The new electricity tariff - effective 1st June 2011.

FENERGY SOURCE Coal Electricity in Malaysia is powered mainly by natural gas (54.4%) and coal (40.2%). Hydro power and oil make up the remainder. 40.2% MALAYSIA Electricity supply 54.4% Natural Gas THE RATIONALE SUMMARY The electricity tariff revision is mainly driven by the escalating cost of fuel. Rising material and capital expenses have also intensified the situation. reviews in July 2008 and March 2009 were mainly to cater for fuel cost increases due gas and coal price revisions. The new tariff reflects these rising costs. It will help TNB to partly recover for the escalating electricity cost of supply since the last base tariff revision in 2006. But the electricity tariff revision was carefully structured' so low income eamers will not experience any change in the bills while the majority of Malaysians will undergó minimum impacts. The new rate reflects these costs. The last review of the base tariff was carried out in June 2006. Subsequent NATURAL GAS 28%HIKE COAL US$ 15-30/TONNEMORE INCREASING OPERATION COST FUTURE CAPEX INVESTMENT As of 1st June 2011, natural gas to the power sector will cost RM13.70/mmBTU instead of RM10.70/MMBTU, The hike is based on the government's natural gas pricing mechanism to reflect market price trend. Similarly, coal prices have been on the rise. The new tariff was structured based on the average coal price of US$ 85/tonne CIF even though for the first six months of its financial year, TNB had been buying coal at an average price of USS 100/tonne CIE. Currently, the average coal price has risen up to USS 120/tonne CIF Rising equipment cost, material cost and inflation are other reasons on why the tariff revision is needed. The new electricity rate and natural gas will take into effect on the same day. The tariff revision is needed to partiy cushion impact of the difference in the cost of coal and the allowable cost pass-through in tariff which is affecting TNB's financials. Electricity supply industry is a capital intensive industry. As such TNB needs to pump in around RM4-5 billion a year in capital expenditure for electricity supply infrastructure investment. This is to ensure the security, reliability and quality of electricity supply in Malaysia. Material Equipment Inflation RISING ENERGY COST OTHER RISING COST