anagement Discussion and Analysis Quarter 2

mainly driven by the decrease in interest expenses at GEC of Baht 37 million, resulting from lower principal and interest rates thanks to the refinancing of certain loans. For Roi-et Green, owing to an increase of loan drawndown, its interest expenses increased by Baht 5 million whereas the interest expenses of APBP decreased by Baht 1 million owing to lower principal amount. 4) The Overseas Group's expenses were Baht 232 million, a decrease of Baht 19 million or 8% compared to 2003, owing to the following reasons: * Cost of Sales were Baht 83 million, a decrease of Baht 24 million or 22% as compared to last year. This resulted from a decrease of Northern Mindanao Power Corporation (NMPC)'s depreciation caused by a lower forecasted electricity production and the transfer of NMPC's 58 MW to NPC. * Administration expenses and other expenses were Baht 113 million, an increase of Baht 14 million or 14%. * Interest expenses were Baht 35 million, a decrease of Baht 9 million or 20% owing to lower principal amount. 5) The Other Business Group's expenses were Baht 205 million, an increase of Baht 20 million or 11%, owing to the following reasons: * Service costs were Baht 130 million, an increase of Baht 11 million or 10%, resulting from an increase of ESCO's operation and maintenance (O&M) services to customers which was consistent with its revenue. * Cost of water sales of EGCOM Tara was Baht 27 million, a decrease of Baht 1 million or 3% which was in line with an increase of EGCOM TARA revenue. * Administration expenses and other expenses were Baht 42 million, an increase of Baht 13 million or 44%, mostly from ESCO's expenses which was in line with an increase of ESCO revenue * Interest expenses were Baht 6 million, a decrease of Baht 4 million or 39%, resulting from the lower principal amount as well as the lower interest rate at EGCOM Tara. 3. Report and Analysis of Financial Position 3.1 Asset Analysis As at June 30, 2004, total assets of EGCO, its subsidiaries, associates and joint ventures amounted to Baht 55,725 million, a decrease of Baht 712 million or 1% from December 31, 2003. The important details are as follows: 1) Cash, deposit at banks and financial institutions, and short term and long term marketable securities were Baht 6,590 million or 12% of the total assets, down Baht 1,225 million or 16%. This was categorized by a decrease of Baht 1,006 million in deposits at banks and financial instruments and short-term marketable securities, a decrease of Baht 450 million in long-term investments in marketable securities and others resulted from additional investment in GEC and shareholder loans to GEC and NTPC as well as a diminishing market value of marketable securities; whereas the cash and cash equivalent were up by Baht 231 million. 2) Short-term and long-term investments used as collateral were Baht 9,394 million or 17% of the total assets, down Baht 560 million or 6%, with the partial cash reserve of debt repayment in US Dollars in the amount of USD 60 million. 3) Investment in subsidiaries and associates and interests in joint ventures amounted to Baht 352 million or 1% of the total assets, down by Baht 17 million or 5%. This mainly resulted from the recognition of investment write-down in Nam Theun 2 owing to the new accounting policy which amounted to Baht 24 million. 4) Property, plant and equipment (net) totaled Baht 30,268 million or 54% of total assets. They were down Baht 1,275 million or 4% due to the depreciation of EGCO and subsidiaries' assets totaling Baht 1,191 million, the reclassification of unutilised capital spare parts from property, plant and equipment to inventories of KEGCO, amounting to Baht 268 million, GEC's impairment of its power plant of Baht 11 million whereas the translation adjustment up Baht 23 million. An increase in property, plant and equipment was substantially from REGCO and KEGCO's capital spare parts of Baht 34 million, Baht 41 million, respectively. Moreover, an increase of Baht 52 million was from the construction of GEC. 5) Other assets were Baht 9,121 million or 16% of the total assets, up Baht 2,366 million or 35% mainly from accounts receivable from related companies, up Baht 1,069 million, an increase of Spare Parts and Supplies by Baht 615 million, shareholder loans to GEC amounting to Baht 338 million and NTPC amounting to Baht 249 million. The other current asset was up by Baht 25 million. 3.2 Liability Analysis As at June 30, 2004, the company's total liabilities were Baht 27,741 million, down Baht 1,995 million or 7% as a result of the loans and debentures repayment at EGCO, REGCO and KEGCO. The total liabilities consisted of the following: 1) Long-term loans and debentures totaled Baht 26,045 million, or 94% of total liabilities, down Baht 1,867 million or 7%. The details are as follows: - USD loans in the amount of USD 358 million - Yen loans in the amount of Yen 1,212 million - Philippine Peso loans in the amount of Peso 101 million - Baht loans in the amount of Baht 3,739 million - Debentures in the amount of Baht 7,163 million In the first six-months of 2004, the amount of loans denominated in Baht, USD, and Peso, including debenture decreased by Baht 1,947 million as compared to 2003 mostly from principal repayment by EGCO, REGCO, KEGCO, APBP, TLP Cogen, Conal, EGCOM TARA and GEC's loan refinancing. On the other hand, the amount of loans denominated in Yen were up Baht 76 million, which was due to the loan drawdown for the construction of Roi-Et Green. 2) Other liabilities amounted to Baht 1,696 million or 6% of total liabilities, mostly resulted from bank overdrafts and short-term loans of Baht 340 million, trade accounts payable of Baht 435 million, interest payable of Baht 165 million, value added tax payable and income tax payable of Baht 328 million and others of Baht 428 million. 3.3 Shareholders' Equity Analysis As at June 30, 2004, Shareholders' Equity (excluding treasury stock) amounted to Baht 27,984 million, which was Baht 1,283 million higher than the amount as at December 31, 2003. This was due mainly to the profits from operation during the first half of 2004, partially offset by a decrease of the unrealized gain on investments in marketable securities totaling Baht 649 million.The analysis of the company's capital structure as at June 30, 2004 is summarized as follows: Shareholders' equity was Baht 27,984 million or 50.22%. Liabilities were Baht 27,741 million or 49.78%. Important financial ratios were as follows; - Debt to equity ratio was 0.99 times, lower than 1.11 times at the end of last year. - Book value per share was Baht 51.56, higher than Baht 49.21 at the end of last year. 4 Report and Analysis of Cash Flow Position Cash Flow Statement shows the change in cash flows from operating activities, investing activities, and financing activities at the end of the accounting period, and indicates the ending balance of the cash and the cash equivalents. As at June 30, 2004, the ending balance of the cash and the cash equivalent was Baht 1,962 million, up by Baht 231 million from the end of 2003. The details of the sources and uses of funds are as follows; -Net cash received from operating activities totaled Baht 3,077 million, a decrease of Baht 916 million as compared to 2003. Most of the changes were due to a decrease in cash from operating activities by Baht 1,164 million whereas cash received from working capital increased by Baht 248 million. -Net cash received from investing activities was Baht 208 million. Baht 1,026 million was for the net sale of short-term financial investments whereas the dividend from Krung Thai Dividend Selected Flexible Portfolio Fund (KTSF) and East Water Resources Development and Management Public Co., Ltd were Baht 305 million and Baht 40 million, respectively. The shareholder loans to GEC and NTPC were Baht 338 million and Baht 249 million, respectively. - Net cash payment for financing activities was Baht 3,058 million, mainly owing to long-term loan and debenture repayment by EGCO, REGCO, KEGCO, TLP Cogen, Roi-Et Green, APBP and GEC in the amount of Baht 2,520 million and dividend payment to shareholders amounted to Baht 786 million while the loan drawdown from TLP Cogen and Roi-Et Green increased by Baht 228 million.