NUAL FINANCIAL STATEMENTS 1999

The notes to the consolidated and company financial statements on pages 9 to 25 form an integral part of these financial statements. Electricity Generating Public Company Limited Statements of Cash flows For the years ended 31 December Consolidated 1999 1998 (Restated) Baht Baht Cash flows from operating activities Net Profit 2,647,954,570 6,181,192,156 Adjustments to reconcile net income to net cash Depreciation and amortisation 1,683,735,279 1,640,563,658 Unrealised losses (gains) on exchange rate 250,914,152 (3,443,731,618) Gains from disposal of marketable securities (43,133,461) - Provision for lower of cost or market value Of marketable securities - (14,945,741) Impairment charged for development cost of project 161,647,426 - Dividends received from other companies (93,093,457) - Shares of profits from subsidiaries and associaties (8,457,958) (72,812,258) Minority interest (93,854,574) (4,852,777) Others (14,759,195) 1,318,062 Cash flows before changes in working capital 4,490,952,782 4,286,731,482 Changes in working capital : Deposits at banks and financial institutions Used as collateral (314,352,683) (2,299,413,566) Amounts due from related companies 16,544,243 (49,791,959) Trade accounts receivable (127,295,117) (338,607,208) Spare parts and supplies (93,481,742) 61,084,980 Other current assets (114,041,445) 305,729,686 Other assets (14,611,507) (1,432,054) Trade accounts payable (104,776,248) (109,689,800) Amounts due to related companies 1,195,106 72,074,087 Other current liabilities (101,887,739) (25,512,796) Net cash receipts /(payments) from operating activities 3,638,245,650 1,901,172,852 Cash flows from investing activities Purchases of property, plant and equipment (324,535,065) (466,497,891) Investment in subsidiaries - - Investment in associates and others 324,058,796 (698,546,799) Investments in marketable securities 153,491,377 136,079,426 Loans to related companies (60,241,725) - Short-term investments 6,382,297 38,346,428 Dividends received 93,093,457 - Net cash receipts/(payments) from investing activities 192,249,137 (990,618,836) The notes to the consolidated and company financial statements on pages 9 to 25 form an integral part of these financial statements. Company 1999 1998 (Restated) Baht Baht Cash flows from operating activities Net Profit 2,647,954,570 6,181,192,156 Adjustments to reconcile net income to net cash Depreciation and amortisation 44,530,835 13,271,187 Write-offs pre-operating expenses of subsidiary - - Unrealised losses (gains) on exchange rate - - Gains from disposal of marketable securities (43,133,461) - Provision for lower of cost or market value Of marketable securities - (14,945,741) Provision of advance in mining project and others - - Dividends received from other companies (93,093,457) - Shares of profits from subsidiaries and associaties (2,671,947,009) (5,925,565,753) Minority interest - - Others (27,008,850) 24,650 Cash flows before changes in working capital (142,697,372) 253,976,499 Changes in working capital : Deposits at banks and financial institutions Used as collateral - - Amounts due from related companies (13,874,121) 5,634,689 Trade accounts receivable - - Spare parts and supplies - - Other current assets (48,076,872) 187,963,366 Other assets (12,788,078) 24,666,896 Trade accounts payable - - Amounts due to related companies 4,721,312 - Other current liabiliti (6,334,320) 129,027,613 Net cash receipts /(payments) from operating activities (219,049,451) 601,269,063 Cash flows from investing activities Purchases of property, plant and equipment (173,670,454) (373,087,044) Investment in subsidiaries (241,500,000) (322,050,000) Investment in associates and others 317,558,797 (500,000,000) Investments in marketable securities 153,491,377 28,810,146 Loans to related companies (20,000,000) (30,000,000) Short-term investments - 625,000 Dividends received 1,150,599,723 27,618,687 Net cash receipts/(payments) from investing activities 1,186,479,443 (1,168,083,211) The notes to the consolidated and company financial statements on pages 9 to 25 form an integral part of these financial statements. Electricity Generating Public Company Limited Statements of Cash flows For the years ended 31 December Consolidated 1999 1998 (Restated) Baht Baht Cash flows from financing activities Issue of ordinary shares 46,857,000 44,262,000 Additional paid-up share capital of subsidiaries 108,600,000 - Cash received from debentures 4,700,000,000 - Payments on long-term borrowings (2,173,536,380) (1,683,534,600) Payment of dividends (621,063,016) - Net cash receipts/(payments)from financing activities 2,060,857,604 (1,639,272,600) Net increase/(decrease) in cash and cash equivalents 5,891,352,391 (728,718,584) Cash and cash equivalents, beginning balance 2,452,164,670 3,180,883,254 Cash and cash equivalents, ending balance 8,343,517,061 2,452,164,670 Cash and cash equivalents are made up as follow : Cash in hand and at banks 1,680,602,753 1,044,418,442 Short-term investments 6,662,914,308 1,407,746,228 8,343,517,061 2,452,164,670 Supplementary information for cash flows : Interest paid 2,921,933,298 3,327,696,577 Tax paid - - The notes to the consolidated and company financial statements on pages 9 to 25 form an integral part of these financial statements. Company 1999 1998 (Restated) Baht Baht Cash flows from financing activities Issue of ordinary shares 46,857,000 44,262,000 Additional paid-up share capital of subsidiaries - - Cash received from debentures 5,000,000,000 - Payments on long-term borrowings - - Payment of dividends (621,062,997) - Net cash receipts/(payments)from financing activities 4,425,794,003 44,262,000 Net increase/(decrease) in cash and cash equivalents 5,393,223,995 (522,552,148) Cash and cash equivalents, beginning balance 2,141,725,970 2,664,278,118 Cash and cash equivalents, ending balance 7,534,949,965 2,141,725,970 Cash and cash equivalents are made up as follow : Cash in hand and at banks 1,413,455,703 975,525,756 Short-term investments 6,121,494,262 1,166,200,214 7,534,949,965 2,141,725,970 Supplementary information for cash flows : Interest paid - - Tax paid 13,722,829 - Company The notes to the consolidated and company financial statements on pages 9 to 25 form an integral part of these financial statements. Electricity Generating Public Company Limited Notes to the Consolidated and Company Financial Statements For the years ended 31 December 1999 and 1998 1 Significant accounting policies The principal accounting policies adopted in the preparation of these consolidated and company financial statements are set out below: Basis for preparation The consolidated and company financial statements are prepared in accordance with and comply with generally accepted accounting principles in Thailand. Consolidation Subsidiary undertakings, which are those companies in which the Group, directly or indirectly, has an interest of more than one half of the voting rights or otherwise has power to exercise control over the financial and operating policies, have been consolidated. Subsidiaries are consolidated from the date on which effective control is transferred to the Group and are no longer consolidated from the date of disposal. All intercompany transactions, balances and unrealised surpluses and deficits on transactions between group companies have been eliminated. Where necessary, accounting policies for subsidiaries have been changed to ensure consistency with the policies adopted by the Group. Separate disclosure is made for minority interest in the consolidated balance sheets and consolidated income statements. A listing of the Group's principal subsidiaries is set out in Note 11. The financial effect of the acquisition of subsidiaries is shown in Note 29. Investments in subsidiaries Investments in subsidiary undertakings are accounted for in the non- consolidated financial statements by the equity method of accounting. These are undertakings over which the Company has over 50% of the voting rights, and over which the Company exercises control. All intercompany transactions, balances and unrealised surpluses and deficits on transactions between group companies have been eliminated. Where necessary, accounting policies for subsidiaries have been changed to ensure consistency with the policies adopted by the Group in the consolidated balance sheets and consolidated income statements. Investments in associates Investments in associated undertakings are accounted for in the consolidated and company financial statements by the equity method of accounting. These are undertakings over which the Group has between 20% and 50% of the voting rights, and over which the Group exercises significant influence, but which it does not control. A listing of the Group's principal associates is set out in Note 11. Investments Debt securities and marketable equity securities which classified as available-for-sale securities are carried at fair values. Fair value of debt securities is calculated by reference to the risk-free yield curve adjusted by the appropriate risk premium. Fair value of marketable equity securities is calculated by reference to Stock Exchange quoted bid prices at the close of business on the balance sheet date. Increases/decreases in the carrying amount are credited/charged against unrealised gains/losses on investments in available-for-sale securities in shareholders' equity. Investments in debt securities which are classified as held-to-maturity securities are carried at amortised cost. Investments in non-marketable equity securities which are classified as general investments are carried at cost. A test for impairment is carried out when there is a factor indicating that such investment might be impaired. If the carrying value of the investment is less than its recoverable amount, impairment loss is charged to the statements of income. When disposing part of the Group's holding of a particular investment in debt or equity securities, the carrying amount of the disposed part is determined from the weighted average carrying amount of the total holding of the investment. Gains or losses from such disposal are recognised in the statements of income. Spare parts and supplies Spare parts and supplies are stated at cost less provision for obsolete stock. Cost is calculated based on the moving average basis. The inventories are categorised as "specific spare parts", which are used for specific plant equipment, and "common spare parts", which are for general use. The provision for specific spare parts is calculated by dividing the balances of specific spare parts on hand at the year end by the number of years remaining under the Power Purchase Agreement with the Electricity Generating Authority of Thailand. The provision for common spare parts is generally provided based on an aging analysis. Property, plant and equipment All property, plants and equipment are initially recorded at cost. All plants and equipment are stated at historical cost less depreciation. Depreciation is calculated on the straight - line method to write off the cost of each asset, except for land as it is deemed to have an indefinite life, to their residual values over their estimated useful lives as follows: Years Power plants 15 and 20 Buildings and structures 20 Transmission system 20 Office equipment, furniture and computers 5 and 10 Operating and maintenance equipment 5 Motor vehicles 5 Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount. Estimated recoverable amount is the higher of the anticipated discounted cash flows from the continuing use of the asset and the amount obtainable from the sale of the asset less any cost of disposal. Gains and losses on disposal of property, plant and equipment are determined by reference to their carrying amounts and are taken into account in determining operating profit. Costs associated with the maintenance of existing computer software programmes and for modifications for the Year 2000 are expensed as incurred. Foreign currencies Foreign currency transactions are accounted for at the exchange rates prevailing at the date of the transactions. Gains and losses resulting from the settlement of such transactions and from the translation of balances monetary assets and liabilities denominated in foreign currencies, are recognised in the consolidated and company statements of income. Such balances are translated at year-end exchange rates. Major repair and maintenance expenses Major repair and maintenance expenses relating to power plants are expensed when incurred. Spare parts are charged to repairs and maintenance expenses when they are issued from stocks. Comparative figures Where necessary, comparative figures have been adjusted to conform with changes in presentation in the current year. 2 Change in accounting policy In accordance with the Accounting Standard No. 40 which has been effective since 1 January 1999, the Group has changed its accounting policy relating to Accounting for Investments in Debt and Equity Securities from the lower of cost or market value to fair values. According to the Accounting Standard as mentioned above, no retrospective adjustment is required. In the fourth quarter of 1999, in accordance with the Interpretation number 4 of the Institute of the Certified Accountants and Auditors of Thailand, dated 20 January 2000 , the Group reviewed its accounting policy in respect of capitalisation of certain intangible assets including deferred pre-operating expenses and other deferred expenses. As a result of this review, the Group changed its accounting policy to expense such cost as incurred. The Group therefore accounted for the change in accounting policy retrospectively by adjusting to the opening retained earnings as at 1 January 1999 and 1998. The effect of the change is a decrease in previously reported consolidated and company balance sheets as at 1 January 1999 and 1998 as follows : Consolidated 1 January 1999 1 January 1998 Baht Baht Other assets 717,907,246 830,062,280 Investments in subsidiaries - - Retained earnings 717,907,246 830,062,280 Company 1 January 1999 1 January 1998 Baht Baht Other assets - - Investments in subsidiaries 717,907,246 830,062,280 Retained earnings 717,907,246 830,062,280 In addition, the effect of the change results in an increase in net profit and earnings per share of 1998 as follows : Consolidated Company 1998 1998 Baht Baht Net profit increases 112,056,675 112,056,675 Earnings per share increase 0.21 0.21 3 Statements of cash flows Change in deposits at banks and financial institutions used as collateral is included in cash flows from operating activities. Cash and cash equivalents consist of cash on hand and at banks and deposits at banks and financial institutions which maturities are within 3 months. 4 Related party transactions A summary of significant transactions with related companies is as follows: Consolidated 1999 1998 Transactions during the year Million Baht MillionBaht Electricity revenues 8,438 8,764 Major repair and maintenance expenses 308 493 Balances as at December 31 Investments in debentures of subsidiary - - Debentures held by subsidiaries - - Company 1999 1998 Transactions during the year Million Baht Million Baht Electricity revenues - - Major repair and maintenance expenses - - Balances as at December 31 Investments in debentures of subsidiary 76 107 Debentures held by subsidiaries 300 - Trade accounts receivable are mainly due from the Electricity Generating Authority of Thailand (EGAT), one of the major shareholders, being in respect of sales of electricity. The two subsidiaries have entered into the Power Purchase Agreements (PPAs) with 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 from such agreements are calculated, based on "Cost plus basis". There is a limitation of sales of electricity to third parties as specified in the agreements. These agreements have been pledged as collateral with the lenders under the Master Agreements. Under the PPAs 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 Agreements" dated on January 30, 1998 over the periods of the PPAs. The compensations for the years ended December 31, 1999 and 1998 amount to Baht 705 million and Baht 918 million respectively. Under the PPAs, EGAT has to bear the natural gas cost until the subsidiaries enter 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 subsidiaries to negotiate with the Petroleum Authority of Thailand in order to enter into a natural gas purchase agreement. However, on August 10, 1998, the subsidiaries informed EGAT to continuously bear the natural gas cost and EGAT has agreed with the subsidiaries' requests on August 25, 1998. The two subsidiaries have entered into the Major Maintenance Agreements with EGAT for the latter to provide major maintenance services, repair services, administrative services and additional services related to the subsidiaries' power plants. The compensation for such services is calculated, based on "Cost plus basis" and will be adjusted annually according to Consumer Price Index. The agreements have been effective for a period of 6 years, commencing October 3, 1994, and May 14, 1996, and can be extended for an additional period of six years. These agreements have been pledged as collateral with the lenders under the Master Agreements. The investment in debentures of a subsidiary is due in 2011 and bears interest at the rate of 11.5625% per annum. 5 Cash on hand and at banks Cash on hand and at banks of the company and its subsidiaries comprise cash and saving accounts, bearing interest at the rates of 0.75% to 3.25% per annum. 6 Deposits at banks and financial institutions Deposits at banks and financial institutions are mainly deposits at banks and promissory notes issued by local financial institutions, bearing interest at the rates of 1.25 % - 4.75% per annum. 7 Marketable securities Available for sale 1999 Consolidated Company Baht Baht Debt securities - 76,152,840 Equity securities 52,656,000 52,656,000 Add Adjustment for changes in value of investments 42,821,840 42,821,840 95,477,840 171,630,680 8 Deposits at banks and financial institutions used as collateral Consolidated 1999 1998 Baht Baht Current Deposits at banks and financial institutions for purpose of repayment of principal and interest 5,898,158,621 6,433,112,131 Deposits at banks pledged for bank guarantees 34,255,398 9,835,480 Deposits at banks and financial institutions used as collateral 5,932,414,019 6,442,947,611 Non-current Deposits at banks and financial institutions for purpose to minimise the exchange risk 3,740,991,262 2,861,303,210 Deposits at banks and financial institutions used as collateral of the two subsidiaries are cash reserves to be maintained under the loan agreements referred to in notes 15 and 16, for the purpose of repayment of principal and interest due within one year and a reserve to minimise the exchange risk. These cash reserves are provided from the proceeds from sales of electricity. As at December 31, 1999 and 1998, the cash reserves, which are for the purpose of repayment of principal and interest due within one year, amounted to Baht 3,326 million and 3,431 million, respectively. The remaining balances of Baht 2,569 million and Baht 3,001 million as at December 31, 1999 and 1998, mainly represent Holding accounts of both subsidiaries and Borrower's accounts of Khanom Electricity Generating Company Limited, which must be maintained in accordance with the loan agreements. The cash reserve for minimising the exchange risk represents deposits in US Dollar. The two subsidiaries have to provide this reserve until such account equals the lower of 25% of the aggregate outstanding unhedged (more)