Integrated Annual Report 2021

2021 was a year of resilience at MHB, as we worked through the challenges of the persisting COVID-19 pandemic. Our Heavy Engineering segment was impacted by supply chains disruptions, while our Marine segment faced intensified competition within a smaller market for dry docking opportunities. Nevertheless, our resilience ensured we remained on track with our value creation activities. Putting into practice lessons learnt, we strengthened our business continuity through operational, health and safety SOPs and crisis management plans. We shortened yard shutdown periods by swiftly obtaining regulatory approval to operate at the permitted maximum capacity as soon as announcements were made for various Movement Control Orders (MCO) throughout 2020 and 2021. Our expeditious response to vaccinate all our workforce including our subcontractors as well as vendors and record a 100% vaccination rate as at the end of 2021 not just safeguarded their health but enabled them to continue working on projects at our yard. Our balance sheet remains strong, with cash balance of RM709.9 million as at the end of 2021, compared to RM651.1 million in 2020. This should enable us to execute our strategic priorities and maintain business continuity. Within the Heavy Engineering segment, we progressed with the Kasawari Gas Development Project and the Bekok Oil Project for PETRONAS Carigali Sdn. Bhd. to complete and sail away project milestones. Our ability to perform according to client expectations was key to our successful award for PANDAI OTHMAN Managing Director & Chief Executive Officer, Malaysia Marine and Heavy Engineering Holdings Berhad (MHB) engineering, procurement, construction, installation, and commissioning services (EPCIC) works for the E11R-AA Riser Platform and Host Tie-In for the existing E11R-A Platform under the Kasawari Gas Development Project. Another major new project we secured was the SapuraOMV Upstream (Sarawak) Inc. (SapuraOMV) EPCIC works for the SK408W Jerun Development Project, offshore Sarawak. As at the end of 2021, both large scale central processing platform (CPP) projects of Kasawari and Jerun have progressed at 64.20% and 16.94% respectively, and will sustain MHB’s recurring income until 2024. The addition of Dry Dock No. 3 (DD3) to our infrastructure in 2020 significantly enhanced our Marine segment’s capacity to conduct repair and refurbishment services on vessels and other marine and oil and gas facilities. Marking a new chapter in our future growth ambition in line with energy transition opportunities, in 2021 we successfully completed our first remote cargo containment system maintenance work onboard the FSU Tenaga Empat. A key strategic achievement was the Memorandum of Understanding (MoU) we entered into with Kellogg Brown & Root Asia Pacific Pte. Ltd. (KBR), an internationally recognised company in the offshore platform and renewable energy sectors, covering collaborations on offshore wind farm, offshore oil and gas platform, and both offshore and onshore oil and gas modular structures for the Asia Pacific region. This has strengthened our ability to successfully diversify into new growth areas of wind farms and modular structures for our future profitability. Additionally, we signed an MoU with Axens South East Asia Sdn. Bhd. (Axens SEA). This gives MHB access to Axens SEA’s licensing technologies and proprietary equipment across the fields of oil refining, petrochemicals, gas processing, bio/renewable fuels and petrochemicals, plastics recycling and water treatment. It also provides MHB access to Axens SEA’s technical expertise in the areas of gas modular skid design, engineering procurement and construction. The MoU strengthens our footing to take advantage of energy transition opportunities. Our partnership with Smulders Projects Belgium NV (Smulders) led to us obtaining a contract to provide technical manpower assistance in the execution of the Greater Changhua Wind Farm Project in Taiwan in early 2021. As for modular structures, we have set strong foundations by being the first company in Malaysia to be certified in Canadian Standard Association (CSA) Standard W47.1 Certification of Companies for Fusion Welding of Steel by the Canadian Welding Bureau (CWB). Within the Plant Turnaround & Shutdown Maintenance segment, our industry track record enabled us to obtain a contract for the Idemitsu plant owned by Idemitsu Kosan Company, Ltd., a Japanese petroleum company. We also identified and assessed a reliable and reputable new partner for PETRONAS’ Turnaround Main Mechanical and Maintenance Mechanical Static (TA4MS) contract. We have stepped up on our sustainability commitments by establishing our Sustainability Framework and Governance Structure in alignment with the MISC Sustainability Strategy 2021 – 2025. Our new sustainability strategy integrates environmental, social and governance (ESG) elements within our various business segments. We have also published our Task Force on Climate-Related Financial Disclosures (TCFD) Statement, reflecting our adoption of the recommendations of the TCFD in managing and disclosing climate-related risks and opportunities. Mindful that energy transition and climate change will impact our business, our adoption of TCFD recommendations will play a part in ensuring our long-term business sustainability. Moving into 2022, we foresee new COVID-19 variants could cause fresh waves of infections causing regional economic recovery rates to vary. However increased vaccinations worldwide has led to most major economies reopening which will improve energy demand and stabilise oil prices. Considering all this, we remain cautiously optimistic on the year ahead. MANAGING DIRECTOR & CHIEF EXECUTIVE OFFICER’S REMARKS Our strategic priorities for the year ahead centre on building our internal capability within both our Heavy Engineering and Marine segments, to be both competent and competitive. Our focus in Plant Turnaround & Shutdown Maintenance is to explore opportunities in the non oil-and-gas sector, while simultaneously actively pursuing non-PETRONAS opportunities. Our diversification into modular and serial fabrication will see us focusing on establishing our footprint in the offshore wind farm market and exploring other opportunities in serial fabrication and light engineering. Additionally, we are exploring carbon capture, utilisation and storage (CCUS) and onshore modular opportunities in hydrogen and ammonia production plants. We believe that our focused strategic approach will enable us to maintain our value creation purpose into the future. Leveraging on the commitment and diligence of our skilled and motivated workforce, we remain committed to creating value for our stakeholders in the longer term. PANDAI OTHMAN Managing Director & Chief Executive Officer, Malaysia Marine and Heavy Engineering Holdings Berhad (MHB) MARINE & HEAVY ENGINEERING BUSINESS REVIEW MISC Berhad 144 Integrated Annual Report 2021 MISC Berhad Integrated Annual Report 2021 145