Acquisition of Ordinary Shares of Power Generation Services

No. EGCO 110/530 Date: 17 December 2009 Attn: President of the Stock Exchange of Thailand Subject: Acquisition of Ordinary Shares of Power Generation Services Company Limited Attachment: Details of the Connected Transaction regarding Share Acquisition Electricity Generating Public Company Limited (EGCO) would like to announce to the Stock Exchange of Thailand that, on 17 December 2009, EGCO purchased the ordinary shares of Power Generation Services Company Limited (PGS) from CLP Power (Southeast Asia) Operation Limited (CLP-SEA) in a proportion of 50% of total outstanding shares and plans to conduct the entire business transfer to BLCP Power Company Limited (BLCP), which is equally 50% held by EGCO and Banpu Public Company Limited (BANPU), and will subsequently close down PGS. PGS is the company providing operation and maintenance services to BLCP power plant according to Operations & Maintenance Agreement (the O&M Agreement). Based on the O&M Agreement, PGS is entitled to service revenues for the BLCP power plant operation for a period of 25 years under the Power Purchase Agreement between BLCP and EGAT which ends 31 January 2032. Its shareholding structure includes CLP-SEA and BANPU with a shareholding proportion of 60% and 40% respectively. The acquisition price amounted to 554,843,750 million baht. Such acquisition took place in accordance with the resolution of the Board of Directors of EGCO No. 8/2009 on 14 December 2009. Pursuant to the Notification of the Stock Exchange of Thailand Re: Disclosure of Information and Other Acts of Listed Companies Concerning the Connected Transactions, 2003 (Amended on 17 September 2004), this transaction was considered to be a connected transaction, the details of which are set out in Attachment 1. This transaction was also considered an acquisition of asset with a transaction size of 0.85% based on the total value of consideration paid compared with the value of assets of the listed company pursuant to the SEC Notification of Capital Market Supervisory Board Tor Chor 20/2551 Re: Rules on Entering into Material Transactions Deemed as Acquisition or Disposal of Assets. Since the transaction size was less than 15%, EGCO was not required to submit the information disclosure regarding the acquisition of asset to the Stock Exchange of Thailand. Please be informed accordingly. Yours faithfully, Vinit Tangnoi President Corporate Secretary Division Tel. 0 2998 5020-24 Attachment 1 Details of the Connected Transaction regarding Share Acquisition 1. Transaction Date: 17 December 2009 2. Parties Involved: Acquirer: Electricity Generating Public Company Limited (EGCO or the Company) Seller: CLP Power (Southeast Asia) Operation Limited (CLP-SEA or the Seller) 3. Relationship between Parties: CLP-SEA and EGCO have the same major shareholder, namely, CLP Holdings Ltd. with the details as follow. Relationship between CLP Holdings Ltd. and PGS CLP Holdings Ltd. held 60% stake in PGS through CLP-SEA, a wholly owned subsidiary of CLP Holdings Ltd. Relationship between CLP Holdings Ltd. and EGCO CLP Holdings Ltd. holds 12.74% stake in EGCO through its group of companies as follow: - CLP Holdings Ltd. holds 50% stake in OneEnergy Ltd. while OneEnergy Ltd. holds 22.42% stake in EGCO - CLP Holdings Ltd. holds 100% stake in CLP SEA Energy Limited while CLP SEA Energy Limited holds 1.53% stake in EGCO 4. General Characteristics of Transaction 4.1 Transaction Category CLP-SEA sold PGS shares in a proportion of 60% to EGCO and Banpu Public Company Limited (BANPU) in a proportion of 50% and 10% respectively at the same price. Such transaction will help facilitate the entire business transfer of PGS to BLCP Power Company Limited (BLCP) and closure of PGS since EGCO and BANPU are major shareholders holding equal portion of 50% stake in BLCP. Such transaction was considered as: - Connected transaction type 4, transaction relating to assets or service, as per the SEC Notification of Capital Market Supervisory Board TorChor 21/2551 Re:Rules on Entering into Material Transactions Deemed as Acquisition or Disposal of Assets and the Notification of the Stock Exchange of Thailand Re: Disclosure of Information and Other Acts of Listed Companies Concerning the Connected Transactions, 2003 (Amended on 19 November 2003) - Acquisition of assets as per the SEC Notification of Capital Market Supervisory Board TorChor 20/2551 Re: Rules on Entering into Material Transactions Deemed as Acquisition or Disposal of Assets 4.2 Transaction Size - The connected transaction size was 1.14% of EGCO's net tangible assets as of 30 September 2009. As such, the Company was required to seek approval from the Board of Directors and disclose information to the Stock Exchange of Thailand. - Acquisition of assets with the transaction size of 0.85% based on the total value of consideration paid. 4.3 Transaction Size Consideration - Connected transaction: the transaction size of 554.84 million baht compared to EGCO's net tangible assets of 48,722.07 million baht as of 30 September 2009. - Acquisition of asset: the transaction size of 554.84 million baht compared to EGCO's consolidated assets of 65,456.96 million baht as of 30 September 2009. (Note: PGS's consolidated financial statements as of 30 September 2009 was unaudited.) 5. Details of Assets PGS is a company providing the operation and maintenance services to BLCP power plant according to Operations & Maintenance Agreement (the O&M Agreement). Under the O&M Agreement, PGS is entitled to service revenues for the BLCP power plant operation for a period of 25 years under the Power Purchase Agreement between BLCP and EGAT which ends 31 January 2032. PGS was founded on 3 November 2004 with the paid-up capital of 10 million baht comprising of 100,000 ordinary shares at the par value of 100 baht per share. Its shareholders include CLP-SEA and Banpu Public Company Limited (BANPU) with a shareholding proportion of 60% and 40% respectively. Financial highlights of PGS as of 2007 and 2008 are as follow. Financial Highlights (million baht) 2007 2008 Total Assets 214.97 252.71 Total Liabilities 152.61 186.91 Shareholders Equity 62.36 65.80 Paid-up Capital 10.00 10.00 Total Revenue 600.08 653.32 Net Profit 127.82 122.45 Earnings per Share (baht) 1,278.24 1,224.47 Net Profit Margin % 21.30 18.74 6. Criteria regarding acquisition price and transaction size The acquisition price of PGS was agreed upon by both the acquirer and the seller and was considered to fall in an appropriate price range evaluated by the financial advisor. 7. Source of fund for acquisition EGCO used the cash flows from operations to finance the acquisition cost in a one-time lump sum amount. 8. Reasonableness of entering into the connected transaction PGS has a main stream of service revenue based on O&M Agreement with BLCP, a company which is equally held by EGCO and BANPU. CLP-SEA, a connected party of EGCO, holds 60% stake in PGS while, on the other hand, it does not directly hold stake in BLCP. Such shareholding structure may lead to the potential conflict of interests. EGCO, therefore,entered into this connected transaction to prevent the potential conflict of interests. Moreover, EGCO will receive a higher return on investment through BLCP after conducting an entire business transfer and dissolve PGS. Nevertheless, the Company incurs risk if such acquisition does not take place or is delayed, thus causing a negative adverse effect on the return on investment. Such risk, on the other hand, can be offset by the fact that the connected transaction helps prevent the potential conflict of interests. 9. Directors who have conflict of interests and/or directors who are related persons who will not attend the Board of Directors Meeting and have no voting rights. Name Relationship Shareholding Proportion 1. Mr. Peter Littlewood Director - 2. Mr. Mark Jobling Director - 3. Mr. Hideaki Tomiku Director - 4. Mr. Shinji Tsuchiya Director - 10. EGCO's conduct to comply with SET regulation EGCO scheduled the meetings with the Audit Committee, and the Board of Directors to consider reasonableness, and benefits of the connected transaction to the Company. The financial advisor was engaged to evaluate the transparency and benefits to all shareholders. Directors who have conflict of interests or who are related persons did not attend the Board of Directors' meeting and had no voting rights. In addition, EGCO disclosed the information regarding this connected transaction according to the SET regulation. 11. Board of Directors and Audit Committee's opinion regarding the connected transaction Audit Committee's Opinion The audit committee considered the information from the management and the financial advisor and provided an opinion that the acquisition of PGS ordinary shares in a proportion of 50% of total outstanding shares at the price determined by the executive board was appropriate and yielded the best benefit to EGCO. Board of Directors' Opinion The Board of Directors provided an opinion that this connected transaction was transparent,fair, and beneficial to the Company. Such connected transaction helped prevent the potentialconflict of interests, and created value to BLCP administration. EGCO will also receive higher return on investment through BLCP after conducting an entire business transfer and dissolve PGS. The Board of Directors, therefore, resolved to approve this connected transaction.