anagement Discussion and Analysis for the 9-month 2006

electricity sales showed an increase in the first nine months of 2006 when compared to the same period of 2005 in which a physical impairment of an electricity generating equipment happened. And the increase of Roi-Et Green's electricity sales came from higher tariff as well, thanks to the tariff formula that is linked to the price of fuel oil. Sales of Electricity - SPP Group: Unit : Million Baht 9M2006 9M2005 %Changes GEC 2,371 2,189 8% TLP Cogen 1,476 1,266 17% APBP 254 190 33% Roi-Et Green 186 128 45% Total Sales of Electricity - SPP Group 4,287 3,773 14% - Interest income and others amounted to Baht 72 million, an increase of Baht 27 million mainly from an increase of GEC's interest income of Baht 13 million as well as an increase of TLP Cogen's interest income of Baht 10 million thanks to higher interest rates. And an increase of APBP's other income in the amount of Baht 6 million was a result of the acknowledgement of insurance claims of aphysical impairment of an electricity generating equipment. - Share of profit from associates was from AEP totaling Baht 67 million, an increase of Baht 32 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 3,470 million, an increase of Baht 421 million or 14% as compared to the same period of 2005. This was substantially driven by an increase in cost of sales of GEC amounting to Baht 220 million owing to higher fuel costs and usages as well as an increase at TLP Cogen amounting to Baht 192 million from higher fuel costs and usages. The Baht 6 million higher of APBP's cost of sales was in line with an increase in its sales. And there was an increase at Roi-Et Green's cost of sales by Baht 3 million due to higher operating and maintenance cost. Cost of Sales - SPP Group : Unit : Million Baht 9M2006 9M2005 %Changes GEC 2,032 1,813 12% TLP Cogen 1,152 960 20% APBP 201 195 3% Roi-Et Green 85 82 4% Total Cost of Sales - SPP Group 3,470 3,049 14% - Administrative expenses and income taxes were Baht 345 million, up by Baht 113 million or 48% as compared to the first nine months of 2005. This increase was substantially from GEC's higher administrative expenses and income taxes of Baht 111 million, reported at Baht 324 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 344 million, an increase of Baht 104 million or 43%, driven mainly by an increase in GEC's interest expenses amounting to Baht 113 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 9 million and Baht 2 million, respectively, owing to lower principal amounts. 4) Overseas Group refers to Conal and NTPC, of which their revenues were Baht 559 million, a decrease of Baht 75 million or 12% compared to the same period of 2005. The expenses were Baht 338 million, a decrease of Baht 359 million or 51% 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 9M'06 9M'05 9M'06 9M'05 9M'06 9M'05 % Chg Revenues 557 632 2 2 559 635 (12%) Expenses 316 353 22 344 338 697 (51%) - Sales of electricity of the Overseas Group were Baht 502 million, a decrease of Baht 98 million or 16% 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 57 million, an increase of Baht 23 million or 68% as compared to the first nine months of 2005, mainly due to an increase of Conal's other income. - Cost of Sales were Baht 109 million, a decrease of Baht 52 million or 32% due to the transfering of NMPC. - Administrative expenses and income taxes were Baht 174 million, a decrease of Baht 313 million or 64%. This was due to the change to the proportionate consolidation method for the accounting of NTPC that led to a recognition of these expenses in the amount of Baht 22 million for this period whereas the expenses were acknowledged in the amount of Baht 346 million in the first nine months of 2005, mainly from development expenses of Baht 280 million. Conal's income tax increased by Baht 50 million, mainly owing to the adjustment of a deferred income tax incurred in the first nine months of 2005; whereas the transfering of NMPC resulted in lower administrative expenses by Baht 38 million. - Interest expenses were Baht 55 million, up by Baht 7 million or 13%. 5) Other Business Group includes two subsidiaries, ESCO and ET. Total revenues were Baht 686 million, an increase by Baht 123 million or 22% as compared to the same period of 2005 and total expenses totaled Baht 465 million, an increase of Baht 88 million or 23%. The details are as follows; Total Revenues and Expenses of Other Business Group:Unit Million Baht ESCO ET Total 9M'06 9M'05 9M'06 9M'05 9M'06 9M'05 % Chg Revenues 539 436 148 128 686 564 22% Expenses 419 330 46 47 465 376 23% - Service income from ESCO amounted to Baht 525 million, up by Baht 99 million or 23%, 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 142 million, up by Baht 17 million, or 13%, thanks to an increase of minimum take and tariff under the Water Purchase Agreement. - Interest income and others amounted to Baht 16 million, an increase of Baht 7 million or 71%, mainly from ET's interest income, up Baht 4 million and ESCO's interest income, up Baht 3 million thanks to the higher interest rates. - ESCO's share of profit from associates totaled Baht 3 million, an increase of Baht 1 million, mainly from Amata Power-Esco Service Co., Ltd (AMESCO). - Cost of Services were Baht 362 million, an increase of Baht 88 million or 32%, 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 43 million, up Baht 2 million or 5% mainly from an increase of operating and maintenance service costs. - Administrative expenses and income taxes totaled Baht 58 million, an increase of Baht 1 million or 1% compared to the same period of 2005, mostly from an ESCO's higher administrative expenses. - Interest expenses were Baht 2 million, a decrease of Baht 2 million or 52% compared to the first nine 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 September 30, 2006, total assets of EGCO, its subsidiaries, associates and joint ventures amounted to Baht 67,125 million, an increase of Baht 5,875 million or 10% 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 10,937 million or 16% of the total assets, down Baht 1,476 million or 12%. This resulted mainly from cash and cash equivalent that decreased by Baht 2,724 million due to REGCO's prepayment its remaining balance of US Institution Notes. On the other hand, there was an increase of Baht Baht 1,140 million in deposits at financial institutions and short-term marketable securities, plus an increase of Baht 109 million in long-term investments in marketable securities. 2) Short-term and long-term investments used as collateral were Baht 5,544 million or 8% of the total assets, up Baht 1,069 million or 24%. This increase mainly came from cash reserved for the purpose of repayment of principal and payment of interest at GEC and REGCO. 3) Investment in subsidiaries, associates and interests in joint ventures amounted to Baht 465 million or 1% of the total assets, up by Baht 61 million or 15%. This increase is mainly a result of the recognition of the share of profit of AEP. 4) Property, plant and equipment (net) totaled Baht 40,169 million or 60% of the total assets. They were up Baht 5,420 million or 16% due to an increase in property, plant and equipment related to GEC (GPG and GYG), NTPC and APBP's construction of Baht 5,855 million, Baht 1,370 million and Baht 137 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 305 million and Baht 40 million, respectively. Meanwhile, a decrease in property, plant and equipment was from depreciation of EGCO and subsidiaries' assets totaling Baht 1,909 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 189 million, Baht 164 million and Baht 35 million, respectively. 5) Other assets were Baht 10,011 million or 15% of the total assets, up Baht 801 million or 9% mainly from an increase of trade receivable from a related party (EGAT) Baht 450 million, other current assets increased by Baht 232 million, GEC's advanced payment and input VAT refund of Baht 110 million and ESCO's unearned income of Baht 81 million. Other non-current assets increased by Baht 217 million. 4.2 Liability Analysis As at September 30, 2006, the company's total liabilities were Baht 31,654 million, up Baht 2,519 million or 9% 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 27,035 million, or 85% of total liabilities, up Baht 3,549 million or 15%. The details are as follows: - USD loans in the amount of USD 320 million - Yen loans in the amount of Yen 970 million - Filipino Peso loans in the amount of Peso 61 million - Baht loans in the amount of Baht 7,782 million - Baht debentures in the amount of Baht 7,514 million In the first nine months of 2006, there was additional loan drawdown that totaled Baht 9,823 million for the construction of GEC, NTPC and APBP. On the other hand, there was loan principal repayment of Baht 8,235 million: from REGCO - Baht 3,853 million for repayment of its Institution Notes; KEGCO- Baht 559 million; TLP Cogen - Baht 149 million; ET - Baht 30 million; Roi-et Green- Baht 34 million; Conal - Baht 103 million; APBP - Baht 33 million; and GEC - Baht 3,474 million. Based on EGCO's equity ownership of 50% in GEC, 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. And KEGCO's debenture repayment was Baht 283 million. 2) Other liabilities amounted to Baht 4,619 million or 15% of total liabilities, represented a decrease of Baht 1,031 million which mostly resulting from a decrease of GEC's contruction payable amounting to Baht 2,110 million whereas GEC's other non-current liabilities increased by Baht 487 million from retention and NTPC's non-current liabilities increased by Baht 263 million. 4.3 Shareholders' Equity Analysis As at September 30, 2006, Shareholders' Equity amounted to Baht 35,471 million, which was Baht 3,356 million or 10% higher than the amount as at December 31, 2005. This was due mainly to the profits from operation of the first nine months of 2006. The analysis of the company's capital structure as at September 30, 2006 is summarized as follows: Shareholders' equity was Baht 35,471 million or 52.84%. Liabilities were Baht 31,654 million or 47.16%. Important financial ratios were as follows: - Debt to equity ratio was 0.89 times, lower than 0.91 times at the end of last year. - Book value per share was Baht 65.15, higher than Baht 58.96 at the end of last year. 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 September 30, 2006, the ending balance of the cash and the cash equivalent was Baht 6,096 million, down Baht 2,724 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 4,941 million. Most of this was cash from operating activities that amounted to Baht 6,886 million whereas cash from working capital caused a decrease by Baht 1,945 million. -Net cash payment for investing activities was Baht 9,747 million. There was cash payment for the investment in power plant construction that amounted to Baht 7,316 million at GEC, Baht 1,179 million at NTPC and Baht 137 million at APBP and short-term investment of Baht 1,141 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 2,100 million, mainly owing to loan drawdown of GEC in the amount of Baht 8,579 million, NTPC in the amount of Baht 1,129 million and APBP in the amount of Baht 94 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 8,235 million and debenture repayment from KEGCO amounting to Baht 283 million. EGCO also paid dividend to shareholders in the amount of Baht 2,040 million.