Issuu on Google+


002

Financial Highlights

004

General Information

006

Message from the Chairman

008

Message from the CEO

014

Vision and Mission

018

Corporate Governance

028

Corporate Social Responsibilities

030

Environment, Health and Safety Management

032

Board of Directors

034

Management Team

038

Business

050

Products and Production Facilities

056

Risk Factors

068

Shareholding and Management Structure

094

Related Party Transactions

096

Management s Discussion and Analysis

106

Audit Committee s Report

108

Financial Statements


Glow Group is one of the largest private electricity generators and providers of industrial utilities in Thailand. We operate IPP and Cogeneration facilities. Our core business is to produce and supply electricity to EGAT and also the electricity and steam to industrial customers in Map Ta Phut Industrial Estate and nearby.




Financial Highlights

Financial Position (Consolidated)

(Unit : Million Baht)

2007

2006

2005

Total Revenue

33,011

33,992

28,596

Operating Revenue

32,266

32,593

28,495

EBITDA

8,605

9,052

8,371

EBIT

5,654

5,933

5,794*

Normalized Net Profit

4,314

4,602

4,312*

Total Assets

54,024

54,609

57,357

Total Liabilities

25,053

28,169

32,354

Shareholders' Equity

28,971

26,440

25,003

1.575

2.850

0.700

Dividend Per Share (Baht) Note :

(1)

(2)

*restated (1) 0.975 Baht / share paid from 2006 results, 0.60 Baht / share paid from 2007 results (interim) (2) 2.25 Baht / share paid from 2005 results, 0.60 Baht / share paid from 2006 results (interim) (3) 0.70 Baht / share paid from 2004 results

(3)


34,000 32,266

32,593

32,000

6,000

5,000

4,602 4,314

30,000

(Unit : Million Baht)

(Unit : Million Baht)

(Unit : Million Baht)



58,000 57,357

57,000

4,312

4,000

56,000

3,000

55,000

28,495

28,000

54,609 54,024

26,000

2,000

2007

2006

2005

Operating Revenue

54,000

2007

2006

2005

Normalized Net Profit

2007

2006

2005

Total Assets

Key P&L performance indicator for Glow is Normalized Net Profit (NNP) • Glow IPP has an outstanding loan in USD which will be repaid by USD linked operating cash flows. • Under Thai GAAP the outstanding USD loan is converted at year-end in THB at the current exchange rate. Any difference in THB outstanding loan amount due to using a difference exchange rate compared to last year leads to an unrealized FX gain (THB appreciation) or loss (THB depreciation). • Since the USD loans in Glow IPP are served by USD linked cash flows the Unrealized FX gains / losses should, in Glow’s view, be ignored from an economic point of view. • Glow’s management has always and consistently focused on NNP ignoring unrealized FX gains / losses (substance over form).




General Information Glow Energy Public Company Limited Head Office address Plant Location Homepage Type of Business

: 195 Empire Tower 38th Floor-Park Wing, South Sathorn Road, Yannawa, Sathorn, Bangkok 10120 Tel. (66 2) 670 1500 - 33 Fax (66 2) 670 1548 - 9 : Glow Energy Phase 2 - Central Utilities Cogeneration Plant 3, 5, I - 4 Road, Map Ta Phut Industrial Estate, Muang District, Rayong 21150 Tel. (038) 684 078 - 80 Fax (038) 684 - 061 and Glow Energy Phase 4 - Central Utilities Cogeneration Plant 11, I - 5 Road, Map Ta Phut Industrial Estate, Muang District, Rayong 21150 Tel. (038) 684 780 - 8 Fax (038) 684 789 : www.glow.co.th : Supply utilities (electricity, steam, clarified and demineralized water)

Subsidiary Company that the Company holds shares of more than 50% 1. Glow Company Limited

Head Office address Type of Business

2. Glow IPP Company Limited Head Office address

Plant Location Type of Business

3. Glow SPP 1 Company Limited Head Office address

Plant Location Type of Business

: :

195 Empire Tower 38th Floor-Park Wing, South Sathorn Road, Yannawa, Sathorn, Bangkok 10120 Tel. (66 2) 670 1500 - 33 Fax (66 2) 670 1548 - 9 Provide management services, consultant services and management advisory for related companies

: : :

195 Empire Tower 38 Floor-Park Wing, South Sathorn Road, Yannawa, Sathorn, Bangkok 10120 Tel. (66 2) 670 1500 - 33 Fax (66 2) 670 1548 - 9 42, Moo 8, CIE - 8 Road, Chonburi Industrial Estate (Bowin), Sriracha District, Chonburi 20230 Tel. (038) 345 900 - 5 Fax (038) 345 906 Generate and supply utility (electricity)

th

: 195 Empire Tower 38 Floor-Park Wing, South Sathorn Road, Yannawa, Sathorn, Bangkok 10120 Tel. (66 2) 670 1500 - 33 Fax (66 2) 670 1548 - 9 : Glow SPP 1 Plant - Central Utilities Cogeneration Plant 10, Soi G-2, Pakornsongkrawhrat Road, Eastern Industrial Estate, Huaypong, Muang District, Rayong 21150 Tel. (038) 685 589 Fax (038) 685 104 : Generate and supply utility including electricity, steam and demineralized water for industrial use th

4. Glow SPP 2 Company Limited Head Office address : 195 Empire Tower 38th Floor-Park Wing, South Sathorn Road, Yannawa,

Plant Location Type of Business

: :

Sathorn, Bangkok 10120 Tel. (66 2) 670 1500 - 33 Fax (66 2) 670 1548 - 9 Glow SPP Phase 3 - Hybrid Cogeneration Plant 11, I - 5 Road, Map Ta Phut Industrial Estate, Muang District, Rayong 21150 Tel. (038) 684 780 - 8 Fax (038) 684 789 Generate and supply utilities including electricity and steam for industrial use




5. Glow SPP 3 Company Limited Head Office address : 195 Empire Tower 38th Floor-Park Wing, South Sathorn Road, Yannawa,

Plant Location Type of Business

: :

Sathorn, Bangkok 10120 Tel. (66 2) 670 1500 - 33 Fax (66 2) 670 1548 - 9 Glow SPP Phase 3 - Hybrid Cogeneration Plant 11, I - 5 Road, Map Ta Phut Industrial Estate, Muang District, Rayong 21150 Tel. (038) 684 780 - 8 Fax (038) 684 789 Generate and supply utilities including electricity, steam and demineralized water for industrial use

6. Glow Demin Water Company Limited Head Office address : 195 Empire Tower 38th Floor-Park Wing, South Sathorn Road, Yannawa,

Plant Location Type of Business

: :

Sathorn, Bangkok 10120 Tel. (66 2) 670 1500 - 33 Fax (66 2) 670 1548 - 9 9, Soi G-2, Pakornsongkrawhrat Road, Eastern Industrial Estate, Huaypong, Muang District, Rayong 21150 Tel. (038) 685 589 Fax (038) 685 104 Generate and supply demineralized water for industrial use

7. Glow IPP 3 Company Limited (Formerly Glow Hemaraj Energy Company Limited) Head Office address Type of Business

: 195 Empire Tower 38th Floor-Park Wing, South Sathorn Road, Yannawa, Sathorn, Bangkok 10120 Tel. (66 2) 670 1500 - 33 Fax (66 2) 670 1548 – 9 : Investment and development of power generation projects

8. Glow IPP 2 Holding Company Limited

Head Office address Type of Business

: 195 Empire Tower 38th Floor-Park Wing, South Sathorn Road, Yannawa, Sathorn, Bangkok 10120 Tel. (66 2) 670 1500 - 33 Fax (66 2) 670 1548 – 9 : Investment in power generation companies

9. GHECO-One Company Limited Head Office address : 195 Empire Tower 38th Floor-Park Wing, South Sathorn Road, Yannawa,

Type of Business

• Number of Employees

as of 31 December 2007

• Registered Capital

: 450 persons : 110 persons are located at Bangkok and 340 persons at Plant

: 14,828,650,350 baht

: 14,628,650,350 baht

as of 31 December 2007

• Paid up Capital

Sathorn, Bangkok 10120 Tel. (66 2) 670 1500 - 33 Fax (66 2) 670 1548 – 9 : Development of power generation projects

as of 31 December 2007

Other References Bondholder’s Representative Auditor

: :

Siam Commercial Bank Public Company Limited Tower 2, 3rd Floor, 1060 New Petchaburi Road, Makkasan, Rajatevee Bangkok 10400 Tel. (66 2) 256 2323 - 27 Deloitte Touche Tohmatsu Jaiyos Audit Company Limited th 183 Rajanakarn Building 25,26,28 Floor, South Sathorn Road, Yannawa, Sathorn, Bangkok 10120




Message from the Chairman

The performance of the Glow Group in 2007 was satisfactory, with targeted business plans achieved, including profitable growth, operational excellence as well as maintenance of prudent standards on environmental, safety and occupational health management, including social responsibility. Our performance in 2007 recorded consolidated total revenues of Baht 33,011 million, a 2.9 percent decrease from Baht 33,992 million. Our normalised net profit (‘NNP’ - net profit before unrealised foreign exchange gains and losses) was Baht 4,314 million, a 6.3 percent decrease from Baht 4,602 million. This was the first time in many years that the Company’s results experienced a decrease when compared with those of the previous year. This was mainly due to the 8% depreciation of the US Dollar (the currency in which a fraction of our contracted tariff with EGAT is expressed) and the reduction in PEA tariff. However, growth potential in all areas of the business looks very promising. The Company has recently been awarded an additional 74 MW SPP contract by EGAT. The Power Purchase Agreement for the new contract is expected to be signed by the second quarter of 2008, with commercial operation schedule for the end of 2011. In addition, the continued development of the Thai petrochemical sector, which is expanding as part of the start of the third petrochemical phase is driving up the demand for both steam and electricity in Map Ta Phut Industrial Estate and nearby industrial estates and to meet this demand the Company anticipates that it will need to add 350 MW of new capacity to its cogeneration power plant facilities. In our IPP Business, GHECO-One Co. Ltd, an affiliate of Glow Group, was selected as the preferred bidder for a 660 MW coal-fired project in December 2007. Total construction cost for this project is estimated at USD 1,150 million. Construction is expected to start in 2008, and commercial operation is due to start by the end of 2011. In parallel with prospects for growth, the Company recognises the importance of social and environmental matters. It is our policy, both in our day-to-day operations, and when undertaking project developments, always to take into consideration potential environmental impacts and to actively and sincerely support the sustainable development of the quality of life of the communities in the area around the power plants.




For the expansion of our IPP Business, the company has chosen one of the world’s cleanest coal-fired power plants. The plant will meet statutory limits required for coal-fired plants of even the most stringent international regulations such as those of the European Union. Simultaneously with these projects, Glow will also invest in emission reduction technologies to further decrease, as far as is economically feasible, the emission levels from our existing plants so that after the new IPP and cogeneration plants become operational, the total NO X and SO 2 emission levels and the emissions of particulate matter (both actual and maximum) from our power plants in Map Ta Phut will be lower than the current levels. The net result should contribute to an improvement of the overall air quality in Map Ta Phut To development our plans for operational excellence, the Company has conducted an opinion survey of our employees to evaluate and improve our organisation’s performance and our employees’ own efficiency. The Company believes that bottomup participation by employees by sharing their views will yield great benefits to the continuing operational excellence policy. On behalf of the Company’s Board of the Committee, I would like to express my gratitude to all executives and employees for their dedication and hard work in carrying out their duties. I would also like to thank the shareholders, customers, investors, financial institutes, public and private sectors including the local communities for their trust and continued support for our business, which has further contributed to the mutual benefit of and fairness to all stakeholders. Mr. Guy Richelle Chairman of the Board




Message from the CEO

The 2007 financial results show our second best year ever in terms of NNP (Normalised Net Profit), even though it decreased by 6%. This was mainly due to the depreciation of the US Dollar by 8.4%. The impact on our results of the weakening of the US Dollar against the Thai Baht, is estimated at around 300-400 MTHB. The PEA(1) price was reduced from the high levels of 2006 since the third gas pipeline came on line in the third quarter of 2006. The 8.4% increase in industrial electricity sales, and 3.9% additional steam sales did not fully contribute to our profit since a lot of additional energy had to be supplied from expensive sources (including boilers). For 2008, the key focus will be on growth and changes to our vision, mission and corporate culture.

1. Financial Results

EBITDA

Cogen EBITDA

8,387

Normalized net income2

IPP EBITA 9,052

8,371

8,605

Cogen

IPP 4,602 4,312

8,149 4,314

3,968

6,702

926

975

1,212

962

2,986

2,492

2,885

2,561

5,401

5,879

6,167

6,044

3,042

3,337

3,390

3,352

2004

2005

2006

2007

2004

2005

2006

2007

The Provincial Electricity Authority (PEA) of Thailand Normalized net income excludes unrealized FX gains / losses

(1) (2)

Cash from operations

2004

6,290

6,255

2005

2006

2007




2. Glow’s Strategy Glow’s objectives remain balanced between achieving long-term and short-term financial targets, both in accounting and cash. In doing so we also aim to comply with the boundary fundamental conditions for proper and sustainable business, which includes social responsibility. Final Goals Earnings Cash EBITDA and NNP (Thai GAAP) Shareholders Value Creation - Long Term, Reduce earning Volatility risk adjusted Free Cash Fllow - Short Term, dividend policy Actions • Commercial • Financial • Operational • Human Resources • Social Fundamental Conditions Managerial Fundamentals Quality management (Reliability of decision-making and Risk Management reporting based on standardized documented processes, (Legal and Corporate) Compliance Commodity risk automated tools / systems and highly quallified & motivated management (FX, interest, gas, coal) workforce who adheres to values & culture of Glow Social Responsibility Strengthen educational support, government relations, community relations, environmental care


10

Key Target 2008 : to Ensure Profitable Growth In the second quarter of 2008, we hope to start on the construction of the 660 MW coal fired IPP expansion (GHECO ONE) in which Glow has a 65% stake. We were awarded the project on December 7th 2007. The most important milestone will be the signature of the Power Purchase Agreement with EGAT, for which the timely receipt of the EIA permit is required. We also hope to start the construction of the new gas fired cogeneration expansion in the thrid quarter of this year. We have already been awarded a 74 MW SPP contract with EGAT and another 150 MWe of industrial sales. In addition we are in the final stage negotiations for substantial additional volume of industrail sales. The aggregate volume allows for an expansion as a combined cycle gas turbine (CCGT) plant of 380 MWe.

3. Glow Vision Changes to Include Expansion Outside Thailand

The scope of our business has widened. We have now more focus on capturing profitable growth of the IPP and Cogeneration businesses in Thailand, and our scope now also includes IPP development in Laos and Cambodia and cogeneration development in South East Asian countries.

Operational Excellence

Profitable Growth

• • • • • •

Focus on reliability and improvement of heat rates Reduce production costs and increase productivity Improve fuel management and efficiency Reduce cost of capital Improve reporting and management tools & processes Enhance customer relationships and satisfaction

• • • •

Grow Cogen businesses in Thailand by selling steam and electricity to high-load industrial customers who value reliability Grow IPP business in Thailand Grow business in Laos and Combodia Follow key customers when they pursue petrochemical projects in SEA'n countries, to the extent that all full operational integration in Glow's activities makes sense and allows for synergy.

Because of our expertise and operational track record of timely project completion and years of reliable supply with major national and international petrochemical groups we should be well placed to target expansion in the cogeneration business both in Thailand and abroad. Development and implementation of opportunities in Laos and Cambodia will be more challenging since we will target projects entered into with EGAT and such projects are often not subject to a public competitive bidding process. Still we will start to prospect actively for these new opportunities.


11

GLOW’S MISSION FOCUSES ON VALUE CREATION FOR SHAREHOLDER’S AND CUSTOMERS AND ON ENVIRONMENTAL AND SOCIAL RESPONSIBILITY • Create value for our shareholders and customers in a sustainable manner through: a : Reliable products and services b : Operational excellence c : Profitable growth d : Committed and knowledgeable employees e : A network of expertise • Run the business in a sustainable relationship with the environment and with society: a : Environmentally responsible projects b : Develop the quality of life of communities in areas where we do business c : A prime focus on environment health and safety for our employees, contractors and the surrounding communities

GLOW’s Mission

d

:

Provide expertise and support for the development of the Thai energy sector

Controlling the environmental impact of our activities is part of our Mission Glow operates highly efficient plants with modern emission control and monitoring systems. The cogeneration technology of our plants in Map Ta Phut ensures high efficiency in the use of fuel in energy production, thus contributing to low emissions per MWheq of energy produced. Thanks to our modern emission control systems our emissions are well below the required standards and comparable with the best installations worldwide. For our future expansions in Map To Phut we will continue to apply state-of-the-art emission control designs and we will also invest in emission reduction technologies to further decrease, as far as economically feasible, the emission levels from our (existing) plants so that in aggregate we can achieve a reduction in emissions from our plants.


12

Working together with communities and Thai society is part of our Mission At Glow Group, social responsibility has been part of our operations since our first plants were built. Over the past 15 years, since the start up of the company, we have organized social activities and supported community projects which enable the people in the vicinity of our plants to produce or acquire basic necessities and improve their quality of life. We look forward to support new programs and activities in 2008 to complement our community and social development work. When it becomes commercially operation, our new coal-fired IPP will contribute about 100 MTHB per year to a local community development fund.

4. GLOW’S CORPORATE CULTURE • Communication • Adaptability • Commitment • Unity : Loyalty, Courage : has been achieved and will be replaced with new values that need to be stressed. • Social Partnership : Develop a sustainable relationship with the environment, community and society • Sustainable business relations: develop and maintain a long-term relationship and commitment to all business partners ( suppliers, customers, equity investors) through loyal, honest and sincere conduct. Expressing and defining a culture is not a matter of preparing a list of good corporate values. There are hundreds of such values. The point is to identify areas on which we want and need to focus to make our business more successful. The values we include should define how we as a company and as individuals act and interact with the outside world. There will be a strong focus on Social Partnership and Sustainable Business Relations.


13

Social Partnership. We have to care about people, communities and the natural environment where we do business. This means looking out for the safety of our employees, contractors, neighbours, communities and customers. We must act with a sense of responsibility. We should comply with all the applicable regulations and care about the impact of our activities on the people. Community relation work and in general social work related to our activities is part of our mission and culture. Social Partnership is also a duty we owe not only to our shareholders who entrusted their savings with us but also to our personnel whose employment we seek to protect. Social partnership also means we seek the profitability in full respect of all boundary conditions of our business, including respect for the environment and the people.

Sustainable Business Relations. Glow has to foster a constructive and honest dialogue with its business partners: employees, shareholders, equity partners, customers, the authorities and the public. We can only do effective business on a long-term basis in a climate of trust and transparency. This means we have to be honest about our expectations and our constraints. The dialogue with our business partners is always ongoing. Contracts with our customers are to be construed and applied in a reasonable and honest manner. This honest and sincere dialogue with our business partners is a matter of professionalism, care and integrity.

Peter Termote

CEO of Glow Group


14

GLOW’S VISION

CHANGES TO INCLUDE EXPANSIONS OUTSIDE THAILAND GLOW VISION STATEMENT

Operational Excellence • Focus on plant reliability and improvement of heat rates • Reduce production costs and increase productivity • Improve fuel management and efficiency • Reduce cost of capital • Improve reporting and management tools & processes • Improve customer intimacy and satisfaction

Profitable Growth • Grow Cogen businesses in Thailand by selling steam and electricity to high-load industrial customers who value reliability • Grow IPP business in Thailand • Grow business in Lao and Cambodia •

Follow key customers when they pursue petrochemical projects in SEA’n countries, to the extent that a full operational integration in Glow’s activities makes sense and allows for synergies.


15

GLOW’S MISSION

FOCUSES ON VALUE CREATION FOR SHAREHOLDER’S AND CUSTOMERS AND ON ENVIRONMENTAL AND SOCIAL RESPONSIBILITY

Create value for our shareholders and customers in a sustainable manner through :

• Reliable products and services • Operational excellence • Profitable growth • Committed and knowledgeable employees • A network of expertise

Perform the business in a sustainable relationship with the environment and with the society : • Environmentally responsible projects • Develop the quality of life of communities in areas where we do business • A prime focus on environment health and safety for our employees, contractors and the surrounding communities • Provide expertise and support to the development of the Thai energy sector if valued by the authorities


16

S

IA OC

L

S ER N T R PA

HIP

U DS N A

LE AB N I STA

1

2

BUS IN E SS

LA RE

TIO


17

ES

UR

EO

AR

NS

O

Y KE

V

U AL

Because we want to ensure sustainable development, controlling the environmental impact of our activities and working together with the communities and the Thai society are an integral part of our Mission. Social Partnership and Sustainable business relation are part of our culture. We have to care about the people, the communities and the natural environment where we conduct our business and we can only do effective business on a long-term basis in a climate of trust and transparency. Only by respecting these boundaries conditions can we ensure sustainable development of our group together with the community and our partners.

1. Mr. Nikom Janhorn President of Sustainable Economics Agriculture Group Klong Nam Hoo, Rayong Province 2, 3, 4 Member of Takuan - Aowpradoo Fisherman Group, Rayong 3

4


18

Corporate Governance

Good Corporate Governance is a key value for Glow Group.

In 2007, the Board of Directors approved a revised Corporate Governance policy to reiterate the importance of Good Corporate Governance within the Group. The Board of Directors is committed to the principles of good corporate governance in compliance with the recommended best practices for listed company and relevant rules, regulations and guidelines of the Stock Exchange of Thailand (“SET”), the Office of the Securities and Exchange Commission (“SEC”), the OECD Principles of Corporate Governance and Suez best practices.


19

The Company follows the prudent supervision control principles according to guidelines prescribed by the Stock Exchange of Thailand as follows:

Rights of Shareholders • • • •

The Board of Directors of the Company has established the corporate governance policies concerning the shareholders' basic rights as follows: 1. 2. 3. 4.

Rights to buy, sell, or transfer shares Rights to share in the profit of the company Rights to have access to the company’s information in a timely fashion and on a regular basis Rights to participate and vote in the shareholders’ meeting including the rights to - Elect or remove members of the Board - Propose and approve the appointment of external auditor - Participate in the decision making of any transactions that affect the Company and/or the shareholders in a material manner

The Company has facilitated the shareholders during each shareholder’s meeting by preparing the appropriated meeting venues which correspond to the number of shareholders participating in the meeting. The Company also sends each shareholder a letter of invitation to the meeting together with an agenda and clear, complete and adequate information to be used with each agendum 7 days in advance of the meeting date. Each agendum also has commendations of the Board of Directors of the Company. Moreover, the Company prepares the accurate and complete minutes of each meeting to be made available for inspection by the shareholders on the website of the Company. The Company has also developed a process allowing the shareholders to propose agenda or questions to the company or contact person for the shareholders’ meeting through Company website Since January 14, 2008, the Company has already informed and published this process to the shareholders via the ELCID system of the SET. In 2007, the Company has arranged 1 annual shareholders’ meeting. During the shareholders’ meeting, the Chairman of the meeting allows every shareholder to equally examine business operations of the Company. Shareholders were welcome to voice any queries, express their opinions and make other suggestions.

Equitable Treatment of Shareholders • •

Under the Company’s Corporate Governance Policy, it is the duty of the Board of Directors to facilitate the minority shareholders to propose, in advance of the meeting date, any issues for consideration in the shareholders meeting. The Board of Directors has established a procedure to allow the shareholders to make proposals including a procedure to nominate candidates. The detailed procedures and criteria can be found on the Company website. The Board of Directors has approved the Insider Trading Policy to prevent the abusive use of inside information and has communicated this policy to everyone in the company via the Company website. Moreover, when directors and certain executives of the Company, who are considered as being in the position of an Informed Function, buy/sell shares of the Company, they are required to submit a report on ownership (Form 59-2) to the SEC within 3 days.


20

Role of Stakeholders • • •

The Company acknowledges and is fully aware of the rights of the stakeholders. It is the Company’s policy to encourage the cooperation between the Company and the Stakeholder in enhancing the mutual interests as well as ensuring that the stakeholders have been protected and treated well. The Company places importance on the rights of all stakeholders groups such as employees, customers, business partners, business competitors and the overall societies. The operating guidelines for the directors, executive officers and employees are clearly defined as the business practice in the Code of Conduct section of the Corporate Governance Policy. The Board of Directors has also established The Audit Committee to examine the key operations of the company. The Audit Committee’s duties shall involve auditing/governing the Company’s operations, financial reports and internal control systems, the selection of auditors, and the consideration of conflicts of interest, including risk management. The Audit Committee scope and responsibilities are described in the Audit Committee Charter. The Board of Directors has approved the Environmental Policy to ensure continuous and sustainable development of its core business, without compromising the ability of the current and the future generation to enjoy the environment. In addition, The Board of Directors has also approved the Health and Safety Policy so that the Company pays full attention to the health and safety concerns that affect our employees, clients and the community.

Disclosure and Transparency • • • •

Information related to the Annual General Shareholder Meeting, Ethics Charter, Health, Safety & Environmental Charter, Code Of Conduct, Insider Trading, Ethic Officer contact details, Ethical and Social policies and other relevant information approved by the Board of Directors, have been provided through various channels such as the company’s annual reports and website. In addition to disclosing information, as specified in relevant regulations, through the channel of the SET, Form 56-1, and annual reports, the Board of Directors has designated the Finance & Investor Relations Department to disseminate information to shareholders and other stakeholders and to equitably and appropriately assist investors and securities analysts to understand the company and its business. Information posted in the company’s website is both in Thai and English. In addition, the Corporate Communications Department has been assigned to widely publicize timely corporate information and performance data via various media. The Board of Directors is responsible for the consolidated financial position of the Company and its subsidiaries as well as the financial information as appears in the Company’s annual report. Such financial statements are prepared in accordance with the generally accepted accounting principles of Thailand by using the appropriate accounting policies, by adhering to them constantly and by carefully using the best judgment. The important information is adequately disclosed in the note to the financial statements. The Board of Directors has established an effective internal control system to ensure that the report and the accounting information are accurate, complete and adequate enough to maintain the assets and to prevent the loss, dishonest conduct or other ill-operations which might result in damage to the Company. The Company has disclosed the roles and responsibilities of the Board of Directors together with these of the committees in the Directors Charter of Corporate Governance Policy. In 2007, the Board of Directors has arranged 4 ordinary meetings and 4 extraordinary meetings. The participation of each director can be summarized as follows:


21

Name Position Holding Participation / Total Meeting Ordinary Extra- Total Meeting Meeting

1.

Mr. Guy Richelle*

28 Feb 07

3/4

4/4

7/8

2.

Mr. Peter Valere Germain Termote

28 Apr 05

3/4

4/4

7/8

3.

Mr. Kovit Poshyananda

25 Apr 07

4/4

3/4

7/8

4.

Mr. Vitthaya Vejjajiva

28 Apr 05

4/4

4/4

8/8

5.

Ms. Supapun Ruttanaporn

25 Apr 07

4/4

4/4

8/8

6.

Mr. Dirk Achiel Marc Beeuwsaert

25 Apr 07

1/1

1/1

2/8

7.

Mr. Guido Geeraerts

25 Apr 07

2/4

1/4

3/8

8.

Mr. Johan De Saeger*

28 Feb 07

2/4

2/4

4/8

9.

Mr. Rajit Nanda*

15 Sep 06

3/4

3/4

6/8

10. Mr. Philip De Cnudde

28 Apr 06

2/4

1/4

3/8

11. Mr. Anut Chatikavanij

28 Apr 05

4/4

3/4

7/8

12. Mr. Brendan G. H. Wauters

28 Apr 06

2/4

2/4

4/8

Note:

* Mr. Guy Richelle replaces Mr. Marc Raymond Josz as a director from 28 February 2007. * Mr. Johan De Saeger replaces Mr. Shankar Krishnamoorthy as a director from 28 February 2007. * Mr. Rajit Nanda replaces Mr. Matti Kristian Castron as a director from 15 September 2006.

The process of setting and evaluating the objectives related to the determination of the remuneration of the Executive Vice Presidents and the CEO (not individual remuneration) will be disclosed to the Board of Directors in the annual report and the website. The disclosed remuneration figures of directors and management in the annual report will remain aggregated and will not be individualized. The individual remuneration of the Executive Vice Presidents and CEO will be disclosed to the remuneration committee.

Responsibilities of the Board 1) Board Structure

• The Board of Directors has an adequate and appropriate number of directors according to the size and the operation of the Company by having a total of 12 directors, consisting of 1 director who is in a management position, and 11 non-management directors. Of all directors, 3 are independent.

The - - - -

term of service of directors has been clearly stated in Glow’s Corporate Governance policy as follows: Board members will be elected for a period of three (3) years, after which the members need to resign. Resigned member may be nominated again. During any rotation period, no more than one third of the directors should be rotated to ensure continuity. During the implementation phase, some members may serve an additional year to ensure that the rotation policy could be implemented effectively.

• As specified by Glow’s Corporate Governance Policy, directors must be independent according to the SEC’s notification regarding the qualifications and scope of work of the Audit Committee, including other qualifications as required


22

by the Company. This is to enable the directors to work for the best interest of all shareholders on an equitable basis and to prevent conflicts of interest between the Company and management of major shareholder(s) or other companies having management/major shareholders in common. In addition, directors must also be able to express their opinion independently.

According to The Direct Charter (Article 3 and 6) of the Glow Corporate Governance Policy, each Director shall dedicate the necessary time and attention to fulfill his duties. Should a Director propose to accept another Directorship in addition to that (or those) held at the time of his appointment (with the exception of such position with an unlisted group company), this fact has to be brought to the attention of the Chairman of the Board’s Committee in charge of appointments with whom they are to assess whether such new responsibilities would leave them the time necessary to be devoted to their Director responsibilities. In addition, each Director shall inform the Board of Directors completely and beforehand of any real or potential conflict of interest, direct or indirect, which they may have. Any Director with such a conflict must not participate in any discussion of any such topic and on voting on it.

The roles and responsibilities of the Chairman are different from those of the CEO. As described by the Glow’s Corporate Governance Policy, the board should separate the roles and responsibilities of both positions so that the Board, under the guidance of the Chairman, has authority and is able to control the management’s operations effectively and efficiently.

• The Company’s Board of Directors has assigned the Vice President - Finance & Investor Relations as the company secretary to serve the Board of Directors in areas of taking care of the board’s activities and monitoring compliance to the Board’s resolutions.

2) Committees

The Company’s Board of Directors has appointed the sub-committee to help with supervising the Company’s business operations as follows:

Audit Committee The Audit Committee consists of 3 directors. A member of the Audit Committee may serve for a maximum of 6 consecutive years, counting for practical purposes as of 1 April 2005 listing. To ensure continuity, a maximum of one third may be replaced in any given 24 months period. All of the Audit Committee members are independent directors. The Audit Committee shall hold at least 4 meetings per year. In 2007, there were 7 audit meetings.

The Audit Committee is comprised of 3 committee members as follows:

1. Mr. Kovit Poshyananda

Chairman of the Audit Committee

2. Mr. Vitthaya Vejjajiva

Audit Committee

3. Ms. Supapun Rattanaporn

Audit Committee

Name

Position

Scope of Authority and Responsibilities of the Audit Committee • To review the sufficiency, credibility and objectivity of the financial reporting by coordinating with the external auditors and management responsible for preparing the quarterly and yearly financial reports and to suggest issues or matters to be included for review or audit by the external auditors during its audit of the company.


23

• •

To review the adequacy and effectiveness of internal control systems and internal audit functions by coordinating with the external auditors and internal auditors.

• •

To consider and advise the appointment of the external auditors including the audit fee by considering the credibility, the adequacy of its resources, the volume of engagements, and the experience of its supervisory and professional staff.

1. Mr. Dirk Achiel Marc Beeuwsaert

Chairman of the Nomination and Remuneration Committee

2. Mr. Guy Richelle

Member

3. Mr. Vitthaya Vejjajiva

Member

To review compliance with the Securities and Exchange Acts, Regulations of the SET, and any other relevant laws of Thailand.

The Audit Committee should also keep the nature of the non-audit services under review. The Audit Committee should set and apply a formal policy specifying the types of non-audit services; - Not permissible; - Permissible after the review of the Audit Committee; and - Permissible without the referral to the Audit Committee.

• To consider the appropriate disclosure of all connected transaction and any conflict-of-interests matters in conformity of relevant rules and regulations. • To take care of other matters assigned to it by the Board of Directors and agreed to by the Audit Committee. • To report the activities of the Audit Committee in the company's annual report, which shall be signed by the Chairman of the Audit Committee. • To act as the Corporate Governance Committee to ensure that the Company has in place and effectively complies with a corporate governance framework to protect the reputation of the company and the interest of all stakeholders. Nomination and Remuneration Committee The Nomination and Remuneration Committee, comprises of 3 members of the Board, of which 1 is an independent director. The Nomination and Remuneration committee’s role is to select appropriate candidates to be proposed for the positions of director and CEO. The nomination process shall be set up in accordance with certain criteria and shall be transparent. The Nomination and Remuneration Committee shall also consider the guidelines for the remuneration of the Board, the CEO and the executives directly reporting to the CEO, to ensure that the basis is fair and reasonable for submission to the Board and the shareholders' meeting for approval. The Nomination and Remuneration Committee’s scope and responsibilities are described in the Nomination and Remuneration Committee Charter. The Nomination and Remuneration Committee is comprised of 3 committee members as follows:

Name

Position

Overall Purpose / Objectives • The role of the Nomination and Remuneration Committee is to propose to the Board of Directors ("the Board"), in the first instance, any new appointments, whether of executive or of non-executive directors, and recommend a successor to the Chief Executive Officer when considered necessary. The Committee will review Board membership on a regular basis, considering inter alia the length of service of members, their contribution to the work of the Board and the breadth of expertise of the Board as a whole.


24

• The Committee is also responsible for recommending to the Board the remuneration arrangement for non-executive and independent members of the Board. • In performing its duties, the Committee will maintain effective working relationships with the Board, and each Committee member will obtain an understanding of the detailed responsibilities of Committee membership as specified in this Charter. •

The Committee shall define on behalf of the Board of Directors ("the Board") and the shareholders, Glow’s remuneration policy for the Chief Executive Officer and Executive Vice Presidents (“senior executives”), and to determine their specific remuneration, benefits and terms of employment including pension rights and any compensation payments and to monitor implementation of Glow’s human resources vision and strategy.

Authority • The Board authorises the Nomination and Remuneration Committee, within the scope of its responsibilities, to propose candidates with proper qualifications to the Board, and make all decisions relevant to this Charter (other than where Board approval is specifically required). • The Board authorises the Nomination and Remuneration Committee, within the scope of its responsibilities, to make all decisions relevant to its Charter (other than where Board approval is specifically required) and have access to professional advice inside and outside Glow at Glow's expense, subject to the prior approval of the Board. Roles and Responsibilities 1) Nomination • Review and recommend the criteria for Board membership and required qualifications.

Review the composition, size and experience of the Board on a regular basis, including current and future requirements, having regard in part to regulatory constraints.

Make recommendations to the Board of candidates with proper qualifications for the Board to submit for appointment to the annual general shareholders' meeting.

Seek proposals of individuals for appointment as independent members of the Board.

Ensure that new members to the Board participate in the orientation program for new directors.

Review and recommend to the Board the remuneration arrangements for non-executive and independent members of the Board, including their responsibilities for Committee activities, for subsequent approval by shareholders.

Make recommendations to the Board for the successor to the Chief Executive Officer when considered necessary.

Develop a succession plan for the Chief Executive Officer that considers both potential internal and external candidates.

2) Remuneration • Review Glow’s annual remuneration strategy and recommend strategy to the Board for endorsement. • Establish guidelines for remuneration on the initial appointment of the CEO and the Executive Vice Presidents of Glow.

Ensure that a proper system of long and short-term compensation is in place to provide performance-oriented incentives to management.


25

• Monitor implementation of Glow’s human resources vision and strategy, including management development programs for senior executives. • Evaluate the Chief Executive Officer’s performance based on a personal development plan, which incorporates short-term and long-term objectives together with performance targets linked to Glow’s strategy. Determine the salary and benefits annually at the end of each financial year by reference also to the factors listed in 4.18 below. • Ensure that Glow’s remuneration packages are competitive in view of industry practices, and judge where to position Glow relative to other similar companies with respect to salaries and relevant performance of comparable banks. • Provide a remuneration policy and package designed to attract, retain and motivate staff of outstanding ability and of the quality required but, the Committee should avoid, where possible, paying more than is necessary for this purpose. • With respect to early retirements for the Chief Executive Officer and senior executives, the Committee should avoid rewarding poor performance, while dealing fairly with cases where departure is not due to poor performance. • Ensure that succession plans for CEO and EVPs are reviewed periodically, through assessment of specific senior executive positions and qualified potential replacements. Salary and Benefits of CEO and EVPs. • Review the salary and benefits of the Chief Executive Officer (CEO) and on the recommendation of the CEO, review the salaries, and benefits of the Executive Vice Presidents (EVPs) individually, at the end of each financial year. Bonus of CEO and EVPs. • Operate an annual performance related bonus scheme for the Chief Executive Officer and Executive Vice Presidents. Approve the objectives and the compensation (which for Executive Vice Presidents is proposed by the CEO). Annual performance bonus should be a percentage of base salary and depend upon the achievement of individual performance targets which reflect Glow’s strategic objectives and the individual’s contribution to such objectives. Bonuses should be aligned to give the Chief Executive Officer and Executive Vice Presidents incentives to perform at the highest levels. Share Options Issued by Glow • Make recommendations to the Board on executive share options in Glow. Pensions and Life Assurance of CEO and EVPs • Assess reasonableness of pensions and life assurance benefits for the Chief Executive Officer and EVPs. In general, pensionable salary should not include annual bonuses or the value of other contingent benefits. Aggregate Salary and Bonuses of VP and SVP • Review the aggregate salary, benefit and bonus package of the Vice Presidents (VPs) and Senior Vice Presidents (SVPs) of the company with a review of individual package that exceed the maximum level under the applicable Glow grading system. Notice Period for Resignation of CEO and EVPs • Establish notice periods for the Chief Executive Officer and EVPs at initial appointment. Notice periods should not be less than 3 months. • Approve the terms and conditions of early retirements for the Chief Executive Officer and EVPs.


26

3) Roles and Responsibilities of the Board

The Company’s Board of Directors has clearly specified the roles, duties and responsibilities of the directors and the management. The Board of Directors has appointed the President to be responsible for management of the daily operations of the Company. The Board shall approve the vision, mission, strategy, goals, business plan and budget of the Company presented to it by the management. In addition, the Board of Directors has the internal control mechanism for supervising, monitoring and evaluating the operational results of the management by using operating objectives bases in measuring the operations of the management and the employees.

The Board of Directors has set up policies to encourage the business undertaking for maximum benefits in parallel with the encouragement of business undertaking with ethics. In order to create an organization with standardized plans and operations and to ensure that all parties will be treated equally and fairly, the Board of Directors has established the Code of Conduct of the directors, the management and the employees for their acknowledgement, compliance and adherence in performing the Company’s business missions.

In order to prevent the occurrence of conflicts of interest, the Board of Directors has established the policies and operating guidelines to prevent directors and employees of the Company from exploiting for personal benefits by not allowing the directors and the employees to perform any related transaction, which might cause conflicts of interest of the Company. In cases where it is necessary to perform the related transaction, the Board of Directors has specified that such operation must be in accordance with criteria specified by the SET by having the price and conditions as if it was making the transaction with third parties. Furthermore, the directors or the employees who will benefit from such transaction shall not be allowed to participate in the approval process.

The Company’s Board of Directors has the internal control systems in place that cover all aspects such as finance, operations and management so as to be in accordance with the related laws, rules and regulations. There are also the auditing and balance of power mechanisms which are effective enough to protect and oversee the shareholders’ capital and company’s assets. The delegation of authority and responsibilities of the management and the employees is prescribed in an orderly manner.

• The Board of Directors has established a risk management policy to cover all activities of the Company. Business risks are assessed twice a year. Also, risks are discussed during Board of Directors’ meetings and monthly management meetings.

4) Board Meetings

The Board of Directors has at least 4 fixed and confirmed meetings a year during the months of February, May, August and November to consider and approve the quarterly financial statements and extraordinary meetings may be arranged if and when necessary. For each meeting, a clear agenda is specified with correct, complete and adequate supporting documents submitted to each director at least 7 days in advance of the meeting so that the director can have time to study the information before attending the meeting. Each director can openly discuss and express his/her opinion. The Chairman will collect all comments and summarize information gathered from the meeting.

• The Company’s secretariat shall record the minutes of the meeting in writing. Minutes of meeting of the previous meetings, which have been approved from the Board of Directors’ meeting, shall be kept and made available for the directors and concerned parties to inspect at any time.

5) Board Self Assessment

• Every year, the Board will undertake a formal and rigorous annual evaluation of its own performance and that of its committees and individual directors.


27

• The Chairman of the Nomination and Remuneration Committee ensures that every 2 years, the members of the Board will assess the performance of the Board and its member committees as a whole or specifically to the issues, not to any director. Over a period of time, the Board will develop a benchmark of its performance year-on-year. •

The Chairman of the Nomination and Remuneration Committee ensures that every 2 years each individual Board member is evaluated in its capacity as a member of the Board or member of one of its committees. Individual evaluation is aimed to show whether each director continues to contribute effectively and to demonstrate commitment to the role (including commitment of time for Board and committee meetings and any other duties).

• The chairman (of the Board) will act on the results of the performance evaluation by recognizing the strengths and addressing the weaknesses of the Board and, where appropriate, proposing new members to be appointed to the Board or seeking the resignation of directors. •

In the annual report, the Board will disclose that the performance evaluation of the Board, its committees and its individual directors has been conducted. Evaluations will not be disclosed. The non-executive directors, led by the senior independent director, should be responsible for the performance evaluation of the Chairman of the Nomination and Remuneration Committee, taking into account the views of the executive directors.

6) Remuneration

The Company has established the Nomination and Remuneration Committee whose main roles are to propose to the Board of Directors, in the first instance, any new appointments, whether of executive or of non-executive directors, and recommend a successor to the Chief Executive Officer when considered necessary. The Committee will review Board membership on a regular basis, considering inter alia the length of service of members, their contribution to the work of the Board and the breadth of expertise of the Board as a whole.

The Committee is also responsible for recommending to the Board the remuneration arrangement for non-executive and independent members of the Board. The Committee shall define on behalf of the Board of Directors and the shareholders, Glow’s remuneration policy for the Chief Executive Officer and Executive Vice Presidents and to determine their specific remuneration, benefits and terms of employment including pension rights and any compensation payments and to monitor implementation of Glow’s human resources vision and strategy.

7) Board and Management Training

• New directors shall be provided with a Directors Package so that they may perform their duty effectively. They shall also attend a Directors training within 6 months of taking their post.

The Supervision of the Use of Inside Information

The Company has established the operating guidelines and penalty rules regarding the use of internal information of the Company to prevent the directors, the management or the employees from using the material information which has not been disclosed to the public or information that has been already disclosed but not in necessary level to be used for his/ her own benefit or for the benefits of a third party who has been told about such information and in which the use of such information has a conflict of interest or might result in damages to the Company and/or the public.


28

Corporate Social Responsibilities

The Glow Group run its business while developing good and sustainable relationships both in environmental and social affairs. The Company’s mission is to operate projects in an environmentally responsible manner, along with the development of quality of life of the communities located surrounding the Company, emphasising the health, working conditions and safety of employees, contractors and communities, as well as providing specialists and promoting on development of energy agencies in Thailand for the public benefit. Social responsibility projects undertaken by the Company during 2007 included:

Community Development:

• The Company has allocated and contributed the energy fund for the development of the local communities within a 5 kilometer radius around the power plants since July 2007 at the rate of 0.02 Baht/kWh for a coal-fired plant and 0.01 Baht/kWh for a gas-fired power plant, according to the guidelines established by Ministry of Energy. • Supporting the quality of life and environment development fund in Map Ta Phut and Ban Chang communities to improve quality of life and environment in the local communities. • Supporting ‘Strong Rayong Foundation Fund’ to develop potential growth on agriculture, industry and tourism of Rayong Province in all aspects.

Education and Religion:

• Continuing support for rural development projects in collaboration with the Office of Her Royal Highness Princess Sirindhorn, particularly educational development for hill-tribe students in the North of Thailand • Arranging on educational tutoring program “PreUniversity Entrance” project to Rayong high school students, donating educational equipment, holding exhibitions on power generation, and offering plant tour programs to school children, college students, and the general public. • Arranging “Computer Literacy Program” to promote and develop understanding of computer and information technology together with LAN system amongst local students. • Donating computers to government offices in Rayong province to enhance administration work on data collection. The Company also regularly supports traditional festivals and cultural events of the local communities. • The Company makes financial contributions to temples located around the industrial estate and in nearby areas.


29

Sport and Health Care:

• Sponsoring a mobile clinic by arranging for medical specialists to provide free examinations and health care for the residents in local communities surrounding the industrial estate. The Company also supports various sport competitions at both municipal and provincial levels. • The Company is an active member of the Public Relations Club of the Map Ta Phut Industrial Estate (MPR Club). The club’s objectives are to help arranging public activities to promote local welfare and serving as a forum to exchange ideas on important events as well as finding solution to common problems. • Supporting other activities, e.g. donating additional funds to Camillians Social Center to help HIV/AIDS infected patients.

• Supporting traditional sporting activities, arranging anti-drug campaign by cooperating with local communities and educational institutes in the Map Ta Phut area. This activity is held annually. • Supporting fitness projects for senior citizens in local communities, reducing illness and creating social learning process for people of all ages and genders.

Environmental Issues:

• Arranging “Mobile Power Plant Project,” presenting the business operations of Glow Group through exhibitions to provide information and knowledge to the governmental agencies, educational institutes and general public. • Arranging the ‘Environmental Governance Project’ by collaborating with the Industrial Estate Authority of Thailand, in which Glow Group presented information on environmental management via on-line system post in order to educate the to general public. • Supporting breeding of aquatic animals by coordinating with Map Ta Phut Industrial Port and Industrial Estate Authority of Thailand to replace aquatic animals in the sea and make possible their seasonal breeding cycles.


30

Environment, Health and Safety Management

Environment, Health and Safety Management

In 2007, the Company committed to corporate social responsibility and environmentally sustainable activities. An Environment, Health and Safety (EH&S) management system for our employees, contractors and the surrounding communities is the prime focus on sustainable achievement for GLOW Group.


31

The focus on EH&S programs and initiatives are as follows: • In January 2007, Glow Rayong Facilities (Glow SPP1, Glow SPP2&3 and Glow Energy Plc.) participated in the “Environmental Good Governance Project” organized by The Map Ta Phut Industrial Estate (MIE). In this project, each facility committed to the “Emissions Reduction Program” which consisted of air and wastewater emissions and industrial waste generation, which stipulated targets to be reached and a time-frame in which to achieve them. The Auditors from MIE and local representatives have visited each plant on a quarterly basis to follow-up on progress and effectiveness of the programs. The overall audit results at Glow Rayong Facilities were satisfactory, ranging form very good to excellent. Based on the outstanding performance at each facility, Glow Rayong Facilities received the “Green Flag of Environmental Good Governance” from MIE on January 29, 2008. • Glow SPP2&3 installed an emission display board in front of the plant to publically demonstrate online air emissions publicly, showing the transparency of our environmental reporting system. • The environmental key performance indicator has been initiated to control emissions and environmental impact of our activities. Emissions from our business are continually monitored and controlled and are well below the required standards in comparable with the best available control technology worldwide. The low emission levels for the new IPP project were designed not only to meet Thai standards but also to be one of the world’s cleanest coal-fired power plants. • Ash from existing coal-fired power plants is recycled in the cement industry and is also being used for brick production in local communities. • The Company has always been transparent in measuring and reporting emission levels by installation of the Continuous Emission Monitoring System (CEMS) at every exhaust stack. • The Company has promoted and achieved ISO 14001 internal certification at Glow SPP1, Glow SPP2&3 and Glow IPP as verified by the Glow Internal Audit Team in Q3 2007. • A corporate safety culture program has been launched and promoted within the Company through activities such as Corporate Safety Day, Near Miss reporting and the Zero Lost Time Accident Campaign. • Health and Safety Risk Assessment Procedure and Ergonomic Guidelines have been established and implemented to provide provisions and guidelines for employees. In addition, contractors must sign up to Glow’s Health and Safety Requirements for Contractors before contracts are agreed. The Company confirms that all activities of the GLOW Group were carried out in compliance with SUEZ Environmental Charter, Glow Environmental Impact Assessments (EIA) and other Thai Environmental Regulations.


32

Board of Directors

1

3

5

6

4

2

1) Mr. Guy Richelle

Chairman of the Board

2) Mr. Peter Valere Germain Termote

Director and Chief Executive Officer

3) Mr. Kovit Poshyananda

Independent Director and Audit Committee

4) Mr. Vitthaya Vejjajiva

Independent Director and Audit Committee

5) Ms. Supapun Ruttanaporn

Independent Director and Audit Committee

6) Mr. Dirk Achiel Marc Beeuwsaert

Director


33

8

9

11

10

7

12

7) Mr. Guido Geeraerts

Director

8) Mr. Johan De Saeger

Director

9) Mr. Rajit Nanda

Director

10) Mr. Philip De Cnudde

Director

11) Mr. Anut Chatikavanij

Director

12) Mr. Brendan G. H. Wauters

Director


34

Management Team

1

3

4

1. Mr. Peter Valere Germain Termote 2. Ms. Sriprapha Sumruatruamphol 3. Mr. Esa Heiskanen

4. Mr. Pajongwit Pongsivapai 5. Mr. Suthiwong Kongsiri

2

5


35

1. Mr. Peter Valere Germain Termote

Chief Executive Officer

2. Mr. John A. Guidy

Executive Vice President and Chief Operating Officer

(January - November 2007)

3. Ms. Sriprapha Sumruatruamphol

Executive Vice President and Chief Commercial Officer

4. Mr. Esa Heiskanen

Executive Vice President and Chief Project Development

& IPP Business

5. Mr. Pajongwit Pongsivapai

Executive Vice President and Chief Operating Officer

(November 2007 - Present)

6 Mr. Suthiwong Kongsiri

Executive Vice President and Chief Financial Officer

7. Ms. Natnicha Kulcharattham

Senior Vice President - Human Resources &

Administration (Resigned January 1, 2008)

8. Mr. Svend Erik Jensen

Senior Vice President - Construction & Technical Management

9. Mr. Kanit Thangpetch

Senior Vice President - Rayong Facilities Management

10. Mr. Louis Stephen Holub

Senior Vice President - Operations Support Services

11. Mr. Michael W. Reiff

Senior Vice President and Chief Financial Controller

12. Mr. Wisit Srinuntawong

Senior Vice President - Engineering

13. Mr. Narongchai Visutrachai

Senior Vice President - IPP Business & Government Affairs

14. Ms. Chamaiporn Soonthorntasanapong

Vice President - Compliance & Insurance

15. Ms. Sirichan Chotchaisathit

Vice President - Industrial Sales

16. Mr. Prateep Phuthamrugsa

Vice President - Supply Chain Management

17. Mr. Somchai Klinsuwanmalee

Vice President - Government & Public Affairs

18. Ms. Mantana Kunakorn

Vice President - Human Resources & Administration

19. Mr. Renaud Louis Albert Pilleul

Vice President - Industrial Customer Relations

20. Mr. Jirasek Poomchai

Vice President - Logistics & Fuel Management

21. Ms. Suttasinee Pengsupaya

Vice President - Accounting

22. Mr. Chaiwut Rattanapornsinchai

Vice President - Information Technology

23. Ms. Unchana Kittipiyakul

Vice President - Budgeting & Business Controlling

24. Dr. Somgiat Dekrajangpetch

Vice President - Asset Optimization

25. Mr. Sirote Vichayabhai

Vice President - Finance & Investor Relations

26. Mr. Akarin Prathuangsit

Vice President - Marketing & Business Planning

27. Mr. Anutarachai Natalang

Plant Manager - Glow Energy site (Phase 1 & 2)

28. Mr. Apichart Jamjuntr

Plant Manager - Glow SPP2, Glow SPP3, Glow Energy site (Phase 3 & 4)

29. Mr. Apidech Siriphornoppakhun

Plant Manager - Glow SPP1 & Glow Demin Water Site

30. Mr. Suratchai Bangluang

Facility Manager - Glow IPP Site


36

WE

GL

OW

1

2


37

Community relations activities and general social activities related to our activities are embedded in our mission and culture.

O

UR

SO

C

IE

TY

Care for environment projects Develop people quality of life for communities in the areas where we do business A prime focus on environment health and safety for our employees, contractors and the surrounding communities Provide expertise and support to development of Thai energy sector that add value to the authorities

1, 2, 3, 4 Students from Wat Map Chalood School, Rayong 3

4


38

Business

Glow’s business objectives remain balanced

between achieving long-term and short-term financial targets, from both accounting and cash perspectives. We must also comply with the boundary conditions of proper and sustainable business and social responsibilities. To achieve our objectives, we leverage on our strength of proven track records of superior reliability, critical scale, strategic location, stability of cash flows and strong technical support from our major shareholder SUEZ.


39

Overview We are one of the largest private electricity generators and providers of industrial utilities in Thailand. We operate IPP and cogeneration facilities (most of which operate as SPPs under Thailand’s SPP program) and our core business is to produce and supply electricity to EGAT and electricity and steam to industrial customers in the MIE Area. We have operated in Thailand since 1993 and our five principal production facilities are located in Rayong and Chonburi provinces on the industrial eastern seaboard of Thailand. On December 31, 2007, we had a total generating capacity of 1,708 MW of electricity and 967 tons per hour of steam.

Electricity generation and sales is the most important component of our business, accounting for 83.9 percent of our total revenues in 2007. Generation and sales of steam is also a significant part of our business, accounting for 12.8 percent of our total revenues in 2007. We currently own and operate five principal production facilities, four of which generate electricity. Our production facilities and their operating characteristics as of December 31, 2007, are:

Glow IPP plant, which operates in the Chonburi Industrial Estate and can generate 713 MW of electricity;

Glow Energy plant, which operates in the MIE and can generate 358 MW of electricity, 687 tons per hour of steam and 3,320 cubic meters per hour of processed water;

Glow SPP 1 plant, which operates in the EIE and can generate 124 MW of electricity, 90 tons per hour of steam and 70 cubic meters per hour of processed water;

Glow SPP 2/ SPP 3 plant, which operates in the MIE and can generate 513 MW of electricity, 190 tons per hour of steam and 150 cubic meters per hour of processed water;

Glow Demin Water plant, which operates in the EIE and can generate 120 cubic meters per hour of processed water.

In 2007, we had total revenues of Baht 33,011.3 million and a net profit of Baht 4,782.8 million. As of December 31, 2007 we had total assets of Baht 54,023.7 million.


40

Structure of revenues Revenues We derive our revenues primarily from sales of electricity to EGAT and sales of electricity, steam and clarified and demineralized water to industrial users in the MIE Area. The following table breaks down our revenues by source for the periods indicated:

Year Ended December 31,

Revenues from Sales of Goods and

2005 (Baht millions)

2006 (%)

(Baht millions)

(%)

2007 (Baht millions)

(%)

Rendering of Services Electricity

Sales to EGAT by IPP

8,616.9

30.1

10,705.0

31.5

10,161.8

30.8

Sales to EGAT by SPPs

9,059.0

31.7

9,640.6

28.4

9,323.5

28.2

Sales to Industrial Customers

6,411.8

22.4

7,877.2

23.2

8,224.8

24.9

Total

24,087.8

84.2

28,222.8

83.1

27,710.1

83.9

Steam

4,101.4

14.3

4,029.9

11.9

4,219.2

12.8

Processed water

305.7

1.1

340.4

1.0

336.6

1.0

Total

28,494.9

99.6

32,593.1

96.0

32,265.8

97.7

Other Income

101.1

0.4

1,398.7

4.0

745.4

2.3

28,596.0

100.0

33,991.9

100.0

33,011.3

100.0

Total Revenues


41

Business strategies

1. Overview

Our vision is to enhance profitability through operational excellence and value-creating growth. We have created a business strategy that takes into account four perspectives: commercial, operational, financial and human resources. We have balanced our short - and long-term objectives to create a well-defined set of priorities and action plans for our company. For our existing operations, this involves enhancements in utilization, efficiency and reliability and achieving overall cost reductions, optimizing our cost of capital and strengthening internal reporting systems and procedures. We believe that our business strategies will prepare us for growth opportunities with new and/or existing industrial customers, and will as position us favorably for a new round of IPP bidding if and when such opportunities arise. With the assistance of SUEZ, we plan to continue to develop a highly motivated and competent Thai management team and workforce to support these efforts.

2. Commercial Perspective

From a commercial perspective, our focus is on (a) growing our core business, (b) proactively managing our client relationships, (c) optimizing fuel costs and securing our fuel supply, and (d) maintaining and enhancing our local knowledge and relationships.

(a) Pursuing growth of our core business

We intend to grow our core business by both increasing our capacity to meet growing industrial demand for electricity and steam and by positioning ourselves to compete successfully for opportunities to install new generating capacity in Thailand. For example, in 2005, we have completed the first and second stage of Glow Energy’s capacity expansion in the MIE, allowing us to produce an additional 78 MW of electricity and 138 tons per hour of steam. We are now constructing a new CFB with a net capacity of 115 MW which is scheduled to begin commercial operation by the end of 2009. In addition to these projects, we will consider further opportunities to

expand and strengthen our ability to serve industrial customers (See Expansion and Potential section). We intend to continue to seek opportunities to acquire new high-value industrial customers and grow to follow the demand from our existing customers. In addition, we will focus on maintaining and enhancing our operations, continuing to provide high-quality, reliable service, performing our obligations under our EGAT power purchase agreements and strengthening our institutional relationships within Thailand (including with our regulators), all of which, we believe, has put us in a favourable position to bid for new electricity generation projects in Thailand that may arise in the future. In 2007, we were been awarded preferred bidder status by the Ministry Of Energy for a 660 MW coal fired IPP plant. If we are successful in executing the new PPA with EGAT and arranging finance on limited recourse basis, we plan to start construction within 2008 and commercial operations by the end of 2011. EGAT has also recently accepted our application for a new 74 MW SPP license. If we are successful in securing additional new industrial customers, we aim to build a new cogeneration facility with the start of commercial operations in 2011.


42

(b) Proactively managing our industrial customer relationships

Our industrial customer base is a key component of our business. Our industrial customers are principally involved in the petrochemical production process, which relies upon stable supply of electricity and steam to avoid start-up costs associated with interruption during production. As such, our focus is on strengthening our relationships with existing customers, not only by providing them with a reliable supply of electricity and industrial utilities, but by working closely with them to further understand their needs and to develop ways in which to further improve our levels of service. We focus on various action plans to improve customer satisfaction by improving supply reliability, communication, incident handling and problem solving and firmly believe that customer satisfaction is the key to customer retention and acquisition of new customers or new contracts from existing customers. We believe that our service reliability sets us apart from our competitors and positions us favourably as the electricity and industrial utility supplier of choice in our markets. We target customers for steam and high-load electricity, who value reliability of supply.

(c) Optimising our fuel management by reducing fuel cost and ensuring supply availability

Fuel is our major cost item and our business is exposed to fluctuations in price and availability of fuel (and in particular coal). We commit significant resources to fuel management and will continue to do so. We seek opportunities to enhance our coal procurement arrangements to reduce our coal and freight costs, which directly affect our profitability. We continue to examine our open positions on fuel costs and, in connection with our ongoing efforts to protect our company from fuel price fluctuations, we may in the future enter into hedging arrangements from time to time. Our primary fuel supply arrangements seek to maintain a sufficient supply of fuel that is critical to our ability to operate our business and we also seek to maintain prudent levels of back-up fuel supplies.

(d) Maintain and enhance local knowledge and relationships

We have a long-term commitment to Thailand and our core business is to generate and supply electricity and steam to customers in Thailand. We focus on identifying key individuals for us to train to lead our company in future years as well as on strengthening our institutional relationships with EGAT, the government and government authorities and our regulators.

3 Operational perspective

From an operational perspective, our focus is on (a) maintaining and improving reliability and availability of our generating units, (b) improving our fuel efficiency, (c) reducing our operating costs and (d) effectively managing our projects under construction.

(a) Maintaining and improving reliability and capacity utilization

Our plant capacity utilization can be improved through capacity enhancement measures and reducing the amount of unplanned outage or reducing the days needed for scheduled maintenance. We are continually seeking to improve our performance in all areas through various measures, such as condition and performance monitoring, preventive and effective maintenance and reduction of forced outages through root cause analysis and enhanced operating procedures.


43

(b) Improving fuel efficiency

Fuel is a major cost item for us and our fuel efficiency is an important driver of our profitability. We seek to continually improve our operational efficiency by optimizing dispatch, critical equipment monitoring, work processes and energy loss monitoring and mitigation.

(c) Reducing operational costs

4. Financial Perspectives

Maintain and improve our financial position

(d) Executing projects effectively

Our internal focus on excellence includes financial management. We actively evaluate opportunities to minimize the weighted average cost of capital by optimizing our capital structure while reducing our exposure to financial risks. We seek to avoid cash foreign exchange risk by matching the currency of costs and debt service payments with the currency of free cash flow. We have a prudent but flexible interest rate risk management system which is supported by the expertise of the SUEZ finance departments who assist us in determining the amount and timing of fixing of interest rates. We seek to improve our management reporting systems and procedures by improving the reliability of the systems and reviewing and documenting the processes. We continue to implement a sustainable program of Internal Control (also referred to as the Codis or Control Disclosure Program), which applies to our company as a subsidiary of SUEZ, and we have signed-off the SUEZ Energy international Codis entities attestation letter for the accounting year 2007. The appropriate implementation, within the Group, of the methodology developed under the Codis Program ensures the compliance of SUEZ with the French “Loi de Sécurité Financière” (“LSF”) and the related French regulatory authority (AMF) recommendations and, from 2008, with the European Union regulation (7th and 8th European Directives). The aforementioned laws and regulations seek to promote corporate responsibility, increase public disclosure, and improve the quality and transparency of financial reporting and auditing. They also make the company executives explicitly responsible for establishing, evaluating, and monitoring the effectiveness of their company's internal control structure. In addition, we actively monitor our cash balance, in conjunction with our capital expenditure plans, so that in the long run, shareholders value is maximized. For further details on the Codis Program, see the “Internal Control” section.

We seek to minimize our operational and maintenance costs by creating transparency in the manner and timing in which the costs are incurred and by exercising good judgment as to whether those erpenses are needed. We have a focus on cost management through reliable systems and control procedures. We have already achieved substantial cost improvements in our long-term service agreements. In the future, we hope to be able to refurbish parts used in Glow IPP’s major inspections, which would result in substantial cost reductions. Our relationship with and technical support from SUEZ enables us negotiate effectively with suppliers and to source equipment and parts on competitive terms.

We are continually either constructing new power plants to serve new customers’ demand, implementing projects to enhance performance and/or constructing distribution lines to our customers. These projects are handled by a dedicated team of employees in an organized and prudent manner in order to avoid delay, poor performance and the financial consequences thereof.


44

Competitive strengths

We believe that our principal competitive strengths are the following: 1. Critical mass and reliability of operations We do not believe that the scale of our cogeneration We believe that we have a critical mass for our operations in operations can be replicated in the near term, which Thailand. Glow IPP has two electrical generators and we believe limits our competitors’ opportunities to grow our cogeneration facilities have an aggregate of 20 electrical their business. The scale of our operations allows us to generators. This size is critical to our competitiveness capitalize on the synergy between our various businesses, since we have interconnected our cogeneration facilities including system redundancies, economies of scale, to provide a reliable supply of electricity and steam to spare parts management, operational expertise, automated our industrial customers. We have a steam network which systems, procedures, qualified and trained personnel substantially reduces the risk of supply interruption and leverage with regard to suppliers. Our size and and pressure loss in the event that any one unit fails. long-term presence also allows us to attract a highly The interconnection of our facilities provides us with a motivated and competent workforce and provides us number of advantages: we are able to dispatch our with key market know-how and credibility as a long-term lowest-cost generating units and improve the reliability player in the Thai energy industry. We operate IPP and of our electricity and steam supply to our customers, cogeneration facilities (most of which operate as SPPs we have greater flexibility in coordinating and rotating under Thailand’s SPP program), giving us a major maintenance schedules and we are able to provide greater presence in two distinct sectors of the Thai electricity flexibility to our customers in scheduling maintenance supply market and a diverse business “footprint” in outages and in supplying peak start-up demand. Overall, Thailand. In addition, we have full or near-full ownership these factors have allowed our cogeneration facilities to and sole operational control of our key assets, which maintain high reliability rates as well as to reduce operating allows us to control strategic business decisions and costs. react quickly and in a coordinated manner to market developments. We believe that these factors, in turn, position us to capture new business in the future.

2. Strategic location and assets

In addition to critical mass in our operations, we believe that the location and concentration of our assets also provides us with a key competitive advantage. We are the principal private electricity supplier in the MIE, which is the largest and most important industrial estate for petrochemical companies in Thailand, and one of the largest industrial utilities suppliers in the MIE Area. We operate a centralized utility park that has allowed


45

us to apply our strategic resources in a focused manner to achieve operational strength (including in terms of system redundancies and infrastructure connections) efficiently and effectively. Our operation in the M IE Area provides us with an established presence and business infrastructure in a key area of Thailand and has afforded us an opportunity to develop important business relationships with some of Thailand’s largest companies. Our facilities are located centrally within the MIE and are surrounded by several key petrochemical producers. Additionally, we have invested in a supply infrastructure that connects our facilities to our clients via an underground electrical network and an above- ground steam pipe network. Industrial activity in the MIE Area is expanding, which we believe will provide us with attractive opportunities for growth. We are able to use our existing property and facilities to expand our operations.

We operate IPP and cogeneration facilities (most of which operate as SPPs under Thailand’s SPP program), giving us a major presence in two distinct sectors of the Thai electricity supply market and a diverse business “footprint” in Thailand. Our assets are also diversified in the sense that we (i) operate both gas- and coal-fired generating units, (ii) sell to industrial customers as well as to EGAT, (iii) sell material amounts of both electricity and steam and (iv) operate IPP, SPP and non- SPP cogeneration facilities. This diversified portfolio of products, customers and plants gives us a major presence in the Thai energy supply market.

3. Established track record as a reliable supplier focusing on customer satisfaction

We have operated in Thailand since 1993 and believe that we have established a reputation as a reliable provider of electricity and steam offering a high level of service to our customers. Reliability of supply is particularly important to our industrial customers operating in the petrochemicals industry, and we have focused on developing our reliability of supply and quality of service in order to differentiate ourselves from our competitors. In the MIE Area, our generating park is centralized and interconnected and we have a dedicated transmission network. Reliability of supply to industrial customers is further enhanced through implementation of critical redundancies and through underground cabling for electricity customers. We focus on customer satisfaction as a key driver of customer retention and acquisition. We believe that our track record, particularly with our industrial customers in the MIE Area, has strengthened our reputation and positions us well to compete successfully as we go forward to capture future growth.

In contrast to certain of our competitors, generation and supply of electricity and steam is our core business. This allows us to focus our management resources on business development and operational excellence and to capitalize on support from SUEZ which is also principally engaged in electricity and industrial utilities production and supply.


46

4. Relationship with SUEZ We are a subsidiary of SUEZ a worldwide group whose expertise spans most major areas of the global electricity and gas industries. This provides us with access to critical experience and technical know-how and allows us to capitalize on and benefit from group-wide relationships. We have formalized certain aspects of this relationship in a sponsor support agreement that Glow Ltd has signed with a wholly-owned subsidiary of SUEZ which, among other things, provides us with access to control, operational and project consulting support from SUEZ Tractebel. We have signed a separate agreement with SUEZ in which it has agreed not to compete directly with us in the electricity generation business in Thailand. As SUEZ’s sole vehicle for investment in the electricity generation business in Thailand, we believe that we will continue to benefit from this relationship going forward, under the terms of these agreements and otherwise.

5. Stability of revenues and cash flows Most of our sales of electricity and steam are made under long-term sales contracts with durations of approximately 15 years for our industrial customers and between 21 and 25 years for sales to EGAT. Most of our current contracts with industrial customers expire between 2010 and 2015, while the EGAT power purchase agreements expire between 2016 and 2025 for our SPPs and in 2028 for Glow IPP. This provides our business an element of stability and predictability and affords us some level of protection from competition. In addition, most of our industrial customers are in the petrochemical industry and, due to the nature of petrochemical production processes, have relatively high load factors and relatively stable levels of demand.


47

History Glow Energy was incorporated as The Cogeneration Public Company Limited in October 1993. SUEZ in Glow Ltd in September 1997 and acquired its initial interest in Glow Energy in November 2000 (and subsequently de-listed the company). Our company was formed through the combination of Glow Energy and Glow Ltd in December 2004. In the reorganization, Glow Energy acquired Glow Ltd from SUEZ Tractebel on a book value basis for a net purchase price of Baht 7,114.8 million, bringing Glow IPP, Glow SPP 1 and Glow Demin Water into our corporate group. In February 2005, we changed our name from “Glow SPP Public Company Limited” to “Glow Energy Public Company Limited”. In 2007, we also set up Glow IPP2, and GHECO-One. Glow IPP2 and Glow IPP3 (formerly Glow Hemaraj Energy Co., Ltd) are holding companies while GHECO-One is an operating company. These companies principal business is developing power generation projects in Thailand and certain neighbouring countries under the Thai Independent Power Producer Program and future similar programs for

the purchase of power from independent power producers by the Electricity Generating Authority of Thailand ("EGAT") or any successor of EGAT. In December 2007, GHECO-One was selected as the preferred bidder for a 660 MW coal fired project in the new round of IPP bidding. Glow Group owns a 65% share in GHECO-One and Hemaraj Land and Development Plc owns 35%.

The following diagram sets out our current organizational and ownership structure:

100%

Glow

95%

Minority 100%

SUEZ Tractebel1

100%

Glow IPP

100%

Glow Demin

65%

GHECO-One

Glow Energy 100%

Glow SPP1

Glow SPP2

30.89% 69.11%

100%

Glow SPP3

Glow IPP2 Holding

Hemaraj 35%

100%

Glow IPP3

Note: (1) SUEZ Tractebel holds its interest in Glow Energy through its wholly-owned subsidiary, SUEZ-Tractebel Energy Holdings Cooperative U.A. and

SUEZ Energy (Thailand) Co., Ltd.


48

The following timeline sets out key steps in Glow Energy’s history and development October 1993

: Glow Energy was incorporated under the name [“The Cogeneration Public Company Limited”].

February 1996

: The Cogeneration Plc. listed its shares on the SET.

October 1996

: The Cogeneration Plc.’s cogeneration plant began initial commercial operation.

March 1999

: The Glow SPP 2/ Glow SPP 3 hybrid plant began commercial operation.

November 2000

: SUEZ Tractebel acquired a 62 percent stake in The Cogeneration from Site Pacific Holdings Limited.

February/March 2001

: SUEZ Tractebel increased its shareholding in The Cogeneration to 99 percent by purchasing Banpu’s shares and conducting a tender offer for remaining outstanding shares.

August 2002

: The Cogeneration’s shares were delisted from the SET.

May 2003

: Change of company name from The Cogeneration Plc. to Glow SPP Plc.

December 2004

: Glow SPP acquired 100 percent of Glow Ltd from SUEZ Tractebel.

January 2005

: Phase 4 Stage 1 began full commercial operation.

February 2005

: Change of company name from Glow SPP Plc. to Glow Energy Plc.

April 2005

: Glow Energy listed its shares on the SET.

December 2005

: Phase 4 Stage 2 became commercially operational.

December 2007

: GHECO-One was selected as the preferred bidder for a 660 MW coal fired project in the new round of IPP bidding.


49

The following timeline sets out key steps in the history of Glow Ltd beginning with SUEZ-Tractebel’s initial investment in Glow Ltd: September 1997

:

February 1998

: Glow SPP 1’s 124 MW cogeneration plant began commercial operation.

May 1999

: Glow Ltd acquired the remaining 49 percent interest in Glow IPP, bringing its interest to 100 percent.

February 2000

: SUEZ Tractebel increased its interest in Glow Ltd to 75 percent.

2000-2004

: SUEZ Tractebel progressively increased its interest in Glow Ltd to 100 percent in a series of transactions that involved an indirect sale of a five percent interest in Glow IPP to Hemaraj.

January 2003

: Glow IPP’s 713 MW plant began commercial operation.

December 2004

: Glow SPP acquired 100 percent of Glow Ltd’s shares from SUEZ Tractebel.

SUEZ Tractebel formed a joint venture with Hemaraj Land and Development Plc (“Hemaraj”), in which each party had a 50 percent interest with respect to Glow Ltd (formerly H-Power Company Limited). H-Power at the time owned 100 percent of Glow SPP 1 (formerly Industrial Power Company Limited) and 51 percent of Glow IPP (formerly Bowin Power Company Limited).

Although our reorganization has changed our corporate structure, it has not resulted in any significant operational changes. Both Glow Energy and Glow Ltd were previously owned by our major shareholder, SUEZ Tractebel, and they and their respective subsidiaries were managed and operated as a single group of companies. This remains the case after our reorganization. Although our key operating assets are owned by separate companies within our corporate group, we maintain a single, coordinated management structure for all of our group companies and assets, which allows us to monitor and coordinate the operations of our production facilities. SUEZ Tractebel, the Selling Shareholder, is itself a subsidiary of SUEZ, an international industrial and services group which provides electricity, gas, water and waste services solutions worldwide. SUEZ Tractebel, which is headquartered in Brussels, Belgium, is a major global energy company, with energy-related businesses throughout North America, South America, Europe, the Middle East and Asia. Our company is part of SUEZ’s Electricity & Gas International (“EGI”) division, one of SUEZ’s four business lines. EGI develops, builds and operates electricity- and gas-related energy facilities throughout North America, Latin America, Southeast Asia and the Middle East, including transportation and distribution of liquefied natural gas


50

Products and Production Facilities

Our core business is the generation

and supply of electricity to EGAT and the generation and supply of electricity, steam, clarified and demineralized water to industrial customers within the Map Ta Phut area.


51

The following map shows the locations of our head office and our production facilities.

Head office

Head Office and Plant Locations

Laos

Myanmar

Bangkok Chonburi Rayong

Malaysia

Glow IPP

Cambodia

Glow Energy Glow SPP1 Glow SPP2/SPP3 Glow Demin Water Glow Energy Expansion


52

Our core business is the generation and supply of electricity to EGAT and the generation and supply of electricity and steam, with clarified and demineralized water as secondary products, to industrial customers within the MIE Area.

Products

(1) Electricity

We produce electricity for sale both to EGAT and to industrial customers. Electricity sold to EGAT, the single wholesale buyer of electricity in Thailand, is routed into EGAT’s national transmission system. EGAT sells this electricity to PEA and MEA, which distribute it through their respective distribution networks to end users throughout Thailand. We own and operate an interconnected system of supply sources and transmission lines and the various companies within our legal group have entered into contracts to sell electricity to industrial customers in the MIE Area. While the contracts of Glow Energy, Glow SPP 2 and Glow SPP 3 are principally with industrial customers in the MIE, they also have other industrial customers elsewhere in the MIE Area. Glow SPP 1 sells to industrial customers in the EIE and AIE. We supply the electricity that we sell to our customers through dedicated transmission lines. This electricity is used by our industrial customers for a variety of industrial purposes, primarily relating to petrochemical and petrochemical-related manufacturing and production processes.

(2) Steam

We supply steam to industrial users in the MIE Area. Glow Energy, Glow SPP 2 and Glow SPP 3 principally sell to industrial customers in the MIE and AIE, while Glow SPP 1 sells to industrial customers in the EIE. The steam that we sell to our customers, at varying levels of pressure, is used for a variety of industrial purposes. Because of inherent limitations on the ability to transport steam over long distances, most of our steam customers are located within four kilometers of our steam generating facilities.

(3)

Processed water We also sell clarified and demineralized water to industrial users in the MIE Area, which is not a core business line in itself (although the production and sale of demineralized water is Glow Demin’s core business). However, it is complementary to our electricity and steam generation businesses, and we entered into the business in order to be able to internally generate the water that we need for our own production purposes. We sell excess processed water that we produce to industrial customers.


53

Production facilities

The following table sets out certain information, including key capacity statistics, relating to our production facilities as of December 31, 2007: P roduction Capacity Plant Name Location Electricity Steam Processed Water Commercial (MW) (tons/hr) (cu.m/hr) Operation Date Production Facilities Clarified Demin Glow IPP CIE 713 - - - Jan. 2003 Glow Energy Phase 2 & 4 MIE 358 437 1,500 480 Oct. 1996 Glow SPP 1 EIE 124 90 - 70 Feb. 1998 Glow SPP 2/ SPP 3 MIE 513 190 - 150 Mar. 1999 Glow Energy Phase 1 MIE - 250 1,110 230 Jul. 1994 Glow Demin Water EIE - - - 120 Nov. 1999 Total 1,708 967 2,610 1,050 Source: Glow Energy. Although ownership of our plants rests with separate legal entities within our corporate group, we manage all of them centrally through a single, coordinated management structure. This allows us to monitor the operations of our facilities, coordinate their operation and implement policy on a group-wide basis.

(a) Glow IPP Plant

The Glow IPP plant is a natural gas-fired combined cycle plant that began commercial operation in January 2003. The plant operates as an independent power producing facility under Thailand’s IPP program, generating and selling electricity to EGAT. The Glow IPP plant, as of December 31, 2007, had an electricity generating capacity of 713 MW.


54

(b) Glow Energy Phase 1 plant

The Glow Energy Phase 1 plant, consisting of a natural gas-fired “D� type boiler for steam generation and a water production plant, began commercial operation in July 1994. It is located in the MIE and is capable of generating 250 tons per hour of steam, 1,110 cubic meters per hour of clarified water and 230 cubic meters per hour of demineralized water. Because this facility uses relatively inefficient boilers for steam generation, we do not enter into long-term steam supply contracts with respect to this facility, but rather use it to satisfy short-term demand, start-up demand and excess capacity and to strengthen our overall system reliability. We principally sell the processed water generated by this facility to industrial customers in the MIE.

(c) Glow Energy Phase 2 plant

(d) Glow Energy Phase 4 plant

The Glow Energy Phase 2 plant is a combined cycle natural gas-fired cogeneration plant that began commercial operation in October 1996. As of December 31 2007, the plant, located in the MIE, had an electricity generating capacity of 281 MW and a steam generating capacity of 300 tons per hour. Electricity generated by the Glow Energy plant is sold both to EGAT and to industrial customers in the MIE and steam is sold to industrial customers in the MIE. In addition, the Glow Energy Phase 2 plant also has water treatment facilities that can produce 900 cubic meters per hour of clarified water and 280 cubic meters per hour of demineralized water for consumption within the Glow Energy Phase 1 plant and for sale to industrial customers.

The Glow Energy Phase 4 plant is a gas-fired cogeneration plant that began commercial operation in February 2005. As of December 31 2007, the plant, located in the MIE, had an electricity generating capacity of 77 MW, a steam generating capacity of 137 tons per hour, clarified water generating capacity of 600 cubic meters per hour and demineralized water generating capacity of 200 cubic meters per hour. We sell electricity, steam and processed water from the plant to industrial customers in the MIE.


55

(e) Glow SPP 1 plant

The Glow SPP 1 plant is a natural gas-fired combined cycle cogeneration facility that began commercial operation in February 1998. The plant is located in the EIE and as of December 31, 2007 had an electricity generating capacity of 124 MW, a steam generating capacity of 90 tons per hour and a demineralized water production capacity of 70 cubic meters per hour. We sell electricity generated by the Glow SPP 1 plant to EGAT and to industrial customers in the EIE. We sell steam and processed water from the plant to industrial customers in the EIE and also use this processed water internally for steam production and for sale to Glow Demin Water.

(f) Glow SPP 2/ SPP 3 plant

The Glow SPP 2/ SPP 3 plant is a hybrid natural gas- and coal-fired cogeneration facility located in the MIE that began commercial operation in March 1999. Technically, although we consider the plant to be a single generation facility, the gas-fired generation portion of the facility is owned by Glow SPP 2 and the coal-fired portion is owned by Glow SPP 3. The plant is divided in two parts: (i) two 35 MW gas-fired gas turbine units and two heat recovery units and (ii) two 222 MW hybrid cogeneration units, each comprising a steam turbine and coal-fired circulating fluidized bed boiler. The Glow SPP 2/ Glow SPP 3 plant had, as of December 31 2007, an electricity generating capacity of 513 MW, a steam generating capacity of 190 tons per hour and a demineralized water production capacity of 150 cubic meters per hour. We sell electricity generated by the Glow SPP 2/ Glow SPP 3 plant to EGAT and to industrial customers in the MIE Area. We also sell steam and processed water from the plant to industrial customers in the MIE.

(g) Glow Demin Water Plant

The Glow demineralized water plant, located in the EIE, began commercial operation in November 1999. The expansion of 40 cubic meters per hour of demineralized water was completed in 2007. It is capable of producing a total of 120 cubic meters per hour of demineralized water. We sell processed water produced by the Glow Demin plant to industrial users in the EIE.


56

Risk factors

Risk factors describe some of the significant risks that could adversely affect our company, our business and the value of our shares.


57

Risks relating to us and our business

We are exposed to fluctuations in fuel prices Fuel is our most significant operating cost, accounting for 79.9 percent of our total expenses in 2007. Whether and to what extent we can pass fuel price fluctuations on to our electricity and steam customers depends on the specific terms of our sales agreements.

• • • • •

Under the terms of Glow IPP’s power purchase agreement with EGAT, which accounted for 30.8 percent of our total revenues in 2007, our fuel costs are all passed on to EGAT at contracted heat rates. Under the terms of our SPP power purchase agreements with EGAT relating to our gas-fired facilities, which together accounted for 21.9 percent of our total revenues in 2007, our fuel costs are passed on to EGAT at contracted heat rates. Under the terms of our SPP power purchase agreements with EGAT relating to our coal-fired facilities (of which there are two, 90 MW each), which together accounted for 6.3 percent of our total revenues in 2007, our fuel costs are only partially passed on to EGAT as the freight charges relating to our purchase of coal, which are an important component of fuel costs, are not passed on to EGAT. Overall coal costs, including freight costs, have increased significantly over the past two to three years, which has had an adverse effect on our profit margins. Under the terms of our power supply agreements with industrial customers, which together accounted for 24.9 percent of our total revenues in 2007, we generally sell electricity at prices that are based on the retail electricity tariff charged by the Provincial Electricity Authority of Thailand (“PEA”), the electricity distribution utility for the areas of Thailand in which we operate. Although the PEA tariff is designed to reflect fluctuations in fuel prices through a fuel transfer charge (“FT”), it does so in accordance with a fuel index maintained by EGAT which is not designed to reflect our actual fuel costs and only factors in coal costs (which we also use to generate up to 120 MW of electricity that we supply to our industrial customers) to a very limited extent. We are also constructing a 115 MW coal fired plant to supply industrial customers with scheduled COD at the end of 2009. This will increase fuel diversification but also coal commodity risk. In addition, the Ft does not always function as designed. See section below “—We price a portion of our electricity sales by reference to the PEA tariff, which does not reflect our actual costs and may not be adjusted as designed to reflect fluctuations in, among other things, fuel costs and inflation”. Under the terms of our steam supply agreements with industrial customers, which together accounted for 12.8 percent of our total revenues in 2007, we sell steam based on prices that are indexed to fluctuations in the price of natural gas, but not coal (which we also use to produce the steam that we sell). In addition, the natural gas indexation in our steam tariffs does not fully reflect our actual natural gas costs.


58

Because we cannot pass on all the changes in our fuel costs to our customers, we are exposed to increases in the prices of fuel (and in particular coal). If there are material increases in our cost of fuel and we are unable to pass these increases on to our customers, this will directly reduce our profit margins and could have an adverse effect on our business, results of operations, financial situation and prospects.

We price a portion of our electricity sales by reference to the PEA tariff, which does not reflect our actual costs and may not be adjusted as designed to reflect fluctuations in, among other things, fuel costs and inflation Under the terms of our electricity supply agreements with our industrial customers, which together accounted for 24.9 percent of our total revenues in 2007, we generally sell electricity at prices that are based on the retail tariff charged by PEA (such prices are typically expressed as a percentage discount to the PEA tariff). The PEA’s tariffs are determined by the Thai government and take into account the electricity generation, purchase, transmission and distribution costs of PEA, the Metropolitan Electricity Authority of Thailand (the “MEA”) and EGAT, the major electricity utilities in Thailand. So, the PEA tariff rates, and consequently the prices at which we sell electricity to our industrial customers, do not necessarily reflect our actual costs of producing and supplying this electricity. The PEA tariff is designed to reflect fluctuations in fuel prices, inflation, foreign exchang rates and other factors by applying of the FT. However, the most significant component of the FT, the fuel cost component, refers to a general fuel index that does not necessarily reflect our actual fuel costs, and only factors in coal costs, which we use partially to generate up to 120 MW of electricity that we supply to our industrial customers, to a very limited extent. In addition, the FT does not always function as designed. When the FT adjustment is not applied or not fully applied to the PEA tariff when fuel costs are rising, it means that the prices at which we sell electricity to our customers are not increased to reflect higher prevailing fuel prices, and consequently, our profit margins are reduced. For the foregoing reasons, our reliance on the PEA tariff could have an adverse effect on our business, results of operations, financial situation and prospects.

We are highly dependent on EGAT EGAT is our largest and most important customer and is committed to purchasing electricity from us under our EGAT power purchase agreements, which are long-term contracts with durations from 21 to 25 years. The EGAT power purchase agreements are material to our business, accounting for 59.0 percent of our revenues in 2007. EGAT is the dominant player in the Thai electricity market. In addition to being the single wholesale buyer and controlling all of the wholesale transmission of electricity in Thailand, EGAT is also Thailand’s largest electricity generator. EGAT may in the future be listed in the Stock Exchange of Thailand. We cannot predict what effect EGAT’s privatization would have on our business, although any such effect could be materially adverse to us. For example, in the past we were not required to compete with EGAT for installation of new electricity generating projects, although we may in the future be required to do so as a result of its privatization. A number of our important contracts contain unclear terms which have led to disagreements with


59

EGAT regarding the operation of our business, as discussed below in this section “—We have had a number of significant disputes with EGAT in the past” and which could result in further disputes in the future. Any material disputes or disagreements that we have with EGAT could have an adverse effect on our business, results of operations, financial situation and prospects.

We are highly dependent on a small number of industrial customers concentrated in the petrochemicals sector In addition to EGAT, we are also highly dependent on a small number of industrial customers. Our ten largest industrial customers (which, for the avoidance of doubt, excludes EGAT) accounted for 29.7 percent of our total revenues in 2007. A disruption of our relationship with one or more of our industrial customers could have an adverse effect on our business, results of operations, financial situation and prospects. In addition, many of our contracts with industrial customers have terms that are unfavorable to us, which could result in large contractual claims against us or early termination of these contracts. Further, our industrial customers are highly concentrated both geographically and in terms of industrial classification. Most of our industrial customers are located in the MIE or elsewhere within the MIE Area. This exposes us to increased risk of an accident, natural disaster, infrastructure or other failure or breakdown disrupting the facilities of the MIE, the other industrial estates in which our industrial customers are located or the MIE Area generally. In addition to their geographic concentration, many of our industrial customers are companies operating in petrochemical or petrochemical-related industries. This exposes them, and indirectly us, to the performance of the petrochemical sector. Many petrochemical products are commodities and the petrochemical industry is highly competitive. In addition, significant price fluctuations in the business cycle are common in many petrochemical-related industries. These factors may affect our ability to conclude new agreements with these customers or negatively affect our demand and load factor, customer creditworthiness, the timing of our customers’ expansions and thereby the terms on which we are able to reach any such new agreements and may, for these reasons or otherwise, have an adverse effect on our business, results of operations, financial situation and prospects. In approximately 3 to 4 years, many of our long-term sales agreements with our industrial customers (for both electricity and steam) will begin to expire. However, we have successfully extended some of those contracts and secured new contracts with industrial customers. Certain of these contracts are significant to our business and some of these are with customers that are affiliates of our competitors, including PTT Pcl (“PTT”) (which is itself completing construction of a major industrial utilities production facility in the MIE Area) and its subsidiaries and affiliates, and/or are currently in the process of constructing their own industrial utilities generation facilities. We can not assure you that we will be able to retain these customers or find new customers to replace them on commercially reasonable terms when our sales agreements with them expire. In addition, it is important to our business to maintain minimum levels of steam sales in order to meet applicable generating efficiency requirements (and failure to do so could result in termination of certain of our EGAT power purchase agreements). If we are unable to retain our customers or to find new customers to replace them on commercially reasonable terms and along the product lines that we require, this could have an adverse effect on our business, results of operations, financial situation and prospects.


60

We face significant competition We face significant competition, particularly in respect to our supply of electricity and steam from our cogeneration facilities to industrial customers in the MIE Area. Although our customers are party to long-term agreements with us, we compete with the utility business units of both PTT Chemical Public Co., Ltd., a merged company between Thai Olefins Plc (our existing industrial customers) and National Petrochemical Plc (which is the owner of this utility business) and PTT Utility Company Limited (“PTT Utility”), which are both affiliates of PTT, and the PEA for new customers. PTT Utility is a recently-established joint venture of PTT with its affiliates PTT Chemical and PTT Aromatics and Refining that is located in the vicinity of the MIE and generates electricity and steam. PTT Chemical utility business unit, PTT Utility and PEA have certain competitive advantages over us. PTT Chemical and PTT Utility are affiliated with PTT, the principal natural gas supplier in Thailand and, through this relationship, with a number of companies in the MIE Area (including many of our important customers). PTT also has an equity interest in a number of our industrial customers (most significantly PTT Chemical (previously known as “Thai Olefins Plc”) and PTT Aromatics and Refining (previously known as “Aromatics (Thailand) Plc”, sales to which accounted for 11.5 per cent. of our total electricity sold to industrial customers (in MWh), 28.6 percent of our total revenue from sales of steam and 6.5 percent of our total revenues in 2007. PEA, on the other hand, does not require its customers to enter into long-term contracts. According to market information as of December 2007, PTT Utility aim is to support the future growth of the petrochemical business of the PTT group of companies, but may also serve the utilities needs of nearby factories in the MIE Area. We believe that this project will further increase the level of competition that we face for industrial customers, particularly in the following respects: (i) we need to maintain steam sales and are already facing lower levels of new steam demand, (ii) certain of our important steam customers are PTT affiliates and (iii) certain of our existing customers already do business with PTT and its affiliates. See section “Business—Competition” for more discussion of the competitive risks that we believe PTT Utility poses to our business. In order to expand our operations under the IPP program we had to bid for, and be awarded, concessions for new electricity generating facilities. While our bid for new 660 MW IPP plant submitted in October 2007 pursuant to IPP Solicitation 2007-01 has been shortlisted as preferred bid, we still need to conclude PPA negotiations, obtain necessary licenses and raise funding for such investments. We cannot assure you that we would be able to successfully achieve that nor that we would be able to successfully bid for any other future electricity generation projects in Thailand. These factors could materially limit our ability to expand our business, adversely affect the viability of current expansion projects, and either of these factors or any general inability by us to compete successfully with current or future industry participants could have an adverse effect on our business, results of operations, financial situation and prospects.


61

We are subject to significant contractual risks under our SPP power purchase agreements EGAT is our largest and most important customer, and sales to EGAT from our SPPs accounted for 28.2 percent of our total revenues in 2007 (see section “—We are highly dependent on EGAT”). EGAT is the sole purchaser of wholesale electricity in Thailand. Due in part to the foregoing, our SPP power purchase agreements with EGAT are standard form contracts that we were not given an opportunity to negotiate. This means that these contracts are not tailored to our specific operating circumstances and contain a number of ambiguous provisions. Certain of the terms of our SPP power purchase agreements that we believe present risks to our business are as follows: • in contrast to our IPP power purchase agreement, our SPP power purchase agreements only provide for very limited instances in which penalties or liquidated damages are EGAT’s principal remedy for our failure to perform our contractual obligations. This means that any such failures by us are more likely to constitute events of default under our SPP power purchase agreements and, upon expiration of relevant cure periods, give EGAT the right to terminate these agreements; • a power purchase agreement may be terminated before the end of its term due to the default of either party and our only remedy may be to bring a claim in arbitration and prove damages; • although the power purchase agreements do not include liquidated damages provisions, penalties are imposed in the form of reduced capacity or energy payments from EGAT or refunds by us where (i) we supply less than the contracted capacity, (ii) we provide electricity for less than 7008 hours in a year, (iii) the cogeneration efficiency is less than 45% or (iv) thermal energy accounts for less than 10 percent of our total energy sold; • if a force majeure event affecting EGAT or a governmental force majeure event (as defined in the power purchase agreement) prevents us from supplying electricity to EGAT, EGAT will continue to make its capacity payment (the payment that is designed to allow us to recover our fixed costs for constructing and operating the power generating facility over the life of the contract) to us for only up to six months. In addition, failure by PTT to deliver gas to us is not considered to be a governmental force majeure event for these purposes, so in the event of a PTT supply failure EGAT will only pay us for capacity actually made available and energy actually delivered; and • our SPP power purchase agreements with EGAT contain only a general commitment for both parties to negotiate in good faith to amend to our contractual arrangement in response to any adverse change in law, including changes in environmental standards, which provides us with only limited change-in-law protection. This is particularly relevant if new laws were to impose more stringent environmental conditions on our existing facilities, which could require significant opex and capex. These contractual risks could have an adverse effect on our business, results of operations, financial situation and prospects.


62

We operate in a highly regulated industry that is subject to change The regulatory framework applicable to electricity generating companies in Thailand has undergone significant structural changes in the past and may undergo significant changes in the future. In addition, there have been a variety of proposals for reform of the Thai electricity industry in the past which, once made, have subsequently been delayed, cancelled, or significantly modified prior to their implementation. Thailand has been considering deregulation of the electricity industry for a number of years, including privatization of EGAT, MEA and PEA. EGAT has begun the process of privatization, but this process has been put on hold. However, the EGAT power purchase agreements for our SPPs do not contain any dealing with the potential privatization of EGAT or the restructuring of the electricity sector. We are unable to predict what effect deregulation or privatization would have on our contractual arrangements and on the electricity sector in Thailand in general. If such deregulation were result in the abolition of the PEA price, for example, which is the reference price that we use to price our electricity sales to industrial customers, we would probably have to attempt to renegotiate the pricing structure with our industrial customers, which we may not be able to do on reasonable commercial terms or at all. Because we operate a number of SPPs (and our companies account for a material portion of all SPP electricity sold to EGAT), which are higher-cost wholesale electricity generators compared with IPPs and many of EGAT’s generating facilities, we are exposed to regulatory changes that seek to increase generating efficiency or to penalize high-cost generating facilities. This could take the form of changes in law and many of our key sales contracts do not contain specific mechanisms for compensating us in the event of adverse changes in law. To facilitate continued reform, the Energy Industry Act was published on the 10th of December 2007. Under this Act, a new independent regulatory body, the Energy Regulatory Board (“ERB”), will be formed in order to regulate both the electricity and natural gas supply industries and to ensure fair competition. This agency’s key responsibilities will include: • Primarily regulating the electricity supply industry and the gas supply industry (GSI); • Regulating tariffs, standards and service quality; • Ensuring competition and preventing abuse of monopoly power; • Protecting consumers and dealing with consumer complaints; • Recommend to the National Energy Policy Council the policy on the energy procurement and the policy on diversification of fuel sources and types for power generation to ensure efficiency and security of the electricity industry; and • Consider the power development plan, the investment plans of the electricity industry, the natural gas procurement plan and the energy network system expansion plan. These or other regulatory or structural changes affecting the Thai electricity industry could require us to significantly change the way that we operate our business and could have an adverse effect on our business, results of operations, financial situation and prospects.


63

We have had significant disputes with EGAT in the past EGAT is our largest and most important customer. We have been involved in a number of significant disputes with EGAT in the past, including disputes relating to important components of our business operations. Most significantly, in 2004, EGAT challenged the interconnection of our various cogeneration facilities, which we believe is central to the reliability and quality of our service, as a violation of our power purchase agreements and challenged the compliance of our Glow SPP 2/SPP 3 hybrid plant with applicable operating efficiency criteria established under Thailand’s SPP regulations. Although we have resolved these disputes in a satisfactory manner and amended our relevant EGAT power purchase agreements to reflect our agreements with EGAT, we agreed as part of the settlement to make financial concessions to EGAT (although we do not consider the amounts of these concessions to be material). We can not assure you that we will not become involved in further disputes with EGAT, or that if we do, we will be able to resolve any such disputes on satisfactory terms. In the past, we have been involved in discussions with EGAT regarding important aspects of our business, including the reference index for coal prices that we are permitted to pass on to EGAT under our power purchase agreements and the synchronization of our non-SPP generating units to the EGAT grid. Although we do not characterize these as disputes, we believe that, because of the structure of the Thai electricity supply industry and the nature of our power purchase agreements, we will probably continue to maintain a dialogue with EGAT to resolve these and similar types of issues in order to continue to clarify certain aspects of our contractual relationship. There is the potential for disputes to arise in connection with any such issues or points of discussion. Because EGAT is our most important customer and disputes with EGAT may involve some of our most important contracts, any disputes that we may have with EGAT in the future may require us to materially change the way in which we operate our business and could have an adverse effect on our business, results of operations, financial situation and prospects.

Our business operations are dependent on the availability of fuel Our business is dependent on the availability of fuel, in particular natural gas and coal. In 2007, purchases of natural gas accounted for 76.0 percent of our cost of sales and purchases of coal accounted for 5.3 percent of our total cost of sales. Shortages in natural gas or coal, or an inability of our suppliers to provide these fuels to us, could prevent some or all of our facilities from being able to generate electricity and steam, which could prevent us from fulfilling our contractual obligations. We have entered into long-term natural gas supply agreements with PTT. Because of the structure of the Thai fuel supply industry, PTT currently operates as an effective monopoly and is the only entity that is able to supply us with natural gas to allow us to operate our business. In the event that PTT fails to supply us with adequate quantities of natural gas under our gas supply agreements, we could face significant disruptions to our business. Although there is a compensation provision in the gas supply agreements between our SPPs and PTT which require PTT to compensate us for its inability to deliver contracted quantities of natural gas to us, this compensation only extends to the natural gas that we use to produce electricity to sell to EGAT and not to our industrial customers. Most of our gas-fired facilities are designed to run on diesel fuel as an alternative fuel source, but we could incur significant costs and operating inefficiencies in switching using diesel fuel. Moreover, our cogeneration facilities may not be able to operate on diesel fuel for sustained periods of time, as, when operating on diesel fuel, we consume diesel fuel faster than we are able to re-fill our diesel fuel storage tanks. There is a risk of natural gas supply disruption resulting from defects in or the requirement for maintenance of the pipeline, over which we have no control. The current limitations on the supply of natural gas to the areas in which we operate, or any disruption in the supply of natural gas, could have an adverse effect on our business, results of operations, financial situation and prospects.


64

We have entered into a long-term coal supply agreement with Banpu International Limited (“Banpu”) for supply of coal to our Glow SPP 2/ SPP 3 plant, which is our only coal-fired facility. Our current policy states that we will source approximately 50-53 percent of our coal requirements from Banpu, and approximately 40-45 percent under medium term contracts with other international supplier(s) and the remainder through spot sales.

We are highly dependent on PTT As discussed in the section “—Our business operations are dependent on the availability of fuel”, we rely heavily on PTT for the supply of natural gas to our operating facilities. Purchases of natural gas, which were almost all purchased from PTT, accounted for approximately 76.0 percent of our total cost of sales in 2007. In addition to being a key supplier, PTT has an equity interest in PTT Chem and PTT Utility, two of our principal competitors (as discussed above in the section “—We face significant competition”). PTT also has an equity interest in a number of our industrial customers (most significantly PTT Chemical, previously known as “Thai Olefins Plc” and PTT Aromatics and Refining, previously known as Aromatics (Thailand) Plc). Sales to these two customers accounted for 11.5 percent of our total electricity sold to industrial customers (in MWh), 28.6 percent of our total revenue from sales of steam and 6.5 percent of our total revenues in 2007. See section “—We face significant competition”. If our competitive position with PTT adversely affects its willingness to enter into new agreements to supply natural gas to us, or the terms on which it will do so, or if our relationship with PTT deteriorates for any other reason, this could have an adverse effect on our business, results of operations, financial situation and prospects.

Environmental Opposition to expanding Map Ta Phut Some NGO’s, local communities and politicians believe the industrial expansion of the petrochemical complex in Map Ta Phut is not sustainable from a health and environmental point of view. Several measures restricting environmental permits have been made, including: 1) No new allocation of emission quota 2) No new emissions unless emissions from existing plants are reduced. There must be a reduction of NOX and SO2 emissions from the existing facilities, so that the new project can be allowed. Added air emissions rate shall not be more than 80 percent of reduced air emission. There could also be new more stringent emissions standards applicable in Map Ta Phut or Thailand on existing power plants or new power plants. There could also be a decision to develop the petrochemical business further in the Southern Seaboard. This could have an adverse effect on the business, results of operation, financial situation and prospects.


65

We are exposed to foreign exchange risk We are exposed to foreign exchange risk in a number of respects. Many of our operating costs are denominated in US dollars and other currencies. Most of our US dollar-denominated operating costs can be serviced by US dollar-linked income. However, we also purchase parts and equipment for our plants in US dollars, and Glow IPP incurs a significant amount of Swiss franc-denominated costs relating to maintenance. Moreover, our coal and coal freight costs, although largely denominated in Baht, are US dollar-based and we can not fully pass the fluctuations in these costs (including as a result of currency fluctuations) through to our customers. Further, while our revenues are partially linked to the US dollar, a significant amount of our indebtedness is Baht-denominated. We have in the past targeted a substantial degree of US dollar content or linkage in cash flows (and thus normalized net earnings) available to distribute to shareholders and, if we continue to do so, any appreciation of the Baht compared to the US dollar would reduce the Baht amount of dividend payments to our shareholders. For these reasons, significant fluctuations in exchange rates could have an adverse effect on our business, results of operations, financial situation and prospects.


66


67

Sustainable business relations It is our philosophy to develop and maintain a long-term relationship and commitment to all our business partners including our suppliers, customers and shareholders through loyal, honest and sincere conduct. This means we have to be honest sharing our expectations and our constraints. The dialogue with our business partners is always ongoing. Contracts with our customers are to be construed and applied in a reasonable and honest manner, not only by looking at the consequences of the grammatical meaning of the sentences. This honest and sincere dialogue with our business partners is a matter of professionalism, care and integrity.


68

Shareholding and Management Structure

We create value for our shareholders

and customers through the commitment and knowledge of our employees. We seek to implement best practices through human resource, information systems, HR policies, and standardized procedures. Our major shareholder provides support and guidance in developing best practices for our company.


69

Management Structure

Shareholders The following table sets out our major shareholders as at December 31, 2007.

Major shareholders

# Shares

%

1. SUEZ-Energy (Thailand) Co., Ltd.

645,259,773

44.11

2. SUEZ-Tractebel Energy Holdings Cooperatieve U.A.(1)

365,716,260

25.00

3. State Street Bank and Trust Company for London

65,115,149

4.45

4. Nortrust Nominees Ltd.

34,180,000

2.34

5. Littledown Nominees Limited 7

22,544,454

1.54

6. HSBC (Singapore) Nominees Pte Ltd.

18,656,717

1.28

7. Chase Nominees Limited 32

17,200,100

1.18

8. Littledown Nominees Limited

14,640,000

1.00

9. Somers (U.K) Limited

12,700,000

0.87

10. State Street Bank and Trust Company

12,072,343

0.83

11. Others

254,780,239

17.42

1,462,865,035

100.00

Note:

(1)

SUEZ-Tractebel Energy Holdings Cooperatieve U.A. is the wholly owned subsidiary of SUEZ-Tractebel S.A.


70

Glow Energy Public Company Limited

Board of Directors

Audit Committee

Chief Executive Officer

Internal Audit

Executive Vice President and Chief Financial Officer

Senior Vice President and Chief Financial Controller

Executive Vice President and Chief Commercial Officer

Vice President - Human Resources & Administration

Vice President - Marketing & Business Planning

Vice President - Accounting

Vice President - Industrial Sales

Vice President - Information Technology

Vice President - Industrial Customer Relations

Vice President - Budgeting & Business Controlling

Vice President - Finance & Investor Relations

Vice President - Compliance & Insurance


71

Executive Vice President and Chief Projects Development & IPP Business

Executive Vice President and Chief Operating Officer

Senior Vice President - Construction & Technical Management

Senior Vice President - Operations Support Services

Senior Vice President Engineering

Senior Vice President - Rayong Facilities Management

Plant Manager - Glow Energy Site (Phase 2)

Senior Vice President - IPP Business & Government Affairs

GIPP Facility Manager

Plant Manager - Glow SPP 2, Glow SPP3, Glow Energy Site (Phase 3 & 4)

Vice President - Government & Public Affairs

Vice President - Supply Chain Management

Plant Manager - Glow SPP1 & Glow Demin Water Site

Vice President - Asset Optimization


72

The company’s management structure is comprised of the Board of Directors, the Audit Committee, and the Management Team

1. Board of Directors

Position

1. Mr. Guy Richelle

Chairman of the Board

2. Mr. Peter Valere Germain Termote

Director and Chief Executive Officer

3. Mr. Kovit Poshyananda

Independent Director and Audit Committee

4. Mr. Vitthaya Vejjajiva

Independent Director and Audit Committee

5. Ms. Supapun Ruttanaporn

Independent Director and Audit Committee

6. Mr. Dirk Achiel Marc Beeuwsaert

Director

7. Mr. Guido Geeraerts

Director

8. Mr. Johan De Saeger

Director

9. Mr. Rajit Nanda

Director

10. Mr. Philip De Cnudde

Director

11. Mr. Anut Chatikavanij

Director

12. Mr. Brendan G. H. Wauters Director Mr. Sirote Vichayabhai is the Company’s secretariat.

Authorized Directors

Mr. Anut Chatikavanij or Mr. Dirk Achiel Marc Beeuwsaert or Mr. Guido Geeraerts or Mr. Peter Valere Germain Termote or Mr. Philip De Cnudde or Mr. Brendan G. H. Wauters or Mr. Johan De Saeger or Mr. Guy Richelle or Mr. Rajit Nanda, 2 of these 9 directors to sign jointly and affixed Company’s seal.

Scope of Authority and Responsibilities of the Board of Directors

Name

The Company’s board of directors must perform its duties in accordance with laws, objectives and articles of association of the Company as well as in accordance with the resolutions of shareholders’ meetings. The board of directors may empower one or more directors or any person to act on its behalf.

• •

The board of directors has the power to make decisions and oversee the operations of the Company, except in the following cases which require approval from the shareholders’ meeting first. any activity that laws and/or articles of association of the Company has specified that require approval from the shareholders’ meeting first.


73

any undertaking of any related transaction according to the regulations of the Stock Exchange of Thailand.

• •

any acquisition and disposal of the assets according to the regulations of the Stock Exchange of Thailand. The board of directors has the power to declare payment of interim dividends from time to time if it deems that the Company has enough profit to do so.

2. Management Team

The Management Team is comprised of 30 persons as follows:

Name

Position

1. Mr. Peter Valere Germain Termote

Chief Executive Officer

2. Mr. John A. Guidy

Executive Vice President and Chief Operating Officer

(January - November 2007)

3. Ms. Sriprapha Sumruatruamphol

Executive Vice President and Chief Commercial Officer

4. Mr. Esa Heiskanen

Executive Vice President and Chief Projects Development

& IPP Business

5. Mr. Pajongwit Pongsivapai

Executive Vice President and Chief Operating Officer

(November 2007 - Present)

6 Mr. Suthiwong Kongsiri

Executive Vice President and Chief Financial Officer

7. Ms. Natnicha Kulcharattham

Senior Vice President - Human Resources & Administration

(Resigned January 1, 2008)

8. Mr. Svend Erik Jensen

Senior Vice President - Construction & Technical Management

9. Mr. Kanit Thangpetch

Senior Vice President - Rayong Facilities Management

10. Mr. Louis Stephen Holub

Senior Vice President - Operations Support Services

11. Mr. Michael W. Reiff

Senior Vice President and Chief Financial Controller

12. Mr. Wisit Srinuntawong

Senior Vice President - Engineering

13. Mr. Narongchai Visutrachai

Senior Vice President - IPP Business & Government Affairs

14. Ms. Chamaiporn Soonthorntasanapong

Vice President - Compliance & Insurance

15. Ms. Sirichan Chotchaisathit

Vice President - Industrial Sales

16. Mr. Prateep Phuthamrugsa

Vice President - Supply Chain Management

17. Mr. Somchai Klinsuwanmalee

Vice President - Government & Public Affairs

18. Ms. Mantana Kunakorn

Vice President - Human Resources & Administration

19. Mr. Renaud Louis Albert Pilleul

Vice President - Industrial Customer Relations

20. Mr. Jirasek Poomchai

Vice President - Logistics & Fuel Management

21. Ms. Suttasinee Pengsupaya

Vice President - Accounting

22. Mr. Chaiwut Rattanapornsinchai

Vice President - Information Technology

23. Ms. Unchana Kittipiyakul

Vice President - Budgeting & Business Controlling

24. Dr. Somgiat Dekrajangpetch

Vice President - Asset Optimization

25. Mr. Sirote Vichayabhai

Vice President - Finance & Investor Relations


74

Name

Position

26. Mr. Akarin Prathuangsit

27. Mr. Anutarachai Natalang

Vice President - Marketing & Business Planning Plant Manager - Glow Energy Site (Phase 2)

28. Mr. Apichart Jamjuntr

Plant Manager - Glow SPP2 / SPP3, Glow Every Site (Phase3 & 4)

29. Mr. Apidech Siriphornoppakhun

Plant Manager - Glow SPP1 and Glow Demin Water Site

30. Mr. Suratchai Bangluang

Facility Manager - Glow IPP

Scope of Authority and Responsibilities of the CEO The CEO shall have the authority to perform the normal business operations of the Company except the following matters which shall be considered and approved by the Board of Directors or recommended to the Shareholders’ Meeting for its approval, as the case may be: • Authorization of internal power of attorneys; • Amendment of the Company’s Articles of Association; • Merger, split up or any modification of the form of the Company; • Dissolution of the Company; • Increase, decrease or transfer of the registered capital of the Company; • Taking of a lien or any other security on the assets of the Company; • Any material change to the main agreements, i.e. Power Purchase Agreement with EGAT, Gas Supply Agreement with PTT, Coal Supply Agreement with Banpu Minerals Co., Ltd. and EPC Contracts; • Negotiation and execution of documents in relation to the opening of credit facilities with banks, for an amount exceeding the amount mentioned in the daily management powers granted by the Board of Directors to the CEO; • Commencement or discontinuance of any business; • Removal and appointment of CEO; • Approval of long-term strategic plan; and • Approval of annual budget.


75

Details of The Board of Directors 1. Mr. Guy Richelle (52) Education : : Sharholding Proportion (Percent) : Family Relation with Management : 5 years past experience : : 2. Mr. Peter Valere Germain Termote (43) Education : : : Sharholding Proportion (Percent) : Family Relation with Management : 5 years past experience :

Master Degree in Nuclear Engineering, Universite Liege in Belgium Master Degree in Business Administration, University of Louvain-la-Neuve in Belgium None None Present • Chairman of the Board and Director / Glow Energy Public Co., Ltd • Chairman of the Board / Glow Group • Chairman of the Board and Director / SUEZ Energy Asia & SUEZ Energy (Thailand) • Regional Manager / SUEZ Energy Middle East-Asia & Africa • Director / PTT Natural Gas Distribution Co., Ltd. (PTT NGD) • Director / Huay Ho Power Company (Laos) • Director / HIDD Power Company Limited • Director / Sohar Global Contracting & Construction Company Limited (Oman) • Director / Zhenjiang PRC (China) • Director / United Power Company SAOG/Sohar Power Development Cy (Oman) • Director / Baymin Enerig AS (Turkey) • Director / Total Tractabel Emirates Power Company/Total Tractebel Emirates EPC Cy/Total Tratebel Emirates O&M Company S.A. (France) • Director / SUEZ Energy India (India) • Director / Brightbeam Pte Limited (Malaysia) • Director / Elyo South East Asia Pte Limited (Malaysia) • Director / Elyo Pte Limited (Malaysia) . 2001-2006 • Chief Executive Officer / Tractebel EGI Middle East (Dubai)

Master Degree from Harvard University with full scholarship (Tuition & COL) Master Degree from University of Paris 1 - Sorbonne with full scholarship (Tuition & COL) Bachelor Degree in Law (Highest Honors) 1st of Class Award, University of Brussels 223,200 shares (0.02%) None Present • Director and Chief Executive Officer / Glow Energy Public Co., Ltd. • Director and Chief Executive Officer / Glow Group


76

3. Mr. Kovit Poshyananda (72)

Education : : : : Sharholding Proportion (Percent) : Family Relation with Management : 5 years past experience : 4 Mr. Vitthaya Vejjajiva (71) Education : : : Sharholding Proportion (Percent) : Family Relation with Management : 5 years past experience :

Honorary Doctorate (Economics), Chulalongkorn University National Defense College M.A., Ph.D. from Cornell University B.A. (Honors) from Cambridge University None None Present • Independent Director & Audit Committee / Glow Energy Public Co., Ltd. • Independent Director / Glow Group (Except Glow IPP 3 Co., Ltd. and GHECO - One Co., Ltd.) • Chairman of the Board of Director and the Audit Committee / Sansiri Public Co., Ltd. • Director and Chairman of the Audit Committee / Furukawa Metal (Thailand) Co., Ltd. • Director and Chairman of the Audit Committee / Shangri-La Hotel Public Co., Ltd. • Director / Bangkok Bank Public Co., Ltd. • Director / Office of the Council of State • Chairman of the Appellate Committee / Thai Securities and Exchange Commission (SEC)

Master Degree of Laws, Harvard University, USA Bachelor Degree of Laws, Gray’s – Inn, England Role of Chairman Program Class 2/2001, Thai Institute of Directors Association (IOD) None None Present • Independent Director & Audit Committee / Glow Energy Public Co., Ltd. • Independent Director / Glow Group (Except Glow IPP 3 Co., Ltd. and GHECO - One Co., Ltd.) • President / National Committee United World Colleges • President / K-Line (Thailand) Co., Ltd. • President / Kawasaki-Dowa Company Limited


77

5. Ms. Supapan Ruttanaporn (66)

Education : : : Sharholding Proportion (Percent) : Family Relation with Management : 5 years past experience : : 6. Mr. Dirk Achiel Marc Beeuwsaert (59) Education : : Sharholding Proportion (Percent) : Family Relation with Management : 5 years past experience :

MBA (Accounting), Michigan State University, USA Bachelor of Accounting (Second Honor), Chulalongkorn University Certificate in Director Certification Program (DCP), Class 15/2002, Thai Institute of Directors Association (IOD) None None Present • Independent Director & Audit Committee / Glow Energy Public Co., Ltd. • Independent Director / Glow Group (Except Glow IPP 3 Co., Ltd. and GHECO - One Co., Ltd.) • Independent Director & Audit Committee / Delta Electronics (Thailand) Public Co., Ltd. • Member of the Ethic Committee / Federation of Accounting Profession Past • Chairperson / Thai Accounting Association • Independent Director & Audit Committee / Chiang Mai Frozen Food Public Co., Ltd. • Member of Department of Accountancy Committee / Faculty of Commerce and Accountancy, Chulalongkorn University • Member of the subcommittee on the Automatic Adjustment Mechanism Monitoring / National Energy Policy Office of Thailand • Member of the Accounting and Finance Specialist Committee / Office of Civil Service Commission

General Management Programme Cedep, Fontainebleau Bachelor Degree in Electrical and Mechanical Engineering, University of Ghent None None Present • Director / Glow Energy Public Co., Ltd. • Director / Glow Group (Except Glow IPP 3 Co., Ltd. and GHECO - One Co., Ltd.) • Chief Executive Officer / Tractebel Electricity and Gas International • Director / Tractebel Energia (Brazil) • Director / Tractebel Inc. (USA)


78

7. Mr. Guido Geeraerts (54)

Education : Sharholding Proportion (Percent) : Family Relation with Management : 5 years past experience : 8. Mr. Johan De Saeger (40) Education : : Sharholding Proportion (Percent) : Family Relation with Management : 5 years past experience : : : 9. Mr. Rajit Nanda (37) Education : : Sharholding Proportion (Percent) : Family Relation with Management : 5 years past experience : :

Master Degree in Organizational Sociology, Gent University None None Present • Director / Glow Energy Public Co., Ltd. • Director / Glow Group (Except Glow IPP 3 Co., Ltd. and GHECO - One Co., Ltd.) • Senior Vice President - Trading and Sales / Electricity and Gas International • Department of Organizational Studies / Electrabel N.V. (Belgium) • Department of Organization and Development / Electrabel N.V. (Belgium) • Director / Tractebel Energy Marketing Inc. • Director / Tractebel Energy Services Inc. • Director / Electrabel Nordic AS

Commercial Energineering, Catholic University of Louvain, Belgium Master Degree in Business Administration, Cornell University, the United States of America None None Present • Director / Glow Energy Public Co., Ltd. • Director / Glow Group • Executive Vice President – Business Development / SUEZ Energy International (Johannesburg and Thailand) • Director / Zhenjiang Hongsun Thermal Power CY Limited • Director / SUEZ Energy India Private Company • Director / Houy Ho Power Company Limited • Director / Elyo PTE Limited • Director / SUEZ Energy Southern Africa (PTY) Ltd. 2002-2006 • Executive Vice President Country Manager / SUEZ Energy International 2000-2003 • Senior Vice President - Strategy & Portfolio Management / Tractebel Electricity & Gas International

Master Degree of Business Administration, Utkal University, India Bachelor Degree of Commerce, Utkal University, India None None Present • Director / Glow Energy Public Co., Ltd. • Director / Glow Group (Except Glow IPP 3 Co., Ltd. and GHECO - One Co., Ltd.) • Chief Executive Officer / SUEZ Energy International Asia, Middle East & Africa • Director / Tractebel Parts & Repairs FZE 2000-2006 • Director / SUEZ Group


79

10. Mr. Philip De Cnudde (47) Education Sharholding Proportion (Percent) Family Relation with Management 5 years past experience 11. Mr. Anut Chatikavanij (41) Education Sharholding Proportion (Percent) Family Relation with Management 5 years past experience 12. Mr. Brendan G.H. Wauters (38) Education Sharholding Proportion (Percent) Family Relation with Management 5 years past experience Remark :

: : : : : :

Master Degree in Electrical Engineering from Ghent University Operational Management in further Degree from Ghent University General Management Programme CEDEP at INSEAD, Fontainebleau None None Present • Director / Glow Energy Public Co., Ltd. • Director / Glow Group (Expert Glow IPP 3 Co., Ltd. and GHECO - One Co., Ltd.) • Chief Business Controller / SUEZ Energy International

: : : : :

Bachelor Degree from Lehigh University, Pennsylvania, USA Certificate in Director Accreditation Program (DAP), Class 38/2005, Thai Institute of Directors Association (IOD) 135,200 shares (0.01%) Relative of Ms. Sriprapha Sumruatruamphol (Management) Present • Director / Glow Energy Public Co., Ltd. • Director / Glow Group • Director / Leading Edge Glof Co., Ltd. • Director / Hunter Mutaul Fund Co., Ltd. • Director / Operation Power Services Co., Ltd.

: : : : : :

Master Degree in Business Administration, University of Brussels Commercial Engineering Degree of University of Brussels (VUB) Certificate in Director Accreditation Program (DAP), Class 57/2006, Thai Institute of Directors Association (IOD) None None Present • Director / Glow Energy Public Co., Ltd. • Director / Glow Group (Except Glow IPP 3 Co., Ltd. and GHECO - One Co., Ltd.) • Chief Financial Officer, Corporate & Project Finance Department / Tractebel Asia

Glow Group as per mention in this attachment is 1) Glow SPP 2 Co., Ltd. 6) Glow Demin Water Co., Ltd. 2) Glow SPP 3 Co., Ltd. 7) Glow IPP 2 Holding Co., Ltd. 3) Glow Co., Ltd. 8) Glow IPP 3 Co., Ltd. 4) Glow SPP 1 Co., Ltd. 9) GHECO - One Co., Ltd. 5) Glow IPP Co., Ltd.


80

Details of Management Team 1. Mr. Peter Valere Germain Termote (See description at the Board of Director profile no. 2) 2. Mr. John A. Guidry (59) Education : Master Degree in Business Administration (International Business), University of Houston, Texas, USA : Bachelor Degree in Engineering Science – Nuclear University of Texas, USA Sharholding Proportion (Percent) : None Family Relation with Management : None 5 years past experience : January - November 2007 • Executive Vice President and Chief Operating Officer / Glow Energy Public Co., Ltd. • Executive Vice President and Chief Operating Officer / Glow Group 3. Ms. Sriprapha Sumruatruamphol (44) Education : Master of Business Administration, Syracuse University, New York, USA : Bachelor Degree in Science (Chemical Engineering), Michigan Technological University, Michigan, USA Sharholding Proportion (Percent) : 30,000 shares (0.00%) Family Relation with Management : Relative of Mr. Anut Chatikavanij (Director) 5 years past experience : Present • Executive Vice President and Chief Commercial Officer / Glow Energy Public Co., Ltd. • Executive Vice President and Chief Commercial Officer / Glow Group • Director / Eastern Fluid Transport Co., Ltd • Vice Chairman and Director / Association of Private Power Producers 4. Mr. Esa Heiskanen (41) Education : Master Degree in Science (Mechanical Engineering), Helsinki University of Technology, Finland Sharholding Proportion (Percent) : None Family Relation with Management : None 5 years past experience : Present • Executive Vice President and Chief Projects Development & IPP Business / Glow Energy Public Co., Ltd. • Executive Vice President and Chief Projects Development & IPP Business / Glow Group : 2001-2004 • Senior Business Developer / Tractebel Asia, Bangkok Office


81

5. Mr. Pajongwit Pongsivapai (39) Education : Master Degree of Science in Chemical Engineering, Oregon State University, USA : Bachelor Degree in Chemical Engineering, Chulalongkorn University Sharholding Proportion (Percent) : 8,000 Shares (0.00%) Family Relation with Management : None 5 years past experience : Present • Executive Vice President and Chief Operating Officer / Glow Energy Public Co., Ltd. • Executive Vice President and Chief Operating Officer / Glow Group : 2006-2007 • Deputy Chief Operating Officer and Senior Vice President - Operations / Glow Energy Public Co., Ltd. • Deputy Chief Operating Officer and Senior Vice President - Operations / Glow Group : 2003-2004 • Operation Director / S.T.P. & I. Public Co., Ltd. : 1996-2003 • Senior Vice President – Special Project / Glow Group 6. Mr. Suthiwong Kongsiri (37) Education : Master Degree in Business Administration, University of North Carolina, Chapel Hill : Bachelor Degree in Finance & Banking, Assumption University, Bangkok Sharholding Proportion (Percent) : 50,000 Shares (0.00%) Family Relation with Management : None 5 years past experience : Present • Chief Financial Officer and Executive Vice President / Glow Energy Public Co., Ltd. • Chief Financial Officer and Executive Vice President / Glow Group : 2003-2004 • Senior Vice President and Deputy Chief Financial Officer/ Glow Energy Public Co., Ltd. • Senior Vice President and Deputy Chief Financial Officer/ Glow Group 7. Ms. Natnicha Kulcharattham (53) Education : Master Degree in Public Administration, National Institute of Development (NIDA) : Bachelor Degree in Public Relation and Communication Arts, Chulalongkorn Univesity Sharholding Proportion (Percent) : None Family Relation with Management : None 5 years past experience : Present Resigned from the Company on January 1, 2008 : 2005 - 2007 • Senior Vice President - Human Resources and Administration / Glow Energy Public Co.,Ltd. • Senior Vice President - Human Resources and Administration / Glow Group : 1997 -2005 • Human Resources Manager / BlueScope Steel (Thailand) Company Limited


82

8. Mr. Svend Erik Jensen (50) Education : : Sharholding Proportion (Percent) : Family Relation with Management : 5 years past experience : : 9. Mr. Kanit Thangpetch (50) Education : : Sharholding Proportion (Percent) : Family Relation with Management : 5 years past experience : : 10. Mr. Louis Stephen Holub (46) Education : : Sharholding Proportion (Percent) : Family Relation with Management : 5 years past experience : : :

Master Degree in Business Administration, Sydney, Australia Bachelor Degree in Mechanical Engineering, Denmark None None Present • Senior Vice President - Construction & Technical Management / Glow Energy Public Co., Ltd. • Senior Vice President - Construction & Technical Management / Glow Group 2001-2003 • Project Manager / Glow Energy Public Co., Ltd. • Project Manager / Glow SPP 3 Co., Ltd.

Master Degree in Business Administration, Pathumthani University Bachelor Degree in Engineering (Electrical), King Mongkut Institute of Technology (Ladkrabang), Bangkok None None Present • Senior Vice President - Rayong Facilities Management / Glow Energy Public Co., Ltd. • Senior Vice President - Rayong Facilities Management / Glow Group (Except Glow IPP Co., Ltd.) 2002-2006 • General Manager of Operations of Rayong Facilities / Glow Group (Except Glow IPP Co., Ltd.)

United States Navy Education Programs, City College of Chicago, Dundalk Community College American University (Tulane & Arizona State) Degree Accreditation Pending None None Present • Senior Vice President - Operations Support Services / Glow Energy Public Co., Ltd. • Senior Vice President - Operations Support Services / Glow Group 2006-2007 • Senior Vice President - Strategic Initiatives / Glow Energy Public Co., Ltd. • Senior Vice President - Strategic Initiatives / Glow Group • Vice President - GIPP Facility Management / Glow IPP Co., Ltd. 2002-2006 • Senior Vice President - Rayong Facilities Management / Glow Energy Public Co., Ltd. • Senior Vice President - Rayong Facilities Management / Glow Group


83

11. Mr. Michael W. Reiff (45) Education : Diploma of Industrial Management, Industrial Academy Stuttgart, Germany Sharholding Proportion (Percent) : None Family Relation with Management : None 5 years past experience : Present • Senior Vice President and Chief Financial Controller / Glow Energy Public Co., Ltd. • Senior Vice President and Chief Financial Controller / Glow Group : 2004-2006 • Corporate Controller / Johnson Electric, Hong Kong : 2000-2003 • Operations Development Manager / The Coca-Cola Co., Ltd. 12. Mr. Wisit Srinuntawong (45) Education : Master Degree in Business Administration, Bangkok University : Bachelor Degree in Engineering (Electrical Power), King Mongkut Institute of Technology (North Bangkok) Sharholding Proportion (Percent) : None Family Relation with Management : None 5 years past experience : Present • Senior Vice President - Engineering / Glow Energy Public Co., Ltd. • Senior Vice President - Engineering / Glow Group : 1999-2004 • Vice President - Engineering / Glow Energy Public Co., Ltd. • Vice President - Engineering / Glow Group 13. Mr. Narongchai Visutrachai (41) Education : Master Degree in Science (Economics), University of North Texas, USA : Master Degree in Business Administration, Kasetsart University : Bachelor Degree in Political Science (Public Administration), Chulalongkorn University Sharholding Proportion (Percent) : None Family Relation with Management : None 5 years past experience : Present • Senior Vice President - IPP Business & Government Affairs / Glow Energy Public Co., Ltd. • Senior Vice President - IPP Business & Government Affairs / Glow Group 14. Ms. Chamaiporn Soothorntasanapong (47) Education : Master Degree in Liberal Art (Thai – English Translation), Ramkamhang University : Bachelor Degree in Liberal Arts (English), Thammasart University Sharholding Proportion (Percent) : None Family Relation with Management : None 5 years past experience : Present • Vice President - Compliance and Insurance / Glow Energy Public Co., Ltd. • Vice President - Compliance and Insurance / Glow Group


84

15. Ms. Sirichan Chotchaisathit (43) Education : : Sharholding Proportion (Percent) : Family Relation with Management : 5 years past experience : 16. Mr. Prateep Puthamrugsa (43) Education : : Sharholding Proportion (Percent) : Family Relation with Management : 5 years past experience : : 17. Mr. Somchai Klinsuwanmalee (42) Education : Sharholding Proportion (Percent) : Family Relation with Management : 5 years past experience : 18. Ms. Mantana Kunakorn (42) Education : Sharholding Proportion (Percent) : Family Relation with Management : 5 years past experience : : 19. Mr. Renaud Louis Albert Pilleul (41) Education : Sharholding Proportion (Percent) : Family Relation with Management : 5 years past experience : :

Master Degree in Business Administration, Chulalongkorn University Bachelor Degree in Liberal Arts, Thammasart University None None Present • Vice President - Industrial Sales / Glow Energy Public Co., Ltd. • Vice President - Industrial Sales / Glow Group (Except Glow IPP Co., Ltd.)

Master Degree in Public Administration, Pathumthani University Bachelor Degree in Industrial Technology, Srinakarinwirot University None None Present • Vice President - Supply Chain Management / Glow Energy Public Co., Ltd. • Vice President - Supply Chain Management / Glow Group 2000-2006 • Rayong Administration and Supply Chain Manager / Glow Group (Except Glow IPP Co., Ltd.)

Bachelor Degree in Accounting, Chulalongkorn University None None Present • Vice President - Government & Public Affairs / Glow Energy Public Co., ltd. • Vice President - Government & Public Affair / Glow Group

Bachelor Degree in Liberal Arts (Industrial Psychology), Thammasart University None None Present • Vice President - Human Resources and Administration / Glow Energy Public Co., Ltd. • Vice President - Human Resources and Administration / Glow Group 2002-2007 • Assistant Vice President - Human Resources and Administration / Glow Energy Public Co., Ltd. • Assistant Vice President - Human Resources and Administration / Glow Group

Bachelor Degree in Process Engineering, Institut National Polytechnique de Grenoble, France None None Present • Vice President - Industrial Customer Relations / Glow Energy Public Co., Ltd. • Vice President - Industrial Customer Relations / Glow Group 2003-2004 • Project Manager - Phase 4 Stage 1 & 2 / Glow Energy Public Co., Ltd.


85

20. Mr. Jirasek Poomchai (41) Education : : Sharholding Proportion (Percent) : Family Relation with Management : 5 years past experience : : 21. Ms. Suttasinee Pengsupaya (40) Education : : Sharholding Proportion (Percent) : Family Relation with Management : 5 years past experience : 22. Mr. Chaiwut Rattanapornsinchai (40) Education : : Sharholding Proportion (Percent) : Family Relation with Management : 5 years past experience : 23. Ms. Unchana Kittipiyakul (36) Education : : Sharholding Proportion (Percent) : Family Relation with Management : 5 years past experience : :

Master Degree in Business Administration, Thammasart University Bachelor Degree in Science, Kasetsart University None None Present • Vice President - Logistics and Fuel Management / Glow Energy Public Co., Ltd. • Vice President - Logistics and Fuel Management / Glow Group 2001-2002 • Assistant Vice President - Logistics and Fuel Management / Glow Energy Public Co., Ltd. • Assistant Vice President - Logistics and Fuel Management / Glow Group

Master Degree in Science (Accounting), Thammasat University, Bangkok Bachelor Degree in Accounting, Thammasat University, Bangkok None None Present • Vice President - Accounting / Glow Energy Public Co., Ltd. • Vice President - Accounting / Glow Group

Master Degree in Computer Science, Rangsit University Bachelor Degree in Computer Science, Chandrakasem Teacher College None None Present • Vice President - Information of Technology / Glow Energy Public Co., Ltd. • Vice President - Information of Technology / Glow Group

Master Degree in Business Administration, Kasetsart University Bachelor Degree in Accounting, Thammasart University. None None Present • Vice President - Budgeting and Business Controlling / Glow Energy Public Co., Ltd. • Vice President - Budgeting and Business Controlling / Glow Group 2003-2006 • Assistant Vice President - Financial Control / Glow Group Glow Energy Public Co., Ltd. • Assistant Vice President - Financial Control / Glow Group


86

24. Dr. Somgiat Dekrajangpetch (34) Education : : : : Sharholding Proportion (Percent) : Family Relation with Management : 5 years past experience : : 25. Mr. Sirote Vichayabhai (33) Education : : Sharholding Proportion (Percent) : Family Relation with Management : 5 years past experience : : 26. Mr. Akarin Prathuangsit (32) Education : : Sharholding Proportion (Percent) : Family Relation with Management : 5 years past experience : : 27. Mr. Anutarachai Nathalang (44) Education : : Sharholding Proportion (Percent) : Family Relation with Management : 5 years past experience : :

Doctorate Degree in Electrical Engineering (Electrical Power), Iowa State University Master Degree in Economics, Iowa State University Master Degree in Electrical Engineering, Iowa State University Bachelor Degree in Science-Electrical Engineering, Chulalongkorn University None None Present • Vice President - Asset Optimization / Glow Energy Public Co., Ltd. • Vice President - Asset Optimization / Glow Group 2003-2006 • Systems Optimization Manager / Glow Group

Master Degree in Science (International Securities Investment and Banking), University of Reading, England Bachelor Degree in Science (Economics), University of London, England None None Present • Vice President - Finance & Investor Relations / Glow Energy Public Co., Ltd. • Vice President - Finance & Investor Relations / Glow Group 2002-2003 • Assistant Vice President - Finance / Glow Energy Public Co., Ltd. • Assistant Vice President - Finance / Glow Group

Master Degree in Business Administration, Assumption University Bachelor Degree in Engineering (Industrial Engineering), Sirindhorn International Institute of Technology, Thammasat University None None Present • Vice President - Marketing and Business Planning / Glow Energy Public Co., Ltd. • Vice President - Marketing and Business Planning / Glow Group 2003-2004 • Assistant Vice President - Marketing and Business Planning / Glow Energy Public Co., Ltd. • Assistant Vice President - Marketing and Business Planning / Glow Group

Master of Engineering (Electrical), King Mongkut Institute of Technology (Ladkrabang) Bechelor of Science (Physics), Chiangmai University None None Present • Plant Manager / Glow Energy site (phase 1 & 2) 1994-2006 • Operation Planning Manager / Glow Group


87

28. Mr. Apichart Jamjuntr (42) Education : Sharholding Proportion (Percent) : Family Relation with Management : 5 years past experience : : 29. Mr. Apidech Siriphornoppakhun (38) Education : Sharholding Proportion (Percent) : Family Relation with Management : 5 years past experience : : 30. Mr. Suratchai Bangluang (39) Education : Sharholding Proportion (Percent) : Family Relation with Management : 5 years past experience : : Remark :

Bechelor Degree in Engineering (Electronics Engineering), Rajamangala None None Present • Plant Manager / Glow SPP2, Glow SPP3 & Glow Energy 1995-2006 • Operation Manager / Glow SPP2, Glow SPP3 & Glow Energy

Bachelor Degree in Science (Industrial Technology), Rahaphat Institute Chachoengsao, Chachoengsao None None Present • Plant Manager / Glow SPP1 Co., Ltd. 1997-2007 • Operation Manager / Glow SPP1 Co., Ltd.

Bachelor Degree in Electrical Engineering, Mahanakorn University of Technology, Bangkok None None Present • Facility Manager / Glow IPP Co., Ltd. 2003-2006 • Maintenance Manager / Glow Energy Public Co., Ltd., Glow SPP2, Glow SPP3 & Glow Energy

Glow Group as per mention in this attachment is 1) Glow SPP 2 Co., Ltd. 6) Glow Demin Water Co., Ltd. 2) Glow SPP 3 Co., Ltd. 7) Glow IPP 2 Holding Co., Ltd. 3) Glow Co., Ltd. 8) Glow IPP 3 Co., Ltd. 4) Glow SPP 1 Co., Ltd. 9) GHECO - One Co., Ltd. 5) Glow IPP Co., Ltd.


88

Information of management position of company, its subsidiary and associate company as of 31 March 2008

Company name Company Management

Glow Subsidiaries Energy Glow Glow Glow Glow Glow Glow Glow Glow GHECO PCL SPP 2 SPP 3 Co., Ltd. SPP 1 IPP Demin IPP 2 IPP 3 -One Co., Ltd. Co., Ltd. Co., Ltd. Co., Ltd. Water Holding Co., Ltd. Co., Ltd. Co., Ltd. Co., Ltd.

1. Mr. Guy Richelle

X

X

X

X

X

X

X

X

X

/

2. Mr. Peter Valere Germain Termote

//

//

//

//

//

//

//

//

//

/

3. Mr. Kovit Poshyananda

/

/

/

/

/

/

/

/

4. Mr. Vitthaya Vejjajiva

/

/

/

/

/

/

/

/

5. Ms. Supapan Ruttanaporn

/

/

/

/

/

/

/

/

6. Mr. Dirk Achiel Marc Beeuwsaert

/

/

/

/

/

/

/

/

7. Mr. Guido Geeraerts

/

/

/

/

/

/

/

/

8. Mr. Johan De Saeger

/

/

/

/

/

/

/

/

/

/

9. Mr. Rajit Nanda

/

/

/

/

/

/

/

/

/

10. Mr. Philip De Cnudde

/

/

/

/

/

/

/

/

11. Mr. Anut Chatikavanij

/

/

/

/

/

/

/

/

12. Mr. Brendan G.H. Wauters

/

/

/

/

/

/

/

/

13. Ms. Sriprapha Sumruatruamphol

14. Mr. Esa Heiskanen 15. Mr. Pajongwit Pongsivapai 16. Mr. Suthiwong Kongsiri 17. Mr. Svend Erik Jensen

18. Mr. Kanit Thangpetch 19. Mr. Louis Stephen Holub 20. Mr. Michael W. Reiff 21. Mr. Wisit Srinuntawong 22. Mr. Narongchai Visutrachai 23. Ms. Chamaiporn Soonthorntasanapong

24. Ms. Sirichan Chotchaisathit 25. Mr. Prateep Phuthamrugsa 26. Mr. Somchai Klinsuwanmalee 27. Ms. Mantana Kunakorn 28. Mr. Renaud Louis Albert Pilleul 29. Ms. Suttasinee Pengsupaya 30. Mr. Chaiwut Rattanapornsinchai 31. Ms. Unchana Kittipiyakul 32. Dr. Somgiat Dekrajangpetch 33. Mr. Sirote Vichayabhai 34. Mr. Akarin Prathuangsit 35. Mr. Anutarachai Natalang 36. Mr. Apichart Jamjuntr 37. Mr. Apidech Siriphornoppakhun 38. Mr. Suratchai Bangluang Remark / = Director

X = Chairman of the Board // = Chief Executive Officer

/


89

2. Selection of Directors and Management Team Selection of Directors The Company has set up the Nomination and Remuneration Committee whose roles include, amongst others: • the recommendations to the Board of candidates with proper qualifications for the Board to submit for appointment to the annual general shareholders meeting. • seek proposals of individuals for appointment as independent members of the Board. At the meeting of the Shareholders, the following rules and procedures with regards to the voting of directors shall apply: • each shareholder shall have one vote for each share he or she (or it) holds; • each shareholder shall exercise all the votes he or she (or it) holds to elect one or several person(s) to be directors (if any shareholder wishes to vote for several candidates, the votes held by such shareholders shall be equally allotted between all such candidates); and • the candidates receiving the most votes, in descending order, shall be elected directors of the Company until all of the directors’ positions are filled. In the event of a vacancy of a director’s position for reasons other than by retirement in due course, the Board of Directors shall, by a majority vote of not less than three-fourths of the remaining directors, elect a suitably qualified person, who does not possess characteristics that are prohibited under Section 68 of the Public Company Limited Act B.E. 2535. Selection of Management Team The Nomination and Remuneration Committee shall also make recommendations to the Board for the successor to the Chief Executive Officer when considered necessary as well as to develop a succession plan for the Chief Executive Officer that considers both potential internal and external candidates. The Board of Directors of the Company shall select the management teams by taking into consideration experiences, knowledge and skills for management according to the related position selected. For more details on the scope and responsibilities of the Nomination and Remuneration Committee, please refer to section “Nomination and Remuneration Committee.” 3. Remunerations Remunerations of the Board of Directors During the 2007 fiscal year, the total remuneration paid to 12 directors was 3,588,830 Baht

Remuneration of the Management Team

The total remuneration received from the Company by the 30—person management team during the 2007 fiscal year comprised salary and other remuneration such as bonuses and provident fund, totaling 138,892,100 Baht.


90

4. Human Resource Management As of 31 December 2007, total number of employees was 450 persons. Company Head Office

Employee Plants Total

Glow Energy Plc.

-

54

54

Glow Co.,Ltd.

110

135

245

Glow IPP Co.,Ltd.

-

38

38

Glow SPP 1 Co.,Ltd.

-

32

32

Glow SPP 2 Co.,Ltd.

-

57

57

Glow SPP 3 Co.,Ltd.

-

24

24

Glow Demin Water Co.,Ltd

Total

(1)

-

-

-

110

340

450

Remark : (1) Company indicated no employee, receives supports from Glow Co., Ltd.

Employees Remuneration As of 31 December 2007, the total remuneration paid to employees amounted to 485,605,019.87 Baht including salaries, bonuses and provident funds.

The Company and its Subsidiaries’ Policy for Employees

Glow Company believes that our people are the foundation of our success. We employ 450 people in Thailand, at Head Office in Bangkok and Power plants in Rayong and Chonburi. Our employees enjoy a working environment that encourages commitment, teamwork and innovation. This philosophy is supported by the strength of our leadership, our high technical standards and our passion for safety. We work in a safe and satisfying environment. We commit ourselves to being a world class operator of power generation and co-generation facilities and to conducting this core business with full attention to Environmental, Health and Safety concerns that affect our employees, clients and the community. We create value for our shareholders and customers through the commitment and knowledge of our employees. We seek to implement best practices through human resource information systems and HR policies, and standardized procedures. We focus on employee training and development and strengthening our employees’ ability to enhance organization capability. Our major shareholder provides support and guidance in developing best practices for our company. We seek to attract and retain qualified professionals who can adhere to the Glow culture, which is based on communication, courage, adaptability, loyalty, unity and commitment. We support our people to realize their full potential by offering challenging work, project assignment, on-the-job development, formal training and education. We also offer our employees highly competitive remuneration packages, including an attractive range of benefits. Our success comes from our people. We work in a safe and satisfying environment. We choose to treat each other with trust and respect and maintain a healthy balance between work and family life. Our operational excellence, teamwork and ability to deliver product reliability and availability of our generating units are our most valued and rewarding strengths.


91

5. Dividend Policy Dividends may be declared by Glow Energy’s board of directors subject to, in the case of annual dividends, the approval of our shareholders at any annual general meeting. Our declaration of interim dividends does not require shareholder approval. The current policy of our board of directors is to recommend to our shareholders to distribute annual dividends in the amount of not less than 50 per cent of our net income for each year, normalized by excluding unrealized foreign exchange gains and losses and after deduction of all specified reserves, subject to our investment plans and other considerations that our board of directors deems appropriate. Under the PLCA (Public Company Limited Act), we may not make any distribution of dividends other than out of our net income. In addition, no dividends can be paid if our retained earnings are not positive, even if we record net income for the current year. Under the PLCA, we are required to set aside as a legal reserve an amount equal to 5 per cent of our annual net income until our total legal reserve is not less than 10 per cent of our registered capital, which may reduce the amount of net income available for our payment of dividends. As at December 31, 2007, our registered capital was Baht 14,828.7 million and our legal reserve was Baht 1,087.8 million, or 7.3 per cent of our registered capital as at that date. Our total unapproriated retained earnings as at December 31 2007 were Baht 3,342.9 million. At present, the Subsidiary of the Company has no specific policy for distribution of dividends. The Board of Directors of each Subsidiary may consider and recommend to the Shareholders’ Meeting for consideration and approval of the distribution of the dividends.

6. Internal Control The Glow Audit Committee consists of 3 members who are also member of the Company’s Board of Directors. The company’s Internal Audit function, reporting to the Audit Committee and the Company management, has been outsourced to PricewaterhouseCoopers FAS Ltd, who performs internal audits in cooperation with SUEZ Energy International Group internal audit (“SEI IA”). In 2007, the Audit Committee assessed the adequacy of the internal control systems of the Company in order to ensure the effectiveness of all operational and financial controls. The Audit Committee concluded that the Company has adequate and appropriate internal control systems in place, taking into account the current business environment and characteristics. In addition, the Company’s auditors also commented that there were no material deficiencies in the internal control of the Company in accordance with the generally accepted accounting principles.

The Organization and The Environment

• • • •

The organizational structure in place allows the Company’s management team to operate objectively and efficiently by clearly specifying the roles and duties of each person. Comprehensive policies and procedures have been established for all the significant business processes. Every employee has to comply with these policies and procedures within his/her responsibility. A Glow Code of Conduct has been implemented and the SUEZ Ethics Charter has been communicated to all employees of the Company. Since 2005, Glow internal audit has been outsourced to PricewaterhouseCoopers FAS Ltd. Glow Internal Audit formally reports its activities and the internal audit findings to the Company management and to the Audit Committee, at least four times a year. In 2005 and 2006, internal audit focused approximately seventy five percent of their time and effort on financial reporting on internal controls.


92

Risk Management Measurement

The Company is also subject to SUEZ Energy International Group internal audit (“SEI IA”). Annually, SEI IA will determine their audit priorities for the SUEZ Energy International Group. The Company, being a significant subsidiary in the Group, is subject to an operational audit from SEI IA at least once per year. During 2007, SEI IA performed internal audits on the corporate governance framework and financial risk management. SEI IA and the Company’s outsourced Internal Audit function work closely together and the Company’s Internal Audit is responsible to coordinate and follow-up the implementation of all audit recommendations.

Business risks which might have an impact on the business to achieve its objectives are formally assessed twice a year, taking into consideration the present and future risks and covering strategic, financial, operational and compliance risks.

The impact and likelihood of each risk and its risk factors are identified and assessed.

Risk responses and measurements are developed to reduce risks, and these risks are continuously monitored.

Risks are discussed during Board of Directors’ meetings and monthly management meetings.

Operation Controls of the Management

• •

An Internal and External Power Of Attorney (“POA”) have been established and communicated to all employees of the Company. Both documents are updated when required and are approved by the Board of Directors. The POA clearly specifies the authorization limits for capital and operational spending per function. For other transactions with major shareholders, directors, management, staff or others persons related to those parties, the Company has established a strict guideline to prevent any conflict of interest, by taking into consideration the optimization of the Company’s value to its shareholders and other stakeholders. In addition, all related party transactions should be done on an arms-length basis, the same basis applicable to third parties transactions.

Information and Communication Systems • • • •

Important and reliable business and financial information is available for the Company’s directors to assist them in decision making. The Company’s directors receive an invitation and agenda together with all the relevant supporting documentation to the agenda. The proposed agenda, together with information on possible impact towards the Company as well as all other information that is required for consideration purposes, is distributed before the meeting within the minimum period of time prescribed by law. Moreover, the minutes of meeting of the Board of Directors contain all necessary details so that the shareholders can inspect the appropriateness of the operations of the Company’s Board. The Company maintains and retains all documentation that is used in recording of accounting transactions as well as all other relevant supporting documentation in an organized manner and in compliance with laws regulating the documentation retention period. The Company applies accounting policies in accordance with Thai Accounting Standards (“TAS”) and other international Generally Accepted Accounting Principles, where appropriate, and which are applicable and aligned with the characteristics of the Company’s business.


93

Monitoring System

• • •

LSF – French Law on Internal Controls

• • • • • • •

Glow Internal Audit reports all material internal control deficiencies to Glow management and to the Audit Committee. The Audit Committee evaluates the deficiencies and assesses the adequacy of the remediation plans in place and reports on such findings to the Company’s Board of Directors for their notification within a reasonable period of time. The Company’s directors monitored and compared the operational performance of the Company, as well as those of management against agreed objectives, key performance indicators and budgets. The Company’s internal control systems are audited on a continuous basis. Each year, the Company agrees on an Internal Audit Plan based on identified high risk areas to be included in the internal audit’s planning.

Since a couple of years, principles of corporate governance and the internal control requirements have been undergoing a deep reform. In September 2003, the SUEZ Group launched the Control Disclosure Program (“CODIS”) in response to the increasing regulatory pressure for internal control and disclosure requirements, such as the French Law on Internal Controls (LSF). Beyond mere compliance, the Program was seen as an opportunity to add value by reinforcing the financial reporting processes as well as the system of internal control within the Group. For Glow Group, Glow Energy, Glow SPP3 and Glow IPP were identified in the scope of the CODIS program. The CODIS program required a significant effort from Glow Group, especially during the last three years. All processes and related internal controls with a potential relevant impact on the financial statements have been documented and the internal controls have been assessed by company management both on design effectiveness (completeness of documentation of the controls) and operating effectiveness (effective execution of the internal control). Among the documented processes are accounting management, asset management, sales management, procurement management, operations management, corporate governance and IT management. A selection of the most critical internal controls (Key Controls) has been extensively tested by both Glow Internal Audit and SEI Internal Audit as well as by the External Auditor. These tests included assessment of design effectiveness and operating effectiveness. For all deficiencies identified during these tests, Glow management has developed the necessary remediation plans. The implementation of the remediation actions has been closely monitored and has been subjected to ongoing testing to ensure effective implementation. On February 5th 2008, the Chief Executive Office (“CEO”) and Chief Financial Officer (“CFO”) of the Company have signed-off the Glow CODIS Attestation for the Accounting Year 2007 to SEI management. Currently, the company is in the process of further embedding the internal control culture within the organization.


94

Related Party Transactions

Detail of Related Party Transactions The Company has business transactions with its subsidiaries, associated companies and related companies as detailed in the note to the financial statements No. 23. In addition, the Company and its six subsidiaries, comprising Glow Co., Ltd., Glow SPP 1 Co., Ltd., Glow SPP 2 Co., Ltd., Glow SPP 3 Co., Ltd., Glow IPP Co., Ltd., and Glow Demin Water Co., Ltd. (“Glow Group”) jointly entered into a Support Services Agreement and an Engineering Services Agreement on May 3, 2005 with SUEZ-Tractebel S.A. (“SUEZ”), whereby SUEZ shall provide consulting services in respect of engineering, operational, financial and auditing systems, investments, project financing, insurance, etc. The service fee is based on the reference market rate and shall be in Euro currency. The service agreements will be determined in an hourly rate dependent on the type of services. The term of the agreements is 5 years from the execution date, automatically renewed for a successive one- year term unless termination is notified by either party. Nevertheless, the agreements shall be terminated on the date when SUEZ holds directly or indirectly less than 25% of the shares of Glow Group. The related transactions between the Company and the persons who might have conflict of interest for the past year have been executed by taking into consideration the maximum benefit of the Company, and the Audit Committee has considered and agreed that such transactions were normal course of business and that there was no benefit transfer between the Company and the persons who might have the conflict of interest. In addition, price fixing, fee rate and interest rate of the transactions were all in accordance with general trade conditions. Price fixing was comparable to the market price and competitive mechanisms or was the reasonable price and did not have conditions that differed from making transactions with other third parties.

Necessity and reasonableness of the Transactions


95

Approval Procedures of Related Transactions Since the related transactions of the Company were in accordance with the normal course of business operations, just like the purchase, sales and/or services provided to the other unrelated business, the approval procedures are in accordance with the regulations of the Company, the subsidiaries, the associated companies and the related companies. In addition, for the consideration of the related transactions between the Company and the persons who might have conflict of interest and are a shareholder or the management of such company, such shareholder or such management shall not take part in the approval process.

Policy and Trend of Related Transaction in the Future The Company anticipates that there will be related transactions incurred in the future because the related transactions of the Company have been done in accordance with the normal business of the Company and the Company has the policy to operate such related transactions for the maximum benefit of the Company. For the related transactions in the future, the Company shall comply with the laws concerning securities and stock exchange and the regulations, announcements, orders or requirements of the Stock Exchange of Thailand as well as with the requirements concerning the disclosure of the related transactions and the acquisition and disposal of the material assets of the Company including compliance with the accounting standards specified by the Accountants and the Certified Public Auditors Association of Thailand and Federation of Accounting Professionals. However, if there is a related transaction of the Company with a person who might have conflict of interest or the stakeholders or who might have conflict of interest in the future, the Company shall appoint the Audit Committee to give an opinion on the necessity and reasonableness of such transaction and the appropriateness of price fixing of other items in order to be in accordance with the general market price and with the conditions that are not different from other third parties or at prime cost. In addition, the Company shall disclose the related transactions in the note to the financial statements, which has been audited by the auditors of the Company.

Auditor’s remuneration for the period of January 1, 2007 – December 31, 2007 consists of: -

(Unit: Baht)

Audit fee

The company

Subsidiaries

1,869,310.00

5,192,690.00

- Review of Financial ratio

61,440.00

- Review of Package

1,021,116.00

303,372.00

200,000.00

100,000.00

Non-audit fee

- Professional fee for the additional scope of work - Other

-

-

-


96

Management’s Discussion and Analysis

Management’s Discussion and Analysis of financial condition and results of operations OVERVIEW Glow Energy Public Company Limited and its subsidiaries are one of the largest private electricity generators and providers of industrial utilities in Thailand. We operate IPP and cogeneration facilities (most of which operate as SPPs under Thailand’s SPP program) and our core business is to produce and supply electricity to EGAT and electricity and steam to industrial customers in the MIE Area. As of December 31, 2007, we had a total generating capacity of 1,708 MW of electricity and 967 tons per hour of steam.


97

We recorded total revenues of Baht 33,011.3 million in 2007, a 2.9 per cent decrease from Baht 33,991.9 million in 2006. Our normalized net profit (net profit excluding unrealized exchange gains/losses), which is the basis used to determine our dividend distribution, was Baht 4,313.7 million in 2007, a 6.3 per cent decrease from Baht 4,602.0 million in 2006. As of December 31, 2007, we had total assets of Baht 54,023.7 million and total liabilities of Baht 25,052.8 million.

REVENUES We derive our revenues primarily from sales of electricity to EGAT and sales of electricity, steam, clarified and demineralized water to industrial users in the MIE Area. The following table breaks down our revenues by source for the periods indicated:

Revenues

Year to Date Ended December 31, 2007

2006

(Baht millions)

(%)

Difference

(Baht millions) (%)

Revenues from Sales of Goods and Rendering of Services Electricity Sales to EGAT by IPP 10,161.8 Sales to EGAT by SPPs 9,323.5 Sales to Industrial Customers 8,224.8 Total 27,710.1

30.8 28.2 24.9 83.9

10,705.0 9,640.6 7,877.2 28,222.8

Steam Processed water Total

12.8 1.0 97.7

4,029.9 11.9 340.4 1.0 32,593.1 96.0

Other Income

Total Revenues

4,219.2 336.6 32,265.9

745.4 2.3 33,011.3

100.0

(%)

(543.2) (317.1) 347.6 (512.8)

(5.1) (3.3) 4.4 (1.8)

189.3 (3.8) (327.3)

4.7 (1.1) (1.0)

1,398.7 4.0 (653.3)

(46.7)

33,991.8

31.5 28.4 23.2 83.1

(Baht millions)

100.0

(980.6)

(2.9)

Our revenues are in part driven by the volumes of electricity and industrial utilities that we produce and sell to our industrial customers in MIE Area. The following table sets out our volumes of electricity and industrial utilities sold for the periods indicated:


98

Volumes Sold Electricity dispatch (GWh) To EGAT by IPP To EGAT by SPPs To Industrial Customers Total Steam (thousands of tons) Processed water (thousands of cubic meters)

Year to Date Ended December 31, 2007 5,175.4 3,949.6 3,323.3 12,448.3 5,696.5 11,262.4

2006

Difference

(%)

5,328.1 (152.7) (2.9) 3,994.6 (45.0) (1.1) 3,066.9 256.4 8.4 12,389.6

58.7

0.5

5,483.4

213.2

3.9

12,230.3

(968.0)

(7.9)

REVENUES FROM SALES OF GOODS

Electricity Sales to EGAT We sell electricity to EGAT under our EGAT power purchase agreements. We are currently party to one IPP power purchase agreement, in respect of 713 MW of electricity and a total of 8 SPP power purchase agreements, in respect of an aggregate of 590 MW of electricity. Electricity Sales to Industrial Customers We sell electricity to our industrial customers under our power supply agreements. As of December 31, 2007, we were party to a total of 35 power supply agreements with 27 industrial customers in respect of an aggregate of 440 MW of electricity. Steam Sales We sell steam to our industrial customers under our steam supply agreements. As of December 31, 2007, we were party to a total of 23 steam supply agreements with 17 industrial customers in respect of an aggregate of 736 tons per hour of steam. Processed Water Sales We sell clarified water and demineralized water to our industrial customers under our water supply agreements. As of December 31, 2007, we were party to a total of 13 water supply agreements with 9 customers in respect of an aggregate of 1,549 cubic meters per hour of water.


99

EXPENSES Our expenses consist of cost of sales of goods and selling and administrative expenses. The following table sets out the different components of our expenses by their amount and as a percentage of our total expenses for the periods indicated:

Expenses

Year to Date Ended December 31, 2007 (Baht millions)

2006 (%)

(Baht millions) (%)

Difference (Baht millions)

(%)

Cost of Sales of Goods Fuel Natural Gas Coal Diesel Maintenance Depreciation/Amortization Other Total Cost of Sales of Goods

19,967.9 74.6 19,640.9 73.2 326.9 1.7 1,396.7 5.2 1,550.4 5.8 (153.7) (9.9) 27.0 0.1 55.7 0.2 (28.7) (51.5) 786.1 2.9 699.0 2.6 87.1 12.5 2,925.3 10.9 2,976.2 11.1 (50.9) (1.7) 1,161.7 4.3 1,248.4 4.7 (86.7) (7.0) 26,264.7 98.1 26,170.7 97.6 94.1 0.4

Selling and Adminstrative Expenses Depreciation/Amortization Financial Expenses General Total Selling and Administrative Expenses Exchange Loss Total Expenses

25.5 0.1 27.3 0.1 (1.8) (6.5) 81.4 0.3 98.6 0.4 (17.2) (17.4) 410.8 1.5 531.1 2.0 (120.3) (22.6) 517.7 1.9 656.9 2.4 (139.2) (21.2) 0 0 0 0 0 0 26,782.4 100.0 26,827.5 100.0 (45.1) (0.2)

The following table shows a breakdown of our costs for Glow IPP, on one hand, and for our cogeneration facilities, on the other:


100

IPP and Cogeneration Facilities Cost of Sales of Goods Breakdown(1) Glow IPP Natural Gas Coal Maintenance Depreciation/Amortization Others Total Cost of Sales

Year to Date Ended December 31, 2007 (Baht millions)

2006 (%)

Difference

(Baht millions) (%)

7,213.6 83.8 17.4 0.2 84.3 1.0 1,109.1 12.9 180.6 2.1 8,604.9 100.0

Cogeneration Facilities Natural Gas Coal Diesel Maintenance Depreciation/Amortization Others Total Cost of Sales

12,754.3 72.2 1,396.7 7.9 9.6 0.1 701.8 4.0 1,816.3 10.3 981.0 5.6 17,659.8 100.0

(Baht millions)

(%)

7,396.4 83.6 (182.9) (2.5) 49.0 0.6 (31.6) (64.5) 67.9 0.8 16.4 24.2 1,137.2 12.9 (28.2) (2.5) 192.7 2.2 (12.0) (6.3) 8,843.2 100.0 (238.3) (2.7)

12,244.5 70.7 509.8 4.2 1,550.4 9.0 (153.7) (9.9) 6.7 0.0 2.9 43.6 631.1 3.6 70.7 11.2 1,839.0 10.6 (22.7) (1.2) 1,055.7 6.1 (74.7) (7.1) 17,327.5 100.0 332.3 1.9

Note: (1) The data presented herein as the cost of sales of our cogeneration facilities is our consolidated financial results less the results of Glow IPP. In fact, certain of these amounts are attributable to portions of our business, which are not technically our cogeneration facilities, although these amounts represent only a small portion thereof.

COST OF SALES OF GOODS

Fuel

The principal fuels that we use to generate electricity and steam are natural gas and coal. Purchases of natural gas constitute our single largest operating expense, accounting for 74.6 per cent of our total expenses in 2007. The following table sets out our average gas costs for the periods indicate: Average Effective Cost of Natural Gas(1) Average cost To Glow IPP To Cogeneration facilities(2) Note:

Year to Date Ended December 31,

2007

2006

(Bt/mmBTU)

(Bt/mmBTU)

(Bt/mmBTU)

202.00 208.13

201.87 207.35

0.14 0.79

Difference (%)

0.1 0.4

(1) These are not our actual gas prices, but are derived by taking our total natural gas expenses and dividing by total fuel consumption of the facilities for the periods presented. (2) This is a “blended� rate, reflecting principally prices paid to PTT (i) by our cogeneration facilities for gas used to supply electricity to EGAT and industrial customers, (ii) for gas used to fire boilers to generate steam for industrial customers. Each of the prices set out in (i) and (ii) are different. We also purchase small amounts of tail gas from another Thai supplier, which prices are separate and are also factored into the foregoing rates.


101

Purchases of coal accounted for 5.2 per cent of our total expenses in 2007. The following table sets out average coal costs for the periods indicated:

Average Cost of Coal

coal price @ 6,700 kcal/kg(1) Reference Freight costs(2)

Year to Date Ended December 31,

2007

2006

($/ton)

($/ton)

($/ton)

Difference

48.21 11.28

48.11 9.55

0.10 1.73

(%) 0.2 18.1

Note: (1) These are not our actual coal prices, which are subject to various adjustments under the terms of our coal supply contracts, but a benchmark provided to illustrate the general movements in coal prices over the periods presented. (2) These reflect our actual freight and insurance costs.

The key determinants of our fuel expenses are the amounts of electricity and steam produced by our facilities and the efficiency with which we are able to generate such products. The following table sets out the energy production levels and heat rates of our facilities for the periods indicated:

Production and Heat Rates(1) Glow IPP Equivalent energy production (GWh) Fuel consumption (mmBTU, HHV) Heat rate (BTU/kWhe, HHV) Cogeneration facilities Allocated energy production (GWh equivalent)(2) Gas-fired cogeneration facilities Coal-fired cogeneration facility Fuel consumption (mmBTU, HHV) Gas-fired cogeneration facilities Coal-fired cogeneration facility Allocated heat rates (BTU/kWhe, HHV) Gas-fired cogeneration facilities Coal-fired cogeneration facility(3) Note:

Year to Date Ended December 31, 2007

5,175 35,742,561 6,906

6,950 1,693

61,201,856 17,185,749 8,806 10,202

2006 5,328 36,737,712 6,895

6,672 1,700

58,950,657 17,431,948 8,835 10,285

(1) We present an “allocated” heat rate, which is a deemed heat rate for our cogeneration facilities that we derive by dividing the total fuel energy consumption of such facilities over a specified period of time by the energy produced during such period. This is not a straightforward exercise, particularly with respect of our Glow SPP 2/SPP 3 hybrid facility, where, for purposes of such calculation, we are required to “allocate” the amount of energy produced using steam and the amount of energy used producing gas. We make this allocation on the basis of the contribution of each energy source to total energy input, which involves subjective judgments and the use of simplifying assumptions. (2) Includes production of electricity and steam. For these purposes, steam has been converted into MW at a deemed equivalent electrical energy value. (3) CFB start-up gas is charged to the coal heat rates for purposes of the figures presented in this table.


102

Maintenance Expenses

The following table sets forth a breakdown of our maintenance costs for the periods indicated:

Maintenance Costs Glow IPP Cogeneration facilities

Year to Date Ended December 31,

2007

2006

(Baht millions)

(Baht millions)

84.3 701.8

67.9 631.1

Difference (Baht millions)

(%)

16.4 70.7

24.2 11.2

RESULTS OF OPERATIONS Year 2007 compared to Year 2006 Revenues Revenues from sales of goods and the rendering of services was Baht 33,011.3 million in 2007, a 2.9 per cent decrease from Baht 33,991.9 million in 2006. The decrease is attributable to the following factors: • Sales of electricity to EGAT by Glow IPP amounted to Baht 10,161.8 million in 2007, a 5.1 per cent decrease from Baht 10,705.0 million in 2006. This decrease was principally caused by a lower capacity payment from EGAT due to the appreciation of Thai Baht and by a lower availability due to inspection and maintenance outage in 2007. The Thai baht appreciated by 8.5 per cent from 37.86 Baht per US Dollar in 2006 to 34.64 Baht per US Dollar in 2007. Plant availability was at 94.6 per cent in 2007 versus 97.5 per cent last year. • Sales of electricity to EGAT by our cogeneration facilities amounted to Baht 9,323.5 million in 2007, a 3.3 per cent decrease from Baht 9,640.6 million in 2006. This decrease was principally caused by the maintenance outage at Glow SPP3 and a stronger Thai Baht in 2007 compared to 2006. • Sales of electricity to industrial customers by our cogeneration facilities amounted to Baht 8,224.8 million in 2007, a 4.4 per cent increase from Baht 7,877.2 million in 2006. This increase was principally due to increases in volumes of electricity sold from new contracts starting in 2007. The electricity volume sold to industrial customers grew 8.4 per cent year on year but the selling price decreased, mainly due to decreases in the FT component of the PEA tariff (which is the principal index for sales prices). The FT decreased by 7.76 satang or a decrease of 9.9 per cent year on year, while the base tariff remained unchanged. • Sales of steam to industrial customers by our cogeneration facilities amounted to Baht 4,219.2 million in 2007, a 4.7 per cent increase from Baht 4,029.9 million in 2006. This increase was principally because of increases in steam sales volume, which grew 3.9 per cent year on year. • Sales of other products and services by our cogeneration facilities amounted to Baht 336.6 million in 2007, a 1.1 per cent decrease from Baht 340.4 million in 2006. This decrease was due to a lower selling volume of processed water as a result of customers’ maintenance outage. Our other income consists mostly of revenue from net exchange gains, interest income and others.


103

There was a net exchange gain in 2007 amounting to Baht 533.2 million, a decrease of Baht 623.1 million from Baht 1,156.3 million in 2006. This exchange gain is derived mainly from the US dollar denominated debt in Glow IPP, which is being served by the US dollar linked revenue from sales of electricity to EGAT. We recognized interest income of Baht 122.7 million in 2007, a decrease of Baht 51.0 million from Baht 173.7 million in 2006. Our interest income in 2007 was principally attributable to interest earned on cash held in the form of deposits, instruments and in reserve accounts under our project financing agreements. Our interest income in the year 2006 was principally attributable to the same sources. The interest rate on deposits had decreased over the year while at the same time the company is maintaining less cash balance. Others income in 2007 amounted to Baht 89.5 million, and consisted principally of revaluation of spare parts. Others in the year 2006 amounted to Baht 68.8 million, and consisted principally of proceeds from sales of unused spare parts remaining from the previous Long Term Service Agreement. As a result of the foregoing, total revenues in 2007 amounted to Baht 33,011.3 million, a 2.9 per cent decrease from Baht 33,991.9 million in 2006.

Expenses Cost of sales of goods was Baht 26,264.7 million in 2007, a 0.4 per cent increase from Baht 26,170.7 million in 2006, which increase is attributable to the following factors: Glow IPP • Glow IPP’s cost of natural gas was Baht 7,213.6 million in 2007, a 2.5 per cent decrease from Baht 7,396.4 million in the year 2006. This decrease was principally because of less fuel consumption due to lower availablility in 2007. • Glow IPP’s cost of diesel was Baht 17.4 million in 2007, compared to Baht 49.0 million in 2006. This decrease was due to lower diesel dispatch by EGAT compared to the previous year. • Glow IPP’s maintenance costs were Baht 84.3 million in 2007, compared to Baht 67.9 million in 2006. The higher maintenance costs can mainly be attributed to A and B inspections performed on the gas and steam turbines in Q4 2007. • Glow IPP’s depreciation and amortization costs were Baht 1,109.1 million in 2007, a 2.5 per cent decrease from Baht 1,137.2 million in 2006. • Glow IPP’s other costs of sales of goods were Baht 180.6 million in 2007, a 6.3 per cent decrease from Baht 192.7 million in 2006. Glow IPP’s other costs of sales of goods consist mainly of water, chemicals, and general overhead costs, where overhead costs decreased slightly year on year. Cogeneration facilities • Our cogeneration facilities’ cost of natural gas was Baht 12,754.3 million in 2007, a 4.2 per cent increase from Baht 12,244.5 million in 2006. This increase was principally due to increases in the volumes of electricity sold to industrial customers. • Our cogeneration facilities’ cost of coal was Baht 1,396.7 million in 2007, a 9.9 per cent decrease from Baht 1,550.4 million in 2006. The coal consumption reduced by 1.4 per cent since there was a major inspection of the coal facility. Although the total coal price in USD CIF increased by 4.0 per cent, the total coal price in THB CIF decreased by 4.8


104

per cent as a result of the stronger Thai Baht. Coal price (USD FOB) increased by 0.2 per cent and freight price (USD) increased by 18.1 per cent.

• •

Our cogeneration facilities’ maintenance costs were Baht 701.8 million in 2007, a 11.2 per cent increase from Baht 631.1 million in 2006, mainly due to the A and B inspections at Glow Energy and Glow SPP1. Our cogeneration facilities’ depreciation and amortization costs were Baht 1,816.3 million in 2007, a 1.2 per cent decrease from Baht 1,839.0 million in 2006.

• Our cogeneration facilities’ other costs of sales of goods were Baht 981.0 million in 2007, a 7.1 per cent decrease from Baht 1,055.7 million in 2006, since in 2006 we wrote off a gas engine for Baht 65 million and in 2007 we wrote off development costs totalling Baht 28 million for our gas IPP bid. Selling and administrative expenses in 2007 amounted to Baht 517.7 million, a 21.2 per cent decrease from Baht 656.9 million in 2006. This was attributable to the following factors: • Depreciation and amortization amounted to Baht 25.5 million in 2007, a 6.5 per cent decrease from Baht 27.3 million in 2006. • Financial expenses amounted to Baht 81.4 million in 2007, a 17.4 per cent decrease from Baht 98.6 million in 2006. This decrease can be mainly attributed to lower guarantee fee under the Glow IPP loan facility. • General selling and administrative expenses amounted to Baht 410.8 million in 2007, a 22.6 per cent decrease from Baht 531.1 million in 2006. This decrease was due to costs associated with the third party expenses for HR and office administration costs and consultant fees. As a result of the foregoing, our total expenses in the 2007 were Baht 26,782.4 million, a 0.2 per cent decrease from Baht 26,827.5 million in 2006. Profit Before Interest Expenses and Income Tax As a result of the foregoing, our profit before interest expenses and income tax in 2007 was Baht 6,228.9 million, a 13.1 per cent decrease from Baht 7,164.3 million in 2006. Interest Expenses Our interest expenses in 2007 were Baht 1,112.6 million, a decrease of 13.5 per cent from Baht 1,285.6 million in 2006. This decrease was principally attributable to the reduction of average interest cost and from lower net outstanding debt at Glow Energy.


105

Income Tax Expenses Our income tax expenses in 2007 were Baht 276.5 million, an increase of Baht 99.2 million from Baht 177.3 million in 2006. Our income tax expenses in 2007 were principally attributable to taxable income at Glow Energy, which is out of its BOI full tax exemption period. Profit After Tax As a result of the foregoing, our profit after tax in 2007 amounted to Baht 4,839.7 million, a 15.1 per cent decrease from Baht 5,701.5 million in 2006. Net Profit of Minority Interest Net profit of minority interest in 2007 was Baht 57.0 million from Baht 105.1 million in 2006. This decrease was principally due to the lower revenue of Glow IPP compared to 2006 (which is the company representing most of the minority interest in our group companies). Net Profit As a result of the foregoing, our net profit in 2007 was Baht 4,782.8 million, a 14.5 per cent decrease from Baht 5,596.4 million in 2006. Normalized Net Profit In 2007, our net profit excluding Baht 469.0 million unrealized foreign exchange gains, was Baht 4,313.7 million, a 6.3 per cent decrease from Baht 4,602.0 million in 2006. This normalized net profit is the basis used to determine our dividend distribution.


106

Audit Committee's Report

To: The Shareholders

The Audit Committee is composed of three independent directors:

• Mr. Kovit Poshyananda

Chairman

• Mr. Vitthaya Vejjajiva

Member; and

• Ms. Supapun Ruttanaporn

Member

Glow Energy Public Company Limited (“the Company”)

The Audit Committee was appointed for a three-year term, commencing on 18 April 2005. The internal audit function has been outsourced to PricewaterhouseCoopers who acts as the audit committee secretary. During the period ended 31 December 2007, the Audit Committee held seven meetings and performed their duties and responsibilities in accordance with the Audit Committee Charter. The principal responsibilities during the period were as follows:

1. Independently reviewed the interim and annual financial statements by coordinating with the external auditors and related management and proposed for the Board’s approval.

2. Reviewed the adequacy and effectiveness of the internal control systems and the internal audit function by coordinating with the external auditors and internal auditors.

3. Reviewed compliance with the Securities and Exchange Act, Stock Exchange of Thailand regulations, and any other relevant laws of Thailand.

4. Considered and advised on the appointment of the external auditors including the audit fee.

5. Reviewed and approved the internal audit plan and assess the performance of the outsourced internal audit.

6. Reviewed company risks as identified by the internal auditor and management, and also review that appropriate risk management is employed by top management.

7. Considered the accuracy and sufficiency of the company’s disclosure of information on connected transactions or potential conflicts of interest.

The Audit Committee is of the view that the company recognises the importance of conducting its business in accordance with the Stock Exchange of Thailand’s Principles of Good Governance, as evidenced by a process to review all the Corporate Governance Policies to ensure they are compliant with all the SET Principles and include relevant best practices. In addition, the Audit Committee has been given the responsibility associated with good Corporate Governance.


The company has a good and effective internal control system, as the management of the company recognises the importance of such. In addition, as a subsidiary of a company listed overseas, the company is required to comply with the internal control requirements of the French Law (Loi de Sécurité Financière - “LSF”) and the European Directive that will be applicable in 2008. The LSF French Law requires that the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) of SUEZ, the major shareholder of Glow, to attest on the quality of internal control over financial reporting for the year-end 2007 Financial Statements. In order to support their signature, SUEZ is requesting a back-up attestation from the CEO and CFO of the Company. Furthermore, the company’s senior management has an ongoing commitment to add value to the company for the benefit of all stakeholders. The Audit Committee proposed the appointment of Deloitte Touche Tohmatsu Jaiyos Audit Co.,Ltd as the external auditor of the company for the period ending 31 December 2008 and proposed that the Board of Directors request that the meeting of the company’s shareholders for the year 2007 consider appointing Ms. Thanawan Anuratbodee, CPA registration no. 3440 or Mr. Niti Jungnitnirundr, CPA registration no. 3809 or Ms. Somporn Dulyavit, CPA registration no. 3769 of Deloitte Touche Tohmatsu Jaiyos Audit Co.,Ltd as the external auditors of the company as well as the determination of the audit fee.

Mr. Kovit Poshyananda Chairman of the Audit Committee Glow Energy Public Company Limited


GLOW ENERGY PUBLIC COMPANY LIMITED AND SUBSIDIARIES

Financial Statements


109

Report Of The Independent Certified Public Accountants

TO THE SHAREHOLDERS AND THE BOARD OF DIRECTORS GLOW ENERGY PUBLIC COMPANY LIMITED We have audited the consolidated balance sheets of Glow Energy Public Company Limited and its subsidiaries and the separate balance sheets of Glow Energy Public Company Limited as at December 31, 2007 and 2006, and the related consolidated and separate statements of income, changes in shareholders' equity and cash flows for the years then ended. These financial statements are the responsibility of the Company's management as to their correctness and completeness of the presentation. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance as to whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the aforementioned consolidated and separate financial statements present fairly, in all material respects, the financial position of Glow Energy Public Company Limited and its subsidiaries and of Glow Energy Public Company Limited, as at December 31, 2007 and 2006, and the results of operations and cash flows for the years then ended in accordance with generally accepted accounting principles. Without qualifying our opinion, as discussed in Note 1.2 to the financial statements, for the year ended December 31, 2007, the Company changed its accounting policy for investments in subsidiaries from the equity method to the cost method for the separate financial statements to be in compliance with the Notification of Federation of Accounting Professions, and restated the separate financial statements for the year ended December 31, 2006 for the change in such accounting policy. Chongchitt Leekbhai Certified Public Accountant (Thailand) Registration No. 2649 DELOITTE TOUCHE TOHMATSU JAIYOS AUDIT CO., LTD. BANGKOK January 28, 2008


110

Balance Sheets

GLOW ENERGY PUBLIC COMPANY LIMITED AND SUBSIDIARIES As At December 31, 2007 And 2006

Unit : Baht

Note

Consolidated 2007

The Separate financial statements �Restated�

2006

2007

2006

ASSETS CURRENT ASSETS Cash and cash equivalents

5

4,042,573,667

4,367,969,055

187,428,600

771,124,225

Current investments

6

1,710,093,615

1,770,519,781

653,598,524

650,875,854

7, 23

4,569,233,694

4,764,759,471

1,206,856,476

Trade accounts receivable, net Advances to related parties

23

Interest receivable from related parties

23 -

Inventories, net

8

2,767,890 -

1,660,961,042

- 1,637,974,601

1,212,466,253

172,531,930

19,320,313

30,733,644

30,733,644

245,045,789

217,425,747

Other current assets

Prepaid expenses

139,049,485

157,667,488

37,436,932

44,179,801

197,218,410

217,619,658

19,057,847

17,804,060

131,739,257

122,920,884

43,131,911

28,145,260

12,453,637,060

13,039,430,938

2,595,821,653

2,992,075,157

Advance payment

Others

Total Current Assets

NON-CURRENT ASSETS

Investments in subsidiaries using the cost method Long-term investments in other company

Long-term loans to related parties

9

-

-

1,500,000

1,500,000

10, 23 -

Property, plant and equipment, net

11

Other non-current assets, net

12

Total Non-Current Assets

40,861,674,350 706,840,983

- 40,992,055,222 576,310,771

19,774,948,743 1,500,000 6,015,000,000 10,244,087,368 50,720,647

19,490,733,681 1,500,000 6,015,000,000

8,534,157,480 25,763,224

41,570,015,333

41,569,865,993

36,086,256,758

34,067,154,385

54,023,652,393

54,609,296,931

38,682,078,411

37,059,229,542

TOTAL ASSETS

Notes to the financial statements form an integral part of these statements


111

Balance Sheets

(Continued)

GLOW ENERGY PUBLIC COMPANY LIMITED AND SUBSIDIARIES As At December 31, 2007 And 2006

Unit : Baht

Note

Consolidated 2007

The Separate financial statements ”Restated”

2006

2007

2006

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES Trade accounts payable

23

2,793,699,618

3,822,852,193

825,555,320

Current portion of finance lease payables

13

38,537,672

16,376,197

5,080,985

Current portion of long-term loans

14

717,675,588

865,048,652

-

Current portion of convertible debentures

15

-

Current portion of debentures

16

2,600,000,000

2,600,000,000

2,600,000,000

2,600,000,000

Advances from related parties

23

20,398,027

19,086,217

45,112,783

6,840,862

1,497,674 -

1,381,900,274 4,379,565 - 1,497,674

Other current liabilities Other payables

Accounts payable - acquisition of assets

55,217,120 49,588,104

11,498,721

4,087,023

131,356,097

106,660,955

65,874,149

Accrued interest expense

128,646,595

174,713,961

110,589,662

Accrued expenses

314,731,734

350,852,582

111,125,822 91,380,729

Value added tax payable

132,104,242

209,735,133

Corporate income tax payable

71,044,281

Others

722,045,371

639,294,253

7,725,456,345

8,909,865,817

Total Current Liabilities

54,159,896

19,524,759 149,074,820

32,607,723

41,699,350

38,842,041

54,159,896

585,584,911 511,179,185 4,431,872,117

4,865,724,137

NON-CURRENT LIABILITIES Finance lease payables

13

39,471,693

22,069,582

Long-term loans

14

9,290,374,213

10,581,999,448

2,427,699,600

2,476,874,700

Debentures

16

7,773,376,069

8,368,327,096

7,773,376,069

8,368,327,096

6,438,810

9,003,360

Other non-current liabilities

17,327,345,810

19,259,058,917

10,403,864,773

11,108,093,454

25,052,802,155

28,168,924,734

14,835,736,890

15,973,817,591

Total Non-Current Liabilities

TOTAL LIABILITIES

224,123,835

286,662,791

Notes to the financial statements form an integral part of these statements

196,350,294

253,888,298


112

Balance Sheets

(Continued)

GLOW ENERGY PUBLIC COMPANY LIMITED AND SUBSIDIARIES As At December 31, 2007 And 2006

Unit : Baht

Note

Consolidated 2007

2006

The Separate financial statements ”Restated” 2007

2006

LIABILITIES AND SHAREHOLDERS’ EQUITY (Continued) SHAREHOLDERS’ EQUITY SHARE CAPITAL Authorized share capital 1,482,865,035 ordinary shares of Baht 10 each

14,828,650,350

14,828,650,350

14,828,650,350

14,828,650,350

Issued and paid-up share capital 1,462,865,035 ordinary shares of Baht 10 each

14,628,650,350

PREMIUM ON ORDINARY SHARES

2,935,427,353

14,628,650,350 2,935,427,353

14,628,650,350 4,786,986,727

14,628,650,350 4,786,986,727

RETAINED EARNINGS Appropriated Legal reserve

18

1,087,782,469

834,535,369

1,087,782,469

834,535,369

Unappropriated

9,950,083,268

7,724,586,427

TOTAL COMPANY’S SHAREHOLDERS’ EQUITY

28,601,943,440

26,123,199,499

MINORITY INTEREST

368,906,798

317,172,698

TOTAL SHAREHOLDERS’ EQUITY

28,970,850,238

26,440,372,197

23,846,341,521

21,085,411,951

54,023,652,393

54,609,296,931

38,682,078,411

37,059,229,542

3,342,921,975 23,846,341,521

835,239,505 21,085,411,951

- -

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

Notes to the financial statements form an integral part of these statements


113

Statements Of Income

GLOW ENERGY PUBLIC COMPANY LIMITED AND SUBSIDIARIES For The Years Ended December 31, 2007 And 2006

Unit : Baht

Consolidated

2007

The Separate financial statements ”Restated”

2006

2007

2006

REVENUES Revenues from the sales of goods

32,265,849,729

32,593,115,443

10,597,905,928

10,078,360,459

Other income Exchange gain

533,192,178

1,156,297,530

Interest income

122,715,830

173,688,766

Dividend income

-

Others

Total Revenues

89,537,563 33,011,295,300

- 241,649,132

-

291,821,334

-

3,654,366,571

2,271,260,714

68,757,374

27,893,907

21,697,633

33,991,859,113

14,521,815,538

12,663,140,140

EXPENSES Costs of the sales of goods

26,264,725,355

Selling and administrative expenses

517,678,154

Exchange loss

26,170,662,124 656,872,709

-

Total Expenses

-

8,512,327,364 228,173,391 1,728,662

8,074,808,617 194,994,330 3,160,098

26,782,403,509

26,827,534,833

8,742,229,417

8,272,963,045

TAX EXPENSES

6,228,891,791

7,164,324,280

5,779,586,121

4,390,177,095

INTEREST EXPENSE

1,112,619,140

1,285,579,625

INCOME TAX EXPENSE

276,537,617

PROFIT BEFORE MINORITY INTEREST

4,839,735,034

PROFIT BEFORE INTEREST AND INCOME

MINORITY INTEREST (56,978,663) NET PROFIT

4,782,756,371

177,289,675 5,701,454,980 (105,069,779) 5,596,385,201

552,349,917

648,187,343

162,294,204

150,937,000

5,064,942,000

3,591,052,752

-

-

5,064,942,000

3,591,052,752

3.46

2.45

BASIC EARNINGS PER SHARE

3.27

3.83

WEIGHTED AVERAGE NUMBER OF

1,462,865,035

1,462,865,035

1,462,865,035

ORDINARY SHARES

SHARES

DILUTED EARNINGS PER SHARE (Note 17)

-

3.83

-

1,462,865,035

2.45

DILUTED WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES

SHARES

-

1,462,881,204

Notes to the financial statements form an integral part of these statements

-

1,462,881,204


114

Statements Of Changes In Shareholders’ Equity GLOW ENERGY PUBLIC COMPANY LIMITED AND SUBSIDIARIES For The Years Ended December 31, 2007 And 2006

Unit : Baht

Consolidated

Issued and

Appropriated Unappropriated

paid-up share

Premium on

retained

retained

Minority

capital

ordinary shares

earnings

earnings

interest

6,577,185,836

306,952,919

Total shareholders’

equity

BEGINNING BALANCE, JANUARY 1, 2006

14,628,650,350

2,935,427,353

554,716,109

Share subscription received from minority of a subsidiary

-

-

-

Capital decrease of a subsidiary

-

-

-

Dividend paid (Note 19)

-

-

-

Dividend paid to minority of a subsidiary

-

-

-

Net profit

-

-

-

5,596,385,201

-

-

279,819,260

(279,819,260)

14,628,650,350

2,935,427,353

Appropriation of net profit for legal reserve ENDING BALANCE, DECEMBER 31, 2006

-

50,000,000

-

(32,500,000)

(4,169,165,350) -

834,535,369 7,724,586,427

25,002,932,567

-

50,000,000 (32,500,000) (4,169,165,350)

(112,350,000)

(112,350,000)

105,069,779

5,701,454,980

- 317,172,698

-

26,440,372,197

BEGINNING BALANCE, JANUARY 1, 2007

14,628,650,350

2,935,427,353

834,535,369

7,724,586,427

317,172,698

26,440,372,197

-

-

-

-

87,056,000

87,056,000

acquired by the Company

-

-

-

-

(92,300,563)

(92,300,563)

Dividend paid (Note 19)

-

-

-

(2,304,012,430)

Net profit

-

-

-

Share subscription received from minority of subsidiaries Minority interest of a subsidiary

Appropriation of net profit for legal reserve ENDING BALANCE, DECEMBER 31, 2007

4,782,756,371

- 56,978,663

-

-

253,247,100

(253,247,100)

-

14,628,650,350

2,935,427,353

1,087,782,469

9,950,083,268

368,906,798

Notes to the financial statements form an integral part of these statements

(2,304,012,430) 4,839,735,034 - 28,970,850,238


115

Statements Of Changes In Shareholders’ Equity

(Continued)

GLOW ENERGY PUBLIC COMPANY LIMITED AND SUBSIDIARIES For The Years Ended December 31, 2007 And 2006

Unit : Baht

Issued and

The Separate financial statements

Appropriated

Unappropriated

paid-up share

Premium on

retained

retained

capital

ordinary shares

earnings

earnings

Total shareholders’ equity

BEGINNING BALANCE, JANUARY 1, 2006 AS PREVIOUSLY REPORTED

14,628,650,350

2,935,427,353

554,716,109

6,577,185,836

24,695,979,648

Cumulative effects of change in accounting policy (see Note 1.2) BEGINNING BALANCE, JANUARY 1, 2006 - RESTATED

- 14,628,650,350

1,851,559,374 4,786,986,727

Dividend paid (Note 19)

-

-

Net profit

-

-

Appropriation of net profit for legal reserve

-

-

ENDING BALANCE, DECEMBER 31, 2006 - RESTATED 14,628,650,350

4,786,986,727

- 554,716,109

(4,884,014,473) 1,693,171,363

-

(4,169,165,350)

-

3,591,052,752

(3,032,455,099) 21,663,524,549 (4,169,165,350) 3,591,052,752

279,819,260

(279,819,260)

-

834,535,369

835,239,505

21,085,411,951

BEGINNING BALANCE, JANUARY 1, 2007

14,628,650,350

2,935,427,353 834,535,369

7,724,586,427

26,123,199,499

AS PREVIOUSLY REPORTED Cumulative effects of change in accounting policy (see Note 1.2) BEGINNING BALANCE, JANUARY 1, 200 - RESTATED Dividend paid (Note 19)

- 14,628,650,350

1,851,559,374 4,786,986,727

-

-

Net profit

-

Appropriation of net profit for legal reserve

-

ENDING BALANCE, DECEMBER 31, 2007

14,628,650,350

- 834,535,369

(6,889,346,922) 835,239,505

(5,037,787,548) 21,085,411,951

-

(2,304,012,430)

(2,304,012,430)

-

-

5,064,942,000

5,064,942,000

-

253,247,100

4,786,986,727

Notes to the financial statements form an integral part of these statements

1,087,782,469

(253,247,100)

-

3,342,921,975

23,846,341,521


116

Statements Of Cash Flows

GLOW ENERGY PUBLIC COMPANY LIMITED AND SUBSIDIARIES For The Years Ended December 31, 2007 And 2006

Unit : Baht

Consolidated 2007

2006

The Separate financial statements �Restated� 2007

2006

CASH FLOWS FROM OPERATING ACTIVITIES Net profit

4,782,756,371

5,596,385,201

5,064,942,000

3,591,052,752

Items to reconcile net profit to net cash provided by operating activities: Minority interest

Dividend received from subsidiaries Provision for coal loss

56,978,663

105,069,779

-

-

-

21,000,000

- (3,654,366,571) -

-

(2,271,260,714) -

Depreciation

2,924,878,620

Amortization of other non-current assets

47,054,343

45,164,032

20,589,842

4,900,229

Amortization of deferred bond issue expenses

13,058,714

12,565,503

13,058,714

12,565,503

Write-off of inventories and other non-current assets

2,978,025,843

26,900

4,117,245

554,274,525

526,170,398

14,350

691,926

Write-off of fixed assets

-

50,922,712

-

-

Impairment loss of fixed assets (reversal)

(66,520,000)

66,520,000

-

-

Loss (gain) on disposals of fixed assets

63,466,411

3,668,137

Reversal of provision for fire loss

-

(9,926,550)

Amortization of other non-current liabilities

(62,538,956)

(53,393,356)

Exchange loss (gain)

(526,442,373)

(1,141,064,053)

75,915 - (57,538,004) 2,834,998

(18,425) -

(50,621,081) 5,728,009

Reversal of provision for repurchase of

convertible debentures

(410,750)

-

(410,750)

-

Adjustment of finance lease payable

(19,073,960)

-

-

-

3,330,499

-

-

-

(1,776,043)

7,977

-

Excess of minority interest paid to acquire

a subsidiary

Amortization of premium (discount) on forward

foreign exchange contracts

7,977

Profit from operations before changes in operating assets and liabilities

7,214,788,439

7,679,062,470

1,943,475,019

1,819,216,574

Operating assets (increase) decrease Trade accounts receivable

195,525,777

(133,346,874)

5,609,777

(24,119,655)

Advances to related parties

(2,767,890)

17,461,455

(146,128,235)

18,296,090

Interest receivable from related parties

-

-

-

45,680,055

Inventories

(23,451,034)

19,397,838

(6,759,244)

63,603,801

Prepaid expenses

18,618,003

10,974,715

6,742,869

3,584,596

Advance payment

86,801,248

(43,469,674)

(1,253,787)

(1,531,450)

(14,986,651)

27,479,354

Other current assets

(8,821,925)

Other non-current assets

(68,522,777)

304,957,856

Notes to the financial statements form an integral part of these statements

(57,961,961)

(4,078,005)

(337,805)


117

Statements Of Cash Flows

(Continued)

GLOW ENERGY PUBLIC COMPANY LIMITED AND SUBSIDIARIES For The Years Ended December 31, 2007 And 2006

Unit : Baht

Consolidated 2007

2006

The Separate financial statements �Restated� 2007

2006

CASH FLOWS FROM OPERATING ACTIVITIES (Continued)

Operating liabilities increase (decrease) Trade accounts payable Advances from related parties

(1,029,167,879)

266,965,035

(556,344,954)

142,600,427

1,311,810

(9,461,520)

38,271,921

Other payables

5,642,037

28,814,118

7,411,698

Accrued interest expense

(46,067,366)

(19,565,641)

(38,485,158)

(11,434,216)

Accrued expenses

(26,443,434)

(17,821,328)

19,808,159

31,172,082

Value added tax payable

(77,630,891)

26,119,645

(9,091,627)

3,298,352

Other current liabilities

Net cash provided by operating activities

50,460,403 6,290,274,521

76,739,811 8,148,865,945

(70,048) 2,508,807

9,912,771

49,874,703

1,254,104,553

2,169,821,667

CASH FLOWS FROM INVESTING ACTIVITIES Withdrawal from (deposit in) Debt Service/ Maintenance Accrual Accounts

31,618,815

(1,802,735,157)

(2,722,670)

(650,875,854)

Cash received from repayment of long-term loans to related parties Cash paid for investments in subsidiaries Dividends received from subsidiaries

-

-

(95,631,062)

-

-

-

- (284,215,062) 3,654,366,571

2,835,000,000 (25,000,000) 2,271,260,714

Cash paid for purchase of property, plant and equipment Cash paid for purchase of assets from a subsidiary Proceeds from sale of fixed assets Advance received from sale of fixed assets Advance payment for purchase / right transfer of land Payment of assignment fee for land leasehold right Proceeds from long-term right to use of assets Net cash provided by (used in) investing activities

(2,632,829,835)

(865,992,296)

(1,731,503,187)

-

(513,003,535)

- 22,788,751 - (84,500,000) (150,911,992)

1,622,010

2,000,000

-

(34,350,000)

-

-

- (2,909,465,323)

2,990,173

31,725,626

(37,473,225) -

(2,666,361,654)

1,087,070,902

Notes to the financial statements form an integral part of these statements

(463,023,897) - 1,589,866 - (16,250,000) - 9,416,167 3,962,116,996


118

Statements Of Cash Flows

(Continued)

GLOW ENERGY PUBLIC COMPANY LIMITED AND SUBSIDIARIES For The Years Ended December 31, 2007 And 2006

Unit : Baht

Consolidated 2007

2006

The Separate financial statements �Restated� 2007

2006

CASH FLOWS FROM FINANCING ACTIVITIES Finance lease payables decrease Proceeds of long-term loans from financial institutions

(41,428,382) -

(13,118,864) 2,526,596,300

(4,455,130) -

(5,232,735) -

Cash received from the issue of new debentures

2,000,000,000

-

2,000,000,000

-

Cash paid for debentures issue expenses

(8,009,741)

-

(8,009,741)

-

(4,054,874)

Cash paid for front-end fee of new loan

(4,054,874)

-

Long-term loans repayment

(830,885,050)

(4,838,596,705)

Repayment of debentures

(2,600,000,000)

(650,000,000)

- (2,600,000,000)

Repayment of convertible debentures

(1,076,700)

-

(1,076,700)

Dividend paid

(2,304,012,430)

(4,169,165,350)

(2,304,012,430)

- (2,000,000,000) (650,000,000) - (4,169,165,350)

Share subscription received from minority of subsidiaries

87,056,000

50,000,000

-

-

Cash paid to minority for capital decrease of a subsidiary

-

(32,500,000)

-

-

Dividend paid to minority of a subsidiary

-

(112,350,000)

-

-

Net cash used in financing activities Unrealized exchange loss of cash and cash equivalents

(3,702,411,177)

(7,239,134,619)

(2,921,608,875)

(6,824,398,085)

(3,793,409)

(10,226,968)

(3,262,205)

(6,621,066)

Net decrease in cash and cash equivalents

(325,395,388)

(1,766,857,296)

(583,695,625)

(699,080,488)

Cash and cash equivalents as at January 1,

4,367,969,055

6,134,826,351

771,124,225

1,470,204,713

Cash and cash equivalents as at December 31, (Note 5)

4,042,573,667

4,367,969,055

187,428,600

Notes to the financial statements form an integral part of these statements

771,124,225


119

Notes to the financial statements

GLOW ENERGY PUBLIC COMPANY LIMITED AND SUBSIDIARIES For The Years Ended December 31, 2007 And 2006

1. OPERATIONS OF THE COMPANY AND SUBSIDIARIES 1.1 The Company’s general information Glow Energy Public Company Limited “the Company” registered as a public limited company under Thai laws on September 1, 1995, and was listed on the Stock Exchange of Thailand (SET) in February 1996 until August 2002 and listed again on April 21, 2005. The Company operates in Thailand and principally engages in the generation and distribution of electricity, steam and water for industrial use. The Company’s office is located at 195 Empire Tower, 38th Floor - Park Wing, South Sathorn Road, Yannawa, Sathorn, Bangkok. As at December 31, 2007 and 2006, the Company’s major shareholder is Suez Energy (Thailand) Company Limited, holding 44.1 percent of the Company’s share capital. On January 27, 2006, Suez-Tractebel Energy Holdings Cooperatieve U.A. (STEH), holding 1,010,976,033 shares of the Company (or approximately 69.1 percent of the Company’s share capital), transferred 645,259,773 shares of the Company (or approximately 44.1 percent of the Company’s share capital) to its wholly owned subsidiary, Suez Energy (Thailand) Company Limited (Suez Energy Thailand). The transaction occurred as part of a Suez-Tractebel S.A. (the parent company of STEH) internal shareholding restructuring, pursuant to an agreement entered into between STEH and Suez Energy Thailand. As at December 31, 2007 and 2006, the Company had total employees of 54 persons and 47 persons, respectively. The employee costs for the years ended December 31, 2007 and 2006 were Baht 59.4 million and Baht 62.3 million, respectively. 1.2 Change in accounting policy For the year ended December 31, 2007, the Company changed its accounting policy for investments in subsidiaries from the equity method to the cost method to comply with the Notification of Federation of Accounting Professions No. 26/2549 (Amendment No. 1) regarding Thai Accounting Standard No. 44 “Consolidated Financial Statements and Accounting for Investment in Subsidiaries” and the Notification of Federation of Accounting Professions No. 32/2549 regarding the explanation for Thai Accounting Standard No. 44 “Consolidated Financial Statements and Accounting for Investment in Subsidiaries” (paragraph 27) and Thai Accounting Standard No. 45 “Accounting for Investment in Associates” (paragraph 11). This change in accounting policy has been accounted for retroactively in the separate financial statements as if the Company had recorded such investments by the cost method according to the new accounting policy continuously. Therefore, the comparative information for the separate statement of income for the year ended December 31, 2006 and the balance sheet as at December 31, 2006 has been restated to conform to the new accounting policy, of which the effects are as follows:


120

Unit : Baht

December 31, 2006

Balance sheet Decrease in investments in subsidiaries

5,037,787,548

Increase in premium on ordinary shares

1,851,559,374

Decrease in retained earnings

6,889,346,922

For the year ended

December 31, 2006

Statement of income Decrease in share of profits from investments using the equity method

4,276,593,163

Increase in dividend income

2,271,260,714

Decrease in net profit

2,005,332,449

Decrease in basic earnings per share

1.38

Decrease in diluted earnings per share

1.38


23.9

23.2

-

-

-

-

30

35

-

-

-

-

-

-

-

44.5

33.9

48.7

* Glow Demin Water Company Limited, Glow IPP 3 Company Limited (formerly Glow Hemaraj Energy Company Limited), GHECO-One Company Limited and Glow IPP 2 Holding Company Limited have no staff because the subsidiaries have been provided services by Glow Company Limited.

43.6

50

3) Glow SPP 2 September 19,1994 Generate and distribute electricity and steam 57 Company Limited for industrial use 4) Glow SPP 3 August 9, 1991 Generate and distribute electricity, steam and 24 Company Limited water for industrial use 5) Glow IPP March 12, 1997 Generate and distribute electricity to EGAT 38 Company Limited 6) Glow Demin Water January 13, 1999 Generate and distribute demineralised water and - Company Limited* high quality water for the general industry and for the petrochemical industry. 7) Glow IPP 3 June 14, 2005 Develop power generation projects. - Company Limited (formerly Glow Hemaraj Energy Company Limited)* 8) GHECO-One April 27, 2007 Develop power generation projects. - Company Limited* 9) Glow IPP 2 Holding October 16, 2007 Invest in other companies - Company Limited*

1.3 Subsidiaries All subsidiaries of the Company are companies registered in Thailand and their office is located at 195 Empire Tower, 38th Floor – Park Wing, South Sathorn Road, Yannawa, Sathorn, Bangkok. The information of the subsidiaries is as follows: Number of employees Employee costs Company’s name Registered date Main business objective As at For the years ended December 31, December 31, Million Baht 2007 2006 2007 2006 1) Glow Company Limited March 12, 1997 Provide management services, consultant services 245 239 307.1 317.1 and management advisory for related companies 2) Glow SPP 1 December 6, 1994 Generate and distribute electricity, steam and 32 30 28.4 34.0 Company Limited water for industrial use

121


122

2. BASIS FOR PRESENTATION OF THE FINANCIAL STATEMENTS 2.1 The consolidated and the separate financial statements have been prepared in accordance with the Regulation of The Stock Exchange of Thailand dated January 22, 2001, regarding the preparation and submission financial statements and reports for the financial position and result of operations of the listed companies, and in accordance with accounting standards and practices generally accepted in Thailand. The brief particulars in the financial statements are shown in accordance with the Notification of the Department of Commercial Registration (currently the Department of Business Development) dated September 14, 2001 regarding “The Brief Particulars in the Financial Statements (B.E. 2544)”. 2.2 The Federation of Accounting Professions has issued the Notifications of Federation of Accounting Professions No. 9/2550 dated May 2, 2007, No. 38/2550 dated September 21, 2007 and No. 62/2550 dated December 7, 2007 regarding the following accounting standards that were announced in the Royal Gazette, but were not in effect in 2007. TAS 25 (Revised 2007) Cash Flow Statements TAS 29 (Revised 2007) Leases TAS 31 (Revised 2007) Inventories TAS 33 (Revised 2007) Borrowing Costs TAS 35 (Revised 2007) Presentation of Financial Statements TAS 39 (Revised 2007) Accounting Policies, Changes in Accounting Estimates and Errors TAS 41 (Revised 2007) Interim Financial Reporting TAS 43 (Revised 2007) Business Combination TAS 49 (Revised 2007) Construction Contracts TAS 51 Intangible Assets The above accounting standards will supersede previously issued accounting standards. The management has assessed the impact of these accounting standards, when they are effective, for financial statements for fiscal periods beginning on or after January 1, 2008 and do not expect them to have a material effect on the Company’s financial statements. 2.3 The consolidated financial statements included the accounts of the Company and its subsidiaries, after elimination of intercompany transactions, of which the percentage of shareholding is as follows: % of Shareholding 2007 2006 Owned by the Company Glow Company Limited 100 100 Glow SPP 2 Company Limited 100 100 Glow SPP 3 Company Limited 100 100 Glow IPP 3 Company Limited (formerly Glow Hemaraj Energy Company Limited) 100 50 Glow IPP 2 Holding Company Limited 100 - Owned by Glow Company Limited Glow SPP 1 Company Limited 100 100 Glow IPP Company Limited 95 95 Glow Demin Water Company Limited 100 100

Owned by Glow IPP 2 Holding Company Limited GHECO-One Company Limited

65

-


123

3. SIGNIFICANT ACCOUNTING POLICIES Significant accounting policies of the Company and subsidiaries are summarized below: 3.1 Cash and cash equivalents Cash and cash equivalents are cash on hand, deposits at banks’ saving accounts and current accounts, and short-term highly liquid investments with maturities within three months. 3.2 Recognition of revenues Revenues from the sales of goods represent the invoiced value, excluding value added tax, of products supplied after deducting discounts, which is estimated based on annual purchase volumes of each customer and calculated by the percentage of net sales as specified in the agreement. Revenues from rendering of services are recognized on an accrual basis. 3.3 Allowance for doubtful accounts Allowance for doubtful accounts are based on estimated uncollectible debts. 3.4 Inventories Inventories consisting of raw materials, spare parts, and supplies for machines are valued at the lower of cost and net realizable value. Cost is determined by weighted average method. Provision is made, when necessary, for obsolete and slow moving inventories based on the Company’s experience. 3.5 Property, plant and equipment Property is stated at cost. Plant and equipment are stated at cost less accumulated depreciation. Depreciation is calculated by reference to cost of assets on a straight-line basis over the following estimated useful lives: Years Plant and parts of construction in progress which are already in operation 2.2 - 30 Leasehold improvements 5 - 20 Machinery, tools and plant equipment 5 - 20 Furniture, fixtures and office equipment 3, 5, 10 Motor vehicles 5 3.6 Construction in progress Construction in progress includes construction and other related costs which management has determined to be directly related to constructing the asset or bringing it to working condition. Borrowing costs that are directly attributable to loans for construction and incurred during construction period are capitalized as part of the cost of construction in progress.


124

3.7 Borrowing costs Interest and exchange gains/losses incurred before commencement of trading activities and related to loans obtained for construction of the power plant and acquisition of machinery are capitalized as part of the cost of assets, but to a level not exceeding the interest cost that would be paid assuming the loan were a Thai Baht loan of which the conditions and maturity date were similar to those of the foreign currency loans. 3.8 Amortization of other non-current assets Deferred right to use grid system and transmission line are amortized on a straight-line basis over the period of power purchase agreements. Deferred land lease fee is amortized on a straight-line basis over the period of the lease agreement from the date of commencing commercial operations. Deferred land leasehold right is amortized on a straight-line basis over the period of the lease agreement of 30 years. Deferred financial service fees are amortized on a straight-line basis over the period of related agreements. Deferred right of pipe rack usage is amortized on a straight-line basis over the period of the lease agreement of 15 years. 3.9 Investments Long-term investments in other company, which are non-marketable equity securities and held as other investments are valued at cost. The Company recognizes loss on impairment of securities in the statement of income in the period in which it incurs. 3.10 Long-term lease - Operating lease Leases in which substantially all the risks and rewards of ownership of assets remain with the lessor are accounted for as operating leases. Rentals applicable to such operating leases are charged to the statement of income over the lease term. - Finance lease Leases in which substantially all the risks and rewards of ownership, other than legal title, are transferred to the Company and its subsidiaries are accounted for as finance leases. At inception, the fair value of the leased assets is recorded together with the obligation. The leased assets are depreciated using the straight-line method over their estimated useful lives. Interest or financial charge and depreciation are recognized as expenses in the statement of income. 3.11 Foreign currencies Transactions denominated in foreign currencies are translated into Baht at rates of exchange prevailing at the transaction dates. All balances of monetary assets and liabilities in foreign currencies and forward foreign exchange contracts at the end of the year are converted at the reference exchange rates established by the Bank of Thailand at the end of the year. Both realized and unrealized foreign exchange gains or losses are recognized as revenues or expenses in the statements of income.


125

3.12 Financial instruments The Company and its subsidiaries entered into Interest Rate Swap Agreements, Forward Foreign Exchange Contracts and Currency Swap Agreements in asset and liability management activities to control exposure to fluctuations in interest and foreign exchange rates. Further details of financial instruments are disclosed in Note 22. Income and expense from interest rate swap agreements used to manage interest rate exposures are recognized as adjustments to interest income and expense in statements of income. Such adjustments that are attributable to construction are capitalized as part of construction in progress. Gains and losses on forward foreign exchange contracts and currency swap agreements designated as hedges of existing assets and liabilities are recognized as income or expense in the statements of income. Amounts to be paid and received are offset in the balance sheet. Premiums or discounts on forward foreign exchange contracts are amortized to revenues or expenses over the contract period. The Company and its subsidiaries have no policy to speculate in or engage in the trading of any derivative financial instruments. 3.13 Provident fund The Company, the subsidiaries and their employees jointly registered a provident fund scheme under Provident Fund Act B.E. 2530. The funds are contributed by the employees, the Company and its subsidiaries. Company’s name Managed by Glow Energy Public Company Limited Bank of Ayudhaya Public Company Limited. Glow Company Limited TISCO Assets Management Co., Ltd., and Bank of Ayudhaya Public Company Limited. Glow SPP 1 Company Limited TISCO Assets Management Co., Ltd. Glow SPP 2 Company Limited Bank of Ayudhaya Public Company Limited. Glow SPP 3 Company Limited Bank of Ayudhaya Public Company Limited. Glow IPP Company Limited TISCO Assets Management Co., Ltd. The above funds will be paid to the employees upon termination in accordance with the rules of the provident fund. Contributions for employees by the Company, under the provident fund scheme, are recorded as expenses when incurred. 3.14 Income tax expense


126

Income tax expense is based on tax paid and accrued for the year. 3.15 Earnings per share Basic earnings per share are calculated by dividing net profit for the year by the weighted average number of ordinary shares issued during the year. Diluted earnings per share are calculated by dividing net profit for the year, after adjusting for the effect of transactions relating to dilutive potential ordinary shares, by the total sum of the weighted average number of ordinary shares issued during the year plus the weighted average number of ordinary shares to be issued for conversion of all dilutive potential ordinary shares into ordinary shares. 3.16 Use of accounting estimates The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities. Actual results may differ from those estimates. 4. SUPPLEMENTAL CASH FLOWS INFORMATION 4.1 Cash paid for interest and income tax for the years ended December 31, 2007 and 2006 are as follows: Unit : Baht Consolidated The Separate financial statements 2007 2006 2007 2006 Interest 1,158,686,506 1,305,145,266 590,835,075 659,621,558 Income tax 281,147,422 170,779,693 177,612,052 96,777,110 4.2 Accounts payable – acquisition of assets for the years ended December 31, 2007 and 2006 are as follows: Unit : Baht Consolidated The Separate financial statements 2007 2006 2007 2006 Accounts payable – acquisition 106,660,955 478,342,211 19,524,759 296,387,509 of assets brought forward Add Purchase of fixed assets Unrealized exchange gain Less Cash payment Assets under finance lease Accounts payable – acquisition of assets carried forward 4.3

2,672,724,517

515,631,206

1,780,798,494

194,587,390

(1,600,676)

(8,521,439)

(353,917)

(744,743)

(2,632,829,835)

(865,992,296)

(1,731,503,187)

(463,023,897)

(13,598,864)

(12,798,727)

(2,592,000)

(7,681,500)

131,356,097

106,660,955

65,874,149

19,524,759

In October 2007, the Company entered into a new Facility Agreement to obtain a Yen 8,100 million loan and fully prepaid the previous Yen loan for the same amount. These transactions had no impact on cash inflows and outflows (see Note 14).


127

5. CASH AND CASH EQUIVALENTS Cash and cash equivalents as at December 31, 2007 and 2006 consist of: Unit : Baht Consolidated The Separate financial statements 2007 2006 2007 2006 Cash 762,735 768,921 46,016 46,142 Bank deposits in current accounts 772,811 746,091 512,811 528,798 Bank deposits in saving accounts 2,691,455,549 2,468,181,930 186,869,773 270,989,990 Bills of exchange 1,349,582,572 199,770,510 - - Short-term debentures - 1,698,501,603 - 499,559,295 4,042,573,667 4,367,969,055 187,428,600 771,124,225 As at December 31, 2007 and 2006, cash and cash equivalents of Glow IPP Company Limited of Baht 2,127.5 million and Baht 1,232.1 million, respectively, are pledged as collateral to secure credit facilities obtained from financial institutions. However, the pledged accounts can be withdrawn for use as working capital required in the normal course of its business. As at December 31, 2007, bank deposits in saving accounts, bills of exchange and short-term debentures carry interest between 0.125-4.25 percent per annum (2006: 0.5-5.1 percent per annum). 6. CURRENT INVESTMENTS Current investments as at December 31, 2007 and 2006 consist of: Unit : Baht Consolidated The Separate financial statements 2007 2006 2007 2006 Bank deposits in saving accounts 660,826,005 1,002,649,331 653,598,524 650,875,854 Bills of exchange 650,000,000 200,000,000 - - Fixed deposits - 140,000,000 - - Global Liquidity Fund 399,267,610 427,870,450 - - 1,710,093,615 1,770,519,781 653,598,524 650,875,854 Current investments of the Company represent bank deposits in Debt Service Accrual Account, which is for the purpose of repayment of the Company’s debentures. As at December 31, 2007 and 2006, current investments of Glow IPP Company Limited of Baht 1,056.5 million and Baht 1,119.6 million, respectively, including Global Liquidity Fund invested in overseas of USD 11.9 million, are pledged as collateral to secure credit facilities obtained from financial institutions and are restricted for repayment of long-terms loans and payment of major maintenance.


128

7. TRADE ACCOUNTS RECEIVABLE, NET Trade accounts receivable, net as at December 31, 2007 and 2006 are classified Consolidated 2007 2006 Trade accounts receivable, other companies Current 4,599,979,273 4,796,882,675 Past due Less than 3 months 2,800,407 6,067,334 3 - 6 months - 2,856,070 6 - 12 months 1,163,496 8,696,768 More than 12 months 33,113,900 18,727,605 4,637,057,076 4,833,230,452 Less Provision for contract discounts (69,045,872) (69,491,467) Allowance for doubtful accounts - (118,239) 4,568,011,204 4,763,620,746 Trade accounts receivable from related parties Current 1,222,490 1,138,725 Past due Less than 3 months - - Total trade accounts receivable, net 4,569,233,694 4,764,759,471 8. INVENTORIES, NET Inventories, net as at December 31, 2007 and 2006 consist of:

by aging as follows: Unit : Baht

The Separate financial statements 2007

1,238,237,677

2006

1,240,860,291

-

44,647

-

-

-

2,813,534

44,647

118,239

1,238,282,324

1,243,836,711

(64,853,222)

(64,681,416)

-

(118,239)

1,173,429,102

1,179,037,056

33,427,374

10,858,972

-

22,570,225

1,206,856,476

1,212,466,253

Unit : Baht

Consolidated

Raw material - coal

Raw material - oil

Spare parts and supplies for machines

Less

Allowance for obsolete inventories

Total inventories, net

2007 302,982,392

2006

368,653,934

The Separate financial statements 2007 -

2006 -

220,386,699

219,769,454

-

1,161,885,665

1,076,587,184

245,045,789

217,425,747

1,685,254,756

1,665,010,572

245,045,789

217,425,747

(24,293,714) 1,660,961,042

(27,035,971) 1,637,974,601

- 245,045,789

-

- 217,425,747


129

9. INVESTMENTS IN SUBSIDIARIES USING THE COST METHOD Investments in subsidiaries using the cost method in the separate financial statements as at December 31, 2007 and 2006 are as follows: Unit : Baht Paid-up Portion of “Restated” Company’s name Capital Investment (%) 2007 2006 Glow Company Limited 4,401,668,111 100 7,114,824,403 7,114,824,403 Glow SPP 2 Company Limited 4,941,534,880 100 4,941,534,760 4,941,534,760 Glow SPP 3 Company Limited 7,373,389,550 100 7,379,374,488 7,379,374,488 Glow IPP 3 Company Limited 240,140,000 100 228,715,092 55,000,030 (formerly Glow Hemaraj Energy Company Limited) Glow IPP 2 Holding Company Limited 110,500,000 100 110,500,000 - Total 19,774,948,743 19,490,733,681 In 2007, the Board of Directors’ meeting of the subsidiaries passed a resolution to distribute interim dividends detailed as follows: Company’s name Meeting date Baht per Amount Dividend share (Million Baht) payment date Glow SPP 2 Company Limited November 12, 2007 0.45 222.4 November 27, 2007 Glow Company Limited August 9, 2007 0.45 198.1 August 29, 2007 Glow SPP 1 Company Limited August 9, 2007 0.93 200.0 August 29, 2007 Glow SPP 3 Company Limited August 9, 2007 1.93 1,423.1 August 29, 2007 Glow Company Limited May 10, 2007 0.68 299.3 May 29, 2007 May 10, 2007 0.70 150.5 May 29, 2007 Glow SPP 1 Company Limited Glow SPP 3 Company Limited May 10, 2007 0.55 405.5 May 29, 2007 On April 25, 2007, the annual general shareholders’ meetings of the subsidiaries passed a resolution to distribute annual dividends for the year 2006. The dividends were paid as interim dividends following the resolutions of the Board of Directors’ meetings of the subsidiaries detailed as follows: Company’s name Meeting date Baht per Amount Dividend share (Million Baht) payment date Glow SPP 3 Company Limited February 28, 2007 1.50 1,106.0 March 12, 2007 November 8, 2006 2.73 1,201.7 December 25, 2006 Glow Company Limited Glow SPP 1 Company Limited November 8, 2006 3.95 849.3 December 25, 2006 Glow Company Limited September 15, 2006 2.43 1,069.6 October 2, 2006 Glow SPP 1 Company Limited September 15, 2006 1.16 249.4 October 2, 2006 Glow IPP Company Limited February 17, 2006 1.54 539.0 March 7, 2006 Glow IPP Company Limited February 17, 2006 4.88 1,708.0 May 16, 2006 On March 14, 2006, the extraordinary shareholders’ meeting of Glow SPP 1 Company Limited, wholly owned subsidiary of Glow Company Limited, passed a special resolution to increase the registered capital from Baht 800 million to Baht 2,150 million by issuing 135 million new ordinary shares with the par value of Baht 10 each. Baht 550 million of the newly issued shares together with the remaining unpaid capital of Baht 12 million were paid by Glow Company Limited on February 27, 2006. The balance of Baht 800 million of the newly issued shares was paid on May 16, 2006.


130

On March 14, 2006, the extraordinary shareholders’ meeting of Glow IPP Company Limited passed a special resolution to decrease the registered capital from Baht 3,500 million to Baht 2,850 million by decreasing of an aggregate number of 65 million ordinary shares with the par value of Baht 10 per share. The subsidiary registered the capital decrease with the Department of Business Development on June 22, 2006. Glow IPP 3 Company Limited (formerly Glow Hemaraj Energy Company Limited) On December 20, 2005, the extraordinary shareholders’ meeting of Glow IPP 3 Company Limited (formerly Glow Hemaraj Energy Company Limited) passed a resolution to increase the registered capital from Baht 10 million to Baht 110 million by issuing 10 million new ordinary shares with the par value of Baht 10 each. On December 21, 2005, the subsidiary sent a notice to the Company to call for payment of the capital increase shares as the first installment of Baht 25 million within December 23, 2005 and the second installment of Baht 25 million within January 20, 2006. The Company paid for the first and second installment of the shares on December 23, 2005 and February 1, 2006, respectively. On April 28, 2006, the annual general shareholders’ meeting of the subsidiary passed a special resolution for such capital increase. The subsidiary registered the capital increase with the Department of Business Development on May 10, 2006. On April 11, 2007, the extraordinary general shareholders’ meeting of the subsidiary passed a special resolution to increase the registered capital from Baht 110 million to Baht 380 million by the issuance of 27 million new ordinary shares with the par value of Baht 10 each. 60 percent of the newly issued shares (16.2 million shares) were subscribed by the Company. The subsidiary registered the capital increase with the Department of Business Development on August 30, 2007. On May 21, 2007, the subsidiary sent a notice to the Company to call for payment of the capital increase in the following sequence: - Baht 78.1 million within June 2007 - Baht 78.1 million within February 2008 - Baht 2.9 million within April 2008 - Baht 2.9 million within June 2008 The Company paid for the 1st installment of Baht 78.1 million on June 29, 2007. On August 15, 2007, the Company purchased 1.1 million shares of the subsidiary from Hemaraj Land and Development Public Company Limited at par value of Baht 10 each, resulting in a change of the shareholding proportion of the Company from 50 percent to 60 percent. The Company has already paid in advance for the shares purchase totaling Baht 11 million on June 29, 2007. On October 15, 2007, the Company entered into a sale and purchase agreement to purchase 15,199,997 shares of the subsidiary from Hemaraj Land and Development Public Company Limited at the price of Baht 96.0 million, resulting in a change of the shareholding proportion of the Company from 60 percent to 100 percent. Baht 64.5 million was paid on October 15, 2007, whereby the remaining Baht 31.5 million will be paid depending on certain conditions of the agreement. However, the purchase price was adjusted and the final remaining amount of Baht 20.1 million was paid in December 2007. On October 31, 2007, the extraordinary general shareholders’ meeting of the subsidiary passed a resolution to change its name from “Glow Hemaraj Energy Company Limited” to “Glow IPP 3 Company Limited”. The subsidiary registered the name change with the Department of Business Development on December 14, 2007.


131

10.

GHECO-One Company Limited GHECO-One Company Limited was also established under the Joint Development and Venture Agreement dated March 18, 2005 made by the Company and Hemaraj Land and Development Public Company Limited. The subsidiary registered as a limited company in Thailand on April 27, 2007 with Baht 10 million registered capital, 65 percent of which was held by the Company. On May 21, 2007, the extraordinary general shareholders’ meeting of the subsidiary passed a special resolution to increase the registered capital from Baht 10 million to Baht 100 million by issuing 9 million new ordinary shares with the par value of Baht 10 each. The subsidiary registered the capital increase with the Department of Business Development on June 4, 2007. The Company has paid for the called increase shares of Baht 26 million on July 6, 2007. On October 13, 2007, the Company and Hemaraj Land and Development Public Company Limited entered into a shareholders’ agreement, which superseded the Joint Development and Venture agreement dated March 18, 2005, in order to regulate their responsibilities with respect to the ownership and management of GHECO-One Company Limited. On October 16, 2007, the Company entered into a share purchase agreement to sell 6,499,996 shares of GHECO- One Company Limited to Glow IPP 2 Holding Company Limited at Baht 32.5 million. Glow IPP 2 Holding Company Limited Glow IPP 2 Holding Company Limited registered as a limited company in Thailand on October 16, 2007 with Baht 1 million registered capital. On December 6, 2007, the annual general shareholders’ meeting of the subsidiary passed a resolution to increase the registered capital from Baht 1 million to Baht 220 million by issuing 2.19 million new ordinary shares with the par value of Baht 100 each. The subsidiary registered the capital increase with the Department of Business Development on December 25, 2007 and called for payment of the increase shares at Baht 50 per share.

LONG-TERM LOANS TO RELATED PARTIES On September 29, 2003, the Company entered into Phase III Project Shareholder Loan Agreement with Glow SPP2 Company Limited and Glow SPP 3 Company Limited for loans granted to them totaling Baht 13,159 million in order to prepay all of their long-term loans outstanding under the Master Agreement, Offshore Credit Agreement, Onshore Credit Agreement dated November 27, 1997, on September 30, 2003. The loans consist of Tranche A and Tranche B of Baht 13,000 million and Baht 159 million, respectively, and carry interest at a certain percentage per annum. The loan under Tranche A is repayable before each date on which a principal payment must be made in respect of the debentures of the Company. The loan under Tranche B is repayable under the condition specified in the agreement. The Company had received full repayment of the Tranche B loan from both subsidiaries on October 3, 2003. On December 25, 2006, the Company entered into a Novation Agreement with Glow SPP 1 Company Limited and Glow SPP 3 Company Limited, whereby Glow SPP 3 Company Limited transferred part of the above Tranche A loan of Baht 850 million, including interest, obligations and liabilities in connection with the transferred loan to Glow SPP 1 Company Limited. Glow SPP 1 Company Limited paid a novation fee of Baht 107.7 million to Glow SPP 3 Company Limited on December 25, 2006.


132

11. PROPERTY, PLANT AND EQUIPMENT, NET Property, plant and equipment, net consist of:

Unit : Baht

Leasehold

Land

Plant

Consolidated

Furniture,

Machinery, fixtures and tools and

office

improvement equipment equipment

Motor

Construction

vehicles

in progress

Total

Cost December 31, 2006

291,865,672

58,785,501,376

153,770,956

300,564,984

220,641,112

79,006,915

134,459,864

59,965,810,879

-

333,232,870

187,000

16,799,382

30,265,591

13,621,664

2,278,618,010

2,672,724,517

Adjustment

-

185,000,000

-

-

-

-

44,489

185,044,489

Transfer

-

250,970,843

2,280,000

325,000

3,773,389

-

(257,349,232)

Disposals

-

(159,717,301)

(43,786)

(2,192,212)

Purchases

December 31, 2007

(986,079)

(6,281,365)

-

-

(169,220,743)

291,865,672

59,394,987,788

155,251,877

317,645,580

252,487,880

86,347,214

2,155,773,131

62,654,359,142

December 31, 2006

-

18,466,005,045

37,079,255

199,910,642

155,835,784

48,404,931

-

18,907,235,657

Depreciation for the year

-

2,856,220,639

8,824,147

25,663,478

20,838,332

13,332,024

-

2,924,878,620

Depreciation – disposals

-

(2,064,448)

(6,281,364)

-

(74,028,722)

Depreciation – transfer

-

(267,128)

-

Depreciation – adjustment

-

34,599,237

-

-

-

-

-

34,599,237

December 31, 2007

-

21,291,588,162

45,501,031

225,530,340

174,876,796

55,188,463

-

21,792,684,792

December 31, 2006

-

66,520,000

-

-

-

-

-

66,520,000

Reversal

-

(66,520,000)

-

-

-

-

-

(66,520,000)

December 31, 2007

-

-

-

-

-

-

-

December 31, 2006

291,865,672

40,252,976,331

116,691,701

100,654,342

64,805,328

30,601,984

134,459,864

40,992,055,222

December 31, 2007

291,865,672

38,103,399,626

109,750,846

92,115,240

77,611,084

31,158,751

2,155,773,131

40,861,674,350

2007

2,924,878,620

2006

2,978,025,843

Accumulated depreciation

(65,236,759) -

(402,371)

(43,780)

-

-

267,128

-

Provision for impairment

-

Net book value

Depreciation for the years ended December 31,


133

Unit : Baht The Separate financial statements Furniture, Machinery, fixtures and Leasehold tools and office Motor Construction Plant improvement equipment equipment vehicles in progress Total Cost December 31, 2006 12,594,622,526 75,858,224 202,538,136 54,492,259 25,806,586 28,311,536 12,981,629,267 Purchases 104,929,325 - 618,375 4,316,518 2,592,000 1,668,342,276 1,780,798,494 Purchase assets of phase 1 483,312,941 - 16 114,310 - 1,632,088 485,059,355 Adjustment - - - - - 44,489 44,489 Transfer 13,226,021 - - - - (13,226,021) - Disposals (1,657,500) (986,079) - (663,656) (3,982,300) - (7,289,535) December 31, 2007 13,194,433,313 74,872,145 203,156,527 58,259,431 24,416,286 1,685,104,368 15,240,242,070 Accumulated depreciation December 31, 2006 4,258,737,150 4,704,752 125,930,319 43,118,330 14,981,236 - 4,447,471,787 Depreciation for the year 525,070,976 3,721,235 16,975,188 4,266,164 4,240,962 - 554,274,525 Depreciation – disposals (620,825) (402,371) - (586,116) (3,982,298) - (5,591,610) December 31, 2007 4,783,187,301 8,023,616 142,905,507 46,798,378 15,239,900 - 4,996,154,702 Net book value December 31, 2006 8,335,885,376 71,153,472 76,607,817 11,373,929 10,825,350 28,311,536 8,534,157,480 December 31, 2007 8,411,246,012 66,848,529 60,251,020 11,461,053 9,176,386 1,685,104,368 10,244,087,368 Depreciation for the years ended December 31, 2007 554,274,525 2006 526,170,398 All of the land, construction, machinery and equipment of the power plant of Glow IPP Company Limited and Glow SPP 1 Company Limited have been mortgaged to secure credit facilities obtained from financial institutions. In May 2007, Glow SPP 1 Company Limited has already released the collateral as its loans were fully prepaid in May 2006. In June 2007, the Company purchased phase 1 water plant from Glow SPP 3 Company Limited to facilitate the operation of the Company (see Note 23). As at December 31, 2007 and 2006, cost of property, plant and equipment in the consolidated financial statements that was fully depreciated but still in use was Baht 4,535.1 million and Baht 3,387.0 million, respectively.


134

12. OTHER NON-CURRENT ASSETS, NET Other non-current assets, net as at December 31, 2007 and 2006 consist of: Unit : Baht Consolidated The Separate financial statements 2007 2006 2007 2006 163,767,498 174,675,381 - - Deferred right to use grid system 140,818,170 147,825,481 - - Deferred right to use transmission line Deferred land lease 93,530,889 99,056,390 - - Deferred land leasehold right 177,772,227 - 37,428,736 - Deferred financial service fee 8,309,436 19,995,413 3,949,200 15,371,528 Deferred securities underwriting fee - 4,564,510 - 4,564,510 Project development costs 81,598,954 35,110,921 - - Refundable deposits 21,176,196 8,139,889 4,769,641 705,986 Others 19,867,613 86,942,786 4,573,070 5,121,200 Total other non-current assets, net 706,840,983 576,310,771 50,720,647 25,763,224 47,054,343 45,164,032 20,589,842 4,900,229 Amortization for the years ended December 31, 12.1 Deferred right to use grid system represents right to use grid system of Glow SPP 2 Company Limited and Glow SPP 3 Company Limited, whereby on September 27, 2000, both subsidiaries handed over and transferred the ownership of certain parts of the grid system and granted the right to use part of grid system to Electricity Generating Authority of Thailand (EGAT). The transfer of the ownership was made in order to comply with the power purchase agreement, under the regulation of purchasing electricity from small producers. The net book value of the transferred parts of the grid system at the transfer date was Baht 242.8 million. 12.2 Deferred right to use transmission line represents the costs paid by Glow IPP Company Limited for construction of transmission line in order to comply with the power purchase agreement, under the regulation of purchasing electricity from independent producers. The ownership of the transmission line belongs to EGAT and the subsidiary has the right to use the transmission line over the period of the power purchase agreement of 25 years. 12.3 Deferred land lease represents fees paid by Glow SPP 2 Company Limited and Glow SPP 3 Company Limited under the co-leasehold contract for the land at industrial harbour in Map Ta Phut Industrial Estate for a period of 28 years, from December 1, 1996 to November 30, 2024 in order to construct power plant project - Phase III. The proprietary rights on construction still belong to the subsidiaries after the expiration of the contract.


135

12.4 Deferred land leasehold right represents the fees of Baht 169 million of the Company, Glow SPP 2 Company Limited and Glow SPP 3 Company Limited which were paid in relation to the assignment of the leasehold right for 57 rais of land to them. Such deferred land leasehold occurred from Glow IPP 3 Company Limited (formerly Glow Hemaraj Energy Company Limited) entered into a Deposit and Lease Option Agreement with a local company as a leasehold right owner, to transfer the leasehold right for land of approximately 62 rais to the subsidiary at the price totaling Baht 181 million to be used for the development of a new IPP project. Deposit of Baht 18.1 million was paid by Glow IPP 3 Company Limited. On January 29, 2007 and March 19, 2007, the transferor issued two letters to reduce the area of the land and the leasehold transfer fee to be 57 rais and Baht 169 million, respectively. On August 9, 2007, the Company and Glow IPP 3 Company Limited entered into an Assignment Agreement to assign all rights and obligations under the Deposit and Lease Option Agreement to the Company. Under the assignment agreement, the Company is to pay the consideration, consisting of Assignment Fee of Baht 23.1 million and reimbursement of actual rental and utility fee already paid by Glow IPP 3 Company Limited to IEAT from August 2006 to August 2007. The Company paid the consideration totaling Baht 27.1 million to Glow IPP 3 Company Limited on August 30, 2007. On August 21, 2007, the Company sent a notice to exercise the lease option and paid the remaining assignment fee to the leasehold right owner of Baht 150.9 million on December 18, 2007. The Company, Glow SPP 2 Company Limited and Glow SPP 3 Company limited jointly entered into a land lease agreement for the above land with IEAT on December 19, 2007 (see Note 24.1.8 1)). 12.5 Project development costs represent costs incurred by Glow IPP 3 Company Limited (formerly Glow Hemaraj Energy Company Limited) that were transferred to GHECO-One Company Limited in December 2007 in accordance with the Joint Development and Venture Agreement dated March 18, 2005. 13. FINANCE LEASE PAYABLES The Company and its subsidiaries entered into finance lease agreements for vehicles and office equipment, under which the balance of minimum lease payments as at December 31, 2007 and 2006 are as follows: Unit : Baht Consolidated The Separate financial statements 2007 2006 2007 2006 Less than 1 year 50,581,193 18,450,702 5,662,533 5,087,814 More than 1 year 132,624,013 24,026,064 7,049,709 9,852,406 Total minimum lease payment 183,205,206 42,476,766 12,712,242 14,940,220 Less: Interest expense (105,195,841) (4,030,987) (1,192,447) (1,557,295) Total minimum lease payment, net 78,009,365 38,445,779 11,519,795 13,382,925 Less: Current portion of finance lease payables (38,537,672) (16,376,197) (5,080,985) (4,379,565) 39,471,693 22,069,582 6,438,810 9,003,360


bank

-

-

Dec. 30, 2011

Dec. 30, 2011

YEN

YEN

8,100,000,000

-

8,100,000,000

8,100,000,000

61,500,000

41,847,646

1,418,007,499

9,290,374,213

(717,675,588)

10,008,049,801

Less Current portion of long-term loans in the consolidated financial statements

46,677,871

Total in the consolidated financial statements

USD

7,580,350,201

installments

Jun. 15, 2014

Jun. 15, 2003

annual

200,906,322

23 semi-

6,162,342,702

- Tranche EIB

181,860,490

USD 217,666,655

Jun. 15, 2018

financial institutions

Jun. 15, 2006

-

8,100,000,000

2,427,699,600

2,427,699,600

-

USD/YEN

Baht

Baht

10,581,999,448

(865,048,652)

11,447,048,100

8,970,173,400

1,691,176,620

7,278,996,780

2,476,874,700

-

2,476,874,700

2006

4) Loan from overseas

installments

annual

commercial banks

25 semi-

3) Loan from overseas

Subsidiary

Total in the separate financial statements

-

-

branch of another foreign bank

2) Loan from local

branch of a foreign

1) Loan from local

14. LONG-TERM LOANS Long-term loans of the Company and its subsidiaries as at December 31, 2007 and 2006 consist of: Terms Repayable Maturity Currency Facility 2007 Commencement Date Date USD/YEN The Company

136


137

The Company’s loan On February 16, 2005, the Company entered into a Facility Agreement for Yen 8,100 million loan, carrying interest at JPY LIBOR plus a certain percentage per annum. The loan was swapped into Baht loan in the amount of Baht 2,964.6 million under the Cross Currency Rate Swap Agreement made with the lender (see Notes 22.2 1) and 22.3 1)). The above Facility Agreement contains normal covenants related to various matters such as the maintenance of tangible net worth, a certain gearing ratio, a certain debt service coverage ratio, and keeping secured indebtedness within a specified amount, etc. In addition, on February 16, 2005, Glow SPP 2 Company Limited and Glow SPP 3 Company Limited have issued letters of guarantee in respect of a joint obligation to guarantee and undertake to pay to the lenders under such agreement. On September 17, 2007, the Company sent a Prepayment Notice to the lender to prepay the whole amount of the loan on October 22, 2007. On October 2, 2007, the Company entered into a new Facility Agreement with local branch of another foreign bank to obtain a Yen 8,100 million loan, carrying interest at JPY LIBOR plus a certain percentage per annum. The loan was drawn down on October 22, 2007 and used for prepayment of the above mentioned Yen loan. The loan is guaranteed by Glow SPP 1 Company Limited, Glow SPP 2 Company Limited and Glow SPP 3 Company Limited (see Note 4.3). The new Facility Agreement contains normal covenants related to various matters such as the maintenance of tangible net worth and a certain net debt to equity ratio. The Subsidiary’s loans The subsidiary’s loans in No. 3) and 4) represent loans of Glow IPP Company Limited. For the loan in No. 3), the subsidiary entered into the Loan Transfer Coordination Agreement dated December 12, 2005, Comprehensive Amendment Agreement, Amended and Restated Common Terms Agreement and Commercial Bank Loan Facility Agreement dated December 15, 2005 with the overseas commercial banks as the Replacement Finance Parties. In respect to the Commercial Bank Loan Facility Agreement under the Comprehensive Amendment Agreement, the previous ERG Facility Agreement and the OND Facility Agreement were consolidated and the outstanding principal amounts were fully prepaid. As a consequence, as of the Amendment Date, total loan under the Commercial Bank Loan Facility Agreement was USD 151.2 million, including new granted loan of USD 8 million, and a further loan commitment of USD 66.5 million was still available. The loan carries interest at LIBOR plus a certain percentage per annum and payable semi-annually. On March 6, 2006 and May 15, 2006, the subsidiary drew down an additional amount of loans of USD 21 million and USD 45.5 million, respectively. On March 1, 2006, the Company entered into a Dollar Debt Service Reserve Guarantee agreement with an Offshore Collateral Agent, as agent for the lenders, of Glow IPP Company Limited to guarantee and undertake to the agent for the payments of Accrual Scheduled Debt Service when due, of which the guarantee facility amount shall not exceed 50 percent of the amount required for the Relevant Debt Service Reserve Account on that Repayment Date.


138

15.

For the loan in No. 4), on July 14, 2000, the subsidiary entered into loan agreements with a foreign financial institution, under the Common Term Agreement, Tranche EIB of USD 70.9 million which carries interest at cost of fund plus a fixed percentage per annum or fixed interest rate per annum depending on the type of interest rate chosen at the drawdown date. Such type of interest rate is fixed throughout the period of each drawdown, and payable semi-annually. The loan principal is repayable in 24 semi-annual installments in the amounts specified in the agreement from December 2002 to June 2014. On February 5, 2003, the subsidiary and the foreign financial institution agreed to reduce the loan facility from USD 70.9 million to USD 61.5 million and to change the repayment schedule to be 23 semi-annual installments from June 2003 to June 2014. On December 12, 2005, under the Loan Transfer Scheme, the Tranche EIB was amended only the EIB Guarantors. Glow IPP Company Limited entered into an EIB Guarantee Facility Agreement with various offshore banks to support its obligations under the EIB Finance Contract for an amount equal to 115 percent of the outstanding principal amount of the EIB Loans from time to time. All loans of Glow IPP Company Limited are secured by the mortgage of all of the land, construction, machinery and equipment (see Note 11), the pledge of deposits at financial institutions and current investments (see Notes 5 and 6), and the assignment of all rights and obligations under various agreements relating to the project. In addition, the loans are secured by the pledge of all shares of Glow IPP Company Limited, of which 95 percent are owned by Glow Company Limited and 5 percent by other shareholders. The loan agreements contain normal covenants related to various matters, such as the maintenance of certain debt to equity ratio, the maintenance of certain debt service coverage ratio, and the project completion period. The subsidiary entered into interest rate swap agreements for the USD loan in No. 3) (see Note 22.3 2)).

CONVERTIBLE DEBENTURES Convertible debentures as at December 31, 2006 consist of:

USD Convertible debentures 30,000 Provision for repurchase of convertible debentures 9,485 Less Current portion of convertible debentures

Baht 1,086,924 410,750 1,497,674 (1,497,674) -


139

On February 12, 1997, the Company issued 120,000 units of convertible debentures of USD 1,000 each to overseas investors totaling USD 120 million with interest at the coupon rate of 2.5 percent per annum. The debentures are due for redemption within 10 years and could be converted into ordinary shares from July 1, 1997 to January 31, 2007 at a current conversion price of Baht 48 per share. The exchange rate to be used for conversion is USD 1 for Baht 25.87. The debentures carry a call option allowing the Company the option to wholly or partially redeem them at anytime on or after February 12, 2000 at their principal plus accrued interest under certain conditions that the closing price of its shares on the Stock Exchange of Thailand has to be at least 140 percent of their conversion price in effect on each such trading day for 30 consecutive trading days. The debentures also carry a put option allowing the bondholders the option to have their debentures redeemed at 127.478 percent on their face value in USD on February 12, 2002. The USD 56.59 million and USD 63.38 million of the convertible debentures were repurchased by the Company in 2000 and early redeemed by the bondholders on February 12, 2002, respectively. The above convertible debentures were due and redeemed on February 12, 2007. 16. DEBENTURES Debentures as at December 31, 2007 and 2006 consist of: Unit : Baht Consolidated and The Separate financial statements 2007 2006 Debentures No. 1/2550 2,000,000,000 - Less Deferred debentures issue expenses (7,516,530) - Debentures No. 1/2546 and No. 2/2546 8,400,000,000 11,000,000,000 Less Deferred debentures issue expenses (19,107,401) (31,672,904) Current portion of debentures (2,600,000,000) (2,600,000,000) 7,773,376,069 8,368,327,096 Debentures No. 1/2550 On May 21, 2007, the Company issued 2,000,000 units of unsubordinated and guaranteed debentures with a debentureholders’ representative in the named-registered certificate at the face value of Baht 1,000 each, totaling Baht 2,000 million. These were offered exclusively to institutional or large investors. The debentures have a 10-year term and will be due for redemption on May 21, 2017. The debentures have a coupon rate at a certain percentage per annum, payable semi-annually commencing November 21, 2007. The debentures are guaranteed by Glow SPP 1 Company Limited, Glow SPP 2 Company Limited and Glow SPP 3 Company Limited according to the letter of guarantee issued by them in respect of a joint obligation to guarantee and undertake to pay to the debentureholders’ representative in respect of the debentures. The above debentures stipulate certain covenants such as the maintenance of tangible net worth, the maintenance of a certain gearing ratio and the maintenance of a certain debt service coverage ratio.


140

Debentures No. 1/2546 and No. 2/2546 The Company entered into a Placement Agreement dated June 30, 2003 and amendments to the Placement Agreement dated September 19, 2003, September 26, 2003, and November 17, 2003, respectively, with two local financial institutions to offer guaranteed amortising debentures of Baht 12,300 million, at a price of Baht 1,000 each and to issue Bills of Exchange. On September 30, 2003, the Company issued 6,500,000 units of the debentures at a price of Baht 1,000 each, totaling Baht 6,500 million (Debentures No. 1/2546). These were offered by way of private placement to institutional or specific investors. The debentures have a maturity of 5 years and the principal is repayable in eight semi-annual instalments commencing April 1, 2005 and have a coupon rate at a certain percentage per annum, payable semi-annually commencing April 1, 2004. On December 11, 2003, the Company issued 5,800,000 units of the debentures at a price of Baht 1,000 each, totaling Baht 5,800 million (Debentures No. 2/2546). These were offered by way of public offering and private placement to institutional investors. The debentures consist of: - 2,310,000 units of Tranche 1 at a price of Baht 1,000 each, totaling Baht 2,310 million, with a term of 5 years 9 months and 20 days. The Debentures are repayable on April 1 and October 1, 2009, and have coupon rate at a certain percentage per annum, payable semi-annually commencing April 1, 2004. - 3,490,000 units of Tranche 2 at a price of Baht 1,000 each, totaling Baht 3,490 million, with a term of 7 years. The Debentures are repayable on December 11, 2010 and have coupon rate at a certain percentage per annum, payable semi-annually commencing June 11, 2004. The debentures No. 1/2546 and No. 2/2546 were issued for financial support to Glow SPP 2 Company Limited and Glow SPP 3 Company Limited. On September 29, 2003, both subsidiaries issued a letter of guarantee in respect of a joint obligation to guarantee and undertake to pay to the debentureholders representative in respect of the debentures. The above debentures stipulate certain covenants such as the maintenance of tangible net worth, the maintenance of a certain gearing ratio, the maintenance of a certain debt service coverage ratio and keeping of trade-related secured indebtedness within a specified amount. Under the above Placement Agreement and Amendment Agreements, an amount of Baht 369 million was received by the Company from both financial institutions for the difference between pricing of debentures and bills of exchange, and Benchmark Pricing. The amount was included in other non-current liabilities in the balance sheets and is being accreted against interest expense over the term of debentures.


141

17. RECONCILIATION OF DILUTED EARNINGS PER SHARE The calculation of diluted earnings per share for the year ended December 31, 2006 is as follows: Consolidated The Separate financial statements “Restated” “Restated” “Restated” Weighted average Weighted average number of Earnings number of Earnings Net profit ordinary shares per share Net profit ordinary shares per share Baht Shares Baht Baht Shares Baht Basic earnings per share Net profit 5,596,385,201 1,462,865,035 3.83 3,591,052,752 1,462,865,035 2.45 Effect of dilutive potential ordinary shares Convertible debentures (122,253) 16,169 (122,253) 16,169 Diluted earnings per share Net profit of ordinary shareholders assuming the conversion of dilutive potential ordinary shares 5,596,262,948 1,462,881,204 3.83 3,590,930,499 1,462,881,204 2.45 The diluted earnings per share for the year ended December 31, 2007 has not been calculated as the convertible debentures were due and redeemed on February 12, 2007. 18. LEGAL RESERVE 18.1 Pursuant to Section 116 of the Public Limited Companies Act B.E. 2535, the Company is required to set aside a legal reserve of at least 5 percent of net earnings after deducting accumulated deficit brought forward (if any) until the reserve reaches 10 percent of the registered share capital and the reserve is not available for distribution as dividends. 18.2 According to the Civil and Commercial Code, subsidiary companies are required to set aside a legal reserve of at least 5 percent of net earnings at each dividend payment until the reserve reaches 10 percent of the registered share capital. Such reserve is not available for distribution as dividends. 19. DIVIDEND PAYMENT On August 9, 2007, the Board of Directors’ meeting of the Company passed a resolution to distribute an interim dividend from profit for the six-month period ended June 30, 2007 at Baht 0.60 per share, totaling Baht 877.7 million. The dividend was paid on September 7, 2007.


142

The annual general shareholders’ meeting of the Company passed a resolution to distribute dividends as follows: Shareholders’ Baht Amount Dividend Meeting Date per share (Million Baht) payment date April 25, 2007 1.575 2,304.0 May 25, 2007 for Baht 0.975 per share and September 8, 2006 for Baht 0.60 per share *

April 28, 2006

2.250

3,291.4

May 26, 2006

* The interim dividend of Baht 0.60 per share totaling Baht 877.7 million was paid following the resolution of the Board of Directors’

meeting of the Company on August 9, 2006.

20.

PROVIDENT FUND EXPENSE Provident fund contributions made by the Company and its subsidiaries for their employees and recorded as expense in the income statements for the years ended December 31, 2007 and 2006 are as follows: Unit : Million Baht

Company’s name Consolidated

2007

The Separate financial statements

2006

2007

2006

Glow Energy Public Company Limited

1.7

1.4

1.7

1.4

Glow SPP 1 Company Limited

0.9

0.8

-

-

Glow SPP 2 Company Limited

1.2

1.2

-

-

Glow SPP 3 Company Limited

0.5

0.6

-

-

Glow IPP Company Limited

0.7

0.9

-

-

Glow Company Limited

7.7

6.7

-

-


143

21. PROMOTIONAL PRIVILEGES The Company and all of subsidiaries have been granted various promotional privileges under the Investment Promotional Act, B.E. 2520 by the Board of Investment under the promotion certificates as follows:

Company’s name

Glow Energy Public Company Limited

Certificates No.

1st Income Dated

Privileges

Date

1413/2537

July 11, 1994

May 1995

a) to g)

1392/2538

June 23, 1995

January 1996

a) to g)

1206(2)/2547

March 9, 2004

July 2004

a) to g)

1635(2)/2547

August 9, 2004

December 2005

a) to g)

1609(2)/2550

June 18, 2007

-

a) to g)

2155/อ./2550

November 16, 2007

-

a) to b)

Glow Company Limited

1479/2546

September 4, 2003

-

a)

Glow SPP 1 Company Limited

1032/2539

January 22, 1996

September 1997

a) to g)

1532/2539

July 24, 1996

July 1998

a) to g)

Glow SPP 2 Company Limited

1744/2539

November 6, 1996

August 1997

a) to g)

Glow SPP 3 Company Limited

1222/2536

November 5, 1993

July 1994

a) to g)

1552/2540

August 22, 1997

August 1999

a) to g)

Glow IPP Company Limited

1526/2542

November 30, 1999

January 2003

a) to d)

Glow Demin Water Company Limited

1213/2542

May 21, 1999

May 1999

a) to g)

1235(2)/2549

March 2, 2006

July 2006

a) to g)

Subject to certain imposed conditions, the privileges include the following: a) Permission to own land in order to carry on the promoted activities as the Board may deem appropriate. b) Exemption of import duty on machinery, materials and supplies imported for production for domestic sales as approved by the Board. c) Exemption of corporate income tax on net profit for a period of eight years commencing from the date of earning operating income. In cases where the business incurs a loss during that period of exemption, the loss incurred in such period can be taken as a deduction from net profit of the years after the period of exemption, not exceeding 5 years. d) Exemption of income tax on dividends paid from the profit of the promoted operation for a period of eight years. e) An allowance of fifty percent of the normal rate of corporate income tax on net profit for a period of five years after the expiry date of the corporate income tax exemption period as described in c) above. f) Permission to deduct double the cost of transportation, electricity and water supply for corporate income tax purpose for a period of ten years commencing from the date of earning operating income. g) Permission to deduct the cost of installation or construction of public utilities at the rate of twenty-five percent in addition to normal depreciation charges.


144

As Glow SPP 3 Company Limited sold its Phase 1 water plant to the Company in June 2007, therefore, on November 16, 2550, Glow SPP 3 Company Limited transferred the remaining privileges under the promotion certificate No. 1222/2536 dated November 5, 1993 to the Company. All the Company’s sales are domestic sales, which are allocated to promoted and non-promoted activities as follows: Unit : Baht The Separate financial statements 2007 2006 Promoted Non-promoted Promoted Non-promoted activities Activities Total activities activities Total Revenues from 9,287,273,470 1,310,632,458 10,597,905,928 8,791,683,027 1,286,677,432 10,078,360,459 the sales of goods 22. DISCLOSURE OF FINANCIAL INSTRUMENTS 22.1 Credit risk Credit risk is the risk arising from the inability of a counterparty of the Company and its subsidiaries to meet the terms of a financial instrument, causing the Company and subsidiaries to incur a financial loss. It is the policy of the Company and its subsidiaries to enter into financial instrument contracts only with creditworthy counterparties. Although the Company and its subsidiaries are subject to significant concentrations of credit risk, as almost all sales are made to Electricity Generating Authority of Thailand (EGAT) and companies in the petrochemical industry, the Company and its subsidiaries do not expect to incur material credit losses on their risk management or other financial instruments. As at December 31, 2007 and 2006, the maximum exposure to credit risk in the event the counterparties fail to perform their obligations is the carrying amount of the financial assets as stated in the balance sheets. 22.2 Foreign currency risk The exposure to foreign currency risk relates primarily to purchases of equipment, repairs and maintenance of power plants and loans denominated in foreign currencies. In order to hedge the foreign currency risk, the Company and its subsidiaries entered into currency swap agreements and forward foreign exchange contracts, of which the details are as follows: 1) On February 16, 2005, the Company entered into a cross currency interest rate swap agreement with a financial institution to swap the Company’s long-term loan of Yen 8,100 million for a Baht 2,964.6 million loan. The term of the agreement is from February 18, 2005 to December 30, 2011. On September 4, 2007, the Company and the financial institution agreed to restructure the swap agreement (see Note 22.3 1)). 2) On January 23, 2007, the Company entered into forward foreign exchange contracts with three financial institutions for the USD amount of the Offshore Supply Contract for construction of new Power Plant. The outstanding balances of the forward contracts as at December 31, 2007 are as follows:


145

Unit : Million

Value date

Contract amount

USD

Baht

February 1, 2008

11.0

396.9

April 1, 2008 - August 1, 2008

41.7

1,491.6

November 1, 2008 - March 1, 2010

41.0

1,462.8

As the payment term of the construction will be extended, therefore on September 20, 2007, the Company entered into a forward foreign exchange contract with one of the above financial institutions for the extended payment term as follow:

Value date

Unit : Million

February 1, 2008

Contract amount USD

1.2

Baht 41.9

3)

Glow IPP Company Limited has forecasted the payments of the spare parts for scheduled major maintenance in Swiss Franc currency (CHF) while its revenues are mainly indexed to the USD currency. To manage the risk incurring from exchange rate fluctuations between both currencies, the subsidiary entered into forward foreign exchange contracts with a financial institution, of which the outstanding balances as at December 31, 2007 are as follows:

Contract period

Unit : Million

CHF

USD

May 8, 2006 – April 1, 2008

17.6

15.3

May 8, 2006 – June 2, 2008

20.1

17.6

Furthermore, Glow IPP Company Limited gradually entered into forward foreign exchange contracts with the above financial institution to exchange the above USD amounts for Baht amounts. The outstanding balances of the forward contracts as at December 31, 2007 are as follows: Unit : Million

Value date

Contract amount

USD

April 1, 2008

14.0

503.2

June 2, 2008

13.5

478.7

Contract amount

Baht

As at December 31, 2007 and 2006, the Company and its subsidiaries have net current liabilities in foreign currencies which are not hedged against foreign exchange rate risk as follows: Unit : Million

Foreign Currencies

2007

2006

USD

3.1

5.0

EUR

0.4

0.4

CHF

0.5

2.4

SEK

-

0.2


146

22.3 Interest rate risk Interest rate risk is the risk whereby future movements in market interest rates will have an effect on the operating results and cash flows of the Company and its subsidiaries. Financial instruments of the Company and its subsidiaries with floating interest rates comprise deposits at financial institutions, and long-term loans. In order to hedge interest rate risks of long-term loans, the Company and its subsidiaries entered into interest rate swap agreements, of which the details are as follows: 1) On February 16, 2005, the Company entered into a cross currency interest rate swap agreement with a financial institution (same agreement in Note 22.2 1)) to swap interest at JPY LIBOR plus a certain percentage per annum for THB-THBFIX plus a certain percentage per annum. The term of the agreement is from February 18, 2005 to December 30, 2011. On September 4, 2007, the Company and the financial institution agreed to restructure the swap agreement by swapping interest at JPY LIBOR plus a certain percentage per annum for a certain percentage per annum. The amended swap agreement shall be effective on February 18, 2008 until December 30, 2011. 2) On December 9, 2005, Glow IPP Company Limited entered into three interest rate swap agreements with three foreign banks for the USD loan under the Commercial Bank Loan Facility Agreement dated December 15, 2005 at the notional amount totaling USD 64.27 million, swapping interest at LIBOR for a certain percentage per annum. The interest rate swap agreements will be effective on December 15, 2008 and mature on June 15, 2018. In addition, other financial instruments of the Company and its subsidiaries, which have fixed interest rates, are deposits at financial institutions and current investments, which will be due within three months from the balance sheet date, and debentures. 22.4 Fair value of financial instruments Thai Accounting Standard No. 48, “Financial Instruments Disclosure and Presentation�, requires certain fair value disclosures. Considerable judgement is necessarily required in estimation of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amount that could be realized in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value. The following methods and assumptions were used by the Company and its subsidiaries in estimating fair value of financial instruments. Cash and cash equivalents, current investments, trade accounts receivable, other current assets, trade accounts payable, other current liabilities and long-term loans; the carrying values approximate their fair values. As at December 31, 2007 and 2006, the carrying values of currency swap agreements, interest rate swap agreements, forward foreign exchange contracts and debentures compared to their fair values, are as follows:


147

Unit : Million

Consolidated Contract amount Yen

CHF

USD

Baht

8,100.0

-

-

2,964.6

USD

Baht

Yen

USD

Baht

USD

Baht

rate swap agreement

- (624.8) 8,100.0

-

2,964.6

-

(624.8)

-

-

-

(5.5)

-

-

-

Forward foreign exchange

contracts

- CHF / USD

-

37.7

- USD / Baht

-

-

122.4

-

-

64.2

December 31, 2007 The Separate financial statements Fair value Contract amount Fair value Asset Asset (Liability) (Liability)

Cross currency interest

32.9

- 4,375.0

0.4

-

-

-

(7.2)

-

-

94.9

(10.4)

-

-

-

3,393.2

Interest rate swap agreements

- Note 22.3 2)

-

-

Unit : Million Consolidated Contract amount CHF

USD

Baht

USD

Baht

8,100.0

-

-

2,964.6

-

(625.5)

Yen

Baht

Baht

rate wap agreement

8,100.0

2,964.6

(625.5)

Forward foreign exchange

contracts

- CHF / USD

-

58.6

50.6

-

(1.2)

-

-

-

-

- USD / Baht

-

-

19.9

742.3

(0.7)

-

-

-

-

-

-

64.2

-

(7.5)

-

-

-

-

Interest rate swap agreements

Yen

Cross currency interest

ecember 31, 2006 D The Separate financial statements Fair value Contract amount Fair value Asset Asset (Liability) (Liability)

- Note 22.3 2)

Unit : Million

December 31, 2007 Consolidated and the Separate financial statements Carrying value Fair value Baht Baht

December 31, 2006 Consolidated and the Separate financial statements Carrying value Fair value Baht Baht

Debentures 1/2550

2,000.0

1,813.4

-

-

Debentures 1/2546

2,600.0

2,585.1

5,200.0

5,025.7

Debentures 2/2546 Tranche 1

2,310.0

2,322.2

2,310.0

2,202.2

Debentures 2/2546 Tranche 2

3,490.0

3,510.6

3,490.0

3,347.0

The fair value of debentures is determined by the last bid price on the Thai Bond Dealing Center on the last business day of the year.


148

23.

TRANSACTIONS WITH RELATED PARTIES A portion of the company’s business is represented by transactions with its related parties which have the same group of shareholders and directors. The financial statements reflect the effects of those transactions occur in the normal course of business based on the basis determined by the Company and its related parties. Significant balances and transactions between the Company and its related parties are as follows: Unit : Baht

Account name/ Company’s name

Relationship

As at December 31, Consolidated The Separate financial statements 2007 2006 2007 2006

Trade accounts receivable from related parties

Glow SPP 2 Company Limited

Subsidiary

-

-

Glow SPP 3 Company Limited

Subsidiary

-

-

Suez Energy Asia Company Limited

Related company

1,222,490

1,138,725

-

1,222,490

1,138,725

33,427,374

33,429,197

-

968,350

21,858,255

2,900,682

11,569,119

30,528,515

Advances to related parties

Glow Company Limited

Subsidiary

-

-

Glow SPP 2 Company Limited

Subsidiary

-

-

951,712

Glow SPP 3 Company Limited

Subsidiary

-

-

168,812,262

GHECO-One Company Limited

Suez-Tractebel S.A.

Subsidiary Major shareholder

-

- 18,351,963

-

-

66

-

2,767,890

-

2,767,890

-

2,767,890

-

172,531,930

19,320,313

Interest receivable from related parties

Glow SPP 1 Company Limited

Subsidiary

-

-

1,844,384

586,849

Glow SPP 2 Company Limited

Subsidiary

-

-

7,099,657

7,099,657

Glow SPP 3 Company Limited

Subsidiary

-

-

21,789,603

23,047,138

-

-

30,733,644

30,733,644

-

-

850,000,000

850,000,000

Long-term loans to related parties

Glow SPP 1 Company Limited

Subsidiary

Glow SPP 2 Company Limited

Subsidiary

-

-

1,499,951,198

1,499,951,198

Glow SPP 3 Company Limited

Subsidiary

-

-

3,665,048,802

3,665,048,802

-

-

6,015,000,000

6,015,000,000

Trade accounts payable to related parties

Glow SPP 2 Company Limited

Subsidiary

-

-

30,747,578

62,376,497

Glow SPP 3 Company Limited

Subsidiary

-

-

58,810,723

105,447,018

-

-

89,558,301

167,823,515

Advances from related parties

Glow SPP 1 Company Limited

Subsidiary

-

-

1,178,177

Glow SPP 2 Company Limited

Subsidiary

-

-

50,104

Glow SPP 3 Company Limited

Subsidiary

-

-

-

2,550

Glow Company Limited

Subsidiary

-

-

33,709,280

317,229

Glow IPP 2 Holding Company Limited

-

-

1,000,000

Suez-Tractebel S.A.

Major shareholder

12,773,152

15,599,792

5,057,744

2,809,815

Suez Energy Asia Company Limited

Related company

7,277,233

3,136,425

4,117,478

3,136,425

Suez University

Related company

347,642

-

-

South Sathorn Company Limited

Related company

Subsidiary

-

350,000

-

20,398,027

19,086,217

45,112,783

- 574,843

-

- - 6,840,862


149

Unit : Baht

Account name/ Company’s name

Relationship

As at December 31, Consolidated The Separate financial statements 2007 2006 2007 2006

Sales

Glow SPP 2 Company Limited

Subsidiary

-

-

65,726,165

26,347,327

Glow SPP 3 Company Limited

Subsidiary

-

-

99,644,013

39,682,679

Subsidiary

-

-

30,600,000

586,849

Glow SPP 2 Company Limited

Subsidiary

-

-

53,998,243

64,576,494

Glow SPP 3 Company Limited

Subsidiary

-

-

131,941,757

190,913,040

5,730,842

2,608,928

-

Interest income

Glow SPP 1 Company Limited

Service income

Suez Energy Asia Company Limited

Related company

-

Sale of spare parts

Glow SPP 1 Company Limited

Subsidiary

-

-

123,387

579,175

Glow SPP 2 Company Limited

Subsidiary

-

-

1,794,028

351,218

Glow SPP 3 Company Limited

Subsidiary

-

-

2,323,509

Glow IPP Company Limited

Subsidiary

-

-

17,646

-

Glow Demin Water Company Limited

Subsidiary

-

-

8,370

-

Glow SPP 2 Company Limited

Subsidiary

-

-

182,336,920

303,357,504

Glow SPP 3 Company Limited

Subsidiary

-

-

391,889,994

459,761,958

Purchases

377,141

Service expense

Suez-Tractebel S.A.

Major shareholder

8,463,567

8,043,725

4,308,107

2,809,815

Suez Energy Asia Company Limited

Related company

4,168,640

5,810,142

4,117,478

5,810,142

Suez University

Related company

347,642

-

-

-

South Sathorn Company Limited

Related company

9,179,545

4,550,000

-

-

-

113,206,229

(9,053,553)

-

Management fees

Glow Company Limited Suez-Tractebel S.A.

Subsidiary Major shareholder

- (444,056)

112,727,000 -

Purchase of spare parts

Glow SPP 1 Company Limited

Subsidiary

-

-

156,979

22,603

Glow SPP 2 Company Limited

Subsidiary

-

-

1,274,940

588,838

Glow SPP 3 Company Limited

Subsidiary

-

-

9,400,095

Glow IPP Company Limited

Subsidiary

-

-

288,568

-

Subsidiary

-

-

505,920,153

-

550,840

Purchase of water plant and related assets

Glow SPP 3 Company Limited

Dividend income

Glow Company Limited

Subsidiary

-

-

497,388,490

Glow SPP 2 Company Limited

Subsidiary

-

-

222,369,064

-

Glow SPP 3 Company Limited

Subsidiary

-

-

2,934,609,017

-

2,271,260,714


150

No interest is charged on advances with related parties. The Company and the related companies have determined prices of sales and purchases of electricity, steam and water to and from related companies based on average selling price charged to industrial customers of the Company and related companies. Management fees are determined based on the cost related to rendering services to the Company and its subsidiaries plus a certain margin. Sale of spare parts is determined based on cost plus a certain margin. On June 25, 2007, the Company purchased phase 1 water plant together with assets used for its operations, i.e. furniture, office equipments, tools and equipment, and spare parts, from Glow SPP 3 Company Limited. The assets were priced at Baht 513 million, determined based on an agreed price for water plant, net book value for furniture, office equipments, and tools and equipment, and cost for spare parts. In December 2007, a reduction of Baht 7.1 million was adjusted to the price as a result of actual cost subsequently incurred. 24. COMMITMENTS AND CONTINGENT LIABILITIES The Company and its subsidiaries have commitments and contingent liabilities as follows: 24.1 Commitments 24.1.1 Significant power purchase agreements The Company and its subsidiaries entered into Power Purchase Agreements (PPAs) with the Electricity Generating Authority of Thailand (EGAT). Each of the agreements is effective commencing from the month in which electricity was sold to EGAT. The Company and its subsidiaries have provided letters of guarantee issued by banks to guarantee their performance as specified in the PPAs as below:

Company’s name

Date of

Number of

Agreement

Bank

Agreement

Agreements

Term

guarantee

(Years)

Million Baht

21

326.2

Glow Energy Public Company January 7, 1998 2

Limited

Glow SPP 1 Company Limited

February 1, 1996

2

23

199.3

Glow SPP 2 Company Limited

December 23, 1997

2

25

217.4

Glow SPP 3 Company Limited

December 23, 1997

2

25

455.8

Glow IPP Company Limited

November 19, 1997

1

25

Not required


151

24.1.2 Power, steam and water supply agreements among the group of companies On December 25, 2006, Glow SPP 1 Company Limited, Glow SPP 2 Company Limited, Glow SPP 3 Company Limited and the Company jointly entered into Back-up Agreements for supply of electricity, steam, clarified water and demineralized water among them. Such agreements shall be effective for the period of 25 years starting from January 1, 2004. 24.1.3 Gas purchase agreements 1) The Company and its subsidiaries entered into Gas Purchase Agreements with PTT Public Company Limited (PTT) detailed as follows: Company’s name Date of Number of Agreement Agreements Glow Energy Public Company Limited November 22, 1999 1

Term/ Renew Years 21/ 4

Glow SPP 1 Company Limited October 1, 1998

1

21/ 4

September 28, 1999

1

21/ 4

December 12, 1997

1

25

Glow SPP 2 Company Limited Glow IPP Company Limited

2) 3)

Under the agreements, the Company and its subsidiaries are committed to purchase gas at a specified quantity and price starting from the Gas Commercial Utilization Date. On September 7, 2005, the Company entered into a Memorandum of Purchase of Natural Gas with PTT to purchase gas for power plant expansion project 1 and 2 of the Company at a quantity and price as stipulated in the Memorandum for a period of not less than 15 years starting from December 1, 2004 (Gas Commercial Utilization Date of Expansion Project 1). On January 15, 2004, Glow SPP 3 Company Limited entered into a Gas Purchase Agreement with PTT to purchase gas at the quantity and price as stipulated in the Agreement for a period of 5 years starting from January 1, 2004. On January 15, 2007, Glow SPP 3 Company Limited and PTT agreed to terminate the above Gas Purchase Agreement and entered into a new Gas Purchase Agreement to purchase gas at the quantity and price as stipulated in the Agreement for a period of 5 years starting from November 1, 2006. On July 27, 2007, Glow SPP 3 Company Limited, PTT and the Company entered into an assignment agreement to assign all rights and obligations under the Gas Purchase Agreement to the Company, whereby the assignment shall be effective starting from June 25, 2007.


152

24.1.4 Coal purchase agreements 1) Glow SPP 3 Company Limited is committed under Coal Supply Agreement dated December 17, 1997, Amendment No.1 dated April 8, 1999, Amendment No.2 dated September 6, 2002 and Amendment No. 3 dated December 15, 2006 to purchase coal from a local company at a specified quantity and price until December 31, 2014, renewable for another 10 years. 2) Glow SPP 3 Company Limited entered into three coal supply agreements dated February 1, 2005, November 10, 2005 and November 22, 2007 with an overseas company to purchase coal at the quantity and price as stipulated in the agreements for the period of 3 years each commencing from January 1, 2005 to December 31, 2007, January 1, 2006 to December 31, 2008, and January 1, 2008 to December 31, 2010, respectively. 24.1.5 Back-up power purchase agreements Glow SPP 2 Company Limited, Glow SPP 3 Company Limited and the Company entered into Back-up Power Purchase Agreements with EGAT to purchase back-up power at the quantity and price as stipulated in the agreements. The agreements are for a period of 1 year, renewable every year and are detailed as follows:

Company’s Name

Agreement Date

Effective Date

Glow Energy Public Company Limited

Number of Agreement

February 2, 2004

October 1, 2003

2

Glow SPP 2 Company Limited

March 22, 2002

January 1, 2001

2

Glow SPP 3 Company Limited

February 2, 2004

October 1, 2003

2

On September 30, 2004, the Company and three subsidiaries jointly entered into an agreement with EGAT to settle the dispute regarding the interconnection of the power and steam systems of the Group. Under the agreement, Glow SPP 2 Company Limited, Glow SPP 3 Company Limited and the Company agreed to purchase additional back-up power from EGAT at a quantity specified in the agreement. Subsequently, on February 2, 2005, the Company and both subsidiaries made amendments to the Back-up Power Purchase Agreements with EGAT to revise the quantity of back-up power and to purchase the back-up power over the periods as follows:

Company’s name Glow Energy Public Company Limited

Project

Period up to

1

March 31, 2017

2

September 30, 2017

Glow SPP 2 Company Limited

1

March 28, 2024

2

April 25, 2024

Glow SPP 3 Company Limited

1

August 31, 2024

2

March 19, 2025

In the event the PPAs are terminated before the above date, the back-up power purchase agreements will be consequently terminated.


153

24.1.6 Pipe rack agreements 1) On August 30, 2007, the Company entered into an agreement with PTT Public Company Limited for right of use of structure for piping of PTT for its pipeline system for a period of 15 years commencing January 1, 2007 to December 31, 2021. The right of use fee, which is calculated following the calculation formula stipulated in the agreement, is to be paid semi-annually, of which the amount is approximately Baht 0.2 million, increase by 3 percent every year. 2) On September 1, 2004, the Company entered into a pipe rack agreement to lease the space in the piping support system from a local company for a period from June 1, 2005 to December 31, 2020, with an annual rental of Baht 4.5 million adjusted every year by 5 percent. 3) On September 29, 2005, Glow SPP 3 Company Limited entered into an agreement with PTT Public Company Limited for right of use of structure for piping of PTT for its pipeline system for a period of 15 years commencing September 1, 2005 to August 31, 2020. The right of use fee, which is calculated following the calculation formula stipulated in the agreement, is to be paid semi-annually, of which the amount is approximately Baht 0.3 million, increase by 3 percent every year. 4) Glow SPP 1 Company Limited entered into a pipe rack agreement dated May 28, 1999, superseded the pipe rack usage agreement dated September 25, 1998, to lease the space in the piping support system from a local company for a period of 15 years from October 1, 1998 to September 30, 2013. The right of use fee of Baht 8.6 million was paid by the subsidiary and recorded as deferred right of pipe rack usage. In addition, the subsidiary is liable to pay a semi-annual rental fee of approximately Baht 3 million, increase by 5 percent every year. On September 1, 2002 and September 28, 2006, the subsidiary entered into amendments No.1 and No.2, respectively, to the pipe rack agreement to lease more space and extend the period for another 8 years.


154

24.1.7 Construction and development 1) As at December 31, 2007 and 2006, the Company and its subsidiaries have outstanding commitments in respect of construction and improvement as follows: Unit : Million Baht

Company’s name

Commitments Amount

Glow Energy Public Company Construction and improvement

Limited

2007

2006

520.2

102.7

5.5

47.7

19.0

1.4

-

2.5

-

14.7

of power plant and transmission line

Glow SPP 3 Company Limited

Improvement of power plant system

Glow IPP Company Limited

Improvement of power plant system

Glow Demin Water Company

Limited

Construction of demineralised water system

Glow SPP1 Company Limited

Construction of steam piping and metering station

2) On August 7, 2000, Glow SPP 3 Company Limited entered into a joint agreement with the Industrial Estate Authority of Thailand (IEAT) to develop an area to construct a shipping berth at Map Ta Phut Industrial Estate. The construction of the dedicated berth for use in handling of coal, other raw materials and necessary goods has been completed and it commenced the operation on December 7, 2001. Glow SPP 3 Company Limited has the right to utilize this area for a period of 30 years, with the following benefits paid to IEAT: - Right of way fee for coal conveyor construction at Baht 1.3 million per annum, adjusted every 10 years by 10 percent. - Water front fees of Baht 23.6 million payable within 1 year, and fees of Baht 9.9 million per annum payable from 2001 to 2030. - Fee payable at a rate stipulated in the agreement for actual shipments made through the berth, and, from 2002, a minimum of at least an amount equivalent to 500,000 tons per year being shipped through the berth is to be paid. In addition, the ownership of the dedicated berth will be transferred to IEAT in the fifteenth year from the date of commencing the operations, without any compensation.


155

3) On January 22, 2007, the Company entered into Offshore Supply Contract and Onshore Construction Contract with an overseas company for construction of a new 115 MW CFB Power Plant, of which the contract prices are USD 122.5 million and Baht 1,575.6 million, respectively. As at December 31, 2007, the Company had outstanding commitments of USD 94.9 million and Baht 1,205.4 million. 24.1.8 Lease agreements 1) The Company and its subsidiaries entered into land lease agreements with the Industrial Estate Authority of Thailand (IEAT) for the construction of power plants and power substation and to operate an electricity and steam generation business as follows: Company’s name Date of Agreement Term/ Lease/ Guarantee

Renew

Year

Cash Bank Guarantee

Years

Million Million Million Baht

Baht

Baht

Glow Energy Public Company Limited,

Glow SPP 2 Company Limited

and Glow SPP 3 Company Limited

December 19, 2007

30

7.6

7.6

7.6

Glow Energy Public Company Limited

June 5, 2007

13

1.0

1.0

1.0

Glow Energy Public Company Limited

April 4, 1994

26/ 20

0.5

0.5

0.5

Glow SPP 2 Company Limited

August 13, 1998

28

0.5

0.5

0.5

27/ 20

0.7

-

1.3

28

30.9

-

46.4

(started September

30, 1996)

Glow SPP 3 Company Limited

June 1, 1993 December 6, 1996

Glow SPP 2 Company Limited

and Glow SPP 3 Company Limited

On June 5, 2007, the lease agreement of Glow SPP 3 Company Limited dated June 1, 1993 was terminated. On July 11, 2003, the Company and both subsidiaries entered into an addendum attached to the above Lease Agreement dated December 6, 1996, whereby both subsidiaries allowed the Company to join as a counterparty of the lease agreement.


156

2) On January 23, 2007, the Company and Glow SPP 3 Company Limited jointly entered into an agreement with IEAT for right of use of the land for laying their power transmission line for a period of 30 years commencing January 15, 1996 to November 30, 2024, renewable for another 20 years, with an annual fee of approximately Baht 2.2 million, adjusted by 10 percent every 10 years. The fee for the period from January 15, 1996 to January 14, 2008 of Baht 27.2 million was paid in January 2007. 3) On February 15, 2005, Glow SPP 3 Company Limited entered into a land lease agreement with PTT Public Company Limited to lease the land where its network of power transmission line systems are erected for a period of 20 years starting from January 1, 2005 to December 31, 2024. The subsidiary has to pay an annual rental fee of Baht 5.4 million, adjusted every year by 2 percent after the tenth year of the lease agreement. 4) On June 1, 2007, Glow Company Limited entered into two agreements with a company for lease and service of building space for a period of 2 years commencing June 1, 2007 to May 31, 2009 with a monthly fee of Baht 1.5 million. 5) As at December 31, 2007 and 2006, the Company and its subsidiaries had outstanding commitments in respect of software licenses, lease of vehicles, and other services agreements totaling approximately Baht 146.5 million and Baht 151.9 million, respectively. 24.1.9 Maintenance service agreements 1) On April 20, 2004, the Company and Glow SPP 2 Company Limited entered into the Long Term Parts and Long Term Service Agreements (LTSAs) with a local company in order for provision of parts and maintenance services of Gas Turbine Units and their associated equipments. The term of the LTSAs is determined by the number of hours that such Cover Unit is operated (Factored-Fired Hour) and number of Major Inspection as specified in the agreements. The provision of services commenced in January 2005. The contract price consist of a fixed Thai Baht monthly fee and variable monthly fee in both USD and Baht currency as specified in the agreements. These prices are subject to escalation in accordance with the terms of the LTSAs. 2) On December 27, 2002, Glow SPP 3 Company Limited entered into the Hot Loop Refractory Maintenance Service Contract with Foster Wheeler International Corporation (FW). FW will provide maintenance services of two CFB Boilers and other related services required. The term of such contract is 72 months commencing from January 2003. The total contract prices are USD 0.9 million and Baht 21.2 million.


157

24.1.10 Support service agreements 1) The Company and six subsidiaries (“Glow Group”) jointly entered into Support Services Agreement and Engineering Services Agreement on May 3, 2005 with Suez-Tractebel S.A. (“Suez”), whereby Suez shall provide consulting services in respect of engineering, operational, financial and auditing system, investment, project finance, insurance, etc. The service fee shall be in Euro currency. The service agreements will be determined in the hourly rate depend on the type of services. The term of the agreements is 5 years from the execution date, automatically renewed for successive one - year term unless termination is notified by either party. Nevertheless, the agreements shall be terminated on the date that Suez holds directly or indirectly less than 25 percent of the shares of Glow Group. 2) Glow IPP Company Limited entered into a technical support agreement with Suez-Tractebel S.A. for the operation and maintenance of its facility. The subsidiary has to pay an annual fixed service fee and monthly variable service fees based on actual costs incurred. The agreement will be terminated when each party has notified of the termination in written form. 24.1.11 Utilities Agreement Glow IPP Company Limited entered into a utility agreement with a local company for the service on basic infrastructure, purchase of raw water, potable water, process wastewater and other services for the period of 25 years commencing from the commercial operation date, which was January 31, 2003. The subsidiary has to pay service fees as specified in the agreement. 24.1.12 Purchase of spare parts In February 2007, Glow IPP Company Limited issued 4 purchase orders to an overseas supplier to purchase spare parts to be used for major maintenance in February 2008 in the amount totaling CHF 49 million. An advance payment of 25 percent of CHF 12.3 million was paid in April 2007. The remaining amount of CHF 19.6 million and CHF 17.1 million will be paid when the parts are ready for delivery and after receipt of the parts, respectively. In April 2007, Glow IPP Company Limited issued another 2 purchase orders to the above overseas supplier to purchase spare parts to be used for major maintenance in June and August 2008 in the amount totaling CHF 2.8 million. An advance payment of 25 percent of CHF 0.7 million was paid in November 2007. The remaining amount of CHF 1.1 million and CHF 1.0 million will be paid when spare parts are ready for delivery and after receiving of the parts, respectively.


158

24.2 Contingent liabilities 24.2.1 Letters of guarantee As at December 31, 2007 and 2006, there were outstanding letters of guarantee issued by banks on behalf of the Company and its subsidiaries in respect of certain performance bonds as required in the normal course of business of the Company and its subsidiaries as follows: Unit : Million Baht

Company’s name Amount

2007

2006

Glow Energy Public Company Limited

812.2

345.5

Glow SPP 1 Company Limited

203.3

203.3

Glow SPP 2 Company Limited

240.6

240.6

Glow SPP 3 Company Limited

489.0

488.8

Glow IPP Company Limited

6.8

6.8

Glow IPP 2 Holding Company Limited and another shareholder

Glow Energy Public Company Limited and six subsidiaries

330.0 2.0

- 2.0

The above bank guarantee of Glow IPP 2 Holding Company Limited of Baht 330 million is guaranteed by the Company in the amount not exceeding Baht 214.5 million. 24.2.2 Others 1) On October 17, 2007, the Company, Glow SPP 2 Company Limited, Glow SPP 3 Company Limited and GHECO-One Company Limited entered into a land option agreement to grant an option to GHECO-One Company Limited to acquire the leasehold right of approximately 32 rais of land at the price of Baht 96 million for construction and operation of 700 MW coal fired power plant under the Thai Independent Power Producer Program. The exercise of the option shall be within December 31, 2008. 2) On October 17, 2007, the Company and GHECO-One Company Limited entered into a coal storage land lease option agreement to grant an option to GHECO-One Company Limited to acquire the leasehold right of 44.7 rais of land at the price totaling approximately Baht 136.9 million. The exercise of the option shall be within March 31, 2009. 3) On June 6, 2006, the Company entered into a Memorandum of Understanding (MOU) with a local company, being an industrial estate owner, whereby, by December 31, 2006, both parties shall enter into an agreement for the sale and purchase of land of approximately 31 rais in the amount totaling Baht 81.25 million for the development of a new cogeneration power plant. Advance payment of Baht 8.1 million has been paid on the signing date of the MOU and another Baht 8.1 million has been paid on September 30, 2006. Under certain conditions of the MOU, the Company shall be granted two options; 1) to terminate the MOU by January 31, 2007, and all payments made shall be returned to the Company, or 2) to extend signing the Land Sale and Purchase Agreement until December 31, 2007, in the event that the Company fails to sign the agreement within that date, all payments made by the Company shall be confiscated.


159

On January 3, 2007, the Company sent a notice to exercise the option to extend signing the Land Sale and Purchase Agreement until December 31, 2007. On December 11, 2007, the Company sent the letter requesting to extend the term of the MOU to be until April 30, 2008. Accordingly, the signing of the Land Sale and Purchase Agreement will be postponed to be by April 30, 2008. 4) On December 23, 2005, Glow IPP 3 Company Limited (formerly Glow Hemaraj Energy Company Limited) entered into a Land Deposit Agreement with a local company, being an industrial estate owner, to reserve land of approximately 134 rais at the price as specified in the agreement totaling Baht 268 million to be used for the development of a new IPP Project. A down payment of Baht 26.8 million has been paid by the subsidiary. The term of the agreement is 18 months and can be extended for another 6 months with an additional down payment of Baht 8.9 million. In the event that the subsidiary decides not to purchase the land within the term of the agreement, 50% of the down payment shall be returned to the subsidiary. On June 29, 2007, the subsidiary entered into the Land Purchase and Sale Agreement to purchase 111.3 rais of the above reserved land at the amount totaling Baht 222.6 million. Baht 44.5 million and Baht 40.0 million were paid on the signing date and on December 15, 2007, respectively. The remaining amount of Baht 111.3 million will be paid on March 31, 2008. Under the Land Purchase and Sale Agreement, the subsidiary has an obligation to purchase approximately 22.7 rais of the land at the price of Baht 2 million per rai in the event that the land will not be used for EGAT power line installation. In case EGAT still has not made decision until the end of 2012, the subsidiary shall enter into the Land Purchase and Sale Agreement within 90 days from the end of 2012. In addition, the subsidiary shall be responsible for the cost of engineering expenses and construction of raw water pipeline, and process waste water facility and waste water collection pipeline system in excess of the standard capacity. 5) Glow IPP Company Limited has performed an offline water wash at a 1-3 month interval and EGAT has duly paid for the Availability Payment during the period of such operations. The Availability Payment during the offline water wash operations, received from EGAT starting from the commercial operation date up to May 2005, was approximately Baht 30 million. However, EGAT has made a new interpretation of the PPA and has argued that EGAT is not entitled to pay the Availability Payment. Accordingly, EGAT has not paid for the Availability Payment since invoice of June 2005 up to December 2007 totaling Baht 36.7 million. The subsidiary has sent a letter to EGAT requesting for payment of the over due balance with interest. EGAT has refused to pay. The subsidiary believes that it is clearly stated in paragraph 22 of Schedule 2 of the PPA that a reduction in output or availability due to offline water washing during the allowed transient period shall not result in deductions from the Full Availability Payment.


160

Due to the difference in interpretation, as aforementioned, both parties agreed to bring the matter to arbitration in an amicable manner. If the subsidiary loses the case in arbitration, it will lose availability payment on a recurrent basis of approximately Baht 30 million per year until the PPA is terminated.

25. FINANCIAL INFORMATION BY SEGMENT The Company’s and its subsidiaries’ operations involve a single industry segment, the production and distribution of electricity, steam and water for industrial use and being carried on in the single geographic area being Thailand. As a result, revenues, operating profits and identifiable assets as reflected in these financial statements pertain to the aforementioned industry segment and geographic area. 26. SUBSEQUENT EVENT 26.1 On January 21, 2008, Glow SPP 3 Company Limited entered into a Shared Facilities Agreement to provide and allow the use of its Facilities to GHECO-One Company Limited in operating its new power plant for a period of 25 years commencing from the date that will be agreed later. 26.2 On January 25, 2008, the extraordinary shareholders’ meeting of GHECO-One Company Limited passed a special resolution to increase the registered capital from Baht 100 million to Baht 324 million by issuing 22.4 million new ordinary shares with the par value of Baht 10 each. On the same date, the subsidiary sent a notice to call for payment of the capital increase from Glow IPP 2 Holding Company Limited in the following sequence: - Baht 36.4 million within January 2008 - Baht 109.2 million within May 2008 27. APPROVAL OF THE FINANCIAL STATEMENTS These financial statements have been authorized for issuance by Finance Executive Management on January 28, 2008.



Glow 07