGR 2008~2013: 6.3% __________1 _________.. ..G_AG_R_2014F-2()181F:}.2% ———-j 62 IMF Press Release No. 14/126 8. INDUSTRY OVERVIEW (Cont’d) Source: Central Informatics Organisalion of Bahrain and Frost &Sullivan 4.5.2.5 Water Supply Trends Total water production in Bahrain is on the rise at a CAGR of 4.8% from 0.45 million m’ per day in 2008 to 0.57 million m’ per day in 2013. Bahrain’s natural water resources were almost exhausted by the agricultural sector over the last decade. Hence, the water demand was mainly met by desalinated water which grew at a higher CAGR 5.6% between 2008 and 2013.
Table 4:11: Total Water Production million m’ er da in Bahrain b Source, 2008-2013 . ~ 2008.__ ._-.-1.._._._ 0.38 0.07 0.45 1 ~2~00~9c_ –~-.-ri 0.45 0.04 0.49 2010 _ 0.48 0.05 0.53 2011 0.48 0.07 0.55 l——–2012 0.48 0.07 0.55 ~
I 2013 0.50 0.07 0.57 It1:%0~G~;(2008-2013) 5.6% 4′.8% Note: Exclude other water sources such as freshwater and water reuse, which is not pUblicly available. Source: Central Informatics Organisation of Bahrain and Frost & Sullivan 4.5.2.6 Competitive Landscape 4.5.2.6.1 Profile of IPP/IWP/IWPP Players Based on publicly available information, the effective capacity of companies with interests in IWPPs was tabulated for the period of 2013. In 2013, Malakoff also had an effective generation capacity of 371.6 MW based on power plant installed capacity. Additionally, Malakoffs effective capacity in Bahrain based on water production plant design capacity was 164,000 m’ per day. Table 4:12: Profile of Selected Companies with Interests in IPPs based on Power Plant Installed Capacity (MW) in Bahrain, 2013 i’ 2013 I ____ _~~ I Equity I Effective capacity based No’ Power Plants . Stake Installed Capacity (MW) , on equity stake (MWj I~_l!ez ~~~~_gYl~!~~~.~~ional (Suez) ._—–r———-1—….”‘”‘;4c;;27~.-5–~-~­1__1 _ AI Ezz.1 Power Plan!..__________ ~45.0_…. _… 950 …._… i ? ,! __8Lfj_i~_~_e_~~~~~_~ __W~!~~_!:~~~L.”, _ 30·9 929 278.7 3 I’ AI Our Power and Water Plant* 45.1 1,234 556.5 I 3.113 1262.7 Ft”nrii~~Jr~~~i!~~~;~~~~=r~;~ .iiP/,; 19253~ +-~ ~~~;.-..-. !MalakO~” . I/’; .~ 2184.—-..1.. 736.0 i-··-“-··1–~—rAi–Hi(idpowe-r–an-dwater·Pla-nf–t40:o-‘r—929 “····—–r—~—~—37f6~~ _I II 929 I 371.6 ~~~T~T~d~~~Pa(~~~~~1anC–l·-30~O-T 929 I -2~—·-­.I II 929 2767 ~f~-i~r-~r~~~~im:~~~;~~~–~-~~~·~-~=·=~—-·’1-····10.0 I 950 ..-.—.————‘1”—–95.0———-. -“-1 L….L .L L -.JJ.5_0_~ J.__ 95.0_J *Other stake holders ofAI Our Power and Water Plant include GIC, Socia/Insurance Organisation, Bahrain Islamic Bank, Capital Management House, First Energy Bank and Bunyah (lnstrata Capital) Source: MEED, Kingdom of Bahrain Electricity and Water Authority (“SEWA’). Company websites and Frost & Sullivan ~pany No.: 731568-V 8. INDUSTRY OVERVIEW (Cont’d) Table 4:13: Profile of Selected Companies with Interests in IWPs and IWPPs based on Water Production Plant Design Capacity (m3 per day) in Bahrain, 2013 II I 1_ 2013 __ I’ . I I Equity’ Plant DeSign Capacity Effective capacitr based on No I Water Production Plants , Stake ,i (m3 per day) ~ equity stake (m per day) Kongdom of Bahl’i\ln:!ileclncJ y.IDj JY\’aler~ol Ilk BEWA).”,”‘..,,,.. · .1.
IGilf¥~i&’u~nJ:~~”1i~?c: 1:520808~” -:” .~~5::8100″” …..–.. II 182,880 18,288, “AI Our Power and Water Plant. Capacity of 48 miff/on Impendl gallon per day (conve/1ed to m3fer day) Source, Malakoff Annual Report 2013, BEWA6 and Frost & Sutlivan 4.5.2.6.2 Market Share by Installed Generation Capacity The installed capacity in Bahrain was recorded at 3,934 MW in 2013. The top 3 players with the highest market share were the Suez with a market share of 32.1%, GIC with a market share of 18.7% and Malakoff with a market share of 9.4%. Chart 4:2: Malakoff’s Market Share (%) among Selected Companies with Interests in IPPs and IWPPs based on Effective Capacity in Bahrain (by Installed Capacity of Power Plant), 2013 Others 39.7%
l GIC Malakoff-~”‘”‘ 18.7% 9.4% Source, BEWA64, Matakoff Annual Report 2013 and Frost & Sutlivan 63 Kingdom of Bahrain Electricity and Water Authority. Website accesed on 20 March 2015 hUD:IIWoNW.mew.qov,bh/default.asp?aclion=category&id=65 8. INDUSTRY OVERVIEW (Cont’d) 4.5.2.6.3 Market Share by Water Production Capacity Total water production capacity in Bahrain was recorded at 720,000 m’ per day in 2013. AI Hidd Power and Water Plant (“AI Hidd”) garnered a market share of 58.6% with a water production capacity of 410,000 m’ per day in 2013. Chart 4:3: Market Share (%) of IWPs and IWPPs based on Gross Capacity in Bahrain (by Water P!oducti()~ Plant Del;ignc:apacity), 2013 _ _ _
Source: BEWA65, Malakoff’s Annual Report 2013 and Frost & Sullivan As at December 2013, AI Hidd was the largest IWPP in Bahrain and accounted for approximately 34.0% of Bahrain’s gross installed power generation capacity and approximately 58.6% of Bahrain’s gross water production capacity in 2013. 4,5.2.7 Industry Outlook and Prospects Frost & Sullivan expects the demand for electricity in Bahrain to grow from 13,349 GWh in 2013 to 16,200 GWh in 2018 at a CAGR of 4.3%. The Government of Bahrain plans to increase the country’s installed capacity by another 2,400 MW in the next few years. The projects include a second power and desalination plant at AI Our Power and Water Plant (“AI Our”) with a generation capacity of 1,200 MW. The plant will cost about USD2.0 billion and is expected to open by late 2015 or early 2016. AI Our when completed in 2016 is likely to supply 1,200 to 1,500 MW of power availability per day. Other development in pockets includes a 25 MW waste to energy plant to come online by 2015. Frost & Sullivan expects demand for water in Bahrain to grow from approximately 437.2 million m’ per day in 2014 to 497.9 million m’ per day in 2018. The nation’s water needs are met by its existing 5 water plants. As of 2014, the Government of Bahrain has not announced any new water plant projects for the forecast period. However, opportunities for private players still exist in the form of buying into or increasing their shareholding in existing water plants. 4.5.3 Saudi Arabia 4.5.3.1 Industry Structure Fuel sources such as natural gas and oil belong to the Ministry of Petroleum and Mineral Resources which supplies the necessary fuel sources to Saudi Eiectricity Company (“SEC”) whereby SEC is the sole generator, transmitter and distributor of electricity in Saudi. The Ministry of Water and Electricity Saudi Arabia (“MWE”) is responsible for establishing policies and plans for the electricity and water industry whereas the Electricity and Cogeneration Regulatory Authority of Saudi Arabia (“ECRA”) is responsible for regulating the industry and the 64  www.mew.qav.bh. Website accessed on 20 March 2015  http://wvv\.v.mew.gov.bh/default.asp?action=category&id=65  65  BEWA. Website accesed on 20 March 2015 http://www.mew.qov.bh/default.asp?actiolv=categorv&id=65
I 8. INDUSTRY OVERVIEW (Cont’d) issuance of licences to any person involved in the industry. Currently SEC is responsible for the tendering and procurement of IPPs. The water production industry falls under the jurisdiction of the MWE as well. On the other hand, the Water and Energy Company was established as a limited liability company with the objective of being the offtaker for all electricity and desalinated water produced by IWPPs. 4.5.3.2 Electricity Consumption Trends Total electricity consumption in Saudi Arabia reached 256,688 GWh in 2013. The residential segment consumed 49.0% of total electricity in Saudi Arabia. Similar to most GCC countries, air conditioning accounted for almost 80% of residential electricity consumption due to the harsh weather conditions. Meanwhile, the industrial segment used approximately 19.9%. This was followed by the commercial segment at 15.4% while others, which include the agriculture and hospital segments, accounted for approximately 15.8% of total electricity consumption in Saudi Arabia. Total electricity consumption in Saudi Arabia increased at a CAGR of 7.2% from 181,098 GWh in 2008 to 256,688 GWh in 2013 on the back of higher electricity consumption from the commercial (CAGR 13.1 %), industrial (CAGR 9.5%), residential (CAGR 5.4%) and other segments (CAGR of 5.7%). Electricity consumption per capita has also been on an upward trend, increasing from 7,019 kWh in 2008 to 8,556 kWh in 2013 at a CAGR of 4.0% driven by strong demand from the commercial and industrial segments. Frost & Sullivan estimates that electricity consumption will increase at a CAGR of 6.3% between 2014 and 2018. This growth is driven by the expanding population, higher electricity consumption per capita and urbanisation in Saudi Arabia. Consumption from the residential sector is expected to remain as the biggest consumer sector comprising more than 44.0% of total electricity consumption in 2018. Meanwhile, industrial consumption is expected to increase to 75,578 GWh in 2018 and account for approximately 21.7% of the total consumption whereas consumption by the commercial sector is foreseen to constitute approximately 68,579 GWh or 19.7% of total electricity consumption.
….. 20_0…8__.. 181,098 nla ______2°_°9_… 193,472 6.8 2010 212,263 9.7 ._2_01…1……__1-___ 219,661 3.5 …. ~oJL.. _.. ..__~<\0,2~8..__ _ ll.:.L 2013 256,688 __~6~.8—__i i-_—-;2″‘0-;-14″”F……………………………………… 272,800 6.3 __2Q_15….F_._ 289,800 6.2 2016F 308,000 6.3 __ … _20}2E: ……. 327,200 6.2 2018F 347,700 6.3 CAGR 2008-2013: 7.2% -…-…———-“‘CA”O’G~R=”‘:20~14·F-2018F: 6.”3%’…··—-·

_

 

Source: AUPTDE and Frost & Sullivan 4.5.3.3 Electricity Supply Trends The installed energy generation capacity in Saudi Arabia increased from 39,242 MW in 2008 to 58,462 MW in 2013 at a CAGR of 8.3% on the back of capacity additions from the combined cycle power plants (CAGR of 21.7%) and diesel power plants (CAGR of 17.6%) for the past 5 years. The country is also connected to the GCC Power Grid. 8. INDUSTRY OVERVIEW (Cont’d) Table 4:15: Installed Energy Generation Capacity (MW) by Sources in Saudi Arabia, 2008 to 2013 II Combined II I’ Year I Diesel Cycle I Gas I Steam Others I Total 1-_2008 877 2,371 !?”915 12,7~ 4,2ij.’l…,).. 39,242 I 2009 1,127_–!_-,2~,3=,6″,9′—I_~2,”,2,-,3~8~9_ ,_~,7fl5…_1_-‘5:cc,9″‘0~-.. _,.44,582 1_–oc20:c:1c:;0_-+’_-o1,-:,1c:;0~72,300 24,495 12″.7!1!L_. _.3441 __ … 49,138. i 2011 1,415 2,299 _25,281 –1,.-;;1*3,,*98::;;6o_+-~8 ..~,149r’ 2012 -+—:1:-‘,7″2~7c–+-2″‘,~33;;c1;–t 26,327 13,986 ._9_,~_7_ ..1… 53,588 1-r-_-_-i~~~~~3″‘R-c:cd_–“‘miic….–+–‘==…….. 1-r-.J4,68§. 1_1,g_49_.~-58,_46_.2_…….–1·—1’-‘,9”:’6~9 __(2008@1~) 2.8% 20.9% I 8~ Source: AUPTOE and Frost & Sullivan The capacity to generate electricity in Saudi Arabia is expected to expand further in order to meet the increasing electricity demand. In 2011, the SEC announced a series of new IPPs with a total installed capacity of 12,260 MW to be built until 2021 to meet total electricity demand. Table 4:16: Selected Tar eted Installed Capacity Pro’ects in Saudi Arabia, 2014-2018
4.5.3.4 Water Consumption Trends Total water consumption in Saudi Arabia was estimated to be 47.4 million m3 per day in 2013, 3declining from’ 58.8 million m per day in 2008. The agriculture sector accounted for approximately 81.3% of the total water consumption or 38.6 million m3 per day. This is largely due to the Government of Saudi Arabia’s plan to achieve self·sufficiency in the country’s food production. Meanwhile the municipal sector made up approximately 13.7% of the total consumption, which was equivalent to 6.5 million m3 of desalinated water per day. The industrial sector consumed an estimated 2.4 million m3 of desalinated water in a day which accounted for 5.0% of the total consumption. Saudi Arabia’s municipal water consumption per capita decreased slightly at a CAGR of 0.04% from an estimated 2171 litres per day in 2008 to 216.7 Iitres per day in 2013.
66 W\rVW.se.com.sa. Website accessed on 20 March 2015 http://www.58.com.sa/SEC/Enqlish/Menu/Partners/IPP+Pragram/Prajects.htm 61 http://www.swcc.gov.sa/defaultasp?pia.:::68. Website accessed on 20 March 2015
8. INDUSTRY OVERVIEW (Cont’d) CAGR 2008·2013: -4.2%
8. INDUSTRY OVERVIEW (Cont’d) 4,5,3.6 Competitive Landscape 4.5.3.6.1 Profile of IPP/IWP/IWPP Players Yanbu Phase 2 Expansion MED Seawater Desalination Plant became operational in December 2012 producing 68,190 m’/day of water and 690 MW of electricity. The facility is owned by Power and Water Utility Company for Jubail and Yanbu (“MARAFIQ”). Table 4:20: Profile of Selected Companies with Interests in IWPs and IWPPs based on
Nas;onal Berhad) Source: Malakoff’s Annual Report 2013, Water and Electricity Compan,r, of Saudi Arabia (“WEC’)”, ACWA Power g, MARAFIQ70, and Frost & Sullivan Table 4:21: Profile of Selected Companies with Interests in IPPs based on Power Plant I tailed C • ‘t (MW)’ S d’ Arabia 2013 E uit • 2013qY ~ __ __ ~ –~~_~ ~ -~ , Stake , Effective capacity based on No I I Power Plants I (%) l Installed CapacitY (MW) I equitY stake (MW)
66 WEC 2013. Websites accessed on 20 March 2015. hUp:llwww.wec.com.sa/PageContentDetails.aspx?menuld=13 69 ACWA Power 2013. Website accessed on 20 March 2015 hUp:llwww.acwapower.com/projectl3/jubail-water-and­power-company.html 70 MARAFIQ 2013. Website accessed on 20 March 2015 http://WWIN.marafiq.com.sa/en/proj/proL3.aspx. 8. INDUSTRY OVERVIEW (Cont’d) 1 Equity !-__ 2013 ——–_.–­I ! Stake I I Effective capacity based on No i Power Plants i (%) f Installed Capacity (MW) i equity stake (MW)
owned 30% by ACWA Power and the remaining 30% by Malaysian consortium (TNB, Malakoff and Khazanah Nasional Berhad) Source: SEC, MEED, Company Websites and Frost &Sullivan 4.5.3.6.2 Market Share by Installed Generation Capacity The installed energy generation capacity in Saudi Arabia was recorded at 58,462 MW in 2013. The top 5 players with the highest effective installed generation capacity were Suez Consortium (2.8%), MARAFIQ JV (1.9%), Saudi Aramco (1.8%) and PIF (1.0%) and SAMAWEC (0.9%). SAMAWEC is a consortium of Malaysian and Saudi Arabian companies, where the Malaysian consortium comprises Khazanah Nasional Berhad, Malakoff and TNB. Chart 4:4: Market Share (%) of Selected Companies with Interests in IPPs and IWPPs based on Effective Capacity in Saudi Arabia (by Power Plant Installed Capacity), 2013
MARAFIQ JV, 1.9% Suez Consortium, 2.8% Saudi Aramco, Others, 91.6% 1.8% R—-__PIF,1.0% SAMAWEC, 0.9% ACWA Consortium, 1.6% 8. INDUSTRY OVERVIEW (Cont’d) Source: SEC”, MEED, Company Websites and Frost & Sullivan 4.5.3.6.3 Market Share by Water Production Plant Design Capacity The total design capacity for water production plant in Saudi Arabia was 5.4 million m3 per day in 2013. The top 5 players with the highest effective generation capacity were SWCC (54.0%), SAMAWEC (11.4%), Suez Consortium (8.9%), PIF (7.4%) and MARAFIQ JV (7.2%). Chart 4:5: Market Share (%) of Selected Companies with Interests in IPPs and IWPPs based on Effective Capacity in Saudi Arabia (by Water Production Plant Design Capacity), 2013 MARAFIQJV 7.2%. PIF 7.4%

swccSuez Consortium 54.0%8.9% SAMAWEC 11.4% Source: Malakoffs Annual Report 2013, WEC”, ACWA Powel3, MARAFIQ”, and Frost & Sullivan Malakoff’s plants, namely the Shuaibah Phase 3 IWPP and Shuaibah 3 Expansion IWP, marked a total design capacity of 1,030,000 m3 per day, and accounted for a collective market share of 10.1% (Shuaibah Phase 3 IWPP, 8.6%, and Shuaibah 3 Expansion IWP, 1.5%) of the gross plant design capacity in Saudi Arabia. As at December 2013, Shuaibah Phase 3 IWPP and Shuaibah 3 Expansion IWP collectively formed the largest independent water project in the MENA region. 4.5.3.7 Industry Outlook and Prospects Frost & Sullivan forecasts the demand for electricity in Saudi Arabia to increase from 272,800 GWh in 2014 to 347,700 GWh in 2018. The country is already executing a USD80 billion expansion plan for power projects through the Kingdom’s Ninth Development Plan (2010 -2014), which aims to increase installed capacity by an additional 20.4 GWh by 2014. In 2013, the SEC asserted that the country will need USD80 billion in investments to expand the country’s electricity generation to meet the growing demand, thereby necessitating the SEC to produce an additional 30,000 MW. The generation capacity in Saudi Arabia is likely to expand to 120 GW by 2032, as an enormous power augmentation programme by the government to meet increasing demand. This translates to opportunities to public and private players to expand the electricity infrastructure in Saudi Arabia to support the country’s increasing demand for electricity. As a result of its policy of food independence, Saudi Arabia’s agricuitural sector has dominated the demand for water in the country. The unsustainable high level of water usage has forced the Government of Saudi Arabia to turnaround its policy and gradually begin to reduce the amount of water intake by the agriculture sector. Further the liberalisation and privatisation of the economy will continue to present enormous opportunities in the water sector. At the same time 71 www.wec.com.sa. Website accessed on 20 March 2015 http://www.wee.com.sa/PageContentDetails.aspx?men uld-13 72 WEe 2013. Websites accessed on 20 March 2015. http://www.wec.com.safitems.aspx?catld=17 73 ACWA Power 2013. Website accessed on 20 March 2015 http://www,acwapower-com/projectl3Jjubail-water·and· Dower-company.html 74 MARAFIQ 2013. Website accessed on 20 March 2015 hUp:llwww.marafiq.com.sa/en/proj/proL3.aspx. Company No.: 731568-V 8. INDUSTRY OVERVIEW (Cont’d) government revenues assimilated from the rich oil production and exports can inadvertently be also diverted towards this sector. Select goals from the Ninth Development Plan include increasing the storage capacity of dams and that of desalination plants. As such, Frost & Sullivan estimates the demand for water in Saudi Arabia to remain stagnant from approximately 47.0 million m3 per day in 2014 to 47.2 million m3 per day in 2018, due to the above rebalancing methods of the Government of Saudi Arabia. 4.5.4 Oman 4.5.4.1 Industry Structure The electricity supply industry in Oman is heavily dependent on fuel sources such as natural gas and oil. These fuel sources belong to the Ministry of Oil and Gas, which supplies the necessary fuel sources to the Electricity Holding Company SAOC (“EHC”). EHC is a government-owned company that holds shares in electricity companies, thereby controlling the electricity generation, transmission and distribution processes in Oman. The Oman Power and Water Procurement Company (“OPWP”) is the single buyer of power and water for all IPP or IWPP projects within Oman. 4.5.4.2 Electricity Consumption Trends Oman has one of the fastest-growing electricity supply industries in the MENA region. Between 2008 and 2013, electricity consumption in Oman increased from 12,850 GWh in 2008 to 22,791 GWh in 2013 recording a CAGR of 12.7%. This growth was mainly driven by the strong CAGR of 8.9% from the residential sector, which accounted for more than half of the total electricity demand in Oman. Meanwhile, the commercial sector, the second largest consumer, consumed 4,527 GWh of electricity in 2013, up ataCAGR of 12.4% from 2008. The industrial seCtor, which accounted for 16.1 % of the totai electricity consumption, grew from a low base of 983 GWh in 2008 to 3,686 GWh in 2013 ataCAGR of 30.3%. Between 2008 and 2013, the electricity consumption per capita increased from 4,589 kWh to 6,331 kWh at a CAGR of 6.6%. This increment in per capita consumption of electricity reflected the upward trend of Oman’s GDP per capita during the same period. Frost & Sullivan anticipates that Oman’s electricity consumption will increase from 25,397 GWh in 2014 to 37,573 GWh in 2018 ata CAGR of 10.3%. This high forecast grow1h in Oman is attributed to the growing population, increased income per capita and its oil-production activities. Table 4:22: Electricity Consumption (GWh in Oman, 2008-2018F Year •• 12,850 nla i 14,482 12.7 ._­16,133 8.5 18,512 12.5 … .._._­2008 2009 2015F1–_—-:201 0201120122014F
.._–_….._._-+–,”._—­-20,958 10.4 ~~—+—–_. ._…2013__._._-_..-. —.. 22,7.9~ ____..___ ._…_ 19.8 ~-,~,——-­.._,.. 25,397 11.4-I 28,509 12.3 —I—–~~m=~–T=-·······~l:~g~ ..——….l===~-__To.~—–.i ——-1618£_…_j ·.__.37,573_ ..:::t====::Jl:o__ .-i CAGR 2008-2013: 12.1% ;==::=:::===:…:… . CAGR 2014-2Q_1.!l!’:jOj–… . ] Source: Oman Statistical Yearbook 2008 fo 2013, 7 Year Statement (2014 –2020) published by OPWP and Frost & SuI/ivan 8. INDUSTRY OVERVIEW (Cont’d) 4.5.4.3 Electricity Supply Trends The installed capacity in Oman witnessed an upward trend between 2008 and 2013, increasing from 4,006 MW to 4,938 MW. Grow1h in installed capacity was low during the 2009 to 2010 period as a result of lower investments for infrastructure projects due to the then financial crisis. Due to the availability of natural gas as a by-product from its heavy oil-production activities, this nation is largely dependent on natural gas to fuel power generation. Table 4:23: Installed Energy Generation Capacity (MW) by Sources in Oman, 2008 to 2013 i. Combined ‘iI DIesel C I Gas: Steam I Others TotalYear I yce iI 2008  364  1,036  2,502  104  2009  364  1,036  2,502  104  2010  364  1,036  2,502  104  2011  300  1,690  1,845  105  2012  300  1,690  2,843  105 105 2013  300  1,690  2,843  9AG.R’ (2P.08*~013)  .3.~;~ <i  10.3%<!!~  ~;;«<:I’~%  0.2% –
-1-. –710· –
…._._­-
~~~!a_
.not consIdered In the Total as per AUPTDE Source: AUPTDE and Frost & Sullivan 4.5.4.4 Water Consumption Trends Total water consumption in Oman was estimated to be at 3.8 million m3 per day in 2013, a CAGR increase of 0.5% from 3.7 million m3 per day in 2008. The agriculture sector accounted for approximately 84.2% of total water consumption or 3.2 million m3 of water per day due to the Government of Oman’s initiatives to encourage grow1h of the agriculture industry in the country. Meanwhile the residential sector made up 13.2% of the total consumption, which was equivalent 3to 0.5 million m of desalinated water per day. The increase in residential water demand was mainly caused by the growing popUlation. The industrial sector consumed approximately 0.1 million m3 of desalinated water per day which only accounted for 2.6% of the total consumption. Oman’s domestic water consumption per capita decreased at a CAGR of 0.6% from an estimated 142.9 litres in 2008 to 138.9 litres in 2013. Overall, total water consumption in Oman is slightly higher than that in Bahrain, due to the Government of Oman’s initiatives and support to encourage more agricultural activities in the country.
Table 4:24: Water Consumption (million m er da ___-o:2″‘0::c0–.-_-t . ~2….________1_ . ._~ _ 083 r-“,,-,­2009 …-.-.—, -‘” -, ­2010 3.7 . …._..__0.00/”-. .. 1—__–720:::-1:.01:-__+ -‘:’3″‘.7____ 0.0%. 1-“‘——“–‘-“c’2~”0~”~~~F -+ ._….. -ii—-=_:_.. ··–~–~~==~~i~-­_ …_2..9!!if: -+. ._3_.9_. ._____ ,~,6~ .—··~~f~–~.~ …. +.~,~~.­r” 2018F 4.0 ..-_.~————: …. ·~-·2·:·6070—-·­”1———-…–‘——-‘ … –ICAGR 2008-2013:'():5%··——· !. -=========.-CAGR 2014F-2018F: {:lo/.-,—-====__=-=-=—==J Source: FAG AQUASTAT”, World Bank and Frost & Sullivan 75 FAO AQUASTAT. Online database accessed on 20 March 2015 8. INDUSTRY OVERVIEW (Cont’d) Between 2014 and 2018, Frost & Sullivan forecasts total water consumption in Oman to grow at a CAGR of 1.3%. Water demand from the agricultural sector is expected to remain as the highest among all the three user segments in 2018 and account for 3.2 million m3 water per day or 80.3% of the total consumption. Consumption from the residential and industrial segments are forecast to reach 0.7 million m3 per day and 0.1 million m3 per day respectively (18.4% and 1.3% respectively of the total water consumption). 4.5.4.5 Water Supply Trends Total water production plant capacity in Oman increased from 0.8 million m3 per day in 2008 to 1.2 million m3 per day in 2013 at a CAGR of 8.4%. Table 4:25: Total Water Production Plant Design Capacity (million m’ per day) in Oman, 2008-2013 Year I Water Production Plant Design Capacity (million rn’ per day) _. ~2~00~8~. .. .._._.. 0.8 .———–1 2009 0.9 …_._—_._.._._._—­2010 ..__.1″.’C-1 –I!–2011 _. .. ..__…—.1J —-j I CAGR~~J;7-2.~_J__.. …. ._ 8~4t”_____’___”‘___” 3 Note 1: water production capacity refers to water desalination capacity. Source: FAD AQUASTA-r6 The total water production plant design capacity in Oman is expected to expand further in order to meet increasing water demand. OPWP and ACWA Power Barka have signed a Water Purchase Agreement for the expansion of the latter’s existing Barka-2 IWPP water production capacity br 45,460 m’ per day. This expansion project has commenced commercial operation in May 2014 ‘. SUbsequently in November 2014, ACWA Power was awarded another expansion project by OPWP for the phase 2 expansion of Barka IWP with a capacity of 57,000 m3 per day and is expected to be commissioned in October 2015. Meanwhile, the Indian water-technology company VA Tech Wabag Limited won a contract in May 2012 for the expansion of the water production plant at the Sohar Industrial Port complex. The expansion will increase total capacity of the plant to 20,000 m’ per day with completion expected by mid-2013. In 2012, Malakoff, together with consortium members comprising Japan’s Sumitomo and Spain’s Cadagua SA, won a bid for the development and construction of the AI Ghubrah IWP in Muscat, Oman with a water prOduction capacity of 191,000 m3 per day. The plant is expected to operate commercially by 2015.
Table 4:26: Targeted Additional Installed Capacity (m’ per da AI Ghubrah IWP 1.191,.000 2015 __~~~vg~~:2″‘-~~~[_~-:”= J.ig~~ . …… ·i-:”:”:”~~.~=-= j.9urrayat IW’=-__…. ._L…… 200.000 I ._.~.ll.11.._. _ ~.”®’q IWP _L _._ l?§.QQQ.-=-I:..:..–20!.~ _ Note: Water production capacity refers to water desalination capacity. Source: 7 Year Statement (2014 -2020) published by DPWP and Frost & Sullivan 76 FAO AQUASTAT. Online database accessed on 20 March 2015 77 BNC website, retrieved from https:I!\oVINW.bncnetwork.netlNews/ACWA_Power_awarded_water_expa nsion_project_at_Barka_in_Oman-lHK1qY zOJ—e4= 8. INDUSTRY OVERVIEW (Cont’d) 4.5.4.6  Competitive Landscape  4.5.4.6.1  Profile of IPP/IWP/IWPP Players  Based on  pUblicly available information, the effective capacity of companies with interests in
IWPPs tabulated for the period of 2013 are as follows: Table 4:27: Profile of Selected Companies with Interests in IPPs based on Power Plant Installed Capacity (MW) in Oman, 20137• AC’WA Power International Barka AI Kamil Power Company AI Kamil PowerPlant
f——-‘—-‘-:..::.. SMN Power Holding SAOG 1 SMN Bar7k-a””P;-o-w””e~r a-n””dc;W=-a:-te-r·P”‘la-n:7t–~==~~~-..,-~=”‘:’2-:,-­
r—ic—A-IR-u-sail Power Plant2f—–.-L—–­S-ohar Power Company SAOG __~ __~I_~~har P!?~~and Water Plant-. ~_ ____’5″’90”–__ _U-ni~-ed-P_O~1b~~\Ve~lant 270 …. _~ Wad’ AI Jizzi Power Company 1 TAl Jizzi ~~~er Plant 245 _’::~~~’~~.j.. Sembcoi’p,’Salalah O&M Services Company’ (Sembc6fp)s~lilti’ft)~V:r–7—‘-;C;==-···:····,·<k>”ii;<~”i:c>.> 1 Salalah IWPP , 445 Note 1: The Sembcorp Salalah -O&fV’f SelVices Company is a JV between Sembcorp U”t”‘ill’i’·tie:Cs~(7″O;;;%”‘o) and Oman Investment Corporation (30%) Source: EHCrg, MEED, Company Websites and Frost &Sullivan Table 4:28: Profile of Selected Companies with Interests in IWPs and IWPPs based on Water Production Plant Desi n Ca acit m’ er da in Oman, 2013
Source’MalakoffAnnualRepon2013, Suez-TractebelOperation andMaintenanceOman L.L.C.(STOMO;’o, ACWA Powel’, OPWPC” and Frost & Sullivan 18  OPWPC Annual Report 2013, pg.23,  http://www.omanpwp.com/PDFIOPWP%20Annual%20Report%202013%20eng.pdf  19  www.ehcoman.com.Websiteaccessedon20March2015htlp:l/.NW.W.ehcoman.com/businesses.aspx#  80  STOMO 2011. Website accessed on 20 March 2015, http://www.stomo.com.om/aboutus.html
Company No.: 731568-V 8. INDUSTRY OVERVIEW (Cont’d) 4.5.4.7 Industry Outlook and Prospects Frost & Sullivan projects the demand for electricity in Oman to grow from 25,397 GWh in 2014 to 37,573 GWh in 2018 at a CAGR of 10.3%. A growing population with a corresponding rising electricity demand is leading Oman to Invest heavily in its electrical infrastructure, with the country in the process of preparing tenders for new power plants in Dhofar and Salalah in a bid to boost the country’s generating capacity by 2,000 MW to 5,000 MW. This translates to opportunities for public and private players to expand their electricity infrastructure in Oman to support the country’s increasing demand for electricity. A growing economy has brought an increase in urbanization with a corresponding demand for high levels of service and quality for water supplies. Frost & Sullivan projects the demand for water in Oman to grow from 3.8 million m 3 per day in 2014 to 4.0 million m3 per day in 2018 driven by growing population and agricultural activities which is encouraged by the Government of Oman to reduce the country’s dependence on oil exports. Hence, investments in new water infrastructure are crucial to cater for the increasing water needs of the country. This could lead to opportunities for all players including public or private players in the water production market in Oman. PROSPECTS AND OUTLOOK FOR MALAKOFF As of 20 March 2015, Malakoff was the largest IPP in terms of effective power generation capacity installed in SEA with an effective capacity of 6,035.6 MW. In the same period, Malakoff was also the largest company with interests in IPPs in Malaysia in terms of installed capacity, with a gross installed capacity of 7,249.4 MW and an effective installed capacity of approximately 5,346.0 MW via its interests in five subsidiaries and one associate company. Meanwhile in the MENA region, Malakoff has a portfolio of power and water assets with a total net power generation capacity of 480 MW and net water production capacity of 358,850 m3 per day. In Australia, Malakoff is also a major player in the wind energy generation sector with an effective installed capacity of 210 MW. Electricity consumption in Malaysia is forecasted by Frost & Sullivan to grow at a CAGR of 9.7%, from 126,565 GWh in 2014 to 183,310 GWh in 2018. The projected growth of the electricity supply industry is expected to be driven by the Government of Malaysia’s initiatives to drive the economic growth in Malaysia and the increasing usage of electrical and electronic consumer products. In light of the increasing demand for electricity, the Government of Malaysia intends to increase the contribution of renewable energy from 41.5 MW in 2009 to 2,080 MW in 2020, or 11.0% of the nation’s total electricity generation mix. Frost & Sullivan also notes that coal will be gaining advantage over natural gas as the preferred source for electricity generation in Malaysia over the short to medium term. Electricity supply industry in Australia is also likely to experience a steady growth in line with the growth in population, economy and industrial development, as well as the Australian Government’s focus in expanding the country’s power generation capacity. Frost & Sullivan expects wind power generation to grow at a CAGR of approximately 25.5% over 2012-2013 and 2019-2020. Large scale wind energy generation is the most favourable form of renewable power source with about 2,220 MW installed capacity projects announced up to 2019 in Australia mostly in the region of South Australia. Malakoffs 50% ownership of the Macarthur Wind Farm, which is the largest wind farm in the Southern Hemisphere as of 20 March 2015, bodes well with the favourable market environment for wind energy generation in Australia. 61  ACWA  Power  2014,  Our  Investments  Overview.  Website  accessed  on  20  March  2015  http://www.acwapower.com/our~investments.html  B2  OPWPC Annual Report 2012, pg. 15-17. http://www.omanpwp.com/PDF/01~AR-2012-0man%20Power-eng.pdf
8. INDUSTRY OVERVIEW (Cont’d) Additionally, the electricity supply industry in the MENA region is projected to grow at a CAGR of 9.4% from 826,340 GWh in 2014 to 1,184,118 GWh in 2018. Meanwhile, Frost & Sullivan anticipates that water consumption will further increase at a CAGR of 2.1 % to reach 860.5 million m’ per day in 2018. In order to cater for the increase in electricity demand in Algeria, the MEM has announced in 2012 its plans to allocate nearly USD30 billion for the production of 1,200 MW per year by 2020 to meet the growing demand for electricity. The Algerian government also introduced an emergency programme to add 8,400 MW in new capacity between 2015 and 2017. Meanwhile, the Government of Bahrain plans to increase the country’s installed capacity by another 2,400 MW in the next few years. The Government of Saudi Arabia is already executing a USD80 billion expansion plan for power projects and aims to increase its installed capacity by an additional 20.4 GWh by the end of 2014. On the other hand, demand for water in Saudi Arabia is expected to be driven by its growing population and the new Economic Cities Programme. The Government of Oman has been executing plans for power projects to increase the installed capacity by 2,000 to 5,000 MW over the medium term. Additionally, the Government of Oman is also looking to expand its nation’s water production capacity to meet its increased demand for water. The rising demand for electricity and water driven by increasing an population, increasing consumption per capita and economic growth, coupled with various supporting government initiatives to facilitate the growth in these countries are viewed as possible sources of growth for Malakoff in these nations and regionally. [The rest of this page is intentionally left blank]

 

 

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