Annual Report 2007 BANPU PUBLIC COMPANY LIMITED

01

F o c u s o n S u s t a i n a b l e G r o w t h

Banpu deals with the problem of depleting assets through the careful and strategic timing of new investments, cost rationalization schemes – and by focusing on good corporate governance and management training. Through these efforts we also sharpen our acquisition skills and ensure efficient access to finance when we need it. Finally we diversify our risks geographically and through investment in the power business. Going forward we have also made a commitment to invest in renewable energy, an intrinsically more sustainable form of energy supply. C o n t e n t s 02 Annual Report 2007 • Banpu Public Company Limited

003 Financial Highlights

004 Board of Directors’ Review

006 Chief Executive Officer Review

010 Key Financial Results

012 Vision & Mission

014 Focus on Sustainable Growth

018 Banpu Corporate Social Responsibility During 2007

023 Industrial & Marketing Outlook

031 Risk Factors

037 Operations During the Previous Year

039 Revenue Structure

041 Summary of Major Changes and Developments in 2007 and Major Current Events

043 Major Shareholders

044 Organization Chart

045 Management Structure

051 Board of Directors and Management

059 Shareholdings of the Board of Directors and Management

060 Remuneration of the Board of Directors and Management

062 Corporate Governance and Supervision on the Use of Internal Information

073 Internal Control

076 Connected Persons and Transactions

083 Report of the Board of Directors’ Responsibility in the Financial Statements

084 Report of the Audit Committee to Shareholders

086 Management’s Discussion and Analysis of the Consolidated Financial Statements

091 Auditor’s Report

092 Financial Statements

147 Other References

148 Banpu Group Structure

150 Details of the Company and Its Subsidiary and Associated Companies F i n a n c i a l H i g h l i g h t s 00303 Annual Report 2007 • Banpu Public Company Limited

For the year ending

2007 2006 2005

Financial Position Total Assets (THB million) 65,051 49,386 45,088 Total Liabilities (THB million) 26,554 27,043 23,288 Total Shareholders’ Equity (THB million) 38,497 22,344 21,801 Issued and Paid-up Share Capital (THB million) 2,717 2,717 2,717

Operational Results Sales Revenues (THB million) 32,442 33,378 25,209 Cost of Sales (THB million) 20,964 20,838 13,933 Gross Profit (THB million) 11,478 12,541 11,275 Selling and Administration Expenses (THB million) 5,114 4,447 3,136 Export Tax (THB million) - 706 196 Royalty Fee (THB million) 3,247 3,238 2,547 Other Revenues (THB million) 2,491 1,755 3,646 Other Expenses (THB million) 390 659 232 Profit from Operation (THB million) 5,217 5,246 8,811 Share of Gain/(Loss) of Joint Ventures and Asso. (THB million) 4,504 801 (119) Interest Expenses (THB million) 1,160 953 509 Corporate Income Tax (THB million) 1,492 1,122 2,217 Net Profit (THB million) 6,654 3,610 5,559

Financial Ratios Gross Profit Margin (%) 35.38 37.57 44.73 Net Profit Margin (%) 19.05 10.28 19.26 Returns on Assets (%) 11.63 7.64 13.14 Returns on Equity (%) 21.87 16.36 24.75 Interest Coverage Ratio (times) 5.60 7.24 8.94 Net Debt to Equity (times) 0.14 0.66 0.34

Data per Share Earnings per Share (THB) 24.49 13.29 20.46 Book Value per Share (THB) 141.67 82.22 80.22 Dividend per Share (THB) 8.50 7.50 12.50

* The Company announced dividend payments of THB 8.50 per share, of which an interim dividend worth THB 3.75 per share was paid on 28 September 2007. The remaining dividend of THB 4.75 per share, which will be paid out of the Company’s retained earnings and operational results during the period between 1 July 2007 and 31 December 2007, is scheduled on 24 April 2008.

Remark: Financial figures are based on the consolidated financial statement. B o a r d o f D i r e c t o r s ’ R e v i e w 00404 Annual Report 2007 • Banpu Public Company Limited

In 2007, Banpu Public Company Limited achieved our stated objectives in terms of operational results and corporate growth, even in the face of major economic changes both domestic and international. Many factors affected the Company’s volume of coal production, including the rising oil price in the global market and significant weather events, including some of the heaviest rainfall in memory in the Republic of Indonesia. A higher average price for coal, conforming to a world-wide upward trend in coal prices, was able to offset the Company’s lower output, and contributed positively to earnings in 2007. 2007 was thus another year during which Banpu made major advances in our commercial operations, our evolving systems of business and personnel management, and activities that demonstrated our commitments to society. In all these ways, Banpu was able to build a greater, more sustainable future. Among our most notable activities in 2007 were the following: ë Banpu successfully registered our subsidiary, PT. Indo Tambangraya Megah Tbk, or ITM, in the Indonesian Stock Exchange on 18 December 2007. This move has contributed to a strengthening and acceleration of Banpu’s sustainable growth in Indonesia. ë Another subsidiary, Banpu Power Ltd., signed a joint development agreement (JDA) with Ratchaburi Electricity Generating Holding Public Co., Ltd. (RATCH) to study and develop Hongsa Project, located in Hongsa Subdistrict, Xayaburi District, Lao People’s Democratic Republic. The Lao government has permitted Banpu Power to conduct a feasibility study and build a coal-fired power plant with a capacity of 1,878 megawatts. ë A business stream devoted to developing new energy sources has been established. This new department named New Energy Development Project will explore opportunities in renewable & alternative energy and environment- friendly energy sources that minimize carbon dioxide output. Our aim is to dedicate 2 per cent of corporate assets to investments in this field. ë The official closure of the Lampang mine (LP-2) at Lampang, after over 16 years of operation, was considered a model closure for the industry. The Lampang mine was one of Thailand’s largest coal mines. Even after its closure, the mine is still regarded as an example of professional mine management for other Banpu coal mines, both in the Republic of Indonesia and the People’s Republic of China. ë Banpu received the world’s first TPM3 Excellence Award from CTPM (Australasia) in Sydney, Australia – clear acknowledgement of the Company’s adherence to the highest standards of total productive maintenance recognized by CTPM (Australasia). The Board of Directors regards the sustainable growth of the Company’s business to be among its most important concerns. “Sustainable Development Policy” was announced last year by way of emphasizing the Company’s obligation to act as a good member of society, to conduct all our business ethically, and to adhere to the rules of whatever community or country in which we operate. Our publication of this policy is intended to enhance the confidence reposed in Banpu as the builder and maintainer of a balance among the economy, society, and the environment. Our Corporate Social Responsibility (CSR) activities, both in corporate & local level, have thus been constant expressions of Banpu’s policy. In 2007, the Company made special efforts to encourage personnel to take part in aiding society through our “Employee Volunteering Program”. Every staff member, of every level and in every line of work, 00505

Mr. Soonthorn Vongkusolkit Chairman of the Board of Directors

including executives, had a part to play in building society and making sacrifices for the sake of the community’s welfare. This dedication was complemented by regular CSR programs of Banpu, such as the ICT Development for Education Program, the Power Green Camp, and the YIM Program, all of which are slated for continuation in years to come. High-quality personnel are among the best guarantors of the Company’s ongoing, sustainable growth. One of Banpu’s main commitments, therefore, has been training that develops the excellence of individuals and teams within the organization so that they work together effectively and are able to deal with continuous change in our field of business. Among the types of training we offer are those which deal with leadership performance and career skills. We also continually emphasize the “Banpu Spirit” through numerous activities that bring our personnel, who belong to various countries and ethnic groups, into one corporate culture, mould them to work together in pursuit of similar goals, and help them live together in harmony. In search of more efficient management and corporate governance at Banpu, the Board of Directors continues to find ways to add sustainable value to the organization. The principles of good corporate governance are applied strictly to Banpu as a whole, and more specifically to the Company’s Indonesia- and China- based subsidiaries, which must also strictly observe the laws of the countries in which they operate. During 2007, the Board of Directors has had a major role to play in improving management in Banpu and Banpu’s subsidiaries, as follows: ë The structure and process of management at PT. Indo Tambangraya Megah Tbk (ITM) were adjusted so as to make the Company a leader in the Indonesian Stock Exchange. This restructuring included a new organization chart, redelegation of duties to facilitate better work performance, appointing a board of commissioners and board of directors at ITM and specifying the scope of authority and responsibilities of each, and preparing for the establishment of Audit Committee, as well as Corporate Governance, Nomination, and Compensation Committee, to ensure good governance of the Company. ë The Board of Directors supports the development of Banpu as a learning organization and a centre of expertise in the field of coal mining. Annual technical meetings and internal knowledge-sharing programs are arranged to facilitate the sharing of information, knowledge, experience, and innovative ideas among Banpu staff in Thailand, Indonesia, China, and India. The effectiveness of our communication technologies and their applications represent another area in which much more needs to be done. ë The Board of Directors and the Audit Committee have joined forces to improve the structure and system of internal audits as they relate to operations, auditing, performance management, and risk management. Finally, the Board of Directors would like to thank our shareholders, our stakeholders, and our supporters for their sustained and generous contributions. The Board of Directors is determined to continue conducting our business with fairness, transparency, good corporate governance, and good citizenship in every country where Banpu operates. We shall continue to place particular emphasis on the development of communities, society, and the environment, along with successful business practice. We believe, in other words, that “an industry will be strong only when it is developed in tandem with social and environmental responsibility.” C h i e f E x e c u t i v e O f f i c e r R e v i e w 00606 Annual Report 2007 • Banpu Public Company Limited

Banpu achieved strong earnings growth in 2007 based on a first full year of income from BLCP and BPIC. The result is the reward of many years of hard work and patience in developing a new coal-fired power business at Banpu. While the relative proportion of our power sector earnings could fall in the years ahead, we are committed to further investment in this area, particularly where coal-power synergies are possible. In this regard, I am pleased to report good progress in the early stages of development of Hongsa in Laos – and our intention to get to financial close on this project by the end of 2008. Our coal business underwent a second year of careful restructuring, investment and rationalization in 2007, including a stock market listing for our Indonesian coal interests under PT. Indo Tambangraya Megah Tbk (“ITM”) in December. Going forward, while the coal price environment is a cause for some optimism, costs are rising – and coal industry asset price expectations will make acquisition growth more challenging.

O u r f i n a n c i a l p e r f o r m a n c e i n 2 0 0 7

Earnings increased 84 per cent from THB 13.3 per share in 2006 to THB 24.5 per share in 2007 – or in absolute terms from THB 3,610 million to THB 6,654 million. This strong bottom line performance was primarily the result of a nearly three-fold increase in earnings before interest and tax (“EBIT”) from our power interests as well as some exceptional income from share sales (minor stakes in ITM and Lanna Resources). On the basis of this earnings strength, Banpu announced dividends for the year of THB 8.5 per share, up from THB 7.5 in 2006. The rapid growth in power business earnings was due to a first full year of associate income from our 50 per cent stake in the BLCP coal-fired power operation as well as a first full year of revenue from our power assets in China (“BPIC”). While our coal business EBIT fell 18 per cent year-on-year to THB 3,903 million, our power business EBIT increased 293 per cent to THB 5,073 million. Overall Banpu’s EBIT increased by nearly 50 per cent in 2007. The fall in coal business earnings, despite higher prices, was a consequence of an 11 per cent fall in coal sales volume, Thai Baht appreciation and higher costs. Total coal sales from Banpu’s Indonesian and Thai mines fell in 2007 due to the impact of a force majeure incident at Bontang and heavy rains – as well as the winding-down of our Thai coal operations. At the consolidated revenue level, Banpu’s coal sales revenues were down 7 per cent year-on-year at THB 28,429 million, dragging down the top-line revenue figure by 3 per cent to THB 32,442 million (including BPIC revenues). Cost pressures during the year were mainly the result of an increasing fuel price and higher stripping ratios at Banpu’s coal operations. 00707

Mr. Chanin Vongkusolkit Chief Executive Officer

C o a l s a l e s i n 2 0 0 7 a n d t h e o u t l o o k

Banpu’s total consolidated coal sales volume in 2007 was around 19.3 million tonnes, down about 11 per cent from 2006. The adverse weather conditions and technical problems at Bontang impacted sales to the premium East Asian markets as well as to Indonesia and Thailand. Thai sales were also affected by reduced output at LP-2 and CMMC. Over 40 per cent of Banpu’s coal sales continued to be exported to the premium markets of Japan, Taiwan and South Korea, although in absolute terms coal tonnage to these markets fell in 2007. Sales in and to Indonesia and Thailand fell to 1.2 million tonnes and 3.3 million tonnes respectively in 2007. By contrast, our sales to China increased more than three times to 2.5 million tonnes. Banpu’s weighted average selling price in 2007 increased 17 per cent on the previous year thanks to rising coal prices globally. Looking forward to 2008 and with over 70 per cent of sales contracted and priced, we can expect an average selling price increase of around 50 per cent or perhaps more compared with last year. The Barlow Jonker spot index is at USD 128 per tonne1 at the time of writing2, more than double the levels seen since 2004. This unprecedented increase is the result of strong demand growth, supply constraints in the main coal exporting countries, diversions to metallurgical coal markets – and the continued rise in oil prices. Looking ahead, while a US economic slowdown may impact growth in Asia and possibly coal prices, we expect many of the key supply-demand dynamics at work to keep coal prices at relatively high levels in 2008 and 2009.

I n d o n e s i a n c o a l b u s i n e s s : r e s t r u c t u r i n g a n d l i s t i n g

Banpu decided to restructure its Indonesian coal business under one holding company, PT. Indo Tambangraya Megah Tbk (“ITM”) in 2007 and to float the company on the Indonesian stock exchange. Enhancing accountability and facilitating further growth were the main reasons behind this decision. These themes are discussed further in this annual report in the “Focus on sustainable growth”. ITM raised IDR 3.2 trillion (approximately USD 338 million) in the initial public offering (“IPO”) by issuing new shares representing around 20 per cent of the post-offer capital. ITM shares (under the ticker code “ITMG”) commenced trading on the Indonesian Stock Exchange on 18 December 2007 and the share price has since performed very well relative to the local index. Through the restructuring and IPO, Banpu’s effective “equity” interest in the Indonesian coal assets has now been reduced to approximately 74 per cent.

Notes: 1 Based on CV 6,700 kcal/kg GAD coal exports from Australia to Japan 2 28 February 2008 00808

I n d o n e s i a n c o a l b u s i n e s s : i n v e s t m e n t a n d r a t i o n a l i s a t i o n

Although Indominco-Bontang’s output in 2007 rose to 11.5 million tonnes (from 10.3 million tonnes in 2006), overall ITM’s coal production fell 8 per cent year-on-year due to lower output at Trubaindo and Jorong – and cessation of operations at Kitadin-Embalut. In 2008 we are targeting production slightly above 2007 levels, including 5 million tonnes at Trubaindo. Looking further ahead, ITM is seeking to sustain output levels through exploration drilling at Jorong and through the development of the East Block open-pit at Indominco-Bontang (subject to final approvals by Ministry of Mines and Energy), the West Block underground mine also at Indominco-Bontang (under feasibility and trials) – and the new Bharinto mine, scheduled to commence production by the end of 2009. ITM will also continue to evaluate new acquisition opportunities as in previous years – and seize any which are likely to create value for the company. Additionally, ITM plans to update parameters so as to review coal reserves within this year by the third party consultant to issue new Competent Person Report. Last year saw the launch of a major expansion of the Bontang coal terminal designed to increase throughput capacity and efficiency at many levels, including an expansion of the ship-loading capacity from 12.5 million tonnes to 18.5 million tonnes per annum. The objectives are to improve the service to customers (blending, reliability...), to reduce costs and to enable Trubaindo coal to be handled through Bontang. The expansion project should be complete by early 2009. In parallel with the expansion we are also investing in other schemes designed to reduce costs and enhance value to customers. These include addressing contractor and equipment capacity constraints, construction of a 14 megawatt captive coal-fired power plant at Bontang to reduce petroleum dependence, flexible loading schedules to reduce demurrage charges, better barge fleet management – and a washing plant at Trubaindo.

O u r o t h e r c o a l b u s i n e s s e s

In Thailand, LP-2 and CMMC are now coming to the end of their commercial lives. This year will see the last production from these mines at around 0.5 million tonnes and then full closure and land reclamation. In China, Banpu holds minority but strategic interests in two companies: Hebi Zhong Tai Mining (“HZTM”) in Henan Province (40 per cent) and Asian American Coal Inc. (21 per cent) which owns a 56 per cent shareholding in the Daning underground operation in Shanxi Province and a 45 per cent stake in a new project called Gaohe, also in Shanxi Province. In 2007, HZTM completed an expansion to a capacity of 1.5 million tonnes per annum and achieved an average coal price of RMB 423 per tonne versus RMB 372 in 2006. At Daning, output grew to 3.1 million tonnes with an average selling price of RMB 381 per tonne, up from RMB 281 in the previous year. In 2008, a 15 kilometer rail spur to connect to the provincial railway is scheduled for completion and output is targeted at 4 million tonnes. The new project at Gaohe plans to produce up to 6 million tonnes per annum of semi-anthracite coal by 2013, selling to domestic utilities and steel mills. The project is now under construction and is applying for licenses. The production profile and economics of the project should become clearer by mid-year after some critical degas trials. Banpu’s position in AACI is currently under review – either for expansion to a meaningful level of control, or divestment. 00909

B a n p u ’ s p o w e r b u s i n e s s

Through holding company BPIC, Banpu owns three combined heat and power (“CHP”) plants in China: two in Hebei Province (Luannan and Zhengding) and one in Shandong Province (Zouping). All plants are being upgraded. The total power capacity of BPIC is now approximately 250 megawatts with around 800 tonnes per hour of steam capacity. BPIC performed well in 2007 and total EBITDA3 from the three operations in 2007 was USD 36.34 million. Going forward the higher coal price environment will put increasing pressure on margins. In Thailand, BLCP, the 1,434 megawatt coal-fired power plant which came on stream in 2006, achieved a smooth first full year of operation. Total revenues in 2007 were recorded at THB 20,307 million. EBITDA in 2007 was THB 11,243 million and Banpu was able to register equity associate income of THB 4,076 million from its 50 per cent shareholding. Banpu’s next major power project involves the development of a lignite-fired 1,800 megawatt power plant project in Laos. In 2007, the project achieved some key milestones with signature of an EPC contract with CMEC and Harbin, approval of a long term electricity tariff of THB 2.05 per kilowatt hour – and agreement of a basic shareholder structure including RATCH and Lao interests. In 2008 we will aim for financial close on the project. Commissioning is targeted for 2013.

I n t e g r a t i o n , t r a i n i n g a n d c o r p o r a t e g o v e r n a n c e

Banpu now has a total staff of over 3,000 employees. Just over 60 per cent are located in Indonesia, nearly 25 per cent in China – and the rest in Thailand. We have a mix of several nationalities working at Banpu including Indonesian, Chinese, Thai, Australian, British, Indian and Philippino. Our main HR objective is integration and instilling a common philosophy of continuous improvement and the Banpu Spirit (innovation, integrity, care and synergy). As part of this strategy, our training program in 2007 has included leadership courses, the Technical Knowledge Portal and Innovation Promotion. With the listing of ITM, we are also now working to ensure that corporate governance, management systems and investor relations at the new company meet the standards which have been set at Banpu in recent years.

A f e w c l o s i n g w o r d s o n t h e f u t u r e

While coal price strength is good for our core business, it also tends to be associated with higher mining costs (high oil prices and higher stripping ratios). Higher coal prices also mean higher costs for our power business. They also mean higher coal asset price expectations. So, while I am cautiously optimistic about the future, it will be no less challenging than the past. We will maintain our primary focus on shareholder and stakeholder value – and will continue to combine both pro-active strategies and opportunism in our quest for further value-creating investments. With more hard work and patience – plus perhaps a bit more strategic innovation and flexibility than in the past, we should continue to generate the returns that our shareholders and stakeholders have come to expect from us.

Note: 3 Earnings before interest, tax, depreciation and amortization K e y F i n a n c i a l R e s u l t s 010 Annual Report 2007 • Banpu Public Company Limited

T o t a l A s s e t s T o t a l S h a r e h o l d e r s’ E q u i t y ë The Company’s total assets as of 31 December 2007 ë Shareholders’ equity as of 31 December 2007 reported at THB 65,051 million – increased by reported at THB 38,497 million – an increase of THB 32 per cent or THB 15,664 million compared to 16,153 million or 72 per cent compared to last year. the same period last year. The increase was mainly The increase was mainly due to a net profit of from cash received from the listing of Indonesian THB 6,654 million and a premium on share capital subsidiary in the Indonesian Stock Exchange, from the listing of a subsidiary in the Indonesian and accrued dividends from related parties. Stock Exchange.

(THB Million) (THB Million) 65,051

38,497 49,386

45,088

22,344

21,801

05 06 07 05 06 07 (Year) (Year)

N e t D e b t t o E q u i t y T o t a l R e v e n u e s ë The Company’s net debt as of 31 December 2007 ë As of 31 December 2007, the Company reported reported at THB 5,217 million – a decrease of the total revenues of THB 32,442 million, a 3-per cent THB 9,540 million. This was due to a decrease decrease or THB 936 million compared to the in loan repayment and an increasing cash-flow previous year. This was mainly due to the decrease from the listing of subsidiary in the Indonesian in coal sales volume and the appreciation of Thai Baht. Stock Exchange. 2007 average coal selling price rose 17 per cent ë Net debt to equity stood at 0.14 times, decreasing compared to last year. from 0.66 times in 2006.

(Times) (THB Million)

33,378

32,442 0.66 25,209

0.34

0.14

05 06 07 (Year) 05 06 07 (Year) 011

G r o s s P r o f i t & G r o s s P r o f i t M a r g i n E B I T D A ë The Company’s gross profit as of 31 December 2007 ë The Company’s 2007 EBITDA reported at THB recorded at THB 11,478 million – decreased by THB 12,017 million – increased by THB 3,109 million 1,063 million. This was due to a decrease in coal sales or 35 per cent compared to last year. The increase volume, a higher unit cost associated with higher was due to gains on investment in domestic power portion of good-quality coal sales, a rising diesel price, business. and increasing stripping ratio. Gross profit margin decreased to 35 per cent from 38 per cent of the previous year.

(THB Million) (THB Million) 12,017

8,908 12,541 8,455

11,478

11,275

05 06 07 05 06 07 (Year) (Year)

N e t P r o f i t E a r n i n g s p e r S h a r e ë The Company’s 2007 net profit was THB 6,654 ë The Company’s earnings per share (EPS) as of million – increased by THB 3,044 million or 31 December 2007 was THB 24.49 per share, 84 per cent compared to the same period last year. a 84 per cent increase from the previous year of The net profit in 2007 included gain from minor THB 13.29 per share. divestment of the Indonesian subsidiary and gain form divestment of held-for-sale securities.

(THB Million) (THB/Share)

6,654 24.49

5,559

20.46 3,610

13.29

05 06 07 (Year) 05 06 07 (Year) V i s i o n & M i s s i o n 012 Annual Report 2007 • Banpu Public Company Limited 013

Vision

To become a leading energy company in Asia and to be acknowledged as an active developer and investor, a fair partner, a truly professional and a provider of excellent energy products & services.

Mission

To promote and contribute to the development of To diversify and invest society by acting as To develop businesses in strategic businesses, a good citizen, committing To serve our customers in the fields of energy in which will support and to safety practices in Asia with value priced pursuit of a leadership enhance our businesses and preserving nature and high quality of position in Asia. positions. and environment. products and services. F o c u s o n S u s t a i n a b l e G r o w t h 014 Annual Report 2007 • Banpu Public Company Limited 015

With a core business in coal-mining, Banpu is D y n a m i c p r i c e a n d c o s t e n v i r o n m e n t constantly faced with the problem of depleting assets. Achieving value growth which is sustainable over the The first point, of course, is that in real life prices long term is therefore challenging. Banpu deals with this and costs are dynamic. Banpu has made a deliberate problem through the careful and strategic timing of strategic decision since 2001 to invest heavily in the new investments, cost rationalization schemes – and coal industry, partly in anticipation of a significant by focusing on good corporate governance and rise in coal prices. The Indocoal assets were acquired in management training. Through these efforts we also 20021 and 20032 for approximately THB 3 billion with sharpen our acquisition skills and ensure efficient an additional THB 7 billion spent in developing and access to finance when we need it. Finally we diversify expanding them between 2003 and 2005. Output was our risks geographically and through investment in increased by a multiple of four between 2001 and 2006 the power business. Going forward we have also and the results in financial terms speak for themselves. made a commitment to invest in renewable energy, Banpu also changes its mine planning tactics from an intrinsically more sustainable form of energy supply. year to year as coal prices and coal price expectations change. For example, if coal prices are stronger, T h e d e p l e t i o n c h a l l e n g e Banpu will tend to increase its stripping ratios to mine out blocks which might not be economic in a lower Coal mines deplete. If Banpu just owned one coal price environment. The objective is long term value coal mine with fixed prices and fixed costs the value maximization. equation would be very simple. The mine would In addition Banpu works to achieve sustainable generate cashflow and pay it out as dividends each year. reductions in costs – and related increases in productiv- Each year shareholders would get a total shareholder ity. This has been a particular focus since 2006 at our return (“TSR”) exactly equal to their opportunity cost Indonesian coal business. Obtaining “economies of scale” of capital. And each year the value of the company, i.e. simply mining bigger coal deposits with bigger reflecting the present value of future free cash flows equipment is one way of achieving this. But there are would fall. When the mine came to the end of its reserve other ways as well. For example we are making efforts life, the company would have zero value. to enhance logistics and infrastructural efficiencies – and Given the depletion challenge, how does to reduce and manage our exposure to the oil price. Banpu – as a listed company – create sustainable growth We have fuel saving schemes and are investing in in value for its shareholders and stakeholders? coal-fired power at Bontang.

Notes: 1 65 per cent of Indominco-Bontang, 90 per cent of Trubaindo and 100 per cent of Kitadin-Embalut 2 35 per cent of Indominco-Bontang 016

A c q u i s i t i o n s k i l l s a n d a c c e s s t o f i n a n c i a l C o r p o r a t e g o v e r n a n c e a n d h u m a n r e s o u r c e m a r k e t s d e v e l o p m e n t

Now that high coal prices have “arrived”, At Banpu, developing best practice IR is related creating value simply by buying coal assets is much more to a more general commitment to good corporate difficult. Competition for coal assets is considerably governance. Banpu has been honored to receive several tougher and price expectations are very challenging. corporate governance and management related awards Going forward, Banpu’s acquisition skills and efficient in recent years including the “Best Managed Large access to financial markets will be critical to being Cap Company in Thailand” award from Asiamoney able to secure new coal assets at prices which leave Magazine in 2007. room for material value creation. Having the network, By paying attention to corporate governance experience and patience to identify and originate good systems, employee motivation, stakeholder relations and opportunities is the first necessary skill. Banpu has socio-environmental issues, we believe that Banpu should taken a pro-active approach to business development be more able to develop a constructive and innovative throughout the Asia-Pacific region for many years corporate culture while reducing the likelihood of now – and is supported by the Company’s coal sales and stakeholder conflicts and liabilities over the long run. marketing efforts in Asia. We hope that this will provide Needless to say, our most important “stakeholders” a good foundation for further growth in future years. are our management and employees. By investing in our After origination comes evaluation. Banpu works people through training we facilitate better management with its advisors to ensure that its valuation techniques skills and better decision-making. This in turn leads and evaluation methods are best practice. We will only to fewer problems, smoother operations, greater go forward with an opportunity if it is clearly value- innovation – and better relationships with other creating for us. Next is structuring and negotiation - stakeholders. By emphasizing the “Banpu Spirit” and finally, financing. The ability to raise finance on cultural code, we foster both motivation and loyalty. favorable terms and at short notice depends very much Our code sets high standards and encourages a principle on developing a relationship of trust and confidence with of continuous improvement in all areas. banks, fund managers and analysts. This takes time and requires transparency and consistency in communication from Banpu. Through a concerted effort to improve our investor relations (“IR”) program since 2002, Banpu is now recognized as one of the top listed companies for IR in Asia. 017

I T M l i s t i n g : c o m b i n e d g r o w t h D i v e r s i f i c a t i o n a n d g o v e r n a n c e o b j e c t i v e s Finally, to achieve sustainable growth, Banpu The decision to list ITM on the Indonesian Stock has developed a policy of asset and geographic Exchange last year is a good example of an innovative diversification. While Banpu is focused on “coal-based mix of both corporate governance and growth related energy in Asia-Pacific” this leaves ample room still for objectives: diversification. From a “horizontal” perspective, Banpu 1. Corporate governance: imposing reporting has developed new skills in underground mining as well and corporate governance disciplines on the management as in anthracite and semi-metallurgical coals in recent of ITM years. BLCP, BPIC and Hongsa all represent different 2. Corporate citizenship: introducing local forms of “vertical” diversification: coal-fired IPP, Indonesian investors to the capital of ITM and coal-fired CHP assets – and a vertically integrated becoming more accountable to local Indonesian lignite-fired power project. regulation. Geographically, Banpu first invested in 3. Value transparency: enhancing the visibility a substantial way in Indonesia in 2002 and has since of the value of Banpu’s Indonesian coal assets by made significant investments in China. Going forward obtaining a publicly traded share price for ITM. we are likely to see substantial investment by Banpu 4. Capital: providing opportunities for indepen- in Laos and other countries in the Asia-Pacific region. dent equity and debt capital funding – and releasing some This approach supports long term visibility and equity capital back to Banpu. sustainability by diversifying our risks and by securing 5. Growth: establishing an acquisition currency more stable cashflows which are less dependent (or and local competitive advantage for further growth in not at all dependent) on limited and depleting coal Indonesia. reserves. We hope that the ITM listing will be an important A last word on sustainability. The most building block towards sustainable growth for our sustainable forms of energy resource are renewable business in Indonesia. resources. Banpu recognizes this and in line with our emphasis on innovation and sustainability, we have recently initiated a policy to begin evaluating renewable energy investment opportunities, alternative energy technologies and carbon credits. We hope that this new policy will provide the seed for a new area of diversification and sustainable growth at Banpu. B a n p u C o r p o r a t e S o c i a l R e s p o n s i b i l i t y D u r i n g 2 0 0 7 018 Annual Report 2007 • Banpu Public Company Limited

In 2007, Banpu initiated and continued social Financial support to Faculty of Science, projects both at a corporate level and a local level Chulalongkorn University in Thailand, Republic of Indonesia and People’s Banpu presented THB 1 million to HRH Republic of China where we have operations. The Princess Maha Chakri Sirindhorn in order to support following are our highlighted social projects during Chula Dusadee Pipat Project, which was a part of the the past year. celebration of the 90th Anniversary of Chulalongkorn University’s Faculty of Science to fund researches of S o c i a l R e s p o n s i b i l i t y P r o g r a m s both science professors and PhD students that will a t t h e C o r p o r a t e L e v e l benefit the country’s development.

Educational Support Programs The Enviromental Support Programs Fourth consecutive year of ICT Development The Power Green Camp 2 : Envi-Science for Education Learning Through Actions Banpu donated THB 1.7 million to 5 schools “Applying Science Following His Majesty under its ICT Development for Education project in the King’s Footsteps for Sustainable Lamphun, Lampang and Phayao to upgrade their learning Environment” facilities especially ICT equipment and ICT skills of Banpu joined hands with the Faculty of Envi- their teachers and students. Banpu’s support has con- ronmental and Resources Studies, Mahidol Univer- tinued for the fourth consecutive year. sity, in organizing the “Power Green Camp 2” between The ICT Development for Education project 15-21 October 2007. The camp, held on the occasion supported by Banpu is intended to improve school of HM the King’s 80th Birthday Anniversary, was facilities and enhance potentiality of teachers and attended by 67 high-school students of Matayom 5 students as well as upgrade teaching quality so as to (Grade 11) from all over the country. Students not turn these schools into a center of the community for only learned how HM the King conserved the sustainable learning. environment through the use of environmental In 2007, Banpu in collaboration with the science, but they also learned and practiced with leading Organization Development Consulting Institute scientists at Mahidol University’s sophisticated organized a training course entitled “Team Learning environmental science laboratory. The camp was Development” to 150 teachers and instructors intended to expose Thai children to an environmental in Banpu’s sponsored schools in the 3 northern conservation concept based on HM the King’s provinces. The course aimed to improve teachers’ initiatives of Sufficiency Economy and to introduce capability in working in team, to increase learning them to an idea of sustainable development. Aside skills as well as to introduce teachers to new from activities in the camp, students also exhibited knowledge to build a stronger team of teachers in these their projects under the title of “Applying Science schools. Following His Majesty the King’s Footsteps for Sustainable Environment,” at Santi Chaiprakarn Park, Phra Arthit Road. 019

GLOBE Project: “Learning about Climate Youth Support Program Change to inspire the Next Generation of YIM 3 together with youth leaders from Scientists” Chiang Mai to visit Wat Pra Baht Nam Phu Banpu sponsored the Institute for the Promo- The “Youth Innovation Marketplace 3” or tion of Teaching Science and Technology (IPST) to “YIM 3”, co-sponsored by Banpu and Thai Health organize the conference entitled the “Asia-Pacific Globe Promotion Foundation took more than 30 youth lead- Learning Expedition Thailand 2007: Learning about ers from Chiang Mai’s “Boys Love Boys: AIDS and Climate Change to Inspire the Next Generation of Sex Education for Youth” project to visit Thammarak Scientists,” held in Prachuab Khiri Khan Province Niwet project of Wat Pra Baht Nam Phu, Lopburi Prov- during 13-18 November 2007 at Navy Phirom 1 ince. By learning more about the AIDS hospice and Hotel, Hua Hin, Prachuab Khiri Khan. Co-organized how to take care of AIDS patients, they could go back by IPST’s GLOBE Thailand and GLOBE Program to raise awareness of AIDS among their peers in Chiang Office, USA, the conference allowed students in Mai Province. Asia-Pacific to research about the Earth System The visit was part of the “Boys Love Boys: Science with teachers, scientists and communities. AIDS and Sex Education for Youth” project, one It was a forum for students and GLOBE scientists to of the eight social projects selected by YIM 3. present research papers and exchange information in order to understand more about interconnected Other Activities and interdependent of the Earth systems. Banpu has Banpu also launched the “Employee Volun- supported the GLOBE program for 2 consecutive years. teering Program” which allows Banpu staff from all levels to do social work in a response to the Thai Support for the Asian Dendrochronology government’s policy that announced 2007 as the Conference and Workshop “Year of Giving and Volunteering the Society.” Banpu also supported Faculty of Environmen- The first project involved a construction of clean and tal and Resources Studies, Mahidol University sanitary toilets to students of Ban Yubtanaeng School, to organize “The First Asian Dendrochronology a small primary school at Wang Chan District of Conference and Workshop: Environmental Change and Rayong Province. Not only did Banpu staff come to Human Activity.” The conference, which was held at build toilets, their families and other civil society Riverside Hotel, Bangkok, during 9-15 September 2007, networks also took part in this fun project to give was to create a new generation of researchers and nurture something back to the society. a research network of those interested in tree ring while Banpu Charity Club (Bangkok) donated 1,250 acting as a forum for those interested in forestry con- used books it got from Banpu’s executives and staff servation to present papers relating to the growth of to Maruey Knowledge & Resource Center who trees and their growth factors. would donate it to more than 300 libraries in need of books nationwide under the “Book Drive for Needy Libraries” project held to celebrate the 32nd Anniversary of the Stock Exchange of Thailand (SET). 020

Banpu Charity Club (Bangkok) held a Lampang Mine and residents of Sopprab reforestation activity where 40 staff and family members District participated with “Beautiful Roads with went to the Gulf of Thailand at Khok Kham Sub- Your Hands” project by planting 6,000 seedlings of District of Samut Sakhon Province, to plant mangrove perennial yellow flower trees such as Golden Tree, trees there. Cassia (Rajapruk) and Scramble Egg Tree (Tsong- Badan) along a 10-km distance at km. 553 - km. 563 S o c i a l R e s p o n s i b i l i t y P r o g r a m s of Phaholyothin Highway in Sopprab District, a t t h e L o c a l L e v e l Lampang Province. Banpu and residents of Mae Gua Sub-district of Sopprab District also planted trees to Thailand celebrate HM the King’s 80th Birthday Anniversary Public Health at the Ban Mae Gua’s reservoir. Lampang Mine held a campaign to raise Chiang Muan Mine and staff together awareness of dengue fever for Moo 7 and Moo 9 with Ban Sra residents planted 15,000 seedlings of residents of the Mae Than Village. On this occasion, Vetiver Grass to celebrate HM the Queen’s Birthday public health officials from Pa Tan-Na Krua Tambon Anniversary around the reservoir, at Moo 10, around Municipality was invited to provide information Ban Sra School, at Moo 12 and around the commu- about the dengue fever including how to spot those nity health center in Moo 3. infected from the disease, prevention and destruction Religion and Customs of stagnant water which caused mosquito-borne Lampang Mine and Chiang Muan Mine con- diseases. Pamphlets of dengue fever prevention were tinued to sponsor various annual religious events. distributed to 297 households. Lampang Mine joined a merit-making ceremony on Education the Visakha Bucha Day with the community. Together Chiang Muan Mine donated THB 50,000 with Sandonkaew Tambon Administration Organiza- to Ban Sra School to build school fence. tion (TAO), Lampang Mine also organized a merit- Occupational Enhancement making ceremony to mobilize funds to build a fence Chiang Muan Mine organized “Local Food for Wat Mae Than at Sandonkaew Sub-district of Cooking Course” to groups of homemakers in Ban Mae Tha District, Lampang Province. Chiang Muan Sra Sub-district. Mine joined its community in a traditional northern Environment merit-making ceremony called Than Salak at Wat Sra Lampang Mine joined hands with communi- Tai, Chiang Muan Sub-district of Phayao Province. ties in Mae Gua, Sandonkaew and Samai Sub-districts to plant 80,000 saplings for HM the King on an Republic of Indonesia 80-rai concession area of Banpu. In addition, Banpu Banpu Indonesia follows what Banpu’s and the communities also planted trees in 220 rai of various mines in Thailand do in their community land, of which 80 rai were in Mae Gua Sub-district of development projects while adapting to local needs. Sopprab District, 100 rai were in Samai Sub-district To strengthen its efficiency when working with of Sopprab District and the remaining 40 rai were in community development agencies in Republic of Sandonkaew Sub-district of Mae Tha District. Indonesia, Banpu Indonesia implemented a commu- nity development policy for relevant units to use as a guideline in late January 2007 so that all activities were conducted on the same standard. 021

Banpu Indonesia designs its community Trubaindo Mine organized a health check- development direction based on the four corporate up service to two primary schools; namely, SDN 004 shared values of “Banpu Spirit” which closely (Sekolah Dasar Nasional or State Elementary School) covers four factors of mission, manpower, funding and SDN 006 at Muara Lawa, Kuta Barat Town. Children and senior executives. The policy direction, designed were not only checked by doctors but they were also to ensure that management and operational staff taught how to brush teeth and trim nails. undersold the same thing, not only strengthens the Education work of community development staff but also acts Indominco-Bontang Mine and Kaltim Prima as a community development blueprint to bring Coal (KPC) donated money to an education fund of sustainable growth to mining communities that can East Kutai District to allow needy students a chance also be adapted to meet community’s expectation. to further their study from primary to university In 2007, Banpu Indonesia was hosting the levels. Banpu commits to donate IDR 4 million each 13th Corporate Forum for Community Development year until the project completes. (CFCD) meeting at Crown Plaza Hotel, Jakarta, Kitadin-Embalut Mine organized a computer under the concept of “CSR as gold rating proper course for beginners to provide computer skills to and strengthened by CFCD.” Project leaders from more than 50 residents in Ring 1 Area. This referred member groups of more than 50 companies nation- to those from Separi Mahakam Village, Embalut wide attended the Meeting. Village, Bangun Rejo Village and Kerta Buana Also in 2007, Banpu Indonesia was behind Village. Residents were taught on how to use Microsoft the following social projects at the local level: Word, Microsoft Excel, Microsoft PowerPoint and Public Utilities how to surf the internet. Banpu Indonesia, Jakarta Office, paid a visit Occupational Enhancement to those suffering from diarrhea and dengue fever Indominco-Bontang Mine launched the from major floods that hit Jakarta in February 2007 Farming Club project for residents of Suka Rahmat at Tarakan General Hospital and Koja Hospital. Village, East Kutai District. The Club was to develop Banpu donated money and necessary items such as farming skills and provide related assistance to beverages, vitamin, milk, baby food and diapers to farmers. It was initiated in a response to the government’s the patients. policy to increase competitiveness to Indonesian Public Health farmers under the “Gerdabangagri Project,” that aims Indominco-Bontang Mine officially opened to turn East Kutai into the region’s farming district Public Health Service Building in Tihi-tihi Village by 2010. in Bontang. The building was built in a 45-square Kitadin-Embalut Mine in conjunction with meter area and is under the care of Banpu’s Commu- the Vocational Education Development Center for nity Development Department. As a center for Agriculture (VEDCA) of Cianjur City launched a healthcare services, the building provides vaccination, voluntary retrenchment program to train staff on how mother and child care, diarrhea prevention and to farm, raise animals and fish. The program, held nutrition promotion services. The project has received for the second time, provided an opportunity for staff significant support from public health officials and to create supplementary incomes from farming activities. local officers. About 194 staff attended the program. 022

Trubaindo Mine also launched a project Environment to plant rubber trees to generate incomes to the com- Zhengzhou Representative Office, Coal munity in the long run. 25,000 seedlings were Business, together with the Zhengzhou local distributed to residents in the two villages of Dilang government planted trees every year in an annual Puti and Swakong. This project will continue into 2008 tree-planting activity held every March. as the target is to distribute up to 100,000 seedlings. Sports Environment Banpu officially opened the “Banpu Table Indominco-Bontang Mine, Kitadin-Embalut Tennis Club” at Zhengding National Table Tennis Mine and Trubaindo Mine planted trees as a part of Training Center, Hebei Province, China. The Banpu the Indonesian Government’s campaign to plant 79 Table Tennis Club was born out of collaboration million trees to fight against climate change, which between the Zhengding National Table Tennis is a part of the UN Environmental Program’s “Plant Training Center (one of the centers chosen to train for the Planet: Billion Tree Campaign,” following the national Chinese table tennis athletes before their UN Climate Change Conference in Bali, December big matches) and Shijiazhuang Chengfeng Cogen 2007. Co., Ltd., which oversees the Zhengding Power Plant. Founded in 2003, the Club was originally named P e o p l e ’ s R e p u b l i c o f C h i n a “Chengfeng Cogen Table Tennis Club” but changed to the current name after Banpu took over Shijiazhuang Public Utility Chengfeng Cogen Co., Ltd. in 2006. The Club intends Luannan Power Plant donated RMB 40,000 to promote table tennis to the public. It also to representatives from the two villages of Gujiaying strengthens a relationship between Banpu and local and Lisi to upgrade their infrastructure. communities. The support not only reflects the four Education values of Banpu Spirit but also responds to the Luannan Power Plant donated stationeries Chinese government’s policy to create unity in the and sports equipment to students of a disabled school society. At present, the Banpu Table Tennis Club on the occasion of the National Aiding Disabled boasts 130 athletes and 15 trainers. Day. I n d u s t r i a l & M a r k e t i n g O u t l o o k 023 Annual Report 2007 • Banpu Public Company Limited

I n d u s t r i a l O u t l o o k Historical of World Thermal Coal Exports by Countries

1. Steam Coal Trade in the World Market million tonnes Other Countries Venezuela (Source: Barlow Jonker Pty. Ltd.) 600.00 Vietnam US & Canada In 2007, sales of steam coal/thermal coal in the Europe 500.00 Colombia world’s market continued to expand. The total sales were Russia 400.00 South Africa 580 million tonnes or an increase of 21 million tonnes China Indonesia from the previous year due to increasing demands 300.00 Australia from Asia, especially China and India, and increasing 200.00 imports by South Korea, Japan and Malaysia. 100.00 Australia still suffered a lack of transportation infrastructure, resulting in delayed and inefficient coal 0

2000

2001

2002

2003

2004

2005

2006 transportation. Australia exported approximately 121 2007 million tonnes of coal. Indonesia suffered from heavy rains earlier in the year. The country also had a problem Key Exporters of of coal transportation due to inadequate facilities. It ended World Thermal Coal in 2007 up exporting roughly the same amount of coal it did the million tonnes previous year at 115 million tonnes or a mere increase 120.00 of 2 per cent. Yet, Republic of Indonesia remains the 100.00 world’s number two coal exporter after Australia. The thermal coal export price at FOB Newcastle, 80.00 Australia, continued to increase from early last year 60.00 at USD 55 per tonne in the first quarter to USD 70 40.00 a tonne in the second quarter before weakening by USD 2 a tonne and surging again to over USD 80 a tonne 20.00 during the last quarter of the year. The highest price was 0

mbia

China on 13 December 2007 at USD 90.46 a tonne. An average Russia

th Africa

Australia

Colo

Indonesia

Sou

ther Country

ther Country

ther Country

ther Country

ther Country

ther Country

ther Country price for the entire year was at USD 65.83 a tonne. ther Country

O

O

O

O

O

O

O

O It was clear that this year’s price was far better than last year, which was at USD 49 a tonne. Thermal Coal Export Price The market and the export price for coal in 2008 FOB Newcastle may ease a little as the world’s economy is weakening. USD/tonne However, as an oil price in the world market tends to 100.00 stay higher than USD 80 a barrel, this will continue to sustain the coal price and demands for coal in the world’s 80.00 market. 60.00

40.00

20.00

0

07

Jul-07

Jan-07

Jan-08

Sep-07

Mar-07

Nov-

May-07

Source: Barlow Jonker Pty. Ltd. 024

2. Steam Coal Trade in Thailand 3. Power Generation Business in Thailand (Source: Coal Market Research, Banpu) (Source: The Energy Policy and Planning Office: In 2007, Thailand consumed a total of 31 million EPPO) tonnes of steam coal/thermal coal from local and Thai economy was growing by 4.5 per cent in overseas mines, which was closed to what the country 2007, while an inflation rate was around 1.6 per cent did the previous year. Of this, 18 million tonnes were with a current account surplus. Exports, which remained local lignite, which was down 1 million tonnes from the country’s main driving force of growth, were a year ago; while the other 13 million tonnes were slowing down due to the global economic downturn. The imported coal, an increase of 1 million tonnes from last state of the Thai economy caused its total electricity year. In terms of heat, heating values were higher demands to be at 133,102 GWH. The highest demand than last year because imported coal had a higher for electricity was recorded in April 2007, at 22,586 gross calorific value than local lignite. Of all the local megawatts, which was 1,522 megawatts higher than lignite consumed, 16 million tonnes were used by the the previous year. An average load factor was 75 Electricity Generating Authority of Thailand (EGAT) to per cent while the reserved margin was at 20.4 per cent. generate power. The remaining 2 millions were used by Electricity consumption in Bangkok metropolitan area other industrial sectors; namely, cement, pulp & paper, was 42,393 GWH or an increase by 2.2 per cent while food and others. Local lignite consumption during the the provinces consumed 88,020 GWH of electricity, or previous year drastically fell because the Lampang Mine, a rise by 5.7 per cent. Consumption by EGAT’s direct which was Banpu’s main mine, was in its last phase of customers totaled 2,690 GWH or an increase by 8.1 mining life. Its coal reserves and production capacity per cent. were depleted, which required the country to import The industrial sector consumed the highest thermal coal as a substitution. Thailand, as a result, saw electricity totaling 45 per cent of the total electricity its import of thermal coal increase to 13 million tonnes consumed in this country, or a rise by 4.6 per cent or an 8-per cent rise. Of this, 8.5 million tonnes from the previous year. The business sector’s power were used in industrial sectors while the remaining consumption rose 4.0 per cent. The household sector’s 4.5 million tonnes were used by both Independent Power consumption rate increased 5.0 per cent. The agricultural Producers (IPP) and Small Power Producers (SPP) to sector and other sectors saw their consumption rise by generate power. 5.5 per cent. In 2008, Thailand expects to see its demands for In terms of production, total electricity production steam coal and thermal coal to rise by only 3 per cent as in 2007 was 28,230 megawatts. Power generated and the economy just starts to recover. In addition, there is bought by EGAT totaled 148,463 GWH, or no large coal-fired power plant or factory scheduled to a 4.6-per cent increase from a year before. Of all the open in 2008. generated power, 67 per cent was produced by natural gas, 21 per cent from lignite/thermal coal, 2 per cent from fuel oil, 5 per cent from hydropower and 5 per cent from imported energy. It is expected that in 2008, electricity generated by natural gas will be higher since PTT Public Company Limited (PTT) is able to supply more natural gas to EGAT; BLCP Power Ltd. will be able to reach its full production capacity. However, power and electricity generated from hydropower, bunker oil and imported sources will fall. 025

M a r k e t i n g O u t l o o k s The Company is currently upgrading the Bontang coal terminal to handle 18.5 million 1. Coal Production and Distribution Business tonnes of coal a year so that we can respond more to 1.1 Overseas coal market customer’s demands. Competition strategies Speeding up our service Competition in 2007 was light due to Banpu has introduced a computerized increasing demands for coal around the world especially system to its documentation process. Invoice, price in China, India and South Korea while major coal pro- calculation and information of coal quality are now ducers suffered from natural disasters and other prob- linked with the logistics system to reduce document lems. Australia suffered heavy flood in Newcastle, which errors and to respond more quickly to customers. This is where the world’s largest coal terminal is situated. helps reducing costs of communications and loss of Indonesia and South Africa also had to deal with heavy time when dealing with customers. rain situations. In Russia, it did not have enough train Providing technical assistance to bogeys to transport coal. Also in Russia and Poland, customers there were labor strikes while China restricted its coal Banpu has set up a technical support exports. As a result, the amount of coals exported by unit equipped with technical experts to advise and several countries was far lower than expected. The coal recommend customers on how to use Banpu’s coal more business remained tight almost the entire year in 2007 effectively to help customers reducing their costs when due to production and transportation problems. This using our coal. prompted the world’s price of coal to surge 74.8 per cent. Sophisticated quality control system In 2007, Banpu increased its sales in markets that Banpu has asked its technical experts offered better prices such as in Japan and China. The to produce a manual on how to analyze the quality of Company also did a lot of spot sales to achieve a better coal. In addition, a central laboratory has been established price while modernizing its marketing database to be able at the Bontang coal terminal to test the quality of coal to react quickly to market changes. Banpu’s competition before being delivered to our customers. Banpu’s Coal strategies for the highest profit and a sustainable growth Technology Unit has also hired quality staff to monitor were as follows. the quality of our coal at each production process until it Creating customer’s satisfaction reaches customers. In the end, our customers show they In 2007, Banpu conducted a survey of have more confidence in our coal. customer’s satisfaction over Banpu’s products and Continued promoting the “Banpu” services. Results of the survey were used in improving Brand our work process by making it leaner to increase We strengthen the “Banpu” Brand by customer’s satisfaction. continuing to sponsor the world’s coal conferences at Improving coal terminal various venues. In addition, our senior executives are At present, Banpu’s Bontang coal guest speakers at various coal conferences in Asia and terminal in Republic of Indonesia, is able to handle Europe. The Company is increasingly recognized by coal 12.5 million tonnes of coal a year. The Company also manufacturers, distributors and consumers around the improves facilities at Bontang to handle a 95,000-tonne world. The firm is known as a manufacturer of good barge to meet international standards. This has quality of coal. We are also known as being reliable and lowered customer’s freight costs and also increased professional when it comes to delivery. The “Banpu” our competitiveness. Brand is now recognized as the world’s leading coal producing firm. 026

Customer Relationship Management Product variety Banpu communicates with its customers Since Banpu produces coal from various via salespersons and senior marketing executives who mines, it offers coal of various qualities that can meet pay regular visits to our customers. We have developed customers’ demands in various markets. This prevents the following to enable our sales personnel to respond us from competing head-on in a particular market. Last more accurately to demands from our customers: year, the Company was able to launch a new product, Customer database which was coal that had a heating value of 6,350/6,250 Information of each customer is kept in kcal/kg with low rate of ash (at around 5 per cent). The a database. This includes customer’s demands for product has been well-received by customers since it coal, sales agreement, delivery of coal to customers helps them reduce their cost of production as they in each agreement and quality of coal being delivered. now have a choice not to buy high-quality coal from Salespersons can access this information from the Australia or China. database very quickly and this helps them respond Creating and using a marketing to customer’s need in no times. Besides, customer’s database information in our database also enables us to answer As Banpu continues to develop its market- to their needs more accurately. ing database to the point that it can timely monitor World coal database movements of coal price and conditions of the world’s Banpu continues to develop its database coal markets, this information can be used to enhance its of the world’s coal. At the moment, it has updated infor- marketing decisions. This helps speeding up Banpu’s mation of price movements and market situations. Sales- quotations and by helping the Company to negotiate persons can access to the information and update cus- with its customers. In addition, the information also tomers constantly. This not only strengthens the relation- boosts its operation efficiency and reduces its costs ship between Banpu and customers but also adds more of sales and administration by reducing unnecessary value to the Company from a customer’s perspective. corporate activities. Customer’s visit to Banpu’s mines Focus on long-term customers Banpu invites senior executives of The Company focuses on building a long- its major customers to visit our mines so that they term relationship with its customers. This is one reason understand our production process, transportation and why the firm has a list of long-time customers in its hands quality control. The visit also updates the latest situation to whom it sells most coal. Although some customers of Banpu to our customers. This way, the Company can might not sign a long-term agreement with Banpu, they win a lot of confidence from them while strengthening continue to buy it from us again and again. Banpu goes a personal relationship with them. on strengthening this relationship through various Creating added value activities such as exchanging information about market Banpu has used its coal terminal to mix prospects, organizing a company’s visit, and providing medium-quality coal with premium-graded coal produced customers with technical assistance. by its new mine, Trubaindo, to achieve high-quality coal that it can sell in markets at a high price. 027

Expanding customer base Banpu’s customers Banpu continues to expand a customer to Most of Banpu’s customers are power- markets offering higher prices. Last year, we managed generating companies which have a lot of demands for to penetrate into People’s Republic of China, a rapidly coal to generate power. They are in Japan, South Korea, growing market. This helps expanding our customer base Taiwan, China, Malaysia, the Philippines, Indonesia and and increasing our incomes while reducing our risk in some countries in the continental Europe. In addition, having to depend on a particular market. Banpu also sells coal to cement, paper, plastic and Pricing policy chemical industries. Still, Banpu’s focus remains at the The Company’s pricing policy is based on power-generating firms since they have a high growth an average year-long coal price reflecting through rate. However, Banpu still sells part of the coal to other an index of short-term coal market. The idea is to create industries to expand its customer base and to maintain a balance between its short-, medium- and long-term sales a good relationship. to suit market conditions at the time. During the past year, Major competitors Banpu increased its short-term sales to gain from a rapid Banpu’s main competitors are large manufac- increase of coal price in the world’s markets. Medium turers in Australia, China, Indonesia and South Africa. and long-term sales transactions however accounted for 50 per cent of the total coal it expected to sell each year. 1.2 Coal markets in Thailand The Company has been discussing with its clients In 2007, competitions in the local coal annually to guarantee its incomes and to reduce impacts market were fierce as the market saw a lot of new from pricing volatility. suppliers entering the market for the first time. Due Due to its solid marketing information, Banpu to the decline of local coal production, users had to can choose to negotiate with its customers at a right time. import coal. This led several new coal suppliers to It can also adjust a price it has proposed each time so import coal locally. At the same time, local demands that it is well in line with the market condition at the for coal in 2007 were closed to the level of the previous moment. year. While demands for coal in the cement industry Distribution and distribution channels fell sharply 13 per cent from the previous year due to Banpu increasingly does direct sales and an economic downturn, demands in other industries agent sales with its customers. Still, it needs to sell were much higher due to a higher cost of fuel, which led through agents in various countries to facilitate our several fuel-based factories to switch to coal instead. customers. Agents not only help with documents but Besides, BLCP Power Plant, which was an IPP also find information about energy situations, coal, (Independent Power Producer) was running at its full customers and competitors in a host country for us to production capacity rate and therefore used more coal use in our planning. than it did in the previous year. One reason demands The Company also sells coal through trading for coal in the end hardly increased was due to a fall companies, which are used to reach target customers and of local coal production as coal reserves in the country to reduce our marketing expenses. were depleted. Users instead turned to import coals, which reported a much higher heating value, this in turn reduced the amount of coal being consumed. 028

Competition strategy Coal Distribution Center Locally-produced coal Banpu has set up a coal distribution Banpu is a major coal producer in Thai- center where coal is piled up before being distributed land, producing 75 per cent of coal being produced by to customers at a designated destination to reduce the Thailand’s private sector. Most coal is sold under burden of stock management and customer’s inventory long-term contracts Banpu has signed with major expenses. Besides, the center is used as a place to customers. The Company feels it is very important to be separate coal based on its sizes and heating values to able to deliver coal as agreed with customers. It focuses suit each customer’s need. As mentioned earlier, the at post-delivery service, quality control to ensure that its Company focuses at a timely delivery and quality coal is having a quality agreed earlier, on-time delivery control so that it delivers the right product to the right and environmental-friendly operation. customer. It also ensures that its operation at the Imported coal facilities meets environmental requirements and Banpu has a closed relationship with its minimizes effects to surrounding communities to customers for a long time. It has shown to customers increase customer’s confidence in the long run. that it is responsible for all the obligations it has by Pricing policy providing coal that answers to their demands in terms of Locally-produced coal quantity and quality and by delivering it on time. So far, Coal produced locally is limited, most of it has won customer’s confidence as they continue to which are under long-term sales agreements signed with place orders for imported coal. major customers. That’s why sales price of Banpu’s The fact that Banpu has its coal reserves locally-made coal is binding such long-term contract. in Indonesia and at the moment produces coal from This allows customers to calculate their operation 3 mines means the firm is able to offer coal with costs more accurately. For retail customers, prices are a variety of quality to respond to customer’s needs. adjustable according to the world’s market prices, which At the same time, it is ready to strike both short- and are usually quoted on a yearly basis. long-term deals to sell coal. Imported coal The Company has invited customers Sales prices of imported coal are based on to visit our mines in Indonesia to win their confidence the world’s market mechanisms, depending on when that we have enough coal to meet customer’s demands a price is quoted to customers. A contract is made with in terms of quantity, quality and constant delivery in customers for delivery on a case-by-case basis or for the long run. a period of one year or more than one year, depending Banpu has restructured its internal on customer’s needs. When importing coal, Banpu organization where a special unit is set up to manage usually transports coal to customers. That’s why it a comprehensive logistics process to reduce a cost of includes a cost of freight in its quotation. Banpu also transportation and to increase product distribution signs an agreement with container ships so that it can efficiency. The bottom line is to handle increasing provide shipping service to transport the amount of coal demands of imported coal. within a period stated in the contract to its customers. 029

Banpu’s customers Major competitors Most Banpu customers are in the industrial 1. Local coal – major competitors are Siam sector, which can be further divided as follows: Cement Industry Co., Ltd. (who produces coal for other 1. Cement industry where coal is used in companies within the Siam Cement Group). cement burning process – this is the largest group of 2. Imported coal – during the past year, there coal users in the country’s private sector. There are very were newcomers who imported coal into the country. few of them but each of them consumes a lot of coal. There are approximately 9 major suppliers. Most of 2. Coal-fired power and steam generation newcomers are trading companies, who buy and sell industry where coal is used to produce heat in coal without their own production sources. They a large steam boiler – this consists of pulp and paper, therefore are facing with delivery uncertainty and petrochemical and textile industries. quality fluctuation. Last year, since the world demanded 3. Other industries where coal is used to a lot of coal, small suppliers could not find coal with produce heat in a smaller steam boiler or as a fuel to fire, a right price and therefore was forced to pull out of the boil or cure in a production process – most of them are market. Yet, demands for coal in Thailand sharply small factories such as small pulp & paper factories, increased. This led to an increasing interest in the a chemical industry, a food factory or a kaolin factory. Thai markets by major world-class suppliers, which Users in this group are mostly retail and the amount therefore made competitions fiercer. of coal per person is not high but there are a large number of customers and they need coal with more 2. Power Generation and Distribution Business specific characteristics than the previous two groups. 2.1 Power Business in China Power industry in China China’s power industry continued to grow in 2007 as follows.

Unit 2006 2007 Growth rate of total consumption % 14.00 14.42 Growth rate of industrial sector consumption % 14.30 15.66 Growth rate of production capacity % 20.30 14.67 Total production capacity Megawatt 622,000 713,290 030

In general, demands and supply in the power 2.3 Power Business in Thailand market in China in 2007 remained in balance since Banpu has invested 50 per cent in the BLCP demands, which were higher than expected, were duly power plant, which accounts for 717 megawatts of met by power generated from new production capacity. power; and 14.99 per cent in the natural gas-based power However, some regions also experienced a black-out plant of Ratchaburi Electricity Generating Holding Plc., but less severely than what happened during 2004-2005. which accounts for 590 megawatts of power. In 2007, Banpu increased its sales of power All power generated from the two are sold to EGAT generated from the three power plants at an average under long-term IPP (Independent Power Producer) growth rate of 21.48 per cent from the previous year due power purchase agreements. to higher demands in the markets. Competition strategies However, coal supply for power plants Coal-fired power plant in Thailand during the past year was very volatile due to high Banpu’s priorities are at environment demands for coal in the world’s market; transportation and community recognition. In recent years, as there has costs, which were more expensive than before; and higher been an increasing awareness in an environmental issue taxes charged for coal use. As a result, coal price rose 22 among Thais that leads to amendments of laws and per cent from the previous year. Banpu still implemented regulations and upgrades of standards, this also means the same policy by reserving coal for use during winter more investments in environmental activities and more when demands and prices were high while closely protests against power plant. Lack of clear policy monitoring the situation. directions and assurance from the government makes Customer Relationship Management an investment in a project riskier. Banpu continues to focus at customer Major competitors relationship management for both public and private Major power producers in Thailand are sector customers. This includes the local power Electricity Generating Public Company Limited, authority, which remains the only buyer of its power, Ratchaburi Electricity Generating Holding Plc. and Glow and other steam customers. Meetings are regularly held Energy Plc. to set up goals, monitor customer’s satisfaction and Overseas power producers and investors maintain a good relationship with local governments. Through its cooperation and supports to the local authorities, the Company is recognized as a model company there.

2.2 Power Business in Laos PDR Banpu is conducting a feasibility study to develop a coal-fired 1,800-MW power plant in the northern part of Laos PDR where part of the power will be sold to Thailand’s EGAT while the rest will be consumed in the country by 2013. At present, the project is negotiating the power purchase agreement. R i s k F a c t o r s 031 Annual Report 2007 • Banpu Public Company Limited

Banpu and companies within its group 1.2 Interest Risk manage internal and external risks to meet changes Banpu manages an interest risk by making through the Risk Management Committee, which sure that the level of its risk is proper and by closely convenes on a quarterly basis. In addition, it moni- monitoring current and future interest rates in the tors, analyzes and manages risks at a business world’s markets and in Thailand. In addition, its loan unit level where meeting is held every month. portfolio is a mix of short- and long-term loans with The Company also analyzes and supervises risk fixed and floating interest rates that correspond to management activities at the operation level and uses different types of Banpu’s investments. Financial application software to handle risk management instruments are also used to reduce the interest risk, tasks that keep changing according to its investments. as the case may be. As of 31 December 2007, the Company’s fixed- and floating-rate loans were 51 per 1. Financial Risk cent and 49 per cent of all loans, respectively. 1.1 Exchange Risk Banpu manages foreign currencies to 1.3 Risk from Coal and Oil Prices prevent exchange risk both at the Company level The Banpu group has managed risk from and at a group level through a natural hedging policy coal prices that affect its incomes and risk from fuel where it strives to create a balance between its assets price that affect its operating costs by partly using and liabilities in foreign currencies in Thailand, coal swaps and gas oil swaps. A Commodity Risk Indonesia and China. Other financial instruments Management Committee has been set up to manage are also implemented from time to time based on risk from volatile coal and gas prices to ensure circumstances. Banpu’s maximum benefits. Training of commodity As of 31 December 2007, 71 per cent of risk and risk management was given to Banpu group’s the Company’s loans were in Thai Baht currency; 25 executives and staff to enhance their understanding per cent in US dollars and 4 per cent in Chinese RMB. about the issue for better and more effective perfor- Banpu also adjusted its forwarding contracts to suit mances. the proportion of its foreign-currency assets and liabilities. At the same time, it re-invested parts of 2. Risk in Coal Business foreign exchange incomes earned from its overseas 2.1 Risk from Coal Price Volatility operations abroad. By doing so, Banpu managed Prices of coal in the world’s market are very to make its risk management more flexible while volatile and not only driven by supply and demand reducing foreign exchange impacts. but also by coal futures trading in derivatives Banpu’s subsidiaries in Indonesia which markets. This has become one of the major risks that earn incomes in US dollars continue to use financial greatly affect incomes of coal producers. Banpu instruments to buy US dollars in advance based on manages its risk by expanding its customer base, their estimated monthly incomes and expenses to choosing a right time to settle a price with customers reduce the risk from an exchange rate between US who have signed a contract with us for as much as dollars and Indonesian Rupiah. Part of the dollars is 50 per cent of the amount of coal expected to be sold also deposited overseas to reduce a country risk. in that year to guarantee Banpu’s steady income while the rest will be settled throughout the year. These deals are made on the basis of market conditions and a proper allocation of short- and long-term purchase agreements for the most efficient sales planning. Banpu also uses coal swaps to minimize its exposure to the income volatility. 032

2.2 Delivery Risk 2.4 Risk from Volatility in Cost Delivery risk frequently refers to force of Production majeure, something that beyond our control; such as Diesel is Banpu’s major cost of coal heavy rain that prevents a mine from operating and production since it fuels important mining and a huge accident that prevents a machine from stripping equipment. That’s why volatile oil price in working, which, in the end, means there is no coal to the world’s markets has affected Banpu’s cost of deliver. A possible risk is a fine that Banpu has to pay production. To manage this risk, Banpu closely monitors for demurrage. Yet, this is a risk that can be limited. and analyzes movements of oil prices in the world’s Most of the time, Banpu will ask its clients to have market so that it can effectively plan its purchase of the barge pick up coal at other coal terminals first fuel and its production activities to reduce its oil and postpone a delivery schedule until its production dependency and to increase an efficiency of its oil resumes. use. In the long run, Banpu plans to study on how to cut down its dependence of oil-based machines. 2.3 Risk from an Expansion of the Coal Terminal in Indonesia 2.5 Risk from Changes of Coal Reserves Banpu has taken out a risk insurance Coal reserves depend on exploration against a suspension of coal transportation at the Bontang information. Additional exploration and information coal terminal due to accidents. In other words, Banpu could mean that the Company’s coal reserves either will be compensated if the terminal suffers from increase or decline. But Banpu is exploring new coal accident that prevents it from functioning. Banpu also reserves all the time to ensure that it can serve its formulates a maintenance plan by emphasizing at customers in the long run. a preventive maintenance, giving regular skill trainings for the maintenance unit and stocking enough critical 2.6 Risk from Contractor’s Operation spare parts to minimize repair time and impact to its Banpu hires contractors to strip off soil operations. surface and to haul coal. If contractors cannot do their At the moment, Banpu is expanding its jobs due to various problems such as machines do Bontang coal terminal to handle up to 18.5 million not arrive on time, substandard maintenance, an tonnes of coal annually to enhance its delivery ineffective operation or a labor problem, this will capability. The Bontang coal terminal is also used as affect Banpu’s operation. To prevent this, Banpu a place to mix coal destined to Banpu’s customers to selects only reliable contractors with a good history improve and maintain its quality. But to expand Bontang, of work experiences with whom it signs medium its existing terminal must be temporarily shut down and long-term agreements so that contractors feel it so that construction can continue there, which means is worthy enough to invest in brand-new machines. during the period, Banpu will not be able to transport Banpu also helps contractors maintain their machines and deliver coal to customers. However, Banpu solves to enable them to perform effectively. this problem by loading coal onto small barges to be re-loaded into larger shipping barges or by loading coal at other terminals instead to minimize effect on its customers. The Company has also coordinated with customers to set proper demurrage schedules to pick up the coal. But the impact is short-term only since the Bontang construction will complete as soon as possible. 033

3. Risk in the Power Business 1. PT. Centralink Wisesa International Banpu’s investment risk in the local power (Holding company) business is considered low as long as Banpu con- 2. PT. Indo Tambangraya Megah Tbk tinues to manage its contract well since a rate of (Holding company and coal distribution return is stable as there is no risk in marketing and company) sales prices because everything is clearly stated in 3. PT. Jorong Barutama Greston the long-term Power Purchase Agreement (PPA) (Produce and sell coal for the Jorong Mine) with the Electricity Generating Authority of Thailand 4. PT. Trubaindo Coal Mining (EGAT). An amount of power to be purchased is also (Produce and sell coal for the fixed (based on the existing production capacity) while Trubaindo Mine) electricity price can also be adjusted based on a cost 5. PT. Kitadin (Produce and sell coal of fuel and an exchange rate of Baht at a certain for the Kitadin-Embalut Mine) period. 6. PT. Indominco Mandiri (Produce and Risk in the power business in China however sell coal for the Indominco Mine) is higher than the same risk in Thailand. Banpu’s 7. PT. Bharinto Ekatama (Produce and co-generation power plant will receive an investment sell coal for the Bharinto Mine) promotion from the Chinese government and will be more efficient than other power plants in general. 5. Risk from Regulatory Changes in Countries where It enjoys priviledge to sell heat and steam to Banpu Has Investments designated areas and is guaranteed to sell electricity As most of Banpu’s operations are overseas; to local authorities. namely, in Indonesia and China, Banpu has to Other risks in the power business are business confront with regulatory change risk in these risks in general such as a requirement to maintain tools countries. The changes may affect Banpu’s operation. and equipment to maximize the plant’s efficiency, During the past year, rules and regulations in these cost management of the coal, power plant’s efficiency, countries were changed. Some of the examples are: security of its steam customers and relationship with Indonesia local communities and local authorities. In addition, If a law on mining, environment, forestry the Chinese government’s policy to increase the and land use or even a renewal of licenses is amended, energy use efficiency may lead to changes of rules this will definitely affect Banpu as it could mean that and regulations and this can affect Banpu’s power Banpu will not be able to operate all or part of its business in China. mines there. Yet, this will not affect Banpu alone. On the contrary, it will affect every company in 4. Risk from Political Changes in Indonesia the same business. That’s why the government Banpu has taken out an insurance worth USD must be careful when changing rules and regulations 166.1 million against its investments in Indonesia. since it will affect a lot of employment. Coal This will protect Banpu’s investments, loans and business is a major business that generates incomes interests in its subsidiaries in Indonesia. Assets to Indonesia. covered by the insurance are investments in the following companies: 034

China Aside from the energy policy and measures China is constantly updating its rules and mentioned above which increase the production regulations to respond to its rapid economic growth. cost of every coal mine, the Chinese government That’s why there have been a lot of changes. The Chinese also terminates a tax privilege previously granted government has formulated the following policies to foreign joint venture companies. Starting on 1 January for the energy business where coal is China’s main 2008, foreign joint venture firms are to pay the same energy resource: 25 per cent income tax local business does. But they Safety policy against coal mines and will continue to enjoy other privileges granted by the environment measures: measures that have been authorities. Based on the risks described above, Banpu put in place are closing of inefficient and unsafe has entrusted responsible persons in each country to small- and medium-sized coal mines whose produc- monitor regulatory changes both at the federal and tion capacity is less than 30,000 tonnes a year and local levels. It has also hired local legal advisors to determining new safety standards to prevent death help interpret and advise legal compliance. and reduce accidents. The Chinese government also increases a reserves requirement for a mine’s safety 6. Environmental and Safety Risk from Coal fund and charges an environmental tax. Operation Maximizing use of natural resources: a Environmental Risk coal mine must improve its production capacity and Realizing an immediate need to protect and efficiency. The government refuses to approve a new restore nature, Banpu has formulated a sustainable mine of which production capacity is lower than the development policy. The policy clearly states its pre-determined level. New mines in Shanxi, Shaanxi commitment to reduce and minimize environmental and Inner Mongolia must produce no less than 1.2 impacts resulted from its operations. The Management million tonnes of coal a year. The government also by the Quality, Safety and Environment Committee encourages small mines to be merged into its bigger has closely monitored Banpu’s environmental counterparts. Fees charged for the use of resources in activities. The Quality Safety And Environmental strategic provinces are also raised. Development Center is designated to coordinate and Creating a balance between supply and assist units to comply with environmental standards demand of coal: aside from closing small mines, the to ensure maximum efficiency. Banpu not only pays Chinese government also stops auctioning a rights a strict attention to environmental compliance but for coal exploration until the end of 2008. it aims to utilize resources effectively to preserve natural Reducing international trade conflicts resources and reduce impacts to climate change and and promoting energy conservation by removing coal biodiversity. import tax and by increasing coking coal export tax to 5 per cent. Environmental compliance Banpu complies with legal environmental standards and conditions stated in its environmental impact assessment and management plan. In 2007, Banpu’s environmental compliance standards remained high and continued to expand. However, to further control its impacts to the environment, Banpu focuses on managing major risks as follows. 035

Quality of water released from Banpu’s Land use – although Banpu has got a lot mine to public waterways – this is determined by PH/ of concession to mine vast areas of land, it carefully alkaline value and quality of sludge. For mines that plans its mining activity to minimize geographic and boast acid soil and minerals such as Indominco-Bontang, ecological impacts based on its environmental Trubaindo and Jorong in Indonesia and projects master plan and a mine-closing plan. In 2007, Banpu currently being developed such as Bharinto in has 65,560 hectares of land in its control but only 8,754 Indonesia and Hongsa project in Laos PDR, Banpu hectares or 13.35 per cent of the total land was used. implements measures to prevent and resolve water The Company restored 4,171 hectares (or 47.65 per that becomes acid due to its mining activity. This starts cent of the total land being used). The remaining at a production planning stage to managing land and lands have been kept in its pre-mining conditions. In to the stage where the area is restored after the addition, Banpu has developed a geographic information production ends. For every open-pit mine, a settling system and remote sensing (GIS-RS) database to support pond is built so that sludge from soil erosion can be a collaborative management between production, effectively settled. In addition, Banpu’s prevention transportation and environmental management. method is to make sure that as much as soil is filled The system is now completely installed and running back into a mine. If it is necessary to remove soil out at Indominco-Bontang Mine and will be later expanded of a mine pit, a measure to restore the soil will be to cover Trubaindo Mine in 2008. implemented. In this regard, reforestation will start Energy use – Energy is one of Banpu’s as soon as the soil dumping ends. major costs of production. Reducing energy use such Dust from mining activities such as pit as reducing a greenhouse effect will benefit Banpu. opening and coal mining, improving coal quality and Having realized its role in mitigating the problem, transporting coal – due to vast mining areas and changing Banpu has put this in its Sustainable Development weather conditions, it is impossible to perfectly Policy Re: Establish and maintain greenhouse gas control dust particles. But Banpu has implemented inventory data and publicly report our emissions. several measures that are suitable to each operation Banpu also focuses at reducing the use of its energy, area. For example, a wind-blocking dike is built in which in turn will reduce air pollution resulted from a high-risk area to avoid dusting; speed is limited in energy consumption such as sulfur dioxide and oxide the mining areas and dirt roads are regularly sprayed. of nitrogen.

Resource utilization Occupational health and safety risk Although resource utilization is not a direct As mining activity is associated with a lot risk to Banpu’s business, ineffective utilization of of vehicles and machines, the occupational risk re- resources could unnecessarily cause environmental mains high. Although it is normal to have an accident impacts from either waste or pollution. It also increases in an open-pit mining, Banpu strives to minimize production costs due to a conflict for limited natural injuries and death from work. This also covers work resources. Banpu focuses at the following two points by its contractors. In 2007, Banpu implemented the in managing the resources: contractor management system for environmental, health and safety issues at Indominco-Bontang Mine, Trubaindo Mine and Jorong Mine in Indonesia. 036

7. Risk from Social and Community Impacts 8. Environmental and safety risk in Banpu’s power Banpu has been aware of its impacts to com- generation munities, whether they are impacts to the environ- Environmental risk ment, safety and/or to the economy or the society. The main environmental issue of a power It has formulated a risk management plan to handle plant is air quality resulted from emission of sulfur these impacts as follows. dioxide, oxide of nitrogen and dust particles of Setting up the Community Consultative a turbine generator. Banpu emphasizes at controlling Committee (CCC) consisting of representatives from and reducing impacts by (a) preventing – this can be the local government, local communities and the done by choosing a right fuel; for example, high-quality Company. coal with low sulfur; and (b) eradicating – an electro- Initiating community development projects static precipitator and a flue gas desulphurization that help solve community problems based on have been installed as a standard of practice at every a collaboration process on the concept of “Go Together, Banpu’s power plant starting in 2008 in Thailand, Grow Together, Sustainability for Life.” China and in the Hongsa project in Laos PDR. Communicating between communities The BLCP power plant also installs a continuous and Banpu’s mines with community development emission monitoring stations (CEMS) and four officers acting as a direct point of contact at every real-time monitoring system around the plant. Banpu mine. also formulates a plan for its Chinese power plants to Conducting a community perception be certified by ISO 14001 environmental management survey and formulating a social mapping to provide assurance standard by 2008 and equipped with the a database to each CCC so that they can effectively Total Productive Maintenance tools. plan and monitor developments in the communities. Occupational health and safety risk Initiating the CSR Master Plan to meet the As every power plant has to deal with heat ISO 26000 assurance system in the near future, which and pressure, each has to comply with strict safety helps creating a criteria to promote community standards. The BLCP power plant has been certified development work in Indonesia. of meeting the OHSAS 18001 occupational health and safety standard since last year. Power plants in China also strictly comply with safety regulations issued by the state. In 2007, there were no serious accidents or death reports among those working at Banpu’s power plants. O p e r a t i o n s D u r i n g t h e P r e v i o u s Y e a r 037 Annual Report 2007 • Banpu Public Company Limited

Last year, various industrial sectors witnessed C o a l B u s i n e s s strong growth, which constantly led to high demands for energy. This in turn sustained coal prices, which remained The regional market for coal in 2007 was tight fairly high throughout the year. As one of coal exporters due to high demands for coal while production remained to various regions, Banpu’s operation results remained limited. What was clearly seen was that demands for coal strong as in 2007. The total sales revenues were THB in China rose as a result of its strong economic growth 32.442 billion, which was down 3 per cent or THB 936 while domestic transportations of coal was disrupted million from the same period a year ago, due largely to and delayed. Not only regional demands for coal were a decline of Banpu’s production and sales of coal in higher, exporters of 2 major producers; namely, Thailand and a suspension of coal production in one of Australia and Indonesia, were having trouble trying to its subsidiaries in Indonesia. Banpu’s net profit was THB export their coal. While Australia’s Newcastle coal 6.654 billion, or an 84-per cent increase totaling THB terminal was reaching its capacity, Indonesia had to 3.044 billion from the same period last year as a result confront with the worst heavy rains in its history, which of recognition of profits from affiliated companies and caused its production to be lower than expected. its disposal of investment in a subsidiary in Indonesia. Banpu sold a total of 19.29 million tonnes of coal in 2007, which was 11 per cent lower than the year before. Most of the declining sales volume was a result of Trubaindo’s falling production. Trubaindo Mine was having trouble with its contractors and had to deal with unusually-heavy rains in the rainy season. Yet, the declining sales volume was compensated by an increasing average sales price, which rose to USD 41.06 a tonne or 17 per cent from the year before.

F o r t h e y e a r e n d i n g

2 0 0 7 2 0 0 6 2 0 0 5

Coal Sales Volume (Million Tonnes) 19.29 21.69 17.00

Indominco-Bontang 11.55 10.37 7.36 Trubaindo 3.73 4.11 1.45 Jorong 2.70 3.21 2.92 Kitadin-Embalut 0.12 1.58 1.62 Thailand 1.16 2.42 3.65 Other sources 0.03 - - 038

F o r t h e y e a r e n d i n g

2 0 0 7 2 0 0 6 2 0 0 5

Total Revenues (THB Million) 32,442 33,378 25,209 Coal business:

Indominco-Bontang 18,758 16,638 14,013 Trubaindo 6,126 6,971 3,162 Jorong 2,616 3,035 3,016 Kitadin-Embalut 175 2,123 2,429 Thailand 717 1,667 2,426 Other sources 38 - - Total incomes from coal business 28,429 30,434 25,047 Power business 3,865 2,808 - Other businesses 148 136 162 Gross Profit Margin (%) 35 38 45

Indominco-Bontang 39 39 46 Trubaindo 38 41 42 Jorong 30 36 43 Kitadin-Embalut 32 33 40 Thailand 10 37 48 Other sources (30) - - Coal business 37 38 45 Power business 25 29 - Other business 28 35 41

P o w e r B u s i n e s s 4.076 billion (the amount also includes THB 591 million gain from foreign exchange). Another local power Banpu’s performance in its power business was plant in which Banpu holds 14.99 per cent also paid THB strong and helped strengthening its cash flow. The two 457 million dividend. Banpu Power Investment Co., Ltd., units of the BLCP power plant which it has 50 per cent which is Banpu’s subsidiary that operates 3 co-genera- stake therein have started their commercial production tion power plants in China, reported a net profit of THB since February 2007 and reported a profit sharing of THB 593 million. R e v e n u e S t r u c t u r e 039 F o r t h e p r e v i o u s 3 y e a r s e n d e d 3 1 D e c e m b e r

B a n p u P u b l i c C o m p a n y L i m i t e d (Unit: THB Million)

% of 2007 2006 2005 Conduct Products/Services Share- by holding Revenue % Revenue % Revenue %

Sales Revenues

1. Domestic Coal BP 100 575 32.51 1,443 76.36 2,150 83.58 2. Imported Coal BP 100 1,066 60.29 369 19.54 370 14.38 3. Other Revenues BP 100 127 7.20 78 4.10 52 2.04 Total Sales Revenues 1,768 100.00 1,890 100.00 2,572 100.00 Participating Profit (Loss) from Investment in Associated Companies (Equity Method) 4,504 801 (119) Total Revenues 6,272 2,691 2,453

B a n p u P u b l i c C o m p a n y L i m i t e d and Its Subsidiaries (Unit: THB Million)

% of 2007 2006 2005 Conduct Products/Services Share- by holding Revenue % Revenue % Revenue %

Sales Revenues - Thailand

1. Domestic Coal BP 100 476 1.47 900 2.70 1,541 6.11 BPI 100 77 0.24 555 1.66 652 2.58 BMC 100 ----40.02

CMMC 94, 98 163 0.50 213 0.64 229 0.91 2. Imported Coal BP 100 937 2.89 200 0.60 334 1.33 BMC 100 7 0.02 350 1.05 215 0.85 BPS 100 1,353 4.17 1,245 3.73 905 3.59 BPI 100 977 3.01 1,081 3.24 1,349 5.35 SLM 100 --659 1.97 105 0.42 3. Other Revenues 148 0.46 136 0.41 91 0.36 Total Sales Revenues - Thailand 4,139 12.76 5,339 16.00 5,425 21.52 040

B a n p u P u b l i c C o m p a n y L i m i t e d a n d I t s S u b s i d i a r i e s ( c o n t i n u e d ) (Unit: Million Baht)

% of 2007 2006 2005 Conduct Products/Services Share- by holding Revenue % Revenue % Revenue %

Sales Revenues - Overseas

1. Coal - International Trade Indominco 100 18,271 56.32 16,045 48.08 13,805 54.76 Kitadin 100 110 0.34 1,707 5.11 1,983 7.87 Trubaindo 90 5,107 15.74 6,380 19.11 2,750 10.91 Jorong 95 912 2.81 1,099 3.29 1,175 4.66 2. Power BPIC 100 3,865 11.91 2,808 8.41 - - 3. Industrial Minerals 38 0.12 --71 0.28 Total Sales Revenues - Overseas 28,303 87.24 28,039 84.00 19,784 78.48 Total Sales Revenuesvenues 32,442 100.00 33,378 100.00 25,209 100.00 Participating Profit (Loss) from Investment in Associated Companies (Equity Method) 4,504 801 (119) Total Revenues 36,946 34,179 25,090

Notes: 1. Other incomes consisting of other services 2. The Company did not recognize sales incomes derived from the power business since its shareholding ratio is less than 50 per cent therein.

Division of Responsibility Policy among Companies with in Banpu Group

This policy applies to operations of companies engaging in the production and sales of coal where the Company and its subsidiaries in Thailand will produce and distribute coal to markets in Thailand only. On the other hand, foreign subsidiaries will produce and sell coal overseas whereby part of their production might be sold to Thailand as well through the Company and/or other subsidiaries through a sales price set according to the market rates normally transacted among customers in general. S u m m a r y o f M a j o r C h a n g e s a n d D e v e l o p m e n t s 041 i n 2 0 0 7 a n d M a j o r C u r r e n t E v e n t s Annual Report 2007 • Banpu Public Company Limited

C o a l B u s i n e s s On 4 May 2007, PT. Indo Tambangraya Megah (ITM) and PT. Centralink Wisesa International On 2 May 2007, Banpu filed a report, (CTL), two subsidiaries in which Banpu holds saying that it planned to register its Indonesian coal 99.99 per cent and 95.00 per cent of their shares, business in the Indonesian Stock Exchange through respectively, disposed of 3,500 shares in PT. Barasentosa an Initial Public Offering of PT. Indo Tambangraya Lestari, which was allowed to operate the Barasentosa Megah Tbk (ITM)’s shares in which it held 95 per coal mine at Sumatra, Republic of Indonesia, at a par cent. value of IDR 1,000,000 a share to PT. Duta Sarana On 7 December 2007, ITM received an Internusa and Buntardjo Hartadi Sutanto, for a total approval letter from Badan Pengawas Pasar Modal of USD 800,261, or an equivalent to a sales price of dan Lembaga Keuangan, an equivalent to Thailand’s USD 228.65 a share. Securities and Exchange Commission (SEC). ITM went on to offer a total of its 225,985,000 IPO shares for P o w e r B u s i n e s s the first time during 12-14 December 2007 at a par value of IDR 500 a share (equivalent to 20 per cent On 28 November 2007, Banpu Power Ltd. of its paid-up capital following an issuance and offer (BPP), a subsidiary in which Banpu holds 99.99 of a total of 1,129,925,000 shares) for IDR 14,000 per cent of its shares, was approved by its Board to a share or approximately THB 54.45 a share (at an sign a Joint Development Agreement (JDA) with exchange rate of THB 3.8893 per IDR 1,000.) Ratchaburi Electricity Generating Holding Public The IPO shares were listed in the Company Limited (RATCH) with the purpose of Indonesian Stock Exchange on 18 December 2007 collaborating the study and the development of the and PT. Indo Tambangraya Megah Tbk or Ticker Hongsa Project. RATCH’s rights and duties under the “ITMG” received a net amount after expenses of JDA however will be effective upon the Lao approximately THB 11.934 billion from the IPO. government’s approval only.

O t h e r s

On 30 May 2007, Banpu’s Board of Directors resolved to approve a dividend payment where Banpu would pay approximately 50 per cent of its net profit of a consolidated financial statement after deducting all statutory reserves required by the laws and as determined by the Company. However, the payment would depend on its cash flow and investment situations of the Company itself and its subsidiaries including legal restrictions and other requirements. 042

On 29 August 2007, Banpu’s Board of On 27 February 2008, Banpu’s Board of Directors resolved to pay an interim dividend from Directors resolved to allow the Company to pay its retained earnings and its 6-month operation results an annual dividend for 2008 at THB 8.50 a share. Since as at 30 June 2007 to 271,747,855 shares at THB 3.75 an interim dividend at of THB 3.75 a share had been per share, totaling THB 1,019,054,456.25. Of this, paid on 28 September 2007, only THB 4.25 per share THB 1.55 a share was paid out of net profit of remained to be paid. The Company was asked to pay businesses required to pay a 30-per cent corporate the dividend out of its retained earnings and its income tax of their net profit while the other THB operation results from 1 July 2007 to 31 December 2.20 per share was paid out of profits exempted 2007 to shareholders whose names were in the from being included in the calculation of a corporate Shareholder Register Book as of 17 March 2008 at income tax. The payment was made on 28 September THB 4.75 per share. Payment was made out of 2007. profits being exempted not to be included in On 5 October 2007, Universal Exploration corporate income tax calculation. Those receiving Co., Ltd. (a subsidiary in which the Company holds the dividend however were not entitled to a tax 99.99 per cent of its shares) was registered to be credit. Payment would be made on 24 April 2008. dissolved with the Company and Partnership Regis- trar, Department of Business Development, Ministry of Commerce. The firm is being liquidated. M a j o r S h a r e h o l d e r s 043 Annual Report 2007 • Banpu Public Company Limited

T e n M a j o r S h a r e h o l d e r s a s o f 3 1 D e c e m b e r 2 0 0 7

Major Shareholders Number of Shares Hold Percentage

1. Thai NVDR Co., Ltd. 57,833,795 21.28 2. The Vongkusolkit Family and related companies * 44,868,867 16.51 3. State Street Bank and Trust Company for London 15,262,900 5.62 4. HSBC (Singapore) Nominees Pte. Ltd. 10,860,149 4.00 5. Littledown Nominees Limited 9 9,719,200 3.58 6. Littledown Nominees Limited 5,363,500 1.97 7. State Street Bank and Trust Company 5,106,279 1.88 8. Chase Nomineees Limited 4,672,200 1.72 9. J.P. Morgan Bank Luxembours S.A. Lend 4,228,300 1.56 10. Somers (U.K.) Limited 3,805,104 1.40

Notes : * The Vongkusolkit Family and related companies comprise of No. of Shares Percentage 1) The Vongkusolkit Family 22,039,133 8.11 2) Mitr Phol Sugar Corp., Ltd. 8,053,808 2.96 Mitr Siam Sugar Corp., Ltd. holds 99.99 per cent of its paid-up capital. 3) TME Capital Co., Ltd. 7,839,000 2.88 The Vongkusolkit Family holds 54.23 per cent of its paid-up capital. 4) MP Particle Board Co., Ltd. 2,080,965 0.77 United Farmer and Industry Co., Ltd. holds 99.99 per cent of its paid-up capital. 5) United Farmer and Industry Co., Ltd. 1,779,445 0.65 Mitr Phol Sugar Corp., Ltd. holds 87.56 per cent of its paid-up capital. 6) Ufinves Co., Ltd. 1,070,611 0.39 TME Capital Co., Ltd. holds 100.00 per cent of its paid-up capital. 7) Pacific Sugar Corporation Ltd. 681,905 0.25 The Vongkusolkit Family holds 45.12 per cent of its paid-up capital. Mitr Phol Sugar Corp., Ltd. holds 25.00 pe rcent of its paid-up capital. 8) Mitr Phu Viang Sugar Co., Ltd. 615,200 0.23 United Farmer and Industry Co., Ltd. holds 99.99 per cent of its paid-up capital. 9) Mitr Kalasin Sugar Co., Ltd. 480,000 0.18 The Vongkusolkit Family holds 99.99 per cent of its paid-up capital. 10) City Holding Co., Ltd. 228,800 0.08 The Vongkusolkit Family holds 92.00 per cent of its paid-up capital.

T h e L i m i t a t i o n o f F o r e i g n S h a r e h o l d e r s

The foreign shareholders can be able to hold not more than 40 per cent of its paid-up capital as of 31 December 2007, which now have been holding 40.00 per cent of its paid-up capital. O r g a n i z a t i o n C h a r t 044 Banpu Public Company Limited • As of 31 December 2007

B o a r d o f D i r e c t o r s

Compensation Committee Audit Committee

C h i e f E x e c u t i v e O f f i c e r Corporate Governance and Nomination Committee

...... Internal Audit Department

Corporate Services Chief Operating Officer

Office of Chief Executive Officer

Corporate Communications Human Resources Coal Operations - Banpu Power & Public Affairs Department Department Thailand

Corporate Strategic QSE Coal Operations - Planning Department Development Center Indonesia China Power Business

Information Technology Finance Department Marketing & Logistics Department Engineering & Project Development Technical Development China Coal Business Legal Department & Services Strategic Planning & Asset Management New Energy Development Corporate System Coal Business Office Project Department (Thailand & Indonesia) Hongsa Project Business Development General Affairs Division Department

Company Secretary Division M a n a g e m e n t S t r u c t u r e 045 Annual Report 2007 • Banpu Public Company Limited

The Company’s management structure as of 31 Duties and Responsibilities of the Board of December 2007 consisted of the Board of Directors and Directors the management. The Board of Directors consisted of The Board is accountable to shareholders sub-committees, which included the Audit Committee, through the overseeing and supervision of Banpu’s the Corporate Governance and Nomination Committee, operations to ensure that that the business is managed the Compensation Committee, Directors and Indepen- in a way that will achieve the goals previously set and dent Directors. to the best interests of its shareholders within an ethical framework and by taking into consideration the interests 1. The Board of Directors consists of the following: of all stakeholders. 1. Mr. Soonthorn Vongkusolkit The Board has a duty to strictly comply with Chairman of the Board of Directors the laws, the Company’s objectives, the Articles of 2. Mr. Rutt Phanijphand Association and resolutions of shareholders’ meetings Independent Director by acting in good faith, taking care of both short-term 3. Mr. Montri Mongkolswat and long-term interests of shareholders and complying Independent Director with rules and regulations of the Stock Exchange of 4. Mr. Kopr Kritayakirana Thailand (SET) and the Office of the Securities and Independent Director Exchange Commission (SEC). 5. Mr. Somkiat Chareonkul To perform its duties, the Board of Directors Independent Director has appointed a Chief Executive Officer (CEO) to be 6. Mr. Anothai Techamontrikul responsible for the Company’s businesses and to Independent Director supervise its management. The Board of Directors has 7. Mr. Vitoon Vongkusolkit duties and responsibilities to consider and approve the Director following: 8. Mr. Sawatdiparp Kantatham 1. The Company’s policy, business strategy, Director business plan and annual budget. 9. Mr. Chanin Vongkusolkit 2. Monthly and quarterly performance report Director in comparison to the Company’s plan, budget and 10. Mr. Metee Auapinyakul business outlook in the following period of the year. Director 3. Investment in a project worth more than 11.Mr. Ongart Auapinyakul THB 600 million. Director 4. Investment, which exceeds 10 per cent of the total investment budget of an approved project and Directors with Authority to Sign on Behalf 10 per cent of the total non-project investment budget. of the Company 5. Purchase and disposal of assets and an Two of the following six; namely, Mr. Soonthorn acquisition and participation in a joint venture project, Vongkusolkit or Mr. Vitoon Vongkusolkit or Mr. Chanin which is not conflicting with the SET’s rules, for Vongkusolkit, Mr. Sawatdiparp Kantatham or Mr. Metee an amount that exceeds CEO’s authority. Auapinyakul or Mr. Ongart Auapinyakul, shall jointly 6. Transaction with material effect to the sign a document together with the Company’s seal. Company’s financial status, liabilities, business strategy and reputations. 7. Entering into a contract not related to a normal course of business and a contract related to an important normal business. 046

8. Parts of a related transaction between the The Board of Directors requires new directors Company, its subsidiaries or affiliates and related to attend an orientation session so that they know what individuals that do not require resolution of the the Company expects from their roles, duties and respon- shareholders’ meeting. sibilities and what its corporate governance policy 9. Any transaction which may cause the and practices are. The orientation will also help them Company’s Debt-to-Equity Ratio to exceed 2.5 : 1. understand the Company’s business better as well as 10. Payment of an interim dividend. provide a chance to visit Banpu’s operations to prepare 11. Net borrowing which exceeds a maximum new directors for their tasks. amount stated in a budget or an annual estimate that The Board of Directors has a policy to educate all exceeds THB 1 billion. directors about corporate governance, industrial outlook, 12. Changes in policy and practices with business prospects and new innovations where it urges material implication to accounting, risk management directors to attend a seminar or a coursework organized and reserves. by the Thai Institute of Directors Association (IOD) 13. Significant changes in financial and manage- and other reputable institutes to promote effective ment control. performances of the directors. 14. Determination and review of authorization The Board of Directors also sets to have its Board granted to CEO, Executive Officers (EO) and Chief Retreat outing every year so that all directors have a Operating Officer (COO). chance to make recommendations and express their views 15. Recruitment of CEO, approval to recruit and extensively and in a non-formal environment, which employ EO and COO as proposed by the CEO, approval should benefit the Board itself and the management. of budget, salary, bonus or bonus formula and formula The Board of Directors requires that its to adjust annual remuneration packages of senior performance and the independence of its independent executives and employees. directors be evaluated by the Corporate Governance and 16. Appointment and termination of directors Nomination Committee on an annual basis. and the Company Secretary or Secretary of the Board of Directors. 2. The Audit Committee consisted of the following: 17. Authorization given to Chairman of the Board 1. Mr. Somkiat Chareonkul of Directors, CEO or any director, and amendment to Chairman of the Audit Committee such authorization. 2. Mr. Montri Mongkolswat 18. Appointment and determination of duties of Member of the Audit Committee committees. 3. Mr. Anothai Techamontrikul 19. Establishing and supervising the management Member of the Audit Committee on the basis of the corporate governance policy and practices. The Audit Committee’s term of office is 3 years 20. Appointment of directors or executive officers each term starting from April 2007 to April 2010. as directors of subsidiary and affiliated companies. 21. Registration of a new company and company Duties and Responsibilities of the Audit dissolution. Committee 22. Amendment of the Board of Directors’ scope The Audit Committee’s responsibilities are of approving power as described in Clause 1-21. to review the Company’s financial statements, assess whether the Company’s internal control and risk management system is adequate, see if the Company 047

has duly complied with relevant laws, rules and 1. Within the scopes of its authority, inviting regulations, prepare reports or provide opinions to the executive officers or supervisors to attend its meeting Board of Directors for approval or submission to the for clarification purpose or to submit relevant documents. shareholders’ meeting, as the case may be. Details are 2. Hiring consultants or spend money in any as follows: other ways relating to its job which the Company will be 1. To review the Company’s financial statements responsible for the expenses. for accuracy and adequacy purpose. 2. To ensure that the Company has an efficient 3. The Corporate Governance and Nomination and appropriate internal control system and an internal Committee consisted of the following: audit system. 1. Mr. Kopr Kritayakirana 3. To ensure that the Company has duly com- Chairman of the Corporate Governance plied with the laws on securities and exchange, the Stock and Nomination Committee Exchange of Thailand’s (SET) requirements and other 2. Mr. Sawatdiparp Kantatham laws relating to the Company’s business. Member of the Corporate Governance 4. To review and select the Company’s auditor and Nomination Committee and to determine auditor’s fee. 3. Mr. Anothai Techamontrikul 5. To review the disclosure of the Company’s Member of the Corporate Governance information in case there is any connected transaction and Nomination Committee or any transaction with possible conflict of interest to Note: On 4 April 2007, Mr. Somkiat Chareonkul resigned from ensure that the transaction is accurate, complete and the Corporate Governance and Nomination Committee transparent. when he was Chairman of the Audit Committee. 6. To write a corporate governance report which The Board appointed Mr. Anothai Techamontrikul as a will be published in the Company’s annual report and member of the Corporate Governance and Nomination signed by the Chairman of the Audit Committee. Committee. 7. To continue monitoring major risk manage- ment procedures after Risk Management Committee did; The Corporate Governance and Nomination to review financial derivatives transactions, commodity Committee’s term of office is 3 years each term from hedging with contractual parties for linkages with the April 2007, to April 2010. internal control. 8. To express opinions regarding appointment Duties and Responsibilities of the Corporate and termination of employment, the operation plan Governance and Nomination Committee and operation results, budgeting and personnel of the As its name suggests, the Corporate Governance Internal Audit Department. and Nomination Committee’s duties can be divided 9. To review and propose recommendations to into 2 major tasks; namely, to review the corporate amend scopes of work, duties and responsibilities of the governance policy and the Code of Conduct as well as Audit Committee to respond to changing circumstances. monitor compliance of such policy and practices so that 10. To submit an operation report to the Board of it remains within an ethical framework and, secondly, Directors at least once a year. to nominate directors, Chief Executive Officer and 11.To do any other tasks as designated by the Executive Officers, review a succession plan in order Board of Directors upon the Audit Committee’s approval. to nominate appropriate person to fill management positions (from Department Vice Presidents and over), To ensure that the Audit Committee effectively and report to the Board of Directors for approval or performs its tasks, the Committee must do the follow- for submission to the shareholders’ meeting, as the case ing: may be. 048

Duties and Responsibilities of the Corporate 4. The Compensation Committee consisted of Governance and Nomination Committee are as follow: the following: 1. To consider and review whether Banpu’s 1. Mr. Rutt Phanijphand corporate governance policy and its Code of Conduct Chairman of the Compensation Committee are appropriate and considered adequate and to regularly 2. Mr. Vitoon Vongkusolkit update the CG policy. Member of the Compensation Committee 2. To monitor and supervise directors and staff’s 3. Mr. Montri Mongkolswat compliance with the corporate governance policy and Member of the Compensation Committee the Code of Conduct so that it is in line with those determined by the Board of Directors and to arrange The Compensation Committee’s term of office is a system where Banpu can receive grievance with three years each term from April 2007 to April 2010. regard to the corporate governance and Code of Conduct from stakeholders. Duties and Responsibilities of 3. To review the structure and components of the Compensation Committee the Board of Directors, monitor the term of office of The Compensation Committee’s duty is to pro- its directors, CEO and Executive Officers (EO), and vide suggestions regarding compensation management prepare a succession plan of senior executives (starting to the Board of Directors either for its approval or for from Department Vice President and over). submission to the shareholders’ meeting, as the case may 4. To recruit and nominate persons as Directors, be, as follows. Chief Executive Officers and Executive Officers when 1. To recommend guidelines on compensation the term is due or whenever there is a vacancy. payment and how to pay compensations and other 5. To recommend ways and means to evaluate benefits to the Board of Directors and other committees performances of directors and the Board of Directors appointed thereby. for the Board of Directors; to participate in such 2. To consider and recommend amount of evaluation and monitor improvement based on results payment of compensations and other benefits by taking of such evaluation. duties and responsibilities of the CEO and Executive 6. To review and give recommendations to amend Officers into consideration and by reviewing evaluation scopes of work, duties and responsibilities of the Corpo- criteria to determine the right annual remunerations. rate Governance and Nomination Committee to respond 3. To review a compensation structure, compen- to changing circumstances. sation rules and regulations as stated in Clause 1 and 2 7. To submit an operation report to the Board of to suit the person’s duties and responsibilities, Banpu’s Directors at least once a year. operation results and market conditions. 8. To do any other tasks as designated by the 4. To review the overall budgets for salary Board of Directors. increase, annual bonus payment and provision of other staff’s fringe benefits. To ensure that the Corporate Governance and 5. To review and propose recommendations to Nomination Committee effectively perform its tasks, the amend scopes of work, duties and responsibilities of Committee must do the following: the Compensation Committee to respond to changing 1. Within the scopes of its authority, inviting circumstances. executive officer or supervisor to attend its meeting for 6. To submit an operation report to the Board of clarification purpose or to submit relevant documents. Directors at least once a year. 2. Hiring consultants or spend money in any 7. To do any other tasks as designated by the other ways relating to its job which the Company will be Board of Directors. responsible for the expenses. 049

To ensure that the Compensation Committee 4. Approval of increasing operating budget as effectively performs its tasks, the Committee must do a result of changes of stripping ratio (S/R) is limited to the following: no more than THB 500 million. 1. Within the scopes of its authority, inviting the 5. To invest in projects of which the total value management or supervisor to attend its meeting for does not exceeding THB 600 million. clarification purpose or to submit relevant documents. 6. To review and submit budgets for annual 2. Hiring consultants or spend money in any other salary increase, staff bonus payment and provision of ways relating to its job which the Company will be major staff welfare. responsible for the expenses. 7. To consider and approve the signing of a purchase agreement, a lease agreement or a service 5. The Management consisted of the following: agreement as follows. 1. Mr. Chanin Vongkusolkit 7.1 Service agreement to remove overbur- Chief Executive Officer den and transport coal for no more than 5 years and not 2. Mr. Rawi Corsiri exceeding THB 2 billion. Chief Operating Officer 7.2 Land transport agreement of coal for no 3. Mr. Chanchai Jivacate* more than 5 years and not exceeding THB 1 billion President – Power Business 7.3 Transport agreement for no more than 4. Ms. Somruedee Chaimongkol 5 years and not exceeding THB 1 billion. Group Senior Vice President – Finance 7.4 Purchase agreement, hiring agreement, 5. Mr. Sathidpong Wattananuchit service agreement and lease/hire-purchase agreement Group Senior Vice President – for no more than 5 years and not exceeding THB Corporate Services 1 billion. Note: Mr. Chanchai Jivacate, President – Power Business, 8. To approve the sales of permanent assets (land retired on 31 December 2007. He has become Banpu and the upgrade thereof) which, at the market price as of Plc’s advisor since 1 January 2008. the sales date, do not exceed THB 300 million. 9. To approve the sales of permanent assets Duties and Authority of Chief Executive (building and construction) which, at the market price as Officer of the sales date, do not exceed THB 300 million. 1. To review an annual operation plan not 10. To borrow a net loan, which exceeds the exceeding 5 per cent of the total operation budgets maximum amount stated in an annual budget or an already approved. annual budget estimate already approved, but it must 2. To approve an investment which altogether not exceed THB 1 billion. does not exceed 10 per cent of the total investment 11.To sign major contract (based on contract budget approved; and to approve the use of other value) for mining equipment and power of which the investment budgets which however do not exceed 10 value is not exceeding THB 300 million. per cent of the total non-project investment budget. 12. To approve acquisitions of lands and proper- 3. To approve new investment items where no ties for the Company’s businesses under an unplanned budget has been set aside for no more than THB 100 budget of which the value does not exceed THB 300 million a transaction. million. 13. To determine and review approval authority granted to department heads and lower. 050

The Board of Directors sets a target/goal for 4. A director who is neither related to nor be the CEO and EO and that their performances will be a closed relative of the Company’s executives or major subject to a review every year. The CEO will evaluate shareholders. performances of senior executive officers using goals 5. A director not appointed as a representative to and evaluation rules linked closely with Banpu’s maintain the interests of the Company’s directors or major strategic plan and annual operation plan to come up with shareholders or shareholders relating to the Company’s appropriate and attractive pay packages and incentives. major shareholders. 6. A person who is able to perform duties, 6. Independent Directors account for 45 per cent express opinions or report results of performances in the Company’s Board of Directors; the Committee based on his duties entrusted by the Board of Directors consisted of the following: independently without subject to any control of the 1. Mr. Montri Mongkolswat Company’s executives or its major shareholders includ- Independent Director ing those relating thereto or closed relatives thereof. 2. Mr. Kopr Kritayakirana Independent Director Nomination of Directors and Executives 3. Mr. Somkiat Chareonkul The Corporate Governance and Nomination Independent Director Committee will nominate new directors who shall 4. Mr. Rutt Phanijphand replace those retiring on rotation or otherwise based Independent Director on the following procedures: 5. Mr. Anothai Techamontrikul 1. The Committee will review the Board of Independent Director Directors’ entire structure and components with a purpose to strengthen its position. “Independent Director” is defined as follows: 2. The Committee will review general and 1. A person holding no more than 5 per cent specific qualifications of independent directors and of paid-up capital of the Company, its subsidiaries, add new qualifications deemed suitable for circumstances affiliates or relevant companies; this shall include shares at the time, the Company’s requirements and to the SET’s held by relating persons. terms and conditions. The Corporate Governance and 2. A non-executive director in the management Nomination Committee will then submit its nomination of the Company, its subsidiaries, affiliates, relevant to the Board of Directors, who will submit it to the companies or major shareholders; a person who is not Annual General Shareholders’ Meeting for approval and an employee or consultant regularly receiving monthly appointment. salary from the Company, its subsidiaries, affiliates, relevant companies or major shareholders. To nominate an executive officer, the Corporate 3. A director with no direct or indirect benefit or Governance and Nomination Committee will draft interest in financial or in management aspects of the a succession plan covering CEO, COO and senior Company, its subsidiaries, affiliates, relevant companies executive officers to ensure that Banpu will have or major shareholders including the person not having competent executives with proper expertise and benefit or interest in such a manner one year prior to experiences to succeed in its important positions in the his appointment unless the Board of Directors has future. thoroughly considered that such interest or benefit in the past will not affect his performance and opinion as an independent director. B o a r d o f D i r e c t o r s a n d M a n a g e m e n t 051 Annual Report 2007 • Banpu Public Company Limited

% Work experience in the last five years Name/Position Age Education Share held Period Position Organization

1. Mr. Soonthorn 69 Honorary Ph.D. in Business 0.72 2006-Present Chairman Banpu Public Company Limited Vongkusolkit Administration, University 2004-2006 Member of the Corporate Banpu Public Company Limited Chairman of the Thai Chamber of Commerce Governance and * An older brother of persons Chairman 2000 Program #7/2002, Nomination Committee number 9 and 11 Thai Institute of Directors 1983-2006 Vice Chairman Banpu Public Company Limited Association (IOD) 2002-2007 Chairman United Standard Terminal Directors Accreditation Program Public Company Limited (DAP) #19/2004, Thai Institute 1983-Present Director TME Capital Co., Ltd. of Directors Association (IOD) 1981-Present Director City Holding Co., Ltd. Modern Managers Program (MMP), 1974-Present Chairman Mitr Phol Sugar Corp., Ltd. Chulalongkorn University and its affiliates Mattayomsuksa

2. Mr. Rutt Phanijphand 60 M.S. in Business Ad., Fort Hays - 2005-Present Independent Director Banpu Public Company Limited Independent Director Kansas State University, Chairman of Banpu Public Company Limited Chairman of the Hays, Kansas, U.S.A. the Compensation Compensation Committee B.S., Kasetsart University Committee Directors Accreditation Chairman of Executive Land and Houses Retail Bank Public Program: (DAP) # 4/2003, Directors Company Limited Thai Institute of Directors Director Land and Houses Retail Bank Public Association (IOD) Company Limited Directors Certification 2006-Present Director IRPC Public Company Limited Program (DCP) # 61/2005, Member of the Audit IRPC Public Company Limited Thai Institute of Directors Committee Association (IOD) 2001-Present President / Chief Quality Houses Public Company National Defence College Executive Officer Limited (Class 388) Director Home Product Centre Public Company Limited 2007-Present Chairman of the Home Product Centre Public Company Nomination and Limited Compensation Committee 2003-2004 Member of the Audit Krung Thai Bank Public Company Committee Limited 2004-2005 Executive Director Krung Thai Bank Public Company Limited 2002-Present Chairman of the Activities Kasetsart University Promotion Committee 2006-Present Member, Council of Kasetsart University Kasetsart University 052

% Work experience in the last five years Name/Position Age Education Share held Period Position Organization

3. Mr. Montri Mongkolswat 64 B.A. (Commerce), Thammasat - 1999-Present Independent Director / Banpu Public Company Limited Independent Director University Member of Audit Member of the Audit B.A. (Accountancy), Thammasat Committee Committee University 2002-Present Member of the Banpu Public Company Limited Member of the National Defence College Compensation Compensation Committee (Class 355) Committee Chairman 2000 Program #3/2001, 2004-2005 Member of the Corporate Banpu Public Company Limited Thai Institute of Directors Governance and Association (IOD) Nomination Committee 2003-2004 Chairman of the Banpu Public Company Limited Compensation Committee Present Director / Member of The Deves Insurance Public Company the Nomination Limited Committee and Compensation Committee / Advisor to the Executive Committee

4. Mr. Kopr Kritayakirana 68 B.Sc. (Physics), Chulalongkorn - 2003-Present Independent Director Banpu Public Company Limited Independent Director University 2004-Present Chairman of Banpu Public Company Limited Chairman of the Corporate Ph.D. (Physics), Harvard University the Corporate Governance and Directors Certification Program Governance and Nomination Committee (DCP) #11/2001, Thai Institute Nomination Committee of Directors Association (IOD) 2003-Present Directors Thai Institute of Directors Association (IOD) Present Director Thai Reinsurance Public Company Limited Director Siam Panich Leasing Public Company Limited Director Sicco Securities Public Company Limited Member, Council of Chulalongkorn University Chulalongkorn University 053

% Work experience in the last five years Name/Position Age Education Share held Period Position Organization

5. Mr. Somkiat Chareonkul 66 Bachelor of Commerce, - 2005-Present Independent Director, Banpu Public Company Limited Independent Director Thammasat University Chairman of the Audit Chairman of the Audit Bachelor of Law, Sukhothai Committee Committee Thammathirat University 2005-2007 Member of the Corporate Banpu Public Company Limited Certificate in “Strategic Alliance Governance and Seminar”, The Wharton School, Nomination University of Pennsylvania, U.S.A. Committee Certificate in “Selected Problems Present Director Oishi Group Public Company Limited of Tax Auditing and Investigation”, 2003-Present Director Mueng Kit Co., Ltd. Germany and Singapore 2004-Present Director Chantaburi Resort and Spa Co., Ltd. Certificate in “Seminar on Taxation (Indirect Tax Course)”, JICA (Japan International Cooperation Agency), Japan Certificate of Training “The Management Program” Sasin Graduate Institute of Business Administration, Chulalongkorn University Certificate of Training “Senior Executive, Class 30” Civil Service Training Institute, Civil Service Commission Directors Certification Program (DCP) #79/2006, Thai Institute of Directors Association (IOD) Audit Committee Program, Class 1/2004, The Institute of Director Association (IOD) 054

% Work experience in the last five years Name/Position Age Education Share held Period Position Organization

6. Mr. Anothai 64 B.A. (Accounting), - 2006-Present Independent Director / Banpu Public Company Limited Techamontrikul Chulalongkorn University Member of the Audit Independent Director Diploma in Advanced Vocational Committee Member of the Audit Training, Germany 2007-Present Member of the Corporate Banpu Public Company Limited Committee Directors Accreditation Program Governance and Member of the Corporate (DAP) #5/2003, Thai Institute Nomination Governance and of Directors Association (IOD) Committee Nomination Committee Directors Certification Program Present Chairman (Executive D.T.C. Industries Public Company (DCP) #89/2007, Thai Institute Board) Limited of Directors Association (IOD) Vice Chairman Alcan Packaging Strongpack Public Company Limited Vice Chairman United Auditing PKF Limited Director Safety Steel Industry Company Limited 1998-2004 Director and General The Industrial Finance Corporation of Manager Thailand

7. Mr. Sawatdiparp 68 B.A. (Economics), Hanover 0.24 1983-Present Director Banpu Public Company Limited Kantatham College, Indiana, U.S.A. 2001-Present Member of the Corporate Banpu Public Company Limited Director Program on Investment Appraisal Governance and Member of the Corporate and Management, Harvard Nomination Governance and the University Graduate School of Committee Nomination Committee Business Administration, 2001-2004 Member of the Banpu Public Company Limited Massachusetts, U.S.A. Compensation National Defence College Committee (Class 35) 1998-2003 Member of the ESOP Banpu Public Company Limited Directors Certification Program Allocation Committee (DCP) #31/2003, Thai Institute 1995-Present Director TME Capital Co., Ltd. of Directors Association (IOD) 2005-Present President The Phrae People Association 1988-Present Vice President The American University Alumni Association 2000-2006 Senator The Senate 055

% Work experience in the last five years Name/Position Age Education Share held Period Position Organization

8. Mr. Metee Auapinyakul 54 B.SC. (Management), St. Louis 0.08 2007-Present Director Thai Agro Energy Public Company Director University, Missouri, U.S.A. Limited Executive Officer Infrastructure for the Market 1983-Present Director / Executive Banpu Public Company Limited Director with Authority Economy, Harvard University Officer to Sign on Behalf of John F. Kennedy School of 2005-2006 Sub-Committee of Board The Board of Investment the Company Government, Boston, U.S.A. of Investment * An older brother of person National Defence College 2004-Present Advisor GENCO Public Co., Ltd. number 10 (Class 377)#7 2001-Present Sub-Committee for National Safety of Thailand National Defence College, Public Relations College of Management, 2001-2006 Specialist Energy Committee, House of Mahidol University Representatives (Mini MMM Class 1) 2003-2006 National Science and Ministry of Science and Technology Directors Certification Program Technology (DCP) #61/2005, Thai Institute Development Board of Directors Association (IOD) Committee 2004-2005 Committee for Project The Board of Investment Consideration 2003-2005 Advisor The Board of Investment 2003-2004 Chairman, Customer Thai Airways International Services Quality Public Company Limited Assurance Committee Member of the Customer Thai Airways International Services Quality Public Company Limited Assurance Committee 2002-2004 Advisor Academic Committee, National Defence College 1984-2005 Director Royal and Sun Alliance Insurance (Thailand) Limited 056

% Work experience in the last five years Name/Position Age Education Share held Period Position Organization

9. Mr. Chanin Vongkusolkit 55 Honorary Ph.D. in Economics, 0.58 1983-Present Director / Chief Banpu Public Company Limited Director Chiang Mai University Executive Officer Chief Executive Officer M.B.A. (Finance), St. Louis 2004-Present Director The Erawan Group Public Company Director with Authority University, Missouri, U.S.A. Limited to Sign on Behalf of B. Economics, Thammasat 2003-Present Director Ratchaburi Electricity Generating the Company University Holding Public Company Limited * A younger brother of persons Directors Certification Program 1983-Present Director Mitr Phol Sugar Corp., Ltd. number 1 and 11 (DCP) #20/2002, Thai Institute 2005-Present Vice Chairman Thai Listed Companies Association of Directors Association (IOD) 2004-Present Director Federation of Thai Capital Market DCP Refresher Course # 3/2006, Organizations Thai Institute of Directors Association (IOD)

10. Mr. Ongart Auapinyakul 51 B.S. (Mechanical Engineering), 0.26 1983-Present Director / Executive Banpu Public Company Limited Director University of Missouri, Officer Executive Officer Columbia, U.S.A. 2007-Present Chairman, Phrae Phrae Community College Director with Authority Senior Executive Program 3, Community College to Sign on Behalf of the Sasin Graduate Institute of Trustees Company Business Administration of * An younger brother of person Chulalongkorn University number 8 National Defence College (Class 4414) Directors Certification Program (DCP) #23/2002, Thai Institute of Directors Association (IOD) 057

% Work experience in the last five years Name/Position Age Education Share held Period Position Organization

11. Mr. Vitoon Vongkusolkit 66 B.Sc. (Pharmacology), 1.32 1983-Present Director Banpu Public Company Limited Director Chulalongkorn University 2001-Present Member of the Banpu Public Company Limited Member of the Directors Certification Program Compensation Compensation Committee (DCP) #17/2002, Thai Institute Committee Director with Authority to of Directors Association (IOD) 2004-Present Chairman of the Financial The Erawan Group Sign on Behalf of Senior Executive Program #6, and Risk Management the Company Sasin Graduate Institute of Committee * A younger brother of person Business Administration of 1989-2007 Director Erawan Ploenchit Co., Ltd. number 1 Chulalongkorn University 1987- Present Director Mitr Phol Sugar Corp., Ltd. * An older brother of person Chairman 2000 Program #11/2005, and its affiliates number 9 Thai Institute of Directors Director Erawan Hotel Public Company Limited Association (IOD) 1983-Present Chairman IAG Insurance (Thailand) Co., Ltd. 1977- Present Director United Standard Terminal Public Company Limited 1998-2006 Chairman United Securities Public Company Limited 2001-2004 Member of the Corporate Banpu Public Company Limited Governance and Nomination Committee 1987-2004 Managing Director Amarin Plaza Public Company Limited

12. Mr. Rawi Corsiri 57 M.B.A., Sasin Graduate Institute - 2001-Present Chief Operating Officer Banpu Public Company Limited Chief Operating Officer of Business Administration of Director Banpu Minerals Company Limited Chulalongkorn University Director Banpu Singapore Pte. Ltd. B.Sc., Chulalongkorn University Director Banpu International Limited Directors Certification Program Director / President Banpu Power Limited (DCP) #32/2003, Thai Institute Director Banpu Coal Power Limited of Directors Association (IOD) Director Banpu China Pte. Ltd. Capital Market Academy Leader Director Banpu Power International Limited Program (CMA) # 2/2006, Capital Director BLCP Power Limited Market Academy Director Power Generation Services Co., Ltd. Executive Leadership Program Director Banpu Power Investment Co., Ltd. NIDA-Wharton, Co-program Director Peak Pacific Investment (L) BHD between National Institute of Director Edifice Engineering Company Limited Development Administration Director Silamani Corp. Ltd. (NIDA) and The Wharton School, Director Silamani Marble Company Limited University of Pennsylvania, U.S.A. 058

% Work experience in the last five years Name/Position Age Education Share held Period Position Organization

13. Mr. Chanchai Jivacate 61 Master Degree in Engineering 0.03 Present Advisor Banpu Public Company Limited Advisor, Banpu Public Mechanical, Lamar 2001-2007 President Banpu Power Limited Company Limited University, Texas, U.S.A. Director Banpu Power Limited (starting from 1 January B. Engineering (Mechanical), Director Banpu Coal Power Limited 2008) Chulalongkorn University Director BLCP Power Limited Directors Certification Program Present Director Banpu China Pte. Ltd. (DCP) #22/2002, Thai Institute of Director Banpu Power International Ltd. Directors Association (IOD) 2002-Present Director The Aromatics (Thailand) Public Company Limited

14. Ms. Somruedee 46 B.Sc. (Accounting), Bangkok 0.08 2006-Present Group Senior Vice Banpu Public Company Limited Chaimongkol University President - Finance Group Senior Vice Program for Global Leadership, 2001-2006 Senior Vice President - Banpu Public Company Limited President – Finance Harvard University Graduate Finance School of Business Administration, Present Director Banpu Singapore Pte. Ltd. Boston, U.S.A. Director Banpu Minerals Company Limited Directors Certification Program Director Banpu International Limited (DCP) #78/2006, Thai Institute Director Edifice Engineering Company Limited of Directors Association (IOD) Director Silamani Corp., Ltd. Director Silamani Marble Company Limited Director Banpu China Pte. Ltd. Director BP Overseas Development Co., Ltd.

15. Mr. Sathidpong 49 Doctor of Philosophy in Strategic - 2006-Present Group Senior Vice Banpu Public Company Limited Wattananuchit Management, University of President - Corporate Group Senior Vice Northern Washington Services President – Corporate M.B.A. Strategic Management 2004-2005 Senior Vice President - Banpu Public Company Limited Services Leadership, IOU of Netherlands Internal Audit B.A. (Administration), Sukhothai 1998-2003 Senior Vice President - Banpu Public Company Limited Thammathirat University Human Resources B.A. (English), Nakhon Ratchasima Rajaphat University Philosophy Training, Saint Gabriel’s Institution, India Directors Certification Program (DCP) #74/2006, Thai Institute of Directors Association (IOD)

Note: *Mr. Chanchai Jivacate, President of Banpu Plc’s Power Business, retired on 31 December 2007 and has been appointed as advisor of Banpu Public Company Limited starting from 1 January 2008. S h a r e h o l d i n g s o f t h e B o a r d o f D i r e c t o r s a n d M a n a g e m e n t 059 Annual Report 2007 • Banpu Public Company Limited

+ / (-)

A s o f 3 1 D e c e m b e r 2 0 0 7

O r d i n a r y S h a r e ( U n i t s ) N a m e 31 December 2007 31 December 2006 + / (-)

1. Mr. Soonthorn Vongkusolkit 1,948,296 1,973,296 (25,000) 2. Mr. Montri Mongkolswat - -- 3. Mr. Sawatdiparp Kantatham 662,745 920,255 (257,510) 4. Mr. Vitoon Vongkusolkit 3,590,911 4,360,911 (770,000) 5. Mr. Kopr Kritayakirana - -- 6. Mr. Somkiat Chareonkul - -- 7. Mr. Rutt Phanijphand - -- 8. Mr. Anothai Techamontrikul - -- 9. Mr. Chanin Vongkusolkiit 1,688,071 2,000,371 (312,300) 10. Mr. Metee Auapinyakul 221,599 369,799 (148,200) 11.Mr. Ongart Auapinyakul 710,500 810,000 (99,500) 12. Mr. Rawi Corsiri - 414,669 (414,669) 13. Mr. Chanchai Jivacate 45,000 70,000 (25,000) 14. Ms. Somruedee Chaimongkol 212,628 212,628 - 15. Mr. Sathidpong Wattananuchit - --

Notes: From report of securities held by the Company’s directors as of 28 December 2007. R e m u n e r a t i o n o f t h e B o a r d o f D i r e c t o r s a n d M a n a g e m e n t 060 Annual Report 2007 • Banpu Public Company Limited

1. R u m e n e r a t i o n i n C a s h f o r t h e Y e a r E n d i n g 3 1 D e c e m b e r 2 0 0 7 1.1 Remuneration in cash for Board members in the forms of meeting allowance and gratuity was THB 29,337,502 of which details are as follows.

Meeting Allowance (THB/year) Total Gratuity Name/Position Corporate Remuneration Audit Governance and Compensation (THB/year) Director (THB/year) Committee Nomination Committee Committee

1. Mr. Soonthorn Vongkusolkit 800,000.00 - - - 1,977,457.00 2,777,457.00 Chairman / Member of the Corporate Governance and Nomination Committee

2. Mr. Montri Mongkolswat 620,000.00 210,000.00 - 115,000.00 1,738,842.00 2,683,842.00 Independent Director / Member of the Audit Committee / Member of the Compensation Committee

3. Mr. Sawatdiparp Kantatham 620,000.00 - 120,000.00 - 1,738,842.00 2,478,842.00 Director / Member of the Corporate Governance and Nomination Committee

4. Mr. Vitoon Vongkusolkit 620,000.00 - - 115,000.00 1,738,842.00 2,473,842.00 Director / Member of the Compensation Committee

5. Mr. Kopr Kritayakirana 595,000.00 - 155,000.00 - 1,738,842.00 2,488,842.00 Independent Director / Chairman of the Corporate Governance and Nomination Committee

6. Mr. Somkiat Chareonkul 620,000.00 270,000.00 20,000.00 - 1,738,842.00 2,648,842.00 Independent Director / Member of the Audit Committee / Member of the Corporate Governance and Nomination Committee

7. Mr. Rutt Phanijphand 620,000.00 - - 147,500.00 1,738,842.00 2,506,342.00 Independent Director / Chairman of the Compensation Committee

8. Mr. Anothai Techamontrikul 620,000.00 210,000.00 100,000.00 - 1,313,741.00 2,243,741.00 Independent Director / Member of the Audit Committee 061

Meeting Allowance (THB/year) Total Gratuity Name/Position Corporate Remuneration Audit Governance and Compensation (THB/year) Director (THB/year) Committee Nomination Committee Committee

9. Mr. Chanin Vongkusolkit 595,000.00 - - - 1,738,842.00 2,333,842.00 Director

10. Mr. Metee Auapinyakul 620,000.00 - - - 1,738,842.00 2,358,842.00 Director

11.Mr. Ongart Auapinyakul 545,000.00 - - - 1,738,842.00 2,283,842.00 Director

12. Mr. Krirk-Krai Jirapaet* - - - - 1,634,125.00 1,634,125.00

13. Mr. Manas Leeviraphan* - - - - 425,101.00 425,101.00

Total 29,337,502.00

Notes: *Mr. Krirk-Krai Jirapaet resigned from his position as Chairman of the Board of Directors in October 2006. Mr. Manas Leeviraphan retired on 31 March 2006.

1.2 Remuneration in cash for the Company’s executives in the forms of salary and bonus

Unit : THB Number of executives 2007 Number of executives 2006

Total salaries 5 35,005,020.00 5 32,241,568.00 Total bonuses 5 16,351,480.00 511,166,246.00 Total (THB) 51,356,500.00 43,407,814.00

Notes: In 2006 and 2007, There were 5 executives namely, Mr. Chanin Vongkusolkit, Mr. Rawi Corsiri, Mr. Chanchai Jivacate, Ms. Somruedee Chaimongkol and Mr. Sathidpong Wattananuchit.

2. Other remunerations 2.1 Contributions to the Provident Fund In 2007, the Company paid the following contributions to its executives.

Unit (THB) Number of executives 2007 Number of executives 2006

Contributions to the Provident Fund 4 1,757,901.60 4 1,241,306.00

Notes: In 2006 and 2007, there were 4 executives namely, Mr. Chanin Vongkusolkit, Mr. Rawi Corsiri, Ms. Somruedee Chaimongkol and Mr. Sathidpong Wattananuchit C o r p o r a t e G o v e r n a n c e a n d 062 S u p e r v i s i o n o n t h e U s e o f I n t e r n a l I n f o r m a t i o n Annual Report 2007 • Banpu Public Company Limited

C o r p o r a t e G o v e r n a n c e Thai Bankers’ Association, the Thai Listed Companies Association and Federation of Thai Capital Market 1. Corporate Governance Policy Organizations, the award was given to Boards of The Board of Directors believes that Corporate Directors that distinguish themselves in performing in Governance is an important factor that will bring accordance with good corporate governance principles. success and maximum benefit to its shareholders. Banpu Banpu duly complied with the principles of good has announced its Corporate Governance policy and corporate governance for listed companies 2006 in these Code of Conduct since 2002. The corporate governance following five principles: policy and code of conduct booklets have been provided Rights of shareholders since then. The current Corporate Governance policy and Banpu fully complied with the best practices Code of Conduct is the second edition revised in 2005 on shareholders’ rights, especially in 2007, when it and implemented in 2006. Published in Thai, English allowed minor shareholders to propose agendas of and Bahasa Indonesia, the updated version of Corporate the 2008 Annual General Meeting of Shareholders Governance and Code of Conduct are well-responded (AGM) in advance between December 2007 and January to evolving times and circumstances and covered 2008. Shareholders were notified via the SET posted international practices. The Corporate Governance and at www.banpu.co.th/th/investor for transparent Code of Conduct have been distributed to directors, procedure and criteria. executives, and staff to use as a reference and a practice Equitable treatment of shareholders guideline. They are also disclosed to public in Banpu’s Banpu fully complied with the best practices website under “Corporate Governance” topic. in regard to shareholder’s rights especially when it In 2007, Banpu translated its Corporate Gover- allowed minor shareholders to propose the agendas nance policy and Code of Conduct into Chinese for of the 2008 AGM, a practice considered an equal implementation in 2008. In this regard, Banpu has set treatment to all shareholders. Banpu is in the process a principle of Corporate Governance implementation of studying a procedure for the nomination of in companies which it has major shareholders or candidates by minority shareholders. management authority. This principle will be applied as Roles of Stakeholders standard of business ethic in the countries Banpu plan to Banpu has formulated a policy indicating operate its business in the future. To implement the the way it treats all groups of stakeholders in its Corporate Governance, Banpu also takes legal, economic Corporate Governance policy. In addition, customers and social conditions as well as corporate culture of can file a complaint through the Marketing & Logis- related companies into consideration. tics Department while investors can file the same through Banpu also evaluates an effectiveness of its the Investor Relations Division. Staff, too, may file a Corporate Governance implementation by using Key grievance through the Corporate Governance and Nomi- Performance Indicator (KPI) in the part of Behavioral nation Committee’s secretary. All complaint reports Factor under “integrity” value. The result, classified by will be submitted to the Corporate Governance and staff levels and operation sites, revealed a satisfactory Nomination Committee on a quarterly basis while outcome. summary is also submitted to the Board. As of the In 2007, Banpu was one of 14 companies end of 2007, there was no single grievance. Banpu receiving Board of the Year for Distinctive Practices also commits to the best practices on environment and Awards 2006/2007. Held by the Institute of Directors, social activities through its Sustainable Development the Stock Exchange of Thailand (SET), the Board of Policy. Trade of Thailand, the Federation of Thai Industries, the 063

Disclosure and Transparency manner for them to make a decision. In addition, the Banpu discloses its information and policies Board of Directors also insists that shareholders have which are regularly updated in both Thai and English rights to attend and vote at a shareholders’ meeting, through the SET and the Company’s website, through to amend the Company’s major policies, to elect and its financial statements and an auditor’s report, an remove directors, approve appointment of auditors and annual report and a report of the Board of Directors’ right to share in profits. The Board of Directors also responsibilities. In addition, remunerations paid to its facilitates shareholders attending the shareholders’ directors and senior executives are disclosed. No meeting by sending adequate information in time for remuneration is paid to directors who also sit as the meeting, urging shareholders to exercise their rights directors of its subsidiaries. Investors can reach at the meeting or appointing a person or an indepen- Banpu’s Investor Relations Department at 02-694-6744 dent director as a proxy to vote on his behalf. In addi- or by e-mail at: [email protected]. In tion, shareholders are equally allowed to express their 2007, it held an analyst’s meeting every quarter, plus views, request an explanation or ask a question. 4 overseas road shows and 1 local road show. Banpu In 2007, Banpu held the 2007 AGM on 28 March also provides information for investors under the 2007. All directors (11) attended the meeting. Banpu “Investor News” topic, which is regularly updated in designated Thailand Securities Depository Co., Ltd., its website. which was its share registrar, to submit an invitation Responsibilities of the Board of Directors letter to shareholders 12 days in advance. Banpu posted The Company has complied with the best the letter at http://www.banpu.co.th/th/investor 21 days practices in regard to Board of Directors, which in- prior to the meeting date. The Minutes of the 2007 clude the board’s roles and responsibilities, meetings, AGM were posted at the website 12 days after the self-assessment, remunerations and development of meeting. Shareholders failing to attend the meeting directors and senior executives. Of Banpu’s 11-member could appoint independent directors as their proxy. Board, 5 are independent directors. At the moment, At the 2007 AGM, 13.64 per cent of shareholders Banpu is studying how it can determine a number of exercised these rights. To allow shareholders to companies each director could sit on. So far, there is propose meeting agendas, Banpu announced in no limited number of term a director can stay in his November 2007 via the SET that it would allow office but has set a retirement age for director at 72 shareholders to propose the agendas from December years old. Banpu is also preparing to appoint its com- 2007 - January 2008. This was also posted in its website pany secretary. at www.banpu.co.th/th/investor with clear procedures and transparent criteria. 2. Shareholders: Rights and Equality Treatment The Board of Directors gives a priority to 3. Rights of All Stakeholders the rights and equality of shareholders. This has been Banpu is eager to treat all stakeholders on a clearly stated in Banpu’s corporate governance fairly basis. Banpu’s policy to stakeholders has been policy under the topic of “policy to shareholders: part of its Corporate Governance policy where it pro- rights and equality of shareholders and shareholders’ motes collaboration between itself, stakeholders meeting,” where it states that Banpu’s shareholders and other related parties such as staff, customers, are equally entitled to basic rights to receive share suppliers, creditors, government agencies, communities certificates, transfer their shares and access adequate where Banpu operates and the society at large. Banpu’s information in a timely, appropriate and adequate Code of Conduct also describes best practices for 064

directors, executives and staff to perform to ensure The Code of Conduct includes a policy and practices fair and balance dealing with stakeholders. These prac- on how Banpu should treat its customers. Banpu will tices cover major topics such as conflicts of interest, honor a promise it makes to customers by delivering responsibility to shareholders and policy and treat- quality products and services at a fair price, giving ment of staff, customers, suppliers, creditors, busi- accurate and appropriate information to customers in ness competitors and the society. Directors, execu- a timely fashion, strictly complying with customer’s tives and staff are to learn, understand and strictly requirements, providing customers a grievance comply with these guidelines so that all stakeholders system to complain about quality, volume and safety are fairly protected and treated. of Banpu’s products and services, speedily respond- In addition, Banpu reports its operations and ing to customers and doing everything to make sure performances to stakeholders and those entitled to that customers will be promptly responded, advising know in its annual report and the Company’s website. customers on how to effectively use Banpu’s A two-way communication channel has been set up products and services for their benefit and keeping for stakeholders and parties to voice their opinions customer’s secrets without exploiting them. and file grievance in case they are unfairly treated by For suppliers and/or creditors, Banpu has written Banpu. So far, the Company has set up a grievance a policy announcing that it will equally and fairly treat system to receive complaints from 3 groups of people; them by taking into consideration Banpu’s maximum namely, shareholders, investors and Banpu’s own staff. benefits and by making sure that suppliers and There was no grievance in 2007. creditors are enjoying a fair return. Banpu will do Regarding Banpu’s staff, as staff is an impor- everything to avoid a situation that may lead to a conflict tant factor for its success, a policy about Banpu’s staff of interest and will honor any commitment it has and staff treatment has been written in Banpu’s Code committed. of Conduct. It’s our policy to treat our staff fairly in Regarding business competitors, in its Code regard to job opportunity, remunerations, appointments, of Conduct, Banpu commits to treat competitors transfer and skill development. We make sure our work according to international principles and within a environment is safe. With a concern over staff’s legal framework of a fair trade competition without wellbeing, Banpu strictly complies with appropriate violating their secrets or acquiring their secrets in a safety and occupational health measures to prevent fraudulent way. Banpu has strictly complied with what accidents, injuries and job-related diseases. We has been stated in its Code of Conduct. During the respect human rights where everyone must not be past year, it had no dispute with competitors. discriminated against their races, nationalities, Regarding communities and the society, Banpu religions and culture. has a policy to do a business that benefits the economy Banpu commits to pay a fair salary and and the society, safeguard local customs in areas where provide fair welfare and other returns which are closely it operates, be a good corporate citizen by complying linked with added long-term value for our sharehold- with all rules and regulations and improve people’s ers. Banpu promotes a fair human resource manage- quality of life either by itself or by collaborating with ment system and will fully offer opportunities to all government agencies, communities or non-governmental staff to develop themselves. organizations. Banpu has announced its Sustainable In terms of customers, Banpu realizes that Development Policy which will work as criteria in an customer’s satisfaction is crucial to its success and issue such as greenhouse effect in power plant or mine. intends to effectively respond to customer’s needs. It also believes that a strong corporate citizen must 065

have Corporate Social Responsibility (CSR), a term the money to fund researches by science lecturers that refers to a commitment to social development, and PhD students and to allow grantees to experience playing by rules and treating everyone fairly. So far, research activities at elite schools overseas. Banpu has formulated an effective safety, occupational Regarding environmental activities, aside from health, environment practices based on its Sustain- conducting activities for sustainable environment in able Development Policy to identify operation risks communities around Banpu’s operation, in 2007, Banpu that may incur to staff, suppliers, the environment and joined hands with the Faculty of Environment and the communities. Resources Studies, Mahidol University, to organize To support the Sustainable Development Policy, the “Power Green Camp 2” aimed to promote one of Banpu’s CSR practices is to regularly return environmental science to Thai youths. The camp something back to the society. Budget has been included both classroom and practice activities to allocated for CSR activities while an awareness increase children’s awareness of environmental campaign is regularly carried out to urge staff at all situations and to resolve environmental problems in levels to feel responsible for the society they are members. a more systematic way. Banpu also sponsored the In 2007, it initiated “Employee Volunteering Program”, Institute for the Promotion of Teaching Science and where Banpu’s staff built toilets to Ban Yubtanaeng Technology (IPST)’s GLOBE activity by sponsoring School in Rayong Province. a meeting entitled the “Asia-Pacific Globe Learning In 2007, Banpu continued to pursue social Expedition Thailand 2007: Learning about Climate projects in local and international levels, including Change to Inspire the Next Generation of Scientists.” in countries it operates especially in Republic of Held in Prachuab Khiri Khan during 13-18 Novem- Indonesia. Several new projects were initiated. For ber 2007, the meeting saw students and teachers, example, in education, Banpu has provided ICT De- scientists and academics from Asia-Pacific countries velopment support to rural schools in Lamphun, Lampang exchanging information about the Earth System and Phayao Provinces for the fourth consecutive year. Science to understand more about interconnected and The sponsorship given is aimed at improving school’s interdependent of the Earth Systems to come up with ICT system & developing their teachers & student sustainable solutions to the environmental problems. capabilities so as to help enhance the school’s learn- In 2007, Banpu helped Faculty of Environment ing and teaching quality. Banpu also organized train- and Resources Studies, Mahidol University organize ing entitled “Team Learning Development” to teach- the 1st Asian Dendrochronology Conference and ers to promote their teamwork and how to teach new Workshop: Environmental Change and Human Activity. knowledge to students to create a stronger instructor’ The meeting, which was held at Riverside Hotel, s team for the schools. Bangkok, and attended by 100 academics from all over Banpu provides scholarships to two PhD the world, aimed to create a new generation of programs; one of which is the PhD program in researchers and nurture a research network of those Economics of the Faculty of Economics, Chiang Mai interested in tree ring while acting as a forum for those University, which is now in its third year (2005-2007). interested in forestry conservation to present papers The purpose is to produce PhD professors in economics relating to the growth of trees and their growth for universities nationwide. The other is a THB factors as well as the issue of climate change in 1-million fund given to Chulalongkorn University’s Thailand and the region. Chula Dusadee Pipat Project to produce PhD scientists. Chulalongkorn University plans to use 066

Banpu believes that children are a force Public health – each mine usually dispatches behind the country’s sustainable development in the a mobile doctor’s unit together with the local authorities future. That’s why it focuses a lot of activities at to provide free healthcare to residents in the commu- tomorrow’s adult. In early 2007, Banpu continued to nity. In addition, nutritional supplements are given support the “Youth Innovation Marketplace” (YIM) to children lower than 5 years old while pregnant project to nurture a new generation of business women are advised on how to take care of their entrepreneurs in the Thai society and to provide them pregnancy. a platform to initiate their social development Knowledge enhancement to community projects based on their interests. leaders – training is held to train community leaders In Indonesia, Banpu commits to social and en- in the CCC so that they know the process how to vironmental responsibilities where all coal mines; namely, design a project plan for their communities and keep Indominco Bontang, Kitadin-Embalut, Jorong and all of the community’s database for future planning. Trubaindo, and Jakarta office have conducted social CSR Master Plan and Community Develop- and environmental projects which focus at commu- ment MIS (CD MIS) – Banpu starts formulating a nity development and local participation. Banpu also CSR Master Plan and initiates a project to develop supports community activities related to basic infra- the community development MIS. The idea is to make structure, education, religion, sanitation, economy and its community development activities and evaluation culture. Details are as follows. procedures more effective. In addition, Banpu wants Occupation Enhancement - this refers to make sure that its CSR is transparent and meet the to a project that supports a household industry at ISO 26000 standards that it aims to achieve and Indominco-Bontang Mine which involves food implement by 2008. processing of agricultural products; for example, ginger powder, processed banana and pineapple jam. These 4. Shareholders’ Meeting products are also certified as Halal food and are In 2007, the Company held one Annual now available at local supermarkets. In addition, General Meeting (AGM) at Radisson Hotel’s Grand local people have been trained for weed cultivation Ballroom, of 92, Soi Saengcham, Rim Klong Bangkapi in an area closed to the Bontang coal terminal as Road, Bangkapi, Huay Khwang, Bangkok. The Board another source of their income. Banpu also urges those urges shareholders to participate in a decision- living around Trubaindo to plant rubber trees while making process and makes sure that shareholders communities around Kitadin-Embalut are encouraged receive complete and adequate information in a to raise freshwater fish. timely fashion to make decision. In this regard, Banpu Education – Banpu regularly organizes sent out invitation letters and supporting information training to both teachers and students, especially with to shareholders 12 days prior to the meeting date. regard to IT development, auto repair and sewing. Each agenda contained Board of Directors’ opinions. Scholarships are given to university students who are Eleven directors including Chairman of the Audit also given an opportunity to be a trainee at Banpu. Committee, Chairman of the Corporate Governance Environment – Banpu encourages the and Nomination Committee and Chairman of the Community Consultative Committee (CCC) at each Compensation Committee attended the meeting. mine to take a good care of natural resources through various activities ranging from rehabilitation of land to maintaining canals and waterways, repairing bridges, and reforestation. 067

Chairman of the Meeting allowed sharehold- During the past year, Banpu’s Management ers to equally inquire about the Banpu’s operations led by its CEO submitted a five-year strategic plan and give advice. Banpu facilitated the voting and the after the current plan ended in 2008. The strategy proxy appointment. Banpu also asked shareholders was to provide future business directions, assess risks, to express their opinions and ask about Banpu’s prepare the Company to a variety of conditions in the operations. In addition, the Board posted its Minute future and make sure that Banpu’s vision and of Meeting at the Company’s website 12 days after mission statements would be in line with its business, the meeting date for shareholders to check without corporate status and current market conditions. having to wait until the next meeting. 6. Conflicts of Interest 5. Leadership and Vision One of Banpu’s very important policies is Banpu has a clear vision to become a leading its directors, executives and staff must not use their energy company in Asia and to be acknowledged as status to gain personal benefit. The Code of Conduct an active developer and investor, a fair partner, a truly clearly states that directors, executives and staff must professional and a provider of excellent energy refrain from conducting a connected transaction that products & services. The mission is to to develop may lead to a conflict of interest with the Company. businesses in the fields of energy in pursuit of a If it is necessary to do so for Banpu’s benefit, the Board leadership position in Asia; diversify and invest in must comply with the SET’s rules and regulations, strategic businesses, which will support and enhance where a transaction be made at a price and under our businesses positions; to promote and contribute a condition as if it is done with the third party and to the development of society by acting as a good citizen, a director or staff with an interest must not be involved committing to safety practices and preserving nature in an approval process. If it is indeed a connected and environment as well as to serve our customers in transaction under the SET’s rules, one must strictly Asia with value priced and high quality of products comply with the rules, procedures and information and services. disclosure methods of connected transactions by listed To ensure that Banpu’s operations will benefit companies. shareholders, the Board of Directors has formulated In addition, the Board of Directors also Banpu’s vision, missions, goals, policy, operation prohibits directors, executives or staff from using an directions, long-term strategic plan, operation plan and opportunity or information acquired in the work to annual budget where the Management is designated seek personal interest or to conduct a competing to propose them. The Board is allowed to express its business with or related to Banpu’s business. This ideas with the Management to reach a mutual approval includes a ban from using insider’s information to buy before granting permission. The Board of Directors or sell the Company’s shares for staff’s personal also appoints Chief Executive Officer (CEO) to interest or from giving insider’s information to the develop and implement strategies. It also clearly third party to buy or sell Banpu’s shares. If an execu- differentiates roles, duties and responsibilities tive or a staff is involved in a special operation between the Board of Directors, the Committees and of which information has not yet been released to Banpu’s executives. the public and a negotiation is ongoing where the information must be kept confidential to prevent an effect to the Company’s share price, such executive or staff must sign a confidentiality agreement with the Company until the information is disclosed to the SET and the SEC. 068

7. Code of Conduct Staff is advised what they should do and To maximize shareholders’ benefits, the Board otherwise and this is in line with the policy stated of Directors equally treats success and a modus in the Code of Conduct to ensure constructive operandi that leads to such achievement. That’s why practices. the Board sets both the corporate goals and how to reach these goals in Banpu’s vision, missions, 8. Balancing of Power by Non-Executive Directors values, corporate governance principles and policy. The Board of Directors ensures that the In addition, it clearly states in the Code of Conduct number of its existing directors is proportional to that Banpu expects its directors, executives and Banpu’s size. At present, Banpu’s Board of Directors staff to use it as a practice guideline. This includes consists of 11 members, three of whom are executive equal treatments of fellow staff, shareholders, directors and the other eight are non-executive direc- customers, suppliers, business competitors and the tors. Of all the members, five are independent direc- society. tors. Banpu requires its directors, executives and During the past year, the Corporate Governance staff to understand and strictly comply with policies and Nomination Committee reviewed the number and practices stated in the Code of Conduct. of non-executive directors and independent directors Executives of all levels must make sure that their of the Board and found the existing ratio of non- subordinates know, understand and comply with the executive directors appropriate. Code of Conduct, and that regular meetings are held and PR materials are distributed to inform staff in Thai- 9. Consolidation or Separation of Office land and aboard. In this regard, supervisors of all levels The Board of Directors requires its Chairman must be a good role model and urge their staff to comply not to also be Chief Executive Officer (CEO). with the practices. Role and responsibility, power and duty are clearly As Banpu embarks on its Corporate Shared separated for a healthy balance between management Values project to promote good corporate culture and corporate governance. among staff that everyone can share aside from the standard of practices stated in its Code of Conduct, 10. Remunerations of Directors and Executives during the past year, Banpu constantly organized The Board of Director has assigned the PR activities to promote the values to enhance staff Compensation Committee to review a compensation understandings in Thailand and abroad. The impor- structure as well as remunerations of Banpu’s tance of Banpu’s 4 shared values is as follows: executives. The policy is that remunerations must be 1. Innovation – this refers to initiatives, being competitive with offers made by a similar business creative and dare to express for ongoing development. of a similar size in the same industry after taking into 2. Integrity – this refers to being ethical, consideration duties and responsibilities of each sincere and transparent. director and executive. This however is subject to 3. Care – this refers to being sincere, open, approval of the Shareholders’ Meeting. courteous and welcome colleagues and the society. Details of the remunerations Banpu paid to its 4. Synergy – this refers to collaboration, directors and executives in 2007 are in the topic of helping each other, an ability to share, teamwork Remunerations. and mutual goals. 069

11. Board of Directors’ Meetings interest in an issue discussed by the Board at the The Board of Directors convenes at least once moment, he must leave the room when the matter is a month on the last Wednesday of the month. An considered. additional meeting may be held if necessary. At A minute of meeting is subsequently made each meeting, there are clear meeting agendas, both in writing and after seconded by the meeting will be for acknowledgement and for consideration. In certified true and correct by Chairman of the Board addition, there are a complete set of supporting of Directors and Secretary of the Board. Documents documents sent to the Board of Directors at least to be kept include minutes of meeting, of which the 7 days in advance so that the Board has enough time original copy is kept in the form of a document file, to study before attending the meeting. Each a scanned original file for directors and other parties meeting lasts approximately 3.5 hours. At the to use as reference and an electronic file, supporting meeting, all directors can openly voice their opinions documents. while Chairman of the Meeting summarizes comments In 2007, the Board of Directors convened 14 and opinions from the meeting. If a director has a material times. Each director attended the meeting as follows:

Meeting Attendance Name Title Term of Office Ordinary Special Total Meeting Meeting 1. Mr. Soonthorn Vongkusolkit Chairman Apr. 2006 - Apr. 2009 12 2 14/14 2. Mr. Montri Mongkolswat Independent Director Apr. 2005 - Apr. 2008 12 2 14/14 3. Mr. Sawatdiparp Kantatham Director Apr. 2007 - Apr. 2010 12 2 14/14 4. Mr. Vitoon Vongkusolkit Director Apr. 2006 - Apr. 2009 12 2 14/14 5. Mr. Kopr Kritayakirana Independent Director Apr. 2007 - Apr. 2010 11 2 13/14 6. Mr. Somkiat Chareonkul Independent Director Apr. 2007 - Apr. 2010 12 2 14/14 7. Mr. Rutt Phanijphand Independent Director Apr. 2005 - Apr. 2008 12 2 14/14 8. Mr. Anothai Techamontrikul Independent Director Apr. 2006 - Apr. 2009 12 2 14/14 9. Mr. Metee Auapinyakul Director Apr. 2005 - Apr. 2008 11 2 13/14 10. Mr. Chanin Vongkusolkit Director Apr. 2005 - Apr. 2008 12 2 14/14 11.Mr. Ongart Auapinyakul Director Apr. 2006 - Apr. 2009 10 1 11/14 070

12. Sub-Committees The Compensation Committee The Audit Committee The Compensation Committee consists of The Audit Committee consists of 3 three members chaired by an independent director independent directors responsible for reviewing while all its members are non-executive directors. the Company’s financial statements; checking if The Committee’s duty is to submit a compensation the internal control system, the risk management policy and details how Banpu would pay remunera- system and Banpu’s legal compliance are adequate; tions and fringe benefits to the Board of Directors, reviewing derivatives & commodity hedging, select- members of the subcommittees, CEO and executives. ing and appointing the Company’s auditors and The Compensation Committee is also responsible proposing an auditing fee; reviewing Banpu’s for setting up criteria to evaluate performances of disclosure of information to ensure accuracy and Banpu’s CEO and executives and to review a transparency in case of connected transaction or compensation system and a payment structure to transaction with possible conflicts of interest; reviewing directors and remuneration rates to directors and significant risk management measures and, if executives. appropriate, asking executives to review measures In 2007, the Compensation Committee and providing opinions regarding an operation plan, convened 5 times, all of which were attended by all budget, appointments, termination and manpower members. of the Internal Audit Department. In 2007, the Audit Committee met 7 times. 13. Internal Control and Auditing All members attended the seven meetings. The Audi- The Board of Directors sets up an internal tor Committee’s opinions as stated in meeting agen- control system that covers every aspect of Banpu’s das were followed up to ensure implementation. operation, ranging from finance to operation and legal compliance in compliance with relevant rules The Corporate Governance and Nomination and regulations. The Board also makes sure that Committee there is enough and effective check-and-balance In 2007, the Corporate Governance and mechanisms to protect shareholders’ equities and Nomination Committee consists of 3 members chaired Banpu’s assets. Banpu has also set up the Internal by an independent director. All members of the Com- Audit Department to inspect operations of all mittee were non-executive directors. The Corporate business and supporting units. The Department Governance and Nomination Committee had two major gives advice on how to set up a standard internal responsibilities: to review Banpu’s corporate gover- control system, formulate an internal control plan nance policy and its Code of Conduct and monitor its that focuses at Banpu’s major risks and assess the compliance based on its policy; and to recruit and efficiency and adequacy of the internal control. The nominate candidates as director, CEO and senior Department also closely monitors the internal executives, to recruit senior executives starting from control for the Management and will perform its director and over as part of a succession plan, to seek tasks based on the COSO Internal Control Integrated the Board of Directors’ approval or to submit the matter Framework. The Board of Directors makes sure that to the Shareholders’ Meeting, as the case may be. the Internal Audit Office remains independent, can In 2007, the Corporate Governance and fully perform its check-and balance job and is able to Nomination Committee convened 5 times, all of which directly report to the Audit Committee so that the in- were attended by all members. ternal control system can be an important mechanism to drive Banpu to a sustainable growth. 071

14. Board of Directors’ Report abroad, to the Corporate Communications & Public The Board of Directors is responsible for Affairs Department, whose duty is to disseminate Banpu’s consolidated financial statements and corporate information to shareholders, investors and financial information appeared in Banpu’s annual the public through local and international press and report. The financial statements are prepared under media. the Generally-Accept Accounting Principles (GAAP) In 2007, Banpu organized 4 international in Thailand where an appropriate accounting policy road shows, 4 analyst meetings to report its has been selected and implemented on a regular quarterly and annual performances, 74 company basis. The Audit Committee and auditors meanwhile visits for analysts and investors wishing to learn jointly review the accounting policy to see if it more about Banpu’s operation results, 1 overseas site remains practical. While preparing the financial visit for securities analysts, 2 press conferences to statements, the Board of Directors insists that the inform Banpu’s operation results and one internatio- working team carefully exercise its discretion and nal press tour. Banpu regularly released its press that important information is adequately disclosed in releases every time there was an important investment notes to the financial statements, if any. or business event. In addition, the Board of Directors entrusts Banpu discloses its information through its the Audit Committee to monitor quality of Banpu’s website at www.banpu.com so that other groups of financial statements and its internal control system. stakeholders can equally access the information. The Audit Committee’s opinion in the matter has been Those interested in Banpu’s information can contact stated in the Report of the Audit Committee to Share- the Investor Relations Division at Tel. 0 2694 6744, holders published in this Annual Report. or Fax 0 2207 0557 or send e-mails to investor@ The Board of Directors is of the opinion that banpu.co.th. the financial statements of both Banpu and its subsidiaries as of 31 December 2007 are complete, S u p e r v i s i o n o n t h e U s e o f I n t e r n a l accurate and reliable. I n f o r m a t i o n

15. Investor Relations Information disclosure and transparency are The Board of Directors makes sure that both important for Banpu. A policy on information financial and non-financial information relating to the disclosure, transparency and financial statements Company’s business and performance is revealed in has been stated in its corporate governance policy to a complete, adequate and regular manner. In addition, ensure that financial and other business information the information must reflect the Company’s actual as well as Banpu’s performance results are accurately performance and its true financial status as well as and adequately disclosed in a reliable and timely fashion its business future while strictly complying with the to its shareholders, investors, securities analysts laws, rules and regulations relating to information and the public. Banpu’s Board of Directors commits disclosure of both the Securities and Exchange Com- to comply with all the rules and regulations with mission (SEC) and the SET. regard to information disclosure and transparency. Aside from disclosing information as required Sales or purchase of shares by any director or by the SET and the SEC, Banpu also communicates executive have been reported to a supervision with shareholders and investors through other agency according to the Securities and Exchange channels, ranging from the Investor Relations Commission’s requirements. In addition, status of Division, which directly communicates with share- director’s securties holder is also reported each holders, investors and securities analysts here and month at the Board of Directors’ Meeting. 072

To take care of its internal information, Banpu Banpu has introduced an information system has stipulated preventive measures in its Code of to control the use of its internal information. For Conduct under the topic of “Conflicts of Interests example, it has a system that blocks outsiders from and Use of Company Information” especially if it is accessing its information while allowing staff of related to the use of Company information. Banpu different levels to have different levels of access to considers that it is a responsibility of directors, the information based on their responsibilities. If executives and staff to keep Company information an executive or staff is involved in a special task of strictly confidential especially if its insider informa- which the information has not yet been released to tion not yet released to the public or if it may affect the public and is currently discussed where the Banpu’s operation or share price. The following are release of such information may affect Banpu’s practices in regard to Company information: securities prices, the executive and staff must sign 1. Director, executive or staff must not take a Confidentiality Agreement with Banpu until the advantage of the fact that he is an executive or staff information is released to the SET and the SEC. of Banpu or must not use the information he receives Banpu has stipulated in its Work Regulations as an executive or staff of Banpu for his personal under the topic of “disciplinary action” that anyone benefit and for doing a business that competes with not complying with or violating such regulation the Company or a related business. will be subject to disciplinary action and liable to 2. No inside information shall be used for punishment based on the nature of offence as personal benefit to sell or buy Banpu’s shares or no follows: anyone “disclosing the Company’s secret with insider information shall be given to others for the an intention to destroy its reputation, credibility or purpose of trading Banpu’s shares. its products, resulting in Banpu losing or suffering 3. Confidential information must not be from a loss of business opportunity” can be dismissed. disclosed to the third party especially to competitors even after the person no longer becomes the Company’s director, executive or staff. I n t e r n a l C o n t r o l 073 Annual Report 2007 • Banpu Public Company Limited

The Board of Directors held its Meeting No. 1.1 The Corporate Business Development 1/2008 on 25 January 2008 to which the Audit Commit- Department has been re-structured to directly report tee reported a view about Banpu’s internal control to the Business Development Department, Coal system whether or not it was adequate and sound. The Operation - Indonesia. Audit Committee informed its auditing activities in 2007 1.2 The Information Technology Department to the Board of Directors as follows. has been divided into 5 divisions; namely, Enterprise The Audit Committee had reviewed Banpu’s Mission Solution, Enterprise Support Solution, Informa- risk assessment plan and an internal audit report while tion Management, Infrastructure Supports and Office constantly provided recommendations to the Board. The Automation. internal control focused at assessing Banpu’s financial 1.3 The External Relations Department has control, operations and legal compliance to ensure been restructured by being combined with the Corporate efficiency and to meet international standards. The Communications Department, becoming the Corporate process also monitored and resolved important risk Communications & Public Affairs Department, which issues that may affect Banpu’s management or that consists of Corporate Communications, Community were connected transactions and thus could lead to Relations and Government Relations. possible conflicts of interest. It also monitored actual 1.4 The New Energy Development Project is transactions considered a normal course of business to re-divided into 3 divisions of Coal To Liquids, maximize the Company’s interest. The Audit Committee Renewable Energy and Administration Support. found that the review outcome was what it had expected 1.5 The Quality Safety And Environmental and that everything was in compliance with rules, Development Center has been divided into Quality regulations and Banpu’s corporate governance policy. Development, Safety Development and Environmental Regarding its discussion with an external auditor with Development. a purpose to assess Banpu’s internal control system, 1.6 The Hongsa Project is further divided into the Audit Committee found the system sound and 6 divisions under a new structure; namely, Support corresponding to the accounting principles, adequate Function, Coal Mining, Power Plant, Environmental and had no serious defect. Impact Assessment (EIA) and Resettlement Action Plan, The Board of Directors’ opinions towards Banpu’s Infrastructures and Liaison Office. internal control system were similar to the Audit 1.7 The India Project Development Manage- Committee’s, which can be summarized as follows. ment is directly reported to the Business Development Department. 1. Organization and Environment 1.8 Banpu Power is restructured itself into Banpu has so far updated its organizational 4 departments; namely, China Power Business, structure to increase flexibility and a better response Engineering & Project Development, Strategic Planning to meet changes in business conditions and to accom- and Asset Management and the Hongsa Project. modate its long-term plans and overseas expansion as follows: 074

2. Operations 3. Risk Management Banpu’s Board of Directors has had a clear policy Banpu has placed a priority to its risk manage- to promote “Banpu Spirit” to benefit the Company and ment policy. It has actively monitored risk management the society. A corporate shared value, “Banpu Spirit” aims activities and plans of various departments. The Com- to continue harmonizing staff performance by encour- pany has also made sure that a risk-reporting and moni- aging them to be innovative, to have integrity, care and toring system remains sound and fast enough to handle synergy. In 2007, Banpu organized the Quality Resources, current business conditions. The Management has Quality Returns (QR) activity, believing that quality re- continued to review and submit Banpu’s risk policy and sources reflected a quality company. The activity was to plan to the Risk Management Committee. Staff and stimulate staff to drive Banpu to a sustainable success in executives are told of an importance of risk and risk the future while promoting corporate governance and management to reach a corporate goal. Employees are business ethics, transparency, fairness to staff, custom- told that risk management is everyone’s responsibility. ers and suppliers and responsibility to stakeholders, the A system of risk management has been created where society and the environment. Banpu is and continues to plans and measures are formulated. Risk factors that commit to Corporate Social Responsibility (CSR). It is may affect Banpu’s operation and goals are constantly also updating its practices and policies to respond to the assessed. Risk management by internal departments have growth and changes. So far, it has had a clear monitoring been closely monitored and reported to the Risk Man- and control system. Its Internal Audit Department, whose agement Committee so that it could later report to the tasks are to assess major business risks that cover major Board of Directors. In 2007, Banpu organized a risk operations of Banpu itself and its subsidiaries, remains management training to enhance staff’s understanding independent and directly reports to the Audit Commit- about the subject. The Company also introduced an online tee. The Department also monitors important adminis- risk management system; Key Risk Indicator (KRI) tration activities after the Risk Management Committee information and a risk quantification study so that finishes its tasks, reviews financial derivative transac- various departments can implement them. Banpu also tions and commodity hedging, and re-assesses Banpu’s provided and drilled its staff on how to formulate the compliance with relevant rules and regulations so that Business Continuity Plan (BCP) to ensure stable and its operation and the internal control is closely linked secured business operation. and assessable while meeting the Company’s policy and planning to ensure effective management and supervi- 4. Control of the Management’s Operations sion. At the same time, stakeholders can be confident The Board of Directors has appointed 3 that their interests are well taken care of while long-term sub-committees; namely, the Audit Committee, the values and benefit are created for them. Corporate Governance and Nomination Committee and the Compensation Committee. The 3 committees have 075

strictly performed their duties based on their scopes of The Audit Committee also holds regular meetings work, authorities and responsibilities. Banpu has also with Certified Public Accountants and the Accounting determined scopes of work, authorities and responsibili- Department to review Banpu’s accounting policy on the ties of executives and staff at each level and continued basis of the Generally-Accepted Accounting Principles to update approval authority granted to their executives (GAAP) and to review key information based on the at different levels. Banpu has also published an opera- Auditor’s report. Banpu also updates its accounting tion manual, constantly monitored operations of its system to meet the international IFRS standards to subsidiaries and affiliates and produced a manual on ensure accuracy and credibility of its financial statements legal compliance and Banpu’s practices in relation and to facilitate the Management’s decisions. It has so to juristic acts and related agreements. The Audit far introduced the Cognos system to do the budgeting Committee has reviewed and approved an annual risk and to also improve communications between itself and assessment plan by making sure that the audit plan overseas subsidiaries and affiliates to ensure effective covers high-risk operations and meets stakeholders’ supervision. expectations. The bottom line is all departments have effective internal control mechanisms that cover issues 6. Monitoring System raised by both internal and external auditors. Auditing In 2007, Banpu held 14 Board of Directors’ results are closely monitored and reported to the meetings plus a monthly Executive Board of Directors’ Management and executives of relevant departments to meeting to monitor the Management’s performances. At improve Banpu’s operations. these meetings, if a result was different from a goal, the meeting would request the Management to remedy it 5. Information Technology and Communications before reporting back to the Board of Directors. Banpu The Company has so far introduced Mincom has introduced the KPI (Key Performance Indicator) to Cooperation’s IT system to manage its coal production monitor staff’s operations at all levels. and sales of all its mines under the Business Process The Audit Committee convened 7 times in 2007 Standardization (BPS) Project to have an effective to evaluate Banpu’s operation results and financial sta- supply chain management database that helps facilitat- tus and to give advise to the Management from time to ing the management’s decision-making process and that time. A monitoring system has been in place to oversee increases effective communications among departments. Banpu’s operations. An internal control system has been Banpu has continued to provide important information constantly reviewed and changes are immediately made to the Board; by recording and summarizing of opinions to respond to the latest development. The Board of expressed at every meeting of the Board of Directors. Directors has been duly reported of Banpu’s financial Banpu has set up an IT system to communicate with statements and the review of its internal control while staff at all levels internally and externally. It has kept its risk management is reported every 6 months. The supporting documents for its books & accounts as Chairman is also reported of meeting results of the Audit required by the laws. Banpu also has a data back-up. Committee in other matters if considered important. C o n n e c t e d P e r s o n s a n d T r a n s a c t i o n s 076 Annual Report 2007 • Banpu Public Company Limited

C o n n e c t e d P e r s o n s

Connected Persons / Type of Business Description of Relationship Major Shareholders List of Board of Directors

1. Mitr Phol Sugar Corp., Ltd. 1) Being one of the major shareholders As of 31 December 2007 1. Mr. Soonthorn Vongkusolkit (Production and of Banpu Plc., holding 2.96 per cent Mitr Siam Sugar Co., Ltd. 99.99% 2. Mr. Vitoon Vongkusolkit distribution of sugar of its paid-up capital. 3. Mr. Isara Vongkusolkit and molasses) 2) The major shareholder is the 4. Mr. Chanin Vongkusolkit Vongkusolkit Family, which is also 5. Mr. Banthoeng Vongkusolkit one of major shareholders of Banpu Plc. 6. Mr. Choosak Vongkusolkit 3) There are 3 joint directors as follows: 7. Mr. Phadung Dechasarin 1. Mr. Soonthorn Vongkusolkit 8. Mr. Taweewat Thaweepiyamaporn 2. Mr. Vitoon Vongkusolkit 9. Wg. Cmr. Laksami Putpongsiriporn 3. Mr. Chanin Vongkusolkit

2. TME Capital Co., Ltd. 1) Being one of the major shareholders As of 31 December 2007 1. Mr. Soonthorn Vongkusolkit (Investment Company) of Banpu Plc., holding 2.88 per cent 1. The Vongkusolkit Family 54.23% 2. Mr. Vitoon Vongkusolkit of its paid-up capital. 2. The Auapinyakul Family 20.52% 3. Mr. Chanin Vongkusolkit 2) The major shareholder is the 3. Ufinves Co., Ltd. 10.50% 4. Mr. Metee Auapinyakul Vongkusolkit family, which is also 4. Mrs. Panhatai Serirak 3.64% 5. Mr. Ongart Auapinyakul one of major shareholders of Banpu Plc. 5. The Kantatham Family 3.17% 6. Mr. Sawatdiparp Kantatham 3) There are 6 joint directors as follows: 6. The Karnchanakamnerd 2.58% 7. Mr. Prachuab Trinikorn 1. Mr. Soonthorn Vongkusolkit Family 8. Mr. Werajet Vongkusolkit 2. Mr. Vitoon Vongkusolkit 7. The Putpongsiriporn 0.63% 9. Ms. Jintana Karnchanakamnerd 3. Mr. Chanin Vongkusolkit Family 4. Mr. Metee Auapinyakul 5. Mr. Ongart Auapinyakul 6. Mr. Sawatdiparp Kantatham

3 United Farmer and Industry 1) Being one of the shareholders of As of 31 December 2007 1. Mr. Soonthorn Vongkusolkit Co., Ltd. Banpu Plc., holding 0.65 per cent of Mitr Phol Sugar Corp., Ltd. 87.56% 2. Mr. Vitoon Vongkusolkit (Production and distribution its paid-up capital. 3. Mr. Isara Vongkusolkit of sugar and molasses) 2) The major shareholder is Mitr Phol 4. Mr. Banthoeng Vongkusolkit Sugar Corp., Ltd. 5. Ms. Chayawadee Chaianan 3) There are 2 joint directors as follows: 6. Mr. Taweewat Thaweepiyamaporn 1. Mr. Soonthorn Vongkusolkit 7. Ms. Jintana Karnchanakamnerd 2. Mr. Vitoon Vongkusolkit 8. Mr. Sukkan Wattanawekin

4 Ufinves Co., Ltd. 1) Being one of the shareholders of As of 31 December 2007 1. Mr. Soonthorn Vongkusolkit (Holding Company) Banpu Plc., holding 0.39 per cent of TME Capital Co., Ltd. 100.00% 2. Mr. Vitoon Vongkusolkit its paid-up capital. 3. Mr. Chanin Vongkusolkit 2) The major shareholder is the 4. Mr. Werajet Vongkusolkit Vongkusolkit Family, which is also 5. Ms. Jintana Karnchanakamnerd one of major shareholders of Banpu Plc. 3) There are 2 joint directors as follows: 1. Mr. Vitoon Vongkusolkit 2. Mr. Chanin Vongkusolkit 077

Connected Persons / Type of Business Description of Relationship Major Shareholders List of Board of Directors

5. Pacific Sugar 1) Being one of the shareholders As of 31 December 2007 1. Mr. Soonthorn Vongkusolkit Corporation Ltd. of Banpu Plc., holding 0.25 per cent 1. Mitr Phol Sugar Corp., Ltd. 25.00% 2. Mr. Isara Vongkusolkit (Export Distributor) of its paid-up capital. 2. Mr. Kamol Vongkusolkit 17.59% 3. Mr. Banthoeng Vongkusolkit 2) The major shareholder is 3. Mr. Soonthorn Vongkusolkit 15.04% 4. Mr. Kritsada Monthienvichienchay Mitr Phol Sugar Corp., Ltd. 4. Mr. Vitoon Vongkusolkit 12.49% 5. Mr. Tasana Wanakornkul 3) There is one joint director, 6. Mr. Jeerasak Vongkusolkit Mr. Soonthorn Vongkusolkit

6. Mitr Phu Viang Sugar 1) Being one of the shareholders of As of 31 December 2007 1. Mr. Soonthorn Vongkusolkit Co., Ltd. Banpu Plc., holding 0.23 per cent United Farmer and Industry 2. Mr. Isara Vongkusolkit (Production and distribution of its paid-up capital. Co., Ltd. 99.99% 3. Mr. Banthoeng Vongkusolkit of sugar and molasses) 2) The major shareholder is United 4. Mr. Kachorn Theppatipath Farmer and Industry Co., Ltd. 3) There is one joint director, Mr. Soonthorn Vongkusolkit

7. Mitr Kalasin Sugar Co., Ltd. 1) Being one of the shareholders of As of 31 December 2007 1. Mr. Kamol Vongkusolkit (Production and distribution Banpu Plc., holding 0.18 per cent United Farmers and Industry 2. Mr. Soonthorn Vongkusolkit of sugar and molasses) of its paid-up capital. Co., Ltd. 99.99% 3. Mr. Vitoon Vongkusolkit 2) The major shareholder is United 4. Mr. Isara Vongkusolkit Farmer and Industry Co., Ltd. 5. Mr. Banthoeng Vongkusolkit 3) There are 2 joint directors as follows: 1. Mr. Soonthorn Vongkusolkit 2. Mr. Vitoon Vongkusolkit

8. City Holding Co., Ltd. 1) Being one of the shareholders of As of 31 December 2007 1. Mr. Kamol Vongkusolkit (Holding Company) Banpu Plc., holding 0.08 per cent 1. The Vongkusolkit Family 92.00% 2. Mr. Soonthorn Vongkusolkit of its paid-up. 2. The Putpongsiriporn Family 2.00% 3. Mr. Vitoon Vongkusolkit 2) The major shareholder is the 3. The Karnchanakamnerd Family 6.00% 4. Mr. Isara Vongkusolkit Vongkusolkit Family, which is also 5. Mr. Chanin Vongkusolkit one of the major shareholders of 6. Ms. Jintana Karnchanakamnerd Banpu Plc. 7. Mr. Werajet Vongkusolkit 3) There are 3 joint directors as follows: 8. Mr. Banjerd Vongkusolkit 1. Mr. Soonthorn Vongkusolkit 9. Ms. Arada Vongkusolkit 2. Mr. Vitoon Vongkusolkit 3. Mr. Chanin Vongkusolkit 078

Other Connected transactions between the Company, subsidiaries, affiliated companies and other related companies, including a price-setting policy and applicable interest rates. Details of Banpu’s connected transactions with subsidiaries, affiliates and related companies are in Clause 8 of Notes to Financial Statements

Connected transactions between businesses with the following relationships were executed:

Connected Transactions Related Companies Transaction Value

Banpu Public Company Limited

1. The Company executed the following connected transactions with Chiang Muan Mining Co., Ltd. THB 31.84 million Chiang Muan Mining Co., Ltd.: • In 2007, incomes of THB 15.34 million were generated from coal sale to Chiang Muan Mining Co., Ltd. • Accounts receivable of related businesses worth THB16.42 million • Related advance worth THB 0.08 million

2. The Company executed the following connected transactions with Banpu International Ltd. THB 125.88 million Banpu International Ltd.: • In 2007, incomes of THB 95.84 million were generated from coal sale to Banpu International Ltd. • Related advance worth THB 0.04 million • Accrued management fee worth THB 30 million

3. Connected transactions with Banpu Minerals Co., Ltd.: Banpu Minerals Co., Ltd. THB 2,020.77 million The Company extended a loan in a form of P/N to Banpu Minerals Co., Ltd. at an interest rate calculated from an average cost of lending plus 0.5 per cent per annum. The Company had connected transactions with Banpu Minerals Co., Ltd. as follows: • As of 31 December 2007, the outstanding loan was THB 1,929.37 million. • In 2007, interest incomes were THB 91.40 million.

4. Connected transactions with BP Overseas Development Co., Ltd.: BP Overseas Development Co., Ltd. USD 32.80 million The Company extended a loan in a form of P/N to BP Overseas and THB 150.40 Development Co., Ltd. at an interest rate calculated from an average million cost of lending plus 2 per cent per annum. The Company had connected transactions with BP Overseas Development Co., Ltd. as follows: • As of 31 December 2007, the outstanding loan was USD 32.80 million. • In 2007, interest incomes were THB 68.64 million. • As of 31 December 2007, the outstanding advance was THB 81.76 million. 079

Connected Transactions Related Companies Transaction Value

5. Connected transactions with Banpu Singapore Pte. Ltd.: Banpu Singapore Pte. Ltd. USD 3.00 million The Company extended a loan in a form of P/N to Banpu Singapore Pte. Ltd. at an interest rate calculated from an average cost of lending plus 2 per cent per annum. The Company had connected transactions with Banpu Singapore Pte. Ltd. as follows: • As of 31 December 2007, the outstanding loan was USD 1.88 million. • In 2007, interest incomes were USD 0.12 million. • Accrued management fee was USD 1 million.

6. Connected transactions with PT. Jorong Barutama Greston: PT. Jorong Barutama Greston USD 3.96 million and The Company extended a loan in a form of P/N to PT. Jorong Barutama THB 110.75 million Greston at an interest rate calculated from an average cost of lending plus 2 per cent per annum. The Company had the following connected transactions with PT. Jorong Barutama Greston: • As of 31 December 2007, the outstanding loan was USD 3.96 million. • In 2007, interest incomes were THB 82.95 million. • As of 31 December 2007, the outstanding advance was THB 27.80 million.

7. Connected transactions with PT. Nusantara Thai Mining Services: PT. Nusantara Thai Mining Services USD 0.28 million The Company extended a loan in a form of P/N to PT. Nusantara Thai Mining Services at an interest rate calculated from an average cost of lending plus 2 per cent per annum. The Company had connected transactions with PT. Nusantara Thai Mining Services as follows: • As of 31 December 2007, the outstanding loan was USD 0.24 million. • In 2007, interest incomes were USD 0.04 million.

8. A connected transaction with PT. Centralink Wisesa International as follows: PT. Centralink Wisesa International THB 92.73 million The Company received a loan it had extended back from PT. Centralink Wisesa International in 2007. As a result, the only connected transaction it had with the firm was interest incomes totaling THB 92.73 million in 2007.

9. A connected transaction with PT. Kitadin as follows: PT. Kitadin THB 101.43 million The Company received a loan it had extended back from PT. Kitadin in 2007. As a result, the only connected transaction it had with the firm was interest incomes totaling THB 101.43 million in 2007. 080

Connected Transactions Related Companies Transaction Value

10. Connected transactions with PT. Trubaindo Coal Mining as follows: PT. Trubaindo Coal Mining USD 21 million The Company extended a loan in a form of P/N to PT. Trubaindo Coal and THB 120.21 Mining at an interest rate calculated from an average cost of lending million plus 2 per cent per annum. The Company had the following connected transactions with PT. Trubaindo Coal Mining: • As of 31 December 2007, the outstanding loan was USD 21 million. • In 2007, interest incomes were THB 120.16 million. • As of 31 December 2007, the outstanding advance was THB 0.05 million.

11. Connected transactions with PT. Indominco Mandiri: PT. Indominco Mandiri THB 83.43 million The Company had the following connected transactions with PT. Indominco Mandiri: • In 2007, interest incomes were THB 38.54 million. • Management fee was THB 31.80 million. • As of 31 December 2007, the outstanding advance was THB 13.09 million.

12. A connected transaction with PT. Bharinto Ekatama as follows: PT. Bharinto Ekatama THB 7.18 million The Company received a loan it had extended back from PT. Bharinto Ekatama in 2007. As a result, the only connected transaction it had with the firm was interest incomes totaling THB 7.18 million in 2007.

13. Connected transactions with Banpu Power International Ltd.: Banpu Power International Ltd. THB 233.74 million The Company extended a loan in a form of P/N to Banpu Power International Ltd. at an interest rate calculated from an average cost of lending plus 0.5 per cent per annum. Banpu Plc. had the following connected transactions with Banpu Power International Ltd.: • As of 31 December 2007, the outstanding loan was THB 228.43 million. • In 2007, interest expenses were THB 5.31 million.

14. Connected transactions with Banpu China Pte. Ltd.: Banpu China Pte. Ltd. USD 32.8 million and The Company extended a loan in a form of P/N to Banpu China Pte. Ltd. THB 38.65 million at an interest rate calculated from an average cost of lending plus 0.5 per cent per annum. The Company had the following connected transactions with Banpu China Pte. Ltd.: • As of 31 December 2007, the outstanding loan was USD 32.8 million. • In 2007, interest incomes were THB 38.65 million. 081

Connected Transactions Related Companies Transaction Value

Banpu Minerals Co., Ltd.

1. Connected transactions with Silamani Corp., Ltd.: Silamani Corp., Ltd. THB 313.48 million Banpu Minerals Co., Ltd. extended a loan in a form of P/N to Silamani Corp., Ltd. at an interest rate calculated from an average cost of lending plus 0.5 per cent per annum. Banpu Minerals Co., Ltd. had the following loans and interest expenses with Silamani Corp., Ltd.: • As of 31 December 2007, the outstanding loan was THB 304 million. • In 2007, interest expenses were THB 9.48 million.

2. Connected transactions with Chiang Muan Mining Co., Ltd.: Chiang Muan Mining Co., Ltd. THB 79.11 million Banpu Minerals Co., Ltd. extended a loan in a form of P/N to Chiang Muan Mining Co., Ltd. at an interest rate calculated from an average cost of lending plus 0.5 per cent per annum. Banpu Minerals Co., Ltd. had the following loans and interest expenses with Chiang Muan Mining Co., Ltd.: • As of 31 December 2007, the outstanding loan was THB 76 million. • In 2007, interest incomes were THB 3.11 million.

3. Connected transactions with Banpu International Ltd.: Banpu International Ltd. THB 18.45 million Banpu Minerals Co., Ltd. extended a loan in a form of P/N to Banpu International Ltd. at an interest rate calculated from an average cost of lending plus 0.5 per cent per annum. Banpu Minerals Co., Ltd. had the following transactions with Banpu International Ltd.: • As of 31 December 2007, the outstanding loan was THB 18 million. • In 2007, interest expenses were THB 0.45 million.

4. A connected transaction with Banpu Minerals (Singapore) Pte. Ltd. as follows: Banpu Minerals (Singapore) Pte. Ltd. THB 20.82 million Banpu Minerals Co., Ltd. received a loan it had extended back from Banpu Minerals (Singapore) Pte. Ltd. in 2007. As a result, the only connected transaction it had with the firm was interest incomes totaling THB 20.82 million in 2007.

5. Connected transactions with Silamani Marble Co., Ltd.: Silamani Marble Co., Ltd. THB 176.45 million Banpu Minerals Co., Ltd. extended a loan in a form of P/N to Silamani Marble Co., Ltd. at an interest rate calculated from an average cost of lending plus 0.5 per cent per annum. Banpu Minerals Co., Ltd. had the following loans and interest expenses with Silamani Marble Co., Ltd.: • As of 31 December 2007, the outstanding loan was THB 171 million. • In 2007, interest expenses were THB 5.45 million. 082

Connected Transactions Related Companies Transaction Value

Banpu Power Ltd.

1. A connected transaction with Banpu Coal Power Ltd. as follows: Banpu Coal Power Ltd. THB 5.77 million Banpu Power Ltd. received a loan it had extended back from Banpu Coal Power Ltd. in 2007. As a result, the only connected transaction it had with the firm was interest incomes totaling THB 5.77 million in 2007.

N e c e s s i t y a n d S o u n d n e s s o f C o n n e c t e d T r a n s a c t i o n s

In case the Company enters into an agreement or if there is any connected transaction between the Company and its subsidiary companies, affiliated companies, related companies and/or the third party, the Company will consider the necessity and soundness of such connected transaction before executing a contract based mainly on the Company’s interests.

A p p r o v a l M e a s u r e s o r P r o c e d u r e s o f C o n n e c t e d T r a n s a c t i o n s

When the Company executes a contract or whenever there is a connected transaction between itself and its subsidiary companies, affiliated companies, related companies, the third party and/or anyone with possible conflicts of interest, the Board of Directors requires the Company, for the purpose of its benefits, to comply with the rules stated in the Stock Exchange of Thailand’s (SET) Announcement Re: Information disclosure and practices of listed companies in connected transactions. Meanwhile, prices and other conditions shall be as if the transaction is made with the third party where directors or staff with an interest in such transaction must not participate in the approval process.

P o l i c y o r O u t l o o k f o r F u t u r e C o n n e c t e d T r a n s a c t i o n s

None

R e p o r t o f t h e A u d i t C o m m i t t e e R e g a r d i n g t h e C o n n e c t e d T r a n s a c t i o n s

None R e p o r t o f t h e B o a r d o f D i r e c t o r s ’ 083 R e s p o n s i b i l i t y i n t h e F i n a n c i a l S t a t e m e n t s Annual Report 2007 • Banpu Public Company Limited

The Board of Directors’ priority is to supervise the Company’s operations that they are in line with the good corporate governance policies and that financial statements and financial data appeared in the Company’s annual report contain accurate, complete and adequate information. Its duty is also to make sure that the financial statements are in line with the generally-accepted accounting principles practiced in Thailand where an appropriate accounting policy is being chosen and carefully pursued on a regular basis. In addition, the Board of Directors must also ensure that the Company has an effective internal control system to guarantee the credibility of its financial statements, that a protection system is in place to prevent unusual transactions, that a connected transaction that might lead to possible conflicts of interest is in fact an actual transaction reasonably carried out during a normal course of business for the Company’s maximum benefits and that relevant laws and regulations are complied. The Audit Committee has already reported the result of its action to the Board of Directors and has also reported its opinions in the Audit Committee’s Report as seen in the annual report.

In this regard, the Board of Directors is of the opinion that the Company’s internal control system is proven satisfactory and contributes to the Company’s credibility as of 31 December 2007. The Company’s auditor has already audited it according to the generally-accepted accounting standards and has an opinion that the financial statements show an accurate financial status and operation result in its essence as per the generally-accepted accounting principles.

(Mr. Soonthorn Vongkusolkit) (Mr. Chanin Vongkusolkit) Chairman of the Board Chief Executive Officer R e p o r t o f t h e A u d i t C o m m i t t e e t o S h a r e h o l d e r s 084 Annual Report 2007 • Banpu Public Company Limited

Dear Shareholders of Banpu Public Company Limited,

The Audit Committee of Banpu Public Company Limited consists of Mr. Somkiat Chareonkul, Chairman of the Audit Committee, and Mr. Montri Mongkolswat and Mr. Anothai Techamontrikul, members of the Audit Committee.

The Audit Committee performed its duty based on its scopes of responsibility entrusted by the Board of Directors. In 2007, the Audit Committee meetings were held seven times. Senior executives, Head of the Internal Audit Department and auditors also attended the meeting if there were relevant agendas. The results of the Audit Committee’s performance can be summarized as follows.

•Preparation of Financial Statement – The Audit Committee reviewed a quarterly financial statement and the 2007 financial statement with executives and auditors to ensure that financial statements of both the Company and its subsidiaries were in accordance with generally accepted accounting principles and that information was adequately and completely disclosed in a reliable manner. In addition, the Audit Committee also acknowledged solution guidelines for the Company’s benefit. Disclosure of related party transactions between the Company, its subsidiary and affiliated companies was scrutinized to ensure that the Company complied with business criteria required by the Stock Exchange of Thailand.

• Internal Control System – The Audit Committee reviewed the 2007 risk-based audit plan and recommended the Internal Audit Department to assess an internal control system that would cover subsidiary and affiliated companies overseas based on COSO international standards. This was to ensure adequate monitoring and solving issues of material essences as shown in an auditing report. In the end, all units must have an adequate internal control system to drive the business to a sustainable growth.

• Risk Management – The Board of Directors and its executives gave a priority to risk management and operations under a risk management policy. Risk factors were assessed while risk prevention systems were implemented to reduce impact to the Company’s operation. The Audit Committee reviewed the risk management policy and guidelines and monitored the development of risk management policy, work plans, coordination with related units and awareness of the risk management concept by the Risk Management Committee to ensure a linkage between an internal control and the Company’s business plan.

• Related Party Transactions – The Audit Committee reviewed related party transactions that may cause a conflict of interest to the Company and found that they were real and carried out during a normal course of business and the Company carried them out according to a good corporate governance policy.

• Law and Regulations Compliance – The Audit Committee reviewed the Company’s compliance according to the laws governing securities and exchange, regulations of the Stock Exchange of Thailand and other legislations relating to its business and found that they were fully complied. 085

• Corporate Governance – The Company’s priority was to manage its business according to the principles of good corporate governance for transparency, ethics so that shareholders, investors and all stakeholders are confident.

The Audit Committee, having reviewed the operation, is of the opinion that the Company diligently pursued the good corporate governance policy, resulting in an adequate internal control system with no significant weaknesses. The risk management was efficiently carried out. Related party transactions which may lead to conflict of interest were actual transactions found during a normal course of business carried out for the Company’s maximum benefit. No unusual item with material essence was found. The Company also fully complied with all the rules and regulations. For the financial statements during the accounting period that ended 31 December 2007, there was no incident that depicted items with financial impacts. The financial statements were properly done. Information was adequately disclosed and in line with the accounting standards.

The Audit Committee also selected the following auditors who will be nominated to the Board of Directors, which will subsequently seek approval from the Shareholders’ Meeting. They are: Ms. Nangnoi Charoenthaveesub, C.P.A. (Thailand) No. 3044; and/or Mr. Prasit Yuengsrikul, C.P.A. (Thailand) No. 4174; and/or; Mr. Vichien Khingmontri, C.P.A. (Thailand) No. 3977 of PricewaterhouseCoopers ABAS Limited, as the Company’s auditor in 2008 for a total auditing fee of THB 1,968,100.

12 February 2008 On behalf of the Audit Committee

(Mr. Somkiat Chareonkul) Chairman of the Audit Committee Banpu Public Company Limited M a n a g e m e n t ’ s D i s c u s s i o n a n d A n a l y s i s o f 086 t h e C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s Annual Report 2007 • Banpu Public Company Limited

The Company’s management would like to explain its fiscal year financial statement ending 31 December 2007 in comparison with the fiscal year financial statements ending 31 December 2006. Details of financial statements have been made in the attached note stated in the consolidated financial statement as of 31 December 2007.

1. The Consolidated Profit and Loss for the fiscal year ending 31 December 2007 in comparison with the Consolidated Profit and Loss for the fiscal year ending 31 December 2006 1.1 Sales revenue reported at THB 32,442 million, a decrease of THB 936 million or 3 per cent compared to the same period last year. The decrease was mainly due to lower coal sale volume and strengthening of Thai Baht while coal selling prices rose 17 per cent. Details of the Company’s sales revenue are as follow: Revenue from coal sales of THB 28,429 million accounted for 88 per cent of total sales revenue. This represents a decrease of THB 2,005 million or 7 per cent. The revenue from coal sales includes: Sales revenue from Indonesian coal mines of THB 27,712 million; Sales revenue from domestic coal mines of THB 717 million. Sales of power and steam (from BPIC) of THB 3,865 million accounted for 12 per cent of total sales revenue and increasing 38 per cent compared to the previous year. Sales from others THB 148 million. Coal sale volume totaled 19.286 million tonnes, decreasing 11 per cent due to decreased production and sales volume of Thai mine and production suspension at an Indonesian mine. Average coal selling price was USD 41.06 per tonne, increasing 17 per cent due to increased coal market price and a higher portion of sales volume from high quality coal. 1.2 Cost of sales THB 20,964 million, increasing THB 126 million or 1 per cent due to the higher unit cost associated with higher portion of good-quality coal sale, increases in diesel price, and increases in mining ratio. 1.3 Gross profit reported at THB 11,478 million, a decrease of THB 1,063 million or 8 per cent. Gross profit margin is calculated at 35 per cent in this period. The gross profit margin from coal is 37 per cent and from power is 25 per cent. 1.4 Selling and administrative expenses reported at THB 5,114 million, an increase of THB 667 million or 15 per cent. due to an increase in general expenses, employee compensation, port rental, demurrage charges and provision for mine closure of domestic mines. 1.5 Export tax expenses was nil while reported at THB 706 million in last year. 1.6 Royalty fees reported at THB 3,247 million, an increase of THB 9 million due to the higher selling price of coal. 1.7 Gain on investment held for sale THB 452 million, from partial divestment of a listed coal company while in last year reported a gain from divestment of a listed petrochemical company of THB 902 million. 1.8 Gain on investment in subsidiaries THB 1,167 million, from selling of 2.4 per cent share capital of subsidiary which realized THB 1,146 million and divestment of a non-operating company in Indonesia of THB 21 million. 087

1.9 Loss on foreign exchange of THB 361 million, compared to a loss of THB 186 million reported in the same period of last year. 1.10 Dividend income of THB 479 million received from a listed power company. 1.11 Gain from financial derivatives of THB 68 million from coal Swap and oil hedging contract of subsidiary in Indonesia while in last year reported a loss of THB 438 million. 1.12 Equity income from subsidiaries and affiliates reported at THB 4,504 million, derived from equity income from BLCP of THB 4,076 million, and equity income from China coal business of THB 428 million. 1.13 Interest expenses of THB 1,160 million increased THB 207 million, mainly from new borrowings to fund capital increase of a power business in Thailand, power business in China, and investment projects in Indonesia. 1.14 Corporate income tax amounted to THB 1,492 million, increasing THB 369 million from the increased profit of Indonesian subsidiaries including tax expenses related to dividend received from overseas subsidiaries. 1.15 Net profit for the fiscal year of 2007 reported at THB 6,654 million, an increase of THB 3,044 million or 84 per cent. Compared to the same period last year, Thai Baht appreciated 9 per cent against US Dollar. Since the company’s revenues and cost of sales are mostly denominated in US Dollar, the appreciation of Thai Baht thus impacted the accounting translation of revenues and cost of sales when preparing for consolidated financial statement. Had the exchange rate of last year been used in preparing consolidated financial statement, the revenues, cost of sales, and net profit in Thai Baht in this quarter would have been higher by THB 2,998 million, THB 1,888 million, and THB 373 million respectively (based on average THB/USD exchange rate of 37.93 and 34.57 in 2006 and 2007 respectively). 1.16 Earnings per share (EPS) for the fiscal year 2007 reported at THB 24.49 per share compared to THB 13.29 per share last year.

2. Consolidated Balance Sheet as of 31 December 2007 in comparison with Consolidated Balance Sheet as of 31 December 2006 2.1 Total assets of THB 65,051 million reported an increase of THB 15,664 million or 32 per cent with details described below: Cash and cash equivalents of THB 13,304 million increased THB 8,500 million or 177 per cent due to cash received from the listing of Indonesian subsidiary in the Indonesian Stock Exchange, and cash paid for investment in BLCP and investment in machine and equipment. Accounts and note receivable of THB 3,656 million decreased THB 349 million due to early payment by customers. Accrued dividends from related parties of THB 2,075 million from accrued dividend of BLCP. Investment in subsidiaries, joint venture and associates of THB 11,303 million increased THB 4,470 million or 65 per cent due to capital increase and profit sharing of BLCP. Other investment of THB 10,442 million increased THB 285 million or 3 per cent from mark-to-market adjustment. 088

Property plant and equipment of THB 14,786 million increased of THB 1,341 million due to machinery investment in subsidiaries in Indonesia and China. However, the accounting values of these assets were lowered by the appreciation of Thai Baht. 2.2 Total liabilities of THB 26,554 million increased THB 489 million or 2 per cent with details described below: Bank loans and overdrafts of THB 2,278 million decreased THB 982 million or 30 per cent from repayment of loans that matured and carried high interest rate, while domestic bills of exchange with lower interest rate were issued. Current portion of long-term loans and current portion of Baht debenture of THB 1,808 million decreased THB 534 million from loans repayment. Accrued overburden and transportation expenses of THB 2,067 million, increased THB 53 million mainly from the Indonesian operations. Long-term loans of THB 5,854 million increased THB 1,869 million due to borrowing to fund the capital increase in BLCP of THB 2,250 million and issuing bill of exchange of THB 1,400 million. Baht debenture of THB 8,581 million decreased THB 1,393 million from partial transfer to current portion. 2.3 Shareholders’ equity of THB 38,497 million increased THB 16,153 million or 72 per cent mainly from Net profit for the fiscal year of 2007 at THB 6,654 million. Premium on share capital of THB 7,887 million from the listing of subsidiary in the Indonesian Stock Exchange. Dividend payment to shareholders of THB 2,154 million. An increase of THB 418 million from a higher mark-to-market value of investment in listed companies. The decrease from affiliates’ foreign exchange translations of THB 427 million. 2.4 Net debt-to-equity as of 31 December 2007 reported at 0.14 times for the consolidated balance sheet and 1.34 times for the parent company. As of 31 December 2006, the ratio were 0.66 times for the consolidated balance sheet and 1.91 times for the parent company.

3. Statement of Cash Flow for the fiscal year ending 31 December 2007 in comparison with the previous year ending 31 December 2006 Banpu’s statement of cash flow for the fiscal year ending 31 December 2007 recorded an increased in net cash flow of THB 8,616 million compared to last year. The Company’s net cash flow is divided into: 3.1 Cash flow from operation of THB 3,371 million; net from corporate income tax of THB 2,166 million. 3.2 Cash flow from investment recorded a deficit of THB 4,526 million; Cash payment for investment in machinery and mining equipment of THB 2,984 million, project in progress and overburden removals in advance of THB 2,237 million, and capital increase in BLCP of THB 3,258 million. 089

Cash received from the listing of subsidiary and divestment of a non-operating subsidiary of THB 1,593 million, partial divestment of a listed coal company of THB 596 million, and dividend income of THB 1,702 million. 3.3 Cash flow from financing recorded of THB 9,772 million, from cash received from the listing of subsidiary of THB 12,305 million and drawdown of bank loan and long-term loan of THB 12,382 million. Cash outflows were for repaying bank loan, long-term loan and debenture of THB 12,775 million and dividend payment of THB 2,154 million.

4. Impacts from application of new accounting standard According to the notification of Federation of Accounting Professions which requires that accounting for investment in subsidiaries and associates under non-consolidated financial statements be changed from equity method to cost method, the Company has applied these accounting methods which is mandatory from 1 January 2007. The impacts from application of such methods are as follow. The non-consolidated financial statement for fiscal year of 2007 records a net profit of THB 3,540 million whereas the consolidated financial statement records a net profit of THB 6,654 million. The non-consolidated financial statement for fiscal year of 2006 records a net profit of THB 742 million whereas the consolidated financial statement records a net profit of THB 3,610 million. On the balance sheets, the non-consolidated financial statement as of 31 December 2006 records a decline in “Investments in subsidiaries and associates and interests in joint ventures” by THB 12,855 million, a decline in retained earnings by THB 8,601 million, and a decline in shareholders’ equity by THB 12,855 million. Note that the new accounting method affects the accounts in subsidiaries, associates, and joint ventures under the non-consolidated financial statements only but does not affect the consolidated financial statements or fundamental business of the Company.

5. Management Discussion and Analysis The thermal coal market during year 2007 indicates further tightening of regional market on the back of rising demand and limited supply. Market balance changed remarkably in China, whose robust economy coupled with in-land logistic difficulty almost turned the country from a major coal exporter into a net importer for the first time. Against the higher regional demand was limited supply growth from the two main exporters, Australia and Indonesia. Australia’s export was held back by persistent bottleneck at Newcastle ports, while Indonesia’s wettest monsoon in many years cut short coal production from the archipelago. The spot coal price, based on the Barlow Jonder Index, responded by soaring 75 per cent from USD 51 per tonne at the beginning of the year to USD 89 per tonne at year end, or an all-year average of USD 61 per tonne (USD 49 per tonne in 2006). 090

Banpu’s coal operation reports sales volume of 19.286 million tonnes in 2007, decreasing 11 per cent from its previous year and missing the initial target by 8 per cent. The output was mainly dragged by weak production at Trubaindo mine where unreadiness of mining contractor was exacerbated by the unusually severe rainfall. Production improvement is expected in the following year after a new contractor with bigger capacity was put in place since October. Nevertheless, the lower volume was compensated by a stronger average coal selling price of USD 41.06 per tonne which increased 17 per cent year-on-year and exceeded the Company’s original estimate by 11 per cent. In China, the two coal mining associates together provided an equity income of THB 428 million. The Power Business performed well and helped diversify cash flows for the Company. The 50 per cent-owned BLCP power plant, which has been fully commenced since February 2007, generated an equity income of THB 4,076 million (including a foreign exchange gain of THB 591 million). The 14.99 per cent holding in a listed power company provided a dividend income of THB 457 million. In addition, the Chinese subsidiary BPIC delivered a steady net profit of THB 593 million from its three Combined Heat and Power (CHP) plants. The EBITDA for 2007 totaled THB 12,916 million, increasing 36 per cent from previous year. Coal Business contributed THB 7,398 million (57 per cent of total) while Power Business generating THB 5,518 million. On 18 December, the Company completed the IPO of PT Indo Tambangraya Megah Tbk. (ITM) in the Indonesian Stock Exchange. A total 20 per cent of enlarged shares were issued through IPO. In a separate transaction, the Company sold 2.4 per cent stake in ITM to the existing partner. As a result, Banpu’s effective holding in ITM was diluted to 73.72 per cent (from pre-IPO level of 95 per cent) and non-recurring income of THB 1,146 million incurred in the Company’s financial statement. In late 2007, the Company began divesting its 10 per cent stake in a listed coal company and booked an after-tax gain from divestment of THB 316 million. In sum, for the year 2007 the Company realized a consolidated net profit of THB 6,654 million, an increase of 84 per cent from the previous year. By excluding non-recurring items, the core businesses generated a net profit of THB 5,920 million, or an increase of 61 per cent from the previous year. A u d i t o r ’ s R e p o r t 091 Annual Report 2007 • Banpu Public Company Limited

To the Shareholders of Banpu Public Company Limited

I have audited the accompanying consolidated and company balance sheets as at 31 December 2007 and the related consolidated and company statements of income, changes in shareholders’ equity and cash flows for the year then ended of Banpu Public Company Limited and its subsidiaries and of Banpu Public Company Limited, respectively. The Company’s management is responsible for the correctness and completeness of information in these financial statements. My responsibility is to express an opinion on these financial statements based on my audit. The consolidated and company financial statements for the year ended 31 December 2006 of Banpu Public Company Limited and its subsidiaries and of Banpu Public Company, presented herewith for comparative purposes, were audited by another auditor from the same firm as myself and the other auditor expressed an unqualified opinion on those statements on her report dated 21 February 2007. I conducted my audit in accordance with generally accepted auditing standards. Those standards require that I plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion. In my opinion, the consolidated and company financial statements referred to above present fairly, in all material respects, the consolidated and company financial position as at 31 December 2007 and the consolidated and company results of operations and cash flows for the year then ended of Banpu Public Company Limited and its subsidiaries and of Banpu Public Company Limited in accordance with generally accepted accounting principles.

(Nangnoi Charoenthaveesub) Certified Public Accountant (Thailand) No. 3044 PricewaterhouseCoopers ABAS Limited

Bangkok 27 February 2008 B a l a n c e S h e e t s 092 Banpu Public Company Limited • As at 31 December 2007 and 2006

C o n s o l i d a t e d C o m p a n y

2007 2006 2007 2006 Notes THB Thousand THB Thousand THB Thousand THB Thousand (Restated)

ASSETS

Current Assets Cash and cash equivalents 3 13,304,348 4,804,200 3,222,320 1,884,959 Trade accounts receivable, net 4 3,655,600 4,004,123 381,132 148,920 Trade accounts receivable from subsidiaries 28.2 - - 16,417 49,435 Amounts due from related parties 28.2 9,004 11,358 626,868 921,065 Dividend receivables from related parties 28.2 2,074,500 - 3,124,201 - Advances to related parties 28.3 122 21 110,117 522,315 Inventories, net 5 1,850,900 1,645,847 504,762 326,101 Spare parts and machinery supplies 318,226 334,361 22,363 22,538 Other current assets 6 1,799,223 1,601,140 584,083 293,263 Total Current Assets 23,011,923 12,401,050 8,592,263 4,168,596

Non-Current Assets Loans to employees 15,063 17,608 3 38 Long-term loans to subsidiaries 28.3 - - 5,331,183 13,730,051 Long-term loans to other companies 7 341,774 342,119 341,774 336,726 Investments in subsidiaries and associates and interests in joint ventures 8 11,302,562 6,832,666 7,966,674 3,767,031 Other investments, net 9 10,442,019 10,156,783 5,375,556 5,387,680 Property, plant and equipment, net 10 14,786,069 13,444,755 321,445 395,821 Other non-current assets Deferred exploration and development expenditures and deferred overburden expenses, net 11 2,746,461 3,645,833 41,231 456,171 Mining property rights and negative goodwill, net 12 303,549 425,518 - - Projects under development 13 897,012 554,420 252,881 172,561 Other non-current assets 14 1,204,373 1,565,725 235,821 360,365 Total Non-Current Assets 42,038,882 36,985,427 19,866,568 24,606,444 Total Assets 65,050,805 49,386,477 28,458,831 28,775,040

The notes to the consolidated and company financial statements on pages 102 to 146 are an integral part of these financial statements. B a l a n c e S h e e t s ( c o n t i n u e d ) 093 Banpu Public Company Limited • As at 31 December 2007 and 2006

C o n s o l i d a t e d C o m p a n y

2007 2006 2007 2006 Notes THB Thousand THB Thousand THB Thousand THB Thousand (Restated)

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current Liabilities Bank overdrafts and loans from banks and financial institutions 15 2,278,143 3,260,001 993,546 2,470,283 Trade accounts payable 939,743 363,135 - - Advances from subsidiaries 28.4 - - 10,873 4,396 Short-term loan from a subsidiary 28.4 - - 862,373 1,429,305 Current portion of long-term loans, net 17 408,016 741,873 - 100,000 Current portion of debentures, net 18 1,400,000 1,600,000 1,400,000 1,600,000 Other current liabilities Accrued overburden and coal transportation costs 2,066,614 2,013,792 16,313 27,145 Accrued interest expenses 111,057 154,069 122,179 168,435 Accrued royalty expenses 985,571 999,693 5,501 7,641 Accrued income tax expenses 503,111 1,177,803 - - Others Current Liabilities 16 3,096,280 2,400,872 283,065 229,831 Total Current Liabilities 11,788,535 12,711,238 3,693,850 6,037,036

Non-Current Liabilities Long-term loans from subsidiaries 28.4 - - 1,218,019 1,698,430 Long-term loans, net 17 5,854,409 3,985,200 4,363,094 1,909,991 Debentures, net 18 8,580,547 9,973,946 8,580,547 9,973,946 Employee retirement benefits obligation 19 268,155 333,967 14,134 79,174 Other liabilities 61,863 38,208 497 497 Total Non-Current Liabilities 14,764,974 14,331,321 14,176,291 13,662,038 Total Liabilities 26,553,509 27,042,559 17,870,141 19,699,074

The notes to the consolidated and company financial statements on pages 102 to 146 are an integral part of these financial statements. B a l a n c e S h e e t s ( c o n t i n u e d ) 094 Banpu Public Company Limited • As at 31 December 2007 and 2006

C o n s o l i d a t e d C o m p a n y

2007 2006 2007 2006 Notes THB Thousand THB Thousand THB Thousand THB Thousand (Restated)

LIABILITIES AND SHAREHOLDERS’ EQUITY (continued)

Shareholders’ Equity Share capital Registered share capital 354,050,479 ordinary shares of THB 10 each 3,540,505 3,540,505 3,540,505 3,540,505

Issued and paid-up share capital 20 2,717,479 2,717,479 2,717,479 2,717,479 Premium on share capital 20 5,058,329 5,058,329 5,058,329 5,058,329 Surplus on dilution of investments in a subsidiary 7,886,746 - - - Fair value reserve of available-for-sale securities 6,909,652 6,491,683 1,109,364 983,047 Translation adjustment (1,742,428) (1,315,039) - - Retained earnings Appropriated Legal Reserve 26 744,376 414,514 354,051 354,051 Unappropriated 12,734,861 8,564,169 1,349,467 (36,940) Total parent’s shareholders’ equity 34,309,015 21,931,135 10,588,690 9,075,966 Minority interests 4,188,281 412,783 - - Total Shareholders’ Equity 38,497,296 22,343,918 10,588,690 9,075,966 Total Liabilities and Shareholders’ Equity 65,050,805 49,386,477 28,458,831 28,775,040

The notes to the consolidated and company financial statements on pages 102 to 146 are an integral part of these financial statements. S t a t e m e n t s o f I n c o m e 095 Banpu Public Company Limited • For the years ended 31 December 2007 and 2006

C o n s o l i d a t e d C o m p a n y

2007 2006 2007 2006 Notes THB Thousand THB Thousand THB Thousand THB Thousand (Restated)

Sales 32,441,789 33,378,263 1,767,837 1,889,751 Cost of sales (20,963,896) (20,837,590) (1,606,743) (1,236,625) Gross profit 11,477,893 12,540,673 161,094 653,126 Selling and administrative expenses (5,114,262) (4,446,971) (1,072,937) (771,940) Royalty fee (3,246,604) (3,237,779) (16,014) (42,040) Export tax 27 - (705,500) - - Profit (loss) from sales 3,117,027 4,150,423 (927,857) (160,854) Gain on disposal of investments in available-for-sale securities 451,520 902,003 451,520 850,361 Gain on disposal of investments in subsidiaries 1,167,240 - - - Dividends income from subsidiaries 28.1 - - 4,352,136 287,031 Dividends income from others 478,877 554,015 252,565 305,156 Interest income 123,377 141,302 865,996 1,002,299 Net gain (loss) from financial instruments 68,391 (437,981) (1,295) 51,035 Net loss on exchange rate (360,995) (185,685) (424,851) (669,123) Directors’ remuneration 25 (29,364) (35,801) (29,364) (35,801) Others 201,157 157,661 226,381 141,896 Operating profit 21 5,217,230 5,245,937 4,765,231 1,772,000 Share of profit of associates and interests in joint ventures 8 4,504,372 800,793 - - Profit before interest and income tax 9,721,602 6,046,730 4,765,231 1,772,000 Interest expenses (1,160,392) (953,243) (971,919) (825,758) Financial expenses (146,383) (227,384) (116,740) (203,906) Income taxes 29 (1,491,668) (1,122,339) (136,296) - Profit before minorities 6,923,159 3,743,764 3,540,276 742,336 Less Profit attributable to minorities (268,736) (133,583) - - Net profit for the year 6,654,423 3,610,181 3,540,276 742,336

Basic earnings per share (THB) 22 24.49 13.29 13.03 2.73

The notes to the consolidated and company financial statements on pages 102 to 146 are an integral part of these financial statements. S t a t e m e n t s o f C h a n g e s i n S h a r e h o l d e r s ’ E q u i t y 096 Banpu Public Company Limited • For the years ended 31 December 2007 and 2006

C o n s o l i d a t e d 2 0 0 7

Surplus on Fair value dilution of reserve of Unappro- Issued and Premium investment available- priated paid-up on share in a for-sale Translation Legal retained Minority share capital capital subsidiary securities adjustment reserve earnings interest Total Notes THB Thousand THB Thousand THB Thousand THB Thousand THB Thousand THB Thousand THB Thousand THB Thousand THB Thousand

Opening balance of 2007 2,717,479 5,058,329 - 6,491,683 (1,315,039) 414,514 8,564,169 412,783 22,343,918 Fair value adjustment 9 ---417,969 - - - - 417,969 Translation adjustment ----(427,389) - - 3,506,762 3,079,373 Legal reserve 26 -----329,862 (329,862) - - Dividend paid 24 ------(2,153,869) - (2,153,869) Surplus on dilution of investment in a subsidiary --7,886,746 - - - - - 7,886,746 Net profit for the year ------6,654,423 268,736 6,923,159 Closing balance of 2007 2,717,479 5,058,329 7,886,746 6,909,652 (1,742,428) 744,376 12,734,861 4,188,281 38,497,296

C o m p a n y 2 0 0 7

Fair value reserve of Unappro- Issued and Premium available- priated paid-up on share for-sale Translation Legal retained share capital capital securities adjustment reserve earnings Total Notes THB Thousand THB Thousand THB Thousand THB Thousand THB Thousand THB Thousand THB Thousand

Opening balance of 2007 2,717,479 5,058,329 6,491,683 (1,315,039) 414,514 8,564,169 21,931,135 Adjustment 2.3 --(5,508,636) 1,315,039 (60,463) (8,601,109) (12,855,169) Opening balance after restropective adjustment 2,717,479 5,058,329 983,047 - 354,051 (36,940) 9,075,966 Fair value adjustment 9 -- 126,317 - - - 126,317 Dividend paid 24 - ----(2,153,869) (2,153,869) Net profit for the year - ----3,540,276 3,540,276 Closing balance of 2007 2,717,479 5,058,329 1,109,364 - 354,051 1,349,467 10,588,690

The notes to the consolidated and company financial statements on pages 102 to 146 are an integral part of these financial statements. S t a t e m e n t s o f C h a n g e s i n S h a r e h o l d e r s ’ E q u i t y ( c o n t i n u e d ) 097 Banpu Public Company Limited • For the years ended 31 December 2007 and 2006

C o n s o l i d a t e d 2 0 0 6

Fair value Issued and reserve of Unappro- paid-up Premium available- priated share on share for-sale Translation Legal retained Minority capital capital securities adjustment reserve earnings interests Total Notes THB Thousand THB Thousand THB Thousand THB Thousand THB Thousand THB Thousand THB Thousand THB Thousand

Opening balance of 2006 2,717,479 5,058,329 6,914,095 (452,180) 397,515 6,941,115 224,210 21,800,563 Fair value adjustment - - (422,412) - - - - (422,412) Translation adjustment - - - (970,327) - - (179,619) (1,149,946) Legal reserve 26 - - - - 16,999 (16,999) - - Dividend paid 24 - ----(1,970,128) - (1,970,128) Net profit for the year - ---- 3,610,181 133,583 3,743,764 Additional investment in a subsidiary - - - 107,468 - - 234,609 342,077 Closing balance of 2006 2,717,479 5,058,329 6,491,683 (1,315,039) 414,514 8,564,169 412,783 22,343,918

C o m p a n y 2 0 0 6

Fair value reserve of Unappro- Issued and Premium available- priated paid-up on share for-sale Translation Legal retained share capital capital securities adjustment reserve earnings Total Notes THB Thousand THB Thousand THB Thousand THB Thousand THB Thousand THB Thousand THB Thousand

Opening balance of 2006 2,717,479 5,058,329 6,914,095 (452,180) 397,515 7,026,895 21,662,133 Adjustment - - (5,350,675) 452,180 (43,464) (5,836,043) (10,778,002) Opening balance after restropective adjustment 2,717,479 5,058,329 1,563,420 - 354,051 1,190,852 10,884,131 Fair value adjustment - - (580,373) - - - (580,373) Dividend paid 24 - - - - - (1,970,128) (1,970,128) Net profit for the year - - - - - 742,336 742,336 Closing balance of 2006 2,717,479 5,058,329 983,047 - 354,051 (36,940) 9,075,966

The notes to the consolidated and company financial statements on pages 102 to 146 are an integral part of these financial statements. S t a t e m e n t s o f C a s h F l o w s 098 Banpu Public Company Limited • For the years ended 31 December 2007 and 2006

C o n s o l i d a t e d C o m p a n y

2007 2006 2007 2006 Notes THB Thousand THB Thousand THB Thousand THB Thousand (Restated)

Cash flows from operating activities Net profit for the year 6,654,423 3,610,181 3,540,276 742,336 Adjustment to reconcile net profit to net cash provided by operations Depreciation 21 1,455,859 1,511,200 108,189 86,236 Amortisation of deferred expenditures 21 2,483,566 1,980,971 200,378 394,810 Write-off spare parts and machinery supplies 11,987 - - - Write-off property, plant and equipment 52,880 - 512 - Impairment losses of assets - 14,484 - - Impairment losses of deferred overburden 11 101,152 - 87,204 - Allowance for doubtful accounts 4 (20,609) 63,584 (20,609) (20,609) Allowance for net realisable value of inventories 5 228,203 - 224,185 - Share of net profit of associates and interests in joint ventures 8 (4,504,372) (800,793) - - Dividends received from subsidiaries 28.1 - - (4,352,136) (287,031) Dividends received from joint ventures (1,222,938) - - - Dividends received from other investments (478,877) (554,015) (252,565) (305,156) Write-off projects under development 13 - 8,020 - - (Gain) loss on disposal of property, plant and equipment (24,856) 1,827 (22,550) (5,311) Gain on disposal of investments in subsidiaries (1,281,899) - - - Gain on disposal of other investments (451,520) (902,003) (451,520) (856,375) Unrealised (gains) loss on exchange rate (95,584) 317,290 369,304 1,217,986 Net share of profit to minority shareholders’ interests 268,736 133,583 - - Cash flow before changes in working capital 3,176,151 5,384,329 (569,332) 966,886

The notes to the consolidated and company financial statements on pages 102 to 146 are an integral part of these financial statements. S t a t e m e n t s o f C a s h F l o w s ( c o n t i n u e d ) 099 Banpu Public Company Limited • For the years ended 31 December 2007 and 2006

C o n s o l i d a t e d C o m p a n y

2007 2006 2007 2006 Notes THB Thousand THB Thousand THB Thousand THB Thousand (Restated)

Changes in working capital (exclude effect from acquistion and disposal of subsidiaries) Trade accounts receivable 369,132 (1,667,339) (178,585) 324,175 Amounts due to related parties 2,354 40,980 294,197 (141,392) Inventories (433,256) 14,786 (153,381) 94,660 Spare parts and machinery supplies 4,148 73,260 175 3,513 Other current assets (198,083) (38,053) (290,820) (69,989) Trade accounts payable 576,608 (341,996) - - Accrued overburden and coal transportation costs 52,822 499,649 (10,832) (13,188) Accrued interest expenses (43,012) 4,965 (46,256) (29,779) Accrued royalty fee (14,122) 131,418 (2,140) 2,120 Accrued income tax (674,692) (485,581) - (243,674) Employee retirement benefits obligation (142,810) 27,944 (65,040) 363 Other current liabilities 695,579 660,791 53,234 (86,885) Net cash receipts (payments) from operating activities 3,370,819 4,305,153 (968,780) 806,810

The notes to the consolidated and company financial statements on pages 102 to 146 are an integral part of these financial statements. S t a t e m e n t s o f C a s h F l o w s ( c o n t i n u e d ) 0100100 Banpu Public Company Limited • For the years ended 31 December 2007 and 2006

C o n s o l i d a t e d C o m p a n y

2007 2006 2007 2006 Notes THB Thousand THB Thousand THB Thousand THB Thousand (Restated)

Cash flows from investing activities Cash receipts (payments) for advances to related parties (101) - 6,477 (205,738) Cash receipts (payments) for advances from related parties - - 412,198 (1,644) Cash receipts from loans to related parties 28.3 54,504 - 11,718,333 2,028,148 Cash payments for loans to related parties 28.3 (55,047) - (3,856,033) (8,277,824) Cash receipts from long-term loans to other companies - 9,000 - - Cash receipts from loans to employees, net 2,545 4,989 35 102 Cash receipts from disposal of investments in subsidiaries 1,593,297 - - - Cash payments for purchase of investments in subsidiaries, associates and interests in joint ventures (3,329,657) (6,751,886) (4,199,643) - Cash receipts from disposal of other investments 596,426 1,160,308 596,426 1,009,097 Cash payments for purchase of other investments 9 (13,431) (93,635) (6,465) (87,155) Cash payments for projects under development (402,110) (206,110) (78,549) (124,799) Cash payments for deferred overburdened expenses 11 (1,934,408) (3,997,444) (111,106) (311,970) Cash payments for purchase of property, plant and equipment 10 (2,983,853) (639,797) (37,096) (37,682) Cash receipts from disposal of property, plant and equipment 73,050 79,664 24,062 12,060 Other non-current assets 170,495 (40,148) 124,032 (105,170) Cash receipts from dividends from other investments 478,877 554,015 252,565 305,156 Cash receipts from dividends from investments in subsidiaries, joint venture and associates 1,222,938 - 1,227,935 287,031 Net cash receipts (payments) from investing activities (4,526,475) (9,921,044) 6,073,171 (5,510,388)

The notes to the consolidated and company financial statements on pages 102 to 146 are an integral part of these financial statements. S t a t e m e n t s o f C a s h F l o w s ( c o n t i n u e d ) 0101101 Banpu Public Company Limited • For the years ended 31 December 2007 and 2006

C o n s o l i d a t e d C o m p a n y

2007 2006 2007 2006 Notes THB Thousand THB Thousand THB Thousand THB Thousand (Restated)

Cash flows from financing activities Cash receipts from loans from banks 9,484,161 4,722,985 4,001,536 2,860,167 Repayment of loans from banks (10,371,882) (2,970,828) (5,470,283) (1,415,726) Repayment of short-term loan from related parties - - (507,231) 1,429,305 Cash receipts from loans from related parties 28.4 - - 709,440 441,151 Repayment of loans from related parties 28.4 - - (1,194,502) (2,475,548) Cash receipts from long-term loans 17 2,898,288 3,701,221 2,600,270 1,946,690 Repayments of long-term loans 17 (803,166) (1,175,770) (100,000) (300,000) Cash payments for deferred financing service fee for long-term loans 17 (10,031) (11,893) (3,015) (11,893) Repayments of debentures 18 (1,600,000) (1,254,126) (1,600,000) (1,254,126) Other liabilities 23,655 162,265 - 1 Cash receipts from additional share capital of a subsidiary 12,304,928 - - - Dividends paid 24 (2,153,869) (1,970,128) (2,153,869) (1,970,128) Net cash receipts (payments) from financing activities 9,772,084 1,203,726 (3,717,654) (750,107)

Net increase (decrease) in cash and cash equivalents 8,616,428 (4,412,165) 1,386,737 (5,453,685) Increase from purchase of investments - 493,577 - - Reclassification - (50,048) - (50,048) Adjustment from foreign exchange translation (107,949) (363,272) (41,386) (234,809) Cash and cash equivalents at beginning of the year 4,795,869 9,127,777 1,876,969 7,615,511 Cash and cash equivalents at end of the year 13,304,348 4,795,869 3,222,320 1,876,969

Cash and cash equivalents comprise: Cash and cash equivalents - as presented in the balance sheets 3 13,304,348 4,804,200 3,222,320 1,884,959 Less Bank overdrafts 15 - (8,331) - (7,990) Cash and cash equivalents at end of the year 13,304,348 4,795,869 3,222,320 1,876,969

Supplementary information for cash flows: Cash paid during the year Interest paid 1,203,404 948,278 1,018,175 989,200 Corporate income tax 2,166,360 1,607,920 136,296 243,674

The notes to the consolidated and company financial statements on pages 102 to 146 are an integral part of these financial statements. N o t e s t o t h e C o n s o l i d a t e d a n d C o m p a n y F i n a n c i a l S t a t e m e n t s 102 Banpu Public Company Limited • For the years ended 31 December 2007 and 2006

1. General information

Banpu Public Company Limited (“the Company”) is a public limited company incorporated and resident in Thailand. The address of the Company’s registered office is 1550 New Petchburi Road, Makkasan, Ratchathewi, Bangkok. The Company is listed on the Stock Exchange of Thailand. For reporting purpose, the Company and its subsidiaries, associates and joint ventures are referred to as the Group. The Group is engaged in coal mining and power businesses. The Group has operations in Thailand and overseas which are mainly in Indonesia and Republic of China. As at 31 December 2007, the Company employed 225 people (2006: 271 people) and the Group employed approximately 3,209 people (2006: 4,146 people). These consolidated and company financial statements were authorised for issue by Board of Directors on 27 February 2008.

2. Accounting policies

The principal accounting policies adopted in the preparation of these consolidated and company financial statements are set out below: 2.1 Basis of preparation The consolidated and company financial statements have been prepared in accordance with Thai generally accepted accounting principles under the Accounting Act B.E. 2543, being those Thai Accounting Standards issued under the Account Profession Act B.E. 2547, and the financial reporting requirements of the Securities and Exchange Commission under the Securities and Exchange Act B.E. 2535. The consolidated and company financial statements have been prepared under the historical cost convention except certain accounts as disclosed in the accounting policies below. The preparation of financial statements in conformity with Thai generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the amounts of revenues and expenses in the reported periods. Although these estimates are based on management’s best knowledge of current events and actions, actual results may differ from those estimates. Where necessary, comparative figures have been adjusted to conform with changes in presentation in the current year. An English version of the consolidated and company financial statements has been prepared from the consolidated and company financial statements that are in the Thai language. In the event of a conflict or a difference in interpretation between the two languages, the Thai language consolidated and company financial statements shall prevail.

2.2 Amendments to accounting standards and new accounting standard effective in 2007 and 2008 During the year 2007, the Federation of Accounting Professions announced the amendments to Thai Accounting Standards (TAS) and a new standard as details below. Amendments to accounting standards effective in 2007 The effective date for the following revised accounting standards is for accounting periods beginning on or after 1 January 2007. TAS 44 “Consolidated Financial Statements and Separate Financial Statements” TAS 45 “Investments in Associates” TAS 46 “Interests in Joint Ventures” The Group has adopted the aforementioned standards for which applies the cost method of accounting in the company financial statements, commencing 1 January 2007. The Group has applied retrospective adjustments. The effects of the change to the company financial statements are discussed in Note 2.3. 103

Amendments to accounting standards and new accounting standard effective in 2008 The effective date for the following revised and new accounting standards is for accounting periods beginning on or after 1 January 2008. The revised accounting standards TAS 25 “Cash Flow Statements” TAS 29 “Leases” TAS 31 “Inventories” TAS 33 “Borrowing Costs” TAS 35 “Presentation of Financial Statements” TAS 39 “Accounting Policies, Changes in Accounting Estimates and Errors” TAS 41 “Interim Financial Reporting” TAS 43 “Business Combinations” TAS 49 “Construction Contracts” The new accounting standard TAS 51 “Intangible Assets” The Group will apply these standards from 1 January 2008. The Group’s management assessed and determined that there are no significant impacts to financial statements being presented except the revised TAS 35 “Presentation of Financial Statements”, the revised TAS 43 “Business Combinations” and TAS 51 “Intangible Assets” as details below. TAS 35 (revised) requires the additional disclosures on critical judgement and estimates made by the management. The significant estimates which the management accounted in the financial statement of the Group are saleable reserve and resource of the project and provision for environment rehabilitation. TAS 43 (revised) requires an entity which is the acquirer to reassess the identification and measurement of the acquiree’s identifiable assets, liabilities and contingent liabilities and the measurement of the cost of the combination if, at the acquisition date, the acquirer’s interest in the net fair value of those items exceeds the cost of the combination. Any excess remaining after that reassessment must be recognised by the acquirer immediately in the income statement. As at 31 December 2007, the balances of negative goodwill and annual charges of amortisation were THB 1,112.14 million and THB 35.25 million, respectively. The Group will apply the retrospective adjustment for this change in accounting policy. The effects of change in accounting policy to the consolidated financial statements for the years ended 31 December 2007 are as next page:

2007 THB Thousand

Consolidated balance sheet at 31 December Decrease in negative goodwill, net (1,112,143) Increase in retained earnings 1,112,143

TAS 51 requires certain criteria to be met in order to capitalise as intangible assets. The management needs to review its existing accounting policy to be in line with the new accounting standards. However, as at 31 December 2007, the Group does not have any intangible assets that do not qualify. 104

2.3 Change in an accounting policy in relation to accounting standard effective since 1 January 2007 During 2007, the Federation of Accounting Professions amended TAS 44 “Consolidated financial statements and separate financial statements”, TAS 45 “Investments in associates” and TAS 46 “Interests in joint ventures” which require the change from equity method of accounting to cost method of accounting for investments in subsidiaries and associates and interests in joint ventures presented in the separate financial statements and income from investment will be recognised when dividends are declared. The notification is mandatory from 1 January 2007. The change in the accounting policy has an impact to the separate financial statements only and does not have an impact to the consolidated financial statements. The Company has adopted the cost method for the investments in subsidiaries and associates and interests in joint ventures since 1 January 2007 by applying retrospective adjustments. The effects of the change to the company financial statements for year ended 31 December 2006 are as follows:

2006 THB Thousand

Balance sheet as at 31 December Decrease in investments in subsidiaries and associates and interests in joint ventures 12,855,169 Decrease in fair value reserve of available-for-sale securities 5,508,636 Increase in translation adjustment 1,254,576 Decrease in retained earnings - opening balance as at 1 January 2006 5,836,043 Decrease in retained earnings - closing balance as at 31 December 2006 8,601,109

Statement of income for the year ended 31 December Decrease in net profit 2,867,845 Decrease in basic earnings per share (THB) 10.56

2.4 Group accounting - Investment in subsidiaries and associates and interests in joint ventures Subsidiaries Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the financing and operating policies generally accompanying a shareholding of more than one half of the voting rights. Subsidiaries are consolidated from the date on which its control is transferred to the Group and are no longer consolidated from the date that control ceases. The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instrument issued or liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets and liabilities assumed in an acquisition are measured initially at their fair value at the acquisition date. The excess of the cost of acquisition over the fair value of the net assets of the subsidiary acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of net assets of subsidiary acquired, the difference is recognised as negative goodwill. (See Note 2.10 the accounting policy on goodwill and negative goodwill). Intercompany transactions, balances and unrealised gains or losses on transactions between group companies are eliminated, except unrealised losses which the Group considers when there is the factor of indicating that an asset might be impaired. Where necessary, accounting policies of subsidiaries have been changed to ensure consistency with the policies adopted by the Group. 105

In case that a subsidiary in which the Group hold an investment increase its share capital and the Group does not participate, either fully or partially, in the increase of share capital. Non participation, either fully or in part, in the share capital increase of a subsidiary reduces the Group’s shareholding in that subsidiary and is considered to be a deemed disposal of interest on dilution. A deemed disposal on dilution changes the Group’s interest in the net assets of the subsidiary and therefore a difference arises between the pre and post dilution share of net assets of the subsidiary. Dilution gains or losses that arise on share issued by the subsidiary to other investors are not recognised in the income statement. The change in net assets of the investment in subsidiary is taken to the shareholders’ equity. On disposal of this investment to third party, such changes are transferred to retained earnings. In the company financial statements the cost method is applied to account for investments in subsidiaries. Under the cost method, income from investments in subsidiaries are recognised when dividends are declared. A list of the Group’s principal subsidiaries is shown in Note 8.

Associates and joint ventures Associates and joint ventures are entities over which the Group has significant influence or joint control, but which it does not control. Investments in associates and interests in joint ventures are accounted for by the equity method of accounting in the consolidated financial statements. Under this method the Group’s share of the post-acquisition profits and losses of associates and joint ventures is recognised in the income statement and its share of post-acquisition movements in fair value reserve is recognised in fair value reserves. The cumulative post- acquisition movements are adjusted against the carrying amount of the investment. Unrealised gains or losses on transactions between the Group and its associates and joint ventures are eliminated to the extent of the Group’s interests in the associates and joint ventures, except unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. The Group’s investments in associates and interests in joint ventures include goodwill (net of accumulated amortisation) on acquisition. When the Group’s share of losses in an associate or a joint venture exceeds its interest in the associate or joint venture, the Group does not recognise further losses unless the Group has incurred obligations or made payment on behalf of the associates and joint ventures. In the company financial statements the cost method is applied to account for investments in associates and interests in joint ventures. Under the cost method, income from investments in associates and interests in joint ventures are recorded when dividends are declared. A list of the Group’s principal associates and joint ventures are shown in Note 8.

2.5 Foreign currency translation Items included in the financial statements of each entity in the Group are measured using the reporting currency of that entity. The consolidated financial statements are presented in Thai Baht. Foreign currency transactions are translated into the reporting currency using the exchange rates prevailing at the date of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated into the reporting currency at the exchange rates prevailing at the balance sheet date. Gains and losses resulting from the settlement of foreign currency transactions and from the translation of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of income. Statements of income and cash flows of foreign entities are translated into Thai Baht at the weighted average exchange rates for each month and balance sheets are translated at the exchange rates ruling on the balance sheet date. Currency translation differences arising from the retranslation of the net investment in foreign entities are taken to shareholders’ equity. On disposal of such foreign entity, accumulated currency translation differences are recognised in the consolidated statement of income as part of the gain or loss on disposal.

2.6 Cash and cash equivalents Cash and cash equivalents comprise cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less and bank overdrafts. Bank overdrafts are included in current liabilities on the balance sheet. 106

2.7 Trade accounts receivable Trade accounts receivable are carried at original invoice amount and subsequently measured at the remaining amount less allow- ance for doubtful receivables based on a review of all outstanding amounts at the year end. The amount of the allowance is the difference between the carrying amount of the receivable and the amount expected to be collectible. Bad debts are recognised in the statement of income within selling and administrative expenses.

2.8 Inventories, spare parts and machinery supplies Coal inventories are valued at the lower of cost or net realisable value. Cost is determined by the weighted average method. The cost of coal comprised direct labour, other direct costs and related production overhead to mine activities. Spare parts and machinery supplies are valued at the lower of cost or net realisable value. Cost is determined by the weighted average method. The cost of purchase comprises both the purchase price and costs directly attributable to the acquisition of the spare parts and machinery, such as import duties and transportation charge, less all attributable discounts, allowances or rebates. Net realisable value is the estimate of the selling price in the ordinary course of business, less the costs of completion and selling expenses. Allowance is made, where necessary, for obsolete, slow-moving and defective inventories, spare parts and machinery supplies.

2.9 Other investments Investments other than investments in subsidiaries and associates and interests in joint ventures are classified into the following three categories: 1) held-to-maturity, 2) available-for-sale and 3) general investments. The classification is dependent on the purpose for which the investments were acquired. Management determines the appropriate classification of its investments at the time of the purchase and re-evaluates such designation on a regular basis. Investments with fixed maturity that the management has the intent and ability to hold to maturity are classified as held-to- maturity and are included in non-current assets, except for maturities within twelve months from the balance sheet date which are classified as current assets. Investments intended to be held for an indefinite period of time, which may be sold in response to liquidity needs or changes in interest rates, are classified as available-for-sale; and are included in non-current assets unless management has expressed the intention of holding the investment for less than twelve months from the balance sheet date or unless they will need to be sold to raise operating capital, in which case they are included in current assets. Investments in non-marketable equity securities are classified as general investments. Purchases and sales of investments are recognised on the trade date, which is the date that the Group commits to purchase or sell the investments. Cost of investment includes transaction costs. Available-for-sale investments are subsequently carried at fair value. Unrealised gains and losses arising from changes in the fair value of investments classified as available-for-sale are recognised in equity. Held-to-maturity investments are carried at amortised cost using the effective yield method. The fair value of investments are based on quoted bid price by reference to the Stock Exchange of Thailand. When investments classified as available-for-sale are sold or impaired, the accumulated fair value adjustments are included in the statement of income as gains and losses from investment in securities. General investments are carried at cost less impairment. A test for impairment is carried out when there is a factor indicating that an investment might be impaired. If the carrying value of the investment is higher than its recoverable amount, impairment loss is charged to the statement of income. On disposal of an investment, the difference between the net disposal proceeds and the carrying amount is recognised to the statement of income. When disposing of part of the Group’s holding of a particular investment in debt or equity securities, the carrying amount of the disposed part is determined by the weighted average carrying amount of the total holding of the investment. 107

2.10 Other non-current assets Goodwill and negative goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net assets of the acquired subsidiary, joint venture or associated undertaking at the date of acquisition. Goodwill on acquisitions of subsidiaries is reported in the consoli- dated balance sheet as an intangible assets. Goodwill on acquisitions of interest in joint ventures or associates are included in investments in associates and joint ventures. Goodwill is amortised using the straight-line method over the useful life. Management determines the estimated useful life of goodwill based on its evaluation of the respective companies at the time of the acquisition, considering factors such as existing market share, potential growth and other factors inherent in the acquired subsidiaries, joint ventures and associates. Goodwill arising on acquisi- tions of the Group is amortised on the straight-line basis over 5-10 years. At each balance sheet date, the Group assesses whether there are any indications of impairment. If such indications exist, an analysis is performed to assess whether the carrying amount of goodwill is fully recoverable. A write down is made if the carrying amount exceeds the recoverable amount. Negative goodwill represents the excess of the fair value of the Group’s share of the net assets acquired over the cost of acquisition. Negative goodwill is presented in the same balance sheet classifications as goodwill. The Group recognises in the statement of income over the remaining weighted average useful life of those assets.

Mining property right Mining property right represent the excess of the cost of an acquisition over the fair value of net assets, which in managements’ view represents future economic benefits attributable to the mining rights held by subsidiaries. Mining property rights are amortised using the units of coal produced in relation to the total expected reserves (saleable reserves and resources) of the project, based on the estimated reserves reviewed by an independent geologist appraiser.

Project under development For new project The Group has searched the new reserve to replace the old one and invested in new project so as to extend the future business. The development expenditures are recognised as expenses as incurred. Costs incurred on development projects are recognised as intangible assets when the projects have been approved by the Sounding Committee to perform the feasibility study and it is probable that the project will be success considering its commercial and technological feasibility and only if the cost can be measured reliably.

For mining Projects under development for mining are primarily exploration and development before production which are accumulated sepa- rately for each mine and recognised as projects under development, presented in balance sheet. When the exploration and development has been completed, such projects under development are classified as deferred exploration and development expenses and amortised to be cost of produc- tion since commence the production. Projects under development are written-off to be expenses in statement of income when the benefit of project has been changed and the economic benefit is not recoverable for mining.

Deferred exploration and development expenditures Exploration and development expenditures are capitalised on an area of interest basis. Such expenditures comprise net direct costs such as license, geology and geophysics expenditures and do not include general overheads or administrative expenditures not directly attributable to a particular area of interest. Exploration and development expenditures incurred prior to the commencement of the commercial operations are capitalised as deferred exploration and development expenditures when it is probable that the project will be a success considering its commercial and technical feasibility and only if the cost can be measured reliably. 108

Deferred exploration and development expenditure is amortised using the units of coal production in relation to the total expected reserves (saleable reserves and resources) of each area of interest starting from the commencement of the commercial operations. The saleable reserves and resources are reviewed by an independent geologist appraiser. Exploration and development expenditures in respect of an area of interest, which has been abandoned or for which a decision has been made by the Group against the commercial viability of the area of interest, are written-off in the period the decision is made.

Deferred overburdened expenses Expenses incurred on mine overburden (if any) are deferred and amortised using the units of coal production in relation to the total expected reserves (saleable reserves and resources) of the project, based on the estimated reserves reviewed by an independent geologist appraiser.

2.11 Property, plant and equipment Property, plant and equipment are initially recorded at cost. All plant and equipment are stated at historical cost less accumulated depreciation. Depreciation is calculated on the straight-line method to write off the cost of each asset, except for land as it is deemed to have an indefinite life, to their residual values over their estimated useful life as follows: Land improvement, buildings, construction and building improvement 5 and 20 years Machinery and equipment period of the mine right and 10 years Furniture 5 years Office equipment and tools 5 years Motor vehicles 5 years

Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount. Repairs and maintenance are charged to the statement of income during the financial period in which they are incurred. The cost of major renovations is included in the carrying amount of the asset when it is probable that future economic benefits in excess of the originally assessed standard of performance of the existing asset will flow to the Group. Major renovations are depreciated over the remaining useful life of the related asset. Gains and losses on disposals are determined by comparing proceeds with carrying amount and are included in statement of income. Interest costs on borrowings to finance the construction of property, plant and equipment are capitalised as part of cost of the asset during the period of time required to complete and prepare the property for its intended use. Borrowing costs include: interest on bank overdrafts and short-term and long-term borrowings, and related taxes; amortisation of discounts or premiums relating to borrowings; amortisation of ancillary costs incurred in connection with the arrangement of borrowings; and finance lease charges. All other borrowing costs except for the listed above are expensed in statement for income.

2.12 Impairment of assets Property, plant and equipment and other non-financial assets, including goodwill and intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount which is the higher of an asset’s net selling price and value in use. For the purposes of assessing impairment, assets are grouped at the lowest level for which there are separately identifiable cash flows. 109

2.13 Leases Leases of property, plant or equipment which substantially transfer all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased property or the present value of the minimum lease payments. Each lease payment is allocated to the principal and to the finance charges so as to achieve a constant rate on the finance balance outstanding. The outstanding rental obligations, net of finance charges, are included in other long-term payables. The interest element of the finance cost is charged to the statement of income over the lease period. Property, plant or equipment acquired under finance leases is depreciated over the shorter of the useful life of the asset or the lease term. Leases not transferring a significant portion of the risks and rewards of ownership to the lessee are classified as operating leases. Payments made under operating leases are charged to the statement of income on a straight-line basis over the period of the lease. When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognised as an expense in the period in which termination takes place.

2.14 Borrowings Borrowings are recognised initially at the fair value of proceeds received, net of transaction costs incurred. Borrowings are subse- quently stated at amortised cost using the effective yield method; any difference between proceeds (net of transaction costs) and the redemption value is recognised in the statement of income over the period of the borrowings.

2.15 Employee benefits The Group operates a provident fund that is a defined contribution plan, the assets of which are held in a separate trust fund. The provident fund is funded by payments from employees and by the relevant Group companies. Contributions to the provident fund are charged to the statement of income in the year to which they relate. Employees are entitled to receive benefits on reaching normal retirement age under the labour law applicable in Thailand and countries, which the Group has the operation, or such other dates of entitlement as may be agreed between the Group and employees. The defined benefit obligation on the Group is measured, using the projected unit credit method in accordance with actuarial as the present value of the estimated future cash outflows, based on employee wages, turnover rate, retirement ages, mortality, length of service and others, and using the interest rates of government securities, which have terms to maturity approximating the term of the related obligations. Actuarial gains or losses arising from changes in actuarial assumptions, when exceeding 10% of the present value of defined benefit, are recognised as income or expenses over the average remaining service lives of the related employees. The costs associated with providing these benefits are charged to the statement of income so as to spread the cost over the period of employment during which the entitlement to benefits is earned.

2.16 Provisions Provisions, which excluded employee benefits, are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. Where the Group expects a provision to be reimbursed, the reimbursement is recognised as a separate asset but only when the reimburse- ment is virtually certain. Provision for environmental rehabilitation (if any) is recognised by units of sale at the rate determined by the Company’s geologist. The provisioning rate is based on the estimated cost for mine rehabilitation through to the end of the mine. The Group reviews and revises the rate to reflect the actual expenses incurred on a regular basis. 110

2.17 Share capital Ordinary shares with discretionary dividends are classified as equity. Incremental external costs directly attributable to the issue of new shares, other than in connection with a business combination, are shown in equity as a deduction, net of tax, from the proceeds. Share issue costs incurred directly in connection with a business combination are included in the cost of acquisition.

2.18 Revenue recognition Revenue comprises the invoiced value for the sale of goods and services net of value-added tax, rebates, discounts and transporta- tion. Revenue from sales of goods is recognised when significant risks and rewards of ownership of the goods are transferred to the buyer. Sales of coal are quantified by weight at the front mine. The increment or reduction of coal values as a result of quality and weight noticed by customers will be recorded in the month of goods delivery. Sales of electricity and steam are shown net of output tax and discount. Sales will be recognised upon transmission of electricity and steam at delivery points stipulated in Power Purchase Agreement (“PPA”) and Steam Purchase Agreement (“SPA”). Service income is recognised when services are rendered. Other revenues earned by the Group are recognised on the following bases: interest income - accrual basis. dividend income - when the Group’s right to receive payment is established.

2.19 Dividends Dividends are recorded in the consolidated and company financial statements in the period in which they are approved by the Board of Directors or shareholders.

2.20 Related parties Enterprises and individuals that directly, or indirectly through one or more intermediaries, control, or are controlled by, or are under common control with, the Company, including holding companies, subsidiaries and fellow subsidiaries are related parties of the Company. Associates and individuals owning, directly or indirectly, an interest in the voting power of the Company that gives them significant influence over the enterprise, key management personnel, including directors and officers of the Company and close members of the family of these individuals and companies associated with these individuals also constitute related parties. In considering each possible related party relationship, attention is directed to the substance of the relationship, and not merely the legal form.

2.21 Financial risk management Financial risk factors The Group’s activities expose it to a variety of financial risks, including the effects of changes in foreign currency exchange rates, interest rates, coal price and oil price. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. The Group uses derivative financial instruments such as forward foreign exchange contracts, currency swaps contracts, interest rate swap contracts, coal swap contracts and oil swap contract to hedge certain exposure. Risk management is carried out by a central treasury department under policies approved by the Board of Directors. Group Treasury identifies, evaluates and hedges financial risks in close co-operation with the Group’s operating units. 111

Foreign exchange risk The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to US Dollars. The Group uses forward foreign exchange contracts and currency swaps contracts to hedge their exposure to foreign currency risk in connection with their measurement currency. Group Treasury is responsible for hedging the net position in each currency and external forward foreign exchange contracts or currency swap contracts.

Interest rate risk The Group’s income and operating cash flows are substantially independent of changes in market interest rates. All interest rate derivative transactions are subject to approval by the Financial Management Committee before execution. The Group’s policy is to maintain borrowings in both fixed and floating rate instruments.

Coal price fluctuation risk The Group is exposed to coal price risk from substantial fluctuations in coal price. The Group uses coal swap contracts to minimise its exposure to fluctuations in coal price in it business operations, both in Thailand and overseas, and maintains on emphasis on a balance of overall coal price in the Group by entering into both short-term and long-term sales agreements.

Oil price fluctuation risk The Group is exposed to oil price risk from substantial fluctuations in oil price. The Group uses oil swap contracts to minimise its exposure to fluctuation in oil price in its business operations of the Group.

Credit risk The Group has no significant concentrations of credit risk. The Group has policies in place to ensure that sales of goods and services are made to customers with an appropriate credit history. Derivative counter parties and cash transactions are limited to high credit quality financial institutions. The Group has policies that limit the amount of credit exposure to any one financial institution.

Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of credit facilities and the ability to close out market positions. Due to the dynamic nature of the underlying business, Group Treasury aims at maintaining flexibility in funding by keeping credit lines available.

Accounting for derivative financial instruments and hedging activities The Group is party to derivative financial instruments, which mainly comprise forward foreign currency contracts and foreign currency swap contracts are recognised in the financial statements on inception. Interest rate swap contracts, coal swap contracts and oil swap contracts are not recognised on the inception date of each contract. Forward foreign currency contracts and foreign currency swap contracts protect the Group from movements in exchange rates by establishing the rate at which a foreign currency asset will be realised or a foreign currency liability settled. Any increase or decrease in the amount required to realise the asset or settle the liability is offset by a corresponding movement in the value of the related contracts. The gains and losses on the derivative instruments and the underlying financial asset or liability are therefore offset for financial reporting purposes and are recognised in the financial statements. The fee incurred in establishing each agreement is amortised over the contract period, if any. Interest rate swap contracts protect the Group from movements in interest rates. Any differential to be paid or received on interest rate swap contracts is recognised as a component of interest expenses in the statement of income. Coal swap contracts protect the Group from movements in coal price by establishing the agreed price, which is not recognised at inception. The difference between the price at contract settlement date and agreed price will be recognised as realised gains and losses in the statement of income at settlement date. 112

Oil swap contracts protect the Group from movements in oil price by establishing the agreed price, which is not recognised at inception. The difference between the price at contract settlement date and agreed price will be recognised as realised gains and losses in the statement of income at settlement date. Disclosures about derivative finance instruments to which the Group is a party are provided in Note 31.

3. Cash and cash equivalents

Consolidated Company

À¡“¬‡Àµÿ 2007 2006 2007 2006 THB Thousand THB Thousand THB Thousand THB Thousand

Cash on hand 790 1,545 155 258 Deposit held at call with banks 9,374,905 3,354,839 487,901 466,257 Fixed deposit 712,132 1,447,816 584,264 1,418,444 Bills of exchange 3,216,521 - 2,150,000 - Total cash and cash equivalents 13,304,348 4,804,200 3,222,320 1,884,959

The weighted average of interest rate on deposit held at call with banks was 0.50% - 3.25% per annum (2006: 0.50% - 1.00% per annum). The weighted average of interest rate on fixed deposit with banks was 4.80% - 5.12% per annum (2006: 2.25% - 3.25% per annum). Bills of exchange represent original maturities less than three months and the weighted average of interest rate was 3.20% - 8.00% per annum (2006: Nil).

4. Trade accounts receivable, net

Trade accounts receivable consist of:

Consolidated Company

À¡“¬‡Àµÿ 2007 2006 2007 2006 THB Thousand THB Thousand THB Thousand THB Thousand

Trade accounts receivable Subsidiaries (Note 28.2) - - 16,417 49,435 Third parties 3,783,331 4,152,463 474,879 263,276 3,783,331 4,152,463 491,296 312,711 Less Allowance for doubtful accounts (127,731) (148,340) (93,747) (114,356) Trade accounts receivable, net 3,655,600 4,004,123 397,549 198,355 113

Trade accounts receivable balance are aged as follows:

Consolidated Company

À¡“¬‡Àµÿ 2007 2006 2007 2006 THB Thousand THB Thousand THB Thousand THB Thousand

Trade accounts receivable under credit term 3,426,124 2,387,684 267,136 181,786 Trade accounts receivable due for payment Less than 3 months 223,757 1,603,881 124,834 10,965 Over 3 months but less than 6 months 142 6,980 1 27 Over 6 months but less than 12 months - 1,003 - 1,003 Over 12 months 18,889 17,887 6,583 5,579 Trade debtor under the Central Bankruptcy Court 114,419 135,028 92,742 113,351 Total trade accounts receivable 3,783,331 4,152,463 491,296 312,711 Less Allowance for doubtful accounts (127,731) (148,340) (93,747) (114,356) Trade accounts receivable, net 3,655,600 4,004,123 397,549 198,355

As at 31 December 2007, trade accounts receivable of an overseas subsidiary amounting to THB 168.81 million (2006: THB 127.86 million) have been used as collateral for long-term loans in accordance with a project financing loan agreement (Note 17).

5. Inventories, net

Consolidated Company

À¡“¬‡Àµÿ 2007 2006 2007 2006 THB Thousand THB Thousand THB Thousand THB Thousand

Coal inventories 2,082,338 1,649,082 728,947 326,101 Less Allowance for net realisable value (231,438) (3,235) (224,185) - Inventories, net 1,850,900 1,645,847 504,762 326,101

As at 31 December 2007, inventories of an overseas subsidiary amounting to THB 405.91 million (2006: THB 444.06 million) have been used as collateral for long-term loans in accordance with a project financing loan agreement (Note 17). 114

6. Other current assets

Consolidated Company

À¡“¬‡Àµÿ 2007 2006 2007 2006 THB Thousand THB Thousand THB Thousand THB Thousand

Prepayments 150,485 176,708 125,437 30,439 Advances for business 369,737 103,433 14,490 12,018 Value added tax 66,973 33,835 2,545 2,475 Withholding tax 411,991 749,055 203,508 46,890 Other accounts receivable 715,845 475,221 165,057 143,105 Accrued income 84,192 62,888 73,046 58,336 Total other current assets 1,799,223 1,601,140 584,083 293,263

7. Long-term loans to other companies

Long-term loans to other companies represent loans to two companies in US Dollar of USD 0.15 million (2006: USD 0.15 million) and in Thai Baht of THB 336.73 million (2006: THB 336.73 million) bearing interest at the rates of 4.88% - 7.21% per annum (2006: 4.88% - 7.88% per annum).

8. Investments in subsidiaries and associates and interests in joint ventures

a) Investments in subsidiaries and associates and interests in joint ventures are as follow:

Consolidated Company

À¡“¬‡Àµÿ 2007 2006 2007 2006 THB Thousand THB Thousand THB Thousand THB Thousand Restated

Subsidiaries Banpu Minerals Co., Ltd. - - 39,994 39,994 Universal Exploration Co., Ltd. - - 778,931 778,931 Banpu Power Ltd. - - 6,197,890 2,000,000 BP Overseas Development Co., Ltd. - - 606,566 606,566 Banpu China Pte. Ltd. - - 341,540 341,540 Banpu Power International Ltd. - - 1,753 -

Joint ventures BLCP Power Ltd. 5,997,864 2,740,064 - - Power Generation Services Co., Ltd. 4,000 4,000 - - Hebi Zhong Tai Mining Co., Ltd. 1,631,649 1,631,649 - - 115

Consolidated Company

À¡“¬‡Àµÿ 2007 2006 2007 2006 THB Thousand THB Thousand THB Thousand THB Thousand Restated

Associates Asian American Coal Inc. 1,820,214 1,817,632 - - Asian American Gas Inc. 194,421 191,841 - - Investments in subsidiaries and associates and interests in joint ventures - cost method 9,648,148 6,385,186 7,966,674 3,767,031 Add Cumulative share of profit of associates and interests in joint ventures 1,654,414 447,480 - - Investments in subsidiaries and associates and interests in joint ventures - equity method 11,302,562 6,832,666 7,966,674 3,767,031

As at 31 December 2007, under the condition of loan for project finance of subsidiaries and a joint venture, the Group uses its investments in two subsidiaries and a joint venture with a cost of THB 12,630 million (2006: THB 5,656.59 million), as collateral for a long-term loans from financial institutions of such subsidiaries and a joint venture. Movement of investments in subsidiaries and associates and interests in joint ventures for the years ended 31 December are as follows:

Consolidated Company

À¡“¬‡Àµÿ 2007 2006 2007 2006 THB Thousand THB Thousand THB Thousand THB Thousand Restated

Opening balance 6,832,666 2,173,964 16,622,200 3,767,031 Adjustment (Note 2.3) - - (12,855,169) - Opening balance after retrospective adjustment 6,832,666 2,173,964 3,767,031 3,767,031 Addition of investments in subsidiaries - - 4,199,643 - Addition of interests in joint ventures and investments in associates 3,262,962 3,551,732 - - Reclassification - 306,177 - - Dividends received from joint ventures (3,297,438) - - - Add Share of profit of associates and interests in joint ventures 4,504,372 800,793 - - Ending balance 11,302,562 6,832,666 7,966,674 3,767,031 116

Changes in investments in subsidiaries and associates and interests in joints ventures are as follows: Addition of investments in subsidiaries During the year ended 31 December 2007, the Company invested in the additional of share capital in subsidiaries totaling THB 4,199.64 million as follows: In March 2007, Banpu Power International Ltd. issued additional 49,900 ordinary shares at USD 1 per share, totaling USD 49,900. The Company purchased all new shares issued at par value, totaling USD 49,900 or equivalent to THB 1.75 million instead of Banpu Power Ltd. (a subsidiary) who is existing shareholder. As at 31 December 2007, the Group invested in 100% shareholding of Banpu International Ltd. (2006: 100% of shareholding). During the year ended 31 December 2007, Banpu Power Ltd. (a subsidiary) issued additional 381,113,890 ordinary shares at THB 10 per share, totaling 3,811.14 million. All additional shares were called fully and paid-up shares. Banpu Power Ltd. registered the additional shares with Ministry of Commerce on 26 June 2007. The Company purchased all new shares issued at par value, totaling THB 3,811.14 million. In addition, the Company purchased the investment in Banpu Power Ltd. held by Universal Exploration Co., Ltd. (a subsidiary) in the net book value of THB 386.75 million. As a result, the Company had 100% shareholding in Banpu Power Ltd. (2006: 90.46% of shareholding).

Addition of interest in a joint venture BLCP Power Ltd. (a joint venture) called for additional paid-up shares at THB 60 per share from 100 million shares and the additional share capital of 5.16 million shares of THB 100 per share. The Group paid for the addition paid-up shares in the same proportion (50%) as it original investment, totaling THB 3,258 million.

Dividends received from joint ventures Dividends received from joint ventures are consisted of dividends from BLCP Power Ltd. of THB 3,000 million, Power Generation Services Co., Ltd. of THB 43 million and Hebi Zhong Tai Mining Co., Ltd. of THB 254 million.

Share of profit of associates and interests in joint ventures During the year ended 31 December 2007, share of profit of associates and interests in joint ventures is primarily from BLCP Power Ltd. which has operated since October 2006.

Others In February 2007, the extraordinary meeting of shareholders of Peak Pacific Investment Co., Ltd. (an indirect subsidiary) passed a resolution to approve the change of the company’s name to be Banpu Power Investment Co., Ltd. In March 2007, the Group disposed investment in PT. Barasentosa Lestari (an indirect subsidiary) to a third parties in the amount of USD 3.3 million. The Group recognised a gain from the disposal of THB 21 million in the consolidated statement of income. At the Board of Directors meeting, the board approved the plan to list the Indonesian coalmining interests via an initial public offering (“IPO”) of PT. Indo Tambangraya Megah (an indirect subsidiary, on the Indonesia Stock Exchange (“ISX”). The process of initial public offering (“IPO”) was finished in December 2007. On 7 December 2007, an indirect subsidiary placed and priced its IPO on the ISX amounting to 225,985,000 new ordinary shares, at a par value of Rupiah (IDR) 500 per share, with an offering price of IDR 14,000 per share totaling IDR 3,163,750 million. On 18 December 2007, the new ordinary shares were traded on the main board of ISX. The Group did not make any additional investment in these increased share capital. Therefore, the increase in share capital of a such subsidiary decreased the Group’s shareholding percentage from 99.99% to 77.60% of issued and paid-up shares. The Group has gain on dilution amounting to THB 7,887 million which is presented as surplus on dilution of investment in a subsidiary in shareholders’ equity. 117

At the extraordinary meeting of shareholders of Universal Exploration Co., Ltd. (a subsidiary) on 10 September 2007 which was confirmed by the extraordinary meeting of shareholders on 30 September 2007, its shareholders passed a resolution to liquidate the Company. The subsidiary registered the liquidation with the Ministry of Commerce on 5 October 2007. As at 31 December 2007, a such subsidiary was under the process of liquidation. List of financial position and operation result of associates and joint ventures consist of:

Net profit Percentage of Total assets Total liabilities Revenue (loss) shareholding Name of company Country THB Thousand THB Thousand THB Thousand THB Thousand (%) À¡“¬‡Àµÿ

As at 31 December 2007 Associates Asian American Coal Inc. British Virgin Islands 5,371,935 518,345 - 647,645 21.73 Asian American Gas Inc. British Virgin Islands 1,233,958 609,399 - (193,887) 17.03 6,605,893 1,127,744 - 453,758

Joint ventures BLCP Power Ltd. Thailand 57,202,283 42,501,567 20,104,336 8,116,995 50 Power Generation Services Co., Ltd. Thailand 214,966 152,610 599,928 127,090 40 Hebi Zhong Tai Mining Co., Ltd. Republic of China 4,878,389 666,646 2,772,721 716,985 40 62,295,638 43,320,823 23,476,985 8,961,070

As at 31 December 2006 Associates Asian American Coal Inc. British Virgin Islands 4,539,264 86,540 - (542,598) 22.21 Asian American Gas Inc. British Virgin Islands 1,339,885 864,752 - (130,242) 21.29 5,879,149 951,292 - (672,840)

Joint ventures BLCP Power Ltd. Thailand 42,111,380 36,043,259 2,677,583 1,133,185 50 Power Generation Services Co., Ltd. Thailand 117,654 74,622 352,586 47,518 40 Hebi Zhong Tai Mining Co., Ltd. Republic of China 4,591,603 422,566 2,266,781 552,912 40 46,820,637 36,540,447 5,296,950 1,733,615 118

b) List of subsidiaries, associates and interest in joint ventures are as follows:

Percentage of direct shareholding Name of company Country Business 2007 2006 % %

Direct shareholding Banpu Minerals Co., Ltd. Thailand Coal mining and trading 99.99 99.99 Universal Exploration Co., Ltd. Thailand Drilling & exploration 99.99 99.99 Banpu Power Ltd. Thailand Investment in power 100.00 90.46 BP Overseas Development Co., Ltd. British Virgin Islands Investment in coal mining and trading 100.00 100.00 Banpu China Pte. Ltd. Singapore Investment in power 100.00 100.00 Banpu Power International Ltd. Mauritius Islands Investment in power 100.00 -

Indirect shareholding Banpu Minerals Co., Ltd. Subsidiary companies are as follows: 1. Ban-Sa Mining Co., Ltd. and subsidiary Thailand Investment in 98.87 98.87 coal mining and trading 1.1 Chiang Muan Mining Co., Ltd. Thailand Coal mining and trading 51.00 51.00 2. Banpu International Ltd. Thailand Coal trading 99.99 99.99 3. Silamani Corp., Ltd. Thailand Coal trading 99.99 99.99 4. Chiang Muan Mining Co., Ltd. Thailand Coal mining and trading 49.00 49.00 5. Silamani Marble Co., Ltd. Thailand Coal trading 99.96 99.96 6. Banpu Singapore Pte. Ltd. Singapore Coal trading 100.00 100.00 7. Banpu Minerals (Singapore) Pte. Ltd. and Singapore Coal trading 100.00 100.00 subsidiaries 7.1 PT. Jorong Barutama Greston Indonesia Coal mining and trading - 95.00 7.2 PT. Nusantara Thai Mining Services Indonesia Mining services 95.00 95.00 7.3 PT. Centralink Wisesa International Indonesia Investment in coal 95.00 95.00 and subsidiaries 7.3.1 PT. Indo Tambangraya Megah Indonesia Investment in coal 77.60 99.99 and subsidiaries 7.3.1.1 PT. Trubaindo Coal Mining Indonesia Coal mining and trading 100.00 90.00 7.3.1.2 PT. Barasentosa Lestari Indonesia Coal mining and trading - 100.00 7.3.1.3 PT. Indominco Mandiri Indonesia Coal mining and trading 100.00 99.99 7.3.1.4 PT. Kitadin Indonesia Coal mining and trading 99.99 99.99 7.3.1.5 PT. Bharinto Ekatama Indonesia Coal mining and trading 99.00 99.00 7.3.1.6 PT. Jorong Barutama Greston Indonesia Coal mining and trading 100.00 - 8. Hebi Zhong Tai Mining Co., Ltd. Republic of China Coal trading 40.00 - 119

Percentage of direct shareholding Name of company Country Business 2007 2006 % %

Universal Exploration Co., Ltd. Subsidiary company is as follow: 1. Banpu Power Ltd. Thailand Investment in power - 9.54

BP Overseas Development Co., Ltd. Associated companies are as follows: 1. Asian American Coal Inc. British Virgin Islands Investment in coal 21.73 22.21 and power 2. Asian American Gas Inc. British Virgin Islands Investment in power 17.03 21.29

Banpu China Pte. Ltd. Joint venture company is as follow: 1. Hebi Zhong Tai Mining Co., Ltd. Republic of China Coal trading - 40.00

Banpu Power Ltd. Subsidiary and joint venture companies are as follows: 1. Banpu Coal Power Ltd. and a joint venture Thailand Investment in power 100.00 100.00 1.1 BLCP Power Ltd. Thailand Power production 50.00 50.00 and trading 2. Banpu Power International Ltd. and subsidiaries Mauritius Islands Investment in power 0.20 100.00 2.1 Synergy Power Co., Ltd. and subsidiaries Mauntiue Islands Investment in power - 99.99 2.1.1 Banpu Power Investment Co., Ltd. Singapore Investment in power - 100.00 and subsidiaries 2.1.1.1 Shijiazhuang Chengfeng Republic of China Power production - 100.00 Cogen Co., Ltd. and trading 2.1.1.2 Luannan Peak Co., Ltd. Singapore Investment in power - 100.00 and subsidiaries Pan-western Energy Cayman Investment in power - 100.00 Corp. and a subsidiary Island Tangshan Peak Republic of China Power production - 87.90 Heat & Power and trading Co., Ltd. 120

Percentage of direct shareholding Name of company Country Business 2007 2006 % %

2.1.1.3 Peak Pacific (China) Investment Republic of Investment in power - 100.00 Co., Ltd. and a subsidiary China Tangshan Peak Republic of Power production - 12.10 Heat & Power Co., Ltd. China and trading 2.1.1.4 Zouping Peak Pte. Ltd. Singapore Investment in power - 100.00 and a subsidiary Zouping Peak Republic of Power production - 70.00 Heat & Power Co., Ltd. China and trading 2.1.1.5 Peak Pacific Investment Labuan Investment in power - 100.00 Co., Ltd.

3. Power Generation Services Co., Ltd. Thailand Operating power 40.00 40.00 plant service

Banpu Power International Ltd. Subsidiary companies are as follows: 1. Synergy Power Co., Ltd. and subsidiaries Mauritius Islands Investment in power 99.99 - 1.1 Banpu Power Investments Co., Ltd. . Singapore Investment in power 100.00 - and subsidiaries 1.1.1 Shijiazhuang Chengfeng Cogen Co., Ltd. Republic of Power production 100.00 - China and trading 1.1.2 Luannan Peak Pte. Ltd. and subsidiaries Singapore Investment in power 100.00 - 1.1.2.1 Pan - Western Energy Corp. Cayman Islands Investment in power 100.00 - and a subsidiary Tangshan Peak Heat & Republic of Power production 87.90 - Power Co., Ltd. China and trading

1.1.3 Peak Pacific (China) Investment Co., Ltd. Republic of Investment in power 100.00 - and a subsidiary China 1.1.3.1 Tangshan Peak Heat & Republic of Power production 12.10 - Power Co., Ltd. China and trading 1.1.4 Zouping Peak Pte. Ltd. and a subsidiary Singapore Investment in power 100.00 - 1.1.4.1 Zouping Peak Heat & Power Republic of Power production 70.00 - Co., Ltd. China and trading 1.1.5 Peak Pacific Investment Co., Ltd. Labuan Investment in power 100.00 - 121

9. Other investments, net

Consolidated Company

À¡“¬‡Àµÿ 2007 2006 2007 2006 THB Thousand THB Thousand THB Thousand THB Thousand

Investments in available-for-sale securities 3,392,633 3,473,697 4,174,786 4,261,515 General investments 332,442 384,110 120,412 172,125 Total other investments 3,725,075 3,857,807 4,295,198 4,433,640 Add Adjustment to fair value for investments in available-for sale securities 6,909,651 6,491,683 1,109,365 983,047 Less Allowance for impairment of general investments (192,707) (192,707) (29,007) (29,007) Other investments, net 10,442,019 10,156,783 5,375,556 5,387,680

Movements of other investments for the years ended 31 December are as follows:

Consolidated Company

À¡“¬‡Àµÿ 2007 2006 2007 2006 THB Thousand THB Thousand THB Thousand THB Thousand

Opening net book value 10,156,783 10,871,862 5,387,680 5,990,326 Acquisitions 13,431 280,533 6,465 93,169 Disposals (146,164) (316,331) (144,906) (164,750) Transfer - (306,177) - - Reclassification - 50,048 - 50,048 Changes in fair value of investments 417,969 (423,152) 126,317 (581,113) Closing net book value 10,442,019 10,156,783 5,375,556 5,387,680 122

10. Property, plant and equipment, net

Consolidated

À¡“¬‡Àµÿ Furniture & Land Machinery & office Construction Land improvement Building equipment equipment Tools Vehicle in progress Total THB Thousand THB Thousand THB Thousand THB Thousand THB Thousand THB Thousand THB Thousand THB Thousand THB Thousand

As at 31 December 2006 Cost 123,092 2,370,068 2,994,580 13,354,085 566,766 315,386 128,772 856,862 20,709,611 Less Accumulated depreciation - (511,234) (1,247,557) (4,900,604) (379,671) (142,244) (69,063) - (7,250,373) Allowance for impairment (11,147) - (2,200) (1,136) - - - - (14,483) Net book amount 111,945 1,858,834 1,744,823 8,452,345 187,095 173,142 59,709 856,862 13,444,755

Year ended 31 December 2007 Opening net book amount 111,945 1,858,834 1,744,823 8,452,345 187,095 173,142 59,709 856,862 13,444,755 Additions - 270 70,301 395,949 44,898 36,210 25,751 2,410,474 2,983,853 Disposals - Net book value - (18) (2,264) (7,277) (494) (1,601) (2,594) (86,826) (101,074) Increase from investment in subsidiary - - 154,824 2,958 13 - - - 157,795 Reclassification - 524,962 1,032,538 (649,407) 18,175 15,644 2,137 (753,192) 190,857 Translation adjustment - (116,133) (38,329) (233,812) (7,988) (8,063) (2,463) (23,745) (430,533) Depreciation charge - (220,160) (253,840) (843,754) (69,518) (55,351) (16,961) - (1,459,584) Closing net book amount 111,945 2,047,755 2,708,053 7,117,002 172,181 159,981 65,579 2,403,573 14,786,069

As at 31 December 2007 Cost 123,092 2,750,011 4,498,948 11,733,952 600,053 392,963 133,655 2,403,573 22,636,247 Less Accumulated depreciation - (702,256) (1,788,695) (4,615,814) (427,872) (232,982) (68,076) - (7,835,695) Allowance for impairment (11,147) - (2,200) (1,136) - - - - (14,483) Net book amount 111,945 2,047,755 2,708,053 7,117,002 172,181 159,981 65,579 2,403,573 14,786,069

As at 31 December 2007, the gross carrying amount of fully depreciated plant and equipment that are still in use totalled THB 2,213.98 million (2006: THB 1,999.42 million). 123

Company

À¡“¬‡Àµÿ Furniture & Land Machinery & office Construction Land improvement Building equipment equipment Tools Vehicle in progress Total THB Thousand THB Thousand THB Thousand THB Thousand THB Thousand THB Thousand THB Thousand THB Thousand THB Thousand

As at 31 December 2006 Cost 64,383 99,728 252,064 746,048 215,451 43,829 44,815 13,482 1,479,800 Less Accumulated depreciation - (73,342) (135,188) (643,357) (166,310) (41,781) (24,001) - (1,083,979) Net book amount 64,383 26,386 116,876 102,691 49,141 2,048 20,814 13,482 395,821

Year ended 31 December 2007 Opening net book amount 64,383 26,386 116,876 102,691 49,141 2,048 20,814 13,482 395,821 Additions - - 466 - 4,577 52 6,840 25,181 37,096 Disposals - Net book value - - (404) (129) (2) - (262) (715) (1,512) Reclassification - 31 - - - - - (31) - Depreciation charge - (8,051) (19,499) (58,922) (16,690) (761) (6,037) - (109,960) Closing net book amount 64,383 18,366 97,439 43,640 37,006 1,339 21,355 37,917 321,445

As at 31 December 2007 Cost 64,383 99,759 251,870 725,586 219,056 41,401 45,596 37,917 1,485,568 Less Accumulated depreciation - (81,393) (154,431) (681,946) (182,050) (40,062) (24,241) - (1,164,123) Net book amount 64,383 18,366 97,439 43,640 37,006 1,339 21,335 37,917 321,445

As at 31 December 2007, the gross carrying amount of fully depreciated plant and equipment that are still in use totaled THB 500.96 million (2006: THB 446.12 million). As at 31 December 2007, property, plant and equipment in the consolidated financial statements amounting to THB 5,306.15 (2006: THB 1,502.04 million) have been used as collateral for a long-term loans (Note 17). During 2007, borrowing cost of THB 103.56 million (2006: THB 98.88 million) arising from financing specifically of an overseas subsidiary is included in “Additions” of construction in progress. 124

11. Deferred exploration and development expenditures and deferred overburden expenses, net

Consolidated Company THB Thousand THB Thousand À¡“¬‡Àµÿ As at 31 December 2006 Cost 13,762,956 4,672,338 Less Accumulated amortisation (10,117,123) (4,216,167) Net book amount 3,645,833 456,171

For the year ended 31 December 2007 Opening net book amount 3,645,833 456,171 Additions 1,934,408 111,106 Amortisation (2,394,616) (438,842) Decrease from divestment of an indirect subsidiary (71,068) - Allowance for impairment (101,152) (87,204) Translation adjustment (266,944) - Closing net book amount 2,746,461 41,231

As at 31 December 2007 Cost 15,359,352 4,783,444 Less Accumulated amortisation (12,511,739) (4,655,009) Allowance for impairment (101,152) (87,204) Net book amount 2,746,461 41,231

12. Mining property rights and negative goodwill, net

Consolidated

À¡“¬‡Àµÿ 2007 2006 THB Thousand THB Thousand

Mining property rights, net 1,415,692 1,632,081 Negative goodwill, net (1,112,143) (1,206,563) Net balance 303,549 425,518 125

Mining property rights, net Movement of mining property rights for the year ended 31 December 2007 are as follows:

Consolidated

À¡“¬‡Àµÿ 2007 2006 THB Thousand THB Thousand

Opening net book amount 1,632,081 1,962,701 Amortisation (42,454) (64,095) Decrease from divestment of an indirect subsidiary (58,372) - Translation adjustment (115,563) (266,525) Closing net book amount 1,415,692 1,632,081

Negative goodwill, net Movement of negative goodwill for the year ended 31 December 2007 are as follows:

Consolidated

À¡“¬‡Àµÿ 2007 2006 THB Thousand THB Thousand

Opening net book amount 1,206,563 1,349,933 Amortisation (35,253) (67,279) Translation adjustment (59,167) (76,091) Closing net book amount 1,112,143 1,206,563

A subsidiary in Republic of China, power production, has the negative goodwill which incurred from its acquisition since 1999. This negative goodwill has been amortised on a straight-line basis over the remaining useful life of its power plant (See Note 2.2, relating to the effects of the change in accounting policy effective from 2008). 126

13. Projects under development

Movement of projects under development for the years ended 31 December are as follows:

Consolidated Company

À¡“¬‡Àµÿ 2007 2006 2007 2006 THB Thousand THB Thousand THB Thousand THB Thousand

Opening balance 554,420 1,052,407 172,561 204,691 Additions 405,664 208,523 80,320 125,761 Reclassification - (696,718) - (157,891) Write-off - (8,020) - - Decrease from divestment of an indirect subsidiary (22,472) - - - Translation adjustment (40,600) (1,772) - - Closing balance 897,012 554,420 252,881 172,561

14. Other non-current assets

Consolidated Company

À¡“¬‡Àµÿ 2007 2006 2007 2006 THB Thousand THB Thousand THB Thousand THB Thousand

Advance for business - land compensation for development of coal mine 373,548 399,146 - - Machinery and spare parts pending for disposal 223,381 240,532 223,381 240,532 Other receivable from unwind forward and currency swap contracts - 107,874 - 107,874 Others 607,444 818,173 12,440 11,959 Total other non-current assets 1,204,373 1,565,725 235,821 360,365

Machinery and spare parts at the net book value of THB 223.38 million (2006: THB 240.53 million) have not been in use and pending for disposal. However, the Company’s management has already considered the adequacy of its allowance for impairment. 127

15. Bank overdrafts and loans from banks and financial institutions

Bank overdrafts and unsecured loans from banks and financial institutions consist of:

Consolidated Company

À¡“¬‡Àµÿ 2007 2006 2007 2006 THB Thousand THB Thousand THB Thousand THB Thousand

Bank overdrafts - 8,331 - 7,990 Loans from banks and financial institutions 2,278,143 3,251,670 993,546 2,462,293 Total Bank overdrafts and Loans from banks and financial institutions 2,278,143 3,260,001 993,546 2,470,283

As of 31 December 2007, loans from banks and financial institution of the Company are Baht loans from several commercial banks amounting to THB 993.55 million (2006: USD 23.80 million and THB 1,600 million). The loans bear interest at the average rates of 3.38% - 3.39% per annum (2006: 5.18% - 6.63% per annum). As of 31 December 2007, loans from banks and financial institutions of subsidiaries are US Dollar loans amounting to USD 37.91 million (2006: USD 21.79 million) The loans bear interest at the average rates of 3.38% - 9.48% per annum (2006: 5.18% - 7.32% per annum).

16. Other

Consolidated Company

À¡“¬‡Àµÿ 2007 2006 2007 2006 THB Thousand THB Thousand THB Thousand THB Thousand

Accrued expenses 551,214 529,445 144,396 119,670 Other accounts payable 1,848,695 1,482,434 76,791 69,825 Withholding tax payable 472,366 260,588 11,555 8,197 Value added tax payable 96,442 72,167 18,189 5,553 Retention payable 89,249 25,007 291 45 Unearned income 16,798 4,967 298 387 Forward and currency swap contracts payable - 1,142 - 1,142 Others 21,516 25,122 31,545 25,012 Total other current liabilities 3,096,280 2,400,872 283,065 229,831 128

17. Long-term loans, net

Consolidated Company

À¡“¬‡Àµÿ 2007 2006 2007 2006 THB Thousand THB Thousand THB Thousand THB Thousand

Baht loans 2,000,180 100,180 2,000,000 100,000 Foreign currency loans 4,277,875 4,637,134 2,371,950 1,920,232 Less Deferred financing service fee (15,630) (10,241) (8,856) (10,241) 6,262,425 4,727,073 4,363,094 2,009,991 Less Current portion of long-term loans (408,016) (741,873) - (100,000) Long-term loans, net 5,854,409 3,985,200 4,363,094 1,909,991

Long-term loan from bank of the Company amounting to USD 70 million is unsecured liabilities (2006: USD 53 million), bears the interest at the rate of LIBOR plus applicable fixed margin 0.425% per annum (2006: LIBOR plus applicable fixed margin 0.425% per annum). The principle of loan is repayable within 2009. Long-term loan amounting of the Company to THB 2,000 million is unsecured liabilities, bears the interest at the rate of THBFIX 3 months plus applicable fixed margin. The principle of loan is repayable every 6 months starting from 31 May 2010. Long-term loans from banks of two overseas subsidiaries amounting to USD 17.20 million and USD 38.88 million are secured liabilities (2006: USD 27.78 million and USD 47.21 million). Detail of loans are shown as follows: Loan from bank, which is secured liabilities, amounting to USD 17.20 million bears the interest at the rate of LIBOR plus applicable fixed margin 4% per annum (2006: LIBOR plus applicable fixed margin 4% per annum). The principle of loan is repayable 7 installments, every 6 months starting from 30 December 2005. Loan from bank, which is secured liabilities, amounting to USD 38.88 million bears the interest at the rate LIBOR plus applicable fixed margin (2006: LIBOR plus applicable fixed margin). The principle of loan is repayable within 2013. The long-term loans are secured over the assets of such two overseas subsidiaries according to project financing loan agreements (Note 4, 5 and 10). After taking account of interest rate swap, the weighted average effective interest rate of long-term loans of the Group are as follows:

2007 2006 (%) (%)

Foreign currency loans 7.14 5.22 Baht loans 8.16 3.61 129

Interest rate risk of long-term loans of the Group after recognised the effect from interest swap contracts are as follows:

Consolidated Company

À¡“¬‡Àµÿ 2007 2006 2007 2006 THB Thousand THB Thousand THB Thousand THB Thousand

at fixed rates 180 1,106,491 - 100,000 at floating rates 6,277,875 3,630,823 4,371,950 1,920,232 Total long-term loans 6,278,055 4,737,314 4,371,950 2,020,232

Movement in long-term loans of the Group for the years ended 31 December are as follows:

Consolidated Company

À¡“¬‡Àµÿ 2007 2006 2007 2006 THB Thousand THB Thousand THB Thousand THB Thousand

Opening net balance 4,727,073 2,199,235 2,009,991 399,500 Additional loans 2,898,288 3,701,221 2,600,270 1,946,690 Increase in investment in a subsidiary - 267,036 - - Repayment of loans (803,166) (1,175,769) (100,000) (300,000) Payment for deferred financing service fee (10,031) (11,893) (3,105) (11,893) Amortisation of deferred financing service fee 4,642 2,152 4,400 2,152 Unrealised gain from exchange rate (554,381) (254,909) (148,552) (26,458) Closing net balance 6,262,425 4,727,073 4,363,094 2,009,991

Maturity of long-term loans are as follows:

Consolidated Company

À¡“¬‡Àµÿ 2007 2006 2007 2006 THB Thousand THB Thousand THB Thousand THB Thousand

Within 1 year 408,016 741,873 - 100,000 Between 2 years and 5 years 4,053,561 3,995,441 3,621,950 1,920,232 Over 5 years 1,816,478 - 750,000 - Total long-term loans 6,278,055 4,737,314 4,371,950 2,020,232 130

The Group is required to comply with certain procedure and conditions; for example, maintain net value of shareholders’ equity, maintain debt to equity ratio, maintain ratio of debt coverage and trading debt with security guarantee not exceeding a limited amount, etc.

18. Debentures, net

Consolidated Company

À¡“¬‡Àµÿ 2007 2006 2007 2006 THB Thousand THB Thousand THB Thousand THB Thousand

Local debentures 10,000,000 11,600,000 10,000,000 11,600,000 Less Deferred financing service fee (19,453) (26,054) (19,453) (26,054) 9,980,547 11,573,946 9,980,547 11,573,946 Less Current portion of debentures (1,400,000) (1,600,000) (1,400,000) (1,600,000) Debentures, net 8,580,547 9,973,946 8,580,547 9,973,946

The effective interest rate of debentures of the Group after recognised effect from interest rate swap contracts is 5.43% per annum (2006: 5.29% per annum) The interest rate on the debentures of the Group are as follows:

Consolidated Company

À¡“¬‡Àµÿ 2007 2006 2007 2006 THB Thousand THB Thousand THB Thousand THB Thousand

at fixed rates 8,750,000 10,250,000 8,750,000 10,250,000 at floating rates (MLR plus applicable fixed margin) 1,250,000 1,350,000 1,250,000 1,350,000 Total debentures 10,000,000 11,600,000 10,000,000 11,600,000 131

Movement in debentures for the years ended 31 December are as follows:

Consolidated Company

À¡“¬‡Àµÿ 2007 2006 2007 2006 THB Thousand THB Thousand THB Thousand THB Thousand

Opening net balance 11,573,946 12,819,947 11,573,946 12,819,947 Repayment of debentures (1,600,000) (1,254,126) (1,600,000) (1,254,126) Amortisation of deferred financing service fee 6,601 8,125 6,601 8,125 Closing net balance 9,980,547 11,573,946 9,980,547 11,573,946

Maturity of debentures are as follows:

Consolidated Company

À¡“¬‡Àµÿ 2007 2006 2007 2006 THB Thousand THB Thousand THB Thousand THB Thousand

Within 1 year 1,400,000 1,600,000 1,400,000 1,600,000 Between 2 years and 5 years 6,100,000 7,500,000 6,100,000 7,500,000 Over 5 years 2,500,000 2,500,000 2,500,000 2,500,000 Total debentures 10,000,000 11,600,000 10,000,000 11,600,000

Debentures are unsecured liabilities. However, the Company is required to comply with certain procedure and conditions; for example, maintain net value of shareholders’ equity, maintain debt to equity ratio, maintain ratio of debt coverage and trading debt with security guarantee not exceeding a limited amount, etc.

19. Provision for employee retirement benefits

Consolidated Company

À¡“¬‡Àµÿ 2007 2006 2007 2006 THB Thousand THB Thousand THB Thousand THB Thousand

Opening balance 333,967 473,325 79,174 78,811 Expenses 89,101 265,119 4,812 13,141 Payment during the year (142,810) (439,202) (69,852) (12,778) Unrealised (gain) loss from exchange rate (12,103) 34,725 - - Closing balance 268,155 333,967 14,134 79,174 132

Principal actuarial assumptions are as follows:

Discount rate 5% - 10% Salary increases 4% - 10% Withdrawal rate 2% - 12% Normal retirement age 55 years - 60 years

20. Share capital

Issued and paid-up share capital

Number of Ordinary shares Premium Total shares THB Thousand THB Thousand THB Thousand À¡“¬‡Àµÿ As at 31 December 2005 271,747,855 2,717,479 5,058,329 7,775,808 Issued shares - - - - As at 31 December 2006 271,747,855 2,717,479 5,058,329 7,775,808 Issued shares - - - - As at 31 December 2007 271,147,855 2,717,479 5,058,329 7,775,808

As at 31 December 2007, there are 271,747,855 issued and paid up ordinary shares (2006: 271,747,855 shares) at par value of THB 10 per share (2006: THB 10 per share). All issued shares are fully paid-up.

21. Operating profit

The following expenditure items, classified by nature, have been charged in arriving at operating profit:

Consolidated Company

À¡“¬‡Àµÿ 2007 2006 2007 2006 THB Thousand THB Thousand THB Thousand THB Thousand

Staff costs 1,915,736 2,645,253 397,857 480,963 Net (gain) on exchange rate (360,995) (185,685) (424,815) (669,123) Depreciation on property, plant and equipment 1,455,859 1,511,200 108,189 86,236 Amortisation 1,932,860 1,936,062 200,378 394,810 Operating leases 635,478 924,379 38,051 37,620 Allowance for impairment of assets 329,355 14,484 311,389 - Demurrage expense 564,343 317,080 6,710 818 133

22. Earnings per share

Basic earnings per share is calculated by dividing the net profit attributable to shareholders by the weighted average number of ordinary shares in issue during the year.

Consolidated Company

À¡“¬‡Àµÿ 2007 2006 2007 2006 THB Thousand THB Thousand THB Thousand THB Thousand

Net profit attributable to ordinary shareholders (THB Thousand) Before adjustment 6,654,423 3,610,181 3,540,276 3,610,181 Adjustment - - - (2,867,845) After adjustment 6,654,423 3,610,181 3,540,276 742,336 Weighted average ordinary shares (shares) 271,747,855 271,747,855 271,747,855 271,747,855 Earnings per share (THB) 24.49 13.29 13.03 2.73

There are no potential dilutive shares in issue for the years ended 31 December 2007 and 2006.

23. Segments information

For the year ended 31 December 2007

Coal and Minerals Power

Republic of Republic of Elimination Thailand Indonesia China Thailand China entries Total THB Thousand THB Thousand THB Thousand THB Thousand THB Thousand THB Thousand THB Thousand

Net sales 4,403,877 26,862,558 - - 3,865,116 (2,689,762) 32,441,789 Profit (loss) from sales (583,749) 4,116,266 - - 711,371 (1,126,861) 3,117,027 Unallocated income 842,438 Gain on disposal of investments 1,618,760 Net loss from exchange rate (360,995) Interest expenses and other financial expenses (1,306,775) Corporate income tax (1,491,668) Net profit from operation 2,418,787 Share of profit of associates and interests in joint ventures --427,527 4,076,845 - - 4,504,372 Net profit of minority interests (268,736) Net profit for the year 6,654,423 Total segmented assets 702,235 29,545,415 4,007,578 7,457,889 8,207,998 (78,847) 49,842,268 Total unallocated assets 15,208,537 Total assets 65,050,805 134

For the year ended 31 December 2006

Coal and Minerals Power

Republic of Republic of Elimination Thailand Indonesia China Thailand China entries Total THB Thousand THB Thousand THB Thousand THB Thousand THB Thousand THB Thousand THB Thousand

Net sales 6,489,966 27,932,215 - - 2,803,319 (3,852,237) 33,378,263 Profit from sales 11,165 3,934,695 - - 627,610 (32,459) 4,150,423 Unallocated income 379,196 Gain on disposal of investments 902,003 Net loss from exchange rate (185,685) Interest expenses and (1,180,627) other financial expenses Corporate income tax (1,122,339) Net profit from operation 2,942,971 Share of profit of associates and interests in joint ventures - - 187,807 612,986 - - 800,793 Net profit of minority interests (133,583) Net profit for the year 3,610,181 Total segmented assets 1,106,371 22,016,215 3,828,928 3,012,475 7,073,570 (78,576) 36,958,983 Total unallocated assets 12,429,494 Total assets 49,386,477

24. Dividends

At the Annual General Shareholders’ Meeting on 28 March 2007, the shareholders approved a payment of remaining interim dividend of 2006 of THB 4.25 per share and at the Board of Directors’ meeting on 29 August 2007, the board approved a payment of interim dividend of 2007 of THB 3.75 per share of 271,747,855 shares, totaling of THB 2,153.87 million which was paid on 18 April 2007 and 28 September 2007, respectively. At the Annual General Shareholders’ Meeting on 30 March 2006, the shareholders approved a payment of remaining interim dividend of 2005 of THB 4.00 per share and at the Board of Directors’ Meeting on 30 August 2006, the board approved a payment of interim dividend of 2006 of THB 3.25 per share of 271,747,855 shares, totaling of THB 1,970.13 million which was paid on 11 April 2006 and 28 September 2006, respectively.

25. Directors’ remuneration

At the Annual General Shareholders’ Meeting on 28 March 2007, the shareholders approved the payment of director’s remuneration of 2006 amounting to THB 20,363,681 which was paid during year 2007 (2006: THB 35,800,728). 135

26. Legal reserve

As at 31 December, legal reserve consist of:

Consolidated 2007

À¡“¬‡Àµÿ Beginning balance Appropriation Ending balance THB Thousand THB Thousand THB Thousand

Legal reserve Company 354,051 - 354,051 Subsidiaries 60,463 329,682 390,325 414,514 329,682 744,376

Consolidated 2006

À¡“¬‡Àµÿ Beginning balance Appropriation Ending balance THB Thousand THB Thousand THB Thousand

Legal reserve Company 354,051 - 354,051 Subsidiaries 43,464 16,999 60,463 397,515 16,999 414,514

Under the Public Company Act, the Company is required to set aside as a statutory reserve of at least 5% of its net profit after accumulated deficit brought forward (if any) until the reserve reaches not less than 10% of the registered capital. The legal reserve is non-distributable. At present, the Company set aside legal reserve at 10% of registered capital.

27. Export tax

In 2006, the subsidiaries in Indonesia had paid export tax for exported coal which was effective from 2005 amounting to THB 705.50 million. However, the exported tax was cancelled on 13 September 2006. 136

28. Related party transactions

The following significant transactions were carried out with related parties: 28.1 Transactions during the years ended 31 December are as follows:

Consolidated Company

À¡“¬‡Àµÿ 2007 2006 2007 2006 THB Thousand THB Thousand THB Thousand THB Thousand

Sales of goods and services to subsidiaries - - 111,186 712,450 Purchases of goods and cost of services from subsidiaries - - 677,817 154,078 Dividends received from subsidiaries - - 4,352,136 287,031

Management fee Subsidiaries - - 145,447 116,231 Joint ventures 28,437 28,603 - - Total 28,437 28,603 145,447 116,231

Sales of fixed assets to subsidiaries - - 4,962 842 Interest income from subsidiaries - - 815,788 912,627 Interest expenses to subsidiaries - - 54,833 70,244

The pricing policies for transactions between subsidiaries, joint ventures, associates and related parties are set out below: The prices of sales and services charged between the Company and subsidiaries approximate to those charged to third parties. Management income represents fee charged to subsidiaries, joint ventures and associates for rendering the management services in the normal course of business. The fees are based on the service provided and agreed rate in accordance with the condition in agreement. For loans, borrowings, interest income and interest expenses, the Group charges interest by considering to average cost of borrowings plus 0.5% per annum for local subsidiaries and plus 2% per annum for overseas subsidiaries. 137

28.2 Amounts due from related parties as at 31 December consist of:

Consolidated Company

À¡“¬‡Àµÿ 2007 2006 2007 2006 THB Thousand THB Thousand THB Thousand THB Thousand

Trade accounts receivable subsidiaries (Note 4) - - 16,417 49,435 Interest receivable Subsidiaries - - 461,116 664,160 Joint venture 6,248 6,248 1 - 6,248 6,248 461,117 664,160 Other receivable Subsidiaries - - 165,751 256,905 Joint ventures 2,756 5,110 - - 2,756 5,110 165,751 256,905 Total amounts due from related parties 9,004 11,358 626,868 921,065

Dividend receivable from related parties Subsidiaries - - 3,124,201 - Joint ventures 2,074,500 - - - Total dividend receivable from related parties 2,074,500 - 3,124,201 -

28.3 Advances and long-term loans to related parties as at 31 December consist of:

Consolidated Company

À¡“¬‡Àµÿ 2007 2006 2007 2006 THB Thousand THB Thousand THB Thousand THB Thousand

Advances to related parties Subsidiaries - - 109,995 522,294 Joint venture 21 21 21 21 Associates 101 - 101 - Total advances to related parties 122 21 110,117 522,315

Long-term loans to subsidiaries - - 5,331,183 13,730,051 138

As at 31 December 2007, long-term loans to subsidiaries represent US Dollars loan amounting to USD 59.88 million and Thai Baht loan amounting to THB 3,316.37 million (2006: USD 266 million and THB 4,167 million) bearing interest at rates of 1.49% - 7.50% per annum (2006: 1.49% - 7.50% per annum). The repayment term is at call. However, the Company will not request for repayment until these subsidiaries have ability to pay. Movement of long-term loans to subsidiaries for the years ended 31 December are as follows:

Consolidated Company

À¡“¬‡Àµÿ 2007 2006 2007 2006 THB Thousand THB Thousand THB Thousand THB Thousand

Opening balance - 336,726 13,730,051 8,876,627 Increase for the year - - 3,856,033 8,277,824 Repayment for the year - - (11,718,333) (2,028,148) Reclassification - (336,726) - (336,726) Unrealised loss from exchange rate - - (536,568) (1,059,526) Ending balance - - 5,331,183 13,730,051

In 2006, long-term loan to other related parties amounting to THB 336.73 million bearing interest at rates 4.50% - 5.75% per annum was reclassified to long-term loan to other company because the Company has fully disposed the investment in such company during 2006.

28.4 Advances and loans from subsidiaries

Consolidated Company

À¡“¬‡Àµÿ 2007 2006 2007 2006 THB Thousand THB Thousand THB Thousand THB Thousand

Advances from subsidiaries - - 10,873 4,396 Short-term loan from a subsidiary - - 862,373 1,429,305 Long-term loans from subsidiaries - - 1,218,019 1,698,430

Short-term loan from a subsidiary represents US Dollar loan amounting to USD 25.45 million (2006: USD 39.45 million) bearing interest at the rate of 2.5% per annum (2006: 2.5% per annum). The repayment term is in 2008. Long-term loans from subsidiaries represent US Dollar loan amounting to USD 8 million and Thai Baht loan amounting to THB 938 million (2006: THB 1,698 million) bearing interest at the rates of 1.49% - 2.50% per annum (2006: 2.50% per annum). The repayment term is at call. However, the subsidiaries will not request for repayment within 12 months. 139

Movement of long-term loans from subsidiaries for the years ended 31 December are as follows:

Consolidated Company

À¡“¬‡Àµÿ 2007 2006 2007 2006 THB Thousand THB Thousand THB Thousand THB Thousand

Opening balance - - 1,698,430 3,732,827 Increase for the year - - 714,488 441,151 Repayment for the year - - (1,194,502) (2,475,548) Unrealised gain on exchange rate - - (397) - Closing balance - - 1,218,019 1,698,430

29. Income tax expense

The Group does not recognise corporate income tax payable or receivable in future periods in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Corporate income tax for the year ended 31 December 2007 are calculated based on the net profit (tax base) which excluded the share of net profit of associates and interests in joint ventures. The rates are as follows: Thailand 30% Indonesia 30% Republic of China 9%

30. Commitment, contingent liabilities and significant contracts

30.1 As at 31 December, the Group had obligations with banks as follows:

Consolidated Company

À¡“¬‡Àµÿ 2007 2006 2007 2006 Million Million Million Million (Original currency) (Original currency) (Original currency) (Original currency)

Letters of Guarantee US Dollar 14.16 153.93 - 145.39 Thai Baht 105.58 79.02 53.86 27.31 Indonesian Rupiah 3.77 - - - Letters of Credit US Dollar 5.90 5.87 - - 140

30.2 Significant contracts a) Subsidiaries have entered into the significant contracts as follows: Contract regarding the service of coal ash removal from the area under the silo in the area of the power plant of Glow SPP3 Co., Ltd. for which the subsidiary is responsible for any damage possibly incurred from the service. Payment is determined in accordance with the removed quantity. The contract duration lasts for 15 years commencing from date of operation, 17 March 1999. Contract for mining and disposal of lignite coal at Ban-sa Mine, Amphur Chiang Muan, Phayao Province, with the Energy Development and Promotion Department for which a subsidiary is granted subrogation right for 22 years commencing on 10 January 1996. Moreover, such subsidiary has to comply with various requirements specified in the contract. Contract for mining services with an Indonesian company, the agreement will be expired on 22 October 2010 or at the end of open pit production of West Block area, whichever is the earlier. In addition, a subsidiary has entered into another agreement with that company for coal mining services at East Block area. The agreement is valid for three years as of the commencement date and may be extended for additional minimum two years. Contract for production sharing with the Government of Indonesia to share 13.5% of coal produced to the Government.

b) The overseas subsidiaries have entered into the Power Purchase Agreement (“PPA”) and Steam Purchase Agreement (“SPA”) with its local bureau at the agreed quantity and price according to such agreements. The agreement term is annually.

c) On 18 December 2006, the Government of Lao PDR (“GOL”) and a subsidiary entered into Head of Agreement in order to develop and construct a mine-mouth power plant in Hongsa District, Xayabury Province, Lao PDR. The agreement shall be effective for a period of 24 months from the agreement date. The power plant project shall comprise a mining operation of approximately 13 million tonnes per year and 1800 MW coal-fired power plant to be supplied to Electricity Authority of Thailand (EGAT) and Electricite du Laos. Under the agreement, the subsidiary has to obtain and maintain a bank guarantee in the amount of USD 500,000 from the agreement date through the date of signing of the Concession Agreements. The guarantee has been provided to GOL as a guarantee against the subsidiary’s unreasonable termination of the project according to the terms and conditions hereof during the development period. A concession agreement to operate the Hongsa Lignite-Fired Power Plant has been proposed to the GOL and has been expected to be finalised within 2008.

d) On 11 December 2007, the Group entered into the Joint Development Agreement (“JDA”) and Supplementary Agreement with Ratchaburi Electricity Generating Holding Public Company Limited (“RATCH”) with the objective to study and develop the Lignite Mining Project and the Lignite-Fired Power Project which located in Hongsa District, Xayabury Province, Lao People’s Democratic Republic. According to the Joint Development Agreement, the Group, and RATCH and Lao Holding State Enterprise (“LHSE”) agree to establish two companies, one is to have a holding in the Lignite Mining concession and another is an operator of Lignite-Fired Power plant. Three joint developers will have interests in the Lignite Mining Project for 37.5%, 37.54% and 25%, respectively, and in the Lignite-Fired Power Project for 40%, 40% and 20%, respectively. In addition, if the new comer, Chinese investor, agrees to join these projects, the interests of the Group and RATCH will be reduced to 28.125% and 30.00% for the interests in Lignite Mining Project and Lignite-Fired Power Plant, respectively. 141

However, JDA will be effective after RATCH receives an approval from the Government of the Lao People’s Democratic Republic (“GOL”) to join this project. Additionally, RATCH agrees to pay the Joint Development Right Fee to the Group on the participation of the project at a maximum amount not exceeding USD 16 million and a minimum amount of no less than USD 10 million in accordance with the JDA. The amounts depend on the specified formula having a Levelised Tariff as agreed by the Electricity Generating Authority of Thailand as a key factor. The instalment payments shall be made when RATCH receives approval from GOL to join the project with the last payment occurring upon the Financial Close.

30.3 Litigation a) A subsidiary has provided land, property, factory, machineries and diverse equipment under lease to another company. The lessee company has been overdue in respect of its payments for a long period. Such subsidiary has, therefore, ceased to recognise rental revenue from May 1998 and has raised allowance for doubtful lease receivables in the whole amount of THB 6.63 million. The subsidiary has cancelled the contract and exercised its contractual right to occupy the leased asset and prosecuted a claim for overdue lease payment plus fines in an amount of THB 70.76 million. Apart from this, the lessee has also breached the granite coal contract with another subsidiary in amount of THB 24.78 million. Because they are the litigants in the lawsuit, the lessee company has prosecuted the Company and its subsidiary which occupied the leased asset for breach of the lease contract and infringement, claiming an indemnity in the amount of THB 204 million. The cases are currently under the judgment of the court. The final judgment may not be known for the time being. The management is of the view that the Company has no responsibility for the damage as claimed by the plaintiff. As a result, the Company and its subsidiaries have not yet provided for any losses from such litigation.

b) Three overseas subsidiaries have been sued and asked for the compensation of land amounting to IDR 197,970 million. The Company’s management is of the view that the subsidiaries have no responsibility for such compensation. As a result, the three subsidiaries have not provided any losses from such litigation.

c) During year 2007, a person and related group of companies, the plaintiff, who were a previously joint partner with the Company and subsidiaries in developing the coal mining and power plant project in Laos (“Hongsa project”), have filed a Civil Court case against the Company and the two subsidiaries which transgressed them in the development of the Hongsa project. They have a claim against the Company and subsidiaries for damages totalling THB 63,500 million plus interest. The Company has defended the case and lodged a counterclaim against the plaintiff in the amount of THB 4,488 million plus interest. The management and the Company’s legal counsellor are of the view that the Company have no responsibility for the damages as claimed by the plaintiff. As a result, the Group has not provided any losses from such litigation.

30.4 Capital commitments As at 31 December 2007, the Group had capital commitments in relation to mine development of three overseas subsidiaries but not recognised in the consolidated financial statements in the amount of USD 66.66 million (2006: USD 5.06 million).

30.5 Coal Supply Agreement commitments As at 31 December 2007, the Group had coal supply commitments in accordance with Coal Supply Agreement in the amount of 16.61 million tonnes at the market price (2006: 19.24 million tonnes), such coals will be delivered within 2014. 142

31. Financial instruments

The principal financial risks faced by the Group are interest rate risk, foreign exchange rate risk, coal price fluctuations risk, oil price fluctuations and credit risk. The Group borrows both fixed and floating rates of interest to finance its operations. The Group manages these risks as follows: a) Interest rate risk The Group manages its exposure to interest rate risk through a variety of measures, including the use of both fixed and variable instruments with different activities and entering into interest rate swap on a specific basis where management consider it appropriate to do so. The Group has established a Financial Management Committee which holds monthly meetings for consideration and discussion of how to protect or reduce financial risks which might be incurred.

Interest rate swap contract Interest rate swap contract is entered into to manage exposure to fluctuations in interest rate. As at 31 December 2007, the interest rate for outstanding debentures of THB 1,250 million has been converted from the rate of average MLR at 2 days before maturity date of 4 commercial banks minus 0.375% per annum to a multiple of the 1.25 fixed bank deposit (THB FIX) for 6 months plus 2.58% per annum. As at 31 December 2006, an overseas subsidiary entered into a interest rate swap contract with an overseas bank to manage exposure to fluctuations in interest rates by converting floating rate based on LIBOR plus certain margin 4% per annum to fixed interest rate 8.08% per annum on the US Dollar notional amount. The effective date of the contract was 30 June 2005 and will be expired on 31 December 2008. However, the subsidiary has terminated this contract during 2007 with the loss of THB 3.4 million is recognised in the consolidated financial statements for the year ended 31 December 2007. Net fair value The net fair value of interest rate swap contract at the balance sheet date was:

Consolidated Company

À¡“¬‡Àµÿ 2007 2006 2007 2006 THB Thousand THB Thousand THB Thousand THB Thousand

(Unfavourable) interest rate swap contract (1,772) (7,929) (1,772) (7,929)

Fair values of interest rate swap contract has been calculated using rate quoted by the Group’s bankers as if the contract was termi- nated at the balance sheet date. 143

b) Foreign exchange risk In order to reduce exposure to fluctuations in currency exchange rates, the Group uses natural hedges of its business operations, both in Thailand and overseas, through emphasis on a balance of foreign currencies in the Group and sometime through the use of financial instruments. The Group has both foreign currency denominated assets and liabilities and uses natural hedges between these assets and liabilities to manage certain its exposures. The Group will also enter into forward foreign exchange contracts in specific circumstances. The objectives in using financial instruments are to reduce uncertainty over future cash flows arising from movements in exchange rate. The following strategies are employed to achieve these objectives. Forward foreign exchange contracts are entered into to manage exposure to fluctuations in foreign currency exchange rate on general transactions.

Forward foreign exchange contracts As at 31 December, the settlement dates on open forward foreign exchange contracts were within 1 year. The local currency amounts to be received and contractual exchange rates of the outstanding contracts were:

Consolidated Company

À¡“¬‡Àµÿ 2007 2006 2007 2006 THB Thousand THB Thousand THB Thousand THB Thousand

Selling 2007: Nil - 219,842 - 219,842 (2006: USD 6 million at the average rate of THB 36.35 : USD 1) - 219,842 - 219,842

Buying 2007: USD 41.48 million at the average rate of THB 33.92 : USD 1 1,407,117 - 1,407,117 - (2006: Nil) 1,407,117 - 1,407,117 - 144

Net fair values The net fair values of the derivative financial instruments at the balance sheet date were:

Consolidated Company

À¡“¬‡Àµÿ 2007 2006 2007 2006 THB Thousand THB Thousand THB Thousand THB Thousand

Favourable forward foreign exchange contracts - selling - 1,830 - 1,830 (Unfavourable) forward foreign exchange contracts - buying (9,891) - (9,891) -

Fair values of forward foreign exchange contracts have been calculated using rates quoted by the Group’s bankers as if the contracts were terminated at the balance sheet date.

c) Coal price fluctuations risk The Group manages its exposure to coal price fluctuations risk from its business operations, both in Thailand and overseas, and to achieve a balance of overall coal price in the Group by entering into both short-term and long-term sales agreements and sometimes through the use of financial instruments. The objective in using financial instruments is to reduce uncertainty over future cash flows arising from movements in coal price. The following strategy is employed to achieve these objectives.

Coal swap contracts Coal swap contracts are entered into to manage exposure to fluctuations in coal price on general transactions. As at 31 December 2007, the Group has entered coal swap contracts with no physical delivery of selling side amounting to 1,512,000 tonnes at the average rate of USD 52.35 per tonne (2006: 7,353,000 tonnes at the average rate of USD 50.01 per tonne) and buying side amounting to 1,512,000 tonnes at the average rate of USD 65.92 per tonne (2006: 3,834,000 tonnes at the average rate of USD 52.31 per tonne). Such contracts are due within 1 years. Differences between coal swap contracts price and market price specified by API 4 Index.

Net fair values The net fair values of average coal swap contracts at the balance sheet date were:

Consolidated Company

À¡“¬‡Àµÿ 2007 2006 2007 2006 THB Thousand THB Thousand THB Thousand THB Thousand

(Unfavourable) coal swap contracts - Selling (1,940,162) (208,863) (1,940,162) (208,863) (Unfavourable) coal swap contracts - Buying 1,244,603 (16,152) 1,244,603 (16,152)

Fair values of coal swap contracts have been calculated using rates quoted by the Group’s bankers as if the contracts were terminated at the balance sheet date. 145

d) Oil price fluctuations risk The Group manages its exposure to oil price fluctuations risk from its business operations in overseas and to achieve a balance of overall oil price in the Group by sometimes through the use of financial instruments. The objective in using financial instruments is to reduce uncertainty over future cash flows arising from movements in oil price. The following strategy is employed to achieve these objectives. Oil hedging contract Oil hedging contract is entered into to manage exposure to fluctuations in oil price on general transactions. As at 31 December 2007 and 2006, the Group has no remaining oil hedging contract.

e) Credit risk The Group has no significant concentrations of credit risks. Derivative counter parties and cash transactions are limited to high credit quality financial institutions.

f) Fair values The carrying amounts of the following financial assets and financial liabilities approximate to their fair values: cash and cash at banks, investments, trade receivables and payables, other receivables and payables, loans to and from related parties, short-term loans and long- term loans with the floating rate. The Group has the fair values information of debentures as follows:

2007 2006

À¡“¬‡Àµÿ Contract amount Fair values Contract amount Fair values THB Million THB Million THB Million THB Million

Debentures 10,000 10,429 11,600 12,098

The fair values of derivative are disclosed above in (b) and (c).

g) Other risks - Indonesian economic conditions Indonesia has been experiencing a prolonged period of economic difficulty which has been compounded by a downturn in the global economy and its domestic political situation. Indonesia’s return to economic stability is dependent to a large extent on the effectiveness of measures taken by the government and decisions of international lending organizations. However, the Group has entered into insurance policies with overseas insurance companies to protect its investment risk which may occur through law and order or administrative actions of Indonesian government. 146

32. Promotional privileges

The Company has received promotional privileges from the Board of Investment for mining business under five promotion certificates. Under these privileges, the Company receives exemption from certain taxes and duties as detailed in the certificates, as well as exemption from corporate income tax of net profit from granted business for a period of six to eight years commencing from the date operating income is earned. As a promoted industry, the Company is required to comply with the terms and conditions as specified in the promotional certificates.

Company Revenues shown in the Company financial statements classified by BOI granted and Non-BOI granted are as follows: As at 31 December 2007, all promotion certificates had been expired.

For the year ended 31 December 2006 (restated)

À¡“¬‡Àµÿ Non-BOI BOI granted granted Total THB Thousand THB Thousand THB Thousand

Sales 886,169 1,003,582 1,889,751 Other income - 2,637,778 2,637,778 Total revenues 886,169 3,641,360 4,527,529 Total expenses (518,792) (3,266,401) (3,785,193) Net operating profit 367,377 374,959 742,336 Income taxes --- Net profit for the year 367,377 374,959 742,336

33. Subsequent Events

On 10 January 2008, the Group received the confirmation notice from The Government of the Lao People’s Democratic Republic in granting the rights to Ratchaburi Electricity Generating Holding Public Company Limited to be a joint developer of the Lignite-Fired Power Project. As at February 2008, the Group disposed an investment in Asian American Gas Inc. (an associate) in the amount of USD 13.60 million or equivalent to THB 447.09 million. The Group recognised a gain from the disposal of USD 8.4 million or equivalent to THB 278 million. According to the announcement of the Government of Indonesia on 4 February 2008, all companies which have the activities in produc- tion and protected forest area but not related to forestry activity will have obligation to pay a forestry fee ranging from IDR 1,200,000 to IDR 3,000,000 per hectare. O t h e r R e f e r e n c e s 147 Annual Report 2007 • Banpu Public Company Limited

1) Ordinary Share Registrar 4) Financial Advisor Thailand Securities Depository -None- Company Limited for Depositors 62 The Securities Exchange of 5) Advisor or Manager under Management Thailand Building, Ratchadaphisek Road, Agreement Khlong Toei, Bangkok 10110 The Company hired neither advisor Tel. 0 2229 2800 nor manager under any permanent management agreement. Rather, advisors 2) Debenture Registrar (such as financial advisor) were hired on Thai Military Bank Public Company Limited a case-by-case basis a necessary to help 3000 Phaholyothin Road, Jatujak, with its operation from time to time. Bangkok 10900 The Company’s daily management is mainly Tel. 0 2299 1111 supervised by the Board of Directors.

3) Auditor 6) Financial Institutions Frequently Contacted Ms. Nangnoi Charoenthaveesub Around 20 local and international commercial Authorised Auditor No. 3044 banks and financial institutions. PricewaterhouseCoopers ABAS Ltd. 15th Floor, Bangkok City Tower, No. 179/74-80 South Sathorn Road, Bangkok 10120 Tel. 0 2286 9999, 0 2344 1000 B a n p u G r o u p S t r u c t u r e 148 Annual Report 2007 • Banpu Public Company Limited (Entities with 10 per cent or more shares held by BANPU)

BANPU PUBLIC COMPANY LIMITED

99.99% 100.00%

BP Overseas Banpu Power Ltd. Development Co., Ltd.

7.61% 99.80%

7.38% 0.20% 99.99% 40.00%

Ratchaburi Banpu Power Banpu Power Electricity International Coal Power Generation Generating Ltd. Ltd. Services Holding Plc. Co., Ltd.

99.99% 50.00% 17.03% 21.67%

Synergy BLCP Asian Asian Power Power Ltd. American American Co., Ltd. Gas Inc. Coal Inc.

100.00%

Banpu Power Investment Co., Ltd.

100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

Pan-Western Peak Pacific Zouping Peak Peak Pacific Luannan Peak Shijiazhuang Energy (China) Pte. Ltd. Investment Pte. Ltd. Chengfeng Corporation Investment Company (L) Cogen LLC Co., Ltd.* BHD Co., Ltd.

87.90% 70.00%

Tangshan Peak Zouping Peak Heat and Power CHP Co., Ltd. 12.10% Co., Ltd. Note: * The Company name has been changed to Banpu Power Investment (China) Ltd. since 15 February 2008. 149

100.00% 99.99%

Banpu China Pte. Ltd. Banpu Minerals Co., Ltd.

40.00% 49.00% 98.87% 99.96% 99.99% 99.99% 100.00% 100.00%

Hebi Chiang Ban-Sa Silamani Silamani Banpu Banpu Banpu Zhong Tai Muan Mining Marble Corp. Ltd. International Minerals Singapore Mining Mining Co., Ltd. Co., Ltd. Ltd. (Singapore) Pte. Ltd. Co., Ltd. Co., Ltd. Pte. Ltd.

...... 51.00%

95.00% 95.00%

PT. Centralink PT. Nusantara Wisesa Thai International Mining Services

77.60%

PT. Indo Tambangraya Megah Tbk

100.00% 99.00% 100.00% 99.99% 100.00%

PT. Jorong PT. Bharinto PT. Trubaindo PT. Kitadin PT. Indominco Barutama Ekatama Coal Mining Mandiri Greston D e t a i l s o f t h e C o m p a n y a n d 150 I t s S u b s i d i a r y a n d A s s o c i a t e d C o m p a n i e s Annual Report 2007 • Banpu Public Company Limited

No. of paid- % Type of Par value Name Authorized Paid up capital up capital of Head Office Telephone business per share capital (shares) holding

1 Banpu Plc. Energy 3,540,504,790 2,717,478,550 271,747,855 10 - 26-28th Floor, Thanapoom Tower, 0 2694 6600 THB THB 1550 New Petchburi Road, Makkasan, Ratchathewi, Bangkok 10400

Subsidiary companies

2 Banpu Minerals Coal mining 40,000,000 40,000,000 40,000 1,000 99.99% 58/1 Moo 1, Soi Thungkwao 1, 0 2694 6600 Co., Ltd. and trading THB THB Yontrakijkosol Road, Tambon Thungkwao, Amphoe Mueang Phrae, Phrae Province

3 Banpu Singapore Coal trading No authorized 1,500,000 1,500,000 No par 100.00% One Marina Boulevard, 65 6890 7188 Pte. Ltd. shares* SGD value* #28-00 Singapore 018989

4 Banpu Minerals Investment in No authorized 17,670,002 17,670,002 No par 100.00% One Marina Boulevard, 65 6890 7188 (Singapore) Pte. Ltd. coal mining shares* SGD value* #28-00 Singapore 018989

5PT. Jorong Coal mining 4,500,000,000 4,500,000,000 300 15,000,000 100.00% 3rd Floor, Ventura Building, 6221 750 4390 Barutama Greston in Indonesia IDR IDR Jalan R.A. Kartini No. 26, Cilandak, Jakarta 12430, Indonesia

6PT. Nusantara Thai Mining 541,750,000 541,750,000 250,000 2,167 95.00% 3rd Floor, Ventura Building, 6221 750 4390 Mining Services services IDR IDR Jalan R.A. Kartini No. 26, Cilandak, Jakarta 12430, Indonesia

7PT. Centralink Wisesa Services & 110,000,000,000 109,473,000,000 109,473 1,000,000 95.00% 3rd Floor, Ventura Building, 6221 750 4390 International trading in IDR IDR Jalan R.A. Kartini No. 26, Cilandak, Indonesia Jakarta 12430, Indonesia

8PT. Indo Mining, 1,500,000,000,000 564,962,500,000 1,129,925,000 500 77.60% 3rd Floor, Ventura Building, 6221 750 4390 Tambangraya Megah construction, IDR IDR Jalan R.A. Kartini No. 26, Cilandak, transportation, Jakarta 12430, Indonesia workshop, plantation, general trading, industry, services in Indonesia

9PT. Indominco Coal mining 20,000,000,000 12,500,000,000 12,500 1,000,000 100.00% 3rd Floor, Ventura Building, 6221 750 4390 Mandiri in Indonesia IDR IDR Jalan R.A. Kartini No. 26, Cilandak, Jakarta 12430, Indonesia

10 PT. Kitadin Coal mining 1,000,000,000,000 377,890,000,000 188,945 2,000,000 99.99%, 3rd Floor, Ventura Building, 6221 750 4390 in Indonesia IDR IDR Jalan R.A. Kartini No. 26, Cilandak, Jakarta 12430, Indonesia

Remark: * under Singaporean Corporate Law 151

No. of paid- % Type of Par value Name Authorized Paid up capital up capital of Head Office Telephone business per share capital (shares) holding

11 PT. Trubaindo Coal mining 100,000,000,000 63,500,000,000 63,500 1,000,000 100.00% 3rd Floor, Ventura Building, 6221 750 4390 Coal Mining in Indonesia IDR IDR Jalan R.A. Kartini No. 26, Cilandak, Jakarta 12430, Indonesia

12 PT. Bharinto Ekatama Coal mining 68,000,000,000 17,000,000,000 17,000 1,000,000 99.00% 3rd Floor, Ventura Building, 6221 750 4390 in Indonesia IDR IDR Jalan R.A. Kartini No. 26, Cilandak, Jakarta 12430, Indonesia

13 Banpu International Investment 250,000,000 250,000,000 25,000,000 10 99.99% 26-28th Floor, Thanapoom Tower, 0 2694 6600 Ltd. in coal mining THB THB 1550 New Petchburi Road, Makkasan, Ratchathewi, Bangkok 10400

14 Silamani Corp., Ltd. Coal trading 300,000,000 300,000,000 30,000,000 10 99.99% 26-28th Floor, Thanapoom Tower, 0 2694 6600 THB THB 1550 New Petchburi Road, Makkasan, Ratchathewi, Bangkok 10400

15 Silamani Marble Coal trading 200,000,000 200,000,000 2,000,000 100 99.99% 26-28th Floor, Thanapoom Tower, 0 2694 6600 Co., Ltd. THB THB 1550 New Petchburi Road, Makkasan, Ratchathewi, Bangkok 10400

16 Ban-Sa Mining Investment 60,000,000 60,000,000 600,000 100 98.87% 26-28th Floor, Thanapoom Tower, 0 2694 6600 Co., Ltd. in coal mining THB THB 1550 New Petchburi Road, Makkasan, and trading Ratchathewi, Bangkok 10400

17 Chiang Muan Mining Coal mining 100,000,000 100,000,000 10,000,000 10 99.42% 26-28th Floor, Thanapoom Tower, 0 2694 6600 Co., Ltd. and trading THB THB 1550 New Petchburi Road, Makkasan, Ratchathewi, Bangkok 10400

18 BP Overseas Investment 15,533,002 15,533,002 15,533,002 1 100.00% Level 11, One Cathedral Square, 230 210 4000 Development in coal USD USD Port Louis, Mauritius Co., Ltd. mining

19 Banpu Power Ltd. Investment 6,021,995,000 6,021,995,000 602,199,500 10 99.99% 26-28th Floor, Thanapoom Tower, 0 2694 6600 in power THB THB 1550 New Petchburi Road, Makkasan, Ratchathewi, Bangkok 10400

20 Banpu China Investment No authorized 14,272,642 14,272,642 No par value* 100.00% 1 Temasek Avenue #27-01, 65 6338 1888 Pte. Ltd. in power shares* SGD Millenia Tower, Singapore 039192

21 Banpu Power Investment No authorized 84,177,391 77,132,663 No par value* 100.00% 1 Temasek Avenue #27-01, 65 6338 1888 Investment Co., Ltd. in electrical shares* USD Millenia Tower, Singapore 039192 power business

22 Zouping Peak Investment No authorized 2 2 No par value* 100.00% 1 Temasek Avenue #27-01, 65 6338 1888 Pte. Ltd. in electrical shares* SGD Millenia Tower, Singapore 039192 power business

23 Luannan Peak Pte. Ltd. Investment No authorized 2 2 No par value* 100.00% 1 Temasek Avenue #27-01, 65 6338 1888 in electrical shares* SGD Millenia Tower, Singapore 039192 power business

Remark: * under Singaporean Corporate Law 152

No. of paid- % Type of Par value Name Authorized Paid up capital up capital of Head Office Telephone business per share capital (shares) holding

24 Peak Pacific (China) Investment 30,000,000 30,000,000 0 NA 100.00% 2nd Floor, Sunflower Tower, No. 37 8610 85275162 Investment Co., Ltd.** in electrical USD USD Maizidian Street, Chaoyang Dist, power business Beijing 100026, PRC

25 Zouping Peak CHP Power and heat 261,800,000 261,800,000 0 NA 70.00% Xiwang Industrial Region, 86543 4615655 Co., Ltd. production RMB RMB Handian Town, Zouping County, and sales Binzhou City 256209, Shandong Province, PRC

26 Shijiazhuang Power 15,125,000 14,000,000 1,125,000 NA 100.00% North Beiguan, Zhengding County, 86311 85176918 Chengfeng Cogen and heat USD USD Shijiazhuang City 050800, Co., Ltd. production Hebei Province, PRC and sales

27 Tangshan Peak Heat Power 47,504,000 47,504,000 0 NA 100.00% West of Gujiaying Villiage, 86315 4168274 and Power Co., Ltd. and heat USD USD Bensi Road, Luannan County, production Tangshan City 063500, and sales Hebei Province, PRC

28 Pan-Western Energy Investment 100,000 100,000 1,000,000 0.01 100.00% Maples and Calder, Ugland House, 1 345 949 8066 Corporation LLC in power USD USD South Church Street, P.O. Box 309, George Town, Grand Cayman, Cayman Islands

29 Peak Pacific Investment 1,000 1,000 1,000 1 100.00% Level 9F, Main Office Tower, 60 87 443 118 Investment in power USD USD Financial Park, 87000 Labuan FT, Company (L) BHD Malaysia

30 Banpu Power Investment 50,000 50,000 50,000 1 100.00% Level 11, One Cathedral Square, 230 210 4000 International Ltd. in power USD USD Port Louis, Mauritius

31 Synergy Power Investment 11,000,000 11,000,000 11,000,000 1 99.99% Level 11, One Cathedral Square, 230 210 4000 Co., Ltd. in power USD USD Port Louis, Mauritius

32 Banpu Coal Investment 5,921,587,160 5,921,587,160 592,158,716 10 99.99% 26-28th Floor, Thanapoom Tower, 0 2694 6600 Power Ltd. in power THB THB 1550 New Petchburi Road, Makkasan, Ratchathewi, Bangkok 10400

Associated companies

33 BLCP Power Ltd. Power 12,000,000,000 12,000,000,000 120,000,000 100 50.00% 9 i-8 Road, Map Ta Phut Industrial 0 3892 5100 production THB THB Estate, Amphoe Mueang Rayong, and sales Rayong Province

34 Power Generation Operate 10,000,000 10,000,000 100,000 100 40.00% 9 i-8 Road, Map Ta Phut Industrial 0 3892 5140 Services Co., Ltd. and THB THB Estate, Amphoe Mueang Rayong, maintenance Rayong Province for power plant 35 Hebi Zhong Tai Investment 783,330,000 783,330,000 NA NA 40.00% No. 98, Hongqi Street, Hebi, (86) Mining Co., Ltd. in coal mining RMB RMB Henan Province, the PRC 392 291 7401-2

Remark: * under Singaporean Corporate Law ** the company name has been changed to Banpu Power Investment (China) Ltd. since 15 February 2008. Plan Grafik Tel. : 0 2237 0080 # 300 : Tel. Plan Grafik

Designed By : Designed By : Cover printed on recycled & FSC paper BANPU PUBLIC COMPANY LIMITED 26th-28th Floor, Thanapoom Tower, 1550 New Petchburi Road, Makkasan, Ratchathewi, Bangkok 10400, Thailand Tel. +66 (0) 2694 6600 Fax +66 (0) 2207 0695-8 www.banpu.com