I NT EGRA T ED ANNUA L REPORT 2 0 2 1
What’s Inside MISC INTEGRATED ANNUAL REPORT 2021 MOVING ENERGY TO BUILD A BETTER WORLD As a dynamic, progressive and innovative global brand with over 50 years of history, MISC is conscious of the role that we play towards building a better world for our future generations. Being part of the energy value chain, our solutions enable the movement of energy cargoes through our vessels and assets to power businesses and economies all over the world. As a responsible corporate citizen, we are energised to keep on striving to elevate our standards in all that we do, to promote innovation and to foster the development of a sustainable future. LEADERSHIP Our Board at a Glance 200 Profiles of the Board of Directors 202 Profiles of the Management Committee 214 GOVERNANCE Corporate Governance Overview Statement 228 Nomination & Remuneration Committee Report 249 Board Audit Committee Report 257 Board Governance & Risk Committee Report 266 Statement on Risk Management and Internal Control 271 Statement of Directors’ Responsibility 286 Additional Compliance Information 287 FINANCIAL STATEMENTS Directors’ Report 290 Statement by Directors 296 Statutory Declaration 296 Income Statements 297 Statements of Comprehensive Income 298 Statements of Financial Position 299 Consolidated Statements of Changes in Equity 302 Statements of Changes in Equity 304 Statements of Cash Flows 305 Notes to the Financial Statements 309 Independent Auditors’ Report 448 ADDITIONAL INFORMATION MISC Group Structure 458 Properties Owned by MISC Berhad and Its Subsidiaries 462 List of Vessels and Assets 464 Statistics on Shareholdings 471 Corporate Information 475 List of Abbreviations 476 ANNUAL GENERAL MEETING Notice of Annual General Meeting 482 Administrative Notes relating to the 53rd AGM 487 Form of Proxy About This Report 2 WHO WE ARE About MISC 8 Who We Are and What We Do 10 What We Own/Operate 12 How We Move Energy 14 Where We Operate 16 Key Milestones 18 KEY MESSAGES Chairman’s Message 24 President/Group CEO’s Review 28 HIGHLIGHTS Key Highlights 2021 38 A Look Back at 2021 40 STRATEGIC REVIEW Strategic Overview 44 How We Create Value 50 Our Strategic Focus 56 Our Material Matters 62 Our Stakeholders 66 Our Operating Environment 68 Our Risks and Mitigation Strategies 78 Delivering Our Strategy 86 SUSTAINABILITY Anchoring Sustainability @ MISC 96 FINANCIAL REVIEW Group Financial Review 108 Financial Calendar 113 Five-Year Group Financial Performance 114 Statement of Value Added and Value Distributed 116 BUSINESS REVIEW Gas Assets & Solutions 120 Petroleum & Product Shipping 126 Offshore Business 136 Marine & Heavy Engineering 142 Integrated Marine Services 152 Port Management & Maritime Services 160 Maritime Education & Training 166 People Development 174 Operating Safely and Sustainably 180 Operating Responsibly 190
ABOUT THIS REPORT We are pleased to present MISC Berhad’s 2021 Integrated Annual Report (IAR) in which we have adopted the International Integrated Reporting <IR> Framework as developed by the International Integrated Reporting Council (IIRC). This IAR aims to provide report users with clarity on how MISC has embedded integrated thinking into our business model as we continue to create value for our business and our stakeholders. MISC’S 2021 INTEGRATED REPORT SUITE For 2021, we have refined our basis of presentation by developing the integrated report suite as follows. INTEGRATED ANNUAL REPORT (IAR) 2021 MISC’s 2021 IAR has been developed to provide our shareholders and other stakeholders with a transparent and accountable narrative of our business activities and financial and non-financial performance for the year under review. It provides an account of the external environment and outlook, our business model and strategy, our financial statements and our approach to material matters, corporate governance and risk management. Reporting Frameworks: • International <IR> Framework issued by the IIRC in 2013 • Main Market Listing Requirements of Bursa Malaysia Companies Act 2016 • Malaysian Code on Corporate Governance 2021 • Corporate Governance Guide (3rd edition) issued by Bursa Malaysia • Malaysian Financial Reporting Standards (MFRS) • International Financial Reporting Standards (IFRS) SUSTAINABILITY REPORT (SR) 2021 In 2021, we have favoured a standalone SR in addition to our sustainability-related sections within our IAR. This SR presents details of our management and performance of material environmental, social and governance (ESG) matters. This is done as part of our continuous efforts to provide our stakeholders with better transparency of our ESG performance. This SR includes our inaugural Task Force on Climate-related Financial Disclosures (TCFD) Report. Reporting Frameworks: • Bursa Malaysia Sustainability Reporting Guide • Global Reporting Initiative (GRI) Standards (Core Option) • Sustainability Accounting Standards Board (SASB) Standards • Dow Jones Sustainability Index (DJSI) • Carbon Disclosure Project (CDP) • Transition Pathway Initiative (TPI) • Task Force on Climate-related Financial Disclosures (TCFD) • AA1000 Stakeholder Engagement Standard • United Nations Global Compact Guiding Principles • United Nations Guiding Principles on Human Rights • Principles of Climate Governance by World Economic Forum REPORTING SCOPE AND BOUNDARY This IAR provides disclosures on MISC Berhad, its subsidiaries, associates and joint ventures, which are referred to as MISC or the Group throughout the report. The IAR covers the Group’s activities and performance for the financial year ended 31 December 2021 (FY2021). It also includes any material events that occurred after this date up to the date of publication. Information presented in this IAR pertain to the Group’s business activities and operations which includes Gas Assets & Solutions, Petroleum & Product Shipping, Offshore Business, Marine & Heavy Engineering, Integrated Marine Services, Port Management & Maritime Services and Maritime Education & Training. It also covers the material business activities of our joint ventures and associates. DEMONSTRATING OUR INTEGRATED THINKING Through this IAR, we have sought to provide a contextualised account of how the Group has created value by employing our corporate and sustainability strategies. Wherever possible, this IAR presents relevant targets and performance indicators to quantify MISC’s financial and operational performance for the year under review. We recognise the strong linkages between economic and ESG matters, and the high degree of influence these have on MISC’s value creation abilities and outcomes. As such, our 2021 IAR seeks to provide: We have taken cognisance of all material matters that impact the Group’s ability to create value in the short, medium and long term. This IAR focuses on global developments, industry challenges, as well as risks and opportunities that are material to both our business and our stakeholders which could potentially impact our performance. Details of our material matters can be found in the Our Material Matters section on page 62 of this IAR and links are drawn throughout the report to demonstrate their interrelatedness and interdependencies to other factors. Throughout this IAR, we seek to demonstrate our organisation’s integrated thinking through the following means: How We Use Our Six Capitals Engaging with Internal and External Stakeholders Identifying and Referring to Our Material Matters Throughout the preparation of this IAR, the internal reporting team has conducted engagements with our internal stakeholders in order to present a holistic perspective of the Group’s activities in FY2021. Our internal stakeholders comprise each of MISC’s business units, service units and key subsidiaries. In addition, the team has incorporated the outcomes of engagements that have been conducted with our external stakeholders, including investors and analysts, throughout the year under review. Details of our stakeholder engagements can be found in the Our Stakeholders section on page 66 of this IAR. An orientation of where we are, where we aim to be and how we plan to address the expectations and challenges ahead, taking into account our past experiences An account of our value creation journey for the year under review, taking into account our strategic targets An insight into how our strategy creates sustainable value for our stakeholders We provide an account into how we interact with the external environment and utilise our six capitals to create sustainable value for our stakeholders over the short, medium and long term. This includes descriptions throughout the report of how we have allocated our resources, in line with our business and sustainability strategies. Details of our six capitals and how we have use them can be found in the How We Create Value section on page 50 of this IAR. MISC Berhad 2 Integrated Annual Report 2021 MISC Berhad Integrated Annual Report 2021 3
MISC Berhad 4 Integrated Annual Report 2021 MISC Berhad Integrated Annual Report 2021 5 ABOUT THIS REPORT INVESTOR RELATIONS The Group’s Corporate Disclosure Guidelines identify the following management personnel responsible for Investor Relations activities: NAVIGATION ICONS The following navigation icons are used throughout this IAR: RESPONSIBILITY STATEMENT MISC’s Board of Directors acknowledges its responsibility in ensuring the integrity of this Integrated Annual Report. This report has been presented in accordance with the International Integrated Reporting <IR> Framework. This report was approved by the Board on 21 February 2022. DATUK ABU HURAIRA ABUYAZID DATUKYEEYANG CHIEN Chairman President/Group CEO Social & relationship capital Intellectual capital Human capital Physical capital Financial capital Natural capital Sustainability Report Integrated Annual Report Employees Customers Shareholders/Investors/ Financial providers Government/ Regulatory Business partners/ Suppliers & vendors Community Project and financial performance Values and governance Skilled workforce Climate change Customer satisfaction Risk management Digitalisation and innovation Ocean health Diversity and inclusion Business knowledge and expertise Natural resource use Health and safety Employee engagement Further information can be found on our website www.misc.com.my Contact us at firstname.lastname@example.org Cross References Our Stakeholders Our Material Matters Our Six Capitals President/Group CEO Vice President, Corporate Planning Vice President, Finance General Manager, Corporate Planning Corporate Governance misc.com.my/corporate-governance misc.com.my/investor-relations Investor Relations Contact us at email@example.com misc.com.my/sustainability Sustainability Contact us at firstname.lastname@example.org misc.com.my/solutions Business Solutions SUSTAINABILITY In line with our commitment to practising the principles of sustainable development, and to ensure MISC’s long-term business sustainability, we have integrated our sustainability strategy into our business model and the governance of our business. Throughout this IAR, we have provided disclosures of our response to our stakeholders in relation to ESG matters. Further information can be found in the Anchoring Sustainability @ MISC section on page 96 of this IAR. Our Board has also integrated ESG considerations in their deliberations in order to effectively address material ESG risks and opportunities. More information can be found in the Corporate Governance Overview Statement on page 228 of this IAR, and the Board Governance and Risk Committee Report on page 266 of this IAR. Full and comprehensive details of our sustainability strategy, initiatives and outcomes can be found in our standalone SR. ASSURANCE This IAR has third-party assurance for the following: • Our external auditors, Ernst & Young PLT, provide assurance on the audited financial statements • Each of our vessel’s fuel consumption and relevant activity data have been verified by a third party i.e. DNVGL confirming the data was collected and reported in accordance with the methodology and processes set out in the ship’s Ship Energy Efficiency Management Plan (SEEMP) as required by Regulation 22A of Annex VI of MARPOL Convention The internal team has maintained its continuous oversight in the preparation of this IAR to ensure that data provided are reliable. EXCLUSIONS The information presented in this IAR is guided by our appetite for disclosure. We have withheld information that fall within the following categories: • Information that would jeopardise our strategic and competitive advantage; • Information that we are contractually precluded from sharing; and • Information which we are unable to verify. FORWARD-LOOKING STATEMENTS This IAR contains forward-looking statements which shares the Group’s expectations of its future value creation prospects. These forward-looking statements involve a marked degree of uncertainty due to the continually changing operating environment and the uncertainties of the industry within which MISC operates. This could result in actual results differing from those stated in the forward-looking statements. ABBREVIATIONS AND ACRONYMS A list of the abbreviations and acronyms used in this Report can be found on pages 476 to 479.
WHO WE ARE 8 14 10 16 12 18 ABOUT MISC HOW WE MOVE ENERGY WHO WE ARE AND WHAT WE DO WHERE WE OPERATE WHAT WE OWN/OPERATE KEY MILESTONES MISC Berhad 6 Integrated Annual Report 2021 MISC Berhad Integrated Annual Report 2021 7
ABOUT MISC VISION To consistently provide better energy related maritime solutions and services MISSION To be consistently better, we strive: • To exceed the expectations of our customers • To promote individual and team excellence of our employees • To create a positive difference to the lives of communities • To care for the environment and operate responsibly • To drive sustainable value for our shareholders SHARED VALUES Loyalty Loyal to corporation Integrity Honest and upright Professionalism Strive for excellence Cohesiveness United, trust and respect for each other WHO WE ARE Provides comprehensive solutions, from EPCIC to operations and decommissioning of offshore floating solutions Gas Assets & Solutions and Petroleum & Product Shipping segments commission, acquire and in-charter LNG carriers and tankers to transport energy resources - LNG, crude and petroleum products for customers Full spectrum of EPCIC services for the energy industry, both offshore and onshore Comprehensive marine repair and refurbishment ALAM provides maritime education and training for seafarers MMS provides port management and maritime services Professionally-qualified Eaglestar seafarers manage and operate LNG and petroleum vessels Incorporated in 1968, MISC Berhad is a world leading provider of international energy-related maritime solutions and services. The Group’s principal businesses comprise energy shipping and its related activities, owning and operating offshore floating solutions, marine repair and conversion, engineering and construction works, integrated marine services, port management and maritime services, as well as maritime education and training. Operating a modern and diversified fleet, and powered by a multi-national workforce of over 8,800 talents, MISC is firmly committed to creating value for our stakeholders and contributing to the sustainable development of the maritime industry. MISC Berhad 8 Integrated Annual Report 2021 MISC Berhad Integrated Annual Report 2021 9
WHO WE ARE AND WHAT WE DO 53years of sterling track record in delivering energy-related maritime solutions and services BBB+ (Stable) Baa2 (Stable) USD7.6 billion Among the world’s STRONG credit rating in the marine transport sector LEADING S&P Global Ratings Moody’s Investors Service Integrated Marine Services Human Capital •• 4,810 employees including 4,516 seafarers Customers •• Internal - MISC Group •• External - Marine transportation industry customers Services Performed •• Shipmanagement, engineering and procurement •• Project management - supervision and consultancy service for dry docking and new building of vessels Revenue Structure •• Shipmanagement and Project Management Service fees •• Maritime consultancy fees Cost Structure •• Operational costs include employee/crew costs, overheads, logistics and personnel travel, professional & IT services, rental and depreciation Competitive Advantage •• Specialised experience in niche areas of LNG bunkering vessels, very large ethane carriers, floating storage and regasification, dynamic positioning shuttle tankers, dual-fuel crude tankers and modular capture vessel •• Deep knowledge of regional shuttle tanker trade in the Brazilian basin and Northern Europe •• Globally renowned shipmanagement company, with stellar track record for the highest quality and standards of delivery Human Capital •• 69 employees Physical Capital •• 39 vessels •• Two vessels under construction Customers •• PETRONAS Group •• Energy majors •• Energy traders •• Petrochemical companies Services Performed •• Transportation of LNG and ethane •• New LNG asset-based solutions •• Technological solutions for FSU Revenue Structure •• Revenue from time charter contracts Cost Structure •• Operational costs include employee/crew costs, repair and maintenance, materials and supplies, professional and purchased services, and depreciation Competitive Advantage •• Sterling reputation for operational excellence •• Consistent track record of reliable and on-time cargo deliveries •• Leveraging on our proven industry experience to successfully expand into the emerging sectors of LNG bunkering vessels and very large ethane carriers Gas Assets & Solutions Human Capital •• 185 employees Physical Capital •• 67 vessels •• 11 vessels under construction Customers •• Energy majors •• Refiners •• National oil companies (NOCs) •• Energy traders Services Performed •• Conventional Services –– Transportation of crude oil, petroleum products and chemicals •• Specialised Services –– Owner and operator of DPSTs in the North Sea and Brazil –– Provision of lightering services in the US Gulf and Latin America Revenue Structure •• Revenue from time charter contracts, voyage charter contracts, contract of affreightment, lightering, and other shipping-related income Cost Structure •• Operational costs include bunker (marine fuel), employee/crew costs, repair and maintenance, materials and supplies, depreciation, as well as professional and purchased services Competitive Advantage •• Advancing green shipping solutions with modern and technologically advanced fuel-efficient vessels •• Industry pioneers in the fields of modular capture vessels and LNG dual-fuel vessels •• Focused people investments to expand their sea and onshore skills and capabilities Petroleum & Product Shipping Human Capital •• 173 employees Customers •• PETRONAS Group •• Pengerang Terminals •• Domestic and international shipping companies Services Performed •• Operator of ports and terminals •• Pilotage, mooring master, loading master and marine controller services •• Jetty maintenance services •• Single Point Mooring (SPM) maintenance services •• Logistic support services •• Ship vetting services •• Offshore vessel inspection services •• Marine assurance and consultancy services which includes ship screening, Tanker Management and Self Assessment (TMSA), Offshore Vessel Management and Self Assessment (OVMSA) and Roving Marine Marshall Services (RMMS) Revenue Structure •• Fees from port terminal management and maritime services Cost Structure •• Operational cost include salaries and wages, rental and lease, business travelling, material and supplies, and professional fees Competitive Advantage •• Strong industry reputation, with more than two decades of experience in port and terminal operations, and maritime services •• Own proprietary digital applications for Vessel Inspection System (VIS) and Offshore Support Vessel Inspection System (OSVIS) •• The acknowledged and preferred operator for the Terengganu Crude Oil Terminal, Miri Crude Oil Terminal, Bintulu Crude Oil Terminal and Sabah Oil and Gas Terminal Port Management & Maritime Services Human Capital •• 418 employees Physical Capital •• 12 offshore floating solutions •• One FPSO under construction Customers •• PETRONAS Group •• Energy majors •• NOCs Services Performed •• Engineering, procurement, construction, installation, commissioning, operations and maintenance, decommissioning and demobilisation (EPCICODD) solutions •• Own, operate and maintain offshore floating assets to extract, store and offload hydrocarbons to shuttle tankers Revenue Structure •• Revenue from time charter contracts and bare boat charter contracts •• Revenue from operations and maintenance of offshore floating assets Cost Structure • Operational costs include employee/crew costs, repair and maintenance, materials and supplies as well as professional and purchased services and depreciation Competitive Advantage •• Highly skilled workforce •• Strong relationships of mutual trust with key Asia-based partners, subcontractors and suppliers •• Outstanding contractual deliveries Offshore Business Human Capital •• 2,649 employees Physical Capital •• Dry Dock 1,2 and 3 •• Fabrication yards •• Land berth cranes Customers •• PETRONAS Group •• Energy majors •• Production sharing contract (PSC) contractors •• EPCC contractors (offshore and onshore) •• Petrochemical companies •• Domestic and international shipping companies Services Performed •• Heavy Engineering Segment –– Wide range of EPCIC services for offshore facilities –– Fabrication services for onshore modules and facilities •• Marine Segment –– Conversion of offshore facilities in one location –– Repair and refurbishment for various types of vessels, rigs and marine facilities •• Plant Maintenance and Turnaround –– Plant shutdown and maintenance –– Routine maintenance and upgrading works Marine & Heavy Engineering Human Capital •• 168 employees, including 65 academicians Customers •• Students with SPM certificates •• Marine Officers •• Participants from shipping companies and oil and gas players Services Performed •• Conducts Pre-Sea Diploma, Post-Sea, Ratings and Modular Programme •• Research and consultancy services Revenue Structure •• Tuition fees / Course fees •• Research and consultancy fees Cost Structure •• Faculties’ salaries and benefits •• Training and learning facilities costs Competitive Advantage •• Providing a broad spectrum of maritime education and training, beyond Standards of Training, Certification and Watchkeeping (STCW) •• Research and consultancy expert, providing flexible solutions encompassing the total lifecycle of port development Maritime Education & Training 106 Modern fleet of LNG, Petroleum and Product vessels assets Reputable FPS owner-operator with 8,851 A diverse and inclusive workforce of employees from over 47 nationalities 12 Revenue Structure •• Construction and conversion contract revenue based on stage of completion •• Marine repair and refurbishment revenue •• Plant maintenance and turnaround revenue Cost Structure • Operational costs comprising direct and indirect costs, fixed and variable costs, and depreciation Competitive Advantage •• Own and operate one of the region’s largest marine and heavy engineering facilities •• The only Malaysian yard with the capacity and skills to undertake complex offshore mega structures and marine facilities projects WHO WE ARE shipping conglomerates with a market capitalisation of MISC Berhad 10 Integrated Annual Report 2021 MISC Berhad Integrated Annual Report 2021 11
WHAT WE OWN/OPERATE * Includes one Panamax tanker currently trading crude oil FLOATING STORAGE UNIT (FSU) An FSU is a flexible LNG storage solution and provides an alternative to land-based facilities. LNG BUNKER VESSEL (LBV) An LBV is a small-scale LNG vessel used to supply LNG as marine fuel (bunker) to LNG-fuelled vessels via ship-to-ship transfer operations. This vessel can also be utilised for smallscale LNG transportation, and for Gas Up Cool Down (GUCD) operations for conventional LNG vessels. VERY LARGE ETHANE CARRIER (VLEC) A specialised gas carrier which transports very large quantities of liquified ethane for trading over long distances, for example between North America and the Far East. The vessel transports ethane at -94° Celsius in membrane tanks and is equipped with dual-fuel propulsion and reliquefaction systems. We own and operate a diversified fleet of specialised assets and conventional tankers in all key geographies to deliver services to the global energy companies, refiners and traders. Our product fleet transports a wide range of petroleum products, chemicals and vegetable oils. Our specialised assets provide critical support to the oil and gas industry. SUEZMAX TANKER Tanker vessel with a capacity of shipping approximately 1 million barrels of crude oil, with the flexibility to do longer-haul cargo as well as shorter regional trades. VERY LARGE CRUDE CARRIER (VLCC) A VLCC has the capacity to transport approximately 2 million barrels of crude oil over long distances to facilitate inter-regional trade. DYNAMIC POSITIONING SHUTTLE TANKER (DPST) A DPST utilises dynamic positioning technology to load crude from remote offshore production facilities and transports it to the shore for storage or distribution. LIGHTERING SUPPORT VESSEL (LSV) Transports equipment and crew to conduct ship-to-ship cargo transfer operations. LR2 TANKER Coated tanker with the capacity to transport approximately 0.7 million barrels and able to carry both clean and dirty products in regional trades. AFRAMAX TANKER* An Aframax tanker has the capacity to transport approximately 0.7 million barrels of crude oil. Used to carry crude oil or dirty products such as fuel oil in mainly regional trades. FPSOs and FSOs have become an effective way of extracting hydrocarbons in many offshore oil and gas producing regions around the world. Vessel sizes depend on the oil and condensed storage capacity requirements and the vessels are secured to the seabed via mooring systems which are determined by the environment in which they operate. SEMI-SUBMERSIBLE FLOATING PRODUCTION SYSTEM (SEMI-FPS) A large pontoon-like structure submerged below the sea surface at a predetermined depth with an FPS that receives fluids such as crude oil, water and others from a subsea reservoir through risers. Topside production facilities separate the fluids into crude oil, natural gas, water and impurities. Our semi-FPS operates at a depth of 1,400 metres. The oil is exported via a 200-kilometre long pipeline to an oil and gas terminal in Kimanis, Sabah. FLOATING PRODUCTION, STORAGE AND OFFLOADING (FPSO) A vessel-type production system that receives full well stream fluids such as crude oil, water and others from a subsea reservoir through risers. It has topside production facilities that separate the fluids into crude oil, natural gas, water and impurities. It also has storage tanks where processed crude oil is stored. Crude oil is offloaded onto tankers for further refining onshore. It can be designed with the capability of staying on location for continuous operations for 20 years or longer. FLOATING STORAGE AND OFFLOADING (FSO) Simpler than an FPSO, an FSO unit does not have production processing capabilities. It is normally integrated with other production systems such as fixed platforms, mobile offshore production units (MOPU), and tension leg platforms (TLP). An FSO is also equipped to store and offload crude oil to a tanker. HEAVY ENGINEERING ASSETS We have the largest fabrication area by tonnage capacity in Malaysia, to provide engineering, procurement, construction, installation and commissioning (EPCIC) of complex structures for offshore and onshore facilities. LNG carriers (LNGCs) transport natural gas in a liquid state, allowing it to be moved across oceans without pipelines. The containment systems on board the vessels are capable of storing natural gas at below its boiling point of -162° Celsius. At this temperature, the gas turns to liquid, thus reducing volume by 600 times. MISC’s fleet of LNGCs utilise two types of containment systems, known as membrane and Moss types. GAS ASSETS & SOLUTIONS MOSS-TYPE LNGC A Moss-type vessel has self-supporting spherical tanks making it more robust and resistant to sloshing. It possesses a higher degree of operational flexibility for worldwide trading capability including the ability to load cargos at a floating liquefied natural gas (FLNG) unit. MEMBRANE-TYPE LNGC The membrane-type system is more space efficient and has a higher capacity than a Moss-type vessel of the same dimension. PETROLEUM & PRODUCT SHIPPING MODULAR CAPTURE VESSEL (MCV) A modular Aframaxsized vessel that combines FPSO and dynamic positioning technology in a single hull to enable safe capture of hydrocarbons. The MCV is part of an innovative marine system solution designed to respond to a subsea well control incident. CHEMICAL TANKER Transports a variety of chemicals and vegetable oils in both inter and intra-regional trades. OFFSHORE BUSINESS MARINE & HEAVY ENGINEERING MARINE BUSINESS ASSETS Our well-equipped yard includes three dry docks, land berths, quays and a shiplift. These facilities enable us to perform repair works, maintenance, marine conversion and refurbishment of a wide range of vessels. The assets we own and operate are those which enable us to provide comprehensive marine services for a wide range of offshore facilities and vessels within our six major solutions of offshore, onshore, conversion, marine repair and refurbishment, plant maintenance and turnaround and other services. 5 VESSELS 4 VESSELS 8 VESSELS 23 VESSELS 6 VESSELS 8 VESSELS 2 VESSELS 1 VESSEL 6 VESSELS 5 UNITS 1 UNIT 25 VESSELS 11 VESSELS 2 VESSELS WHO WE ARE 6 UNITS VESSELS 5 MISC Berhad 12 Integrated Annual Report 2021 MISC Berhad Integrated Annual Report 2021 13
MISC GROUP : CORE BUSINESS SOLUTIONS AND CAPABILITIES ACROSS THE ENERGY VALUE CHAIN Natural gas and oil resources are vital for the continuity of businesses, industries and communities. These resources provide us fuel and electricity and form the feedstock for a wide spectrum of everyday products used in all spheres of life. MISC plays an integral role in the energy value chain by transporting these commodities across vast distances with our fleet of vessels. Our business also provides maritime assets that are required for the offshore extraction of oil and gas resources. We are committed to continue providing sustainable maritime transportation solutions to meet the energy needs of the world now and into the future. HOW WE MOVE ENERGY Complete/Full Range Offshore Platform EPCIC Services for Offshore & Onshore Construction Comprehensive Marine Repair & Refurbishment Marine Conversion Works Shipmanagement WHO WE ARE MISC’S BUSINESSES & ACTIVITIES RELATED ACTIVITIES ON OIL & GAS VALUE CHAIN MISC Berhad 14 Integrated Annual Report 2021 MISC Berhad Integrated Annual Report 2021 15
WHERE WE OPERATE IntraRegional Crude Oil and Product Trade BRAZIL RIO DE JANEIRO UNITED STATES OF AMERICA (USA) HOUSTON GALVESTON URUGUAY MONTEVIDEO UNITED KINGDOM (UK) LONDON NETHERLANDS ROTTERDAM NORWAY STAVANGER INDIA GURGAON MUMBAI JAPAN YOKOHAMA MALAYSIA KUALA LUMPUR JOHOR BAHRU MELAKA LABUAN PHILIPPINES MANILA SINGAPORE SHIPPING ROUTES AND ASSET LOCATIONS KEY LNG TRADE KEY VLCC TRADE KEY VLEC TRADE LIGHTERING DYNAMIC POSITIONING SHUTTLE TANKERS MODULAR CAPTURE VESSELS OFFSHORE ASSETS MISC GROUP’S GLOBAL BUSINESS NETWORK GAS ASSETS & SOLUTIONS PETROLEUM & PRODUCT SHIPPING OFFSHORE BUSINESS MARINE & HEAVY ENGINEERING INTEGRATED MARINE SERVICES PORT MANAGEMENT & MARITIME SERVICES MARITIME EDUCATION & TRAINING VLEC loading from Nederland, Texas and discharge at Lianyungang, Jiangsu, China (through Panama Canal) LNG from the US destined for Europe LNG from Africa destined for Asia and Europe LNG from Middle East destined for Europe and East Asia LNG from Malaysia destined for East Asia (Japan, Korea, China and Taiwan) LNG from Australia destined for Malaysia and East Asia (Japan, Korea, China and Taiwan) Crude oil from Atlantic Basin (US, North Sea, Latin America and West Africa) destined for Asia Pacific Crude oil from Middle East destined for Asia Pacific and the US WHO WE ARE THESE ARE OUR MAIN TRADE ROUTES ONLY AND NOT MEANT TO BE AN EXHAUSTIVE LIST Inter and Intra-Regional Crude Oil and Product Trade MISC Berhad 16 Integrated Annual Report 2021 MISC Berhad Integrated Annual Report 2021 17
KEY MILESTONES MISC launched our foray into energy shipping and was entrusted to deliver Malaysia’s first LNG cargo to Japan. Our first fleet of LNG carriers (LNGCs) were the Tenaga Class. During this period, we also embarked on the chemical shipping business. MATES was upgraded to academy status and renamed as the Malaysian Maritime Academy (ALAM). The highlight of the era was the listing of MISC on the Main Board of the Kuala Lumpur Stock Exchange (now known as Bursa Malaysia Securities Berhad). MISC also diversified its businesses to include land-based shipping-related services such as container services, logistics and warehousing as well as shipping agency. Towards the end of this period, MISC became a subsidiary of PETRONAS. 2000-2008 A dynamic era of growth and expansions, particularly in the energy-related maritime solutions sector, MISC acquired American Eagle Tankers (now known as AET) and made the Malaysia Shipyard and Engineering Sdn. Bhd. (MSE) its wholly-owned subsidiary, which was later renamed as the Malaysia Marine and Heavy Engineering Sdn. Bhd. (MMHE). Offshore Business Unit was formed during this period as we continue to strengthen our position as a leading player in the oil and gas industry. MISC took delivery of our first floating production, storage and offloading (FPSO) facility, FPSO Bunga Kertas and our first deepwater facility, FPSO Kikeh. MISC also expanded its energy solutions portfolio by venturing into the business of developing and operating tank terminals for storage solutions. 1981-1999 1968-1980 REACHING NEW HEIGHTS ACHIEVING HISTORIC MILESTONES OUR HUMBLE BEGINNINGS WHO WE ARE A decade of firsts unfolds with the incorporation of the Malaysia International Shipping Corporation (MISC) as the country’s first shipping line followed by the launch of MV Bunga Raya being MISC’s first ship. We then received our first batch of qualified and trained Malaysian seafarers. We began building our global presence, serving the regional and intercontinental shipping routes with a diversified range of shipping solutions including liner, dry bulk and liquid bulk. This period also saw the foundation of the Malaysian Training and Education of Seamen (MATES). Today, our work supports many of our clients’ own success stories from the safe transportation of energy-related cargoes to operating offshore floating solutions and the construction of complex marine structures. MISC’s history began in 1968 to support trade and economic development and at the same time promote the maritime sector for Malaysia. Since then, we have grown into a global maritime conglomerate with over 100 vessels and floating assets and more than 8,800 professionals at sea and shore. Throughout the years, MISC had various streams of businesses which cut across multiple aspects of shipping and logistics, liner, dry and liquid bulk, LNG, petroleum and chemical products. Over time, we have defined the focus of our businesses in supporting the energy value chain through our range of energy-related maritime solutions and services. We have successfully built our presence in the global energy industry with a distinguished reputation for safety, efficiency and reliability. MISC Berhad 18 Integrated Annual Report 2021 MISC Berhad Integrated Annual Report 2021 19
We celebrated our 50th anniversary in 2018, marking five decades of growth, resilience and commitment towards excellence. This period marks the continuation of MISC’s journey that is driven by our People with their unwavering Passion to push boundaries and explore the Possibilities that lie ahead. We have been pursuing efforts towards sustainable growth in the long term by developing a healthy pipeline of new projects as well as winning the trust and confidence of our stakeholders. MISC has also received numerous accolades which recognised our excellence in corporate governance, investor relations, sustainability and HSSE performance. We became a member of Getting to Zero Coalition by GMF, leading the push for international shipping’s decarbonisation. We broke new grounds within the industry through the deployment of LNG dual-fuel vessels and have joined forces with other industry players to develop new zero-carbon fuel technology that reflects our pledge in upholding sound environmental stewardship. MISC became a constituent of the FTSE4Good Bursa Malaysia Index, a testament to our remarkable sustainability performance. We also refreshed our Vision, Mission Statements and Tagline as well as enhanced our logo. During this period, MISC Group’s shipmanagement units were integrated into a single entity known as Eaglestar. PETRONAS Maritime Services Sdn. Bhd. became part of MISC Group and now known as MISC Maritime Services Sdn. Bhd. (MMS). MISC took delivery of our first fleet of Moss-type LNGCs, the Seri C Class. The period also saw AET taking delivery of its first MCV, Eagle Texas. MISC joined the ranks of global maritime industry players as a Strategic Partner of the Global Maritime Forum (GMF), committed to unleashing the potential of the global maritime industry to increase sustainable long-term economic development and human well-being. After weathering several years of severely challenging conditions in the shipping industry, we took the difficult decision to exit from the liner business in 2011 as well as to divest our non-core businesses (such as the land logistics and tank terminal business), a process which continued until 2017. This strategic rebalancing of our business portfolio allowed us to channel our resources on our four core businesses, namely LNG shipping, petroleum shipping, offshore and heavy engineering business, and take advantage of other opportunities within the energy and maritime industry. MMHE was listed on the main market of Bursa Securities as Malaysia Marine and Heavy Engineering Holdings Berhad (MHB). During this period, MISC delivered the Gumusut-Kakap semi-submersible FPS, Asia’s largest facility for deepwater development. The Group also launched our first two LNG FSUs for Malaysia’s first regasification terminal in Sungai Udang, Melaka. AET successfully operationalised its DPST business in Brazil. 2009-2013 Despite the devastating global impacts of the COVID-19 pandemic, MISC moved onwards, charting several firsts. We secured our first major deepwater FPSO project in Brazil, building strong foundations for future large scale and complex international projects. We entered the China and ethane maritime transport markets, with MISC taking delivery of six newbuild VLECs, all with long-term charters. MHB successfully completed and commenced operations at Dry Dock 3 at MMHE West in Pasir Gudang, Johor. AET added to our recurring income stream, long-term charter contracts to own and operate three newbuild LNG dual-fuel VLCCs. Representing the next milestone in our sustainability-centred value creation journey, on 23 November 2021, MISC was listed as a constituent of the Dow Jones Sustainability Emerging Markets Index – the only Malaysian transportation sector company and one of the three Malaysian companies to do so. For more details about our achievements in 2021, please refer to pages 40 to 41. 2020-2021 REAPING THE REWARDS OF OUR ROBUST BUSINESS MODEL EMBRACING OPPORTUNITIES JOURNEY OF REBUILDING & DISCOVERY WEATHERING THE STORM KEY MILESTONES WHO WE ARE 2014-2017 2018-2019 MISC Berhad 20 Integrated Annual Report 2021 MISC Berhad Integrated Annual Report 2021 21
KEY MESSAGES CHAIRMAN’S MESSAGE PRESIDENT/GROUP CEO’S REVIEW 24 28 MISC Berhad 22 Integrated Annual Report 2021 MISC Berhad Integrated Annual Report 2021 23
CHAIRMAN’S MESSAGE KEY MESSAGES I am happy to share that MISC has been able to effectively manage both the shorter-term challenges of the pandemic to ensure its business continuity and stability, whilst at the same time focusing on the longer-term trends influencing the Group’s business environment, to redefine the Group’s direction as the world evolves towards a decarbonised future. MISC Berhad 24 Integrated Annual Report 2021 MISC Berhad Integrated Annual Report 2021 25 DEAR VALUED SHAREHOLDERS On behalf of the Board of Directors (Board), it is my honour to present to you the Integrated Annual Report and Audited Financial Statements of MISC Berhad and its subsidiaries for the financial year ended 31 December 2021 (FY2021). Marking my first full year as the Chairman, I have had the privilege of working closely with my colleagues on the Board to uphold our stewardship of MISC’s value creation journey as we pursue our aspiration of moving energy to build a better world. CHALLENGING OPERATING ENVIRONMENT 2021 has been shaped by the challenges of going through a second year of the COVID-19 pandemic. Concerted national vaccination drives formed the main thrust of attempts to bring about an end to the pandemic. However, new virus variants caused further waves of infections which led to cycles of relaxation and reimposition of restrictions. Continued mobility restrictions and supply chain disruptions constrained oil demand as well as global industrial activities. There was heightened global attention on climate change and a focus on the decarbonisation agenda. Rising expectations on this front made it imperative for organisations to rethink their future role in a net-zero economy. I am happy to share that MISC has been able to effectively manage both the shorter-term challenges of the pandemic to ensure its business continuity and stability, whilst at the same time focusing on the longer-term trends influencing the Group’s business environment, to redefine the Group’s direction as the world evolves towards a decarbonised future. OUR FINANCIAL PERFORMANCE Despite facing another challenging year, MISC’s financial performance and financial position have remained strong. The Group’s strategy of focusing on long-term time charters has largely insulated us from the market volatility. In 2021, MISC’s revenue increased by 13.5% to RM10,671.7 million. The Group recorded a profit before tax of RM1,774.6 million in 2021 compared to a loss before tax of RM123.6 million in 2020, as 2020’s results included a one-off impact due to the unfavourable decision in relation to the GumusutKakap Semi-Floating Production System (L) Limited (GKL) arbitration. The Group’s financial position remained robust, with low gearing ratios and stable credit ratings. Our cash balance remains healthy at RM7,952.3 million, supported by the recurring cash flow generated from the Group’s portfolio of long-term contracts. CREATING VALUE FOR SHAREHOLDERS AND STAKEHOLDERS For FY2021, the Board has declared a total dividend of 33.0 sen per share, maintaining a consistent level of dividend payout for the third year running. This is in accordance with our commitment to provide sustainable dividends to our shareholders. Despite the evolving challenges impacting the industry landscape, we continued to uphold the high standards of operational excellence in our services to our customers. The Group also stepped up on initiatives throughout its value chain of business partners and suppliers to ensure they practise the same high standards of integrity and ethics as MISC. As part of continuing efforts to safeguard the safety, health and well-being of our workforce, we implemented the COVID-19 Vaccination Programme to facilitate the vaccination of employees and their dependents. By the end of 2021, 99% of onshore employees and 90% of seafarers were fully vaccinated. The Group has maintained its social stewardship by continuing the ALAM Cadet Sponsorship programme, whereby more than RM21.71 million has been spent towards providing maritime education and training for youths to ensure a sustainable talent pipeline for the maritime industry. Our ongoing Heart of the Ocean Programme includes the Mersing Islands Reef Conservation Initiative and the UMT-MMS Sea Turtle Conservation Initiative. This programme, implemented under the Biodiversity Conservation initiative of the MISC Sustainability Strategy, includes capacity building to improve sustainable tourism and elevate the socio-economic status of local communities. As a responsible corporate citizen, the Group has contributed RM268,750 through the MISC Disaster Fund to help with disaster recovery efforts in the wake of the disastrous floods that affected Malaysians in December 2021 as well as our continued support towards those affected by the pandemic. DATUK ABU HURAIRA ABU YAZID CHAIRMAN
CHAIRMAN’S MESSAGE KEY MESSAGES MISC Berhad 26 Integrated Annual Report 2021 MISC Berhad Integrated Annual Report 2021 27 ADDRESSING CLIMATE CHANGE AND LONG-TERM SUSTAINABILITY IN AN INTEGRATED MANNER Acknowledging the threat of climate change, we are cognisant that maintaining the status quo is not an option, and the Group will have to transform its business model to remain resilient in the net-zero and circular economy of 2050. In December 2021, the Board approved the MISC 2050 long-range strategy which will guide the Group as we navigate towards a sustainable future come 2050 by diversifying into new business areas that address the issues of climate change and energy transition, namely the opportunity pillars of Renewable Energy and Waste-to-Value. In addition to this, and in line with its net-zero commitment to decarbonise the business, the Board has approved MISC’s mid-term target of 50% greenhouse gas (GHG) intensity reduction by 2030 compared to the base year of 2008 for our shipping operations, and a longerterm commitment of net-zero GHG emissions by 2050. These developments reinforce the Group’s approach of integrating sustainability considerations in its strategies, action plans and risk management. ENHANCING OUR GOVERNANCE In 2021, MISC deepened its risk governance focus through the inception of the Board Governance and Risk Committee (BGRC) by segregating the roles and responsibilities of the previous Board Audit and Risk Committee (BARC), which is now known as the Board Audit Committee (BAC). The decoupling of focus areas with separate committees has given Board members greater focus on project risk management, and other prevailing and emerging risks. The Group adopted several recommendations of the Malaysian Code on Corporate Governance (MCCG) 2021 which further enhanced its corporate governance practices. Besides the inclusion of climate change action as part of the sustainability considerations the Board takes into account, MISC has stepped up on our Board diversity and inclusivity by bringing on board new members. Effective 1 January 2022, four out of 12 members consist of women, thus boosting female representation on the Board beyond the 30% threshold recommended by MCCG 2021. UNSWERVING COMMITMENT TO ROBUST GOVERNANCE During the year, MISC continued to augment the Board’s composition by appointing new members who will bring their extensive knowledge, wisdom and experience to the Group. We bade farewell to Mr. Lim Beng Choon, who retired on 15 August 2021 after serving as an Independent Non-Executive Director (INED) for nine years. On behalf of MISC, I thank Beng Choon for his dedication and commitment in helping the Group pursue its value creation objectives. In his place, I welcome Mr. Chew Liong Kim, who was appointed as INED on 1 September 2021. We look forward to working closely with him, to gain from his fresh perspective and insight. We also welcomed YM Dato’ Tengku Marina binti Tunku Annuar as an INED on 1 January 2022. I am confident that Dato’ Tengku Marina’s extensive international experience and credentials will further augment the Board’s ability to steer MISC on a path of sustainable growth. Changes were made within MISC’s Board Committees, with the 1 January 2022 appointment of both Mr. Chew Liong Kim as a BAC Member and Datin Norazah binti Mohamed Razali as a Nomination and Remuneration Committee (NRC) Member, and we look forward to their contributions on this front. DRIVING OUR TALENT AGENDA Succession planning is an important agenda for MISC to ensure the strength of its leadership team and the availability of a ready pool of talent to drive its business ambitions. As the result of its robust succession planning programme and Leadership and Functional Competency Framework, MISC has developed a strong leadership bench possessing the required skills and competencies to execute its strategic priorities. While the maritime sector is predominantly a male-dominated industry, MISC is committed to promoting and appointing women who possess the right calibre and skills in line with its dedicated pursuit of talent excellence, as demonstrated by the appointment of its first female Vice President of Human Resource Management, Puan Shariza binti Mohd Jaafar in 2021. MISC has also groomed Malaysia’s first female Master Mariner, Captain Eezmaira Sazzea binti Shaharuzzaman, who started as a cadet with ALAM and in 2021 was appointed by Eaglestar to command the LNG carrier Seri Bijaksana. INTERNATIONAL VALIDATIONS AND AWARDS In acknowledgement of MISC’s commitment to sustainability, the Group has received recognitions on several fronts for its industry-leading standards. 2021 marked the year of MISC’s inaugural inclusion on the Dow Jones Sustainability Emerging Markets Index as global recognition of our ESG performance and leadership. Further reinforcing its ability to integrate sustainability into its operations and business practices, MISC was declared the Winner of the Waste Productivity & Materiality, Climate-Change & Emissions, and Land Use & Biodiversity categories at the Sustainable Business Awards (SBA) 2020/2021, where it also obtained the Significant Achievement award recognition for Stakeholder Management. LOOKING AHEAD The Board is committed to steering MISC towards a sustainable future that will create further value for shareholders and stakeholders. We will continue to maintain diligent oversight on all areas that are critical to ensure MISC’s long-term business sustainability, and look forward to the Group’s journey ahead as it reinvents itself to become a vital part of the circular economy of 2050. IN APPRECIATION Undoubtedly MISC’s ability to weather the impacts of another challenging year was only possible with the continuing support of all our stakeholders. On behalf of the Group, I would like to extend our deepest appreciation to our shareholders, customers, business partners and financiers for their sustained support. The local and international authorities the Group has worked with have been critical in enabling business continuity, and we are indebted to them for their collaborations and support. To all MISC employees, the Board members and I wish to thank you from the bottom of our hearts for demonstrating resilience and commitment through the challenges of the year and coming through on the organisation’s goals. As for my fellow colleagues on the Board, I would like to extend my personal and sincere gratitude for devoting your time to share your valuable perspectives towards generating continuous growth for the Group. We are confident that the spirit of collaboration we have fostered within the Group as well as with all our stakeholders will help us overcome future challenges in our voyage of value creation, towards a greener and sustainable future for all. DATUK ABU HURAIRA ABU YAZID CHAIRMAN In December 2021, the Board approved the MISC 2050 longrange strategy which will guide the Group as we navigate towards a sustainable future come 2050 by diversifying into new business areas that address the issues of climate change and energy transition, namely the opportunity pillars of Renewable Energy and Waste-toValue. In addition to this, and in line with its net-zero commitment to decarbonise the business, the Board has approved MISC’s mid-term target of 50% greenhouse gas (GHG) intensity reduction by 2030 compared to a base year of 2008 for our shipping operations, and a longer-term commitment of netzero GHG emissions by 2050.