anagement Discussion and Analysis for 6 Month

Total Sales of Electricity - SPP Group 2,803 2,397 17% - Interest income and others amounted to Baht 53 million, an increase of Baht 30 million mainly from an increase of APBP's other income in the amount of Baht 17 million according to the acknowledgement of insurance claims of a physical impairment of an electricity generating equipment since last year and an increase of Baht 7 million from GEC's interest income due to higher interest rates. - Share of profit of associates and joint ventures was from AEP totaling Baht 63 million, an increase of Baht 44 million as compared to the same period of 2005 due to a gain on foreign exchange rate and increased electricity sales from EGAT and industrial users. - Cost of Sales of SPP Group were reported at Baht 2,277 million, an increase of Baht 343 million or 18% as compared to the same period of 2005. This was substantially driven by an increase in cost of sales of GEC amounting to Baht 191 million owing to higher fuel costs and usages as well as an increase at TLP Cogen amounting to Baht 146 million from higher fuel costs and usages. There was an increase at Roi-Et Green's cost of sales by Baht 2 million due to higher operating and maintenance cost.And the Baht 5 million higher of APBP's cost of sales was in line with an increase in its sales. Cost of Sales - SPP Group: : Unit : Million Baht 1H'06 1H'05 %Changes GEC 1,333 1,142 17% TLP Cogen 758 612 24% APBP 132 127 4% Roi-Et Green 55 53 3% Total Cost of Sales - SPP Group 2,277 1,934 18% - Administrative expenses and income taxes were Baht 242 million, up by Baht 79 million or 49% as compared to the first six months of 2005. These increases were substantially from GEC's higher administrative expenses and income taxes of Baht 77 million, reported at Baht 225 million, that resulted from prepayment fee for refinancing and debt restructuring service fees at GEC's 3 subsidiaries, namely; Gulf Cogeneration Co., Ltd. (GCC), Nong Khae Cogeneration Co., Ltd. (NKCC), and Samutprakarn Cogeneration Co., Ltd. (SCC) . - Interest expenses were Baht 240 million, an increase of Baht 78 million or 48%, driven by an increase in GEC's interest expenses amounting to Baht 83 million due to an unwind cost of Interest Rate Swap Agreement and loan drawdown for administrative expenses for Khaeng Khoi 2 Project. TLP Cogen and Roi-Et Green's interest expenses were down by Baht 5 million and Baht 1 million, respectively, owing to lower principal amounts. 4) Overseas Group refers to Conal and NTPC, of which their revenues were Baht 381 million, a decrease of Baht 36 million or 9% compared to the same period of 2005. The expenses were Baht 207 million, an increase of Baht 4 million or 2% compared to the same period of 2005, owing to the following reasons: Total Revenues and expenses of Overseas Group: Unit : Million Baht Conal NTPC Total 1H'06 1H'05 1H'06 1H'05 1H'06 1H'05 % Chg Revenues 380 418 2 - 381 418 (9%) Expenses 197 203 10 - 207 203 2% - Sales of electricity of the Overseas Group were Baht 344 million, a decrease of Baht 52 million or 13% compared to the same period of last year. This resulted from the contractual transfer of the 40 MW of NMPC's Power Plant to NPC in February 2006. - Interest income and others amounted to Baht 37 million, an increase of Baht 16 million or 75% as compared to the first six months of 2005, mainly due to an increase of Conal's interest income and other income. - Cost of Sales were Baht 56 million, a decrease of Baht 38 million or 41% due to the transfering of NMPC. - Administrative expenses and income taxes were Baht 113 million, an increase of Baht 37 million or 49%. The change to the proportionate consolidation method for the accounting of NTPC led to a recognition of expenses in the amount of Baht 10 million for this period. Conal's expenses increased by Baht 27 million, mainly owing to the adjustment of a defered income tax incurred in the first six months of 2005 which led to an increase of Baht 47 million; whereas the transfering of NMPC resulted in lower administrative expenses by Baht 21 million. - Interest expenses were Baht 38 million, up by Baht 5 million or 15%. 5) Other Business Group includes two subsidiaries, ESCO and ET. Total revenues were Baht 517 million, an increase by Baht 118 million or 30% as compared to the same period of 2005 and total expenses totaled Baht 354 million, an increase of Baht 90 million or 34%. The details are as follows; Total Revenues and Expenses of Other Business Group:Unit : Million Baht ESCO EGCOM TARA Total 1H'06 1H'05 1H'06 1H'05 1H'06 1H'05 % Chg Revenues 421 314 96 85 517 399 30% Expenses 323 232 31 31 354 264 34% - Service income from ESCO amounted to Baht 411 million, up by Baht 102 million or 33%, resulting mostly from an increase of operation and maintenance (O&M) services and selling spare parts to Elgali 2 Power Plant in Sudan. - Sales of water from a subsidiary, ET, were Baht 93 million, up by Baht 10 million, or 12%, thanks to an increase of minimum take and tariff under the Water Purchase Agreement as indicated. - Interest income and others amounted to Baht 10 million, an increase of Baht 3 million or 51%, mainly from ESCO's interest income, up Baht 2 million and ET's interest income, up Baht 2 million thanks to the higher interest rates. - ESCO's share of profit of associates and joint ventures totaled Baht 3 million, an increase of Baht 3 million, mainly from Amata Power-Esco Service Co., Ltd (AMESCO). - Cost of Services were Baht 281 million, an increase of Baht 92 million or 49%, resulting from an increase in the costs of ESCO's operation and maintenance (O&M) services to customers and spare parts which was consistent with its increased revenues. - Cost of water sales of ET was Baht 28 million, up Baht 1 million or 4% mainly from an increase of operating and maintenance service costs. - Administrative expenses and income taxes totaled Baht 43 million, a decrease of Baht 1 million or 3% compared to the same period of 2005, mostly from the drop in ESCO's income tax by Baht 3 million due to decreased net profit . - Interest expenses were Baht 2 million, a decrease of Baht 1.64 million or 48% compared to the first six months of 2005, owing to lower principal amount of EGCOM TARA's debt. 4. Report and Analysis of Financial Position 4.1 Asset Analysis As at June 30, 2006, total assets of EGCO, its subsidiaries, associates and joint ventures amounted to Baht 68,824 million, an increase of Baht 7,574 million or 12% from December 31, 2005. The important details are as follows: 1) Cash and deposits at financial institutions, and short term and long term marketable securities were Baht 13,907 million or 20% of the total assets, up Baht 1,494 million or 12%. This resulted from an increase of Baht 2,150 million in deposits at financial institutions and short-term marketable securities, thanks to dividend payment from EGCO's subsidiaries, plus an increase of Baht 37 million in long-term investments in marketable securities. On the other hand, cash and cash equivalent was down by Baht 692 million. 2) Short-term and long-term investments used as collateral were Baht 4,765 million or 7% of the total assets, up Baht 290 million or 6%. This increase mainly came from cash reserved for the purpose of repayment of principal and payment of interest of REGCO. 3) Investment in subsidiaries, associates and interests in joint ventures amounted to Baht 460 million or 1% of the total assets, up by Baht 57 million or 14%. This increase is mainly a result of the recognition of the share of profit of AEP. 4) Property, plant and equipment (net) totaled Baht 39,367 million or 57% of the total assets. They were up Baht 4,618 million or 13% due to an increase in property, plant and equipment related to GEC, NTPC and APBP's construction of Baht 4,956 million, Baht 911 million and Baht 82 million, respectively; as well as the recording of capital spare parts as property, plant and equipment following the major maintenance of REGCO, KEGCO and TLP Cogen in the amount of Baht 263 million, Baht 220 million and Baht 40 million, respectively. Meanwhile, a decrease in property, plant and equipment was from depreciation of EGCO and subsidiaries' assets totaling Baht 1,268 million and the reclassification of unutilised capital spare parts from property, plant and equipment to inventories of REGCO, KEGCO and TLP Cogen amounting to Baht 168 million, Baht 116 million and Baht 35 million, respectively. 5) Other assets were Baht 10,325 million or 15% of the total assets, up Baht 1,115 million or 12% mainly from an increase of other current assets of Baht 566 million according to an increase of GEC's value added tax of Baht 304 million and advanced payment of Baht 70 million, while ESCO's unearned income increased by Baht 139 million and trade receivable from a related party was up Baht 428 million. 4.2 Liability Analysis As at June 30, 2006, the company's total liabilities were Baht 33,809 million, up Baht 4,674 million or 16% as a result of additional loan drawdown and debenture issuance. The total liabilities consist of the following: 1) Long-term loans and debentures totaled Baht 28,478 million, or 84% of total liabilities, up Baht 4,993 million or 21%. The details are as follows: - USD loans in the amount of USD 363 million - Yen loans in the amount of Yen 1,018 million - Filipino Peso loans in the amount of Peso 65 million - Baht loans in the amount of Baht 7,323 million - Baht debentures in the amount of Baht 7,511 million In the first six months of 2006, there was additional loan drawdown that totaled Baht 7,685 million for the construction of GEC, NTPC and APBP. Reflecting EGCO's equity ownership of 50%, EGCO's proportion of 50% in GCC's issuance of Baht debenture to refinance GCC, NKCC and SCC's long-term debt facilities in April 2006 amounted to Baht 2,900 million. On the other hand, there was principal repayment of Baht 4,532 million and KEGCO's debenture repayment of Baht 287 million. 2) Other liabilities amounted to Baht 5,331 million or 16% of total liabilities, mostly resulting from contruction payables amounting to Baht 1,202 million, trade payables of Baht 865 million, interest payable of Baht 176 million, value added tax payable and income tax payable of Baht 862 million, and others of Baht 2,226 million. 4.3 Shareholders' Equity Analysis As at June 30, 2006, Shareholders' Equity amounted to Baht 35,015 million, which was Baht 2,900 million higher than the amount as at December 31, 2005. This was due mainly to the profits from operation of the first six months of 2006. The analysis of the company's capital structure as at June 30, 2006 is summarized as follows: Shareholders' equity was Baht 35,015 million or 50.88%. Liabilities were Baht 33,809 million or 49.12%. Important financial ratios were as follows: - Debt to equity ratio was 0.97 times, higher than 0.91 times at the end of last year. - Book value per share was Baht 64.23, higher than Baht 58.96 at the end of last year. 3. 5. 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, 2006, the ending balance of the cash and the cash equivalent was Baht 8,128 million, down Baht 692 million from the end of 2005. The details of the sources and uses of funds are as follows: -Net cash received from operating activities totaled Baht 3,224 million. Most of this was cash from operating activities that amounted to Baht 4,571 million whereas cash from working capital caused a decrease by Baht 1,348 million. -Net cash payment for investing activities was Baht 8,663 million. There was cash payment for the investment in power plant construction that amounted to Baht 5,660 million at GEC, Baht 849 million at NTPC and Baht 82 million at APBP and short-term investment of Baht 1,863 million. The cash inflow was from dividends of KTSF, EASTW and the other open-ended funds which amounted to Baht 130 million, Baht 31 million and Baht 7 million, respectively. - Net cash received from financing activities was Baht 4,763 million, mainly owing to loan drawdown of GEC in the amount of Baht 6,948 million, NTPC in the amount of Baht 678 million and APBP in the amount of Baht 60 million, plus GCC's debenture issuance of Baht 2,900 million. On the other hand, the loan repayment from REGCO, KEGCO, TLP Cogen, Roi-Et Green, ET, APBP, GEC and Conal totaled Baht 4,532 million and debenture repayment from KEGCO amounting to Baht 283 million. EGCO also paid dividend to shareholders in the amount of Baht 908 million.