Management Discussion and Analysis Q3/2009

Total Revenues, Total Expenses and Share of Profits (Losses) from JVEs of SPP: Unit : Million Baht EGCO Cogen Roi-Et Green GEC (exclude GPG) 9M09 9M08 9M09 9M08 9M09 9M08 Total revenues 1,454 1,456 228 215 - - Total expenses 1,381 1,309 115 113 - - Profits bf Share of Profits (Losses) from JVEs 73 147 113 102 - - Share of Profits (Losses) from JVEs - - - - 251 250 Net Profit bf FX and MI 73 147 113 102 251 250 APBP and AEP* Total 9M09 9M08 9M09 9M08 % Chg Total revenues - - 1,682 1,670 1% Total expenses - - 1,495 1,422 5% Profits bf Share of Profits (Losses) from JVEs - - 187 248 (25%) Share of Profits (Losses) from JVEs - 41 251 292 (14%) Net Profit bf FX and MI - 41 438 540 (19%) * APBP and AEP were sold in May 2008 * Sales of electricity of SPP were Baht 1,674 million, representing an increase of Baht 18 million or 1%, mainly from Roi-Et Green's electricity sales that increased by Baht 15 million due to higher Energy Charge from higher fuel oil price, which was in accordance with the tariff formula. EGCO Cogen's electricity sales increased by Baht 3 million due to higher electricity sales to EGAT caused by the increasing of fuel price. Sales of Electricity - SPP: Unit : Million Baht 9M09 9M08 %Changes EGCO Cogen 1,450 1,446 0.22% Roi-Et Green 225 210 7% Total Sales of Electricity - SPP 1,674 1,657 1% * Interest income and others amounted to Baht 8 million, a decrease of Baht 6 million or 44%, mainly from the lower interest income of EGCO Cogen. * Cost of Sales of SPP was reported at Baht 1,407 million, an increase of Baht 72 million or 5%. This was substantially driven by an increase in cost of sales of EGCO Cogen in the amount of Baht 71 million as a result of major maintenance expenses. Cost of Sales - SPP : Unit : Million Baht 9M09 9M08 %Changes EGCO Cogen 1,301 1,231 6% Roi-Et Green 105 103 2% Total Cost of Sales - SPP 1,407 1,334 5% * Administrative expenses and income taxes were Baht 23 million, up by Baht 1 million or 4%. * Finance costs were Baht 66 million, an increase of Baht 2 million or 2%, mainly from higher interest rates. * Share of profits from joint ventures, GEC (excluding GPG) totaled Baht 251 million,slightly different from the same period of the previous year. Moreover, the disposal of APBP and AEP was made in May 2008. 4) Overseas share of profits from joint ventures, Conal, NTPC and Quezon, was reported at Baht 341 million, an increase of Baht 367 million mainly from the recognition of Quezon's share of profit since December 2008. 5) Other Business's total revenues were Baht 590 million, a decrease of Baht 271 million or 31%; and total expenses were Baht 450 million, a decrease of Baht 157 million or 26%. Share of losses from the joint ventures were Baht 6 million when compared to the same period of the previous year that created the share of profit totaling Baht 4 million. The details are as follows: Total Revenues, Total Expenses and Share of Profits (Losses) from JVEs of Other Business: Unit : Million Baht ESCO * ET 9M09 9M08 9M09 9M08 Total revenues 389 683 201 178 Total expenses 356 553 94 54 Profits bf Share of Profits (Losses) from JVEs 33 131 107 124 Share of Profits (Losses) from JVEs - 4 - - Net Profit bf FX and MI 33 134 107 124 NED Total 9M09 9M08 9M09 9M08 % Chg Total revenues - - 590 861 (31%) Total expenses - - 450 606 (26%) Profits bf Share of Profits (Losses) from JVEs - - 140 255 (45%) Share of Profits (Losses) from JVEs (6) - (6) 4 N.A. Net Profit bf FX and MI (6) - 134 259 (48%) * AMESCO was sold in May 2008 * Service income from ESCO amounted to Baht 382 million, down by Baht 278 million or 42%, resulting mostly from lower maintenance service income and spare parts sale to overseas power plants. * Sales of water from ET, were Baht 199 million, up by Baht 27 million, or 16%, thanks to the increase of the tariff and minimum take under the long-term Water Purchase Agreement with Provincial Waterworks Authority. * Interest income and others amounted to Baht 10 million, down by Baht 20 million or 68% due to a gain on the sale of AMESCO totaling Baht 15 million in 2008. * Cost of services was Baht 275 million, a decrease of Baht 185 million or 40% which was in accordance with the decrease in service income. * Cost of water sales of ET was Baht 57 million, an increase of Baht 7 million or 14%. * Administrative expenses and income taxes totaled Baht 118 million, an increase of Baht 22 million or 22% as a result of ESCO's fine from defaulting on rice husk power plant construction as well as from higher tax payment of ET in the amount of Baht 33 million due to the end of corporate tax reduction on February 2009. Meanwhile, ESCO's corporate tax decreased by Baht 47 million from lower revenues. * Share of losses from joint ventures totaled Baht 6 million from the acquisition of NED, natural energy developing in Thailand, in July 2009. Compared to the same period of the previous year,a share of profit of ESCO was Baht 4 million from AMESCO. 4. Report and Analysis of Financial Position 4.1 Asset Analysis As at September 30, 2009, total assets of EGCO, its subsidiaries and interests in joint ventures amounted to Baht 65,457 million, an increase of Baht 7,127 million or 12% from December 31, 2008. The important details are as follows: 1) Cash and deposits at financial institutions, and short-term and long-term marketable securities were Baht 10,566 million or 16% of the total assets, up Baht 4,534 million or 75%. This resulted mainly from EGCO's drawn down of a long-term loan amounting to Baht 4,000 million, dividends from joint ventures totaling Baht 2,300 million, dividend of Baht 109 million received from EASTW, higher market price of EASTW by Baht 266 million and net cash receipts from operating activities of Baht 2,630 million. Meanwhile, dividend payment to shareholders amounted to Baht 2,670 million, an investment in joint ventures was Baht 1,279 million and principal repayment and interest payment totaled Baht 953 million. 2) Short-term and long-term investments used as collateral were Baht 1,368 million or 2% of the total assets, up Baht 201 million or 17%. 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 September 30, 2009 amounted to Baht 28,379 million or 43% of the total assets, up Baht 3,885 million or 16%. 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 5,600 million. 3.2) An increase in share capital of a joint venture totaling Baht 8 million. 3.3) The transfer of net liabilities to interests in joint ventures totaling Baht 452 million. 3.4) Dividends received from BLCP, GEC, Conal and Quezon by Baht 2,366 million. 3.5) An acquisition of a joint venture amounting to Baht 483 million. 3.6) Loss from translation adjustments totaling Baht 293 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 September 30, 2009 was Baht 35,652 million, up Baht 1,328 million, mainly due to the additional paid-up shares in EGCO International B.V.I. Ltd. (EGCO BVI) and NTPC. 4) Property, plant and equipment (net) totaled Baht 15,588 million or 24% of the total assets. They were down Baht 1,452 million or 9% due to the decrease in property, plant and equipment from the depreciation of EGCO and subsidiaries' assets totaling Baht 1,653 million and the reclassification of unutilised capital spare parts from property, plant and equipment to spare parts and supplies at REGCO, EGCO Cogen and KEGCO totaling Baht 199 million. Meanwhile, there was a recording of capital spare parts as property, plant and equipment following the major maintenance at REGCO, EGCO Cogen and KEGCO in the amount of Baht 273 million and net purchase of property, plant and equipment totaling Baht 126 million. 5) Other assets were Baht 9,557 million or 15% of the total assets, down Baht 40 million or 0.42% mainly from a decrease of spare parts and supplies from REGCO by Baht 140 million. Meanwhile, there was an increase of trade receivables from ESCO, EGCO Cogen and ET by Baht 84 million. 4.2 Liability Analysis As at September 30, 2009, the EGCO Group's total liabilities were Baht 15,890 million, which was Baht 3,102 million or 24% higher than the amount as at December 31, 2008. The total liabilities consist of the following: 1) Short-term loans totaled Baht 3,500 million or 22% of total liabilities. This came from EGCO's drawn down of a short-term loan according to a long-term promissory note agreement with a Thai commercial bank in November 2008. 2) Long-term loans and debentures totaled Baht 11,145 million, or 70% of total liabilities, up Baht 3,375 million or 43%. This mainly came from EGCO's drawn down of a long-term loan from a Thai commercial bank amounting to Baht 4,000 million. Meanwhile, KEGCO, EGCO Cogen and Roi-Et Green repaid the principal of debentures and long-term loans. The details are as follows: - USD loans in the amount of USD 16 million - Yen loans in the amount of Yen 671 million - Baht loans in the amount of Baht 8,536 million - Baht debentures in the amount of Baht 1,830 million Maturity of long-term loans and debentures as of September 30, 2009 Unit : Million Baht EGCO KEGCO EGCO Cogen Roi-Et Green Within 1 Year - 864 154 38 1-5 Years - 966 910 154 > 5 Years 8,000 - - 59 Total 8,000 1,830 1,064 251 Long-term loans and debentures are secured liabilities over land, buildings, power plants and equipments of subsidiaries. The subsidiaries have to maintain cash reserves as at September 30, 2009 totaling Baht 536 million for the purpose of payment of principal and interest due within one year. 3) Other liabilities amounted to Baht 1,245 million or 8% of total liabilities, representing a decrease of Baht 273 million or 18% which mostly resulted from the decrease in REGCO, KEGCO and ESCO's income tax payable. 4.3 Shareholders' Equity Analysis As at September 30, 2009, Shareholders' Equity amounted to Baht 49,567 million, which was Baht 4,025 million or 9% higher than the amount as at December 31, 2008. This was due mainly to the net profit in the consolidated financial statements that amounted to Baht 6,655 million. Meanwhile, appropriated dividend totaled Baht 2,632 million. The analysis of the company's capital structure as at September 30, 2009 can be summarized as follows: Shareholders' equity was Baht 49,567 million or 75.72%. Liabilities were Baht 15,890 million or 24.28%. Important financial ratios were as follows: - Debt to equity ratio was 0.32 times, lower than 0.28 times at the end of 2008. - Book value per share was Baht 93.18, higher than Baht 85.60 at the end of 2008. 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, 2009, the ending balance of the cash and the cash equivalent was Baht 9,244 million, which was Baht 4,265 million higher than the amount as at December 31, 2008. The details of the sources and uses of funds are as follows: -Net cash received from operating activities totaled Baht 2,781 million. This was cash received from operating activities of Baht 3,909 million, cash payment for working capital of Baht 638 million and cash payment for corporate income tax of Baht 490 million. -Net cash received from investing activities was Baht 1,107 million mainly due to dividend received from joint ventures and EASTW amounting to Baht 2,300 million and Baht 109 million, respectively. Meanwhile, an investment in joint ventures was Baht 1,279 million. -Net cash received from financing activities was Baht 377 million mainly due to EGCO's drawn down of a long-term loan from a Thai commercial bank amounting to Baht 4,000 million. Meanwhile, the payment includes the dividend payment to shareholders amounted to Baht 2,670 million and principal repayment and interest payment of EGCO, KEGCO, EGCO Cogen and Roi-Et Green totaled Baht 952 million. In the nine-month period of 2009, the analysis of the company's liquidity ratios is as follows: - Current ratio was 3.45 times, compared to 2.58 times in 2008 - Quick ratio was 2.19 times, compared to 1.34 times in 2008