Day 1 Monday 15 October 2007 Session 1: Coal Demand Outlook 1

Speech 2 Malaysia
Coal Demand Outlook in Malaysia

Mr. Hiew Char Loong Senior Executive (Logistics) TNB Fuel Services Sdn Bhd Malaysia

Mr Hiew Char Loong

Mr Hiew Char Loong is currently holding the post of Senior Executive Logistics of TNB Fuel Services Sdn Bhd (TNBF), a wholly owned subsidiary of Tenaga Nasional Berhad, Malaysia He started work with the National Tenaga Nasional Berhad since September 2001. In the past 6 years, he has served in various field in the Power Generation sector of TNB; 2002:- Engineer (Performance Planning & Budgeting) Station Pasir Gudang Power

2004:- Engineer (Material Management) Pasir Gudang Power Station 2005:- Engineer (Material Planner, Procurement) Pasir Gudang Power Station 2006- Present: (Senior Executive Logistics) - TNB Fuel Services Sdn Bhd He holds a Bachelor of Mechanical Engineer(Hons.) from University of Tenaga Nasional, Malaysia.

APEC Clean Fossil Energy Seminar 2007 Shaanxi Zhangbagou Guesthouse, Xian, Peoples Republic of China 15 - 17 October 2007

Coal Demand Outlook for Malaysia

A presentation by;
Rusli bin Idrus Managing Director TNB Fuel Services Sdn Bhd

CONTENTS
Capacity Mix in Peninsular Malaysia Coal Demand of the Electricity Supply Industry in Malaysia Key Concerns Over Coal Supply Coal Market Outlook Internal Challenges in Meeting Coal Supply Conclusion

EXISTING SYSTEM (as of 20 July 2007)

MAJOR GENERATING STATIONS IN PENINSULAR MALAYSIA

TELUK EWA GT 2X34MW Distillate TTPC GT 3x143MW Gas ST 1x221MW

LEGEND
POWER STATION

Installed Capacity : 19,023 MW TNB 33.4%, IPP 66.6% (including KEV, Janamanjung) System Peak : 13,458 MW Electricity Generation

GELUGOR GTJan-03 2x110MW Gas ST 1x110MW

Hydro Thermal
SKS SKS (PRAI) PERGAU PERGAU 4x150 MW

700 CC 1x350MW Gas MW Coal Sept BERSIA 3x23 MW SEGARI GT 3x140MW Gas ST 1x231.5MW

Note: GT CC Conv MW
ULU TERENGGANU 212MW (2014) KENYIR 4x100 MW KENYIR 4x100 MW

Gas Turbine Combine Cycle Conventional Thermal Installed Capacity

TEMENGOR 4x82 MW KENERING 3x36 MW 3x40 Blk1,2 3x11 MW 1x8 MW CHENDEROH 3x11 MW 1x8 MW -02 ULU JELAI 372MW (2013) JOR 4x25 MW JOR 4x25 MW WOH 3 x 50 MW WOH 3 x 50ODAK 3x1.4 MW MW ODAK 3x1.4 MW SG. PIAH UPPER 2x7.3 MW SG PIAH LOW ER 27.7 MW 2x27.7 MW 27.7 MW

GB3 GT 3x143MW Gas ST 1x211MW JANAMANJUNG Conv 3x690MW Coal

PAKA GT 3x95MW Gas ST 1x100MW GT 2x87 MW Gas ST 1x92MW

Blk 1,2,3

Blk 4

KAPAR Conv 2x300MW Gas Conv 2x300MW Coal Conv 2x500MW Coal GT 2x110MW Gas CONNAUGHT BRIDGE GT 4x130MW Gas GT 2x106MW Gas ST 1x100MW

YTL PAKA GT 2x128MW Gas ST 12x134MW

Blk 1,2

SEPANGJIMAH GT 1X235 MW Jul -02 Conv 1x 700 MW Coal (Jan 2010) GT 1X235 MW Nov -02 Conv 1+240 MW Aug -03 2011) CC x 700 MW Coal (Jul

SOUTH CHINA SEA

SERDANG GT 2x110 MW Gas GT 3x135MW Gas GT 2X20 MW Gas GENTING SANYEN GT 1x38MW Gas GT 143 MW Gas GT 1x20MW Gas GT 143 MW Gas GT 143 MW Gas GT 3x151MW Gas ST +251 MW Gas ST 1x251MW

PANGLIMA POW ER GT 2X230 MW Gas POWERTEK (PANGLIMA) ST 1 x 260 MW OCGT 2X240 MW Mar -02

Sales by Sector (2006)

STRAITS OF MELAKA

YTL P.GUDANG GT 2x128MW Gas ST 1x134MW -

PD POWER GT 4x109.1 MW Gas

TUANKU JAAFAR CC1 715MW Gas CC2 750MW Gas (Dec 2008) -02 -03 POWERTEK GT 4x108.5 MW Gas

PAHLAWAN GT 2X103MW Gas ST 1X116MW SKS TG BIN Conv 1 x 700MW Coal (Sep 2006) Conv 1 x 700 MW Coal (Mar 2007) Conv 1 x 700MW Coal (Sep 2008) PASIR GUDANG Conv 2x120MW Gas GT 2x110MW Gas GT 2x87MW Gas ST 1x95MW

TENAGA NASIONALBERHAD

CAPACITY MIX BY FUEL TYPE FOR PENINSULAR MALAYSIA

Capacity Mix 1975 Capacity Mix 1975
Diesel(7%) Hydro(31%)

Capacity Mix 1980 2000

C o al ( 11.4 %) H ydro ( 13 .6 %)

Oil (62%)

G a s ( 7 1.9 %)

Capacity Mix 2007

H ydro ( 10 %)

C o al ( 2 6 .7 %)

Gas ( 6 2.9 %)

The changing of fuel mix from high dependence on Fuel Oil in 1975 to high dependence on Natural Gas in 2000 and subsequent introduction of large Coal units which is reflective of fuel diversification.

Gen Projects Forum

Capacity Mix (%)

30,000

Gas
25,000

Coal

Hydro

Fuel Oil & Distillate

Peak Demand
25,194 24,184

21,771

21,955 9%

22,213 11%

22,996 11% 16% 21%

Total Capacity (MW)

20,000 16,946 15,000 11% 22% 10,000 17,351 11% 21% 17,571 11%

18,921 10% 27% 21%

19,621 10% 29%

20,371 9% 28%

9% 33%

33%

33%

32%

31%

29%

5,000

65%

66%

68%

63%

61%

62%

58%

58%

56%

56%

53%

49%

0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

COAL DEMAND FOR POWER GENERATION IN WEST MALAYSIA

(million tonne per annum-Mtpa)

Plant Kapar Ph. 2 Kapar Ph. 3 Manjung Tanjung Bin Jimah Total

Annual Capacity Commissioning Consumption (MW) Year (Mtpa) 600 1000 2100 2100 1400 8600 1988 2001 2002/03 2006/07 2009/10 1.50 2.50 6.00 5.50 3.50 19.00

COAL DEMAND FOR POWER GENERATION IN EAST MALAYSIA

(million tonne per annum-Mtpa)

Plant Sejingkat Ph.1 Sejingkat Ph.2 Lahad Datu Ph.1 Lahad Datu Ph.2

Annual Capacity Commissioning Consumption (MW) Year (Mtpa) 100 110 160 160 1998 2000 2010 2011 0.50 0.50 0.50 0.50

Total

530

2.00

Growth in Coal Demand

(Million mt/ annum)
25

20

15

10

0 2004 2005 2006 2007 2008 2009 2010

Kapar

Manjung

Tanjung Bin

Jimah

Sejingkat

Lahad Datu

Key Concerns Over Coal Supply

Highly dependent on imports Logistics infrastructure in key producing countries Coal Quality - Lowering of average CVs Environmental concerns air and water quality Weather Inclement leading to Force Majeure Volatile Coal and Freight Cost

Key Concerns Over Coal Supply

Highly Dependence on Imports
Country Diversification (Indonesia, Australia & S. Africa) to reduce country risk Load Port Diversification (Kalimantan- 9, Australia - 3, S. Africa - 1) Plus/Minus Options (20%) in Coal Purchase Contracts Long term contracts (5 + 5 years) with option for extension Staggered contract periods Coal Pre-Qualification shorten procurement time

Key Concerns Over Coal Supply

Coal Supplying Countries
Indonesia Large sub bituminous resource available. Limited loading ports. No reliable index to benchmark against. Unpredictable pattern of the monsoon season River congestion, shallow rivers during dry season, Australia & South Africa Geographical disadvantage higher freight cost. Bituminous coal resource available. Index available but not very transparent. Logistic infrastructure can cause delays in the supply chain, up to 70 vessels in waiting - waiting time 35 days. (Australia) Capacity balancing system imposed by port authorities reduce coal supply (Australia)

Key Concerns Over Coal Supply

Coal Quality Assurance
Measures against Deterioration in Coal Quality blending of bituminous and sub-bituminous coals Coal quality specification - within Design Coal Range Coal quality - meets the Coal Quality Rejection Limits Coal Supply from Reputable Coal Suppliers Proven suitability through Trial Burn for new coal brand Due Diligence of new coal mines Independent Third Party Surveyors

Key Concerns Over Coal Supply

Environmental Issues
Misperception of the public at large on Clean Coal NGOs are becoming more vocal and getting greater public support Additional costs for public buy-in More stringent enforcement of Statutory Regulations Changes in Environmental Laws Longer period for planting up of Coal coal-fired power plants Higher costs in coal-fired power plants both capital and operational

Key Concerns Over Coal Supply

Weather Inclement
Heavy rainfall in Kalimantan Mines & haul roads flooding, problem in barging & vessel loading Heavy Storm in Newcastle and Hunter Valley region mines flooding, affected railways & ports Changes in seasonal monsoons Leading to Force Majeure Causes the rescheduling of coal supply

Key Concerns Over Coal Supply

Volatility in Coal and Freight Market
Demand outstripping supply - Bullish market for Suppliers Increasing demand from developing world especially China and India. China has become a net importer Difficulty in nominating vessels Competition with other commodities iron ore, grains Increase in Oil Price has a direct impact on the Coal and Freight costs especially on operational, production and equipment Overdependence on US Dollars as the transaction currency FOREX risk Difficulty in optimising as-delivered costs Some coal suppliers have taken advantage of the current high cost of coal, by dishonourably defaulting term contracts where they have successfully won the bids at lower prices

Coal Market Outlook

GlobalCOAL and JPU Benchmark Coal Market Prices
80.00 70.00 Globalcoal RB

60.00

50.00

US$ / mt

Globalcoal NEWC

40.00 JPU 30.00

20.00

K1 (5900 GAR)

10.00 K2 (5000 GAR) 7/5/2002 1/5/2003 4/5/2003 7/5/2003 1/5/2004 4/5/2004 7/5/2004 1/5/2005 4/5/2005 7/5/2005 1/5/2006 4/5/2006 7/5/2006 1/5/2007 4/5/2007 10/5/2002 10/5/2003 10/5/2004 10/5/2005 10/5/2006 7/5/2007

Date

Source: globalcoal, Platts

Coal Market Outlook - Freight

Source: SSY

Internal Challenges in Meeting Coal Supply

Mismatch of Coal specifications and Boiler designs Limited flexibility in diverting coal between IPPs Energy despatch uncertainties forced outages of generating units Stringent Environmental Requirements changes in Laws Quality versus Cost impact on merit order of despatch

Conclusion
Coal has become one of the 2 main fuel sources of power generation in Malaysia. The changes in demand and supply of the global coal market are affecting the cost and reliability of coal supply. Volatile coal and freight market is a great concern to buyers. Weather inclement that can disrupt coal supply severely such as the recent delayed monsoon in Kalimantan, Indonesia, and the severe storm in the Hunter Valley region of Australia. Important to ensure a balance in the generation mix and therefore available alternatives to coal have to be seriously considered. Environmental issues will be a main concern in the future.

VISIT MALAYSIA YEAR 2007

Contact Details Name: Rusli bin Idrus Email : ruslii@tnb.com.my Phone: +603-79568349 Fax : +603-79569221