87 Annual Report 2020 >> Our Performance Financial Measures and Performance Preserving liquidity to ensure sustainability Proactive cost containment, cash preservation and cash recovery measures ensured that Malaysia Airports remained sustainable throughout the turbulent year. Assets and Liabilities - Cash Balances, Bank Borrowings and Liquidity Cost containment Group-wide, we reduced operational expenditure and strictly prioritised maintenance capital expenditure for mission-critical projects, while deferring other capital expenditure. Cost containment exceeded targets Total cost reduction RM1,155.7 mil -36.3% Core operating costs reduced RM563.1 mil -26.1% vs targeted -20% Critical maintenance CAPEX RM189.7 mil Maintenance CAPEX deferred RM1,500.0 mil Critical maintenance capital expenditure was limited to key projects for future growth – core IT network replacement for KUL, runway rehabilitation, washroom refurbishment works, Single Token Journey via facial recognition, as well as the replacement of the Baggage Handling System (BHS) and Aerotrain Track Transit System. In terms of core operating costs, the pandemic provided us with the opportunity to innovate, rethink and reimagine our operations and costs structures. Among the initiatives was a Cost Lab launched in March that utilises Lean Six Sigma methodology to seek out cost containment opportunities while driving operational excellence. Through the lab, we reviewed the operations at five major subsidiaries - Malaysia Airports (Sepang) Sdn Bhd [MA (Sepang)], Malaysia Airports Sdn Bhd (MASB), Malaysia Airports (Niaga) Sdn Bhd [MA (Niaga)], Urusan Teknologi Wawasan Sdn Bhd (UTW) and MAB Agriculture-Horticulture Sdn Bhd (MAAH) - which together cover airport operations in Malaysia, duty free and non-dutiable goods, project and repair maintenance and agriculture and horticulture. The exercise yielded cost containment of RM145.0 million in 2020 alone. Another prime example of sustainable cost containment followed from the review of our energy framework. Energy costs make up a substantial portion of our operating costs, with approximately RM400.0 million spent on energy in 2019. In 2020, we achieved a one-off or temporary cost reductions when the government agreed to extend the discount on electricity tariffs to MA Sepang from April to September, and also through the replanning of operations in under-utilised areas of KUL. However, we pursued a more ambitious plan to achieve sustainable cost containment in energy, by re-examining our energy framework. As a result, our new joint venture with TNB Engineering Corporation Sdn Bhd for cooling energy supply will bring about sustainable energy cost savings of over RM50.0 million annually. The cost savings are derived from modernising KUL’s district cooling plant to improve its efficiency and to run fully on electricity. This also represents a switch from the use of turbines fuelled by hydrocarbon gas to electricity-powered, which is a cleaner option. Cash preservation Malaysia Airports made early approaches to key stakeholders to defer certain payments due in 2020 and 2021. Therefore, as at 31 December 2020, the Group’s cash and money market investments stood at RM1,717.0 million, which was 46.9% less than the previous year. Among the main cash preservation measures was deferment of user fees under the Operating Agreements for Malaysia operations in which the government of Malaysia agreed to defer the fees due for 2020 till April 2021. The Turkish government agreed to defer indefinitely the utilisation fee for SAW of EUR114.8 million which would originally be due in January 2021.
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