anagement Discussion and Analysis Quarter 1

* Cost of Sales were Baht 39 million, a decrease of Baht 37 million or 49% as compared to last year. This resulted from a decrease of Northern Mindanao Power Corporation (NMPC)'s depreciation caused by a lower forecasted electricity production and the transfer of NMPC's 58 MW to NPC. * Administration expenses and other expenses were Baht 58 million, a decrease of Baht 0.05 million or 0.09%. * Interest expenses were Baht 16 million, a decrease of Baht 5 million or 22% owing to lower principal amount. 5) The Other Business Group's expenses were Baht 119 million, an increase of Baht 54 million or 83%, owing to the following reasons: * Service costs were Baht 78 million, an increase of Baht 44 million or 128%, resulting from an increase of ESCO's operation and maintenance (O&M) services to customers which was consistent with its revenue. * Cost of water sales of EGCOM Tara was Baht 14 million, an increase of Baht 1 million or 6% which was in line with an increase of EGCOM TARA revenue. * Administration expenses and other expenses were Baht 24 million, an increase of Baht 11 million or 92%, mostly from ESCO's expenses and corporate income tax payment that amounted to Baht 9 million. * Interest expenses were Baht 3 million, a decrease of Baht 2 million or 43%, resulting from the lower principal amount as well as the lower interest rate at EGCOM Tara. 3. Report and Analysis of Financial Position 3.1 Asset Analysis As at March 31, 2004, total assets of EGCO, its subsidiaries, associates and joint ventures amounted to Baht 57,758 million, an increase by Baht 1,321 million or 2% from December 31, 2003. The important details are as follows: 1) Cash, deposit at banks and financial institutions, and short term and long term marketable securities were Baht 7,080 million or 12% of the total assets, down Baht 735 million or 9%. This was categorized by a decrease of Baht 1,468 million in Deposits at Banks and Financial Instruments and short-term marketable securities, a decrease of Baht 408 million in long-term investments in marketable securities and others whereas the cash and cash equivalent were up by Baht 1,142 million. 2) Short-term and long-term investments used as collateral were Baht 11,763 million or 20% of the total assets, up Baht 1,809 million or 18%, with the partial cash reserve of debt repayment in US Dollars in the amount of USD 61 million. 3) Investment in subsidiaries and associates and interests in joint ventures amounted to Baht 359 million or 1% of the total assets, down by Baht 11 million or 3%. This mainly resulted from the acknowledgement of written-down investment in Nam Theun 2 owing to the new accounting policy which amounted to Baht 9 million. 4) Property, plant and equipment (net) totaled Baht 31,034 million or 54% of total assets.They were down Baht 510 million or 2% due to the depreciation of EGCO and subsidiaries' assets totaling Baht 616 million and the translation adjustment of Baht 24 million. Whereas an increase in property, plant and equipment was substantially from REGCO and KEGCO's capital spare parts of Baht 60 million, Baht 45 million, respectively. Moreover, an increase of Baht 41 million was from the construction of GEC. 5) Other assets were Baht 7,522 million or 13% of the total assets, up Baht 767 million or 11% mainly from sponsor loans to GEC amounting to Baht 338 million and Nam Theun 2 amounting to Baht 238 million. The trade accounts receivable increased by Baht 67 million and other current asset was up by Baht 197 million whereas inventories and accounts receivable from related companies were down by Baht 46 million and Baht 28 million, respectively. 3.2 Liability Analysis As at March 31, 2004, the company's total liabilities were Baht 30,108 million, up Baht 373 million or 1% mainly from accrued interests of EGCO, REGCO and KEGCO. The total liabilities consisted of the following: 1) Long-term loans and debentures totaled Baht 27,658 million, or 92% of total liabilities, down Baht 254 million or 1%. The details are as follows: - USD loans in the amount of USD 385 million - Yen loans in the amount of Yen 1,212 million - Philippine Peso loans in the amount of Peso 105 million - Baht loans in the amount of Baht 3,735 million - Debentures in the amount of Baht 8,005 million In the first three-months of 2004, the amount of loans denominated in USD, Baht and Peso, decreased by Baht 424 million as compared to 2003. This resulted from principal repayment by TLP Cogen, Roi-Et Green and APBP and GEC's loan refinancing. On the other hand, the amount of loan disbursement was up Baht 228 million, which was due to the loan of TLP Cogen, Roi-Et Green and GEC. 2) Other liabilities amounted to Baht 2,450 million or 8% of total liabilities, mostly resulted from bank overdrafts and short-term loans of Baht 343 million, trade accounts payable of Baht 783 million, interest payable of Baht 613 million, value added tax payable and income tax payable of Baht 301 million and others of Baht 410 million. The company is committed to administering its obligation in compliance with good corporate governance. It has, accordingly, set up a reserve fund of 25% of total obligations to its subsidiaries and associates; thus, reducing the risk of default and providing extra return in the form of interest income and increased financial stability. As at March 31, 2004, the company had fully reserved this fund in the amount of Baht 206 million. 3.3 Shareholders' Equity Analysis As at March 31, 2004, Shareholders' Equity (excluding treasury stock) amounted to Baht 27,649 million, which was Baht 948 million higher than the amount as at December 31, 2003. This was due mainly to the profits from operation during the first quarter of 2004, partially offset by a decrease of the unrealized loss on investments in marketable securities. totalling Baht 605 million. The analysis of the company's capital structure as at March 31, 2004 is summarized as follows: Shareholders' equity was Baht 27,649 million or 48%. Liabilities were Baht 30,108 million or 52%. Important financial ratios were as follows; - Debt to equity ratio was 1.09 times, lower than 1.11 times at the end of last year. - Book value per share was Baht 50.90, higher than Baht 49.21 at the end of last year. 4 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, 2004, the ending balance of the cash and the cash equivalent was Baht 2,872 million, up by Baht 1,142 million from the end of 2003. The details of the sources and uses of funds are as follows; -Net cash received from operating activities totaled Baht 558 million, a decrease of Baht 398 million as compared to 2003. Most of the changes were due to a decrease in cash from operating activities by Baht 1,147 million whereas cash received from working capital increased by Baht 749 million. -Net cash payment for investing activities was Baht 755 million. Baht 1,461 million was for the net sale of short-term financial investments whereas the dividend from Krung Thai Dividend Selected Flexible Portfolio Fund (KTSF) and East Water Resources Development and Management Public Co., Ltd were Baht 227 million and Baht 40 million, respectively. The sponsor loans to GEC and Nam Theun 2 were Baht 338 million and Baht 238 million, respectively. - Net cash payment for financing activities was Baht 173 million, mainly owing to long-term loan repayment by TLP Cogen, Roi-Et Green, APBP and GEC in the amount of Baht 424 million while the loan drawdown from TLP Cogen, Roi-Et Green and GEC increased by Baht 228 million.