Banpu Public Company Limited

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.

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