INTEGRATED ANNUAL REPORT 2022
About This Report WHO WE ARE About MISC What We Do How We Move Energy Where We Operate KEY MESSAGES Chairman’s Message President/Group CEO’s Message HIGHLIGHTS Key Highlights 2022 A Look Back at 2022 STRATEGIC REVIEW Strategic Overview How We Create Value Our Strategic Focus Our Material Matters Our Stakeholders Our Operating Environment Our Risks and Mitigation Strategies Delivering Our Strategy SUSTAINABILITY Anchoring Sustainability @ MISC FINANCIAL REVIEW Group Financial Review Financial Calendar Five-Year Group Financial Performance Statement of Value Added and Value Distributed Inside This Report BUSINESS REVIEW Gas Assets & Solutions Petroleum & Product Shipping Offshore Business Marine & Heavy Engineering Integrated Marine Services Port Management & Maritime Services Maritime Education & Training People Development Operating Safely & Sustainably Operating Responsibly LEADERSHIP Our Board at a Glance Our Board of Directors Profiles of the Board of Directors Our Management Committee Profiles of the Management Committee GOVERNANCE Corporate Governance Overview Statement Nomination & Remuneration Committee Report Board Audit Committee Report Board Sustainability & Risk Committee Report Statement on Risk Management & Internal Control Statement of Directors’ Responsibility Additional Compliance Information ADDITIONAL INFORMATION MISC Group Structure Properties Owned by MISC Berhad & Its Subsidiaries List of Vessels & Assets Statistics on Shareholdings Corporate Information List of Abbreviations ANNUAL GENERAL MEETING Notice of Annual General Meeting Administrative Notes relating to the 54th Annual General Meeting Form of Proxy 2 8 10 16 18 22 28 34 36 42 46 52 57 61 63 71 76 86 96 101 102 104 108 112 118 124 130 134 138 144 146 148 240 244 246 255 259 260 266 271 152 154 156 162 164 172 195 203 212 218 236 237 2022 was the year that we intensified our efforts in strengthening our fundamentals, as we continue to focus on project delivery and execution excellence. These efforts are critical to powering our resilience and expanding our capabilities and capacity for new growth areas to grow sustainably and create value in the long term. This includes investing in the development of our talents at sea and shore, strengthening our leadership bench strength, and harnessing digital transformation that will enable us to be future-focused. We will continue fostering strategic collaborations with our stakeholders, to deliver positive business outcomes and drive value creation across the ecosystem as we continue to build a sustainable future together.
• Bursa Malaysia Sustainability Reporting Guide • Global Reporting Initiative (GRI) Standards • 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 Principle on Human Rights • Principles of climate governance by World Economic Forum ABOUT THIS REPORT We are pleased to present MISC Berhad’s 2022 Integrated Annual Report in which we have adopted the International <IR> Framework as issued by the IFRS Foundation in January 2021. This 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 2022 INTEGRATED REPORT SUITE This provides disclosures on MISC Berhad, its subsidiaries, associates and joint ventures, which are referred to as MISC or the Group throughout the report. It covers the Group’s activities and performance for the financial year ended 31 December 2022. It also includes any material events that occurred after this date up to the date of publication. Information presented 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. For 2022, we developed disclosures in our reports based on the following reporting frameworks. • Developed to provide shareholders and other stakeholders with a transparent and accountable narrative of our business activities and financial and non-financial performance for the year • Provides an account of the external environment and outlook, our business model and strategy, financial statements and approach to material matters, corporate governance and risk management • Complements sustainability-related information shared in various sections in this report • Present details of our management and performance of material Environmental, Social and Governance (ESG) matters as part of our continuous efforts to provide our stakeholders with better transparency of our ESG performance • Includes our Task Force on Climaterelated Financial Disclosures Report DEMONSTRATING OUR INTEGRATED THINKING 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 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, environmental, social and governance matters, and the high degree of influence these have on MISC’s value creation abilities and outcomes. As such, we seek to provide: • An insight into how our strategy creates sustainable value for our stakeholders; • An account of our value creation journey for the year under review, taking into account our strategic targets; and • 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. • International <IR> Framework issued by the IFRS Foundation in 2021 • 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) Reporting Frameworks: ASSURANCE This IAR has third party assurance for the following: • Our external auditors, Ernst & Young PLT, provide assurance on the audited financial statements. Details can be found in the Financial Statements section of FR2022. • Each of our vessel’s fuel consumption and relevant activity data have been verified by a third party i.e. DNV 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 to ensure that data provided are reliable. EXCLUSIONS The information is guided by our appetite for disclosure. We have withheld information that falls 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 ABBREVIATIONS AND ACRONYMS It 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. A list of the abbreviations and acronyms used in this Report can be found on pages 260 to 263. REPORTING SCOPE AND BOUNDARIES • Provides all our financial statements and Directors’ Report on MISC’s financial performance for the year under review • Includes our Independent Auditors’ Report which provides assurance on the faithful presentation of the Group’s financial performance Reporting Frameworks: Reporting Frameworks: • Malaysian Code on Corporate Governance 2021 • Main Market Listing Requirements of Bursa Malaysia • Companies Act 2016 • MFRS • IFRS Integrated Annual Report (IAR) 2022 Sustainability Report (SR) 2022 Financial Report (FR) 2022 3 2 MISC Berhad Integrated Annual Report 2022
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 23 February 2023. DATUK ABU HURAIRA ABU YAZID CAPTAIN RAJALINGAM SUBRAMANIAM Chairman President/Group Chief Executive Officer RESPONSIBILITY STATEMENT NAVIGATION ICONS The following navigation icons are used throughout this report: OUR SIX CAPITALS OUR MATERIAL MATTERS OUR STAKEHOLDERS Financial Capital Financial Performance Government/ Regulatory Human Capital Talent Attraction Financial Providers Intellectual Capital Waste Management Employees Digitalisation Suppliers/ Vendors (Non-critical) Physical Capital Values, Governance and Business Ethics Shareholders/ Investors Social & Relationship Capital Climate Change Customers Natural Capital Human Rights Suppliers/ Vendors / Insurance (Critical) Ocean Health Industry Peers Media Business Knowledge Communities Sustainable Supply Chain Business Partners Diversity and Inclusion Academic Organisations Trade Associations/ NGOs/ Activist Groups Health and Safety Community Investment Cybersecurity Security CROSS REFERENCES Integrated Annual Report Sustainability Report INVESTOR RELATIONS The Group’s Corporate Disclosure Guidelines are governed by respective management President/Group CEO Vice President, Finance Vice President, Corporate Planning General Manager, Corporate Planning Further information can be found on our website The Group’s Corporate Disclosure Guidelines are governed by respective management Contact us at Contact us at Contact us at Corporate Governance www.misc.com.my miscweb@miscbhd.com Business Solutions Investor Relations Sustainability misc.com.my/solutions misc.com.my/investor-relations misc.com.my/sustainability investor.relations@miscbhd.com misc.sustainability@miscbhd.com misc.com.my/corporate-governance ABOUT THIS REPORT Energy Management Natural Resource Use Water Management Air Emissions Financial Report 5 4 MISC Berhad Integrated Annual Report 2022
About MISC What We Do How We Move Energy Where We Operate 8 10 16 18 7 MISC Berhad 6 Integrated Annual Report 2022
ABOUT MISC 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, MISC is firmly committed to creating value for our stakeholders and contributing to the sustainable development of the maritime industry. VISION MISSION SHARED VALUES To consistently provide better energy related maritime solutions and services To be consistently better, we strive to: • Exceed the expectations of our customers • Promote individual and team excellence of our employees • Create a positive difference to the lives of communities • Care for the environment and operate responsibly • Drive sustainable value for our shareholders Loyalty Loyal to corporation Integrity Honest and upright Professionalism Strive for excellence Cohesiveness United, trust and respect for each other S&P Global Ratings Moody’s Investors Service 54 107 9,355 12 LEADING STRONG assets USD7.6 billion years of sterling track record in delivering energy-related maritime solutions and services Among the world’s Modern fleet of Reputable FPS owner-operator with A diverse and inclusive workforce of employees from over 44 nationalities credit rating in the marine transport sector shipping conglomerates with a market capitalisation of LNG, Petroleum and Product vessels BBB+ (Stable) Baa2 (Stable) Who We Are Who We Are 9 8 MISC Berhad Integrated Annual Report 2022
PETROLEUM & PRODUCT SHIPPING WHAT WE DO 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. 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. An FSU is a flexible LNG storage solution and provides an alternative to land-based facilities. MOSS-TYPE LNGC FLOATING STORAGE UNIT (FSU) GAS ASSETS & SOLUTIONS Physical Capital • 39 vessels • 16 vessels under construction Services Performed • Transportation of LNG and ethane • New LNG asset-based solutions • Technological solutions for FSU 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 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. Physical Capital • 68 vessels • 3 vessels under construction 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 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 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. Coated tanker with the capacity to transport approximately 0.7 million barrels and able to carry both clean and dirty products in regional trades. LR2 TANKER 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. 17 2 VESSELS VESSELS Transports equipment and crew to conduct shipto-ship cargo transfer operations. LIGHTERING SUPPORT VESSEL (LSV) VERY LARGE CRUDE CARRIER (VLCC) A VLCC has the capacity to transport approximately two million barrels of crude oil over long distances to facilitate inter-regional trade. 10 10 VESSELS VESSELS MODULAR CAPTURE VESSEL (MCV) Tanker vessel with a capacity of shipping approximately one million barrels of crude oil, with the flexibility to do longer-haul cargo as well as shorter regional trades. SUEZMAX TANKER 6 2 VESSELS VESSELS A modular Aframax-sized 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. Transports a variety of chemicals and vegetable oils in both inter and intraregional trades. CHEMICAL TANKER AFRAMAX TANKER 18 3 VESSELS VESSELS 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. The membrane-type system is more space efficient and has a higher capacity than a Mosstype vessel of the same dimension. MEMBRANE-TYPE LNGC 25 5 2 6 1 VESSELS VESSELS VESSELS VESSELS VESSEL 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 shipto-ship transfer operations. This vessel can also be utilised for small-scale LNG transportation, and for Gas Up Cool Down (GUCD) operations for conventional LNG vessels. Who We Are Who We Are 11 10 MISC Berhad Integrated Annual Report 2022
WHAT WE DO 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. OFFSHORE BUSINESS Physical Capital • 12 offshore floating solutions • 1 FPSO under construction 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 Competitive Advantage • Highly skilled workforce • Strong relationships of mutual trust with key Asia-based partners, subcontractors and suppliers • Outstanding contractual deliveries 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 and tension leg platforms. An FSO is also equipped to store and offload crude oil to a tanker. SEMI-SUBMERSIBLE FLOATING PRODUCTION SYSTEM (SEMI-FPS) HEAVY ENGINEERING ASSETS FLOATING STORAGE AND OFFLOADING (FSO) FLOATING PRODUCTION, STORAGE AND OFFLOADING (FPSO) MARINE BUSINESS ASSETS 1 UNIT 6 VESSELS 5 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. MARINE & HEAVY ENGINEERING Physical Capital • Dry Dock 1,2 and 3 • Fabrication yards • Land berth cranes 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 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 We have the largest fabrication area by tonnage capacity in Malaysia, to provide EPCIC of complex structures for offshore and onshore facilities. 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. 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. 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. Who We Are Who We Are 13 12 MISC Berhad Integrated Annual Report 2022
WHAT WE DO PORT MANAGEMENT & MARITIME SERVICES INTEGRATED MARINE SERVICES Services Performed • Shipmanagement, engineering and procurement • Project management - supervision and consultancy service for dry docking and new building of vessels Services Performed • Conducts Pre-Sea Diploma, Post-Sea, Ratings and Modular Programme • Research and consultancy services Services Performed • Operator of ports and terminals • Pilotage, mooring master, loading master and marine controller services • Jetty maintenance services • Single Point Mooring maintenance services • Logistic support services • Ship vetting services • Offshore vessel inspection services • Marine assurance and consultancy services which includes ship screening, TMSA, OVMSA and RMMS Competitive Advantage • Specialised experience in niche areas of LNG bunkering vessels, very large ethane carriers, floating storage and regasification, dynamic positioning shuttle tankers, dualfuel 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 Competitive Advantage • Providing a broad spectrum of maritime education and training, beyond STCW • Research and consultancy expert, providing flexible solutions encompassing the total lifecycle of port development 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 VIS and 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 MARITIME EDUCATION & TRAINING Who We Are Who We Are 15 14 MISC Berhad Integrated Annual Report 2022
HOW WE MOVE ENERGY 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. Complete/Full Range Offshore Platform EPCIC Services for Offshore & Onshore Construction Comprehensive Marine Repair & Refurbishment Marine Conversion Works Shipmanagement MISC’S BUSINESSES & ACTIVITIES RELATED ACTIVITIES ON OIL & GAS VALUE CHAIN Who We Are Who We Are 17 16 MISC Berhad Integrated Annual Report 2022
GAS ASSETS & SOLUTIONS PETROLEUM & PRODUCT SHIPPING OFFSHORE BUSINESS MARINE & HEAVY ENGINEERING INTEGRATED MARINE SERVICES PORT MANAGEMENT & MARITIME SERVICES MARITIME EDUCATION & TRAINING MISC GROUP’S GLOBAL BUSINESS NETWORK NORWAY UNITED KINGDOM (UK) UNITED STATES OF AMERICA (USA) NETHERLANDS BRAZIL URUGUAY STAVANGER LONDON HOUSTON GALVESTON ROTTERDAM RIO DE JANEIRO MONTEVIDEO Inter and Intra-Regional Crude Oil and Product Trade LNG from Africa destined for Asia and Europe LNG from the US destined for Europe WHERE WE OPERATE KEY LNG TRADE KEY VLCC TRADE KEY VLEC TRADE THESE ARE OUR MAIN TRADE ROUTES ONLY AND NOT MEANT TO BE AN EXHAUSTIVE LIST LIGHTERING DYNAMIC POSITIONING SHUTTLE TANKERS MODULAR CAPTURE VESSELS OFFSHORE ASSETS SHIPPING ROUTES AND ASSET LOCATIONS INDIA JAPAN PHILIPPINES MALAYSIA SINGAPORE GURGAON MUMBAI YOKOHAMA MANILA KUALA LUMPUR JOHOR BAHRU MELAKA LABUAN Crude oil from Middle East destined for Asia Pacific and the US Crude oil from Atlantic Basin (US,North Sea, Latin America and West Africa) destined for Asia Pacific IntraRegional Crude Oil and Product Trade LNG from Australia destined for Malaysia and East Asia (Japan, Korea, China and Taiwan) LNG from Malaysia destined for East Asia (Japan, Korea, China and Taiwan) LNG from Middle East destined for Europe and East Asia VLEC loading from Netherlands, Texas and discharge at Lianyungang, Jiangsu, China (through Panama Canal) Who We Are Who We Are 19 18 MISC Berhad Integrated Annual Report 2022
Chairman’s Message President/Group CEO’s Message 22 28 21 MISC Berhad 20 Integrated Annual Report 2022
CHAIRMAN’S MESSAGE On behalf of the Board, I am pleased to present to you the Integrated Annual Report and Financial Report of MISC Berhad and its subsidiaries (the Group) for the financial year ended 31 December 2022 (FY2022). MISC has come through a year that has been shaped by the VUCA (Volatility, Uncertainty, Complexity and Ambiguity) landscape defining the rapidly changing and complex world we are living in. In this uncertain environment, the Group has been agile, adaptable, and resilient to navigate challenges and seize opportunities as it continues delivering value to shareholders. MISC’s intensified efforts in strengthening our business fundamentals in 2022 have been critical to powering our resilience and expanding our capabilities for new sustainable growth. DATUK ABU HURAIRA ABU YAZID Chairman 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. Dear Valued Shareholders, The global decarbonisation agenda ramped up with the introduction of new maritime regulations. These include the EEXI, CII, the EU ETS and Carbon Tax. Consistent with the economic and environmental forces shaping the world, MISC made a strategic decision that new capex investments will focus on green asset classes, namely dual-fuel and low-carbon emission vessels. Tensions between the USA, China and Russia continued to dominate world headlines in 2022, causing uncertainty and instability which disrupted global economic development and trade. The ongoing conflict between Russia and Ukraine impacted global supply chains, disrupted transportation routes, delayed the delivery of goods and increased volatility in energy markets. The interest rates uptrend during the year, elevated financial costs, with bearish financial markets heralding the risk of a global recession. Concurrently, new opportunities arose as energy transition gathered pace. LNG has become an increasingly important fuel source which can reduce GHG emissions and support the transition to cleaner energy. The production, transportation and use of LNG has lower GHG emissions compared to other fossil fuels. In line with the energy transition and decarbonisation agenda, MISC is pivoting and targeting new potential income sources that come with the wave of demand for renewable energy and waste-to-value solutions. OPERATING ENVIRONMENT FINANCIAL PERFORMANCE BEYOND PERFORMANCE: POWERING OUR RESILIENCE In FY2022, MISC continued to create value for shareholders as it recorded a solid financial performance. MISC’s revenue increased by almost 30% to RM13,867.0 million. The Group recorded a 6% increase in profit before tax of RM1,874.3 million from RM1,774.6 million in FY2021. The Group has maintained its strong cash balance, low credit ratio and stable credit ratings, reflecting its robust financial position. The Board declared a total dividend of 33.0 sen per share in FY2022. This is equivalent to RM1,473.0 million to our valued shareholders, thus maintaining a consistent track record of dividend pay-outs over the past four years. Our Marine & Heavy Engineering arm, MHB, secured a contract from PCSB to undertake EPCIC services for the Kasawari CCS project, off the coast of Sarawak, Malaysia. Once completed, the Kasawari CCS project will be the world’s largest offshore CCS project by volume of CO2 captured and Malaysia’s first CCS project. MHB also secured a contract from Sarawak Shell Berhad (SSB) to undertake EPC services of the offshore platform for the Rosmari-Marjoram gas project which will be primarily powered by renewable energy from solar panels. The contracts that we have secured across the MISC Group are a testament to our diverse capabilities and expertise, and most importantly, our reputation as a trusted partner to global energy players. BEYOND SUSTAINABILITY: DRIVING A SUSTAINABLE FUTURE The MISC Group has always been committed to our role as a responsible member of the global maritime industry. The Group’s approach to sustainability has gone beyond the traditional concept and approach. Our sustainability ethos focuses on integrating our current strategic initiatives with ESG principles to ensure that we execute our business with the goal of generating sustainable value well into the future, or what can be termed as “Sustainability Plus”. Last year, the Group pledged its commitment to achieve NetZero GHG emissions by 2050 and we are firmly focusing on implementing the initiatives that will pave the way to achieve our targets. Our long-range MISC 2050 strategy serves as the roadmap to guide the transition of our business across the Group to thrive in a net-zero and circular economy. Besides lowering the fleet’s emissions, ever-increasing global maritime logistics demands entail us focusing on efficiency through digitalisation and enhancing the safety of people, asset and cargo carried. In addition to supporting the global climate change commitments, MISC’s low-carbon assets also help its customers lower their carbon emissions. As many of our customers are working towards decarbonising their operations and businesses, MISC’s offering of low-carbon asset services and solutions supports in systematically reducing emissions within the entire value chain. MISC’s value creation for the wider community is guided by the MISC Sustainability Strategy 2021 – 2025. We have prioritised biodiversity conservation, education and safety in support of our mission ‘to create a positive difference to the lives of communities’. We are committed to making a positive impact on ocean biodiversity through our Group’s Heart of the Ocean marine biodiversity conservation programme which includes During the year, the MISC Group secured over USD1.1 billion worth of long-term projects in terms of capital expenditure. This will go a long way in powering our resilience to thrive in an evolving marketplace and consistently drive sustainable value creation. In November 2022, MISC together with our consortium partners, NYK, K-Line and CLNG secured long-term charter contracts by QatarEnergy for a total of 12 newbuild LNG carriers. MISC also secured long-term time charter contracts with SRM, a wholly-owned subsidiary of ExxonMobil, for two more LNG carriers, bringing the total number of contracts with SRM to four LNG carriers. Our Petroleum & Product Shipping segment, AET, together with PTT of Thailand also inked a Memorandum of Understanding to develop two zero-emission Aframaxes to be powered by green ammonia, which will be delivered to PTT for long-term charters in Q4 2025 and Q1 2026 respectively. The Offshore Business Unit obtained several contract extensions namely a one-year charter contract extension for FPSO Bunga Kertas to April 2023 as well as staggered contract extensions for FPSO Ruby 2. Key Messages Key Messages 23 22 MISC Berhad Integrated Annual Report 2022
reef, sea-turtles and mangrove conservation. In FY2022, MISC’s investment in biodiversity conservation amounted to RM300,000. Our flagship investment in our maritime academy ALAM and the Cadet Sponsorship Programme allows us to meet our community responsibilities and contribute to the growth of the regional maritime industry. MISC’s provision of maritime education opportunities to deserving students and highquality maritime education has ensured the development of a sustainable pipeline of qualified seafaring industry professionals. Towards the end of FY2022, we have sponsored 751 students with a total investment of approximately RM24.2 million. MISC has also furthered the adoption of the MCCG. Effective 1 April 2022, the BAC is comprised solely of independent directors, in line with Step-Up Practice 9.4 of the MCCG. MISC acknowledges the importance of the diversity of Board members to incorporate new insights into the boardroom. This belief, whether the diversity in terms of skills and backgrounds, view and perspective or gender, are able to help to incorporate new insights as well as improve governance and oversight in the boardroom. During the year, MISC recorded some changes in the Board which have added new skills and capabilities to the Board’s diversity matrix. At the beginning of the year, we saw the appointment of Dato’ Tengku Marina Tunku Annuar’s as an Independent Non-Executive Director of MISC Berhad. As indicated earlier, Captain Rajalingam Subramaniam was elevated as the President/Group CEO and Non-Independent Executive Director of MISC Berhad effective 1 October 2022. Captain Rajalingam’s appointment came upon the retirement of Datuk Yee Yang Chien as President/Group CEO and NonIndependent Executive Director of MISC Berhad effective 30 September 2022. On 1 June 2022, Encik Mohd Yusri Bin Mohamed Yusof stepped down as Non-Independent Non-Executive Director of MISC Berhad. On behalf of the Board, I extend our immense appreciation to Encik Yusri for his valuable contribution during his tenure at the MISC Board. Encik Yusri was replaced by Cik Wan Shamilah Binti Wan Muhammad Saidi as NonIndependent Non-Executive Director on the same date. We are confident that the Board changes during the year will enhance shareholder value over the long term through the strengthening of the Board’s capabilities, and that our new Board members will play a huge contributory role to MISC’s continuing success. CHAIRMAN’S MESSAGE STRENGTHENING GOVERNANCE MISC’s international validations and awards in FY2022 has further reinforced our stellar reputation and credibility in the international maritime industry. AET’s first LNG dual-fuel VLCC Eagle Valence obtained the Tanker of the Year Award at the Tanker Shipping and Trade Conference, Awards and Exhibition 2022 held in Athens, Greece on 10 November 2022. The award was in recognition to tankers delivered since November 2021 that are engaged in bulk liquid transport that sets new benchmarks in design, environmental, operational, safety, and technical performance. Testament of our value creation ability, MISC was honoured at the Alpha Southeast Asia 12th Annual Institutional Investor Corporate Awards 2022 for the Strongest Commitment to Sustainable Energy Transportation and was once again ranked among the Top Five Malaysian Companies in the category of Most Organised Investor Relations. The Strongest Commitment to Sustainable Energy Transportation Award validates our efforts to see through our commitment to move energy safely and efficiently, led by our high-performing global workforce at sea and shore. On the ESG front, both MISC and MHB were the recipients of Silver Awards in the Transport & Logistics and Energy categories respectively at The Edge Malaysia ESG Awards 2022 on 28 November 2022. These awards are testimony to the Group’s deep and unwavering passion towards cultivating ESG principles through our firm and consistent approach to drive long-term value for stakeholders while creating a positive impact that contributes towards a sustainable future. AFFIRMATION OF MISC’S ROBUST SUCCESSION PLANNING A DIVERSE AND STRONG BOARD MISC has been firm and consistent in upholding and implementing responsible corporate governance practices as well as robust risk management and internal control measures across the Group. The year saw the adoption of the MISC Directors’ Fit and Proper Policy, to ensure that all Board members have the necessary qualities, competencies, and experience to perform their duties and carry out the responsibilities required of their position in the most effective manner. Reflecting MISC’s sustainability agenda and our determination to shape a sustainable future, the Board approved the renaming of the BGRC to the BSRC effective 1 January 2023. This move will further embed all facets of sustainability into our business model, ensuring that these are reflected throughout the company’s strategy and operations. Towards assessing the performance and effectiveness of members of the Board, Board Committees, and individual directors in fulfilling their roles and functions, a Board Effectiveness Evaluation (BEE) was conducted, facilitated by an independent expert. The BEE provided the Board with objective insights into the Board’s focus areas as well as the breadth and depth of experience, expertise and mindsets represented on the Board. It also enabled us to gauge the depth and level of the Board’s culture and partnership with Management. The BEE validated the effectiveness and efficiency of the Board’s processes and reinforced the Board’s effectiveness in providing value to MISC’s Perform-Transform priorities. MISC has continuously driven the development of its talent agenda to establish and maintain a sustainable talent stream across all job levels to provide seamless leadership and talent succession planning throughout the Group. Robust succession planning has empowered MISC with a pipeline of qualified candidates to fill leadership positions as they become available and armed the organisation with a solid bench strength to continue to operate effectively towards achieving business goals. In FY2022, our succession planning enabled the smooth leadership transition of MISC’s new President/Group CEO. On 30 September 2022, Datuk Yee Yang Chien retired from his role as President/Group CEO and turned the helm over to MISC’s Chief Operating Officer and AET’s President & CEO, Captain Rajalingam Subramaniam. Captain Rajalingam’s appointment on 1 October 2022 demonstrates the strength and sustainability of MISC Group’s talent development and leadership succession plans. On behalf of the Group, I would like to extend our deepest appreciation and gratitude to Datuk Yee Yang Chien for his exemplary leadership at MISC. Datuk Yee Yang Chien has had a long and remarkable career in the maritime industry, spanning more than 20 years in various leadership roles within the Group. I would also like to welcome on board Captain Rajalingam and reiterate our full trust and confidence in his ability to steer MISC in its voyage moving forward to drive progress and create sustainable value. Another testament of MISC’s strong talent development agenda is Eaglestar’s first female Master Mariner Captain Eezmaira Sazzea binti Shaharuzzaman who was Malaysia’s first female recipient of the prestigious National Seafarer of The Year award on 25 June 2022. The award is given to “outstanding Malaysian seafarers who have demonstrated significant passion and commitment in their profession, as well as in recognition of their social contribution to the maritime community”. Captain Eezmaira’s achievement reinforces our commitment to continue progressing with our Diversity and Inclusion agenda, as the bulwark of our commitment to building human capital in the maritime sector. INTERNATIONAL VALIDATIONS AND AWARDS MISC has continuously driven the development of its talent agenda to establish and maintain a sustainable talent stream across all job levels to provide seamless leadership and talent succession planning throughout the Group. Robust succession planning has empowered MISC with a pipeline of qualified candidates to fill leadership positions as they become available and armed the organisation with a solid bench strength to continue to operate effectively towards achieving business goals. Key Messages Key Messages 25 24 MISC Berhad Integrated Annual Report 2022
Our firm commitment to upholding a strong Generative HSSE Culture was recognised at the MSOSH Awards 2022 when the Group achieved six awards at the 40th MSOSH Awards 2022. Following on from our 2021 inaugural inclusion on the Dow Jones Sustainability Emerging Markets Index, we are proud to once again be listed as a constituent for the second consecutive year. As well as that, MISC continues to be listed on the Bursa Malaysia FTSE4Good Index for nine years running. The recognition of our efforts and capabilities afforded by these prestigious external stakeholders are the testament to MISC’s commitment to excellence in our ESG performance and industry leadership, and we remain unwavering on our path to generate sustainable growth in the longer term. On behalf of the Group, I would like to take this opportunity to thank our shareholders, customers, business partners and financiers for their unwavering faith in our ability to generate sustainable growth. We affirm our commitment to continue working collaboratively with local and international authorities and governments and are deeply appreciative of their continued support as MISC works towards reshaping our business and making positive impacts on the shipping industry. We also wish to record our deepest gratitude to our shore and sea workforce for embodying MISC’s high performance culture in their jobs every single day. To my fellow Board colleagues, I thank them for their commitment and focus in sharing their insights and skills to steer MISC forward in its growth journey. 2022 has been MISC’s year of Powering Resilience as we augmented our fundamentals to future proof the Group. We trust that all our stakeholders will continue to lend us their steadfast support in our growth journey and in delivering long term-value creation across the global maritime value chain as we continue to build a Sustainable Future together. Thank you. CHAIRMAN’S MESSAGE MOVING FORWARD IN APPRECIATION The recognition of our efforts and capabilities afforded by these prestigious external stakeholders are the testament to MISC’s commitment to excellence in our ESG performance and industry leadership, and we remain unwavering on our path to generate sustainable growth in the longer term. We are cognisant that the VUCA environment will continue into the near-term future. These will present the Group with both challenges and opportunities, and we are mindful of mitigating our risks with regards to the former, while making the most of the latter. Our growth strategy for 2023 will see MISC focus on excellent project delivery for projects under construction while conducting selective investment within the current portfolio to sustain our ability to generate predictable, secured, and recurring cash flows. To augment the Group’s long-term business sustainability, we will be conducting regular evaluations of our financial capacity, resources, and capabilities. These will be balanced against our risk appetite and complemented by the identification of an appropriate growth strategy to sustain our forward moving journey. Financial prudence will underpin all our efforts, and we will continue the discipline of spending within our means for growth. In line with our MISC 2050 strategy, we will gradually reshape our business portfolio to address value gaps and prepare the Group for the energy transition towards a Net-Zero pathway. This will require the reassessment of the current business portfolio to identify opportunities that will unlock value and optimise our business portfolio. Key Messages Key Messages 27 26 MISC Berhad Integrated Annual Report 2022
PRESIDENT/ GROUP CEO’S MESSAGE CAPTAIN RAJALINGAM SUBRAMANIAM President/ Group Chief Executive Officer Our efforts will be supported by the enhancement of our organisational culture and behaviour through the adoption of a broader international and adaptive mindset, while we continue to invest in the reskilling and upskilling of our workforce to meet the challenges of tomorrow. INTRODUCTION DELIVERING FINANCIAL SUSTAINABILITY OUR STRATEGIC REPORT CARD FOR 2022 2022 was a year of transition. Personally, I transitioned from COO to take over as Group CEO in October. Although I am an MISC veteran, transitioning from sea to shore and through various management and leadership roles in the group, this new accountability was a humbling experience. I have been reminded in my first few months as PGCEO of how blessed we are as an organisation to have such a committed team. The energy and passion throughout our businesses is impressive. This is of course in no small part due to our former President and Group CEO, Datuk Yee Yang Chien. Datuk Yee Yang Chien spent 20 years in various leadership roles within MISC and played an important role in its development. I wish to thank him for sharing his insights and perspectives on MISC with me, as we worked together for a seamless leadership transition. As a Group, we thank him for all he has done for the organisation and wish him the very best with his future voyage. Through these multi-dimensional challenges MISC took early proactive steps to continually keep our people safe, and to comply with all emerging laws, rules and regulations. Further, MISC recorded positive progress in our strategic execution, taking the opportunity to strengthen our foundations. This was made possible because of the premium reputation and relationships we have built with our valued stakeholders, including blue-chip clients. In an uncertain and volatile environment, the strength of the MISC brand and our diversified portfolio added security to our business, while the steadfast implementation of our strategy continued to deliver sustainable financial returns. Our concerted efforts were critical in powering our resilience, as we expanded our capabilities to venture into new areas in line with our ambition to drive sustainable growth and long-term value creation. 2022 also reinforced the need to accelerate the transition to a low-carbon future, both on environmental and energy security grounds. MISC remains one of the highest rated shipping companies in the world, and we have maintained our credit ratings with Moody’s and S&P. We refuse to let short term events, no matter how unpredictable, blow us off course from our strategic path of long-term value creation through sustainable growth. To balance mitigating short-term challenges with focusing on long-term strategic objectives, MISC employs a dual-growth strategy. We drive short- to medium-term growth through our five-year rolling business plans. These focus on serving traditional markets as responsibly as possible to generate secured recurring cash flows via long term contracts with premium clients. These underpin MISC’s financial sustainability, deliver returns to our shareholders, and ensure we have the capital headroom required to fund the transition of our business and long-term strategy. Our long-term strategy is defined by MISC 2050. This is our pathway to building a new portfolio of businesses that will enable the Group to thrive in the net-zero and circular economy. We do this by investing in our brand, our people and our planet. The performance of our various businesses is detailed more fully in the Chairman’s message and business segments of this report, but in summary, in 2022 MISC delivered on the following fronts as we executed our strategy. 1. HSSE HSSE shall always remain our highest priority. In 2022 MISC’s HSSE performance was generally maintained, but we are conscious of the need to inculcate a Generative HSSE Culture as a way of life in our organisation. We will work tirelessly to achieve this. 2. Project Execution We focussed relentlessly on execution, particularly our Brazilian FPSO project, which had previously experienced challenges caused by COVID-19 and global supply chain issues. This focus is bearing fruit, and the recovery plan remains on track with delivery scheduled for 2024. Dear Valued Shareholders, A YEAR IN REVIEW 2022 was a year of mixed fortunes for MISC. As lockdowns and border restrictions eased around the world, many of MISC’s businesses were able to resume operations at pre-pandemic levels, although China’s zero-COVID strategy continued to affect some of our projects there. Some business segments leveraged firming markets while, conversely, macroeconomic factors and geopolitical tensions exacerbated supply chain disruptions and caused challenges for others. We witnessed the fundamental reassessment of economic relations and dependencies as the world became more polarised. Rising commodity prices contributed to inflationary pressures and in response, central banks worldwide raised interest rates rapidly, escalating recessionary risks. We also saw volatility in energy markets. Energy security became of prime concern to policymakers and decarbonisation took a temporary back seat as nations sought to replace lost supplies. MISC delivered robust financial returns to record improved year-on-year performance. Group revenue rose 29.9% to RM13,867.0 million in 2022 compared to RM10,671.7 million in 2021, while profit before tax (PBT) increased by 5.6% to RM1,874.3 million in 2022, as compared to PBT of RM1,774.6 million in 2021. Cash flow from operations (CFO) remains our preferred yardstick as it represents the real-world cash generation of our assets, undistorted by artificial accounting measures. The Group recorded CFO of RM3,042.1 million in 2022, which included cash payments of RM2,679.9 million for the conversion of an FPSO. Excluding the latter payment, MISC would have had CFO in 2022 of RM5,722.0 million, a 41.8% increase from 2021. MISC’s strong cash flows and consequent resilience is testament to the fundamental strength of our strategy - to create secured and recurring incomes by leasing assets on long term charters to select premium clients. Year on year, our strategy has delivered sustainable incomes that underpin MISC’s continued success and predictable future cash flows, enabling MISC to deliver consistent dividends. Our balance sheet remains healthy with a relatively low gearing compared to industry peers. Adopting a prudent hedging strategy has insulated MISC from the impacts of rapid interest rate rises. In 2022 MISC successfully returned to the bond markets after 18 years, issuing USD1.0 billion Global Medium-Term Notes at competitive rates, and prior to 2022’s significant interest rate increases. Key Messages Key Messages 29 28 MISC Berhad Integrated Annual Report 2022
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