Management Discussion and Analysis for 3 Month 2008

- Share of profits from joint ventures, BLCP and GPG, were recognised in the amount of Baht 1,875 million, an increase of Baht 350 million or 23%, mostly due to a share of profit from GPG of Baht 497 million (including a gain from foreign exchange of Baht 209 million), up by Baht 244 million or 97% resulting from electricity sales of GPG, following its KK2 Project-Unit 1 and 2 achieving COD in May 2007 and February 2008, respectively; plus a share of profit from BLCP of Baht 1,378 million (including a gain from foreign exchange of Baht 504 million), up by Baht 105 million or 8% from a gain on foreign exchange. 3) SPP Group incorporates five companies, namely: GEC (excluding GPG), AEP, APBP, EGCO Cogen and Roi-Et Green. The total revenues were reported at Baht 556 million, a decrease of Baht 7 million or 1% compared to the same period of 2007. The expenses were Baht 452 million, an increase from the same period of last year by Baht 4 million or 1%. The share of profits from joint ventures were reported at Baht 235 million (including a gain from foreign exchange of Baht 143 million), an increase of Baht 162 million or 224% compared to the same period of last year. The details are as follows: Total Revenues, Total Expenses and Share of Profits (Loss) from JVEs of SPP Group: Unit : Million Baht EGCO Cogen Roi-Et Green GEC (exclude GPG) 3M08 3M07 3M08 3M07 3M08 3M07 Total revenues 482 494 74 68 - - Total expenses 413 413 39 35 - - Profits bf Share of Profits (Loss) from JVEs 69 81 35 34 - - Share of Profits (Loss) from JVEs - - - - 194 62 Net Profit bf Subs's Fx and MI 69 81 35 34 194 62 APBP and AEP Total 3M08 3M07 3M08 3M07 % Chg Total revenues - - 556 563 (1%) Total expenses - - 452 448 1% Profits bf Share of Profits (Loss) from JVEs - - 104 115 (10%) Share of Profits (Loss) from JVEs 41 10 235 73 224% Net Profit bf Subs's Fx and MI 41 10 339 188 81% - Sales of electricity of the SPP Group were Baht 551 million, representing an increase of Baht 3 million or 1% compared to the same period of last year. Most of the increase of SPP group's electricity sales was from Roi-Et Green in the amount of Baht 13 million, resulting mainly from higher Energy Charge due to higher fuel oil cost, which was in accordance with the tariff formula. Meanwhile, EGCO Cogen's electricity sales decreased by Baht 10 million due to lower electricity sales to EGAT as a result of planned outage. Sales of Electricity - SPP Group: Unit : Million Baht 3M08 3M07 %Changes EGCO Cogen 479 489 (2%) Roi-Et Green 72 59 22% Total Sales of Electricity - SPP Group 551 548 1% - Interest income and others amounted to Baht 5 million, a decrease of Baht 11 million or 70%, mainly because the four-year subsidy for guarantee fee from UNDP for Roi-Et Green ended in 2007 and the lower interest rates caused a decrease in interest income of Roi-Et Green and EGCO Cogen. - Cost of Sales of SPP Group were reported at Baht 422 million, an increase of Baht 3 million or 1% as compared to the same period of 2007. This was substantially driven by an increase in cost of sales of Roi-Et Green amounting to Baht 4 million due to higher fuel costs. Cost of Sales - SPP Group: Unit : Million Baht 3M08 3M07 %Changes EGCO Cogen 387 388 (0.33%) Roi-Et Green 35 31 15% Total Cost of Sales - SPP Group 422 419 1% - Administrative expenses and income taxes were Baht 9 million, up by Baht 4 million or 88% as compared to the same period of 2007. This mainly resulted from EGCO Cogen's penalty payment to EGAT amounting to Baht 5 million, since its thermal process ratio did not meet the requirement in accordance with the PPA. - Interest expenses were Baht 20 million, a decrease of Baht 4 million or 15%,mainly from a lower principal of EGCO Cogen. - Share of profits from joint ventures, GEC (excluding GPG), APBP and AEP, totaled Baht 235 million, up by Baht 162 million or 224% as compared to the same period of 2007. The share of profit from the joint venture GEC contributed the most in the amount of Baht 194 million (including a gain on foreign exchange of Baht 134 million), an increase of Baht 132 million or 212% as compared to the same period of last year. This was primarily a result of an increase in the gain on foreign exchange rate. Moreover, the share of profits from joint ventures, APBP and AEP, totaled Baht 41 million (including a gain on foreign exchange of Baht 10 million), up by Baht 31 million or 299%, which was primarily from AEP's higher electricity sales to EGAT as well as lower maintenance cost. 4) Overseas Group refers to Conal and NTPC, of which their share of losses from joint ventures were reported at Baht 237 million, an increase in loss of Baht 168 million compared to the same period of 2007. NTPC's share of loss was Baht 251 million including a loss from foreign exchange of Baht 235 million), an increase in loss of Baht 172 million or 218% as compared to the same period of 2007, caused mainly by higher foreign exchange loss of Baht 167 million. Meanwhile, Conal's share of profit was reported at Baht 15 million (including a gain on foreign exchange of Baht 4 million), an increase of Baht 4 million or 39% compared to the same period of last year, mainly from a decrease in administrative expenses, income tax and interest expenses. 4) Other Business Group includes two subsidiaries, ESCO and ET and a joint venture, AMESCO. Total revenues were Baht 313 million, an increase by Baht 57 million or 22% as compared to the same period of 2007 and total expenses totaled Baht 215 million, an increase of Baht 54 million or 33%. The share of profit from a joint venture was reported at Baht 2.41 million, an increase of Baht 1.42 million or 144% as compared to the same period of last year. The details are as follows: Total Revenues, Total Expenses and Share of Profits (Loss) from JVEs of Other Business Group: Unit : Million Baht ESCO ET Total 3M08 3M07 3M08 3M07 3M08 3M07 % Chg Total revenues 254 199 60 57 313 256 22% Total expenses 198 145 17 17 215 161 33% Profits bf Share of Profits (Loss) from JVEs 56 54 43 41 98 95 3% Share of Profits (Loss) from JVEs 2.41 1 - - 2.41 1 144% Net Profit bf Subs's Fx and MI 58 55 43 41 101 96 5% - Service income from ESCO amounted to Baht 251 million, up by Baht 54 million or 28%, resulting mostly from higher maintenance service income and spare parts sale to power plant in overseas. - Sales of water from ET, were Baht 57 million, up by Baht 3 million, or 5%, thanks to the increase of the minimum take and tariff under the long-term Water Purchase Agreement with Provincial Waterworks Authority. - Interest income and others amounted to Baht 5 million, an increase of Baht 0.18 million or 4%. - Cost of services were Baht 169 million, an increase of Baht 60 million or 55%, resulting from an increase in maintenance service costs which was consistent with its increased revenues. - Cost of water sales of ET was Baht 16 million, down Baht 1 million or 6% mainly from the incurrence of maintenance service costs in the same period of 2007. - Administrative expenses and income taxes totaled Baht 29 million, a decrease of Baht 5 million or 15% compared to the same period of 2007, mostly from a decrease in ESCO's administrative expenses and income taxes by Baht 6 million. - ESCO's share of profit from a joint venture totaled Baht 2.41 million, an increase of Baht 1.42 million from AMESCO. 4. Report and Analysis of Financial Position 4.1 Asset Analysis As at March 31, 2008, total assets of EGCO, its subsidiaries and interests in joint ventures amounted to Baht 56,187 million, an increase of Baht 2,587 million or 5% from December 31, 2007. The important details are as follows: 1) Cash and deposits at financial institutions, and short-term and long- term marketable securities were Baht 6,875 million or 12% of the total assets, up Baht 1,382 million or 25%. This resulted mainly from an increase of cash and cash equivalent by Baht 1,319 million due to cash receipts from operating activities of Baht 655 million, dividends from joint ventures totaling Baht 875 million and from EASTW by Baht 78 million. Meanwhile, principal and interest payments were made totaling Baht 125 million. 2) Short-term and long-term investments used as collateral were Baht 1,316 million or 2% of the total assets, up Baht 401 million or 44%. This increase mainly came from cash reserved for the purpose of repayment of principal and payment of interest of KEGCO. 3) Investment in subsidiaries and interests in joint ventures recorded under the equity method in the consolidated financial statements as at March 31, 2008 amounted to Baht 20,611 million or 37% of the total assets, up Baht 378 million or 2%. The major change can be defined as follows: 3.1) an increase in share of profit from investment according to the equity method amounting to Baht 2,127 million. 3.2) dividend received from BLCP by Baht 1,667 million. 3.3) an investment in the additional paid-up shares amounting to Baht 10 million. 3.4) profit from translation adjustment totaling Baht 91 million. For the company financial statements, the original cost was applied for recording the investment in subsidiaries and interests in joint ventures at the beginning; the book value as at March 31, 2008 was Baht 29,673 million, up Baht 19 million, thanks to the additional paid-up shares in joint ventures, NTPC and Sustainable Energy and Environmental Development Co.,Ltd. (SEED) 4) Property, plant and equipment (net) totaled Baht 18,111 million or 32% of the total assets. They were down Baht 527 million or 3% due to the decrease in property, plant and equipment from the depreciation of EGCO and subsidiaries' assets totaling Baht 535 million and the reclassification of unutilised capital spare parts from property, plant and equipment to spare parts and supplies at REGCO totaling Baht 49 million. Meanwhile, there was a recording of capital spare parts as property, plant and equipment following the major maintenance at REGCO in the amount of Baht 45 million and net purchase of property, plant and equipment totaling Baht 12 million. 5) Other assets were Baht 9,274 million or 17% of the total assets, up Baht 952 million or 11% mainly from an increase of dividend receivable from a joint venture by Baht 792 million, ESCO's accrued income by Baht 82 million. 4.2 Liability Analysis As at March 31, 2008, the EGCO Group's total liabilities were Baht 11,442 million, which was Baht 163 million or 1% lower than the amount as at December 31, 2007. The total liabilities consist of the following: 1) Long-term loans and debentures totaled Baht 9,091 million, or 79% of total liabilities, down Baht 146 million or 2%. This mainly came from the long-term loans repayment from EGCO Cogen and Roi-Et Green that totaled Baht 90 million. The details are as follows: - USD loans in the amount of USD 39 million - Yen loans in the amount of Yen 823 million - Baht loans in the amount of Baht 4,677 million - Baht debentures in the amount of Baht 2,957 million Maturity of long-term loans and debentures as of March 31, 2008 Unit : Million Baht EGCO KEGCO EGCO Cogen Roi-Et Green Within 1 Year - 1,349 150 32 1-5 Years - 2,227 986 128 > 5 Years 4,000 - 121 99 Total 4,000 3,576 1,256 259 Long-term loans and debentures are secured liabilities over land, buildings, power plants and equipment of subsidiaries and joint ventures. The subsidiaries and joint ventures have to maintain cash reserves for the purpose of repayment of principal and interest due within one year and as a reserve for minimising the foreign exchange risk. 2) Other liabilities amounted to Baht 2,351 million or 21% of total liabilities, representing a decrease of Baht 16 million or 1% which mostly resulted from trade payables that decreased by Baht 281 million mainly from EGCO Cogen and KEGCO.Meanwhile, net liabilities in a joint venture increased by Baht 181 million from recognising NTPC's share of loss. Income tax payable was up Baht 112 million mainly from REGCO and KEGCO. 4.3 Shareholders' Equity Analysis As at March 31, 2008, Shareholders' Equity amounted to Baht 44,745 million,which was Baht 2,750 million or 7% higher than the amount as at December 31, 2007. This was due mainly to the net profit in the consolidated financial statements that amounted to Baht 2,817 million. The analysis of the company's capital structure as at March 31, 2008 can be summarized as follows: Shareholders' equity was Baht 44,745 million or 79.64%. Liabilities were Baht 11,442 million or 20.36%. Important financial ratios were as follows: - Debt to equity ratio was 0.26 times, lower than 0.28 times at the end of 2007. - Book value per share was Baht 83.93, higher than Baht 78.78 at the end of 2007. 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 March 31, 2008, the ending balance of the cash and the cash equivalent was Baht 5,069 million, which was Baht 1,319 million higher than the amount as at December 31, 2007. The details of the sources and uses of funds are as follows: -Net cash received from operating activities totaled Baht 655 million. This was cash received from operating activities of Baht 1,732 million and cash payment for working capital of Baht 1,077 million. -Net cash received from investing activities was Baht 792 million mainly due to dividends from joint ventures and EASTW of Baht 875 million and Baht 78 million, respectively. Meanwhile, deposits at financial institutions amounted to Baht 138 million. - Net cash payment for financing activities was Baht 128 million. The payment includes the loan repayment of EGCO Cogen and Roi-Et Green that totaled Baht 90 million and interest payment of Baht 35 million. In the three-month period of 2008, the analysis of the company's liquidity ratios is as follows: - Current ratio was 5.60 times, compared to 4.22 times in 2007 - Quick ratio was 3.13 times, compared to 2.26 times in 2007 Both ratios were higher than the ratios in 2007 due to an increase of cash and cash equivalent resulted mainly from dividends from joint ventures and an increase of short-term investment used as collateral of KEGCO.