ANNUAL REPORT 2018 CREATING SUSTAINABLE ENERGY CREATING SUSTAINABLE ENERGY CONTENT Annual Report 2018 Corporate Information Vision and Mission 04 Message from the Board of Directors 06 Board of Directors 09 Awards of Great Pride 23 Financial Highlights 24 General and Other Important Information 26 Performance Overview Shareholding Structure of The Company and Subsidiaries 28 Dividend Policy of the Company and Subsidiaries 33 Revenue Structure 35 Nature of Business Operation 36 Risk Factors 47 Marketing and Competition 50 Good Corporate Governance The Management Structure 57 Corporate Ethics 85 Corporate Governance 91 Internal control and risk management 103 Connected Transactions 104 Corporate Social Responsibilities 106 Anti-Corruption Policy 130 Whistle Blowing Policy towards Corruption 140 Report of the Audit Committee 145 Financial Information Report of the BOD’s Responsibility to the Financial Statements 147 Independent Auditor’s Report 148 Management Discussion and Analysis 153 Financial Statements 160 Notes to the Financial Statements 172 VISION Leading energy innovations and technology in Asia Pacific. MISSION 01 Research and develop energy technology that is clean and sustainable by adapting technology to build value for the business. 02 Create satisfying return for investors. 03 Manage human resources to be qualified, create inspiration and maintain a good relationship with the team in a supportive atmosphere. 04 Plays a part in developing a sustainable environment. 4 ANNUAL REPORT 2018 Message from the Chairman of the Board of Directors The overall natural gas consumption in Thailand in 2018 saw a continuous decrease especially in the transport section. This was due to the decreasing retail price of the oil within the country and few NGV stations. As a result, some car owners turned to the oil. The situation affected the company’s NGV station business. However, the pressurized natural gas for industrial plant (iCNG) consumption increased and is highly likely to grow, since natural gas is still a cost-effective fuel considering it serves various purposes. It is clean and able to reduce the air pollution. In late 2018, the Bangkok Metropolitan Region suffered from small dust particle, or PM 2.5, level exceeding the standard value which could be harmful to the health. The company believes that the government will encourage environmental friendly fuel because of the pollution problem. The main factor that contributed to Thailand’s current air pollution issue is from diesel engine cars, of which the number is continuously increasing as well as old diesel cars that still go around, including the Bangkok Mass Dr, Thanong Bidaya Transit Authority (BMTA)’s vehicles that have been in service for 20-30 years Chairman of the Board of Directors and are now old and generating air pollution. Moreover they are not enough to meet the demand. As transportation system is crucial to the country’s development, the company is proud to be part of the livelihood improvement process for the people and the environment through BMTA’s 10-year-long bidding for 489 air-conditioned NGV bus procurement and maintenance project. Eventually, the company won the bidding and, with the collaboration from strong business partners under the name SCN-CHO, successfully delivered quality clean-energy vehicles to replace the old ones that were reaching the end of their service life. In addition, the company has started to focus more on renewable energy business, because the entire world is giving much precedence to this trend. It is the fastest growing energy source. The company has recognized the trend and started investing in solar energy power plant, a clean energy source that could reduce global warming. With years of experiences on solar energy power plant construction in Thailand, in 2018 the company decided to expand its power plant business in the ASEAN region. The investment started with the Minbu solar energy power plant in Myanmar, which will be the largest solar energy power plant project in Southeast Asia with an output of 220 megawatts. It is a suitable alternative for delivering electricity to Nay Pyi Taw. Myanmar’s new capital is growing, but the location is not favorable for natural gas pipeline installation and the city suffers a lot from power shortage because of insufficient power plant supply. The delivery of electricity in the country is still not sufficient, with only one-third of the country’s 60 million population having access to electricity. Therefore, this project is part of the energy security development as well as enhances the livelihood of the people. In 2019, the company will continue to seek new opportunities to thrive and reinforce its 3 main businesses: natural gas, renewable energy, and automotive. On behalf of the Board of Directors and executives, I would like to express my deep gratitude for our shareholders, clients, business partners and all supporters for their trust and support for the company’s business. We promise to conduct our business for the interest of shareholders, clients, all relevant parties and the nation in order to remain a quality organization that advances sustainably together with the Thai society. 6 ANNUAL REPORT 2018 Message from the President of the Executive Committee Despite the natural gas consumption situation and Thailand’s current economic situation affecting some operations in the natural gas business, the company’s business expansion still succeeds in other businesses. This year, the company’s policy is to rely less on NGV and enhance its growing pressurized natural gas for industrial plants (iCNG) as well as establish partnership with world-class companies to further extend its natural gas-related products to other countries in the region and expand its expertise in the natural energy field to in clean energy automation and renewable energy businesses in order to achieve sustainably and steadily growing revenue stream. The company’s success in the delivery and maintenance of air-condi- tioned NGV buses for BMTA in the past year was a result of the application of its core value and natural gas knowledge collected over the past 30 years in combination with business partnership with vehicle body and automotive engineering system installation experts, under the SCN-CHO collaborative Mr. Thanchart Kitpipit group. Despite the temporary injunction of the administrative court, it was President of the executive committee later withdrawn and dismissed from the file directory. The collaborative group could start delivering clean energy-driven vehicles which helped alleviate the air pollution problem and come with facilities and new technology that allow disabled people and seniors to easily and safely use the vehicles, improving the livelihood of the people. All 489 vehicles were successfully delivered as planned in March 2019. As for the renewable energy business situation in 2018, since no policy regarding purchasing renewable energy- generated electricity is clearly established, the company foresaw the opportunity to expand its business abroad. With its expertise in solar energy power plant management developed over the years from the experiences, knowledge and competency of the management team and former domestic power plant business personnel. The company invested as one of the developers and became the biggest shareholder in the 10 billion baht Minbu solar enrgy power plant project in Myanmar, which has an output of 220 megawatts. As Myanmar is developing, the demand for electricity is growing continuously. The investment in the country can be further expanded in the future. This is also an opportunity to power plant investment expansion in Asia, such as Japan, the Philippines and Vietnam. The achievement in 2018 has shown the Board of Directors and executives’ vision and determination to create value for all interested parties, fully performing their roles and responsibilities as directors. Their experiences, knowledge and expertise have been utilized to effectively determine the strategies and make business decisions. The Corporate Governance Code: CG Code has also been applied in business operation to ensure that decision and operation mechanisms are in place, in order to direct the business in the right way and adapt, grow, and create value for the business itself as well as interested parties and the society as a whole. SCAN INTER (PUBLIC) COMPANY LIMITED 7 Message from the Chief Executive Officer In 2018, the company underwent many changes and improvements to accommodate business expansion, emphasizing on reinforcing the human resource system. I believe that the management team’s efficient strategic planning and quality personnel with professional expertise and dedication have contributed to the company’s success and driven the organization forward. The company has adjusted the career development plan and has been hiring more professionals in each function, as well as conducted its business based on the good governance principle, transparent and verifiable operations. The operational system is regularly improved to ensure effective and efficient mechanism. In the organizational ethics and corporate governance aspect, the company gives priority to Corporate Social Responsibility (CSR). In 2018, the company ran 19 CSR projects in total, to create values within the community, society and environment which will lead to stable and sustainable growth. The operations in 2018 were affected by the NGV business in Thailand. However, the company’s performance was still good with a total