the Company to make a loss on exchange rates (see details in Clause 15.2 : Risk of exchange rate fluctuation). 3. The Group founded Gunkul Powergen Co., Ltd. to operate the business of production and sale of electricity. In this regard, it has applied for sale of solar power to the Provincial Electricity Authority according to the project for purchase of power from very small power producers (VSPPs), with a total production capacity proposed for sale of 30.9 megawatts. Its Project 1, Phase 1, capacity of 3.0 mw has been operational since early 2011, while Project 1, Phase 2, capacity of 4.4 mw started distributing electrical power in late 2011. All the remaining projects, with total capacity of 23.5 mw are in the process of construction and expected to realize income since 2013 onwards. Expansion of electricity generating and selling business will affect the Company’s future financial status and business performance in 3 manners, i.e. income structure, investment structure and cash flow, as follows:- • The Group will receive higher income from the sale of electricity which is proportional to the amount of electricity sold, leading to changes in the Group’s future income structure. The aforementioned income fluctuations depend on the Company’s capacity to generate electricity. • The Company has obtained investment funds for the power plant projects, capacities of 3.0 mw and 4.4 mw, at Petchaboon province by incurring debts, which can be calculated at a debt to equity ratio of approximately 2.5-3.0 times. In the initial period of this investment, the debt to shareholder equity may change from the current ratio, with the liability ratio being increased. Construction of solar power plants will require an investment of approximately 100-120 million baht per 1 mw of capacity. • As most expenses of the project are depreciations while realization of income from electricity sale is paid in cash, the Group’s cash flow generated from operations tends to increase in the future.
Gunkul Engineering Public Company Limited
GUNKUL_2012 GUNKUL ENGINEERING PCL Annual Report 2012