Screenshots

Secondly, TNB's 2004 balance sheet looked ugly. It inherited cumulative debts of RM31 billion, most were denominated in US dollars, while cash flows were just sufficient to finance CapEx and OpEx.

Thirdly, foreign shareholding was less than 5%, making immediate term effort to reduce gearing, especially via placement, less feasible.

Fourthly, cost containment was not working well, and the escalating operating costs had eaten into the bottomline. For example, for FY ending August 31, 2004, net profit fell 23.3% YoY despite a 7.6% increase in revenue.

Fifthly, the haunting ghosts of the IPPs (Independent Power Producers) -- a Frankenstein created during the Mahathir Administration, and Public Enemy No. 1 in Screenshots' eyes. At a time when the country had continual excess of produced energy -- reserve margin stood at an alarming 40% and perhaps more -- the IPPs continued to charge TNB exorbitant capacity payment. In other words, the IPPs have the right to charge TNB for capacity when energy is not required to be produced in an excess situation!

Sixthly, bad corporate decisions made during the time of previous administration. We are talking about TNB's acquisition of a coal mine in Indonesia during the time of Dr Jamaluddin Jarjis as its President and Pian Sukro as the CEO. Now, TNB has to take a haircut by disposing of the bad venture at a loss.

That was three years then. Three years now, as the record shows, Che Khalib was able to get the footing right in reforming TNB, and stop the bleeding by means of severe cost control and value creation. We hope he would also focus a little more on customer satisfaction contact points in the new financial year.

Screenshots was told that, for example, TNB managed to cut the production cost of its 2007 Chinese New Year TV commercials by 50%. Che Khalib used its own in-house staff as talents, and its in-house facilities as locations and props.

The 'Outsider' with his senior management at the launch of TNB CNY TV commercials

TNB staff who appear as talents in the TV commercials... LensaPress photos by Jeff Ooi

With that, espirit de corp and self-esteem among the thousands of Warga TNB were restored. It was like hitting two birds with one stone -- reducing costs and fostering harmonious employee relations.

Get a copy of The Edge (Issue No.640, February 26, 2007) to see what TNB senior management plans to do, moving forward.

How had Che Khalib and his management team tackled those six major challenges? Or perhaps, how are they coping with the recalcitrant problems for now?

• CHALLENGE #1: OUTSIDE REFORMIST: We have briefly touched on the harmonisation programmes involving Human Resource and Employee Relations strategies. (As a reference, in October, LensaMalaysia featured the 'dodol' making by and for TNB staff, which had a TV3 live cross-over.)
• CHALLENGE #2: BLEEDING BALANCESHEET TNB's debt has dropped by about 25% since 2004, achieved through a stronger ringgit against the US dollar, and paring down of liabilities. A merchant bak has been appointed to advise the management to retire some of TNB's US dollar bonds.
• CHALLENGE #3: FOREIGN SHAREHOLDING TO BOOST INVESTOR CONFIDENCE: Significantly, too, total foreign shareholding in TNB has improved from below 5% in 2004 to 26% at the moment -- the highest in TNB's history.

  TNB has also been assigned the "BUY" counter for its stock. TNB's share price, which floated around RM8 in 2006, closed 40% higher on the last trading day in 2006. Last week, it hovered around RM12.30.

• CHALLENGE #4: COST CONTAINMENT: Value and revenue creation seems to be the strategy that worked well. TNB has resorted to cost-cutting and productivity enhancement to achieve the dual-impact. Thus far, TNB has chalked up RM900 million and RM800 million in the last two years, with RM1 billion set as the target.

  It involved the cutting of workers' overtime claims, a move which was initially met with lobbies for the removal of Che Khalib.

  However, for FY2006, TNB managed to record a turnover of over RM20 billion, giving it a net profit growth of 66.2% YoY, or a net profit of RM2.1 billion.

  While people may argue that the FY2006 profit growth was due to the 12% tariff increase effective June 1, 2006, analysts have cited that TNB's cost-cutting exercise as among the main reason for the improved financial performance and ultimate turnaround.

  They pointed out that even before the tariff hike, net profit had already improved under Che Khalib's term to the preFY2004 level.

• CHALLENGE #5: IPP CONTRACTS AND OPEN TENDERS: Transparency and Accountability is easier said than done, as can be seen in most GLCs.

  However, according to The Edge, TNB had for the first time in its history called for open tenders in the 300MW Sabah coal-fired power plant project, which attracted the participation of 13 companies.

  Previously, IPP licenses were awarded through direct negotiations with politically well-connected parties.

• CHALLENGE #6: CLEARING BAD DECISIONS OF THE PAST: The Indonesian coal mine acquired during the time of Jamaludddin Jarjis-Pian Sukro administration will be disposed off.

  Significantly, Che Khalib said:
  

  There are two lessons to be learnt in the process of overseas investments. Firstly, we have to invest in business we know best. Secondly, we have to be comfortable with the country we are investing in."

Admittedly, it's not roses all the way for TNB despite the accolades.

Screenshots may try to discuss the various challenges it faces, notably the 40% over capacity and the IPPs tariff chargeable to TNB, which ultimately burdens the energy consumers at commercial and residential levels.