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Strictly Private & Confidential No:

TNB NORTHERN ENERGY BERHAD


(Company No. 1024796-X)

INFORMATION MEMORANDUM

PROPOSED ISSUE OF, OFFER FOR SUBSCRIPTION OR


PURCHASE OF, OR INVITATION TO SUBSCRIBE FOR OR
PURCHASE OF SUKUK BASED ON THE SHARIAH PRINCIPLES OF
IJARAH AND WAKALAH (“SUKUK TNB NE”) OF UP TO RM2.0
BILLION IN NOMINAL VALUE

Joint Principal Advisers, Joint Lead Arrangers and Joint Lead Managers

HSBC Amanah Malaysia Berhad KAF Investment Bank Berhad


(Company No: 807705-X) (Company No: 20657-W)

This Information Memorandum is dated 15 April 2013


TNB Northern Energy Berhad Information Memorandum

RESPONSIBILITY STATEMENT

This Information Memorandum has been approved by TNB Northern Energy Berhad (“TNB
NE” or the “Issuer”), TNB Prai Sdn Bhd (“TNB Prai” or the “Project Company”) and
Tenaga Nasional Berhad (“TNB” or the “Guarantor”) and TNB NE, TNB Prai and TNB
accept full responsibility for the accuracy of the information contained in this Information
Memorandum. To the best of the knowledge and belief of the Issuer, Project Company and
Guarantor (having taken all reasonable care to ensure that such is the case), the information
contained in this Information Memorandum is in accordance with the facts and does not omit
anything likely to affect the import of such information. The Issuer, Project Company and
Guarantor, having made all reasonable enquiries, confirm that this Information
Memorandum contains all information which is material in the context of the Islamic
securities based on the Shariah principles of Ijarah and Wakalah (“Sukuk TNB NE”) of up to
RM2.0 billion in nominal value, that the information contained in this Information
Memorandum is true and accurate in all material respects and is not misleading, that the
opinions and intentions expressed in this Information Memorandum are honestly held and
that there are no other facts the omission of which would make this Information
Memorandum or any of such information or the expression of any such opinions or
intentions misleading.

E-DISCLAIMER

This Information Memorandum may be sent to you in an electronic form. Distribution of the
Information Memorandum to any persons, other than the person receiving the electronic
transmission from the Issuer, the Joint Principal Advisers, the Joint Lead Arrangers, the Joint
Lead Managers and their respective agents and any person retained to advise the person
receiving the electronic transmission with respect thereto, is unauthorised. The person
receiving the electronic transmission from the Issuer, the Joint Principal Advisers, the Joint
Lead Arrangers, and the Joint Lead Managers or their respective agents is prohibited from
disclosing the Information Memorandum, altering the contents of the Information
Memorandum or forwarding a copy of the Information Memorandum or any portion thereof
by electronic mail or otherwise to any person. By opening and accepting this electronic
transmission of the Information Memorandum, the recipient agrees to the foregoing.

Transmission over the internet may be subject to interruptions, transmission blackout,


delayed transmission due to internet traffic, incorrect data transmission due to the public
nature of the internet, data corruption, interception, unauthorised amendment, tampering,
viruses or other technical, mechanical or systemic risks associated with internet
transmissions. The Issuer, the Joint Principal Advisers, the Joint Lead Arrangers, and the
Joint Lead Managers or their respective agents have not accepted and will not accept any
responsibility and/or liability for any such interruption, transmission blackout, delayed
transmission, incorrect data transmission, corruption, interception, amendment, tampering or
viruses or any consequences thereof.

The electronic transmission of the Information Memorandum is intended only for use by the
addressee name in the email and may contain legally privileged and/or confidential
information. If you are not the intended recipient of the e-mail, you are hereby notified that
any dissemination, distribution or copying of the email, and any attachments thereto, is
strictly prohibited. If you have received the email in error, please immediately notify by reply
email and permanently delete all copies of the e-mail and destroy all printouts of it.

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TNB Northern Energy Berhad Information Memorandum

IMPORTANT NOTICE AND GENERAL STATEMENT OF DISCLAIMER

This Information Memorandum may not be, in whole or in part, reproduced or used for any
other purpose, or shown, given, copied to or filed with any other person including, without
limitation, any government or regulatory authority except with the prior written consent of the
Issuer or as required under Malaysian laws, regulations or guidelines.

The Joint Principal Advisers, the Joint Lead Arrangers and the Joint Lead Managers have
not separately verified the information or data contained herein. Accordingly, no
representation, warranty or undertaking, express or implied, is made and no responsibility or
liability is accepted by the Joint Principal Advisers, the Joint Lead Arrangers and the Joint
Lead Managers or their respective affiliates as to the authenticity, origin, validity, accuracy or
completeness of the information or data contained in this Information Memorandum or any
other information provided by the Issuer in connection with the Sukuk TNB NE or the
distribution of this Information Memorandum.

The Joint Principal Advisers, the Joint Lead Arrangers and the Joint Lead Managers do not
accept any responsibility for the contents of this Information Memorandum or for any other
statement, made or purported to be made by the Joint Principal Advisers, the Joint Lead
Arrangers and the Joint Lead Managers or on their behalf in connection with the Issuer, TNB
Prai and TNB or the issue and offering of the Sukuk TNB NE. The Joint Principal Advisers,
the Joint Lead Arrangers and the Joint Lead Managers accordingly disclaim all and any
liability whether arising in tort or contract or otherwise (save as referred to the above) which
they might otherwise have in respect of this Information Memorandum or any such
statement. No representation, warranty or undertaking, express or implied, is given or
assumed by the Joint Principal Advisers, the Joint Lead Arrangers and the Joint Lead
Managers as to the authenticity, origin, validity, accuracy or completeness of such
information and data or that the information or data remains unchanged in any respect after
the relevant date shown in this Information Memorandum.

This Information Memorandum has not been and will not be made to comply with the laws of
any jurisdiction outside Malaysia (“Foreign Jurisdiction”), and has not been and will not be
lodged, registered or approved pursuant to or under any legislation of (or with or by any
regulatory authorities or other relevant bodies of) any Foreign Jurisdiction and it does not
constitute an offer of, or an invitation to subscribe for or purchase the Sukuk TNB NE or any
other securities of any kind by any party in any Foreign Jurisdiction. This Information
Memorandum is not and is not intended to be a prospectus. Unless otherwise specified in
this Information Memorandum, the information contained in this Information Memorandum is
correct as at the date hereof.

The distribution or possession of this Information Memorandum in Malaysia or in any Foreign


Jurisdiction may be restricted or prohibited by law. Each recipient is required by the Issuer,
the Joint Principal Advisers, the Joint Lead Arrangers and the Joint Lead Managers to seek
appropriate professional advice regarding, and to observe, any such restriction or
prohibition. None of the Issuer, the Joint Principal Advisers, the Joint Lead Arrangers and the
Joint Lead Managers accepts any responsibility or liability to any person in relation to the
distribution or possession of this Information Memorandum in Malaysia or in any Foreign
Jurisdiction.

By accepting delivery of this Information Memorandum, each recipient agrees to the terms
upon which this Information Memorandum is provided to such recipient as set out in this
Information Memorandum, and further agrees and confirms that: (a) it will keep confidential
all of such information and data, (b) it is lawful for the recipient to receive this Information
Memorandum and to subscribe for or purchase the Sukuk TNB NE under all jurisdictions to

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TNB Northern Energy Berhad Information Memorandum

which the recipient is subject, (c) the recipient will comply with all the applicable laws in
connection with such subscription or purchase of the Sukuk TNB NE, (d) the Issuer, the Joint
Principal Advisers, the Joint Lead Arrangers, the Joint Lead Managers and their respective
directors, officers, employees, agents and professional advisers are not and will not be in
breach of the laws of any jurisdiction to which the recipient is subject as a result of such
subscription or purchase of the Sukuk TNB NE and they shall not have any responsibility or
liability in the event that such subscription or purchase of the Sukuk TNB NE is or shall
become unlawful, unenforceable, voidable or void, (e) it is aware that the Sukuk TNB NE can
only be transferred or otherwise disposed of in accordance with the relevant selling
restrictions and all applicable laws, (f) it has sufficient knowledge and experience in financial
and business matters to be capable of evaluating the merits and risks of subscribing for or
purchasing the Sukuk TNB NE and is able and prepared to bear the economic and financial
risks of investing in or holding the Sukuk TNB NE, (g) it is a person to whom an issue, offer
or invitation to subscribe or purchase the Sukuk TNB NE would constitute an excluded offer
or excluded issue as specified in Schedule 6 or Section 229(1)(b), and Schedule 7 or
Section 230(1)(b) read together with Schedule 9 or Section 257(3) of the Capital Markets
and Services Act 2007 (“CMSA”) (as amended from time to time) at issuance, and Schedule
6 or Section 229(1)(b) read together with Schedule 9 or Section 257(3) of the CMSA
thereafter.

This Information Memorandum is not intended to provide the basis of any credit or other
evaluation and should not be considered as a recommendation by the Issuer, the Joint
Principal Advisers, the Joint Lead Arrangers and the Joint Lead Managers that any recipient
of this Information Memorandum should purchase any of the Sukuk TNB NE. Each investor
contemplating purchasing any of the Sukuk TNB NE should make its own independent
investigation of the financial condition and affairs, and its own appraisal of the
creditworthiness, of the Issuer and the terms of the offering of the Sukuk TNB NE, including
the merits and risks involved.

ACKNOWLEDGMENT

The Issuer hereby acknowledges and authorises HSBC Amanah Malaysia Berhad
(Company No. 807705-X) and KAF Investment Bank Berhad (Company No. 20657-W) as
Joint Principal Advisers (the “Joint Principal Advisers”), Joint Lead Arrangers (the “Joint
Lead Arrangers”) and Joint Lead Managers (the “Joint Lead Managers”) to distribute this
Information Memorandum on a confidential basis to potential investors for the sole purpose
of assisting such investors to decide whether to subscribe for or purchase any Sukuk TNB
NE. At the point of issuance of the Sukuk TNB NE, the Sukuk TNB NE may not be offered,
sold or delivered, directly or indirectly, nor may any document or other material in connection
therewith be distributed in Malaysia other than to persons falling within any one of the
categories of persons specified in Schedule 6 (or Section 229(1)(b)) or Schedule 7 (or
Section 230(1)(b)) read together with Schedule 9 (or Section 257(3)) of the CMSA.

STATEMENTS OF DISCLAIMER – SECURITIES COMMISSION

In accordance with the CMSA, a copy of this Information Memorandum will be


deposited with the Securities Commission, which takes no responsibility for its
contents.

The issue, offer or invitation in relation to the Sukuk TNB NE in this Information
Memorandum is subject to the fulfilment of various conditions precedent including without
limitation the approval from the Securities Commission and each recipient of this Information

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TNB Northern Energy Berhad Information Memorandum

Memorandum acknowledges and agrees that the approval of the Securities Commission
shall not be taken to indicate that the Securities Commission recommends the subscription
or purchase of the Sukuk TNB NE.

The Securities Commission shall not be liable for any non-disclosure on the part of the
Issuer and assumes no responsibility for the correctness of any statements made or
opinions or reports expressed in this Information Memorandum.

FORWARD LOOKING STATEMENT

Certain statements in this Information Memorandum are based on historical data, which may
not be reflective of future results, and others are forward-looking in nature, which are subject
to uncertainties and contingencies. All forward-looking statements are based on estimates
and assumptions made by the Issuer, Project Company and Guarantor. Although the Board
of Directors of the Issuer and the Project Company believe that these forward-looking
statements are reasonable, the statements are nevertheless subject to known and unknown
risks, uncertainties and other factors which may cause the actual results, performance or
achievements to differ materially from the future results, performance or achievements
expressed or implied in such forward-looking statements. In light of these and other
uncertainties, the inclusion of forward-looking statements in this Information Memorandum
should not be regarded as a representation or warranty by the Issuer or the Project
Company or its advisers or the Joint Lead Arrangers/ Joint Lead Managers that the plans
and objectives of the Issuer will be achieved.

(The rest of this page has been intentionally left blank)

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TNB Northern Energy Berhad Information Memorandum

CONFIDENTIALITY

To the recipient of this Information Memorandum

This Information Memorandum and its contents are strictly confidential and the information
herein contained is given to the recipient strictly on the basis that the recipient shall ensure
the same remains confidential. Accordingly, this Information Memorandum and its contents,
or any information, which is made available to the recipient in connection with any further
enquiries, must be held in complete confidence.

This Information Memorandum is submitted to selected persons specifically in reference to


the Sukuk TNB NE and may not be reproduced or used, in whole or in part, for any purpose,
nor furnished to any person other than those to whom copies have been sent by the Joint
Principal Advisers, Joint Lead Arrangers and the Joint Lead Managers.

In the event that there is any contravention of this confidentiality undertaking or there is
reasonable likelihood that this confidentiality undertaking may be contravened, each of the
Issuer, the Joint Principal Advisers, the Joint Lead Arrangers and the Joint Lead Managers
may, at its discretion, apply for any remedy available to the Issuer or the Joint Principal
Advisers, the Joint Lead Arrangers and/or the Joint Lead Managers (as the case maybe)
whether at law or equity, including without limitation, injunctions. Each of the Issuer and the
Joint Principal Advisers, the Joint Lead Arrangers and the Joint Lead Managers is entitled to
fully recover from the contravening party all costs, expenses and losses incurred and/or
suffered, in this regard. For the avoidance of doubt, it is hereby deemed that this
confidentiality undertaking shall be imposed upon the recipient, the recipient’s professional
advisers, directors, employees and any other persons who may receive this Information
Memorandum (or any part of it) from the recipient.

The recipient must return this Information Memorandum and all reproductions thereof
whether in whole or in part and any other information in connection therewith to the Joint
Principal Advisers, the Joint Lead Arrangers and the Joint Lead Managers promptly upon the
Joint Principal Advisers’, the Joint Lead Arrangers’, the Joint Lead Managers’ request,
unless that recipient provides proof of a written undertaking satisfactory to the Joint Principal
Advisers, the Joint Lead Arrangers and the Joint Lead Managers with respect to destroying
these documents as soon as reasonably practicable after the said request from the Joint
Principal Advisers, the Joint Lead Arrangers and the Joint Lead Managers.

INVESTORS SHOULD RELY ON THEIR OWN EVALUATION TO ASSESS THE MERITS AND
RISKS OF THE INVESTMENT. EACH SERIES OF THE SUKUK TNB NE WILL CARRY
DIFFERENT RISKS AND ALL POTENTIAL INVESTORS ARE STRONGLY ENCOURAGED TO
EVALUATE EACH SUKUK TNB NE SERIES ON ITS OWN MERIT.

IT IS RECOMMENDED THAT PROSPECTIVE INVESTORS CONSULT THEIR FINANCIAL, LEGAL


AND OTHER ADVISERS BEFORE PURCHASING OR ACQUIRING OR SUBSCRIBING FOR THE
SUKUK TNB NE.

v
TABLE OF CONTENTS
CLAUSE PAGE NO.

1 EXECUTIVE SUMMARY ........................................................................................... 6


1.1 Introduction................................................................................................................. 6
1.2 Issuer.......................................................................................................................... 6
1.3 Project Company ........................................................................................................ 6
1.4 Guarantor...... ............................................................................................................. 6
1.5 Project Background .................................................................................................... 6
1.6 Project Structure ........................................................................................................ 7
1.7 Key Project Documents.............................................................................................. 7
1.8 Description of Sukuk TNB NE .................................................................................... 7
1.8.1 Rating ....................................................................................................................... 10
1.8.2 Issue Amount ........................................................................................................... 10
1.8.3 Selling Restriction .................................................................................................... 10
2. INFORMATION ON THE ISSUER ........................................................................... 12
2.1 Incorporation ............................................................................................................ 12
2.2 Principal Activities .................................................................................................... 12
2.3 Share Capital............................................................................................................ 12
2.4 Shareholding Structure ............................................................................................ 13
2.5 Profile of Directors.................................................................................................... 13
3. INFORMATION ON THE PROJECT COMPANY .................................................... 16
3.1 Incorporation ............................................................................................................ 16
3.2. Principal Activities .................................................................................................... 16
3.3 Share Capital............................................................................................................ 16
3.4 Shareholding Structure ............................................................................................ 16
3.5 Profile of Directors.................................................................................................... 17
4. INFORMATION ON THE GUARANTOR ................................................................. 21
4.1 Incorporation ............................................................................................................ 21
4.2 Principal Activities .................................................................................................... 21
4.3 Share Capital............................................................................................................ 21
4.4 Shareholding Structure ............................................................................................ 22
4.5 Profile of Directors.................................................................................................... 25
4.6 Management Team .................................................................................................. 33
4.7 Business Overview of the Guarantor ....................................................................... 40
4.8 Key Financial Highlights of the Guarantor ............................................................... 41
5. INFORMATION ON THE PROJECT ....................................................................... 42
5.1 Technical Description ............................................................................................... 42
5.1.1 Plant Site and Layout ............................................................................................... 42
5.1.2 Plant Process and Technology ................................................................................ 44
5.1.3 Project Construction Schedule................................................................................. 45
5.2 Licensing Requirement ............................................................................................ 45
5.3 Project Economics ................................................................................................... 46
5.4 Project Structure ...................................................................................................... 47
5.5 Summary Of Key Project Documents ...................................................................... 48
5.5.1 Power Purchase Agreement .................................................................................... 48
5.5.1.1 Overview....... ........................................................................................................... 48
5.5.1.2 Conditions Precedent to Commence Generation of Electricity ............................... 48
5.5.1.3 Conditions Precedent to Commercial Operation ..................................................... 49
5.5.1.4 Sale and Purchase Obligations................................................................................ 50
5.5.1.5 Purchase Price and Other Charges ......................................................................... 50
5.5.1.6 Billing and Payment ................................................................................................. 51
5.5.1.7 Liquidated Damages ................................................................................................ 51
5.5.1.8 Performance Security............................................................................................... 52
5.5.1.9 Facility Construction and Start-up ............................................................................ 52
5.5.1.10 Representations and Warranties ............................................................................. 52
5.5.1.11 Insurance.................................................................................................................. 53
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CLAUSE PAGE NO.

5.5.1.12 Force Majeure .......................................................................................................... 53


5.5.1.13 Default and Termination ........................................................................................... 54
5.5.1.14 Termination Upon Event of Default .......................................................................... 56
5.5.1.15 Step-In Rights........................................................................................................... 56
5.5.1.16 Critical Milestones .................................................................................................... 57
5.5.1.17 Indemnification and Liability ..................................................................................... 57
5.5.1.18 Dispute Resolution and Arbitration .......................................................................... 57
5.5.1.19 Transfers and Assignment ....................................................................................... 58
5.5.1.20 Governing Law ......................................................................................................... 58
5.5.2.1 Overview .................................................................................................................. 59
5.5.2.2 Scope and Period of GSA ........................................................................................ 59
5.5.2.3 Delivery and Quantities ............................................................................................ 59
5.5.2.4 Annual Take-or-Pay ................................................................................................. 59
5.5.2.5 Liability ..................................................................................................................... 60
5.5.2.6 Delivery Pressure ..................................................................................................... 60
5.5.2.7 Price ......................................................................................................................... 60
5.5.2.8 Invoicing and Payment ............................................................................................. 62
5.5.2.9 Measurement ........................................................................................................... 62
5.5.2.10 Force Majeure Event ................................................................................................ 63
5.5.2.11 Termination .............................................................................................................. 63
5.5.2.12 Assignment............................................................................................................... 64
5.5.3.1 Salient Terms ........................................................................................................... 65
5.5.3.1.1 Scope of EPC Works ............................................................................................... 65
5.5.3.1.2 Commencement of EPC Works ............................................................................... 65
5.5.3.1.3 Contract Price........................................................................................................... 65
5.5.3.1.4 Time for Completion ................................................................................................. 65
5.5.3.1.5 Performance Security............................................................................................... 66
5.5.3.1.6 Defects Notification Period Performance Security ................................................... 67
5.5.3.1.7 Taking-Over.............................................................................................................. 67
5.5.3.1.8 Insurance.................................................................................................................. 70
5.5.3.1.9 Force Majeure .......................................................................................................... 71
5.5.3.1.10 Termination .............................................................................................................. 72
5.5.3.1.11 Liquidated Damages ................................................................................................ 75
5.5.3.1.12 Limitation of Liability ................................................................................................. 76
5.5.4 Land Lease Agreement ............................................................................................ 77
5.5.4.1 Grant of Lease.......................................................................................................... 77
5.5.4.2 Plant Land ................................................................................................................ 77
5.5.4.3 Lease Term .............................................................................................................. 77
5.5.4.4 Conditions Precedent ............................................................................................... 78
5.5.4.5 Lease Rental and Terms of Payment ...................................................................... 78
5.5.4.6 Delivery of Possession ............................................................................................. 78
5.5.4.7 Maintenance Costs .................................................................................................. 78
5.5.4.8 Termination .............................................................................................................. 78
5.5.4.9 Ownership ................................................................................................................ 79
5.5.4.10 Covenants of the Lessee ......................................................................................... 79
5.5.4.11 Covenants of the Lessor .......................................................................................... 79
5.5.4.12 Assignment............................................................................................................... 80
5.5.5 Operations And Maintenance Agreement................................................................ 80
5.5.5.1 Scope of Services .................................................................................................... 80
5.5.5.2 Contract Price........................................................................................................... 80
5.5.5.3 Term of Agreement .................................................................................................. 81
5.5.5.4 Limitation of Liability ................................................................................................. 82
5.5.5.5 Performance Guarantees ......................................................................................... 82
5.5.5.6 Liquidated Damages and Bonuses .......................................................................... 83
TABLE OF CONTENTS
CLAUSE PAGE NO.

5.5.5.7 Curtailment of Operations ........................................................................................ 85


5.5.5.8 Termination.... .......................................................................................................... 85
5.5.5.8.1 Termination upon expiry........................................................................................... 85
5.5.5.8.2 Termination for Operator’s Default........................................................................... 85
5.5.5.8.3 Termination for TNB Prai’s Default .......................................................................... 87
5.5.5.8.4 Termination of EPC Contract, PPA or expiry of the Term ....................................... 88
5.5.5.8.5 Assignment............................................................................................................... 88
5.5.6 Long Term Maintenance Programme Contract ....................................................... 89
5.5.6.1 Overview .................................................................................................................. 89
5.5.6.2 Scope of Work .......................................................................................................... 89
5.5.6.3 Price and Payment Terms ....................................................................................... 89
5.5.6.4 Term of LTMP .......................................................................................................... 90
5.5.6.5 Limitation of Liability ................................................................................................. 91
5.5.6.6 Defects Liability and Warranty ................................................................................. 92
5.5.6.7 LTMP Contractor’s Insurance .................................................................................. 93
5.5.6.8 TNB Prai’s Insurance ............................................................................................... 93
5.5.6.9 Payment Security ..................................................................................................... 94
5.5.6.10 Termination .............................................................................................................. 94
5.5.6.10.1 LTMP Contractor’s Default ....................................................................................... 94
5.5.6.10.2 Termination for Convenience ................................................................................... 95
5.5.6.10.3 TNB Prai’s Default .................................................................................................... 95
5.5.6.10.4 Termination for Extended Force Majeure ................................................................ 96
5.5.6.10.5 Termination Fee ....................................................................................................... 96
5.5.6.10.6 Force Majeure .......................................................................................................... 97
5.5.7 Turnkey Contract ...................................................................................................... 98
5.5.7.1 Salient Terms ........................................................................................................... 98
5.5.7.1.1 Scope ....................................................................................................................... 98
5.5.7.1.2 Commencement of Works...................................................................................... 100
5.5.7.1.3 Contract Price......................................................................................................... 100
5.5.7.1.4 Performance Security............................................................................................. 101
5.5.7.1.5 Payment Terms ...................................................................................................... 101
5.5.7.1.6 Completion, Taking Over and Delays .................................................................... 101
5.5.7.1.7 Permit and Insurance ............................................................................................. 103
5.5.7.1.8 Force Majeure ........................................................................................................ 103
5.5.7.1.9 Termination by Employer ....................................................................................... 105
5.5.7.1.10 Liquidated Damages .............................................................................................. 107
5.5.7.1.11 Defects Liability ...................................................................................................... 108
5.5.7.1.12 Claims, Disputes and Arbitration............................................................................ 110
5.6 Project Insurance ................................................................................................... 111
5.6.1 Construction / Erection All Risks ............................................................................ 111
5.6.2 Marine Cargo.......................................................................................................... 111
6. PRINCIPAL TERMS AND CONDITIONS OF THE SUKUK TNB NE .................... 112
7. INVESTMENT CONSIDERATIONS ...................................................................... 166
7.1 Considerations Relating to the Sukuk TNB NE ..................................................... 166
7.1.1 Rating ..................................................................................................................... 166
7.1.2 No Prior Market in the Sukuk TNB NE ................................................................... 166
7.1.3 Suitability of Investments ....................................................................................... 168
7.1.4 Shariah Compliance ............................................................................................... 168
7.1.5 The Sponsor’s Completion Support and The Sponsor’s Rolling Guarantee ......... 168
7.1.6 Risk of Mandatory Redemption.............................................................................. 169
7.2 Risks Relating to the Issuer ................................................................................... 169
7.2.1 Issuer’s Ability to Meet its Obligations Under the Sukuk TNB NE ......................... 169
7.3 Risks Relating to the Project .................................................................................. 170
7.3.1 Construction Risks ................................................................................................. 170
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CLAUSE PAGE NO.

7.3.2 Technology and Operator Risk .............................................................................. 175


7.3.3 Gas Supply Risks ................................................................................................... 180
7.3.4 Force Majeure ........................................................................................................ 183
7.3.5 PPA Termination .................................................................................................... 183
7.3.6 GSA Termination .................................................................................................... 184
7.3.7 Adequacy of Insurance .......................................................................................... 184
7.3.8 Financial Considerations ........................................................................................ 185
7.3.9 Regulatory and Environmental Risks ..................................................................... 186
7.4 Risks Relating to the Guarantor ............................................................................. 189
7.4.1 TNB requires significant capital for its business .................................................... 189
7.4.2 Future restructuring of the electricity industry in Malaysia may have an adverse
effect on TNB’s business and operations .............................................................. 189
7.4.3 The business of electricity generation, transmission and distribution involves many
operating risks ........................................................................................................ 190
7.4.4 Fluctuations in the supply of certain energy sources could have a negative impact
on TNB’s operational performance and profitability............................................... 190
7.4.5 TNB is subject to many environmental laws .......................................................... 190
8. OTHER INFORMATION – THE ISSUER .............................................................. 191
8.1 Contingent Liabilities .............................................................................................. 191
8.2 Material Litigation ................................................................................................... 191
8.3 Related Party Transactions .................................................................................... 191
9. OTHER INFORMATION – THE PROJECT COMPANY........................................ 192
9.1 Contingent Liabilities .............................................................................................. 192
9.2 Material Litigation ................................................................................................... 192
9.3 Related Party Transactions .................................................................................... 192
10. OTHER INFORMATION – THE GUARANTOR ..................................................... 193
10.1 Contingent Liabilities .............................................................................................. 193
10.2 Material Litigation ................................................................................................... 193
10.3 Related Party Transactions .................................................................................... 194
11. POTENTIAL CONFLICT OF INTEREST SITUATIONS ........................................ 195
APPENDIX 1................. ............................................................................................................... 196
AUDITED FINANCIAL STATEMENTS OF THE PROJECT COMPANY FOR THE FINANCIAL
YEARS ENDED 31 AUGUST 2011 AND 31 AUGUST 2012 ...................................................... 196
APPENDIX 2................. ............................................................................................................... 197
AUDITED FINANCIAL STATEMENTS OF THE GUARANTOR FOR THE FINANCIAL YEARS
ENDED 31 AUGUST 2011 AND 31 AUGUST 2012 ................................................................... 197
APPENDIX 3 (A)........... ............................................................................................................... 198
BASE CASE CASHFLOW PROJECTIONS FOR THE FINANCIAL YEARS 2016 TO 2036 ..... 198
APPENDIX 3 (B)............ .............................................................................................................. 197
SUMMARY OF SOURCES AND USES OF FUNDS OF THE PROJECT .................................. 197
APPENDIX 4................. ............................................................................................................... 142
ASSUMPTIONS OF BASE CASE CASHFLOW PROJECTIONS............................................... 142
TNB Northern Energy Berhad Information Memorandum

GLOSSARY OF DEFINITIONS AND ABBREVIATIONS

The following definitions (in addition to the definitions contained in the body herein) shall
apply throughout this Information Memorandum except where the context otherwise
requires:

ACCA : Association of Chartered Certified Accountants


Accepted Contract Amount : as defined in Section 5.5.3.1.3
Act 520 : Lembaga Pembangunan Industri Pembinaan
Malaysia Act, 1994
ACQ : Annual Contract Quantity
Asset : as defined in Section 1.8
Base Case Cashflow : as defined in Section 5.3
Projections
BNM : Bank Negara Malaysia
Bursa : Bursa Malaysia Securities Berhad
CCGT : Combined Cycle Gas Turbine

CIDB : Construction Industry Development Board


COD : Commercial Operation Date
Companies Act : Companies Act of Malaysia 1965 (as amended from
time to time
CMSA : Capital Markets and Services Act 2007 (as amended
from time to time)
CEAR : as defined in Section 5.6.1
Declaration of Trust : as defined in Section 1.6.3
Delivery Point : as defined in Section 5.5.2.3
DEIA : Detailed Environmental Impact Assessment
DOE : Department of Environment
DSU : as defined in Section 5.6.1
DQ : Daily Quantity
EBH : Equivalent Base Hours
EC : Energy Commission of Malaysia
EIA Approval : means all the requisite approvals required from the
Department of Environment under the Environmental
Quality Act 1974 in respect of the Project pursuant to
the submission of an Environmental Impact
Assessment Report by IPP in relation thereto
EOH : Equivalent Operating Hours

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TNB Northern Energy Berhad Information Memorandum

ESA : Electricity Supply Act, 1990 (as amended from time


to time)
Exempt Regime : regime under which the sukuk or debt securities are
offered, issued or subscribed in accordance with
section 229(1) or section 230(1) of the CMSA, and
are listed but not quoted for trading on the Exchange
Exercise Price : as defined in Section 1.8
Facility : as defined in Section 5.5.3.1.1
FOR : Fixed Operating Rate
Government : The Government of Malaysia
Generation Licence : means the licence required to be obtained by IPP (in
this case, TNB Prai) pursuant to Section 9 of the
Electricity Supply Act 1990 to enable TNB Prai to
own and operate the Plant and/or the Facility and
deliver and sell electrical energy and generating
capacity to TNB
Grant of Right : as defined in Section 1.8
Grant of Right Agreement : as defined in Section 1.8
Grantee : as defined in Section 1.8
Grantor : as defined in Section 1.8
GSA : Gas Sales Agreement dated 21 December 2012
Heat Rate Performance LDs : as defined in Section 7.3.1
Independent Consulting : Mott MacDonald Singapore Pte Ltd
Engineer or “ICE”
Ijarah Lease Agreement : as defined in Section 1.8
Ijarah Project Lands : Part of the 2 pieces of lands held under titles HSD
50349 Lot PT 10 and HSD 55959 Lot PT 13, both in
Bandar Prai, Seberang Perai Tengah, measuring
approximately 77,610 sq m and 12,360 sq m
respectively, where the Plant will be situated
Initial Operating Date or IOD : six (6) months prior to the scheduled COD
IPP : Independent Power Producer
IPP Pumphouse : as defined in Section 5.5.4.1
Issuer or TNB NE : TNB Northern Energy Berhad (Company No.
1024796-X)
Jetty : as defined in Section 5.5.4.2
Joint Lead Arrangers : HSBC Amanah Malaysia Berhad (Company No.
807705-X) and KAF Investment Bank Berhad
(Company No. 20657-W)

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TNB Northern Energy Berhad Information Memorandum

Joint Lead Managers : HSBC Amanah Malaysia Berhad (Company No.


807705-X) and KAF Investment Bank Berhad
(Company No. 20657-W)
Joint Principal Advisers : HSBC Amanah Malaysia Berhad (Company No.
807705-X) and KAF Investment Bank Berhad
(Company No. 20657-W)
LA : Lease Agreement
Lease Rentals : as defined in Section 1.8
Lease Period : as defined in Section 1.8
Lessee : as defined in Section 5.5.4.1
Lessor : as defined in Section 5.5.4.1
Letter of Consent : as defined in Section 5.5.4.4
LLA : Land Lease Agreement dated 30 November 2012

LLN : Lembaga Letrik Negara


LTMP : Long Term Maintenance Programme Contract dated
21 January 2013
LTMP Contractor : as defined in Section 5.5.6.1
MARC or Rating Agency : Malaysian Rating Corporation Berhad (Company No.
364803-V)
Marine Cargo Open Cover : as defined in Section 5.6.2
Material Damage : as defined in Section 5.6.1
Metering Equipment : as defined in Section 5.5.2.9
MIA : Malaysia Institute of Accountants
MW : megawatt
MyClear : Malaysian Electronic, Clearing Corporation Sdn Bhd
(Company No. 836743-D)
Net ACQ : Net Annual Contract Quantity
New Lease : as defined in Section 5.5.4.3
NTP : Notice To Proceed
OEM : Original Equipment Manufacturer
Offtaker : as defined in 7.3.1
OMA : Operation & Maintenance Agreement dated 21
January 2013
One-off Rental : as defined in Section 1.8
Output Performance LDs : as defined in Section 7.3.1
Petronas : Petroliam Nasional Berhad

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TNB Northern Energy Berhad Information Memorandum

PEIA : Preliminary Environmental Impact Assessment


Periodic Distribution Amounts : as defined in Section 1.8
Plant : as defined in Section 5.5.1.1
Plant Land : as defined in Section 5.5.4.2
PPA : Power Purchase Agreement dated 30 November
2012
Project : the financing, design, engineering, procurement,
construction, installation, testing, commissioning,
ownership, operation and maintenance of the Plant
Project Agreements : as defined in Section 1.7
Project Company or TNB Prai : TNB Prai Sdn. Bhd. (Company No. 500784-D)
PTC : Principal Terms and Conditions
Purchaser : as defined in Section 1.8
Purchase Undertaking : as defined in Section 1.8
Redemption Amount : as defined in Section 1.8
RFP : Request for Proposal
RPS : Redeemable Preference Shares
Samsung E & C : Samsung Engineering & Construction (M) Sdn Bhd
(Company No. 205537-V)
Samsung C & T : Samsung C & T Corporation
SC : Securities Commission Malaysia

Scheduled COD : as defined in Section 5.1.3


Series : as defined in Section 1.8
Service Charge Amount : as defined in Section 1.8
Servicing Agent : as defined in Section 1.8
SESB : Sabah Electricity Sdn. Bhd. (Company No. 462872-
W)
Shariah Adviser : HSBC Amanah Malaysia Berhad (Company No.
807705-X)
Siemens : Siemens Aktiengesellschaft (“Siemens AG”) and
Siemens Malaysia Sdn Bhd (“Siemens LS”)
Sponsor’s Completion Support : as defined in item 2(l) of PTC
Sponsor’s Rolling Guarantee : as defined in item 2(l) of the PTC
SPV : Special Purpose Vehicle (generic term)

Stop Date : as defined in 5.5.4.4

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TNB Northern Energy Berhad Information Memorandum

Sukuk TNB NE : Issuance of up to RM2.0 billion in nominal value of


Islamic securities under the Islamic principle of Ijarah
and Wakalah
Sukukholders : as defined in Section 1.8

Supplemental Lease Rentals : as defined in Section 1.8

Term Warranty : as defined in Section 5.5.6.6


Third Party Liability : as defined in Section 5.6.1
TNB or Guarantor or Sponsor : Tenaga Nasional Berhad (Company No. 200866-W)
or Off Taker
TNB Remaco or the “O&M : TNB Repair and Maintenance Sdn. Bhd. (Company
Contractor” No. 360318-P)
TOP : Take-Or-Pay Obligation
Total Loss Event : as defined in Section 1.8
Trust Asset : as defined in Section 1.8
Trustee : AmTrustees Berhad
Turnkey Contract : the contract between the Project Company and the
Issuer, whereby the Issuer will procure the execution
of the Project on a turnkey basis and administer and
manage the development of the Project on behalf of
the Project Company
Turnkey Structure : a dual-SPV contractual structure designed to mirror
common project finance contractual agreements and
risk allocation
VOR : Variable Operating Rate
Wakeel : as defined in Section 1.6

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TNB Northern Energy Berhad Information Memorandum

1 EXECUTIVE SUMMARY

1.1 Introduction

The Issuer proposes to issue, offer for subscription of purchase, or invite


subscriptions for or purchase of sukuk of up to RM2.0 billion in nominal value under
the Shariah principles of Ijarah and Wakalah.

1.2 Issuer

The Issuer was incorporated in Malaysia on 19 November 2012 under the


Companies Act, 1965. It was initially incorporated as a private company limited by
shares and later converted to a public company limited by shares with effect from 16
January 2013 with a registered address at The Company Secretary’s Office, Level 2,
Tenaga Nasional Berhad Headquarters, No. 129, Jalan Bangsar, 59200 Kuala
Lumpur.

1.3 Project Company

TNB Prai was incorporated in Malaysia on 8 December 1999 under the Companies
Act, 1965. It was incorporated as a private company limited by shares with a
registered address at The Company Secretary’s Office, Level 2, Tenaga Nasional
Berhad Headquarters, No. 129, Jalan Bangsar, 59200 Kuala Lumpur.

1.4 Guarantor

TNB was incorporated in Malaysia on 12 July 1990 under the Companies Act, 1965.
It is a public company limited by shares with a registered address at The Company
Secretary’s Office, Level 2, Tenaga Nasional Berhad Headquarters, No. 129, Jalan
Bangsar, 59200 Kuala Lumpur.

1.5 Project Background

In October 2012, TNB won a competitive bid to undertake the Project in response to
a RFP by the EC. TNB has assigned its wholly-owned subsidiary TNB Prai to
undertake the above development as the IPP. The generated electrical power will
then be purchased by the Off-Taker, pursuant to a PPA. Gas will be supplied under a
long-term GSA with Petronas.

The project site is a brown field site located in the area of Prai, Butterworth, Penang,
Malaysia which previously housed a 3 x 120 MW conventional oil-fired thermal power
plant which has been decommissioned and demolished in 2002.

The Project development operates under the Turnkey Structure whereby:

(a) TNB NE is to act as financee and undertake the construction of the Project;
and

(b) TNB Prai is to undertake the operations post COD.

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TNB Northern Energy Berhad Information Memorandum

The sale of the Plant’s entire dependable capacity and net electrical output to the Off-
Taker is contracted under a 21-year Power Purchase Agreement. The Project
Company will undertake the role of the IPP.

The Issuer has engaged Samsung Engineering and Construction (M) Sdn Bhd,
backed by a parent company guarantee from Samsung C & T as the EPC Contractor
which will enter into a fixed-price, date-certain, turnkey EPC Contract with the Issuer.
The Project will be operated by TNB Remaco, a 100% subsidiary of TNB, under a
long-term OMA. The long-term maintenance services will be undertaken by the OEM
and Siemens pursuant to a LTMP.

1.6 Project Structure

The Project will be implemented utilising the Turnkey Structure which is set out in
further detail in section 5.4 below.

1.7 Key Project Documents

A summary of the Project Agreements (including supplemental/novation agreements


thereto) for the Plant are as follows:

Project Agreements Contracting Parties Date of Document

PPA TNB Prai and TNB 30 November 2012


LLA TNB and TNB Prai 30 November 2012
GSA Petronas and TNB Prai 21 December 2012
EPC Contract TNB NE and Samsung E&C 21 January 2013
OMA TNB Prai and TNB Remaco 21 January 2013
LTMP TNB Prai and Siemens 21 January 2013
Turnkey Contract TNB Prai and TNB NE 21 January 2013

1.8 Description of Sukuk TNB NE

The Proposal

The proposed one-time issuance of up to Ringgit Malaysia Two Billion


(RM2,000,000,000.00) in nominal value of Sukuk TNB NE is based on the Shariah
principles of Ijarah and Wakalah. The Sukuk TNB NE will consist of 39 tranches with
tenures ranging from 4 years to 23 years from the date of issue of the Sukuk TNB
NE.

The Sukuk TNB NE will be secured. The Sukuk TNB NE will not be listed on Bursa
Malaysia Securities Berhad under its Exempt Regime, if the Issuer so decides.

The PTC for the Sukuk TNB NE are set out in section 6 of this Information
Memorandum.

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TNB Northern Energy Berhad Information Memorandum

Shariah Principles of Ijarah and Wakalah

Grant of Right Agreement

Pursuant to the LLA entered into between TNB Prai and TNB as Land Lessor, the
Ijarah Project Lands (as defined in paragraph (2)(d) of the PTC) are leased to TNB
Prai for a duration of 24 years.

TNB Prai (in its capacity as grantor (“Grantor”)) shall enter into a grant of right
agreement (the “Grant of Right Agreement”) with TNB NE (in its capacity as
grantee (“Grantee”)) acting on behalf of subscribers of the Sukuk TNB NE
(“Sukukholders”), which term shall include any holders of the Sukuk TNB NE from
time to time, to grant the right over the use of the Ijarah Project Lands and to derive
the benefits of the usufruct rights over the use of the Ijarah Project Lands (the
“Asset”) for a duration of 24 years or such period as corresponding to the lease term
in the LLA with an option to be extendable for another 24 years subject to the PPA
term being extended as set out in the LLA (“Grant of Right”). The Grantee will make
a single upfront rental payment (“One-off Rental”) to the Grantor, which amount shall
be equivalent to the aggregate proceeds to be raised from the issuance of the Sukuk
TNB NE.

Declaration of Trust and issuance of Sukuk TNB NE

Pursuant to a Declaration of Trust, the Issuer (in its capacity as trustee) shall declare
a trust over the Asset including the rights, title, interest and benefit, present and
future, in and to under the Grant of Right Agreement, the Ijarah Lease Agreement (as
defined below), the Service Agency Agreement and the Purchase Undertaking (the
“Trust Asset”) for the benefit of the Sukukholders. The Issuer shall issue Sukuk
TNB NE to the Sukukholders which shall represent the Sukukholders’ undivided
proportionate beneficial ownership interest, rights and entitlements under the Trust
Asset. The Sukuk TNB NE proceeds shall be utilised to pay the Grantor the One-off
Rental under the Grant of Right Agreement.

Ijarah Lease

With the Asset held by the Issuer (in its capacity as Grantee), acting on behalf of the
Sukukholders, the Issuer (in its capacity as Lessor) shall enter into an Ijarah Lease
Agreement (the “Ijarah Lease Agreement”) with TNB Prai (as Lessee), to lease the
Asset to the Lessee, for a tenor corresponding to the maturity of the final series
(“Series”) of the Sukuk TNB NE, i.e. more than 4 years and not exceeding 23 years
(the “Lease Period”), in consideration for pre-determined Ijarah rental payments (the
“Lease Rentals”) which shall be the sum equivalent to the aggregate of all Periodic
Distribution Amounts (as defined below) to be channeled by the Issuer to the
Sukukholders as periodic distributions (“Periodic Distribution Amounts”) in
proportion to their sukukholdings on each periodic distribution date.

Under the Ijarah Lease Agreement, the Lessor shall be responsible for procuring
takaful/insurance in respect of the Asset, and the Lessee has acknowledged that the
Lessor may procure the Servicing Agent or its representative, in accordance with the
terms and conditions set out in the Service Agency Agreement, to perform or to
procure the payment of takaful/ insurance of the Asset under a Total Loss Event (as
defined below).

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TNB Northern Energy Berhad Information Memorandum

To the extent that the Servicing Agent incurs any cost and expenses in relation to the
procurement of takaful/insurance (the “Service Charge Amount”), the Lease
Rentals under the Ijarah Lease Agreement will provide for supplementary rental
(forming part of the rental payments), which will be an amount equal to the Service
Charge Amount incurred in the previous period (the “Supplementary Lease
Rentals”).

The Supplementary Lease Rentals due from the Lessee will be set off against the
obligation of the Issuer to pay the Service Charge Amount to the Servicing Agent.

Wakalah Arrangement

Pursuant to a Wakalah Agreement, TNB Prai shall appoint the Issuer as its agent
(“Wakeel”) for the provision of certain services for a wakalah fee of RM100.00, for a
period corresponding to the period for the construction and delivery of the Plant to
TNB Prai under the Turnkey Contract (referred to below). The Wakeel shall be
responsible to:

(a) Safe-keep the One-off Rental paid to TNB Prai as Grantor on a Wadiah
basis; and

(b) To make payments including (a) payment on behalf of TNB Prai (as lessee) of
the Lease Rentals to the Lessor; (b) any payments as set out paragraph
(2)(m) of the PTC (Details on Utilisation of Proceeds) items (1) to (3); and (c)
any other payments or cost in relation to and associated with the Project (as
defined below) comprising those set out in the said paragraph (2)(m) items (4)
to (6) of the PTC.

The Wakalah Agreement will cease upon the completed Plant being delivered to TNB
Prai under the Turnkey Contract. Thereafter, TNB Prai as Lessee will pay the Lease
Rentals directly to the Lessor, who in turn will channel to Sukukholders as Periodic
Distribution Amounts.

Service Agency Agreement

Pursuant to a Service Agency Agreement, the Issuer (in its capacity as Lessor),
acting on behalf of the Sukukholders, shall appoint TNB Prai as the “Servicing
Agent” for a servicing agent fee of RM100.00, throughout the Lease Period to carry
out certain of its obligations. The Servicing Agent shall be responsible to procure
takaful/insurance in respect of the Asset that provides sufficient proceeds for the
redemption of the Sukuk TNB NE under a Total Loss Event (as defined below). If the
takaful/insurance proceeds are insufficient to cover the redemption amount due
under the Sukuk TNB NE under a Total Loss Event (the “Redemption Amount”),
the Servicing Agent shall be liable to make good the difference. Any excess from the
takaful/insurance proceeds over the Redemption Amount, if any, shall be paid to the
Servicing Agent as an incentive fee.

“Total Loss Event” is the total loss or destruction of, or damage to the whole (and
not part only) of the Asset under the Grant of Right Agreement and Ijarah Lease
Agreement or any event or occurrence that renders the whole (and not part only) of
the Asset permanently unfit for any economic use and the repair or remedial work in
respect thereof is wholly uneconomical.

For the avoidance of doubt, “Redemption Amount” shall be equal to the nominal
value of all outstanding Sukuk TNB NE plus an amount equal to any Service Charge

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TNB Northern Energy Berhad Information Memorandum

Amount payable in respect of the Asset and provided that an amount equal to such
Service Charge Amount has not already been paid by way of Supplementary Lease
Rentals plus all accrued but unpaid Lease Rentals up to the date of the declaration of
the Total Loss Event.

Purchase Undertaking

TNB Prai (as the “Purchaser”) will grant a purchase undertaking (the “Purchase
Undertaking”) to the Issuer, whereby the Purchaser irrevocably undertakes to
purchase the proportionate undivided ownership in the remaining period of the Grant
of Right from the Sukukholders of the relevant series of the Sukuk TNB NE, upon
declaration of a Dissolution Event (save for a Dissolution Event due to a Total Loss
Event) or upon the Maturity Date whichever is earlier, at the relevant Exercise Price
(defined below). The proceeds therefrom shall be utilised by the Issuer for the
redemption of such relevant Sukuk TNB NE held by the Sukukholders which shall
then be cancelled.

In relation to the Purchase Undertaking, the “Exercise Price” is as follows:

(a) upon declaration of a Dissolution Event (save for a Dissolution Event due to a
Total Loss Event), the Exercise Price shall be equal to the nominal value of all
outstanding Sukuk TNB NE plus an amount equal to any Service Charge
Amount payable in respect of the Asset and provided that an amount equal to
such Service Charge Amount has not already been paid by way of
Supplementary Lease plus all accrued but unpaid Lease Rentals up to the
date of the declaration of the Dissolution Event; or

(b) upon maturity of the relevant series of the Sukuk TNB NE, the Exercise Price
shall be equal to the nominal value of such series of the Sukuk TNB NE plus
an amount equal to any Service Charge Amount payable in respect of the
Asset and provided that an amount equal to such Service Charge Amount
has not already been paid by way of Supplementary Lease Rentals plus all
accrued but unpaid Lease Rentals up to the date of maturity.

1.8.1 Rating

MARC has assigned preliminary rating of AAAIS to the Sukuk TNB NE.

1.8.2 Issue Amount

Up to Ringgit Malaysia Two Billion (RM2,000,000,000.00) in nominal value.

1.8.3 Selling Restriction

Selling Restrictions at Issuance

The Sukuk TNB NE may only be offered, sold, transferred or otherwise disposed
directly or indirectly to a person to whom an offer or invitation to subscribe the Sukuk
TNB NE may be made and to whom the Sukuk TNB NE are issued would fall within
Schedule 6 or Section 229(1)(b) and Schedule 7 or Section 230(1)(b) read together
with Schedule 9 or Section 257(3) of the CMSA.

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TNB Northern Energy Berhad Information Memorandum

Selling Restrictions Thereafter

The Sukuk TNB NE may only be offered, sold, transferred or otherwise disposed
directly or indirectly to a person to whom an offer or invitation to purchase the Sukuk
TNB NE would fall within Schedule 6 or Section 229(1)(b) read together with
Schedule 9 or Section 257 of the CMSA.

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TNB Northern Energy Berhad Information Memorandum

2. INFORMATION ON THE ISSUER

2.1 Incorporation

The Issuer was incorporated in Malaysia on 19 November 2012 under the


Companies Act, 1965. It was initially incorporated as a private company limited by
shares and later converted to a public company limited by shares with effect from 16
January 2013 with a registered address at The Company Secretary’s Office, Level 2,
Tenaga Nasional Berhad Headquarters, No. 129, Jalan Bangsar, 59200 Kuala
Lumpur.

The Issuer, TNB Prai and TNB are undertaking the financing, design, engineering,
procurement, construction, installation, testing, commissioning, ownership, operation
and maintenance of a 1071.43 MW combined cycle power plant in Prai, Pulau
Pinang, Malaysia.

The Issuer is a wholly owned subsidiary of the Project Company, who in turn, is
wholly owned by TNB.

2.2 Principal Activities

The Issuer was set up to provide engineering services concerning electricity and
promote cooperation with any institutions or utilities inside or outside Malaysia in
connection with the generation, transmission, distribution, supply accumulation and
employment of electricity and is a contractor for power related projects. The Issuer is
also a special purpose vehicle incorporated principally to act as the funding vehicle to
part finance the Project as well as to procure the construction of the Project. Upon
completion, the Project is to be transferred to the Project Company who will
undertake the operation of the Project post completion. The Project Company has
signed a PPA with TNB who also acts as the sponsor.

2.3 Share Capital

As at 31 March 2013, the authorised share capital and the issued and fully paid-up
share capital of the Issuer are as follows:

Authorised Share Capital RM10,000,000.00 comprising 2,000,000 ordinary


shares of RM1.00 each and 8,000,000 Redeemable
Preference Shares of RM1.00 each
Issued and Fully Paid-Up RM2.00 comprising 2 ordinary shares of RM1.00
Share Capital each

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TNB Northern Energy Berhad Information Memorandum

2.4 Shareholding Structure

As at 31 March 2013, the shareholder of the Issuer is as follows:

No. of Ordinary Shares of RM1.00


Name of Shareholder each held

No. (%)

TNB Prai Sdn Bhd 2 100

2.5 Profile of Directors

The board of directors of the Issuer and their respective profiles as at 31 March 2013
are as follows:

Name of Director Profile

Mustaffa bin Ja’afar 54 years of age – Malaysian

Encik Mustaffa bin Ja’afar holds a Bachelor of Science


(Hons.) Electrical and Electronics Engineering from
Brighton Polytechnic (now Brighton University),
England.

Encik Mustaffa bin Ja’afar joined LLN/TNB on 1


September 1982. He has served LLN/TNB in various
capacities within the Generation Division since 1982
as Assistant Electrical Maintenance Engineer, Matrix
Engineer, Deputy Site Manager / Electrical / C&I /
Commissioning Engineer, Deputy Chief Resident
Engineer, Project Manager, Head of Unit and Project
Director.

On 15 August 2011 he was appointed as General


Manager (Engineering Services), Asset Development
Department, Generation Division, which is currently
known as Major Projects Department, New Business &
Major Projects Division.

Encik Mustaffa bin Ja’afar was appointed as Director


of TNB NE on 19 November 2012.

Jamel bin Ibrahim 49 years of age – Malaysian

Encik Jamel bin Ibrahim completed his education at


the Emile Woolf College of Accountancy, London and
is a Chartered Accountant under the Malaysian
Institute of Accountants (MIA). He is also a fellow
member of the Association of Chartered Certified
Accountants, United Kingdom (ACCA).

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TNB Northern Energy Berhad Information Memorandum

Name of Director Profile

He is currently holding a position as the Senior


General Manager (Investment Management) in TNB
from 2009 till present and has more than 20 years of
working experience gained in various companies
which include, a multi-national oil company, a
merchant bank, a manufacturing company and a few
others.

Encik Jamel bin Ibrahim has served in various


capacities since joining TNB, which includes holding
the position of the Managing Director (TNB Properties
Sdn Bhd) and General Manager (Property Services
Department) from 2004 to 2009, Chief Financial
Officer of TNB Liberty Power Limited, Pakistan from
2001 to 2004 and Head of Accounts Management,
Distribution Division, TNB from 1999 to 2001.

Prior to joining TNB, Encik Jamel bin Ibrahim was the


Chief Financial Officer of Scomi Trading Sdn. Bhd.
from 1995 to 1998, a Manager (Corporate Banking) in
Rakyat Merchant Bankers Berhad from 1994 to 1995
and an Executive with Shell Malaysia Trading Sdn Bhd
from 1988 to 1993.

Encik Jamel bin Ibrahim was appointed as Director of


TNB NE on 19 November 2012.

Ahmad Faraid bin Mohd 54 years of age – Malaysian


Yahaya
Encik Ahmad Faraid bin Mohd Yahaya holds a
Bachelor of Science in Electrical and Electronics
Engineering (Hons.) from Loughborough University of
Technology, United Kingdom. He also holds a Master
of Science in Control Engineering from Sheffield
University, United Kingdom.

Encik Ahmad Faraid bin Mohd Yahaya joined


LLN/TNB on 1 September 1982. He has served
LLN/TNB in various capacities within the Generation
Division since 1982 as an Assistant Electrical
Maintenance Engineer, Construction Engineer, Project
Engineer/ Head of Matrix for Control & Instrumentation
Section in Prai and Kapar Power Stations. He also has
served TNB as the Engineering Manager and Project
Manager for the 3 x 700 MW Manjung Coal-Fired
Power Plant Project and as Project Director for Lahad
Datu Coal-Fired Power Plant Project.

Since 25 May 2011, he was appointed as the Project


Director for the 1000 MW Manjung Coal-Fired Power
Plant Project under the New Business & Major
Projects Division, TNB.

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TNB Northern Energy Berhad Information Memorandum

Name of Director Profile

Encik Ahmad Faraid bin Mohd Yahaya was appointed


as Director of TNB NE on 18 March 2013.

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TNB Northern Energy Berhad Information Memorandum

3. INFORMATION ON THE PROJECT COMPANY

3.1 Incorporation

TNB Prai was incorporated in Malaysia on 8 December 1999 under the Companies
Act, 1965. It was incorporated as a private company limited shares with a registered
address at The Company Secretary’s Office, Level 2, Tenaga Nasional Berhad
Headquarters, No. 129, Jalan Bangsar, 59200 Kuala Lumpur.

3.2. Principal Activities

The Project Company is a private company limited by shares, incorporated and


domiciled in Malaysia. The principal activities of the Project Company are to generate
and deliver electricity energy and generating capacity to TNB. The Project Company
is a wholly owned subsidiary of TNB.

3.3 Share Capital

As at 31 March 2013, the authorised share capital and the issued and fully paid-up
share capital of the Project Company are as follows:

Authorised Share Capital RM25,000,000.00 comprising of 10,000,000 ordinary


shares of RM1.00 each and 15,000,000 Redeemable
Preference Shares of RM1.00 each.
Issued and Fully Paid-Up RM2.00 comprising of 2 ordinary shares of RM1.00
Share Capital each.

3.4 Shareholding Structure

As at 31 March 2013, the shareholder of the Project Company is as follows:

No. of Ordinary Shares of RM1.00


Name of Shareholder each held

No. (%)

Tenaga Nasional Berhad 2 100

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TNB Northern Energy Berhad Information Memorandum

3.5 Profile of Directors

The board of directors of the Project Company and their respective profiles as at 31
March 2013 are as follows:

Name of Occupation Job functions, responsibilities,


Directors educational & professional
qualification, work experience

Datuk Seri Ir. President/Chief 56 years of age – Malaysian


Azman bin Mohd Executive Officer,
TNB Datuk Seri Ir. Azman bin Mohd holds a
Bachelor of Engineering (Electrical
Engineering), University of Liverpool,
United Kingdom and a Master of
Business Administration (MBA),
University of Malaya.

Datuk Seri Ir. Azman bin Mohd was


appointed as the President/Chief
Executive Officer of TNB on 1st July
2012. He has served the Company in
various capacities within Distribution
Division since 1979 including as
Assistant District Engineer, District
Manager, Area Manager, Assistant
General Manager and General Manager.
He was Senior General Manager of
Operations (Region 2) and later made
Vice President, Distribution from 14
November 2008 until 14 April 2010. Prior
assuming his current position, he was
then Executive Director/Chief Operating
Officer.

Datuk Seri Ir. Azman bin Mohd was


appointed to the Board of TNB Prai on
30 June 2012.

Dato’ Ir. Mohd Vice President 57 years of age – Malaysian


Nazri bin (New Business &
Shahruddin Major Projects) Dato’ Ir. Mohd Nazri bin Shahruddin
TNB joined the LLN/TNB on 1 September
1979 upon completion of his studies in
the United Kingdom as an LLN scholar.

Dato’ Ir. Mohd Nazri bin Shahruddin has


served in several power stations in the
field of Operations and Maintenance and
was involved in developing a number of
power plants, most notably the Sultan
Azlan Shah Power Station in Perak.
Later, Dato’ Ir. Mohd Nazri bin

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TNB Northern Energy Berhad Information Memorandum

Name of Occupation Job functions, responsibilities,


Directors educational & professional
qualification, work experience
Shahruddin headed a team from TNB,
Khazanah Nasional Berhad and Malakoff
Corporation Berhad which, in association
with a private Saudi firm, developed the
first Independent Water and Power
Producer (IWPP) project in Saudi Arabia,
the Shuaibah Power and Water Facility.
He was based in Jeddah for three years
to complete the project. In 2008, Dato’ Ir.
Mohd Nazri bin Shahruddin was
appointed Vice President of Generation,
a position he held until his appointment
in September 2012 as Vice President of
New Business & Major Projects. Dato’ Ir.
Mohd Nazri bin Shahruddin holds a
Bachelor of Science in Mechanical
Engineering from King’s College,
University of London.

Dato’ Ir. Mohd Nazri bin Shahruddin was


appointed to the Board of TNB Prai on 1
November 2012.

Suhaimi bin Ali Senior General 54 years of age – Malaysian


Hanafiah Manager (Major
Projects) New Encik Suhaimi bin Ali Hanafiah holds a
Business & Major Diploma in Mechanical Engineering and
Projects Division a Bachelor in Engineering (Mechanical)
TNB from Universiti Teknologi Malaysia,
Johor.

Encik Suhaimi bin Ali Hanafiah started to


serve for LLN/TNB at Tuanku Jaafar
Power Station, Port Dickson in 1 April
1980. The opportunity to work as a
power plant Executive/Engineer has
offered the in-depth knowledge and
experiences on the operation and
maintenance of a thermal power plant
including overhaul of turbines, boilers
and associated balance of plant.

In December 1990, he was transferred to


Connaught Bridge Power Station in
Klang, as the Construction Manager
(Mechanical) at Site Manager Office, the
beginning of a new era, i.e. development
of thermal projects. The construction,
erection and commissioning activities
have offered a vast experience in
building a combined cycle gas turbine

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TNB Northern Energy Berhad Information Memorandum

Name of Occupation Job functions, responsibilities,


Directors educational & professional
qualification, work experience
power plant. Subsequently and until now,
he is involved in the development of local
and overseas projects for TNB, notably
the Liberty Power Plant in Pakistan, the
Sultan Azlan Shah Power Station in
Manjung, Perak and the recent bidding
for the 1000MW Combined Cycle gas-
fired power plant in Prai, Pulau Pinang.

He was later appointed as Senior


General Manager (Asset Development)
Generation Division, on 25 May 2011,
which is currently known as Major
Projects Department of the New
Business & Major Projects Division. This
appointment has offered the opportunity
for him to be involved and spearhead the
development of new power projects.

Encik Suhaimi bin Ali Hanafiah was


appointed to the Board of TNB Prai on 1
November 2012.

Norazni binti Company 50 years of age – Malaysian


Mohd Isa Secretary of TNB
Puan Norazni binti Mohd Isa holds a
Master of Law from University of Malaya.

Puan Norazni binti Mohd Isa was


appointed as Legal Executive from 1990
to 1993 assisting the Head of Legal
Department and later appointed as
Contract Management Executive until
2002 in the Company Secretary Office,
TNB. She was then promoted as
Manager (Contract Management
Department) in the Procurement
Department until 2003 and later moved
to Regulatory & Compliance Unit,
Corporate Communication Department
as Manager (Licensing & Compliance)
Regulatory Unit. She was again
promoted as Senior Manager (Share
Purchasing) in the Procurement Division
and served in the Division until 2011.

Since then, Puan Norazni binti Mohd Isa


has been appointed as Deputy Company
Secretary and was currently promoted as
Company Secretary of TNB with effect
from 1 June 2012 and has resumed the

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TNB Northern Energy Berhad Information Memorandum

Name of Occupation Job functions, responsibilities,


Directors educational & professional
qualification, work experience
position ever since.

Puan Norazni binti Mohd Isa was


appointed to the Board of TNB Prai on
11 July 2011.

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TNB Northern Energy Berhad Information Memorandum

4. INFORMATION ON THE GUARANTOR

4.1 Incorporation

TNB is the largest electricity utility in Malaysia and a leading utility company in Asia.
Listed on the Main Board of Bursa Malaysia with almost RM87 billion in assets,
TNB’s more than 33,500 employees serve an estimated 8.3 million customers in
Peninsular Malaysia, Sabah and Labuan. TNB has been Keeping the Lights On in
Malaysia ever since it was set up as the Central Electricity Board in 1949, powering
national development by providing electricity.

4.2 Principal Activities

TNB’s core businesses are in the generation, transmission and distribution of


electricity. In Peninsular Malaysia, the Company supplies households and industry
with electricity generated from six thermal stations and three major hydroelectric
schemes. It also manages and operates the National Grid which links TNB power
stations and IPPs to the distribution network. The grid is connected to Thailand’s
transmission system in the north and Singapore’s transmission system in the south.

In East Malaysia, TNB has 83% equity in SESB, which manages the Sabah grid.
Other than its core business, TNB has diversified into the manufacture of
transformers, high voltage switchgears and cables; the provision of professional
consultancy services; and architectural, civil, electrical engineering works and
services, repair and maintenance. TNB also engages in research and development,
property development and management services. Tapping into opportunities
available overseas, TNB is making inroads into emerging markets, focusing on the
Asia-Pacific, Middle East and North Africa regions.

4.3 Share Capital

As at 31 March 2013, the authorised share capital and the issued and fully paid-up
share capital of TNB are as follows:

Authorised Share Capital RM10,000,001,501.00 comprising of 10,000,000,000


ordinary shares of RM1.00 each, 1,000 Class A
Redeemable Preference Shares of RM1.00 each,
500 Class B Redeemable Preference Shares of
RM1.00 each and 1 Special Rights Redeemable
Preference Share of RM1.00.

Issued and Fully Paid-Up RM5,509,832,109 comprising of 5,509,832,109


Share Capital ordinary shares of RM1.00 each and 1 Special
Rights Redeemable Preference Share of RM1.00

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TNB Northern Energy Berhad Information Memorandum

4.4 Shareholding Structure

The substantial shareholders of the Guarantor as at 31 March 2013 are as follows:

No. Name of Substantial Shareholders No. of (%)


Shares
1. Khazanah Nasional Berhad 1,939,655,861 34.79
2. Employees Provident Fund Board 707,723,819 12.69
1,875,000 shares held in its own name
649,946,182 shares held through Citigroup
Nominees (Tempatan) Sdn.
Bhd.
19,679,862 shares held through Citigroup
Nominees (Tempatan) Sdn.
Bhd.
14,551,100 shares held through Citigroup
Nominees (Tempatan) Sdn.
Bhd.
7,957,675 shares held through Citigroup
Nominees (Tempatan) Sdn.
Bhd.
3,827,800 shares held through Citigroup
Nominees (Tempatan) Sdn.
Bhd.
3,380,000 shares held through Citigroup
Nominees (Tempatan) Sdn.
Bhd.
2,328,200 shares held through Citigroup
Nominees (Tempatan) Sdn.
Bhd.
2,055,000 shares held through Citigroup
Nominees (Tempatan) Sdn.
Bhd.
1,700,000 shares held through Citigroup
Nominees (Tempatan) Sdn.
Bhd.
423,000 shares held through Citigroup
Nominees (Tempatan) Sdn.
Bhd.
3. Amanahraya Trustees Berhad Skim Amanah 584,843,968 10.49
Saham Bumiputera

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TNB Northern Energy Berhad Information Memorandum

The 30 largest shareholders of the Guarantor as at 31 March 2013 are as follows:

No. Name of Shareholders No. of Shares %

1. Khazanah Nasional Berhad 1,879,655,861 33.72


2. Citigroup Nominees (Tempatan) 649,946,182 11.66
Sdn. Bhd.
Employees Provident Fund
Board
3. Amanahraya Trustees Berhad 584,843,968 10.49
Skim Amanah Saham
Bumiputera
4. Lembaga Tabung Haji 210,615,968 3.78
5. Cartaban Nominees (Asing) Sdn. 107,464,431 1.93
Bhd.
Exempt An for State Street Bank
& Trust Company (West CLT
OD67)
6. Kumpulan Wang Persaraan 74,209,200 1.33
(Diperbadankan)
7. Amanahraya Trustees Berhad 68,000,000 1.22
Amanah Saham Malaysia
8. Amanahraya Trustees Berhad 64,383,625 1.15
Amanah Saham Wawasan 2020
9. Maybank Nominees (Tempatan) 51,700,000 0.93
Sdn. Bhd.
Maybank Trustees Berhad for
Public Ittikal Fund
(N14011970240)
10. Cartaban Nominees (Tempatan) 50,572,718 0.91
Sdn. Bhd.
Exempt An for Eastspring
Investments Berhad
11. HSBC Nominees (Asing) Sdn. 47,467,109 0.85
Bhd.
Exempt An for the Bank of New
York Mellon (Mellon Acct)
12. Malaysia Nominees (Tempatan) 47,205,525 0.85
Sendirian Berhad
Great Eastern Life Assurance
(Malaysia) Berhad (PAR 1)
13. Maybank Nominees (Tempatan) 40,149,575 0.72
Sdn. Bhd.
Maybank Trustees Berhad for
Public Regular Savings Fund
(N14011940100)

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TNB Northern Energy Berhad Information Memorandum

No. Name of Shareholders No. of Shares %

14. Amanahraya Trustees Berhad 37,627,700 0.67


AS 1Malaysia
15. AMSEC Nominees (Tempatan) 36,963,800 0.66
Sdn. Bhd.
AmTrustee Berhad for CIMB
Islamic Dali Equity Growth Fund
(UT-CIMB-DALI)
16. HSBC Nominees (Asing) Sdn. 36,209,726 0.65
Bhd.
Exempt An for JPMorgan Chase
Bank, National Association
(U.A.E.)
17. HSBC Nominees (Asing) Sdn. 35,196,011 0.63
Bhd.
Exempt An for JPMorgan Chase
Bank, National Association
(Saudi Arabia)
18. Cartaban Nominees (Asing) Sdn. 33,632,325 0.60
Bhd.
Government of Singapore
Investment Corporation Pte Ltd
for Government of Singapore (C)
19. HSBC Nominees (Asing) Sdn. 29,387,861 0.53
Bhd.
Exempt An for JPMorgan Chase
Bank, National Association
(U.S.A.)
20. HSBC Nominees (Asing) Sdn. 28,580,507 0.51
Bhd.
BBH and Co Boston for
Vanguard Emerging Markets
Stock Index Fund
21. Amanahraya Trustees Berhad 24,654,175 0.44
Public Islamic Dividend Fund
22. HSBC Nominees (Asing) Sdn. 23,603,900 0.42
Bhd.
Exempt An for JPMorgan Chase
Bank, National Association
(Resident -U.S.A.- 2)
23. HSBC Nominees (Asing) Sdn. 22,227,800 0.40
Bhd.
HSBC BK Plc for Saudi Arabia
Monetary Agency
24. Cartaban Nominees (Tempatan) 21,738,625 0.39
Sdn. Bhd.

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TNB Northern Energy Berhad Information Memorandum

No. Name of Shareholders No. of Shares %

Petroliam Nasional Berhad


(Strategic Inv)
25. Amanahraya Trustees Berhad 21,555,737 0.39
Amanah Saham Didik
26. Citigroup Nominees (Tempatan) 19,679,862 0.35
Sdn. Bhd.
Employees Provident Fund
Board (Nomura)
27. HSBC Nominees (Asing) Sdn. 19,010,950 0.34
Bhd.
Exempt An for JPMorgan Chase
Bank National Association
(Netherlands)
28. Amanahraya Trustees Berhad 17,778,700 0.32
Public Islamic Select Enterprises
Fund
29. Citigroup Nominees (Tempatan) 16,713,250 0.30
Sdn. Bhd.
Exempt An for American
International Assurance Berhad
30. HSBC Nominees (Asing) Sdn. 15,569,475 0.28
Bhd.
Exempt An for JPMorgan Chase
Bank, National Association
(Norges BK Lend)
Total 4,316,344,566 77.42

4.5 Profile of Directors

The Board of directors of the Guarantor and their respective profiles as at 31 March
2013 are as follows:

Name of Occupation Job functions, responsibilities, educational &


Directors professional qualification, work experience

Tan Sri Leo Non- 72 years of age – Malaysian


Moggie Independent
Non-Executive Tan Sri Leo Moggie was appointed as Non-
Chairman, Independent Non-Executive Chairman to the
TNB Board of TNB on 12 April 2004.

He holds a Master of Arts in History from


University of Otago, New Zealand and a Master
of Business Administration from Pennsylvania
State University, United States of America. He is

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TNB Northern Energy Berhad Information Memorandum

Name of Occupation Job functions, responsibilities, educational &


Directors professional qualification, work experience
the Chairman of the Board Finance and
Investment Committee.

Prior to his appointment as Chairman of TNB,


Tan Sri Leo Moggie served the Malaysian
Government for more than 38 years. He held
several senior ministerial positions at both the
Federal and State levels from 1976 until 2004
that included Minister of Energy,
Communications and Multimedia (1998-2004),
Minister of Works (1989-1995), Minister of
Energy, Telecommunications and Posts (1978-
1989 and 1995-1998), Minister of Local
Government (1977-1978) and Minister of Welfare
Services (1976-1977) in the State Government of
Sarawak. He was elected as Member of
Sarawak State Council from 1974 until 1978 and
a Member of Parliament from 1974 until 2004.

Tan Sri Leo Moggie’s other directorship in public


companies include Digi.Com Berhad and ACE
Jerneh Insurance Berhad. He also sits as
Chairman on various Boards of TNB Group of
Companies and several other private
companies.

Dato’ Non- 50 years of age – Malaysian


Mohammad Independent
Zainal bin Non-Executive Dato’ Mohammad Zainal bin Shaari was
Shaari Director, appointed as Non-Independent Non-Executive
Director to the Board of TNB on 31 March 2007.
TNB
Dato’ Mohammad Zainal bin Shaari is a Fellow
of the Institute of Chartered Accountants in
England and Wales, ACCA of the United
Kingdom. He is also a Member of the MIA and
Malaysian Institute of Certified Public
Accountants (MICPA). He serves as a member
of the Board Tender Committee, Board Finance
and Investment Committee and Board
Nomination and Remuneration Committee.

He has served in various capacities in the


private sector, including with a public accounting
firm in the United Kingdom from 1984 until 1990
and thereafter PricewaterhouseCoopers (PwC)
until 2002. He was an Executive Director/Chief
Operating Officer of Khazanah Nasional Berhad
until February 2013.

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TNB Northern Energy Berhad Information Memorandum

Name of Occupation Job functions, responsibilities, educational &


Directors professional qualification, work experience

Dato’ Zainal Senior 67 years of age – Malaysian


Abidin bin Putih Independent
Non-Executive Dato’ Zainal Abidin bin Putih was appointed as
Director, TNB Independent Non-Executive Director to the
Board of TNB on 1 May 2003 and later, re-
designated as Senior Independent Non-
Executive Director on 1 October 2010.

He serves as the Chairman of the Board Audit


Committee and a Member of the Board Finance
and Investment Committee.

He is a qualified Chartered Accountant of the


England and Wales Institute. He was formerly
the Chairman of Malaysian Accounting
Standards Board (MASB), Mentakab Rubber
Company Berhad and Pengurusan Danaharta
Nasional Berhad. He was also a past President
of the MICPA, a former member of the Malaysian
Communications and Multimedia Commission
and a former Advisor to Messrs Ernst & Young
Malaysia. Dato' Zainal Abidin bin Putih has
extensive experience in public accounting
practice and has been a Partner, Executive
Director, Country Managing Partner and
Chairman of Hanafiah Raslan & Mohamad which
merged with Ernst & Young in 2002. He is
currently the Chairman of Mobile Money
International Sdn. Bhd. and a Trustee of the
National Heart Institute Foundation.

His other directorships in public companies


include CIMB Group Holdings Berhad, Petron
Malaysia Refining & Marketing Berhad (formerly
known as ESSO Malaysia Berhad), Dutch Lady
Milk Industries Berhad, Land & General Berhad,
CIMB Investment Bank Berhad, CIMB Bank
Berhad, Southeast Asia Special Asset
Management Berhad and several other private
companies

Tan Sri Dato’ Independent 63 years of age – Malaysian


Hari Narayanan Non-Executive
a/l Director, TNB Tan Sri Dato’ Hari Narayanan a/l Govindasamy
Govindasamy was appointed as Independent Non-Executive
Director to the Board of TNB on 1 March 1995.

He is a holder Bachelor of Electrical and


Electronics Engineering from the University of
Northumbria, England. He serves as a Member

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TNB Northern Energy Berhad Information Memorandum

Name of Occupation Job functions, responsibilities, educational &


Directors professional qualification, work experience
of the Board Audit Committee and Board
Nomination and Remuneration Committee.

He is a Registered Professional Engineer with


the Board of Engineers, Malaysia. He has vast
and diverse experience in the field of electrical
and electronics engineering and has held key
positions in InchCape Berhad and Tamco Cutler-
Hammer Sdn. Bhd. He was formerly the
Chairman of Noblemax Resources Sdn. Bhd.
and Deputy Chairman of Emrail Sdn. Bhd

His directorships in other public listed companies


include S P Setia Berhad and Puncak Niaga
Holdings Berhad, IEV Holdings Ltd and several
other private companies.

Dato’ Fuad bin Independent 70 years of age – Malaysian


Jaafar Non-Executive
Director, TNB Dato’ Fuad bin Jaafar was appointed as
Independent Non-Executive Director to the
Board of TNB on 15 March 2007. He is a holder
of Diploma in Technology from Brighton College
of Technology (now Brighton University), United
Kingdom.

He is a Member of the Board Tender Committee,


Board Disciplinary Committee and Board
Nomination and Remuneration Committee.

He began his career with TNB in 1966. He


served for 35 years in various key positions
including Assistant Distribution Engineer, Senior
District Manager, Construction Engineer,
Assistant Senior Construction Engineer, Senior
Construction Engineer, Deputy Chief
Engineer/Assistant General Manager and
Deputy General Manager. Dato’ Fuad bin Jaafar
was appointed as General Manager of the
Transmission Division in January 1994 and was
later made Senior General Manager of Energy
Supply. He was TNB’s Chief Operating Officer
and Executive Director from 4 September 1997,
and then appointed as President/Chief Executive
Officer on 16 October 2001, a position he held
until November 2001.

His directorships in private companies include


Sarawak Hidro Sdn. Bhd. and TNB Group of
Companies.

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TNB Northern Energy Berhad Information Memorandum

Name of Occupation Job functions, responsibilities, educational &


Directors professional qualification, work experience

Tan Sri Dato’ Independent 73 years of age – Malaysian


Seri Siti Norma Non-Executive
binti Yaakob Director, TNB Tan Sri Dato’ Seri Siti Norma binti Yaakob was
appointed as Independent Non-Executive
Director to the Board of TNB on 12 September
2008.

She graduated as a Barrister-at-law from Gray’s


Inn, London. She also holds a Certificate in
Public International Law in Post-Finals Course,
Council of Legal Education, London.

Tan Sri Dato’ Seri Siti Norma binti Yaakob


serves as the Chairman of the Board Disciplinary
Committee and Board Nomination and
Remuneration Committee. She is also a Member
of the Board Finance and Investment
Committee.

She has held various senior positions in the


Legal Service of Malaysia including Senior
Assistant Registrar of the High Court, President
of the Sessions Court, Senior Federal Counsel
of the Attorney General's Chambers, Deputy
Public Trustee and Chief Registrar of the
Federal Court. Tan Sri Dato' Seri Siti Norma binti
Yaakob was appointed as a Judge of the High
Court of Malaya from 1983 until 1994 and
thereafter appointed as a Judge of the Court of
Appeal, Malaysia from 1994 until 2000. She was
made a Judge of the Federal Court of Malaysia
on 1 January 2001 and eventually elevated to
Chief Judge of Malaya, a position she held from
8 February 2005 until her retirement on 5
January 2007. Tan Sri Dato' Seri Siti Norma binti
Yaakob is presently the Chairman of Malaysian
Competition Commission.

Her directorships in other public companies


include RAM Holdings Berhad, RAM Rating
Services Berhad and RAM Ratings (Lanka)
Limited.

Datuk Seri Ir President/Chief 56 years of age – Malaysian


Azman bin Executive
Mohd Officer, Non- Dato’ Seri Ir. Azman bin Mohd was appointed as
Independent a Non-Independent Executive Director to the
Executive Board of TNB on 15 April 2010.
Director, TNB

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TNB Northern Energy Berhad Information Memorandum

Name of Occupation Job functions, responsibilities, educational &


Directors professional qualification, work experience
He is a holder of Bachelor of Engineering
(Electrical Engineering) from University of
Liverpool, United Kingdom and Master of
Business Administration (MBA) from University
Malaya.

He was appointed the President/Chief Executive


Officer of TNB on 1 July 2012. He has served
the Company in various capacities within
Distribution Division since 1979 including as
Assistant District Engineer, District Manager,
Area Manager, Assistant General Manager,
General Manager and Senior General Manager.
He was the Vice President of Distribution from
14 November 2008 until 14 April 2010. Prior to
assuming his current position, he was the
Executive Director/Chief Operating Officer of
TNB.

Dato’ Abd Independent 57 years of age – Malaysian


Manaf bin Non-Executive
Hashim Director, TNB Dato’ Abd Manaf bin Hashim was appointed to
the Board of TNB as Independent Non-Executive
Director on 1 February 2010.

He is a holder of Higher National Diploma in


Engineering from Cambridgeshire College of
Arts and Technology O.N.D. of Thames Valley
University (Slough Campus). He serves as a
Member of the Board Audit Committee, Board
Disciplinary Committee and Board Tender
Committee.

He has been a Member of the Suruhanjaya


Perkhidmatan Awam Negeri Perak since 2009
and serves as Chairman in several private
companies that involve in the construction,
telecommunications and solar hybrid sectors
since 1993. Prior to that, he held various
positions in Shapadu Decloedt Dredging Sdn.
Bhd. (1990-1992), Industrial Boilers and Allied
Equipment (IBAE)(1984-1986), Hakasa Sdn.
Bhd. (1983-1984) and Asie Sdn. Bhd. (1982-
1983).

His directorship in public company includes


Integrax Berhad and a number of private
companies.

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TNB Northern Energy Berhad Information Memorandum

Name of Occupation Job functions, responsibilities, educational &


Directors professional qualification, work experience

Datuk Chung Independent 52 years of age – Malaysian


Hon Cheong Non-Executive
Director, TNB Datuk Chung Hon Cheong was appointed as
Independent Non-Executive Director to the
Board of TNB on 1 October 2010. He holds a
qualification in Advance Computer
Programming, CDS Computer Data Services.

He serves as a Member of the Board Audit


Committee and Board Finance and Investment
Committee.

He is the Chief Executive Officer/Executive


Director of Rexit Berhad. He has over 30 years
of professional experience in the information
technology (IT) industry, where he began his
career in the early 1980s. In 2001, he was
appointed Managing Director of E-Resource.com
Sdn. Bhd., a company that conducts research
and development in RFID applications.
Thereafter, he joined Rexit Solution Sdn. Bhd. in
2003 and later became Managing Director of
Rexit Venture Sdn. Bhd.

His directorships in other public companies


include Rexit Berhad, Rexit (Labuan) Berhad
and a number of private companies.

Datuk Nozirah Non- 58 years of age – Malaysian


binti Bahari Independent
Non-Executive Datuk Nozirah binti Bahari was appointed to the
Director, TNB Board of TNB as Non-Independent Non-
Executive Director on 28 June 2011.

She has a Bachelor of Social Science (Hons.)


(Urban Studies) from University of Science,
Malaysia and a Diploma in Public Administration
from Institute of Public Administration (“INTAN”).
She is the Chairman of Board Tender Committee
and a Member of the Board Disciplinary
Committee.

She is the Deputy Secretary General


(Management) in the Ministry of Finance. She
has over 30 years service in the Malaysian Civil
Service starting as an Assistant Secretary,
Finance Division in the Ministry of Finance
before rising to her current position. Among
other positions she has held were Deputy Under
Secretary, Procurement and Supplies Division

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TNB Northern Energy Berhad Information Memorandum

Name of Occupation Job functions, responsibilities, educational &


Directors professional qualification, work experience
(2002-2004), Deputy Under Secretary, Loan
Management, Financial Market and Actuary
Division (2005-2007), Under Secretary, Loan
Management, Financial Market and Actuary
Division (2007-2011) and Director of Budget
Management Division (21 March-20 May 2011)
in the Ministry of Finance.

Her directorships of public companies include


Proton Holdings Berhad and Bank Simpanan
Nasional Berhad.

Suria binti Ab Alternate 40 years of age – Malaysian


Rahman Director to
Dato’ Puan Suria binti Ab Rahman was appointed as
Mohammad Non-Independent Non-Executive Alternate
Zainal bin Director to Dato’ Mohammad Zainal bin Shaari
Shaari, Non- on 30 November 2009.
Independent
Non-Executive She holds an MBA from the Judge Business
Director, TNB School, University of Cambridge and a Bachelor
of Science in Economics (Accounting and
Finance) from London School of Economics.
She is an Associate of the Institute of Chartered
Accountants in England and Wales (ICAEW) and
the Institute of Internal Auditors United Kingdom
and Ireland as well as a Member of the MIA.

She is a Director in Strategic Human Capital


Management of Khazanah Nasional Berhad.
Prior to that, she served the Managing Director's
Office as a Director from June 2009 until June
2012. She has held various key roles in
Khazanah Nasional Berhad that included Head
of Risk Management Unit from February 2006
until May 2009 and Vice President, Risk
Management Unit from April 2005 until January
2006. Prior to joining Khazanah Nasional
Berhad, she served KPMG in its London offices
for nine-and-a-half years from mid-1996 until
2005.

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TNB Northern Energy Berhad Information Memorandum

4.6 Management Team

The management team of the Guarantor and their respective profiles as at 31 March
2013 are as follows:

Name of Occupation Job functions, responsibilities,


Management educational & professional qualification,
Team work experience

Datuk Seri Ir President/Chief 56 years of age – Malaysian


Azman bin Executive Officer
Mohd Datuk Seri Ir. Azman bin Mohd has held
several key positions in TNB since joining the
organisation 31 years ago. Starting his career
as a District Office Electrical Engineer, he
gradually acquired positions of greater
responsibility, holding posts such as District
Manager, State General Manager and
General Manager of Strategic Management &
Organisation Development at the company
headquarters before being appointed as
Senior General Manager of Operational
Region 2 in 2006. On 14 November 2008, he
was made Vice President of Distribution; and
on 15 April 2010, he was appointed as Chief
Operating Officer/Executive Director of TNB.
He took over the helm of the company as its
President/CEO on 1 July 2012. Datuk Seri Ir.
Azman obtained a Diploma in Engineering
from the England Newark Technical College,
United Kingdom, in 1976, a Bachelor of
Engineering in Electrical Engineering from the
University of Liverpool, United Kingdom, in
1979, and a Master of Business
Administration from the University of Malaya
in 1996.

Fazlur Rahman Vice 44 years of age – Malaysian


bin Zainuddin President/Chief
Financial Officer Encik Fazlur Rahman bin Zainuddin, was
(Group Finance) appointed as TNB Chief Financial Officer and
Vice President (Group Finance) on 1 July
2012. Prior to this, he was the Chief Financial
Officer of the Naza Group. Before joining the
Naza Group in 2010, Encik Fazlur was with
Telekom Malaysia Berhad (TM) for five years
from 2005, during which time he served in a
number of different capacities culminating in
the position of Vice President, Business
Development. Encik Fazlur Rahman bin
Zainuddin also spent 10 years from 1995 with
Shell Malaysia in various financial

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TNB Northern Energy Berhad Information Memorandum

Name of Occupation Job functions, responsibilities,


Management educational & professional qualification,
Team work experience
management and corporate roles. Prior to
that, he gained four years’ experience in
public accounting practice, which included
almost three years in PwC Kuala Lumpur as a
tax consultant. Encik Fazlur Rahman bin
Zainuddin also sits on the Board of Directors
of various TNB subsidiaries. He is a
professional accountant by training, a Fellow
of the ACCA, United Kingdom, and a member
of the MIA.

Dato’ Ir. Mohd Vice President 57 years of age – Malaysian


Nazri bin (New Business &
Shahruddin Major Projects) Dato’ Ir. Mohd Nazri bin Shahruddin joined the
LLN on 1 September 1979 upon completion of
his studies in the United Kingdom as an LLN
scholar. He served in several power stations
in the field of Operations and Maintenance
and was involved in developing a number of
power plants, most notably the Sultan Azlan
Shah Power Station in Perak. Later, he
headed a team from TNB, Khazanah Nasional
Berhad and Malakoff Corporation Berhad
which, in association with a private Saudi firm,
developed the first Independent Water and
Power Producer (IWPP) project in Saudi
Arabia, the Shuaibah Power and Water
Facility. He was based in Jeddah for three
years to complete the project.

In 2008, Dato’ Ir. Mohd Nazri bin Shahruddin


was appointed Vice President of Generation,
a position he held until his appointment in
September 2012 as Vice President of New
Business & Major Projects.

He holds a Bachelor of Science in Mechanical


Engineering from King’s College, University of
London.

Zainudin bin Vice-President 57 years of age – Malaysian


Ibrahim (Generation)
Tuan Haji Zainudin bin Ibrahim began his 32-
year career in TNB as a Mechanical Engineer
at Tuanku Ja’afar Power Station in 1980.
Following a two-year stint as a Shift Charge
Engineer at Sultan Ismail Power Station,
Paka, he returned to Tuanku Ja’afar Power
Station where he continued to serve for the

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TNB Northern Energy Berhad Information Memorandum

Name of Occupation Job functions, responsibilities,


Management educational & professional qualification,
Team work experience
next 20 years in various positions in the
Maintenance Department culminating as a
Senior Manager. Between 2007 and April
2012, he assumed the post of General
Manager, first at the Putrajaya Power Station,
and later at the Tuanku Ja’afar Power Station.
He then spent six months as the Senior
General Manager (Operations) of Generation
Division. On 3 September 2012, he assumed
his current position as the Vice President,
Generation.

Tuan Haji Zainudin bin Ibrahim obtained his


Bachelor of Engineering in Mechanical
Engineering from the University of Sheffield,
United Kingdom in 1980 and his Master of
Engineering Management from Universiti
Tenaga Nasional (UNITEN) in 2005.

Datuk Rozimi Vice-President 56 years of age – Malaysian


bin Remeli (Transmission)
Datuk Rozimi bin Remeli has spent over 33
years in TNB. He started as a Technical
Assistant in Distribution Butterworth, Penang.
He then served in Transmission Maintenance
since 1984 until he was promoted to General
Manager of Maintenance in 2006. Later in
2007 he was again promoted to hold a
position as a Senior General Manager
Transmission Asset Development. On 9
January 2010, he assumed his current
position as the Vice President, Transmission
Division. Datuk Rozimi bin Remeli holds a
Diploma in Electrical Engineering from
Universiti Teknologi Malaysia, a Bachelor of
Engineering from Northorp University, United
States of America, and an MBA from
Universiti Sains Malaysia.

In addition, he is currently the Adjunct


Professor in the Civil Engineering Department
of UNITEN. He is also the National Mirror
Committee Chairman for IEC/TC 115 where
Malaysia is the participating member.

Datuk Ir. Vice-President 50 years of age – Malaysian


Baharin bin Din (Distribution)
Datuk Ir. Baharin bin Din has spent almost his
entire 27-year career at various engineering

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TNB Northern Energy Berhad Information Memorandum

Name of Occupation Job functions, responsibilities,


Management educational & professional qualification,
Team work experience
positions in TNB, with the exception of two-
and-a-half years when he served the Ministry
of Energy, Telecommunications & Posts
Malaysia, first as a Deputy Director, then a
Director, of the Electrical Inspectorate
Department, in Sabah then Pahang.

At TNB, he has taken on managerial positions


in the Engineering Department overlooking
the development of Distribution. He has been
involved in Business Development, Network
Maintenance, Metering Services, Construction
Service, Network Service, and Engineering
Service and Logistics. In March 2007, he was
made Managing Director of SESB, a position
he held for four years before being assigned
as Senior General Manager, Customer
Service & Metering, in the Distribution Division
on 1 December 2011.

He was promoted to Vice President of


Distribution on 1 January 2012. Datuk Ir.
Baharin obtained a Bachelor of Science in
Electrical Engineering from Syracuse
University, New York, United States of
America, and an MBA from UNITEN and
Bond University, Australia, under a joint
UNITEN/Bond MBA programme.

Dato’ Vice-President 51 years of age – Malaysian


Muhammad (Human
Razif bin Abdul Resources) Dato’ Muhammad Razif bin Abdul Rahman
Rahman has spent his entire 28-year career with
LLN/TNB. During this time, he has served in
various capacities as Transmission Protection
Engineer, Power Plant Engineer, TNB
Workshop Services Sdn. Bhd. Business
Development Manager, Perusahaan Otomobil
Elektrik Malaysia’s Operations Manager and
Head of Training at TNB Transmission
Network Sdn. Bhd.

In 2002, he moved from operations to the


Group Human Resources Division, where he
served as Head of Training & Development
and, later, as Head of Human Resources
Planning and Staffing, before been promoted
to Vice President of Human Resources in
December 2008.

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TNB Northern Energy Berhad Information Memorandum

Name of Occupation Job functions, responsibilities,


Management educational & professional qualification,
Team work experience
Dato’ Muhammad Razif bin Abdul Rahman
obtained a degree in Electrical Engineering
from the University of Liverpool in 1984.

Datin Roslina Vice-President 51 years of age – Malaysian


binti Zainal (Planning)
Datin Roslina binti Zainal has served TNB for
27 years, beginning as an Electrical Engineer
in Johor Bahru when she joined LLN/TNB on
1 July, 1985. She was promoted to a Senior
Engineer of Energy Planning at the Planning
and Development Department in TNB’s
headquarters in 1988, following which she
was seconded as the Assistant Director of
Energy in the Economic Planning Unit of the
Prime Minister’s Office from 1991 to 1993. On
her return to TNB, she was appointed as
Manager, Regulatory & Business Strategy at
the Corporate Planning Division and then
Senior Manager, Strategic and Business
Management. In 2005, she was made
General Manager, Procurement of Energy,
and on 1 April 2009, she assumed her current
position of Vice President (Planning).

She is also a member of the Planning


Committee of the National Nuclear
Development Programme, member of the
Board of Engineers Malaysia, an advisor to
the Institute of Energy Policy and Research,
UNITEN, and a Director of TNB Fuel Services
Sdn. Bhd. She obtained a degree in Electrical
Engineering from the University of Lakehead,
Canada, and an MBA from the University of
New England, Australia.

Kamaruddin bin Chief Information 53 years of age – Malaysian


Mahmood Officer
Encik Kamaruddin bin Mahmood has more
than 27 years’ experience in the Information &
Communication Technologies (ICT) industry,
the last seven years of which have been spent
in TNB.

He joined TNB in May 2005 as General


Manager of the IT Department in the ICT
Division. Since then, he has acquired a range
of expertise within the ICT Division, spending
seven months as General Manager of IT &

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TNB Northern Energy Berhad Information Memorandum

Name of Occupation Job functions, responsibilities,


Management educational & professional qualification,
Team work experience
Telecommunications Development
Department, one-and-a-half years as General
Manager of the IT & Business Solutions
Department, and another two years as Senior
General Manager of the same department,
following which he was promoted to his
current position as Chief Information Officer
(CIO) in March 2012.

As CIO, he is responsible for ensuring the


company’s vision, mission, strategy and goals
are achieved through the effective use of ICT.
Before joining TNB, he served in various key
positions in ICT in large companies dealing in
commodities and oil and gas.

Encik Kamaruddin bin Mahmood obtained a


Bachelor of Science from Murdoch University,
Australia, and attended a Management
Programme at Cambridge University, United
Kingdom.

Ir. Syed Abu Chief 56 years of age – Malaysian


Hanifah Bin Procurement
Syed Alwi Officer Ir. Syed Abu Hanifah Bin Syed Alwi, has
served LLN/TNB for almost 30 years and has
devoted half of his career to the procurement
line. He began his career as an Assistant
Engineer at Kuala Lumpur (South District) in
the area of operation and maintenance of
electrical systems up to 33kV. He was then
promoted to become the District Manager at
Kulim, Kedah, where he was exposed to the
art of management.

He was then transferred back to Kuala


Lumpur and placed in the Engineering
Department of the Distribution Division. He
introduced new equipment and work
processes so as to ensure that the best
engineering practices were implemented in
the Distribution Division.

His career in procurement started in 1998


where he was assigned the position of
Material Planning Manager of the Material
Resource Management Dept in the
Distribution Division. From there on he rose
through the ranks to become Senior General
Manager of the Material Management

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TNB Northern Energy Berhad Information Memorandum

Name of Occupation Job functions, responsibilities,


Management educational & professional qualification,
Team work experience
Department in the Distribution Division – his
last post prior to the current position. He
assumed the post of Chief Procurement
Officer of TNB on 1 January 2013.

He holds a degree in Electrical (Power)


Engineering from Universiti Teknologi Mara
(UiTM). He had the privilege of attending a
Management Programme at Judge Business
School, University of Cambridge, United
Kingdom.

Dato’ Roslan Chief Corporate 56 years of age – Malaysian


bin Ab Rahman Officer
Dato’ Roslan bin Ab Rahman began his more
than 30-year career at TNB in 1980, when he
joined the company as an electrical engineer
based in Batu Pahat, Johor. He then assumed
positions of greater responsibility – from
District Officer in Termerloh, Pahang to Senior
Manager of Distribution at the Headquarters,
and Senior District Manager in Klang followed
by Kuantan. In 1999, he was promoted to
Head of Corporate Quality at TNB’s
headquarter; two years later he became
General Manager of TNB Putrajaya/
Cyberjaya, following which he was appointed
General Manager of Customer Service and
Marketing, Distribution Division.

Prior to being promoted to Chief Corporate


Officer on 1 September 2012, he was a
Senior General Manager, Operation Region 2,
for a period of three years.

He holds a Bachelor of Science in Electrical


Engineering from the University of
Southampton, United Kingdom.

Norazni binti Company 50 years of age – Malaysian


Mohd Isa Secretary
Puan Norazni binti Mohd Isa holds a Master of
Laws from University of Malaya.

Puan Norazni binti Mohd Isa was appointed


as a Legal Executive from 1990 to 1993
assisting the Head of the Legal Department
and later appointed as a Contract
Management Executive until 2002 in the

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TNB Northern Energy Berhad Information Memorandum

Name of Occupation Job functions, responsibilities,


Management educational & professional qualification,
Team work experience
Company Secretary’s Office of TNB. She was
then promoted as Manager (Contract
Management Department) in the Procurement
Department until 2003 and later moved to
Regulatory & Compliance Unit, Corporate
Communication Department as Manager
(Licensing & Compliance) Regulatory Unit.
She was again promoted as Senior Manager
(Share Purchasing) in the Procurement
Division and served in the Division until 2011.

Since then, Puan Norazni binti Mohd Isa has


been appointed as Deputy Company
Secretary and was promoted as Company
Secretary of TNB with effect from 1 June 2012
and has held the position ever since.

4.7 Business Overview of the Guarantor

TNB’s core business lies in the generation, transmission and distribution of electricity.
Driven by its central role to ‘Keep the Lights On’, TNB has become a leading utilities
provider in the region.

The Generation Division is responsible for generating electricity at TNB’s six thermal
power stations and three hydroelectric power generating schemes in Peninsular
Malaysia. Together with two IPPs that it supports, namely the wholly-owned Sultan
Azlan Shah Power Station and the majority-owned Sultan Salahuddin Abdul Aziz
Shah Power Station, these plants make up 36.6% of the generation market share in
the peninsula. The Generation Division also owns TNB Liberty Power Limited of
Pakistan.

The Transmission Division transports electricity from power generators to distributors


and large industrial customers. Its primary business includes operating the grid and
maintaining thousands of circuit-kilometres of transmission lines and pylons in the
peninsula. The division is committed to providing safe, secure and reliable electricity
supply at optimal cost.

The Distribution Division is responsible for reliable and robust network delivery. It
plans, designs, constructs, operates and maintains the nation’s electricity supply
system to provide sufficient electricity to all segments of customers, as efficiently as
possible. The division also presents TNB’s frontline service, handling the Customer
Service Centres, collecting revenue, and operating the Call Management Centres
(TNB Careline 15454 and One Stop Engagement Centre 1-300-88-5454).

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TNB Northern Energy Berhad Information Memorandum

4.8 Key Financial Highlights of the Guarantor

Summary of the Guarantor’s Group Balance Sheet

FYE Unaudited Audited


RM’ Million three (3)
months
31 August 1 September
ended 30 31 August
2011 2010
November 2012
(Restated) (Restated)
2012

Total assets 89,006.4 88,469.1 79,064.3 78,662.4

Total borrowings 22,444.4 23,071.8 19,054.1 21,095.6

Total liabilities 55,428.7 52,070.8 46,834.9 46,709.5

Share capital 5,535.3 5,501.6 5,456.6 4,352.7

Shareholders’ 33,316.8 36,137.3 31,997.4 31,761.7


equity

Summary of the Guarantor’s Group Income Statement

FYE Unaudited Audited


RM’ Million three (3)
months
ended 30 2011 2010
2012
November (Restated) (Restated)
2012

Revenue 9,130.8 35,848.4 32,241.2 30,317.4

Operating profit 1,757.8 6,396.9 1,816.8 4,180.0

Profit/(loss) before 2,002.6 5,537.2 1,156.7 4,019.4


taxation and zakat

Profit/(loss) after 1,415.4 4,206.2 964.5 3,196.2


tax

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TNB Northern Energy Berhad Information Memorandum

5. INFORMATION ON THE PROJECT

5.1 Technical Description

5.1.1 Plant Site and Layout

The proposed plant is a CCGT power plant with a capacity of 1071.43 MW. The
project site is a brown field site located in the area of Prai, Butterworth, Penang,
Malaysia (Figure 5.1) which previously housed an oil-fired power plant which has
been decommissioned and demolished. The nearest airport is the Bayan Lepas
International Airport, on Penang Island approximately 25 km away. The nearest
seaport and railway terminal is approximately 5km away. It is accessible by roads,
expressways and railway. There is an adjacent power generation facility, i.e. Prai
Power Plant, owned by Prai Power Sdn Bhd.

FIGURE 5.1 - PROJECT LOCATION

Project Site 

The Project site is located within the western section of Prai Industrial Estate with its
west boundary bordering the sea (Figure 5.2). The Project site falls under the
jurisdiction of District of Seberang Perai Tengah, Majlis Perbandaran Seberang
Perai.

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TNB Northern Energy Berhad Information Memorandum

FIGURE 5.2 – SATELLITE VIEW OF PROJECT SITE

P
r
o
j
e
c
t
Si
t
e

The Project site is located on a brownfield site which used to house a 3x120 MW
conventional oil-fired thermal power plant. The latter has been decommissioned and
demolished with only some small structures and administration building remaining.

FIGURE 5.3 – SITE PLAN OF THE PROJECT SITE

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TNB Northern Energy Berhad Information Memorandum

The power station is to be built on the Plant Land. A new land plot, Plot A1, is
currently being acquired from the State Government and a part of the circulating
water system will occupy Plot A1 as shown in the diagrams below.

5.1.2 Plant Process and Technology

The Plant will be a natural gas fired 1,071.43 MW CCGT power plant capable of
operation on distillate backup fuel as well. The plant will consist of two Generating
Blocks, each consisting of a single-shaft configuration including the Siemens H-class
gas turbine (SGT5-8000H), a hydrogen cooled generator (SGen5-3000W), a Heat
Recovery Steam Generators (HRSG) and a Siemens tandem-compound steam
turbine (SST5-5000) coupled to the same generator via a self-shifting synchronous
clutch.

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TNB Northern Energy Berhad Information Memorandum

The Siemens’ H-Class combustion turbine technology is expected to achieve


combined cycle efficiencies of up to and exceeding 60%. Exhaust gas from the gas
turbine will be directed through an unfired horizontal HRSG, which is designed as a
triple pressure, Benson-type, natural circulation boiler with a reheat section.

The steam turbine will be a reheat condensing turbine comprising a combined high
pressure (HP)/intermediate pressure (IP) turbine module and a double-flow low
pressure (LP) turbine. Exhaust steam will be condensed in the once-through
seawater cooled condenser. A 100% steam turbine bypass system will be provided
for start-up and in case of a steam turbine trip.

A fuel gas treatment system will be provided to measure, filter, heat and regulate the
pressure of the gas according to the gas turbine requirements.

The power plant will include the following key interfaces:

 Connection to the TNB National Grid at the high voltage (HV) terminals of the
Gas Insulated Switchgear (GIS).

 Natural Gas Supply, as the primary fuel, by Petronas.

 Distillate Fuel, as the backup fuel, to be purchased by TNB from four (4)
major oil suppliers with fuel depots in Prai/Butterworth
(Shell/Esso/Petronas/Chevron) and delivered by road tankers (distillate tanks
will be provided for on-site storage).

 Water supply by connection to the local municipal potable water system.

 Once through seawater cooling supply by a submerged intake pipe and to


discharge together with the treated waste water to a discharge outfall.

5.1.3 Project Construction Schedule

The Power Facility and the Interconnection Facilities will be constructed pursuant to a
fixed-price, date-certain, lump sum turnkey EPC Contract. Scheduled COD is defined
as 1 January 2016 under the PPA and the Parties shall co-operate to procure that
the Initial Operation Date of each Generating Block shall occur on 1 July 2015, six (6)
months before Scheduled COD.

A Limited Notice to Proceed was executed 30 November 2012 and the construction
schedule pursuant to the EPC Contract is expected to be thirty two (32) months from
Notice to Proceed for both Generating Blocks. The ICE has opined that for the
schedules in the PPA and EPC Contract to coincide, NTP needs to be issued by 2
May 2013.

5.2 Licensing Requirement

Under the ESA, a person who intends to operate a power plant is required to hold an
electricity generation licence. Licences may be granted by the Commission with the
approval of the Minister upon payment of such fees and upon such conditions as
appear to be requisite or expedient having regard to the function and duties of the
Energy Commission, established under the Energy Commission Act 2001.

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TNB Northern Energy Berhad Information Memorandum

The requirement to procure the Generation Licence is a condition precedent to


commencement of generation of electricity in respect of the first Generating Block
under the PPA and constitutes a condition subsequent to the issuance of the Sukuk
TNB NE, which is to be fulfilled within nine (9) months after the issuance of the Sukuk
TNB NE.

Accordingly, no later than nine (9) months after issuance of the Sukuk TNB NE, the
Project Company is to provide a certified true copy of the generation license issued
to them by the EC to the Issuer.

The ESA further provides that a term of a generation license shall not without the
express approval of the Minister (for the time being charged with the responsibility for
matters relating to the supply of electricity) be for a period exceeding twenty-one (21)
years.

As at the date of this Information Memorandum, TNB Prai does not hold an electricity
generation licence.

5.3 Project Economics

Base Case Cashflow Projections

The information and assumptions contained in a detailed financial model (“Base


Case Cashflow Projections”) are discussed in this section and represent the
current and anticipated contractual terms between TNB NE and the relevant parties
as well as other assumptions on the operating and financial parameters of the Plant,
made as of the date of this Information Memorandum.

The Base Case Cashflow Projections and certain statements herein are forward-
looking statements and illustrative only. The calculations are based on certain
assumptions which may not be realized. In addition, the forward-looking statements
involve a number of risks and uncertainties. Each recipient should carefully conduct
an independent evaluation of the financial projections of the Plant and associated
due diligence to determine the viability of the under-mentioned assumptions.

As the Project is still under development, these parameters are expected to change
or be revised from time to time in the future.

An extract of the Base Case Cashflow Projections is attached as Appendix 3 (A) of


this Information Memorandum. The parameters of the Project assumed in the Base
Case Cashflow Projections are summarized in Appendix 4 of this Information
Memorandum.

Project Capital Structure

The sources and uses of funds presented in this section are derived from
assumptions as to when payments under the EPC Contract and other Project
expenditures are expected to occur. Shareholders’ funds are provided pari passu
with issuances of the Sukuk TNB NE according to the assumed finance to equity
ratio. Sponsor’s Equity Contribution will be provided on a pro-rata basis with the
disbursement of proceeds from the issuance of the Sukuk TNB NE according to the
assumed finance to equity ratio.

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TNB Northern Energy Berhad Information Memorandum

A summary of the sources and uses of funds of the Project is attached as Appendix 3
(B) of this Information Memorandum.

5.4 Project Structure

The Project will be implemented utilising a Turnkey Structure based on the key
contractual relationships between the parties involved in the Project which is shown
below:

CONTRACTUAL STRUCTURE

Tenaga Nasional
Tenaga Nasional Berhad
Berhad Sponsor
Offtaker PPA

100%
Equity
Petroliam Nasional
Berhad
GSA
Fuel Supplier
LTMP Siemens AG / Siemens
TNB Prai Sdn Bhd
Malaysia Sdn Bhd
Project Company
OEM
TNB Repair and
Maintenance Sdn OMA
Turnkey 100%
Bhd
Contract Equity
O&M Contractor

EPC Samsung Engineering


Tenaga Nasional LLA TNB Northern Energy Contract and Construction (M)
Berhad Berhad
Sdn Bhd
Land Lessor Issuer
EPC Contractor

Sukukholders

Source: Project Documents and Financing Documents

The Project Company is a SPV formed for the purpose of implementing the Project.
The Project Company has entered into the following Project Documents:

(a) Power Purchase Agreement with TNB;


(b) Gas Sales Agreement with Petronas;
(c) Operations and Maintenance Agreement with TNB Remaco;
(d) Long-Term Maintenance Program with Siemens AG and Siemens LS;
(e) Land Lease Agreement with TNB;
(f) Turnkey Contract with the Issuer.

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TNB Northern Energy Berhad Information Memorandum

The Issuer is a SPV, formed for the purpose of carrying out the development,
construction and financing of the Project and is a wholly-owned subsidiary of the
Project Company. The Issuer will not be involved in the operation and/or
maintenance of the Power Facility. The Issuer has entered into the following
project documents:

(a) Turnkey Contract with the Project Company; and


(b) EPC Contract with the EPC Contractor.

5.5 Summary Of Key Project Documents

In respect of defined terms in this section 5.5 only, where the same is not defined
elsewhere in this preliminary IM, the defined terms have the meaning ascribed to
them in the relevant Project Document.

5.5.1 Power Purchase Agreement

The following section incorporates the key terms and conditions that are
contained in the PPA entered into between TNB Prai and TNB on 30 November
2012.

5.5.1.1 Overview

The PPA sets out the terms and conditions governing the sale and delivery of
electricity and generating capacity from the Plant (defined in the PPA as the
“Facility”) by TNB Prai to TNB and the purchase and receipt by TNB of such
electricity and generating capacity from TNB Prai.

TNB Prai shall design, construct, own, operate and maintain the Facility in
accordance with the terms and conditions of the PPA.

The commencement date of construction of the Facility is expected to be 4 May


2013. The Facility comprises of the following:

(a) two generating blocks with each consisting of one (1) gas turbine, one (1)
generator and one (1) steam turbine including one (1) heat recovery
steam generator, operating in combined-cycle mode otherwise known as
the “Generating Blocks”;

(b) fuel facilities enabling the Facility to receive and utilise Fuel supplied
under the Fuel Supply Contracts in quantities sufficient to permit the
Facility to operate continuously at full load Despatch on natural gas or for
three and a half days (3.5) days on the standby Distillate Fuel Oil
otherwise known as the “Fuel Facilities”; and

(c) interconnection facilities enabling TNB to receive electrical energy from


the Facility and to maintain the stability of the Grid System, otherwise
known as the “Interconnection Facilities”.

5.5.1.2 Conditions Precedent to Commence Generation of Electricity

The Initial Operation Date of each Generating Block and the right of TNB Prai to
commence generation of electrical energy at the Facility and to supply, deliver

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TNB Northern Energy Berhad Information Memorandum

and sell electricity shall only occur upon satisfaction or waiver of the following
conditions, namely that:

(a) each of the Project Documents (i.e. the EPC Contract, the OMA, the GSA,
the LLA and such other agreements designated by mutual agreement) is
in full force and effect and all conditions precedent to their effectiveness
(except for conditions relating to the PPA) are satisfied or waived;

(b) the initial financing documents which have been entered into by TNB Prai
are in full force and effect and all conditions precedent to their
effectiveness have been satisfied or waived;

(c) TNB Prai has submitted to TNB, with a copy to the Commission, the
conceptual design of the Facility accompanied by a certificate from the
independent engineer;

(d) TNB Prai has submitted to TNB, with a copy to the Commission, one (1)
certified copy of each of the initial financing documents and the Project
Documents (other than the PPA);

(e) TNB Prai has submitted to TNB a certified copy of the Generation
Licence;

(f) the Interconnection Facilities has been designed, manufactured, supplied,


constructed, installed, tested and commissioned in accordance with the
requirements of the PPA and prudent utility practices;

(g) the performance security as set out in the PPA has been delivered to
TNB and is in full force and effect;

(h) TNB Prai has submitted to TNB, with a copy to the Commission, a
certified copy of the ElA Approval;

(i) the commissioning, start-up and testing programs set out in the PPA have
been submitted by TNB Prai to TNB, with a copy to the Commission and
approved by TNB which approval shall not be unreasonably withheld or
delayed.

5.5.1.3 Conditions Precedent to Commercial Operation

The COD for each Generating Block and the right of TNB Prai to supply and
deliver net electrical output and daily available capacity and the obligation of TNB
to accept and to purchase net electrical output and daily available capacity from
that Generating Block or to make energy payments and available capacity
payments to TNB Prai in respect of that Generating Block shall not occur until the
satisfaction of the following:

(a) TNB Prai has submitted to TNB a copy of the "Commissioning Test
Certificate" or similar document to the like effect issued by the
Commission as contemplated by the Generation Licence in respect of that
Generating Block being operational in combined cycle mode;

(b) TNB Prai has submitted to TNB, with a copy to the Commission, the final
design of the Facility and a certificate from the Independent Engineer
stating that the relevant Generating Block and the Interconnection

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TNB Northern Energy Berhad Information Memorandum

Facilities have been tested and commissioned in accordance with the


tests contained in the PPA and the EPC Contract;

(c) TNB Prai has established and declared the contractual available capacity
for such Generating Block in accordance with the terms of the PPA and
the test results show that TNB Prai can meet the declared contractual
available capacity for that Generating Block;

(d) no default by TNB Prai of (i) any material provision of the PPA or (ii) any
provision of the Financing Documents, the breach of which could
reasonably be expected to have a material adverse effect on TNB Prai’s
ability to perform its obligations or availability of the rights of TNB under
the PPA shall have occurred and be continuing;

(e) the representations and warranties by TNB Prai in the PPA are true and
correct in all material respects as if made on the COD of that Generating
Block; and

(f) all the documentation, data, information and certified test results set out in
the PPA have been submitted by TNB Prai to TNB, with a copy to the
Commission, and verified by TNB as being in conformance with the
requirements of the PPA.

5.5.1.4 Sale and Purchase Obligations

From the Initial Operation Date of each Generating Block and continuing
throughout the Term, TNB shall accept all Test Energy and pay TNB Prai for
such Test Energy in accordance with the PPA.

From the COD of each Generating Block and continuing throughout the Term:

(a) TNB Prai shall deliver and sell to TNB, and TNB shall accept and
purchase the net electrical output and daily available capacity from and of
that Generating Block; and

(b) TNB shall pay TNB Prai for such net electrical output and daily available
capacity of that Generating Block in accordance with the PPA.

TNB is not obligated to accept net electrical output from a Generating Block that
does not conform to the electrical characteristics set forth in the PPA.

5.5.1.5 Purchase Price and Other Charges

TNB agrees to pay to TNB Prai the following charges from and after the initial
operations date:

(a) Test Energy – for each kWh of test energy generated from the Facility and
metered by TNB owned metering equipment at the interconnection points;

(b) Available Capacity Payments – starting from the Commercial Operating


Date of the First Generating Block;

(c) Energy Payment – starting from the Commercial Operating Date of the
First Generating Block;

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(d) Start-up Payment – starting from the Commercial Operating Date of the
First Generating Block;
5.5.1.6 Billing and Payment

TNB shall within thirty (30) days of receipt of the Billing Statement pay in full to
TNB Prai Available Capacity Payments, Energy Payments and Start-up
Payments invoiced in such Billing Statement. A Billing Statement is to be issued
monthly starting from the Initial Operation Date of the First Generating Block.

5.5.1.7 Liquidated Damages

Except in the event of any delay or default by TNB or the occurrence of a Force
Majeure Event, TNB Prai agrees to pay TNB by way of pre-ascertained and
agreed liquidated damages the following:

(a) if, due to the default of TNB Prai or its contractors or agents under the
PPA, the COD of the First Generating Block does not occur on or before
the Scheduled COD of the First Generating Block, TNB Prai shall pay to
TNB liquidated damages in an amount equal to RM321,429.00 per day
for each day following the Scheduled COD of the First Generating Block
until the earlier of (i) the COD of the First Generating Block; (ii) the date
on which the PPA is terminated by TNB in accordance with the
provisions of the PPA; and (iii) one hundred and eighty (180) days after
the Scheduled COD of the First Generating Block;

(b) if, due to the default of TNB Prai or its contractors or agents under the
PPA, the COD of the Second Generating Block does not occur on or
before the Scheduled COD of the Second Generating Block, lPP shall
pay to TNB liquidated damages in an amount equal to RM321,429.00
per day for each day following the Scheduled COD of the Second
Generating Block until the earlier of (i) the COD of the Second
Generating Block; (ii) the date on which the PPA is terminated by TNB
in accordance with the provisions of the PPA; and (iii) one hundred and
eighty (180) days after the Scheduled COD of the Second Generating
Block;

(c) if TNB Prai abandons the Project after the PPA becomes unconditional
TNB Prai shall forthwith pay to TNB liquidated damages in an amount
equal to RM 57,857,220.00;

(d) if the Contractual Available Capacity of the affected Generating Block is


less than the Nominal Capacity, then TNB Prai shall forthwith pay to
TNB liquidated damages (the Performance Liquidated Damages) in an
amount equal to Ringgit Malaysia five thousand (RM5,000.00) per kW
(or part thereof) multiplied by the difference (expressed in kW) between
the Nominal Capacity for that Generating Block and the Contractual
Available Capacity for such Generating Block; and

(e) if TNB Prai fails to comply with or operate in conformity with any of the
standards or characteristics set out in the PPA, TNB Prai shall pay TNB
liquidated damages amounting to RM100,000 for each such failure.

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5.5.1.8 Performance Security

As security for the performance of TNB Prai’s obligations under the PPA, and no
later than the earlier of:

(a) seven (7) days from the Financial Closing Date; and
(b) two hundred and ten (210) days after the Effective Date,

TNB Prai is obligated to provide an irrevocable bank guarantee issued by a


commercial bank reasonably acceptable to TNB in an amount equal to
RM57,857,220.00. This bank guarantee shall permit drawings by TNB to satisfy
the performance obligations of TNB Prai for liquidated damages.

The bank guarantee is to remain valid until expiration of six (6) months after the
Scheduled COD of the Second Generating Block.

If TNB Prai fails to provide the bank guarantee within this time frame (or such
other date as may be agreed between the parties), TNB may terminate the PPA
by giving notice to TNB Prai.

5.5.1.9 Facility Construction and Start-up

Construction work at the Site shall commence no later than 4 May 2013 and TNB
Prai shall provide TNB with written confirmation that the Commencement Date
has occurred within five (5) days after it occurs.

5.5.1.10 Representations and Warranties

TNB Prai represents and warrants to TNB that as at the date of the PPA:

(a) TNB Prai is a private limited liability company duly organised and validly
existing under the laws of Malaysia and TNB Prai has all requisite power
and authority to conduct its business, to own its properties and to execute,
deliver and perform its obligations under the PPA;

(b) the execution, delivery and performance by TNB Prai of the PPA has
been duly authorized by all necessary action, including applicable
corporate authorizations, and does not and will not (i) require any consent
or approval of TNB Prai’s board of Directors or shareholders, other than
those that have been obtained; (ii) result in a breach of or constitute a
default under, any provisions of TNB Prai’s constitution or incorporation
documents, any indenture, contract or agreement to which it is a party or
by which it or its assets may be bound, or violate any law, order, writ,
judgement, injunction, decree, determination or award presently in effect
which is applicable to TNB Prai;

(c) the PPA constitutes a legal, valid and binding obligation of TNB Prai;

(d) there is no pending action or proceeding affecting TNB Prai before any
court, government entity or arbitrator that is likely to affect materially and
adversely the financial condition or operations of TNB Prai and the ability
of TNB Prai to perform its obligations under the PPA, or that purports to
affect the legality, validity or enforceability of the PPA.

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5.5.1.11 Insurance

TNB Prai shall maintain or procure to be maintained in effect the following


insurance policies and coverage with respect to the Facility and where applicable,
the Interconnection Facilities:

(a) from Commencement Date until the COD of each Generating Block,
"Erection All Risks" insurance against damage to the Facility and the
Interconnection Facilities in amounts not less than the total construction
and erection cost of such facilities and on a replacement cost basis
subject to deductibles of no more than RM7,750,000.00) for each and
every loss;

(b) throughout the Term, "Industrial All Risk" insurance covering all fixed
assets all risk of physical loss or damage where the sum insured shall be
on a full replacement value basis subject to deductibles of not more than
RM3,500,000.00 for each and every loss;

(c) throughout the Term, "Machinery Breakdown" insurance covering all


machinery, plant, boilers and ancillary equipment forming part of the
Facility against sudden and physical loss or damage where the sum
insured shall be on a full replacement value basis subject to deductibles
of not more than RM7,500,000.00 for each and every loss;

(d) throughout the Term, "Public Liability" insurance with combined single
limits for bodily injury and property damage of at least RM25,000,000.00
per occurrence, including coverage for pollution due to sudden and
accidental causes; and

(e) throughout the Term, any other insurances as required under the laws of
Malaysia including but not limited to "Comprehensive Automobile
Liability", "Motor Vehicle Liability", “Workmen's Compensation" and/or
"Employer's Liability" insurance.

All amounts referred to in the above sub-clauses shall be reviewed on an


annual basis and may be revised subject to mutual agreement by the
Parties.

5.5.1.12 Force Majeure

Either party may terminate the PPA if a Force Majeure Event (“FM Event”)
prevents either party from substantially performing any material obligation under
the PPA for a period which exceeds one hundred and eighty (180) days. Note
however that if a FM Event cannot be cured within one hundred and eighty (180)
days with the use of reasonable diligence, then the period shall be extended for
another one hundred and eighty (180) days.

While there is a right of termination as a result of a FM Event provided under the


PPA, the right is only exercisable upon giving thirty (30) days written notice if a
FM Event is preventing either party from substantially performing any material
obligation under the PPA for a period exceeding one hundred and eighty (180)
days, subject to the following:

(a) if an FM Event cannot be remedied within one hundred and eighty (180)
days with the use of reasonable diligence then the one hundred and

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eighty (180) period shall be extended by a further period of one hundred


and eighty (180) days;

(b) if the party affected is unable to remedy the FM Event by the further
period, then the Parties shall consult as to what steps shall be taken with
a view to mitigating or remedying the consequences of a FM Event;

This includes the affected Party demonstrating to the satisfaction of the other
Party that (i) the affected Party is diligently applying reasonable efforts to execute
a plan to overcome the FM Event and resume performance of the Agreement; (ii)
that the FM Event can be overcome within a reasonable time after the expiration
of the further period:

(a) if the Parties agree to extend the further period then the above
provisions apply with regards to the remedy and mitigation of the FM
Event.

(b) if the Parties are unable to agree to extend the further period, then
either party may terminate the Agreement by thirty (30) days written
notice of termination.

5.5.1.13 Default and Termination

Each of the following events shall constitute an Event of Default by TNB Prai,
unless excused under another provision of the PPA:

(a) TNB Prai fails to make a payment of any amount of substantial nature
which is due and payable under the PPA within sixty (60) days after
receipt of notice of non-payment from TNB;

(b) TNB Prai fails to comply with or operate in conformity with any obligation
of the PPA (other than a payment obligation) and such failure, if capable
of remedy, continues uncured for a period of ninety (90) days, after
receipt of notice of such failure from TNB;

(c) TNB Prai is dissolved or liquidated, other than for the purpose of a
voluntary dissolution or liquidation as part of a reorganisation or
reincorporation;

(d) TNB Prai applies for or consents to a receiver, manager, custodian,


trustee or liquidator being appointed over or taking possession of all or a
substantial part of its assets;

(e) TNB Prai admits in writing its inability to pay its debts as they fall due;

(f) TNB Prai makes a general assignment or an arrangement or composition


with or for the benefit of its creditors;

(g) TNB Prai commences a voluntary case or files a petition seeking to take
advantage of any law relating to bankruptcy, insolvency, reorganisation of
its debts, winding-up or composition or readjustment of its debts;

(h) TNB Prai fails to dispute in a timely manner, or acquiesces in writing to,
any petition filed against it in an involuntary case under any bankruptcy or
similar law;

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(i) TNB Prai takes any action for the purpose of effecting any of the events
described in paragraphs (c) through (g) above;

(j) the COD of a Generating Block fails to occur within six (6) months of the
Scheduled COD of such Generating Block (unless otherwise excused or
extended under the PPA;

(k) TNB Prai abandons the Project after the Effective Date and fails to
resume activities within a period of time agreeable to TNB;

(l) the Generation Licence is suspended or revoked or terminated or expired


due to TNB Prai's default, and TNB Prai has not caused the Generation
Licence to be reinstated or renewed either (i) within the shorter of three
hundred and sixty-five (365) days and the legally permissible period for
such reinstatement or renewal or (ii) after having exhausted all available
administrative or legal appeals and applications for such reinstatement or
renewal; or

(m) any of the following events occur prior to the fifth (5th) anniversary of the
COD of the First Generating Block, without the prior written approval of
the Federal Government of Malaysia:

(i) TNB Prai sells, conveys, transfers or otherwise disposes of the


Project or any material part or any interest in it to any other Person
or enters into an agreement to do so; or

(ii) any Shareholder sells, transfers or otherwise disposes of any


share in TNB Prai (including for this purpose the assignment of the
beneficial interest therein the creation of any charge or other
security interest over, such share or the renunciation or
assignment of any right to receive or to subscribe for such share)
or any interest in such share or enters into an agreement to do so;
or

(iii) there is a change in control of TNB Prai.

If an Event of Default occurs and is continuing, the non-defaulting party may


terminate the PPA by giving written notice of such breach and the non-defaulting
party’s intention to terminate the PPA to the defaulting party.

Subject to the rights of the financing parties under the financing documents, TNB
shall have a step-in right by written notice to assume operational responsibility for
the Facility in the place of TNB Prai in order to complete construction or continue
operation of the Facility or to complete any necessary repairs so as to assure
uninterrupted availability of electrical energy from the Facility and TNB Prai shall
use its best reasonable efforts to cause the financing parties specifically to
acknowledge such right of TNB in the financing documents.

TNB’s election to operate the Facility shall in no event be deemed to be a transfer


of title or a transfer of TNB Prai’s obligations as owner thereof.

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5.5.1.14 Termination Upon Event of Default

If an Event of Default occurs (other than an Event of Default falling within sub-
paragraph (b) above that cannot be cured with the exercise of reasonable
diligence within the period of ninety (90) days therein), the non-defaulting Party
may terminate the PPA by giving fourteen (14) days' written notice to the other
Party.

If an Event of Default which falls within sub-paragraph (b) above cannot be cured
with the exercise of reasonable diligence within the period of ninety (90) days
specified therein, then that period shall be extended for a further period of one
hundred and eighty (180) days. If the Event of Default continues uncured at the
end of such further period, then the non-defaulting Party may terminate the PPA
immediately by written notice to the defaulting Party.

Option Upon Termination

If TNB terminates the PPA as a result of an Event of Default by TNB Prai, TNB
shall have the option but not the obligation, exercisable by notice in writing within
sixty (60) days of the termination of the PPA, to purchase the Project in the
manner and for the purchase price determined in accordance with the provisions
of the PPA.

If TNB Prai terminates the PPA as a result of an Event of Default by TNB, TNB
Prai shall have the option but not the obligation, (exercisable by prior notice
writing within sixty (60) days of the termination of the PPA), to sell the Project to
TNB, in the manner and for the purchase price determined in accordance with the
provisions of the PPA. In the event this option is exercised by TNB Prai, TNB
shall be required to purchase the Project from TNB Prai.

5.5.1.15 Step-In Rights

TNB

TNB shall have the right, but under no circumstances the obligation to assume
partial or complete (as TNB may decide) operational responsibility for the Facility
(in the capacity of an operator only) in the place and instead of TNB Prai in order
to continue operation of the Facility or complete any necessary repairs so as to
assure uninterrupted availability of electrical energy from the Facility.

Such step-in rights shall arise upon the occurrence and continuance of an Event
of Default with respect to the Project which could reasonably be expected to
materially adversely affect TNB Prai’s ability to operate and maintain the Facility
in accordance with the PPA.

TNB shall not exercise such step in rights until any applicable cure period
specified has expired, unless at any earlier time the Financing Parties request
TNB to step in under any right that has arisen under the Financing Documents.
For so long as the Financing Documents remain in effect, TNB shall not exercise
step-in rights hereunder if the operation of the Facility has been assumed by any
Financing Party or any approved assignee or designee within the applicable cure
period.

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TNB shall have the right at any time, but not exceeding six (6) months from the
time TNB exercises its step-in rights, to return the operational responsibility for
the Facility to TNB Prai, provided that TNB shall return the Facility to TNB Prai in
a condition no worse than that immediately prior to the assumption of the
operational responsibility for the Facility by TNB, ordinary wear and tear
excepted.

The Commission

So long as consistent with the terms of the financing documents or the rights of
the Financing Parties thereunder, if the Commission exercises its statutory right
to operate the Facility, TNB shall continue to make Energy Payments for net
electrical output despatched by the grid system operator and available capacity
payments to TNB Prai in accordance with the PPA to the extent that a Generating
Block is Available and to the extent such payments to TNB Prai are permitted by
Law.

5.5.1.16 Critical Milestones

One of the critical milestones in the PPA is that the Commencement Date is to
occur by 4 May 2013. Other critical milestones in the PPA are that:

(a) the Financial Closing Date must occur by 2 May 2013. The “Financial
Closing Date” is defined as - the date on which the Financing Documents
relating to the financing or refinancing for the total construction costs of
the Project have been entered into by the IPP and the Financing Parties,
and all of the conditions precedent for the initial drawdown by IPP under
such Financing Documents satisfied by IPP or waived by the Financing
Parties thereunder.

(b) the Project Documents must be fully effective and unconditional by 2 May
2013.

(c) the Initial Operation Date of each Generating Block shall occur on 1 July
2015.

Notwithstanding the above, the failure to meet any of the critical milestones does
not in itself amount to an Event of Default by TNB Prai under the PPA.

5.5.1.17 Indemnification and Liability

TNB Prai shall defend, indemnify and hold TNB, and its officers, directors,
agents, employees. contractors and subcontractors, harmless from and against
any and all claims, judgments, liabilities, losses, costs, expenses (including
reasonable lawyers' fees) and damages under every applicable environmental
law or regulation arising out of the condition of the Site, TNB Prai's construction,
ownership or operation of the Facility or TNB Prai’s construction of the
Interconnection Facilities, except to the extent such damages are attributable to
the negligence or misconduct of, or breach of the PPA by TNB, its officers,
directors, agents, employees, contractors or subcontractors.

5.5.1.18 Dispute Resolution and Arbitration

In the event of any dispute arising out of or relating to the PPA, either party may
deliver to the other party a written notice identifying the dispute. The parties

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agree to attempt to resolve amicably all disputes promptly, equitably and in good
faith manner. In the event that such a dispute is not settled amicably, the dispute
shall be referred to arbitration.

5.5.1.19 Transfers and Assignment

Except as required by the financing parties under the financing documents, TNB
Prai shall not sell, convey, transfer or otherwise dispose of the Project or any
material part or any interest in it to any other Person without the prior written
consent of TNB and the Commission, which consent shall not be unreasonably
withheld or delayed.

5.5.1.20 Governing Law

The PPA is be governed by, and shall be construed in accordance with the laws
of Malaysia. Subject to the arbitration provisions in the PPA, the Parties hereby
submit to the exclusive jurisdiction of courts located in Kuala Lumpur, Wilayah
Persekutuan.

(The rest of this page has been intentionally left blank)

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5.5.2 Gas Sales Agreement

5.5.2.1 Overview

The GSA was executed between Petronas and TNB Prai on 21 December 2012.
Under the GSA, Petronas agreed to sell and deliver and TNB Prai agreed to
purchase, receive and pay for natural gas for the purpose of electricity
generation.

5.5.2.2 Scope and Period of GSA

The term of the GSA shall be twenty one (21) calendar years and one (1) day
from the First Contractual Delivery Date falling on 31 December 2015 unless the
GSA is terminated earlier in accordance with its terms.

5.5.2.3 Delivery and Quantities

For each day in each Contract Year, Petronas shall deliver Gas for each Contract
Year up to a Daily Quantity (“DQ”) at the first flange located immediately
downstream of the metering station of Petronas (the “Delivery Point”). Any
amount to be delivered by the Seller over and above the DQ shall be on a
reasonable endeavour basis and subject to supply availability.

5.5.2.4 Annual Take-or-Pay

During the first ten (10) years of the term of the GSA (“Initial Term”), TNB Prai is
bound by the GSA to purchase and take delivery of a minimum quantity of natural
gas equivalent to 80% of the net Annual Contract Quantity (“ACQ”). After expiry
of the Initial Term, TNB Prai shall be bound thereafter by the GSA to purchase
and take delivery of natural gas equivalent to 85% of the net ACQ.

In each Contract Year TNB Prai shall be obligated to take and pay for or to pay
for if not taken, a quantity of Gas at least equal to the TOP Quantity. For the
purpose of calculating the TOP Quantity, the Net ACQ is the ACQ for the
Contract Year (i.e. the DQ multiplied by the number of days in the relevant
Contract Year ) reduced by the Excused Quantities.

The Excused Quantities are as follows:

(a) any quantity of Gas properly nominated on any day which the Seller has
for reasons of Force Majeure Event, Emergency Situation, Maintenance
Shutdown. Operational Shutdown or an Operational Flow Order not
delivered or been prevented from delivering;

(b) any quantity of Gas properly notified for delivery on any day which TNB
Prai has for reasons of a Force Majeure Event, Emergency Situation,
Maintenance Shutdown or Operational Shutdown not accepted or been
prevented from accepting;

(c) any quantity of Gas rejected by TNB Prai by reason of it being Off--Spec
Gas;

(d) any quantity of Gas properly nominated on any day which the Seller is
unable to deliver for any other reason. except where the inability to deliver
was due the fault and/or negligence of TNB Prai, save that where the

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quantity of Gas so nominated or notified for delivery exceeds the DQ in


any particular day, the reduction of the ACQ for determining the Net ACQ
shall only be limited to the difference between the DQ and the quantity of
Gas which has been delivered or accepted, as the case may be.

5.5.2.5 Liability

Petronas shall be liable for and indemnify and hold TNB Prai free and harmless
from and against all claims, losses, damages, costs (including legal costs on a
solicitor-client basis), expenses and liabilities:

(a) in respect of all injuries to, including death of any of the officers,
servants agents or contractors of Petronas howsoever or by
whomsoever caused and wherever arising whether or not such claims,
losses, damages, costs (including legal costs on a solicitor-client basis)
expenses and liabilities arose or were incurred as a result of any act,
omission, negligence or breach of duty by TNB Prai, its officers,
servants, agents or contractors;

(b) arising out of or in connection with all damage to or destruction or loss


of property, whether real or personal or otherwise, beneficially and/or
absolutely owned by Petronas arising out of any act or omission of TNB
Prai, its officers, servants, agents or contractors without regard to
whether any act or omission of Petronas contributed to the damage,
destruction or loss.

TNB Prai shall be liable for and indemnify and hold Petronas free and harmless
from and against all claims, losses, damages, costs (including legal costs on a
solicitor-client basis), expenses and liabilities:

(a) in respect of all injuries to, including death of any of TNB Prai’s officers.
servants, agents or contractors howsoever or by whomsoever caused
and wherever arising whether or not such claims, losses, damages,
costs (including legal costs on a solicitor-client basis), expenses and
liabilities arose or were incurred as a result of any act, omission,
negligence or breach of duty by Petronas, its officers, servants, agents
or contractors;

(b) arising out of or in connection with all damage to or destruction or loss


of property, whether real or personal or otherwise, beneficially and/or
absolutely owned by TNB Prai arising out of any act or omission of
Petronas, its officers, servants, agents or contractors without regard to
whether any act or omission of TNB Prai contributed to the damage,
destruction or loss.

5.5.2.6 Delivery Pressure

Petronas shall use its best endeavours to ensure that the Gas is delivered to TNB
Prai at the Delivery Point at a delivery pressure of 2,500 kPag to 4,000 kPag.

5.5.2.7 Price

The Contract Price of Gas bought by TNB Prai is calculated in accordance with
the formula set out below:

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Lx/52 S x Ex
Pn = (1-D) x + + R + T
1.05506 1.05506

P = The Contract Price of Gas for Gas delivered in month 'n’ on a Gross Heating
Value basis expressed in RM/GJ.

D = 15% being the discount given to the power sector in Malaysia.

Lx = the weighted average price of LNG exported from Malaysia on a free on


board basis. expressed in RM/MT which will be calculated by dividing the total
Exports Value over the Reference Period 'x' by the total Exports Volume over
the Reference Period 'x' PROVIDED THAT there shall be at least one
publication of the Exports Value and Exports Volume in any one Reference
Period. Article 10.7(c) shall apply mutatis mutandis in respect of any
adjustments to be made to an invoice.

In any given year, Lx for Gas delivered in the following delivery periods shall
use the following reference periods:

Delivery Period Reference Period

January, February and March September to November of the


preceding year

April, May and June December to February of the year

July, August and September March to May of the year

October, November and June to August of the year


December

52 = The Conversion factor from MT to MMBtu for LNG.

1.05506 = The Conversion rate from MMBtu to GJ.

S = The LNG shipping tariff from Bintulu to Peninsular Malaysia, in


USD/MMBtu, and where:

(a) until 31 December 2014, S shall be fixed at USD0.50/MMBtu;

(b) from 1 January 2015 and for each subsequent two-year


periods, S will be reviewed by the Seller, expressed in
USD/MMBtu, based on the following formula:

S = A + B + C

(i) A = 75% x 0.50;

(ii) B = 10% x 0.50 x 1.024 y and where y equals


the year of review minus 2012; and

(iii) C = 15% x 0.50 x HSFO/530: and where


HSFO equals the spot price which shall
be the monthly average of the prices

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TNB Northern Energy Berhad Information Memorandum

quoted by the Platt's Asia Pacific/Arab


Gulf Market Scan online services of
Singapore cargoes at the location of
Singapore for HSFO 380 cst over the 24
months immediately preceding the year of
review.

Ex = The value of one (1) USD in RM based on Bank Negara's average


TT/OD selling rate from commercial banks published in New Straits
Times over the respective Reference Period.

R = The LNG regasification tariff at the Melaka LNG receiving terminal as


published by the terminal operator from time to time, or as
determined by a Regulator, expressed in RM/GJ.

T = The transportation tariff of dry gas using the PGU to the Buyer's
Delivery Point, as published by the Transporter from time to time or
as determined by a Regulator, expressed in RM/GJ.

5.5.2.8 Invoicing and Payment

Petronas will invoice TNB Prai on a weekly basis, for quantities of natural gas
delivered. Petronas will also issue quarterly and annual statements to TNB Prai.
The weekly invoices are to be settled by TNB Prai within thirty (30) days from the
date of receipt by TNB Prai of the said invoices. TNB Prai is required to furnish
Petronas with a bank guarantee (valid for an initial term of twelve (12) months
and subject to annual review thereafter) to be issued thirty (30) days prior to the
First Contractual Delivery Date.

The amount to be secured by the Bank Guarantee shall be calculated using the
following formula:

S = P₃ x DQ x 30

Where:

S is the amount to be secured by the Security; and

P₃ is the equivalent to the average Contract Price of Gas of the three (3) months
preceding the issuance date of the Security.

5.5.2.9 Measurement

Petronas shall measure, test and analyse the Gas delivered, at its own cost, and
done using its own measuring and testing appliances and equipment (“Metering
Equipment”). While TNB Prai may install and operate (at its own cost) its own
Metering Equipment, measurements taken by TNB Prai’s Metering Equipment
will not be used in any way or prevail over the measurements taken by the
Metering Equipment of Petronas. However, TNB Prai has the right from time to
time, upon giving reasonable notice to the Seller, to inspect the Seller's Metering
Equipment and the charts and other measurements and test data of the Seller.

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5.5.2.10 Force Majeure Event

The GSA provides that in the event that either party is rendered unable by reason
of a force majeure event to perform wholly or in part any of its obligations in the
GSA, then such party shall be relieved of such obligations and shall not be
deemed to be in breach of such obligations and shall not be liable to the other
party in respect of such breach to the extent only that the force majeure event
continues and for the period of such force majeure event. Force majeure events
mean any event, condition or circumstances which is not reasonably foreseeable
or, if reasonably foreseeable is beyond the reasonable control and without the
fault or negligence of the party claiming force majeure which, despite all of such
party’s reasonable efforts to prevent, avoid or mitigate, causes a delay,
interference or disruption in the performance of its obligations under the GSA.

Force majeure events include, without limitations, acts of God, acts of war,
natural disasters, governmental expropriation or compulsory acquisition of the
TNB Prai power station or any part of the facilities of Petronas, explosion or
accident to Petronas’ plant or equipment or other facilities which are caused by a
force majeure event, and failure of Petronas’ contractors to supply and deliver
natural gas where such failure is caused by a force majeure event.

5.5.2.11 Termination

Either Party may immediately upon giving written notice to the other Party,
terminate the GSA if:

(a) the other Party commits a material breach of the GSA and if capable of
remedy, fails to remedy that breach within thirty (30) days from the date of
the notice from the non-defaulting Party specifying such a breach had
occurred or such longer period as may be reasonable in the
circumstance;

(b) the other Party becomes insolvent or suspends payment of its debts
generally or is unable to pay its debts as and when they fall due;

(c) a receiver, manager, liquidator or similar officer is applied for, by or over


the other Party or over all or a substantial part of the assets of such Party
or an order is made or a resolution passed for the winding up liquidation
and/or dissolution of that Party;

(d) a Party secures or compounds with or enters into an arrangement with its
creditors;

(e) the Generation License is revoked at any time during the existence of the
GSA; or

(f) the Power Purchase Agreement is terminated at any time at any time
during the existence of the GSA.

Petronas may by giving fourteen (14) days written notice to TNB Prai terminate
the GSA in the following circumstances:

(a) TNB Prai uses or attempts to use Gas illegally or not in accordance with
the purposes specified in the GSA:

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(b) TNB Prai causes damage to the Petronas’ Facilities and such facilities
have not been restored to its original condition within thirty (30) days or on
such later date as Petronas may specify;

(c) TNB Prai violates any material laws or Regulation in the performance of
its obligations under the GSA;

(d) TNB Prai fails to take Gas after a lapse of ninety (90) days continuously
from the last day of offtake by the Buyer at any time due to any reason
other than a Force Majeure Event or any other failure by Petronas to
make delivery of the Gas at the Delivery Point;

(e) TNB Prai unable to take or receive Gas continuously for a period of two
(2) months at any time during the Supply Period (after the First
Contractual Delivery Date) due to any reason other than a Force Majeure
Event. Maintenance Shutdown, Operational Shutdown or any other failure
by Petronas to make delivery of the Gas at the Delivery Point; or

(f) the suspension of supply of Gas due to non-payment by TNB Prai


continues for more than thirty (30) days.

Petronas may terminate the GSA forthwith, amongst others, (a) if TNB Prai fails
to obtain or renew the bank guarantee for payment of the Gas supply; and (b) if
Generation Licence is not issued to TNB Prai by the First Contractual Delivery
Date.

5.5.2.12 Assignment

TNB Prai shall not assign any of its rights or obligations arising under the GSA
without the prior written consent of Petronas, and Petronas shall not be entitled to
assign, novate or otherwise transfer any of its obligations under the GSA without
the prior written consent of TNB Prai. Petronas shall be entitled to assign the
benefits under the GSA provided prior written notice has been given to the Buyer.

Notwithstanding the above, nothing shall prevent any Party from entering into any
agreement to pledge, mortgage or charge its rights hereunder as security for any
indebtedness incurred or to be incurred by such Party.

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5.5.3 EPC Contract

5.5.3.1 Salient Terms

5.5.3.1.1 Scope of EPC Works

To establish the Facility together with associated facilities for the production of
electrical power at Seberang Perai Tengah, in the district of Seberang Perai,
Pulau Pinang Malaysia with associated interconnection facilities.

TNB NE has entered into the EPC Contract with the EPC Contractor to provide
for the complete design, engineering, manufacture, procurement, delivery,
installation, construction, testing and commissioning thereof on the Facility a fixed
price lump sum turnkey basis.

5.5.3.1.2 Commencement of EPC Works

The EPC Contractor shall commence the EPC Works following issuance of the
Notice To Proceed (“NTP”) following the satisfaction or waiver of the NTP
Conditions. The Employer shall provide the Contractor with no less than fourteen
(14) days' prior written notice of the issuance of the NTP Notice. NTP shall occur
upon receipt by the Contractor of the NTP Notice, but shall not occur any earlier
than 2 May 2013.

Upon the occurrence of NTP, the Contractor shall diligently perform EPC Works
to completion so that each Generating Block, and the Interconnection Facilities,
shall be ready for taking -over on or before its scheduled or planned taking-over
date.

5.5.3.1.3 Contract Price

The contract price in respect of the EPC Works comprises fixed lump sums
denominated in USD and EUR for the foreign/offshore portion of the EPC Works
and a fixed lump sum denominated in RM for the local onshore portion of the
EPC Works (the “Accepted Contract Amount”).

The contract price includes the costs for design, execution and completion of the
EPC works and remedying of any defects and any adjustments permitted under
the EPC Contract.

5.5.3.1.4 Time for Completion

The Contractor shall schedule and perform the Works so as to cause the
Generating Blocks, the Interconnection Facilities and the Common Facilities to be
ready for taking-over no later than its scheduled or planned Take-Over Date. The
Employer shall schedule and perform the Works and each Section within the
Time for Completion for the Works or Section including:

(a) achieving the passing of the Tests on Completion;

(b) completing all work which is stated in the Contract for purposes of taking
over;

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(c) issuance of the Defects Notification Period Performance Security (“DNP


Performance Security”) with an amount of 5% of the Contract Price in
favour of the Employer.

The Contractor guarantees that each of the Sections shall be ready for Taking
Over as follows:

(a) for the Common Facilities, the date falling nine hundred and seventy four
(974) days after the day the NTP Notice is issued (excluding such day);

(b) for Generating Block 1 and associated parts of the Common Facilities, the
date falling nine hundred and seventy four (974) days after the day the
NTP Notice is issued (excluding such day);

(c) for Generating Block 2 and associated parts of the Common Facilities, the
date falling nine hundred and seventy four (974) days after the day the
NTP Notice is issued (excluding such day); and

(d) for the Interconnection Facilities and associated parts of the Common
Facilities, the date falling no later than twenty (20) days prior to the first
day on which electricity is generated from Generating Block 1.

5.5.3.1.5 Performance Security

The EPC Contractor shall within seven (7) days prior to the NTP, obtain (at his
cost) a Performance Security (irrevocable and payable unconditionally
immediately upon demand) for proper performance in the amount and currencies
stated in the Contract Information.

The EPC Contractor shall deliver to TNB NE the Performance Security effective
from the NTP and duly executed by a bank reasonably satisfactory to TNB NE
and the Lenders with a minimum credit rating of A-, as security for the due
performance by the EPC Contractor of its obligations under this Contract.

The Performance Security shall be for an amount equivalent to 20% of the


Accepted Contract Amount. The Performance Security shall remain valid until the
Taking-Over Date of Generating Block 2, and shall be returned to the EPC
Contractor, within twenty eight (28) days after the Taking-Over Date of Generating
Block 2.

TNB NE shall not make a claim under the Performance Security, except for
amounts to which TNB NE is entitled under the Contract which shall be limited to
the following events:

(a) failure by the EPC Contractor to extend the validity of the Performance
Security;

(b) failure by the EPC Contractor to pay TNB NE an amount due;

(c) failure by the EPC Contractor to remedy a default within forty two (42) days
after receiving TNB NE's notice requiring the default to be remedied;

(d) circumstances which entitle TNB NE to termination under the EPC Contract,
irrespective of whether notice of termination has been given.

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TNB NE shall indemnify and hold the EPC Contractor harmless against and from
all damages, losses and expenses (including legal fees and expenses) resulting
from a wrongful claim under the Performance Security.

5.5.3.1.6 Defects Notification Period Performance Security

Upon the Taking-Over Date of Generating Block 2, the EPC Contractor shall issue
a new performance security in favour of TNB NE ("DNP Performance Security")
which shall be irrevocable and payable unconditionally immediately upon
demand. The DNP Performance Security shall be for an amount equivalent to the
total sum of 5% of the Accepted Contract Amount which includes the cost of
necessary rectification and/or replacement identified at or during the Tests on
Completion.

The DNP Performance Security shall take effect from the Taking-Over Date of the
Generating Block 2.

The DNP Performance Security shall be adjusted on the expiry of the DNP of
Generating Block 2, such that the DNP Performance Security represents an
amount equivalent to 5% of the value of the interconnection Facilities and shall
remain valid until the expiry of the DNP in respect of the Interconnection
Facilities.

In the event a major component is replaced or repaired during the DNP, TNB NE
and EPC Contractor shall discuss the necessity for any extension in the validity of
the DNP Performance Security which may be extended accordingly.

If the terms of a Performance Security or a DNP Performance Security specify its


expiry date, and the EPC Contractor has not become entitled to receive the
relevant performance certificate by the date twenty eight (28) days prior to the
expiry date, the EPC Contractor shall extend the validity of such security until the
Works have been completed and any defects have been remedied.

5.5.3.1.7 Taking-Over

The Taking-Over Requirements of a Generating Block shall be met when:

(a) such Generating Block has passed:

(i) all of the Tests on Completion set out in the Employer’s


Requirements i.e. Pre-Commissioning Tests, Commissioning
Tests, Performance Tests and Reliability Run to the satisfaction of
TNB NE; or

(ii) all of the Tests on Completion except for the Performance Tests to
demonstrate that such Generating Block meets the Guaranteed
Net Power Output or Guaranteed Net Heat Rate but has attained
the Minimum Acceptance Criteria and the Contractor has paid
Liquidated Damages to TNB NE in respect of its failure to attain
the Guaranteed Performance; and

(b) such Generating Block (and its associated Common Facilities) complies
with the Contract and applicable laws; and

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(c) the Contractor has submitted the documents that are necessary to enable
the Employer to obtain a commissioning test certificate, or a document to
similar effect, to be issued by the Commission in accordance with the
requirements of the Generation Licence;

(d) the Interconnection Facilities have achieved taking-over;

(e) the EPC Contractor has made training available to the Employer’s
Personnel (or other nominees of TNB NE); and

(f) the EPC Contractor has submitted to TNB NE the as-built drawings and
the operation and maintenance manuals and the handbook as reasonably
required by TNB NE for the safe and reliable operation of the Generating
Block and its associated Common Facilities; and

(g) the Contractor has submitted to the Employer written confirmation that title
to the relevant Generating Block and its associated Common Facilities
and all equipment and materials supplied in connection with the relevant
Generating Block, whether by the EPC Contractor or any Subcontractor,
has invested in TNB NE free from any liens and encumbrances; and

(h) any other liquidated damages payable by the EPC Contractor to TNB NE
have been paid and/or satisfied; and

(i) the EPC Contractor has obtained all applicable permits and approvals
required to be obtained in its name in accordance with the EPC Contract;
and

(j) the Contractor has issued all Contractor’s Documents including certified
test results required to be issued to attain taking-over for the relevant
Generating Block (and its associated Common Facilities) pursuant to the
EPC Contract, and

(k) all Works, Special Tools, Components or equipment required to be


operational to attain taking-over of the relevant Generating Block (and its
associated Common Facilities) are ready for safe operation or use by TNB
NE in the manner for which they are intended; and

(l) the EPC Contractor has returned all the equipment and materials
belonging to TNB NE and removed all of its equipment, construction
materials, temporary facilities, wreckage waste material and rubbish from
such part of the Site and IF Site relevant to such Generating Block (and
its associated Common Facilities), except for such equipment,
construction materials and facilities required for the Works, if any, to be
performed by the EPC Contractor following taking-over of the relevant
Generating Block;

(m) the EPC Contractor has left such part of the Site and IF Site relevant to
such Generating Block free and clear from obstructions and impediments
placed and Hazardous Substances introduced thereon by the EPC
Contractor and is otherwise in the same condition (disrepair by
reasonable ordinary wear and tear excepted) as on the NTP; and

(n) the Contractor and the Employer have agreed the punch list items and
except for such punch list items, all Works required pursuant to the EPC

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Contract to be completed on or prior to the taking-over of such Generating


Block have been completed in accordance with the Contract.

"Site" means the place where the Facility is to be constructed, and any other
places as may be specified in the Contract as forming part of the Site.

"Interconnection Facilities Site" or "IF Site" means all those parcels of land owned
or leased, or to be owned or leased by the Employer, or over which the Employer
has easement rights, and at, on, under, over, in or through which the
Interconnection Facilities will be constructed or located and/or the Works in
relation to the Interconnection Facilities is to be performed, carried out or
conducted, all as shown in the Employer's Requirements.

The Taking-Over Requirements of the Facility shall be met when the Generating
Block 2 (and the balance of the Common Facilities) have satisfied the Taking
Over Requirements above.

The Taking-Over Requirements of the Interconnection Facilities shall be met


when:

(a) the Interconnection Facilities have passed all of the Tests on Completion
to the satisfaction of the Employer and in accordance with the EPC
Contract ; and

(b) the Interconnection Facilities have been constructed to the reasonable


satisfaction of TNB NE and comply with the provisions of EPC Contract
and applicable laws; and

(c) the EPC Contractor has submitted to TNB NE the as-built drawings and
the operation and maintenance manuals as required under the EPC
Contract and as reasonably required by the TNB NE for the safe and
reliable operation of the Interconnection Facilities and the Facility;

(d) the EPC Contractor has submitted to TNB NE written confirmation that
title to the Interconnection Facilities and all equipment and materials
supplied in connection with the Interconnection Facilities, whether by the
EPC Contractor or any Subcontractor, has vested in TNB NE free from
any liens or encumbrances; and

(e) all Works, Special Tools, components or equipment required to be


operational to attain taking-over for the Interconnection Facilities are
ready for safe operation or use by TNB NE in the manner for which they
are intended.

Without prejudice to the above, the EPC Contractor shall have the right to make a
request to the Engineer appointed under the EPC Contract or TNB NE for a
waiver of the timely fulfilment of any of the Taking-Over Requirements provided
always that the Facility can be operated safely and reliably.

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5.5.3.1.8 Insurance

The EPC Contract requires for the maintenance of the following Insurances:

EPC Contractor’s Insurance for EPC Contractor’s Equipment

The EPC Contractor shall insure the Plant, Materials and EPC Contractor’s
Documents for not less than the full reinstatement cost including the costs of
demolition, removal of debris and professional fees and profit. This insurance shall
be effective until the date of issue of the Taking-Over Certificate for the Works.

Insurance for EPC Contractor’s Foreign Personnel

Without limiting or reducing the EPC Contractor’s liability and responsibility as


contained elsewhere in this Contract, the EPC Contractor shall immediately in
relation to the Works once access to the Site or IF Site has been granted,
procure from insurers licensed to underwrite such risks in the Country, according
to international standards and on terms and conditions acceptable to TNB NE and
maintain at its own cost and expense during the performance of the Works, all
insurances prescribed by law, including but not limited to Contract Foreign
Workmen's Compensation/Employer's Liability insurance applicable to its
operations with respect to and for the duration of this Contract.

Contractors Insurance for Motor Vehicle Liability Insurance

Motor Vehicle Liability insurance with combined single limit for third party property
damage of at least RM3,000,000.00 per occurrence and in aggregate, where
applicable, covering vehicles owned, hired and non-owned and unlimited liability
for bodily injury.

Contractors Insurance required by Law

The EPC Contractor shall maintain at its own cost and expense during the
performance of the Works, all insurances prescribed by law
Insurance for EPC Contractor’s local Personnel

The EPC Contractor shall effect and maintain insurance against liability for claims,
damages, losses and expenses (including legal fees and expenses) arising from
injury, sickness, disease or death of any person employed by the EPC Contractor
or any other of the EPC Contractor’s Personnel.

TNB NE and the Engineer appointed under the EPC Contract shall also be
indemnified under the policy of insurance, except that this insurance may exclude
losses and claims to the extent that they arise from any act or neglect of TNB NE
or of TNB NE's Personnel.

The insurance shall be maintained in full force and effect during the whole time
that these personnel are assisting in the execution of the Works.

Employer's Insurance for Works and Plant

TNB NE will, subscribe and maintain in full force and effect from the date of issue
of the Notice to Proceed up to the Taking-Over Certificate, the insurance cover set
out below:

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(a) Workmen's Compensation/Contingent Employer's Liability for any person


employed by Employer.

(b) Construction/Erection All Risk insurance including liability to third parties


for bodily injury and death or material damage arising out of, resulting or
occurring from the engineering, construction, erection and Ownership of
the Plant.

(c) Employer's Motor Vehicle Insurance for liabilities resulting from the use
and possession of motor vehicles, whether owned, hired, leased or
otherwise used by Employer or its employees.

(d) Marine Cargo subscribed and maintained before the first shipment, which
shall be primary to any other insurance cover taken out, underwritten or
maintained by or on behalf of the EPC Contractor.

5.5.3.1.9 Force Majeure

In the EPC Contract, "Force Majeure" means an exceptional event or circumstance:

(a) which is beyond the reasonable control and occurs without fault or
negligence on the part of the Party claiming it as a Force Majeure;

(b) which such Party could not reasonably have provided against before
entering into the Contract;

(c) which, having arisen, such Party could not reasonably have avoided or
overcome; and

(d) which is not substantially attributable to the other Party.

Force Majeure may include, but is not limited to, exceptional events or
circumstances of the kind including war, hostilities, rebellion, terrorism, riot,
commotion, disorder, war, natural catastrophes, so long as conditions (a) to (d)
above are satisfied.

Any delay in, or total or partial failure of, performance of a Party caused by Force
Majeure shall not constitute a default under the EPC Contract provided, however,
that:

(a) the affected Party shall use all reasonable commercial efforts to eliminate
any Force Majeure and mitigate or limit the effect of any such delay or
inability to perform and damages to the other Party;

(b) the affected Party gives the other Party notice of such Force Majeure;

(c) the suspension of performance is of no greater scope and of no longer


duration than is reasonably required by the Force Majeure;

(d) no liability of either Party which arose before the occurrence of the Force
Majeure causing the suspension of performance shall be excused as a
result of such occurrence

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(e) obligations of the Parries that are required to be completely performed


before the occurrence of a Force Majeure event shall not be excused to
the extent of the existing delay or default existing prior to such Force
Majeure event;

(f) when the affected Party is able to resume performance of its obligations
under the EPC Contract, that Party shall give the other party written notice
to that effect and shall promptly resume performance hereunder.

Consequences of Force Majeure

In the event and to the extent that any event of Force Majeure that the EPC
Contractor can demonstrate will or could affect the EPC Contractor's ability to meet
any of its obligations under the EPC Contract including the Taking-Over Date or
the Milestones under the EPC Contract, then the EPC Contractor shall, subject to
sub-paragraph (a) below, be entitled to an adjustment under the provisions for
variation and adjustment in one or more of such dates and in the Milestone
Payment Schedule and the Project Schedule. Except as otherwise expressly set
forth in the Force Majeure provisions, there shall be no adjustment to either the
Performance Guarantees, and/ or the EPC Contract Price as a result of a Force
Majeure event.
If the EPC Contractor is delayed in the performance of the Works by a Force
Majeure, then:

(a) to the extent that the delay (s) are, in the aggregate, one hundred and
forty (140) days or less, the EPC Contractor shall absorb all of its costs
and expenses resulting from said delay(s); and

(b) to the extent that the delay(s) are, in the aggregate, more than one
hundred and forty (140) days, the EPC Contractor shall be reimbursed by
TNB NE for those incremental costs and expenses directly resulting from
the said delay(s) which are reasonably incurred by the EPC Contractor after
the said one hundred and forty (140)-day period.

In the event that the Works or any part of the Works is damaged or destroyed
due to Force Majeure, then the EPC Contractor shall only be obliged to reinstate
or replace the Works or part thereof which has been damaged or destroyed if
requested by TNB NE, in which case it shall be entitled to an adjustment.

Optional Termination, Payment and Release

If the execution of substantially all the Works in progress is prevented for a


continuous period of eighty four (84) days by reason of Force Majeure of which
notice has been given, or for multiple periods which total more than one hundred
and forty (140) days due to the same notified Force Majeure, then either Party
may give to the other Party a notice of termination of the EPC Contract. In this
event, the termination shall take effect seven (7) days after such notice is given.

5.5.3.1.10 Termination

Termination by TNB NE

The occurrence of any of the following events, unless excused by Force Majeure
or TNB NE’s failure to fulfil its obligations under the EPC Contract, shall

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constitute an Event of Default by the EPC Contractor, and TNB NE shall be


entitled to terminate the Contract if:

(a) the EPC Contractor fails to comply with provisions with regards to the
Performance Security or with a notice to correct;

(b) the EPC Contractor fails substantially to perform any of its material
obligations under the EPC Contract in any material respect, abandons the
Works or otherwise plainly demonstrates the intention not to continue
performance of his material obligations under the Contract;

(c) the EPC Contractor without reasonable excuse fails:

(i) to proceed with the Works in accordance with the provisions of the
EPC Contract; or

(ii) the Engineer appointed under the EPC Contract reasonably


determines that the EPC Contractor has failed to commence and
continue to use reasonable efforts to carry out the Corrective
Action thereunder within a specified reasonable time;

(d) the EPC Contractor sub-contracts the whole of the Works or assigns or
transfers the Contract without the express written consent of TNB NE;

(e) the EPC Contractor is dissolved or adjudicated a bankrupt or insolvent,


goes into liquidation, has a receiving or administration order made against
him, compounds with his creditors, or carries on business under a receiver,
trustee or manager for the benefit of his creditors, or if any act is done or
event occurs which (under Applicable Laws) has a similar effect to any of
these acts or events, which results in the EPC Contractor being unable to
materially fulfil its obligations;

(f) the EPC Contractor gives or offers to give (directly or indirectly) to any
person any bribe, gift, gratuity, commission or other thing of value, as an
inducement or reward for showing or forbearing to show favour or
disfavour to any person in relation to the EPC Contract.

(g) the EPC Contractor repudiates the EPC Contract, or provides a written
notice to that effect to TNB NE, Engineer or other third party, or abandons
the construction of any Generating Block for more than twenty eight (28)
consecutive days without the written consent of TNB NE or reasonable
excuse as determined by the Engineer appointed under the EPC
Contract;

(h) any material representation made by the EPC Contractor in the EPC
Contract shall be proved to have been false or misleading in any material
respect when made unless a remedy is provided for in the EPC Contract;

(i) failure to achieve the Taking Over of any Generating Block within one
hundred and eighty (180) days after the Taking-Over Date for the relevant
Generating Block;

(j) the Net Power Output of a Generating Block fails to meet the Minimum
Acceptance Criteria set out in the Contract Information within one hundred

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and eighty (180) days after the Taking-Over Date for the relevant
Generating Block;

(k) the measured heat rate of a Generating Block fails to meet the Minimum
Acceptance Criteria set out in the Contract Information within one hundred
and eighty (180) days after the Taking-Over Date for the relevant
Generating Block;

(l) Subject to (i) above, the liquidated damages payable under the EPC
Contract has reached the maximum liquidated damages allowable;

(m) the EPC Contractor or any of its Sub-Contractors fails to comply with any
provision of any applicable Law or applicable Permit, and such failure is
not remedied within

(i) fourteen (14) days after the EPC Contractor receives actual
knowledge thereof, or

(ii) such longer period as may be necessary for the EPC Contractor to
cure such failure, not to exceed eighty four (84) days, provided that
the EPC Contractor diligently pursues the cure of such failure and
such cure is effected in such a manner and within such time that
such failure to comply could not reasonably be expected to have a
material adverse effect on TNB NE, the Works or the EPC
Contractor's ability to perform its obligations under the EPC Contract
in accordance with the terms hereof; or

(n) the EPC Contractor:

(i) knowingly fails to maintain any insurance policy required of it, or

(ii) otherwise fails to maintain and, within two (2) business days of
receiving actual knowledge of such failure, fails to correct its failure
to maintain any such required insurance policy;

In any of these events or circumstances, TNB NE may, upon giving


fourteen (14) days' notice to the EPC Contractor, terminate the Contract
and expel the EPC Contractor from the Site and/or IF Site. However, in the
case of sub-paragraph (e) or (f), TNB NE may by notice terminate the
Contract immediately.

Termination by EPC Contractor

The occurrence of any of the following events, unless excused by Force Majeure,
or the EPC Contractor's failure to fulfil its obligations, shall constitute an Event of
Default by TNB NE, and the EPC Contractor shall be entitled to terminate the
Contract if:

(a) TNB NE defaults in payment as and when due of any moneys payable
(but unpaid) under the EPC Contract and such default shall continue for a
period of fifty six (56) days except for progress payment applications
disputed in good faith by TNB NE; or

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(b) TNB NE substantially fails to perform his material obligations under the
Contract or a material aspect of its obligations which renders the EPC
Contractor unable to achieve the Taking-Over of Generating Block,

(c) a prolonged suspension affects the whole of the Works, or

(d) TNB NE is dissolved or becomes bankrupt or insolvent, goes into


liquidation, has a receiving or administration order made against him,
compounds with his creditors, or carries on business under a receiver,
trustee or manager for the benefit of his creditors, or if any act is done or
event occurs which (under Applicable Laws) has a similar effect to any of
these acts or events.

In any of these events or circumstances, the EPC Contractor may, upon giving
fourteen (14) days’ notice to TNB NE, terminate the Contract. However, in the case
of sub-paragraph (d), the EPC Contractor may by notice terminate the Contract
immediately.

5.5.3.1.11 Liquidated Damages

The EPC Contractor shall pay Liquidated Damages properly due to TNB NE in
accordance with the provisions herein. Parties agree that these damages shall
not relieve the EPC Contractor from his obligation to complete the Works, or from
any other duties, obligations or responsibilities which he may have under the
EPC Contract.

(a) Liquidated Damages for delay in Taking Over

The EPC Contractor shall pay to TNB NE by way of liquidated damages the
amount stated in the EPC Contract Information, for each day of delay in
achieving the Taking Over of Generating Block 1 and Generating Block 2 beyond
the respective Taking-Over Date that is not the result of Force Majeure or TNB
NE's failure to materially fulfil its obligations under this EPC Contract.

For the avoidance of doubt, Liquidated Damages for delay in relation to


Generating Block 1 and/or Generating Block 2 shall be payable in the event of
any defect, damage or impairment which causes delay to the Interconnection
Facilities which is required for commercial operation of Generating Block 1 or
Generating Block 2 (as the case may be), notwithstanding that such defect,
damage or impairment occurs after the Taking Over of the Interconnection
Facilities.

(b) Liquidated Damages for Performance

(i) Liquidated Damages - Output

In the event that Generating Block 1 or Generating Block 2 is ready for taking-
over but the relevant Generating Block's Net Power Output established in the
Performance Test is less than the Guaranteed Net Power Output,

(A) the EPC Contractor will pay to TNB NE as Liquidated Damages the
amount stated in the EPC Contract Information for each kilowatt (or pro-
rata) of shortfall in the Guaranteed Net Power Output per Generating
Block after adjusting to the guaranteed conditions and allowing a

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tolerance for instrument error, in accordance with codes and standards,


all as identified in TNB NE’s Requirements; or

(B) If the EPC Contractor exercises the option to cure any deficiency in the
Guarantee Net Power Output or Guaranteed Net Heat, the EPC
Contractor shall pay to TNB NE as Liquidated Damages the amount to be
calculated in accordance with the provisions of the EPC Contract and
provide TNB NE with Curing Period Performance Security.

(ii) Liquidated Damages – Heat Rate

In the event that Generating Block 1 or 2 is ready for taking-over but the
heat rate established for such Generating Block in the Performance Test
exceeds the Guaranteed Net Heat Rate for the relevant Generating Block:

(A) the EPC Contractor will pay to TNB NE as liquidated damage the amount
stated in the EPC Contract Information for each kJ/kWh (or pro-rata) in
excess of the Guaranteed Net Heat Rate for each Generating Block so
affected after adjusting to the guaranteed conditions and allowing a
tolerance for instrument error in accordance with codes and standards, all
as identified in TNB NE's Requirements; or

(B) If the EPC Contractor exercises the option to cure any deficiency in the
Guarantee Net Power Output or Guaranteed Net Heat, the EPC
Contractor shall pay to TNB NE as Liquidated Damages, the amount to be
calculated in accordance with the provisions of the EPC Contract and
provide TNB NE with the Curing Period Performance Security.

(C) Payment of Liquidated Damages

TNB NE shall have the right to set off the liquidated damages, if any, against
remaining payments of the EPC Contract Price due to the EPC Contractor
hereunder. In the event that the remaining payments are insufficient, the EPC
Contractor shall pay such liquidated damages within twenty eight (28) days upon
demand in writing by TNB NE and if after such twenty eight (28) days the
liquidated damages are still unpaid, TNB NE shall be entitled to commence
recovery proceedings and charge interest on such unpaid amounts.

5.5.3.1.12 Limitation of Liability

The total liability of the EPC Contractor to TNB NE, under or in connection with
the EPC Contract other than under sub-clauses for Electricity, Water, Gas and
Distillate Fuel Oil, Employer’s Equipment and Free-Issue Material, Indemnities and
Intellectual and Industrial Property Rights, shall not exceed the Accepted EPC
Contract Amount and shall exclude insurance proceeds.

The total liability of the EPC Contractor to TNB NE for:

(a) Liquidated Damages for delay in Taking Over shall not exceed 15% of the
Accepted EPC Contract Amount; and

(b) Liquidated Damages for performance shall not exceed in aggregate a


Ringgit Malaysia amount equal to the value of 20% of the Accepted EPC
Contract Amount.

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The total liability of the EPC Contractor to TNB NE shall not exceed in aggregate
a Ringgit Malaysia amount equal to the value of 20% of the Accepted EPC
Contract Amount.

No limitation of liability shall apply in any case of fraud, deliberate default or reckless
misconduct by the defaulting Party.

5.5.4 Land Lease Agreement

5.5.4.1 Grant of Lease

TNB Prai Sdn Bhd (Company No. 500784-D) (the “Lessee”) has been awarded
the Project to build, own and operate a combined cycle power station to be
located on the Plant Land (as hereinafter defined) and the Lessee is also
desirous of utilizing a portion of the Jetty as a pumphouse (hereinafter referred to
as the "IPP Pumphouse").

In pursuance thereof, Tenaga Nasional Berhad (Company No. 200866-W) (the


“Lessor”) has agreed to grant a lease over the Plant Land and the IPP
Pumphouse on an "as is where is" basis in accordance with the National Land
Code 1965 and the Lessee has agreed to accept the lease of the Plant Land and
the IPP Pumphouse for the Lease Term (as hereinafter defined) subject to the
terms and upon the conditions set forth in the Lease Agreement (“LA”) dated 30
November 2012 to enable the Lessee to carry out its business of generation,
supply and sale of electrical energy and generating capacity exclusively to the
Lessor.

For the purposes of this particular section, “Lease” means the valid and
registrable lease for the Plant Land and the IPP Pumphouse for the Lease Term
to be granted by the Lessor to the Lessee in respect of the Plant Land and the
IPP Pumphouse in accordance with the provisions of the National Land Code
1965 (Form 15A).

5.5.4.2 Plant Land

The Plant Land comprises of a portion of the land held under H.S.(D) 50349, PT
10, in Mukim Bandar Prai, District of Seberang Perai Tengah, Pulau Pinang
measuring approximately 77,610 square meters (“Plant Land”).

The jetty is held under H.S.(D) 55959, PT 13, Mukim Bandar Prai, District of
Seberang Perai Tengah, Pulau Pinang measuring approximately 12,360 square
meters (“Jetty”).

5.5.4.3 Lease Term

The Lease Term commences from the Effective Date and ends on the day before
the 21st anniversary of the COD (the COD is ascribed in the Power Purchase
Agreement) of the First Generating Block and can be extended or earlier
terminated.

“Effective Date” means the date on which all conditions precedent listed in the
clause below have been satisfied or waived.

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Extension of Lease Term

Where the term of the Power Purchase Agreement is extended, the Lessee may
extend the Lease Tenure by notifying the Lessor (“New Lease”). The tenure of
the New Lease shall correspond with the extension of the Power Purchase
Agreement and be based on the prevailing market condition.

5.5.4.4 Conditions Precedent

The LA shall be conditional upon

(a) the Lessor obtaining the state consent for the grant of the Lease (“Letter
of Consent”); and

(b) for the Power Purchase Agreement is in full force and effect and all
conditions precedent to its effectiveness are satisfied or waived.

If any of the above conditions are not satisfied on or before six (6) months from
the Execution Date (“Stop Date”), the Lessor and Lessee shall extend the Stop
Date to such date as may be mutually agreed in writing.

5.5.4.5 Lease Rental and Terms of Payment

The annual rental in respect of the Lease for the Plant Land and the IPP
Pumphouse to be paid by the Lessee to the Lessor, shall amount to
RM970,000.00 only per annum and the first annual rental payment shall fall ten
(10) Business Days after the Effective Date of the LA and thereafter the Rental
for each subsequent year, for the duration of the Lease Term, shall be due to be
paid on the anniversary of the first Due Date;

5.5.4.6 Delivery of Possession

Possession of the Plant Land and IPP Pumphouse to the Lessee shall be
delivered on the Effective Date. However, the Lessee may request for early
delivery of possession of the Plant Land and IPP Pumphouse to commence site
preparation work or preliminary construction works by way of a written request to
the Lessor and the Lessor shall deliver the same within thirty (30) days of the
Lessee’s written request.

5.5.4.7 Maintenance Costs

The Lessee shall pay the Lessor the maintenance costs reasonably incurred by
the Lessor (to a maximum of RM250,000.00 per annum). If the maintenance cost
for a year is below the maximum RM250,000.00 limit, such difference shall be
carried forward to the next year to increase that year’s annual maintenance limit
would be increased.

5.5.4.8 Termination

The Lessor is entitled to terminate the LA if the project is aborted prior to the
Financial Closing Date or if the Lessee fails to satisfy a Walk Away Event by the
relevant Walk Away Date In the event of such a termination, the Lessor shall
return to the Lessee the portion of the Rental after deducting amounts for the
proportion of Rental incurred and the cost of removal of the Lessee’s Facilities
and cost of clearing up the Plant Land.

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In the event the LA is terminated by virtue of termination of the PPA and (as a
consequence thereof) the Lessor purchases the Project, the LA shall terminate
upon completion of the Lessor’s purchase of the Project and the Lessee shall
deliver possession of the lands to the Lessor on that same date.

In the event the LA is terminated by termination of the PPA and the Lessor does
not purchase the Project, the Lessee shall (within three hundred and sixty five
(365) days from date of PPA’s termination) remove all its facilities and clear up
the lands for delivery of possession to the Lessor.

The Lessor is not entitled to terminate or forfeit this LA so long as the PPA
remains in force.

For the purposes of this section, the following definitions would apply:

“Walk Away Date” means the date listed against each Walk Away Event in the
table below as the date by which the Walk Away Event must be achieved.

“Walk Away Events” means those events marking the completion of certain
critical steps in achieving the COD of a Generation Block on or before the
Scheduled COD of such Generating Block, in accordance with the terms of the
LLA, as identified in the table below.

Walk Away Event Walk Away Date

Occurrence of Financial Closing Date 2 July 2013

Issuance of NTP under the EPC 4 July 2013

5.5.4.9 Ownership

During the Lease Term, the Lessee shall be deemed the legal and beneficial
owner of the Lessee’s Facilities and the Lessor shall be deemed the legal and
beneficial owner of the Lessor’s Facilities.

5.5.4.10 Covenants of the Lessee

The Lessee shall bear all costs and expenses in obtaining the Letter of Consent
and the registration of the Lease (Form 15A). Each party shall bear its own
solicitors’ fees and costs in connection with the obtaining the Letter of Consent
and the registration of the Lease (Form 15A).

5.5.4.11 Covenants of the Lessor

Subject to the Lessee punctually paying the Rental and observing and performing
all its covenants stipulated in this LA, the Lessor covenants that the Lessee shall
peaceably and quietly hold and enjoy the Plant Land and the IPP Pumphouse.

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5.5.4.12 Assignment

The Lessee shall not assign, transfer, sub-lease or grant any tenancy in respect
of the Plant Land and the IPP Pumphouse, nor create any charge, lien, pledge or
trust in respect of, or in any other manner or from whatsoever dispose of, the
whole and/or any part of the Plant Land and the IPP Pumphouse or any part of
any right or interest of the Lessee in the Plant Land and the IPP Pumphouse
without the consent in writing of the Lessor. Notwithstanding the above, in the
event that the Financing Documents (as defined in the PPA) require the Lessee
to create an-assignment of the rights, benefits and obligations of the Lessee
under the LLA in favour of the Lenders (as defined in the PPA) the Lessor shall
provide its consent to the Lessee for the sole purpose of the same. In the event
that the LLA or the PP A is terminated, the Lessee shall discharge the
assignment, charge, lien or pledge (if any) created over the registered lease.

5.5.5 Operations And Maintenance Agreement

TNB Northern Energy entered into the EPC Contract on 21 January 2013 for the
design, engineering, procurement, and installation of the Facility.

Consequently, TNB Prai entered into the the following agreements: (i) the LTMP
Contract for the maintenance of 2 gas turbines that are to be installed in the
Facility; (ii) the Turnkey Contract on 21 January 2013 for the procurement and
sourcing of the skill, expertise and resources required to design, engineer,
procure and install the Facility; and (iii) the OMA with TNB Remaco (the
“Operator”) on 21 January 2013 for the operation and maintenance of the
Facility.

5.5.5.1 Scope of Services

The Operator is to operate the Facility as required to produce electrical energy


from the Facility in accordance with the operation and maintenance manuals,
prudent utility practice, the PPA, all applicable laws and the Grid Code. The
Operator is to maintain the Facility including inspecting, monitoring, cleaning
and taking of protective measures including testing as necessary with a view to
keeping the Facility in good working order, repair, replacing parts and
preventing it from prematurely deteriorating or wearing out in accordance with
Prudent Utility Practices; and the Operator is to carry out other repairs to restore
the subject equipment to a condition in which it can provide a substantially
similar service as can be expected from equipment of equivalent age. The
Operator has the obligation to meet the performance guarantees in respect of
the tested annual availability capacity, contracted average availability target,
heat rates and unscheduled outage limits as set out in the OMA.

5.5.5.2 Contract Price

TNB Prai shall pay the Operator operation and maintenance costs, comprising:

(a) Mobilisation Cost

The Mobilisation Cost is paid by TNB Prai to the Operator in consideration


of the Works carried out during the Mobilisation Period.

(b) The Procurement, operation and maintenance cost for the Works during
the Operating Period shall comprise the following:

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Fixed Operating Cost (FOC)

The Fixed Operating Cost is paid by TNB Prai to the Operator, in consideration of
the Works carried out during the Operating Period and comprises:

(a) Fee for the operation and maintenance

(b) Reimbursements:

(i) O&M Staff Salary

(ii) Insurance for O&M works (Workman Compensation and Vehicles


only)

(iii) General and Administrative (Staff, Travelling, Office Expenses and


Maintenance)

(c) Supply of Office, Safety, Lab Equipment, Tools and Vehicles

(d) Supply of Consumables / Supplies / Expendables

The Fixed Operating Cost shall be invoiced and paid by TNB Prai in 12 equal
monthly instalments at the end of each month of each year during the Term. For
the avoidance of doubt, the first invoice for the Fixed Operating Cost shall be
issued after the expiry of thirty (30) days from the Commercial Operations Date.

Variable Operating Cost (VOC)

The Variable Operating Cost is paid by TNB Prai to the Operator, in consideration
of the variable component of the Works carried out during the Operating Period.
The Variable Operating Cost shall be invoiced monthly at the end of each month
during the Operating Period.

5.5.5.3 Term of Agreement

The Term shall commence on the date of the OMA and shall continue for a
period being the later of:

(a) 21 years from the COD of the First Generating Block; and

(b) the expiry of the PPA;

unless otherwise extended or terminated in accordance with the terms of the


OMA.

The Term may be extended on a yearly basis upon mutual agreement between
the Parties. At least 1 year before the expiry of the Term, TNB Prai may notify the
Operator of its desire to extend the Term, whereupon the Parties shall commence
negotiations in good faith to reach to an agreement on the terms and conditions
of any extension.

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5.5.5.4 Limitation of Liability

Limit of Liability for Claims Relating To The OMA

The Operator's liability with respect to a claim or claims of any kind relating to the
OMA or the subject matter hereof, whether as a result of breach of contract,
warranty, indemnity, tort, strict liability or otherwise, shall be limited as follows:

(a) during the Mobilisation Period, an aggregate cap of 30% of the


Mobilisation Cost;

(b) during the Operating Period, a cap of 30% of the Procurement, Operation
and Maintenance Cost due in the relevant year in each case for the
relevant year;

(c) an overall aggregate cap for the Term of 50% of the Operation and
Maintenance due in the base year during the Operating Period; and

(d) The Contractor's gross negligence or wilful default, the Contractor's


liability under its indemnification obligations and any liability satisfied by
the proceeds of Contractor's insurance are all excluded from the caps
listed above.

Limit of Liability for Each Performance Guarantee

For each year during the Term, the maximum amount of liquidated damages that
the Operator is liable shall be limited to 30% of the Fixed Operating Cost for the
respective year.

Limit of Liability for Total of All Performance Guarantees

For each year during the Term, the maximum combined total amount of liquidated
damages that the Operator is liable be limited to 50% of the Fixed Operating Cost
for the respective year.

5.5.5.5 Performance Guarantees

Guaranteed Net Heat Rate

The heat rate (at the higher heating value) for each Generating Block throughout
the Term shall be no more than the applicable heat rates set out in the Schedule
of Heat Rates (at the Higher Heating Value) for each Generating Block in the
PPA.

Unplanned Outage Limit (UOL)

The aggregate unplanned outage (measured in kWh) of each Generating Block


throughout out the Term as calculated in accordance with the formula below shall
not exceed UOL₁:

∑k(DACPWK-DACAWK) x 1000 x 24

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Tested Annual Available Capacity (TAAC)

(a) The TAAC of each Generating Block throughout the Term as


establishedand determined in accordance with the PPA and Appendix C
of the PPA shall not be less than 535.715 MW.

(b) In the event the contractual available capacity established prior to the
COD of each Generating Block is lower than the 535.715 MW, such lower
figure shall be considered the TAAC which the Operator is required to
maintain.

Contracted Average Availability Target (CAAT)

The average availability target for a contract year block shall not be less than the
CAAT of 94.0% as out in the PPA.

Compliance with Despatch Instructions

The Operator shall cause the Facility to comply with all Despatch Instructions as
set out in OMA.

Satisfaction of Monitoring Tests

The Operator shall cause the Facility to satisfy tests conducted by the GSO upon
issuance of a notice by TNB to TNB Prai to determine the capability of a
Generating Block to meet the specified MW level up to the Declared Daily
Available Capacity within the time specified in the notice.

Compliance with Operating Standards or Characteristics

The Operator shall cause the Facility to comply with or operate in conformity with
any of the operating standards or characteristics as set out and further described
in the PPA.

5.5.5.6 Liquidated Damages and Bonuses

Failure to Maintain Guaranteed Net Heat Rate

In the event the heat rate of a Generating Block exceeds the Guaranteed Net
Heat Rate and ACC ≥ ADFP, the Operator shall pay TNB Prai as liquidated
damages:

Where:

LDHR (in RM) = (ACC - ADFP) x 30%

LDHR = Liquidated damages payable in the event the Guaranteed Net Heat Rate
is exceeded.

ACC = The aggregate audited fuel consumption (in Ringgit Malaysia) of the
relevant Generating Block based on net electrical output in the same financial
year of TNB Prai.

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ADFP = Total fuel payment received by the Owner from TNB over a financial year
of TNB Prai in connection with the relevant Generating Block calculated in
accordance with the PPA.

Failure to Maintain Unplanned Outage Limit

In the event the aggregate unplanned outage (measured in kWh) calculated in


accordance with the calculation as per the UOL above exceeds UOL the
Operator shall pay TNB Prai, as liquidated damages, 30% of the reduction in
Available Capacity Payments.

Failure to Achieve Tested Annual Available Capacity (TAAC)

In the event the Tested Annual Available Capacity is established or determined at


less than 535.715 MW the Operator shall pay TNB Prai as liquidated damages,
30% of the reduction in Available Capacity Payments for each day in accordance
with the PPA.

Contracted Average Availability Target (CAAT)

In the event the Facility fails to achieve the Contracted Average Availability
Target, the Operator shall pay TNB Prai as liquidated damages 30% of the
Availability Target Payment.

Failure to Comply with Despatch Instructions

In the event the Facility fails to comply with a despatch instruction, the Operator
shall pay to TNB Prai for each such failure and as liquidated damages an amount
equal to RM250,000 and the Energy Payment for any excess net electrical
output, save and except where the failure to comply with a Despatch Instruction
constitutes the third such failure to comply with a Despatch Instruction, within a
period of fourteen (14) days, whereby the Operator shall forthwith pay Liquidated
Damages in accordance with the following formula:-

(Reference Despatch Level - Deemed Declared Available Capacity) x CCR x


Reference Period

Failure to Satisfy Monitoring Tests

In the event the Facility fails to comply with a Monitoring Test, the Operator shall
pay to TNB Prai for each such failure and as liquidated damages an amount
equal to RM250,000 and the Energy Payment for any excess net electrical
output, save and except where the failure to comply with a Monitoring Test
constitutes the third such failure to comply with a Monitoring Test, within a period
of fourteen (14) days, whereby the Operator shall forthwith pay Liquidated
Damages in accordance with the following formula:-

(Reference Despatch Level - Deemed Declared Available Capacity) x CCR x


Reference Period

Failure to Comply with Operating Standards or Characteristics

In the event the Facility fails to comply with or operate in conformity with any of
the operating standards or characteristics set out in the PPA, the Operator shall

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pay to TNB Prai, for each such failure and as liquidated damages RM
100,000.00.

Bonus

In the event the heat rate of a Generating Block does not exceed the Guaranteed
Net Heat Rate and ACC < ADFP, TNP Prai shall pay to the Operator as a heat
rate bonus calculated as follows:

30% x (ADFP – ACC)

Whereby:

ACC = The aggregate audited fuel consumption (in Ringgit Malaysia) of the
relevant Generating Block based on net electrical output in the same financial
year of the Owner.

ADFP = Total fuel payment received by TNB Prai from TNB over a financial year
of TNB Prai in connection with the relevant Generating Block calculated in
accordance with the PPA.

5.5.5.7 Curtailment of Operations

If the Operator curtails output of electricity or shuts down the Facility, as a result
of TNB or GSO's refusal to accept net electrical output from the Facility:

(a) the Operator shall inform TNB Prai of the additional cost that Owner and
Operator may incur as a result of a rapid shutdown of the Facility (if
applicable); and

(b) TNB Prai must continue to pay the Operator the Procurement, Operation
and Maintenance Cost and, unless it is due to the Facility delivering net
electrical output which does not conform to the electrical characteristics
described in the PPA or an act or omission of the Operator, its employees,
agents or Subcontractors,

(i) TNB Prai must reimburse the Operator for any reasonable additional
resulting cost incurred by the Operator; and

(ii) the Operator will be excused from its Performance Guarantees and
will not be liable to pay any liquidated damages and will not be held
to be in breach of the OMA.

5.5.5.8 Termination

5.5.5.8.1 Termination upon expiry

The OMA will automatically terminate upon the expiry of the Term, unless earlier
terminated or extended in accordance with the OMA.

5.5.5.8.2 Termination for Operator’s Default

(a) The occurrence of any of the following events at any time from the date of the
NTP, unless excused by Force Majeure or TNB Prai's failure to fulfil its
obligations under the OMA, shall constitute an Event of Default by the Operator:

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(i) Wilful Misconduct

if the Operator has committed an intentional breach or demonstrated a


reckless disregard in the performance of the Works and such actions have
not been remedied within ten (10) days (or such longer period as may be
specified in that notice) of receipt of a written notice from TNB Prai
requiring the Operator to do so; or

(ii) Breach of obligations

if without prejudice to the provision of (iv) below, the Operator commits a


breach of its obligations under the OMA and receives written notice in
respect thereof from TNB Prai and if such breach:

(A) either (a) is persistent and repeated or (b) has not been remedied
within thirty (30) days (or such longer period as may be specified
in that notice) of receipt of a written notice from TNB Prai to do so;
and

(B) materially disrupts or materially adversely affects or prejudices:

(1) the management of the Facility as required by Law; or


(2) the performance of the Works; or

(iii) Insolvency of Operator

if the Operator is dissolved or adjudicated a bankrupt, makes a general


assignment for the benefit of creditors, seeks or consents to the
appointment of a receiver, custodian, or similar official for any substantial
part of its property; institutes any proceedings seeking an order for relief
or to adjudicate it insolvent or for an adjustment of its debts under any law
relating to bankruptcy or insolvency;

(iv) Employee Disputes

if any dispute has occurred between the Operator and its employees
which results in a failure by the Operator to perform any work which
failure has any of the effects specified in (ii) above and such failure has
not been remedied within thirty (30) days of receipt of a notice from TNB
Prai to do so or if as a result of the industrial action of the Operator's
employees or any dispute between the Operator and its employees, tire
Operator has been unable to Operate the Facility for an aggregate of forty
five (45) days in any 3 year period; or

(v) Cessation of Business

if the Operator ceases to carry on power station operation as its principal


business; TNB Prai may by fifteen (15) days' written notice to the
Operator to terminate the OMA; or

(vi) Maximum Liability

if the liability of the Operator under the OMA exceeds the amount referred
to in section 5.5.5.5 above for more than 2 consecutive years; TNB Prai

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may by fifteen (15) days written notice to the Operator terminate the OMA;
or

(vii) Reduction in Availability and Efficiency

If at any time during the Operating Period:

(a) the Tested Annual Available Capacity falls below the level set out
in the OMA;

(b) the Unplanned Outage exceeds the level set out in the OMA;
and/or

(b) the Guaranteed Net Heat Rate exceeds the level referred to in the OMA as may
be demonstrated from the difference in the payments made for Nominated Fuel
supplied by the Nominated Fuel supplier and payment received for Energy
Payments from TNB under the PPA in each month;

for more than 3 consecutive Contract Years due to causes which are wholly
attributable to the breach by the Operator of any of its obligations under the OMA
BUT PROVIDED THAT if any dispute on this provision has been referred for
resolution in accordance with the provisions in the OMA on arbitration and
dispute resolution, the OMA shall not be terminated until such dispute is resolved.

(c) Except for the mechanisms provided to enable the Contractor to cure its failure to
perform its obligation, if there shall occur an Event of Default, TNB Prai may give
the Operator notice in writing specifying and describing the Event of Default
complained of. If TNB Prai gives such notice and the Operator does not
commence to diligently pursue to cure such Event of Default within twenty (20)
days after receipt of such notice and thereafter continue to pursue such cure
diligently and promptly and to complete such cure within ninety (90) days or such
longer period as may reasonably be required to effect such cure, TNB Prai may,
in addition to other remedies set forth in the OMA, terminate the OMA by written
notice to the Operator.

5.5.5.8.3 Termination for TNB Prai’s Default

(a) The occurrence of any of the following events at any time from date of the Notice
To Proceed, unless excused by Force Majeure, shall constitute an Event of
Default by TNB Prai:

Insolvency

TNB Prai is dissolved or adjudicated a bankrupt; makes a general assignment for


the benefit of creditors; seeks or consents to the appointment of a receiver,
custodian, or similar official for any substantial part of its property; institutes any
proceedings seeking an order for relief or to adjudicate it insolvent or adjustment
of its debts under any law relating to bankruptcy or insolvency;

Default in payment

TNB Prai defaults in payment as and when due of any moneys payable (but
unpaid) under the OMA and such default shall continue for a period of 15 days
except for progress payment applications disputed in good faith by TNB Prai;

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Breach of obligations

TNB Prai fails substantially to perform any of its obligations under this Agreement
in any material respect; or

Misrepresentation

any material representation made by TNB Prai herein shall be proved to have
been false or misleading in any material respect when made.

(b) If there shall occur an Event of Default in respect of TNB Prai, the Operator may
give TNB Prai notice in writing specifying in detail the Event of Default. If the
Operator gives such notice and TNB Prai does not commence to diligently pursue
the cure of such default within twenty (20) days after TNB Prai's receipt of such
notice and thereafter continue to pursue such cure diligently and promptly and to
complete such cure within such period or such longer period not to exceed ninety
(90) days as may reasonably be required to effect such cure, the Operator may
terminate the OMA by written notice to TNB Prai and seek remedies pursuant to
the OMA.

5.5.5.8.4 Termination of EPC Contract, PPA or expiry of the Term

(a) The OMA may be terminated, at TNB Prai's option, if:

(i) the EPC Contract is terminated prior to the commencement of the


Mobilisation Period, provided however the Mobilisation Cost due and any
other reasonable costs incurred by the Operator pursuant to its
performance prior to such termination and its reasonable costs pursuant to
such termination shall be paid or reimbursed by TNB Prai; or

(ii) the Facility is purchased from TNB Prai following the termination of the
PPA, provided however TNB Prai shall use its reasonable endeavours to
assist the Operator in obtaining an agreement on terms no less favourable
than the OMA with the new owner of the Facility to allow the Operator to
continue to Operate and Maintain the Facility.

(b) Subject to extension in accordance with the OMA, the OMA should automatically
terminate 21 years after the COD of the First Generating Block, unless otherwise
agreed.

5.5.5.8.5 Assignment

The OMA shall not be subject to assignment by either party without the prior
written consent of the other party except that TNB Prai may assign the
Agreement to any financing Parties as security for providing the financing or
refinancing for the Facility. The Operator agrees to enter into an assignment and/
or direct agreement with TNB Prai and the Financing Parties in a form reasonably
required by the financing parties, subject to the consent of the Operator, which
consent must not be unreasonably withheld, that contemplates, amongst other
things, the exercise by the Financing Parties of the rights of TNB Prai under the
OMA so that the Financing Parties may step into the position of TNB Prai under
the OMA.

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5.5.6 Long Term Maintenance Programme Contract

5.5.6.1 Overview

The LTMP was entered into on 21 January 2013 between TNB Prai and Siemens
AG and Siemens LS (Siemens AG and Siemens LS jointly referred to as “LTMP
Contractor”) to provide for the supply of long term maintenance services
consisting of parts, shop repairs, miscellaneous hardware and scheduled outage
services to the Facility by the LTMP Contractor.

5.5.6.2 Scope of Work

The LTMP Contractor’s scope of work, the terms and conditions of the LTMP and
the LTMP contract price are based upon the following basic operating
parameters:

(a) operation and maintenance of the Gas Turbine shall be operated and
maintained in accordance with the operating regime and technical limits
specified in the LTMP;

(b) operation of the Power Plant and the take-over settings, using fuel and
consumables in accordance with the specifications contained in the
LTMP;

(c) the Power Plant shall be operated using water and chemicals meeting
the specifications contained in the LTMP, and TNB Prai shall ensure
that the LTMP Contractor has the right to take gas, water and chemical
samples at any time during the term of the LTMP; and

(d) the Power Plant shall be operated in such a way that the scheduled
outages can be conducted on the Gas Turbine in accordance with the
specifications contained in the LTMP.

The LTMP Contractor shall only be liable for at least negligently incorrectly given
or at least negligently omitted instructions regardless of the legal theory of
recovery whether based in contract, in tort (including negligence and strict
liability), under warranty, indemnity or otherwise. The LTMP Contractor shall not
be liable for the consequences of any failure to comply with the instructions.

5.5.6.3 Price and Payment Terms

In consideration of the LTMP Contractor's performance of its obligations carried


out within its scope of work under the LTMP, TNB Prai shall pay to the LTMP
Contractor the following fees:

(a) Mobilisation Fee.

The Mobilisation Fee consists of an offshore part (Siemens AG) and onshore part
(Siemens LS).

(b) Fixed Fee:

Each year a Fixed Fee shall be paid and invoiced in equal monthly instalments at
the beginning of each month, starting at the originally Scheduled COD of the 1st

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Gas Turbine and ending at the end of the term of the LTMP. The total Fixed Fee
per year consists of an offshore part (Siemens AG) and onshore part (Siemens
LS).

(c) Variable Fee:

The Variable Fee is based on the number of Equivalent Base Hours (“EBH”) the
gas turbine actually accrues starting from First Fire. The Variable Fee based on
EBH shall be paid at the end of each calendar month. The amount of each
monthly payment is based on the number of EBH that the Gas Turbine accrued in
the previous calendar month. The initial Variable Fee payment based on EBH
shall consist of the actual EBHs accrued between First Fire and actual TOC and
shall be invoiced to TNB Prai at originally Scheduled COD.

TNB Prai has the right to request services for a Scheduled Outage prior to the
Gas Turbine accruing the number of EBH requiring such inspection. If a
Scheduled Outage of the Gas Turbine is to be carried out prior to the planned
EBH intervals as defined in Attachment C (Planned Outage Schedule), a "true
up" payment shall be paid, equal to the difference between the actual paid
Variable Fee and the amount that would have been due if the outage was
performed at the EBH interval defined in the LTMP. The EBH Fee shall be
payable until commencement of the Scheduled Outage scheduled at 100.000
EBH.

(d) Payments for extra work (if any)

Invoices for change orders shall be submitted in accordance with the mutually
agreed price and procedure as specified in the change order.

Price Indexation

Except as otherwise provided in the LTMP, each instalment payment shall be


subject to adjustment in accordance with the price indexation formula as set out
in the LTMP.

5.5.6.4 Term of LTMP

The term of this LTMP (the “Term”) shall commence on the Effective Date and,
unless terminated earlier pursuant to Clause 12 (Termination), it shall end for
each Gas Turbine upon completion of the earlier of:

(a) the later of:

(i) a prescribed level of accumulated EBHs on the applicable Gas


Turbine, calculated from First Firing of the applicable Gas Turbine;
or

(ii) the 8th Scheduled Outage of the applicable Gas Turbine has been
completed; or

(b) 20 years after the Effective Date

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“Effective Date” means the later of:

(a) the date this LTMP is signed by both parties, or, if not signed by both
parties simultaneously, the date of signature by the second party
(“Signature Date”), and

(b) the date on which TNB NE, as party to the EPC Contract, issues a valid
notice to proceed. TNB Prai shall inform the LTMP Contractor immediately
after issuance and shall provide a copy of the notice to proceed.

Additional Term

If TNB Prai anticipates that:

(a) the achievement of the aforesaid prescribed level of accumulated EBHs


on the applicable Gas Turbine will not have occurred by the time the first
Gas Turbine has reached its 6th inspection, or

(b) not all of the Scheduled Outages on the applicable Gas Turbine will have
been performed by the time the first Gas Turbine has reached its 6th
inspection;

TNB Prai shall be entitled to order an extension of the Term (“Additional


Term”) by sending a written notice to the LTMP Contractor not earlier than
7 years from the Effective date but prior to the first Gas Turbine reaching
its 6th inspection.

If TNB Prai exercises the option for this extension, the Term shall end for
each Gas Turbine upon completion of the earlier of:

(i) the later of:

(A) the aforesaid prescribed level of accumulated EBHs on the


applicable Gas Turbine, calculated from First Firing of the
applicable Gas Turbine; or

(B) the 8th Scheduled Outage of the applicable Gas Turbine has
been completed;

or

(ii) 24 years after the Effective Date.

5.5.6.5 Limitation of Liability

The LTMP Contractor shall be liable for any damage to the TNB Prai’s property
caused by negligent acts or omissions or wilful misconduct or based on strict
liability of the LTMP Contractor for the performance of its obligations hereunder.

However, TNB Prai expressly agrees that under no circumstances shall the
liability of the LTMP Contractor under any theory of recovery (including
reimbursement of costs incurred by TNB Prai), whether based in contract, in tort
(including negligence and strict liability), under warranty, indemnity or otherwise,
exceed caps (i) per event and Gas Turbine, (ii) per Contract Year and Gas

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Turbine and (iii) in total aggregate over the Term for any physical damage to
property.

TNB Prai expressly agrees that its remedies provided herein are exclusive and
that under no circumstances (except for wilful misconduct, fraud and
indemnification under clause 13.1.1 of the LTMP) shall the liability of the LTMP
Contractor under any theory of recovery (including reimbursement of costs
incurred by TNB Prai), whether based in contract, in tort (including negligence
and strict liability), under warranty, indemnity or otherwise, exceed:

(a) in aggregate in any Contract Year 62.5% of the Contract Price paid to the
LTMP Contractor during such Contract Year, and

(b) in aggregate for any post term liability 15% of the yearly Contract Price
paid to the LTMP Contractor on average per year during the Term, and

(c) as the maximum aggregate 62.5% of the total Contract Price.

5.5.6.6 Defects Liability and Warranty

Term Warranty for Program Parts

The LTMP Contractor shall be liable for defects in material and workmanship, or
for normal wear and tear:

(a) of the program parts supplied by the LTMP Contractor under the LTMP,
and

(b) once the defects' liability for program parts under the EPC Contract has
expired, earliest however two (2) calendar years after Scheduled COD,
program parts which were delivered under the EPC Contract,

from the date supplied until the end of Term ("Term Warranty").

If during this period a program part fails to conform to the above Term Warranty
and the LTMP Contractor is promptly notified in writing by TNB Prai of the defect
within the Term Warranty period, the LTMP Contractor shall, at its option and
expense, either:

(i) repair the defective program part; or

(ii) install a new or refurbished program part as substitute for the defective
program part.

Post-Term Defects Liability for Program Parts

(a) After the expiration of the Term, the LTMP Contractor shall be liable for
defects in material and workmanship of the program parts installed in
such Gas Turbine by LTMP Contractor during the performance of the last
Scheduled Outage until the earlier of:

(i) twelve (12) months after the date of completion of such Scheduled
Outage, or

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(ii) eight thousand (8,000) EBHs after the date of completion of such
Scheduled Outage.

(b) If during this period a program part fails to conform to the above defects'
liability and the LTMP Contractor is promptly notified in writing by TNB
Prai of such defect within the above period, the LTMP Contractor shall, at
its option and expense, either:

(i) repair the defective program part, or

(ii) install a new or refurbished program part as substitute for the


defective program part.

5.5.6.7 LTMP Contractor’s Insurance

During the Term, the LTMP Contractor shall maintain in full force and effect:

(a) General comprehensive third party liability insurance, including bodily


injury, property damage, products / completed operations, standard
contractual and accidental environmental impairment / pollution liability;
this cover may exclude however damage to property of third parties
(including TNB Prai’s property) which is under care, custody or control of
the insured.

(b) Employer’s liability and workmen compensation insurance in accordance


with any Applicable Laws; where any Applicable Laws do not require any
specific regulations or amounts, the LTMP Contractor shall arrange this
insurance as it is customarily done according to good industrial practices.

(c) Automobile liability insurance in accordance with any Applicable Laws;


where any Applicable Laws do not require any specific regulations or
amounts, the LTMP Contractor shall arrange this insurance as it is
customarily done according to good industrial practices.

The coverage shall be at the usual levels in the ordinary course of


business. Upon request, the LTMP Contractor shall provide to TNB Prai
certificates or other evidence of such coverage. The LTMP Contractor
shall give TNB Prai thirty (30) days advance notice of any cancellation or
material changes in such policies.

5.5.6.8 TNB Prai’s Insurance

During the Term, TNB Prai shall maintain in full force and effect:

(a) Property all risk insurance, including boiler and machinery breakdown
coverage, covering all real and personal property of TNB Prai on a 100%
replacement cost basis.

(b) General comprehensive third party liability insurance, including bodily


injury, property damage, products / completed operations, standard
contractual and accidental environmental impairment / pollution liability.

TNB Prai’s insurances shall provide the best terms and conditions as are
reasonably available in the insurance market and shall be effected with insurers

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(or, where the local insurance market is a restricted insurance market, with
reinsurers) being at least A-rated or better.

TNB Prai shall ensure that each of the insurances to be provided by TNB Prai in
accordance with this provision shall be primary to any insurance carried by TNB
Prai and TNB Prai’s subcontractors, and that each insurance shall name the
LTMP Contractor and its subcontractors as co-insured with insurer’s waiver of
subrogation.

TNB Prai shall provide to the LTMP Contractor a copy of the property all risks
and machinery breakdown insurance and, upon request, certificates or other
evidence of the other insurances. TNB Prai shall give the LTMP Contractor thirty
(30) days advance notice of any cancellation or material changes in such
policies.

TNB Prai’s Insurance before TOC

TNB Prai shall ensure that the LTMP Contractor and its subcontractors are
named as co-insured with insurer’s waiver of subrogation in the construction /
erection all-risks’ insurance which has to be provided under the EPC Contract for
any activities of TNB Prai or its subcontractors before TOC.

5.5.6.9 Payment Security

Financial security as is acceptable to LTMP Contractor (such as a bank bond)


shall be established to secure TNB Prai's payments under this Contract. Such
financial security shall (i) be issued by a entity acceptable to the LTMP
Contractor, (ii) be established by TNB Prai in favour of the LTMP Contractor
within fifteen (15) days from Effective Date, (iii) be in a form prescribed in the
LTMP, (iv) guarantee payments of the Contract Price; and (v) remain in full force
and effect until all payments due to the LTMP Contractor under this Contract
have been paid in full. Within ten (10) days of TNB Prai's submittal of notice from
the LTMP Contractor, TNB Prai shall extend the validity or increase the amount
of such payment security as may be required to effect full payment of any
amendment or Change Order or Instruction to TNB Prai. All expenses incurred by
TNB Prai in connection with the establishment and operation of such payment
security shall be for the account of the TNB Prai.

5.5.6.10 Termination

Neither Party shall be entitled to terminate the LTMP, unless established under
the LTMP.

5.5.6.10.1 LTMP Contractor’s Default

TNB Prai shall be entitled to terminate the LTMP by prior written notice to the
LTMP Contractor if the LTMP Contractor is in Default. The LTMP Contractor shall
be considered to be in “Default”:

(a) if the LTMP Contractor is insolvent or if any proceeding is instituted


against the LTMP Contractor seeking to adjudicate the LTMP Contractor
as bankrupt or insolvent, or if the LTMP Contractor makes a general
assignment for the benefit of its creditors, or if a receiver is appointed on
account of the insolvency of the LTMP Contractor, or if LTMP Contractor
files a petition seeking to take advantage of any other Law relating to

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bankruptcy, insolvency, winding up or composition or readjustment of


debts and, in the case of any such proceeding instituted against the LTMP
Contractor (but not by the LTMP Contractor) if such proceeding is not
dismissed within forty five (45) days of such filing; or

(b) if the LTMP Contractor is in breach of any material provision of this LTMP,
and the LTMP Contractor has not commenced cure of such breach within
thirty (30) days after receipt of written notice from the TNB Prai of such
breach; or

(c) if the LTMP Contractor is in breach of any material provision of this LTMP,
and the LTMP Contractor is continuing to abandon the pursuit of the cure
of such breach twenty (20) days after having received written notice from
the TNB Prai that the TNB Prai may terminate this LTMP.

The LTMP Contractor shall not be considered to be in breach of a provision of


this LTMP in case payment of liquidated damages is the remedy foreseen for
such breach and the LTMP Contractor is not in default of payment of such
liquidated damages.

If TNB Prai elects to terminate this LTMP pursuant to the above provision, the
LTMP Contractor shall be entitled to retain or receive only those amounts paid or
payable hereunder at the time of termination. Upon such termination, the LTMP
Contractor shall stop work on the terminated portion of this LTMP and shall place
no further orders with lower tier subcontractors.

5.5.6.10.2 Termination for Convenience

TNB Prai may, after the first Major Inspection, and upon thirty (30) days written
notice to the LTMP Contractor, at its sole option, terminate the LTMP, at any time
for the TNB Prai’s convenience.

5.5.6.10.3 TNB Prai’s Default

(a) Suspension for TNB Prai’s Default

In the event of any of the following occurs the LTMP Contractor may at its option
suspend wholly or partly the provision of its Works under the LTMP, if:

(i) TNB Prai having failed to make payment of any amount due and payable
to the LTMP Contractor within thirty (30) days after the receipt of a written
payment reminder by the LTMP Contractor; or

(ii) TNB Prai is insolvent or any proceeding is being instituted against TNB
Prai seeking to adjudicate TNB Prai as bankrupt or insolvent or TNB Prai
makes a general assignment for the benefit of its creditors or a receiver is
being appointed on account of any insolvency or TNB Prai is filing a
petition seeking to take advantage of any law relating to bankruptcy,
insolvency, winding up or readjustment of debts and, in the case of any
such proceeding instituted against TNB Prai (but not by TNB Prai) if such
proceeding is not dismissed within forty five (45) days of such filing; or

(iii) upon a change in the ownership or ultimate management control of TNB


Prai, the LTMP Contractor reasonably believes that this change could

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materially affect the LTMP Contractor’s interests, including without


limitation the sale of any ownership interest in TNB Prai or the Power
Plant to any entity in competition with LTMP Contractor; or

(iv) TNB Prai having failed to perform any of its material obligations under this
LTMP or having impeded the LTMP Contractor’s exercise of any of its
material rights under this Contract; or

(v) TNB Prai having failed to provide or maintain a letter of credit or security
instrument agreed upon by the parties to be provided pursuant to section
5.5.6.9 above (Payment Security).

In the event the LTMP Contractor suspends the provision of its Works, TNB Prai
shall pay the LTMP Contractor any additional Costs and expenses incurred
resulting from such suspension.

(b) Termination for TNB Prai’s Default

The LTMP Contractor may terminate a part or the whole LTMP by written notice
with immediate effect in case the requirements set forth in section 5.5.6.10.3
(i)(b) or (c) are given, with thirty (30) days written notice to TNB Prai in the other
cases stipulated in section 5.5.6.10.3(i)(d) or (e) and with sixty (60) days written
notice in case the TNB Prai having failed to make payment of any amount due
and payable to the LTMP Contractor.

Upon the termination by the LTMP Contractor becoming effective:

(i) the LTMP Contractor shall stop all Works and place no further orders or
subcontracts, and

(ii) TNB Prai shall promptly pay the LTMP Contractor for all works, supplies
and Services performed and all reasonable termination cost, if any, from
lower tier subcontractors upon submission of the LTMP Contractor’s
invoice, and

(iii) TNB Prai shall pay for any other cost or liability which was reasonably
incurred by the LTMP Contractor under the circumstances including the
cost of removal / return of items or the repatriation of staff.

5.5.6.10.4 Termination for Extended Force Majeure

If one or more Force Majeure events continue to cause delay for more than six
(6) months, then either Party may terminate the LTMP with immediate effect. If
any of the Parties elects to terminate the LTMP pursuant to this Clause, then
upon such termination, the LTMP Contractor shall stop all Works related to the
LTMP and place no further orders or subcontracts, and TNB Prai shall promptly
pay the LTMP Contractor for all Works, supplies and Services performed until
and including the date such termination becomes effective.

5.5.6.10.5 Termination Fee

TNB Prai shall pay to LTMP Contractor the applicable termination fee calculated
in accordance with the LTMP if:

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(a) TNB Prai terminates this LTMP under Termination for convenience; or

(b) the LTMP Contractor terminates this LTMP as Termination for TNB Prai’s
Default.

5.5.6.10.6 Force Majeure

Excuse by Force Majeure

For the purposes of this LTMP, Force Majeure shall mean an exceptional event,
condition, or circumstance or its effect which:

(a) is beyond the reasonable control of and occurs without fault or negligence
of Party claiming it as a Force Majeure Event;

(b) could not have been provided against by the Party claiming it as a Force
Majeure Event before entering into the LTMP;

(c) causes a delay or disruption in the performance of any obligation of the


Party claiming it as a Force Majeure Event under this LTMP despite all
reasonable efforts of the Party claiming it as a Force Majeure Event to
prevent it or mitigate its effects.

Neither Party shall be liable for failure to perform any obligation or a delay in
performance resulting from Force Majeure including but not limited to acts of
God, acts of civil or military authority; acts of war whether declared or undeclared;
acts (including delay, failure to act) of any governmental authority, civil
disturbance, insurrection or riot, sabotage, terrorist acts, fire, inclement weather
conditions, earthquake, flood, strike, work stoppage or other labour difficulty,
embargo or car shortage.

Under no circumstances TNB Prai shall be excused by a Force Majeure Event


from its payment obligations in respect of the Contract Price.

Effect of Force Majeure

In the event either Party is unable to perform its duties and obligations under this
LTMP as a result of a Force Majeure event, such Party shall give notice to the
other of such inability stating the Force Majeure event in question.

In the event of a delay in performance caused by Force Majeure, the date of


Delivery or the date of the duties and obligations for the Party claiming Force
Majeure shall be extended by a period of time reasonably necessary to overcome
the effect of such delay. Immediately upon cessation of the relevant Force
Majeure event, the Party claiming it as a Force Majeure event shall give notice of
such cessation to the other Party.

Notwithstanding the aforementioned, the Party claiming Force Majeure Event


shall continue to perform its obligations during any period of Force Majeure to the
extent reasonably practicable.

Neither Party shall be entitled to cost relief in case of Force Majeure.

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5.5.7 Turnkey Contract

5.5.7.1 Salient Terms

5.5.7.1.1 Scope

TNB Northern Energy Berhad (Company No. 1024796-X) (“TNB NE” or


“Contractor”) entered into the Turnkey Contract dated 21 January 2013 with TNB
Prai Sdn Bhd (Company No. 500784-D) (“TNB Prai” or “Employer”) the
Contractor undertook to perform the Works, including but not limited to the
following:

(a) design, procure, construct, manufacture, deliver to the Site and/or IF Site
and erect or install all equipment, systems, components and Materials
necessary to achieve successfully the Performance Guarantee, to
commission and be ready for the taking over of each Generating Block,
the Common Facilities and the Interconnection Facilities by their
respective Taking-Over Dates, to complete successfully the Tests On
Completion and to achieve the issuance of all the Taking-Over
Certificates, on a fixed priced, lump sum turnkey basis;

(b) design, engineer, construct and commission each Generating Block, the
Common Facilities, and the Interconnection Facilities as the case may be,
in accordance with this Turnkey Contract and where these are silent on
any specific matters, then in accordance with Prudent Utility Practices;
and

(c) design, engineer and construct each Generating Block to meet the
standards and requirements more particularly described in this Turnkey
Contract, as follows:

(i) in relation to noise and emissions, the Contractor shall ensure that
the Generating Blocks and/or the Facility complies with the
conditions and other provisions of the EIA Approval and the
environmental requirements. In relation to the start up time and
despatch ramp rates, the Contractor shall ensure that the
Generating Blocks and the Facility complies with the conditions as
specified in the Turnkey Contract;

(ii) electric energy generated by each Generating Block, shall be


capable of being delivered to the Interconnection Point and shall
meet all technical requirements, operating standards and
characteristics contained in the Turnkey Contract and the Grid
Code;

(iii) each Generating Block shall be designed, engineered and


constructed to meet its respective Guaranteed Net Output;

(iv) each Generating Block shall be designed, engineered and


constructed to meet its respective Guaranteed Net Heat Rate;

(v) each Generating Block, shall be designed, engineered and


constructed to meet the Permitted Emissions;

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(vi) each Generating Block shall be designed, engineered and


constructed to meet the Permitted Noise Level;

(vii) each Generating Block shall be designed, engineered and


constructed to meet all other performance and operation
parameters in accordance with Prudent Utility Practices; and

(viii) the Interconnection Facilities shall be designed, engineered and


constructed to meet all performance and operation parameters in
accordance with the Turnkey Contract;

(d) (i) connect each Generating Block to the Interconnection Point to


receive or deliver electricity;

(ii) connect each Generating Block to the relevant delivery point(s) to


receive or deliver fuel, water, waste and any other input or output
of the Works, other than electricity;

(e) start-up, test and commission each Generating Block including initial
testing of components, calibration of controls and equipment, initial
operation of the Works and each component thereof, function and
verification tests, and all other start-up and initial operation functions
pertaining to the Works at the Site and/or IF Site. The Employer and the
Utility shall have the right (but shall not be obligated) to observe all start-
up and initial operation functions pertaining to the Works. At all times
during the performance of the Works, the Contractor shall use all
reasonable efforts to minimise (consistent with Prudent Utility Practices
and the terms of the Turnkey Contract) the use of fuels, utilities,
consumables, waste disposal services, electricity, water and chemicals;

(f) to use best efforts to make available for purchase by the Employer
suitable spare parts for the operation and maintenance of the Works for a
period of time following taking over;

(g) to provide as part of the Accepted Contract Amount, all Special Tools for
the operation and maintenance of the Plant;

(h) the Contractor shall submit to the Employer the construction schedule that
indicates, in a manner consistent with the overall construction schedule
then set forth, the proposed dates for completion of the individual features
of the Works set forth (as such construction schedule may be adjusted),
and the Employer shall have access to the updated schedules of the
Works and monthly progress reports of actual progress of the Works
prepared by the Contractor or as may be provided by the Subcontractor to
the Contractor, as the case may be; and

at all times, coordinate and liaise with the Employer, the Utility and/or Off-taker to
ensure that the notice and coordination activities stipulated in the Turnkey
Contract are achieved. In addition to the above and among others, the
Contractor shall be solely responsible in financing the Project. The Contractor
shall complete and/or present all written representations, undertakings, and other
documentation or information as may be reasonably required under the Turnkey
Contract to meet the requirements of the financial institutions.

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For the purposes of this section, the following definitions would apply:

“Accepted Contract Amount” means the amount described as such in this


Turnkey Contract for the execution and completion of the Works and the
remedying of any defects.

“Project” means the design, construction, ownership, operation, maintenance and


financing of the Power Plant to generate and deliver electrical energy and make
generating capacity available to the Offtaker.

“Special Tools” mean the special tools provided by the Contractor and/or the
Subcontractor for the operation and maintenance of the Plant or as may
otherwise be agreed, and shall include items normally included with the purchase
of equipment from Subcontractors. The Contractor shall hand over the Special
Tools to the Employer in good order, or replace them at its cost.

“Subcontractor” means any person named in this Turnkey Contract as a


subcontractor, or any person appointed as a subcontractor, for a part of or for the
entire Works and the legal successors in title to each of these persons.

“Works” mean the designing, manufacturing, delivery, installation, commissioning


and testing (including performance and guarantee tests) of the Project and its
associated facilities; or the permanent works and temporary works, or either of
them as appropriate.

5.5.7.1.2 Commencement of Works

The Contractor shall commence Works under the Turnkey Contract upon the
execution of the Turnkey Contract.

The Contractor may subcontract the Works wholly or in part to Samsung E&C,
and the Contractor shall ensure that its obligations under the Turnkey Contract
shall apply to the EPC Contract. The Contractor shall remain responsible for the
Subcontractor’s performance and performance of its obligations under the
Turnkey Contract. The Contractor shall also remain responsible for the acts or
defaults of the Subcontractor, its agents or employees, as if they were the acts or
defaults of the Contractor.

5.5.7.1.3 Contract Price

In consideration of the Contractor performing its obligations under this Turnkey


Contract, the Employer shall be obligated to pay the Contractor, the Accepted
Contract Amount inclusive of duties and taxes, provided that the Accepted
Contract Amount may be adjusted under the following circumstances:

(a) There is a variation in the construction cost in respect of this Turnkey


Contract; or

(b) There is a variation in the components of the Accepted Contract Amount.

Provided always, the adjusted Accepted Contract Amount shall not be more than
ten percent (10%) of the Accepted Contract Amount stipulated above.

The parties have since agreed to revise the Accepted Contract Amount by way of
a supplemental agreement which was entered into on 3 April 2013.

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The Accepted Contract Amount shall be paid by the Employer to the Contractor
in stages after the issuance of the Taking-Over Certificate and the Employer shall
have the right to make payments in instalments in amounts and for the duration
to be agreed between the parties.

The Employer shall endeavour to apply, with the assistance of the Contractor, for
tax exemption for all import taxes on plant and materials imported into Malaysia
and excise duties on locally manufactured plant and materials. The Accepted
Contract Amount shall be adjusted when any tax exemptions are obtained. In the
event that no tax exemptions are obtained, the Contractor shall pay all taxes,
duties and fees required to be paid by him under the Turnkey Contract or by
applicable laws.

5.5.7.1.4 Performance Security

(a) The Contractor shall, if required by the Employer in writing, within seven
(7) days before the issuance of the NTP, obtain (at its cost) a
Performance Security for proper performance in the amount stated in the
Contract Information i.e. 20% of the Accepted Contract Amount.

The Contractor shall deliver to the Employer the Performance Security


effective from the date of issue duly executed by a bank satisfactory to the
Employer, as security for the due performance by the Contractor of its
obligations under this Turnkey Contract.

(b) The Performance Security shall remain valid until the Taking-Over Date,
and shall be returned to the Contractor, if uncalled by the Employer within
twenty eight (28) days after the Taking-Over Date.

(c) Upon the Taking-Over Date, the Contractor shall, if required by the
Employer in writing, issue a new Performance Security in favour of the
Employer ("DNP Performance Security") at an amount as outlined in the
EPC Contract and subject to terms and conditions to be determined by
the Parties.

(d) The Contractor shall ensure that the Performance Security or the DNP
Performance Security is valid and enforceable until the Contractor has
executed and completed the Works and remedied any defects.

5.5.7.1.5 Payment Terms

The Accepted Contract Amount shall be paid by the Employer to the Contractor
in stages after the issuance of the Taking-Over Certificate and the Employer shall
have the right to make payments in instalments in amounts and for the duration
to be agreed between the Employer and the Contractor.

5.5.7.1.6 Completion, Taking Over and Delays

Time for Completion

(a) The Contractor shall schedule and perform the Works so as to cause
each Generating Block to be ready for taking over no later than its
scheduled or planned Taking-Over Date.

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(b) The Contractor shall complete the whole of the Works, and each Section
(if any), within the Time For Completion for the Works, which shall not
exceed nine hundred and seventy four (974) days or section (as the case
may be), including:

(1) achieving the passing of the Tests On Completion;

(2) completing all work which is stated in this Turnkey Contract as


being required for the Works or Section to be considered to be
completed for the purposes of taking-over; and

(3) the issuance of the DNP Performance Security at an amount and


subject to terms and conditions to be determined by the Parties
and in favour of the Employer, if required by the Employer in
writing.

(c) The Works shall not be considered to be complete until:

(1) the Contractor has submitted the documents that are necessary to
enable the Employer to obtain the Commissioning Tests
certificate, or a document to similar effect, to be issued by the
Commission in accordance with the requirements of the
Generation Licence, and the Contractor has submitted the as-built
drawings and the provisional operation and maintenance manuals;

(2) the Contractor has established, determined and declared the


Guaranteed Net Output and Guaranteed Net Heat Rate in
accordance with this Turnkey Contract; and

(3) all the documentation, data, information and certified test results
relating to the Works have been submitted by the Contractor to the
Employer's Representative, and verified by Off-taker as being in
conformance with the requirements to be determined within the
time frames set out therein.

Extension Of Time For Completion

The Contractor shall be entitled to an extension of the Time For Completion, if


and to the extent that completion for the taking over of the Works is or will be
delayed by any of the following causes:

(a) a Variation (unless an adjustment to the Time For Completion has been
agreed);

(b) a cause of delay giving an entitlement to extension of time under a Sub-


Clause of these Conditions;

(c) exceptionally adverse and Unforeseeable climatic conditions;

(d) Unforeseeable shortages in the availability of personnel or Goods caused


by epidemic or governmental actions;

(e) any delay, impediment or prevention caused by or attributable to the


Employer, the Employer's Personnel and the Employer's other contractors
on the Site; or

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(f) any delay, impediment or prevention caused by or attributable to TNB as


a utility.

Taking Over

(a) The Works shall be taken over by the Employer when:

(1) the Works have been completed in accordance with this Turnkey
Contract, and except as allowed in sub-paragraph (b) below; and

(2) a Taking-Over Certificate for the Works has been issued, or is


deemed to have been issued in accordance with this Sub-Clause.

(b) The Contractor may apply in writing to the Employer's Representative for
a Taking-Over Certificate not earlier than fourteen (14) days before the
Works are, in the Contractor's opinion, scheduled to be completed and
ready for taking over.

(c) The Employer’s Representative shall, after receiving the Contractor’s


application:

(1) issue the Taking-Over Certificate to the Contractor, stating the


date on which the Works were completed in accordance to the
Turnkey Contract, except for any minor outstanding work(s) and
defects which will not substantially affect the use of the Works for
their intended purpose (either until or whilst this work is completed
and these defects are remedied); or

(2) reject the application, giving reasons and specifying the work
required to be done to enable the issuance of the Taking-Over
Certificate.

5.5.7.1.7 Permit and Insurance

The Contractor and/or its Subcontractor shall procure all necessary and relevant
permits and insurances required for the performance of its obligations under this
Turnkey Contract.

5.5.7.1.8 Force Majeure

The Turnkey Contract provides that "Force Majeure" means an exceptional event
or circumstance:

(a) which is beyond a Party's control;

(b) which such Party could not reasonably have provided against before
entering into this Turnkey Contract;

(c) which, having arisen, such Party could not reasonably have avoided or
overcome; and

(d) which is not substantially attributable to the other Party.

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Force Majeure may include, but is not limited to, exceptional events or
circumstances of the kind listed below, so long as conditions (a) to (d) above are
satisfied:

(i) war, hostilities (whether war be declared or not), invasion, act of foreign
enemies;

(ii) rebellion, terrorism, revolution, insurrection, military or usurped power, or


civil war;

(iii) riot, commotion, disorder, strike or lockout by persons other than the
Contractor's Personnel and other employees of the Contractor and
Subcontractor(s);

(iv) ammunitions of war, explosive materials, ionising radiation or


contamination by radio-activity, except as may be attributable to the
Contractor's use of such munitions, explosives, radiation or radio-activity;
and

(v) natural catastrophes such as earthquake, hurricane, typhoon or volcanic


activity.

Excused Performance Due To Force Majeure

Any delay in, or total or partial failure of, performance of a Party caused by Force
Majeure shall not constitute a default hereunder provided, however, that:

(a) the affected Party shall use all reasonable commercial efforts to eliminate
any Force Majeure and mitigate or limit the effect of any such delay or
inability to perform and damages to the other Party;

(b) the affected Party gives the other Party notice of such Force Majeure
event;

(c) the suspension of performance is of no greater scope and of no longer


duration than is reasonably required by the Force Majeure event;

(d) no liability of either Party which arose before the occurrence of the Force
Majeure event causing the suspension of performance shall be excused
as a result of such occurrence;

(e) obligations of the Parties that are required to be completely performed


before the occurrence of a Force Majeure event shall not be excused to
the extent of the existing delay or default existing prior to such Force
Majeure event;

(f) when the affected Party is able to resume performance of its obligations
under this Turnkey Contract, that Party shall give the other party written
notice to that effect and shall promptly resume performance hereunder.

Consequences of Force Majeure

(a) In the event and to the extent that any event of Force Majeure affects the
Contractor's ability to meet any of its obligations under this Contract which

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adversely affect the Taking-Over Date, then the Contractor shall be


entitled to an adjustment under the provisions of the Turnkey Contract.

There shall be no adjustment to either the Performance Guarantees,


and/or the Accepted Contract Amount as a result of a Force Majeure
event.

(b) If the Contractor is delayed in the performance of the Works by a Force


Majeure event, then:

(i) to the extent that the delay(s) are, in the aggregate, one hundred
and forty (140) days or less, the Contractor shall absorb all of its
costs and expenses resulting from the said delay(s); and

(ii) to the extent that the delay(s) are, in the aggregate, more than one
hundred and forty (140) days, the Contractor shall be reimbursed
by the Employer for those incremental costs and expenses directly
resulting from the said delay(s) which are reasonably incurred by
the Contractor after the said one hundred and forty (140) days
period.

In the event that the Works or any part of the Works is damaged or destroyed
due to Force Majeure, then the Contractor shall only be obliged to reinstate or
replace the Works or part thereof which has been damaged or destroyed if
requested by the Employer, in which case it shall be entitled to an adjustment
under the terms of the Turnkey Contract.

Force Majeure affecting Subcontractor

If any Subcontractor is entitled under any contract or agreement relating to the


Works to relief from Force Majeure on terms additional to or broader than those
specified, such additional or broader Force Majeure events or circumstances
shall not excuse the Contractor’s non-performance or entitle it to relief.

Optional Termination, Payment and Release

If the execution of substantially all the Works in progress is prevented for a


continuous period of eighty four (84) days by reason of Force Majeure of which
notice has been given, or for multiple periods which total more than one hundred
and forty (140) days due to the same notified Force Majeure, then either Party
may give to the other Party a notice of termination of this Turnkey Contract. In
this event, the termination shall take effect seven (7) days after the notice is
given.

5.5.7.1.9 Termination by Employer

The Employer shall be entitled to terminate this Turnkey Contract if:

(a) the Contractor fails to comply with section 5.5.7.1.4 (Performance


Security) above or with a notice issued by the Employer to make good a
failure and to remedy it within a specified reasonable time;

(b) the Contractor fails substantially to perform any of its material obligations
under this Turnkey Contract which resulted in the termination of the PPA,

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abandons the Works or demonstrates the intention not to continue


performance of its material obligations under the Turnkey Contract;

(c) the EPC Contract or any agreement which forms part of the EPC Contract
is terminated;

(d) the Contractor without reasonable excuse fails:

(i) to proceed with the Works in accordance with paragraph 5.5.7.1.6


(Commencement, Taking Over, Delays And Suspension); or

(ii) to commence and continue to use reasonable efforts to carry out


the corrective action thereunder within a specified reasonable time
as reasonably determined by the Employer's Representative;

(e) the Contractor is dissolved or adjudicated a bankrupt or insolvent, goes


into liquidation, has a receiving or administration order made against him,
compounds with its creditors, or carries on business under a receiver,
trustee or manager for the benefit of its creditors, or if any act is done or
event occurs which (under applicable Laws) has a similar effect to any of
these acts or events, which results in the Contractor being unable to
materially fulfil its obligations;

(f) the Contractor repudiates this Turnkey Contract, or abandons the


construction of any Generating Block for more than twenty eight (28)
consecutive days without the written consent of the Employer or
reasonable excuse as determined by the Employer's Representative;

(g) failure to achieve the taking over of any Generating Block within one
hundred eighty (180) days after the Taking-Over Date for the relevant
Generating Block;

(h) the measured output of a Generating Block is more than five percent (5%)
below the Guaranteed Net Output for that Generating Block within one
hundred eighty (180) days after the Taking-Over Date for the relevant
Generating Block;

(i) the measured heat rate of a Generating Block is more than five percent
(5%) above the relevant Guaranteed Net Heat Rate for that Generating
Block within one hundred eighty (180) days after the Taking-Over Date for
the relevant Generating Block;

(j) the liquidated damages payable above have reached the maximum
liquidated damages payable under the relevant clause;

(k) the Contractor assigns or transfers this Turnkey Contract (or any right or
interest herein) without the express written consent of the Employer;

(l) the Contractor fails to comply with any provision of any applicable Laws or
Applicable Permit, and such failure is not remedied within fourteen (14)
days after the Contractor receives actual knowledge or such longer period
necessary for the Contractor to cure such failure, not to exceed eighty
four (84) days;

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(m) the Contractor knowingly fails to maintain any insurance coverages


required of it or within two (2) days of receiving actual knowledge of such
failure, fails to correct its failure to maintain any such required insurance
coverages.

5.5.7.1.10 Liquidated Damages

The Contractor shall pay liquidated damages to the Employer in accordance with
the provisions herein. The Parties agree that these damages shall not relieve the
Contractor from its obligation to complete the Works, or from any other duties,
obligations or responsibilities which it may have under this Turnkey Contract.

(a) Liquidated Damages for Delay In Taking Over

(i) The Contractor shall pay to the Employer agreed Liquidated


Damages for each day of delay in achieving the taking over of
Generating Block One (1) and Generating Block Two (2), beyond
the Taking-Over Date that is not the result of Force Majeure or the
Employer's failure to materially fulfil its obligations under this
Turnkey Contract.

(ii) Liquidated damages for delay in relation to Generating Block One


(1) and Generating Block Two (2) shall be payable in the event of
any defect, damage or impairment of which causes delay to the
Interconnection Facilities which is required for commercial
operation of Generating Block One (I) or Generating Block Two (2)
(as the case may be), notwithstanding that such defect, damage or
impairment occurs after the taking over of the Interconnection
Facilities.

(iii) However, the total of the liquidated damages for delay in taking
over shall not exceed an amount equal to the value of 15% of the
Accepted Contract Amount.

(b) Liquidated Damages for Performance

(i) If a Generating Block’s output established in the Performance Test


is less than the Guaranteed Net Output, the Contractor shall pay to
the Employer as liquidated damages an amount to be determined.

(ii) If the heat rate established for such Generating Block in the
Performance Test exceeds the Guaranteed Net Heat Rate for the
relevant Generating Block, the Contractor shall pay to the
Employer as liquidated damages an amount to be determined.

(iii) However, the total of the liquidated damages for performance


payable by the Contractor shall not exceed an amount equal to the
value of 20% of the Accepted Contract Amount.

The cumulative total of the liquidated damages in Items (a) and (b) above
shall not exceed an amount equal to the value of 20% of the Accepted
Contract Amount.

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(c) Payment of Liquidated Damages

The Employer shall have the right to set off the liquidated damages, if
any, against any remaining payments of the Accepted Contract Amount
due to the Contractor.

Payment Upon Termination

In the event of termination by no fault of the Contractor, the Contractor shall be


entitled to the Termination Payment, which is equal to the sum of:

(a) any and all scheduled payment due and owing to the Contractor on or
prior to the date of termination;

(b) a pro-rata payment for the Works properly performed by the Contractor
and/or its Subcontractor(s) prior to the date of termination; and

all reasonable, actual termination costs incurred by the Contractor as a direct


result of terminating, including any outstanding financing costs, and demobilising
all aspects

5.5.7.1.11 Defects Liability

Completion of Outstanding Work And Remedying Defects

The Contractor shall:

(a) complete any work which is outstanding on the date stated in the Taking-
Over Certificate, within such reasonable time as is instructed by the
Employer’s Representative; and

(b) execute all work required to remedy defects or damage, as may be


notified by the Employer on or before the expiry date of the relevant
Defects Notification Period for the Works or Section, as the case may be.

If a defect appears or damage occurs, the Contractor shall be notified by the


Employer.

Defects Notification Period

The Contractor warrants to remedy defects or damage:

(a) with respect to Generating Block One (1) and the Common Facilities, for a
period of three hundred and sixty five (365) days from the Taking-Over
Date or such later date for taking over the Generating Block One (1) and
the Common Facilities as agreed between the Employer’s Representative
and the Contractor; or

(b) with respect to Generating Block Two (2), for a period of three hundred
and sixty five (365) days from the Taking-Over Date or such later date for
taking over the Generating Block Two (2) as agreed between the
Employer’s Representative and the Contractor; or

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(c) with respect to the Interconnection Facilities, for a period of seven


hundred and thirty (730) days from the Taking-Over Date or such later
date for taking over the Interconnection Facilities as agreed between the
Employer’s Representative and the Contractor; or

(d) with respect to such parts of the Facility that are not covered by the
clauses above for a period of three hundred and sixty five (365) days from
the Taking-Over Date for the Facility or such later date for taking over the
Facility as agreed between the Employer’s Representative and the
Contractor.

Cost of Remedying Defects

Contractor is to bear risk and cost for all work referred to above if the work is
attributable to:

(a) the design of the Works other than a part of the design for which the
Employer is responsible; or

(b) Plant, Materials or workmanship not in accordance with the Turnkey


Contract;

(c) Improper operation or maintenance for matters which the Contractor is


responsible for; or

(d) Contractor failing to comply with any other obligation.

Extension of Defects Notification Period for Recurring Defects

(a) The Contractor shall start anew the Defects Notification Period for any
recurrent defect from the day of commissioning the changed, modified,
remedied or replaced parts for twenty four (24) months in the case of
Interconnection Facilities and twelve (12) months in all other cases.

(b) When to the extent of the Works or a major item of Plant cannot be used
because of a defect or damage, the Employer may extend the Defects
Notification Period by no more than two (2) years.

(c) The Defects Notification Period shall start anew in respect of parts of a
Generating Block and/or Facility which is renewed.

Failure to Remedy Defects

(a) The Employer shall fix a new date to remedy the defect or damage and
give reasonable notice of it if the Contractor fails to remedy any defect or
damage within a reasonable time.

(b) If the Contractor fails to remedy the defect or damage, the Employer may
at its option:

(i) carry out the work by himself or others at the Contractor’s cost;

(ii) require the Employer’s Representative to agree or determine a


reasonable reduction in the Accepted Contract Amount;

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(iii) if the defect or damage deprives the Employer of substantially the


whole benefit of the Works or any major parts of the Works,
terminate the Turnkey Contract, in whole or in part. The Employer
shall then be entitled to recover all sums paid for the Works or for
such part, plus financing costs, cost of dismantling, clearing the
Site and returning Plant and Materials to the Contractor.

Latent Defect Period

If any error, defect, damages and/or failure of parts of the Works is discovered by
the Employer and/or the Utility within sixty (60) months after the Taking Over
Date for the relevant Generating Block or the Interconnection Facilities or the
Facility or such later date for taking over such relevant Generating Block or the
Interconnection Facilities or the Facility as agreed between the Employer’s
Representative and the Contractor, the Contractor warrants to repair, replace,
adjust and/or modify, provided that the defect was caused by the negligence of
the Contractor and was a latent defect.

5.5.7.1.12 Claims, Disputes and Arbitration

Contractor’s Claims

If the Contractor considers himself to be entitled to any extension of the Time For
Completion (Turnkey) and/or any additional payment, the Contractor shall give
notice to the Employer’s Representative, describing the event giving rise to the
claim. The notice must be given within twenty eight (28) days after the Contractor
became aware of the event or circumstance, failure of which would render the
Time For Completion (Turnkey) to not to be extended and the Contractor shall
not be entitled to additional payment. Further, the Employer shall be discharged
from all liabilities in connection with the claim.

Amicable Settlement

(a) Both Parties shall attempt to settle any dispute arising from the Turnkey
Contract before the commencement of any arbitration.

(b) Both Parties shall continue to perform their obligations under the Turnkey
Contract in the event any dispute or arbitration arises.

Arbitration

(a) Any dispute, controversy or claim arising out of the Turnkey Contract, or
the breach, termination or invalidity thereof, shall be settled by arbitration
in accordance with the rules for arbitration of the Kuala Lumpur Regional
Centre for Arbitration by 1 arbitrator appointed in accordance with the said
rules. The language to be used shall be English.

(b) If any dispute arises in connection with the Turnkey Contract and the
Contractor opines that the dispute concerns subcontracted Works, the
Contractor may by notice in writing to the Subcontractor require that any
dispute under the subcontract shall be referred to the mediator and/or
arbitrator to whom the dispute under the Turnkey Contract is referred to.

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Mediation

Either Party may suggest that the Parties undertake an ad-hoc mediation in
respect of a dispute.

5.6 Project Insurance

The Project Company and the Issuer will procure and maintain the insurance
policies listed in sections 5.6.1 - 5.6.2 below over the construction period, with
licensed insurers in Malaysia. Both the Project Company and the Issuer will be
named as insured parties under the insurance policies procured for the Project.

5.6.1 Construction / Erection All Risks

The Construction/Erection All Risks insurance covers the works and project
materials, while in storage on site, during construction, erection, commissioning
and testing until the issuance of the taking-over certificate of the plant, plus an
additional warranty/maintenance period.

The Material Damage section of the policy is structured to cover for the
replacement value of the loss. Coverage provided by this policy is on an “all risks”
basis and covers most accidental losses common to construction/erection. The
full EPC Contract Price will be insured under the CEAR policy.

The Delay In Start-Up section of policy provides cover against loss of projected
revenue/fixed costs (including finance service costs), arising from the delay. The
sum insured will be the Debt Service (excluding principal repayment obligations)
and the Fixed costs only and the indemnity period is twenty (24) months.

The Third Party Liability section of the policy will provide insurance coverage to
the named insurers, for any legal action brought against them by third parties for
bodily injury or death, or loss or damage to third party property from sudden and
accidental means arising out of and in connection with the construction / erection
works. The Third Party Liability policy will have a limit of indemnity of RM
50,000,000 for each and every occurrence.

5.6.2 Marine Cargo

The Marine Cargo Open Cover provides insurance cover against loss or damage
to all materials including plant and equipment, spares, etc. during transit from the
time the materials leave the supplier’s premises anywhere in the world, during the
journey and includes all incidental storage and fabrication off-site until the
materials are delivered to the Site.

The Delay in Start-Up section of the Marine Cargo Open Cover provides cover
against loss of projected revenue/fixed costs (including finance service costs),
following a loss or damage to the shipment insured under the Marine Cargo Open
Cover (excluding principal repayment obligations) which consequently results in a
delay in commercial operations. The sum insured will be the Debt Service and
Fixed costs only and the indemnity period is eighteen (18) months.

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6. PRINCIPAL TERMS AND CONDITIONS OF THE SUKUK TNB NE

1. BACKGROUND INFORMATION

a. Issuer

(i) Name TNB Northern Energy Berhad (“TNB Northern


Energy”, “TNB NE” or the “Issuer”)

(ii) Address Company Secretary’s Office, Level 2, Tenaga


Nasional Berhad Headquarters, No. 129 Jalan
Bangsar, 59200 Kuala Lumpur

(iii) Business Company No. 1024796-X


registration no.

(iv) Date and place of 19 November 2012 / Malaysia


incorporation

(v) Date of listing Not listed

(vi) Status on residence Resident controlled company

(vii) Principal activities Generating and supplying electricity and handling


other matters relating to electricity in Malaysia

(viii) Board of directors As at 30 March 2013, the members of the Board of


Directors of TNB NE are as follows:

(a) Mustaffa bin Ja’afar (NRIC: 590223-01-5633)

(b) Jamel bin Ibrahim (NRIC: 641204-07-5689)

(c) Ahmad Faraid Bin Mohd Yahaya (NRIC:


591024-07-5873)

(ix) Structure of As at 30 March 2013, the substantial shareholders


shareholdings and and structure of their shareholdings of the Issuer are
names of as follows:
shareholders or, in
the case of a public Name No. of ordinary Shareholding
company, names of shares of (%)
all substantial RM1.00 each
shareholders held

TNB Prai 2 100


Sdn Bhd

(x) Authorised, issued Authorised Share Capital as at 30 March 2013


and paid-up capital RM10,000,000.00 divided into 2,000,000 ordinary
shares of RM1.00 each and 8,000,000 Redeemable
Preference Shares of RM1.00 each

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TNB Northern Energy Berhad Information Memorandum

Issued and Fully Paid-up Share Capital as at 30


March 2013
RM2.00 divided into 2 ordinary shares of RM1.00
each
(xi) Disclosure of the
following

 if the Issuer or its None


board of members
have been convicted
or charged with any
offence under the
securities laws,
corporation laws or
other laws involving
fraud or dishonesty in
a court of law, for the
past five years prior to
the date of application;
and

 if the Issuer has been Not applicable as the Issuer is not a listed company
subjected to any action
by the stock exchange
for any breach of the
listing requirements or
rules issued by the
stock exchange, for
the past five years
prior to the date of
application

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2. INDICATIVE PRINCIPAL TERMS AND CONDITIONS

a. Name of parties involved in the proposed transactions (where applicable)

(i) Joint principal advisers HSBC Amanah Malaysia Berhad (“HSBC


Amanah”) and KAF Investment Bank Berhad
(“KAF”)

(ii) Joint lead arrangers HSBC Amanah and KAF (jointly known as the
“JLAs”)

(iii) Co- arranger Not applicable

(iv) Solicitors Messrs Zaid Ibrahim & Co., acting for the Issuer

Messrs Adnan Sundra & Low, acting for the


JLAs

(v) Financial adviser HSBC Bank Malaysia Berhad

(vi) Technical adviser / Mott MacDonald Singapore Pte Ltd


Environmental Adviser

(vii) Sukuk Trustee AmTrustees Berhad

(viii) Shariah adviser HSBC Amanah

(ix) Guarantor Tenaga Nasional Berhad (“TNB”, the


“Sponsor” or the “Guarantor”)

(x) Valuer Not applicable

(xi) Facility Agent KAF

(xii) Primary subscriber(s) To be determined prior to issuance


(under a bought-deal
arrangement) and
amount subscribed

(xiii) Underwriter(s) and Not applicable


amount underwritten

(xiv) Central depository Bank Negara Malaysia (“BNM”)

(xv) Paying agent BNM

(xvi) Reporting accountant PricewaterhouseCoopers (“PwC”)

(xvii) Calculation agent Not applicable

(xviii) Others (please specify) Joint Lead Managers (“JLMs”)

HSBC Amanah and KAF

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Joint Bookrunners (“JBs”)

HSBC Amanah and KAF

Insurance Adviser

Sterling Insurance Broker Sdn Bhd

Project Company

TNB Prai Sdn Bhd (“TNB Prai” or the “Project


Company”)

Security Agent

KAF

Account Bank

HSBC Amanah

b. Islamic principles used Ijarah and Wakalah


Issue of Sukuk
c. Facility description
Issuance of up to RM2.0 billion in nominal value
of Islamic securities under the Islamic principles
of Ijarah and Wakalah (“Sukuk TNB NE”).

Grant of Right Agreement

Pursuant to a Land Lease Agreement (the


“LLA”) entered into between TNB Prai and TNB
as Land Lessor, the Ijarah Project Lands (as
defined below) are leased to TNB Prai for a
duration of 24 years.

TNB Prai (in its capacity as grantor (“Grantor”))


shall enter into a grant of right agreement (the
“Grant of Right Agreement”) with TNB NE (in
its capacity as grantee (“Grantee”)) acting on
behalf of subscribers of the Sukuk TNB NE
(“Sukukholders”), which term shall include any
holders of the Sukuk TNB NE from time to time,
to grant the right over the use of the Ijarah
Project Lands and to derive the benefits of the
usufruct rights over the use of the Ijarah Project
Lands (the “Asset”) for a duration of 24 years
or such period as corresponding to the lease
term in the LLA with an option to be extendable
for another 24 years subject to the PPA term
being extended as set out in the LLA (“Grant of
Right”). The Grantee will make a single upfront
rental payment (“One-off Rental”) to the
Grantor, which amount shall be equivalent to

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TNB Northern Energy Berhad Information Memorandum

the aggregate proceeds to be raised from the


issuance of the Sukuk TNB NE.

Declaration of Trust and issuance of Sukuk


TNB NE

Pursuant to a Declaration of Trust, the Issuer


(in its capacity as trustee) shall declare a trust
over the Asset including the rights, title, interest
and benefit, present and future, in and to under
the Grant of Right Agreement, the Ijarah Lease
Agreement (as defined below), the Service
Agency Agreement and the Purchase
Undertaking (the “Trust Asset”) for the benefit
of the Sukukholders. The Issuer shall issue
Sukuk TNB NE to the Sukukholders which shall
represent the Sukukholders’ undivided
proportionate beneficial ownership interest,
rights and entitlements under the Trust Asset.
The Sukuk TNB NE proceeds shall be utilised
to pay the Grantor the One-off Rental under the
Grant of Right Agreement.

Ijarah Lease

With the Asset held by the Issuer (in its capacity


as Grantee), acting on behalf of the
Sukukholders, the Issuer (in its capacity as
Lessor) shall enter into an Ijarah Lease
Agreement (the “Ijarah Lease Agreement”)
with TNB Prai (as Lessee), to lease the Asset to
the Lessee, for a tenor corresponding to the
maturity of the final series (“Series”) of the
Sukuk TNB NE, i.e. more than 4 years and not
exceeding 23 years (the “Lease Period”), in
consideration for pre-determined Ijarah rental
payments (the “Lease Rentals”) which shall be
the sum equivalent to the aggregate of all
Periodic Distribution Amounts (as defined
below) to be channeled by the Issuer to the
Sukukholders as periodic distributions
(“Periodic Distribution Amounts”) in
proportion to their sukukholdings on each
periodic distribution date.

Under the Ijarah Lease Agreement, the Lessor


shall be responsible for procuring
takaful/insurance in respect of the Asset, and
the Lessee has acknowledged that the Lessor
may procure the Servicing Agent or its
representative, in accordance with the terms
and conditions set out in the Service Agency
Agreement, to perform or to procure the
payment of takaful/ insurance of the Asset
under a Total Loss Event (as defined below).

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TNB Northern Energy Berhad Information Memorandum

To the extent that the Servicing Agent incurs


any cost and expenses in relation to the
procurement of takaful/insurance (the “Service
Charge Amount”:), the Lease Rentals under
the Ijarah Lease Agreement will provide for
supplementary rental (forming part of the rental
payments), which will be an amount equal to
the Service Charge Amount incurred in the
previous period (the Supplementary Lease
Rentals”).

The Supplementary Lease Rentals due from


the Lessee will be set off against the obligation
of the Issuer to pay the Service Charge Amount
to the Servicing Agent.

Wakalah Arrangement

Pursuant to a Wakalah Agreement, TNB Prai


shall appoint the Issuer as its agent (“Wakeel”)
for the provision of certain services for a
wakalah fee of RM100.00, for a period
corresponding to the period for the construction
and delivery of the Plant to TNB Prai under the
Turnkey Contract (referred to below). The
Wakeel shall be responsible to:

(i) Safe-keep the One-off Rental paid to


TNB Prai as Grantor on a Wadiah basis;
and

(ii) To make payments including (a)


payment on behalf of TNB Prai (as
lessee) of the Lease Rentals to the
Lessor; (b) any payments as set out
paragraph (2)(m) below (Details on
Utilisation of Proceeds) items (1) to (3);
and (c) any other payments or cost in
relation to and associated with the
Project (as defined below) comprising
those set out in the said paragraph
(2)(m) items (4) to (6).

The Wakalah Agreement will cease upon the


completed Plant being delivered to TNB Prai
under the Turnkey Contract. Thereafter, TNB
Prai as Lessee will pay the Lease Rentals
directly to the Lessor, who in turn will channel to
Sukukholders as Periodic Distribution Amounts.

Service Agency Agreement

Pursuant to a Service Agency Agreement, the


Issuer (in its capacity as Lessor), acting on

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TNB Northern Energy Berhad Information Memorandum

behalf of the Sukukholders, shall appoint TNB


Prai as the “Servicing Agent” for a servicing
agent fee of RM100.00, throughout the Lease
Period to carry out certain of its obligations. The
Servicing Agent shall be responsible to procure
takaful/insurance in respect of the Asset that
provides sufficient proceeds for the redemption
of the Sukuk TNB NE under a Total Loss Event
(as defined below). If the takaful/insurance
proceeds are insufficient to cover the
redemption amount due under the Sukuk TNB
NE under a Total Loss Event (the
“Redemption Amount”), the Servicing Agent
shall be liable to make good the difference. Any
excess from the takaful/insurance proceeds
over the Redemption Amount, if any, shall be
paid to the Servicing Agent as an incentive fee.

“Total Loss Event” is the total loss or


destruction of, or damage to the whole (and not
part only) of the Asset under the Grant of Right
Agreement and Ijarah Lease Agreement or any
event or occurrence that renders the whole
(and not part only) of the Asset permanently
unfit for any economic use and the repair or
remedial work in respect thereof is wholly
uneconomical.

For the avoidance of doubt, “Redemption


Amount” shall be equal to the nominal value of
all outstanding Sukuk TNB NE plus an amount
equal to any Service Charge Amount payable in
respect of the Asset and provided that an
amount equal to such Service Charge Amount
has not already been paid by way of
Supplementary Lease Rentals plus all accrued
but unpaid Lease Rentals up to the date of the
declaration of the Total Loss Event.

Purchase Undertaking

TNB Prai (as the “Purchaser”) will grant a


purchase undertaking (the “Purchase
Undertaking”) to the Issuer, whereby the
Purchaser irrevocably undertakes to purchase
the proportionate undivided ownership in the
remaining period of the Grant of Right from the
Sukukholders of the relevant series of the
Sukuk TNB NE, upon declaration of a
Dissolution Event (save for a Dissolution Event
due to a Total Loss Event) or upon the Maturity
Date whichever is earlier, at the relevant
Exercise Price (defined below). The proceeds
therefrom shall be utilised by the Issuer for the
redemption of such relevant Sukuk TNB NE

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TNB Northern Energy Berhad Information Memorandum

held by the Sukukholders which shall then be


cancelled.

In relation to the Purchase Undertaking, the


“Exercise Price” is as follows:

(a) upon declaration of a Dissolution Event (save


for a Dissolution Event due to a Total Loss
Event), the Exercise Price shall be equal to the
nominal value of all outstanding Sukuk TNB NE
plus an amount equal to any Service Charge
Amount payable in respect of the Asset and
provided that an amount equal to such Service
Charge Amount has not already been paid by
way of Supplementary Lease plus all accrued
but unpaid Lease Rentals up to the date of the
declaration of the Dissolution Event; or

(b) upon maturity of the relevant series of the


Sukuk TNB NE, the Exercise Price shall be
equal to the nominal value of such series of the
Sukuk TNB NE plus an amount equal to any
Service Charge Amount payable in respect of
the Asset and provided that an amount equal to
such Service Charge Amount has not already
been paid by way of Supplementary Lease
Rentals plus all accrued but unpaid Lease
Rentals up to the date of maturity.

In the event there is a Mandatory Redemption


event as set out in paragraph (2)(y)(xvii), TNB
Prai (as the “Purchaser”) will, pursuant to the
Purchase Undertaking, purchase the relevant
proportionate undivided ownership in the
remaining period of the Grant of Right from the
Sukukholders of the relevant series of the
Sukuk TNB NE, at the relevant Mandatory
Redemption Exercise Price (defined below).
The proceeds therefrom shall be utilised by the
Issuer for the redemption of such relevant
Sukuk TNB NE held by the Sukukholders which
shall then be cancelled.

In relation to the Purchase Undertaking, the


“Mandatory Redemption Exercise Price” is
equal to the percentage of the Mandatory
Redemption Amount allotted to the respective
series as set out in paragraph (2)(y)(xvii)(a) and
(b).

“Turnkey Contract” means the contract


between the Project Company and the Issuer,
whereby the Issuer will procure the execution of
the Project on a turnkey basis and administer
and manage the development of the Project on

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TNB Northern Energy Berhad Information Memorandum

behalf of the Project Company.

“Project” means, the financing, design,


engineering, procurement, construction,
installation, testing, commissioning, ownership,
operation and maintenance of a 1071.43MW
combined cycle gas-fired power plant (“Plant”)
in Prai, Pulau Pinang.

A diagrammatical illustration for Sukuk TNB NE


is set out in Appendix 1.

The “Ijarah Project Lands”, which are part of


d. Identified assets
the 2 pieces of lands held under titles HSD
50349 Lot PT 10 and HSD 55959 Lot PT 13,
both in Bandar Prai, Seberang Perai Tengah,
measuring approximately 77,610 sq m and
12,360 sq m respectively, where the Plant will
be situated.

e. Purchase and selling Purchase and selling price


price/rental (where applicable) Not applicable

Rental
To be determined at the point of issuance of the
Sukuk TNB NE.

Sukuk of up to RM2 billion in nominal value,


f. Issue/Sukuk Size
one-off issuance based on the Shariah
principles of Ijarah and Wakalah (“Sukuk TNB
NE”)

g. Tenure of issue/Sukuk The tenor of each Series of the Sukuk TNB NE


shall be more than four (4) years and up to
twenty three (23) years (subject to finalisation of
cashflow projections and comments by the
relevant rating agency) from the issue date.

For the avoidance of doubt, there will only be a


one-off issuance of the Sukuk TNB NE,
accordingly, all the Series of Sukuk TNB NE will
have the same issue date.
It is expected that the Sukuk TNB NE will
consist of 39 Series, with tenors ranging from 4
years to 23 years.

h. Availability period of Sukuk The period starting from the day all conditions
precedent are complied with (or waived, as the
case may be) to the satisfaction of the JLAs, up
to the date falling one (1) year from the date of

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TNB Northern Energy Berhad Information Memorandum

approval by the Securities Commission (“SC”).

i. Profit/coupon/rental rate To be determined prior to issuance of the Sukuk


TNB NE (“Periodic Distribution Rate”).

j. Profit/coupon/rental payment The frequency of the periodic distribution


frequency amounts (“Periodic Distribution Amounts”)
for the Sukuk TNB NE shall be on a semi-
annual basis. The periodic distribution dates
(“Periodic Distribution Dates”) shall be the
date for payment of each of the Periodic
Distribution Amount, being each date falling at
the end of consecutive six (6) month periods
commencing from the Issue Date.

The Periodic Distribution Amounts shall be


k. Profit/coupon/rental payment
calculated based on the actual number of days
basis
elapsed and 365 days basis (actual/365).

l. Security/collateral, where The Sukuk TNB NE shall be secured by:


applicable (1) A first ranking assignment of all of the
Issuer and Project Company’s rights,
interests, titles and benefits under the
Project Documents (as defined below)
including all the performance and/or
maintenance bonds issued or to be issued
to the Issuer and/or the Project Company
in relation to the Project, and the
proceeds therefrom, excluding the
generation license;
(2) A first ranking assignment and charge of
all Designated Accounts (as defined
below) and the credit balances therein;
(3) A debenture incorporating a first ranking
fixed and floating charge on the assets of
the Project Company and the Issuer in
relation to the Project, both present and
future;
(4) A first ranking assignment of all relevant
material insurance policies/ Takaful
contracts of the Project Company and the
Issuer in respect of the Project;
(5) Sponsor’s Completion Support (as
referred to below);
(6) Sponsor’s Rolling Guarantee (as referred
to below);
(7) Security to be granted as conditions
subsequent pursuant to sub-paragraphs
2(y)(ii)(f) and 2(y)(ii)(h) below;

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TNB Northern Energy Berhad Information Memorandum

Such other security as may be required by the


rating agency to achieve the requisite rating for
the Sukuk TNB NE or advised by the legal
counsel of the Joint Lead Arrangers as are
mutually agreed between the Joint Lead
Arrangers and the Issuer.

Sponsor’s Completion Support

The Sponsor shall provide an unconditional and


irrevocable guarantee for the period
(“Guarantee Period”) commencing from (and
including) the issue date of the Sukuk TNB NE
and expiring on the date falling 12 months from
the Scheduled COD (as defined below) or the
date upon the declaration of a Dissolution Event
(whichever is earlier) to:

(1) fund any cost overruns incurred relating to


the Project for up to a cap of 10% of the
Project cost as reflected in the Base Case
Financial Model (as defined below); and

(2) fund any principal obligations and Periodic


Distribution Amounts under the
Transaction Documents (as defined
below) (“Finance Service”) for up to 12
months post the Scheduled COD (as
defined below).

The Sponsor shall have the right, but not the


obligation, to increase the guaranteed amount
and/or extend the period of the guarantee at its
sole discretion.

For the avoidance of doubt, the Sponsor’s


Completion Support shall not include any
accelerated payments upon a declaration of a
Dissolution Event.

The Sponsor’s Completion Support shall cease


and have no further effect on the earlier of the
expiry of the Guarantee Period and the date on
which the following having been fulfilled to the
reasonable satisfaction of the Security Agent:

(i) certification has been received from the


Technical Adviser confirming the date
specified in the Taking Over Certificate
issued by the Issuer’s engineer under the
EPCC as the date on which the Works (as
defined in the EPCC) are completed in
accordance with the EPCC;

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TNB Northern Energy Berhad Information Memorandum

(ii) all costs incurred or payable prior to


Commercial Operation Date (as defined in
the PPA) in relation to the Project have
been paid (including any cost overruns);
and

(iii) all Conditions Subsequent have been


satisfied.

Sponsor’s Rolling Guarantee

Upon cessation of the Sponsor’s Completion


Support and until the final maturity date of the
Sukuk TNB NE or the date upon the declaration
of a Dissolution Event (whichever is earlier), the
Sponsor shall provide a rolling, unconditional
and irrevocable guarantee in an amount
equivalent to the next 6-month Finance Service.
The Sponsor’s Rolling Guarantee shall
automatically be renewed at every Periodic
Distribution Dates or when drawn.

For the avoidance of doubt, the Sponsor’s


Rolling Guarantee shall not include any
accelerated payments upon a declaration of a
Dissolution Event.

28 calendar days prior to each Periodic


Distribution Date, in the event that the cash
balance in the Issuer MYR RA is less than the
upcoming scheduled Finance Service amount
payable (“Upcoming Finance Service”), the
Sponsor’s Rolling Guarantee will be drawn to
fund the Issuer MYR RA, via the ProjCo MYR
RA, up to an amount equivalent to the
Upcoming Finance Service.

m. Details on utilisation of The Issuer and Project Company shall


proceeds by Issuer. If undertake to use the proceeds only for the
proceeds are to be utilised for following Shariah-compliant utilisations in
project or capital expenditure, connection with the Project:
description of the project or (1) pay and/or towards reimbursement of all
capital expenditure, where costs associated with the Project
applicable including but not limited to site
acquisition, development, design,
construction, compensation payments,
start-up, initial operations of the Project
pursuant to the Project Documents;
(2) pay and/or towards reimbursement of all
rentals, fees, expenses, commissions
and all other amounts payable in
connection with the Sukuk TNB NE

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TNB Northern Energy Berhad Information Memorandum

(including fees and costs incurred for the


establishment of the Sukuk TNB NE
facility and issuances thereunder, if any)
prior to the COD of the Project;
(3) pay and/or towards reimbursement of
any other Project related costs,
including consultant fees, takaful
contribution and contingencies;
(4) meet the working capital requirements of
the Issuer/Project Company in relation
to the Project;
(5) inter-company advances between the
Issuer and Project Company for
payments of any costs associated to the
Project; and
(6) conversions into USD and EUR for the
payments of all Project costs.
For the avoidance of doubt, the use of the
proceeds by the Issuer as set out above shall
not be subject to the “Priority of Cashflow” as
provided below, and in particular, any
reimbursement of costs and expenses
advanced to the Issuer or the Project Company
prior to issuance of the Sukuk TNB NE will not
be subject to the restrictions on payments set
out in Negative Covenants item (j) (Restricted
Payments).

n. Sinking fund and designated Sinking fund accounts: none.


accounts, where applicable
Designated Accounts: refer to item 2(y)(xi)

o. Rating
 Credit rating(s) assigned The Sukuk TNB NE has been accorded a
(Please specify if this is an preliminary rating of AAAIS by the Rating
indicative rating) Agency.

 Name of credit rating Malaysian Rating Corporation Berhad (Co. No.


agency 364803-V)

p. Mode of issue The Sukuk TNB NE may be issued via bought


deal or via book-building on a best effort basis
or via direct placement on a best effort basis.

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TNB Northern Energy Berhad Information Memorandum

q. Selling restriction, including Selling Restrictions at Issuance


tradability (i.e. tradable or non-
tradable) The Sukuk TNB NE may only be offered, sold,
transferred or otherwise disposed directly or
indirectly to a person to whom an offer or
invitation to subscribe the Sukuk TNB NE may
be made and to whom the Sukuk TNB NE are
issued would fall within Schedule 6 or Section
229(1)(b) of the Capital Markets and Services
Act 2007 (“CMSA”) and Schedule 7 or Section
230(1)(b) of the CMSA, read together with
Schedule 9 or Section 257(3) of the CMSA.

Selling Restrictions Thereafter

The Sukuk TNB NE may only be offered, sold,


transferred or otherwise disposed directly or
indirectly to a person to whom an offer or
invitation to purchase the Sukuk TNB NE would
fall within Schedule 6 or Section 229(1)(b) of
the CMSA, read together with Schedule 9 or
Section 257 of the CMSA.

r. Listing status and types of The Sukuk TNB NE will not be listed on any
listing, where applicable stock exchange.

s. Other regulatory approvals None.


required in relation to the
issue, offer or invitation to
subscribe or purchase sukuk,
and whether or not obtained

t. Conditions precedent To include but not limited to the following:


A. Main Documentation
(a) The Project Documents and Transaction
Documents (as defined below) have
been signed and where applicable
stamped or endorsed as being exempted
from stamp duty and presented for
registration with the relevant registries
(where applicable) including the High
Court of Malaya in respect of the power
of attorneys. For the avoidance of doubt,
“Transaction Documents” in context of
this condition precedent only, excludes
the security documents required to be
perfected under paragraph 2(y)(ii)
(Conditions Subsequent) below; and
(b) All relevant notices and
acknowledgements (where applicable)
shall have been made or received as the

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TNB Northern Energy Berhad Information Memorandum

case may be, other than those set out in


paragraph 2(y)(ii) (Conditions
Subsequent).
(c) Receipt from the Issuer and Project
Company, as the case may be, certified
true copies of all the executed and where
applicable, stamped Project Documents
and any other supplemental
documentation in relation thereto.
For the purposes of this PTC, “Transaction
Documents” means the transaction documents
executed or to be executed in connection with
the proposed issue of the Sukuk TNB NE,
which term includes issue documents, Shariah
required documents and security documents
relating to the Sukuk TNB NE.
B. The Issuer / Project Company
(a) Certified true copies of the Certificate of
Incorporation and the Memorandum and
Articles of Association of the Issuer and
Project Company;
(b) Certified true copies of the Forms 24
and 49 of the Issuer and Project
Company;
(c) A certified true copy of a board
resolution of the Issuer and Project
Company authorising, among others,
the execution of the relevant
Transaction Documents;
(d) A list of the Issuer and Project
Company’s authorised signatories and
their respective specimen signatures;
(e) A report of the relevant company search
of the Issuer and Project Company;
(f) A report of the relevant winding-up
search or the relevant statutory
declaration of the Issuer and Project
Company; and
(g) Evidence satisfactory to the Joint Lead
Arrangers that the Project Company has
an issued and paid-up share capital of
not less than RM5m.
C. General
(a) The approval from the Securities
Commission (“SC”);
(b) The Sukuk TNB NE shall have received

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TNB Northern Energy Berhad Information Memorandum

a rating of at least AAAIS from the


Rating Agency;
(c) Evidence that all the Designated
Accounts have been opened and in
accordance with the provisions of this
PTC;
(d) Evidence that the Forms 34 (as
prescribed under the Companies Act),
where applicable, in respect of the
charges created pursuant to the relevant
Transaction Documents (for the purpose
of registration of such charges with the
Companies Commission of Malaysia
(“CCM”) in accordance with Section 108
of the Companies Act 1965) have been
duly lodged with the CCM and that
immediately prior to the lodgement of
such Forms 34, a search conducted on
such company in respect of which the
Form 34 is filed, revealed that there are
no other charges that have been
registered by it with the CCM;
(e) The Joint Lead Arrangers have received
a satisfactory legal opinion from the
Issuer’s solicitors addressed to them
advising with respect to, among others,
the legality, validity and enforceability of
the Project Documents (excluding the
generation license) against the
Issuer/Project Company and confirming
to the Joint Lead Arrangers that all the
conditions precedents in relation to the
Project Documents (if applicable) have
been fulfilled;
(f) The Joint Lead Arrangers have received
a satisfactory legal opinion from their
legal counsel addressed to them and the
Trustee advising with respect to, among
others, the legality, validity and
enforceability of the Transaction
Documents and a confirmation from the
legal counsel addressed to the Joint
Lead Arrangers confirming that all the
conditions precedent in relation to the
Transaction Documents have been
fulfilled;
(g) A written report from the Technical
Adviser in form and substance
satisfactory to the Joint Lead Arrangers;
(h) A written report from the Insurance
Adviser in form and substance

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TNB Northern Energy Berhad Information Memorandum

satisfactory to the Joint Lead Arrangers;


(i) A written report from the Environmental
Adviser in form and substance
satisfactory to the Joint Lead Arrangers;
(j) Receipt of a certified true copy of the
environmental impact assessment report
("EIA") and environmental management
plan ("EMP") in respect of the Project
and evidence that all conditions in the
EIA and EMP reports (which are
required to have been met at such time)
have been met and approved by the
Department of Environment ("DOE");
(k) Evidence of the confirmation from the
Shariah Advisers that the structure and
mechanism together with the
Transaction Documents of the Sukuk
TNB NE are in compliance with Shariah
principles;
(l) Delivery of a financial model, showing a
minimum projected base case FSCR of
at least 1.25x ("Base Case FSCR") and
a FE Ratio not exceeding 70:30,
satisfactory to the Joint Lead Arrangers
(the "Base Case Financial Model");
(m) All transaction fees, costs and expenses
have been fully paid or documentary
evidence that it will be paid from the
issue proceeds; and
(n) Such other conditions precedent as may
be advised by the legal counsel of the
Joint Lead Arrangers and to be mutually
agreed between the Joint Lead
Arrangers and the Issuer.

u. Representations and Each of the Issuer and Project Company


warranties represents and warrants to all the
counterparties of the facility agreement as
follows:
(a) it is a company with limited liability duly
incorporated and validly existing under the
laws of Malaysia, has full power to carry on
its business and to own its property and
assets;
(b) subject to the perfection requirements
referred to in the legal opinion delivered
under paragraph 2(t) (Conditions Precedent)
and paragraph 2(y)(ii) (Conditions
Subsequent) and upon taking all necessary
actions and obtaining the consents and

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TNB Northern Energy Berhad Information Memorandum

approvals referred to under paragraph 2(t)


(Conditions Precedent) and paragraph
2(y)(ii) (Conditions Subsequent), its
memorandum and articles of association
incorporate provisions which authorise, and
all necessary corporate and other relevant
actions have been taken to authorise, and
all relevant consents and approvals of any
administrative, governmental or other
authority or body in Malaysia have been
duly obtained and are in full force and effect
which are required to authorise it to execute
and deliver and perform the transactions
contemplated in the Transaction Documents
in accordance with their terms;
(c) subject to any general principles of law
limiting its obligations referred to in the legal
opinion delivered under paragraph 2(t)
(Conditions Precedent) and paragraph
2(y)(ii) (Conditions Subsequent) and upon
taking all necessary actions and obtaining
the consents and approvals referred to
under paragraph 2(t) (Conditions Precedent)
and paragraph 2(y)(ii) (Conditions
Subsequent), the Sukuk TNB NE and each
of the other Transaction Documents, is or
will be when executed and/or issued, as the
case may be, in full force and effect and
constitutes, or will when executed or issued,
as the case may be, constitute, its valid and
legally binding obligations enforceable in
accordance with the terms of the Sukuk
TNB NE and each such Transaction
Document;
(d) subject to the perfection requirements
referred to in the legal opinion delivered
under paragraph 2(t) (Conditions Precedent)
and paragraph 2(y)(ii) (Conditions
Subsequent) and upon taking all necessary
actions and obtaining the consents and
approvals referred to under paragraph 2(t)
(Conditions Precedent) and paragraph
2(y)(ii) (Conditions Subsequent), neither the
execution and delivery of any of the
Transaction Documents by the Issuer, nor
the performance of any of the transactions
contemplated by the Transaction
Documents by the Issuer, did or does as at
the date the representation and warranty is
made or repeated (i) contravene or
constitute a default under any provision
contained in any financing agreement,
instrument, law, ordinance, decree,

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TNB Northern Energy Berhad Information Memorandum

judgment, order, rule, regulation, licence,


permit or consent by which it or any of its
assets are bound or which is applicable to it
or any of its assets, (ii) cause the powers of
its directors, whether imposed by or
contained in its memorandum and articles of
association or in any agreement, instrument,
law, ordinance, decree, order, rule,
regulation, judgment or otherwise, to be
exceeded, or (iii) cause the creation or
imposition of any security interest or
restriction of any nature on any of its assets
(other than the securities as contemplated
under this PTC); which will have a Material
Adverse Effect or a material adverse effect
on the validity or enforceability of the
Transaction Documents or the right or
remedies of a party (other than the Issuer)
under the Transaction Documents;
(e) save for the perfection requirements
referred to in the legal opinion delivered
under paragraph 2(t) (Conditions Precedent)
for Issuance and paragraph 2(y)(ii)
(Conditions Subsequent) and upon taking all
necessary actions and obtaining the
consents and approvals referred to under
paragraph 2(t) (Conditions Precedent) and
paragraph 2(y)(ii) (Conditions Subsequent),
no authorisation, approval, consent, licence,
exemption, registration, recording, filing or
notarisation and no payment of any duty or
tax and no other action whatsoever is
necessary to ensure the legality, validity,
enforceability of its liabilities and obligations
or the rights of the Sukukholders under the
Transaction Documents or the Sukuk TNB
NE;
(f) save for the CIDB Licence which the Issuer
will obtain within 6 months after issuance of
the Notice to Proceed (as defined in the
EPCC) Sukuk TNB NE, all consents,
licences, approvals or authorisations of
governmental authorities in Malaysia which
are required for it to own its assets and
carry on its business as it is being
conducted have been duly obtained and
complied with and are in full force and effect
where failure to do so would have a Material
Adverse Effect;
(g) except as disclosed to the Trustee in writing,
no litigation, arbitration or administrative
proceeding or claim is current, presently in
progress or pending against it or any of its

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assets which would have a Material Adverse


Effect;
(h) the information memorandum issued in
connection with the Sukuk TNB NE
(“Information Memorandum” which term
shall include the Information Memorandum
as amended or supplemented from time to
time) does not contain any statements or
information which are false or misleading in
any material respect, or from which there is
a material omission which makes the
statement therein, in light of the
circumstances under which they are made,
misleading in any material respect as at the
date of the Information Memorandum or
such other date specified therein and all
expressions of expectation, intention, belief
and opinion contained therein were honestly
made on reasonable grounds after due and
careful inquiry by the Issuer based on facts
existing as at the date of the Information
Memorandum or such other dates specified
therein;
(i) there has been no material adverse change
in the financial condition of the Issuer since
the date of its incorporation (where no
audited financial statements have been
prepared) or since its last audited financial
statements, which would have a Material
Adverse Effect;
(j) no Dissolution Event has occurred and
continuing.
(k) unless otherwise disclosed, its latest audited
financial statements (including the cashflow
statements, income statements and balance
sheet) have been prepared in accordance
with approved accounting standards in
Malaysia and give a true and fair view of its
financial position for that year and the state
of its affairs at that date, as the case may
be;
(l) all necessary returns have been delivered to
the relevant taxation authorities and there
has not been default in the payment of any
tax;
(m) it has fully disclosed in writing to the Facility
Agent, the Security Agent and the Joint
Lead Managers all facts relating to it which it
knows or should reasonably know and
which are material for disclosure to the
Trustee or the Sukukholders in the context

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of the Transaction Documents;


(n) the Sukuk TNB NE constitute direct,
unconditional and secured obligations of the
Issuer and at all times rank: (i) pari passu,
without discrimination, preference, priority
amongst themselves; (ii) at least pari passu
with all other present and future unsecured
and unsubordinated obligations of the
Issuer, subject to those preferred by law;
(o) Each copy of the Project Documents
delivered to the Trustee/Security Agent is
true and complete;
(p) Save for the Project Documents delivered to
the Trustee/Security Agent there is no other
agreement in connection with the Project, or
arrangements which amend, supplement or
change the effect of any Project Document
in any material respect; and
(q) all takaful/insurances required under the
Project Documents have been effected and
are valid and binding and all takaful
contributions/ premiums due have been paid
and, so far as the Issuer is aware, nothing
has been done or omitted to be done which
has made or could make any such policy
void or voidable.
“Material Adverse Effect” means,
in relation to any event, the occurrence of which
materially and adversely affect the ability of the
Issuer, Project Company or Sponsor to perform
its respective obligations under the Sukuk TNB
NE and/or any of the Transaction Documents to
which it is a party.
The representations and warranties are given
on the date of the relevant agreements and
repeated on the date of the issue request and
the issue date of the Sukuk TNB NE only with
respect to the facts and circumstances then
subsisting, as if repeated by reference to the
then existing circumstances.

v. Events of default, dissolution The following events:


event and enforcement event, (a) the Issuer fails to pay any principal or profit
where applicable under the Sukuk TNB NE and such failure is
not remedied within five (5) business days
from its due date;
(b) the Issuer, Project Company and/or
Sponsor fails to observe or perform any of

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its obligations under any of the Transaction


Documents or under any undertaking or
arrangement entered into in connection
therewith (other than an obligation of the
type referred to in paragraph (a) above)
where such failure would have a Material
Adverse Effect, and in the case of a failure
which in the reasonable opinion of the
Trustee is capable of being remedied, the
Issuer does not remedy the failure within 30
days after the Issuer became aware or
having been notified by the Trustee in
writing of the failure to comply;
(c) any representation or warranty made or
given by the Issuer and/or Project
Company under the Transaction Documents
or which is contained in any certificate,
document or statement furnished at any
time pursuant to the terms of the Sukuk
TNB NE and/or any of the Transaction
Documents proves to have been incorrect or
misleading in any material respects on or as
of the date made or given or deemed made
or given, where such event would have a
Material Adverse Effect and in the case of a
failure which in the reasonable opinion of
the Trustee is capable of being remedied,
the Issuer and/or Project Company do not
remedy the failure within 30 days after the
Issuer and/or Project Company become
aware of such misrepresentation or has
been notified by the Trustee in writing of
such misrepresentation;
(d) any of the Project Documents is terminated
or there has been a breach of any material
obligations by the Issuer, Project Company
and/or project counterparties under any of
such documents which would have a
Material Adverse Effect and which, if
capable of remedy, has not been remedied
to the reasonable satisfaction of the Trustee
within a period of 30 days after the Issuer
and/or Project Company became aware or
having been notified by the Trustee in
writing of such breach;
(e) any financial indebtedness (other than the
Sukuk TNB NE) of the Issuer and/or Project
Company becomes due or payable or
capable of being declared due or payable
prior to its stated maturity, or any guarantee
or similar obligations of any of the Issuer
and/or Project Company for financial
indebtedness is not discharged at maturity

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or when called and such declaration of


financial indebtedness being due or payable
or such call on the guarantee or similar
obligations would have a Material Adverse
Effect unless within 90 days:
(i) it is contested in good faith by the Issuer
and/or Project Company; or
(ii) the Trustee is furnished with evidence
that the relevant creditors’ agreement
has been obtained not to declare due or
not to call on the guarantee or similar
obligations or to waive such default or
not to take any further action in relation
thereto.
For the purpose of this paragraph, “financial
indebtedness” shall mean, without duplication
or double counting, whether Islamic or
conventional:
a. all indebtedness for borrowed money in
respect of which interest and profit
charges are customarily paid and other
indebtedness under or pursuant to
Islamic financing;
b. all indebtedness for or in respect of any
amount raised pursuant to the issue of
bonds, notes, debentures, loan stock or
any similar instrument;
c. all financial guarantees by the Issuer
and/or Project Company of financial
indebtedness of others; and
d. all hire purchase and finance lease
obligations of the Issuer and/or Project
Company,
provided that notwithstanding the foregoing,
the term "financial indebtedness" shall not
include subordinated shareholders loans or
advances, redeemable preference shares,
vendor financing, trade credits in the ordinary
course of business or security or refundable
deposits taken in the ordinary course of
business.
(f) an encumbrancer takes possession of, or a
trustee, receiver, receiver and manager or
similar officer is appointed in respect of the
whole or any part of the assets of the Issuer
and/or Project Company, or distress, legal
process, sequestration or any form of
execution is levied or enforced or sued out
against such assets which would have a

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Material Adverse Effect and is not


discharged within 90 days, or any security
interest which may for the time being affect
any of such assets becomes enforceable
and which would have a Material Adverse
Effect.
(g) the Issuer and/or Project Company fails to
satisfy any judgement involving material
liabilities passed against it by any court of
competent jurisdiction (excluding those
liabilities in which it is confirmed that
insurance coverage can be claimed) which
would have a Material Adverse Effect
provided that no Dissolution Event shall
occur under this paragraph (g) if:
(i) an appeal against such judgement has
been made to any appropriate appellate
court within the time prescribed by law;
or
(ii) an application is made to discharge or
stay such judgment within the time
prescribed by law;
unless for the purposes of and followed by a
reconstruction previously approved in
writing by the Trustee where during or
following such reconstruction the Issuer
and/or Project Company becomes or is
declared to be insolvent, a winding-up order
has been made against the Issuer and/or
Project Company or any step is taken for
the winding-up, dissolution or liquidation of
the Issuer and/or Project Company or a
resolution is passed for the winding-up of
the Issuer and/or Project Company or a
petition for winding-up is presented against
the Issuer and/or Project Company (unless
such petition is frivolous or vexatious or
related to a claim to which the Issuer has a
good defence or which is being contested in
good faith by the Issuer) and the Issuer
and/or Project Company has not taken any
action in good faith to set aside such petition
or the petition is not withdrawn or
discharged within 90 days from the date of
service of such winding-up petition or a
winding-up order has been made against
the Issuer and/or Project Company;
(h) unless for the purposes of and followed by a
reconstruction previously approved in
writing by the Trustee and where during or
following such reconstruction the Issuer

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TNB Northern Energy Berhad Information Memorandum

and/or Project Company becomes or is


declared to be insolvent, the Issuer and/or
Project Company:
(i) convenes a meeting of its creditors or
proposes or makes any arrangement
(including any scheme of arrangement
under Section 176 of the Companies
Act, 1965) or composition or begins
negotiations with its creditors, or takes
any proceedings or other steps, with a
view to a rescheduling or deferral of all
or a part of its indebtedness; or
(ii) a moratorium is agreed or declared by a
court of competent jurisdiction in respect
of or affecting all or a part of its
indebtedness; or
(iii) makes any assignment for the benefit of
its creditors in respect of or affecting all
or a part of its indebtedness,
which, would have a Material Adverse
Effect;
(i) where there is a revocation, withholding,
invalidation or modification of any license,
authorisation, approval or consent
necessary for the Issuer and/or Project
Company to carry on its business which
would have a Material Adverse Effect;
(j) any creditor of the Issuer and/or Project
Company exercises a contractual right to
take over the financial management of the
Issuer and/or Project Company and such
event would have a Material Adverse Effect;
(k) the Issuer and/or Project Company
repudiates any of the Transaction
Documents or Project Documents to which it
is a party;
(l) all or a part of the assets, undertakings,
rights or revenue of the Issuer and/or
Project Company are seized, nationalised,
expropriated or compulsorily acquired by or
under the authority of any governmental
body which would have a Material Adverse
Effect;
(m) any event or events has or have occurred or
a situation exists which would have a
Material Adverse Effect and in the case of
the occurrence of such event or situation
which in the reasonable opinion of the
Trustee is capable of being remedied, the

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TNB Northern Energy Berhad Information Memorandum

Issuer and/or Project Company does not


remedy it within 60 days after the Issuer
and/or Project Company became aware or
having been notified in writing by the
Trustee of the event or situation;
(n) the occurrence of Total Loss Event;
(o) COD does not occur within 6 months of the
Scheduled COD in the manner set out in the
PPA (unless otherwise excused or extended
under the PPA);
(p) the Issuer and Project Company ceases to
be 100% owned by the Sponsor directly or
indirectly;
(q) the Issuer and/or Project Company changes
in a material manner the nature or scope of
its business, or suspends the operation of
any part of its business which it now
conducts directly or indirectly;
(r) At any time: (aa) it is illegal or unlawful for
the Issuer and/or Project Company to
perform any of its obligations under the
Transaction Documents or at any time any
of the provisions of the Transaction
Documents is or becomes illegal, void,
voidable or unenforceable; and
(bb) any of the provisions of the Project
Documents, in so far as it relates to material
obligations under the Project Documents
that remain undischarged is or becomes
illegal, void, voidable or unenforceable and
has a Material Adverse Effect, unless such
Project Document has been sufficiently
replaced to the satisfaction of the Trustee;
(s) For whatever reason any of the Security
Interests created under any of the
Transaction Documents is rendered invalid
generally or defective in any material way or
ceases to have first ranking priority (save
and except for those which are preferred by
law);
(t) Where the generation licence is:
(i) terminated, revoked or ceases to be in
full force and effect without a substitute
licence being issued therefor within 180
days of such termination, revocation or
cessation; or
(ii) modified and the effect of such
modification would be to prevent the

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implementation or carrying out of all or a


substantial part of the Project
(v) Such other Dissolution Events as may be
advised by the legal counsel of the Joint
Lead Arrangers and which have been
mutually agreed between the Joint Lead
Arrangers and the Issuer.
Upon the occurrence of a Dissolution Event
which is continuing, the Trustee may, at its
sole and absolute discretion and shall, if so
directed by an extraordinary resolution of the
Sukukholders (subject to its rights to be
indemnified to its satisfaction against all
reasonable costs and expenses thereby
occasioned), declare (by giving notice to the
Issuer) that a Dissolution Event has occurred
whereupon the Trustee shall be entitled to
accelerate the nominal value of the Sukuk
TNB NE and the Periodic Distribution Amounts
accrued until the date of such declaration by
way of exercising the Purchase Undertaking
and thereupon, the Exercise Price shall be due
and payable, and enforce its rights under the
Transaction Documents.

w. Covenants Positive Covenants


(a) The Issuer covenants that so long as the
Sukuk TNB NE are outstanding:it shall
maintain a paying agent who is based in
Malaysia;
(b) during the construction period prior to the
COD, the Issuer shall submit a progress
report every quarter to the Technical
Adviser for verification and to the Trustee,
and which shall contain (i) a summary of
progress towards achieving the COD, (ii)
estimated date of COD, (iii) confirmation of
construction and other costs paid up to the
date of the then quarterly progress report
and estimated remaining capital
expenditure/ construction-related costs and
pre-operational expenditure to be incurred
towards the implementation of the COD and
(iv) details of actual or likely cost overruns;
and
(c) during the construction period prior to the
COD, the Issuer shall procure the EA to
provide a report every quarter to the Trustee
confirming the Issuer’s compliance with the
EMP and all relevant material environmental
laws, permits, guidelines and regulations.

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TNB Northern Energy Berhad Information Memorandum

Both Issuer and Project Company


covenants that so long as the Sukuk TNB
NE are outstanding:
(a) it:
(i) has at all times observed, performed
and complied with all its covenants,
representations, warranties and other
relevant obligations under the
Transaction Documents to which each is
a party and shall provide to the Trustee
at least on an annual basis, a certificate
confirming the same, and confirming
that there does not exist or had not
existed, from the date the Sukuk TNB
NE were issued or the date of the last
certificate, as the case may be, any
Dissolution Event, and if such is not the
case, to specify the same; and
(ii) is in material compliance with the EMP
and all relevant material environmental
laws, permits, guidelines and
regulations;
(b) it shall deliver to the Trustee the following:
(i) as soon as they become available (and
in any event within a period to be
mutually agreed in the Transaction
Documents after the end of its financial
year) copies of its financial statements
for that year which shall contain the
income statement and balance sheet,
and which are audited by a firm of
independent certified public accountants
acceptable to the Trustee (“Auditors”);
(ii) as soon as they become available (and
in any event within a period to be
mutually agreed in the Transaction
Documents after the end of the first half
of its financial year) copies of its
unaudited financial statements for that
half-yearly period which shall contain the
income statement and balance sheet;
(iii) promptly, such additional financial or
other information or reports as the
Trustee may from time to time
reasonably request including without
limitation, such information as the
Trustee may require in order for the
Trustee to discharge its duties and
obligations to the extent permitted by
law and would not result in the Issuer

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TNB Northern Energy Berhad Information Memorandum

breaching any stock exchange


requirements, duty of confidentiality or
confidentiality obligations;
(c) it shall promptly notify the Trustee of any
litigation or other proceedings of any nature
whatsoever being initiated against it before
any court or tribunal or administrative
agency which would have a Material
Adverse Effect;
(d) it shall promptly give notice to the Trustee
of:
(i) any change in the utilisation of proceeds
from the Sukuk TNB NE from that set
out in the Transaction Documents;
(ii) the occurrence of any Dissolution Event;
(iii) any substantial change in the nature of
its business;
(iv) any change in the withholding tax
position or taxing jurisdiction of the
Issuer; or
(v) any amendments or variations made to
any of the Project Documents and
provide a certified true copy thereof.
(e) it shall maintain in full force and effect all
relevant authorisations, consents, rights,
licences, approvals and permits
(governmental and otherwise) and will
promptly obtain any further authorisations,
consents, rights, licences, approvals and
permits (governmental and otherwise) which
is or may become necessary to enable it to
own its assets, to carry on its business or for
the Issuer to enter into or perform its
obligations under the Transaction
Documents or to ensure the legality, validity,
enforceability, admissibility in evidence of its
obligations or the priority or rights of the
Trustee/the Facility Agent/the Security
Agent or the Sukukholders under the
Transaction Documents where failure to do
so would have a Material Adverse Effect;
(f) it shall at all times on demand by the
Trustee (acting reasonably) execute all such
further documents and do all such further
acts reasonably necessary at any time or
times to give further effect to the terms and
conditions of the Transaction Documents
and Project Documents;

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TNB Northern Energy Berhad Information Memorandum

(g) it shall exercise reasonable diligence in


carrying out its business and affairs and in
accordance with sound financial and
commercial standards and practices and its
Memorandum and Articles of Association;
(h) it shall prepare its financial statements on a
basis consistently applied in accordance
with approved accounting standards in
Malaysia (unless otherwise disclosed) and
those financial statements shall give a true
and fair view of its results of the operations
for the period to which the financial
statements are made up;
(i) it shall maintain an accounting system and
records in compliance with applicable
statutory requirements and in accordance
with generally accepted accounting
principles in Malaysia which are adequate to
record and reflect its operations and
financial condition and it will permit upon
reasonable request by the Trustee or its
agent and servants and any person
appointed or authorised by it with prior
notice and at all reasonable times to have
access to and to inspect its books of
accounts and records relating to its
business at any office, branch or place of
business of the Issuer and all records kept
by any other persons subject to such parties
executing confidentiality undertakings as
prescribed by the Issuer/Project Company
and provided further that such access and
disclosure does not result in any
contravention of any laws, regulations or
directives by the Issuer/Project Company
and would not result in the Issuer breaching
any stock exchange requirements, duty of
confidentiality or confidentiality obligations;
(j) it shall promptly comply with all applicable
laws (including the provisions of the Capital
Markets and Services Act 2007 and all
circulars, conditions or guidelines issued by
the Securities Commission from time to
time) as may be applicable to it;
(k) the Issuer and Project Company shall
provide the Trustee and its representatives
reasonable access to the Project site and
inspection of all relevant Project Documents
at all reasonable times provided prior notice
has been given to the Issuer and Project
Company and subject to such parties
executing confidentiality undertakings as

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TNB Northern Energy Berhad Information Memorandum

prescribed by the Issuer and Project


Company and provided further that such
access and disclosure does not result in any
contravention of any laws, regulations or
directives by the Issuer and would not result
in the Issuer/Project Company breaching
any stock exchange requirements, duty of
confidentiality or confidentiality obligations;
(l) it shall open and maintain each of the
required Designated Accounts and pay all
relevant amounts into such accounts and
make all payments from such accounts, only
as permitted under the Transaction
Documents;
(m) it shall ensure that the Sukuk TNB NE will at
all times rank at least pari passu with all
other present and future unsecured and
unsubordinated obligations of the Issuer
and/or Project Company;
(n) it shall deliver to the Trustee the following:
(i) Distribution FSCR calculation (certified
by at least one director of each of the
Issuer and the Project Company) for
the balance sheet closing date of the
relevant financial statements on a
semi-annual basis;
(ii) FE Ratio calculation (certified by at
least one director of each of the Issuer
and the Project Company) for the
balance sheet closing date of the
relevant financial statements on a
semi-annual basis;
(iii) promptly, such additional financial or
other information or reports as the
Trustee may from time to time
reasonably request including without
limitation, such information as the
Trustee may require in order for the
Trustee to discharge its duties and
obligations to the extent permitted by
law and would not result in the Issuer
breaching any stock exchange
requirements, duty of confidentiality or
confidentiality obligations; and

(o) Such other Positive Covenants as may


be advised by the legal counsel of the
Joint Lead Arrangers and which have
been mutually agreed between the Joint
Lead Arrangers and the Issuer.

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TNB Northern Energy Berhad Information Memorandum

Negative Covenants
Both Issuer and Project Company covenant
that, for so long as any Islamic Security is
outstanding, it will not:
(a) not add, delete, amend or substitute its
Memorandum or Articles of Association in a
manner inconsistent with the provisions of
the Transaction Documents unless required
by law;
(b) reduce its authorised or paid-up share
capital (except by way of purchase,
acquisition or reduction permitted under the
law or redemption of redeemable preference
shares permitted under the Transaction
Documents) whether by varying the amount,
structure or value thereof or the rights
attached thereto or by converting any of its
share capital into stock, or by consolidating,
dividing or sub-dividing all or any of its
shares which would have a Material
Adverse Effect;
(c) change in a material manner the nature or
scope of its existing business nor suspend a
substantial part of its business where such
change or suspension would have a
Material Adverse Effect;
(d) obtain or permit to exist any financial
indebtedness other than the following:
(i) the Sukuk TNB NE;
(ii) financing facilities from related
corporations of the Issuer that are
subordinated to the Sukuk TNB NE;
(iii) the financing facilities (“Permitted
Facilities”) arising from or in connection
with the Issuer’s obligations under the
Project Documents (including the PPA)
to any provision of bonds/performance
guarantee or in the ordinary course of
business, up to an amount to be agreed
with the Joint Lead Arrangers in the
Transaction Documents;
(iv) financing which repayment or
redemption are subordinated to the
Sukuk TNB NE;
(v) working capital facilities (“Working
Capital Facilities”) up to an amount to
be agreed with the Joint Lead Arrangers
in the Transaction Documents; and
(vi) any hedging arrangements entered into
by the Issuer or the Project Company in

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TNB Northern Energy Berhad Information Memorandum

connection to the Project to hedge


against not more than one hundred per
centum (100%) of its foreign currency
exposure in relation to payments under
the EPCC and LTMP.
(e) create or permit to exist any security interest
over its assets, except for:
(i) liens arising in the ordinary course of
business by operation of law and not by
way of contract;
(ii) those security as contemplated in this
PTC;
(iii) securities given for the Permitted
Facilities and Working Capital Facilities;
(iv) securities given as an alternative
(whether in whole or in part) to the
Permitted Facilities and Working Capital
Facilities (“Alternative Securities”);
(v) any netting or set-off arrangement
entered into in the ordinary course of
banking arrangements for the purpose
of netting debit and credit balances;
(vi) security created in relation to
documentary credits, trust receipts and
bankers acceptances opened in the
ordinary course of business;
(vii) security arising under retention of title,
leases, hire purchase or conditional sale
arrangements in respect of any assets
or goods supplied in the ordinary course
of business;
(viii) security created in respect solely
of indebtedness incurred or assumed for
the purpose of financing the purchase
price of any asset (including but not
limited to shares), in each case, created
solely over such assets;
(ix) security created in respect of liabilities
which exist on any property or asset
prior to its acquisition or arising after
such acquisition pursuant to contractual
commitments entered into prior to, but
not in connection with or in
contemplation of, such acquisition;
(x) security existing as at the date of the
Transaction Documents and disclosed
to the Trustee;
(xi) security created with the prior written
consent of the Trustee; and

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TNB Northern Energy Berhad Information Memorandum

(xii) security which equally and rateably


secures the obligations under the Sukuk
TNB NE.
(f) sell, transfer or lease or otherwise dispose
of or in any case cease to exercise control
over, whether by a single transaction or a
number of transactions, related or not, the
whole or part of the Issuer’s undertaking,
business or assets, except:
(i) sale or disposal of the Issuer’s
undertaking, business or assets which is
in the ordinary course of business and
on ordinary commercial terms on the
basis of arm’s length transaction; or
(ii) disposal of any of the Issuer’s
undertaking, business or assets due to
obsolescence ,deterioration, surplus,
redundant, damaged and/or defective ;
or
(iii) as permitted under the Sukuk TNB NE;
or
(iv) solely for the purpose of facilitating any
Islamic financing in connection with any
of the financing facilities allowed under
the Sukuk TNB NE; or
(v) sale or disposal pursuant to security
permitted under the Sukuk TNB NE; or
(vi) sale or disposal which would not have a
Material Adverse Effect; or
(vii) sale or disposal constituted by creation
of permitted security; or
(viii) sale or disposal in exchange for
other assets comparable or superior as
to value.
(g) use the proceeds of the issue of the Sukuk
TNB NE for any purpose other than as
stated in the Transaction Documents;
(h) put to its directors or shareholders any
resolution for, or appoint any liquidator for,
its winding-up or any resolution for the
commencement of any bankruptcy or
insolvency proceeding with respect to it;
(i) enter into any contract, transaction or
engage in any business or activity other
than:
(i) the Transaction Documents to which it is
a party (or any amendment or
supplemental agreement thereto);

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TNB Northern Energy Berhad Information Memorandum

(ii) as provided for or permitted in the


Transaction Documents;
(iii) such matters as incidental to the Sukuk
TNB NE or the Transaction Documents;
or
(iv) in the ordinary course of its business
(j) make any transfers to the Distribution
Account in order to declare or pay any
dividends or make any distribution whether
income or capital in nature to its
shareholders or redeem any preference
shares (“Restricted Payments”) if:
(i) the Distribution FSCR on the most
recent scheduled principal repayment
date (as defined below) falls below 1.50
times before and after such payment or
distribution;
(ii) in respect of distributions declared or
made after Commercial Operations
Date, the FE Ratio will not exceed 75:25
after such payment or distribution;
(iii) COD (as defined in the PPA) has not
occurred;
(iv) first repayment of the Sukuk TNB NE
has not been made; and
(v) a Dissolution Event has occurred and is
continuing or if following such payment
or distribution, a Dissolution Event would
occur.
For the purposes of this paragraph, the
distribution finance service cover ratio
(“Distribution FSCR”) is, on the most
recent scheduled principal repayment date
of the Sukuk TNB NE, the ratio of aggregate
Net Available Cash (as defined below) for
the relevant 6 month period of the Issuer
and Project Company to Total Finance
Service (as defined below) to be paid for
such period of the Issuer and Project
Company, where:
(A) net available cash (“Net Available
Cash”) for any period is the aggregate
of:
(i) the net operating cash flow
generated during the previous 6
months period; and
(ii) income on cash balances during
the previous 6 months; and

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TNB Northern Energy Berhad Information Memorandum

(iii) all cash balances (including those


of the Designated Accounts) at the
end of the 6 month period; and
(iv) the amount guaranteed by the
Sponsor’s Rolling Guarantee at the
beginning of the 6 month period;
less
(v) all Restricted Payments,
intercompany facilities from related
corporations of the Issuer, and any
other subordinated payments
during the previous 6 months.
For the avoidance of doubt, such
amounts will also include the nominal
value of any Permitted Investments; and
(B) Total Finance Service refers to the
aggregate amount that is required to be
paid (relating to outstanding principal
obligations and periodic distribution
amounts, and all other corresponding
amounts) in connection with all financing
facilities of the Issuer and Project
Company (except in relation to
intercompany facilities from related
corporations of the Issuer/Project
Company) for the next 6 months period.
In this regard, the net operating cash flow
generated means (a) with respect to inflow,
all the deposits received under the
respective revenue accounts below and (b)
with respect to outflow, the item (a) listed
under the heading “Issuer Priority of
Cashflow” and “ProjCo Priority of Cashflow”
below.
For the avoidance of doubt: (aa) any double
counting shall be disregarded; and (bb) any
payments of dividends or distributions
(whether income or capital in nature) or
redemption of any preference shares shall
only be made from the Distribution Account
and not from any other account.
In the event there is a dispute and the
Trustee requires certification from any
external party (choice of such party must be
acceptable to the Trustee) in relation to the
calculation of the said Distribution FSCR,
the Issuer shall promptly procure such
certification prior to the relevant periodic
distribution amount date.
Such external party’s certification shall be
provided to the Trustee before the Trustee

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TNB Northern Energy Berhad Information Memorandum

gives any confirmation as required above


and such external party’s certification is
final.
(k) amend, vary, terminate (except due to lapse
of time), replace or supplement (or agree to
do so) any of its Project Documents which
would have a Material Adverse Effect;
(l) waive, or agree to waive any breach or
proposed breach in any of the Project
Documents by any of its counterparties
which would have a Material Adverse Effect;
(m) do any act or omit to do any act, or execute
or omit to execute any document which may
render any of the Project Documents to be
illegal, void, voidable or unenforceable
which would have a Material Adverse Effect;
(n) enter into any agreement with its related
corporations or associated companies if it
has a Material Adverse Effect;
(o) provide any financing facility to any party
other than in compliance with the Listing
Requirements;
(p) open any bank accounts other than
Designated Accounts, other than any
accounts permitted under the Transaction
Documents or approved by the Trustee; and
(q) Such other Negative Covenants as may be
advised by the legal counsel of the Joint
Lead Arrangers and to be mutually agreed
between the Joint Lead Arrangers and the
Issuer.

Provisions
x on buy-back and The Issuer and its related corporations may at
. early redemption of sukuk any time purchase the Sukuk TNB NE in the
open market at any price, but any Sukuk TNB
NE repurchased by the Issuer and its
subsidiaries shall be cancelled and cannot be
resold.
Other
y principal terms and
. conditions for the proposal

(i) Conditions Precedent to Conditions precedent to each disbursement


Each Disbursement from the Escrow Accounts to include but not
limited to the following:
(a) All representations and warranties are true
and correct in all material respects by
reference to the facts and circumstances
subsisting at such time;
(b) No Events of Default/ Dissolution Events
have occurred and are continuing;

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(c) Such drawdown would not cause the FE


Ratio to exceed the FE Ratio set out in the
Base Case Financial Model after such
drawdown;
(d) Receipt of a drawdown certificate, including
certification by the Technical Adviser, if
applicable, in accordance with the
Transaction Documents; and
(e) Such other conditions precedent as may be
advised by the legal counsel of the Joint
Lead Arrangers and to be mutually agreed
between the Joint Lead Arrangers and the
Issuer.

(ii) Conditions Subsequent To include the following:


(a) No later than the COD, evidence and
confirmation from the Project Company
that all operational period insurance cover
has been effected and is in full force and
effect. For the avoidance of doubt, if item
(ii)(b) below is met no later than COD, this
item (ii)(a) is considered satisfied;
(b) No later than 1 month after COD, receipt of
a confirmation from the Insurance Adviser
that the agreed operational phase
insurance cover has been effected, in line
with the requirements of the Transaction
Documents;
(c) No later than 9 months after issuance of
the Sukuk TNB NE, receipt of a certified
true copy of the generation license from the
Energy Commission;
(d) No later than 6 months after issuance of
the Notice to Proceed (as defined in the
EPCC), the Issuer has obtained the
Construction Industry Development Board
licence (“CIDB Licence”) and have
provided a certified true copy of the same
to the Security Agent/Trustee;
(e) No later than 12 months after issuance of
the Sukuk TNB NE, presentation for
registration in the name of the Project
Company of the lease of the Ijarah Project
Lands (as defined below) and the Issuer or
the Project Company shall have provided
the original title to the lease to the Security
Agent;
(f) No later than 12 months after issuance of
the Sukuk TNB NE, presentation for
registration of a charge over the lease of
the Ijarah Project Lands in favour of

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TNB Northern Energy Berhad Information Memorandum

Security Agent and the Project Company


shall have provided the Security Agent
with: (i) the receipt of such presentation
from the relevant land authority; (ii)
evidence that the Form 34 (as prescribed
under the Companies Act) in respect of
such charge has been lodged with the
CCM; and (iii) a legal opinion satisfactory
to the Security Agent (from legal counsel
approved by the Security Agent), and
addressed to the Security Agent advising
with respect to, among others, the legality,
validity and enforceability of such charge;
(g) No later than 12 months after issuance of
the Sukuk TNB NE, alienation in favour of
TNB of a third piece of land to be identified
in the Transaction Documents (“Additional
Land”) and the Issuer or the Project
Company shall have provided the original
title to the lease to the Security Agent for
safekeeping together with: (i) a lease
agreement made between TNB and the
Project Company in respect of the
Additional Land; and (ii) a legal opinion
satisfactory to the Security Agent (from
legal counsel approved by the Security
Agent), and addressed to the Security
Agent advising with respect to, among
others, the legality, validity and
enforceability of such lease against the
Issuer/Project Company;
(h) No later than 12 months after issuance of
the Sukuk TNB NE, presentation for
registration of (i) the lease over the
Additional Land in favour of the Project
Company together with (ii) the charge over
such lease in favour of Security Agent and
the Project Company shall have provided
the Security Agent with: (aa) certified true
copies of the receipts of such presentations
from the relevant land authority; (bb)
evidence that the Form 34 (as prescribed
under the Companies Act) in respect of
such charge has been lodged with the
CCM; and (cc) a legal opinion satisfactory
to the Security Agent (from legal counsel
approved by the Security Agent), and
addressed to the Security Agent advising
with respect to, among others, the legality,
validity and enforceability of such charge
against the Issuer/Project Company; and
(i) Such other conditions subsequent as may
be advised by the legal counsel of the Joint

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TNB Northern Energy Berhad Information Memorandum

Lead Arrangers and to be mutually agreed


between the Joint Lead Arrangers and the
Issuer.
“Ijarah Project Lands” has the meaning
ascribed to it above.
The Additional Land and the Ijarah Project
Lands shall collectively be referred to as the
“Project Lands”.

(iii) Form and Denomination The Sukuk TNB NE shall be issued in


accordance with (1) the “Participation and
Operation Rules for Payment and Securities
Services (“MyClear Rules”) issued by
Malaysian Electronic Clearing Corporation Sdn
Bhd (“MyClear”), and (2) Operational
Procedures for Securities Services issued by
MyClear (“MyClear Procedures”) or their
replacement thereof (collectively the “MyClear
Rules and Procedures”) applicable from time
to time.
Each Series of the Sukuk TNB NE shall be
represented by a global certificate to be
deposited with BNM, and shall be exchanged
for definitive bearer form only in certain limited
circumstances. The denomination of the Sukuk
TNB NE shall be RM1,000 or in multiples of
RM1,000 at the time of issuance.

(iv) Finance to Equity Ratio (“FE The Finance to Equity Ratio will be defined as:
Ratio”) the aggregate outstanding principal obligations
of the Issuer and Project Company under all
financing facilities (except in relation to
intercompany facilities from related corporations
of the Issuer), hire purchase obligations and
finance lease obligations; to
(a) Sponsor’s Equity Contribution.

For the avoidance of doubt, outstanding


principal obligations under the Sukuk TNB NE
shall be deemed equivalent to the aggregate
amounts disbursed from the Escrow Accounts
into the Disbursement Accounts as at such
date.

(u) Base case finance service The Base Case FSCR is the ratio of:
cover ratio (“Base Case (a) the aggregate net operating cash flow
FSCR”) generated for the 6-monthly period ending
on each repayment date of the Issuer and
Project Company; to
(b) the aggregate amount that is required to be
paid (relating to outstanding principal

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TNB Northern Energy Berhad Information Memorandum

obligations and periodic distribution


amounts, and all other corresponding
amounts) in connection with all financing
facilities of the Issuer and Project Company
(except in relation to intercompany facilities
from related corporations of the Issuer) for
the current 6-month period.
In this regard, the net operating cash flow
generated means (a) with respect to inflow, all
the deposits received under respective revenue
accounts below and (b) with respect to outflow,
the item (a) listed under the heading “Issuer
Priority of Cashflow” and “ProjCo Priority of
Cashflow” below.

(vi) Transferability Transferable but subject to the Selling


Restrictions.

The Sukuk TNB NE and the Transaction


(vii) Governing Laws and
Documents shall be governed by the laws of
Jurisdiction
Malaysia.

The Issuer and Project Company shall


unconditionally and irrevocably submit to the
exclusive jurisdictions of the courts of Malaysia.

All payments by the Issuer shall be made


(viii) Taxation
without withholding or deductions for or on
account of any present or future tax, duty or
charge of whatsoever nature imposed or levied
by or on behalf of Malaysia or any other
applicable jurisdictions, or any authority thereof
or therein having power to tax, unless such
withholding or deduction is required by law, in
which event the payer shall not be required to
make such additional amount so that the payee
would receive the full amount which the payee
would have received if no such withholding or
deductions are made.

(ix) No Payment of Interest For the avoidance of doubt and notwithstanding


any other provision to the contrary herein, it is
hereby agreed and declared that nothing in this
indicative principal terms and conditions and
the Transaction Documents shall oblige or
entitle any party nor shall any party pay or
receive or recover interest on any amount due
or payable to another party pursuant to the
indicative principal terms and conditions or the
Transaction Documents and the parties hereby
expressly waive and reject any entitlement to
recover such interest.

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TNB Northern Energy Berhad Information Memorandum

(x) Other Conditions The Sukuk TNB NE shall at all times be


governed by the guidelines issued and to be
issued from time to time by Securities
Commission, BNM, MyClear having jurisdiction
over matters pertaining to the Sukuk TNB NE.

(xi) Designated Accounts The Issuer and Project Company shall open
and maintain the following Shariah compliant
designated accounts (“Designated Accounts”)
with the Account Bank:
Issuer Accounts
(a) Sukuk MYR Escrow Account;
(b) Sukuk USD Escrow Account;
(c) Sukuk EUR Escrow Account;

(The Sukuk MYR Escrow Account,


Sukuk USD Escrow Account and
Sukuk EUR Escrow Account will be
collectively known as the Escrow
Accounts”).

(d) Issuer MYR Disbursement Account;


(e) Issuer USD Disbursement Account;
(f) Issuer EUR Disbursement Account;

(The Sukuk MYR Disbursement


Account, Sukuk USD Disbursement
Account and Sukuk EUR Disbursement
Account will be collectively known as
the “Disbursement Accounts”).

(g) Issuer MYR Revenue Account; and


(h) Issuer MYR Operating Account.

Project Company Accounts


(i) Project Company MYR
Disbursement Account;
(j) Project Company MYR Revenue
Account;
(k) Project Company MYR Operating
Account;
(l) Project Company EUR Operating
Account;
(m) Maintenance Reserve Account; and
(n) Distribution Account.

The Issuer and Project Company shall not have


any bank accounts other than the Designated
Accounts so long as any of the Sukuk TNB NE
is outstanding, unless otherwise agreed by the
Trustee (acting reasonably).

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TNB Northern Energy Berhad Information Memorandum

Upon enforcement of security, the Security


Agent shall be the sole signatory of all
Designated Accounts, except Distribution
Account.

Sukuk MYR Escrow Account (“MYR EA”)


The Issuer shall open a Shariah compliant MYR
Sukuk escrow account for the purpose of
depositing and/or remitting the issuance
proceeds of the Sukuk TNB NE. The Issuer
shall use the credit balances in the MYR EA for
the payments into the Issuer MYR DA, subject
to the Conditions Precedent to each Utilisation
having been satisfied or transfers to the USD
EA and EUR EA, up to one hundred per centum
(100%) of its foreign currency exposure in
relation to payments under the EPCC.
Any credit balance remaining in the MYR EA
after the COD of the last Generating Block shall
be deposited into the Issuer MYR RA and the
MYR EA will thereafter be closed.
The MYR EA shall be jointly operated by the
Security Agent and the Issuer.

Sukuk USD Escrow Account (“USD EA”)


The Issuer shall open a Shariah compliant USD
Sukuk escrow account for the purpose of
depositing and/or remitting the proceeds from
foreign exchange conversions between the
Escrow Accounts. The Issuer shall use the
credit balances in the USD EA for the payments
into the Issuer USD DA, subject to the
Conditions Precedent to each Utilisation having
been satisfied.
Any credit balance remaining in the USD EA
after the COD of the last Generating Block shall
be converted and deposited into the Issuer
MYR RA and the USD EA will thereafter be
closed.
The USD EA shall be jointly operated by the
Security Agent and the Issuer.

Sukuk EUR Escrow Account (“EUR EA”)


The Issuer shall open a Shariah compliant EUR
Sukuk escrow account for the purpose of
depositing and/or remitting the proceeds from
foreign exchange conversions between the
Escrow Accounts. The Issuer shall use the
credit balances in the EUR EA for the payments
into the Issuer EUR DA, subject to the
Conditions Precedent to each Utilisation having

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TNB Northern Energy Berhad Information Memorandum

been satisfied.
Any credit balance remaining in the EUR EA
after the COD of the last Generating Block shall
be converted and deposited into the Issuer
MYR RA and the EUR EA will thereafter be
closed.
The EUR EA shall be jointly operated by the
Security Agent and the Issuer.

Issuer MYR Disbursement Account (“Issuer


MYR DA”)
The Issuer shall open a Shariah compliant MYR
disbursement account for the purpose of
depositing MYR proceeds of Sponsor’s Equity
Contribution, intercompany advances and the
Sponsor’s Completion Support Payments (if
any), disbursements from the MYR EA, any
compensation payments and relevant insurance
proceeds received. The Issuer shall use the
credit balances in the Issuer MYR DA for the
purposes of making Issuer related MYR
payments set out under the heading “Details on
Utilisation of Proceeds” above and transferring
between the Issuer USD DA and Issuer EUR
DA only.
Any credit balance remaining in the Issuer MYR
DA after the COD of the last Generating Block
shall be deposited into the Issuer MYR RA and
the Issuer MYR DA will thereafter be closed.
The Issuer MYR DA shall be jointly operated by
the Security Agent and the Issuer.

Issuer USD Disbursement Account (“Issuer


USD DA”)
The Issuer shall open a Shariah compliant USD
disbursement account for the purpose of
depositing USD proceeds from the Issuer MYR
DA, any compensation payments and relevant
insurance proceeds received which the Issuer
elects at its discretion to keep in USD. The
Issuer shall use the credit balances in the
Issuer USD DA for the purposes of making
USD payments set out under the heading
“Details on Utilisation of Proceeds” above and
transferring to/from the Issuer MYR DA only.
Any credit balance remaining in the Issuer USD
DA after the COD of the last Generating Block
shall be converted and deposited into the Issuer
MYR RA and the Issuer USD DA will thereafter
be closed.

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TNB Northern Energy Berhad Information Memorandum

The Issuer USD DA shall be jointly operated by


the Security Agent and the Issuer.

Issuer EUR Disbursement Account (“Issuer


EUR DA”)
The Issuer shall open a Shariah compliant EUR
disbursement account for the purpose of
depositing EUR proceeds from the Issuer MYR
DA, any compensation payments and relevant
insurance proceeds received which the Issuer
elects at its discretion to keep in EUR. The
Issuer shall use the credit balances in the
Issuer EUR DA for the purposes of making
EUR payments set out under the heading
“Details on Utilisation of Proceeds” above and
transferring to/from the Issuer MYR DA only.
Any credit balance remaining in the Issuer EUR
DA after the COD of the last Generating Block
shall be converted and deposited into the Issuer
MYR RA and the Issuer EUR DA will thereafter
be closed.
The Issuer EUR DA shall be jointly operated by
the Security Agent and the Issuer.

Issuer MYR Revenue Account (“Issuer MYR


RA”)
The Issuer shall open a Shariah compliant MYR
revenue account for the purpose of depositing
the following:
(i) all revenues and income received, including
all payments from Project Company
pursuant to the contract between Project
Company and Issuer;
(ii) proceeds of takaful/insurance claims in
respect of takaful and insurance taken
and/or maintained in connection with the
Project save for payment allowed to be
made directly to third parties in accordance
with the provisions of the Transaction
Documents;
(iii) any claims received in respect of third party
performance bonds/guarantees or any other
compensation received by the Issuer;
(iv) any remaining credit balances in the Escrow
Accounts and Disbursements Accounts after
the COD; and
(v) any intercompany advances from Project
Company and/or Sponsor’s Equity
Contribution or any claims pursuant to the

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TNB Northern Energy Berhad Information Memorandum

Sponsor’s Rolling Guarantee.


The credit balances in the Issuer MYR RA shall
be applied in accordance with the "Issuer
Priority of Cashflow" clause below.
The Issuer MYR RA shall be jointly operated by
the Security Agent and the Issuer.

Issuer MYR Operating Account (“Issuer MYR


OA”)
The Issuer shall open a Shariah compliant MYR
operating account for the purpose of depositing
the amount transferred from the Disbursement
Accounts (prior to COD) and the Issuer MYR
RA (from COD onwards), for the payment of
operating and maintenance, taxes and duties in
respect of the Project.
The Issuer MYR OA shall be operated by the
Issuer solely.

Project Company MYR Disbursement Account


(“ProjCo MYR DA”)
The Project Company shall open a Shariah
compliant MYR disbursement account for the
purpose of depositing MYR proceeds of
Sponsor’s Equity Contribution, intercompany
advances, compensation payments and
relevant insurance proceeds received. The
Project Company shall use the credit balances
in the ProjCo MYR DA for the purposes of
making Project Company related MYR
payments set out under the heading “Details on
Utilisation of Proceeds” above, liquidated
damages payments under the PPA and
Sponsor’s Equity Contribution to Issuer only.
Any credit balance remaining in the ProjCo
MYR DA after the COD of the last Generating
Block shall be deposited into the ProjCo MYR
RA and the ProjCo MYR DA will thereafter be
closed.

The ProjCo MR DA shall be jointly operated by


the Security Agent and the Project Company.
Project Company MYR Revenue Account
(“ProjCo MYR RA”)
The Project Company shall open a Shariah
compliant MYR revenue account for the
purpose of depositing the following:
(i) all revenues and income received;

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TNB Northern Energy Berhad Information Memorandum

(ii) proceeds of takaful/insurance claims in


respect of takaful and insurance taken
and/or maintained in connection with the
Project, save for payment allowed to be
made directly to third parties in accordance
with the provisions of the Transaction
Documents;
(iii) any claims received in respect of third party
performance bonds/guarantees or any other
compensation received by the Project
Company;
(iv) any remaining credit balances in the ProjCo
MYR DA after the COD;
(v) any Sponsor’s Equity Contribution;
(vi) any claims pursuant to the Sponsor’s
Rolling Guarantee); and
(vii) any intercompany advances and/or
shareholder’s distribution from Issuer.
The credit balances in the ProjCo MYR RA
shall be applied in accordance with the "ProjCo
Priority of Cashflow" clause below.
The ProjCo MYR RA shall be jointly operated
by the Security Agent and the Project
Company.

Project Company MYR Operating


Account(“ProjCo MYR OA”)
The Project Company shall open a Shariah
compliant MYR operating account for the
purpose of depositing the amount transferred
from the ProjCo MYR RA, for the payment of
MYR operating and maintenance, taxes, duties,
capital expenditures (recurring or otherwise)
and any other Project Company’s payment
obligations under the Project Documents.
The ProjCo MYR OA shall be operated by the
Project Company solely.

Project Company EUR Operating Account


(“ProjCo EUR OA”)
The Project Company shall open a Shariah
compliant EUR operating account for the
purpose of depositing the amount transferred
from the ProjCo MYR RA, for the payment of
EUR operating and maintenance, taxes, duties
and capital expenditures (recurring or
otherwise) and any other Project Company’s
payment obligations under the Project
Documents.

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TNB Northern Energy Berhad Information Memorandum

The ProjCo EUR OA shall be operated by the


Project Company solely.

Maintenance Reserve Account


The Project Company shall open a Shariah
compliant MYR maintenance reserve account
(“Maintenance Reserve Account”), for the
purpose of fulfilling its obligations under the
PPA. The Maintenance Reserve Account shall
be built up to a sum of RM24 million over a
three (3) year period, commencing on COD at
the rate of RM 8 million per annum.
The Project Company is allowed to draw from
the Maintenance Reserve Account to pay for
maintenance expenses of the Project, including
any repair or replacement, however the balance
must be reinstated to the minimum balance
over the 3 months following the withdrawal (or
such other date as may be agreed between
TNB and the Project Company) in accordance
with the ProjCo Priority of Cashflow.
The Maintenance Reserve Account shall be
operated by the Project Company solely.

Distribution Account
The Project Company shall open a Shariah
compliant MYR Distribution Account for the
purpose of depositing the amount transferred
from the ProjCo MYR RA for any Restricted
Payments.
For avoidance of doubt, distributions from the
Distribution Account are at the sole discretion of
the Project Company and shall not be subject to
the Negative Covenants item (j) above.
The Distribution Account shall be operated by
the Project Company solely.

(xii) Issuer Priority Cashflow Priority application of cash flow from the Issuer
MYR RA shall be as follows:
(a) for transfers to the Issuer MYR OA for
payment of operating and maintenance
expenses, taxes, duties and compensation
payments;
(b) for payment of Periodic Distribution Amount,
fees, costs, expenses, commissions and
other financing costs payable in connection
with the Sukuk TNB NE;
(c) for payment of all principal obligations under
the Sukuk TNB NE;

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TNB Northern Energy Berhad Information Memorandum

(d) for payment of periodic distribution


amount/profit payments, fees, costs,
expenses, commissions and other financing
costs payable in connection with the other
financing facilities as allowed under the
Transaction Documents;
(e) for payment of all principal obligations under
the other financing facilities as allowed
under the Transaction Documents;
(f) for intercompany advances to ProjCo MYR
RA; and
(g) for all other payments to the ProjCo MYR
RA to be determined at the discretion of the
Issuer.
With respect to costs, fees and expenses
(including enforcement costs, fees and
expenses in connection with the Sukuk TNB NE
which in the view of the Facility Agent cannot be
attributed solely to any particular Series, such
costs, fees and expenses shall be allocated
amongst all the Series proportionately based
on the then outstanding nominal value of each
Series.

(xiii) ProjCo Priority of Cashflow Priority application of cash flow from the ProjCo
MYR RA shall be as follows (except where the
insurance claims are not related to loss in
revenue, business interruption and/or delay in
start-up, item (f) of the “ProjCo Priority of
Cashflow” shall not apply):
(a) for transfers to the ProjCo MYR OA and/or
ProjCo EUR OA for payment of operating
and maintenance, taxes, duties, recurring
capital expenditures in respect of the
Project, including the Project Company’s
compensation payments and other payment
obligations under the Project Documents
including payments to Issuer due under the
Turnkey Contract;
(b) for compliance with the requirements in
connection with the Maintenance Reserve
Account and the Alternative Securities;
(c) for payment of periodic distribution
amount/profit payment, fees, costs,
expenses, commissions and other financing
costs payable in connection with the other
financing facilities as allowed under the
Transaction Documents;
(d) for payment of all principal obligations under
the other financing facilities as allowed
under the Transaction Documents;

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(e) for intercompany advances, claims pursuant


to the Sponsor’s Rolling Guarantee and/or
Sponsor’s Equity Contribution to Issuer
MYR RA; and
(f) for transfers to the Distribution Account,
subject to compliance with Negative
Covenants item (j) above.

(xiv) Permitted Investments Credit balances in the Designated Accounts


may be used to invest in Permitted Investments.
The Permitted Investments shall comprise
investment products approved by the SC
Shariah Advisory Council, BNM’s Shariah
Advisory Council and/or other recognised
Shariah authorities from time to time.
The Permitted Investments are as follows:
(a) Mudharabah, Wadiah and other
deposits under Shariah principles with
licensed financial institutions;
(b) Islamic bankers acceptances, Islamic
bills and other Islamic money market
instruments by licensed financial
institutions with a short term rating of P1
or MARC-1 or a minimum long term
rating of AA3 or AA-;
(c) Islamic treasury bills, Islamic money
market instruments, and other sukuk or
sukuk issued by BNM or the
Government of Malaysia;
(d) Sukuk or sukuk issued by quasi
government or government related
corporations with a short term rating of
P1 or MARC-1 or a minimum long term
rating of AA3 or AA- or Sukuk or sukuk
guaranteed by the Government of
Malaysia or BNM;
(e) Sukuk or sukuk issued by corporations
with a short term rating of P1 or MARC-
1 or a minimum long term rating of AA3
or AA- or by financial institutions with a
short term rating of P1 or MARC-1 or a
minimum long term rating of AA3 or AA-;
or
(f) any Islamic fund approved by the SC
which invests in any of the instruments
above.

(xv) Project Documents The following:


(a) Power Purchase Agreement ("PPA");
(b) Gas Sales Agreement ("GSA");

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(c) Land Lease Agreement (“LLA”);


(d) EPC Contract and associated bonds and
guarantees from or on behalf of the EPC
contractor (“EPCC”);
(e) Operation & Maintenance Agreement
(“OMA”);
(f) Long Term Maintenance Program Contract
(“LTMP”);
(g) Material Takaful/insurances relating to the
Project issued in favour of or for the benefit
of the Issuer;
(h) Turnkey Contract;
(i) when issued, the generation license; and
(j) Any other permit, license, agreement
and/or document that is issued to the
Issuer or to which the Issuer is a party
which is material to the Project as may be
reasonably determined by the Joint Lead
Managers and agreed with the Issuer to be
designated as a Project Document.

All documents relating to the Sukuk TNB NE


(xvi) Transaction Documents
and the Security/Collateral.

(xvii) Mandatory Redemption The Issuer shall use the proceeds from any
performance liquidated damages received from
the EPC contractor to pay the Mandatory
Redemption Amount (as defined below). The
total amount to be applied to the mandatory
redemption (the “Mandatory Redemption
Amount”) will be the lower of:
(i) total proceeds relating to performance
liquidated damages received from the
EPC contractor; and
(ii) such amount necessary (following the
mandatory partial redemption) to restore
the projected minimum Base Case FSCR
at such time to 1.25x, after adjusting only
assumptions regarding net electrical
output of the Plant, and/or net heat rate of
the Plant in the Base Case Financial
Model to reflect the relevant reduced net
electrical output of the Plant and/or
increased net heat rate of the Plant.

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The Issuer shall apply the Mandatory


Redemption Amount towards the redemption of
the Sukuk TNB NE in the following manner:
a) If the projected minimum Base Case FSCR can
be restored to 1.25x following such partial
redemption, the Issuer shall partially redeem
each Series of the Sukuk TNB NE in inverse
order of maturity;
b) If partial redemption in inverse order of maturity
does not restore the projected minimum Base
Case FSCR to 1.25x, the Issuer shall partially
redeem all Series of the Sukuk TNB NE on a
pro-rata basis.
Following the payment of the Mandatory
Redemption Amount, the Issuer may use the
remaining proceeds from performance
liquidated damages received from the EPC
contractor (if any) to make distributions.

(xviii) Scheduled Commercial 1 January 2016 or as extended in accordance


Operation Date with the PPA.
(“Scheduled COD”)

Refers to all shareholders’ equity contribution


(xix) Sponsor’s Equity
made directly or indirectly by the Sponsor,
Contribution
whether in the form of ordinary share capital,
preferred shares or subordinated shareholder
loans, and including any equity bridge loan
undertaken by the Issuer and/or Project
Company but guaranteed by the Shareholder.

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Appendix 1

Diagrammatical Illustration for Sukuk TNB NE

Service Agency
Agreement
6

Ijarah Lease
Agreement
3

TNB Grant of Right TNB Sukuk issue


Agreement
Prai 1 NE 2 Sukuk
(Grantor, One-off Rental (Issuer,
Sukuk proceeds holder
Lessee, equivalent to Sukuk Trustee,
Servicing Grantee, s
proceeds
Agent, Lessor,
Purchase 4&7 Wakeel) 4&7
r) Lease Rental Periodic
5 Distribution
Amounts
Wakalah
Agreement
8

Purchase
Undertaking

Step 1 TNB Prai (in its capacity as grantor (“Grantor”)) shall enter into a grant of right
agreement (the “Grant of Right Agreement”) with TNB NE (in its capacity as
grantee (“Grantee”)) acting on behalf of subscribers of the Sukuk TNB
NE(“Sukukholders”), which term shall include any holders of the Sukuk TNB NE
from time to time, to grant the right over the use of the Ijarah Project Lands and to
derive the benefits of the usufruct rights over the use of the Ijarah Project Lands
(the “Asset”) for a duration of 24 years or such period as corresponding to the
lease term in the LLA with an option to be extendable for another 24 years subject
to the PPA term being extended as set out in the LLA (“Grant of Right”). The
Grantee will make a single upfront rental payment (“One-off Rental”) to the
Grantor, which amount shall be equivalent to the aggregate proceeds to be raised
from the issuance of the Sukuk TNB NE.
Step 2 Pursuant to a Declaration of Trust, the Issuer (in its capacity as trustee) shall
declare a trust over the Asset including the rights, title, interest and benefit,
present and future, in and to under the Grant of Right Agreement, the Ijarah Lease
Agreement (as defined below), the Service Agency Agreement and the Purchase
Undertaking (the “Trust Asset”) for the benefit of the Sukukholders.
The Issuer shall issue Sukuk TNB NE to the Sukukholders which shall represent
the Sukukholders’ undivided proportionate beneficial ownership interest, rights
and entitlements under the Trust Asset. The Sukuk TNB NE proceeds shall be
utilised to pay the Grantor the One-off Rental under the Grant of Right Agreement.

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Step 3 With the Asset held by the Issuer (in its capacity as Grantee), acting on behalf of
the Sukukholders, the Issuer (in its capacity as Lessor) shall enter into an Ijarah
Lease Agreement (the “Ijarah Lease Agreement”) with TNB Prai (as Lessee), to
lease the Asset to the Lessee, for a tenor corresponding to the maturity of the final
series (“Series”) of the Sukuk TNB NE, i.e. more than 4 years and not exceeding
23 years (the “Lease Period”).
Step 4 Pursuant to the Ijarah Lease Agreement, the Lessee shall pay the ijarah rental
payment (“Lease Rentals”) to the Lessor which shall be the sum equivalent to the
aggregate of all Periodic Distribution Amounts (as defined below) to be channeled
by the Issuer to the Sukukholders as periodic distributions (“Periodic Distribution
Amounts”) in proportion to the Sukuk TNB NE they hold on each periodic
distribution date.
Step 5 Pursuant to a Wakalah Agreement, TNB Prai shall appoint the Issuer as its agent
(“Wakeel”) for the provision of certain services for a wakalah fee of RM100.00, for
a period corresponding to the period for the construction and delivery of the Plant
to TNB Prai under the Turnkey Contract. The Wakeel shall be responsible to:
(i) Safe-keep the One-off Rental paid to TNB Prai as Grantor on a Wadiah basis;
and
(ii) To make payments including (a) payment on behalf of TNB Prai (as lessee) of
the Lease Rentals to the Lessor; (b) any payments as set out paragraph 2(m)of
the PTC (Details on Utilisation of Proceeds) items (1) to (3); and (c) any other
payments or cost in relation to and associated with the Project comprising those
set out in the said paragraph 2(m)items (4) to (6).
Step 6 Pursuant to a Service Agency Agreement, the Issuer (in its capacity as Lessor),
acting on behalf of the Sukukholders, shall appoint TNB Prai as the “Servicing
Agent” for a servicing agent fee of RM100.00, throughout the Lease Period to
carry out certain of its obligations. The Servicing Agent shall be responsible to
procure takaful/insurance in respect of the Asset that provides sufficient proceeds
for the redemption of the Sukuk TNB NE under a Total Loss Event. If the
takaful/insurance proceeds are insufficient to cover the redemption amount due
under the Sukuk TNB NE under a Total Loss Event (the “Redemption Amount”),
Service Agent shall undertake to pay shortfall amount. Thereafter any proceeds
from the takaful/insurance proceeds shall be for the account of Service Agent.

Step 7 The Wakalah Agreement will cease upon the completed Plant being delivered to
TNB Prai under the Turnkey Contract. Thereafter, TNB Prai as Lessee will pay the
Lease Rentals directly to the Lessor, who in turn will channel to Sukukholders as
Periodic Distribution Amounts.
Step 8 TNB Prai (as the “Purchaser”) will grant a purchase undertaking (the “Purchase
Undertaking”) to the Issuer, whereby the Purchaser irrevocably undertakes to
purchase the proportionate undivided ownership in the remaining period of the
Grant of Right from the Sukukholders of the relevant series of the Sukuk TNB NE,
upon declaration of a Dissolution Event (save for a Dissolution Event due to a
Total Loss Event), upon the occurrence of the Mandatory Redemption event or
upon the Maturity Date whichever is earlier, at the relevant Exercise Price or
Mandatory Redemption Exercise Price (where relevant). The proceeds therefrom
shall be utilised by the Issuer for the redemption of such relevant Sukuk TNB NE
held by the Sukukholders which shall then be cancelled.

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7. INVESTMENT CONSIDERATIONS

Each issue of the Sukuk TNB NE will carry different risks and all potential investors
are strongly encouraged to evaluate each issue of the Sukuk TNB NE on its own
merit. Recipients of this Information Memorandum are advised to independently
evaluate the risks described in this section before making an investment decision.
The Sukuk TNB NE are subject to certain risk factors that could adversely affect,
amongst others, the business of the Issuer and/or the Project Company. The risk
factors relating to the Sukuk TNB NE and its possible mitigating factors which are
summarised below do not purport to be comprehensive or exhaustive and are not
intended to be a substitute or replacement for an independent assessment of the risk
factors that may affect the Sukuk TNB NE. Each investor should carefully conduct his
or her independent evaluation of the risks associated with investing in the Sukuk TNB
NE.

7.1 Considerations Relating to the Sukuk TNB NE

7.1.1 Rating

MARC has assigned a preliminary rating of AAAIS for the Sukuk TNB NE. A rating is
not a recommendation to purchase, hold or sell the Sukuk TNB NE. There is no
assurance that a rating will remain in effect for any given period of time or that a
rating will not be downgraded, suspended or withdrawn entirely by MARC in the
future, if, in its judgment, circumstances in the future so warrant. Further, such a
rating is not a guarantee of repayment or that there will be no default by the Issuer
under the Sukuk TNB NE. In the event that the rating initially assigned to the Sukuk
TNB NE is subsequently downgraded, suspended or withdrawn for any reason, no
person or entity will be obliged to provide any additional credit enhancement with
respect to the Sukuk TNB NE. Any downgrading, suspension or withdrawal of a
rating may have an adverse effect on the liquidity and market price of the Sukuk TNB
NE. Any downgrading, suspension or withdrawal of a rating will not constitute an
event of default with respect to the Sukuk TNB NE or an event by itself that warrants
the Sukuk TNB NE to be immediately due and payable.

7.1.2 No Prior Market in the Sukuk TNB NE

The Sukuk TNB NE comprises a new issue of securities for which there is currently
no secondary market. There can be no assurance that such secondary market will
develop or, if it does develop, that it will provide the Sukukholders with the liquidity of
investments or will continue for the tenor of the Sukuk TNB NE. If a market develops,
the market value of the Sukuk TNB NE may fluctuate. Any sale of the Sukuk TNB NE
by the Sukukholders in any secondary market which may develop may be at a
discount from the original issue price of the Sukuk TNB NE, depending on many
factors, including the prevailing interest rates and the market for similar securities.

Trading prices of the Sukuk TNB NE may also be influenced by numerous factors,
including the operating results and/or financial condition of the Issuer, political,
economic, financial and any other factors that can affect the capital markets, the
industry or the Issuer. Adverse economic developments could have a material
adverse effect on the market value of the Sukuk TNB NE.

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7.1.3 Suitability of Investments

Each potential investor in the Sukuk TNB NE must determine the suitability of its
investment in light of its own circumstances. In particular, each potential investor
should:

(i) have sufficient knowledge and experience to make a meaningful evaluation of


the Sukuk TNB NE, the merits and risks of investing in the Sukuk TNB NE
and the information contained in this Information Memorandum;

(ii) have access to, and knowledge of, appropriate analytical tools to evaluate, in
the context of its particular financial situation, an investment in the Sukuk TNB
NE and the impact the Sukuk TNB NE will have on its overall investment
portfolio;

(iii) have sufficient financial resources and liquidity to bear all of the risks of an
investment in the Sukuk TNB NE;

(iv) understand thoroughly the terms of the Sukuk TNB NE and be familiar with
the behaviour of any relevant indices and financial markets; and

be able to evaluate (either alone or with the help of a financial adviser) possible
scenarios for economic and other factors that may affect its investment and its ability
to bear the applicable risks.

7.1.4 Shariah Compliance

Notwithstanding the approvals of the Shariah Adviser of the Sukuk TNB NE, case law
in Malaysia indicates that the courts in Malaysia may still examine the issue of
whether there has been compliance with Shariah and if held to be non-Shariah
compliant, the recoverability of the profit element under the Sukuk TNB NE may be
affected. No assurance is given that the approval(s) of the Shariah Adviser will not be
subject to challenge on grounds that the Sukuk TNB NE is not Shariah compliant.

7.1.5 The Sponsor’s Completion Support and The Sponsor’s Rolling Guarantee

Other than recourse to the internally generated funds of the Issuer which would
primarily consist of Project cash flows, the ability of Sukukholders to recover amounts
due by the Issuer on the Sukuk TNB NE will also be dependent upon the ability of
TNB to fulfil its obligations under the Sponsor’s Completion Support or the Sponsor’s
Rolling Guarantee as set out in Item 2(l) of the PTC.

Under the Sponsor’s Completion Support, TNB shall provide an unconditional and
irrevocable guarantee for the period commencing from (and including) the issue date
of the Sukuk TNB NE and expiring on the date falling twelve (12) months from the
Scheduled COD or the date upon the declaration of a Dissolution Event (whichever is
earlier) to: (1) fund any cost overruns incurred relating to the Project for up to a cap
of 10% of the Project cost as reflected in the Base Case Financial Model; and (2)
fund any principal obligations and Periodic Distribution Amounts under the
Transaction Documents for up to twelve (12) months post the Scheduled COD.

Under the Sponsor’s Rolling Guarantee, upon cessation of the Sponsor’s Completion
Support and until the final maturity date of the Sukuk TNB NE or the date upon the
declaration of a Dissolution Event (whichever is earlier), the Sponsor shall provide a
rolling, unconditional and irrevocable guarantee in an amount equivalent to the next

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6-month principal obligations and Periodic Distribution Amounts under the


Transaction Documents.

However, investors should be aware that the Sponsor’s Completion Support and the
Sponsor’s Rolling Guarantee do not include any accelerated payments upon a
declaration of a Dissolution Event. As such, in the event of the occurrence of a
Dissolution Event, Sukukholders will effectively be compelled to choose between (a)
refraining from declaring an EOD and relying on the Sponsor’s Completion Support
or the Sponsor’s Rolling Guarantee (as the case may be) and the Rolling Guarantee
as the source of repayment; or (b) declaring an EOD and commencing enforcement
of the Transaction Documents and securities whereby the Sponsor’s Completion
Support or the Sponsor’s Rolling Guarantee will not then cover the accelerated
amounts due.

Further to the above, the ability of TNB to meet its obligations under the Sponsor’s
Completion Support or the Sponsor’s Rolling Guarantee (as the case may be) is in
turn, dependent on the successful continuation of TNB’s business of generation,
transmission and distribution of electricity in Peninsular Malaysia. In this regard, there
is no assurance that any disruption, decline or threat to the continuation of TNB’s
business will not have an adverse effect on the Issuer’s ability to meet payments due
under the terms and conditions of the Sukuk TNB NE and the Transaction
Documents.

7.1.6 Risk of Mandatory Redemption

The provision for mandatory redemption to the Sukukholders earlier than the fixed
maturity date may result in the Sukukholders incurring capital loss as this will impact
the Sukukholders who purchased the Sukuk TNB NE above par. The liquidity of the
remaining Sukuk TNB NE may be affected.

7.2 Risks Relating to the Issuer

7.2.1 Issuer’s Ability to Meet its Obligations Under the Sukuk TNB NE

The Issuer was incorporated in Malaysia on 19 November 2012 under the


Companies Act, 1965 and has a limited operating history. As at the date of this
Information Memorandum, the only activities that the Issuer will engage in are the
issuance of Sukuk TNB NE, the construction and operation of the Power Plant as per
the Turnkey Contract and other activities incidental or related to the foregoing as
required under the transaction documents. The Issuer will not engage in any other
business activity. The Issuer will therefore only be able to meet its obligations to the
Sukukholders in and pay amounts due under the Sukuk TNB NE (including via the
Project Company pursuant to the Purchase Undertaking) from internally generated
funds post COD from revenue under the PPA.

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7.3 Risks Relating to the Project

7.3.1 Construction Risks

(a) Construction Delay

The PPA specifies the Scheduled COD to be 1 January 2016. Failure to achieve
COD on or before the scheduled COD due to default of Project Company or its
contractors will result in the PPA Delay LDs being payable by the Project Company
to TNB in an amount of RM321,429 per day per Generating Block of delay. Failure
to achieve COD within six (6) months of the scheduled COD is a Project Company’s
EOD.

However, the following factors are to be considered as mitigating factors to the risks:

(i) the ICE confirming the construction schedule is representative of the current
market for gas-fired power stations worldwide and they consider the
construction schedule to be achievable by the EPC Contractor;

(ii) the ICE opining the EPC Contractor and original equipment supplier have
experience with the type of plant being specified and can deliver the Project in
a timely and proficient manner;

(iii) the EPC Contractor has a major global presence in many disciplines including
engineering, procurement and construction and has been involved in the
successful development of a number of large power projects. The original
equipment supplier, Siemens, is one of the largest power plant engineering,
procurement and construction companies and is one of the most experienced
and capable organizations in successfully implementing combined cycle gas
turbine projects. The ICE has opined that both organizations are suitably
qualified for the Project. Siemens and Samsung have also successfully
completed a number of turnkey EPC projects together, including gas-fired
power plant projects in Singapore, Indonesia and the Kingdom of Saudi
Arabia;

(iv) the Sponsor is an experienced developer of greenfield and brownfield power


projects in Malaysia, with several in a project financing context. All of the
Sponsor’s development projects in Malaysia have been delivered on
schedule, including the 3x700MW Manjung coal-fired power plant.

(v) pursuant to the EPC Contract, the EPC Contractor is liable for Delay LDs per
day per Generating Block of delay between the scheduled COD and the date
COD is actually achieved. The Delay LDs are required to compensate the
Project Company/ Issuer for:

(A) PPA Delay LDs payable to TNB;

(B) unavoidable fixed costs of the Project Company and Issuer


(comprising manpower costs, fixed operating costs, land lease
payments and other general fixed costs); and

(C) finance service obligations of the Project Company and Issuer.

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Delay LDs are capped at 15% of the Accepted EPC Contract Amount. The ICE has
opined that the Delay LD cap will cover a period of four hundred and seventy two
(472) Generating Block days and is adequate, as the period would cover the longstop
date under the EPC Contract, which falls one hundred and eighty (180) days after the
scheduled COD.

Testing and commissioning commence at the Initial Operating Date (“IOD”), which is
six (6) months prior to the scheduled COD. All performance of the testing and
commissioning and verification of results will be subject to monitoring by the Sponsor
and the ICE. The Sponsor has extensive prior experience in the testing and
commissioning of power projects. By virtue of being both the off-taker and the
Sponsor, TNB is in a position to ensure that potential delays can be identified and
managed at an early stage.

(b) Output Shortfall Risks

Under the PPA, the Power Facility is required to achieve a Net Power Output of
1,071.43 MW upon completion. Failure to achieve the Guaranteed Net Power Output
will result in the PPA Performance LDs payable to TNB in an amount of RM5,000.00
per kW of shortfall. Available Capacity Payment is made on the basis of the most
recent tested annual available capacity. Therefore it is important EPC Contractor is
able to deliver a plant of Net Power Output of no less than 1,071.43 MW.

The output performance risk is primarily mitigated by the nature of selected


technology and the track record and experience of Samsung as the EPC Contractor
and Siemens as the original equipment supplier. On top of that, the EPC Contract will
contain, amongst others, a Guaranteed Net Power Output equal to 1,071.43 MW, a
minimum performance level of ninety five per cent (95%) of the guaranteed capacity,
as well as performance and reliability tests, which must be successfully completed
prior to Issuer taking over the Power Facility.

The EPC Contractor is liable for performance liquidated damages for output shortfall
(“Output Performance LDs”) per kW/Generating Block of shortfall if it fails to
achieve the performance guarantees under the EPC Contract. The EPC Contractor
may elect to pay Output Performance LDs at the Taking-Over Date. Alternatively, the
EPC Contractor may choose to initiate steps to achieve the Guaranteed Net Power
Output within a cumulative total curing period of two years.

Therefore, the Output Performance LDs would be paid at the latest 2 years after
Taking-Over Date if the EPC Contractor elects to return to the Power Facility to
attempt to achieve the Guaranteed Net Power Output. Therefore, there is a risk that
the Project Company would not recover lost revenues due to reduced capacity during
the 2-year cure period. The non-compensated reduced revenue period is however
limited to 2 years only and the Finance Services remains supported by the reduced
revenue levels and the Sponsor’s Rolling Guarantee.

Performance LDs are capped at 20% of the Accepted EPC Contract Amount. The
Output Performance LDs will, together with Heat Rate Performance LDs, be
supported by performance security representing twenty per cent (20%) of the
Accepted EPC Contract Amount. The ICE has confirmed that the level of the Output
Performance LDs is sufficient to recover lost revenues due to reduced capacity and
make payments for PPA Performance LDs. However, the ICE has opined that a 5%
MW output shortfall requires a total LD equal to 24% of the Accepted EPC Contract
Amount, which is more than the liability cap of 20%. Nevertheless, the Output

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Performance LDs up to the level of the liability cap are sufficient to meet the PPA
Performance LDs payable to TNB.

The ICE has also confirmed that:

(i) the LD cap and provision of the performance security is considered adequate
to incentivise the EPC Contractor to complete and warrant the Power Facility.

(ii) the limit on the Performance LDs is consistent with the current market
conditions and is considered acceptable.

(c) Failure to Achieve the Contracted Heat Rate Under the PPA

Under the PPA, the Fuel Payment component of the tariff paid to the Project
Company is calculated based on the Applicable Heat Rate. The Applicable Heat Rate
is the contracted heat rate, as set out in the PPA.

Contractually, there are no margins between the weighted plant heat rate based on
EPC heat rate values and PPA table of heat rates. Nevertheless, certain margins are
expected to be achieved during operations (please refer to the section on Heat Rate
Performance during operations below).

Therefore, if the EPC Contractor fails to achieve the heat rate performance target
equal to, or better than, the contracted heat rate as set out in the PPA, and/or if the
heat rate achieved by the EPC Contractor degrades such that the heat rate is higher
than the contracted heat rate as set out in the PPA, the Project Company is at risk of
receiving fuel payments which do not fully compensate the Project Company for the
fuel costs incurred.

The heat rate performance risk is primarily mitigated by the nature of selected
technology and the track record and experience of Siemens, the technology supplier.
On top of that, the EPC Contract will contain a weighted average Heat Rate
Performance Guarantee which is equivalent to the weighted average of the
contracted heat rate under the PPA, a minimum performance level of one hundred
and five per cent (105%) of the guaranteed heat rate as well as performance and
reliability tests, which must be successfully completed prior to Issuer taking over the
plant. The ICE has opined that the minimum acceptable performance level for heat
rate is in line with normal practice.

The EPC Contractor is liable for performance liquidated damages for heat rate (“Heat
Rate Performance LDs”) if it fails to achieve the Guaranteed Net Heat Rate under
the EPC Contract. The EPC Contractor may elect to pay Heat Rate Performance LDs
at the Taking-Over Date. Alternatively, the EPC Contractor may choose to initiate
steps to achieve the Guaranteed Net Power Output within a cumulative total curing
period of two years.

Therefore, the Heat Rate Performance LDs would be paid at the latest 2 years after
Taking-Over Date if the EPC Contractor elects to return to the Power Facility to
attempt to achieve the Guaranteed Net Heat Rate. Therefore, there is a risk that the
Project Company would not recover additional fuel costs due to a higher heat rate
during the 2-year cure period. The non-compensated additional fuel costs period is
however limited to 2 years only and the Finance Services remains supported by the
reduced revenue levels and the Sponsor’s Rolling Guarantee.

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Performance LDs are capped at 20% of the Accepted EPC Contract Amount. The
Heat Rate Performance LDs will, together with Output Performance LDs, be
supported by performance security representing twenty per cent (20%) of the
Accepted EPC Contract Amount. The ICE has confirmed that the level of the Heat
Rate Performance LDs is sufficient to recover additional fuel costs due to a higher
heat rate. However, The ICE has opined that the maximum acceptable heat rate
requires a total LD equal to 149% of the Accepted EPC Contract Amount, which is
more than the liability cap of 20%. Hence, there is a risk that the Heat Rate
Performance LDs paid up to the liability cap will not be sufficient to recover additional
fuel costs due to a higher heat rate. Under the EPC contract, reaching the LD cap is
an event of default, and hence negotiations will take place that could further reduce
the exposure of the Owner.
ICE has confirmed that:

(i) the LD cap and provision of the performance security is considered adequate
to incentivise the EPC Contractor to complete and warrant the Power Facility.

(ii) the limit on the Performance LDs is consistent with the current market
conditions and is considered acceptable.

(d) Cost Overruns and Cost Variations

The EPC Contract is on a fixed-price basis, such that cost overruns may arise from
variation orders that are not compensated via the PPA change in law provisions and
there is limited scope for other price increases under the EPC Contract.

The Issuer retains risk in some aspects of the project which are not necessarily within
the Issuer’s control. The key risks include, inter alia, additional costs and delays
resulting from:

(i) fossils, coins, articles of value or antiquity and/or archeological finds;

(ii) unforeseeable physical conditions, e.g. contamination or pollution by


hazardous substances of the soil, ground, surface water or groundwater, or
artificial underground objects or constructions;

(iii) any changes in law or in the applicable codes and standards after 30
November 2012;

(iv) the Issuer’s risks.

The risk of unforeseeable physical conditions and presence of artefacts on the Site is
substantially mitigated by the extensive knowledge of the Site gained by the Sponsor
from the development and operation of the previous Perai Power Station on the
proposed site. Nevertheless, there is a risk of existing ground contamination, which
may increase the risk of unforeseen costs. This risk is mitigated through the financing
plan including a budget for site remediation costs of RM 10 million and a contingency
amount equivalent to 1.5% of EPC Contract Amount (or 1.1% of total Project Cost).
There is also Sponsor’s Completion Support equivalent to ten per cent (10.0%) of the
total Project Cost.

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The Issuer’s risks are events outside the control of the Issuer1, but if these risks
occur, generally, the Issuer will not receive any compensation from TNB or any
insurance proceeds with which to reinstate such damage or loss, or to cover any lost
revenue during any resultant delays (save for where an Emergency Condition which
relates to the Grid System where TNB will have to compensate the Project Company
pursuant to clause 20 of the PPA). The Issuer’s risks events outside the control of the
Issuer relates to “political force majeure” events occurring in Malaysia and uninsured
force majeure events. The risk of “political force majeure” events occurring in
Malaysia would need to be assessed by the Finance Parties. The insurance package
proposed to be put in place limits substantially the range of uninsured force majeure
events which can have an impact on the Power Facility. The ICE has confirmed that
the risk of damage to the Power Facility due to any Grid System malfunction, failure
or breakdown is low.

This risk is mitigated through the 180 day longstop date under the PPA, the financing
plan including contingency equivalent to 1.5% of EPC Contract Amount (or 1.1% of
total Project Cost) and Sponsor’s Completion Support equivalent to ten per cent
(10.0%) of the total Project Cost. The level of contingency included in the financing
plan, together with the Sponsor’s Completion Support is in excess of the contingency
level recommended by the ICE. The ICE has confirmed that EPC Contractor’s
technical proposal is considered suitable for the Project requirement.

Another mitigating point to be considered is the Sponsor’s experience as a developer


of green field and brown field power projects locally and internationally and the ability
of the Sponsor to manage cost overrun and delay risk.

(e) Other Construction Risks

(i) TNB Delay

The PPA provides for commensurate extensions of time (“EOT”) for:

(a) Any delay to the initial operation date imposed by the GSO beyond
fifteen (15) days;

(b) Any delays caused by TNB as the offtaker (the “Offtaker”).

If the delay in COD is caused by the Offtaker failing to inspect the


interconnection protective devices, the Offtaker will pay for any additional
interest incurred by the IPP over the period of delay.

Additionally, if COD of a Generating Block fails to occur within thirty (30) days
from its scheduled date due to any delay to its initial operation date imposed
by the GSO, the Offtaker will pay Available Capacity Payments to the IPP
from the date that is thirty (30) days after the Scheduled COD.

If TNB fails to complete the transmission facilities specified in the PPA by the
stipulated date thereby delaying COD of the Generating Block, it will pay IPP
the full Available Capacity Payments from the Scheduled COD.

1
Other than the Issuer's occupation of the Site, which is within the Issuer's control.

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There are a number of mismatches between the risks allocation and rights of
the Project Company under the PPA and the risks allocation and the rights of
the EPC Contractor under the EPC Contract, which leave the Issuer bearing a
number of risks. This is particularly the case on issues relating to
unforeseeable ground conditions, rights to suggest design changes, rights to
delay testing or provision of services during testing and commissioning, and
changes in law. These mismatches could, individually or when combined,
give rise to cost increases or delays that could have a significant impact on
the Project. Nevertheless, TNB can request design changes, not only to
interconnection but also to the Facility. The impact of those requested
changes can be limited. Although TNB has the right to review and approve
the design, the approval is limited to achievement of the technical information
contained within appendices to the PPA. However, this includes the Grid
Code which can be amended by TNB at any time. In view of TNB’s role as
both Offtaker and Sponsor, it is in a position to manage any risks relating to
design changes.

(ii) EPC Contractor Performance and Termination

If the Issuer chooses to terminate the EPC Contractor's engagement under


the EPC Contract, it will only be entitled to receive compensation for its direct
losses connected with completing the works and will not be entitled to receive
any compensation for its lost revenues. This could cause potential cashflow
issues for the Issuer if the Issuer is forced to terminate the EPC Contractor's
engagement. Prospective investors should evaluate and consider the track
record and experience of the EPC Contractor in successful delivery of thermal
power plants and the risk of an event arising which leads to termination of the
EPC Contract by the Issuer. This risk is mitigated by the Sponsor’s
Completion Support and Rolling Guarantee. The Completion Support covers
overruns of 10% of Project costs and Finance Service during the 12 month
period following Scheduled COD, while the Rolling Guarantee will cover the
Finance Service in each six-month period, once the Completion Support falls
away. This provides the Project Company additional time to complete the
Project before the project economics affect Sukukholders.

7.3.2 Technology and Operator Risk

(a) Technology Risk

The proposed gas turbine will be supplied by Siemens, which utilises Siemens’ H-
Class SGT5-8000H combustion turbine technology. This program concept began in
October 2000. The engine basic design started in November 2001. Only one SGT5-
8000 in single shaft combine cycle configuration (“SCC5-8000H-1S”) is currently in
operation, at Irsching 4 in Germany where it was first fired in December 2007 and the
testing and validation was completed in August 2009. The GT validation and tests
accumulated 4,365 Equivalent Operating Hours (“EOH”) with 85 starts.

The engine in Irsching has undergone 4 visual inspections and 1 combustion


inspection up to February 2013. As of March 2013, the engine had achieved over
15,802 EOH in combined cycle, and more than 441 starts.

SCC5-8000H-1S power plants in Turkey and Germany are due for COD in February
2015 and September 2015 respectively.

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The SGT6-8000H (the smaller 60 Hz version of the SGT5-8000H) underwent 3,822


EOH and 137 starts during testing and validation. 3 SGT6-8000H are currently being
commissioned and have achieved 2902 EOH and115 starts. A further 13 SGT6-
8000H have been sold and are due to enter operation from 2013 onwards.

Due to its limited track record, the SGT5-8000H can be considered as more
technically and commercially risky than its proven predecessor, the SGT5-4000F and
may initially result in higher unavailability compared to engines with significant
operational hours.

The following factors are to be considered to mitigate the aforesaid risks:

(i) The EPC Contractor and original equipment supplier having experience of
engineering, procuring and constructing plants with similar operating
parameters. Siemens is one of the largest power plant engineering,
procurement and construction companies and is one of the most experienced
and capable organizations in successfully implementing CCGT projects;

(ii) Siemens has spent more than 10 years with significant research and
development investment to create a robust 8000H gas turbine technology.
The thorough testing and validation ensured a mature and proven first 8000H
gas turbine on commercial operation. The performance, hardware integrity
and lifetime prediction has been confirmed with the first 8000H gas turbine
through 5 inspections.

(iii) The provision of a latent defect period of five years where the contractor is
required to make good any defects identified during the term of the warranty;

(iv) Gas turbine and compressor spare parts are kept by Siemens for delivery to
site within 48 hours. Siemens spare parts inventory is installed and
established in Berlin to support the global 8000H fleet. Other strategic spares
i.e. for HRSG and Steam Turbine will be purchased by the Operator and kept
at site. Siemens will maintain their maintenance support specialists based in
the region, who will work with the Operator;

(v) The plant control system is supplied with the required hardware and/or
software to allow the control system to be interfaced to third party applications
for the purpose of real time extraction of process data.

(b) Reliability Risk

Pursuant to the PPA, the Project Company is granted an unplanned outage


allowances of four per cent (4%) to six per cent (6%) per annum in addition to the
scheduled outages. If the Project Company breaches the four per cent (4%)
allowance, a reduced Available Capacity Payment is payable to the Project
Company. If the Project Company breaches the six per cent (6%) allowance, a
further reduction to Available Capacity Payment and an additional penalty would
apply.

In addition, the Available Capacity Payment is made on the basis of the most recent
tested annual available capacity. Therefore, it is critical that the Power Facility is able
to achieve tested annual available capacity equal to the Nominal Capacity over the
long-term as well as daily actual available capacity being at least equal to the daily
planned available capacity on an ongoing basis.
The following factors are to be considered to mitigate the aforesaid risks:

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(i) The EPC Contract will provide for tests on completion including a reliability
run, with failure to pass such tests resulting in the right of the Issuer to order a
retest or reject Power Facility.

(ii) The responsibilities of the Project Company are passed through to the
Operator via the inclusion of the PPA and the GSA obligations in the
schedules of OMA.

(iii) The Operator provides guarantees and the OMA provides for a payment and
incentive mechanism on the Operator which are formulated to align with the
performance targets of the Project Company under the PPA. These include
penalties on the Operator where, inter alia:

(1) the Power Facility suffers unplanned outages at a rate exceeding four
per cent (4%);

(2) the Power Facility suffers unplanned outages at a rate exceeding six per
cent (6%);

(3) the Tested Annual Available Capacity of each Generating Block is lower
than the Guaranteed Capacity2;

(4) the Power Facility fails to achieve the Contracted Average Availability
Target of 94%, as set out in the PPA;

(5) the Power Facility fails to fulfil a Despatch Instruction.

(iv) Whilst the payment and incentive mechanism under the OMA is not designed
to achieve a direct pass-through of the revenue loss suffered by the Project
Company, the ICE has confirmed that performance guarantees under the
OMA and the performance targets under the PPA are aligned from a technical
perspective. Therefore, the Operator is incentivised to ensure ongoing
compliance of the Power Facility with the performance targets under the PPA.

(v) The Operator is the largest operation and maintenance service provider to the
power generation sector in Malaysia and is highly experienced in operating
and maintaining power plants, including gas fired combined cycle power
plants.

(vi) The Sponsor’s Rolling Guarantee in an amount equivalent to the next semi-
annual scheduled Finance Service, until the final maturity date of the Sukuk
TNB NE.

In addition, the ICE has estimated that the expected Net Power Output could be less
than the Net Power Output of 1,071.43 MW required under the PPA, based on the
proposed design and technical solution. The potential output shortfall arises from the
expected auxiliary system losses and would occur following the Taking-Over Date,
which means that Output Performance LDs would not be payable by the EPC

2
“Guaranteed Capacity” is defined as the lower of (i) Contractual Available Capacity and (ii) 535.715 MW.
Contractual Available Capacity is the capacity achieved by the EPC Contractor.

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Contractor. Investors should note that this is based on estimates by the ICE and
should consider it in the context of the mitigating factors stated below.

The Project Company has also assumed that there will be no capacity degradation,
as based on their previous experience, it is expected that new turbine models
generally see an improvement in performance as it undergoes more operating hours.
As the SCC5-8000H-1S is the newest model in Siemen’s stable, the Project
Company expects to see improvements in its performance on or after COD. The ICE
has opined that it is common that turbines experience a capacity degradation of
around 2.5% over the life of the asset.

The following factors are to be considered to mitigate the aforesaid risks:

(i) As noted above, the Operator provides guarantees and the OMA provides for a
payment and incentive mechanism on the Operator which are formulated to
align with the performance targets of the Project Company under the PPA;

(ii) There are margins expected in the Net Power Output, as reference conditions
for corrected output during testing are more severe than actual site conditions.
The ICE has confirmed that, based on historical trends, this assumption is not
unreasonable;

(iii) The Sponsor’s Rolling Guarantee in an amount equivalent to the next semi-
annual scheduled Finance Service, until the final maturity date of the Sukuk
TNB NE.

(c) Heat Rate Performance

Under the PPA, the Fuel Payment component of the tariff paid to the Project
Company is calculated based on the Applicable Heat Rate. The Applicable Heat Rate
is the lower of the contracted heat rate, as set out in the PPA.

The Project Company therefore needs to ensure it is able to maintain in the long term
a heat rate at the Power Facility that is at least equal to the contracted heat rate,
otherwise the fuel payment component of the tariff may not fully compensate the
Project Company for the actual cost of fuel incurred.

The PPA does not include adjustments for heat rate degradation, though this will be
expected to occur in practice. Contractually, there are no margins between the
weighted plant heat rate based on EPC heat rate values and PPA table of heat rates.
Nevertheless, there are margins expected in the actual heat rate during operations,
as site conditions for heat rate during testing are more severe than actual site
conditions. The ICE has confirmed that, based on historical trends, this assumption is
not unreasonable.

The following factors are also considered to mitigate the said risks:

(i) Under the OMA, the Operator has accepted the same performance values
stipulated under the PPA and takes on the heat rate performance risk,
guaranteeing the Power Facility will meet the Applicable Heat Rate, with no
adjustments for heat rate degradation. Failure to meet the guaranteed heat
rate will result in LDs payable by the Operator, equal to thirty per cent (30%)
of the increased costs of fuel payable by the Project Company. Nevertheless,
the ICE has opined the LD cap provided under the OMA covers heat rate
degradation of only 0.4%, which is below the expected actual heat rate

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degradation of the plant, which ICE estimates to be 2% to 2.5% on average,


over the Term.

(ii) Whilst the payment and incentive mechanism under the OMA is not designed
to achieve a full pass-through of the increased costs suffered by the Project
Company as a result of Operator failure to meet the heat rate guarantee, the
heat rate performance guarantees under the OMA and the heat rate
performance targets under the PPA are the same. The Operator is
incentivised to ensure ongoing compliance of the Power Facility with the heat
rate performance target under the PPA due to the LDs applicable under the
OMA and the profit sharing with the Operator on actual cost savings on fuel.
However it should be noted that the performance LDs under the OMA will not
cover the expected heat rate degradation.

(iii) Under the LTMP, LDs relating to heat rate degradation are payable by
Siemens, covering about 5% of the actual loss incurred. There is also a profit
sharing mechanism with Siemens under the LTMP, if the gas turbine heat
rate improvement is beyond 1% of the guaranteed heat rate after a major
inspection.

(iv) The Sponsor’s Rolling Guarantee in an amount equivalent to the next semi-
annual scheduled Finance Service, until the final maturity date of the Sukuk
TNB NE.

(d) Operation and Maintenance Costs

O&M Costs will be largely covered by the FOR and VOR components of the tariff.
Under the PPA, FOR and VOR are pre-agreed fixed values in Ringgit Malaysia and
indexed at four per cent (4%) every four (4) years.

The Project Company will engage the Operator as the operation and maintenance
contractor for the Project. The Operator does not provide any security for the
performance of its obligations under the OMA. This is due to the quasi-owner-
operator approach of the project structure and in view of the Operator being a wholly-
owned subsidiary of the Sponsor. Further, the Operator is an experienced provider of
operation and maintenance services to power plants and is the largest of such
provider in Malaysia.

The Project Company retains risk in some aspects of the project which are not
necessarily within the Project Company’s control. The key risks include, inter alia:

(i) The Project Company’s cash flows may be negatively affected by operating
expenses of the Project Company being higher than initially budgeted, e.g.
escalation of payments under the LTMP at higher rates than assumed in the
Base Case Financial Model;

(ii) The OMA provides for reimbursement by the Project Company to the
Operator for any costs incurred relating to emergency conditions, including
when scheduled outages are delayed etc. This is contrary to PPA where the
Project Company is not compensated for this.

(iii) Change in circumstances as defined in the OMA, including:

(1) any change in law;

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(2) a change in quality of the Nominated Fuel against the quality stipulated
in the OMA;

(3) any material change in the EPC Contract which has a material impact
on the operation and maintenance of the Power Facility;

(4) when more than an aggregate of 300 hours of operation of all the gas
turbines on distillate fuel per year have been reached, except to the
extent that such change is compensated under the LTMP.

The following factors are to be considered to mitigate the said risks:-

(i) The ICE has opined that the O&M budget is acceptable and that, via its other
projects, the Sponsor and Operator have the capability and resource to
implement a suitable O&M plan

(ii) The Project Company will also set aside a Maintenance Reserve Account,
with a minimum balance of RM24m, consistent with the PPA requirements.

(iii) The Sponsor’s Rolling Guarantee in an amount equivalent to the next semi-
annual scheduled Finance Service, until the final maturity date of the Sukuk
TNB NE.

(e) Offtake and/or Despatch Risks

Under the PPA, the Project Company does not take despatch risk as the Available
Capacity Payment component of the tariff is paid regardless of actual despatch level
of the Power Facility, provided that the Power Facility does not exceed unplanned
outage limits provided under the PPA and meets the PPA availability targets.
Available Capacity Payment is set at a level intended to be sufficient to cover fixed
costs, finance service, taxes and to provide sufficient return to the Sponsor.
Furthermore, the Power Facility is expected to be despatched as a base load power
plant, as the coal plants are expected to be despatched first as base load plants and
the next cheapest and efficient gas-fired plant will follow. This is expected to be the
Power Facility, in view of the improved efficiencies, vis-à-vis the existing gas-fired
plants in Malaysia.

TNB has successfully weathered two periods of significant macroeconomic stress


during the 1998 Asian crisis and the 2008 global financial crisis. TNB is rated BBB+
by Standard & Poor’s, one notch down from Malaysia’s sovereign rating of A-. The
Government of Malaysia indirectly holds seventy nine point four per cent (79.4%) as
at 30 November 2012 in TNB in addition to veto rights with respect to all major
corporate decisions. Although the Government of Malaysia is not involved in the day-
to-day running of TNB, it has a strong influence as it has a representative on the
board of TNB. This, together with TNB’s systemic importance to the stability of the
Malaysian economy ensures a high likelihood that the Malaysian government will
provide timely support to TNB should the latter experience financial difficulties.

7.3.3 Gas Supply Risks

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(a) Price

As long as the Government Directive is in place, the Project Company shall pay
Petronas for the committed gas quantities based on the regulated gas price. Under
the PPA, fuel cost that will be passed through to TNB will be based on the weighted
average fuel price derived by dividing the amount paid by the Project Company to
Petronas for gas consumed by the aggregate GJ of such natural gas consumed. In
periods where the Plant is not available on natural gas, the Project Company can
changeover to Distillate Fuel Oil and TNB will make Energy Payments based on the
cost of Distillate Fuel Oil consumed during such period. ICE has confirmed that fuel
price variations do not impact the Project from a technical perspective as fuel costs
are passed through to TNB under the PPA, subject to the Project Company achieving
the Guaranteed Net Heat Rate under the PPA.

(b) Security of Supply

Petronas has an obligation to make available gas to the Project Company up to the
Daily Quantity (“DQ”). The ICE has confirmed that the DQ nominated in the GSA is
adequate to meet the requirements of the Power Facility at 100% load, taking into
account degradation. Petronas has the right to revise the DQ downwards for the
remaining Contract Years if the consumption of gas for any two consecutive Contract
Years is less than the TOP Quantity, save that the Seller shall not revise the DQ
downwards in the event the Delivered Quantity to the Power Sector for the same two
Contract Years is equal to or exceeds the TOP Quantity for the Power Sector for the
same period. If the DQ is revised to a level below what is required to operate the
Power Facility at 100% load, the Project may face reduced revenues due to reduced
gas availability. The risk of such downward revision is considered minimal, as the
majority of the gas-fired power plants in Malaysia have historically been despatched
as base load plants which will enable all such plants to meet the TOP levels on
aggregate. The Sponsor expects this to continue to hold true, even with the
additional gas-fired capacity that are expected to be tendered, given the increasing
electricity demand in the country. Furthermore, certain existing combined cycle gas-
fired power plants will be expiring between 2015 and 2017 and the fuel mix strategy
in daily operation will remain.

The delivery of Commissioning Gas will be subject to Petronas and the Project
Company, in good faith, discussing and agreeing on the quantities of Commissioning
Gas that the Project Company would require, the timing for delivery and the terms for
delivery and acceptance. The Project Company has no recourse to Petronas for any
delays in commissioning and will be liable for delays under the PPA if Commissioning
Gas is unavailable or agreement cannot be reached. The Sponsor views this to be
acceptable as given the history of cooperation with Petronas on other gas-fired
plants.

Under the PPA, the Project Company has the right to declare availability on Distillate
Fuel Oil if the Project Company and TNB agree that gas is not available and it is not
resulting from a breach by the Project Company. Disruptions in gas supply due to a
force majeure event would constitute a Force Majeure Event under the PPA, which in
turn allows the Project Company to switch over to and be available based on
Distillate Fuel Oil as well.

Once the Project Company declares availability based on Distillate Fuel Oil, it will be
obligated to despatch based on Distillate Fuel Oil if so instructed by the GSO. Under
the O&M agreement, distillate firing is limited to 300 hrs in aggregate over any one
year (total for both Generating Blocks). Distillate firing carries a penalty in terms of

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EBH of 1.3, ie every three hours firing on Distillate Fuel Oil is equivalent to four hours
running on gas. Substantial distillate running will hence mean shorter intervals
between overhauls. If the Project Company despatches based on Distillate Fuel Oil
over a prolonged period, it may face lower availability due to distillate firing triggers
reductions set out in PPA. However, the Sponsor believes that, looking at the plan for
scheduled maintenance outage supplied by the OEM there is ample margin for the
Project Company to achieve the 94% Availability Target in a 3-year block if it is
instructed to run on Distillate Fuel Oil despite the accelerated interval between
overhauls. It is to be noted that the GSO will exercise great prudence when
dispatching any power plant on Distillate Fuel Oil as this cost is absorbed by TNB
and not passed to the consumer at large.

It is envisaged that any disruption in gas supply is likely to be temporary in nature,


and the risks of a material increase in maintenance costs or reduction in capacity
payments is therefore small. The ICE has opined that the likelihood of failed gas
supply occurring together with the failure of the various back-up fuel sources is
considered highly unlikely.

Additional pipeline facilities are needed for the supply of gas by Petronas to the
Project and Petronas will be appointing a contractor for the development of these
additional facilities. Under the GSA, the cost of these additional facilities are the
responsibility of the Project Company and the financing plan includes a provision of
RM 160 million for these costs. A delay in completion of these facilities could result in
a failure to achieve first energisation of the Power Facility and consequently, a failure
to meet Scheduled COD and a need to pay PPA Delay LDs. The following factors are
to be considered to mitigate the said risks:

(i) A history of cooperation between TNB and Petronas on fuel supply to gas-fired
plants.

(ii) The Sponsor’s Rolling Guarantee in an amount equivalent to the next semi-
annual scheduled Finance Service, until the final maturity date of the Sukuk
TNB NE.

(c) Take-or-Pay Risk

Petronas has an obligation to make available gas to the Project Company, pursuant
to a TOP. The TOP quantity is 80% of the Net Annual Contract Quantity (“Net ACQ”)
for the first ten (10) Contract Years and 85% of Net ACQ thereafter. The Net ACQ is
calculated as the DQ, multiplied by the number of days in the Contract Year, less the
excused quantity.

Failure to take the TOP Quantity in any Contract Year would mean that the Project
Company has to pay for the quantity of gas not taken, up to the TOP Quantity. For
any gas paid for but not taken, the Project Company has up to three (3) years to
nominate Make-Up Gas based on the difference between the prevailing gas price at
the point of delivery and the price already paid.

Notwithstanding the TOP obligations, IPP will be able to fully pass through the cost of
TOP gas under the PPA.

(d) Quality

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Pursuant to the GSA, Petronas undertakes to supply natural gas of a certain quality.
Petronas shall use its best endeavours to ensure that the gas delivered to the Project
Company conforms to the specifications set out in the GSA. Petronas has the right to
discontinue delivery of Off-Spec Gas if, in its reasonable opinion, such delivery may
cause damage to the Petronas’ facilities. The Project Company shall use best
endeavours to take receipt of Off-Spec Gas, but it, too, has the right to reject Off-
Spec Gas from the Seller if, in its reasonable opinion, such receipt may cause
damage to the Power Facility.

The risk of delivery of Off-Spec gas is seen to be relatively low risk to the Project,
based on the Sponsor’s experience on other gas-fired plants in its portfolio.

7.3.4 Force Majeure

Force majeure provisions are found in the PPA, GSA, EPC Contract, LTMP, OMA,
LLA and Turnkey Contract (“the Agreements”).

A force majeure event is an event, condition, or circumstance, which is beyond the


reasonable control of the parties and occurs without fault or negligence on the part of
the party claiming it. Such an event would result in delay or disruption in the
performance of obligation under the affected Agreements despite all reasonable
efforts of the party claiming it to prevent it or mitigate its effects.

There is a risk that the Project Company and the Issuer may be adversely affected by
a force majeure event either directly or indirectly if the other project counterparties to
the affected Agreements are relieved of their contractual obligations thereunder.

7.3.5 PPA Termination

There is a risk that the Sukukholders may not receive all of their outstanding debt
and related costs on the termination of the PPA due to an EOD of the Project
Company, where TNB elects to acquire the Power Facility. If the PPA is terminated
by TNB due to the Project Company’s EOD, TNB has the option, but not the
obligation, to purchase the Project for a purchase price equal to:

(a) all of the outstanding indebtedness if the Sponsor's gross equity contribution
amounts to twenty percent (20%) or more of the Total Project Costs, and
ninety-five percent (95%) of the outstanding indebtedness if the Sponsor's
gross equity contribution is less than twenty percent (20%) of the Total
Project Costs; plus

(b) RM10.00; plus

(c) reasonable costs and expenses of Project Company which are incurred or
suffered as a result of purchase of the Project by TNB; minus

(d) cash balances at bank and in hand and liquid securities held by the Project
Company.

Sukukholders are at risk in the event TNB elects not to purchase the Project upon
termination of the Project Company’s EOD and as such, TNB would be under no
obligation to pay any termination sums. Potential investors must evaluate the
performance risk of the Project Company with respect to its obligations under the
PPA and the ability of the Project Company to carry out those obligations in

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accordance with the requirements under the PPA and the resulting risk of the Project
Company’s EOD leading to termination.

If TNB elects to purchase the Project upon termination of the Project Company’s
EOD, the purchase price may comprise of ninety-five per cent (95%) of the
outstanding indebtedness only, in the case where the Sponsor’s gross equity
contribution is less than twenty percent of the Total Project Costs. This is considered
to be low risk, since the Sponsor’s gross equity contribution in the Base Case
Financial Model is in excess of twenty percent.

TNB has a number of rights to set-off amounts owing to it from the Project Company,
including all liquidated damages payable by the Project Company. This creates a risk
to the Financing Parties that TNB may set-off amounts owing to it at termination and
reduce the termination payments that may be payable. This risk is mitigated by the
strength of the Sponsor’s operational experience, the likelihood of any operational
failure leading to termination and the fact that TNB is both the Off-taker and the
Sponsor for the Project.

7.3.6 GSA Termination

Under the GSA, Petronas is entitled to give fourteen (14) days written notice to the
Project Company to terminate the GSA in certain circumstances, including:

(a) if the Project Company fails to take gas after a lapse of ninety (90) days
continuously from the last day of offtake, other than due to a Force Majeure
event or a failure by Petronas to deliver gas;

(b) if the Project Company is unable to take or receive gas continuously for a
period of two (2) months at any time during the supply period, other than due
to a Force Majeure event, Maintenance Shutdown, Operational Shutdown or
a failure by Petronas to deliver gas.

The Project Company expects to meet its electricity generation obligations under the
PPA by using natural gas as the main source of fuel and the Power Facility is not
expected to run on Distillate Fuel Oil on a long term basis. The ICE has opined that it
is unlikely for the above to occur, as it would need both Generating Blocks to be
unavailable at the same time and for a minimum period of two (2) months, not
excused by Force Majeure. The ICE has further opined that during the operations
period, to facilitate resource scheduling, the intention will be to schedule the
maintenance of the turbines at separate periods.

Nevertheless, the Project Company will not receive any compensation if the GSA is
terminated. Prospective investors should evaluate and consider the risk of an event
arising which leads to termination of the GSA.

7.3.7 Adequacy of Insurance

The Issuer and the Project Company maintain insurance policies to mitigate certain
risks in accordance with the provisions of the PPA. The conditions precedent for the
issuance of Sukuk TNB NE include a written report from the Insurance Adviser in
form and substance satisfactory to the Joint Lead Arrangers. In particular, Investors
should take note that the DSU section of CEAR and Marine Cargo Open Cover
policies do not cover principal repayment obligations.

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However, there can be no assurance that there will be sufficient coverage to fully
protect against interruption to business, generation of revenue, increased
expenditure or any other liabilities associated with the business of the Issuer and the
Project Company. In addition, the creditworthiness of the reinsurers (the ultimate
parties who bear the insurance risk) may impact the ability of the Issuer and/ or the
Project Company to receive amounts payable as a result of insured events in full.

7.3.8 Financial Considerations

(a) Equity Contribution Risks

The Sponsor will contribute at least more than thirty per cent (30.0%) of Project
Costs in the form of equity and RPS prior to COD. The risk of the Sponsor failing to
contribute the required equity to the Project is mitigated by the financial strength of
the Sponsor. The Sponsor has been able to consistently obtain AAA ratings for its
senior corporate debt facilities and non-recourse debt facilities at subsidiary project
level from the Rating Agency.

(b) Exposure to Foreign Currency Fluctuations

Exposure to the risk of foreign currency fluctuations during the construction phase
arises mainly from EPC costs denominated in USD and EUR, which will be actively
managed by the Sponsor. This risk is mitigated by the Sponsor’s significant
experience as a power developer and in managing foreign currency exposures
across its portfolio, as well as the Sponsor’s Completion Support equivalent to ten
per cent (10%) of project costs.

Exposure to foreign currency fluctuations during the operations phase arises mainly
from the EUR-denominated payments under the LTMP and will also be actively
managed by the Sponsor. This risk is similar mitigated by the Sponsor’s experience
in managing foreign currency exposures across its portfolio, as well as the Sponsor’s
Rolling Guarantee in an amount equivalent to the next semi-annual scheduled
Finance Service, until the final maturity date of the Sukuk TNB NE.

The following steps will be taken by the Sponsor on behalf of the Project Company
and Issuer to mitigate the foreign exchange risk:

(i) Forward exchange contracts

The Sponsor purchases currencies more than two (2) days before settlement
date provided firm amount and value date are known earlier to avoid
speculative hedging as stipulated under BNM rules and regulations. This
mechanism will enable the Sponsor to lock-in the forward rates upfront to
protect the Project Company and Issuer from adverse currency fluctuation.

(ii) Floats in USD and EUR

The Sponsor will carry out an opportunistic spot buying of USD and EUR
whenever MYR strengthens against the currencies. The floats will act as
natural hedge and any USD and EUR payments will be settled via foreign
currency accounts. Whenever necessary, the Sponsor may purchase the
additional amount of USD and EUR to top up the floats should the amounts
decrease due to utilisation.

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(c) Inflation

The Project Company enjoys some protection against Malaysian inflation risk as the
fixed operating rate and variable operating rate components of the tariff are escalated
at a rate of four per cent (4%) every four years.

(d) Exposure to Interest Rate Fluctuations

The Issuer is not exposed to interest rate risk for the Sukuk TNB NE, as the periodic
distribution rates for the Sukuk TNB NE are fixed over the term of the Sukuk TNB
NE.

7.3.9 Regulatory and Environmental Risks

(a) Change in Law

A change in law resulting in the Project Company being required to make capital
improvements in excess of RM10,000,000.00 will result in TNB and Project Company
renegotiating the CRF component of the tariff. If the parties cannot agree the dispute
resolution process applies.

Pursuant to the PPA, if an industry restructuring event occurs (defined as the


revamping of the electricity industry with a view to set up a power pool or other
market system), the Project Company and TNB will negotiate amendments to the
PPA. If agreement is not reached within six (6) months, TNB may terminate the PPA
and pay to the Project Company a termination sum covering outstanding financing
amounts and a portion of the Sponsor’s return.

(b) Political, Economic and Regulatory Risks

Like all businesses, adverse developments in political, economic and regulatory


conditions in the country could materially affect the financial and operational
condition as well as the overall profitability of the Issuer and the Project Company.
Other political and economic uncertainties include the risk of war, expropriation,
nationalisation, renegotiation or nullification of existing contracts, changes in rates of
interest and methods of taxation.

(c) Construction Industry Development Board (“CIDB”) Licence

Under the Lembaga Pembangunan Industri Pembinaan Malaysia Act, 1994 (“Act
520”), no person shall undertake to carry out and complete any construction works
unless he is registered with the CIDB and holds a valid certificate of registration
issued by the CIDB. While the construction of the Works will be sub-contracted to the
EPC Contractor pursuant to the EPC Contract, TNB NE will nevertheless be required
to procure CIDB Licence in order to perform its obligations under the Turnkey
Contract and as a condition subsequent to the issuance of the Sukuk TNB NE, to be
fulfilled no later than six (6) months after the issuance of the Sukuk TNB NE.
Investors should therefore consider the regulatory and legal implications should there
be a delay in obtaining the CIDB Licence, in view of the above.

(d) Generation Licence

Under the ESA, a person who intends to operate a power plant is required to hold an
electricity generation licence. The requirement to procure the Generation Licence
forms a condition precedent to commencement of generation of electricity in respect

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of the first Generating Block under the PPA and constitutes a condition subsequent
to issuance of the Sukuk TNB NE, which condition subsequent is to be fulfilled within
nine (9) months after the issuance of the Sukuk TNB NE. A delay in obtaining the
Generation Licence could delay the commissioning of the Power Facility, which, if the
delay results in Scheduled COD not being met, would reduce the revenues and
cashflow of the Project Company post-COD.

Unless and until such Generation Licence is obtained, the Project Company would
not be able to commence generation of electricity. The Energy Commission, in
issuing such licence, may also impose such conditions as may appear to be requisite
or expedient in accordance with the provisions of the ESA. There is no certainty as to
the nature of such conditions that may be imposed. Pursuant to the ESA, in the event
of a breach of any of such conditions imposed, the Generation Licence may be
suspended or revoked by the Energy Commission.

Under the PPA, TNB is entitled to terminate the PPA in accordance with its terms in
the event the Generation Licence is suspended or revoked or terminated due to the
Project Company’s default and the Project Company has not caused the same to be
reinstated or renewed within the stipulated remedy period.

(e) Renewal of Licence/Permit Risks

The Project Company and the Issuer will require various approvals, licences, permits
and certificates to operate their business and the Power Facility and will be required
to renew these approvals, licences, permits and certificates or to obtain new
approvals, licences, permits and certificates. Whilst the Project Company and the
Issuer may not have experienced any significant difficulty in renewing and
maintaining the approvals, licences, permits and certificates granted, there will not be
any assurance that in the future the relevant authorities will issue or renew any
required approvals, licences, permits or certificates in a timely manner or at all.
Failure to renew, maintain or obtain the required approvals, licences, permits and
certificates may interrupt the operations or delay or prevent the implementation of
any capacity expansion or other new projects and may have a material adverse
effect on the Project Company and the Issuer’s business, financial condition and
results of operations.

(f) Project Lands

The Project Company will occupy the Project Lands for purposes of the construction
of the Power Facility.

However, the Ijarah Project Lands contain restrictions over, amongst others, lease
and charge of the Ijarah Project Lands without the prior consent of the state
authorities. Whilst consent of the state authority for the lease of the Ijarah Project
Lands by TNB has been obtained, consent for creation of the charge over the Ijarah
Project Lands to secure the Sukuk TNB NE has not been applied, hence the charge
over the Ijarah Project Lands cannot be created at Financial Close. As for the
Additional Land, it has not been alienated to TNB.

Further, pending alienation of the Additional Land in favour of TNB, the lease of the
Additional Land by TNB to the Project Company and the receipt of the consent of the
State Authorities for the lease and creation of the charge respectively, the creation of
the charge over the Additional Lands to secure the Sukuk cannot be created at
Financial Close.

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In view of that, the following are conditions subsequent to the issuance of the Sukuk:

(i) presentation for registration in the name of the Project Company of the lease
of the Ijarah Project Lands;

(ii) presentation for registration of a charge over the lease of the Ijarah Project
Lands;

(iii) alienation in favour of TNB of the Additional Land and delivery of a lease
agreement between TNB and the Project Company in respect of the
Additional Land; and

(iv) presentation for registration of the lease over the Additional Land in favour of
the Project Company and the charge over such lease.

The risk lies in that the state authorities may not approve the registration of the lease
and charge to be entered in respect of the Project Lands or that it will not grant its
consent to the creation of the charge over the Project Lands respectively.

In addition to the above, there is further risk that the relevant authorities may delay or
not complete the relevant administrative procedures or that alienation may result in
the land being subject to conditions (a) which are unfavourable for its intended usage
by the parties; or (b) which restrict or otherwise prohibit the creation of security in the
manner contemplated by the terms and conditions of the Sukuk TNB NE.

Notwithstanding the above, the Lease Agreement for the lease of the Ijarah Project
Lands by TNB to the Project Company has been entered into on 30 November 2012
and receipt of the consent of the state authorities for the lease of the Ijarah Project
Lands by TNB to the Project Company has been obtained on 1 April 2013.

“Project Lands” means collectively, the Additional Land and the Ijarah Project Lands.

“Additional Land” means lands to be identified in the relevant transaction document.

“Financial Close” means the date upon which the Financing Documents providing the
total debt requirements implementing the Project shall have been signed and are in
full force and effect and funds are committed and available to be drawn.

(g) Environmental and Social Risks

The Project is located within an existing power plant site and as such, impact on the
surrounding environment is expected to be limited.

The Project is classified as a Prescribed Activity under the Malaysian Environmental


Quality Order 1987, which requires a PEIA but not a DEIA. The Department of
Energy required a PEIA to be carried out, including additional studies on economic
valuation and public engagement. The revised PEIA was submitted to the
Department of Energy on 6 February 2013 and the Project Company received the
approval on 14 March 2013.

The Project, as with all other IPPs, is subject to environmental legislations, policies
and regulations. These include meeting air, water and noise emission standards.
There can be no assurance that the standards imposed by the environmental
legislations and regulations will not change or otherwise result in the increase in
costs or losses of or reductions in revenue to the Project Company and the Issuer.

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Non-compliance could also result in the suspension or revocation of the Generation


License and/or the imposition of fines.

(h) Industry Restructuring Risks

If industry restructuring (such as the introduction of a power pool or other market


system) is implemented, and TNB and the Project Company are unable to reach
agreement on amendments to the PPA to reflect such industry restructuring within a
period of six (6) months, then TNB is entitled to terminate the PPA immediately.
There can be no assurance that any industry restructuring will not have an adverse
effect on the Project Company’s business and operations. Nevertheless, the risk to
Sukukholders is considered low, as the purchase price to be paid by TNB in a
termination scenario includes:

(a) all of the outstanding indebtedness; plus

(b) an agreed level of shareholders’ return; plus

(c) reasonable costs and expenses of Project Company which are incurred or
suffered as a result of purchase of the Project by TNB; minus

(d) cash balances at bank and in hand and liquid securities held by the Project
Company.

7.4 Risks Relating to the Guarantor

7.4.1 TNB requires significant capital for its business

TNB incurs substantial capital expenditure relating to new projects as well as the
replacement of operating assets and infrastructure. The capital expenditures are
expected to be funded through a combination of internally generated cash flow and
other external financing sources. If TNB is unable to fund capital expenditures from
internally generated cash flow or obtain funds from external sources on acceptable
terms or in timely manner, or at all, the capital expenditures would have to be
deferred. This may restrict TNB’s ability to grow and, over time, may reduce the
quality and reliability of the service it provides as well as adversely affect future
profitability.

7.4.2 Future restructuring of the electricity industry in Malaysia may have an adverse
effect on TNB’s business and operations

The Government may consider a reform of the Malaysian Electricity Supply Industry
in the future in order to enhance transparency and efficiency of the industry. There is
no assurance that can be made as to the form and scope of any final restructuring
plan that will be adopted by the Government, if any. Nevertheless any efforts on
industry restructuring must ensure that all the prerequisites such as fuel subsidy, fuel
cost pass through, tariff cross subsidy etc must be addressed and resolved before
moving ahead. There can be no assurance that any industry restructuring will not
have an adverse effect on TNB’s business and operations.

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7.4.3 The business of electricity generation, transmission and distribution involves


many operating risks

The operation of electricity generation, transmission and distribution facilities involves


many operating risks. TNB has experienced or may experience breakdown or failure
of electricity generation equipment, transmission lines, distribution lines or drops,
pipelines or other equipment or processes, inability to obtain adequate fuel supplies
and performance below expected levels of output or efficiency (whether due to
misuse, unexpected degradation or design or manufacturing defects), failure to keep
on hand adequate supplies of spare parts, operation error, labour disputes, thefts,
catastrophic events such as fires, floods, earthquakes and other similar events and
the need to comply with the directions of relevant government authorities. The
occurrence of any of these events could increase the cost of operating TNB’s
facilities or otherwise materially and adversely affect TNB’s financial condition and
results of operations. Although insurance is maintained by TNB to protect against
certain of these operating risks, the proceeds of such insurance may not be adequate
to cover lost revenues or increased expenses.

7.4.4 Fluctuations in the supply of certain energy sources could have a negative
impact on TNB’s operational performance and profitability

Fluctuations in the fuel supply to the electricity industry may require TNB to rely to a
greater extent on other more expensive fuel sources for generating electricity.
Furthermore, under the existing power purchase agreements between TNB and the
IPPs, any increase in fuel costs to those IPPs may be passed through to TNB. The
gas allocation to the power sector has decreased significantly since January 2010,
below the requirement level of 1,250 mmscfd. The situation has deteriorated further
in December 2010 when one of the gas facilities caught fire and has to be on long
outages for repair works. Since then, the average gas supply to power sector has
consistently been below 1,250 mmscfd. Although existing coal plants have been
maximised during this period, the shortfall in gas volume has also been replaced by
utilising more oil and distillates, which are more expensive. There can be no
assurance that such shortages or fluctuations in the supply of energy sources will not
continue in the future, which may adversely affect TNB’s performance and
profitability.

7.4.5 TNB is subject to many environmental laws

TNB’s operations are subject to various environmental laws relating to water, air and
noise pollution and the disposal of hazardous materials. Although TNB believes that
it is in compliance in all material aspects of these environmental laws, some risk of
environmental costs and liabilities is inherent in their operations and there can be no
assurance that material costs and liabilities will not be incurred in the future in this
regard. Compliance with environmental laws and regulations may also result in
delays in the expansion and development of TNB’s generation plants, transmission
and distribution systems.

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8. OTHER INFORMATION – THE ISSUER

8.1 Contingent Liabilities

The Issuer is a newly incorporated special purpose vehicle and therefore does not
have any contingent liabilities.

8.2 Material Litigation

As at 31 March 2013, there are no legal claims, demands, lawsuits or litigation


(including those pending or threatened) by or against the Issuer or any proceedings
pending or threatened which might materially and adversely affect the position or
business of the Issuer, and in particular, any injunctions, winding up orders, any
orders relating to the enforcement of judgments or other remedies which may if
granted by the court, effectively cause the Issuer to have to cease all or parts of the
Issuer’s business.

8.3 Related Party Transactions

As at 31 March 2013, the Issuer confirms that there are no related party transactions.

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9. OTHER INFORMATION – THE PROJECT COMPANY

9.1 Contingent Liabilities

As at 31 August 2012, the directors of the Project Company are not aware of any
material contingent liabilities other than as disclosed in the audited financial
statements.

9.2 Material Litigation

As at 31 March 2013, there are no legal claims, demands, lawsuits or litigation


(including those pending or threatened) by or against the Project Company or any
proceedings pending or threatened which might materially and adversely affect
the position or business of the Project Company, and in particular, any injunctions,
winding up orders, any orders relating to the enforcement of judgments or other
remedies which may if granted by the court, effectively cause the Project Company to
have to cease all or parts of the Project Company’s business.

9.3 Related Party Transactions

As at 31 March 2013, the Project Company confirms that there are no related party
transactions to disclose.

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10. OTHER INFORMATION – THE GUARANTOR

10.1 Contingent Liabilities

As at 31 August 2012, the directors of the Guarantor are not aware of any material
contingent liabilities other than as disclosed in the audited financial statements.

10.2 Material Litigation

As at 31 March 2013, material litigation in respect of the Guarantor is as follows:

Case No. Court of Appeal No.W-02-(NCC)(W)-2339-10/2012

Appellant Tenaga Nasional Berhad (TNB)

Respondent Irham Niaga Sdn Bhd (INSB) & Irham Niaga Logistics Sdn
Bhd (INLSB)

Case No. W-02-(NCC)(W)-2339-10/2012

Nature of claim The suit filed by INSB & INLSB against TNB at the Kuala
Lumpur High Court to enforce an arbitration award obtained
against TNB Transmission Network Sdn Bhd (a TNB
subsidiary).

Full hearing was conducted and on 20 September 2012 the


High Court allowed INSB & INLSB’s claim as pleaded in
paragraph 58 of the Statement of Claim, the details of which
are as follows:

(i) the Final Award due to the 1st Plaintiff for the sum of
RM106,888,499.34

(ii) the Final Award due to the 2nd Plaintiff for the sum of
RM6,102,922.50

(iii) interest at the rate of 5% per annum from 19.4.2004 on


the amounts due in (a) and (b) respectively to the date
of full payment

(iv) costs of the arbitration amounting to RM75,095.50

(v) costs awarded by the High Court in Originating Motions


No R4-25-336-2007 and R2(R4)-24-80-2007 and the
cost arising from the appeal thereto; and

(vi) costs of these proceedings for the sum of


RM150,000.00

Status On 18 January 2013, payment for the above judgment was


made to joint solicitors’ account; however TNB is appealing
against the judgment. Hearing of the appeal has been fixed
on 23 April 2013.

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The Guarantor is of the opinion that this case has no material adverse impact on the
Guarantor’s business.

10.3 Related Party Transactions

There are two (2) related party transactions entered into by the Guarantor or its
subsidiaries with the major shareholders during the last 3 years as follows:

(i) Execution of Concession Agreement on 27 October 2011 between Airport


Cooling Energy Supply Sdn. Bhd., a wholly owned subsidiary of TNB
Engineering Corporation Sdn. Bhd. which is a wholly owned subsidiary of
TNB and Malaysia Airports Holdings Berhad (MAHB) for the privatization of
the development of a 132kV sub-station and a district cooling plant for the
supply of chilled water and electricity and associated works at the new low
cost carrier terminal at Kuala Lumpur International Airport, Sepang, Selangor.

(ii) Execution of Sale and Purchase Agreement on 24 December 2010 with


Magic Coast Sdn. Bhd (MCSB) to acquire the Property from MCSB. MCSB, is
a wholly-owned subsidiary of Amanahraya Hartanah Sdn. Bhd., a wholly-
owned subsidiary of Amanah Raya Berhad (which in turn is a wholly-owned
subsidiary of the Minister of Finance, Incorporated (“MOF Inc”), whilst
Khazanah Nasional Berhad is a major shareholder of TNB (which in turn is a
wholly owned subsidiary of MOF Inc).

To the best of the Guarantor’s knowledge, there are no related party transactions that
were not at arms’ length and for full value.

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11. POTENTIAL CONFLICT OF INTEREST SITUATIONS

A. HSBC

As at the date hereof and after making enquiries as were reasonable in the
circumstances, HSBC confirms that, to the best of its knowledge and belief,
there is no existing or potential conflict of interest in its capacity as, amongst
others, one of the Joint Principal Advisers, Joint Lead Arrangers, Joint Lead
Managers and Joint Bookrunners as well as the Shariah Advisor in respect of
the proposed issue of the Sukuk TNB NE.

B. KAF

As at the date hereof and after making enquiries as were reasonable in the
circumstances, KAF confirms that, to the best of its knowledge and belief,
there is no existing or potential conflict of interest in its capacity as, amongst
others, one of the Joint Principal Advisers, Joint Lead Arrangers, Joint Lead
Managers and Joint Bookrunners as well as Facility Agent / Security Agent in
respect of the proposed issue of the Sukuk TNB NE.

C. AmTrustees Berhad

As at the date hereof and after making enquiries as were reasonable in the
circumstances, AmTrustees Berhad confirms that, to the best of its
knowledge and belief, it is not aware of any circumstances which would give
rise to a potential conflict of interest in its capacity as the Trustee in respect of
the proposed issue of the Sukuk TNB NE.

D. Messrs Zaid Ibrahim & Co.

As at the date hereof and after making enquiries as were reasonable in the
circumstances, Messrs Zaid Ibrahim & Co. is not aware of any circumstance
that would give rise to a conflict of interest in its capacity as the legal counsel
to the Issuer and the Project Company in respect of the proposed issue of the
Sukuk TNB NE.

E. Messrs Adnan Sundra & Low

As at the date hereof and after making enquiries as were reasonable in the
circumstances, Messrs Adnan Sundra & Low is not aware of any
circumstance that would give rise to a conflict of interest in its capacity as the
legal counsel to the Joint Principal Advisers and Joint Lead Arrangers in
respect of the proposed issue of the Sukuk TNB NE.

F. PricewaterhouseCoopers, Malaysia

As at the date hereof and after making enquiries as were reasonable in the
circumstances, PricewaterhouseCoopers, Malaysia, is not aware of any
circumstance that would give rise to a conflict of interest in its capacity as the
reporting accountants in respect of the proposed issue of the Sukuk TNB NE.

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APPENDIX 1

AUDITED FINANCIAL STATEMENTS OF THE PROJECT COMPANY


FOR THE FINANCIAL YEARS ENDED 31 AUGUST 2011 AND 31 AUGUST 2012

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APPENDIX 2

AUDITED FINANCIAL STATEMENTS OF THE GUARANTOR FOR THE FINANCIAL


YEARS ENDED 31 AUGUST 2011 AND 31 AUGUST 2012

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