IM of Connected Transaction

Electricity Generating Public Company Limited Information Memorandum in relation to the Connected Transaction The Meeting of the Board of Directors of Electricity Generating Public Company Limited ("EGCOMP") No. 6/2006 held on October 30, 2006 passed a resolution to approve EGCOMP to enter into an agreement to acquire ordinary shares of BLCP Power Limited ("BLCP" or "the Company") from CLP Power (BLCP) Ltd. ("CLP-BLCP"), a company under the CLP Holdings Limited Group, and two individual shareholders, namely Mr. James Richarde Truscott and Mr. Andrew John Pickering (collectively called the CLP Group), and to propose this acquisition transaction to the Extraordinary General Meeting of Shareholders No.1/2006 for further consideration and approval. This transaction is considered to be a connected transaction, in relation to assets or service, in accordance with the Notification of the Board of Governors of the Stock Exchange of Thailand regarding Disclosure of Information and Act of Listed Companies concerning the Connected Transaction B.E. 2546. Details of the transaction are as follows: 1) Date of Transaction After obtaining the shareholders' approval resolution from EGCOMP's Extraordinary General Meeting of Shareholders No.1/2006 and fulfilling all conditions precedent as specified in the share purchase agreement. 2) The Parties Involved Buyer: Electricity Generating Public Company Limited. ("EGCOMP") Seller: CLP Power (BLCP) Ltd. ("CLP-BLCP"), a company under the CLP Holdings Limited Group, and 2 individual shareholders, namely Mr. James Richarde Truscott and Mr. Andrew John Pickering (collectively called the CLP Group) Relationship between the Parties Involved: EGCOMP and CLP-BLCP have a common major shareholder, namely CLP Holdings Limited. CLP Holdings Limited holds an indirect 100 % equity stake in CLP-BLCP via CLP Power International Ltd. and an indirect 11.21 % equity stake in EGCOMP via CLP Power Projects (Thailand) Limited. 3) General Information of the Transaction and Total Transaction Value EGCOMP would acquire BLCP ordinary shares, each with a par value of Baht 100 each, totaling 57.422 million shares from CLP-BLCP and two individual shareholders (the CLP Group). The total amount of payment to be made to the CLP Group stands at Baht 6,645 million, consisting of payment to be made for 7.422 million of BLCP existing shares totaling Baht 4,645 million and payment to be made for 50 million of BLCP newly issued shares, with a par value of Baht 100 each but partially paid-up at Baht 40 a share on November 6, 2006, totaling Baht 2,000 million. In paying for the Existing Shares, EGCOMP would make the payment totaling Baht 4,645 million to the CLP Group on the closing date after EGCOMP obtains the shareholders' approval resolution from its Extraordinary General Meeting of Shareholders No.1/2006 and all conditions precedent as specified in the Share Purchase Agreement are fulfilled. In accordance with its BOD's Meeting No. 6/2006 held on October 30, 2006, for the 50 million of Newly Issued Shares, EGCOMP will make an advance payment ("Advance Payment") totaling Baht 2,000 million, the amount conforming to the percentage of stake in BLCP it will hold, to the CLP Group on November 6, 2006 so that such Advance Payment can be applied for subscription of BLCP shares. If the deal fails, CLP-BLCP will pay the money back to EGCOMP with the interest at 8% per year. In addition, the capital injection in BLCP project will be called within 2007, the amount conforming to the percentage of stake in BLCP EGCOMP will hold, of approximately USD 147.9 million minus the equity injection on November 6, 2006 of Baht 2,000 million USD equivalent amount at the exchange rate on such date; in case that BLCP will call for the capital injection before the fulfillment of all conditions precedent, EGCOMP will provide the advance payment for such equity injection. If the deal failed, CLP-BLCP will pay the money back to EGCOMP with the interest at 8% per year. 4) Conditions Precedent In accordance with the Share Purchase Agreement, the transaction of acquiring BLCP ordinary shares will take place after some conditions precedent are fulfilled. Details of such conditions precedent are summarized as follows: * The passing at a board of directors' meeting and a shareholders' meeting of EGCOMP of a resolution approving the acquisition of the BLCP shares from the CLP Group in compliance with relevant SET's notification; * Obtaining consent for the acquisition transaction from relevant government authorities such as EGAT in accordance with the PPA; * Obtaining consent for the acquisition transaction from BLCP's creditors in accordance with the Financing Agreement, from BLCP's shareholders other than the CLP Group in accordance with the Shareholder Agreement and from any person that is party to an agreement in relation to the business of power generation to which the Company is party. 5) Information about the Asset to be Acquired BLCP was incorporated on September 30, 1997, and entered into the Power Purchase Agreement ("PPA") with the Electricity Generating Authority of Thailand ("EGAT") to engage in the business of generating and selling electricity to EGAT under the Independent Power Producer Program (IPP). As at September 30, 2006, BLCP's total registered and paid-up capital stands at 1,484.40 million baht, consisting of 14.844 million shares with a par value of Baht 100 each. BLCP's major shareholders include the CLP Holdings Limited Group and the Banpu Plc. Group, each holding a 50 % stake in the Company. BLCP operates the BLCP Power Plant Project with a contracted capacity of 673.25 MW per unit, with total contracted capacity of 1,346.50 MW for the Project. The scheduled commercial operation dates (SCOD) of Unit 1 and Unit 2 are October 1, 2006 and February 1, 2007, consecutively. The term of the PPA is 25 years from the SCOD of Unit 2, and the term will expire in the Year 2032. The BLCP Power Plant Project is a pulverized coal-fired, steam electric generating station, located in the Map Ta Phut Industrial Estate. The Industrial Estate Authority of Thailand ("IEAT") grants BLCP the right of land use for operating electricity generation plant under a long term/30-year land lease agreement. The Plant is arranged within the three interconnected structures, the boiler structures, the turbine building, and the integrated control and electrical building. Construction of the Plant was carried out by the Mitsubishi Consortium from Japan that has vast experience and expertise in constructing many types of power plants in many countries around the world under the Engineering Procurement & Construction Contract (EPC Contract). Imported high quality coal will be used as the primary fuel of the Plant. BLCP entered into the Coal Supply &Transportation Agreement (CSTA) with a term of 25 years with Australian Coal Holdings Pty Ltd. ("ACH") under the Australian Rio Tinto Group. Under the CSTA, ACH is obligated to supply coal with the quantity and quality as specified in the CSTA to BLCP for the whole CSTA term. BLCP entered into the Operation & Maintenance Agreement (O&M Agreement) with a term of 25 years with Power Generation Services Co., Ltd., a joint venture between Banpu Public Company Limited. Group (holding a 40 % equity stake) and the CLP Holdings Limited Group (holding a 60 % equity stake). Although Unit 1 of the Project is scheduled to begin its commercial operation on October 1, 2006, it passed the completion of Commercial Operations Test, and begins delivering electricity to EGAT's transmission grid since mid-August 2006. Some important financial information of BLCP for the Years ended December 31, 2003, 2004 and 2005 as disclosed in the Company's audited financial statements and for 6-month period ended June 30, 2006 as disclosed in its reviewed financial statements are as below: For the Years Ended December 31(Unit:Million Baht) 2003 2004 2005 For 6 Month period ended June 30 Total Revenue 32.00 12.22 - 7.27 Net Profit (Loss) 2.23 (98.99) (269.48) (55.38) Total Assets 8,374.27 12,201.17 18,991.94 25,244.36 Total Liabilities 7,070.86 10,996.74 18,057.00 24,364.81 Total Shareholders' Equity 1,303.41 1,204.42 934.94 879.55 Note: - In the past, BLCP has no operating revenue as it is still in the process of power plant construction and preparation for power generation. The SCODs of Unit 1 and Unit 2 of the BLCP Power Plant Project are October 1, 2006 and February 1, 2007, respectively. 6) Criteria Used in Determining Total Transaction Value The amount of proceeds totaling Baht 4,645 million to be paid by EGCOMP to the CLP Group is an amount agreed upon between the involved parties, and is determined based upon valuation of BLCP shares as conducted by Kim Eng Securities (Thailand) Public Company Limited, a financial advisor approved by the Securities & Exchange Commission (SEC). For the Newly Issued Shares of BLCP, EGCOMP will make an Advance Payment totaling Baht 2,000 million to the CLP Group for subscription of such shares, with a par value of Baht 100 each but partially paid up at Baht 40 a share. 7) Transaction Size The transaction size is 20.73 % of net tangible assets (NTA) of EGCOMP and its subsidiaries based on the latest reviewed consolidated financial statements as at June 30, 2006. 8) Details of the Connected Person CLP-BLCP is the connected person to EGCOMP such that they have a common major shareholder, namely CLP Holdings Limited. In conducting this acquisition transaction, CLP-BLCP will be the interested person such that it will receive the proceeds from sale of investment in BLCP amounting Baht 4,645 million from EGCOMP. 9) Source of Funds Source of funds to be used for acquiring BLCP ordinary shares will consist of loans from financial institutions for the amount totaling 5,000 million Baht, and the remaining will be from EGCOMP's internal cash flows. Loans from financial institutions will impose no detrimental effect to EGCOMP shareholders' right. 10) Conditions of the Transaction As the transaction of acquiring BLCP shares is considered to be a connected transaction in relation to assets or services in accordance with the Notification of the Board of Governors of the Stock Exchange of Thailand regarding Disclosure of Information and Act of Listed Companies concerning the Connected Transactions B.E. 2003, and the size of this transaction is at 20.73 %, thus exceeding 3 % of EGCOMP's and its subsidiaries' NTA calculated based on the reviewed financial statements as at June 30, 2006, it is required to propose this transaction to the Extraordinary General Meeting of Shareholders No.1/2006 for further consideration and approval. A resolution of the shareholders' meeting to approve this transaction must consist of three-fourths of total votes of shareholders attending the meeting and having voting rights, excluding interested shareholders. In addition, prior to entering into this transaction, all conditions precedent as specified in the shareholder agreement to be signed between EGCOMP and the CLP Group must be fulfilled. 11) Dissemination of the Notice of the Shareholders' Meeting EGCOMP will send a Notice of the Extraordinary General Shareholders' Meeting No.1/2006 to the Stock Exchange of Thailand at least 5 business days before sending it to shareholders, and will send such notice together with the opinion of the Independent Financial Advisor to shareholders no less than 14 days prior to the date of shareholders' meeting. 12) Name of the Interested Shareholder who cannot Vote for the Transaction The interested shareholder who cannot vote for this transaction in EGCOMP's Extraordinary General Shareholders' Meeting is CLP Power Projects (Thailand) Limited that is a company under the CLP Holdings Limited Group and is EGCOMP's major shareholder that holds EGCOMP ordinary shares for the total amount of 118.02 million shares, accounting for 22.42 % of EGCOMP's total paid-up shares. 13) EGCOMP's Actions to Comply with the Relevant SET Regulation - EGCOMP appointed Kim Eng Securities (Thailand) Public Company Limited to act as an independent financial advisor and the independent financial advisor has provided opinions that EGCOMP's entering into the transaction to acquire BLCP is based on reasonableness which will benefit EGCOMP and the shareholders of EGCOMP; the price is acceptable since the transaction meets the Company's policy which respect to business expansion as well as creating economic benefit to the country. Based on the appropriate price, the independent financial advisor has the opinion that the shareholders should vote in favor of this proposal to purchase BLCP's common shares. - EGCOMP will hold a meeting of the board of directors for consideration of the transaction, taking into account rationale and benefits of the transaction to EGCOMP. Interested directors could not attend the meeting, and has no voting rights. - EGCOMP will disclose the information as required under the relevant SET regulation. - EGCOMP will hold a shareholder meeting to approve the transaction. 14) Interested Directors who cannot attend the BOD Meeting and cannot Vote for the Transaction Interested directors or directors who are connected persons and cannot attend the BOD meeting and cannot vote for the transaction include Mr. Richard McIndoe, Mr. Peter Albert Littlewood, and Mr. Hideaki Tomiku, all of whom are the representatives of the CLP Holdings Limited Group. 15) Benefit of the Transaction of Acquiring BLCP Shares 1. Increase EGCOMP's market share in the domestic power generation and distribution business; 2. Increase EGCOMP's revenue and profitability from investing in the BLCP Power Plant Project; 3. Investing in BLCP Helps to Increase EGCOMP's Experience in Operating and Maintaining Coal-fired Power Plants and Diversify Source of Fuel; 4. Investing in BLCP allows EGCOMP to invest in an IPP project of which construction process is almost complete and ready to be in operation in accordance with the schedule, thus substantially reducing pre-operating risk and allowing EGCOMP to realize revenue from investment immediately. 16) The Board of Directors and the Audit Committee's Opinion about the Transaction In the opinion of the Audit Committee and the Board of Directors, it is viewed that the acquisition of BLCP shares from CLP Group, which is a connected transaction is undertaken as an implementation plan in accordance with EGCOMP's policy to be a flagship in coal fired power business. This transaction will also enhance the operation of EGCOMP and expand its business opportunity to cope with growing demand for electricity, as well as allow EGCOMP to utilize the competency and specialization of its personnel to the utmost benefits. In addition, EGCOMP has thoroughly considered a number of generally accepted valuation approaches in determining the appropriate value of the transaction for the benefits of EGCOMP and its shareholders and agreed that the remuneration to be made to CLP Group for the acquisition of shares is in the appropriate range and would not result in undue benefits to CLP. Thus, entering into the transaction is based on reasonableness and justifiable rationale and is considered acceptable. 17) Responsibility of Directors with respect to Information in This Information Memorandum The Board of Directors have reviewed the information contained in this information memorandum, and hereby certify that the information is correct, complete and true and does not cause any misunderstanding or concealment. The Company hereby certifies that the statements contained in this information memorandum are true in all respects Yours sincerely, Visit Akaravinak President