F/S OF EGCOMP 1998

8. Spare parts and supplies, net consist of the following : The company only Consolidation 1998 1997 1998 1997 (Baht) (Baht) (Baht) (Baht) Fuel - - 354,336,800 359,143,239 Specific spare parts - - 1,482,040,153 1,541,288,128 Common spare parts - - 41,654,198 36,720,108 Spare parts in transit - - - 1,964,656 - - 1,878,031,151 1,939,116,131 Less: Provision for obsolete stock - - (93,708,097) (92,388,035) - - 1,784,323,054 1,846,728,096 Deposits at financial institutions 9. This represents promissory notes issued by a financial institution of an exchange of promissory notes of financial institutions which were closed by the announcement of the Ministry of Finance on December 8, 1997. These promissory notes are due in 2000 and 2002 and bear interest at the rate of 6.87% - 6.95% per annum as at December 31, 1998. Electricity Generating Public Company Limited and its subsidiaries Page 17 Notes to the financial statements and consolidated financial statements - December 31, 1998 continued Investments in and Loan to subsidiary, associated and other companies 10. 10.1 Investments in and loan to subsidiary, associated and other companies in the company's financial statements are as follows : Type of business Subsidiary companies Rayong Electricity Generating Company Limited Electricity Generating Khanom Electricity Generating Company Limited Electricity Generating EGCO Engineering and Service Company Providing maintenance Limited services to power plants EGCO Joint Ventures and Development Company Making investments in Limited electricity industry EGCO Mining Company Limited Mining industry Associated companies EGCO Mining Company Limited Mining industry 10.1 The company only 1998 Paid-up share Cost Equity capital % of method method (Baht'000) holding (Baht'000) (Baht'000) Subsidiary companies Rayong Electricity Generating Company Limited 4,700,000 99.99 4,700,000 5,123,037 Khanom Electricity Generating Company Limited 4,850,000 99.99 4,850,000 5,786,850 EGCO Engineering and Service Company Limited 210,000 99.99 210,000 143,083 EGCO Joint Ventures and Development Company Limited 447,720 99.99 447,720 499,490 EGCO Mining Company Limited 176,000 69.99 124,800 110,715 Associated companies EGCO Mining Company Limited - - Total investments in subsidiary and associated companies 10,332,520 11,663,175 Other companies Thai LNG Power Company Limited - 10.00 37,499 PMI International Company Limited - 10.00 300 Investment in Open-End Fixed Income Fund 500,000 Total investments in other companies 537,799 Loan to a subsidiary 25,200 10.1 The company only 1997 Paid-up share Cost Equity capital % of method method (Baht'000) holding (Baht'000) (Baht'000) Subsidiary companies Rayong Electricity Generating Company Limited 4,700,000 99.99 4,700,000 1,825,886 Khanom Electricity Generating Company Limited 4,850,000 99.99 4,850,000 3,336,853 EGCO Engineering and Service Company Limited 170,000 99.99 170,000 126,423 EGCO Joint Ventures and Development Company Limited 252,070 99.99 2 52,070 235,996 EGCO Mining Company Limited - - - - Associated companies EGCO Mining Company Limited 99,500 63,599 55,375 Total investments in subsidiary and associated companies 10,035,669 5,580,533 Other companies Thai LNG Power Company Limited - 10.00 37,499 PMI International Company Limited - 10.00 300 Investment in Open-End Fixed Income Fund - Total investments in other companies 37,799 Loan to a subsidiary - Electricity Generating Public Company Limited and its subsidiaries Page 18 Notes to the financial statements and consolidated financial statements - December 31, 1998 continued 10.2 Investments in subsidiary, associated and other companies in the consolidated financial statements are as follows : Type of business Associated companies AMATA EGCO Power Company Limited Electricity generating Bangchak Power Company Limited Electricity generating AM ESCO Company Limited Providing services to (formerly named as CM ESCO) power plants ESCO Wood Company Limited Providing maintenance services to power plants Consolidation 1998 Paid-up share Cost Equity capital % of method method (Baht'000) holding (Baht'000) (Baht'000) Associated companies AMATA EGCO Power Company Limited 1,350,000 29.70 400,950 466,909 Bangchak Power Company Limited 40,000 30.00 12,000 11,675 AM ESCO Company Limited (formerly named as CM ESCO) 2,000 50.00 1,000 16,752 ESCO Wood Company Limited 20,000 45.00 9,000 427 Total investment in associated companies 422,950 495,763 Other companies Thai LNG Power Company Limited - 10.00 37,499 PMI International Company Limited - 10.00 300 Investment in Open-End Fixed Income Fund 507,000 Total investments in other companies 544,799 Consolidation 1997 Paid-up share Cost Equity capital % of method method (Baht'000) holding (Baht'000) (Baht'000) Associated companies AMATA EGCO Power Company Limited 572,500 29.70 209,404 - Bangchak Power Company Limited 40,000 30.00 12,000 - AM ESCO Company Limited (formerly named as CM ESCO) 2,000 50.00 1,000 - ESCO Wood Company Limited 20,000 45.00 9,000 - Total investment in associated companies 231,404 - Other companies Thai LNG Power Company Limited - 10.00 37,499 PMI International Company Limited - 10.00 300 Investment in Open-End Fixed Income Fund - Total investments in other companies 37,799 The financial statements for the year 1998 include shares of net profits totalling Baht 80.2 million from the four associates ( 1997 : nil ). The results for the year 1998 of these associates are based on unaudited financial statements. Electricity Generating Public Company Limited and its subsidiaries Page 19 Notes to the financial statements and consolidated financial statements - December 31, 1998 continued Property, plant and equipment, net 11 The company only 1998 1997 (Baht) (Baht) Property, plant and equipment, at cost Land 284,429,029 284,429,029 Power plants - - Buildings and structures - - Operating and maintenance equipment 227,000 227,000 Transmission system - - Office equipment, furniture and computers 47,734,342 43,783,747 Vehicles 15,578,728 7,213,307 Construction in progress 534,433,876 173,692,026 Machinery in transit - - 882,402,975 509,345,109 Less: Accumulated depreciation (33,337,914) (22,042,543) 849,065,061 487,302,566 Consolidation 1998 1997 (Baht) (Baht) Property, plant and equipment, at cost Land 1,478,325,798 1,478,325,798 Power plants 29,007,664,061 28,984,682,625 Buildings and structures 2,643,197,391 2,621,022,983 Operating and maintenance equipment 118,288,331 97,335,923 Transmission system 44,745,029 7,002,029 Office equipment, furniture and computers 103,316,937 91,968,606 Vehicles 41,810,198 29,844,777 Construction in progress 569,515,173 201,744,704 Machinery in transit - 28,980,060 34,006,862,918 33,540,907,505 Less: Accumulated depreciation (5,373,484,156) (3,734,647,492) 28,633,378,762 29,806,260,013 Depreciation for the year of Baht 11,299,899 has been charged to the statement of income (1997 : Baht 8,556,310) and Baht 1,640,717,606 to the consolidated statement of income (1997 : Baht 1,622,312,792). Land, buildings and equipment of power plants which are specified in the Master Agreement are mortgaged as collateral for long-term loans and debentures (see notes 13 and 14). Electricity Generating Public Company Limited and its subsidiaries Page 20 Notes to the financial statements and consolidated financial statements - December 31, 1998 continued Other assets, net 12. Other assets mainly represent management and advisory fee relating to the fund raising of subsidiaries. The balance is net of accumulated amortisation amounting to Baht 386.13 million and 271.99 million in the consolidated balance sheets as at December 31, 1998 and 1997, respectively. Amortisation for the year amounting to Baht 114,140,542 (1997 : Baht 117,201,941) has been charged to the consolidated statement of income. Long-term loans 13. The long-term loans are loans in US Dollar and Thai Baht of the two subsidiaries as follows : The company only 1998 1997 (Baht) (Baht) Long-term loans in US Dollar - - Long-term loans in Thai Baht - - - - Less: Current portion of long-term loans - - - - Consolidation 1998 1997 (Baht) (Baht) Long-term loans in US Dollar 16,591,398,000 21,750,214,440 Long-term loans in Thai Baht 2,769,000,000 3,017,500,000 19,360,398,000 24,767,714,440 Less: Current portion of long-term loans (1,200,557,900) (1,266,775,240) 18,159,840,100 23,500,939,200 The long-term loans of Rayong Electricity Generating Company Limited are the loans under the Master Agreement, Credit Agreement and Institutional Loan Agreement, each dated November 30, 1994 and the long-term loans of Khanom Electricity Generating Company Limited are the loans under the Master Agreement and Bank Credit Agreement, each dated June 3, 1996. Electricity Generating Public Company Limited and its subsidiaries Page 21 Notes to the financial statements and consolidated financial statements - December 31, 1998 continued The loan information of the two subsidiaries is summarised as follows : Total Outstanding balance Term of Facilities as at Dec. 31, 1998 repayment Interest rate (million) (million) (years) (% per annum) Loans of Rayong Electricity Generating Company Limited USD 141 98.7 10 LIBOR plus a certain margin USD 141 141 15 8.85% Baht 3,550 2,769 12 MLR minus a certain margin Loans of Khanom Electricity Generating Company Limited USD 100 90 12 LIBOR plus a certain margin USD 165 148.5 12 LIBOR plus a certain margin Baht 225 (not yet be 15 MLR minus a certain margin drawdown) Rayong Electricity Generating Company Limited entered into the interest rate swap agreement to convert a floating interest rate based on LIBOR plus a certain margin to fixed interest rates of 8.12% and 8.22% per annum for 2 Tranches of loan amount of US Dollars 141 million. The agreement is effective from December 7, 1994 to December 7, 2004. On May 9, 1996, Khanom Electricity Generating Company Limited entered into the interest rate swap agreement to convert a floating interest rate based on LIBOR plus a certain margin to a fixed interest rate of 8.0275% per annum for the loan amounted of US Dollars 165 million. In addition, there is a currency and interest rate swap agreement to convert a loan amounted of US Dollars 100 million with a floating interest rate to Thai Baht currency at a fixed interest rate of 11% per annum. As a result, the balance of this loan as at December 31, 1998, amounting to US Dollars 90 million, equals to Baht 2,270 million. These agreements are effective from June 19, 1996 to June 14, 2008. Electricity Generating Public Company Limited and its subsidiaries Page 22 Notes to the financial statements and consolidated financial statements - December 31, 1998 continued The Master Agreements of both subsidiaries have certain clauses which stated that cash reserves are to be provided from the proceeds from sales of electricity for repayment of principal and interest due within one year and other conditions as described in note 7 to the financial statements. Also, a reserve for exchange risk shall be provided as described in the same note. In addition, the PPAs, the Major Maintenance Agreements, insurance policies, other related agreements with the lenders, land, building and equipment of power plants as specified in the agreements have been assigned as collateral. Debentures 14. The debentures are debentures in Thai Baht of the two subsidiaries as follows : The company only Consolidation 1998 1997 1998 1997 (Baht) (Baht) (Baht) (Baht) Debentures - - 10,102,339,783 10,519,099,143 Less: Current portion of debentures - - (973,695,000) (310,130,420) - - 9,128,644,783 10,208,968,723 The debentures of Rayong Electricity Generating Company Limited are under the Master Agreement and Debenture Holder Representative Appointment Agreement No. 1 and No. 2 each dated November 30, 1994. The debentures of Khanom Electricity Generating Company Limited are under the Master Agreement and the Statements of the Terms and Conditions Regarding the Rights and Obligations of the Issuer and the Debentureholders which were dated June 3, 1996 and June 19, 1996 respectively. Electricity Generating Public Company Limited and its subsidiaries Page 23 Notes to the financial statements and consolidated financial statements - December 31, 1998 continued The debenture information of the two subsidiaries is summarised as follows : Outstanding balance Interest rate Term of as at Dec. 31, 1998 (% per repayment Due date (Baht million) annum) (years) Rayong Electricity Generating Company Limited Debentures No.1 2,500 11.25% 5,7,10,12 Dec. 7, 2006 Debentures No.2 780 11.25% 1-12 Dec. 7, 2006 Khanom Electricity Generating Company Limited Debentures 6,946.7 11.5625% 15 June 14, 2011 The No. 1 debentures of Rayong Electricity Generating Company Limited are divided into 4 parts, being repayable in 5 years, 7 years, 10 years, and 12 years in 1999, 2001, 2004 and 2006, respectively. The No. 2 debentures are divided into 12 parts, being repayable in 1 - 12 years, in 1995 - 2006. The interest is payable semi-annually. The debentures of Khanom Electricity Generating Company Limited are secured debentures with the holders' names being registered, totalling 750,000 units of Baht 10,000 face value each, for a total of Baht 7,500 million. The total debentures were offered to the public and are repayable within 15 years from the date of issuance on June 14, 1996, at six monthly intervals to 2011. The interest rate is fixed at 11.5625% per annum and is payable semi-annually. Both subsidiaries are also required to maintain a reserve for repayment of principal and interest and to pledge a certain number of assets as collateral as mentioned in note 13. Electricity Generating Public Company Limited and its subsidiaries Page 24 Notes to the financial statements and consolidated financial statements - December 31, 1998 continued Share capital 15. The company only 1998 1997 (Baht) (Baht) Registered share capital : 530,000,000 ordinary shares of Baht 10 each 5,300,000,000 5,300,000,000 Issued and paid-up share capital: 522,709,200 ordinary shares of Baht 10 each (1997 : 521,233,800 ordiary shares of Baht 10 each) 5,227,092,000 5,212,338,000 Consolidation 1998 1997 (Baht) (Baht) Registered share capital : 530,000,000 ordinary shares of Baht 10 each 5,300,000,000 5,300,000,000 Issued and paid-up share capital: 522,709,200 ordinary shares of Baht 10 each (1997 : 521,233,800 ordiary shares of Baht 10 each) 5,227,092,000 5,212,338,000 During the year 1998, the company's employees exercised the rights to buy 1,475,400 ordinary shares at the price of Baht 30 per share. The company's paid-up share capital and premium on share capital increased by Baht 14,754,000 and Baht 29,508,000, respectively. As at December 31, 1998, the balance of outstanding share warrants is 7,290,800 units. Other expenses 16. Other expenses consist of the following : The company only 1998 1997 (Baht) (Baht) Losses from disposal of marketable securities - 379,785,824 Currency exchange losses (gains) - - - 379,785,824 Consolidation 1998 1997 (Baht) (Baht) Losses from disposal of marketable securities - 379,785,824 Currency exchange losses (gains) (3,231,544,438) 67,985,251 (3,231,544,438) 447,771,075 Electricity Generating Public Company Limited and its subsidiaries Page 25 Notes to the financial statements and consolidated financial statements - December 31, 1998 continued Extraordinary item 17. On July 2, 1997, the Ministry of Finance declared the adoption of an immediately effective managed floatation of the Thai Baht against foreign currencies. As a result, the two subsidiaries incurred the exchange loss of Baht 7,235 million for the year 1997 and this was presented as extraordinary item in the statement of loss in accordance with the announcement of the Institute of Certified Accountants and Auditors of Thailand, dated September 19, 1997. Legal reserve 18. Pursuant to the Public Limited Companies Act (B.E. 2535) 1992, the company must appropriate to a reserve fund from the annual net profit not less than five percent of the annual net profit until the reserve fund reaches an amount of not less than ten percent of the authorised capital. The company appropriated to the reserve from profit including the share of profits (losses) from subsidiaries and associates. Provident fund 19. The company and subsidiaries have provident funds for those employees who apply to join. The contributions comprise the employee's portion and the same amount from the company's contribution. The fund is managed by an authorised fund manager in accordance with the Provident Fund Act (B.E. 2530) 1987. Electricity Generating Public Company Limited and its subsidiaries Page 26 Notes to the financial statements and consolidated financial statements - December 31, 1998 continued Promotional privileges 20. The two subsidiaries have received promotional privileges from the Board of Investment under promotion certificates issued on June 15, 1995 and November 6, 1996 in respect of electricity generating. Under these privileges the subsidiaries have received exemption from certain taxes and duties as detailed in the certificates including exemption from corporate income tax for a period of 8 years from the date of commencement of earning revenue. As a promoted industry, the subsidiaries are required to comply with the terms and conditions as specified in the promotion certificates. Commitment and contingent liabilities 21. (a) As at December 31, 1998 the company had commitments under contracts for construction of Baht 218 million and had credit facilities to a subsidiary company as a short-term loan amounting to Baht 20 million. (b) As at December 31, 1998 the company had commitments under the Sponsor Support Agreement, which made for subsidiary and associated companies in respect of the following on behalf of the company : Currency Baht US Dollar Raw material purchase - 5,292,300 Performance bond 59,000,000 12,193,500 (c) As at December 31, 1998, the two subsidiaries did not enter into forward exchange contracts to cover the exchange risk relating to long-term loans of US Dollars 388.2 million. However, such exchange risk will be partially covered by "The First Amendment to Power Purchase Agreements" dated January 30, 1998 as described in note 3. Electricity Generating Public Company Limited and its subsidiaries Page 27 Notes to the financial statements and consolidated financial statements - December 31, 1998 continued Comparative figures 22. As a result of reclassifications of certain items in the 1998 financial statements, the comparative figures of 1997 in the financial statements have been amended accordingly. The Year 2000 issue (unaudited and not covered by the auditor's report) 23. The company submitted a plan to resolve the Year 2000 issue to the Stock Exchange of Thailand on July 29, 1998. The company has identified the systems which will be affected by the Year 2000 issue to be the production system and certain hardware of the general operating systems, which are required to be changed. The company estimated a total related cost amounting to Baht 64 million and it is anticipated that the plan will be completed by September 1999. Although there are certain problems such as the late delivery of equipment for replacement and EGAT' s electricity system control center has asked to postpone the shutdown schedule as required by the Y2K testing plan. Nevertheless, these problems have been managed within the schedule plan. The next tasks are to continue with the remaining machines to change equipment and to perform integrated test, which no problem is anticipated. The contingency plan is in the process of completion. Auditor's report page 1.