PERAK CORPORATION BERHAD (210915-U) (Incorporated in Malaysia) ANNOUNCEMENT FOR PUBLIC RELEASE OPERATION AND MAINTENANCE AGREEMENTS NO. 1, NO. 2 AND NO. 3 1.0 INTRODUCTION On behalf of the Board of Directors of Perak Corporation Berhad ( PCB or Company ), we wish to announce that Lumut Maritime Terminal Sdn Bhd ( LMT ), a 50% plus 1 share subsidiary the Company, has on 5 April 2018 entered into: a. Addendum to existing Operation & Maintenance Agreement ( OMA1 ), b. New Operation & Maintenance Agreement No. 2 ( OMA2 ), and c. New Operation & Maintenance Agreement No.3 ( OMA3 ) (collectively referred to as the OM Agreements ) with Lekir Bulk Terminal Sdn Bhd ( LBT ), a subsidiary of Integrax Berhad. Pursuant to paragraph 10.09 of the Bursa Malaysia Securities Berhad s Main Market Listing Requirements, the OM Agreements are deemed to be a recurrent related party transaction of a revenue and trading nature. 2.0 INFORMATION ON LMT AND LBT 2.1 Information on LMT LMT, bearing Company No. 180480-D, was incorporated in Malaysia under the then Companies Act 1965 as a private limited company on 3 April 1989. The issued share capital of LMT amounted to RM23,800,000 comprising a total of 23,800,000 ordinary shares. The principal activities of LMT are that of the development of an integrated privatised project encompassing ownership and operations of multipurpose port facilities, operation and maintenance of a bulk terminal, sales and rental of port related land and other ancillary activities. 2.2 Information on LBT LBT, bearing Company No. 414060-T, was incorporated in Malaysia under the then Companies Act 1965 as a private limited company on 3 April 1989. The issued share capital of LBT amounted to RM68,000,000 comprising a total of 68,000,000 ordinary shares. The principal activities of LBT are that of the development of an integrated privatised project encompassing ownership of a bulk terminal, LBT Terminal. LBT is an associate company of LMT by virtue of 50% minus 1 shares held by Pelabuhan Lumut Sdn Bhd in LMT which also holds 80% of shares in LBT. Indirectly LBT is being owned and controlled by Tenaga Nasional Berhad ( TNB ) via it s holding of Integrax Berhad. The OM Agreements are deemed to be a related party transaction by virtue of Pelabuhan Lumut Sdn Bhd and Integrax Berhad, direct and indirect substantial shareholder of LBT respectively, are direct and indirect substantial shareholder of LMT respectively. 1
3.0 CONTEXT AND SALIENT TERMS OF THE OM AGREEMENTS Pursuant to the OM Agreements, LMT will continue to operate and maintain LBT Terminal which is owned by LBT. Detailed context and salient terms of the agreements are as follows: OPERATION & MAINTENANCE AGREEMENT (OMA1) There is a Jetty Terminal User Agreement ( JTUA1 ) signed by LBT and TNB Janamanjung Sdn Bhd on 19 August 1999 for 26 years period There is OMA1 signed between LMT and LBT on 30 June 2000 for LMT to provide Operation and Maintenance Services as required under JTUA1 on LBT s behalf which the commencement date started on 22 May 2002 for the initial terms of 180 months (15 years) Schedule 8 Tariff in OMA1 ended after 15 years (180 months @ 21 May 2017), and there is provision for the Tariff to be reviewed & mutually agreed by LMT and LBT Addendum to the existing OMA1 for the changes in Schedule 8 Tariff to include another 10 years starting from 22 May 2017 Expected revenue from the period of 10 years generated from OMA1 will be approximately as follows: 1. Tonnage payment RM 164.25 million 2. Based Operating Payment RM 162.12 million RM 326.37 million OPERATION & MAINTENANCE AGREEMENT NO. 2 (OMA2) There is a Jetty Terminal User Agreement No. 2 ( JTUA2 ) signed by LBT and TNB Janamanjung Sdn Bhd on 27 July 2012 for 26 years period Previously there is no OMA signed between LMT and LBT for LMT to provide Operation and Maintenance Services as required under JTUA2 on LBT s behalf There were negotiations for establishment of OMA2 between LMT and LBT since 2015 The new agreement (OMA2) will be established to reflect the linkages to JTUA2 and similar concept of structures as OMA1 Commencement date of OMA2 will be 3 October 2014 for 26 years in accordance with JTUA2 Expected revenue from period of 26 years generated from OMA2 will be approximately as follows: 1. Tonnage payment RM 178.17 million 2. Based Operating Payment RM 88.57 million RM 266.74 million 2
OPERATION & MAINTENANCE AGREEMENT NO. 3 (OMA3) There is a Jetty Terminal User Agreement No. 3 ( JTUA3 ) signed by LBT and TNB Janamanjung Sdn Bhd on 25 February 2015 for 26 years period Previously there is no OMA signed between LMT and LBT for LMT to provide Operation and Maintenance Services as required under JTUA3 on LBT s behalf There were negotiations for establishment of OMA3 between LMT and LBT since 2017 The new agreement (OMA2) will be established to reflect the linkages to JTUA3 and similar concept of structures as OMA1 Commencement date of OMA3 will be 1 July 2017 for 26 years in accordance with JTUA3 Expected revenue from period of 26 years generated from OMA3 will be approximately as follows: 1. Tonnage payment RM 183.75 million 2. Based Operating Payment RM 22.18 million RM 205.93 million 4.0 BASIS OF ARRIVING AT THE TARIFF CONSIDERATION FOR THE OM AGREEMENTS The tariff consideration was arrived at based on negotiations between LMT and LBT on a willing willing basis after taking into consideration the tariff provided in OMA1 and JTUA s. The tariff also taking into consideration LMT s cost of operating and maintaining the facilities provided in the OM Agreements. 5.0 RATIONALE AND PROSPECTS OF THE OM AGREEMENTS LMT had been operating under OMA1 for LBT for the last 15 years since May 2002 and had shown a good performance in giving its services. This had given the confidence to LBT and TNB to continue and expand the services given by LMT as their service provider under OM Agreements. The execution of the OM Agreements will also give a secured potential revenue of approximately total revenue of close to RM 800 mill in the span of 26 years. 6.0 RISK FACTORS The Board of Directors of PCB is not aware of any risk factor arising from the execution of the OM Agreements other than the normal business, market and global economic risks, in-fact it is an opportunity for LMT to increase its revenue stream. 7.0 SOURCE OF FUNDS There will be no additional funds required in execution of the OM Agreements other than the normal business and operations requirement which LMT will fund through its own equity. 8.0 FINANCIAL EFFECT OF THE EXECUTION OF THE OM AGREEMENTS 8.1 Share capital and substantial shareholders shareholdings The OM Agreements will not have any effect on the issued share capital of PCB and the substantial shareholders shareholdings of PCB. 3
8.2 Earnings Per Share, Net Assets Per Share and Gearing The OM Agreements will not have any material effect on the earnings per share, net assets per share and gearing of PCB Group for the financial year ending 31 December 2018. However, barring any unforeseen circumstances, the OM Agreements are expected to contribute positively to the future earnings of PCB Group. 9.0 APPROVAL REQUIRED The Company has sought a mandate from the shareholders of the Company for the transactins under OMA1, being recurrent related party transactions of a revenue and trading nature. The Company will seek a mandate from the shareholders of the Company at the forthcoming Annual General Meeting for LMT to enter into transactions under OMA2 and OMA3, being recurrent related party transactions of a revenue and trading nature. 10.0 DIRECTORS AND MAJOR SHAREHOLDERS INTEREST None of the directors or major shareholders of PCB and/or persons connected with the directors and/or major shareholders of PCB, has any interest, direct or indirect, in the OM Agreements. 11.0 AUDIT COMMITTEE S STATEMENT The Audit Committee of PCB, having considered all aspects of the OM Agreements, including the rationale, fairness of the contract sum and the financial effects of the OM Agreements, is of the opinion that the OM Agreements are in the best interest of PCB and not detrimental to the interest of the non-interested shareholders of PCB. The Audit Committee is of the view that the OM Agreements are fair, reasonable and on normal commercial terms. 12.0 DIRECTORS RECOMMENDATION The Board of Directors of PCB, having considered all aspects of the OM Agreements including the rationale, fairness of the contract sum and the financial effects of the OM Agreements and the recommendation of the Audit Committee, is of the opinion that the OM Agreements are in the best interests of the Company and not detrimental to the interest of the non-interested shareholders of PCB. The Board of PCB is of the view that the OM Agreements are fair, reasonable and on normal commercial terms. 13.0 TRANSACTIONS WITH LBT FOR THE PRECEDING 12 MONTHS Save for the OM Agreements, LMT and LBT have not entered into any other material transactions for the preceding 12 months. 4
14.0 DOCUMENTS FOR INSPECTION The OM Agreements are available for inspection during the office hours from 9.00 a.m. to 5.00 p.m. from Monday to Friday (except for public holidays) at the registered office of the Company at D-3-7 Greentown Square, Jalan Dato Seri Ahmad Said, 30450 Ipoh, Perak Darul Ridzuan for a period of three (3) months from the date of this announcement. This announcement is dated 5 April 2018. 5