Power to the people
Izzaddin Idris CPA, CFO of Malaysia's main power company Tenaga Nasional Berhad, spent early this morning on the phone to an investor in San Francisco, and the previous evening talking to investors in Europe. These out-of-hours chats are part and parcel of the modern CFO's working life in a global environment where investors need real-time information in order to make crucial decisions. With over 20 per cent of Tenaga's share capital owned by foreign investors, Idris appreciates that a call from the company's finance man can be very reassuring.
'I understand with someone thousands of kilometres away, that they need to know what's going on, the issues, and what's being done. They need to talk to someone they can relate to, and if they talk to the CFO it will certainly give them great comfort,' says Idris, who cites dealing with capital markets as one of the aspects of his role he most enjoys. As a former investment banker of 10 years' standing, that's not surprising.
While he describes investment banking as 'hard work' and the foundation of his career, he also sees it is a safe haven, because the advisory work puts him close to clients, who must still take responsibility and live with the decisions.
In contrast, his role in Tenaga, a RM68 billion publicly listed government link company, is one 'where I don't have to worry where the money comes from, as we collect RM1.8 billion a month. My focus is where the money goes'.
This is perhaps why business development is a main aspect of his role. 'We can't rely on the business interests in Malaysia forever,' he says. 'Growth will slow down and we need to grow the business elsewhere.' Idris is examining potential power development projects in developing countries in Indo-China (Vietnam), the Middle East, and India. Together with the investor relations function, it's a role that frequently sees him on the road.
Growth may slow down for Tenaga on the domestic front, but Idris maintains it is unlikely that the company's monopoly status will change. Tenaga controls 50 per cent of Malaysia's generation and 100 per cent of the transmission and distribution business.
'In a country as big as this, there are pockets where there are heavy subsidies to the transmission and distribution side,' he explains. 'There are also areas of great demand and concentration of consumers. If you tried to sell off and create distribution companies, people would start cherry picking the best and leaving the unprofitable. From what we see overseas it's not working the way it's intended to.'
What will change for Tenaga is the source of fuel in the future. Thirty-five per cent of the country's generation is fuelled by coal-fired plants, and current premium coal prices have put pressure on margins. 'A tonne of coal takes hundreds of years to develop but takes half an hour to burn, so demand will always exceed supply,' he says. 'And if we don't have viable alternatives we could be in serious trouble in years to come. This goes not just for Tenaga but for any power company.'
The company is looking to hydro power to partially replace fossil fuels, but that brings its own problems. 'All the hydro power is located in East Malaysia and the issue is transferring it 700 km over land and 670 km under sea. The cost of building the infrastructure is high, but with current coal prices it now becomes viable.
'We are going to harness a lot of hydro in years to come,' Idris says. 'It's very clean. It has its environmental issues, which we need to tackle.' By 2013, 2400 megawatts of hydro power will be available as part of a phased operation, 'but that's just one project in the
river scheme, which could generate as much as 20,000 megawatts in the future'. Currently Tenaga has an installed capacity of over 10,000 megawatts.
Another investment for the future is staff, and Idris says human resources is one of the most satisfying of his responsibilities. He describes himself as a 'hands-on' boss with his 320 indirect and eight direct reports: 'If I need information I tend to go directly to that person. I'm not protocol-conscious by nature'.
HR is a focus for the company overall. Tenaga established the Universiti Tenaga Nasional to produce well-rounded, competent individuals in various fields, and on the finance front it is one of two Malaysian companies to be an approved training organisation for CPA Australia. Idris has also recently started a vacation work program for university students. 'This way we can identify the candidates we want to recruit,' he explains.
'Over a six-month period we can see whether they can do the job and can adapt to the working environment.
'Of course if I'm able to identify my successor that would be the greatest achievement
for anyone. Not many people want that, but if I can find somebody to replace me I've done my job.'
The role of Tenaga CFO is not Idris' only job. He also juggles directorships with the heavy workload of his day job. The directorships are as diverse as Kumpulan Wang Persaraan, the retirement fund for civil servants, and the Shuaibah Project Company, a US$2.5 billion power and desalination project in Saudi Arabia. The former, he says, needs a conservative approach to issues, while the latter demands a tight timeline to meet a new operating environment.
Outside directorships, he says, 'provide a great opportunity to understand a different business altogether. Certainly, it enables you to apply your skills and knowledge into a different environment and you are able to articulate your arguments on a formal and commanding platform: the board. Furthermore, interacting with other directors means you will benefit from the differing perspectives they bring to the discussion.'
Along with integrity, strategic thinking, managed prudence and a well-rounded outlook, Idris believes good com-munication skills are an essential part of the CFO's armoury.
'I may need to explain high finance to an engineer, or a lawyer for that matter,' he says. 'Any professional worth their salt should be able to explain their profession in layman's terms; that shows they understand it.'
Out of hours
How do you relax?
With my kids (as I have a young family). We have beach holidays. I also enjoy movies, especially on outings with my wife. I am a huge Star Wars fan. During tense negotiations I try to break the ice by using catchphrases, like Darth Vader's to Luke Skywalker: 'This is your destiny'. (I try to do the voice!) I also enjoy the English Premier League and sports programs generally, as the skills required fascinate me.
What keeps you awake at night?
These days, currency and commodity (coal) markets, but generally I sleep very well.
What are you reading at the moment?
Alan Greenspan's Age of Turbulence. I feel he has pre-empted what has been unfolding in the crisis in America's banking system.
Reference: May 2008, volume 78:04, p. 22 - 25
