anagement Discussion and Analysis yearly 2004

This was partly a result of the offsetting of the write-off of Bo Nok's development expenses amounting to Baht 103 million and the impairment expenses of Bo Nok's land amounting to Baht 104 million whereas there was a written-back of impairment expense of Bo Nok's land amounting to Baht 44 million in 2004. If excluding the aforementioned, the 2004 administration expenses increased by Baht 238 million according to the project cost of KK2 such as Development Cost, Community Relation and Public Relation, Forward Contract, Standby Letter of Credit Fee and the goodwill of Nong Khae Cogeneration Co.,Limited (NKCC) and Samutprakarn Cogeneration Co.,Limited (SCC) amounting to Baht 54 million. - Interest expenses were Baht 297 million, a decrease of Baht 50 million or 14%, mainly driven by the decrease in interest expenses at GEC of Baht 54 million, resulting from lower principal and interest rates thanks to the refinancing of certain loans. In addition, the interest expenses of TLP Cogen and APBP decreased by Baht 2 million and Baht 1 million according to lower principal amount. For Roi-et Green, owing to an increase of loan drawndown, its interest expenses increased by Baht 6 million. 4) The Overseas Group's expenses were Baht 581 million, an increase of Baht 61 million or 12% compared to 2003, owing to the following reasons: - Cost of Sales were Baht 229 million, a decrease of Baht 7 million or 3% 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 279 million, an increase of Baht 79 million or 40% as a result of the expiry of the six-year income tax holiday in 2003 for the Western Mindanao Power Corporation (WMPC) and the Southern Philippines Power Corporation (SPPC). - Interest expenses were Baht 73 million, a decrease of Baht 11 million or 13% owing to lower principal amount. 5) The Other Business Group's expenses were Baht 420 million, an increase of Baht 114 million or 37%, owing to the following reasons: - Service costs were Baht 269 million, an increase of Baht 99 million or 58%, resulting from an increase of ESCO's operation and maintenance (O&M) services to customers which was consistent with its increased revenue. - Cost of water sales of EGCOM Tara was Baht 55 million, a decrease of Baht 1 million or 2% mainly from a decrease of operating and maintenance service costs. - Administration expenses and other expenses were Baht 86 million, an increase of Baht 22 million or 34%, mostly from ESCO's expenses which was in line with an increase of ESCO revenue - Interest expenses were Baht 10 million, a decrease of Baht 5 million or 35%, 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 December 31, 2004,total assets of EGCO, its subsidiaries, associates and joint ventures amounted to Baht 55,066 million, a decrease of Baht 1,370 million or 2% from December 31, 2003. The important details are as follows: 1) Cash, deposits at financial institutions, and short term and long tem marketable securities were Baht 7,340 million or 13% of the total assets, down Baht 476 million or 6%. This was categorized by a decrease of Baht 854 million in deposits at financial institutions and short-term marketable securities, and a decrease of Baht 580 million in long-term investments in marketable securities and others following additional investments in GEC and extensions of shareholder loans to GEC and NTPC as well as a diminished market value of marketable securities; whereas the cash and cash equivalent were up by Baht 958 million. 2) Short-term and long-term investments used as collateral were Baht 7,419 million or 13% of the total assets, down Baht 2,535 million or 25% after KEGCO obtained lender's approval in quarter 3 of 2004 to release the Foreign Exchange Reserved Account (FEXRA) amounted of USD 27 million and release Debt Service Reserved Account (DSRA) amounted of USD 12 million by pledging the Bank Guarantee. For REGCO, the cash reserve of debt repayment in FEXRA amounted to USD 26 million. 3) Investment in subsidiaries and associates and interests in joint ventures amounted to Baht 398 million or 1% of the total assets, up by Baht 29 million or 8%. This increase is a net result of the recognition of share of losses derived from expensing the development cost of Nam Theun 2 owing to the new accounting policy which amounted to Baht 25 million, whereas the share of profit of AEP and AMESCO amounted to Baht 53 million and Baht 1 million, respectively. 4) Property, plant and equipment (net) totaled Baht 31,283 million or 57% of total assets. They were down Baht 260 million or 1% due to the depreciation of EGCO and subsidiaries' assets totaling Baht 2,440 million, the reclassification of unutilised capital spare parts from property, plant and equipment to inventories of KEGCO, GEC, REGCO and TLP Cogen amounting to Baht 336 million, Baht 196 million, Baht 96 million and Baht 6 million respectively, GEC's impairment of its power plant of Baht 11 million and the translation adjustment down Baht 31 million. An increase in property, plant and equipment was substantially from the GEC's construction of Baht 2,147 million and others of Baht 359 million. The record of capital spare parts as property, plant and equipment according to major maintenance of REGCO, KEGCO and TLP Cogen in the amount of Baht 110 million, Baht 234 million and Baht 7 million respectively. 5) Other assets were Baht 8,626 million or 16% of the total assets, up Baht 1,871 million or 28% mainly from accounts receivable and accounts receivable from related companies, up Baht 714 million, shareholder loans to GEC amounting to Baht 175 million and NTPC amounting to Baht 464 million, an increase of Spare Parts and Supplies by Baht 558 million. The other asset was up by Baht 100 million. 3.2 Liability Analysis As at December 31, 2004, the company's total liabilities were Baht 25,963 million, down Baht 3,772 million or 13% as a result of the loans and debentures repayment at EGCO, REGCO and KEGCO. The total liabilities consist of the following: 1) Long-term loans and debentures totaled Baht 23,933 million, or 92% of total liabilities, down Baht 3,980 million or 14%. The details are as follows: - USD loans in the amount of USD 324 million - Yen loans in the amount of Yen 1,163 million - Philippines Peso loans in the amount of Peso 87 million - Baht loans in the amount of Baht 5,390 million - Baht Debentures in the amount of Baht 5,558 million In 2004, the amount of loans and debentures denominated in Baht, USD, and Peso, including debenture decreased by Baht 5,178 million as compared to 2003, mostly from principal repayment by EGCO, REGCO, KEGCO, APBP, TLP Cogen, Conal and EGCOM TARA as well as GEC's loan refinancing. On the other hand, the amount of loans denominated in Yen were up Baht 57 million, which was due to the loan drawdown for the construction of Roi-Et Green. 2) Other liabilities amounted to Baht 2,030 million or 8% of total liabilities, mostly resulted from bank overdrafts and short-term loans of Baht 75 million, trade accounts payable of Baht 476 million, related companies' trade accounts payable of Baht 185 million, interest payable of Baht 152 million, value added tax payable and income tax payable of Baht 482 million, dividend payable of Baht 41 million and others Baht 620 million. 3.3 Shareholders' Equity Analysis As at December 31, 2004, Shareholders' Equity (excluding treasury stock) amounted to Baht 29,103 million, which was Baht 2,402 million higher than the amount as at December 31, 2003. This was due mainly to the profits from operation of 2004, partially offset by a decrease of the unrealized gain on investments in marketable securities totaling Baht 847 million that came from a fall in share prices of marketable securities. The analysis of the company's capital structure as at December 31, 2004 is summarized as follows: Shareholders' equity was Baht 29,103 million or 52.85%. Liabilities were Baht 25,963 million or 47.15%. Important financial ratios were as follows: - Debt to equity ratio was 0.89 times,lower than 1.11 times at the end of last year. - Book value per share was Baht 53.55, 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 December 31, 2004, the ending balance of the cash and the cash equivalent was Baht 2,688 million, up by Baht 958 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 8,534 million. Most of this was cash from operating activities that amounted to Baht 6,968 million. Short-term and long-term investments used as collateral dropped by Baht 2,482 million, trade receivable from a related party increased by Baht 708 million and spare parts and supplies increased by Baht 485 million. -Net cash payment for investing activities was Baht 1,974 million. The investment in GEC's construction of Power Plant amounted to Baht 2,101 million and shareholder loans to GEC and NTPC amounted to Baht 175 million and Baht 464 million, respectively. Whereas the cash inflow was Baht 582 million from the net disposals of short-term and long-term investments, the dividends from KTSF and Eastern Water Resources Development and Management Public Co., Ltd. (EASTW) amounting to Baht 428 million and Baht 40 million, respectively. - Net cash payment for financing activities was Baht 5,605 million, mainly owing to long-term loans and debentures repayment by EGCO, REGCO, KEGCO, TLP Cogen, Roi-Et Green, APBP and GEC in the amount of Baht 5,862 million and dividend payment to shareholders amounted to Baht 1,571 million while the loan drawdown from GEC, TLP Cogen and Roi-Et Green increased by Baht 2,074 million.