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Corporate Governance Statement |
Corporate Governance Statement
Tuas Power Ltd believes that good corporate governance is essential to the long-term
sustainability of the Company’s business and performance. It is fully committed to
effective corporate governance and supports the principles of integrity, openness and
accountability. Good corporate governance is the key to ensuring transparency, protecting
stakeholders’ interest and maximising shareholder value. As such, the Company
strives to continuously improve all aspects of the governance practice.
The following describes the Company’s corporate governance practices for the financial year ended
31 March 2008.
Board’s conduct of affairs
The Board provides entrepreneurial leadership, sets strategic aims and ensures that necessary
financial and human resources are in place for the Company to meet its objectives so as
to protect and enhance long-term shareholder value. The Board, together with management,
shapes the Company’s values and standards. It encourages the Company to be more
entrepreneurial, innovative and global in its mindset in order to drive the Company’s
business to a higher level of growth. The Board is responsible for the overall corporate
governance of the Company, providing oversight in the proper conduct of its businesses, assets
and performance of the Company, as well as establishing goals for management and
monitoring the achievement of these goals.
To assist the Board in the discharge of its functions, the Board has delegated specific
responsibilities to a number of Board Committees including an Audit Committee, an Executive
Compensation Committee and a Tender Committee. The activities of each Committee
are reported to the Board. The Board has also established a framework for the management
of the Company including a system of internal controls and business risk management.
Matters requiring board approval
The Company has adopted internal policies and procedures which set out the matters that
require Board approval. These include business strategies, key activities and items of a significant
nature not carried out in the ordinary course of business for which the Board has direct
responsibility for decision-making such as but are not limited to:
• Approval of annual budget
• Approval of annual report and accounts
• Convening of shareholder’s meeting
• Approval of corporate strategy
• Review of the Company’s performance
• Authorisation of major investments or transactions
In addition, the Board has adopted internal controls which set out approval limits for
capital expenditure, bank borrowings and cheque signatory arrangements at Board
level. Approval sublimits are also provided at management levels to facilitate operational
efficiency. These approval limits are regularly reviewed and revised where necessary to meet
operational and organisational requirements.
Board composition and guidance
To carry out its oversight function well, the Board must be effective, able to lead and control
the business of the Company. The Company believes that the Board should have independent
directors who can take a broader view of the Company’s activities and are able to exercise
objective judgment on corporate affairs independently.
The Board comprises seven directors, all of whom are non-executive members. There
are two nominee directors, while the other five members are independent directors.
This enables management to benefit from an alternative and objective perspective on
issues that are brought before the Board. Each director is expected to act in good
faith and in the interest of the Company.
The directors bring with them a diversity of invaluable experience, extensive business
networks and expertise in specialised fields such as power, finance, banking, business, law
and in the petroleum industry. The particulars of the directors in office as at 31 March 2008 are
set out on pages 16 to 19 of this Annual Report.
The Company believes that Board renewal must be an ongoing process, to ensure good
governance and to maintain relevance to the changing needs of the Company. Under the
Articles of Association of the Company, one-third of the directors retire from office at each Annual
General Meeting and offer themselves for re-election. In addition, a newly appointed
director will submit himself for retirement and re-election at the Annual General Meeting
immediately following his appointment. Thereafter, he is subject to the one-third rotation rule.
The following are the directors as at 31 March 2008:
* Arising from the sale of all the shares in the Company from Temasek Holdings (Pte) Limited to SinoSing Power Pte Ltd
on 24 March 2008, the incumbent directors resigned on 24 March 2008, but all five members were subsequently
reappointed on 25 March 2008.
Board meetings and access to information
The Board meets regularly on a quarterly basis and once annually to conduct its strategic
planning exercise. Adhoc Board meetings may be convened as required to deliberate on urgent
matters or significant issues. Apart from sit-down affairs, Board meetings can be conducted via
video and telephone conferencing, thus making it more convenient for the Board to hold meetings.
The Chairman leads the Board meetings to ensure its effectiveness on all aspects of its role.
The agenda for Board meetings is prepared by the Company Secretary in consultation
with the Chairman and the President and Chief Executive Officer. Besides matters for
decision, standing agenda items include review of performance and financial reports and
declaration of directors’ interests.
Board papers provide sufficient background or explanatory information on matters to be
deliberated so as to enable directors to be adequately informed. As a general rule, Board
papers are sent to directors at least seven days prior to the meeting so that Board members can
be adequately prepared for active participation during the meeting. This is critical for effective
decision-making. Under special circumstances, matters may be tabled at the meeting itself or
discussed without Board papers being distributed. Relevant managers in charge of matters to be
deliberated would be in attendance at the Board meetings. External advice and consultations are
made available to directors to ensure that full information is available before important decisions
are made by the Board. All issues are actively deliberated by the Board and properly minuted.
In addition to Board meetings, management regularly provides the Board with adequate
and timely information as well as ongoing reports relating to the operational and financial
performance of the Company. At Board meetings, the Company’s actual results are compared
against the budget and material variances are then explained.
All directors have separate and independent access to management as well as the Company
Secretary and may consult with any other employees and seek additional information
on request.
During the financial year, the directors held five meetings including a one-day strategic
planning meeting.
Training of directors
New Board members are fully briefed on the business of the Company. They are provided
with background information on the Company’s history, vision and values and receive appropriate
orientation training such as on-site power plant visits to gain greater insight of the Company’s
operations. Throughout the year, directors were also given the opportunity to attend external
training courses on corporate governance and key business issues and developments.
Chairman and President and Chief Executive Officer
There is a clear division of executive duties and responsibilities in the Company in the office of
Chairman and the President and Chief Executive Officer. This serves as a check and balance
to ensure that no one individual represents a considerable concentration of power and
creates increased accountability as well as greater capacity of the Board for independent
decision-making.
The position of Chairman and President and Chief Executive Officer are separate and held
by Mr Huang Long and Mr Lim Kong Puay respectively. The Chairman is non-executive
and is responsible for the effective working of the Board. In between formal Board meetings,
the Chairman obtains periodic updates on the Company from the President and Chief Executive
Officer on a regular but informal basis. The day to day running of the Company with full executive
responsibility over the business directions and operations decisions of the Company is
delegated by the Board to the President and Chief Executive Officer.
Board committees
1) Audit Committee
The Audit Committee is chaired by Mr Ng Kwan Meng who is a non-executive independent
director. Its members are Mr Lim How Teck, Mr Lim Ming Seong and Ms Zhou Hui.
The Audit Committee performs the following functions:
a) reviews the Company’s financial statements before submission to Board for approval
b) makes recommendations to the Board concerning the appointment and remuneration
of internal and external auditors
c) reviews the scope and planning of the external and internal audit and the reports of the
auditors
d) monitors the effectiveness of the Company’s systems of accounting, internal and risk
management controls
e) examines any other matters that is referred to it by the Board.
The Audit Committee met three times during the year in review. All members participated actively
at the meetings. The external and internal auditors were in attendance when the Committee reviewed
the external and internal audit reports. The Audit Committee also met with the external auditors,
without the presence of management, at a separate session.
2) Executive Compensation Committee
The Committee is chaired by Mr Lim How Teck. Its members are Mr Huang Long, Dr Wu Shen
Kong and Mr Alvin Yeo.
This Committee:
a) sets and reviews policies concerning the compensation and promotion of top
management officers of the Company
b) sets the annual performance targets for and evaluates the performance of the President
and Chief Executive Officer
c) reviews the key management succession plans of the Company.
The Executive Compensation Committee met four times during the year in review.
3) Tender Committee
This Committee is chaired by Mr Lim How Teck with Mr Ng Kwan Meng, Mr Alvin Yeo and
Ms Zhou Hui as members. The Committee considers and approves tenders called by
the Company and waivers of competition which are above specified financial limits. The
Committee did not hold any formal meeting, but the Committee’s decision in writing was obtained
by circulation on various tender submissions during the year.
Remuneration matters
The Company’s remuneration policy is to provide compensation packages at competitive market
rates so as to attract, retain and motivate the best talent in order to enhance corporate
performance. The remuneration packages offered by the Company are comparable to
those of its peers in the industry.
Fees for directors are based on a scale of fees comprising basic retainer fees as director and
additional fees for attendance and serving on Board Committees. The fees are approved by
the shareholder.
The remuneration of senior management staff is determined by the Executive Compensation
Committee. To ensure greater transparency, a formal procedure based on key performance
indicators has been developed for determining the remuneration packages of senior management.
The compensation structure comprises two key components i.e. fixed and variable component,
with the variable component comprising a performance-based bonus which is payable
upon the achievement of individual and corporate performance targets.
Accountability
For effective monitoring of the Company’s business, the management provides the Board
with appropriately detailed management accounts of the Company’s performance and prospects
on a monthly basis showing quarterly results, forecasts for profits and cash flow, working
capital and borrowing levels, compared against the approved budget. The annual budget is
reviewed and approved by the Board.
Internal controls
The Board has put in place a framework of prudent controls and systems to manage our
risks and to adequately safeguard, verify and maintain accountability of its assets. These
controls include financial, operational controls and risk management policies established by
the management. The Board, through the Audit Committee, continuously reviews the
effectiveness of all internal and operational controls including ensuring that adequate
financial risk management policies and compliance controls are in place and that
proper accounting records are maintained.
A risk management committee comprising management representatives from finance,
trading, retail, fuel management and risk management meets regularly throughout the
year to look into the Company’s overall risk profile and the various risk aspects of the
Company’s business units and corporate functions. It also ensures that risks to the
business are properly identified and evaluated, and effective responses are promptly developed
for their management. The risk management committee reports to the Company’s
management. To ensure independence, the head of risk management reports directly
to the Audit Committee.
Internal audit
During the year, the Company adopted a risk-based auditing approach. The internal audit
plan is established by the internal auditor in consultation with, but is independent of,
management. The plan is submitted to the Audit Committee at the beginning of each
year. The internal auditor meets with the Audit Committee to finalise and obtain approval for
the plan.
Audits are carried out on all significant business areas in the Company. The internal audit reports
are submitted to the Audit Committee and the findings and recommendations of the internal
auditors deliberated at the Audit Committee meetings.
The internal audit function is outsourced, with management remaining responsible for monitoring
compliance regularly.
Communication with shareholder
The Company communicates regularly with its shareholder through monthly progress reports,
quarterly financial reports and annual reports and accounts. The shareholder is also informed of all
major developments that impact the Company through special reports and submissions.
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