Management Discussion and Analysis for Q1-2010

(Losses) from JVEs - - 93 83 12% Share of Profits (Losses) from JVEs bf FX (5) - 65 103 (37%) Net Profit bf FX and MI (5) - 158 186 (15%) * Sales of electricity of SPP were Baht 571 million, a decrease of Baht 7 million or 1%, mainly from a decrease in EGCO Cogen's electricity sales to EGAT due to Baht appreciation and a decrease in natural gas price. Sales of Electricity - SPP: Unit : Million Baht 3M10 3M09 %Changes EGCO Cogen 493 500 (1%) Roi-Et Green 78 78 0.02% Total Sales of Electricity - SPP 571 578 (1%) * Interest income and others amounted to Baht 2 million, a decrease of Baht 1 million or 28%, mainly from the lower interest income. * Cost of Sales of SPP was reported at Baht 451 million, a decrease of Baht 16 million or 3%. This was substantially driven by a decrease in cost of sales of EGCO Cogen by Baht 22 million from a decrease in natural gas price. Meanwhile, Roi-Et Green's cost of sales increased by Baht 6 million from a higher price of rice husk. Cost of Sales - SPP : Unit : Million Baht 3M10 3M09 %Changes EGCO Cogen 411 433 (5%) Roi-Et Green 40 34 17% Total Cost of Sales - SPP 451 467 (3%) * Administrative expenses and income taxes were Baht 10 million, as same as last year. * Finance costs were Baht 19 million, a decrease of Baht 2 million or 11%. * Share of profits from joint ventures before FX, GCC, NKCC, SCC and GYG, totaled Baht 65 million, a decrease of Baht 38 million or 37% mainly from a higher corporate tax due to the end of BOI privilege on corporate tax exemption for NKCC and higher profits of GCC and SCC. 4) Overseas' share of profits from joint ventures before FX, Conal, NTPC and Quezon, was reported at Baht 283 million, an increase of Baht 178 million mainly from the elelctricity sales of NTPC due to pre-COD. Moreover, share of profits from Conal increased as the corporate tax calculation changed. 5) Other Business' total revenues were Baht 185 million, a decrease of Baht 41 million or 18%; and total expenses were Baht 134 million, a decrease of Baht 23 million or 15%. 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 /5 Total 3M10 3M09 3M10 3M09 3M10 3M09 % Chg Total revenues 121 160 64 66 185 226 (18%) Total expenses 102 130 32 27 134 157 (15%) Profits bf Share of Profits (Losses) from JVEs 19 30 32 39 51 69 (26%) Share of Profits (Losses) from JVEs bf FX - - - - - - - Net Profit bf FX and MI 19 30 32 39 51 69 (26%) /5 ESCO purchased additional shares in ET in January 2010, increased the investment portion to 74.19%. * Service income from ESCO amounted to Baht 120 million, down by Baht 37 million or 24%, resulting mostly from lower maintenance service income and spare parts sale to overseas power plants. * Sales of water from ET, were Baht 64 million, down by Baht 1 million, or 2%. * Interest income and others amounted to Baht 2 million, down by Baht 2 million or 56% from a decrease in ESCO's other income. * Cost of services was Baht 82 million, a decrease of Baht 28 million or 26% which was in accordance with the decrease in service income. * Cost of water sales of ET was Baht 19 million, an increase of Baht 2 million or 9%. * Administrative expenses and income taxes totaled Baht 33 million, an increase of Baht 4 million or 12% as a result of higher tax payment of ET in the amount of Baht 6 million due to the end of BOI privilege on corporate tax exemption on February 2009. 4. Report and Analysis of Financial Position 4.1 Asset Analysis As at March 31, 2010, total assets of EGCO, its subsidiaries and interests in joint ventures amounted to Baht 64,557 million, an increase of Baht 1,637 million or 3% from December 31, 2009. The important details are as follows: 1) Cash and deposits at financial institutions, and short-term and long-term marketable securities were Baht 9,606 million or 15% of the total assets, up Baht 1,683 million or 21%. This resulted mainly from dividends from joint ventures totaling Baht 1,300 million and cash receipts from operating activities of Baht 613 million. Meanwhile, there were principal repayment and interest payment totaling Baht 180 million and an investment in joint ventures of Baht 28 million. 2) Short-term and long-term investments used as collateral were Baht 1,315 million or 2% of the total assets, up Baht 368 million or 39%. 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, 2010 amounted to Baht 29,274 million or 45% of the total assets, up Baht 745 million or 3%. 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 1,585 million. 3.2) Dividends received from BLCP and Conal by Baht 656 million. 3.3) A repayment from Lao Holding State Enterprise (LHSE) totaling Baht 4 million regarding the first investment in NTPC that EGCO paid for LHSE. 3.4) Profit from translation adjustments totaling Baht 180 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, 2010 was Baht 32,216 million, down by Baht 4 million due to a repayment from LHSE regarding the investment in NTPC that EGCO paid for. 4) Property, plant and equipment (net) totaled Baht 14,618 million or 23% of the total assets. They were down Baht 450 million or 3% due to the decrease in property, plant and equipment from the depreciation of EGCO and subsidiaries' assets totaling Baht 545 million and the reclassification of transfer capital spare parts out to spare parts and supplies at Rayong power plant and KEGCO totaling Baht 22 million. Meanwhile, there was a recording of capital spare parts as property, plant and equipment following the major maintenance at KEGCO and Rayong power plant in the amount of Baht 95 million and net purchase of property, plant and equipment totaling Baht 22 million. 5) Other assets were Baht 9,744 million or 15% of the total assets, down Baht 709 million or 7% mainly from a decrease of dividends receivable from BLCP by Baht 772 million. 4.2 Liability Analysis As at March 31, 2010, the EGCO Group's total liabilities were Baht 11,562 million, which was Baht 264 million or 2% lower than the amount as at December 31, 2009. The total liabilities consist of the following: 1) Long-term loans and debentures totaled Baht 10,596 million, or 92% of total liabilities, down Baht 120 million or 1%. This mainly came from the long-term loans repayment from EGCO Cogen and Roi-Et Green. The details are as follows: - USD loans in the amount of USD 14 million - Yen loans in the amount of Yen 616 million - Baht loans in the amount of Baht 8,507 million - Baht debentures in the amount of Baht 1,410 million Maturity of long-term loans and debentures as of March 31,2010 Unit : Million Baht EGCO KEGCO EGCO Cogen Roi-Et Green Within 1 Year - 913 179 35 1-5 Years 4,000 497 791 144 > 5 Years 4,000 - - 36 Total 8,000 1,410 970 216 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 March 31, 2010 totaling Baht 463 million for the purpose of payment of principal and interest due within one year. 2) Other liabilities amounted to Baht 966 million or 8% of total liabilities, representing a decrease of Baht 144 million or 13% which mostly resulted from the decrease in accrued bonus expenses of EGCO, Rayong power plant and subsidiaries totaling Baht 190 million. Meanwhile, there was an increase of KEGCO and EGCO's interest payable totaling Baht 66 million. 4.3 Shareholders' Equity Analysis As at March 31, 2010, Shareholders' Equity amounted to Baht 52,995 million, which was Baht 1,901 million or 4% higher than the amount as at December 31, 2009. This was due mainly to the net profit in the consolidated financial statements that amounted to Baht 2,071 million. The analysis of the company's capital structure as at March 31, 2010 can be summarized as follows: Shareholders' equity was Baht 52,995 million or 82.09%. Liabilities were Baht 11,562 million or 17.91%. Important financial ratios were as follows: - Debt to equity ratio was 0.22 times, lower than 0.23 times at the end of 2009. - Book value per share was Baht 99.64, higher than Baht 96.06 at the end of 2009. 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, 2010, the ending balance of the cash and the cash equivalent was Baht 7,553 million, which was Baht 1,698 million higher than the amount as at December 31, 2009. The details of the sources and uses of funds are as follows: -Net cash received from operating activities totaled Baht 613 million. This was cash received from operating activities of Baht 1,250 million and cash payment for working capital of Baht 637 million. -Net cash received from investing activities was Baht 1,264 million mainly due to dividend received from BLCP of Baht 1,300 million. Meanwhile, investment in ET amounted to Baht 28 million. - Net cash payment for financing activities was Baht 180 million. The payment includes the loan repayment of EGCO Cogen and Roi-Et Green that totaled Baht 96 million and interest payment of Baht 83 million. In the three-month period of 2010, the analysis of the company's liquidity ratios is as follows: - Current ratio was 9.64 times, compared to 8.30 times in 2009 - Quick ratio was 5.73 times, compared to 4.35 times in 2009 Both ratios were higher than the ratios in 2009 mainly due to dividends from BLCP totaling Baht 1,300 million.