Management Discussion and Analysis for Year 2009

revenues. The corporate tax reduction BOI privilege for Rayong power plant ended on April 19, 2008. Moreover, tax payment at KEGCO decreased by Baht 67 million due to lower revenues. KEGCO's 50% corporate tax reduction BOI privilege on profits from power generation already ended on September 25, 2009. * Finance costs were Baht 229 million, a decrease of Baht 114 million or 33%, resulting from KEGCO's lower principal amounts of debentures and KEGCO's completion of overseas loan repayment in June 2008. * Share of profits from joint ventures before FX, BLCP and GPG, was recognised in the amount of Baht 4,869 million, an increase by Baht 101 million or 2% that resulted from an increase of GPG's electricity sales due to the Kaeng Khoi 2 (KK2) unit 2 achieved its Commercial Operating Date (COD) on February 27, 2008. Meanwhile, BLCP's electricity sales decreased due to lower in the Base Availability Credit. 3) SPP's total revenues were reported at Baht 2,237 million, an increase of Baht 3 million or 0.14%. The total expenses were Baht 1,972 million, an increase of Baht 11 million or 1%. The share of profits from joint ventures before FX was reported at Baht 325 million,down by Baht 40 million or 11%. The details are as follows: Total Revenues, Total Expenses and Share of Profits (Losses) from JVEs before FX of SPP: Unit : Million Baht EGCO Cogen Roi-Et Green GCC,NKCC,SCC,GYG 2009 2008 2009 2008 2009 2008 Total revenues 1,933 1,947 305 287 - - Total expenses 1,814 1,804 158 157 - - Profits bf Share of Profits (Losses) from JVEs 119 143 147 130 - - Share of Profits (Losses) from JVEs bf FX - - - - 325 324 Net Profit bf FX and MI 119 143 147 130 325 324 APBP and AEP* Total 2009 2008 2009 2008 % Chg Total revenues - - 2,237 2,234 0.14% Total expenses - - 1,972 1,961 1% Profits bf Share of Profits (Losses) from JVEs - - 265 273 (3%) Share of Profits (Losses) from JVEs bf FX - 41 325 365 (11%) Net Profit bf FX and MI - 41 590 638 (8%) * APBP and AEP were sold in May 2008 * Sales of electricity of SPP were Baht 2,226 million, representing an increase of Baht 11 million or 0.49%, mainly from Roi-Et Green's electricity sales that increased by Baht 18 million due to higher Energy Charge from higher fuel oil price, which was in accordance with the tariff formula. Meanwhile, EGCO Cogen's electricity sales decreased by Baht 7 million due to lower steam sales. Sales of Electricity - SPP: Unit : Million Baht 2009 2008 %Changes EGCO Cogen 1,927 1,935 (0.40%) Roi-Et Green 299 281 7% Total Sales of Electricity - SPP 2,226 2,216 0.49% * Interest income and others amounted to Baht 11 million, a decrease of Baht 8 million or 42%, mainly from the lower interest income of EGCO Cogen. * Cost of Sales of SPP was reported at Baht 1,847 million, an increase of Baht 11 million or 1%. This was substantially driven by an increase in cost of sales of EGCO Cogen in the amount of Baht 7 million as a result of major maintenance expenses. Cost of Sales - SPP : Unit : Million Baht 2009 2008 %Changes EGCO Cogen 1,705 1,698 0.40% Roi-Et Green 142 138 3% Total Cost of Sales - SPP 1,847 1,836 1% * Administrative expenses and income taxes were Baht 39 million, up by Baht 1 million or 2%. * Finance costs were Baht 86 million, a decrease of Baht 1 million or 1%. * Share of profits from joint ventures before FX, GCC, NKCC, SCC and GYG, totaled Baht 325 million, a decrease of Baht 40 million or 11% from the disposal of APBP and AEP in May 2008. 4) Overseas' share of profits from joint ventures before FX, Conal, NTPC and Quezon, was reported at Baht 693 million, an increase of Baht 672 million mainly from the recognition of Quezon's share of profit from acquiring 23.40% in December 2008 and 2.60% in March 2009, and an increase of NTPC's other income from the liquidated damages charged to the head contractor due to the project delay. 5) Other Business' total revenues were Baht 891 million, a decrease of Baht 142 million or 14%; and total expenses were Baht 674 million, a decrease of Baht 43 million or 6%. Share of losses from the joint ventures before FX were Baht 11 million when compared to 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 before FX of Other Business: Unit : Million Baht ESCO * ET 2009 2008 2009 2008 Total revenues 621 796 270 238 Total expenses 545 641 129 76 Profits bf Share of Profits (Losses) from JVEs 76 155 141 162 Share of Profits (Losses) from JVEs bf FX - 4 - - Net Profit bf FX and MI 76 159 141 162 NED Total 2009 2008 2009 2008 % Chg Total revenues - - 891 1,034 (14%) Total expenses - - 674 717 (6%) Profits bf Share of Profits (Losses) from JVEs - - 217 317 (32%) Share of Profits (Losses) from JVEs bf FX (11) - (11) 4 N.A. Net Profit bf FX and MI (11) - 206 321 (36%) * AMESCO was sold in May 2008 * Service income from ESCO amounted to Baht 611 million, down by Baht 158 million or 21%, resulting mostly from lower maintenance service income and spare parts sale to overseas power plants. * Sales of water from ET, were Baht 267 million, up by Baht 38 million, or 17%, 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 13 million, down by Baht 22 million or 64% due to a gain on the sale of AMESCO totaling Baht 15 million in 2008. * Cost of services was Baht 435 million, a decrease of Baht 96 million or 18% which was in accordance with the decrease in service income. * Cost of water sales of ET was Baht 77 million, an increase of Baht 6 million or 9%. * Administrative expenses and income taxes totaled Baht 162 million, an increase of Baht 47 million or 40% as a result of ESCO's fine from defaulting on rice husk power plant construction amounted to Baht 37 million as well as from higher tax payment of ET in the amount of Baht 46 million due to the end of corporate tax reduction on February 2009. Meanwhile, ESCO's corporate tax decreased by Baht 38 million from lower revenues. * Share of losses from joint ventures before FX totaled Baht 11 million from the acquisition of NED, natural energy developing in Thailand, in July 2009. Compared to the previous year, a share of profit of ESCO was Baht 4 million from AMESCO, which was sold in May 2008. 4. Report and Analysis of Financial Position 4.1 Asset Analysis As at December 31, 2009, total assets of EGCO, its subsidiaries and interests in joint ventures amounted to Baht 62,920 million, an increase of Baht 4,590 million or 8% 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 7,923 million or 13% of the total assets, up Baht 1,891 million or 31%. 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 3,563 million, dividend of Baht 109 million received from EASTW, higher market price of EASTW by Baht 511 million and net cash receipts from operating activities of Baht 4,165 million. Meanwhile, dividend payment to shareholders amounted to Baht 2,708 million, an investment in joint ventures was Baht 2,549 million, a short-term investment in financial institutions was Baht 556 million and principal repayment and interest payment totaled Baht 5,088 million. 2) Short-term and long-term investments used as collateral were Baht 947 million or 2% of the total assets, down Baht 219 million or 19%. This increase mainly came from the principal repayment and interest payment of KEGCO. 3) Investment in subsidiaries and interests in joint ventures recorded under the equity method in the consolidated financial statements as at December 31, 2009 amounted to Baht 28,529 million or 45% of the total assets, up Baht 4,035 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 6,323 million. 3.2) An increase in share capital of a joint venture, Quezon and PGS, totaling Baht 1,038 million. 3.3) The transfer of net liabilities to interests in joint ventures, NTPC, totaling Baht 1,361 million. 3.4) Dividends received from BLCP, GEC, Conal and Quezon by Baht 4,428 million. 3.5) Loss from the translation of foreign currencies to Thai Baht on the net investment in foreign joint ventures, Conal and Quezon, totaling Baht 259 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 December 31, 2009 was Baht 32,219 million, down Baht 2,105 million, mainly due to transferring REGCO to EGCO. 4) Property, plant and equipment (net) totaled Baht 15,068 million or 24% of the total assets. They were down Baht 1,973 million or 12% due to the decrease in property, plant and equipment from the depreciation of EGCO and subsidiaries' assets totaling Baht 2,214 million and the reclassification of unutilised capital spare parts from property, plant and equipment to spare parts and supplies at Rayong power plant, EGCO Cogen and KEGCO totaling Baht 216 million. Meanwhile, there was a recording of capital spare parts as property, plant and equipment following the major maintenance at Rayong power plant, EGCO Cogen and KEGCO in the amount of Baht 273 million and net purchase of property, plant and equipment totaled Baht 184 million. 5) Other assets were Baht 10,452 million or 17% of the total assets, up Baht 856 million or 9% mainly from higher dividends receivable from joint ventures by Baht 865 million. 4.2 Liability Analysis As at December 31, 2009, the EGCO Group's total liabilities were Baht 11,826 million, which was Baht 962 million or 8% lower than the amount as at December 31, 2008. The total liabilities consist of the following: 1) Short-term loans of Baht 3,500 million were repaid in October 2009. 2) Long-term loans and debentures totaled Baht 10,716 million, or 91% of total liabilities, up Baht 2,946 million or 38%. This mainly came from EGCO's drawn down of a long-term loan 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 8,555 million - Baht debentures in the amount of Baht 1,410 million Maturity of long-term loans and debentures as of December 31, 2009 Unit : Million Baht EGCO KEGCO EGCO Cogen Roi-Et Green Within 1 Year - 914 168 76 1-5 Years 4,000 497 894 150 > 5 Years 4,000 - - 57 Total 8,000 1,410 1,062 243 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 December 31, 2009 totaling Baht 223 million for the purpose of payment of principal and interest due within one year. 3) Other liabilities amounted to Baht 1,110 million or 9% of total liabilities, representing a decrease of Baht 408 million or 27% which mostly resulted from the decrease in Rayong power plant, KEGCO and ESCO's income tax payable. 4.3 Shareholders' Equity Analysis As at December 31, 2009, Shareholders' Equity amounted to Baht 51,093 million, which was Baht 5,551 million or 12% higher than the amount as at December 31, 2008. This was mainly from 3 factors as follows: 1. The net profit in the consolidated financial statements amounted to Baht 7,936 million, while appropriated dividend totaled Baht 2,619 million made the increasing of retained earnings by Baht 5,317 million. 2. The market price of available-for-sale investment in EASTW increased by Baht 511 million. 3. Loss from the translation of foreign currencies to Thai Baht on the net investment in foreign joint ventures, Conal, NTPC and Quezon, totaling Baht 322 million. The analysis of the company's capital structure as at December 31, 2009 can be summarized as follows: Shareholders' equity was Baht 51,093 million or 81.20%. Liabilities were Baht 11,826 million or 18.80%. Important financial ratios were as follows: - Debt to equity ratio was 0.23 times, lower than 0.28 times at the end of 2008. - Book value per share was Baht 96.06, 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 December 31, 2009, the ending balance of the cash and the cash equivalent was Baht 5,855 million, which was Baht 876 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 4,165 million. This was cash received from operating activities of Baht 5,211 million. Whereas cash payment for corporate income tax was Baht 653 million and cash payment for working capital was Baht 393 million.. -Net cash received from investing activities was Baht 508 million mainly due to dividend received from joint ventures and EASTW amounting to Baht 3,563 million and Baht 109 million, respectively. Meanwhile, an investment in joint ventures was Baht 2,549 million and a short-term investment in financial institutions was Baht 556 million. -Net cash payment for financing activities was Baht 3,797 million mainly due to the dividend payment to shareholders amounting to Baht 2,708 million and principal repayment and interest payment of EGCO, KEGCO, EGCO Cogen and Roi-Et Green totaling Baht 5,088 million. Meanwhile, EGCO drew down a long- term loan amounting to Baht 4,000 million. In 2009, the analysis of the company's liquidity ratios is as follows: - Current ratio was 8.30 times, compared to 2.58 times in 2008. - Quick ratio was 4.35 times, compared to 1.34 times in 2008. Both ratios were higher than the ratios in 2008 due to the repayment of short- term loan of EGCO amounting to Baht 3,500 million.