MISC Integrated Annual Report 2020

///// Sustainability / Financial Review / Business Review / Leadership / Governance /// MISC Berhad / Integrated Annual Report 2020 7 146 MISC Berhad / Integrated Annual Report 2020 7 147 /// Governance / Leadership / Business Review / Financial Review / Sustainability ///// Section Section PETROLEUM & PRODUCT SHIPPING PRESIDENT & CEO’S REMARKS CAPTAIN RAJALINGAM SUBRAMANIAM President & CEO, AET While 2020 started on a stable footing, by the end of the first quarter of the year, the COVID-19 pandemic had triggered a global health and economic crisis with wide-ranging implications for the maritime and logistics industry. At AET, there was a significant shift in our business, as we dealt with the new landscape. Relying on our strategy, strong brand reputation and high- performance workforce, AET maintained strict focus to sustain our operations as an ‘essential services’ business delivering the world’s energy. We adapted time tested crisis management plans, which we rolled out across all our regions of operation. Keeping our employees safe was our utmost priority, and we effected new working norms such as remote working arrangements and accelerated our adoption of digital platforms and technologies in order to enable remote working. The shifting work patterns proved to be challenging for our employees on several fronts, as they sought to deliver on their jobs and responsibilities efficiently and productively whilst dealing with the emotional stress of living through a pandemic. But we learned how to balance our approach in keeping our team members safe and maintaining good business efficiencies. As for our seafarers, heightened health and safety standard operating procedures (SOPs) led to increasingly stringent restrictions on crew changes being implemented by global authorities globally. Many seafarers had to extend their time onboard vessels. However, AET and the MISC Group made every effort to proactively seek out ways to bring our seafarers back home safely. Our customers in the energy sector were impacted by the drastic drop in demand actuated by the pandemic. This along with the global glut in oil output, led to many energy majors reducing CAPEX for the year. At AET, we worked together with our customers to ensure that we delivered on our contractual obligations despite the difficulties encountered. We operationalised our strategic priorities to continue to build secure income streams and diversify our portfolio. A milestone we are particularly proud of is the agreement we entered into for the construction and time charter of two LNG dual-fuel very large crude carriers (VLCCs) ever built. Delivery of these vessels will commence in 2022 and will grow our long-term secured income portfolio as part of the greener shipping solutions. AET was also awarded long- term charter contracts for three Suezmax second-generation dynamic positioning shuttle tankers (DPSTs) by Petrobras, effectively expanding our presence in the Latin America region. Another significant achievement was the delivery of seven DPST newbuilds. These comprised our first two LNG dual-fuel DPSTs and five eco-efficient DPSTs. All these vessels are on long-term charters with major international energy players. You can read more on our key achievements for the year in the Key Developments section of this Business Review. AET continued to deliver on customer expectations throughout the year. We collaborated with our customers and evolved our business to support them in their energy transition. Our agreement with one of the World’s leading energy majors on LNG dual-fuel VLCCs is an example of our collaborative approach with our customers. These vessels will be amongst the most environmentally friendly VLCCs in the market and represent a significant step on our part to provide greener shipping solutions that respond to our customers’ needs. Our teams have also done well in renewing various lightering and VLCC time charter contracts with quality customers across the globe. Our efforts to provide responsive and proactive services to our customers were reflected in the results of our first ever Net Promoter Score customer survey that was conducted during the year. A total of 60% of customers responded as being 'Satisfied' with our levels of service, while another 40% were 'Very Satisfied'. Most importantly, in an extremely challenging year, we have maintained the financial trust of our key stakeholders such as banks and financiers to sustain strong lines of financing and credit, and secured attractively-priced longer-term debt financing for our new deliveries in 2020 and 2022. Our Sustainability Journey At AET, governance is not merely an exercise in compliance, and we believe in practicing a robust governance culture throughout the organisation. In 2020, we achieved the ISO 37001 Anti-Bribery Management certification as a result of our sustained focus on establishing a culture of integrity, transparency, openness, and compliance. Alongside this, we continued to develop our high- performance culture that is centred on doing what is right rather than what is convenient. Despite the pandemic, we remained on course with our corporate social responsibility (CSR), in particular on the education agenda, to build the capability of our next generation of maritime talent. We brought onboard 19 interns, to expose them to the maritime and logistics industry at our global operations. Our team members across various units in AET supported this human capital development as part of our commitment to build future maritime talent. Mindful of the difficulties faced by communities across the globe as a result of the pandemic, we did our part to give back to society. In 2020, we funded over two million meals for the underprivileged in the form of either cooked meals or food packs. Our CSR donation for the year stood at USD600,000 to support COVID-19 impacted vulnerable community members. We partnered with national and local charities' food programmes in Singapore, United States, Brazil, and United Kingdom where our key offices are located, and in India and the Philippines where we have a significant shipping industry sea faring presence. In 2020 we continued to drive the sustainability agenda across every aspect of our business, and we plan to expand our sustainability commitments in line with MISC’s Sustainability Strategy 2021–2025 as well as our own strategic business objectives. Reflecting the global transition to clean energy, AET’s customers are shifting their focus from being oil and gas providers to becoming integrated energy providers. A key takeaway from the pandemic has been the acceleration of the environmental agenda as the means to drive a sustainable future. We are looking into various means by which we can continue to bring environmental, social and governance (ESG) matters to the fore within our business. We have found sweet spots in terms of providing LNG and dual-fuel sourced vessels as an eco-friendlier fuel alternative. Bearing in mind the energy transition shift, we have already started looking at how we can rejuvenate our fleet and minimise environmental impacts in the various localities we operate in. Our aspiration is to have a larger percentage of our operating fleet on cleaner fuels, including LNG, by 2025. We strongly believe in developing a diverse and inclusive maritime workforce as an essential component of our employee management approach. In 2020 we furthered our commitment in this area by adopting our Diversity and Inclusion Policy. Our multi-generational talent pool is the backbone of our success, and we seek to develop multi- generational maritime employees who are sensitive to global social causes. We continue to champion a balanced workforce in the maritime industry, and AET’s male to female gender ratio of 56:44 reflects our successful efforts in this regard. We have stayed on course with our talent development agenda and leadership succession plan, to create a cadre of leaders who both inspire and motivate. As we move into 2021, we expect an evolving global trading landscape providing both opportunities and challenges amidst a global reset. However, we believe we are in position to effectively manage emerging risks and future challenges that may arise. We believe that success is a team sport, and our strength lies in our diverse and inclusive team with over 20 nationalities, energised and focused to remain sustainable and purposeful. We remain committed to ensuring our profitability, strengthening our balance sheet whilst improving our stakeholder returns. CAPTAIN RAJALINGAM SUBRAMANIAM President & CEO, AET