CONTENT Message from the Chairman of the Board of Directors 02 Message from the Chairman of the Executive Board and the President 0่4 Board of Directors 08 Executive Board 10 Senior Management Team 11 Management Team 12 Advisors Committee for Board of Directors and the Executive Board 14 Company Secretary 14 Part 1 Business Operations Business Policy and Overview 16 Nature of Business Operations 28 Risk Factors 47 Assets for Business Operations 55 Legal Disputes 59 General Information and Other Significant Information 61 Part 2 Management and Corporate Governance Information on Securities and Shareholders 70 Management Structure 76 Corporate Governance 85 Corporate Social Responsibility 124 Internal Control and Risk Management 125 Connected Transactions 129 Part 3 Financial Position and Operational Results Financial Highlights 151 Management Discussion and Analysis 152 Report and consolidated financial statements 161 Attachment Attachment 1: Details of the Company’s Directors, Executives, 244 Controllers and Company Secretary Attachment 2: Details of Directors of Subsidiaries 269 Attachment 3: Details of Head of Internal Audit Unit 270 and Head of Compliance Unit MESSAGE FROM THE CHAIRMAN OF THE BOARD OF DIRECTORS MR. ASWIN KONGSIRI Chairman of the Board of Directors Thailand’s economic outlook in 2016, according investment in infrastructure projects which have to the Fiscal Policy Office’s forecast, would expand been constantly accelerated and carried out by 3.3 percent (ranging between 3.0 - 3.5 percent), earnestly to ensure the concrete results throughout an increase from 2.8 percent of the previous year, the previous year. CH. Karnchang has beenfully due to the factors which included not only the prepared to participate in these major projects. public sector expenditure and investments, but also the government’s measures expediting Our operational results in 2016 was satisfactory, drawdown of investment in various projects, namely, our net profit in the consolidated financial particularly due to the continued investment in statements was Baht 2,002 Million; and as at the infrastructure projects, let alone the fact that the end of 2016, our backlog was worth Baht 56,736 tourism sector started having a tendency to be Million. In this regard, operations in all projects improved; the private consumption was likely to progressed as planned and certain projects were continuously expand from that of the previous completed and were opened for service, such as, year resulting from the government’s economic the Si Rat - Outer Ring Road Expressway Project stimulus measures, including the low interest rate, and the MRT Purple Line Project, Bang Yai - Bang and most importantly, the political stability helped Sue Section, as completed ahead of schedule give rise to the improved growth of Thailand’s and already opened for service in the past year. economy, despite the global economic fluctuations. For all other projects under our responsibility, they In addition, the construction industry expanded could be implemented as targeted to our great well in 2016 and tended to continuously expand satisfaction. Moreover, in early 2017, we have during 2017 - 2018, mainly due to the public sector signed as contractor the MRT Orange Line Project CK. 45th Anniversary 2 MESSAGE FROM THE CHAIRMAN OF THE BOARD OF DIRECTORS (East Section) with the Mass Rapid Transit in response to the government’s policy through the Authority of Thailand, totaling three contracts, “Competitive Workforce” agreement made with 13 with the total value of Baht 46,971,243,222, and national leading organizations, with the main aim also executed the EPC Contract as contractor for of improving the quality of vocational-level students the Modification Works of Booster Pump Stations as well as providing them opportunity and jointly to be Water Distribution Stations and Construction enhancing capability of students to answer the Works as the Permission Conditions with TTW needs and meet the requirements of the business Public Company Limited, with the value of Baht premises and private sector. In so doing, the 302,890,687. As for various projects scheduled Company selected the vocational college students to be opened for bids in 2017, for instance, double who obtained vocational certificates and passed tracks railway projects, motorway projects, etc., the the test, as well as possessing suitable qualifications, Company is well-prepared in terms of personnel, to further study at the high vocational certificate technology and investment to bid for such projects. level for two years, and also accepted students to be educated and trained by our technicians Our management in 2016 continued to realize and engineers, not to mention the fact that the and focus on management in compliance with the students were given opportunity to make on-the-job good corporate governance principles, as clearly tryouts. This campaign is a good chance for us evidenced by our “Excellent” corporate governance to share competency and knowledge of our rating (CGR) in 2016 from the Thai Institute of personnel to be part of development of “youths of Directors (IOD), the highest score and the main- new generation” to ensure that they have knowledge tained rating at “Excellent” from 2015, despite and expertise needed by the business sector to greater stringent scoring criteria as usual. However, truly serve the national development. other than the management under the good corporate governance principles, we give priority On behalf of the Board of Directors, I would like to our policies on contributing benefits and values to thank shareholders, management, all staff, to society, communities and environment through the public and private partners, as well as all Corporate Social and Environmental Responsibility stakeholders, for your support and trust in the Program or CSR activities, as main policies which Company, and playing the key role in helping push we are determined to regularly develop. forward the Company to enter the 45th year with The Corporate Social and Environmental stability and dignity. Our business operations remain Responsibility Committee remained committed committed to the guidelines which will take the to setting up policies and organizing CSR Company to achieve the growth and additional activities in the best interest to society to ensure strategies so as to add value to and lead the the concrete results with sustainability. In 2016, we Company to the stability and sustainability under continued to organize various CSR activities that management mainly based on the corporate were beneficial to society, such as, blood donation governance and responsibilities towards society, and various sponsorships, for instance, budget communities and environment for the utmost sponsorships for the literature for childhood life interest of stakeholders, society and country. development program, which was first launched at Wat Chai Sisa-at Child Development Center, Tambon Donrat, Amphoe Rattanaburi, Surin Province, etc. For the first time in 2016, we introduced the “DVE Career Choices” campaign ANNUAL REPORT 2016 3 MESSAGE FROM THE CHAIRMAN OF THE EXECUTIVE BOARD AND THE PRESIDENT With our vision and business philosophy to With respect to administration of CH. Karnchang emphasize implementation of beneficial projects Public Company Limited, we further restructured and play a part of the national and social the top management in 2016 to allow personnel development, CH. Karnchang then become of new generation in both main functions and recognized as the leader in construction business supporting functions to make the concerted efforts and as the comprehensive local and regional basic through the synergy with our senior executives infrastructure developer and investor. For this to employ knowledge and accumulated experience reason, CH. Karnchang remains committed to the of more than 40 years for expanding with the business operations focusing on such concept and innovations to enhance our beneficial projects and management under the competitiveness and capability to ensure our concept of the Power of Synergy on a continuous preparedness for the ongoing change in the world basis in order to lead the organization to the of new era. Yet, we have continued to emphasize sustainable and stable growth. Over the past the concept of the Synergy for Transformation several years, we have carried out the business and to prepare for our approach to the 45th business restructuring in CK Group, namely, the transportation anniversary with greater pride, confidence and business by Bangkok Expressway and Metro strength. Public Company Limited, and the tap water business by TTW Public Company Limited, and the energy CH. Karnchang Public Company Limited’s business by CK Power Public Company Limited, operational results for 2016 were satisfactory, to ensure the efficiency and readiness to with the signed contract value in 2016 of more accommodate the demand for various aspects of than Baht 25,300 Million and the backlog to be basic infrastructure both in Thailand and the region, recognized as revenue in the amount of Baht as evidently proven by the concerted efforts in the 56,736 Million. Among these projects were, for manner of synergy with strength and efficiency, example, energy projects, namely, the Xayaburi allowing for the potential growth and generating Hydroelectric Power Project, the Small Power good returns with fairness to all of us. Producer Project (SPP), the cogeneration power project, the Project for Improvement