Enclosure 2
Information Memorandum about the Acquisition of Assets and Connected Transaction of TPC Power Holding Public Company Limited
About
Investment in the biomass power plant project
TPC Power Holding Public Company Limited
Information Memorandum about the Acquisition of Assets and Connected Transaction of TPC Power Holding Public Company Limited
The Board of Directors’ Meeting of TPC Power Holding Public Company Limited (“the Company”) No. 6/2017, held on 2 August 2017, resolved to approve the Company’s subsidiaries - TPCH Power 1 Company Limited (“TPCH 1”), TPCH Power 2 Company Limited (“TPCH 2”), TPCH Power 5 Company Limited (“TPCH 5”), and Pattani Green Company Limited (“Pattani Green”) – to invest in the construction of biomass power plants (“the Biomass Power Plant Project”) as detailed in the following:
1.1. TPCH 1 will construct a very small biomass power plant (VSPP) with the generating sales capacity not exceeding 9.2 MW at Budi, Muang Yala District, Yala Province under a total budget of Baht 800,000,000 (Eight hundred million Baht).
1.2. TPCH 2 will construct a very small biomass power plant (VSPP) with the generating sales capacity not exceeding 9.2 MW at Budi, Muang Yala District, Yala Province under a total budget of Baht 788,000,000 (Seven hundred and eighty-eight million Baht).
1.3. TPCH 5 will construct a very small biomass power plant (VSPP) with the generating sales capacity not exceeding 6.3 MW at Bang Por, Muang Narathiwat District, Narathiwat Province under a total budget of Baht 648,000,000 (Six hundred and forty-eight million Baht).
1.4. Pattani Green will construct a small biomass power plant (SPP) with the generating sales capacity not exceeding 21 MW at Lipasa-ngo, Nong Chik District, Pattani Province under a total budget of Baht 1,721,000,000 (One billion seven hundred and twenty-one million Baht).
Apart from the investment in the Power Plant Project being a transaction of the acquisition of assets of listed companies, the Subsidiaries will enter into a construction contract with Thai Polycons Public Company Limited (“Thai Polycons”), which is the Company’s connected person, for the construction of the biomass power plants. The Subsidiaries also purchase land from the connected person of the Subsidiaries as a construction site of the Power Plant Project.
As such the Company is obligated to disclose information concerning the aforementioned transactions. The details are stated below:
1. Information Memorandum List 1
(1) Date of the Transaction
The Subsidiaries will construct the Power Plant Project within October 2017 after the Company receives approval from the meeting of shareholders which will be held on 29 September 2017.
After the Subsidiaries are granted approval to purchase land from the connected person of the Subsidiaries, the Subsidiaries will be transferred ownership from the seller of all the land plots that will be used for the construction of the biomass power plant project within October 2017. TPCH 1 and TPCH 2 have been transferred ownership of most of the land on 23 June 2017 and Pattani Green has been transferred ownership of most of the land on 25 May 2017.
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(2) The Parties Involved and Relationship with the Listed Company
2.1. Entering the Construction Contract for the Power Plant Project
Client: 1. TPCH 1 2. TPCH 2 3. TPCH 5 4. Pattani Green
Contractor: Thai Polycons
Relationship with the Company: Thai Polycons is a major shareholder of the Company, who holds a total of 41.26 per cent of the Company’s total issued shares.
2.2. Land Purchase
Buyer: 1. TPCH 1 2. TPCH 2 3. Pattani Green
Seller: Mr. Sombat Chairatmanokorn
Relationship with the Subsidiaries: Mr. Sombat Chairatnanokorn holds 25 per cent of the registered capital of TPCH 1 and TPCH 2, and Mr. Sombat Chairatnanokorn and his connected persons holds 99 per cent of the registered capital of Narapara Company Limited who holds 25% of Pattani Green’s registered capital.
As TPCH 1, TPCH 2, and Pattani Green will construct biomass power plants in the three southern border provinces which are considered a risky region and different from other locations in which other subsidiaries have constructed a power plant. Moreover, the land needed is in large amount and it needs to be in the area suitable for the construction of a power plant. The area needs to be (1) close to the connection point and power lines; (2) close to the transport routes for the convenient transportation of fuel to the plant; (3) has sufficient amount of land for the construction of the power plant, the office building, the fuel storage and other related buildings; and (4) close to the fuel source to save the cost of the transportation of fuel to the power plant.
Mr. Sombat Chairatmanokorn is the owner of the business that buys and processes rubberwood in the local area for more than 20 years. He is familiar with the region and knows which location is suitable and safe for the construction of a power plant. Moreover, as Mr. Sombat Chairatmanokorn knows the local people, he has established credibility that can facilitate the purchase of land. He also agrees to find the land needed and take on the responsibility of being transferred the ownership of the land and paying the landowner on behalf of the Subsidiaries before the Subsidiaries receive the power purchase agreement from the Provincial Electricity Authority and Electricity Generating Authority of Thailand.
Apart from the hiring of Thai Polycons as the contractor of the Power Plant Project and the land purchase as mentioned above, the Subsidiaries will also purchase land, tools, and parts from the person and/or juristic person who is not a connected person in accordance with the Notification of the Capital Market Advisory Board No. Tor Jor. 21/2551 regarding Rules on Connected Transactions dated 31 August 2008 and its amendments, and the Notification of the
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Board of Governors of the Stock Exchange of Thailand regarding Disclosure and Compliance by Listed Companies relating to Connected Transactions B.E.2546 dated 19 November 2003 and its amendments.
(3) General Characteristics of the Transaction, Details of the Acquired Assets and the Value of the Acquired Assets
The Subsidiaries generate and distribute electricity from biomass and have entered a power purchase agreement (“PPA”) with the Provincial Electricity Authority and Electricity Generating Authority of Thailand. The details of the PPA are stated below:
1. TPCH 1 (the Company holds 65 per cent of TPCH 1’s registered capital) generates and distributes electricity from biomass with the sales capacity not exceeding 9.2 MW. TPCH 1 is located in Budi, Muang Yala District, Yala Province and has enter a PPA on the basis of Feed-in Tariff B.E.2559 (FiT) with the Provincial Electricity Authority as a very small power producer (VSPP). The PPA term is 20 years from the Commercial Operation Date. The Company also receives a FiT premium at the rate of Baht 0.30 per kWh for the duration of 8 years from the Commercial Operation Date and the Scheduled Commercial Operation Date (SCOD) set on 31 December 2018. The construction budget for this power plant is Baht 800,000,000 (Eight hundred million Baht), which includes the cost of land, construction, machinery, tools, and parts.
2. TPCH 2 (the Company holds 65 per cent of TPCH 2’s registered capital) generates and distributes electricity from biomass with the sales capacity not exceeding 9.2 MW. TPCH 2 is located in Budi, Muang Yala District, Yala Province and has enter a PPA on the basis of Feed-in-Tariff B.E.2559 (FiT) with the Provincial Electricity Authority as a very small power producer (VSPP). The PPA term is 20 years from the Commercial Operation Date. The Company receives a FiT premium at the rate of Baht 0.30 per kWhr for the duration of 8 years from the Commercial Operation Date with the Scheduled Commercial Operation Date (SCOD) set on 31 December 2018. The construction budget for this power plant is Baht 788,000,000 (Seven hundred and eighty-eight million Baht), which includes the cost of land, construction, machinery, tools, and parts.
3. TPCH 5 (the Company holds 65 per cent of TPCH 5’s registered capital) generates and distributes electricity from biomass with the sales capacity not exceeding 6.3 MW. TPCH 5 is located in Bang Por, Muang Narathiwat District, Narathiwat Province and has enter a PPA on the basis of Feed-in-Tariff B.E.2559 (FiT) with the Provincial Electricity Authority as a very small power producer (VSPP). The PPA term is 20 years from the Commercial Operation Date. The Company receives a FiT premium at the rate of Baht 0.30 per kWh for the duration of 8 years from the Commercial Operation Date with the Scheduled Commercial Operation Date (SCOD) set on 31 December 2018. The construction budget for this power plant is Baht 648,000,000 (Six hundred and forty-eight million Baht), which includes the cost of land, construction, machinery, tools, and parts.
4. Pattani Green (the Company holds 65 per cent of Pattani Green’s registered capital) generates and distributes electricity from biomass with the sales capacity of 21 MW. Pattani Green is located in Lipasa-ngo, Nong Chik District, Pattani Province. Pattani Green has entered into a non-firm PPA with the Electricity Generating Authority of Thailand for the duration of 5 years and to be renewed for the duration of 5 years at time. If Pattani Green fails to comply with any clause in the contract, EGAT will send a notice for remedy. If Pattani Green fails to remedy the misconduct, EGAT reserves
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the rights to terminate the contract. The Company will receive an adder rate at Baht 1.30 per kWh for the duration of 7 years from the Commercial Operation Date with the Scheduled Commercial Operation Date (SCOD) set on 1 March 2019. The construction budget for this power plant is Baht 1,721,000,000 (One billion seven hundred and twenty-one million Baht), which includes the cost of land, construction, machinery, tools, and parts.
The Subsidiaries will invest on the construction of the Power Plant Project under the PPA, with the investment budget detailed as follows:
1. TPCH 1 will construct a very small biomass power plant (VSPP) with the generating sales capacity not exceeding 9.2 MW under the total budget of Baht 800,000,000 (Eight hundred million Baht), which includes the cost of land, construction, machinery, tools and parts.
2. TPCH 2 will construct a very small biomass power plant (VSPP) with the generating sales capacity not exceeding 9.2 MW under the total budget of Baht 788,000,000 (Seven hundred and eighty-eight million Baht), which includes the cost of land, construction, machinery, tools and parts.
3. TPCH 5 will construct a very small biomass power plant (VSPP) with the generating sales capacity not exceeding 6.3 MW under the total budget of Baht 648,000,000 (Six hundred and forty-eight million Baht), which includes the cost of land, construction, machinery, tools and parts.
4. Pattani Green will construct a very small biomass power plant (VSPP) with the generating sales capacity not exceeding 21 MW under the total budget of Baht 1,721,000,000 (One billion seven hundred and twenty-one million Baht), which includes the cost of land, construction, machinery, tools and parts. Pattani Green has received the PPA on 17 August 2017.
The Subsidiaries’ investment in the Power Plant Project is considered an acquisition of assets of the Company in accordance with under the Notification of the Capital Market Advisory Board No. Tor Jor. 20/2551 regarding Rules for Entering into Substantial Transactions within the Definition of an Acquisition or Disposal of Assets dated 31 August 2008 and its amendments, and the Notification of the Board of Governors of the Stock Exchange of Thailand regarding Disclosure and Compliance by Listed Companies relating to Acquisition or Disposal of Assets B.E. 2547 dated 29 October 2004 (“Notification on Acquisition or Disposal”). The total size of the four transactions is equivalent to 83.58 per cent of the Company’s consolidated asset value (according to the audited consolidated financial statement ended 31 March 2017) and in the past 6 months the Company has not entered into any assets acquisition transaction. As such the transaction is considered an acquisition of assets type 1 of which the value is greater than 50 per cent but lower than 100 per cent of the Company’s consolidated asset value as of 31 March 2017. Therefore, the Company is required to prepare a relevant report disclosing minimum information memorandum specified in Schedule 1 of the Notification of Acquisition and Disposal and to seek approval from the shareholders’ meeting for an entry into such transactions with votes of not less than three-fourth of the total votes of shareholders in attendance and eligible for voting, excluding the interested shareholders’ votes.
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Calculation of the Transaction Size of the Investment in the Power Plant Construction Project
Subsidiary Calculation Transaction Size TPCH 1 800,000,000.00 x 100 16.90 per cent 4,734,445,898.99 TPCH 2 788,000,000.00 x 100 16.64 per cent 4,734,445,898.99 TPCH 5 648,000,000.00 x 100 13.69 per cent 4,734,445,898.99 Pattani Green 1,721,000,000.00 x 100 36.35 per cent 4,734,445,898.99 Total 83.58 per cent
Remark: The calculation of the size of each transaction is based on the Company’s consolidated total assets according to the audited consolidated financial statement as of 31 March 2017. The size of each transaction calculated by using the Company’s consolidated total assets according to the audited consolidated financial statement as of 30 June 2017 will be 16.21 per cent, 15.96 per cent, 13.31 per cent and 34.87 per cent (respectively), totalling 80.17 per cent.
Moreover, the Subsidiaries also employ Thai Polycons, who is the Company’s major shareholder to construct all 4 of the aforementioned power plants under a turnkey construction contract. The contract covers the civil engineering work, building construction, system installation, machinery installation, and testing. The value of the employment is detailed in the following:
1. TPCH 1 will enter into a construction contract for the construction of a very small biomass power plant (VSPP) with the generating sales capacity not exceeding 9.2 MW with the construction budget of Baht 667,150,000 (Six hundred and sixty-seven million, one hundred and fifty thousand Baht). 2. TPCH 2 will enter into a construction contract for the construction of a very small biomass power plant (VSPP) with the generating sales capacity not exceeding 9.2 MW with the construction budget of Baht 654,320,000 (Six hundred and fifty-four million, three hundred and twenty thousand Baht). 3. TPCH 5 will enter into a construction contract for the construction of a very small biomass power plant (VSPP) with the generating sales capacity not exceeding 6.3 MW with the construction budget of Baht 520,300,000 (Five hundred and twenty million, three hundred thousand Baht). 4. Pattani Green will enter into a construction contract for the construction of a small biomass power plant (SPP) with the generating sales capacity not exceeding 21 MW with the construction budget of Baht 1,331,000,000 (One billion three hundred and thirty-one million Baht).
The employment of Thai Polycons is considered a connected transaction in accordance with the Notification of the Capital Market Advisory Board No. Tor Jor. 21/2551 regarding Rules on Connected Transactions dated 31 August 2008 and its amendments, and the Notification of the Board of Governors of the Stock Exchange of Thailand regarding Disclosure and
TPC Power Holding Public Company Limited
Compliance by Listed Companies relating to Connected Transactions B.E.2546 dated 19 November 2003 (“Notification on Connected Transactions”). The calculation of the size of the four transactions in accordance with the Notification on Connected Transactions reveals the value of the transactions to be equivalent to 157.38 per cent of the Company’s net tangible asset value according as of 31 March 2017.
Subsidiary Calculation Transaction Size TPCH 1 667,150,000.00 x 100 33.09 per cent 2,015,924,366.57 TPCH 2 654,320,000.00 x 100 32.46 per cent 2,015,924,366.57 TPCH 5 520,300,000.00 x 100 25.81 per cent 2,015,924,366.57 Pattani Green 1,331,000,000.00 x 100 66.02 per cent 2,015,924,366.57 Total 157.38 per cent
Remark: The calculation of the size of each transaction is based on the Company’s consolidated total assets according to the audited consolidated financial statement as of 31 March 2017. The size of each transaction calculated by using the Company’s consolidated total assets according to the audited consolidated financial statement as of 30 June 2017 will be 32.63 per cent, 32.00 per cent, 25.45 per cent and 65.10 per cent (respectively), totalling 155.18 per cent.
As the Company submitted a bid for the power purchase agreement, according to the announcement of Energy Regulatory Commission about the request for tender to purchase power in the three southern border provinces and in four special districts in Songkhla province. There is a limited timeframe to find a suitable location for the construction of the biomass power plant, and to secure sufficient amount of land for the construction of the biomass power before the Provincial Electricity Authority inspects the connection point and evaluate the qualifications of the bidder. There is also a limitation in the accessibility of the region and communication with the local people. For these reasons, the Subsidiaries need a local person who is familiar with and knows the region well enough to secure the land, and so that EGAT will accept the request to sell electricity. To receive the acceptance Pattani Green needs to be able to:
(a) Find suitable lands, with the land title document or a clear permission letter for the use of the land from the person or related authorities;
(b) Have sufficient fund for the project;
(c) Be able to procure technology and;
(d) Be equipped to acquire fuel.
Because the Subsidiaries need to use a large amount of land for the construction of power plants and that there are limitations in accessing the area to find the land, TPCH 1, TPCH 2 and Pattani Green needs to purchase land from Mr. Sombat Chairatmanokorn (who is a connected person of the Subsidiaries). Mr. Sombat Chairatmanokorn is familiar with the area. With expertise and ability to access the local people, he helped to secure the land in time for the inspection of the connection point. Mr. Sombat Chairatmanokorn also agrees to pay for the expenses from securing the land to make sure that the right to use the land is secured before he sells the land to the Company. Mr. Sombat Chairatmanokorn was transferred the ownership of the land for
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TPCH 1, and TPCH 2 in late 2016. He was transferred the ownership of most of the land for Pattani Green between 2013-2014.
Proceeding with the plan to construct each power plant, the Subsidiaries need the following amount of land as a construction site:
1. The area of land needed for the construction of TPCH 1’s power plant must be no less than 50 rai
2. The area of land needed for the construction of TPCH 2’s power plant must be no less than 50 rai
3. The area of land needed for the construction of Pattani Green’s power plant must be no less than 130 rai
However, the land intended to be used for the construction of TPCH 5’s power plant as stated in the PPA with the Provincial Electricity Authority is in the flooded area. TPCH 5 petitioned for the relocation of the power plant. The Provincial Electricity Authority granted the permission for relocation on 21 August 2017. Therefore, TPCH 5 is in the process of securing another suitable piece of land and negotiating with the landowner who is not a connected person.
TPCH 1, TPCH 2 and Pattani Green have already purchased and been transferred ownership of most of the land needed, and will purchase additional land to complete the construction of the power plants according to the plan that the Subsidiaries have set out in the bidding proposal for the PPA. The detail is as follows:
1. Land Purchase Part 1 (Purchased and Ownership Transferred)
(1) On 23 June 2017, TPCH 1 has purchased and been transferred ownership of 31 plots of land with a gross area of 46-0-15.5 rai under the purchase price of Baht 25,321,312.50 (Twenty-five million, three hundred and twenty-one thousand, three hundred, twelve Baht and fifty Satang).
(2) On 23 June 2017, TPCH 2 has purchased and been transferred ownership of 18 plots of land with a gross area of 32-2-11 rai under the purchase price of Baht 17,890,125.00 (Seventeen million eight hundred and ninety thousand one hundred and twenty-five Baht).
(3) On 25 May 2017, Pattani Green has purchased and been transferred ownership of 32 plots of land with a gross area of 135-2-52 rai under the purchase price of Baht 76,500,000.00 (Seventy-six million and five hundred thousand Baht).
2. Land Purchase Part 2 (in the purchasing process)
The Subsidiaries need to purchase additional land from Mr. Sombat Chairatmanokorn. The additional land plots are adjacent to the plots previously purchased to be used as a construction site of the power plants. The detail is as follows:
(1) TPCH 1 will purchase 5 plots of land with the gross area of 13-0-19 rai under the purchase amount of Baht 7,176,125.00 (Seven million one hundred and seventy-six thousand one hundred and twenty-five Baht).
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(2) TPCH 2 will purchase 10 plots of land with the gross area of 18-1-04 rai under the purchase amount of Baht 10,043,000.00 (Ten million and forty-three thousand Baht).
The land that TPCH 1, TPCH 2, and Pattani Green purchased from Mr. Sombat Chairatmanokorn is without any obligation.
The land purchase from Mr. Sombat Chairatmanokorn is considered a connected transaction under the regulations of the Company and the Subsidiaries which state that in case the Subsidiaries enter into a transaction with a connected person, they have to act in accordance with the Notification on Connected Transactions. However, the Subsidiaries’ land purchase part 1 did not follow the Articles of Associations of the Company and the subsidiaries. Therefore, the land purchase part 1 will be proposed for consideration and approval of the shareholders along with the land purchase part 2 in the Extraordinary Meeting of Shareholders No. 1/2017 that will be held on 29 September 2017.
The calculation of the size of the transaction of the land purchase part 1 and 2 in accordance with the Notification on Connected Transactions reveals the value of the transactions to be equivalent to 6.80 per cent of the Company’s net tangible asset value as of 31 March 2017.
Calculation Criteria for Land Purchase Part 1
Subsidiary Calculation Transaction Size TPCH 1 25,321,312.50 x 100 1.26 per cent 2,015,924,366.57 TPCH 2 17,790,125.00 x 100 0.89 per cent 2,015,924,366.57 Pattani Green 76,500,000.00 x 100 3.79 per cent 2,015,924,366.57 Total 5.94 per cent Remark: The calculation of the size of each transaction is based on the Company’s consolidated total assets according to the audited consolidated financial statement as of 31 March 2017. The size of each transaction calculated by using the Company’s consolidated total assets according to the audited consolidated financial statement as of 30 June 2017 will be 1.24 per cent, 0.88 per cent, and 3.74 per cent (respectively), totalling 5.86 per cent.
Calculation Criteria for Land Purchase Part 2
Subsidiary Calculation Transaction Size TPCH 1 7,176,125 x 100 0.36 per cent 2,015,924,366.57 TPCH 2 10,043,000 x 100 0.50 per cent 2,015,924,366.57 Total 0.86 per cent Remark: The calculation of the size of each transaction is based on the Company’s consolidated total assets according to the audited consolidated financial statement as of 31 March 2017. The size of each transaction calculated by using the Company’s consolidated total assets according to the audited consolidated financial statement as of 30 June 2017 will be 0.35 per cent and 0.49 per (respectively), totalling 0.84 per cent.
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Calculation Criteria for Land Purchase Part 1 and Part 2
Subsidiary Calculation Transaction Size TPCH 1 32,497,437.50 x 100 1.62 per cent 2,015,924,366.57 TPCH 2 27,933,125.00 x 100 1.39 per cent 2,015,924,366.57 Pattani Green 76,500,000.00 x 100 3.79 per cent 2,015,924,366.57 Total 6.80 per cent Remark: The calculation of the size of each transaction is based on the Company’s consolidated total assets according to the audited consolidated financial statement as of 31 March 2017. The size of each transaction calculated by using the Company’s consolidated total assets according to the audited consolidated financial statement as of 30 June 2017 will be 1.59 per cent, 1.37 per cent and 3.74 per (respectively), totalling 6.70 per cent.
The transactions concerning the employment of Thai Polycons and the land purchase mentioned above is greater than 3 per cent of the Company’s net tangible asset value (according to the last audited consolidated financial statement ended on 31 March 2017). Therefore, the Company is required to disclose information to the Stock Exchange of Thailand and hold a meeting of shareholders to seek approval for the entry into such transactions with votes of not less than three-fourth of the total votes of shareholders in attendance and eligible for voting, excluding the interested shareholders’ votes. The Company is obliged to send to the shareholders a meeting invitation enclosed with opinions from an independent financial advisor no less than 14 days before the meeting date.
(4) Total Consideration Value
The investment budget for the Power Plant Project of each subsidiary is detailed in the following:
(1) TPCH 1: the budget is in the amount of Baht 800,000,000 (Eight hundred million Baht)
(2) TPCH 2: the budget is in the amount of Baht 788,00,000 (Seven hundred and eighty- eight million Baht)
(3) TPCH 5: the budget is in the amount of Baht 648,000,000 (Six hundred and forty-eight million Baht)
(4) Pattani Green: the budget is in the amount of Baht 1,721,000,000 (One billion seven hundred and twenty-one million Baht)
The total investment budget amounts to Baht 3,957,000,000 (Three billion nine hundred and fifty-seven million Baht). The budget includes the construction cost and the cost of land. The detail of the employment of construction contractor and the cost of land is as follows:
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1. The Employment of Thai Polycons to construct four biomass power plants:
(1) TPCH 1: the cost is in the amount of Baht 667,150,000 (Six hundred and sixty- seven million, one hundred and fifty thousand Baht)
(2) TPCH 2: the cost is in the amount of Baht 654,320,000 (Six hundred and fifty- four million, three hundred and twenty thousand Baht)
(3) TPCH 5: the cost is in the amount of Baht 520,300,000 (Five hundred twenty million and three hundred thousand Baht)
(4) Pattani Green: the cost is in the amount of Baht 1,331,000,000 (One billion three hundred and thirty-one million Baht)
2. The land purchase from Mr. Sombat Chairatmanokorn:
(1) TPCH 1: the purchase value is in the amount of Baht 32,497,437.50 (Thirty- two million, four hundred and ninety-seven thousand, four hundred, thirty- seven Baht and fifty Satang)
(2) TPCH 2: the purchase value is in the amount of Baht 27,933,125.00 (Twenty- seven million, nine hundred and thirty-three thousand, one hundred and twenty-five Baht)
(3) Pattani Green: the purchase value is in the amount of Baht 76,500,000.00 (Seventy-six million and five hundred thousand Baht)
(5) Criteria used in Determining Prices
The cost of the construction will be compared to the construction cost of the biomass power plant with a similar capacity currently operated by the Company. The cost will be considered along with the price appraisal from an independent engineering advisor.
The land price is agreed between the seller and the Subsidiaries even though the price of some part of the land is higher than the appraised price of the Department of Lands and the appraised price of Panns Integrated Property Company Limited who is the independent appraiser (the appraised price of the independent appraiser is 57.38 million Baht). The construction of each power plant in the project requires a large area of land which needs to be in a potential location suitable for the construction of a power plant. However, since there are limitations in reaching out to landowners and buy a large amount of adjacent land plots, it becomes necessary that a familiar or a local person takes on the responsibility of looking for suitable and connected land plots with a gross area that matches the need of each subsidiary. Nonetheless, the land purchase price is still within the budget specified by the Subsidiaries.
(6) Benefits Expected to be Obtained by the Company from the Transaction
The Subsidiaries can fulfill their main business objective as an electricity generator and distributor. The Company will be informed of the profits of the biomass power plant business and the returns from the biomass power plant business, while the Company will receive dividends from their operation in the proportion of 65 per cent of the Subsidiaries’ registered capital.
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The Internal Rate of Return of the Biomass Power Plant Project:
Unit TPCH1 TPCH2 TPCH5 PTG Project IRR Percentage 1142. 1164. 106.1 23.97 Payback Period 1/ Year 7.1 7.0 74. 3.8 Net Present Value 2/ Million Baht 236.31 246.89 149.15 1,980.96 Remark: 1/ From the Commercial Operation Date 2/ The Present value of the net cashflow after investment fund deduction
(7) Source of Fund for the Transaction
The source of fund will be from the Subsidiaries’ internal cashflow, which is accounted for 25% of the investment fund and the loan from financial institution, which is accounted for 75% of the investment fund and will not have any effect on the Company’s liquidity and operation.
The payment for the land purchase of TPCH 1, TPCH 2, and Pattani Green comes from the internal cashflow of the Subsidiaries.
(8) Details of the Connected Transaction
Thai Polycons is a major shareholder of the Company, and thus considered a connected person in accordance with the Notification on Connected Transactions.
Mr. Sombat Chairatmanokorn is a major shareholder of the Subsidiaries who holds a total share of 25 percent of TPCH 1 and TPCH 2’s registered capital, and is a shareholder (including connected persons) in the ratio of 99 per cent of Narapara Company Limited’s registered capital who holds a total share of 25 per cent of Pattani Green. Therefore, he is considered a connected person of the Company. In order to comply with the Articles of Association of the Company and the Subsidiaries in case of a connected transaction, the transaction needs to be carried out in accordance with the Notification on Connected Transactions.
The value of each connected transaction is greater than 3% of the Company’s net tangible asset value. Therefore, the Company is required to prepare a relevant report disclosing information specified in the Connected Transaction Rules and to seek approval from the shareholders’ meeting to enter into such transactions, with votes of not less than three-fourth of the total votes of the shareholders in attendance and eligible for voting, excluding the interested shareholders’ votes.
(9) Characteristics and Scope of Interests of the Connected Person
Thai Polycons holds a total of 165,549,960 shares or an equivalence of 41.26 per cent of the Company’s total issued shares and has three directors in common with the Company: Mr. Tanu Kulchon, Mrs. Kanoktip Chanpalangsri, Mr. Cherdsak Wattanavijitkul and Mr. Pathompol Saosap.
Mr. Sombat Chairatmanokorn’s shareholding in the Subsidiaries is detailed in the following:
1. TPCH 1’s shares held: 500,000 shares or an equivalence of 25 per cent of TPCH 1’s registered capital
2. TPCH 2’s shares held: 500,000 shares or an equivalence of 25 per cent of TPCH 2’s registered capital
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3. Pattani Green’s shares held through Narapara Company Limited: 12,500,000 shares or an equivalence of 25 per cent of Pattani Green’s registered capital (Mr. Sombat Chairatmanokorn and his connected persons hold a total share of 99 per cent of Narapara Company Limited’s registered capital.)
(10) Opinions of the Company’s Board of Directors
The business objective of each subsidiary is to generate and distribute electricity produced from biomass. Therefore, the investment in the construction of biomass power plants fulfils the business objective of each subsidiary. After the appraisal of the investment value and the expected returns from the Power Plant Project, the Company will receive the internal rate of return (IRR) of more than 10 per cent, which is considered appropriate and in accordance with the Company’s investment policy.
For the employment of Thai Polycons as a constructor of the Power Plant Project, the decision is based on the consideration of Thai Polycons’ expertise and experience in the construction of power plants. Moreover, Thai Polycons has been hired as the contractor in every other project of the Subsidiaries and has successfully completed the project under the agreement with a reasonable price.
In case of the land purchase, accounting for the fact that the price of the lands purchased for the Power Plant Project is higher than the appraised price of the Department of Lands and the appraised price of the independent appraiser, these are the reasons that are taken into consideration:
1. The construction of a power plant requires a large amount of land. It is difficult to find a single landowner that owns a single land plot with the gross area sufficient for the power plant construction. The land purchase thus comes from the aggregation of land plots from multiple landowners.
2. A suitable land plot that is suitable for the power plant construction needs to be in the area that is permitted to be the power distribution site by the Provincial Electricity Authority and the Electricity Generating Authority of Thailand.
3. There are limitations in having an outsider accessing lands in the risky area within the three southern border provinces.
4. In finding a suitable land, the Company’s land purchase policy states that the Company needs to obtain a license from the Provincial Electricity Authority and the Electricity Generating Authority of Thailand to be a power generator before the transfer of land ownership can be completed.
For the reasons stated above, the Subsidiaries assigned a local person or a person familiar with the high-risk area in the three southern border provinces to find a suitable land for the power plant construction. Mr. Sombat Chairatmanokorn is a resident in the area who is familiar with and knows the area very well. He is capable of finding a suitable land plot close to the fuel source and power lines. More importantly, Mr. Sombat Chairatmanokorn is able to provide information to the company about which location within the target area is safe and suitable for investment in the construction.
TPC Power Holding Public Company Limited
Moreover, in order to procure the land for the Company, Mr. Sombat Chairatmanokorn needed to pay for the land, which was a risk in case the Subsidiaries were not granted the PPA, since the Subsidiaries will only purchase the land from Mr. Sombat Chairatmanokorn after they are chosen to be issued the PPA. As a result, the Company is not obligated to pay Mr. Sombat Chairatmanokorn if the PPA was not issued.
Nonetheless, as the Subsidiaries have already purchased some part of the land from Mr. Sombat Chairatmanokorn, and that Mr. Sombat Chairatmanokorn is a connected person of the Subsidiaries, the Company needs to comply with the Articles of Association of the Company and the Subsidiaries in regards to the entry into connected transaction of the Subsidiaries with their connected person. In compliance with the Articles of Association and the Notification on Connected Transactions, the Company is required to seek approval from the meeting of shareholders to give a ratification to the transaction.
The Board of Directors sees that the investment in the Power Plant Project, the land purchase and the hiring of Thai Polycons as the constructor of the Subsidiaries’ power plants are appropriate and beneficial to the Company. It will also build confidence among investors in the Company as an electricity generator and distributor, and thus increase the value of the Company.
Moreover, because of a business reason, the Subsidiaries were afraid that the disclosure of the information about the land purchase part 1 could affect the result of the bidding to obtain the PPA which was not yet certain that the Company would be issued the PPA. However, in the future if the Company has a similar business transaction, whether with Mr. Sombat Chairatmanokor, or other connected persons of the Company, and/or subsidiaries, the Company will follow Notification on Connected Transactions, and will only disclose necessary information which will not affect the bidding.
There were 7 directors from 8 directors attending the Board of Directors Meeting No. 6/2017. The interested director did not attend the meeting to consider the agenda item in which the director had an interest in.
(11) Opinions from the Board of Directors and/or the Audit Committee that are different from the Opinions from the Board of Directors detailed in Schedule 10
The Audit Committee does not have a different opinion from the opinion of the Board of Directors. The Audit Committee also saw that the Subsidiaries needed to complement necessary actions to be issued the PPA which will grant the Subsidiaries more profit. Moreover, even the cost of the land is high, it is still within the budget that the Subsidiaries researched and allocated for the investment in the biomass power plant project. The internal rate of return is also higher than the return rate specified in the Company’s investment policy which states that the Company will invest in the project with the minimum internal rate of return of 10 per cent per year.
However, the interested directors did not attend the meeting and did not vote to approve the Company’s entering into a construction contract with Thai Polycons.
The Company certifies that information in this memorandum is accurate and true, and that the memorandum is prepared with deliberation and care and with the benefits of the shareholders as a priority. This information memorandum is also prepared for the purpose of disclosing information, and not intended to be used as an invitation or an offer to acquire or reserve the rights to acquire securities.
TPC Power Holding Public Company Limited
2. The Board of Directors’ Responsibility toward the Information Memorandum Enclosed in the Document Submitted to the Shareholders
The Board of Directors reviewed the information in this information memorandum with their utmost capacity and with the information available to them. The Board certifies that the information in this information memorandum is accurate, complete and does not contain information that may mislead other persons from the main points, nor does it lack information that should be contained in the main points.
3. The Qualification of the Independent Financial Advisor who Gives Opinion about the Transactions
For the entry into the transaction of the assets acquisition of a listed company and the Subsidiaries’ connected transactions with a connected person, the Company has appointed Advisory Plus Company Limited (“the Independent Financial Advisor”) to provide independent financial advice on the investment in the biomass power plant construction project of the Subsidiaries. The Independent Financial Advisor is not connected to the Company in any way and agrees to have the Company published their opinion dated 23 August 2017 as set put in the Report of the Opinion from the Independent Financial Advisor enclosed in the Notice to the Extraordinary Meeting of Shareholders No.1/2017.
4. The Company’s Information
4.1. The Information of the Company and its subsidiaries, Summary of Business Operation and the Business Outlook
4.1.1. The Information of the Company and its subsidiaries and Summary of Business Operation
TPC Power Holding Public Company Limited
Thai Polycons Public Minor Shareholders Directors, Executives,
Company Limited (Free float) Employees, and Subsidiaries 41.26% 58.74% TPC Power Holding Public Company Limited
Operation Construction Development Other Business
65.0% Pattani Green 35.0% Chang Raek VSPP 16.9% Pattalung Green 40.0% Power CO,.LTD PA Waste & Energy 73.1% 26.9% 60.0% WWE 45.0% EnBW 10.0% Power CO,.LTD Company Limited BiopowerCO,.LT TPCH Power 1 Sombat Chairattanamanokorn 65.0% 35.0% D 25.0% GPP 10.0% 55.0% GPP 10.0% Company Limited WWE 40.0% Maewong Energy 15.0% Chor Prommarak 51.0% Satun Green 49.0% 85.0% TPCH Power 2 Sombat Chairattanamanokorn Company Limited 5.0% Power CO,.LTD GPP 9.0% 65.0% 35.0% 25.0% GPP 10.0% Limited Company Limited Thungsung 35.0% EnBW TPCH Power 3 65.0% 65.0% 35.0% Green Company Company Limited
EnBW 46.0% TPCH Power 4 Sombat Chairattanamanokorn 46.0% Mahachai Green 54.0% 65.0% 35.0% GPP 5.0% 25.0% GPP 10.0% Power CO,.LTD Company Limited NC 3.0% Sombat Chairattanamanokorn 65.0% TPCH Power 5 35.0% Company Limited 25.0% GPP 10.0%
50.0% Thawee Chongkavinit 31.0% 50.0% Siam Power Company Limited Weeraphol Chokvittayarat 19.0%
TPC Power Holding Public Company Limited
TPC Power Holding Public Company Limited (“Company” or “TPCH”)
The main operation of TPCH is the holding of shares in other companies (Holding Company) whose business operation deals with the generation and sales of electricity from renewable energy; and to support its subsidiaries’ operations. TPCH has made investments in subsidiaries and jointly controlled entities whereas 14 companies have plans for the operation of electricity production and sales from biomass and another 1 company has a plan for the operation of electricity production and sales from municipal solid waste. TPCH also makes investment in RDF, jointly controlled entity, whose business operation deals with the refuse derived fuel (RDF) production plant.
Chang Raek Biopower Company Limited (“CRB” or “Core Company”)
Chang Raek Biopower Company Limited was incorporated on December 1, 2008 to operate the biomass-fuelled electricity generation and sale business with the installed capacity of 9.2 megawatts for sale. CRB is located at Tambon Na Bodhi, Amphoe Thung Song, Nakhon Si Thammarat. CRB signed the Power Purchase Agreement (“PPA”) for a very small power producer with the Provincial Electricity Authority (“PEA”) on November 18, 2010. The term of the PPA is 5 years upon the Commercial Operation Date (“COD”), and the PPA would be automatically renewed on every 5 years upon the term expiration. According to the PPA, the PEA agrees to purchase electricity in a maximum of 9.2 megawatts. From the letter of intent notified by the PEA on July 12, 2010, CRB would be subsidized for the Adder of Baht 0.30 per kilowatt-hour for a period of 7 years upon the COD (March 15, 2013). On March 11, 2016, CRB has been approved by the resolution of the Energy Policy and Planning Office to change the electricity sale system from Adder to Feed-in-Tariff up to the expiration of the PPA on March 14, 2029.
The core fuel of CRB is biomass from rubber tree while palm oil is an alternative fuel for combustion. CRB has engaged VSPP, a shareholder in CRB holding shares of 16.88 percent, to operate the biomass power plant, supply the fuel sufficiently, and provide the maintenance service for the biomass power plant of CRB.
As of December 31, 2016, CRB had the registered and paid-up capital of Baht 200,000,000, divided into 20,000,000 ordinary shares with a par value of Baht 10 per share. TPCH held 73.12 percent of shares in CRB while VSPP Consultant Company Limited (VSPP), and EnBW Erneuerbare und Konventionnelle Erzeugung AG/ EnBW Kraftwerke AG held 16.88 percent and 10 percent of shares of the registered capital of CRB respectively.
Mahachai Green Power Company Limited (MGP)
Mahachai Green Power Company Limited was incorporated on March 7, 2010 to operate the biomass-fuelled electricity generation and sales business with the installed capacity of 8.0 megawatts for sale. MGP is located at Tambon Chai Mongkol, Amphoe Muang, Samut Sakhon. MGP signed the Power Purchase Agreement (“PPA”) for a very small power producer with the Provincial Electricity Authority (“PEA”) in Feed-in Tariff system. The term of the PPA is 20 years upon the Commercial Operation Date, and it shall receive the FiT premium of Baht 0.30 for a period of 8 years upon the COD. MGP began its COD on April 8, 2016.
MGP uses biomass from coconut tree as its core fuel whereas scrap wood and sawdust from industrial plants nearby are alternative fuels for combustion. TPCH used MGP as the first
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project to develop its personnel to operate the power plant itself instead of employing an external power producer. At present, TPCH engages some engineers with experience in operating biomass and renewable power plants as a team to take part in this project since the beginning of the power plant construction; therefore, they understand this project from the initial stage. Now, MGP has 52 staffs in charge of administrating the power plant.
As of December 31, 2016, MGP had the registered and paid-up capital of Baht 235,000,000, divided into 2,350,000 ordinary shares with a par value of Baht 100 per share. TPCH held 46.00 percent of shares in MGP while EnBW, Green Power Producer Group Co., Ltd. (GPPG), and NC held 46 percent, 5 percent, and 3 percent of shares of the registered capital of MGP respectively.
Thung Sung Green Company Limited (TSG)
Thung Sung Green Company Limited was incorporated on November 11, 2010 to operate the biomass-fuelled electricity generation and sale business with the installed capacity of 9.2 megawatts for sale. TSG is located at Tambon Thung Sung, Amphoe Thung Yai, Nakhon Si Thammarat. TSG signed the Power Purchase Agreement (“PPA”) for a very small power producer with the Provincial Electricity Authority (“PEA”) in Feed-in Tariff system. The term of the PPA is 20 years upon the Commercial Operation Date, and TSG receives FiT premium of Baht 0.30 for a period of 8 years upon the COD. TSG began its COD on October 3, 2016.
TSG uses biomass from rubber tree as its core fuel whereas palm oil is an alternative fuel for combustion. TSG has engaged VSPP (not a related company) to operate the biomass power plant, supply the fuel sufficiently, and provide the maintenance service for the biomass power plant of TSG.
As of December 31, 2016, TSG had the registered and paid-up capital of Baht 200,000,000, divided into 2,000,000 ordinary shares with a par value of Baht 100 per share. TPCH held 65 percent of shares in TSG while CarbonBW (Thailand) Company Limited held 35 percent of shares of the registered capital of TSG.
Maewong Energy Company Limited (MWE)
Maewong Energy Company Limited was incorporated on December 3, 2007 to operate the biomass-fuelled electricity generation and sale business with the installed capacity of 8.0 megawatts for sale. MWE is located at Tambon Wang San, Amphoe Mae Wong, Nakhon Sawan. MWE signed the Power Purchase Agreement (“PPA”) for a very small power producer with the Provincial Electricity Authority (“PEA”) in Feed-in Tariff system. The term of the PPA is 20 years upon the Commercial Operation Date, and it receives FiT premium of Baht 0.30 for a period of 8 years upon the COD. MWE began its COD on October 12, 2015.
MWE uses biomass from rice husk and woodchip as its core fuels whereas biomass from cassava is an alternative fuel for combustion. On July 10, 2014, MWE signed the Operation and Maintenance Agreement with Green Power Plant Company Limited (“GPP”), a related company, to operate the power plant of MWE. The scope of service also includes the sufficient supply of fuel to the power plant.
As of December 31, 2016, MWE had the registered and paid-up capital of Baht 200,000,000, divided into 2,000,000 ordinary shares with a par value of Baht 100 per share. TPCH held 85 percent of shares in MWE while Green Power Plant Company Limited and Ch. Prommaruk Limited Partnership held 10 percent and 5 percent of shares of the registered capital of MWE respectively.
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Bangsapan-noi Biomass Company Limited (“BBRP”)
Bangsapan-noi Biomass Company Limited was incorporated on December 18, 2008 to operate the biomass-fuelled electricity generation and sale business with the installed capacity of 8.0 MW for sale, located at Tambon Pak Praek, Amphoe Bang Saphan Noi, Prachuap Khiri Khan. BBRP signed the Power Purchase Agreement (PPA) for a very small power producer with the Provincial Electricity Authority (“PEA”) on December 9, 2009 for a 5-year contract term effective on the Commercial Operation Date (“COD”). The PPA would be automatically renewed on every 5 years until to the contract termination. Under the Agreement, the PEA agreed to purchase electricity from BBRP with a maximum capacity of 8.0 MW. According to the Letter of Intent of the PEA on power purchase on June 10, 2009, BBRP was subsidized for the Adder of Baht 0.30 per KWh for 7 years upon the Commercial Operation Date.
However, on July 31, 2014, the Extraordinary Meeting of Shareholders of BBRP, No. 2/2014, passed a resolution on BBRP’s business disruption, and on studying the guideline, steps and impacts of business winding-up before making decision on closing down it in the future. (On August 22, 2014, the Extraordinary Meeting of Shareholders of BBRP, No. 3/2014 approved the capital decrease of BBRP by cancelling three-fourths of shares from 1,000,000 shares to 250,000 shares with a par value of Baht 10 per share. The reduction amount was proportionate to the number of shares held by each shareholder. On February 13, 2015, the Meeting of the Board of Directors of BBRP, No. 1/2015 passed the resolution on the winding-up of BBRP. On April 3, 2015, the 2015 Annual General Meeting of the Shareholders considered and approved such winding-up. On July 27, 2015, BBRP registered the business winding-up with the Department of Business Development, Ministry of Commerce. On September 21, 2015, the Extraordinary Meeting of Shareholders, No. 2/2015 resolved to approve the financial statements and liquidation of BBRP.)
Patthalung Green Power Company Limited (PGP)
PGP was incorporated on October 31, 2013 to operate the biomass-fuelled electricity generation and sale business with the installed capacity of 9.2 MW for sale, located at Tambon Pa Bon, Amphoe Pak Phayun, Phatthalung. PGP signed the Power Purchase Agreement (PPA) for a very small power producer with the Provincial Electricity Authority (“PEA”) in Feed-in Tariff system for a period of 20 years effective on the Commercial Operation Date (“COD”). PGP is also subsidized for FiT Premium of Baht 0.30 for 8 years upon the COD.
PGP uses biomass from rubber tree as its core fuel whereas biomass from palm oil is an alternative fuel for combustion. PGP signed the Operation and Maintenance Agreement with Stepwise Energy Management Company Limited (“STEM”) to operate the power plant of PGP. The scope of service also includes the sufficient supply of fuel for the power plant.
As of December 31, 2016, PGP had the registered and paid-up capital of Baht 250,000,000, divided into 25,000,000 ordinary shares with a par value of Baht 10 per share. TPCH held 60 percent of shares in PGP while Wood Work Energy Company Limited held 40 percent of shares of the registered capital of PGP.
Satun Green Power Company Limited (SGP)
SGP was incorporated on March 25, 2014 to operate the biomass-fuelled electricity generation and sale business with the installed capacity of 9.2 MW for sale, located at Tambon Khuan Kalong, Amphoe Khuan Kalong, Satun. SGP signed the Power Purchase Agreement (PPA) for a very small power producer with the Provincial Electricity Authority (“PEA”) in Feed-in Tariff system for a period of 20 years effective on the Commercial Operation Date (“COD”). PGP is also subsidized for FiT Premium of Baht 0.30 for 8 years upon the COD.
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SGP uses biomass from rubber tree as its core fuel whereas biomass from palm oil is an alternative fuel for combustion. SGP signed the Operation and Maintenance Agreement with Stepwise Energy Management Company Limited (“STEM”) to operate the power plant of PGP. The scope of service also includes the sufficient supply of fuel for the power plant.
As of December 31, 2016, SGP had the registered and paid-up capital of Baht 250,000,000, divided into 25,000,000 ordinary shares with a par value of Baht 10 per share. TPCH held 51 percent of shares in SGP while Wood Work Energy Company Limited, Green Power Plant Company Limited held 40 percent and 9 percent of shares of the registered capital of SGP respectively.
Pattani Green Company Limited (PTG)
PTG was incorporated on August 23, 2013 to operate the biomass-fuelled electricity generation and sale business with the capacity of 42.0 MW for sale, located at Tambon Lipa Sa-ngo, Amphoe Nong Chik, Pattani. PTG was subsidized with the Adder of Baht 1.30 per KWh, which is higher than the Adder paid to other biomass power plants of TPCH because this power plant is located in the area of three southern border provinces where the power plants are subsidized for more 1.0 Baht per KWh.
On August 29, 2014, PTG submitted an application on electricity sale and system connection with the Electricity Generating Authority of Thailand (“EGAT”) to sell electricity from the first power plant of PTG with a maximum capacity of 21 MW. PTG is now preparing to submit an application on electricity sale and system connection to EGAT for another 21 MW from the second power plant of PTG. However, at present, EGAT has temporarily halted its electricity purchase. Both power plants are located in the same area. Now, the Environmental Impact Assessment or “EIA” of PTG has been approved already; therefore, the total installed capacity of PTG is 46 megawatts.
On December 31, 2016, PTG had the registered and paid-up capital of Baht 10,000,000, divided into 1,000,000 ordinary shares with a par value of Baht 10 per share. TPCH, Naraphara Company Limited, and Green Power Plant Company Limited held 65 percent, 25 percent, and 10 percent of shares of the registered capital in PTG respectively.
TPCH Power 1 Company Limited (TPCH1)
TPCH Power 1 Company Limited was incorporated on May 24, 2016 to operate the biomass- fuelled electricity generation and sale business with the capacity of 9.2 MW for sale, located at Tambon Bu Dee, Amphoe Muang, Yala. TPCH1 signed the Power Purchase Agreement (PPA) for a very small power producer with the Provincial Electricity Authority (“PEA”) in Feed-in Tariff system of Baht 3.10 per unit for a period of 20 years effective on the Commercial Operation Date (“COD”). TPCH1 is also subsidized for FiT Premium of Baht 0.30 for 8 years upon the COD. The Scheduled Commercial Operation Date (“SCOD”) of TPCH1 is December 31, 2018.
TPCH1 uses biomass from rubber tree as its core fuel whereas palm oil is an alternative fuel for combustion. TPCH1 is now considering whether it would manage the power plant itself or make the Operation and Maintenance Agreement for the biomass power plant with any power plant service provider.
As of December 31, 2016, TPCH1 had the registered capital of Baht 20,000,000, divided into 2,000,000 ordinary shares with a par value of Baht 10 per share. Its paid-up capital was Baht 5,000,000. TPCH held 65 percent of shares in TPCH1 while Mr. Sombat Chairatnanokorn,
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owner of Naraphara Company Limited, and Green Power Plant Company Limited held 25 percent and 10 percent of shares of the registered capital of TPCH1 respectively.
TPCH Power 2 Company Limited (TPCH2)
TPCH Power 2 Company Limited was incorporated on May 24, 2016 to operate the biomass- fuelled electricity generation and sale business with the capacity of 9.2 MW for sale, located at Tambon Bu Dee, Amphoe Muang, Yala. TPCH2 signed the Power Purchase Agreement (PPA) for a very small power producer with the Provincial Electricity Authority (“PEA”) in Feed-in Tariff system of Baht 3.10 per unit for a period of 20 years effective on the Commercial Operation Date (“COD”). TPCH2 is also subsidized for FiT Premium of Baht 0.30 for 8 years upon the COD. The Scheduled Commercial Operation Date (“SCOD”) of TPCH2 is December 31, 2018.
TPCH2 uses biomass from rubber tree as its core fuel whereas palm oil is an alternative fuel for combustion. TPCH2 is now considering whether it would manage the power plant itself or make the Operation and Maintenance Agreement for the biomass power plant with any power plant service provider.
As of December 31, 2016, TPCH1 had the registered capital of Baht 20,000,000, divided into 2,000,000 ordinary shares with a par value of Baht 10 per share. Its paid-up capital was Baht 5,000,000. TPCH held 65.00 percent of shares in TPCH2 while Mr. Sombat Chairatnanokorn, owner of Naraphara Company Limited, and Green Power Plant Company Limited held 25 percent and 10 percent of shares of the registered capital of TPCH2 respectively.
TPCH Power 3 Company Limited (TPCH3)
TPCH Power 3 Company Limited was incorporated on May 24, 2016 to tender a bid for the Power Purchase Agreement to the Energy Regulatory Commission for an area at Tambon Lipa Sa-ngo, Amphoe Nong Chik, Pattani, but TPCH3 was not awarded.
As of December 31, 2016, TPCH3 had the registered capital of Baht 20,000,000, divided into 2,000,000 ordinary shares with a par value of Baht 10 per share. Its paid-up capital was Baht 5,000,000. TPCH held 65 percent of shares in TPCH3 while Mr. Sombat Chairatnanokorn, owner of Naraphara Company Limited, and Green Power Plant Company Limited held 25 percent and 10 percent of shares of the registered capital of TPCH3 respectively.
TPCH Power 4 Company Limited (TPCH4)
TPCH Power 4 Company Limited was incorporated on May 24, 2016 to tender a bid for the Power Purchase Agreement to the Energy Regulatory Commission, but the bid was not submitted finally.
As of December 31, 2016, TPCH4 had the registered capital of Baht 20,000,000, divided into 2,000,000 ordinary shares with a par value of Baht 10 per share. Its paid-up capital was Baht 5,000,000. TPCH held 65.00 percent of shares in TPCH4 while Mr. Sombat Chairatnanokorn, owner of Naraphara Company Limited, and Green Power Plant Company Limited held 25 percent and 10 percent of shares of the registered capital of TPCH4 respectively.
TPCH Power 5 Company Limited (TPCH5)
TPCH Power 5 Company Limited was incorporated on May 30, 2016 to operate the biomass- fuelled electricity generation and sale business with the capacity of 6.3 MW for sale, located at Tambon Bang Po, Amphoe Muang, Narathiwat. TPCH5 signed the Power Purchase Agreement
TPC Power Holding Public Company Limited
(PPA) for a very small power producer with the Provincial Electricity Authority (“PEA”) in Feed-in Tariff system of Baht 3.42 per unit for a period of 20 years effective on the Commercial Operation Date (“COD”). TPCH2 is also subsidized for FiT Premium of Baht 0.30 for 8 years upon the COD. The Scheduled Commercial Operation Date (“SCOD”) of TPCH5 is December 31, 2018.
TPCH5 uses biomass from rubber tree as its core fuel whereas palm oil is an alternative fuel for combustion. TPCH5 is now considering whether it would manage the power plant itself or make the operation and maintenance agreement for the biomass power plant with any power plant service provider.
As of December 31, 2016, TPCH5 had the registered capital of Baht 20,000,000, divided into 2,000,000 ordinary shares with a par value of Baht 10 per share. Its paid-up capital was Baht 5,000,000. TPCH held 65 percent of shares in TPCH5 while Mr. Sombat Chairatnanokorn, owner of Naraphara Company Limited, and Green Power Plant Company Limited held 25 percent and 10 percent of shares of the registered capital of TPCH5 respectively.
PA Waste & Energy Company Limited (“PA”)
PA Waste & Energy Company Limited was incorporated on December 23, 2014 to produce and manage the renewable energy from the refuse derived fuel (RDF). TPCH has acquired 103,500 shares of PA from the existing shareholders at the price of Baht 100 per share (equivalent to the par value) or the total investment is Baht 10,350,000, representing 45 percent of its registered capital.
As of December 31, 2016, PA had the registered and paid-up capital of Baht 23,000,000, divided into 230,000 ordinary shares with a par value of Baht 100 per share. TPCH held 45 percent of shares in PA while Mr. Umnaj Jomnongprasartporn and Mr. Pairach Paisalayakij held 27.5 percent and 27.5 percent of shares of the registered capital of PA respectively.
Siam Power Company Limited (SP)
Siam Power Company Limited was incorporated on July 17, 2013 to produce and manage the waste renewable power generation facility. TPCH has acquired 400,000,000 shares of SP at the par value of Baht 10 per share, representing to 50 percent of the registered capital of SP.
SP has received a concession from the Nonthaburi Provincial Administrative Organization (PAO) for the municipal solid waste management by landfill for a period of 23 years. This project consists of 2 sections: power plant; and waste separation and waste-to-energy plant for RDF. Such power plant is fuelled by RDF3 produced from the waste separation plant.
As of December 31, 2016, SP had the registered and paid-up capital of Baht 400,000,000, divided into 40,000,000 ordinary shares with a par value of Baht 10 per share. TPCH held 50 percent of shares in SP while Mr. Thavee Jongkavanit and Mr. Veerapol Chokvittayarat held 31 percent and 19 percent of shares of the registered capital of SP respectively.
4.1.2 The Business Outlook of the Company and its subsidiaries
General industries in Thailand have increasingly consumed the renewable energy as stimulated by the renewable energy development policy, which aims to encourage the use of renewable energy by every sector in the society. This not only reduces the use of fossil-based energy, but also the energy import. At present, the renewable energy development in Thailand focuses on the consumption of energy produced in the country, including solar cell, wind power, small hydropower, biomass, waste, and biofuel (ethanol and biodiesel).
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According to data recorded by the Department of Alternative Energy Development and Efficiency, the installed capacity from renewable energy, in 2016, totaled 9,139 megawatts, an increase of 14.78 percent from the previous year.
Renewable Energy Units Target 2036 Performance 2013 2014 2015 2016 (Jan-Dec) Electricity1/2/ megawatts 19,684.00 3,788.46 4,494.03 7,962.79 9,139.65 Kilo ton of oil 5,588 1,341 1,467 1,556 2,122 equivalent 1. Solar cell megawatts 6,000.00 823.46 1,298.51 1,419.58 2,149.25 2. Wind power megawatts 3,002.00 222.71 224.47 233.90 507.04 3. Small megawatts 376.00 108.80 142.01 172.12 182.12 hydropower3/ 4. Biomass megawatts 5,570.00 2,320.78 2,451.82 2,726.60 2,814.70 5. Biogas4/ megawatts 1,280.00 265.23 311.50 372.51 434.86 6. Waste5/ megawatts 550.00 47.48 65.72 131.68 145.28 7. Large megawatts 2,906.40 - - 2,906.40 2,906.40 hydropower6/ Source: Performance of renewable energy, Department of Alternative Energy Development and Efficiency, Ministry of Energy, 2016
Energy Demand
“Energy” is an essential factor to serve human basic needs, and also a main factor in the business and industrial sector. The rapid population increase and economic growth directly drive the global energy consumption higher. This is a reason why certain fossil-fuel sources, which are commercial exhaustible energy sources like natural gas, coal, oil, have been gradually reducing.
1. Important motives of the national renewable energy development
Thailand does not have many commercial energy sources to serve all local demand, so some energy must be imported. The final energy consumption stayed at 1,449 KTOE, or an increase of 2.1 percent based on better economic condition due to the consumption of petroleum, electricity, imported coal, and natural gas. The consumption of petroleum ranked on top or at 55 percent of total final energy consumption or an increase of 3.9 percent. The value of imported energy amounted to Baht 764 billion, a decrease of 16.2 percent due to the declining energy price in the global market. Such decrease of imported energy involved the crude oil, petroleum, and coal, except the value of imported natural gas and liquefied natural gas (LNG) that has been increasing according to higher imported quantity.
The global warming caused by greenhouse gas emission is a major trouble the world has been concerned about, and places certain controlling measures. Trade barrier measure is a technique likely to be widely used in the future. Although Thailand has not yet been affected by the said measure now, the renewable energy development and promotion must be undertaken as a solution to reduce the greenhouse gas emission, and it would trigger Thailand to become a low carbon society. This would be the world’s model and Thailand would be mentioned as a country with strong determination in using the renewable energy.
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Agricultural output could be used as raw materials in the power generation, e.g. biomass, biogas, biodiesel and ethanol. After food processing, some waste may be changed to be energy. Thailand also has potential in the natural energy such as solar energy in an approximate amount of 18.2 MJ/m2/day. Some areas in the country have potential in wind power. Therefore, Thailand’s potential in renewable energy is at an excellent level. According to the preparation of Thailand Power Development Plan for Year 2015 – 2036 (PDP 2015), the estimated fuel consumption as stated in PDP 2015 for Year 2036 involves the purchase of hydropower from other countries for 15-20 percent, clean coal for 20-25 percent, renewable energy for 15-20 percent, natural gas for 30-40 percent, and nuclear not exceeding 5 percent.
Table illustrating a projected proportion of fuel use for electricity generation under PDP 2015
Types of Fuel 2014 2026 2036 Projected Projected Projected Percentage Percentage Percentage Purchase the hydropower 7 10-15 15-20 from other countries Coal from clean technology 20 20-25 20-25 (including Lignite) Renewable energy 8 10-20 15-20 (including hydropower) Natural Gas 64 45-50 30-40 Nuclear - - 0-5 Diesel/Fuel Oil 1 - -
2. Target of renewable energy development
From the government policy targeting the consumption of renewable and alternative energy from Year 2015-2036 to replace the fossil-fuel consumption for 30 percent within Year 2036, for the electricity generation sector, this Power Development Plan targets the renewable energy power plants based on the national power development framework in the total of 19,634.4 megawatts, which are the installed capacity. When the plan is prepared, this would become the contracted capacity of 17,678.9 megawatts in total, which involves the contracted capacity in the current system at the end of 2014 totaling 5,872.1 megawatts, less the expired capacity of 298.1 megawatts, so the new electricity production capacity is 12,104.9 megawatts. Therefore, the new production capacity from renewable energy from Year 2015 – 2026 would be 8,101.2 megawatts, and from Year 2027 – 2036 would be 4,003.7 megawatts. The summary of electricity production by types of fuel is as follows:
New renewable energy power plants during the year of 2015-2026 Solar cell 3,292.5 megawatts Wind power 1,643.7 megawatts Hydro 191.0 megawatts Biomass 2,122.6 megawatts Biogas 199.1 megawatts
TPC Power Holding Public Company Limited
Waste 373.2 megawatts Energy Crops 279.1 megawatts Total 8,101.2 megawatts
New renewable energy power plants during the year of 2026-2036 Solar cell 1,077.6 megawatts Wind power 910.2 megawatts Hydro 86.9 megawatts Biomass 1,363.9 megawatts Biogas 108.2 megawatts Waste 56.0 megawatts Energy Crops 400.9 megawatts Total 4,003.7 megawatts
National Production Capacity of the Same Product
Since energy is an essential factor for the national economic development, various state-owned entities and private organizations have established a large number of projects to support the electricity generation from renewable energy, which give great benefits to the country as this reduces the national dependence on some imported energy and environmental impact, and boosts efficient use of recycled materials. Some stated-supported projects are:
“Small Renewable-energy Power Producer Promotion” project by The National Energy Policy Council (NEPC) to which Baht 3,000 million from the Energy Conservation Promotion Fund was spent to subsidize the power purchase from small power producers.
“Policy of power purchase from renewable energy from small power producers” by The Energy Policy and Planning Office - This policy supported the research studies relating to the processing of biomass such as supporting a group of wood-based energy development, the Department of Forestry to process some agricultural waste to firewood and charcoal.
“EE Revolving Fund” by the Department of Alternative Energy Development and Efficiency - In 1992, the Thai Government enacted the Energy Conservation Promotion Act in order to promote the energy conservation, improve appropriate procedure, rules and regulations, and allocate some grants and resources. The Department of Alternative Energy Development and Efficiency under the Ministry of Energy has been assigned to be responsible for the compulsory work plan, rules, and regulations for factories and medium-sized buildings. The Department of Alternative Energy Development and Efficiency realized this problem; therefore, it established the EE Revolving Fund with aims at promoting and encouraging more investments in energy conservation, and at ensuring and familiarizing various financial institutions in granting loans for energy conservation projects.
The following table showed the quantity of renewable energy from SPPs and VSPPs that have already been in the system and have signed the PPA as of EGAT 13/03/2560, PEA 02/03/2560, and MEA 28/10/2560, as well as the number of biomass power plant operators.
TPC Power Holding Public Company Limited
Status SPP Power Plants VSPP Power Plants Total Power Plants Project Installed Volume of Project Installed Volume of Project Installed Volume of Production Contracted Production Contracted Production Contracted Capacity Sale (MW) Capacity Sale (MW) Capacity Sale (MW) (MW) (MW) (MW) Already ------submitting an application, waiting for purchase confirmation Purchase 7 233.90 152.62 - - - 7 233.90 152.62 confirmed, PPA has not been signed yet Already 3 85.00 58.00 55 411.08 314.70 58 496.08 372.70 signing PPA, but COD has not yet achieved COD has 31 928.40 631.10 146 1,790.07 891.87 177 2,718.47 1,522.97 achieved already Total 41 1,247.30 841.72 201 2,201.15 1,206.57 242 2,448.45 2,048.30
The above table formed a conclusion that biomass energy consumption is likely to be bright and this kind of energy would be used by more power plants to replace the fossil fuels, which must be imported, rare, expensive, and will run out finally. Biomass is also friendly to the environment as it does not add carbon dioxide to the climate causing the greenhouse effect, contains low sulfur, and may be found in many sources in the country while several biomass fuels could be rotated throughout the year.
On August 4, 2017, the Energy Regulatory Commission of Thailand issued an announcement of power purchase from small power producers (SPP) in SPP Hybrid Firm project, Year 2017, in accordance with the resolution of the National Energy Policy Council (NEPC), in an aggregate of 300 megawatts whereas only one type or more of renewable energy may be used for electricity generation. The Energy Regulatory Commission determines that an interested company must submit a proposal for sale of electricity at the beginning of October 2017, the list of selected companies would be announced on December 14, 2017.
TPCH has been ready to tender a bid in the said project as it is a good investment opportunity because, from 300 MW of electricity nationwide, the Electricity Generating Authority of Thailand (EGAT) has potential to purchase the electricity in the southern region for 100 MW. Nevertheless, TPCH plans to boost its installed capacity in biomass projects to 200 megawatts within 2020, and TPCH has strong determination to attain this target as scheduled.
4.2 List of 10 Shareholders as at 18 August 2017
No. List of Names Number of Percentage shares held 1. Thai Polycons Public Company Limited 165,549,960 41.26 2. Thai NDVR Company Limited 17,727,201 4.42 3. Thai Life Insurance Public Company Limited 10,125,900 2.52
TPC Power Holding Public Company Limited
No. List of Names Number of Percentage shares held 4. Electricity Generating Authority of Thailand 9,001,300 2.24 Employees Registered Provident Fund 5. Muang Thai Life Insurance Public Company 7,681,500 1.91 Limited 6. TISCO Master Pooled Registered Provident Fund 7,301,900 1.82 7. Mr. Sathit Vittayakorn by Denali Prestige Asset 5,093,700 1.27 Management Limited 8. SCB Dividend Stock 70/30 Long Term Equity Fund 4,900,000 1.22 9. Mr. Kritnapat Nithithanutkul 4,000,000 1.00 10. Mr. Chainarong Chanpalangsri 4,000,000 1.00
4.3 List of Directors and Management as at 10 August 2017 No. List of Names Title 1. Dr. Thanu Kulachol Chairman of the Board of Directors/ Independent Director 2. Mrs. Boontipa Simaskull Independent Director/ Chairman of the Audit Committee/ Director 3. Mr. Thanwa Theeravitayaleret Independent Director/ Member of the Audit Committee/ Director 4. Mr. Norachai Sripimol Independent Director/ Member of the Audit Committee/ Director 5. Mr. Chainarong Chanpalangsri Director 6. Mrs. Kanoktip Chanpalangsri Director/ Chairman of the Executive Board of Directors 7. Mr. Cherdsak Wattanavijitkul Director/ Executive Committee 8. Mr. Pathompol Saosap Director/ Executive Committee 9. Mr. Pol Kongsua Director/ Executive Committee
List of Management
No. List of Names Title 1. Mr. Cherdsak Wattanavijitkul President 2. Ms. Sompis Saenrang Vice President, Finance & Account 3. Mr. Pol Kongsua Vice President, Operation & Construction 4. Ms. Nunnapas Srabongkoch Assistant Vice President, International Business Development 5. Ms. Yupawadee Chaiya Assistant Vice President, Domestic Business Development
TPC Power Holding Public Company Limited
4.4 Liabilities
4.4.1 Total issued and unissued debt instruments
- None -
4.4.2 Total term loans of the Company and subsidiaries, and obligations of placing assets as collateral
No. Types of Loan Outstanding Collateral Amount as of Jun 30, 2017 (Unit: Million Baht) 1 Long-term loans 1,698,410,000 - Secured by mortgage of from financial land as well as structures institutions and machinery together with all equipment in the electricity generation system, which are guaranteed according to the proportion of share held.
4.4.3 Total amount of other liabilities of the Company and subsidiaries and obligations of placing assets as collateral
No. Types of Loan Outstanding Amount as of Collateral Jun 30, 2017 (Unit: Million Baht) 1 Finance lease 10,406,436.36 Vehicles liabilities
4.4.4 Contingent Liabilities
TPC Power Holding Public Company Limited
1. The Company has liability to guarantee a loan amounting to Baht 500 million provided to Mahachai Green Power Company Limited, a jointly controlled entity. The guarantee is subject to the proportion of shareholding in the amount of Baht 230 million.
2. The Company has liability to guarantee a loan amounting to Baht 500 million provided to Maewong Energy Company Limited, a subsidiary. The guarantee is subject to the proportion of share held in the amount of Baht 425 million.
3. The Company has liability to guarantee credit cards and other services at gas stations amounting to Baht 1 million provided to 3 subsidiaries and jointly controlled entity.
TPC Power Holding Public Company Limited
4. The Company has liability to guarantee a loan amounting to Baht 500 million provided to Patthalung Green Power Company Limited, a subsidiary. The guarantee is subject to the proportion of share held in the amount of Baht 300 million.
5. The Company has liability to guarantee a loan amounting to Baht 500 million provided to Thung Sung Green Power Company Limited, a subsidiary. The guarantee is subject to the proportion of share held in the amount of Baht 325 million.
6. The Company has liability to guarantee a loan amounting to Baht 500 million provided to Satun Green Power Company Limited, a subsidiary. The guarantee is subject to the proportion of share held in the amount of Baht 255 million.
7. The Company has liability from engaging an engineering advisor with the contract value of Baht 1.7 million: Baht 0.68 million has been paid and Baht 1.02 million has been unpaid.
8. The Company has liability from engaging a financial advisor with the contract value of Baht 1.2 million: Baht 0.4 million has been paid and Baht 0.8 million has been unpaid.
9. The Company has liability from engaging a contractor with the contract value of Baht 25.15 million: Baht 5.99 million has been paid and Baht 19.16 million has been unpaid.
10. The Company has liability from engaging a consultant to conduct the feasibility study for power plant projects and environmental impact according to the contract conditions with the contract value of Baht 3.6 million: Baht 1.08 million has been paid and Baht 2.52 million has been unpaid.
11. The Company has liability to guarantee a loan amounting to Baht 281.62 million provided to Chang Raek Biopower Company Limited, a subsidiary.
Chang Raek Biopower Company Limited (CRB)
Chang Raek Biopower Company Limited has contingent liabilities from the Letter of Guarantee issued by a bank amounting to Baht 1.0 million as guaranteed by the mortgage of land, structures, and machinery in the project of CRB, and by Thai Polycons Public Company Limited.
Thung Sung Green Company Limited (TSG)
1. TSG has liability from engaging a contractor, a related company, with the contract value of Baht 630 million: Baht 617.19 million has been paid and Baht 12.80 million has been unpaid.
2. TSG has liability from engaging a lawyer with the contract value of Baht 1 million: Baht 0.50 million has been paid and Baht 0.50 million has been unpaid.
3. TSG has contingent liabilities from the Letter of Guarantee issued by a bank for electricity consumption to be placed with the Provincial Electricity Authority amounting to Baht 144,000 as guaranteed by the mortgage of land,
TPC Power Holding Public Company Limited
structures, and machinery in the project of TSG, and by the Company as a shareholder of TSG.
4. TSG has liability to pay the land lease as contracted amounting to Baht 15,000 per year for the 25-year contract term. The lease price shall be increased for 5 percent in every 5 years. The Land Lease Agreement shall end on 2041.
5. TSG has liability to pay the land lease as contracted amounting to Baht 15,000 per year for the 3-year contract term. The Land Lease Agreement shall end on 2019.
Pattani Green Company Limited (PTG)
1. PGC has contingent liabilities from the Performance Bond issued by a bank according to the Sale and Purchase Agreement amounting to Baht 4.2 million as guaranteed by bank deposit.
2. PGC has liability from engaging the control service for landfill and excavation work with the contract value of Baht 33.52 million: Baht 23.46 million has been paid and Baht 10.06 million has been unpaid.
3. PTG has liability from engaging an engineering advisor with the contract value of Baht 2.55 million: Baht 1.42 million has been paid and Baht 1.13 million has been unpaid.
4. PGC has liability from making the land purchase agreement for the power plant construction amounting to Baht 76.50 million: Baht 30.63 million has been paid and Baht 45.87 million has been unpaid.
Patthalung Green Power Company Limited (PGP)
1. PGP has contingent liabilities from the Performance Bond issued by a bank according to the Sale and Purchase Agreement amounting to Baht 1.84 million as guaranteed by bank deposit.
2. PGP has liabilities according to the Service Agreement regarding submission of an application for power plant construction license with the contract value of Baht 6.0 million: Baht 5.5 million has been paid and Baht 0.5 million has been unpaid.
3. PGP has liability from engaging a construction contractor with the contract value of Baht 648 million: Baht 618.99 million has been paid and Baht 29.01 million has been unpaid.
4. PGP has liability from engaging a consultant for power plant construction with the contract value of Baht 0.52 million: Baht 0.26 million has been paid and Baht 0.26 million has been unpaid.
5. PGP has liability from employing for the management of power plant construction with the contract value of Baht 3.22 million: Baht 3.1 million has been paid and Baht 0.12 million has been unpaid.
6. PGP has contingent liabilities from the Letter of Guarantee issued by a bank for electricity consumption to be placed with the Provincial Electricity Authority amounting to Baht 1.2 million as guaranteed by the mortgage of
TPC Power Holding Public Company Limited
land, structures, and machinery in the project of PGP, and by the Company as a shareholder of PGP.
7. PGP has liability to make an advance payment according to the Power Plant Management Agreement amounting to Baht 18.5 million, which has not been paid yet.
Satun Green Power Company Limited (SGP)
1. SGP has contingent liabilities from the Performance Bond issued by a bank according to the Sale and Purchase Agreement amounting to Baht 1.84 million as guaranteed by bank deposit.
2. SGP has liability from engaging a construction contractor with the contract value of Baht 648 million: Baht 519.70 million has been paid and Baht 128.30 million has been unpaid.
3. SGP has liability from engaging a consultant for power plant construction with the contract value of Baht 1.20 million: Baht 1.08 million has been paid and Baht 0.12 million has been unpaid.
Maewong Energy Company Limited (MWE)
MWE has contingent liabilities from the Letter of Guarantee issued by a bank for electricity consumption amounting to Baht 1.2 million as guaranteed by bank deposit.
TPCH Power 1 Company Limited (TPCH1)
1. TPCH1 has contingent liabilities from the Performance Bond issued by a bank according to the Sale and Purchase Agreement amounting to Baht 0.99 million as guaranteed by bank deposit.
2. TPCH1 has liability from the purchase of land for the power plant construction amounting to Baht 25.32 million, which has not been paid yet.
3. TPCH1 has liability from engaging the landfill and excavation work service amounting to Baht 8.74 million, which has not been paid yet.
TPCH Power 2 Company Limited (TPCH2)
1. TPCH2 has contingent liabilities from the Performance Bond issued by a bank according to the Sale and Purchase Agreement amounting to Baht 0.99 million as guaranteed by bank deposit.
2. TPCH2 has liability from the purchase of land for the power plant construction amounting to Baht 17.89 million, which has not been paid yet.
3. TPCH2 has liability from engaging the landfill and excavation work service amounting to Baht 14.36 million, which has not been paid yet.
TPCH Power 5 Company Limited (TPCH5)
TPCH5 has contingent liabilities from the Performance Bond issued by a bank according to the Sale and Purchase Agreement amounting to Baht 0.63 million as guaranteed by bank deposit.
TPC Power Holding Public Company Limited
4.5 Inter-company Transactions during Period between 2016 and the Second Quarter ended 30 June 2017
Transactions Transaction Size (Million Baht) Nature of Transaction/ Transaction Opinions of the Audit Committee Necessity and Validation As of December As of June 2017 2016 1. Connected transaction with 40.00 0.00 Loan Agreement 1: A loan amounting to Audit Committee:- It was of opinion Thai Polycons Public 0.89 Baht 15 million as of January 27, 2015 – that the transaction was appropriate as Company Limited (TPOLY) TPCH granted a loan to TPOLY in the TPCH acquired the returns from the Loan amount of Baht 15 million with an equity injection of TPCH during interest of 5 percent per annum. Interest TPCH has waited for spending it in Interest income payment shall be made at the end of each power plant projects. In addition, the month. As of January 30, 2016, both conditions and interest rate as parties made the Memorandum of specified in the Loan Agreements Agreement to extend the date of were appropriate as the loan interest repayment for both principal and interest was significantly higher than the from January 31, 2016 to January 30, deposit interest, and this transaction 2017. did not subserve any interest to any Loan Agreement 2: A loan amounting to persons who may have conflicts of Baht 35 million as of September 15, 2015 interest. – TPCH granted a loan to TPOLY in the amount of Baht 35 million with an interest of 5 percent per annum. Interest payment shall be made at the end of each month. As of March 14, 2016, both parties made the Memorandum of Agreement to extend the date of repayment for both principal and interest from March 15, 2016 to March 14, 2017. In Quarter 2/2017, TPCH received all repayment in the total of Baht 40 million.
TPC Power Holding Public Company Limited
Transactions Transaction Size (Million Baht) Nature of Transaction/ Transaction Opinions of the Audit Committee Necessity and Validation As of December As of June 2017 2016 The interest income incurred in 2017 totaled Baht 890,401.95. Space rental 0.14 As of August 1, 2013, TPCH made the Audit Committee:- As TPCH is a Other accounts payable 0.08 0.08 Space Lease Agreement together with a holding company; it is not necessary common area with TPOLY in an area of to use a very large area for its business 74 square meters, priced at 200 operation. The lease conditions and Baht/sq.m/month whereas the Lessor has price were appropriate, which were the right to increase the rental for not compatible and such rental was not more than 5 percent per year. As of higher than the rate leased by August 31, 2016, the rental was Baht neighboring offices. 24,773.71/month or 231.53 Baht/sq.m/month. The total rental in Quarter 2/2517 was Baht 148,642.25. Other accounts payable totalled Baht 79,523.61, which was paid on July 2017. 2. Connected transaction with 90.00 50.00 As of September 30, 2015, TPCH Thung Sung Green Company 1.27 granted a loan to TSG in 2 agreements in Limited (TSG) the total amount of Baht 153 million with Loan interest rate of 5 percent per annum. Interest payment shall be made at the end Interest income of each month. Loan Agreement 1: A loan amounting to Audit Committee:- It was of opinion Baht 33 million dated July 28, 2015. The that the transaction was appropriate as principal shall be repaid to TPCH when TPCH acquired the returns from the TSG receives a loan granted by Bangkok equity injection of TPCH during Bank (according to the Loan Agreement TPCH has waited for spending it in between the Bank and TSG). The power plant projects. In addition, the repayment condition was altered; it shall conditions and interest rate as be made on demand. specified in the Loan Agreement were
TPC Power Holding Public Company Limited
Transactions Transaction Size (Million Baht) Nature of Transaction/ Transaction Opinions of the Audit Committee Necessity and Validation As of December As of June 2017 2016 Loan Agreement 2: A loan amounting to appropriate as the loan interest was Baht 120 million dated September 25, significantly higher than the deposit 2015 The principal shall be repaid to interest, and this transaction did not TPCH when TSG receives a loan granted subserve any interest to any persons by Bangkok Bank (according to the Loan who may have conflicts of interest. Agreement between the Bank and TSG). The repayment condition was altered; it shall be made on demand. As at the end of 2016, the remaining amount of loan granted to TSG was Baht 90 million. On January 19, 2017, TSG made an additional repayment to TPCH in the amount of Baht 40 million. Therefore, as of June 30, 2017, the remaining loan to TSG was Baht 50 million only. Interest income in Quarter 2/2017 was Baht 1,271,438.36 in total Other income 0.03 On January 1, 2017, TPCH made the Service Agreement for accounting, procurement, and information service with TSG at the service fee of Baht 5,000 per month. In Quarter 2/2017, the service fee totaled Baht 30,000. 3. Connected transaction On January 1, 2017, TPCH made the between TPCH and Chang Service Agreement for accounting, Raek Biopower Company procurement, and information service
Limited (CRB) with CRB at the service fee of Baht 5,000
Other income per month. In Quarter 2/2017, the service 0.03 fee totaled Baht 30,000.
TPC Power Holding Public Company Limited
Transactions Transaction Size (Million Baht) Nature of Transaction/ Transaction Opinions of the Audit Committee Necessity and Validation As of December As of June 2017 2016 4. Connected transaction with On September 10, 2015, TPCH made the Audit Committee:- It was of opinion TPCH and Maewong Energy Loan Agreement with MWE for the that the transaction was appropriate as Company Limited (MWE) amount of Baht 75 million with interest TPCH acquired the returns from the Loan rate of MLR-1.5% by reference to an equity injection of TPCH during interest rate of Krung Thai Bank. The TPCH has waited for spending it in Interest income principal shall be repaid on demand. power plant projects. In addition, the Interest payment shall be made at the end conditions and interest rate as of each month. specified in the Loan Agreement were On September 10, 2015, MWE drew the appropriate as the loan interest was loan amounting to Baht 15 million from significantly higher than the deposit TPCH according to the Loan Agreement. interest, and this transaction did not In Quarter 4/2015, an additional amount subserve any interest to any persons of Baht 35 million was drawn. Therefore, who may have conflicts of interest. as of December 31, 2015, the loan draw down by MWE totaled Baht 50 million. Other income 0.03 In Quarter 2/2017, interest income totaled Baht 1,183,938.35. On January 1, 2017, TPCH made the Service Agreement for accounting, procurement, and information service with MWE at the service fee of Baht 5,000 per month. In Quarter 2/2017, the service fee totaled Baht 30,000. 5. Connected transaction As of January 19, 2016, TPCH made the Audit Committee:- It was of opinion between TPCH and Mahachai Loan Agreement for the amount of Baht that the transaction was appropriate as Green Power Company 20 million, and, on July 12, 2016, another TPCH acquired the returns from the
Limited (MGP) loan agreement was made for the amount equity injection of TPCH during
Loan of Baht 30 million or the loans were Baht TPCH has waited for spending it in 50 million in total with interest rate of power plant projects. In addition, the
TPC Power Holding Public Company Limited
Transactions Transaction Size (Million Baht) Nature of Transaction/ Transaction Opinions of the Audit Committee Necessity and Validation As of December As of June 2017 2016 Interest Income 50.00 50.00 MLR-1.5%. The loans shall be repaid on conditions and interest rate as 1.18 demand. Interest payment shall be made specified in the Loan Agreement were at the end of each month. appropriate as the loan interest was significantly higher than the deposit interest, and this transaction did not subserve any interest to any persons who may have conflicts of interest. Other income 0.06 On January 1, 2017, TPCH made the Service Agreement for accounting, procurement, and information service with MGP at the service fee of Baht 10,000 per month. In Quarter 2/2017, the service fee totaled Baht 60,000. 6. Connected transaction On September 26, 2016, TPCH made the Audit Committee:- It was of opinion between TPCH and Pattani Loan Agreement with PTG for the that the transaction was appropriate as Green Power Company amount of Baht 50 million with interest TPCH acquired the returns from the
Limited (PTG) rate of MLR-2% per annum (Bangkok equity injection of TPCH during
Loan Bank). Loan repayment must end within TPCH has waited for spending it in 18.00 0.00 December 31, 2017. Interest payment power plant projects. In addition, the Interest Income 0.36 shall be made at the end of each month. conditions and interest rate as As of December 31, 2016, PTG drew the specified in the Loan Agreement were loan amounting to Baht 18 million from appropriate as the loan interest was TPCH. significantly higher than the deposit interest, and this transaction did not In Quarter 2/2017, PTG drew the loan subserve any interest to any persons from TPCH amounting to Baht 30.63 who may have conflicts of interest. million. On May 8, 2017, the total amount of loan was repaid, together with interest for Year 2017 in the amount of Baht 360,316.78.
TPC Power Holding Public Company Limited
Transactions Transaction Size (Million Baht) Nature of Transaction/ Transaction Opinions of the Audit Committee Necessity and Validation As of December As of June 2017 2016 7. Connected transaction On June 22, 2017, TPCH made the Loan between TPCH and Agreement with PGP for the amount of Patthalung Green Power Baht 50 million with interest rate of Company Limited (PGP) MLR-2% per annum (Bangkok Bank). The loan shall be repaid on demand. Interest payment shall be made at the end of each month. Loan 5.00 In Quarter 2/2017, PTG drew the loan Audit Committee:- It was of opinion Interest income 0.001 from TPCH in the amount of Baht 5 that the transaction was appropriate as million, and interest for Year 2017 TPCH acquired the returns from the Accrued interest receivable 0.001 totaled Baht 1,746.58. equity injection of TPCH during TPCH has waited for spending it in power plant projects. In addition, the conditions and interest rate as specified in the Loan Agreement were appropriate as the loan interest was significantly higher than the deposit interest, and this transaction did not subserve any interest to any persons who may have conflicts of interest. 8. Connected transaction On July 10, 20103, CRB and VSPP made Audit Committee:- It was of opinion between CRB and VSPP the Operation Service Agreement to that entering into the said agreement Consultant Company Limited substitute the existing Operation Service was appropriate because the operation
(VSPP) Agreement (dated July 1, 2013) with the by VSPP for CRB attained the target
Management fee service rate at 44.75 percent of net established by TPCH. The service 23.76 72.44 electricity revenues. The advance rate was appropriate and CRB needed Trade payable 18.50 28.61 payment as the revolving capital and fuel not to bear the risk associated with the Advance payment for reserve totaled Baht 18.50 million. fluctuating fuel price. management fee 18.50
TPC Power Holding Public Company Limited
Transactions Transaction Size (Million Baht) Nature of Transaction/ Transaction Opinions of the Audit Committee Necessity and Validation As of December As of June 2017 2016 The advance payment for management shall be returned upon the expiration of service term if the Employer wishes not to renew the Agreement. On November 7, 2016, the operation service fee was revised to be Baht 1.68 per unit, starting from March 11, 2016 to December 31, 2016. Both parties agreed to extend the expiration date to be December 31, 2021 with the operation service fee of Baht 1.76 per unit, starting from January 1, 2017 to December 31, 2021. 9. Connected transaction On July 10, 2014, MWE and GPP made Audit Committee:- It was of opinion between MWE and Green the Operation and Maintenance that entering into the said agreement Power Producer Group Agreement with the service fee of Baht was appropriate because the operation
Company Limited (GPP) 1.75 per unit for a service period of 1 year by GPP for MWE attained the target
Management fee upon the date agreed by both parties. The established by TPCH. The service 19.25 72.14 advance payment as the revolving capital rate was appropriate and MWE Trade payables 18.50 24.54 and fuel reserve for not less than 19,000 needed not to bear the risk associated Advance payment for 18.50 tons totaled Baht 18.50 million, which with the fluctuating fuel price. management fee shall be returned upon the expiration of the said service. On May 9, 2017, the Memorandum of Agreement, No. 3 was made to revise the service fee to be Baht 2.35 per unit, effective on February 1, 2017 up to January 31, 2018. Service fee for Quarter 2/2017 amounted to Baht 72,136,367.15.
TPC Power Holding Public Company Limited
Transactions Transaction Size (Million Baht) Nature of Transaction/ Transaction Opinions of the Audit Committee Necessity and Validation As of December As of June 2017 2016 Trade payables amounted to Baht 24,544.424.25. 10. Connected transaction On September 20, 2016, TSG and VSPP Audit Committee:- It was of opinion between TSG and VSPP made the Operation and Maintenance that entering into the said agreement Agreement with the service fee of Baht was appropriate because the operation Management fee 23.87 65.06 2.00 per unit, starting from the COD up by VSPP for CRB attained the target Trade payables 8.50 23.33 to the date the power plant passes the established by TPCH. The service Advance payment for 8.50 performance test (COC), and Baht 1.68 rate was appropriate and TSG needed management fee per unit from the date of passing the not to bear the risk associated with the performance test (COC) up to the fluctuating fuel price. expiration date of the Agreement. Both parties agreed that TSG would make the advance payment as the revolving capital whereas VSPP had to reserve some fuel for not less than 15 days in the total amount of 8.50 million. This advance payment shall be returned upon the expiration of service term and the Employer wishes not to continue the Agreement. The service fee for Quarter 2/2017 amounted to Baht 65,061,610.64. Trade payables amounted to Baht 23,334,365.18. 11. Connected transaction On March 21, 2014, TSG made the EPC Audit Committee:- It was of opinion between TSG and TPOLY Contract with TPOLY for a 9.9 MW that the transaction was reasonable biomass power plant with the contract because TPOLY had experience in Advance payment as contracted 4.27 4.27 value of Baht 630 million, and TSG also constructing several power plants. Construction in progress made the first installment of advance Under the proposal of TPOLY, the Retention 630.00 630.00 payment for 15 percent, equivalent to construction period was shorter than
TPC Power Holding Public Company Limited
Transactions Transaction Size (Million Baht) Nature of Transaction/ Transaction Opinions of the Audit Committee Necessity and Validation As of December As of June 2017 2016 Trade payables 61.29 29.79 Baht 94.50 million. The second other contractors while its service fee Accrued construction cost installment of advance payment for 10 was appropriate. The advance percent, equivalent to Baht 63.00 million payment of TPOLY could be also payable 17.30 17.30 was made on August 5, 2015. compatible with the conditions agreed On October 3, 2016, TSG began the between TPOLY and other clients. COD for its sale of electricity to the Provincial Electricity Authority. Therefore, TSG recognized the full amount of construction in progress as the power plant asset. As a result, as of June 30, 2017, the remaining amount of advance payment as contracted amounted to Baht 4.27 million; retention amounted to Baht 29.79 million; and accrued construction cost payable amounted to Baht 17.03 million. On September 1, 2014, TSG made a contract with TPOLY to proceed with community relations for the power plant establishment. TSG had expenses for car rental at Baht 10,000 per month and other compensation for staffs assigned to take care of those communities. Car rental 0.02 On September 30, 2015, TSG made the Audit Committee:- It was of opinion Other trade payables 0.02 0.00 Memorandum to cancel the existing car that the transaction was appropriate as rental agreement and to make a new car TPOLY has achieved the experience rental agreement under the rental in community relations, and it has amounting to Baht 10,000 per month. On stayed in that area, and initiated the March 1, 2017, such car rental agreement construction project in CRB. The
TPC Power Holding Public Company Limited
Transactions Transaction Size (Million Baht) Nature of Transaction/ Transaction Opinions of the Audit Committee Necessity and Validation As of December As of June 2017 2016 was terminated. In Quarter 2/2017, the service fee was appropriate as it was rental amounted to Baht 20,000. The car the compensation to the assigned rental agreement was ended on March 1, staffs and other related expenses 2017. actually incurred from their working in the area. 12. Connected transaction On April 27, 2015, PGP made a turnkey Audit Committee:- It was of opinion between PGP and TPOLY contract with TPOLY for construction of that the transaction was appropriate a 9.9 MW biomass power plant with the because the price agreed by both Advance payment as contracted 47.93 9.67 contract value of Baht 648 million. PGP parties was the price compared by an Construction in progress made an advance payment for 25 percent, independent appraiser, OWL, who Retention 456.29 609.32 amounting to Baht 162 million. In compared the construction cost of Construction cost payables 45.63 60.93 Quarter 2/2017, TPOLY drew the TPOLY with those of other construction progress payment for 94.03 contractors. The agreed price was percent, which included the construction lower, equivalent to Baht 27.58 in progress amounting to Baht 609.32 million or it accounted for 4.26 million. Advance payment remained percent. In addition, the payment Baht 9.67 million, and retention conditions and penalty for delayed amounting to Baht 60.93 million was construction were in accordance with deducted. general normal business courses and fair to PGP. 13. Connected transaction On April 27, 2015, SGP made a turnkey Audit Committee:- It was of opinion between SGP and TPOLY contract with TPOLY for construction of that the transaction was appropriate a 9.9 MW biomass power plant with the because the price agreed by both Advance payment as contracted 109.36 42.77 contract value of Baht 648 million. SGP parties was the price compared by an Construction in progress made an advance payment for 25 percent, independent appraiser, OWL, who Retention 210.57 476.93 amounting to Baht 162 million. In compared the construction cost of Construction cost payables 21.06 45.23 Quarter 2/2017, TPOLY drew the TPOLY with those of other 19.76 construction progress payment for 73.60 contractors. The agreed price was percent, which included the construction lower, equivalent to Baht 27.58
TPC Power Holding Public Company Limited
Transactions Transaction Size (Million Baht) Nature of Transaction/ Transaction Opinions of the Audit Committee Necessity and Validation As of December As of June 2017 2016 in progress amounting to Baht 476.93 million or it accounted for 4.26 million. Advance payment remained percent. In addition, the payment Baht 42.77 million, and retention conditions and penalty for delayed amounting to Baht 45.23 million was construction were in accordance with deducted. The construction cost payable general normal business courses and remained Baht 19.76 million. fair to SGP. 14. Connected transaction On September 19, 2016, PTG made the Audit Committee:- It was of opinion between PTG and TPOLY Service Agreement with TPOLY for that the transaction was appropriate landfill work with the contract amount of because PTG had the installed Cost of controlling landfill 0.21 0.49 work Baht 700,000. In Quarter 4/2016, the capacity of 46MW, located in an area construction progress payment of 131-1-6 Rai, which was a large area amounting to Baht 210,000 was made to for landfill work. In addition, the TPOLY. power plant was located in the place In Quarter 2/2017, the construction risky to the unrest situation, so the progress payment totaling Baht 490,000 work duration might be longer than was made to TPOLY. other power plants. 15. Connected transaction On November 1, 2016, PTG made the Audit Committee:- It was of opinion between PTG and Mr. Land Sale Agreement with Mr. Sombat that such land purchase was Sombat Chairattanamanokorn for 32 plots of land reasonable although the purchase
Cost of land in an aggregate area of 135-2-52 Rai at price was higher than the land price 76.50 an approximate price of Baht 1,140.09 appraised by an independent Land cost payable 45.88 per square wah or the total purchase price appraiser due to: was Baht 76.50 million. On July 24, 1. In constructing small power plants 2017, the first payment amounting to with the installed capacity of 46 Baht 30.62 million was made. The MW in a joint area of PTG1 and remaining payment to be made in Quarter PTG2 to be submitted for EIA in an 2/2017 would be Baht 45.88 million. aggregate area of 131-1-6 Rai; this area had to be gathered from
TPC Power Holding Public Company Limited
Transactions Transaction Size (Million Baht) Nature of Transaction/ Transaction Opinions of the Audit Committee Necessity and Validation As of December As of June 2017 2016 several land owners totaling 32 title deeds. 2. Such area was located in 3 deep southern provinces where is in the risk zone, so the land acquisition persons had to be the local people who have been familiar with such area, which must be safe and appropriate, and have potential for establishing the power plants. 3. Under conditions on land sale and purchase to be complied with by land acquisition persons, such land had to be the location of the power plant that has been already approved to sell electricity to the Electricity Generating Authority of Thailand only. 4. For the price of land where the project was located, when it was calculated as project investment value, the investment return of PTG project accounted for 24.03 percent, which was higher than the project investment return as determined in the Company’s investment policy.
TPC Power Holding Public Company Limited
Transactions Transaction Size (Million Baht) Nature of Transaction/ Transaction Opinions of the Audit Committee Necessity and Validation As of December As of June 2017 2016 16. Connected transaction On May 4, 2017, TPCH1 made the Land Audit Committee:- It was of opinion between TPCH1 and Mr. Sale Agreement with Mr. Sombat that such land purchase was Sombat Chairattanamanokorn for 31 plots of land reasonable although the purchase
Cost of land in an aggregate area of 46-0-15 Rai at an price was higher than the land price 25.32 approximate price of Baht 1,375 per appraised by an independent Property cost payable 25.32 square wah or the total purchase price appraiser due to: was Baht 25.32 million. The land 1. In constructing a very small power ownership was transferred on June 23, plant with the installed capacity of 2017. 10 MW in an aggregate area of 59- The outstanding amount to be made in 0-34.5 Rai; this area had to be Quarter 2/2017 was Baht 25.32 million. gathered from several land owners totaling 36 title deeds. 2. Such area was located in 3 deep southern provinces where is in the risk zone, so the land acquisition persons had to be the local people who have been familiar with such area, which must be safe and appropriate, and have potential for establishing the power plants. 3. Under conditions on land sale and purchase to be complied with by land acquisition persons, such land had to be the location of the power plant that has been already approved to sell electricity to the Electricity Generating Authority of Thailand only.
TPC Power Holding Public Company Limited
Transactions Transaction Size (Million Baht) Nature of Transaction/ Transaction Opinions of the Audit Committee Necessity and Validation As of December As of June 2017 2016 4. For the price of land where the project was located, when it was calculated as project investment value, the investment return of TPCH1 project accounted for 11.34 percent, which was higher than the project investment return as determined in the Company’s investment policy. 17. Connected transaction On May 4, 2017, TPCH2 made the Land Audit Committee:- It was of opinion between TPCH1 and Mr. Sale Agreement with Mr. Sombat that such land purchase was Sombat Chairattanamanokorn for 18 plots of land reasonable although the purchase
Cost of land in an aggregate area of 32-2-11 Rai at an price was higher than the land price 17.89 approximate price of Baht 1,375 per appraised by an independent Property cost payable 17.89 square wah or the total purchase price appraiser due to: was Baht 17.89 million. The land 1. In constructing a very small power ownership was transferred on June 23, plant with the installed capacity of 2017. 10 MW in an aggregate area of 50- The outstanding amount to be made in 3-15 Rai; this area had to be Quarter 2/2017 was Baht 17.89 million. gathered from several land owners totaling 28 title deeds. 2. Such area was located in 3 deep southern provinces where is in the risk zone, so the land acquisition persons had to be the local people who have been familiar with such area, which must be safe and appropriate, and have potential for establishing the power plants.
TPC Power Holding Public Company Limited
Transactions Transaction Size (Million Baht) Nature of Transaction/ Transaction Opinions of the Audit Committee Necessity and Validation As of December As of June 2017 2016 3. Under conditions on land sale and purchase to be complied with by land acquisition persons, such land had to be the location of the power plant that has been already approved to sell electricity to the Electricity Generating Authority of Thailand only. 4. For the price of land where the project was located, when it was calculated as project investment value, the investment return of TPCH2 project accounted for 11.56 percent, which was higher than the project investment return as determined in the Company’s investment policy.
TPC Power Holding Public Company Limited
4.6 Summary Table of Financial Statements for Past 3 Years and the Second Quarter ended 30 June 2017 with Explanation, and Analysis of Financial Status and Operating Results for Past Year and Potential Risk Factors to the Company’s Profit
Statement of Financial Position
Transactions Consolidated Financial Consolidated Financial Consolidated Financial Consolidated Financial Statements Statements Statements Statements 31 Dec 14 31 Dec 15 31 Dec 16 30 Jun 17 Million Percentage Million Percentage Million Percentage Million Percentage Baht Baht Baht Baht Current Assets Cash and cash equivalent 1,226.14 41.34 54.00 1.64 203.37 4.56 144.42 2.39 Short-term investments 139.32 4.70 700.39 21.26 391.65 8.79 358.12 7.26 Trade receivables and other ------receivables – related parties receivables and other 49.03 1.62 97.30 2.95 168.33 3.78 174.75 3.54 receivables – other companies receivables and other 45.36 1.53 95.04 2.89 126.86 2.85 146.11 2.96 receivables – other receivables Short-term investments to - - 50.00 1.52 90.00 2.02 50.00 1.01 related parties Advance payment for cost 12.90 0.43 - - 20.64 0.46 - - of land Advance payment for cost 129.49 4.37 269.21 8.17 162.51 3.65 59.08 1.20 of construction Inventory ------Total current assets 1,602.24 54.01 1,265.94 38.43 1,163.36 26.11 932.47 18.89 Non-current assets Deposit subject to 14.06 0.47 15.78 0.48 21.08 0.47 23.22 0.47 restrictions Investment in subsidiaries ------Investment in joint ventures 58.39 1.97 106.80 3.24 345.14 7.75 413.58 8.38 Property, plant and 1,255.89 42.34 1,846.67 56.06 2,853.38 64.05 3,496.93 70.85 equipment Intangible assets 9.14 0.31 9.73 0.30 9.55 0.21 9.48 0.19 Advance payment for 18.50 0.62 37.00 1.12 45.50 1.02 45.50 0.92 management fee Withholding tax 0.07 0.00 0.20 0.01 0.37 0.01 0.48 0.01 Deferred tax assets 8.06 0.27 12.12 0.37 14.16 0.32 14.16 0.29 Other non-current assets ------Total non-current assets 1,364.11 45.99 2,028.30 61.57 3,289.19 73.87 4,003.35 81.11 Total assets 2,966.35 100.00 3,294.24 100.00 4,452.55 100.00 4,935.82 100.00
TPC Power Holding Public Company Limited
Transactions Consolidated Financial Consolidated Financial Consolidated Financial Consolidated Financial Statements Statements Statements Statements 31 Dec 14 31 Dec 15 31 Dec 16 30 Jun 17 Million Percentage Million Percentage Million Percentage Million Percentage Baht Baht Baht Baht Current liabilities Bank overdraft and short- 99.49 3.35 - - - - term loans from financial institutions Trade accounts payable 23.84 0.80 43.05 1.31 72.90 1.64 80.28 1.63 Other accounts payable 40.86 1.38 49.21 1.49 118.57 2.66 165.23 3.35 Current portion of long- 74.16 2.50 136.68 4.15 136.68 3.07 240.88 4.88 term loan Short-term loans from ------related parties Liabilities under lease 1.65 0.05 1.65 0.05 3.28 0.07 5.30 0.11 finance agreement – current portion Current portion of retention 30.43 0.92 30.43 0.92 - - 90.72 1.84 Accrued income tax - - 0.02 0.00 - - Other current liabilities ------Total current liabilities 239.44 8.07 261.01 7.92 331.43 7.44 582.42 11.80 Non-current liabilities Current portion of long- 730.11 24.61 858.84 26.07 1,544.16 34.66 1,698.41 34.41 term loans – net Current portion of 1.63 0.05 2.28 0.07 5.66 0.13 10.41 0.21 liabilities under lease finance agreement – net Retention payable 42.45 1.43 30.28 0.92 127.98 2.87 45.36 0.92 Retirement benefit 2.97 0.10 4.67 0.14 5.92 0.13 4.93 0.10 obligations Long-term provisions 2.14 0.07 - - - - Total non-current 779.30 26.27 896.07 27.20 1,683.72 37.79 1,759.11 35.64 liabilities Total liabilities 1,108.74 34.34 1,157.08 35.12 2,015.15 45.23 2,341.53 47.44 Shareholders’ equity Registered capital 401.20 13.53 401.20 12.18 401.20 9.01 401.20 8.13 Paid-up capital 400.00 13.48 401.20 12.18 401.20 9.01 401.20 8.13 Premium on share 1,251.55 42.19 1,254.31 38.08 1,254.31 28.15 1,254.31 25.41 Capital reserve for share------based payment Differences from business ------combination under common control Legal reserve - - 4.08 0.12 17.77 0.40 30.37 0.62 Unappropriated retained 40.30 1.36 81.27 2.47 268.76 6.09 348.60 7.06 earnings Other components of 30.66 1.03 30.73 0.93 33.73 0.76 33.73 0.68 shareholders’ equity Total equity attributable to 1,722.51 58.07 1,771.60 53.78 1,975.77 44.37 2,068.21 41.90 the parent
TPC Power Holding Public Company Limited
Transactions Consolidated Financial Consolidated Financial Consolidated Financial Consolidated Financial Statements Statements Statements Statements 31 Dec 14 31 Dec 15 31 Dec 16 30 Jun 17 Million Percentage Million Percentage Million Percentage Million Percentage Baht Baht Baht Baht Non-controlling interests 225.11 7.59 365.56 11.10 461.63 10.37 526.08 10.66 Shareholders’ Equity – 1,947.62 65.66 2,137.16 64.88 2,437.40 54.74 2,594.29 52.56 Net Total liabilities and 2,966.35 100.00 3,294.24 100.00 4,452.55 100.00 4,935.82 100.00 shareholders’ equity
Comprehensive Profit and Loss Statement
Transactions Consolidated Financial Consolidated Consolidated Consolidated Statements Financial Statements Financial Statements Financial Statements 31 Dec 14 31 Dec 15 31 Dec 16 30 Jun 17 Million Percentage Million Percentage Million Percentage Million Percentage Baht Baht Baht Baht Revenues Revenues from sales of 235.84 91.32 282.76 92.74 658.16 97.88 475.73 100.00 electricity Revenues from subsidizing 22.41 8.68 22.13 7.26 14.23 2.12 - the Adder Total revenues 258.26 100.00 304.89 100.00 672.39 100.00 475.73 100.00 Cost of sale 146.39 56.68 181.30 59.46 345.31 51.36 253.73 53.33 Gross profit 111.87 43.32 123.59 40.54 327.08 48.64 222.00 46.67 Other income 3.47 1.34 17.61 5.78 15.98 2.38 8.86 1.86 Profit before expense 115.34 44.66 141.20 46.31 343.06 51.02 230.86 48.53 Expenses Administrative expenses 42.48 16.45 47.35 15.53 68.73 10.22 57.20 12.20 Bad debts from winding-up 0.42 (28.39) (4.22) 8.43 1.77 of subsidiaries Loss on investments in joint 1.92 2.42 ventures Finance costs 27.56 10.67 27.04 8.87 44.57 6.63 27.95 5.87 Total expenses 71.96 27.12 77.23 24.40 84.91 12.63 76.71 16.13 Profit before income tax 43.38 17.54 63.97 21.91 258.15 38.39 154.15 32.40 expenses Income tax 6.14 2.38 3.99 1.31 1.82 0.27 - - Profit for the period 49.52 19.92 67.96 23.22 259.97 38.66 154.15 32.40 Other comprehensive profit (loss) Other comprehensive 0.04 0.02 (1.16) (0.38) - - - profit (loss) for the year Total comprehensive profit 49.56 19.19 66.80 22.05 259.97 38.66 154.15 32.40 (loss) for the year Attributable to: The parent 28.54 46.19 201.17 104.48 Non-controlling interests 21.02 21.77 58.80 49.67
TPC Power Holding Public Company Limited
Profit per share 0.09 0.11 0.50 0.26
Explanation and Analysis of Financial Status and Performance
Analysis of Performance and Financial Status and Significant Changes
Overview of past performance and financial status
The Company was established on December 26, 2012 by holding shares in other companies (holding company) that operate the electricity generation and sales from renewable energy, and supporting the operations of its subsidiaries. As of June 30, 2017, the Company has made investments in 14 companies as listed below.
List of Companies Abbr. Paid-up Proportion of Current Status capital Shareholding (Million Baht) Chang Raek Biopower Company CRB 200.00 73.12% COD has achieved already. Limited Mahachai Green Power Company MGP 233.50 46.00% COD has achieved already. Limited Thung Sung Green Company TSG 200.00 65.00% COD has achieved already. Limited Maewong Energy Company MWE 200.00 85.00% COD has achieved already. Limited Patthalung Green Power Company PGP 250.00 60.00% COD has achieved already. Limited Pattani Green Company Limited PTG 10.00 65.00% Under process of submitting an application for license Satun Green Power Company SGP 250.00 51.00% Under construction Limited TPCH Power 1 Company Limited TPCH1 5.00 65.00% Under process of submitting an application for license TPCH Power 2 Company Limited TPCH2 5.00 65.00% Under process of submitting an application for license TPCH Power 3 Company Limited TPCH3 5.00 65.00% Under process of submitting an application for license TPCH Power 4 Company Limited TPCH4 5.00 65.00% Under process of submitting an application for license TPCH Power 5 Company Limited TPCH5 5.00 65.00% Under process of submitting an application for license PA Waste & Energy Company PA 23.00 45.00% Under process of submitting an Limited application for license Siam Power Company Limited SP 250.00 50.00% Under process of submitting an application for license
TPCH Power Holding Public Company Limited is a company making investments in other companies that operate the power plants from renewable energy based on the Alternative Energy Development Plan; boosting the energy generation potential from renewable energy to attain the full capacity in each area by mainly considering the public interest.
TPC Power Holding Public Company Limited
Management’s Discussion and Analysis (MD&A)
Six Months Ending June3 0, 2017
Events and progress of the Company during Q2/2017
. COD of Phattalung Green Power Project
On July 7, 2017, Phattalung Green Power project (PGP), a power plant with an installed capacity of 9.2 MW, started selling electricity commercially to the Provincial Electricity Authority of Thailand.
. Progress of Projects Under Construction as of June 30,2017
Satun Green Power Project (SGP), having a Power Purchase Agreement (PPA) of 9.2 MW with Provincial Electricity Authority of Thailand, is approximately 80% complete and scheduled to COD in the fourth quarter of 2017.
. Project Under Development
The Company currently has six projects under development, categorized into three areas:
1. Pattani Green 1 project )PTG1( is a biomass project under the Adder system with an installed capacity of 23 MW that will be selling electricity to the Electricity Generating Authority of Thailand.
2. TPCH 1, TPCH 2, and TPCH 5 are three biomass projects under the FIT system with a combined total installed capacity of 26.1 MW .Electricity will be sold to the Provincial Electricity Authority.
3. Siam Power )SP (is a municipal-waste project having a total installed capacity of 9.5 MW and will be selling electricity under the FIT system to Metropolitan Electricity Authority.
. SPP Hybrid Firm
On August 4, 2017, the Energy Regulatory Commission )ERC (issued a proclamation calling for Small Power Producers )SPP (to participate in bidding for projects in the SPP Hybrid Firm policy .A total of 300 MW covering many provinces in Thailand will be out for bid under this policy .Among the 300 MW megawatts out for bid, 100 MW are located in the South of Thailand which is currently a strategic location for the Company’s business .This policy qualifies the use of one or more types of alternative energy .To participate in this type of project, the company would have to be under firm structure )produce electricity at 100 %capacity during peak hours and maximum of 65 %capacity during off peak hours with the understanding that the government has the option of adjusting off-peak hour demand .(
Overview of Financial Performance of the Company and Its Subsidiaries in Q2/2017
TPC Power Holding Public Company Limited
Company financial performance in a second quarter of 2017 was 15.39 million THB, decreased 29.21 million THB compare to a first quarter of 2017 which had a profit of 44.60 million THB .
Reasons of such performance are as follows:
- The company received fewer dividends from its subsidiary companies compared to the first quarter .In the second quarter, the company received a dividend of 44.63 million THB )CRB of 14.62 million THB, MWE of 17 million THB, and TSG of 13 million (which was lower than a dividend of 52.28 million THB of the first quarter.
- Second Quarter Company expenses were 34.44 million THB, increased 21.05 million THB compared to 13.39 million THB of the first quarter of 2017 .Extra expense occurred from a provision for impairment of investment in bills of exchange of 19.82 million THB and also an increase in the number of employees, directors and executives to support the rapid growth of the Company .Extra expense also included research and sourcing for potential renewable energy projects.
. Company Performance in Second Quarter of 2017 3 Months Ending March 31, 2017 6 Months Ending June 30, 2017 Consolidated Financial Statements (Million THB) Q2-2560 Q1-2560 QoQ Q2-2560 Q2-2559 YoY Revenues from sales of electricity 239.90 235.83 1.7% 475.73 283.06 68.1% Cost from sales of electricity* 114.26 99.44 14.9% 213.70 130.10 64.3% Gross Profit 125.64 136.39 -7.9% 262.03 152.96 71.3% Administrative Expenses* 38.66 16.92 128.5% 55.58 30.61 81.6% Other Revenue 4.44 4.42 0.5% 8.86 8.25 7.4% Profit (loss) from investment in joint venture 8.32 0.11 7463.6% 8.43 17.69 -52.3% EBITDA 99.74 124.00 -19.6% 223.74 148.29 50.9% Depreciation and amortization cost 21.09 20.55 2.6% 41.64 27.12 53.5% Interest Expense 13.55 14.40 -5.9% 27.95 20.49 36.4% Income Tax 0.00 0.00 0.0% 0.00 0.00 0.0% Net Profit 65.10 89.05 -26.9% 154.15 100.68 53.1% Earnings (loss) per share 0.10 0.16 -36.5% 0.26 0.20 28.3%
Owners of the Company Owners of the Company 40.56 63.92 -36.5% 104.48 81.46 28.3% Non-controlling interests 24.54 25.13 -2.3% 49.67 19.22 158.4% Profit (Loss) for the periods 65.10 89.05 -26.9% 154.15 100.68 53.1% Note* Depreciation excluded
TPC Power Holding Public Company Limited
. Revenue from Electricity Sales
TPCH and its subsidiaries had a total revenue from electricity sales in six months ending June 30, 2017 of 475.73 million THB, which was an increase of1 92.67 million THB compared to a revenue of 283.06 million THB in the same period of 2016. Revenue from electricity sales increased substantially due mainly to the Company's power plants selling electricity on a commercial project as opposed to just two power plants, CRB and MWE, in the same period of2016 . There are now four power plants that sell electricity commercially –CRB, MWE, MGP, and TSG.
. Cost from sales of electricity
Cost of electricity production primarily includes wages, operating fees, machine management fees and materials .The Company also outsourced operators to build the core assets to increase efficiency, depreciation and amortization of property used in the operation of power plants and administration of wages, operating fees, machine management and the management of the Company.
TPC Power Holding Public Company Limited
Q2-2017 Q2-2016 Cost of Electricity sales (million THB) CRB MWE TSG Total % CRB MWE Total % Wages / Maintenance cost 72.44 72.14 65.06 209.64 82.62 65.41 55.65 121.06 77.45 Depreciation and amortization cost 13.22 13.21 13.59 40.02 15.77 13.16 13.05 26.21 16.77 Maintenance cost 0.43 0.00 0.00 0.43 0.17 7.40 0.00 7.40 4.73 The electricity project cost 0.66 0.99 1.99 3.64 1.43 0.68 0.95 1.63 1.04 Total 86.75 86.34 80.64 253.73 100.00 86.65 69.65 156.30 100.00 Margin of COGS 53.33 55.22
Cost of electricity sales in six months ending June 30, 2017 has increased rapidly compare to the same period in 2016, due to a number of commercial projects. In 2017, the Company had three projects under operation (CRB, MWE, and TSG) while only two projects were under operation (CRB and MWE) in 2016 which lead to a higher cost when comparing the two periods.
The cost of sales in this period of CRB was 86.75 million THB which increased 0.1 million THB compared to 86.65 million THB of the same period in 2016.
The cost of sales in this period of MWE was 86.34 million THB which increased 16.70 million THB compared to 69.64 million THB of the same period in 2016. Such decrease occurred from a change of agreement in operations and maintenance with the power plant’s operator from giving them 1.75 THB per unit produced to 2.35 THB per unit due to a higher price of feed stock in the area.
The cost of sales in this period of TSG was 80.64 million THB with an agreement in operations and maintenance with the power plant’s operator at 1.68 THB per unit of electricity produced.
. Other Revenue
The Company also earned other revenue from debt and return on a temporary investment during the development period of the project power plants, by investing in short-term investments and debt securities that have high-yield and low risk .Other revenue in six months ending June 30, 2017 was 8.86 million THB which increased 0.61 million THB from 8.25 million THB of the same period in 2016.
. Administrative Expenses
The Company’s administrative expense in six months ended June 30, 2017 was 57.19 million THB, an increase of 25.66 million THB from 31.53 million THB in the same period in 2016 . The costs occurred related to a provision for impairment of investment in bills of exchange of 19.82 million THB and an increasing in number of employees, directors and executives, sourcing a purchasing potential in domestic and international renewable energy power plants, and joint ventures to support the rapid growth of the company.
. Financial Costs
The Company's finance costs in six months ending June 30, 2017 was 27.95 million THB, an increase of 7.46 million THB from 20.49 million THB in the same period in 2016 due to additional interest expenses of the TSG power plant which started selling electricity commercially on October 3, 2016.
TPC Power Holding Public Company Limited
. Profit (loss )from investments in joint ventures.
Share of profits from investing in joint ventures was according to the proportion allotted in each company .
The share of profit from 46 percent in MGP for six months ending June 30, 2017 was 14.90 million THB, a decrease of 2.79 million THB from 17.69 million THB of the same period in 2016 .MGP received an extra profit in 2016 from a contractor as its penalty from a delay in construction process .
The share of loss from 45 percent in PA Waste and Energy Company Limited )PA (from this period was 0.6 million THB.
The share of loss from 50 percent in Siam Power Company Limited )SP (from this period was 6.40 million THB.
. Total Net Profit (Loss)
In the six months ending June 30, 2017, the Company had a consolidated net profit of 154.15 million THB and a separate net profit of 104.48 million THB .During the same period of 2016, the Company had a consolidated net profit of 100.68 million THB and a separate net profit of 81.46 million THB .Both consolidated net profit and separate net profit increased by 53.47 million THB and 23.02 million THB, respectively. The decrease in separated net profit was due to a provision for impairment of investment in bills of exchange.
TPC Power Holding Public Company Limited
Performance of Power Plants under Operation
Performance of electricity production in each power plant are as follows:
CRB, a 9.2 MW power plant which started selling electricity commercially on March 15, 2013, has generated electricity of 19,733,083 units under the FiT system )4.54 baht/unit (in Q2/2017
TPC Power Holding Public Company Limited
MWE, an 8. 0MW power plant which started selling electricity commercially on October 12, 2015, has generated electricity of 15,441,932 units under the FiT system )4.54 baht/unit (in Q2/2017 .A nine day preventive maintenance occurred in this quarter as well.
MGP, an 8. 0MW joint venture which commenced selling electricity on April 8, 2016, has generated electricity 17,254,376 units under the FiT system )4.54 baht/unit (which will recognize results of operations in accordance with its shareholding.
TSG, a 9.2 MW power plant which started selling electricity commercially on October 3, 2016, has generated electricity of 18,742,780 units under the FiT system (4.54 baht/unit) in Q2/2017.
Trend of Business in 2017
On August 4, 2017, the Energy Regulatory Commission )ERC (issued a proclamation calling Small Power Producers )SPP (to participate in bidding for projects in the SPP Hybrid Firm policy .A total of 300 MW covering many provinces Thailand will be out for bid under this policy to promote renewable alternative energy and use extensive natural resources .This policy qualifies the use of one or more types
TPC Power Holding Public Company Limited of alternative energy .Bid submission period is scheduled to begin at the end of October and the winners will be announced on December 14, 2017 .
According to the proclamation, TPCH is currently preparing to participate in the bidding for these projects using our comprehensive understanding of the alternative energy business and excellent management of both projects and personnel .By looking at good investment opportunities, among the 300 MW megawatts out for bid, 100 MW is in the South of Thailand. At the same time, the Company has also looking for and studying opportunities to invest in other regions as well .
TPCH is highly committed to a target of reaching capacity of 200 MW in Biomass by 2020 .The Company also is continually exploring new opportunities in the alternate energy field to grow and expand the Company and improve the quality of life for communities by promoting and providing clean renewable energy now and in the future.
Risk Factors
1. Business risks
1.1 Risk from dependence on service operators for power plant operation
At present, TPCH has engaged VSPP to operate CRB and TSG power plants. GPP has been also engaged to operate MWE power plant in accordance with the operation and maintenance agreement because these service providers have many personnel with long investment experience in biomass power plants. Their staffs are specialized in operating the biomass power plants, controlling and maintaining all machinery and equipment used for generating the biomass-fuelled electricity. They have also had some experience in managing the power plants and fuel, which is an important factor in generating and selling the electricity of biomass power plants. The management of power plants by inexperienced or non-specialized people may lead to damages, which could adversely affect revenues and operating performance of TPCH.
However, TPCH recognizes the risk of such dependence. It certainly adheres to the Code of Best Practices defined by imposing appropriate terms and conditions in the operation and maintenance agreement whereas they can motivate such service operators so that both parties could gain satisfactory benefits. For example, the compensation to a power plant operator in accordance with the operation and maintenance agreement shall be flexible by the net income of electricity cost. The minimum electricity generation is fixed, but if the power plant operator can generate the electricity higher than the established target, an additional payment would be made to such operator as an operating incentive. Meanwhile, CRB, TSG and MWE can gain higher revenues and profit from some increasing production units. On the contrary, if the power plant operator generates the electricity less than the target, it would be fined. This is to prevent or reduce the loss of benefits in CRB, TSG and MWE, etc.
1.2 Fuel risk
(1) Risk from adequacy of fuel
Fuel is one of the most important factors for the operation of biomass power plant, especially the power plant that owns no fuel source. If a biomass power plant fails to find out the fuel sources sufficiently and consistently, it will not be able to generate electricity based on its full production capacity. This could directly impact the project revenues and returns, ability in repayments, and dividend payments to the Company eventually.
TPCH recognizes this impact, and formulates a guideline to mitigate such risk. To elaborate, before an investment and development of a biomass power plant, TPCH shall
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study the adequacy of fuel by surveying any fuel sources around the power plant whether that fuel could be delivered or not. TPCH determines that each biomass power plant of its subsidiaries must have a big fuel warehouse there and an open area to store much fuel to be used during the fuel shortage. TPCH has a policy of storing some fuel in the warehouse at least 15 days. This measure is specified in the operation and maintenance agreement made with VSPP for CRB and TSG power plants, and with GPP for MWE power plant.
TPCH also defines the strategy for approaching fuel sources by employing the power plant operators whose scope of service includes the sufficient supply of fuel for the power plant operation. TPCH will consider the power plant operators capable of approaching fuel sources, and of generating and selling electricity as specified in the operation and maintenance agreement such as power plant projects of CRB, TSG and MWE. TPCH may advise its subsidiaries to make a long-term fuel purchase agreement with an entrepreneur who owns the fuel sources. In this regard, TPCH has made investments in power plant projects with the fuel owners, e.g. power plant projects of MGP, PGP, SGP, and PTG in order to approach big fuel sources to feed those power plants consistently.
Besides, TPCH has a policy of building the good relationship with owners of other fuels to ensure that the fuel will be supplied to the power plants adequately in the long term.
(2) Risk from the fluctuation of fuel prices
Fuel cost is the highest portion of cost in a biomass power plant. If the fuel price becomes high significantly, the profit and returns of such biomass power plant would be affected substantially as well. TPCH manages the risk of fuel price by assigning the power plant operators to be responsible for fuel supplies as specified in the operation and maintenance agreement. However, according the previous operation data, the fuel price has not been so fluctuating that it takes effect to TPCH. In addition, the different cost is partly derived from the combination of fuel types used in the electricity generation as a cost management. For example, stump is cheaper than wood slab. If stump is much more used, the average cost is likely to be lower.
TPCH has a policy of monitoring fuel prices regularly. Whenever the core fuel comes out so much and the price drops, TPCH shall inform the power plant operators to purchase more fuel because the power plants of TPCH have some large areas, either indoor or outdoor, for fuel storage.
In case that the price of such core fuel is so high that it is not worthwhile for electricity production, TPCH would consider other types of fuel compatible and harmless to the incinerator of those power plants because TPCH selects the machinery technology compatible with several types of fuel.
1.3 Risk from delayed power plant projects
Currently, some power plant projects of TPCH have been under construction. This is a risk that the project implementation may not be in line with the plan. TPCH recognizes the risk of project development before each biomass power plant will begin its commercial operation. These projects may be delayed by procedures of applying for licenses, construction and installation of machinery and equipment by the EPC contractor, conflicts with surrounding communities, or natural disaster. These factors may affect the operation period and/or cause the cost overrun, which make TPCH unable to recognize the revenues as planned, and the investment returns
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miss the expectation. Therefore, TPCH defines some operating measures to reduce this risk; for example, preparation of a manual describing the procedures of submitting applications for all and any necessary licenses as well as all important documents and information to be submitted at each stage to ensure accuracy, completion, and quickness in applying for licenses, selection of sub-contractors holding good reputation, experience, and expertise, making the agreements carefully, work guarantee after completion of each construction project, request for contractors to guarantee the efficiency and proficiency of electricity generation, communications with surrounding communities for the good relationship with them, making the insurance to mitigate the impact from natural disaster. TPCH has engaged certain external experts to manage the projects and construction works to ensure that the construction works would be completed on schedule. If the construction works could not be completed as stated in the construction service contract, the said contractor would be fined.
1.4 Risk from not receiving investment returns as anticipated from subsidiaries
TPCH prioritizes this risk; it assigns the Business Development Department to be in charge of regularly monitoring the operating results of each power plant invested by TPCH. For example, VSPP, the biomass power plant operator of CRB, would summarize the operating performance of CRB biomass power plant on a daily basis, and analyze the actual returns as compared with the projection, to ensure that the businesses invested by TPCH achieve the operating results and efficiency as anticipated. TPCH also formulates certain measures and operation guideline to prevent this risk as described below:
- Formulate a guideline of management in subsidiaries by delegating the directors and/or executives of TPCH to be directors of such subsidiaries. The number of directors in those subsidiaries must not be less than the proportion of shares held by TPCH in those subsidiaries or associated companies (as the case may be). TPCH also appoints its representatives to act as top executives in its subsidiaries.
- TPCH is able to access into the information about power plant operation at any time by the real time monitoring system. TPCH also receives the daily report from operation providers; therefore, the Company’s Business Development Department can prepare and submit the analysis report on the subsidiaries’ operating performance to the Company’s management and Board of Directors regularly so that their operations can be improved and remedied appropriately and timely.
- TPCH assigns its internal auditor to inspect its subsidiaries’ activities regularly in accordance with the Audit Plan to ensure that they have the adequate and efficient internal control system. The auditing result shall be reported to the Audit Committee.
1.5 Risk from dependence on major clients
For all current power plants of TPCH, they have only one major client that is PEA (for the future project, PTG, the client is EGAT), which is a state enterprise purchasing all quantity of electricity generated in accordance with the power purchase agreement, which specifies the amount or purchase quantity and price precisely at each period, based on the policy of supporting the electricity production and use from renewable energy by the Energy Policy and Planning Office, Ministry of Energy like other power producers from renewable energy sources.
1.6 Risk from accidents, protest of local people, and sabotage
For business operation by the Group of Companies, any accidents may occur from machines or equipment, which may cause fire. There is also a risk from the community protest due to the
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negative attitude toward the power plant or production process possibly impacting those communities. The accidents may derive from the useful life of the power plant, personnel’s operation. The power plants are also the target of sabotage. TPCH believes that, from the existing measures and close monitoring of the said situations, this risk hardly occurs. However, the management of TPCH set up several measures to be implemented constantly to prevent and reduce such risk as follows:
- Insisting with all workers (or power plant operators) consistently on prudence as it believes that a slight negligence may lead to the invaluable damage.
- Maintaining all machinery and equipment as scheduled to keep their functioning efficiency.
- Binding the good relationship with neighboring communities, and coordinating with all related state entities and authorities to the relevant understanding of all related parties.
- Defining the safety and emergency plan, installing safety devices, e.g. closed-circuit television system, and arranging the drill regularly.
- Providing the power plant insurance covering all risks, machinery breakdown, business interruption, and third party liability to ensure that, upon an occurrence of force majeure, the Company and subsidiaries will obtain the adequate and appropriate coverage.
1.7 Risk from changes in policy by the government and regulatory agencies
Risk from the electricity purchase by means of competitive bidding
As the Energy Regulatory Commission (ERC) issued an announcement on purchase of power from very small power producers (VSPP) in renewable energy project (excluding solar power projects) under the FiT scheme via competitive bidding, the projects proposing the maximum discount of FiTF would be first selected, and sorted out according to the proposed discount until the ERC receives all electricity quantity as intended. This announcement drives the competition tougher; this may adversely affect the goal of TPCH in expanding its investments in power plants in the future.
However, previously, TPCH has made most investments in the southern area. To reduce the aforesaid risk, TPCH plans to expand investments in other regions and on abroad. It also considers other types of renewable energy, e.g. solar cell, wind power, waste, etc.
Risk from foreign investments
TPCH plans to expand both local and foreign investments in the electricity generation business constantly. At present, TPCH conducts a feasibility study on the development of an electric power dam project in the Lao People’s Democratic Republic. However, TPCH realizes the risk of developing new projects in other countries; therefore, it places certain measures on selecting investment projects and joint investors carefully. All related factors are analyzed, including economic policy, politics, and society of countries to be invested. Then, economic and industrial situations, financial cost, cost of machinery and equipment, and cost of construction as well as all related laws are analyzed in order to have the investment probability and expected returns. The sensitivity analysis is also conducted to have the risk prevention guideline as this takes the great and direct effect to the business operation on abroad.
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1.8 Risk associated with compliance with environmental law
The operation of electricity production and sales by subsidiaries of TPCH is under laws and regulations on environmental impact prevention and mitigation as prescribed by either central government entities or local authorities. These laws and regulations cover soil, water, air, and toxin pollution control, disposal and management of refuse and waste, health and safety at workplace, and management of hazardous materials. The said requirements are complicated and amended frequently, but the enforcement, in some cases, depends on the interpretation by particular authorities.
The Group of Companies recognizes the environmental impact caused by power plants. Therefore, before beginning a power plant construction, TPCH always prepares the Environmental and Safety Assessment (“ESA”) and arranges the public participation by local people around each power plant of its subsidiaries, except PTG project for which TPCH has engaged a consultant to conduct the study and prepare the Environmental Impact Assessment (“EIA”) as this project contains the production capacity over 10 megawatts. The preventive environmental impact measures carried out by the Group of Companies include the substance release system, pollutant control system, waste water treatment system, waste and disposal treatment system by distributing some fuel ash left from fuel combustion to local people and surrounding communities to be utilized as fertilizer, multi-cyclone dust collector system, and electrostatic precipitator, etc. TPCH and its subsidiaries also monitor and examine any possible environmental impact closely to ensure that the electricity generation process of these subsidiaries is in conformity with any and all related laws and regulations, and to minimize the environmental pollution so that their power plants are actually the power plants for local communities. Subject to the noise, dust, and air pollution examinations in all power plants of these subsidiaries in 2016, all examination results are relevant to the criteria prescribed by law.
2. Financial risk
2.1 Risk from fluctuation of interest rates
The operation of biomass power plant needs high investment. Most power plant operators prefer the long-term project finance granted by financial institutions. Debt to equity ratio would be approximately 2:1 or 3:1. The interest charged is usually the floating interest rate. The power plants of these subsidiaries inevitably rely on such loans. Therefore, changes in interest rate take the direct effect to the financial expenses of TPCH.
TPCH exactly recognizes this risk. Therefore, during a project feasibility study, TPCH studies the possible impact from changes in interest rate in case of high fluctuation of interest rate. This is to assess the financial impact before making investments in each power plant. Besides, when listed on the SET, TPCH may consider other alternatives from various financial sources such as debt instrument with fixed interest rate to mitigate the fluctuation of interest rate.
4.7 Financial Projections of Present Year
- N/A -
4.8 Pending Material Litigation Case or Claim
On September 3, 2015, a group of local people preferred a charge before Nakhon Si Thammarat Administrative Court against the local authority, and requested the Court to revoke the Permit for Factory Operation and Power Plant Construction License given to Thung Sung Green Company Limited as it considered that the issuance of such licenses was unlawful and possibly impacted the environment. The Court considered and determined that the judgment or order to
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this case might affect Thung Sung Green Company Limited; therefore, the Court had an order on November 14, 2015 to summon Thung Sung Green Company Limited to be the interpleader of prosecuted persons, and it was determined as the third prosecuted person. This case is now pending in the Court.
4.9 Other Information Which May Materially Affected Investors’ Decision
- N/A -
5. Appraisal of Assets’ Price by Independent Appraisal●
The Company has engaged an independent appraisal company, Panns Integrated Property Company Limited, who was an independent appraiser as approved by Thai Valuers Association (TVA) and The Valuers Association of Thailand (VAT) to appraise the asset prices of its subsidiaries according to the appraisal report dated July 24, 2017 for public purposes.
The Company has appointed OWL Energy Limited (OWL) to be the engineering consultant in charge of estimating the construction cost of power plants of its subsidiaries. This engineering consultant had no shares or relationship with the Company.
Both independent appraisers mentioned above agreed for the disclosure of such appraisal report as presented in No. 3 – Opinion of the Financial Advisor, Enclosure 4 – Summary of Construction Cost Estimation, and Enclosure 5 – Summary of Land Appraisal.
6. Opinions of the Board of Directors toward Adequacy of the Working Capital
The total investment spent by the subsidiaries in the construction of biomass power plants was approximately Baht 3,957,000,000. The Board of Directors was of opinion that the subsidiaries had no problem about the adequacy of revolving capital as they could use some capital from their cash flow in an approximate amount of Baht 1,063,000,000, and/or loans from financial institutions in an approximate amount of Baht 2,894,000,000. At present, the subsidiaries have been negotiating for loans with the financial institutions.
7. Connected Person and/or Interested Shareholders and Not Entitled for Vote Casting
In entering into the transaction the Company requires the votes of not less than three-fourths of the total votes of the shareholders in attendance and eligible for voting, excluding of the votes of interested shareholders. The interested shareholders who are not eligible for voting are as follows:
Transaction 1 The subsidiaries invest in the construction of biomass power plants
-None-
Transaction 2 The subsidiaries entry into a construction contract for the construction of a biomass power plant with Thai Polycons
TPC Power Holding Public Company Limited
List of Names Title in TPCH Number of Percentage of Shares held in Shareholding TPCH as of August 18, 2017 1. Thai Polycons Public Company Major shareholder 165,549,960 41.26 Limited 2. Mr. Chainarong Chanpalangsri Shareholder/ 4,000,000 1.00 Director 3. Mr. Cherdsak Wattanavijitkul Shareholder/ 158,079 0.04 Director/ Executive Director/ President 4. Mrs. Kanoktip Chanpalangsri Shareholder/ 84,684 0.02 Director/ Executive Director 5. Mrs. Boontipa Simaskull Shareholder/ 90,000 0.02 Independent Director 6. Mr. Thanwa Theeravitayaleret Shareholder/ 58,000 0.01 Independent Director 7. Mr. Pornthep Sawetwannakul Shareholder 50,000 0.01 8. Ms. Nunnapas Srabongkoch Shareholder/ 5,000 0.0012 Assistant Vice President, International Business Development 9. Ms. Yupawadee Chaiya Assistant Vice 20,069 0.0050 President, Domestic Business Development
Transaction 3 and 4: Subsidiaries purchased some plots of land from related persons.
List of Names Title in TPCH Number of Percentage of Shares held in Shareholding TPCH as of August 18, 2017 1. Mr. Sombat Shareholder 120,000 0.03 Chairattanamanokorn
The interested directors who have not attended the board’s meeting nor voted in favor of this transaction are as follows:
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1. Mrs. Boontipa Simaskull 2. Mr. Thanwa Theeravitayaleret 3. Mrs. Kanoktip Chanpalangsri 4. Mr. Chainarong Chanpalangsri 5. Mr. Cherdsak Wattanavijitkul 6. Mr. Pathompol Saosap
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8. Interest or Connected Transactions between TPCH and Directors, Executives, and Shareholders Directly or Indirectly Holding Shares for 10 percent and up
Transaction Transaction Size (Million Baht) Nature of Transaction/ Transaction Opinions of the Audit Committee Necessity and Validation As of December As of June 2017 2016 Transaction between Loan Agreement 1: A loan amounting to Baht Audit Committee:- It was of opinion TPCH and TPOLY 15 million as of January 27, 2015 – TPCH that the transaction was appropriate granted a loan to TPOLY in the amount of as TPCH acquired the returns from Loans 40.00 0.00 Baht 15 million with an interest of 5 percent the equity injection of TPCH during Interest income 0.89 per annum. Interest payment shall be made at TPCH has waited for spending it in the end of each month. As of January 30, power plant projects. In addition, the 2016, both parties made the Memorandum of conditions and interest rate as Agreement to extend the date of repayment specified in the Loan Agreement for both principal and interest from January were appropriate as the loan interest 31, 2016 to January 30, 2017. was significantly higher than the Loan Agreement 2: A loan amounting to Baht deposit interest, and this transaction 35 million as of September 15, 2015 – TPCH did not subserve any interest to any granted a loan to TPOLY in the amount of persons who may have conflicts of Baht 35 million with an interest of 5 percent interest. per annum. Interest payment shall be made at the end of each month. As of March 14, 2016, both parties made the Memorandum of Agreement to extend the date of repayment for both principal and interest from March 15, 2016 to March 14, 2017. In Quarter 2/2017, TPCH received all repayment in the total of Baht 40 million. The interest income incurred in 2017 totaled Baht 890,401.95.
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Transaction Transaction Size (Million Baht) Nature of Transaction/ Transaction Opinions of the Audit Committee Necessity and Validation As of December As of June 2017 2016 Space rental 0.14 As of August 1, 2013, TPCH made the Space Audit Committee:- As TPCH is a Other accounts payable 0.08 0.08 Lease Agreement together with a common holding company; it is not necessary area with TPOLY in an area of 74 square to use a very large area for its meters, priced at 200 Baht/sq.m/month business operation. The lease whereas the Lessor has the right to increase conditions and price were the rental for not more than 5 percent per appropriate, which were compatible year. As of August 31, 2016, the rental was and such rental was not higher than Baht 24,773.71/month or 231.53 the rate leased by neighboring Baht/sq.m/month. The total rental in Quarter offices. 2/2517 was Baht 148,642.25. For other accounts payable amounting to Baht 79,523.61, which was paid on July 2017.
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9. Summary of Significant Contracts for the Past 2 Years
TPC Power Holding Public Company Limited (“Company” or “TPCH”)
1. Lease Agreement
Lessor Lessee Agreement Area Monthly Contract Start End1/ (Square Rental Term meter) (Baht) TPCH TPOLY Space Lease Agreement 107 24,773.71 1 year 1 Aug 31 Jul together with other 2016 2017 utilities including cost of electricity, pipe water, parking, maintenance and security, and area cleaning in the building of Thai Polycons Public Company Limited, located at 2, 4 Soi Prasert-Manukitch 29 Yak 8, Prasert-Manukitch Road, Chaorakhebua, Ladprao, Bangkok 10230 Note: 1/The term of this Lease Agreement is 1 year and each term shall be automatically renewed for a period of 1 year. The rental may be increased, but not more than 5 percent per annum, which shall be effective up to the termination of the Agreement.
Chang Raek Biopower Company Limited
1. Operation and Maintenance Agreement
Parties 1) Chang Raek Biopower Company Limited (“Employer” or “CRB”) 2) VSPP Consultant Company Limited (“Employee” or “VSPP”)
Relationship 1) VSPP is a major shareholder in CRB, holding 16.87 percent of between Parties shares. 2) Both parties have a joint director or Mr. Wattana Seneewong Na Ayutthaya.
Date of Execution 10 July 2014
Term 1 July 2014 – 30 June 2021
Scope of Service 1) The Employee agrees to guarantee the operation for electricity Provided by the generation and sales to the PEA in the quantity of 70.2 million Employee units per year (“Guaranteed Units”). In normal circumstances, if the Employee is able to sell electricity less than the Guaranteed Units, it agrees to be fined by the Employer in the amount of Baht 0.50 per unit of the unachieved units. However, if the Employee is able to operate and generate electricity more than the said Guaranteed Units, the Employer agrees to pay a bonus to the
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Employee in the amount of Baht 0.50 per unit of the excessive units. 2) The Employee shall supply the biomass fuel sufficiently for generating and selling electricity to the PEA, at least to achieve the Guaranteed Units. In this regard, the Employee must reserve the fuel sufficiently for electricity generation and sale for not less than 15 days. If the fuel shortage occurs, which makes the Employer unable to sell electricity; the Employee must compensate the damage cost equivalent to the loss of revenues caused by such incident. 3) The Employee must provide the staffs that have knowledge and abilities in operating and maintaining the power plant so that it is ready for operation and has the appropriate functional life. 4) The Employee must provide tools, equipment, parts, and chemicals necessary for electricity generation and power plant maintenance. 5) The Employee must control the environment, either inside or outside the power plant, in accordance with all applicable laws. 6) The Employee must prepare the report to be submitted to the Employer. 7) The Employee must coordinate with the PEA and other related authorities to ensure that the power plant operation is lawful. It must also take care of community relationship between the power plant and neighboring communities by the Employee’s own expenses. 8) The Employee must coordinate, prepare documents, and facilitate any natural persons and/or juristic persons assigned by the Employer to arrange for the Certified Emission Reductions (CERs).
Service fee and 1) Service fee shall be paid on the monthly basis at 44.75 percent of payments net electricity revenue, which means the revenue from selling electricity in each month that also includes the Adder and Ft less the operating fee charged by the PEA at 2 percent of net electricity cost that CRB sells to the PEA, but excluding the Adder for the period from July 10, 2014 to March 10, 2016. 2) Service fee shall be paid based on the total units sold to the PEA at Baht 1.68 per unit of total units sold on that particular month for the period from March 11, 2016 to December 31, 2016. 3) Service fee shall be paid based on the total units sold the PEA at Baht 1.76 per unit of total units sold on that particular month for the period from January 1, 2017 to December 31, 2021. 4) The Employer shall make an advance payment in the amount of Baht 18.5 million. This advance payment shall be returned by the Employee upon the expiration of service term if the Employer desires not to renew the Agreement. This advance payment shall be deducted from the service fee to be paid to the Employee as described below:
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- Installment 1 amounting to Baht 2 million to be deducted from the service fee on the third month before the expiration of the Agreement. - Installment 2 amounting to Baht 2 million to be deducted from the service fee on the second month before the expiration of the Agreement. - Installment 3 amounting to Baht 3 million to be deducted from the service fee on the last month before the expiration of the Agreement. - Installment 4 amounting to Baht 5 million to be deducted from the service fee on the first month after the expiration of the Agreement. - Installment 5 amounting to Baht 6.5 million to be deducted from the service fee on the second month after the expiration of the Agreement. In case that the Employee is unable to make such advance payment, the Employer has the right to deduct the service fee to be paid by the Employer to the Employee until the outstanding amount is completely balanced. 5) Upon an occurrence of force majeure, which makes the Employee unable to operate and sell electricity, the Employer shall pay to the Employee the service fee and salary, social security benefits, employees’ welfare, compensation according to the labor law, security cost, and other necessary expenses during the occurrence of such force majeure, but not more than 6 months. 6) Service fee under 1) above shall be paid within 35 days upon the date when the Employer bills the monthly electricity cost to the PEA and after the Employee has sent the monthly invoice to the Employer already.
Termination of the The Agreement shall be terminated upon the occurrence of either event Agreement specified below: 1) The expiration of the Agreement on December 31, 2021 and both parties desire not to renew the Agreement. 2) The Employee or the Employer becomes bankrupt according to the Court’s sentence or it becomes insolvent. 3) Either party breaches the Agreement. 4) Any force majeure occurs that makes the power plant defunct and no longer be able to operate. 5) The Employee or its staffs undertakes by negligence or makes any mistake, which causes the severe impact to the power plant. 6) Both parties agree to terminate the Agreement without any dispute.
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2. Loan Agreement from Financial Institution
Parties 1) Chang Raek Biopower Company Limited (“CRB”) 2) A local financial institution (“Credit Provider”)
Date of Execution 30 August 2011, and the first amendment was made on July 30, 2013, and the second amendment was made on March 1, 2017
Amount of Credit Baht 500 million
Objective Investment in a biomass power plant of CRB
Interest Rate MLR – 1.25% per annum, MLR -2% per annum starting from March 1, 2017
Repayment Period 6 years and 9 months (81 installments)
Conditions on 1) CRB must finalize the credit drawdowns before the COD or within Credit Drawdowns 24 months upon the month of signing the Agreement (whichever event comes first). 2) CRB must first spend its own investment amounting to Baht 80 million in the project; otherwise it shall not be entitled to use the credit line.
Principal 1) To be paid on the monthly basis in the total of 81 installments. The Repayment payment for Installment 1-80 shall be Baht 6.18 million per each, and the entire remaining amount of principal shall be paid on Installment 81. The first installment payment shall start on the month after a period of 6 months from the COD or on the month after 27 months from the first credit drawdown, whichever event comes first. 2) During a period of 3 years after the COD, if CRB makes the dividend payment more than 50 percent of its net profit after tax, CRB must repay the principal to the Credit Provider at 70 percent of its excessive dividend.
Important 1) CRB must not incur any other debts or obligations, except those Conditions on incurred by its normal business operation or by the Credit Credit Line Usage Provider’s approval. 2) CRB shall not reduce its registered capital or merge with any other juristic person or establish or invest in any other juristic person with an aim at replacing CRB or combine with any other juristic person in any manner except the Credit Provider’s prior consent whereas the said juristic person must be liable to all liabilities under this Agreement. 3) CRB is able to make the dividend payment when all of the following events have already occurred: 3.1) CRB has not made any defaults under this Agreement;
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3.2) CRB’s sum in its debt service reserve account is sufficient to balance the debts according to terms and conditions set forth in this Agreement; and 3.3) Debt service coverage ratio (DSCR) on the year of making the dividend payment must not be less than 1:25:1. 4) CRB must maintain its debt-to-equity ratio, which must not be higher than 2:5:1, except determined otherwise by the Credit Provider. 5) CRB must maintain its DSCR, which must not be higher than 1:2:1, except CRB is able to conform to Condition 6; its DSCB must not be less than 1:1. 6) At any time, CRB must deposit some money in its debt service reserve account to make it sufficient to balance the debts under this Agreement that shall be due on next month.
Guarantee Mortgage of land, structures, and machinery of CRB.
3. Insurance Contract
3.1 Property Damage Insurance
Insurer 1) Dhipaya Insurance Public Company Limited (“Dhipaya Plc.”) 2) Bangkok Insurance Public Company Limited (“Bangkok Plc.”)
Insured Chang Raek Biopower Company Limited
Beneficiary The Siam Commercial Bank Public Company Limited according to obligations
Insurance Term 14 August 2016 – 14 August 2017
Sum Insured Baht 764.69 million 1) Dhipaya Plc. amounting to Baht 458.81 million (60%) 2) Bangkok Plc. amounting to Baht 305.88 million (40%)
Type of Policy 1) Industrial All Risk with sum insured amounting to Baht 600 million 2) Business interruption with sum insured amounting to Baht 164.69 million 3) Public liability with sum insured amounting to Baht 10 million
3.2 Machinery Insurance
Insurer 1) Dhipaya Insurance Public Company Limited (“Dhipaya Plc.”) 2) Bangkok Insurance Public Company Limited (“Bangkok Plc.”)
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Insured Chang Raek Biopower Company Limited
Beneficiary The Siam Commercial Bank Public Company Limited according to obligations
Insurance Term 14 August 2016 – 14 August 2017
Sum Insured Baht 200 million 1) Dhipaya Plc. amounting to Baht 200 million (60%) 2) Bangkok Plc. amounting to Baht 80 million (40%)
Insured Machinery Boiler & Stream Turbine & Generator and other component parts
3.3 Business Interruption Insurance due to Machinery Breakdown
Insurer 1) Dhipaya Insurance Public Company Limited (“Dhipaya Plc.”) 2) Bangkok Insurance Public Company Limited (“Bangkok Plc.”)
Insured Chang Raek Biopower Company Limited
Insurance Term 14 August 2016 – 14 August 2017
Sum Insured Baht 164.69 million 1) Dhipaya Plc. amounting to Baht 98.81 million (60%) 2) Bangkok Plc. amounting to Baht 65.88 million (40%)
Coverage Loss of gross profit or increasing expenses from the operation as determined due to some damage incurred to the insured properties
Mahachai Green Power Company Limited
1. Loan Agreement from Financial Institution
Parties 1) Mahachai Green Power Company Limited (“MGP”) 2) A local financial institution (“Credit Provider”)
Date of Execution 2 August 2013
Amount of Credit Baht 500 million
Objective Investment in a biomass power plant of MGP
Interest Rate MLR – 1.5% during 5 years upon the first drawdown and MLR -1.25% after the first 5 years
Repayment Period Within 120 months upon the first drawdown
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Drawdown The Borrower sends a notice to the Credit Provider informing of each Conditions credit drawdown in advance for not less than 7 business days.
Repayment 1) Interest payment shall be made every month after the first credit drawdown. 2) Principal repayment shall be made at Baht 5.24 million per installment. The first installment shall be due after 25 months upon the first drawdown, and next installments shall be paid every month.
Guarantee Mortgage of land, structures, and machinery of MGP, and guaranteed by shareholders of MGP based on the proportion of shares held.
Important D/E ratio must not be higher than 2.5 times, and MGP must not incur Condition any debts with other financial institutions.
2. Insurance Contract
2.1 Property Damage Insurance
Insurer 1) Dhipaya Insurance Public Company Limited (“Dhipaya Plc.”) 2) Muang Thai Insurance Public Company Limited (“Muang Thai Plc.”)
Insured Mahachai Green Power Company Limited
Beneficiary Bangkok Bank Public Company Limited according to obligations
Insurance Term 31 July 2016 – 31 July 2017
Sum Insured Baht 845 million 1) Dhipaya Plc. amounting to Baht 507 million (60%) 2) Muang Thai Plc. amounting to 338 million (40%)
Type of Policy 1) Industrial All Risk with sum insured amounting to Baht 620 million 2) Business interruption with sum insured amounting to Baht 225 million 3) Public liability with sum insured amounting to Baht 10 million
2.2 Machinery Insurance
Insurer 1) Dhipaya Insurance Public Company Limited (“Dhipaya Plc.”) 2) Muang Thai Insurance Public Company Limited (“Muang Thai Plc.”)
Insured Mahachai Green Power Company Limited
Beneficiary Bangkok Bank Public Company Limited according to obligations
TPC Power Holding Public Company Limited
Insurance Term 31 July 2016 – 31 July 2017
Sum Insured Baht 200 million 1) Dhipaya Plc. amounting to Baht 120 million (60%) 2) Muang Thai Plc. amounting to 80 million (40%)
Insured Machinery Boiler & Stream Turbine & Generator and other component parts
2.3 Business Interruption Insurance due to Machinery Breakdown
Insurer 1) Dhipaya Insurance Public Company Limited (“Dhipaya Plc.”) 2) Muang Thai Insurance Public Company Limited (“Muang Thai Plc.”)
Insured Mahachai Green Power Company Limited
Insurance Term 31 July 2016 – 31 July 2017
Sum Insured Baht 845 million 1) Dhipaya Plc. amounting to Baht 135 million (60%) 2) Muang Thai Plc. amounting to 90 million (40%)
Coverage Loss of gross profit or increasing expenses from the operation determined due to some damage incurred to the insured properties
Thung Sung Green Company Limited
1. Fuel Supply, Operation and Maintenance Agreement
Parties 1) Thung Sung Green Company Limited (“Employer” or “TSG”) 2) VSPP Consultant Company Limited (“Employee” or “VSPP”)
Date of Execution 20 September 2016
Effective Date 5 years after 1 March 2017
Scope of Service 1) The Employee shall supply the biomass fuel sufficiently for Provided by the generating and selling electricity to the PEA, at least to achieve the Employee Guaranteed Units whereas the Employee must reserve the fuel sufficiently for electricity generation and sale for not less than 15 days. If the Employee fails to reserve the fuel as determined within 7 days, it must be fined in the amount equivalent to the cost of lacking fuel (calculated from the fuel cost of Baht 600 per ton), and such fine shall be deducted by the Employer from the service fee to be paid to the Employee on that particular month.
TPC Power Holding Public Company Limited
2) The Employee must provide the staffs that have knowledge and abilities in operating and maintaining the power plant so that it is ready for operation and has the appropriate functional life. 3) The Employee must provide tools, equipment, parts, and chemicals necessary for electricity generation and power plant maintenance. 4) The Employee must control the environment, either inside or outside the power plant, in accordance with all applicable laws. 5) The Employee must prepare the report to be submitted to the Employer. 6) The Employee must coordinate with the PEA and other related authorities to ensure that the power plant operation is lawful. It must also take care of community relationship between the power plant and neighboring communities by the Employee’s own expenses. 7) The Employee must care for the implementation of the Code of Practice during the operating period.
Service fee and 1) The amount of payment shall be based on the electricity units Payments recorded by the PEA from the electricity meter at the power plant before being deducted by the operating fee at Baht 2.00 per unit up to the date the power plant passes the performance test or other date as mutually agreed, and the amount of payment shall be permanently fixed at Baht 1.68 per unit from the date the power plant passes the performance test or other date as mutually agreed. 2) The Employer shall make an advance payment in the amount of Baht 8.5 million. This advance payment shall be returned by the Employee upon the expiration of the Agreement if the Employer desires not to renew the Agreement. This advance payment shall be returned as described below: 1. Baht 1 million to be returned on the third month before the expiration of the Agreement. 2. Baht 1 million to be returned on the second month before the expiration of the Agreement. 3. Baht 1 million to be returned on the last month before the expiration of the Agreement. 4. Baht 1 million to be returned on the first month after the expiration of the Agreement. 5. Baht 4.5 million to be returned on the second month after the expiration of the Agreement. In case that the Employee fails to make the aforesaid payments to the Employer, the Employer has the right to deduct them from the outstanding service fee to be paid to the Employee until all outstanding amount of advance payment is completely made.
Termination of the The Agreement shall be terminated upon the occurrence of either event Agreement specified below:
TPC Power Holding Public Company Limited
1) The service term is 5 years, starting from the date the power plant passes the performance test or other date as mutually agreed. 2) The Employee or the Employer is put under absolute receivership. 3) Either party breaches the Agreement. 4) Any force majeure occurs that makes the power plant defunct and no longer be able to operate. 5) The Employee or its staffs undertakes by negligence or makes any mistake, which causes the severe impact to the power plant. 6) Both parties agree to terminate the Agreement without any dispute.
2. Loan Agreement from Financial Institution Request for Credit 1) Thung Sung Green Company Limited (“TSG” or “Borrower”) Line between 2) A local financial institution (“Credit Provider”)
Date of the Notice 13 November 2015 of Credit Granting
Long-term Credit Baht 500 million
Objective Investment in a biomass power plant of TSG
Interest Rate MLR – 1.5% throughout the contract term
Repayment Period Within 120 months upon the first drawdown
Drawdown Installment 1 – Drawing of Baht 20 million after the mortgage of land Conditions Installment 2 – Drawing 80% of the construction inspection notice for the cost of power plant construction amounting to Baht 70 million Installment 3 – Drawing the remaining credit amount to pay for the machinery and equipment used for electricity generation
Repayment 1) Month 1-24 – Only interest payments 2) Month 25-120 – Principal payments amounting to Baht 5.21 million per month (excluding interest payment)
Guarantee Mortgage of land, structures, and machinery of TSG, and guaranteed by shareholders of TSG based on the proportion of shareholding
Important 1) Maintain D/E ratio not to be over 2.5 times, and not incur debts Conditions with any other financial institutions. 2) Maintain DSCR not to be less than 1.20 times. 3) Dividend payment must be approved by the Credit Provider.
3. Insurance Contract
3.1 Property Damage Insurance
TPC Power Holding Public Company Limited
Insurer 1) Bangkok Insurance Public Company Limited (“Bangkok Plc.”) 2) Falcon Insurance Public Company Limited (“Falcon Plc.”)
Insured Thung Sung Green Company Limited
Beneficiary Bangkok Bank Public Company Limited according to obligations
Insurance Term 9 July 2015 – 8 March 2017
Sum Insured Baht 630 million 1) Bangkok Plc. amounting to Baht 504 million (80%) 2) Falcon Plc. amounting to Baht 126 million (20%)
Type of Policy Contractors’ All Risks Insurance (C.A.R.)
Maewong Energy Company Limited
1. Operation and Maintenance Agreement
Parties 1) Maewong Energy Company Limited (“Employer” or MWE”) 2) Green Power Plant Company Limited (“Employee”)
Relationship The Employee is a shareholder in the Employer, holding 10 percent between Parties of shares.
Date of Execution 10 July 2014
Effective Date The date after the power plant passes the performance test or other date as mutually agreed.
Scope of Service 1) The Employee agrees to guarantee the operation for electricity Provided by the generation and sale to the PEA in the quantity of 62.4 million units Employee per year (“Guaranteed Units”). In normal circumstances, if the Employee is able to sell electricity less than the Guaranteed Units, it agrees to be fined by the Employer in the amount of Baht 0.50 per unit of the unachieved units. However, if the Employee is able to operate and generate electricity more than the said Guaranteed Units, the Employer agrees to pay a bonus to the Employee in the amount of Baht 0.50 per unit of the excessive units. 2) The Employee shall supply and reserve the biomass fuel sufficiently for generating and selling electricity with the quantity of reserved fuel for not less than 15 days. If the fuel has not been reserved and the fuel shortage occurs, the Employee must be liable to all damage incurred. 3) The Employee must provide the staffs that have knowledge and abilities in operating and maintaining the power plant so that it is ready for operation and has the appropriate functional life.
TPC Power Holding Public Company Limited
4) The Employee must operate and maintain the power plant for electricity generation and sale with its full efficiency. 5) The Employee must provide tools, equipment, parts, and chemicals necessary for electricity generation. 6) The Employee must control the environment in accordance with all applicable laws. 7) The Employee must prepare the report to be submitted to the Employer. 8) The Employee must coordinate with the PEA and other related authorities to ensure that the power plant operation is lawful. It must also take care of community relationship between the power plant and neighboring communities by the Employee’s own expenses. 9) The Employee must undertake to receive ISO 9000 in accordance with requirements of the Investment Promotion Certificate.
Service Fee and 1) To be paid based on units to be sold to the PEA at the following Payments rates: i. Year 1 at Baht 1.75 per unit of total units sold on a particular month before deducting the operating fee charged by the PEA. ii. Year 2 and 3, the service fee shall be increased from the rate charged in Year 1 with reference to the electricity rate and increasing wage. 2) Service fee for the period starting from the COD to the Effective Date shall be agreed between the Employer and the Employee. 3) The Employer agrees to make an advance payment of Baht 15 million, which shall be returned upon the expiration of service term and the Employer does not want to renew the Agreement. Such advance payment shall be deducted from the service fee as follows: - Installment 1 amounting to Baht 2 million to be deducted from the service fee on the third month before the expiration of the Agreement. - Installment 2 amounting to Baht 2 million to be deducted from the service fee on the second month before the expiration of the Agreement. - Installment 3 amounting to Baht 3 million to be deducted from the service fee on the last month before the expiration of the Agreement. - Installment 4 amounting to Baht 4 million to be deducted from the service fee on the first month after the expiration of the Agreement. - Installment 5 amounting to Baht 4 million to be deducted from the service fee on the second month after the expiration of the Agreement. In case that the Employee is unable to make such advance payment, the Employer has the right to deduct the service fee to be paid by
TPC Power Holding Public Company Limited
the Employer to the Employee until the outstanding amount is completely balanced. 4) Upon an occurrence of force majeure, which makes the Employee unable to operate and sell electricity, the Employer shall pay to the Employee the service fee and salary, social security benefits, employees’ welfare, compensation according to the labor law, security cost, and other necessary expenses during the occurrence of such force majeure, but not more than 6 months. 5) Service fee under 1) above shall be paid within 35 days upon the date when the Employer bills the monthly electricity cost to the PEA and after the Employee has sent the monthly invoice to the Employer already.
Termination of the The Agreement shall be terminated upon the occurrence of either Agreement event specified below: 1) After 3 years upon the Effective Date of the Agreement and both parties desire not to renew the Agreement. 2) The Employee or the Employer becomes bankrupt according to the Court’s sentence or it becomes insolvent. 3) Either party breaches the Agreement. 4) Any force majeure occurs that makes the power plant defunct and no longer be able to operate. 5) The Employee or its staffs undertakes by negligence or makes any mistake, which causes the severe impact to the power plant. 6) Both parties agree to terminate the Agreement without any dispute.
Termination of the The Employer reserves the right to terminate the Agreement prior to Agreement prior to the Effective Date of the Operation and Maintenance Agreement the Effective Date whereas the Employee has no right to claim for any damage.
2. Loan Agreement from Financial Institution
Parties 1) Maewong Energy Company Limited (MWE” or “Borrower”) 2) A local financial institution (“Credit Provider”)
Date of Execution 24 March 2014
Amount of Credit Baht 500 million
Objective Investment in a biomass power plant of MWE
Interest Rate Month 1-48 – MLR – 1.5% per annum Month 49-116 – MLR -1.25% per annum
Repayment Period Within 9 years and 8 months (116 months) with 20-month grace period for the principal repayment upon the Date of Execution
TPC Power Holding Public Company Limited
Drawdown The Borrower sends a notice to the Credit Provider informing of each Condition credit drawdown in advance for not less than 7 business days.
Repayment 1) Interest payment shall be made every month after the first credit drawdown. 2) Principal repayment: Month 1-20 – Grace period for principal repayment Month 21-115 – Repayment for not less than Baht 5.21 million per month Month 116 – Repayment for not less than Baht 5.05 million or for all remaining amount of debt
Important MWE must maintain its D/E ratio at any time not to be higher than 2.5 Condition times, and it must not incur any debts with other financial institutions until all debts are repaid to the Credit Provider.
Guarantee Mortgage of land, structures, and machinery of MWE, and guaranteed by shareholders of MGP based on the proportion of shares held.
3. Insurance Contract
3.1 Property Damage Insurance
Insurer Dhipaya Insurance Public Company Limited (“Dhipaya Plc.”)
Insured Maewong Energy Company Limited
Beneficiary Krung Thai Bank Public Company Limited according to obligations
Insurance Term 20 December 2016 – 20 December 2017
Sum Insured Baht 877.45 million
Type of Policy 1) Industrial All Risk with sum insured amounting to Baht 687.15 million 2) Business interruption with sum insured amounting to Baht 190.30 million 3) Public liability with sum insured amounting to Baht 10 million
3.2 Machinery Insurance
Insurer Dhipaya Insurance Public Company Limited (“Dhipaya Plc.”)
Insured Krung Thai Bank Public Company Limited according to obligations
Insurance Term 20 December 2016 – 20 December 2017
TPC Power Holding Public Company Limited
Sum Insured Baht 221 million
Insured Machinery Boiler & Streamer Turbine & Generator and other component parts
3.3 Business Interruption Insurance due to Machinery Breakdown
Insurer Dhipaya Insurance Public Company Limited (“Dhipaya Plc.”)
Insured Krung Thai Bank Public Company Limited according to obligations
Insurance Term 20 December 2016 – 20 December 2017
Sum Insured Baht 190.30 million
Coverage Loss of gross profit or increasing expenses from the operation as determined due to some damage incurred to the insured properties
Patthalung Green Power Company Limited
1. Operation and Maintenance Agreement
Parties 1) Patthalung Green Power Company Limited (“Employer” or “PGP”) 2) Stepwise Energy Management Company Limited (“Employee”)
Date of Execution 24 March 2016
Effective Date The date after the power plant passes the performance test or other date as mutually agreed.
Scope of Service 1) The Employee shall supply and reserve the biomass fuel Provided by the sufficiently for generating and selling electricity with the quantity Employee of reserved fuel for not less than 15 days. 2) The Employee must provide tools, equipment, parts, and chemicals necessary for electricity generation. 3) The Employee must provide the staffs that have knowledge and abilities in operating and maintaining the power plant so that it is ready for operation. 4) The Employee must operate and maintain the power plant for electricity generation and sale with its full efficiency. 5) The Employee must control the environment, either inside or outside the power plant, in accordance with all applicable laws. 6) The Employee must eliminate all ashes deriving from the generation process.
Service Fee and 1) The Employer agrees to pay the service fee to the Employee based Payments on the quantity of units to be charged as follows: - Year 1 at Baht 1.4293 per unit of total units charged.
TPC Power Holding Public Company Limited
- Year 2 at Baht 1.4371 per unit of total units charged. - Year 3 at Baht 1.4451 per unit of total units charged. - Year 4 at Baht 1.4535 per unit of total units charged. - Year 5 at Baht 1.4623 per unit of total units charged. 2) Service fee for the period starting from the COD to the Effective Date shall be agreed between the Employer and the Employee. 3) The Employer agrees to make an advance payment of Baht 18,500,000 million, which shall be returned by deducting it from the service fee as follows: - Baht 2 million to be deducted from the service fee on the third month before the expiration of the Agreement. - Baht 2 million to be deducted from the service fee on the second month before the expiration of the Agreement. - Baht 3 million to be deducted from the service fee on the last month before the expiration of the Agreement. - Baht 5 million to be deducted from the service fee on the first month after the expiration of the Agreement. - Baht 6.5 million to be deducted from the service fee on the second month after the expiration of the Agreement.
Termination of the The Agreement shall be terminated upon the occurrence of either event Agreement specified below: 1) After 5 years upon the Effective Date of the Agreement and both parties desire not to renew the Agreement. 2) The Employee or the Employer becomes bankrupt according to the Court’s sentence or it becomes insolvent. 3) Either party breaches the Agreement. 4) Any force majeure occurs that makes the power plant defunct and no longer be able to operate. 5) The Employee or its staffs undertakes by negligence or makes any mistake, which causes the severe impact to the power plant. 6) Both parties agree to terminate the Agreement without any dispute.
2. Loan Agreement from Financial Institution
Request for Credit 1) Patthalung Green Company Limited (“PGP” or “Borrower”) Line between 2) A local financial institution (“Credit Provider”)
Date of the Notice 6 October 2015 of Credit Granting
Long-term Credit Baht 500 million
Objective Investment in a biomass power plant of PGP
TPC Power Holding Public Company Limited
Interest Rate MLR – 2% throughout the contract term
Repayment Period Within 120 months upon the first drawdown
Drawdown Installment 1 – Drawing of Baht 20 million after the mortgage of land Conditions Installment 2 – Drawing 80% of the construction inspection notice for the cost of power plant construction amounting to Baht 70 million Installment 3 – Drawing the remaining credit amount to pay for the machinery and equipment used for electricity generation
Repayment 1) Month 1-24 – Only interest payments 2) Month 25-120 – Principal payments amounting to Baht 5.21 million per month (excluding interest payment)
Guarantee Mortgage of land, structures, and machinery of PGP, and guaranteed by shareholders of PGP based on the proportion of shareholding
3. Property Damage Insurance
Insurer Bangkok Insurance Public Company Limited (“Bangkok Plc.”)
Insured Patthalung Green Company Limited
Beneficiary Bangkok Bank Public Company Limited according to obligations
Insurance Term 3 March 2016 – 3 March 2017
Sum Insured Baht 693 million
Type of Policy Contractors’ All Risks Insurance (C.A.R.)
Satun Green Power Company Limited
1. Operation and Maintenance Agreement
Parties 1) Satun Green Power Company Limited (“Employer” or “SGP”) 2) Stepwise Energy Management Company Limited (“Employee”)
Date of Execution 24 March 2016
Effective Date The date after the power plant passes the performance test or other date as mutually agreed.
Scope of Service 1) The Employee shall supply and reserve the biomass fuel Provided by the sufficiently for generating and selling electricity with the quantity Employee of reserved fuel for not less than 15 days. 2) The Employee must provide tools, equipment, parts, and chemicals necessary for electricity generation.
TPC Power Holding Public Company Limited
3) The Employee must provide the staffs that have knowledge and abilities in operating and maintain the power plant so that it is ready for operation. 4) The Employee must operate and maintain the power plant for electricity generation and sale with its full efficiency. 5) The Employee must control the environment, either inside or outside the power plant, in accordance with all applicable laws. 6) The Employee must eliminate all ashes deriving from the generation process.
Service Fee and 1) The Employer agrees to pay the service fee to the Employee based Payments on the number of units to be charged as follows: - Year 1 at Baht 1.4293 per unit of total units charged. - Year 2 at Baht 1.4371 per unit of total units charged. - Year 3 at Baht 1.4451 per unit of total units charged. - Year 4 at Baht 1.4535 per unit of total units charged. - Year 5 at Baht 1.4623 per unit of total units charged. 2) Service fee for the period starting from the COD to the Effective Date shall be agreed between the Employer and the Employee. 3) The Employer agrees to make an advance payment of Baht 18,500,000 million, which shall be returned by deducting it from the service fee as follows: - Baht 2 million to be deducted from the service fee on the third month before the expiration of the Agreement. - Baht 2 million to be deducted from the service fee on the second month before the expiration of the Agreement. - Baht 3 million to be deducted from the service fee on the last month before the expiration of the Agreement. - Baht 5 million to be deducted from the service fee on the first month after the expiration of the Agreement. - - Baht 6.5 million to be deducted from the service fee on the second month after the expiration of the Agreement.
Termination of the The Agreement shall be terminated upon the occurrence of either event Agreement specified below: 1) After 5 years upon the Effective Date of the Agreement and both parties desire not to renew the Agreement. 2) The Employee or the Employer becomes bankrupt according to the Court’s sentence or it becomes insolvent. 3) Either party breaches the Agreement. 4) Any force majeure occurs that makes the power plant defunct and no longer be able to operate. 5) The Employee or its staffs undertakes by negligence or makes any mistake, which causes the severe impact to the power plant.
TPC Power Holding Public Company Limited
6) Both parties agree to terminate the Agreement without any dispute.
2. Loan Agreement from Financial Institution
Request for Credit 1) Satun Green Company Limited (“SGP” or “Borrower”) Line between 2) A local financial institution (“Credit Provider”)
Date of the Notice 14 September 2016 of Credit Granting
Long-term Credit Baht 500 million
Objective Investment in a biomass power plant of SGP
Interest Rate MLR – 2% throughout the contract term
Repayment Period Within 120 months upon the first drawdown
Drawdown Installment 1 – Drawing of Baht 20 million after the mortgage of land Conditions Installment 2 – Drawing 80% of the construction inspection notice for the cost of power plant construction amounting to Baht 70 million Installment 3 – Drawing the remaining credit amount to pay for the machinery and equipment used for electricity generation
Repayment 1) Month 1-24 – Only interest payments 2) Month 25-120 – Principal payments amounting to Baht 5.21 million per month (excluding interest payment)
Guarantee Mortgage of land, structures, and machinery of SGP, and guaranteed by shareholders of SGP based on the proportion of shareholding
3. Property Damage Insurance
Insurer Bangkok Insurance Public Company Limited (“Bangkok Plc.”)
Insured Satun Green Company Limited
Beneficiary Bangkok Bank Public Company Limited according to obligations
Insurance Term 1 July 2016 – 1 July 2018
Sum Insured Baht 693 million
Type of Policy Contractors’ All Risks Insurance (C.A.R.)
TPC Power Holding Public Company Limited
Power Purchase Agreement with the Provincial Electricity Authority (“PEA”)
Power CRB MGP TSG MWE PGP SGP Producer
Agreement VSPP-PEA- VSPP-PEA- VSPP-PEA- FiT-PEA- FiT-PEA- FiT-PEA- No. 022/2554 005/2556 116/2555 003/2558 004/2558 009/2558
Date of 18 26 March 19 December 8 July 2015 11 11 Execution November 2013 2012 September September 2011 2015 2015
Maximum 9.2 MW/ 8 MW/ 9.2 MW/ 8 MW/ 9.2 MW/ 9.2 MW/ Electricity 33,000 V 22,000 V 33,000 V 22,000 V 33,000 V 33,000 V Volume/ Voltage
Feeder T. Na Bho T. Chai T. Thung T. Wang San T. Pa Bon T. Khuan Mongkon Sung Kalong, A. A. Thung A. Mae A. Pa Bon Khuan Song A. Muang A. Thung Wong Patthalung Kalong Yai Nakhon Si Samut Nakhon Satun Thammarat Sakhon Nakhon Si Sawan Thammarat
SCOD 30 June 2013 31 31 December 16 28 February 28 February December 2014 December 2017 2017 2014 2015
Usage and 14 March The Power Purchase Agreement has the term of 20 years upon the End of the 2029 Commercial Operation Date. Agreement
Condition on The PEA shall record the electricity credit, and calculate the cost of electricity in each month before power informing it to the very small power producer to prepare the invoice. The PEA shall pay for the cost of purchase electricity to the very small power producer within 30 days upon the date the PEA receives the receipt. payments*
Usage and To subsidize the electrical price in Feed in Tariff (FiT) system from renewable energy with the generating End of Feed in capacity more than 3 megawatts, the purchase price is Baht 4.54 per selling unit. The prices of Baht 4.54 Tariff will be stable up to Year 2017, but after Year 2017, FiTv price will be adjusted subject to the core inflation. Revenues from selling electricity to the PEA in Feed in Tariff (FiT) system involve the income from selling electricity to the PEA in Feed in Tariff (FiT) system and income from FiT Premium. FiT Premium shall be subsidized during a period of 8 years starting from the COD.
Power Producers TPCH1 TPCH2 TPCH5
Agreement No. FiT-PEA- FiT-PEA- FiT-PEA- 003/2016 004/2016 006/2016
Date of Execution 23 December 2016 23 December 2016 23 December 2016
Maximum Electricity 9.2 MW/ 33,000 V 9.2 MW/ 33,000 V 9.2 MW/ 33,000 V Volume/ Voltage
Feeder T. Budee A. Muang, T. Budee A. Muang, T. Bang Po, A. Muang, Yala Yala
TPC Power Holding Public Company Limited
Narathiwat
SCOD 31 December 2018 31 December 2018 31 December 2018
Usage and End of the The Power Purchase Agreement has the term of 20 years upon the Commercial Agreement Operation Date.
Condition on power The PEA shall record the electricity credit, and calculate the cost of electricity in purchase payments* each month before informing it to the very small power producer to prepare the invoice. The PEA shall pay for the cost of electricity to the very small power producer within 30 days upon the date the PEA receives the receipt.
Usage and End of Feed- To subsidize the electrical price in Feed in Tariff (FiT) system from renewable in Tariff energy with the generating capacity more than 3 megawatts, the purchase price is Baht 4.54 per selling unit. The prices of Baht 4.54 will be stable up to Year 2017, but after Year 2017, FiTv price will be adjusted subject to the core inflation. Revenues from selling electricity to the PEA in Feed in Tariff (FiT) system involve the income from selling electricity to the PEA in Feed in Tariff (FiT) system and income from FiT Premium. FiT Premium shall be subsidized in the amount of Baht 0.30 during a period of 8 years. The power plant projects located in southern border provinces shall be subsidized at Baht 0.50 throughout the project life starting from the Commercial Operation Date (COD) of each project. TPCH1/ TPCH2/ TPCH3 projects are under price bidding and the Company won the bid whereas TPCH1 and TPCH2 proposed FiTF discount at 81.17%, and TPCH5 proposed FiTF discount at 67.78%.
*Referred from the Regulation on Power Purchase from Very Small Power Producers (for electricity generation from renewable energy)
TPC Power Holding Public Company Limited
10. Opinion of Independent Financial Adviser
The opinion of the independent financial adviser is as per the report on the opinion of independent financial adviser for connected transaction of Advisory Plus Company Limited (Enclosure item no. 3).
The summary of the opinion of the independent advisor about the above transactions is as follows:
1. Assets Acquisition Transaction (Transaction 1: Investment in the Construction of Biomass Power Plant)
The investment in the construction of biomass power plants of the 4 subsidiaries, TPCH 1, TPCH 2, TPCH 5 and Pattani Green, is in line with the Company’s objective in becoming the leading generator of electricity from renewable energy. The Company focuses on the investment in biomass power plant as the Company has experiences from operating 5 existing biomass power plants, with the sixth biomass power plant being close to completion. The investment in the new power plants will increase stability, revenues and returns of the Company in the long term. The internal rate of return is as follows: (See the detail in the Enclosure no. 3 concerning the appraisal of the appropriateness of the investment)
The Internal Rate of Return of the Biomass Power Plant Project:
Unit TPCH1 TPCH2 TPCH5 PTG
Project IRR Percentage 11.42 11.64 10.61 23.97
Payback Period 1/ Year 7.1 7.0 7.4 3.8
Net Present Value 2/ Million 236.31 246.86 149.15 1,980.96 Baht Remark: 1/ From the Commercial Operation Date 2/ The Present value of the net cashflow after investment fund deduction
For the reason stated above, the independent advisor agrees that TPCH 1, TPCH 2, TPCH 5 and Pattani Green should invest in the biomass power plant construction and that the shareholders should grant approval to TPCH 1, TPCH 2, TPCH 5 and Pattani Green to invest in the construction of the biomass power plants, with the construction value of 3,957 million Baht. However, the final decision is chiefly dependent on the consideration of the shareholders.
2. Connected Transaction (Transaction 2: Hiring of TPOLY)
Thai Polycons is an acknowledged and experienced contractor of the biomass power plant construction for other business operators and for the 5 existing biomass power plants of the subsidiaries. Moreover, the contract with Thai Polycons is a turnkey contract that includes the civil work, the building, the system, and the installation and testing of machinery. The construction value of the 4 power plants is fixed at the total value of 3,172.77 million Baht. To an extent the 4 subsidiaries have transferred the probably risk to TPOLY who is the contractor of the construction of the power plants. It can thus be assured that the construction of the power plants will be completed in
TPC Power Holding Public Company Limited
time, and that the power plants will be able to generate and sell electricity according to the plan.
Moreover, the cost of the construction of each biomass power plant that Thai Polycons have proposed is appropriate and lower than the appraised price by OWL, the independent engineering advisor. The cost is summarized as follows: (See detail in the Enclosure no. 4 concerning the summary of the construction cost appraisal)
(Unit : Baht) Price Offered Price Price offered by TPOLY higher by TPOLY Appraised by (lower) than the appraised price OWL )Baht( )Baht( )Percentage( )Baht(
TPCH 1 667,150,000 759,019,660 (91,869,660) (12.10)%
TPCH 2 654,320,000 759,019,660 (104,699,660) (13.79)%
TPCH 5 520,300,000 688,797,525 (168,497,525) (24.46)%
Pattani 1,331,000,000 1,654,594,523 (323,594,523) (19.56)% Green
Total 3,172,770,000 3,861,431,368 )688,661,368( )17.83(%
From the summary table above, the price of the construction of the 4 power plants offered by Thai Polycons totals 3, 172.77 million Baht, which is lower than the price appraised by OWL at 3,861.42 million Baht, or lower by 688.66 million Baht, an equivalence of 17.83 per cent lower than the appraised price by OWL. The independent financial advisor sees that the construction price is an appropriate price.
The conditions of the payment will be made according to the progress made in the construction, the retaining of 10 per cent of the payment according to the total contract value, the requirement for the contractor to put a collateral with the value equivalent to 10 per cent of the contract value, and the imposing of fine in case of the delay in construction or the failure of the power plant to perform according to the agreement. These conditions are considered normal and fair to the employer. Thus the independent financial advisor agrees that the proposal of Thai Polycons is fair to the 4 subsidiaries.
As such, the independent financial advisor agrees that the entering into the construction contract with Thai Polycons of the 4 subsidiaries, with the total construction value of 3,172.77 million Baht is an appropriate transaction and the shareholders should grant approval to TPCH 1, TPCH 2, TPCH 5 and Pattani Green to enter into the transaction. However, the final decision is chiefly dependent on the consideration of the shareholders.
3. Connected Transaction (Transaction 3 and 4: Land Purchase from Mr. Sombat Chairatmanokorn)
TPCH 1 and TPCH 2 are chosen to be the generator of the electricity from biomass for the 3 southern border provinces and 4 special districts in Songkhla Province, with the generating capacity of the two power plants at 9.9 MW and both are located in Muang District, Yala Province, and Pattani Green is issued an Adder PPA by EGAT on 17
TPC Power Holding Public Company Limited
August 2017, with the power plant being located in Nong-Chik District, Pattani Province. The location of the three power plants are in the three southern border provinces, which are considered a risky region and different from other locations of the other power plants of the Company.
Therefore, in order for the subsidiaries to be able to find suitable and safe land for the construction within the appropriate time frame for the completion of the power plant construction in time to begin the generation of electricity according to the PPA, the Company has entered a negotiation with Mr. Sombat Chairatmanokorn, who has operated businesses within the region for more than 20 years and is well familiar with the region. He is capable of finding suitable and safe location for the power plant. As he has operated rubberwood businesses in the region for a long time, he is also familiar with and well known among the local people. Thus he has credibility and ability to negotiate with the local people to purchase and procure land.
The independent financial advisor considers the land purchase by referring to the appraised value of assets of the independent assets appraisal and finds that the price of the land purchase (including the land that is already purchased and the land will be additionally purchased), which totals 136.93 million Baht, is higher than the appraised price of the independent appraiser which is at 57.38 million Baht. The price of the land is higher than the appraised price by 79.55 million Baht, or an equivalence of 138.64 per cent of the appraised price. As such the independent advisor sees that the price of the land purchased from Mr. Sombat Chairatmanokorn is higher than the appraised price and is not appropriate.
However, the Company agreed to have Mr. Sombat Chairatmanokorn to procure land in the region because Mr. Sombat has operated business in the local area for more than 20 years. He is familiar and knows the area well to be able to identify which area is suitable and safe to be the location of the power plants. Moreover, Mr. Sombat has operated a rubberwood business in the area for a lond time. He is familiar and well known among the local people, and thus has the credibility to successfully purchase land in the area. For the reason above, the independent financial advisor sees that the land purchase from Mr. Sombat Chairatmanokorn is appropriate.
Even though the purchase price from Mr. Sombat Chairatmanokorn is not appropriate, the benefits and advantages that come from the purchase should be considered. The land purchase is needed so that the investment in the construction of the new power plants is completed and the Company’s business objective is achieved. The purchased land is suitable for the construction of the power plant which will begin its construction after approval from the meeting of shareholders. Moreover, the land is approved by PEA and EGAT according to the signed PPA. The disadvantage and risk that may arise from the cancellation of the transaction includes the risk from having to spend time finding new land, procuring adjacent plots of land to reach the amount needed for the construction and the land needs to be in the location suitable for the power plant. For example, the land needs to be close to the connection point of PEA and EGAT, close to the fuel source, and transportation route. Moreover, there has to be the time needed to organize a public hearing (for Pattani Green’s power plant) and to request an approval for the relocation of the power plant from PEA and EGAT. As a result there could be a delay in the construction and additional cost arising from the process of new land procurement (in additional to the value of land that the Company has been transferred ownership totaling 119.71 million Baht). As a result the cost of investment will be higher and affect the return rate.
TPC Power Holding Public Company Limited
Moreover, in the calculation of the worth of the investment in the project, the independent advisor uses the land price from Mr. Sombat, which is higher than the appraised price. The calculation result reveals that:
(1) The base-case net present value of the investment of TPCH 1, TPCH 2, and Pattani Green is 223.31 million Baht, 246.89 million Baht, and 1,980.96 million Baht respectively, which is higher than zero and;
(2) The base-case internal rate of return of the investment of TPCH 1, TPCH 2 and Pattani Green is at 11.42 per cent, 11.64 per cent, and 23.97 per cent per year respectively, which is higher than the base-case average cost of capital at 7.59 per cent, 7.49 per cent and 7.61 per cent per year respectively. Moreover, the return rate is higher than the Company’s investment policy stating that the return rate of the investment must be no less than 10 per cent per year.
Even though the land purchase price from Mr. Sombat Chairatmanokorn is not appropriate because it is higher than the appraised price, the consideration of the benefits and advantages against the risks and disadvantages that may arise from not entering into the transaction reveal that the land purchase from Mr. Sombat Chairatmanokorn benefits the Company and the shareholders. Moreover, the return rate from the investment of TPCH 1, TPCH 2 and Pattani Green is still higher than the return rate stipulated in the investment policy of the Company. As such, the independent financial advisor sees that the shareholders should grant approval to the land purchase from a connected person. However, the final decision is chiefly dependent on the consideration of the shareholders.
The independent advisor hereby certifies that the assets acquisition transaction and the two connected transactions of the Company are carefully considered according to the standard practice of the profession, and with the interests of the shareholders as the primary concern.
The Company certifies that the statements in this information memorandum are true and correct in all respects and have been prepared with prudent and due care, significantly taking into account the shareholders’ interest. This information memorandum has been only made for informational purpose and it does not intend to be an invitation nor offer for acquiring or subscribing securities.
TPC Power Holding Public Company Limited
Mr. Cherdsak Wattanavijitkul Director and Managing Director