Management Discussion and Analysis for 3 month 2007

before the inclusion of foreign exchange indexation if the exchange rate is above Baht 28 per US Dollar and vice versa. In the first quarter of 2007, REGCO and KEGCO received compensation for the exchange rate effect of Baht 114 million. - Interest income and others amounted to Baht 36 million, a decrease of Baht 58 million or 62%, mainly from REGCO's decreased interest income in the amount of Baht 50 million. It resulted from lower interest rates and lower amount of deposits at banks and financial institutions due to capital reduction at REGCO from Baht 9,220 million to Baht 4,702 million in December 2006. KEGCO's interest income decreased by Baht 6 million resulting from lower interest rates. REGCO and KEGCO's other revenues also decreased by Baht 3 million. - Share of profit from Joint Venture, BLCP, was recognized in the amount of Baht 1,274 million. The recognition in the proportion of 50% started in January 2007. - Cost of sales totaled Baht 816 million, an increase of Baht 39 million or 5% compared to the first quarter of 2006, mainly because of REGCO's increased cost of sales by Baht 65 million or 15% from higher fuel cost caused by EGAT's ordering of machine start-up and shut-down.Meanwhile, KEGCO's cost of sales decreased by Baht 26 million or 7% as compared to the same period of 2006 when there was planned major maintenance. Cost of Sales - IPP Group: Unit: Million Baht Q1'07 Q1'06 %Changes REGCO 484 419 15% KEGCO 332 358 (7%) total Cost of Sales - IPP Group: 816 777 5% - Administrative expenses and income taxes were Baht 207 million, a decrease of Baht 149 million or 42%, mainly from lower tax payment at REGCO and KEGCO. REGCO and KEGCO currently enjoy 50% corporate tax reduction privilege on profits from power generation, ending on April 19, 2008 and September 25, 2009, respectively. - Interest expenses were Baht 147 million, a decrease of Baht 162 million or 52%, resulting from REGCO's payment of all of its debt in December 2006 and KEGCO's lower principal amounts of loans and debentures. 3) SPP Group's total revenues and share of profit from joint ventures were reported at Baht 888 million for the first quarter of 2007, an increase of Baht 425 million or 92% compared to the first quarter of 2006. The SPP Group incorporates five companies, namely: GEC, AEP, APBP, TLP Cogen and Roi-Et Green. The expenses were Baht 449 million, an increase from last year by Baht 28 million or 7%. The details are as follows: Total Revenues and Expenses of SPP Group: Unit : Million Baht GEC TLP Cogen APBP Q1'07 Q1'06 Q1'07 Q1'06 Q1'07 Q1'06 Revenues 494 466 68 78 315 (141) Expenses 415 390 34 34 - - Roi-Et Green Total Q1'07 Q1'06 Q1'07 Q1'06 % Chg Revenues 10 60 888 463 92% Expenses - - 449 424 6% - Sales of electricity of the SPP Group were Baht 548 million, representing an increase of Baht 18 million or 3% compared to the same period of last year. Most of the increase of SPP group's electricity sales was from TLP Cogen in the amount of Baht 27 million, resulting from higher tariff received from EGAT and higher electricity sales to industrial users; whilst Roi-Et Green's eletricity sales decreased by Baht 9 million from lower tariff, as its tariff formula is linked to the price of fuel oil which experienced a drop. Sales of Electricity - SPP Group: Unit : Million Baht Q1'07 Q1'06 %Changes TLP Cogen 489 462 6% Roi-Et Green 59 68 (13%) Total Sales of Electricity - SPP Group 548 530 3% - Interest income and others amounted to Baht 15 million, an increase of Baht 1 million or 9%, mainly from an increase of TLP Cogen's interest income of Baht 2 million. - Share of profit from interests in joint ventures, GEC, APBP and AEP, totaled Baht 325 million, up by Baht 406 million as compared to the same period of 2006. The share of profit from joint venture, GEC, contributed the most in the amount of Baht 315 million, an increase of Baht 456 million as compared to the same period of last year. This was primarily a result of the gain on foreign exchange rate, up by Baht 191 million,plus an increase of other income in the amount of Baht 122 million, mostly from KK2 Project-Unit 1's liquidated damage claim on the EPC contractor owing to the delayed COD. Meanwhile, the share of profit from interest in joint ventures,APBP and AEP, totaled Baht 10 million, down by Baht 50 million, which was primarily from AEP's higher maintenance expenses and lower electricity sales to EGAT. - Cost of Sales of SPP Group were reported at Baht 419 million, an increase of Baht 27 million or 7% as compared to the first quarter of 2006. This was substantially driven by an increase in cost of sales of TLP Cogen amounting to Baht 26 million from higher fuel costs and usages as well as an increase in cost of sales at Roi-Et Green, also up by Baht 1 million. Cost of Sales - SPP Group: Unit : Million Baht Q1'07 Q1'06 %Changes TLP Cogen 388 363 7% Roi-Et Green 31 30 4% Total Cost of Sales - SPP Group 419 392 7% - Administrative expenses and income taxes were Baht 7 million, up by Baht 1 million or 29% as compared to the same period of 2006. - Interest expenses were Baht 24 million, a decrease of Baht 3 million or 12%, mainly from a decrease in TLP Cogen's interest expenses amounting to Baht 3 million due to lower principal. 4) Overseas Group refers to Conal and NTPC, of which their share of loss from joint ventures were reported at Baht 68 million, a decrease in profit of Baht 89 million compared to the first quarter of 2006. Conal's share of profit was reported at Baht 10 million, a decrease of Baht 33 million compared to the same period of 2006, mainly from a decrease of electricity sales after transferring NMPC, a 40 MW power plant, to NPC in February 2006. NTPC's share of loss was Baht 79 million, an increase in loss of Baht 56 million as compared to the same period of 2006, caused by a foreign exchange loss of Baht 68 million. 5) Other Business Group includes two subsidiaries, ESCO and ET and a joint venture, AMESCO. Total revenues were Baht 257 million, a decrease by Baht 79 million or 24% as compared to the same period of 2006 and total expenses totaled Baht 163 million, a decrease of Baht 72 million or 31%. The details are as follows: Total Revenues and Expenses of Other Business Group: Unit : Million Baht ESCO ET Total Q1'07 Q1'06 Q1'07 Q1'06 Q1'07 Q1'06 % Chg Revenues 200 290 57 46 257 336 (24%) Expenses 144 220 19 15 163 234 (31%) - Service income from ESCO amounted to Baht 197 million, down by Baht 88 million or 31%, resulting mostly from a decrease of spare parts sale to Elgali 2 Power Plant in Sudan. - Sales of water from a subsidiary, ET, were Baht 55 million, up by Baht 10 million, or 21%, 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 0.19 million or 4%, mainly from ET's interest income, up Baht 1.43 million and ESCO's interest income, up Baht 0.47 million, whilst ESCO's other income was down by Baht 1.72 million. - ESCO's interest in joint ventures totaled Baht 1 million, a decrease of Baht 0.5 million from AMESCO. - Cost of Services were Baht 109 million, a decrease of Baht 78 million or 42%, resulting from a decrease in the costs of ESCO's spare parts sale to customers which was consistent with its decreased revenues. - Cost of water sales of ET was Baht 17 million, up Baht 4 million or 29% mainly from an increase of operating and maintenance service costs. - Administrative expenses and income taxes totaled Baht 36 million, an increase of Baht 3 million or 10% compared to the same period of 2006, mostly from ESCO's higher administrative expenses of Baht 8 million; whilst ESCO's income tax decreased by Baht 6 million from a lower profit. 4. Report and Analysis of Financial Position 4.1 Asset Analysis As at March 31, 2007, total assets of EGCO, its subsidiaries and interests in joint ventures amounted to Baht 52,317 million, an increase of Baht 1,857 million or 4% from December 31, 2006. The important details are as follows: 1) Cash and deposits at financial institutions, and short term and long term marketable securities were Baht 6,048 million or 12% of the total assets, down Baht 2,729 million or 31%. This resulted mainly from a decrease of cash and cash equivalent by Baht 2,633 million due to EGCO's payment for the acquisition of shares in BLCP amounting to Baht 4,645 million to CLP Power (BLCP) Ltd., a subsidiary of CLP Holdings Limited, and EGCO's payment for additional paid-up shares in BLCP and GEC amounting to Baht 3,293 million. Meanwhile, EGCO drew down short-term financing of Baht 4,350 million from local banks. 2) Short-term and long-term investments used as collateral were Baht 2,697 million or 5% of the total assets, up Baht 397 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 as at March 31, 2007 amounted to Baht 17,265 million or 33% of the total assets, up Baht 4,887 million or 39%. The major change can be defined as follows : 3.1) investment in the additional paid-up shares amounting to Baht 3,293 million; GEC of Baht 1,043 million and BLCP of Baht 2,250 million. 3.2) an increase in share of profit from investment according to the equity method amounting to Baht 1,594 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, 2007 was Baht 27,403 million, up Baht 3,293 million or 14%, thanks to the additional paid-up shares in joint ventures, GEC and BLCP. 4) Property, plant and equipment (net) totaled Baht 19,756 million or 38% of the total assets. They were down Baht 383 million or 2% due to the decrease in property, plant and equipment from the depreciation of EGCO and subsidiaries' assets totaling Baht 522 million and the reclassification of unutilised capital spare parts from property, plant and equipment to spare parts and supplies at REGCO totaling Baht 63 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 139 million. 5) Other assets were Baht 6,551 million or 13% of the total assets, down Baht 315 million or 5% mainly from a decrease of trade receivable from a related party (EGAT) by Baht 245 million and spare parts and supplies by Baht 90 million. 4.2 Liability Analysis As at March 31, 2007, the EGCO Group's total liabilities were Baht 13,915 million, down Baht 627 million or 4%. The total liabilities consist of the following: 1) Short-term loans totaled Baht 4,350 million, or 31% of total liabilities. On 3 January 2007, EGCO entered into short-term loan agreements with two local banks for a credit facility of up to Baht 4,000 million with each bank. The first drawdown was on 29 January 2007. The principal is to be repaid in one lump sum one year from the agreement entering date. 2) long-term loans and debentures totaled Baht 7,350 million, or 53% of total liabilities, down Baht 163 million or 2%. The details are as follows: - USD loans in the amount of USD 78 million - Yen loans in the amount of Yen 921 million - Baht loans in the amount of Baht 753 million - Baht debentures in the amount of Baht 3,609 million Maturity of long-term loans and debentures as of March 31, 2007 Unit: Million Baht KEGCO TLP Cogen Roi-Et Green Within 1 Year 1,983 148 29 1-5 Years 3,623 934 120 > 5 Years - 389 124 Total 5,606 1,471 273 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. 3) Other liabilities amounted to Baht 2,215 million or 16% of total liabilities, representing a decrease of Baht 4,813 million which mostly resulted from EGCO's payment for the acquisition of BLCP of Baht 4,645 million to CLP Power (BLCP) Ltd. in return for the share transfer on January 30, 2007. In addition, trade payables decreased by Baht 264 million; whereas interest payable was up Baht 129 million and income tax payable up Baht 95 million. 4.3 Shareholders' Equity Analysis As at March 31, 2007, Shareholders' Equity amounted to Baht 38,403 million, which was Baht 2,483 million or 7% higher than the amount as at December 31, 2006. This was due mainly to the net profit from consolidated financial statements that amounted to Baht 2,538 million. The analysis of the company's capital structure as at March 31, 2007 can be summarized as follows: Shareholders' equity was Baht 38,403 million or 73.40%. Liabilities were Baht 13,915 million or 26.60%. Important financial ratios were as follows: - Debt to equity ratio was 0.36 times, lower than 0.40 times at the end of 2006. - Book value per share was Baht 71.91,higher than Baht 67.26 at the end of 2006. 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, 2007, the ending balance of the cash and the cash equivalent was Baht 2,969 million, down Baht 2,633 million. The details of the sources and uses of funds are as follows: -Net cash received from operating activities totaled Baht 1,031 million. This was cash received from operating activities that amounted to Baht 1,433 million and cash payment for working capital of Baht 402 million. -Net cash payment for investing activities was Baht 7,922 million. Cash payment for the investment in the additional shares in joint ventures that amounted to Baht 1,043 million at GEC and Baht 2,250 million at BLCP which cash and payment for the acquisition of shares in BLCP amounted to Baht 4,645 million. The cash inflow was from dividends of EASTW and the other open-end funds which amounted to Baht 61 million and Baht 21 million, respectively. - Net cash received from financing activities was Baht 4,258 million, mainly owing to the short-term loan drawn down by EGCO in the amount of Baht 4,350 million whereas the loan repayment of TLP Cogen and Roi-Et Green totaled Baht 92 million. In the first quarter of year 2007, the analysis of the company's liquidity ratios is as follows: - Current ratio was 1.48 times, lower than 1.68 times for 2006 - Quick ratio was 0.96 times, lower than 1.18 times for 2006 Both liquidity ratios were slightly lower compared to 2006, as a result of the payment of the additional shares amounting to Baht 3,293 million to BLCP and GEC and the payment for shares acquisition in BLCP totaling Baht 4,645 million to CLP Power (BLCP) Ltd. while there was short-term loan draw down amounting to Baht 4,350 million.