CAHYA MATA SARAWAK ANNUAL REPORT 2016

A N N U A L R E P O R T 2 0 1 6 Section 03 P E R F O RMA N C E 2 0 1 6 25 Cahya Mata Sarawak Berhad SAMALAJU INDUSTRIAL PARK The Samalaju Industrial Park (SIP) is one of five growth nodes under the Sarawak Corridor of Renewable Energy (SCORE) initiative and the biggest single industrial park in Malaysia. Home to a host of energy-intensive industries, it is also SCORE’s most successful node and makes up the bulk of the investment projects approved under SCORE thus far. As of mid-June 2016, the SIP had attracted and approved 16 projects with a total investment of RM25.29 billion. This is envisaged to lead to the creation of over 13,000 job opportunities and, in the immediate years ahead, will create a significant long-term sustainable industrial base that takes the Malaysian economy into new sectors and which will generate more employment and business opportunities in the SIP. In November 2016, two of China’s largest firms, Hebei Xinwuan Steel Group and MCC Overseas Limited, signed a Framework Cooperation Agreement with the Sarawak State Government to inject USD3.0 billion (RM13.00 billion) in foreign direct investment (FDI) in a steel plant in the SIP. This sets the stage for SCORE to be a major player in the global steel business. Mandated by the State, the SIP remains an attractive drawing card to investors, particularly heavy and energy- intensive industries that are keen to leverage on the competitive edge afforded by Sarawak. This includes the State’s competitive long-term renewable energy costs, its quality infrastructure, its business-friendly Government and its strategic proximity to fast growing East Asian markets. By virtue of our involvement in the development of the township adjoining the SIP, CMS is capitalising on the opportunity to be a major local participant in SCORE. Our continued involvement in the SIP is expected to propel Samalaju Properties Sdn Bhd forward as a major engine MANAGement DISCUSSION AND ANALYSIS TOTAL INVESTMENT IN SIP AS AT MID-JUNE 2016 RM 25.29 billion of growth for CMS. We have been an active participant in the SIP in three core areas: firstly, our ventures into energy- intensive industries at the SIP; secondly, the provision of temporary workers’ accommodation through our lodges and hotel; and thirdly, our property development activities within the same. In the first core area, CMS has taken up a 25% equity stake in OM Materials (Sarawak) Sdn Bhd (OM Materials Sarawak) and in OM Materials (Samalaju) Sdn Bhd (OM Materials Samalaju) for the development of a smelter with a revised capacity of 192,000 MT of ferrosilicon alloys and 200,000MT - 300,000MT of manganese alloys (silicomanganese and high carbon ferromanganese) where production is presently being ramped up to reach full production by the end of 1H2017. A second investment involves taking up a 40% stake in Malaysian Phosphate Additives (Sarawak) Sdn Bhd which is developing a phosphate additives (and related products) plant with an annual production capacity of approximately 1.5 million MT which is expected to be commissioned in 1H2018. Through our involvement in the second core area, that of accommodation and housing, Samalaju Properties is addressing the short-term accommodation needs of industries locating to the SIP. To this end, we have developed the Samalaju Lodges to provide accommodation for workers, supervisors and managers of industries at Samalaju, both during construction and