F/S THE SECOND QUARTER 1998 EGCOMP

Unaudited Reviewed Electricity Generating Public Company Limited and its subsidiaries Page 5 Notes to the financial statements and consolidated financial statements - June 30, 1998 Basis of preparation of the interim financial statements 1. The financial statements on pages 2 to 4 are unaudited and have been prepared from the accounting records of the company and its subsidiaries. In the opinion of Management, these interim financial statements present fairly the financial position and the results of their operations and change in shareholders' equity of the company and its subsidiaries in conformity with generally accepted accounting principles. These interim financial statements should be read in conjunction with the financial statements and the consolidated financial statements for the year ended December 31, 1997. Basis of consolidation 2. The consolidated financial statements include the financial statements of the following subsidiaries : 1998 1997 Percentage Percentage of holding of holding Rayong Electricity Generating Company Limited 99.99 99.99 Khanom Electricity Generating Company Limited 99.99 99.99 EGCO Engineering & Service Company Limited 99.99 99.99 EGCO Joint Ventures & Development Company Limited 99.99 99.99 EGCO Mining Company Limited 66.70 40.00 Intercompany transactions have been eliminated in the consolidated financial statements. Unaudited Reviewed Electricity Generating Public Company Limited and its subsidiaries Page 6 Notes to the financial statements and consolidated financial statements - June 30, 1998 continued Principal accounting policies 3. A summary of significant accounting policies of the company is set out below. (a) Short-term investments Investments in marketable securities are stated at the lower of aggregate cost or market value. (b) Spare parts and supplies Spare parts and supplies are stated at cost less provision for obsolete stock. Cost is calculated by the moving average basis. The provision for obsolete stock is mainly calculated by dividing the balances of spare parts and supplies on hand at the year end by the number of years remaining under the Power Purchase Agreement with Electricity Generating Authority of Thailand (EGAT). (c) Investments in subsidiary, associated and other companies Investments in subsidiaries and associated companies are accounted for under the equity method . Investments in other companies are accounted for under the cost method. (d) Property, plant and equipment Property, plant and equipment are stated at cost. Unaudited Reviewed Electricity Generating Public Company Limited and its subsidiaries Page 7 Notes to the financial statements and consolidated financial statements - June 30, 1998 continued Depreciation is calculated on a straight-line basis over the expected useful economic lives of the assets concerned. The principal annual rates used for this purpose are : Years Power plant 15 and 20 Building and structure 20 Communication system 5 and 10 Transmission system 20 Operating and maintenance equipment 5 Office equipment 5 and 10 Furniture and fixtures 5 Computers and accessories 5 and 10 Vehicles 5 (e) Deferred expenses Pre-operating expenses, organisation expenses and other deferred charges are amortised under the straight-line method, over a period of 5 - 10 years. (f) Foreign currencies Trading transactions denominated in foreign currencies are translated into Thai Baht at the exchange rates ruling when the transactions were entered into. The balances of monetary assets and liabilities denominated in foreign currencies are translated into Thai Baht at the exchange rate ruling at the balance sheet date. Exchange gains or losses are included in the statements of income (loss) and consolidated statements of income (loss). (g) Earnings (loss) per share Earnings (loss) per share is calculated based on the weighted average number of shares issued during the period. Reviewed Electricity Generating Public Company Limited and its subsidiaries Page 8 Notes to the financial statements and consolidated financial statements- June 30, 1998 continued Related party transactions 4. A summary of significant transactions with a related company is as follows : Consolidation 1998 1997 second quarter six-month second quarter six-month (Million Baht) (Million Baht) (Million Baht) (Million Baht) Transactions during the period Electricity revenues 2,270 4,806 1,888 3,746 Maintenance service expenses 207 298 4 5 Account receivable-trade is due from Electricity Generating Authority of Thailand (EGAT), the major shareholder, being in respect of sales of electricity. The two subsidiaries entered into Power Purchase Agreements with the EGAT. The agreements shall be effective for periods of 15 and 20 years. According to the resolutions of the Cabinet's meetings dated February 15, 1994 and January 23, 1996 , the electricity revenues occurred from such agreements are calculated, based on "Cost plus basis". There is a limitation of sale of power to third parties as specified in the agreements. These agreements have been pledged as collateral with the lenders under the Master Agreements. Unaudited Reviewed Electricity Generating Public Company Limited and its subsidiaries Page 9 Notes to the financial statements and consolidated financial statements - June 30, 1998 continued Under the Power Purchase Agreements, EGAT has to bear the natural gas cost until the company enters into a natural gas purchase agreement with the Petroleum Authority of Thailand. Therefore, the calculation of revenues from the portion of energy sales of electricity does not include a calculation of the natural gas cost. On July 20, 1998 EGAT informed the company to negotiate with the Petroleum Authority of Thailand in order to enter into a natural gas purchase agreement. Under the Power Purchase Agreements with EGAT, the subsidiaries are eligible to take into consideration the exchange rate effects to adjust the formulae for calculation of electricity power sold to EGAT in each month pertaining to "The First Amendment to Power Purchase Agreement " dated on January 30, 1998. The compensations for the exchange losses for the second quarter and the six-month period ended June 30, 1998 were amounts of Baht 223 and 565 million respectively. The two subsidiaries have entered into Major Maintenance Agreements with EGAT for the latter to provide major maintenance services, repair services, administrative services and additional services related to the companies' power plant. The compensation for such services is calculated based on "Cost plus basis" and will be adjusted annually according to Consumer Price Index as announced by the Price Index Division, Ministry of Commerce. The agreements can be extended for an additional period of six years. The agreements have been pledged as collateral with the lenders under the Master Agreements. Deposits used as collateral 5. Deposits at financial institutions used as collateral represent a reserve in US Dollars which is provided from the proceeds of sales of electricity. This is for the purpose of minimising the exchange rate risk in accordance with the Master Agreements (see Note 7). The subsidiaries have to provide a reserve until such account equals the lower of 25% of the aggregate outstanding unhedged long-term loan amounts or an amount of US Dollars 103 million. As at June 30, 1998 the reserve amounted to of US Dollars 66 million. Electricity Generating Public Company Limited and its subsidiaries Notes to the financial statements and consolidated financial statements - June 30, 1998 continued Investments in subsidiaries, associated and other companies. 6. 6.1 Investments in subsidiary, associated and other companies in the company's financial statements are as follows : 1998 Investments Type of business Paid-up share capital Subsidiary companies Rayong Electricity Generating Company Limited Electricity Generating 4,700,000 Khanom Electricity Generating Company Limited Electricity Generating 4,850,000 EGCO Engineering and Services Company Providing maintenance 210,000 Limited services to power plants EGCO Joint Venture and Development Company Making investments in 343,770 Limited electricity industry EGCO Mining Company Limited Mining industry 150,500 Associated companies EGCO Mining Company Limited Mining industry AMATA EGCO Power Company Limited Electricity Generating Total investments in subsidiaries and associated companies Other companies Thai LNG Power Company Limited PMI International Company Limited Total investments in other companies 6.1 cont. 1997 Investments % of Cost Method Equity method Paid-up share % of Cost Method Equity method Interest (Baht'000) (Baht'000) (Baht'000) Interest (Baht'000) (Baht'000) 99.99 4,700,000 3,493,962 4,700,000 99.99 4,700,000 5,683,188 99.99 4,850,000 4,950,057 4,850,000 99.99 4,850,000 6,013,604 99.99 210,000 148,450 170,000 99.99 170,000 134,328 99.99 343,770 329,416 39,970 99.99 39,970 26,648 66.70 100,400 94,370 - - - - - 50,000 48 24,000 - - 572,500 30 172,599 10,204,170 9,016,255 9,956,569 11,857,768 10.00 37,499 - 10 37,499 10.00 300 - 10 - 37,799 37,499 Electricity Generating Public Company Limited and its subsidiaries Notes to the financial statements and consolidated financial statements - June 30, 1998 continued (More)