Management Discussion and Analysis for First-Half 2009

3) SPP's total revenues were reported at Baht 1,089 million, a decrease of Baht 10 million or 1% compared to the same period of the previous year. The total expenses were Baht 996 million, an increase by Baht 81 million or 9%. The share of profits from joint ventures was reported at Baht 163 million, down by Baht 49 million or 23% 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) 1H09 1H08 1H09 1H08 1H09 1H08 Total revenues 940 960 148 139 - - Total expenses 923 848 73 68 - - Profits bf Share of Profits (Losses) from JVEs 17 112 75 71 - - Share of Profits (Losses) from JVEs - - - - 163 171 Net Profit bf FX and MI 17 112 75 71 163 171 APBP and AEP* Total 1H09 1H08 1H09 1H08 % Chg Total revenues - - 1,089 1,099 (1%) Total expenses - - 996 916 9% Profits bf Share of Profits (Losses) from JVEs - - 92 184 (49%) Share of Profits (Losses) from JVEs - 41 163 212 (23%) Net Profit bf FX and MI - 41 255 396 (35%) * APBP and AEP were sold in May 2008 * Sales of electricity of SPP were Baht 1,083 million, representing a decrease of Baht 7 million or 1% compared to the same period of the previous year, mainly from EGCO Cogen's electricity sales that decreased by Baht 17 million due to lower electricity sales to industrial users from planned outage. Meanwhile, Roi-Et Green's electricity sales increased by Baht 9 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 1H09 1H08 %Changes EGCO Cogen 937 953 (2%) Roi-Et Green 146 137 7% Total Sales of Electricity - SPP 1,083 1,090 (1%) * Interest income and others amounted to Baht 6 million, a decrease of Baht 3 million or 35%, mainly from the lower interest income of EGCO Cogen. * Cost of Sales of SPP was reported at Baht 937 million, an increase of Baht 79 million or 9% 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 73 million as a result of expenses incurred during a planned outage. Cost of Sales - SPP : Unit : Million Baht 1H09 1H08 %Changes EGCO Cogen 870 797 9% Roi-Et Green 67 61 10% Total Cost of Sales - SPP 937 858 9% * Administrative expenses and income taxes were Baht 15 million, up by Baht 0.5 million or 3% as compared to the same period of 2008. * Finance costs were Baht 44 million, an increase of Baht 2 million or 4%, mainly from higher interest rates. * Share of profits from joint ventures, GEC (excluding GPG) totaled Baht 163 million, a decrease of Baht 8 million or 5% compared to the same period of the previous year as a result of higher maintenance expenses. Moreover, the disposal of APBP and AEP was made in May 2008. 4) Overseas share of profits from joint ventures, Conal, NTPC and Quezon, was reported at Baht 167 million, an increase of Baht 188 million mainly from the recognition of Quezon's share of profit since December 2008. 5) Other Business's total revenues were Baht 369 million, a decrease of Baht 201 million or 35% as compared to the same period of 2008; and total expenses were Baht 254 million, a decrease of Baht 132 million or 34%. 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 4 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 1H09 1H08 1H09 1H08 1H09 1H08 % Chg Total revenues 236 451 133 119 369 570 (35%) Total expenses 195 352 59 34 254 387 (34%) Profits bf Share of Profits (Losses) from JVEs 41 98 74 85 115 183 (37%) Share of Profits (Losses) from JVEs - 4 - - - 4 (100%) Net Profit bf FX and MI 41 102 74 85 115 187 (39%) * AMESCO was sold in May 2008 * Service income from ESCO amounted to Baht 232 million, down by Baht 200 million or 46%, resulting mostly from lower maintenance service income and spare parts sale to overseas power plants. * Sales of water from ET, were Baht 131 million, up by Baht 17 million, or 15%, 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 6 million, down by Baht 18 million or 74% compared to the same period of the previous year due to a gain on the sale of AMESCO totaling Baht 15 million in 2008. * Cost of services was Baht 160 million, a decrease of Baht 122 million or 43% which was in accordance with the decrease in service income. * Cost of water sales of ET was Baht 37 million, an increase of Baht 4 million or 12%. * Administrative expenses and income taxes totaled Baht 57 million, a decrease of Baht 14 million or 19% compared to the same period of 2008 as a result of ESCO's lower corporate tax from lower revenues. * ESCO's share of profit from a joint venture, AMESCO, decreased by Baht 4 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 June 30, 2009, total assets of EGCO, its subsidiaries and interests in joint ventures amounted to Baht 60,710 million, an increase of Baht 2,380 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 6,084 million or 10% of the total assets, up Baht 52 million or 1%. This resulted mainly from dividends from joint ventures totaling Baht 1,120 million, dividend of Baht 78 million received from EASTW, higher market price of EASTW by Baht 183 million and cash receipts from operating activities of Baht 1,848 million. Meanwhile, dividend payment to shareholders amounted to Baht 1,334 million,an investment in joint ventures was Baht 1,060 million and principal repayment and interest payment totaled Baht 791 million. 2) Short-term and long-term investments used as collateral were Baht 1,176 million or 2% of the total assets, up Baht 9 million or 1%. 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 June 30, 2009 amounted to Baht 27,289 million or 45% of the total assets, up Baht 2,795 million or 11%. 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 3,768 million. 3.2) Dividends received from BLCP, GEC, Conal and Quezon by Baht 1,606 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 322 million. 3.5) Loss from translation adjustments totaling Baht 173 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 June 30, 2009 was Baht 35,444 million, up Baht 1,119 million, thanks to the additional paid-up shares in EGCO BVI and NTPC. 4) Property, plant and equipment (net) totaled Baht 16,064 million or 26% of the total assets. They were down Baht 977 million or 6% due to the decrease in property, plant and equipment from the depreciation of EGCO and subsidiaries' assets totaling Baht 1,095 million and the reclassification of unutilised capital spare parts from property, plant and equipment to spare parts and supplies at EGCO Cogen, REGCO and KEGCO totaling Baht 85 million. Meanwhile, there was a recording of capital spare parts as property, plant and equipment following the major maintenance at EGCO Cogen , KEGCO and REGCO in the amount of Baht 134 million and net purchase of property, plant and equipment totaling Baht 69 million. 5) Other assets were Baht 10,097 million or 17% of the total assets, up Baht 501 million or 5% mainly from an increase of dividends receivable from BLCP by Baht 486 million. 4.2 Liability Analysis As at June 30, 2009, the EGCO Group's total liabilities were Baht 11,818 million, which was Baht 970 million or 8% 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 30% 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 7,236 million, or 61% of total liabilities, down Baht 533 million or 7%. This mainly came from the debentures and long-term loans repayment from KEGCO, 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 722 million - Baht loans in the amount of Baht 4,596 million - Baht debentures in the amount of Baht 1,830 million Maturity of long-term loans and debentures as of June 30, 2009 Unit : Million Baht EGCO KEGCO EGCO Cogen Roi-Et Green Within 1 Year - 864 155 36 1-5 Years - 966 874 146 > 5 Years 4,000 - 121 75 Total 4,000 1,830 1,150 256 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 June 30, 2009 totaling Baht 206 million for the purpose of payment of principal and interest due within one year. 3) Other liabilities amounted to Baht 1,082 million or 9% of total liabilities,representing a decrease of Baht 436 million or 29% which mostly resulted from the decrease in EGCO and ESCO's accrued expenses. 4.3 Shareholders' Equity Analysis As at June 30, 2009, Shareholders' Equity amounted to Baht 48,891 million, which was Baht 3,349 million or 7% 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 4,642 million. Meanwhile, appropriated dividend totaled Baht 1,316 million. The analysis of the company's capital structure as at June 30, 2009 can be summarized as follows: Shareholders' equity was Baht 48,891 million or 80.53%. Liabilities were Baht 11,818 million or 19.47%. Important financial ratios were as follows: - Debt to equity ratio was 0.24 times, lower than 0.28 times at the end of 2008. - Book value per share was Baht 91.92, 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 June 30,2009, the ending balance of the cash and the cash equivalent was Baht 4,866 million, which was Baht 113 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 1,848 million. This was cash received from operating activities of Baht 2,701 million, cash payment for working capital of Baht 578 million and cash payment for corporate income tax of Baht 274 million. -Net cash received from investing activities was Baht 164 million mainly due to dividend received from joint ventures amounting to Baht 1,120 million. Meanwhile, an investment in joint ventures was Baht 1,060 million. - Net cash payment for financing activities was Baht 2,125 million. The payment includes the dividend payment to shareholders amounting to Baht 1,334 million and principal repayment and interest payment of EGCO, KEGCO, EGCO Cogen and Roi-Et Green totaling Baht 791 million. In the six-month period of 2009, the analysis of the company's liquidity ratios is as follows: - Current ratio was 2.81 times, compared to 2.58 times in 2008 - Quick ratio was 1.40 times, compared to 1.34 times in 2008 The current ratio was higher than the ratio in 2008 due to an increase of dividends receivable and a decrease of accrued expenses.