The recognition of gains or losses on exchange rate

No. EGCO 310/055 Date: February 23, 1998 Attn: The President of the Stock Exchange of Thailand Subject: The recognition of gains or losses on exchange rate Reference to our letters dated October 6, 1997 and dated January 30,1998, the Board of Directors of Electricity Generating Public Company Limited (EGCOMP) passed the resolution to recognize gains or losses on the application of the managed float exchange system by recording as deffered loss and amortized over the average remaining term of the debts. In order to comply with (1) the Notification of the SEC No. KorJor. 40/2540 Re:Criteria, Conditions and Procedures of Disclosure Information Concerning Financial Status and Results of Business Operations of the company which issues securities and (2) the Regulations of the Stock Exchange of Thailand Re: Rules, Conditions and Procedures Governing Preparation and Filing of Financial Statements and Reports Concerning Financial Status and Results of Business Operations of Listed Companies (No.1) B.E.2541, the Board of Directors' meeting No. 3/2541 held on February 20, 1998 had the resolution to change in accounting policy to fully write off foreign exchange gains or losses arising from the changes in the Baht to US Dollar exchange rate in the year they are incurred in accordance with Accounting Standard No. 30 Re: the effect of the change in foreign exchange rate. This accounting policy is effective for all financial statements in Quarter 4 of year 1997 and in year 1997 for which the company will report to SET immediately after being audited by the company's external auditor. The Board of Directors believes that the impact from this foreign exchange write off policy, though will post loss in 1997 profit and loss statement with large amount but would bring in greater financial benefit to the company because of its positive tax impact and because of the smaller annual realized loss on exchange rate from 10-15 years amortized US Dollar debt and debt service coverage ratio still exceed 1.2 over the loan life. Furthermore Electricity Generating Authority of Thailand (EGAT) which is the electricity purchaser of Rayong Electricity Generating Company Limited (REGCO) and Khanom Electricity Generating Company Limited (KEGCO) adjusted tariff formula citing the change in the exchange rate increasing the revenue of REGCO & KEGCO. Sincerely, Mr. Machima Kunjara Na Ayudhya Deputy Managing Director - Finance