Management Discussion and Analysis for Q1-2009

reduction BOI privilege on April 19, 2008. Meanwhile, tax payment at KEGCO decreased by Baht 37 million or 54% due to lower revenues. KEGCO currently enjoys 50% corporate tax reduction BOI privilege on profits from power generation, ending on September 25, 2009. - Finance costs were Baht 63 million, a decrease of Baht 36 million or 36%, 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, BLCP and GPG, was recognised in the amount of Baht 1,529 million, an increase by Baht 367 million or 32% that resulted from an increase of GPG's and BLCP's electricity sales. 3) SPP's total revenues were reported at Baht 581 million, an increase of Baht 26 million or 5% compared to the same period of the previous year. The total expenses were Baht 498 million, an increase by Baht 47 million or 10%. The share of profits from joint ventures was reported at Baht 103 million, up by Baht 12 million or 13% as compared to the same period of the previous year. The details are as follows: Total Revenues, Total Expenses and Share of Profits (Losses) from JVEs of SPP: Unit : Million Baht EGCO Cogen Roi-Et Green GEC (exclude GPG) 3M09 3M08 3M09 3M08 3M09 3M08 Total revenues 502 482 79 74 - - Total expenses 461 413 37 39 - - Profits bf Share of Profits (Losses) from JVEs 41 69 42 35 - - Share of Profits (Losses) from JVEs - - - - 103 60 Net Profit bf FX and MI 41 69 42 35 103 60 APBP and AEP* Total 3M09 3M08 3M09 3M08 % Chg Total revenues - - 581 556 5% Total expenses - - 498 452 10% Profits bf Share of Profits (Losses) from JVEs - - 83 104 (20%) Share of Profits (Losses) from JVEs - 31 103 91 13% Net Profit bf FX and MI - 31 186 195 (5%) * APBP and AEP were sold in May 2008 - Sales of electricity of SPP were Baht 578 million, representing an increase of Baht 27 million or 5% compared to the same period of the previous year, mainly from EGCO Cogen's electricity sales that increased by Baht 21 million due to higher Energy Charge from higher fuel price. Moreover, Roi-Et Green's electricity sales also increased by Baht 6 million due to higher Energy Charge from higher fuel oil price, which was in accordance with the tariff formula. Sales of Electricity - SPP: Unit : Million Baht 3M09 3M08 %Changes EGCO Cogen 500 479 4% Roi-Et Green 78 72 8% Total Sales of Electricity - SPP 578 551 5% - Interest income and others amounted to Baht 3 million, a decrease of Baht 1 million or 30%, mainly from the lower interest income of EGCO Cogen. - Cost of Sales of SPP was reported at Baht 467 million, an increase of Baht 44 million or 11% as compared to the same period of 2008. This was substantially driven by an increase in cost of sales of EGCO Cogen in the amount of Baht 45 million as a result of higher fuel price. Cost of Sales - SPP : Unit : Million Baht 3M09 3M08 %Changes EGCO Cogen 433 387 12% Roi-Et Green 34 35 (3%) Total Cost of Sales - SPP 467 422 11% - Administrative expenses and income taxes were Baht 10 million, up by Baht 1 million or 10% as compared to the same period of 2008. - Finance costs were Baht 22 million, an increase of Baht 2 million or 8%, mainly from the Baht depreciation in this period. - Share of profits from joint ventures, GEC (excluding GPG) totaled Baht 103 million, an increase of Baht 12 million or 13% compared to the same period of the previous year as a result of lower administrative expenses and income taxes. 4) Overseas share of profits from joint ventures, Conal, NTPC and Quezon, was reported at Baht 105 million, an increase of Baht 111 million mainly from the recognition of Quezon's share of profit since December 2008. 5) Other Business's total revenues were Baht 226 million, a decrease of Baht 87 million or 28% as compared to the same period of 2008; and total expenses were Baht 157 million, a decrease of Baht 58 million or 27%. There was no share of profit from the joint venture when compared to the same period of the previous year that created the decrease of Baht 2.41 million or 100%. The details are as follows: Total Revenues, Total Expenses and Share of Profits (Losses) from JVEs of Other Business: Unit : Million Baht ESCO * ET Total 3M09 3M08 3M09 3M08 3M09 3M08 % Chg Total revenues 160 253 66 60 226 313 (28%) Total expenses 130 198 27 17 157 215 (27%) Profits bf Share of Profits (Losses) from JVEs 30 55 39 43 69 98 (30%) Share of Profits (Losses) from JVEs - 2.41 - - - 2.41 (100%) Net Profit bf FX and MI 30 58 39 43 69 100 (31%) * AMESCO was sold in May 2008 - Service income from ESCO amounted to Baht 157 million, down by Baht 94 million or 38%, resulting mostly from lower maintenance service income and spare parts sale to overseas power plants. - Sales of water from ET, were Baht 65 million, up by Baht 8 million, or 13%, thanks to the increase of the tariff under the long-term Water Purchase Agreement with Provincial Waterworks Authority. - Interest income and others amounted to Baht 4 million the same as the same period of the previous year. - Cost of services was Baht 110 million, a decrease of Baht 59 million or 35% which was in accordance with the decrease in service income. - Cost of water sales of ET was Baht 18 million, an increase of Baht 1 million or 8%. - Administrative expenses and income taxes totaled Baht 29 million, an increase of Baht 1 million or 2% compared to the same period of 2008. - ESCO's share of profit from a joint venture, AMESCO, decreased by Baht 2.41 million or 100% as a result of the sale of AMESCO in May 2008. 4. Report and Analysis of Financial Position 4.1 Asset Analysis As at March 31, 2009, total assets of EGCO, its subsidiaries and interests in joint ventures amounted to Baht 60,381 million, an increase of Baht 2,051 million or 4% 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 6,962 million or 12% of the total assets, up Baht 930 million or 15%. This resulted mainly from dividends from joint ventures totaling Baht 1,052 million and cash receipts from operating activities of Baht 729 million. Meanwhile, there were an investment in joint ventures of Baht 678 million and principal repayment and interest payment totaling Baht 165 million. 2) Short-term and long-term investments used as collateral were Baht 1,355 million or 2% of the total assets, up Baht 189 million or 16%. 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, 2009 amounted to Baht 25,746 million or 43% of the total assets, up Baht 1,251 million or 5%. 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 1,587 million. 3.2) Dividends received from BLCP, GEC and Conal by Baht 1,038 million. 3.3) An acquisition of a joint venture amounting to Baht 483 million. 3.4) An increase in share capital of a joint venture and the transfer of net liabilities to interests in joint ventures totaling Baht 182 million. 3.5) Profit from translation adjustments totaling Baht 37 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, 2009 was Baht 35,060 million, up Baht 736 million, thanks to the additional paid-up shares in a subsidiary and a joint venture, EGCO BVI and NTPC. 4) Property, plant and equipment (net) totaled Baht 16,554 million or 27% of the total assets. They were down Baht 487 million or 3% due to the decrease in property, plant and equipment from the depreciation of EGCO and subsidiaries' assets totaling Baht 544 million and the reclassification of unutilised capital spare parts from property, plant and equipment to spare parts and supplies at REGCO totaling Baht 7 million. Meanwhile, there was a recording of capital spare parts as property, plant and equipment following the major maintenance at KEGCO and REGCO in the amount of Baht 31 million and net purchase of property, plant and equipment totaling Baht 34 million. 5) Other assets were Baht 9,765 million or 16% of the total assets, up Baht 168 million or 2% mainly from an increase of REGCO and KEGCO's other current assets by Baht 88 million and trade receivable from a related party by Baht 52 million. 4.2 Liability Analysis As at March 31, 2009, the EGCO Group's total liabilities were Baht 12,598 million, which was Baht 190 million or 1% lower 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 28% 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 7,663 million, or 61% of total liabilities, down Baht 107 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 17 million - Yen loans in the amount of Yen 716 million - Baht loans in the amount of Baht 4,586 million - Baht debentures in the amount of Baht 2,227 million Maturity of long-term loans and debentures as of March 31, 2009 Unit : Million Baht EGCO KEGCO EGCO Cogen Roi-Et Green Within 1 Year - 816 159 37 1-5 Years - 1,410 893 149 > 5 Years 4,000 - 122 76 Total 4,000 2,227 1,174 262 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, 2009 totaling Baht 494 million for the purpose of payment of principal and interest due within one year. 3) Other liabilities amounted to Baht 1,436 million or 11% of total liabilities, representing a decrease of Baht 83 million or 5% which mostly resulted from the decrease in EGCO's accrued expenses by Baht 107 million. 4.3 Shareholders' Equity Analysis As at March 31, 2009, Shareholders' Equity amounted to Baht 47,783 million, which was Baht 2,240 million or 5% 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 2,239 million. The analysis of the company's capital structure as at March 31, 2009 can be summarized as follows: Shareholders' equity was Baht 47,783 million or 79.14%. Liabilities were Baht 12,598 million or 20.86%. Important financial ratios were as follows: - Debt to equity ratio was 0.26 times, lower than 0.28 times at the end of 2008. - Book value per share was Baht 89.79, 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 March 31, 2009, the ending balance of the cash and the cash equivalent was Baht 4,090 million, which was Baht 888 million lower 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 729 million. This was cash received from operating activities of Baht 1,420 million and cash payment for working capital of Baht 691 million. -Net cash payment for investing activities was Baht 1,436 million mainly due to deposits at financial institutions that amounted to Baht 1,836 million and investment in joint ventures of Baht 678 million. Meanwhile, dividend received from joint ventures amounted to Baht 1,052 million. - Net cash payment for financing activities was Baht 182 million. The payment includes the loan repayment of EGCO Cogen and Roi-Et Green that totaled Baht 100 million and interest payment of Baht 65 million. In the three-month period of 2009, the analysis of the company's liquidity ratios is as follows: - Current ratio was 2.83 times, compared to 2.58 times in 2008 - Quick ratio was 1.57 times, compared to 1.34 times in 2008 Both ratios were higher than the ratios in 2008 due to dividends from joint ventures totaling Baht 1,052 million.