Chemical Company of Malaysia Berhad Annual Report 2019

As we focus our efforts on growing our chlor-alkali business in Malaysia through increasing our chlor- alkali production capacity with PGW1, we anticipate an increase in power consumption. Currently approximately 60% of our variable cost stems from energy costs. To mitigate the ever increasing energy costs, we will be investing some RM27.9 million in a 7.8 MW co-generation (COGEN) plant. COGEN or Combined Heat and Power is the simultaneous production of electricity and usable thermal energy from a single fuel source which is significantly more efficient and cost effective. It supports the national agenda of achieving 8% savings from energy efficiency by 2025. The heat that is created from COGEN is captured and recycled to provide hot water or steam for other uses such as heating or cooling of production facilities. The project will also reduce greenhouse gas emissions such as carbon dioxide (CO 2 ) and other air pollutants like nitrogen oxide and sulphur dioxide, thereby producing a cleaner environment. Even as we look forward to reap the benefits of energy savings from the COGEN initiative in 2021, we are currently utilising the latest zero-gap electrolyser technology which allows us to save a further 3%-5% in energy costs. We have also turned to consuming the excess hydrogen from our plants as fuel which has also led to reduced energy costs. In FY 2019, we saved just over RM1 million from the latter initiative. Moving Forward As we move forward into FY 2020, we expect to reap the benefits of the caustic soda supply contract to PETRONAS’ RAPID facilities. We plan to leverage on this contract to maximise the Group’s trading opportunities. Currently, Malaysia produces over 300,000 MT of caustic soda per annum with CCM contributing some 120,000 MT to 144,000 MT per annum towards this total. Although there is rising local market demand for caustic soda, the players in the domestic market cannot fulfil this demand. As such there is a need to import caustic soda. We are in a position to do this in an effective manner given our experience and vast network of connections. In FY 2019, to meet growing market demand for chlor- alkali products, we not only ran our local chlor-alkali production at almost full capacity but also imported 90,000 MT of caustic soda from Japan, Indonesia and China for sale to domestic customers. Today, we hold an estimated 40% share of the caustic soda market and plan to increase to this to over 50% in the near future. | Group Managing Director’s | Management Discussion and Analysis 22 CHEMICAL COMPANY OF MALAYSIA BERHAD